=file wwlog3.txt =// Copyright (C) 2001-2011 by Xenakis ConsultingServices Inc. =content ww2010.weblog.y2007 =content ww2010.weblog.y2006 =content ww2010.weblog.y2006 =content ww2010.weblog.y2004 =content ww2010.weblog.y2003 =content ww2010.weblog.y2002 =data x.x send wwlog3.txt xxxx del wwlog3.txt ren xxxx wwlog3.txt send wwlog3.txt xxxx dir xxxx del wwlog3_copy.txt dir xxxx ren wwlog3.txt wwlog3_copy.txt ren xxxx wwlog3.txt =eod =// &&2 e071230 Pakistanis are increasingly joining forces with al-Qaeda =data ww2010.weblog.y2007.e071230.head Pakistanis are increasingly joining forces with al-Qaeda =data ww2010.weblog.y2007.e071230.keys pakistan, red mosque, pervez musharraf, benazir bhutto, china, robert gates, iraq, al-qaeda, iran, islamic revolution, abu musab al-zarqawi, afghanistan, pakistan strategy, predictions, iraq strategy, india partition, lebanon, syria =data ww2010.weblog.y2007.e071230.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071230.date 30-Dec-07 =data ww2010.weblog.y2007.e071230.txt1 The contrast with the Iraq war and al-Qaeda in Iraq is instructive. =data ww2010.weblog.y2007.e071230.txt2 In January of this year, female students at a large seminary complex known as Lal Masjid or Red Mosque in Islamabad began protesting against the government of President Pervez Musharraf, demanding that <#inc ww2010.weblog.ref e070712 "Taliban-style Sharia law be imposed."#> <#inc ww2010.pic g071230.jpg right "" "Protesting female students at Red Mosque seminary wearing burkas and carrying bamboo sticks"#> The girls began wearing head-to-toe black burkas and, in a move heavy with erotic sexual symbolism, began carrying bamboo sticks. They demanded that all the Islamabad prostitutes be arrested for violating Islamic law, but they weren't taken seriously until they began abducting prostitutes and locking them in the seminary. In July the girls abducted some Chinese prostitutes. That prompted an objection from the Chinese government, and Musharraf's government finally decided to crack down. That led to a 36-hour siege and gunfight -- the male students were carrying guns, not bamboo sticks -- ending in a bloodbath on July 10. Over 100 people were dead. Prior to the gunfight, <#stdurl http://www.time.com/time/magazine/article/0,9171,1640407,00.html?iid=chix-sphere "a Time reporter"#> interviewed Umma Aman, 22, a "pretty seminary student." Saying that she's prepared to die for God, she says, "We must practice Islam. We must act on God's will." Later, after six hours of the gun battle, she says, "We are never afraid. One day all lives will end, and if this is the case, then why not give our life to Islam?" Another young female student tells the reporter, "Tell them how angry we are. Write in your story how willing we are to die for our cause." After it was all over, it turned out that al-Qaeda has been using the Red Mosque to store a huge cache of weapons. Since July, over <#stdurl http://www.reuters.com/article/asiaCrisis/idUSB647837 "a dozen suicide bomb attacks in Pakistan"#> have killed 50 people. (To put this into perspective, imagine how Americans would react if there were just ONE suicide bomber attack on American soil.) When <#inc ww2010.weblog.ref e071021 "Benazir Bhutto narrowly escaped death"#> from suicide bombers on October 19, she blamed al-Qaeda and Taliban militants for the assassination attempt, and declared she would risk her life to restore democracy in Pakistan and prevent an extremist takeover:

"We believe democracy alone can save Pakistan from disintegration and a militant takeover. We are prepared to risk our lives and we are prepared to risk our liberty, but we are not prepared to surrender our great nation to the militants."

Later, in an interview in mid-November, Bhutto said the following:

"The situation in Pakistan is very grave. Pakistan is imploding from within. And yet, there's very little appreciation of the deepening crisis here. I receive reports on the Frontier [NorthWest Frontier Province] and how the Taliban are advancing, advancing into our cities, and the Administration simply can't fight. The military is leaderless. It's a great military, it knows how to fight, it's fought wars in the past. But it needs the will of the people behind it, and that will is not there, and I'm just worried, as I said yesterday, where will they go to next? <#inc ww2010.pic g071230b.jpg right "" "Benazir Bhutto, in a mid-November interview (Source: CNN)"#> I believe that democracy is the only way that can save Pakistan, and I believe that it's the free expression of the will of the people, mobilizing the strength of the people, that can save our country. Unfortunately, General Musharraf's regime is more concerned about containing democrats than it is about containing extremists."

Bhutto's warning that the country is "imploding from within" was confirmed, in a sense, by US Secretary of Defense <#inc ww2010.weblog.ref e071223 "Robert Gates,"#> who says that al-Qaeda has been unsuccessful in Iraq and Afghanistan, and that "Al-Qaeda right now seems to have turned its face toward Pakistan and attacks on the Pakistani government and Pakistani people." Many people are comparing the situation in Pakistan today to the situation in Iraq a year or two ago. In fact, there are a lot of similarities:

An invasion by affiliates of al-Qaeda;
An increasing number of suicide bombers and roadside bombs;
Cooperation between al-Qaeda and local citizens in terrorist acts.
An al-Qaeda objective to foment a civil war, in order to promote an "Islamic revolution," such as occurred in Iran in 1979.

These are the shallow, naïve similarities being noted by journalists, pundits and politicians, many of whom probably need a spell-checker just to spell "Pakistan." These people, in denial about pretty much everything going on in the world, believe that what's going on in Pakistan must be the fault of the Bush administration, and that the right magic words from the American President would cause the Pakistani people to eject al-Qaeda elements, just as the Iraqi people have done with al-Qaeda in Iraq. From the point of view of Generational Dynamics, the situations in the two countries are very different, especially when the Red Mosque event is taken into account. Things like roadside bombs and suicide bombings are acts performed by individuals or small groups of people, while Generational Dynamics looks for attitudes and behaviors of large masses of people. In April, when I wrote <#hreftext ww2010.i.iraq070401 ""Iraqi Sunnis are turning against al-Qaeda in Iraq,""#> I was able to show by quoting documents from a variety of sources that the Iraqis themselves had little interest in fighting against each other, though al-Qaeda did everything possible to provoke them. One of the most interesting examples was a letter of complaint from al-Qaeda in Iraq leader Abu Musab al-Zarqawi to Osama bin Laden, including the following:

"Jihad here unfortunately [takes the form of] mines planted, rockets launched, and mortars shelling from afar. The Iraqi brothers still prefer safety and returning to the arms of their wives, where nothing frightens them. Sometimes the groups have boasted among themselves that not one of them has been killed or captured. We have told them in our many sessions with them that safety and victory are incompatible, that the tree of triumph and empowerment cannot grow tall and lofty without blood and defiance of death, that the [Islamic] nation cannot live without the aroma of martyrdom and the perfume of fragrant blood spilled on behalf of God, and that people cannot awaken from their stupor unless talk of martyrdom and martyrs fills their days and nights."

Now contrast this appraisal of the Iraqis with some of the things we've learned about the Pakistanis, and their attitudes toward al-Qaeda in Pakistan:

The young students in the Red Mosque, including the female students, were willing to die for the al-Qaeda cause, and proved it by taking part in a 36-hour gunfight.
Bhutto described the nation as "imploding from within" because of the Taliban and al-Qaeda militants, and blamed the Musharraf administration because the military wasn't fighting them. She said, "It's a great military, it knows how to fight, it's fought wars in the past. But it needs the will of the people behind it, and that will is not there, and I'm just worried, as I said yesterday, where will they go to next?" This is a very interesting statement, indicating that support for the Taliban and al-Qaeda is widespread. This is a statement that's appeared, in one form another, in many news stories in news stories since July.

Bhutto added, "I believe that democracy is the only way that can save Pakistan, and I believe that it's the free expression of the will of the people, mobilizing the strength of the people, that can save our country." Unfortunately, this is wishful thinking; those girls in the Red Mosque would not have had their minds changed by some sort of expression of democracy; those bamboo sticks they were carrying were targeting prostitutes, not people opposed to democracy. Pakistani <#stdurl http://www.dailytimes.com.pk/default.asp?page=2007%5C12%5C29%5Cstory_29-12-2007_pg1_6 "analyst Najam Sethi confirmed the spread"#> of al-Qaeda and Taliban membership into Pakistan:

"Clearly, Al Qaeda in Pakistan and Afghanistan doesn’t just comprise Arabs and Uzbeks and Tajiks. It also comprises Pakistanis; and among such Pakistanis it comprises Pathans and Punjabis and possibly Urdu speakers who constitute the Pakistani Taliban. Certainly, it is known that a number of Pakistani sectarian and jihadi Sunni organisations have joined the Al Qaeda Network after the government launched efforts to disband them since the “peace process” started with India. So Al Qaeda is now as much a Pakistani phenomenon as it is an Arab or foreign element."

None of this happened in Iraq. Even at the worst, there was always a clear distinction between al-Qaeda foreigners and Iraqi Sunni insurgents. The difference between Iraq and Pakistan is generational. Iraq is in a generational Awakening era, since only one generation has passed since their last crisis war, the genocidal Iran/Iraq war of the 1980s. Pakistan is in a generational Crisis era, since three generations have passed since their last crisis war, the genocidal bloodbath accompanying Partition in 1947. In Iraq, there are still plenty of survivors of the 1980s war around, and they're determined to prevent any such bloodbath from recurring. in Pakistan, there are few survivors left of the Partition, and young people, such as those in the Red Mosque, have no fears of any such recurrence. To see how naïve journalists and analysts, here's a quote from <#stdurl http://observer.guardian.co.uk/focus/story/0,,2233291,00.html "analysis appearing in the Guardian:"#>

"Is Pakistan on the brink of civil war? Pakistan is in crisis but not about to implode. The 60-year existence of the state has seen a series of huge upheavals, bridged by periods of relative calm. A civil war is unlikely for the simple reason that it is difficult to see who would fight whom. Bhutto's supporters are not armed or organised into any kind of militias, and it is hard to see them marching on the lawless tribal areas where the likely killers of their leaders come from, trying to purge militants from the cities of the Punjab, for example, or taking on the army. So is there a threat of an Islamic militant takeover? Not immediately. Though the militants are strong in the west of the country, have some political representation, and have roots in a well-embedded structure of religious schools and colleges, they are divided among themselves and lack genuine broad-based popular support."

This is typical of the kind of airhead analysis we so often on different subjects, whether it's the credit bubble, the Iraq war, the Darfur war, or the Pakistan situation. But it's exactly this naïveté that leads to a new crisis war, since it can lead to panicked reactions. Here's <#stdurl http://en.wikipedia.org/wiki/Iranian_Revolution "one description"#> of Iran's 1979 Islamic Revolution:

"The revolution was unique for the surprise it created throughout the world: it lacked many of the customary causes of revolution — defeat at war, a financial crisis, peasant rebellion, or disgruntled military; produced profound change at great speed; overthrew a regime thought to be heavily protected by a lavishly financed army and security services; and replaced an ancient monarchy with a theocracy based on Guardianship of the Islamic Jurists (or velayat-e faqih). Its outcome, an Islamic Republic "under the guidance of an 80-year-old exiled religious scholar from Qom," was, as one scholar put it, "clearly an occurrence that had to be explained.…" Not so unique but more intense is the dispute over the revolution's results. For some it was an era of heroism and sacrifice that brought forth nothing less than the nucleus of a world Islamic state, "a perfect model of splendid, humane, and divine life… for all the peoples of the world." At the other extreme some disillusioned Iranians explain the revolution as a time when "for a few years we all lost our minds," and as a system that, "promised us heaven, but ... created a hell on earth."

This is the event that al-Qaeda hopes to emulate in Pakistan, and there's no reason why it can't happen. A Pakistani civil war would be no more impossible than Iran's Islamic Revolution was. (Iran was also in a generational Crisis era; its previous crisis war was the Constitutional Revolution of 1905-1910.) Some people might say: Not enough time has passed. Just as Iraq took a few years to expel al-Qaeda, maybe it'll take 3-4 years for Pakistan to expel al-Qaeda. Saying that misses the point of what I'm saying. Since 2003, I've been saying that <#inc ww2010.weblog.ref e071031 "a civil war in Iraq was IMPOSSIBLE"#> because Iraq is in a generational Awakening era. I stuck to this prediction when some papers were actually claiming that <#inc ww2010.weblog.ref e040812 "the Iraq civil war had already begun,"#> when <#inc ww2010.weblog.ref e061129 "NBC News made the ridiculous announcement"#> to call it a "civil war," and when Senator Joe Biden, easily the stupidest man in the Senate, <#inc ww2010.weblog.ref e070429 "he went on Meet the Press in April"#> and said that American troops should be moved from Iraq to Darfur. Finally, by November 1, it was clear that <#inc ww2010.weblog.ref e071031 "Generational Dynamics had been proven right,"#> and just about every other politician, pundit, analyst and journalist in the world had been proven wrong. In fact, every Generational Dynamics prediction I've made -- on the Mideast, Darfur, China, Burma (Myanmar), Japan, global finance, and so forth -- has either come true or is trending true. Not a single one has turned out to be wrong. As I've been saying for years, I defy anyone to find any web site in the world that has anything close to the successful prediction record that this one has. I've looked, and I know that there isn't any. So now I'm talking about Pakistan. Just as I was able to confidently predict that a civil war in Iraq was completely IMPOSSIBLE, I can just as confidently predict that a war in Pakistan is ABSOLUTELY CERTAIN. The way that the Generational Dynamics forecasting methodology works is that it tells you what your final destination is, but it doesn't tell you what scenario will take you there, or how long it will take to get there. That's called a "long-term forecast," since the prediction is 100% certain, but the time window can be years or even decades long. The next step is to match up day-to-day events to identify trends that are consistent with the long-term forecast, and merge them with the long-term forecast. This is what we do on the web site every day. The result is a short-term forecast with a probabilty of 80-90% of being correct, in a window of a few months, or perhaps a couple of years. The last few days have been difficult ones, because there has been a maelstrom of events and and analyses, and it's not always possible to figure out whether these events match or conflict with the Generational Dynamics long-term prediction of a new war re-fighting the 1947 Partition genocide. <#inc ww2010.pic pakfata2.gif left "" "Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas), highlighting Swat Valley (Source: pakistan.gov.pk)"#> The following list is intended to be somewhat educational, by illustrating the kinds of issues that I've been thinking about the last few days and weeks, and what conclusions can be drawn:

Will Musharraf retain the Presidency? Generally speaking, a political result is a chaotic (in the sense of Chaos Theory) event, and it's impossible to predict whether it will happen, or what the consequences will be if it does happen. The trend is that Musharraf is getting weaker, but it's still possible that he can hold on in some way.
Will Pakistan continue to destabilize? That's been a clear trend since the beginning of the year, as illustrated by the Red Mosque disaster, and it's consistent with the Generational Dynamics long-term trend. At the beginning of the year, Musharraf was clearly in charge of the government and the military; today, he no longer controls the military, and he's losing power in government.
Can "fair and free elections" bring stability back to Pakistan, as Bhutto claimed, and as the Bush administration claims? Stability contradicts the Generational Dynamics long-term trend, and so it can be safely rejected as a possibility. Any elections, fair or otherwise, will only create further instability, since anything will create further instability.
Will the the Sindhis be at war with the Mohajirs or the Punjabis? This impossible to predict until a trend develops. There will certainly be ethnic warfare of some kind, but whether it will be among these three groups can't be predicted. Thus, as I mentioned a couple of days ago, there has been no ethnic violence of this type so far, so there's no reason to conclude that it's going to happen.
Will al-Qaeda continue to get stronger in Pakistan? This question is whether more and more people will support them, and the trend today appears to be in that direction. This is an extremely ominous development, since a strengthening al-Qaeda could overthrow the government.
Will there be war with India? India has already gone on high military alert since Bhutto's assassination. A war between Pakistan and India is definitely supported by the Generational Dynamics long-term prediction, so there might be a war beginning next week, or next month, or a year from now. It's going to happen with certainty, but it can't be predicted whether the Bhutto assassination will be the trigger that starts it. Incidentally, it's good to remember that the fiercest genocide following the 1947 Partition was between Muslim Punjabis and Hindu Punjabis. The Kashmir and Jammu regions are still a source of continuing conflict between the two countries.
Will there be war between Sunni and Shia Muslims? Once again, this can't be predicted, and no clear trend has yet shown itself. Balochistan and Sindh provinces are mostly Shia Muslim, while Punjab and NWFP are mostly Sunni. (Correction: Balochistan is predominantly Sunni Muslim. Correction on 2009-Feb-21.
Will Pakistan's nuclear weapons be used? Both India and Pakistan are nuclear nations, and once war begins between then, nuclear weapons will come into the picture before long.

=inc ww2010.cf.cf071106 p right In other words, the situation in Pakistan is still very murky, but it's headed toward increasing chaos, according to the Generational Dynamics long-term prediction. However, there's little doubt that with all its instability, Pakistan is currently the most dangerous region in the world. Just one more comment. The American Presidential candidates have been scrambling to figure out what to say in the aftermath of the assassination. What Republicans and Democrats have been saying is so vacuous and idiotic that it's actually been giving me a headache to listen to them. There was just thing that was said that's of interest to this web site. On Sunday morning on CNN, Hillary Clinton made the following comments:

"I don't think the Pakistani government at this time under President Musharraf has any credibility at all. They have disbanded an independent judiciary, they have oppressed a free press. Therefore I'm calling for a full, independent, international investigation, perhaps along the lines of what the United Nations has been doing with respect to the assassination of Prime Minister Hariri in Lebanon. I think it is critically important that we get answers, and really those answers are due, first and foremost, to the people of Pakistan, not only those who were supportive of Benazir Bhutto and her party, but every Pakistani. Because we cannot expect to move towards stability without some reckoning as to who was responsible for this assassination."

The terror bombing that <#inc ww2010.weblog.ref e050216 "killed Rafiq Hariri in Lebanon February 2005"#> is comparable to the Bhutto assassination for the amount of international shock that it caused. As Clinton mentioned, there has been an ongoing UN-sponsored investigation to see if Syria played a part in the assassination of Hariri. However, once again we see a politician try to compare two countries that can't be compared. Like Iraq, Lebanon is in a generational Awakening era, following the genocidal Lebanese civil war of the 1980s. There's been enormous political conflict in Lebanon in the past two years, and that's to be expected in a generational Awakening era. But there can be no civil war. In that highly politicized atmosphere, an outside investigation is a possibility. But can you imagine the leaders of al-Qaeda in Pakistan agreeing to any sort of outside investigation of the Bhutto death? Whereas disagreements in Lebanon can lead to major political conflicts, in Pakistan such an agreement could lead to violent conflict. That's the difference, again, between a generational Awakening era and a Crisis era. But this illustrates the point that policy-makers make mistakes all the time that could be avoided by studying generational theory. This was certainly true in Iraq, over and over again. And yet, all attempts by me to get government or academic officials interested in Generational Dynamics have just resulted in me getting blown off. Even though they make one mistake after another, they'd rather keep doing that than consider a new methodology and discipline that could make a real difference. =eod =// &&2 e071229 Benazir Bhutto assassination appears to be uniting Pakistan against Musharraf =data ww2010.weblog.y2007.e071229.head Benazir Bhutto assassination appears to be uniting Pakistan against Musharraf =data ww2010.weblog.y2007.e071229.keys pakistan, benazir bhutto, pakistan strategy, india, pervez musharraf, manmohan singh, al-qaeda =data ww2010.weblog.y2007.e071229.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071229.date 29-Dec-07 =data ww2010.weblog.y2007.e071229.txt1 There was widespread rioting and looting in major cities of Pakistan on Friday, =data ww2010.weblog.y2007.e071229.txt2 the day of Bhutto's funeral, following <#inc ww2010.weblog.ref e071227 "her assassination on Thursday."#> <#inc ww2010.pic pakfata2.gif right "" "Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas), highlighting Swat Valley (Source: pakistan.gov.pk)"#> As expected, the greatest <#stdurl http://www.dailytimes.com.pk/default.asp?page=2007%5C12%5C28%5Cstory_28-12-2007_pg12_1 "rioting occurred in Karachi,"#> the capital of Bhutto's native Sindh process, where police have been given permission to shoot looters on sight. Bhutto was Sindhi herself, and she was seen as a Sindhi hero who had many hopes vested in her to bring change to Pakistan and the Sindhi people. However, the rioting and looting were not ethnically based. The looting was directed at government institutions -- banks, political offices, and so forth -- associated with government of President Pervez Musharraf. As I've said many times, Generational Dynamics concerns itself with the behaviors and attitudes of great masses of people, entire generations of people. The actions or behaviors of politicians are irrelevant except insofar as they reflect the attitudes of the masses of people. Unfortunately, the press is so heavily biased against and hostile to Musharraf that it's not altogether possible to discern what's going on from news reports. Still, what's clear is that there's lots of violence but no ethnic violence. All we can really conclude in this rapidly evolving situation is that, so far, there are no signs of ethnic violence, and there are going signs of anger directed at Musharraf. That could change quickly, however. One mourner at her funeral <#stdurl http://www.guardian.co.uk/pakistan/Story/0,,2233048,00.html "was quoted as saying:"#> "Punjab is responsible for this. We hate the Punjab. Benazir was safe wherever she went, but when she went to Punjab, she was martyred. The future of Pakistan is very dark." One big problem is that there's no clear successor to Bhutto, and another big problem is that there would be no clear successor to Musharraf if he were to disappear. Musharraf is a survivor of the bloodbath surrounding the 1947 Partition that created the nations of India and Pakistan. I've said many times that I have great admiration for both Pakistan's President Pervez Musharraf and his Indian counterpart, India's Prime Minister Manmohan Singh, because these two leaders have engineered a remarkable détente that has prevented a nuclear conflict between the two countries. Both Musharraf and Singh survived Partition, they were both born in India -- though they have different religions (Muslim and Sikh, respectively.) (This paragraph corrected on 3-Jan.) =// belong to the same ethnic group -- Punjabs -- though they have Thus, as pressure builds to remove Musharraf from office, it's hard to see how the situation could go any way but downhill if Musharraf is forced to leave. His replacement might well be Punjabi, but he would be much younger, and much less willing to compromise with Singh and India. And his replacement would NOT be Sindhi, so the Sindhi groups would be dissatisfied. And so, as far as I can tell, replacing Musharraf would substantially increase the probably of ethnic war and the probability of war with India, probably in some scenario starting from the disputed region of Kashmir. I'll mention one strange thing that happened on Friday. Pakistan's Interior Ministry announced that Bhutto was not killed by a bullet or by shrapnel from the suicide bomb. Instead, the force of the bomb caused her to bump her head on a metal lever, resulting in her death. Bhutto had standing with her head and upper body through the sunroof of her car, as she was waving at her supporters, when the attack took place. <#stdurl http://www.thepeninsulaqatar.com/Display_news.asp?section=World_News&month=December2007&file=World_News2007122923257.xml "A ministry spokesman said"#> Bhutto had died from a head wound after smashing against the sunroof’s lever as she tried to shelter inside her car. "There is no evidence of any foreign element in her body. No bullet hit her, nor any splinters hit her. Unfortunately, it was to be that way. I wish she had not come out of the roof top of her vehicle." As one pundit put it, this claim is so bizarre that it's probably true, since the Musharraf government has nothing to gain by making up such a story. What really matters is her death, and the cause is irrelevant. This assassination appears to be a great victory for al-Qaeda and the Taliban. Bhutto was a strongly pro-American secular leader, and her demise is a victory by al-Qaeda over both Pakistan and the West. Al-Qaeda has targeted <#stdurl http://www.dailytimes.com.pk/default.asp?page=2007%5C12%5C29%5Cstory_29-12-2007_pg1_6 "a number of Pakistani political figures"#> in recent years, including two attempts on the life of President Musharraf, one on the former corps commander of Karachi, one on Ahsan Saleem Hayat, one on the former prime minister Shaukat Aziz and two attempts on former interior minister Aftab Sherpao. The last attempt, on Sherpao, <#inc ww2010.weblog.ref e071223 "occurred only a week ago."#> And now, Mustafa Abu Al-Yazid, a top al-Qaeda commander, has <#stdurl http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=192593&version=1&template_id=41&parent_id=23 "claimed credit for the murder,"#> saying it had killed "the most precious American asset." The death of Benazir Bhutto has hurt Pakistan deeply. It's hard to imagine a more unstable situation. With so much popular opposition building, it's hard to see how Musharraf can hold onto office for long. And it's hard to see how any replacement would satisfy more than a minority of the country. In this highly emotional and unstable situation, it's quite possible that a new leader will emerge, and draw the support of the entire country, or draw the support of one group and the opposition of another group. From the point of view of Generational Dynamics, Pakistan is in a generational Crisis era, since 60 years have passed since the end of the genocidal bloodbath that occurred with Partition. The political situation is so unstable that the possibility of panic on someone's part -- the government or an opposition group -- is very high, and depends on chaotic triggers that can't be predicted. What's certain is that at some point in the not too distant future, there will be a new ethnic war, and a nuclear war between India and Pakistan. =eod =// &&2 e071227 Benazir Bhutto killed by suicide bomber after election rally in Rawalpindi =data ww2010.weblog.y2007.e071227.head Benazir Bhutto killed by suicide bomber after election rally in Rawalpindi =data ww2010.weblog.y2007.e071227.keys benazir bhutto, pakistan, pervez musharraf, pakistan strategy =data ww2010.weblog.y2007.e071227.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071227.date 27-Dec-07 =data ww2010.weblog.y2007.e071227.txt1 Here's what to watch for in the next few hours and days. =data ww2010.weblog.y2007.e071227.txt2 =inc ww2010.pic bhutto.jpg right "" "Benazir Bhutto" Analysts have recently been calling Pakistan the most dangerous region on earth, and that view seemed to be exactly right on Thursday when opposition leader Benazir Bhutto was killed by a suicide bomber as she was leaving a political rally. The assassination occurred in Rawalpindi, near the country's capital, Islamabad. At least 20 other people were killed. No one has claimed credit, but the al-Qaeda is suspected. Bhutto was favored to win the office of Prime Minister in elections on January 8. Bhutto is well-known internationally, and the scenario that Western countries have been hoping for was that Bhutto as PM would work closely with President Pervez Musharraf, and that between them they would restore stability to the country. However, this hope may well have been only an apparition, however, because of <#inc ww2010.weblog.ref e071112 "their differing ethnicities."#> <#inc ww2010.pic pakfata2.gif left "" "Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas), highlighting Swat Valley (Source: pakistan.gov.pk)"#> Musharraf, born in 1942, is a Mohajir, one of millions of Urdu speaking Sunni Muslim Indians who migrated into Pakistan following Partition in 1947. He heads the Mohajir Qaumi Movement (MQM - Migrant National Movement) political party. This party changed its name to the Muttahida Qaumi Movement (United National Movement) in the 1990s. [Note: A correspondent in Pakistan has informed me that Musharraf does NOT head MQM. I will revise this paragraph and the paragraph below about Nawaz Sharif, when I get this issue straightened out.] Bhutto, born in 1953, is Sindhi, a Sindhi-speaking ethnic group that traces its roots back to Persia (Iran) and Shia Islam in Sindh province. There has been low-level violence between Mohajirs and Sindhis after Mohajirs flooded into Sindh provice in the 1950s, mostly settling in Karachi, forcing the less-wealthy Sindhis to relocate to rural areas surrounding Karachi. The early Sindhi hero was Zulfikar Ali Bhutto, Benazir's father. In 1966, Zulfikar created the Pakistan People's Party (PPP), which Benazir now heads. Zulfikar became President of Pakistan for several years in the 1970s, until his government was overthrown in 1977, and he was executed by hanging on April 4, 1979. =inc ww2010.xr.related1 right pakistan 3 Thursday's assassination of Benazir Bhutto thus has the potential to lead to an explosive situation. Another opposition leader, former President Nawaz Sharif, whom Musharraf overthrew in 1999, will now become more prominent. Sharif is a conservative Muslim and is ethnically Punjabi, the most powerful ethnic group in Pakistan, and a group that formerly have been strong supporters of Musharraf. =// Sharif is head of the Pakistan Muslim League =// (PML-Q), a conservative, Punjabi-based political party. So here are the things to watch for in the next few hours and days:

Will the broad Pakistani public blame Musharraf for this assassination, or, to the contrary, will Musharraf become more popular as a strong leader who can fight al-Qaeda? (In the latter case, it would be similar to <#inc ww2010.weblog.ref e071204 "Vladimir Putin's increasing popularity"#> with Russian people at a time of internal crisis.)
Will there be renewed ethnic violence, especially between Mohajirs and Sindhis in the region around Karachi?
Will al-Qaeda become increasingly violent - and increasingly successful? US Secretary of Defense <#inc ww2010.weblog.ref e071223 "Robert Gates recently said"#> that, "Al-Qaeda right now seems to have turned its face toward Pakistan and attacks on the Pakistani government and Pakistani people."
Will the January 8 elections go on, or will they be canceled?
Will Musharraf reinstate marshall law and a state of emergency? He originally imposed the state of emergency on November 3, and lifted it two weeks ago under heavy international pressure.

From the point of view of Generational Dynamics, Pakistan is in a generational Crisis era. Most of the survivors of the genocidal bloodbath following the <#inc ww2010.weblog.ref e071112 "Partition of the Indian sub-continent"#> in 1947 are now gone, with Musharraf himself being the most prominent exception. Younger generations, born after Partition, have no fear of the horrors of another ethnic war, and al-Qaeda has indicated that it will trigger such a war if it can. =inc ww2010.cf.cf071106 p left Pakistan is possibly the most dangerous region in the world today. On November 6, in my little conflict risk graphic, <#inc ww2010.weblog.ref e071106 "I raised the "conflict risk level""#> for Kashmir from 2 (medium risk of war within 6 months) to 3 (high risk of war within six months). Generational Dynamics predicts that there will be a new genocidal war on the Indian subcontinent. Components will include war between Muslim Pakistan and Hindu/Sikh India, and war among various ethnic groups that cross country boundaries. Such a war would undoubtedly become a nuclear war, as both India and Pakistan have nuclear weapons. As Pakistan appears to become increasingly chaotic, this war is coming closer. =eod =// &&2 e071226 As credit card defaults surge, banks become more restrictive with credit =data ww2010.weblog.y2007.e071226.head As credit card defaults surge, banks become more restrictive with credit =data ww2010.weblog.y2007.e071226.keys finance, credit crunch, advice =data ww2010.weblog.y2007.e071226.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071226.date 26-Dec-07 =data ww2010.weblog.y2007.e071226.txt1 New rules may affect the way that your FICO score is computed. =data ww2010.weblog.y2007.e071226.txt2 In the last few months, the "credit crunch" has caused banks to hoard cash, reluctant to lend it even to other banks. And now, expect to see banks become reluctant to lend it even to consumers, especially those in the "high risk" category with low FICO scores. Part of the banks' motivation for this change is that more consumers are defaulting on their credit cards. This has been a while in coming. One of the things that have surprised analysts this year is that consumers have been paying their credit cards bills prior to making their mortgage payments. You would think that people would rather risk losing their credit cards than losing their homes, but it's turned out that the opposite is true: A person can always go live with relatives, but he needs his credit card to buy groceries. Finally, however, with mortgage defaults and foreclosures surging, credit card delinquencies and defaults are beginning to catch up. According to <#stdurl http://www.cbsnews.com/stories/2007/12/23/business/main3643715.shtml "a recent analysis by AP"#> of data representing 325 million credit card accounts:

The value of credit card accounts at least 30 days late is 26% higher than a year ago.
Defaults -- where lenders give up hope and write off the debt -- rose 18% in the last year.
Serious delinquencies -- accounts at least 90 days delinquent -- were up 50%.

Many analysts see this as the next wave of problems for financial institutions, in conjunction with the continuing wave of mortgage defaults. It turns out that credit card debt is "securitized" in much the same way that subprime mortgages are securitized. Credit card debt from millions of accounts is <#stdurl http://www.247wallst.com/2007/12/as-credit-card.html "combined into pools,"#> which are sold to banks, investment houses and institutional investors. Over $400 billion of credit card is packaged into these pools. As credit card delinquencies and defaults surge, the value of that $400 billion in credit card pools becomes questionable, and more "writeoffs" will be necessary, just as writeoffs of mortgage-backed assets have had to be written off. It also turns out that many banks were issuing credit cards to people who are poor risks, just as many subprime mortgages were given to people who were poor risks. So, just as mortgage lenders waited to long to tighted mortgage lending standards, credit card lenders have waited too long to tighten credit card standards. In fact, it's already <#stdurl http://www.fool.com/personal-finance/credit/2007/12/19/tougher-credit-days-ahead.aspx "getting harder to borrow money"#> from the bank -- for credit cards, for home equity loans, for mortgage loans, for card loans, or any other kind of credit. As part of this effort, the <#stdurl http://www.fool.com/personal-finance/credit/2007/12/24/will-credit-score-changes-hurt-you.aspx "formulas for computing the FICO credit score"#> are changing. The formulas have always taken into account such factors as consumers' level of credit indebtedness and payment histories, length of credit histories, number of recent credit openings and inquiries, and the type of credit used, to determine scores. The exact formulas are proprietary and secret, but <#stdurl http://online.wsj.com/article/SB119802346920538029.html "an article in the Wall Street Journal"#> lists some of the changes that will be made in the next few months:

It will be more forgiving of occasional slips by consumers, but will take a harder line on repeat offenders.
The new formula will particularly target three groups: subprime borrowers; those with "thin," or young, credit files; or consumers who are actively seeking new credit.
The new formula will give more points to consumers who maintain a variety of credit types, such as credit cards, a mortgage and auto loan, because it shows they can manage payments on different kinds of loans. It penalizes borrowers who use a high percentage of their available credit.
A person with only one account in arrears will not be penalized; but someone with multiple delinquent accounts will have a lower score.
High risk people who "piggyback" on someone else's good credit by sharing a credit card will no longer gain from doing that. This will eliminate certain kinds of credit card fraud, but will also hurt legitimate users -- people who give a credit card to a child or a spouse as an authorized user to help boost their credit score.

All in all, it will be getting harder to obtain credit, and banks will be more punitive of people who are delinquent. If there's any way that you can do what <#stdurl http://youtube.com/watch?v=9Z1qix6W8Gs "these people did with their blender,"#> you'll be much better off:

=eod =// &&2 e071225 Merry Christmas and Happy Holidays to all my readers. =data ww2010.weblog.y2007.e071225.head Merry Christmas and Happy Holidays to all my readers. =data ww2010.weblog.y2007.e071225.keys web site =data ww2010.weblog.y2007.e071225.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071225.date 25-Dec-07 =data ww2010.weblog.y2007.e071225.txt1 Thank you all for your support this year, =data ww2010.weblog.y2007.e071225.txt2 and for the kind wishes that I've received from many of you. The past year has been difficult for many people in the world, and next year unfortunately promises to be a lot worse. =inc ww2010.pic xmastree.gif right "" "" The Christmas season is a good time to count one's blessings. "I complained that I had no shoes, and then I met a man who had no feet," it says in the Old Testament. It's also a good time to think about the future. Correction: A web site reader has pointed out to me that this phrase does not come from the Old Testament. It comes from <#stdurl http://www.intratext.com/X/ENG0160.HTM "The Gulistan,"#> a landmark poetic work written by the Persian poet Saadi in 1259. The phrase is derived from the following text in Story 19: ". . . once, when my feet were bare, and I had not the means of obtaining shoes. I came to the chief of Kufah in a state of much dejection, and saw there a man who had no feet. I returned thanks to God and acknowledged his mercies, and endured my want of shoes with patience . . ." (Paragraph added on 15-Jan-2008.) As I frequently say on this web site: Treasure the time you have left, and use it to prepare yourself, your family, your community and your nation. This is a good time to remind you that you can write to me with comments and questions. It may take a few days to get back to you, but so far I've been doing OK keeping up with the e-mail messages. Use either an e-mail message, or the "Comment" link at the top of this page. If you want to have a more open debate, you can do so in the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 ""Objections to Generational Dynamics" thread"#> of the Fourth Turning forum. I hope that everyone is doing well. To all of you, have a great Christmas holiday and a great New Year. =eod =// &&2 e071223b Wheat prices surge above $10 per bushel, sparking little concern =data ww2010.weblog.y2007.e071223b.head Wheat prices surge above $10 per bushel, sparking little concern =data ww2010.weblog.y2007.e071223b.keys food prices, wheat prices =data ww2010.weblog.y2007.e071223b.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071223b.date 23-Dec-07 =data ww2010.weblog.y2007.e071223b.txt1 World food stocks dwindling rapidly, according to the UN. =data ww2010.weblog.y2007.e071223b.txt2 In an "unforeseen and unprecedented" shift, the world food supply is dwindling rapidly and food prices are soaring to historic levels, <#stdurl http://www.iht.com/articles/2007/12/17/europe/food.php "according to the UN"#> Food and Agriculture Organization (FAO). <#inc ww2010.pic g071222.gif right "" "Price of wheat, 2005-2008, in tonnes (metric tons) (Source: UN FAO)"#> A new level of concern was triggered earlier this week when the price of wheat surged above $10 per bushel for the first time in history, in trading on the Chicago Board of Trade (CBOT). That's twice as high as a year ago, and three times as high as the typical price of around $3.50 per bushel. (In interpreting this graph, a "tonne" is a "metric ton," which = 1000 kg = 2205 pounds. A bushel weighs 60 pounds. So a "tonne" of wheat at $10 per bushel is: $10/bushel ÷ 60 lbs/bushel * 2205 lbs/tonne = $367/tonne.) =inc ww2010.xr.related1 left foodprices 3 During this time, other foods have also been increasing sharply in price, especially dairy, meat, egg and cereal products. Overall, the UN FAO's "food price index" has increased by an enormous 40% in 2007. At the same time, reserves of cereals are severely depleted, with only 12 weeks of wheat in storage, and only 8 weeks of corn left. These are historic lows since the early 1980s, according to UN FAO's figures. I've <#inc ww2010.weblog.ref e071107 "given all the reasons"#> why this is happening several times before -- population growth, the Law of Diminishing Returns, the use of biofuels -- but there's one reason that constantly stands out in my mind as the most amazing: What really amazes me about all this is the lack of concern. The dwindling food stocks and the sharp increases in worldwide food prices can't be described as anything other than a catastrophe. A man who formerly had to work four hours a day to feed his family now has to work perhaps six hours a day -- leaving insufficient money for other expenses. And a man who's already working 8 hours a day to feed his family may no longer be able to feed his family adequately at all. This is a real problem today, but instead of addressing it, officials fly in jet planes around the world to beach resorts to attend <#inc ww2010.weblog.ref e071214b "farcical meetings on climate change"#> in air conditioned meeting halls. The people who survived World War II would never have ignored this situation. They had just lived through years of horror, with death, homelessness and starvation all around them them, and they knew that insufficient food was one of the root causes of the war. In their determination to make sure that nothing like a world war ever happens again, they focused on producing enough food for everyone. The <#hreftext ww2010.i.food040628 "Green Revolution"#> was their most spectacular success. But as I've been writing since 2005, the price of food has been going up faster than inflation since 2000. Each time, there's always an expert who says that prices will soon start going down again, but they've only been increasing more and more rapidly. No one cares. Anything sufficiently absurd draws more attention than this real crisis, as the world drifts toward a Clash of Civilizations world war. By the way, have you heard? Britney's little sister is pregnant. =eod =// &&2 e071223 Pakistan on high alert after massive terrorist bomb kills 50 worshippers =data ww2010.weblog.y2007.e071223.head Pakistan on high alert after massive terrorist bomb kills 50 worshippers =data ww2010.weblog.y2007.e071223.keys pakistan, al-qaeda, iraq, afghanistan, robert gates, india partition, pervez musharraf =data ww2010.weblog.y2007.e071223.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071223.date 23-Dec-07 =data ww2010.weblog.y2007.e071223.txt1 Al-Qaeda and Taliban terrorists from Pakistan's Tribal Regions =data ww2010.weblog.y2007.e071223.txt2 are <#stdurl http://www.theglobeandmail.com/servlet/story/LAC.20071222.PAKISTAN22/TPStory/TPInternational/Asia/ "the likely perpetrators of a suicide bomb attack"#> Friday on a mosque, packed with people celebrating the Eid al-Adha festival, one of the holiest days in the Muslim calendar. <#inc ww2010.pic pakfata2.gif left "" "Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas), highlighting Swat Valley (Source: pakistan.gov.pk)"#> It's thought that the probably target of the attack was a close associate of President Pervez Musharraf, Aftab Sherpao, who survived the blast. However, this is the second attack on Sherpao this year. =inc ww2010.xr.related1 right pakistan 3 The attack took place in Sherpao's home town, near Peshawar and the Tribal Areas border. The Tribal Areas are independent regions that are not part of Pakistan, but are administered by Pakistan. Sunni al-Qaeda and Taliban terrorists, including Osama bin Laden, are hiding out there, out of reach of either the Americans or the Pakistanis. There have been about a dozen suicide bombing attacks in Pakistan in the last six months, mostly in the Swat Valley in the NorthWest Frontier Province, but also reaching the capital city of Islamabad itself, with <#inc ww2010.weblog.ref e070712 "the Red Mosque attack"#> on July 11. Musharraf <#inc ww2010.weblog.ref e071103 "imposed emergency rule"#> and suspended the Constitution on Pakistan on November 3. He cited a "downward trend" in Pakistani society, saying that "with all the facts available to me, consider that inaction at this moment is suicide for Pakistan, and I cannot allow this country to commit suicide." Musharraf has been under enormous international pressure to end the state of emergency, including a humiliating <#inc ww2010.weblog.ref e071124 "suspension of Pakistan itself"#> as a member of the British Commonwealth of Nations. Since then, Musharraf has complied with many of the demands of the Commonwealth members: He's given up his military position as Chief of Army staff; he's removed curbs on media broadcasts; and, last week on Saturday, he lifted the state of emergency, saying that the threat had been contained. "The wave of terrorism and militancy has been stopped under the emergency and there has been considerable improvement in the overall situation." Friday's new suicide bombing has shocked the nation, as the time comes for the January 8 election, which the terrorists have vowed to disrupt. And it's also a time when al-Qaeda is increasing turning away from Iraq and Afghanistan, and particularly targeting Pakistan, according to US Secretary of Defense Robert Gates, in a <#stdurl http://www.defenselink.mil/transcripts/transcript.aspx?transcriptid=4113 "press conference"#> on Friday:

"Well, first of all I think that -- I heard just this morning, in fact, that the number of fighters coming across the border [into Afghanistan] is down about 40 percent. Al Qaeda right now seems to have turned its face toward Pakistan and attacks on the Pakistani government and Pakistani people. The Pakistani army has had some success in their counterinsurgency effort in Swat. We are beginning a dialogue with the new chief of staff of the Pakistani army in terms of how we can help them do a better job in counterinsurgency through both training and equipment. So I would say that right now, at least, there is no question that some of the areas in the frontier area have become areas where al Qaeda has reestablished itself, but so far we haven't seen any significant consequence of that in Afghanistan itself. I would say, with respect to Osama bin Laden, that we are continuing the hunt."

Thus, Pakistan continues to become increasingly dangerous. Indeed, Pakistan is probably the most dangerous place in the world today, the region most likely to trigger a world war. =inc ww2010.cf.cf071106 p right Six weeks ago, I raised the "conflict risk level" for Kashmir from 2 (medium risk of war within 6 months) to 3 (high risk of war within six months), to reflect the increasing chances of war between Pakistan and India. There are many scenarios that could lead to war. For example,

A weakened Musharaff becomes more confrontational with the militants, or he's deposed in a coup and his successor, being younger, is more confrontational.
The resulting confrontation leads to regional fighting within Pakistan.
The growing violence leads to war between ethnic groups that spreads to India.
Alternatively, the confrontation leads to conflict between Hindus and Muslims in Kashmir, forcing both India and Pakistan to move to protect their interests.

Pakistan has only recently commemorated the 60th anniversary of the bloodbath that accompanied the <#inc ww2010.weblog.ref e071112 "Partition of the Indian sub-continent"#> into India and Pakistan, when Britain withdrew control in 1947. President Musharraf lived through that bloodbath and survived it, and his major goal in life, still, is to make sure that nothing like that every happens again. However, people in his generation are almost gone now, replaced by younger people born after the war following Partition, and these young people are not afraid of a new war. Generational Dynamics predicts that there'll be a new genocidal war between Pakistan and India, primarily along the Muslim/Hindu fault line. What will trigger this war and when it will occur cannot be predicted, but for the next few weeks and months, Pakistan's and Musharraf's fate are closely tied together. =eod =// &&2 e071221 Will hyper-inflation make the dollar worthless (like the Weimar republic)? =data ww2010.weblog.y2007.e071221.head Will hyper-inflation make the dollar worthless (like the Weimar republic)? =data ww2010.weblog.y2007.e071221.keys finance, hyperinflation, weimar republic, deflation, japan, europe, macroeconomics =data ww2010.weblog.y2007.e071221.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071221.date 21-Dec-07 =data ww2010.weblog.y2007.e071221.txt1 I've gotten this question several times this week from web site readers, =data ww2010.weblog.y2007.e071221.txt2 so it's on a lot of people's minds. The moves by the Fed, the Bank of England and the European Central Bank to pour huge amounts of liquidity into the banking system <#inc ww2010.weblog.ref e071219 "have shocked people"#> and caused them to make comparisons to the Weimar Republic. This is a reference to Germany in the early 1920s, when the government purposely hyperinflated the currency (the mark) in order to pay war reparations in cheaper marks. (See <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world""#> for more information.) Many people are also aware of the current situation in Zimbabwe, where the inflation rate has been well above 1000% per year for a couple of years. (Corrected 16-Apr-2008) In both of these cases, the hyperinflation was a purposely self-destructive act induced by printing huge amounts of paper currency and selling it for foreign currency. However, there's a very important factor: Germany in 1921 and Zimbabwe today had very small economies, devastated by war. The value of a currency is determined by what you can buy with it, and there wasn't much you could buy with it in these two war-torn economies. So this type of hyperinflation is possible in an economy so small that you can print enough paper money to buy pretty much everything that's for sale. Can the same thing happen in the United States? It's hard to answer with absolutely certainty, since there are scenarios where it might happen -- a US totally devastated and nearly destroyed by war, for example. But barring these extreme scenarios, the answer appears to be NO. First, it's pretty clear that they'd have to print billions of paper bills, worth tens of trillions of dollars, to make a dent in an economy the size of America's. But of course those examples are irrelevant today, because only a tiny proportion of our money supply is created through printing money, as I explained in <#inc ww2010.weblog.ref e071206 ""Questions and answers about the 'credit crunch.'""#> Last week, the ECB dumped $500 billion of liquidity into European banks. It didn't do this by printing 36,400,000 thousand-euro paper bills. It did it electronically, crediting the money to the banks' accounts, just as money that you borrow or earn is electronically deposited into your savings or checking account. So now the question is this: Could the Fed dump so much liquidity into the world's banks that it would make the dollar worthless? Because that's the question on everyone's mind. The Fed could lower interest rates, or even buy back Treasury bonds, in order to pour money into the financial system. Could it do so much that it would make the dollar worthless? The answer to that question is pretty obvious that it can't. And there are many examples to illustrate this. If you believe that the Fed could make the dollar worthless, then you'd have to answer the following question: How is it possible that the Bank of Japan set interest rates on the yen to 0% for so many years since the 1990s, without making the yen worthless? Not only did Japan NOT have hyperinflation at 0% interest, it actually had DEFLATION. In fact, Japan's economy is still deflationary today. Now, if the Bank of Japan can't even end deflation with 0% interest rates, then why would you think that a similar Fed action would end with the dollar in hyperinflation? Let's take a look at the ECB's huge injection of $500 billion last week. That's a lot of money. Now compare that with the amount of money that the credit bubble has injected into the world in the last few years -- hundreds of trillions of dollars. That money is just as real as the money injected by the Fed as I illustrated in <#inc ww2010.weblog.ref e071206 ""Questions and answers about the 'credit crunch.'""#> It's the huge growth in abusive credit that created all the bubbles in the last ten years. Since August, the credit bubble has been deflating, and there's less money in the world every day. Furthermore, the rate of loss of money seems to be accelerating. I used an analogy in <#inc ww2010.weblog.ref e071219 "an article a few days ago,"#> and I'll repeat it now. The Central Banks in Europe and North America are desperately trying anything they can to pump the bubble up again. It's as if you were on the beach, and the tide is going out, and the central bankers are running back and forth, carrying buckets of water from the kitchen to the ocean, trying to replace the water that's disappearing with the tides. In the end, it makes no difference at all. So, with the credit bubble deflating, the value of the currency is deflating. That's what happened in Japan in the 1990s. The reason that the Japanese currency kept deflating, even at 0% interest rates, is because the enormous Japanese credit bubble from the 1980s was deflating, taking much more currency out of circulation than the Bank of Japan could ever put back in. And that's why, barring the catastrophic scenario mentioned above, the Fed can't have much effect on inflation, one way or another. I can't prove this, but I've come to believe that the Fed can influence the inflation rate by a few percentage points at any time, but never any more than that. Whether the currency is inflationary or deflationary depends on the cycles in the use of credit by the great masses of people, and that's a generational phenomenon. Let's explore that further. First, understand that mainstream macroeconomics hasn't gotten anything right. Those guys have NO IDEA what's going on, and many mainstream concepts have been completely disproven in recent years. A major example is the one I've been discussing - deflation. Ben Bernanke is known to have believed that deflation was impossible, since a central bank can just inflate the money supply. That's been proven completely wrong by Japan, which still has a deflationary economy after 15 years of zero and near-zero interest rates. Does Bernanke still believe that deflation is impossible? Who knows? I heard CNBC's resident economist, Steve Lieseman, discuss this the other day. Some guest being interviewed opined that inflation would not increase since there are a lot of unemployed people, so demand for employees was down, so salaries wouldn't increase, so inflation would not increase. Lieseman "corrected" him by saying that inflation is NOT caused by salaries; it's caused by the amount of money in the economy. That's nonsense, as can be seen from the fact that, to repeat, we've had huge amounts of liquidity in the world in the last few years, with no hyperinflation. The idea that the amount of money in the economy causes inflation has simply been proven completely wrong (except in the catastrophic scenario described above). Then what does cause inflation? America's last great inflationary period was the Great Inflation of the 1970s -- the rate was over 10%. Why was inflation so high then, when it's so low now? As I say frequently on this web site, journalists, politicians and pundits never recognize any generational explanation for anything, even when it's completely obvious. The same is true of economists. Economists assume that every decade is the same as every other decade. Exactly the same economic policies that work in the 1950s should also work in the 1960s, 1980s, and 2000s. But that's clearly absurd. People in the 1950s had lived through the Great Depression. They're obviously going to spend and save differently than people in the 1970s or 1990s. That's common sense, but economists have little of it. America's businesses renewed themselves in the 1930s. Old businesses went bankrupt, and new ones sprang up. Old businesses that survived had to reinvent themselves completely. So effectively, all businesses were brand new by the end of the 1930s. By the 1960s, all of these businesses were "hot." They were producing brand new products that everyone wanted, and the demand for those products was great. That's why inflation was so high in the 1970s. By the 2000s, all of these businesses were old, encrusted with bureaucracy. With a few exceptions in the high-tech field, there was no innovation; people just wanted to do their jobs and go home. That's when we started losing jobs to other countries -- manufacturing jobs to China, service jobs to India. America's great strength was innovation, and if businesses were no longer willing to innovate, then customers might as well buy the same old products more cheaply from other countries. So that's the pattern: Inflation was high in the 1970s, because innovative products were in great demand; inflation has been low recently, because the same old products can be purchased more cheaply elsewhere. So is hyperinflation going to occur? Will the dollar become worthless? To the contrary. We're in for a period of serious deflation, and the Fed is powerless to stop it, no matter how much liquidity they pour out. In fact, it's already been proven. There was NO inflation in Japan in the 1990s and 2000s, with zero and near-zero interest rates. There was LITTLE inflation the last few years, when the Fed rate was at 1%, and the credit bubble was flooding the world with massive amounts of additional liquidity. Barring the "catastrophic" scenario, it is almost absolutely certain that we will see deflation, not inflation. =eod =// &&2 e071219b William A. Strauss, February 5, 1947 - December 18, 2007 =data ww2010.weblog.y2007.e071219b.head William A. Strauss, February 5, 1947 - December 18, 2007 =data ww2010.weblog.y2007.e071219b.keys william strauss, strauss and howe, fourth turning =data ww2010.weblog.y2007.e071219b.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071219b.date 19-Dec-07 =data ww2010.weblog.y2007.e071219b.txt1 The co-author, with Neil Howe, of foundational books on generational theory, =data ww2010.weblog.y2007.e071219b.txt2 passed away on Tuesday of cancer at age 60. <#inc ww2010.pic g071218c.jpg right "" "William A. Strauss" (Source: lifecourse.com)"#> Strauss and Howe coauthored several best-selling books on generations, starting with Generations (1991), a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most simulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Their most important work, in my opinion, is The Fourth Turning (1997), which establishes Strauss and Howe as the founding fathers of generational theory. This book presented a new theory of Anglo-American history, from the 1400s through the present, showing that major historical events are driven by generational changes, not by politicians. For example, we know that today's Boomers, the generation born after WW II, are arrogant and narcissistic, and that those in next generation, Generation-X, are angry and disaffected. What Strauss and Howe discovered, by reading thousands of histories and diaries, is that generations that follow major wars (crisis wars, or "fourth turning" wars) are similar. For example, those in the Reformation Generation that was born after the War of the Roses (1459-87) were also arrogant and narcisstic, and the next generation, the Reprisal Generation, was also angry and disaffected. By piecing together these bits of evidence, they put together the monumental book Generations. Many readers of this book, especially people who don't understand what's going on in the world, have found this book to be comforting, by each person where he fits in the generational flow. Going further, The Fourth Turning presents what amounts to a highly readable but rigorous presentation of generational flow for the entire Anglo-American historical timeline. Previously, Strauss coauthored two books with Lawrence Baskir about the Vietnam War: Chance and Circumstance: The Draft, The War, and the Vietnam Generation (1978), and Reconciliation After Vietnam (1978). Around that time, he served on the staff of the U.S. Senate and President Ford’s White House. It was during this time that Strauss first began to notice that people of different social classes in the same generation are much more similar to one another than people from the same social class in different generations. That led to his partnership with Howe, and authorship of Generations. In addition to his career as a writer and historian, Strauss is a noted playwright, theater director, and performer. He was co-founder and director of the <#stdurl http://www.capsteps.com/ "Capitol Steps,"#> a professional satirical troupe that has performed over 7,000 shows, three PBS specials, and fifty radio shows for NPR stations. The Steps have released 26 albums (most recently, I’m So Indicted) and two books (most recently, Sixteen Scandals), and have performed numerous times off-Broadway, often with Strauss in the cast. Strauss has written three musicals (MaKiddo, Free-the-Music.com, and Anasazi) and two plays (Gray Champions and The Big Bump) about various themes in the books he has co-authored with Howe. And in the summer of 1999, Strauss co-founded <#stdurl www.cappies.com "the Cappies,"#> a high school “Critics and Awards” program. A native of San Francisco, William A. Strauss was a graduate of Harvard College (1969), Harvard Law School (1973), and the Kennedy School of Government (1973). He's survived by a wife and four grown children. --- It's hard to believe that anyone's life has been affected by Strauss and Howe's work more than mine. Generational Dynamics grew out of The Fourth Turning theory, and has taken over my life as a total obsession. Outside of working for a living, I rarely do anything anymore unrelated to my web site. On my web site I sometimes mention the mythical Cassandra. Apollo fell in love with her and gave her the gift of seeing the future. When she spurned his advances, he cursed her: She could still prophesy the future, but nobody would believe her. When her predictions came true, and the soldiers poured out of the Trojan Horse and massacred most of the people in the city, she was reviled and raped. Strauss and Howe have never talked about this aspect of the work they've done, that I know of, but I have to believe that some form of this has applied to them as well, as it has applied to me. I believe that this is the reason why Strauss and Howe never published any further work on the "fourth turning" theory, but instead focused on the social, workplace and marketplace implications of the rise of the new Millennial generation. William A. Strauss had many dear friends and followers. Those wishing to express condolences may do so in the <#stdurl http://www.fourthturning.com/forum/announcement.php?f=7 "Bill Strauss, 1947-2007: With Great Sadness"#> thread of the <#stdurl http://fourthturning.com/forum "The Fourth Turning Forum"#> . Finally, here's <#stdurl http://youtube.com/watch?v=ECA8yqSWCwE "a video"#> from a production of the Capitol Steps:

=eod =// &&2 e071219 European Central Bank shocks financial community with huge cash drop =data ww2010.weblog.y2007.e071219.head European Central Bank shocks financial community with huge cash drop =data ww2010.weblog.y2007.e071219.keys finance, mervyn king, bank of england =data ww2010.weblog.y2007.e071219.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071219.date 19-Dec-07 =data ww2010.weblog.y2007.e071219.txt1 Commentators were stunned Tuesday, when the ECB offered "unlimited" funds at low interest =data ww2010.weblog.y2007.e071219.txt2 rate to a wide variety of European banks. The fixed 4.21% interest rate was substantially lower than borrowing rates otherwise. By the end of the day Tuesday, the <#stdurl http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3070990.ece "ECB had flooded the market"#> with $500 billion of new liquidity. Furthermore, banks borrowing this money were allowed to put even mortgage-backed securities up as collateral. The catch? It's a two week loan. It has to be paid back to the ECB - with interest -- at the end of two weeks. The ECB's purpose is to make sure that banks have plenty of money to lend right now, since banks need plenty of liquidity at year end to meet potential regulatory requirements. This ECB auction comes on top of the "Term Auction Facility (TAF)" auctions that were jointly <#inc ww2010.weblog.ref e071213 "announced last week"#> by many of the world's major central banks. The global economy is like a drug addict that needs a bigger and bigger "kick" each time. In August, a ½% interest rate reduction sent investors on a buying orgy. By October, an interest rate reduction had no effect at all, and last week's interest reduction was met with <#inc ww2010.weblog.ref e071212 "international scorn and ridicule."#> So now the ECB has really poured it on, with this huge $½ trillion injection of funds in one day. <#inc ww2010.pic g071218.jpg right "" "Aaron Heslehurst, BBC anchor (Source: BBC)"#> Did it have the desired effect? It was hardly noticed on Wall Street. But in Europe it actually caused a great deal of fright. On the BBC world business report on Tuesday morning, here's how the anchor, Aaron Heslehurst, opened his report:

"Well, if you haven't been worrying up to this point, perhaps it is time to start, because the big question is, are we headed toward an end of year money market meltdown. Well today, the European central bank has certainly given us cause to worry by offering the region unlimited funds at a fixed rate. It amounts to eye-watering $500 billion to tide the banks over to the year-end period, the second time it's made such a move in its nine year history. Of course it's uncharted territory in the credit crunch, all sparked, of course, by that sharp downturn in the US property market. It follows coordinated action by the US Fed and other central banks on Monday."

Mervyn King, the Governor of the Bank of England, was <#stdurl http://business.timesonline.co.uk/tol/business/economics/article3070982.ece "testifying on Tuesday"#> to the Commons Treasury Committee. He said that the central banks had to act to dispel lenders' fears: <#inc ww2010.pic g071218b.jpg right "" "Mervyn King, Governor of Bank of England (Source: BBC)"#>

"What has become evident is that banks are concerned about the capital position of other banks. They do not know where the losses resulting from the array of derivative financial instruments will finally come to rest, and I think in the last four weeks we've also seen a more disturbing development, which is that the banks themselves are worried that the impact of their reluctance to lend collectively will lead to a sharper downturn in the United States, and perhaps elsewhere, thus generating further losses outside the housing and financial sectors, which will feed back onto balance sheets and reinforce their reluctance to lend, because of the need to generate more capital."

Oddly enough, <#stdurl http://business.timesonline.co.uk/tol/business/economics/article3070982.ece "King says that"#> banks are "awash with cash," but they're afraid to loan money to other banks. The fear arises over possible new losses on CDOs and other mortgage-backed securities that in many cases have turned out to be near worthless. It was this fear, rather than a shortage of funds, that was keeping banks from lending to other banks.

"In the last four to five weeks, there has been a palpable sense of fear. The difficulty we face is that even operations we put in place cannot be guaranteed [to], and are indeed unlikely to, bring about a significant reduction in [interest rate] spreads."

What's going on here? So much of what's happening is opaque, but we can make some reasonable assumptions, keeping in mind that the optimistic views presented by pundits and financial executives over the last year or two have all turned out to be completely wrong. The credit bubble has grown enormously. The notional value of credit derivatives in the last year has grown from about $450 trillion to about $750 trillion. Now here's the obvious thing: If the value of credit derivatives can INCREASE by $300 trillion in a year, then they can DECREASE by $300 trillion in a year, and that's what's been going on. Commentators joke about banks and financial institutions "going to the confessional," meaning that they admit that a percentage of their assets are mortgage-backed securities that are now near-worthless. The fact is that very few institutions have gone to the confessional. Probably 99.9% of even the world's financial institutions are hiding vast amounts of near-worthless securities, and that doesn't even touch upon investments by non-financial companies (such as investment pools in state and local goverments like those <#inc ww2010.weblog.ref e071201 "in Florida and Montana."#>) So the reason that banks are holding on to all their cash is because they've been hiding their questionable assets, and when they finally do "go to the confessional," they're going to have to replace those worthless assets with cash. Mervyn King himself says that these injections of liquidity are "unlikely to bring about a significant reduction" in interest rate spreads. This is what happens when a credit bubble contracts. While it's expanding, and there's plenty of money everywhere, then no one cares what's going on. Once it begins leaking, and once the leaking speeds up as is happening now, then people panic. That's why the Central Banks in Europe and North America are desperately trying anything they can to pump the bubble up again. It's as if you were on the beach, and the tide is going out, and the central bankers are running back and forth, carrying buckets of water from the kitchen to the ocean, trying to replace the water that's disappearing with the tides. In the end, it makes no difference at all. It was on August 17, almost exactly four months ago, that I posted the article, <#inc ww2010.weblog.ref e070817 ""The nightmare is finally beginning.""#> That was based on the increasing levels of anxiety and panic that I saw in investors, commentators, and financial executives. I thought at that time that something would have happened by now, and I believe it would have, if the Central Banks hadn't made such a concerted effort to keep the bubble pumped up. But for the drug addict investors, each new injection of liquidity gives less of a "kick" than the previous one. The bubble is leaking faster and faster, and I would still guess that it can't be too much longer before a generational panic begins to take shape. We're overdue for it. =eod =// &&2 e071218b Chinese commemorate the 1937 Massacre at Nanking (Nanjing) =data ww2010.weblog.y2007.e071218b.head Chinese commemorate the 1937 Massacre at Nanking (Nanjing) =data ww2010.weblog.y2007.e071218b.keys china, japan, nanking massacre, nanjing massacre, nagasaki and hiroshima, turkey, darfur, united nations, roxanne xenakis, orthodox christianity, armenia, germany, japan, world war ii, korea, china, japan strategy =data ww2010.weblog.y2007.e071218b.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071218b.date 18-Dec-07 =data ww2010.weblog.y2007.e071218b.txt1 Hundreds of thousands of civilians were raped and killed =data ww2010.weblog.y2007.e071218b.txt2 in the one-time capital city of China, in a Japanese invasion that began on December 13, 1937. <#inc ww2010.pic g071216.jpg right "" "The NY Times of December 18, 1937, photographed in the Nanjing Massacre Memorial in Nanjing, China, with news of the Nanjing massacre as the lead page one story. (Source: Xinhua)"#> There seems little doubt that the massacre occurred, especially because there were Western observers who reported on it, and because the Japanese themselves <#stdurl http://www.nationalpost.com/news/story.html?id=165132 "bragged about it in Tokyo newspapers"#> shortly after it happened. Nonetheless, remembering the Nanjing massacre causes pain among the Japanese, to the point where many "nationalist" Japanese are denying that it ever happened, or that more than a few dozen people were killed. The result is that the Nanjing massacre, along with the Japanese army's use of Korean and Chinese women as "comfort women" during World War II, remains a festering and growing sore in the relationship between the Chinese and Japanese people. From the point of view of Generational Dynamics, these sores are going to be a major part of the visceral emotions that will lead to a new war between China and Japan, as part of the Clash of Civilizations world war. The incident is even a source of division among the Japanese themselves. A new movie, "The Truth About Nanjing," by Japanese producer Satoru Mizushima, will premiere in January. The movie reportedly <#stdurl http://uk.reuters.com/article/entertainmentNews/idUKT24924820071214 "contains newsreel footage from the time"#> that shows the Japanese military entering the city and bringing peace and order. This point of view has divided Japanese opinion, but is generally condemned outside of Japan. As part of the Generational Dynamics theory, I use the word "genocide" quite often on this web site, but I use the word in a way that differs from the strictly legal definition. The Generational Dynamics definition of "genocide" refers to any action that clearly gives little value to individual life. Generally this means that the society gives much higher priority to scoring a victory in war than it gives to the goal of preserving individual lives, especially civilian lives. For example, under the Generational Dynamics definition, the following would be considered genocidal actions by the United States in World War II:

Sending tens of thousands of soldiers onto the beaches of Normandy, where they would be slaughtered like fish in a barrel;
Firebombing Dresden and Tokyo, and using nuclear weapons on Nagasaki and Hiroshima, killing masses of civilians.

Other examples of genocidal acts during World War II are the Holocaust (by the Germans) and the Bataan Death March (by the Japanese). From the point of view of Generational Dynamics, these kinds of genocidal acts are what characterize a crisis war. Non-crisis wars do NOT have these genocidal acts, as can be seen, for example, of America's actions in the wars in Vietnam and Iraq, where internal political pressures force us to criminally prosecute soldiers who harm civilians. I've said on occasions that no nation ever remembers the genocidal acts that they perpetrate against others, or ever forgets the genocidal acts that others perpetrate against them. That's an exaggeration, but there's still a good question to ask: What does it take for a nation to be "forgiven" for its genocidal acts? It would appear that it takes an admission, an acknowledgment, and an apology. This is obviously a subject that's not easy to deal with, and there are several contemporary disputes on genocide:

The Nanjing (Nanking) massacre, as just discussed;
The question of whether the war deaths of <#inc ww2010.weblog.ref e071029 "hundreds of thousands of (Orthodox) Armenians"#> living with Turkey's borders was a "genocide," in international law.
The question of whether the Darfur war is a "genocide." The United States was the first and so far (I believe) the only nation or organization to call it a "genocide." The United Nations and the Europeans have refused to do so.

Memories of these events can last for centuries. My mother, a devout Greek Orthodox, would express anger at an event that occurred centuries ago. When I was young I never even knew what she was talking about, but it was clear that it was important. In 1204, a new Catholic Crusade was heading out to recapture Jerusalem back again from the Muslim Turks. Along the way, the Catholic army sacked Constantinople, starving and murdering its citizens, and plundered the Orthodox Church's treasures accumulated over the centuries. The deed was capped by placing a prostitute on the Emperor's throne at the church of St. Sophia, at that time the most beautiful church in Christendom. This event has caused centuries of hatred and conflict between Catholics and Orthodox Christians, because there had never been an apology. Finally, in 2004(!!), <#inc ww2010.weblog.ref e040713b "Pope John Paul apologized"#> for the 1204 sacking of Constantinople -- exactly 800 years later. Since World War II, there's been a difference between Germany and Japan. The Germans have largely received international praise and respect for their willingness to admit and discuss their Nazi past during World War II. This openness is something that Germans can be proud of although, of course, not everyone has forgiven them. It's been very difficult for the Germans to go through that self-analysis, but the Japanese have had an even more difficult time. Their reluctance to apologize to "comfort women" or to clearly acknowledge the atrocities of previous generations, their ambiguities about Japanese "war heroes," their willingness to <#stdurl http://www.csmonitor.com/2007/1023/p04s01-wosc.html "revise history texts,"#> and their nationalist movements to deny the past have infuriated modern Koreans and Chinese. The difference is easy to see: Just look at the the relationship today between Jews and Germans, and contrast it to the relationship today between Chinese and Japanese. The fact is that genocide is really not so strange; in fact, it's as much a part of being human as sex is. When there isn't enough food to feed two nations, then they fight over existing resources, often with the intent of each to exterminate the other. Genocidal warfare is necessary for "survival of the fittest" in human evolution. Without both sex and genocidal warfare, human beings would not exist today. Despite all that, "Anti-Japanese feeling runs deep in many Chinese breasts," according to <#stdurl http://www.csmonitor.com/2007/1214/p06s02-wogn.html "an American reporter."#> "But especially in Nanjing, where Imperial Japanese troops ran amok in December 1937 in what has become known in China as the Nanjing Massacre. One Chinese taxi driver told me that on every Dec. 13th, the anniversary of Nanjing's fall, none of his colleagues will carry a Japanese passenger – though they don't discriminate the rest of the year. He said that it was a special day." There are several movies describing the massacre being released at this time. <#stdurl http://www.imdb.com/title/tt0889588/ "The Children of Huang Shi"#> is about a British journalist who saved a group of orphaned children during the massacre. And <#stdurl http://www.imdb.com/title/tt0893356/ "Nanking"#> tells the story of the massacre, aided by original news footage. Al-Jazeera has put together a well-done <#stdurl http://www.youtube.com/watch?v=AdIzTzxnQeg "news story on the massacre,"#> which can be viewed here:

=eod =// &&2 e071218 As corporate earnings fall, stock prices rush to catch up =data ww2010.weblog.y2007.e071218.head As corporate earnings fall, stock prices rush to catch up =data ww2010.weblog.y2007.e071218.keys finance, earnings, fed model, bank of england, european central bank, credit crunch =data ww2010.weblog.y2007.e071218.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071218.date 18-Dec-07 =data ww2010.weblog.y2007.e071218.txt1 Price/earnings ratios have risen significantly in the last few weeks, =data ww2010.weblog.y2007.e071218.txt2 as estimates for fourth quarter earnings have continued to fall. The stock market bubble has been driven in recent years partially by investor anticipation of continued double-digit earnings growth. However, estimates have fallen sharply in the last half of this year. At the beginning of Q3, estimates were that corporate earnings would grow by 6.2%; at the end, <#inc ww2010.weblog.ref e071116 "corporate earnings actually FELL 2.4%."#> The fall appears to be accelerating in Q4, according to the latest summary from <#stdurl http://www.cnbc.com/id/15839135/site/14081545/ "CNBC's earnings central:"#>

"Earnings Central Stats As of Friday, December 14th: 4 companies in the S&P 500 have reported earnings for Q4, 75% have beaten estimates, 25% were in-line, and none have missed. (Data provided by Reuters Estimates)The blended earnings growth rate for the S&P 500 in fourth-quarter 2007, combining actual numbers for companies that have reported, and estimates for companies yet to report, fell to -3.8%, down from -1.3% last week, attributed in part to downward estimate revisions in Financials, including Bank of America, Washington Mutual and Citigroup. At the start of the quarter, the growth rate for Q4 was 11.5%. (Data provided by Thomson Financial)"

In other words, the estimate at the beginning of Q4 was that earnings would grow by 11.5%; instead, the current estimate is that they FALL by 3.8%. That's even worse than last week's estimate, that they would fall by 1.3%. The fall in corporate earnings growth is taking its toll on "stock valuations" or "stock price/earnings ratios." As the earnings fall, the P/E ratio goes up. There's a price/earnings ratio chart at the bottom of this web site's home page, and it gets updated automatically every Friday. Here's the December 14 version of the chart: <#inc ww2010.pic pe071214.gif center "" "S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 14-Dec-2007. (Source: MarketGauge ® by DataView, LLC)"#> As you can see, the P/E ratio varied between 17 and 18 for the last year, but recently went up to about 19. This increase reflects the fall in earnings estimates. This could explain why Wall Street stocks have been falling recently. Investors all tend to follow the same formula, based on something called the "Fed Model," a fallacious but widely used investment formula derived from a single paragraph buried deep in a 1997 Federal Reserve report. As P/E ratios rise, this formula will tell them that stocks are overpriced. From the point of view of Generational Dynamics, the stock market is indeed overpriced -- by a factor of around 250% -- as I explained in my article <#hreftext ww2010.i.panic070820 ""How to compute the 'real value' of the stock market.""#> Central banks - the US Federal Reserve (Fed), the Bank of England (BoE), the European Central Bank (ECB) -- have all been taking steps to increase liquidity, to fight the "credit crunch." Last week's spectacular announcement by world central banks of <#inc ww2010.weblog.ref e071213 "a plan to end credit crunch"#> is being supplemented by various more informal plans to provide liquidity in various ways. However, as I explained in <#inc ww2010.weblog.ref e071206 ""Questions and answers about the 'credit crunch,'""#> there isn't enough money in the world to fill the hole left by continually contracting amount of money in the world. The credit bubble is deflating, apparently with increasing speed. The central banks are desperately trying to pump it up again, but they can't keep up. So far, it seems likely that stock prices have been controlled mostly by institutional investors; there aren't too many "Main Street" investors who have been reacted to the credit crunch so far. But we're now overdue for a "generation panic and crash," an elemental force of nature that hasn't been seen since the 1929 crash. The generations of people who survived the 1929 crash and the horrors of the 1930s Great Depression are gone now. Today's leaders are Boomers and Generation-Xers who have never seen anything like a generational stock market panic and crash, and don't even believe that it's possible. At some point, millions or tens of millions of Boomers and Xers will panic and try to sell off their stocks, resulting in a new generational panic and crash, and it can't be stopped any more than a tsunami can be stopped. =eod =// &&2 e071217 California - Schwarzenegger will declare 'fiscal emergency' =data ww2010.weblog.y2007.e071217.head California Governor Arnold Schwarzenegger will declare "fiscal emergency" =data ww2010.weblog.y2007.e071217.keys arnold schwarzenegger, housing bubble, finance, 1950s =data ww2010.weblog.y2007.e071217.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071217.date 17-Dec-07 =data ww2010.weblog.y2007.e071217.txt1 After years of increased state spending, thanks to bloated tax revenues from the bubble economy, =data ww2010.weblog.y2007.e071217.txt2 California has been increasing spending on new programs. But now, as the real estate bubble is collapsing and the credit bubble is leaking, tax revenues are slowing, while expenses are increasing. The result is a $1.9 billion shortfall in this fiscal year, and an anticipated $14 billion shortfall next year. Nothing can be done immediately, since the California state legislature hibernates, just like bears do. The winter recess began in September and ends in January. When the legislature convenes in January, <#stdurl http://www.signonsandiego.com/news/state/20071215-9999-1n15budget.html "Schwarzenegger will declare a state of fiscal emergency,"#> under a little-known provision in Proposition 58, a balanced-budget measure that voters approved in March 2004. Apparently this is going to be very dramatic. Schwarzenegger will declare a state of emergency, after which the legislature has 45 days to solve the problem -- either by raising taxes or cutting programs. If they haven't succeeded, then they're not allowed to conduct any other business until they do succeed. For some reason, this story reminds me of a remark by one of my school teachers in the 1950s. Her name was Miss Shepherd, and she had a wooden leg -- I assume she lost her leg in the war, but I don't know. Anyway, one day out of the blue she said, "People think that if you have a job as a schoolteacher, then your job is safe, because they always need schoolteachers. But that isn't what happened in the 1930s. They would put two or three classes together in a single room, and replace three teachers with just one teacher." That's all I remember, except that she was very emotional when she said it -- a combination of anger and sadness. Generational Dynamics predicts that, unfortunately, those days are coming again. The situation in California is hardly unique among the states, and it's only going to get worse as the bubbles continue to deflate. There are some hard days ahead, and there's no way to stop them. As I always say, treasure the time you have left, and use the time to prepare yourself, your family, your community and your nation. =eod =// &&2 e071216 UN Climate Change conference reaches a compromise agreement =data ww2010.weblog.y2007.e071216.head UN Climate Change conference reaches a compromise agreement =data ww2010.weblog.y2007.e071216.keys global warming, south africa =data ww2010.weblog.y2007.e071216.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071216.date 16-Dec-07 =data ww2010.weblog.y2007.e071216.txt1 The two-week conference at the Bali beach resort ended Saturday, =data ww2010.weblog.y2007.e071216.txt2 with the United States <#stdurl http://www.reuters.com/article/latestCrisis/idUSSP186600 "caving in on some of the demands"#> of the "developing nations," resulting in a compromise agreement. The worst of the demands, setting numerical requirements on carbon emissions, was avoided by means of the persistent refusal of the US delegation to accede. As we described a couple of days ago, <#inc ww2010.weblog.ref e071214b "investment bankers have been lobbying for these demands,"#> because the resulting "carbon credit" system could be turned into money-making scam like the subprime mortgage securities. Apparently the financial engineers at these banks, led by Louis Redshaw at Barclays Capital in London, have figured out a way to turn these carbon credits into derivatives. I don't know the details, but it's probably something like derivative securities that "bet" on whether or not a particular country will meet its emission targets by some date. The financial engineers would then turn these into AAA rated CDOs. The banks would make billions by taking fat commissions off the top, and everyone else would get screwed, same as with mortgage-backed securities. The numerical targets were NOT agreed to, infuriating the "developing nations," who have been hoping to use "climate change" as a political vehicle to demand money from the United States. Last time, we quoted a bitter, angry spokeswoman for environmental groups saying, "There is a wrecking crew here in Bali led by the Bush Administration and its minions. Those minions continue to be the governments of Canada, Japan, Saudi Arabia and others, with unfortunately Australia shadowing that group of minions." As I said the last time, this banking scheme doesn't have a snowflake's chance in hell of being approved, largely because investors will not fall this scam after falling for the subprime mortgage scam. Another demand was for an "Adaptation Fund," where the US would pay "developing nations" to curb emissions. This fund is supposed to start in 2008, but it's a lot smaller in scope than the carbon credit scheme. As I understand it, the turning point in the conference came when the South African delegation bitterly denounced the US for refusing to compromise. Now, the sainted Nelson Mandela has been going around comparing Bush to Hitler, and so as far as I'm concerned the South Africans can take their denunciations and shove them. Nonetheless, the South Africans' denunciations were met with wild applause by the other "developing nations" delegates, and the US finally acceded on this point. It's highly doubtful that anything will come of this farce. In the end, the compromise agreement was more an agreement to have more conferences in 2008, with a final agreement to be worked out in 2009. It'll be interesting to see which politicians sign on to these nutty proposals during the Presidental campaign. In the meantime, despite all the sunning and surfing and bickering and political one-upsmanship, this isn't about anything but money. There isn't a single credible proposal for any country to reduce its carbon emissions by any amount at all. =eod =// &&2 e071214b UN Climate Change conference appears to be ending in farce =data ww2010.weblog.y2007.e071214b.head UN Climate Change conference appears to be ending in farce =data ww2010.weblog.y2007.e071214b.keys global warming, al gore, united nations, ban ki-moon, europe, china, india, louis redshaw =data ww2010.weblog.y2007.e071214b.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071214b.date 14-Dec-07 =data ww2010.weblog.y2007.e071214b.txt1 After two weeks of fun on Bali beaches, participants appear to have agreed on only one thing: =data ww2010.weblog.y2007.e071214b.txt2 that "the United States, is principally responsible for obstructing progress here in Bali." Those are the words of former Vice President Al Gore, for which he receive wild cheers and acclamations at the UN Climate Change Conference in Bali. <#inc ww2010.pic g071213a.jpg right "" "Al Gore speaking at Climate Change Conference (Source: CNN)"#> Now the conference is apparently about to collapse in farce, with no agreement whatsoever. A bitter, angry <#stdurl http://www.smh.com.au/news/environment/bali-talks-in-balance/2007/12/13/1197135655538.html "spokeswoman for environmental groups"#> at the conference said, "There is a wrecking crew here in Bali led by the Bush Administration and its minions. Those minions continue to be the governments of Canada, Japan, Saudi Arabia and others, with unfortunately Australia shadowing that group of minions." UN Secretary General <#stdurl http://www.spiegel.de/international/world/0,1518,522929,00.html "Ban Ki-moon said,"#> "We are at a crossroad. "One path leads to a comprehensive climate change agreement, the other to oblivion. The choice is clear." Oblivion? This whole thing is a big joke. Even if all the claims about "global warming" are true (and I doubt it), I still haven't heard anything remotely like a technology or a plan to stop it that has even the tiniest hope of making any difference. Al Gore himself obviously thinks it's a big joke. He lives in a mansion expending huge amounts of energy, and makes jokes about donating money to Greenpeace to make up for it. Every chance he gets, he uses "global warming" as an opportunity to make fatuous political statements. If Al Gore really believed what he was saying, then he'd be a lot more serious. Instead, his only prescription is that you should vote for Democrats. If he really believed what he was saying, and that the earth was in danger, he wouldn't be joking around and making stupid political statements. I know this because I DO believe what I'm saying. I believe every word that I write on my web site. When I was just getting started, and realized the consequences to myself and the world, I was so depressed that I couldn't sleep for months. (Incidentally, I'm doing my part to support the great worldwide crusade to prevent global warming. I use fluorescent light bulbs throughout my apartment, I walk often, and when I drive, it's a compact car. I feel confident that my "carbon footprint" is smaller than Al Gore's.) <#inc ww2010.pic g071213b.jpg left "" "Bali Beach Resort"#> And now we have 159 countries sending delegates and their staffs in jet planes to an expensive beach resort in the middle of the (northern hemisphere) winter, to meet in air conditioned rooms for three hours a day before going out to enjoy the beach. Trust me, these are not serious people. They would NEVER be doing this if they believed anything they were saying about "oblivion." For example, they could have had their meeting by setting up five or six meeting rooms on different continents, linking them up with video meeting software. If they really believed what they were saying, then they would have "saved the planet" by doing that. A year ago I wrote an article saying that <#inc ww2010.weblog.ref e060104 "the Kyoto protocol was evidently dead."#> The reason is because the European nations were doing almost nothing -- NOTHING -- to comply with it. The European nations were either doing nothing to reach their targets, or they were actual INCREASING their carbon emissions. And yet, the EU countries were officially meeting their targets. How? Because their targets were set based on 1990 emissions, and many countries have converted from coal to oil factories since then, so their emissions would have decreased anyway. The same is true of Russia. And these are the same arrogant Europeans who criticize America for not signing the Kyoto treaty. Furthermore, everyone knows that nobody is going to do anything to reduce carbon emissions. Americans aren't going to give up their SUVs. Europeans aren't going to spend any money on this. The nations growing fastest in carbon emissions -- China and India -- aren't going to do anything about it, because they're "developing nations." So nobody is going to do anything to reduce carbon emissions. So why the bitter denunciations? It turns out that there's a very easy answer to that question. Back in the 70s and 80s, the United States government used a trading scheme that permitted one region to keep polluting if it purchased "credits" from another region that did reduce pollution. And it worked pretty well. The US has done a great deal to reduce pollution in the last few decades. The EU has developed a similar "Carbon Trading Scheme" that permits one country to purchase carbon credits from another country that was reducing carbon emissions. However, as we said above, the targets were set so high that the market for carbon credits collapsed, and nobody actually did anything to reduce carbon emissions. So now the folks at Bali want to implement a similar trading scheme, on a worldwide basis that includes the US. The US would have to commit to reducing carbon emissions by 20-40% by 2020, an absurd goal. Well, if you want to understand what's going on, the first place you might look is at the statements of <#stdurl http://www.spiegel.de/international/germany/0,1518,522785,00.html "UN official Yvo de Boer,"#> who claims that an international market of trading carbon credits between rich and poor nations might be worth over $100 billion per year. "That would offer rich countries the choice of reducing emissions at home or implementing a project in a developing country," said de Boer. "Often reducing emissions in developing countries is a lot cheaper." So there you have it. If only the US would sign up for this new protocol, then they'd vote to set the targets in such a way that the US would have to pay $100 billion to "developing countries." Can you believe this? And who would be administering this $100 billion -- soon to be $200 billion, then a trillion, then several trillion? Why, the UN would be administering it, not hesitating to take their fat commissions off the top to pay for Ban Ki-moon's bloated bureaucracy. But there's more. Once you scratch the surface of this, it turns into a mind-boggling scam that rivals the subprime mortgage crisis. <#inc ww2010.pic g071213c.jpg right "" "Louis Redshaw, Head of Environment Markets, Barclays Capital (Source: IHT.com)"#> While I was researching this story, I came across the name Louis Redshaw as perhaps the most outspoken business supporter of the carbon trading scheme. He works at Barclays Capital in London, where his title is Head of Environment Markets. So I used google to find out a bit about this guy. It turns out that he's a Generation-Xer, born around 1970, who started his career as an <#stdurl http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2075030.ece "energy trader at Enron Corp.,"#> the company that became mired in scandal and collapsed in the early 2000s. But that only whet his appetite:

"In 2004, Louis Redshaw, a trader in his early thirties, trudged around the London offices of some of the world’s biggest investment banks with a bright idea: how to make pots of money from trading carbon. Some were sceptical; others rejected the idea outright. Only Barclays Capital took the bait. Today just about every sizeable investment bank – from Goldman Sachs to JP Morgan and the French bank Calyon – has plunged into trading carbon credits and emissions certificates in what some have dubbed a ‘green gold rush’. The market, at about €40 billion (£27 billion) a year, may be small compared with foreign currency or bond trading, but it is hot. With many predicting that the carbon-trading market will grow explosively to top $1,000 billion (£492 billion) within the decade, no investment bank can afford to sit on the sidelines. Top traders are among the rising stars of the City, earning hundreds of thousands of pounds in pay and bonuses. In the close-knit world of about 150 carbon traders in London, Redshaw, who worked as a trader for Enron, the collapsed energy giant, and EDF Energy, is seen as one of the pioneers."

An <#stdurl http://business.timesonline.co.uk/tol/business/article552446.ece "article written in 2005"#> says

"Fans reckon trading volumes will soon be worth many billions of pounds per year. James Cameron at the investment boutique Climate Change Capital said: “I think this is likely to get bigger than the interest-rate-swaps market within 10 to 15 years, particularly once America joins in.” ... Cameron said: “Europe will be the centre of the global market as a result of it taking the lead. It will provide the benchmark. London is the leading centre and will remain so for years to come. The preparation has taken place here, and other financial centres are not so advanced, although there is also a concentration of expertise in the Netherlands.” The market is attracting interest from hedge funds, former Liffe traders and the big banks. Louis Redshaw at Barclays Capital said: “We were the first British bank involved and are now the biggest banking participant. We handle transactions that are many multiples of the standard market size of 10,000 tonnes. A million-tonne transaction is not out of the question."

Notice the claim that it will be "bigger than the interest rate swap market within 10-15 years"; that's part of the alchemy that Gen-X financial engineers used to transform near worthless subprime mortgages into AAA rated securities. By September of this year, <#stdurl http://www.iht.com/articles/2007/09/26/business/bank.php "major banks were lobbying hard"#> to get the United States to agree to carbon emission limits at the Bali meeting:

"A group representing some of the world's leading banks will urge the United States and other industrial nations this week to move quickly to introduce a lightly regulated system for trading carbon emissions permits. Permit-trading offers banks a potentially vast new business. For it to grow, leading economies - particularly the United States - will need to set limits on the quantities of greenhouse gases that can be released and to allow companies in other parts of the world to buy emissions permits. "Where politicians opt to implement carbon constraints, then it should be cap-and-trade," said Imtiaz Ahmad, head of emissions trading at Morgan Stanley in London and vice president of a lobbying group called International Carbon Investors and Services, which is being created to represent the banks. The banking companies, which include Citigroup, Lehman Brothers Holdings and Morgan Stanley, are giving strong signs that Wall Street wants Washington to open the way to reduced emissions using a trading system based on the Kyoto Protocol, an agreement the United States did not ratify, rather than by enacting carbon taxes. The group also includes European institutions like BNP Paribas, Barclays Capital and Deutsche Bank, as well as niche investment banks like Climate Change Capital and the law firms of Baker & McKenzie and DLA Piper. ... Carbon traders say emissions permits could become the world's largest commodities market if developed economies agree to take part in second-phase Kyoto negotiations, to be held in Bali, Indonesia, in December."

Do you recognize that list of banks? Those are the same banks that are mired in writedowns of hundreds of billions of dollars in near-worthless securities based on "subprime" mortgages. And consider the time frame: This article appeared in September, just after the August "credit crunch" crisis, when all the subprime schemes were beginning to collapse. These banks were looking for a new gravy train. And then, just last week, Barclays Capital launched the first Global Carbon Index. Here's an excerpt from <#stdurl http://www.barcap.com/sites/v/index.jsp?vgnextoid=81f9f999ddca6110VgnVCM2000001613410aRCRD&vgnextchannel=1c6c15cd3f4f8010VgnVCM1000002581c50aRCRD "the press release:"#>

"This is the first time that such an index has been made available to asset managers, private banks and institutional investors looking for a comprehensive benchmark for the rapidly growing carbon emissions markets. The index is governed by the Barclays Capital Environmental Markets Index Committee, a newly formed independent body comprising representatives from the carbon industry and members of the institutional investment community. The Committee has been mandated to provide oversight to the development of the BGCI. ... Louis Redshaw, Head of Environmental Markets, added: "The launch of this index is an important development in our environmental markets product offering. As we move towards the launch of the first phase of the Kyoto protocol and the second phase of the EU Emissions Trading Scheme, we expect the market to grow significantly as both corporates and investors look to manage their risks and leverage new opportunities. Barclays Capital is regarded as one of the major innovators in the emissions trading space, and with the addition of this product to our portfolio we are very pleased to be able to provide carbon risk solutions to the full spectrum of clients."

Within the last couple of weeks, <#stdurl http://www.securitiesindustry.com/issues/19_41/21763-1.html "Redshaw was still lobbying:"#>

"Carbon will be the world’s biggest commodity market, and it could become the world’s biggest market overall,” said Louis Redshaw, head of environmental markets at Barclays Capital and an early pioneer in carbon trading. He is not alone in that opinion. Chris Leeds, head of emissions trading at Merrill Lynch & Co. said he believes that carbon could become “one of the fastest-growing markets ever, with volumes comparable to credit derivatives inside a decade."

And so Dear Readers, admit it: When I said a few paragraphs back that this was a scam intended to rival the subprime mortgage disaster, you thought I was joking or being hyperbolic, didn't you? But now you see that I wasn't. Now, I don't really know who Louis Redshaw is, but I know his type: A <#inc ww2010.weblog.ref e071121 "Gen-Xer with contempt for the United States and for the entire world financial system,"#> the type of person who couldn't care less how many other people get screwed, as long as he makes his millions. And you can bet that all those environmental delegates lounging on the beaches in Bali are aware of this as well. They all talk to their brokers every day, and they all believe it's their turn to screw the world and make their millions as well. And you can be certain that Al Gore and Ban Ki-moon have their hands in the honey pot as well. If you read through those articles, you can see that the entire scam depends on one thing: Getting the United States to agree to it. At that point, the whole scheme can start to take off. That's why all those greedy bastards are so bitterly furious about the refusal of the US to get on board. They couldn't care less about how many people die from coastal flooding. They just want their money. In the end, "Global Climate Change" is nothing but an enormous scam. The only good thing about it is that it doesn't have a snowflake's chance in hell of getting approved. =eod =// &&2 e071214 Algeria bombings are from new generation of young al-Qaeda terrorists =data ww2010.weblog.y2007.e071214.head Algeria bombings are from a new generation of young al-Qaeda terrorists =data ww2010.weblog.y2007.e071214.keys algeria, al-qaeda, salafist group for preaching and combat, gspc, hero/prophet relationship, pakistan =data ww2010.weblog.y2007.e071214.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071214.date 14-Dec-07 =data ww2010.weblog.y2007.e071214.txt1 Thirty people, including 11 UN employees, were killed =data ww2010.weblog.y2007.e071214.txt2 by <#stdurl http://www.smh.com.au/news/world/un-staff-among-30-bomb-victims/2007/12/12/1197135557588.html "two suicide bomb blasts in Algiers on Tuesday."#> The blasts targeted the Algiers UN building and Algeria's Constitutional Council building, and also claimed the lives of students traveling to school in a school bus. =inc ww2010.xr.related1 right algeria 3 Algiers has been targeted by Sunni Islamist terrorist bombings since the 1990s, but recent activities represent a significant change of strategy. Whereas terrorist activities in the past have specifically targeted the the Algerian government, recent bombings are targeted international targets. The change coincides with the announcement, in September, 2006, that the major Algerian terrorist group <#inc ww2010.weblog.ref e060915 "was joining al-Qaeda in its worldwide jihadist efforts,"#> especially targeting France, Algeria's former colonial power. The terrorist group, called "Salafist Group for Preaching and Combat (GSPC)" changed its name to "Al Qaeda in the Islamic Maghreb" (Maghreb is the Arabic word for North Africa), and began much more visible terrorist activities, beginning with spectacular <#inc ww2010.weblog.ref e070413 "terrorist bombings in Algiers and Casablanca"#> on April 11 of this year. Professor Noureddine Jebnoun of Georgetown University was interviewed on BBC World, and described the strategy as follows:

"Q: Why Algeria today, and why the United Nations? Noureddine: We have three attacks -- April 11, called "Black Wednesday" in Algiers, we have July 11, the suicide bomb attack against the military base in the south and east of the capital Algiers, and today, another attack. This is the symbol of al-Qaeda. Q: Why always on the 11'th of the month -- April 11, July 11, and now December 11 -- and of course, September 11? Noureddine: This is the symbol of al-Qaeda since 9/11 -- September 11 -- and it's become a symbol of this organization. Q: But why would they want to target something like the United Nations relief agency, because that does send a very big signal, does it not, to the international community? Noureddine: This is just al-Qaeda trying to cut off the support from the international community, and especially from the United Nations, and to send a message to the French government, after the visit of President Sarkozy, and to the United States. This government is very weak and you cannot continue to supply this government against what they thought was against the Algerian people. Q: Any danger that Algeria could revisit the violence that rocked it in the 1990s, with an appalling toll of hundreds of thousands of people killed? <#inc ww2010.pic g071211d.jpg left "" "Noureddine Jebnoun, Georgetown University (Source: BBC)"#> Noureddine: I think so, because you know Algeria and North Africa and the Mahgrab region, you have a huge reservoir of youth, disenfranchised youth, that this organization can recruit, and it can use it against the Algerian government, against the Algerian security forces, And now the strategy, the modus operand of this organization, was completely shifted. They tried to attack the civil target, and they tried to attack the Algerian government symbols, as for example the Supreme Court."

This emphasis on the younger generation is something I've discussed many times before. Last month, MI5 Director General Jonathan Evans gave <#inc ww2010.weblog.ref e071107b "a speech on the UK's threat from al-Qaeda,"#> including the following:

"As a country, we are rightly concerned to protect children from exploitation in other areas. We need to do the same in relation to violent extremism. As I speak, terrorists are methodically and intentionally targeting young people and children in this country. They are radicalising, indoctrinating and grooming young, vulnerable people to carry out acts of terrorism. This year, we have seen individuals as young as 15 and 16 implicated in terrorist-related activity."

As I wrote <#inc ww2010.weblog.ref e061113 "last year,"#> from the point of view of Generational Dynamics, many of Britain's young Muslims have set up a "Hero/Prophet" relationship with the radical clerics in Pakistan's Tribal Areas. This kind of relationship is the visceral basis by means of which new genocidal crisis wars begin. There's an emotional connection between the elder Prophet generation (the idealistic generation born after the last crisis war) and the impatient college age Hero generation (the soldiers who will be fighting the new crisis war). Thanks to the internet and other modern forms of communication, this same kind of "Hero/Prophet" relationship is being set up by al-Qaeda in Pakistan's Tribal Areas. Those who claim that Osama bin Laden is irrelevant because he's hiding out in a cave somewhere are missing the point. Al-Qaeda has become the leading worldwide terrorist "brand name," and bin Laden has become a major prophet and mentor to young, disaffected Islamist youth around the world who are looking for some way to become heroes, even if it means killing themselves. Al-Qaeda is becoming increasingly high-tech, and is using internet videos as a recruiting device. One of those recruiting videos, <#stdurl http://www.youtube.com/watch?v=x2KMmiN03aY ""Al Qaeda Musical Jihad 2,""#> was recently screened on David Letterman's late-night <#stdurl www.cbs.com/latenight/lateshow/wahoo/index/php/20070828.phtml "television show:"#>

=eod =// &&2 e071213b Ben Bernanke: The man with increasing agony. =data ww2010.weblog.y2007.e071213b.head Ben Bernanke: The man with increasing agony. =data ww2010.weblog.y2007.e071213b.keys ben bernanke, finance, japan, alan greenspan, credit crunch, macroeconomics =data ww2010.weblog.y2007.e071213b.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071213b.date 13-Dec-07 =data ww2010.weblog.y2007.e071213b.txt1 In 2005, I described Bernanke as the "The Man without Agony," =data ww2010.weblog.y2007.e071213b.txt2 because <#hreftext ww2010.i.051029bernanke "he didn't express any concern about the global financial situation."#> At various times in the past, he's said that he doesn't believe in bubbles, that the Fed could easily have prevented the 1930s Great Depression, that deflation is easily prevented, and that Fed jawboning is all you need to prevent inflation. This is all blithering nonsense, so much so that I've pretty much ignored most of what Bernanke has said, even since he became Fed Chairman. That's all pretty remarkable, but what's even more remarkable is that Bernanke apparently learned nothing from the experience of the Japanese in the 1990s. Japan had a huge stock market bubble that burst in 1990, leading to 15 years of deflation. Bernanke, as I understand it, simply shrugged off Japan's experience, and blamed it on policy errors by the Bank of Japan. (From the point of view of Generational Dynamics, Japan's experience was right on time. In brief, Japan had a major generational stock market panic and crash in 1990, just like America in 1929. But Japan's previous major stock market crash was in 1919. So you have: Wall Street: Crash in 1929, new bubble in 1995, 66 years later; Tokyo Stock Exchange: Crash in 1919, new bubble in 1984, 65 years later.) In my <#hreftext ww2010.i.051029bernanke "2005 article,"#> I contrasted Bernanke's attitude with that of then-Fed chairman, Alan Greenspan. On this web site, I've been tracing Greenspan's changes of moods: <#hreftext ww2010.i.greenspan040108 "Congratulating himself"#> in January 2004; <#hreftext ww2010.i.greenspan040706 "mixed emotions"#> in July 2004; <#inc ww2010.weblog.ref e050217 "total repudiation of his previous views"#> by February 2005; and his <#inc ww2010.weblog.ref e050830 "schizophrenic swan song"#> as Fed chairman in August 2005. This last speech contained a memorable paragraph that's worth reading again:

"Thus, this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent. To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy. But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums."

Now, this is EXACTLY what's happened since then, and it's what happening now. The reason it's so memorable is that no one can claim they weren't warned. Did Bernanke even read this? If so, did he think that Greenspan was an old fool who didn't know anything? And what about hotshot journalists like Greg Ip at WSJ, or Steve Lieseman at CNBC. Did they pay any attention? This is a very significant and predictive paragraph, and yet I've never seen it quoted anywhere except on this web site. Why is that? Actually, there is ONE place. It's referenced in <#stdurl http://opinionjournal.com/editorial/?id=110010981 "an op-ed article"#> appearing in the Wall Street Journal on Wednesday. The author? Alan Greenspan:

"On Aug. 9, 2007, and the days immediately following, financial markets in much of the world seized up. Virtually overnight the seemingly insatiable desire for financial risk came to an abrupt halt as the price of risk unexpectedly surged. Interest rates on a wide range of asset classes, especially interbank lending, asset-backed commercial paper and junk bonds, rose sharply relative to riskless U.S. Treasury securities. Over the past five years, risk had become increasingly underpriced as market euphoria, fostered by an unprecedented global growth rate, gained cumulative traction. The crisis was thus an accident waiting to happen. If it had not been triggered by the mispricing of securitized subprime mortgages, it would have been produced by eruptions in some other market. As I have noted elsewhere, history has not dealt kindly with protracted periods of low risk premiums." [My emphasis.]

Later in the article, Greenspan points out:

"After more than a half-century observing numerous price bubbles evolve and deflate, I have reluctantly concluded that bubbles cannot be safely defused by monetary policy or other policy initiatives before the speculative fever breaks on its own. There was clearly little the world's central banks could do to temper this most recent surge in human euphoria, in some ways reminiscent of the Dutch Tulip craze of the 17th century and South Sea Bubble of the 18th century."

However, in keeping with general policy of telling half-truths, Greenspan doesn't bother to reach the conclusion that he's obviously implying: That the current bubble is going to end with the same kind of disastrous financial crisis as did the Tulipominia and South Sea bubbles. Greenspan is clearly expressing a great deal of agony. Born in 1926, he's lived through and survived this kind of disaster before, and he knows what's coming. But that leads to the obvious question: Does Ben Bernanke yet feel any agony? Has he begun to realize that his conclusions about the easy avoidability of the Great Depression -- conclusions that he arrived at while sitting on his grandmother's knee as a child, as I drescribed in <#inc ww2010.weblog.ref e070827 ""Bernanke's historic experiment takes center stage,""#> -- has he begun to realize that his entire view of world finance is 100% wrong? Or does he still believe that he can save the world by announcing exactly the right kind of interest cut, accompanied by exactly the right kind of jawboning? The events of the last 24 hours were apparently a great shock to Bernanke, if we're to believe the Wednesday morning chit-chat on CNBC. As <#inc ww2010.weblog.ref e071212 "we described in yesterday's article,"#> commentators and economists were EXTREMELY CONTEMPTUOUS of the "miserly" ¼% interest rate reduction announced by the Fed at 2:15, at which time the Dow Industrials fell 340 points. If Bernanke really was shocked, then this is the first time we've known about it, and it may be a sign that Bernanke is finally beginning to question the nonsense he's believed since he sat on his grandmother's knee. That contempt about the "miserly" rate cut continued through Wednesday, as defenders of Bernanke and the Fed were as scarce as hen's teeth. Yesterday I discussed at length that investors are no longer interested in the market per se; all they care about is whether they anticipate a Fed "surprise" rate cut. Along those lines, what happened on Wednesday was absolutely breaktaking. <#inc ww2010.pic g071212a.gif right "" "Dow Industrials spiked 300 points, then started falling almost 400 points from the peak on December 12"#> Here's what appeared on the Wall Street Journal web site on Wednesday morning:

"Stocks Poised for a Rebound. Stocks are set to rally Wednesday on hopes the Federal Reserve, a day after a rate cut that disappointed the market, may step in to ease the credit crunch. Markets were mostly lower in Europe and Asia. 8:20 a.m."

And indeed they did rally, shooting up almost 300 points (Dow Industrials) within minutes after the market opened, by which time the Fed had announced its plan to inject liquidity into the economy. (There were cynics who believed that the Fed's move was a reaction to the previous day's market plunge, but obviously the new policy was global and must have taken weeks to set up.) Later in the day, the following appeared on the WSJ site:

"Fed Move Lights Fire Under Stocks. Stocks advanced after the Fed announced further steps to ease the credit crunch, though the major indexes were recently off their best gains of the day. Treasury yields surged. 1:02 p.m."

And by the end of the day it read:

"Stocks' Wild Ride Ends in Gains The Dow industrials climbed 41.13 to 13473.90, capping off a session of wild intraday swings with a modest gain as investors digested the Fed's plans to add liquidity to money markets and profit warnings from major banks. 6:26 p.m"

What's remarkable about all this, as I indicated yesterday, is nobody gives a damn about the stocks themselves, or the companies that they represent. Things are so bad in the credit markets that investors don't want to buy stocks, unless they believe that the Fed is going to "save the world." As for Bernanke, he's in the midst of a major shock. Everything that he believed, everything that he taught as a Professor of Economics at Princeton is turning out to be completely wrong. The conclusion that he reached on his grandmother's knee is that the Great Depression could have been avoided if the Fed had injected a little more money into the economy. Now he's beginning to realize the truth: That as the liquidity bubble recedes, there isn't enough money in the universe to end the credit crunch. But it's more important than that. This represents the almost total collapse of the last few decades of macroeconomic theory. As I've said many times, mainstream economists have gotten everything wrong at least since the 1995 start of the bubble, including the bubble itself. Just before the Nasdaq crash of 2000 they were predicting that Nasdaq would increase forever. Many economists were saying that there's no housing bubble as late as a few months ago. Go back and look at their predictions about unemployment, inflation, and so forth, and you'll find that economists are far less reliable than weathermen are in predicting the weather. And you can bet that nobody foresaw the current situation, or has any idea what to do about it. As I wrote last year in <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory,""#> mainstream macroeconomic theory MUST include generational dynamics if it's going to work. But every time I mention this to one of these academics, they simply blow me off -- even though they get one thing wrong after another themselves. As I've been saying for years, the entire world is in a huge bubble. That bubble is leaking, causing banks to hoard money. Bernanke and other central bankers are scrambling around, trying to keep the bubble from leaking, and of course they have no hope of stopping it. It's leaking because attitudes have changed massively among the entire Boomer and Generation-X generations. They're much less willing to take risks, and so they won't respond to Bernanke's schemes to stop the leaks. It's worth repeating the paragraph from Greenspan's 2005 speech:

I wonder if Ben Bernanke is feeling any agony yet? Well, it doesn't really matter, because one way or the other, Bernanke is going to learn his lesson. =eod =// &&2 e071213 World Central Banks announce a plan to end credit crunch. =data ww2010.weblog.y2007.e071213.head Central Banks around the world announce an "unprecedented" joint plan to end the credit crunch. =data ww2010.weblog.y2007.e071213.keys united kingdom, europe, japan, switzerland, sweden, austria, credit-anstalt bank, germany, danatbank =data ww2010.weblog.y2007.e071213.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071213.date 13-Dec-07 =data ww2010.weblog.y2007.e071213.txt1 There were simultaneous announcements on Wednesday by the US, Canada, =data ww2010.weblog.y2007.e071213.txt2 the UK, Europe, Japan, Switzerland and Sweden to provide liquidity to banks at a lower interest rate and under easier terms than usual. The BBC and others have described the new plan as "unprecedented." What was particularly interesting is that all of these central banks are injecting liquidity in the form of US dollars into their local banking system. This is because banks have been hoarding dollars more than other currencies. The other central banks will obtain dollars from the Fed through a repo (repurchase) agreement. Statements were issued simultaneously on Wednesday by the <#stdurl http://www.federalreserve.gov/newsevents/press/monetary/20071212a.htm "Federal Reserve,"#> <#stdurl http://www.ecb.int/press/pr/date/2007/html/pr071212.en.html "European Central Bank,"#> <#stdurl http://www.bankofengland.co.uk/publications/news/2007/158.htm "Bank of England,"#> <#stdurl http://www.bankofcanada.ca/en/notices_fmd/2007/not121207.html "Bank of Canada,"#> <#stdurl http://www.snb.ch/en/mmr/reference/pre_20071212/source/pre_20071212.en.pdf "Swiss National Bank,"#> <#stdurl http://www.boj.or.jp/en/type/release/zuiji07/un0712a.htm "Bank of Japan,"#> and <#stdurl http://www.riksbank.com/templates/Page.aspx?id=26488 "Swedish Riksbank."#> The Fed statement refers to the establishment of a brand-new <#stdurl http://www.federalreserve.gov/monetarypolicy/taf.htm "Term Auction Facility (TAF) program."#> Using whatever securities they have in their portfolios as collateral, banks will be able to bid for dollars to be offered at a series of TAF auctions. The dates for the TAF auctions are as follows:

$20 billion to be auctioned on Monday, December 17;
$20 billion to be auctioned on Thursday, December 20;
Unspecified amounts to be auctioned on January 14 and 28.

The statement adds:

"Experience gained under this temporary program will be helpful in assessing the potential usefulness of augmenting the Federal Reserve’s current monetary policy tools--open market operations and the primary credit facility--with a permanent facility for auctioning term discount window credit. The Board anticipates that it would seek public comment on any proposal for a permanent term auction facility."

In my August article, <#inc ww2010.weblog.ref e070827 ""Bernanke's historic experiment takes center stage,""#> I described how open market operations and the discount window work. The TAF, if it's successful, would add another major tool to the Fed's arsenal. Still, let's face it, this is desperation -- a desperate act to try to pump up the leaking credit bubble and keep it from collapsing. They're talking about $40 billion this month -- that's nothing compared to the writedowns that are occurring. Even the most hopeful mainstream estimates are that there will be a total of $500 billion in writedowns, resulting in $2 trillion more in lost credit, as I described last week in my article, <#inc ww2010.weblog.ref e071206 ""Questions and answers about the 'credit crunch'.""#> So even assuming these optimistic amounts, $40 billion is still a drop in the bucket. You know, the first of these TAF auctions is on Monday, just three days away. So we may know by then whether these auctions will "save the world." Everyone seems to think that with a little Fed "magic," everything will go back to the halcyon days of 2004 to August 2007, when bad news was always good news, and the market had no way to go but up. But that's absolutely impossible, for three reasons:

The credit bubble has gotten too large to be sustainable. It has to deflate just because of its sheer weight.
The generations of people who survived the 1929 crash and the horrors of the 1930s Great Depression are gone now. Today's leaders are Boomers and Generation-Xers who have never seen anything like a generational stock market panic and crash, and don't even believe that it's possible. At some point, millions or tens of millions of Boomers and Xers will panic and try to sell off their stocks, resulting in a new generational panic and crash.
Even ignoring the possibility of a panic and crash, the Boomers and Xers who used the debauched and depraved forms of credit that gave rise to the huge credit bubble are now considerably more risk-averse than they were. A couple of Fed interest rate reductions will not reverse this generational change in attitude to risk-aversion.

Now let me return to the remark by the BBC that this plan is "unprecedented." Maybe a few of the details have changed, but this kind of international cooperation to save the world is not unprecedented. If you haven't read the fascinating story of <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world,""#> then now is a good time to do so. It's the story of what happened in 1930 and 1931, when the world's central bankers got together to save the world from financial collapse. In fact, it was this joint plan that led to the creation of the Bank of International Settlements. The problems then were the same as they are today. The 1920s bubble had created huge amounts of money in the form of a credit bubble, and after the 1929 crash, that bubble started to leak. It was bad enough in the US, but it got worse and worse in Europe. Central bankers in Britain, the US and France got together with a plan to prevent the financial collapse of central Europe by injecting huge amounts of liquidity into the European banks. It worked for a while, but not for long. On May 11, 1931, the Credit-Anstalt bank of Austria failed. This triggered mass panic and bank failures throughout Central Europe, and generated a worldwide banking crisis. On July 13, the German Danatbank failed. Foreign investors in Germany quickly withdrew their capital from Germany, heightening the crisis, leading to the complete collapse of the German economy. By the end of the year, there were over 6 million unemployed, and the resulting social tension gave rise to Communism and Naziism. So, the new international "TAF" plan is not unprecedented. It was tried before, and it failed. Now it's being tried again, for the same reason as in 1930-31, and it's going to fail again, for the same reason as in 1930-31: There isn't enough money in the universe to prevent the credit bubble from collapsing. =eod =// &&2 e071212 Investors suddenly end orgy after 'miserly' Fed interest rate cut =data ww2010.weblog.y2007.e071212.head Investors suddenly end orgy after "miserly" Fed interest rate cut =data ww2010.weblog.y2007.e071212.keys finance, ubs ag, singapore, bank of england, mervyn king =data ww2010.weblog.y2007.e071212.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071212.date 12-Dec-07 =data ww2010.weblog.y2007.e071212.txt1 The Dow Industrials feel 270 points in 30 minutes on Tuesday, =data ww2010.weblog.y2007.e071212.txt2 and then and then fell 70 more points before the final bell. <#inc ww2010.pic g071211a.gif left "" "Dow Industrials fell sharply at 2:15 pm on December 11, after Fed announced a ¼% rate cut."#> The sharp tumble began at 2:15 pm, when the Fed announced a ¼% rate cut to 4.25%. Investors had been hopin' and prayin' for a "surprise" ½% rate cut, and <#stdurl http://www.forbes.com/markets/feeds/afx/2007/12/11/afx4428385.html "expressed contemptuous attitudes"#> at the ¼% announcement, with one economist summarizing it as "Wimps vote for mush." Another <#stdurl http://blogs.wsj.com/economics/2007/12/11/economists-react-miserly-action/ "economist called it"#> "the biggest flop since Ishtar," and a Bear Stearns statement called it a "miserly action." Now, as I've said many times, Generational Dynamics is less concerned about the daily ups and downs of the stock market, and much more concerned about the attitudes of large masses of people, entire generations of people. The ups and downs of the stock market are of interest only insofar as they reflect the attitudes of large masses of people. So the fact that this contemptuous attitude toward the Fed rate cut is so widespread is worth examining closely. <#inc ww2010.pic g071211b.gif right "" "Dow Industrials surged after two "surprise" rate cuts (Aug 17 and Sep 18), but fell after two "ordinary" rate cuts (Oct 31 and Dec 11)"#> This graph shows the results of the last four Fed rate cuts:

The Aug 17 Fed cut in the discount rate was unscheduled and so was a complete surprise; the Sept 18 rate cut of ½% was a surprise, much higher than the expected ¼% cut. The market surged after each of these rate cuts.
The Oct 31 and Dec 11 rate cuts of ¼% were as expected. On both occasions, the market surged in the days prior to the announcement, as investors became erotically aroused at the thought of a new "surprise" -- an unexpected ½% rate cut. When the investors became frustrated, not only did the market not surge either time, but in fact the market fell sharply on both occasions.

In addition, the credit markets responded negatively last week when <#inc ww2010.weblog.ref e071207 "the Bank of England lowered its Bank Rate ¼%."#> In fact, the Libor interest rate (sterling, 3 month) spread <#stdurl http://www.forbes.com/afxnewslimited/feeds/afx/2007/12/11/afx4425637.html "continues to increase every day."#> As of Tuesday morning, the Libor was at 6.63%, representing a "spread" of 1.13% above the official BoE Bank rate of 5.50%. This continual increase is very ominous. And so we reach the following conclusion: The only thing that will push the market up is the ANTICIPATION of a much larger than expected Fed interest rate cut. Now let's take a look at something interesting: <#inc ww2010.pic g071211c.gif center "" "Probability of various outcomes of Fed Funds rate at Tuesday's Fed meeting, as determined by investor "bets.""#> The explanation of this chart is as follows: Since the Fed Funds rate was 4.50%, the possible outcomes of Tuesday's Fed meeting was they would leave it unchanged at 4.50%, raise it to 4.75%, or lower it to 4.25%, 4.00% or 3.75%. The above chart, is <#stdurl http://www.clevelandfed.org/research/policy/fedfunds/index.cfm "provided by the Cleveland Fed,"#> is based on data provided by the Chicago Board of Trade (CBOT). The CBOT allows you to bet on one of the possible outcomes, by purchasing a <#stdurl http://www.clevelandfed.org/research/policy/fedfunds/binary.cfm "a "binary option""#> on any desired target rate. If you select the correct rate (4.50% in this case), then you get $1,000; if you select a different rate, then you get nothing. Based on the investor "bets," the CBOT can come up with an estimated probability of investor expectation of the outcome of the Fed meeting. The chart above represents "bets" as of the end of last week. Reading values off the graph, you can see that the expected probability of each outcome was as follows:

    Target Fed        Probability of
    Funds Rate          that outcome
    -----------       --------------
    3.75%               0.01
    4.00%               0.28
    4.25%               0.70
    4.50%               0.00
    4.75%               0.01
    -----------       --------------
    TOTAL               1.00

As you can see, the probability of a 4.25% outcome was the highest -- at 0.7 (or 70% probability) -- and that was the outcome that occurred on Tuesday. However, the probability of a ½% decrease to 4.00% had risen to 0.28 (or 28% probability), meaning that more than a quarter of those making "bets" thought that there would be a "surprise" ½% rate cut. Now, look at the "4.00%" across the graph. It's at probability 0.0 on November 2, remains around .01 until November 27, and then suddenly jumps to 4.00%. What happened on November 27? We're now able to correlate three different things that happened around November 27:

As I wrote in <#inc ww2010.weblog.ref e071127 "a Nov 27 article,"#> international credit markets were nearing "virtual panic mode," as interest spreads continued to increase.
The probability of a ½% Fed interest rate cut went from 0.1 to 0.3, in the expectations of investors who "bet" on the CBOT options described above.
The Dow Industrials began to surge from 12743 up to Monday's peak of 13727, in anticipation of a Fed "surprise" interest rate cut of ½%. When the actual cut was ¼% on Tuesday, the index fell to 13432.

So when you put this all together, you can see how absolutely crazy this is. The news about the international credit markets was INCREDIBLY BAD. But investors treated it as good news, because it was so bad that it would cause the Fed to cut ½%. This is the crazy "bad news is good news" syndrome that we've been seeing for the past couple of years, and it appears to be getting worse. Investors talk about things like earnings and valuation of the stock they buy, but the only thing they care about is what the Fed is going to do. There is no rational connection between stock market prices and anything going on in the world. Even the normally bubbly commentators on CNBC are beginning to notice this. It's frequently said that the market didn't pay much attention to the August credit crunch, even though if there were anything rational going on, stock prices would have fallen and stayed down on the news. In fact, this is the point that Bank of England governor Mervyn King made last month when <#inc ww2010.weblog.ref e071117 "he predicted a severe fall in stock prices:"#>

That was a month ago, and the situation has <#inc ww2010.weblog.ref e071207 "gotten much worse"#> since then, especially as banks hoard money and lending rates surge. A particularly notable event occurred on Monday, when Europe's largest bank, UBS AG, announced that it will be forced to <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aLbriQo4Aj4Q&refer=home "write down $10 billion"#> in its asset pool, after already writing down $4.66 billion in the third quarter. The reason is that the pool contains CDOs backed by "subprime" mortgages. We're talking about real money here when we talk about these huge losses. UBS might be on the road to bankruptcy, but they've been saved by an $11.5 billion investment from the Government of Singapore Investment Corp., in return for which Singapore will own 10% of UBS. UBS raised another $2 billion from an unnamed Middle Eastern country. This deal resembles the deal struck by Citibank, which was saved by <#inc ww2010.weblog.ref e071128 "an investment by the Abu Dhabi Investment Authority,"#> after it took $16.4 billion in writeoffs of worthless CDOs. From the point of view of Generational Dynamics, we're overdue for a new generational stock market panic and crash, followed by a 1930s style Great Depression. The scenario that's going on today, with CDO writedowns, "surprise" Fed announcements, and daily bank writedown announcements, could not have been predicted in 2002, when I first predicted a coming stock market crash, based on the fact that <#hreftext ww2010.i.panic070820 "stock market is overpriced"#> by a factor of around 250%. =eod =// &&2 e071208 IBM develops supercomputer on a chip =data ww2010.weblog.y2007.e071208.head IBM develops supercomputer on a chip =data ww2010.weblog.y2007.e071208.keys ibm, singularity, i robot, arnold schwarzenegger, japan =data ww2010.weblog.y2007.e071208.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071208.date 8-Dec-07 =data ww2010.weblog.y2007.e071208.txt1 Also, the Japanese are developing robots that play the violin and do other neat things. =data ww2010.weblog.y2007.e071208.txt2 Back in 1964, an engineer friend of mine told me this: "Computers can't get much faster. The circuits in today's computers require signals to travel at almost the speed of light, and there is no way to get around that. Thus, computers may get a little faster, but not much faster than they are today." There was a way around that, of course -- to make the circuits in the computer smaller and smaller. Electricity would still travel around the circuits at the speed of light, but the electricity would have much less distance to travel. Since the 1960s, computer circuits have been made smaller and smaller by packing more and more tiny transistors onto a silicon chip. More transistors on a chip means shorter distances between chips, which means faster computers. According to <#stdurl http://www.intel.com/technology/mooreslaw/index.htm "Moore's Law,"#> described in 1965 by Intel co-founder Gordon Moore, the number of transistors on a chip would double every two years, making computers faster and faster. However, more transistors also mean more heat - a lot more heat. This placed a theoretical limit on Moore's law that it would stop working in the 2010s decade, and computers would no longer get faster. <#inc ww2010.pic g071207b.gif right "" "Nanophotonic rib waveguide diodes carry light photons, rather than copper wires carrying electrons. (Source: IBM)"#> But now, new "nanophotonic" technology from IBM overcomes the limitations to Moore's law by using light pulses instead of electrical pulses to transmit information. Light pulses generate much less heat, and so much more information can be packed into the same space. Instead of using copper wire to transmit electrical pulses, the new technology uses "nanophotonic rib waveguide diodes" to transmit light pulses. The picture above shows one of these rib waveguides. Each one is 550 nm (nanometers) wide. That means that if you took 200 of these waveguides, and placed them side by side, the total width would still less than the width of a human hair. Within a few years, it will be possible to build supercomputers that are as powerful as the human brain, and then it will be possible to develop computer software that, within a few years, make the computer as intelligent as a human being. <#inc ww2010.pic term3.jpg right "" "Robots played by Arnold Schwarzenegger and Kristanna Loken in Terminator"#> If you saw the <#hreftext ww2010.i.robot040709 "the 2004 movie I, Robot,"#> then you may recall that intelligent robots were living side by side with human beings. That was a movie, but the technology will soon become quite real. At some point, probably some time in the late 2020s, computers will be intelligent enough so that they'll be responsible for their own research and development as necessary to invent new, more powerful versions of themselves. <#inc ww2010.pic irobot1.jpg left "" "Robot from I, Robot"#> At this point, known as the Singularity, computers will quickly become so much more intelligent than humans that they'll displace humans as the major "species" on earth. Whether the human race will survive long after 2030 is not known, and is impossible to predict. However, in the meantime, robots are being designed to do some neat things, especially by the Japanese. On Thursday, Toyota Motor Co. announced some <#stdurl http://itn.co.uk/news/aab8a6ad1e64f0989af5a45e56ac23f1.html "new home robots that are under development,"#> including one that plays the violin. Here's <#stdurl http://youtube.com/watch?v=qyPAIpXm-nU "a video of the Toyota robots:"#>

Quite honestly, I thought the violin playing was a little scratchy. =eod =// &&2 e071207 Credit crunch worsens after Britain cuts interest rates =data ww2010.weblog.y2007.e071207.head Credit crunch worsens after Britain cuts interest rates =data ww2010.weblog.y2007.e071207.keys finance, bank of england, libor, moveon.org =data ww2010.weblog.y2007.e071207.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071207.date 7-Dec-07 =data ww2010.weblog.y2007.e071207.txt1 Financial pundits are wondering, this Friday morning, =data ww2010.weblog.y2007.e071207.txt2 why the international credit markets have gotten worse, instead of better, after the <#stdurl http://www.forbes.com/markets/feeds/afx/2007/12/07/afx4416047.html "Bank of England cut overnight interest rates"#> on the British pound a quarter point to 5½% from 5¾%. The BoE's Bank rate is similar to the American Fed Funds Rate. It specifies the overnight interest rate -- the rate at which banks lend money to each other for just one day. The problem that policy makers are facing is that normally one wants to borrow money for a longer period than one day -- with three months being a typical time period. And the three-month borrowing rate is determined by the marketplace, not by the BoE bank rate or the Fed funds rate. Nonetheless, the different rates usually change in unison. When a central bank (the BoE or the Fed) reduces the overnight rate by 25 bp (= 25 basis points = 0.25% = ¼%), then it's normal for the 3-month lending rate also to fall by 25 basis points. What happened in the last 24 hours is far from normal, however. The BoE lowered overnight interest rates by 25 basis points, but the 3-month rate fell by only 4 basis points. This indicates that banks are still hoarding money, as I described in <#inc ww2010.weblog.ref e071206 ""Questions and answers about the 'credit crunch.'""#> The Bank of England's stated purpose in lowering the overnight rate was to bring down 3-month rates, but they failed to do so. The 3-month rate was an extremely high 6.65% before Thursday, but on Friday it's almost as high at 6.61%. The 3-month rate is known as Libor, or the London Interbank Offering Rate. This is a market-driven rate, and it's different for every currency (dollars, pounds, euros, etc.), and it's different for every time period (overnight, 3-month, 6-month, etc.). The overnight rate is sometimes referred to as the "overnight interest swap," or OIS. This market-driven value is different for every currency, and it usually equals the overnight fund rate for the central bank. Thus, you can think of the OIS as a proxy for the Fed Funds rate in dollars, for the BoE bank rate in pounds, or the European Central Bank rate for euros. The "spread" is the difference between the official bank rate and the market-driven rate for whatever interest rates we're talking about. In this case, we're talking about overnight rates for the pound, versus the 3-month Libor rate for the pound. As we said, those rates are 5.5% and 6.61%, respectively. The difference between these two values (1.11% in this case) is called the "spread." A spread of 1.11% is exceptionally high. This situation is so exceptional that <#stdurl http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2007/12/07/cnbank107.xml "some UK economists are saying"#> that the "Bank of England has lost control" of monetary policy, and that it can no longer do anything but react and hope for the best:

"Experts warned that it was a sign that the credit crisis could escalate over the Christmas period, even though the Bank has now embarked on a major series of interest rate cuts for the first time in almost eight years. It coincided with a chilling warning from the Organisation for Economic Co-operation and Development that the UK economy is heading for a major slowdown next year - and possibly a "significant slump" in house prices. This month's short sterling futures, which indicate where the market expects the key benchmark interbank borrowing rate to be in two weeks' time, actually rose markedly after the Bank's decision - an almost unprecedented reaction. The pound also ended the day up slightly on its trade-weighted index - another highly unusual outcome on the day of an interest rate cut. John Wraith of Royal Bank of Scotland said: "They haven't got the control over rates in the financial system that they ordinarily have. "Historically, a 25-basis point change in Bank rate would lead to an almost identical change in Libor [the benchmark rate in the money market]. That hasn't happened." ... Peter Spencer, chief economic adviser to the Ernst & Young Item Club, said: "The fact of the matter is that the market rather than the Bank is now dictating monetary policy - and not from the point of view of controlling inflation, but from the point of view of a random walk. It is behaving in a way which is totally rational for individual banks but adds up to a major deflationary issue. "I think this is a very grave situation indeed - and not just for the 1.5m [households due to renew their mortgages next year]. If this problem is not sorted out in the next two to three months we are looking at major insolvencies in UK plc." The sense of fear in the City was compounded by the severity of the Bank's brief accompanying statement, which said: "Conditions in financial markets have deteriorated and a tightening in the supply of credit to households and businesses is in train, posing downside risks to the outlook for both output and inflation further ahead."

The situation is puzzling economists, as in <#stdurl http://www.mi2g.com/cgi/mi2g/press/071207.php "this article"#> entitled "Why is the LIBOR differential getting larger?" accompanied by the following graph: <#inc ww2010.pic g071207.gif center "" "3-month Libor rates versus overnight rates (OIS) for UK pounds sterling, euros, and US dollars (Source: mi2g.com)"#> The above graph shows the overnight vs 3-month interest rate spreads over the last four years in bps (basis point spread). As you can see, the spreads are normally around 5-10 basis points, or around 0.05% to 0.1%. However, there was a huge spike in August, giving rise to the international "credit crunch" that almost caused a market meltdown. And, as of Friday, the new spike has gotten even higher than the August spike. That's why the credit crunch is more serious today than it was in August, and why UK economists are saying that the BoE has "lost control" of monetary policy. This follows <#inc ww2010.weblog.ref e071117 "several recent warnings"#> by the Governor of the BoE, Mervyn King, that the worldwide financial markets are poised for a crisis. Over here in America, where <#inc ww2010.weblog.ref e071205 "most investors probably wouldn't even know how to spell 'UK',"#> the concerns of the Bank of England are out of sight, out of mind, and investors are continuing their <#inc ww2010.weblog.ref e071129 "drunken orgies,"#> especially now that the Treasury Dept. has announced its bailout plan to "save struggling homeowners." I haven't studied this plan enough to see if it makes sense, but I note that pundits and politicians are quite mixed about it. Many pundits believe that at best it will do nothing and at worst it will do more harm than good. Other pundits think it's wonderful. And now the politicians are getting into the act, which can only be a bad thing, led by Hillary Clinton who's saying that "it doesn't save enough people." Yecch. My own view is that you should remember that the government is being run by Boomers who have no governing skills, and the Democrats are being driven by nihilistic Generation-Xers in Moveon.org. These are the people who probably couldn't even spell 'UK', and so it's doubtful that they have any idea what's going on in financial markets, which is just as well. From the point of view of Generational Dynamics, none of this makes any difference. The spike in interest rates is being caused by the fact that <#inc ww2010.weblog.ref e071206 "there's much less money in the world"#> than there was a few weeks ago, and there's less and less every day. What we're really seeing is a massive adjustment in generational attitudes. Boomers and Gen-Xers have been blithely and contemptuously abusing the credit markets in a debauched fashion, thinking that someone else will pay for their mistakes. They believe that a massive stock market panic and crash is impossible, or at worst, inconsequential. From the point of view of Generational Dynamics, such a panic and crash is certain, and it will be disastrous, as the Boomers and Xers will learn. =eod =// &&2 e071206 Questions and answers about the 'credit crunch' =data ww2010.weblog.y2007.e071206.head Questions and answers about the "credit crunch" =data ww2010.weblog.y2007.e071206.keys finance, credit crunch, advice, deflation, merrill lynch, morgan stanley, goldman sachs, jpmorgan chase and bear stearns, m-lec, florida, montana, belgium, siv, cdo, calculatedrisk, ratings agencies, nat king cole, boomers, generation-x, robert kuttner, tulipomania, south sea bubble, french monarchy bankruptcy, assignats, panic of 1857, p/e ratios =data ww2010.weblog.y2007.e071206.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071206.date 6-Dec-07 =data ww2010.weblog.y2007.e071206.txt1 What's going on, and what you can do about it. =data ww2010.weblog.y2007.e071206.txt2 I've been getting a lot of questions lately about the economy, so I thought that I'd answer several of them in a posting. =inc ww2010.h2 what "What's a credit crunch, and what's going on?" The easiest way to understand it is this: The world's money is disappearing. Every day, there's less money in the world than there was the day before. Since there's less money available, it's harder to get money, unless you're willing very high interest rates to get it. Hence, there's a "credit crunch." One result is that banks are hoarding money, and are increasingly reluctant to lend money to one another and to other businesses. This means that even legitimate, creditworthy individuals and businesses are having a hard time getting credit, getting mortgages, or getting loans without having to pay extremely high interest rates. =inc ww2010.h2 how "How could there possibly be less money in the world?" It's not that people are eating dollar bills for lunch. In fact, paper money is pretty irrelevant these days. Very little money is created by means of printing presses today. Money is created by means of credit, as I explained in my September article, <#inc ww2010.weblog.ref e070910 ""Understanding deflation: Why there's less money in the world today than a month ago.""#> When a central bank (like the Fed or the Bank of England) wants to create more money, it doesn't run the printing presses more; it simply lowers interest rates, so that there'll be more credit, hence more money. Unfortunately, financial institutions found that they can use a technique called "leveraging" to create money from credit, essentially going around the central bank. They create a new security and tell you that it's worth $10, but they'll let you buy it for $1 and loan you the other $9. So $10 that didn't exist before now does. It's wonderful. It's magic. These securities are called "credit derivatives," and among them are CDSs (credit default swaps) and CDOs (collateralized debt obligations). The credit bubble has created $750 trillion (notional value) in credit derivatives. Are those credit derivatives the same as money? Not exactly. You can't go into the grocery store and pay for your groceries with a credit derivative. But you CAN use those credit derivatives in your portfolio as collateral for a loan, and then you can use THAT money to buy groceries. So in fact the credit derivatives ARE a form of money. That's what's been happening up till July of this year. But suddenly people are discovering that the security that was supposedly worth $10 is really worth only $5 or even $2.50 or even $1, and sometimes they're totally worthless. So the process of creating money is now going in reverse. Instead of money being created through credit, today money is being destroyed through credit unwinding. =inc ww2010.h2 how "How much money has been destroyed since July?" A huge amount already. Let's start with an example. Things really started moving in mid-July, when <#inc ww2010.weblog.ref e070718 "Bear Stearns announced that its hedge funds were almost worthless."#> That's because the hedge funds were these CDOs that had been magically created, and were supposedly worth several billion dollars. Well, they discovered that nobody wanted to buy them, and if nobody wants to buy them, then they have no market value, when they're "marked to market." Since then a number of financial institutions have "gone to the confessional" to explain that, they too, have lost a great deal of money in writedowns because their portfolios contained CDOs that were worthless. These are major financial institutions like Citigroup, Merrill Lynch, Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bear Stearns. Citibank tried to save itself by means of a fraudulent scheme known as a <#inc ww2010.weblog.ref e071015 ""Master-Liquidity Enhancement Conduit (M-LEC).""#> Under the scheme, Citibank and other banks would sell worthless CDOs to each other at inflated prices, in order to establish a phony "market price" for the CDOs. Citibank's fraudulent M-LEC idea didn't take off, forcing the bank to take $16.4 billion in writeoffs of worthless CDOs after all. Citibank might have gone bankrupt except that it was saved by <#inc ww2010.weblog.ref e071128 "an investment by the Abu Dhabi Investment Authority."#> These big financial institutions are announcing more every day, and "mainstream estimates vary as high as $500 billion in writedowns. Now, that $500 billion is gone. That's money that existed a few months ago, but no longer exists. That's how money gets destroyed. And that's only the large institutions. We've hardly heard from the small institutions, but we're beginning to. State and local governments in Florida and Montana have to <#inc ww2010.weblog.ref e071201 "freeze their investment pools"#> because they pools were found to have invested in near-worthless CDOs. And that's the tip of the iceberg. There are tens of millions more small and medium-sized institutions around the world that are going to have similar situations, forcing them to write down their securities. With $750 trillion (notional) of credit derivatives in the world, it would not be surprising if the total writedown amounted to $7.5 trillion (1%) or even $75 trillion (10%). =inc ww2010.h2 qqq "Is that all?" Hardly. Because next you have the de-leveraging problem. When a bank has $1 million in assets available to it, it can loan out 5 or 10 times as much as that, or $5-10 million. That's leveraging. But if the $1 million in assets suddenly disappears, then there's $5-10 million that it can't loan out any more. That's de-leveraging. The point of all this is that there's MUCH less money in the world today, and there's less and less every day. =inc ww2010.h2 qqq "What do subprime mortgage have to do with all this?" For the most part, residential subprime mortgages were the original "seeds" for the credit explosion. Banks started requiring less and less of people wanting mortgages, and by the time it was over, anyone could get a mortgage for any amount with no problem at all, even if they had no assets, no income, no job, and no hope of making the mortgage payments. These mortgage loans, like any other form of credit, created new money. That new money could then be leveraged into credit derivatives that were worth 5-10 times as much as the original mortgage loans. Those credit derivatives could then be leveraged further. This process could continue several times. However, there were other "seeds" as well. Requirements for credit cards and other forms of credit were also relaxed, so that people could get credit that way as well. Delinquencies have been rising in credit cards, just as they have in mortgage loans. And <#stdurl http://online.wsj.com/article/SB119690536188815285.html "a front-page article in Friday's WSJ"#> is about how delinquency rates have been rising in car loans and even <#stdurl http://online.wsj.com/article/SB119690691390915331.html "student loans."#> =inc ww2010.h2 qqq "Why would banks make loans to people who couldn't pay them back?" Because the banks made money that way. The loan officers made commissions from the loans. I'd be happy to lend you $1 million of someone else's money if I got a $50,000 commission from it. And that's what happened. That's what happened with mortgage loans, with credit card loans, with car loans, with student loans, and so forth. And then the financial geniuses got hold of the loan contracts and turned them magically into CDOs with phony notional prices. They sold those, and got hefty commissions from selling them. All along the way, people were loaning out other people's money, and taking fat commissions for themselves. =inc ww2010.h2 qqq "Isn't that illegal?" You're damn right it's illegal. And I can hardly wait to see some of these financial geniuses get put away. I've been studying this stuff for a few years now, trying to figure out what was going on. At first I thought that people were just being naïve or stupid. But I've since come to the conclusion that the mess that we're in was done on purpose -- by contemptuous and nihilistic Generation-Xers taking advantage of airhead Boomers (who are even too stupid to price/earnings ratios, as I described in <#inc ww2010.weblog.ref e071129 "a recent article."#>) A web site reader from Belgium wrote to me:

"In Flanders, financial experts appear angry on our business tv station explaining how "stupid" investors are when they are selling their stocks because the problems reside only in the heads of the investors. Unbelievable !!!"

Yes, it is unbelievable, until you realize that the reason that these financial "experts" are talking this way is because they can no longer sell to investors and collect fat commissions. They may call the investors "stupid," but the investors are smart enough to stop paying these so-called "experts." I'm really starting to pull this information together. Last month I posted <#inc ww2010.weblog.ref e071121 "an article"#> showing how this lethal arrangement between Boomers and Gen-Xers worked. If you haven't read it yet, then you should -- it's mind-blowing. I'll have a lot more to say about this subject soon. The point is that a lot of people have committed crimes, and they're going to well-deserved jail. =inc ww2010.h2 siv "What's a "structured investment vehicle (SIV)"" This is one of the gimmicks that the financial geniuses created. Their objectives were to collect huge commissions for themselves, while defrauding the general public with securities that they knew had to become almost worthless. The SIV is part of that. When banks issue these CDOs, they aren't issued by the bank itself. Instead, the bank creates a new "virtual" bank called a "structured investment vehicle." All the "financial magic" is done within the SIV, so that if something goes wrong, then the original bank had nothing to do with it. That's called "keeping structured securities off the balance sheet" of the original bank, a phrase you see often in the press. However, the same people are involved in both the original bank and the SIV, and so they still PERSONALLY collect the same huge commissions, often in the millions of dollars. The <#stdurl http://calculatedrisk.blogspot.com/2007/12/german-banks-bail-out-sivs.html "Calculated Risk blog"#> gave a concise explanation of how SIVs work recently, and it's worth repeating here:

"To understand these stories, it helps to understand the structure of an SIV (Structured Investment Vehicle). (see SIV Accounting for more) First an SIV has investors - like hedge funds or wealthy individuals - who invest say $1 Billion in the SIV (the equity). Then the SIV issues commercial paper (CP) and medium-term notes (MTN) that pay slightly higher rates than similar duration paper. The typical SIV, according to Fitch, uses 14 times leverage, so in our example the SIV would sell CP and MTN for $14 Billion. Now the SIV invests this $15 Billion ($1 Billion equity and $14 Billion borrowed) in longer term notes. The idea is simple: borrow short, lend long, hedge the interest rate and credit risks - and the profits flow to the investors in the SIV. Back to the story: what happens when the CP comes due and no one wants to buy any more? To cover the CP, the SIV might have to sell the longer term assets at a steep discount, and this would trigger a liquidation of the entire SIV. To prevent this "fire sale", the sponsoring banks stepped up and provided the financing to cover the expiring CP."

And just so we know who we're talking about here: When it says "the SIV has investors - like hedge funds or wealthy individuals" -- that's a little misleading. Because the investors also include ordinary people's pension funds and so forth. I don't think that the people of Florida would consider themselves "wealthy individuals," now that <#inc ww2010.weblog.ref e071201 "their investment pool contains SIV funds"#> that have to be written down. The last paragraph above is the reason why banks have been forced to "write down" SIV funds: no one wants to buy the commercial paper any more, once the Bear Stearns hedge funds collapsed in July. And they've been desperately using every trick that they could play to keep the fraud going by avoiding the "fire sale" mentioned above as long as possible. =inc ww2010.h2 agencies "What part do ratings agencies play?" The three ratings agencies -- Standard & Poor's, Moody's Investors Service and Fitch Ratings -- colluded with the banks to defraud the public, as <#inc ww2010.weblog.ref e070630 "Bloomberg news accused"#> on June 30. While the bankers were taking fat commissions for themselves, they were also making fat payments to the ratings agencies to provide AAA ratings on the CDOs in the SIVs. This was an essential part of the scheme. Take, for example, the Florida investment pool that we've been talking about. The people who ran that pool didn't know which securities were good and which were questionable. They just depended on the ratings from the ratings agencies. And one of their internal rules (I assume) is that the pool could invest ONLY in AAA securities. So if the bank managers pay the ratings agencies to provide AAA ratings on the questionable securities in the SIVs, then Florida and anyone else could invest in them, without even asking any questions. The bankers would get their fat commissions, the ratings agencies would get their fat fees, and the investors would get screwed. Now, we all know what the bankers and ratings agencies are saying and going to say. "We thought they'd be OK. We were just following the rules. We didn't know that these problems would arise." So let me make something clear. I've been studying these for several months now, and there is NO CHANCE WHATSOVER that these people didn't know what they were doing. Sure, maybe the first few deals really were OK. But as time went on, and the rules were bent more and more, there could have been NO DOUBT in the minds of these bankers and ratings agencies that were defrauding the public. In <#inc ww2010.weblog.ref e071111 "a recent article,"#> I quoted a March 22, 2007, statement from a Fitch expert, wherein he explained their ratings model. Now, if you want to say that they didn't know what they were doing in 2002, then fine. In 2003? Fine. In 2004, 2005, 2006? Fine. But there is no way in hell they didn't know what they were doing on March 22, 2007. By this time, there can be no doubt that it was absolute fraud. After Bloomberg accused the ratings agencies of fraud on June 30, they knew they had to change. Since then, they've been re-rating many of the SIV securities, sometimes lowering their ratings as many as 10 or 20 levels lower than the original AAA rating. That's what happened to many of the securities that the Florida investment pool had invested in, and that's why they're currently facing a financial crisis. Imagine how much better off we'd be if the ratings agencies had correctly rated these securities in the first place. Then innocent victims like the Florida pool would not have invested in them. How much better off we'd be today! But then the bankers and the ratings agencies wouldn't have gotten their fat commissions and fees. Hopefully, they'll have time in jail to think about what they might have done differently. (This question and answer added on 6-Dec.) =inc ww2010.h2 qqq "What do bubbles have to do with this?" Let's take a break. Here's <#stdurl http://www.youtube.com/watch?v=fBiSd9R9YUA "a video"#> from a 1957 "Nat King Cole" tv show, featuring a group called the "Merry Macs" singing "I'm Forever Blowing Bubbles":

OK, back to work. This debauched and depraved use of credit created a huge amount of liquidity that poured into various investment vehicles. The stock market bubble actually began in 1995 with the dot-com bubble. It began to deflate after the 2000 Nasdaq crash, but it started expanding again in 2002, thanks to the creation of credit. The money that poured into the real estate market created a real estate bubble. That bubble started to deflate late in 2005. It also created a commodities bubble, with prices of everything from wheat to oil to copper skyrocketing. The biggest bubble of all was the credit bubble. That bubble started to serious deflate in August with the "credit crunch." Now, as all these bubbles are deflating, and the amount of money in the world is decreasing day by day, we're headed for a major worldwide financial crisis. =inc ww2010.h2 qqq "Can't the government do something to fix it?" Governments and central bankers around the world are ready to try a million different things to "fix" it. There was the M-LEC debacle. There's the new proposal to somehow bail out homeowners. There's talk about bailing out the Florida investment pool we mentioned earlier. With the amount of money in the world decreasing, more and more people and institutions are becoming exposed. Every time some important institution becomes exposed, government officials run around trying to figure out a scheme to save it. However, the problems are occurring faster and faster, too fast for government officials to keep up. =inc ww2010.h2 qqq "What happened to Japan in the 1990s?" A web site reader wrote to me:

"Instead of a great depression scenario, I think its more realistic to expect something like the Japanese 90's. They had deflation, 80% decline in their major index which took 14 years, and a major housing bubble bust. I think we could get away with a less severe decline (50%?) but I expect a lot of similarities and it will probably take as long to unwind (well at least 10 years anyway)."

The comparison to Japan in the 1990s is perceptive, since that was a regional generational panic and crash for Japan, just like 1929 and what we're facing today. Japan's previous major stock market crash was in 1919. So you have: Wall Street: Crash in 1929, new bubble in 1995, 66 years later; Tokyo Stock Exchange: Crash in 1919, new bubble in 1984, 65 years later. <#inc ww2010.weblog.ref e070220 "See this article."#> The Nikkei fell from 40,000 to 8,000 -- an 80% collapse before it was over. A similar result can be expected for Wall Street. There wasn't massive homelessness and starvation in Japan in the 1990s, which would be expected from an 80% stock market crash. I believe that the reason that Japan escaped this is because they were still able to receive support from the economic bubbles in the U.S. and China. A regional crash is not as severe as an international crash, which is what we're expecting today. =inc ww2010.h2 qqq "Will we see a stagflation, a recession or a depression?" It will be an era of severe depression, worse than the 1930s, with massive unemployment, bankruptcies, homelessness and starvation. =inc ww2010.h2 qqq "Can something like "circuit breakers" prevent a panic?" "Circuit breakers" are used by the stock markets to try to control a panic. If the market loses, say 15% in one day, then the market closes for a few hours, to let people catch their breath. Unfortunately, circuit breakers are useless. A generational crash is an elemental force of nature, like a tsunami. There will be millions or even tens of millions of Boomers and Generation-Xers in countries around the world, never having seen anything like this before, and not having believed it was even possible, suddenly in a state of total mass panic, trying to sell all at once. Computer systems will crash or will be clogged for hours, or perhaps even for a day or two. People who had hoped to get out just as the collapse is occurring will be totally screwed, and will lose everything. Brokers and other institutions will go bankrupt. People who went short hoping to make a fortune will find that their brokers' escrow accounts are gone, and they'll be totally screwed, and will lose everything. Being in the market today, either short or long, is a very high risk proposition. =inc ww2010.h2 qqq "Has anything like this ever happened before?" What's happening today is identical in many ways to what happened prior to the 1929 stock market crash. American Prospect's <#inc ww2010.weblog.ref e071011 "Robert Kuttner recently testified"#> before the Congressional House Committee on Financial Services. He summarized similarities between "the systemic risks of the 1920s and many of the modern practices" as follows: excessive leveraging, misrepresentation, insider conflicts of interest, non-transparency, and the triumph of engineered euphoria over evidence. The people who lived through the 1929 stock market crash and the 1930s Great Depression learned their bitter lessons about the debauched use of credit. Here's what one web site reader wrote to me:

"My father immigrated to the U.S. from Germany in the 20s and experienced the great depression in Pennsylvania. When I was a teenager, he told me his generation would not cause another depression because of what they experienced in the 30s. My father would not borrow money - only purchased in cash. Just before his death in 1962, he commented that the current generation was making mistakes his generation had made, and another depression was inevitable. What would he have said observing uncontrolled growth of financial derivatives, and our massive, ever increasing, unrepayable national debt? Having experienced hyper-inflation in Germany, believe he would have said our national debt would be repaid in drastically cheaper dollars."

So what happened leading to the 1929 crash is exactly what's happening today. In fact, the same thing happens every 70-90 years or so. When a generational crash occurs, it traumatizes everyone who lives through it. After that, everything's OK, because once traumatized, people don't abuse credit again. But when the people who lived through the previous financial crisis have all disappeared (retired or died), all at once, then younger generations use "financial magic" to create money in the same way, by turning credit into worthless securities. That financial magic is called "securitization of credit," and it happens each time, just prior to a new generational financial crisis. Since the 1600s, there have been five occasions when major worldwide financial crises have occurred, and they all used securitization of credit:

The <#inc ww2010.weblog.ref e070328 "1637 Tulipomania bubble"#> was based on a market in tulip futures, securitized with personal credit notes.
The 1721 South Sea Bubble was securitized by shares of the South Sea company, a company operating in South America.
The 1789-1795 bankruptcy of the French monarchy was securitized by "assignats," bills of credit based on lands confiscated from the clergy.
The <#inc ww2010.weblog.ref e070406 "Panic of 1857"#> was securitized by railway shares.
The 1929 Wall Street crash was securitized by stock shares, and by bonds from well over 100 foreign countries. This is described in <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world.""#>
Today of course we're securitizing credit by turning subprime mortgages and other questionable credit into credit derivatives and CDOs.

We're now overdue for the next generational crash. It could happen tomorrow, next week, next month or next year, but it's coming soon. =inc ww2010.h2 qqq "Can I make money shorting Google?" I actually wrote about Google in <#inc ww2010.weblog.ref e071111 "a recent article."#> With a price/earnings ratio of about 60, it's way overpriced -- much more so than the rest of the market which is also way overpriced. When all is said and done, its stock price will probably fall to 5-10% of its current value. However, that doesn't necessarily mean you can make money shorting the stock. The problem is that a lot of brokers and other people will go bankrupt, and a lot of escrow accounts will simply vanish, so when it comes time to collect your money, your counterparty may be unable to pay (or may have committed suicide). =inc ww2010.h2 qqq "Isn't there some way to make money from this information?" All that Generational Dynamics can tell you is what the trends are. Whether you could make money selling Google short depends on a number of chaotic factors that can't be predicted. I can think of scenarios where you'll make a lot of money, and I can think of scenarios where you'll lose everything. A lot on what happens will depend on timing factors that can't be predicted. Almost everyone in the market is going to lose a lot of money. If you put your money into Treasuries or into your mattress, then you won't lose anything, and so you'll make a ton of money compared to everyone else. Think of it that way. =inc ww2010.h2 qqq "How do we protect the money we have?" I recommend staying out the market and out of every investment vehicle except cash and US Treasuries. A web site reader sent me a pointer to an article on <#stdurl http://www.thedigeratilife.com/blog/index.php/2007/12/04/where-should-you-put-your-cash-5-steps-to-safety/ "Where to put your money - 5 steps to safety."#> It's a good read. Some people talk about investing in gold. Don't do that unless you have plenty of cash around and you want to speculate a bit with what's left over. I can think of scenarios where you'll make money with gold, and I can think of scenarios where you'll lose money. On the other hand, gold is probably safer than the stock market. However, if you invest in gold, make sure that you take actual delivery of actual gold coins or bars. Don't bother with gold-backed securities or some such, because they may turn out to be just as worthless as CDOs. =inc ww2010.h2 qqq "Should I grow food so that I can survive in an emergency?" The problem with growing food in a garden is that starving neighbors will steal it. You should stock up on canned and dried food, as well as water, medicines, batteries, etc. A web site reader sent me a pointer to <#stdurl http://survivalacres.com/wordpress/?p=846 "an article"#> on Survival on a Budget. That might help. A web site reader wrote to me:

"I've been recently introduced to your website through my son who is a Political Science major at OSU. Right now he's at Marine Officer Training (so scary for the mom) so I can't ask him anything but I was wondering is there a book or advice on the web about handling the looming crisis. I'm a school teacher with limited economic resources and it sounds like I should be preparing for the harsh financial climate possibly awaiting us in upcoming months. Any suggestions would really be appreciated. Your work is so fascinating and brilliant; thanks so much for having the courage to share it with the public."

It's so nice to get a compliment like that. Unfortunately, I don't know of any other web site even remotely like this one, or any book that covers this material except mine. People in the Boomer generation and Generation-X have a real mental block against even thinking about this stuff, so they shut it out and make up fantasies. =inc ww2010.h2 qqq "How can you be so sure that the stock market will crash?" Well actually I've been predicting a crash since 2002, based on the fact that the market is way overpriced by historical standards, and that hasn't changed at all. In 2002 I said it would probably happen in the 2006-2007 time frame, and today that estimate doesn't seem very far off. One of the standards is price/earnings ratios, and here's the current graph, from my recent article <#hreftext ww2010.i.panic070820 ""How to compute the 'real value' of the stock market":"#> <#inc ww2010.pic g070818c.gif center "" "S&P 500 Price/Earnings Ratio (P/E1) 1871 to August 2007"#> Anyone looking at this graph can see that the price/earnings index is poised to fall to well below 10, and when it does, the market will fall to the Dow 4000 range, or below. As my article showed, the stock market today has a "real value" of about Dow 5000, meaning that it's overpriced by a factor of around 250% -- same as in 1929. That's a huge bubble, and it MUST burst. That's how one can be sure a crash MUST occur. Central banks can defy the laws of gravity for a while, but when it comes to bubbles, there's no way to avoid the rule that I learned when I was watching cartoons on television as a child: What goes up must come down. =eod =// &&2 e071205 Europe is a country, isn't it? =data ww2010.weblog.y2007.e071205.head Europe is a country, isn't it? =data ww2010.weblog.y2007.e071205.keys kellie pickler =data ww2010.weblog.y2007.e071205.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071205.date 5-Dec-07 =data ww2010.weblog.y2007.e071205.txt1 On a recent quiz show, =data ww2010.weblog.y2007.e071205.txt2 former American Idol finalist <#stdurl http://www.kelliepickler.com "Kellie Pickler"#> was competing against a 5th grader, and was asked the question, "Budapest is the capital of what European country?" <#stdurl http://www.fliggo.com/video/X9TKy7oH "Here is"#> what happened:

Are You Smarter Than a 5th Grader?

By the way, here's a picture of Kellie from her <#stdurl http://www.kelliepickler.com "web site:"#> =inc ww2010.pic KelliePickler.jpg center "" "Kellie Pickler" =eod =// &&2 e071204 Vladimir Putin's party wins Russian Parliamentary election by a landslide =data ww2010.weblog.y2007.e071204.head Vladimir Putin's party wins Russian Parliamentary election by a landslide =data ww2010.weblog.y2007.e071204.keys vladimir putin, russia, united russia, chechnya, yukos, nicolai lenin, royal dutch shell, exxonmobil, adolf hitler, franklin roosevelt, winston churchill, hero/prophet relationships, pakistan, britain, china =data ww2010.weblog.y2007.e071204.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071204.date 4-Dec-07 =data ww2010.weblog.y2007.e071204.txt1 How does Putin's "cult of personality" work? =data ww2010.weblog.y2007.e071204.txt2 <#inc ww2010.pic g071203a.gif center "" "Election results (Source: WSJ)"#> The phrase "cult of personality" is being applied to Vladimir Putin today after the party he leads won a <#stdurl http://www.thenews.com.pk/daily_detail.asp?id=84216 "landslide victory in Parliamentary elections."#> <#inc ww2010.pic g071203b.jpg right "" "Russian President Vladimir Putin comes out to meet the enthusiastic crowds after his party's victory (Source: CNN)"#> The election appears to have been <#stdurl http://online.wsj.com/article/SB119670847787412061.html?mod=hps_us_whats_news "widely corrupted."#> The television airwaves were flooded with political ads for Putin's party, United Russia, but no opposition parties were permitted to advertise at all. Opposition parties were harassed, and there was no international monitoring during the actual vote. In Chechnya, where Putin waged war against the people for a few years, the <#stdurl http://www.reuters.com/article/homepageCrisis/idUSL03585550._CH_.2400 "vote was 99.3% in favor"#> of Putin's United Russia party. And so, it seems likely that Putin controlled this election. There are few people who doubt that, one way or another, Putin is going to retain absolute power after his term as President expires early next year. Putin is not eligible to run for President again under the Russian Constitution, and he's previously promised not to try to amend the Constitution so that he can run again. It's been the subject of widespread speculation for a couple of years how Putin would manage to stay in power, assuming he kept his promise. We can now see several possible scenarios:

He'll have total control of the Parliament after today, so he can freely back off from his promise not to amend the Constitution.
He can resign as President, and take a new position as Prime Minister. He could attain this position through his party's Parliamentary victory today.
He can resign as President, become Prime Minister, and then run for President again in the spring, since he would (as I've been given to understand) be permitted to run for President again under the Constitution, since the terms would no longer be consecutive.

<#inc ww2010.pic g071203c.jpg left "" "Crowds of young people spontaneously celebrate Putin's victory (Source: BBC)"#> One thing that everyone seems to agree on is that it doesn't really make any difference which of these scenarios Putin chooses, since Putin is so popular with the Russian people that they want him to retain power by whatever means he desires. =inc ww2010.xr.related1 right yukos 2 Long time web site readers may recall that back in 2004 I followed the situation with Yukos pretty closely. In 2003, Yukos supplied 11.4% of all the oil in the whole world. By the end of 2004, Yukos was defunct. At the beginning of 2004, Putin was denying that he had any evil intentions toward Yukos. Putin began by jailing Yukos CEO Mikhail Khodorkovsky on trumped-up political charges. (He's still in jail, incidentally.) By the end of the year, <#inc ww2010.weblog.ref e041229 "Yukos had been dismantled and nationalized"#> by means of the vilest series of steps imaginable. At the beginning of 2004, I was wondering what Putin had in mind. By the end of the year, it was obvious that Putin had lied about his intentions, and that he was willing to use any means available to him to get what he wants, while still retaining personal deniability. At the beginning of the year, I was wondering if Putin was trying to emulate Nicolai Lenin (Vladimir Ilyich Ulyanov), and I quoted this 1922 memo to the Politburo on the destruction of the Russian Orthodox Church in order to harvest the Church's wealth:

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

By the end of the year, it was obvious that Putin was much more politically subtle than Lenin, but just as ruthless. During the entire Soviet era, the Communist leaders were free to take anything they wanted and keep it for themselves. The "reason" is that there's "no private property" under Communism, which is the excuse that Communist leaders used to justify taking what they want. This had been the entire Russian culture since the 1920s. After Putin used extortion and fraud to take Yukos in 2004, Putin has also managed to extort the Sakhalin Island project from Royal Dutch Shell in 2006, as well as an ExxonMobil project, and a BP project in the Kovykta gas field in 2007. Various political enemies have been knocked off mysteriously -- murdered or jailed. Sunday's election appears to be the same -- Putin ran the whole show. The same thing happens over and over again: Putin's enemies die, and Putin takes what he wants. It always ends up the same way, even thought there's never any ironclad proof, and Putin always has deniability. The question that I'm asking is how these two things are related: Putin's steel-hard determination to take anything he wants

The cult-like adoration that the Russian people feel for Putin.

The adoration for Putin very much has a generational feel to it, as Russia goes deeper into a generational Crisis era. There are only two other leaders that I can think of that have generated similar adoration: FDR and Hitler. Now, I'm NOT saying that FDR was as ruthless as Putin or Hitler, and I'm not saying that Putin is (yet) as ruthless as Hitler (or Lenin). In fact, the point is that the three of them are so different, but generate what appears to be the same strong cult-like adoration from a large part of the population that they want them to stay unconditionally in power, even if extraordinary means are required. Hitler was enormously popular in Germany, and Roosevelt was so popular in the US that he was the only President to be elected for more than two terms, even when he was near death. By contrast, George Bush doesn't generate that kind of loyalty today, and Winston Churchill didn't generate that kind of loyalty until WW II actually began. There is one major thing that all three appear to have in common: In all three cases, they came to power at the time of a major financial crisis. Putin is viewed as saving the Russian economy after Yeltsin destroyed it in the 1990s, Roosevelt is viewed as having saved the American economy after three years of economic collapse, and Hitler was viewed as saving the German economy after <#hreftext ww2010.i.garrett071009 "massive bank failures occurred in 1931."#> An additional possibility is that they may be examples of the "Hero/Prophet" relationship that develops as a country goes deeper into a generational Crisis era. As I wrote <#inc ww2010.weblog.ref e061113 "last year,"#> analyzing the July 7, 2005, London subway bombings, many of Britain's young Muslims have set up a "Hero/Prophet" relationship with the radical clerics in Pakistan. It's possible that the young people of Russia have "selected" Putin as their choice for the person in the generational "Prophet" archetype to lead them through the Crisis era. As we approach the Clash of Civilizations world war, we have no way of knowing who will lead America through this war, and the same is true for Britain, China, and many other countries. But it appears that we have a pretty good idea who will lead Russia through the Clash of Civilizations world war: Russia's current President, Vladimir Vladimirovich Putin. =eod =// &&2 e071201 Dept. of Treasury proposes national mortgage bailout as losses become more widespread =data ww2010.weblog.y2007.e071201.head Dept. of Treasury proposes national mortgage bailout as losses become more widespread =data ww2010.weblog.y2007.e071201.keys finance, florida, housing bubble, citibank, m-lec, united arab emirates, kenya, tanzania, uganda =data ww2010.weblog.y2007.e071201.loc ww2010.weblog.log0712 =data ww2010.weblog.y2007.e071201.date 1-Dec-07 =data ww2010.weblog.y2007.e071201.txt1 Florida state and local governments are in financial crisis this weekend, =data ww2010.weblog.y2007.e071201.txt2 after Gov. Charlie Crist <#stdurl http://www.palmbeachpost.com/state/content/state/epaper/2007/11/30/m1a_flafin_1130.html "halted further withdrawals"#> from the state-run muncipal investment pool. Local governments had made panicked withdrawals of $13.5 billion in the past two weeks, leaving only $15 billion remaining. The panic was triggered by recent news that some of the fund's investments were tainted by the subprime mortgage crisis, and were being downgraded by the ratings agencies. School districts, counties and cities across the state are scrambling this weekend to take out short-term loans <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aHR5KklFq4X0 "to cover payroll for teachers and other employees."#> "The unthinkable and the unimaginable have just happened here in Florida," said the CFO of one school district. The largest investor in the frozen fund is <#stdurl http://www.citizensfla.com/ "Citizens Property Insurance Corp.,"#> with <#stdurl http://www.palmbeachpost.com/blogs/content/shared-blogs/palmbeach/floridapolitics/entries/2007/11/30/citizens_has_largest_balance_l.html "$2 billion."#> Citizens was set up in 2002 to provide property insurance to Florida citizens after several insurance companies had pulled out of Florida in the wake of several hurricanes. Gov. Crist is seeking the services of outside financial advisors over the weekend, hoping to resolve the situation and permit emergency withdrawals by Tuesday. Florida is not unique in having these investment pools. Like many individual investors, muncipal governments do not have the expertise to make the best investments. They rely on investment pools set up by the state or region to manage all investments in the state or region. There are thousands of local districts across the country investing in these pools. In fact, a similar situation is brewing in Montana, where panicky towns and school districts have <#stdurl http://www.billingsgazette.net/articles/2007/11/30/news/state/22-investment.txt "withdrawn ¼ of the state's Short Term Investment Pool funds."#> These pools are supposed to invest in only the highest rated AAA securities. However, as more and more financial firms are discovering, an AAA rating doesn't necessarily have much value when the securities are risk-laden mortgage-based CDOs that have been created by financial geniuses who found ways to transform high risk mortgage loans into "zero risk" CDO securities. As the "subprime crisis" continues to spread, politicians and other officials are searching for ways to delay, delay, delay the inevitable. Last month the big idea, promulgated by the Dept. of Treasury and Citibank, was the mind-boggling <#inc ww2010.weblog.ref e071015 "Master-Liquidity Enhancement Conduit (M-LEC)."#> Its purpose was to commit fraud by allowing banks to sell worthless CDOs to one another at inflated prices, in order to establish phony "market prices." Citibank's fraudulent M-LEC idea didn't take off, forcing the bank to take $16.4 billion in writeoffs of worthless CDOs after all. Citibank might have failed completely except that it was saved by <#inc ww2010.weblog.ref e071128 "an investment by the Abu Dhabi Investment Authority."#> Public opinion is changing very rapidly these days. A few months ago, the idea that Arab oil sheiks might own a piece of Citibank would have been met with enormous outrage. But today, Americans are getting so desperate for money from somewhere, anywhere, that there's no outrage to be had. That's why everybody's looking hopefully toward a brand new boondogle, much, much huger than the M-LEC boondoggle. The M-LEC plan was worked out between the Treasury Dept. and the banks, especially Citibank. (Massive fraud is OK, but only if Treasury says it's OK.) The new boondoggle is being worked out between the Treasury Dept. and mortgage lending firms. Next week, <#stdurl http://www.reuters.com/article/businessNews/idUSN3042179920071201 "Treasury Secretary Henry Paulson is expected to announce"#> a plan to "save struggling homeowners" from foreclosure, as adjustable rate mortgages reset. According to leaks, the plan will keep low teaser rates low for an additional period of time. This is going to be quite a mess if it's tried. First off, a lot of the "struggling homeowners" facing foreclosure don't have adjustable rate mortgages (ARMs). They have regular Prime or Alt-A mortgages, but they lied about their income to get them. In many cases, they planned to "flip" the house, but falling real estate prices have ended that idea. Second, many of the mortgages were for 100% of the purchase price, and with falling real estate prices, the mortgage loans now exceed the value of the house, sometimes substantially. As CNBC's financial pundit <#inc ww2010.weblog.ref e070801 "Jim Cramer ranted in July,"#> if your home is worth less than your mortgage loan, and you're struggling to make payments, then you might as well walk away from it. Third, there's a big complication that comes from the financial engineering that the geniuses set up. Remember that the company that made the mortgage loan no longer holds the mortgage. The mortgage debt was sliced and diced into collateralized debt obligations (CDOs). So your Aunt Mabel's mortgage loan is really being held by other investors. If mortgage rates don't reset to higher rates, then mortgage payments will be lower than the financial geniuses predicted, and the investors will have the right to take legal action. By coincidence, the BBC's Business Daily radio show just had a commentary on another bailout -- the bailout of African countries that couldn't pay their debts. Long time readers of this web site will recall that in 2005, the "wealthy nations" made a decision at the G-8 meeting <#inc ww2010.weblog.ref e050612 "to cancel Africa's debts."#> The politicians were very self-congratulatory at this "historic" gesture, even though the whole thing was a joke. Well now comes <#stdurl http://www.bbc.co.uk/worldservice/programmes/business_daily.shtml "this commentary"#> by the BBC's regular Kenyan commentator, Wycliffe Muga (<#stdurl http://downloads.bbc.co.uk/podcasts/worldservice/bizdaily/bizdaily_20071129-2151.mp3 "MP3/Podcast file"#>), saying that the Kenyans aren't very happy with the situation that's unfolded:

"A few weeks ago, I spoke about the grassland ecosystem that ranges from the Serengeti National Park in Tanzania to the Masai Mara game preserve in Kenya, which is famous for the annual wildebeest migrations, and I explained how the superior infrastructure on the Kenyan side of the border insured that Kenya, which is already better off than Tanzania, earned far more [[from tourists]] from this jointly owned resource than Tanzania. But there are situations in which a poor country will benefit in a way that a slightly better off neighbor cannot. Take for example, the Highly Indebted Poor Countries Initiative of the World Bank and the IMF. Under this arrangement, the debts of 38 poorest countries in the world, most of them in sub-Saharan Africa, were substantially written off by the lending institutions. There were conditions attached to this, but it was a massive debt writeoff, all the same. In East Africa, Tanzania and Uganda qualified for the debt relief, but Kenya did not. Now, you would think that Kenyans would regard this as a compliment. After all, it cannot be a matter of national pride that your country is identified as highly indebted and poor. But that is not how many Kenyans saw it. Both political leaders, and ordinary people, were prompt in expressing their outrage at the fact that Kenya had been left out of this beneficial program. The argument raised was that Kenya was being punished for having been diligent in paying its debts, and for struggling to live within its means, while neighboring countries, which had recklessly piled up loans beyond their capacity to repay, were now being rewarded for their folly. The more enterprising commentators took it a step farther, and presented convincing approximations on how many classrooms or clinics, how many kilometers of paved roads, and how many additional schoolteachers and nurses the government of Kenya would be able to employ if it could convert the money currently used on annual debt repayment to providing services to its people. And this line of argument invariably concluded with a demand that Kenya should immediately be placed on that list of poorest nations, so that it too could benefit from the Debt Cancellation Program. So whereas in tourism it pays to have some money if you are to create the infrastructure needed for exploiting a game park, when it comes to the global programs, run by the World Bank and the IMF, it's being poor and heavily indebted that will really get you a slice of the cake."

And so, Kenyans are unhappy because they're not being bailed out like the Tanzanians and the Ugandans were. That's probably going to be the fatal flaw in this new program to bail out "struggling homeowners" facing foreclosure. Someone who responsibly made all his mortgage payments and even planned ahead for the ARM interest reset is going to get no help at all, while his next door neighbor, who lied about his income and doesn't even care whether he's foreclosed or not is going to get huge amounts of help. That's the "moral hazard" argument that applies to all of these situations. People are high and mighty when they say, "You made your bed, now lie in it." Or, as the Kenyans say, "Why are those other countries being rewarded for the recklessness?" But when Americans become sufficiently desperate, then this concern about moral hazard, rewarding people for being reckless, goes out the window, just like the outrage over Arab ownership of Citibank has gone out the window. =eod =// &&2 e071130 Tony Blair compares the Mideast peace process to the Northern Ireland peace process =data ww2010.weblog.y2007.e071130.head Tony Blair compares the Mideast peace process to the Northern Ireland peace process =data ww2010.weblog.y2007.e071130.keys gaza, west bank, israel, ireland, tony blair, south africa, japan, darfur, iraq, ireland strategy =data ww2010.weblog.y2007.e071130.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071130.date 30-Nov-07 =data ww2010.weblog.y2007.e071130.txt1 Generational Dynamics illuminates when such historical comparisons are valid and when they are not. =data ww2010.weblog.y2007.e071130.txt2 People are always quoting the famous phrase by George Santayana, "Those who cannot remember the past are condemned to repeat it." Politicians and historians are always trying to discover ways to apply the lessons of the past to the present. Unfortunately what is true in one place or time may or may not be true in another place or time. For example, there was an international oil embargo against South Africa in the late 1980s because of Apartheid, and it was one of the factors that successfully ended Apartheid. On the other hand, there was an oil embargo against Japan in 1941, and it led to Pearl Harbor and international war. So, what do we learn from history? Do we learn that oil embargoes work, or do we learn that oil embargoes don't work? Generational Dynamics gives us at least a partial answer. The oil embargo against South Africa worked because it occurred at the time of the climax of an Awakening era. Politics and morality play a big role in societies in late Awakening and Unraveling eras, and so a political act, like an embargo, can have a big effect. The oil embargo failed against Japan because Japan was in a generational Crisis era. During a Crisis era, morality issues are far less potent, and something like an embargo can easily be considered to be an act of war. Thus, when you're trying to learn lessons from history, you have to make sure that the generational eras correspond. Another example is the civil war in Darfur versus the so-called "civil war" in Iraq. I've said for years that a civil war in Iraq is impossible, because Iraq is in a generational Awakening era, and any incipient civil war fizzles quickly. That's <#inc ww2010.weblog.ref e071031 "exactly what happened in Iraq."#> Contrast that to the real civil war in Darfur. Politicians around the world have been whining because no one has "stopped" the Darfur civil war. I wrote from the beginning that the Darfur is in a generational crisis era, and a crisis civil war CANNOT be stopped, just as a tsunami cannot be stopped. And indeed, the UN and the international community have failed completely and repeatedly to stop it. That's the difference between a generational Awakening era, as in Iraq, and a generational Crisis era, as in Darfur. If people in the State Department or the United Nations understood generational theory, they wouldn't make so many mistakes. Generational theory, properly applied, could give any country a substantial advantage in international relations. Unfortunately, no one even wants to consider it. This finally brings us to the main topic today, Tony Blair's comparison of the Mideast "peace process," going on today, versus the Northern Ireland peace process. The "Troubles" of Northern Ireland peaked in 1972 with <#stdurl http://en.wikipedia.org/wiki/Bloody_Sunday_(1972) ""Bloody Sunday,""#> in which the British army fired on a large mass of civil rights protestors, killing 26. (A roughly similar event occurred in the US in 1971, when the Ohio National Guard <#stdurl http://en.wikipedia.org/wiki/Kent_State_shootings "fired on Kent State students,"#> killing four.) These are Awakening era events -- violent to be sure, but still Awakening era events. Violent Awakening Era events are never crisis civil wars, but the issues surrounding them either grow and fester, leading to civil war in the next Crisis era, or else they die out, usually in the next Unraveling era. The latter is what happened in the Troubles of Northern Ireland. Bloody Sunday ostensibly pitted the Protestants against the Catholics, but there has been no recent history of a major war fault line between Protestants and Catholics. The amount of violence has substantially disappeared since 1972. But no such reasoning applies to the Mideast. There IS a major fault like between Arabs and Jews in the Mideast, and they fought an extremely bloody and genocidal war in the late 1940s when Palestine was partitioned and the state of Israel was created. Israel was created on May 15, 1948, and the Palestinians today still commemorate May 15 every year as "Al Naqba - Catastrophe Day." <#inc ww2010.pic g071129a.jpg left "" "Mideast envoy Tony Blair, former British Prime Minister. (Source: CNN)"#> And so, from the point of view of Generational Dynamics, the Northern Ireland Troubles would have led to peace with or without the help of politicians, while the Mideast troubles must lead to war with or without the help of politicians. Politicians make ABSOLUTELY no difference to either situation. That doesn't stop them from taking the credit, though. (As the old joke goes, it's like the rooster taking credit for the sunrise.) And that's exactly what Tony Blair did on Thursday, when <#stdurl http://transcripts.cnn.com/TRANSCRIPTS/0711/29/ywt.01.html "interviewed by reporter Hala Gorani on CNN International."#> The context of the interview was the <#inc ww2010.weblog.ref e071127b "Mideast summit in Annapolis"#> that ended on the same day. The "accomplishment" was that everyone agreed to talk some more. It's really kind of pathetic, but it's what politicians do. Here's how Blair began:

"The really important thing about the conference at Annapolis is that it has launched a process with a time table, namely 2008. And not to talk about SOME of the issues, but to resolve ALL of the core issues between Israel and Palestine. And that is a, you know, it's a huge undertaking. It's a very big challenge. And, of course, there will be lots of people be skeptical because of all the failures in the past. But actually this is a very strong statement and commitment by both the Israelis and the Palestinians and the president of the United States has put the weight of the U.S. behind it. So, you know, there's a lot that's got to happen now that it's a very strong and important beginning."

<#inc ww2010.pic g071129b.jpg right"" "Coquettish Hala Gorani interviews Tony Blair on CNN International (Source: CNN)"#> You know I like Tony Blair, because he always has a friendly, positive demeanor, even when he's blowing hot air. The "peace process" has repeatedly failed to accomplish anything for decades, and Blair is saying that EVERYTHING will now be accomplished within a year. Why? Because of a "very strong statement and commitment" by both sides. What was that commitment? To talk more. Gorani asked Blair about the Jerusalem issue, which she indicated was one of many issues on which neither side is willing to compromise. here's Blair's response:

"You know, one of the things I learned when I did the northern Ireland peace process is that things that seem absolutely irresolvable, you know, things that -- where the parties just, you think, that can't be done, actually can be done if the will is there and some hope and credibility comes back in the process. So -- and it's not for me to negotiate the issue of Jerusalem here, but I don't believe if you get everything else working, it will be impossible to find a way through."

Now this is simply wrong. Here's where Blair is comparing an Awakening era political dispute to a Crisis era fault line dispute. The first is resolvable, and the second is not. Having "some hope and credibility" has nothing to do with it. There is simply no comparison. Gorani picks up on the comparison by comparing the northern Ireland terrorist group, the Irish Republican Army (IRA), with the Palestinian terrorist organization, Hamas:

Gorani: "Now you mentioned northern Ireland and this was a great success achieving peace in that part of the world after so many decades of bad blood between two communities. But the IRA, which was considered a terrorist group that nobody could ever talk to, was then embraced in the end. Why not do the same with Hamas? What is the difference?" Blair: "The difference is very simple. When we actually got the Sinn Féin political party associated with the IRA into the peace process, we did so on the basis that certain principles were accepted. And let me make it very clear, it's not that people are saying, we will never contemplate dealing with Hamas. Hamas can be dealt with provided that they except the two principles of the gateway into the process. Number one, there should be two states, so Israel's got a right to exist."

Comparing the IRA to Hamas really illuminates the lash of generational theory, and why it means that the two situations are completely different.

The northern Ireland Troubles were fomented by a young generation, like America's Boomer generation, in the 1960s and 1970s. It was really a "generation gap" struggle, typical of generational Awakening eras. As the decades have passed, the generation gap has dissipated, as it has here in America. As as the generation gap dissipated, the IRA became more and more willing to compromise.
The generational balance is completely the opposite in the Mideast. The fight between Israelis and Arabs is not a generation gap; it's an ethnic fault line. While generation gaps dissipate, fault lines tend to strengthen, leading to a new crisis war. The survivors of the Arab-Israeli war in the late 1940s, including Israelis like Ariel Sharon and Palestinians like Yasser Arafat and Mahmoud Abbas, were determined to spend their lives making sure that no such war would ever happen again. And they succeeded so far, and Mahmoud Abbas is still determined to succeed. But Hamas was formed by people in younger generations who do not fear another war with Israel, and are far more motivated by the injustices they fell from Israeli occupation and control. This younger generation is growing, and the older generations are dying off, and so when Tony Blair says that the Mideast problem can be solved by having "some hope and credibility," the whole idea is absurd. Hope and credibility are completely irrelevant to these kids, who see only despair and depression.

<#inc ww2010.pic basgen.gif right "" "Fault lines and generation gaps"#> Here's a diagram that I worked up several years ago to illustrate what goes on, and how generation gap lines are distinguished from fault lines. When I have some time, perhaps I'll turn it into an animated GIF where the horizontal generation gap line moves up and down automatically. But here's the idea: In the years immediately following a crisis war, the horizontal generation gap line is near the bottom of the diagram, and there's a large older generation of war survivors who have vowed to spend their lives preventing any such war from ever occurring again. That's why the portion of the vertical fault line that's above the horizontal line is shown as a dotted line; violence across the fault line is muted because neither side wants another war. As time goes on, the horizontal line moves up; the older generation disappears, and the younger generation grows larger. The portion of the vertical fault line that's BELOW the horizontal line is shown as a solid line, because it's a real fault line, and the level of violence and hostility grows. It's a shame that people in our State Dept. or the United Nations don't have a clue about any of this stuff. At the very least, it would allow them to concentrate their resources where they might actually do some good. =eod =// &&2 e071129 Investors in drunken orgy push the Dow up 311 points. =data ww2010.weblog.y2007.e071129.head Investors in drunken orgy push the Dow up 311 points. =data ww2010.weblog.y2007.e071129.keys finance, julie van cleave, p/e ratios =data ww2010.weblog.y2007.e071129.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071129.date 29-Nov-07 =data ww2010.weblog.y2007.e071129.txt1 It was the biggest two-day Dow Industrials increase in five years, =data ww2010.weblog.y2007.e071129.txt2 and everyone wore a smile a mile wide on CNBC on Wednesday. On Tuesday, investors had gotten all excited when the nice <#inc ww2010.weblog.ref e071128 "oil sheiks in Abu Dhabi agreed to bail out Citibank."#> On Wednesday, a Fed Governor gave a speech and supposedly hinted that the Fed would cut interest rates again, when the FOMC (Federal Open Market Committee) meets next on December 11. That's all it took to push the Dow Industrials up 311 points on Tuesday. Here's how a <#stdurl http://www.msnbc.msn.com/id/22012064/ "Financial Times article"#> explained what happened:

"Stocks surged on Wednesday after Federal Reserve vice-chairman Don Kohn dropped what investors saw as a clear hint that the US central bank was ready to cut interest rates again next month unless market conditions improve. Mr Kohn, the number-two official at the central bank, said the Fed would be "flexible and pragmatic" in responding to new risks to growth arising from the relapse in financial markets."

Now, I read through <#stdurl http://federalreserve.gov/newsevents/speech/kohn20071128a.htm "Kohn's complete speech,"#> and you can do the same, but I don't see any "clear hint" at all. The 2000 word speech discusses the Fed balancing act -- promoting financial stability while avoiding moral hazard -- and concludes with the following:

"In response to developments in financial markets, the Federal Reserve has adjusted the stance of monetary policy and the parameters of how we supply liquidity to banks and the financial markets. These adjustments have been designed to foster price stability and maximum sustainable growth and to restore better functioning of financial markets in support of these economic objectives. My discussion today was intended to highlight some of the issues we will be looking at in financial markets as we weigh the necessity of future actions. We will need to assess the implications of these developments, along with the vast array of incoming information on economic activity and prices, for the future path of the U.S. economy. As the Federal Open Market Committee noted at its last meeting, uncertainties about the economic outlook are unusually high right now. In my view, these uncertainties require flexible and pragmatic policymaking--nimble is the adjective I used a few weeks ago. In the conduct of monetary policy, as Chairman Bernanke has emphasized, we will act as needed to foster both price stability and full employment."

So yes, the phrase "flexible and pragmatic policymaking" does appear in the next-to-last sentence of the speech, but it refers to the balancing act of financial stability versus moral hazard. It's a thin reed on which to base a stock-buying orgy. Nonetheless, investors have succumbed to full-scale bipolar disease for several weeks now, and after a long depressive period, it was probably time for a manic episode. <#inc ww2010.pic g071128a.jpg right "" "Phil Roth, Miller Tabak (Source: CNBC)"#> I did make note of some particularly amusing statements made on CNBC on Wednesday, so that I could share them with you, Dear Reader. Here's one from Phil Roth, chief technical market analyst at trading firm Miller Tabak:

"Short term the problem will be the Fed meeting, because people are now buying stock in anticipation of some good news from the Fed. You probably need bad economic news to get good news from the Fed. So you probably have to hope for a bad employment report, and then action from the Fed."

This is exactly the kind of "bad news is good news" statement that I keep talking about. So if you've recently become unemployed, and you can't find another job, you should be aware that it's good news, and that a you're very lucky person. Even more important, you're helping the wealthy Wall Street investors make more money, and that's what counts in life. <#inc ww2010.pic g071128b.jpg right "" "Julie Van Cleave, DWS Capital Growth Fund (Source: CNBC)"#> And now, here's the funniest statement of all on CNBC on Wednesday:

"The market was very oversold, and currently we've got a 14 multiple on the market which is very low in any of the last 10 years as far as what would be a normal point here. So I think the market was very oversold. We've taken a lot of bad news and we're ready for a short term rally."

This brief statement is so wrong on so many levels that it's hard to know where to begin. It's typical of what we hear on CNBC, and I wish the quote had come from a male, so that I can't be accused of picking on a girl, especially a blonde. But male or female, blonde, brunette or redhead, this kind of blithering stupidity is the norm. She says that "we've got a 14 multiple on the market." What does that mean? It means that the price/earnings ratio index is 14. But readers may have noted that there's a price/earnings ratio chart at the bottom of this web site's home page, and it gets updated automatically every Friday. Here's the November 23 version of the chart: <#inc ww2010.pic pe071123.gif center "" "S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 23-Nov-2007. (Source: MarketGauge ® by DataView, LLC)"#> As you can see from the above graph, the P/E ratio is not 14. It's actually around 17-18. The question is: Where did Van Cleave get the figure 14 from? The answer is that she's using the wrong value for earnings. The P/E ratio should be computed by dividing the stock price by the company's earnings per share for the last year. But Van Cleave isn't doing that, because that would give an embarrassing result. Van Cleave is using so-called "forward earnings," the bloated estimates for earnings in 2008. By using a bloated value for earnings, the P/E ratio becomes smaller. What Van Cleave computed is total gibberish. And this is a woman who probably makes over a million dollars per year investing other people's money in the stock market. What you should understand, Dear Reader, is that YOUR pension fund, your 401k, your stock market or hedge fund broker -- the people managing YOUR hard-earned money are, like Van Cleave, too stupid to know how to compute a price/earnings ratio. Computing the price/earnings ratio isn't exactly rocket science. Someone would have to be unbelievably stupid to be unable to learn it. And yet, Van Cleave and other people who manage YOUR money are just that stupid. It doesn't stop there. She says, "which is very low in any of the last 10 years." But look at this graph of P/E ratios for the last century that I've posted several times: <#inc ww2010.pic g070818c.gif center "" "S&P 500 Price/Earnings Ratio (P/E1) 1871-2007"#> Now as you can see, the P/E ratio index was ENORMOUSLY above average for the last ten years, by historical standards, and so to compare today's value to the last 10 years is moronic. I don't expect the "man on the street" to necessarily understand these things. But I DO expect someone who earns millions of dollars managing other people's money to understand them. And yet, Van Cleave is not only TOO STUPID to even know how to compute a price/earnings ratio, she's also TOO STUPID to know what the historical average is. And remember, this idiot or someone like her is managing your pension fund. Let's go on to the third common error, though not one used by Van Cleave on this day. Very often you hear some so-called expert on CNBC use the phrase "reversion to the mean," or "is reverting to the mean," to indicate that some long-term index is getting closer to its long-time historic average or mean value. For example, some so-called genius might say, "the P/E ratio is getting close to 14, so it's reverting to the mean, so stocks are cheap again." This is total nonsense. The Principle of Mean Reversion is not "reversion TO the mean"; it's "reversion OF the mean." It's not the current P/E ratio that has to revert to 14; it's the mean or average that has to revert to 14. And the only way that can happen is for the current P/E ratio to go much lower -- around 5 or 6, as has happened several times in the last century, most recently in 1982 -- and stay very low for many years, so that the AVERAGE will get back down to 14. I realize that to understand this concept requires several advanced degrees in higher mathematics, and so we can't expect Van Cleave and other financial experts to understand it when they're too stupid even to know how to compute the P/E ratio in the first place. I just can't get over the sheer day by day stupidity of these people. It never ceases to astound me and infuriate me. The only thing I can't figure out is whether they're being incredibly stupid or incredibly dishonest. It's quite possible that Van Cleave and others like her are very well aware that they're lying, and therefore they're committing fraud on their clients. If you're a client of one of these people, I definitely think you should start preparing your lawsuit for fraud and make these people pay dearly for their dishonesty and lack of ethics. They deserve the worst punishment they can get. Now still you may be thinking, "Gee, who cares? The markets went up 2½% to 3% on Wednesday, so everything is going great!!" Well just take a look at my <#hreftext ww2010.i.djia "Dow Jones historical page,"#> and check out what happened on Monday, October 7, 1929 (1929-10-07) -- notice that the market went up 6.32% on that one day alone. You can just imagine the smiles and laughter of investors on that day. And look at how much the stock market continued to gain throughout the entire week. Then, check out what happened just two weeks later. That doesn't mean that we're going to have a stock market crash in two weeks, though we might. What it means is that Wednesday's 3% gain is not a sign of market strength; it's a sign of a drunken orgy at a time of great investor desperation. From the point of view of Generational Dynamics, we're overdue for a stock market panic and crash. It might come next week, next month or next year, but it's coming with absolute certainty, and probably sooner rather than later. =eod =// &&2 e071128 Will the United Arab Emirates save the world? =data ww2010.weblog.y2007.e071128.head Will the United Arab Emirates save the world? =data ww2010.weblog.y2007.e071128.keys finance, united arab emirates, citibank =data ww2010.weblog.y2007.e071128.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071128.date 28-Nov-07 =data ww2010.weblog.y2007.e071128.txt1 Markets soar after Abu Dhabi oil sheiks give Citibank $7.6 billion, in return for a stake in the company. =data ww2010.weblog.y2007.e071128.txt2 I've been wondering the last few days whether the Fed or the Dept. of Treasury would come up with some spectacular move to attempt to resolve the revived credit crunch crisis, and return the investment community back to a state of euphoria. Well, it was neither the Fed, nor the Treasury Dept. It was the Abu Dhabi Investment Authority (AIDA), the secretive association that invests the enormous oil profits of Abu Dhabi in the United Arab Emirates (UAE). Actually, I should have thought of something like that. When I wrote the article, <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world,""#> I suggested that China might try to save the American economy, for its own well-being, in the same way that the US tried to save the German economy in 1931. Then and now it should have occurred to me that the Gulf oil sheiks might try to do exactly the same thing. AIDA will <#stdurl http://www.telegraph.co.uk/money/main.jhtml;jsessionid=XW245H1UUWDTPQFIQMFCFFOAVCBQYIV0?xml=/money/2007/11/27/bcnciti127.xml "invest $7.5 billion in Citibank"#> (actually, Citigroup) in return for a stake in the company. Rumors have been spreading for several days that Citibank was planning thousands of layoffs, and some people were speculating that Citibank would become insolvent. The rumors spread because Citibank has had to take $16.9 billion in writedowns in recent weeks. These writedowns have become common among many financial institutions recently. They come about because financial institutions create credit derivatives and CDOs, backed by subprime mortgage loans, priced according to computerized models that compute notional values far above what anyone would really be willing to pay for them. One firm after another has been forced to go through the "mark to market" process recently, revealing the true market value of these securities. Quite a few, nominally worth billions of dollars, have turned out to be almost worthless. Citibank has been hit so hard by these writedowns that the future existence of the institution was in doubt. The injection of funds from Abu Dhabi gives new life to Citibank, at a time when it was most desperate to receive it. However, Citibank, which has 320,000 employees globally, is <#stdurl http://www.telegraph.co.uk/money/main.jhtml;jsessionid=XW245H1UUWDTPQFIQMFCFFOAVCBQYIV0?xml=/money/2007/11/27/cnciti127.xml "still expected to lay off tens of thousands"#> of employees. It'll be interesting to see what kind of political backlash, if any, this provokes. In the past, Washington has gotten all bent out of shape after Arabs or Chinese or Japanese have made large investments in the U.S. This time, however, the Citibank situation is so desperate that it's not likely that we'll hear more than a few peeps. Investors were thrilled, and quickly became drunk with euphoria. The Dow Industrials quickly rose over 100 points on Tuesday morning, and closed 215 points up. The "bad news is good news" mentality returned to investors throughout the day. The reasoning was as follows: The market has fallen 10% from its high -- an amount that would qualify as a market "correction." Since the market has now had its "correction," according to this reasoning, it's time for the market to go up again. Here's how CNBC anchor Joe Kernen put it on Tuesday morning:

"We're down 10%. This is a script that I'm writing. If I produce a movie. Market hits a 10% correction. All these things that have gone too far -- where we may have quasi- or pseudo-bubbles -- they start to reverse. The markets finish - got the 10% out of the way -- oil starts reversing. The dollar starts reversing. Interest rates stop dropping. All these things start happening, and we all live happily ever after."

It's a nice fairy tale, and maybe some day it'll make a great movie. But unfortunately the latest news doesn't justify this kind of euphoria. Housing prices have <#stdurl http://www.reuters.com/article/ousiv/idUSN2748402720071128 "fallen 1.7% in the last three months"#> alone -- the largest tumble in the 21 year history of the Home Price Index. And the US Consumer Confidence Survey index fell much more sharply than expected, indicating that consumer spending will be reduced. Several paragraphs ago I mentioned the article, <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world.""#> If you haven't read that, then now would be a good time to do so. It uses a book written in 1931 to inform us of what's happening today -- how one desperate measure after another is being used to avoid the inevitable result. From the point of view of Generational Dynamics, the stock market is <#hreftext ww2010.i.panic070820 "overpriced by a large factor,"#> currently almost 250%, same as in 1929. A full-scale generational panic and crash must come before too much longer. =eod =// &&2 e071127b Mideast summit in Annapolis has feel of act of desperation =data ww2010.weblog.y2007.e071127b.head Mideast summit in Annapolis has feel of act of desperation =data ww2010.weblog.y2007.e071127b.keys israel, gaza, west bank, saudi, syria =data ww2010.weblog.y2007.e071127b.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071127b.date 27-Nov-07 =data ww2010.weblog.y2007.e071127b.txt1 No one appears to have any expectations whatsoever -- talking just to talk. =data ww2010.weblog.y2007.e071127b.txt2 The last major <#stdurl http://afp.google.com/article/ALeqM5iLeg7yCE38f7YzAcSwHYwDROBn0Q "Mideast peace initiative"#> of the Bush administration begins on Tuesday in Annapolis, as leaders of Israel, the Palestinian Authority, Saudi Arabia and even Syria sit down to talk. If there's anybody anywhere who believes that this summit meeting will actually accomplish anything, I haven't seen it or read about it. Instead, those who favor the initiative are saying it's the beginning of a process, consisting of additional meetings in the future, to eventually come to a Mideast peace solution -- two states, one Israeli and one Palestinian, living side by side in joy and peace and harmony. However, this "process" has begun a number of times in the past. Major examples include the Oslo accordings in 1994, President Clinton's 14-day Camp David summit get-together in 2000, and the Mideast Roadmap to Peace in 2003. These and other initiatives have all failed completely -- even when an agreement was reached, things only got worse afterwards. In fact, on May 1, 2003, when the <#hreftext ww2010.i.may01 "Mideast Roadmap to Peace"#> was announced, I predicted that the Roadmap would fail, the Mideast would becoming increasingly chaotic, leading to a major genocidal war between Arabs and Jews that would re-fight the genocidal war of 1948-49, following the partitioning of Palestine and the creation of the state of Israel. Since 2003, and especially since the death of Yasser Arafat, it's hard to find a single day when the situation was not measurably worse than it was the previous day. In fact, things have been getting worse and worse pretty steadily since the first Intifada in the late 1980s. President Clinton held several summit meetings with Mideast leaders during his Presidency, and things only got worse, especially after the disastrous Camp David meeting in 2000. President Bush has held no summit meetings until now, and things have only gotten worse. It doesn't take a rocket scientist to see that it doesn't make any difference whether you hold summit meetings or not -- things will get worse either way. Indeed, each day that passes makes any kind of agreement less likely. Why? Because the people who most want an agreement are the generations that survived the 1949 war, and who see an agreement as the best way to prevent any such disaster from occurring again, and every day, more and more of those survivors die. Left behind are younger generations, most of whom are convinced that the only way to resolve the issue is to have victory over the other side. Here are some of the current roadblocks to a peace agreement:

Hamas will not agree to recognize Israel's right to exist, and Hamas is probably more powerful today than the "official" Palestinian government. Furthermore, Hamas is not even attending the Annapolis meeting.
There are many Palestinian terrorist groups shooting rockets into Israel. They are not willing to stop this activity.
Israelis would have to give up their West Bank settlements, the Golan Heights, and parts or all of Jerusalem, and they will not do that. Apart from purely emotional issues, this would require thousands of Jews to move, and would expose the Israeli population to even closer range rockets from terrorist groups.
Any agreement to a two-nation solution would require the Palestinian nation to be one contiguous peace of land. The current Palestinian territories are split into two separate parts, Gaza and the West Bank, and Palestinians cannot travel freely between them.
Palestinians would have to give up their "right to return," meaning that they would be able to re-occupy the land that their grandparents lived on. The Palestinians will not agree to that.

It's worth pointing out that the trends on all of the above issues is that they've gotten worse and more intractable; there is no indication of an improvement in any area that I'm aware of. In fact, as I've pointed out many times, the governments of countries that fought in World War II as a crisis war are all becoming increasingly paralyzed. This is true of the United States, France, Japan, and other countries. The reason is that the the post-war generations, like America's Boomer generation, don't have any skills for leading and governing. This also applies to the Israelis and Palestinians. So even an agreement like the Oslo accords could not be repeated now. From the point of view of Generational Dynamics, the Mideast is going in one and only one direction: Toward a major new war between Arabs and Jews, refighting the genocidal war of the late 1940s. And the new war will pull in the United States and numerous other countries that will be forced to choose sides between the two warring enemies. =eod =// &&2 e071127 International credit markets are nearing "virtual panic mode" =data ww2010.weblog.y2007.e071127.head International credit markets are nearing "virtual panic mode" =data ww2010.weblog.y2007.e071127.keys finance, credit crunch, libor =data ww2010.weblog.y2007.e071127.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071127.date 27-Nov-07 =data ww2010.weblog.y2007.e071127.txt1 Markets in Europe, America and Asia have fallen sharply on Monday and Tuesday, =data ww2010.weblog.y2007.e071127.txt2 as the evidence builds that a major new international "credit crunch" crisis is about to begin. Banks are hoarding cash, refusing to lend money to other banks. The interest rates tell the story:

Interest rates on US Treasury bills have fallen sharply. Here's <#stdurl http://finance.yahoo.com/bonds "the table:"#>
```
Maturity   Yield   Yesterday Last Week Last Month
--------   -----   --------- --------- ----------
3 Month    2.99    3.10      3.23      3.80
6 Month    3.14    3.23      3.33      3.87
2 Year     2.88    3.07      3.16      3.76
3 Year     2.81    3.01      3.06      3.77
5 Year     3.20    3.41      3.55      4.05
10 Year    3.83    4.00      4.07      4.40
30 Year    4.29    4.42      4.48      4.70
```
In the above table, the "Yield" is the interest rate. Remember that the yield on Treasury bills goes down as the price goes up, and vice versa. The above table shows that yields are falling sharply, which means that prices are increasing sharply, which (by the law of supply and demand) means that demand is increasing sharply. If demand for Treasury bills is increasing sharply, it means that banks are purchasing them in higher than expected volume. (This is what the phrase "hoarding cash" means. If a bank has cash and wants to keep cash, it still invests it in Treasury bills, since even a 2.99% interest rate is better than 0%.) This is a very exceptional situation. Recall that the Fed Funds Rate is now at 4.75%, which is the interest rate set by the Fed for overnight loans. The 3-month interest rate would be fairly close to 4.75% in normal times. At 2.99%, it's very unusual.
On the other hand, the interest rates on interbank loans is very high. The value of Libor (London interbank offering rate), which is normally close to the Fed Funds rate, went from 5.04% to 5.05% yesterday (euro, 3-month contract). This means that a bank wanting to borrow money from another bank in euros will have to pay a much higher interest rates. The Libor rate is even higher for loans in pounds sterling.

This is exactly what happened in July and August, when the "credit crunch" almost shut down the entire banking system. This time, however, the Fed and other central banks are trying to stay ahead of it. The Fed is <#stdurl http://news.independent.co.uk/business/news/article3198940.ece "pumping $8 billion into the economy,"#> to head of a new credit crunch. The European Central Bank (ECB) announced a similar policy last week. However, it's not clear that the central banks can do much more than they have, and what they've done isn't very much. According to <#stdurl http://www.ft.com/cms/s/0/16e2b24c-9b93-11dc-8aad-0000779fd2ac.html "a JPMorgan economist,"#> the markets went into "virtual panic mode" last week. "Pressure is building for central banks to become a lot more active and vocal [this] week if they want to avert a collapse in credit markets." Whether the central banks and the Treasury Dept. can pull of some spectacular policy change to postpone the inevitable remains to be seen. From the point of view of Generational Dynamics, there's no question about what's going to happen. As I've been saying since 2002, the stock market is <#hreftext ww2010.i.panic070820 "overpriced by a large factor,"#> currently almost 250%, same as in 1929. A full-scale generational panic and crash must come before too much longer. =eod =// &&2 e071126 Political chaos increases in Lebanon as Constitution fails to provide a new President =data ww2010.weblog.y2007.e071126.head Political chaos increases in Lebanon as Constitution fails to provide a new President =data ww2010.weblog.y2007.e071126.keys lebanon, rafiq hariri, emile lahoud, syria, hizbollah, iran, israel, sabra and shatila massacre =data ww2010.weblog.y2007.e071126.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071126.date 26-Nov-07 =data ww2010.weblog.y2007.e071126.txt1 Hizbollah is threatening to cripple Lebanon's government indefinitely, =data ww2010.weblog.y2007.e071126.txt2 now that Émile Lahoud's term as President ended on Friday, and the Parliament has been <#stdurl http://news.bbc.co.uk/2/hi/middle_east/7111071.stm "unable to select a successor."#> =inc ww2010.blocking.start =inc ww2010.xr.related1 right lebanon 2 Lebanon is politically split between pro-Syrian and anti-Syrian politicians. Lahoud was a pro-Syrian politician. That's why Hizbollah was supporting him, and don't want him replaced with an anti-Syrian person. The Lebanese Parliament is supposed to select a new President, but it currently has anti-Syrian majority. Terrorists, most likely hired and funded by Syria, have been killing one anti-Syrian politician after another, beginning in 2005 with the <#inc ww2010.weblog.ref e050216 "massive Beirut explosion that killed Rafiq Hariri."#> There have been more of these killings, and the seventh killing occurred with <#inc ww2010.weblog.ref e070614b "a Beirut bomb blast in June."#> This has whittled the anti-Syrian majority in the Parliament down to just one or two votes. That's presumably the reason why Hizbollah is threatening to prevent a vote indefinitely. They can do this by having their members <#stdurl http://www.reuters.com/article/worldNews/idUSL2516044820071125 "boycott Parliament meetings,"#> so there won't be a necessary quorum. Presumably that kind of stalling will give Syria the time necessary to kill off one or two more anti-Syrian members. There has been renewed fear of civil war in Lebanon, like the horrible civil war that occurred in the 1980s. Ever since last summer's Israeli war with Hizbollah in Lebanon, pundits have been almost unanimous in predicting a new civil war in Lebanon, especially since Hizbollah (supported by Iran and Syria) has been trying to trigger one. Apparently the pundits' reasoning is that if they had a horrible civil war 20 years ago, then they're ready, willing and able to have another. I've said repeatedly that a civil war in Lebanon is absolutely impossible, since only one generation has passed since the genocidal Lebanese civil war of the 1980s. Lebanon is in a generational Awakening era, and so a civil war is impossible. The Lebanese are terrified of another civil war. This is true of every country in a generational Awakening era. In this case, the survivors who lived through the 1980s are still, to this day, completely traumatized and horrified because of the barbarity of what ordinary Lebanese people did to each other. This was especially true in the explosive climax in 1982 when Christian Arab forces massacred and butchered hundreds or perhaps thousands of Palestinian refugees in camps in <#stdurl en.wikipedia.org/wiki/Sabra_and_Shatila_massacre "Sabra and Shatila."#> It's this horror and fear of repeating the atrocities of the last crisis war that prevent the survivors from ever taking part in a new crisis war. That's the essence of a generational Awakening era. So, as bad as the political turmoil becomes in Lebanon, there won't be another civil war, no matter how much the pundits talk about it. To get a feel for how the current situation is affecting the Lebanese, think of the American election in the year 2000, when there wasn't a clear winner chosen on election night. It's extremely dangerous for a country to be without a leader, since decisions can't be properly made. It was certainly one of the principal motivations of the US Supreme Court at that time to make sure that the indecisive state didn't continue for long. And there are many bitter feelings still continuing to this day over the way it turned out. That's the situation in Lebanon right now. The country will continue on with only a partial government until some compromise can be found to select a new President. But there won't be a civil war. =inc ww2010.blocking.end =eod =// &&2 e071124 Pakistan is suspended from the British Commonwealth of Nations =data ww2010.weblog.y2007.e071124.head Pakistan is suspended from the British Commonwealth of Nations =data ww2010.weblog.y2007.e071124.keys pakistan, british commonwealth, francophonie,rwanda, pervez musharraf, india, al-qaeda, taliban, benazir bhutto, antigua and barbuda, australia, bangladesh, barbados, belize, botswana, brunei darussalam, cameroon, canada, cyprus, dominica, fiji islands, ghana, grenada, guyana, india, jamaica, kenya, kiribati, lesotho, malawi, malaysia, maldives, malta, mauritius, mozambique, namibia, nauru, new zealand, nigeria, pakistan, papua new guinea, samoa, seychelles, sierra leone, singapore, solomon islands, south africa, sri lanka, st kitts and nevis, st lucia, st vincent and the grenadines, swaziland, the bahamas, the gambia, tonga, trinidad and tobago, tuvalu, uganda, united kingdom, united republic of tanzania, vanuatu, zambia =data ww2010.weblog.y2007.e071124.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071124.date 24-Nov-07 =data ww2010.weblog.y2007.e071124.txt1 Once upon a time, long, long ago, there was a British Empire. =data ww2010.weblog.y2007.e071124.txt2 Today, there's no longer a British Empire. In its place is the <#stdurl http://www.thecommonwealth.org "British Commonwealth of Nations,"#> a group whose <#stdurl http://www.thecommonwealth.org/Internal/142227/members/ "members are 53 nations"#> consisting mostly of former British colonies. Reference list of members: Antigua and Barbuda, Australia, Bangladesh, Barbados, Belize, Botswana, Brunei Darussalam, Cameroon, Canada, Cyprus, Dominica, Fiji Islands [suspended], Ghana, Grenada, Guyana, India, Jamaica, Kenya, Kiribati, Lesotho, Malawi, Malaysia, Maldives, Malta, Mauritius, Mozambique, Namibia, Nauru [special member], New Zealand, Nigeria, Pakistan [now suspended], Papua New Guinea, Samoa, Seychelles, Sierra Leone, Singapore, Solomon Islands, South Africa, Sri Lanka, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Swaziland, The Bahamas, The Gambia, Tonga, Trinidad and Tobago, Tuvalu, Uganda, United Kingdom, United Republic of Tanzania, Vanuatu, Zambia. Although the Commonwealth has officially existed since the mid 1800s, it became particularly important with the breakup of the British Empire after World War II. Still with the Queen as its head, the nations of the Commonwealth provide technical and administrative assistance to one another. Interestingly, there is a competing organization: <#stdurl http://www.francophonie.org "Organisation internationale de la Francophonie,"#> the alliance of French-speaking nations. Coincidentally, la Francophonie also has 53 member nations. Just as Britain and France are in competition over everything else, there's also a competition between the Commonwealth and la Francophonie. In fact, there's currently a kerfuffle over the <#stdurl http://allafrica.com/stories/200711240027.html "bid by Francophone nation Rwanda"#> to join the Commonwealth. Rwanda's aspiration to join the Commonwealth is not intended to shut out Francophone practices and the French language, according to the Rwandan government. "We are not going to the Commonwealth to speak better English, but to get economical, social and community benefits." And so, although the Commonwealth and la Francophonie organizations are almost totally unknown in the United States, membership in these organizations is a very big deal among many nations internationally. Which is why Thursday's suspension of Pakistan from the Commonwealth is also a very big deal. Every two years, there's a Commonwealth Heads of Government Meeting (CHOGM), a get-together of the leaders of all the member nations. By coincidence, <#stdurl http://www.chogm2007.ug/ "the CHOGM 2007 meeting"#> is being held this very weekend in Kampala, Uganda. On the eve of the meeting, on Thursday evening, the Commonwealth Ministers Action Group (CMAG) reached the <#stdurl https://www.chogm2007.ug/index.php?option=com_content&task=view&id=250&Itemid=116 "decision to suspend Pakistan from the Commonwealth,"#> because "it failed to fulfil. its obligations in accordance with Commonwealth principles." CMAG particularly objected to the fact that President Musharraf is both a civilian and military leader, both Head of State and Chief of Army Staff. Saying that the decision was taken "taken in sorrow not in anger," CMAG demanded implementation of the following measures before Pakistan could be restored to full membership in the Commonwealth:

immediate repeal of the emergency provisions and full restoration of the Constitution and of the independence of the judiciary. This should also include full restoration of fundamental rights and the rule of law that have been curbed under the Proclamation of Emergency;
President Musharraf to step down as Chief of Army Staff as promised;
immediate release of political party leaders and activists, human rights activists, lawyers and journalists detained under the Proclamation of Emergency;
immediate removal of all curbs on private media broadcasts and restrictions on the press;
move rapidly towards the creation of conditions for the holding of free and fair elections in accordance with the Constitution.

This is actually the second time that the Commonwealth has suspended Pakistan's membership. Pakistan was suspended in 1999, when General Pervez Musharraf seized power through a coup. The suspension was lifted in 2004. An angry Pakistan government spokesman <#stdurl http://economictimes.indiatimes.com/News/PoliticsNation/Suspended_by_Commonwealth_Pakistan_fumes_India_cautious/articleshow/2566253.cms "rejected CMAG’s decision"#> and said it was "based on lack of realism and absence of understanding" of the situation in the country, and that they would not tolerate outside interference in Pakistan's affairs. Pakistan's Ministry of Foreign Affairs issued <#stdurl http://www.mofa.gov.pk/Press_Releases/2007/Nov/PR_287_07.htm "the following statement"#> on Friday:

"The Government of Pakistan deeply regrets the decision of the Commonwealth Ministerial Action Group (CMAG) to suspend Pakistan from the Councils of the Commonwealth. The decision does not take into account the objective conditions prevailing in Pakistan . The Government of Pakistan is committed to restore full democracy in the country. Emergency was a necessary measure to avert a serious internal crisis which is being addressed and the situation is now returning towards normalcy. A neutral caretaker government is in place to hold free, fair and impartial elections. The Election Commission of Pakistan has already announced that elections to the National and Provincial Assemblies would be held on 8 th January, 2008 . Foreign election observers are welcome. Except for a few, all detainees held as a measure of precaution have been released. The print media was never under any restriction, while the large majority of television channels have resumed their transmission. Following the judgment of the Supreme Court on the validity of Presidential election, President Musharraf is expected to take the oath of the office as a civilian President. The pace of progress towards normalcy will be determined by ground realities and legal requirements in Pakistan rather then unrealistic demands from outside. In order to prevent any precipitate decision by CMAG, both the Prime Minister and the Foreign Minister had contacted the leaders of CMAG on telephone and through letters communicating the ground realities in Pakistan and underlining the significant political progress made since the imposition of Emergency. The CMAG countries were asked to take this progress into account in their deliberations and to postpone any consideration of suspension until a CMAG delegation could visit Pakistan to see for itself the existing circumstances and the steps taken by the Government to place Pakistan firmly on the path of democracy. Therefore, the CMAG decision is unreasonable and unjustified. Pakistan will review its association and further cooperation with the organization."

As indicated by this statement, Musharraf appears to be moving in the direction of complying with Commonwealth demands. However, he has not yet named a date for removing the state of emergency. On Friday, Pakistan's election commission <#stdurl http://www.abc.net.au/news/stories/2007/11/24/2100360.htm?section=world "confirmed that Musharraf won"#> the October 6 presidential election, giving him another five years in office as Head of State. This frees Musharraf, according to previous promises he's made. to resign as head of the military, and he's renewed his promise to do this within a week. Parliamentary elections are scheduled for January 8. <#inc ww2010.pic pakfata2.gif right "" "Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas), highlighting Swat Valley (Source: pakistan.gov.pk)"#> From the point of view of Generational Dynamics, Pakistan and India are headed for a new crisis war, re-fighting the genocide that followed the 1947 Partition of the subcontinent into (Muslim) Pakistan and (Hindu and Sikh) India. Thus, there are many things happening that will complicate the path to the January 8 elections and the removal of the state of emergency:

A <#inc ww2010.weblog.ref e071119 "large military operation"#> is in progress in Swat Valley in the Northwest (NWFP) to drive out al-Qaeda and Taliban militants led by terrorist cleric Maulana Fazlullah.
On Saturday morning, <#stdurl http://www.iht.com/articles/2007/11/24/asia/pakistan.1-177176.php "two suicide bombers killed 15"#> people. The bombers targeted Pakistan's military headquarters in Rawalpindi, just south of Islamabad, the nation's capital. Such attacks in the past have been linked to al-Qaeda and Taliban terrorists in NWFP and the Tribal areas (FATA).
Former President Nawaz Sharif, whom Musharraf overthrew in the 1999 coup, is scheduled to <#stdurl http://www.guardian.co.uk/international/story/0,,2216510,00.html "return to Pakistan on Sunday,"#> after a year in prison and seven years of exile in Saudi Arabia. Unlike Benazir Bhutto, a formerly exiled former Prime Minister, who is secular and <#inc ww2010.weblog.ref e071112 "ethnically Sindhi,"#> Sharif is a conservative Muslim and is ethnically Punjabi, the most powerful ethnic group in Pakistan. Thus, in the Parliamentary elections, Sharif would split the formerly strong Punjabi support for Musharraf's candidates. However, Musharraf was reportedly pressured to allow Sharif to return by Saudi King Abdullah, so that Sharif would provide a conservative Muslim counterweight to Benazir Bhutto, a relatively secular and liberal woman.

Reading through the above list, it's clear how rapidly Pakistan's domestic situation is changing. Thus, although the Commonwealth's suspension of Pakistan is humiliating, it's far down the list of major factors that will influence Musharraf's actions. And there's little doubt that there will be further rapid and unexpected changes in the weeks to come. =eod =// &&2 e071123b Spain's King to Chavez: ¿Por qué no te callas? =data ww2010.weblog.y2007.e071123b.head ¿Por qué no te callas? =data ww2010.weblog.y2007.e071123b.keys spain, venezuela, hugo chavez, iran, mahmoud ahmadinejad, cuba fidel castro, jose luis rodriguez zapatero, jose maria aznar, juan carlos, chile =data ww2010.weblog.y2007.e071123b.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071123b.date 23-Nov-07 =data ww2010.weblog.y2007.e071123b.txt1 The King of Spain's memorable putdown of Venezuelan President Hugo Chávez =data ww2010.weblog.y2007.e071123b.txt2 has become the most popular ringtone in Spanish history. <#inc ww2010.pic g071123d.jpg right "" ""Parody sweeps Bájatela" is the claim by the Bájatela mobile phone company in a ringtone ad. (Source: CNN)"#> Venezuelan President Hugo Chávez has increasingly become the biggest and most obnoxious loudmouth among international leaders, often even eclipsing his pal, Iranian President Mahmoud Ahmadinejad. (His other pal, Cuba's Fidel Castro, has been too sick to matter for a while now.) So at a meeting in Chile two weeks ago, when Chávez kept interrupting Spanish Prime Minister José Luis Rodriguez Zapatero in order to call Spain's former Prime Minister José María Aznar a fascist, Spain's King Juan Carlos spoke up and said to Chávez "¿Por qué no te callas?" which means, "Why don't you shut up?" The King's remark has been made available as a mobile phone ringtone by several by several phone companies, and about <#stdurl http://www.eitb24.com/new/en/B24_76068/life/CHAVEZ-SPANISH-KING-CONTROVERSY-Why-dont-you-shut-up/ "half a million people have downloaded it"#> to their mobile phones. In addition, the phrase has appeared on T-shirts and mugs. Here's an <#stdurl http://www.eitb24.com/new/en/B24_74503/world-news/Transcription-clash-between-Chavez-Zapatero-and-Spainrsquos/ "English-language translation of the exchange"#> that occurred in Chile on November 11:

"Zapatero: We are in a committee of democratic governments which represent their citizens in an Ibero American community which has respect as main principle. You can be diametrically opposed to a political idea, I don’t share former president Aznar’s ideas, but former president Aznar was chosen by Spanish people and I demand, I demand… Chávez: Tell him to respect. Zapatero: I demand you......., one moment…. Chávez: Tell him the same. Zapatero: I demand that respect for one reason, moreover….. Chávez: Tell him the same, president. Zapatero: Of course. Chávez: Tell him the same.... Spain’s King: Why don’t you shut up? Bachelet: Please, don’t make a conversation, you have already had time to express your points of view, president, you have to finish, Chávez: President Aznar may be Spanish but he is a fascist and a…… Zapatero: President Hugo Chávez, I think an essence exists, and it is that in order to respect and to be respected, we must try not to discredit. You can have different ideas, condemn conducts, but without discrediting. What I want to express is that a good way to work is to understand each other in favour of our countries, we must respect each other, and I ask – president Bachelet- that must be a rule of conduct in a summit which represents citizens, we must respect our leaders, every presidents and former presidents of all the countries that form this community. I think it is a good principle and I strongly wish that should be a rule of conduct, because conduct gives essence to things, and you can disagree with everything respecting the rules, that is the principle in order to be respected. I’m sure that all this committee and all Latin Americans want every democratic leaders (…) to be respected, today and tomorrow, although we have different beliefs. (applause) Chávez: Venezuela’s Government reserves the right to answer any attack anywhere, and in any tone.

Chávez is not used to having anyone talk back to him. He's <#stdurl http://www.eitb24.com/new/en/B24_75424/world-news/Venezuelas-Chavez-asks-Spanish-King-to-apologize-/ "demanded that the King Carlos apologize"#> to him, and has made implied threats to nationalize Spanish investments in Venezuela if no apology is forthcoming. So this amusing little spat is probably not yet over. =eod =// &&2 e071123 CNBC's Steve Lieseman talks about Armageddon =data ww2010.weblog.y2007.e071123.head CNBC's Steve Lieseman talks about Armageddon =data ww2010.weblog.y2007.e071123.keys finance, marketpsych fear index, credit crisis, bear stearns =data ww2010.weblog.y2007.e071123.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071123.date 23-Nov-07 =data ww2010.weblog.y2007.e071123.txt1 In a discussion on Friday morning on CNBC, =data ww2010.weblog.y2007.e071123.txt2 CNBC's chief macroeconomics commentator compared what's happening now to the worldwide credit crisis that occurred in August. That crisis, you'll recall, was resolved by unexpectedly large interest rate cuts by the Fed. Lieseman described what he's been hearing people say lately: =inc ww2010.blocking.start

"I want to give you the flavor of what I'm hearing from people in the credit markets. And the story I'm hearing is that it's worse now than it was back in August. I'm hearing worse comments, like Armageddon out there in some of these credit markets. <#inc ww2010.pic g071123a.jpg right "" "ABX and Swap Spread screens referenced by Lieseman (Source: CNBC)"#> It's an easier story to tell than it was back in August, because you're seeing it reflected in equity markets. I want to run through a couple of screens here. Take a look at the ABX. This is a market for insuring mortgage bonds or mortgage derivatives, and that's down - this is the close of business on Wednesday. That's not good -- it's below the August level by quite a bit. Then take a look at a wider market, which is the swaps market, and this is a swaps to treasury spread -- and you can see that it's actually higher now than it was back in August. And what you see there -- this is just a measure of risk aversion. The higher that number is, basically, the more risk averse people are. ... Bottom line is that relative to August -- and equities have caught on to this it seems -- credit markets are doing worse. We're awaiting a fix. There is increasing talk about a government fix here -- not letting the market sort this out on its own."

=inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic g061229b.jpg left "" "Jack Bouroudijian of Brewer Investment Group gushes over stock market (29-Dec-06) (Source: CNBC)"#> Before continuing with this, I'd like to remind the reader of an article that I wrote in December of last year, entitled <#inc ww2010.weblog.ref e061230 ""Financial analysts gush at stock market's meteoric rise.""#> In that article, I quoted what Jack Bouroudijian of the <#stdurl http://www.investwithbig.com/ "Brewer Investment Group"#> said on on CNBC:

"This has been a wonderful six months for the market. And the worst thing about it is that we underperformed the rest of the world. So it's really of question of whether we're at the beginning of a multi-year run in equities. I guess that's the big debate. When you've got these superstar fund managers like the Bill Millers of the world, that are underperforming that are still unbelievers out there, that makes me even more bullish than I am. And we see all this data coming out and this is absolutely everything that you want."

Bouroudijian's extremely gushy remarks were contrasted to the more sober remarks of others. <#inc ww2010.pic g061229c.jpg right "" "Randall Dodd, director of the Financial Policy Forum (29-Dec-06) (Source: CNBC)"#> In particular, in that same article, I also quoted Randall Dodd, director of <#stdurl http://www.financialpolicy.org/ "The Financial Policy Forum,"#> who gave a warning about the coming crisis in credit derivatives:

"I don't want to be alarming, I'm just trying to raise people awareness about these issues. I would look at the credit derivatives market. We've had some problems in clearing and settlement of those contracts. We've had problems with people trading more credit derivatives than there is underlying debt. And right now there's one big issue we have to look at -- it's that a lot of our major banks and broker dealers are moving their credit risk off their books and into hedge funds. So you have financial institutions with capital requirements reducing the amount of capital they use by moving that credit risk into hedge funds which have no capital requirements and often use very high leverage to manage their credit risk of selling credit protection through this credit derivatives market."

Now that these warnings about credit derivatives are coming true, it's interesting to look at how attitudes have changed in the past year. Randall Dodd's warning is no long considered "alarming"; it's part of the general discourse today, and now for the first time there's even talk of "Armageddon." =inc ww2010.blocking.end Bouroudijian appears on the CNBC panels pretty often, and he's consistently gushy. To him, the market can go in only one direction -- up, then up some more. He uses words like "unbelievers out there" to indicate that it's all a matter of faith. Well, now the question is this: Has Bouroudijian changed at all recently, now that the market has been falling fairly steadily since the October 9 high? Here's how he responded on Friday morning to a question about what would be necessary for a year-end rally to occur:

"I think one of the things we're going to have to see is the dollar stabilizing a little bit. You and I know that one of the problems out there is the speed at which the dollar is deteriorating. It's OK for the dollar to go down in a controlled manner, but what's been happening lately has been scaring a lot of portfolio managers. One of the things that I like is that there is so much negative press out there. If you read the NY Times today, then there's an article about the Japanese basically calling it quits in America. Remember that this is the same group that bought the top. <#inc ww2010.pic g071123b.jpg right "" "Lieseman and Bouroudijian argue about government intervention. (Source: CNBC)"#> And as far as Steve is concerned, Steve, you're talking to people who were looking at NO PROBLEM WHATSOEVER early in the summer. And now they're looking at Armageddon, now that all the news is out. Well that tells me that we're very close to a bottom. I love that kind of press."

Well, Bouroudijian is always good for a chuckle. But there are some very interesting things about what he said:

He's conceding, for the first time ever that I've heard from him, that the market is going down, and may continue to be going down, at least for a while.
He refers to the "speed at which the dollar is deteriorating." This is an interesting phrase because it indicates that he's seeing signs of panic.
He quickly returns to the usual "bad news is good news" attitude that we hear from bubblehead investors. The news is very bad, therefore we must be near a bottom, and therefore the news is very good. Things like this drive me absolutely crazy.

Lieseman responded to Bouroudijian as follows:

"I'm going to take you on a little bit on that. I think this is one of those things where "negative" is not a marginal consideration -- it's a real consideration. And I think in order to turn the market around you need two things -- visibility on one, the problem, and two, the solution. And I don't think we're close to that. You need a sense that you're not going to come in in the morning and get whacked from the side that you've never heard of before, which keeps happening. Almost every day we hear a new thing coming out. That's one. And two, you need a sense that either the government or the markets or some combination of the markets and the government have their hands around how to put a fix into the system. I don't think we're anywhere near the bottom on either one of those two stories yet."

There was some further arguing between the two over whether it's appropriate for the government to intervene in the market system, with Bouroudijian firmly opposed to any such intervention. What's interesting about that discussion is the unstated assumption that there IS a government fix that would work. Is there really a government fix for everything? What if there ISN'T any government fix? No one considered that possibility. After all, the government has been so successful at fixing everything else, so naturally they have a fix for the credit crunch crisis as well, don't they. Let's take a look at one more indicator: <#inc ww2010.pic g071123c.gif center "" "MarketPsych Fear Index -- 23-Nov-2006 to 23-Nov-2007 (Source: Marketpsych)"#> I've referenced the MarketPsych investor fear index several times in the past, most recently <#inc ww2010.weblog.ref e071103b "on November 3,"#> when I wrote that it was forecasting sharply increased market turbulence. The graphic above presents the index as of Friday morning. Notice that there's a sharp upward spike on the right-hand side. That spike may or may not hold. In watching this index, I've noticed that spikes often disappear within a day or two, as more data comes in. So that spike may or may not disappear. What IS significant, however, is the permanently elevated level of the index for over a full month. This is at the same level as the one-day spike in February over the Shanghai stock market panic, and it's almost as high as the August level. This index was at a low on January 19, and has been trending upward ever since, indicating an increasing level of investor anxiety throughout the year. And this is the main point that I want to emphasize today. When I wrote my August 17 article entitled <#inc ww2010.weblog.ref e070817 ""The nightmare is finally beginning,""#> I wasn't referring to what was happening to the stock market indexes; I was referring to what I perceived as a sharply increased level of investor anxiety. Because really, nothing special has happened to the stock market indexes in the last few months, or even this year. You could take this year's stock market performance and drop it into almost any year in the past six decades, and it wouldn't be considered particularly exceptional or noteworthy. From the point of view of Generational Dynamics, what's important are the changes in attitudes and behaviors of masses of investors, entire generations of investors. The ups and downs of the stock market are irrelevant, except insofar as they reflect the changes in attitudes and behaviors of the masses of investors. What's different now is that something big has changed since July 19, when the market reached the historic high of Dow 14000. The triggering event appears to have been the July 18 Bear Stearns announcement that <#inc ww2010.weblog.ref e070718 "its hedge funds were almost worthless,"#> thanks to writedowns of CDOs. By August 17, when I wrote the "nightmare" article, it was very clear that things had changed dramatically. What we're seeing now is a huge change since July 19. Attitudes and behaviors have changed enormously. And the market itself is reflecting these changes, through its steady downward drift since it reached its new history high of Dow 14164 on October 9. As I've been saying since 2002, Generational Dynamics predicts that <#hreftext ww2010.i.panic070820 "we're overdue for a generational stock market panic and crash,"#> as happened in 1929. This is based on the simple fact that price/earnings ratios have been astronomically high by historic standards, and that the stock market is overpriced today by a factor of about 250%, same as in 1929. =eod =// &&2 e071122 On Thanksgiving, thank you to my readers. =data ww2010.weblog.y2007.e071122.head On Thanksgiving, thank you to my readers. =data ww2010.weblog.y2007.e071122.keys strauss and howe, web site, fourth turning =data ww2010.weblog.y2007.e071122.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071122.date 22-Nov-07 =data ww2010.weblog.y2007.e071122.txt1 The number of regular readers to this web site has been growing steadily =data ww2010.weblog.y2007.e071122.txt2 over the past year, and I thank all of you who keep coming back. I particularly want to thank the four people who donated a total of $441. This was extremely generous and unexpected. I often receive e-mail messages from people who call me insane or psychopathic. I chuckle at these, and I note that as the world situation deteriorates I'm getting far fewer of them. More important, I also get e-mail messages from people who thank me profusely for "saving" them and their families, by allowing them to prepare for what's coming. I'm very thankful for these messages. These messages are very special to me, and they make all the work that I put into this web site worthwhile. I'm very proud of the work that I've done in the development of Generational Dynamics, because I've accomplished so much, as I've shown on this web site. The amount of resistance to accepting anything this new, especially from Boomer academics, is enormous, and quite honestly I don't expect to survive long enough to see generational theory as an established academic pursuit. Nonetheless, with more and more people reading this web site, I hope that I've created a nucleus of interest that will grow as this extremely important analytical and forecasting methodology becomes better recognized. I want to thank Bill Strauss and Neil Howe, the founding fathers of generational theory, as described in their 1995 book, The Fourth Turning. Generational Dynamics builds on top of their theory, and without their work it would not have happened. I've just learned recently that Bill is seriously ill with cancer. I wish him well. I'm still managing to keep up with all e-mail questions sent to me, though it sometimes takes a few days (or longer) for me to get back with a response, depending on volume of e-mail. So if you have a question, by all means send me an e-mail message, or use the "Comment" link at the top of this page. If you want to have a more open debate, you can do so in the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 ""Objections to Generational Dynamics" thread"#> of the Fourth Turning forum. A web site reader recently wrote to me to wonder if there was any "redemption" for people like me. I wrote back to her that if there is any redemption, it comes about from people who read this web site and who take action in their own lives. As I've said many times: No one can stop what's coming, any more than anyone can stop a tsunami. You can't stop what's coming, but you can prepare for it. Treasure the time you have left, and use the time to prepare yourself, your family, your community and your nation. If you haven't heeded that advice yet, then now is the time to do it. =eod =// &&2 e071121 Markets fall as investors are increasingly unsettled by bad economic news =data ww2010.weblog.y2007.e071121.head Markets fall as investors are increasingly unsettled by bad economic news =data ww2010.weblog.y2007.e071121.keys =// && ... here =data ww2010.weblog.y2007.e071121.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071121.date 21-Nov-07 =data ww2010.weblog.y2007.e071121.txt1 Hopes for quick return to "normal" bubble growth are fading. =data ww2010.weblog.y2007.e071121.txt2 A strong signal that investors and pundits are becoming increasingly pessimistic is what might be called the "time horizon" effect -- when do pundits think that things will return to "normal"? Usually the pundits give a time horizon of a day or, at most, a week. But listening to the pundits on CNBC on Tuesday and Wednesday gave a very different picture. I heard one and only one pundit say that he expects a "year-end rally." The rest were unanimous: People are not going to be buying stocks for the rest of year -- and that includes large institutional investors, as well as small investors with 401K's -- because they want to wait until things have "settled down" again. One pundit said that he's hearing that investors won't buy again until the Dow Industrials index is below 12,000 -- 1,000 points below where it is now. He also said that it might happen within the next week. Asian stocks fell sharply on Tuesday night / Wednesday:

    Australia All Ordinaries     6450.20     - 0.62%
    Bombay Sensex               18602.62     - 3.52%
    Hong Kong Hang Seng         26618.19     - 4.15%
    Japan Nikkei                14837.66     - 2.46%
    Shanghai Composite           5214.22     - 1.50%
    Singapore STI                3347.20     - 2.65%
    South Korea Composite        1806.99     - 3.49%
    Taiwan Weighted              8484.11     - 2.27%

According to the Wall Street Journal, <#stdurl http://online.wsj.com/article/SB119561972340400335.html "Asian investors were concerned"#> that the U.S. economy, the most important export market for many of the region's companies, would continue to weaken. It said that "the region took its cue from unsettled trading" on Wall Street on Tuesday, when the market closed slightly higher, but only after turbulent 250 point swings. The article quotes a Tokyo trader as asking, "What the heck were the wild ups and downs in New York?" saying that the trading pattern reflected the unsettled prospects for the market. European stocks on Wednesday similarly fell sharply. As I've said many times before, from the point of view of Generational Dynamics, what's important is changes in behaviors and attitudes of large masses of investors, entire generations of people. The ups and downs of the markets are not per se of concern, except insofar as the indicate changes in behaviors and attitudes. What we're seeing now is what I had been expecting to see when I wrote my August 17 article entitled <#inc ww2010.weblog.ref e070817 ""The nightmare is finally beginning.""#> I indicated that we were now on the road to a stock market crash in the near future. The exact timing couldn't be predicted, but the speculation was that it would happen by the end of September. However, <#inc ww2010.weblog.ref e071003 "unexpectedly aggressive"#> Fed interest rate cuts caused a period of drunken euphoria among investors, and postponed the inevitable results. The markets in the last few days have been following the 1929-like pattern that I was expecting in September, before it was redirected by the Fed interest rate cuts. The one major thing that we haven't seen yet is a large "crash upward" such the 6.9% Dow increase that occurred on October 7, 1929, two weeks before the crash. (See <#hreftext ww2010.i.djia "Dow Jones historical page."#>) At any rate, extreme caution is called for. Something else that's becoming increasingly clear is that faith in the Fed is collapsing. In fact, faith in any "easy solutions" is collapsing. On October 15, the <#inc ww2010.weblog.ref e071015 "mind-boggling "M-LEC" announcement,"#> which was supposed to calm jitters, only increased them. The October 31 Fed interest rate cut only caused <#inc ww2010.weblog.ref e071102 "investors to become more sober,"#> instead of returning to drunken euphoria. On October 24, I <#inc ww2010.weblog.ref e071024 "quoted a pundit"#> as saying, "Investors believe that everything is going to be OK because the Fed will cut interest rates. Everyone knows that the Fed is on their side." No one says anything like that any more. The discussion about the Fed on CNBC on Wednesday morning was extremely negative. CNBC anchor Steve Lieseman expressed great concern that the Fed was contradicting itself on inflation, sometimes indicating that there's no problem, other times expressing concern. Another pundit described as "scary" the impression that the Fed was no longer setting policy, but was simply reacting to day by day events. So, within the last 4-8 weeks, there has been enormous loss of hope in every direction. I can't recall hearing anyone describe any scenario that's going to make things better, except "waiting." Before going on, I want to take a quick digression about the inflation rate, because I get a lot of questions about this. There's a lot of obsessive fixation on the inflation rate because it's thought by many to be the key to the future. If the inflation rate is low, then the Fed can lower interest rates and "save the world" again; if the inflation rate is high, then the Fed can't risk lowering interest rates because that would raise inflation even more. It's important to remember that there are two separate measures of inflation. They usually track each other closely, but they've been diverging in recent years.

The internal inflation rate is measured by the CPI (consumer price index). This measures how much your dollar is worth when you visit the grocery store or the clothing store. I've <#hreftext ww2010.i.fed040921 "been saying"#> for several years that the CPI is on a long-term deflationary trend, and I expect the CPI to fall 30% or so by 2010. That's still my expectation. That means that your dollars will be increasingly valuable in the next few years. People who say "Get rid of all your dollars because they'll be worthless" are talking nonsense. Remember, you're still going to have to purchase groceries and stuff, so you're going to need cash. (I apologize for being so America-centric in the above paragraph. However, the internal inflation rate will trend down just as sharply in most other countries, and for similar reasons. So the same remarks apply in other countries.)
The external inflation rate is measured by the foreign exchange markets. For example, the fall of the dollar against the euro has been dramatic. It was at 82 cents per euro a few years ago, and today a euro costs almost $1.50. The fall in the value of the dollar has been an important factor in the increases in commodity prices, particularly the cost of oil. I've made no predictions about the external value of the dollar, or on the claim that the dollar will become "worthless" in international markets, since it depends at least partially on political factors, in America and in other countries. However, writing about <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world""#> has led me more and more to believe that even if the dollar weakens further, it will remain strong during the crisis. One web site reader pointed out to me that it took 50 years for the British pound to lose 80% of its value and status as the world's reserve currency.

The problem that the Fed has these days is because the dollar is internally deflationary, but is externally inflationary. That's why nobody understands the Fed's message on inflation. For those of you who are concerned about the value of the dollar, it's worthwhile keeping these considerations in mind. That ends the inflation digression. The 1929 stock market crash was not a one-day event. The stock market kept falling, month after month after month, for three years, until 1932, when it had fallen 90% of its peak value. (Paragraph corrected - 7-Apr-09) One question that I've wondered about is the "mood" of investors during those years. During the last few years, we've seen the "euphoric" mood of bubblehead investors for whom every bit of bad news was good news, and every bit of good news was cause for chirps of joy. Well, what was it like during the downturn years? It may be what we're seeing now -- an increasing expectation of more and more bad news, a lengthening time horizon before the masses of investors expect good news to start again. This is certainly something that pundits and investors and journalists are completelly oblivious to. The whole concept of investor mood is foreign to them, especially when it's related to generational concepts. And yet, it's the key to understanding what's going on and what's coming. In order to advance this a little farther, here's a graph of the Dow Industrials since 1950: <#inc ww2010.pic g071120.gif center "" "Generational 'moods' overlaying Dow Industrials since 1950"#> In the above graph, the red line is the Dow Industrials. The blue line is the exponential growth trend, computed since 1896, and represents the "real value" of the stock market. This provides a reference to whether the market is overpriced or underpriced at any given time. What I would like to do is speculate on how investor "moods" change as generational changes occur. What I especially want to focus on is the two "inflection points" on the DJIA graph. At each of these two points, the graph turns a sharp corner to the left, forming the letter "V". Mathematically, these are the points in 1995 and 2003 where the second derivative is discontinuous (or infinite, depending on how you look at it). Things in nature tend to be continuous, unless affected violently by some external force. A rolling ball may slow down or speed up, but the change in speed will be continuous unless the ball hits a rock or a tree. Similarly, we would expect the DJIA curve to continue in the same direction, perhaps gradually rising or lowering, but a sharp "V" cannot occur unless affected violently by some external force. And the most obvious choice of an external force is a generational change. Thus, we provide theoretically the following generational investor "moods" from 1950 to the present:

Depression survivor mood: 1950 to 1995. The leaders in the nation's public and private organizations were survivors of the crash of 1929 and the Great Depression of the 1930s. They were very cautious, and very suspicious of credit. During this period, the DJIA oscillated fairly close to the long-term trend line. The Depression era survivors exerted leadership in global financial institutions. These leaders included those in the Silent Generation, the "depression babies" and "war babies" who grew up during the horrors of the Great Depression and World War II. They were in charge until the early 1990s, when they all disappeared (retired or died), all at once, leaving behind a new generation of younger leaders with little or no fear of credit.
Boomer Euphoria: 1995 to 2000. The Baby Boomers were the first generation born after WW II. In common parlance, the Boomer generation starts with those born in 1946, but in generational theory it starts in 1942, because anyone born after that time has no personal memory of WW II. The phrase that I'm going to apply to Boomers is: "passively destructive." As I've described many times on this web site, Boomers have no ability to govern or lead. Their parents had been taking care of them their whole lives. All that the Boomers ever did was argue with and humiliate their parents, as happened in the 1960s with the "generation gap." This is the explanation for the dot-com bubble in the 1990s. Boomers didn't actively create the bubble; they passively let it happen by removing decades-old restrictions, imposed by their parents, on the types of investments that they'd allow themselves to make. There was no destructive intent to harm other people. The destruction was passive.
Boomer Panic: 2000-2002. The bursting of the dot-com bubble changed the Boomers' euphoria to panic. There's really little difference between euphoria and panic, since both are totally emotional. They correspond respectively to the manic and depressive phases of bipolar disease. The symptoms may be different, but it's the same disease.
Generation-X Euphoria: 2002 to September, 2007. There was a distinct change in 2002, and it was a generational change, but it appears to have been a different kind of generational change than the one that occurred in 1995. There's little doubt that it was in 2002 that the real abuse of credit began. There had been things like credit derivatives around before, but it was in 2002 that the really explosive use of "structured credit" began. The Boomers were still nominally the leaders, but, as before, they didn't want to lead. The Gen-Xers stepped up and took charge. Here's what PIMCO's Bill Gross said recently <#stdurl http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+September+2007.htm "in his monthly column:"#>
"During times of market turmoil it helps to simplify and get basic – explain things to a public and even yourself in terms of what can be easily understood. Goodness knows it’s not a piece of cake for anyone over 40 these days to understand the maze of financial structures that now appear to be unwinding. They were created by youthful financial engineers trained to exploit cheap money and leverage who showed no fear and who have, until the last few weeks, never known the sting of the market’s lash. They are wizards of complexity. I, however, having just turned 63, am a professor of simplicity."
A web site reader put it a little differently. "Only Gen-Xers would have the technical sophistication to devise these complex, opaque and (consciously or not) dangerously deceptive models that the CDOs use. Few Boomer men can even type, let alone write software." If the Boomers were "passively destructive," the Xers have been "actively destructive," creating these complex financial structures. Much of what the Xers did was fraudulent, illegal, and contemptuous of the entire global financial system. I've pointed out several examples of fraud on this web site, especially fraudulent methods used to avoid having to apply "mark to market" to overpriced CDOs. In fact, the number of legal actions is increasing. As time goes on, we're going to see more and more criminal prosecutions against everyone from individual homeowners who lied on their applications to mortgage brokers to major financial institutions. Generation-Xers are the name for the generation born roughly between the early 1960s and the early 1980s. In generational theory, they belong to the Nomad archetype, the generation of people born during a generational Awakening era. Bill Strauss and Neil Howe, the founding fathers of generational theory, found that those in Nomad generations become disaffected and angry, growing up in the shadow of the favored Prophet generation (like America's Boomers). In 2002, the first wave of Gen-Xers reached the age of 40, and were in sufficiently high leadership positions that they could influence and often control the financial decisions of many organizations, especially since their Boomer bosses just let them do what they want anyway. I've spent a lot of time since the beginning of this year trying to figure out what's been going on. Once you really begin to understand what's going on with securitization of credit, credit derivatives and CDOs, you realize what a totally debauched, depraved and abusive design they are. This is no simple passive mistake -- that's what the dot-com bubble was. This was a massively destructive and self-destructive financial architecture, devised by nihilistic financial engineers on the edges of the Generation-X generation. This was active destruction at its most debauched and depraved, condoned by passively destructive Boomers. We're now about to pay a very, very expensive price.
Generation-X Panic: September, 2007, to ????. It appears now that Gen-Xers are just beginning to panic. The market is on a steady downward trend, and it appears that this will continue. There hasn't been a generational panic yet, but indications are that it's coming close.

Don't think that I'm saying that Boomers are good and Xers are bad. Both are pathetically bad, but it's their interaction, the way they complement each other, that results in the destruction we're headed for. The above is a first pass at a generational explanation of what's going on. As time goes on, and as more information and more criminal prosecutions become known, I'll try to expand and refine it. Finally, a web site reader has sent me, "for my reading pleasure," the <#stdurl http://www.gold-eagle.com/editorials_01/seymour062001.html "address of a web page"#> containing statements of journalists, pundits, financiers and politicians from the years 1927 to 1933. Here's the list -- and remember that the crash began on October 24, 1929, and continued for three years, until mid-1932:

"We will not have any more crashes in our time." - John Maynard Keynes in 1927
"I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future." - E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928
"There will be no interruption of our permanent prosperity." - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928
"No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment...and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding." - Calvin Coolidge December 4, 1928
"There may be a recession in stock prices, but not anything in the nature of a crash." - Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929
"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929
"This crash is not going to have much effect on business." - Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929, Black Thursday.
"There will be no repetition of the break of yesterday... I have no fear of another comparable decline." - Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929
"We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices." - Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929
"This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years." - R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929, two days after Black Monday.
"Buying of sound, seasoned issues now will not be regretted" - E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929
"Some pretty intelligent people are now buying stocks... Unless we are to have a panic -- which no one seriously believes, stocks have hit bottom." - R. W. McNeal, financial analyst in October 1929
"The decline is in paper values, not in tangible goods and services...America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin." - Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929
"Hysteria has now disappeared from Wall Street." - The Times of London, November 2, 1929
"The Wall Street crash doesn't mean that there will be any general or serious business depression... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before." - Business Week, November 2, 1929
"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation..." - Harvard Economic Society (HES), November 2, 1929
"... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall." - HES, November 10, 1929
"The end of the decline of the Stock Market will probably not be long, only a few more days at most." - Irving Fisher, Professor of Economics at Yale University, November 14, 1929
"In most of the cities and towns of this country, this Wall Street panic will have no effect." - Paul Block (President of the Block newspaper chain), editorial, November 15, 1929
"Financial storm definitely passed." - Bernard Baruch, cablegram to Winston Churchill, November 15, 1929
"I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress." - Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929
"I am convinced that through these measures we have reestablished confidence." - Herbert Hoover, December 1929
"[1930 will be] a splendid employment year." - U.S. Dept. of Labor, New Year's Forecast, December 1929
"For the immediate future, at least, the outlook (stocks) is bright." - Irving Fisher, Ph.D. in Economics, in early 1930
"...there are indications that the severest phase of the recession is over..." - Harvard Economic Society (HES) Jan 18, 1930
"There is nothing in the situation to be disturbed about." - Secretary of the Treasury Andrew Mellon, Feb 1930
"The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity." - Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930
"... the outlook continues favorable..." - HES Mar 29, 1930
"... the outlook is favorable..." - HES Apr 19, 1930
"While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us." - Herbert Hoover, President of the United States, May 1, 1930
"...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..." - HES May 17, 1930
"Gentleman, you have come sixty days too late. The depression is over." - Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930
"... irregular and conflicting movements of business should soon give way to a sustained recovery..." - HES June 28, 1930
"... the present depression has about spent its force..." - HES, Aug 30, 1930
"We are now near the end of the declining phase of the depression." - HES Nov 15, 1930
"Stabilization at [present] levels is clearly possible." - HES Oct 31, 1931
"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S." - President F.D. Roosevelt, 1933

It was only in mid-1932 that the stock market began to gain again, having fallen 90% from its 1929 peak. =eod =// &&2 e071119 Sunni/Shia violence increasing in Pakistan tribal areas as Taliban gains strength =data ww2010.weblog.y2007.e071119.head Sunni/Shia violence increasing in Pakistan tribal areas as Taliban gains strength =data ww2010.weblog.y2007.e071119.keys =data ww2010.weblog.y2007.e071119.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071119.date 19-Nov-07 =data ww2010.weblog.y2007.e071119.txt1 The Pakistan army is massing for an assault against Taliban in Northwest =data ww2010.weblog.y2007.e071119.txt2 Frontier Province (NWFP), as Taliban militants have taken control of the Swat valley. <#inc ww2010.pic pakfata2.gif right "" "Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas), highlighting Swat Valley (Source: pakistan.gov.pk)"#> Pakistan army helicopters and artillery <#stdurl http://www.hindu.com/thehindu/holnus/003200711190325.htm "are pounding militant positions in the Swat Valley,"#> in anticipation for a ground assault in the next few days. According to a <#stdurl http://www.dailytimes.com.pk/default.asp?page=2007%5C11%5C18%5Cstory_18-11-2007_pg1_3 "rare media briefing by the army,"#> a senior commander said the army had assembled about 15,000 troops in the Swat Valley's main town, and would launch its main offensive within days because militants from Afghanistan as well as the lawless Pakistani border regions of Waziristan and Bajaur had reinforced the followers of rebel cleric Maulana Fazlullah in Swat. The plan was to push the militants back into the rugged Piochar side valley where they had established bases. "We will bottle up as many of them as possible and then eliminate them," said General Ahmed Shuja Pasha. "This is our killing ground," he added. For some time, al-Qaeda and Taliban militants, including Osama bin Laden himself, have had control of the lawless FATA (Federally Administered Tribal Areas) -- not officially part of Pakistan, but administed by the Pakistan government. In recent days, Taliban cleric Maulana Fazlullah has led his army of Taliban militants from the tribal areas into the settled areas of Pakistan's Northwest Frontier Province (NWFP), and have gained control of the Swat Valley. This was one of the reasons given by President Pervez Musharraf to explain the imposed state of emergency. In a related matter, dozens are dead in a <#stdurl http://www.dailytimes.com.pk/default.asp?page=2007\11\18\story_18-11-2007_pg1_5 "clash between Sunnis and Shia"#> in the tribal areas near Balochistan. In an interview broadcast on CNN on Sunday, opposition leader Benazir Bhutto blamed the increasing violence on Musharraf. The following is my transcription of her remarks:

"I want to say that what General Musharraf has done is simply not enough, because al-Qaeda and Taliban have regrouped, and pro-Taliban elements now control the tribal areas of Pakistan. They have entered into the settled areas of the Frontier Province of Pakistan, and there is a fierce battle taking place between the military and the militants. Now the military is engaged in blanket bombing at times, and instead of targeting just the terrorists, it actually ends up targeting the local population too. We'd like to see the local population co-opted. We'd like to see the military go in instead, for combat against the militants like the Americans did in Pujera(?) [[probably Bakubah]] - what was that place in Baghdad - near Baghdad, a holdout of the militants. That's the kind of support we need from our military. And we need to support our military by also co-opting the local population. I know the local population would have defended their town if we had given them the arms and the guns. They turned to me and asked me to get them some help, and I spoke about this at a diplomatic reception to caution the government that the militants were coming. But unfortunately, the people aren't given the support they need to fight and face the militants themselves, and in the meantime, the militants spread. So I think that what General Musharraf has done may have been a little bit, but it hasn't stopped the spread of militancy and extremism in Pakistan. ... The issue for me is to have fair elections, and to have the people of Pakistan to express their view. I believe that the attempts to block my leadership and to block democracy are actually paving the way for the extremists to spread their influence, and I feel that the focus ought to be really on the extremists, not diverting the attention away from the real battle in Pakistan. In my view it's the threat by the extremists that threatens today to disintegrate Pakistan. They're already into the Valley of Swat, and soon they'll be spreading outwards, toward our capital city of Islamabad. I may have my critics, but I leave the decision of Pakistan's destiny to the people of Pakistan. And the people of Pakistan have stood by me. Three million of them turned up at Karachi airport to receive me. 18,000 were imprisoned in the witchhunt launched to stop our "long march" to apply pressure for the restoration of democracy. The people want a democracy. They're marching with their feet so that their voices can be heard, so that their march can be heard. And I would make a plea for fair elections. My concern is that if the elections are rigged, and I think they're heading towards rigged elections, well General Musharraf's team might end up giving more control to the religious parties under whose influence these extremists have spread, and then we would really be in the soup."

One thing that I'm understanding more and more about Benazir Bhutto is that she's an extremely careful politician who weighs every word she says for its political import. Many of remarks about democracy and popularity should be viewed through that filter. There is one particular portion of her comments that I'd like to focus on:

"We'd like to see the military go in instead, for combat against the militants like the Americans did in Pujera(?) - what was that place in Baghdad - near Baghdad, a holdout of the militants. That's the kind of support we need from our military."

Bhutto is suggesting that Musharraf execute a military strategy similar to the "surge" strategy devised by General Petraeus in Iraq. The end result of that strategy is that the Sunni insurgents turned against al-Qaeda in Iraq, and ended up fighting on the side of the Americans. It's important to understand that this strategy cannot possibly work in Pakistan. From the point of view of Generational Dynamics, Iraq is in a generational Awakening era, just one generation past the end of the last crisis war, the genocidal Iran/Iraq war of the 1980s. That means that the Iraqi people are "attracted away" from war, and will do everything possible to keep another genocidal war from occurring. That's why <#inc ww2010.weblog.ref e071031 "the Iraqi war was never a crisis civil war,"#> and could never have been a crisis civil war. Any attempt to ignite a civil war, which is what al-Qaeda in Iraq tried, was doomed to failure, and any such war would fizzle out quickly. That's exactly what happened. But Pakistan is in a generational Crisis era, three generations past the end of the last crisis war, the genocidal war that followed Partition in 1947. That means that the Pakistani people are "attracted towards" war. Thus, Bhutto's suggestion to provide arms and weapons to the people of Swat Valley and expect them to eject the Taliban militia is far more likely to spiral out of control into full-scale warfare. Iraq today and Pakistan today are in totally different generational eras. There is NO COMPARISON between the two. Anyone who tries to apply lessons learned in one country to the other country is on a fool's errand. If there is any "rule" to be learned, it's that Pakistan will most likely do exactly the opposite of what Iraq does in a like situation. Possibly the thing that struck me the most when I did my <#inc ww2010.weblog.ref e071112 "in-depth analysis of Pakistan"#> last week is that Musharraf and Bhutto are themselves split along the major internal Pakistan fault line -- Urdu-speaking Mohajirs (migrants from India) versus Sindhi-speaking Sindhis. This means that there never was a snowflake's chance in hell that Musharraf and Bhutto could have governed together in some power-sharing agreement, even though encouraging such an arrangement was (and perhaps still is) official US and British policy. A web site reader has pointed out a related fact that's perhaps even more crucial. I've said many times that I have great admiration for both Pakistan's President Pervez Musharraf and his Indian counterpart, India's Prime Minister Manmohan Singh, because these two leaders have engineered a remarkable détente that has prevented a conflict, indeed a nuclear conflict, between the nations, and they've pulled back from the continuing seething dispute over Kashmir and Jammu. What my web site reader has pointed out is that both Musharraf and Singh share the same ethnic group -- Punjabi -- though of course they have different religions (Muslim and Sikh, respectively). Singh was born in 1932 in what is now Pakistan's Punjab province, and Musharraf was born in 1943 in Delhi, adjacent to what is now India's Punjab province. That means that once Partition took place in 1947, Singh's family was in the forced relocation of western Hindus and Sikhs to India, while Musharraf's family was in the relocation of eastern Muslims to Pakistan. That's very significant, and explains a great deal about why Musharraf and Singh have developed such a close relationship, and why they've been able to forge the remarkable détente that I've discussed. It also means that any similar arrangement between Bhutto and Singh would be very unlikely. From the point of view of Generational Dynamics, the genocidal bloodbath war that followed Partition in 1947 will be re-fought with 100% certainty. There are two major scenarios. The first scenario is a regional war in Kashmir spreading throughout the region; and the second scenario is an ethnic or sectarian war starting somewhere and spreading through the region. Either way, a major nuclear between Pakistan and India cannot be avoided. =eod =// &&2 e071118 CBS's Bob Schieffer comments on the "Do Nothing" Congress =data ww2010.weblog.y2007.e071118.head CBS's Bob Schieffer comments on the "Do Nothing" Congress =data ww2010.weblog.y2007.e071118.keys =data ww2010.weblog.y2007.e071118.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071118.date 18-Nov-07 =data ww2010.weblog.y2007.e071118.txt1 This was the only mildly amusing thing on the Sunday news talk shows. =data ww2010.weblog.y2007.e071118.txt2 <#inc ww2010.pic g071118.jpg right "" "CBS's Bob Schieffer on Face the Nation. (Source: CBS)"#> In his <#stdurl http://www.cbsnews.com/stories/2007/11/18/opinion/schieffer/main3518311.shtml "weekly commentary on "Face the Nation""#> on Sunday, CBS news man Bob Schieffer said that Congress could only accomplish one thing, namely, doing nothing:

"Senate Republican Leader Mitch McConnell made a speech the other day in which he bragged that even though Republicans are the minority, they had kept many bad things from happening. Well, that's just the half of it. With the help of the Democratic majority, they have managed to keep much of anything from happening, good or bad. Who says there's nothing that two sides can't accomplish together? Of course there is - doing nothing. Congress ran to the airport Friday for yet another break - they're taking two weeks this year for Thanksgiving. I wouldn't ask how many days you're taking because that would be a digression. But my question is this: What do the following have in common? Legislation to provide health insurance for children, education legislation, energy legislation, the farm bill, funding the Iraq war, and legislation funding all federal agencies except the Pentagon next year. =inc ww2010.xr.related1 right paralysis 1 The answer is: All of them are stalled in Congress, awaiting final action, tangled in the gridlock that the Republicans blame on the Democrats and the Democrats blame on the Republicans. Breaking the gridlock won't be easy. After all, once Congress gets back from the Thanksgiving break, Christmas vacation will be just weeks away. I've heard all the excuses so many times, I've stopped listening. All I know is Congress continues to bring new meaning to that old phrase: Nothing Doing."

This is all exactly as predicted by Generational Dynamics. I've written about this many times, in articles in the adjacent "Related Articles" bar. America is now being led by Boomers, people who were born after World War II. These people grew up during the 1960s "generation gap," where all they did was argue with and humiliate their parents. They never learned how to do anything but argue -- certainly not how to lead and govern. That's why Congress can't accomplish anything. In the 1980s, Congress accomplished a lot, because people from the GI Generation and the Silent Generation (people born during the Great Depression and WW II) were in charge. In the 1980s, the Republicans and the Democrats cooperated with each other to change the Social Security system to make it a sounder system. After that, they cooperated again to specify new rules to control the budget deficit. Compromise was still possible in 1996, when Democratic President Bill Clinton, saying that "the era of big government is over," cooperated with the Republican congress to eliminate the welfare entitlement. But there isn't a single such issue on which compromise is possible today. The Democrats are especially paralyzed, because they're hog-tied by the nihilistic folks over at MoveOn.org, who take so-called anti-war positions that are willfully self-destructive and destructive of the country, the party, and the individual Democrats who are forced to do MoveOn.org's bidding. However, America is not unique in this predicament. Every country that fought WW II as a crisis war is in the same predicament, being led by people in the post-war generations that can't do anything but whine and complain. From the point of view of Generational Dynamics, everyone is sitting around waiting for "something" to happen. There's no way to predict what that "something" will be -- it might be a major terrorist attack on American soil or a major military defeat elsewhere in the world, for example -- but it will be something that ends the political bickering and unifies the country. In generational theory it's called the "regeneracy," because it "regenerates" national and societal unity. Until then, expect the Congress to continue with "Nothing Doing." =eod =// &&2 e071117 Warning signs for imminent financial crisis are growing rapidly =data ww2010.weblog.y2007.e071117.head Warning signs for imminent financial crisis are growing rapidly =data ww2010.weblog.y2007.e071117.keys =data ww2010.weblog.y2007.e071117.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071117.date 17-Nov-07 =data ww2010.weblog.y2007.e071117.txt1 European interest rates soared on Friday, raising fears of a new credit crunch. =data ww2010.weblog.y2007.e071117.txt2 The interest rate of concern is the LIBOR (London Interbank Offered Rate), which is the rate at which European banks lend money to one another. It jumped to nearly 6.34% on Friday (sterling, 3-month contract), from 6.29% on Thursday. It's at its highest point since September, when the worldwide credit crunch finally began to ease. What this means is that banks are holding on to their cash, for fear of not being able to borrow money when they need it. That's exactly what happened when the global financial crisis occurred in August. That's only one piece of a slew of extremely gloomy financial news that's been released in the last couple of days. =inc ww2010.h2 goldman "Goldman Sachs report" The biggest news on Friday morning was <#stdurl http://www.reuters.com/article/bondsNews/idUSL16411320071116 "a report by Goldman Sachs on the spreading subprime crisis."#> You'll recall that this has to do with CDOs and other credit derivatives with notional values that are far higher than the market would pay for them. There are hundreds of trillions of dollars (notional) worth of these in financial portfolios around the world. The Goldman report, written by Jan Hatzius, the company's chief economist, says that "the likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognized. It is easy to see how such a shock could produce a substantial recession." The issue is this: Large financial firms have been "writing down" the values of their securities backed by mortgages. There have been some $64 billion in writedowns from a number of large financial institutions, including Citigroup, Merrill Lynch, Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bear Stearns. Analysts are predicting that large financial institutions will lose as much as $400 billion in writedowns, but that's the not the end of the problem:

"But unlike stock market losses, which are typically absorbed by "long-only" investors, this mortgage-related hit is mostly borne by leveraged investors such as banks, broker-dealers, hedge funds and government-sponsored enterprises. And leveraged investors react to losses by actively cutting back lending to keep capital ratios from falling -- A bank targeting a constant capital ratio of 10 percent, for example, would need to shrink its balance by $10 for every $1 in losses. "The macroeconomic consequences could be quite dramatic," Hatzius said in the note to clients. "If leveraged investors see $200 billion of the $400 billion aggregate credit loss, they might need to scale back their lending by $2 trillion." "This is a large shock," he said, adding the number equates to 7 percent of total debt owed by U.S. non-financial sectors."

The scaling back of lending by $2 trillion will take an enormous amount of money out of the economy. What the Goldman report is talking about is the reverse of the credit bubble. Financiers were using 10 to 1 leveraging to build up the credit bubble quickly, and now leveraging is going to collapse the credit bubble quickly. Because of leveraging, $200-400 billion credit loss is leveraged into $2 trillion in scaled back lending. I want to comment on the first paragraph above. If you're a "long-only" investor, then you buy and sell stock shares, sometimes making money, sometimes losing money. If you lose money, then someone else makes money, and the total amount of money in the financial system remains the same. But reducing lending by $2 trillion means that there's actually $2 trillion less money in the economy. (For more information, see my September 9 article, <#inc ww2010.weblog.ref e070910 ""Understanding deflation: Why there's less money in the world today than a month ago.""#>) But CNBC commentator Rick Santelli said that the situation is much worse than that. The following is a transcription of his remarks:

"Many of the issues that we've been talking about for how long are finally beginning to be talked about in public. I think the biggest comments today are really what Goldman is saying. And what they're saying is that unlike equities, a dollar lost is a dollar lost. When you look at the capital markets and you consider $200-400 billion, which is probably on the light side - real losses -- in some of these investment banks, the part of the picture that nobody's talking about, that they very well understand is that trillions, hundreds of trillions, of notional value derivatives have been marketed by that core group. But yet only the core group has moved up to the confessional. Do you think at this poker table they're only dealing derivatives among themselves? How much have you heard from all the people on the other side of the trades? The issue here is that Goldman says the "back of the envelope" on this $400 billion could turn out to be trillions. Well of course it can. You know, this credit was created off balance sheet for a reason. It's credit creation out of the realm of regulators. Unregulated means unregulated. And the notion we've had all along -- delights many on our channel -- is that the Fed's easing is going to make a difference. Well, it probably makes a difference on the back side when the economy looks at this leverage and realizes it can get nastier. But the reality is that it's not going to help the epicenter of this, or as it spreads out into things like hedge funds ... You know, maybe Goldman's on the right side of this trade, but the real question is - the leverage on those receivables they think they have might be at the risk of the counterparty who owes them the money who at some point might not be willing or able to pony it up."

Santelli is referring to a figure that I've mentioned a few times -- the $750 trillion of credit derivatives that are in financial portfolios around the world. Many of these are Credit Default Swaps (CDSs) that investors take out as "insurance" against mortgage defaults and foreclosures. The counterparties are the institutions that will have to pay off that insurance if the defaults occur. The problem is that these counterparties will "not be willing or able" to make the insurance payouts, as the number of mortgage foreclosures surges. As Santelli points out, this is something that almost no one is talking about, except on web sites like this one. But now the Goldman report is beginning to make these concerns public. This would make the macroeconomic losses much higher than the $2 trillion, which is already astronomically high. =inc ww2010.h2 earnings "Fourth quarter earnings" As <#inc ww2010.weblog.ref e071116 "I wrote a couple of days ago,"#> third quarter corporate earnings are far below expectations. As of July 1, analysts were predicting that third quarter corporate earnings would grow 6.2%; now it turns out that they didn't grow at all, but fell by 2.4%. This is a huge turnaround. Now let's turn to fourth quarter earnings. Another anomaly is that, up until two or three weeks ago, analysts were predicting that 4th quarter earnings growth would be double-digits -- 11.5%. Now the analysts have adjusted these predictions to a growth of only 3%. <#inc ww2010.pic g071023.gif left "" "Quarterly S&P 500 earnings growth, 2000-present, with estimates for Q4 and for 2008 (graphic from 23-Oct)."#> In <#inc ww2010.weblog.ref e071024 "an article a month ago,"#> I posted the adjoining WSJ graphic which shows -0.1% earnings growth in Q3 2007 (that's the figure that's now been reduced to -2.4%), but also showed over 10% earnings growth estimates in Q4 and Q1. I and several CNBC pundits pointed out that those Q4 and Q1 estimates are completely unrealistic. Well, now is the time that those unrealistic estimates are finally coming down. Fourth quarter estimates of earnings growth are now only 3%. <#inc ww2010.pic g071117a.jpg right "" "CNBC anchor Bob Pisani's fourth quarter earnings growth summary. (Source: CNBC)"#> CNBC's Bob Pisani discussed these changes, highlighting the major ones with the adjoining graphic. Stocks for financial institutions had been expected to grow by 0.7%; instead, growth is negative, down 20%. Stocks for retailers for consumer discretionary spending had been expected to grow by 22%; now the estimate is only 15%. =inc ww2010.h2 recession "Chances of a recession" For at least a couple of years, pundits have debated whether a recession was coming, especially in view of escalating energy prices, and the bursting of the housing bubble. The analytical view was that consumers would have less to spend because of increasing energy prices, and falling real estate prices would make it impossible for consumers to borrow money by refinancing their homes. What's happened for several quarters now is that consumers have continued to borrow, but on their credit cards, with the result that retail spending has continued to grow. But now the "chickens are coming home to roost," as the saying goes, and consumers finally appear to be spending less. The stock market bubble in the last few years was based on this willingness of Americans to buy more and more on credit, using money provided through the astronomical credit bubble. But as these bubbles burst, consumers and businesses alike are becoming more risk-averse. On CNBC on Friday afternoon, David Rosenberg, chief North American economist at Merrill Lynch, made the case why a recession is coming. What's interesting about this interview was the behavior of the interviewer, well-known CNBC anchor Maria Bartiromo. This chick is an enormous cheerleader for the bubbleheads. I <#inc ww2010.weblog.ref e070817 "mentioned a couple of months ago"#> one day when the market went up that Bartiromo "was so giddy that she jumped up and down like a schoolgirl." In this interview, she was openly hostile to Rosenberg's discussion of the factors leading to a recession. Here's Rosenberg's first response to why a recession is coming:

"We had a number today [indicating] that the recession may already be starting. The industrial production number. The production of consumer goods was down .3% - it's now down 3 months in a row. Another sign: We have the worst credit crunch since 1991; we have the worst energy price information since 1991; we have a situation where employment growth has been cut in half; and you can see already in the consumer confidence numbers we're going into the most important season of the year for retailers, and consumer confidence is actually weaker today than it was in the onset of the past two recessions. <#inc ww2010.pic g071117b.jpg right "" "David Rosenberg, Merrill Lynch, on CNBC. On the bottom, Maria Bartiromo glares at Rosenberg to convey disbelief. (Source: CNBC)"#> And what people are telling you in these surveys is that people are pulling back in their selling intentions, and it's primarily what we've seen in the housing market, the credit crunch, reduced employment prospects, and of course these punishingly high gasoline prices now as well."

Bartiromo asked where there were weaknesses in the economy besides housing.

"Out of the retail numbers, you're seeing a slowdown in practically every consumer discretionary, consumer cyclical outside of restaurants. Restaurants and travel and tourism -- because of the weak dollar I would say that part is absolutely booming - but you're seeing it across apparel, you're seeing it in department stores, you're seeing it in furniture, applicances, electronics. You're even starting to see it now out of the data in "etailing" [[electronic retailing]] - so online shopping's also slowing down. So it's actually -- even outside housing it's becoming very broadly based. This is no longer a "contained" story, just the latest in the housing market. Bartiromo: But what about the other side, that the global story remains intact, we're seeing economies around the world doing very well, American businesses are benefiting from that. Rosenberg: That's an overbought story, and frankly I don't even think it's true any more."

Now, here's where Bartiromo became super-indignant. "How is it not true any more? You've got India growing 9%, China growing 12%, and Europe up 3%. What do you MEAN it's not true any more?" As she said that, she raised her eyebrows, opened her mouth, and effected a glare that a woman might use to convey doubt that the lipstick on her boyfriend's collar had an innocent explanation. Rosenberg stuttered a little under this hostile glare, but pushed on:

"OK, well look, the UK - is it speeding up or slowing down? It's slowing down. Is continental Europe speeding up or slowing down? It's slowing down. Japan's probably going to be negative this quarter. When you take a look at the part of the global economy that's actually slowing down right now, it's 60% of our exports. So yeah, it's nice to talk about India, Russia and China -- but when you take a look at these bricks, the emerging markets, they represent 10% of our exports. 60% of our export pie in terms of where it goes globally, is actually slowing down right now, so the export story -- I'm not going to stay it's not a positive story. It's been completely overblown."

It doesn't appear that Bartiromo understood the point Rosenberg was making, as she asked, "How much can China slow down so it's going to be a problem? It's growing 12%, so it slows down to 10% -- I'm supposed to be worried at that?" Rosenberg concluded,

"No, but if China slows down, how does that affect the United States? Maybe if China slows down, it's gonna affect emerging markets. China's the one that exports to the US. We don't really export to China. That's my major point, Maria. Who are our primary export destinations? It's not China. It's Canada, it's Mexico, it's the UK, it's Euroland, it's Japan. They're all slowing down. I would say take the last 12 months, and transcend it on the next 12 months is a very dangerous game right now. The global economy is slowing. It doesn't mean that there's not pockets of strength. Unfortunately the pockets of strength are not where the US exports to."

When Rosenberg referred to "pockets of strength," Bartiromo could be heard to exclaim, "Aha!" Bartiromo thanked Rosenberg for coming on the show. Later in the hour, when the Dow Industrials index increased, Bartiromo once again squealed with delight like a schoolgirl. =inc ww2010.h2 mervyn "Mervyn King predicts severe fall" <#inc ww2010.pic g071117c.jpg right "" "Mervyn King, Governor of the Bank of England. (Source: Bloomberg)"#> Mervyn King is the Governor of the Bank of England, and plays the same central banker role for Britain that Ben Bernanke does for the US as Chairman of the Federal Reserve Bank. It was just three weeks ago that the Bank of England issued a report saying that <#inc ww2010.weblog.ref e071026 "the global financial system"#> is at risk of further instability because of "ongoing uncertainties" about credit-market losses, and that both the stock market and commercial real estate values are particularly vulnerable to "further shocks, either in credit markets or from new sources." Now <#stdurl http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/11/15/cnking115.xml "Mervyn King is adding"#> an "extremely unusual warning" about the world stock markets. His point was that the August credit crunch was so severe that it should have driven stock prices down. (I just love this. King is totally confused because investors drove the stock market up, even though the financial news was very bad. Poor Mervyn King just doesn't understand the bubblehead investor logic that "bad news is good news" that's prevailed for several years: If the news is bad, then the Fed will lower interest rates, and so the news is really good.)

"It is very striking that despite the developments we've seen in the last three months , despite the stresses and strains in the banking sector , equity prices are higher now than they were in August. ... This is true around the world, and in emerging markets they're 20% higher. There must be some downside risks there. ... That's the bigger risk to the global economy than the narrower one focused on the banking sector. ... The repricing of risk hasn't really fed through to equity markets, and if there were to be an adjustment of risk premia in equity markets with a fall in asset prices then that could have a bigger impact on the world economy. ... The difficulty in the world economic system at present is that a number of major economies have flexible exchange rates... Others, like China, have linked theirs to the dollar and that is causing great currency tensions. I came away from the [International Monetary Fund] meeting more concerned about the implications of these tensions, because the unwinding of [global economic] imbalances is not just a hypothetical prospect, but is happening now. And I think this is a major concern."

The last paragraph is important, because it describes the current situation in a way that few people seem capable of understanding: The financial crisis has already begun. I'll repeat an analogy that I've used before. Think of the world economy as a huge, enormous bloated mansion made of wood, with all kinds of additions tacked on all over the place. Think of the CDOs as millions of termites that are eating away at the insides, so that another piece of the mansion falls off into the ravine almost every day. The Fed and other central banks have been running around the mansion with hammers and glue and nails, patching things up as fast as they can, trying to keep ahead of termites. They've been pretty successful with their hammers and glue and nails in postponing the inevitable, even bloating the mansion up a little more, but they can't keep up with the termites. What Mervyn King is saying is that the hammers and glue and nails aren't working, and that it won't be long now before the entire mansion collapses into the ravine. =inc ww2010.h2 roubini "Nouriel Roubini: Systemic Financial Meltdown" I've <#inc ww2010.weblog.ref e070730b "mocked Nouriel Roubini"#> before, and recently <#inc ww2010.weblog.ref e071111 "criticized him further,"#> because he repeatedly presents a great deal of data in <#stdurl http://www.rgemonitor.com/blog/roubini "his blog"#> showing that the economy is headed for a major crisis, but he remains completely unwilling to draw that as a conclusion. Instead, he equivocates over whether the economy will have a "soft landing" or "hard landing." On Friday, Roubini turned around. The data is too great for even him to ignore. In <#stdurl http://www.rgemonitor.com/blog/roubini/227330 "his Friday blog entry"#> he wrote the following:

"Those of us who warned for the last 12 months about a combination of a worsening housing recession, a severe credit crunch and financial meltdown, high oil prices and a saving-less and debt-burdened consumers being on the ropes causing an economy-wide recession were repeatedly rebuffed the consensus view about a soft landing given the presumed resilience of the US consumer. But the evidence is now building that an ugly recession is inevitable. Thus, the repeated statements by Fed officials that they may be done with cutting the Fed Funds rate are both hollow and utterly disingenuous. The Fed Funds rate will be down to 4% by January and below 3% by the end of 2008. More revealing of the change in mood the financial press and some of the most prominent market analysts are coming to the realization that a recession is highly likely. The Economist has a cover story and long piece arguing that a US recession highly likely (and citing this author's work with Menegatti and our views on the inevitability of such a recession)."

Roubini gives several more examples to show that the mood has changed in the financial press. As I've said many times, the important things from the point of view of Generational Dynamics are the attitudes and behaviors of the large masses of people, entire generations of people. Although Roubini (probably) knows nothing about generational theory, his remarks are exactly to the point that the mood is changing, and that this widespread change in mood is significant. What is most breathtaking about Roubini's Friday essay is his conclusion:

"I now see the risk of a severe and worsening liquidity and credit crunch leading to a generalized meltdown of the financial system of a severity and magnitude like we have never observed before. In this extreme scenario whose likelihood is increasing we could see a generalized run on some banks; and runs on a couple of weaker (non-bank) broker dealers that may go bankrupt with severe and systemic ripple effects on a mass of highly leveraged derivative instruments that will lead to a seizure of the derivatives markets (think of LTCM to the power of three); a collapse of the ABCP market and a disorderly collapse of the SIVs and conduits; massive losses on money market funds with a run on both those sponsored by banks and those not sponsored by banks (with the latter at even more severe risk as the recent effective bailout of the formers’ losses by theirs sponsoring banks is not available to those not being backed by banks); ever growing defaults and losses ($500 billion plus) in subprime, near prime and prime mortgages with severe known-on effect on the RMBS and CDOs market; massive losses in consumer credit (auto loans, credit cards); severe problems and losses in commercial real estate and related CMBS; the drying up of liquidity and credit in a variety of asset backed securities putting the entire model of securitization at risk; runs on hedge funds and other financial institutions that do not have access to the Fed’s lender of last resort support; a sharp increase in corporate defaults and credit spreads; and a massive process of re-intermediation into the banking system of activities that were until now altogether securitized. When a year ago this author warned of the risk of a systemic banking and financial crisis – a combination of global liquidity and solvency/credit problems - like we had not seen in decades, these views were considered as far fetched. They are not that extreme any more today as Goldman Sachs is writing today on the risk of a contraction of credit of the staggering order of $2 trillion dollars in the next few years causing a severe credit crunch and a serious recession. As I will flesh out in a forthcoming note the risks of such a generalized systemic financial meltdown are now rising. Hopefully by now some folks at the New York Fed and at the Fed Board are starting to think about this most dangerous systemic financial crisis that could emerge in the next year and what to do to prepare for it."

Roubini is very late to the game in saying these things, but that fact alone gives his remarks greater significance. What's interesting is that he provides a step by step scenario about how he expects the system to break down. Even now, he's hedging. His final sentence says that the crisis "could emerge in the next year." He's still covering his ass, apparently for fear that God, in a massive <#stdurl http://dictionary.reference.com/browse/deus%20ex%20machina "deus ex machina"#> intervention in human affairs, will smite the financial engineers and restore the global economy to normalcy. I don't think that's in the cards. =inc ww2010.h2 observations "Some Observations" On August 17, I posted an article entitled <#inc ww2010.weblog.ref e070817 ""The nightmare is finally beginning.""#> I indicated that we were now on the road to a stock market crash in the near future. The exact timing couldn't be predicted, but the speculation was that it would happen by the end of September. It didn't happen at that time, but the trends have only been getting worse. Today the trend lines are MUCH WORSE than they were on August 17. Perhaps most significant of all is that the mood of gloom and doom is saturating the investment community, including investors and pundits, except for Maria Bartiromo. From the point of view of Generational Dynamics, there have been a series of generational financial panics and crashes, of international significance, every 70-80 years or so. Since the 1600s, these have been: <#inc ww2010.weblog.ref e070328 "the 1637 Tulipomania bubble,"#> the South Sea bubble of the 1710s-20s, the bankruptcy of the French monarchy in the 1789, <#inc ww2010.weblog.ref e070406 "the Panic of 1857,"#> and the 1929 Wall Street crash. Each new bubble begins precisely when the people in the generations that survived the preceding crash all disappear (retire or die), all at once, leaving behind younger generations with no wisdom and no fear of the horrors of a generational panic. We're now overdue for the next generational panic. It might happen next week, next month or next year, but it MUST happen soon because the stock market is <#hreftext ww2010.i.panic070820 "overpriced by a factor of 250%,"#> same as in 1929. The worsening trend lines indicate that it's getting close. =eod =// &&2 e071116 Third quarter corporate earnings are substantially below expectations =data ww2010.weblog.y2007.e071116.head Third quarter corporate earnings are substantially below expectations =data ww2010.weblog.y2007.e071116.keys =data ww2010.weblog.y2007.e071116.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071116.date 16-Nov-07 =data ww2010.weblog.y2007.e071116.txt1 Stocks have been falling pretty steadily since the October 9 =data ww2010.weblog.y2007.e071116.txt2 high at Dow 14164. Here's the most recent data from my <#hreftext ww2010.i.djia "Dow Jones historical page:"#>

Date              DJIA (Change)   (% of trend)      (% of 2007 high)
----------------- --------------  ---------------- ----------------
Tue 2007-10-09  14164.53( +0.86%) (267% of 5302.8) (100% of 07-10-09) [October 9, 2007]
Wed 2007-10-10  14078.69( -0.61%) (265% of 5303.5) ( 99% of 07-10-09)
Thu 2007-10-11  14015.12( -0.45%) (264% of 5304.2) ( 98% of 07-10-09)
Fri 2007-10-12  14093.08( +0.56%) (265% of 5304.8) ( 99% of 07-10-09)
---------------------------------------------------------------------
Mon 2007-10-15  13984.80( -0.77%) (263% of 5306.8) ( 98% of 07-10-09)
Tue 2007-10-16  13912.94( -0.51%) (262% of 5307.5) ( 98% of 07-10-09)
Wed 2007-10-17  13892.54( -0.15%) (261% of 5308.1) ( 98% of 07-10-09)
Thu 2007-10-18  13888.96( -0.03%) (261% of 5308.8) ( 98% of 07-10-09)
Fri 2007-10-19  13522.02( -2.64%) (254% of 5309.5) ( 95% of 07-10-09)
---------------------------------------------------------------------
Mon 2007-10-22  13566.97( +0.33%) (255% of 5311.5) ( 95% of 07-10-09)
Tue 2007-10-23  13676.23( +0.81%) (257% of 5312.1) ( 96% of 07-10-09)
Wed 2007-10-24  13675.25( -0.01%) (257% of 5312.8) ( 96% of 07-10-09)
Thu 2007-10-25  13671.92( -0.02%) (257% of 5313.5) ( 96% of 07-10-09)
Fri 2007-10-26  13806.70( +0.99%) (259% of 5314.1) ( 97% of 07-10-09)
---------------------------------------------------------------------
Mon 2007-10-29  13870.26( +0.46%) (260% of 5316.1) ( 97% of 07-10-09)
Tue 2007-10-30  13792.47( -0.56%) (259% of 5316.8) ( 97% of 07-10-09)
Wed 2007-10-31  13930.01( +1.00%) (261% of 5317.5) ( 98% of 07-10-09)
Thu 2007-11-01  13567.87( -2.60%) (255% of 5318.1) ( 95% of 07-10-09)
Fri 2007-11-02  13595.10( +0.20%) (255% of 5318.8) ( 95% of 07-10-09)
---------------------------------------------------------------------
Mon 2007-11-05  13543.40( -0.38%) (254% of 5320.8) ( 95% of 07-10-09) [October 9, 2007]
Tue 2007-11-06  13660.94( +0.87%) (256% of 5321.5) ( 96% of 07-10-09)
Wed 2007-11-07  13300.02( -2.64%) (249% of 5322.1) ( 93% of 07-10-09)
Thu 2007-11-08  13266.29( -0.25%) (249% of 5322.8) ( 93% of 07-10-09)
Fri 2007-11-09  13042.74( -1.69%) (245% of 5323.5) ( 92% of 07-10-09)
---------------------------------------------------------------------
Mon 2007-11-12  12987.55( -0.42%) (243% of 5325.5) ( 91% of 07-10-09)
Tue 2007-11-13  13307.09( +2.46%) (249% of 5326.1) ( 93% of 07-10-09)
Wed 2007-11-14  13223.93( -0.62%) (248% of 5326.8) ( 93% of 07-10-09)
Thu 2007-11-15  13110.05( -0.86%) (246% of 5327.5) ( 92% of 07-10-09)

The last line of this shows the following:

On November 15, the Dow was at 13110.05, having fallen 0.86% that day.
The "real value" of the stock market, as described in my essay, <#hreftext ww2010.i.panic070820 ""How to compute the 'real value' of the stock market,""#> is Dow 5327.5 That means that the stock market is overpriced today by a factor of 246%, a huge bubble.
The value of the Dow is 92% of October 9 high.

Why has the market been falling? Is it because our bubblehead investment community has finally developed a little sense? I guess it's possible, but in view of the moronic display we've been seeing in the past, that doesn't seem likely. My guess is that they're getting scared. In fact, that's what Generational Dynamics predicts, as I've said many times. The Boomers only know how to argue; they have no idea what's going on, since their parents' generation always took care of everything for them. The Generation-Xers are even worse; they don't have idea what's going on either, but they're driven by a nihilistic view of the world that causes them to be destructive and self-destructive. How else can you explain the existence of $750 trillion of CDOs and other credit derivatives, much of which may turn out to be worthless? But not having any idea what's going on means that you don't know what to do when all your assumptions are wrong. For years, one assumption has been that earnings per share would continue to grow at double-digit rates, something that hasn't happened for long historically. Well, now the long-awaited fall in corporate earnings seems to be happening, as of the third quarter. Here's the summary from <#stdurl http://www.cnbc.com/id/15839135/site/14081545/ "CNBC's earnings central:"#>

"As of Friday, November 9th: 451 companies in the S&P 500 have reported earnings for third-quarter, 64.30% have beaten estimates, 11.31% were in-line, and 24.39% have missed. (Data provided by Reuters Estimates) The blended earnings growth rate for the S&P 500 in third-quarter 2007, combining actual numbers for companies that have reported, and estimates for companies yet to report, fell to -2.4% from -1.6% last week, and below the 3.6% estimate from October 1st. On July 1st, the estimated growth rate was 6.2%. (Data provided by Thomson Financial)

In other words, as of July 1, our financial gurus expected third quarter earnings to grow by 6.2%; instead, earnings have FALLEN by 2.4%. And that's even worse than expected just last week. This pulls the rug out from under the standard bubblehead investment strategy that we keep seeing. Now things are changing. Formerly, the subprime mortgage bubble fed into a huge credit bubble (by means of CDOs and other credit derivatives backed by faulty mortgage contracts), which provided cash to corporations to generate bubble earnings, which caused historically high earnings growth, which investors used to justify high price/earnings ratios on stocks. Now with the bubble credit bubble deflating, there's less money around, and it's harder to generate bubble earnings, which means that stock prices have to fall to maintain the same price/earnings ratios. But there's more, and this is an interesting angle pointed out by Kevin Depew in <#stdurl http://www.minyanville.com/articles/GE-bac-m/index/a/14892 "the Minyanville blog."#> He quotes Karen Hoguet, CFO of Macy's. Macy's had been planning to buy back $1 billion of its own stock before the end of the year. But now with the credit bubble collapsing, these plans are in doubt, according to Hoguet:

"Given the current condition in the credit markets, we are carefully evaluating our options with respect to the timing of completing our remaining $1 billion authorization. As a result, some or most of that $1 billion could end up being deferred into next year. While we are optimistic about our prospects, and we believe the stock today represents a great value, we do need to balance this with the benefits of preserving access to all financial markets during these volatile times in the credit market."

Now here's the gimmick: Macy's and many other companies had been using money from the credit bubble to buy back their own stock for years. Why? It reduces the number of outstanding shares of stock for the company. By reducing the number of shares, the "earnings per share" computation increases (because you're dividing by a smaller number of shares outstanding), and that's the same as the price/earnings ratio. So companies have been reducing the price/earnings ratio of their own stock by using credit bubble money to buy back shares of their own stock. Now that window is being closed down, and Macy's and other companies are forced to defer their stock buyback plans. Here's some more from Hoguet:

"The truth is that's why we give a range of estimates. If we don't buy back the billion dollars, obviously the operations are going to have to do better to get to the same earnings [per share]. But that is part of the reason we give a range. You know, it's not as precise as you all think to estimate earnings going forward. So we do the best that we can as we provide guidance."

So CFO Hoguet is saying that Macy's will have to WORK for those earnings per share, rather than get them automatically through stock buybacks. What we're seeing is a stock market collapse proceeding step by step. We haven't seen a total panic yet, but it's coming. It would be a truly wondrous thing to behold if the consequences weren't so disastrous. From the point of view of Generational Dynamics, we're overdue for a stock market panic and crash. It might come next week, next month or next year, but it's coming with absolute certainty. =eod =// &&2 e071113b Hamas fires on civilian Palestinian crowd commemorating Yasser Arafat =data ww2010.weblog.y2007.e071113b.head Hamas fires on civilian Palestinian crowd commemorating Yasser Arafat =data ww2010.weblog.y2007.e071113b.keys =data ww2010.weblog.y2007.e071113b.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071113b.date 13-Nov-07 =data ww2010.weblog.y2007.e071113b.txt1 Eight people were killed when Hamas gunmen fired into the crowd. =data ww2010.weblog.y2007.e071113b.txt2 <#inc ww2010.pic g071112.jpg right "" "Hundreds of thousands of Palestinians carrying yellow Fatah flags pay tribute to Yasser Arafat. Later, at bottom, Fatah supporter is dragged and beaten by Hamas. (Source: BBC)"#> Hundreds of thousands of Palestinians crowded into Gaza city on Monday to <#stdurl http://www.arabnews.com/?page=4§ion=0&article=103493&d=13&m=11&y=2007 "pay tribute to Yasser Arafat."#> This was the first major demonstration by Fatah in Gaza since the entire Mideast was shocked by <#inc ww2010.weblog.ref e070622 "Hamas' stunning victory of Fatah in Gaza."#> Each side is blaming the other for starting the violence, though the battle was unequal, with the Fatah supporters throwing stones and the Hamas forces firing guns and throwing stun grenades. By the end, eight Palestinians were killed, and over 130 were wounded. According to some witnesses, the trouble started when some in the crowd through stones at the Hamas forces, shouting "Shiite, Shiite," accusing them of being a proxy for Iran and its ally Syria. From the point of view of Generational Dynamics, there are several significant things about this development. First, something I've mentioned before -- the Palestinians don't seem to have anything like the pure venomous hatred of Israelis that they have for each other. This is something that I look for in evaluating events today. Mainstream news media tend to completely confuse political fighting with genocidal violence, and lump them all together. So, for example, in Pakistan these last few days, I've seen lots of political conflict, including lawyers in penguin suits running around and demonstrating like college students, but almost no real violence. As I've said before, if the Palestinians were ready to take on Israel, they'd pour through that security wall separating Israel from the Palestinian territories and start slitting some throats. But I've seen nothing like that. However, what happened on Monday between Fatah supporters and Hamas. To call a Palestinian a "Shiite" is a venomous epithet, especially if it represents a widespread attitude, and Hamas forces exhibited extremely violent behavior toward Fatah supporters, as you can see from the third picture above. Second, the "Shiite" epithet is also a direct insult to Iranian president Mahmoud Ahmadinejad. As I wrote in my <#inc ww2010.weblog.ref e070702 "July analysis of Iran and Ahmadinejad,"#> Iran is a very dangerous wild card in international politics. Ahmadinejad has plans to gain hegemony over the entire Mideast, including the Arabian peninsula. To that end, he's been funding Hizbollah in Lebanon, and terrorist Palestinian groups, including Hamas. The problem is that the Arabian peninsula is Sunni Muslim, while Iran is Shia Muslim, and there's no way in Allah's heaven that the Arabs are ever going to submit to hegemony by Shiites. Thus, ironically, this split between Fatah and Hamas Palestinians is more offensive to Iran than it is to Israel. When the Mideast Roadmap to Peace was announced in May, 2003, calling for side-by-side Palestinian and Israeli states, I predicted that <#hreftext ww2010.i.may01 "the Roadmap would never succeed,"#> and that the death of Yasser Arafat, when it occurred, would trigger a generational change leading to a new genocidal war between Arabs and Jews. This is based on a Generational Dynamics analysis of the situation following the genocidal war of the late 1940s, when Palestine was partitioned and the state of Israel was created. I said at the time that the situation would degenerate into war, probably within two years after Arafat's death. Monday's rally was for the third anniversary of Arafat's death, so my timeline was off, as is often the case when I speculate on a timeline, but the end result hasn't changed. Since Arafat's death, life in the Palestinian territories, especially Gaza, has been increasing violent and degenerate, with the vast majority of the citizens unemployed. The vitriolic hatreds between Hamas and Fatah continue to deepen, a violent civil war, followed by a war between Arabs and Jews, cannot be too far off. =eod =// &&2 e071113 British Prime Minister Gordon Brown loves America too. =data ww2010.weblog.y2007.e071113.head British Prime Minister Gordon Brown loves America too. =data ww2010.weblog.y2007.e071113.keys =data ww2010.weblog.y2007.e071113.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071113.date 13-Nov-07 =data ww2010.weblog.y2007.e071113.txt1 We now have two European leaders competing for our affections. =data ww2010.weblog.y2007.e071113.txt2 Last week, French President Nicolas Sarkozy spent an hour telling how much he loved America and America's idealism to a joint session of Congress. As <#inc ww2010.weblog.ref e071108b "I wrote last week,"#> Sarkozy is playing a complex political game to gain a French advantage over Britain in the European Union, by trying to show that France can be a better friend to America than Britain can. Well, not so fast. On Monday, British Prime Minister Gordon Brown gave his <#stdurl http://www.number10.gov.uk/output/Page13736.asp "first major foreign policy speech"#> and, not to be outdone by the French, he expressed his admiration for America too:

"It is no secret that I am a life long admirer of America. I have no truck with anti-Americanism in Britain or elsewhere in Europe and I believe that our ties with America - founded on values we share - constitute our most important bilateral relationship. And it is good for Britain, for Europe and for the wider world that today France and Germany and the European Union are building stronger relationships with America. The 20th century showed that when Europe and America are distant from one another, instability is greater; when partners for progress the world is stronger."

Brown even complimented "the personal leadership of President Bush." This is quite a change. For years, former Prime Minister Tony Blair was ridiculed by the press as being "George Bush's poodle," because of his close ties with American policy. What this was supposed to mean, in case you don't get it, is that Blair was somehow hypnotized by Bush, and simply did as Bush commanded, a concept so ludicrous that only someone like a BBC reporter could conceive of it. Thus, when Blair stepped down and Brown became Prime Minister, he carefully avoided giving the impression that he was going to be Bush's new poodle. He made it clear that he was his own man, and that his policies would be distinctly different from America's. Well, Nicolas Sarkozy seems to have changed all that. Here's how <#stdurl http://news.bbc.co.uk/2/hi/uk_news/politics/7091279.stm "the BBC put it on Monday:"#>

"Gordon Brown's Guildhall speech shows that Britain's foreign policy remains somewhere in the middle of the Atlantic. On this occasion, the British prime minister gave a touch on the tiller to take the British ship of state a bit closer to the American shore. He was worried perhaps that mixed signals he and his ministers have been putting out indicated a cooling off after the heat of the Blair-Bush relationship. He is also mindful that the French under Nicolas Sarkozy have suddenly rediscovered their taste for America. Britain might be feeling a little left out, but then it has always been the case that the prodigal son gets the warmest welcome."

And so, for a while at least, the English and the French are competing for the love and attention of America. Let's enjoy it while it lasts, because I doubt that it will last long. =eod =// &&2 e071112 Tense Pakistani president Musharaff calls for elections by January 9 =data ww2010.weblog.y2007.e071112.head Tense Pakistani president Musharaff calls for elections by January 9 =data ww2010.weblog.y2007.e071112.keys =data ww2010.weblog.y2007.e071112.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071112.date 12-Nov-07 =data ww2010.weblog.y2007.e071112.txt1 After the embarassingly small turnout by Benazir Bhutto supporters on Friday, =data ww2010.weblog.y2007.e071112.txt2 it's hard to see that there's any political leader around who could challenge the current President Pervez Musharraf. If that's true, it means that the country will be led by Musharraf, or will be displaced by a new army coup. <#inc ww2010.pic g071111.jpg right "" "Tense and somber Pakistan President Pervez Musharraf at press conference on Sunday (Source: CNN)"#> In Sunday's tense press conference, Musharraf announced the following:

Parliamentary elections, originally scheduled for November 15, should go on before January 9.
However, he would not commit to a date to lift the state of emergency and restore the constitution. This means that the election would be conducted under the state of emergency.
He would "remove his uniform" as soon as the Supreme Court confirmed that he had won the October 6 election as President. Musharraf took office in 1999 in a military coup, and became both President and head of the armed forces. He's promised to give up his military roles several times, but hasn't yet done so.
He would not commit to further negotiations with Benazir Bhutto, saying that he belonged to no political party. "There is no point in a personality getting in touch with me. I am not heading a political party," <#stdurl http://timesofindia.indiatimes.com/World/Pakistan/Musharraf_non-committal_on_possible_power-sharing_with_Bhutto/articleshow/2533541.cms "said Musharraf."#>
Military courts would be empowered to try civilians on any issue of national security.

Former Prime Minister Benazir Bhutto called for anti-Musharraf protests and demonstrations on Friday. She was prepared to lead these demonstrations, but army forces prevented her from leaving her home in Rawalpindi (near the capital, Islamabad). Only a few hundred supporters showed up to take part in the demonstrations, far fewer than the tens of thousands that she had called for, and far, far fewer than the hundreds of thousands who cheered her return from exile at Karachi airport on October 18. (That was the day she was <#inc ww2010.weblog.ref e071021 "almost killed by a suicide bomber."#>) Bhutto is defiantly calling for more anti-Musharraf protests and demonstrations starting on Monday. She's described those planned demonstrations as a "long march" (reminiscent of Mao Zedong's "long march" in 1934), traveling from Lahore to Islamabad. There is nothing in all this that gives a picture of stability. It's possible that the upcoming election will lead to a resolution of problems, but things are moving quickly, and there are many factors that can upset the applecart. In Sunday's tense press conference, Musharraf claimed again that the imposition of martial law was not for his political gain, but for the sake of the country, a claim that I find to be credible, for <#inc ww2010.weblog.ref e071106 "reasons I gave last week."#> He described the declaration of the state of emergency as "the most difficult decision I have ever taken in my life," and <#stdurl http://www.pr-inside.com/pakistan-s-president-says-parliamentary-elections-r294857.htm "added the following:"#> "I could have preserved myself, but then it would have damaged the nation. I found myself between a rock and a hard surface. I have no personal ego and ambitions to guard. I have the national interest foremost." He voiced anger over the "aspersions" cast on his commitment to fighting Taliban and al-Qaeda militants, and his commitment to democracy. However, while many Pakistanis support the decision for martial law, as shown by the lack of support so far for Bhutto, many others are infuriated by it, including many who are sympathetic to the the Taliban and al-Qaeda. So the possibility of more violence, including terrorist attacks and suicide bombings, is real. =inc ww2010.h2 provinces "The Pakistani Provinces" In an attempt to get at least a basic understanding of what's going on in Pakistan, I've been studying the ethnic and geographic breakdown of the country. <#inc ww2010.pic pakfata.gif right "" "Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas) (Source: pakistan.gov.pk)"#> The name "Pakistan" itself is a hybrid. It was formed in the 1930s from the name of the largest region, Balochistan, by removing the "Baloch" part, and replacing it with P for Punjab, A for Afghanistan, and K for Kashmir. A later interpretation of the name says that I is for Indus, S is for Sindh, and T is for Turkestan, leaving only the "AN" as the remains of the original name, Balochistan. The official "correct" map of Pakistan, obtained from the <#stdurl http://www.pakistan.gov.pk/ministries/ContentInfo.jsp?MinID=6&cPath=59_283_744&ContentID=3716 "Pakistan government web site,"#> shows four major provinces. However, the story isn't complete unless you do something like what I did: I added the "FATA" regions in red. These regions, the Federally Administered Tribal Areas, are tribal areas in a strip of land between Pakistan and Afghanistan. They're considered part of Pakistan, sort of, but they're self-governing and not under the control of Pakistan, although Pakistan does provide administrative services. Now, the FATA regions are quite important, because that's where you'll find, for example, the tribal region of Waziristan, where Osama bin Laden is supposedly hiding out, along with his merry band of throat-slashers. That's also where the training camps for the international terrorist movement are located. The London subway bombers were trained in Waziristan. The FATA regions are heavily populated by Taliban and al-Qaeda supporters, and they've become terrorist havens out of reach of either the coalition forces in Afghanistan or the Pakistan army. Now let's look at the four major provinces:

Balochistan was originally populated mainly by Persian tribes from Iran. It's the most rebellious of the provinces, and has never gotten along well with the government in Islamabad. Furthermore, the Balochis are being displaced by another group, the Pashtuns, who migrated from Afghanistan because of the recent war. The Pashtuns outnumber the Balochis in large cities, and the Balochis accuse Islamabad of giving the Pashtuns favorable treatment.
North West Frontier Province (NWFP) was originally populated mainly by Pashtun tribes originating in Afghanistan and Turkey.
Punjab province was originally populated by Punjabi tribes originating in India, and in fact there's an adjacent Punjab province in India. Punjab is the most prosperous of the provinces. Punjab was the epicenter of the 1947 genocidal bloodbath that occurred when Britain withdrew from the Indian subcontinent, partitioning it into (Muslim) Pakistan and (Hindu) India. The original plan of Partition was that everyone would stay put, but a huge war forced mass relocations of Muslim Punjabis from India to Pakistan, and mass relocations of Hindu Punjabis from Pakistan to India. Today, 60 years have passed since Partition, and the generations of Partition survivors, who had vowed to never let anything like that happen again, are now gone, replaced by younger generation leaders with vestigial hatred of India, and demanding that all of Kashmir must become part of Pakistan. That's why Punjab is seething with anti-Musharraf and pro-terrorist resistance.
Sindh was originally populated by Balochis who migrated further west, with the Sindhi people speaking the Sindhi language. However, the demography of the province changed dramatically after 1947. Since Partition, millions of Urdu speaking Indians migrated into Pakistan, settling in all four provinces. These immigrants and their descendants are called Mohajirs or Muhajirs, from the Urdu word for "migrant." The Mohajirs seem to have successfully assimilated themselves in most places, so much so that Urdu and English are the two official languages of Pakistan. But assimilation did not occur in Sindh. As the relatively wealthy and well-educated Mohajirs poured into the Sindh in the 1950s, they gradually became dominant, in population, in government and business in the large cities of Karachi and Hyperabad. Displaced Sindhis moved into rural areas, creating a signifcant ethnic fault line. There were violent Mohajir-Sindhi clashes in the 1970s, beginning when the language riots (Urdu versus Sindhi) broke out in Karachi in 1972. Question: Who's the most prominent Mohajir in Pakistan today? Answer: Pervez Musharraf. Question: Who's the most prominent Sindhi in Pakistan today? Answer: Benazir Bhutto. The early Sindhi hero was none other than Zulfikar Ali Bhutto, Benazir's father. In 1966, Zulfikar created the Pakistan People's Party (PPP), which Benazir now heads. Zulfikar was President of Pakistan when the language riots broke out in 1972. He set up a <#stdurl http://www.conflict-prevention.net/page.php?id=40&formid=73&action=show&surveyid=15/ "regime of job quotas in state jobs"#> and admissions in state-owned education institutions: 60% rural and 40% urban. The purpose was to give educational and employment opportunities to Sindhi, who lived principally in rural areas. This solved some problems, but exacerbated other conflicts. The quotas were supposed to have expired in 1983, but they've continued as a form of discrimination, and <#stdurl http://www.yespakistan.com/education/edu_quotas.asp "are still causing friction today."#> In 1984, an Urdu-speaking student association formed a new political party, the Mohajir Qaumi Movement (MQM - Migrant National Movement). It quickly became extremely popular among Sindh Mohajirs. In the 1990s, both PPP and MQM expanded into broader national movements. MQM changed its name to Muttahida Qaumi Movement (United National Movement). However, both are still centered mainly on their original respective Urdu-speaking and Sindhi-speaking constituencies.

Musharraf himself claims to be without political affiliation, although he's worked closely with MQM since his successful 1999 coup. =inc ww2010.h2 observations "Some Observations" <#inc ww2010.pic pakfata.gif right "" "Official map of Pakistan, with the addition of the FATA (Federally Administered Tribal Areas) (Source: pakistan.gov.pk)"#> The Pakistan crisis was touched upon in the Sunday morning television news talk shows, but it's pretty clear that almost none of the journalists and politicians giving opinions have bothered to learn even the minimal amount about Pakistan that I learned in a few days of research and study.

The Western press has been painting the relationship between Musharraf and Bhutto as almost a minor tiff. But their differing ethnicities -- Mohajir and Sindhi, respectively -- mean that their differences go very deep.
One of the pundits (I think it was ABC's Sam Donaldson) called for democratic elections, and said that, "Obviously, Benazir Bhutto is going to win." This is a pretty bizarre statement anyway, since Musharraf is President, and Bhutto is Prime Minister in the scenarios being discussed, and the election is for Parliament. But the opinion that Bhutto would "obviously" win is based on the huge outpouring -- hundreds of thousands of people -- who greeted Bhutto on her return from exile on October 18. Obviously, someone so popular is going to win the election. Right? Well, it's more difficult than that. Bhutto arrived in Karachi, the heart of Sindhi population. Contrast that to what happened on Friday, where only a few hundred supporters showed up for her protests and demonstrations. That was in Rawalpindi, just outside of Islamabad, in the heart of Urdu-speaking Punjab territory. On Tuesday she's planning her new "long march" from Lahore to Islamabad, also within Punjab. That's a high risk strategy for her. It's far from clear that Bhutto has much substantial support outside of Sindh province, when people are forced to choose between her and Musharraf.
The Mohajir-Sindhi fault line has experienced low-level conflict since the 1960s. This is a typical generational pattern. As long as survivors of the 1947 Partition are alive, they'll do everything possible to prevent a new genocidal war, and so the violence remains at a low level. But it's right about now that the last of the 1947 survivors are disappearing, and the younger generations are not hesitant to initiate increased levels of violence, and such violence could spiral out of control into full-scale warfare. This is the kind of thing that Musharraf can sense viscerally, since he himself was a Partition survivor. That's one of the reasons for his implementing martial law, especially after the suicide bombing of Bhutto's party on October 18.
The other major fault line is between Muslims and Hindus, and could erupt into violence, especially in Pakistani Punjab and Indian Punjab. This fault line, in eastern Pakistan, is emotionally connected to the Pashtun groups that are harboring Osama bin Laden and Sunni Taliban and al-Qaeda groups in Northwest Frontier Province and the adjacent tribal areas, especially Waziristan. Listening to the Sunday news talk shows, all I heard from pundits and politicians was how Musharraf was failing because he hadn't brought the terrorist violence in Waziristan under control. These people assume that suicide bombings were the only thing to worry about. From Musharraf's point of view, a much bigger potential problem is that the Pashtuns and Punjabis will be so angered as to join in overthrow of the government, in order to establish a Sharia Sunni state. This would lead to an internal war with the Sindhis and Balochis, and to an external war with India. This would also give the Sunni extremists control of Pakistan's nuclear weapons.

Sunday's Toronto Sun has <#stdurl http://torontosun.com/News/TorontoAndGTA/2007/11/11/4647038-sun.html "a story about an 80-year old Pakistani-Canadian"#> who, years ago, was a student fighting for independence of Pakistan:

"Witness to Pakistan's birth sides with Musharraf crackdown, by Don Peat For one Pakistani-Canadian living in Mississauga the present emergency in his homeland brings back memories of the country's past turmoil-- the mass migrations and mass killings that grimly greeted Pakistani independence in 1947. Hasan Akhter Beg, 80, describes his life as having seen the history of Pakistan unfold in front of his eyes. The Mississauga resident was a university student in his late teens and living in eastern Punjab when he watched the British Raj dissolve into India and Pakistan and erupt into religious violence between Hindus and Muslims. "We lost so many lives trying to make (Pakistan) a place we would want to live," Beg said. He travelled from the east on foot to western Punjab, what would become Pakistan, and witnessed the fighting first-hand. "I saw so many kidnappings and killings," Beg said. "Oh my God, you can't imagine, what miseries with my own eyes ...you can't imagine." To cope with all he saw he has written political poems about what he calls "the miseries of partition." Despite the chaos then, as now, life went on. Beg was as a student worker in the independence movement. His job was to work for the election committee. He spent the next 40 years as a railway track engineer before coming to Canada in 1991. Watching the current situation in Pakistan, Beg is troubled by the violence and unrest. But, from the events he's seen, Beg feels that Pakistani President General Pervez Musharraf is on the right track. His experience during partition fuels that view. "I always tell my sons that our priority is not democracy," he said. "Our survival, our existence must come first." Beg says the army is the only way to guarantee that survival. "People are divided here (in Canada) but the majority are with Musharraf," he said. The judiciary was interfering too much with the path of the country, Beg believes, and so Musharraf is justified in trying to maintain order. "There should be fair elections- no doubt," he said. "But we don't want corrupt leaders in our country." As protests mount and uncertainty continues, Beg hopes the country he helped forge will survive. "I feel the work they did (during independence) is preserved," Beg said. "I hopes it stays that way."

This is the point of view held by people who survived the Partition and resulting genocide. It's less often the position of someone who was born after Partition. From the point of view of Generational Dynamics, the result is inevitable. People in old generations die, and their wisdom dies with them. People in new generations are born, and they repeat the same forgotten mistakes that their forefathers made. A new genocidal war between India and Pakistan, between Muslims and Hindus, in the near future is 100% certain. President Musharraf is under pressure from all sides, internally and externally. In his tense press conference on Sunday, he tried to "thread the needle" through policy decisions in a way that would keep everyone happy, without triggering an explosion. In many ways, Pervez Musharraf is in the same boat as Ben Bernanke. Both of these men realize that they're on the precipice of disaster -- one in Pakistan, and one in global financial markets -- and both are trying to prevent a disaster. But the best that either of them can hope to do is postpone the disaster. Whether either or both of them will be able to do even that in the next few weeks remains to be seen. =eod =// &&2 e071111 Markets fall as torrents of CDO exposures bolster fears of new credit crunch =data ww2010.weblog.y2007.e071111.head Markets fall as torrents of CDO exposures bolster fears of new credit crunch =data ww2010.weblog.y2007.e071111.keys =data ww2010.weblog.y2007.e071111.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071111.date 11-Nov-07 =data ww2010.weblog.y2007.e071111.txt1 British investors panicked on Friday on a rumor that Barclays =data ww2010.weblog.y2007.e071111.txt2 Bank (Barclays Plc) would have to <#stdurl http://news.independent.co.uk/business/news/article3146474.ece "write down $10 billion in overpriced securities."#> Panic selling drove Barclays stock shares down 9% on the London Stock Exchange before trading was suspended. Trading resumed after a company spokesman said, "There is absolutely no substance to these rumours," and the stock closed down 2½% for the day. The Barclays rumors spread after Wachovia Bank announced, on Friday morning, <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aKDuhdPh2w_U&refer=home "$1.7 billion in writedowns."#> In fact, there have been some $64 billion in writedowns from a number of large financial institutions, including Citigroup, Merrill Lynch, Morgan Stanley, Goldman Sachs, JPMorgan Chase and Bear Stearns. A new report from Morgan Stanley predicts that the writedown will <#stdurl http://www.financialnews-us.com/?page=ushome&contentid=2449136225 "total as much as $500 billion."#> Do you believe that's all it will be, Dear Reader? At the beginning of the year it was going to be nothing, then it would be a few hundred million, then a few billion, and now $500 billion. Do you see a trend here? What's being written down is credit derivatives (Credit Default Swaps (CDSs) and Collateralized Debt Obligations (CDOs)) that were devised by brilliant PhD financial engineers who discovered that they could turn high-risk subprime mortgage loans into AAA rated securities. Now that real estate prices have been falling, and the number of mortgage foreclosures has been surging, it turns out these credit derivatives are worth a lot less -- 50%, 10% -- of what the financial engineers said they'd be worth. Some have turned out to be worthless. There are some $750 trillion in various credit derivatives in the financial portfolios of institutions around the world, based on figures from the Bank of International Settlements. Even if only 10% of them are written down 50% (an optimistic assumption), that's still $37.5 trillion writedowns, where the global GDP is just $45 trillion. (Corrections made on 13-Nov) Where are all these $750 trillion in credit derivatives? Nobody wants to admit it, but a good guess is that they're in the portfolios of tens of millions of businesses and individuals that have invested in "high-yielding bonds," so that "their money can work for them by earning more money." =inc ww2010.h2 hiding "Hiding the truth" That's why all these institutions are desperately trying to avoid having to sell off their assets. There's widespread fear that if there's a major sale of CDOs, then a "market price" will be established, and that will force other institutions to "mark to market" -- write down their assets to the market price, which in many cases is "nearly worthless." However, events are conspiring to force more and more huge chunks of near worthless CDOs to be written down. In just the last few days:

Citibank's <#stdurl http://news.bbc.co.uk/2/hi/business/7082495.stm ""M-LEC" superfund has apparently collapsed."#> You're recall that the purpose of the That's the reason for these SIVs (structured investment vehicles) and the <#inc ww2010.weblog.ref e071015 ""M-LEC,""#> or Master-Liquidity Enhancement Conduit, structures was to allow Citibank and other banks to sell these worthless securities to each other at artificially high prices. This would create a phony, fraudulent "market price" which could then be used for "mark to market" purposes. Apparently Citibank has been unable to get other banks to invest the $75 billion required to start the M-LEC up.
In the last few weeks, the ratings agencies -- Moody's, Fitch and S&P -- have been <#stdurl http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-10-30T202705Z_01_N30219930_RTRIDST_0_RATINGS-CDOS-MOODYS-UPDATE-1.XML "re-evaluating their ratings"#> on hundreds of CDO contracts, including securities that they'd previously given AAA ratings to. This can create a domino effect. Many institutions are not permitted -- either by law or by charter -- to invest in anything other than AAA-rated securities. If these securities are downrated, the many institutions holding them will have to sell them, once again establishing a "market price" that will apply to other similar CDOs. <#inc ww2010.pic g071110.gif right "" "Prices of ABX-HE series 07-2 for various risk levels on 9-Nov-2007. The lowest risk levels are at the top. (Source: Markit.com)"#>
The ABX indexes have continued to fall, almost continuously. What's especially significant is that the AAA and AA rated indexes have been collapsing. The ABX indexes are proxies for mortgage-backed credit derivatives, but have no legal or regulatory role, so they could be simply ignored by everyone. What's happened is that the fall in the ABX indexes has been so dramatic that it's been widely reported in the media, causing a lot more investors to openly question why CDOs aren't being re-evaluated by the ratings agencies. Thus, the fall in the ABX indexes has been part of the environment that has pressured the ratings agencies to downgrade worthless securities, and has pressured financial institutions to revalue their assets.
And now for the big one. On Thursday evening, ratings agency Standard & Poor's <#stdurl http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-11-09T113920Z_01_T51742_RTRIDST_0_CDO-STATE-STREET-UPDATE-2.XML "slashed its ratings"#> of the securities in Carina CDO Ltd, a CDO managed by State Street Bank. Carina was originally a $1.5-billion CDO issued in September 2006. S&P's re-evaluation lowered the rating of one AAA class to BB, and the rating of another AAA class went down 18 notches to CCC-minus. Now, you may recall that when the Bear Stearns debacle broke in June, Bear <#inc ww2010.weblog.ref e070624 "bailed out its two defaulting hedge funds,"#> pouring $2.3 billion dollars of its own money into the hedge funds, when it could simply have let them default, and sold off the assets. But Bear was apparently extorted into bailing them out because selling off the assets would have gotten the ball rolling on re-valuing worthless CDOs. In the end, Bear Stearns announced that <#inc ww2010.weblog.ref e070718 "the hedge funds were almost worthless,"#> a month later. Well, there's none of that silliness with State Street Bank and the Carino CDO. State Street quickly announced <#stdurl http://money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-20876789.htm "the following:"#> "State Street acts as collateral manager for approximately $6 billion in CDO assets. State Street is neither the trustee to nor the underwriter of any of these CDO assets, and a decision to accelerate a CDO and liquidate the collateral portfolio resides directly with the CDO's senior investors." In other words, State Street won't do what Bear did. If the investors want to sell off and liquidate the assets, they're free to do so. So on Friday, there was the Wachovia news and there was the Barclays rumor, described at the beginning of the article, and there was widening speculation that the Carino asset selloff would <#stdurl http://www.latimes.com/business/la-fi-wrap9nov09,1,3614825.story?coll=la-headlines-business "trigger a "fire sale""#> of CDO assets owned by other banks. Such a fire sale would end up causing the dreaded widespread CDO re-evaluation that everyone's been dreading. It's not known what immediate impact the Carina selloff will have. The scenario that most people are worried about is that it will trigger the domino effect previous mentioned, one selloff leading to another, causing panic to spread, as early as next week. On the other hand, some of the "best" financial minds in the world are spending the weekend looking for ways to prevent that kind of meltdown, or rather to stall it for a little longer. We'll see.
A month ago I wrote about a new accounting rule <#inc ww2010.weblog.ref e071014b "FASB Statement 157,"#> which requires companies to clearly designate which of its assets are "marked to market," and which are "marked to model." The latter categorization is called "Level 3," and it refers to assets which can only be valuated by means of a computer algorithm dreamed up one night by a financial engineer looking to increase his own commissions. FASB Statement 157 becomes effective next week, on November 15. In the following months, companies are going to be required by this accounting rule to clearly identify how much they have in "Level 3" marked to model assets, and this will further pressure these companies to provide realistic prices for them.

What's interesting about the above list is how many different things are piling up at once. It seems to me that the domino effect has already begun, albeit slowly, and is speeding up. The days where "all bad news is good news" seem to be over. =inc ww2010.h2 how "How did we get here?" Before going on to further consequences, it's worthwhile to stop, take a breath, and recall how we got here. This is a generational thing. There is nothing new about this. People who say that this is "new" or "different" are fooling themselves. If you go back through history, there are many small or regional recessions. But since the 1600s there have been only five major international financial crises: <#inc ww2010.weblog.ref e070328 "the 1637 Tulipomania bubble,"#> the South Sea bubble of the 1710s-20s, the bankruptcy of the French monarchy in the 1789, <#inc ww2010.weblog.ref e070406 "the Panic of 1857,"#> and the 1929 Wall Street crash. When comparing these international financial crises, the details are always different, but they're all remarkably similar in the following ways, as described in <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world""#>: A debauched and perverted use of credit, occurring at exactly the time that the survivors of the previous financial crisis have all died or retired; a huge asset bubble; the securitization of credit; and an upsurge in corruption. All of those elements are enormously present today. Not only that, but in each previous case there was an invented certificate or security that could be bought and sold and which, in the end, turned out to be worthless: tulip futures, shares in South Sea company, "assignats" based on lands confiscated from French clergy, railway shares in 1857, and stock shares in 1929. Today it's CDOs. In fact, we've been discussing debauched abuse of mortgage credit, but the same can be said for many other forms of credit -- prime mortgages, auto loans, credit cards, consumer loans and commercial real estate loans, for example. Problems with these forms of credit haven't yet made the front pages, but they will before long. It isn't mortgages that are the problem; the problem is with Boomers and Xers. From the point of view of Generational Dynamics, we're waiting until a "generational panic" triggers the inevitable collapse. The asset bubble MUST collapse; the credit securities (CDOs) WILL become worthless; the corruption MUST be punished. Almost no one alive today has any personal memories of the Great Depression. People in the Boomer generation are narcissistic and arrogant, and have no idea how to run the world, since their parents took care of everything. The people in Generation-X are worse. Arrogant Boomers are content to let other people take care of things so they can sit back and criticize, as they criticized their parents during the 1960s, and criticize each other today. The youthful nihilistic Xers show contempt for all caution and have no fear of anything, even their own destruction, and devised the huge credit bubble that close to bursting today. An anecdote in the comment section of <#stdurl http://ftalphaville.ft.com/blog/2007/11/09/8778/banks-hammered-as-cdo-defaults-spike-liquidating-positions-may-trigger-firesale/ "a blog entry in a Financial Times blog"#> from a couple of days ago gives a good example. This anecdote tells of a conversation with someone from the Fitch ratings agency who was explaining why their high ratings for CDO securities were so good. The ratings are assigned by means of a computer software algorithm that takes into account the creditworthiness of the homeowner (as measured by his FICO score), and assumes that home prices will continue to increase, as they have "for the past 50 years":

"We were on the March 22 call with Fitch regarding the sub-prime securitization market’s difficulties. In their talk, they were highly confident regarding their models and their ratings. My associate asked several questions. FPA: “What are the key drivers of your rating model?” Fitch: They responded, FICO scores and home price appreciation (HPA) of low single digit (LSD) or mid single digit (MSD), as HPA has been for the past 50 years. FPA: “What if HPA was flat for an extended period of time?” Fitch: They responded that their model would start to break down. FPA: “What if HPA were to decline 1% to 2% for an extended period of time?” Fitch: They responded that their models would break down completely. FPA: “With 2% depreciation, how far up the rating’s scale would it harm?” Fitch: They responded that it might go as high as the AA or AAA tranches."

This phone conversation took place on March 22. At that time, the Fitch representative was explaining how wonderful their models were, even though they assumed that real estate prices would keep on increasing. Who the heck are these people? Are they totally nuts? You mean that they didn't know, on March 22 of this year, that the real estate bubble was bursting? How could they not know? These are supposed to be brilliant, highly skilled financiers. How did I know in 2004 that there was a housing bubble, and I said so. (That was in the article where Fed Chairman Alan Greenspan said that <#inc ww2010.weblog.ref e041020 "there's no housing bubble,"#> but even if there were, it would be a GOOD thing, because homeowners have been refinancing the mortgages, and that gives the homeowners a lot more money to spend. Ha, ha.) How did I know, in 2005, that the housing bubble was about to burst, which is the one and only reason why I sold my condo and moved into an apartment? How did I know these things, if these financial geniuses at Fitch didn't even know on March 22 of this year? I just can't get over this. I listen to CNBC or I read articles in WSJ by Greg Ip, or I read statements by Ben Bernanke, and I constantly have to ask myself, how is it possible that I can see what's going on and these people can't? Am I hallucinating? Am I insane? Am I nuts? Is it really possible that all these people are so dumb that they can't see what's right in front of their faces, and I'm the only person who isn't? Is that even conceivable? And then there's my article, <#hreftext ww2010.i.panic070820 ""How to compute the 'real value' of the stock market,""#> which shows that the stock market is overpriced by a factor of 250% today, same as in 1929. One of the graphs from that article is the following, which is an updated version of a graph I've been showing people and posting for years: <#inc ww2010.pic g070818c.gif center "" "S&P 500 Price/Earnings Ratio (P/E1) 1871-2007"#> Now, no one in his right mind can look at this graph and not see immediately that the stock market is going to crash. The P/E ratio will drop below 10, as it did in 1982, for example, and the stock market will fall to Dow 4000 or lower. This has been perfectly obvious to me since I first constructed a version of this graph in 2002, and started telling people we were headed for a new 1930s style Great Depression. And there isn't even any doubt. This MUST happen. Why, why, why am I the only person who sees this? Why do I have this "superpower," which has turned into an obsession, and which has brought me nothing but grief, contempt and sadness? I started studying generational theory shortly after 9/11, when I picked up a copy of The Fourth Turning, by William Strauss and Neil Howe. Out of that came Generational Dynamics and this web site. The Fourth Turning, written in the early 1990s, predicted that people would become incredibly stupid in this decade (although Strauss and Howe didn't use the word "stupid," that's what it amounts to). But I never could have believed that it would be this bad. How could so many people be so stupid? I read the various economics blog on the internet. I read <#stdurl http://www.rgemonitor.com/blog/roubini "Nouriel Roubini's blog,"#> <#stdurl http://globaleconomicanalysis.blogspot.com/ "Michael ("Mish") Shedlock's blog,"#> the <#stdurl http://calculatedrisk.blogspot.com/ "Calculated Risk blog"#> (with Tanta), the <#stdurl http://suddendebt.blogspot.com/ "Sudden Debt blog,"#> the <#stdurl http://www.minyanville.com/ "MinyanVille blog,"#> and others. All of these people post analyses of things going on -- the latest jobs reports, the latest currency exchange rates, real estate foreclosure rates, interest rates, housing inventories, etc. They paint dark pictures of what's going on, but they never say what's coming next. Do they believe that we can get out of this mess? They never say that. Do they believe that there's going to be another 1930s style Great Depression? They NEVER say that. The most they ever say is that we might have a repeat of the Panic of 1987, which was hardly a blip to the economy. In fact, from the point of view of Generational Dynamics, it's called the <#inc ww2010.weblog.ref e071019 "false panic of 1987,"#> since the stock market was actually underpriced at that time. One other person said that the worst we were headed for was a repeat of the Panic of 1892. I think he was joking, but I'm not sure. "1929" is the word that may not be uttered. I was mocking <#inc ww2010.weblog.ref e070806 "Professor Nouriel Roubini"#> a few weeks ago, for bragging about how clever he was, a year ago, to predict that the housing bubble would cause a "hard landing" in the economy. Well, what the hell, how did I know that in 2005? All of these guys (and Tanta) are supposed to be top-notch experts. They seem to know a lot of details, but they have no idea of what's going on -- the big picture. Why is that? I don't expect the man on the street to look at the above P/E1 graph and understand it. Lots of people don't have those skills. But hell, we're not talking about the man in the street. We're talking about financial engineers with PhDs in economics and mathematics. We're talking about a Princeton University professor of economics, for heavens sake. Why don't any of them know what's going on or, if they do, why don't they say so? =inc ww2010.h2 nasdaq "The fall of Nasdaq and tech stocks" OK, enough ranting about that subject. Let's turn to the stock market this week. Anxiety was pretty high on CNBC most of this week, as pundits and financiers sought to reassure each other with phrases like, "I think every company is moving as quickly as possible to get their writedowns completed," or "The worst of the credit crunch is over," or "A couple more weeks of bad news, and then we'll get back to business as usual," or "It's just the financials dragging the stock market down; the tech stocks look like real winners." Oops, well that wasn't true by the end of the week, as the Nasdaq and other tech stocks fell sharply. The tech-heavy Nasdaq index has been spiking up all year, and lately the index has been principally supported by four stocks: Apple, Google, RIMM (Research in Motion), and Amazon. But on Friday, all four fell sharply. One CNBC pundit (I wish I had made a note of his name) was close to tears over Google, which fell over 4% on Friday. "I just can't understand it. Google has been doing well this year, and the fundamentals haven't changed, so why oh why is it falling now?" Ya think he has some Google shares he's been counting on? A poster on one online forum gave his reasons "Why Google deserves its share price and more." He explains, "I've been reading articles about how Google is overpriced ever since their IPO, and ... [all] of them are wrong, and I'll explain why." He explains why Google has the best search engine, good PR, great free services, a great business model. Saying that "MSN and Yahoo suck," he concludes, "Google is one of those rare companies that comes along and kicks everyone's ass for a very long time, and I'm not getting off the bus anytime soon." Now the problem with this argument is that it doesn't provide any reason that Google's share price is worth it. Let's assume that everything he says is correct; then the same argument could be used to justify a share price of $600, $6000 or $6 million. Is Google worth $6 million a share? According to the above "reasoning," it is. Google has a price/earnings ratio of about 60. There's no way it's worth the $600+ share price, by a long shot. But we've seen this show before, haven't we? There were lots of "googles" in 2000, all of them "rare companies" that were "kicking everyone's ass," and they all fell on their faces in the Nasdaq crash. Financial pundits have been talking about getting past the "bad news," and getting back to "business as usual." It never seems to dawn on them that bubblehead logic is not "business as usual." We will never return to <#inc ww2010.weblog.ref e070406 "the mania of just a few months ago."#> The mania has been driven by Boomers and Xers. Not having lived through the Great Depression, they have no idea what's going on, or how to handle it. Now they're beginning to panic, because they're over their heads in debt, threatened with bankruptcy and losing their homes. Their stock market investments are based on raw emotion. The events of the last few months have frightened them, and all it will take is one little push to send them over the edge into full-scale panic. =inc ww2010.h2 ben "Can Ben Bernanke save the world again?" On August 17, I posted an article entitled <#inc ww2010.weblog.ref e070817 ""The nightmare is finally beginning.""#> I indicated that we were now on the road to a stock market crash in the near future. The exact timing couldn't be predicted, but the speculation was that it would happen by the end of September. Well, it didn't happen, and so I got what I deserved for speculating. But hey, I'm a Boomer, and like other Boomers, I never seem to learn my lesson. So I'm going to speculate once again. Fed Chairman Ben Bernanke "saved the world" last time, by lowering the discount rate on August 17, and then lowering interest rates by an unexpectedly large ½% on September 18. Investor anxiety dissolved into euphoria, and drunken investors pushed the stock market bubble up to a historic high of Dow 14164 on October 9. The euphoria died on October 15 with the M-LEC announcement. When the Fed lowered interest rates again on October 31, not only did it not restore the euphoria, it appeared to increase the level of dread. And so, today, we're back at the point where I originally wrote, "The nightmare is finally beginning." Can Ben Bernanke "save the world" again? Bernanke is no fool, as many people seem to believe he is. As I wrote in <#inc ww2010.weblog.ref e070827 ""Bernanke's historic experiment takes center stage,""#> Bernanke has a specific strategy for handling this situation. The only problem is the Bernanke's strategy cannot possible work, and the fiasco of the October 31 interest rate reduction is already a significant failure in his strategy. Does he have any ammunition left? I don't believe he can do much by himself, but he might seek help from two other sources:

There have been some rumors that there's going to be a big joint announcement next week by Bernanke and US Treasury Secretary Henry Paulson. The objective will be to "save the dollar," which has been falling precipitously on international currency markets.
When I wrote the article, <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world,""#> one conclusion that I reached was that China would at some point decide it's to China's advantage to help the American economy, in order to protect China's economy. Thus, sooner or later I would expect some kind of joint announcement by Bernanke and the Chinese. Although I think that it's still way too early for such an announcement, such an announcement may come sooner or later.

The point is that Bernanke can only "save this world" this time with something significant and dramatic. From the point of view of Generational Dynamics, nothing can work in the long run. Just take another look at the price/earnings (P/E1) graph earlier in this article. All the Fed can do is stall a little longer. =eod =// &&2 e071108b Nicolas Sarkozy gives stirring speech to joint session of Congress =data ww2010.weblog.y2007.e071108b.head Nicolas Sarkozy gives stirring speech to joint session of Congress =data ww2010.weblog.y2007.e071108b.keys =data ww2010.weblog.y2007.e071108b.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071108b.date 8-Nov-07 =data ww2010.weblog.y2007.e071108b.txt1 Years of French/American hostility seemed to melt away on Wednesday, =data ww2010.weblog.y2007.e071108b.txt2 as French President Nicolas Sarkozy expressed his love for America in a speech to a joint session of Congress. There were frequent standing ovations as he cheered American idealism, American morality, and America's courage in saving France during the World Wars. <#inc ww2010.pic g071108a.jpg left "" "French President Nicolas Sarkozy speaks to a joint session of Congress. (Source: C-SPAN)"#> I frequently point out that, from the point of view of Generational Dynamics, the actions and behaviors of politicians are really irrelevant to what's going to happen, except insofar as the politicians' views represent those of the masses of people who elected them. So the question is, how deeply do the French agree with these views stated by Sarkozy? I don't know the answer to that question, except that I've heard several pundits recently talk about how much the French people love America, only differing with Americans over pursuit of the Iraq war. I have to say that this is news to me. During the 1970s I spent a fair amount of time in Europe on business, and it was perfectly clear to me that the Germans liked Americans and the French hated Americans. Probably more to the point is the attitudes of the French people toward the British or, as Sarkozy's predecessor used to call them, the "Anglo-Saxons." Jacques Chirac's denunciations of Tony Blair and British policy during discussions of the EU constitution were so bitter that I indicated that a future war between France and Britain seemed fairly certain. People tend to recoil when I suggest this, but it's really not far-fetched at all. There have been numerous bitter crisis wars fought between the English and French in the millennium since 1066, and the only really far-fetched idea is that such a war will never happen again. Many older French people today still have bitter feelings towards the British because of the Duke of Wellington's victory over Napoleon Bonaparte at Waterloo in 1815. Napoleon had an early vision of a "European Union" led by France, and the visceral feeling is that the British are guilty of blocking France's leadership in the EU today just as they did with Napoleon. So it's not surprising that Sarkozy spoke at length about France's support for America in the American revolution. He didn't mention the British, but of course web site readers may recall that the American Revolution was fought against the British, with whom France had been at war in many places around the world in the previous century. An ironic choice by Sarkozy was his emphasis on the great French aristocrat <#stdurl http://en.wikipedia.org/wiki/Gilbert_du_Motier,_marquis_de_La_Fayette "Lafayette,"#> who volunteered to fight alongside the colonists in the Revolutionary War and became a close friend with George Washington. Sarkozy repeatedly referred to this close friendship, but didn't mention that later Lafayette opposed Napoleon. =inc ww2010.h2 thanks "Thanking America's courage in the World Wars" The most touching of Sarkozy's remarks came when he thanked America for saving France twice during the two world wars. It's interesting that he put a generational spin on it as well. (This is my own transcript of the simultaneous translation; I'll update this page if a better transcript becomes available.)

"Ladies and gentlemen, the men and women of my generation heard their grandparents talk to them about how in 1917, America saved France. At a time when my country had reached the final limits of its strengths, a time when France was exhausted, it had spent its strength in the most absurd and bloodiest of wars, and France was able to count upon the courage of American soldiers. And I have come to say to you on behalf of the French people that never, never will we forget that. The men and women of my generation heard their parents talk about how America returned in 1944 to free us from the horrifying tyranny that threatened to enslave us. And fathers in my country took their sons to see the vast cemetaries where under thousands of white crosses, so far from home, thousands of American soldiers lay, who had fallen not to defend their own freedom, but to defend the freedom of all others, who died far from their homes Not to defend their own families and their own homeland, but to defend humanity as a whole. That is why we love America. And the fathers took their sons to the beaches, the beaches where the young men of America had so heroically landed. and the fathers read to their sons the admirable letters of farewell that those soldiers, those 20 year old soldiers, had written to their families before battle, to say to them, we don't consider ourselves to be heroes, we want this war to be over, but however much dread that we feel, you can count on us. And before they landed, Eisenhower told them -- and we have not forgotten in Europe these words -- "The eyes of the world are upon you, young men of America, the hopes and prayers of all liberty loving people much with you." And the children of my generation, as they listen to their fathers, as they watch movies, as they read history books, and the letters of YOUR soldiers who died on our beaches of Normandy and Provence, as they visited the cemetaries where the Star Spangled Banner flies, the children of my generation understood that these young 20 year old Americans were true heroes to whom we owed the fact that we were free people and not slaves. America liberated us, and this is an eternal debt that we owe America. As president of the French Republic, my duty is to say to the people of America, that you represent in its vast diversity, that France will never forget, the sacrifice of your children, and to say to the families of those who did not return, those who did not come back, to those who cried the loss of their fathers whom they virtually had no time to know. that the gratitude of France is forever. On behalf of my generation that did not suffer under the war, on behalf of those children who will always remember, and to all the veterans who are present here, and in particular the seven I was honored to decorate last night, one of whom, [Hawaii Senator Daniel K.] Inouye, who belongs to your Congress, I want to express the deep and sincere gratitude of the French people. and I want to tell you something, something important. Every time, whenever an American soldier falls, somewhere in the world, I think of what the American army did for France, I think of them, and I am sad, as one is saddened to lose a member of one's family.

Sarkozy received several standing ovations during this portion of the speech, and that was true in other portions as well. =inc ww2010.h2 idealism "Praise for American idealism"

"But the US and France are not simply two nations that are true to the memory of what they've accomplished together in the past. The United States and France are two nations that remain true to the one and same ideal, who uphold the same principles, believe in the same values. <#inc ww2010.pic g071108b.jpg right "" "Sarkozy enjoys a standing ovation after praising American idealism (Source: C-SPAN)"#> I refer, I speak to you, as I stand before the portraits and of Washington and of Lafayette. Lafayette was the first to speak to both chambers. What could possibly have brought together two people who were so different in terms of age and of origin - Lafayette and Washington? It is the common values, the shared values. the same love of liberty and of justice. And when Lafayette joined George Washington, he said to him, I have come here to this land of America to learn, and not to teach. He came from the old world, and he came to the new world, and he said, I have come to learn, and not to teach. That is the new spirit and youth of the old world, coming to seek out the wisdom of the new world. to open here in America new era for all of humankind. The American dream, was from the very beginning, the very outset, a matter of putting into practice what the old world had dreamt of without being able to build it, to acommplish it. From the beginning, the American dream meant proving to all men and women throughout the world, that freedom, justice, human rights and democracy, were not an utopia, but quite the reverse -- they where the most realistic policy there is, and the most like ly to improve the lot and fate of each and every one. to the millions of men and women who came from every country in the world and with their own hands, their intelligence, and their hearts, built the greatest nation in the world, America did not say, come and everything will be given to you. Rather she said, come, and the only limits to what you will be able to achieve will be the limits of your own courage, your boldness, and your talent. The America that we love throughout the world embodies this extraordinary ability to grant each and every person a a second chance, another chance, because in America, failure is never the last world, there's always another chance. Here, in your contry, on this soil, the humblest and most illustrious citizens alike, know that nothing is owed to them, and that everything has to be earned. That is what constitutes the moral value of America. America did not teach men the idea of freedom. She taught them how to practice it. And America fought for this freedom whenever she felt it to be threatened or jeopardized. And it was by watching America grow that men and women understood that freedom and liberty were possible, and it is that that gives you a special responsibility. What made America great is her ability to transform her own dream, the American dream, into a source of hope for all of mankind."

=inc ww2010.h2 elvis "From Elvis to Martin Luther King"

"But my generation did not love America only because she defended freedom. We also loved America because for us she embodied what was most audacious about the human enterprise, because America for us embodied the spirit of conquest. We loved America, because for us, America was a new frontier that was continuously being rolled back, a constantly renewed challenge to the inventiveness of the human spirit. =inc ww2010.xr.related1 right sarko 3 My generation, without even coming to America, shared all of your dreams. In our imaginations, our imaginations were fueled by Hollywood, by the great conquest of the western territories, by Elvis Presley - you probably haven't head his name quoted here -- but for my generation, he is universal. Duke Ellington, Hemingway, John Wayne, Charlton Heston, Marilyn Monroe, Rita Hayworth, Bud Armstrong, Aldren, Collins, who fulfilled mankind's oldest dream, on the day when Americans walked on the moon. That day, America was universal, and each one of us wanted to be part of its great adventure. What was most extraordinary for us was that through your literature, your cinema, your music, it seemed to us that America America always seemed to emerge ever greater, ever stronger from adversity, from the challenges that it faced. And it seemed to us that instead of causing America to engage in self-doubt, these difficulties only strengthened her belief in her values. What makes America strong is the strength of this ideal that is shared by all Americans, and by all those who love her, because they love freedom. And let me say as I stand before you in this congress America's strength is not only a material strength, it is first and foremost a moral strength, a spiritual strength, and no one expressed this better than a black pastor, who asked just one thing of America, that she be true to the ideal in whose name he -- he the grandson of a slave -- felt so deeply American. That name was Martin Luther King. He made America a universal role model. And the world still remembers his words, that not a single young Frenchman of my generation has forgotten either, the words of Martin Luther King words of love, words of dignity, words of justice. And these words, America heard, and as a result America changed. And the men and women who had doubted America, because they no longer recognized her, began to love her once again. Fundamentally, what are those who love America asking of her, if not to remain forever true to your founding values."

=inc ww2010.h2 911 "Remembering 9/11"

"Ladies and gentlemen, today as in the past, as we stand at the beginning of the 21st century, it is together that we must fight to defend and promote the values and ideals of freedom and democracy that men such as Washington and Lafayette coined and invented together. Together, united, we must fight against terror. On September 11, 2001, all of France, horror struck as we were, but rallied to the American people. On the front page headline of one of our major dailies read, we are all American on this 11th of September 2001. And on that day, when you were mourning so many dead, never had America appeared to me so great, so dignified, so strong. The terrorists had thought they would weaken you, but they made you greater, and the people of the world admired America for its courage. that is the truth. And from day one, France decided to participate shoulder to shoulder with you in the war. in afghanistan. And let me tell you solemnly today, France will remain engaged in Afghanistan for as long as it takes, because what is at stake in that country is the very future of our values and that of the of the Atlantic alliance. Solemnly, before you, let me say, failure is not an option. Terrorism will not prevail, for democracies are not entitled to be weak. And because, we, the free world, are not afraid of this new barbarism, and because of that, America can count on France in its battle on terror.

The above is a transition into policy issues. Sarkozy commits France to continued support of the war on terror and the war in Afghanistan. Later, he declares support for America's policy versus Iran. He never mentions Iraq. =inc ww2010.h2 capitalism "Financial capitalism and monetary war" Sarko didn't use the word "subprime," but he made some startling remarks alluding to the current global financial crisis, for which he clearly blames the United States:

"And allow a friend of America to say this to her. This stated responsibility comes with duties, for France and for America, and the first of which is setting an example. Those who love this nation, which, more than any other has demonstrated the virtues of free enterprise, expect America to be the very first to denounce the abuses and the excesses of a financial capitalism that sets too great a store by speculation. They expect her to commit fully to the necessary rules and safeguards. the America that I love is the one that encourages entrepreneurs, not speculators. Those who admire the nation that has built the world's greatest economy, and has never ceased trying to persuade the world of the advantages of free trade, expect her to be the first to promote fair exchange rates. the yuan is already everybody's problem. The dollar cannot remain solely the problem of others. If we are not careful, monetary disarray could indeed morph into monetary war, and we would all, all of us, be its victims.

Talking about "monetary war" is a fairly alarming statement for a politician who's in the middle of a speech where he's sucking up to American congressmen. It's the main reminder of the Jacques Chirac's bitter remarks in 2005 about the "Anglo-Saxon" word view, and how it differs from the French world view. He made some remarks on global warming that didn't go over too well:

"Those of us who love the country of wide open spaces, and open parks, and nature protected nature reserves expect America to stand alongside europe, leading the fight against global warming that threatens the destruction of our planet. I know that the American people and its citizen states are increasingly aware of the stakes and determined to act. Allow me to say with all the friendship that I feel for America: That this fight is essential for the future of humanity, and we will not be able to achieve the results that we must achieve without America leading this fight, for the safeguarding of our planet, of the human species. We need America in order to protect our planet and its environment."

Sarkozy received polite applause for these remarks on global warming, but just after the words "destruction of our planet," I could swear that I heard a number of "boos" mixed in with the polite applause. =inc ww2010.h2 observations "Some observations" During the past few days, we've had two major speeches by international leaders appealing to America's sense of its own history. Pakistan President Pervez Musharraf's <#inc ww2010.weblog.ref e071103 "speech declaring marshal law"#> spoke of how Abraham Lincoln had to violate Constitutional principles at the height of the American Civil War. <#inc ww2010.pic g071108c.jpg left "" "Sarkozy shakes hands after his speech ends (Source: C-SPAN)"#> And now we have Sarkozy's speech, where he talks of his own love for America and French-American friendship by referring to America's own Revolutionary War ideals. People who criticize this web site or Generational Dynamics seem to be unaware of the power of historical images in other people, while accepting in themselves. Thus, most Americans understand the symbolism intended by Musharraf and Sarkozy in their references to American history, to Lincoln and Washington, respectively. So it shouldn't be a surprise that people in other nations have strong reactions to references to the 1947 genocidal bloodbath in Pakistan and India, or the fall of the Byzantine Empire in Constantinople to the Muslims in 1453. Events like these are earthquakes that trigger tsunamis that are just reaching us today. Nicolas Sarkozy's speech to the joint session of Congress on Wednesday is important because of the symbols he chose to mention -- the American Revolutionary War and the victory over the British at Yorktown. But it's also important because of the symbol that he didn't mention -- the British victory over France at Waterloo. Sarkozy is playing a complex political game to gain a French advantage over Britain in the European Union, by trying to show that France can be a better friend to America than Britain can. Whether it's possible for a few Sarkozy speeches to overcome deep visceral hatreds from a millennium of wars between the French and the Anglo-Saxons remains to be seen, but from the point of view of Generational Dynamics, it's not very likely. Even so, it's nice to hear such deeply textured words of praise for America and American ideals. Things may become contentious again before long, but we can at least enjoy the moment while it lasts. =eod =// &&2 e071108 Benazir Bhutto to make a power play against Musharraf on Friday =data ww2010.weblog.y2007.e071108.head Benazir Bhutto to make a power play against Musharraf on Friday =data ww2010.weblog.y2007.e071108.keys =data ww2010.weblog.y2007.e071108.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071108.date 8-Nov-07 =data ww2010.weblog.y2007.e071108.txt1 Bhutto has called for thousands of her supporters to demonstrations =data ww2010.weblog.y2007.e071108.txt2 and protests on Friday. If she succeeds in inciting large crowds of Pakistanis to call for an immediate end to President Pervez Musharraf's state of emergency, then she will have achieved a big political victory. Indeed, Musharraf's actions appear to have been getting harsher, and dozens of Bhutto supporters have now been jailed. Furthermore, officials in Musharraf's administration have indicated that they won't permit the demonstration to occur. So far, I still don't see any massive Pakistani upheaval against the martial law restrictions so far. There have been lawyers in penguin suits protesting the restrictions on courts; there have been sporadic student demonstrations, not generally supported by the mass of students. This makes sense to me. Whatever results Musharraf's actions have for the state of democracy in Pakistan, most people are very concerned about <#inc ww2010.weblog.ref e071106 "the rise in Taliban and al-Qaeda violence"#> throughout the country, and the fact that the Taliban is now in complete control of the northwest provinces in Waziristan, on the border with Afghanistan. Bhutto herself <#inc ww2010.weblog.ref e071021 "narrowly escaped death"#> last month when her procession was attacked by a suicide bomber. So the results of Friday's pro-Bhutto demonstrations and protests can have a significant impact, and may go either way: A poor showing may indicate support for Musharraf's proclamation, and a good showing may indicate that Musharraf's in trouble. From the point of view of Generational Dynamics, the turnout will be an indicator of the near-term stability of Pakistan itself. =eod =// &&2 e071107b Chief of MI5 says that al-Qaeda is recruiting British teenagers =data ww2010.weblog.y2007.e071107b.head Chief of MI5 says that al-Qaeda is recruiting British teenagers =data ww2010.weblog.y2007.e071107b.keys =data ww2010.weblog.y2007.e071107b.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071107b.date 7-Nov-07 =data ww2010.weblog.y2007.e071107b.txt1 Describing "the most immediate and acute peacetime threat in the 98-year history" of MI5, =data ww2010.weblog.y2007.e071107b.txt2 Director General Jonathan Evans gave <#stdurl http://www.mi5.gov.uk/output/Page564.html "a speech on Monday"#> on the UK's threat from al-Qaeda. =inc ww2010.pic g071106b.jpg right "" "MI5 Director Jonathan Evans" A major point was that al-Qaeda is recruiting young teenagers:

This is consistent with <#inc ww2010.weblog.ref e061113 "the speech given last year by Dame Eliza Manningham-Buller, the previous Director-General of MI5:"#>

"And, chillingly, we see the results here. Young teenagers are being groomed to be suicide bombers. We are aware of numerous plots to kill people and to damage our economy. What do I mean by numerous? Five? Ten? No, nearer....... thirty that we know of. These plots often have links back to Al-Qaida in Pakistan and through those links Al-Qaida gives guidance and training to its largely British foot soldiers here on an extensive and growing scale. And it is not just the UK of course. Other countries also face a new terrorist threat: from Spain to France to Canada and Germany."

=inc ww2010.xr.related1 right londonsubway 2 This year, Evans made it clear that the problem is spreading, rather than being contained:

"You may recall that in her speech this time last year, my predecessor, Eliza Manningham-Buller, pointed out that this country was facing an increasing threat from Al Qaida-inspired terrorism. When she spoke, MI5 had identified around 1,600 individuals who we believed posed a direct threat to national security and public safety, because of their support for terrorism. That figure today would be at least 2,000. This growth, which has driven the increasingly strong and coordinated government response, is partly because our coverage of the extremist networks is now more thorough. But it is also because there remains a steady flow of new recruits to the extremist cause. And it is important that we recognise an uncomfortable truth: terrorist attacks we have seen against the UK are not simply random plots by disparate and fragmented groups. The majority of these attacks, successful or otherwise, have taken place because Al Qaida has a clear determination to mount terrorist attacks against the United Kingdom. This remains the case today, and there is no sign of it reducing. So although MI5 and the police are investigating plots, and thwarting them, on a continuing basis, we do not view them in isolation. Al Qaida is conducting a deliberate campaign against us. It is the expression of a hostility towards the UK which existed long before September 11, 2001. It is evident in the wills and letters left behind by actual and would-be bombers. And it regularly forms part of Al Qaida's broadcast messages."

The successful July 7, 2005, London subway bombing has been a powerful tool for the Islamist radicals in recruiting young Muslims in England to form terror cells for further terrorist acts. As I wrote <#inc ww2010.weblog.ref e061113 "last year,"#> from the point of view of Generational Dynamics, many of Britain's young Muslims have set up a "Hero/Prophet" relationship with the radical clerics in Pakistan. This kind of relationship is the visceral basis by means of which new genocidal crisis wars begin. There's an emotional connection between the elder Prophet generation (the idealistic generation born after the last crisis war) and the impatient college age Hero generation (the soldiers who will be fighting the new crisis war). It's becoming increasingly clear that the young British Muslims are <#inc ww2010.weblog.ref e070219b "particularly connected to the resurging al-Qaeda leadership on the Afghan-Pakistan border."#> This is exactly the same region in northwest Pakistan that is completely controlled by al-Qaeda and Taliban militants, causing President Pervez Musharraf to <#inc ww2010.weblog.ref e071106 "declare martial law"#> in the country. But now, even the Pakistani-based "Prophet" culture is expanding to multiple nations, according to Evans:

"Another development in the last 12 months has been the extent to which the conspiracies here are being driven from an increasing range of overseas countries. Over the last five years much of the command, control and inspiration for attack planning in the UK has derived from Al Qaida's remaining core leadership in the tribal areas of Pakistan - often using young British citizens to mount the actual attack. But worryingly, we have more recently seen similar processes emerging elsewhere. For instance, there is no doubt now that Al Qaida in Iraq aspires to promote terrorist attacks outside Iraq. There is no doubt that there is training activity and terrorist planning in East Africa - particularly in Somalia - which is focused on the UK. And there is no doubt that the extension of what one might call the 'Al Qaida franchise' to other groups in other countries - notably in Algeria - has created a significant upsurge in terrorist violence in these countries. It is no coincidence that the first suicide bombing in Algeria followed the creation of the new 'Al Qaida in the Lands of the Islamic Maghreb.' This sort of extension of the Al Qaida brand to new parts of the Middle East and beyond poses a further threat to us in this country because it provides Al Qaida with access to new centres of support which it can motivate and exploit, including in its campaign against the UK. Since 9/11, there have been a number of examples of serious Al Qaida-related terrorist activity in Europe. But in the last 12 months we have seen an increase in attack planning across the continent. This summer alone we saw many terrorist arrests, including those in Germany, Denmark and Austria. It is too early to assess with confidence what all this means but certainly, we can see that the threat from Al Qaida related terrorism goes well beyond the UK."

This concept of the al-Qaeda "brand name" is one we've written about several times, as al-Qaeda-sanctioned suicide bombings occur in other countries. The al-Qaeda linked groups in other countries are not under the control of al-Qaeda in Pakistan, but they communicate over the internet, and share technology and planning. In reporting on the Jonathan Evans' speech, the BBC reporter described the speech while standing in front of a screen with displays of MI5 software to keep track of the thousands of suspects, cells and plots: <#inc ww2010.pic g071106c.jpg center "" "BBC reporter in front of a screen displaying MI5 software for tracking suspected terrorists (Source: BBC)"#> That such software is needed is indicated by Evans' description of the difficulty in obtaining the proper intelligence:

"It is important to recognise too that intelligence will rarely provide a complete picture. It gives us pieces of a whole, which then require assessment and interpretation. It helps improve our chances of success. And as we have seen in more than 200 terrorist convictions in the UK since 9/11, it does save lives. But it will not in itself provide certainty. There is, however, a further difficulty in relation to intelligence work against the current threat, and it is one that I think has led to a degree of misunderstanding about MI5's work. The networks we investigate are not the hard-edged cells typical of some other terrorist groups. Even though it may only be a handful of people who actually carry out a violent attack, it is now rare to see extremist groups acting entirely in isolation. So the deeper we investigate, the more we know about the networks. And the more we know, the greater the likelihood that, when an attack or attempted attack does occur, my Service will have some information on at least one of the perpetrators. And in a sense this is a benefit. Why? First, because it means we can move more swiftly from intelligence to arrests. It means we can provide an informed assessment for the police, emergency services and Government, of the context of an attack, the likely depth of the conspiracy, and most importantly, the potential leads to follow to ensure that culprits can be arrested. And second, it demonstrates how the counter-terrorist net that the British intelligence community and our liaison partners have strung across the globe is working."

From the point of view of Generational Dynamics, al-Qaeda by itself is not a major source of danger except, of course, to the thousands or tens of thousands of innocent people who are killed by suicide bombings and other terrorist attacks. The real danger from al-Qaeda is as we're seeing in Pakistan: Frequent terrorist acts polarize the population and generate small conflicts that can easily become large ethnic or religious conflicts. This is <#inc ww2010.weblog.ref e071106 "the danger in Pakistan"#> today. =eod =// &&2 e071107 UN expert calls biofuels a 'crime against humanity' =data ww2010.weblog.y2007.e071107.head UN expert calls biofuels a "crime against humanity" =data ww2010.weblog.y2007.e071107.keys =data ww2010.weblog.y2007.e071107.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071107.date 7-Nov-07 =data ww2010.weblog.y2007.e071107.txt1 Separately, Oxfam says that biofuels won't work, and they "trample" poor people. =data ww2010.weblog.y2007.e071107.txt2 He's called by the title, "The UN Special Rapporteur on the right to food." And he's commenting on the <#inc ww2010.weblog.ref e070825 "meteoric rise in the price of wheat this year,"#> as well as similar increases in other food prices. =inc ww2010.xr.related1 right foodprices 3 <#stdurl http://allafrica.com/stories/200710310238.html "According to Jean Ziegler,"#> the rising prices of food prices are making it impossible for poor countries to import enough food for their people:

"It is a crime against humanity to convert agricultural productive soil into soil which produces food stuff that will be burned into biofuel." Ziegler argued that biofuels will only lead to further hunger in a world where an estimated 854 million people (1 out of 6) already suffer from the scourge; 100,000 people die from hunger or its immediate consequences every day; and every five seconds, a child dies from hunger. All of this takes place, he added, in a world that already produces enough food to feed every child, woman and man and could feed 12 billion people, double the current world population, according to the UN Food and Agriculture Organisation (FAO). "All causes of hunger are man-made, it's a problem of access, not overpopulation or underproduction, and can be changed by human decision," he stated.

A lot of this is just plain silly, and he's contradicting himself. Worldwide, about 2% of the available crop land is used for biofuels today. If there's enough food to feed double the current world population, then what difference would it make to have a small fraction of food production diverted to biofuels? If there's enough food to feed double the current population, then why is anyone starving? If the only problem was access, then why not just fix the access problem, and stop worrying about biofuels? I'll answer all these questions in the section below on "The Law of Diminishing Returns," but first let's take a look at what's happening:

Spiking food prices are affecting lives around the world. In Botswana, for example, <#stdurl http://allafrica.com/stories/200711060828.html "food prices are soaring"#> for the usual reasons, and also because of high transportation costs from South African suppliers. One store manager says that he doesn't make a profit from selling bread. "This is a commodity we are selling at loss price. We felt our customers could go hungry if everything had to be this expensive and decided to sell bread at a loss price. But, ingredients of bread such as yeast, sugar and salt have been increased. We are just helping our customers."

(Source: WSJ)

Dietary habits are changing dramatically in developing countries, according to <#stdurl http://online.wsj.com/article/SB119431589903983501.html "a report by Credit Suisse Group."#> In particular, meat consumption is increasing rapidly, straining agricultural production.
In a return to Soviet-style economic controls, Russia has <#stdurl http://www.timesonline.co.uk/tol/news/world/europe/article2741064.ece "imposed price controls on food prices."#> It's thought that this is being done because Russians will be voting for a new parliament on December 2 and a successor to President Putin on March 2.
Recently, China <#stdurl http://www.iht.com/articles/ap/2007/10/30/business/AS-FIN-China-Diesel-Rationing.php "price controls on gasoline,"#> so that food producers won't pass the increased cost of gasoline on to their customers in the form of higher food prices. However, serious fuel shortages have forced them to reverse that decision and raise fuel prices.
Price controls in Zimbabwe have <#stdurl http://africa.reuters.com/business/news/usnBAN037556.html "caused panic buying of food,"#> to the extent that the shelves are empty.
Panic buying of food in Nigeria has caused <#stdurl http://allafrica.com/stories/200710310380.html "grain prices to double."#>

Price controls and panic buying are only going to make the problem worse on a worldwide basis, as panic buying in one place tends to create greater shortages in other places. As things stand, rising food prices are <#inc ww2010.weblog.ref e070908 "causing social unrest in poor countries"#> around the world, according to United Nations warnings. =inc ww2010.h2 law "The Law of Diminishing Returns" What I mainly want to focus on in this article is the question that always comes up when the topic of food prices and food scarcity comes up:

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

I specifically want to discuss how the Law of Diminishing Returns applies to this question, but first, let's look at some obvious things:

If there's more than enough food for everyone, then the real problem is moving the food from places where it's plentiful to places where it's scarce.
Therefore, the only issue is money. Anyone who has enough money can obtain food for himself by paying to get it, if he has enough money to do so.
Availability of food requires many intermediate steps and many additional resources besides planting and growing: harvesting, preparation, packaging, refrigeration, transportation, local distribution.
Therefore, even if there's enough food to feed the world in the world, it still remains to be shown that the there are enough of these additional resources to feed the world.

So the issue isn't the amount of FOOD, it's the amount of OTHER RESOURCES that are keeping the world from being fed. So we have a situation which can be described as follows: You have a process that requires multiple resources to produce an output. You want to add resources in order to produce a greater output, but you can only add certain types of resources. Here's what the Law of Diminishing Returns says:

Suppose you have a process that requires resources A, B, C, D, ... and produces an output X. (For example, suppose that you have a carpenter, a plumber, and an electrician building houses.)
Suppose that you add more A to the process, to produce a greater output, but don't add other resources. (In the example, you add a carpenter to get two carpenters, working with one plumber and one electrician. They can build more houses in the same amount of time than they could with just one carpenter.)
Then you can get greater returns (more output) by adding more and more of resource A, but each time that you add another unit of resource A, the additional return (output) diminishes. (In the example, the third carpenter provides less additional return than the second, the fourth provides less than the third, and so forth. By the time you have 20 carpenters, but still only one plumber and one electrician, you're just wasting resources, since you have the carpenters sitting around, waiting for the plumber and electrician to catch up.)

In other examples, you have a manufacturing process that uses both machines and manual labor. You can add more people, but each new person results in less return (output) than the previous person you added. Farming is a perfect application to discuss with respect to the Law of Diminishing Returns, because you're usually talking about a fixed amount of farmland. If you want to grow more food on the same amount of farmland, you can use more fertilizer, more insecticide and more herbicide. In fact, that's what was done in the "Green Revolution" of the 1960s and beyond. The first time that fertilizers, insecticides and herbicides were used in India and other places, they produced spectacular results in terms of increased output. But then the use of these ingredients was increased on a given acreage of farmland, and each increase produced diminishing benefits and output. After a while, use of additional fertilizers, insecticides and herbicides actually became counterproductive, since runoffs tended to cause pollution. =inc ww2010.h2 escalate "The "Law of Escalating Prices"" The "Law of Escalating Prices" is not an officially recognized law, but it's my name for another way of looking at the Law of Diminishing Returns. If you add resources to a process, but only increase the output a little, then the costs per unit of output are going to increase. For example, in the example of the multiple carpenters working with a single plumber and electrician, all those carpenters have to be paid, even when they're sitting around waiting for the electrician and plumber to catch up, and those costs go into the final cost of the houses being built. In the case of adding fertilizers, insecticides and herbicides to the farmland, the costs of those items go into the cost of growing the food. =inc ww2010.h2 world "Feeding the world" Now let's tackle the problem we're really interested in: If there's enough food in the world to feed twice the population, then how do we feed the world? For all practical purposes, the amount of farmland in the world, and hence the amount of food, is fixed. (It's actually growing gradually, but for this discussion that's not important.) But in order to get the food where it's needed, then you need to spend a number of additional resources as listed previously, including harvesting, preparation, packaging, refrigeration, transportation, local distribution. By the "Law of Escalating Prices," also known as the Law of Diminishing Returns, these additional resources are going to add to the cost of the food. And that shouldn't be surprising. As world population increases, it becomes more and more expensive to ship food into densely populated megacities. Just imagine one resource -- refrigerated trucks. Those are very expensive items, and more and more of them are needed in order to distribute food locally within these megacities. Who's going to pay for those trucks? Whoever does is going to add the cost of those trucks into the price of the food. Shipping food from, say, South America to, say, Africa or southeast Asia, obviously incurs shipping costs, and by the Law of Escalating Prices, those costs increase per unit of food. Thus, the increases in food prices we've seen since 2000 can be attributed to the Law of Diminishing Returns. And as "returns" have kept diminishing as resources are added, the food prices have been increasing very sharply since 2005, and even more sharply in 2007. We can show this very dramatically by means of the following graph: <#inc ww2010.pic bdi0711soy.gif center "" "Shipping costs and soybean prices from 2001 to the present"#> This graph illustrates how the price of shipping and the price of soybeans have increased in tandem. I wrote about the <#inc ww2010.weblog.ref e050705 "Baltic Dry Index"#> in 2005, and how it had been increasing at that time because of the demand for imported goods into China. The graph above does not prove that the increased cost of soybeans is caused by the increased cost of shipping from the Law of Diminishing Returns, but it provides dramatic support. In fact, it illustrates a larger picture. Because it takes so long to build a new ship, the number of ships has also been fairly constant, just like the amount of food in the world. The increased demand for shipping, especially from China, has pushed up the cost of shipping for ALL goods, not just food. =inc ww2010.h2 gen "Generational view of food scarcity and famine" The recent crisis in Pakistan has called attention the problems of the entire Indian subcontinent, especially the genocidal bloodbath that occurred in 1947 with <#inc ww2010.weblog.ref e071021 "Partition and the independence of India and Pakistan,"#> when Britain relinquished control of the Indian subcontinent. That wasn't the only memorable disaster that happened to the Indian subcontinent during World War II. The following is a description of the <#stdurl http://www.indiaonestop.com/Greenrevolution.htm "Bengal (eastern India) famine of 1943:"#>

"The world's worst recorded food disaster happened in 1943 in British-ruled India. Known as the Bengal Famine, an estimated four million people died of hunger that year alone in eastern India (that included today's Bangladesh). The initial theory put forward to 'explain' that catastrophe was that there as an acute shortfall in food production in the area. However, Indian economist Amartya Sen (recipient of the Nobel Prize for Economics, 1998) has established that while food shortage was a contributor to the problem, a more potent factor was the result of hysteria related to World War II which made food supply a low priority for the British rulers. The hysteria was further exploited by Indian traders who hoarded food in order to sell at higher prices. Nevertheless, when the British left India four years later in 1947, India continued to be haunted by memories of the Bengal Famine. It was therefore natural that food security was a paramount item on free India's agenda. This awareness led, on one hand, to the Green Revolution in India and, on the other, legislative measures to ensure that businessmen would never again be able to hoard food for reasons of profit."

This essay, which was written recently, goes on to describe the successes and problems of the Green Revolution. I want to call your attention particularly to one of the essay's conclusions:

"Nothing like the Bengal Famine can happen in India again. But it is disturbing to note that even today, there are places like Kalahandi (in India's eastern state of Orissa) where famine-like conditions have been existing for many years and where some starvation deaths have also been reported. Of course, this is due to reasons other than availability of food in India, but the very fact that some people are still starving in India (whatever the reason may be), brings into question whether the Green Revolution has failed in its overall social objectives though it has been a resounding success in terms of agricultural production."

This paragraph is so much an emblem of our times:

The writer is (presumably) too young to have any personal memory of the Bengal famine, and claims that it can't ever happen again.
And yet, people are dying from starvation in parts of India today.
And what's the problem? The Green Revolution has "failed in its overall social objectives"!!!!!

Social objectives, political objectives. Nothing else matters to these people. There are many reasons why the price of foods is going up: increased demand, dietary changes in developing nations, use of biofuels, and the Law of Diminishing Returns are major reasons. Failure of "social objectives" is not on the list of reasons, or if it is, it's pretty far down. Overlaying all this is a generational lack of purpose. Maybe it might be possible to feed everyone today with the food available. But that would require a worldwide determination to do so. The people who survived WW II spent their lives traumatized by it, and determined that nothing like that should ever happen again, especially to their children. Now those survivors are gone, and their children are the leaders, and they're completely oblivious to what's going on. If you had to pick one word to characterize today's generations of leaders, a good choice would be "oblivious." They're oblivious about the growing dangers of starvation of huge masses of people in the world. They're oblivious about the dangers of abuse of debt and credit, and about the dangers of the many stock market bubbles today -- they've learned nothing from the dot-com bubble of the late 1990s, or the housing bubble of the last five years. They're oblivious about the danger of world war in the near future, as illustrated by the nonsense we're hearing from politicians and reporters about <#inc ww2010.weblog.ref e071106 "the current crisis in Pakistan."#> Food prices have been increasing faster than inflation since 2000, and have been surging quickly since 2004. This year they've grown faster than ever. The world appears to have crossed some "tipping point," where food prices are simply out of control. Almost everyone is completely oblivious to what's going on, preferring instead to worry about Britney or spew fatuous political nonsense. This won't last forever. =eod =// &&2 e071106 Risk of Pakistan meltdown increases as Musharaff clamps down =data ww2010.weblog.y2007.e071106.head Risk of Pakistan meltdown increases as Musharaff clamps down =data ww2010.weblog.y2007.e071106.keys =data ww2010.weblog.y2007.e071106.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071106.date 6-Nov-07 =data ww2010.weblog.y2007.e071106.txt1 We're raising the "conflict risk index" for Kashmir from 2 (medium risk) to 3 (high risk). =data ww2010.weblog.y2007.e071106.txt2 Pakistani President Pervez Musharaff faced massive international and domestic pressure on Monday, and even threats of a coup, in the third day of the country's state of emergency. <#stdurl http://www.app.com.pk/en/index.php?option=com_content&task=view&id=20131&Itemid=1 "Musharaff's order"#> suspends freedoms of speech and assembly, shutsdown broadcasts by independent media, and jailed some 1500 activists and politic opponents, including some in the judiciary. In his <#inc ww2010.weblog.ref e071103 "televised speech on Saturday,"#> he said that the courts and the media were, in effect, supporting the al-Qaeda terrorists that were becoming increasing violent and powerful within the country. "I personally, with all my conviction, and with all the facts available to me, consider that inaction at this moment is suicide for Pakistan, and I cannot allow this country to commit suicide." You can be certain that Musharraf is reacting to events that occurred when he was just five years old. In 1947, Britain relinquished control of the Indian subcontinent, which was partitioned into (Hindu) India and (Muslim) Pakistan. The <#inc ww2010.weblog.ref e071021 "Partition and the independence of India and Pakistan"#> triggered a massive genocidal bloodbath that even a five-year-old could never forget. Today, with rising religious and ethnic violence, he sees the same forces building. Musharraf's motivation is not political. Musharraf is making a desperate and panicky move to prevent a recurrence of the 1947 bloodbath. Domestic and international politicians and media are oblivious to this. They're condemning Musharraf's declaration, saying that its ONLY purpose was purely political -- to retain political power. The BBC report asked the question that was typical of the media: "Will the White House do anything to punish its ally?" The implication of the report was that President Bush would do nothing -- also for political reasons. A rare <#stdurl http://transcripts.cnn.com/TRANSCRIPTS/0711/04/le.01.html "serious analysis of the situation in Pakistan"#> was given by Arnaud de Borchgrave (pronounced AHR no de BOHR grahv) of the Center for Strategic and International Studies, interviewed by Wolf Blitzer on CNN on Sunday. Here are some excerpts:

"Well, what's unfolding is a failing state that is also one of the eight nuclear powers in the world, Wolf. This is the worst nightmare that anybody can think of. Doesn't mean that the nuclear weapons are going to be used by bad guys tomorrow against us among the terrorists, but there is that danger. ... The arsenal is controlled by the military, and the warheads are separated from the launchers in different parts of the country, which is their security system. But beyond that, I don't know how they're controlled. What we do know is that two of the four provinces in Pakistan are controlled by people who are pro-Taliban and pro-Al Qaida. The Red Mosque in downtown Islamabad has been retaken by the bad guys, by the pro-Taliban people. We know that Osama bin Laden is -- has got almost a 50 percent approval rating in Pakistan out of 160 million people. And that Musharraf himself is in the single-digit approval. ... I don't see how [a return to] democracy would prevent a return to sanity in that country. Right now, it is out of control. The military, as you know, have been defeated in the federally administered tribal areas, in the north, especially North Waziristan and South Waziristan. Several hundred soldiers were captured without a fight. I mean, this is a very bad situation. ... ISI [The Pakistan intelligence service] is still very active all over Afghanistan. And Taliban ... and Al Qaida have virtually won against the Pakistani army on the border, which enables, of course, the ISI to repenetrate Afghanistan and in effect, turn against -- I mean, counteract India's influence, which has grown quite strong, in Afghanistan, in recent times. [When asked if this is right now the most dangerous situation in the world:] Without any question. Just think of Pakistan as one of the eight nuclear powers and out of control."

Other reports indicate that Musharraf has become extremely unpopular in both the general public AND in the army, and that the portions of the army are turning against Musharraf. The Pakistan people were shocked on Friday when paramilitary army forces, fighting Taliban militants in the North West Frontier Province (NWFP), <#stdurl http://www.indianexpress.com/story/236127.html "dropped their arms and surrendered,"#> rather than fire on Muslims. The Islamic militants paraded the Pakistani fighters in front of the press before allowing them to leave. From the point of view of Generational Dynamics, it's important to know how deep the opposition to Musharraf goes among the Pakistani people. With the enormous hostility in the mainstream media to Musharraf, especially for his pro-Bush and pro-American policies, it's hard to for me to make that judgment from here in my apartment in Framingham, Mass. After the Saturday proclamation, the press had been predicting massive street demonstrations and riots across the country on Monday. There were indeed demonstrations on Monday, but the major participants appear to the group of lawyers who <#inc ww2010.weblog.ref e070318b "protested against Musharraf"#> in March, following Musharraf's suspension of the country's Chief Justice Iftikhar Muhammad Chaudhry. Chaudhry is currently under house arrest. Former Prime Minister Benazir Bhutto is playing an ambiguous role. You'll recall that <#inc ww2010.weblog.ref e071021 "she narrowly escaped death"#> two weeks ago from suicide bombers, during her triumphal return from eight years of exile. At that time, it was thought that she and Musharraf would make some kind of agreement to govern the country jointly. Bhutto has refused to fully condemn Musharraf, and even holds out the possibility of further negotiations, but she's called for immediate cessation of martial law, and is <#stdurl http://www.timesonline.co.uk/tol/news/world/asia/article2814144.ece "threatening street demonstrations."#> Now here's the point: On Sunday's interview with Arnaud de Borchgrave, excerpted above, they quoted an excerpt from an e-mail message that Bhutto had sent to de Borchgrave the previous day. The excerpt read:

"The fact that militants hold open meetings without fear of retaliation proves that the Musharraf regime is totally inept, unwilling or colluding in their expansion. Our rapprochement talks with Musharraf have foundered in the quicksand of his failing promises."

The issue here is that Bhutto's stance is far more confrontational than Musharraf's is. <#inc ww2010.pic india5.gif right "" "Indian subcontinent, showing the disputed regions of Kashmir and Jammu."#> This is exactly what generational theory tells us to expect. Musharraf grew up during the bloody Partition genocide and is in the "Artist" generational archetype, so named because they tend to be very sensitive and always willing to compromise. But Bhutto was born after the war ended, and is so is similar to the arrogant, narcissistic people in America's Boomer generation. =inc ww2010.cf.cf060209 p left This is why I've said so many times that Musharraf himself is almost indispensible to Pakistan. When he's replaced, he'll be replaced by someone younger who will be much more confrontational than he is. Even if he retains power, then he's likely to be weakened enough that he'll be forced to become more confrontational himself. For these reasons, I now believe that the risk of all out war between Pakistan and India in the next six months has gotten considerably greater. The epicenter of such a war would be the disputed regions of Kashmir and Jammu. As de Borchgrave says, Pakistan is the most dangerous region in the world today, "without any question." I am therefore going to raise the "conflict risk level" for Kashmir from 2 (medium risk of war within 6 months) to 3 (high risk of war within six months). This is the first change in the conflict risk graphic since February, 2006 - over 1½ years ago. The new graphic is as shown on the right. =inc ww2010.cf.cf071106 p right There are many scenarios that could lead to war. For example,

A weakened Musharaff becomes more confrontational with the militants, or he's deposed in a coup and his successor, whether Bhutto or a new army general, is more confrontational.
The resulting confrontation leads to regional fighting within Pakistan.
The growing violence leads to war between ethnic groups that spreads to India.
Alternatively, the confrontation leads to confrontations between Hindus and Muslims in Kashmir, forcing both India and Pakistan to move to protect their interests.

For those who think that a "minor" confrontation could not lead to all-out war because people are too "sensible" to do that, remember that Pakistan and India are in generational Crisis eras. The risk-averse people in Musharraf's generation are almost all gone, and the leadership throughout the country are the far more confrontational post-war generation. The possibility of a panicked response on one side or the other is great. That's how generational crisis wars begin. If Musharraf survives the current crisis and the country returns to a more peaceful state (something not likely in a generational Crisis era), then we can consider changing the risk level back to 2. As I've been saying for years, India and Pakistan are headed for a war re-fighting the 1947 genocidal war with 100% certainty. Only the timing is unknown. The current crisis may provide the catalyst. =eod =// &&2 e071105 Citibank announces additional $8-11 billion losses in mortgage meltdown =data ww2010.weblog.y2007.e071105.head Citibank announces additional $8-11 billion losses in mortgage meltdown =data ww2010.weblog.y2007.e071105.keys =data ww2010.weblog.y2007.e071105.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071105.date 5-Nov-07 =data ww2010.weblog.y2007.e071105.txt1 And there may be a lot more to come. =data ww2010.weblog.y2007.e071105.txt2 As of September 30, Citibank officials believed that they'd finally gotten things under control. They'd written off $2.2 billion in near-worthless securities, and the rest of the $55 billion in mortgage-backed securities (collateralized debt obligations which are collateralized by asset-backed securities, ABS CDOs) where in good shape. These securities had nominal values of $55 billion, and they're in the highest quality (lowest risk) tranches of the ABS CDO marketplace. There were no securities safer than those. On Sunday, Citibank (actually, Citigroup Inc), issued <#stdurl http://www.citi.com/citigroup/press/2007/071104b.htm "a press release"#> announced the following:

"Citigroup Inc. announced today significant declines since September 30, 2007 in the fair value of the approximately $55 billion in U.S. sub-prime related direct exposures in its Securities and Banking (S&B) business. Citi estimates that, at the present time, the reduction in revenues attributable to these declines ranges from approximately $8 billion to $11 billion (representing a decline of approximately $5 billion to $7 billion in net income on an after-tax basis)."

Citibank went on to explain that the addition writedowns became necessary because ratings agencies have downgraded sub-prime mortgage-related assets. I mentioned this point a few days ago in <#inc ww2010.weblog.ref e071031b "an article leading up to the Fed announcement."#> The ratings agencies are doing this on a volume basis now -- downgrading tens of billions of dollars in CDOs every week. Merrill Lynch had a similar double embarassment, initially predicting $4.5 billion in writedowns a few weeks ago, and then <#inc ww2010.weblog.ref e071025 "announcing an $8.4 billion writedown"#> last week. The Citibank press release gets very interesting when it explains WHY it doesn't yet know the extent of further writedowns:

"Although the principal collateral underlying these super senior tranches is U.S. sub-prime RMBS [[residential mortgage based securities]], as noted above, these exposures represent the most senior tranches of the capital structure of the ABS CDOs. These super senior tranches are not subject to valuation based on observable market transactions. Accordingly, fair value of these super senior exposures is based on estimates about, among other things, future housing prices to predict estimated cash flows, which are then discounted to a present value. The rating agency downgrades and market developments referred to above have led to changes in the appropriate discount rates applicable to these super senior tranches, which have resulted in significant declines in the estimates of the fair value of S&B super senior exposures."

Note the tricky word play here. The phrase "super senior tranches" makes them sound like they should be super safe. But no, this paragraph says that they're super-unsafe. Why? Because they can't be valuated in the marketplace, since there's no market for them. Instead, their values must be ESTIMATED, based on, "future housing prices to predict estimated cash flows." Wow! Do you really think anyone knows what future housing prices are going to be? A year ago, officials were telling us that the housing crisis was over, and that housing prices would start going up again this past year. Well, that didn't work out did? This past year, housing prices have tumbled, sales have tumbled, and foreclosures have surged. And it's only beginning, since the stream of "adjustable rate mortgages" (ARMs) that are going to reset to much higher interest rates has only just started, and will really surge next year. The Citibank press release continues as follows:

"The fair value of S&B sub-prime related exposures depends on market conditions and assumptions that are subject to change over time. In addition, if sales of super senior tranches of ABS CDOs occur in the future, these sales might represent observable market transactions that could then be used to determine fair value of the S&B super senior exposures described above. As a result, the fair value of these exposures at the end of the fourth quarter will depend on future market developments."

Now, this is REALLY heavy. Up till now, Citibank has valuated all these securities by using computer algorithms ("mark to model"), based on ratings assumptions that are turning out to be fault. But the really DREADED situation will occur when somebody actually SELLS some of these CDOs in a fair market. This will establish a market value for the CDOs, and will force OTHER holders to re-valuate them using "mark to market." Everyone's absolutely dreading this, because there's an enormous fear out there that the market price of these CDOs will be NOTHING, or close to it. That's what happened to Bear Stearns when it announced in July that <#inc ww2010.weblog.ref e070718 "its hedge funds are almost worthless."#> That's the reason for these SIVs (structured investment vehicles) and the <#inc ww2010.weblog.ref e071015 "mind-boggling "M-LEC,""#> or Master-Liquidity Enhancement Conduit or "Super-SIV" (Structured investment vehicle). The purpose of these structures is to allow Citibank and other banks to sell these worthless securities to each other at artificial prices, which is fraud, but it's OK because the government says it's OK. Anything's better than any free market in these things. So, what Citibank is saying is that it has NO IDEA how much more it's going to have to write down. Of the $55 billion they thought they had, they're writing down $8-11 billion. That leaves around $45 billion left. How much of that will be written down? They have NO IDEA. They're just hopin' and prayin' that it won't be too much. And now, Dear Reader, let's talk about Y-O-U. Do you have investments in money market funds, hedge funds, pension plans, or any of a wide variety of investment vehicles? Are your investments safe? Oh, really? You say they ARE safe? How do you know? How can you possibly know? If the brilliant financial engineers at Citibank and Merrill Lynch don't know, then how can you know? Are you really that much smarter than the financial engineers at Citibank and Merrill Lynch? Recall that, according to a report from the International Monetary Fund (IMF) that <#inc ww2010.weblog.ref e071001 "I analyzed"#> last month, there were $415 trillion dollars of CDOs and other credit derivatives outstanding globally, as of December, 2006. Ron Insana on CNBC says that the figure is up to $750 trillion now. This is in a world where the total GDP (value of all products and services produced in the whole world) is only $45 trillion. So there's an unbelievable amount of pain yet to come, as the marking down process continues. The writedowns will affect mutual funds, investment trusts, hedge funds, savings banks, pension funds, college endowments, money market funds, insurance companies, and any other institution with money -- possibly including institutions that hold YOUR money. From the point of view of Generational Dynamics, this has all been caused by the debauched and depraved abuse of credit by people in the Boomer Generation and Generation-X. These are the first generations with no personal memory of the starvation and homelessness of the Great Depression, and have convinced themselves that nothing like the Great Depression can ever happen again. They're going to be shocked by what happens, just as the officials at Citibank have already been shocked to learn that many of the securities that they thought were OK turn out to be worthless. =eod =// &&2 e071103b MarketPsych investor fear index forecasts sharply increased market turbulence. =data ww2010.weblog.y2007.e071103b.head MarketPsych investor fear index forecasts sharply increased market turbulence. =data ww2010.weblog.y2007.e071103b.keys =data ww2010.weblog.y2007.e071103b.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071103b.date 3-Nov-07 =data ww2010.weblog.y2007.e071103b.txt1 With investor anxiety increasing, the index forecasts a return to the "mini-panic" level of August. =data ww2010.weblog.y2007.e071103b.txt2 Since I wrote about the <#inc ww2010.weblog.ref e070918 "Marketpsych "Fear Index""#> in September, I've been following it on a daily basis. Each day I watch CNBC and make my own judgment as to whether investors are anxious or sanguine, and then the next day I check to see if my judgment is matched by a change in this fear index, and it's been pretty accurate so far. It appears to be a very powerful tool for assessing the level of investor anxiety and panic. Here's the <#stdurl http://www.marketpsych.com/ "graph of the index as of today,"#> annotated with some of the major events that have triggered ups and downs in the index this year: <#inc ww2010.pic g071103b.gif center "" "MarketPsych Fear Index -- 2-Nov-2006 to 2-Nov-2007 (Source: Marketpsych)"#> From the point of view of Generational Dynamics, the ups and downs of the stock market are not as important as the changes in behaviors and attitudes of the masses of investors, as it's the latter that indicates major generational changes that trigger huge historical events. If you examine this graph, then you'll see the following:

Although the index has had wide swings throughout the year, the general trend has been strongly upward since mid-January. This long-term trend is particularly significant for Generational Dynamics, because it appears to show a massive increase in the level of panic and anxiety among those in the Boomer generation and Generation-X.
In the past few days, the index has exhibited exactly the same pattern that it exhibited just prior to the February 27 and August 17 "mini-panics." This observation, combined with the long-term trend just described, indicates that we're getting much closer to the full-scale generational panic that Generational Dynamics predicts MUST occur, with 100% certainty.

In order to clarify the annotations on the above graph, I've prepared the following list of the events that I consider most likely to have triggered the major ups and downs in the index since mid-January. The actual data values are approximate, since I have no access to the data other than what I can read from the graph itself.

January 19, index=4 and rising. Financial Times publishes <#inc ww2010.weblog.ref e070121 "an article about hedge funds,"#> indicating that hedge fund managers may be committing fraud. After all the political turmoil following the elections began to simmer down, the index was at 4, the lowest point of 2007.
February 20, index=6 and spiking up. Media reports start talking about the falling ABX index. More important, many media reports are saying that <#inc ww2010.weblog.ref e070226 "the Shanghai stock market bubble"#> appears close to bursting.
February 27, index spikes from 12 to 22. A "mini-panic" occurs on Wall Street, and in Asian and European stock markets, after the <#inc ww2010.weblog.ref e070227b "Shanghai stock market index falls 8.8%."#>
February 27 - May 20, index falls to 11. Investors conclude that there was nothing to worry about, as the Shanghi bubble resumes.
May 20 - early June, index steady around 11.
June 6, index at 12 and rising. Morgan Stanley in Europe signals <#inc ww2010.weblog.ref e070608 "a "Full House" sell signal."#>
June 15-22, index rises from 12 to 15. Bear Stearns reveals that <#inc ww2010.weblog.ref e070624 "it's bailing out two hedge funds."#> This is the first major announcement of a CDO "writedown" -- securities that had previously been AAA rated were now becoming worthless. The index starts falling again down to 12.
July 18, index spikes up from 12 to 15. Bear Stearns announces that <#inc ww2010.weblog.ref e070718 "its hedge funds are almost worthless."#> This is the major inflection point of the "credit crunch" crisis of August, as financial managers realize that all kinds of hedge funds, commercial paper, and even some money market funds may contain worthless or near-worthless assets. On July 19, the market reached a historic high, Dow 14000.
July 26, index spikes again to 21. <#inc ww2010.weblog.ref e070727 "Worldwide markets plummeted 2%"#> as credit crunch increases.
August 5, index around 21. <#inc ww2010.weblog.ref e070805 "CNBC's Jim Cramer becomes hysterical,"#> blaming Ben Bernanke for letting the economy tank. The video is widely reported and viewed.
August 9, index spikes to 25. BNP Paribas announces that they would freeze three of their hedge funds that had invested in mortgage-backed securities. In response, US and European central banks <#inc ww2010.weblog.ref e070810 "inject billions in cash to stanch market meltdown."#> It was getting clear to me at this time that we were beginning to see real signs of a generational panic. The Fed continued to <#inc ww2010.weblog.ref e070811 "pour more money into Wall Street."#>
August 16, index at all-time high of 26. It was clear to me that investors were approaching full-scale panic, and I wrote that <#inc ww2010.weblog.ref e070817 "the nightmare is finally beginning."#>
August 17, index at all-time high of 26, spikes down to 18. The Fed makes an extraordinary announcement to lower the discount rate. Fed Chairman Ben Bernanke, who didn't believe in bubbles and thought that the 1930s Great Depression could have been avoided with a minor change in Fed policy, begins his <#inc ww2010.weblog.ref e070818 "Great Historic Experiment"#>, trying to stay ahead of a stock market crash by injecting liquidity into the marketplace.
August 17 to September 8, index remains around 18. The investment community awaits the FOMC meeting, hoping for interest rate reductions.
September 17, index spikes up a little. Investors are suddenly nervous that the Fed won't cut interest rates.
September 18, index spikes down to 13. The Fed shocks financial community by announcing a full ½% interest rate decrease, when only ¼% had been expected. Investors turn giddy with delight and push markets up 2.5%. By October 9, the Dow Industrials had reached a new historic high: 14164.
October 15, index at 12 begins spike up to 21. This was the date of the <#inc ww2010.weblog.ref e071015 "mind-boggling "M-LEC" announcement."#> The Master-Liquidity Enhancement Conduit or "Super-SIV" (Structured investment vehicle) had, as its purpose, to allow Citibank and other banks to sell worthless securities (CDOs and other credit derivatives) to each other at artificially inflated prices, so that the artificial prices become "market prices." This would permit these worthless securities to be "marked to market" at the artificial prices. I wrote that this was out and out fraud, supported by the US Government in the form of the Treasury Secretary and, much to my surprise, the financial community apparently agrees with me, as the index has been increasing fairly steadily since then. In addition, it was becoming apparent that <#inc ww2010.weblog.ref e071024 "third quarter earnings growth was much lower"#> than in previous quarters.
October 19, index around 18. Investors commemorate the 20-year anniversary of <#inc ww2010.weblog.ref e071019 "the Panic of 1987."#>
October 31, index around 18, spikes up to 23. The Fed lowered the interest rate by another ¼%, but investors had been hopin' and prayin' for a ½% cut. <#inc ww2010.weblog.ref e071102 "Investors became sober,"#> and bad news was no longer good news.

The index value for a particular day is subject to revision for a couple of days thereafter, and so the last couple of index values may change. But it's been pretty clear that something pretty dramatic changed after the Fed announcement on Wednesday, and investors are exhibiting genuine fear. Let's review the big picture, what's really going on here. If you go back through history, there are of course many small or regional recessions. But since the 1600s there have been only five major international financial crises: <#inc ww2010.weblog.ref e070328 "the 1637 Tulipomania bubble,"#> the South Sea bubble of the 1710s-20s, the bankruptcy of the French monarchy in the 1789, <#inc ww2010.weblog.ref e070406 "the Panic of 1857,"#> and the 1929 Wall Street crash. When comparing these international financial crises, the details are always different, but they're all remarkably similar in the following ways, as described in <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world""#>: A debauched and perverted use of credit, occurring at exactly the time that the survivors of the previous financial crisis have all died or retired; a huge asset bubble; the securitization of credit; and an upsurge in corruption. All of those elements are enormously present today. From the point of view of Generational Dynamics, we're waiting until a "generational panic" triggers the inevitable collapse. The asset bubble MUST collapse; the credit securities (CDOs) WILL become worthless; the corruption MUST be punished. The working hypothesis is that the "MarketPsych Fear Index" is a tool that tells us when this panic is likely to come. We've shown above that the index is showing a pattern that's similar to the last two "mini-panics" of 2007, and that the long-term trend of the index is up. We hypothesize that, therefore, there will be a new sharp spike up in investor anxiety and panic. Further, we hypothesize that if the current spike up in anxiety doesn't lead to a full-scale generational panic, then there will be further repeated similar cycles, until one of them DOES trigger a full-scale generational panic and crash. Fed Chairman Ben Bernanke "cured" the August mini-panic by means of a dramatic and unexpected injection of liquidity into the financial system. It's possible that the Fed has enough firepower left to "cure" the coming mini-panic, possibly by shocking everyone by dropping the Fed Funds rate another 1% to 3½%. However, he may not have the ability to do that, since it would weaken the dollar so substantially on world markets that the same international financial crisis may be triggered anyway, by a different route. At any rate, this is a time of great danger to investors. If you're one of those giddy investors who believe that a new stock market crash is impossible, you might at least consider pulling out of the market until the next mini-panic is over. =eod =// &&2 e071103 Pakistan President Pervez Musharraf declares martial law and a state of emergency. =data ww2010.weblog.y2007.e071103.head Pakistan President Pervez Musharraf declares martial law and a state of emergency. =data ww2010.weblog.y2007.e071103.keys =data ww2010.weblog.y2007.e071103.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071103.date 3-Nov-07 =data ww2010.weblog.y2007.e071103.txt1 In a highly dramatic televised speech to the nation and the world, =data ww2010.weblog.y2007.e071103.txt2 Pakistan President Pervez Musharraf defended his decision to assume essentially dictatorial powers in Pakistan. His declaration suspends the constitution, and curtails freedom of the press and the power of courts in Pakistan. In his speech, he referred to the numerous terrorist bombings throughout Pakistan, killing several hundred people in just the last couple of months. He described how embarrassing it has been to explain to foreign leaders why these attacks have been occurring. He particularly mentioned his embarrassment at having to explain to Chinese leaders why <#inc ww2010.weblog.ref e070721 "a convoy of Chinese workers"#> were attacked by suicide bombers. He blamed the press for encouraging such terrorist acts, and he blamed the courts for preventing him from taking the necessary steps to stop the terrorist acts. He used these reasons as justification for suspending the constitution. Musharraf's actions are provoking bitter condemnations within Pakistan itself, and harsh criticism from Westerners, most of whom are interpreting his actions purely politically. Secretary of State Condoleezza Rice, speaking from Istanbul in a meeting with Turkish leaders about the situation in Iraq, criticized the move because it diverted Pakistan from democracy. There will be a lot more discussion of this in the days to come, but I wanted to post this right away in order to quote some of Musharraf's highly dramatic and emotional speech. <#inc ww2010.pic g071103a.jpg right "" "Pakistan President Pervez Musharraf, speaking to the nation and the world on Saturday (Source: CNN)"#> Most of the speech was in Urdu, but he broke into English at one point. The following is my own transcript, and may contain errors. (I'll update this page if a better transcript becomes available.) (Corrections made on 4-Nov)

"I would like to direct this to our friends in the United States and India and the Commonwealth... I would ask you to finally understand the criticality of the environment inside Pakistan. Pakistan is on the verge of destabilization, if not arrested in time. Now, without moving any further, time or delaying the issue. The saddest part of everything, that saddens me the most, that after all we have achieved in the past seven years I see in front of my eyes, Pakistan's upsurge taking a downward trend. I personally, with all my conviction, and with all the facts available to me, consider that inaction at this moment is suicide for Pakistan, and I cannot allow this country to commit suicide. =inc ww2010.xr.related1 right pakistan 3 Therefore I had to take this action, in order to preserve the democratic transaction which I initiated a few years back. I would like to repeat that... I started with a 3 stage transition:

From 1999 to 2002, [a dictatorship] where I remained in control.
2002 to 2007 - five years of democratic rule, with all assemblies, and local governments fully functioning.
[This year] I launched the third phase, to be completed in only a few months -- return to full democracy, myself being only a civilizan president, if elected.

It's this third stage that is being subverted today, and I want to complete it with all my conviction. If we don't take action. I don't know what chaos may follow. So therefore, I request you all to bear with us. To the critics and idealists, against this action, I would like to say, please do not expect or demand your level of democracy which you learnt over a number of centuries. We're also trying to learn, and we're doing well. Please give us time. Please also do not demand and expect your level of civil rights, human rights and civil liberties, that you've learned over the centuries. We're trying to learn, and we're doing well. Please give us time. I would at this time venture to read out an excerpt of president Abraham Lincoln, especially to all my listeners in the U.S. As an idealist, Abe Lincoln had one consuming passion during that time of supreme passion - and this was to preserve the Union because the Union was in danger. Toward the end, he broke laws, he violated the Constitution, he usurped arbitrary power, and he trampled individual liberties, but his justification was that this was a necessity to preserve the Union. In explaining this, he wrote in a letter in 1864. Quote.

"[M]y oath to preserve the constitution to the best of my ability, imposed upon me the duty of preserving, by every indispensible means, that government -- that nation -- of which that constitution was the organic law. Was it possible to lose the nation, and yet preserve the constitution? By general law life and limb must be protected; yet often a limb must be amputated to save a life; but a life is never wisely given to save a limb. I felt that measures, otherwise unconstitutional, might become lawful, by becoming indispensable to the preservation of the constitution, through the preservation of the nation. Right or wrong, I assumed this ground, and now avow it."

Unquote. We're also learning democracy - we're going through a difficult time. It's the nation that's important. For me and for every Pakistani, Pakistan comes first, and everyone else's considerations come after that. I look at it from this point of view. Whatever I do, it's for Pakistan, and whatever anyone else thinks, comes secondary. What I do with full conviction, and heart and soul, and mind in it."

The letter that Musharraf quoted from was written in 1864 by Abraham Lincoln, at the height of the Civil War, to defend his actions in violating his oath to obey the Constitution. It was a <#stdurl http://showcase.netins.net/web/creative/lincoln/speeches/hodges.htm "letter to a southerner, Albert G. Hodges,"#> defending his views. I recommend to all readers of this web site to take the time to read the entire letter. From the point of view of Generational Dynamics, Musharraf's actions are quite understandable. The actions that he's taking are to preserve the nation. As we've said many times on this web site, when a nation, any nation, enters a generational Crisis era, then individual rights are always sacrificed in order to preserve the nation and its way of life. However, such moves are always politically controversial, as Musharraf's are. The easiest way to understand the political conflict in Pakistan is that it's a much more virulent form of the controversies going on in America today. On the one hand, we have President Bush advocating policies to prevent terrorist attacks such as occurred on 9/11, and on the other hand we have political opposition that objects to loss of civil rights in the form of potential wiretapping and torture of terrorism suspects. As bad as the animosity is in the U.S., it's a thousand times worse in Pakistan. The situation in Pakistan is exceedingly dangerous and explosive right now, and we'll be following it closely. I'd like to close this posting by quoting the final paragraph of Lincoln's <#stdurl http://showcase.netins.net/web/creative/lincoln/speeches/hodges.htm "letter Albert G. Hodges,"#> that Musharraf excerpted:

"In telling this tale I attempt no compliment to my own sagacity. I claim not to have controlled events, but confess plainly that events have controlled me. Now, at the end of three years struggle the nation's condition is not what either party, or any man devised, or expected. God alone can claim it. Whither it is tending seems plain. If God now wills the removal of a great wrong [[referring to slavery]], and wills also that we of the North as well as you of the South, shall pay fairly for our complicity in that wrong, impartial history will find therein new cause to attest and revere the justice and goodness of God."

This is exactly what Generational Dynamics tells us, and what I've been saying over and over. Those who continue either to credit or blame President Bush for being the cause of some good things or bad things should understand that President Bush is NOT controlling events. Whether it's Iraq or Pakistan or Iran, events are now flowing far beyond the control of any politicians. The events are being controlled by huge waves of generational changes that were put into effect decades ago, and those huge waves cannot be stopped any more than a tsunami can. Musharraf has imposed emergency control and martial law. He has no choice, as his country is becoming increasingly unstable, as younger generations assume leadership. Young people in these generations have no personal memory of the huge genocidal bloodbath that occurred in 1947 with <#inc ww2010.weblog.ref e071021 "Partition and the independence of India and Pakistan"#> from British rule. People in these younger generations have NO IDEA that this massive bloodbath is coming again, and possibly quite soon. There's one thing of which I'm fairly certain: Musharraf's 3-stage transition to democracy has been permanently derailed, and stage 3 will never be completed. I don't know what scenario will be followed, but I'm pretty certain that it won't be the one that Musharraf and many Pakistanis hope for. =inc ww2010.cf.cf060209 p left In my little "conflict risk" graphic, I've put the Kashmir problem (the epicenter of the coming war between Pakistan and India) at Level 2 (medium risk of regional war in the next six months). As I've explained, I have great admiration for both Pakistan's President Pervez Musharraf and his Indian counterpart, India's Prime Minister Manmohan Singh. Both Pakistan and India are nuclear powers, but these two leaders have engineered a remarkable détente that has prevented a conflict, and they've pulled back from the continuing seething dispute over Kashmir and Jammu. Musharraf is being challenged both inside Pakistan and outside by new generations of leaders with no fear of the coming bloodbath genocide. Within a day or two, it should be possible to judge whether it's time to raise the conflict risk level for Kashmir to 3 -- high risk of war. =eod =// &&2 e071102 Investors appear to be sobered by latest Fed interest decrease. =data ww2010.weblog.y2007.e071102.head Investors appear to be sobered by latest Fed interest decrease. =data ww2010.weblog.y2007.e071102.keys =data ww2010.weblog.y2007.e071102.loc ww2010.weblog.log0711 =data ww2010.weblog.y2007.e071102.date 2-Nov-07 =data ww2010.weblog.y2007.e071102.txt1 Investors acted drunk and giddy after the September 18 interest reduction, =data ww2010.weblog.y2007.e071102.txt2 evidently believing that the Fed had "saved the world," with the ½% interest rate decrease. In the aftermath, investors blew the stock market bubble up larger than ever, and pushed Dow Industrials average up to a new historical all-time high on October 9. Investors' logic the last few weeks was so bizarre that I never would have believed it possible, if I hadn't seen it for myself, and watched it unfold on CNBC:

Any good news was good news, and it justifies pushing the stock market up higher.
Any bad news was good news, because bad news means that the Fed has an excuse to lower interest rates again, which justifies pushing the stock market up higher.
Any disastrous writedown of worthless mortgage-based securities in the portfolio of a financial company was good news, because it meant that the company had gotten it all behind them, which was more good news, which justifies pushing the stock market up higher.
Any minor dip in the stock market indexes was good news because it meant that stocks were "cheap," and represented a buying opportunity, which justifies pushing the stock market up higher.

I know from e-mail correspondence with certain people that there is absolutely no evidence that would convince them that the stock market was in a bubble, or that a bubble was even possible. Even reminding them of the Nasdaq crash in 2000 would have no effect. But the atmosphere became distinctly different after the October 31 Fed action to lower interest rates an additional ¼%. Many investors had hoped for another ½% decrease, and were disappointed by just ¼%. But that wasn't the biggest problem. The Fed also issued "guidance" that said, in effect: Don't expect any more interest rate decreases this year. This has changed the entire atmosphere, and it was palpable on CNBC on Thursday, as worried pundits and anchors hardly knew what to expect. The Fed "safety net" was gone. No more could you hope for the Fed to bail you out if you did something stupid. The Fed made it clear that you're on your own now. And there's plenty to worry about. Credit is getting hard to find again, not yet as bad as in the August "credit crunch," but getting closer. The mortgage crisis appears to be accelerating, as noted in a <#stdurl http://online.wsj.com/article/SB119396287130379934.html?mod=hps_us_whats_newsp "page one article"#> to appear in Friday's Wall Street Journal:

"The situation is now more negative than in the summer," said Pete Nolan, a portfolio manager at Smith Breeden Associates in Chapel Hill, N.C. He said that "in many cases, the fundamentals are catching up" with investors' worst fears. [chart] The worry is that the huge financial edifice that is built on top of the now-shaky mortgage market could weaken, potentially causing lenders to tighten up on loans and slowing the economy. Besides the problems with banks and brokers, there was evidence of more problems in the mortgage market. Mortgage-servicing companies, which collect payments from borrowers, said delinquency and prepayment data were worse than expected. "Mortgages are still deteriorating at an accelerating pace, and that's scary," said Karen Weaver, global head of securitization research at Deutsche Bank AG. "We haven't come near a stabilization, and we expect things to get worse as the bulk of resets" of interest rates on adjustable-rate mortgages "have yet to come." The percentage of subprime mortgages -- those to home buyers with weak credit -- that were more than 60 days behind in their mortgage payments topped 20% in August, up from 18.7% in July and 17.1% in June, according to latest data from FirstAmerican Loan Performance. Meantime, home prices in many markets have slipped. They were down more than 4% in the month of August from a year ago, as measured by the S&P/Case-Shiller index. The weaker prices have prevented some borrowers from refinancing into new loans loans, and have reduced the value of the collateral backing mortgage loans and securities. Mark Zandi, an economist at Moody's Economy.com, estimates that of the $2.45 trillion in especially risky mortgages currently outstanding -- including subprime mortgages, interest-only mortgages, mortgages that exceed Fannie Mae lending limits and others -- as much as a quarter could suffer defaults in the months ahead. Total losses on these mortgages, he estimates, could reach $225 billion. That would hit bondholders hard, since the value of mortgage securities is driven by the performance of underlying mortgages. And it could make such bonds harder to sell in the future. Many expect the value of homes to continue to slip as well. Mr. Zandi puts the drop at 10%, from the market's peak in the fourth quarter of 2005 to its projected bottom in the fourth quarter of 2008. That would be a decline that would wipe out more than $2 trillion in home values. That's less than the $7 trillion in stock wealth wiped out by the tech bust, but still would represent a significant hit to the economy. Because mortgages are bundled into securities sold to investors all over the world, the deterioration in mortgages' value is having a widespread effect. Many of the more complex securities, known as collateralized debt obligations, or CDOs, are held by banks and brokerage firms. They've been the cause of much of the big losses at those institutions. In CDOs, risk is portioned out to different groups of investors. Those willing to take the biggest risks buy securities with the highest potential returns, while investors who want more safety give up some return to get it. Already, the riskier "tranches" of CDOs have sunk dramatically in value. An index that tracks risky subprime bonds [[the ABX index]] has fallen to a record low of 17.4 cents on the dollar, down 50% from August, according to Markit Group. That decline, while worrisome, hit investors willing to take risk. But the recent turmoil stems from declines in the market for the safest securities. Rated triple-A, they should be affected by mortgage defaults only in extreme circumstances. An index that tracks triple-A securities is trading at 79 cents on the dollar, down from roughly 95 cents just a month ago. At the top are "super senior tranches." It is a decline in value of these supposedly safe securities that is hurting many banks and brokerage firms. In October alone, ratings firms Moody's InvestorsService, Fitch Ratings and Standard & Poor's have downgraded or put on watch for downgrade more than $100 billion in CDOs and the mortgage securities they contain. In a glimpse of how much banks have at stake, Swiss-based UBS holds more than $20 billion of super-senior tranches of CDOs. They're among the reasons UBS, which reported a third-quarter loss of 830 million Swiss francs ($712.8 million), has warned that its investment bank is likely to face further losses in the current quarter. "There was some widespread miscalculation when it came to estimating the credit risk and market risk of the super-senior tranches," notes Ralph Daloiso, managing director of structured finance at Natixis, a French banking group. The large Wall Street firms weren't alone in believing triple-A-rated debt securities were safe. In the last few years, bond insurers such as MBIA Inc. and Ambac Financial Group Inc., as well as financial guaranty units of American International Group Inc., PMI Group Inc. and ACA Capital Holdings, aggressively wrote insurance on super-senior tranches of CDOs that were backed mainly by subprime mortgages. These companies effectively agreed to bear the risk of losses on these securities. Shares of Ambac and PMI yesterday fell 19.7% and 11%, respectively, and along with MBIA hit new 52-week lows, on growing investor worry that they may need to hold more capital against the risk they are insuring and could be hit with sizable claims down the road. Over the past two weeks, some of the insurers posted significant net losses for the third quarter due to adjustments on credit derivatives they used to provide insurance on the bonds. The bond insurers have said, however, that they don't expect actual losses from the CDO tranches they have insured."

What's so dramatic about this article is how gloomy it is -- just as gloomy as the pundits and anchors on CNBC on Thursday. This is an enormous contrast from the bubbly articles you usually encounter in WSJ and on CNBC. That's how dramatically things have changed in just a couple of days. From the point of view of Generational Dynamics, we're headed for a major stock market panic and crash, and a new 1930s style Great Depression. The panic will be led by the Boomer Generation and Generation-X, people who have no personal memory of the 1930s, and who have no idea what's going on in the world. It's impossible to predict when this full scale panic will begin, and all we can do is which for signals of increasing panic. The current widespread change in investor mood may be such a signal, or it may not. A web site reader has referred me to the <#stdurl http://youtube.com/watch?v=GLnryKeQ16A "following YouTube video,"#> interviewing Martin Summers, the Former East European projects officer for the New Economics Foundation:

What's interesting about this video is that he discusses many of the same concepts that I do. (Do you think he's seen my web site?) My favorite quote is:

"Many of the mechanisms for balancing the economy that were put in place following the end of the second world war have been deliberately dismantled by a following generation of politicians who believed in the magic of the market. That was stupid."

=eod =// &&2 e071031b Wednesday's Fed announcement is the most watched in a long time =data ww2010.weblog.y2007.e071031b.head Wednesday's Fed announcement is the most watched in a long time =data ww2010.weblog.y2007.e071031b.keys =data ww2010.weblog.y2007.e071031b.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071031b.date 31-Oct-07 =data ww2010.weblog.y2007.e071031b.txt1 As the continuing rapid collapse of the ABX indexes signals a time of great danger, =data ww2010.weblog.y2007.e071031b.txt2 the Fed has never been watched, and speculated about, more obsessively than today. The Fed Open Market Committee (FOMC) is having its regularly scheduled meeting on Wednesday, and will announce whether it will cut interest rates again. Investors are overwhelmingly expecting a ¼% interest rate reduction, and many are hoping for a ½% reduction, as happened last month. Last month's ½% reduction caused a great deal of instant drunken euphoria among investors, and most would like to get drunk again. Lowering interest rates will weaken the dollar as international currency, and it's already the weakest it's been in decades. Leaving interest rates unchanged with bitterly disappoint investors, though it will strengthen the dollar. One major issue is the surging mortgage crisis, which appears to be getting worse by the day. Many mortgage loan foreclosures are from ARMs (adjustable rate mortgages), where the homeowner signs up for the mortgage with a low monthly payment, based on a low "teaser" interest rate. That teaser rate expires after 1, 2 or 3 years, depending on the terms, and then the interest rate "resets" to a much higher value, and the homeowner's monthly payment can double or even quadruple. Here's a chart showing ARM reset schedules that I've used before: <#inc ww2010.pic resetbigchart.gif "center" "" "Monthly ARM reset schedules, 2007-2009 (Source: Calculated Risk)"#> As we've described many times before, these mortgages went through "financial reengineering," slicing and dicing the mortgage loans into tradable securities called Collateralized Debt Obligations (CDOs). I recently had occasion to be reminded of some of the lyrics from Gilbert & Sullivan 1878 musical play, H.M.S. Pinafore, where the First Lord of the Navy explains how he came to rise to that position:

    As office boy I made such a mark
    That they gave me the post of a junior clerk
    I served the writs with a smile so bland
    And I copied all the letters in a big round hand
    I copied all the letters in a hand so free
    That now I am the Ruler of the Queen's Navy

Well, the financial engineers who created these CDOs created them with a hand so free that even the riskiest of subprime mortgages was somehow converted into the highest-rated AAA CDO securities. A web site reader has asked me how it's even possible for a high-risk mortgage loan to be converted into a low-risk anything. I won't try to describe the entire process, but I'll give an example of how it works. Suppose you owe me money, and there's a 25% chance that you won't repay me, which is a pretty high risk loan, which is why I charged you a high rate of interest. Now suppose that 1,000 people owe me money under the same conditions. Then I can expect 750 of the loans to be repaid, and 250 of the loans to default. So I take the 1,000 loans and put them into a pool, and I sell shares in the pool. Actually, I sell two types of shares, low-risk shares and high-risk shares. When people start paying off the loans, the income from the first 600 who pay the amounts owed goes to the investors in the low-risk shares; after that, the remaining income "cascades" to the investors in the high-risk shares. If you've gone through this example, you can see that the low-risk investors should receive the income from 600 people, and the high-risk investors should receive the income from 150 people (750-600=150). But suppose that the 75% figure is wrong? Suppose that only 50% of the loans are repaid? Then the low-risk investors get income from only 500 repayments, and the high-risk investors get nothing. <#inc ww2010.pic g071030.gif right "" "Prices of ABX-HE series 07-2 for various risk levels on 30-Oct-2007 (Source: Markit.com)"#> That's what the ABX index is for. The mortgages are sliced and diced into credit default swaps and then into CDOs. There are low-risk, AAA-rated securities and there are high-risk BBB-rated securities. The income from the mortgage loan repayments goes first to the AAA securities, and anything left over "cascades" down to lower-rated securities. As you can see from the adjoining graphs, the low-rated securities (at the bottom) have been falling in value so quickly that they're almost worthless. The high-rate securities at the top have been falling in value as well, because the number of defaults and foreclosures is so much higher than anyone predicted. This is an incredible situation. It's out of public view because these CDSs and CDOs are so opaque to the general public. But there are trillions of dollars (notional value) of these things in financial portfolios around the world, and nobody knows how much the damn things are worth -- except that nobody any longer believes that they're worth the trillions of dollars originally claimed. It was just last week that Merrill Lynch shocked the financial community by <#inc ww2010.weblog.ref e071025 "writing down $8.4 billion"#> in value of securities that turned out to be almost worthless. And on Tuesday, <#stdurl http://afp.google.com/article/ALeqM5gYX-UKDn4JidrwR3koNyt0L0k6IA "Switzerland's largest bank, UBS, reported its first quarterly loss"#> in five years because of similar writedowns. The ratings agencies, Moody's, Fitch and S&P, are re-evaluating the ratings of all the CDOs that were previously rated too high -- which is all of them. Tens of billions of dollars worth of CDOs are being reevaluated downward each week. The continuing rapid collapse of the ABX index, which is a proxy for the values of these CDOs is a very alarming development, as the collapse may reach a tipping point that causes a domino effect throughout the global financial system. From the point of view of Generational Dynamics, we're overdue for a generational panic and crash, as I've been saying since 2002, long before the CDO crisis burst forth. It's impossible to predict whether this is the time, but we can be certain that it's a time of great danger. What does Ben Bernanke think about all this? As I wrote in my August article, <#inc ww2010.weblog.ref e070827 ""Bernanke's historic experiment takes center stage,""#> Ben Bernanke is putting into practice his core beliefs, acquired on his grandmother's knee as a child in the 1960s: That the 1930s Great Depression could have been avoided, and a future Great Depression can be avoided, by injecting money into the economy. That seems to imply that he'd rather err on the side of reducting interest too much, rather than on the side of not reducing enough. =eod =// &&2 e071031 Casualties are down sharply in Iraq. =data ww2010.weblog.y2007.e071031.head Casualties are down sharply in Iraq. =data ww2010.weblog.y2007.e071031.keys =data ww2010.weblog.y2007.e071031.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071031.date 31-Oct-07 =data ww2010.weblog.y2007.e071031.txt1 This issue has been a spectacular validation of Generational Dynamics theory. =data ww2010.weblog.y2007.e071031.txt2 The number of U.S. military and Iraqi civilian deaths <#stdurl http://www.cnn.com/2007/WORLD/meast/10/30/iraq.main/ "has dropped dramatically."#> =inc ww2010.blocking.start =inc ww2010.xr.related1 right iraqcivil 3 However, nobody is claiming that the problem has been solved. After all, if American forces can "surge," then so can al-Qaeda forces, and they may "surge" to provide a new rise in deaths, even if it's only temporary, in order to gain a public relations victory. However, casualties have been falling for several months now, so a trend is clear. Sunni insurgent groups have turned against al-Qaeda in Iraq, and are now cooperating with the Americans. Shia groups, including the Mehdi militias, are under ceasefire, by order of Muqtada al-Sadr, and they're now cooperating with the Americans too. This situation is extremely gratifying to me personally, and is a spectacular validation of Generational Dynamics theory for several reasons:

Because I got this prediction exactly right from <#hreftext ww2010.i.aug19 "the beginning,"#> in 2003.
Because everybody else got it wrong. Pro-war or anti-war, Republican or Democrat, nobody predicted anything remotely like what I predicted, based on Generational Dynamics theory, and I got it right and they got it wrong. You wouldn't BELIEVE the amount of grief and vitriol I've been given over this, even to the point of being called names. Since the beginning I've asserted, based on Generational Dynamics theory, that a civil war in Iraq was impossible, and that any such fighting would fizzle out. That's exactly what's happened, and people who claimed otherwise have now been shown to be wrong.
Because this is GOOD news. On this web site, I've stated many Generational Dynamics predictions -- on the Mideast, Darfur, China, Burma (Myanmar), Japan, global finance, and so forth -- and they've all come true or are trending true. But all of those are BAD news. The reason that this particular prediction is so spectacular is because it's GOOD news for a change.

I know that I'm going to get more grief for writing this article, but after years of frustration, this situation is really gratifying. =inc ww2010.bugcomment left I'll stop there except to thank the ever growing readership of this web site. I'm still keeping up with answering e-mail comments and questions, though it sometimes takes me a few days to get back. If you have any questions or comments, you can use e-mail or one of the little "Comment" forms. =inc ww2010.blocking.end =eod =// &&2 e071030 Another way to obtain the "real value" of the stock market =data ww2010.weblog.y2007.e071030.head Another way to obtain the "real value" of the stock market =data ww2010.weblog.y2007.e071030.keys =data ww2010.weblog.y2007.e071030.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071030.date 30-Oct-07 =data ww2010.weblog.y2007.e071030.txt1 Many people claim that you can't tell if you're in a bubble until it's over. =data ww2010.weblog.y2007.e071030.txt2 That may have been true prior to the 1900s, before masses of historical data became available. But today you can usually tell if something is in a bubble by analyzing historical data. <#inc ww2010.pic g071016.gif "right" "" "Shanghai stock market has been skyrocketing for the last year. (Source: wsj.com)"#> Sometimes the bubble is so pronounced that you don't need a great deal of data. That's the case with the Shanghai stock market bubble, as shown by the adjoining graph that I referenced two weeks ago in an article, <#inc ww2010.weblog.ref e071017 ""Wall Street Journal wonders if Shanghai stocks are in a bubble.""#> However, many analysts would object to my use of the word "obvious," since only 3½ years of data are used, and that's a fair criticism. It's actually pretty easy to "lie with statistics" when using too little data. I've actually seen analyses that attempt to project trends from only 3 or 4 data points. Such attempts are meaningless. In my article, <#hreftext ww2010.i.panic070820 ""How to compute the 'real value' of the stock market,""#> the current value of the stock market is computed by using three different types of historical data: historical earnings, historical growth rates, and historical book values. All three of these methods come to roughly the same result -- the real value of the stock market today is around Dow 5000, meaning that the stock market today is overpriced by a factor of 250% (same as in 1929). Here's a graph from that article: <#inc ww2010.pic g070818b.gif center "" "Dow Jones Industrial Average, logarithmic scale, 1900 - August 17, 2007."#> When you want to extrapolate into the future from historical data, then you have to use many data points. The graph above uses over a century of monthly data, over 1200 data points. When we're talking about generational trends, which repeat in roughly 80 year intervals (the length of a human lifetime), you need at least a century of data. Frankly, I wish I could use three or four centuries of data, but unfortunately no such data exists. In the above graph, the red line shows the Dow Industrials for each month since 1900. The blue line is obtained by curve-fitting an exponential curve to the Dow Industrials. (The exponential curve appears as a straight line because the y-axis is a logarithmic scale.) Although more analysis is required to be certain, the graph itself is a good visualization of a bubble. The graph provides a current "real value" of the stock market -- in this case Dow 5268 on August 17, meaning that the stock market is overprices by a factor of over 250% - same as in 1929. (The trend value for each day is given on my <#hreftext ww2010.i.djia "Dow Jones historical page."#> For October 29, the trend value is Dow 5316.) This method provides an estimate for the stock market as a whole -- at least as measured by the Dow Industrials stock index -- but does not provide information about different stocks. =inc ww2010.h2 au "Thomas Au's "Investment Index"" Thomas P. Au, with the financial services firm R. W. Wentworth, has developed something called the "Investment Index," which he says measures the "real value" of individual stocks. Au's formula for investment index is very simple:

      IV = (book value per share) + 10 x (dividend per share)

What's interesting about this computation is that it doesn't appear to have anything to do with historical values. That isn't true, however -- the "book value" is a kind of historical value on its own. Let's look at the two components of IV:

The "book value" of a company is the amount of money that the company would be worth if it were liquidated today, and all the assets were sold off and the debts per paid off. The book value of a company (also called shareholder's equity) is computed according to standard accounting rules, and equals the value of all the assets minus the value of the debts. When an asset is acquired, its book value equals its price. Each year, its value is "depreciated," and the book value is reduced by the amount of depreciation. For example, a manufacturing firm may pay $1 million for a piece of machinery. The life of the machine is estimated to be 10 years, and so the book value of the machine is depreciated by 10% per year, or $100,000 per year. At the end of ten years, its book value would be zero. Thus, the book value of an asset takes into account its history. To compute the current book value of the entire company, add together the book values of each of the company's assets, and subtract the value of its debts. That's the amount the company would be worth if the company were liquidated today.
Of course in most cases a company is NOT being liquidated today. The assets will NOT be sold off, and the company will continue making money. The second part of the computation provides the amount of the share price attributed to future earnings to the shareholder. Why is the dividend per share multiplied by 10? That's an approximation to the "present value computation" for dividends paid in the future. The formula assumes that dividends will be paid each year into the future. Suppose that someone loans you $100, and you promise to pay him in a year at 8% interest, or $108. So the "future value" of $100 today is ($100 x 1.08) = $108. Now turn that around. If $108 is to be paid a year from now, then the "present value" of that payment is ($108 / 1.08) = $100, assuming an interest rate of 8%. If you're going to receive a $108 dividend every year for eternity, and you assume an interest rate of 10%, then it turns out (according to <#stdurl http://www.investopedia.com/articles/03/101503.asp "the formula for computing the present value of an annuity"#>) that the present value is $1080, or 10 x $108.

And so, Thomas Au's "investment value" of a share of stock is made up of two components, one of which represents the historic value and the other of which represents the future value. In an article entitled, <#stdurl http://biz.yahoo.com/ts/071024/10386237.html?.v=2 ""How far down for the Dow,""#> Au uses his IV formula to compute the value of each of the 30 stocks that make up the Dow Jones Industrial Index, and he comes up with the following table:

                    Putting a value on the Dow
                            Book    Divi-   Invest- Price   Premium/
                            Value   dend    ment            Discount
                                            Value
                              ($)     ($)     ($)     ($)     ($)
    AIG                     42.50    0.75    50.00   63.27    26.5%
    Alcoa                   19.20    0.68    26.00   37.44    44.0%
    Altria                   7.50    2.75    35.00   70.50   101.4%
    American Express         9.00    0.60    15.00   57.11   280.7%
    AT&T                    18.00    1.40    32.00   41.37    29.3%
    Boeing                   6.75    1.45    21.25   93.90   341.9%
    Caterpillar             13.00    1.30    26.00   73.57   183.0%
    Citigroup               26.00    2.16    47.60   42.36   -11.0%
    Coca-Cola                8.60    1.34    22.00   58.76   167.1%
    Disney                  16.00    0.35    19.50   33.81    73.4%
    Du Pont                 11.20    1.48    26.00   47.16    81.4%
    ExxonMobil              21.50    1.40    35.50   92.14   159.5%
    General Electric        11.50    1.10    22.50   40.04    78.0%
    General Motors          -7.75    1.00     2.25   37.60  1571.1%
    Hewlett-Packard         15.00    0.32    18.20   51.40   182.4%
    Home Depot              13.75    0.90    22.75   30.76    35.2%
    Honeywell               11.00    1.00    21.00   58.42   178.2%
    IBM                     15.00    1.35    28.50  112.28   294.0%
    Intel                    6.50    0.45    11.00   26.30   139.1%
    Johnson & Johnson       16.00    1.60    32.00   64.23   100.7%
    JPMorgan                36.50    1.50    51.50   45.02   -12.6%
    McDonald's              13.00    1.20    25.00   56.42   125.7%
    Merck                    9.30    1.52    24.50   53.11   116.8%
    Microsoft                4.60    0.40     8.60   30.17   250.8%
    Pfizer                  10.25    1.25    22.75   24.07     5.8%
    Proctor & Gamble        21.50    1.35    35.00   70.80   102.3%
    3M                      14.00    2.00    34.00   86.62   154.8%
    United Technologies     19.90    1.36    33.50   76.00   126.9%
    Verizon                 16.80    1.62    33.00   44.27    34.2%
    Wal-Mart                16.20    0.88    25.00   44.98    79.9%
    Proration factor                                        0.484950838
    Dow                                                     13552.02
    Dow at Investment Value                                  6572.06
    Source: Value Line estimates, author's calculations

    Closing prices as of Friday, Oct. 19.

The last two lines of the table tell the story: The Dow was at 13552 on October 19, but the total Investment Value of all of the 30 stocks comes out to 6572. In my article, <#hreftext ww2010.i.panic070820 ""How to compute the 'real value' of the stock market,""#> the three methods that I used came out to a stock market real value around 5000, so Thomas Au's computation comes to a value some 15% higher. I haven't studied Au's method enough to understand why there was this difference, but for the current discussion, the point is moot. A stock market value of Dow 6572 is still much lower than today's bubble value, and means that the stock market is overpriced by a factor of over 200%, still enough to trigger a generational panic and stock market crash. Interestingly, Thomas Au doesn't seem to believe his own results. I'm referring now to the final statement in the article: "At the time of publication, Au was long Alcoa, Johnson & Johnson and Pfizer, although holdings can change at any time." If Au believed his own results, then he wouldn't be long ANY stocks at the present time. =eod =// &&2 e071029 As Turkey prepares to invade northern Iraq, it's isolating itself internationally =data ww2010.weblog.y2007.e071029.head As Turkey prepares to invade northern Iraq, it's isolating itself internationally =data ww2010.weblog.y2007.e071029.keys =data ww2010.weblog.y2007.e071029.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071029.date 29-Oct-07 =data ww2010.weblog.y2007.e071029.txt1 A new "Young Turks revolution" is reestablishing strong Turkish nationalism. =data ww2010.weblog.y2007.e071029.txt2 Turkish officials have been talking for months about sending the army across the border into northern Iraq to root out the PKK Kurd terrorist groups, but it's always been mostly talk and little action. <#inc ww2010.pic g071027.jpg right "" "College-aged student demonstrations Saturday in Ankara calling for a military invasion of Iraq to stop PKK terrorism (Source: CNN)"#> Although pressure to invade has been building gradually after months of terrorist attacks in Turkey perpetrated by the PKK terrorists operating out of the Qandil mountains in Iraq's Kurdish region in the north. The pressure spiked up sharply last week when PKK terrorists <#stdurl http://www.turkishpress.com/news.asp?id=199890 "ambushed a Turkish military patrol last Sunday,"#> killing 12 soldiers and capturing eight. The result was massive protests and street demonstrations by Turkish citizens, especially young Turkish college students, demanding that the army immediately cross the border into Iraq to destroy the PKK hideouts. Even prior to the ambush, Turkey's Parliament had voted overwhelmingly to authorize the government to order military incursions against the PKK bases in Iraq. Tensions this week have risen much higher, with over 100,000 Turkish soldiers on the border, poised to invade, and the Turkish air force has begun bombing PKK positions in Iraq. Prime Minister Recep Tayyip Erdogan has increasingly warned that his country will order increased military attacks against the PKK camps in Iraq. The <#stdurl http://www.bloomberg.com/apps/news?pid=20601085&sid=a15Zkcw9lMok&refer=europe "Turkish foreign minister,"#> speaking in Iran, said on Saturday, "Our patience has come to an end. All options are on the table." =inc ww2010.h2 divergence "Divergence of opinion in Turkey" As I've been watching this situation unfold in the months since the beginning of 2007, it's been clear to me that there's a divergence of opinion within Turkey itself: There are widespread demands from Turkish people to invade Iraq and destroy the PKK camps, but Turkish politicians, lead by Erdogan, have been as conciliatory as possible, conducting an international diplomatic campaign with the Iraq, U.S., Europe, Iran, Russia, and other countries to find a way to end the terrorist attacks without a Turkish invasion. From the point of view of Generational Dynamics, this divergence represents a split that I've discussed many times in many different contexts.

What matters in evaluating a nation's people and events is the attitudes and behaviors of large masses of people. Thus, the most important factor in this story is the apparently surging demand by Turkish people to take whatever steps are necessary to stop PKK attacks.
The attitudes of politicians are not important, except insofar as they represent the attitudes of the people. Thus, Erdogan can postpone an invasion of Iraq up to a point, but if public demands continue to increase, he'll have to find a way to comply.

There are many reasons why a Turkish military incursion into Iraq to destroy the PKK bases is a bad idea. First, almost every nation in the world has said it would be a bad idea. And second, the PKK bases are buried deep in the Qandil mountains in northern Iraq, and a military incursion would most likely fail. =inc ww2010.h2 youngturks "The revolution of the Young Turks" <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> I've used the adjoining map several times on this web site to emphasize how Israel and the Palestinian terrorities, represented by a tiny red dot in the middle, are surrounded by vast regions of green, representing Muslim nations. However, the fact that the nations in green are all Muslim nations doesn't mean that they're homogeneous, or that they agree on much of anything. There are important ethnic differences that often override the common Muslim identity. The people in Turkey are Turks who originally came from central Asia; the people of Iran are Persians; the people on the Arabian peninsula are Arabs. The last time that most of these Muslim nations were united was in the Ottoman Empire that was formed following the fall of Constantinople (Istanbul, Turkey) in 1453. By the 1600s, the Ottoman Empire was extremely powerful and controlled most Sunni Muslim nations in the region -- though not Shia Iran. The empire only began to fall apart in 1689, when the Ottomans disastrously and humiliatingly lost the War with the Holy League in Europe, as I described in my <#inc ww2010.weblog.ref e070415 "brief generational history"#> of the Ottoman Empire. The greatest level of genocidal hatred in all the crisis wars fought by the Ottomans was in the fault line between Islam and Orthdox Christianity. The map above shows Orthodox nations in orange. The Crimean War of the 1850s was nasty and humiliating to almost all major participants (Turks, Russians, Europeans), and by the 1880s led the Turks to start wondering, "Why do we keep on trying to run an empire with all these different people in it?" In the late 1800s, a Turkish identity movement had begun to form, promoting Turkish (as opposed to Ottoman) literature and culture. However, the Turkish nationalism movement didn't gain much traction with the public immediately, mainly because for centuries, years the great strength of the Ottoman Empire, and indeed the previous Islamic empires, was that they were all multi-ethnic and the Muslim rulers were really very good at preserving the rights and meeting the needs of their various ethnic minorities. However, the Turkish identity movement became seriously nationalistic with the Young Turks coup in 1908. This led to an extremely bitter and hugely genocidal war from about 1910-1921, which included these elements:

A renewal of centuries of war between the Turks and the (Orthodox) Greeks, including massive genocide on both sides.
International (British) demands for an independent (Orthodox) Armenian state.
International (British) demands for an independent (Muslim) Kurdistan.
A slaughter of hundreds of thousands of (Orthodox) Armenians, living with Turkey's borders.
Slaughter of many Turks at the hands of the Greeks.
Loss of all Arab lands after the end of World War I, in which Turkey had sided with Germany.
The status of the island of Cyprus, which has both Greek and Turkish populations, was not settled, and remains a sore point today.

The final blow came in 1921, when the Ottoman Empire was finally destroyed, and Turkey gave up its Muslim Ottoman identity and adopted a secular Turkish identity, with the intention of becoming recognized as part of Europe, rather than as a Muslim state. In the following years, new countries were formed out of the pieces of Ottoman Empire, including Iraq, Syria, Lebanon and Jordan (as Transjordan). Generational crisis wars for any society or country generally come in variable intervals, where one crisis war usually begins roughly 50-80 years following the end of the previous crisis war. The destruction of the Ottoman Empire was a major, devastating crisis war for almost all of the Sunni Muslims in the Mideast. (Incidentally, Iran also had a crisis war, but slightly earlier: The Iranian Constitutional Revolution of 1906-1910.) So we would expect that all of these countries would have their next crisis wars around the 1970s or 1980s, and in most cases they were pretty much "on schedule" -- the Syria/Lebanon war, the Lebanese civil war, and the Iran/Iraq war. But two countries, Jordan and Turkey, had different experiences. Each country, each situation, has to be analyzed for events like unexpected invasions. When two nations on different generational "timelines" go to war with each other, there are a number of possibilities that must be analyzed -- the war may be a crisis or non-crisis war for either side or both sides, for example, or, in some cases, their generational crisis eras become aligned because of the war. One of the most interesting cases is when a country in a generational Awakening era receives an unexpected genocidal invasion from a country in a generational Crisis era. The first country does everything possible to avoid war, often retreating (if possible), instead of fighting. But if the war is so devastating to this country that the country's inter-generational structure is destroyed -- which often happens in the case of a massive forced relocation of the population -- then the generational timeline for that country "resets" back to the generational Recovery Era (also called the High or Austerity era), just the same as if the preceding war HAD been a crisis war. That's what happened to the Arabs in Palestine -- the Palestinians -- when there was a massive influx of European Jews fleeing Nazi persecution. The genocidal 1948-1949 genocidal war that followed the partitioning of Palestine and the creation of the state of Israel cause the mass migration of huge numbers of Palestinian Arabs into Jordan, effectively resetting the generational "timeline" of the Palestine and Jordan to a Recovery Era following the war. That's why Israel, the Palestinian territories and Jordan are all entering generational Crisis eras today. In about 10-15% of the cases, a country has a new crisis war more than 80 years after the end of the preceding crisis war. This is what happened to Turkey -- they're now deep into a crisis era, having not yet had a new crisis war since 1921. (Other countries that are similarly deep into crisis eras include Mexico, Saudi Arabia, and Russia.) The original vision of a secular Turkey, promulgated by modern Turkey's found, Ataturk, in 1924, was that Turkey would be part of and associated with Europe and the West, rather than with the Mideast. However, the old battles of World War I keep coming back, leaving Turkey to suffer one indignity after another at the hands of Westerners, including the following:

Turkey has received one rejection after another in its bid to join the European Union. Old enmities with Greece, especially over Cyprus, are standing in the way.
International groups are demanding that the Turkish slaughter of Armenians in the 1910s decade be officially labeled a "genocide," and that Turkey admit it. Turks are absolutely furious about this, they were also the victims of genocide.
An independent Kurdistan was never created, but in the 1980s, low-level violence and terrorism began with a separatist group of Kurds in Turkey -- the Kurdistan Workers Party, or PKK.
Turkey has repeatedly asked the Europeans and the Americans for help with the problem of PKK Kurd terrorism, and have gotten none, leading to the current threat of a military incursion into Iraq.

The Turkish people are more and more realizing that they're going to continue to receive what is, from their point of view, contemptuous treatment by the West. =inc ww2010.h2 xeno "Increasing xenophobia between Turks and West" Ever since Ataturk established a secular Turkey in 1924, the Turks have maintained an open, friendly attitude toward Europeans and the West. But that has been changing during the past few years. There's been widespread reporting in the mainstream media that the Turks are becoming more hostile towards Americans because of the Iraq war. But this is a total misrepresentation of the situation. The Turks have been getting more hostile to almost all major groups outside of Turkey, including Muslim groups. In fact, among Muslim groups in different countries, the Turks appear to be the most hostile to others. Here are the results of a recent <#stdurl http://pewresearch.org/pubs/623/turkey "poll by the Pew Global Attitudes group:"#>

"Recent Pew Global Attitudes surveys show that negative views of the United States are indeed widespread and growing in Turkey. In fact, the United States receives a lower favorability rating (9%) in Turkey than in any of the 47 countries in the 2007 Pew Global Attitudes survey. This is down considerably from a 30% favorability rating in Pew's 2002 poll and from 52% in a 2000 State Department poll. There also has been a correspondingly sharp drop in the favorability rating for the American people (from 32% in 2002 to a mere 13% in 2007). These negative views are also seen in Turks' opinions on American foreign policy. For example, just 9% of Turks support the U.S.-led war on terror, and only 14% think the U.S. considers the interests of countries like Turkey when making foreign policy decisions. Moreover, according to a 2006 Pew poll, a large majority (64%) of Turks believe that the efforts to establish a stable democratic government in Iraq will fail. This is the largest percentage in any of the 15 countries surveyed in 2006, including four other predominantly Muslim countries (29% in Jordan expressed this view, 25% in Egypt, 16% in Indonesia and 14% in Pakistan). Not surprisingly, in light of these negative views of the U.S. and American foreign policy, 86% of Turks now favor removing U.S. troops from Iraq, according to the 2007 Pew poll. View of the EU and the West Negative views also appear to be growing among Turks with respect to the European Union and to Westerners in general. Such negativity toward the EU is likely associated with disillusionment over Turkey's stalled bid to join the union. For instance, the favorability rating for the EU dropped from 58% in 2004 to 27% in 2007. A combination of all these factors seems to be generating more negative views of Westerners generally. Of the 10 Muslim publics surveyed in the 2006 Pew Global Attitudes poll, for instance, the Turkish public showed the most negative views, on average, toward Westerners. The survey asked Muslims whether they associate people in Western countries such as the U.S. and European nations with a series of negative and positive characteristics, including "arrogant," "greedy," "immoral," "selfish," and "violent," as well as "generous" and "honest." The two positive characteristics were reverse coded to reflect the opposite. For this analysis, a negativity index that ranges from zero (extremely positive) to 7 (extremely negative) was created using this series of questions."

The following poll results, from the Pew study, show that, among all Muslim groups polled, the Turks had the highest negativity to Westerners:

      Average Negativity to Westerners
        Group                   Mean
        ------------------      ----
        Turkey                  5.2
        Indonesia               5.1
        Jordan                  4.8
        Egypt                   4.7
        Pakistan                4.4
        Nigerian Muslims        4.4
        British Muslims         4.2
        German Muslims          3.2
        French Muslims          2.7
        Spanish Muslims         2.7

The following results show the percentage of Turks who have favorable views three religious groups -- Christians, Muslims, Jews. (I wish they had distinguished between Western and Orthodox Christianity. I think it might have made a big difference.)

    Rating of Christians, Muslims and Jews

    Percent of Turks with a very or somewhat favorable opinion of ...

                Christians      Muslims Jews
                %               %       %
                ----------      ------- ----
        2006    16              88      15
        2005    21              83      18
        2004    31              88      27

The above results are important because they show a significant TREND of decreasingly favorable opinion towards Christians and Jews. This xenophobia is consistent with Turkey being deep into a generational Crisis era. We see similar xenophobia in other countries as well, though not yet as entrenched as in Turkey. The next set of results may be surprising at first, but makes plenty of sense in view of the brief history of Turkey provided above.

  Turks Not as Favorable toward Arabs as Other Muslims

  Percent with a very or somewhat favorable view of Arabs:
          Muslim group          %
        -----------------      ----
        Nigerian Muslims        90
        Spanish Muslims         85
        French Muslims          84
        Indonesia               84
        Pakistan                78
        British Muslims         65
        Turkey                  46
        German Muslims          45

Finally, an <#stdurl http://www.publicopinionpros.com/features/2007/oct/wike.asp "additional analysis"#> of the same Pew Research data was done to provide a single index of "negativity" of one group to another. The index is called the "Religious-Cultural Negativity Index," or RCN. On a scale of 0-7, with 0 being least negative and 7 being most negative, it measures the negativity of one group towards another. Here's how the attitude of Muslim publics toward Westerners is described: And here is a summary of the poll results:

"The data on Muslim attitudes toward Westerners ... revealed a variety of negative views. In the five majority-Muslim countries, as well as Nigeria, at least 40 percent of Muslims in the survey characterized Westerners as arrogant, violent, greedy, and immoral; meanwhile, relatively few said Westerners were generous or honest.... And Muslims in these countries were particularly likely to say Westerners were selfish—in all six, majorities suggested selfishness was common among people in Europe and the United States. Negative assessments of Westerners were fairly common across all six of these countries, although they were slightly more prevalent in Jordan and Indonesia. European Muslims were consistently less likely to associate negative characteristics with Westerners and were more likely to label them as generous and honest."

      The Religious-Cultural Negativity Index

    Negativity of Muslim publics towards Westerners

        Muslims                 Mean RCN
        -----------------       --------
        Turkey                  5.2
        Indonesia               5.1
        Jordan                  4.8
        Egypt                   4.7
        Pakistan                4.4
        Nigerian Muslims        4.4
        German Muslims          3.2
        French Muslims          2.7
        Spanish Muslims         2.7

As you can see, Turks are more negative toward Westerners than other Muslim groups, and significantly so. Now we turn the tables, and ask about the negativity of Westerners to Muslims in general. It turns out that Westerners are significantly LESS negative about Muslims than Muslims are about Westerners.

"The positive qualities from the survey included in our analysis were “generous” and “honest,” while the negative characteristics were “arrogant,” “greedy,” “immoral,” “selfish,” and “violent.” The results showed that many non-Muslims associated negative traits with Muslims.... Majorities of survey respondents in Nigeria, India, Spain, Russia, and Germany saw Muslims as violent. Large numbers, including majorities in India, Nigeria, and Russia, also considered Muslims arrogant. Many also associated selfishness with Muslims, although India was the only country where a majority did so. Non-Muslims were less likely to rate Muslims as greedy or immoral—in France, for instance, only 10 percent said Muslims were greedy, and just 18 percent labeled them as immoral. Neither of the two positive traits included in our analysis was consistently associated with Muslims.... Still, many did characterize Muslims as honest and generous. Roughly two in three (64 percent) of French, 56 percent of British, and 52 percent of German respondents considered Muslims honest, and majorities in France (63 percent) and Nigeria (55 percent) saw them as generous."

      The Religious-Cultural Negativity Index

   Negativity of Westerners towards Muslim publics
        Non-Muslim publics      Mean RCN
        India                   4.4
        Russia                  4.0
        Nigerian non-Muslims    3.7
        Spain                   3.5
        United States           2.9
        Germany                 2.8
        Britain                 2.5
        France                  2.1

=inc ww2010.h2 new "A new Young Turks revolution?" The defining characteristic of the Young Turks revolution that began in 1908 was increased nationalism for Turkey. These survey results indicate that a similar process is occurring now, and Turks become increasingly negative and hostile to almost all other groups. From the point of view of Generational Dynamics, Turkey's central role in Asia Minor means it will play a central role in the coming "Clash of Civilizations" world war. The exact path that Turkey will take cannot be predicted, but a new war between Turkey and the West, especially between Turkey and the Christian Orthodox nations, is coming with absolute certainty. =eod =// &&2 e071026 Near total collapse of ABX index shows that mortgage problems continue to grow =data ww2010.weblog.y2007.e071026.head Near total collapse of ABX index shows that mortgage problems continue to grow =data ww2010.weblog.y2007.e071026.keys =data ww2010.weblog.y2007.e071026.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071026.date 26-Oct-07 =data ww2010.weblog.y2007.e071026.txt1 On a day when the Bank of England warned investors that the stock market is "particularly vulnerable," =data ww2010.weblog.y2007.e071026.txt2 the ABX-HE index continued to fall like a stone, indicating that the market values of CDOs in many institutions' portfolios are continuing to fall as well. <#inc ww2010.pic g071025.gif right "" "Prices of ABX-HE series 07-2 for various risk levels on 25-Oct-2007 (Source: Markit.com)"#> This came on the day when the Bank of England issued <#stdurl http://www.bankofengland.co.uk/publications/fsr/2007/fsr22.htm "the semi-annual Financial Stability Report."#> The report said that the global financial system is at risk of further instability because of "ongoing uncertainties" about credit-market losses, and that both the stock market and commercial real estate values are particularly vulnerable to "further shocks, either in credit markets or from new sources." The gloomy outlook was confirmed in <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/10/25/nshares125.xml "testimony by Chancellor of the Exchequer Alistair Darling."#> None of this affected investors, of course. Speaking from the floor of the New York Stock Exchange, CNBC commentator Bob Pisani said that "investors are obsessed with a Fed rate cut next week. That's all they think about. That's all that matters to them." The ABX-HE indexes are a measure of investor confidence that homeowners are not going to default on their mortgages. The three graphs shown above reflect mortgages that were granted this year, from January 1 to July 1, 2007. The top level graph represents the highest quality prime mortgages, with rating AAA or AA; the middle level graph represents medium risk Alt-A mortgages, with rating A; and the bottom graph represents highest risk subprime mortgages. Indexes at all levels are falling like rocks, and may be headed to zero. The ABX indexes are proxies for the "market values" of mortgage-backed CDOs in the portfolios of Merrill Lynch and other financial institutions. Who knows? Maybe one of the reasons that Merrill had to <#inc ww2010.weblog.ref e071025 "write down $7.9 billion in CDO values,"#> instead of the $4.5 billion they had told us just two weeks ago, is because the ABX indexes fell sharply in the interim. I like to look at trends, so let's take a look at the trends that have gotten us to the current place:

In 2004, Fed Chairman Alan Greenspan said that <#inc ww2010.weblog.ref e041020 "there's no housing bubble,"#> but even if there were, it would be a GOOD thing, because homeowners have been refinancing the mortgages, and that gives the homeowners a lot more money to spend.
Through 2006, mainstream financial reporters and pundits were saying that there's no housing bubble, but if there was, then it was only a tiny one, and wouldn't hurt much.
On February 9, 2007, I first wrote about the ABX index with the article, <#inc ww2010.weblog.ref e070209 ""Rapid collapse of ABX index indicates that investors may be starting to panic.""#> The article was triggered because Household Finance Corp., a subsidiary of HSBC Holdings plc, issued a press release saying that they expected to have $1.75 billion in unanticipated bad debts, because so many people were defaulting on their mortgages. Another major institution, New Century Financial Corporation, made a similar announcement at the same time. At that time, mainstream financial reporters and pundits were saying that problems from the housing bubble were "contained," and that the only firms affected would be mortgage lending institutions, like HSBC and Century.
In June, 2007, came the <#inc ww2010.weblog.ref e070624 "Bear Stearns debacle,"#> where Stearns had to purchase their own near-worthless securities. This is the first time that the public became aware of the practice of purchasing one's own near-worthless securities in order to establish a phony "market price" that was much higher than the real market price. At that time, mainstream financial reporters and pundits were saying that the problems were "contained" to just a few companies in the business of funds based on mortgage-back securities. The problems were also pretty much in the past, according to the financial reporters and pundits, because they were based on subprime mortgages loans that had been given out in 2005 and 2006. Soon all those problems would be taken care of.
In July the ABX index series 07-1 (representing mortgage loans granted in the last half of 2006) <#inc ww2010.weblog.ref e070710 "began to fall rapidly,"#> after Moody's announced it was downgrading some CDO classes. This was one of the causes of the "credit crunch" of August as financial institutions, not knowing whether their asset-backed commercial paper was worth anything anymore, started hoarding cash. At that time, mainstream financial reporters and pundits were still saying that the problems were "contained" by mortgage loans that had been granted in 2006. Standards had gotten stiffer in 2007, we were told.
The credit crunch was "contained" by means of several large <#inc ww2010.weblog.ref e070919 "interest rate reductions by the Fed and Bank of England."#> At that time, mainstream financial reporters and pundits were saying that the credit crunch had disappeared, and that investor confidence had been restored. This was a return to the height of the "bad news is good news" mentality of investors, where any bit of bad news meant that the Fed would lower interest rates further, and so bad news was good news.
In early October, third quarter earnings started coming in. There were announcements by several financial firms that they would have to write down their asset values because they had been found to be near-worthless mortgage-backed CDOs. Earnings growth had become negative. This was the BEST news of all!!!! Investors were calling the third quarter the "kitchen sink" quarter, because all these firms were going to write off everything they could, so that by Q4 they could be expanding the bubble again.
In early October, the ABX indexes in the 07-2 series started falling precipitously (see graphs at start of this article). This happened as more really bad news about the housing market came out -- occupied home sales were falling, new home sales were falling, foreclosures were surging, defaults were increasing, and so forth. What really became apparent was this: The mortgage crisis was not "contained" by mortgage loans granted in 2005-2006; the mortgage loans granted in 2007 were just as bad as the ones issued in 2006. Also, the mortgage crisis was not "contained" to subprime mortgage loans; CDOs at all risk levels were affected. Still, mainstream financial reporters and pundits were reassuring us that financial institutions were getting all of this settled now, writing things down, so that they could start fresh in Q4.
Then we've had this week's <#inc ww2010.weblog.ref e071025 "Merrill Lynch debacle,"#> where the company almost doubled its writedowns in the space of two weeks. This showed that the "kitchen sink" theory was all wrong, and that no one could be sure whether any financial institution's portfolio was worth what was claimed.

I wanted to give this summary just to show that the mainstream financial media and pundits will always put the best spin on things. They are, in effect, biased in the direction of keeping the bubble growing as long as possible, even though the larger the bubble, the greater the disaster when it finally bursts completely. The continued collapse of the ABX index values is really bad news, because it means that the CDOs and other securities in the portfolios of financial institutions are becoming more and more worthless every day. CNBC commentator David Faber made an interesting point on Thursday. He said that "Merrill Lynch wrote down its high-grade CDOs by 19%, and its [low-grade] CDOs-Squared by 57%." He then compared this to what a small investment firm, Ambex has done. "By contrast, the mark-to-market losses announced by Ambex on its CDO portfolio, which is made up of exactly the same stuff that Merrill had in its portfolio, stand at 2½%." Faber's comment makes it clear that Ambex has a long way to go in writing down the values of its securities, and by implication so does almost everyone else. Even Merrill, in making its announcement on Wednesday, said that it might have further writedowns on the same securities. How long can these firms keep this up? How long can they hide the fact that their CDOs are worth far less than they're telling us? How long can they resort to SIVs and M-LECs and Super-SIVs that allow banks to sell worthless securities to each other at inflated prices in order to establish a phony "market value" for the worthless securities? My instincts tell me that this can't possibly go on much longer, but let's face it, my timing instincts haven't always been the best. But at some point there'll be a "tipping point" and a panic, when it becomes clear that the global financial system is built on top of these near-worthless securities. This panic might occur next week or next month or even next year, but I just can see how it can be prevented much longer. Let's just review what we do know. As I showed in my article, <#hreftext ww2010.i.panic070820 ""How to compute the 'real value' of the stock market,""#> the stock market is overpriced by a factor of 250%, same as in 1929. One of the graphs from that article is the following: <#inc ww2010.pic g070818c.gif center "" "S&P 500 Price/Earnings Ratio (P/E1) 1871-2007"#> Now, no one in his right mind can look at this graph and not see immediately that the stock market is going to crash. The P/E ratio will drop below 10, as it did in 1982, for example, and the stock market will fall to Dow 4000 or lower. From the point of view of Generational Dynamics, we're headed for a generational panic and crash with 100% certainly. =eod =// &&2 e071025 What did Merrill know, and when did they know it? =data ww2010.weblog.y2007.e071025.head What did Merrill know, and when did they know it? =data ww2010.weblog.y2007.e071025.keys =data ww2010.weblog.y2007.e071025.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071025.date 25-Oct-07 =data ww2010.weblog.y2007.e071025.txt1 Merrill Lynch writes down $8.4 billion in bad security holdings, =data ww2010.weblog.y2007.e071025.txt2 just two weeks after they had said that the writedown would be only $4.5 billion. Starting with the <#inc ww2010.weblog.ref e070624 "Bear Stearns debacle"#> that became public in June, there have been one story after another with the same theme: Banks and other financial institutions are taking every possible step to hide from the public the losses from bad securities (usually mortgage-backed CDOs and other credit derivatives) in their portfolios. The investment community was shocked on Wednesday to learn that <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aZTavhrTkOcQ&refer=home "Merrill will take $8.4 billion in write downs"#> for bad securities. That includes CDOs that had a high notional value, but had to be marked down in value by $7.9 billion. The problem is that it was just two weeks ago that Merrill said that the writedown would be only $4.5 billion. How could they have made that mistake? I mean, it's one thing if you can't balance your checkbook because you've lost track of a $3.25 payment somewhere, but no one should ever lose track of four billion dollars, especially one of biggest investment banks in the world. A billion here and a billion there, as the saying goes, and pretty soon it adds up to real money. Merrill is making excuses, of course. "Well, gawrsh, we figured it all out and came to a figure of $4.5 billion two weeks ago. But we did some 'additional analysis' over the last two weeks, and now it's $8.4 billion." Is Merrill willing to guarantee that there won't be any more writedowns? No, they aren't, although they have "only" $15.3 billion in CDOs left. And there's the problem. If Merrill made this mistake, aren't other banks likely to be making similar mistakes? And banks are the experts. If they're making such huge mistakes, what about financial organizations of lesser expertise -- mutual funds, investment trusts, hedge funds, savings banks, pension funds, college endowments, money market funds, insurance companies? The thing is, as I've said before, what's going on is fraud. People have invested money in funds that may be backed by mortgage-based securities that are worth a lot less than the fund managers claim. That means that the investors stand to lose a great deal of money. As cynical as I am about what's been going on, I'm still really shocked by how bad it's gotten. It's incredible to me that you have Treasury Secretary Henry Paulson cooperating with Citibank to set up <#inc ww2010.weblog.ref e071015 "this M-LEC"#> or "Super-SIV" whose purpose is specifically to allow financial institutions to sell worthless securities to one another at inflated prices, in order to establish the inflated price as a "market value." For those of you readers who are students of the Bible, I'm sure that you must recognize the kind of debauched, depraved behavior that we're seeing today, although admittedly there were no collateralized debt obligations (CDOs) that we know of in Sodom and Gomorrah. But it's interesting from a generational point of view, how the "last days" of any society or nation, prior to the start of a new genocidal crisis war, always feature a complete unraveling of all the rules that the society adopted at the end of the preceding crisis war to guarantee that no such war would ever happen again. I know that my 1950s schoolteachers, who often talked about the greed that led to 1929, would be in a state of shocked disbelief at the depraved financial behavior that's the norm today. I've been predicting since 2002 that we would have a generational panic and stock market crash and a new 1930s style Great Depression, so I'm not surprised that each day we're obviously closer to that result. But what's really shocking to me is the public displays of depravity and dishonesty. A few years ago I never would have believed that this was possible, and even a few months ago I could not have believed that this behavior could get so bad, and keep getting worse. The intent of all this depravity is to prevent banks and other financial institutions from having to mark their securities to market, which would mean huge writedowns, such as those from Merrill Lynch. But those writedowns are happening anyway. The SIVs and the Super-SIVs and the M-LECs can't keep worthless securities at artificially high prices forever. As one institution after another is forced to revalue their assets, pretty soon there may be a domino effect. As I've said many times, Generational Dynamics tells you what your final destination is, but it doesn't predict how you'll get there. I've been speculating that the worldwide financial crisis could be triggered by a panic on Wall Street or in Shanghai or Hong Kong. But maybe it will be something quite different: The panicked selling of mutual funds, hedge funds, and other portfolios containing CDOs, before the CDOs have to be marked to market. At any rate, bubbly investors now have one less hook on which to hang their hats. In the "bad news is good news" frame of mind, investors have been treating previous writedowns as a good thing. The phrase we've been hearing was that the third quarter was a "kitchen sink" quarter, meaning that financial institutions would get all their writedowns out of the way in the third quarter, so that they could go back to inflating the bubble in the fourth quarter. This concept is no longer viable. It's now clear that, at best, financial institutions have no idea how big their exposure is and, at worst, they do know, but are fraudulently hiding it from the public. Either way, bubbly investors are now beginning to realize that the "kitchen sink" concept doesn't work, and that there will be a lot more writedowns in the quarters to come. And with foreclosures surging and real estate prices falling, it's increasingly clear that much worse is yet to come. =eod =// &&2 e071024 Investor anxiety is palpably increasing on housing and earnings news =data ww2010.weblog.y2007.e071024.head Investor anxiety is palpably increasing on housing and earnings news =data ww2010.weblog.y2007.e071024.keys =data ww2010.weblog.y2007.e071024.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071024.date 24-Oct-07 =data ww2010.weblog.y2007.e071024.txt1 As credit crunch returns, will the Fed save the world again next week? =data ww2010.weblog.y2007.e071024.txt2 There's very little left of the bubbly optimism that you used to hear on CNBC. The anchors keep asking the same questions -- of each other and of the pundits they invite as guests: Should investors pay attention to the economy, to earnings, or to the Fed?

The economy. The thing that triggered the sharp selloff last Friday was an earnings report from Caterpillar. It included poor results and, more important, it predicted a slow economy in the future because of the collapse of the housing bubble. There was other bad news about the economy, including the increasing expectation that it will be a slow holiday season this year. This spooked investors on Friday, resulting in a 2.5+% stock selloff. The main concerns about the economy center around the housing bubble collapse. Housing starts have been falling sharply, meaning increasing unemployment; foreclosures have been surging, meaning that banks and financial institutions will be losing money; home prices are falling, preventing people from borrowing money against their homes, as they've done in past years, so they can't use money from their homes to make large holiday purchases. Last week I wrote an article, <#inc ww2010.weblog.ref e071015 ""Big banks discuss mind-boggling "M-LEC" superfund to bail themselves out.""#> This article discussed how Citibank has set up an independent corporation, called a "Master-Liquidity Enhancement Conduit," that it and other banks could use to launder money, so that they could sell worthless mortgage-based securities to one another at artificially inflated prices. Citibank's M-LEC, also called a "Super-SIV" or "Super Structured Investment Vehicle" apparently didn't fool investors, much to my surprise, since investors seem willing to be fooled by anything. The financial community is extremely suspicious of the M-LEC, as well they should be. This is all bad news. For some reason, investors panicked on Friday, and bad news was interpreted as (gasp!) bad news, and they sold off. By Monday, bad news was good news again, and the market rallied, even though there was an obvious level of anxiety.
Earnings. As I wrote in my 2005 article, <#hreftext ww2010.i.050711eleven ""The 11% Solution,""#> corporate earnings have historically grown at an average rate of 11% per year, but since the 1995 dot-com bubble started, corporate earnings have been growing at an average of 18% per year. By the Principle of Mean Reversion, corporate earnings would have to reestablish the long term average. Since they'd been ABOVE 11% for over ten years, then have to be BELOW 11% for over ten years. I've been waiting for something like that to happen since 2005, since it HAD to happen. Finally, third quarter results are in, and here's a summary from <#stdurl http://www.cnbc.com/id/15839135/site/14081545/ "CNBC Earnings Central:"#>
"As of Tuesday, October 23rd: 185 companies in the S&P 500 have reported earnings for third-quarter, 67.03% have beaten estimates, 10.27% were in-line, and 22.70% have missed. ... As of Friday, October 19th, the blended earnings growth rate for the S&P 500 in third-quarter 2007, combining actual numbers for companies that have reported, and estimates for companies yet to report, remains at -0.1%, below the 3.6% estimate from October 1st. On July 1st, the estimated growth rate was 6.2%. (Data provided by Thomson Financial)"
So third quarter earnings had been expected to grow 6.2% as of July, and 3.6% as of October. But now that actual results have been pouring in, earnings growth has been NEGATIVE: -0.1%. <#inc ww2010.pic g071023.gif right "" "Quarterly S&P 500 earnings growth, 2000-present, with estimates for Q4 and for 2008."#> There is something VERY PECULIAR going on with earnings, as you can see from the adjoining graph. This is one more mind-boggling thing in an increasingly mind-boggling world. Thomson Financial is the firm that provides these earnings growth figures. The adjoining graph shows the -0.1% growth in Q3 2007, but look at what comes after that: They're showing 10% earnings growth in Q4 and Q1!! There's no way that they could have reached that conclusion, and I'm not the only person who's noticed this. Many financial pundits on CNBC have been wondering, "When is Thomson going to reduce those 10% earnings growth estimates for Q4 and Q1? Those rates will NEVER happen." There's only one possibility: Thomson is purposely inflating its estimates to 10% so that investors will still be thinking in terms of "double digit earnings growth." In other words, it's another fraud, just like the M-LEC. We've seen one example after another of these coverups and frauds this year. Bear Stearns purchased its own hedge funds' securities at artificial prices, in order to <#inc ww2010.weblog.ref e070624 "cover up the fact that they were worthless."#> Ratings agencies <#inc ww2010.weblog.ref e070630 "S&P, Moody's and Fitch"#> deliberately overrated worthless mortgage-based securities in order to collect commissions from their customers. This Thomson thing with the phony earnings growth estimates is just mind-blowing to me. These financial firms are defrauding the public in full view of the public. I'm almost tempted to say that I just can't get over this. What's their excuse? I'm sure it would be, "If we told the truth, then investors would panic." Indeed.
The Fed. As I heard one pundit put it, "Investors believe that everything is going to be OK because the Fed will cut interest rates. Everyone knows that the Fed is on their side." Last month, there was a surprise <#inc ww2010.weblog.ref e070919 "monetary loosening by the Fed and Bank of England."#> In particular, the Fed reduced interest rates by a full ½%. This had an enormous psychological effect on investors. They hadn't been sure that the Fed would reduce interest rates at all, and were sure that if there were any reduction, it would be only ¼%. The ½% reduction caused an almost erotic euphoria among investors, and they pushed the <#inc ww2010.weblog.ref e070923 "stock market to new highs."#> The Fed Open Market Committee (FOMC) will be meeting again on October 31. Expectations this time are much different. One pundit after another has said something to the effect that, "The Fed will, WITHOUT DOUBT, reduce interest rates by at least ¼%." The "credit crunch" that almost crashed the markets in August was averted by aggressive action by the Fed and by the Bank of England. But the credit crunch isn't over. Apparently the Europeans are more aware of this than we are, as <#stdurl http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/23/cncredit123.xml "an article from the Telegraph"#> entitled "New credit crunch looms" describes. The Fed is in a difficult place. If the FOMC doesn't cut the interest rate at all, then investors, who have been counting on a cut, will immediately initiate a stock selloff, and the credit crunch will worsen. If the Fed does a ¼% reduction, then they won't give the economy any psychological boost at all, the kind of psychological boost that drove stock prices up last month. And if the Fed does a ½% reduction, then investors will be slightly surprised, though not nearly as much as last month. But more significantly, a ½% reduction will cause the value of the dollar to fall even further on international markets, causing a whole new set of dangers and problems that we haven't even discussed. So it will be interesting to see what the Fed does on October 31, and whether the Fed can "save the world" again, for the second time in two months.

From the point of view of Generational Dynamics, we're headed for a new 1930s Great Depression, as I've been saying since 2002, based on the stock market bubble. In 2002 I had no idea how it would unfold, but now we're seeing it. What's amazing is how the financial community is using one artifice after another, many of them simply fraudulent, to postpone the inevitable, making the situation worse with each new artifice. That's exactly what happened in 1929, as described by John Kenneth Galbraith in his 1954 book, The Great Crash - 1929, as follows:

"A bubble can easily be punctured. But to incise it with a needle so that it subsides gradually is a task of no small delicacy. Among those who sensed what was happening in early 1929, there was some hope but no confidence that the boom could be made to subside. The real choice was between an immediate and deliberately engineered collapse and a more serious disaster later on. Someone would certainly be blamed for the ultimate collapse when it came. There was no question whatever as to who would be blamed should the boom be deliberately deflated. (For nearly a decade the Federal Reserve authorities had been denying their responsibility for the deflation of 1920-21.) The eventual disaster also had the inestimable advantage of allowing a few more days, weeks, months of life. One may doubt if at any time in early 1929 the problem was ever framed in terms of quite such stark alternatives. But however disguised or evaded, these were the choices which haunted every serious conference on what to do about the market." (p. 25)

This is exactly what's happening today. I had to laugh on Tuesday morning, listening to Steve Liesman on CNBC talk about the M-LEC or Super-SIV. He said that an unnamed senior Fed official offers conditional support to the Super-SIV, provided that it's completely transparent, and that the securities being sold are at true market prices. So first off we can laugh at the fact that the Fed wants to support the project so much that they're willing to have an unnamed official say so on condition that his name isn't mentioned. Some support. And what's the nature of the support? It's conditional, and depends on the securities being sold at true market prices, which of course everyone knows they won't be, because the whole purpose of the Super-SIV is to fraudulently sell them at unrealistically inflated prices. So the Fed gets to eat its cake and have it too. They can support the Super-SIV at the present time, when it's expedient to do so, but only with an unnamed official; and later, when the whole thing blows up, they can say, "Well, yeah, we said it was OK, but ONLY if they sold the securities at market prices. We NEVER meant to support these fraudulent sales." All these financial officials are covering their asses now, waiting until the inevitable crash occurs, and hoping that SOMEONE ELSE will be blamed. This would be fun to watch, if only the consequences weren't so disastrous. =eod =// &&2 e071022 Anti-immigrant Swiss People's Party makes large gains in election =data ww2010.weblog.y2007.e071022.head Anti-immigrant Swiss People's Party makes large gains in election =data ww2010.weblog.y2007.e071022.keys =data ww2010.weblog.y2007.e071022.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071022.date 22-Oct-07 =data ww2010.weblog.y2007.e071022.txt1 Following a pattern of xenophobia that's growing around the world, =data ww2010.weblog.y2007.e071022.txt2 the Swiss people gave a major election victory to a party that its opponents say is nationalistic and racist. <#inc ww2010.pic g071021.gif center "" "Anti-immigration election poster, declared "racist" by opponents, depicts white sheep kicking a black sheep away from a Swiss flag, with the caption, "Establish your security.""#> Based on exit polls, the <#stdurl http://www.nytimes.com/2007/10/22/world/europe/22swiss.html?_r=1&ref=world&oref=slogin "Swiss People's Party won 29% of the vote"#> in the parliamentary election, making it the largest single party in Parliament. The <#stdurl http://www.ausschaffungsinitiative.ch/ "Swiss People's Party"#> had campaigned aggressively on an anti-immigrant platform, calling for the forced deportation of any foreign family where any family member is a criminal. The party's campaign featured posters showing white sheep kicking a black sheep away from a Swiss flag. Similar gains for anti-immigration parties have been made in other European countries. This is part of the growing xenophobia that's spreading around the world, among countries for which World War II was a crisis war. From the point of view of Generational Dynamics, this xenophobia leads to a new crisis war. As a country enters a crisis era, approximately 55-60 years after the end of the last crisis war, immigration issues, and xenophobia in general, become important political issues, as is happening today in countries around the world. At first, this anti-immigrant attitude is diffused and unfocused. But as time goes on, the anti-immigrant attitude becomes more explicit and focused, leading to increasing calls for action. The point of view can turn into what might be called "hatred," and the call for action might be called "war." This happens to every nation to some extent. On this web site we've often discussed the increasing xenophobia between Latinos and Anglos in America, between Europeans and Muslims, between Jews and Arabs, between Pakistanis and Indians, between Chinese and Japanese, between Koreans and Japanese, between Chinese and Americans. Generational Dynamics predicts that xenophobia and anti-immigrant attitudes will continue to increase in countries around the world, eventually leading to a new "clash of civilizations" world war. =eod =// &&2 e071021 Benazir Bhutto narrowly escapes death from suicide bombers =data ww2010.weblog.y2007.e071021.head Benazir Bhutto narrowly escapes death from suicide bombers =data ww2010.weblog.y2007.e071021.keys =data ww2010.weblog.y2007.e071021.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071021.date 21-Oct-07 =data ww2010.weblog.y2007.e071021.txt1 Pakistan is adrift and at a crossroads today, as its people wonder where to go next. =data ww2010.weblog.y2007.e071021.txt2 We <#inc ww2010.weblog.ref e071018 "mentioned briefly a couple of days ago"#> that former prime minister Benazir Bhutto was returning from exile to Pakistan, under an agreement with President Pervez Musharraf to share power. Bhutto has been in exile since the 1990s, when she was charged with massive corruption, and chose exile over jail. <#inc ww2010.pic g071019a.jpg left "" "Benazir Bhutto, shocked from having narrowly escaped death, is rescued from bombed vehicle on Thursday (Source: dailytimes.com.pk)"#> Benazir Bhutto's return to Pakistan on Thursday was euphoric, as hundreds of thousands of supporters lined the streets along which her caravan traveled from the Karachi airport. The cheers had the atmospherics of a huge party. The euphoria ended abruptly, however, when two <#stdurl http://www.iht.com/articles/2007/10/19/asia/pakistan.php "suicide car bombers approached her vehicle and exploded."#> It was only through the sheerest luck that she was unhurt; she had been fully exposed, waving to the crowds, and only moments before the blasts had she retreated into her vehicle for a brief rest. Even so, her vehicle was badly damaged, and dozens of members of her personal guard were killed as they used their bodies to prevent the suicide bombers from getting closer. Hundreds of onlookers were killed and wounded as well. <#inc ww2010.pic g071019b.jpg right "" "Benazir Bhutto, at a press conference on Friday afternoon. (Source: BBC)"#> At a press conference on Friday, <#stdurl http://ap.google.com/article/ALeqM5jIE0IUn4WIiaMBpjG8SI_6H5RXzgD8SCHCV00 "Bhutto blamed al-Qaeda and Taliban militants"#> for the assassination attempt, and declared she would risk her life to restore democracy in Pakistan and prevent an extremist takeover:

These remarks cut very close to the bone for Bhutto. =inc ww2010.h2 zulfikar "Benazir's father, Zulfikar Ali Bhutto" Benazir's own father, Zulfikar Ali Bhutto, was President of Pakistan from 1971 to 1973, and Prime Minister from 1973 to 1977. He founded the Pakistan People's Party (PPP) in the 1960s, and governed through some very tumultuous times, especially a humiliating loss in a war with India. Here's the map of the Indian subcontinent as of 1970: <#inc ww2010.pic india1970a.gif center "" "Indian subcontinent, 1970, highlighting provinces of Waziristan and Balochistan. East Bengal province, also known as East Pakistan, seceded and became Bangladesh in 1971. (Source: Stearns, Encyclopedia of World History)"#> The defeat by India was devastating to the Pakistanis. India gained control of much of the disputed provinces of Kashmir and Jammu, and East Pakistan seceded to form a new nation, Bangladesh. The secession of Bangladesh led to an (Awakening era) secessionist insurgency in Balochistan province, with widespread civil disorder and civil disobedience. This led to the overthrow of Zulfikar Ali Bhutto's government in 1977, resulting in martial law and a military dictatorship. Bhutto himself was accused and tried for murder and other crimes, which his supporters claim he did not commit. Bhutto was found guilty. He was executed by hanging on April 4, 1979. Electoral government was restored in 1985, and Benazir Bhutto was elected Prime Minister in 1988. There followed a period of very chaotic government with numerous Prime Ministers. Two of them, Bhutto and Nawaz Sharif, were both exiled from the Pakistan after being found guilty of corruption. =inc ww2010.h2 musharraf "Coup by Army chief Pervez Musharraf" In 1999, a new military coup by Army chief Pervez Musharraf returned some stability to the government. Musharraf and Pakistan had been allied with the Taliban in Afghanistan, but after September 11, 2001, Musharraf turned against al-Qaeda, the Taliban and Islamist extremism. Since then, Musharraf and Pakistan have been allied with the United States in the war against terror. =inc ww2010.xr.related1 right pakistan 3 Musharraf has been very popular with the Pakistani people because of the stability he brought to the government, and because of economic improvements brought about, his opponents claim, by the money provided by the U.S. in return for supporting the war against terror. However, Musharraf's popularity has been plummeting this year, for several reasons:

The appearance that Musharraf's government is losing control of the Islamist terrorist situation, especially after the <#inc ww2010.weblog.ref e070712 "the spectacular assault on the Red Mosque"#> in Islamabad in July, killing over 100 people.
The almost complete <#inc ww2010.weblog.ref e070723 "loss of control of the Waziristan provinces"#> in the northwest to al-Qaeda militants.
The nationwide riots that followed <#inc ww2010.weblog.ref e070513b "Musharraf's March 9 suspension"#> of the country's Chief Justice.
The appearance that Musharraf is doing George Bush's bidding, which infuriates that al-Qaeda Islamists in particular.

Benazir Bhutto has been criticizing Musharraf from exile, especially for his 1999 coup, which was reminiscent of the 1977 coup that overthrew her father's government. Her call for a "return to democracy" is made for exactly that reason. However, Bhutto's popularity is also jeopardized, especially among conservative Muslims, who are opposed to having Bhutto in power because she's liberal, moderate, secular, openly pro-American, and a woman. Among all the many groups that dislike Bhutto, which one is likely to have perpetrated the assassination attempt? During her press conference on Friday, she <#stdurl http://www.timesonline.co.uk/tol/news/world/asia/article2696680.ece "listed four different groups that wanted her dead"#> within hours of her return:

"There was one suicide squad from the Taleban elements, one suicide squad from al-Qaeda, one suicide squad from Pakistani Taleban and a fourth – a group, I believe, from Karachi."

There are certainly sharp disagreements in Pakistan between moderate and hardline Muslims. However, while those disagreements may cause terrorism and low-level violence, it will not cause a crisis war. =inc ww2010.h2 hindu "Hindu vs Muslim: Partition, independence, genocide" Two months ago, in August, India and Pakistan celebrated 60 years of independence. And at the same time they commemorated Partition, one of the most genocidal mass migrations in history. The British, who had ruled the Indian subcontinent for centuries, finally gave in to the demands of the people for independence. The forced migration of 14 million people and the killing of perhaps a million more makes the 1947 Partition of the Indian subcontinent into two countries, separating Muslims from Hindus, one of the largest mass migrations in history. It came about because the British, who had ruled the Indian subcontinent for centuries, finally gave into the demands for independence. In order to prevent a civil war, the British partitioned the subcontinent into two portions:

West Pakistan and East Bengal province for the Muslims. (The latter became Bangladesh in 1971.)
India for the Hindus and Sikhs.

Historically, the defining event of the Indian subcontinent of the last millennium was the 1526 conquest of Delhi in Northern India, climaxing with the Battle of Panipat on April 21, 1526. <#inc ww2010.pic india5.gif left "" "Indian subcontinent, showing the disputed regions of Kashmir and Jammu. Bangladesh used to be the eastern portion of Pakistan."#> The conquest was by the Mongols (the descendants of Genghis Kahn) coming from Persia (Iran), having adopted a form of the Shia Muslim religion. The result was centuries of rule by the Mughals (the Persian name for Mongols). There are two Mughal emperors of note: Babur, who led the conquest in 1526, and sought to give Muslims a privileged status over Hindus, before dying in 1532; and Akbar, the greatest Mughal emperor, who ruled from 1556 until his death in 1605, and who was greatly tolerant about religion, and encouraged the growth of the Hindu religion along with his own Muslim religion. These two leaders, Babur and Akbar, represent the opposite poles of Muslim leaders that have defined the lives of the people of the Indian subcontinent for the centuries since then, and continue to do so today. Tolerant Mughals ruled India through the 1600s, making the Mughal Empire perhaps the greatest empire in the world at the time, with Muslims and Hindus living in relative peace. Hindu persecution began with Aurangzib, who became emperor in 1658. He destroyed Hindu temples, and adopted policies prohibiting exercise of the Hindu religion. The Mughal Empire disintegrated in the 1700s, and in 1764, a major victory brought the subcontinent under British rule. British rule continued until August, 1947, and Partition. Britain withdrew control of India, and created two nation-states: India with a majority Hindu population, and Pakistan, which was predominantly Muslim. The plan was that the populations would remain in place, and that the remaining Hindus in Pakistan would live there, as would the remaining Muslims in India. The plan didn't work. There were mass migrations of some 12 million people, crossing the partition borders, Hindus moving to India and Muslims moving to Pakistan, often leaving everything they owned behind. The ethnic violence killed perhaps a million people. The provinces of Kashmir and Jammu remain chronic sore spots to this day. =inc ww2010.h2 prospects "The prospects: A new Hindu / Muslim war" From the point of view of Generational Dynamics, the massive ethnic violence and genocide that followed the 1947 Partition will be re-fought in a new crisis war between India and Pakistan, at some time in the not too distant future. =inc ww2010.cf.cf060209 p left In my little "conflict risk" graphic, I've put the Kashmir problem at Level 2 (medium risk of regional war in the next six months). As I've explained, I have great admiration for both Pakistan's President Pervez Musharraf and his Indian counterpart, India's Prime Minister Manmohan Singh. Both Pakistan and India are nuclear powers, but these two leaders have engineered a remarkable détente that has prevented a conflict, and they've pulled back from the continuing seething dispute over Kashmir and Jammu. The question that I'm considering is whether the time has come for me to raise this potential conflict to Level 3 (high risk). Musharraf, born 1943, and Singh, born 1932, are both survivors of World War II and the subsequent genocidal war fought after Partition and independence. This is exactly the kind of détente that can be expected from people in an "Artist" type, people who grow up during a crisis war. They become adults who, as a group, are more sensitive and more willing to compromise than people in other generations. When they retire or die, they're replaced by people in the arrogant post-war generations (like our Baby Boomers and Generation-Xers). People in these generations are far more confrontational, and that's been pretty apparent for some time from reading Benazir Bhutto's statements. In particular, Bhutto's statements regarding terrorist activities in Waziristan have been considerably harsher than those of Musharraf, and echo Bhutto's father's attitudes towards the insurgency in Balochistan in the 1970s. (There was a suicide bombing in southern Balochistan on Saturday. Press reports claim that it was unrelated to the assassination attempt on Bhutto, but that's far from clear. It could well have been perpetrated by the same insurgency that Bhutto's father fought in the 1970s.) (Paragraph added 21-Oct) The disappearance of either Musharraf or Singh would change the situation dramatically, as either one would likely be replaced by someone much younger, and much more confrontational. This is the kind of generational change that leads to new crisis wars. The rapidly deteriorating political situation in Pakistan raises the possibility that such a change of leadership could be close; and even if Musharraf and Bhutto do come to a power-sharing arrangement, the political situation may continue to deteriorate anyway, and this could spiral into a confrontation with India. I'm not the only person that this thought has occurred to; the India news media is expressing increasing concern about the situation in Pakistan. Here's a <#stdurl http://www.hindustantimes.com/StoryPage/StoryPage.aspx?id=9b6df1e0-1512-425d-9097-6533c2565170 "possible scenario from the Hindustan Times:"#>

"The attacks were not unexpected in Karachi, which is a hotbed of sectarian killings. Intelligence reports even warned that various jehadi groups linked to al-Qaeda and the Taliban were planning to carry out such strikes on Ms Bhutto on her return. The fact that the former premier announced the date and place of her return weeks ago probably gave the perpetrators enough time to prepare. Although no one has yet claimed responsibility for the attacks, many elements in Pakistan are opposed to Ms Bhutto’s possible return to power. She is widely seen as a pro-Western moderate and her open statements supporting US policy in the region obviously put her in the cross-hairs of terrorist outfits. She returns to the political scene at a time when Pervez Musharraf’s grip on the presidency is at its weakest since he seized power in a coup eight years ago. The General’s popularity ratings continue to nosedive even as Opposition parties challenged his re-election as president earlier this month. The loyalty of Pakistan’s powerful military and US patronage appear to be just about the only things going for the embattled president. ... Ironically, the very forces that the general and Ms Bhutto had created now pose the biggest threat to them. For it was during Ms Bhutto’s second term in office in 1994, when General Musharraf was her Director General of Military Operations, that they projected the Taliban as a force to further Pakistani interests in Afghanistan. But now, any military solution they try out against the radicals would likely trigger more turbulence and invite attacks on the Pakistan army. As Pakistan drifts, the problem for India is that Islamabad’s military rulers might try to divert attention by indulging in military adventurism. Which means a real danger of increased militancy in Kashmir, more active insurgencies in the North-east and terrorist strikes in the subcontinent."

To this I would add one more scenario. Although there have been a dozen suicide bombings and other terrorist attacks in Pakistan this year alone, they haven't yet galvanized the Pakistani people into political unity. (This is the generational concept of "regeneracy," referring to the regeneracy of national unity that occurs during crisis eras.) It's possible that this particular attack, directed at Bhutto and hence at the heart of Pakistan's democracy, could change the population's behaviors and attitudes to the point where they'll demand that "something must be done." This could cause, to select one of many possible scenarios, a panicked reaction that leads to some kind of inter-tribal warfare, and that too could spread into India. (Paragraph added 21-Oct) As these scenarios illustrate, the situation in Pakistan is becoming increasingly dangerous, and may be close to spiraling into all-out war. =eod =// &&2 e071019b WSJ: When crash means 'buy' =data ww2010.weblog.y2007.e071019b.head WSJ: "When crash means 'buy'" =data ww2010.weblog.y2007.e071019b.keys =data ww2010.weblog.y2007.e071019b.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071019b.date 19-Oct-07 =data ww2010.weblog.y2007.e071019b.txt1 How mainstream financial media are cheerleaders for the Principle of Maximum Ruin. =data ww2010.weblog.y2007.e071019b.txt2 As we watch the current financial scene unfold, we see the following message in the financial media: There's really nothing to worry about, but maybe be a little cautious since there have been problems before. No one wants to go out on a limb and say that there will never be another crash, but the larger message is always the same, that when the stock market dips a few percentage points, then that's a great buying opportunity to take advantage of the next all-time high (which, surely, will only be a couple of weeks away). In order for a generational financial crisis (like 1929) to be as totally devastating as possible, it's necessary for as many people as possible to believe that a crisis could never happen and, once it's begun, that it will end quickly. This is the basis for the principle that I've discussed several times on this web site, the Principle of Maximum Ruin: That a generational financial crisis will ruin the maximum number of people to the maximum extent possible. The mainstream financial media are doing as much as they can to convince people that, while there might something to worry about some day "down the road," there's nothing to worry about now. These articles are especially plentiful today, as <#inc ww2010.weblog.ref e071019 "investors commemorate the false panic of Monday, October 19, 1987."#> An <#stdurl http://online.wsj.com/article/SB119275163589664160.html "article in Friday's Wall Street Journal"#> illustrates very well how this works:

"When Crash Means 'Buy' - After Black Monday, Advice to Invest on Dips" The 1987 crash -- 20 years ago today -- had investors bracing for the worst. When the worst didn't come, those who quickly recognized that the economy and the stock market were far more resilient than they had thought looked smart. A little more than a year later, the Dow Jones Industrial Average had made back all the ground it had lost, and anyone who bought in the aftermath of the crash could feel justifiably pleased. "I put all of my 401(k) in the stock market at that time, and it turned out to be one of the few really smart things I've ever done," says ING Investment Management economic adviser James Griffin, who was then an economist for Aetna Life Insurance. Even after declines this week, at 13888.96 yesterday, the Dow is up nearly eightfold from its close of 1738.74 on Black Monday, Oct. 19, 1987. As the market has rebounded from every downturn in the 20 years since the crash, individual investors accepted the notion that they should continue to plow money into the stock market even when the picture looks bleak. "Buy on the dips" has become their creed, and standard-issue investment advice. Many saw this summer's credit-market turmoil, which sent stocks down sharply in August, as a buying opportunity. The Dow industrials have rebounded more than 8% since their recent low on Aug. 16 and hit two records just this month. It is a testament to the dynamism of the economy and stock market, and how skillful policy makers have become when faced with a crisis. At the same time, there is a risk that investors have become too complacent, and that if the day comes that the economy can't bounce back, there will be big losses. "Probably the largest lesson taken away from 1987 was a belief in the system and the ability of the system to avoid disaster," says John Bollinger, president of Bollinger Capital Management in Manhattan Beach, Calif. "In the long haul, that's probably a lousy lesson for the markets to have learned, because it ultimately sets up for problems down the road." ... Mr. [James] Griffin, now at ING, says what made him bullish in 1987, when many of his colleagues were not, was the way the Fed, under its newly appointed chairman, Alan Greenspan, responded to the crash. Cutting interest rates stood in contrast to 1929, when the Fed kept rates high. The Fed lowered rates in 1995 after the Mexican peso crisis, in 1998 after the Russian debt crisis, in the aftermath of the Sept. 11, 2001, attacks and, most recently, in response to this summer's turmoil. Donald Fine, a market analyst at Chase Manhattan Bank in 1987, recalls that after the crash "the recession talk began immediately." But when the economy shrugged off the crash "it said that the economy was considerably more resilient than people thought," says Mr. Fine. The next recession didn't begin until 1990, making the economic expansion begun in 1982 the longest ever in the U.S. during peacetime. The expansion that followed, which didn't end until 2001, was the longest in history. It's all part of a damping of economic volatility over the past 25 years that some economists dub "The Great Moderation." One consequence of the Great Moderation has been that companies no longer get rocked as hard by the forces of boom and bust as they did before. That, and policy makers' skill at guiding the economy through crises, has meant buying stocks after selloffs has generally been a good tactic. ... The real risk, says Mr. Bollinger, is that someday the U.S. economy will run into trouble that defies the ability of the Fed to deal with or, to put it another way, that the success of economy's resilience over the past 25 years has more to do with luck than it does with policy makers' skill."

It isn't just WSJ that's cheerleading for the Principle of Maximum Ruin. Here's part of a <#stdurl http://www.thestreet.com/markets/marketfeatures/10385229.html "Friday morning column on thestreet.com"#> written by financial contributor Rev Shark:

"How You Could Have Managed the '87 Crash" There is a lot of talk today about the stock market crash that took place 20 years ago. It certainly is important to understand that the market can act so dramatically. Although the 1987 crash was of an almost unimaginable magnitude, it does illustrate that the potential for surprises is always lurking. However, it is important not to learn the wrong lessons from the crash as well. I would bet that much more has been lost worrying that another giant one-day crash might occur than was actually lost in the 1987 crash. Fear of a crash has caused a lot of people to be overly cautious without must justification. ... If you used any sort of money management system at all and set stops at reasonable levels, the great likelihood is that you would have been out of almost all your positions before the market crashed 23% on Monday, Oct. 19, 1987. The lesson here is obvious. Use a money management system, and when stocks are downtrending, don't be too quick to try to catch the turning point. If you keep that in mind, not only would a 1987 crash not cause you too much pain, but it would present a huge opportunity if you stayed patient. Don't let fear of a crash make you overly cautious. Just make sure you develop a system for cutting losses and stick to it.

This is the typical cheerleading that you read today, along with this silly advice to "set stops at reasonable levels." He's wrong about this on multiple levels. He's suggesting that you use "sell stop orders" to protect yourself. That means that you instruct your broker (or your online software) to sell your stock as quickly as possible after the price goes below the "stop price." The first problem is a psychological one. People are told that if the stock market dips, then it's a buying opportunity. Using a sell stop order means you're going to SELL when the market dips. That makes no sense at all. And second, sell stop orders would have done no good at all on Oct 19, 1987, because the stock exchange was overwhelmed with sell orders and couldn't keep up. A stop sell order would have done you no good. On days of massive selling, computer systems all over the world will experience failures, because they haven't been designed to handle the huge number of transactions that occur. Basically, you should assume that, once panic selling begins, it will be several hours, or perhaps an entire day, before you'll be able to execute any orders at all. Remember that everyone will be trying to sell, and you're going to be in line behind a lot of people, many of whom have contacts and a lot more clout than you have. From the point of view of Generational Dynamics, we're able to see in "real time" how the Principle of Maximum Ruin unfolds. The fact is that few people believe that anything like the Great Depression could ever happen again; most people seem to believe that even a recession could be controlled by the Fed. This could be described as the generational equivalent of "Pride goeth before the fall." It is 100% certain that we are headed for a major worldwide financial crisis. This will be a generational crisis and, unlike the False Panic of 1987, will continue for years. The stock market fell 40% in 1929, but it kept falling after that, and by 1933 it had fallen to 10% of its peak value. That's the kind of thing that's going to happen again. If you INSIST on adopting a "Buy on the dip" philosophy, then wait until the Dow Industrials dip below 1500, and then it will be time to buy again. =eod =// &&2 e071019 Investors commemorate the false panic of Monday, October 19, 1987 =data ww2010.weblog.y2007.e071019.head Investors commemorate the False Panic of Monday, October 19, 1987 =data ww2010.weblog.y2007.e071019.keys =data ww2010.weblog.y2007.e071019.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071019.date 19-Oct-07 =data ww2010.weblog.y2007.e071019.txt1 The Dow Industrials fell 22% in a single day, the largest one-day drop in history. =data ww2010.weblog.y2007.e071019.txt2 But the collapse wasn't sustained. By the end of 1987, the market was rising robustly again, and it recovered completely within 1½ years. That wasn't true in 1929. On Black Monday in that year, October 28, 1929, the market fell "only" 13%. The difference, though, was that the market kept falling, and falling, and falling -- for four years! Bit by bit, the market kept falling, until it had tumbled to just 10% of its 1929 peak. That's how you can tell that the 1987 crash was a "false panic" -- recovery was rapid, as opposed to the "generational panic" of 1929. It's not surprising that the stock market recovered quickly after the Panic of 1987. The stock market was underpriced in 1987, while today the stock market is <#hreftext ww2010.i.panic070820 "overpriced by a factor of 250%,"#> same as in 1929. John Kenneth Galbraith's 1954 book The Great Crash - 1929, contrasted the 1929 with previous panics:

That's the situation we're in today. One of the reasons that almost no one is concerned about a possible crash today is because there is general belief that once it happens, the troubles will be over. However, from the point of view of Generational Dynamics, we're now <#hreftext ww2010.i.macro061025 "overdue for a new generational crash,"#> and it will be very long-lasting, like the crash of 1929. If you examine the articles that are being written about the Panic of 1987, you'll see that nobody has any idea why the Panic of 1987 occurred, and why it occurred then instead of, say in 1980 or 1990. This is a similar problem to the question of why the 1990s dot-com bubble occurred at the time it did. You can look at all the macroeconomics research and you'll discover that no one has a clue. It's as if it occurred by magic. From the point of view of Generational Dynamics, and from the point of view of ordinary common sense, it's perfectly obvious <#hreftext ww2010.i.macro061025 "why the bubble began in the mid-1990s."#> It began in the 1990s because that's exactly the time when the people from the generation who survived the Great Depression all disappeared (retired or died), all at once, leaving behind the Boomers and the Xers who were debauched in using debt and credit. =inc ww2010.h2 58year "Generational change after 58 years" The Panic of 1987 occurred at that time for a related reason. 1987 was 58 years past the crash of 1929, and generational research has found a number of examples where a huge disaster occurs, and a "false panic" occurs 58 years later. Anyone who was 4 years old or older in 1929 had some personal memory of the panic of 1929. Thus, in 1987, people who were 62 years old or older are the only ones now remembering anything about the 1929 panic. (Paragraph corrected on 22-Oct) Thus, the 1987 panic appears to have occurred at a time of a significant generational change. Whatever latent fears that still existed about a recurrence of the 1929 panic were focused on this moment, as those who remembered the 1929 were quickly disappearing, and were replaced by those who didn't remember it. Another example was the "swine flu" panic in 1976. The public became hysterical over the possibility of a new flu pandemic. Responding to public demands, the government prepared millions of doses of swine flu vaccine. The pandemic amounted to nothing, and the whole thing was a political fiasco. This was a false panic that occurred exactly 58 years after the Spanish Flu epidemic of 1918. It appears to be the same kind of thing as the false panic on Wall Street in 1987. Up to that point, people were afraid of a recurrence of the 1918 epidemic. The 1976 panic was a political fiasco that reversed the public mood, and left the public with no further fear of a flu epidemic. That's why the public today has no fear of a bird flu pandemic. =inc ww2010.h2 1914 "The Panic of 1914" The Panic of 1914 was another "false panic," and it has many similarities to the Panic of 1987. In particular, it occurred 58 years after the previous generational crash, <#inc ww2010.weblog.ref e070406 "the Panic of 1857"#> (also known as the Hamburg crisis of 1857). The Dow Industrials actually fell 24.39% on November 11, 1914, but it's not counted as a one-day fall because the market had just reopened after a hiatus caused by the outbreak of the Great War (World War I). The Panic of 1914 was important in United States history, because it transformed the US into the major monetary superpower in the world. Here's how it's described by William L. Silber in <#stdurl http://press.princeton.edu/chapters/i8243.html "When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America's Monetary Supremacy:"#>

"The Great War threatened the United States with financial disaster. During the last week of July 1914, Europeans began to liquidate their Wall Street investments and transfer gold to Europe to pay for the war. Foreign investors owned more than 20 percent of American railroad securities, the largest category of securities traded on the New York Stock Exchange. Under the gold standard, they could demand the precious metal in exchange for the proceeds of their stock sales. The biggest gold outflow in a generation imperiled America’s ability to repay its debts abroad. Fear that the United States would abandon the gold standard pushed the dollar to unprecedented depths on world markets. The European assault on American finance brought danger and opportunity. In 1914 the United States was a debtor nation with a history of financial crises. Failure to meet its foreign obligations could sink American dreams of world monetary leadership. If it passed the test, however, the United States could jump to the head of the class. Less than three weeks after the outbreak of the European conflict, Woodrow Wilson reviewed a road map for America’s march to world financial supremacy. Henry Lee Higginson, an investment banker in Boston, wrote to the president on August 20, 1914, that "England has been the exchange place of the world, because of living up to every engagement, and because the power grew with the business. Today we can take this place if we choose; but courage, willingness to part with what we don’t need at once, real character, and the living up to all our debts promptly will give us this power; and nothing else will. I repeat that it is our chance to take first place." Wilson sent Higginson’s letter to Treasury Secretary William G. McAdoo with the following covering message: “Here is a letter which is no doubt worth your reading whether you think the suggestions are practicable or not." ... How did the summer of 1914 change history? A suspension of the gold standard in 1914 would have been a setback to American dreams of international financial leadership. The Panic of 1907 had already damaged U.S. credibility. A panic in 1914 would have been the second act in an American financial tragedy. Alexander Noyes, the contemporary business editor of the New York Times, appropriately highlighted the drama: "It is not too much to say that as a matter of financial history, the United States stood during those two or three weeks of August at the parting of the ways." Suspending the gold standard would have relegated the dollar to second-class status, and sterling would have remained the undisputed money of choice for international finance. ... [Treasury Secretary William G.] McAdoo succeeded in August 1914 because he did not hesitate to bludgeon the crisis with a sledgehammer. He wielded powerful weapons— suspending stock trading for four months and flooding the country with emergency currency—that could have injured America. His exit plan, stimulating agricultural exports with the Bureau of War Risk Insurance, avoided lasting damage to the economy. McAdoo could apply massive force because he had implemented a plan to restore normal functions. Failure to include a strategy for withdrawal either promotes toothless emergency weapons, like a placebo to treat a serious disease, or imposes unnecessary costs. ... McAdoo’s imprint—decisive leadership combined with a road map for crisis control—turned a potential financial disaster into a monetary triumph."

This description illustrates another major parallel between the two false panics (1914 and 1987): Treasury Secretary William G. McAdoo established his reputation as major financial leader in 1914, just as Alan Greenspan established a similar reputation in 1987, as I described in <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory.""#> As quoted above, John Kenneth Galbraith wrote, "A common feature of all these earlier troubles [previous panics] was that having happened they were over. The worst was reasonably recognizable as such." This is a very significant statement because it hints at the process that occurs, leading from one generational crash to the next, from 1857 to 1929, and from 1929 to today. The Panics of 1914 and 1987 served the same purpose: They occur 58 years after the preceding crash, at a time of significant generational change from the last people who have any personal memory of the previous crash. And they serve to convince the younger generations that there's nothing to fear, that the economic and policy problems that caused the previous crash have all been solved, and that there's nothing left to fear. From the point of view of Generational Dynamics, the False Panics of 1914 and 1987 are important events. In particular, the False Panic of 1987 has led to the debauched use of debt and credit that we've been seeing for the last few years, and that will lead to the coming generational crash and new 1930s style Great Depression. =eod =// &&2 e071018 Review of recent international stories =data ww2010.weblog.y2007.e071018.head Review of recent international stories =data ww2010.weblog.y2007.e071018.keys =data ww2010.weblog.y2007.e071018.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071018.date 18-Oct-07 =data ww2010.weblog.y2007.e071018.txt1 France, Turkey and Pakistan in the news =data ww2010.weblog.y2007.e071018.txt2 It's time again for a summary of all the important international stories that I've been neglecting while I've been focusing on the deteriorating financial situation. Incidentally, there's a potentially big financial story coming up, possibly as early as Thursday morning. Remember when I used to write a lot about <#inc ww2010.weblog.ref e070225 "the ABX credit derivatives."#> They fell sharply early in the year, leading to the Bear Stearns hedge fund collapse, and credit crisis. <#stdurl http://www.markit.com/information/products/abx.html "The ABX index"#> stabilized over the summer. However, it now turns out that ABX has been crashing like mad in the last few days. This may have repercussions very soon. And investors are nervous as hell anyway, because Friday is the 20th anniversary of the <#hreftext ww2010.i.macro061025#false "False Panic of 1987."#> Take care. =inc ww2010.h2 france "France: Sarkozy facing massive strikes on Thursday" Recall that when <#inc ww2010.weblog.ref e070508 "Nicolas Sarkozy won the election"#> for President in May, he announced a very ambitious program to make France great again. The heart of his program was to eliminate the 35 hour restriction on the work week, and to eliminate some special pension regimes. Well, the labor unions aren't happy, and they're anxious to prove to everyone that they're more powerful than Sarkozy is. The major confrontation begins on Thursday. <#stdurl http://www.time.com/time/world/article/0,8599,1672383,00.html "90% of all scheduled train service"#> across France will be canceled. Other public service workers will be striking as well. From the point of view of Generational Dynamics, France is becoming politically paralyzed. The same thing is happening in America, where the Congress can't get anything done. The same thing is happening in Japan, China, Israel, and other countries that fought in WW II as a crisis war. This happens when the postwar generation (i.e., the Baby Boomer generation in this case) comes to power. Not having lived through a previous crisis war, they don't know how to govern, and so the government becomes paralyzed. Let's see if Sarko can get anything done after this confrontation with the unions. =inc ww2010.h2 france "France: Sarkozy's wife dumps him" <#inc ww2010.pic g071017a.jpg right "" "French President Nicolas Sarkozy and wife, former model Cécilia Sarkozy (Source: telegraph.co.uk)"#> French President Nicolas Sarkozy has one more distraction: His wife is <#stdurl http://www.telegraph.co.uk/portal/main.jhtml?xml=/portal/2007/10/16/nosplit/ftsar116.xml&DCMP=ILC-traffdrv07053100 "having an affair and is about to file for divorce."#> But, ummmm, she may have a problem: <#stdurl http://women.timesonline.co.uk/tol/life_and_style/women/article2681392.ece "Article 67 of the French Constitution"#> says the following:

"The President of the Republic bears no legal responsibility for his acts carried out as President, with exceptions [these include high treason]. During his mandate the President may not be required to testify or become the object of any legal action before any jurisdiction or French administrative authority. He may not be the subject of investigation or prosecution."

So he can't become the object of any legal action including, presumably, a divorce action. Vive la France! =inc ww2010.h2 turkey "Congress backs off on Turkish genocide vote" The plan had been to pass a non-binding resolution of Congress declaring that Turkey had committed the genocide of millions of Armenians in 1915, during World War I. From the point of view of Generational Dynamics, I would certainly call it a "genocide," but then some would also call the <#inc ww2010.weblog.ref e060702 "WW I Battle of the Somme"#> a genocide, where over a million British soldiers were killed, 20,000 on one day alone: July 1, 1916. <#inc ww2010.pic derbrand.jpg right "" "The Fire: Germany Under Bombardment, 1940-45"#> And then there are a number of Germans who would like to declare the Allied bombing of Dresden in WW II a "genocide." So this game of identifying old genocides can be a dangerous one, and can backfire. The Administration has been applying a lot of pressure to Congress to drop the measure, as it would infuriate the Turks, who are an important ally in the war in Iraq. And incidentally, this isn't a party line issue, as there are proponents among both Democrats and Republicans. But the pressure seems to be working, as many former proponents are now expressing the view that this isn't the time to insult an important ally. =inc ww2010.h2 pakistan "Benazir Bhutto returns to Pakistan amid political chaos" President Pervez Musharraf may or may not still be President of Pakistan. He won the election a couple of weeks ago, but the decision won't be final until the Supreme Court decides that he was eligible to run for president in the first place. <#inc ww2010.pic g071017b.jpg left "" "Benazir Bhutto (Source: dailytimes.com.pk)"#> In the midst of all this, former premier Benazir Bhutto is returning from exile on Thursday, under an agreement with Musharraf that he'll be President and she'll be Prime Minister. Bhutto has been in exile since the 1990s, when she was charged with massive corruption, and chose exile over jail. Her return now is begin greeted by millions of supporters, although <#stdurl http://www.bloomberg.com/apps/news?pid=20601091&sid=aUMUR_0r1Cbg&refer=india "it's not clear how long that support will last."#> At a press conference in Dubai on Wednesday, <#stdurl http://www.dailytimes.com.pk/default.asp?page=2007%5C10%5C18%5Cstory_18-10-2007_pg1_1 "Bhutto said:"#> "Tomorrow (Thursday) at this time we will be on board the plane for Karachi, which is a day that I and all the people in Pakistan who love democracy and who believe in fundamental human rights have been waiting for. Pakistan’s future is at stake and I am going to Pakistan with a mission to see a peaceful transition to democracy. My return heralds for the people of Pakistan the turn of the wheel from dictatorship to democracy, from exploitation to empowerment, from violence to peace." She said she wanted to create for the people of Pakistan a country "where they have opportunities for employment, economic well-being, the primacy of civilian rule and a society free of extremism." Now, from the point of view of Generational Dynamics, it's the last few words that are the most significant. I've always expressed admiration for Pakistan's President Pervez Musharraf and his Indian counterpart, India's Prime Minister Manmohan Singh. Both Pakistan and India are nuclear powers, but these two leaders have engineered a remarkable détente that has prevented a conflict. Musharraf, born 1943, and Singh, born 1932, are both survivors of World War II and the subsequent genocidal war between Pakistan and India over Kashmir and Jammu, a dispute that still seethes today, even though the United Nations partitioned the region into Indian and Pakistani regions in 1947. The disappearance of either Musharraf or Singh would change the situation dramatically, as either one would likely be replaced by someone much younger, and much more confrontational. This is the kind of generational change that leads to new crisis wars. With Bhutto coming into the picture, that may actually happen. When she says that she wants "a society free of extremism," she's referring to the freedom from the extremism of hardline Muslim radicals who have been setting off suicide bombs across the country. The most spectacular confrontation occurred in July, when over 106 died in an <#inc ww2010.weblog.ref e070712 "assault on a radical mosque in Islamabad,"#> just down the street from Musharraf's office. Even more serious is that radical al-Qaeda terrorists control what is practically a country within a country, in the lawless Waziristan region of northwest Pakistan. This region, on the border between Pakistan and Afghanistan, is probably where Osama bin Laden is living these days. According to a <#stdurl http://www.latimes.com/news/nationworld/world/la-fg-jihad14oct14,0,2944827.story?coll=la-home-world "a new report in the LA Times,"#> this region is becoming increasingly powerful and dangerous, and is the principal supplier of trained terrorists to Europe. This is something that I've written about a number of times. Young men who are citizens of European countries, but whose parents emigrated from Pakistan, are turning to al-Qaeda clerics on the Pakistan/Afghanistan border, starting with an internet relationship. From the point of view of Generational Dynamics, the young men adopt a "Hero/Prophet" relationship with the clerics, and usually travel to Pakistan for terrorist training. With the clerics acting as "Prophets," the young men decide to become "Heroes" by <#hreftext ww2010.i.050718pape "committing altruistic suicide"#> -- killing themselves for the good of the cause. Musharraf has not been successful in stopping this activity in Waziristan, but the situation hasn't exploded either. Benazir Bhutto was born in 1953 and is like America's Baby Boomers -- arrogant, narcissistic, and unable to govern. If she comes to power, she will be much more confrontational with extremists than Musharraf, and will make more mistakes, and the situation could spiral out of control into civil war in Pakistan. =eod =// &&2 e071017 Wall Street Journal wonders if Shanghai stocks are in a bubble =data ww2010.weblog.y2007.e071017.head Wall Street Journal wonders if Shanghai stocks are in a bubble =data ww2010.weblog.y2007.e071017.keys =data ww2010.weblog.y2007.e071017.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071017.date 17-Oct-07 =data ww2010.weblog.y2007.e071017.txt1 But it's OK if they are, because stock market crashes are GOOD for you! =data ww2010.weblog.y2007.e071017.txt2 <#inc ww2010.pic g071016.gif "right" "" "Shanghai stock market has been skyrocketing for the last year. (Source: wsj.com)"#> I just can't stop laughing at this. There's this big <#stdurl http://online.wsj.com/article/SB119245722443459208.html "page one Wall Street Journal article"#> on Tuesday. It says: "Big unknowns loom over the market, starting with whether China is in a bubble that's in danger of popping." What does it take to get WSJ to declare something a bubble? But it gets much, much worse:

"But there is strong evidence that even if the boom ends with a crash, China's investing frenzy will also leave behind much lasting good, because it is helping build a modern, market-driven financial system. ... The Issue: China's booming stock market has raised concerns it is a bubble that could burst. Silver Lining: China is seeing development of a class of investors that is helping make the economy more market driven. Stateside Perspective: While Wall Street investors are concerned about how a reversal in stocks might dent China's economy, some American firms are benefiting in the boom. ... After the 1929 stock-market crash helped plunge the U.S. into the Great Depression, economist John Maynard Keynes chided those who said the downturn was a just outcome for excesses in prior years. "While some part of the investment which was going on in the world at large was doubtless ill judged and unfruitful, there can, I think, be no doubt that the world was enormously enriched," he wrote."

You know, Dear Reader, I often quote some politician who says something that's so unbelievably stupid that you can't help but laugh. But these are the world's "most respected" financial journalists, writing on page one of WSJ, telling us that they can't tell us if it's a bubble, but if it is, then the crash will be good for us. These journalists are children who have no idea what they're talking about. Of course the Shanghai stock market is in a bubble -- a HUGE bubble. Anyone can see that from the above graph. Of course it's going to crash. Bubbles always do. And of course crashes inflict an enormous amount of horror, in the form of mass starvation and homelessness. Here's a graph from my article, <#hreftext ww2010.i.panic070820 ""How to compute the 'real value' of the stock market""#> <#inc ww2010.pic g070818c.gif center "" "S&P 500 Price/Earnings Ratio (P/E1) 1871-2007"#> And of course Wall Street is also in a bubble, as anyone can see from the above graph. And of course it's going to crash. Bubbles always do. But don't worry, folks. A crash is GOOD for you! The WSJ argument is a little more subtle than that. They argue that major advances occur during stock market bubbles that wouldn't occur otherwise. It's kind of vague what advances the article is referring to, but let's take some guesses. Let's imagine what someone might argue was the benefit of the most recent bubble, that began in 1995. We can talk about all sorts of advances in the computer field -- the Internet, the iPod, and so forth. Would those have occurred without the bubble? Of course they would have. Look at the advances that occurred since the 1950s. There were mainframe computers, minicomputers, desktop computers, local area networks, wide area networks, and .... the Internet, which was actually invented in the 1960s. The article says that you need a crash to have a "modern market-driven financial system." But what good is that if you're still going to have crashes anyway? A bubble and crash aren't good for anyone, and they don't produce anything that wouldn't have been produced otherwise. Just read my article, <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world,""#> to get the idea. But it's nice to know that WSJ is good for a hearty laugh every now and then. Well, here's a little more comedy for your viewing enjoyment, <#stdurl http://www.youtube.com/watch?v=Q3peAYJSJSg "The Bubble Man:"#>

=eod =// &&2 e071016 Washington Post says that al-Qaeda in Iraq is 'crippled' =data ww2010.weblog.y2007.e071016.head Washington Post says that al-Qaeda in Iraq is "crippled" =data ww2010.weblog.y2007.e071016.keys =data ww2010.weblog.y2007.e071016.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071016.date 16-Oct-07 =data ww2010.weblog.y2007.e071016.txt1 Meanwhile, Iraqi citizens' political opposition to America is growing. =data ww2010.weblog.y2007.e071016.txt2 According to <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2007/10/14/AR2007101401245.html "the Washington Post article:"#>

"The U.S. military believes it has dealt devastating and perhaps irreversible blows to al-Qaeda in Iraq in recent months, leading some generals to advocate a declaration of victory over the group, which the Bush administration has long described as the most lethal U.S. adversary in Iraq. But as the White House and its military commanders plan the next phase of the war, other officials have cautioned against taking what they see as a premature step that could create strategic and political difficulties for the United States. Such a declaration could fuel criticism that the Iraq conflict has become a civil war in which U.S. combat forces should not be involved. At the same time, the intelligence community, and some in the military itself, worry about underestimating an enemy that has shown great resilience in the past."

There's no doubt that the American military has scored very significant achievements over al-Qaeda in Iraq since the "surge" began, but it's far from a victory, as the article continues:

"There is widespread agreement that AQI [al-Qaeda in Iraq] has suffered major blows over the past three months. Among the indicators cited is a sharp drop in suicide bombings, the group's signature attack, from more than 60 in January to around 30 a month since July. Captures and interrogations of AQI leaders over the summer had what a senior military intelligence official called a "cascade effect," leading to other killings and captures. The flow of foreign fighters through Syria into Iraq has also diminished, although officials are unsure of the reason and are concerned that the broader al-Qaeda network may be diverting new recruits to Afghanistan and elsewhere."

It certainly would be a political disaster to declare any kind of victory. The next day, al-Qaeda in Iraq would find a way to blow something up with a suicide car bomber, and the press would have a field day condemning America again. That point was made over the weekend, as Sunday talk shows and the mainstream press have been breathlessly reporting on a speech by former General Ricardo Sanchez, who once was the commander of the American forces in Iraq. What we've <#stdurl http://www.guardian.co.uk/usa/story/0,,2191316,00.html "been hearing all weekend is this:"#>

"Lieutenant General Ricardo Sanchez has delivered one of the most damning assessments of US policy in Iraq, becoming the most senior war commander to do so. "There is no question that America is living a nightmare with no end in sight," he told reporters in Arlington, Virginia. ... Even without naming names, Gen Sanchez's analysis of the mishandling of the occupation of Iraq, delivered on Friday, was piercing. "From a catastrophically flawed, unrealistically optimistic war plan to the administration's latest surge strategy, this administration has failed to employ and synchronise its political, economic and military power," he said."

The above has been quoted hundreds of times on television news shows, and in thousands of news articles. But it wasn't until I checked out <#stdurl http://www.foxnews.com/story/0,2933,301676,00.html "articles by Fox News"#> that I found out that Sanchez ALSO spoke as follows:

"In his speech to the Military Reporters and Editors Association in Washington, D.C., on Friday, Sanchez made many accusations, including blaming reporters for "unscrupulous reporting, solely focused on supporting an agenda and preconceived notions of the U.S. military." Without naming a specific company, Sanchez said "parent media organizations" have political agendas that direct the news coverage of the war and in some cases put U.S. service members in deadly situations. "What is clear to me is that you are perpetuating the corrosive partisan politics that is destroying our country and killing our service members who are at war. My assessment is that your profession, to some, has strayed from these ethical standards and allowed external agendas to manipulate what the American public sees on TV, reads in newspapers and what they see on the Web," Sanchez said."

For some reason, reporters at BBC, CNN, NBC and other mainstream news organizations "forgot" to put that part in. However, with the number of suiciding bombings in Iraq reduced significantly, I have noticed one big change in the mainstream news coverage. It used to be, as I complained frequently, that every mainstream newscast led every day with the same story: The latest suicide bombing in Iraq. It was perfectly obvious that al-Qaeda in Iraq was using suicide bombings as a public relations tools, and was scheduling one each day to match the news cycles. The mainstream news producers were stupidly doing the bidding for al-Qaeda by obediently covering its "press events." Well, that doesn't seem to happen any more. I don't if it's because the number of suiciding bombings has gone down, or if it's because the mainstream news producers have gotten smarter. Since I doubt the latter, I assume that the former is true. But if we now look at what's happening in Iraq itself, we see that the following:

There is no civil war in Iraq. There never has been a civil war, and there CAN'T be a civil war, because Iraq is in a generational Awakening era, and a crisis civil war during a generational Awakening era is impossible. (For an example of a real civil war today, look at Darfur.)
There IS increasing political turmoil and outrage directed against Americans by Iraqis themselves. Lately, this has been most apparent in <#stdurl http://afp.google.com/article/ALeqM5iJaPlgp7v14yag8gIaJvbn8QZSIw "Iraqi demands for withdrawal of security firm Blackwater."#> Political turmoil ALWAYS occurs during generational Awakening eras, just as it did in ww2010.i.sixties040501 "America in the 1960s-70s,"#> which was America's last Awakening era. This political turmoil is caused by a "generation gap," and today it's the Americans who are playing the part of the "parents" in Iraq. Iraqis, especially younger Iraqis, are rebelling against their "parents," as always happens in an Awakening era.

Both of these precisely parallel the Generational Dynamics predictions that I've been making on this web site since 2003, and have repeated many times. One of my first major predictions was the <#hreftext ww2010.i.aug19 "August 19, 2003, article on Iraq,"#> where I wrote the following:

"Today's massive car bombing of the hotel used as United Nations headquarters in Baghdad is just the most recent of terrorist bombings in Iraq in recent days -- including two bombings of an important oil pipeline last weekend and the car bombing of the Jordanian Embassy in Baghdad on August 7. Many analysts believe that this increasing level of terrorist violence is part of a guerrilla war being directed against American interests, and sponsored by a combination Saddam's Baathists and al Qaeda. The obvious intent of the terrorists is to, well, terrorize the public and generate a massive civil war against the American occupiers. In fact, Generational Dynamics indicates that something quite different may happen. The effect of terrorist acts on a nation often depends most on where the nation is on the generational timeline. Terrorist acts can indeed incite massive war, but usually only when the nation is in, or about to enter, a "crisis" period. (In fact, that could be the effect of another massive bombing that occurred today in Jerusalem, a region which is entering a crisis period.) But Iraq has already had its crisis period -- during the Iran/Iraq war, the Gulf War and the subsequent internal rebellion, running from 1980 to 1991. Today, Iraq is in an "awakening" period, and the easiest way to understand that is to compare it to America's own awakening period during the 1960s and 70s. Awakening periods are characterized by riots and demonstrations motivated by a generation gap. In other words: During an awakening period, there are a lot of college kids making a lot of noise to rebel against their parents. That's why you're seeing massive riots and demonstrations among the Shi'ites in southern Iraq, but you're not seeing massive violence against the American occupiers. There's no "Tet offensive" and no Vietnam-like "quagmire" in the cards for the Americans. Terrorist acts during this period can thus have the effect of backfiring against the terrorist. The young people taking part in massive demonstrations and riots sometimes take a deep breath and say, "Whoa! This is farther than we wanted to go." The result is that public opinion begins to turn against the terrorists rather than (in this case) the Americans. That's not to say there aren't dangers, and here we'll point out two major ones: First, the terrorist attacks may continue and get worse. Terrorism is more a political technique rather than a military technique. Al Qaeda may succeed in increasing the level of terrorist attacks in order to influence American public opinion. And second, the terrorist acts may presage a larger regional war involving the Palestinian Arabs and the al Qaeda against Americans in Iraq. Iraq is in an awakening period, but the Palestine region is just about to enter a crisis period. Some analysts claim that the terrorist acts are being perpetrated by Palestinian Arabs and "Mujahadeen" being paid thousands of dollars each, funded by Saddam and Osama bin Laden, arriving from Syria and Saudi Arabia. The really dangerous scenario is that large numbers of Palestinian and "mujahadeen" terrorists will be motivated by identity group relationships to move into Iraq as a theatre of war against the Americans. That isn't happening now, but it's one of several possible scenarios that may unfold in the Mideast region during the next few months and years."

I can't even imagine a better analysis and prediction, given the information available to me on August 19, 2003. And I gave a full analysis in <#hreftext ww2010.i.iraq070401 "an April, 2007, article."#> Now, you can go to analysts like Stratfor or Brookings or Cato or anyone else, and you will not find an analysis that comes anywhere close to what I wrote in 2003. Even today, analysts are still getting it wrong. They just don't learn, because they're too bound up in politics. I have no politics. I'm neither Republican nor Democrat. I'm neither Liberal nor Conservative. I just use the Generational Dynamics forecasting methodology, which I began to develop in 2003 and I first <#hreftext ww2010.i.danger041120#forecast "described at length in 2004,"#> and have described further many times since then. Using this methodology, I've made predictions about the Mideast, Iraq, Iran, Darfur, Lebanon, Burma, China, and many other countries, and every one of those predictions has either come true or is trending true. Since 2002 I've also been predicting that we're headed for a new 1930s style Great Depression. For years people scoffed at me, but few people have been scoffing in the last few months. I'll repeat a challenge I've made before: Show me any web site, anywhere in the world, that has anything close to the predictive success of this one. I know that none exists because I've looked for one. If you'd like to get the latest political assessment, go to Stratfor or Brookings or Cato or one of the mainstream analysts. If you want to know what's going on in the world, this is the only web site that will tell you. =eod =// &&2 e071015 Big banks discuss mind-boggling 'M-LEC' superfund to bail themselves out. =data ww2010.weblog.y2007.e071015.head Big banks discuss mind-boggling "M-LEC" superfund to bail themselves out. =data ww2010.weblog.y2007.e071015.keys =data ww2010.weblog.y2007.e071015.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071015.date 15-Oct-07 =data ww2010.weblog.y2007.e071015.txt1 Citigroup, JPMorgan and Bank of America, with US Treasury help, prolong the coverup. =data ww2010.weblog.y2007.e071015.txt2 As we've been saying, financial firms have been increasingly using <#inc ww2010.weblog.ref e071014 "deceptive or fraudulent practices"#> to avoid having to sell the securities that they manage. Why? Because they got investors to pour money into funds backed by these securities by valuating the securities at notional prices that can't be sustained in the marketplace. Many of these securities are CDOs and other credit derivatives based on sub-prime mortgage loans that now have very high default rates. The firms have been using a variety of practices to avoid selling these securities. Practices include: refusing to reveal prices of assets to investors; hiding at-risk securities in separate "black-box" corporations known as SIVs (structured investment vehicles); negotiating deceptive or fraudulent sweetheart deals with other financial firms to establish artificial "market values" for assets. For these firms, a sale of these securities must be avoided at all costs. And now, huge new deceptions based on the mother of all SIVs are about to be announced. And it's been endored by US Treasury Secretary Henry Paulson, so it MUST be ok. We won't know all the details until the announcement, possibly on Monday, but it goes something like this: Citibank doesn't dare sell any of its vast holdings of questionable securities in an open market, because that might show them to be nearly worthless. Also, Citibank can't buy the securities from itself, because that wouldn't make sense (as if anything else does). Soooooooooooo, Citibank (actually Citigroup), in conjuction with JP Morgan and Bank of America, is going to set up a ... wait for it! ... a Master-Liquidity Enhancement Conduit, or <#stdurl http://online.wsj.com/article/SB119221840415557568.html "M-LEC."#> These <#stdurl http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2658425.ece "three firms will put $100 billion dollars into the M-LEC."#> Most of the money will come from Citibank; the other two firms will sit back and collect fat fees. Citibank will be able to sell its questionable securities to the M-LEC at whatever notional price it wants. It's still Citibank's money buying Citibank's questionable securities, but since the money is laundered through the M-LEC, it's an "open market" sale. So Citibank can thus establish a "market price" for its questionable securities. Both the American and British governments have been encouraging additional banks to participate in the M-LEC, but there have been no further announcements. Why are these governments endorsing this deception? Because they fear another major credit crunch, like the one that almost brought down Wall Street in August. To me, this appears to be a move of total desperation. And a new week begins. =eod =// &&2 e071014b How do you compute the 'fair value' of a security? =data ww2010.weblog.y2007.e071014b.head How do you compute the "fair value" of a security? =data ww2010.weblog.y2007.e071014b.keys =data ww2010.weblog.y2007.e071014b.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071014b.date 14-Oct-07 =data ww2010.weblog.y2007.e071014b.txt1 FASB Statement 157 doesn't help much because it ignores history. =data ww2010.weblog.y2007.e071014b.txt2 For ten years, we've been increasingly in a world where investors have poured their money into securities that have no obvious value. And, as each day goes by in the current liquidity crisis, it's more and more apparent that financial firms are scrambling to <#inc ww2010.weblog.ref e071014 "hide losses through deceptive or fraudulent practices."#> These losses come from having sold investments in CDOs and other structured credit securities at wildly optimistic prices that can no longer be sustained in the marketplace. In some cases, such as at Bear Stearns, the securities turn out to be <#inc ww2010.weblog.ref e070718 "almost totally worthless."#> The practices include: refusing to reveal prices of assets to investors; hiding at-risk securities in separate "black-box" corporations known as SIVs (structured investment vehicles); deceptive or fraudulent sweetheart deals with other financial firms to establish artificial "market values" for assets. The Financial Accounting Standards Board (FASB) has tried to help out by issuing a new accounting rule, Statement 157, to take effect on November 15, on how to determine the "fair value" of the securities that now turn out to be overvalued. Unfortunately, I don't see that Statement 157 provides any help at all, for two reasons. But first, let's summarize Statement 157. The actual statement can be found on the <#stdurl http://www.fasb.org/st/summary/stsum157.shtml "the FASB web site"#> (or <#stdurl http://www.fasb.org/pdf/fas157.pdf "full text PDF file."#>) The gold standard for the fair value of a security is its price on an open market: "The definition of fair value retains the exchange price notion in earlier definitions of fair value. This Statement clarifies that the exchange price is the price in an orderly transaction between market participants to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability." However, this method for determining fair value is useless if there's no open market for securities being valuated. (And many of the deceptive and fraudulent practices being used by financial firms today are tricks to avoid an open market valuation.) The FASB statement provides three different types of valuation. Here's a summary of the three methods, as provided by <#stdurl http://online.wsj.com/article/SB119214581308956665.html "the Wall Street Journal,"#> in decreasing order of "precision":

Level 1 - "Marking to Market." Valuations are based on "quoted prices in active markets for identical assets or liabilities." Prices appear on computer screens. Assets in this category: Publicly traded stocks, listed futures and options, government and agency bonds, and mutual funds.
Level 2 - "Marking to Matrix." Valuations are based on "observable market data" for similar or comparable assets, such as dealer-pricing services based on surveys or other market bids and offers. Fewer screen prices. Assets in this category: Emerging-market government bonds, some infrequently traded corporate and municipal bonds, structured notes, some mortgage and asset-backed securities, and some derivativatives that don't trade publicly.
Level 3 - "Marking to Model." [[Called "Marking to Myth" by Warren Buffett.]] Valuations are based on management's best judgment, and involve management's "own assumptions about the assumptions market participants would use in pricing the asset." The process can employ pricing models based on estimates of future cash flows or other formulas. Assets in this category: Some real-estate and private-equity investments, certain loan commitments, some long-term options, and less easily tradable asset-backed bonds.

As I said, there are two problems with this new accounting rule. The first problem is that it doesn't change anything; it simply encodes the practices that have caused the current problems. Except to handle some technical issues, there really isn't much point of issuing Statement 157. The second problem is that it exalts market-based valuation methods, without recognizing the possibility of an asset bubble. In particular, it doesn't even recognize bubble-independent historical earnings-based valuation methods. Now, regular readers of this web site will immediately recognize that this is the sort of thing that I've been railing about here for years. In my article, <#hreftext ww2010.i.panic070820 ""How to compute the 'real value' of the stock market,""#> the current value of the stock market is computed by three different methods: historical earnings, historical growth rates, and historical book values. All three of these methods come to roughly the same result -- the real value of the stock market today is around Dow 5000, meaning that the stock market today is overpriced by a factor of 250%. I'm not saying that FASB should prescribe historical methods as the preferred valuation method. What I'm saying is that FASB should give SOME RECOGNITION to historical methods. For example, a rule might specify the following: If market methods and historical methods differ by, say, more than 25%, then you must provide a justification for why the market price isn't a bubble price. (If the market price is lower, as would happen during a period of deflation, you'd have to justify the lower price in the same way.) I like to joke that most people today seem to believe that the world was created ten or twenty years ago, and nothing that happened before that has any relevance to today. That's the reason why Generational Dynamics has worked over and over through the centuries. People think that "old data" and "old events" are too old to matter. So when the same thing happens again, people panic and turn a crisis into a disaster. I doubt that a new FASB rule requiring some recognition of history would make any real difference, but it certainly couldn't hurt. =eod =// &&2 e071014 Financial firms increasingly hide losses through deceptive or fraudulent practices =data ww2010.weblog.y2007.e071014.head Financial firms increasingly hide losses through deceptive or fraudulent practices =data ww2010.weblog.y2007.e071014.keys =data ww2010.weblog.y2007.e071014.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071014.date 14-Oct-07 =data ww2010.weblog.y2007.e071014.txt1 According to an article in Friday's Wall Street Journal, =data ww2010.weblog.y2007.e071014.txt2 banks and other organizations are going to extraordinary lengths to <#stdurl http://online.wsj.com/article/SB119214581308956665.html "hide the real values"#> of mortgage-backed securities (MBSs) in their asset portfolios. Techniques include: refusing to reveal prices of assets to investors; hiding at-risk securities in separate "black-box" corporations known as SIVs (structured investment vehicles); deceptive or fraudulent sweetheart deals with other financial firms to establish artificial "market values" for assets. In addition, some of these techniques appear to have been designed to illegally avoid tax consequences on certain kinds of income. On Friday, the <#stdurl http://www.nytimes.com/2007/10/13/business/13tax.html?_r=1&ref=business&oref=slogin "IRS announced an inquiry"#> into a particular kind of SIV known as "remics" (real estate mortgage investment conduits). A financial firm transfers its mortgage-backed securities to a remic, which can then sell slices of the MBSs to investors. The IRS is examining whether financial firms controlling these remics are underreporting the income they earn. The use of SIVs is the latest twist to come under scrutiny following the "Bear Stearns disaster" that became public in June. At that time, <#inc ww2010.weblog.ref e070624 "Stearns bailed out its defaulting hedge funds"#> rather than have to sell some of the assets in their portfolios. These assets were collateralized debt obligations (CDOs), a kind of synthetic security created by slicing and dicing mortgage loans at various risk levels. Stearns had given these synthetic securities a certain value, or notional price, based on computer programs designed to valuate these kinds of synthetic securities. Unfortunately, no one was willing to purchase the CDOs at the notional prices that the Stearns computer programs had computed. Finally, in mid-July, the firm announced that <#inc ww2010.weblog.ref e070718 "its hedge funds were almost totally worthless."#> This led, in August, to the "liquidity crunch" or "credit crunch" and the worldwide banking crisis. Companies around the world were no longer able to sell "asset-backed commercial paper" (ABCP), where the assets were CDOs, because investors had no way of knowing whether the notional prices had any validity. Various central banks -- the Fed, the Bank of England, the European Central Bank -- provided a temporary solution by shocking investors with <#inc ww2010.weblog.ref e070919 "a large monetary loosening,"#> much more generous than investors had expected. They lowered interest rates (by a full ½ point in the US), and perhaps even more important, the central banks accepted some of this asset-back commercial paper as collateral for central bank loans. However, the commercial paper crisis is far from over. The Fed itself said as much in <#stdurl http://federalreserve.gov/newsevents/press/monetary/20071009a.htm "the Open Market Committee meeting minutes,"#> published last week, which said, "Given existing commitments to customers and the increased resistance of investors to purchasing some securitized products, banks might need to take a large volume of assets onto their balance sheets over coming weeks, including leveraged loans, asset-backed commercial paper, and some types of mortgages." What the Fed is referring to is the fact that market exigencies are forcing one institution after another to place their mortgage-backed securities on the market, to test what prices they can sell for. This is an ongoing process. In the past month, eight major financial firms -- UBS, Merrill Lynch & Co., Citigroup Inc., Deutsche Bank AG, Morgan Stanley, Goldman Sachs, Lehman Brothers Holdings Inc., and Bear Stearns Cos. -- have written down $20 billion in asset values. There's a lot more to come. How big is the problem? In times past, an investment portfolio might have contained stocks that trade on the stock market, the WSJ reports that substantially more than 50% of the assets in most portfolios are now securities that DON'T trade on exchanges. In order to prevent a market for these securities from developers, financial firms are refusing to providing pricing information to investors in the overwhelming majority of cases. The article provides the following "Percentage of investors who reported problems getting price quotes this summer in various markets:"

	Corporate bonds                         62%
	Commerical mortgage-backed securities   63%
	High-yield bonds                        65%
	Mortgage-backed securities              66%
	Leveraged loans                         69%
	Collateralized loan obligations         78%
	Asset-back securities                   82%
	CDOs / Structured credit                83%

Besides refusing to divulge prices, financial firms are resorting to other methods to "protect" themselves at the expense of the public:

A hedge fund manager in a subsidiary of UBS AG was disciplined and relieved of his duties for marking down the price of his portfolio of securities "to where I could reasonably sell them."
One company, Ellington Management Group, has suspended investor redemptions, because the firm doesn't know how much its assets are worth.
Some firms have been setting asset prices by offering them for sale at the notional price, and then claiming that the mere offer to sell is a valid "mark to market" exercise for valuating securities.
A group of firms may sell securities to one another in order to establish an artificially high market price for all the firms' securities.
One firm will sell a securities portfolio to another firm, with a commitment to buy them back at a later time at a minimum price. Bear Stearns is known to have used this technique.

I'm not a lawyer but these practices sure look like fraud to me. If a firm uses deceptive practices to claim unrealistically high asset values in sales to investors, then the investor is being defrauded. What we're seeing are two growing trends, both of which I've described several times before: First, the size of the problem is growing. Investors, mutual funds, investment trusts, hedge funds, savings banks, pension funds, college endowments, money market funds, insurance companies, and so forth have all invested HUGELY in securities that have no credible value. And second, the net is spreading for people who are going to be blamed for the coming financial crisis. When everyone was making money, no one cared about a little cheating or a little fraud or a little embezzlement. But once people start losing money, the desire for revenge will be enormous, and repercussions will be felt in every corner of the world. In the meantime, here are <#stdurl http://www.stockmania.com/index.php?showimage=57 "your Sunday comics:"#> <#inc ww2010.pic g071013.gif "center" "" "Stocks at all time highs! (Source: stockmania.com)"#> =eod =// &&2 e071012 Madonna switches record labels, accelerating a return to a new Big Band Era =data ww2010.weblog.y2007.e071012.head Madonna switches record labels, accelerating a return to a new Big Band Era =data ww2010.weblog.y2007.e071012.keys =data ww2010.weblog.y2007.e071012.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071012.date 12-Oct-07 =data ww2010.weblog.y2007.e071012.txt1 Madonna is leaving Warner Music, her long time record label, for Live Nation, =data ww2010.weblog.y2007.e071012.txt2 the concert promoter behind the Live 8 events. The switch happened after <#stdurl http://business.timesonline.co.uk/tol/business/industry_sectors/media/article2636261.ece "Warner refused to match the $120 million ten-year deal"#> offered by Live Nation. The switch from Warner Music to Live Nation is more than just a label switch. It's a symbolic of the music business' rapid change from making money by recorded music (records, CDs, etc.) to making money principally from live performances. As I wrote in my 2003 article, <#hreftext ww2010.i.bigband ""Return of the Big Band Era,""#> we're rapidly approaching a time, around the mid to late 2010s, when it will be possible to have a computer with a disk file containing every song ever recorded. And with network bandwidths and disk sizes increasing exponentially every year, it will be possible to download hundreds of new recordings every day. Basically, there will no longer be any technical limitation to listening to recorded music. The only real limitation will be the quaint fact that a normal human being isn't capable of listening to more than a few songs a day. What this means is that the big money in the music industry will come from live performances -- just as was the case when bobby soxers -- teenage girls -- mobbed venues where Frank Sinatra was crooning. Five years from now, there may be little money to be made from sales of a Madonna recording, but there may be huge amounts to be made from a live Madonna concert playing live to a worldwide concert over the internet. Few people seem to understand what the Big Band Era of the 1930s was all about. It came about because of the Big Depression of the 1930s. A bandleader could afford to hire a big band of 10-20 instruments because out-of-work musicians were willing to work for a dollar a week -- and happy to have the opportunity. It was only after the economy recovered in the mid-1940s that the big bands disappeared. Also, few people seem to understand the KIND of music that was played in the 1930s, 40s and 50s. The view is almost of demented robots who could only understand the simplest music possible, not the complex music that sophisticated people listen to today. One song that became very popular after the war was an old Al Jolson song with the following lyrics:

    When the red red robin
    Comes bob bob bobbin' along, along
    There'll be no more sobbin'
    When he starts throbbin' his old sweet song

    Wake up, wake up you sleepy head
    Get up, get up get out of bed
    Cheer up, cheer up the sun is red
    Live, love, laugh and be happy

    What if I've been blue
    Now I'm running through fields of flowers
    Rain may glisten
    But still I listen for hours and hours

    I'm just a kid again
    Doing what I did again
    Singing a song
    When the red red robin comes bob bob bobbin' along, along

It's hard to believe that this is anything but a silly children's song, but in fact that was a very popular song among adults for a number of years after the war. The 1930s and 1940s were times of enormous hardship. Starvation and homelessness were all around. And then people learned of their loved ones being tortured and maimed by the Bataan Death March in 1942, or mowed down blades of grass on the beaches of Normandy in 1944. Today we have scandals when someone Cindy Sheehan loses her son in the Iraq war. Imagine how women must have felt when the news filtered back that tens of thousands of their sons, their husbands, their brothers and their fathers had all been tortured or killed in Europe or Asia? People did not want complex music during this period. They went down to the local dance hall to listen to the Big Bands play simple, carefree music that would take their minds off of what was going on in the world. Actually, Big Band music really WAS very complex and sophisticated in another way, because it conveyed sexuality without the need for explicitness that came into vogue in later decades. The songs were light and carefree, with lyrics that are sometimes absolutely hilarious if you stop to listen to them. Here are the lyrics to a couple of Big Band Era songs:

    I DOUBLE DARE YOU

    I double dare you to sit over here.
    I double dare you to lend me your ear.
    Take off your high hat, and let's get friendly.
    Don't be a scare cat,
    Say what-d'ya care, can't you take dare?

    I double dare you to kiss me and then,
    I double dare you to kiss me again.
    And if that look in your eye means what I'm thinking of
    I double dare you to fall in love with me,
    I double dare you.

    MOONLIGHT SERENADE - Glenn Miller

    I stand at your gate and the song that I sing is of moonlight.
    I stand and I wait for the touch of your hand in the June night.
    The roses are sighing a Moonlight Serenade.

    The stars are aglow and tonight how their light sets me dreaming.
    My love, do you know that your eyes are like stars brightly beaming?
    I bring you and sing you a Moonlight Serenade.

    Let us stray till break of day
    In love's valley of dreams.
    Just you and I, a summer sky,
    A heavenly breeze kissing the trees.

    So don't let me wait, come to me tenderly in the June night.
    I stand at your gate and I sing you a song in the moonlight,
    A love song, my darling, a Moonlight Serenade.

Incidentally, who's greatest pop star of the 20th century? The Beatles? Naaaaah. It's Frank Sinatra. After the war ended, people were still traumatized for the rest of their lives by what had happened. As philosopher Hannah Arendt wrote in 1949, reflecting the mood of America at that time, "Two world wars in one generation, separated by an uninterrupted chain of local wars and revolutions, followed by no peace treaty for the vanquished and no respite for the victor, have ended in the anticipation of a third World War between the two remaining world powers. This moment of anticipation is like the calm that settles after all hopes have died. ... Never has our future been more unpredictable, never have we depended so much on political forces that cannot be trusted to follow the rules of common sense and self-interest -- forces that look like sheer insanity, if judged by the standards of other centuries." So now go back and reread the lyrics of "Red Red Robin," and you'll see that it's a very touching song with a message: "The war is over. It's time to start living again." The song was still being sung on television as late as 1957, as shown by <#stdurl http://youtube.com/watch?v=YuoMbQ3QDdo "the following TV clip,"#> where Ethel Merman and Perry Como sing the song with a comic twist:

The music of the era reflected the attitudes of the people of the era. People today think of the early 1950s as a time of ultra-conformity and oppression of women. Nothing could be further from the truth. During the 1930s, families became homeless and were forced into the streets. During the war, tens of millions of women lost their husbands to the war, and women who would have liked to stay home and take care of the kids were forced to take "Rosie the Riveter" jobs that they hated, but took them anyway out of patriotism. By the time the 1950s came around, the "American way of life" meant that every woman could have a husband, a couple of kids, and a nice home (with a nice picket fence), and women wouldn't be forced to work unless they wanted to. 1950s women didn't want their daughters to suffer as they had, and they considered it to be a gift to their daughters that they handed them a country where all that was possible. Songs like "Red Red Robin" were appreciated by the survivors of WW II, but was not appreciated by those born after the war, in the Baby Boomer generation. The Boomers rebelled against their parents and their music. 1960s women's libbers humiliated their mothers by rejecting their message. They were mad at their mothers for telling them to wear girdles and not to have sex before marriage. They burned their bras in rebellion against their mothers. But women were never discriminated against. As we look back over the whole period, we see that the carefree music of the 1930s and 40s gave way to the sweet, romantic music of the 1950s, which gave way to the Boomer's rebellious music of the 1960s, which gave way to the Generation-Xer's nihilistic music of the 1990s. Now Madonna is leading the way as we enter a new 1930s style Great Depression. Once again, live performances will be the important things. Once again, there'll be Big Band Era. It'll be called something else, of course, but it'll be based on the same economics as the 1930s: With lots of people unemployed, live performances by groups of musicians will become popular again, and we may even see huge audiences of teenage girls squealing with delight at some new hot young crooner. =eod =// &&2 e071011 American Prospect's Robert Kuttner compares 2007 to 1929 =data ww2010.weblog.y2007.e071011.head American Prospect's Robert Kuttner compares 2007 to 1929 =data ww2010.weblog.y2007.e071011.keys =data ww2010.weblog.y2007.e071011.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071011.date 11-Oct-07 =data ww2010.weblog.y2007.e071011.txt1 His comparison is clearly generational, but he fails to notice it. =data ww2010.weblog.y2007.e071011.txt2 I can't prove it, but it seems to me that more and more people are comparing what's happening today to what happened in the 1929 crash. It just seems to me that I hear "1929" mention pretty frequently now. A web site reader alerted me to the article <#stdurl http://www.prospect.org/cs/articles?article=the_alarming_parallels_between_1929_and_2007 ""The Alarming Parallels Between 1929 and 2007,""#> containing recent testimony to the Congressional House Committee on Financial Services by The American Prospect co-editor Robert Kuttner. The author has a book coming out in a few weeks on the subject. He summarizes similarities between "the systemic risks of the 1920s and many of the modern practices" as follows: excessive leveraging, misrepresentation, insider conflicts of interest, non-transparency, and the triumph of engineered euphoria over evidence. Generally, his comparison are very similar to those that I discussed in my article, <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world.""#> So I'll only expand on those similarities that present new information. He gives the following similarities:

Creation of asset bubbles. "The most basic and alarming parallel is the creation of asset bubbles, in which the purveyors of securities use very high leverage; the securities are sold to the public or to specialized funds with underlying collateral of uncertain value; and financial middlemen extract exorbitant returns at the expense of the real economy. This was the essence of the abuse of public utilities stock pyramids in the 1920s, where multi-layered holding companies allowed securities to be watered down, to the point where the real collateral was worth just a few cents on the dollar, and returns were diverted from operating companies and ratepayers. This only became exposed when the bubble burst. As Warren Buffett famously put it, you never know who is swimming naked until the tide goes out."
Securitization of credit. "Some people think this is a recent innovation, but in fact it was the core technique that made possible the dangerous practices of the 1920. Banks would originate and repackage highly speculative loans, market them as securities through their retail networks, using the prestigious brand name of the bank -- e.g. Morgan or Chase -- as a proxy for the soundness of the security. It was this practice, and the ensuing collapse when so much of the paper went bad, that led Congress to enact the Glass-Steagall Act, requiring bankers to decide either to be commercial banks -- part of the monetary system, closely supervised and subject to reserve requirements, given deposit insurance, and access to the Fed's discount window; or investment banks that were not government guaranteed, but that were soon subjected to an extensive disclosure regime under the SEC." In <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world,""#> we quoted examples of foreign bonds -- bonds issued by dozens of other countries -- that American investors purchased, receiving only a promise to redeem the bonds several decades later. There are two major "advantages" to the securitization of credit: First, it separates the creditor from the debtor. The creditor lends money by purchasing a security; he has no idea who will use the money, or how the money will be used. And second, the sale of securities is handled by middlemen who have no reason to be cautious, since the money being loaned is not his own. The middlemen collect their fat commissions and are on their way. Today, of course, the securitization of credit has been raised to a monstrous level, with $750 trillion of CDOs and other credit derivatives in the portfolios of organizations around the world. Kuttner points out that since the repeal of Glass-Steagall, there is no longer any distinction between the banking system and the general economy: "Since repeal of Glass Steagall in 1999, after more than a decade of de facto inroads, super-banks have been able to re-enact the same kinds of structural conflicts of interest that were endemic in the 1920s -- lending to speculators, packaging and securitizing credits and then selling them off, wholesale or retail, and extracting fees at every step along the way. And, much of this paper is even more opaque to bank examiners than its counterparts were in the 1920s. Much of it isn't paper at all, and the whole process is supercharged by computers and automated formulas. An independent source of instability is that while these credit derivatives are said to increase liquidity and serve as shock absorbers, in fact their bets are often in the same direction -- assuming perpetually rising asset prices -- so in a credit crisis they can act as net de-stabilizers." Kuttner makes an interesting new point at the end of the above paragraph: That all these credit derivatives are based on the assumption that the stock market will keep going up forever. The stock market never goes up forever, and once it starts going down, the market for credit derivatives starts crashing as a unit.
Excessive use of leverage. "A third parallel is the excessive use of leverage. In the 1920s, not only were there pervasive stock-watering schemes, but there was no limit on margin. If you thought the market was just going up forever, you could borrow most of the cost of your investment, via loans conveniently provided by your stockbroker. It worked well on the upside. When it didn't work so well on the downside, Congress subsequently imposed margin limits. But anybody who knows anything about derivatives or hedge funds knows that margin limits are for little people. High rollers, with credit derivatives, can use leverage at ratios of ten to one, or a hundred to one, limited only by their self confidence and taste for risk. Private equity, which might be better named private debt, gets its astronomically high rate of return on equity capital, through the use of borrowed money. The equity is fairly small. As in the 1920s, the game continues only as long as asset prices continue to inflate; and all the leverage contributes to the asset inflation, conveniently creating higher priced collateral against which to borrow even more money."
Corruption of the gatekeepers. "The fourth parallel is the corruption of the gatekeepers. In the 1920s, the corrupted insiders were brokers running stock pools and bankers as purveyors of watered stock. 1990s, it was accountants, auditors and stock analysts, who were supposedly agents of investors, but who turned out to be confederates of corporate executives. You can give this an antiseptic academic term and call it a failure of agency, but a better phrase is conflicts of interest. In this decade, it remains to be seen whether the bond rating agencies were corrupted by conflicts of interest, or merely incompetent. The core structural conflict is that the rating agencies are paid by the firms that issue the bonds. Who gets the business -- the rating agencies with tough standards or generous ones? Are ratings for sale? And what, really, is the technical basis for their ratings? All of this is opaque, and unregulated, and only now being investigated by Congress and the SEC."
Failure of regulation to keep up with financial innovation. "Yet another parallel is the failure of regulation to keep up with financial innovation that is either far too risky to justify the benefit to the real economy, or just plain corrupt, or both. In the 1920s, many of these securities were utterly opaque. Ferdinand Pecora, in his 1939 memoirs describing the pyramid schemes of public utility holding companies, the most notorious of which was controlled by the Insull family, opined that the pyramid structure was not even fully understood by Mr. Insull. The same could be said of many of today's derivatives on which technical traders make their fortunes. "By contrast, in the traditional banking system a bank examiner could look at a bank's loan portfolio, see that loans were backed by collateral and verify that they were performing. If they were not, the bank was made to increase its reserves. Today's examiner is not able to value a lot of the paper held by banks, and must rely on the banks' own models, which clearly failed to predict what happened in the case of sub-prime. The largest banking conglomerates are subjected to consolidated regulation, but the jurisdiction is fragmented, and at best the regulatory agencies can only make educated guesses about whether balance sheets are strong enough to withstand pressures when novel and exotic instruments create market conditions that cannot be anticipated by models."
Universal conviction that markets are self-regulating. "A last parallel is ideological -- the nearly universal conviction, 80 years ago and today, that markets are so perfectly self-regulating that government's main job is to protect property rights, and otherwise just get out of the way." This is an interesting one.

What's disappointing about Kuttner's testimony is that he completely misses the generational aspects, even though they're completely obvious.

"Beginning in the late 1970s, the beneficial effect of financial regulations has either been deliberately weakened by public policy, or has been overwhelmed by innovations not anticipated by the New Deal regulatory schema. New-Deal-era has become a term of abuse. Who needs New Deal protections in an Internet age?"

He goes on to list one thing after another that changed after the 1970s. He even says:

"My perception as a financial journalist is that regulation is so out of fashion these days that it narrows the legislative imagination, since politics necessarily is the art of the possible and your immediate task is to find remedies that actually stand a chance of enactment. There is a vicious circle -- a self-fulfilling prophecy -- in which remedies that currently are legislatively unthinkable are not given serious thought. Mr. Chairman, you are performing an immense public service by broadening the scope of inquiry beyond the immediate crisis and immediate legislation."

It never occurs to him ask why this has happened -- why it happens more and more as the people in the generation that survived the 1920s and 1930s die out, leaving behind younger leaders with no personal memories of the horrors of the Great Depression. If that thought ever crosses his mind, then he might have realized that the features of the 1920s occurred when the generation of people who survived the Panic of 1857 died out, and he might have understood WHY "regulation is so out of fashion these days." As I've said many times on this web site, with respect to many different subject areas, people are completely blind to generational issues, no matter how obvious they are, and this is pretty obvious. Apparently human beings come with some sort of mental block that prevents them, most of the time, from even allowing a generational trend to enter their minds. Kuttner concludes as follows:

"The fact is that the economic fundamentals are sound -- if you look at the real economy of factories and farms, and internet entrepreneurs, and retailing innovation and scientific research laboratories. It is the financial economy that is dangerously unsound. And as every student of economic history knows, depressions, ever since the South Sea bubble, originate in excesses in the financial economy, and go on to ruin the real economy. It remains to be seen whether we have dodged the bullet for now. If markets do calm down, and lower interest bail out excesses once again, then we have bought precious time. The worst thing of all would be to conclude that markets self corrected once again, and let the bubble economy continue to fester. Congress has a window in which restore prudential regulation, and we should use that window before the next crisis turns out to be a mortal one."

I'm not even sure what he means by this. A huge number of factory jobs have fled to China, and a huge number of service jobs have fled to India. It's hard to see why it's appropriate to simply call this "sound." If Kuttner understood even the simplest generational theory, then he'd know that "dodging a bullet for now" doesn't mean that things get better, since generational changes always continue. The depraved use of credit that Kuttner has documented will only get worse as there are additional generational changes, and new regulations will have no greater success than the old ones did. His idea to "restore prudential regulation" is just part of the universal self-delusion that the entire world is suffering from in 2007, just as it did in 1929. =eod =// &&2 e071009 IMF sharply cuts US economic growth estimate =data ww2010.weblog.y2007.e071009.head IMF sharply cuts US economic growth estimate =data ww2010.weblog.y2007.e071009.keys =data ww2010.weblog.y2007.e071009.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071009.date 9-Oct-07 =data ww2010.weblog.y2007.e071009.txt1 But all that matters to investors is that the Fed is less concerned than before about inflation. =data ww2010.weblog.y2007.e071009.txt2

Please read the new article I just posted: <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world.""#> It compares what's happening today to what happened in the 1920s. I was able to make some specific new predictions about the scenario that I expect to unfold in the next couple of years, especially in our relationship with China.

On September 18, the Fed shocked investors by <#inc ww2010.weblog.ref e070919 "announcing a ½ point interest cut,"#> twice as much as had been expected. Since then, believing that the Fed had saved the world, investors have pushed the Wall Street markets up to new historic highs. On Tuesday, the Fed released the minutes from the committee meeting that it held on September 18 at which the ½ point decision was made. It's called the "Fed Open Market Committee," and it releases <#stdurl http://federalreserve.gov/newsevents/press/monetary/20071009a.htm "the minutes of its meetings"#> several weeks after each meeting is held. The minutes contain some pretty negative stuff, such as "consumer sentiment turned down in August" and and the "housing sector remained exceptionally weak." But none of that matters. All that matters is that "with incoming inflation data to the favorable side, the easing of policy seemed unlikely to affect adversely the outlook for inflation." Even this comment on inflation was part of a larger sentence: "With economic growth likely to run below its potential for a while and with incoming inflation data to the favorable side, the easing of policy seemed unlikely to affect adversely the outlook for inflation." So there's the usual craziness. Economic growth is slowing -- which means that corporate earnings will go down, which SHOULD mean that stock prices should go down. But in the continuing bizarre, upside-down world of the investor, bad news is good news. Why? Because bad news means that the Fed might lower interest rates again, and everyone knows that lowering interest rates will save the world again, and any time the world needs saving. In fact, the signs of an economic downturn are growing. The International Monetary Fund (IMF) is expected to report on Wednesday that the <#stdurl http://www.msnbc.msn.com/id/21210572/ "US economic forecast is down sharply."#> And Rodrigo Rato, outgoing managing director of the International Monetary Fund, has warned that the <#stdurl http://www.ft.com/cms/s/0/a5b06b90-750f-11dc-892d-0000779fd2ac.html "credit squeeze was a "serious crisis""#> that was not over yet and would curtail growth worldwide. As I read through the book that I quoted in <#hreftext ww2010.i.garrett071009 ""The bubble that broke the world,""#> I was struck by two things. First, how total, absolute and universal the self-delusion was in the 1920s among investors, financiers, journalists and politicians. And second, how all the same elements of universal self-delusion that occurred in the 1920s are recurring with full force today. How on earth, with all the bad economic news coming out, could investors possibly think that this is good news because the Fed might lower interest rates again, and that the stock market bubble, which is already astronomically large, should be blown even larger? Almost every day, investors act en masse to do something which, by "normal" standards, if absolutely insane. What happened on Tuesday is just one more example. =eod =// &&2 e071008 Students at Tehran University risk protest against Ahmadinejad =data ww2010.weblog.y2007.e071008.head Students at Tehran University risk protest against Ahmadinejad =data ww2010.weblog.y2007.e071008.keys =data ww2010.weblog.y2007.e071008.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071008.date 8-Oct-07 =data ww2010.weblog.y2007.e071008.txt1 When Iranian President Mahmoud Ahmadinejad spoke at Columbia University =data ww2010.weblog.y2007.e071008.txt2 last month, the Columbia University president, Lee Bollinger introduced him by criticizing his denial of the Holocaust. "This makes you quite simply ridiculous. Mr President, you are exhibiting all the signs of a petty and cruel dictator," said Bollinger. These comments by Bollinger were <#stdurl http://archive.gulfnews.com/articles/07/09/27/10156339.html "criticized in the Arab"#> and in the Iranian press. However, the criticisms never really rang true. Generally speaking, Arabs (who are Sunni Muslims) don't really like Ahmadinejad, who is Persian, who is fanatically Shia Muslim, and who has made it clear that he wants Iran to have hegemony over the entire Muslim Mideast, including the Arabian peninsula. Iranians, on the other hand, don't much like Ahmadinejad anymore either, since the economy has been deteriorating, and because Ahmadinejad has infuriated many people with oppressive policies, such as arresting women whose headscarves don't cover enough of their heads. <#inc ww2010.pic g071008.jpg right "" "Tehran University students demonstrating and protesting against Ahmadinejad (Source: iht.com)"#> The dislike is especially true of students, as would be expected from the point of view of Generational Dynamics. Iran is in a generational Awakening era, since only one generation has passed since the genocidal Iran/Iraq crisis war of the 1980s. Today's college-age generation is the first generation born after the war, and <#inc ww2010.weblog.ref e070702 "they are as rebellious against President Ahmadinejad today"#> as American college students rebelled against Presidents Kennedy, Johnson and Nixon in the 1960s and 1970s. So in that sense, it's not surprising that <#stdurl http://news.bbc.co.uk/2/hi/middle_east/7033634.stm "hundreds of students at Tehran University"#> held anti-Ahmadinejad demonstrations on Monday, chanting: "Death to the dictator." There were similar protests in December, 2006, by students at Amir Kabir Technical University, but those students were severely punished. Thus, new protests occur rarely. But this kind of "generation gap" is a standard feature of generational Awakening eras, and so student protests always occur, and will continue to increase. As I wrote in my <#inc ww2010.weblog.ref e070702 "July analysis of Iran and Ahmadinejad,"#> Iran is a very dangerous wild card in international politics. One the one hand, young people are increasingly willing to demonstrate and protest against the older generation, the generation that lived through the 1980s war. On the other hand, Ahmadinejad and the older generation clerics, who took part in the 1979 Iranian revolution, are increasingly alarmed by these protests and demonstrations, and they (mistakenly) see a potential military conflict with the west as a way to unite the country once more. The easiest way to understand this conflict is to think of President Kennedy's situation in the early 1960s. As a World War II survivor, Kennedy was determined to prevent a world war against Communism, which is why he authorized military actions against Cuba and Vietnam. But growing student protests led to political problems in Kennedy's, Johnson's and Nixon's administrations. Like Kennedy, Ahmadinejad came into power at the beginning of his country's Awakening era. The internal protests and demonstrations may force Ahmadinejad to overreact, and in some scenarios that could lead to war. =eod =// &&2 e071005 President Jimmy Carter has near-altercation in Darfur =data ww2010.weblog.y2007.e071005.head President Jimmy Carter has near-altercation in Darfur =data ww2010.weblog.y2007.e071005.keys =data ww2010.weblog.y2007.e071005.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071005.date 5-Oct-07 =data ww2010.weblog.y2007.e071005.txt1 Generationally, Darfur is ten years ahead of Burma. =data ww2010.weblog.y2007.e071005.txt2 Former President Jimmy Carter got into a shouting match with Sudanese security forces who <#stdurl http://ap.google.com/article/ALeqM5hwDgA5DI3HWtqNkkqqBLcGSr3iCgD8S1PTH00 "blocked him from visiting with Darfur refugees."#> =inc ww2010.xr.related1 right darfur 2 "You can't go! It's not on the program!" said Omar, the security chief. "We're going anyway! You don't have the power to stop me!" said Carter. In the end, the Sudanese did block his visit, and Carter was forced to leave. Carter is on a fact-finding mission to Darfur with an entourage of "Elders," including billionaire businessman Richard Branson and Graca Machel, the wife of former South African President Nelson Mandela, and South Africa's Archbishop Desmond Tutu. From the point of view of Generational Dynamics, this whole effort by Carter is pretty silly. From time to time, various political figures -- Jimmy Carter, Jesse Jackson, Jane Fonda -- take trips to foreign countries, proclaiming that if we all just talk together, then we can get along. These trips are almost always just political side shows and, as far as I know, none of these trips has ever accomplished anything real. On this web site, whenever I describe these major world events, I always emphasize that they're being caused by attitudes and behaviors of large masses of people, entire generations of people, and that no politician can ever hope to have an effect. That's certainly true of the Darfur war, as I've described repeatedly on this web site, starting with my first Darfur article, <#inc ww2010.weblog.ref e040628 ""Darfur genocide: The UN is completely irrelevant.""#> In fact, not only has the U.N. not halted the Darfur genocide, but the situation seems to get worse almost on a daily basis. In <#inc ww2010.weblog.ref e070619 "a recent article,"#> I summarized the recent generational history of Darfur, correcting some common misstatements in the mainstream media. The most important confusions in the mainstream media are the names given to the various group. So here's a summary of the major groups, and how their names have changed since the 1970s:

The farmers became the Blacks or Africans in the 1980s, and became just Darfurians in 2000s. Today they're called the rebels, with the implication that they're rebelling against the oppressive Sudanese government.
The herders became the Arabs in the 1980s, became the Janjaweed militia in 1990s, and today are often referred to as "government (Sudanese) forces."
The war began in the 1970s as minor land disagreements between farmers and camel herders. The disagreements escalated slowly but surely through the 1980s, 1990s, and early 2000s. The low-level violence became a full-fledged generational crisis war on February 26, 2003, when the "regeneracy" was triggered by a Darfurian raid on a police station.
Since then, the war has become increasingly genocidal on all sides, as always happens in generational crisis wars.
The was will continue until it reaches some kind of massive, explosive climax that brings things to a halt. (As an example, think of America's use of nuclear weapons in WW II.) There's no way to predict the exact nature of the climax, but one possibility will be some kind of massive slaughter.

The "West," as represented mostly by the U.N., the U.S., and Europe, with no understanding of what a generational crisis war is, have been extremely naïve in it's portrayal of what's been going on. Here are some mistakes that Western politicians and journalists make all the time:

They claim that the war began in 2004. Actually, it began with low-level violence in the 1970s.
They claim that it's the "Sudanese" vs the "Darfurians." Actually, it was something like that in 2004-5, but today the situation as become much more fragmented, as we'll see below, and Western politicians and journalists are completely bollixed.
They claim that the "Sudanese" side (as represented by the Janjaweed militias) is genocidal, and the "Darfurian" side as victims of genocide. Actually, as happens in every crisis war, it's becoming increasingly genocidal on all sides, and the Western politicians and media don't understand that, or are in denial about it.

Actually, the situation is becoming increasingly complex and increasingly unstable. A big sign of this occurred early this week when a <#stdurl http://www.voanews.com/english/2007-10-01-voa40.cfm "large group of 'rebels' launched a genocidal attack"#> on a group African Union "peacekeepers." Western groups are totally perplexed by this. The "rebels" are supposed to be good guys, and they shouldn't be massacring "peacekeepers." The West's entire world view of the Darfur war is totally screwed up now. But the situation is even worse than that. According to a <#stdurl http://www.pinr.com/report.php?ac=view_report&report_id=692&language_id=1 "new analysis on pinr.org,"#> both the "Arab" side and the "black rebel" side have split into warring ethnic groups. Here's a one-paragraph extract from the analysis, to give you a flavor:

"The black rebel movement was split from the beginning between the Sudan Liberation Movement/Army (S.L.M./A.) and the Justice and Equality Movement (J.E.M.). The S.L.M./A. had the backing of the Fur, the largest of the black Muslim tribes in Darfur, through the leadership of Abdul Wahid al-Nur, as well as significant backing from the Zaghawa and Masalit tribes. Led by Khalil Ibrahim, the J.E.M. was a smaller, mostly Zaghawa operation made up of Islamists who were purged from the government in 1999. The group then received backing from the Chadian government and aligned itself with a separate rebel movement in Sudan's northeast, thus receiving support from Eritrea as well."

It's hard to know what the Western media and politicians are going to make of all this, once they get it figured out, assuming that they ever get it figured out. From the point of view of Generational Dynamics, here's what's going on: The regeneracy was triggered on February 26, 2003, as described above. The word "regeneracy" is used because this is the point where an identity group's unity is "regenerated," for the first time since the end of the previous crisis war. Initially, it was just the Africans versus the Arabs, but as the years have passed and the war has become more and more genocidal, both of these sides have splintered further, and regeneracies of individual tribal and ethnic loyalties have also occurred. =inc ww2010.h2 burma "Darfur versus Burma" =inc ww2010.xr.related1 left burma 2 We've been discussing the situation in Burma (Myanmar) during the last couple of weeks. Here's the question: Why is the Burmese government so violent with protesting / demonstrating citizens? Are Burmese government officials all such psychopaths that they get enjoyment out of seeing blood pouring out of the heads of harmless monks after being hit with clubs? When someone applies for a job in the Burmese government, do they give him a battery of psychological tests, and reject him if he isn't totally sadistic? If you want to understand how Generational Dynamics works, you have to be able to understand the minds of people who commit acts that seem to be monstrous. The fact is, if you're unable to understand why Hitler and his lieutenants felt that was they were doing was perfectly reasonable and necessary, then you also can't understand why President Roosevelt felt that what he was doing was perfectly reasonable and necessary. And everything is always driven by the previous crisis war. The survivors of a crisis war spend their entire lives doing everything possible to make sure that their own children will never have to suffer anything so horrible. In America's case, when WW II ended, the survivors believed (incorrectly) that the war could have been prevented if they'd stopped Hitler in 1935. After the war, the survivors <#hreftext ww2010.i.awakening060919 "adopted the 'Truman Doctrine,'"#> making America the "Policemen of the World." That's why we found the Korean and Vietnam wars, and why we're in Iraq today. In <#inc ww2010.weblog.ref e070926 ""Burma: Growing demonstrations by the "88 Generation" raise fears of new slaughter,""#> I summarized the previous crisis wars for Burma, and they were mostly dominated by ethnic civil wars. Burma's last crisis war was the civil war ending in 1958. That was an extremely bloody, genocidal war among Burmese ethnic groups, and today's Burmese government is determined that it shouldn't happen again. Furthermore, the Burmese officials look a few thousand miles to the west, and they see what's happening in Darfur today: a growing civil war among Sudan's ethnic groups. The Burmese officials actually LIVED through a multi-ethnic war like the one going in on Darfur, and they know very well that no "peacekeeping mission" is going to stop the Darfur war. People like Jimmy Carter, as well as US, UN and European officials must look like total buffoons to Burmese officials. I can just imagine them saying to one another, "Those guys must be idiots to think that they can just go to Darfur and talk to a few people, and end a multi-ethnic civil war involving millions of people." So the Burmese officials believe that they have no choice. The protests and demonstrations HAVE to be stopped AT ALL COSTS, to prevent a recurrence of the 1950s genocidal crisis civil war, even if it means killing some monks. In fact, in the disturbed minds of the Burmese officials, it's either kill a few monks or allow a mass genocide. If YOU had to make that choice, which choice would YOU make? In fact, Burma is about ten years behind Darfur. Ten years ago, Darfar was in a generational Unraveling era. At that time, the Janjaweed militia were merely a police force in Darfur, and there was nothing more than low-level violence. Burma is still in a generational Unraveling era today, which is why the the protests and demonstrations fizzled out -- and why they would have fizzled out anyway, even if the government hadn't resorted to violence. If Burmese officials had understood that, then they would have known that no violence was necessary at this time. And if Jimmy Carter and other "peacekeeping officials" understood what a crisis war is, then they might stop tilting at windmills. =eod =// &&2 e071003 The effects of the Fed's August 17 discount rate cut =data ww2010.weblog.y2007.e071003.head The effects of the Fed's August 17 discount rate cut =data ww2010.weblog.y2007.e071003.keys =data ww2010.weblog.y2007.e071003.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071003.date 3-Oct-07 =data ww2010.weblog.y2007.e071003.txt1 Without the interest rate cut, things might be very different today. =data ww2010.weblog.y2007.e071003.txt2 It was on early morning, August 17, that I posted my essay, <#inc ww2010.weblog.ref e070817 ""The nightmare is finally beginning.""#> I had reached the conclusion that the masses of investors had had a dramatic change of attitude that was so overwhelming that we would see a generational crash within a few weeks. I set up a "real time experiment," comparing the day by day changes in the Dow Industrials to corresponding days in 1929, to see if we would have a generational crash in the same time frame. That didn't happen, as we now know. But even without following exactly the same schedule as 1929, it remains still true that something dramatic had changed on August 17. Apparently I'm not the only person who's reached that conclusion. Here's what PIMCO's Bill Gross, head of the world's largest bond fund, wrote in <#stdurl http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+October+2007.htm "his October market commentary:"#>

"I and other PIMCO professionals were attempting to describe to high-ranking Treasury and Fed officials the near-frozen commercial-paper markets and the draining confidence of bond and stock investors worldwide. It was Thursday, August 16. Stocks had closed down 210 points and were expected to open hundreds of points lower on Friday. The country’s largest mortgage originator, Countrywide Financial, was rumored to be in liquidation mode (it survived that crisis). This was to be Ben Bernanke’s first test, an opportunity to prove that he and his board of governors knew “something” as opposed to “nothing.” Pass the test he did, cutting the discount rate the next morning and calming markets in ensuing weeks. When Bernanke’s Fed met officially on September 18, it acted again and joined a convoy of global central bankers maneuvering to restore a semblance of normalcy to credit and equity markets. So far, so good."

Note that, according to Gross, the market was expected to open several hundred points lower on Friday. This, in fact, is what I was expecting. In other words, Gross was talking to Washington officials at the same time, and telling them his own version of "the nightmare is just beginning." Let's take a look at the table that was in my August 17 posting. This table measured the speculative real-time experiment, comparing the 1929 and 2007 markets, following the respective market peaks. This data is taken from my <#hreftext ww2010.i.djia "Dow Jones historical page."#> On September 3, 1929, the market peaked at Dow 381.17. By November 15, it had fallen 40% to 228.73. This year, the market had peaked on July 19 at 14000. The table that I posted compares 1929 and 2007, following the respective peaks:

    1929   % of peak (381.17)
    -------------------------
    Tue 09-03 ( +0.22%) 100%              2007   % of peak (14000)
    Wed 09-04 ( -0.41%)  99%              ------------------------
    Thu 09-05 ( -2.59%)  97%              Thu 07-19 ( +0.59%) 100%
    Fri 09-06 ( +1.76%)  98%              Fri 07-20 ( -1.07%)  98%
    ------------------------              ------------------------
    Mon 09-09 ( -0.36%)  98%              Mon 07-23 ( +0.67%)  99%
    Tue 09-10 ( -2.04%)  96%              Tue 07-24 ( -1.62%)  97%
    Wed 09-11 ( +0.99%)  97%              Wed 07-25 ( +0.50%)  98%
    Thu 09-12 ( -1.23%)  96%              Thu 07-26 ( -2.26%)  96%
    Fri 09-13 ( +0.14%)  96%              Fri 07-27 ( -1.54%)  94%
    ------------------------              ------------------------
    Mon 09-16 ( +1.51%)  97%              Mon 07-30 ( +0.70%)  95%
    Tue 09-17 ( -1.04%)  96%              Tue 07-31 ( -1.10%)  94%
    Wed 09-18 ( +0.65%)  97%              Wed 08-01 ( +1.14%)  95%
    Thu 09-19 ( -0.25%)  97%              Thu 08-02 ( +0.76%)  96%
    Fri 09-20 ( -2.14%)  94%              Fri 08-03 ( -2.09%)  94%
    ------------------------              ------------------------
    Mon 09-23 ( -0.84%)  94%              Mon 08-06 ( +2.18%)  96%
    Tue 09-24 ( -1.78%)  92%              Tue 08-07 ( +0.26%)  96%
    Wed 09-25 ( -0.01%)  92%              Wed 08-08 ( +1.14%)  97%
    Thu 09-26 ( +0.96%)  93%              Thu 08-09 ( -2.83%)  94%
    Fri 09-27 ( -3.11%)  90%              Fri 08-10 ( -0.23%)  94%
    ------------------------              ------------------------
    Mon 09-30 ( -0.41%)  90%              Mon 08-13 ( -0.02%)  94%
    Tue 10-01 ( -0.26%)  89%              Tue 08-14 ( -1.57%)  93%
    Wed 10-02 ( +0.56%)  90%              Wed 08-15 ( -1.29%)  91%
    Thu 10-03 ( -4.22%)  86%              Thu 08-16 ( -0.12%)  91%
    Fri 10-04 ( -1.45%)  85%
    ------------------------
    Mon 10-07 ( +6.32%)  90%
    Tue 10-08 ( -0.21%)  90%
    Wed 10-09 ( +0.48%)  90%
    Thu 10-10 ( +1.79%)  92%
    Fri 10-11 ( -0.05%)  92%
    ------------------------
    Mon 10-14 ( -0.49%)  92%
    Tue 10-15 ( -1.06%)  91%
    Wed 10-16 ( -3.20%)  88%
    Thu 10-17 ( +1.70%)  89%
    Fri 10-18 ( -2.51%)  87%
    ------------------ -----
    Mon 10-21 ( -3.71%)  84%
    Tue 10-22 ( +1.75%)  85%
    Wed 10-23 ( -6.33%)  80%
    Thu 10-24 ( -2.09%)  78% Black Thursday
    Fri 10-25 ( +0.58%)  79%
    ------------------------
    Mon 10-28 (-13.47%)  68% Black Monday
    Tue 10-29 (-11.73%)  60%
    Wed 10-30 (+12.34%)  67%
    Thu 10-31 ( +5.82%)  71%
    Fri 11-01  (Closed)
    -----------------------
    Mon 11-04 ( -5.79%)  67%
    Tue 11-05  (Closed)
    Wed 11-06 ( -9.92%)  60%
    Thu 11-07 ( +2.61%)  62%
    Fri 11-08 ( -0.70%)  62%
    ------------------------
    Mon 11-11 ( -6.82%)  57%
    Tue 11-12 ( -4.83%)  55%
    Wed 11-13 ( -5.27%)  52%
    Thu 11-14 ( +9.36%)  57%
    Fri 11-15 ( +5.27%)  60%
    -----------------

The table stops at 8/17. As it turns out, the next line was:

                                   Fri 08-17 ( +1.82%)  93%

That is, the Dow Industrians gained 1.82%, after the Fed announced the discount rate cut. If the Fed hadn't announced the discount rate cut then, according to Gross, the market was expected to fall several hundred points, let's say, -4%. This would have matched what happened in 1929: On Thursday, October 3, the market fell -4.22%. So, if Gross is correct, then we would indeed have been following the 1929 path, and the generational crash might well have occurred already, by September 21. Gross adds that the basic problems that the problems that led to the near-meltdown on August 17 "remain to be disproved." He continues,

"The modern financial complex has morphed into something unrecognizable to many astute market veterans and academics. [Fed Chairman Ben] Bernanke’s fellow governors and [Treasury Secretary] Hank Paulson’s staff at the Treasury spread their roots during an era in which traditional banking activity – lending out deposits backed by a certain level of reserves – was the accepted vehicle for liquidity creation. Remember those old economics textbooks that told you how a $1 deposit at your neighborhood bank could be multiplied by five or six times in a magical act of reserve banking? It still can, but financial innovation has done an end run around the banks. Derivatives and structures with three- and four-letter abbreviations – CDOs, CLOs, ABCP, CPDOs, SIVs (the world awaits investment banking’s next creation; perhaps IOU?) – can now take a “depositor’s” dollar and multiply it ten or 20 times. Reserve banking, and the Federal Reserve that regulates the system, appear anemic in comparison."

This is the point that I've made many times. Only I believe the use of CDOs have created leverage by a factor much higher than 10 or 20. He continues:

"I’m sure that Bernanke, Paulson, and their cohorts understand this, but it isn’t yet clear how much they appreciate it. Alan Greenspan admits in his newly published book that he didn’t appreciate until recently the impact adjustable-rate mortgages and their subprime character, accompanied in some cases by outright fraud, would have on the housing market. If the Fed was so slow to grasp the role that subprime mortgages played in the housing boom and bust, do the Fed and the Treasury of today totally comprehend what happens when the nonbanking private system suddenly stops flooding the market with credit? Do they recognize that such a shutdown puts spending for housing and business investment at risk, and job growth as well? The Fed will have to adapt its monetary policy, and the Bush Treasury will have to adjust its fiscal policy to this brazen new world dominated more and more by private rather than public policies and proclivities. To overcome private-market caution, the Fed may need to put on a bold face marked by even more decisive cuts in short-term rates. To prevent a housing-market slump from metastasizing into a cancerous self-feeding tumor, Treasury Secretary Paulson will have to coordinate policies that lend a helping hand to homeowners in distress."

I agree with what Gross says, except for his evident belief that it's still possible to do something to prevent a global economic meltdown. Nothing has really changed since I wrote my August 17 essay, <#inc ww2010.weblog.ref e070817 ""The nightmare is finally beginning.""#> What these financial officials don't understand is that they have things backwards. They believe that a series of accidents -- the housing bubble, the distress of a couple of banks -- is the CAUSE of the investor anxiety and panic. They believe that if they can take a few confidence-building steps, and convince people that the banks are OK, then investor anxiety and panic will return back to "normal." But that's backwards. The panic and anxiety is CAUSED by generational changes -- the people in the generations that survived the 1930s Great Depression have all disappeared, replaced by Boomers and Gen-Xers who have no idea what's going on, and are panicking as a result. The generational panic and anxiety that had been growing silently among Boomers and Xers finally metastasized into action on August 17. The shot of heroin that the Fed provided with interest rate reductions has produced the desired euphoria, but that euphoria can't last much longer. Something very significant happened on August 17, even if the comparison with 1929 didn't precisely occur. The issue is NOT the ups and downs of the stock market; the issue is the dramatic increase in panic and anxiety among investors. That's not going to change. It's still true that the generational panic I've described might occur next week, next month, next year or even later, it's still my expectation that we'll see it within the next few weeks. =eod =// &&2 e071002b Bad news is good news again, as Dow hits a new high =data ww2010.weblog.y2007.e071002b.head Bad news is good news again, as Dow hits a new high =data ww2010.weblog.y2007.e071002b.keys =data ww2010.weblog.y2007.e071002b.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071002b.date 2-Oct-07 =data ww2010.weblog.y2007.e071002b.txt1 Here's how the pundits explain it. =data ww2010.weblog.y2007.e071002b.txt2 Monday started off ominously.

UBS AG, the biggest bank in Europe, <#stdurl http://www.iht.com/articles/2007/10/01/business/banks.php "announced a third-quarter loss,"#> of $700-900 million. Its assets, many of which are tainted with CDOs backed by subprime mortgages, suffered a $3.42 billion reduction in value.
Citigroup, the largest bank in the U.S. by assets, announced a 60% drop in third-quarter earnings, thanks to write-downs for securities backed by subprime mortgages. In addition, Citigroup suffered losses tied to corporate takeovers (leveraged buyouts or LBOs) because of the credit crisis.
This followed <#stdurl http://money.cnn.com/news/newsfeeds/articles/djf500/200709281658DOWJONESDJONLINE000790_FORTUNE5.htm "the failure, on Friday, of NetBank Inc.,"#> based in Alpharetta, Ga. The $2.5 billion thrift had been an online banking pioneer, but was seized by regulators because of significant mortgage-related losses.

Those were ominous warning signs. But no matter. The Dow Industrials skyrocketed by 191 points on Monday, to close at an all time history high, 14,087, eclipsing the 14,000 point high that it reached on July 19. Here's how CNBC commentator Bob Pisani described the situation as of 1 pm, when the Dow was already at a new intraday high:

"It sounded like bad news from Citigroup and UBS, but the market treated it this morning -- and the comments in the trade press were very clear -- "Get the bad news out now." They took the right approach. ... Doesn't sound like good news, but the market said, look, they're getting everything out. The losses are very conservative. That is they're taking significant losses. They're trying to anticipate that it may even be worse, and they're trying to move ahead. The market loves that, and you'll notice that the stocks are on the up side here. ... What seemed like bad news is actually being turned on its head. ... They're getting all the dirty laundry out right now."

And here's what Richard Bove, financial strategist at Punk, Ziegel & Co., said at about 8 am:

"I think it's pretty clear. ... It's because people simply don't believe that there is a crisis of this nature out there. They believe that the Federal Reserve can solve any problem whatsoever. I mean the Federal Reserve's ability to print money and to throw that money around and solve any crisis that could arise in the financial system is so great that people simply don't believe that this is meaningful."

This has my head spinning. We've moved back into this crazy, bizarre world where up is down and good is bad. If UBS AG had posted a large profit, investors would have been ebullient about the high earnings, and would have pushed the market up to new highs. But UBS AG posted a big loss, and investors are STILL ebullient. Why? Because UBS is taking significant losses, anticipating that things may even get worse, and they're staying ahead of it. Aaaaahhhhhhhhhhhhh!!!! In the 1950s, my teachers would tell us about how gullible and clueless the investors were prior to the 1929 crash, and I never understood how it was possible. Now I do. What's going on today is absolutely mind-boggling. The average investor appears to be as dumb as a stump. And to think that they've pushed the stock market bubble up to a new high is almost too incredible to be believed. Do you want to know how these guys -- these investors and their advisors -- make their decisions, reach their conclusions? Here's an example, by Morgan Stanley's David Miles, in a <#stdurl http://www.morganstanley.com/views/gef/archive/2007/20070927-Thu.html#anchor5559 "posting on Morgan Stanley's global economics forum:"#>

"Our main tool for judging medium and longer-term trends in inflation is a five-equation model that allows us to determine the long-run steady state levels for key macroeconomic variables. Part of this model incorporates a Bank of England reaction function such that short-term interest rates are consistent with a path for inflation that stabilises around the target. The other elements in the model reflect wage pressures, consumer spending, unemployment and oil prices – driving factors behind inflation pressures and therefore central to Bank of England interest rate decisions. For the short term (up to one year) central outlook and risk analysis we take into account a wide range of information, including the likely path of utility prices, oil prices, pressures on food prices, house prices and council taxes. At each stage, we consider risks: in the long run, whether the economy could converge to a different activity level; in the medium term, analysis of shocks that could affect the medium-term path; in the short run, current inflationary pressures that can affect the near-term path. Fortunately, all three approaches currently give a relatively consistent picture."

Can you believe this? He has a "five-equation model" to predict inflation for the next year. He probably has another "five-equation model" that tells him where the stock market will be next year, and another "five-equation model" that tells him what mood his wife will be in that evening. I would like to hear from anyone who reads this web site who believes that a "five-equation model" can be used to predict almost anything. Just write to me and let me know. These guys have no idea what they're talking about. If you listen to the weather forecasts on the radio in the morning, they'll probably be accurate for the entire day. If you listen to stock market forecasts in the morning, there's a good chance they'll be wrong by 11 am. Even retrospective explanations are bizarre. An evening business report might say, "Stocks went up today on the news that oil prices were falling." Then, the next evening, it'll be, "Stocks went up today as investors were unfazed by rising oil prices." Before I go on, let me mention that last night when I wrote the article, <#inc ww2010.weblog.ref e071001 ""IMF questions the globe's continuing financial stability,""#> I made a couple of mistakes in my description of how CDSs and CDOs are created. I thank a couple of sharp-eyed web site readers for correcting me, and the article itself has now been corrected. However, it really hit me last night how REALLY crazy all this. There's a joke that no one who knew how sausage was made would ever eat sausage. Well, who the hell would ever buy a CDO? Only a maniac would, especially when you know how they're made. You take high-risk subprime mortgages and merge them into a big blob, break up the big blob into small shares, and the high risk mortgages magically turn into low-risk CDOs. Actually, you still have have some high-risk CDOs left over, and you make another big blob, do the same thing, and magically convert THOSE into low-risk CDOs-squared. Is anyone really dumb enough to invest in one of those? That's INSANE. And yet, here we are. Investors, mutual funds, investment trusts, hedge funds, savings banks, pension funds, college endowments, money market funds, insurance companies, and so forth -- they all invested HUGELY in CDOs. There are 750 TRILLION DOLLARS of these and other credit derivatives in the portfolios of these organizations. And it's all leveraged, based on JUST 10 TRILLION DOLLARS worth of contracts. Man, that's leveraging! And the worldwide annual GDP -- the total sum of all the goods and services produced in the whole world, is ONLY 45 TRILLION DOLLARS. But that's no problem. All we need is a "five-equation model." It'll tell us that everything is fine. So stop worrying! Be happy! I never thought that investors would be dumb enough to push the stock market bubble even higher than it was on July 19, but that goes to show how wrong a guy can be. I can hardly wait to see what happens next. =eod =// &&2 e071002 Burma (Myanmar) demonstrations fizzle after violent government response =data ww2010.weblog.y2007.e071002.head Burma (Myanmar) demonstrations fizzle after violent government response =data ww2010.weblog.y2007.e071002.keys =data ww2010.weblog.y2007.e071002.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071002.date 2-Oct-07 =data ww2010.weblog.y2007.e071002.txt1 Thousands of troops are exerting a massive stranglehold on the streets of Rangoon =data ww2010.weblog.y2007.e071002.txt2 (Yangon) on Monday, as the <#stdurl http://english.aljazeera.net/NR/exeres/63E88A88-1738-4256-9504-4069923BD79B.htm "street protests have died out."#> It's thought that <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-6962910,00.html "hundreds of activists and citizens have been shot dead"#> or burned alive in government crematoriums. Thousands of Buddhist monks, who led the protests to begin with, have been rounded up and detained. Some have been found floating face down in rivers. Horror stories abound. =inc ww2010.xr.related1 right burma 2 In an odd coincidence, <#stdurl http://www.mercurynews.com/news/ci_7053006 "Sylvester Stallone has witnessed some of the genocide"#> that was going on in Burma even before the recent protests began. Stallone returned eight days ago from shooting his new movie "John Rambo," filmed on a river separating Thailand and Burma. "I witnessed the aftermath—survivors with legs cut off and all kinds of land mine injuries, maggot-infested wounds and ears cut off. We saw many elephants with blown off legs. We hear about Vietnam and Cambodia and this was more horrific," Stallone told The Associated Press in a telephone interview Monday. "This is a hellhole beyond your wildest dreams," Stallone said. "All the trails are mined. The only way into Burma is up the river." Stallone said that he plans to incorporate the real-life genocide into the movie during editing. Ironically, the army need not have resorted to violence to end the protests. As I wrote a week ago in my article, <#inc ww2010.weblog.ref e070926 ""Burma: Growing demonstrations by the '88 Generation' raise fears of new slaughter,""#> Burma is in a generational Unraveling era. Burma's last crisis war ended in 1958. Following the end of a crisis war, a country or society goes through a series of "generational eras," as the generations change and fight one another. The greatest conflict is between the generations that lived through and survived the crisis war, and those born after the war ended. This "generation gap" generates the behaviors that are characteristic of each era. The Awakening era, which begins 15-20 years after the crisis war ends, is characterized by strident political battles between survivor and post-war generations. The Unraveling era, which begins around 40 years after the crisis war ends, is a time when all the "lessons learned" from the last crisis war unravel. About 60 years after the crisis war ends, when the survivors of the last crisis war all die or retire, a new generational Crisis era begins. During a generational Unraveling era, large protests and demonstrations occur, but they always fizzle out quickly, as I explained last week. So if the army had simply waited a few days, they would have gotten what they wanted without violence. This is a perfect example of how an understanding of Generational Dynamics can aid policy makers. If the Burmese government officials had understood what a generational Unraveling era is, then they would have known not to start spraying civilians with machine gun fire. There's a lot of wishful thinking going on in the world about Burma. For example, Carl Bildt, Minister for Foreign Affairs for Sweden, wrote <#stdurl http://www.asiantribune.com/index.php?q=node/7606 "an article"#> entitled, "Rotten regime will not be long-lived." In this article, he says:

"Regimes like that in present-day Burma never last forever, and in our increasingly open world these enclaves of isolation are being placed under ever greater pressure. Human rights are justly regarded as universal; modern IT technology does not respect old borders, and the accelerating process of globalisation is gradually opening up even the most closed of societies. The only thing we can say with absolute certainty about present-day Burma is that the current regime will sooner or later belong in the past. We would like to be able to say when and how this will happen - and we would like for it to happen now, through the open dialogue that not least the monks are calling for in their protest."

Unfortunately, Sweden's foreign affairs minister doesn't understand a generational Unraveling era either. If he did, he'd know that the current regime is certain to survive for many years. Burma will enter a generational Crisis era again in the late 2010s. Around that time, there will be a new civil war, and almost certainly the current regime will be overthrown. There's nothing magic or psychic about these conclusions. Students of generational theory have identified hundreds of similar situations throughout history where exactly the same thing happens over and over. Let's take a brief look at some other news stories that we've covered on this web log:

Venezuela is also in an Unraveling era, and when <#inc ww2010.weblog.ref e070530 "students rioted against Hugo Chávez"#> in May, the protests fizzled quickly.
China was in an Unraveling era in 1989, when the <#hreftext ww2010.i.china050116 "the Tiananmen Square massacre"#> occurred. In that case, a violent overreaction by the Chinese authorities did succeed in dispersing the crowd, but was an enormous shock to China, and resulted in the Falun Gong dissident movement that threatens the stability of China at the present time.
Iran is just entering its Awakening era, just one generation after the end of the genocidal 1980s Iran/Iraq war. As I wrote in my analysis, <#inc ww2010.weblog.ref e070702 ""Iran's President Ahamadinejad facing a growing 'generation gap,'""#> students are stridently opposed to many of the oppressive policies of Mahmoud Ahmadinejad. However, Westerners who have been hoping for an overthrow of the hardline Muslim mullahs who rule Iran are going to be disappointed -- such conflicts do not happen during Awakening eras.
Lebanon is also in an Awakening era. For over a year, since the 2006 war between Hizbollah and Israel, pundits have overwhelmingly been predicting a new Lebanese civil war. I've pointed out repeatedly that <#inc ww2010.weblog.ref e061201 "such a civil war is completely impossible"#> during an Awakening era, and time has shown that to be true.
Iraq is in an Awakening era, a time of enormous political turmoil, but no civil war. The talk of an incipient civil war in Iraq for several years has been political nonsense. Now we're seeing more and more stories about sharp reductions in casualties in Iraq, and greater Sunni/Shia cooperation in the government. The credit for this is being given to America's military "surge" strategy, but I would give even more credit to the simple fact that Awakening era behavior is finally asserting itself. The idea of a Sunni/Shia war during an Awakening era never made any sense at all, which is why on this web site I've been emphasizing the role of the invading forces -- especially al-Qaeda in Iraq. Now, finally, the expected behavior appears to be coming to pass.

Every one of these examples has domestic policy implications for the countries involved, and foreign policy implications for the United States and other countries. Generational Dynamics can serve as a powerful tool by governments in determining matters of state and war. =eod =// &&2 e071001 IMF questions the globe's continuing financial stability =data ww2010.weblog.y2007.e071001.head International Monetary Fund (IMF) questions the globe's continuing financial stability =data ww2010.weblog.y2007.e071001.keys =data ww2010.weblog.y2007.e071001.loc ww2010.weblog.log0710 =data ww2010.weblog.y2007.e071001.date 1-Oct-07 =data ww2010.weblog.y2007.e071001.txt1 Saying that the "global financial system is enduring an important test," =data ww2010.weblog.y2007.e071001.txt2 the IMF is warning that the global financial system has been getting increasingly unstable for at least several months, and that this trend is continuing. Let's look at some excerpts from the executive summary of the <#stdurl http://www.imf.org/External/Pubs/FT/GFSR/2007/02/index.htm "International Monetary Fund's October, 2007, Global Financial Stability Report (GFSR):"#>

"Since the April 2007 Global Financial Stability Report (GFSR), global financial stability has endured an important test. Credit and market risks have risen and markets have become more volatile. Markets are recognizing the extent to which credit discipline has deteriorated in recent years—most notably in the U.S. nonprime mortgage and leveraged loan markets, but also in other related credit markets. This has prompted a retrenchment from some risky assets and deleveraging, causing a widening of credit spreads in riskier asset classes and more volatile bond and equity markets. The absence of prices and secondary markets for some structured credit products, and concerns about the location and size of potential losses, has led to disruptions in some money markets and funding difficulties for a number of financial institutions, as some counterparties have been reluctant to extend credit to those thought to hold lower quality, illiquid assets. The resulting disruption has required extraordinary liquidity injections by a number of central banks to facilitate the orderly functioning of these markets."

This refers to the tremendous volatility and investor anxiety that occurred in August. The report indicates August events are a great threat to global financial stability, and most of the report is about what happened in August and how to keep it from happening again.

"The potential consequences of this episode should not be underestimated and the adjustment process is likely to be protracted. Credit conditions may not normalize soon, and some of the practices that have developed in the structured credit markets will have to change. At the same time, the global economy entered this turbulent period exhibiting solid growth, especially in emerging market countries."

The report does not predict a 1930s style Great Depression, as I do, but says that the problems will continue for a long time, and will get worse. The report says that "some of the practices that have developed in the structured credit markets will have to change," but as we'll see, any significant change is unlikely.

"Systemically important financial institutions began this episode with adequate capital to manage the likely level of credit losses. So far, despite the significant ongoing correction in financial markets, global growth remains solid, though some slowdown could be expected. Downside risks have increased significantly and even if those risks fail to materialize, the implications of this period of turbulence will be significant and far reaching. Eventually, lessons for both the private sector and the regulatory and supervisory arenas will have to be drawn in order to strengthen the financial system against future strains."

"Systemically important financial institutions" refer to major financial institutions, such as large banks, insurance companies, and investment firms around the world. This makes the point that it's not just a few small town savings banks that are in trouble.

"The threat to financial stability increased as the uncertainty became manifest in the money markets that provide short-term financing (especially commercial paper markets). At the center of the turmoil is a funding mismatch whereby medium-term, illiquid, and hard-to-value assets, such as structured credit securities, were being funded by very short-term money market securities—often asset-backed commercial paper."

This "funding mismatch" is the problem that exploded. Here's an example of what can happen:

A bank (or another lending institution) gives a 30-year mortgage loan to a homeowner. The bank has to guarantee an interest rate that lasts for 30 years.
But in order to grant the loan, the bank has to borrow that money from somewhere, and usually that's over a much shorter period -- usually 30, 60 or 90 days. This is the mismatch: borrowing money for 90 days, and lending it out for 30 years.
At the end of each 30-90 day period, the bank "rolls over" the debt by borrowing money for another 30-90 period. As long as short-term interest rates remain low, then the bank is OK; but if short-term interest rates go up, then the bank is in trouble.
In order to make greater profits, banks has been focusing on subprime mortgages that command higher interest rates (once the initial "teaser" rates expire). This "protects" the bank from higher short-term rates.
However, then the bank to be sure that not too many of the homeowners with subprime mortgage loans default.

"The market illiquidity and the difficulty in valuing the complex, structured products held as assets has compounded the risks of the funding mismatch. Thus, while potentially helping protect the financial system from concentrations of credit risk in banks, the dispersal of structured credit products has substantially increased uncertainty about the extent of the risks and where they are ultimately held."

The creation of these "complex, structured products" is the most bizarre financial development of the modern age. Let's continue with the above example: =//

A bank (or other lending institution) that wants to be =// "protected" against a rise in short-term interest rates can buy =// "insurance" from a third party. The bank makes a contract called =// a "credit default swap" (CDS), where the third party, in effect, =// promises to cover the bank's losses if short-term interest rates =// rise. Thus, the bank can feel protected against rises in =// interest rates for the entire 30-year period of the mortgage loan. =// The CDS contract can involve several forms of payment -- an =// initial payment when the contract is signed. Money changes hands =// when the contract is executed, and a fraction of the monthly =// mortgage payment is paid to the third party. The their party pays =// the bank if short-term interest payments rise too high. [I hope I =// have all of this straight.]
In a sense, everything so far is perfectly natural. The CDS =// is an insurance policy, and getting an insurance policy against =// short-term interest rate increases really isn't so different from =// getting a fire insurance policy. But now a series of bizarre =// steps begin to take place.

A bank (or other lending institution) that wants to be "protected" against a homeowner default by purchasing "insurance" from a third party. The bank makes a contract called a "credit default swap" (CDS), where the third party, in effect, promises to cover the bank's losses if the homeowner defaults. The CDS contract can involve several forms of payment -- an initial payment when the contract is signed. Money changes hands when the contract is executed, and a fraction of the monthly mortgage payment is paid to the third party. The third party pays the bank if the homeowner defaults. (1-Oct correction)
In a sense, everything so far is perfectly natural. The CDS is an insurance policy, and getting an insurance policy against homeowner default really isn't so different from getting a fire insurance policy. But now a series of bizarre steps begin to take place. (1-Oct correction)
The first bizarre step is that the CDS itself becomes something that can be traded. Since the CDS generates income, it has an intrinsic value, and can be bought and sold. The value of the CDS can be computed by a "present value" analysis of the expected generated income.
The next bizarre step is that millions of mortgage contracts are combined together into huge investment packages, and then broken up into "tranches" by level of risk, low-risk (AAA) to high-risk (BBB-). Each tranche is then broken up into shares, and individual shares can be bought and sold. The CDSs are also combined and broken up into tranches. What's the value of one of the shares of one of these tranches? It's getting harder and harder to put a real value onto it.
The next bizarre steps are the most magical of all. Investment firms have no difficulty selling the shares in the AAA rated tranches, but a lot less luck selling shares in the BBB or BBB- rated tranches. We'd like all the shares to be AAA rated, wouldn't we? So a way is needed to turn BBB rated securities into AAA rated securities.
You do this by taking the BBB and BBB- tranches, and break these up into low-rated to high-rated tranches, and then sell shares of those tranches. Those shares are called "collateralized debt obligations," or CDOs. You set up the returns so that if everyone makes their mortgage payments, then all the CDO owners will get paid; but if homeowners start defaulting on their mortgages, then the lower-rated CDO tranches will get nothing, and the the upper-level tranches will get whatever money is available. Therefore, the highest rated CDOs will almost certainly get paid. So the ratings agencies (Moody's, S&P, Fitch) rate them AAA.
Now let's take it to one more horrible step. The previous step converted low-rated CDSs into high-rated CDOs, but there are still some low-rated CDOs around. What do we do with those? Why, we repeat the same step. The low-rated CDOs are merged together, and split into low-risk to high-risk tranches by using the same kind of structuring. Shares in the new tranches are called "CDO-squared" securities. And I guess you can repeat this process over and over, convert high-risk securities into low-risk super-CDOs. (1-Oct addition)
All of these CDOs can be bought and sold like other securities. How do you determine the value of a CDO? The credit default swaps (CDSs) could be evaluated in a sane way, but a CDO is so far away from the underlying mortgage loans, that there's no sane way to evaluate them. And so the young financial gurus develop computer models that figure out the values of these CDOs, based on various assumptions about long-term interest rates and default rates. This is called "mark to model," because the value of the CDO is based on a computer model.
It's only when an attempt is made to actually sell these CDOs that a real market price can be determined. That's called "mark to market." The "mark to model" price is called the "notional price," and the the "mark to market" price is called the "market price."

"This funding mismatch was undertaken by a significant number of conduits and special purpose vehicles that had assumed they could hold their illiquid assets to maturity. Many have been associated with regulated banks, and to a large extent their funding strategies were backed by contingent liquidity lines from those banks. When doubts about the quality of some of the underlying assets emerged and the high ratings were perceived as less reliable, prices of the assets fell, the rollover of associated asset-backed commercial paper became very difficult, and funding began to be squeezed. As a consequence, what had been contingent, off-balance sheet liabilities for regulated banks threatened to move "on balance sheet."

    Table 4. Global Over-the-Counter Derivatives Markets: Notional
    Amounts and Gross Market Values of Outstanding Contracts

    (In billions of U.S. dollars)

         Date       Notional amounts  Gross Market Values
      -----------   ----------------  -------------------
      31-Dec-2004     257,894                  9,377
      30-Jun-2005     281,493                 10,605
      31-Dec-2005     297,670                  9,749
      30-Jun-2006     369,507                  9,936
      31-Dec-2006     415,183                  9,695

    FOOTNOTE: All figures are adjusted for double-counting. Notional
    amounts outstanding have been adjusted by halving positions
    vis-à-vis other reporting dealers. Gross market values have been
    calculated as the sum of the total gross positive market value of
    contracts and the absolute value of the gross negative market
    value of contracts with non-reporting counterparties.

"Das is pretty droll for a math whiz, but his message is dead serious. He thinks we're on the verge of a bear market of epic proportions. The cause: Massive levels of debt underlying the world economy system are about to unwind in a profound and persistent way. ... [He] foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates. ... [He] points a finger at three parties: regulators who stood by as U.S. banks developed ingenious but dangerous ways of shifting trillions of dollars of credit risk off their balance sheets and into the hands of unsophisticated foreign investors; hedge and pension fund managers who gorged on high-yield debt instruments they didn't understand; and financial engineers who built towers of "securitized" debt with math models that were fundamentally flawed. "Defaulting middle-class U.S. homeowners are blamed, but they are merely a pawn in the game," he says. "Those loans were invented so that hedge funds would have high-yield debt to buy." The liquidity factory Das' view sounds cynical, but it makes sense if you stop thinking about mortgages as a way for people to finance houses and think about them instead as a way for lenders to generate cash flow and create collateral during an era of a flat interest-rate curve. Although subprime U.S. loans seem like small change in the context of the multitrillion-dollar debt market, it turns out these high-yield instruments were an important part of the machine that Das calls the global "liquidity factory." Just like a small amount of gasoline can power an entire truck given the right combination of spark plugs, pistons and transmission, subprime loans became the fuel that underlays derivative securities many, many times their size. Here's how it worked: In olden days, like 10 years ago, banks wrote and funded their own loans. In the new game, Das points out, banks "originate" loans, "warehouse" them on their balance sheet for a brief time, then "distribute" them to investors by packaging them into derivatives called collateralized debt obligations, or CDOs, and similar instruments. In this scheme, banks don't need to tie up as much capital, so they can put more money out on loan. The more loans that were sold, the more they could use as collateral for more loans, so credit standards were lowered to get more paper out the door -- a task that was accelerated in recent years via fly-by-night brokers now accused of predatory lending practices. Buyers of these credit risks in CDO form were insurance companies, pension funds and hedge-fund managers from Bonn to Beijing. Because money was readily available at low interest rates in Japan and the United States, these managers leveraged up their bets by buying the CDOs with borrowed funds. So if you follow the bouncing ball, borrowed money bought borrowed money. And then because they had the blessing of credit-ratings agencies relying on mathematical models suggesting that they would rarely default, these CDOs were in turn used as collateral to do more borrowing. In this way, Das points out, credit risk moved from banks, where it was regulated and observable, to places where it was less regulated and difficult to identify. Turning $1 into $20 The liquidity factory was self-perpetuating and seemingly unstoppable. As assets bought with borrowed money rose in value, players could borrow more money against them, and it thus seemed logical to borrow even more to increase returns. Bankers figured out how to strip money out of existing assets to do so, much as a homeowner might strip equity from his house to buy another house. These triple-borrowed assets were then in turn increasingly used as collateral for commercial paper -- the short-term borrowings of banks and corporations -- which was purchased by supposedly low-risk money market funds. According to Das' figures, up to 53% of the $2.2 trillion commercial paper in the U.S. market is now asset-backed, with about 50% of that in mortgages. When you add it all up, according to Das' research, a single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion -- or eight times total global gross domestic product of $60 trillion. Without a central governmental authority keeping tabs on these cross-border flows and ensuring a standard of record-keeping and quality, investors increasingly didn't know what they were buying or what any given security was really worth. A painful unwinding Now here is where the U.S. mortgage holder shows up again. As subprime loan default rates doubled, in contravention of what the models forecast, the CDOs those mortgages backed began to collapse. Because they were so hard to value, banks and funds started looking at all CDOs and other paper backed by mortgages with suspicion, and refused to accept them as collateral for the sort of short-term borrowing that underpins today's money markets. Through late last month, according to Das, as much as $300 billion in leveraged finance loans had been "orphaned," which means that they can't be sold off or used as collateral. One of the wonders of leverage is that it amplifies losses on the way down just as it amplifies gains on the way up. The more an asset that is bought with borrowed money falls in value, the more you have to sell other stuff to fulfill the loan-to-value covenants. It's a vicious cycle. In this context, banks' objective was to prevent customers from selling their derivates at a discount because they would then have to mark down the value of all the other assets in the debt chain, an event that would lead to the need to make margin calls on customers already thin on cash. Now it may seem hard to believe, but much of the past few years' advance in the stock market was underwritten by CDO-type instruments which go under the heading of "structured finance." I'm talking about private-equity takeovers, leveraged buyouts and corporate stock buybacks -- the works. So to the extent that the structured finance market is coming undone, not only will those pillars of strength for equities be knocked away, but many recent deals that were predicated on the easy availability of money will likely also go bust, Das says. That is why he considers the current market volatility much more profound than a simple "correction" in prices. He sees it as a gigantic liquidity bubble unwinding -- a process that can take a long, long time."

(1-Oct correction)

The Looming Tower: Al-Qaeda and the Road to 9/11,

Face the Nation

Bob Schieffer: Why can't we find Osama bin laden? <#inc ww2010.pic g070930a.jpg right "" "Lawrence Wright with Bob Schieffer on Face the Nation (Source: CBS)"#> Lawrence Wright: It may very well be, Bob, that we more or less HAVE found him. We know that he's in the tribal areas, probably. And yet, we decided not to get him, because going into the tribal areas to actually find him might destabilize Pakistan. At least this is the view of a lot of American policy makers. So in a general way, we have found him. In a specific way, we don't know exactly where he is, probably, but the hunt for bin Laden has essentially stopped at the borders. Bob Schieffer: If we caught bin laden, what would we do with him? Lawrence Wright: The CIA asked me that question, because I'm a screenwriter. They appealed to me for a scenario, and I said I can't write a screenplay for the CIA because I'm a reporter, but I'll tell you what I think, in the form of an op-ed. First of all, he's the most famous man in the world - he's going to be one of the most famous men in history. So you don't just deal with bin Laden the man. You have to deal with "bin-Laden-ism" and the legacy that he's going to leave for untold generations. So if you find him, don't kill him, because that's what he wants, and his martyrdom will seal that legacy in amber for all eternity. But don't bring him to America - not right away. Take him first of all to Kenya where, on August 7, 1998, he set off a bomb in front of the American embassy and killed over 200 people. More than 150 were blinded by the flying glass. Let Osama bin Laden sit in a courtroom in Nairobi and tell 150 blind Africans that he was just striking at a symbol of American power. Then, after that, take him to Tanzania where, on the same day, he set off another bomb in front of another American embassy killing 11 people, all of the Muslims. Al-Qaeda excuses that because it was Friday, and "good Muslims" would be in a mosque. It would be a wonderful venue to ask, "What is a good Muslim?" Then you can have him answer for the Cole bombing, and the 3000 people who died on 9/11, and you could take him so many other places. Just take him one last place. Just take him home to Saudi Arabia, where hundreds of Saudis and ex-pats have died, and try him under Sharia law. And if he's convicted, he'll be taken to a square, a "chop-chop square" in downtown Riyadh. And the Saudi custom is that the executioner goes out and beseeches the crowd, who are composed of the families of the victims of the condemned man to forgive him. And if they can't do that, then the executioner will do his job and bin Laden will be taken and buried in an unmarked Wahhabi graveyard. I think in that way you can begin to roll back some of his legacies."

Dying to Win

"The leading Democratic White House hopefuls conceded Wednesday night they cannot guarantee to pull all U.S. combat troops from Iraq by the end of the next presidential term in 2013. "I think it's hard to project four years from now," said Sen. Barack Obama of Illinois in the opening moments of a campaign debate in the nation's first primary state. "It is very difficult to know what we're going to be inheriting," added Sen. Hillary Rodham Clinton of New York. "I cannot make that commitment," said former Sen. John Edwards of North Carolina."

The Iraq war began in 1991, not 2003 as everyone seems to believe, and continues to this day. It's been going on for 16 years, since we reponded to Iraq's invasion of Kuwait in 1991. It escalated sharply in 1999 with almost daily bombing of no-fly zones. The 2003 ground war was another escalation, but if we hadn't done it, we'd still be bombing no-fly zones with completely unpredictable results.
The 2003 Iraq ground war was not an impromptu decision by the Bush administration. Neither public nor Congressional opinion would have tolerated Saddam's continued intransigence. If Al Gore had been President after 9/11, he would have done the same thing, or he would have lost in 2004.
Iraq is in a generational Awakening era, since it's been just one generation past the genocidal Iran/Iraq crisis war of the 1980s. This means that a crisis civil war is impossible. The Iraq war has NEVER been a civil war, and could never be a civil war.
Just as there was no choice but to enter Iraq in 2003, today there is no choice but to stay in Iraq. The Democratic presidential candidates' sudden shyness in calling for immediate withdrawal from Iraq is based on this reality.

Daily Show

(Source: Comedy Central)

"Greenspan: No, actually, what a sound money system does is to stabilize all the elements in it, and reduces the uncertainty that people confront. And the one thing that all human beings do when they're confronted with uncertainty is pull back, withdraw, disengage. And that means that economic activity, which is really dealing with people, just goes straight down. And so the key problem is ... Stewart: It's about perception then. It's about making people believe that the system is sound. ... if the stock market is high, people feel confident and spending, and if it lowers, they feel less confident Greenspan: I think you have to realize that there are certain aspects of human nature which move exactly the way that you've defined it. The problem is periodically we all go a little bit euphoric until we get to the point where we are assuming with confidence that everything is terrific, there will be no problems, nothing will ever happen. and then it dawns on us ... no. And we go the other way. [Stewart: Huge fear.] I was telling my colleagues the other day, I've been dealing with these big mathematical models, forecasting the economy -- and I'm looking at what's going on in the last few weeks and you know if I could figure out a way to determine if people are more fearful, or changing to euphoric, and I had a third way of figuring out which of the two things are working, I don't need any of this other stuff. I could forecast the economy better than any way that I know. The trouble is that we can't figure that out. The same meeting I was talking at, I said that I've been in the forecasting business for 50 years ... more than that actually ... I'll have to think about that ... but in any event, I'm no better than I was, and nobody else is. Forecasting 50 years ago was as good or as bad as it is today. And the reason is that human nature hasn't changed. We can't improve ourselves. Stewart: You just bummed the [bleep] out of me."

(Source: CNN)

"Every civilized nation also has a responsibility to stand up for the people suffering under dictatorship. In Belarus, North Korea, Syria, and Iran, brutal regimes deny their people the fundamental rights enshrined in the Universal Declaration. Americans are outraged by the situation in Burma, where a military junta has imposed a 19-year reign of fear. Basic freedoms of speech, assembly, and worship are severely restricted. Ethnic minorities are persecuted. Forced child labor, human trafficking, and rape are common. The regime is holding more than 1,000 political prisoners -- including Aung San Suu Kyi, whose party was elected overwhelmingly by the Burmese people in 1990. =inc ww2010.xr.related1 right burma 2 The ruling junta remains unyielding, yet the people's desire for freedom is unmistakable. This morning, I'm announcing a series of steps to help bring peaceful change to Burma. The United States will tighten economic sanctions on the leaders of the regime and their financial backers. We will impose an expanded visa ban on those responsible for the most egregious violations of human rights, as well as their family members. We'll continue to support the efforts of humanitarian groups working to alleviate suffering in Burma. And I urge the United Nations and all nations to use their diplomatic and economic leverage to help the Burmese people reclaim their freedom."

Crisis war:

Awakening Era war:

Crisis war:

Awakening:

Unraveling war:

1948:

Note:

Crisis war:

(Source: CNN)

Awakening Era climax:

Note:

Today:

Note:

(Source: Japan Times)

Japan Times

"New Liberal Democratic Party President Yasuo Fukuda is known as an advocate of relatively conciliatory policies, so after a year with the hawkish Shinzo Abe in power the public may be expecting a major shift in various policy areas, including diplomacy and the Yasukuni Shrine issue. Political analysts, however, are doubtful there will be much of a drastic change now that Fukuda has been elected head of the LDP and is set to become prime minister on Tuesday. "What one prime minister wants to do personally and whether or not he will be able to move forward with his policies are two different things," said Takeshi Sasaki, a political science professor at Gakushuin University. "A perfect example of this is Abe himself." Abe pushed forward his conservative ideas by ramming a controversial bill through the Diet to revise the Fundamental Law of Education to instill patriotism in the classroom, and he stressed his vague but conservative ideology for a "beautiful country." But at the same time, Sasaki pointed out, Abe suppressed much of his hawkish tendencies. ... Political observers say Fukuda will have difficulty pushing his dovish policies because he is likely to face strong opposition from conservative forces within his own party. "Fukuda has the motivation (to push dovish policies) . . . but whether he will actually be able to act on his convictions is the issue," Sasaki said. "As long as Abe was able to (control) the LDP's hawks, it was all right — but that is not possible anymore. So Fukuda will be faced with raw" demands from hawkish LDP lawmakers."

"You are a funny guy since 2006 you predict a crash, it will never happen. After all this mess, the Dow still close to 14 000 nothing can kill this market. It seems obvious...Even the bursting of the housing bubfle and the mortgage mess don't kill that market... What it will take... Why don't you explain that, genius?"

"The dollar fell sharply Friday, reaching a record low against the euro and capping a dramatic week for global financial markets that was marked by interest rate cuts, bank bailouts and skyrocketing oil prices. The level of the dollar - often regarded as a barometer of the U.S. economy's health - dropped to $1.4120 against the euro during business hours in Asia, reaching an all-time low for a second consecutive day. It also slipped against a number of other major currencies on speculation that the U.S. Federal Reserve would keep cutting interest rates as the world's largest economy weakens. Sentiment soured for the dollar after Ben Bernanke, chairman of the Federal Reserve, stoked speculation that he might continue to lower rates following this week's aggressive trim of half a percentage point. Bernanke said Thursday that the sell-off in credit markets could make the housing recession more severe."

"Fears of dollar collapse as Saudis take fright Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East. Ben Bernanke has placed the dollar in a dangerous situation, say analysts. "This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas. "Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said. The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg."

Financial Times

"Most recently, as I am sure Committee members are well aware, subprime mortgage losses that triggered uncertainty about structured products more generally have reverberated in broader financial markets, raising concern about the consequences for economic activity. As I noted in a speech last month at the economic symposium hosted by the Federal Reserve Bank of Kansas City, the turbulence originated in concerns about subprime mortgages, but the resulting global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans. These wider losses reflect, in part, a significant increase in investor uncertainty centered on the difficulty of evaluating the risks for a wide range of structured securities products, which can be opaque or have complex payoffs. Investors also may have become less willing to assume risk. Some increase in premiums that investors require to take risk is probably a healthy development on the whole, as these premiums have been exceptionally low for some time. However, in this episode, the shift in risk attitudes combined with greater credit risk and uncertainty about how to value those risks has created significant market stress. On the positive side of the ledger, past efforts to strengthen capital positions and financial market infrastructure places the global financial system in a relatively strong position to work through this process."

(Source: Calculated Risk)

Devil Take the Hindmost, a history of financial speculation:

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

The nominal value of all credit derivatives in the world is now around $750 trillion.
The total world GDP is around $45 trillion. That is, if you add together all the products and services produced by all the countries and firms in the world, it adds up to $45 trillion.

"Today when the Fed anounced, I experienced a massive system failure in order placement. This is the first time I have seen this. Maybe you were right when you told me that there would be no system access during a major crash. I had 2 isolated systems with their own connections during the outage and both failed to respond. Luckily for me I was on the correct side of the trade and was not affected much by the outage. But this has scared me. My broker told me that there were multiple firms that all experienced the same problem."

"PS: I am very bullish now 70%. I expect new highs in the Dow soon."

(Source: Marketpsych)

60 Minutes

Stahl: "Well, what we've already begun to see is not just that housing prices are falling but that it's affecting the job market for anything related to housing, including real estate, including the sales of appliances and furniture." Greenspan: "But there is an underlying strength in the United States. And, indeed, when you look around the world, even with this extraordinary credit problem, the economies seem to be holding up. But for the moment it does not look sufficiently severe that it will spiral into anything deeper. "We’re going to get through this particular credit crunch. We always do. This is a human behavior phenomenon, and it will pass. The fever will break and euphoria will start to come back again."

Wall Street Journal

(Source: MarketWatch)

(Source: Guardian)

(Source: Calculated Risk)

Outlays during the Bush administration are about average, or a little lower, for the entire period since 1971.
However, outlays began to shoot up in 2000, the last year of the Clinton administration.
This shouldn't be a surprise, since the "Bush tax cut" and "Bush spending programs" didn't begin until 2003 or 2004. So the deficit could NOT POSSIBLY have been caused by anything that the Bush administration did.
The deficit was MAINLY caused by a collapse of income that began in 2000 -- the last year of the Clinton administration.
The collapse of income coincided with (and was undoubtedly caused by) the collapse of the dot-com bubble in 2000, and the bubble began in 1996, in the midst of the Clinton administration.

"We know big government does not have all the answers. We know there's not a program for every problem. We have worked to give the American people a smaller, less bureaucratic government in Washington. And we have to give the American people one that lives within its means. The era of big government is over. But we cannot go back to the time when our citizens were left to fend for themselves. Instead, we must go forward as one America, one nation working together to meet the challenges we face together. Self-reliance and teamwork are not opposing virtues; we must have both. ... I say to those who are on welfare, and especially to those who have been trapped on welfare for a long time: For too long our welfare system has undermined the values of family and work, instead of supporting them. The Congress and I are near agreement on sweeping welfare reform. We agree on time limits, tough work requirements, and the toughest possible child support enforcement. But I believe we must also provide child care so that mothers who are required to go to work can do so without worrying about what is happening to their children. I challenge this Congress to send me a bipartisan welfare reform bill that will really move people from welfare to work and do the right thing by our children. I will sign it immediately. Let us be candid about this difficult problem. Passing a law, even the best possible law, is only a first step. The next step is to make it work. I challenge people on welfare to make the most of this opportunity for independence. I challenge American businesses to give people on welfare the chance to move into the work force. I applaud the work of religious groups and others who care for the poor. More than anyone else in our society, they know the true difficulty of the task before us, and they are in a position to help. Every one of us should join them. That is the only way we can make real welfare reform a reality in the lives of the American people."

(Source: Moveon.org)

Meet the Press

The New Republic

Congressional Quarterly.

The people in the Baby Boomer generation follow the generational "prophet" archetype. They're arrogant and narcissistic, and their greatest, most erotic life experiences occurred in their childhood, in the 1960s generational Awakening era when they defeated the parents' generation politically, humiliating them over the Vietnam war, women's lib, and other issues. This struggle was known as the "generation gap," because it pitted the young boomers against their older parents. The result is that Boomers don't know how to do anything -- how to lead, how to govern, and so forth. All then know how to do is complain about other people who DO know how to do something. Throughout their lives, the Boomers had everything done for them by their parents. Their parents ran the United Nations, the World Bank, and the other organizations that I mentioned previously, and did a good job. But that generation is gone now, leaving the Boomers in charge. Unfortunately, the Boomers have no idea what to do.
The generation that followed the Boomers was Generation-X, in the generational "nomad" prototype. William Strauss and Neil Howe, the founding fathers of generational theory, found that people in the Nomad generations are disaffected and angry, and have much higher crime rates and substance abuse than other generations. Some of the world's worst dictators are early Nomads (born 16-25 years after the end of the last crisis war), including Adolf Hitler, Josef Stalin, Leon Trotsky, Osama bin Laden, Abu Musab al-Zarqawi, and Shamil Basayev (the guy who masterminded 2004's Beslan school massacre). On the other hand, FDR and other Heroes are also early Nomads. The people in Generation-X are "doers," unlike the Boomers. The Boomers are content to let other people take care of things, and the Xers want to do things. But the Xers' general disaffection and hatred of the Boomers makes the Xers often very destructive and self-destructive. Nomads often have views and behaviors that Friedrich Nietzsche would have characterized as nihilistic, seeing human existence as devoid of meaning, purpose or essential value.

"During times of market turmoil it helps to simplify and get basic – explain things to a public and even yourself in terms of what can be easily understood. Goodness knows it’s not a piece of cake for anyone over 40 these days to understand the maze of financial structures that now appear to be unwinding. They were created by youthful financial engineers trained to exploit cheap money and leverage who showed no fear and who have, until the last few weeks, never known the sting of the market’s lash. They are wizards of complexity. I, however, having just turned 63, am a professor of simplicity."

(Source: BBC)

"Britain has a very strong and stable economy. We also have a very strong and stable banking system. And the reason that Bank of England has provided facilities is because the Governor and I are determined that that should be maintained. We have a Bank of England, that is a lender of last resort, precisely to deal with difficulties like this, to ensure that where there are short-term difficulties in getting money -- and there is a lot of money in the system -- it's just that people are reluctant to lend to each other at the moment -- where you've got that difficulty, the Bank can step in to allow Northern Rock to carry on doing business.

"With queues of anxious savers forming outside some Northern Rock branches this morning, the No 1 priority for the bank and its regulators is to restore confidence that depositors' money is safe. Which, by the way, it is. The Bank of England has made plain that it is ready to provide whatever liquidity is necessary to get the bank through its present difficulties. Northern Rock may not be one of the four or five banks at the heart of the UK financial system, but it is close enough for it to be unthinkable that it would be allowed to fail its depositors. So there is no reason for the hundreds of thousands of savers with £24 billion of deposits in Northern Rock to panic."

(Source: WSJ)

Wall Street Journal

"He recommends two other means of coping with financial fear. The first sounds simple but is essential -- training yourself to recognize fear in the first place. For example, your habit may be to avoid the markets altogether by shunning the newspaper or online stock quotes. The second approach is to prepare for a busted or volatile market, much like an astronaut rehearsing emergency procedures. This helps neutralize the fear in your decision making, especially in those moments when it seems so easy to succumb. That's why it might make sense to decide ahead of time your range of responses if your portfolio loses, say, 10% to 20% of its value. Research has shown that, unsurprisingly, retail investors are usually the worst at this, adds [MIT Professor Andrew Lo]."

(Source: WSJ)

"Each generation has to go through it and has to emotionally experience it," [says 67-year-old financier Lewis van Amerongen]. "Without that, it's just an academic exercise." In other words, there is no substitute for having survived other fearful experiences. The best antidote for fear just may be fear itself."

Last summer, two Israeli soldiers were kidnapped near the Lebanon border and <#inc ww2010.weblog.ref e061223 "Israel panicked and launched the Lebanon war within four hours,"#> with no plan and no objectives. What was the "fear index" among Israelis at that time? I'll bet it was pretty high. What is it today? That would tell us a great deal about the likelihood of an Israeli strike against Palestinians or, more importantly, Iran.
As I've written dozens of times since 2003, the Iraq war has NEVER been a civil war, and CANNOT be a civil war. This is finally becoming clear to all but the stupidest of pundits and politicians, but earlier this year the level of American "Iraqi civil war hysteria" was incredibly high. A civil war in Iraq is impossible because only one generation has passed since their last crisis war, the genocidal Iran/Iraq war of the 1980s. The "fear index" gives us a framework for understanding this. Al-Qaeda in Iraq has tried since 2004 to trigger a civil war in Iraq by promoting sectarian violence by murdering Iraqis under the guise of opposing Americans. It appeared to be working for a long time, but in 2007 the Sunni Iraqis have turned against al-Qaeda in Iraq, and many are now cooperating with Americans. CNN, NBC, the BBC, the New York Times, and other news services that are promoting an American failure in Iraq have been switching their emphasis onto a new subject: The "greatest humanitarian disaster in history," where millions of Iraqis are fleeing to Syria. In fact, this is no humanitarian disaster. (Check with Darfur or the Republic of Congo for REAL humanitarian disasters.) It's a sensible move by a population that refuses to panic, because they remember what happened when they panicked in the Iran/Iraq war. Rather that panicking and starting a genocidal civil war between Sunnis and Shia, they flee to Syria, undoubtedly planning to return as soon as the al-Qaeda assault ends. What's the "fear index" for Iraqis these days? I'd bet that it's pretty low.
Ever since last summer's Israeli war with Hizbollah in Lebanon, pundits have been almost unanimous in predicting a new civil war in Lebanon, especially since Hizbollah (supported by Iran and Syria) has been trying to trigger one. I've said repeatedly that a civil war in Lebanon is absolutely impossible, since only one generation has passed since the genocidal Lebanese civil war of the 1980s. Not only has no civil war occurred since then, the entire Lebanese population is currently celebrating a major victory by the Lebanese army over insurgents from <#inc ww2010.weblog.ref e070521 "al-Qaeda linked Fatah al-Islam,"#> who attacked the Nahr al-Bared camp in northern Lebanon in May. Once again, the Lebanese cannot have a civil war, because they cannot panic, and they cannot panic because they remember what happened when they panicked in 1982, when Lebanese Christian Arab forces <#stdurl en.wikipedia.org/wiki/Sabra_and_Shatila_massacre "massacred and butchered hundreds or perhaps thousands of Palestinian refugees in camps in Sabra and Shatila."#> To this day, the Lebanese are deeply ashamed of this panic-born event, and will not risk repeating it. What's the "fear index" for the Lebanese people these days? I'd bet that it's pretty low.
The Palestinians DID initiate a civil war between Fatah and Hamas earlier this year, although it didn't spiral into a full-fledged genocidal crisis war. What's the "fear index" for the Palestinians in Gaza and the West Bank? I'd bet that it's been growing steadily, just like the "fear index" for investors depicted in the previous graphics, and I'd bet that it spiked up earlier this year. I'd bet that it settled back down since then, but that it's been growing steadily like the investors' "fear index."
On Thursday morning, at 8:30 am, <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aItrnfsCWDr4&refer=home "a report from the Labor Department"#> indicated that claims for unemployment insurance increased last week from the previous week, but didn't increase by as much as analysts had predicted. This was considered very good news by anxious investors, and the "Dow futures" instantly went up by 35 points. (This means that when the markets opened at 9:30 am, we should expect the Dow Industrials to open 35 points higher than they would have otherwise.) Even the CNBC pundits were amazed by this. "This was just one week of claims" that had this big effect on the Dow futures. "Wow!" This anxious upward movement is just as indicative of panic as anxious downward movement. Recall that, prior to the 1929 crash, the market had up and down days, increasing 6.32% one day, just a week before the crash. The steady increase of the "fear index" explains why this has been happening.

(Source: Minyanville)

(Source: BBC)

December 2006: Head of government tax panel resigned because taxpayers were subsidizing his love nest with his mistress.
December: Administrative minister resigned over accusations of corruption.
January 2007: Health minister called women "breeding machines." You know that can't be politically popular.
March: Abe said that the <#inc ww2010.weblog.ref e070307 "Japanese would no longer apologize"#> for the use of "comfort women" during WW II, and that there was "no evidence" that the women were forced into prostitution.
May: Agriculture minister commits suicide over a political funding scandal.
July: Defense minister resigns after saying that America's atomic bombings of Japan "couldn't be helped."
Aug: New agriculture minister resigns after corruption charges.
Sept: Another new agriculture minister resigns over accusations of illegal dealings. What is it about Japanese agriculture ministers?

"[Despite the negative results of the legislative elections,] I had determined that the reforms should not be stopped and that the direction of breaking away from the post-war regime should not be changed. I decided to continue in office. Since then, I have worked as hard as possible, until now. ... Recently [I said that] the war against terrorism should not be discontinued and that it should be continued by all means. ... I had the responsibility to persist in this policy with everything in my power. With that thought, I said that I would make every effort and risk my job in order not to discontinue this mission. I also said I would absolutely not cling to power. Toward this end, I had to make every effort possible. I also felt that I had to work hard to create the environment, and that I had to give everything I have, and to do everything possible. [I met with opposition leaders and,] unfortunately, my proposal for the meeting was, in effect, rejected, [and I was criticized] for not following the people's mandate. It is truly regrettable. I thought about what I should do in order to continue the war against terrorism and concluded that I needed to turn the tide. Under a new prime minister, the government should aim to continue the fight against terrorism, and to provide a breakthrough in this situation."

The Lebanese people didn't join Hizbollah against Israel, even when Lebanese infrastructure was bombed. This Lebanese behavior is exactly what is to be expected, since Lebanon is in a generational Awakening era, since only one generation has passed since the end of the genocidal 1980s Lebanese civil war.
Even the Hizbollah soldiers didn't really get into the fight that much, choosing to launch missiles and then return to their wives and families. This is to be expected for exactly the same reason -- Hizbollah soldiers are Lebanese, and Lebanon is in a generational Awakening era.
The Palestinians didn't side with Hizbollah or join in the fight against Israel, as Hizbollah and Iran had hoped.

(Source: Der Spiegel)

The Old Guard. These are people born before 1949, including Yasser Arafat and Mahmoud Abbas. Having lived through and survived the genocidal 1940s war between Jews and Arabs, they've made it their life goal to keep any such war from occurring again. They negotiated the 1994 Oslo peace agreement with Israel. Arafat died in 2004, and Abbas is over 70 years old. This generation has all but disappeared.
Hamas Generation. Born in the decades following the 1940s war, they have no personal memory of its horrors. Hamas was formed in the early 1980s. It began the first Intifada, starting in 1989. They agreed to a ceasefire when the Oslo agreement was signed, but refused to honor the agreement or recognize Israel. Today, they're more and more the generation in charge, as the Old Guard generation disappears. They use violence against Israel for political ends.
The Young Guard. This is the generation of young militants described above. Born since 1980, they consider violence against Israelis as an end in itself, and many (or perhaps most) are committed to the destruction of Israel.

"The only part of your theory that I do not understand is this: I sell my stock in company ABC. I have to put that money in some instrument. The stock is valued at the sell price. Everyone else follows suit in a panic. They all put the money under the mattress or somewhere, The stock continues to decline. The wealth is not disappearing. It is simpling changing hands."

Suppose I have $100 and you have nothing. I lend you the $100, and get an IOU from you for $100. All of a sudden, $100 has turned into $200. How? You have $100 in your pocket. I have a $100 IOU that I can use as collateral for $100 worth of more investments. So we have $200 between the two of us.
Let's look at something more complicated. I buy a share of certain hedge fund for $100. Frank does the same. I sell my share to you for $200. Now I have $200, and you have a hedge fund share worth $200, so we have $400 between us. But what about Frank? His share is now worth $200, even though he's just been sitting there, doing nothing. So Frank has also made $100, and there's a lot more money in the world.
Last year I provided <#inc ww2010.weblog.ref e061230 "a lengthy explanation"#> of how hedge fund managers "make money" -- and I mean that literally -- they actually create new money. Briefly, they start up a new hedge fund, based on underlying assets of any kind whatsoever, and then bid up the price of the hedge fund shares so that they're worth many times more than the value of the underlying assets. In essence, the hedge fund manager is "making money" -- literally, as if he had a printing press. The hedge fund shares can now be traded at their inflated values, so in some circles they're as good as money.

(Source: Bloomberg via Bennet Sedacca)

Sunday Telegraph

"Britain's biggest banks could be forced to cough up as much as £70bn ($140 billion) over the next 10 days, as the credit crisis that has seized the global financial system sparks a fresh wave of chaos. Almost 20 per cent of the short-term money market loans issued by European banks are due to mature between September 11 and September 19. Senior bankers fear that they will have to refinance almost all of these debts with funds from their own coffers, putting a further strain on bank balance sheets. Tens of billions of pounds of these commercial paper loans have already built up in the financial system, because fear-ridden investors no longer want to buy them. Roughly £23bn ($46 billion) of these loans expire on September 17 alone. Fears of this impending call on bank credit lines are the true reason that lending between banks has ground to a halt, according to senior money market sources. Banks have been stockpiling cash in preparation for this "double rollover" week, which sees quarterly loans expire alongside shorter term debts - exacerbating a problem that lies at the heart of the credit crisis."

"As we reveal today, an estimated £70bn worth of European commercial paper that has not yet been caught up in the crisis is due to expire between September 11 and 19. Ordinarily, this would present little problem. Companies borrowing money by issuing commercial paper normally expect to "roll over" the loan from one period the next. Just in case the lenders decide not to play ball, most borrowers arrange a backstop funding facility with a major bank. Except, now, everyone is getting cold feet at the same time. Lenders are worried that some of the borrowers could be contaminated by the subprime mortgage crisis in the US. Until they can find out which ones, they don't want to lend to anyone at all. So the banks who offered backstop lending lines will soon discover just where the buck really stops."

Wall Street Journal

"Former Federal Reserve Chairman Alan Greenspan said the current market turmoil is in many ways "identical" to that which occurred in 1987 and 1998, when the giant hedge fund Long-Term Capital Management nearly collapsed. =inc ww2010.xr.related1 right macro 2 "The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987, I suspect what we saw in the land-boom collapse of 1837 and certainly [the bank panic of] 1907," Mr. Greenspan told a group of academic economists in Washington, D.C., last night at an event organized by the Brookings Papers on Economic Activity, an academic journal. Mr. Greenspan, Fed chairman from 1987 to 2005 and now a private consultant, said business expansions are driven by euphoria and contractions by fear. While economists tend to think the same factors drive expansions and contractions, "the expansion phase of the economy is quite different, and fear as a driver, which is going on today, is far more potent than euphoria." The euphoria in human nature takes over when the economy is expanding for several years, and leads to bubbles, "and these bubbles cannot be defused until the fever breaks," he said. Bubbles can't be defused through incremental adjustments in interest rates, Mr. Greenspan suggested. The Fed doubled interest rates in 1994-95 and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred." "The human race has never found a way to confront bubbles," he said."

"There appears to be enough evidence, at least tentatively, to conclude that our strategy of addressing the [1990s dot-com] bubble's consequences, rather than the bubble itself, has been successful. Despite the stock market plunge, terrorist attacks, corporate scandals and wars in Afghanistan and Iraq, we experienced an exceptionally mild recession, even milder than that of a decade earlier." -- Alan Greenspan to the American Economic Association's annual meeting.

"To some extent, those higher [stock and housing] values may be reflecting the increased flexibility and resilience of our economy. But what [investors] perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums."

Wall Street Journal Online

"STOCK MARKETS STAYED DEEP IN THE RED, underpinned by renewed concerns about weakness in the housing and credit markets."

(Source: CNBC)

"Dow is about 700 points below July all-time closing high."
"Stocks extend losses following release of Fed's Beige Book." (Note: The Beige Book is an economic summary published by the Fed.)
"10-year Treasury Yield falls to 5-month low after econ data, Beige Book." (Note: If Treasury yields are falling, it usually means that people are moving money from stocks into Treasury bills, in a "flight to safety.")
"Nasdaq lower for the first time in five sessions."
"29 Dow stocks lower." (Note: 30 stocks make up the Dow Industrials index.)
"S&P 500 on pace for worst quarter since Q12005."

(Source: CNBC)

"The bottom line is that 'big money' wants more selling. They want to see and feel some panic in the market before they feel that it's over. They haven't liked the rally over the last couple of days."

    1929   % of peak (381.17)
    -------------------------
    Tue 09-03 ( +0.22%) 100%              2007   % of peak (14000)
    Wed 09-04 ( -0.41%)  99%              ------------------------
    Thu 09-05 ( -2.59%)  97%              Thu 07-19 ( +0.59%) 100%
    Fri 09-06 ( +1.76%)  98%              Fri 07-20 ( -1.07%)  98%
    ------------------------              ------------------------
    Mon 09-09 ( -0.36%)  98%              Mon 07-23 ( +0.67%)  99%
    Tue 09-10 ( -2.04%)  96%              Tue 07-24 ( -1.62%)  97%
    Wed 09-11 ( +0.99%)  97%              Wed 07-25 ( +0.50%)  98%
    Thu 09-12 ( -1.23%)  96%              Thu 07-26 ( -2.26%)  96%
    Fri 09-13 ( +0.14%)  96%              Fri 07-27 ( -1.54%)  94%
    ------------------------              ------------------------
    Mon 09-16 ( +1.51%)  97%              Mon 07-30 ( +0.70%)  95%
    Tue 09-17 ( -1.04%)  96%              Tue 07-31 ( -1.10%)  94%
    Wed 09-18 ( +0.65%)  97%              Wed 08-01 ( +1.14%)  95%
    Thu 09-19 ( -0.25%)  97%              Thu 08-02 ( +0.76%)  96%
    Fri 09-20 ( -2.14%)  94%              Fri 08-03 ( -2.09%)  94%
    ------------------------              ------------------------
    Mon 09-23 ( -0.84%)  94%              Mon 08-06 ( +2.18%)  96%
    Tue 09-24 ( -1.78%)  92%              Tue 08-07 ( +0.26%)  96%
    Wed 09-25 ( -0.01%)  92%              Wed 08-08 ( +1.14%)  97%
    Thu 09-26 ( +0.96%)  93%              Thu 08-09 ( -2.83%)  94%
    Fri 09-27 ( -3.11%)  90%              Fri 08-10 ( -0.23%)  94%
    ------------------------              ------------------------
    Mon 09-30 ( -0.41%)  90%              Mon 08-13 ( -0.02%)  94%
    Tue 10-01 ( -0.26%)  89%              Tue 08-14 ( -1.57%)  93%
    Wed 10-02 ( +0.56%)  90%              Wed 08-15 ( -1.29%)  91%
    Thu 10-03 ( -4.22%)  86%              Thu 08-16 ( -0.12%)  91%
    Fri 10-04 ( -1.45%)  85%              Fri 08-17 ( +1.82%)  93%
    ------------------------              ------------------------
    Mon 10-07 ( +6.32%)  90%              Mon 08-20 ( +0.32%)  93%
    Tue 10-08 ( -0.21%)  90%              Tue 08-21 ( -0.23%)  93%
    Wed 10-09 ( +0.48%)  90%              Wed 08-22 ( +1.11%)  94%
    Thu 10-10 ( +1.79%)  92%              Thu 08-23 ( -0.00%)  94%
    Fri 10-11 ( -0.05%)  92%              Fri 08-24 ( +1.08%)  95%
    ------------------------              ------------------------
    Mon 10-14 ( -0.49%)  92%              Mon 08-27 ( -0.42%)  95%
    Tue 10-15 ( -1.06%)  91%              Tue 08-28 ( -2.10%)  93%
    Wed 10-16 ( -3.20%)  88%		  Wed 08-29 ( +1.90%)  94%
    Thu 10-17 ( +1.70%)  89%		  Thu 08-30 ( -0.38%)  94%
    Fri 10-18 ( -2.51%)  87%		  Fri 08-31 ( +0.90%)  95%
    ------------------ -----		  ------------------------
    Mon 10-21 ( -3.71%)  84%		  Tue 09-04 ( +0.68%)  96%
    Tue 10-22 ( +1.75%)  85%		  Wed 09-05 ( -1.07%)  95%
    Wed 10-23 ( -6.33%)  80%
    Thu 10-24 ( -2.09%)  78% Black Thursday
    Fri 10-25 ( +0.58%)  79%
    ------------------------
    Mon 10-28 (-13.47%)  68% Black Monday      September 10
    Tue 10-29 (-11.73%)  60%
    Wed 10-30 (+12.34%)  67%
    Thu 10-31 ( +5.82%)  71%
    Fri 11-01  (Closed)
    -----------------------
    Mon 11-04 ( -5.79%)  67%
    Tue 11-05  (Closed)
    Wed 11-06 ( -9.92%)  60%
    Thu 11-07 ( +2.61%)  62%
    Fri 11-08 ( -0.70%)  62%                   September 21
    ------------------------
    Mon 11-11 ( -6.82%)  57%
    Tue 11-12 ( -4.83%)  55%
    Wed 11-13 ( -5.27%)  52%
    Thu 11-14 ( +9.36%)  57%
    Fri 11-15 ( +5.27%)  60%
    -----------------

Wall Street Journal

(Source: WSJ)

    Silent Generation       10%
    Baby Boomer Generation  40%
    Generation-X            40%
    Millennial Generation   10%

Individual homeowners who lied on applications to get a mortgage.
Lenders who practiced "predatory lending" practices, like offering low teaser rates. Mortgage brokers who recommended loans with low teaser rates, took a big commission from the loan, and then got out of town before the teaser rates ended.
Homebuilders and lenders or brokers who colluded with each other to inflate the market value of a home in order to get a larger mortgage and a larger commission for themselves.
Financial advisers who protect their own assets from a crash, while telling clients that the stock market can only go up, so they can keep getting commissions.
Individual people who "borrowed" money from the till at work, expecting to pay it back as soon as their hedge funds paid off.
Ratings agencies (S&P, Fitch, Moody's) that gave subprime mortgage-back securities AAA ratings.
Hedge fund, mutual fund, money market fund managers.
Politicians.
College professors who didn't see it coming.
Fed Chairmen (Alan Greenspan, Ben Bernanke).

The Great Crash - 1929

"In many ways the effect of the crash on embezzlement was more significant than on suicide. To the economist embezzlement is the most interesting of crimes. Alone among the various forms of larceny it has a time parameter. Weeks, months, or years may elapse between the commission of the crime and its discovery. (This is a period, incidentally, when the embezzler has his gain and the man who has been embezzled, oddly enough, feels no loss. There is a net increase in psychic wealth.) At any given time there exists an inventory of undiscovered embezzlement in -- or more precisely not in -- the country's businesses and banks. This inventory -- it should perhaps be called the bezzle -- amounts at any moment to many millions of dollars. It also varies in size with the business cycle. In good times people are relaxed, trusting, and money is plentiful. But even though money is plentiful, there are always many people who need more. Under these circumstances the rate of embezzlement grows, the rate of discovery falls off, and the bezzle increases rapidly. In depression all is reversed. Money is watched with a narrow, suspicious eye. The man who handles it is assumed to be dishonest until he proves himself otherwise. Audits are penetrating and meticulous. Commercial morality is enormously improved. The bezzle shrinks. The stock market boom and the ensuing crash caused a traumatic exaggeration of these normal relationships. To the normal needs for money, for home, family and dissipation, was added, during the boom, the new and overwhelming requirement for funds to play the market or to meet margin calls. Money was exceptionally plentiful. People were also exceptionally trusting. A bank president who was himself trusting Kreuger, Hopson, and Insull was obviously unlikely to suspect his lifelong friend the cashier. In the late twenties the bezzle grew apace. Just as the boom accelerated the rate of growth, so the crash enormously advanced the rate of discovery. Within a few days, something close to universal trust turned into something akin to universal suspicion. Audits were ordered. Strained or preoccupied behavior was noticed. Most important, the collapse in stock values made irredeemable the position of the employee who had embezzled to play the market. He now confessed. After the first week or so of the crash, reports of defaulting employees were a daily occurrence. They were far more common than the suicides. On some days comparatively brief accounts occupied a column or more in the Times. The amounts were large and small, and they were reported from far and wide. ... Each week during the autumn more such unfortunates were reveled in their misery. Most of them were small men who had taken a flier in the market and then become more deeply involved. Later they had more impressive companions. It was the crash, and the subsequent ruthless contraction of values which, in the end, exposed the speculation by Kreuger, Hopson, and Insull with the moey of other people. Should the American economy ever achieve permanent full employment and prosperity, firms should look well to their auditors. One of the uses of depression is the exposure of what auditors fail to find. Bagehot once observed: "Every great crisis reveals the excessive speculations of many houses which no one before suspected." [pp. 132-35]

One possibility is that it isn't one investor, but a collection of unrelated investors, all of whom <#stdurl http://www.cnbc.com/id/20461003 "share the belief that the market is due for a very big correction."#>
According to a web site reader: "There are both mutual funds and hedge funds with massive S&P500 exposure in the billions of dollars, if they want to protect themselves, they can sell an out of the money call, and use the money to buy an out of the money put. This insurance basically costs them nothing if the market remains somewhat flat, they get a little protection against a crash, at the expense of limited upside gains if the market climbs a lot. John Hussman of the Hussman Funds does this all the time (buying S&P500 puts as a hedge against his always net long holdings)." (Paragraph added 31-Aug)
It might be a big hedge fund caught in a liquidity crunch, needing money immediately, because their clients are trying to bail out. As I understand it, this could be someone selling "call options" now in order to get cash from market makers (the people who set these deals up), and who will have to pay quite a bit on September 21, when the options come due, if the market doesn't crash. In this scenario, the $900 million bet is actually a move of desperation.
It might be someone who believes that a market correction is due sometime this fall. If it hasn't happened by September 21, then the investor can "roll the options over" for another month or two. There are many people who believe that a big market correction is due, and so this is a reasonably rational thing to do.
It <#stdurl http://www.moneymorning.com/2007/08/29/this-900-million-bet-has-global-traders-talking%e2%80%a6/ "might be China,"#> as part of a strategy either to regain some of hundreds of billions it's loaned to America, or in preparation for war.
It might be some large institution with inside knowledge about some imminent bad news that will move the market sharply down. One theory is the Osama bin Laden himself has placed the bet, expecting to make money from a planned terrorist attack on September 11.
More prosaically, it might be someone with inside knowledge of a major bankruptcy of a large corporation or financial institution. Because of the recent stock market volatility and increasing risk aversion of investors, the investor may be betting that such bad financial news will panic investors.

Addendum.

(Paragraph added 31-Aug)

(Source: Yahoo)

(Source: Conference Board)

"Readings on core inflation had improved modestly in recent months. However, a sustained moderation in inflation pressures had yet to be convincingly demonstrated. Moreover, the high level of resource utilization had the potential to sustain those pressures. The Committee's predominant policy concern remained the risk that inflation would fail to moderate as expected. Future policy adjustments would depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."

    1929   % of peak (381.17)
    -------------------------
    Tue 09-03 ( +0.22%) 100%              2007   % of peak (14000)
    Wed 09-04 ( -0.41%)  99%              ------------------------
    Thu 09-05 ( -2.59%)  97%              Thu 07-19 ( +0.59%) 100%
    Fri 09-06 ( +1.76%)  98%              Fri 07-20 ( -1.07%)  98%
    ------------------------              ------------------------
    Mon 09-09 ( -0.36%)  98%              Mon 07-23 ( +0.67%)  99%
    Tue 09-10 ( -2.04%)  96%              Tue 07-24 ( -1.62%)  97%
    Wed 09-11 ( +0.99%)  97%              Wed 07-25 ( +0.50%)  98%
    Thu 09-12 ( -1.23%)  96%              Thu 07-26 ( -2.26%)  96%
    Fri 09-13 ( +0.14%)  96%              Fri 07-27 ( -1.54%)  94%
    ------------------------              ------------------------
    Mon 09-16 ( +1.51%)  97%              Mon 07-30 ( +0.70%)  95%
    Tue 09-17 ( -1.04%)  96%              Tue 07-31 ( -1.10%)  94%
    Wed 09-18 ( +0.65%)  97%              Wed 08-01 ( +1.14%)  95%
    Thu 09-19 ( -0.25%)  97%              Thu 08-02 ( +0.76%)  96%
    Fri 09-20 ( -2.14%)  94%              Fri 08-03 ( -2.09%)  94%
    ------------------------              ------------------------
    Mon 09-23 ( -0.84%)  94%              Mon 08-06 ( +2.18%)  96%
    Tue 09-24 ( -1.78%)  92%              Tue 08-07 ( +0.26%)  96%
    Wed 09-25 ( -0.01%)  92%              Wed 08-08 ( +1.14%)  97%
    Thu 09-26 ( +0.96%)  93%              Thu 08-09 ( -2.83%)  94%
    Fri 09-27 ( -3.11%)  90%              Fri 08-10 ( -0.23%)  94%
    ------------------------              ------------------------
    Mon 09-30 ( -0.41%)  90%              Mon 08-13 ( -0.02%)  94%
    Tue 10-01 ( -0.26%)  89%              Tue 08-14 ( -1.57%)  93%
    Wed 10-02 ( +0.56%)  90%              Wed 08-15 ( -1.29%)  91%
    Thu 10-03 ( -4.22%)  86%              Thu 08-16 ( -0.12%)  91%
    Fri 10-04 ( -1.45%)  85%              Fri 08-17 ( +1.82%)  93%
    ------------------------              ------------------------
    Mon 10-07 ( +6.32%)  90%              Mon 08-20 ( +0.32%)  93%
    Tue 10-08 ( -0.21%)  90%              Tue 08-21 ( -0.23%)  93%
    Wed 10-09 ( +0.48%)  90%              Wed 08-22 ( +1.11%)  94%
    Thu 10-10 ( +1.79%)  92%              Thu 08-23 ( -0.00%)  94%
    Fri 10-11 ( -0.05%)  92%              Fri 08-24 ( +1.08%)  95%
    ------------------------              ------------------------
    Mon 10-14 ( -0.49%)  92%              Mon 08-27 ( -0.42%)  95%
    Tue 10-15 ( -1.06%)  91%              Tue 08-28 ( -2.10%)  93%
    Wed 10-16 ( -3.20%)  88%
    Thu 10-17 ( +1.70%)  89%
    Fri 10-18 ( -2.51%)  87%
    ------------------ -----
    Mon 10-21 ( -3.71%)  84%
    Tue 10-22 ( +1.75%)  85%
    Wed 10-23 ( -6.33%)  80%
    Thu 10-24 ( -2.09%)  78% Black Thursday
    Fri 10-25 ( +0.58%)  79%
    ------------------------
    Mon 10-28 (-13.47%)  68% Black Monday      September 10
    Tue 10-29 (-11.73%)  60%
    Wed 10-30 (+12.34%)  67%
    Thu 10-31 ( +5.82%)  71%
    Fri 11-01  (Closed)
    -----------------------
    Mon 11-04 ( -5.79%)  67%
    Tue 11-05  (Closed)
    Wed 11-06 ( -9.92%)  60%
    Thu 11-07 ( +2.61%)  62%
    Fri 11-08 ( -0.70%)  62%                   September 21
    ------------------------
    Mon 11-11 ( -6.82%)  57%
    Tue 11-12 ( -4.83%)  55%
    Wed 11-13 ( -5.27%)  52%
    Thu 11-14 ( +9.36%)  57%
    Fri 11-15 ( +5.27%)  60%
    -----------------

Bernanke was greatly affected by a Great Depression "shoe factory" story when he was growing up in the 60s: People couldn't afford shoes because they were unemployed because the shoe factory had shut down. Bernanke concluded that just by providing some money to the shoe factory, the shoe factory could have provided both shoes and jobs, solving the whole problem.
Bernanke has said that he does not believe in bubbles, and that he believes that any future threat of a major downturn can be handled by the Fed by simply providing money to the economy in the proper way.

Normally funds can be borrowed from the discount window for one day only. The Fed permitted money to be borrowed for 30 days, renewable by the borrower.
It explicitly changed antitrust regulations for Citibank, so that the bank could then lend money to brokers and dealers in its subsidiary, who would then lend it to clients. So this provided a route for the Fed to lend money to investors.
The New York Fed <#stdurl http://www.frbdiscountwindow.org/cfaq.cfm?hdrID=21&dtlID=?hdrID=21. "posted on its web site"#> an explicit statement that it would accept asset-backed commercial paper as collateral for the loans from the discount window, even when the assets were based on subprime loans. This provides a means for banks to get past immediately liquidity problem from being unable to sell expiring securities.

Lower the Fed Funds rate. The most obvious one is the Fed Funds rate, currently set at 5.25%. This is the major interest rate that's always dicussed by pundits, politicians, and journalists in general. It's the rate of interest that banks charge each other for overnight loans. However, it's not an automatic thing. Banks are free to charge each other any interest rate they like. However, if a bank has money to lend, and it can lend the money to another bank at interest rate A, or lend it to the government (the Fed) at interest rate B, then the bank will lend it at whichever rate is higher. That's just common sense. And so, the Fed can control A by controlling B. This is done by "open market operations." To control B, you have to get banks to lend money to the government, and the way you do that is by selling short-term (overnight) Treasury bills, and let banks bid on them, applying the law of supply and demand. If a lot of bids come in, so demand is very high, then the prices of the bills go up, pushing yields down below 5.25%, so the Fed increases supply and auctions more off; if only a few bids come in, so demand is very low, then the prices of the bills go down, pushing yields above 5.25%, then the fed decreases supply, and stops auctioning. (29-Aug correction) So the Fed auctions off exactly enough each day to keep the interest rate on the bills it sells at exactly 5.25%, or as close as possible. That's how B is controlled. Once B is set to 5.25%, then A will also return to 5.25%, to compete with the government, and so banks will loan money to each other at that rate.
Lower the Fed Discount rate. The Discount Rate is the rate at which the Fed lends money to banks through the discount window. This is the rate that was just reduced from 6.25% to 5.75%. It's the interest rate at which the Fed loans money to banks in return for collateral.
"Unlike some central banks, and barring changes to current law, the Fed is relatively restricted in its ability to buy private securities directly. However, the Fed does have broad powers to lend to the private sector indirectly via banks, through the discount window. Therefore a second policy option, complementary to operating in the markets for Treasury and agency debt, would be for the Fed to offer fixed-term loans to banks at low or zero interest, with a wide range of private assets (including, among others, corporate bonds, commercial paper, bank loans, and mortgages) deemed eligible as collateral. For example, the Fed might make 90-day or 180-day zero-interest loans to banks, taking corporate commercial paper of the same maturity as collateral. Pursued aggressively, such a program could significantly reduce liquidity and term premiums on the assets used as collateral. Reductions in these premiums would lower the cost of capital both to banks and the nonbank private sector, over and above the beneficial effect already conferred by lower interest rates on government securities."
This is the particular option that Bernanke exercised in the last week, with some variation: it's a 5.75% interest loan (not zero interest), and it's a 30-day loan. It takes as collateral some of the questionable commercial paper that's being backed by subprime mortgage loans, as described previously. At this point, it's worthwhile to note that Bernanke is pursuing this policy for a different reason than the reason he discussed in 2002. At that time, he was concerned about deflation (as occurred in the early 1930s, and in Japan in the 1990s), and was describing asset-backed loans at zero interest rates for the purpose of combating deflation. This whole idea was based on concepts of deflation that were completely wrong, and have been proven wrong in the intervening time. Today, Bernanke isn't concerned about defeating DEFLATION; he's concerned about increasing money liquidity in the markets, but without increasing INFLATION. There's an inherent contradiction in such policies, since increasing money liquidity should naturally increase inflation (or decrease deflation, which was his point in 2002). So he's offering discount window loans at 5.75% -- a high interest rate -- to avoid stirring inflation. Well, if the interest rate is so high, then why lower the discount rate at all? The answer appears to be that it's all psychological. Lowering interest rates to increase liqudity and to defeat deflation makes sense; lowering them to increase liquidity but not to increase inflation really doesn't make sense. And this is a point that we'll return to: Bernanke's 2002 speech was about avoiding a new Great Depression by controlling deflation. That's not the situation today. So this is one of many serious problems with Bernanke's strategy. In fact, the reason that he even lists other tools in his strategy is because he believes they'll be needed when the Discount Rate and Funds Rate go down to zero, and therefore cannot go any lower. (You know, I don't really believe this, but that's a topic for another day.) I'll now go on and list the remaining tools that he described, because it's of interest to get the whole list down. But remember that they're all geared towards injecting liquidity by controlling deflation.
Lowering interest rates on long term Treasury bonds. There's no easy way to do this directly, but he gives several indirect methods:
1. The Fed commits to holding the overnight rates at zero for some specified period. For example, if the Fed committed to zero interest rates for three years, then three-year bonds would effectively have a near-zero interest rate
2. The Fed buys back long-term Treasuries that it has previously sold. This increases demand, and therefore lowers the yields (interest rates).
Purchasing foreign debt. According to Bernanke, "the Fed has the authority to buy foreign government debt, as well as domestic government debt." So, if I'm a government and I have a certificate saying that someone owes me $1 billion, then I can sell that certificate to the Fed (for, say, $900 million), and then the debtor owes the $1 billion to the Fed, not to me. Meanwhile, I have $900 million in cash to loan to other people. Bernanke notes that the Fed would have to "tread carefully" in this case, however, since purchasing foreign debt has foreign policy implications.
Fiscal policy: Tax cut. The above actions are monetary policy, performed by the Fed. Bernanke also suggests fiscal policies, which are performed by acts of Congress. This is where he made his famous statement:
"A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money."
This is the one part of the speech that everyone seems to remember, but Bernanke wasn't recommending it; he was simply repeating a suggestion by Milton Friedman.
Fiscal policy: Increase spending. Money can be injected into the economy through fiscal policy by means of tax cuts or increased spending.
Fiscal + Monetary policy: Acquire assets. Here he suggests a multi-step process involving both fiscal and monetary policy. The government purchases a major asset. (I'm not sure what he has in mind -- perhaps the English might wish to sell Scotland to us.) In order to make the purchase, the government issues an IOU to the selling party. Then the Fed purchases the IOU for cash.

"Deflation: Its Causes and Effects Deflation is defined as a general decline in prices, with emphasis on the word "general." At any given time, especially in a low-inflation economy like that of our recent experience, prices of some goods and services will be falling. Price declines in a specific sector may occur because productivity is rising and costs are falling more quickly in that sector than elsewhere or because the demand for the output of that sector is weak relative to the demand for other goods and services. Sector-specific price declines, uncomfortable as they may be for producers in that sector, are generally not a problem for the economy as a whole and do not constitute deflation. Deflation per se occurs only when price declines are so widespread that broad-based indexes of prices, such as the consumer price index, register ongoing declines. The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand--a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending--namely, recession, rising unemployment, and financial stress."

"As I have already emphasized, deflation is generally the result of low and falling aggregate demand. The basic prescription for preventing deflation is therefore straightforward, at least in principle: Use monetary and fiscal policy as needed to support aggregate spending, in a manner as nearly consistent as possible with full utilization of economic resources and low and stable inflation. In other words, the best way to get out of trouble is not to get into it in the first place. Beyond this commonsense injunction, however, there are several measures that the Fed (or any central bank) can take to reduce the risk of falling into deflation."

"[As] suggested by a number of studies, when inflation is already low and the fundamentals of the economy suddenly deteriorate, the central bank should act more preemptively and more aggressively than usual in cutting rates.... By moving decisively and early, the Fed may be able to prevent the economy from slipping into deflation, with the special problems that entails."

Generational Dynamics

"I've been listening to end-of-year economic forecasts by stock analysts on TV. There seem to be two groups of forecasts:

Those who believe that once we do our quickie, no-pain, one-to-two-week war in Iraq, the stock market will rebound to its 1999 levels, up above 11,000;
Those who believe that the stock market will be steady, in the 8000s, through the end of 2003.

If technological and economic forecasting means anything at all (and it does), then the first of these forecasts doesn't have a chance of happening. The second forecast may come true, in the sense that the forecasted crash to below 6000 may wait a year or two. My guess: Something will go wrong in the war against Iraq or the war against terror, something that will expose a new vulnerability. That will have two effects: The DJIA will fall, and public resolve to pursue the war against terror will increase. Even if the war goes well in 2003, the stock market will continue to fall. My guess is that the DJIA will be in the low 7000s or lower at the end of 2003."

"The conclusion that deflation is always reversible under a fiat money system follows from basic economic reasoning. A little parable may prove useful: Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal. What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

"Japan The claim that deflation can be ended by sufficiently strong action has no doubt led you to wonder, if that is the case, why has Japan not ended its deflation? The Japanese situation is a complex one that I cannot fully discuss today. I will just make two brief, general points. First, as you know, Japan's economy faces some significant barriers to growth besides deflation, including massive financial problems in the banking and corporate sectors and a large overhang of government debt. Plausibly, private-sector financial problems have muted the effects of the monetary policies that have been tried in Japan, even as the heavy overhang of government debt has made Japanese policymakers more reluctant to use aggressive fiscal policies. Fortunately, the U.S. economy does not share these problems, at least not to anything like the same degree, suggesting that anti-deflationary monetary and fiscal policies would be more potent here than they have been in Japan."

"Second, and more important, I believe that, when all is said and done, the failure to end deflation in Japan does not necessarily reflect any technical infeasibility of achieving that goal. Rather, it is a byproduct of a longstanding political debate about how best to address Japan's overall economic problems. As the Japanese certainly realize, both restoring banks and corporations to solvency and implementing significant structural change are necessary for Japan's long-run economic health. But in the short run, comprehensive economic reform will likely impose large costs on many, for example, in the form of unemployment or bankruptcy. As a natural result, politicians, economists, businesspeople, and the general public in Japan have sharply disagreed about competing proposals for reform. In the resulting political deadlock, strong policy actions are discouraged, and cooperation among policymakers is difficult to achieve. In short, Japan's deflation problem is real and serious; but, in my view, political constraints, rather than a lack of policy instruments, explain why its deflation has persisted for as long as it has. Thus, I do not view the Japanese experience as evidence against the general conclusion that U.S. policymakers have the tools they need to prevent, and, if necessary, to cure a deflationary recession in the United States."

"The federal funds rate was lowered another half-point [0.5%] in late January 2001. At the March 2001 FOMC meeting, with the economy continuing to weaken, Mr. Greenspan said: "I fear that with a reduction of 75 basis points [0.75%] or even 100 basis points [1.0%] today... stock prices could still fall, leading too many observers to conclude that monetary policy is ineffective. ... If we do 50 points and stock prices fall further, as they well might today, it is the central bankers who may be perceived as intellectually inadequate, not policy itself. This is far less dangerous to the economy. ... This is one of the rare periods when in my judgment calculated ambiguity can serve a useful purpose in minimizing unthoughtful activity." The chairman proposed a 50 basis points cut in the funds rate to 5 percent, in which the committee concurred."

Wall St. Journal

(Source: WSJ)

(Source: nfu.ca)

"Every six years, we’re adding to the world the equivalent of a North American population. We’re trying to feed those extra people, feed a growing livestock herd, and now, feed our cars, all from a static farmland base. No one should be surprised that food production can’t keep up. ... [T]he converging problems of natural gas and fertilizer constraints, intensifying water shortages, climate change, farmland loss and degradation, population increases, the proliferation of livestock feeding, and an increasing push to divert food supplies into biofuels means that we are in the opening phase of an intensifying food shortage. ... If we try to do more of the same, if we try to produce, consume, and export more food while using more fertilizer, water, and chemicals, we will only intensify our problems. Instead, we need to rethink our relation to food, farmers, production, processing, and distribution. We need to create a system focused on feeding people and creating health. We need to strengthen the food production systems around the world. Diversity, resilience, and sustainability are key."

du jour

They began at roughly the same time -- in the mid-1990s.
That was the time of the disappearance of survivors of the Great Depression -- who remembered how dangerous the abusive use of credit is, and who ALSO remembered how dangerous starvation is, since it can lead populations to war.
Thus, it was the time that the arrogant, narcissist Boomer generation took charge, driven by the bitter, enraged Generation-X. The Boomers make it their life's work to reject every bit of wisdom their parents tried to hand down, and the GenXers make it their life's work to drive the Boomers to self-destruction. Unfortunately, they both succeed.
People in these generations have the attitude that the only important thing is individual civil rights, and that everything having to do with the global economy, agriculture, and wars will take care of itself, or is someone else's problem. What they don't realize is that it's the people in the generations who survived the Great Depression and WW II who have been taking care of everything for them. With those generations gone, nobody is taking care of the important things.
The new generations are increasingly contemptuous of everything that the older generations were trying to accomplish. They use credit abusively, and they've stopped making the effort to feed the world.
In particularly, they're totally, utterly oblivious to the exponentially increasing inbalances in both the economy and the agricultural marketplaces. They think that everything will take care of itself and, if it doesn't, then someone else is to blame. The only thing that matters to them is politics and arguing.
For example, I feel I can be quite certain that if the survivors of the Great Depression and WW II were still leading the nation and the world, then no one would be talking about reassigning huge amounts of agricultural land away from production of food and to production of biofuels, just to feed a "global warming" fad. They would understand how enormously dangerous that was, when there are people starving.
As a result, the world is facing both a financial crisis and a food crisis, and few people have the vaguest idea what's going on.
Although they're oblivious to these crises, as soon as danger becomes apparent, they panic -- whether it's panic selling of stocks, panic buying of food, or <#inc ww2010.weblog.ref e061223 "a panicked attack on another nation."#>

Wall Street Journal

"Doomsday predictions of a major food shortage in China and elsewhere have circulated for years but haven't materialized. And some economists believe the recent increase in crop demand probably can be met without severely straining the global economy. They think prices could come back down over time, especially if some countries that have more land that could be put under cultivation -- particularly Brazil -- can greatly increase production. Technological advances, such as better seed varieties, could also help boost production to keep up with demand."

The Wall Street Journal

Boston Globe

"A columnist for The New York Times wrote ... in 1975, just as Cambodia and Vietnam were falling to the communists: "It's difficult to imagine," he said, "how their lives could be anything but better with the Americans gone." A headline on that story, date Phnom Penh, summed up the argument: "Indochina without Americans: For Most a Better Life." The world would learn just how costly these misimpressions would be. In Cambodia, the Khmer Rouge began a murderous rule in which hundreds of thousands of Cambodians died by starvation and torture and execution. In Vietnam, former allies of the United States and government workers and intellectuals and businessmen were sent off to prison camps, where tens of thousands perished. Hundreds of thousands more fled the country on rickety boats, many of them going to their graves in the South China Sea. Three decades later, there is a legitimate debate about how we got into the Vietnam War and how we left. ... Whatever your position is on that debate, one unmistakable legacy of Vietnam is that the price of America's withdrawal was paid by millions of innocent citizens whose agonies would add to our vocabulary new terms like "boat people," "re-education camps," and "killing fields."

"Some will disagree. Listen to this comment from a high-ranking American official. 'It became clear that if we were prepared to stay the course, we could help lay the cornerstone for a diverse and independent region. If we faltered, the forces of chaos would smell victory, and decades of strife and aggression would stretch endlessly before us. The choice was clear. We would stay the course, and we shall stay the course.' That's not President Bush speaking; it's Lyndon Johnson speaking, 40 years ago, ordering 100,000 more American soldiers to Vietnam."

During the Vietnam war, America was in a <#hreftext ww2010.i.sixties040501 "generational Awakening era,"#> so the population fought the war half-heartedly. But it was a crisis war for the Vietnamese and Cambodians, so they fought it genocidally. The Cambodian genocide would have occurred irrespective of American involvement in the Vietnam war. Their previous crisis war was the French conquest of Indochina in 1868-1885.
The Iraq war began in 1990, with American involvement beginning in 1991, and continuing ever since. It escalated sharply in 1999 with almost daily bombing of no-fly zones. The 2003 ground war was another escalation, but if we hadn't done it, we'd still be bombing no-fly zones with completely unpredictable results. Iraq today is in a generational Awakening era, so the Iraqi people are fighting half-heartedly; America is in a Crisis era, and is not going to give anywhere nearly as easily as we did in Vietnam.
The Iraq war is NOT a civil war; it's a proxy war between America and foreigners from al-Qaeda in Iraq, as well as Iran. The Vietnam War WAS a civil war.
The defining situation in the Mideast is the coming crisis war between Jews and Arabs, and a related crisis war between Sunnis and Arabs. This war will be genocidal, it will pull in the U.S. and every other country in the region. All kinds of weapons will be used, including WMDs. The Iraqi people will try to stay out of it, but probably won't have much luck in doing so.

"The enemy who attacked us despises freedom, and harbors resentment at the slights he believes America and Western nations have inflicted on his people. He fights to establish his rule over an entire region. And over time, he turns to a strategy of suicide attacks destined to create so much carnage that the American people will tire of the violence and give up the fight. If this story sounds familiar, it is -- except for one thing. The enemy I have just described is not al Qaeda, and the attack is not 9/11, and the empire is not the radical caliphate envisioned by Osama bin Laden. Instead, what I've described is the war machine of Imperial Japan in the 1940s, its surprise attack on Pearl Harbor, and its attempt to impose its empire throughout East Asia.

"Ultimately, the United States prevailed in World War II, and we have fought two more land wars in Asia. And many in this hall were veterans of those campaigns. Yet even the most optimistic among you probably would not have foreseen that the Japanese would transform themselves into one of America's strongest and most steadfast allies, or that the South Koreans would recover from enemy invasion to raise up one of the world's most powerful economies, or that Asia would pull itself out of poverty and hopelessness as it embraced markets and freedom. The lesson from Asia's development is that the heart's desire for liberty will not be denied. Once people even get a small taste of liberty, they're not going to rest until they're free. Today's dynamic and hopeful Asia -- a region that brings us countless benefits -- would not have been possible without America's presence and perseverance.

New York Times

NY Times

Journal

NY Times

"More than 70 years ago, two Columbia professors named Benjamin Graham and David L. Dodd came up with a simple investing idea that remains more influential than perhaps any other. In the wake of the stock market crash in 1929, they urged investors to focus on hard facts — like a company’s past earnings and the value of its assets — rather than trying to guess what the future would bring. A company with strong profits and a relatively low stock price was probably undervalued, they said. Their classic 1934 textbook, “Security Analysis,” became the bible for what is now known as value investing. Warren E. Buffett took Mr. Graham’s course at Columbia Business School in the 1950s and, after working briefly for Mr. Graham’s investment firm, set out on his own to put the theories into practice. Mr. Buffett’s billions are just one part of the professors’ giant legacy. Yet somehow, one of their big ideas about how to analyze stock prices has been almost entirely forgotten. The idea essentially reminds investors to focus on long-term trends and not to get caught up in the moment. Unfortunately, when you apply it to today’s stock market, you get even more nervous about what’s going on. Most Wall Street analysts, of course, say there is nothing to be worried about, at least not beyond the mortgage market. In an effort to calm investors after the recent volatility, analysts have been arguing that stocks are not very expensive right now. The basis for this argument is the standard measure of the market: the price-to-earnings ratio.

(Source: nytimes.com)

A different Way of Looking at Stock Prices "Relative to corporate earnings over the previous 10 years, stocks have been more expensive recently than at almost any other point in the last 130 years. The two exceptions are the great bull markets of the late 1920s and late 1990s. (By the more common definition of the price-to-earnings ratio, which compares stock prices to profits over the previous 12 months, stocks have been at a relatively normal level recently.) Price-to-earnings ratio Based on average corporate profits for the previous 10 years, plotted monthly."

The long-term average for P/E1 is about 14, and is currently 17. Thus, stocks have NOT been "at a relatively normal level recently."
The long-term average for P/E10 is about 17, and is currently around 27.

NY Times

(Source: MarketGauge ® by DataView, LLC)

"We sense reluctance on the part of foreign partners to extend credit to German banks. If we have a banking crisis in Germany with other countries cutting us off, then other banks will also face difficulties."

"Sentinel buys only the highest quality and most liquid securities (unless specifically directed by a client to seek higher yield in somewhat lower quality issues). Sentinel will not use derivatives, options, or any other 'financial engineering' techniques to enhance the yield on its portfolios. Sentinel's objective is to achieve the highest yield consistent with preservation of principal and daily liquidity, not simply 'the highest yield'.

"CALABASAS, Calif., Aug 16, 2007 ... Countrywide Financial Corporation (NYSE: CFC) announced today that it has supplemented its funding liquidity position by drawing on an $11.5 billion credit facility. ... "As we have previously discussed, secondary market demand for non-agency mortgage-backed securities has been disrupted in recent weeks," said David Sambol, President and Chief Operating Officer. "Along with reduced liquidity in the secondary market, funding liquidity for the mortgage industry has also become constrained. "For many years, Countrywide's liquidity management framework has focused on maintaining a diverse, multi-layered assortment of financing alternatives," said Sambol. "A primary component of this framework is a committed, unsecured credit facility of $11.5 billion provided by a syndicate of 40 of the world's largest banks. In response to widely-reported market conditions, Countrywide has elected to draw upon this entire facility to supplement its funding liquidity position. ... "Countrywide has taken decisive steps which we believe will address the challenges arising in this environment and enable the Company to meet its funding needs and continue growing its franchise. ... "Our objective is to navigate the difficult conditions in today's market as we complete the transition of our Bank business and funding strategy," Sambol concluded. "With these changes, we believe we are well-positioned to leverage opportunities presented by a consolidating industry."

"Worried about the stability of mortgage giant Countrywide Financial, depositors crowd branches. In Laguna Niguel, Bill Ashmore drove his Porsche Cayenne to the bank's office and waited half an hour to cash out $500,000. "It's got my wife totally freaked out," he said."

You can go to the <#stdurl http://www2.fdic.gov/idasp/index.asp "Institution Directory page"#> and click on "Bank Find" to get a complete report on your bank. For example, if you type "Countrywide" into the Bank Find form, then click on "Countrywide Bank FSB," then click on "Last Financial Information" available, then click on "Generate Report," then you get a report that tells you that approximately 60% of deposited funds are insured.
You can use a calculator -- the <#stdurl http://www2.fdic.gov/edie/index.html "Electronic Deposit Insurance Estimator"#> -- that will tell you whether your particular deposits are insured.

(Source: Pittsburgh Post-Gazette)

"It's amazing to witness this and read your comments. I've been thinking like you--nobody seems to have a clue and anybody who does (if there is anybody) is not talking. I don't watch CNBC, but the people I was talking to as the market really began to gyrate wildly at the end of last week were babbling utter nonsense too. For example, I called my broker Friday morning. The market was back up by then. I asked for a quote on the S&P. Then I will usually make a little small talk. Anyway, this guy started babbling nonsense and was unable to stop. It didn't make any sense. Something about a guy he knows who is worth $800 million and went to a party with Bernanke and then told him that Bernanke will have to lower interest rates. He must have babbled for 10 minutes without stopping and I listened without saying anything."

The Great Crash - 1929,

"Never was there a time when more people wanted more money more urgently than in those days. The word that a man had got caught by the markets was the signal for his creditors to descend on him like locusts. Many who were having trouble meeting their margin calls wanted to sell some stocks so they could hold the rest and thus salvage something from their misfortunes. But such people now found that their investment trust securities could not be sold for any appreciable sum and perhaps not at all. They were forced, as a result, to realize on their good securities. Standard stocks like Steel, General Motors, Tel and Tel were thus dumped on the market in abnormal volume, with the effect on prices that had already been fully revealed. The great investment trust boom had ended in a unique manifestation of Gresham’s Law in which the bad stocks were driving out the good."

There has been an enormous change in attitudes and behaviors of the masses of investors around the world in just the last two weeks. I made up my mind that generational panic had begun this afternoon, because of the total panic in the faces and voices of everyone who was speaking on CNBC. They were babbling total nonsense, and it was obvious they had NO IDEA what was going on. =inc ww2010.xr.related1 right macro 2 It seems like years now, but it was just a month ago that <#inc ww2010.weblog.ref e070714 "bad economic news would push the market to a new high."#> That was totally irrational. It was just a week ago that I first <#inc ww2010.weblog.ref e070810 "felt I was sensing the "smell of panic.""#> That smell of panic has been growing every day since then, and on Thursday it was a stench. Every little bit of bad news is enough to cause the Dow to fall 100 points almost immediately. And all the commentators, executives, financiers, analysts and journalists who comment on the situation are baffled and desperate. It's in the eyes and voices. This sense of panic has been growing quickly the last couple of weeks, and this is what generational panic is. As if to prove my point, the market gained about 200 points in the last few minutes of Thursday's session. When the Dow went positive, there was a huge cheer from everyone on the floor of the stock exchange, as if a soccer team had scored a goal, and if I'm not mistaken, Maria Bartiromo was so giddy that she jumped up and down like a schoolgirl. So you have a situation where literally no one has any idea at all what's going on. NO IDEA AT ALL. All they can do is hope and pray that things go their way, and they all know in their hearts that they won't.
The panic is fully justified. Most investors are oblivious to the CDO (collateralized debt obligation) problem, but this is a huge problem as I've described several times in the past. And what we're seeing is that the worst-case scenario is turnout out to be the truth. CDOs are everywhere, in every kind of portfolio, every investment class. And they're backed by a mortgage industry that's collapsing, and bringing down everyone with them. Think of the world economy as a huge, enormous bloated mansion made of wood, with all kinds of additions tacked on all over the place. Think of the CDOs as millions of termites that are eating away at the insides, so that another piece of the mansion falls off into the ravine almost every day, and it won't be long before the entire house falls into the ravine. As readers know, I've been following this thing with CDOs closely, and it is BEYOND BELIEF what's happened. I remember in the 1950s hearing my teachers telling me how foolish everyone was in the 1920s. Well, people are going to look back at this time, and the acronym "CDO" will live in infamy.
Everything happening now is what happened just before the 1929 crash, as described in John Kenneth Galbraith's 1954 book, The Great Crash - 1929, which I've quoted many times on this web site: The mania for mergers and acquisitions, the drying up of liquidity, the central banks injecting funds to stave off disaster. They even had hedge funds in those days -- only, they were called "investment trusts," and they were just as abused as hedge funds are today.

"What we're seeing is hedge fund unwinding -- and that's certainly very constructive."
"This is a big buying opportunity -- stocks are very cheap now."
"We've wiped out any excess optimism - that's a good thing."
"We're finally seeing people panic, and that's always when we reach the bottom, and stocks start going up again."
"There's a lot of value out there."
"Today's theme: This is a big opportunity for investors."
"What we're seeing is 'capitulation selling' - everyone is throwing in the towel. This is a clear signal that we're near the bottom."
"The bulls are finally out of the woodwork. We have the setup for a rally, since we've been going down all week."

    1929   % of peak (381.17)
    -------------------------
    Tue 09-03 ( +0.22%) 100%              2007   % of peak (14000)
    Wed 09-04 ( -0.41%)  99%              ------------------------
    Thu 09-05 ( -2.59%)  97%              Thu 07-19 ( +0.59%) 100%
    Fri 09-06 ( +1.76%)  98%              Fri 07-20 ( -1.07%)  98%
    ------------------------              ------------------------
    Mon 09-09 ( -0.36%)  98%              Mon 07-23 ( +0.67%)  99%
    Tue 09-10 ( -2.04%)  96%              Tue 07-24 ( -1.62%)  97%
    Wed 09-11 ( +0.99%)  97%              Wed 07-25 ( +0.50%)  98%
    Thu 09-12 ( -1.23%)  96%              Thu 07-26 ( -2.26%)  96%
    Fri 09-13 ( +0.14%)  96%              Fri 07-27 ( -1.54%)  94%
    ------------------------              ------------------------
    Mon 09-16 ( +1.51%)  97%              Mon 07-30 ( +0.70%)  95%
    Tue 09-17 ( -1.04%)  96%              Tue 07-31 ( -1.10%)  94%
    Wed 09-18 ( +0.65%)  97%              Wed 08-01 ( +1.14%)  95%
    Thu 09-19 ( -0.25%)  97%              Thu 08-02 ( +0.76%)  96%
    Fri 09-20 ( -2.14%)  94%              Fri 08-03 ( -2.09%)  94%
    ------------------------              ------------------------
    Mon 09-23 ( -0.84%)  94%              Mon 08-06 ( +2.18%)  96%
    Tue 09-24 ( -1.78%)  92%              Tue 08-07 ( +0.26%)  96%
    Wed 09-25 ( -0.01%)  92%              Wed 08-08 ( +1.14%)  97%
    Thu 09-26 ( +0.96%)  93%              Thu 08-09 ( -2.83%)  94%
    Fri 09-27 ( -3.11%)  90%              Fri 08-10 ( -0.23%)  94%
    ------------------------              ------------------------
    Mon 09-30 ( -0.41%)  90%              Mon 08-13 ( -0.02%)  94%
    Tue 10-01 ( -0.26%)  89%              Tue 08-14 ( -1.57%)  93%
    Wed 10-02 ( +0.56%)  90%              Wed 08-15 ( -1.29%)  91%
    Thu 10-03 ( -4.22%)  86%              Thu 08-16 ( -0.12%)  91%
    Fri 10-04 ( -1.45%)  85%
    ------------------------
    Mon 10-07 ( +6.32%)  90%
    Tue 10-08 ( -0.21%)  90%
    Wed 10-09 ( +0.48%)  90%
    Thu 10-10 ( +1.79%)  92%
    Fri 10-11 ( -0.05%)  92%
    ------------------------
    Mon 10-14 ( -0.49%)  92%
    Tue 10-15 ( -1.06%)  91%
    Wed 10-16 ( -3.20%)  88%
    Thu 10-17 ( +1.70%)  89%
    Fri 10-18 ( -2.51%)  87%
    ------------------ -----
    Mon 10-21 ( -3.71%)  84%
    Tue 10-22 ( +1.75%)  85%
    Wed 10-23 ( -6.33%)  80%
    Thu 10-24 ( -2.09%)  78% Black Thursday
    Fri 10-25 ( +0.58%)  79%
    ------------------------
    Mon 10-28 (-13.47%)  68% Black Monday
    Tue 10-29 (-11.73%)  60%
    Wed 10-30 (+12.34%)  67%
    Thu 10-31 ( +5.82%)  71%
    Fri 11-01  (Closed)
    -----------------------
    Mon 11-04 ( -5.79%)  67%
    Tue 11-05  (Closed)
    Wed 11-06 ( -9.92%)  60%
    Thu 11-07 ( +2.61%)  62%
    Fri 11-08 ( -0.70%)  62%
    ------------------------
    Mon 11-11 ( -6.82%)  57%
    Tue 11-12 ( -4.83%)  55%
    Wed 11-13 ( -5.27%)  52%
    Thu 11-14 ( +9.36%)  57%
    Fri 11-15 ( +5.27%)  60%
    -----------------

"You just have to ride it out."
"Investors are nervous and irrational."
"The Fed has to cool things down -- relax all the animal spirits out there."
"The underlying economy is one of the strongest in history."
"Everyone's waiting for fundamentals to come back in line."
"There's still plenty of money sitting on the sidelines waiting to come back into the market."
"Things will be back to normal in the fall."
"It's just like 1998 or 1987 - it will pass quickly."

The Great Crash - 1929,

"Sentinel buys only the highest quality and most liquid securities (unless specifically directed by a client to seek higher yield in somewhat lower quality issues). Sentinel will not use derivatives, options, or any other 'financial engineering' techniques to enhance the yield on its portfolios. Sentinel's objective is to achieve the highest yield consistent with preservation of principal and daily liquidity, not simply 'the highest yield'.
Sentinel deals only with investment firms of the highest standing in the industry. Further, it buys from no fewer than four different dealers, both to ensure fair pricing, but also to diversify counterparty risk. ...
Finally, Sentinel's custodian, The Bank of New York, is one of the three top ranked custodians in the U.S. Its size, reputation, and concentration on custody and clearing provide additional assurance to Sentinels' clients that their liquid investments are being serviced by the highest quality professionals in the business. And because they are held in custody, these assets are protected by federal fiduciary law from any third party claims against the bank. Unlike FDIC insurance for bank deposits, there is no limit on the amount of protection this federal law can provide."

"As you undoubtedly know, the credit markets, along with most other markets, have experienced a liquidity crisis in the past several weeks. Investor fear has overtaken reason and has induced a period in which most securities have simply ceased to trade. We've all read the stories about one hedge fund or another suffering losses related to subprime exposure and closing down or being rescued. This fear, while warranted in some cases, has spilled over into the rest of the credit market and liquidity has dried up all over the street. In addition, investment banks and securities firms are stuck with LBO deals they've already entered into but cannot find buyers for the bonds so must inventory them themselves. This liquidity crisis has caused bids to disappear from the market and makes it virtually impossible to properly price securities or to trade them. High grade securities are trading like junk bonds as panicked investors dump names like General Electric at Tyco-like prices. We have carefully monitored this situation for the past several weeks and have met regularly to discuss the potential impact it may have on our clients. We had previously thought that the market would return to some semblance of order and that our clients would not join in the panic. Unfortunately, this has not been the case. We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value and therefore causing unnecessary losses to our clients."

"Sentinel clients can withdraw 100% of their cash daily. Sentinel accepts deposits of any amount daily. A cutoff time of 4:00PM (eastern time) applies for notification of intent to redeem or make deposits same day."

"A margin certificate protects traders in the OTC currency and bond markets against the failure of their trading counterparty. Instead of delivering margin to the broker/dealer, where they become general liabilities of the firm, traders deposit cash into a Sentinel account at The Bank of New York, where they are held in custody as margin for the benefit of the counterparty. By terms of the certificate, the counterparty can draw on them only to satisfy amounts the client owes. The assets used as margin are thereby protected against any third party claims against the counterparty in the event of the latter's failure or illiquidity."

"Before the crash, everybody was frightened about what was going on in the stock market. Every time that things looked very bad, someone with a lot of money would step in and buy stocks, and the market would go back up briefly. Then one day no one stepped in, and the market crashed."

The Great Crash - 1929,

A "liquidity crisis" is similar to a "cash flow" problem in a corporation that, say, has the assets to pay its debts, but can't convert the assets to cash quickly enough, or roll over debts quickly enough, to meet its current obligations. It's OK in the long run, because debt is decreasing, or at least not substantially increasing. Thus, a quick infusion of cash can provide a bridge that solves a liquidity crisis.
What we today have is an "insolvency crisis," where numerous institutions are at the point where debt is increasing so rapidly that there's no hope in the long run. A quick infusion of cash can help only temporarily, because new and larger infusions are continually needed, as debt increases.

"The 1998 LTCM crisis was mostly a liquidity crisis: the US was growing then at 4% plus, the internet bubble had not burst yet, we were in the middle of the "New Economy" productivity boom, households were not financially stretched and corporations were not financially stretched with debt either. In spite of those sound and solvent fundamentals the collapse of Russia – a country then with the GDP of a country such as the Netherlands – caused a global liquidity seizure and crisis of the type experienced by credit markets in the last few weeks: sudden demand for cash liquidity, sharp increase in the 10 year swap spread, sharp increase in the VIX [volatility index] gauge of investors’ risk aversion, liquidity drought in the interbank and euro-dollar market, deleveraging of highly leveraged positions, reversal of the yen carry trades. With the exception of the credit event in Russia, this was not a credit/insolvency crisis. And since it was a liquidity crisis, the Fed easing – 75bps [75 basis points = 0.75%] – was successful in restoring in a matter of weeks calm and liquidity in financial markets. Even that liquidity episode had painful credit fallout: it is not remembered by most but the entire subprime mortgage industry went bankrupt in 1998-99 following the LTCM liquidity crisis. So a liquidity shock event triggered massive credit events then."

Homeowners: "First, you have hundreds of thousands of US households who are insolvent on their mortgages. And this is not just a subprime problem: the same reckless lending practices used in subprime – no downpayment, no verification of income and assets, interest rate only loans, negative amortization, teaser rates – were used for near prime, Alt-A loans, hybrid prime ARMs, home equity loans, piggyback loans. More than 50% of all mortgage originations in 2005 and 2006 had this toxic waste characteristics. That is why you will have hundreds of thousands – perhaps over a million - of subprime, near prime and prime borrowers who will end up in delinquency, default and foreclosure. Lots of insolvent borrowers."
Lenders: "You also have lots of insolvent mortgage lenders – not just the 60 plus subprime ones who have already gone out of business – but also plenty of near prime and prime ones. AHM [American Home Mortgage] – that went bankrupt last week – was not exposed mostly to subprime; it was exposed to near prime and prime. Countrywide has reported sharp losses not only on subprime lending but also on prime ones. So on top of insolvent households/mortgage borrowers you have plenty of insolvent mortgage lenders, subprime and - soon enough - near prime and prime.
Home builders: "You will also have – soon enough – plenty of insolvent home builders. Many small ones have gone out of business; now it is likely that some of the larger ones will follow in the next few months. Beazer Homes – a major home builder - last week had to refute rumors of its impending insolvency; but so did AHM a few weeks before its insolvency. With orders for home builders falling 30-40% and cancellation rates above 30% more than a few home builders will become insolvent over the next year or so.
Investment funds: "We also have insolvent hedge funds and other funds exposed to subprime and other mortgages. A few – at Bear Stearns, in Australia, in Germany, in France – have already gone bankrupt or are near bankrupt. You can be sure that with at least of $100 billion of subprime alone losses – and most losses are still hidden given the reckless practice of mark-to-model rather than mark-to-market - many more will go belly up. In the meanwhile the CDO, CLO and LBO market have completed closed down - a “constipated owl” where “absolutely nothing moves” the way Bill Gross of Pimco put it. This is for now a liquidity crisis in these credit markets; but credit events will occur given that the underlying problem was not of of liquidity but rather one of insolvency: if you take a bunch of to-be-defaulted subprime and near prime mortgages and you repackage them into RMBS and then these RMBS are repackaged into various tranches of CDOs, the rating agencies may be using magic voodoo to turn those junk BBB- mortgages into AAA tranches of CDOs; but this is only voodoo as the underlying assets are going to be defaulted on."
Corporations: "[U]ntil recently the insolvent firms in the corporate sectors included corporations that could service their debt only by refinancing such debt payments at very low interest rates and financially favorable conditions. Many firms, under normal liquidity conditions, would have been forced into distress and debt default (either of the Chapter 7 liquidation form or Chapter 11 debt restructuring form) but were instead able to obtain out-of-court rescue and refinancing packages because of the most easy credit and liquidity conditions in bubbly markets. Now that we are observing a liquidity and credit crunch and a vast widening of credit spread you will observe a sharp increase in corporate defaults and a further risk in corporate risk spreads."

"Thus, while the Fed and the ECB had no option today but to provide massive liquidity in the presence of a most severe liquidity crunch and run, they should not delude themselves that this liquidity injections can resolve the deep insolvency problems of many overstretched borrowers: households, financial institutions, corporates. Insolvency/credit crises lead to financial and economic distress – hard landing of economies – and cannot be resolved with liquidity injections by a lender of last resort. And now the vicious circle of a weakening US economy – with a housing recession getting worse and a fatigued consumer being at the tipping point - and a generalized credit crunch sharply has increased the probability that the US economy will experience a hard landing. We are indeed at a "Minsky Moment" and this recent financial turmoil is the beginning of a much more serious and protracted US and global credit crunch. The risks of a systemic crisis are rising: liquidity injections and lender of last resort bail out of insolvent borrowers - however necessary and unavoidable during a liquidity panic- will not work; they will only postpone and exacerbate the eventual and unavoidable insolvencies."

"BNP Paribas Investment Partners temporarily suspends the calculation of the Net Asset Value of the following funds : Parvest Dynamic ABS, BNP Paribas ABS EURIBOR and BNP Paribas ABS EONIA Paris, 9th Aug. 2007 The complete evaporation of liquidity in certain market segments of the US securitisation market has made it impossible to value certain assets fairly regardless of their quality or credit rating. The situation is such that it is no longer possible to value fairly the underlying US ABS assets in the three above-mentioned funds. We are therefore unable to calculate a reliable net asset value (“NAV”) for the funds. In order to protect the interests and ensure the equal treatment of our investors, during these exceptional times, BNP Paribas Investment Partners has decided to temporarily suspend the calculation of the net asset value as well as subscriptions/redemptions, in strict compliance with regulations, for the following funds: ... The valuation of these funds and the issue/redemption process will resume as soon as liquidity returns to the market allowing NAV to be calculated. In the continued absence of liquidity, additional information on the envisaged measures will be communicated to investors in these funds within one month of today."

The European stock markets started falling 3-4%, as anxious investors sold their stocks. By the end of the day, they were down 2-2½%.
In a related manner, anxious lenders were refusing to lend, leading to a spike in interest rates throughout Europe.
The European Central Bank (ECB) <#stdurl http://www.canada.com/nationalpost/financialpost/story.html?id=fe3a4dba-8223-4b2f-ad26-0da6dc91ed05&k=37394 "injected a record $130.6 billion"#> into Europe's money markets to prevent a financial system seizure. This is a standard procedure, where the ECB makes money available to banks at low interest rates, so that the banks can then lend the money to others, with the intent of solving the "evaporation of liquidity" problem.
The New York stock markets fell 3-4% at the open, and ended the day down 2½-3%.
Numerous other financial firms are reporting problems almost every day. For example, after the US markets closed on Thursday, Countrywide Financial Corp., the biggest U.S. mortgage lender, said that "unprecedented disruptions" in the home loan market may crimp its ability to lend.
The Federal Reserve pumped $24 billion into the American money markets. This was considered surprising, but not a record.
As I'm writing this (around noon, Asian time), Asian markets are down 2-4%, and the Bank of Japan is injecting money into their money markets.

The Independent

    1929   % of peak (381.17)
    -------------------------
    Tue 09-03 ( +0.22%) 100%              2007   % of peak (14000)
    Wed 09-04 ( -0.41%)  99%              ------------------------
    Thu 09-05 ( -2.59%)  97%              Thu 07-19 ( +0.59%) 100%
    Fri 09-06 ( +1.76%)  98%              Fri 07-20 ( -1.07%)  98%
    ------------------------              ------------------------
    Mon 09-09 ( -0.36%)  98%              Mon 07-23 ( +0.67%)  99%
    Tue 09-10 ( -2.04%)  96%              Tue 07-24 ( -1.62%)  97%
    Wed 09-11 ( +0.99%)  97%              Wed 07-25 ( +0.50%)  98%
    Thu 09-12 ( -1.23%)  96%              Thu 07-26 ( -2.26%)  96%
    Fri 09-13 ( +0.14%)  96%              Fri 07-27 ( -1.54%)  94%
    ------------------------              ------------------------
    Mon 09-16 ( +1.51%)  97%              Mon 07-30 ( +0.70%)  95%
    Tue 09-17 ( -1.04%)  96%              Tue 07-31 ( -1.10%)  94%
    Wed 09-18 ( +0.65%)  97%              Wed 08-01 ( +1.14%)  95%
    Thu 09-19 ( -0.25%)  97%              Thu 08-02 ( +0.76%)  96%
    Fri 09-20 ( -2.14%)  94%              Fri 08-03 ( -2.09%)  94%
    ------------------------              ------------------------
    Mon 09-23 ( -0.84%)  94%              Mon 08-06 ( +2.18%)  96%
    Tue 09-24 ( -1.78%)  92%              Tue 08-07 ( +0.26%)  96%
    Wed 09-25 ( -0.01%)  92%              Wed 08-08 ( +1.14%)  97%
    Thu 09-26 ( +0.96%)  93%              Thu 08-09 ( -2.83%)  94%
    Fri 09-27 ( -3.11%)  90%
    ------------------------
    Mon 09-30 ( -0.41%)  90%
    Tue 10-01 ( -0.26%)  89%
    Wed 10-02 ( +0.56%)  90%
    Thu 10-03 ( -4.22%)  86%
    Fri 10-04 ( -1.45%)  85%
    ------------------------
    Mon 10-07 ( +6.32%)  90%
    Tue 10-08 ( -0.21%)  90%
    Wed 10-09 ( +0.48%)  90%
    Thu 10-10 ( +1.79%)  92%
    Fri 10-11 ( -0.05%)  92%
    ------------------------
    Mon 10-14 ( -0.49%)  92%
    Tue 10-15 ( -1.06%)  91%
    Wed 10-16 ( -3.20%)  88%
    Thu 10-17 ( +1.70%)  89%
    Fri 10-18 ( -2.51%)  87%
    ------------------ -----
    Mon 10-21 ( -3.71%)  84%
    Tue 10-22 ( +1.75%)  85%
    Wed 10-23 ( -6.33%)  80%
    Thu 10-24 ( -2.09%)  78% Black Thursday
    Fri 10-25 ( +0.58%)  79%
    ------------------------
    Mon 10-28 (-13.47%)  68% Black Monday
    Tue 10-29 (-11.73%)  60%
    Wed 10-30 (+12.34%)  67%
    Thu 10-31 ( +5.82%)  71%
    Fri 11-01  (Closed)
    -----------------------
    Mon 11-04 ( -5.79%)  67%
    Tue 11-05  (Closed)
    Wed 11-06 ( -9.92%)  60%
    Thu 11-07 ( +2.61%)  62%
    Fri 11-08 ( -0.70%)  62%
    ------------------------
    Mon 11-11 ( -6.82%)  57%
    Tue 11-12 ( -4.83%)  55%
    Wed 11-13 ( -5.27%)  52%
    Thu 11-14 ( +9.36%)  57%
    Fri 11-15 ( +5.27%)  60%
    -----------------

(Source: Xinhua)

(Source: BBC)

"This is the great coming out party. This is the moment when I think China gets much closer to being what it feels it is - a real global power, a real superpower. I think the buildup to next year it will be fairly contradictory. On the one hand, the Chinese will make a real effort to satisfy the [Olympics] committee and the outside world that they're doing this the right way, but they'll be very, very sensitive over lots of different issues, as they get towards the end, they'll be overly sensitive sometimes, with a surprising effect. [On the question of air pollution in Beijing:] The Chinese Communist Party can't play god - they've shifted a lot of heavy industry out of Beijing - they want to improve the air quality. The've been very successful economically because of [their industry], but the cost is that the chinese environment is absolutely critical. [On the question of labor reform and human rights.] There's a Yin and Yang thing. In some ways they've responded quite quickly to claims that there's been stuff produced for the Olympics that involved bad labor practices. On the other hand, this means so much to them, that I don't think that they'll act rationally in some areas, especially when we get closer to it. I think the problem is that they will in some ways be reasonable, in some ways they'll be over-sensitive -- it's difficult to know really how this will pan out. I don't think they want this to be remembered as the tyrant's or dictator's olympics. They really want this to be a showcase. The problem is the things that they can't control - the reporters, the environment - things like that - that's where they might act irrationally and do things that we don't expect and which they really can't control. The thing to remember is that they've never really had this experience -- they've had big events like the Asian games in the early 90s, and also the UN conference in the mid 1990s. But this is by far the biggest exposure they've ever had. So in a sense having all of this attention, all of these journalists, they really have no record of having had to deal with this. That's something that they've got to learn very quickly. I think they do learn very, very quickly, but they are going to have some rough lessons, I think. And we're going to have some lessons too when journalists do go and start picking up things that they don't want the rest of the world to know."

China Daily

"Thanks to the trade surplus, China has accumulated a large sum of US dollars and its world largest foreign exchange reserve is mostly in US dollars. Such a big sum, a considerable portion of which is in the form of US treasury bonds, contributes a great deal to maintaining the position of the US dollar as an international currency. Russia, Switzerland and several other countries have restructured their foreign exchange reserve and reduced the US dollars they hold. China is unlikely to follow suit as long as yuan's exchange rate is stable against the US dollar. The Chinese central bank will be forced to sell US dollars once the renminbi appreciates dramatically, which might lead to a mass depreciation of the US dollar against other currencies."

"The US was [economically] integrated with Germany and Japan prior to WW2. In fact, business notables from Henry Ford to Joseph Kennedy to George Bush's grandpa, Prescott, to IBM, GM, Chase Manhattan, Standard Oil, Dupont, GAF, and AT&T were all in bed with the Nazis even throughout the war. Goodyear ran the Auschwitz slave-labor rubber factory with IG Farben, Chase Manhattan Bank was selling the dental bullion from the gas chamber victims, IBM was running the databases that tracked the ID numbers tattooed onto the concentration camp prisoners, Ford and GM built tanks for the Nazis, AT&T built planes, Standard Oil shipped oil (via Panamanian flagged tankers), Dupont and GAF made the gas for the gas chambers. So, just because almost all the clothes on your back, the computer under your fingertips, the popcorn shrimp in your mouth, the loan that paid for your house, and the money paying for both the Middle East wars and Medicare all came from China, do not assume that war between the US and China is impossible. Every blowhard trade/job protectionist from Lou Dobbs to Hillary Clinton is putting a flame torch to the fuse of the next world war."

"There are <#stdurl http://www.ustreas.gov/tic/mfh.txt "more than two trillion dollars"#> of these long-term bonds sitting in central bank vaults around the world, especially in Japan, China and the UK. Furthermore, this amount continues to grow exponentially. As a result, "everybody" knows the U.S. Treasury will never be able to redeem all those bonds. People tell me, "Of course they'll all be redeemed. The Treasury can print as much money as it wants, and it could redeem them all tomorrow." But my intuition tells me that when the world is flooded with some trillions of some particular item, and that the number of trillions keeps growing exponentially, and that those trillions of items could go on the market at any time, then those items may turn out not to be very valuable. During a crisis or a war, China or another country may put several hundred billion dollars worth of these long-term bonds on the market in order to destabilize the American economy. At that point, if you happen to have some of these bonds, they'll be worthless. So, if you're going to buy Treasury bonds at all, the best bet is probably short-term, 6-month Treasury bonds."

Greenspan was Fed Chairman from 1987 to 2005.
When the dot-com bubble began in the late 1990s, he decided to "allow" the bubble to occur.
Instead, he would deal with its aftermath by setting interest rates to near-zero when the bubble was bursting.
That was, in fact, the Fed policy after 2000, and the Fed reduced interest rates 12 times by June, 2003. That was the policy that Greenspan believed would have worked in 1929, to prevent the Great Depression of the 1930s. His successor, Ben Bernanke, believes the same thing.
In recent months, many people are blaming Greenspan's near-zero interest rate policy as the cause of the housing bubble (which is true).

Wall Street Journal.

"History tells us it’s far better to have people periodically going to excess with its adverse consequences than to try to block it off in the beginning. These adverse periods are very painful but they’re inevitable if we choose to maintain a system in which people are free to take risks, a necessary condition for maximum sustainable economic growth. We have learned to move risk from the leveraged institutions which are the major lenders in this country to those far more capable of absorbing loss. It’s why our economy in recent years has developed the flexibility to absorb severe adjustments."

"Another difficult period occurred in 1994 when inflation began to increase, along with bond yields (interest rates). Alan Greenspan and the Fed took a very tough stand and tightened the money supply, stopping inflation in its tracks, but also causing bond yields to crash. This caught a number of investors by surprise. Remember when Orange County, California, went bankrupt? They blame Greenspan for that."

Wall Street Journal

Greenspan used to think that deflation was impossible, but Japan's 1990s experience proved him wrong. I frequently make the point that mainstream macroeconomics has failed to predict or explain anything since the 1990s, and this shows it as well as any. Why did Greenspan think that deflation was impossible?
Then, in 2003, Greenspan attacked deflation by setting interest rates to zero, flooding the markets with money. Sure enough, all the money created several bubbles -- a housing bubble, a credit bubble, a stock market bubble. But Bernanke and Greenspan evidently don't believe in bubbles. Do they even know that <#inc ww2010.weblog.ref e070220 "Japan was in a big bubble in the 1980s,"#> leading to the bubble bursting and deflation in the 1990s? Do they even connect those two events? Apparently not. They treat deflation as the CAUSE of the problem, rather than a SYMPTOM of the problem, with the result that they've made the bubbles much bigger, and the problems much worse. And once again, they didn't anticipate that, since mainstream macroeconomics does predict or explain anything.

"Any time there is an episode of turmoil in US and global financial markets the question in the mind of investors is whether this is a period of temporary turmoil or the beginning of a more severe and protracted period of financial market volatility and downturn that could end up into a systemic risk episode. In the last decade only the LTCM episode in 1998 at the peak of the Asian and emerging markets financial crisis and the bust of the tech bubble in 2000-2001 - that triggered the US recession of 2001 - had systemic implications. Since then we have experienced a variety of other episodes of financial turmoil that have ended up being only temporary shocks. In these episodes of temporary turmoil investors risk aversion sharply rose for a while, volatility indices and gouges of investors risk aversion (such as the Vix, the 10 year swap spread and credit spread) sharply increased; and the financial pressures spilled over from credit/debt markets to equity markets. But in each of the most recent episodes the turmoil was transitory (a few weeks or, at most, a couple of months); once the transitory sources of the financial disturbances disappeared, calm returned to markets and investors risk aversion returned to lower levels.

caused

"One of such episode of temporary turmoil followed 9/11 in 2001 and the collapse of Enron in late 2001. Another episode of transitory turmoil occurred in early 2003 before the US invasion of Iraq when market started to worry about the risks and consequences of the war on the economy. A more recent episode was the one that – in the spring of 2005 – followed the downgrade of GM and Ford by credit rating agencies; that downgrade caused serious but temporary pressures in the credit derivatives markets and in equity markets. Another episode occurred in the spring of 2006 when a sudden “inflation scare” in the US (worries that inflation was rising and that, therefore, the Fed was not done yet with rising the Fed Funds rate) led to a sharp downturn in US and global equity markets and serious pressures on some emerging markets currencies, equity markets and bond markets. And the final episode – before the most recent turmoil this summer – was in late February 2007 when the combination of a mini-crash in the Chinese stock market, rising worries about the fallout of the subprime crisis and a US “growth scare” affected mostly equity markets in the US. Since most previous episodes of financial turmoil since 2001 have been temporary, the optimistic and consensus view in the markets is that the current financial turmoil will be again transitory and that risky assets – starting with equities – will recover their upward price path once investors’ nervousness abates. That is certainly possible as previous episodes of turmoil since 2001 were mostly contained. But I will flesh out a number of reasons why the current episode of market turmoil may be more serious and protracted than previous ones and why we should worry now about systemic risk.

"First, most of previous transitory episodes occurred at the time when US and other G7 monetary policy conditions were much looser than today. Starting in January 2001 the Fed aggressively cut the Fed Funds rate that fell from 6.5% to a bottom of 1% by 2004. Next, the normalization of US monetary policy brought back the Fed Funds rate to 5.25%; while at the same time monetary policy has been tightened in all G7 countries and several other emerging markets. And with inflationary pressures being still on the upper limits of many central banks’ comfort zone further tightening is expected (say in the Eurozone, UK, China and many other economies). Thus, in past episodes, easy monetary conditions helped; today instead policy is tighter and on the way to further tightening.

"Second, following the brief US recession between March and November 2001, economic growth – first in the US, then in other G7 economies and emerging markets – recovered rapidly and has remained high for a number of years. But starting with the fall of 2006 the US has experienced a serious economic growth deceleration that may turn out into a hard landing (either a growth recession or an outright recession). The rest of the world is growing robustly but the clouds over US economic growth are rising. In previous episodes – like the spring of 2006 or early 2007 – we had an inflation “scare” or a “growth” scare and markets reacted sharply downward. Now, if instead of having a growth “scare” the US were to experience an actual sharp growth hard landing (say a growth recession) the financial consequences would be serious as housing, capex spending and private consumption would sharply slow down.

"Third, between 2001 and 2006 the debt, credit and financial excesses of important sectors of the economy were contained; today they are not. At the time of the 2001 recession the balance sheets of the corporate sector were weak but those of the household were relatively sound. Today, instead, after six years of excessive borrowing and two years of negative savings the balance sheets of the household sector are weak and fragile. At the same time the process of releveraging of the financial and corporate system (hedge funds, private equity, prop desks, LBO and share buyback activity) has led to significant increase in the amount of debt and leverage in the private sector. As suggested by Ed Altman – the leading academic expert of corporate distress - corporate defaults have been kept at a much lower levels (0.6%) than justified by current corporate financial fundamentals (2.5%) only because of the slosh of liquidity that allowed potentially distressed corporations to refinance their debts or do out-of-court restructuring plans. In the last few years a credit boom – if not a bubble – stimulated asset prices in a typical Minsky-style credit-driven asset bubble. The easy monetary conditions after 2001 and the continued wall of liquidity coming from highly saving and forex-accumulating emerging markets fed a US and partly global asset bubble and a credit/debt bubble. Thus, the excessive leveraging of households, some parts of the corporate sector and many financial investors is a new source of financial fragility and systemic risk."

"Fourth, the housing bubble has already popped in the US and is at risk of popping in other bubbly housing markets (UK, Spain, Ireland, Australia, New Zealand, and Iceland to name a few cases). The fallout of the US housing recession has been twofold. First, spillover to other sectors of the economy (auto recession, weakness in durable goods and housing related sectors, weak capex investment of the corporate sectors, slowdown of private consumption among overstretched US households). Second, spillover to other financial markets as: a) this is not just a subprime problem but increasing a near prime and prime mortgage problem; b) there is now a liquidity and credit seizure in a variety of credit markets (LBOs, CDOs, CLOs, etc)."

"Fifth, we are now reaching a point where the distress of many and different economic agents may lead to a systemic effect. Some have argued that the growth of credit derivatives has diffused financial risks among many different agents and in a variety of countries reducing systemic risk. That is why – it is argued - the risk of one huge LTCM blowing up and causing systemic risk are limited. But the experience with previous episodes of systemic risk (the S&L crisis where hundreds of smaller financial institutions went belly up causing a credit crunch and the 1990 recession; the tech bust of 2000-2001 where hundreds of smaller tech and internet companies went belly up and triggered the 2001 recession) suggest that the LTCM type of systemic crisis (one large institution getting in trouble and taking with it most of the financial system) is the exception rather than the rule: many and different agents and institutions getting in trouble can lead to systemic effects especially after a period of asset bubbles driven by a credit/debt bubble. And today there is a variety of economic and financial agents that are under financial pressure if not outright distress. Specifically, hundreds of thousands of subprime and near prime households will default on their mortgage and their homes will end up in foreclosure; the ability of the financial and legal system to manage such a surge in bankruptcies is severely limited. Also, over fifty subprime lenders have now gone out of business and now some of the larger lenders – see AHM and Accredited Home Lenders Holdings Co. - are also in trouble and near bankrupt; the mortgage rot is spreading from subprime to near prime and Alt-A (see Countrywide, IndyMac, etc.). Now, there are news of massive losses among major US home builders and rumors that some may be near bankruptcies. There are already half a dozen mid-sized hedge funds – between US, Australia and Europe – that have gone belly up; and every day financial institutions across the world are reporting large subprime-related losses as a lot of the RMBS and CDO were bought by foreign investors. And in a world where most investors in these illiquid instruments (RMBS, CDOs, CLOs, etc.) are marking to model rather than marking to market the extent of the eventual losses is unknown and the number of financial institutions that will go belly up is also unknown and likely to surprise on the upside. Systemic risk episodes often occur with a death through 1000 cuts rather than one single major – a’ la LTCM – blow."

"The weather has cooled off several times in the last few months. In the first week of September, the temperature fell rather sharply. In the second week of October there was another dip in the temperature. Nervous pedestrians began wearing heavy coats, but in both cases the pedestrians stopped wearing heavy coats as the temperature went up again. Today, pedestrians are starting wear heavy coats again as the temperature dips. But we believe that the pedestrian will regain his confidence, shed his heavy coat, and the temperature will rise once more, so there won't be any winter. That's what happened in September and October, and we can expect that to happen again today."

"Things are different today than they were in September or October. First, there was a snowstorm in Minnesota last week, indicating a more widespread breakdown in the warm weather, and nothing like that happened in September or October. Furthermore, the jet stream appears to be changing course, more and more flowing from the north and less from the south. Finally, factories in China are producing more heavy coats and shipping them to the United States, including New York City, and that will bring temperatures down further. So we have good reason to worry that winter is coming."

(Source: CNBC)

"Lovely Erin Burnett: It's not Ben Bernanke and the rate that matters. Angry Jim Cramer: It's the rate. It's entirely the rate. We're going to spend billions in Iraq to build homes. We have thousands of people losing their homes right now. 14 million people took a mortgage in the last three years. 7 million of them took teaser rates or took piggy-back rates. They will lose their homes. This is crazy. [[At this point, he's screaming at the top of his lungs.]] I'm sorry to be so upset about it, but you have to see what they're saying to me, off the record, before I come in here, every night and every day. And what I hear from these blowhard managers who act like ... Call someone, for heaven's sake. Go call someone. I worked at fixed income. This is not the time to be complacent. Sometimes I wish I didn't know anybody, so I could just sit here and say, 'You know what? Just go buy some Washington Mutual. Take that yield.' Unfortunately, I know too many people, and I'm too darn old Erin: You are 62. Cramer: I've been around for too long. I mean, look, I gotta tell you ... He has got to listen ... [[At this point, he's practically in tears.]] He's gotta call someone. Bernanke's gotta call someone. No, they're not calling anybody. And Bill Poole? Bill Poole? There was a President named Hoover, and no one thinks much of him now, the Great Engineer. I'll leave here, and I'll get another ten calls from the trading desk, saying Cramer, would you please speak up?"

"You mentioned that in essence there is no effective consequence to a person simply walking away from their home, i.e., defaulting on their mortgage (which was taken on the premise that the market would keep going up, etc.). Is that in fact true...no legal consequences?"

Marketplace

(Source: Markit.com)

"I think the problem is contained in the US because of the activity. I think in other parts of Europe there is a much, much stricter regime about some of the underwriting criteria that people can use. There is more control. In the UK there's the FSA, and in Germany and other countries, there are similar organizations that will be controlling that. There's more prudence here I think. There's more respect. .. I think there's going to be a couple of weeks where [the market is] going to be a bit sensitive. I think it will [stabilize]. I think it has to [stabilize]. I think people will realize that it's an isolated incident, albeit a very big one in the US. I think that when people understand that this is a global funding issue, and not a consumer issue, then I think the market will settle."

Meet the Press

"Rebels in Sudan's western Darfur region took up arms against the government in February 2003, saying Khartoum discriminated against non-Arab farmers there.
Khartoum mobilized proxy Arab militia to help quell the revolt. Some militiamen, known locally as Janjaweed, pillaged and burned villages and killed civilians. The government has called the Janjaweed outlaws and denied supporting them."

(Source: BBC)

Slate

"One aspect of the shift is a new "realism" about genocide that reflects the way the world has come to tolerate it: We now tacitly concede that in practice, we can't or won't do much more than deplore it and learn to live with it. Another—more troubling—trend is toward what we might call "defining genocide down": redefining genocide to refer to lesser episodes of killing and thus lessening the power of the word to shock. One has to admire the honesty of Barack Obama, who argued in the recent Democratic YouTube debate that even if rapid withdrawal of troops from Iraq might lead to genocide, he'd favor going ahead and getting the troops out. He wasn't saying he was happy about the possibility—he was just expressing the view that the word genocide shouldn't freeze all discourse: He wouldn't let it be a deal-breaker. Some were shocked by this remark. Others agreed that fear of a future genocide should not inhibit efforts to stop the current killing. ... In other words, let's get real. Let's not pretend we care about the possibility of future genocide in Iraq if we do little or nothing about it where it's already happening now [in Congo and Darfur]."

"This [New York's financial district] is the only area of the country - this square mile - where real estate is up year on year. It's down year on year everywhere else. It's really remarkable. The real issue is the 2/28 mortgage loan -- you're going to hear a lot about this -- the first two years low interest rates, almost no interest rates, almost undocumented. They all reset -- the big bulge of reset will be October of this year to February of next year. Most the of the people who took these mortgages can't pay them. [[Just to explain: the 2/28 mortgage is the ARM (adjustable rate mortgage) where you pay a teaser rate for 2 years, and then the interest rate adjusts so that for the next 28 years your monthly payment is several times higher.]] I'm looking for 100% default on the 2/28. The bears are looking for 50% -- I'm saying that they're foolish and way too optimistic. Now where are these 2/28 loans concentrated? Largely in Florida, in Phoenix, in Las Vegas, in the southland of California, the northern part, Sacramento, but most importantly the "inland empire." We need to plow over the inland empire, because there are too many homes, and the homebuilders have too much inventory, and the people who have made these loans - I think that everything that was written from May 2006 to the end of the year is worthless. [[I.e., he's saying that every mortgage loan granted from May to Dec of last year is worthless.]] By the way, I'm not distinguishing any more between subprime and prime. That's a meaningless distinction. When your house drops 20% in value, then it doesn't matter if you're subprime or prime. It's better to walk away, even if you're wealthy. You don't want to lose your credit card, and you don't want to lose your car. Your house is fungible. It's smart to walk away. You see the economic decision now weighs on walking away from your home. It's actually a good thing. I know that sounds a little bit counter-intuitive. But if your house declines 20% in value, it's really important to sell it, to walk away from it. ... There's no area of the country that's doing well. There's a small area in Baltimore that's probably about a mile or two square that's doing well. And south of Manhattan in NY is doing well. ... All the major homebuilders have indicated that other than a little bit of square feet in Baltimore, and the south of Manhattan, there are no areas that are appreciating in this country. None. What's so odd is that the average home appreciated 1% in 2006. I'm calling for a dramatic decline in home values, based again on the number of homes that continue to be built, and the inability to seell, and now the new found end of the 2/28, the end of all of these products that made it -- the teaser rates are gone. Now, once again I'm going to emphasize -- if the Federal Reserve were to cut interest rates by one full point, what you would have is that things would just reverse dramatically, and everything would go up in value. So it really is just a stroke of the pen for the Fed. [[The above paragraph is total nonsense. Reducing interest rates 1% would have no effect, and may cause investors to panic further.]] But until then we're going to be in what I now believe is a total crisis. The only guys writing honestly about it are Moodys.com, but I also find that duplicitous, since Moody's was so far behind on the mortgages. [[He's referring to <#inc ww2010.weblog.ref e070711b ""Moody's joins S&P in downgrading mortgage-based securities.""#>]]

Housing inventories are so high, that house values are going to fall dramatically before long.
The 2/28 ARMs (adjustable rate mortgages) were sold to homeowners on the basis of the low teaser monthly payments. These payments are going to reset in bulk in the last half of this year, and many people will be unable to make the monthly payments, so they will default.
So he gives this advice: If you're going to default on your mortgage anyway, you might as well walk away and default right now, and save money.
He predicts that 100% of these mortgages will end up in defaults. His reasoning is that it makes no sense to continue making payments on a house, even if you can afford it, if the value of house has fallen so much that it's worth less than the value of the mortgage loan.

"Residential properties in countries around the world, including America, Australia, the United Kingdom, China, South Korea, Spain, the Netherlands, and South Africa, are overpriced by 50% or more. ... Since 2002, we've been pointing out that Generational Dynamics predicts that we're entering a new 1930s style Great Depression, and that stock prices will fall by 50% in the next few years. The Fed's low interest policy has postponed the effects of the Nasdaq crash of 2000, but has not eliminated them.

Barrons

Barron's

The Great Crash - 1929

Wall Street Journal

New York Times

Oh, they built the ship Titanic and when they got her true
They said here's a ship that the water won't go through
But the Lord with mighty hand said this ship it will not stand
It was sad when the great ship went down.

It was sad, Lord, sad, it was sad, Lord, sad
It was sad when the great ship went down,
To the bottom, Lordie.
Husbands and wives, itty-bitty children lost their lives
It was sad when the great ship went down.

Oh, they left Eng-ge-land, and they sailed from the shore
But the rich refused to associate with the poor
So they sent them down below where they'd be the first to go
It was sad when the great ship went down.

It was sad, Lord, sad, it was sad, Lord, sad, etc.

(Source: AP)

The American government has been almost paralyzed since the 2004 election, and is even worse after the 2006 election, with Americans becoming increasingly xenophobic over Latinos and Chinese.
Israel became paralyzed when Ehud Olmert took over after Ariel Sharon went into a coma, with the people increasingly fearful of Palestinian and Hizbollan missiles. As I understand it, Olmert's approval rating in polls is close to 0%, especially after summer, 2006, when he and his government <#inc ww2010.weblog.ref e061223 "panicked and launched the Lebanon war within four hours,"#> with no plan and no objectives.
The Palestinian territories have been sinking into chaos ever since Yasser Arafat died, with xenophobia directed at other Palestinians. Today, the Palestinians are split into two parts, with Mahmoud Abbas and Fatah ruling in the West Bank, and Hamas ruling in Gaza.
In South Korea, <#inc ww2010.weblog.ref e070216 "politicians are in over their heads"#> with the North Korea situation, and buried in scandal. The people are increasingly anxious and fearful of a North Korean explosion.
Some countries have brand new leaders -- Gordon Brown in the UK and Nicolas Sarkozy in France -- with great plans for change. These leaders haven't yet had time to accomplish anything, nor have they had the time to demonstrate that they won't accomplish anything. Xenophobia between Europeans and Muslims is increasing steadily.
On the other hand, countries that still have leaders that grew up during the last crisis war (China's President Hu Jintao, India's Prime Minister Manmohan Singh, and Pakistan's President Pervez Musharraf) are not paralyzed and ungovernable, in my judgment, even though the level of political conflict is very high.

(Source: CNN)

Dying to Win

LA Times

"Al Qaeda in Iraq and its affiliate groups number anywhere from 5,000 to 10,000 individuals, the senior U.S. military officer said. Iraqis make up the majority of members, facilitating attacks, indoctrinating, fighting, but generally not blowing themselves up. Iraqis account for roughly 10% of suicide bombers, according to the U.S. military."

"Others contend that Saudi Arabia is allowing fighters sympathetic to Al Qaeda to go to Iraq so they won't create havoc at home. Iraqi Shiite lawmaker Sami Askari, an advisor to Prime Minister Nouri Maliki, accused Saudi officials of a deliberate policy to sow chaos in Baghdad. "The fact of the matter is that Saudi Arabia has strong intelligence resources, and it would be hard to think that they are not aware of what is going on," he said. Askari also alleged that imams at Saudi mosques call for jihad, or holy war, against Iraq's Shiites and that the government had funded groups causing unrest in Iraq's largely Shiite south. Sunni extremists regard Shiites as unbelievers. Other Iraqi officials said that though they believed Saudi Arabia, a Sunni fundamentalist regime, had no interest in helping Shiite-ruled Iraq, it was not helping militants either. But some Iraqi Shiite leaders say the Saudi royal family sees the Baghdad government as a proxy for its regional rival, Shiite-ruled Iran, and wants to unseat it."

"And second, the terrorist acts may presage a larger regional war involving the Palestinian Arabs and the al Qaeda against Americans in Iraq. Iraq is in an awakening period, but the Palestine region is just about to enter a crisis period. Some analysts claim that the terrorist acts are being perpetrated by Palestinian Arabs and "Mujahadeen" being paid thousands of dollars each, funded by Saddam and Osama bin Laden, arriving from Syria and Saudi Arabia. The really dangerous scenario is that large numbers of Palestinian and "mujahadeen" terrorists will be motivated by identity group relationships to move into Iraq as a theatre of war against the Americans. That isn't happening now, but it's one of several possible scenarios that may unfold in the Mideast region during the next few months and years."

(Source: Markit.com)

Devil Take the Hindmost, a history of financial speculation:

Congressional Quarterly.

The New Republic

New York Times.

NY Times

(Source: iht.com)

President Musharraf's government is to blame for allowing al-Qaeda to regroup within the tribal regions of North Waziristan, on the Afghan border.
Musharraf particularly signed a disastrous peace agreement with tribal chiefs in March, 2006. This gave al-Qaeda a free hand to set up new training camps and rearm on the Pakistani side of the border.
That peace deal only ended last week with the <#inc ww2010.weblog.ref e070716 "substantial increase in al-Qaeda violence"#> throughout Pakistan, including several suicide bombers, killing hundreds of people,
Osama bin Laden is still alive, and is hiding out in Pakistan.

(Source: CNN)

"The Pakistani military is already there in the tribal area. ... Pakistan's commitment cannot be doubted by anybody, and that is why some of our people do not like what we read in some of your newspapers, which are more like leaks and calculated leaks. And we hear of safe havens in Pakistan. It really makes us very angry when we are suffering so many casualties, when our troops are suffering so many casualties. You know, I know you're a friend, but the way you frame your question is something that people in Pakistan don't like. ... All I'm saying is this: I am not trying to underestimate the situation. I know it's a difficult situation. We've suffered casualties in the last three days. What we need is actionable intelligence. We do not want, you know, something said just for the purpose of having an effect on American public opinion. Now, I want to say one thing very clearly. The whole purpose of this exercise: to win hearts and minds of the people. Now, we are aware of that, and we have to carry our public opinion with us. And here is a figure which I would like you and the American audience to ponder over. Look at the ratio of casualties between your troops and Iraqi civilians. And do you know what our casualties have been? When 500 or 600 of our soldiers died -- and I'm talking the past year and not the recent ones -- we were able to get hold of about 800 or 900 fatalities by the militants. Which means the ratio is 1:1.2, whereas the ratio in Iraq, I do not even wish to mention. The difference is that we cannot afford what is conveniently called collateral damage. We have committed to controlling terrorism. We have demonstrated that at the time of Lal Masjid, recently, the Red Mosque, and it lasted over six months. We've tried our best to save human lives. It was only as a last resort that force was used. And people in Pakistan get very upset when, despite all the sacrifices that Pakistan has been making, you know, you have the sort of questions that are sometimes asked by the American media. And as far as the media is concerned, I don't wish to be more frank that I'm going to be in this interview. We heard a lot of what was said before the Iraq war. A lot of newspapers now have been gracious enough to admit that they made certain mistakes. Maybe they are making bigger mistakes at this moment."

(Source: BBC)

2005 4th quarter Up +$  49.9 billion
2006 1st quarter Up +$  56.2 billion
2006 2nd quarter Up +$  66.0 billion
2006 3rd quarter Up +$  46.8 billion
2006 4th quarter Up +$  78.4 billion
2007 1st quarter Up +$ 135.7 billion
2007 2nd quarter Up +$ 130.6 billion

Wall Street Journal

"Let me take this opportunity to provide you with an update on the status of the High-Grade Structured Credit Strategies and High-Grade Structured Credit Strategies Enhanced Leveraged Funds managed by Bear Stearns Asset Management (BSAM). A team at BSAM has been working diligently to calculate the 2007 month-end performance for both May and June for the Funds. This process has been much more time-consuming than in prior months due to increasingly difficult market conditions. [[Notice the names of these funds. Imagine what a Very Important Person you'd have to be to own shares in the High-Grade Structured Credit Strategies Enhanced Leveraged Funds. Wow! Just mention that name to a girl and you'd have her in bed before you reach the word "Funds." Too bad though, 'cause you're getting screwed in other ways as well.]] As you know, in early June, the Funds were faced with investor redemption requests and margin calls that they were unable to meet. The Funds sold assets in an attempt to raise liquidity, but were unable to generate sufficient cash to meet the outstanding margin obligations. As a result, counterparties moved to seize collateral or otherwise terminate financing arrangements they had with the Funds. During June, the Funds experienced significant declines in the value of their assets resulting losses of net asset value. The Funds' reported performance, in part, reflects the unprecedented declines in the valuations of a number of highly-rated (AA and AAA) securities. Fund managers and account executives have been informing the Funds' investors of the significant deterioration in performance for May and June. The preliminary estimates show there is effectively no value left for the investors in the Enhanced Leverage Fund and very little value left for the investors in the High-Grade Fund as of June 30, 2007. in light of these returns, we will seek an orderly wind-down of the Funds over time. This is a difficult development for investors in these Funds and it is certainly uncharacteristic of BSAM's overall strong record of performance."

(Source: Markit.com)

Collapse of the credit derivatives market.
Collapse of the Shanghai stock market bubble.
Collapse of the Wall Street stock market bubbles.

Financial Times

Business Week

Retail sales <#stdurl http://investing.reuters.co.uk/news/articleinvesting.aspx?type=tnBusinessNews&storyID=2007-07-13T125720Z_01_N12234720_RTRIDST_0_BUSINESS-USA-ECONOMY-RETAIL-DC.XML "unexpectedly fell in June,"#> by a surprisingly large amount.
The <#stdurl http://www.forbes.com/feeds/ap/2007/07/12/ap3908914.html "US trade deficit widened in May,"#> increasing 2.3% over the April figure.
The ABX index hit a new intraday low on Friday, though it recovered slightly.

Wall Street Journal

The ratings agencies make money from companies that purchase their ratings, and the companies profit from good ratings. If the ratings agencies had lowered their ratings, then their customers would have suffered. Thus, the ratings agencies had a vested interest in giving advice that turned out to be wrong, and they made money on that bad advice. They are going to be blamed, and perhaps jailed.
The Bear Stearns analyst who said it was time to buy mortgage-based securities made a recommendation that benefited Bear Stearns, who sell hedge funds with portfolios of mortgage-based securities. A negative recommendation would have hurt the analysts' employer. He's going to be blamed, perhaps jailed.
An ordinary financial adviser who protected his own assets while advising his clients to purchase stocks (on which he makes commissions) is going to be blamed, and perhaps jailed.
An ordinary home buyer who lied about his income in order to get a mortgage is going to be blamed, and at least sued.
A mortgage loan officer who didn't bother to verify income claims on loan applications, and thereby made more commissions, is going to be blamed.

"What happened this week was a result of the prices of mortgage securities falling sharply in the past few weeks. Finally on Wednesday, the rating agencies moved to cut ratings of more than $12 billion worth of bonds. This forced the "hogs" mentioned above to sell their bonds into a market that was already nervous about further weakness in the US economy. The result was, of course, carnage. Being unable to sell all the securities they had, many of the investors had to sell other securities, including corporate bonds hitherto unaffected by the rating moves. The immediate question arising from the rating agencies' action focuses on timing. Why did they downgrade this week, based on information that had been available since February? The reason, of course, goes back to the conflict of interest - if agencies admitted that their ratings criteria were wrong, they would lose a lot of business. Indeed, financial newspapers have been pointing out over the past few weeks that smart investors such as hedge funds have been "short" the stock of rating agencies (or their holding companies) for precisely this reason. As alluded to above, we can see that the extra time gave the big investment banks the opportunity to get rid of their existing positions, most often to big central banks around the world. We will know how much these banks lost, especially in Asia, only over the next few years rather than weeks. Next steps The subprime banana skin has thus claimed a number of victims, including Asian central banks that are forced to hold billions in US dollar securities because of their currency manipulation that pushes up reserves. It almost seems poetic justice that the manipulators are given losses by the very people they think they are helping, namely over-consuming Americans. I believe that forced liquidation of many portfolios in Asia will create further losses, but American borrowers will emerge in essence unscathed from all this. Holders of mortgage securities do not have any claim on the underlying assets, only on the intermediate companies, which will of course declare bankruptcy, thus leaving empty shells for lenders to pursue. Unlike in previous crises such as that involving the telecom sector in 2002, most of the losses will be absorbed by central banks around the world rather than North American or European commercial and investment banks. This is one of the greatest robberies of our time, and it will go unreported in essence. Hard-working Asian savers will see their central banks post billions of dollars in losses on the US mortgage crisis in the next few years, but nothing can be done about it given the general lack of accountability across Asia."

Marketplace

"Wall Street soared Thursday, propelling the Standard & Poor's 500 index and Dow Jones industrials to record highs as bright spots among generally sluggish retail sales allowed investors to toss aside concerns about the health of the economy. The rally, which gave the Dow its biggest one-day percentage gain in nearly four years, was perhaps surprising given that there was no extraordinary announcement or other catalyst often seen with such a huge gain, and that it came before most companies have announced their second-quarter earnings. The rise also marked a sharp contrast to the start of the week, when stocks fell sharply amid concerns that some hedge funds could succumb to ill-placed bets on the housing sector. But investors, heartened by signs of a happy and spending consumer, clearly decided to put some money on the table. Though retail sales generally appeared to be crimped last month by higher gasoline prices and a tepid housing market, and the outlook for the coming months was difficult to ascertain, the overall reading wasn't as dour as some investors expected. ... "It's relief that things weren't as bad as people expected," said Bill Schultz, chief investment officer at McQueen, Ball & Associates, referring to the retailers' reports and the economy at large. "We're maybe getting slower growth but not the fall-of-the-cliff economic scenarios," he said of investors' reading of the economy. ... The Dow shot up 283.86, or 2.09 percent, to 13,861.73; its previous record close, which also came June 4, was 13,676.32. Thursday's jump was the biggest one-day percentage gain for the blue chip index since October 2003 and the biggest one-day point gain since October 2002. The Dow also reached a new trading high of 13,869.94 and had its 50th record close since October. The Nasdaq composite index rose 49.94, or 1.88 percent, to 2,701.73; the rise Thursday marked the biggest one-day percentage increase since March. The last time the Nasdaq closed at such levels was in February 2001. Still, the index, bloated by the late 1990s tech boom, is nowhere near its closing record of 5,048.62, set in March 2000."

"Hang in there, John. That tire is just about to explode. I don't care if there was a gain of 283 today. Let's watch. I've told all the people I know to pull their money out, and they treat me like a nut job. Oh well, I can give high interest Mafia loans when the market crashes."

(Source: Der Spiegel)

by dozens of female seminary students studying and living at the madrassas within the mosque complex. The female students then demanded that the government impose Taliban-style sharia law and arrest the prostitutes in downtown Islamabad. After a while, the female students would come out in black burqas with long bamboo sticks and threaten the prostitutes. (Talk about gender issues and sexual symbolism!) In March they kidnapped three women who they claimed were prostitutes, as well as two policemen, but let them go shortly, because they "repented." By this time, the situation was becoming international news, and it was happening around the same time that <#inc ww2010.weblog.ref e070318b "Pakistan's lawyers were rioting and demonstrating"#> over the suspension of the country's Chief Justice. The situation drew outside Islamic militants, and undoubtedly some of these young males were attracted by the women there as well. The last straw came when dozens of students kidnapped nine people, including six Chinese women and a Chinese man, leading to protests from China. The people were released, but Musharraf demanded their surrender. The situation escalated into a 36-hour siege and gun battle that ended on Wednesday in bloodbath. It turned out that the Red Mosque had a huge cache of weapons that apparently had been brought there is the last few months. Most Pakistanis support Musharraf's move, since he apparently had no choice. But questions are being raised about why he let the situation go on for so long, and how he allowed such a huge collection of weapons to be accumlated. The questioning is more critical because the Red Mosque was practically right down the street from Musharaff's own offices. And how did so many weapons get carried into the Mosque, under the noses of the Intelligence Agency offices? <#inc ww2010.pic g070711b.jpg left "" "Violent Islamist cleric Ghazi Abdul Rashid (Source: theage.com.au)"#> The leading cleric for the Red Mosque was Ghazi Abdul Rashid who <#stdurl http://www.theage.com.au/news/world/mosque-martyr-once-a-moderate/2007/07/11/1183833597005.html "called for his own death to spark an Islamic revolution."#> He said that he would rather be martyred than give in to the government, and he was killed during the siege. From the point of view of Generational Dynamics, the interesting part of this story is the desire to "spark an Islamic revolution." The major inspiration for such things nowadays is the Islamic revolution in Iran in 1979. It was sparked by violent student riots, and so it's national for radical Islamists to hope that new student riots will spark a new Islamic resolution. However, a little arithmetic shows that the probability of a similar reaction at this time in Pakistan is much lower than the probability of that reaction in Iran in 1979. Iran's previous generational Crisis war was the Constitutional Revolution, that ran from 1905-1909. So, in 1979, 70 years had passed since the end of the last crisis war. Pakistan's last crisis war was the war with India that ended in 1947, so today only 60 years have passed since Pakistan's last crisis war. Those 10 years make a big difference, since they mean that there are are still a significant number of people around who survived the last Crisis war, and who therefore will do anything possible to prevent another such war from occurring. These people include parents and relatives of the radical students in the mosque, and they also include Musharraf himself, who was born in 1943, and who has done a remarkable job maintaining peace with India. That's not to say that a crisis war in Pakistan is impossible today; it's just that it's less probable than it will be in 10 years, and it's less probable than it was for Iran in 1979. Crisis wars are triggered by mass panic, and people who have already survived one crisis war are very unlikely to panic in a way that will cause a new crisis war. A study of over 100 crisis wars throughout history leads to the following table that shows the chances of a new Crisis war, based on the number of years that have passed since the end of the preceding crisis war: LENGTH OF INTER-CRISIS PERIOD Fraction # years of total Generational Era ------- -------- ------------------ 0- 40 0% Recovery / Awakening eras 41- 49 11% First half of Unraveling era 50- 59 33% Second half of Unraveling era 60- 69 25% First half of Crisis era 70- 79 16% Second half of Crisis era 80- 89 4% "Fifth turning" 90- 99 6% 100-117 5%
As this table shows, Crisis wars have occurred frequently by the 60th year following the end of the previous crisis war (and, in fact, the peak year turns out to be year 58). But most crisis wars wait until after 60 years, so that as many people as possible who survived the previous crisis war are gone. Right now, it doesn't seem likely that the Red Mosque crisis is going to spark a new crisis war, civil war, or "Islamic revolution." But it certainly will raise the level of fear and anxiety in the population. Thus, the next time some crisis arises, the level of fear and anxiety may be enough to cause the panic that leads to a new crisis war. Based on Pakistan's history, however, the new crisis war is not likely to be an "Islamic revolution"; it's much more likely that it will be a civil war between different Muslim ethnic groups in Pakistan, leading to a war with India. If Musharraf disappears, for whatever reason, then he will be replaced by someone from a younger generation who will be much more militant towards India, and the probability of a new crisis war will increase substantially. Generational Dynamics predicts there will indeed be a new genocidal crisis war between India and Pakistan, and since both countries possess nuclear weapons, there's little doubt that they will be used. It's impossible to predict when such a war would begin, but if Musharraf disappears and is replaced by someone from a younger generation, things will certainly start moving along. =eod =// &&2 e070711b Moody's joins S&P in downgrading mortgage-based securities =data ww2010.weblog.y2007.e070711b.head Moody's joins S&P in downgrading mortgage-based securities =data ww2010.weblog.y2007.e070711b.keys =data ww2010.weblog.y2007.e070711b.loc ww2010.weblog.log0707 =data ww2010.weblog.y2007.e070711b.date 11-Jul-07 =data ww2010.weblog.y2007.e070711b.txt1 Stocks fell sharply in Europe, North America and Asia, =data ww2010.weblog.y2007.e070711b.txt2 following the moves on Tuesday morning by ratings agencies Standard & Poor's and Moody's Investors Service to downgrade the ratings of mortgage-based securities based on CDOs (credit derivatives). Mutual funds, investment trusts, hedge funds, savings banks, pension funds, college endowments, money market funds, insurance companies, and so forth, hold nominally tens or hundreds of trillions of dollars of these securities in their portfolios, and a fall in the values of credit derivatives will have a domino effect that causing huge losses in these portfolios. <#inc ww2010.pic g070710a.gif right "" "Index price of low-quality ABX-HE-BBB- 07-1 credit derivatives and high-quality ABX-HE-AAA 07-1 credit derivatives from Jan 19 to Jul 10, 2007 (Source: Markit.com)"#> The ABX-HE-BBB- 07-1 securities index, which is a proxy for the values of the lowest quality of these CDOs, <#inc ww2010.weblog.ref e070710 "fell from 55 to 49 early in the day,"#> just after S&P made its announcement, but recovered slightly to close just above 51, resulting in a net fall of 7.4%. Even more startling, though, is that the ABX-HE-AAA 07-1 index, which is a proxy for the HIGHEST quality of these CDOs fell even more sharply -- from about 99.5 to 98.2. (The "value" of a security based on this index is <#inc ww2010.weblog.ref e070225 "computed from the (100 - the value of the index),"#> and so a fall from 99.5 to 98.2 is a fall by a factor of 2.6.) This means that the the mortgage crisis is now spreading rapidly from low-quality subprime mortgages to the highest quality mortgage-based securities. After S&P announced its lowering of the ratings, <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=ajiZ.rc8Aj5c&refer=home "Moody's followed suit."#> Here are some excerpts from the <#stdurl http://www2.standardandpoors.com/spf/pdf/fixedincome/Subprime.07.10.2007.pdf "actual S&P report (PDF):"#>

"The CreditWatch actions are being taken at this time because of poor collateral performance, our expectation of increasing losses on the underlying collateral pools, the consequent reduction of credit support, and changes that will be implemented with respect to the methodology for rating new transactions. Many of the classes issued in late 2005 and much of 2006 now have sufficient seasoning to evidence delinquency, default, and loss trend lines that are indicative of weak future credit performance. The levels of loss continue to exceed historical precedents and our initial expectations. We are also conducting a review of CDO ratings where the underlying portfolio contains any of the affected securities subject to these rating actions. ... We have been surveilling these transactions on a regular basis and have been monitoring market trends. At this time, we do not foresee the poor performance abating. Loss rates, which are being fueled by shifting patterns in loss behavior and further evidence of lower underwriting standards and misrepresentations in the mortgage market, remain in excess of historical precedents and our initial assumptions. [[Note the phrase, "misrepresentations in the mortgage market." - JX]] New data reveals that delinquencies and foreclosures continue to accumulate at an increasing rate for the 2006 vintage. We see poor performance of loans, early payment defaults, and increasing levels of delinquencies and losses. ... On a macroeconomic level, we expect that the U.S. housing market, especially the subprime sector, will continue to decline before it improves, and home prices will continue to come under stress. Weakness in the property markets continues to exacerbate losses, with little prospect for improvement in the near term. Furthermore, we expect losses will continue to increase, as borrowers experience rising loan payments due to the resetting terms of their adjustable-rate loans and principal amortization that occurs after the interest-only period ends for both adjustable-rate and fixed-rate loans. ... Although property values have decreased slightly, additional declines are expected. David Wyss, Standard & Poor's chief economist, projects that property values will decline 8% on average between 2006 and 2008, and will bottom out in the first quarter of 2008. ... [[Catch the note of optimism in the last sentence. - JX]] The Mortgage Asset Research Institute (MARI) reports that alleged misrepresentations on credit reports were up significantly as a percentage of total submissions received in 2006. MARI, which was recently commissioned by the Mortgage Bankers Assoc. (MBA) to conduct a mortgage fraud study, reported that the current findings of fraud were in excess of previous industry highs. Data quality concerning some of the borrower and loan characteristics provided during the rating process has also come under question. ... Data quality is fundamental to our rating analysis. The loan performance associated with the data to date has been anomalous in a way that calls into question the accuracy of some of the initial data provided to us regarding the loan and borrower characteristics."

S&P's statement does several things that it has to do:

It provides an explanation for the ratings changes. It's worth noting that the language used by S&P is exceptionally pessimistic. You will not find such pessimistic language virtually anywhere prior to last month or so (except on this web site, of course).
It blames someone else for the delay. Investors have been <#inc ww2010.weblog.ref e070630 "accusing ratings agencies of purposely covering up,"#> by failing to lower their ratings on CDOs (mortgage-based credit derivatives) on a timely basis. You can be fairly certain that there will be lawsuits and possibly criminal proceedings against the ratings agencies for having delayed. By saying that other firms had provided S&P with inaccurate data, S&P is laying down its legal defense.
It provides a tiny note of unrealistic optimism, by saying that "David Wyss, Standard & Poor's chief economist, projects that property values will ... bottom out in the first quarter of 2008." S&P doesn't want to make this an official position, so it's worded as the opinion of one man, their chief economist. S&P knows what's really coming, but doesn't want to be responsible for triggering a stock market crash.

Stocks fell about 1% in Europe, North America and Asia, following the release of the ratings changes. <#inc ww2010.weblog.ref e070711 "Tuesday's speech by Fed Chairman Ben Bernanke"#> had no apparent effect on the stock market except to cause them to go lower. As I've been saying now for five years, from the point of view of Generational Dynamics we're headed for a new 1930s style Great Depression. =eod =// &&2 e070711 Fed Chairman Ben Bernanke delivers incredibly bizarre speech on inflation =data ww2010.weblog.y2007.e070711.head Fed Chairman Ben Bernanke delivers incredibly bizarre speech on inflation =data ww2010.weblog.y2007.e070711.keys =data ww2010.weblog.y2007.e070711.loc ww2010.weblog.log0707 =data ww2010.weblog.y2007.e070711.date 11-Jul-07 =data ww2010.weblog.y2007.e070711.txt1 While the rest of the financial world is trying to deal with the subprime mortgage meltdown, =data ww2010.weblog.y2007.e070711.txt2 Bernanke, who replaced Alan Greenspan as Chairman of the Federal Reserve central bank early in 2006, talked as if the only thing in the world that mattered was whether the rate of inflation was 3% or 4%. Talk about fiddling while Rome burns! Here's what he's worried about: Do the American people have the proper expectation of the inflation rate? He uses the term "anchored" to mean that people's expectations match reality; thus, if inflation goes up a little and people expect it to continue to go up a little, then inflation expectations are "perfectly anchored"; but if inflation goes up a little and people expect it to go up a lot, then expectations are "poorly anchored." Can you believe this? Let's go on. Here are extracts from <#stdurl http://www.federalreserve.gov/boarddocs/speeches/2007/20070710/default.htm "Bernanke's speech on Tuesday:"#>

"Why do we care about the variability of inflation expectations? ... [Because] the extent to which inflation expectations are anchored has first-order implications for the performance of inflation and of the economy more generally.... [A] lower sensitivity of long-run inflation to supply shocks would imply that such shocks are much less likely to generate economic instability today than they would have been several decades ago. Notably, the sharp increases in energy prices over the past few years have not led either to persistent inflation or to a recession, in contrast (for example) to the U.S. experience of the 1970s. ... <#inc ww2010.pic g070228.jpg right "" "Fed Chairman Ben Bernanke on February 28 (Source: CNN)"#> Similar logic explains the finding that inflation is less responsive than it used to be to changes in oil prices and other supply shocks. Certainly, increases in energy prices affect overall inflation in the short run because energy products such as gasoline are part of the consumer's basket and because energy costs loom large in the production of some goods and services. However, a one-off change in energy prices can translate into persistent inflation only if it leads to higher expected inflation and a consequent "wage-price spiral." With inflation expectations well anchored, a one-time increase in energy prices should not lead to a permanent increase in inflation but only to a change in relative prices. A related implication is that, if inflation expectations are well anchored, changes in energy (and food) prices should have relatively little influence on "core" inflation, that is, inflation excluding the prices of food and energy. Although inflation expectations seem much better anchored today than they were a few decades ago, they appear to remain imperfectly anchored. ... [Research finds that, not counting shocks, the variability of inflation] appears to have fallen significantly after about 1983. That is, unexpected changes in inflation are today much more likely to be transitory than they were before the early 1980s. Because it seems quite unlikely that changes in inflation could persist indefinitely unless long-run expectations of inflation also changed, I interpret [this] finding as consistent with the view that inflation expectations have become much more anchored since the early 1980s."

The gist of his speech is that inflation is more stable since the early 1980s, and therefore the public's expectations of inflation are more stable, so the public's expectations are "much more anchored." Therefore, things like energy price shocks don't have long-lasting effects. Dear reader, this speech is total, utter, absolute drivel. Bernanke has NO IDEA where inflation expectations help or hurt the economy, or have any effect on the economy at all. He presents some research on what happened in the 1990s, but that research didn't apply before the 1990s, and he has NO IDEA whether it applies today. Total absolute drivel. <#inc ww2010.pic bernanke.jpg left "" "Ben Bernanke at Princeton"#> You know, I used to comment on Alan Greenspan's speeches all the time. He said things I agreed with and things I disagreed with, but what he said always was interesting and insightful and intelligent. Greenspan was born in 1926, lived through the horrors of the Great Depression and World War II, and knows a lot about how the world works. Bernanke was born in 1953, and knows little of how the world works. I rarely comment on Bernanke's speech because he comes across to me as an airhead. He may have been a Princeton professor of Economics, but that obviously doesn't qualify him to actually know anything. Let's recall a couple of things that Bernanke has said in the past, as I explained in my 2005 essay, <#hreftext ww2010.i.051029bernanke ""Ben S. Bernanke: The man without agony,""#> Bernanke doesn't believe in bubbles. He thinks that the Great Depression could have been avoided by a few Fed policy changes (mostly having to do with inflation, incidentally, which probably explains why he talks about it so much today). When speaking about America's astronomical and exponential growing debt to other countries in March, 2005, Bernanke <#inc ww2010.weblog.ref e050314 "blamed America's debt on "global savings glut" in other countries."#> As dumb as that was, it wasn't the dumbest thing that Bernanke has said. I think that the dumbest thing is his belief, as laid out in a speech he made on October 7, 2004, that the Fed strongly influences the stock and bond markets <#inc ww2010.weblog.ref e041010b "merely by publishing the Open Market Committee minutes earlier and more often."#> He doesn't believe that fundamentals have anything to do with the economy; all that matters is what the Fed SAYS, and that's important because it affects what investors think. Bernanke believes that what matters is what people expect. That's why he gave this moronic speech on Tuesday. In his tortured mind, the state of the economy depends on the public's expectations of what inflation will be. And the stock market? He doesn't believe in bubbles. He doesn't believe that price/earnings ratios matter. All that matters is what people expect, and that depends on what the Fed says. As I explained at length in my comprehensive analysis of macroeconomic theory that I wrote last year, <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory,""#> economists have been wrong about everything, at least since the start of the bubble in 1995. They didn't explain or predict the bubble or its timing. They failed to predict low inflation or high unemployment in the early 2000s. They didn't predict or explain productivity increases. They didn't predict or explain the low interest rate "conundrum." They didn't predict or explain the housing bubble. They've been consistently wrong about almost everything. During the 1930s, huge numbers of businesses were wiped out and forced into bankruptcy. The businesses that survived only did so by completely renewing themselves, essentially making themselves new businesses. The reason that inflation was so unstable in the 1970s is because all those businesses reached their peak in the 1960s and 1970s, producing top-notch products that everyone wanted. The demand for these products pushed prices up, leading to high inflation. The reason that inflation is so stable now is because all those 1930s businesses are now encrusted in bureaucracy, and are no longer producing products that people want. This has caused tens of thousands of factories to shut down, as jobs fled to China; even service businesses ended, as service jobs fled to India. The low demand for American-made products has forced inflation to near-zero, despite oil price shocks. The reason that the dot-com bubble occurred in the 1990s was because it occurred at precisely the time that all the risk-averse financial managers who had grown up during the Great Depression disappeared (retired or died), all at once, and were replaced by airhead Baby Boomers who abused credit in a debauched fashion. This has led to the situation we see today, where the housing bubble <#inc ww2010.weblog.ref e070708 "is having a domino effect"#> that will cause tens of millions of people to lose their life savings. But all this appears to be lost on Bernanke, who's worried about what the American public expects about inflation. It's like a cartoon. I don't know what to make of Bernanke. Can he really be as dumb as he seems? He's said stupid things in the past, but surely he can't be so oblivious to what's coming. As I <#inc ww2010.weblog.ref e070708 "wrote the other day,"#> it's now evident that there are many high-level financial managers who know that we're headed for a massive financial crisis, but are afraid to say so because they're afraid of triggering it. Maybe I've underestimated Bernanke; maybe he really knows what's going on, but just doesn't want to say anything. After all, one word from him would indeed be all the trigger that's needed. =eod =// &&2 e070710 ABX index collapses on Tuesday after S&P downgrades mortgage-based securities =data ww2010.weblog.y2007.e070710.head ABX index collapses on Tuesday after S&P downgrades mortgage-based securities =data ww2010.weblog.y2007.e070710.keys =data ww2010.weblog.y2007.e070710.loc ww2010.weblog.log0707 =data ww2010.weblog.y2007.e070710.date 10-Jul-07 =data ww2010.weblog.y2007.e070710.txt1 This is a multiple-alarm warning. =data ww2010.weblog.y2007.e070710.txt2 Let's quickly review where we stand: Two weeks ago I wrote that <#inc ww2010.weblog.ref e070630 "ratings agencies were being accused of purposely covering up,"#> by failing to lower their ratings on CDOs (mortgage-based credit derivatives) on a timely basis. The accused ratings agencies were Standard & Poor's, Moody's Investors Service and Fitch Ratings. Two days ago, I <#inc ww2010.weblog.ref e070708 "I listed three current imbalances"#> that are reaching a state so severe that a collapse is possible at any time. Two of the three require investor panic, but one of the -- the revaluation of overpriced CDOs -- is in progress and cannot be stopped. This morning (Tuesday), <#stdurl http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-07-10T141711Z_01_N10345222_RTRIDST_0_USA-SUBPRIME-BOND-INDEX-UPDATE-1.XML "Standard & Poors said it will downgrade"#> 612 residential securities backed by subprime mortgage loans. This immediately triggered a collapse in the <#inc ww2010.weblog.ref e070624 "ABX-HE-BBB- 07-1 index"#> this morning of over 6 points, to 49 from 55.5. According to Reuters, a downgrade of that size and magnitude would trigger severe losses as investors who are prevented from holding anything other than investment grade issues would unload their holdings en masse. To put it another way: Mutual funds, investment trusts, hedge funds, savings banks, pension funds, college endowments, money market funds, insurance companies, and so forth, hold nominally tens or hundreds of trillions of dollars of these securities in their portfolios are going to have to re-evaluate their holdings sharply downward, according to mark-to-market accounting rules. This is real money we're talking about, folks. If your life savings are in one of these vehicles, or if you expect your pension fund to support you, you should be aware that things are changing quickly. I'll follow up on this subject soon, but I'm posting this right away as it's an extremely alarming situation. =eod =// &&2 e070709 Pope approves return to traditional Catholic masses in Latin =data ww2010.weblog.y2007.e070709.head Pope approves return to traditional Catholic masses in Latin =data ww2010.weblog.y2007.e070709.keys catholicism, pope benedict, vatican council, latin mass =data ww2010.weblog.y2007.e070709.loc ww2010.weblog.log0707 =data ww2010.weblog.y2007.e070709.date 9-Jul-07 =data ww2010.weblog.y2007.e070709.txt1 Expressing surprise that even young generations found the Latin mass "suited to them," =data ww2010.weblog.y2007.e070709.txt2 Pope Benedict has granted permission for Bishops to approve use of the traditional Latin mass when requested by parishoners. <#inc ww2010.pic g070708b.jpg right "" "Pope Benedict"#> The Latin mass was pretty much abolished in 1962 by the Second Vatican Council, which had the mass given in the parish's local language, rather than Latin. According to <#stdurl http://www.vatican.va/holy_father/benedict_xvi/letters/2007/documents/hf_ben-xvi_let_20070707_lettera-vescovi_en.html "the text of the Pope's letter:"#>

"Afterwards, however, it soon became apparent that a good number of people remained strongly attached to this usage of the Roman Rite, which had been familiar to them from childhood. This was especially the case in countries where the liturgical movement had provided many people with a notable liturgical formation and a deep, personal familiarity with the earlier Form of the liturgical celebration. ... Many people who clearly accepted the binding character of the Second Vatican Council, and were faithful to the Pope and the Bishops, nonetheless also desired to recover the form of the sacred liturgy that was dear to them. This occurred above all because in many places celebrations were not faithful to the prescriptions of the new Missal, but the latter actually was understood as authorizing or even requiring creativity, which frequently led to deformations of the liturgy which were hard to bear. I am speaking from experience, since I too lived through that period with all its hopes and its confusion. And I have seen how arbitrary deformations of the liturgy caused deep pain to individuals totally rooted in the faith of the Church. ... Immediately after the Second Vatican Council it was presumed that requests for the use of the 1962 Missal would be limited to the older generation which had grown up with it, but in the meantime it has clearly been demonstrated that young persons too have discovered this liturgical form, felt its attraction and found in it a form of encounter with the Mystery of the Most Holy Eucharist, particularly suited to them. Thus the need has arisen for a clearer juridical regulation which had not been foreseen at the time of the 1988 Motu Proprio. The present Norms are also meant to free Bishops from constantly having to evaluate anew how they are to respond to various situations."

From the point of view of Generational Dynamics, what's most interesting about this letter is the last paragraph: That even young people, with no experience with the Latin mass, are demanding it. As the world enters a new generational Crisis era, 62 years after the end of World War II, there is a return to traditional norms around the world, including traditional gender roles and traditional religious beliefs. Thus, we've seen the <#inc ww2010.weblog.ref e070517 "Russian Orthodox Church reunite 80 years after Bolshevik Revolution,"#> and we've also seen a conflict in Turkey <#inc ww2010.weblog.ref e070514 "between strict followers of Islam and secularists."#> A lot of people are unhappy with Pope Benedict's decision. Within the Catholic Church itself, <#stdurl http://in.today.reuters.com/news/newsArticle.aspx?type=worldNews&storyID=2007-07-08T184632Z_01_NOOTR_RTRMDNC_0_India-283736-1.xml&archived=False "there's a "culture war""#> between traditionalist and modernists. This is not a simple matter. In an <#inc ww2010.weblog.ref e070603b "article on religion last month,"#> I described how some really trivial changes in the rites of the Russian Orthodox Church in 1652 created a major rift in the Church, including a new branch called the "Old Believers" that exists to this very day. I'm sure that Pope Benedict, who has enormous respect for the lessons of history, is quite aware of the lessons of the Old Believers. Another issue is that <#stdurl http://www.ejpress.org/article/news/18212 "Jewish groups are expressing anger"#> at the change. That's because the traditional liturgy prayed for the conversion of the "perfidious Jews" in Good Friday prayers marking the death of Jesus Christ to be Catholics. The revised liturgy, used after 1970, replaced this with a prayer recognizing the Jews’ eternal covenant with God, which is considered less offensive. You know, I've always found this whole debate a constant source of puzzlement. There's really no doubt what Christian theology says: Unless you accept Jesus Christ as your savior and the son of God, you're going to hell. There's no two ways about it, and it doesn't matter whether you're an atheist, an agnostic, a Jew, a Muslim or a Hindu. Returning to a liturgy that calls for the conversion of Jews to the Catholic religion is just saying what's already an ironclad belief. Of course, there is that use of the word "perfidious," which refers to the blame going to the Jews for the death of Jesus Christ. Perhaps Benedict might agree to take that word out. At any rate, this is going to be a heavily debated change, and it will be interesting to see what groups and populations support it, and which oppose it. =eod =// &&2 e070708 As global economy continues to deteriorate, most people are oblivious =data ww2010.weblog.y2007.e070708.head As global economy continues to deteriorate, most people are oblivious =data ww2010.weblog.y2007.e070708.keys =data ww2010.weblog.y2007.e070708.loc ww2010.weblog.log0707 =data ww2010.weblog.y2007.e070708.date 8-Jul-07 =data ww2010.weblog.y2007.e070708.txt1 There is increasing evidence that major financial organizations are purposely covering up =data ww2010.weblog.y2007.e070708.txt2 the dangers to the global economy posed by the subprime mortgage collapse and China's stock market bubble. The most startling example goes back to the Bear Stearns debacle of last month. As I <#inc ww2010.weblog.ref e070624 "described it at the time it happened,"#> Bear was forced ("extorted") into pouring good money after bad bailing out a hedge fund that it did not have to bail out. It did so to "prevent a broad market meltdown," having to do with forced resale of the hedge funds' CDO assets. Such a forced resale would create a market for CDOs, forcing EVERY bank and EVERY financial institution to re-evaluate their holdings, based on mark-to-market rules. At the time I wrote this, this possibility was just beginning to be understood. However, numerous articles are now exposing this as a massive cover-up. I quoted several when I wrote, a couple of weeks ago, that <#inc ww2010.weblog.ref e070628b "the market for credit derivatives may be collapsing."#> We now have a situation that's unique in modern times. Imagine that you were one of the negotiators working for Bear Stearns or JP Morgan or Merrill Lynch during those 18-hour days last month when the negotiations to bail out the hedge fund was being debated. They must have realized that, without a bailout, the forced mark-to-market repricing would cause a domino effect of bankruptcies. Thus, they may have realized that they were holding in their hands the power to force multiple bankruptcies and, at least potentially, create a historic stock market crash. =inc ww2010.h2 blame "Avoiding blame" Now, of course, there are many tin-foil hat paranoics who claim that there are always people with this power. People like John D. Rockefeller and Henry Kissinger were thought to control to control the world's economy through control of oil, and that same paranoia extends today to Halliburton. But it's an important holding of Generational Dynamics that such major events are caused by the attitudes and behaviors of large masses, entire generations of people, not the actions of a small group of individuals. But a more precise statement is that it's generational flow that creates the necessary conditions so that even a small spark can trigger a conflagration -- a major crisis war or a generational panic. And in certain situations, it's possible for an individual to be in a position to provide that spark. This is not a situation that was possible ten years ago, two years ago, or even one year ago. One year ago, if I had been asked, I would have said that it's impossible for anyone to provide a spark that would have the predictable effect of causing a stock market panic and crash. And that seems to be the situation today. The situation with the mark-to-market rules is so irrestible that I can't see how a disastrous domino effect would have been avoided. So we can't be certain, of course, but it appears that the Bear Stearns negotiators had that power in their hands. At the very least, they must have perceived themselves as having that power. Thus, I said that this situation is unique in modern times, but it's not unique in historical times. It was also true in the lead-up to the 1929 stock market crash. Here's how it's described in the book The Great Crash - 1929, by John Kenneth Galbraith:

"Purely in retrospect it is easy to see how 1929 was destined to be a year to remember. ... [It] was simply that a roaring boom was in progress in the stock market and, like all booms, it had to end. On the first of January of 1929, as a simple matter of probability, it was most likely that the boom would end before the year was out, with a diminishing chance that it would end in any given year thereafter. [[This is similar to an argument that I make frequently on this web site -- that a war or a panic is overdue, that it could happen next week, next month, next year, or thereafter. The point is that the probability of it happening later is increasingly small. - JX]] When prices stopped rising -- when the supply of people who were buying for an increase was exhausted -- then ownership on margin would become meaningless and everyone would want to sell. The market wouldn't level out; it would fall precipitately. All this being so, the position of the people who had at least nominal responsibility for what was going on was a complex one. One of the oldest puzzles of politics is who is to regulate the regulators. But an equally baffling problem, which has never received the attention it deserves, is who is to make wise those who are required to have wisdom. Some of those in positions of authority wanted the boom to continue. They were making money out of it, and they may have had an intimation of personal disaster which awaited them when the boom came to an end. But there were also some who saw, however dimly, that a wild speculation was in progress and that something should be done. For these people, however, every proposal to act raised the same intractable problem. The consequences of successful action seemed almost as terrible as the consequences of inaction, and they could be more horrible for those who took the action. A bubble can easily be punctured. But to incise it with a needle so that it subsides gradually is a task of no small delicacy. Among those who sensed what was happening in early 1929, there was some hope but no confidence that the boom could be made to subside. The real choice was between an immediate and deliberately engineered collapse and a more serious disaster later on. Someone would certainly be blamed for the ultimate collapse when it came. There was no question whatever as to who would be blamed should the boom be deliberately deflated. (for nearly a decade the Federal Reserve authorities had been denying their responsibility for the deflation of 1920-21.) The eventual disaster also had the inestimable advantage of allowing a few more days, weeks, months of life. One may doubt if at any time in early 1929 the problem was ever framed in terms of quite such stark alternatives. But however disguised or evaded, these were the choices which haunted every serious conference on what to do about the market." (pp. 24-25)

So this is what's happening right now. There are people who are very well aware that a crash is coming, but they're afraid of being blamed for triggering the crash. Their fear mainly stems from the fact that they're well known public figures. They may have to keep their expectations to themselves, for fear of causing a panic. Amazingly, this is also true of financial bloggers. There are many financial blogs online these days, and many bloggers that talk about these major imbalances in the global economy. But no one seems to want to spell out what's coming in terms of a new 1930s Great Depression. They certainly must know better, since they're constantly posting dramatically awful financial information, but they never state any conclusions. In one case, I posted a comment asking the blogger specifically for what he sees coming. His answer? Something like the Panic of 1893. I don't know if this is a joke or what, but the Panic of 1893 was equivalent to a fairly typical post-WW II recession. These financial bloggers are also Very Important People. Some are high level financial managers, some are college professors. They're such important people that they're probably afraid that if they draw the correct conclusions then they too might be blamed for triggering a crash. I, on the other hand, have an enormous advantage over all of these people, because I'm a total nobody. There are roughly several thousand regular readers of this web site, and probably less than half of them even believe all they read. So there's no chance at all that I'd be responsible for triggering anything. For any official who is an actual somebody, and is in a position to take some action, there comes the dilemma of what to do, what action to take to end the craziness: "The consequences of successful action seemed almost as terrible as the consequences of inaction, and they could be more horrible for those who took the action," as Galbraith points out. So this must have been a consideration for the Bear Stearns negotiators. They must have realized, as the officials did in 1929, that taking the "right" course would lead to an immediate disaster, and taking the "wrong" course, which they did, would lead to a later disaster. And besides, they could use the extra time themselves to protect their own assets, at the expense of others. Let's now look at the major, most visible imbalances in today's global economy. =inc ww2010.h2 #1 "#1: Subprime mortgage based derivatives (CDOs)" There are many major imbalances in today's global economy. America's increasing balance of payments deficit is very visible, but it's not the kind of imbalance that's likely to trigger a major panic. But we'll identify three imbalances that are so near a critical stage, that a panic in the near future cannot be avoided. The first is the <#inc ww2010.weblog.ref e070628b "the collapsing market for credit derivatives."#> Of the three imbalances that we're describing, the other two are large and growing bubbles that must eventually burst at some time in the future. There is no compulsion that those bubbles must burst immediately. But the CDO imbalance appears to be a like a growing crack in a huge, monster dam. You can see the crack growing, but the dam is too big to hope to repair the crack. And you can see distant storm clouds meaning that there'll be even more floods of water pushing against the same, enlarging the crack. You know with certainty that the crack will keep growing and the dam will burst before too much longer. Another way of saying this is as follows: The real estate bubble is already leaking. Increasingly many mortgages are defaulting, and increasingly many banks are foreclosing. That's the growing crack in the dam, and the storm clouds are the vast numbers of subprime "no documentation" adjustable rate mortgage (ARM) loans written in the last two years. It's known that many of these ARMs will "reset" to much higher interest rates this year, forcing more defaults and disclosures, so the widening crack in the dam cannot be stopped. The <#stdurl http://ml-implode.com "Implode-o-Meter"#> web site lists 96 lenders, as of today, that have "imploded" this year, thanks to the continuing collapse of the subprime mortgage market. Just to take one example, Brookstreet Securities Corp. of Irvine, Calif., a lender that has hundreds of offices nationwide, <#stdurl http://www.ocregister.com/ocregister/money/subprime/article_1749954.php "closed its offices last month"#> because it was unable to meet margin calls for its leverage assets. Brookstreet was a security dealer dealer with over 3,600 clients, who had invested a total of $571 million in the company's hedge funds. The hedge funds had invested in mortgage-based credit derivatives, purchased at full price on margin. Last month, Brookstreet was forced to re-evaluation their holdings based on mark-to-market rules. The credit derivatives are now worth far less than their original value, and thousands of clients, ordinary people, will lose their life savings. That's just one example of one company. There are more examples every week or two. And that's not all. The CDOs (credit derivatives) based on these defaulting mortgage loans are falling in value. There are nominally hundreds of billions of dollars of these CDOs being held by hedge funds today, and those <#stdurl http://articles.moneycentral.msn.com/Investing/JubaksJournal/DeepeningDebtCrisisHitsCloseToHome.aspx?page=1 "hedge funds are being held by savings banks, pension funds, college endowments, mutual funds, insurance companies, etc.,"#> meaning that millions of ordinary Americans are going to be hurt. Real estate bubbles and collapses seem to be a part of every generational financial panic and crisis, and that was certainly true of the Great Depression of the 1930s. But it was also true of the previous generational global financial crisis, the <#inc ww2010.weblog.ref e070406 "the Panic of 1857."#> I've previously described how the real estate bubble was formed by quoting from a 1950 book by Allan Nevins, The Emergence of Lincoln: Prologue to Civil War 1859-1861, Volume II. Now let's take a look at Nevins' description of how the bubble unraveled:

"[When] the panic was over, the inevitable aftermath of depression had to be faced. It closed down over the country like a chill mist, filling the next two years with slowly diminishing misery and discontent. A painful readjustment in values had to take place. The price of land, for example, sank to a level bearing a far closer relation to tillage returns. Not merely speculators, but farmers who had mortgaged themselves to buy excessive tracts, paid a sad penalty. As late as 1860, Greeley wrote from Prairie du Chien: "The West is poor. The collapse of the railroad bubble ... has spread desolation over the land." Consumers' goods were a drug on the market. Europeans, estimating that they had lost hundreds of millions of dollars in worthless securities bought during the previous five years, were in a morose mood, and it gave them little comfort to think that Americans had lost more. [President] Buchanan wrote an inadequate analysis of the panic into his message of 1857, dwelling upon the stale theme of vicious systems of paper currency and bank credits. He said nothing about extravagant railroad construction, reckless speculation in land and commodities, or swollen imports. The London Economist characterized it as "a cloud of dust to cover a disgraceful retreat -- a great scapegoat for the rash and impudent speculations -- and in some cases, we regret to say, for the impudent frauds practised upon the too-gullible and too-avaricious people of the Old World." No action was expected of the general government in dealing with the depresion, and except for certain palliative measures by the Treasury, nothing in particular was done. (pp. 193-94)"

As I said, the situation with subprime mortgages and CDOs no longer seems to require a panic. Holders of assets with credit derivatives are increasingly being forced to mark their assets to market, and the repricing is now in the works and cannot be legally stopped. No panic is required. This is a structural imbalance that is now inevitable in the near future. =inc ww2010.h2 #2 "#2: Shanghai Stock Market Bubble" The second imbalance nearing a critical stage is the Shanghai Stock Market, which has <#inc ww2010.weblog.ref e070606 "been in bubble territory"#> for almost a year. Recall that a sharp fall in the Shanghai stock market triggered a momentary panic on Wall Street in February. The Shanghai stock market is extremely volatile, and is showing the signs of volatility that precede a panic and crash. Here are the values of the composite index for the last three weeks:

    Date      Index       Change
    -----     -------     -------
    6/18      4253.34     + 2.92%
    6/19      4269.52     + 0.38%
    6/20      4181.32     - 2.07%
    6/21      4230.82     + 1.18%
    6/22      4091.44     - 3.29%
    6/25      3941.08     - 3.68%
    6/26      3973.37     + 0.82%
    6/27      4078.59     + 2.65%
    6/28      3914.20     - 4.03%
    6/29      3820.70     - 2.39%
    7/02      3836.29     + 0.41%
    7/03      3899.72     + 1.65%
    7/04      3816.16     - 2.14%
    7/05      3615.87     - 5.25%
    7/06      3580.50     + 4.58%

An online correspondent has informed me that the Shanghai stock market is exhibiting "a possible crash pattern as follows:"

"From the high, there was a drop of about 20%, then a rally back up to test the high (but not exceed it). From the retest, there was another drop and the end of that drop shows one daily close below the close of the previous drop. From there, the market has rallied for one day. This is the exact pattern that was made in 1929 before our market crashed. The Hang Seng (Hong Kong Index) made a similar pattern before it crashed in 1997. If the SSE follows these patterns it will crash next week, and the crash will be H-U-G-E."

Now, I personally am not into this kind of short-term forecasting, nor would I be anywhere near so certain that there'll be a crash next week, although my online correspondent may wish to brag about it if it happens. But there's no doubt that this bubble must crash soon -- next week, next month, next year, as I always say. And when it does crash, there's no doubt that it will have major percussions within all of China. Will this affect the United States? Remember that the economies of China and America are very closely tied together these days, as you read the following account from Nevins' book of what happened in the Panic of 1857:

"British and American interest were so closely connected that a blow to one struck the other with almost equal weight. More than a fifth of the British exports in 1856 had gone to the United States, while more than a third of the foreign government securities ordinarily listed on the British exchanges were American. When business with America was half-paralyzed, American stocks and bonds dropped to abysmal levels, and New York paper becamse unsaleable, then British merchants, bankers were hard hit; In October and November a dismal success of failures was chronicled by the British press. Scottish banks were smitten as by a plague. One London brokerage house failed for five million pounds. In France the Crédit Mobilier bubble was priced. French failures in the autumn of 1857 were even more numerous and calamitous than British. Norway, Sweden, and all the Baltic ports suffered heavily. Hamburg, one of the principal trading links between North Europe and America, was brought to her knees. A far east as Poland and Austria, the battering impact of the panic was felt. As Disraeli said, the business mismangement of half Europe was suddenly exposed. "All the bubbles, blunders, and dishonesties of five years' European exuberance and experiments in credit were tested or revealed." (pp. 190-91)

This is the kind of massive financial destruction that can be expected to occur in the United States and world wide, when the inevitable crash of the Shanghai stock market occurs. =inc ww2010.h2 #3 "#3: New York stock markets" I've written about the New York stock markets many times. I've been pointing out for years that a stock market crash is mathematically certain, given that the market is <#hreftext ww2010.i.050711eleven "overpriced by a factor of more than 250%,"#> just like 1929. <#inc ww2010.pic g070708a.gif right "" "Earnings growth, 2003-present. (Source: WSJ)"#> The Dow has maintained astronomically high levels of price/earnings ratios because of astronomically high levels of earnings growth since the year 2000, as the graph shows. In fact, double-digit earnings growth began in 1995, and has continued to this year. Basically, investors were betting that double-digit earnings growth rates would continue for all time, and that justified the high levels of price/earnings ratios. But as I explained in my 2005 article, <#hreftext ww2010.i.050711eleven "long-term average earnings growth rates are 11%."#> After 13 years of growth rates averaging 18%, <#inc ww2010.weblog.ref e060122 "the law of "Mean Reversion""#> dictates that earnings growth must be considerably lower than 11%, in order to restore the long-term average of 11%. This might mean, for example, that earnings growth will be at 4% for 13 years; or it might mean 4-5 years of earnings reductions, then a faster return to 11% annual growth. But in the end, it will have to average 11%. Some people pooh-pooh these claims, thinking that the law of Mean Reversion can't possible be an immutable law of nature. And yet it is, as immutable as the law of gravity. There is no possibility avoiding this earnings result. When I wrote my 2005 article, I thought that average earnings growth would start falling shortly after that, ot they didn't. But now, in 2007, it has, and the graph shows that it's apparently falling rapidly. This undercuts the entire rationale that investors have followed for overpricing the stock market. When this fact sinks in -- and it could happen tomorrow, next week or next year -- investors will panic and start to sell. The Law of Mean Reversion also applies to the Price/Earnings ratio index, which has also been well above average since 1995. It too will to fall sharply from its current value of around 18 to a much lower level. It's been well-below 10 six times in the last century, most recently in 1982, and my expectation is that it will fall at least that far again. Stock prices will fall to the Dow 3000-4000 level or lower. =inc ww2010.h2 summ "Summary" The three global imbalances that I've listed -- credit derivative collapse, Shanghai stock market bubble, and Wall Street bubble -- are now at the point of "high alert," for the reasons that I've given. As I've done several times in the past, I must once again strongly recommend to all my readers that they pull out of the stock market, and also out of (and associated investments, including mutual funds, money funds, investment trusts, hedge funds, and so forth). Keep in mind that I'm not alone in this recommendation -- <#inc ww2010.weblog.ref e070608 "Morgan Stanley in Europe delivered a "Full House" sell signal on stocks"#> just last month. After a financial panic occurs, cash will be king. You should plan on keeping cash in your bank account. If you insist on investing in something, I recommend short-term (6 or 12 month) Treasury bonds. You can purchase these online, for no commission, at <#stdurl treasurydirect.gov#> . I don't think long-term (5 or 10 or 30 year) Treasury bonds are a good idea, because there are hundreds of billions of dollars worth of them languishing in central banks around the world, especially China and Japan, and in case of an international financial crisis, these would all be dumped on the market, making them nearly worthless. Stick with short-term bonds. This web site has been up since 2002, and has been making serious predictions since 2003. Many of these predictions have been counter-intuitive, and have been completely opposed to the "general wisdom" and the statements of pundits, journalists and politicians. And yet, every Generational Dynamics prediction has either come true or is trending true; none have turned out to be wrong. We're now entering another time of extreme danger, and it's important that you be prepared. I'll repeat the message that I've posted many times before: No one can stop what's coming, any more than anyone can stop a tsunami. You can't stop what's coming, but you can prepare for it. Treasure the time you have left, and use the time to prepare yourself, your family, your community and your nation. =eod =// &&2 e070706 Britain's terrorist doctor crisis may be increasing American xenophobia =data ww2010.weblog.y2007.e070706.head Britain's terrorist doctor crisis may be increasing American xenophobia =data ww2010.weblog.y2007.e070706.keys =data ww2010.weblog.y2007.e070706.loc ww2010.weblog.log0707 =data ww2010.weblog.y2007.e070706.date 6-Jul-07 =data ww2010.weblog.y2007.e070706.txt1 I just listened to famous political pundit Dick Morris explain =data ww2010.weblog.y2007.e070706.txt2 the solution to the problem of <#inc ww2010.weblog.ref e070705 "the terrorist doctors in Britain's National Health Service (NHS)."#> <#inc ww2010.pic g070705a.jpg left "" "Dick Morris, speaking on the O'Reilly Factor. (Source: Fox)"#> Ten years ago, the glib, likable Dick Morris used to be an extremely Machiavellian advisor to President Bill Clinton, and managed Clinton's 1996 re-election campaign, until he was forced to resign after a sex scandal. Since then he's turned against both Bill and Hillary Clinton, but doesn't particularly like President Bush either. It was a month ago when the comprehensive <#inc ww2010.weblog.ref e070609 "immigration Bill collapsed in Congress,"#> because Boomers are incapable of governing. I thought that the bill was dead for sure, but then a couple of weeks ago it was revived, thanks mainly to the arm-twisting by Democratic Senator Ted Kennedy (Mass.), working in conjunction with President Bush. Kennedy, born in 1932, is from the Silent Generation, and understands the importance of compromise. To arrogant, narcissistic Boomers, born after WW II, the idea of giving up something to reach a compromise is a foreign concept. But Silents, like Kennedy, who lived through the utter daily horror of WW II, understand how important it is to compromise to get something done. For a while, I actually thought that the revived Immigration bill would pass in the Senate, and passage seemed almost certain up till the final day. But there was a barrage of opposition on both sides. The "anti-immigration" side didn't like the fact that there was a pathway to citizenship. The "pro-immigration" side didn't like the onerous roadblocks put in the way of getting citizenship. By the end, radical Boomers and Gen-Xers on both sides of the issue were able to tear the bill apart, and the Silents lost out. Dick Morris is strongly "anti-immigration." (He would say, strongly "anti illegal immigration.") When he spoke this evening, he expressed the virulent xenophobia that's increasing these days throughout the world. The guest host was the incredibly hot and sexy Michelle Malkin, a conservative pundit who is at her absolute cutest when she's having a cat fight with another female pundit whom she disagrees with. Tonight, however, she was talking to Morris, and agreeing with him completely. Here's the exchange:

"Dick Morris: [I recommend] that we ought to ban all immigration, all tourism, all business travel from countries that are listed by the State Department as "harboring terrorists" or "sponsoring terrorism." If that were the policy in the United States or in the UK, those doctors could never have gotten in. And they chose doctors because they figured that would be easy to get them into the country. And that was the reason that al-Qaeda recruited the doctors, apparently. So what happens is that they're playing our immigration laws. And if we banned immigration from these countries, we would be much safer against terrorism. ... I really hope that people get behind [that recommendation], because that is what is necessary to stop these attacks. <#inc ww2010.pic g070705b.jpg right "" "The hot, sexy Michelle Malkin, serving as substitute host. (Source: Fox)"#> Michelle Malkin: I certainly agree with you. Unfortunately, you've got bi-partisan support for basically doing nothing, when it comes down to cracking down on these people. Dick Morris: And the reason is tuition. 12% of the revenues of the colleges and the universities in the US come from foreign students. Michelle Malkin: And yes, we've got President Bush who has basically opened up our colleges and universities to aviation students from where? Saudi Arabia! That's right! Dick Morris: (Laughing) But he makes taking off and landing a required course. Michelle Malkin: (Also laughing) Well OK, then, I guess we're better off than before."

It's worthwhile tearing this conversation apart, since it's complete drivel. It's value is to show the intensity of the xenophobia exhibited by many people. First off, the UK isn't in a position to ban wholesale any large group of foreign doctors. The UK has a doctor shortage, and 40% of its doctors nationwide are foreign-trained. Britain could not do without those doctors. Second, Dick Morris wants us essentially to ban all kinds of contact with people listed as "harboring terrorists" by the State Dept. I'm not sure where that list is, or if it even exists, but let's focus on the countries that the terror suspects are from: Jordan, Saudi Arabia, India, other Mideast countries. Can you imagine banning tourism and business travel from all of these countries? And what about the UK? They're harboring terrorist doctors! Should we ban Brits from coming to the US? I've been very critical of politicians in general, because of their sheer stupidity and ignorance. This was shown by <#inc ww2010.weblog.ref e070114b "articles in the Congressional Quarterly."#> Washington journalists, analysts and politicians have no idea what's going on in Iraq. They don't know the differences between Sunni and Shi'ite, they don't know that al-Qaeda is operating in Iraq, and they don't know that al-Qaeda is a Sunni organization. So Biden is just one of the mob in that regard. But now we see that Dick Morris is proposing banning all people from these countries. When he referred to countries listed by the State Dept., he must have been thinking of countries like Upper Slobovistan and Lower Slobovistan, countries where almost all the people in them are radical Islamists, and they rarely come to the UK or US anyway. He probably thinks that by banning the Slobistanians, we can make ourselves safe. But when it comes to REAL countries, all of the countries from which the doctors came are our allies. Saudi Arabia, Jordan and India are some of our staunchest allies in Asia. Are we really going to ban all of them? Morris says, "They're playing our immigration laws," and his solution is to shut down all immigration, and especially keep them out of our colleges. Yes, that would be a winning strategy. Now let's turn to Malkin's remarks. First, she said, "you've got bi-partisan support for basically doing nothing, when it comes down to cracking down on these people." This is an interesting remark, because the "bi-partisan support" is being supplied by the people in the Boomer generation and Generation-X, people who are incapable of governing. Referring to bi-partisan support for government paralysis is a clever way of stating it (though perhaps she meant something sharper). But then she made those cute facial expressions and used that pretty little mouth of hers to say that "President Bush basically opened up our colleges and universities to aviation students from where? Saudi Arabia! That's right!" There's an allusion here to the fact that almost all of the 9/11 hijackers had taken aviation courses, where they learned how to fly the planes, but didn't bother to learn how to takeoff and land. That explains Morris's retort about requiring them to learn takeoffs and landings. There's absolutely no way that hijackers could succeed today the way they did on 9/11. Recall that they used box cutters as their only weapons, took over from the pilots, and cut off communications with the towers. None of that could happen today. The door to the pilots area has been strengthened. And the passengers themselves would stand for it. The only way that a plane could be brought down today is by sneaking a bomb onto it, and that doesn't require aviation lessons. So Malkin's remarks are completely irrelevant. The whole conversation is completely irrelevant. What we're seeing is more and more xenophobia in a world that's becoming more xenophobic by the day. We see Congress on the verge of <#inc ww2010.weblog.ref e070618 "passing extremely harsh, punitive laws directed at China,"#> laws that will only invite equally harsh retaliation. In the past we described the <#inc ww2010.weblog.ref e060423 "sudden growth in popularity of the British National Party"#> in the UK. And <#inc ww2010.weblog.ref e041214 "Holland became increasingly nationalistic"#> when filmmaker Theo van Gogh was murdered by a Muslim extremist. From the point of view of Generational Dynamics, every society becomes increasingly xenophobic during generational Crisis periods. This xenophobia increases as time goes on, and eventually grows into what can be called "hatred," leading eventually to a genocidal war. For those who believe that it can't happen, you should realize that it IS happening -- in the harsh laws targeting China and the other actions I've described. As inane as the conversation between Morris and Malkin was, it's the standard level of discourse today. And the same thing is true in countries around the world. No wonder we're headed for a Clash of Civilizations world war. =eod =// &&2 e070705 Britain shocked by terrorist bombing plot by doctors in National Health Service =data ww2010.weblog.y2007.e070705.head Britain shocked by terrorist bombing plot by doctors in National Health Service =data ww2010.weblog.y2007.e070705.keys =data ww2010.weblog.y2007.e070705.loc ww2010.weblog.log0707 =data ww2010.weblog.y2007.e070705.date 5-Jul-07 =data ww2010.weblog.y2007.e070705.txt1 Britain reduced its terrorist threat level from 'critical' to 'severe' =data ww2010.weblog.y2007.e070705.txt2 on Wednesday, for the first time since last weekend's <#inc ww2010.weblog.ref e070630b "attempted triple car bombings in London and Glasgow."#> The level had been <#stdurl http://www.iht.com/articles/ap/2007/07/04/europe/EU-GEN-Britain-Threat-Level.php "raised to 'critical' on Saturday,"#> indicating that further terrorist attacks were thought to be imminent. It remained at the 'critical' level for several days, longer than some people thought prudent, since it meant that policemen throughout Britain would be working very long hours, getting very little sleep. The reduction of the threat level back to 'severe,' where it's been since last August, means that a new attack is considered likely, but not imminent. The terrorists made the calls to the cell phones that were <#stdurl http://abcnews.go.com/Blotter/story?id=3345743&page=1 "to trigger each London car bomb,"#> but the bombs failed to ignite. Then, on Saturday, they attempted to explode an incendiary bomb as a suiciding bombing in Glasgow, and that failed as well. If it weren't for the terrorists' bumbling, the bombs would have killed dozens or hundreds of people. =inc ww2010.h2 doctors "The terrorist doctors" <#inc ww2010.pic g070704.jpg right "" "Gifted surgeon Mohammed Jamil Abdelqadar Asha, allegedly masterminded the terrorist bombings (Source: news.com.au)"#> But what has Britons REALLY freaked out is that the terrorist cell was a <#stdurl http://www.news.com.au/dailytelegraph/story/0,22049,22015711-5001021,00.html "ring of foreign-born doctors in the National Health Service (NHS)."#> The alleged ringleader is a "gifted" surgeon, Mohammed Jamil Abdelqadar Asha, 26 years old, born in Jordan. Three doctors and two trainees are among the seven people being held for questioning in the UK. Another doctor, Mohammed Haneef, an Indian, was detained in Brisbane, Australia, as he was about to board a plane with a one-way ticket to Malaysia. This is causing a great deal of consternation in Britain, where <#stdurl http://www.csmonitor.com/2007/0705/p04s02-woeu.html "22,000 doctors in the NHS are foreign trained,"#> or 40% of the total. The health industry was aghast at the development. "The news that members of a caring profession may be involved in these atrocities was even more appalling," said Dr. Hamish Meldrum, the new chairman of the British Medical Association in a statement. It's thought that hospitals and the "medical fraternity" have provided a convenient network, allowing a terrorist leader to recruit other sympathetic professionals to his cause. =inc ww2010.h2 gener "The generational connection" There's <#stdurl http://online.wsj.com/article/SB118358989440157536.html "an article in Thursday's Wall Street Journal"#> that attempts to answer the question of whether poverty is the "root cause" of suicide bombings. Based on research by Professor Alan B. Krueger, the article concludes that poverty has nothing to do with it. Well duh, I could have told you that. Suicide bombings are explained by generational factors, as I described in a series of articles following the July 7, 2005, London subway bombings. This was summarized in last December's article on <#inc ww2010.weblog.ref e061113 "the MI5 chief's speech,"#> saying that the U.K. population contains thousands of Islamic terrorists and sympathizers. We're seeing that suicide bombers only come from societies that have entered generational Crisis periods, and not before. This indicates that when a society enters a generational Crisis period, the society becomes fundamentally changed, so that the creation of suicide bombers becomes possible. (And as I showed in my analysis on <#hreftext ww2010.i.iraq070401 "Iraqi Sunnis turning against al-Qaeda in Iraq,"#> there are virtually NO Iraqi suicide bombers, since Iraq is in a generational Awakening era; they all have to be imported from Jordan or Saudi Arabia.) Further findings, obtained by combining Generational Dynamics research with <#hreftext ww2010.i.050718pape "Robert Pape's study of suicide bombers, published in the book Dying to Win,"#> we find that suicide bombers justify their terrorist acts as "altruistic suicide." Pape found that suicide bombers most likely come from countries occupied by another country, and his research shows that they come overwhelming from countries that have passed through a generational crisis era without having a crisis war. In these countries, the parents have accepted the occupation, albeit bitterly and reluctantly. But their impatient children take it upon themselves to free their parents' generation from this occupation by this unique form of altruistic suicide. This generational explanation is supported by theory and is supported by the facts. But as I've said before, pundits, experts and journalists have a mental block that prevents them from grasping even the simplest generational connection, even when it's so obvious that it practically bashes them over the head with baseball bat. Their mental capabilities are limited to the subjects of poverty and class, and anything outside of those boundaries is as foreign to them as Sanskrit. =inc ww2010.h2 palestine "The Palestinian connection" Suicide bombers are in the young generation with an ethnic background in a country undergoing occupation. In the case of the London subway bombers, the perpetrators had backgrounds in Pakistan and were bitter about the Kashmir region, disputed between Pakistan and India. They were England-born citizens, but had developed a generational "Hero - Prophet" relationship with radical clerics in Pakistan. Last weekend's failed bombing attempts were perpetrated by foreign-born doctors with a Palestinian connection. Here's a <#stdurl http://www.theglobeandmail.com/servlet/story/LAC.20070704.BRITAINSIDE04/TPStory/TPInternational/Europe/ "summary of suspects:"#>

The alleged ringleader, Mohammed Jamil Abdelqadar Asha, was <#stdurl http://www.mirror.co.uk/news/topstories/2007/07/04/his-mate-was-killed-in-iraq----he-wanted-revenge---89520-19402038/ "said to be filled with hate against the West over Palestine."#> He and his wife, Marwah, were Palestinians who lived and were educated in Jordan before moving to the UK. They blamed the UK and America for the Israeli occupation of Palestine. A relative was quoted as say, "Marwah was increasingly scathing of UK foreign policy. She said it was at the heart of the problems of the Arab-Israeli conflict."
Bilal Abdullah was an Iraqi who had been part of the Sunni insurgency that worked with the <#hreftext ww2010.i.iraq070401 "leader of al-Qaeda in Iraq, Abu Musab al-Zarqawi."#> There is evidence that al-Zarqawi set up the entire bombing plan, prior to his own death on June 7, 2006, from an American air strike. His friends claim that he wanted revenge against British and American troops because one of his best friends had been killed by Shias. (Abdullah was in the car that was to become a failed suicide attack in Glasgow last Saturday. As I mentioned above, there were almost no Iraqi suicide bombers in Iraq; al-Zarqawi had to import them from Jordan and Saudi Arabia. The fact that Abdullah was an Iraqi may be the reason that the suicide attack failed.)
Other detainees were from Saudi Arabia, Lebanon and India. News reports provide no details of their political attitudes.

Before last weekend, I heard a pundit on TV make an interesting claim: That al-Qaeda isn't interested in perpetrating another terrorist attack in the U.S., unless it can be as spectacular as the 9/11 attack. That may or may not be true of Osama bin Laden's closest al-Qaeda group, but al-Qaeda today goes well beyond bin Laden. It's become a "brand name" for a collection of loosely connected terrorist organizations, including al-Qaeda in Iraq, and al-Qaeda in the Islamic Maghreb (North Africa). It's also linked to other terrorist organizations, including the Jemaah Islamiah in Indonesia, and terror groups in Europe. So, whether the pundit was right or not about bin Laden's original group, the network of al-Qaeda terrorist groups certainly doesn't feel so inhibited. Nothing illustrates this so clearly as the variety of connections: bin Laden was bitter about the American presence in Saudi Arabia, the London subway bombers were bitter about Indian control of parts of Kashmir, and last weekend's perpetrators were bitter about the Israeli "occupation" of Palestine. From the point of view of Generational Dynamics, this is part of a continuing process of "identity group" formation. Al-Qaeda is gaining in strength, with groups stretching from southeast Asia to the Mideast to the Mahgreb and from there up to Spain and France. =inc ww2010.cf.cf060209 p left However, as I've said before, I do not expect al-Qaeda to be one of major belligerents in the coming Clash of Civilizations world war, even assuming that al-Qaeda meets its objective of gaining control of some nation. That war will be fought between big powerful adversaries -- a new "axis" most likely consisting of China, Pakistan, North Korea and their allies, versus America, India, Russia and the UK and their allies. The world is becoming increasingly fragile, in that the right kind of spark in any of several dangerous regions could trigger a regional war that would spiral into a world war, thanks to interlocking defense treaties. Al-Qaeda would probably not be a major belligerent in that war, but might well provide the spark that would spiral into the war. From the point of view of Generational Dynamics, this spark could occur next week, next month, next year, or thereafter, but with al-Qaeda growing in power, and the world becoming increasingly fragile, it's going to happen sooner rather than later. =eod =// &&2 e070702 Iran's President Ahmadinejad facing a growing 'generation gap' =data ww2010.weblog.y2007.e070702.head Iran's President Ahmadinejad facing a growing "generation gap" =data ww2010.weblog.y2007.e070702.keys iran, mahmoud ahmadinejad, ayatollah sayed ali khamenei, ayatollah khamenei, islamic revolution =data ww2010.weblog.y2007.e070702.loc ww2010.weblog.log0707 =data ww2010.weblog.y2007.e070702.date 2-Jul-07 =data ww2010.weblog.y2007.e070702.txt1 Gas rationing and restrictions on women are infuriating the college-age generation. =data ww2010.weblog.y2007.e070702.txt2 <#inc ww2010.pic g070701a.jpg right"" " Stephen Colbert on Comedy Central's Colbert Report (Source: ABC)"#> On <#stdurl http://www.comedycentral.com/shows/the_colbert_report/index.jhtml "The Colbert Report"#> this week, comedian Stephen Colbert described the current situation in Iran as follows:

"Earlier this week, the Iranian government started rationing fuel to its citizens, causing long gas lines and riots. This is fantastic news! Think about it! Gas lines! Rough economy! Social unrest! Iran is no longer a menace -- it's America under the Carter administration!"

Iran today is at the beginning of its generational Awakening era, America under the Carter administration was in the last half of its generational Awakening era, so it's no surprise at all that there are similarities. In fact, President Mahmoud Ahmadinejad has pursued such heavy-handed policies in the areas of the economy and individual civil rights, that a major generational backlash is rising even more quickly than it did in America under the administrations of Presidents John Kennedy and Lyndon Johnson. <#inc ww2010.pic g070701b.jpg left "" "Gas rationing in Iran caused huge lines for gas and trashing of gas stations (Source: Der Spiegel)"#> People's anger spilled over into violence on Tuesday evening when <#stdurl http://www.spiegel.de/international/world/0,1518,490984,00.html "Iran suddenly announced gas rationing regulations,"#> just hours before they were to go into effect. Lines at some gas stations were almost a mile long, filled by motorists anxious to get their last full tank of gas before rationing took effect at midnight, limiting them to less than a gallon a day. A dozen Tehran gas stations were trashed and set on fire this week, accompanied by chants lampooning President Ahmadinejad, who had come into office promising to end poverty and improve the economy. Instead, Iran's economy has been getting steadily worse. Many young people blame Ahmadinejad for spending huge amounts of money on his misadventures in supporting Hizbollah in Lebanon and Hamas in Gaza, and ignoring domestic needs. And it hasn't been lost on people that Iran is the world's second largest oil producer, and so should be able to supply its own people with gasoline. (However, Iran has limited refining capabilities, so exports oil but imports gasoline.) The economic problems might not cause so much conflict if it weren't for Ahmadinejad's heavy-handed approach to social issues, especially towards college students, women, the press and labor unions -- groups normally associated with support for individual civil rights. In fact, Iran is in the midst of what is being called <#stdurl http://www.nytimes.com/2007/06/24/world/middleeast/24iran.html "the most ferocious crackdowns on dissent in years."#> To the outside world, the most visible sign of this crackdown is <#inc ww2010.weblog.ref e070425b "Iran's jailing of 150,000 ordinary women wearing loose headscarves,"#> loose coats, or trousers, though most were released quickly to their parents or husbands. These jailings have increased as the warmer spring weather has led to more revealing clothing. And last month, Ahmadinejad <#stdurl http://www.spiegel.de/international/germany/0,1518,486086,00.html "canceled at the last minute a major international women's soccer game in Berlin"#> between German and Iranian teams. The women were to be wearing specially designed headscarves, and only women fans were to be permitted into the stadium, but the game was cancelled nonetheless. Ahmadinejad has managed to do something so awful that every man who hears of it must be cringing: He's managed to get almost every young woman in Iran pissed off at him. Ever since <#inc ww2010.weblog.ref e050625 "the ultraconservative Mahmoud Ahmadinejad became President"#> of Iran in 2005, I've been writing that he should expect a great deal of political turmoil and opposition from college-aged kids, especially from women. This happens to every country entering a generational Awakening era, as Iran is, just one generation past the bloody Iran/Iraq crisis war. But I didn't expect this. Ahmnadinejad seems to be taking every step possible to infuriate the younger generation, as if he were a bullfighter using his red cape to do everything possible to get the bull to gore him. Other recent <#stdurl http://www.nytimes.com/2007/06/24/world/middleeast/24iran.html "oppressive steps taken by the Iranian government"#> include:

Jailed student leaders and student newspaper editor who criticized Ahmadinejad's policies, even though Ahmadinejad has previously praised such students as symbols of Iran's freedom. These include students who <#inc ww2010.weblog.ref e070317 "led anti-Ahmadinejad demonstrations at Amir-Kabir University"#> on December 7, where Ahmadinejad was speaking.
Sent a stern warning to all country's newspaper editor detailing banned topics, including gas rationing, the economy, and possible international sanctions.
Warned professors against attending overseas conferences, lest they be recruited as "spies."
Shut down or threatened thousands of non-governmental agencies for being "spies" of the US government.
Arrested Iranian-Americans for being potential "spies."

Although this seems to be crazy stuff, it actually makes perfect sense from the point of view of Generational Dynamics: Iran's leaders are attempting to relive the heady days of their youth, in the crisis war of the 1980s. The current crackdown appears to have begun following <#stdurl http://www.islam-pure.de/imam/news/news2007/03_2007.htm#210307 "a 21-March-2007 speech by Ayatollah Sayed Ali Khamenei,"#> the recognized leader of the Islamic Revolution that began in 1979. He called the new Iranian year "the year of national unity and Islamic harmony," and said:

"The national movement will be buoyed up in the New Year through by the firm will of the people and authorities as the nation would call for. ... [The enemy challenges Iran through] sowing discord by demoting the Iranian national unity [and] inciting economic problems to slow down the country's progress. ... [He cautioned about enemy's psychological warfare and vicious efforts to stir up differences between the Iranian people and the world of Islam.] Under the pretext of sectarian feelings, religious inclinations and gild orientations, the enemies are bent on destroying unity of the Iranian nation or fan religious differences in the world of Islam and draw a wedge between the Iranian nation and the rest of the Islamic community by inciting war between Shiites and Sunnis. [He affirmed that the sole way to frustrate enemies and thwart their plots lies in efforts to unite the nation and promote its integrity.] In God's assistance, all people of every sect or religion will expedite their hopeful move towards their bright future. ... At the same time all Muslim nations will demonstrate their unity by promoting Islamic solidarity and fraternity."

What's interesting about this speech is how backward-looking it is. This isn't surprising, as old folks frequently want to relive their youth. In fact, as I've written many many times on this web site, today's Boomers in America are similarly trying relive the excitement and eroticism of their own youth in the 1960s. In the case of Khamanei, we see a different angle on this: An old person reliving a previous crisis war. <#inc ww2010.pic g070701c.jpg right "" "Islamic Revolution leader Ayatollah Khamenei and President Mahmoud Ahmadinejad on television on Saturday. (Source: presstv.ir)"#> Yesterday (Saturday), Khamenei <#stdurl http://www.presstv.ir/detail.aspx?id=14977§ionid=351020101 "appeared on Iranian TV with a new speech,"#> praising Ahmadinejad for upholding the values of the Islamic Revolution, as he had demanded in his March speech. Khamenei pointed to Ahmadinejad's "dauntless steps" and "perserverance" in the political and economic arena, and for upholding the values of the Islamic revolution.

"The president has underlined the ideology of the revolution in a time when the enemies are trying to create a climate of distrust by propagating that the Islamic revolution is losing edge. ... The petrol rationing scheme is one of the dauntless moves made by the government which is to be continued by the officials."

These two speeches attempted to re-capture every symbol of the Iranian Revolution of 1979 and the Iran/Iraq war of these 1980s in the face of mounting political opposition:

As in the case of every crisis war in every country at any time, a crisis war unifies the country as it fights to preserve the country and its way of life. Khamenei is trying to preserve that sense of national unity from the 1980s, what he calls the "ideology of revolution."
However, a new generation has come of age since the end of Iran's last crisis war, and that new generation has no interest in Khamenei's "ideology of revolution," especially if it means that young men and women can't spend time together.
This is what's creating the generational conflict. It's this "generation gap" that's at the root of every Awakening era. (In 1960s America, it was the issue of defeating Communism that caused the generation gap. The details are different, but all the concepts are the same.)
Khamenei sees in the rebellious youth the loss of Iran's unity of purpose. This is what always happens in an Awakening era: The need for national unity to preserve the country and its way of life gives way to demands for individual civil rights.
Khamenei hopes that by arresting women and giving religious speeches, he can convince young people to give up the demands for individual civil rights, and return to preserving national unity. This is, of course, folly.
He also believes (or at least hopes) that by blaming the rebellions of youth on the Americans, and by warning of an American invasion, he can frighten young people into giving up the demands for individual civil rights. This too is folly.
Even gas rationing fits the paradigm: Gas was rationed in the 1980s during the Iran/Iraq war. Khamenei wants to re-instill that spirit in any way he can.

Readers may recall that on several occasions I've expressed puzzlement about Iran's foreign policy since Ahmadinejad became President. The reason for my confusion was that Ahmadinejad's policies were contradictory to the will of the people, especially the young people. For example, young Iranians don't approve of Americans in Iraq, but they are pro-American on cultural and social issues. Iranians want to develop nuclear technology, but they don't like to see Ahmadinejad sticking his thumb in the eye of the world, possibly provoking an attack on Iran's nuclear facility. So what is Ahmadinejad up to? From the point of view of Generational Dynamics, a country's direction is determined by the attitudes and behaviors of large masses of people, entire generations. The behaviors of politicians aren't important except insofar as they reflect the will of the people. So it was puzzling to me why Ahmadinejad was acting like a madman in international affairs -- threatening to wipe Israel off the map, denying the Holocaust, threatening weapons-grade plutonium development, and so forth. These things have infuriated the international community, they are not popular with the Iranian people, and they've been puzzling to me. But finally things are falling into place. Ahmadinejad's policies are finally beginning to make sense, thanks to the current situation and Khameini's speeches. All of Ahmadinejad's madman foreign policy actions are tied to exactly the same objective -- preserving national unity, renewing the spirit and ideology of the Islamic Revolution. By provoking the West -- especially Western analysts and journalists -- into making direct or indirect invasion and bombing threats against Iran, Ahmadinejad is pursuing the same strategy that Khameini follows in warning of an American invasion -- he hopes to frighten young people into returning to the sense of national unity. This is a very bizarre strategy of course. It's almost a desperate strategy. But it's consistent with the overriding objective -- the same objective that Presidents Kennedy, Johnson and Nixon had in the 1960s -- to restore national unity. The fact that the strategy is getting him into trouble, as the American's Presidents' strategies got them into trouble, is what always happens during a generational Awakening era. Ahmadinejad is going farther than just words, of course. He's supplying weapons to terrorists in Iraq, Hizbollah in Lebanon, and Hamas in Gaza. He's playing the game <#stdurl http://www.ericberne.com/games/games_people_play_LYAHF.htm ""Let's you and him fight,""#> referring to a psychological and social game described by Eric Berne in his book, Games People Play. I previously described how this game was played in the late 1980s in the <#inc ww2010.weblog.ref e070619 "lead-up to the Darfur war."#> It's actually not a rare game in international politics. Ahmadinejad's game is very dangerous and very desperate. Presumably he wants to provoke a THREAT of war, but doesn't want to provoke an actual war, though we can't be sure of that, given his desperation. And even if provoking actual war is not his intention, he may certainly miscalculate, with unpredictable results. His desperation is increasing with the reality that his policies are not working with the Iranian people, and cannot work; instead of unifying them, his policies are turning them against him. Khameini's speech on Saturday congratulating Ahmadinejad for his "dauntless steps," his "perserverance," and for upholding the values of the Islamic revolution will not convince anybody, and would be subject of much mockery in the college press if it weren't for the fact that such mocking would be severely punished. From the point of view of Generational Dynamics, Iran is a dangerous wild card. If it were an isolated country, then I would say that this political conflict would go on for a few years, and eventually Khameini and Ahmadinejad would have to back off. The kids are bound to win this fight against their parents. There might even be a "velvet coup" peaceful change of government. But Iran is not an isolated country; it's a country situated in the most volatile region of the world, with a desperate policy of provoking war threats all around it. How far this will go remains to be seen. =eod =// &&2 e070630b Britain simultaneously pummeled by terrorist bomb attacks and nationwide floods =data ww2010.weblog.y2007.e070630b.head Britain simultaneously pummeled by terrorist bomb attacks and nationwide floods =data ww2010.weblog.y2007.e070630b.keys =data ww2010.weblog.y2007.e070630b.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070630b.date 30-Jun-07 =data ww2010.weblog.y2007.e070630b.txt1 England and Scotland are facing multiple threats this weekend. =data ww2010.weblog.y2007.e070630b.txt2 Gordon Brown has been Prime Minister for just two days, and is now faced with multiple threats before even getting a chance to catch his breath:

A four-wheel-drive vehicle <#stdurl http://www.alertnet.org/thenews/newsdesk/L30355604.htm "rammed into the main terminal at Glasgow airport"#> on Saturday and exploded in flames.

(Source: NY Times)

On Friday, in the busiest part of downtown London, a metallic green Mercedes was discovered <#stdurl http://www.nytimes.com/2007/06/30/world/europe/30cnd-london.html?_r=1&ref=world&oref=slogin "packed with up to 60 litres of fuel, several gas canisters and a large quantity of nails,"#> designed to inflict maximum damage in an explosion. A few hours later, a second Mercedes, similarly packed, was found.
Emergency services across Britain are stressed this weekend as downpours of rain are continuing, following <#stdurl http://www.ft.com/cms/s/a72aa8fc-2661-11dc-8e18-000b5df10621.html "record levels of flooding that occurred throughout Britain last week,"#> killing four people, and causing a billion dollars in damage.

The news is still sketchy, but apparently it was pure luck that caused the two car bombs to be discovered before being detonated, as a suspicious bystander notified the police. If the car bombs had exploded in the crowded Al-Qaeda is suspected as the perpetrator, but that's still under investigation. Also, it's not known yet whether the Saturday incident is related to the Friday incident, or whether it was some kind of independent copycat crime. There is a Scottish connection to all three car events, and Gordon Brown is a Scot, and so a Scottish angle is being considered. Still, Britain is on nationwide alert, fearing that other explosions may be planned. Furthermore, with the July 4th holiday coming in the US, New York City has also gone on high alert, although there have been no credible threats. The US is not raising its terror alert status, but officials are advising the public to be vigilant. =eod =// &&2 e070630 Bloomberg news accuses S&P, Moody's and Fitch =data ww2010.weblog.y2007.e070630.head Bloomberg news accuses S&P, Moody's and Fitch of purposely "masking losses" =data ww2010.weblog.y2007.e070630.keys cdos, credit derivatives, bloomberg, mark pittman, bear stearns, standard & poor's, moody's, fitch ratings =data ww2010.weblog.y2007.e070630.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070630.date 30-Jun-07 =data ww2010.weblog.y2007.e070630.txt1 This is "the pot calling the kettle black," =data ww2010.weblog.y2007.e070630.txt2 as my mother used to say of <#stdurl http://en.wikipedia.org/wiki/Pot_calling_the_kettle_black "people who blame other people for things they've done themselves."#> It's highly deviant for a news organization to make blunt accusations of anyone but out-of-favor politicians, but that's what happened Friday in <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aN4sulHN19xc&refer=home "an article written by Mark Pittman."#> The accusatory article refers to the ratings on <#inc ww2010.weblog.ref e070628b "the credit derivatives (CDOs)"#> that we've been discussing, following <#inc ww2010.weblog.ref e070624 "last week's Bear Stearns debacle."#> Bear Stearns and other financial managers had been able to greatly overvalue their hedge fund products, based on the inflated valuations of credit derivatives. The valuations are based on investments ratings provided by the three major financial ratings services that investors depend on. Bloomberg is blaming them for keeping the ratings artificially high, "masking burgeoning losses" being experienced by the hedge funds themselves, and also by the individuals who have invested in them. According to the article:

"Standard & Poor's, Moody's Investors Service and Fitch Ratings are masking burgeoning losses in the market for subprime mortgage bonds by failing to cut the credit ratings on about $200 billion of securities backed by home loans. The highest default rates on home loans in a decade have reduced prices of some bonds backed by mortgages to people with poor or limited credit by more than 50 cents on the dollar and forced New York-based Bear Stearns Cos. to offer $3.2 billion to bail out a money-losing hedge fund. Almost 65 percent of the bonds in indexes that track subprime mortgage debt don't meet the ratings criteria in place when they were sold, according to data compiled by Bloomberg. That may just be the beginning. Downgrades by S&P, Moody's and Fitch would force hundreds of investors to sell holdings, roiling the $800 billion market for securities backed by subprime mortgages and $1 trillion of collateralized debt obligations, the fastest growing part of the financial markets. "You'll see massive losses from banks, insurance companies and pension managers," said Joshua Rosner, a managing director at investment research firm Graham Fisher & Co. in New York and co-author of a study last month that said S&P, Moody's and Fitch understate the risks of subprime mortgage bonds. "The longer they wait, the worse it's going to be."

Note the phrase "according to data compiled by Bloomberg." The lengthy article summarizes a great deal of this data, showing why the rating services should have lowered the ratings of CDOs long ago. The article specifically claims that "S&P abandoned seven-year-old criteria for determining a bond's protection against default in February." What we're seeing is a continuing trend: increasing demands for retribution. However, these calls for retribution come from people and organizations who are just as much to blame as the people they're blaming. I've been pointing out for years that a stock market crash is mathematically certain, given that the market is <#hreftext ww2010.i.050711eleven "overpriced by a factor of more than 250%,"#> just like 1929. And yet, financial journalists, analysts, pundits and politicians -- Bloomberg among them -- have been crowing about an "underpriced" market for years. I'm not the only one who's talked about an overpriced market. Here's what <#hreftext ww2010.i.051029bernanke "Alan Greenspan said"#> late in 2005, just as he was finishing up his term as Fed chairman:

What Greenspan is talking about here is exactly what's happening today. We have an "onset of increased investor caution" that "lowers asset values and promotes the liquidation of debt." That's what happened last week with Bear Stearns, and it's what's going to happen in the form of "massive losses from banks, insurance companies and pension managers." The processs that Greenspan described in 2005 is EXACTLY what's happening today. And Greenspan concluded, "This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums." So take your pick. My web site warned the world, but if you don't like that, then Greenspan also warned the world. You have your choice of the unknown guy and the most well-known financial guy in the world, both saying much the same thing, in different words. So where was Bloomberg's warning in 2005? Where was Bloomberg's article claiming that S&P, Moody's and Fitch were rating stocks too high, saying that the price/earnings ratio of these stocks had been astronomically high for over ten years? Where was the article pointing out that, by <#inc ww2010.weblog.ref e070320 "the Law of Mean Reversion,"#> the stock market HAD to have a major readjustment over a period of many years? Bloomberg has hardly been alone in being a cheerleader for larger and larger bubbles. Greg Ip of the Wall Street Journal and Steve Liesman of CNBC are people I've commented on in the past, but obviously the mainstream media have been full of financial reporters saying stupid things. And of course the biggest cheerleader of them all has been the <#hreftext ww2010.i.051029bernanke "new Fed chairman, Ben Bernanke,"#> who doesn't even believe that bubbles exist. But we don't have to go that far back. Let's go back to the phrase "according to data compiled by Bloomberg" from the article quoted above. The data that Bloomberg compiled is hardly new. I quoted much of that data in a series of articles that I wrote in February on the <#inc ww2010.weblog.ref e070209 "rapid collapse of ABX index,"#> which indexes the value of the mortgage-based CDOs that are currently in question. Bloomberg is criticizing S&P, Moody's and Fitch for not lowering the ratings of those CDOs at that time, but why didn't Bloomberg write its accusatory article in February? Why didn't Bloomberg write this in February: "S&P is abandoning its seven-year-old criteria for determining a bond's protection against default." Why wait until today, when the horse, as they say, is already out of the barn? <#inc ww2010.pic g061229b.jpg right "" "Jack Bouroudijian of Brewer Investment Group gushes over stock market (Source: CNBC)"#> In an article I wrote in December, entitled <#inc ww2010.weblog.ref e061230 ""Financial analysts gush at stock market's meteoric rise,""#> I quoted what Jack Bouroudijian of the <#stdurl http://www.investwithbig.com/ "Brewer Investment Group"#> said on on CNBC:

<#inc ww2010.pic g061229c.jpg left "" "Randall Dodd, director of the Financial Policy Forum (Source: CNBC)"#> In that same article, I also quoted Randall Dodd, director of <#stdurl http://www.financialpolicy.org/ "The Financial Policy Forum,"#> who gave a much more sober assessment of the marketplace:

Now tell me, dear reader, which of these two people would you trust in the future? If you're an investor, would you trust your money to Jack Bouroudijian of Brewer Investment Group? I wouldn't, but what do I know? So it's nice that Bloomberg has suddenly "got religion," but Bloomberg has no one to blame but itself. Bloomberg is just as guilty as S&P, Moody's and Fitch. But it does show that the trend of retribution is surging. More and more people are panicking and looking for someone to blame, and since so many people and institutions are to blame, it's not not hard to find someone. Meanwhile, panicking investors are also becoming increasingly risk-averse, less willing to take risks, as we discussed in conjunction with the announcement of <#inc ww2010.weblog.ref e070628b "multiple SEC investigations on credit derivatives."#> This risk-aversion is decreasing the demand for investment opportunities and, by the law of supply and demand, reducing the value of investment opportunities. This "lowers asset values and promotes the liquidation of the debt that supported higher asset prices," as Greenspan predicted in 2005. From the point of view of Generational Dynamics, this is exactly what always happens at the time of a generational panic and stock market crash. The preceding bubble period is made possible by giggling, giddy, gushing investors, journalists, and politicians who believe that the Laws of the Universe have suddenly changed, and that this bubble "is different," and that everyone should pour money into the bubble, making it bigger. At some point these giggling, giddy, gushing gushing investors, journalists, and politicians suddenly fear that everything is collapsing around them, and that they're going to be bankrupt and homeless. That's when they panic. And in the case of a generational panic, it's something that they've never seen before, and they overreact, resulting in a level of panic that brings about a new 1930s style Great Depression. That's the process that's unfolding now. =eod =// &&2 e070628b Market for credit derivatives may be collapsing =data ww2010.weblog.y2007.e070628b.head Market for credit derivatives may be collapsing =data ww2010.weblog.y2007.e070628b.keys =data ww2010.weblog.y2007.e070628b.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070628b.date 28-Jun-07 =data ww2010.weblog.y2007.e070628b.txt1 The SEC is opening multiple investigations into the abuse of CDO investments, =data ww2010.weblog.y2007.e070628b.txt2 following <#inc ww2010.weblog.ref e070624 "last week's Bear Stearns debacle,"#> with the result that investors are being scared away from new CDO investments. The investment landscape has changed dramatically in the last few days. You'll recall that I discussed how Bear and many other financial institutions have their assets in these credit derivatives known as collateralized debt obligations, or "CDOs." The collateral for these debt obligations has been the mortgage payments owed by individual homeowners or investors, but as the number of foreclosures has been increasing, the intrinsic value of the CDOs has fallen. Thus, <#inc ww2010.weblog.ref e070624 "as I discussed,"#> these CDOs have a presumed market value that the banks and hedge fund companies are claiming, but if anyone actually tries to sell them, they may get only 50 cents on the dollar, or less. This downward trend is expected to continue, as the real estate market crisis <#inc ww2010.weblog.ref e070624b "continues to spread."#> This means that the value of assets claimed by many of today's hedge funds far exceed their real market value. The Bear Stearns debacle ended in a major cover-up of the credit derivative world. A major motivation for everyone baling out the hedge fund was to avoid a fire sale of all the hedge fund assets, including the CDOs. Such a fire sale would have established a market price for CDOs and would, by the "mark to market" regulations, require ALL hedge funds in ALL financial institutions to revalue their assets according to the fire sale prices, resulting in a domino effect of hedge fund failures. According to <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=agGitLyUP71Q "a report from JP Morgan,"#> the market for new CDOs is collapsing. A month ago, $20 billion in new CDO investments were offered to investors; today it's only $3 billion, and the terms are far less attractive. That's only part of the retribution that high-flying deal makers are beginning to feel. A front-page <#stdurl http://online.wsj.com/article/SB118288752469648903.html "article in Wednesday's Wall Street Journal"#> is entitled "How Wall Street Stoked The Mortgage Meltdown." It specifically blames Wall Street firms, naming Lehman Brothers Holdings Inc. as the worst of the offenders, of adopting the policies that have led to the proliferation of subprime mortgage loans and resulting foreclosures. The <#stdurl http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/28/cnsec128.xml "Securities and Exchange Commission (SEC)"#> has opened about a dozen investigations into CDOs, following the near-default of the Bear Stearns hedge funds. How much are the CDOs overvalued? <#stdurl http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/26/cnusecon126.xml&CMP=ILC-mostviewedbox "According to one analyst,"#> referring to last week's canceled auction of the Bear Stearns hedge funds assets: "The banks were not prepared to bid over 85% of face value for CDOs rated 'A' or better. God knows how low the price would have dropped if they had kept on going. We hear buyers were lobbing bids at just 30%." He's referring to the higher quality 'A' grade CDOs -- not the low-grade 'BBB-' CDOs, where investors may be even more reticent. He adds, "We don't know what the value of this debt is because the investment banks shut down the market in [the Bear Stearns] cover-up so that nobody would know. There is $750 billion of dubious paper out there in the form of CDOs held by banks that have a total capitalisation of $850 billion." If you enjoy financial nerd humor, you might want to check out <#stdurl http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+July+2007.htm "the new commentary by Bill Gross,"#> head of the PIMCO bond fund, the world's largest. He says sarcastically that "this Paris Hilton charade of a crisis, is really so much more than just a 3 or 27 day lockup in the LA County jail":

"Those that point to a crisis averted and a return to normalcy are really looking for contagion in all the wrong places. Because the problem lies not in a Bear Stearns hedge fund that can be papered over with 100 cents on the dollar marks. The flaw resides in the Summerlin suburbs of Las Vegas, Nevada, in the extended city limits of Chicago headed west towards Rockford, and yes, the naked (and empty) rows of multistoried condos in Miami, Florida. The flaw, dear readers, lies in the homes that were financed with cheap and in some cases gratuitous money in 2004, 2005, and 2006. Because while the Bear hedge funds are now primarily history, those millions and millions of homes are not. They’re not going anywhere…except for their mortgages that is. Mortgage payments are going up, up, and up…and so are delinquencies and defaults. A recent research piece by Bank of America estimates that approximately $500 billion of adjustable rate mortgages are scheduled to reset skyward in 2007 by an average of over 200 basis points [that is, 2%]. 2008 holds even more surprises with nearly $700 billion ARMS subject to reset, nearly ¾ of which are subprimes. ... If delinquencies lead to defaults and then to lower home prices, then we have problems and the potential for an extended – not a 27-day Paris Hilton sentence."

Day by day we're seeing in practice what was predicted theoretically by last year's <#hreftext ww2010.i.macro061025 "article on "System Dynamics and Macroeconomics,""#> and followed with <#inc ww2010.weblog.ref e070312 "an essay that I wrote"#> on "A conundrum: How increases in 'risk aversion' lead to higher stock prices," based on work by Harvard economist named Robert J. Barro. Briefly, the people in the generations that survive the previous crash (in this case, the 1929 crash) become extremely risk-averse, and refuse credit. As those generations disappear (retire or die), the younger generations become risk-seeking, and increasingly use debt and credit abusively. The abusive use of credit actually increases the total amount of money in circulation, so that money is poured into BOTH stocks and bonds, so that they both participate in the bubble. The abuse of credit has been trending upwards for decades now, mainly pursued by members of the Boomer generation and Generation-X, who have no personal memory of the 1930s Great Depression, and saw no need to avoid high levels of risky investments. But now things are changing. These Boomer and Xer investors are beginning to panic because they see that risky investments in subprime mortgage loans are making people homeless, and they're seeing that this is spreading to their own high-flying investments in hedge funds. For the first time, many of them are seeing financial disaster. It hasn't happened to them yet, but they can see it coming. Within just the past few days, this has caused a major turnaround. Fearless investors and financial institutions are turning risk-averse in massive numbers. Just as the abusive use of credit "created" money, pouring huge amounts of liquidity into the market place, the return to risk aversion is now pulling massive amounts of liquidity out of the marketplace. Before closing, let's not forget China, whose entire economy has been in a long-term bubble, and whose <#inc ww2010.weblog.ref e070606 "Communist leaders are scared to death"#> of a a stock market panic. Recall that a sharp fall in the Shanghai stock market index triggered worldwide repercussions in February. This is possibly the most volatile stock market in the world. Here are the closing values for the Shanghai Composite index since the beginning of the month:

    Date      Index       Change
    -----     -------     -------
    6/01      4000.74     - 2.65%
    6/04      3670.40     - 8.26%
    6/05      3767.10     + 2.63%
    6/06      3776.31     + 0.24%
    6/07      3890.80     + 3.03%
    6/08      3913.13     + 0.57%
    6/11      3995.68     + 2.11%
    6/12      4072.13     + 1.91%
    6/13      4176.47     + 2.56%
    6/14      4115.20     - 1.47%
    6/15      4132.86     + 0.43%
    6/18      4253.34     + 2.92%
    6/19      4269.52     + 0.38%
    6/20      4181.32     - 2.07%
    6/21      4230.82     + 1.18%
    6/22      4091.44     - 3.29%
    6/25      3941.08     - 3.68%
    6/26      3973.37     + 0.82%
    6/27      4078.59     + 2.65%
    6/28      3914.20     - 4.03%

The index today is very close to where it was at the start of the month, but with huge variations in between. From the point of view of Generational Dynamics, the world is overdue for a new generational stock market panic, leading to a new 1930s style Great Depression. It's possible that this panic will start on Wall Street, possibly triggered by the CDO problem. But I still think that it's also highly likely that the panic will begin in China, and spread from there to the rest of the world. =eod =// &&2 e070628 Sorry that the web site was down last night. =data ww2010.weblog.y2007.e070628.head Sorry that the web site was down last night. =data ww2010.weblog.y2007.e070628.keys =data ww2010.weblog.y2007.e070628.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070628.date 28-Jun-07 =data ww2010.weblog.y2007.e070628.txt1 This was appalling customer service by Interland (Web.com), the web service provider. =data ww2010.weblog.y2007.e070628.txt2 I'm going to do some ranting today and express my rage about my web service provider and about online services in general. Briefly: I've been running this web site on <#stdurl Web.com Web.com#> (formerly Interland) for over five years. Everything was fine for years until last night when Interland shut down the web site by preventing the web site (cgi) software from writing to disk (exceeding disk quota). I discovered this on Wednesday morning and called Customer Service, and spoke to a girl called Karen. Karen said that I was using 1.1 GB, over four times as much disk storage as was allowed on the plan that was set up five years ago. I said that I looked at their web site and saw that I was paying more for their service than their most expensive plan, and that service plan provided 5 GB of storage. "That doesn't matter. You're on an old server, so you got cut off." Why was I on an old server? "Because it was set up that way five years ago." Would you please change my disk quota for today, so that my web site will be up again? And then I'll get the service plan straightened out. "No, out of the question. You'll have to upgrade to another service." OK, but in the meantime, could you please change my disk quota for a day, so that my web site will be up again? "No, it's out of the question. It can't be done. And your web site isn't down. It's your fault because you have too many files." Well that was news to me. Why has everything been OK for the last few years, and all of a sudden my web site is down today? "Maybe it's because they decided to check today. I don't know. But it's your fault." I've been your customer for years. (Shouting) And my web site is down now. You aren't going to do one simple thing? "You have to upgrade to another service." Yes, I know that. But I'm asking you to let me run my web site while for a day or two while I get that straightened out. "That's impossible. We can't do that." You mean (shouting) that everything was fine yesterday, and today you're screwing me and you won't do anything about it? "Watch your language." (Shouting) You have a hell of a nerve expressing phony outrage when you've brought down my web site and won't do a simple thing like change the quota for a day. "There's no way to do that." Well, you're lying, because I'm familiar with the Apache software you're running and I know you can reset the disk quota in a minute. "My supervisor told me it can't be done." Well either you're lying to me or your supervisor is lying to you. "What would be motive for lying to you?" Oh, lots of reasons. You don't have the right people around. You don't know what you're doing. Your supervisor doesn't know what he's doing. No one knows how to do anything. Are you in India right now? "I've told you all I can." Then she tried to connect me to the "life cycle service" department, whatever that means. I had already been on the phone 45 minutes, on hold multiple times, and then she kept me on hold another half hour, before she told me she couldn't connect me and I could call them myself later in the day. (Screaming) BUT MY WEB SITE IS DOWN. HOW LONG IS THIS GOING TO GO ON? YOU CALL THIS 'AWARD WINNING SERVICE'? YOU REALLY JUST WANT TO SCREW THE CUSTOMER, DON'T YOU. I'd been on the phone for almost 1½ hours at this point. She put me on hold again, and then connected me to some salesman named Sean. He took my order for the "upgrade" which (ironically) costs less than the service I'd been paying for. The salesman, who had the same rude attitude that tech support had, told me that it would take a few hours or a couple of days before my web site would be up again. I signed up for the service. Rather than wait any longer, I went onto my existing the web server and deleted huge swaths of graphics files that are rarely used, and managed to get the file usage below quota. So the web site is up again, though in some corners of the web site you won't get a picture. Now at least I have a day or two to move over to this new service. Hopefully there'll be no more down time. I just can't believe the "screw the customer" attitude that Interland (web.com) has. They shut me down with no warning, refused to take a simple step to deal with the situation, blamed the problem on me, lied to me, constantly gave me boilerplate crap, wondered why I was getting so angry, and blamed me for shouting. This is problem with customer support across the industry. They put on these young people, often young girls, who know pretty much nothing, but have boilerplate paragraphs to read to you. Then they express outrage if you get mad at them. Unfortunately, that kind of service is quite common, as I'll now illustrate with additional examples. Dell.com and MSN.com. Around 2000 I bought a Dell computer, and gave them a credit card number. A year later, I noticed that they were charging me $20 per month for the MSN service which had come with the computer but which I'd never used. I was furious, called up the MSN people, screamed at the lady, and she took charge off my credit card. This is the kind of game these companies play once they have your credit card number. I bought a computer from Dell. I never authorized any charges to Microsoft's MSN service. But they had my credit card number, and just did whatever they pleased with it. This was probably the last time I ever used a "real" credit card number. Since then I've used ONLY virtual credit card numbers (see below), and I estimate that I've saved hundreds of dollars. Yahoo. From 2002-2005 I ran an online Yahoo group called "My Ex-Husband is now my (financial) slave." I had 3,263 members, about 200 of whom were active. The discussion was about gender issues, and the membership spanned radical feminists to radical fathers' rights people. It was a very active group, had hundreds of postings per day, and I was proud to say that we helped a lot of people -- divorced men and women and even some adult children of divorce -- get through some very difficult times. Once or twice I think we even saved a life. One day, I received an extremely offensive e-mail message from Garth Stockden, a politician affiliated with an extreme anti-American hate group called "Australia One Nation." He compared the members of "Ex Husband Now My Slave" to pedophiles. He said he was going to report to Yahoo that the group was a violation of Yahoo's anti-abuse policy. The next thing I knew, much to my astonishment, was that Yahoo listened to him and, within an hour, deleted the entire group and my Yahoo ID. Instantly, with no notice. I'm still in shock from all this, even though it happened two years ago. Yahoo screwed over 3,000 of it's own users because of some hate-filled bigot, but it's increasingly clear that when you're dealing with Yahoo then you're dealing with some of the stupidest people in the computer industry. I can just barely stand to think about Yahoo any more without getting sick to my stomach. I've discovered the following things about Yahoo, talking to other people:

There is NO customer service. If you have a problem, you can send them an e-mail message, but it's ignored. Ignoring e-mail messages, except in certain narrow categories, is their policy.
If you use one of their online services, and their software doesn't work, then you're just screwed.
If they have your credit card number, they'll continue charging it, even if they provide no service.
If you try to cancel your service, the software often won't let you, or if it does, your credit card will be charged a time or two more anyway.
There's no phone number you can call, no one you can e-mail, no one to complain to. They don't care. Their attitude is "we've got your credit card number. Now screw you."

Yahoo is truly the armpit of the computer industry. I strongly urge everyone to stay as far from Yahoo as possible. Whatever you do, don't give them a credit card number, or they'll screw you. If you MUST give them a credit card number, then use a virtual number, as described below. The news from Yahoo this past week has been exceedingly gratifying to me. The CEO and several of his staff have been forced to resign because the company has been losing so much business to Google. Yahoo has a business model that they can give NO customer service, and just get people to pay for online services. It's a rotten business model, and it's screwed a lot of people. It's gratifying to me to see Yahoo falling down. They deserve it. Google. I have actually gotten e-mail responses from Google, which makes them a little better than Yahoo. I tried a couple of things with them. A couple of years ago, I tried advertising this web site on Google, but after a few months I decided that I wasn't getting anything out of it, and canceled it. Earlier this year I tried running Google ads on this web site, and it was a real farce. They don't let you select anything about the ads that run on your web site. They have some algorithm that decides what ads are good for you. For example, when I ran an article on bird flu, it was accompanied by this ad: "*Protein Printing* Print proteins and more with the Calligrapher. *Cytomyx Biomarkers* www.Bio-Rad.com" and this one: "Human DNA Product From High Quality Human Tissue Samples www.cytomyx.com". Writing about a Mideast peace plan brought this ad: "*Criminology peacemaking* Criminal Justice Degrees Get Your Degree Today! www.fmudegrees.com." Writing about religion: "Empower women. Be a Catholic Sister Join us. Maryknoll Sisters sisters.maryknoll.org. At the end, I think I made about $2.03 from advertising, so I canceled that service too. I can't really complain that Google took money unreasonably. Their online software has fewer features than Yahoo's, but is better written and works better. The problem with Google is quite different: They really screw you by not indexing your web site. I tried to get this web site listed on their "Blog Search," and it worked ok for a few days, but then they simply stopped. Try it yourself. Here's the link you can use: <#stdurl http://blogsearch.google.com/blogsearch?q=blogurl:http://www.generationaldynamics.com/#> You can see that they simply stopped indexing on January 23. I sent an e-mail message and actually got an answer, but the answer was just "screw you" boilerplate. Walgreens.com. I started using this web site for prescriptions a couple of months ago. When it works, it works well. But there are several problems with the software, and it makes mistakes. So beware. However, customer service is available, and you can also call your local Walgreens store. In the past, I used drugstore.com with no problems. WSJ.com (Wall Street Journal) First, I really do like the web site. It's updated frequently, it's attractive, and highly functional. However, I'm not interested in using the investment tools; I just want news services for this web site. There are plenty of other online news services these days; they aren't as good as WSJ.com, but they're not bad. So several years ago when I bought an online subscription, they offered me "two weeks free service" before they would charge my credit card and start the subscription. So I signed up. When the year was up, they subtracted the two "free" weeks from the end of the one-year subscription. In other words, the "two free weeks" was a lie. This really annoyed me, so I canceled the subscription, and since I had given them a virtual credit number at the start, they had no way to charge me further. I decided to live without the service for a couple of years until a few months ago, when they gave me a cut-rate offer that I decided to accept. I will say once again, though, it's a very expensive service, but it's top-rate, especially if you have use for their investment tools, and the software works. Virtual Credit Card Numbers. If you have a Citibank credit card, then you can go to citicards.com and sign up for the virtual credit card number service. With this service, you can log on any time and get a new "virtual" credit card number that you can use for online services. The rules are as follows:

You can specify a period of time (e.g., 3 months) and a total charge authorization (e.g., $300). After that, the virtual number can no longer be used.
Only one vendor can charge to a a single virtual number. That means that if someone steals the virtual credit card number that's been used by, say amazon.com, then it's useless to them.
You can increase the time period or the total authorization at any time.
You can cancel the virtual number at any time.
Any charges to a virtual credit card number automatically appear on your bill for the "real" credit card.

I've used this service now probably 100-200 times in the past several years and am very satisfied with it. I also tried similar services from American Express and Discover, and found them to be terrible. Their online software was poorly written, and charges could exceed the limits specified. In the case of the Discover service, I used one of their numbers for my monthly Interland (Web.com) payment. It should have expired within a year, but Interland was able to charge to it for three years. I let it continue this way because I was curious to see how long before Discover would stop permitting charges to the expired virtual number. After three years, I finally had to give Interland another credit card number, and this time I gave them a Citibank number. The Discover service was a complete joke. I've been in the enterprise software business for my entire career, and I can quickly spot well-written and poorly-written software. The American Express and Discover software was written by amateurs who didn't know how to write software. But it was clear from the start that the Citibank software was well-designed and well-written, using a separate database server to track virtual number charges. I recommend the Citibank service highly. Universal Default. This is a different subject, but everyone should be aware of it. Thanks to the Internet, the three credit tracking services (Experian (formerly TRW), TransUnion and Equifax) now can track instantly every credit card transaction. If you're late with any bill payment, they'll know immediately, which means that anyone else can find out. You might have a credit card that charges 10% interest, but if you're a few days late with a payment on any OTHER bill, then your credit card company will know about it, and can raise your interest rate to 30%. If you have several credit cards, and you're a little late on a bill payment, then ALL the credit card companies can raise your interest rates to 30%. I know someone that this happened to, and it was a disaster. This is called "Universal Default." If you have $1,000 charged to credit cards, then you'll end up owing $300 interest by the end of the year. This is getting up to the "vig" charged by organized crime. That's why banks that pursue these policies should be thought of as criminals participating in organized crime. Citibank claims to have ended its Universal Default policy, but other banks have not. If you have credit cards and you're not aware of how this criminal activity works, you should be aware that missing a payment can be a disaster for you. Our corrupt era. These online service abuses all have something in common: They treat individual humans as statistics, rather than as individuals. That's because their business model assumes that there's an unlimited number of people to draw on, and the only objective is to collect people. So if Yahoo can offer a service that will draw 10 million new credit card numbers, then they'll offer it, even if it means that 10,000 people will be charged for a service that doesn't work for them. The only thing that that matters is the 10 million new credit card numbers. The 10,000 people who are screwed are in the same category as industrial waste -- just something that Yahoo has to put up with to make money. And they get rid of this "industrial waste" by providing no customer service, ignoring e-mail messages, and just charging credit cards. Banks that practice the Universal Default criminal activity are doing the same thing. It all has to do with volume -- get as many people as possible paying criminally high interest rates so that they can make money. The people who are really screwed by this policy are just more "industrial waste." This is the other side of a point that I've made several times before: that there's a lot of crime going on today, committed by desperate people who are in over their heads in investments or subprime mortgages or credit card debt. These online companies make promises they can't fulfill to capture as many people as they can, just as a fishing boat will use a new kind of bait to capture as many fish as they can. They protect themselves by walling themselves off from their customers -- no e-mail responses or boilerplate e-mail responses, no customer service or boilerplate customer services. To the online companies, people are just aggregates, not individuals. But the individual people, of course, are not fishes. They're people in trouble -- because of credit card debt, because of subprime mortgages, or whatever. This drives desperate individuals into crimes like embezzlement, which are ticking time bombs. There's an old saying: "To err is human, but to really f---k things up takes a computer." So a company like Yahoo can provide a service to millions of people, but it can also really screw a significant subset of those people. My guess about the reason that Yahoo has done so poorly is that enough people have finally gotten screwed that they refuse to have anything to do with Yahoo. The business model that says that there's an infinite supply of new people and new credit cards really does eventually run out. As long as everyone's making money, no one worries about criminal activities by credit card companies, or about embezzlement by individuals. But when times get tough, retribution is relentless. We're seeing that now on all sides. Individual who lied about their assets on mortgage applications, in order to obtain subprime mortgage loans, are paying the price. Builders and loan officers who colluded with one another are going to go to jail. Financial advisors who protected their own assets, but who made commissions by advising their clients to buy risky stocks are going to be skewered. And now, as discussed <#inc ww2010.weblog.ref e070628b "my next article,"#> the SEC is opening multiple investations in bankers' abuse of credit derivatives. The time of retribution for all this credit debauchery, mainly by people in the Boomer and Xer generations, is getting close. =eod =// &&2 e070625 Bank of International Settlements sees 1930s style Depression =data ww2010.weblog.y2007.e070625.head Bank of International Settlements foresees possible new 1930s style Depression =data ww2010.weblog.y2007.e070625.keys bank of international settlements, bis, great depression, nigel jenkins, payden & regal global, oral history, eileen hallet stone =data ww2010.weblog.y2007.e070625.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070625.date 25-Jun-07 =data ww2010.weblog.y2007.e070625.txt1 Saying that "our understanding of economic processes may be less today" =data ww2010.weblog.y2007.e070625.txt2 than it was in the past, the <#stdurl http://www.bis.org/publ/arpdf/ar2007e.htm "2007 Annual Report of the Bank of International Settlements (BIS)"#> notes that "that the run-up to the Great Depression had exhibited similar non-inflationary characteristics" to those seen today. The report discusses how the growth of the global economy has continued at levels that are among the highest in history, and that, combined with historically low inflation, even the poorest countries have shared in this growing prosperity. However, the report says that major currency imbalances and investors' extreme appetite for risk. It gives three specific threats, as summarized by the BBC:

The US dollar looks vulnerable to sudden loss of confidence by foreign investors;
The Japanese yen's decline in value has been "anomalous," and traders are at risk of a rapid rise in value;
Many firms risk collapse in a downturn because they're too willing to load themselves up with debt.

<#inc ww2010.pic g070625.jpg right "" "Nigel Jenkins, currency strategist at Payden & Regal Global (Source: BBC)"#> In response to the report, the BBC interviewed Nigel Jenkins, currency strategist at Payden & Regal Global, who said the following:

"The reason that we think that there won't be anything like the 1930s depression is that central bankers around the world have on the whole gotten this reduction of global liquidity pretty much right. You've got interest rates up to quite a normal level in the United States - we think they'll be stable there; the ECB [European Central Bank] has a little bit further to go - may 50 or 75 basis points further rate hikes by the end of this year; the Bank of Japan will be raising interest rates, but only at a glacial pace, and from a very low level. There is nothing in the economic data that suggests to us that global central banks really stand a chance of over-tightening interest rates, and it's the over-tightening of interest rates that would be the risk of the major downturn, and we just don't see that."

This response by Nigel Jenkins captures, in just a few brief, pithy sentences, everything that's totally wrong about today's mainstream macroeconomics. I don't blame Jenkins for this, because he's just quoting the standard stuff, but what he said is total nonsense. It's to address stuff like this that last year I wrote my <#hreftext ww2010.i.macro061025 "article on "System Dynamics and Macroeconomics,""#> which shows how mainstream macroeconomics has failed to predict or explain anything, especially since 1995, and how this failure can cause similar results as in 1929. Mainstream macroeconomics has failed to predict or explain the stock market bubble of the late 1990s, or anything that's happened since the Nasdaq crash in 2000. And now we see Jenkins quoting the most banal claim of mainstream macroeconomics, the belief that the only thing that matters is interest rates. But if you go back and look at the three items summarized above by the BBC, you'll see that Jenkins didn't address any of them. Why would stable interest rates prevent a loss of confidence in the American dollar, or a spike in confidence in the Japanese yen? How would stable interest rates protect firms that are swimming in debt from going under during a downturn? What Jenkins said makes as little sense as if he'd said, "Well, the birds have been chirping outside my office, and it's when the birds stop chirping that we have a risk of a major downturn, and we just don't see that." The BIS report points out the huge credit imbalances in today's global economy, and says that "what's old is new again," as economists rediscover some concepts of a century ago:

"At the same time, in the early 2000s another perspective emphasising the role of quantitative aggregates, and especially credit, began to emerge. This perspective had distant roots in those theories of business fluctuations from the early part of the 20th century which had stressed the self-reinforcing processes that led to occasional booms and busts. It also borrowed from the intellectual tradition that highlighted the role of credit and speculative behaviour as a cause of financial instability. Finally, it retained elements of the more recent advances in economic theory, which emphasised how credit imperfections could amplify business cycles."

The report analyzes previous historical downturns, and finds them quite similar to the American economy today:

"Economic history is a useful guide in this respect. The Great Inflation in the 1970s took most commentators and policymakers completely by surprise, as did the pace of disinflation and the subsequent economic recovery after the problem was effectively confronted. Similarly, virtually no one foresaw the Great Depression of the 1930s, or the crises which affected Japan and Southeast Asia in the early and late 1990s, respectively. In fact, each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a “new era” had arrived. Similar surprises can be noted at a more micro level. Around the time of the failure of LTCM in 1998, the firm faced price shocks in various markets that were almost 10 times larger than might reasonably have been expected based on previous history. As a result, its fundamental assumptions – that it was adequately diversified, had ample liquidity and was well capitalised – all proved disastrously wrong."

The report notes that "many will say that our understanding of economic processes has improved thanks to this experience," but quickly discards it, pointing out that economists have no idea whatsoever how to predict or explain trends in excess capacity, import prices, wages, or even perceived inflation. They're saying, in much more diplomatic words, exactly what I'm saying: That mainstream economists don't know crap about what's going on in the world.

"Indeed, in the light of massive and ongoing structural changes, it is not hard to argue that our understanding of economic processes may even be less today than it was in the past. On the real side of the economy, a combination of technological progress and globalisation has revolutionised production. On the financial side, new players, new instruments and new attitudes have proven equally revolutionary. And on the monetary side, increasingly independent central banks have changed dramatically in terms of both how they act and how they communicate with the public. In the midst of all this change, could anyone seriously contend that it is business as usual?"

This 244 page report contains a wealth of historical and analytic information. I've only had a chance to skim through it today, but I'll be drawing on it more in the future. Meanwhile, I'd like to post excerpts from a "Living History" <#stdurl http://www.sltrib.com/news/ci_6216501 "article from the Salt Lake City Tribune,"#> written by <#stdurl mailto:ehswriter@aol.com. "oral historian Eileen Hallet Stone:"#>

Depression brought a prosperous Utah to its knees "In 1929, a crowd gathered downtown on Main Street and watched haplessly as the ticker tape on the Salt Lake Tribune Building tumbled. After a record high of national prosperity, the stock market collapsed and the country spiraled into one of the worst economic downspins in American history. During the Great Depression of the 1930s, banks and businesses failed, factories and stores closed, farm prices dropped, benefits dried up and unemployment soared. Twelve million citizens were suddenly jobless and without savings. Thousands lost their homes. For nearly a decade, the popular song "Brother, Can You Spare a Dime?" wailed the nation's despair. "I don't think there's one person out of a thousand now that would believe what we went through," said Theodore "Pete" Houston of Sandy, who worked in steel mills, logging camps and stone quarries before the Depression cut him to the core. In 1933, Utah's unemployment rate was the fourth highest in the nation. One of three Utahns was out of work. Those employed suffered dwindling hours and severe pay cuts. Others peddled wares, went door-to-door seeking labor in exchange for food or became shoeshine "boys." Families moved in together. Teenagers took to the road - a few less mouths to feed. And passing transients clamoring to work in the cities were run out of town. Breadlines, soup kitchens and "city-operated shelters" opened along the Wasatch Front. They were branded "Hoover cafes" by a populace increasingly frustrated with President Hoover's inability to stem the depression. "We were lucky to find jobs raking leaves, digging ditches or cleaning streets," Houston said. "Many people couldn't find work and went hungry for days. It was hardest on the kids. Imagine, children living on a crust of bread." ... In the 1930s, Utah marriages and births went into a slump. Divorce rates rose. With scarce jobs, married men were first to be hired, unmarried men feared dismissal because they were single and working single women, most of them teachers, were forced to resign if they married. As the depression deepened with no respite in sight, some lost faith in the American system, their future and themselves. In 1929, Jack Findling had a charitable bent and was a leader in his community. ... Then the bottom fell out. "My grandfather lost a lot of money, and found no way whatsoever to recoup his losses," said Joanne McGillis, who was a toddler when he died. "He had always helped others. Now he felt like an albatross around his family's neck. He ended up committing suicide." Bereft of assets, broke and broken-hearted, Findling's wife, Esther, sold their home, furnishings, and possessions. She struggled to keep open the store. "They were devoted to each other," McGillis said. "Nana was devastated. She worked hard. She never remarried." "Once I built a railroad, I made it run, made it race against time. Once I built a railroad; now it's done. Brother, can you spare a dime?"

Generational Dynamics predicts that this is about to happen again, and the time may not be too far off. The Bank of International Settlements seems to agree. =eod =// &&2 e070624b The real estate market crisis is worsening and spreading significantly =data ww2010.weblog.y2007.e070624b.head The real estate market crisis is worsening and spreading significantly =data ww2010.weblog.y2007.e070624b.keys abx index, real estate market, foreclosures, bear stearns, ambrose bierce, ecclesiastes =data ww2010.weblog.y2007.e070624b.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070624b.date 24-Jun-07 =data ww2010.weblog.y2007.e070624b.txt1 The Bear Stearns debacle is just the "tip of the iceberg." =data ww2010.weblog.y2007.e070624b.txt2 <#inc ww2010.pic g070623.png right "" "Index price of ABX-HE-BBB- 07-1 from Jan 19 to Jun 22, 2007 (Source: Markit.com)"#> The recent collapse of the ABX index, as illustrated in the adjoining graph, which I discussed in <#inc ww2010.weblog.ref e070624 "the companion article on the Bear Stearns bail-out,"#> illustrates the continuing deterioration of the subprime mortgage market, and the mortgage market in general. In fact, the entire real estate market has been continuing to deteriorate significantly. Here's a summary from <#stdurl http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adDRCBB5fqZQ "a Bloomberg article last week:"#>

"The worst is yet to come for the U.S. housing market. The jump in 30-year mortgage rates by more than a half a percentage point to 6.74 percent in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, the National Association of Realtors reported. "It's a blood bath," said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. "We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit." Confidence among U.S. homebuilders fell in June to the lowest since February 1991, according to the National Association of Home Builders/Wells Fargo index released this week. Housing starts declined in May for the first time in four months, the Commerce Department reported yesterday. New-home sales will decline 33 percent from 2005's peak to the end of this year, according to the Realtors' group, exceeding the 25 percent three-year drop in 1991 that helped spark a recession."

<#inc ww2010.pic g070623b.gif center "" "These charts on housing starts show the total number of single-family homes begun in rolling 12-month periods, and compare that with the number begun in the period ended a year earlier. In the 12 months through May, 1.27 million single-family homes were started, a figure that is 25 percent below the number started in the 12 months through May 2006. (Source: NY Times)"#> An <#stdurl http://www.nytimes.com/2007/06/23/business/23charts.html "article in Saturday's New York Times,"#> titled "Homes Sell. Homes Don’t Sell. Builders Still Build" was accompanied by the adjoining charts. It underscores the point that home builders have been "far too optimistic," and have continued building new homes, even though existing homes weren't selling. This has resulted in historically high inventories of homes for sale. In fact, a <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aFoDV5gMIDUM&refer=home "report last week by Bank of America analysts"#> came out this week saying that losses in the housing market so far are just the "tip of the iceberg." Here's an excerpt:

"Losses in the U.S. mortgage market may be the "tip of the iceberg" as borrowers fail to keep up with rising payments on billions worth of adjustable-rate loans in coming months, Bank of America Corp. analysts said. Homeowners with about $515 billion on adjustable-rate home loans will pay more this year, and another $680 billion worth of mortgages will reset next year, analysts led by Robert Lacoursiere wrote in a research note today. More than 70 percent of the total was granted to subprime borrowers, people with the riskiest credit records, they said. Surging defaults on subprime loans have pushed at least 60 mortgage companies to close or sell operations and forced Bear Stearns Cos. to offer a $3.2 billion bailout for one of two money-losing hedge funds. New foreclosures set a record in the first quarter, with subprime borrowers leading the way, the Mortgage Bankers Association reported. "The large volume of subprime ARMs [Adjustable Rate Mortgages] scheduled to reset at higher rates in '07 and '08 will pressure already-stretched borrowers," putting more loans into foreclosure, the Bank of America analysts wrote from New York. A collapse of the Bear Stearns funds "could be the tipping point of a broader fallout from subprime mortgage credit deterioration," they said."

What we're seeing is that more and more analysts and pundits are seeing a major financial crisis on the horizon. When I talked to people in 2002 (five years ago) that we would be experiencing a stock market crash and a new 1930s style Great Depression, probably by the 2006-2007 time frame, my prediction was based on various long-term trends, some of them centuries old. In particular, I used <#hreftext ww2010.i.050711eleven "a long-term exponential growth forecasting model,"#> combined with an analysis of long-term price/earnings ratio trends to make the prediction. This eventually led to a part of the Generational Dynamics forecasting methodology, related to long-term financial predictions. People who dismissed this prediction at the time had three types of reasons: (1) They had no idea what I was talking about. (2) They claimed that exponential growth forecasting doesn't work. (3) They claimed that old trends are no longer relevant since "things are different" this time, because the Internet had made markets more transparent, blah, blah, blah. These people were all simply wrong. And of course, my prediction is just as true today as it was in 2002. As with other Generational Dynamics predictions, I was able to predict what our final destination would be, but not the path we would take to reach that destination, nor the exact time frame. As I've described before, the forecasting technique can narrow the time frame by matching short-term indicators to long-term trends. For example, if there's a heat wave in New York in November, you don't assume that "things are different" this time, and that winter isn't coming this year. Instead, you track the temperatures from day to day until they fall back in line with the long-term trend prediction, and use matching techniques to estimate how far off winter still is. Pundits, journalists and high-priced analysts never look at long-term trends. They look ONLY at short-term indicators. Since the short-term indicators are suddenly turning negative, the pundits are suddenly predicting a financial crisis. If there's a blip in the figures next month, then the pundits, journalists, and high-priced analysts will turn positive again. In fact, even the tiniest improvement in the financial climate will cause them to turn positive, because that's what they do. They sell dreams and hopes and fantasies in order to make commissions and justify their salaries. They have NO IDEA what's going on in the world. I sold my condo in 2005 and moved into an apartment because I estimated we were at the top of the housing bubble. That was obvious, based on long-term trend predictions and current indicators at that time. I have no money in stocks because I know that we're in a huge stock market bubble. I've been nowhere near a CDO in my life, as far as I know. Am I really that much smarter than all these high-priced analysts? The answer to that question is mind-boggling. This isn't just true in the financial area. As I'm writing to this, I'm listening to some pundit criticize the Administration for not re-engaging the "peace process" in the Mideast. What is it with these guys' fantasies? At least one thing that I've been saying for years is becoming more and more apparent to even the stupidest journalists: The major problem in the Mideast is not the Iraq war, but the conflict between Arabs and Jews. It's beginning to sink in with all but the densest journalists and politicians that the Palestinian situation is getting very dangerous. These guys get the Mideast situation wrong for exactly the same reason that the financial analysts get the financial situation wrong: They look only at short-term indicators, and never look at long-term trends. In 2003, <#hreftext ww2010.i.may01 "I predicted that the new "Roadmap to Peace"would never succeed,"#> it was based on long-term trends going back centuries. Especially relevant was the genocidal war between Arabs and Jews in the late 1940s, when Palestine was partitioned and the state of Israel was created. I predicted that the disappearance of Ariel Sharon and Yasser Arafat, both of whom were survivors of that war, would be part of a generational change that would lead to exactly that kind of genocidal war between Arabs and Jews. Once again, Generational Dynamics tells you your destination, but not the path you'll take or how long it will take to get there. You narrow the window by matching short-term indicators to the long-term trends. The short-term indicators in Gaza and the West Bank are turning sharply negative, just as the financial indicators are turning sharply negative. We know from <#inc ww2010.weblog.ref e070114b "articles in the Congressional Quarterly"#> that Washington journalists, analysts and politicians have no idea what's going on in Iraq or the Mideast. They don't know the differences between Sunni and Shi'ite, they don't know that al-Qaeda is operating in Iraq, and they don't know that al-Qaeda is a Sunni organization. Once again, the politicians, journalists, pundits, and high-priced analysts never look at long-term trends. They look only at short-term indicators, and that's why if some tiny bit of "positive" news appeared next week, they would all change their forecasts again. But the long-term trend hasn't changed. The global financial system is headed for a generational crash, and the Palestine region is headed for a generational war. The same is true of the prospect of a genocidal war with China. I mentioned this to someone recently, and he laughed and said it was "far fetched." Hell, the Chinese have been militarizing and preparing for war with us for 15 years, and they constantly threaten us with war over Taiwan. What more evidence do you need? Even if you believe that war can be avoided (it can't), then the idea certainly isn't "far fetched." The American satirist Ambrose Bierce (1842-1913) said that "War is God's way of teaching Americans geography." He might also have said that "war is God's way of teaching Americans history," and "a Great Depression is God's way of teaching Americans economics." And he might have said the same about non-Americans as well. Today I'm in the mood to close with a quote from the Bible -- the Old Testament, which is considered a holy book by Jews, Christians and Muslims alike. Here's Ecclesiastes 1:9-18:

"What has been will be again, what has been done will be done again; there is nothing new under the sun. Is there anything of which one can say, "Look! This is something new"? It was here already, long ago; it was here before our time. There is no remembrance of men of old, and even those who are yet to come will not be remembered by those who follow. I, the Teacher, was king over Israel in Jerusalem. I devoted myself to study and to explore by wisdom all that is done under heaven. What a heavy burden God has laid on men! I have seen all the things that are done under the sun; all of them are meaningless, a chasing after the wind. What is twisted cannot be straightened; what is lacking cannot be counted. I thought to myself, "Look, I have grown and increased in wisdom more than anyone who has ruled over Jerusalem before me; I have experienced much of wisdom and knowledge." Then I applied myself to the understanding of wisdom, and also of madness and folly, but I learned that this, too, is a chasing after the wind. For with much wisdom comes much sorrow; the more knowledge, the more grief."

=eod =// &&2 e070624 Bear Stearns bails out defaulting hedge funds, preventing broad market meltdown =data ww2010.weblog.y2007.e070624.head Bear Stearns bails out defaulting hedge funds, preventing broad market meltdown =data ww2010.weblog.y2007.e070624.keys abx index, real estate market, foreclosures, bear stearns, jp morgan =data ww2010.weblog.y2007.e070624.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070624.date 24-Jun-07 =data ww2010.weblog.y2007.e070624.txt1 At the end of a dramatic week described by pundits as a "bloodbath," =data ww2010.weblog.y2007.e070624.txt2 investment firm Bear Stearns caved in to other investment firms, and loaned $2.3 billion of its own money to stave off default of two of the hedge funds that it manages. Both of the hedge funds had heavily invested in credit derivatives related to subprime mortgage loans. The near-collapse of these two hedge funds reflects a larger trend in the economy that the entire subprime mortgage industry may finally be close to collapse. The turning point occurred at the beginning of this month as home foreclosure rates kept increasing, and it became apparent that the subprime mortgage industry was much worse off than officials had been saying. It's still deteriorating, as I discuss my <#inc ww2010.weblog.ref e070624b "the companion article on the real estate market."#> <#inc ww2010.pic g070623.png right "" "Index price of ABX-HE-BBB- 07-1 from Jan 19 to Jun 22, 2007 (Source: Markit.com)"#> The resulting industry-wide investor loss of confidence is measured by the <#stdurl http://www.markit.com/abx.jsp "ABX-HE-BBB- 07-1 index,"#> whose value started falling sharply early in June, as the adjacent graph indicates. I discussed this index in my February 22 article, <#inc ww2010.weblog.ref e070225 "How to interpret and price the ABX derivative table."#> This index represents the value of certain derivative certificates known as CDOs, or collateralized debt obligations. These CDOs provide a kind of insurance that homeowners will pay off their subprime mortgage loans, but as the number of foreclosures increased, the CDOs lost value. The value of the CDOs corresponds to the ABX index shown in the graph. The two Bear Stearns hedge funds had invested heavily enough in CDOs that when they collapsed in value, the entire hedge fund was in jeopardy. The CDOs had been purchased on a leveraged basis, which is similar to individuals buying stocks "on margin," something that was identified as a major cause of the 1929 stock market crash. As the value of the CDOs kept falling, the hedge funds had to meet margin calls by supplying more and more cash to make up the loss in value. Within the last two weeks it became apparent that the hedge funds wouldn't be able to meet margin calls much longer, and the hedge funds were close to default. =inc ww2010.h2 throat "Cutthroat negotiations" During the last two weeks, cutthroat negotiations have been taking place between Bear Stearns and the hedge funds' principal investors, including J.P. Morgan Chase & Co., Merrill Lynch & Co., Goldman Sachs Group Inc. and Barclays PLC. Not all the details are known, but a <#stdurl http://online.wsj.com/article/SB118252387194844899.html "Saturday Wall Street Journal article"#> and a <#stdurl http://www.nytimes.com/2007/06/23/business/23bond.html "Saturday New York Times article"#> provide a number of details:

Bear Stearns manages the hedge funds, but does not invest them. Other firms pay money to invest, and Bear Stearns decides how to manage other people's money.
Therefore, Bear Stearns had no money to lose if the hedge funds defaulted.
Therefore, Bear Stearns refused to invest its own money to save the funds. In fact, the company has a long-standing reputation of not bailing out the funds that it manages, an attitude that pisses off others on Wall Street.
One of the funds had been started last summer with with $600 million in investments from wealthy investors, along with $6 billion in money borrowed from banks and brokerage firms. If the hedge funds defaulted, then these loans would not be repaid, and some banks and brokerage firms would go bankrupt. That's one of the two major reasons why a default could have caused a chain reaction leading to a major market meltdown.
If the hedge funds defaulted, then all its assets would be sold off, including all the CDOs in their portfolios. This would occur at "fire sale" prices, and would establish lower market values for CDOs in general. There is an accounting rule called "mark to market," which means that if you own an asset that you're using for an investment, then you have evaluate the asset according to the current market price. That means that any other firms with CDOs in their portfolios -- and there are many such firms -- would be required by law to re-evaluate their entire portfolios, based on the fire sale prices. This would cause many other firms to be forced to meet margin calls, and that would cause the default of other hedge funds. That's the second of the two major reasons why a default could have caused a chain reaction leading to a major market meltdown.
So the other investment firms made some very substantial threats to get Bear Stearns to change its mind about bailing out the fund. Neither the WSJ article nor the NY Times indicated what the specific threats were, but it was clear that they were going to put Bear Stearns out of business.
As a result, Bear Stearns put out <#stdurl http://www.bearstearns.com/sitewide/our_firm/press_releases/content.htm?d=06_22_2007 "a press release on Friday,"#> saying that it would provide $3.2 billion of its own money to "enable the Fund to replace current secured financing, improve the Fund’s liquidity and facilitate an orderly de-leveraging of the Fund in the marketplace." Wall Street breathed a sigh of relief, although the stock market fell 1¼% anyway, making this week the second worst one this year.

The Bear Stearns debacle is far from over, because the housing market crisis is far from over. According to one <#stdurl http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adDRCBB5fqZQ "pundit quoted by Bloomberg:"#> "It's a blood bath. We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit." This means that CDOs will continue to lose value and that the hedge funds will continue to default. So Bear Stearns will lose its $2.3 billion loan as well. =inc ww2010.h2 mark "The Mark to Market scam" Convincing the Bear Stearns negotiators to put $2.3 billion into a failing hedge fund must have required quite a bit of arm-twisting. The crisis was triggered by a fall in the value of CDOs, and the way that we know that the value of CDOs has fallen is by looking at the ABX-HE-BBB- 07-1, discussed above. According to <#stdurl http://www.minyanville.com/articles/CDO-Credit-Debt-Investors/index/a/12869 "John Succo at minyanville.com,"#> the published ABX index is being held artificially high, much higher than the "real" market value of CDOs. This indicates that CDO values have a lot farther to fall, with consequent impact on other hedge funds invested in CDOs. Succo wrote his article six weeks ago, before the recent fall in the ABX index. He was wondering why CDO valuations were so high, in view of the continuing deterioration of the housing market. In a fair, transparent market, where everyone knows what's going on, the deteriorating housing market should cause CDO valuations to fall much more quickly. Well, why weren't they falling faster? The reason is that there's a kind of scam going on. If the value of a stock share falls, then you can check the price on the New York Stock Exchange, or whatever stock exchange the share is traded on. There's an open, transparent market on stock shares. And according to the "Mark to Market" rule that I described above, anyone using stock shares as collateral must valuate them according to current market prices. But what if your assets are in CDOs, rather than stock shares? How do you valuate them for Mark to Market purposes? There's no public market for CDOs; in fact, most CDO deals are done in smoke-filled back rooms of financial firms by men wearing green eyeshades. The ONLY publicly available gauge of the values of CDOs is the ABX index, and that index is set by agencies marketing the CDOs themselves. This is called "Mark to Model," but an online correspondent refers to it as "Mark to Myth." The problem is that setting the ABX index involves a conflict of interest, as described by Succo on May 17:

"I asked a large broker firm to send over its smartest math person on Collateralized Debt Obligations (CDO) structuring. I wanted to know what I am missing: why is the market so sanguine in the face of deteriorating collateral values in the mortgage market? One of my firm's theses has been that, as the mortgage market deteriorates, investors holding CDO as an investment would realize losses and this would feed into other risky asset classes. Why aren’t losses being seen when the market is clearly deteriorating? The team that came over was headed by a very smart gentleman. He was very good at math and very straightforward. Working for a broker I was prepared for some sugar coating. I didn’t get any. The answer is simple and scary: conflict of interest. He explained that due to the many layers of today's complicated credit products, the assumptions used to dictate the pricing and outcome of CDO are extremely subjective. The process is so subjective in fact that in order to make the market work an "impartial" pricing mechanism must exist that the entire market relies upon. Enter the credit agencies. They use their models, which are not sensitive to current or expected economic activity, but are based almost entirely on past and current default rates and cash flow to price the risk. This of course raises two issues. First, it is questionable whether "recent" experienced losses over the last few years really represent the worst of the credit market (conservative). But even more importantly, it raises a huge conflict of interest: the credit agency's customers are the very issuers of the tranches they rate. The credit agencies, therefore, need to compete for business based at least in part on the ratings they are willing to give these tranches. As a result, they will only downgrade when forced to by experienced losses; not rising default rates, not a worsening economy, but only actual, experienced losses. Even more disturbing, they will be most reluctant to downgrade the riskiest tranches (the equity tranches) since those continue to be owned by the issuers even after the deal is sold. So even though the mortgage market has deteriorated substantially, mark-to-market losses by those holding the CDO paper have generally not been realized simply because the rating agencies have not changed their ratings for all the above reasons. Accounting rules only require holders of the paper to mark prices according to the accepted model, not actual prices. For example, below is a chart of the actual BBB minus tranch of the mortgage-backed securities pool from November '06 to present. [Note: See the chart of the ABX index near the beginning of this article, and note that on May 17, which is when Succo was writing this, the index value was considerably higher than it is today. - JJX] Actual prices where traders can really buy and sell is substantially lower than where investors are marking their positions. The levels at which investors are carrying the paper is not reflecting underlying reality as the holders simply hold their collective breath and the rating agencies ignore a worsening environment. I asked them what would force the rating agencies to change their ratings and the response was "it's just a matter of time if the market continues to deteriorate, for the agencies at some point will be forced by the cumulative losses to acquiesce." Because these losses have been compressed, any re-adjusting of ratings by these agencies are likely to result in a massive repricing of risk."

Succo's analysis, written a month before the Bear Stearns debacle, shows why Wall Street was so anxious to avoid a default; the CDO portfolio held by the Bear Stearns hedge funds would have to be sold off at fire sale prices. This would force the valuation of ALL CDOs in ALL hedge fund portfolios throughout the industry to be revalued, according to Mark to Market rules. Let's repeat a brief portion of the above article:

"The credit agencies, therefore, need to compete for business based at least in part on the ratings they are willing to give these tranches. As a result, they will only downgrade when forced to by experienced losses; not rising default rates, not a worsening economy, but only actual, experienced losses. Even more disturbing, they will be most reluctant to downgrade the riskiest tranches (the equity tranches) since those continue to be owned by the issuers even after the deal is sold."

A Bear Stearns default would provide actual "experienced losses," forcing the credit agencies to downgrade their ratings. The scam I've been describing is based on a conflict of interest that credit agencies have. But in fact, all the parties to this entire deal have conflicts of interest. J.P. Morgan and the other bankers used extortion techniques ("Pour $2.3 billion of your own money into the hedge funds, or we'll shut your whole firm down!") to get Bear Stearns to comply. Was Tony Soprano one of the J.P. Morgan negotiators? I guess the Bear Stearns negotiator should consider himself lucky that he wasn't whacked. The reason that Morgan and the other bankers used illegal extortion techniques is because of their own conflicts of interest. They're in the same position as the credit agencies -- they want to keep CDO valuations and the ABX index as artificially high as possible, in order to protect their own portfolios and the portfolios of their clients. This is, once again, the Principle of Maximum Ruin in action. Every day that the global financial bubble is propped up by such subterfuge and extortion techniques, the bubble gets worse. This means that more people are put at risk, and more of their money is put at risk. In the end, the maximum number of people will be ruined to the maximum extent possible -- the Principle of Maximum Ruin. Let's take one more look at the last paragraph of Succo's analysis:

"I asked them what would force the rating agencies to change their ratings and the response was "it's just a matter of time if the market continues to deteriorate, for the agencies at some point will be forced by the cumulative losses to acquiesce." Because these losses have been compressed, any re-adjusting of ratings by these agencies are likely to result in a massive repricing of risk."

That's the situation in any bubble. As long as financial officials keep propping the bubble up, it just gets worse, with even more disastrous results when the bubble bursts. In fact, that's the simple conclusion of the Bear's decision on Friday to pour $2.3 billion of its own money into a hedge fund that's going to fail anyway. That $2.3 billion is good money going after bad, which is what we're going to see a lot more of in the weeks and months to come. The collusion and extortion that went on this week with the Bear crisis (which, as we've stated, is not over) is being accepted now, because people are desperate to believe any fairy tale that tells them that the market can be saved. After the crash occurs, these people will be blamed for harming the economy, and many of these high-flying financiers will be subject to criminal investigations and perhaps jail. From the point of view of Generational Dynamics, a generational stock market crash is overdue. If you go back through history, there are of course many small or regional recessions. But since the 1600s there have been only five major international financial crises: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash. We're now overdue for the next one. It could happen next week, next month or next year. But when it happens, massive numbers of people will become unemployed, bankrupt and homeless. Many high-flying financiers will be subject to criminal investigations, but mostly they'll stay out of jail because they have the resources to hire big law firms to defend them. The real problem is that many ordinary people will go to jail because of crimes they committed out of desperation, because they had listened to the high-flying financiers, and "borrowed" money that wasn't theirs, hoping to stave off homelessness and bankruptcy. This result will be made much worse by actions like this week's bailing out of the Bear Stearns hedge funds. =eod =// &&2 e070623 1946 Intelligence Report: Islam - A Threat to World Stability =data ww2010.weblog.y2007.e070623.head 1946 Intelligence Report: Islam - A Threat to World Stability =data ww2010.weblog.y2007.e070623.keys 1946 intelligence report, islam, threat to world stability, hannah arendt, origins of totalitarianism, growth of muslim populations =data ww2010.weblog.y2007.e070623.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070623.date 23-Jun-07 =data ww2010.weblog.y2007.e070623.txt1 This report clarifies a lot of today's world. =data ww2010.weblog.y2007.e070623.txt2 The 1946 Intelligence Report, which is <#stdurl http://www.danielpipes.org/article/3370 "posted on Daniel Pipes' web site,"#> is a thorough examination of the world at that time, just after the end of World War II. It was confidential at the time of its publication by Military Intelligence Service of the U.S. War Department, and was declassified in 1979. I strongly urge everyone to read the entire report, as it contains amazing information about many countries of the world as viewed by hardnosed intelligence officers of 1946. In this article, we're going to focus on just the fourth chapter, "Islam: A threat to world stability." =inc ww2010.h2 frame "The right frame of mind" As you read the excerpts from this report, try to put yourself in the frame of mind of the people living at that time. The world was still traumatized from the horror of World War II, and only a few short months had passed since America had dropped nuclear weapons on Japanese cities. Much of the world was still on the verge of starvation because of the war:

"The world is facing an acute food shortage in 1946. Supplies are currently short in every important item, including grains, meats, sugar, and fats and oils. Unless foods are carefully allocated and equitably distributed, the people of many areas will be forced to subsist on supplies inadequate to insure against disease and unrest. ... The 1945 wheat crops failed to meet the expectations of most of the European governments. The disappointing harvest was caused, in part, by inadequate plantings, insufficient fertilizer, and unfavorable weather. Some agricultural areas had been battlefields. Farmer hoarding, inadequate transport, and black market operations, accompanied by a breakdown in collection and distribution procedures and other governmental weakness in a number of countries, further contributed to low grain collections." (p. 44)

Even worse, many people felt that after two world wars, a third world war with Communism was not far behind. As Hannah Arendt wrote in the introduction to her 1950 book, The Origins of Totalitarianism:

"Two world wars in one generation, separated by an uninterrupted chain of local wars and revolutions, followed by no peace treaty for the vanquished and no respite for the victor, have ended in the anticipation of a third World War between the two remaining world powers. This moment of anticipation is like the calm that settles after all hopes have died. ... Never has our future been more unpredictable, never have we depended so much on political forces that cannot be trusted to follow the rules of common sense and self-interest -- forces that look like sheer insanity, if judged by the standards of other centuries. ... We can no longer afford to take that which was good in the past and simply call it our heritage, to discard the bad and simply think of it as a dead load which by itself time will bury in oblivion. The subterranean stream of Western history has finally come to the surface and usurped the dignity of our tradition. This is the reality in which we live. And this is why all efforts to escape from the grimness of the present into nostalgia for a still intact past, or into the anticipated oblivion of a better future, are vain."

=inc ww2010.h2 islam "The 1946 Intelligence Report on Islam" So, having set the mood for you, let's now take a look at what the 1946 Intelligence Report had to say about Islam:

Islam: A Threat to World Stability "The Moslem world sprawls around half the earth, from the Pacific across Asia and Africa to the Atlantic, along one of the greatest of trade routes; in its center is an area extremely rich in oil; over it will run some of the most strategically important air routes. With few exceptions, the states which it includes are marked by poverty, ignorance, and stagnation. It is full of discontent and frustration, yet alive with consciousness of its inferiority and with determination to achieve some kind of general betterment.

By today's standards, this was an extremely insensitive view of Muslims, but it's actually just the opposite of what it first seems. America has always been an extremely idealistic nation, believing that people who try to better themselves can do so. The report emphasizes the poverty and lack of education of many Muslims, but also says that they can better themselves, as Americans did. More important, the analysis now becomes much more specific:

"Two basic urges meet head-on in this area, and conflict is inherent in this collision of interests. These urges reveal themselves in daily news accounts of killings and terrorism, of pressure groups in opposition, and of raw nationalism and naked expansionism masquerading as diplomatic maneuvers. The urges tie together the tangled threads of power politics which — snarled in the lap of the United Nations Assembly — lead back to the centers of Islamic pressure and to the capitals of the world’s biggest nations. The first of these urges originates within the Moslems’ own sphere. The Moslems remember the power with which once they not only ruled their own domains but also overpowered half of Europe, yet they are painfully aware of their present economic, cultural, and military impoverishment. Thus a terrific internal pressure is building up in their collective thinking. The Moslems intend, by any means possible, to regain political independence and to reap the profits of their own resources, which in recent times and up to the present have been surrendered to the exploitation of foreigners who could provide capital investments. The area, in short, has an inferiority complex, and its activities are thus as unpredictable as those of any individual so motivated."

=inc ww2010.h2 population "Fast growth of Muslim populations" This brings us the major conundrum about Muslims of the world: Why have Muslim populations -- Sunni Muslim populations in particular -- been growing twice as fast as Christian and other populations? Here are the figures, from the <#stdurl https://www.cia.gov/library/publications/the-world-factbook/fields/2002.html "The CIA Factbook, 2005:"#>

         Population Growth Rate

***** Western countries:
United States                     0.92%
United Kingdom                    0.28%
France                            0.37%
Germany                           0.00%
Israel                            1.20%

***** Other non-Muslim countries:
Russia                           -0.37%
Burma                             0.42%
China                             0.58%
Thailand                          0.87%
India                             1.40%
Mongolia                          1.45%

***** Muslim countries:
Iran                              0.86% (Shia Muslim)
Indonesia                         1.45% (Below all Sunni Muslim)
Uzbekistan                        1.67%
Turkmenistan                      1.81%
Syria                             2.45%
Saudi Arabia                      3.27%
West Bank                         3.3%
Gaza Strip                        3.89%
Pakistan                          2.01%
Qatar                             2.61%
Kuwait                            3.44%
Yemen                             3.45%

According to the 1946 Intelligence Report, Muslims comprised 14% of a world population 2.2 billion. Today, the world population is 6.5 billion, and Muslims comprise over 20%. Why have Muslim populations been growing so much more quickly? I've asked many Muslims this question, and have never gotten an answer. But the last paragraph from the report, quoted above, provides support for my personal favorite theory. You may recall that in mid-April I posted <#inc ww2010.weblog.ref e070415 "an article about the coming election in Turkey,"#> and I summarized the history of Turkey since the fall of Constantinople in 1453. The fall of Constantinople to the Ottoman Turks is (arguably) the most important worldwide event of the last millennium. It catapulted the Ottoman Empire into a series of successful wars that spread Islam across much of the world. So the destruction of the Ottoman Empire at the end of World War I was a cataclysmic disaster for Sunni Muslims. Turkey turned into a secular state, rejecting even symbols of Islam, and ended the worldwide Sunni Muslim Caliphate, centered in Istanbul. So now we see the meaning of these sentences from the report: "The Moslems remember the power with which once they not only ruled their own domains but also overpowered half of Europe, yet they are painfully aware of their present economic, cultural, and military impoverishment. Thus a terrific internal pressure is building up in their collective thinking." This, then, is my theory for why the Sunni Muslim population has been growing twice as fast as the rest of the world: The "internal pressure" turned into a pressure on men and women to have as many children as possible. For some reason, some people recoil in horror when I provide this explanation, and yet it's really quite reasonable and makes a lot of sense. Everyone agrees that social pressure, especially on women, plays a big part in any family and in any society -- in the ways in which families live, even in the names they give their children. So it's quite reasonable that societal pressure influence men and women as to how big their families should be. So when the report says that Muslims intend, "by any means possible, to regain political independence," it seems to me that having many children to fight in the next war is exactly what would be done. You may notice from the list of population growth rates above that the population growth rate in Gaza is 3.89% - almost the highest in the world, in a small strip of land that's almost the most densely populated in the world. It's hard to get past the feeling that the people of Gaza have been purposely having as many children as possible, in preparation for a war with Israel. That appears to be how the world works. Over the decades I've heard and read many theories about birth rates -- that poor people have fewer children, that poor people have more children, that Catholics have more children than Protestants (referring to the use of contraceptives), and others. Having lots of children gives a country or society a great deal of power. The report has thus described the first of the "urges [that] reveal themselves in daily news accounts of killings and terrorism, of pressure groups in opposition, and of raw nationalism and naked expansionism masquerading as diplomatic maneuvers." This is not a kind appraisal by today's standards, but go back to the beginning of this article and see again how differently people in 1946 looked at the world. <#inc ww2010.pic musworld.jpg center "" "Map of the Muslim world, from the 1946 Intelligence Report."#> =inc ww2010.h2 islam "Islam - Strengths and weaknesses" The Intelligence report continues with the reasons for "killings and terrorism ... and ... raw nationalism and naked expansionism masquerading as diplomatic maneuvers":

"The other fundamental urge originates exteranlly. The world's great and near-great Powers covet the economic riches of the Moslem area and are also mindful of te strategic locations of some of the domains. Their actions are also difficult to predict, because each of these Powers sees itself in the position of the customer who wants to do his shopping in a hurry because he happens to know that the store is going to be robbed."

So the authors of this report are just as hard on the non-Muslim nations, painting them as a gang of robbers and thieves ready to take advantage of and plunder the Muslim countries. You just know that this has to end badly. The report continues:

"In an atmosphere so sated with the inflammable gases of distrust and ambition, the slightest spark could lead to an explosion which might implicate every country committed to the maintenance of world eace through the United Nations Organization. An understanding of the Moslem world and of the stressas and forces operative within it is thus an essential part of the basic intelligence framework."

The report goes on to give a brief history of the Muslims, and then a list of strengths and weaknesses. The weaknesses include the following:

Lack of a common language.
Religious schisms, the oldest being the Sunni-Shia controversy.
The report specifically mentions the Wahabbi movement as an "atavistic movement designed to preserve the original 'purity of Islam,' begun in 1703 in Saudi Arabia by a fanatically purist leader, Abdul Wahab. Today, we know this movement because it provided Osama bin Laden the theological justification for his genocidal crimes. According to the 1946 report, "[It] is now the recognized faith of Saudi Arabia. These Wahabis believe that the Koran is the only source of faith and that it contains the only precepts for war, commerce, and politics; they regard any innovation as heresy."
The report also mentions the Muslim Brotherhood of Egypt, as a society that stresses Islamic culture, and is "openly anti-European and secretly anti-Christian and anti-Jewish." Today, the Muslim Brotherhood is the founder of the Hamas terrorist group in the Palestinian territories. According to the 1946 report, "They issue clandestine pamphlets, attack the government, stir up hatred of the British, and sow the seeds of violence. ... Christian minorities in the Middle East fear these fanatical and nationalistic Moslem societies which exploit the ignorance and poverty of the masses, and even the more enlightened Moslem leaders must cater to their fanaticism in order to retain their positions."
Geographical isolation of the various Muslim groups around the world.
Economic disparities. "Throughout the Moslem world, social conditions closely approximate medieval feudalism. In Egypt, a few thousand people own the land on which 15 million labor as share croppers. In Saudi Arabia, where the purest desert “democracy” exists, the contrast between the living conditions of the peasant and the feudal land-holding classes is very great. That contrast is common throughout the whole Moslem world, where the lack of industrial development has made it easier than elsewhere to retain the feudal system of exploiting the land and the peasants. Social reform has been given only lip service, and the Moslem peasants have a growing conviction, stimulated by Soviet propaganda, that the landowners are their worst enemy. In northern Iran, the peasants have openly revolted under the instigation and protection of the Red Army, and such a revolt can happen anywhere in the Moslem world."
Political rivalries and nationalism: "The Iranian has always looked upon the Arab as a wild man and upon the Turk as a 'son of a dog'; the Turk in turn considers the Iranian a degenerate but agrees with his views of the Arab; and so goes the cycle of animosity. These mutual dislikes have existed for centuries, but they have a deeper meaning in the present era of nationalism."
"Prostitution of leadership. ...The net result of all these intrigues has been that the Moslems are properly suspicious of their leaders. The moment a new leader appears, he is tempted by various European powers to accept their “assistance,” and almost inevitably his loyalty and discretion are eventually sold to one of them."

Next, the report turns to the strengths of the Muslim community:

The Pilgrimage to Mecca. "This ancient duty formerly brought many hundreds of thousands of pilgrims from all sections of the Moslem world to Mecca, where ideas were actively exchanged, along with goods. ... [The pilgrimages] will continue to be a unifying force when Moslems from the East and West meet and repeat prayers in a common language."
Classical Arabic. Although Muslims have different spoken languages, Classical Arabic is a common written language for Muslims around the world.
Modern communications is reducing the isolation of many groups of Muslims. However, "[any] growth in understanding among the poverty-crushed masses ... will be very slow."
The Arab League, a pan-Arab movement uniting Middle East Arabs, because of two major forces: "(1) hatred of European exploitation and (2) fear of a Jewish state on Arab soil."

Today we can see that both of these "forces" were justified. The hatred of British and American involvement in the Mideast was a major motivating factor for al-Qaeda and Hizbollah, and remains so today. And it was two years after the report -- on May 15, 1948 -- that the state of Israel was created. Palestinians today still commemorate May 15 every year as "Al Naqba - Catastrophe Day." However, it would be a mistake to believe, as some do, that if there hadn't been a state of Israel, or if there had been no Jews, then there would be no problems today in the Mideast. As the report said a few paragraphs earlier: "The Iranian has always looked upon the Arab as a wild man and upon the Turk as a 'son of a dog'; the Turk in turn considers the Iranian a degenerate but agrees with his views of the Arab; and so goes the cycle of animosity. These mutual dislikes have existed for centuries, but they have a deeper meaning in the present era of nationalism." What this paragraph indicates is that, without Israel, and even without Jews, the Mideast would still be building to a new war. In fact, we can see that already in the Palestinian civil war, as well as the increasing hostility between Iran and Syria on the one hand, and Saudi Arabia, Egypt and Jordan on the other. The chapter concludes with a final estimate:

"If the Moslem states were strong and stable, their behavior would be more predictable. They are, however, weak and torn by internal stresses; furthermore, their peoples are insufficiently educated to appraise propaganda or to understand the motives of those who promise a new Heaven and a new Earth. Because of the strategic position of the Moslem world and the relentlessness of its peoples, the Moslem states constitute a potential threat to world peace. There cannot be permanent world stability, when one-seventh of the earth’s population exists under the economic and political conditions that are imposed upon the Moslems."

What's remarkable about this report is how prescient it was. This 1946 assessment of Islam was just a 10-page chapter in a larger Intelligence Report, but those 10 pages foresaw every major problem the world faces today in the Mideast. In fact, it could even be said that they predicted the Clash of Civilizations world war, long before Samuel Huntington did. =inc ww2010.h2 politics "The irrelevance of politics" Many people blame today's problems on President Bush or the Iraq war or the Afghan war or President Clinton's policies. I heard several pundits this week blame the Hamas takeover of Gaza on President Bush's not "being engaged" in the Mideast process, whatever the Mideast process is supposed to be. Well, President Harry Truman got "engaged" in the Mideast process in 1948, when he supported the partitioning of Palestine and the creation of the state of Israel. And so, "being engaged" doesn't necessarily lead to peace. It's clear from the 1946 Intelligence Report that everything happening today was known then. The only thing that's changed is that new generations of kids have come along. These kids have absorbed the resentment and fury of their parents, and are willing to do something about it, where their parents and grandparents were not. But the resentment and fury has been there all along -- at least since the destruction of the Ottoman Empire in 1921, and arguably at least as far back as 1689, when the Ottomans disastrously lost the War with the Holy League. If you don't think that anyone cares about a war that happened centuries ago, then remember that Americans are constantly referring back to our own Revolutionary War and the principles on which it was fought. Great concepts and ideas can last for many centuries. And the French speak constantly of the French Revolution. This is something that even many people who have some familiarity with generational theory don't understand, even those who have read works by William Strauss and Neil Howe, the founding fathers of generational theory. A basic principle of their work, as well as of Generational Dynamics, is that politicians have no predictable effect on the major events that are coming. It's completely a waste of time to argue about politics, since nothing that any politician does or doesn't do, says or doesn't say, can have any predictable effect on what's coming. From the point of view of Generational Dynamics, every major event happening today has been in the cards for decades, and maybe even centuries. You can't stop what's going to happen, but you can prepare for it. That's why I keep saying: Treasure the time you have left, and use the time to prepare yourself, your family, your community and your nation. =eod =// &&2 e070622 Hamas' stunning Gaza victory shocks entire Mideast =data ww2010.weblog.y2007.e070622.head Hamas' stunning Gaza victory shocks entire Mideast =data ww2010.weblog.y2007.e070622.keys hamas, fatah, mahmoud abbas, gaza, west bank, william strauss, neil howe =data ww2010.weblog.y2007.e070622.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070622.date 22-Jun-07 =data ww2010.weblog.y2007.e070622.txt1 A major realignment of unknown proportions is occurring throughout the Mideast. =data ww2010.weblog.y2007.e070622.txt2 Fatah should have won last weekend. Fatah is considered the "moderate" of the two major Palestinian political groups. Fatah recognizes the existence of Israel and has renounced violence. Fatah leader and Palestinian President Mahmoud Abbas (Abu Mazen) is favored by the West as someone who is willing to work for a two-state solution, a Palestinian state side-by-side by Israel. Israel and the West like Abbas for that reason. Fatah has more men, and more weapons, thanks to supplies from the US and Israel. <#inc ww2010.pic g070621.gif right"" "Palestinian Territories (Source: Der Spiegel)"#> Hamas should be a lot less powerful. Hamas is a terrorist group committed to using any violence necessary to bring about the destruction of Israel. Israel and the West don't Hamas. And yet, Fatah's larger forces simply crumbled under Hamas's lightning attack. Mohammed Dahlan, head of Fatah's security forces in Gaza, <#stdurl http://www.spiegel.de/international/world/0,1518,489185,00.html "was out of town and was in no hurry to return."#> Hamas showed enormous energy in battle. Fatah showed little. Hamas even committed the atrocity of throwing Abbas's cook to his death from the 18th floor of his apartment block in Gaza. By the time Abbas and Dahlan called for any real action, the war was over and Hamas had won. The fact that an attack was coming could hardly have been a surprise. That Hamas was preparing for a summer war has been rumored for months; <#inc ww2010.weblog.ref e060523 "in fact, I've mentioned it on this web site"#> several times. When the fighting was over, it was quite clear that the attack had indeed been planned for months, as was shown the <#inc ww2010.weblog.ref e070614 "particularly spectacular attack on a Fatah security headquarters building,"#> blown up by a bomb planted in a tunnel beneath the building, dug from a nearby home over a period of months. Now that the fighting is over, there are many people who are not only shocked, but furious, starting with Mahmoud Abbas himself. Abbas, who was formerly committed to getting along with Hamas, both on the ground and in a "unity government," immediately <#inc ww2010.weblog.ref e070615 "dismissed the Hamas ministers"#> in the Palestinian Authority, and replaced them with new people. In a <#stdurl http://www.arabnews.com/?page=4§ion=0&article=97750&d=21&m=6&y=2007 "speech following the Hamas victory,"#> Abbas lashed out at Hamas, calling them "murderous terrorists, and accusing them of trying to build an "empire of darkness" in Gaza. He described in great deal a tape of Hamas members planting bombs under Gaza's main road, preparing to blow him up as he travels to his office. The increasingly harsh rhetoric marks a turning point in the attitudes of Israelis, Arabs and West Bank Palestinians, as the magnitude of the Hamas victory is beginning to sink in. Long time readers of this web site will recall that ever since Yasser Arafat died, I've been watching to see when the Palestinians would be so infuriated at the Israelis that they would be ready to smash down Israel's security wall and pursue a full scale crisis war. On several occasions I've mentioned that I simply hadn't seen anything approaching that kind of fury yet. For example, if Israeli Prime Minister had called the Palestinians sleazebags to a crowd of cheering Israelis, or if Mahmoud Abbas had called the Israelis scuzzbags to a crowd of cheering Palestinians, that would have made me sit up and take notice. But that simply hasn't happened. But it IS happening between the two Palestinian groups, Fatah and Hamas. Those who still believe that some sort of Middle East peace agreement is possible should understand that a line has been crossed, and it will not be possible to go back across that line. The Hamas victory last weekend was an enormous shock to Fatah, since they were totally unprepared for it. It might be compared to the surprise attack on Pearl Harbor in 1941. A crisis war is catalyzed by exactly this kind of shock, as described by William Strauss and Neil Howe, the founding fathers of generational theory:

"The catalyst can be one spark or, more commonly, a series of sparks that self-ignite like the firecrackers traditionally used by the Chinese to mark their own breaks in the circle of time. Each of these sparks is linked to a specific threat about which the society had been fully informed but against which it had left itself poorly protected. Afterward, the fact that these sparks were foreseeable but poorly foreseen gives rise to a new sense of urgency about institutional dysfunction and civic vulnerablity. This marks the beginning of the vertiginous spiral of Crisis."

This is a perfect description of the Hamas victory last weekend. The Hamas attack was foreseeable, but Fatah made no particular attempt to protect itself against it. What sometimes happens in cases like this, in generational Crisis eras, is that the society panics and overreacts. That's what happened last summer when two Israeli soldiers were kidnapped near the Lebanon border and <#inc ww2010.weblog.ref e061223 "and Israel panicked and launched the Lebanon war within four hours,"#> with no plan and no objectives. Today the potential for overreaction is certainly present. The <#stdurl http://news.bbc.co.uk/2/hi/middle_east/6755839.stm "Israelis are extremely alarmed"#> over "the emergence of Hamastan on the border fence." (There are a few joking phrases being thrown around. Some people ironically refer to a brand new "two-state solution," but this time the two states are Gaza, now called "Hamastan," and the West Bank, now called "Fatahstan." The joke's names are based on names of other Muslim states, such as Pakistan or Afghanistan.) Even more significant is the fact that many <#stdurl http://www.spiegel.de/international/world/0,1518,489139,00.html "Western states are now openly siding with Fatah against Hamas,"#> and even see the current situation as an opportunity. The <#inc ww2010.weblog.ref e060410 "US and Europe had ended aid to the Palestinians"#> when Hamas won the parliamentary elections early in 2006, on the grounds that Hamas is a terrorist organization, committed to the destruction of Israel. Now that Abbas has thrown Hamas out of the government, the West is resuming aid to the Palestinians again -- only targeted exclusively to Fatah. As <#stdurl http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2007/06/22/do2203.xml "one commentator described the situation,"#> "One of the more remarkable features of the past few days has been the almost indecent haste with which the key Quartet players - America and the EU - have rushed to restore ties with the newly formed government of Palestinian Prime Minister Mahmoud Abbas. Suddenly everyone - the Israelis, the Americans, Britain, Brussels - wants to talk to the Palestinians and give them support." So Israel and the West have clearly and openly taken sides with Fatah against Hamas, but so have major Arab governments in the region. Over Hamas's objections, Egypt's President, Hosni Mubarak, will be <#stdurl http://news.independent.co.uk/world/middle_east/article2692473.ece "hosting a summit meeting this weekend,"#> inviting Abbas, Olmert, and Jordan's King Abdullah. Abbas is reportedly insisting that the summit will be fruitless if it does not set in train a process aimed at a final resolution of the key issues in the Israel-Palestinian conflict. That kind of resolution is, of course, completely impossible, as we've been discussing on this web site for the last few years. But Abbas's demand reflects the fact that there does not exist such a resolution, and that the region will continue to descend further into chaos. In fact, the support for Abbas from some Arab quarters goes much deeper. Gaza is a very poor region, with not enough food or medicines, Hamas had tens or hundreds of millions of dollars in weapons stashed away for this war. These weapons had to be supplied and smuggled by outsiders, and most people assume that the perpetrators were Iran and Syria. This is extremely worrisome to Arab governments who fear that they will be targeted. An op-ed titled "The Gaza Earthquake," <#stdurl http://www.memri.org/bin/opener_latest.cgi?ID=SD162907 "appearing in the Qatar newspaper Al-Sharq Al-Awsat"#> editor Tariq Al-Humayd wrote:

"The preparedness of the Hamas fighters... proves that while Hamas and its leaders were crying out about lack of funds, Hamas was [actually] amassing arms and ammunition. Someone is providing it with regular funding, and as a result it appeared to be better prepared [for fighting] than the legitimate authorities."

The Jordanian journalist <#stdurl http://www.memri.org/bin/opener_latest.cgi?ID=SD162907 "Raja Talib wrote in the government daily Al-Rai:"#>

"Reality has shown that even if Hamas was originally a Palestinian [movement], it is now completely [committed] to the ideological agenda of Tehran -- in terms of its perception of the enemy and of the struggle against the enemy; in terms of its political priorities; and in terms of its financial and material backing. Thus, Hamas is setting back -- by decades -- the Palestinian cause, the development of the military and political struggle [for Palestine], and the PLO plan [for liberating Palestine], so that they will [all] serve Iran's needs."

The result is that the possibility of a Western attack on either of those two countries is becoming more evident, and such an attack may even be tacitly supported by Arab countries. This level of fury in the Mideast is a step up from what we've seen before. The expectation is that the mutual hatred can only increase. As we said, a line has now been crossed, and it cannot be undone without a genocidal crisis war. From the point of view of Generational Dynamics, the region is headed for a new genocidal war between Arabs and Jews, refighting the genocidal war that was fought in the late 1940s when Palestine was partitioned and the state of Israel was created. In 2003, when the world was euphoric about the new "Roadmap to Peace," <#hreftext ww2010.i.may01 "I predicted that the Roadmap would never succeed,"#> and that the disappearance of Ariel Sharon and Yasser Arafat would be part of a generational change that would lead to exactly that kind of genocidal war between Arabs and Jews. Since Arafat died 2½ years ago, the situation in the Palestinian territories has gotten measureably worse almost every single day. As usual, Generational Dynamics tells you your final destination, but not how you'll get there. What we're seeing now, day by day, is the series of steps, shocks and surprises that are leading the Mideast to a new massive war. We can't predict how long it will take, but we can predict that it's coming soon, with complete certainty. =eod =// &&2 e070620 Generational Composition of Congress =data ww2010.weblog.y2007.e070620.head Generational composition of Congress =data ww2010.weblog.y2007.e070620.keys =data ww2010.weblog.y2007.e070620.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070620.date 20-Jun-07 =data ww2010.weblog.y2007.e070620.txt1 Why can't Congress govern? =data ww2010.weblog.y2007.e070620.txt2 I'm constantly pointing out that the reason that the country is paralyzed and Congress is so incompetent is because it's run by Boomers, and Boomers are incompetent at governing (and Xers are even worse). A web site reader wrote to me and asked how this can be true if all the leaders of Congress are from the Silent generation -- that is, from the generation that grew up during World War So I went to <#stdurl http://www.congress.org/congressorg/directory/demographics.tt?catid=age "this web page, which provides an age breakdown,"#> and I prepared this table: Senate House Combined ------- ------- --------- Age Group # % # % # % Generation --------- -- --- -- --- --- --- ------------ 30-39 0 0% 20 5% 20 4% Generation-X 40-49 10 10% 89 20% 99 18% Xer/Boomer 50-59 28 28% 166 38% 194 36% Boomer 60-69 37 37% 124 28% 161 30% Boomer/Silent >70 24 24% 39 9% 63 12% Silent
By splitting the 40-49 and 60-69 age groups evenly between the two generations in each case, you get this result: Senate House Combined ------- ------- --------- Gen-X 5% 15% 13% Boomer 52% 62% 60% Silent 42% 23% 27%
The important split here is between the Silents (who grew up during World War II and remember very well what happened) and the Xers and Boomers (who have no personal memory of WW II and think it wasn't such a big deal). It's true that the top leaders in both the House and Senate are Silents, but that doesn't mean that they get their way. It's the Boomers and Xers that have most of the votes but have no idea what they're doing. All they know how to do is argue; they don't know how to govern. As I've said many times, the survivors of World War II, the GI Generation and the Silent Generation, did great things -- they created the United Nations, World Bank, Green Revolution, World Health Organization, International Monetary Fund, and so forth. They created these organizations and managed them for decades with one purpose in mind: That their children and grandchildren would never have to go through anything so horrible as World War II. And the relevant question for today always is: Can you imagine clown circus Congress today doing anything remotely like those accomplishments? They're so dumb, they couldn't even figure how <#inc ww2010.weblog.ref e070131 "to vote themselves a pay raise."#> =eod =// &&2 e070619 Ban Ki Moon blames Darfur genocide on global warming =data ww2010.weblog.y2007.e070619.head Ban Ki Moon blames Darfur genocide on global warming =data ww2010.weblog.y2007.e070619.keys ban ki moon, darfur, global warming, stephan faris =data ww2010.weblog.y2007.e070619.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070619.date 19-Jun-07 =data ww2010.weblog.y2007.e070619.txt1 Damn! He's blaming the Darfur crisis civil war on America!! =data ww2010.weblog.y2007.e070619.txt2 In one of the most remarkable explanations I've heard so far, United Nations Secretary General Ban Ki Moon claims that the people of Darfur "lived amicably" until global warming affected the climate. His opinion appeared on Saturday in an <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2007/06/15/AR2007061501857.html "article he authored in the Washington Post:"#>

"Almost invariably, we discuss Darfur in a convenient military and political shorthand -- an ethnic conflict pitting Arab militias against black rebels and farmers. Look to its roots, though, and you discover a more complex dynamic. ... Two decades ago, the rains in southern Sudan began to fail. According to U.N. statistics, average precipitation has declined some 40 percent since the early 1980s. ... It is no accident that the violence in Darfur erupted during the drought. Until then, Arab nomadic herders had lived amicably with settled farmers. A recent Atlantic Monthly article by Stephan Faris describes how black farmers would welcome herders as they crisscrossed the land, grazing their camels and sharing wells. But once the rains stopped, farmers fenced their land for fear it would be ruined by the passing herds. For the first time in memory, there was no longer enough food and water for all. Fighting broke out. By 2003, it evolved into the full-fledged tragedy we witness today."

The <#stdurl http://www.theatlantic.com/doc/prem/200704/darfur-climate "Atlantic Monthly article by Stephan Faris"#> (also <#stdurl http://oldsite.globalsolutions.org/programs/peace_security/news/Atlantic_Real_Roots_Darfur.html "available here for free"#>) completes the picture as follows:

"Among the implications arising from the ecological origin of the Darfur crisis, the most significant may be moral. If the region’s collapse was in some part caused by the emissions from our factories, power plants, and automobiles, we bear some responsibility for the dying. “This changes us from the position of Good Samaritans—disinterested, uninvolved people who may feel a moral obligation—to a position where we, unconsciously and without malice, created the conditions that led to this crisis,” says Michael Byers, a political scientist at the University of British Columbia. “We cannot stand by and look at it as a situation of discretionary involvement. We are already involved.”

So there you have it. Darfur's genocidal civil war finally has a politically correct cause -- global warming. It's America's fault, and the Europeans' fault. What about the other genocides? There was the 1994 Rwanda genocide, and the 1990s Bosnian genocide, and the 1970s Cambodian killing fields genocide. There were dozens of genocides in World War I and World War II. Were those caused by global warning too? As fatuous as this reasoning is, it contains an interesting admission: That the Darfur genocide is not the Darfurians' fault. The reason I call that an "admission" is because the previous position is that the genocide was the fault of the Janjaweed militias and of the Sudan government in Khartoum. By blaming it on the Americans and the Europeans, Moon is exonerating the people involved. After all, global warming isn't the fault of these "amicable" people, is it? No, it's the fault of those venal, thoughtless Americans. How convenient. It's worthwhile to summarize how the Darfur civil war came about, because it follows a fairly standard generational path. Here's a brief summary:

1970s: Low-level violence. Wars are almost always fought over control of scarce resources. In urban settings it's stated as "the rich versus the poor." In rural settings, it's often a fight over land and water resources. As decades pass, and population grows, already scarce resources become scarcer and the level of conflict increases. In the end, the only resolution is a genocidal crisis war that thins the population enough to survive on the scarce resources. In Darfur prior to the 1980s, there was <#stdurl http://www.islamic-relief.com/submenu/appeal/timeline.htm "intermittent low-level violence between farmers and herders."#> This kind of struggle between farmers and herders is a major factor in less-developed countries. In 1800s America, there were major conflicts between whites and Indians over land, but there were also smaller conflicts between farmers and cowboys (cattle herders). Farmers would be infuriated when herds of cattle trampled their crops. They'd respond by building fences, and that infuriated the cowboys. In fact, there was a feel-good song on this subject in Rodgers and Hammerstein's 1941 Broadway show, Oklahoma!:
```
Oh, the farmer and the cowboy should be friends,
Oh, the farmer and the cowboy should be friends.
One man likes to push a plough,
The other likes to chase a cow,
But that's no reason why they cain't be friends.

Territory folks should stick together,
Territory folks should all be pals.
Cowboys dance with farmers' daughters,
Farmers dance with the ranchers' gals.
```
In pre-1980s Darfur, camel and cattle herds would often destroy farmer's crops, but the incidents were rare enough that traditional local leaders on both sides would normally resolve disagreements. Darfur's previous crisis war was World War II, so during the 1970s, there were still plenty of survivors of the war, and the local leaders were skilled at governing and resolving problems.
1983-85: Drought. Things changed in 1983-85 because of a natural disaster -- a drought and famine that ran from 1983-1985. Both farmers and herders were forced to travel to regions with water, and that brought the two sides into closer contact. It also lessened the role of local leaders, with the result that both farmers and herders began to turn to Khartoum for help. This is the drought that Ban Ki Moon was referring to.
1987: Outside agitators. In Eric Berne's classic book, Games People Play, <#stdurl http://www.ericberne.com/games/games_people_play_LYAHF.htm "one of the games that he described"#> was "Let's you and him fight," where one person instigates a fight between two other people. =inc ww2010.xr.related1 right darfur 1 The game "Let's you and him fight" is often played on the world stage, where one politician or group, or an outside agitator, tries to instigate a war between two other groups. In Darfur in 1987, there were outside agitators on both sides, resulting in a brief war. The two groups of Darfurians -- herders and farmers -- could also be distinguished ethnically as Arabs and non-Arabs, respectively. But that distinction had never before made as much difference as the individual tribal identifications, according to <#stdurl http://www.bostonreview.net/BR29.5/dewaal.html "Sudan expert Alex de Wall."#> The 1987 Darfur war was instigated by Libyan leader Muammar Qaddafi, who for years had been trying to start up a "pan-Arab" movement across northern Africa, under his leadership. As part of this, he recruited the Darfur Arab herders and tried to agitate them to be part of his attack force on the neighboring country Chad. That attempt failed, but the identity group name "Arab" stuck. Furthermore, the "Arab" name also served to identify this group of Darfurians with the élite group running the government in Khartoum, who think of themselves as "Arab." This relationship became important later with the formation of the Janjaweed militia. Newton's Third Law in physics says that for every force, there's an equal countervailing force in the opposite direction. The same law applies in politics, so if the Arab Darfurians required an identity group, so did the non-Arabs. In this case, the outside agitator was the Sudan People's Liberation Army (SPLA), a group from the south fighting a different war with Sudan. The SPLA tried to get the Darfurians to join their war, and they used the identity group name "African." This is a very interesting development, because it fundamentally changed the nature of the war. Up to this point, the war was just a bunch of African tribes fighting each other. Who could care anything about that? But now it became very different. Now it was the Arabs versus the Africans. Suddenly it's a battle with international significance. The mere use of identity group names changed the Darfur war from a tribal war to an international war. This is a textbook case for how outside agitators come into a region and, using identity group names, turn a local conflict into a major war. However, in this case, the outside agitators, Qaddafi and the SPLA, didn't succeed in their goals. There was a brief war that fizzled quickly, but not the major war that both agitators had hoped for.
1990s: Police action. Once low-level violence begins, a government can usually handle it with ordinary police. Occasional violence and other criminal acts can be resolved simply by arresting the perpetrators. So now let's look at the situation from the point of view of the Khartoum government. To analyze a crisis war, you MUST look at it from all points of view (at which time you discover that they all seem to be fighting completely different wars). =inc ww2010.mappic sudan.gif right "" Sudan If you're standing in Khartoum, Darfur is almost 1,000 miles away, and seems as far away as the moon, and the Darfurians might as well be an alien species. All the Sudan government wants is for the Darfurians to take care of themselves, and leave Khartoum alone. This was particularly true in the 1990s, when the Khartoum government was already fighting a completely separate and unrelated war with the SPLA in southern Sudan. The SPLA, on the other hand, wanted to radicalize the Darfur farmers so that they would join the SPLA war against Sudan. In 1991, <#stdurl http://observer.guardian.co.uk/international/story/0,6903,1268647,00.html "the SPLA sent an armed force to Darfur to foment resistance."#> The attempt failed, and the SPLA leaders were arrested. After this, the Khartoum government essentially delegated the responsibility of policing the region to the Arab Janjaweed militia, formed from certain groups of herders. This was an ideal solution to Khartoum, since it meant that the "African" and "Arab" Darfurians would have to solve problems themselves, and Khartoum would stay out of it. This would leave the Sudanese army free to focus on the southern war.
April, 2002: Transitions to Crisis Era. Shock events are the catalysts that cause a war to transition from one phase to the next. For shock events to cause such a transition, they have to occur at the correct generational time. If shock events occur too early, they'll have no effect. In particular, shock events seldom have much effect prior to the beginning of the "generational crisis era." The generational crisis period begins generally 55-60 years after the end of the preceding crisis war. It's at that point in time that the survivors of that last war all disappear (retire or die), all at once, and a new generation of leaders takes over. The new leaders were born AFTER the last crisis war, and have no personal memories of its horrors, and so aren't afraid of another war like it. There are two shock events that caused the Darfur war to transfer from the "low-level violence phase" to the "crisis phase." The first occurred in April, 2002. The young men of one ("African") farmer village in central Darfur <#stdurl http://www.bostonreview.net/BR29.5/dewaal.html "complained to the district authorities"#> that they were being harassed by a herder ("Arab") militia group. The shock that they and the farmers received was that, instead of getting help, the young men were jailed, and so was a lawyer who tried to represent them. As we previously stated, disputes between farmers and herders had formerly been resolved by traditional local leaders, "village elders." These traditional leaders were most likely respected heroes of the previous crisis war. Their motivation was that a new crisis war must be avoided at all costs, and they could always negotiate with one another to compromise and contain problems. But village elders one day die off. Most people think that one older person is pretty much like any other, and that if one generation of "village elders" dies off, then a slightly younger new generation of village elders takes its place. But not all older persons are the same. From the point of view of Generational Dynamics, there is always an enormous difference in world view between people who survive a genocidal crisis war, and those born after it. The new generation (called a "Prophet" archetype generation, corresponding to America's Boomer generation) is much more confrontational, much more arrogant and narcissistic, and much less willing to compromise than the generation of survivors that it replaces. So after the respected elders representing the farmers and herders died off, the new generation of elders did not have the skills or temperament to reach a compromise with one another. Like America's Boomers, they were unable to govern. So they did the next best thing, and turned to the district authorities of the Khartoum government. The Janjaweeds also went through a generational change, and the old herders who could negotiate with the farmers were gone. The young Janjaweeds, born after the last crisis war (World War II), are much more confrontational, less willing to compromise. So, when the Darfurian farmers complained to the Sudanese government's district office, the Sudan government had them jailed. From their point of view, it was the easiest way to avoid trouble, and simply continued the police-type action of the 1990s. But this time, the police action acted as a catalyst. It infuriated the farmers, and led to the formation of the Darfur Liberation Front. When a society or nation enters the crisis phase of a war, the reaction is very similar to the mass hysteria that occurs among young girls at a Beatles concert. Prior to that point, the population may feel a great deal of anxiety and fear of some enemy, but the feelings are subdued to meet political demands. The shock event brings the subdued anxiety and fear out into the open, and causes the public to demand that the government "do something." This is the time of great vulnerability for a nation or society, since the public might find any of a wide variety of solutions acceptable.
February 26, 2003: The Regeneracy. The events leading up to a crisis war contain a number of shocks and surprises. For years, during the low-level violence, these surprises have no effect. Then one day, thanks to the generational changes we've described, the low-level violence turns into an actual war, a crisis war. The next significant change comes when a shock event causes a population to panic. On February 26, 2003, the Darfur Liberation Front attacked a police station to take back their lost weapons from the time of the arrest. From the point of view of Generational Dynamics, this attack triggered the "regeneracy," a kind of point of no return when a crisis war turns into an unstoppable tsunami. What was so special about an attack on a remote police station? Things like that had been going on for years, so what was so special now? Here's a summary of what happened next, according to <#stdurl http://news.bbc.co.uk/2/hi/africa/5316306.stm "the BBC's "Quick Guide" to the war:"#>
"In an Arab-dominated country, Darfur's population is mostly black African. For years, there have been tensions between the mostly African farmers and the mostly Arab herders, who have competed for land. Opposition groups in Darfur say the government neglects their province, and discriminates against black Africans. The conflict began in 2003, when rebel groups began attacking government targets. In retaliation, the government launched a military and police campaign in Darfur. More than 2 million people fled their homes. Many spoke of government aircraft bombing villages, after which the Arab Janjaweed militia would ride in on camels and horses to slaughter, rape and steal. The refugees and some western observers said there was a deliberate attempt to drive black Africans out of Darfur. The government admits mobilising "self-defence militias", but denies links to the Janjaweed and says the problems have been exaggerated."
From the point of view of the Darfurian farmers and herders, the conflict had started years earlier, but notice that the BBC says that the conflict began in 2003. That's the Sudanese government point of view. Prior to that, Darfur was "out of sight, out of mind" for them. And that's the point. Suddenly the Darfurians, though still out of sight, were no longer out of mind. From the point of view of Khartoum, suddenly this non-existent group of people turned overnight into a huge mass of millions of people ready to attack Khartoum itself! What happened next is what always happen leads to a generational crisis war. The leaders who grew up during the last crisis war are gone, and all that's left are the arrogant, scornful, narcissistic postwar generation (corresponding to America's Boomer generation), sure of themselves and contemptuous of anyone who tries to accomplish anything, along with the angry, frustrated younger generation (like our Generation X), and the impatient college-age generations. They all suddenly discover that all their assumptions are wrong, and that they're very exposed after all -- exposed so much that their entire way of life may be in danger. The result is a kind of mass hysteria, and once again I would compare it to young girls screaming their love for the Beatles or another pop star. For a more relevant example, take a look at my article on <#inc ww2010.weblog.ref e061223 "How Israel panicked in pursuing the summer Lebanon war with Hizbollah."#> That was exactly the same kind of generational panic that occurred in Darfur in 2003, although in the Lebanon case, it didn't spiral into a full-fledged crisis war. From the point of view of Generational Dynamics, this is known as the "regeneracy." It's a "tipping point" that occurs in every crisis war, when the public becomes so anxious, panicked, furious and outraged by acts (real or perceived) on the other side that the desire to win and to protect one's nation and way of life become more important than anything else. This point is called the "regeneracy," because the public forgets about political differences, and starts worrying about national survival. It's the time of regeneration of civic unity, and, in a sense, it's the time of regeneration of the entire nation. (In the case of a civil war, each of the two belligerents is unified against the other.) At this point, and in the months that follow, the value of an individual human life goes to near-zero, and nothing matters more than the survival of the society and its way of life. In the American Civil War, it was the Battle of Bull Run that turned the war from a spectator sport into a serious war, and led to the bloody Battle of Gettysburg and Sherman's "scorched earth" March through Georgia. In WW II, it was the Bataan Death March that infuriated and united the country, and led to the Allies' saturation bombing of civilians in Germany and Japan.
After 2003: Escalation to full crisis war. Each side expected the other to back down. The farmers had just wanted to get their weapons back. The Janjaweed militias (herders) just wanted to control the situation. What neither side realized was that young people on the other side were now old enough to fight, and they weren't interested in compromise. This lead to the <#inc ww2010.weblog.ref e061211 "mass murders, rapes, genocide, and scorched earth"#> that has characterized the Darfur war since then.

So that's the sequence of events that led to the current Darfur genocide. In 2004, when the Darfur situation first gained international focus, I wrote that <#inc ww2010.weblog.ref e040628 "the U.N. is completely irrelevant to the Darfur genocide,"#> and that it would not be stopped until it's run its course. That has continued true to this day. The <#inc ww2010.weblog.ref e070419 "genocide has gotten worse,"#> and has even spread into neighboring countries Chad and Central African Republic. So this shot out of the blue, where Ban Ki Moon is blaming it on global warming is actually hilarious. It shows just how ignorant the people in power are about what's going on in the world today. =eod =// &&2 e070618 Congressional xenophobia risking confrontation and retaliation from China =data ww2010.weblog.y2007.e070618.head Congressional xenophobia risking confrontation and retaliation from China =data ww2010.weblog.y2007.e070618.keys china, smoot-hawley, hawley-smoot, tariff law, henry paulson, treasury department, currency manipulation, alan greenspan =data ww2010.weblog.y2007.e070618.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070618.date 18-Jun-07 =data ww2010.weblog.y2007.e070618.txt1 Senators are promising a tough "veto-proof" law targeting China's alleged currency manipulation. =data ww2010.weblog.y2007.e070618.txt2 The bill is supported by both Democrats and Republicans. Republic Senator Lindsey (S.C.) urged the Bush administration to support the bill. Democratic <#stdurl http://money.cnn.com/2007/06/13/news/international/china.reut/index.htm "Senator Charles Schumer (NY) predicted overwhelming support"#> from both parties -- enough to override any presidential veto. The bill is prompted by claims that China has been manipulating its currency, making it undervalued, and using it to pursue unfair trade practices. Senators are particularly infuriated by <#stdurl http://money.cnn.com/2007/06/13/news/international/china_yuan.reut/index.htm?postversion=2007061310 "a report from the Treasury Department last week"#> did not find that China had practiced currency manipulation. According to the <#stdurl http://www.treasury.gov/offices/international-affairs/economic-exchange-rates/ ""Report to Congress"#> on International Economic and Exchange Rate Policies - June 2007":

"Although the renminbi [Chinese currency, also called "yuan"] is undervalued and market sentiment clearly favors appreciation, Treasury concluded that China did not meet the technical requirements for designation under the terms of Section 3004 of the Act during the period under consideration. Treasury was unable to determine that China’s exchange rate policy was carried out for the purpose of preventing effective balance of payments adjustment or gaining unfair competitive advantage in international trade.

The Administration position was expressed by Treasury Secretary Henry Paulson, when <#stdurl http://money.cnn.com/2007/06/12/news/international/bc.usa.china.currency.reut/index.htm?postversion=2007061219 "he said this week"#> that the best way to get China to move faster on currency reform was "through direct discussions and negotiations, not through legislation." For many years, the Chinese yuan was pegged to the U.S. dollar, which means that you could always convert dollars to yuans at the same rate, year after year. This was true although the dollar was "falling" internationally, meaning that you would convert dollars to fewer euros or yen. The fixed conversion rate with the yuan also meant that when the Fed drastically reduced interest rates to near-zero in the early 2000s, the interest rate in China was effectively also near-zero. The Fed policy headed off and postponed a major Wall Street stock market crash in the early 2000s, but it also poured a lot of cheap money into the economy, creating the credit and real estate bubbles. And since the yuan was pegged to the dollar, the Fed policy also poured enormous amounts of cheap yuans into the Chinese economy, creating huge export, commodities and stock market bubbles in China. I tied all of this together with macroeconomy theory several months ago in <#inc ww2010.weblog.ref e070312 "an essay that I wrote"#> on "A conundrum: How increases in 'risk aversion' lead to higher stock prices," based on work by Harvard economist named Robert J. Barro. Briefly, the people in the generations that survive the previous crash (in this case, the 1929 crash) become extremely risk-averse, and refuse credit. As those generations disappear (retire or die), the younger generations become risk-seeking, and increasingly use debt and credit abusively. The abusive use of credit actually increases the total amount of money in circulation, so that money is poured into BOTH stocks and bonds, so that they both participate in the bubble. This is what's been happening in both the U.S. and China. At a time like this, there's so much money (liquidity) is available, that people are willing to invest in almost anything. China has put all its extra liquidity into building manufacturing businesses, and have been manufacturing products that it exports to other countries, especially the US. Americans have used all the extra liquidity to purchase Chinese exports. In a sense, this has been beneficial for both countries, but it's created an enormous trade imbalance. So the situation is pretty bad, and Congress is going to make it worse. Congress is demanding the People's Bank of China (PBoC) essentially raise interest rates sharply. If the Fed did that in the US, there would be at least a huge recession. In China, the result would be a bursting of all bubbles, and a financial meltdown. But logic doesn't have anything to do with what Congress does these days. The level of xenophobia has been increasing steadily in the Congress, as people look for ways to punish both Latinos and Chinese, while the Bush administration pushes for more moderate positions and negotiations. And this is not Democrats versus Republicans. The Immigration Bill has split both parties, with the xenophobic side favoring deporting illegal Mexican immigrants back to Mexico, and the accomodative side looking for ways to give them a legal status. Which side a particular politician is on probably depends on how many Latinos he has in his district. But there's NO such split on xenoophobia against Chinese. It seems that almost everyone in Congress hates the Chinese and wants to turn the screws, even if it means hurting Americans as well. It's what my mother used to refer to as "cutting off your nose to spite your face." When I wrote my book, Generational Dynamics: Forecasting America's Destiny, I never really understood how Congress could have passed the Smoot-Hawley Tariff Act in June 1930. The law was opposed by the Hoover administration and by numerous economists. But it was several months after the 1929 stock market crash, and Americans were blaming high unemployment on foreigners stealing jobs away from Americans. The Smoot-Hawley act didn't didn't help the American economy, but it crippled imports from other countries, especially silk from Japan. Japan was already suffering economically anyway, but this act shut down silk industry. It infuriated the Japanese, who invaded Manchuria and China in subsequent years, and bombed Pearl Harbor a few years after that. Now, to my amazement, I'm seeing exactly the same thing happen. The Bush Administration opposes this punitive bill, preferring negotiation, and economists are saying that it won't help the US economy at all, and will invite retaliation. But Congress is going ahead with it anyway, and if passes despite President Bush's veto, the Chinese will be humiliated and infuriated. Plus ça change, plus c'est la même chose. =inc ww2010.h2 treasury "Treasury Bonds, Mortgage Rates and Greenspan" <#inc ww2010.pic greenspan.jpg right "" "Alan Greenspan, speaking in Hong Kong last week. (Source: thestandard.com.hk)"#> Alan Greenspan got into the act again last week, with regard to the issue of Treasury bills (bonds). The subject of long-term Treasury bonds is much in the investor news these days, because interest rates have increased dramatically. In the past several weeks, yields (interest rates) on 10-year Treasury bonds have gone from under 4½% to over 5¼% -- that's a ¾% change, with no interest rate changes by the Fed. And since mortgage interest rates are pegged to the 10-year treasury bond rate, it means that mortgage interest rates have gone up ¾% as well. It's a very striking development, and could signal that something fundamental is changing. Let's have a brief review here: Treasury bills are sold by the Treasury to borrow money. They're sold at an auction so that anyone can bid on them. The Treasury hopes to get as much money as possible for them, so they hope that purchases will bid a lot. No matter how much a bidder pays for a treasury bill, it always pays the same amount back after 10 years. That means that the more you pay for a treasury bill, the lower the effective interest rate (yield) is, and the less you pay, the higher the yield is. Now, yields have gone up sharply in the last few weeks. That means that prices of Treasury bills have gone down. That means that bidders have been willing to pay less and less to purchase these bonds from the US government. Or, to put it another way, bidders are demanding much higher interest rates to loan money to the US Treasury. Some analysts are predicting 10-year yields may go up as high as 6½%. This increase in long-term interest rates is a really big deal. The whole global economy in the last few years has been based on easy credit. It's easy credit that caused the real estate bubble, the subprime mortgage debacle, the stock market bubble, the Chinese economy bubble, and all the other bubbles we've been living with. Such a large interest rate increase could affect not only the US economy but also the world economy. Why would interest rates increase like that? One online blogger blamed it on the mortgage foreclosure surge, but that would be the tail wagging the dog -- the mortgage market is too small to have caused this kind of change. If 10-year yields are increasing rapidly, then it can only be because very large investors are bidding sharply lower prices on 10-year bonds -- and those very large investors would be countries like Japan or China. China has been purchasing huge volumes of 10-year US Treasury bills so that we would have enough money to purchase their huge volume of manufactured exports. Other countries with high savings rates, especially Japan, have done the same. The spiking of yields indicates that someone is cutting back on purchases of US Treasury Bills. This brings us to Alan Greenspan's comment. Greenspan suggested that China and other countries <#stdurl http://www.thestandard.com.hk/news_detail.asp?pp_cat=5&art_id=46762&sid=14050453&con_type=1 "are spending more money on consumer goods and saving less money,#> so that there's less money available to purchase US Treasuries. "What we're now beginning to see is affluence spread throughout what we used to call the `Third World,' and consumption is beginning" to increase, he said. China has hundreds of billions of dollars in US Treasuries in its central bank, and there's some concern that they might try to sell some of them. This would create an oversupply of bonds, pushing down prices, forcing a further sharp rise in interest rates. According to Greenspan, there little reason to fear this. "There's no evidence at this stage that China is selling off securities." His reason? China would not have anyone to sell the securities to. That's a pretty weak reason, and we can see why by returning to the subject of this essay: The anti-China xenophobia in Congress. The proposed punitive law would humiliate and infuriate the Chinese, and invite retaliation. From their point of view, they've been funding America's buying spree, and is America greatful? Noooo. America is passing hostile protectionist laws. That's how China would look at it. One step they could take is simply to dump their hundreds of billions of dollars of Treasury bills on the market. Even if there were no buyers, the market would be so depressed that prices would collapse and interest rates would up into the double-digit range. China's intent would be to retaliate and cause a recession in the US. Of course such a move might do a lot more -- trigger an investor panic and a worldwide financial crisis. At any rate, you may recall that I've advised people to <#inc ww2010.weblog.ref e070608 "take their money out of stocks,"#> and keep it as cash, or else invest in short-term (6-12 month) Treasury bills, paying roughly 5¼% interest at the present time. I strongly recommend against investing in long-term Treasury bills. Why? Because of the scenario I just described. From the point of view of Generational Dynamics, we're now overdue for a generational panic and financial crisis. It could happen next week, next month or next year, but it's coming with certainty. The event triggering such a panic might be anything, but the recent sharp rise in long-term yields and mortgage interest rates certainly raises a lot of possibilities. =eod =// &&2 e070615 Abbas dissolves the Palestinian Authority as Hamas overpowers Fatah in Gaza =data ww2010.weblog.y2007.e070615.head Abbas dissolves the Palestinian Authority as Hamas overpowers Fatah in Gaza =data ww2010.weblog.y2007.e070615.keys =data ww2010.weblog.y2007.e070615.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070615.date 15-Jun-07 =data ww2010.weblog.y2007.e070615.txt1 There are now effectively two Palestinian Authorities, =data ww2010.weblog.y2007.e070615.txt2 one in Gaza governed by Hamas, and one in the West Bank governed by Fatah. Some of the West's worst fears appear to be coming true, as the terrorist group Hamas appears ready to establish a Sunni Sharia state in Gaza, with links to al-Qaeda through the Muslim Brotherhood in Egypt. The <#stdurl http://www.reuters.com/article/newsOne/idUSFLE45503220070615 "jubilant Hamas warriors"#> completely outfought the Fatah security forces, and handed Palestinian Authority president Mahmoud Abbas a humiliating defeat. Egypt is said to be trying to mediate a new compromise of some sort, but that seems unlikely to change things. I've done many generational analyses of the Mideast, starting in 2003, when I wrote that <#hreftext ww2010.i.may01 "the death of Yasser Arafat would be part of a significant generational change"#> that would lead the Mideast into a major new war between Arabs and Jews, replaying the genocidal war of the late 1940s. Last year, in an article called <#inc ww2010.weblog.ref e061210 ""Interviews with young Gazans spotlight road to war,""#> and in 2005, in <#inc ww2010.weblog.ref e051216 ""Palestinian 'Old Guard' giving way to 'Young Guard'""#> I showed how you can break down the Palestinian generations: The "Old Guard," consisting of Palestinian leaders, including Arafat and Abbas, who founded the Palestinian Authority after the 1940s war; the "Hamas generation," born after the 1940s war with no memory of its horrors, and contemptuous of the Old Guard for allowing Israel to get away with so much; and the "Young Guard," the young militants now in complete charge of Gaza, who are rapidly taking matters into their own hands. If I could be philosophical for a moment, I know that many readers of this web site feel everything from skepticism to amazement. At the time that I wrote <#hreftext ww2010.i.may01 "the 2003 article"#> referenced above, I was still pretty skeptical myself. That was my first real predictive article, and I was pretty unsure of what I was doing, but I wanted to get it posted so that if it turned out to be right I would be able to point to a track record of predictions. Today, my skepticism is long past, but my amazement still remains. I had hoped to have some success in determining general trends, but it still astonishes me that each and every Generational Dynamics trend prediction has either come true or is coming true. Not a single one has been wrong. Six years ago I would have believed that any such result was absolutely impossible, and the fact it's working still amazes me probably more than any reader of this web site. The other thing that amazes me is that the politicians and journalists are so ignorant of all this. When I first posted that prediction in 2003, no one was talking like that at all, and there were a number of people who actually called me crazy. Today, the same ignorance prevails. I watched BBC World earlier this evening, and I'm watching CNN International right now, and these people still have NO IDEA what's going to happen. They STILL think that things in Gaza will settle down or, at worst, there'll be a small civil war that'll soon blow over, and then the so-called "peace process" can begin again. When I say that readers of this web site are the only people who know what's going on in the world, you may think I'm just bragging a little, and maybe I am. But it's also true. People just REFUSE to believe what's coming. This is the ONLY web site in the world that correctly predicts and explains everything going on in the world. There's another oddity going on. I know from my web log that there are probably a few thousand regular readers of this web site, yet this web site is almost never mentioned in other blogs and web sites. I know of people who read this web site who simply don't want to talk about it. Period. I'm beginning to think of this web site as being similar to a pornographic web site -- there are a lot of people reading it, but they don't want to admit it. There's another lesson to be learned from the situation in Gaza. The Generational Dynamics prediction is, and always was, that the Arabs and Jews will be have a new genocidal crisis war, replaying the genocidal war of the late 1940s. Generational Dynamics gives you the final destination, but doesn't tell you that path or scenario that you'll take to get there. So now we're seeing the scenario unfolding before our eyes. Who would have thought that the Palestinians would have an internal war, splitting themselves into two groups, led by Hamas and Fatah, respectively, one in Gaza, one in the West Bank? Of course we still don't know the next steps -- how this will turn into a war between Palestinian and Jews -- but we're obviously building up to that point. Can anything be done to stop this? No. It is a basic, core principle of generational theory, as originally developed in the 1980s and early 1990s by William Strauss and Neil Howe, that no politician can have any predictable effect on what's going to happen. That's why, for example, arguing about the Iraq war is futile. Future historians may look back at this time and decide that the Iraq war turned out to hurt us, or they may look back and decide that the Iraq war helped us in the Clash of Civilizations world war, but there's no way to know today. =inc ww2010.cf.cf060209 p left I hope that all of you who read this web site are at least preparing for what's coming. Every day, the global financial economy is gets more and more out of control, relations between China and Taiwan get more and more critical and, of course, the situation in the Palestinian territories becomes more and more chaotic and violent. No one can stop what's coming, but you can prepare for it. As I've said many times: Treasure the time you have left, and use the time to prepare yourself, your family, your community and your nation. =eod =// &&2 e070614c The al-Askariya Shrine in Samarra, Iraq, is bombed again =data ww2010.weblog.y2007.e070614c.head The al-Askariya Shrine in Samarra, Iraq, is bombed again =data ww2010.weblog.y2007.e070614c.keys al-askariya shrine, samarra, iraq =data ww2010.weblog.y2007.e070614c.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070614c.date 14-Jun-07 =data ww2010.weblog.y2007.e070614c.txt1 Last year's bombing triggered months of vicious sectarian violence in Baghdad, =data ww2010.weblog.y2007.e070614c.txt2 and it appears that <#stdurl http://news.independent.co.uk/world/middle_east/article2656030.ece "the perpetrators of Wednesday's bombing are hoping"#> to do the same again. =inc ww2010.blocking.start <#inc ww2010.pic g070613b.jpg right "" "The al-Askariya shrine prior to February, 2006. You can see the golden dome and the two golden minarets. (Source: BBC)"#> The Sunni insurgency was actually beginning to diminish at the end of 2005 and the beginning of 2006, when <#inc ww2010.weblog.ref e060223 "al-Qaeda bombed the Shiite al-Askariya shrine in Samarra in February, 2006."#> At that time, al-Qaeda in Iraq was headed by Jordanian terrorist Abu Musab al-Zarqawi; he was killed in June of last year. However, the bombing of the shrine triggered the massive sectarian violence that occurred in Baghdad last year, fooling pundits and politicians into thinking that Iraq was having a civil war. Iraq is in a generational Awakening era, meaning that it's "attracted away from war." This means that any situation appearing to be leading toward war will be strongly resisted by the Iraqi people, and will soon fizzle out. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic g070613c.jpg left "" "Top: The shrine after the February 2006 bombing. You can see one of the two golden minarets on the left. Bottom: The shrine today. The two minarets are now completely destroyed. (Source: BBC and CNN)"#> And that's exactly what's happened. As I <#hreftext ww2010.i.iraq070401 "wrote a few months ago,"#> the Iraqi Sunnis are turning against al-Qaeda in Iraq, who are actually foreign invaders. This is exactly what you'd expect during an Awakening era. The new bombing of the al-Askariya shrine appears to be an act of desperation by al-Qaeda in Iraq, hoping to trigger a new surge in sectarian violence. However, Shia Grand Ayatollah Ali al-Sistani and Shia cleric Moqtada al-Sadr both called for calm today, naming al-Qaeda as the perpetrators. Al-Sadr also blamed the "American occupiers." But there's no universal agreement that al-Qaeda was the perpetrator this time. The issue this time is that the shrine was being guarded by 150 officers in the Iraqi police force. In a lengthy discussion between two Iraqi government officials on the BBC early Wednesday, the Shia official said that it was certain that the perpetrators were al-Qaeda and former Sunni Baathists. =inc ww2010.blocking.end However, the Sunni official claimed that it was more likely that Iran was the perpetrator. He asked, "Who benefited most from the insurgency in the last year?", and he answered his question by saying that the Shia militias, funded and armed by Iran, were benefited the most. He suggested, therefore, that it was the Shia militias controlled by Iran that perpetrated Wednesday's bombing. At any rate, it's clear that Wednesday's bombing was an "inside job," involving some cooperation with the Iraqi police. <#inc ww2010.pic mideast3b.jpg center "" "On June 13, 2007, (1) Hamas claimed to be taking control of Gaza; (2) Fatah increasingly retaliated on the West Bank; (3) a car bomb killed an anti-Syrian lawmaker in Beirut; and (4) the Shia al-Askariya shrine in Samarra was bombed again."#> As we can see from the three stories on Mideast violence that I've posted today, al-Qaeda appears to be making gains. They're being pushed back by Iraqis in Iraq, but it's doubtful that the Americans can ever stop the suicide bombings. In Lebanon, the Fatah al-Islam group has allowed al-Qaeda to gain a foothold there. In Gaza, Hamas is closely allied with Egypt's radical Muslim Brotherhood, which is increasingly closely linked with al-Qaeda. Al-Qaeda also remains active across the Mahgred (northern Africa) and across Europe, stretching back to Indonesia in southeast Asia. However, from the point of view of Generational Dynamics, al-Qaeda is not the greatest threat facing America. Even if al-Qaeda is successful in launching terrorist acts on American soil, as horrible as they are, no more than a few thousand people are likely to be killed. =inc ww2010.cf.cf060209 p left The biggest threat to America is the coming Clash of Civilizations world war, which will be fought on multiple fronts -- against China in Asia, in the Mideast, in Europe, possibly Africa, and even with Mexican radicals. Hundreds of thousands of Americans died in World War II, and tens of millions died worldwide, and that will be increased proportionately in the coming war. (This paragraph was corrected on June 14) =eod =// &&2 e070614b Another Lebanese anti-Syrian politician killed in Beirut blast =data ww2010.weblog.y2007.e070614b.head Another Lebanese anti-Syrian politician killed in Beirut blast =data ww2010.weblog.y2007.e070614b.keys =data ww2010.weblog.y2007.e070614b.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070614b.date 14-Jun-07 =data ww2010.weblog.y2007.e070614b.txt1 The seventh assassination of anti-Syrian politicians in Lebanon =data ww2010.weblog.y2007.e070614b.txt2 occurred on Wednesday when <#stdurl http://www.cbc.ca/world/story/2007/06/13/lebanon-blast.html "a car bomb killed lawmaker Walid Eido"#> and eleven others. Lebanon became sharply split in 2005 when <#inc ww2010.weblog.ref e050216 "beloved former prime minister Rafiq Hariri was killed"#> by a suicide bomber in Beirut. Most Lebanese blamed the killing on Syria, and the Lebanese became polarized into pro-Syria and anti-Syria factions, with the militia group Hizbollah leading the pro-Syria group. <#inc ww2010.pic mideast3b.jpg center "" "On June 13, 2007, (1) Hamas claimed to be taking control of Gaza; (2) Fatah increasingly retaliated on the West Bank; (3) a car bomb killed an anti-Syrian lawmaker in Beirut; and (4) the Shia al-Askariya shrine in Samarra was bombed again."#> Since that time Lebanese officials, working with the United Nations, have been trying to get an official inquiry established into the perpetrator of the Hariri killing, specifically to determine whether Syria had arranged it. Syria has bitterly opposed this inquiry, and is thought to be responsible to responsible for killings. Lebanon is still facing continued violence in Palestinian refugee companies after the <#inc ww2010.weblog.ref e070521 "al-Qaeda linked Fatah al-Islam"#> attacked the Nahr al-Bared camp in northern Lebanon last month. =eod =// &&2 e070614 Hamas presses for control in Gaza, Fatah gets revenge in West Bank =data ww2010.weblog.y2007.e070614.head Hamas presses for control in Gaza, Fatah gets revenge in West Bank =data ww2010.weblog.y2007.e070614.keys palestinians, gaza, civil war, hamas =data ww2010.weblog.y2007.e070614.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070614.date 14-Jun-07 =data ww2010.weblog.y2007.e070614.txt1 The U.N. is considering deployment of a multinational force in Gaza, =data ww2010.weblog.y2007.e070614.txt2 as it appears increasingly likely that the terrorist militia group Hamas will soon be in complete control of Gaza. <#inc ww2010.pic g070613a.jpg right "" "Young Fatah fighters in the West Bank prepare for revenge against Hamas. (Source: BBC)"#> Fatah's forces in Gaza <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-6707305,00.html "crumbled quickly under fierce mortar"#> and rocket fire. In one particularly spectacular move, a Fatah security headquarters building in the southern town of Khan Younis was blown up by a bomb planted in a tunnel beneath the building, dug from a nearby home over a period of months. There's been violence in Gaza for some time, and one thing that's been concerning analysts is the fear that the violence might jump to the West Bank territory. That's now happening increasingly, as <#stdurl http://www.pr-inside.com/hamas-fatah-gunmen-exchange-fire-in-r152183.htm "Fatah kidnapped several employees"#> of a Hamas production company. Analysts are now forseeing the possibility that Hamas will control Gaza and Fatah will control the West Bank. With Hamas in Gaza, Gaza would essentially be a terrorist state, and would prepare to launch an attack against Israel. Before long, Israel, Gaza and the West Bank would all be involved in a bloody war in some scenarios. Israeli and Palestinian forces have informally asked the United Nations to consider deploying a peacekeeping force in Gaza to prevent any further escalation of violence. <#stdurl http://www.iht.com/articles/ap/2007/06/13/news/UN-GEN-UN-Israel-Palestinians.php "U.N. Secretary-General Ban Ki-moon discussed"#> the issue with the Security Council, but no decision was taken. <#inc ww2010.pic mideast3b.jpg center "" "On June 13, 2007, (1) Hamas claimed to be taking control of Gaza; (2) Fatah increasingly retaliated on the West Bank; (3) a car bomb killed an anti-Syrian lawmaker in Beirut; and (4) the Shia al-Askariya shrine in Samarra was bombed again."#> Slowly but surely, you can see that my <#hreftext ww2010.i.may01 "2003 Generational Dynamics predictions"#> about the Mideast are coming to pass. Each day the all-out genocidal war that was predicted comes closer. The involvement of a U.N. force would make the situation much more complicated. Suppose there is a U.N. force. Are they just going to stand there and watch people kill each other, as other U.N. forces have done? Are they going to shoot at people under some circumstances? Will they shoot at Fatah people? At Hamas people? At Israeli people? And what if those people shoot back? Does the U.N. then send in a larger force? As you can see, the path to all-out war is getting clear and clearer. Pundits are always pretty naïve about what's coming in the Mideast, always predicting the most wildly optimistic option possible -- there'll be a peace plan, a peace process, the next cease-fire will work, etc. (And in the case of Iraq, pundits always predict the most pessimistic option possible. Why is that?) But Generational Dynamics has always been very clear about what's going to happen to the Israelis and the Palestinians: There's going to be a violent genocidal war between Arabs and Jews, replaying the genocidal war between Arabs and Jews that took place in the 1940s, after Palestine was partitioned and the state of Israel was created. We don't yet know the scenario that will take us to that all-out war, but we're clearly getting closer to it every day. =eod =// &&2 e070613 Palestinian road to civil war escalates another step =data ww2010.weblog.y2007.e070613.head Palestinian road to civil war escalates another step =data ww2010.weblog.y2007.e070613.keys palestinians, gaza, civil war, hamas =data ww2010.weblog.y2007.e070613.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070613.date 13-Jun-07 =data ww2010.weblog.y2007.e070613.txt1 Gunfights escalated to larger military actions in northern Gaza =data ww2010.weblog.y2007.e070613.txt2 on Monday and Tuesday, as a Hamas-linked militia <#stdurl http://www.arabnews.com/?page=4§ion=0&article=97437&d=13&m=6&y=2007 "unilaterally declared "the northern Gaza Strip a closed military zone""#> under its control. The result is an important victory for Hamas, leading Palestinian President Mahmoud Abbas’ office to accuse Hamas of plotting a coup. Hamas, for its part, has accused Fatah of trying to assasinate the Hamas Prime Minister Ismail Haniyeh. According to Debka, <#stdurl http://www.debka.org/headline.php?hid=4298 "Hamas threw its entire 15,000-strong Executive Force"#> armed with mortars, RPGs, heavy machine guns and grenades into the bid to conquer the Gaza Strip, whereas Fatah commanders’ desperate appeals to Mahmoud Abbas for reinforcements drew nothing but a futile call for a ceasefire. Since I <#hreftext ww2010.i.may01 "started writing about the Arab/Jewish problem in 2003,"#> the Israel/Palestine region has been almost a textbook case for Generational Dynamics analysis. I said that the region would descend again into war, replaying the extremely violent genocidal war between between Arabs and Jews in the late 1940s, following the partitioning of Palestine and the creation of the state of Israel, and that this war probably begin around two years after Yasser Arafat's death. It's now been about 2½ years since Arafat's death, and the Palestine region has gotten measurably worse almost every day since then. It now appears increasingly likely that the scenario leading to a new genocidal war between Arabs and Jews will begin with a Palestinian civil war. According to BBC, "There's only one rule in Gaza, the rule of the gun. They're tearing Gaza apart in a vicious battle for power which is fueled by calls for revenge." I listened to various pundits on BBC and CNNI, and they stated their various opinions, each one blaming one or more of the following:

Fatah
Hamas
Israel
European Union
United States

In other words, nobody has the vaguest idea what's going on, or why things don't settle, why the Palestinians don't seem to want a Palestinian state, why the Palestinians are fighting each other, and what to do about it. Rarely do you hear about a "peace process" anymore. We've had several years of "peace process," but each cease-fire, each compromise, each "unity government," each Palestinian election has just brought increased violence. None of the pundits made the obvious generational connection. Not a single pundit mentioned that the average age of the people in the densely populated Gaza Strip is 16, meaning that Gaza is being run by children with guns and missiles. Some pundits mentioned that militia groups are not being controlled by their Fatah or Hamas leaders, but none connected that to the ages of the people in the militia groups. You know, you don't have to be a rocket scientist to figure this out. If the Gaza is packed to the gills with people, and if the median age of the people is 16, and if they have plenty of guns and missiles coming in from Egypt, and if the only people they have to listen to are people they hold in contempt, because every attempt to compromise with the Israelis has always brought what they perceive as more intransigience from the Israelis, then why should they do anything other than what they're doing. There's another thing too. The tiny Gaza String has 1.5 million people packed into it, and <#stdurl https://www.cia.gov/library/publications/the-world-factbook/geos/gz.html "the population is growing at 4.7% per year,"#> one of the highest rates in the world. (It's 0.9% per year for the U.S.) So, let's suppose that, by some miracle, the Palestinians and Israelis agree to a peace plan, and move ahead with a Palestinian state. What happens after that? Where are those 1.5 million people going to go? Poverty is enormous, and there's no room left for much more growth. How long can Gaza keep growing at 4.7% per year before civil war breaks out anyway, or war with the Israelis breaks out anyway? That's the thing that no one thinks of -- "peace" doesn't mean "peace forever"; it just means "peace for now." And it still doesn't preclude war later. So the demographics of the situation mean that war is coming no matter what happens. It's also worthwhile making a generational comparison with Iraq, as I've done before. Gaza is in a generational Crisis era, meaning that it's "attracted toward war." Iraq is in a generational Awakening era, meaning that it's "attracted away from war." We've seen the situation in Gaza get worse every day, but the situation in Iraq has been getting better. As I <#hreftext ww2010.i.iraq070401 "wrote a few months ago,"#> the Iraqi Sunnis are turning against al-Qaeda in Iraq. This is exactly what you'd expect during an Awakening era. Al-Qaeda is an outside group, consisting of terrorists from countries like Saudi Arabia and Jordan, which are in generational Crisis eras. They're bringing war INTO Iraq. The Iraqis cooperated for a while, because they don't like the American "occupiers," but now they've been turning against al-Qaeda in Iraq because, after all, it's killing many Iraqi's and few Americans. Now the latest news is that <#stdurl http://www.spiegel.de/international/world/0,1518,487882,00.html "the Sunni insurgency is fighting al-Qaeda."#> According to one Iraqi parliamentarian close to the Sunni insurgency, "We have three enemies. Enemy number one is al-Qaeda, enemy number two is Iran, number three is the Americans." So we're still number three, but at least we aren't number one. And Iraqi Shia aren't even on the list. Despite the political hysteria in the U.S., Iraq has never been in a civil war, and never can be, because a crisis civil war is impossible during a generational Awakening era. (It's possible to have a non-crisis civil war, but it always ends quickly in an Awakening era.) That's what it means to say that Iraq is "attracted away from war." But Gaza is different. Gaza is in a generational Crisis era. In Gaza, the path to civil war is getting worse. The Palestinians are "attracted TO war," not away from war. I've been doing these Generational Dynamics analyses for over four years. I've written over 700 articles for this web site, most of them containing specific predictions, and all of them are still available for anyone who wishes to go back and read them, to see what I said. But you can see with your own eyes what's happening. In Gaza, in a Crisis era, the civil war is getting worse; in Iraq, in an Awakening era, any move in the direction of civil war quickly fizzles. As I've said many times before, I challenge anyone to find any web site or pundit in the world with a better predictive record than this web site. No one has found one because none exists. There is no better predictive methodology than Generational Dynamics. What I wrote in 2003 is still just as true today: The Palestine region is headed for a new genocidal war between Arabs and Jews, replaying the genocidal war of the late 1940s. This war will pull in other nations from the region, and eventually will pull in the U.S. in support of Israel. It will lead to the Clash of Civilizations world war, if that war hasn't begun previously. We can't predict the exact time frame or the exact path to this result, but the final result is 100% certain. =eod =// &&2 e070612b Boomers commemorate the 40th anniversary of the Summer of Love. =data ww2010.weblog.y2007.e070612b.head Boomers commemorate the 40th anniversary of the Summer of Love. =data ww2010.weblog.y2007.e070612b.keys summer of love, beatles, san francisco, golden gate park, timothy leary, flower power, pink floyd, jimi hendrix, janis joplin john phillips, mamas & the papas, scott mckenzie, 1967 =data ww2010.weblog.y2007.e070612b.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070612b.date 12-Jun-07 =data ww2010.weblog.y2007.e070612b.txt1 In many ways, 1967 was the cultural peak of America's Awakening era. =data ww2010.weblog.y2007.e070612b.txt2 <#inc ww2010.pic g070611b.jpg right "" "January 14, 1967 - Tens of thousands of young people filled Golden Gate Park for a "Human Be-In." (Source: PBS)"#> Tens of thousands of young people, including many young teenagers, made their way to San Francisco to fulfill their dreams of freedom. The guys could wear long hair, the girls could wear short dresses; both could wear flowers in their hair. They could listen to rock 'n' roll. They could smoke pot and take LSD. They could be part of the antiwar movement, the civil rights movement, the women's lib movement, the environmental movement. They could become one with nature. They were the beat generation. They could all be hippies, or beatniks, or anything else they wanted to be. The antiwar protests had begun in 1965, when 25,000 students marched on Washington. By 1967, more than 400,000 troops had been sent to Vietnam. The kids would change that. After the Summer of Love, "Flower Power" would rule. They would create a freer nation, socialist instead of capitalist, peaceloving instead of warmongering, where everyone would be equal, and there would be no more war or poverty. They would change the world. It wasn't just the summer. Kids started pouring into the city in January 1967 for a "Human Be-In." Tens of thousands of them filled the Polo Fields at Golden Gate Park on January 14. <#stdurl http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/05/21/DDG0MPU2OS1.DTL "a day of rock music, poetry, Buddhist chants."#> <#inc ww2010.pic g070611c.jpg left "" "Former Harvard Professor Timothy Leary asked students to "turn on, tune in and drop out." (Source: PBS)"#> The intellectual guru and hero was <#stdurl http://en.wikipedia.org/wiki/Timothy_Leary "Timothy F. Leary,"#> a former psychology professor at Harvard who had experimented with psychedelic drugs, especially LSD. He administered LSD on an experimental basis, and claimed that people taking it were benefitted, with mystical and spiritual experiences. He was fired from Harvard in 1963, for being absent from classes. In San Francisco, he told the kids to "turn on, tune in and drop out." By this he meant: Use LSD, listen to him, and drop out of school. The "Human Be-In" got sensational worldwide press coverage. The optimism and idealism brought more tens of thousands of young people to San Francisco for a summer of concerts. 1967 was a breakout year for many, many great bands and albums. The Beatles came out with Sgt. Pepper, although when they admitted to having used LSD, they received mixed reviews for their behavior, if not for their music. Pink Floyd, Jimi Hendrix, Janis Joplin all made a mark. The theme song was "San Francisco," written by John Phillips of the Mamas & the Papas, and sung by Scott McKenzie:

"If you're going to San Francisco
Be sure to wear some flowers in your hair
If you're going to San Francisco
You're gonna meet some gentle people there

For those who come to San Francisco
Summertime will be a love-in there
In the streets of San Francisco
Gentle people with flowers in their hair

All across the nation such a strange vibration
People in motion
There's a whole generation with a new explanation
People in motion people in motion

For those who come to San Francisco
Be sure to wear some flowers in your hair
If you come to San Francisco
Summertime will be a love-in there

If you come to San Francisco
Summertime will be a love-in there."

The song was a worldwide hit, and indeed, flowers were in style around the world as well. <#inc ww2010.pic g070611a.jpg left "" "Bored kids in the "Beat Generation" often turned to drugs. (Source: PBS)"#> But the idealism began to wear off. San Francisco really couldn't handle so many young people for so long, and there were "incidents" that got people arrested. Even worse, many kids without much to do ended up just sitting around smoking pot. Distraught parents, worried about their runaway children, sent photos to San Francisco officials, who posted them around the city. When a runaway teen was identified, the parents were notified to come and get him or her. By the end of the summer, the Summer of Love was over in more ways than one. San Francisco really wasn't that much fun anymore and, more important, the optimism and idealism had turned for many to desperation, bitterness and disappointment. <#inc ww2010.pic g070611d.jpg right "" "Bulletin boards were filled with snapshots of runaway teens sent in by distraught parents. (Source: PBS)"#> Within a few years, Timothy Leary had spent time in jail, and Jimi Hendrix and Janis Joplin had died of drug overdoses. The Summer of Love turned into several long, hot summers of violence, as antiwar and other protesters took to the streets. Still, Boomers today idealize and venerate the Summer of Love as a time when young people came together to make the world a better place. If you're too young to remember anything about the Summer of Love, you should take a little time to learn more about what happened. Most of the photos from this article were taken from the <#stdurl http://www.pbs.org/wgbh/amex/love/ "the PBS series on the Summer of Love,"#> and you can see the entire series on the PBS web site. The San Francisco Chronicle has published a <#stdurl http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/05/20/SUMMER.TMP "five-part series on the Summer of Love,"#> with the title, "1967: The stuff that myths are made of." And <#stdurl http://whitney.org/www/exhibition/SOL_exhib.jsp "New York City's Whitney Museum"#> is exhibiting music, movies, paintings and sculptures from the era. I've been saying for five years now that there is no antiwar movement in America today, and that there can't be any antiwar movement in America today, and that college-aged students would never participate in anything resembling a 1960s-style antiwar movement today. As I explained in last year's article, <#hreftext ww2010.i.060601antiwar ""Why aren't college students protesting against the Iraq war?""#>, college-aged kids aren't protesting against the war because there's no "generation gap" today as there was in the 1960s. Can you imagine today thousands of teenagers running away from home and heading for a "Summer of Love" somewhere? It's unthinkable today, because teenagers aren't estranged from their parents the way they were in the 1960s. And remember who those runaway teens were -- none other than the Baby Boomer generation, the generation that now runs the country, including the clown circus Congress. Those runaway children are now running Congress, still acting like they're on LSD and pot, still hoping that Flower Power will change the world. =eod =// &&2 e070612 Congress fails to pass 'No-confidence vote' against Attorney General Alberto Gonzales. =data ww2010.weblog.y2007.e070612.head Congress fails to pass "no confidence vote" against Attorney General Alberto Gonzales. =data ww2010.weblog.y2007.e070612.keys alberto gonzales, no confidence vote, nicolas sarkozy =data ww2010.weblog.y2007.e070612.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070612.date 12-Jun-07 =data ww2010.weblog.y2007.e070612.txt1 After failing to pass any kind of immigration bill =data ww2010.weblog.y2007.e070612.txt2 last week, the Washington clown circus Congress <#stdurl http://www.iht.com/articles/2007/06/11/america/justice.php "failed on Monday in their attempt"#> to pass a "vote of no confidence" in Attorney General Alberto Gonzales. In fact, one of the reasons that the Democrats wanted to <#inc ww2010.weblog.ref e070609 "stop talking about the immigration bill"#> is that they wanted to move onto this vote of no confidence. But now that's failed too. The Democrats don't like Alberto Gonzales because he fired some Democratic prosecutors and replaced them with Republicans -- or something like that -- I could never get up enough interest to even care what was going on. And then Gonzales bungled his explanation to Congress. So this no-confidence vote is a political stunt to embarass Gonzales and the President. While passing an immigration bill would be an actual accomplishment, it was abandoned in favor of political nonsense, and even the nonsense failed. The Boomers are running Congress and, as I've said many, many times, Boomers are unable to govern. I hope those of you who think I was joking about that begin to realize that it's the absolute truth. Boomers really are unable to govern. A web site reader sent me a message indicating that he thinks I'm being too hard on Congress. He writes to me thus:

"In your recent post about the immigration bill and its failing in the Senate, I think what's more telling than any increase in incompetence of government by Boomers is the public's reaction towards the bill. I think it matters not what the Senate was or wasn't able to do, since that is measuring the capabilties of individuals, but rather the large negative response those senators received from the public. Several senators who were asked about the reaction towards the bill by their constiuents have all said they have received more negative responses towards this immigration bill than anything else in a long time. The public is not happy, and I think that is the crux of why the bill failed. The elites, so disconnected from the public, were taken completely by surprise by the level of disapproval over the bill."

I certainly agree with this comment that the public is extremely divided on the immigration bill. The immigration bill is not a "Democratic" bill or a "Republican" bill. It actually splits both parties down the middle. Both Republican President Bush and Democratic Senator Ted Kennedy strongly favor the bill, and there are plenty of supporters and opponents from both parties. This is not surprising, since immigration and xenophobia are always issues in every country entering a generational Crisis era, as are all the countries today that fought in World War II as a crisis war. You can see xenophobia between Americans and Latinos, between Europeans and Muslims, and between Japanese and Chinese. Not only that, but I'll add one more argument in support of the reader's claim. As I've said before, whenever a country enters a generational Crisis era, as is the case of all the countries that fought World War II as a crisis war, then the country always becomes paralyzed and ungovernable. We can see this in America, Israel, the Palestinian territories, Turkey, the UK, and so forth, as I've described before. In France, incidentally, the new President <#stdurl http://www.bloomberg.com/apps/news?pid=20601100&sid=alCtq07dbFV8&refer=germany "Nicolas Sarkozy won the first round"#> of legislative elections on Monday, and his party appears poised to win a substantial majority in the Parliament when the final vote is taken on Sunday, June 17. Analysts are predicting that this will give him the power to make all the changes he's promised -- repeal the 35 hour work week, control labor unions, make France the leader in a new united Europe, and so forth. However, as I <#inc ww2010.weblog.ref e070519 "wrote last month"#> when he became President, Sarkozy is far more likely to be met with massive violent street protests and other strong opposition if he continues his confrontational approach. In truth, France is just as paralyzed as America is, and chances are that we'll see that pretty shortly. So perhaps, as the reader suggests, I should be more understanding and forgiving of Congress, and more sensitive to their needs and problems. Hell no. I disagree that just because they're Boomers, this gives Congress the right to act like a bunch of clowns. We pay these guys the big bucks to find compromises when necessary -- in other words, to govern. We don't pay them to sit around and scream at each other like a bunch of teenage girls. One tv pundit made an interesting point: The President has an approval rating of about 35% -- and Congress has the same approval rating, and so did the Republican Congress last year. Americans voted for a change last November, when they voted for a Democratic Congress. Instead, they simply replaced the Republican clowns with the Democratic clowns. I think we deserve better. =eod =// &&2 e070609 Immigration Bill collapses in Congress =data ww2010.weblog.y2007.e070609.head Immigration Bill collapses in Congress =data ww2010.weblog.y2007.e070609.keys immigration bill, trent lott =data ww2010.weblog.y2007.e070609.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070609.date 9-Jun-07 =data ww2010.weblog.y2007.e070609.txt1 Trent Lott asks, "Can this Congress do ANYTHING?" =data ww2010.weblog.y2007.e070609.txt2 As I've been saying for some time now, the country is becoming increasingly ungovernable because more and more Boomers are in leadership positions, and Boomers are only able to argue, not govern. This was shown on Thursday evening, when the <#stdurl http://www.nytimes.com/2007/06/09/washington/09bush.html?_r=1&hp&oref=slogin "comprehensive "grand bargain" immigration bill"#> was defeated in the Senate. The NY Times, of course, which becomes less and less credible every day as a source of news, blames the whole thing on Bush's lack of power. I suppose it's true that Bush lacks power, being a lame duck President and all, but that has nothing to do with why the bill failed in Congress, any more than the weather does. The heart of the matter was stated by Senator Trent Lott (R-Miss), who <#stdurl http://www.foxnews.com/story/0,2933,279635,00.html "said this"#> on Thursday:

"If we can't do this, we ought to vote to dissolve the Congress and go home and wait for the next election. Can we do anything any more?"

I'm sure he was referring to more than just the immigration bill. When I tell people that Boomers are unable to govern, they smile as if I'm making a joke. But the fact is that the only major things that Congress has done in the last five years are: Authorize the Iraq war; renew the Patriot act; and, just recently, vote more funds for the Iraq war. As I wrote last month, <#inc ww2010.weblog.ref e070502 "the Democrats are just as incompetent as the Republicans."#> As I've said many times, the survivors of World War II did great things -- they created the United Nations, World Bank, Green Revolution, World Health Organization, International Monetary Fund, and so forth. They created these organizations and managed them for decades with one purpose in mind: That their children and grandchildren would never have to go through anything so horrible as World War II. Can you imagine Congress today doing anything remotely like those accomplishments? I was actually beginning to think that the immigration bill had a shot at passing. It was supported by President Bush and Senator Ted Kennedy (D-Mass), and there seemed to a determination in both parties to get the job done. It reminded me of what happened in the 1980s, when Democrats and Republicans got together and passed a major tax reform law, and then a major Social Security system law, and then rules to control the budget deficit. The way they did it then was as follows: Since these bills were so contentious, they appointed a small committee of senior Republicans and Democrats to come up with a bill. Once they reached a compromise bill, the bill came to the floor under the following rule: The entire Senate could vote the bill up or down, but individual Senators couldn't make amendments. That was a process that guaranteed that a bill would be passed. However, there was no such process this time, and the pundits say that the amendments are what killed the bill. The people on the far left and on the far right proposed amendments that sliced away at the support for the bill. In the end, the Senate didn't have to 60 votes to end debate, and so the bill went down. And so, the existing situation will continue: Mexicans will continue working the U.S. with an illegal status, which is what nobody wanted. And the difference between the 1980s and now is that in the 1980s the GI Generation and Silent Generation, the survivors of WW II, were in the leadership of Congress. They knew how to govern -- they learned how during and after WW II when the United Nations and all those other agencies were set up. They understood that you have to make compromises, that you have to give in a little to get something. But the Boomers were born after WW II, and never learned how to do anything but argue. They don't know how to compromise. They don't know how to apologize. They have no idea how to admit it when they're wrong. And, of course, they don't have any idea how to govern, even though they think they know everything. (And if you're out there gloating because you're a Gen-Xer -- the Xers are worse than the Boomers.) So once again, Congress was totally incompetent. As Trent Lott said, "If we can't do this, we ought to vote to dissolve the Congress and go home and wait for the next election." Sounds about right to me, except we'll need these guys around in a few months when the time comes to vote more funds for the Iraq war. =eod =// &&2 e070608 Morgan Stanley in Europe signals a "Full House" sell signal on stocks. =data ww2010.weblog.y2007.e070608.head Morgan Stanley in Europe signals a "Full House" sell signal on stocks. =data ww2010.weblog.y2007.e070608.keys morgan stanley, full house sell signal, fdic insurance =data ww2010.weblog.y2007.e070608.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070608.date 8-Jun-07 =data ww2010.weblog.y2007.e070608.txt1 Saying that stocks could fall by 14% in the next few months, =data ww2010.weblog.y2007.e070608.txt2 a Morgan Stanley <#stdurl http://www.marketwatch.com/news/story/morgan-stanley-issues-full-house/story.aspx?guid=%7B3B881E12-28ED-4702-92E3-765644052745%7D&dist=hplatest "European strategy report"#> says that all three of its major leading indicators -- bond yields, manufacturing forecasts and P/E ratios -- were signalling a market about to lose value. "Such a full house sell signal across these three indicators is rare, and has occurred only five times since 1980," said analyst Teun Draaisma in a European strategy research report. "Equities have always been down in the next 6 months, on average by 15%." This forecast actually is consistent with other forecasts that the market is "overdue for a correction," meaning that even the usually exuberant analysts realize that every once in a while a continually rising market has to fall, at least a little. What none of these forecasts are taking into account is the possibility of a full scale generational stock market panic. From the point of view of Generational Dynamics, a generational stock market crash is overdue. If you go back through history, there are of course many small or regional recessions. But since the 1600s there have been only five major international financial crises: <#inc ww2010.weblog.ref e070328 "the 1637 Tulipomania bubble,"#> the South Sea bubble of the 1710s-20s, the bankruptcy of the French monarchy in the 1789, <#inc ww2010.weblog.ref e070406 "the Panic of 1857,"#> and the 1929 Wall Street crash. We're now overdue for the next one. It could happen next week, next month or next year. From the point of view of Generational Dynamics, it's easy to prove that a new financial crisis is coming, just by showing that various trend variables -- international account balances, public debt, market capitalization -- are all increasing uncontrollably, with no real attempt being made to stop them. And lately we've seen that the Chinese economy continues to <#inc ww2010.weblog.ref e070426 "explode out of control,"#> even though Chinese officials have to tried to bring down the huge imbalances for five years and have failed completely. This past week's <#inc ww2010.weblog.ref e070606 "fall in the Shanghai stock market"#> has alarmed Chinese officials greatly, as they wait to see what's going to happen next. Wall Street's stock market indices in Thursday all fell 1.5% to 1.8%, and as I write this on Thursday evening (approaching noon Friday in Tokyo), the Tokyo and Hong Kong indices are down 1.6%. One possible scenario is this: the markets will fall a little further, then level off and start to rise again. I've personally been surprised by how frequently that's happened. But there's another scenario, and this one must occur at some point in the not to distant future: The markets will fall perhaps 1% or 2% a day for a few days, and then full-scale generational panic will set in, and the markets will fall 20% over a period of just a few days. No one is expecting this because there hasn't been anything like in our lifetimes -- since 1929. (As I've <#hreftext ww2010.i.macro061025 "indicated a number of times,"#> the so-called panic of 1987 was a "false panic," since the market was underpriced at that time. Today, the market is <#hreftext ww2010.i.050711eleven "overpriced by a factor of more than 250%,"#> just like 1929.) I've posted warnings two or three times in the past that such a panic may be close at hand, and the market has recovered each time. However, on each such occasion, the negative signals were stronger than the last time. In this case, we have the Morgan Stanley "full house" signal, which indicates that many parts of the economy are increasingly in trouble. But more important, we have increased awareness of the weakness of the Chinese economy, including the March statement by <#inc ww2010.weblog.ref e070322 "Chinese premier Wen Jiabao"#> said that China is "unsteady, unbalanced, uncoordinated and unsustainable." As I <#hreftext ww2010.i.china050116 "wrote in January, 2005,"#> China is becoming increasingly unstable and approaching a civil war, and the increasing financial instability of China means that this day may be approaching quickly. Once again I urge all my readers to get out of the stock market, and I'd like to add a little more information in response to a couple of reader questions that I've gotten in the last couple of days. Let me summarize a few points:

A good place to keep your money nowadays is to leave it as cash. Even if you don't believe that there's going to be a panic, at least take the word of the Morgan Stanley advisors and get out of stocks, because you'll still lose 15% according to them.
If you put your money into a savings, checking or money market account, make sure that the account is guaranteed to be "FDIC Insured." There are many accounts that are NOT insured, or are insured by a vulnerable state organization. Make sure that it's "FDIC insured." Many money market funds, investment trusts, mutual funds, and so forth take your money and invest the money in stocks, meaning that the fund is only as secure as the stock market. The FDIC web site has <#stdurl http://www.fdic.gov/consumers/consumer/information/fdiciorn.html "articles providing further information,"#> and also <#stdurl http://www.fdic.gov/deposit/deposits/index.html "lists of additional resources."#> If you have money in the bank, you should take the time to read this material. I googled the phrase, "fdic insured money market funds" and got a number of hits. For example, one hit takes you to <#stdurl http://www.ameriprise.com/amp/individual/planning-advice/cash-rates.asp "an Ameriprise Financial page,"#> listing three money market funds, one of which is FDIC insured and two of which are not. Make sure that you only go with FDIC insured accounts.
One web site reader wrote this to me yesterday:
"I read your recent log posting and noticed that money market funds are not recommended. After seeing that I checked out my 401k options and discovered that there are no federally insured CDs available. The only option that comes close is a CD which is backed by an insurance company and their backing is provided by investment grade bonds, etc. Should I stick with my money market fund or should I transfer to a CD? Please note that I am not soliciting advice, merely an opinion and will not hold you responsible for my investment decisions. (I've been around lawyers too long!!!)"
The insurance company will go bankrupt, and you will lose your money. The best bet is to sell your holdings and either keep them in cash, or put them into an FDIC account.
Another choice is to purchase short-term (6 or 12 month) Treasury bonds. You can purchase these online, for no commission, at <#stdurl treasurydirect.gov#> . I don't think long-term (5 or 10 or 30 year) Treasury bonds are a good idea, because there are hundreds of billions of dollars worth of them languishing in central banks around the world, especially China and Japan, and in case of an international financial crisis, these would all be dumped on the market, making them nearly worthless. Stick with short-term bonds.
Some people wonder why I don't recommend buying gold. Gold is a risky purchase, though probably safer than stocks. Gold has had it's own spike in prices, as part of the general worldwide commodities bubble, and when the commodities bubble bursts, the price of gold may fall sharply. The price of gold may spike up in case of a major war, but you probably won't be able to buy food with gold if financial institutions are shut down for a while. If you're in the mood to take some risk, then gold may be the way to go, but remember that it is a risk.
As <#inc ww2010.weblog.ref e070606 "recently wrote,"#> even selling stocks short on the market is a bad idea. "Going short" is a way of betting that stocks will go down, and that should be a good idea. However, the current massive worldwide liquidity bubble would immediately start contracting, raising interest rates enormously, and making credit almost impossible to get. There would be massive bankruptcies, and even escrow accounts would be vulnerable, depending on how they're set up. One web site reader wrote the following to me:
"I don't quite follow you there, are you saying the brokerages mostly go bankrupt (probability of that is close to zero, even if their customers lost 90% of their assets the brokerages aren't likely to go bankrupt. And even if it a firm does go bankrupt, the money is insured, so the insurers would also have to be bankrupt. We have much more restrictive margin use rules today than they did in 1929, and even back then, I've never heard of a short seller who was somehow unable to collect the money he made from the crash (if you know otherwise I'd be very interested in reading up on it)."
I'll give a general response and a specific response. The general response is that financial managers have created $600 trillion in derivative instruments, mostly credit derivatives, based on public companies worth about $30 trillion worldwide. These are infintely more debauched than margin abuses were in the 1920s. The worldwide economy is a huge pyramid scheme or Ponzi scheme. When it crashes, almost everything will be wiped out. There's nothing that you'll be able to count on. The specific response is that brokerage houses can indeed go bankrupt, and have already done so. Here's an excerpt from <#stdurl http://www.iht.com/articles/2007/02/23/business/hedge.php?page=1 "a recent article on the subject:"#>
"A bankruptcy development that has Wall Street worried NEW YORK: A week ago, Judge Burton Lifland of the U.S. Bankruptcy Court in New York ordered the investment bank Bear Stearns to pay almost $160 million to investors in a hedge fund for doing business with that fund but failing to detect that it was a fraud. The case has been received with true fear on Wall Street, where servicing hedge funds is a business so lucrative that it makes the go-go years of taking technology companies public look quaint. For one, hedge funds do billions of dollars of business in multiple parts of the bank, while many technology companies promptly evaporated after going public. ... Prime brokerage is the business of servicing hedge funds — finding and lending stock to allow hedge funds to short (a bet the price will fall), financing trades (leverage) and structuring swaps, among other things (services vary by firm). Wall Street firms earned $8 billion to $10 billion from prime brokerage activities last year. Hedge fund relationships forged through prime brokerage relationships are critical to banks who can then deliver countless other services to hedge funds: trading over-the-counter derivatives, selling exotic stock or bond deals or structuring hedges. If prime brokerage is an increasingly commoditized product, its significance in generating business is not. The relationship between prime brokers and hedge funds is a naturally strained one: Prime brokers want as much information as possible and hedge funds want to give them as little as possible. After all, most banks are in the same business as hedge funds — looking for investment ideas and making money from them. Most hedge funds use multiple prime brokers. In general, prime brokers operate with the assurance that if a client blows up, they are not on the line for the losses. Unless they have actual knowledge of a fraud, they should be O.K. Until now. ..."
Now, Bear Stearns was forced to pay the $160 million based on a technical point, but as I've pointed out before, every action of every person with access to money is going to be carefully examined and audited once the crash occurs, and any irregularity will be punished severely. So no account is safe, even those of brokerages.

Another web site reader sent me the following reminiscence (slightly modified to disguise the identity):

"Some days I wish this nonsense would end, yet I feel a real fear about what is coming. At times it is very intense and at other times it dissipates almost to nothing. It goes back and forth, round and round. It's almost like being tortured. See, I can still remember looking into my Grandfather's face when he was old. I'll never forget the real and intense fear I saw in his face as long as I live. My Dad's father, who was 87 (born in 1902) was was getting forgetful and one morning a look of intense fear came over his face and he announced, "I have no money!" He was reliving the Depression. My Dad, a Silent born in 1933, very patiently took all of his bank statements out of the drawer and proceeded to show him how much money he had. A look of relief came over my Grandfather's face and he slumped down into the chair and said "Oh." I should also say that my Dad never talked about that incident. I knew it was too painful for him to talk about. ... This is a risky time to be living no matter what you do. Those who survive this will be extremely shrewd AND extremely lucky. Nothing is safe, I'm afraid. The best investment will be one that nobody gave a thought to, like pepper during WWII or something like that. I think you and I think too much alike. That article you wrote about religion is the only thing I've ever seen on the subject that articulates most of my philosophy. Unfortunately, it will probably turn a lot of people off. And that "Full House" signal that Morgan Stanley announced ... will only be the beginning. It may be this month. If it is, there will probably be a brief relief period before it gets worse. That would be the best case for everyone, but I'm not so sure it can work that way. The Fed has been withdrawing liquidity for a year but private liquidity is still raging out of control."

This is relevant to our lives today because there are actually a lot of people, especially young people, looking forward to a major financial or war crisis, because they're simply looking for a change, any kind of change. I've had to tell more than one person to be careful what you wish for. The day that the stock market crashes will be the worst day of your life. =eod =// &&2 e070606 Chinese officials alarmed with fear of stock market panic =data ww2010.weblog.y2007.e070606.head Chinese officials alarmed with fear of stock market panic =data ww2010.weblog.y2007.e070606.keys shanghai stock market, selling short =data ww2010.weblog.y2007.e070606.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070606.date 6-Jun-07 =data ww2010.weblog.y2007.e070606.txt1 Sharp falls in Shanghai and other Chinese stock markets =data ww2010.weblog.y2007.e070606.txt2 are causing great concern among Chinese officials that the huge stock market bubble that's been building for months is about to burst -- causing widespread money losses among ordinary Chinese people. Up until Wednesday of last week, Chinese officials were looking for ways to cool down the bubble growth, hoping that it would be deflated slowly and carefully (as if that were possible). On Wednesday, <#stdurl http://online.wsj.com/article/SB118101393068324730.html "Beijing tripled the tax charged"#> on people buying or selling stocks, hoping that it would slow things down slightly. Instead, it triggered a sharp fall of 15% in four sessions, the biggest drop being 8.3% in a single day. <#inc ww2010.pic g070605a.gif right "" "The Shanghai stock market has fallen sharply in the last few days." (Source: WSJ)"#> Now the Chinese are <#stdurl http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/06/cnchina106.xml "trying to reverse themselves,"#> although it isn't clear what they can do. They're considering more "jawboning" (which always works great, of course), and a reduction in last week's tax is also being considered. Stocks <#stdurl http://www.ft.com/cms/s/ed9b2440-1312-11dc-a475-000b5df10621.html "recovered 2.6% on Tuesday,"#> giving everyone a euphoric feeling of relief that another crisis had past, and everything can go on as it was. From the point of view of Generational Dynamics, the Chinese economy is <#inc ww2010.weblog.ref e070426 "is out of control"#> and is headed for a major financial crisis, with 100% certainty. This will be triggered by a panic that might occur tomorrow, next week, next year or thereafter, but the situation has gotten so bad it will probably happen sooner rather than later. ------ I want to say a word to investors who have been "going short." When you go short on a stock, it means the following: You borrow shares of the stock (from your stock broker) and sell them, keeping the money in an escrow account (held by your stock broker). You agree that in three months, you'll purchase shares of stock at the price at that time, and pay back the loan. If the price of the stocks have gone down in the meantime, then you make money, because you buy stocks at a lower price than you sold them. This is the opposite of what investors usually do. Usually, you buy stocks today and sell them sell a few months later. If the price of the stocks has gone up, you make money. Going short means that you sell the stocks today, and buy them back a few months later, so you make money if the price goes down. Now, what I'm about to say is not a Generational Dynamics prediction; it's only a gut feeling on my part, based on what I've seen happening the last few months, and on Generational Dynamics theory. The concern is that selling short is going to lose money either way, no matter what happens. Selling short makes sense when you think the market is going down, but it's been increasingly clear the last few months that the market is going to continue going up, for the reasons I've described on my web site: Debauched and abusive use of credit in America, China, India, and other countries around the world and this money gets pumped into the stock market bubble (I mean this as a figure of speech, not literally) and the other bubbles. This is something that didn't happen in 1987 and hasn't happened since 1929. As long as this process is going on, investors will lose money selling short. What Generational Dynamics IS predicting is that at some point there'll be a worldwide stock market panic, and a complete loss of confidence among investors. Bankers will be calling loans, and credit will become unavailable. Interest rates will increase, and there will be a worldwide collapse in liquidity. Stock market bubbles, including the huge Wall Street bubble, will collapse, and stocks will fall sharply and won't recover. You might think that this is good news for investors who sell short, since they'll make a lot of money, but there's a big problem: The sharp contraction in liquidity will force many bankruptcies, and even escrow accounts will be depleted, depending on how they've been set up. That means that even investors who went short will lose money all their money in this case as well. It's not guaranteed that this scenario will occur, but right now it appears to me to be one of the scenarios most likely to occur. As I <#inc ww2010.weblog.ref e070303 "described at length several months ago,"#> I continue to believe that the best thing to do is keep cash or short-term (not long-term) treasury bills. This does NOT mean corporate bonds; it does NOT mean mutual funds; it does NOT mean money market funds. All of these funds are, in the end, backed by stocks. I mean either cash or short-term treasury bills. =eod =// &&2 e070603b Book review review: Christopher Hitchens: 'God Is Not Great: How Religion Poisons Everything' (II) =data ww2010.weblog.y2007.e070603b.head Book review review: Christopher Hitchens: "God Is Not Great: How Religion Poisons Everything" (II) =data ww2010.weblog.y2007.e070603b.keys christopher hitchens, god is not great, how religion poisons everything, communism, henry david thoreau, green revolution, naziism, fascism, communism, peter turchin =data ww2010.weblog.y2007.e070603b.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070603b.date 3-Jun-07 =data ww2010.weblog.y2007.e070603b.txt1 Part II: The role of religion in Generational Dynamics theory. =data ww2010.weblog.y2007.e070603b.txt2

<#inc ww2010.weblog.ref e070603 "Part I"#> <#inc ww2010.weblog.ref e070603b "Part II"#>

In this book review review, <#inc ww2010.weblog.ref e070603 "Part I"#> looked at the politics issues around Hitchens' book. In Part II, we become a lot more theoretical. We turn to Generational Dynamics theory, as it looks at religion. As I discussed in Part I, Christopher Hitchens' justifications that "religion poisons everything" are mostly bizarre, and certainly not logic. In particular, he notes examples of correlation between war and religion and thereby claims that religion causes war without, for some reason, considering that war causes religion. In fact, it is the Generational Dynamics view that war causes religion, as this essay will demonstrate. But that conclusion will come later. As we'll show, the reason that "war causes religion" is that religious arguments are used as justification for wars that were going to occur anyway. Obviously, this kind of explanation wouldn't satisfy the religion-haters, like Hitchens, but it also won't satisfy the religious believers. (I was recently discussing religion with a web site reader, when she finally wrote to me, "I think you're dead already." She certainly wasn't too happy.) =inc ww2010.h2 cause "What causes war?" Let's start at the beginning. If war causes religion, then what causes war? This question is at the heart of generational theory. People sometimes write to me accusing me of following some ideology. I always write back asking them to tell me exactly what ideology they believe that I'm following. I'm perfectly happy criticizing airheads on both the right and the left, the neocons as well as the loony left, and so that question is never answered. These people are mostly disturbed by the Generational Dynamics finding that there MUST be genocidal wars at regular intervals, and that a new world war is coming. In fact, it's very easy to prove that SOME kind of genocidal war cycle must exist. In order to understand this, let's put humans aside for the moment, and look at what happens to animals. In the case of animals, as the population grows, it fills up available land and uses up available food and water resources. The result is that some animals have to die. Generally, animals simply "die quietly" of starvation or disease. In the case of two sub-species competing for the same food and water, the weaker sub-species may simply "die quietly" and become extinct. But human beings don't "die quietly," because human beings are "intelligent." All of the above considerations are the same for humans, except for one major one: Humans don't "die quietly." Suppose that you have two ethnic groups, one short and one tall, living together. After the low-hanging fruit has been eaten, the shorter humans will face starvation. Instead of dying quietly, they'll first ask the taller humans to pass down some of the high-hanging fruit. When the high-hanging fruit becomes scarce, and the taller human refuses, the short human doesn't "die quietly." He becomes violent, rather than starve to death. Eventually, the group of shorter humans will get together and wage war against the taller humans, and eventually this will become a genocidal war. This proves that SOME kind of genocidal war cycle exists. By itself it doesn't provide proof for the rich descriptions of generational turnings archetypes originally developed by William Strauss and Neil Howe, the founding fathers of generational theory, and further developed by Generational Dynamics. But it does provide a proof that a major part of generational theory, indeed the part that most people viscerally object to, is absolutely true. There MUST be genocidal wars at regular intervals, because population growth always eventually -- in a matter of decades -- exceeds the availability of land and resources. As I wrote in my <#hreftext ww2010.i.food040628 "my 2004 article on the Green Revolution and the Malthus effect,"#> I estimate that worldwide population has grown at an average of 1.72% per year since World War II, while food production grows at only 0.96% per year. This means that periodic genocidal wars must occur to reduce the population so that there'll be enough food for the survivors. As we said, animals usually "die quietly" when food, water or other resources aren't available. But some animals do have wars, as described by one of the great antiwar activists in American history. Here's an excerpt from Chapter 12 of <#stdurl http://www.gutenberg.org/etext/205 "Henry David Thoreau's 1840s book, Walden:"#>

"I was witness to events of a less peaceful character. One day when I went out to my wood-pile, or rather my pile of stumps, I observed two large ants, the one red, the other much larger, nearly half an inch long, and black, fiercely contending with one another. Having once got hold they never let go, but struggled and wrestled and rolled on the chips incessantly. Looking farther, I was surprised to find that the chips were covered with such combatants, that it was not a duellum, but a bellum, a war between two races of ants, the red always pitted against the black, and frequently two red ones to one black. The legions of these Myrmidons covered all the hills and vales in my wood-yard, and the ground was already strewn with the dead and dying, both red and black. It was the only battle which I have ever witnessed, the only battle-field I ever trod while the battle was raging; internecine war; the red republicans on the one hand, and the black imperialists on the other. On every side they were engaged in deadly combat, yet without any noise that I could hear, and human soldiers never fought so resolutely. I watched a couple that were fast locked in each other's embraces, in a little sunny valley amid the chips, now at noonday prepared to fight till the sun went down, or life went out. The smaller red champion had fastened himself like a vice to his adversary's front, and through all the tumblings on that field never for an instant ceased to gnaw at one of his feelers near the root, having already caused the other to go by the board; while the stronger black one dashed him from side to side, and, as I saw on looking nearer, had already divested him of several of his members. They fought with more pertinacity than bulldogs. Neither manifested the least disposition to retreat. It was evident that their battle-cry was "Conquer or die." In the meanwhile there came along a single red ant on the hillside of this valley, evidently full of excitement .... He saw this unequal combat from afar -- for the blacks were nearly twice the size of the red -- he drew near with rapid pace till be stood on his guard within half an inch of the combatants; then, watching his opportunity, he sprang upon the black warrior, and commenced his operations near the root of his right fore leg, leaving the foe to select among his own members; and so there were three united for life, as if a new kind of attraction had been invented which put all other locks and cements to shame. [[In the following, Thoreau mocks the marching bands that accompany armies going to war. Saying "the less the difference," he means that both wars are equally futile. He's specifically inveighing against the Mexican-American war, which was the Vietnam war of those days.]] I should not have wondered by this time to find that they had their respective musical bands stationed on some eminent chip, and playing their national airs the while, to excite the slow and cheer the dying combatants. I was myself excited somewhat even as if they had been men. The more you think of it, the less the difference.... [[Now, Thoreau specifically mocks the Revolutionary War, partially triggered by the tea tax and the Boston Tea Party.]] I have no doubt that it was a principle they fought for, as much as our ancestors, and not to avoid a three-penny tax on their tea; and the results of this battle will be as important and memorable to those whom it concerns as those of the battle of Bunker Hill, at least. ... I never learned which party was victorious, nor the cause of the war; but I felt for the rest of that day as if I had had my feelings excited and harrowed by witnessing the struggle, the ferocity and carnage, of a human battle before my door."

Thoreau was clearly moved by the war between the black and red ants, but has no idea why the war had to take place. But it's obvious what must have happened: Several weeks earlier, a small black ant nest established itself at one end of the wood pile, and a small red ant nest established itself at the other end. Both populations grew, and soon there wasn't enough vegetation and other food to support both nests. The wood pile was soon too small for both nests to co-exist, and so there was a war of extermination. Only one group could survive; or, if both groups survived, then the population would be so reduced that there would be enough food for everyone. Then all the ants could be happy until the next war. Note that this situation could mean that there's a genocidal war among the ants every few weeks. The reduced population grows again in both nests, until it becomes necessary to have another war, and the cycle repeats. So the war had a very important purpose: To decide which group survives, and which group is exterminated, since there wasn't enough food for both of groups. It's as simple as that. Why couldn't Thoreau see that? Beats me. It's not as if there was any other choice. There simply wasn't enough food for both groups. There HAD to be a genocidal war. =inc ww2010.h2 wwii "The purpose of World War II" Why don't people understand that World War I, World War II and other major wars have exactly the same purpose? Germany needed "Lebensraum" to expand the German population. Japan was starving economically, and had already conquered Korea and was gaining ground in Manchuria and China. There was no other choice; there HAD to be a genocidal war, because there wasn't enough food in the world to feed everyone. Today there are, once again, too many people. There are 6.5 billion people in the world, and by my rough estimates, the population would have to be reduced to about 4.5 billion to have the same amount of food per capita as in 1950. As world population has continued to increase, and since the gains from the 1960s "green revolution" petered out in the 1990s, and as food per capita has been decreasing, the price of food has been increasing dramatically around the world. Around the world there are "megacities," each containing tens of millions of people with no access to farmland. Families in poverty in those cities often survive by foraging in large garbage dumps for scraps of food left over by people who can afford to buy food. As population continues to increase, this problem of megacities will multiply. These problems have occurred in cycles throughout human history, and have gotten many times worse in the last two centuries because medical discoveries have lowered the infant mortality rate from 40-50% to 1-2%. That's why, for example, the death rate (as percentage of population) was ten times higher in WW II than it was in the Napoleonic wars. We're approaching the Clash of Civilizations world war, at a time when infant mortality has fallen far, leading to masses of people who are packed by the millions into large megacities, in a fragile world where any economic dislocation can cause mass starvation, creating huge pools of young men ready for war. Many of these megacities are already megaslums around the world, filled with hundreds of millions of people squatting on marginal or toxic land, drinking filthy water filled with excrement, just barely surviving on the garbage left by others. Here's where you see the real power of terrorists. Terrorist acts can inflame populations, and when you have a huge mass of young men who can't feed their families and have to forage for food in garbage dumps, then they have nothing to lose by spontaneous riots, civil wars, or external wars. At least when you're in an army, you get fed and you get paid with money you can send back to your family. For example, the effects of explosive population growth is especially clear in China. There are tens of thousands of mass riots every year in China. There are over a hundred million migrant workers, high unemployment, high food prices, high income disparities, and addiction to a bubble economy, unraveling of Mao's social structure and several provinces threatening to secede. Recently, <#inc ww2010.weblog.ref e070322 "Chinese premier Wen Jiabao"#> said that China is "unsteady, unbalanced, uncoordinated and unsustainable." As I <#hreftext ww2010.i.china050116 "wrote in January, 2005,"#> China is becoming increasingly unstable and approaching a civil war, and a resulting world financial and war crisis. Incidentally, one of the largest megacities in the world is Mexico City, the capital of Mexico, with some 20 million people. A major financial crisis will strike Mexico very hard (as well as many other countries with poverty-stricken megacities). Generational Dynamics predicts that Mexico is headed soon for a new civil war along the European/indigenous fault line, and that this civil war will spill over into the southwestern U.S., especially in California where 1/3 of the population is Mexican. =inc ww2010.h2 cycles "Cycles of animal populations" The ant wars that Henry David Thoreau described are not typical of animals; in most cases, there are no such wars, and animals that can't find food simply "die quietly." However, what is very common among animals is a population cycle. Even in simple cases, where you have a species of animal eating vegetation, you might have a surplus of animals eating all vegetation available. Once there's nothing left, there are mass deaths from starvation, causing near-extinction of the animal. Then the vegetation can grow back, the surviving animals start to eat and reproduce, and the cycle repeats itself. This kind of thing happens with locust populations near the equator, for example. These kinds of cycles occur frequently among animal populations, as described by University of Connecticut Professor Peter Turchin in his book Complex Population Dynamics. <#inc ww2010.pic lempop.gif right "" "The population density of lemmings and owls over time (Source: Peter Turchin in Complex Population Dynamics)"#> The adjoining graph shows the population density of lemmings and owls in a certain region. As you can see, the lemmings become almost extinct, but then every four years or so the ground is covered with them (giving rise to the myth that lemmings follow one another off a cliff). The owls eat the lemmings (among other things). So as the number of lemmings grows, they get eaten by more owls, and the number of owls increases. When all the lemmings get eaten, then the owls die off as well. So the result is a 4-year cycle. These kinds of cycles, where there are interplays between predator and prey, can cause very complex population cycles. So it shouldn't be surprising that the population cycle in human beings is also complicated, and in fact it's a lot more complicated than it is in animals. I receive criticisms of Generational Dynamics all the time, and two that I see a lot of are: "It's too simple" and "It's too complicated." It IS simple in the sense that it says that population growth leads to genocidal war, as we've been discussing. But it's also complicated, because Generational Dynamics supplies the details of how this population cycle works, through generational turnings and archetypes and through crisis wars. So let's now turn to one of these "details": How wars are the cause of religions. =inc ww2010.h2 fault "Defining fault lines with religion" Previously we discussed the example of shorter and taller humans. Let's discuss this example further. Imagine an island in the ocean somewhere with a population of 10,000 horses, one short subspecies and one tall subspecies, with enough vegetation to support a population of 100,000 horses. Well, those are happy horses, with plenty to eat. But suppose the population of horses grows to 100,000. What happens then? Well, the low-hanging food gets eaten by the all the horses, but when that runs out, and only high-hanging vegetation is left, the short horses starve. Horses aren't like ants, so there won't be a big war. The short horses will simply "die quietly," and in fact the entire short subspecies may very well be extinguished. But human beings don't "die quietly." Suppose now we're talking about 10,000 human beings, rather than horses, on an island with enough crops, hunting and fishing to sustain a population of 100,000. And let's suppose that one group of humans is smaller and weaker, and the other group is taller and stronger. What happens when the population of humans grows? Well, around the population of 50,000 or so, you begin to see shortages of food in some regions. The short, weak humans will begin to be jealous of the tall, strong humans, who seem to have control over everything. The short, weak humans will make a lot of noise and will even perform acts of aggression to get food for their families. The tall, strong humans will alternate between punishing the aggressors one day and promise to provide them with food the next. As the population approaches 100,000, and food becomes very scarce, and some people are dying of starvation, there's a war between the two groups which, presumably, the tall, strong humans win. Either the short, weak group is completely exterminated, or else enough of the population in both groups is killed so that the total population is, say, 30,000, and once again there's enough food for everyone to live on until population grows again, leading to the next genocidal war. What made the above example easy to describe was the distinction between short, weak humans and tall, strong humans. In real situations, it's usually not that simple. Sometimes there are two groups with distinct physical differences. In the 1994 Rwanda civil war genocide the Tutsis (victims) were a bit taller than the Hutus (the attackers). In fact, the genocide was triggered by a radio call from a Hutu leader "cut down the tall trees." The most obvious difference is with skin color. In the Darfur crisis civil war going on today, there is a small skin color difference between the two sides, although it's mostly been erased by decades of intermarriage. The point is this: When the population becomes so large that a genocidal war becomes a necessity, then there must be a mechanism that permits the choosing of sides. If there's a physical distinction, then that can be used. If there's a language difference, that can be used. If there's a geographical border separating the groups, then that can be used. But what happens when two sides are homogeneous in appearance? Many civil wars in history have been "brother against brother." This was true in the American civil war. There were those people unambiguously in the South, and there were those who were unambiguously in the North. People in the border states had to choose sides. "Am I a Northerner or a Southerner?" It was a crucial decision, sometimes leading to "brother against brother" kinds of fights. (And, given how Christopher Hitchens and his brother Peter get along, as described in <#inc ww2010.weblog.ref e070603 "Part I,"#> it wouldn't surprise me if they were on opposites of any civil war, should one occur.) If a genocidal war is coming, each leader has to be able to say what makes his side unique, different from the other side. He has to be able to say, "We're superior to them because we're taller / shorter / darker / lighter / richer / poorer / more moral." More moral? That's where religion begins to appear. Each side wants to be "right," and has to believe they're "right" in order for a leader to convince his followers to go out and kill people. One dramatic example occurred in Russia in the late 1600s. There was a power struggle between the Tsar and the Russian Orthodox Church. In 1652, the Patriarch Nikon introduced some changes in rituals, in order to be consistent with the Greek Orthodox Church. The changes in rituals were, to an outsider, incredibly trivial: Make the sign of the cross with two fingers instead of three; sing alleluia twice instead of three times; refer to "the True Lord," instead of just "the Lord," in the Creed; and change the spelling of "Jesus" slightly. As trivial as these changes were, they met with wide opposition and created a schism in the Church and a secessionist group called <#stdurl http://en.wikipedia.org/wiki/Old_Believers "the Old Believers."#> Starting in 1685, persecutions began, resulting in tens of thousands of deaths. Now here you had two groups of people with the same physical characteristics, living in the same geographical areas, and having the same religion, but engaged in a power struggle between peasants and Tsar. The struggle turned into a war and created a new religious branch as a by-product; it was the existing conflict between the peasants and the Tsar that CAUSED the new variant religion to be created. Incidentally, Old Believer groups continue to exist to this very day. Many historians, and probably Christopher Hitchens, would claim that it was religion that "caused" this war. One group wanted to make the sign of the cross with two fingers, and one wanted to make it with three fingers, and so they fought a war over that and similar religious differences. But just reading this last sentence makes you see how unrealistic that view is. You would not have massive persecutions and ten thousand deaths over a simple ritual matter, unless there were something else going on. From the point of view of Generational Dynamics, religion did NOT cause that war. It was the continuing ancient conflict between Tsar and peasants that was going on anyway that caused the war; the ritual differences, and the resulting creation of a new religious variant, were the RESULT of the conflict, not the cause. Let's look at some further examples. =inc ww2010.h2 rise "The rise of great religions" In my book, <#hreftext ww2010.book "Generational Dynamics: Forecasting America's Destiny,"#> I describe how some of the world's great religions came about through generational changes. Here's a brief summary:

Jesus's ministry began in his early 30s around 30 AD, during an Awakening era when young Jewish radicals were rebelling against their parents and protesting against Roman rule. Jesus's followers confronted the Romans by claiming that Jesus was the REAL king of the Jews. Jesus became very popular among young Jews, and created so much political conflict that he was considered a threat by BOTH the Romans and the elder Jews, following the usual paradigm for a generational conflict. Because he threatened everyone in the older generations, he was executed, but of course that didn't end the "Jewish problem" for the Romans. Following Jesus' death there were more rebellions and skirmishes, leading to a crisis war with the Romans that climaxed in 66 AD with the destruction of the Jewish Temple in Jerusalem, and of most of the city of Jerusalem as well. This was the end of the Jews in Jerusalem for centuries, but it was the beginning of the spread of Christianity.
Mohammed was born around 570 AD in Mecca. He was orphaned and became a survivor of the crisis wars in the region between Christians, Jews and pagans, and Mohammed participated as part of the "Hero generation" of that war. Around 610, he had an experience that he and his believers say was a visit from an angel of God, telling him to become the messenger of God. The angel told him to recite certain verses that he would receive from God regularly. These verses were eventually collected and organized into Islam's holy book, The Quran. He liked the Jews, and hoped that they would recognize him as the promised Savior, but of course that didn't happen. Around 620 he was so popular among the youth in Mecca that he was threatened by the elders, and had to flee to Medina. During the next ten years, he became increasingly powerful, conducting wars, but always preferring diplomacy to war, as was befitting an Awakening era. Finally, in 630, he led his army back to conquer Mecca. His enemies, seeing that they would lose, simply accepted Mohammed as the new ruler, allowing his return to Mecca in triumph. After his death in 632, his followers took over most of the Arabian peninsula. The main problem was selection of "caliph," or Mohmammed's successors. This dispute lead to a crisis civil war between competing clans from 656-661. A tense peace followed, but an assassination in 680 led to a historic split between Sunni and Shia Muslims. After that, Islam spread like wildfire, east across Africa and into Spain, and west into India.

This illustrates an important finding of Generational Dynamics: That great ideas are born during Awakening Eras, and they become either established or extinguished during Crisis Eras. In each of these cases, ask yourself whether religion CAUSED the war, or was a by-product of the conflict. Did the Romans REALLY attack the Jews because of their religion? If they had been pagans, like the Romans, would they have left that population alone? Or would they have attacked anyway, just because the population was getting too large and unruly? In the case of the Muslim clan war that began in 656, the clans all had the same religion, so there wasn't a religious difference to fight over. The religious difference was born because of a power struggle between the clans that was going to happen anyway. =inc ww2010.h2 ideologies "The rise of non-religious ideologies" I mentioned in <#inc ww2010.weblog.ref e070603 "Part I"#> of this review of Christopher Hitchens' book that Generational Dynamics considers non-religious ideologies like Marxism to follow similar patterns as religions. Marxism was born during the European Awakening era "revolutions of 1848." It was first tried in the Paris Commune of 1871, leading to a violent crisis civil war. Communism was extinguished there. It was established in Russia in the Bolshevik Revolution of 1917, and in China in Mao Zedong's civil war that began with the Long March in 1934 and climaxed in 1949. From the point of view of Generational Dynamics, Communism is just another ideology, like religion, used as a justification for a war that was going to occur anyway. In the Bolshevik Revolution, Communism was almost a perfect mirror image of religion, demanding atheism, as opposed to the Russian Orthodox religion of its followers. In China, Communism was Mao's method for distinguishing his followers from those of his enemy, Chiang Kai-Shek. Communism is no different from Fascism and Naziism, in the sense that they were ideologies spread by leaders who wanted to use the ideologies to become dictators. Each of these ideologies can be thought of as a kind of "reverse religion," with all the good removed, and replaced by more evil. In each case, the ideology was used by a psychotic monster -- Stalin, Mao, Mussolini, Hitler -- to justify the torture and extermination of tens of millions of people. What I find astonishing is how popular they were and even still are. Fascism was a great "liberal" favorite in the 1930s, since Mussolini "may be a dictator, but he keeps the trains running on time." Communism was extremely popular when I was attending MIT in the People's Republic of Cambridge, Mass., in the 1960s, and it seemed that half of my friends carried the little red booklets, "Thoughts of Chairman Mao" in their back pockets -- even as Mao had slaughtered tens of millions of innocent Chinese peasants in the Great Leap Forward. I'm not a religious person, but I like religion and I can understand the value that religion fills in people's lives -- providing comfort and support to those who need it, and providing a framework for keeping families close to one another. But I just can't understand why any intelligent person would adulate Naziism or Fascism or Communism. Even today, I know several people who adulate Communism, despite its repeated failure, and its use as a justification for tens of millions of murders. "You have to break a few eggs to make an omelet," is what I've been told -- you have to kill a few million people if you want to create a Worker's Paradise. But as we showed in Part I, Communism can only work for small populations; you can use the mathematics of Computation and Complexity theory to prove that it simply collapses as populations get larger. That's why Communist societies in Russia, Cuba, East Germany and North Korea all got stuck in the 1950s, using 1950s products and forbidding any economic innovation. In the end, "laissez-faire capitalism" is not an ideology so much as a mathematical imperative, as populations grow. And this brings us back to Christopher Hitchens, the believer in Communism, because it's "rational," the rejecter of religion because it's "supernatural" and "irrational." And the only reason Communism hasn't worked is because Trotsky didn't win the civil war in Russia in the 1920s. What faith!

<#inc ww2010.weblog.ref e070603 "Part I"#> <#inc ww2010.weblog.ref e070603b "Part II"#>

=eod =// &&2 e070603 Book review review: Christopher Hitchens: 'God Is Not Great: How Religion Poisons Everything' (I) =data ww2010.weblog.y2007.e070603.head Book review review: Christopher Hitchens: "God Is Not Great: How Religion Poisons Everything" (I) =data ww2010.weblog.y2007.e070603.keys christopher hitchens, god is not great, how religion poisons everything, herbert w armstrong, huston smith, feminism, marxism, communism =data ww2010.weblog.y2007.e070603.loc ww2010.weblog.log0706 =data ww2010.weblog.y2007.e070603.date 3-Jun-07 =data ww2010.weblog.y2007.e070603.txt1 Part I: Is religion really the root of all evil? =data ww2010.weblog.y2007.e070603.txt2

<#inc ww2010.weblog.ref e070603 "Part I"#> <#inc ww2010.weblog.ref e070603b "Part II"#>

I haven't read Hitchens' book, though I've read <#stdurl http://www.nytimes.com/2007/05/13/books/chapters/0513-1st-hitc.html "the first chapter online,"#> and I've read <#stdurl http://www.nytimes.com/2007/05/13/books/review/Kinsley-t.html?8bu&emc=bu "some reviews"#> and <#stdurl http://frontpagemagazine.com/Articles/ReadArticle.asp?ID=28552 "some interviews with Hitchens."#> So this isn't precisely a book review; call it a book review review. Most important, this review gives me an opportunity to write about the role of religion in Generational Dynamics. Here, Part I starts with the Hitchens' view of religion in politics, which contrasts sharply with the Generational Dynamics view. Later, <#inc ww2010.weblog.ref e070603b "Part II"#> develops a purely theoretic view of the role of religion in human development, and contrasts it with Hitchens' and others' theories. I'm not a religious person. To paraphrase what a college friend once told me, God has never seen fit to bless me with faith. (The implication, in case you don't get it, is that if I don't have faith in God, then it's God's fault, not mine.) But I've never been a religious hater either. Some of my best friends, as the saying goes, have been Jews, Christians, Muslims, Buddhists, Hindus, atheists, and so forth. And I respect them for having religion as a framework for understanding the world they have to live in. I know that most of them must be wrong (since these religions all contradict one another, so at most one of them could be correct), but I know that I've been wrong from time to time too. (Rarely, of course.) But I look at other things as "religions" too. Communism is a religion, albeit one that rejects God. There are political religions as well: "Pro-abortion" and "pro-life" are examples. So are "Conservatism" and "Liberalism." Once again, I know that most of them must be wrong, since they contradict one another. But they provide a framework for getting through the day, and that's good. I disagree with religious scholars who claim that you have to be religious to have a philosophy of "right" and "wrong." You don't have to be religious to believe that "Thou shalt not murder" is correct. Or that it has exceptions -- for self-defense or in war, for example. And since most people are wrong about religion (since at most one religion can be correct), it follows that most people, most societies and nations, figured out "Thou shalt not murder" without having to resort to a conversation with God. I became turned off by religion in my youth. My devoutly religious mother took me to church every Sunday, and at times put me into "Sunday school." It wasn't until years later, looking back, that I figured out why I was so uncomfortable with that dynamic: I didn't speak Greek, so when I was in the Sunday school class, I forced all the others to speak English, which they hated to be forced to do. And I didn't really understand a whole lot of what was going on anyway, so the entire thing was pretty unpleasant all around. Still, in college I became fascinated by religion, and studied it assiduously in college, especially after I fell in with a gang of fundamentalist Christians, who spoke of nothing else. As an MIT student, I was fortunate for two years to be able to sit in on the classes of Religions of the East and West given by Professor Huston Smith, probably the greatest religious scholar in the world. His classes were both inspiring and fascinating. I also spent hundreds of hours studying the <#stdurl http://www.raisingtheruins.com/ "Bible Correspondence Course of Herbert W. Armstrong."#> Because of those and other studies, I became far more knowledgeable about religion than most "religious" people, just as I've studied countries around the world for this web site, and <#inc ww2010.weblog.ref e070114b "enormously shocked and surprised"#> to learn that I now know more about history and current events than almost all of the politicians, journalists and "experts" in Washington. =inc ww2010.h2 peter "Christopher and Peter" I mention all this to explain why I greatly respect Christopher Hitchens for his scholarly, reasoned approach. He is one of the very few in Washington who are not total morons. Unlike almost everyone in Washington, he actually takes the trouble to learn about something, whether it's religion or Iraq, before he goes on TV or writes a book. I have <#hreftext ww2010.book2.preface "elsewhere on this web site"#> speculated on the reasons why I'm able to develop this web site and the Generational Dynamics theory, when so few other people can. One of the reasons is that I'm not religious but I like religion. Most people who like religion are religious, and most people who aren't religious hate religion. Being not religious and liking religion appears to be a fairly unique quality, and although I've discussed religion with many people over the years, right now I really can't remember anyone besides myself who is not religious but likes religion. <#inc ww2010.pic g070603a.jpg right "" "Christopher Hitchens, left; his brother, Peter Hitchens, on the right."#> Certainly Christopher Hitchens doesn't fit that category. Hitchens hates religion. Hitchens REALLY hates religion. His hatred of religion seems to come out of his pores. This can be understood from <#stdurl http://www.dailymail.co.uk/pages/live/articles/news/newscomment.html?in_article_id=459427&in_page_id=1787&in_a_source= "an article by Christopher's brother Peter,"#> in which he reviews the book, and bluntly explains what's wrong what's wrong with Christopher. He describes their upbringing:

"Because my father was in the Navy, we were brought up in a very old-fashioned Britain. ... Our boarding-school education, mainly on the edge of Dartmoor, took place in conditions closer by far to the Thirties than to now. Our ancestry, so far as I have been able to dig it up, is a volatile mixture. On my father’s side, fierce West Country nonconformists mixed with gentle, rather saintly Hampshire Anglicans. One grandfather was a pioneer of the National Union of Teachers and a straggler from the First World War, saved from the trenches by being sent to India. Well into the Sixties his house was a museum of the world before 1939: no telephone, no TV, but a quietly singing kettle always on the hob and a mangle in the porch, and he refused to read fiction because he thought it immoral. As for the other grandfather, I have yet to track him down, and we were always told he was "killed in the war", which is true in the sense that he was run over by a bus in the blackout."

This provides a very interesting generational insight. Both Peter and Christopher are in the rebellious Boomer generation, and they both rebelled strongly against their father and grandfather. However, they rebelled in completely different ways: Christopher "of the Left," Peter "of the Right." Christopher is "for" the Iraq war, Peter is "against" it. Christopher is an "atheist," Peter is a "believer." What could be more typical of Boomers? They can't do anything but argue. They argue with their parents, they argue with each other. Each one is in the center of the universe, and his words are the Golden Words of Truth, even when they change their minds. This is a completely stereotypical case. =inc ww2010.h2 view "View of Religion" Although I greatly respect Christopher Hitchens for his scholarly, reasoned approach, his years of study and scholarship have taken him to a place that make no sense at all with regard to religion. And the sub-title of his book, "How religion poisons everything," epitomizes his total misunderstanding of the role of religion in human life. He makes his argument by pointing to examples where, he believes, religion does harm or advocates harm:

He described a speech he gave a few days before 9/11, and said: "[The] most faith-based group in American history was then just only a few days away from boarding a plane -- or two, that the most religious people in the country were -- perhaps in the history of the country -- at least since the Confederates decided to declare war on the basis of a Christian belief in slavery -- were just about to crash their planes into our cities." He's claiming that the Muslim religion CAUSED the 9/11 attacks.
He says that in 1965, the Archbishop of Canterbury said, "A nuclear war would involve nothing more than the transition of many millions of people into the love of God, only a few years before they were going to find it anyway." To this, Hitchens wonders what the point of religion is if you're more interested in living on earth than what happens after death.
He's concerned about how religion tortures people with obscure religious beliefs. For example, the Pope recently said that "dead babies, un-baptized ... go to hell." Hitchens considers this to be torture to the mothers of those dead babies.
He says that religion is "pulled toward child abuse," as with genital mutilation.
He says that "Religious propaganda is based on sexual repression."

Now, arguing against religion by means of a series of specific examples like this makes absolutely no sense at all. Maybe religion is still "right" overall, but those specific examples expose details where human beings have erred in detailing religious beliefs. You could even argue that the top levels of the religious hierachy in some religion are corrupt, without being able to logically conclude that individual believers are necessarily corrupt or that they don't do good. For example, the 9/11 terrorists have been criticized, even by many Muslims, as violating Islam, and that Osama bin Laden is corrupt. The Archbishop of Canterbury may have simply been trying to comfort people anxious about nuclear war. Maybe religion is right, but hell still doesn't exist. Maybe the acts of child abuse are all individual errors. And as for "sexual repression," what aspect of human life is more complex than that? Does Hitchens really think that "Thou shalt not commit adultery" would not be accepted as a general rule for morality if it weren't for religion? Just ask any man or woman how they feel about their spouses committing adultery, and you have your answer. But Hitchens knows this. But he's not arguing against religion, for whose falsehood is a given to him. He's arguing against belief in religion. The subtitle of his book is, "How Religion Poisons Everything." But what he's really arguing is that "Belief in religion poisons everything." =inc ww2010.h2 positives "Positives and negatives" But even here his argument makes no sense. Belief in religion may have had its problems, but it's also had its positives, and probably more positives than negatives. Belief in religion provides a social framework through which the people of a society can love and understand one another, and help and comfort one another in times of distress. The Archbishop of Canterbury wasn't trying to prepare people for the afterlife; he was trying to comfort living people in fear of nuclear war. "Thou shalt not commit adultery" is not a means of inflicting sexual repression on people; it's a way of providing a cultural norm that increases harmony and reduces conflict. And the fact that some people use religion to urge war is more than offset by the fact that most people use religion to urge peace. The logical flaw in Hitchens' argument is that he considers all irrational thought to be based in religion, and that without religion, thought becomes rational. He says, "I consider all religions equally fallacious, because they all involve a surrender to faith." Well, aren't many non-religious political beliefs also a surrender to faith? Isn't the acceptance of ANY ideology a surrender to faith? =inc ww2010.h2 feminism "Feminism and Communism" Actually, Christopher Hitchens and I have one major experience in common: We both used to like President Clinton until it became clear that he was a violent serial rapist. Hitchens turned against Clinton when this became clear in 1999, and was viciously attacked for it. Here's how <#stdurl http://frontpagemagazine.com/Articles/ReadArticle.asp?ID=28552 "he describes the situation:"#>

"And that’s -- and I have letters from some of those -- several of those women, thanking me for doing it; women -- two of whom had been brutally raped by the President, I might add. This is not nothing. And I ask you to think about it for a second. The feminist movement didn’t care there was a rapist in the Oval Office? The women’s movement didn’t mind there was a serial abuser, someone who was always hitting on the help, in the Oval Office? They didn’t mind this? Well, I don’t think I’m being too judgmental in saying, well, I do. I’m not going to have a rapist as President. It’s not brave at all to come out and say that. It would just be cowardly not to do it; let’s be clear. It was sickening to find that friends of mine were involved in covering up for this psychopath."

And yet, millions of feminists, who claim that this it's outrageous to even question the sincerity of a woman who says she's a rape victim, automatically condemn Clinton's accusers as lying. The recent <#inc ww2010.weblog.ref e070422 "collapse of the Duke University rape case"#> by a prosecutor who knew (or should have known) for a certainty that the young white male students were innocent and the black woman accuser was a liar shows that it's feminists who care least of all about women who are raped. As I discussed at the time, feminism is a vast, wealthy, criminal enterprise, headed by Emily's List, the richest, wealthiest and most powerful political group in the country. Feminist groups adopt policies that increase the rape and abuse of women and children because they make money from such cases. They ignore rape accusations against wealthy supporters like Clinton, and bring false charges against innocent males who can't defend themselves. This is corruption at its highest. A criminal organization like Emily's List requires for its success a large army of women who are so blinded to the feminist propaganda that they walk in lockstep with and obedience to the criminal enterprise and its money-generating machine, without even a whimper of protest about the people, especially millions of children, whose lives are being destroyed. Now, why doesn't Hitchens call feminism a "religion"? It certainly embodies all the negative characteristics that Hitchens criticizes in a religion, including blind belief supported by faith, but it isn't "supernatural" enough for Hitchens to call it a religion. You can understand why he's so insistent on this point when you realize that Hitchens spent many early years of his life promoting socialism and Communism, and believes that Communism would have been successful in Russia if only Trotsky, instead of Stalin, had won the Russian civil war in the 1920s. Does Hitchens consider Communism to be a religion? Well no, says Hitchens: Marxism was "designed as it was to be the negation of faith." He adds, "I would say, to declare oneself a Marxist in any sense at all is to say, No, it’s not a religion; it is defined as a non-belief in the supernatural and as a repudiation of anything could be called a faith." And yet, in the year 2007, we can confidently say that Marxism has never worked. It led to massive bloodshed in the Paris Commune of 1871; in the Bolshevik Revolution of 1917; in Stalin's genocide of the Ukranians in the 1930s; in the Chinese Civil War of the 1930s-40s; in the Mao Zedong's "Great Leap Forward" in the late 1950s. If religion "poisons everything," and is the CAUSE of all kinds of wars and repression, then surely the tens and perhaps hundreds of millions of deaths CAUSED by Marxism is even worse. Furthermore Marxism has NEVER worked. You can blame the Catholic, Protestant, Orthodox, Muslim, Jewish, Hindu, Buddhist, Confucian and other religions for whatever wars or tortures you want, but each of them can at least point to centuries of time when those religions were a boon to mankind, providing comfort and support to those who need it, and providing a framework keeping families close to one another. Marxism has never even survived more than a few decades, and always has been a bloody disaster. So, for Hitchens and other apologists for Marxism and socialism to claim that Russian Communism would have succeeded if only Trotsky had beaten Stalin has got to be a conclusion that can only be reached by the wildest of irrational faiths. And yet, here's the man decrying irrational religious thought, pursuing the most irrational non-religious thought. From the point of view of Generational Dynamics, socialism and communism can't survive for long anyway. It's easy to prove, using the mathematics of Computation and Complexity Theory, that controlled, regulated economies only work for relatively small populations. As the population grows, the number of "regulators" grows exponentially faster than the population, and so either the government regulates less or it collapses. So, for example, if only 0.5% of the population is needed as regulators for 10,000 people, then 1% may be needed to perform the same amount of regulation for 100,000 people, and 2% for a million people, and so forth. That's why Communist societies in Russia, Cuba, East Germany and North Korea all got stuck in the 1950s, using 1950s products and forbidding any economic innovation: their communist governments didn't have enough people to manage the economic changes. In the end, "laissez-faire capitalism" is not an ideology so much as a mathematic imperative, as populations grow. And so, we have Hitchens, who vigorously rejects religion as being poisonous, irrational thought based on faith then accepting Marxism, which is even more poisonous and irrational, and even mathematically impossible. Hitchens never seems able to reach the obvious insight: Religion doesn't cause wars; it's wars that cause religion. Religion serves as a justification for wars that were going to happen anyway. In that sense, religion is like other ideologies. But we'll get to all that in <#inc ww2010.weblog.ref e070603b "Part II"#> of this essay.

<#inc ww2010.weblog.ref e070603 "Part I"#> <#inc ww2010.weblog.ref e070603b "Part II"#>

=eod =// &&2 e070531 Chavez threatens further harsh reprisals against the 'fascist assault' by the media =data ww2010.weblog.y2007.e070531.head Chavez threatens further harsh reprisals against the "fascist assault" by the media =data ww2010.weblog.y2007.e070531.keys hugo chavez, venezuela, tiananmen square massacre, china, south korea, kwangju massacre =data ww2010.weblog.y2007.e070531.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070531.date 31-May-07 =data ww2010.weblog.y2007.e070531.txt1 In Venezuela, the student anti-government demonstrations appear to headed for a violent climax, =data ww2010.weblog.y2007.e070531.txt2 as President Hugo Chávez <#stdurl http://english.eluniversal.com/2007/05/30/en_pol_art_chavez:-i-will-take_30A877343.shtml "threatened further harsh government actions"#> against reporters and students. Do you remember the pictures of rioting students that were in the <#inc ww2010.weblog.ref e070530 "the article that I posted yesterday?"#> Well, some of those pictures came from a Venezuelan television news station called Globovisión. Chávez went on television on Wednesday in a very bellicose, threatening mood, and blamed the media, especially Globovisión, for "creating chaos" in the streets. "Greetings, Globovisión, you will see where you will go. You may move forward, and you may continue to call people to disobedience and encouraging my assassination, like you did openly late Sunday (May 27), if you want to. But I am warning you in front of the country, take my advice, take a sedative and cool down. Otherwise, I will take care of Globovisión myself." For students, he provided the following warning: "Be careful, you are being used as a tool by some people who want you to get killed." Anyone who remembers America in the 60s will immediately realize that this is EXACTLY the wrong thing to do in response to student protests. Threatening students only infuriates them. Threatening reporters only makes them more arrogant. This is beginning to look very bad. My belief is that if Chávez simply backed off, then the demonstrations would just peter out. This opinion is based on the reasons I gave yesterday -- Venezuela is well into its generational Unraveling period, and the generation gap that drives demonstrations in the Awakening era is now pretty much in the past. But Chávez is not backing off. Instead, he's raising the stakes for everyone. He'd have to be crazy to think that everyone is going to back down just because he threatens them -- but then again he is a nutcase, isn't he. Yesterday I identified two recent historical events that might be comparable: China's 1989 Tiananmen Square massacre, and South Korea's 1980 Kwangju massacre. Both of these massacres occurred during the Unraveling era, so they would have similar characteristics. If Chávez continues as he has, then someone is going to get killed, and the word "massacre" will apply. Incidentally, massive demonstrations in Unraveling eras don't have to end in massacres. For example, there were several large demonstrations in America in the 1990s Unraveling era -- the Million Man march and civil rights demonstrations come to mind. These didn't end in massacres because, after all, nobody shot at the demonstrators. The demonstrations were just allowed to peter out by themselves. However, Chávez doesn't appear to be heading in that direction. The next few weeks in Venezuela should be interesting. =eod =// &&2 e070530 Students riot against Hugo Chavez in Venezuela =data ww2010.weblog.y2007.e070530.head Students riot against Hugo Chavez in Venezuela =data ww2010.weblog.y2007.e070530.keys hugo chavez, venezuela, tiananmen square massacre, china, south korea, kwangju massacre =data ww2010.weblog.y2007.e070530.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070530.date 30-May-07 =data ww2010.weblog.y2007.e070530.txt1 Finally we can see what America in the sixties was like. =data ww2010.weblog.y2007.e070530.txt2 If you're old enough to remember America in the 60s and 70s, the pictures below will bring a tear to your eye and a lump to your throat. These pictures are amazing. I could swear that I remember seeing all these pictures before -- they're so eerily familiar -- but I saw them as a student in the 60s and 70s. But the pictures aren't from America in the 60s; they're from Venezuela, and they're captured from video taken in the last two days. Now you can really see why I say that the so-called "antiwar movement" of today so anemic and pathetic that there really isn't an antiwar movement. I'll come back to that later, but let's get to the pictures. <#inc ww2010.pic g070529a.jpg center "" "At left, policemen fire tear gas and rubber bullets at students. At right, a student demonstrator, face draped in a Venezuelan flag, throws a rock at the police. (Source: Der Spiegel)"#> <#inc ww2010.pic g070529c.jpg center "" "Text messaging devices are de rigeur for the smart, chic rioter. The students text one another on the whereabouts of riot police. (Source: CNN)"#> <#inc ww2010.pic g070529d.jpg center "" "Monica Herrero is a good-looking journalism student close to graduation. She says, "I think while Chavez is here in Venezuela, we can do our war." She wears a bandage over her mouth to protest censorship. (Source: CNN)"#> <#inc ww2010.pic g070529e.jpg center "" "On the left we see students demonstrating early Tuesday evening. The camera pans to the right, where we see riot police on top of the bridge. Police have been shooting rubber bullets. (Source: Fox)"#> <#inc ww2010.pic g070529b.jpg center "" "Here's a variety of scenes shown live around noon Tuesday on Venezuela television. (Source: CNN)"#> <#inc ww2010.pic colomb1.jpg right "" "Venezuela and Colombia"#> Venezuela's last crisis war was shared with Colombia, where most of the genocide and destruction took place. It took place from 1948-58, and was known as <#stdurl http://www.onwar.com/aced/data/cite/colombia1948b.htm ""La Violencia,""#> or the Colombian Revolt. More than 200,000 persons lost their lives and more than a billion dollars of property damage was done. The kinds of political demonstrations you're seeing in Venezuela are performed by the generation born after the end of the last crisis war. I've explained what happens many times, so I'll only summarize it. The survivors of a generational crisis war are so traumatized by the war that they vow to do everything they can to make sure that their children and grandchildren never have to go through the same thing. They create institutions and rules designed to make sure of this. The generation born after the end of the war grow up feeling oppressed by these institutions and rules. When they grow up, around 20 years past the end of the crisis war, they rebel against their parents and the onerous institutions and rules. This is known as a generational "Awakening era," like <#hreftext ww2010.i.sixties040501 "America in the 1960s-70s."#> The young kids in the post-war generation and rebel against them, creating a "generation gap" with their parents. America's last crisis war was World War II, so you saw massive student demonstrations in the 1960s and 1970s. What people have so much difficulty understanding is that it's ONLY THE ONE POST-WAR GENERATION, the Boomers in the case of America, and NO OTHER GENERATION, that perform these massive demonstrations. See my article, <#hreftext ww2010.i.060601antiwar "Why aren't college students protesting against the Iraq war?"#> For the past five years, politicians and journalists have been scratching their heads, wondering why college kids are aren't protesting against the Iraq war. The reason is: THEY AREN'T BOOMERS. In fact, you sometimes see something demonstrators like "Grannies against the war." These grannies are exactly the same women who were burning their bras and protesting against the Vietnam war when they were 40 years younger. So now let's turn to Venezuela. 49 years have passed since the end of the last crisis war, so that Venezuela is past the end of its generational Awakening era, and in its generational Unraveling era. I mention 49 years particularly because of something I heard several times in the news coverage of the Venezuela protests: Several reporters made the point that there were more than students participating in the demonstrations -- that older people in their thirties and forties were also demonstrating. The conclusion they drew from this was that the demonstrations were more serious than if just students were demonstrating. I heard this same thing several times. But that's not necessarily the case. Of course some of the demonstrators were older -- they're in the post-war generation born after 1958, so some of the demonstrators are going to be older. From the point of view of generational theory, the older demonstrators will only want to pursue a political struggle; however, some of the younger demonstrators -- that is, the students (who correspond to America's Generation-X) -- may be more inclined to low level violence. We'll have to wait and seen how it rolls out. The event that triggered the demonstrations was the decision by nutcake <#stdurl http://www.spiegel.de/international/world/0,1518,485461,00.html "President Hugo Chávez to shut down a popular TV station"#> which has supported Chávez' opposition. This has prompted cries of censorship, and angered a lot of people. The best thing that Chávez could do is to allow the opposition TV station to continue broadcasting, and then try to close it down again in a year or so, when the demonstrations might well be much smaller. However, if Chávez overreacts, as it appears he's already doing, then the demonstrations are likely to grow. There are two recent historical examples that the current situation can be compared with, because they're demonstrations that occurred roughly at the end of the Awakening era. One is <#hreftext ww2010.i.china050116 "the 1989 Tiananmen Square massacre in China."#> In that case, a violent overreaction by the Chinese authorities did succeed in dispersing the crowd, but was an enormous shock to China, and resulted in the Falun Gong dissident movement that threatens the stability of China at the present time. The second comparable example is <#inc ww2010.weblog.ref e070216 "the Kwangju massacre of 1980 in South Korea."#> In the case of China, the "old generation" won; in South Korea, the "young generation" won, and it's that younger generation that's in power today in a scandal-ridden administration that's way over its head in dealing with the North Korean threat. These two examples -- China's Tiananmen Square massacre and South Korea's Kwangju massacre -- illustrate some of the range of possible scenarios that can follow a harsh crackdown by Hugo Chávez. We'll have to watch in the next few weeks to see what happens. One of the things that I mention from time to time on this web site is <#inc ww2010.weblog.ref e070131 "Schadenfreude:"#> taking pleasure from someone else's misfortune. For those of us who don't like Hugo Chávez, it's a joy to watch his chagrin as he looks out his window and sees his "revolution" being challenged by thousands of counter-revolutionary students. =eod =// &&2 e070528b Some thoughts on Memorial Day =data ww2010.weblog.y2007.e070528b.head Some thoughts on Memorial Day =data ww2010.weblog.y2007.e070528b.keys memorial day, truman doctrine, john f kennedy =data ww2010.weblog.y2007.e070528b.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070528b.date 28-May-07 =data ww2010.weblog.y2007.e070528b.txt1 Today is a good day to =data ww2010.weblog.y2007.e070528b.txt2 think about our nation's history and what the United States has meant to the world. It's a good day to forget, at least temporarily, that we have so many Washington politicians and journalists who have <#inc ww2010.weblog.ref e070528 "committed their careers to America's defeat and humiliation overseas."#> <#inc ww2010.pic flagwave.gif right "" ""#> It's a good day to remember that, for better or worse, we've taken on an enormous commitment and responsibility by becoming policemen of the world. This happened after World War II with the <#hreftext ww2010.i.awakening060919 ""Truman Doctrine" of 1947."#> Under this doctrine, we promised the world that we would do everything in our power to prevent a new world war, by stopping the spread of destructive doctrines, like Fascism, Naziism and Communism. Today, it's radical Islamist extremism. Truman's justification was that, whatever being policemen of the world cost us in lives and money, it would minuscule compared to the cost of World War II. Soon we're going to have to learn that lesson again. It's a good day to re-read President John F. Kennedy's 1961 inauguration speech:

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

It's a good day to understand that, once again, our country is facing a time of maximum danger, and that, for better or worse, it's America's manifest destiny to lead the world in defending democracy and freedom. It's a good day to thank all those young men and women who have personally taken on the role of defending freedom in its hour of maximum danger. This is the new generation of Heroes, our young darlings, the new "greatest generation." When the time comes and the nation is facing its greatest danger, these Heroes will go off to war fearlessly and do their duty. Without any thought for themselves, they'll go proudly and valiantly into battle, and they won't even be sad about it. It's their parents in the Generation X and Boomer generations who'll be standing on the shore in tears, waving goodbye as their ships disappear over the horizon, knowing that we'll never see many of them again, but also knowing that there's no choice. It's a good day to think about the inevitability of history. Whatever is coming is coming, and it can't stopped any more than a tsunami can be stopped. We can't stop it, but we can prepare for it. It's a good day to treasure the time you have left, and to use the time to prepare yourself, your family, your community and your nation. =eod =// &&2 e070528 The 'Anbar Awakening' may be good news in Iraq. =data ww2010.weblog.y2007.e070528.head The "Anbar Awakening" may be good news in Iraq. =data ww2010.weblog.y2007.e070528.keys iraq war, anbar awakening, carl levin, hilary clinton, barack obama, ron brownstein, joe klein =data ww2010.weblog.y2007.e070528.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070528.date 28-May-07 =data ww2010.weblog.y2007.e070528.txt1 But you would never know it from the Sunday morning news talk shows. =data ww2010.weblog.y2007.e070528.txt2 Several sources are reporting that al-Qaeda is being driven from Anbar Province in Iraq. This is consistent with the <#hreftext ww2010.i.iraq070401 "article that I wrote two months ago"#> entitled "Iraqi Sunnis are turning against al-Qaeda in Iraq." <#inc ww2010.pic anbar.jpg right "" "Iraq's al-Anbar province (Source: PBS)"#> Iraq is in a generational Awakening era, just one generation past its last crisis war, the genocidal Iran/Iraq war of the 1980s. The survivors of a crisis war are so traumatized by the war that they vow to spend their whole lives keeping anything like that from happening to their children and grandchildren. That's why pundits and politicians who are calling the Iraqi war a "civil war" are wrong, as I've been saying for four years. A crisis civil war is impossible in a country in a generational Awakening era. More and more, we're seeing the Iraqis turn against al-Qaeda, and putting their Iraqi nationalism ahead of their religious (Sunni vs Shia) differences. This is quite consistent with Iraq's history, as I showed in the referenced article: Iraqis have always united when faced with an external enemy. And that's certainly happening now as the the Iraqis in Anbar Province, formerly almost totally controlled by external al-Qaeda forces, are close to driving al-Qaeda out completely. What surprised me this week is what the Iraqis are calling it: "Sahwa al-Anbar" or the "Anbar Awakening." Here's how Joe Klein described it in <#stdurl http://www.time.com/time/nation/article/0,8599,1624697,00.html "an article in Time Magazine:"#>

"Some 30 tribes in Al Anbar formed an alliance, the "Anbar Awakening," in September and pledged to fight Al Qaeda militants in the insurgency-plagued province by forming their own paramilitary units and sending recruits to the local police force. There is good news from Iraq, believe it or not. It comes from the most unlikely place: Anbar province, home of the Sunni insurgency. The level of violence has plummeted in recent weeks. An alliance of U.S. troops and local tribes has been very effective in moving against the al-Qaeda foreign fighters. A senior U.S. military official told me—confirming reports from several other sources—that there have been "a couple of days recently during which there were zero effective attacks and less than 10 attacks overall in the province (keep in mind that an attack can be as little as one round fired). This is a result of sheiks stepping up and opposing AQI [al-Qaeda in Iraq] and volunteering their young men to serve in the police and army units there." The success in Anbar has led sheiks in at least two other Sunni-dominated provinces, Nineveh and Salahaddin, to ask for similar alliances against the foreign fighters. And, as TIME's Bobby Ghosh has reported, an influential leader of the Sunni insurgency, Harith al-Dari, has turned against al-Qaeda as well. It is possible that al-Qaeda is being rejected like a mismatched liver transplant by the body of the Iraqi insurgency."

Here's <#stdurl http://www.adnki.com/index_2Level_English.php?cat=Security&loid=8.0.417462806&par= "another report,"#> based on information from an Arab source:

"Baghdad, 23 May (AKI) - A delegation of Sahwa al-Anbar, (Anbar Awakening) the tribal alliance in the restive Sunni province of Al Anbar, has made an unprecedented visit to Sadr City, the Baghdad stronghold of radical Shiite imam Moqtada al-Sadr, according to pan Arab daily al-Sharq al-Awsat. "We have taken this step to place national interest ahead of any differences" said the head of the US-endorsed Sunni alliance Hamid al-Hayas. "This is an effort to bring closer together the Sunni and Shiite Iraqi points of view. We want to deliver a message to all the political groups to put aside their differences and act for the common good" he said. The whereabouts of Moqtada al-Sadr remain undisclosed, but he was represented in the meeting by three MPs from the 30-strong bloc in Parliament loyal to him and prominent individuals from the Sadr City area. At the end of the meeting the two sides signs a joint document in which they vowed to fight the terrorism of al-Qaeda. The group has become increasingly isolated within the Sunni insurgency because of its indiscriminate targeting of civilians. Al-Qaeda in Iraq has been seeking to impose its fierce Salafite philosophies and strategies and consolidate its power over the many resistance groups in the Sunni Arab galaxy, some of whom view foreign fighters and Wahhabis with suspicion. In recent months the heads of the powerful al-Anbar tribes have coalesced in a big to counteract al-Qaeda in Iraq and have begun a tentative dialogue with some elements in the al-Maliki government about entering the political process. As well as coming under increasing pressure from US and Iraqi forces in Baquba and elsewhere, the al-Qaeda in Iraq fighters have been increasingly in clashes with other insurgent formations."

Regular readers will be aware that this is exactly the kind of thing that I've been saying ever since I first <#hreftext ww2010.i.aug19 "wrote about it on August 19, 2003, just after al-Qaeda had bombed U.N. headquarters in Iraq:"#> And in 2004, when some papers were actually claiming that <#inc ww2010.weblog.ref e040812 "the Iraq civil war had already begun"#> between Moqtada al-Sadr's militias and the Sunnis, I pointed out that this was nonsense. I've made a number of predictions about Iraq, and they've all turned out to be right. You will not find a web site anywhere in the world with predictive success of this one. You will find that every journalist, analyst and pundit who has made predictions has turned out to be almost consistently wrong, and you will find that every prediction that I've made, based on the Generational Dynamics methodology, has turned out to be right. The fact that the Iraqis are calling this the "Anbar Awakening" is more than just a coincidence. Unless some of them have seen my web site (very unlikely), they have no idea that Iraq is in a generational Awakening era. But the word "Awakening" is a very compelling one to describe what happens. Those old enough to remember America in the 1950s will recall how different the country became in the 1960s, when America's Awakening began: boys grew their hair, girls burned their bras, Martin Luther King led equal rights marches, etc. An Awakening era REALLY is an "awakening," both in America in the 1960s and in Iraq today. This brings us to the Sunday news talk shows, where nothing about an "Anbar Awakening" was ever mentioned. The Republicans pretty much avoided the subject, and the Democrats described the Iraq war as a disastrous loss. Actually, nobody that I heard even cares how the Iraq war is going. All they care about is whether the Republicans or the Democrats are going to gain or lose votes. Can you believe this? We're in the middle of a war, and we're being governed by a bunch or narcissistic clowns that can't talk about anyone but themselves. "I have the best withdrawal plan," says one. "No you don't, I do. Nyah, nyah, nyan." How did we get stuck with this pathetic bunch of losers? The big news, of course, is that the <#inc ww2010.weblog.ref e070524 "Congress voted to fund the Iraq war without deadlines,"#> but that Hilary Clinton and Barack Obama BOTH voted not to fund the troops. Did anyone ask what effect all this had on the war and the troops. Nooooooo. It was all, Who did better, Republicans or Democrats? Yuk. But despite all the nonsense, something important did happen this week, because so many leading Democrats voted not to fund the troops and the war. Here's how George Will, a conservative commentator from the Silent Generation (i.e, he grew up during World War II), summarized the situation: <#inc ww2010.pic g070527a.jpg right "" "George Will, speaking angrily about the Democrats' statements, and stopping abruptly at the bottom frame. (Source: ABC)"#>

"The tail wagging this dog is MoveOn.org and all that it represents. MoveOn.org happens to be right. That's not a sentence that I use often. They're right, and I mean they're correct as a matter of constitutional fact -- that the Democrats could stop the war if they chose. They choose not to. But, a majority of House Democrats, including the Speaker, are now against funding the war in Iraq. That means that they are heavily invested in Petraeus' failing.

Will stopped talking abruptly right there, but you could tell from his face how angry he is. Will is absolutely right in what he says, but if he had continued, he would have said some things that are unacceptable in polite Washington circles or on TV. So I'll finish George Will's thought for him: Having our Democratic leaders heavily invested in General Petraeus' failing in Iraq is something that infuriates me and a lot of other people. This is ABSOLUTELY DISGRACEFUL behavior by Congressional politicians, and, in my opinion, it borders right on the edge of treason. These people have no right to commit their careers on American failure in war. <#inc ww2010.pic g070527c.jpg left "" "Senator Carl Levin (Source: CBS)"#> There are lots of ways to to oppose the Bush administration without this kind of disgraceful behavior. Carl Levin, a Democrat who is also from the Silent generation, has shown the way in this. He's about as liberal and anti-Bush and antiwar as anyone can imagine, but <#stdurl http://levin.senate.gov/newsroom/release.cfm?id=275102 "he expresses his opposition responsibly."#> Democratic members of Congress have a professional and ethical obligation to act in America's best interest. So, for example, when <#inc ww2010.weblog.ref e070429 "Senator Joe Biden goes on Meet the Press"#> and spends the better part of an hour saying one unbelievably stupid thing after another, and says things that imply that he's betting his career on America's loss and humiliation in Iraq, it really infuriates me. (Incidentally, on Sunday morning's Meet the Press, Bill Richardson was the guest, and Tim Russert challenged almost everything he said. This is in stark contrast to Russert's automatically accepting every stupid, moronic thing that Biden said. Why is that?) It's worth saying again that many responsible Democrats are not happy with this situation either. Lawrence Kaplan, a senior editor at the liberal, pro-Democratic opinion magazine, The New Republic, wrote <#inc ww2010.weblog.ref e070502 "an article entitled "Congressional leaders are illiterate on Iraq,""#> in which he basically reached the following conclusions about the Democrats in Congress: They're morons; they go out of their way to avoid learning anyting; they make up any "fact" they want as they go along, since they don't know anything; and they couldn't care less what happens in Iraq, since they just want votes. I think America deserves better than that. Ron Brownstein, a liberal Los Angeles Times columnist, made the following remarks in response to George Will's comments, reported above: <#inc ww2010.pic g070527b.jpg right "" "Columnist Ron Brownstein (Source: ABC)"#>

"The war is already very unpopular. It is an extraordinary statement how the world has changed since 2004. John Kerry voted against funding after he voted to authorize the war. Here are the two leading presidential candidates making the same vote, after voting to authorize the war voting against funding, and yet feeling very comfortable essentially because the country HAS turned against the war in a way that is very difficult to imagine turning back. Whatever Petraeus comes back with, it's very hard to see that the level of improvement in Iraq is going to be such to meaningfully change public opinion, and I think Democrats still feel that no matter how vulnerable they may be to Republicans' attacks, on not funding the troops, Republicans are going to be more vulnerable for standing with Bush."

What Brownstein's remarks tell us is that no matter how the war effort under General Petraeus goes, the Democrats are going to call it a failure. Words cannot describe how sickening this attitude makes me, when there's so much at stake for our country. The "Anbar Awakening" development shows how stupidly the Democrats are acting. Failure in Iraq is far from the certainty that the irresponsible Democrats are claiming, and if there is failure in Iraq, then their actions are liable to earn them the blame for the failure. I will not attempt to predict what's going to happen politically, since Generational Dynamics does not make political predictions, and I dislike them, but I will say this: It is my personal hope that the responsible Democrats do OK, but that the irresponsible Democrats get totally screwed in the next election. In the meantime, for those of us who are still hoping for America's success rather than failure, let's watch the "Anbar Awakening," and see if it leads to an even better outcome. =eod =// &&2 e070527 China confirms that a soldier has contracted bird flu =data ww2010.weblog.y2007.e070527.head China confirms that a soldier has contracted bird flu =data ww2010.weblog.y2007.e070527.keys china, bird flu =data ww2010.weblog.y2007.e070527.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070527.date 27-May-07 =data ww2010.weblog.y2007.e070527.txt1 Leaders of China's Central Committee are "highly concerned" =data ww2010.weblog.y2007.e070527.txt2 about the case, according to <#stdurl http://news.xinhuanet.com/english/2007-05/26/content_6155546.htm "the Xinhua report,"#> which also quotes China's Ministry of Health. The soldier is 19 years old, and is now receiving treatment at an army hospital. He developed symptoms of pneumonia on May 9, and has been hospitalized since May 14. This story reminds us that, although another flu season has gone by, the danger has not passed. The deadly H5N1 Bird flu was virtually unknown three years ago, but during the winter of 2005-2006 it <#inc ww2010.weblog.ref e060407 "spread like wildfire"#> across Asia, into Europe and Africa. New infestations of H5N1 again spread rapidly this past winter, especially <#inc ww2010.weblog.ref e070217b "during the Tet and Chinese New Year celebrations."#> According to <#stdurl http://www.recombinomics.com/News/05100703/H5N1_Evolution_Revolution.html "a posting on the controversial Recombonomics web site"#> by researcher Henry J. Niman, analysis of the gene sequences in cases around the world show that mutations are being spread by migrating birds, and then combined with one another. This analysis is especially revealing when examining the mutations that first were discovered at the <#inc ww2010.weblog.ref e050707 "huge Lake Qinghai nature preserve in western China in 2005:"#>

"The recent H5N1 sequence data out of the Middle East and Western Africa further support a paradigm shift in the understanding of evolution. The recent data strongly indicate that single nucleotide changes, previously thought to be due to random mutations, are really genetic changes acquired by recombination and are not due to de novo mutations resulting from copy errors. The selection of copy errors represents the previous understanding of genetic evolution and drug resistance, but the current data indicates that rapid change is through selection of recombinants. H5N1 evolution provides a model for rapid evolution in a natural setting. The growing sequence database provides examples of how influenza genes evolve over time, and the recently discovered Qinghai strain (clade 2.2) firmly ties this evolution to migratory birds. Sequence data provide the initial evidence against the role of de novo random mutations in influenza evolution. Genetic drift allows the virus to escape immune responses. H5N1 is the fastest evolving influenza serotype and has created the greatest concern because of the associated high case fatality rate in infected hosts, which is coupled with rapid change into an expanding geographical reach and a growing host range. Recent sequence data identified clear cut recombination in H5N1 isolates in China, and recent swine sequences identified sequences copied with absolute fidelity for over 25 years. These two observations raised serious questions about the role of random mutations in the rapid changes seen in both seasonal and pandemic influenza genes. Similarly, polymorphism tracing identified the rapid movement of polymorphism from one genetic background to another, which followed identifiable pathways that coincided with the movement of migratory birds. The role of migratory birds became increasingly clear after the H5N1 Qinghai outbreak, almost exactly two years ago. On May 9, 2005, 178 dead bar-headed geese were reported at Qinghai Lake in central China. Although H5N1 involvement was initially denied, a novel strain was identified in five species of long range migratory birds. Eventually the number of dead birds at Qinghai Lake exceeded 5000. Most were bar headed geese that could travel 1000 miles in 24 hours. The establishment of H5N1 in such long range migratory birds set the stage for a rapid expansion of the H5N1 global reach. A few months later, H5N1 was reported for the first time in Russia, Kazakhstan, and Mongolia. When sequence data indicated that all three outbreaks were due to the Qinghai strain of H5N1 in long range migratory birds, it was clear that a dramatic increase in the H5N1 reach had begun. The regions in Siberia and Mongolia were linked to migratory pathways that would move H5N1 into Europe, the Middle East, and Africa. Within 12 months H5N1 had been reported for the first time in almost 50 countries west of China and all outbreaks involved the Qinghai strain. This rapid spread created an experiment of nature for the study of influenza evolution in a natural environment. H5N1 had not been reported in any of these countries previously, and the newly reported sequences included newly acquired polymorphisms that were regionally specific. The polymorphisms could be traced to determine the origins of the changes to confirm the role of recombination in the acquisitions. As expected, the vast majority of the newly acquired polymorphisms were already present in the sequence database. Most could be found in other H5N1 isolates, although contributions from low path polymorphism were also seen. However, the greatest insight came from closely monitoring changes in a large number of isolates from the same region over a limited time frame. This opportunity was presented by the sequences generated by US NAMRU-3 in Egypt. Like most of the countries in Europe, the Middle East, and Africa, Egypt reported its first case of H5N1 in poultry in February, 2006. However subsequent analysis of an isolate from a healthy teal indicated that Qinghai H5N1 was already in the Nile Delta in December, 2005. Egypt also lies under overlapping migratory bird flyways, allowing for multiple introductions and significant genetic mixing via recombination. After the outbreaks in the winter / spring of 2006, detection of H5N1 decreased. New infections in poultry and humans were reported in the fall of 2006 signaling a new season and a new set of H5N1 sequences. The new sequences were more genetically complex and the newly acquired polymorphisms were frequently found in earlier Qinghai isolates, although the regional markers seen in early 2006 were also present in 2007. The recently released sequences from 2006 H5N1 isolates in Israel and Gaza indicated that the regional markers seen in Egypt extended to Israel and Gaza, as had been seen earlier in a human isolate from Djibouti. The 2006 isolates from Egypt, Djibouti, Israel, and Gaza formed a genetic baseline for H5N1 polymorphisms in the region, so newly acquired polymorphisms in the 2006/2007 season were easily identified. The large number of poultry and human samples collected by NAMRU-3 provided a real time view of the H5N1 evolution. The newly acquired sequences were readily found in H5N1 isolates in eastern Asia, including changes in the receptor binding domain as well as oseltamivir (Tamiflu) resistance, providing further evidence for acquisitions via recombination. The donor sequences in eastern Asia were on H5N1 isolates, but these isolates were genetically distinct from the recent isolates in Egypt, which had the regional markers from the prior season. Similarly, as more sequences from Qinghai isolates from other countries were released, it became increasingly easy to find the newly acquired polymorphism in Egypt in other locations, but the polymorphism was being acquired individually. One of the changes in Egypt was M230I which was encoded two different ways. One matched H5N1 in Asia, while the other matched H7N3 in Europe. However, recent sequences showed that the Asia version of M230I was in a Qinghai isolate in a German eagle owl, indicating both versions that appeared in the Nile Delta in Egypt in the 2006/2007 season were in wild birds in northern Europe in the 2005/2006 season. ... The evolution by acquisitions of single nucleotide changes via recombination represents a paradigm shift creating an evolution revolution."

The bottom line of all this is that, although bird flu hasn't been in the news much lately, the situation is as threatening as ever. As I always do, I once again remind the reader that it's impossible to predict when a particular mutation will permit easy human-to-human transmission, which would result in a worldwide pandemic. This could happen next week, next month, next year, or thereafter. Once again, as I always say, you and your family should prepare immediately for a possible pandemic. If human to human transmission became public next week on Monday, then by Tuesday all the shelves in grocery stores would be bare. If you stock up on food now, then you'll be sure to have what you need. Even if you think that you can beat the crowds to the grocery store, you should still stock up in advance. If you get your canned food after the panic begins, then you're depriving somebody else of food. But if you stock up in advance, then the shelves will be restocked, and you won't deprive someone else of food. I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e070526 Chinese peasants use fertility drugs to get around 'one-child' policy =data ww2010.weblog.y2007.e070526.head Chinese peasants use fertility drugs to get around "one-child" policy =data ww2010.weblog.y2007.e070526.keys china, one-child policy, fertility drugs =data ww2010.weblog.y2007.e070526.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070526.date 26-May-07 =data ww2010.weblog.y2007.e070526.txt1 How did this family get four kids? =data ww2010.weblog.y2007.e070526.txt2 <#inc ww2010.pic g070525a.jpg right "" "Parents has quintuplets after taking fertility drugs. They gave one child away to a relative because they couldn't afford to raise all five children. (Source: BBC)"#> The number of families with twins has been skyrocketing in Henan Province in central China, according to <#stdurl http://news.bbc.co.uk/2/hi/asia-pacific/6694135.stm "a report by the BBC."#> The adjoining picture is of a family with four children. The mother took fertility drugs hoping to have twins, and ended up with quintuplets. They gave one child away to a relative because they couldn't afford to raise all five of them. A Chinese woman is not allowed to get pregnant more than once. Violating this rule is treated harshly by government officials - the family could face a huge fine, or the woman could be sterilized. The intent of the "one-child" policy, since it was adopted in the late 1970s, was to reduce the growth of China's population. However, the peasants are becoming increasingly angry at having this kind of government control. On May 19, in Bobai, a town in China's southern Guanxi province, there was <#inc ww2010.weblog.ref e070523 "a large regional rebellion,"#> involving thousands of peasants attacking government officials, overturning cars and setting fire to government buildings. China has tens of thousands of regional riots and demonstrations each year. The use of fertility drugs is a loophole in China's harsh "one-child" laws. They're widely available in China without a prescription, according to the BBC report, and many women take them in the hope of having multiple births. A woman whose pregnancy leads to multiple births is permitted to keep the children without any fines. <#inc ww2010.pic g070131.jpg right "" "Typical Chinese maternity ward: Five boys (white) and three girls (pink) (Source: CNN)"#> China has had plenty of other problems with its one-child policy. A typical <#inc ww2010.weblog.ref e070201 "maternity ward has many more boys than girls,"#> since many parents want a son who will support them in their old age, rather than a daughter who will marry someone else and move away. Mothers use ultrasound, followed by abortion or infanticide, to guarantee that their one child will be a boy. As a result, there are 130 boys born for every 100 girls in rural areas. This whole policy is just one more example of how China's society is coming apart at the seams. China has a population so huge, 1.5 billion people, that it can barely be governed anyway. (As a mathematician, I like to joke that 1.5 billion equals infinity, for all practical purposes.) The one-child policy is merely a stopgap measure that can't possible succeed for long, and today it appears to be unraveling completely. In March, <#inc ww2010.weblog.ref e070322 "Chinese premier Wen Jiabao"#> said that China is "unsteady, unbalanced, uncoordinated and unsustainable." As I <#hreftext ww2010.i.china050116 "wrote in January, 2005,"#> China is becoming increasingly unstable and approaching a civil war, and a resulting world financial and war crisis. =eod =// &&2 e070524 Congress votes to fund Iraq war without deadlines =data ww2010.weblog.y2007.e070524.head Congress votes to fund Iraq war without deadlines =data ww2010.weblog.y2007.e070524.keys =data ww2010.weblog.y2007.e070524.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070524.date 24-May-07 =data ww2010.weblog.y2007.e070524.txt1 The result shows conflicting anxieties during America's Crisis era. =data ww2010.weblog.y2007.e070524.txt2 As I've said repeatedly on this web site, the Iraq war could not be avoided. Even if Al Gore had been President after 9/11, he would have pursued the Iraq war. Thursday's passage of a bill to fund the Iraq war without specifying any deadlines shows how little control politicians have over what's coming. I've been saying for five years that there will be no "antiwar movement" over the Iraq war, the way there was for the Vietnam War, and there hasn't been. There have been almost no demonstrations, and there have been few if any college students against the war. Most of the so-called "antiwar Democrats" haven't been against the war so much as against the President. Democrats say that Americans are "against the war," but what does that mean? It means that they don't "like" the war, but does it mean that Americans should withdraw the troops from Iraq? The <#stdurl http://www.harrisinteractive.com/harris_poll/index.asp?PID=758 "results of a new Harris poll"#> show that, in fact, Americans are quite fearful of the outcome of withdrawing from Iraq. The poll asked the following two questions:

"If the United States withdraws its troops from Iraq in the next two years without achieving a stable, democratic Iraqi government, do you think the following probably will happen or probably will not happen?"
"Assume that each of these events does actually happen because the U.S. withdraws its troops in the next two years. For each, please indicate if you think it will be damaging or not to people in the U.S.?"

Here are the results of the poll:

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

America today is in a generational Crisis era, and we're seeing two different things that are characteristic of a crisis era. First, we're seeing how contentious politics is. Politicians in Congress do not know how to govern. All they know how to do is argue. Second, we're seeing how anxious Americans are. They're enormously anxious about the war, but they're even more fearful of the result of ending the war. The fact is that President Bush and America have almost no choices about many things. Events in the world are taking their own course, and nothing can be done to change the course of events. I like to use the comparison to a tsunami: It's going to do whatever it's going to do, and nothing can be done to stop it. You can prepare for it, but you can't stop it. My own expectations haven't changed. My expectation is that American troops will remain in Iraq until the Clash of Civilizations world war begins. At the time, the troops will be withdrawn because they'll be urgently needed elsewhere. =eod =// &&2 e070523 Multiple bubbles bursting in China as peasants riot over "one child" policy =data ww2010.weblog.y2007.e070523.head Multiple bubbles bursting in China as peasants riot over "one child" policy =data ww2010.weblog.y2007.e070523.keys china, one-child policy, stock market bubble, shanghai, graveyard bubble, alan greenspan =data ww2010.weblog.y2007.e070523.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070523.date 23-May-07 =data ww2010.weblog.y2007.e070523.txt1 Government officials are expressing increasing concern over China's stock market bubble, =data ww2010.weblog.y2007.e070523.txt2 which can't seem to stop growing. Zhou Xiaochuan, the head of China's central bank, the People's Bank of China (PBoC), has said repeatedly in the last few months that the stock market was in a dangerous bubble. Last week, the PBoC raised interest rates, a move that should have dampened investors' ardor. Stocks did fall briefly, but then <#stdurl http://uk.reuters.com/article/fundsNews/idUKNOA14538320070521 "jumped back even higher."#> There seems to be nothing that the Beijing government can do to let a little bit of air seep out of the bubble. That really shouldn't surprise anyone, I suppose, since America's stock market is also well into bubble territory, overpriced by a factor of over 250%. No matter how much bigger the bubble grows, the more exuberant investors become. To show how crazy things are, there's one company, Yardeni Research, that's saying publicly that <#stdurl http://www.nytimes.com/2007/05/20/business/yourmoney/20mark.html?_r=1&oref=slogin "stocks are cheap."#> They say that valuations (price/earnings ratios) are low right now -- even though they're far above historical averages -- because you can make more money in the stock market today than in the bond market. I disposed of this argument several months ago in <#inc ww2010.weblog.ref e070312 "an essay that I wrote"#> on "A conundrum: How increases in 'risk aversion' lead to higher stock prices." This essay, based on work by Harvard economist named Robert J. Barro was very exciting to me personally, because it connected a lot of dots in integrating macroeconomic theory with generational theory, and explained how the global economy goes from one major crash to the next one, 70-90 years later. Briefly, the people in the generations that survive the previous crash (in this case, the 1929 crash) become extremely risk-averse, and refuse credit. As those generations disappear (retire or die), the younger generations become risk-seeking, and increasingly use debt and credit abusively. The abusive use of credit actually increases the total amount of money in circulation, so that money is poured into BOTH stocks and bonds, so that they both participate in the bubble. Well, exactly the same thing has been happening in China. At a time like this, there's so much money (liquidity) is available, that people are willing to invest in almost anything. Even graveyards. Yes, there's been a graveyard bubble in China. It's actually very much like the worldwide real estate bubble. People purchase real estate with no intention of living there, but simply to "flip" the property and sell it again when the price go up. In China ten years ago, you could have purchased an austere burial tomb for about $25. Today you'd have to <#stdurl http://english.people.com.cn/200705/15/eng20070515_374871.html "pay more like $250, and some go for as much as $2500."#> In recent years, people have been purchasing graveyards, and then selling the tombs at bubble prices. The bubble has also dramatically pushed up funeral prices. People have been getting scammed. One man <#stdurl http://news.bbc.co.uk/2/hi/asia-pacific/6654175.stm "bought 24 empty graveyard plots"#> in a cemetery called Spiritual Spring. He spent his family's entire life savings -- around $20,000. But the company never delivered the plots, and all he has to show for his investment is 20 certificates -- worthless pieces of paper. The story of what's been happening in China reminds me of <#inc ww2010.weblog.ref e070328 "the last days of the Tulipomania bubble of the 1630s,"#> as described in Edward Chancellor's 1999 book, Devil Take the Hindmost, a history of financial speculation:

Perhaps it's easier to understand how China could be having a graveyard bubble if you realize that it was just like Europe's own Tulipomania bubble. As all these examples show, once the market is in the middle of a bubble, investors are totally blinded. They just pour more and more money into the market until the bubble bursts and they lose everything. In every bubble, when you point out to investors that it's bubble, they always say, "This time it's different." That's what investors are saying today, worldwide, according to a <#stdurl http://online.wsj.com/article/SB117985628323111066.html "page one article in Wednesday's Wall Street Journal."#> "[A] small group of seasoned investors -- including some with no vested interest in selling stock -- believe the U.S. market is in the midst of another long period of gains," according to the article. "This group of extreme optimists believes that global economic strength will keep shares rising for much longer than has been common in previous eras. Not only China and India, but also Japan, Western Europe, Latin America and other parts of Asia are feeding on one another." You really have to laugh at some of the reasoning. "This adds up to a special time in market history, says [Louise] Yamada, the former head of technical research at Citigroup's brokerage arm, who now runs Louise Yamada Technical Research Advisors. Comparing the market's behavior with historical patterns -- the number of advancers and decliners, for example, or the duration and magnitude of gains -- she says that in April 2006, the market looked like it was primed to fall heavily. Instead, it bounced back before it fell as much as 10%, which she attributes to the breadth of global economic strength. 'That is why I say it really is different this time,' she says." This is so ridiculous that it's laughable. Do people really pay money to this "advisor?" She's a moron. I should give all the reasons but it would take several paragraphs. Just read my 2005 article, <#hreftext ww2010.i.050711eleven "The 11% Solution,"#> or, for those into macroeconomics theory, my 2006 article, <#hreftext ww2010.i.macro061025 ""System Dynamics and Macroeconomics.""#> So anyway, this "group of seasoned investors" believes that the bubble is just going to keep growing and growing and growing -- even in China!!! -- for another ten years. Even officials in China don't believe that. As we said, the PBoC is looking very hard at ways to stop the bubble. In an <#stdurl http://online.wsj.com/article/SB117994449875112338.html "article in Wednesday's Wall Street Journal,"#> they've quoted a song that's circulating on the internet in China. Here's the translation:

    STOCK ANTHEM

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

    "The Song of the Stock Market"
    Author unknown

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

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

So, some people in China "get it." China may indeed be in the last days of its bubble. Former Fed chairman <#stdurl http://www.canada.com/nationalpost/financialpost/story.html?id=e119bac3-fd38-4e91-9c5b-158246213214&k=60490 "Alan Greenspan was quoted as saying,"#> on Wednesday, that China's bubble is getting too large.

"It is clearly unsustainable," he said "There's going to be a dramatic contraction at some point." Greenspan also said a correction could cause problems for Chinese personal wealth. Some analysts have speculated that the Chinese government could be tempted to dip into its reserves to bail out any stung investors and avoid social unrest. Greenspan, who stood down as Fed governor last year, said cheap Chinese imports were one of the elements stoking world growth, along with Eastern European workers and the knock-on effects on lower inflation and rates. "In the last five years, the world as a whole is a growing faster than at any time in the world's history," he said. "It can't last and it won't last because it's a one-shot adjustment."

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

"Greenspan said asset prices around the world could fall but that the economy may escape unscathed if it were flexible enough to absorb asset price shocks. "We will get major declines in certain levels but it need not feed back significantly to levels of employment or the real economy," he said."

So the rest of the world is just going to shrug off the collapse of China's economy? That's funny. Actually, China is coming apart at the seams, and even China's leaders know it. In March, Chinese premier <#inc ww2010.weblog.ref e070322 "Wen Jiabao said that China is "unsteady, unbalanced, uncoordinated and unsustainable.""#> What I <#hreftext ww2010.i.china050116 "wrote in January, 2005,"#> is that China is becoming increasingly unstable and approaching a civil war. China has tens of thousands of regional riots and demonstrations every year, and there was a big one that made international news just this past week. <#stdurl http://www.guardian.co.uk/china/story/0,,2084868,00.html "Thousands of peasants in south-west China have attacked family planning officials,"#> overturned cars and set fire to government buildings in a riot sparked by the state's "one-child" policy. The "one-child" policy was adopted in the late 1970s as a means of controlling population; it forbids any woman from having more than one child, on pain of fine or forced abortion. According to the news stories, local "family planning" officials have been acting like <#stdurl http://www.hbo.com/sopranos/ "The Sopranos"#> in enforcing the policy, forcing them to pay thousands of dollars in fine, or having their homes destroyed, possessions taken, face smashed, and fingers broken. What I read into this situation is that China's family planning officials are over their head in debt in some way, and they're using the kind of desperate measures that Tony Soprano might use to generate some income. That's why the peasants were revolting. From the point of view of Generational Dynamics, China is destabilizing and headed for civil war, as I <#hreftext ww2010.i.china050116 "wrote in January, 2005,"#> replaying the violent civil war that ended in 1949. This conclusion was based on a variety of factors, including the increasing number of mass riots, a huge migrant worker population, big income disparities, and an unraveling of the social structure. Once that happens, world war will not be far off. =eod =// &&2 e070522 Jordan's King Abdullah renews stark warnings about Palestinian problem =data ww2010.weblog.y2007.e070522.head Jordan's King Abdullah renews stark warnings about Palestinian problem =data ww2010.weblog.y2007.e070522.keys jordan, king abdullah, gaza, israel =data ww2010.weblog.y2007.e070522.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070522.date 22-May-07 =data ww2010.weblog.y2007.e070522.txt1 Both Israelis and Palestinians are becoming increasingly furious at each other, =data ww2010.weblog.y2007.e070522.txt2 as <#stdurl http://www.nytimes.com/2007/05/22/world/middleeast/22mideast.html?_r=1&oref=slogin "both sides carried out deadly attacks on Monday."#> Palestinian militias continued launching numerous rockets from Gaza into Israel. Most did no harm, but one killed a woman driving a car. The Israeli Air Force continued striking in Gaza, targeting members of Palestinian militias accused of launching the rockets. Both sides are threatening to escalate further: Israel is threatening to target the Hamas leadership, and Hamas is threatening to renew its suicide bomber attacks on Israeli civilians. The escalated fighting with Israel has, for the time being at least, quelled the internecine fighting between the Fatah and Hamas factions of the Palestinians. All of this happened as heavy fighting continued in the Palestinian refugee camp in northern Lebanon, home to about 40,000 Palestinians. Dozens have been killed in the crossfile between the Lebanese army and the new al-Qaeda linked terrorist group, Fatah al-Islam, led by Palestinian terrorist Shakir al-Abssi. Evidently, Palestinians are not supporting Fatah al-Islam and feel no connection to the group, but they are appalled that it's Palestinian refugees that are being killed as collateral damage. (There are 13 Palestinian refugee camps in Lebanon, set up in the 1960s to house the Palestinians displaced by wars with Israel.) At the same time, there was another bomb blast in the capital, Beirut. Sunday's bomb blast was in a Christian neighborhood, and Monday's was in a Muslim neighborhood. With the Palestinian situation seeming increasingly out of control, Jordan's King Abdullah has appealed once more for international help to bring the situation under control, in an interview with the BBC. The interview was very interesting because of his analysis of the situation, and where Generational Dynamics agrees with him and where it disagrees with him. <#inc ww2010.pic g070307.jpg right "" "Jordan's King Abdullah II, addressing a joint session of Congress on March 7 (Source: CNN)"#> You may recall that on March 7, <#inc ww2010.weblog.ref e070308 "King Abdullah addressed a joint session of Congress,"#> at which he made a desperate plea for help with the Palestinian situation. Abdullah's central point is that the Israeli/Palestinian problem is the core problem, the heart of all problems in the Mideast. In an interview with ABC's George Stephanopoulos in November, <#inc ww2010.weblog.ref e061126 "he explained this to Stephanopolous five times,"#> but Stephanopolous remained clueless. There is absolutely no question that Abdullah is 100% correct in this appraisal, as I've been saying on this web site for five years. And yet, none of these journalists, politicians and pundits seem to get it. They constantly focus on the Iraq war as the cause of all problems, as if the Arab/Jewish conflicts began in 2003 instead of eons ago. Abdullah repeated this point in Monday's interview, but he made a number of other interesting points as well. Here's my transcript of some excerpts, with my comments interspersed. The first question had to with the reasons for the Palestinian civil war:

Abdullah: "I think it's an issue that's just erupted between both parties. But I do know from all our accounts that both sides, Fatah and Hamas, are trying to maintain calm as quickly as possible, because I think they realize that it's very easy for this issue to spill out of control." ... Q: "Is this about a power struggle between Hamas and Fatah, or is it street level power?" Abdullah: "I think it's a bit of both. I would say that at least the leaders are being very responsible on both sides now because whatever is happening on the street now can get out of control. Our reports indicate that the leadership on either side are trying to bring calm as quickly as possible. .. I think that there are quite wide ideological differences between both groups and that's one of the challenges that the Palestinians have. They have to keep in mind that overshadowing their difficulties is really this final opportunity for peace, and the final opportunity for a Palestinian state, and my concern is that this infighting, or this civil disorder at the moment, will affect the future of Palestine."

These comments go to the heart of what I've been saying about this conflict. The Gaza strip is densely populated and <#stdurl https://www.cia.gov/library/publications/the-world-factbook/fields/2177.html "the median age in the Gaza strip is 15.8."#> Thus, the Gaza strip is run by a generation of children with guns and missiles. It certainly is true that there are differences between Fatah and Hamas at the leadership level, but those differences are nuances, not really of interest to the children running Gaza. My reading of the situation is that it's much more a "street level" struggle than a leadership struggle. And as the generational changes continue, the conflict at the "street level" will continue to grow, not lessen, no matter what the leadership does.

Q: "Are Israel's attacks on Gaza mean a return to the battles of the last year?" Abdullah: "No, I don't think so. I think the leaders realize on all sides -- the Israeli leadership is keeping themselves mindful of the peace proposal. I don't think it is back to the drawing board. We see a spike of tension and crises, and I think this is why everyone is scrambling to try and restore calm as quickly as possible because we don't want to lose the next month or two due to the instability that allows the extremists to call victory against the peace process." Q: "What do you think -- what's been your reaction when you've heard of Israeli warplanes targeting very specifically hamas headquarters?" Abdullah: "We want all sides to be a positive element to bring stability back. so our reaching out as Arab countries to fight Hamas also Jordan and Egypt are reaching out to Israel. We need cooler heads to prevail at the moment because if one element is involved in targeting or violence then it's very easy for the other elements to get into it. We just need everybody to back off -- understanding that Israel has some major of having rockets fired at their country."

Abdullah calls it "a spike in tension and crises," but this is not what's going on at all. It's a TREND of increasing tension and crises. As regular readers will recall, <#hreftext ww2010.i.may01 "I first said in 2003,"#> that the Jews and the Arabs are headed for a new genocidal war, replaying the genocidal war of the late 1940s, when Palestine was partitioned and the state of Israel was created, and that this new war will pull in countries in the entire region, including Europe and the United States eventually. These conclusions were based on a Generational Dynamics analysis. Since then, especially since the death of Yasser Arafat, the trend in the region has been almost straight downhill, with worsening tension, crises and chaos, almost on a daily basis, as I've documented frequently on this web site. So "a spike in tension" doesn't the describe the situation at all.

Q: "But do you fear what some might consider an impetuous move by the Israelis to assert themselves in Gaza, given what's happening internally but for domestic Israeli political reasons?" Abdullah: "That is always a concern and again, we keep reminding all the players to keep their eye on the prize, the larger picture, which is trying to launch a peace process. By the way, whenever we come close to launching a process, this is when extremists on all sides want to destabilize the issue, and create arguments not to move forward. So whenever we come closer to getting the parties to resolve their differences and take that step forward, these things happen. We just need to keep our eye on the bigger prize."

This is an interesting point that's not made often enough: That there are groups of people, like Osama bin Laden but especially in younger generations, who WANT to provoke full-scale war. An example came out yesterday. There were 140 rockets launched from Gaza into Israel last week, and according to <#stdurl http://www.haaretz.com/hasen/spages/862314.html "an analysis by one columnist,"#> Hamas times "the lethal Qassam [rocket] salvo to occur just before the 8 P.M. television news after keeping a low profile all day. The purpose is to create maximum terror and maximum news coverage. The same thing is true in Iraq, incidentally. The al-Qaeda insurgents set off one or two car bombs in marketplaces each morning, so that they'll make the BBC morning newscast, and then the American newscast later in the day. Terrorist can be just PR.

Q: "I'm tempted therefore to put to you the remarkable progress that was made in Northern Ireland two weeks ago. Now, you could have said there were equal moments of despair over many years, including the last decade, when people thought it was impossible to get any kind of deal. Do you think there's something in what we've seen in Northern Ireland which will be applicable to what we have here, which will end what we're seeing in Gaza at the moment." Abdullah: "Having studied in England for many years, I always see many comparisons of the complications of Northern Ireland and the difficulties that the British and the Irish face to what we have here. There's a lot of similarities. But what it comes down to, what history shows, is that people with the right conscience do not give up. As difficult and as dark as it gets, we have to keep trying. And this is what we're saying."

It's the technique of journalists who really don't think very much to think that two situations that have some cosmetic similarities are completely similar, and that some magic solution that worked in one case worked in the other. What matters is the generational timeline, and journalists never have any concept of that. I've never done an in-depth analysis of what's happened in Northern Ireland. There had been centuries of fights between the Protestants and Catholics, and they seemed to be tapering off, until the 1840s when the Irish potato famine occurred. This triggered new waves of violence, most recently in the 1970s. It's not surprising that the violence is tapering off, just as some of the European "religious wars" of the 1500s and 1600s have tapered off. But there's absolutely no connection between those situations and the Arab/Palestinian struggle, with the latter going much, much deeper. Fortunately, King Abdullah didn't swallow the bait.

"Specifically on the Palestinian issue, because physically in a year or two, we may not have much left of a Palestinian state to talk about, and therefore if we don't have a Palestinian state, can we ever have peace between the Arabs and Israelis? This is why we're trying our hardest to launch the process now, knowing that this is not the right time, but really it's the only time we have left to us."

Here he puts forth an idea that I don't understand, and neither did the pundit who followed the interview. What does he mean that "physically in a year or two" there won't be "much left of a Palestinian state to talk about"? Is he saying that the region is on the verge of total war? Or does he mean that the Palestinian government is falling apart, and won't be able to govern at all in two years? Enquiring minds want to know, but unfortunately he didn't explain it.

Q: "Can I finally ask you about the implications of what's happening in Iran. Because you're trying to keep the crisis here focused on the Palestinian question. And there are those who say that Iran is creating enormous challenges." Abdullah: "We have always understood in this part of the world that everything in this part of the world is interconnected. That's a difficulty I think that the West has of connecting the dots. We're looking at all these regional issues as big pieces of a puzzle. And what I'm saying is that the most critical piece of that puzzle for the future of the Mideast is the Israeli/Palestinian one." Q: "So Iran does not broaden the issue. Iraq does not broaden the issue." Abdullah: "They're all interconnected, but if we want to start pushing them at least back into the light, we need to start getting some winds. I keep saying that the core issue, of all the issues we have in the Middle East, the central issue, the heart and the center of all Arabs and Muslims IS the Israeli/Palestinian one. If we can move that in the opposite direction, it allows us much more flexibility in dealing with the others." Q: "Your majesty, thank you very much indeed."

In these last questions, the BBC interviewer goes completely off the rails. =inc ww2010.cf.cf060209 p left As I said earlier, people just don't seem to get it that the conflict between Arabs and Jews overshadows everything in the Mideast. I get that because Generational Dynamics tells me, and King Abdullah understands it intuitively, because he's at the center of everything. On my little conflict risk graphic, Iran and Iraq don't even appear. There's a very good reason for that. Both countries are in a generational Awakening era, just one generation past the genocidal Iran/Iraq war of the 1980s. Therefore, Generational Dynamics tells us quite clearly that it's very unlikely that either country will spark a major war. That's just how it is, and how it's been throughout history. The same is true of Lebanon and Syria. But Saudi Arabia, Jordan, Israel, and the Palestinian territories are all in generational Crisis eras. Saudi Arabia's last crisis war was the Ibn Saud conquest that ended in 1925; and as for the others, the last crisis war was the extremely genocidal war between Arabs and Jews that occurred in the late 1940s, after Palestine was partitioned and the state of Israel was created. And incidentally, the reason that so many suicide bombers come from Saudi Arabia is because that country is so deep into a Crisis era, farther even than the Palestinians or Israelis. So that's where the real war is going to begin -- not in Awakening era countries like Iran or Iraq, but in Crisis era regions like Israel, Gaza and the West Bank. In fact, the reason that there's still any major insurgency at all in Iraq is because it's being driven by al-Qaeda Sunnis from Crisis era countries. I detailed this in <#hreftext ww2010.i.iraq070401 "an article in April."#> King Abdullah's desperate plea has fallen largely on deaf ears. It was perfectly obvious that the BBC journalist didn't believe Abdullah that the major problem in the region was the Arab/Jewish conflict. It's simply too abstract a concept for him and most journalists to understand. From the point of view of Generational Dynamics, the Arabs and Jews are headed for a new genocidal crisis war, replaying the genocidal crisis war of the late 1940s. This war will pull in other countries, including America, and will trigger the Clash of Civilizations world war if it hasn't already begun. =eod =// &&2 e070521 New al-Qaeda linked terrorist group provokes heavy gun battle in northern Lebanon =data ww2010.weblog.y2007.e070521.head New al-Qaeda linked terrorist group provokes heavy gun battle in northern Lebanon =data ww2010.weblog.y2007.e070521.keys al-quaeda, lebanon, tripoli, nahr al-bared, fatah al-islam, shakir al-abssi, jaish al-islam, army of islam =data ww2010.weblog.y2007.e070521.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070521.date 21-May-07 =data ww2010.weblog.y2007.e070521.txt1 Islamist militants in Fatah al-Islam, led by Shakir al-Abssi, battled Lebanese troops on Sunday, =data ww2010.weblog.y2007.e070521.txt2 killing 25 soldiers and 15 militants. The <#stdurl http://www.swissinfo.org/eng/international/ticker/detail/Lebanon_army_fights_militants.html?siteSect=143&sid=7838295&cKey=1179700644000 "fighting took place in a Palestinian refugee camp"#> in Nahr al-Bared, near the Sunni Muslim city of Tripoli in north Lebanon. In a separate incident, a bomb exploded in a Christian neighborhood of the capital city, Beirut. It's not known whether the two incidents are connected. Pundits claimed that the violence, which was the worst in a long time, threatened the stability of Lebanon, and <#stdurl http://www.naharnet.com/domino/tn/newsdesk.nsf/Lebanon/79A71A1E6BE2A0B0C22572E100539D84?OpenDocument "raised fears of a new Lebanese civil war."#> Fatah al-Islam is a new Sunni Islamist terrorist group, led by Palestinian Shakir al-Abssi. Al-Abssi was <#stdurl http://www.iht.com/articles/2007/03/15/news/lebanon.php "interviewed by the NY Times"#> in mid-March. In that interview, he claimed not to be part of al-Qaeda, but admitted that he had worked closely with Abu Musab al-Zarqawi. Al-Zarqawi was <#hreftext ww2010.i.iraq070401 "the head of al-Qaeda in Iraq"#> before he was killed in June of last year. According to American and Middle Eastern <#stdurl http://www.iht.com/articles/2007/03/15/news/lebanon.php "intelligence officials,"#> al-Abssi is a new kind of al-Qaeda terrorist who is being seen more often. Osama bin Laden's organization was shattered by the invasion of Afghanistan after 9/11, but now it's reforming itself with small groups around the world like Fatah al-Islam. Intelligence officials say that he's trying to establish himself as a terror leader like al-Zarqawi. They estimate that he's imported 50 militants from Saudia Arabia and other Arab countries, after training with the insurgency in Iraq. From the point of view of Generational Dynamics, we can reach some likely conclusions about what's going on:

The terrorist group Hizbollah, led by Hassan Nasrallah, has been trying to foment a civil war in Lebanon since last year, and has failed repeatedly. In fact, the attempt <#inc ww2010.weblog.ref e070126 "caused Nasrallah to lose support among his own Lebanese supporters."#> The reason, as I've said many times, is that Lebanon is in a generational Awakening era, just one generation past the Lebanese civil war of the 1980s, and a crisis civil war is impossible at this time. Lebanese people simply don't want to fight, unless they're forced to. Thus, the pundits' feared of a renewed civil war are as groundless as ever.
Al-Abssi has probably had the same problems getting the Lebanese Palestinians to fight that al-Zarqawi had trying to get the Iraqi Sunnis to fight. Recall that Iraq is also in a generational Awakening era, just one generation past the genocidal Iran/Iraq war of the 1980s, and <#hreftext ww2010.i.iraq070401 "al-Zarqawi could not get Iraqis to fight"#> unless he paid them. All suicide bombers in Iraq, with almost no exceptions, are jihadists imported from Saudi Arabia or Jordan, because Iraqis refuse to be suicide bombers. That's most likely the reason that al-Abssi found it necessary to import jihadists from Saudi Arabia. He had expected to find a ready group of jihadists in the Palestinian refugee camp, but they refused to fight, and al-Abssi had to import foreign jihadists, just as al-Zarqawi had.
As a matter of generational theory, it's worth pointing out that the Palestinians in Lebanese refugee camps are on a different generational timeline than the ones in the Palestinian territories -- the Gaza Strip and the West Bank -- and in Jordan. The last crisis war for the latter was the genocidal war between Arabs and Jews in the late 1940s; the last crisis war for those in Lebanese refugee camps was the Lebanese civil war.

Lebanese officials are accusing Syria of having sponsored and aided al-Abssi, which Syria denies. However, al-Abssi's home base is in Syria. The emergence of the new group Fatah al-Islam and Shakir al-Abssi in Lebanon comes at a time when intelligence sources have established a new connection between Hamas and al-Qaeda on the Gaza Strip. A connection with al-Qaeda <#stdurl http://www.jcpa.org/JCPA/Templates/ShowPage.asp?DRIT=1&DBID=1&LNGID=1&TMID=111&FID=283&PID=0&IID=1574&TTL=The_Growing_Hamas-Al_Qaeda_Connection "was suspected last year"#> when a terrorist confessed to Egyptian authorities that he had been trained in Gaza by an organization called al-Tawhid wal-Jihad, which was also an earlier name for Abu Musab al-Zarqawi's organization before it became al-Qaeda Iraq. Two weeks ago, a new organization Jaish al-Islam ("Army of Islam") identified itself as the group that kidnapped BBC journalist Alan Johnston, and demanded the release from British jails of a major ideologue of al-Qaeda in Europe. These two new al-Qaeda organizations indicate that al-Qaeda is gaining strength as an international terrorist organization, with known associations stretching from Jemaah Islamiah in Indonesia to the GSPC (Salafist Group for Preaching and Combat) in Northern Africa, the latter having recently renamed itself "al-Qaeda in Maghreb," and perpetrated <#inc ww2010.weblog.ref e070413 "bombings in Algiers and Casablanca"#> last month. This comes at a time when the level of violence in the Gaza Strip is escalating significantly, because of Israeli air strikes, responding to a barrage of missiles fired on Israeli cities. =eod =// &&2 e070519 Sarkozy begins term as activist President of France =data ww2010.weblog.y2007.e070519.head Sarkozy begins term as activist President of France =data ww2010.weblog.y2007.e070519.keys european union =data ww2010.weblog.y2007.e070519.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070519.date 19-May-07 =data ww2010.weblog.y2007.e070519.txt1 The pundits' comparison of Sarkozy to Margaret Thatcher is a dangerous one. =data ww2010.weblog.y2007.e070519.txt2 Nicolas Sarkozy took office as President of France on Wednesday. Pundits have been comparing him to Margaret Thatcher, who served as Prime Minister of Britain from 1979-1990, but the comparison is a dangerous one. One <#stdurl http://scotlandonsunday.scotsman.com/opinion.cfm?id=740372007 "pundit writes:"#>

"It is "Marianne" Thatcher in a red cap of liberty... this is Revolution indeed. Sarko is poised to storm the Bastille of French dirigisme and liberate the economy. He will guillotine the privileged orders in industry and the civil service. Bliss is it in this dawn to be alive... Or possibly not. Is Nicolas Sarkozy France's Thatcher? Is he truly the great reforming president who will drag France, kicking and screaming, from its three-hour déjeuner into the competitive slipstream of the globalised free market? Either we live in more than interesting times, or it is business as usual. The clever money is on the latter. Sarkozy promises change? Oh, that kind of change - plus ça change.

Washington pundit <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2007/05/18/AR2007051801708.html "George Will writes:"#>

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

And here's <#stdurl http://www.todayszaman.com/tz-web/detaylar.do?load=detay&link=111079 "another pundit, Anatole Kaletsky:"#>

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

Indeed, Sarkozy has been rushing to a quick start. As soon as his inauguration ended on Wednesday, he hurried off to the airport and to Berlin to meet with German Chancellor Angela Merkel. His objective is to quickly fulfill one of his campaign promises. Since <#hreftext ww2010.i.eu050601 "France was humiliated"#> by the 2005 referendum that rejected the EU Constitution, Sarkozy wants to lead the effort to develop a "mini-treaty" that will provide some of the changes that Constitution would have provided, but few enough changes so that a new referendum can be avoided altogether. He wants to have this mini-treaty signed by June, a month from now. However, <#stdurl http://www.timesonline.co.uk/tol/comment/leading_article/article1801130.ece?openComment=true "as controversial as this mini-treaty"#> will turn out to be, it's nothing compared to the economic changes that Sarkozy wants to make, especially to eliminate the 35-hour work week. Labor unions are warning Sarkozy, "We'll take to the streets." Here's how Bernard Thibault, head of the General Confederation of Labour union, with 711,000 members, <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/05/13/wfrance13.xml "describes the Sarkozy-Thatcher comparison:"#>

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

So pundits, as well as Sarkozy's supporters and opponents, are all making the comparison with Thatcher. Sarkozy himself has referred to a technique of Thatcher's -- taming the labor unions by making "small changes," rather than large dramatic changes. In order to understand what Nicolas Sarkozy has in common with Margaret Thatcher, it's best to start with what Margaret Thatcher had in common with Ronald Reagan. Margaret Thatcher served the UK as Prime Minister from 1979 to 1990, around the same time as Ronald Reagan, who was President from 1981-89. Both Thatcher and Reagan were very confrontational with the labor unions, and those confrontations were successful, as will be remembered by those old enough to recall <#stdurl http://en.wikipedia.org/wiki/Professional_Air_Traffic_Controllers_Organization "Reagan's confrontation with PATCO,"#> the Professional Air Traffic Controller's Organization. This coincidence should give readers a clue that there was something going on in the 1980s that was more significant than just firm policies by Thatcher or Reagan. The 1960s-70s were tumultuous <#hreftext ww2010.i.sixties040501 "generational Awakening eras"#> for America and for Western Europe, filled with riots, demonstrations and actions by labor unions. By 1980, people were generally sick and tired of the chaos, and were ready to support anything that brought consensus and compromise. Thus, the actions by Reagan and Thatcher to control labor unions were what the times demanded. As I've said many times, Generational Dynamics predicts and explains the attitudes and behaviors of large masses of people, entire generations of people. The actions of individual politicians are of interest only insofar as they reflect that attitudes of large masses of constituents. So, contrary to the assumptions of today's pundits, politicians and journalists, it wasn't Reagan and Thatcher that confronted the labor unions; they were just doing what the people wanted at that time. Similar remarks can be made about the general economy at that time. As I <#hreftext "ww2010.i.macro061025#dev70" "wrote about last year,"#> economists call that era "The Great Inflation of the 1970s," a play on words from "The Great Depression of the 1930s." In the United States, as I described, Paul Volcker at the Fed adopted a "monetarist" approach, using interest rates to control inflation rather than unemployment. There was a recession in the early 1980s, but the Fed stuck to the new policy and inflation fell sharply. Margaret Thatcher's government followed the same policy in Britain. Unemployment spiked in 1981, and pundits began to predict that Thatcher make a "U-Turn" and back down from her policy. Her response: "To those waiting with bated breath for that favourite media catch-phrase -- the U-turn -- I have only one thing to say: you turn if you want to; the Lady's not for turning." The unemployment spike had fallen by 1983, along with inflation, and Thatcher was credited with the successful outcome. So all of those things happened because they were appropriate for that time in the secular generational cycle. Reagan and Thatcher really didn't have much to do with it. That brings us to the present, with America, Britain and France in generational Crisis eras. Anyone who knows anything about generational theory will automatically know that what works at the end of an Awakening era will not work very well in a Crisis era. You can take that to the bank, even if you don't know the facts of the situation. But in Sarkozy's case, the facts are that he is going to move quickly and be confrontational -- just like Margaret Thatcher. And there are huge differences in the social and financial climate today. In the 1980s, stocks were underpriced; today they're overpriced by a factor of more than 250%. In the 1980s, people were confidently looking for compromise and reconciliation, and were even willing to make economic sacrifices to achieve it; today, people are anxious and scared, and are afraid of losing what they have, so they're unwilling to make any economic sacrifices at all. Instead of compromise and reconciliation, people today are prepared for conflict and confrontation to protect what they have. And so, Thatcher's confrontational approach is not going to work for Sarkozy. Union leader Bernard Thibault, quoted above, is right: There will be massive demonstrations and strike actions to prevent anything from changing in France's economy, and either Sarkozy will back down, or the demonstrations will get larger. But a major backdown by the labor unions, as happened to Reagan and Thatcher in the early 1980s, is very unlikely in a crisis era like today. We already saw such demonstrations under Sarko's predecessor. When Jacques Chirac supported a law that would permit French employers to fire an employee under 26 years of age, provided that he's worked less than 2 years, a <#inc ww2010.weblog.ref e060411 "million people, mostly students, took to the streets to protest"#> in April 2006, and Chirac backed down. Pundits express the hope that Sarkozy will be more successful because he's received a kind of "mandate" from his election, and because he's "stronger" (or more "fascist," depending on your point of view) than Chirac, and because he's following Thatcher's model. However, in a generational Crisis era, this kind of confrontation leads to MORE confrontation, not compromise. That's why I've characterized the comparison of Sarkozy to Margaret Thatcher as "dangerous." What Thatcher did was NOT dangerous, since it was appropriate for her time, for her place along the generational timeline. Today, at Sarkozy's place along the generational timeline, exactly the same actions produce different results, and those results can be dangerous. <#inc ww2010.pic g070325b.jpg right "" "June 2005: Jean-Claude Juncker, Tony Blair, Jacques Chirac"#> Sarkozy's plans for a European "mini-treaty" will meet with strong opposition from those who would stand to lose something from the treaty. It's even possible that things will get as bad as in the <#inc ww2010.weblog.ref e050618 "acrimonious European Union summit meeting"#> in June 2005, where British Prime Minister Tony Blair, Luxembourg Prime Minister Jean-Claude Juncker and French President Jacques Chirac exchanged vitriolic accusations over how the EU budget, especially the agricultural subsidies, were to be divided among the EU members. Incidentally, Sarkozy <#stdurl http://www.timesonline.co.uk/tol/comment/leading_article/article1801130.ece?openComment=true "has already indicated"#> that he will not compromise on the agricultural subsidies to France. From the point of view of Generational Dynamics, this situation is really exciting, because there are so many players, so many possibilities and so many interactions, especially with Britain and with the European Union as a whole. It provides the opportunity to further develop the theoretical model of how governments act during a generational crisis era, 62 years after the end of World War II. Unfortunately, Generational Dynamics predicts that the end result will be a new world war, the Clash of Civilizations world war. There are many possible scenarios leading to that result, and some of them may involve the new activist President of France, Nicolas Sarkozy. =eod =// &&2 e070517 Russian Orthodox Church reunites 80 years after Bolshevik Revolution =data ww2010.weblog.y2007.e070517.head Russian Orthodox Church reunites 80 years after Bolshevik Revolution =data ww2010.weblog.y2007.e070517.keys russian orthodox church, bolshevik revolution, russian church abroad, nicolai lenin, josef stalin, vladimir putin, ivan the great =data ww2010.weblog.y2007.e070517.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070517.date 17-May-07 =data ww2010.weblog.y2007.e070517.txt1 In a historic ceremony in Moscow on Thursday, televised around the world, =data ww2010.weblog.y2007.e070517.txt2 two elderly clerics <#stdurl http://www.forbes.com/feeds/ap/2007/05/17/ap3733318.html "signed an agreement and bent to kiss each other's cheeks."#> With that, a schism that split the <#stdurl http://www.mospat.ru/ "Russian Orthodox Church"#> in the early 1920s was ended, though not entirely healed. <#inc ww2010.pic g070517.jpg right "" "Reuniting the Russian Orthodox Church (Source: synod.com)"#> The schism occurred after the bloody Bolshevik Revolution and subsequent civil wars and purges that killed tens of millions of Russians. It was caused by deliberate acts of the two victors, first Nicolai Lenin and later Josef Stalin, who plundered the Church's gold, destroyed its buildings, and murdered its clerics. The wars caused a flood of Russian refugees to Europe and America. The result was that the true Russian Orthodox Church was forced to operate outside of Russia, and a splinter group was formed, later known as the <#stdurl http://www.synod.com/synod/indexeng.htm "Russian Orthodox Church Outside of Russia"#> or the Russian Church Abroad. For several years, Russian President Vladimir <#stdurl http://www.iht.com/articles/2007/05/17/europe/17russia.php "Putin has been leading the negotiations"#> that led to Thursday's agreement. Some people in the Russian Church Abroad, remembering Stalin's atrocities, have been opposed to the reunion, and the involvement by Putin has only made them more suspicious. They might well be suspicious, in view of this 1922 letter from Lenin to the Politburo:

This letter reveals Lenin's principle motive as the acquisition of gold, but the destruction of the Church went much deeper than that, and represented a fundamental change to Russian society. You may recall that in mid-April I posted <#inc ww2010.weblog.ref e070415 "an article about the coming election in Turkey,"#> and I summarized the history of Turkey since the fall of Constantinople in 1453. The fall of Constantinople to the Ottoman Turks is (arguably) the most important worldwide event of the last millennium. It catapulted the Ottoman Empire into a series of successful wars that spread Islam across much of the world. But the effect on Russia was also enormous, because the fall of Constantinople also meant the end of the Byzantine Empire, which had originally been the Eastern Roman Empire. In 1472, Russia's Ivan the Great declared that Moscow was the third Rome (with Rome and Constantinople being the first two), and was the head of the "true" or "Orthodox" Christian Church. Ivan immediately took the title of Tsar, and thus became the first Tsar of the new Tsarist Russia. ("Tsar," or "Czar," was derived from the name of the Roman Emperor Caesar, as is the German word "Kaiser.") So the year 1453 was not the date of a war, it was the date of an event that profoundly affected the fate of two countries -- countries that were repeatedly at war since then. After that time, religion and state were closely intertwined in both countries. Russia was a Russian Orthodox nation, and Turkey was a Muslim nation. But what was begun in 1453 ended with World War I, for both countries. The Ottoman Empire collapsed, and Turkey became a secular state; the Bolshevik Revolution ended Tsarist Russia, and Russia became an atheist state. Both nations turned their backs on centuries of religion that had defined their respective cultures. From the point of view of Generational Dynamics, such major changes often only last one generational saeculum (the period of time from one crisis war to the next, normally about 70-90 years, the length of a human lifetime). A crisis war forces a country to build new institutions and make drastic changes that aren't necessarily consistent with the long-range visceral desires of the people. As we approach the next crisis war for both countries, the Clash of Civilizations world war, we see that these changes are unraveling, and that both countries are moving back, at least partially, to being their "old selves." Turkey is dealing with the possibility of an Islamist government, and Russia is reuniting its Church again. In fact, one of the major factors leading to the current reconciliation occurred in 2000 when the Moscow Church canonized Tsar Nicholas II, Russia's last Tsar, and his family, as well as others in the faith. From the point of view of Generational Dynamics, there's good news and there's bad news in the religious revival occurring in both Turkey and Russia. The good news is the possibility of a cultural renaissance in both countries, as old values and customs are revived and taught to new generations. The bad news is that this kind of religious revival doesn't happen in a vacuum. For Turks and Russians, one way that these two peoples expressed their hatred for one another is through their religion, and the rise of these religious feelings again probably means that their feelings of enmity are rising again as well. =eod =// &&2 e070516 Gaza close to state of emergency as Israel tries to avoid getting pulled in =data ww2010.weblog.y2007.e070516.head Gaza close to state of emergency as Israel tries to avoid getting pulled in =data ww2010.weblog.y2007.e070516.keys palestine, gaza strip, hani kawasmeh, hamas, fatah =data ww2010.weblog.y2007.e070516.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070516.date 16-May-07 =data ww2010.weblog.y2007.e070516.txt1 The streets of Gaza are clear except for gunmen today, =data ww2010.weblog.y2007.e070516.txt2 as gun violence has been increasing throughout the Gaza strip. The "unity government" between Fatah (Mahmoud Abbas) and Hamas is close to collapse, according to reports on CNN International. Monday's <#inc ww2010.weblog.ref e070515 "resignation of Interior Minister Hani Kawasmeh"#> has shattered, for the time being, any chance of peace between Fatah's and Hamas's security forces. Kawasmeh had been chosen as a compromise by Fatah and Hamas because he was trusted by both sides; his resignation sent the respective security forces out of control, resulting in increasing gun violence between the two security forces. There are thousands of armed men in each of the two "security forces" involved in the street battles in Gaza, and hundreds more in militias not affiliated with either Fatah or Hamas. As of noon ET, CNN International reports that a large group of journalists are trapped inside a 15-story building in Ramattan, with violence all around. CNN is showing live pictures from the building of journalists crouched down to avoid bullets occasionally coming through windows. Alan Johnston, the BBC Gaza reporter who was kidnapped several weeks ago, still hasn't been heard from in a long time, and concern for his fate is high. The growing civil war between Fatah and Hamas is a blow to the plans of the Hamas military wing to have a war with Israel. The situation with Palestinians shooting at each other has not only destroyed almost all remaining international sympathy for the Palestinians, but is also frustrating to Hamas terrorists who want the war to be focused on Israel. The result is that Hamas has been shooting dozens of missiles over Ariel Sharon's "security wall" into Israeli terrority, resulting in serious injury for one woman. The likely objective is to cause an overreaction by the IDF (Israeli Defense Forces) that would, once again, unify the Palestinians against Israel, rather than against each other. However, the <#inc ww2010.weblog.ref e070511 "enormous humiliation suffered"#> by Israeli Prime Minister Ehud Olmert and Defense Minister Amir Peretz in their <#inc ww2010.weblog.ref e061223 "panicked pursuit of the summer, 2006, war"#> with Hizbollah in Lebanon, with no plan and no objective, as <#inc ww2010.weblog.ref e070504 "documented in the Winograd Committee report,"#> has had an ironic effect. Israel's government is now much more careful, and new procedures have been put in place to prevent any rash actions. What you're beginning to see in Israel is the first signs of the "regeneracy." In generational theory, the regeneracy occurs in a Crisis era. It's the point where the unity and identity of the nation finally "regenerates." The people put aside their internal political disagreements and unify to utilize any means necessary to defeat the enemy. Once the regeneracy is reached, the war becomes a full-scale genocidal crisis war. The fighting will continue to escalate until an explosive climax occurs, and a resolution is reached. However, that point in Israel is still far away, although we're seeing the first signs. The Israeli government is approaching the Gaza situation much more carefully. The real question is: What's happening in Gaza? I've been watching the situation in Gaza (and the West Bank) very carefully since the death of Yasser Arafat. In particular, I've been watching for the hostility of the Palestinians to rise to the point where they're willing to rise up and smash through the "security wall" and engage the Israelis in total war. I was especially watching for it during last summer's Lebanon war. And I haven't seen it, and still don't see it. Despite warnings of a new "summer 2007 war" with Israel, I haven't seen the genocidal fury among the Palestinians towards Israel among the people in general. Everything I've read is just enormous sadness among the Palestinians that they can't get their own act together enough to deserve a Palestinian state. But now I'm really beginning to see signs of "genocidal fury" among Gazans toward each other. If/when these gunfights really spiral out of control, then outsiders will be forced to intervene. This will be particularly true if the violence appears to be spreading to the West Bank. These outsiders will probably first be the Israelis, and later the Egyptians. From the point of view of Generational Dynamics, as <#hreftext ww2010.i.may01 "I first said in 2003,"#> the Jews and the Arabs are headed for a new genocidal war, replaying the genocidal war of the late 1940s, when Palestine was partitioned and the state of Israel was created. This new war will pull in countries in the entire region, including Europe and the United States eventually. Although Israel's government is proceeding cautiously, keep in mind the following very important point: Generational Dynamics explains and predicts the behaviors and actions of large groups of people, entire generations of people, not the actions of a small group of politicians. The actions of politicians are important insofar as they reflect the attitudes of the people that the politicians represent. And we're seeing the Israeli people getting very impatient with the current situation in Gaza, especially as hundreds of rockets pour over the security wall into Israel. The people don't trust Olmert and Peretz, after the failure of the Lebanon war. They're increasingly demanding that "decisive" action be taken by the IDF to destroy the Hamas militias in Gaza. That, or course, would be a major operation, and would bring Israel fully into the war, which is what Hamas wants. So Olmert is trying to remain cautious, but if the situation in Gaza continues to deteriorate, then the IDF will be forced to undertake a major military action in Gaza, and a war between Jews and Arabs will begin again in earnest. =eod =// &&2 e070515 Palestinian Interior Minister / escalated Gaza violence =data ww2010.weblog.y2007.e070515.head Palestinian Interior Minister resigns as escalated Gaza violence threatens civil war =data ww2010.weblog.y2007.e070515.keys palestine, gaza strip, hani kawasmeh, hamas, fatah, roadmap to peace =data ww2010.weblog.y2007.e070515.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070515.date 15-May-07 =data ww2010.weblog.y2007.e070515.txt1 Six people were killed and dozens wounded over the weekend =data ww2010.weblog.y2007.e070515.txt2 in violence between Hamas and Fatah militias in Gaza. <#inc ww2010.pic g070514.jpg right "" "Frustrated Palestinian Authority Interior Minister Hani Kawasmeh announces his resignation. (Source: jpost.com)"#> It was just two months ago when <#inc ww2010.weblog.ref e070210 "Gazans were jubilantly dancing in the streets"#> because a peace agreement had been signed in Mecca, laying the groundwork for a unity government. With Hamas and Fatah unified, then the Palestinians' growing civil war would end, it was hoped. The ceasefire had been shaky at best, but now the entire Palestinian government is in danger, with the <#stdurl http://www.jpost.com/servlet/Satellite?c=JPArticle&cid=1178708598503&pagename=JPost%2FJPArticle%2FShowFull "resignation of Interior Minister Hani Kawassmeh"#> from the Palestinian Authority unity government. His job was to supervise the security forces in Gaza, but in Monday's press conference, he expressed enormous frustration over the lack of cooperation from both sides. Do you know, dear reader, what we're celebrating this month? It's the fourth anniversary of the <#hreftext ww2010.i.may01 "Mideast Roadmap to Peace,"#> released by the US and EU. By this time, there should have been a Palestinian state existing side by side with Israel, in peace, love and harmony. I said at the time that it would never succeed, because it can't succeed. Forget all this crap about the unity government. The important point about Gaza, which no one ever seems to mention except me, is that the Gaza strip is densely populated and <#stdurl https://www.cia.gov/library/publications/the-world-factbook/fields/2177.html "the median age in the Gaza strip is 15.8."#> Thus, the Gaza strip is run by a generation of children with guns and missiles. So, it doesn't matter what the old men in the "unity government" do or don't do. Those people are just ancient dinosaurs to the kids in Gaza. The fate of the Mideast is in the hands of a generation of children with guns and missiles, children who couldn't care less about the nuances of international diplomacy. At some point they'll decide that there'll be war, and then there'll be war. It's amazing to me that nobody else seems to understand this. I've often said here that politicians, pundits, high-priced analysts and journalists can't recognize any generational concept, no matter how obvious. It's just too abstract for them to understand. As <#inc ww2010.weblog.ref e060505 "I've described in the past,"#> random political events in the Mideast are "attracted" (in the sense of a chaotic attractor in Chaos Theory) in the direction of war, and for the last several years I've been describing on this web site the many political events moving the Mideast closer and closer to war. As I've <#inc ww2010.weblog.ref e060410 "explained many times on this web site,"#> day to day political events are chaotic events that fall like snowflakes in random ways. But just as millions of snowflakes get "attracted" to large snow drifts, millions of individual political events get attracted to the impending Mideast war, since war is a "chaotic attractor" at this time, 58 years after the end of the 1940s genocidal war between Arabs and Jews. It's true that there have been occasional brief intervals of jubilation, when it looked there might be peace. But those brief intervals are like a heat wave in New York City in November -- just because the weather gets warm for a few days doesn't mean that winter isn't coming. Once the heat wave is over, the weather starts getting much colder again. Similarly, there are brief periods when things seem to get better, but they pass quickly, and then political events move back towards war. You know, it's interesting that the Gaza situation is rarely in the news any more. When the Israelis occupied Gaza, it was an important news story every day. But now, it's hardly ever covered even on the BBC. Today was the first day in quite a while. There's been a BBC story every day about Alan Johnston, the BBC Gaza correspondent who was kidnapped several weeks ago, but rarely about the Palestinian government any more. I think that most of the world has simply given up on Gaza. No one believes that the Roadmap to Peace is even relevant any more. In fact, as <#inc ww2010.weblog.ref e070204 "I wrote about in February,"#> interviews with Palestinians show that even they have given up on Gaza. <#inc ww2010.weblog.ref e061210 "Interviews with young Gazans"#> show that they see no hope for the future. Nobody seems to care any more what happens in Gaza. But the situation continues to degrade as the generational changes continue to occur. No one knows what will trigger a conflagration, but something will. I can't resist mentioning one story that came online on Monday on the Time Magazine site, but you'd better check it out fast before they change it. The <#stdurl http://www.time.com/time/world/article/0,8599,1620678,00.html "headline on the story"#> reads "Gaza on the Verge of Civil War," and it's a pretty decent story by Andrew Lee Butters, Time's Jerusalem correspondent. But accompanying the story is a picture of American soldier Sgt. Tierney Nowland pointing a gun at someone. The caption reads: "A U.S. soldier patrols the Ghazaliya neighborhood of Baghdad, March 2007." Apparently some editor thinks that Gaza is in Iraq. See what I mean about most journalists being incredibly stupid, not to mention incredibly sloppy? I mean, this is an editor at a leading news magazine. How incredibly stupid do you have to be, working for a major news magazine, and think that the Gaza Strip is in Iraq. Geez. Well, getting back to the subject, from the point of view of Generational Dynamics, the prediction hasn't changed since I first stated it in 2003: The Jews and the Arabs are headed for a new genocidal war, replaying the genocidal war of the late 1940s, when Palestine was partitioned and the state of Israel was created. This new war will pull in the entire region, including the United States. As usual, Generational Dynamics tells you what your final destination is, but not how you get there; but it looks more and more that a likely scenario is that the war will begin with a civil war among the Palestinians. =eod =// &&2 e070514 More than a million of secularists rally in Turkey =data ww2010.weblog.y2007.e070514.head More than a million secularists rally in Turkey =data ww2010.weblog.y2007.e070514.keys turkey, akp, recep tayip erdogan, ottomans, ottoman empire, ataturk, mustafa kemal, orthodox vs muslims, abdullah gul. =data ww2010.weblog.y2007.e070514.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070514.date 14-May-07 =data ww2010.weblog.y2007.e070514.txt1 The army may intervene in an approaching major confrontation between secularists and Islamists, =data ww2010.weblog.y2007.e070514.txt2 as an Islamist President appears certain to be elected in elections to be held on July 22. <#inc ww2010.pic g070513.jpg right "" "Over a million secularist demonstrators wave national flags during anti-Islamist rally in Izmir (Source: IHT)"#> You may recall, from <#inc ww2010.weblog.ref e070415 "the last time I wrote about this subject,"#> a month ago, that there was supposed to be a May 16 Parliamentary election for President in Turkey. Well, that election isn't going to happen. The Islamist AK Party holds most of the seats in Parliament, and its leader, Recep Tayip Erdogan, is Prime Minister. The only major office still held by one of the secular (non-Islamist) parties is the Presidency. It appeared that Erdogan would become President, and another person from AK would become Premier, leaving AK in complete control of the government. Because of widespread opposition to a totally AKP-controlled government, Erdogan agreed that he would not run for President, and that the AK Party would put up a "compromise" candidate -- Foreign Minister Abdullah Gul. However, the people who opposed Erdogan also opposed Gul, so nothing was really changed. You may recall that one of the issues that secularists raised about Erdogan is that his wife wears a headscarf; Erdogan's opponents took that as a signal of a secret Islamist agenda. Well, it turns out that Gul's wife and daughter also wear headscarves, so the secularists aren't happy. And then a top Army official made a statement that the Army would not tolerate a non-secular government. The army has overthrown civilian governments before, but they have the respect of many Turks because the army always turned the government back to civilian control fairly quickly. But the threat of a new army coup is not pleasant. And so, secularist MPs boycotted sessions of Parliament holding preliminary elections, so there were no preliminary elections. And without preliminary elections, there can't be a final election on May 16. On Thursday, the <#stdurl http://www.turkishweekly.net/news.php?id=44979 "Parliament voted to change all the rules."#> The Parliament will no longer elect the President. Instead, there will be a nationwide election on July 22 that will elect the entire Parliament AND the new President. During the last month, there have been three mass protests against the threat of an AKP-headed government. The latest occurred in Izmir, as the picture at the beginning of this article shows. By some estimates, <#stdurl http://www.iht.com/articles/2007/05/13/news/turkey.php "1.5 million people traveled to Izmir"#> to take part in the demonstrations. That number of people certainly captures my attention since, if they got angry, a major civil war could result. The AK Party is not very popular in the big cities, but it is very popular in the countryside, and polls show that AKP is likely to win BOTH the Parliament and Presidency on July 22. What will happen then? How will those millions of secularist demonstrators react when their worst fears are realized? Will the Army intervene? This all remains to be seen in the next couple of months. ---------------- You may think that all this stuff about headscarves is something of a joke, but this is a REALLY BIG DEAL in Turkey. As I discussed last time, Turkey's last crisis war was the destruction of the (Muslim) Ottoman Empire immediately following World War I. The country's direction for decades had been to develop a new Turkish culture that was distinctly different from the previous Ottoman/Muslim culture. When Kemal Ataturk, founded the Turkish republic in the 1920s, he ended the Caliphate in Istanbul, and discarded all vestiges of Islamic identity. Thus, it became illegal to wear headscarves in public buildings, and this continues to be the case today. As the generations pass after the resolution of a crisis war, all the rules and compromises that were set up begin to unravel. This unraveling can take many forms; some things are simply forgotten, and other things become sources of conflict. There are many examples of these kinds of conflicts in the world today:

In America, the 1947 Truman Doctrine that made us "policemen of the world" has created a conflict today over the Iraq war.
In France, Charles de Gaulle's strong rejection of Anglo-American culture has resulted in a conflict between those wanting to keep a 35-hour work week and those <#inc ww2010.weblog.ref e070508 "agreeing with President-elect Nicolas Sarkozy"#> that it should be abolished.
In the UK, the close relationship with America that developed in the World Wars is being challenged as Tony Blair leaves office.
In Japan, the Yasukuni shrine has become the focal point of a conflict between those who want to honor Japan's WW II war dead, and those who say, along with the Koreans and Chinese, that the shrine honors war criminals.
In China, Mao Zedong's Communist legacy is creating a conflict between poor peasants and élite wealthy landlords and government officials.

In all of these countries, the unraveling of the rules adopted after the last crisis war, designed to prevent a new crisis war, create political conflicts, and sometimes violent conflicts. People want a set of rules that work, and when all the old rules stop working, people get anxious and scared. In Turkey, the old rules called for creation of secular state -- separating shrine from state -- and discarding all vestiges of the old relationships that intertwined Turkey's government with the Muslim religion. Headscarves were forbidden in schools and public buildings for the same reason that American courts sometimes forbid Christian symbols in American schools and public buildings. The appearance of such symbols is considered a violation of the separation of Church and State. But just as Christians object to what they see as discrimination against Christians, Muslims in Turkey see the laws against headscarves in public buildings as discrimination against Muslims. But while the level of conflict is still fairly mild in America, it's really heating up in Turkey, as shown by Sunday's demonstration with over a million people. What Turkey is dealing with right now is not just another election; it's an issue that goes to the core of what Turkey is. From the point of view of Generational Dynamics, Turkey is overdue for a new crisis war. Turkey's traditional enemies have mostly been with the Orthodox Christians, especially the Armenians and the Russians. We may have an idea within the next couple of months what direction that crisis war is going to take. =eod =// &&2 e070513b Riots in Karachi, Pakistan, threaten Musharraf's presidency =data ww2010.weblog.y2007.e070513b.head Riots in Karachi, Pakistan, threaten Musharraf's presidency =data ww2010.weblog.y2007.e070513b.keys pakistan, india, pervez musharraf, manmohan singh, kashmir, jammu, islamist extremism, muhammad chaudhry =data ww2010.weblog.y2007.e070513b.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070513b.date 13-May-07 =data ww2010.weblog.y2007.e070513b.txt1 Thirty people were killed and hundreds were injured on Saturday =data ww2010.weblog.y2007.e070513b.txt2 in riots pitting the supporters of Pakistan's President Pervez Musharraf, running for re-election as President in the fall, against supporters of the opposing parties. <#inc ww2010.pic g070512b.jpg right "" "Top: Riots in Karachi on Saturday. Bottom: President Pervez Musharraf and Chief Justice of Pakistan (CJP) Iftikhar Muhammad Chaudhry (Source: CNN)"#> The riots have been recurring, starting from the days following <#inc ww2010.weblog.ref e070318b "Musharraf's March 9 suspension"#> of the country's Chief Justice Iftikhar Muhammad Chaudhry. Chaudhry has now become the symbolic leader of the opposition. As I explained at that time, Musharraf's position in Pakistan is a major stabilizing factor in the region, and this is strongly affected by the fact that Musharraf was born in 1943, and has personal memory of World War II and the violent genocidal war between India and Pakistan over the disputed Kashmir and Jammu regions. (Musharraf's year of birth corrected on 20-May. Sorry for the error.) <#inc ww2010.pic india5.gif left "" "Indian subcontinent, showing the disputed regions of Kashmir and Jammu."#> If Musharraf disappears, for whatever reason, then he will be replaced by someone from a younger generation who will be much more militant towards India, and the short-term probability of nuclear war between India and Pakistan will increase substantially. Generational Dynamics predicts there will indeed be a new genocidal crisis war between India and Pakistan, and since both countries possess nuclear weapons, there's little doubt that they will be used. It's impossible to predict when such a war would begin, but if Musharraf disappears and is replaced by someone from a younger generation, things will certainly start moving along. =eod =// &&2 e070513 China's skyrocketing trade surplus causing compulsive xenophobia in Congress =data ww2010.weblog.y2007.e070513.head China's skyrocketing trade surplus causing compulsive xenophobia in Congress =data ww2010.weblog.y2007.e070513.keys protectionism, china, tariffs, immigration, xenophobia, smoot-hawley act, stephen roach, morgan stanley chan akya =data ww2010.weblog.y2007.e070513.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070513.date 13-May-07 =data ww2010.weblog.y2007.e070513.txt1 China's February trade surplus soared nearly tenfold compared to the same month last year, =data ww2010.weblog.y2007.e070513.txt2 hitting $23.76 billion, according to <#stdurl http://www.chinadaily.com.cn/photo/2007-03/13/content_827359.htm "China's General Administration of Customs."#> The trade surplus for February was nearly 50 percent higher than in January. Much of China's trade surplus represents exports to the United States. This kind of situation is one of the reasons why Chinese premier <#inc ww2010.weblog.ref e070322 "Wen Jiabao said that China is "unsteady, unbalanced, uncoordinated and unsustainable.""#> The fact that <#inc ww2010.weblog.ref e070426 "China's economy continues to grow explosively"#> is not considered to be a good sign by many policymakers, even within China, who recognize that the economy is becoming dangerously overheated. China has been trying for five years to slow down the economy's growth, and to engineer a "soft landing" for the economy, rather than risk a "hard landing" that would throw millions out of work and create massive social unrest. Howeve, China's attempts to slow down its economy have been a total failure. To the contrary, the economy's growth has been accelerating dangerously. =inc ww2010.h2 shanghai "Manic Shanghai Stock Market investors" The wild growth in exports represents a mania in China's internal economy that isn't really visible to the West. However, there's one place where the height of the mania is glaringly visible: In the Shanhai Stock Market. You may recall that on February 26, <#inc ww2010.weblog.ref e070226 "I posted an article"#> describing that the Shanghai stock market bubble appeared close to bursting. Manic Chinese day-traders would sell their homes and borrow money to invest in the stock market. Then the Shanghai stock market fell 8.8% in one day, causing <#inc ww2010.weblog.ref e070227c "a brief worldwide panic."#> <#inc ww2010.pic g070512a.gif right "" "Shanghai stock market index, past 5 years, as of 11-May-2007 (Source: MarketWatch)"#> Now, just look at the adjoining <#stdurl http://www.marketwatch.com/tools/quotes/intchart.asp?symb=XX%3A1801730&time=12&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp "graph of the past 5 years' performance of the Shanghai stock market."#> It's mind-boggling. The February 27 collapse of 8.8% has had no effect whatsoever. This week, the Shanghai stock exchange index hit the 4,000 mark - just three weeks after passing 3,000 and up more than three times from a low of 1,200 less than two years ago. Already this year, more than <#stdurl http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/05/12/cnchina12.xml "10 million Chinese small investors have opened broking accounts"#> allowing them to trade shares on the Shanghai stock exchange, compared to 3 million during the whole of 2006. Ordinary people continue to borrow money, and to sell their homes and assets, and put everything they have into the stock market bubble. You know, I hear the financial gurus talk about this on TV. One says, "It looks like a bubble." Another says, "Well maybe it isn't a bubble, and it has a long way to go." Another says, "The Chinese people have so few places to invest money that they put all their savings into this one place, and there's plenty more money to invest, so it'll keep going up, so it's not a bubble." And these idiots are supposed to be experts. Yes, it is a bubble, and yes, the Chinese are putting all their money into it -- that's why it's a bubble. And bubbles burst. Here's <#stdurl http://www.mrc.org/cyberalerts/2007/cyb20070509.asp "a quote from Brent Baker,"#> a conservative media watcher:

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

He supports his "absurd" evaluation by making some computations that indicate that he doesn't understand compound interest. But the reason I'm quoting this is to make the point that Americans do have some kind of national memory of the 1929 crash and the Great Depression of the 1930s, even though some people don't believe it could happen again. But China is different. The Chinese people apparently have NO IDEA what's about to happen to them. And any kind of bad news could be the trigger that will cause people to panic and pull their money out of the Shanghai stock market, causing a fall possibly much larger than the 8.8% collapse last time. What would, say, a 20-30% collapse in Shanghai do to the the New York Stock Exchange? Only time will tell. =inc ww2010.h2 xeno "Congressional xenophobia" On this web site, I keep illustrating how people around the world are following their generational scripts, almost as if they were robots. We see this in the Mideast, in Darfur, in Europe, and in global finance. No one can predict what one individual or a group of politicians will do, but Generational Dynamics can and does explain and predict the actions and behaviors of large masses, entire generations of people. The actions of politicians are important insofar as they reflect the behaviors and attitudes or large groups of constituents. Even so, it's astounding to watch Congress repeating history in the worst possible way. Congress is "losing patience" with China, and is close to <#stdurl http://www.iht.com/articles/2007/05/11/news/yuan.php "imposing punitive trade tariffs on China"#> in retaliation for its large trade surplus. Now, anyone with common sense will tell you that if China is going to self-destruct, we shouldn't help it along, if only so that we won't get blamed. But we never have to worry about common sense when we talk about Congress, do we? In 1931, Congress passed the Smoot-Hawley tariff law, supposed to prevent American jobs from being taken by foreigners. As <#inc ww2010.weblog.ref e070409 "I described last month,"#> this law ended up seriously harming Japan, and was a major factor leading to the bombing of Pearl Harbor. Now we're apparently going to be doing exactly the same thing, this time targeting China. Plus ça change, plus c'est la même chose. According to Stephen Roach, chief economist at Morgan Stanley, we're <#stdurl http://www.morganstanley.com/views/gef/archive/2007/20070511-Fri.html#anchor4871 "already past the point of no return:"#>

"Even the old timers in the Congress had never seen anything like it. On May 9, the US House of Representatives held what was billed as a tripartite hearing of three subcommittees on “Currency Manipulation and Its Effects on US Businesses and Workers.” I was one of the “expert witnesses” at this hearing – invited to submit a written statement and then, along with the other six members of the witness panel, to present a five-minute oral summary in front of the assembled legislators.... The hearing concluded with an extensive question and answer session. It was an experience I will never forget. My worst fears were realized. At the end of over three hours of grueling give and take, I left Capitol Hill more convinced than ever that the protectionist train has left the station. ... I suspect this hearing could well mark a major turning point in America’s mounting resistance to trade liberalization and globalization. ... The opening comments of Sander Levin (Democrat from Michigan), who chaired this session, underscored the determination of Congress to take its long-standing concerns over US trade policy to a different level. In his words, "This is an exceptional issue and an exceptional problem that hasn’t been resolved. We need to consider the next steps. This is the real thing." ... In terms of the substance of the debate, three things surprised me about this hearing: First, while the bulk of the discussion was about China, anti-Japan sentiment was formally brought into the picture for the first time. The issue was the yen – characterized by the Congress as the world’s most undervalued major currency. While the absence of explicit intervention by Japanese authorities over the past three years was duly noted, many representatives took the position that there has been unmistakable "implicit manipulation" of the yen. Second, the case against China was framed mainly around the concept of the "illegal subsidy" – WTO-compliant jargon that frees up Congress to impose sweeping countervailing duties on Chinese exporters. ... Third, the congressmen present at this hearing were highly critical of the US Treasury’s bi-annual foreign exchange review process and its failure to cite China for currency manipulation.... Notwithstanding these new developments, the most important message is that Congress remains unwavering in its determined approach to move from rhetoric to action in 2007 on matters of trade policy. Contrary to what most believe, this is not a case of anti-trade Democrats now taking over Congress. I continue to stress that there is broad bipartisan support for anti-China "remedies." While the Democrats are now in charge of the Congress, on matters of trade policy they have been joined by many Republicans in their crusade. ... I didn’t go to this hearing with the naïve expectation that I would be able to change any minds. And there was no surprise on that count. There was little sympathy on the part of the Congress for linking trade deficits to domestic saving shortfalls. To the contrary, there was a broad consensus that bilateral pieces of the massive multilateral US trade deficit are fair game – in essence, an opportunity to whittle away at the US external gap one country at a time. The consensus of congressman at the hearing was that China was the problem – even though the non-Chinese piece of the overall US trade deficit slightly exceeded $600 billion in 2006, over two and a half times the size of the Chinese bilateral deficit with the US. Many congressmen were especially upset with my characterization of "China bashing." One gentleman asked me to strike any such references from my testimony, claiming that, "We’re not China bashers. We are just trying to seek the truth." At the same time, literally no once responded to the concerns I voiced over the unintended consequences of protectionism – namely that China bashing could backfire in the US, the rest of Asia, and the broader global economy. The bottom line here is very clear: The US Congress just doesn’t do [macroeconomics]."

Reading this is very discouraging, but not at all surprising. History makes it clear that Congress enacted the Smoot-Hawley law in 1931, during America's last generational Crisis era, against the advice of many economists, and that the law had incredibly destructive results. Now America is a new generational Crisis era, and we're exhibiting exactly the same destructive xenophobia. For readers of this web site who are still skeptical about its conclusions, here you have a specific, glaring example. The countries around the world that fought World War II as a crisis war are now in a new Crisis era, and xenophobia has been increasing around the world: between Anglos and Latinos in America, between Europeans and Muslims, between Jews and Arabs, between Pakistanis and Indians, between Chinese and Japanese, between Koreans and Japanese, between Chinese and Americans. It's always the same in every cycle. The generations of people who survive a crisis war like WW II come out of it believing that "hate" is the cause of war, and that if we can only eliminate "hate," then we can prevent a new crisis war. And actually they stick to that belief throughout their lives. But when those generations are replaced by new generations, "hate" returns. In the previous paragraph, you can replace the word "xenophobia" by the word "hate," and you'll see what I mean. A lot of people don't understand this. I received an e-mail message from a web site reader last year, in which he mentioned that his European girlfriend "hates / loathes Moroccans." Several months later, he wrote to me on a different subject, and said that today's young people can't understand why blacks and whites used to hate each other, since they get along so well now. Fortunately, I save old e-mail messages, so I was able to write back and remind him about his girlfriend (who, it turns out, is now a former girlfriend). The point is that people don't see themselves as having "hate." The people in Congress who are going to pass punitive measures against the Japanese don't see them as "hate" laws; they see them as justified by the facts. Here's how the "respected" Newsweek economist, <#stdurl http://www.msnbc.msn.com/id/18507726/site/newsweek/ "Robert J. Samuelson, defends the punitive tariffs:"#>

"It is not "protectionist" (I am a longstanding free trader) to complain about policies that are predatory; China's are just that. The logic of free trade is that comparative advantage ultimately benefits everyone. Countries specialize in what they do best. Production and living standards rise. But the logic does not allow for one country's trade systematically to depress its trading partners' production and employment. Down that path lies resentment and political backlash. Everyone complains about America's trade deficits, but they actually symbolize global leadership. Access to the U.S. market has promoted trade by enabling other countries to export. But the deficits cannot grow indefinitely. Imagine now a trading system whose largest member seems intent on accumulating permanently large surpluses. Nor, it might be added, are these ultimately in China's interests. They drain too much of its production from its citizens and contribute to growing domestic economic inequality. What everyone needs is more balanced Chinese economic growth, less dependent on exports."

This may well be quoted as "hate speech" in some future era, just as supposedly "fact-based" ancient articles about blacks are regarded as hate speech today. He says, "Down that path lies resentment and political backlash," without noting that the resentment comes from people like him. I also have to laugh at the moronic statement, "Everyone complains about America's trade deficits, but they actually symbolize global leadership." This is like Fed chairman Ben Bernanke's idiotic 2005 statement that America’s exponentially increasing rate of public debt is everybody’s fault but ours, because other nations are <#hreftext ww2010.i.051029bernanke "guilty of a "global savings glut.""#> But of course it takes that kind of warped reasoning to justify something like the punitive tariff actions: "I'm over my head in debt, but it's not because there's anything wrong with me; it's because there's something wrong with everyone else. So let's punish the guilty party - the one who keeps lending us so much money." Now, that's "hate speech." =inc ww2010.cf.cf060209 p left Now we're once again headed for a new world war, the Clash of Civilizations world war, as predicted by Generational Dynamics. The question is, what will trigger that war? I've identified several possible triggers, and shown by the adjoining graphic. Whatever triggers the war, it would be nice if America weren't blamed for it. But if we pass punitive legislation targeting China, and that punitive legislation is viewed in some future time as triggering the inevitable financial crisis, which then leads to a world war, then America will be blamed for the world war. That isn't good. But that's what's happening. =inc ww2010.h2 weeks "Are we just weeks away from a crisis?" As I always say, Generational Dynamics tells you what your destination is, but it doesn't tell you what path you'll take or how long it will take to get there. For that you have to look at day-to-day signals, and make probabilistic assessments. This gives rise to the question: Has the Chinese economy bubble gotten so huge that a crisis is now imminent? As far as I personally is concerned, I'll quite honestly tell you I don't know. I've said many times that I don't see how the financial crisis hasn't begun already, in view of how the global financial bubble has gotten as big as it is now. There's just no way to predict timing, even when the facts indicating a crisis seem overwhelming. But a web site reader has referred me to <#stdurl http://www.atimes.com/atimes/China_Business/IE12Cb04.html "an intriguing article by "Chan Akya""#> in Asia Times. The article makes the following argument: China's stock market bubble and international trade surpluses have gotten so large that the Beijing government is now politically forced to do something about it. (The word "forced" is in a similar sense to the way Congress is "forced" to pass xenophobic tariff laws.) One reason is to head off action by the American Congress. If China can do something reasonably forceful, then the Congress may be convinced to wait a while. Another reason is that the danger of the bubble bursting is too great, and something has to be done to let some air out of the bubble. Here are some excerpts:

"Six months ago, total transaction volumes on the Shanghai and Shenzhen exchanges were less than US$5 billion per day. That figure now stands 10 times as high, at $50 billion per day. This volume is something China can be proud of, barring one minor detail, namely that the central bank and various policymakers would much rather not see it happening. Even as central bankers exhort the country's citizens to beware of bubble-like conditions in the stock markets, investors appear unruffled, reversing the policy impact of any announcement. Be they students, farmers or construction workers, every Chinese living in the two big cities of Shanghai and Shenzhen appears now to have a brokerage account. Conversations in the normally noisy dai pai dongs in Guangdong province and Hong Kong drop to a quick hush whenever the subject of stock tips comes up. In short, the stock market today represents a revolution against the diktat of the PBoC [People's Bank of China], questioning its very authority. Experience from the rest of the world shows that stock-market bubbles are neither infrequent nor unpredictable; in most cases, they are compounded by the mistakes of policymakers. ... The US housing and stock bubbles positively pale in comparison to the ones being observed in many other markets, including property and stock markets across Asia. There are some notable exceptions such as Thailand, where a combination of policy missteps has left markets relatively stable rather than rising, but in most other places the boom is all too apparent. Even in straitlaced Singapore, house prices have risen broadly over the past two years, wiping out pent-up equity losses from the previous 10 or so years. ... More than India, it is China that faces the threat from investors chasing too few stocks. India's markets have a much longer history and, more important, many investors still remember the stock-market scandal of the early 1990s that wiped out the nest eggs of a few thousand people. China's problem is also one of magnitude: with more than 100 million investors directly participating in the markets, the impact of any downturn will be broad, and politically suicidal. ... Chinese investors have shrugged off recent [interest] rate rises, and banks have circumvented restrictions on lending through other means. ... China will have to choose between the lesser of two evils, namely the protection of employment in its export-dominated industries or the safety net being created by investments in property and stocks by millions of its citizens. I believe it will choose to protect people's wealth more than lower-end manufacturing jobs; therefore a sharp revaluation of the Chinese currency, the yuan, is certain in the next few weeks."

According to Chan Akya's argument, China is trapped between two choices -- doing nothing, or sharply revaluing the yuan, which would make China's exports so much more expensive in other countries that the trade surplus would be cut. If China does nothing, then sooner or later there'll be a downturn, causing stock market crashes whose impact "will be broad, and politically suicidal." If China decides to revalue the yuan in order to reduce exports, it will protect the stock and real estate bubbles (according to Chan), but will only result in the loss of "lower-end manufacturing jobs." Now of course he's wrong about this choice; a bubble is a bubble, and the bubbles will burst no matter what Beijing does. And when it does, huge masses of people will lose their investments AND their jobs. What's intriguing about this argument though is the prediction that a sharp revaluation of the yuan "is certain in the next few weeks." Who is this guy? Does he have some inside information? The author, whoever he is, has taken as a pseudonym the name of a famous Indian philosopher from antiquity, Chanakya Pandit, <#stdurl http://www.philosophy.ru/library/asiatica/indica/authors/kautilya/canakya_niti_sastra.html "someone who was fighting the Greeks (Alexander the Great), no less."#> If Chan's argument turns out to be correct, and China sharply revalues the yuan in the next few weeks, then there will certainly be a major reaction in markets around the world, and this may cause the generational panic which is now well overdue. Or if he's wrong, then we might go on as we have, although I can't see how the Shanghai stock market bubble can go on much longer. But who knows. It's not possible to predict when a panic will occur, but from the point of view of Generational Dynamics, we're now overdue for a generational panic and crisis. It could happen next week, next month or next year, but it's coming with certainty. It will destabilize densely packed populations in China, India and around the world, and will lead to the Clash of Civilizations world war. As usual, Generational Dynamics tells us our final destination, but not how we'll get there. =eod =// &&2 e070511 Israel's Olmert blames the army for being unprepared for Lebanon war =data ww2010.weblog.y2007.e070511.head Israel's Olmert blames the army for being unprepared for Lebanon war =data ww2010.weblog.y2007.e070511.keys =data ww2010.weblog.y2007.e070511.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070511.date 11-May-07 =data ww2010.weblog.y2007.e070511.txt1 Released transcripts show how completely oblivious the Israeli government was =data ww2010.weblog.y2007.e070511.txt2 to what they had to do. Last week we <#inc ww2010.weblog.ref e070504 "discussed the conclusions of the Winograd Committee report"#> on Israel's conduct in last summer's war against Hizbollah in Lebanon. With the release of additional information -- specifically, some of the transcripts of the testimony of Prime Minister Ehud Olmert and Defense Minister Amir Peretz -- it becomes increasingly clear that the Lebanon war is a prototype of a typical war in a generational Crisis era. According to the transcripts, <#stdurl http://www.ynetnews.com/articles/0,7340,L-3397571,00.html "here's what Prime Minister Olmert said:"#>

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

And <#stdurl http://www.ynetnews.com/articles/0,7340,L-3398141,00.html "here's what Defense Minister Peretz said:"#>

"On July 12 [the first day of the war], I was not presented with a situation that the army had not trained enough or that there was any problem with the army's preparedness. I assumed that the international community would not give us any longer than that, although I thought that the longer we give our forces to operate, the more we will weaken Hizbullah."

These are the two men most responsible for the decision to go to war, and they were the two men most responsible for making decisions about prosecuting the war as time went on. Their statements are quite remarkable in that they show that the two men had no idea what was going on. They thought that all they'd have to do is give the order to destroy Hizbollah, and it would be done. This is how people in the Baby Boomer generation think. They actually believe that all you have to do is given an order, and what they order will take place. This is exactly what distinguishes those who lived through World War II from those born afterwards. People who lived through the horror of WW II remember how panicked, anxious and desperate everyone was, and how many mistakes were made. The greatest mistake of all, of course, was allowing almost the entire Pacific fleet to be destroyed in one single day with the attack on Pearl Harbor. People who lived through that experience understand that nothing can be taken for granted, and that every detail has to be managed. Former Prime Minister Ariel Sharon would not have made the mistakes that Olmert made. Sharon would have provided a precise set of attainable goals and plans for the armed forces to follow. He would not simply have given an order, and waited for it to be followed. The Boomers in Congress are exactly the same. One of the reasons that I call all their proposals moronic is that they're impossible. They think that if the President gave the order to pull the troops out of Iraq, then the order would simply be pulled out. Quite the opposite, pulling out of Iraq is impossible. This may surprise you too, dear reader, because you may assume that it would be easy for the troops to leave Iraq, if only President Bush gave the order. But if that order were given, it would immediately become apparent what a disaster would follow, and the American public would become so anxious that the order to leave would be reversed. Israel's Lebanon war is the prototype of what's to come. Generally speaking, postwar generations, like Boomers and Generation-X, are not capable of governing. They don't understand how to do it. As a result, they'll stumble into war, and the survivors of the war will be able to govern in the aftermath. =eod =// &&2 e070508 Euphoric Nicolas Sarkozy supporters celebrate victory over Ségolène Royal =data ww2010.weblog.y2007.e070508.head Euphoric Nicolas Sarkozy supporters celebrate victory over Ségolène Royal =data ww2010.weblog.y2007.e070508.keys nicolas sarkozy, ségolène royal, france, election =data ww2010.weblog.y2007.e070508.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070508.date 8-May-07 =data ww2010.weblog.y2007.e070508.txt1 First 100 days: Put France back to work, stop illegal immigration, and make France a great nation again. =data ww2010.weblog.y2007.e070508.txt2 <#inc ww2010.pic g070506.jpg right "" "Election results: Nicolas Sarkozy 53%, Ségolène Royal 47%. (Source: lemonde.fr)"#> Sarkozy supporters are predicting huge social and political changes, following his decisive victory over Socialist candidate Ségolène Royal. The victory was all the more decisive because 75% of registered voters cast ballots -- the highest percentage in 40 years. I want to explain why Sarkozy won, and what problems he will soon face. The best place to start is to read <#stdurl http://news.bbc.co.uk/2/hi/europe/6631125.stm "some of his victory speech,"#> which is unlike anything you hear these days from any politician in any country -- since it exhibits his patriotism and his love for his country:

"My dear compatriots, as I speak to you this evening, at this time which, as everyone understands, is exceptional in a man's life, I feel enormous, sincere, deep emotion. From a very young age I have felt incredible pride at belonging to a great, an old, a beautiful nation, that of France. I love France as you love someone dear, someone that has given me everything. Now it is my turn to give back to France what France has given me... My thoughts therefore go to all of the French who did not vote for me. I want to tell them that beyond the political battle, beyond the differences of opinion, for me there is only one France. I want to tell them that I will be the president of all the French people, that I will speak for each one of them. I want to tell them that this evening it is not the victory of one kind of France against another... The French people have spoken and have chosen to make a break with the ideas, the customs and the behaviour of the past. I am thus going to restore the status of work, authority, standards, respect, merit. I am going to give the place of honour back to the nation and national identity. I am going to give back to the French people pride in France... The French people have opted for change. I shall be implementing this change because this is the mandate I have received from the people and because France needs it - but I shall do this with all of the French people. I shall do it in a spirit of unity and in a spirit of fraternity. I shall do it in such a way that no one is left with the feeling of being excluded, of being left to one side. I call on all the French, irrespective of their party, their beliefs, their origins, to join with me to ensure that France gets moving again. I call on each person not to allow himself or herself to be enveloped in intolerance and sectarianism, but to open up to others, to those who have different ideas, to those who hold other beliefs. ... I want to issue an appeal to our American friends, to tell them that they can count on our friendship, which has been forged in the tragedies of history which we have faced together. I want to tell them that France will always be by their side when they need it, but I also want to tell them that friendship means accepting that your friends may think differently and that a great nation such as the United States has a duty not to put obstacles in the way of the fight against global warming, but on the contrary to take the lead in this fight, because what is at stake is the fate of humanity as a whole. France will make this battle its primary battle. ..."

Can you imagine any American politician today (with the possible exception of the President) making such an emotionally patriotic speech? No one could, nor could Sarko's opponent, Ségolène Royal. That makes Sarkozy a very different politician. From the American point of view, it's absolutely wonderful to have a French president whose automatic attitude toward America isn't knee-jerk contempt. But the mere fact that he's different did not cause him to win. Nor just the fact that he's patriotic and loves his country. And being "pro-American" couldn't have been much help either. Sarko won because the French people are overwhelmingly anxious over the nation's seemingly insoluble problems, and Sarko appealed to the irrational emotions of the people who are grasping for any possible solution. One mother of three who voted for Sarkozy <#stdurl http://www.iht.com/articles/2007/05/06/news/web-france6.php "was quoted as saying,"#> "We can't go on like this, something needs to happen. [Voting for Sarkozy] is a bit scary, but we have to try something new." What we're seeing in France is exactly the same kind of manic-depressive behavior that we've described so often in the American people. American's entered the manic phase last November, when the Democrats won the Congressional elections and Secretary of Defense Donald Rumsfeld was replaced by Robert Gates. In February, I explained how <#inc ww2010.weblog.ref e070212 ""cognitive dissonance" had turned Democrats into fanatics,"#> as they entered the depressive phase, realizing that in November they had merely been experiencing something close to a sex fantasy. Now, Democrats and Republicans alike have become pathetic ghosts, <#inc ww2010.weblog.ref e070502 "and have become completely paralyzed and incompetent."#> As I've said, the root cause is that the generations of survivors of World War II are all gone. The survivors of World War II did great things -- they created the United Nations, World Bank, Green Revolution, World Health Organization, International Monetary Fund, and so forth. They created these organizations and managed them for decades with one purpose in mind: That their children and grandchildren would never have to go through anything so horrible as World War II. Now all those survivors are gone, and the people (Boomers and Xers) who are left behind don't know how to run those organizations, how to accomplish anything similar. Where governments could accomplish great things in the 50s and 60s, today they can't lay claim to even the smallest achievement. The French people realize that France is beleaguered with problems: Unemployment is high, illegal immigration is growing, terrorism is a threat, and the country has become increasingly insignificant. Perhaps the greatest humiliation came in 2005, when <#hreftext ww2010.i.eu050601 "a French referendum rejected the proposed EU Constitution."#> So along comes Nicolas Sarkozy, saying some new things -- he loves his country and his country will be great again -- with some specific proposals:

He will put the country back to work, particularly by eliminating the enforced 35-hour workweek.
He will solve the problem of illegal immigration.
He will be fair to everyone, including the surburban youth that rioted in 2005.
He will make France a leader in the new European Union.
He will make France a leader in resolving Middle Eastern problems, by means of a "Mediterranean Union," similar to the European Union.

After that, he'll turn water into wine for the nationwide party. Sarkozy's supporters are talking about getting as much of this done as possible in the first 100 days after he takes office on May 16. That's similar to the promises that Democrats made, and <#inc ww2010.weblog.ref e070502 "they've accomplished nothing."#> They're too incompetent even <#inc ww2010.weblog.ref e070131 "to vote themselves a pay raise."#> Boomers today, whether in America or France, are scared to death of losing what they have, through bad investments or through terrorism or through disgrace. The generations that survived World War II were willing to give up many things to guarantee that nothing so horrible could ever happen again. The Boomers have based their entire lives on assumptions they developed during their halcyon days, in the 1960s and 1970s. Now, they see that all those assumptions are wrong, and the cognitive dissonance is driving them to a fanatical refusal to give up anything at all. And so, for example, Sarkozy may well claim that <#stdurl http://www.reuters.com/article/idUSL061088620070506?src=050707_0810_TOPSTORY_sarkozy_plans_reform "his election victory gives him a mandate for labor reform,"#> but the very powerful labor unions will not agree. France has a heritage of rioting and demonstrations that dates back to the French Revolution. During France's last Awakening era, riots and demonstrations were even more violent than they were in America. In May 1968, student protests and labor strikes brought France to the brink of anarchy. Those riots were relived twice in the last two years. In November 2005, violent racial rioting occurred in Paris's Muslim ghetto suburbs, and <#inc ww2010.weblog.ref e051102 "many people blamed Sarkozy,"#> because Sarkozy responded to the rioting by saying that he had a "zero tolerance policy" for violence, and he referred to the troublemakers as "scum" and "riffraff," and vowed to "clean out" the suburbs. Ethnic French students responded in April of last year, after French President Jacques Chirac supported a law that would permit French employers to fire an employee under 26 years of age, provided that he's worked less than 2 years. <#inc ww2010.weblog.ref e060411 "A million people, mostly students, took to the streets to protest"#> in April 2006, and Chirac backed down. As this web site's analysis pointed out, these street protests were a reaction to the November 2005 riots by Muslim youth. Muslims had demanded jobs, and the April rioters knew that jobs for Muslims meant fewer jobs for them. Whether it's the Muslim students or the French students or the labor unions, or any of a wide variety of special interest groups, no one is going to be willing to give anything up. In fact, there's already been scattered violence across France, and several hundred people were arrested on Sunday and Monday evenings. However, appraising the situation is complicated by the fact that, several days before the election, Ségolène Royal said that a Sarkozy victory would lead to street violence. This was an incredibly stupid thing to say because voters get angry at candidates who appear to be pandering to violence. Furthermore, a prediction of violence may become a self-fulfilling prophecy, and it's impossible to tell whether the violence would have occurred if Royal hadn't made her remarks. In fact, there are some signs that the violence is petering out. But the fact that violence is occurring at all is, at the least, a warning to Sarkozy to go slow. So it's going to be impossible for Sarkozy to achieve many of his goals, and it's quite possible that he'll accomplish none of them. What will happen then? If he follows the example of his predecessor, Jacques Chirac, or of the Congressional Democrats, then he'll just back down and become completely impotent and spout nonsense all day long. In that case, the French people will become as angry with Sarkozy as the American people are with President Bush. But the other possibility is that campaign predictions made by Royal's supporters that Sarko will turn into a fascist will turn out to be a something of a self-fulfilling prophecy as well -- or at least that's what his opponents will claim. If Sarko refuses to back down and instead becomes extremely confrontational with demonstrators and labor unions, then things could spiral into violence pretty quickly. Large riots and demonstrations could force Sarkozy to bring out the army, and could lead to confrontations between those with Muslim and those with French ancestry. Sarko has already indicated that he plans to move in that direction. In the last days of the campaign, <#stdurl http://www.theaustralian.news.com.au/story/0,20867,21684591-601,00.html "he said:"#> "I will not be a referee, a monarch sheltering in the Elysée Palace. I will govern and take responsibility," indicating that he won't be like Jacques Chirac. "From day one, I am going to start putting my promises into action and make sure they are carried out." As for the objections already raised by a Communist-led labor union: "I’m sorry if they don’t like change, but they are not the ones being elected." It's been almost 62 years since the end of World War II. France, like America, like Israel, like the UK, and like other countries that fought in World War II as a crisis war, is now in a generational Crisis era. A country in a generational Crisis era has two choices: become increasingly paralyzed and dysfunctional, or become increasingly confrontational. The first choice usually becomes completely unbearable after a while, so that it's always the second choice, and the second choice leads to war. From the point of view of Generational Dynamics, a new West European war is coming with absolutely certainty; the only question is how the sides will line up. I've speculated that there would be a new war between Britain and France, as there have been so many times in the last millennium; however, Sarkozy's victory appears to fly in the face of that speculation, as Sarkozy is openly "pro-American." Well, that remains to be seen. One thing's for sure: When Sarkozy takes office on May 16, he's going to have move quickly to try to get something done. It's quite possible that he'll get nothing done, and when that sinks in, France could go in any direction. =eod =// &&2 e070507 A Canadian financial columnist illustrates the 'Principle of Maximum Ruin' =data ww2010.weblog.y2007.e070507.head A Canadian financial columnist illustrates the 'Principle of Maximum Ruin' =data ww2010.weblog.y2007.e070507.keys warren buffet, derivatives, avner mandelman, john kenneth galbraith, principle of maximum ruin =data ww2010.weblog.y2007.e070507.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070507.date 7-May-07 =data ww2010.weblog.y2007.e070507.txt1 By contrast, Warren Buffett repeated his warnings of "very unpleasant things" coming, =data ww2010.weblog.y2007.e070507.txt2 in a marathon <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aqOmPKd_307U&refer=home "six-hour question and answer session in Saturday's annual meeting of shareholders,"#> attended by 27,000 people. He discounted the effects of the subprime mortgage situation alone on the overall economy, saying that they would cause "plenty of misery" for individual homeowners and lenders. "It will be a very big problem for those involved, but I think it is unlikely that factor alone triggers anything in the larger economy," he said. Instead, Buffett indicate that the widespread use of derivatives will be the trigger. Buffett once called derivatives "financial weapons of mass destruction." <#stdurl http://online.wsj.com/article/SB117837833996593416.html "On Saturday he said:"#>

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

Buffett's partner, Charlie Munger, made a technical point when he said that accounting rules for derivatives were a big problem: "The accounting being deficient enormously contributes to the risk," allowing executives and shareholders to get paid on "profits that don't exist." Buffett <#stdurl http://online.wsj.com/article/SB117837833996593416.html "added that"#> existing accounting conventions allow parties involved in derivative transactions to value the same contract differently, leading to an inadequate or incomplete picture of the contract's risk. "I will guarantee you, if you add up the marks on both sides, they don't add up to zero," Mr. Buffett said, referring to the accounting of a single derivative contract. "There is an electronic herd of people around the world managing an amazing amount of money" who make decisions based on minute-by-minute stimuli, he said, adding, "I think it's a fool's game." By contrast, take a look at what the Canadian columnist, <#stdurl http://www.theglobeandmail.com/servlet/story/RTGAM.20070504.wmandelman0505/BNStory/Business/columnists "Avner Mandelman of the Toronto Globe and Mail"#> says. He's not worried about any bubbles bursting, or any financial panics. Quite the opposite. Based on his vast 25 years of investing experience, he provides a set of rules for you to follow so that you can MAKE MONEY out of a panic. Here's the key to wealth and riches:

"Panics and manias: Sure signs of market opportunities The market is balanced between fear and greed. But occasionally one of these emotions goes wild and grips everyone around you. If you learn to recognize such moments and act against the herd, you can make a lot of money. To help you identify such profitable gut-wrenchers and withstand the emotional pitfalls, here is a sample related from my own experience – plus an example of a current mania. My first experience of massive market fear was in August, 1982, when the then TSE [Toronto Stock Exchange] 300 plunged to about 1,300, interest rates soared to 20 per cent and a famed Bay Street restaurant was boarded with plywood. But stocks were incredibly cheap, and so I gave a bullish talk to a Toronto civic group that had expected to hear me talk about bank certificates of deposit. In that audience was also one Tom Stanley of today's Resolute Performance Fund, who was then just starting out. Next day he invited me to lunch to hear why I thought it prudent to buy in selling panics, and we have remained friends ever since. In those days I was starting out myself, so I couldn't buy much. But next time when panic-selling hit, on October 19, 1987, I was primed. I still recall how my partners at Gordon Capital stood around the trading desk, faces white as the screens flashed red. Luckily Gordon had gone into cash the month before, based on the research department's warning, so the traders had the cash to buy – which they did the following two days. The next panic, in January, 1991, the first Gulf war, was already my third. So the moment the first cruise missile left, I was already writing my buy tickets. When yet a fourth panic occurred on 9/11, in the midst of the horror I recalled my previous three selling panics, and was ready to buy the moment the markets reopened. How about a more recent selling panic? In July last year, as the Lebanon war erupted, this column pointed out that it was a good time to buy. Look back and you'd see that this was the market's bottom. How can you use this new skill? At present, a large American armada is gathering in the Mideast. I make no forecasts, mind, but if another conflict breaks out and the markets tumble, pull out a list of your favourite stocks, look up what had just gotten cheaper, clench your stomach, and buy more. ... Hold on to [your] strong feelings. They are the surest sign of being gripped in a mania. Next time you feel them about any stock or industry or trend, sell and go look for a cheap stock – preferably during a selling panic."

So, Avner Mandelman has it all figured out. When everyone else panics, get ready to start buying, because the panic ends in a few days, and the worst is over. Then there are plenty of cheap stocks available, and the stock market will recover soon. And why does he believe this? Because that's the way it's always happened before. Well, not "always always," since he's only been investing for 25 years. But at least, "always for Avner." I've reproduced several paragraphs of his column because it's fascinating how it fits with the Principle of Maximum Ruin. The Principle of Maximum Ruin says that the maximum number of people will be ruined to the maximum extent possible, because of attitudes like those expressed by Avner Mandelman. I've discussed the Principle of Maximum Ruin several times. The last time was two months ago, <#inc ww2010.weblog.ref e070305 "just after the brief February 27 panic."#> Or better yet, go back and read last year's <#hreftext ww2010.i.macro061025 "article on "System Dynamics and Macroeconomics,""#> which shows how mainstream macroeconomics has failed to predict or explain anything, especially since 1995, and how this failure can cause similar results as in 1929. The Principle of Maximum Ruin was developed based on a description of what happened in 1929 in the book The Great Crash - 1929, by John Kenneth Galbraith. Galbraith summarized the situation as follows, noting that economists and analysts of the day gave advice based on the relative painlessness of previous recent stock market panics:

"A common feature of all these earlier troubles [previous panics] was that having happened they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune." (p. 108) Galbraith showed how, after the initial crash on October 24, 1929, "In the first week the slaughter had been of the innocents," in the second week it was "the well-to-do and the wealthy" who were slaughtered (p. 113), and then more and more people were sucked into ruin during the years that followed. Galbraith particularly describes the doings of the Harvard Economic Society, a group of economists on the Harvard University faculty, possibly the most highly regarded economists in the world. This group kept predicting that the worst was over -- and repeated that prediction over and over for two years -- and they were proven wrong every time. Exactly the same thing is happening today. This is the "generational" concept in action. People assume that nothing that's happened in their own lifetime can ever happen again, and yet the huge bubbles of the 1920s have already happened again. As soon as enough of the people with personal memory of those past disasters die off, then the disasters happen again. It's happened over and over again throughout history, and it's happening again. Why will the next panic be like a 1929 panic, and not like a 1980s panic? Because <#hreftext ww2010.i.050711eleven "the stock market is far overpriced by historical standards,"#> as shown using both exponential growth forecasting methods and mean reversion techniques with price/earnings ratios. The stock market today is overpriced by a factor of 250%, same as in 1929; in the 1980s, the stock market was actually underpriced, and so a panic was not likely to be severe. There are many other signs as well that I've discussed on this web site, and now Warren Buffet has said, "I believe we may not know where exactly the danger begins and at what point it becomes a super danger. We don't know when it will end precisely, but ... at some point some very unpleasant things will happen in markets." It's not possible to predict when a panic will occur, but from the point of view of Generational Dynamics, we're now overdue for a generational panic and crisis. It could happen next week, next month or next year, but it's coming with certainty. It will destabilize densely packed populations in China, India and around the world, and will lead to the Clash of Civilizations world war. As usual, Generational Dynamics tells us our final destination, but not how we'll get there. =eod =// &&2 e070506 Scottish National Party (SNP) victory threatens divorce from England =data ww2010.weblog.y2007.e070506.head Scottish National Party (SNP) victory threatens divorce from England =data ww2010.weblog.y2007.e070506.keys scottish national party, snp, scotland, england, tudors, mary queen of scots, queen elizabeth, battle of blenheim, battle of malplaquet, war of the spanish succession, english civil war, act of union, holyrood, henry viii, anne boleyn, european union =data ww2010.weblog.y2007.e070506.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070506.date 6-May-07 =data ww2010.weblog.y2007.e070506.txt1 Scotland and England were united on May 1, 1707, 300 years ago, =data ww2010.weblog.y2007.e070506.txt2 and winner of Scotland's midterm elections wants to end the Union in 2010. Scotland may be part of the United Kingdom, but the relationship between the Scots and the English hasn't always been smooth sailing. Like many other things, sex and money are heavily involved in the history. If you've been watching the HBO TV series, The Tudors, then you know that King Henry VIII wanted to dump his wife, a Spanish princess, for the lovely Anne Boleyn. But the Catholic Pope refused to grant the divorce, so Henry made himself head of the Church (later known as the Anglican Church) in England, and granted himself the divorce. He married the lovely Anne Boleyn in 1533 (and later beheaded her, but that's another story). After six wives, Henry finally died in 1547, leaving no male heir. After much intrigue, by the 1560s we had Henry's daughter, Elizabeth I, as the Protestant (Anglican) Queen of England, and Henry's grand-niece, Mary Stuart, as the Catholic Queen of Scotland. So you had two chicks running two different countries, favoring two different religions, ruling peoples that didn't like each other. There's no way that this could have ended well. Mary, Queen of Scots, ended up in Elizabeth's dungeon for many years, and was finally executed in 1587. The death of a Scottish Catholic Queen at the hands of an English Protestant Queen triggered one of the most memorable crisis wars of the last millennium: The attack of Spain's huge Invincible Armada, an attack whose failure has been commemorated for centuries in mythic rhyme and song. The fault line between the English and the Scots simmered for decades until 1638, when a war between the English and the Scots triggered the English Civil war of the 1640s. Relations between the two remained completely unsettled, and in 1701 when King Louis of France began a major war of conquest (known as the War of the Spanish Succession). Scotland was allied with France in this war, and it looked as if England's entire empire, including the American colonies, was in danger, and that a new English Civil War was about to begin. England miraculously and unexpectedly defeated the French army in the Battle of Blenheim in 1704, slowing Louis' plans. (Louis' final defeat came in August 1709, at the battle of Malplaquet, the bloodiest battle in Europe for the entire eighteenth century.) However, having lost its ally, Scotland was finally forced to unify with England, and on May 1, 1707, almost exactly 300 years ago, to the day, the Act of Union was signed. The idea of returning to pre-1707 status with an independent Scotland has never died. The Scottish National Party (SNP) was formed in 1934, but never did very well until the generational Awakening era of the 1960s, when it began to grow. It gained its first real victory in 1997, with a "devolved" Scottish Parliament (Holyrood), meaning that Scotland had a Parliament with some independent powers for the first time since 1707. The recent election gave the SNP a plurality in the Scottish Parliament for the first time, beating out the Labour party by one seat. <#stdurl http://politics.guardian.co.uk/scotland/story/0,,2072912,00.html "SNP leader Alex Salmond immediately said,"#> "It is very clear indeed which party has lost this election, and the Labour party no longer has any moral authority left to govern Scotland. Scotland has changed for ever and for good. Never again will we say that the Labour party assumes it has a divine right to rule Scotland." Salmond can't get what he wants without allying with other parties, and it's far from clear that the other parties are as interested in Scottish independence as he is. It seems fairly certain that, <#stdurl http://news.scotsman.com/politics.cfm?id=701122007 "even though international leaders are fearing a period of political chaos,"#> chaos is inevitable. From the point of view of Generational Dynamics, what's interesting about this whole thing is how it illustrates that differences across fault lines almost never seem to heal. I saw a feel-good news story a few days ago about two women, one Palestinian and one Israeli, who had gone on a diet together, and "learned that they had much more in common than they had thought." A while ago I saw a similar story about Israelis and Palestinians playing basketball together. The moral is that just a few more basketball games and diet programs, and all the differences will be resolved. Here in North America, it's been centuries since the invasions by Spain and France. European settlers have been intermarrying with indigenous peoples for all these centuries, and they all speak the same language. And yet, there's still <#inc ww2010.weblog.ref e070208 "a major simmering fault line between descendants of Europeans and indigenous people"#> (Aztecs and Mayans) in Mexico. The bloody Mexican Revolution of the 1910s was fought along that fault line, and the level of political conflict still exists today. A similar fault line between European and indigenous Amerindian peoples exists throughout Latin America. Although not as severe any more, the fault line between Europeans and native American Indians still exists today, and is maintained with Indian reservations. <#inc ww2010.pic g070325b.jpg right "" "June 2005: Jean-Claude Juncker, Tony Blair, Jacques Chirac"#> So, some fault lines eventually disappear, but many continue for centuries and even millennia, resulting in one crisis war after another. Generational Dynamics predicts that there'll be a new West European war, as has happened so many times in the last millennium, and it looks as if <#inc ww2010.weblog.ref e060704 "a component will be a new war between England and France."#> <#inc ww2010.pic merkel2.jpg left "" "German Chancellor Angela Merkel"#> The bitter feelings between the French and "Anglo-Saxon society" became apparent in June, 2005, at a bitter EU summit meeting, reminding everyone of the 1066 war when the Norman French conquered the Saxons in England. In March of this year, <#inc ww2010.weblog.ref e070325 "Europe commemorated its 50'th birthday,"#> but a renewal of the vitriolic arguments was prevented only by means of the feminine touch of Germany's Chancellor, Angela Merkel. So what does the fault line between the Scots and the English mean today? Assuming that the war between the Normans and the Saxons is re-fought once more, which side will Scotland be on? The sudden success of the Scottish National Party at least raises the question. =eod =// &&2 e070504 Israeli government in crisis after report on war with Hizbollah =data ww2010.weblog.y2007.e070504.head Israeli government in crisis after report on war with Hizbollah =data ww2010.weblog.y2007.e070504.keys israel, hizbollah, lebanon war, amir peretz, ehud olmert, winograd committee, william strauss, neil howe, fourth turning =data ww2010.weblog.y2007.e070504.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070504.date 4-May-07 =data ww2010.weblog.y2007.e070504.txt1 Tens of thousands rallied in Tel Aviv to call for Olmert's resignation. =data ww2010.weblog.y2007.e070504.txt2 <#inc ww2010.pic g070503.jpg right "" "Thousands rally in Tel Aviv to demand Olmert's resignation (Source: BBC)"#> Israeli Prime Minister Ehud Olmert refused to resign in defiance of tens of thousands of demonstrators in Tel Aviv on Thursday. According to one pundit I heard, a recent poll gives Olmert a 0% (zero percent) rating. President Bush doesn't know how well off he is. The <#stdurl http://news.bbc.co.uk/2/hi/middle_east/6621337.stm "demonstrators were calling for his resignation,"#> in the wake of the release of the "Winograd Committee Report" on Israel's conduct in last summer's war against Hizbollah in Lebanon. Actually, the major conclusions have been known for some time, and we <#inc ww2010.weblog.ref e061223 "described then in detail in December."#> In summary, Israel panicked and launched the Lebanon war within four hours, with no plan and no objectives. Here are <#stdurl http://www.jpost.com/servlet/Satellite?cid=1177591165908&pagename=JPost%2FJPArticle%2FShowFull "some of the conclusions of the report:"#>

"The decision to respond with an immediate, intensive military strike was not based on a detailed, comprehensive and authorized military plan, based on careful study of the complex characteristics of the Lebanon arena. A meticulous examination of these characteristics would have revealed the following: the ability to achieve military gains having significant political-international weight was limited; an Israeli military strike would inevitably lead to missiles fired at the Israeli civilian north; there was not other effective military response to such missile attacks than an extensive and prolonged ground operation to capture the areas from which the missiles were fired - which would have a high "cost" and which did not enjoy broad support. These difficulties were not explicitly raised with the political leaders before the decision to strike was taken.
Consequently, in making the decision to go to war, the government did not consider the whole range of options, including that of continuing the policy of 'containment', or combining political and diplomatic moves with military strikes below the 'escalation level', or military preparations without immediate military action -- so as to maintain for Israel the full range of responses to the abduction. This failure reflects weakness in strategic thinking, which derives the response to the event from a more comprehensive and encompassing picture.

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

The support in the cabinet for this move was gained in part through ambiguity in the presentation of goals and modes of operation, so that ministers with different or even contradictory attitudes could support it. The ministers voted for a vague decision, without understanding and knowing its nature and implications. They authorized to commence a military campaign without considering how to exit it.
Some of the declared goals of the war were not clear and could not be achieved, and in part were not achievable by the authorized modes of military action.

Once again, very interesting. As I've pointed out numerous times, politicians and journalists in Washington have no idea what's going on in the world. Politicians like Pelosi, Biden and others <#inc ww2010.weblog.ref e070429 "don't know that al-Qaeda is in Iraq,"#> don't know the difference between Sunni and Shia, or that al-Qaeda is a Sunni organization, don't know that the Darfur genocide is a civil war that began decades ago. New Republic senior editor <#inc ww2010.weblog.ref e070502 "Lawrence Kaplan finds that 'Congressional leaders are illiterate,'"#> that they're morons, they avoid learning anything, they make up any "facts" they want, and they couldn't care less what happens in Iraq, as long as they get votes. Journalists are the same. The consequence of this is that our politicians are completely unprepared for emergencies. It's as if you're on an airplane, everyone else passes out, and you have to fly the plane. You've spent your life bashing pilots, and you've fastidiously avoided learning anything that pilots do. So how do you fly the plane? You push a few levers and hope something works. That's what Olmert's government did.

"Even after these facts became known to the political leaders, they failed to adapt the military way of operation and its goals to the reality on the ground. On the contrary, declared goals were too ambitious, and it was publicly states that fighting will continue till they are achieved. But the authorized military operations did not enable their achievement."

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

"The Prime Minister made up his mind hastily, despite the fact that no detailed military plan was submitted to him and without asking for one. ... He made his decision without systematic consultation with others, especially outside the IDF [Israeli Defense Forces], despite not having experience in external-political and military affairs. ... All of these add up to a serious failure in exercising judgment, responsibility and prudence."

Today's senior generation of politicians and journalists have a feeling that things should take care of themselves automatically, because they always have. What they just don't understand is that it's the World War II survivors who took care of everything, and they're gone now. The survivors of World War II did great things -- they created the United Nations, World Bank, Green Revolution, World Health Organization, International Monetary Fund, and so forth. They created these organizations and managed them for decades with one purpose in mind: That their children and grandchildren would never have to go through anything so horrible as World War II. Now all those survivors are gone, and the people who are left behind don't know how to run those organizations. Olmert simply assumed that all he had to do was order the IDF to smash Hizbollah, and it would be done. What he never understood is that he would have to be the one to tell the IDF how to do it, just as Ariel Sharon, his predecessor, would have done. The report now turns to Israel's Defense Minister Amir Peretz:

"The Minister of Defense did not have knowledge or experience in military, political or governmental matters. He also did not have good knowledge of the basic principles of using military force to achieve political goals.
Despite these serious gaps, he made his decisions during this period without systemic consultations with experienced political and professional experts, including outside the security establishment. In addition, he did not give adequate weight to reservations expressed in the meetings he attended.

<#inc ww2010.pic g070223c.jpg right "" "Israel's Defense Minister Amir Peretz (right) looks through binoculars with the lens cap on. On the left is the army's new Chief of Staff, Lt. Gen. Gabi Ashkenazi. They're reviewing a military drill in the Golan Heights. (Source: msnbc.com)"#> I won't comment on this except to remind readers that in February I named <#inc ww2010.weblog.ref e070224 "Peretz as the idiot of the week."#> Look at this picture, and remember that this guy is the MINISTER OF DEFENSE. This is the guy who was running the war, and he's soooooooooooooooo stupid, he's afraid to tell anyone that he doesn't know how to remove the lens cap. How can this guy still be in office three months later??? Still, <#inc ww2010.weblog.ref e070429 "politicians like Senator Biden and journalists like Thomas Friedman"#> are just as stupid and incompetent as Amir Peretz, so why should we expect Israeli politicians to be any different? Here are some additional conclusions from the report:

"The IDF was not ready for this war. Among the many reasons for this we can mention a few: Some of the political and military elites in Israel have reached the conclusion that Israel is beyond the era of wars. It had enough military might and superiority to deter others from declaring war against her; these would also be sufficient to send a painful reminder to anyone who seemed to be undeterred; since Israel did not intend to initiate a war, the conclusion was that the main challenge facing the land forces would be low intensity asymmetrical conflicts.
Given these assumptions, the IDF did not need to be prepared for 'real' war. There was also no urgent need to update in a systematic and sophisticated way Israel's overall security strategy and to consider how to mobilize and combine all its resources and sources of strength - political, economic, social, military, spiritual. cultural and scientific - to address the totality of the challenges it faces."

This is the most frightening conclusion of all, because it applies so intensely to the United States. Recall that in our last Crisis era, our armed forces were totally unprepared for the attack on Pearl Harbor. We had plenty of aircraft to defend ourselves from the Japanese, but they remained on the ground, while their pilots were lounging in bed with their girlfriends. We had plenty of anti-aircraft weaponry on the ships, but the sailors who were supposed to be manning them were sleeping off last night's party. Incredibly, there was an experimental radar installation on Pearl that actually spotted the Japanese aircraft long before they arrived, but no one actually believed that it was possible, so the sightings were ignored. The result was the greatest disaster in American military history -- the loss of our entire Pacific fleet in the space of just a few hours. Today, could we afford to lose half our military capability to a surprise attack by China? Now we're headed for a massive war that China has been preparing for over ten years, with huge and increasing expenditures on missiles, submarines, aircraft, and other sophisticated military hardware specifically designed to defeat America. Just as Olmert was totally unprepared for Hizbollah's response, just as America was totally unprepared for the Pearl Harbor, I am not confident that our armed forces today are prepared for the inevitable attack by China. When Donald Rumsfeld was Secretary of Defense, he was restructuring the armed forces for the coming war with China. Rumsfeld was born in 1932, and he's seen all this before with Japan and Germany. He's well aware of the very real danger the country faces from an attack by China. But <#inc ww2010.weblog.ref e061108 "since Rumsfeld was replaced by Robert Gates,"#> I haven't heard anything more about the continuance of the restructuring. If our armed forces are not preparing the for the next war, then our nation is going to be as shocked as Israel was by last summer's war with Hizbollah. In trying to understand what's going on today, it's worthwhile to see what was predicted by William Strauss and Neil Howe, the fathers of modern generational theory. In their 1996 book, The Fourth Turning, they described the decade of the "Oh-Ohs," and how it would be different from what was "today" to them, the early 1990s, America's last Unraveling era. And as you read this, remember that they knew nothing of 9/11 at the time, so their description of the "early Oh-Ohs" really applies to today:

"The mood of the early Oh-Ohs will be much like today's except a lot more jittery. These will be years of the reality check, of worries about a looming national payback as Americans of all ages begin focusing on how poorly they and their government have prepared for the future. People will no longer deny that the Unraveling's individual empowerment has led to antisocial behavior and a dangerous degree of institutional decay. The harms (especially to youth) will now be perceived to have accumulated to such a grievous extent that truly fundamental change will be required to get the nation back on course. Today's talk about America's inability to mobilize except for emergencies -- what some call the "Pearl Harbor syndrome" -- will have become a tired cliché. More people will start rooting for something big to happen, something bad enough the shock the society out of its civic ennui. The political party in power will stress the ample good news and insist that things have never been better -- but the party out of power (and any niche group that senses it is losing the Culture Wars) will warn against, and show signs of welcoming, a catastrophe on the horizon. [Nothing fits this description more closely than the moronic worldwide focus on "global warming."] The late Unraveling mood will feel much the opposite of the [late 1950s]. Back then, institutions were at their point of maximum strength. Whether curing poverty or landing men on the moon, the nation's grandest conceptions felt entirely achievable. Yet circa-1960 Americans, in the shadow of their Establishment, were starting to chafe at the staleness of their culture. By the middle Oh-Ohs, institutions will reach a point of maximum weakness, individualism of maximum strength, and even the simplest public task will feel beyond the ability of government. As niche walls rise ever higher, people will complain endlessly about how bad all the other niches are. Wide chasms will separate rich from poor, whites from blacks, immigrants from native borns, seculars from born-agains, technophiles from technophobes. America will feel more tribal. Indeed, many will be asking whether fifty states and so many dozens of ethnic cultures make sense any more as a nation -- and, if they do, whether that nation has a future. In the early Oh-Ohs, institutions will seem hypercomplex and fastidiously interconnected at the periphery, but empty at the core. Individuals will feel exquisitely exempt from the day-to-day random vagaries of nature and civil authority, yet rawly vulnerable to the greatest disaster fate can mete out. With soft finger strokes from their home-based tech-centers, millions of people will be commanding pizza deliveries, masterminding financial transactions, and securing hard-disk secrets. But they will be acutely aware that the Unraveling era's "empowered invididual" survives on the flimsiest of foundations -- that, with just one tsunami, the whole archipelago of little human islands could sink into a sea of social chaos. The better the economy performs, the more people will feel they have to lose, and the worse will be the national case of nerves. ... People young and old will puzzle over what it felt like for their parents and grandparents, in a distantly remembered era, to have lived in a society and felt like one national community. They will yearn to recreate this, to put America back together again. But no one will know how. ... By the early Oh-Ohs, when the four generational archetypes fully occupy these life-cycle phases, they will be poised to assert new social roles. Their Unraveling-era behavior cannot and will not continue. The public mood will feel stale, used up, primed for something else. Americans will have had quite enough of glitz and roar, of celebrity circuses, of living as thugh there were no tomrrow. Forebodings will deepen, and spiritual currents will darken. Whether we realize it or not, we will be ready for a dramatic event to shock the nation out of its complacency and decay. The Fourth Turning will be at hand." [pp. 251-53]

This is what Strauss and Howe wrote in the early 1990s, and we see it happening today. Whether the subject is the stock market, the war in Iraq, or our relations with China, Americans are in a state of almost total denial. And like Israeli Prime Minister Olmert, Americans are going to be completely shocked and surprised what will happens. Unfortunately, the stakes are infinitely higher for us than they were for Israel last summer. That's why I keep telling everyone who reads this web site: Nobody can stop what's coming, but you can prepare for it. Treasure the time you have left, and use it to prepare yourself, your family, your community and your nation. =eod =// &&2 e070502 The Democrats are just as incompetent as the Republicans. =data ww2010.weblog.y2007.e070502.head The Democrats are just as incompetent as the Republicans. =data ww2010.weblog.y2007.e070502.keys new republic, joseph biden, nancy pelosi, harry reid, lawrence kaplan =data ww2010.weblog.y2007.e070502.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070502.date 2-May-07 =data ww2010.weblog.y2007.e070502.txt1 And now, "The New Republic" magazine says that they're stupid on purpose. =data ww2010.weblog.y2007.e070502.txt2 This year's Democratic-controlled Congress has spent four months looking exactly like last year's Republic-controlled Congress -- like a bunch of idiot clowns. A year ago, when the Republicans controlled Congress, I pointed out that <#inc ww2010.weblog.ref e060322 "the Congressional calendar was just 97 days for all of 2006,"#> because the Congress was going to do nothing. This year, the Democrats took control of Congress, and it's been nothing but a circus. It started out that the new Congress was so incompetent that <#inc ww2010.weblog.ref e070131 "they couldn't even vote themselves a pay raise."#> House leader Nancy Pelosi bragged that the Democrats would get more done in the first 100 hours than the Republicans had gotten done in all of 2006. They <#stdurl http://www.latimes.com/news/nationworld/politics/la-na-hundred7apr07,1,4920258,full.story?coll=la-news-politics-national "rushed six popular bills through the House"#> in what party leaders calculated was 42 hours, 13 minutes and 28 seconds. Those included a federal minimum wage increase, a cut in student loan interest rates, repeal of oil industry tax breaks, and lower Medicare drug prices. But it's a waste of time since those bills never had a real chance of getting through the Senate, and indeed they haven't. Instead, the Democrats spent over three months, arguing and screaming about one moronic "antiwar" provision after another. Finally, on Tuesday, Congress did <#stdurl http://www.voanews.com/english/2007-05-01-voa63.cfm "pass a bill"#> -- one that they knew that the President would veto immediately. It's worthwhile reminding everyone again just how paralyzed this country is -- as are most of the countries that fought in World War II. The survivors of World War II did great things -- they created the United Nations, World Bank, Green Revolution, World Health Organization, International Monetary Fund, and so forth. They created these organizations and managed them for decades with one purpose in mind: That their children and grandchildren would never have to go through anything so horrible as World War II. Now all those survivors are gone, and the people who are left behind -- mostly the Boomer generation -- don't know how to run those organizations. That's true at the international level, as well as at the national level. Boomers are almost completely incompetent at governing. Generation-Xers are even worse; they can't govern either, but they know that Boomers are incompetent, they hate Boomers and they make decisions by doing everything possible to make Boomers miserable. So this lethal combination is what's paralyzing the government. The Boomer Democrats and Republicans might theoretically be able to get something done cooperatively, but if you take a look around and see who are the most vocal people pushing Democrats to the loony left side, they all seem to be Xers. There aren't very many of them, but they've been pushing the Democrats to waste all this time on the "antiwar" bill, so the result is that nothing has gotten done. And now, the liberal, pro-Democratic opinion magazine, The New Republic, has published <#stdurl http://www.tnr.com/doc.mhtml?i=w070430&s=kaplan050107 "an article by senior editor Lawrence F. Kaplan"#> with the title "Congressional leaders are illiterate on Iraq." The article lists many of the things I've frequently mentioned, such as Nancy Pelosi and Harry Reid not knowing that al-Qaeda is operating in Iraq, and many, many more examples. But "you don't need to cherry-pick quotes to prove the point: Nearly every time a senator's mouth opens, something wrong comes out." But Kaplan goes a lot farther than I do. I merely say that they're stupid, with the implication that they don't have the time or ability to learn what's going on in the world. But Kaplan says that they say stupid things to get more votes, like Woody Woodpecker might say stupid things to get laughs.

"More than that, congressional leaders often seem loath even to hear about events on the ground. During General Petraeus's visit to Washington last week, for example, House Democrats at first denied the Iraq commander an opportunity to brief them, citing "scheduling conflicts." And, when he finally did brief Congress, the evidence of progress that Petraeus was expected to present was dismissed before he even offered it. ... But, then, expertise may be beside the point. Obliviousness, after all, has its uses. It comforts the sensibilities of politicians whose varying levels of awareness allow them to favor certain facts and not others. Obliviousness testifies to the virtue and good intentions of members of Congress who, in truth, couldn't care less what comes next in Iraq. It invites Americans to indulge in the conceit that what happens in Washington obviates the need to think seriously about what happens in Baghdad. Most of all, illiteracy makes for good politics. There is the conviction, to paraphrase McCain, that winning a war takes precedence over winning an election. But it isn't so clear that this conviction guides a partisan brawl in which the Senate majority leader can gush, "We're going to pick up Senate seats as a result of this war." In such an environment, the subordination of facts to politics inform matters small and large, from the relatively trivial question of whether U.S. troops still operate in Tal Afar to enormous questions regarding the future of the U.S. enterprise in Iraq. ... Where all this leads is clear. Piece together a string of demonstrably false "facts on the ground" from a suitably safe remove, and you're left with a scenario where we can walk away from Iraq without condition and regardless of consequence. You don't need to watch terrified Iraqis pleading for American forces to stay put in their neighborhoods. You don't need to read the latest National Intelligence Estimate on Iraq, which anticipates that a precipitous U.S. withdrawal will end in catastrophe. Why, in the serene conviction that things are the other way around, you don't even need to read at all. Chances are, your congressman doesn't either."

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

They're morons.
They go out of their way to avoid learning anything.
They make up any "facts" they want, since they don't know anything.
They couldn't care less what happens in Iraq. They just want votes.

Before today I wouldn't have put it this strongly, but this makes sense. When I wrote about what <#inc ww2010.weblog.ref e070429 "Senator Joe Biden said Sunday on Meet the Press,"#> what was remarkable was how Biden got everything wrong. I mean, everything. Everything he said was incredibly stupid. But now, thanks to Kaplan, we know that he's lying on purpose, because all he cares about is getting votes. But Kaplan's article is very self-serving, because he doesn't address the question about why journalists are so stupid. When Biden was saying one incredibly dumb thing after another in answer to Tim Russert's questions on Meet the Press, Russert never challenged him. Is that because Russert wants to help Democrats get votes? Are Russert and other journalists as purposely stupid as the politicians are? Do they avoid learning anything, so they can make up "facts" as they go along? Do they just want to get votes for Democrats? An even more glaring example occurred the previous Sunday, when <#inc ww2010.weblog.ref e070424 "New York Times columnist Thomas Friedman"#> showed himself to be just as stupid as Biden, and even implied that Biden was his soul-mate. Is Friedman purposely stupid too, so that he can make up "facts" as he goes along? I wish that Kaplan had addressed those questions as well. =eod =// &&2 e070501 Wall Street Journal describes "fears of reckoning" over use of credit =data ww2010.weblog.y2007.e070501.head Wall Street Journal describes "fears of reckoning" over use of credit =data ww2010.weblog.y2007.e070501.keys wall street journal, great depression, 1929, john kenneth galbraith, tulipomania, south sea bubble, panic of 1857, randall smith, susan pulliam, jacques brel, la valse à mille temps =data ww2010.weblog.y2007.e070501.loc ww2010.weblog.log0705 =data ww2010.weblog.y2007.e070501.date 1-May-07 =data ww2010.weblog.y2007.e070501.txt1 Comparing today to 1929, even the normally oblivious WSJ is sensing danger. =data ww2010.weblog.y2007.e070501.txt2 According to <#stdurl http://online.wsj.com/article/SB117789801972686591.html?mod=hps_us_pageone "a page one article by Randall Smith and Susan Pulliam,"#>

"Thanks to advances in financial engineering, investors have never had so many different ways to make commitments that exceed their bankrolls. And never before has leverage wormed its way into so many nooks of the financial world. We're living on planet leverage, and regulators and market gurus are growing nervous. How did this happen? For starters, hedge funds and leveraged-buyout funds have proliferated. They're pioneers in boosting returns using borrowed money, the most traditional form of leverage. Also, investment banks are pumping out newfangled leveraging tools such as derivatives, complex securities that allow hedge funds and other investors to add leverage without borrowing money. Finally, mainstream America has gotten into the act. Once-conservative institutions are copying hedge-fund tactics. The Pennsylvania State Employees' Retirement System has begun dabbling in derivatives. Mutual-fund companies such as Easton Vance Corp. and Federated Investors Inc. have launched funds that rely heavily on derivatives. Garden-products maker Scotts Miracle-Gro Co. and other public companies have loaded up on debt to improve returns."

What's being described today is the same manic credit debauchery that I've described many times. People today look back at <#inc ww2010.weblog.ref e070328 "the Tulipomania bubble of the 1630s,"#> when investors borrowed money to pay astronomical prices for tulips. And even worse, an investor would sell his home and tap his friends to pay an astronomical price in the fall for a certificate giving him the right to a certain tulip to be grown the following spring. When the tulip market crashed on February 3, 1637, investors lost everything. How could they have been so stupid as to think that the price of tulips would keep going up forever? Well, they're just as stupid today. I've been saying it for years, but now it's gotten so bad that even the Wall Street Journal is expressing concern in a front page article. We're seeing the same abuse of credit that was seen just before the crash of 1929, just before <#inc ww2010.weblog.ref e070328 "the 1637 crash of the Tulipomania bubble,"#> just before the South Sea bubble of the 1710s-20s, just before the bankruptcy of the French monarchy in the 1789, and just before <#inc ww2010.weblog.ref e070406 "the Panic of 1857."#> And notice this sentence in the first paragraph above: "And never before has leverage wormed its way into so many nooks of the financial world." This is an interesting sentence, because it captures part of the generational concept. Generational Dynamics does not analyze the attitudes and behaviors of one person or a group of politicians. Generational Dynamics analyzes the attitudes and behaviors of large masses of people, entire generations of people. The fact that leverage has "wormed its way into so many nooks of the financial world" makes it clear that what's going on today is not being caused by one crook or one category of financier. What's going on today is endemic, throughout the population, throughout the world. There is no fear today of borrowing, of credit, of unlimited credit. Let's read some more of the WSJ article to see how far the "leveraging binge" has progressed:

"This leveraging binge has regulators and others worried. In the first place, no one knows how much leverage there is. Much of it is hidden, because investors aren't just juicing returns with borrowed money, but with derivatives, which are harder for regulators to track. No one is sure what will happen to this complex brew in the event of a serious market downturn. When markets turn bad, leverage can create a snowball effect. Lenders and derivatives dealers demand that investors provide them with more collateral -- the stocks, cash or other assets they pledge to cover potential losses. Sometimes, investors dump stocks and bonds to raise cash. Prices drop more, losses accelerate, and more selling ensues. Some Wall Street analysts have taken to referring to a nightmare version of this scenario as "The Great Unwind."

That's where the mania is today. It's not just borrowed money that's messed up; it's the interlocking use of derivatives, using one kind of overpriced derivative as collateral to pay for more overpriced derivatives. As bad as it is in America, it's much, much worse in China, where they don't have the vaguest idea what's going to hit them. "College students are putting their tuition money into the market...stroke-stricken retirees get wheeled into branches of securities firms to trade." This is <#stdurl http://www.reuters.com/article/reutersEdge/idUSSIN15117620070430?src=043007_0748_INVESTING_comment_n_analysis "from star economist Andy Xie, formerly of Morgan Stanley investment firm,"#> in warning of a coming crash in China. (This shows why well-known economists can't tell the truth even if they know it -- they get fired. Fortunately, you have me, dear reader, because I'll never fire myself.) We're at the height of the bubble mania, as I discussed in <#inc ww2010.weblog.ref e070320 "my article based on research by Harvard economist Robert J. Barro."#> It's a giant <#inc ww2010.weblog.ref e061230 "worldwide pyramid scheme (or Ponzi scheme),"#> and every pyramid scheme must come to an end. Compare this to what John Kenneth Galbraith describes in his 1954 book, The Great Crash - 1929:

"[The] amount of speculation was rising very fast in 1928. Early in the twenties the volume of brokers' loans -- because of their liquidity they are often referred to as call loans or loans in the call market -- varied from a billion to a billion and a half dollars. ... Brokers' loans reached four billion on the first of June 1928, five billion on the first of November, and by the end of the year they were well along to six billion. Never had there been anything like it before. ... People were swarming to buy stocks on margin -- in other words, to have the increase in price without the costs of ownership. This cost was being assumed, in the first instance, by the New York banks, but they, in turn, were rapidly becoming the agents for lenders the country over the and even the world around. There is no mystery as to why so many wished to lend so much in New York. One of the paradoxes of speculation in securities is that the loans that underwrite it are among the safest of all investments. They are protected by stocks which under all ordinary circumstances are instantly salable, and by a cash margin as well. The money, as noted, can be retrieved on demand. ... However, there were many ways of making money in 1928. Never had there been a better time to get rich, and people knew it. 1928, indeed, was the last year in which Americans were buoyant, uninhibited, and utterly happy. It wasn't that 1928 was too good to last; it was only that it didn't last. [pp. 20-22]"

The WSJ article compares leveraging in 1929 to leveraging today:

"America has been a nation of debtors for years. Prior to the 1929 stock-market crash, brokers allowed customers to buy stocks with as much as 90% borrowed money -- called margin debt. When the market began sliding, investors had to dump shares to keep their debt levels below 90%, igniting market panic. Nowadays, the SEC limits margin borrowing by most investors to 50% of a stock's purchase price. ... But those limits don't apply to all of the derivatives and other financial instruments that now pack the portfolios of hedge funds and other big investors. Estimates by analysts of leverage at major securities firms, borrowing by hedge funds and margin loans to individuals added up to $4.9 trillion in 2006, compared with $1.8 trillion in 2002. Hedge-fund borrowing and other financing tools were valued at $1.46 trillion last year, up from $177 billion in 2002, according to estimates by Bridgewater Associates Inc., a Westport, Conn., hedge-fund company."

Galbraith's book also provides the response to those nutcakes who still think that the wide use of hedge funds and derivatives will save the market because they'll spread the risk so that people will only get hurt a little. In fact, former Fed Chairman Alan Greenspan often spoke of how great derivatives are, because they spread the risk. What we're going to see is that hedge funds and derivatives and will make things MUCH worse. In 1929, the instrument corresponding to hedge funds was the "investment trust." Here's how Galbraith describes what happened to them:

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

This kind of chain reaction continued. Thus, said Galbraith, "The great investment trust boom had ended in a unique manifestation of Gresham's Law in which the bad stocks were driving out the good." Warren Buffett says that leveraging in derivative trading today "makes a mockery of margin requirements," and that it the leverage that preceded the 1929 crash "look like a Sunday-school picnic," according to the article. =inc ww2010.h2 valse "La Valse à Mille Temps" Writing for this web site for five years has made me acutely aware of the utter craziness going on, as the world appears increasingly to be spinning out of control. And I even mean "spinning" literally, in the sense that leveraging goes around in circles, with investors using hedge fund A as collateral for B, and another investor uses B as collateral for A. In the end they're both worth nothing. Last year I suggested a comparison to the Jacques Brel song "La Valse à Mille Temps" or "Carousel" in the English version. Play <#stdurl http://www.generationaldynamics.com/ww2010/carousel.mp3 "the MP3 version of the song"#> and sing along:

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

I nominate "La Valse à Mille Temps" as the theme song for these times, as the crazy carousel goes spinning out of control, and we head for the greatest financial disaster in the history of the world. LAH luh LAH luh. =eod =// &&2 e070429 Senator Joe Biden wants to move troops from Iraq to Darfur civil war =data ww2010.weblog.y2007.e070429.head Senator Joe Biden wants to move troops from Iraq to Darfur civil war =data ww2010.weblog.y2007.e070429.keys iraq war, darfur war, joseph biden, meet the press, tim russert, bosnian war =data ww2010.weblog.y2007.e070429.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070429.date 29-Apr-07 =data ww2010.weblog.y2007.e070429.txt1 Saying on Meet the Press that we should remove troops from Iraqi "civil war," =data ww2010.weblog.y2007.e070429.txt2 the Delaware Democrat strongly criticized President Bush for continuing to be involved in Iraq, but for not getting involved Darfur. Biden is chairman of the Senate Foreign Relations Committee and is running for President. <#inc ww2010.pic g070429.jpg right "" "Joe Biden on Meet the Press (Source: NBC)"#> Biden repeatedly told <#stdurl http://www.msnbc.msn.com/id/3898804/ "Tim Russert on Meet the Press"#> that the Iraq war was a civil war. Here's how he put it, at first describing the bill that just passed in the Senate:

"[The bill says] Mr. President, you've got to start moving combat troops out of harm's way now. The whole function of this is to try to get this president to change his strategy here. He operates on the premise that if we put enough troops in the middle of a civil war, we can give breathing room to a group of people in Baghdad to get together and form a strong central government that's a democracy. That will not happen in your lifetime and mine. I said that four years ago, I say it now. The only rational purpose for troops in Iraq now - train Iraqis prevent al-Qaeda from occupying large chunks of territory, and we should begin to decentralize the government. That's the underlying essence of what the language in this bill is about. It says though start now to redeploy and have as a target to get out by April 1 the bulk of your combat troops. I strongly subscribe to that view. ... We're trying to fundamentally change what this President is using our forces for. He's in the midst of a civil war, with the flawed objective of establishing a strong central government. That will not happen. And we have an obligation to push back as much and as often and as thoroughly as we can. [Russert said that Biden had repeatedly changed his mind.] The problem here is this is also a moving target. I also called for more troops in Iraq. I called for more troops on this program a couple of years ago. That was in order to stop a civil war. Once the civil war began, I was on the program after that, saying, all the troops in the world cannot settle a civil war."

OK, that's what he said at the beginning of the interview. Here's what he said later in the interview:

"The conduct of this war has so badly damaged our readiness; the conduct of this war and the blood and resources we've had to expend has limited our credibility around the world, and limited our flexibility in terms of the use of force. Here we are - we could end the carnage in Darfur tomorrow."

This is hardly the first time that Joe Biden has called for an invasion of Sudan's Darfur region. Here are excerpts from <#stdurl http://www.msnbc.msn.com/id/18059937/ "a news story from April 11:"#>

"Biden calls for military force in Darfur 'I think it's time to put force on the table and use it' WASHINGTON - Joseph Biden, chairman of the Senate Foreign Relations Committee and a Democratic presidential candidate, called Wednesday for the use of military force to end the suffering in Darfur. "I would use American force now," Biden said at a hearing before his committee. "I think it's not only time not to take force off the table. I think it's time to put force on the table and use it." In advocating use of military force, Biden said senior U.S. military officials in Europe told him that 2,500 U.S. troops could "radically change the situation on the ground now." "Let's stop the bleeding," Biden said. "I think it's a moral imperative." Under U.N.-backed agreements approved last fall, a hybrid force of 22,000 African Union and U.N. peacekeepers are to be deployed in Darfur to protect and provide relief for 2.5 million Darfurians who have been forced from their homes and are now confined to camps. "We must set a hard deadline for Khartoum to accept a hybrid U.N.-AU force," Biden said."

Now, let's see. Biden calls Bush "incompetent" because he sent too few troops into Iraq in 2003, but now he wants to send just 2,500 US troops into Darfur to stop a civil war against 2.5 million Darfurians, even though the United Nations had called for at least 22,000 troops. He says over and over and over things like, "All the troops in the world cannot settle a civil war," and now he's criticizing Bush for not trying to settle the Darfur civil war with 2500 troops. You know, dear reader, I realize that I get criticized for calling these people "idiots," but I just can't help but express my sheer contempt for people like this. Is he just lying, and knows that what' he's saying is crap? That's quite possible - after all, he IS a politician. But let's suppose that he actually believes what he's saying. Biden certainly doesn't know what's going on in Iraq. We know from <#inc ww2010.weblog.ref e070114b "articles in the Congressional Quarterly"#> that Washington journalists, analysts and politicians have no idea what's going on in Iraq. They don't know the differences between Sunni and Shi'ite, they don't know that al-Qaeda is operating in Iraq, and they don't know that al-Qaeda is a Sunni organization. So Biden is just one of the mob in that regard. The mob in Washington, including Biden, are also unaware that the Darfur genocide is a civil war, that began in the 1970s between farmers and camel herders, escalated slowly during the 1980s and 1990s, and became a genocidal crisis civil war in the early 2000s. The Washington politicians and journalists know even less about Darfur than they know about Iraq, and we know from the Congressional Quarterly articles that they know nothing about Iraq. From the point of view of Generational Dynamics, putting American troops into the middle of the Darfur civil war would be a total disaster for America. This is a real crisis civil war, in fact the only generational crisis war going on in the world today (though the <#inc ww2010.weblog.ref e070326 "Sri Lanka civil war will be there soon"#> ). In 2004, when the Darfur situation first gained international focus, I wrote that <#inc ww2010.weblog.ref e040628 "the U.N. is completely irrelevant to the Darfur genocide,"#> and that it would not be stopped until it's run its course. That has continued true to this day. The <#inc ww2010.weblog.ref e061211 "genocide has gotten worse,"#> and has even spread into neighboring countries Chad and Central African Republic. On the other hand, the Iraq war is NOT a civil war, as <#inc ww2010.weblog.ref e070402 "I've written many times,"#> and described in <#hreftext ww2010.i.iraq070401 "a lengthy analysis of the current situation in Iraq."#> Those <#inc ww2010.weblog.ref e070424 "car and truck bombs"#> that lead the news every day are the work of al-Qaeda, and the suicide bombers themselves are all foreigners (Saudi and Jordanian), almost without exception. So Senator Biden wants to remove all our troops from Iraq, which is NOT having a civil war, and allow the invading al-Qaeda force to take complete control of the country, or at least of Anbar province in the West. And he wants to move the troops into Darfur, where there IS a genocidal civil war going on, with millions of people on both sides. You know, Tim Russert could have asked Biden why he wants to move the troops out of Iraq into the civil war in Darfur. That's certainly the question I would have asked, if I had been interviewing Senator Biden. But he didn't, and that's because Russert doesn't know what's going on in the world either. In the Sunday interview on Meet the Press, Biden kept babbling about a "strong centralized government," which he said was impossible in Iraq. Thus his proposal is to partition Iraq into three autonomous regions, the west for the Sunnis (Anbar province for al-Qaeda), the south for the Shia, and the north for the Kurds, a proposal of monumental stupidity, as I wrote about last week in <#inc ww2010.weblog.ref e070424 "my article about Biden's soulmate, NY Times columnist Thomas Friedman."#> It is worth mentioning again that Biden's proposal is COMPLETELY anti-historical. Biden talks about "going back in history," but by that he means three or four years. If you go back a little further to Iraq's crisis wars, then you find something quite different. In the 1920s-30s, in <#inc ww2010.weblog.ref e070202b "the aftermath of the Great Iraqi Revolution of 1920,"#> you find that Iraqis put their Iraqi identity ahead of the sectarian religious identities. Next, in the Iran/Iraq war of the 1980s, all Iraqis, including the Shi'ites, fought on the side of Iraq, and did not join with Iran. But here's what Biden said on Sunday about getting to a partition of Iraq:

"What this is about is we have lost 3300 dead, we have 24000 wounded, and we still have an opportunity to deal with the possiblity of not trading the dictator for chaos, but it will not happen unless we have a serious change in our operating strategic premise. And that is we have to decentralize, not centralize this government. We've got to get the world community in on owning part of this, by calling an international conference to put pressure on the regional powers. If we don't do those two things, I don't see a happy ending to this whole undertaking. We may be forced into a position where there's no option, at some point, to withdraw and try to contain the chaos."

Now all of this is total guesswork by Biden, who is completely clueless about what's going on today, let alone what might happen in the future. But this remark shows that his ignorance is truly cavernous, because the "international conference" he's talking about is already scheduled. There is <#stdurl http://www.alertnet.org/thenews/newsdesk/YAT970549.htm "an international security conference on Iraq on May 3-4,"#> to be held in Egypt. The big news on Saturday is that Iran is going to attend this conference, where previously they had refused. While Joe Biden was talking on Meet the Press, U.S. Secretary of State Condoleezza Rice was on the other Sunday talk shows answering questions about this very conference. Now, how stupid is Joe Biden, when he calls for an international conference when Condoleezza Rice and Iraqi authorities had already set one up for next week? You see what I mean when I say Biden is a moron? And, of course, Tim Russert might have challenged Biden at that point. "Why, Senator Biden, are you not mentioning the international conference that's already scheduled in Egypt next week?" But probably Russert doesn't know about it either. One more point: If an international conference is such a great idea, why didn't he propose one for Darfur, instead of wanting to have the U.S. invade Sudan? Well actually, there have been international conferences in Darfur -- in the United Nations Security Council -- and they've been a total waste of time. If international conferences don't work in Darfur, why on earth does Biden's tortured logic propose one for Iraq? Really, this guy makes "stupid" a compliment. I'm sorry, I'm just so contemptous of people like Joe Biden and Tim Russert. These are supposed to be our nation's leaders, and every time I see them, it sickens me how pathetically ignorant they are of even the simplest facts about the world. Here's another of Biden's concepts, as he explained it to Tim Russert:

"[President Bush] is in the midst of a civil war, with the flawed objective of establishing a strong central government. That will not happen. ... There's never been a time in history that I can think of where there's been a self-sustaining cycle of sectarian violence, that has ended even remotely reasonably without a federated system. Never."

He delivered the last sentence with special emphasis and sternness. I don't know what he's talking about -- and neither does he -- but the American Civil War was finally settled with a strong central government. The Cambodian civil war in the 1970s and the Rwanda civil war in 1994 were also settled with a strong central government. I think Biden was just babbling random words. Let's address one more of Joe Biden's topics, because it raises some interesting theoretical issues:

"You know what happened in the Balkans. Once there was a political agreement reached as to the separation of the parties, from Brcko [pronounced Birchko] to Sarajevo to Srebrenica, there was an incredible diminution in the internecine warfare. Why? Because in the context of an overall political settlement. What this is all about is manoeuvering -- each of these groups -- to determine who is going to call the shots."

Now, Biden's words are total nonsense, and he has no idea what he's talking about, but even Donald Duck occasionally quacks something out that raises some interesting theoretical issues. The comparison of the Iraq war to the Vietnam war has been troublesome to the Democrats, because after the Americans evacuated Saigon, there was a massive genocidal civil war in "the killing fields of Cambodia" that killed millions of people. The Democrats seem to realize that a similar outcome in the Mideast would be disastrous, so Biden is presenting a different comparison: He saying that we should set up an international conference, like the one we set up in Dayton, Ohio, in 1995, at the end of the Bosnian war. After that, as he points out, things settled down. Let's discuss the theoretical factors affecting his proposal in the Vietnam War, the Bosnian War, the Darfur war and the Iraq war:

The Bosnian War. The Dayton conference was set up at the end of the war, after four years of genocidal crisis warfare, including <#inc ww2010.weblog.ref e070227 "the Srebrenica massacre,"#> and after the intervention of the Nato forces. At this point, the genocidal war had run its course, and would have settled down even without any international crisis. From the point of view of Generational Dynamics, I sometimes compare a crisis war to a ball rolling down a hill. A war may begin with years or even decades of low level violence -- occasional terrorist acts or police actions, but general restraint on both sides. In the analogy, the ball might start out very slowly, going back and forth, perhaps getting stuck in the tall grass. Soon it starts to pick up speed, going faster and faster, gathering momentum. Once it has enough momentum, it can't be stopped by any human force. Finally it reaches the bottom in a massive explosion. In the case of a crisis war, it starts out slowly, and becomes increasingly violent as time goes on, ending in a massive genocidal explosion. In generational theory, the point where the ball has too much momentum to be stopped is called the "regeneracy." In the case of a war, this is the point where the society turns away from political bickering and unites against the enemy. The society has literally been "regenerated" as a unified society, and at that point cannot be stopped. But once the explosive climax has been reached and passed, a new phase begins, and the society enters a "recovery" phase. The survivors of the war vow that they'll never let anything so horrible ever happen again, and they set up institutions and define austere rules to guarantee it. In the case of the Bosnian war, the Dayton conference was part of the Recovery phase. This succeeds as long as the survivors are still alive; after the survivors have all been replaced by younger generations born after the war, a new crisis war can begin.
The Darfur War. The Darfur war is still raging in full genocidal fury. The ball is still rolling down the hill, and increasing in speed. No human force can stop that ball, or the Darfur war, today. The Darfur war is headed for some explosive conclusion that cannot yet be predicted. No international conference, or any sort of negotiation or mediation, will have any effect until that explosive conclusion is reached.
The Vietnam War. At the time that America evacuated Saigon, the crisis civil war in Vietnam had not yet ended, and the crisis war in Cambodia had just barely begun. One explosive conclusion occurred in Vietnam, as the North Vietnamese poured into Saigon and purged the South Vietnamese; and a separate explosive conclusion occurred in Cambodia, as millions of people were slaughtered. The American armed forced could never have prevented those conclusions, and no international conference would have had any effect.
The Iraq War. The Iraq war is NOT a crisis war, so the above considerations do not apply. The Iraqi people are in a generational Awakening era, and have no desire for war. An international conference could very well work. However, Iraq is being invaded by foreign forces -- al-Qaeda -- a force that is coming from countries, especially Saudi Arabia, Pakistan and Jordan -- that are in full generational Crisis mode. So some regional neighbors might be willing to help stabilize the region, but al-Qaeda will never do so. Any international conference will be considered a sign of weakness by al-Qaeda, and in any event they will continue their program to destabilize Iraq, and bring war to the entire Mideast.

I've been saying for years that, despite the nonsense going on in the clown circus Congress today by Biden and others, my expectation is that American forces will be in Iraq until the Clash of Civilizations world war begins, at which time they may be forced to leave because they'll be needed elsewhere. Once that happens, Darfur-type genocides will be the norm, rather than the exception. =eod =// &&2 e070428 Ethnic Russians rioting in Estonia after Soviet statue was moved =data ww2010.weblog.y2007.e070428.head Ethnic Russians rioting in Estonia after Soviet statue was moved =data ww2010.weblog.y2007.e070428.keys russia, estonia, talinn, soviet statue, nazi sympathizers, george's night uprising, livonian war, great northern war, bolshevik revolution =data ww2010.weblog.y2007.e070428.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070428.date 28-Apr-07 =data ww2010.weblog.y2007.e070428.txt1 Some of the harshest World War II memories are being stirred, =data ww2010.weblog.y2007.e070428.txt2 thanks to an Estonian government decision to move a controversial statue that honors Soviet soldiers who defeated the Nazis. <#inc ww2010.pic g070428.jpg right "" "The Talinn statue depicts a tired Russian soldier returning home after defeating the Nazis. (Source: BBC)"#> The riots began on Thursday evening in the capital city Talinn, where the statue is located, and spread to other Estonian cities on Friday evening. There were hundreds of injuries, and dozens of ethnic Russians have been arrested. The statue was located near a busy intersection in the heart of Talinn, and has created a public order problem, according to Estonian officials, because it is <#stdurl http://euronews.net/index.php?page=info&article=419417&lng=1 "flash point between Estonian and Russian nationalists."#> The plan is to move the statue to a military cemetary on the outskirts of the city, and also to dig up and move the graves of Russian soldiers buried near the statue. The statue was moved to an undisclosed location in the middle of the night on Friday morning. Estonia was the "Estonian Soviet Socialist Republic" until 1991, when it gained independence from the Soviet Union. Ethnic Russians, which make up 25% of the population, have complained about discrimination since then, and conflicts between Estonians and Russians have been increasing. At the same time, relations between Estonia and Russia have been getting less cordial. Today, Estonia is part of the European Union, and relations between Russia and the EU have been getting less cordial as well. Estonians as a distinct ethnic group have existed for millennia, but they have been surrounded by hostile powers. Denmark took control with the Battle of Lyndanisse in 1219, and shared control with the Germans, reducing the Estonians to serfs. From the Estonian point of view, the seminal battle of the last millennium was <#stdurl http://en.wikipedia.org/wiki/St._George%27s_Night_Uprising "St. George's Night Uprising, occurring on April 23, 1343."#> In this genocidal crisis war, Estonian peasants killed thousands of Germans, their masters and landlords. However, the Germans reestablished control by 1346. <#inc ww2010.pic estonia1.jpg left "" "Estonia - Ethnic Estonians have been surrounded by hostile powers for their entire history"#> The Livonian War in 1561 gave control of Estonia to Sweden. The Great Northern War of 1721 imposed Russian rule on Estonia. In the mid to late 1800s, an Estonian nationalism developed, and the Republic of Estonia was proclaimed on February 24, 1918, after the Bolshevik Revolution ended Tsarist Russia. The period that's being relived today began in 1940, when <#stdurl http://lcweb2.loc.gov/frd/cs/eetoc.html#ee0013 "Josef Stalin's Red Army reoccupied Estonia in June 1940, and made it part of the Soviet Union."#> On a one-night operation, June 13-14, 1941, thousands of Estonians, mostly women and children, were deported to Siberia, while tens of thousands of men were forcibly relocated to Russia to fight in the army. This period of bloody Soviet rule left a deep mark on the Estonians, and so the German Nazis who invaded later in 1941 were greeted as liberators. The Nazis were just as brutal as the Soviets, but when the Red Army returned in September, 1944, some 70,000 Estonians fled the country, and formed a diaspora throughout Europe and North America. After the war, Stalin's Soviet brutality continued as before the war. Estonia remained under Soviet control until the days of the "Riga Barricades" in 1991. Soviet tanks and paratroopers first killed protesters in Vilnius, the capital of Lithuania, and then in Riga, the capital of Latvia, after the people had built concrete barricades all around Riga to stop the Soviet army. In the end, as the Soviet Union collapsed, the three Baltic states became independent nations. Today, as Estonia is well into a new generational Crisis era, it is haunted by ghosts of "Nazi sympathizers" who opposed the Soviets, and a substantial Russian minority, mainly descendants of Russians whom Stalin had forced to relocate to Estonia after the war, and who consider themselves to be victims as well. From the point of view of Generational Dynamics, this is a familiar fault line situation that leads to a new genocidal crisis war. In fact, there is a similar fault line between ethnic Russians and natives of other former Soviet satellite countries, including Ukraine, Georgia, Tajikistan and Kazakhstan. Generational Dynamics predicts that, in this region of the world, these will all be important fault lines in the Clash of Civilizations world war. =eod =// &&2 e070426 China's economy grows at 11.1%, continues to explode =data ww2010.weblog.y2007.e070426.head China's economy grows at 11.1%, continues to explode =data ww2010.weblog.y2007.e070426.keys china, stock market bubble, shanghai stock market =data ww2010.weblog.y2007.e070426.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070426.date 26-Apr-07 =data ww2010.weblog.y2007.e070426.txt1 And champagne corks pop once more, as the Dow tops 13,000. =data ww2010.weblog.y2007.e070426.txt2 If you even heard this story last week, you probably thought it was "good news": <#stdurl http://www.voanews.com/english/2007-04-19-voa21.cfm "China's economy grew at an annual rate of 11.1% last quarter."#> The reason that even Chinese officials are expressing dismay at this figure is because it represents a total failure to slow down the overheated economy. The extremely high growth figure doesn't represent real growth of Chinese industries. Instead, it represents pumped up liquidity and an increasingly credit-based economy, just like in the United States. China's economy has been growing at near 10% annual for an extraordinarily long time -- since the early 1980s -- but for almost five years now, China's leaders have become alarmed that the growth has been too fast, and has created severe imbalances. And yet, China's attempts to slow down its economy have been a total failure. China's growth not only has not been slowing down -- <#stdurl http://www.morganstanley.com/views/gef/archive/2007/20070420-Fri.html#anchor4770 "it's been accelerating"#> -- from 9.5% in 2004 to 9.9% in 2005, 10.7% in 2006, and now to 11.1% in the first quarter of 2007. Recall that in March, <#inc ww2010.weblog.ref e070322 "Chinese premier Wen Jiabao"#> said that China is "unsteady, unbalanced, uncoordinated and unsustainable." The overheated economy is one of the principal reasons. Stephen Roach, the chief economist at Morgan Stanley, who is well-liked by the Chinese, and who <#stdurl http://www.chinadaily.com.cn/bizchina/2007-04/24/content_858336.htm "was just promoted to be Morgan Stanley's Asia chairman,"#> was evidently really shocked by the new growth figures. Here's what <#stdurl http://www.morganstanley.com/views/gef/archive/2007/20070122-Mon.html#anchor4277 "Roach wrote in January:"#>

"At the same time, I also believe that China is serious in its current cooling-off campaign. I expect it to be surprisingly successful in slowing down an overheated -- and commodity-intensive -- investment sector. If I’m right, that could prove to have far more challenging implications for the demand side of the commodity super-cycle than most expect."

And now, here's what <#stdurl http://www.morganstanley.com/views/gef/archive/2007/20070420-Fri.html#anchor4770 "he wrote last week:"#>

"For those of us who have been steadfast in our optimism on China, the blistering first-quarter GDP report throws down the gauntlet. The government has no choice but to move quickly and aggressively to rein in the excesses of this white-hot economy. To stay bullish on China – and that remains my view – policy makers must do a much better job in establishing traction with both the bank lending cycle and the real economy. China has no other choice. ... In the aftermath of this blistering 1Q07 GDP report, there is considerable focus in the markets on a new round of monetary tightening that will be needed to bring the Chinese economy back under greater control. While I have no doubt that additional actions will be taken by China’s central bank, I continue to believe that such moves are largely window dressing for a still blended economy. Fueled mainly by the combination of excessive bank lending and internal cash flow, China’s runaway investment boom has not responded to repeated tightening actions by the monetary authorities. That’s certainly not for any lack of trying. During the past year, bank reserve ratios have been increased seven times while domestic lending rates have been hiked four times. But these actions haven’t put a dent in bank lending growth, which was still surging at a 16% y-o-y rate in March 2007. ... As is typically the case in this still-blended economy, the real tightening is likely to come in the form of administrative edicts issued by the modern-day counterpart of China’s central planning agency – the National Development and Reform Commission (NDRC). By setting stringent criteria for project approval on a case-by-case basis, the NDRC has both the clout and the tools needed to exercise much tighter control over the investment process. I had expected a new round of administrative actions to be unveiled around midyear – tied to increasingly stringent requirements on energy consumption and greenhouse emissions. But in the aftermath of the blistering first-quarter GDP report, I now believe that the next series of administrative edicts will be announced sooner than that, followed by additional actions on energy conservation and pollution. The longer China waits, the harder it will be to strop its rapidly moving investment train. From where I sit, the Chinese government has no choice other than to up the ante on tightening and macro control."

In essence, Roach is saying this: China has totally failed to slow down the economy using standard macroeconomic controls. Now what China has to do is assume full dictatorial controls as in the days of Mao Zedong, and force businesses to do as their told, or be locked up for 20 years. No wonder the Chinese love Roach. The problem is that it won't work. From the point of view of Generational Dynamics, China's economy has increasingly been in an unraveling bubble. The cause is generational -- large masses of people are abusing credit because their generation has no memory of the last financial crisis, in the early 1930s. And Communist nations are just as subject to generational cycles as capitalist nations are. It's certainly ironic that China today suffers from exactly the same list of complaints that Karl Marx claimed only happened to capitalist nations: sharp class distinctions with the wealthy élite class exploiting the poverty-stricken lower class; vulnerability to business cycles; and a restive peasant class on the verge of total rebellion. Whenever I talk about China, I always have the temptation to scream, "Workers of China, unite!! You have nothing to lose but your chains!" There's more to the unraveling of the Chinese economy than just GDP growth. Recall that on February 26, <#inc ww2010.weblog.ref e070226 "I posted an article"#> describing that the Shanghai stock market bubble appeared close to bursting. Manic Chinese day-traders would sell their homes and borrow money to invest in the stock market. Then the Shanghai stock market fell 8.8% in one day, causing <#inc ww2010.weblog.ref e070227c "a brief worldwide panic."#> Well, the Chinese learned nothing from that experience. The Shanghai market has recovered that loss, and Chinese investors have returned to full-scale mania. Get these figures, as <#stdurl http://english.people.com.cn/200704/23/eng20070423_368863.html " reported by China Daily:"#>

Chinese citizens have 90 million stock trading accounts. This number is 7% of China's population.
They opened 11.7 million new stock market accounts so far this year, more than double the number for 2006.
Last week on one day (Thursday) alone, 634,000 new accounts were opened.
Manic investors keep pushing stock prices up, to increasingly now bubble highs.
The average price/earnings ratios of Chinese stocks is around 40 -- much higher than for other stock markets.

My view is that China's investors are much more manic than America's investors. The news about China's first quarter growth is stunning, though few people seem to realize it. This represents a total failure of China's macroeconomic policy, since they've been trying for years to bring down the growth rate to 7% in a so-called "soft landing." They've failed year after year, and the situation is getting worse, with more and more dislocations and worse imbalances. The Beijing government knows that things are going wrong, and they're getting increasingly desperate to change things, but they can't. Even so, I don't believe that the Chinese have even the vaguest idea what's coming. In America, we had the 1930s Depression, and even though most people believe it can't happen again, at least there are small minority that know it's coming. But in China, as far as I can tell, they don't have any idea at all what's going to hit them. They did have a financial crisis in the early 1930s, but it wasn't at the scale of the Great Depression, and anyway they blame the Great Depression on the evils of capitalism, while their managed Communist economy is presumably immune to it. And as I said, they learned nothing from the Shanghai collapse on February 27. It's going to be a huge and disastrous shock to them when it happens. My personal belief is that the most likely trigger of the coming world financial crisis will be triggered not by Wall Street but by China. One of the questions that web site readers ask me most often is this: "You're predicting a worldwide financial crisis, but you never give a precise date, and so you can always say that it's still coming. That way, you're never wrong." This is a fair question. I've answered it before, but the China situation gives me a perfect opportunity to answer it again. The prediction of a worldwide panic and financial crisis is not the only prediction I've made. Implicitly or explicitly, I've made many other predictions that can be verified on an almost daily basis. These other predictions have to do with the values of trend variables. I've shown that <#hreftext ww2010.i.050711eleven "the stock market is far overpriced by historical standards,"#> using both exponential growth forecasting methods and mean reversion techniques with price/earnings ratios. Wednesday's rise to above Dow 13,000 is not good news, because it makes the stock market more overpriced than ever, with the result that the stock market is now <#hreftext ww2010.i.djia "overpriced by a factor of 252%."#> (Dow 13089.89 = 252% long-term trend value, 5193.) At the peak of the stock market prior to the crash of 1929, the stock market was overpriced by a factor of 255%. I've shown that other trend variables -- exponential growth of credit usage, exponential growth of trade deficit, exponential growth of hedge funds and derivatives -- show no signs of leveling off. The point is that mainstream macroeconomic theory has predicted that all of these trend values should have corrected themselves years ago. Instead, they keep getting worse. If any of them started improving as mainstream macroeconomics says they should, then it would be possible to claim that I and Generational Dynamics are wrong. But it never happens. This is the proof that we're headed for a financial crisis: That as long as these trend variables are growing exponentially, with no sign of leveling off and getting better, then a financial disaster is inevitable. And then by comparing today's abuse of credit with similar situations just before the crash of 1929, just before <#inc ww2010.weblog.ref e070328 "the 1637 crash of the Tulipomania bubble"#> and just before <#inc ww2010.weblog.ref e070406 "the Panic of 1857."#> Based on these historical comparisons, I can credibly make the claim that we're headed for a crash, and it's going to happen sooner rather than later. This new situation with China provides me with one more example. The best macroeconomic experts in the world are available to help China. But they've failed repeatedly to achieve anything. Even though they've applied macroeconomic controls to slow the economy down, it keeps speeding up. This isn't an accident. The generational forces are too strong; standard macroeconomic controls cannot succeed. This is a point that I keep making: That mainstream economics has repeated failed, over and over, to predict or explain anything that's happened since the 1990s bubble, including the bubble itself. Mainstream macroeconomics has been a failure. Last year's <#hreftext ww2010.i.macro061025 "article on "System Dynamics and Macroeconomics""#> shows how macroeconomic theory can be made able to predict and explain more of the real world than mainstream theory. However, since I'm a "nobody," I can't get anybody to pay attention to it. But I can assure you, dear reader, that this theoretical development is completely valid. In March, I posted some additional theoretical work, in <#inc ww2010.weblog.ref e070320 "my article based on research by Harvard economist Robert J. Barro."#> The point of this work is that shows how macroeconomic theory, enhanced with Systems Dynamics, predicts and explains periodic international financial crises. So I've used several methodologies to prove that we're headed for a major international financial crisis. The only thing I can't provide is an exact date. (And, let's face it, if I had a date then I wouldn't tell you guys; I'd keep it to myself and use it to make some money.) China is indeed <#inc ww2010.weblog.ref e070322 ""unsteady, unbalanced, uncoordinated and unsustainable.""#> There are well over 100 million itinerant works, income disparities are growing, and rebellions are occurring more often. A nationwide rebellion could begin at any time, but it probably won't happen as long as China is in its bubble economy. Once the bubble bursts, and hundreds of millions of Chinese become unemployed, a war will not be far off. =eod =// &&2 e070425b Iranian police swoop down on women with loose headscarves =data ww2010.weblog.y2007.e070425b.head Iranian police swoop down on women with loose headscarves =data ww2010.weblog.y2007.e070425b.keys =data ww2010.weblog.y2007.e070425b.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070425b.date 25-Apr-07 =data ww2010.weblog.y2007.e070425b.txt1 Sorry, I just can't stop laughing at this one. =data ww2010.weblog.y2007.e070425b.txt2 I'm reminded of the lyrics from the song "At the Big Check Apron Ball" from the Broadway show "New Girl In Town":

    Oh, in these modern days
    When ladies show their ankles
    What's there to keep a poor lad, poor lad,
    From going sim-puh-ly mad?

<#inc ww2010.pic g070424b.jpg right "" "An obvious criminal at large on the streets of Tehran (Source: france24.com)"#> Well, that appears to be exactly what's happened to the poor lad Mahmoud Ahmadinejad, president of Iran, as he's sent out his police officers to <#stdurl http://www.france24.com/france24Public/en/administration/afp-news.html?id=070424152507.8c87wk1z&cat=null "enforce the Islamic dress code"#> that was imposed with the Islamic revolution in 1979. A police bus screeches to a halt. The officers jump out, and swoop down on the women with loose headscarves or whose coats are tight enough to outline their bodies. In some cases, they just warn the women to dress more modestly. At other times, one or two dozen <#stdurl http://www.news.com.au/heraldsun/story/0,21985,21603741-663,00.html "women might be piled into a bus,"#> and taken to the police station for more thorough, uh, questioning. The <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-6580906,00.html "women are furious."#> "What they do is really insulting," said one 23-year-old college student. "You simply can't tell people what to wear. They don't understand that use of force only brings hatred toward them, not love." This is all very interesting from the point of view of Generational Dynamics. Here's what <#inc ww2010.weblog.ref e050625 "I wrote in 2005,"#> just after Ahmadinejad was first elected:

"A particular feature of most awakening eras is the rise of gender issues. Remember how American college girls burned their bras in the 1960s? Well, maybe Iranian girls won't do the same (or maybe they will!), but they'll make their opinions felt in other ways. And since Ahmadinejad obviously considers himself a ladies man, they're going to target him specifically."

<#inc ww2010.pic ahmad2.jpg right "" "President Mahmoud Ahmadinejad of Iran(Source: Mardomyar.ir )"#> Iran is in a generational Awakening era, just like <#hreftext ww2010.i.sixties040501 "America in the 1960s-70s."#> What happens during Awakening eras is that young people rebel against their parents, and that almost always includes some kind of gender component. We had our "women's lib" in the 1960s, and Ahmadinejad is just starting to get into trouble with women in Iran's current Awakening era. Iran is entering a very tumultuous time politically, as <#inc ww2010.weblog.ref e070331b "I wrote in an analysis last month,"#> and Mahmoud Ahmadinejad is under heavy fire. He's receiving heavy international criticism for his nuclear policy, and many Iranians are criticizing him as well. Iran was embarassed by last month's Iranian hostage crisis. Ahmadinejad got nothing out of last summer's Lebanon war, despite spending huge amounts of money to fund Hizbollah, and Iranians are furious that the economy is getting progressively worse. Mahmoud Ahmadinejad is a very dangerous person, and he may yet trigger a war in the Mideast. He may have gone "sim-pul-ly mad," as the song lyrics suggest. However, for the time being at least, we can chuckle and enjoy the fury of Iranian women as the police swoop down on those criminals who expose a few strands of hair. =eod =// &&2 e070425 Separatist rebels in Ethiopia attack Chinese oil facility, killing 74 =data ww2010.weblog.y2007.e070425.head Separatist rebels in Ethiopia attack Chinese oil facility, killing 74 =data ww2010.weblog.y2007.e070425.keys =data ww2010.weblog.y2007.e070425.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070425.date 25-Apr-07 =data ww2010.weblog.y2007.e070425.txt1 To the Africans, it's the Chinese who are the "imperialists" now =data ww2010.weblog.y2007.e070425.txt2 <#inc ww2010.pic g070424.jpg right "" "Gunmen attacked a Chinese oil field in Jijiga, in Ethiopia on Tuesday (Source: turkishpress.com)"#> 200 gunmen <#stdurl http://www.turkishpress.com/news.asp?id=172912 "attacked a Chinese oil field in a remote area of Ethiopia"#> on Tuesday. The event was described as "a massacre," as the gunmen overwhelmed more than 100 Ethiopian soldiers protected in the field in a fierce 50 minute gun battle. According to Xinhua, <#stdurl http://news.xinhuanet.com/english/2007-04/24/content_6023109.htm "65 Ethiopian employees and 9 Chinese workers were killed"#> in the attack. Seven other Chinese workers were kidnapped by the gunmen, indicating that the incident may not be over. The facility was run by the Zhongyuan Petroleum Exploration Bureau under the China Petroleum & Chemical Corporation. The oil field is located in JiJiga in the province of Ogaden, which occupies all of eastern Ethiopia. This province has been bitterly disputed in the past in wars between Somalia and Ethiopia, and the region contains both Somalis and Ethiopians. The perpetrators were the Ogaden National Liberation Front (ONLF), a terrorist group seeking to separate Ogaden from Ethiopia. They took credit for the attack in a <#stdurl http://www.onlf.org/pressApril242007.htm "press release on their web site."#> In it, they said:

"The ONLF has informed the Chinese government in the past that it would be unwise to pursue discussions with the [Ethiopian government] as it was not in a position to guarantee the safety of any firm operating in Ogaden nor was it in a position to enter into contracts with foreign companies for Oil exploration in Ogaden. Unfortunately this warning fell on deaf ears. We urge all international oil companies to refrain from entering into agreements with the Ethiopian government as it is not in effective control of the Ogaden despite the claims it makes."

What makes this so startling, of course, is that we have a rebel group directing its fire at the Chinese rather than the Americans. In the last decade, China has been making deals with various African governments to exploit the continent's massive oil and mineral deposits. What's happening to China is what always happens when a powerful country makes a deal to exploit the resources of a less powerful country. It's starts out being a "win-win" situation, because the powerful country gets the resources it needs, while the less powerful country gets money and jobs that it wouldn't otherwise have gotten. But, no matter what the deal is, sooner or later the less powerful country is going to feel that they're being taken advantage of, and they turn against what they now call the "imperialist power." This has happened to European countries, and of course it's happened to the United States many times. Now it's China's turn, and it's only going to get worse for the Chinese. China is increasingly being called "imperialist," and the Chinese workers are viewed as often disrespectful of African workers. Recently, 15 Chinese workers were kidnapped in Nigeria, and other Chinese workers were attacked in Kenya. The Ethiopia attack is the largest so far. <#inc ww2010.pic afrihorn.gif left "" "Horn of Africa"#> The level of conflict has been increasing steadily on the horn of Africa for a year, now. The Ethiopians were <#inc ww2010.weblog.ref e070102 "at war in Somalia"#> last year when Islamist groups took power, and the Islamists were forced to retreat into Kenya. Since that time, however, the Ethiopian forces have withdrawn, and clan warfare has returned to Somalia, <#stdurl http://www.iht.com/articles/2007/04/24/business/somalia.php "creating an enormous humanitarian crisis."#> Up until now, it's just been African forces in the horn of Africa, with occasional support from Americans. So far, there are no Chinese armed forces in the region. China isn't used to dealing with situations like the one they're faced with now. China is into a generational Crisis era, a time when anxiety and panic tend to take over the population and the government. If China overreacts and sends armed forces into Africa, things could heat up pretty quickly. =inc ww2010.cf.cf060209 p right I've never put the Darfur war (in the west of Sudan) or any African wars on my little risk graphic, because my risk graphic is intended to depict only regions where a regional war is likely to spread to a major war, and then a world war. My feeling has been that as terrible as the Darfur war was, for example, it was extremely unlikely to expand to pull in other countries, and spread into Europe or Asia. If China overreacts and sends forces into Africa, that could change. In the meantime, there must be a great deal of handwringing going on in the hallowed halls of the Chinese Communist Party in Beijing. =eod =// &&2 e070424 NY Times columnist Thomas Friedman shows ignorance and evasiveness about al-Qaeda in Iraq =data ww2010.weblog.y2007.e070424.head NY Times columnist Thomas Friedman shows ignorance and evasiveness about al-Qaeda in Iraq =data ww2010.weblog.y2007.e070424.keys thomas friedman, wolf blitzer, jose maria aznar, al-qaeda, iraq, al-qaeda in iraq, somalia, gspc, algeria, nicolas sarkozy, france =data ww2010.weblog.y2007.e070424.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070424.date 24-Apr-07 =data ww2010.weblog.y2007.e070424.txt1 In an interview that appeared on CNN on Sunday, =data ww2010.weblog.y2007.e070424.txt2 renowned New York Times columnist Thomas Friedman spoke with anchor Wolf Blitzer about the Iraq war. He's supposed to be one of the most knowledgeable people in the world about what's going on in the Mideast, but the interview showed why I have so little respect for him and other journalists. By way of introduction, Wolf Blitzer quoted Senate Majority Leader Harry Reid who, last week, said:

"I believe myself that the Secretary of State, Secretary of Defense and — you have to make your own decisions as to what the President knows — that this war is lost and the surge is not accomplishing anything as indicated by the extreme violence in Iraq."

As I've said many times, it's an absolute disgrace that many journalists and congressmen have committed their careers and credibility to America's defeat and humiliation in Iraq. These people are openly aiding and abetting the enemy, in a manner that some might consider to be treasonous. But it's worth pointing out why there is "extreme violence in Iraq," as I <#hreftext ww2010.i.iraq070401 "discussed at length in my recent analysis."#> The violence is being caused by suicide car and truck bombers and, as I showed with numerous quotes from Arab and American sources, the suicide bombers are NOT Iraqis, with almost no excepts. Suicide bombers are being imported from militant al-Qaeda sympathizers in Saudi Arabia, Jordan and the Palestinian territories. The reason for the violence is that an outside army of terrorists -- known as "al-Qaeda in Iraq" -- is setting off one of these violent bombs every day because they know that morons like mainstream media reports and Harry Reid will cave in to al-Qaeda's wishes. It's sickening. There was some humor in the situation, at least. Reid's statement turns out to be a major gaffe since -- guess what? -- the American people don't want to just give up and go down in defeat. Reid was forced to back off and make some mealy-mouthed statement about changing course, and other Democrats ran from Reid to the hills. Maybe there's hope for Congress yet. <#inc ww2010.pic g070423a.jpg right "" "Thomas Friedman interviewed by Wolf Blitzer (Source: CNN)"#> So anyway, here are some excerpts of what Thomas Friedman said, according to <#stdurl http://transcripts.cnn.com/TRANSCRIPTS/0704/22/le.01.html "the CNN transcript:"#>

"Well, to me, Wolf, there's one metric to measure the surge by, and that is whether it's producing a political solution that will allow us to remove our troops. ... Right now, I don't see that negotiation happening, let alone a conclusion that you say "Wow, the parties are really coming together. They are taking advantage of this, you know, little breathing spell to come together for a solution." And that's really what I'm waiting for. To me, the metric of the surge is not whether the violence is down 10 percent, 20 percent, 30 percent. It is, are the parties coming together? ... I mean you've got Shiites, Sunnis, the Kurds, whether they have the will to really come together. You know, when I first heard the surge idea, Wolf, my reaction was -- you know what it reminds me of? It reminds me of a couple. They get married. The marriage doesn't quite take and they say "You know what? Let's have a baby." You know, somehow that if you put more pressure on this, somehow that will come together. ... And I feel that about the surge, that unless the underlying thing is there, the willingness of the three parties to cut a deal to share power, revenue and space together, there is no possible solution. ... I mean, I certainly think that we're on our very, very, very, very last legs. You know, we certainly haven't won, that's for sure. And I see no sign right now that we're winning because the question I'm looking for is, is that political deal coming together? And I don't see it."

You can see that he's gone on at length without mentioning al-Qaeda in Iraq. Does Thomas Friedman believe that al-Qaeda in Iraq is irrelevant? Does he believe that al-Qaeda in Iraq can't be defeated? Why doesn't he mention this major foreign force? I certainly don't know whether "al-Qaeda in Iraq" could be driven out of Iraq, but I'm almost certain of this: If it could be, then we'd win the Iraq war. It's al-Qaeda in Iraq that's the root cause of the problem. The reason that I have so little respect for the Thomas Friedman's of the world is that he never even mentions al-Qaeda. I'll come back to this. Here's how he responds when Blitzer asks him what would happen if we just pull out:

"But now let's put that aside. OK, what happens if we do leave? No one really knows, Wolf. One can make an argument that all, you know, heck is going to break loose in that part of the world. That's certainly one scenario. Another scenario says there will be a period of fighting. The parties will eventually reach an equilibrium, and we may even have a better chance for a deal. I'm not here to tell you I know which it will be. All I'm telling you is, the president doesn't know either."

Now, I'll give this to Friedman -- at least he hasn't bought into the nonsense civil war scenario. You don't hear much about a civil war in Iraq any more. The morons who were so sure a few months ago that it was a civil war have now seen that it hasn't gone that way. You'd think that this would make some of these people apologize for their stupid remarks in the past, but no such luck. Friedman acknowledges the possibility, not only is there no civil war, but that there are scenarios where the Iraqi people would reach a political solution on their own. I doubt that Friedman knows anything about generational theory, because that's exactly the conclusion to be drawn from the fact that Iraq is in a generational Awakening era. So I would actually agree with Friedman, except for one thing: al-Qaeda in Iraq. If we pulled out, they'd just pour more forces in. But Friedman is very carefully not mentioning al-Qaeda, so finally Blitzer asked him about it specifically. Blitzer played a clip of George Bush talking about Iran and al-Qaeda in Iraq, and Blitzer asked, "Maybe al Qaeda wasn't a major player in Iraq before the war, but the argument is, it is right now." Here's Friedman's reply:

"Well, there's no question al-Qaeda is there. They're having an impact. The question though, Wolf, is to what degree are we part of the problem, and to what degree are we part of -- our leaving would be part of the solution? Our presence there clearly attracts certain forces to Iraq. There's no question about it. Now, are we 30 percent of that? Are we 70 percent? In other words, if we leave, to what extent does the violence go down? To what extent do we create a context where Iraqi Sunnis would want to take these people on? I just don't know, but neither does the president. So he's casting this all in one way, as if it's about winning. There is no more winning to be done there, OK? All that's left is to protect American interests and to be able to get out in a way that leaves some chance, some chance, Wolf, that we'll get some equilibrium in place there that won't destabilize the whole region. I think that's all that's left."

This is about dumbest response imaginable. Al-Qaeda is active in Indonesia, Malaysia, Pakistan, Afghanistan, the Palestinian territories, Egypt (through the Muslim Brotherhood), Somalia, and others. And it was just two weeks ago that <#inc ww2010.weblog.ref e070413 "Al Qaeda in the Islamic Maghreb,"#> the group formerly named GSPC (Salafist Group for Preaching and Combat), shocked Algiers and Casablanca with multiple coordinated bombings. GSPC, which is centered in the former French colony of Algeria, has all but declared war on France. According to <#stdurl http://www.debka.org/headline.php?hid=4108 "an analysis by Debka,"#> GPSC and al-Qaeda are determined to do anything they can to derail the campaign of Nicolas Sarkozy. According to the analysis,

"The al Qaeda jihadists view Sarkozy as a dangerous enemy of radical Islamic organizations in France, who must be prevented from attaining presidential office, exactly like Spain’s Jose Maria Aznar. His foreign policy is likely to friendlier to the United States than that of Royal. Sarkozy is viewed as foe by millions of Muslims living in France from his tough record as interior minister. Royal in contrast wooed the Muslim vote with promises of advantages. A terrorist attack that brings the Socialist contender to power will give al Qaeda a huge prestige boost with French Muslims."

The reference to Spain's José María Aznar is about <#hreftext ww2010.i.madrid040315 "the Madrid subway bombings, masterminded by al-Qaeda,"#> that occurred on March 11, 2004. Those bombings are considered responsible for Aznar's loss in the 2004 election. The Debka report says that al-Qaeda is hoping to repeat that "success" in Paris in the next two weeks. And speaking of subway bombings, let's not forget about al-Qaeda's other "successes" -- the 9/11 attacks in America, and the 7/7/2005 <#inc ww2010.weblog.ref e060707b "bombing of the London subways."#> Al-Qaeda has been expanding and gaining strength for at least two decades, and it continues to do so. Why on earth does Thomas Friedman imagine that al-Qaeda will withdraw from Iraq if America does? What planet is he on? So, I'm in a familiar situation, as I try to decide: Is Friedman stupid or a liar? I can't be sure, but I don't think he's lying; that leaves "stupid." And as we've pointed out many times, most Washington journalists and politicians <#inc ww2010.weblog.ref e070114b "don't even know that al-Qaeda is a Sunni organization,"#> and if you don't know that, then you don't know anything. Here's one more interesting extract from the interview. Blitzer asked him which politician he thought was the most intelligent about the Iraq issues. His answer: "I think Joe Biden's been on top of this from the very beginning. ... So if there's anyone I felt in sync with from the very beginning, I would say it's Joe Biden." Now, Biden has this truly moronic proposal of splitting Iraq up into three countries -- one for Sunnis, one for Shi'ites, and one for Kurds. It's so ridiculous that I've never even bothered to write about it. In the first place, there isn't a snowflake's chance in hell that the Iraqi government would ever agree to it. Second, there would be no way to split of Baghdad. Third, if the Kurds ever got their own nation, then a large Turkish army would come over the border pouring into Kirkuk. So this is the guy that Friedman identifies with. Why am I not surprised? I've previously pointed out <#stdurl http://www.fair.org/index.php?page=2884 "this web page on fair.org"#> that shows that Friedman has made one error after another. He's made one incorrect prediction after another. Unfortunately, he never seems to learn anything, and neither do the people who keep inviting him back for interviews. Here's what <#hreftext ww2010.i.aug19 "I wrote on August 19, 2003, just after al-Qaeda had bombed U.N. headquarters in Iraq:"#>

"That's not to say there aren't dangers, and here we'll point out two major ones: First, the terrorist attacks may continue and get worse. Terrorism is more a political technique rather than a military technique. Al Qaeda may succeed in increasing the level of terrorist attacks in order to influence American public opinion. And second, the terrorist acts may presage a larger regional war involving the Palestinian Arabs and the al Qaeda against Americans in Iraq. Iraq is in an awakening period, but the Palestine region is just about to enter a crisis period. Some analysts claim that the terrorist acts are being perpetrated by Palestinian Arabs and "Mujahadeen" being paid thousands of dollars each, funded by Saddam and Osama bin Laden, arriving from Syria and Saudi Arabia. The really dangerous scenario is that large numbers of Palestinian and "mujahadeen" terrorists will be motivated by identity group relationships to move into Iraq as a theatre of war against the Americans. That isn't happening now, but it's one of several possible scenarios that may unfold in the Mideast region during the next few months and years."

This is what I wrote in 2003, and it's exactly what happened. Unlike Thomas Friedman, I have not gotten any predictions wrong when it was based on the Generational Dynamics forecasting methodology. Now, as I said, I do not know whether "al-Qaeda in Iraq" can be driven out of Iraq by the surge, but my expectation is that American forces will remain in Iraq until the Clash of Civilizations world war begins. After that, they'll be withdrawn because they'll be needed elsewhere. =eod =// &&2 e070422d South Korea gives in to North Korea demands, and supplies rice unconditionally =data ww2010.weblog.y2007.e070422d.head South Korea gives in to North Korea demands, and supplies rice unconditionally =data ww2010.weblog.y2007.e070422d.keys =data ww2010.weblog.y2007.e070422d.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070422d.date 22-Apr-07 =data ww2010.weblog.y2007.e070422d.txt1 So far, North Korea seems to be reneging on its promises to dismantle its nuclear program. =data ww2010.weblog.y2007.e070422d.txt2 So Seoul's <#stdurl http://english.yna.co.kr/Engnews/20070422/630000000020070422085734E3.html "announcement on Sunday to provide 400,000 tons of rice"#> to the North in late May represents a complete diplomatic victory by the North Koreans. The <#inc ww2010.weblog.ref e070216 "South Korean politicians were "euphoric""#> in February, when the six-party talks reached an accord that would give aid to North Korea and North Korea would dismantle its nuclear program. South Korean president Roh Moo-hyun, said he's expecting a "very easy implementation" of this accord. Well, that hasn't happened. As each day goes by, it becomes increasingly apparent that the North Koreans snookered everyone (again), and they have no intention whatsoever of dismantling their nuclear program. This will be no surprise to regular readers of this web log, since I've said as much many times, but it apparently will be a surprise to the South Koreans. Now, to be fair, there's been a hitch. For reasons that I never really figured out, $25 million in frozen North Korean funds remained stuck in a Macau bank because of some mixup between the State Dept. and the Dept. of Commerce. But that mixup has been fixed, the money was released to North Korea two weeks ago, and the North Koreans have no more excuses. The South Koreans are, understandably, extremely anxious about the North Korean situation, and are afraid of an invasion either by North Korean missiles or by North Korea's one-million man army. Thus, the North Koreans effectively have the ability to extort whatever they want from their southern neighbors. That's what happened on Thursday, when the South called for the North to fulfill the terms of their denuclearization agreement. The North Korean delegation <#stdurl http://english.yna.co.kr/Engnews/20070422/630000000020070422085734E3.html "stormed out of the conference room to protest,"#> and the South caved in and agreed to the North's demands. As I wrote in my article about the <#inc ww2010.weblog.ref e070216 "South Korean euphoria over the agreement,"#> the South's leaders are all from the 386 Generation -- corresponding to our Generation X -- and they're too young to know how to handle the nuances of the negotiations with the North. In the hand's of the North's president Kim Jong-il, the South's leaders are simply lambs being led to slaughter. =eod =// &&2 e070422c France heads for chaos in Sunday's first round election for President =data ww2010.weblog.y2007.e070422c.head France heads for chaos in Sunday's first round election for President =data ww2010.weblog.y2007.e070422c.keys nicolas sarkozy, ségolène royal, france, election, charles de gaulle, napoleon, françois bayrou =data ww2010.weblog.y2007.e070422c.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070422c.date 22-Apr-07 =data ww2010.weblog.y2007.e070422c.txt1 Nicolas Sarkozy is leading in the polls, and he may even not hate America. Mon dieu! =data ww2010.weblog.y2007.e070422c.txt2 <#inc ww2010.pic g070420b.jpg right "" "The four major candidates (Source: CNN)"#> As the French head for the polls on Sunday, nobody really has any idea who'll win. The polls indicate that almost half of French voters are undecided, and won't decide until they're in the voting booth. But one thing is certain: A major generational change will take place in the new few weeks, as lame duck President Jacques Chirac, born in 1932, disappears from the political stage, most likely to be replaced by someone born after World War II. Chirac lived through World War II. He remembers how quickly German tanks broke through French lines of defense and occupied the country, and how the country wasn't freed until tens of thousands of British and American soldiers lost their lives on the beaches of Normandy. And he remembers how humiliating all of that was to France. The French remember, with enormous pride, the French Revolution of 1789, considered by many historians to be the greatest revolution in the history of humanity; and they remember, with equal pride, the glory days of Napoleon Bonaparte I, who made France the leading power in Europe in the early 1800s. Since then, France hasn't done so well, having lost to Germany in the Franco-Prussian war of 1870, having destroyed itself in the Paris Commune civil war that followed the Franco-Prussian war, and having been saved -- twice -- by the British and Americans in two world wars. The French military hero of World War II was Charles de Gaulle, and he and his vision have dominated French politics ever since. His view was of renewed French grandeur, as in the days of Napoleon. This meant, in particular, a rejection of the "Anglo-Saxon model," and a resulting anti-British and anti-American brand of politics. I've mentioned several times on this web site that I used to travel to Europe on business in the 1970s, and it was always very clear to me that the Germans like Americans and the French hate Americans. Since de Gaulle launched France's Fifth Republic in 1958, and became its first President (1958-1969), every subsequent French President, even those from the Socialist party, has been a "Gaullist" in philosophy, and a "Napoleonist." These include Georges Pompidou (1969-74), Valéry Giscard d'Estaing (1974-81), François Mitterrand (1981-95), and Jacques Chirac (1995-present). But now that will change enormously, and that's probably why almost half of the population says that they haven't decided whom to vote for on Sunday. =inc ww2010.h2 sarkozy "Nicolas Sarkozy" The candidate currently leading in the polls, is Nicolas Sarkozy. Chirac recently gave grudging support to Sarkozy, even though he said that Sarkozy is too much of an "Atlanticist," meaning that he doesn't hate America enough. Sarkozy is a prolific writer, and he's not afraid to talk about France's grandeur in his new book, <#stdurl http://www.amazon.fr/Ensemble-Nicolas-Sarkozy/dp/2845633459 "Ensemble (in English: Together)."#> Here's how Sarkozy introduces this book:

"Near the end of this campaign, where so many subjects have been broached, and so many words have been spoken, I wanted to tell you why and how we could one again dream of a better future for our children, why and how everything is once again possible for all of us, and for France, which is the name that we give to our common destiny. I didn't want to describe a government program, but rather to paint a great collective ambition. I want to share this ambition with you. Together, we can do what the preceding generations have already done. We can return France to its former grandeur. We can, once again, find the pride in being French. If we are united, if we want it, if we decide it. I know that, beyond all our differences, we have in common the same idea of France and the Republic. Through the strength of this bond that links all of us -- French people born anywhere, of all cultures and every generation -- we can find again the capacity to live together, to act together, to hope together."

This is political fluff, of course, but I wanted to quote it because what it says about Sarkozy himself. Like America, France is in a generational Crisis era, and in any Crisis era, the needs of the nation as a whole -- the survival of the nation and its way of life -- become more important than individual rights. Unlike other French politicians, he doesn't hope to "return France to its former grandeur" by returning to Napoleonic values, and by being contemptuous of American values. This is clear from a <#stdurl http://www.american.com/archive/2007/april-0407/inside-the-mind-of-a-french-presidential-candidate "a recent review of an older Sarkozy book, Testimony."#> Here are some of the passages that the review quotes:

"America came to aid and defend us twice in our recent history… You don’t have to be a grand strategist to understand that our interest is to have the best possible relations with this country... Where our strategic interests are concerned, systematically opposing the United States is a double mistake.... If I had to choose, I feel closer to American society than to a lot of others around the world. ... France is going through a fundamental crisis of confidence… I’m convinced that no country in the world can get by without effort, and that France—notwithstanding its undeniable merits and prestigious past—will become a thing of the past if it doesn’t take the steps necessary to adapt to the changes taking place in the world. ... [In France,] success is not really seen or accepted as a positive value... All the hard work done by those who are eventually successful is rarely acknowledged. This attitude is explained by the French desire for egalitarianism, the fascination with leveling out, and, frankly, jealousy... Success is more often criticized than presented as a model. ... [In discussing the 35-hour work week, that he wishes to abolish:] Great Britain,... it will be remembered, in the late 1970s seemed to be completely left behind, with a GDP 25 percent less than that of France. [Today,] London is becoming the seventh-largest French city. It has attracted, practically to the point of saturation, thousands of young French people who go to live there, including my daughter.... It seems that success has become so shameful in France that a young person who wants to succeed must leave.... A million French people have gone to live abroad over the past few years, a loss almost equivalent in absolute terms to the losses of World War I (1.3 million French deaths)."

Sarkozy himself is the son of an immigrant -- a Hungarian who married a French woman of Greek-Jewish origin. This mixture of east and west European attitudes is undoubtedly what makes him different. This is all very new for the French, and troubling to many of them, and not just because he's not anti-American. Many Frenchmen refer to Sarkozy as a "right winger" and a "racist," because of his strong views of illegal immigration. In fact, <#inc ww2010.weblog.ref e051102 "many people blamed Sarkozy for the violent racial rioting"#> that lasted for two weeks in Paris's Muslim ghetto suburbs in November 2005. At the initial outbreak of violence, Sarkozy responded by saying he had a "zero tolerance policy" for violence, and he referred to the troublemakers as "scum" and "riffraff," and vowed to "clean out" the suburbs. These views make Sarkozy anathema to the vocal "politically correct" segment of French society. And yet, there's a strong visceral xenophobia among the French people, as we've previously discussed on this web site:

When the French <#hreftext ww2010.i.eu050601 "rejected the EU Constitution in 2005,"#> exit polls indicated that those who voted against it did so out of fear of East Europeans coming to France and taking French jobs.
When Jacques Chirac supported a law that would permit French employers to fire an employee under 26 years of age, provided that he's worked less than 2 years, a <#inc ww2010.weblog.ref e060411 "million people, mostly students, took to the streets to protest"#> in April 2006, and Chirac backed down. As this web site's analysis pointed out, these street protests were a reaction to the November 2005 riots by Muslim youth. Muslims had demanded jobs, and the April rioters knew that jobs for Muslims meant fewer jobs for them.

What Sarkozy has done is to tap into that visceral xenophobia. We'll see on Sunday whether it worked for him. =inc ww2010.h2 royal "Ségolène Royal" There are twelve candidates running for President in the first round of voting on Sunday. The top two or three vote-getters will go on the next round, on May 6, where the President is finally chosen. Nikolas Sarkozy is almost guaranteed to be in that top two or three. Ségolène Royal is in second place, and considered likely to make it as well. Ségolène Royal is the Socialist Party candidate with a <#stdurl http://www.spiegel.de/international/0,1518,478200,00.html "fairly standard, classic Socialist economic platform"#> of strong protections for workers while stressing traditional social and family values. Like Sarkozy, Royal also benefits from the immigration issue. Young voters have registered to vote in record numbers, and many of these new voters are French-born children of North African immigrants living in the suburbs -- the same suburbs where Muslim youth were rioting and demonstrating in November, 2005. This generation is expected to vote to the left, and Ségolène Royal is expected to benefit. Royal is unique, of course, because she's a woman. But she's even more unique (if that's possible) by playing the "woman card." She says that Sarkozy is just interested in himself, while she is a woman and a mother who is interested in "all of you," the people. "I am a woman, a mother of four children," she says. "I have my feet on the ground. I'm a practical person. I am a free woman." "I want to address myself to the women," she said. "I need the women's vote. ... I'm told that for certain women, it's too revolutionary to see the state and the nation personified by a woman. But I say to them as well that it is time to put an end to centuries of injustice, of marginalization. It is time to put an end to prejudices that make no sense." She has also made it clear that she doesn't share Sarkozy's Atlanticism; she tells supporters, "We will not genuflect before George Bush." Royal has made a number of gaffes, especially in the area of foreign affairs, giving the impression that she's not very competent. Thus her main appeal is that she's a woman. Whether that's enough remains to be seen. =inc ww2010.h2 lepen "Jean-Marie Le Pen" Jean-Marie Le Pen has been called a fascist because of his nationalist, anti-immigrant, and perhaps even anti-Jewish views. Although he's in fourth place in the polls, and given little chance of winning, his candidacy casts a shadow over the entire election because of what happened in the last Presidential elections on April 21, 2002: To everyone's shock and surprise, Le Pen and Chirac were the only two to win the first round of the elections, because the leftist vote was split among Chirac's opponents. In the second round runoff, Chirac won. The 78-year-old Le Pen has been in politics for 50 years, and according to <#stdurl http://www.timesonline.co.uk/tol/news/world/europe/article1680255.ece "news reports,"#> he appears to be greatly enjoying what will probably be his last run for President. Commenting on the fact that his candidacy has forced the other candidates to respond, he said "They have all moved right except me." He predicts an "enormous double surprise" on Sunday when the voters select him and eliminate Sarkozy. Still, there's a great fear hanging over many French voters that Le Pen will do it again -- that he'll come in second because undecided voters, afraid to admit to pollsters that they support him, will vote for him in the privacy of the voting booth. =inc ww2010.h2 bayrou "François Bayrou" François Bayrou positions himself clearly in the center, between right-wing Sarkozy and left-wing Royal, and he's been trying to benefit from any distaste for either extreme. He claims to be a French Bill Clinton. His candidacy has given rise to a special concept: The vote utile, or "useful vote." Here's the pitch: If you vote for Ségolène Royal, then the runoff will be between Sarkozy and Royal, and Royal will lose, and so your vote will be wasted; instead, vote for Bayrou, the only candidate who can beat Sarkozy. This approach has given Bayrou <#stdurl http://www.spiegel.de/international/europe/0,1518,472503,00.html "an unexpected boost in the polls,"#> much to everyone's surprise, and he's even surpassing Royal in some polls. Bayrou, a former sheep farmer, has promised to unify France's left and right by mixing policies from both sides. As in the case of the other candidates, no one really knows whether voters will be drawn by the proposal, or whether they'll decide that it's just wishful fantasy. =inc ww2010.h2 chaos "Chaos versus a right turn" From this side of the Atlantic, France looks a great deal like Israel -- and even like the Palestinian territories. Since Ariel Sharon became disabled, the only word that can be used to accurately describe Israel's government is "chaos." Ariel Sharon was a survivor of the last crisis war, the genocidal war between Arabs and Jews in the late 1940s. His lifelong goal has been to prevent any such war from occurring again, and his experiences as a youth trained him to do that. With his disappearance, Israel is almost ungovernable, with no clear vision or direction. On the Palestinian side, Yasser Arafat was a survivor of the same war. Although Arafat and Sharon hated each other, they cooperated, perhaps unconsciously, to achieve the same goal: To prevent a major genocidal war between Arabs and Jews from occurring again. In 2003, when the world was euphoric about the new "Roadmap to Peace," <#hreftext ww2010.i.may01 "I predicted that the Roadmap would never succeed,"#> and that the disappearance of Ariel Sharon and Yasser Arafat would be part of a generational change that would lead to exactly that kind of genocidal war between Arabs and Jews. The Palestinian government today is just as chaotic as the Israeli government; the Palestinian territories are ungovernable, with no clear vision or direction, and the Gaza strip particularly is completely lawless. The same kind of thing is now happening in France. All the French presidents since Charles de Gaulle, even when they were from different parties, shared a common vision and determination to avoid a new European war that would devastate France as much as World War II had. But now the last of them, Jacques Chirac, is leaving, and with him goes that common vision and determination. In his <#stdurl http://en.rian.ru/analysis/20070419/63959510.html "emotional farewell address,"#> Chirac said: "Never compromise with extremism, racism, anti-Semitism or the rejection of others. In our history, extremism has already almost ruined us. It's a poison. It divides. It perverts. It destroys." These are words that could only have come out the mouth of someone who had lived them, as he has, but as none of his likely successors have. The voters of France are extremely anxious and worried about two things: the economy and immigration. And these two issues are far more deeply intertwined than most French journalists or politicians would care to admit, because the two issues intersect at one point: Jobs. The children of immigrants are living in poverty in the suburbs because they have no jobs. The ethnic French, even the ones with jobs, are unhappy about the economy because of its poor record and unemployment. They blame each other for their problems, and as economic problems get worse, the means of expressing that blame will become more violent. We've already seen the first major sign that France is becoming ungovernable: Chirac's attempt to reform the economy by permitting French employers to fire an employee under 26 years of age, provided that he's worked less than two years, <#inc ww2010.weblog.ref e060411 "was defeated by massive street riots."#> Under this analysis, it really doesn't matter which of the candidates wins. Sarkozy's plans to put France back to work by eliminating such things as the enforced 35-hour work week cannot succeed because the powerful labor unions will oppose it, as will the same people who rioted against the firing law. Royal's socialist agenda will fail because it would be opposed by the strong conservative French parties, who will point out that France doesn't have any more money to spend. So nothing will get done. In the past couple of years I've written frequently about how countries that fought in World War II are all becoming increasingly paralyzed and dysfunctional, as the generations that lived through and survived that war all disappear and are replaced by generations born after the war. This list includes the U.S., UK, Israel, all of the EU, China, South Korea, Japan, and others. With this new election, France is joining the list. These countries, all paralyzed and dysfunctional, are just waiting for something to happen. History tells us that, sooner or later, one of them will end the chaos by panicking and taking a sharp political turn to the right. This will then lead us into the Clash of Civilizations world war. =eod =// &&2 e070422b As population increases in India, agriculture becomes a crisis. =data ww2010.weblog.y2007.e070422b.head As population increases in India, agriculture becomes a crisis. =data ww2010.weblog.y2007.e070422b.keys =data ww2010.weblog.y2007.e070422b.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070422b.date 22-Apr-07 =data ww2010.weblog.y2007.e070422b.txt1 Deaths on mobbed railway trains become a daily occurrence, =data ww2010.weblog.y2007.e070422b.txt2 according to <#stdurl http://online.wsj.com/article/SB117692100087174362.html "a story in Thursday's Wall Street Journal:"#> <#inc ww2010.pic g070420a.jpg right "" "About 13 people are accidentally killed every day Mumbai (Bombay), thanks to overcrowding on the railways. (Source: WSJ)"#>

"About 13 people per weekday were killed in 2006 scrambling across the tracks, tumbling off packed trains, or, occasionally, jumping onto an oncoming train. Last year, a total of 3,404 people were killed on Mumbai's railways. By comparison, 127 people were killed on New York State's railways in the last five years."

Although India is not the most densely populated country in the world, it's still ten times as densely populated as the United States, as shown by this table that I originally derived from the <#stdurl https://www.cia.gov/cia/publications/factbook "CIA Fact Book (2005):"#>

   Country         Pop/sq km
   -------------   ----------
   Russia             8.46
   World             12.36
   United States     30.15
   Mexico            53.18
   China            134.10
   Haiti            271.27
   Israel           294.49
   India            319.29
   Japan            336.69
   West Bank        381.77
   Bangladesh       961.45
   Gaza Strip      3541.30
   Singapore       6653.09
   Hong Kong       6771.22

The <#stdurl https://www.cia.gov/cia/publications/factbook/geos/in.html "population of India"#> increases about 1.6% each year (compared to 0.9% for the United States). The Indian government claims that food production has been increasing at the rate of 2.3%, which should be enough, since it means that food production is growing faster than the population. But this government claim hardly seems credible, since India's food prices have been rising dramatically in recent years, as I <#inc ww2010.weblog.ref e070411b "wrote about recently."#> Prices of food are increasing around the world, but India's double-digit price increases make it almost a world leader. Furthermore, India used to be a grain exporter, but has been <#stdurl http://yaleglobal.yale.edu/display.article?id=9084 "a net grain importer"#> for the last two years. In fact, agriculture in India seems to be increasingly in a crisis, especially since the early 1990s when the results of the "Green Revolution" began to peter out. This crisis takes many forms, the saddest of which is the dramatic increase in farmer suicides. Agriculture is crucial to India for the obvious reason -- that it produces the food that people eat. But, there's another reason: Farming is the the source of livelihood for 115 million families in India, and 70 percent of the country’s population. At the end of World War II, world leaders were extremely morose and pessimistic about the possibilities for peace. The world had just fought two extremely bloody world wars, and it appeared that a third world war, to be fought by the West against Communism, was on the horizon. Leaders were frenzied and desperate, as they looked for ways to solve the problems that had given rise to the two world wars. Worldwide hunger was identified as a major problem, and it was felt that if a way could be found to guarantee that every family in the world had sufficient food, then a world war could be avoided. So countries of the world, led by the Rockefeller Foundation, launched a "green revolution" which brought modern agricultural techniques and technology to countries around the world. These technologies included new hybrid and genetically modified seed varieties and the use of pesticides. In India, the results were dramatic. Throughout the 1960s and 1970s, food production increased greatly. For the first time, India was able to feed itself and was actually exporting food to other countries. On this web site, I often focus on certain theme: Following a crisis war (like WW II), the survivors of the war set up austere rules and procedures in order to guarantee that their children and grandchildren will never have to go through anything so horrible. But as the decades go by, and the generations of war survivors are replaced by young generations of kids with no patience for austerity, the rules begin to unravel and procedures become abused. This is certainly true of investors' use of credit today, as I've written many times. Well, it's also true of the Green Revolution and farmers in India. Here are some of the things that have happened:

If a little pesticide and fertilizer is good, then more pesticides and fertilizers are even better, and huge amounts are best of all. This is how the "Law of Diminishing Returns" kicks in, as increasing amounts of pesticides and fertilizers produce no additional gains, and may even backfire by damaging the land and the environment.
If high-tech grain seeds have improved yields, then even higher-tech grain seeds will improve yields even more. However, this isn't necessarily the case, as newer technologies are experimental, and don't always work as promised or hoped. Furthermore, new seeds are subject to fraud, because unscrupulous middlemen can mix old and new seeds together and sell them all as new.
If high-tech grain seeds are good, then high-tech cotton seeds are even better, because farmers can make money by exporting cotton. This shift from grain to cotton is one of the reasons contributing to India's high food prices.
If a little credit is good, then more credit is even better, especially since money can be made from higher yields. Just as Americans have created a credit crisis through mortgage loans that can't be repaid, India's farmers have created a credit crisis through agricultural loans that can't be repaid. Abuse of credit is common in unraveling periods, as we've shown with today's investors <#inc ww2010.weblog.ref e070406 "pursuing a scenario of total mania,"#> similar to the mania that investors showed just prior to the <#inc ww2010.weblog.ref e070328 "the crash of the Tulipomania bubble"#> and the <#inc ww2010.weblog.ref e070406 "the Panic of 1857."#> Incidentally, like most of the world, India is also experiencing a real estate bubble.
As increasingly desperate farmers turn to cotton in the hope of making enough money to repay their debts, they discover that cotton seeds are more expensive than grain seeds, cotton crops require more pesticides and fertilizers than grain crops, and cotton crops require more water than grain crops. Thus, farmers go even farther into debt to pay all these expenses, in the hope of repaying the debts with a bumper crop. If there's a crop failure because of not enough raise, or because of an infestation of insects, then the farmer cannot repay his debt.
Because of population growth and urban sprawl, the amount of available farmland is decreasing. (Urban sprawl is also adding to the problems of overcrowding on the commuter railroads, as we described previously.)
Because of population growth, and because farmers are requiring more water for irrigation of cotton and other high-tech crops, India's water table has been falling. In his <#stdurl http://www.rediff.com/cms/print.jsp?docpath=//money/2007/feb/28bud26.htm "the annual budget speech by India’s Minister of Finance Palaniappan Chidambaram,"#> given on February 28, it was described this way:
"Depletion of ground water has assumed grave proportions. The Central Ground Water Board has identified 1,065 assessment blocks in the country as 'over-exploited' or 'critical'. Over 80 per cent of these blocks are in 100 districts in seven States. The strategy for ground water recharge is to divert rain water into 'dug wells'. Each structure will cost about Rs.4,000. The requirement is seven million structures, including about two million structures on land belonging to small and marginal farmers. I propose to provide 100 per cent subsidy to small and marginal farmers and 50 per cent subsidy to other farmers. Ministry of Water Resources will finalise the scheme shortly. In anticipation, I intend to transfer a sum of Rs.1,800 crore to NABARD. The amount will be held in escrow and will be disbursed through the lead bank of the district concerned to the beneficiaries."
The depletion of ground water is feeding into all the other problems. Less ground water means that farmers have to pay more to irrigate their farms, which means more credit and more crop failures. And the desperate use of more water for irrigation causes the ground water to fall even further.
Desperate farmers, in debt and often plagued by poor or failed crops, are <#stdurl "http://en.wikipedia.org/wiki/Farmers'_suicides_in_India" "are committing suicide in increasing numbers."#> This is not a widely discussed phenomenon, for obvious reasons, and usually only <#stdurl http://www.asianews.it/index.php?l=en&art=7110 "secondary news sources"#> report on it, but there was a <#stdurl http://www.pbs.org/frontlineworld/rough/2005/07/seeds_of_suicid.html# "lengthy video segment on PBS Frontline in 2005"#> that you can view.

From the point of view of Generational Dynamics, what's significant is how similar India's unraveling is to America's unraveling. The details are different, of course, but the desperate use of credit in the hope of enough money to get out of debt is the common factor in all of these unraveling situations, including India today, America today, the 1929 crash, the <#inc ww2010.weblog.ref e070328 "Tulipomania bubble in the 1630s"#>, the South Sea bubble of the 1710s-20s, the bankruptcy of the French monarchy in the 1780s, and the <#inc ww2010.weblog.ref e070406 "the Panic of 1857."#> When a worldwide financial crisis occurs, everyone becomes extremely risk-averse, and turns against credit. As younger generations replace the risk-averse generations that lived through the last crisis, the population as a whole becomes more risk-seeking and more abusive of credit and more willing to engage in desperate and often criminal schemes to make money. From the point of view of Generational Dynamics, we're now overdue for the next major worldwide financial crisis. It might be triggered next week, next month, or next year, but it's coming with 100% certainty, and probably sooner rather than later. =eod =// &&2 e070422 Collapse of Duke rape case represents cultural change =data ww2010.weblog.y2007.e070422.head Collapse of Duke rape case represents cultural change =data ww2010.weblog.y2007.e070422.keys =data ww2010.weblog.y2007.e070422.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070422.date 22-Apr-07 =data ww2010.weblog.y2007.e070422.txt1 False accusations against men are likely to occur less often now. =data ww2010.weblog.y2007.e070422.txt2 District attorney Mike Nifong is facing <#stdurl http://www.forbes.com/feeds/ap/2007/04/14/ap3612273.html "ethics charges and possible disbarment"#> after North Carolina Attorney General Roy Cooper criticized Nifong as a "rogue prosecutor" for pursuing unjustified rape charges against members of the Duke lacrosse team. Cooper also announced, based on the findings of his investigators, that the alleged March, 2006, attack never occurred, and that the players were "innocent." The alleged victim, who evidently lied repeatedly in making the rape accusations, will not be charged with anything. The ethics charges being leveled at Nifong relate to his behavior throughout the case. He never spoke to the alleged victim, a stripper named <#stdurl http://www.dukelacrosse.us/duke-lacrosse-rape-accuser-name/ "Crystal Gail Mangum, alias Janette Rivers,"#> a black single mother with two children. He withheld DNA evidence from the defense that showed that the Janette Rivers had sex with several males on the day of the alleged rape, and that the DNA didn't include any of the members of the lacrosse team. Nifong violated the law by purposely withholding this evidence from the defense, since the evidence supports the players' claims of innocence. In a newspaper interview, Nifong called the entire team "a bunch of hooligans." Rivers was asked to identify her attackers from a photo lineup that included only photos of team members. As the months went by, and it became clear to everyone that there was no evidence supporting the accusations, Nifong refused to drop the case. In December, after Rivers had changed her story several times, Nifong was forced to drop the rape charges, but kept the case alive by charging the students with kidnapping and sexual offense. Numerous analysts at the time indicated that it would be almost impossible to prove these charges. In the end, Nifong has been totally humiliated. The ethics charges could lead to his losing his job and even his law license. It's also clear that these college students would be in jail right now if they hadn't had to resources to hire top-notch attorneys. There are estimates that each of the charged students had to pay a million dollars in legal fees to fight the rape charges. If you or I or any man were the victim of phony rape charges by some woman, we'd be locked up for life. When a district attorney is willing to lie and selectively withhold evidence, then any of us could be a victim. The question that I want to explore is this: How could Nifong, a district attorney with long experience, have done this? How could he have risked his entire career and all his credibility on this case? I've discussed this kind of insanity many times on this web site. Investors today are <#inc ww2010.weblog.ref e070406 "pursuing a scenario of total mania,"#> similar to the mania that investors showed just prior to the <#inc ww2010.weblog.ref e070328 "the crash of the Tulipomania bubble"#> and the <#inc ww2010.weblog.ref e070406 "the Panic of 1857."#> The mania has also occurred in the political arena, as shown by the intense fury of <#inc ww2010.weblog.ref e070219 "Senator Ted Kennedy screaming angrily at the top of his lungs"#> in February, and <#inc ww2010.weblog.ref e070114 "NBC reporter Chris Matthews was screaming hysterically"#> in January. As <#inc ww2010.weblog.ref e070212 "I discussed,"#> this is caused by "cognitive dissonance," as Boomers' fundamental beliefs, developed when they were college kids burning their draft cards while their girlfriends were burning their bras, are now being challenged by intractable events in Iraq. The result is hysteria, paralysis, and a collection of idiotic proposals emanating from pundits and Congress. Even worse, in a series of disgraceful actions and statements, many Democratic party politicians have risked their careers and credibility on America's loss and humiliation in Iraq. The same is true of many journalists and media outlets, including CNN and the New York Times. So, when you compare Nifong's actions to those of today's politicians and investors, there are great similarities. They're all still living in the 60s and 70s, and they can't believe how things have changed today. (This is what happened to the survivors of World War II in the 1960s -- they couldn't believe that the American public would turn against their fight against Communism.) The New York Times has been fully in bed in Nifong. According to an <#stdurl http://www.slate.com/id/2148546/ "analysis by Stuart Taylor in Slate in August,"#> the Times repeatedly joined Nifong in making false accusations against the students. Perhaps the Times' most misleading paragraph was this: "By disclosing pieces of evidence favorable to the defendants, the defense has created an image of a case heading for the rocks. But an examination of the entire 1,850 pages of evidence gathered by the prosecution in the four months after the accusation yields a more ambiguous picture. It shows that while there are big weaknesses in Mr. Nifong's case, there is also a body of evidence to support his decision to take the matter to a jury." But when the evidence became public, Taylor also reviewed it, and found no such thing. Furthermore, there's some question as to whether the Times reporter even saw the evidence while it was still secret. Last week's story about Don Imus provides some additional insight. The joke he told was incredibly stupid, offensive and insensitive. But it was still a joke, and he's apologized for it repeatedly. He deserved some consequences, but it seems excessive that he lost his entire career, as it now appears, since his radio and TV shows have all been canceled. What I've particularly focused on was a statement by Jesse Jackson that I can only quote approximately, since I heard it quickly on the news. He said (paraphrasing), "This is just the first of many similar actions that will restore the power and influence of the Rainbow Coalition." I doubt that Jesse Jackson cares a hoot about Imus one way or the other, except that the case gives him a political platform. What all three of these separate events have in common is that they represent Boomers reliving the 1970s and 80s, when the organizations they represent had a great deal of power and influence. These are all attempts to recapture that power and influence for their favored constituencies. I don't know the ins and outs of racial organizations, so I won't comment further on the Imus case. But as for the feminists, I did spend ten years writing a book called Fraternizing with the Enemy: A book on gender issues for men ... and for women who care about men. I interviewed thousands of men and women as well as numerous experts, and I reviewed hundreds of research papers on gender issues, including rape, divorce, custody, domestic violence, battering, sexual harassment, and other gender issues. I normally quote various experts when I write articles for this web site, but on this subject I'm the expert, and I'm pretty sure I have some insight into what happened in the Nifong case. With regard to rape, feminists have enormously inflated the figures, making rape seem like a common occurrence. A 1985 woman's magazine claimed that over 25% of all college girls are raped in college, and feminist organizations have repeated this figure for fund-raising purposes. It's perfectly obvious that the figure is nonsense and not believable, since no father would ever send his daughter to a college if he thought she had a 1 in 4 chance of being raped. As it turns out, the actual figure is approximately ½% (i.e., 0.005 or 0.5%). It also turns out that false accusations of rape aren't that rare. When stranger rape is occurs, the chances are 25-30% that the alleged victim will accuse the wrong person as a rapist. In about 6% of rape accusations the rape never occurred at all; it was simply a completely false accusation. Janette Rivers must have assumed that she could take advantage of the Duke lacrosse players and make a lot of money, one way or another. When you look at Nifong's behavior over the entire year, you have to assume either that Nifong was unbelievably stupid and naïve, or that he was perfectly well aware, right from the the beginning, that the Duke lacrosse students were innocent. Since Nifong is clearly not stupid or naïve, my belief is that he was lying, almost from the beginning, and that he was determined to convict students that he knew to be innocent, in order to help himself politically and financially. In today's world, men have no defense to even the most frivolous charges by a woman. Nifong must have been expected an easy ride: Rich, vulnerable young college men facing a young black woman claiming rape. What could be easier? But once the DNA evidence was in, at that point Nifong must have known that Duke players were innocent, but dismissing the charges would have made him political anathema. So he hid the evidence, lied repeatedly, and decided to convict innocent students in order to serve his own political purposes. Men have no defense to even the most frivolous charges of rape and sexual harassment, and even less to frivolous charges of domestic violence. Domestic violence has almost become a joke. Restraining orders are passed out like candy to women seeking advantage in a divorce -- some 70,000 per year in Massachusetts, and it's unlikely that more than a few hundred of those have any reality at all. When a woman sees a divorce lawyer, the lawyer tells her how to make false charges of domestic violence; when a woman sees a "woman's activist," the activist will tell her how to lie and make false charges. A friend of mine wrote to NOW (National Organization of Women), pretending to be a woman going through a divorce, and NOW provided him with a thick packet of information about how to lie about domestic violence. Another friend accompanied his girlfriend down to the town hall, right here in Framingham, Mass., where I live, to inquire about getting support for a divorce. The woman asked, "Was there domestic violence?" She said, "No." The woman responded by providing an extensive list of services -- housing, lawyers, social workers, etc. -- that she could get if she lied and said she was a victim of domestic violence. (It's hardly worth mentioning except for completeness, but of course there are no such services for men.) Stories abound of judges and social workers giving custody to mothers who beat and starve their children, or whose boyfriends abuse and rape the children. These situations are incredibly lucrative to the judges and social workers, because the real father gets upset that his children are being beaten and abused, and they try to get help from the court system. The court system never sides with the father, because they'd make no money from that. Siding with an abusive mother brings in torrents of funding, because the mother's abuse never ends, so the court cases never end. The winners are social service organizations, court clinics, women's shelters, visitation centers, feminist legal services agencies, women's protective services -- all stand to gain sums of money by supporting as many false charges of battering and abuse as possible. In one <#stdurl http://www.fraternizing.org/cgi-bin/D.PL?d=frater.a.batpak "situation from the 90s that I've documented,"#> these feminist organizations earned well over $300,000 by an abusive illegal alien who made false charges of domestic violence in order to keep from getting deported. She had the help of feminist divorce lawyers, feminist immigration lawyers, feminist judges, feminist shelters, and so forth. All of these feminists knew what was going on, but they pursued the false charges anyway, because that's how they make money. According to government statistics, almost all child abuse is perpetrated by the mother, and most child sexual abuse is perpetrated by mothers' boyfriends. Judges and social workers always give custody to abusive mothers because it's so extremely lucrative to them, while giving custody to the father makes them no money at all. The most spectacular related case occurred with Andrea Yates, the Houston mother who killed her five children on June 20, 2001. Feminist organizations went into overdrive raising money to "support" Andrea Yates. It wouldn't surprise me to learn that feminist organizations made millions of dollars from that case. The saddest case was that of Democratic party official Susan Estrich. She was raped in 1974, and began lecturing about the unfair treatment of rape victims. She even wrote a book, Real Rape, where she wrote extensively about this unfair treatment. Then, in 1998, when a woman name Juanita Broaddrick credibly charged President Clinton with having raped her twenty years earlier, Estrich called the woman a liar and became Clinton's front-line defender. Estrich violated the body of her life's work, and sold herself out as a woman and rape victim's defender. She sent the message that it's OK to rape a woman if you're a Democrat. I honestly don't see how Estrich can live with herself. It later turned out, according to former NOW activist Tammy Bruce, that Clinton and Estrich paid off NOW to keep quiet. It's not surprising to me at all that feminist organizations couldn't care less how many women get raped, as long as they get their money. That certainly must be what happened with Mike Nifong, Janette Rivers, and the Duke lacrosse students. Nifong certainly couldn't have cared less whether Rivers was raped -- after all, he never even bothered to speak to her. For him and for feminist organizations, rape is a financial opportunity and income stream, and they care about rape only insofar as it gives them money and political power. =inc ww2010.h2 emily "Emily's List" <#stdurl http://www.emilyslist.org/ "Emily's List"#> is far and away the wealthiest and most powerful political organization in the country, except for the two political parties. A lot of people haven't even heard of Emily's List, even though it has tentacles controlling politics at the national, state and local levels. To see how wealthy and powerful Emily's List is, go to <#stdurl http://www.fecinfo.com/cgi-win/indexhtml.exe?MBF=PACLEAD "the Federal Election Commission web site"#> and click on 2005-2006 Election cycle, Total Receipts, then click on "List Them." You get a huge list of PACs, with Emily's List on top, way ahead of everyone else. The same is true for every cycle since 1994, except for 2004. Have you ever been in court and seen a woman sitting in the front row taking notes on what's going on? That's a court watcher, sent by an organization indirectly funded by Emily's List, who makes sure that the judge rules the right way -- whatever way will bring more money into Emily's List and the organizations it controls. If a judge rules the wrong way, then Emily's list will use its vast power and money to make sure that the judge doesn't get a budget or is removed. This is clearly illegal extortion, but it happens all the time, and no one does anything about it. Even if you haven't heard of Emily's List, you can be sure that all elected officials have. Emily's List affects almost every election, one way or another. Emily's List funds women candidates directly, and supports compliant male candidates indirectly, through "get out the vote" campaigns. If you're a candidate and you're willing to submit to Emily's List's control, and say only what they want you to say, then you get their help at reelection time; otherwise your opponent does (at least in the primary). If you get elected, you're expected to favor legislation that will pour even more money into Emily's List's coffers, and this is almost always legislation that favors more extortion at the court level. This extortion aids feminist organizations that provide the support for Emily's List at the grass roots level, encouraging women to take a part of the money they've received and donate it to Emily's List. This is a HUGE flow of money, propelling a large, corrupt political machine. It has no purpose other than making money -- certainly not helping women or children. In fact, my book documents many feminist policies which actually promote child abuse, or rape and violence against women. The bottom line is that the more women who are raped and beaten, the more money Emily's List groups make, and the more false accusations they can make, and the more money they make. For example, suppose a divorce judge appoints a Guardian Ad Litem (GAL) to investigate a dispute between a mother and father in a divorce. If the GAL resolves the problem in one meeting, then she only gets paid for one meeting, and the judge never appoints her again. If, instead, she encourages the mother to bring false allegations of domestic violence against the father, then she'll get paid for many more meetings, as the outraged fathers tries to get "justice." Little does he know that these women "professionals" simply shuttle the man from one woman to another, so that the GAL and all her girlfriends make more and more of his money. The judge makes out well too, when he imposes child support penalties, a portion of which get kicked back into his budget to be used to dispense jobs and favors. So everyone makes money, and the children get screwed. Emily's List is so huge, wealthy and powerful that no one even questions it -- certainly no one in the press. Even so, Emily's List has turned the divorce system into a sewer, and created a huge criminal enterprise, probably the biggest criminal enterprise in the nation's history, and certainly larger than Tammany Hall. Now, I'm cynical enough to know that many people reading this totally disregard it. In fact, almost every feminist I've ever met is completely dogmatic, and just repeats feminist propaganda without even questioning it. An Emily's List representative could commit murder, and feminists would support her. That's how sick things are. Most readers will have guessed from my extremely strong views on the subject that I have a personal experience that goes beyond the thousands of men, women and experts that I interviewed over the years. My personal experience occurred in the mid-1980s. There was a social worker named Carrie Phillips who was working for the Middlesex Court Clinic, in Cambridge, Mass. She told me, "We always do what's best for the children. Whenever there's a disagreement between the mother and the father, we always side with the mother, because that's what's in the best interest of the children." Ms. Phillips was following the policies set down by Barbara Hauser, who ran the clinic, and never met a father that she didn't hate. Now, since most child abusers are mothers, especially single mothers, and most child sexual abusers are mothers' boyfriends, Ms. Phillips was admitting criminal activity. Since Ms. Hauser always sides with the mother, even when they know that the mother is abusive, then they're siding with abusive mothers. It's against the law to give custody to abusive mothers, but they do it because that's how they make money and pad their budgets. The same can be said of Dr. Mary Scott of Longwood Pediatrics in Boston, who put in writing a statement that it's against her policy, and the policy of her clinic, that any child under two years old should be permitted to spend more than two hours at a time with their divorced father. Once again, this is criminal activity, because in the case of an abusive mother, or a mother with an abusive boyfriend, it's her policy to give the mother and her boyfriend as much time as possible beat, starve, abuse and rape the child. It's time that we stop thinking of these women as hard-working public servants, when they knowingly and admittedly give custody to mothers who they know are abusive. It's time for us to start thinking of them as criminals who are allowing children to be beaten, starved, abused and raped so that they can pad their own wallets. Saying that these women are helping society is like saying that a child prostitute pimp is helping society by giving employment to teenaged girls. The same can be said for judges and legislators who suborn these illegal activities. And I'm not talking about something that happens only occasionally. I've interviewed thousands and thousands of divorced women and men, and second wives, and the story is remarkably consistent. Virtually no one denies that social workers, psychologists, pediatricians, judges, and other divorce court workers side with mothers, even when they know that the mother is responsible for beating, starving, abusing or raping the children. What makes this all possible is Emily's List. Because of its huge wealth and power, it controls almost every Democratic party seat in Congress. Emily's List claims that its only purpose is to support women candidates and to keep abortion legal, but you can be certain that a pro-abortion Democratic party woman candidate who favors equal parenting in divorce will receive only vitriolic opposition from Emily's List. Emily's List's main legislative function is to make sure that laws are maintained that permit the criminal activities to continue. For example, a law that allowed a social worker to be prosecuted for siding with a divorced mother who knowingly beats, starves and rapes her children would be quickly squelched by Emily's List. Emily's List's other function is to make sure that federal domestic violence programs get funded. The "Violence against women act" (VAWA) has poured hundreds of billions of dollars into an army of women whose only function is to accuse men of domestic violence. It's exactly the same as if the VAWA were paying billions of dollars to the KKK to seek out violent blacks. People do what they're paid to do. And here's another thing that few people realize: None of these programs do women any good. No one even claims that they do. Feminists don't claim that these programs have reduced rape, domestic violence, sexual harassment, or anything else. The reason they don't is because it would imply that their budgets should be reduced. For these feminist organizations, the more women who are beaten and bloodied the better, because the feminist organizations make more money. These programs spend billions of dollars and do nothing but promote hatreds that last for decades, and destroy children's lives. Even more important to Emily's List is the blind, total obedience that feminists pay to it. As I said, an Emily's List representative could murder someone in cold blood, and feminists would support her. It's a total, unquestioning, almost robot-like devotion by many ordinary women. A criminal organization like Emily's List requires for its success a large army of women who are so blinded to the feminist propaganda that they walk in lockstep with and obedience to the criminal enterprise and its money-generating machine, without even a whimper of protest about the people, especially millions of children, whose lives are being destroyed. Police are getting more into the act as well. Fathers are automatically assumed to be dangerous, and they're harassed and jailed at will. The mainstream media plays an important role in all of this. Here in Massachusetts, the Boston Globe is almost totally under control of Emily's List, regularly publishing fund-raising press releases from feminist organizations as if they were news. In the 15-20 years I've researched this issue, I can't recall ever seeing an article that challenged feminist fund-raising press releases; or that spotlighted fathers' grievances in divorce; or that spotlighted the plight of second wives in divorce. With regard to this last point, second wives are vitriolically hated by feminist organizations, because they're women who completely contradict everything that feminists say. If you want to really understand what's going on in divorce courts, just start talking to second wives, as I have. You get a picture you've never seen before. But to Emily's List, to the Boston Globe and other mainstream media organizations, second wives are simply non-persons. The power wielded by Emily's List over the Boston Globe, over Democratic party politicians, and the numerous organizations that it funds and controls is enormous. Anyone in the divorce system who doesn't conform is dealt with viciously and quickly. The pervasiveness of the control this criminal enterprise has over feminists and ordinary women speaks to the degree of political control and domination that Emily's List and feminist organizations have acquired over society as a whole. Now, I don't know if Mike Nifong has any direct relationship with Emily's List. He's a Democratic party politician, so he's certainly aware of them, and may even have received indirect support from them in one of his election campaigns. But at the very least, Nifong followed the standard Emily's List and NOW prescription of using purposely using false accusations for political power and fund raising. Whether Emily's List was involved in the Duke case or not, Nifong's purposeful pursuit of vulnerable young boys whom he knew to be innocent is Emily's List policy and NOW's policy. Mike Nifong's defeat represents a cultural change, because prosecutors were forced to dismiss false accusations against vulnerable male college students. This result should make prosecutors more reluctant to make false accusations for political purposes. Things are changing in other ways as well. A <#stdurl http://www.humanevents.com/evansnovak.php?id=18249#3 "detailed study by published by Evans and Novak Political Report"#> published in the weeks following the November 2006 election showed Emily's list, despite its vast wealth, is doing worse politically. The report found that "of the 19 competitive House races in which EMILY's List backed and funded a candidate, only two won," after a result in 2004 that was almost as bad. "That Emily's List did so poorly, despite the [strongly pro-Democratic trend in 2006] trend, provides yet another interesting confirmation that this election was a non-ideological confrontation between the two parties, decided mostly on the basis of a failed Iraq occupation and a corrupt Republican establishment." The changes in politics in general and "gender politics" in particular are accelerating, thanks to huge generational changes. Today's young adults (called the Millennial generation or Generation Y) are quite different from the Boomers and Generation-X. They grew up during the chaos of the 1990s when they didn't know if or when they'd ever see their fathers again, and all their parents did was argue vitriolically. It's not that today's young people are pro-feminist or anti-feminist (just as they aren't pro-war or anti-war); it's that they're just sick of all the fighting and bickering, and see feminism as one major source of that bickering. As America heads deeper into a generational Crisis era, the country as a whole is increasingly putting national survival ahead of individual and ideological interests. Large political organizations, including the political parties themselves, are being forced to realign themselves and redefine how they do business, just as they had to do during America's last two Crisis eras. During the Civil War crisis, party realignments ended the Whig Party and created the Republican Party. During the World War II crisis, realignments in both major political parties were accompanied by destruction of the corrupt Tammany Hall machine, causing the entire organization to go out of existence 20 years later. In the current Crisis era, we can expect major realignments in both Democratic and Republican parties and, thankfully, the destruction of the corrupt powers of the huge Emily's List machine. Whether Emily's List will even continue to exist depends on how well it adapts itself to the new generation and to the country's changing needs. (This article was updated and expanded on 28-Apr) =eod =// &&2 e070419 President Bush gives Sudan "one last chance" to end Darfur genocide =data ww2010.weblog.y2007.e070419.head President Bush gives Sudan "one last chance" to end Darfur genocide =data ww2010.weblog.y2007.e070419.keys darfur, genocide, sudan, China, omar hassan al-bashir, jesse jackson, joseph biden, mia farrow, steven spielberg =data ww2010.weblog.y2007.e070419.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070419.date 19-Apr-07 =data ww2010.weblog.y2007.e070419.txt1 But is Steven Spielberg aiding the genocide? =data ww2010.weblog.y2007.e070419.txt2 =inc ww2010.xr.related1 right darfur 1 Speaking on Wednesday at the U.S. Holocaust Memorial Museum, President Bush said he would give U.N. Secretary General Ban Ki-moon to try diplomacy, but <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2007/04/18/AR2007041801970.html "delivered this warning to Sudanese President Omar Hassan al-Bashir:"#>

"President Bashir should take the last chance by responding to the secretary general's efforts and to meet the just demands of the international community. I'm looking at what steps the international community could take to deny Sudan's government the ability to fly its military aircraft over Darfur, and if we don't begin to see signs of good-faith commitments, we will hear calls for even sterner measures. The situation doesn't have to come to that."

So, there he goes again, threatening to invade another country -- Sudan -- a country having a real civil war. Gosh, the Democrats must be FURIOUS. Imagine how angry Senator Joseph Biden must be, thinking of American troups in the middle of a civil war, having to keep both sides apart. Didn't the American people speak loud and clear last November, when they elected the Democratic congress, that we didn't want our forces in the middle of a civil war? Wow, the Democrats must be going nuts. Ummmm, no they aren't. Biden is unhappy with the Bush Administration, all right, but only because the President isn't moving quickly enough. Here's what Biden said on Wednesday: "I have little faith Bashir will keep his promise. He will just keep stringing us along. Instead of more threats, we need to act, now." How should we act now? Here's what <#stdurl http://news.yahoo.com/s/ap/20070411/ap_on_go_co/us_sudan "he said just one week ago, on April 11:"#>

"I would use American force now. I think it's not only time not to take force off the table. I think it's time to put force on the table and use it. [2,500 U.S. troops could] radically change the situation on the ground now. Let's stop the bleeding. I think it's a moral imperative."

Well, it's a moral imperative to get US troops in the middle of the Darfur civil war. Who would have guessed that? Actually a lot of so-called "anti-war advocates" have been turning into war advocates in Darfur. Former UN Secretary General Kofi Annan, who <#inc ww2010.weblog.ref e061212 "never tired of bad-mouthing America and President Bush"#> for intervening in Iraq, frequently called for intervention in Darfur. And in 2004, I was startled to hear <#inc ww2010.weblog.ref e040727 "the great peacenik Jesse Jackson call for sending American troops to Darfur."#> You see, Dear Reader, there are "good wars" and "bad wars" when it comes to sending American troops in. Iraq is a "bad war," but Afghanistan is a "good war," and now Darfur is a "good war." That's why the Democrats want us to KEEP ON fighting the Afghan war, and want us to START fighting in the Darfur war, but want us to STOP fighting in the Iraq war. And people wonder why I call the Congress a "clown circus." This unprincipled bunch of politicians simply goes along with whatever the latest poll results say. The only politicians I can think of who have shown any principles at all are Hillary Clinton on the Democratic party side, and John McCain on the Republican party side. Most of the rest are pretty worthless. =inc ww2010.h2 spielberg "Steven Spielberg" If the situation in Darfur weren't so tragic, and if there weren't so many lives at stake, this would be worthy of a televised situation comedy. There are groups of "stop the Darfur genocide" groups around the world, and they've begun to set their sights on China. Why? Because China is blocking any UN Security Council resolutions against Sudan. Why? Because China, through its leading energy companies -- Sinopec, China National Petroleum Corp., and CNOOC -- are <#stdurl http://money.cnn.com/2006/02/08/news/international/africa_fortune/index.htm "buying up every available drop of African oil"#> that they can get. So we have actresses like Mia Farrow looking for ways to pressure China to stop supporting Sudan in the U.N. Now, China is very big and powerful, and really doesn't give a good goddam about the politically correct motivations that seem to drive Western politicians. But, by golly, Mia Farrow has found a way to pressure China: by threatening to <#stdurl http://www.csmonitor.com/2007/0418/p01s03-woaf.html?s=hns "label the 2008 Summer Olympics in Beijing as the "Genocide Olympics.""#> "[One] thing is more important to the Chinese than their access to Sudan's oil, and that's the success of their Olympic Games," says Farrow. Well, it turns out that Steven Spielberg is playing a very big part in the Beijing Olympics -- he's orchestrating the huge opening and closing ceremonies. And so, Mia Farrow is saying that Steven Spielberg is aiding and abetting genocide in Darfur. According to <#stdurl http://www.boston.com/news/globe/editorial_opinion/oped/articles/2007/04/16/artists_abetting_genocide/ "a Boston Globe article:"#>

"Oddly, Spielberg has declared publicly that while aware of genocide in Darfur, he only recently became aware of China's involvement. But the facts are no secret. Beijing has unstintingly provided large-scale economic, military, and diplomatic support to the Islamist regime in Sudan's capital, Khartoum. Spielberg has now sent a letter urging China to use its influence constructively. But that gesture is not enough."

Steven Spielberg, of course, has very firm ideas about good and bad wars. World War II was a "good war" to him because of the Holocaust, and the Vietnam war and other wars were "bad wars" to him, presumably because there are few Jews in Vietnam. So, it will be interesting to see who ends up getting blamed for the continuing genocide in Darfur. It's hard to blame President Bush, since he's actually taken the political lead in advocating international intervention in Darfur. It certainly is ironic that Steven Spielberg is receiving blame. From the point of view of Generational Dynamics, the Darfur civil war is currently the only generational Crisis war in the world right now. The Darfur war started in the 1970s in the form of classic disputes between farmers and herders, similar to the disputes between America's farmers and cowboys in the 1800s. But in Darfur the disputes escalated, and became steadily worse in the 1980s and 1990s. In 2003, it escalated to a crisis war, and by 2004, full scale genocide was in full progress. As I've said from the very beginning, <#inc ww2010.weblog.ref e040628 "the U.N. is completely irrelevant,"#> because a crisis war can't be stopped until it's run its course. I've written about this many times, as various politicians, month after month, have called for efforts to stop the Darfur massacre. A crisis war is a generational war -- meaning that the war comes from the masses of people, entire generations of people -- not from the politicians. The politicians couldn't stop it if they wanted to. A generational crisis war is a huge force of nature, a raging typhoon, a tsunami -- and it can't be stopped until it's ready to be stopped. There are no other crisis wars going on in the world today, although <#inc ww2010.weblog.ref e070326 "the Sri Lanka civil war"#> between Tamil Tiger rebels and government forces is escalating into a new crisis war. The Bosnian war in the 1990s was a crisis war; the Iran/Iraq war in the 1980s was a crisis war; the "killing fields of Cambodia" in the 1970s was a crisis war. And there have been others. The biggest crisis war so far was World War II, which actually can be thought of as a collection of dozens of individual crisis wars around the world. Now, 60 years after the end of World War II, there are few people left with personal memories of the horrors of that war. Generational Dynamics predicts that we're headed for a new crisis war, a Clash of Civilizations world war. This war might begin next week, next month, next year, or later, but it's certain to happen, sooner rather than later. When that happens, the Darfur genocide will the be the norm for a few years, rather than the exception. =eod =// &&2 e070418 Some thoughts about the Virginia Tech massacre =data ww2010.weblog.y2007.e070418.head Some thoughts about the Virginia Tech massacre =data ww2010.weblog.y2007.e070418.keys virginia tech massacre, cho seung-hui, south korea, 386 generation, kwangju massacre, gwangju massacre =data ww2010.weblog.y2007.e070418.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070418.date 18-Apr-07 =data ww2010.weblog.y2007.e070418.txt1 The interesting question is how it will affect the people of Korea. =data ww2010.weblog.y2007.e070418.txt2 It's easy to try to make grand generalizations about what happened on Tuesday, but in one sense there really isn't that much to say. The United States has 300 million people, and out of that many people, you're going to get an occasional psychotic mass murderer. The massacre is big international news. Every country in the world, especially throughout Europe and Asia, is giving this page one coverage. <#inc ww2010.pic g070417.jpg right "" "Virginia Tech students hold a candlelight vigil on Tuesday evening. (Source: CNN)"#> Of course, it's <#stdurl http://www.iol.co.za/index.php?set_id=1&click_id=22&art_id=nw20070417223508327C785596 "huge news in South Korea,"#> because the alleged killer, Cho Seung-Hui, is Korean. It's affecting Koreans in many ways -- even creating a sense of national shame. And there's one thing that never would have occurred to me -- Koreans in America are afraid of a backlash, like the backlash against Muslims after 9/11. Is there a generational explanation? It's hard to see how. It's true that Generation-X, the generation born during the Awakening era in the 1960s-70s are in what William Strauss and Neil Howe call the "Nomad archetype," disaffected, most likely to be in trouble with the law, but nothing like this. That explanation doesn't go anywhere anyway, because Cho Seung-Hui is 23 years old, in the new Millennial generation. Personally, what this incident reminded me of was something that happened in 1966, when <#stdurl http://en.wikipedia.org/wiki/Charles_Whitman "Charles Joseph Whitman, was a student at University of Texas in Austin."#> On August 1, shortly after his mother divorced his father, who had beaten him, he killed his mother and his wife. Then he climbed the 27-story observation tower on the college campus, and killed 15 people with a shotgun, wounding 31 others. Now Whitman was born in 1941, in the "nice" Silent generation, and he did the same thing that Cho Seung-Hui did. So this kind of psychosis affects all generations, and then only very, very rarely. All the political talk in the last couple of days has been about gun control. In a country where any school kid has no trouble buying cocaine if he wants it, these people start talking about banning guns. It's just more fantasy drivel from politicians who feel it's more important to say something stupid than to say nothing. At least I haven't heard anything about video games this time. A German expert was talking about the subject on the BBC on Tuesday. He said that Germany has very strict gun control, but even so there have been 7 school killing incidents in Germany in the last few years, six with guns and one with knives. Anyone determined to get a gun can get one, no matter how strict the laws. I'm also reminded of an incident that occurred in Cambridge, Mass., around 10-15 years ago. A young MIT student was walking along Memorial Drive beside the Charles River, when a small group of local high school students came up to him, beat the crap out him, and killed him with their fists. It was a completely random killing. There are just people like that. Some people are too shy, some people are too noisy, and some people are too violent. When you have 300 million people, you're unfortunately going to get some who are extremely undesirable. So what's the long view of this incident? The most compelling outcome, if the Koreans' worst fears come true, would be that there is indeed some sort of backlash. The only reason to think that might happen is that this is a time of increasing xenophobia in general, as I discussed with respect to the <#inc ww2010.weblog.ref e070409 "harsh trade sanctions that Congress is planning against China."#> And yet, I don't see the same general American xenophobia against the Koreans that I see against the Chinese. But a more significant outcome can be imagined if we turn the above scenario around. The Virginia Tech incident may not substantially affect Americans' views of Koreans, but it might affect Koreans' attitudes toward Americans. Recall that in February I wrote a <#inc ww2010.weblog.ref e070216 "summary of Korean politics since World War II and the Korean War."#> Possibly the most significant event in that entire history occurred on May 18, 1980 -- the Kwangju (Gwangju) massacre. Student anti-government demonstrations were put down by the armed forces, and dozens of students were killed. This event led, in a series of elections, to government control by leaders from the 386er generation (the Korean generation corresponding to our Generation X). Because of unproved allegations of involvement by U.S. armed forces, anti-Americanism developed among the 386ers. And <#stdurl http://www.gorkhapatra.org.np/content.php?nid=16715 "here's an article, written several day ago, before the Virginia Tech massacre,"#> that describes how these feelings have persisted to today. So, as of today, we have the 1980 Kwangju massacre, allegedly supported by the U.S., and we have Tuesday's Virginia Tech massacre, perpetrated by a renegade South Korean student. Among the principles of Generational Dynamics is that history can be structured by identifying huge events, such as crisis wars and Awakening eras. These huge events must occur, and can often be predicted. But it's impossible to predict the minor, day-to-day occurrences that might trigger great events. Who would have predicted that the the <#inc ww2010.weblog.ref e060206 "the publication of Danish cartoons depicting Mohammed"#> -- a tiny decision -- would have triggered enormous confrontations between Muslims and Westerners? Who would have predicted that a terrorist act by Hizbollah -- capturing two Israeli soldiers near the Lebanon border -- would have caused <#inc ww2010.weblog.ref e061223 "Israel to panic and attack Lebanon within four hours,"#> with no plan and no objective? Initial news reports indicate that Cho Seung-Hui's actions have been an enormous shock to the South Korean public. The connection to the Kwangju massacre is not obvious to Americans, but it must be painfully and conspicuously obvious to the Koreans of the 386 generation. It will be worthwhile watching, in the next few weeks and months, whether the actions of Cho Seung-Hui on Tuesday are forgotten quickly, or whether they have a lasting significance. =eod =// &&2 e070415 In Turkey, May 16 election may bring Islamist President into power =data ww2010.weblog.y2007.e070415.head In Turkey, May 16 election may bring Islamist President into power =data ww2010.weblog.y2007.e070415.keys turkey, akp, justice and development party, recep tayip erdogan, seljuk turks, anatolia, osman, ottomans, ottoman empire, byzantine empire, fall of constantinople, holy league, crimean war, young turks, ataturk, mustafa kemal, orthodox vs muslims =data ww2010.weblog.y2007.e070415.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070415.date 15-Apr-07 =data ww2010.weblog.y2007.e070415.txt1 More than 200,000 secularist Turks protested on Saturday =data ww2010.weblog.y2007.e070415.txt2 against <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-6557304,00.html "Turkey's possible return to its old Ottoman empire days,"#> when the Muslim Caliphate was located in Istanbul, and the entire country (and empire) followed strict Muslim Sharia law. =inc ww2010.blocking.start <#inc ww2010.pic g070414a.jpg right "" "More than 200,000 secularist Turks on Saturday protested the possible candidacy of Recep Tayip Erdogan from the Islamist AKP party. (Source: BBC)"#> Turkey has been a secular state since 1924, when Ataturk, the revered founder of modern Turkey, abolished the Caliphate and established secular rule. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic g070414c.jpg left "" "Recep Tayip Erdogan and his wife, Emine. Emine is controversial because she always wears a headscarf, considered by secularists to be a sign of a hidden Islamist agenda. (Source: BBC)"#> However, in a March 2004 election, the Islamist AKP (Justice and Development Party) made substantial gains in parliamentary elections. As a result, AKP's leader, Recep Tayip Erdogan, has become Prime Minister. Erdogan will announce next week whether he will run for President in the May 16 election, and if he does then he's favored to win, which would give AKP effective control of the entire government, except for the army. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic g070414d.jpg right "" "Onur Oymen, leader of the secularist Republican People's Party (CHP), is also running for President. (Source: BBC)"#> According to <#stdurl http://memri.org/bin/latestnews.cgi?ID=IA34007 "some Turkish political analysts,"#> AKP control will be a threat to the core principles of the modern Republic of Turkey, and may even permit AKP to change the constitution and make Turkey into a religious state. A further fear is that the strongly secularist Army will intervene. One of Erdogan's opponents is Onur Oymen, leader of the secularist Republican People's Party (CHP). "If you make religion as the cement of our society, then you'll have no more democracy in Turkey," said Oymen to the BBC. "The single [greatest threat] to our society is the anti-secular movement, and the Prime Minister, unfortunately, has become a symbol of those who are attacking the secular principles of Turkey." =inc ww2010.blocking.end =inc ww2010.h2 history "Brief history of Ottoman Empire" First off, the Turks didn't come from Turkey; Turkey was named after the Turks. The Turks came from central Asia in waves, especially after 1000 AD, and conquered Anatolia (the Asian portion of what is now Turkey). The historical surprise is that the Turks wholeheartedly adopted the Sunni Muslim religion from the Arabs whom they had conquered. The result was the Great Seljuk Empire. <#inc ww2010.pic seljuk.gif center "" "Arrival of Seljuk Turks in 1100 AD: dark area was controlled by Muslim Arabs; medium dark area was controlled by Seljuk Turks; light crossed area were the remaining pieces of the (Orthodox Christian) Byzantine Empire, centered around Constantinople; dark crossed area was Slavic area, converting to Orthodox Christianity."#> What was the most important war of the last millennium? There are many candidates, including our own Revolutionary War. The conquests by Genghis Kahn and the Mfecane in Africa are on the list. But right near the top you'd have to put the Fall of Constantinople in 1453, a conquest that changed the world more than anything until the two World Wars. The Ottoman tribe, led by its chieftain, Osman, began expanding around 1300. When it conquered Constantinople in 1453, and renamed the city Istanbul, it was the end of the Byzantine empire; and since the Byzantine empire had been the eastern portion of the Roman Empire, it was also the end of the Roman empire. By the 1600s, the Ottoman empire was the greatest empire in the world. The effect on Russia was enormous. In 1472, the Catholic Pope offered Sophia, a Byzantine princess, to Russia's Ivan the Great, asking him to join the Roman Church. Ivan did marry Sophia, but also declared that Moscow was the third Rome (with Rome and Constantinople being the first two), the head of the "true" or "Orthodox" Christian Church. Ivan immediately took the title of Tsar, and thus became the first Tsar of the new Tsarist Russia. ("Tsar," or "Czar," was derived from the name of the Roman Emperor Caesar, as is the German word "Kaiser.") Thus, Ivan would be not only the head of Russia, he would also be head of the Orthodox Church -- and never part of the Roman Church. =inc ww2010.h2 league "War with the Holy League and Russia" The Ottomans won one battle after another, with few defeats, but the turning point came in 1683, when the (Christian) Holy League destroyed the (Muslim) Ottoman army as it was assaulting Vienna. This was a historic turning point when the balance of power shifted from the Muslims to the Christians. The Holy League joined with Russia and attacked the Ottomans on several fronts, inflicting unprecedented territorial losses. In 1699, the Ottomans were forced to sign the Treaty at Karlowitz, a moment remembered by Muslim scholars today as a "calamitous defeat" of the greatest magnitude. The Ottomans and the Russians became bitter enemies and fought several wars. In the 1850s, the Ottomans defeated the Russians in the Crimean War, but only with the help of the English and French. This was very significant because it was the first time that large numbers of European forces were present on Ottoman soil. This resulted in enormous changes in the decades to come, because of the Turkish people's reaction to European forces encroaching on Ottoman lands throughout the empire. =inc ww2010.h2 young "The Young Turks and Ataturk" After the Crimean War, the Ottomans continued to lose prestige and additional parts of their empire. In the generational Awakening era that followed, there was increasing discontent. In 1889, secret societies began to form with the intent of developing a Turkish culture -- as opposed to an Ottoman culture. In 1908, the Young Turks, formed from these societies, launched a rebellion that engulfed the entire empire. In 1914, the Ottomans entered World War I on the side of Germany, resulting in enormous dislocations. Of the three million men drafted for the army, half of them deserted. Inflation was enormous, resulting in a 2500 percent increase in cost of living between 1914 and 1918. A famine in Syria and Lebanon (still part of the empire) in 1915-16 claimed 100,000 lives. Turkish nationalism began to grow during World War I because it was becoming clear that only the Turkish people would remain from the Ottoman Empire, and furthermore, some Europeans wanted to even break off even pieces of Turkey. By 1919, there were so many Allied forces in Istanbul that the Ottomans feared that the Allies intended to keep Istanbul for themselves. Actually, there were three separate Muslim identities within the Ottoman Empire that formed in the Mideast around this time: The Turkish identity (in what is now Turkey), the Arab identity (Saudi Arabia), and the Persian identity (Iran). With the encouragement of the English, the Arab nationalists turned against the Ottomans. Another group that turned against the Ottomans must be mentioned: The Armenians. This Orthodox Christian population lives in the midst of the Muslim population of what was the eastern portion of the Ottoman Empire. An Armenian uprising that occurred in Istanbul in 1894-96 was brutally put down, with a large-scale massacre of Armenians in Istanbul. In 1914, Russia organized four large Armenian volunteer guerrilla units to support the war effort against the Ottomans. In reaction, the Ottomans began deporting the entire Armenian population -- millions of people -- resulting in deaths of over a million Armenians in what amounted to a death march. This event, known as the "Armenian genocide," is hotly disputed by Turkish politicians today, and is still a big part of the debate among EU politicians as whether Turkey should join the European Union. <#inc ww2010.pic g070414b.jpg right "" "Statues of Ataturk, the revered founder of modern Turkey, are everywhere today. (Source: BBC)"#> Finally, in October, 1922, the Turkish Republic was declared, putting an official end to the Ottoman Empire after 600 years. The president of the new nation was Mustafa Kemal, an activist who had led the fight to keep Turkey from being split up among the Europeans. Mustafa Kemal, who later took the name Ataturk (father of the Turks), led the new country in a distinctly Turkish direction. He did everything he could to sweep away the Ottoman past. He abandoned the Ottoman policy of territorial expansion, required Turks to wear Western-style clothing, abolished polygamy, adopted the Christian Gregorian calendar, and adopted the Latin alphabet for writing in the Turkish language, which had previously been done in Arabic script. He even sought to purge Arabic and Persian words from the Turkish language. Perhaps most important is that he sought to secularize Turkish society. The caliphate, the office of the supreme spiritual leader for Sunni Muslims worldwide, was abolished. Religious schools were closed, and Islamic law courts were dismantled. A new constitution separated religion from the state, and gave all male Turkish citizens over 21 the right to vote, As for the other pieces of the Ottoman Empire, they were turned into independent nations: Iraq in 1924, Saudi Arabia in 1932, Syria in 1945, Lebanon and Jordan in 1946. =inc ww2010.h2 revival "The revival of Islam in Turkey" Turkey and Russia have been in each other's face every since the Turks conquered Constantinople, so it's important to mention one more parallel: The destruction of the Ottoman empire occurred at the same time as Russia's Bolshevik Revolution. The Turks abandoned Islam as a state religion, and the Russians abandoned Orthodox Christianity as a state religion. Both nations turned their backs on their own religions and on many centuries of their own history. Since the breakup of the Soviet Union in the early 1990s, the Orthodox Church has been making a strong comeback in Russia. And now we see that Islam may be making a comeback in Turkey. That's why the May 16 election is potentially so significant. The AKP and Prime Minister Erdogan have been playing down the Islamist angle, pointing to a secularist agenda and their continued intention to join the European Union. And if you go to read analyses of the upcoming election, you'll find that they mostly treat the idea of an Islamist government as little more than a change in political party, based on popular dissatisfaction with the economy, and so forth. But from the point of view of Generational Dynamics, this goes far deeper than "it's the economy, stupid." It's as if America had decided, in World War II, to throw away our Constitution and go to some other form of government, and now we were talking about re-adopting the old Constitution. This would be a debate of enormous historical importance. The same is true of the Islamist revival in Turkey. It will run very deep and revive ancient feelings, loves and hatreds. There are very good reasons why the Asian Turks adopted Islam when they conquered Anatolia from the Arabs a millennium ago, and all of those reasons will come to the fore and be remembered once again. We never know what minor events are going to trigger enormous changes. One example is the <#inc ww2010.weblog.ref e060206 "the Danish cartoon controversy."#> In this case, a tiny decision by a Danish magazine to publish cartoons depicting Mohammed exploded into worldwide confrontations between Muslims and Westerners. Maybe the AKP candidate, whether it's Erdogan or someone else, will lose the May 16 election; or maybe he'll win, and the world will go on as if nothing special happened. But with Islamist <#inc ww2010.weblog.ref e070413 "Sunni groups around the world linking up with al-Qaeda,"#> it's hard to see how an Islamist victory in Turkey would be anything but very significant. It will stir Muslim passions in Chechnya and southern Russia, in southeast Asia, in the Mideast and in the Maghreb (northern Africa). It will stir fears among the Western Christians in Europe, the Orthodox Christians in Russia, Ukraine, Georgia and Armenia, and the Shia Muslims in Iran and Pakistan. From the point of view of Generational Dynamics, we're headed for a Clash of Civilizations world war with absolute certainty but, as usual, we don't know what will trigger that war or whether the trigger will occur next week, next month, next year, or later. For at least the next six weeks, it's well worthwhile to keep a close eye on Turkey, and an election that might not or might change the world. =eod =// &&2 e070413 Terrorist bombings in Algiers and Casablanca =data ww2010.weblog.y2007.e070413.head Northern Africa in shock after massive terrorist bombings in Algiers and Casablanca =data ww2010.weblog.y2007.e070413.keys algiers, algeria, casablanca, morocco, al-qaeda, al-qaeda in mahgreb, mahgreb =data ww2010.weblog.y2007.e070413.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070413.date 13-Apr-07 =data ww2010.weblog.y2007.e070413.txt1 The usual suspects claim credit: Al-Qaeda's branch in North Africa. =data ww2010.weblog.y2007.e070413.txt2 <#inc ww2010.pic g070412a.jpg right "" "People running from the site of the Algiers suicide bombing (Source: news.com.au)"#> Three suicide bombers <#stdurl http://www.news.com.au/story/0,23599,21541601-401,00.html "blew themselves up Wednesday in Algiers,"#> killing 33 people. The act struck <#stdurl http://www.canada.com/topics/news/world/story.html?id=b776d7b1-f6d8-4927-b738-927d73b09cf4&k=66906 "fear in the entire city,"#> because it signaled a return to the violence that plagued Algeria in 1992. At that time, the army canceled an election that an Islamic group appeared likely to win, and the resulting war and numerous terrorist attacks killed hundreds of thousands of Algerians. After several years of relative peace, it appeared to the people of Algeria that most of the violence was behind them, but this new attack seems to indicate that it's starting again. "The worry is that this is almost a declaration of war because they targeted the Prime Minister's office and the Interior Ministry, which handles terrorist," according to one analyst on TV. Last September, I posted <#inc ww2010.weblog.ref e060915 "an article about an Algerian terrorist group called GSPC (Salafist Group for Preaching and Combat)"#> that had just announced that they were linking with al-Qaeda. Their goal was to establish an Islamist government in Algeria. They also threatened France, which has close ties with Algeria. <#inc ww2010.pic g070412b.jpg left "" "An Islamist web site claims that these three children are the suicide bombers. (Source: Spiegel)"#> Since then, the group has renamed itself "Islamic North Africa" or "Al Qaeda in the Islamic Maghreb." (Maghreb is the Arabic word for North Africa.) This group <#stdurl http://www.spiegel.de/international/world/0,1518,476609,00.html "took responsibility for the bombings on an Internet web site"#> picturing the three suicide bombers, claiming that they used a total of 1,900 kilograms of explosives. From the point of view of Generational Dynamics, this is part of a continuing process of "identity group" formation. Al-Qaeda is gaining in strength, with groups stretching from southeast Asia to the Mideast to the Mahgreb and from there up to Spain and France. It's fashionable among today's pundits to blame al-Qaeda's gain on the United States, and especially on the war in Iraq. But in fact, the growth and strengthening of al-Qaeda has been going on at least since the 1980s. Al-Qaeda terrorist attacks in the 1990s included the 1993 World Trade Center bombing, the bombing of the USS Cole, and the bombing of two American Embassies in Africa. Since 2000, there has been 9/11, of course, but also several bombings in southeast Asia by the group Jemaah Islamiah, which also played a part in the planning of the 9/11 bombing. Other al-Qaeda linked terrorist attacks have been the London subway bombing, the Madrid subway bombing, and bombings in Egypt, in Turkey, in Pakistan, in India, and in other nations. Al-Qaeda is experience a rebirth and a surge in Afghanistan and Pakistan. From the point of view of Generational Dynamics, this is the process of "identity group formation" that can occur very rapidly during generational Crisis eras. The al-Qaeda leaders are trying desperately to gain control of an actual country -- Afghanistan, Iraq, Turkey, Saudi Arabia, Egypt, Somalia, Algeria, Morocco, for example. Once they've accomplished that, then they will command the resources to wage regional wars and make demands in the United Nations General Assembly. As I've been saying for several years, Generational Dynamics predicts that we're headed for a Clash of Civilizations world war with absolutely certainty, but doesn't predict that scenario that will lead to that war. The increasing strength and reach of al-Qaeda suggests that one possible scenario is al-Qaeda control of some nation, leading to an escalation that pulls in other nations, resulting in a major war. In the meantime, the people of Algeria are preparing for the worst. =eod =// &&2 e070411b Price of food is skyrocketing in India and China =data ww2010.weblog.y2007.e070411b.head Price of food is skyrocketing in India and China =data ww2010.weblog.y2007.e070411b.keys food prices, crop prices, india, china =data ww2010.weblog.y2007.e070411b.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070411b.date 11-Apr-07 =data ww2010.weblog.y2007.e070411b.txt1 In fact, crop prices are increasing around the world, =data ww2010.weblog.y2007.e070411b.txt2 according to <#stdurl http://online.wsj.com/article/SB117608539258763747.html "an article in Monday's Wall Street Journal."#> (The article can also be found <#stdurl http://www.truthabouttrade.org/article.asp?id=7404 "here"#> and <#stdurl http://www.azcentral.com/business/consumer/articles/0409crops09-ON.html "here."#>) <#inc ww2010.pic g070410.gif right "" "Rate of food price inflation in US, China, India and Turkey. (Source: WSJ)"#> According to the report, US food prices rose 3.1% in the last year, but they rose 5-10% or more in countries around the world. I'd like to focus on one particular paragraph in the story:

This paragraph is interesting because every sentence is wrong, or at least misleading:

First sentence: "Doomsday predictions of a major food shortage in China and elsewhere have circulated for years but haven't materialized." Almost everyone misunderstands this. When there's a food shortage, you don't have large masses of people dying from starvation, as the "doomsday" word suggests. Instead, a food shortage causes increases in food prices. If a man has to work for an hour to earn enough to feed his family for the day, then that's one thing; but if food prices go up and he has to work 7 or 8 hours to earn enough to feed his family, then he has nothing left over for rent or clothing or other expenses. And if the family lives in a "megacity" packed with 10 or 20 million or more people with no place to grow their own gardens, then the family will have to forage through garbage dumps to eat. There are millions of people today doing exactly that. Whether that constitutes a "doomsday" depends, I suppose, on your point of view.
Second sentence: "And some economists believe the recent increase in crop demand probably can be met without severely straining the global economy." This is the kind of weird stuff that economists come up with. If a few million people are foraging through garbage dumps to feed themselves and their families, maybe that won't strain the global economy, but those millions of people won't be happy.
Third sentence: "They think prices could come back down over time, especially if some countries that have more land that could be put under cultivation -- particularly Brazil -- can greatly increase production." This is a provocative statement. The way that Brazil could put a lot more land under cultivation is because they could cut down the rain forest, causing more "global warming," according to the current fashion. So is it OK to cut down the rain forest if it means that food prices will come down a little?
Fourth sentence: "Technological advances, such as better seed varieties, could also help boost production to keep up with demand." As I <#hreftext ww2010.i.food040628 "wrote about in 2004,"#> the "Green Revolution" made a huge difference in the 1960s in India, because American technology advances were applied to Indian agriculture, which formerly had been using very old techniques. The result was an explosion of food, and everyone was well fed. But that was a one-shot deal. There are no more major technology advances to be applied. Maybe better seed varieties will provide some improved agricultural production, but not enough to make a big difference.

My own estimates are that the Green Revolution had a major effect on food production for a long time, until the 1990s. Since then, food production increases have been leveling off, while the population continues to grow faster. The result is that there's less food for everyone, which pushes food prices up. In 2005, an e-mail discussion led me to do a piece of research that <#inc ww2010.weblog.ref e050810 "that I originally posted at that time."#> I found some food commodity prices on the internet, and was able to prepare the following table:

                          ------ Prices -------    -- Increases --
                          1999-   2000-   2004-    Since    Since
               Commodity   2000    2001    2005     1999     2000
     -------------------  ------  ------  ------   ------  -------
            Spring wheat    2.85    2.79    3.35   17.54%   20.07%
                    Oats    0.90    0.86    1.11   23.33%   29.07%
           Oil sunflower    6.56    6.06   11.96   82.32%   97.36%
                  Canola    7.50    6.55   11.40   52.00%   74.05%
                Flaxseed    3.79    3.31    7.35   93.93%  122.05%
    Beef 400-500# Steers   97.68  106.07  128.86   31.92%   21.49%
             Hogs 250 lb   32.50   43.10   51.12   57.29%   18.61%
    CPI (Inflation rate)  168.80  175.10  190.70   12.97%    8.91%

The last line of this table shows the inflation rate for comparison purposes. This shows that for many foods, prices have increased far faster than inflation. The percentages in the last two columns show price increases over a 5-6 year period. The figures in the Monday's news report indicate that prices in India rose over 10% in one year alone. So the new figures indicate that food prices are increasing even more rapidly. From a theoretical point of view, I would expect food price increases to accelerate. The reason is that, as time goes on, population grows faster than food production, and the difference grows exponentially. The "Malthus effect," the observation that population grows faster than the food supply throughout history, is an important part of Generational Dynamics, because it proves that genocidal crisis wars must occur. The result of the Malthus effect is not "doomsday," or mass starvation. The result of the Malthus effect is war. An individual who can't feed his family anyway has nothing to lose by joining the army; and a nation that can't feed its people has nothing to lose by going to war against someone else. =eod =// &&2 e070411 BBC kills an Iraqi war story because it's "too positive" =data ww2010.weblog.y2007.e070411.head BBC kills an Iraqi war story because it's "too positive" =data ww2010.weblog.y2007.e070411.keys =data ww2010.weblog.y2007.e070411.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070411.date 11-Apr-07 =data ww2010.weblog.y2007.e070411.txt1 But a drama showing British troops brutalizing civilians is perfectly fine. =data ww2010.weblog.y2007.e070411.txt2 Private Beharry was awarded the Victoria Cross in March, 2005, for multiple acts of heroism, risking his own life to save the lives of his own injured men, according to <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/04/08/wiraq308.xml "a Sunday article in the Telegraph."#> He was citied for "valour of the highest order" on two separate occasions a month apart. The BBC commissioned a 90-minute drama, tentatively titled "Victoria Cross." However, the BBC has now canceled the project, because it feared it would alienate members of the audience opposed to the war in Iraq, according to the article. "It needed to tell stories about Iraq which reflected the fact that some members of the audience didn't approve of what was going on. Obviously a story about Johnson Beharry could never do that." <#inc ww2010.pic mirror.jpg right "" "Daily Mirror front page, November 4, 2004: "How can 59,017,382 people be so DUMB?""#> I've written many times how <#inc ww2010.weblog.ref e050331 "blatantly anti-American the BBC is,"#> and that extends to even UK's participation in the Iraq war. It's true of most of the UK press. So they see no problem that UK's channel 4 (not the BBC) is planning to show a program called "The Mark of Cain," which shows British troops brutalising Iraqi detainees, according to the Telegraph article. In 2004, the BBC was reprimanded after a long investigation resulting the the Hutton Report. The investigation showed that the BBC had purposely lied repeatedly, with the result that a government weapons expert committed suicide, rather than continue to be humiliated by the false BBC news stories. The BBC suffered large budget reductions, partially as a result of the Hutton Report. American news channels are even worse, as when <#inc ww2010.weblog.ref e070319b "Donald Trump went on a hysterical rant on CNN"#> that was played over and over and over for three days. CNN is also paying the price for its blatant anti-Americanism, as the Fox News Channel is kicking its ass in the ratings. As I've said before, it's an absolute disgrace how most journalists and Democratic party politicians have bet their entire careers and credibility on American failure in Iraq. This kind of behavior may have been OK during the 1960s, when America was <#hreftext ww2010.i.sixties040501 "in a generational Awakening era,"#> but one thing I know is that this behavior will not be tolerated for long in a generational Crisis era, such as we're in today. The Hutton Report and the ratings loss to Fox News are just two early examples of this. =eod =// &&2 e070410 Tens of thousands of Shi'ites protest against American "occupiers" =data ww2010.weblog.y2007.e070410.head Tens of thousands of Shi'ites protest against American "occupiers" =data ww2010.weblog.y2007.e070410.keys moqtada al-sadr, iraq war, najaf protests =data ww2010.weblog.y2007.e070410.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070410.date 10-Apr-07 =data ww2010.weblog.y2007.e070410.txt1 In what appeared to be a grand, party-like atmosphere, =data ww2010.weblog.y2007.e070410.txt2 tens of thousands of Shi'ites <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-6544552,00.html "heeded the call of Shi'ite cleric Moqtada al-Sadr"#> and poured into Najaf to protest against against America. As <#inc ww2010.weblog.ref e070409b "we wrote yesterday,"#> this is perfectly standard fare for a country in a generational Awakening era. The burning of the American flag might have been a scene out of <#hreftext ww2010.i.sixties040501 "America in the 1960s."#> <#inc ww2010.pic g070409.jpg center "" "Fiery speakers roused huge Shi'ite mobs to scream "No to America," and burn American flags in Najaf on Monday. Moqtada al-Sadr (shown lower right) was nowhere to be seen. (Source: CNN)"#> During an Awakening era, there's always a "generation gap," separating the traumatized survivors of the previous crisis war, who have vowed that their children must never have to go through such a horrific experience, and their children, born after the war, who fight for individual rights, rather than the worrying about preventing another war. In Najaf on Monday, the "children" were the generation born after the end of the 1980s Iran/Iraq war, and the "parents" were the Americans. =eod =// &&2 e070409b Iraq's Moqtada al-Sadr says attack Americans, not each other =data ww2010.weblog.y2007.e070409b.head Iraq's Moqtada al-Sadr tells followers to attack Americans, not each other =data ww2010.weblog.y2007.e070409b.keys moqtada al-sadr, iraq war, najaf protests =data ww2010.weblog.y2007.e070409b.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070409b.date 9-Apr-07 =data ww2010.weblog.y2007.e070409b.txt1 This could be good news. =data ww2010.weblog.y2007.e070409b.txt2 This story is being reported in two different ways, as either bad news or as very bad news. <#inc ww2010.pic alsadr2.jpg left "" "Shiite cleric Moqtada al-Sadr in December, 2006 (Source: CNN)"#> The Stratfor analyst firm took <#stdurl http://www.stratfor.com/products/premium/read_article.php?selected=Situation%20Reports&sitrep=1&id=286925 "the most alarmist view:"#> "Iraq: Al-Sadr Calls For Attacks Against U.S. Forces. Radical Iraqi Shiite leader Muqtada al-Sadr on April 8 called on his militia, the Mehdi Army, to focus their attacks on U.S. forces instead of fellow Iraqis." The slightly less alarmist view is <#stdurl http://www.iht.com/articles/2007/04/08/news/iraq.php "a Reuters report:"#>

"Sadr calls for anti-U.S. protest in Iraq Thousands of Iraqis streamed to Najaf on Sunday in response to a call by a Shiite cleric, Moktada al-Sadr, for a big anti-American protest Monday. Sadr, who blames the U.S.-led invasion for unrelenting violence in Iraq, has urged Iraqis to protest on a day that marks the fourth anniversary of when American forces swept into central Baghdad. "In order to end the occupation, you will go out and demonstrate," Sadr, who accuses U.S. forces of fomenting civil strife in Iraq, said in a statement."

This report talks about a massive anti-U.S. protest, not an "attack." This is, in fact, what would be expected. Iraq is currently in a generational Awakening era, like <#hreftext ww2010.i.sixties040501 "America's last Awakening era, the 1960s-70s."#> And in any Awakening era, the population is attracted toward political protest, and away from violence. A large protest led by al-Sadr is exactly what one would expect during an Awakening era. I get the feeling that what we're seeing here is a media reversion to 2004. Starting in 2003, the media pundits were predicting that there would be a Shi'ite uprising against the Americans, led by Moqtada al-Sadr. The media frenzy increased throughout 2004, and by August 2004, the Boston Globe actually predicted that the Shi'ite uprising had begun. Here's what <#inc ww2010.weblog.ref e040812 "I wrote at the time:"#>

"Meanwhile, it's fun to watch how the mindless Boston Globe reporters cover all this. Tuesday's lead multi-column page one headline was "Shi'ites' uprising grows." That was wishful thinking, and by Wednesday the page one Iraq headline was, "Qaeda arrests called 'lucky' break." Today's headline is "Young marines frustrated by lack of progress." Each day's headline seems so moronic that it could never be topped, but the next day's is even more moronic. I don't know how they manage to do it."

Later, the media abandoned this line, and by 2006 was fully entrenched in the view that Sunnis and Shia were headed for a massive civil war. By November, <#inc ww2010.weblog.ref e061129 "NBC news had a big theatrical announcement"#> that it was going to call the Iraq war a "civil war." It was grossly disgusting. Well, now it's becoming increasingly clear to everyone except the stupidest Senators (i.e., Biden) and news organizations (i.e., NBC) that there's no civil war going on. In fact, it was just last week that <#inc ww2010.weblog.ref e070403 "CNN's Michael Ware, formerly a big "civil war" cheerleader,"#> gave an extensive analysis of the Iraq war without even using the phrase "civil war." So now, with the "civil war" concept fading into the sunset, the media seem to be returning to their old 2004 concept of an anti-American uprising. I recently posted a long <#hreftext ww2010.i.iraq070401 "analysis of the current situation in Iraq,"#> emphasizing the fact that Iraqi citizens are turning against the foreign jihadist organization, "al-Qaeda in Iraq." Iraqi nationalism is beginning to re-assert itself, as it always has in times of war in the past. In that analysis, I focused on the Sunni side of things in Iraq, but left the Shia side out, mostly because Iran's foreign policy is so contradictory, thanks to President Ahmadinejad, that it's impossible to discern what trend the Shia in Iraq might be following. However, there are many reasons why Moqtada al-Sadr would not want see a large, violent anti-American uprising to be in his interests: <#inc ww2010.pic alsadr.jpg right "" "Shi'ite Muslim cleric Moqtada al-Sadr"#>

Moqtada al-Sadr's own father was assassinated by Saddam Hussein's organization in 1999. So al-Sadr was surely happy that the American's god rid of him.
Saddam's Sunni militias brutally controlled the country, and directed a lot of terror against al-Sadr's Shia people.
Today, al-Sadr has the potential of becoming a major political leader in the country.
Al-Sadr fully understands that the death squads and suicide bombings directed against Shia civilians are not Americans, nor are they ordinary Sunni Iraqis. After a major terrorist attack in November 2006 that killed some 200 of the supporters of Shiite cleric Moqtada al-Sadr, al-Sadr himself did not blame the Sunnis; instead, he <#inc ww2010.weblog.ref e061126 "gave a press conference in which he blamed terrorist groups related to al-Qaeda."#>

If you read the above list of reasons, you can see that the most likely explanation for what al-Sadr is doing is political. By bringing masses of Shia into Najaf on Monday for an anti-American demonstration, he proves his own political popularity. Moqtada al-Sadr is one individual, and there's no way to predict what he'll do. He may order additional violence, and he may, in fact, be personally responsible for roadside bombs using Iran-supplied weapons, as well as death squads against Sunnis. But there will NOT be a massive civil war or a massive anti-American uprising. Even if he ordered one, it wouldn't happen, because Iraq is in a generational Awakening era, and the great masses of people, today's generations of people, do not want it. Massive protests are exactly what one would expect from an Iraq in a generational Awakening period. Since 2003, when I first began posting predictions about Iraq, Iraq has never failed to do exactly as Generational Dynamics predicts for a country in a generational Awakening era. =eod =// &&2 e070409 Congress planning harsh protectionist trade sanctions against China =data ww2010.weblog.y2007.e070409.head The Administration and Congress plan harsh protectionist trade sanctions against China =data ww2010.weblog.y2007.e070409.keys protectionism, china, tariffs, immigration, xenophobia, smoot, hawley, smoot-hawley act, stephen roach, morgan stanley =data ww2010.weblog.y2007.e070409.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070409.date 9-Apr-07 =data ww2010.weblog.y2007.e070409.txt1 The Chinese are "strongly dissatisfied" with a recent US decision =data ww2010.weblog.y2007.e070409.txt2 to <#stdurl http://www.chinadaily.com.cn/bizchina/2007-04/02/content_841318.htm "levy penalty tariffs on imports of Chinese coated free sheet paper."#> The US Department of Commerce last Friday announced its preliminary decision to apply US anti-subsidy law to imports of coated paper from China. "This action of the US side goes against the consensus reached by the leaders of both countries to resolve disputes through dialogue," said Wang Xinpei, spokesman for China's Ministry of Commerce. "China strongly requires the US side to reconsider the decision and make prompt changes." Coated paper isn't exactly a major strategic item, as those things go, but this new tariff policy signals the start of a whole series of protectionist trade measures targeting Japan. In a separate matter, administrative officials have indicated plans to <#stdurl http://www.nytimes.com/2007/04/07/business/worldbusiness/07trade.html?th&emc=th "file formal trade complaints against China"#> over pirated copies of American movies, music and software. (We can't even control our own "illegal" downloads of movies, music and software, so we're sanctioning the Chinese for the same thing?) Chinese currency policy is a matter that's infuriating our people in Congress. Democratic party Sen. Charles Schumer, and Republican party Sen. Lindsey Graham are cooperating on <#stdurl http://money.cnn.com/2007/03/28/news/international/bc.economy.china.congress.reut/index.htm?postversion=2007032812 "a "veto-proof" bill"#> to FORCE the Chinese to revalue their currency. (Does any intelligent person really believe that the Chinese will accede to something like that if forced on them? Well, let's face it, "intelligent Senator" is a self-contradictory phrase.) It's been my opinion for some years that the first major hostile act of World War II was not the Japanese bombing of Pearl Harbor, and was not any invasion by Hitler. Here's how I described in my 2003 book, Generational Dynamics: Forecasting America's Destiny, what happened after the 1929 stock market crash:

"Perfectly reasonable acts by one country can be interpreted as hostile acts by another country. Guns and bombs are not needed to create an impression of war. And if one country's innocent act is a shock to another country and is viewed as hostile by that country, and if the people of that country are in a mood for retribution rather than compromise, than they may well look for a way to retaliate. In that sense, the enactment of the Smoot-Hawley Tariff Act in June 1930 can be viewed as the first of the shocking, provocative acts that led to World War II. The Act was opposed by an enormous number of economists as being harmful to everyone, but it was very popular with the public, because of the perception that it would save American jobs. Many in the public believed that the crash had been caused by withdrawal of investment funds by foreign banks, just as many in the public today believe that the Nasdaq crash of 2000 was caused by the illegal or improper actions of CEOs of Enron and other corporations. The public demanded the Smoot-Hawley Act in retribution, just as the public today demands the jailing of corporate CEOs. Interestingly, the Smoot-Hawley Act is still debated by politicians today, with regard to whether it caused or aggravated the Great Depression or had no effect, with pro-free trade politicians taking the first position, and politicians supporting restrictions on free trade taking the second position. Those discussions are entirely America-centric because, for the purposes of this book, it makes no difference whatsoever whether or not the Act aggravated the American depression. We're interested in the effect it had on foreign nations. And the effects were enormous. The bill erected large trade barriers for numerous products, with the intention of saving American jobs. How many American jobs it saved, if any, is unknown, but it virtually shut down product exports to the United States. Both Germany and Japan were going through the same financial crisis America was going through, and they were furious that America as a market was closed to them. Japan was the hardest hit. The Great Depression was hurting Japan just as much as it was hurting America but, in addition, Japan's exports of its biggest cash crop, silk, to America were almost completely cut off by the Smoot-Hawley Act. Furthermore, Japan would have been going through a generational change: The country had undergone a historic revolution some 70+ years earlier, culminating in a major change of government (the Meiji Restoration) in 1868, and the people who had lived through that revolution would be dead or retiring by the early 1930s. So one thing led to another, and in September 1931, almost exactly a year after Smoot-Hawley, Japan invaded Manchuria and later northern China. Britain and American strongly protested this aggression, and Roosevelt finally responded with an oil embargo against Japan. This is the usual pattern of provocative acts on both sides. America saw Smoot-Hawley as its own business, but to Japan it was a hostile shock. Japan saw the Manchuria invasion as "Asian business," while Britain and America saw it as attacking their own Asian interests. Roosevelt saw an oil embargo as a measured response of containment, while energy-dependent Japan saw it almost as an act of war, eventually triggering Japan's attack on Pearl Harbor in 1941."

As I've <#inc ww2010.weblog.ref e070322 "discussed many times on this web site,"#> China is actively planning for war with the United States, and has indicated so in many statements I've quoted. China has over 100 million itinerant workers, and enormous income differences between elite and peasant classes, resulting in tens of thousands of large regional rebellions each year. Chinese premier Wen Jiabao recently said that China is "unsteady, unbalanced, uncoordinated and unsustainable." So China has many troubles, and it blames many of those troubles on the US. China is also aware that it has been subsidizing America's huge credit binge all these years, saving money only to lend it to Americans to spend on Chinese manufactured goods. So after subsidizing America's credit binge for years, the Chinese, who are sensitive to disrespectful foreigners anyway, are going to be increasingly infuriated by further protectionist measures targeting China. As China's own economic problems increase, their anger at America will increase, as will their sense that America has been screwing them economically. As I've <#inc ww2010.weblog.ref e060525 "discussed in the past,"#> nations and populations tend to become increasingly xenophobic during generational crisis eras. That's been happening in the US between Anglos and Latinos, and in fact American hostility to illegal immigration has been growing steadily. It's happening throughout Europe, in the mutual level of distrust between Muslims and ethnic Europeans. And it also flared up last month in a <#inc ww2010.weblog.ref e070307 "confrontation between Japan and China over comfort women,"#> an issue that both sides had thought resolved years ago. Usually, xenophobia takes the form of conflict between natives of and immigrants to a country. But xenophobia can take many forms, and they all come to the fore during generational Crisis eras. All of the examples we're giving -- comfort women, trade protectionism with China, stricter immigration laws, conflicts between Europeans and Muslims -- all of these illustrate exactly the same thing: The growth of xenophobia, hostility and even hatred toward other national, religious or ethnic groups. And they all illustrate what happens during generational Crisis eras. China has been increasingly belligerent towards America, especially over the subject of Taiwan, and now America is becoming increasingly belligerent towards China in the form of protectionist trade sanctions. We saw this with Japan in the 1930s Smoot-Hawley act, and now we're seeing it with China in the 2000s. This is also an illustration of the entire Generational Dynamics concept that when you examine a country's policies and trends, you can't just examine the words of a few politicians or economists. You have to look at the attitudes and behaviors of large masses of people, entire generations of people. In the case of the Smoot-Hawley law, it was opposed by President Hoover and by economists. But the American people were looking for someone to blame for the stock market crash and the Great Depression, and they blamed foreign exports for stealing American jobs. Today, we're in a similar position, and we aren't (yet) suffering anything even close to the pain Americans suffered after the 1929 crash. Still, Americans are suspicious of the Chinese, and China-bashing politicians like Schumer and Graham just pander to these suspicions by passing (or at least threatening to pass) laws that do America no good whatsoever, but will infuriate the Chinese. Stephen Roach, Morgan Stanley's chief economist, has been concerned about this issue for some time, and he also <#stdurl http://www.morganstanley.com/views/gef/archive/2007/20070330-Fri.html#anchor4653 "compares the current craziness to the 1930 passage of the Smoot-Hawley law:"#> "[The] notorious Smoot-Hawley Tariff Act of 1930 – a policy blunder of monumental proportions [played] a key role in `sparking a global trade war and the Great Depression. Some 77 years later, his spirit was very much in evidence as the Senate Finance Committee gathered to debate the 'China threat.'" Roach blamed America's economic problems with China on America itself, and gave three reasons:

"One, America’s extraordinary saving shortfall sets us up for chronic trade deficits with China and a host of our other trading partners. Two, China is focused on a major rebalancing of its own economy that, over time, will provide structural relief to its trade surplus. And three, America’s middle-class angst – which is driving the politics of China bashing – reflects a US economy that failed to prepare its workforce for the pressures of an IT-enabled globalization. There was little or no response to anything I said."

Roach points out that China would not respond to protectionist legislation kindly, but would seek retaliation:

"In these more extreme scenarios, any number of possible Chinese actions might be expected – ranging from retaliatory tariffs of its own to restrictions on foreign direct investment to limits placed on overseas portfolio inflows. Then, of course, there is China’s ultimate trump card – the asset allocation decisions that pertain to its massive reservoir of over $1 trillion in foreign exchange reserves. In the event of a major trade sanction imposed on China by the United States, I think this option could well come into play – not in the form of outright sales of existing positions of China’s dollar-based holdings but more from the diversification of new inflows of foreign exchange reserves into non-dollar-based assets. In that event, America would feel the full force of China’s wrath in the form of a sharp decline in the value of the dollar and a concomitant increase in real long-term US interest rates. Yet one thing is now for certain: America’s anti-China brinksmanship is escalating. ... For their part, the overwhelming majority of investors remain steeped in denial – convinced that nothing like this could ever come to pass. The ghost of Reed Smoot [of the Smoot-Hawley Act of 1930] is a haunting image of an increasingly treacherous endgame."

The third of Roach's three possible forms of retaliation is particularly telling: China has hundreds of billions of dollars worth of American treasury bills in its reserves, representing the hundreds of billions of dollars that we owe to China. And yet, here we are telling China what to do, when it's China that should be telling us what to do. Roach's examples of retaliation are all economic, but he neglects to mention that possibility that American protectionist laws may trigger a panic in China, leading to war. From the point of view of Generational Dynamics, war with China is coming with almost mathematical certainty. As usual, Generational Dynamics tells where we're going, but now how we'll get there. In the past I've described several different possible scenarios that could lead to war: a bird flu pandemic, an international financial crisis, a Chinese economic recession, a threat from Japan, or a Taiwanese action that could be interpreted as moving towards independence. These and other triggers could cause the Chinese public to panic, in the same way that American panicking is causing Washington impose protectionist trade sanctions on China. Panic plays a very important part in wars during a generational Crisis era, as shown by how <#inc ww2010.weblog.ref e061223 "Israel panicked in pursuing the summer, 2006, Lebanon war with Hizbollah."#>) Just as we're panicking now, and Israel panicked last summer, any of a wide variety of incidents could trigger a Chinese panic, leading to full-scale war. =eod =// &&2 e070408 California indoor pot farming soaring, thanks to housing bubble =data ww2010.weblog.y2007.e070408.head California indoor pot farming soaring, thanks to housing bubble =data ww2010.weblog.y2007.e070408.keys marijuana, pot, dea, drug enforcement administration, tulipomania, panic of 1857 =data ww2010.weblog.y2007.e070408.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070408.date 8-Apr-07 =data ww2010.weblog.y2007.e070408.txt1 Marijuana seizures in upscale homes have quadrupled in just three years. =data ww2010.weblog.y2007.e070408.txt2 <#inc ww2010.pic g070407a.jpg left "" "Indoor pot operating using sophisticated irrigation, ventilation and lighting (Source: LA Times)"#> Authorities have confiscated more than $100 million worth of pot in the last year alone, <#stdurl http://www.latimes.com/news/local/la-me-housepot6apr06,0,6581455,full.story "according to officials with the U.S. Drug Enforcement Administration."#> In just three years, the number of plants confiscated has grown from 54,000 to nearly 200,000 in 2006. "They have cropped up in neighborhoods like never before," said Gordon Taylor, who heads the DEA office in Sacramento. "I am not talking about the Cheech and Chong marijuana cultivation of two plants in someone's closet. I am talking about organized crime groups who are purchasing homes in our communities and creating marijuana factories." In recent busts near Los Angeles, marijuana plants valued at tens of millions of dollars were found in <#stdurl http://www.signonsandiego.com/news/state/20070407-9999-1n7pothouse.html "ordinary middle class homes purchased for $500,000 to $1 million."#> The purchasers took advantage of widely available subprime mortgage loans with 100% financing, so that they didn't even have to pay anything for them. <#inc ww2010.pic g070407b.jpg right "" "Publicity shot of TV series Weeds, about a single mother selling marijuana from her home. (Source: Showtime)"#> In other words, it's the housing bubble, the credit debauchery, and the general investor mania -- the things that I keep talking about -- that explain why in-home marijuana gardening has quadrupled in three years. Last week, I described in great detail how this mania worked in <#inc ww2010.weblog.ref e070328 "the case of the Tulipomania bubble:"#>

"By the later stages of the mania [at the end of 1636] the fusion of the windhandel with paper credit created a perfect symmetry of insubstantiality: most transactions were for tulip bulbs that could never be delivered because they didn't exist and were paid for with credit notes that could never be honoured because the money wasn't there."

And I recently described how criminal activities were exposed in <#inc ww2010.weblog.ref e070406 "the Panic of 1857:"#>

"Yet even large, incorporated banks were sometimes grossly misconducted. ... [The] bank had contributed to political parties out of a secret drawer, ... and it had permitted other shocking laxities in expenditure and bookkeeping. ... As the nation's load of debt from railway construction, the expansion of mills, factories, and stores, town promotion, and speculation in commodities rose, the sums owed to banks, brokerage houses, and private lenders became more and more disproportionate to the supporting assets."

And this is how John Kenneth Galbraith described what happened in <#inc ww2010.weblog.ref e070312b "the Wall Street crash of 1929:"#>

The point, as always, is when a financial bubble is in progress, as it has been since 1995, money is plentiful. When money is plentiful, people spend freely, people borrow freely, everyone is happy, people trust other people. Since 1995, we've had several huge bubbles: the dot-com bubble, the credit bubble, the commodities bubble, the stock market bubble, and the real estate bubble. This story of mushrooming (so to speak) in-home pot gardens in California is just one small example. The real estate bubble and the associated credit debauchery not only made it financially possible, but also made it attractive to people who might otherwise simply have gotten a burger-flipping job. And now that these bubbles are deflating, spending will turn to saving, borrowing will turn to bankruptcy, happiness will turn to desperation, and trust will turn to accusations and incriminations. =eod =// &&2 e070406 The financial mania continues with "CDOs Squared" =data ww2010.weblog.y2007.e070406.head The financial mania continues with "CDOs Squared" =data ww2010.weblog.y2007.e070406.keys cdo, cdo squared, cdo^2, collateralized debt obligations, subprime mortgages, panic of 1857, allan nevins, emergence of lincoln, tulip mania, tulipomania =data ww2010.weblog.y2007.e070406.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070406.date 6-Apr-07 =data ww2010.weblog.y2007.e070406.txt1 And suddenly, Moody's is worrying that derivatives may be riskier than they had thought. =data ww2010.weblog.y2007.e070406.txt2 I thank <#stdurl http://suddendebt.blogspot.com/2007/04/cdo-squared-story-just-link-to-very.html "an entry in the SuddenDebt blog"#> for calling my attention to a new investment craze: CDOs Squared! CDOs (collateralized debt obligations) are credit derivatives that are a kind of loan insurance. If you loan someone some money, or purchase a corporation's bonds, which is similar, then there's a chance the loan won't be repaid. CDOs provide the mechanism whereby you can pay a third party an upfront amount plus an annual fee. The holder of the CDO just has to sit back and collect money unless, of course, the company you loaned money to defaults on the loan, and then the third party has to make good on the loan. Banks will take thousands of mortgage loans or credit card loans and package them up together and split them up into pieces based on levels of risk. CDOs then can then be bought and sold the same as a stock certificate. Stock certificates are based on a company's assets, and the CDOs are based on the underlying collection of loans. Well, thanks to the subprime mortgage loan debacle, a lot of people who had just expected to sit back and collect fees are suddenly discovering that they're responsible to make good on a lot of other people's mortgage loans. This is leading the holders to take desperation measure. This brings us to the magic of "CDO squared" or "CDO^2" -- CDOs based on other CDOs. Now, if I have this straight, it works this way: Financial managers holding a lot of these CDOs suddenly have a lot of money to pay, so it's as if they have to repay a loan. So you can put together large bunches of CDOs, just as earlier you could put together large bunches of mortgage or credit card loans. Then you can break up the large bunches of CDOs into pieces, based on levels of risk, and CDO^2s become another money-making scheme. When you get down to the heart of it, what all this does is recycle pieces of paper, CDOs in this case, so that they can be sold and resold, each time at a higher price. It's getting to the point where even <#stdurl http://www.bloomberg.com/apps/news?pid=20601170&sid=aszosOrxVmjk&refer=home "Moody's Investors Service is getting worried."#> They're discovering that CDOs are riskier than people ever realized because of "overlapping subprime exposure." Duh! Last December, <#inc ww2010.weblog.ref e061230 "I explained how this works with hedge funds,"#> how it's possible for a good salesman to start up a new hedge fund, based on underlying assets of any kind whatsoever, and then bid up the price of the hedge fund shares so that they're worth many times more than the value of the underlying assets. In essence, the hedge fund manager is "making money" -- literally, as if he had a printing press. The hedge fund shares can now be traded at their inflated values, so in some circles they're as good as money. It all resulted in this table, as of last year:

    Item                          Value ($ trillion)
    ----------------------------- ------------------
    All public firms-"real value"   30
    All stock market shares         65
    All hedge fund shares          370 (June, up from 300 in Jan)

[[Correction: "All hedge fund shares" should have read "all credit derivative securities."]] (Correction made on 13-Nov) My guess is that the $370 trillion figure reached at $500 trillion by January of this year, but I haven't seen those figures. And when you have hedge fund shares that are worth 10-15 times as much as the underlying assets, then you can bet that there must an awful lot of "overlapping" going on. Moody's might have figured that out long ago. The point I'm making with all of this is the hyper-manic nature of investing, just before a major financial crisis. Last week, I described in great detail how this mania worked in <#inc ww2010.weblog.ref e070328 "the case of the Tulipomania bubble:"#>

A web site reader has referred me to a book that describes what happened in the Panic of 1857. This information is from a 1950 book by Allan Nevins, The Emergence of Lincoln: Prologue to Civil War 1859-1861, Volume II. The book has a lengthy chapter on the panic of 1857, and we're going to quote excerpts. The New York Stock Exchange had been in existence for more than 60 years at that time, and had always been a staid, sedate institution, until the 1850s.

"No feature of the boom had excited more comment than the novel vogue of speculation in securities. Stock-gambling, scolded the National Intelligencer, has grown to "an incredible extent" in the chief cities. ... While numerous journals printed sharp exposures of nefarious operations of brokers, the New York Observer defended them. The public, it argued, had an incorrect estimate of the New York Stock Exchange. "It is not a gambling-house; and although many desperately risk their all on the rise and fall of the market, yet a large part of the business is as legitimate as any other commercial transactions. ... Transactions in bank and insurance stocks were usually sedate, but railroad shares often produced a wild hubbub." (p. 180-1)

It's worthwhile remembering that railroads were the high-tech innovation of the day, just as the Model T Ford was the high tech innovation of the 1920s bubble, and the internet is the high-tec innovation of today. (Incidentally, the tulip was a very high-tech item in the early 1600s, as botanists were able to produce tulips with spectacular colors by means of breeding experiments.)

"To John Bigelow, the sale of more than $22,000,000 worth of stock in one fortnight of 1857 seemed ample basis for an Evening Post editorial denouncing "A Growing Evil" -- overspeculation. The mania for playing the market had attacked every body, he wrote; lawyers, merchants, doctors, and even clergy were abandoning a safe seven percent to gamble for twenty. If the speculation was deplorable, the secret manipulation of stocks by insiders was far more reprehensible. (p. 181)

This raises a point that I've made several times before, and is worth repeating: There is a lot of crime going on today, committed by desperate people who are in over their heads in investments or subprime mortgages. Crimes like embezzlement are ticking time bombs. No one worries about embezzlement when everyone's making money, but when times get tough, every past transaction is gone over with a fine tooth comb. It happens in every generational panic. It's happening already, as even bankers are now being subjected to criminal investigations because of "predatory lending" on mortage loans. What we're now going to see is how bubbles feed into each other. A bubble in one are creates money that can be used to drive up prices in another area.

"Commodity speculation was equally reckless. The press in 1856 and 1856 was studded with items on fortunes quickly conquered by bold Napoleons of the market. Chicago wheat brokers who bought at $1.40 and sold at $1.85, pork dealers who secured prime mess at $16 a barrel and parted with it at $20 -- these men were objects of admiration so long as prices rose. ... By midsummer of 1857, declared the New York Herald, commodity prices had increased forty percent in four years. ... [T]he Herald laid this disastrous rise to speculation. It made a particular point of cotton. Despite an estimated American crop in 1856-57 of about three million bails, with a large carry-over in European warehouses, raw cotton had gone so high that textile interests were being crushed between excessive costs and an overladen market. Within a year, declared the Herald, speculators had forced it up nearly forty percent. (p. 182)

Now we'll see how different bubbles tied in to one another. And for those of you who are interested in the causes of the Civil War, including slavery, the bubble economy even had it's effect on that:

"Speculative ventures in lands, railroad building, and slaves kept and were closely interrelated; the rise in grain, meats, and cotton, and the westward movement of the population, maintaining all three. The "negro fever" was now rife in the South. Cotton planters found that the cost of hands soared out of all proportion even to rising prices for their staple. Prices in the Lower South were rising to $1,800 and even $2,000 for prime field workers. The two possible remedies were a reopening of the African slave trade, and a utilization of cheap lands. Since the former could not be attained except after prolonged agitation, if at all, planters bought lands in Arkansas, Texas, and unsettled parts of the older States with avidity. If they could only get the labor, they might pay for their holdings with one or two crops. Similarly in the Northwest, where McCormick's reaper and other machinery made labor a minor problem, high prices for foodstuffs and meat turned prosperous famrers and immigrants into land buyers, while speculators crowded in early upon their heels. The Graduation Act of 1854, reducing the price of public land in proportion to the lengh of time it had been fruitlessly offered for sale, played into the hands of would-be monopolists; for it placed no limit on the amount of land one purchaser might take. Some bought large areas." (p. 183)

This is all very similar to the last few years. We've had a high-tech bubble, a real estate bubble, a commodities bubble, a stock market bubble, and even the price of food has gone up substantially. It's a purely generational attitude that comes about at the height of the bubble mania, just before a crash, as I discussed in <#inc ww2010.weblog.ref e070320 "my article based on research by Harvard economist Robert J. Barro."#> Tying all the bubbles together is a credit bubble, which allows ordinary people to go more and more deeply into debt in order to get money to put into commodities or real estate or the stock market. It's a giant <#inc ww2010.weblog.ref e061230 "worldwide pyramid scheme (or Ponzi scheme),"#> and every pyramid scheme must come to an end. The mania continued to get worse and worse. As you read the following paragraph, keep in mind that hedge funds today are almost completely unregulated. Therefore, they play the same role today that unincorporated banks played in the 1850s:

"Most incorporated banks were prohibited by law from engaging in any business other than banking. Unincorporated banks, however, were free to employ part of their capital in outside operations, and frequently did so. They sometimes made prodigious temporary gains at the sacrifice of safety. Banks of large capital were likely to have a more prudent management than lesser institutions, for they could employ more skillful and experienced officers, and command better means of credit investigation. Yet even large, incorporated banks were sometimes grossly misconducted. Much indignation was aroused in New York when in 1855 the cashier of the Mechanics' Bank, who had been forced to resign after a quarrel with the president, published a pamphlet containing amazing disclosures. It showed that the bank had contributed to political parties out of a secret drawer, that it had paid "assessments" by the City Chamberlain without keeping any account of them or making any report to the directors, and that it had permitted other shocking laxities in expenditure and bookkeeping." (p. 185)

Once again, you can see that criminal activities became exposed. Now, as you read the following paragraph, remember what I said above about how hedge fund managers "make money" literally -- as if they had a printing press. The same thing happened in the 1850s:

"Viewing the banking system of the country as a whole, men could see that it contained too many new and immature units; in the ten years preceding 1857, no fewer than six hundred and seventy-eight new banks had been set up. They could see that ready assets wee much too small in proportion to liabilities; in 1856, deposits and circulation came to $407,000,000, while specie was only $53,000,000. They could see that bank management was sometimes dishonest, often incompetent, and still more often reckless. The ablest bankers of New York, Boston, and Philadelphia, eager to increase their deposits, fell in with an unfortunate trend. Not content with being mere passive recipients of funds from country banks, they actively solicited deposits, even sending out circulars. On the floating capital thus obtained, they paid as much as four percent for sums up to $5,000 and as much as five percent for sums beyond that amount. These funds they then lent to brokers and others, often on dubious security, at profits of one to three percent a year. The brokers then used the money inventures of a more or less speculative hue. As the nation's load of debt from railway construction, the expansion of mills, factories, and stores, town promotion, and speculation in commodities rose, the sums owed to banks, brokerage houses, and private lenders became more and more disproportionate to the supporting assets." (p. 187-88)

It never ceases to amaze me how blind people, even supposedly intelligent people, are to what's going on. People would rather think of almost anything else besides what's really going on. This "global warming" frenzy is an example of how incredibly crazy all this is. Everyone's getting all upset because the temperature of the earth may go up by 1-2 degrees by the end of the century, and some species of animals will go extinct. Well, how many species of animal will go extinct when we have a world war? Why don't people worry about a financial crisis leading to a world war? And it's easy to prove that there's going to be a world war. Just extrapolate the population growth forward, and extrapolate the amount of food we'll have, and it's easy to see that there won't be enough food to feed everyone. Why wasn't that in Al Gore's movie? Isn't that an environmental disaster too? I guess some "inconvenient truths" are more inconvenient than others, and some truths are just too darned inconvenient even for Al Gore. Better to worry about the earth's temperature in 2080 than in what might happen in the next year. From the point of view of Generational Dynamics, a generational stock market crash is overdue. If you go back through history, there are of course many small or regional recessions. But since the 1600s there have been only five major international financial crises: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash. We're now overdue for the next one. It could happen next week, next month or next year. But when it happens, massive numbers of people will become unemployed, bankrupt and homeless. Many ordinary people will go to jail because of crimes they committed out of desperation. As I've said before, it's possible that some people reading this have committed crimes, such as embezzlement, thinking that no one would check and they wouldn't be caught. It's true that no one checks as long as everyone's making money, but when things go wrong, everything is checked and double-checked, and criminals are caught. If you've committed a crime out of desperation, then you should try to find a solution immediately; even if you're going to be bankrupt and homeless, you don't want to be a criminal as well. Don't tell a friend or family member of your crime, because you'll make that person an accessory after the fact. Go talk to a lawyer immediately, and examine the choices available to you. As the crisis approaches, remember what I always say: No one can prevent the crisis, but you can prepare for it. Treasure the time you have left, and use it to prepare yourself, your family, your community and your nation. =eod =// &&2 e070403 Democrats are now threatening total cutoff of funds to Iraq =data ww2010.weblog.y2007.e070403.head Democrats are now threatening total cutoff of funds to Iraq =data ww2010.weblog.y2007.e070403.keys =data ww2010.weblog.y2007.e070403.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070403.date 3-Apr-07 =data ww2010.weblog.y2007.e070403.txt1 CNN's Michael Ware gives a sober assessment, for a change. =data ww2010.weblog.y2007.e070403.txt2 According to <#stdurl http://www.time.com/time/nation/article/0,8599,1606070,00.html "Time Magazine and other news sources,"#> Senate Majority Leader Harry Reid intends to try to completely cut off funding for the Iraq war if President Bush vetoes the bill that sets a withdrawal deadline, as he's already said he would do. The clown circus in Washington gets worse every day. I've been critical of <#inc ww2010.weblog.ref e070319b "CNN Baghdad reporter Michael Ware"#> before, because he doesn't know what a civil war is, he doesn't know that there's a real civil war going on in Darfur, all he reports on are bombings and killings in Iraq, and he's contemptuous of anyone who disagrees with the Democratic party line. So I was surprised on Monday to hear him give a very sober assessment of what would happen if Reid's threat came to fruition. He was interviewed by CNN anchor Suzanne Malveaux:

"Malveaux: What would happen if the US government pulled most of the funding out for US troops by March of next year? <#inc ww2010.pic g070402b.jpg right "" "Unshaven Michael Ware is interviewed by lovely anchor Suzanne Malveaux (Source: CNN)"#> Ware: It would be an American nightmare. If Congress decided to cut off the flow of finances, if America decides to stop paying for this war, and the fight grinds to a halt, then the people who will benefit will be the enemies that America has identified -- al-Qaeda and Iran, particularly. Because there's no one else to pick up the mantle of the fight and carry it forward. Within Iraq there would be unimaginable bloodshed. And, as the former chief of central command, General Abazaid forewarned, there would almost certainly be regional warfare within the broader Middle East that, without a shadow of a doubt, would not only produce more terrorists, but that would ultimately, eventually blow back on the United States of America. Malveaux: Could the Maliki government survive such a pullout from reducing those funds. Ware: Not at all, not at all. If those funds are cut off, not only does it rip the carpet out from underneath the feet of the American troops here on the ground, but given that America is underwriting the Maliki government, certainly in terms of finances, it would see this brittle administration here in Iraq crumble as well. <#inc ww2010.mappic iraq.gif left "" "Iraq"#> Again, who would be the victor? No one but Iran. Iran already has much greater political influence here in this country than Washington does. So if the pot of money stops, there's nothing to stop Iran consolidating its power. Now, while I understand the Democrats and their posturing like this on the finance issues in Congress reflects the mood of America, here on the ground it just means trouble and a nightmare end to this war. Malveaux: But Michael, what about the alternative: There are some Democrats who say, maybe we should redeploy, put US troops outside of Baghdad and perhaps outside of the country, and they'll be ready to go if such a crisis happens. Ware: This is not a new concept, this is not a new strategy. This is the policy of containment. Pull back, seal what borders we can -- but let's bear in mind, Iraq's longest land border is with Iran, and there'll be no US troops on that border. There's no guarantee that Turkey will allow US troops on it's border, either. And Syria - do you think Syria is going to allow US soldiers and marines on its territory to police Iraq? I don't think so. And you want to make it a precondition that the troops will move in IF something arises? There is no IF. And you'll see America's Arab allies, who have been screaming about the disaster they see here in Iraq, particularly Saudi Arabia, become much more overtly involved in this fight on the Sunni side."

Notice that Ware never uses the phrase "civil war," and does talk about al-Qaeda and Iran. Perhaps in the last couple of weeks he's become aware of the <#hreftext ww2010.i.iraq070401 "efforts by Iraqi Sunnis to expel al-Qaeda in Iraq"#> that I've been writing about. He makes the point that a pullout from Iraq is completely unrealistic, and explains the reasons in detail. He points out that there's no reasonable place for the troops to go, and that if they're going to go back "if something happens," then they're going to go back. It's not surprising that Michael Ware's comments are much more sober than they've been in the past, given that he's spending to much time these days with the US commander, General David Petraeus. It wouldn't surprise me if Petraeus has decided to personally educate Ware and other American reporters who aren't totally hopeless. In fact, I can't prove it, but I've been getting a sense that many newscasts have been moving ever so slightly in the direction of sobriety, as long as you don't listen to the Congressional loonies. There seems to be a greater general realization that the Mideast is headed for a major regional war, and that the Palestinian issue is becoming increasingly serious. This is new. From the point of view of Generational Dynamics, the Palestinians and Israelis are headed for a major war that will pull in the entire region, as <#inc ww2010.weblog.ref e070308 "Jordan's King Abdullah explained to a joint session of Congress,"#> last month. Abdullah said that the Mideast "is pulling the region and the world towards greater danger. As public confidence in the peace process has dropped, the cycle of crises is spinning faster, and with greater potential for destruction." Abdullah's prediction is coming closer to fruition every day. =eod =// &&2 e070402 Sentimental Iraqi pop singer wins Arab 'Idol' contest, uniting Iraqis =data ww2010.weblog.y2007.e070402.head Sentimental Iraqi pop singer wins Arab 'Idol' contest, uniting Iraqis =data ww2010.weblog.y2007.e070402.keys shada hassoun, shadha, star academy, american idol, iraq nationalism =data ww2010.weblog.y2007.e070402.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070402.date 2-Apr-07 =data ww2010.weblog.y2007.e070402.txt1 Shada Hassoun has an Iraqi father and a Moroccan mother, =data ww2010.weblog.y2007.e070402.txt2 and lives in France. <#inc ww2010.pic shada.jpg right "" "Shada Hassoun"#> But she captivated the hearts of all Iraqis and <#stdurl http://www.msnbc.msn.com/id/17883632/ "won the crown as most popular singer"#> on the TV show "Star Academy," the Arab version of American Idol. As I understand it (but cannot verify), her final song was a very sentimental song about Baghdad from several decades ago. She has spoken frequently about her love for Iraq and Iraqis. It's not known whether she's Sunni or Shia, and so both sides have claimed her. In war-torn Iraq, she became a symbol that everyone could love, and her victory on Friday was celebrated across the country. This is <#stdurl http://www.youtube.com/watch?v=WybXT6khLEM "a video of one of her appearances"#> on Star Academy (I'm not sure which one). She's singing along with another contestant, an Egyptian girl named Sally Ahmad. Shada is wearing the white dress.

I've just posted a <#hreftext ww2010.i.iraq070401 "lengthy analysis of the current situation in Iraq,"#> emphasizing the fact that Iraqi citizens are turning against the foreign jihadist organization, "al-Qaeda in Iraq." Iraqi nationalism is beginning to re-assert itself, as it always has in times of war in the past. The country-wide support for Shada, and the shared joy in her victory, are part of the resurgence of Iraqi nationalism. This is a particularly sad time for Iraqis, after the events in Tal Afar last week, as I explained in that article. First, on Tuesday, al-Qaeda in Iraq launched two truck suicide bombs in a Shia neighborhood; then, on Wednesday, Shia gunmen killed numerous Sunni civilians in random gunfire. A total of 152 people were killed. The mainstream media have been gloating about this all week, proclaiming triumphantly that it proves that the "surge" is failing. Actually, as I explain in the article, just the opposite is almost certainly true, as the citizens of Tal Afar have now united against their common enemy, al-Qaeda in Iraq. As I've said before, it's a national disgrace that so many politicians, journalists and pundits have committed their careers and reputations to an American loss and humiliation in Iraq. Things have gotten to the point where almost everything that the BBC and American journalists say cannot be trusted. When you go deeply into foreign sources, as I did, and describe in my analysis, then you find that things are different. And now we see this: If there were a massive civil war between Sunnis and Shia, then the national shared joy and unity over Shada would be impossible. On Sunday, a <#stdurl http://www.timesonline.co.uk/tol/news/world/iraq/article1596821.ece "Times Online article"#> provides additional information:

"Sunnis try to blast Al-Qaeda out of Iraq Late last year Salam al-Zubaie, Iraq’s deputy prime minister, began secret talks with the Sunni groups with the aim of coaxing them away from Al-Qaeda. He held meetings with commanders of groups including the 20th Revolutionary Brigade, the general command of the Iraqi armed forces, the Islamic Army of Iraq, the Ba’ath party and the Salah al-Deen al-Ayyubi Brigade. He encouraged them to form a unified Sunni alliance that could fight Al-Qaeda and attack Iranian influence. They proved receptive to his arguments. "Both Al-Qaeda and Iran seem to have an identical agenda to try to widen the sectarian split between Sunnis and Shi’ites, maintaining instability," Abu Baker, a commander in the 20th Revolutionary Brigade, told The Sunday Times last week. "They stepped up their attacks on innocent Iraqi people and we could not accept that." A senior commander in the Islamic Army said Zubaie had promised not only to help to unify the Sunni groups but also to provide them with financial and logistical support to stop Iranian infiltration. The insurgents demanded assurances from the government that they would not be arrested or attacked by the security forces. They also asked for promises that they could eventually join the security forces. There was one sticking point. "We insisted that our fight with the occupying forces would continue as they are to blame for our current situation," the Islamic Army commander claimed. "Zubaie’s response was that first we had to get rid of Al-Qaeda and turn ourselves into a strong legal force to be reckoned with. Then we’d be in a position to negotiate with the occupying forces and demand their withdrawal. This was something we could not accept." Within weeks, however, the insurgent groups set out to "cleanse" parts of Baghdad of Al-Qaeda influence. Shaker Zuwaini, an Al-Qaeda emir, was assassinated by the 20th Revolutionary Brigade in the Adel district of Baghdad. The emir of the Amiriya district was also killed and another commander was chased away from the Khadra district. Abu Omar, leader of a Ba’ath insurgent group and military commander in Amouriya, said: "Al-Qaeda have turned into a bunch of criminals and gangsters up to their eyes in kidnapping and robberies. We resolved to put an end to them."

This is a significant change in Iraq -- something that hasn't been seen before. Will it last? That remains to be seen. But for the time being, at least, the disgraceful politicians and journalists who are hoping for an Iraqi disaster should be getting worried. For everyone else, the victory of Shada Hassoun provides hope for a better Iraqi future. =eod =// &&2 e070401 April fool - Iran hostages / nuclear =data ww2010.weblog.y2007.e070401.head Iran releases the British hostages, and ends its nuclear development program. =data ww2010.weblog.y2007.e070401.keys =data ww2010.weblog.y2007.e070401.loc ww2010.weblog.log0704 =data ww2010.weblog.y2007.e070401.date 1-Apr-07 =data ww2010.weblog.y2007.e070401.txt1 The New York Times and BBC congratulate George Bush and Tony Blair. =data ww2010.weblog.y2007.e070401.txt2 April fool. =eod =// &&2 e070331b Iran hostage crisis grows increasingly dangerous =data ww2010.weblog.y2007.e070331b.head Iran hostage crisis grows increasingly dangerous =data ww2010.weblog.y2007.e070331b.keys =data ww2010.weblog.y2007.e070331b.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070331b.date 31-Mar-07 =data ww2010.weblog.y2007.e070331b.txt1 This is comparable to the 1962 Cuban missile crisis. =data ww2010.weblog.y2007.e070331b.txt2 These are extremely tense days in Iran, and especially for president Mahmoud Ahmadinejad:

On Sunday, the United Nations Security Council <#stdurl http://www.boston.com/news/world/articles/2007/03/25/security_council_unanimously_approves_sanctions_on_iran/ "unanimously approved sanctions against Iran"#> for its refusal to stop enriching uranium. This was extremely humiliating to Iran and Ahmadinejad, especially since Russia and China joined the unanimous vote.
Russia has previously <#inc ww2010.weblog.ref e070317 "canceled delivery of nuclear fuel"#> to the Russian-built Bushehr nuclear power plant in Iran, and canceled its scheduled September opening, giving non-payment of bills as a reason. Now, <#stdurl http://memri.org/bin/latestnews.cgi?ID=IA33807 "Russia has told Iran"#> that "a nuclear Iran is considered a direct and indirect threat to Russia's interest... Russia will do everything [necessary] to ensure that this [threat] will not come about." This has created a crisis in Iran-Russia relations, and forced Ahmadinejad to claim that Iran will proceed without Russian help.
Ahmadinejad has been losing popularity because the Iranian economy is has become increasingly weak.

From this context came the news, last Saturday, that the Iranian Revolutionary Guard, a vestige of Iran's 1979 Islamic revolution, <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-6505377,00.html "took 15 British marines and sailors hostage"#> at gunpoint in the Persian Gulf. A War of Words Since that time, the "war of words" between Britain and Iran has been steadily escalating. Britons have been infuriated because the hostages were paraded on TV and <#stdurl http://www.timesonline.co.uk/tol/news/uk/article1592316.ece "forced to "confess" on TV and in letters."#> <#inc ww2010.pic g070330.jpg right "" "Iran's Ahmed Khatami: "If they continuing their bullying gestures, they will have an expensive price to pay." (Source: CNN)"#> Iran said that the hostages were being held <#stdurl http://www.dailystar.com.lb/article.asp?edition_id=10&categ_id=2&article_id=81038 "because of "oppressive" British and US behavior."#> As I wrote in my <#inc ww2010.weblog.ref e070317 "lengthy analysis of Iran's strategy,"#> I've had much more difficulty evaluating Iran's direction than other countries' because Iran is following a somewhat contradictory policy, because Ahmadinejad is far more hardline than the young postwar Iranian generation. TV analysts are puzzled as well, a couple of them indicating that Iran appears to want to trigger a war. Kennedy versus Ahmadinejad As I've previously indicated, the most fruitful way to understand Ahmadinejad is to compare him to American President John Kennedy. Some people have found this strange, but it's actually a highly relevant comparison: Ahmadinejad became president at the start of Iran's Awakening era, and Kennedy became president at the beginning of America's Awakening era, at a time when the public was still very fearful of a third world war against the Soviet Union and China. Kennedy was a young "new generation" President, in the "Hero generation" that fought and won World War II. As President, he had to prove that he could stand up to other international leaders, especially the Soviets. And he had to prove that he had learned the lessons of WW II. It was believed (incorrectly) that if Hitler had been stopped early, then WW II could have been avoided; it was American doctrine at the time that Communism had to be stopped early, to prevent World War III. When Fidel Castro's Cuba became a Communist country right on our doorstep, it was recognized as a significant step toward World War III, and Kennedy had to act. First was the disastrous <#stdurl http://en.wikipedia.org/wiki/Bay_of_Pigs_Invasion "Bay of Pigs invasion,"#> which Castro defeated. Then, on October 16, 1962, reconnaissance photos revealed that the Soviets were building long-range ballistic missile sites in Cuba. Kennedy reacted quickly, what became known as <#stdurl http://en.wikipedia.org/wiki/Cuban_Missile_Crisis "the Cuban Missile Crisis."#> On October 22, he went on nationwide TV, revealed the discovery of the missiles, and announced a naval blockade of Cuba that would prevent Soviet ships from bringing additional weapons to Cuba. During the next few days, both the American and Soviet militaries were on high alert, preparing for full-scale nuclear war. On October 28, the Soviets publicly backed down and committed to removing the missile installations. The world breathed a sigh of relief. Now, the way to understand Ahmadinejad's actions is to relate them to Kennedy's. Ahmadinejad is a young "new generation" President, in the "Hero generation" that fought in the 1980s Iran/Iraq war -- which Iran lost. As President, he has to prove that he can stand up to other international leaders, especially the Israelis, Americans and British. And he has to prove that he had learned the lessons of the Iran/Iraq war. The First Iranian Hostage Crisis There's one more important event to take into account: The <#stdurl http://en.wikipedia.org/wiki/Iran_hostage_crisis "original Iranian hostage crisis of 1979-81."#> After the Iranian Revolution of 1979, Islamic radicals invaded the American embassy in Tehran. 52 Americans were held hostage for 444 days. President Carter refused to take military action, but repeatedly pleaded for release of the hostages on humanitarian grounds, to no avail. This event was extremely traumatic for the American public. CBS news anchor Walter Cronkite, supposedly the "most trusted" man in America, began each evening's news cast with something like "Today is Tuesday, January 28, 1980, the 136th day of the Iran Hostage Crisis." (Those numbers are made up, but you get the idea.) That's when the "America Held Hostage" news show debuted on ABC at 11:30 pm each evening, to cover the latest events in the hostage crisis. (After the hostage crisis ended, the show was renamed "Nightline.") The hostage crisis became a major focus of the 1980 Presidential campaign, with Ronald Reagan running against Jimmy Carter. After Reagan won the election, he and Carter made a secret deal that, during the three months from the election until Reagan took office, Reagan would repeatedly threaten the Iranians with armed force if the hostages weren't freed when he took office. It worked, and the hostages were freed and flown out of Iran at noon, on January 21, 1981, just as Reagan was being sworn in. You don't hear much about this deception these days, but there was considerable gloating about this at the time. Americans don't recall this today, but I'm willing to bet that Ahmadinejad remembers it. So when we analyze Ahmadinejad's actions, we have to take all of these factors into account: because of his youth, Ahmadinejad may be unable to back down from a confrontation, and particularly may be unable to simply allow the hostages to be freed, as they were in 1981. Journalists often talk about Ahmadinejad being "hardline." This word means one thing when you're talking about Osama bin Laden, but when you're talking about Ahmadinejad, it means that he's hardline in the same sense that Kennedy was hardline: At the beginning of an Awakening era, a country will be very hardline on any issue that's perceived to risk a new crisis war (like WW II or the Iran/Iraq war, respectively). The Opponents When we compare Ahmadinejad and the current hostage crisis to Kennedy and the Cuban missile crisis, we can see a clear parallel between their behaviors. But there are clear differences when we analyze their respective opponents. Kennedy's opponents were the Soviets, specifically the Russians. The last Russian crisis war was the Bolshevik Revolution and the following civil war, ending in the 1920s. Thus, in 1962, Russia was at the end of its generational Awakening era, entering its generational Unraveling era. As anyone knows who remembers <#hreftext ww2010.i.sixties040501 "America's last Awakening era, the 1960s-70s,"#> hardline policies just don't survive. In the case of America, President Kennedy was assassinated, President Johnson was forced to decline to rerun, and President Nixon was forced to resign. Two events of the early 1990s illustrate an Unraveling era: In the Gulf War, when we drove the Iraqis out of Kuwait, we simply left; we didn't go after Saddam in Baghdad. And later, in the "Blackhawk Down" incident, when a helicopter was shot down in Mogadishu, we simply left Somalia. These two events illustrate how any country acts during an Unraveling era. So Russia was entering an Unraveling era at the time of the Cuban missile crisis, and they backed down. Kennedy's gamble paid off. But things are very different for Ahmadinejad. His opponents are Britain, Israel and the U.S., all in a generational Crisis era. This fact indicates that it's far less likely that Ahmadinejad's opponents will back down the way Kennedy's opponents did. How would Britain have acted this past week if it had been in an Unraveling era? <#inc ww2010.pic g070402.jpg right "" "Map showing conflicting claims of UK and Iran. (Added 2-Apr) (Source: MSNBC)"#> Actually, a number of commentators have addressed this very clearly. Several have said that Tony Blair might have made a statement to the effect, "As far as we know, the hostages were in Iraqi waters; if they were in Iranian waters, then it was a mistake." That would be a typical "Unraveling era" statement, and it might possibly have led to a quick diplomatic solution. Instead, Blair immediately came out with a map that he said proved that the hostages were clearly in Iraqi waters, and couldn't possibly have been in Iranian waters. This closed off the possibility of a diplomatic solution based on "it was a mistake." The Resolution There's a great deal of worldwide hostility toward Iran at the present time, not only because of this hostage crisis, but also because of Iran's unwavering plan to develop nuclear technology (and build nuclear weapons). The fact that Russia has now apparently fully joined the coalition -- with America and the EU -- determined not to allow Iran to develop nuclear weapons, the possibility of military action against Iran is significantly high. And it's worth reminding you again, dear reader, that last summer, when Hizbollah captured two Israeli soldiers as hostages, <#inc ww2010.weblog.ref e061223 "Israel panicked and launched the Lebanon war within four hours,"#> with no plan and no objectives. With 15 British soldiers now in Iranian hands as hostages, this kind of scenario is a possibility. Militating against this scenario is the fact that many countries -- including Britain and the U.S. -- want to find a diplomatic solution. Furthermore, Iran itself is politically split, as any country is during an Awakening era. Kennedy's administration was split between hardliners and moderates, and the same is true in Iran's government today. It's possible that the moderates will force a diplomatic solution on Ahmadinejad. So there are three possible scenarios:

A military action scenario.
A diplomatic scenario.
A continuing crisis, with the hostages kept for a long period of time with no resolution. (This is what happened in 1979.)

Despite the apparently escalating diplomatic situation, I consider a diplomatic solution to be more likely than military action. A Personal Anecdote I very well remember the night that President Kennedy announced the naval blockade of Cuba, and how panicked every one in my dorm at MIT was. It was pretty clear to all of us that Kennedy was making a major gamble that was threatening thermonuclear war and risking all our lives. I was pretty panicky myself -- I had been a NY Times subscriber for years, and I was following the situation assiduously. And I still recall the big sign on the bulletin board in the lobby of my dorm: "Tomorrow's weather forecast: Clear and sunny, with temperatures in the high million degrees." It ended up pretty well for some guys, though. The stories came out afterwards that a number of guys had received phone calls from their girlfriends, saying, "I wanna get laid - I don't want to die a virgin." So that leaves us with the following question: What are young Iranian women telling their boyfriends this weekend? Enquiring minds want to know. =eod =// &&2 e070331 Generational Dynamics web site traffic is growing. =data ww2010.weblog.y2007.e070331.head Generational Dynamics web site traffic is growing. =data ww2010.weblog.y2007.e070331.keys =data ww2010.weblog.y2007.e070331.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070331.date 31-Mar-07 =data ww2010.weblog.y2007.e070331.txt1 During the last year, =data ww2010.weblog.y2007.e070331.txt2 the traffic to this web site has been growing steadily. <#inc ww2010.pic lanl0703.gif right "" "Generational Dynamics web site -- average daily web pages and distinct user sessions -- not including search engine requests"#> The adjoining graph shows that traffic to this web site has roughly tripled in the last year. It was almost zero in 2003. In the current month (March), there have been an average of 768 distinct user sessions per day, requesting an average of 1785 pages per day. This means that the average user requires between 2 and 3 pages per visit. Incidentally, I have no idea what caused that bump in mid-2005. I thank all of you who keep coming back. Thanks to the Generational Dynamics methodology, I believe that that this is the only web site in the world that really tells what's going on in the world. There is no other web site in the world with anything like the predictive success of this web site. I'm still managing to keep up with all e-mail questions sent to me, though it sometimes takes a couple of days for me to get back with a response, depending on volume of e-mail. So if you have a question, by all means send me an e-mail message, or use the "Comment" link at the top of this page. If you want to have a more open debate, you can do so in the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 ""Objections to Generational Dynamics" thread"#> of the Fourth Turning forum. =eod =// &&2 e070329 Iranian scholar: Tom and Jerry a Jewish conspiracy =data ww2010.weblog.y2007.e070329.head An Iranian scholar says that Tom and Jerry cartoons are a Jewish conspiracy =data ww2010.weblog.y2007.e070329.keys tom and jerry, hanna-barbera, walt disney, hasan bolkhari, memri william hanna, joseph barbera =data ww2010.weblog.y2007.e070329.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070329.date 29-Mar-07 =data ww2010.weblog.y2007.e070329.txt1 Professor Hasan Bolkhari is loonier than Ahmadinejad. =data ww2010.weblog.y2007.e070329.txt2 A web site reader has called my attention to <#stdurl http://www.youtube.com/watch?v=40VFcJTIduw "this YouTube video"#> of an Iranian scholar, Professor Hasan Bolkhari, explaining how Tom and Jerry cartoons are a Jewish conspiracy. Take a listen -- I couldn't stop laughing:

The lecture appeared on Iranian TV channel 4 on February 19, 2006. It was recorded and translated by MEMRI (The Middle East Media Research Institute). Here is <#stdurl http://www.memritv.org/Transcript.asp?P1=1049 "MEMRI's transcript of the lecture:"#>

"Hasan Bolkhari: There is a cartoon that children like. They like it very much, and so do adults - Tom and Jerry. ... Some say that this creation by Walt Disney will be remembered forever. The Jewish Walt Disney Company gained international fame with this cartoon. It is still shown throughout the world. This cartoon maintains its status because of the cute antics of the cat and mouse ? especially the mouse. Some say that the main reason for making this very appealing cartoon was to erase a certain derogatory term that was prevalent in Europe. ... If you study European history, you will see who was the main power to hoard money and wealth, in the 19th century. In most cases, it is the Jews. Perhaps that was one of the reasons which caused Hitler to begin the anti-Semitic trend, and then the extensive propaganda about the crematoria began... Some of this is true. We do not deny all of it. Watch Schindler's List. Every Jew was forced to wear a yellow star on his clothing. The Jews were degraded and termed "dirty mice." Tom and Jerry was made in order to change the Europeans' perception of mice. One of terms used was "dirty mice." I'd like to tell you that... It should be noted that mice are very cunning...and dirty. ... No ethnic group or people operates in such a clandestine manner as the Jews. ... Read the history of the Jews in Europe. This ultimately led to Hitler's hatred and resentment. As it turns out, Hitler had behind-the-scene connections with the Protocols [of the Elders of Zion]. Tom and Jerry was made in order to display the exact opposite image. If you happen to watch this cartoon tomorrow, bear in mind the points I have just raised, and watch it from this perspective. The mouse is very clever and smart. Everything he does is so cute. He kicks the poor cat's ass. Yet this cruelty does not make you despise the mouse. He looks so nice, and he is so clever... This is exactly why some say it was meant to erase this image of mice from the minds of European children, and to show that the mouse is not dirty and has these traits. Unfortunately, we have many such cases in Hollywood shows."

<#inc ww2010.pic g070328.gif right "" "Tom and Jerry"#> There are many factual errors with this:

Tom and Jerry cartoons are from <#stdurl http://en.wikipedia.org/wiki/Hanna-Barbera "Hanna-Barbera,"#> not Walt Disney.
According to <#stdurl http://www.adherents.com/people/pd/Walt_Disney.html "one web site,"#> Walt Disney was a Congregationalist Christian, not a Jew.
There isn't a snowflake's chance in hell that William Hanna and Joseph Barbera had any of the lecturer's ideas in mind when they created the cartoon. The cartoons were created for entertainment.

If you'd like to see more of this kind of scintillating entertainment, here's <#stdurl http://www.youtube.com/watch?v=GJWsmOb2TUg "another lecture by Hasan Bolkhari"#> explaining how Jurassic Park is part of the Jewish Crusade against Islam. As funny as this is, let's not get too smug about it. Remember that the <#inc ww2010.weblog.ref e070114b "politicians, journalists and analysts in Washington"#> constantly say things about the Mideast that are just as moronic and ignorant as the things that Hasan Bolkhari said. =eod =// &&2 e070328 As foreclosures surge, people ask why mortgage lenders were so lax =data ww2010.weblog.y2007.e070328.head As foreclosures surge, people ask why mortgage lenders were so lax =data ww2010.weblog.y2007.e070328.keys edward chancellor, tulipomania, tulip mania, south sea bubble, panic of 1857, 1929 crash, robert barro =data ww2010.weblog.y2007.e070328.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070328.date 28-Mar-07 =data ww2010.weblog.y2007.e070328.txt1 Or, perhaps they did it on purpose, to be "predatory" =data ww2010.weblog.y2007.e070328.txt2 An <#stdurl http://calculatedrisk.blogspot.com/2007/03/unwinding-fraud-for-bubbles.html "article on the Calculated Risk blog"#> tries to explain why mortgage borrowers committed fraud and why lenders were so lax about enforcing rules:

"The problem ... is that, recently, we seem to have an epidemic of predator meeting predator and forming an alliance: a borrower willing to commit fraud for housing meets up with a seller or lender willing to commit fraud for profit, and the thing gets jacked up to a whole new level of nastiness. ... As soon as borrowers became convinced that paying substantially more for the property than the current seller did just a few months ago is always and everywhere a good sign, you could no longer rely on the "rational agent" borrower to at least limit his fraudulent tendencies to lying on the loan application in order to get away from apartment life. You actually see them agreeing to sign "secret" sales contract clauses that will require them to borrow more than the fair market value of the property, and then give the excess loan proceeds to someone who won’t be helping to repay the debt. Or accepting "down payment assistance" from an interested party, in order to buy a property whose price is inflated by the amount of the "assistance." That this doesn’t seem to strike them as self-defeating tells you a lot about how uninformed or misinformed we are, how far into a true mania we’ve gotten. In the old days, you used to be able to count on RE frauds to display basic self-interest, naked or camouflaged. Telling the difference between the victims and the victimizers, the predators and the prey, and the fraudulent and the defrauded, is getting a lot harder when you have borrowers not required to make down payments able to lie about their incomes in order to buy a home the seller is overpricing in order to take an illegal kickback. The lender is getting defrauded, but the lender is the one who offered the zero-down stated-income program, delegated the drawing up of the legal documents and the final disbursement of funds to a fee-for-service settlement agent, and didn’t do enough due diligence on the appraisal to see the inflation of the value. Legally, of course, there’s a difference between lender as co-conspirator and lender as mark, utterly failing to exercise reasonable caution, but it’s small comfort when the losses rack up. ... A recent CNN piece quotes a Clayton analyst as having found a mortgage note signed by "M. Mouse".... How did anyone miss that? ... What I want to do instead is to make some general observations about why so much fraud is missed by lenders. Obviously, there are lenders who are colluding with borrowers, or who are defrauding investors or borrowers or some other party; that’s either "fraud for housing" or "fraud for profit" or the new hybrid of the two. To me, that’s the least interesting problem (although it’s an important one). I want to talk about the extraordinarily widespread "insufficient caution" problem in this industry: the lenders who are just too easy to defraud. It seems to me that this problem gets to the heart of a lot of the issues we keep talking about here: toxic mortgage products, loose standards, out of control home price bubbles, and the endless chain of "disintermediation," outsourcing, temping, dumbing down, fragmenting, and otherwise morphing of the business of home mortgage lending into a big fraud magnet. It often seems as if the industry just stopped believing that it could ever really be at risk. On the one hand, everyone does know that you can’t run a mortgage lending business with the same level of anti-fraud measures they use at Domino’s to keep from wasting pizzas on prank calls. On the other hand, we are starting to see—and I predict we will start to see a cascade of—stories of lenders with such lax internal controls that if they did remember the risks, you have to conclude they just tried to repress those memories."

What I'd like you to get out of reading the above description is not the details about how fraud occurred; what I want you to do is get a "feeling" of what's been happening. Remember that Generational Dynamics is not concerned about the behaviors and attitudes of an individual or small group of people; it's concerned with the behaviors and attitudes of large masses of people, entire generations of people. So you should read the above description not for the details of the individual actors -- the buyers, the builders, the lenders, etc. -- and their actions, but the attitude that they all share -- the attitude that nothing really matters. There's little or no difference between victims and victimizers, between predators and prey. Really, everyone has the same attitude, the sense that you'll make money and do all right no matter what. And this is the generational attitude that comes about at the height of the bubble mania, just before a crash, as I discussed in <#inc ww2010.weblog.ref e070320 "my article based on research by Harvard economist Robert J. Barro."#> Now, let's look back in history at the funniest bubble of the all, the Tulipomania bubble. Pundits and journalists today look back on the Tulipomania bubble and laugh. Ha, ha! How could anyone be so utterly stupid to pay such inflated prices for a simple tulip? Or even worse, for a "tulip future," that gave you the right to own a particular tulip that would be grown in the following Spring? How could anyone be so dumb as to think that a tulip could ever be worth as much as a small house? Ha, ha! People were sure incredibly dumb in the 1630s, weren't they? Ha, ha! They must all have been on some sort of drugs or alcohol to do something so incredibly stupid. And when the tulip market crashed on February 3, 1637 -- well, how could they be such idiots not to have seen that coming? Ha, ha! Well, let's take a look at what happened with this tulip mania. Here's an excerpt from the description given in Edward Chancellor's 1999 book, Devil Take the Hindmost, a history of financial speculation:

"The beginning of the tulpenwoerde, or what the Victorians called the tulipomania, is associated with the arrival in the tulip market around 1634 of outsiders who were apparently attracted by stories of rising prices for tulip bulbs in Paris and northern France. Among these entrants to the market -- later dismissed by Dutch florists as the "new amateurs" -- were weavers, spinners, cobblers, bakers, grocers, and peasants. Although the tulip craze grew to embrace most social classes, two parties were absent who might otherwise have brought stability to the trade. The wealthy amateur bulb collectors, who had long shown a readiness to pay vast sums for the rarer varieties, withdrew their custom as prices began to soar, while the great Amsterdam merchants continued investing their trading profits in town houses, East India stock, or bills of exchange -- for them, tulips remained merely an expression of wealth, not a means to that end. The nature of the tulip market changed as the traffic increased. Private negotiations between individuals gave way to informal meetings in the rooms of inns, called Colleges, where trades and speculators could trade in convivial surroundings. ... There were two methods of dealing: direct negotiation between two persons or general auction. The former method, called "with the plates," ... involved both buyer and seller inscribing an agreed price for a bulb on wooden plates provided by the College. Auctions were referred to as "in the naught" since the seller set a starting price by writing a figure in the middle of a slate circled with a zero. A commission of up to three guilders for "wine money" was paid by the buyer to the College, which was spent on tobacco, alcohol, light, and heating. Pleasure was mixed with profit.... No actual delivery of tulips took place during the height of the boom in late 1636 and early 1637 as the bulbs remained snug in the ground. A market in tulip futures appeared, known as the windhandel (the wind trade): sellers promised to deliver a bulb of a certain type and weight the following spring, buyers took the right to delivery -- in the meantime, cash settlement could be made for any difference in market price. Most transactions were expedited with personal credit notes which also fell due in the spring when the bulbs would be dug up and delivered. Gaergoedt boasts of having made 60,000 guilders from his tulip speculations but admits that he has only received "other people's writing." By the later stages of the mania, the fusion of the windhandel with paper credit created a perfect symmetry of insubstantiality: most transactions were for tulip bulbs that could never be delivered because they didn't exist and were paid for with credit notes that could never be honoured because the money wasn't there." (pp. 16-18)

Now, I want you to read this second description in the same way that you read the first one -- not for the details, but for the "feeling" for the attitudes of the people involved. The point is, we're no different today than in the Tulipomania days. We've been doing exactly the same thing. We have the same kind of credit debauchery, the same kind of craziness, the same kind of "state of denial." Only the details are different; the attitudes and behaviors are identical. We also a have a "perfect symmetry of insubstantiality" today: Americans' credit card debt keeps growing, even though it can't grow forever; America's international debt keeps growing, even though it can't grow forever; China lends more and more to the U.S., though it can't keep lending more forever; and China's 20-year-old bubble economy depends on selling textile and electronic goods to Americans, who purchase them with the money that China lends to America.

"On 3 February 1637, the tulip market suddenly crashed. There was no clear reason for the panic except that spring was approaching when delivery fell due and the game would be up. In Haarlem, the centre of the flower trade, rumours circulated that there were no more buyers, and the next day tulips were unsaleable at any price. Contracts were not settled, and one default followed another. The professional florists attempted in vain to extract payment from defaulting speculators."

Once the crash occurred, the "feeling" of credit debauchery ended, of course. In fact, the entire Western world learned its lesson from the Tulipomania crash. But, as the decades passed, the people who learned those lessons grew old and died, and the younger generations eventually developed the same behaviors and attitudes. The epicenter of the Tulipomania crash was in Holland in 1637. The epicenter of the South Sea Bubble crash was in England, in 1721. The epicenter of the French Monarchy (bubble) bankruptcy was in France, in 1789. The epicenter of the Hamburg Crisis of 1857 (Panic of 1857) was in Germany. And the epicenter of the Wall Street crash of 1929 was, of course, in America. Why does the epicenter keep changing? Well, I like to say that young generations forget the wisdom that they're parents tried to teach them, but it's just possible that the epicenter of a crash retains a tiny bit more of that wisdom than the others. A few years ago, when I first began saying that we were headed for a new 1930s style Great Depression, people used to tell me, "It can't happen. In the 1930s, the Roosevelt administration put in new agencies and regulations to prevent another depression from ever occurring." But of course the agencies and regulations that were created in the 1930s to prevent another depression have already failed. Take the Securities and Exchange Commission. When I was high school in the 50s, my teachers all told me how the SEC was going to prevent a future depression. The 1930s depression was caused by the huge stock market bubble of the 1920s, where millions of investors drove up the prices of stocks by borrowing money from each other, a situation that led to a huge stock market correction in the 1930s. The SEC would prevent that from ever happening again by regulating margin rates, which would reduce buying stocks on credit, and prevent another huge stock market bubble. My 1950s high school teachers knew that because they lived through the 1930s, and understood that piece of wisdom. Well, today all the people who remember that wisdom from personal experience are gone. And the SEC failed to prevent the huge 1990s stock market bubble. The SEC has completely failed to perform the principal function that it was originally set up for. Still, those agencies and regulations still exist, and even though they've failed to do their jobs, they've at least slowed things down. We do have some sense of things going wrong, even though we're still in a state of mania. But that's not true in China. I don't get the feeling from anything I've read that the Chinese have any idea at all what's going on. They seem to have no real concept of a bubble, and no real fear of a crash. So I think that the epicenter of the next crash will be in China. The entire world will be economically devastated, of course, but my expectation is that the devastation will be greatest in China. Recall that on February 26, <#inc ww2010.weblog.ref e070226 "I posted an article"#> describing that the Shanghai stock market bubble appeared close to bursting. I described how people were selling their houses, borrowing money from friends and relatives, to do day-trading in the stock market. There seemed to be no sanity at all in the mania. Well, it was <#inc ww2010.weblog.ref e070227b "very next day"#> that a brief panic caused the Shanghai stock market to fall 8.8%, causing <#inc ww2010.weblog.ref e070227c "a small panic on Wall Street"#> as well. What caused the panic in Shanghai, and why did it spread around the world -- to Europe and then to America? No one knows. Let me repeat a quote from Chancellor's book: "On 3 February 1637, the tulip market suddenly crashed. There was no clear reason for the panic except that spring was approaching when delivery fell due and the game would be up." Well, maybe the Shanghai stock market mini-panic occurred on February 27 because spring is coming, and people suddenly feared that the game would be up. Incidentally, guess what? The Shanghai stock market <#stdurl http://www.chinadaily.com.cn/bizchina/2007-03/28/content_838429.htm "has completely recovered"#> from the February 27 collapse, and is once again at NEW HIGHS. It was the seventh straight session when the market ended up. So if it was a bubble on February 26, then isn't it an even bigger bubble on March 28? As I've said so many times, it's not possible to predict when a panic will occur, but from the point of view of Generational Dynamics, we're now overdue for a generational panic and crisis. It could happen next week, next month or next year, but it's coming with certainty. It will destabilize densely packed populations in China and around the world, and will lead to the Clash of Civilizations world war. As usual, Generational Dynamics tells us our final destination, but not how we'll get there. =eod =// &&2 e070326 Tamil Tiger rebel aircraft bomb government airfields, escalating Sri Lanka civil war =data ww2010.weblog.y2007.e070326.head Tamil Tiger rebel aircraft bomb government airfields, escalating Sri Lanka civil war =data ww2010.weblog.y2007.e070326.keys sri lanka, tamil tigers, liberation tigers of tamil eelam, ltte, darfur, crisis war =data ww2010.weblog.y2007.e070326.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070326.date 26-Mar-07 =data ww2010.weblog.y2007.e070326.txt1 Sri Lanka may soon join Darfur as another generational crisis war. =data ww2010.weblog.y2007.e070326.txt2 <#inc ww2010.pic india5.gif right "" "Indian subcontinent, with the island of Sri Lanka off the southern tip of India."#> In a new escalation of the Sri Lanka civil war, Tamil Tiger rebels flying two aircraft <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aEWCWmW_fm5g&refer=home "bombed the government's main air force base"#> near the airport in Colombo, Sri Lanka's capital. According to <#stdurl http://www.tamilnet.com/art.html?catid=13&artid=21667 "a story on TamilNet,"#> the Tamil Tigers' web site, the purpose of the bombing was to prevent the government Sri Lankan air force from bombing Tamil civilians. Recently, thousands of Tamil men, women and children have been forced to flee <#stdurl http://www.theaustralian.news.com.au/story/0,20867,21443387-1702,00.html "shelling and bombing by government forces."#> As I've been <#inc ww2010.weblog.ref e060512 "been describing for the last year,"#> fighting has been increasing, following the collapse of a 2002 cease fire. From the point of view of Generational Dynamics, the Sri Lanka war is following a familiar pattern for a civil war in a country in a generational Crisis era. This war is fought between two ancient races: The Sinhalese (Buddhist) and the Tamils (Hindu). WW II was a crisis war for India and for Ceylon, the former name of Sri Lanka. There was relative peace on the island until 1976, when the Tamils began demanding a separate Tamil state, and formed a separatist group called the Liberation Tigers of Tamil Eelam (LTTE), or just "Tamil Tigers." A non-crisis civil war began in 1983, and the low-level violence continued until a peace treaty was signed in 2002. In the last few months, the peace treaty has been unraveling, and in the last year it appears to be approaching a full scale genocidal crisis civil war. As the violence continues to increase, at some point it will reach a tipping point. This point is known as "the regeneracy" in generational theory, because this is the point where the unity and identity of each group completely "regenerates." The people in each group put aside all internal political disagreements aside and unify to utilize any means necessary to defeat the enemy. Once the regeneracy is reached, the war becomes a full-scale genocidal crisis war. The fighting will continue to escalate until an explosive climax occurs, and a resolution is reached. The only crisis war going on in the world today is the war in Darfur. The Darfur war began in the 1970s as simple clashes between farmers and camel herders competing for land, much as the farmers and cowboys did in the American prairies in the 1800s. But the violence in Darfur has grown intermittently since the 1970s. The regeneracy occurred in 2002-3, and widespread killing and raping began in earnest. The Darfur problem first began to get worldwide attention in 2004, shortly after the 10-year commemoration of the 1994 Rwanda genocide. At that time there were big get-togethers of high-level officials from the U.N. and from various countries, making official pronouncements that the violence must stop. At the commemoration, U.N. Secretary General Kofi Annan promised "Never again." I wrote at the time that <#inc ww2010.weblog.ref e040628 "the U.N. is completely irrelevant to the Darfur genocide,"#> and that it would not be stopped until it's run its course. My prediction that the U.N. would be able to do nothing to stop the Darfur genocide has been shown to be completely true, one of the many predictions on this web site that have been shown to be true. Now we see the Sri Lankan war approaching the same situation. =inc ww2010.cf.cf060209 p left I haven't included the Sri Lanka situation on my conflict risk graphic because I'm assuming that a genocidal Sri Lankan civil war will not automatically trigger a world war, the way a Chinese civil war would, for example. Nonetheless, a full-scale war in Sri Lanka could spread to India, and from there to Kashmir, for example, or into northeast India, where Maoist rebels have increased fighting. Thus, it is possible that in some scenarios a Sri Lanka civil war could trigger the "clash of civilizations" world war which Generational Dynamics predicts will be coming in the near future. =eod =// &&2 e070325 Angela Merkel tries to unify a fractured Europe on its 50th birthday =data ww2010.weblog.y2007.e070325.head Angela Merkel tries to unify a fractured Europe on its 50th birthday =data ww2010.weblog.y2007.e070325.keys european union, angela merkel, tony blair, jean-claude juncker, jacques chirac, Treaty of Rome, Treaty of Berlin, Berlin declaration, Václav Klaus =data ww2010.weblog.y2007.e070325.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070325.date 25-Mar-07 =data ww2010.weblog.y2007.e070325.txt1 Using the feminine touch to keep a bunch of quarrelsome men in line, =data ww2010.weblog.y2007.e070325.txt2 Germany's Chancellor, Angela Merkel, worked to prevent another disastrous blowup like the <#inc ww2010.weblog.ref e050618 "acrimonious European Union summit meeting"#> in June 2005. <#inc ww2010.pic g070325b.jpg right "" "June 2005: Jean-Claude Juncker, Tony Blair, Jacques Chirac"#> The 2005 meeting occurred shortly after the electifying French referendum that rejected the proposed EU constitution. At that summit meeting, British Prime Minister Tony Blair, Luxembourg Prime Minister Jean-Claude Juncker and French President Jacques Chirac exchanged vitriolic accusations over how the EU budget, especially the agricultural subsidies, were to be divided among the EU members. Six months later, <#inc ww2010.weblog.ref e051217 "Tony Blair caved,"#> and only that way could an interim EU budget agreement be reached. <#inc ww2010.pic merkel2.jpg left "" "German Chancellor Angela Merkel"#> At that time, Jean-Claude Juncker held the rotating Presidency of the European Union; today, German Chancellor Angela Merkel holds the seat. And she's been working overtime to avoiding a repeat of the 2005 Sunday was originally supposed to be a grand celebration -- a 50th birthday celebration, commemorating the March 25, 1957, signing of the "Treaty of Rome" that created the precursor to the "United States of Europe." There would be a new "Treaty of Berlin." The heads of all 27 EU member states would sign the new Treaty of Berlin, and that would seal the deal for a new, grand and glorious European Union. Unfortunately, the development of the text of the Treaty of Berlin was as contentious as agreement about the budget has been. So Merkel developed the text in secret, showing it only to those who had to see it, not revealing it until Sunday, when everyone would be signing it. But then Czech president Václav Klaus let it be known that he <#stdurl http://www.ft.com/cms/s/21ef20fe-d81a-11db-b218-000b5df10621.html "might refuse to sign the treaty,"#> because it was prepared in secret. So, Merkel solved that problem by deciding that <#stdurl http://www.iht.com/articles/2007/03/23/news/summit.php "there would be only three signatures:"#> Merkel, as EU president, European Commission president José Manuel Barroso, and European Parliament president Hans-Gert Pottering. It would now just be called the "Berlin Declaration." The text of <#stdurl http://news.bbc.co.uk/2/hi/europe/6491487.stm "the Berlin Declaration"#> shows it to be as bland as water. It just says, essentially, "the EU is great, thanks to everyone's help." I'll comment on the text again below. Czech president Václav Klaus has been <#stdurl http://www.agoravox.com/article.php3?id_article=5743 "unhappy about references to the environment and climate change,"#> since any treaty reducing emissions would fall very heavily on the Czech republic, where factory emissions are high. Poland wanted the declaration to mention the Christian roots of Europe, and now Pope Benedict is <#stdurl http://edition.cnn.com/2007/WORLD/europe/03/24/eu.anniversary.reut/ "accusing the EU of apostasy"#> for refusing to mention Christianity in the declaration. Britain wants mention of the euro currency to be played down, since Britain is still using its own local currency (the pound) in place of the euro. And the biggest problem of all is being played down: There's still no EU constitution, and no real hope in sight. Luxembourg Prime Minister Jean-Claude Juncker wants a constitution right away, but the compromise document simply calls for "renewed common basis before the European Parliament elections in 2009." So it was a nice get-together. The leaders probably got slightly inebriated, but not so much that they would raise any difficult issues with one another. They'll all go home, with nothing accomplished, and nothing in sight. To see how they got to this point, let's go back to the 1950s. Europe had been devastated by two world wars. Everybody was fearful that there could be another world war at any time. Finally, it was agreed by the war survivors that Europe had to form a union like the United States to prevent another war. That was the powerful motivation behind the 1957 Treaty of Rome. That motivation is reflected in <#stdurl http://news.bbc.co.uk/2/hi/europe/6491487.stm "text of the final declaration:"#>

"For centuries Europe has been an idea, holding out hope of peace and understanding. That hope has been fulfilled. European unification has made peace and prosperity possible. It has brought about a sense of community and overcome differences. Each Member State has helped to unite Europe and to strengthen democracy and the rule of law. Thanks to the yearning for freedom of the peoples of Central and Eastern Europe the unnatural division of Europe is now consigned to the past. European unification shows that we have learnt the painful lessons of a history marked by bloody conflict. Today we live together as was never possible before. ... The European Union will continue to promote democracy, stability and prosperity beyond its borders. With European unification, a dream of earlier generations has become a reality. Our history reminds us that we must protect this for the good of future generations. For that reason we must always renew the political shape of Europe in keeping with the times. That is why today, 50 years after the signing of the Treaties of Rome, we are united in our aim of placing the European Union on a renewed common basis before the European Parliament elections in 2009.

In the end, there is no part of this declaration more important than this sentence: "European unification shows that we have learnt the painful lessons of a history marked by bloody conflict." The fear of a major new European war is what has motivated the entire European project. But of course, this fear is generational. It's the older generations that fear a new European war. The younger generations take for granted that there WON'T be a new European war. For the younger generations, all that matters is level of income, quality of life, the most stylish cell phone, the coolest car, and so forth. At the end of 2005, when the European leaders had finally recovered from the shock of the French rejection of the EU constitution, there was a new consensus: Just wait a couple of years and try again, and public opinion will move in the direction of being more favorable. But they've got it backwards. As the older generations, with some memory of the world wars, disappear, and younger generations replace them, the primary visceral motivation for an EU -- fear of a new European war -- is disappearing as well. I showed this in my analysis of <#hreftext ww2010.i.eu050601 "the exit polls"#> from the French referendum on the EU constitution, and the results of France's 1992 referendum on the Maastricht treaty: It was people born before 1945 who primarily voted in favor, and people born after 1945 who primarily voted against. As usual, supposedly intelligent journalists and analysts are completely clueless about all this. All they could talk about were their usual obsessions about class and income. They would ask a really stupid question, like "Why did we lose the middle managers and the moderately highly paid?" The answer to that question was that in 1992, the middle managers and moderately highly paid were born BEFORE 1945, and in 2005 the middle managers and moderately high paid were born AFTER 1945. But no article that I've seen has even discussed this point. It's simply too abstract a concept for the journalists and analysts to even grasp. (Incidentally, this is the kind of concept that's central to Generational Dynamics, and one that I raise over and over. For example, last week I wrote about the Chinese use <#inc ww2010.weblog.ref e070322 "a carrot and stick approach"#> with Taiwan, alternating threats of war with offers of economic incentives. They believe that the Taiwanese people will eventually become convinced that they should reunite with China. But they have it backwards: as older generations die off, the Taiwanese people are less interested in reuniting with China. The same is true with financial trends. The 1990s stock market bubble only occurred with the generation that personally remembered the 1929 stock market crash died off; the younger generations had no fear of abusing credit, and now we're close to a new stock market crash. But analysts never seem able to connect those dots.) But if journalists and analysts aren't intelligent enough to see the generational changes, the people that they interview sometimes are. One <#stdurl http://english.people.com.cn/200703/25/eng20070325_360867.html "news report"#> quotes a 50-year old man as saying yesterday, "My parents had experienced two wars before (the EU was founded). My father lost his brother. I have the opportunity to live in peace here." During the run-up to the 2005 French referendum, young people were quoted as worrying that low-paid East European workers would come to France and take all the jobs; the symbol adopted by opponents of the constitution was the <#inc ww2010.weblog.ref e050530b "low-paid Polish plumber"#> who steals a job away from a well-paid Frenchman. But there was a different kind of opinion expressed by an elderly French voter to a BBC reporter: "My grandfather fought in World War I. My father fought in World Wars I and II. I fought in World War II. And now, for 60 years, my children and grandchildren have lived in peace. That's a good enough reason to me to vote 'yes' on the Constitution." This is all Generational Dynamics in action. When a genocidal crisis war occurs, the people who survive are so traumatized that they spend the rest of their lives do everything in the power to keep it from happening to their children and grandchildren. Their children and grandchildren, however, take it for granted that there will never be a new war, and so they're shocked and surprised when the new war begins in earnest. =inc ww2010.cf.cf060209 p left When I discuss these issues with people, the thing that seems to surprise them the most is that there's going to be a major new European war. This wouldn't be a surprise at all to people who lived through World War II, because they've seen it all before; it's a surprise to the younger generations because they believe that their parents are just being alarmist even talking about the possibility of a new European war. It also shouldn't be a surprise to someone who understands that Europe has had many major crisis wars, at least since 1066, and actually back through the days of the Roman Empire. Each one of these wars was unexpected before it happened -- because the young generations rejected their parents' warnings as being alarmist. The most recent West European crisis wars are the Thirty Years War (ending 1648), War of the Spanish Succession (1714), French Revolution (1799), Franco-Prussian war / Paris Commune (1871), World War II (1945). The most recent East European / Mideast crisis wars are the Battle of Kosovo (ending 1389), Fall of Constantinople (1453), Ottoman conquest of Syria and Egypt (1520), War with Habsburgs (1606), War with Holy League (1699), War with Russia (1774), Crimean War (1856), World War I (1922). There are similar lists for other countries and every region of the world. There is absolutely no reason to believe that the generational changes that produced these wars have suddenly changed. In fact, what we're now seeing is that the above two timelines (that I often refer to, for simplicity but somewhat misleadingly, as the "World War I timeline" and "World War II timeline") are now going to merge into a major Clash of Civilizations world war. Within Europe, there is still the question of how France, England and Germany will line up with one another. Over the centuries, they've lined up as allies or enemies in several different ways. I've speculated that France will line up against England because of my own personal experiences in the 1970s, when I was doing a lot of business travel to Europe; it was perfectly clear to me that the Germans liked Americans and the French hated Americans. The vitriolic exchange, described above, involving Chirac, Juncker and Blair, represents very real, deep-seated conflicts between the French world view and what the French call the "Anglo-Saxon" world view. <#inc ww2010.pic g070325a.jpg right "" "BBC's Robin Hood publicity (Source: Wikipedia)"#> What this shows is how powerful the fault line still remains from the 1066 war when the Norman French conquered the Saxons in England. One interesting speculation is that the Robin Hood legend has survived for centuries because of this fault line. In fact, the BBC last fall launched a brand new <#stdurl http://en.wikipedia.org/wiki/Robin_Hood_(2006_TV_series) "Robin Hood TV Series,"#> and it's just now starting <#stdurl http://www.bbcamerica.com/content/195/index.jsp "on BBC-America."#> What is rarely mentioned is that Robin Hood was a "good" Saxon, stealing from the rich, "evil" French invaders to give to the poor. I'm going to take a wild guess here and say that the Robin Hood legend isn't nearly as popular in France as it is in England. (Just the opposite is presumably the case for the <#stdurl http://en.wikipedia.org/wiki/Joan_of_Arc "Joan of Arc (Jeanne d'Arc) story."#>) From the point of view of Generational Dynamics, there's no doubt at all that there will be a new European war. We can't predict what scenario will lead to that war, or which side each of the European countries will be on -- those are matters of speculation; but the final destination -- a major new European war -- can be predicted with certainty. But there's more to be said. European wars have always had more than one component. On the one hand, there was the Christian component -- Protestants vs Catholics. On the other hand, there was the Christian versus non-Christian component -- Christians versus Jews and Muslims. Both of these components will appear in the coming new European war. The successful July 7, 2005, London subway bombing has been a powerful tool for the Islamist radicals in recruiting young Muslims in England to form terror cells for further terrorist acts. As I wrote in <#inc ww2010.weblog.ref e061113 "a lengthy article in November,"#> from the point of view of Generational Dynamics, many of Britain's young Muslims have set up a "Hero/Prophet" relationship with the radical clerics in Pakistan. This kind of relationship is the visceral basis by means of which new genocidal crisis wars begin. There's an emotional connection between the elder Prophet generation (the idealistic generation born after the last crisis war) and the impatient college age Hero generation (the soldiers who will be fighting the new crisis war). Last month, <#inc ww2010.weblog.ref e070219b "reporting by Peter Bergen on CNN"#> made it clear that the young British Muslims are particularly connected to the resurging al-Qaeda leadership on the Afghan-Pakistan border. The radicalizing of young Muslims is occurring throughout Europe. A reader recently referred me to a <#stdurl http://washingtontimes.com/op-ed/20070313-090315-9588r.htm "Washington Times article by Paul Belien,"#> editor of the Brussels Journal, and a conservative-libertarian political supporter:

"The decisive battle against Islamic extremists will not be fought in Iraq, but in Europe. It is not in Baghdad but in cities like Antwerp, Belgium, where the future of the West will be decided. ... About three years ago, young men dressed in black moved into the neighborhoods. They had been trained in Saudi Arabia and Jordan and adhere to Salafism, a radical version of Islam. They set up youth organizations, which gradually took over the local mosques. "The Salafists know how to debate and they know the Qur'an by heart, while the elderly running the mosques do not," she said They also have money. "One of them told me that he gets Saudi funds." Because they are eloquent, the radicals soon became the official spokesmen of the Muslim community, also in dealing with the city authorities. Ms. Uijt den Bogaard witnessed how the latter gave in to Salafist demands, such as the demand for separate swimming hours for Muslim women in the municipal pools. ... Sadly, what is happening in Antwerp is not unique. The Salafists employ the same strategy in other European cities. They boasted to Ms. Uijt den Bogaard about their international network and their successes in neighboring countries. While the Americans fight to secure Iraq, Western Europe is becoming a hotbed of Salafism."

Now, this is all anecdotal evidence from a political supporter, but it represents what is evidently a growing divide between Europeans and young Muslims living in Europe. Needless to say, none of this was discussed in the Berlin Declaration that was adopted on Sunday. According to the Declaration of Berlin, adopted on Sunday, "European unification shows that we have learnt the painful lessons of a history marked by bloody conflict. Today we live together as was never possible before." Who is the "we" in the phrase "we have learnt"? It's not the younger generations, for whom this exercise is meaningless. They're more worried about what to wear on their next date. This is Generational Dynamics in action. The people who say "we have learnt the painful lessons of a history marked by bloody conflict" are the old dinosaurs that no one cares about anymore. The younger generations are the ones making all the decisions now, and they haven't learned anything at all. And Angela Merkel's feminine touch won't change that at all. =eod =// &&2 e070324 Iran is using cartoons to fight decline in anti-Americanism =data ww2010.weblog.y2007.e070324.head Iran is using cartoons to fight decline in anti-Americanism =data ww2010.weblog.y2007.e070324.keys iran, iran cartoons, mahmoud ahmadinejad, security council, iran sanctions, sadegh zibakalam, university of tehran, revolutionary guard =data ww2010.weblog.y2007.e070324.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070324.date 24-Mar-07 =data ww2010.weblog.y2007.e070324.txt1 Anti-Americanism has been declining in Iran for ten years, =data ww2010.weblog.y2007.e070324.txt2 according to Sadegh Zibakalam, a professor at the University of Tehran, in an interview broadcast by CNN on Saturday. <#inc ww2010.pic g070324a.jpg right "" " Professor Sadegh Zibakalam of the University of Tehran. (Source: CNN)"#> To combat this decline in anti-Americanism, Iran's government has been resorting to televised cartoons that "poke fun at the U.S." Other cartoons are anti-Israeli and very anti-Semitic. According to Professor Zibakalam:

"There are [fewer] anti-Americans amongst average Iranians than there were 5 years ago, or certainly a decade ago. So maybe the government has realized that the anti-American feeling is on the decline, and they've started to make these cartoons to sort of sustain anti-American feeling."

Here's an example of one of the cartoons: <#inc ww2010.pic g070324b.jpg center "" "Iranian cartoon "poking fun at the U.S." (Source: CNN)"#> The CNN announcer describes what's happening as follows:

"President Bush also often gets a grilling. Here, he's talking to the world about Iran's nuclear program, alleging Iran wants nuclear weapons, all while his nose grows longer like Pinnochio, in front of a laughing globe. The cartoons appeal to many here, which is why some moderates are concerned that the average Iranian will confuse American policy and the American people. But for the government of Mahmoud Ahmadinejad, it is just a new campaign against an old enemy."

What's going on here is completely generational, as I described in my recent <#inc ww2010.weblog.ref e070317 "lengthy analysis of Iran's strategy."#> In brief: The Iranians' last crisis war was the Islamic revolution of 1979 followed by the Iran/Iraq war. The generation of people who survived that war blame Iran's difficulties on the U.S. and on America's previous alliance with the Shah of Iran. However, as the postwar generation comes of age, Iran is in a generational Awakening era, and the Shah of Iran is just a random old fossil that the leaders are using to impose Islamic law on citizens. Mahmoud Ahmadinejad is particularly despised for this, especially by women, who always become infuriated with leaders during generational Awakening eras. The women of Tehran are considered among the most stylish in the world, and Ahmadinejad's rules, restricting the wearing of Western apparel and limiting public contact with males, are not going down very well. The Iranian leadership doesn't understand this (just as few leaders anywhere understand generational issues). They think that this is a problem in education or something, and that by showing a few cartoons about the "evil" George Bush, they'll somehow convince the women to go back to their burkas again -- and anyone who knows anything about women also knows that this will never happen until pigs fly. Iran is much in the news today for several different reasons:

On Friday, the Iranian Revolutionary Guard, a vestige of the 1979 Islamic revolution, <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-6505377,00.html "took 15 British marines and sailors hostage"#> at gunpoint in the Persian Gulf. Today, the hostages "admitted" on Iranian television that they were caught in an act of "blatant aggression." We've seen all this before, with the Iranian hostage crisis of the 1980s, and with a smaller hostage situation in 2004.
Later today, the U.N. Security Council will be voting on <#stdurl http://uk.reuters.com/article/worldNews/idUKN2438978020070324 "sanctions against Iran"#> for failure to abandon its nuclear development. The sanctions have been considerably watered down from what the U.S. wanted, but the result is that the vote is expected to be unanimously in favor, and a major humiliation to Iran.
Mahmoud Ahmadinejad had demanded the right to visit the Security Council meeting and to speak, but he canceled on Friday evening. He blamed the cancellation on U.S. visa issues, but that reason isn't credible. In my opinion, the most likely reason is that his "bosses" in the Iranian leadership told him to cancel, rather than make another loony speech that the world will condemn Iran for.

=eod =// &&2 e070322 Wen Jiabao: China is 'unsteady, unbalanced, uncoordinated and unsustainable' =data ww2010.weblog.y2007.e070322.head Premier Wen says China is "unsteady, unbalanced, uncoordinated and unsustainable" =data ww2010.weblog.y2007.e070322.keys china, wen jiabao, taiwan, chen shui-bian, annette lu, koo kwang-ming, anti-secession law, four wants, five noes, chinese economy =data ww2010.weblog.y2007.e070322.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070322.date 22-Mar-07 =data ww2010.weblog.y2007.e070322.txt1 In press conference, he also scolds Taiwan over Chen's "four wants." =data ww2010.weblog.y2007.e070322.txt2 We can imagine the shock and surprise if President Bush ever described America as "unbalanced," or if Tony Blair described Britain as "unsteady." But at Chinese premier Wen Jiabao's <#stdurl http://www.fmprc.gov.cn/eng/zxxx/t304313.htm "press conference"#> on Saturday, he was asked about the economy, and he used those words and more:

"China's economy has maintained fast yet steady growth in recent years. However, this gives no cause for complacency, neither in the past, nor now, or in the future. My mind is focused on the pressing challenges. "A country that appears peaceful and stable may encounter unexpected crises." There are structural problems in China's economy which cause unsteady, unbalanced, uncoordinated and unsustainable development.

Unsteady development means overheated investment as well as excessive credit supply and liquidity and surplus in foreign trade and international payments.
Unbalanced development means uneven development between urban and rural areas, between different regions and between economic and social development.
Uncoordinated development means that there is lack of proper balance between the primary, secondary and tertiary sectors and between investment and consumption. Economic growth is mainly driven by investment and export.
Unsustainable development means that we have not done well in saving energy and resources and protecting the environment.

All these are pressing problems facing us, which require long-term efforts to resolve."

Wen left out the word "unstable," but in fact that word is applicable as well. What I <#hreftext ww2010.i.china050116 "wrote in January, 2005,"#> is that China is becoming increasingly unstable and approaching a civil war, and Wen's speech serves to illustrate that. With regard to Wen's second point, "unbalanced development," the divide between urban and rural areas has <#stdurl http://pinr.com/report.php?ac=view_report&report_id=631&language_id=1 "continued to worsen."#> Rural incomes average about $450 per month, while urban incomes are three times as high, around $1350 per month. To make matters worse, Chinese Communist Party (CCP) officials have freely taken property from citizens in rural areas for whatever development project they desire. And so, besides the urban/rural divide, there's an enormous divide in rural areas between the élite classes and the peasant classes. (For those familiar with Communism and Mao Zedong, this is an ENORMOUS irony.) <#inc ww2010.pic g070321.gif right "" "China: Land seizures in Shunde county in Guangdong province (Source: AFP)"#> The results have been almost hard to imagine for Americans. There are tens of thousands of regional rebellions each year, according to official Chinese ministry figures. If only ONE such rebellion ever occurred in America, it would be major international news. The <#stdurl http://www.france24.com/france24Public/en/administration/afp-news.html?id=070321033932.9db7uxoq&cat=null# "adjoining graphic"#> illustrates the recent problems in just one county. These problems are repeated across the vast country. Unable to support their families, over 100 million people have moved, in a huge mass migration from rural to urban areas, to get jobs. (For comparison, the entire population of the US is about 300 million.) From there, the next problem is Wen's first point: "Unsteady development means overheated investment as well as excessive credit supply and liquidity and surplus in foreign trade and international payments." I first wrote a <#inc ww2010.weblog.ref e040715b "brief note"#> about this in 2004, when China's economy grew much faster than planners had wanted. China's entire economy has been a bubble economy for several years. Wen is well aware that this can't continue for long, and his third point indicates where he sees a danger of dislocation: "Uncoordinated development means that there is lack of proper balance between the primary, secondary and tertiary sectors and between investment and consumption. Economic growth is mainly driven by investment and export." This "uncoordinated" development means that there are many inefficiencies in the economy. The solution may seem simple -- just correct the inefficiences. But trying to do that means that millions of people, whose jobs depend on those inefficiences, may lose their jobs. And any large dislocation, whether caused by attempts to correct inefficiencies or just a good old fashioned recession, brings into play those 100 million plus migrant workers. China has a long history of massive, nation-wide rebellions. Right now, China's well-trained riot police are keeping the tens of thousands of annual regional rebellions under control, but a dislocation of a huge mass of migrant workers would cause China to become completely unstable and head for a new mass rebellion. What would China's leaders do in that event? That brings the military into focus. Let's take a look at China's latest <#stdurl http://www.fas.org/nuke/guide/china/doctrine/wp2006.html "National Defense document,"#> issued in December 2006. First, you have the People's Liberation Army (PLA):

"To effectively fulfill its historic mission in the new stage of the new century, the PLA is speeding up the revolution in military affairs with Chinese features and enhancing in an all-round way its capabilities of defensive operations under conditions of informationization. ... By the end of 2005, China had completed reducing the PLA by 200,000 troops, and the PLA currently has 2.3 million troops. ... The Army is speeding up the upgrading and informationization of its active main battle equipment to build a new type of ground combat force which is lean, combined, agile and multi-functional. Priority is given to building Army aviation, light mechanized and information countermeasures units. The share of the armored component in the Army combined combat forces has been further raised. The artillery and air defense component has fielded new types of cannons, field antiaircraft missiles, reconnaissance early warning radars, fire-control systems, and intelligence and command systems, and increased the proportion of ground-to-air missiles to antiaircraft guns. The engineering component has grown in step with the main combat arms, and improved its capabilities of accompanying support and precision support. The anti-chemical component has established a preliminary nuclear, biological and chemical (NBC) protection system tailored to joint operations, and greatly increased its capabilities of rapid NBC protection, NBC emergency rescue and operations against NBC terrorism. ... The Navy is working to build itself into a modern maritime force of operation consisting of combined arms with both nuclear and conventional means of operations. ... Efforts are being made to improve maritime battlefield capabilities, with emphasis on the construction of relevant facilities for new equipment and the development of combat support capabilities. The Navy is endeavoring to build mobile maritime troops capable of conducting operations under conditions of informationization, and strengthen its overall capabilities of operations in coastal waters, joint operations and integrated maritime support. ... The Navy is enhancing research into the theory of naval operations and exploring the strategy and tactics of maritime people's war under modern conditions. The Air Force is working to build an informationized air fighting force with both offensive and defensive capabilities. It is reducing the number of combat aircraft, giving priority to the development of new fighters as well as air and missile defense weapons. It is working to enhance command and control systems. It stresses mission-oriented and confrontational training, increasing combined tactical training of different arms and aircraft types, and conducts training in flying refitted new aircraft and using new weaponry and equipment in an active and stable way.

So the PLA, now a slim 2.5 million people, is for "external" wars, fighting against foreign enemies. But the same document describes another armed force, People's Armed Police Force (PAPF), consisting of 660,000 people:

"The People's Armed Police Force (PAPF) is charged with the fundamental task of safeguarding national security, maintaining social stability and ensuring that the people live and work in peace and contentment. It strives to make itself a powerful, disciplined and politically reliable force. ... The PAPF has a total force of 660,000. ... In peacetime, the PAPF is tasked to perform guard duties, handle emergencies, combat terrorism, and participate in and support national economic development. In wartime, it assists the PLA in defensive operations. Every day, more than 260,000 PAPF servicemen are on guard duty. Through the combined use of manpower, facilities and technologies, the PAPF has effectively enhanced the efficiency of guard duties and security in recent years. The PAPF annually handles an average of over 100 cases of attempted attacks against guarded targets and escape attempts by detained suspects and imprisoned criminals, organizes thousands of important temporary duties, and ensures the security of important international and national conferences and large-scale events, in cooperation with the government departments concerned. Adhering to the guidelines and principles for handling emergencies, and using proper methods and tactics, the PAPF effectively safeguards the fundamental interests of the people, social stability and the dignity of the law. The PAPF anti-terrorism units closely follow the state's anti-terrorism guidelines and principles, and enhance their combat-readiness training. They have been involved in the successful handling of cases of bombing attempts and kidnapping incidents. The various units of the PAPF take an active part in efforts to keep local order, and assist the public security departments in catching and arresting criminal suspects and cracking down on organized criminal gangs.

For comparison purposes, I estimate that the FBI has 1 person for every 10,000 population, while the PAPF has 1 person for every 2400 Chinese population, or over four times as many people per capita. At this size, the PAPF is large enough to put down a regional rebellion, but if the rebellion expands into tens or hundreds of millions of people, as happened with the Taiping rebellion in the 1850s-60s, or the civil war in the 1930s-40s, then the PAPF would not be able to handle it. At that point, the CCP (government) would be facing its own demise, and would do what it had to do to reunite the country -- start military action against Taiwan, Japan or even America. This is not as farfetched as it might seem, as this kind of thing has happened numerous times in history. Some nutjobs even accuse President Bush for having started the Iraq war for the same reason. That's one scenario for how a war might start, but it's not the only one. What we're seeing today is a game of international brinksmanship between Taiwan and China. Taiwan President Chen Shui-bian has been taunting China and China has been threatening Chen, ever since Chen was elected in 2000. Chen was the first president who openly favored independence for Taiwan. This prompted China to say that Chen, along with his vice president Annette Lu, were the "Scum of the Nation." Relations between Chen and China became even worse when Chen was reelected in 2004. In February 2005, Chen made a conciliatory speech in which he <#inc ww2010.weblog.ref e050308 "reaffirmed the "five noes""#> that he had originally laid out in his 2000 inaugural address:

no declaration of independence,
no change of the nation's official name,
no inclusion of the "state-to-state" theory on cross-strait relations in the nation's Constitution,
no national referendum on changing the status of the island regarding unification or independence, and
no abolition of the National Unification Guidelines or National Unification Council.

Shortly after Chen made that speech, China infuriated Taiwan by passing <#inc ww2010.weblog.ref e050308 "the Anti-Secession Law on March 14, 2005."#> The CCP intended the law to "convince" the Taiwanese people that reunification is in their best interest. Instead, it <#inc ww2010.weblog.ref e050327 "provoked massive anti-Chinese riots in Taiwan."#> Now, at the two-year anniversary of the Anti-Secession law, <#stdurl http://www.taipeitimes.com/News/editorials/archives/2007/03/22/2003353372 "recent polls of the Taiwanese people"#> have shown that the law did not accomplish its purpose. The overwhelming majority of Taiwanese people believe that the law was hostile, that China should not be interfering in Taiwanese affairs, and that it's up to the Taiwanese people, not the Chinese, whether Taiwan reunifies with China or becomes independent. Then, earlier this month, China's premier Wen <#inc ww2010.weblog.ref e070307 "announced a 17.8% increase in its military budget for 2007."#> On the second anniversary of the Anti-Secession law, this was taken as specifically targeting Taiwan militarily. However, it's unusual for any country to accede to threats when it's entering a generational Crisis period. This is a time of high nationalism and high anxiety, as well as vitriolic political turmoil (as can be seen in the U.S. these days). Chen had been strongly criticized by his supporters when he reaffirmed the "five noes" in 2005, and after the CCP's recent announcement of a very large military budget increase, Chen gave a new speech: <#stdurl http://www.chinapost.com.tw/news/archives/front/200735/103826.htm "the "four wants and one without.""#> (The Chinese people have interesting ways of saying things, don't they?) Chen's "four wants" are as follows:

"Taiwan wants independence."
Taiwan "wants name rectification." Taiwan's official name is the "Republic of China" (ROC), while China's official name is the "People's Republic of China" (PRC). Chen wants Taiwan's name to be officially "Taiwan," and wants to re-join the United Nations under that name. Chen has already been putting this "want" into effect by substituting the name "Taiwan" for "China" at the post office and two large government-owned companies.
Taiwan "wants a new Constitution." Chen promised the country a new constitution in 2000, but he backed off because of China's threats. However, Chen seems determined to update the constitution, as we'll discuss below.
Taiwan "wants development."

Chen's "one without" refers to a lack of left and right wing political lines. There's an interesting language-related point in this. According to <#stdurl http://www.chinapost.com.tw/latestnews/2007321/44990.htm "an article in Taiwan's China Post,"#> the translation "four wants" is not entirely accurate. According to the article, Chen used the word "yao," which means "want" when used as a verb; but Chen used it as a noun, and then it means "imperative," in the sense of "a command or an unavoidable obligation or requirement or simply a necessity." If this is the case, then Chen's speech is much sharper than press reports have indicated. As I mentioned above, any country entering a generational Crisis era tends to act in a certain way. This is the time when the generation of people who survived the last crisis war (here, the civil war between Mao Zedong and Chiang Kai-shek) have mostly disappeared, leaving behind the arrogant post-war generation who have no fears and think they know everything. When this generation takes charge, the country enters a generational Crisis era. The population experiences what's known as <#inc ww2010.weblog.ref e070212 ""cognitive dissonance,""#> because their certain knowledge is challenged by reality. In Taiwan's case, the building assumption that Taiwan can be independent comes into conflict with the reality of thousands of Chinese missiles pointing at them. I found a remarkable example of this in a <#stdurl http://www.taipeitimes.com/News/taiwan/archives/2007/03/16/2003352501 "Taipai Times article."#> In a statement supporting Chen's vice president, Annette Lu (whom China has dubbed the "scum of the nation,") in her candidacy for president, former presidential adviser Koo Kwang-ming made the following comments in reaction to China's military threat:

"But there won't be a war in the Taiwan Strait, because China wouldn't want to drive away foreign investors and risk an economic collapse. ... [In the worst-case scenario], I would welcome [a war]. ... Taiwan's biggest crisis is the lack of a national consensus on the nation's future despite the military threat from China. But if China were to launch a military attack against Taiwan, a consensus would be formed within a week."

Well, he's certainly right about that consensus, and it probably wouldn't even take a week. But he doesn't seem to grasp the consequences of such a war for Taiwan itself, or perhaps doesn't care. In this context, Chen's "four wants" speech seems quite similar. His speech is clearly a major provocation to China, and he seems not to fear any possible consequence. In fact, Chen seems determined to <#stdurl http://www.bloomberg.com/apps/news?pid=20601080&sid=a_IKVub6j12Q&refer=asia "draft a new constitution"#> before he leaves office in 2008, although there's no guarantee that it will be adopted. Chen may be leaning towards <#stdurl http://www.taipeitimes.com/News/taiwan/archives/2007/03/19/2003352928 "a "second republic" constitution,"#> drafted by a Taiwan think tank. It clearly spells out the path to independence. So if Taiwan's leaders are in a state of denial and anxiety, the same is true of China's leaders, who often seem close to hysteria. I've <#inc ww2010.weblog.ref e070301b "previously quoted Chinese officials"#> screaming and threatening war, saying that hundreds of American cities will be destroyed by Chinese missiles, and that "one inch" of Chinese territory is worth more than the lives of Chinese people. This brings us to Wen Jiabao's remarks about Taiwan in the <#stdurl http://www.fmprc.gov.cn/eng/zxxx/t304313.htm "same press conference"#> that we began with:

"The years 2007 and 2008 will indeed be crucial for cross-Straits relations. Why? Because they are critical to upholding peace and stability across the Taiwan Straits. In my Report on the Work of the Government, I reiterated our firm opposition to all forms of separatist activities, including "de jure Taiwan independence". We are watching closely the attempts the separatist forces in Taiwan are making for "Taiwan independence". We will never allow any change to the history, reality and universally-recognized legal status of Taiwan, that is, it has been an inalienable part of China's territory since ancient times. ... This is a trend no one can reverse, as described in a classical Chinese poem: A thousand sails pass by the wrecked ship; ten thousand saplings shoot up beyond the withered tree."

This last paragraph is a cute allegory. I think that perhaps it might have a generational meaning -- that new generations make old ideas obsolete. Unfortunately, Wen's state of denial is so complete that he has it backwards. He apparently believes that by using his carrot and stick approach, alternately threatening war and offering economic incentives, then the people of Taiwan will increasing want to be unified with China. (Is there anything that Tony Blair could possibly say that would make Americans want to become part of Britain again?) I'm aware of absolutely no evidence that supports Wen's hopes and dreams, and plenty of evidence that contradicts it. In Wen's allegory, the "withered tree" are the generations that fled China for Taiwan in 1949, and still yearn to return to their homeland. The young "ten thousand saplings" are the new generations that have no personal memory of China, consider it to be a foreign country, and were so horrified by the 1989 Tiananmen Square massacre that they want nothing to do with China. The number of these "young saplings" grows every day. <#inc ww2010.pic taigraph.gif right "" "Taiwan poll results to question: "Do you feel Taiwanese, Chinese or both?" (Source: WSJ)"#> This is supported by the adjoining graphic which <#inc ww2010.weblog.ref e050327 "I've discussed several times."#> It shows that the number of people calling themselves "Taiwanese," rather than "Chinese," has been growing steadily, as the younger generations continue to take over, and the older war generation dies off. I've seen polls (somewhere?) that show that the number of people calling themselves "Taiwanese, not Chinese" has risen to almost 70%. Another change is in the use of language. There is <#stdurl http://www.us.omf.org/content.asp?id=9230 "a dialect known as Minnan,"#> which is considered to be the indigenous Taiwanese language by the Taiwanese themselves. The use of Minnan has been suppressed by harsh government actions for the last century, first by the Japanese colonists and then by the Chinese nationalists, but now the <#stdurl http://observer.guardian.co.uk/comment/story/0,,1995252,00.html "use of Minnan has been soaring,"#> displacing Mandarin which, of course, is favored by China's officials. What all this means is that time is NOT on China's side. The carrot and stick approach is fine, but it only means that, from China's point of view, the situation is Taiwan is getting worse every day, as Taiwan's population feels less and less connected to China. Now, there are a series of sharp political deadlines coming up. These are as follows:

Fall 2007 - Chinese Communist Party congress. This is expected to be very nationalistic toward Taiwan.
December 2007 - Taiwan's legislative elections. (This is the election of Taiwan's LY or Legislative Yuan.)
March 2008 - Taiwan presidential elections
April 2008 - Chen leaves office
Summer 2008 - Summer Olympics in Beijing

Now, the Summer Olympiad is an incredibly big deal to China. It's taken on the emotional stature of a "sweet sixteen" coming out party for a girl. China has been planning for that moment for years, and wants to use the Olympiad to demonstrate to the world that China is an incredibly wonderful place. They're even planning to shut down factories in the Beijing area, so that the smog level will be reduced. This is a VERY BIG DEAL. Here's what to watch out for:

IF the Taiwanese political process appears to be moving in the direction of independence in the fall, China will be enormously humiliated. China will fear that the news stories at the time of summer Olympics will be about Taiwan's independence, rather than the wonderfulness of China. China MAY be panicked into attacking Taiwan, hoping that they can do the reunification quickly, so that it's a fait accompli by the summer.
IF the Taiwanese leaders see the summer Olympiad as an opportunity -- China would never do anything to mess it up -- then the leaders may feel "safe" in using that window of time to move toward unification, believing that any steps would be a fait accompli by the summer.

And what about the United States? A number of people have said or written to me the same thing, with few variations: "We don't care about Taiwan. Furthermore, we're tied down in Iraq, so we can't defend Taiwan. Even if Bush tried, the Democrats would stop him." If there's anyone reading this who believes that even the tiniest shred of this claim is true, please put it out of your mind. It is totally wrong, and it's dangerous to depend on it:

Strategically, we care very much about Taiwan. We're committed to defending Taiwan, as we're committed to defending Japan, South Korea and Australia in the Pacific. If we failed to defend Taiwan, then the entire region, especially Japan and South Korea, would become immediately destabilized, war would ensue quickly, and we'd be pulled into the war anyway.
As I've said many times, I expect the U.S. forces to be in Iraq until the Clash of Civilizations world war begins. Our initial defense of Taiwan would be through the Navy and Air Force, using carriers located in the Pacific. After that, forces would be pulled out of Iraq for operations in the Pacific. The Mideast would become destabilized, and the draft would be reinstated.
The defense of Taiwan would be instantaneously authorized by the President, so there wouldn't be any time for political opponents to react. However, this act would instantly unify the country, and Congress would declare war the next day.

So that's the kind of thing we're headed for, one way or another. In closing, I'll quote a few paragraphs from China's <#stdurl http://www.china.org.cn/english/2005lh/122724.htm "March 2005 Anti-Secession Act:"#>

"(Article 1) This Law is formulated, in accordance with the Constitution, for the purpose of opposing and checking Taiwan's secession from China by secessionists in the name of "Taiwan independence", promoting peaceful national reunification, maintaining peace and stability in the Taiwan Straits, preserving China's sovereignty and territorial integrity, and safeguarding the fundamental interests of the Chinese nation. (Article 2) There is only one China in the world. Both the mainland and Taiwan belong to one China. China's sovereignty and territorial integrity brook no division. Safeguarding China's sovereignty and territorial integrity is the common obligation of all Chinese people, the Taiwan compatriots included. Taiwan is part of China. The state shall never allow the "Taiwan independence" secessionist forces to make Taiwan secede from China under any name or by any means. ... (Article 4) Accomplishing the great task of reunifying the motherland is the sacred duty of all Chinese people, the Taiwan compatriots included. ... (Article 8) In the event that the "Taiwan independence" secessionist forces should act under any name or by any means to cause the fact of Taiwan's secession from China, or that major incidents entailing Taiwan's secession from China should occur, or that possibilities for a peaceful reunification should be completely exhausted, the state shall employ non-peaceful means and other necessary measures to protect China's sovereignty and territorial integrity. The State Council and the Central Military Commission shall decide on and execute the non-peaceful means and other necessary measures as provided for in the preceding paragraph and shall promptly report to the Standing Committee of the National People's Congress. (Article 9) In the event of employing and executing non-peaceful means and other necessary measures as provided for in this Law, the state shall exert its utmost to protect the lives, property and other legitimate rights and interests of Taiwan civilians and foreign nationals in Taiwan, and to minimize losses. At the same time, the state shall protect the rights and interests of the Taiwan compatriots in other parts of China in accordance with law."

In the context of a China that Premier Wen describes as "unsteady, unbalanced, uncoordinated and unsustainable," the generational changes that continue every day are making the entire situation increasingly unstable. From the point of view of Generational Dynamics, this war is coming with almost mathematical certainty. In view of the regional instability, China's extremely rapid militarization and anxiety of the Summer 2008 Olympics, this war could be triggered by any of a wide variety of possible scenarios: a bird flu pandemic, an international financial crisis, a Chinese economic recession, Taiwanese election polling, or any random political action in Taiwan that panics the Chinese. (If you're not familiar with the role of panic in initiating a war during a generational crisis era, then read how <#inc ww2010.weblog.ref e061223 "Israel panicked in pursuing the summer Lebanon war with Hizbollah."#>) This is what's going on in the world, though few Americans realize or grasp it. Meanwhile, our clown college Congress is arguing over one moronic Iraq war resolution after another, and yesterday took time out to debate whether the earth will be one degree or two degrees warmer by 2099. It's good to know that our country is in such good hands. =eod =// &&2 e070320 Robert Shiller compares stock market to 1929 =data ww2010.weblog.y2007.e070320.head Robert Shiller compares stock market to 1929 =data ww2010.weblog.y2007.e070320.keys robert shiller, irrational exuberance, market psychology, robert barro, alan greenspan, liquidity, loss of liquidity, bonds, stock market bubble, 1929 crash =data ww2010.weblog.y2007.e070320.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070320.date 20-Mar-07 =data ww2010.weblog.y2007.e070320.txt1 He says the recent fall was caused by "market psychology," but is puzzled why. =data ww2010.weblog.y2007.e070320.txt2 According to Yale professor of economics Robert J. Shiller, in <#stdurl http://www.shanghaidaily.com/article/shdaily_opinion.asp?id=309566&type=Opinion "an article appearing in a Shaighai paper,"#> there was no rational reason for the February 27 worldwide stock market fall. The author of the 2001 book Irrational Exuberance, a book title that echoed Alan Greenspan's famous 1996 words at the start of the dot-com bubble, said that after the Shanghai market fell 8.8% on that day, there was no reason except "market psychology" for stock markets around the world to fall 2-4%. Moreover, most of these markets are still down 4-8%, compared to their close on February 26. Shiller compares this situation to what happened in 1928-29:

"If history is any guide, markets can be severely destabilized by one-day drops, which make powerful stories that have more psychological salience to investors than much larger drops that occur over longer time intervals. For example, people were really agitated when the Dow dropped 3.8 percent on December 6, 1928. No news story that day discussed economic fundamentals or gave a clear indication of the cause of the decline, relying instead on sensational prose - "the house that Jack built threatened to topple over" and "traders were quaking in their boots." But the December 6, 1928, event began a sequence of increasingly severe one-day drops in the Dow over the course of the following year. Despite a generally rising market, the Dow fell by 3.6 percent on February 7, 1929, 4.1 percent on March 25, 4.2 percent on May 22, 4 percent on May 27 and August 9, 4.2 percent on October 3, and 6.3 percent on October 23, before the infamous "Black Monday" crash. On each occasion, newspaper accounts further established the 1929 market psychology. The story was always that speculation in the markets had government leaders worried, which is, of course, essentially the same story that we heard from China on February 27.

This is an interesting comparison, and there's validity to it, but he appears to be saying that the February 27 collapse corresponds to December 6, 1928, ten months in advance of the October 1929 crash. The follow on reasoning is that a new stock market crash is still a year off. But that comparison ignores the LiveDoor scandal that caused an a <#inc ww2010.weblog.ref e060122 ""Wall Street bloodbath""#> in January, 2006. There was another <#hreftext ww2010.i.060530panic "stock market meltdown"#> in May of last year, leading to speculations about a stock market panic and crash. So if Shiller's date comparison is valid, then we should be very close to a crash right now. And indeed we may be. Robert Shiller is well-known for having recognized the stock market bubble quite early, and predicting that it would burst and create a financial crisis like the 1930s. His book, Irrational Exuberance, published in 2000, was a bestseller and undoubtedly saved a lot of pain for those who read and heeded it. But Shiller has always been completely confused about why the stock market bubble occurred at all, and why it occurred when it did. He's always been interested in the concept of a "rational stock market" -- the concept being that investors make rational decisions after evaluating all the available evidence. So in his book, he tried to come up with "precipitating factors" that caused the new stock market bubble. Frankly, none of them is very convincing, and I don't think even he believes he's doing more than guessing, but he goes ahead with 12 of them:

The arrival of the internet at a time of solid earnings growth (p. 19)
Triumphalism and the decline of foreign economic rivals (p. 21)
Cultural changes favoring business success or the appearance thereof (p. 22)
A Republican congress and capital gains tax cuts (p. 24)
The Baby Boom and its perceived effects on the market (p. 25)
An expansion in media reporting of business news (p. 28)
Analysts' increasingly optimistic forecasts (p. 30)
The expansion of defined contribution pension plans (p. 32)
The growth of mutual funds (p. 35)
The decline of inflation and the effects of money illusion (p. 36)
Expansion of the volume of trade: Discount brokers, day trading, and 24-hour trading (p. 39)
The rise of gambling opportunities (p. 40)

Basically, Shiller believes that there's no rationality to the market at all. This is the same kind of concept for which I've harshly criticized Bernanke for saying, in effect, <#inc ww2010.weblog.ref e040917 "that Fed jawboning, even misleading statements,"#> are the major drivers for the economy rather than fundamentals. So Shiller's reasons include some that appear to me to be total nonsense -- the Internet, cable news, cultural changes, and even gambling opportunities. This is really just guesswork. Ironically, Shiller does come close to hitting on the truth, when he talks about the Baby Boomers:

"Another theory as to why Boomers may be less risk averse is that the Boomers, who have no memory of the Great Depression of the 1930s or of World War II, have less anxiety about the market and the world. There is indeed some evidence that shared experiences in formative years leave a mark forever on a generation's attitudes. Over the course of the bull market since 1982, Boomers have gradually replaced as prime investors those who were teens or young adults during the depression and the war. Although there is no doubt at least some truth to these theories of the Baby Boom's effects on the stock market, it may be public perceptions of the Baby Boom and its presumed effects that are most responsible for the surge in the market. The impact of the Baby Boom is one of the most talked-about issues relating to the stock market, and all this talk in and of itself has the potential to affect stock market value. People believe that the Baby Boom represents an important source of strength for the market today, and they do not see this strength faltering any time soon. These public perceptions contribute to a feeling that there is a good reason for the market to be high and a confidence that it will stay that way for some time to come. Congratulating themselves on their cleverness in understanding and betting on these pouplation trends in the stock market investments, many investors fail to appreciate just how common their thinking really is. Their perceptions fuel the continuing upward spiral in market values. (pp. 27-28)

He almost begins to be going in the right direction in the first of these paragraphs, but in the second paragraphs he wigs out. Once again, fundamentals don't matter; it's "perceptions" that matter. Ironically, Shiller is very well aware of the underlying data. In fact, it's <#stdurl http://www.econ.yale.edu/~shiller/data.htm "Shiller's web site at Yale"#> that I and a lot of other people use to get historical data, dating well back into the 1800s. This data includes stock market graphs and graphs of price/earnings ratios. So, unlike the vast majority of "experts" that you see on CNBC and other TV stations, Shiller actually understands that the stock market was overpriced by a factor of 250% in 1929, and is similarly overpriced today. But he never makes the generational connection that would connect the dots in his work. I must say that <#inc ww2010.weblog.ref e070312 "the essay that I wrote last week"#> on "A conundrum: How increases in 'risk aversion' lead to higher stock prices" has been something of an epiphany to me, and has connected a lot of dots in integrating macroeconomic theory with generational theory. Last year I wrote the article, <#hreftext ww2010.i.macro061025 ""System Dynamics and Macroeconomics.""#> This is the seminal article that explains how to use System Dynamics, invented by MIT's Jay Forrester in the 1960s, can be integrated with mainstream macroeconomic theory to take generational dynamics into account. Now, having had several day to think over last week's <#inc ww2010.weblog.ref e070312 "article,"#> I'm really beginning to understand what I've written, and to see everything coming together, and a number of major questions being answered. I'll be writing a lot more about that article as the occasion requires, but here's a summary. A Harvard economist named Robert J. Barro has done work on "Rare Events and the Equity Premium," to show why stock markets go up, strangely, just when investors become more risk averse. And the more risk averse they become, the greater the stock market bubble grows. This is a mind-boggling result that can be fully explained by adding generational concepts to Professor Barro's work. Here's an outline:

We define a variable "p" that represents what investors believe is the probability of a "rare event" occurring within the next year. In "normal" times, p=0.5%, but can go up to 1% or 1.5%.
By a "rare event," Barro means a world war or a major stock market crash. For the purposes of this summary, we'll just stick to international stock market crashes.
If you go back through history, there are of course many small or regional recessions. But since the 1600s there have been only five major international financial crises: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857 (or Panic of 1857), and 1929 Wall Street crash. Each of these major international crises occurred roughly 70-80 years after the previous one. What you find is that each new "debt bubble" occurs at exactly the time that the generation of people who grew up during the previous financial crisis all disappear (retire or die), all at once. Thus, the length of time between these "generational" financial crises is approximately equal to the length of a maximum human lifetime.
The major driving force of these crashes is not exactly the perception of the probability of a crash, but the widespread willingness of investors to use credit and debt irresponsibly. This is a generational concept: A new debt bubble begins when the generation of people who lived through the last bubble all disappear (retire or die), all at once.
Thus, it's reasonable to say that "p" also represents the willingness of investors to use credit and debt irresponsibly.
From a generational point of view, this means that p drops sharply (close to 0%) just after a crash, and then grows slowly as new generations are born, until it reaches a peak (perhaps around 2%), just before the next crash.
When p increases, and the irresponsible use of credit increases, then the velocity of money increases and liquidity increases.
This big increase in liquidity feeds into BOTH the stock market and the bond market, where by "bonds" we mean super-safe Treasury bonds.
The push of liquidity into bonds increases the demand for bonds, raising the price of bonds, and reducing their yield. Thus, bond yields go DOWN as a crash approaches. (This is the answer to Alan Greenspan's 2005 "conundrum.")
The push of liquidity into stocks increases the stock market bubble.
As investors go increasingly into debt over their heads, they become increasingly desperate for high returns, so they become increasingly risk-seeking. As they take greater risks, risk premiums go DOWN for stocks. That's why the risk premium spread becomes so small. (This stuff is really mindboggling.)
The credit bubble is essentially a pyramid scheme (or Ponzi scheme), and all pyramid schemes must crash.
As investors panic over events like the February 27 mini-crash, investors start to become risk-averse again. This reverses the above process, pulling liquidity out of the market, so that credit becomes less available.
Since credit was supplying the liquidity to keep the bubble growing, investors on the edges start dropping out. As liquidity tightens further, more and more investors are forced to drop out, until a complete generational panic causes a full-scale stock market crash.

I have to tell you, dear reader, putting all this together has been an amazing experience for me. I'll close with one more quotation from Shiller's book, in the concluding chapter:

"The high recent valuations in the stock market have come about for no good reasons. The market level does not, as so many imagine, represent the consensus judgment of experts who have carefully weighed the long-term evidence. The market is high because of the combined effect of indifferent thinking by millions of people, very few of whom feel the need to perform careful research on the long-term investment value of the aggregate stock market, and who are motivated substantially by their own emotions, random attentions, and preceptions of conventional wisdom. Their all-too-human behavior is heavily influenced by news media that are interested in attracting viewers or readers, with limited incentive to discipline their readers with the type of quantitative analysis that might give them a correct impression of the aggregate stock market level. It is a serious mistake for public figures to acquiesce in the stock market valuations we have seen recently, to remain silent about the implications of such high valuations, and to leave all commentary to the market analysts who specialize in the nearly impossible task of forecasting the market over the short term and who share interests with investment banks or brokerage firms. The valuation of the stock market is an important national -- indeed international -- issue. All our plans for the future, as individuals and as a society, hinge on our perceived wealth, and plans can be thrown into disarray if much of that wealth evaporates tomorrow. The tendency for speculative bubbles to grow and then contract can make for very uneven distribution of wealth. It may even cause many of us, at times, to question the very viability of our capitalist and free market institutons. It is for such reasons that we must be clear on the prospect for such contractions and on what should be our individual and national policy regarding this prospect. Of course in the current political and economic climate one incurs a substantial risk of embarassment if one goes on record saying that stock market returns will be low or negative in coming years. We have seen in this book that, although the market appears to have substantial long-term forecastability when it is very overpriced (as it appears to be, based on recent data) or, alternatively, when it is very underpriced, there is always considerable uncertainty about the outlook. But an observer who remains silent about the unjustifiably high values because he or she could be wrong about the outlook is no better than the doctor who, having diagnosed high blood pressure in a patient, says nothing because the patient might be lucky and show no ill effects." (pp. 203-4)

That certainly represents my feelings. This web site is more than just a pastime for me, more even than an obsession. It's a moral imperative to provide this information if I can. I thank all my readers for coming back all the time and for making this web site increasingly popular. =eod =// &&2 e070319b Donald Trump goes on a hysterical rant on CNN =data ww2010.weblog.y2007.e070319b.head Donald Trump goes on a hysterical rant on CNN =data ww2010.weblog.y2007.e070319b.keys Donald Trump, cnn, msnbc, fox news channel, jack cafferty =data ww2010.weblog.y2007.e070319b.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070319b.date 19-Mar-07 =data ww2010.weblog.y2007.e070319b.txt1 This guy and Rosie really deserve each other. =data ww2010.weblog.y2007.e070319b.txt2 As I described in <#inc ww2010.weblog.ref e070319 "the previous web log item,"#> CNN and other mainstream media outlets appear to have totally committed themselves to do everything they can to support our enemies in Iraq. I've <#inc ww2010.weblog.ref e061126 "mentioned before"#> that CNN has really gone over to the dark side. Their reporters speak contemptuously of anyone who doesn't agree with them. Michael Ware and their other Iraq reporters simply take video of car bombers and describe in gritty detail how people were blown up. Pundit Jack Cafferty is always yelling and absolutely seething with hatred, scorn and venom for anyone who disagrees with him, especially the President. Before last November's election, CNN turned the entire network over for several lengthy specials by Jack Cafferty, who read Democratic party talking points out loud, and then spewed loathing for everyone else. I've been watching CNN since it began in 1980, and it's sickening to me to see what a piece of garbage it's turned into now. MSNBC is the same, incidentally, and seems to be moving even farther to the left, if that's possible. We saw that vividly in January, when <#inc ww2010.weblog.ref e070114 "NBC reporter Chris Matthews was screaming hysterically"#> at the top of his lungs, lambasting George Bush. The funny thing is that they're getting their comeuppance, because Fox News Channel is kicking their ass. They all loathe Bill O'Reilly, but Bill O'Reilly's ratings are greater than CNN's and MSNBC's combined. You can say that Fox leans to the political right, but Fox really is much more fair and balanced than either CNN or MSNBC, both of which have fallen over sideways to the left. The most disturbing thing of all is that the Democrats are <#inc ww2010.weblog.ref e070219 "completely committed to losing in Iraq."#> They've staked their political lives on it. From the point of view of Generational Dynamics, this kind of thing has happened before, in previous Crisis periods. Abraham Lincoln was bitterly criticized during the Civil War in the 1860s. The early battles were "disasters" and "quagmires" for the North. The most vicious criticisms came from the "Copperheads" - Peace Democrats who despised Lincoln and argued that the civil war was his fault. The <#stdurl http://www.sonofthesouth.net/union-generals/mcclellan/democratic-platform-1864.htm "1864 Democratic Party Platform"#> called for peace negotiations with the South, to end the war as quickly as possible, "after four years of failure to restore the Union by the experiment of war, during which, under the pretence of military necessity, ... the Constitution itself has been disregarded in every part, and public liberty and private right alike trodden down." As for Franklin Roosevelt, the Republicans were able to accuse the President of one scandal after another. Just google the words "fdr scandal" to get a sense of how those scandals are still remembered today. Even so, it's extremely upsetting to me to see how committed the Democrats and the journalists are to our failure in Iraq. I can't forget <#inc ww2010.weblog.ref e070219 "Senator Ted Kennedy loudly screaming"#> a month ago, "We on this side are interested in protecting American servicemen from the crossfire of a civil war. Some on the other side are more interested in protecting the President from a rebuke." So, all of the above serves as an introduction to Donald Trump's lengthy rants on CNN. He was on all day on Friday, they replayed pieces of it on Saturday, and then repeated the whole thing on Sunday. They could spend what was probably over an hour of airtime on Trump's rant, but they couldn't spare even a minute of airtime to describe <#inc ww2010.weblog.ref e070319 "a poll and some news"#> that things were getting better in Iraq. CNN is so committed to losing that they don't even want to face the possibility that Iraq might get better. <#inc ww2010.pic g070318d.jpg right "" "Donald Trump interviewed by CNN's Wolf Blitzer (Source: CNN)"#> So they couldn't have made a better choice than Donald Trump. Here are some excerpts from <#stdurl http://transcripts.cnn.com/TRANSCRIPTS/0703/16/acd.01.html "the transcript."#> First, Trump seems to really like Saddam Hussein:

"The war is a total disaster. It's a catastrophe, nothing less. It is such a shame that this took place. ... And Saddam Hussein, whether they like him or didn't like him, he hated terrorists. He'd shoot and kill terrorists. When terrorists came into his country, which he did control and he did dominate, he would kill terrorists. Now, it's a breeding ground for terrorists. So look, the war is a total catastrophe and they have a civil war going on.

You can really see Trump going bonkers here. First off, he forgets that Saddam was paying $25,000 to any Palestinian family whose son became a suicide bomber that blew up Israeli civilians. And yes, Saddam would shoot and kill terrorists, but he'd shoot and kill anyone. Or he'd use WMDs on them, or feed them into a meat grinder. Anything to make a point. He continues:

"I don't know what's going on. I just know that they got us into a mess, the likes of which this country has probably never seen. It's one of the great catastrophes of all time. And perhaps even worse, the rest of the world hates us. You go throughout Europe -- I travel, do deals all over the world. The Europeans hate us. You go to Germany, you go to England, you go to places that, you know, we didn't have problems with, they all hate the Americans because of what's happened. We had a chance after September 11 to be the most popular, for the first time ever to be the most popular nation on earth, and we blew it."

This is really a laugh. Trump forgets that most of the Muslim world approved of 9/11, and Palestinians were dancing in the streets. Hmmm. I wonder if Trump thinks we should have gone into Afghanistan? Maybe he thinks we should just have let al-Qaeda terrorists keep flying planes into our buildings, and we shouldn't try to stop it. That's what Osama bin Laden thought would happen. Trump is a man after OBL's own heart. Now here's something really funny. Donald Trump is "friends" with Senator John Kerry and with John Edwards, but he dislikes both of them now because they lost the 2004 election to George Bush. I've never heard anything like this. Can you believe this guy? Here's what he said, when asked first about John Edwards and then about John Kerry:

"Well, I think that [Edwards' run for VP was] a huge negative, because that was a shame that that race was lost, because look what we have right now. It's a disaster. So, you know, I would probably be inclined not to like him on the basis that he lost an election that should have been won. That election should have been won. [Do you blame him or John Kerry?] Well, I guess you'd have to say it's a combination of both. Now, obviously, the second man on the ticket doesn't have too much of an impact as -- in comparison to the first. But -- and I like John Kerry a lot. He's a wonderful guy, he's somebody I know and I have -- he's a friend of mine. But I'm so upset that he blew it. [You're upset because you dislike the current president?] Well, I think Bush is probably the worst president in the history of the United States. And I just don't understand how they could have lost that election."

I always thought the Donald Trump was strange, but I never realized until now how much of a total fruitcake he is. But once again, the more important issue here is not Donald Trump, but CNN. They played and replayed these rants over and over for three days, but they couldn't report the poll results I talked about. Like MSNBC, CNN has become a disgrace to the nation, and it makes me happy that Fox News Channel is making fools out of them. =eod =// &&2 e070319 New optimistic poll of Iraqi people barely mentioned on Sunday TV news shows =data ww2010.weblog.y2007.e070319.head New optimistic poll of Iraqi people barely mentioned on Sunday TV news shows =data ww2010.weblog.y2007.e070319.keys Robert Gates, Bob Schieffer, face the nation =data ww2010.weblog.y2007.e070319.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070319.date 19-Mar-07 =data ww2010.weblog.y2007.e070319.txt1 And Bob Shieffer on CBS's "Face the Nation" asked really dumb questions of Secretary of Defense Robert Gates. =data ww2010.weblog.y2007.e070319.txt2 The poll is described in a series of <#stdurl http://www.timesonline.co.uk/tol/news/world/iraq/article1530526.ece "London Sunday Times articles."#> The poll was conducted by the British polling firm <#stdurl http://www.opinion.co.uk/Newsroom_details.aspx?NewsId=67 "ORB (Opinion Research Business) Group."#> Oddly enough, outside of the London Times, the mainstream media is barely mentioning the poll. The only reason I know about it is that someone mentioned it briefly on one of the Sunday morning news shows (Stephanopolous' show, I think, but I'm not sure). It took a while to find anything about it online, but it finally turned up. There was <#stdurl http://www.theaustralian.news.com.au/story/0,20867,21404747-2703,00.html "a story about it"#> in The Australian. You can bet that if the poll results had been bad for America or for the Adminstration, then the results would have been all over the place. In fact, as I'm typing this, CNN International has just spent several minutes talking about some poll that says that Americans have lost faith in the war. This is big news to CNN, but not something that says things are getting better in Iraq. It's really disgraceful. And they keep replaying <#inc ww2010.weblog.ref e070319b "Donald Trump's truly moronic hate rant."#> But no mention of anything getting better. I find it really sickening. Incidentally, if you go to the ORB link above, you can download a 76-page PDF file filled with tables on the poll results. I'll just quote some of the highlights from the Times articles.

Of the 5,000+ adults polled in face-to-face interviews throughout Iraq, only 26% preferred life under the regime of Saddam Hussein, with 49% preferring life under the current political regime of Noori al-Maliki. This is despite the fact that in Baghdad, one in four has had a relative murdered (15 percent of Sunnis and 34 percent of Shiites) and one in four has had a relative kidnapped.
Sunnis were most likely to back Saddam's regime (51%) with the Shias (66%) preferring the current administration.
Only 27% believe that the country is in a state of civil war. Of the remaining, 22% believe "we are close" and 18% believe the country is "still some way from civil war."

The most interesting thing, from the point of view of the Generational Dynamics, is that only 27% believe it's a civil war. I've been saying since 2003 that a civil war was IMPOSSIBLE in Iraq, because Iraq is in a generational Awakening era. All the Washington nonsense about calling it a civil war was purely political. Other <#stdurl http://www.timesonline.co.uk/tol/news/world/iraq/article1530529.ece "news reports"#> indicate that violence has decreased significantly since the surge began. In addition, the Shia Mahdi militia has mostly disappeared, and Sunni citizens are turning against al-Qaeda and the Sunni insurgents. There's no way to tell whether the level of violence will continue to level off, or whether it will rise again. But if there were anything like a civil war going on, 100% of the Iraqis would know it, not just 27% thinking so, and the level of violence wouldn't come down until it had reached a climax. <#inc ww2010.pic g070318c.jpg right "" "Robert Gates (Secretary of Defense) interviewed by Bob Schieffer on Face the Nation (Source: CBS)"#> Secretary of Defense Robert Gates appeared on Face the Nation on Sunday morning. If you go to <#stdurl http://www.cbsnews.com/sections/ftn/main3460.shtml "the CBS News web page"#> for the appearance, you'll find that they made Gates' appear as negative as possible, and they left out the most important part. Fortunately for you, dear reader, I've transcribed the most important part of his appearance, where host Bob Schieffer asks some really dumb questions about it being a civil war:

Schieffer: Let me just challenge the conventional wisdom here. The President said that if we leave then they're gonna follow us here. And this appears to me to be a civil war. Why would stop fighting each other, which is what they seem to be doing now -- why would they take a break in that and decide to challenge America somewhere down the line if we leave?

Now, you can see from this question how contemptuous Schieffer is of Gates. He asks Gates an incredibly stupid question, to the effect of "Why are you so dumb that you believe they're going to take a break from their civil war and come after us." Once again, a really sickening display from the mainstream media. Incidentally, Schieffer isn't "challenging the convention wisdom"; Schieffer is spouting Washington politicians' and pundits' "conventional wisdom." It's Gates who's trying to tell him what's actually going on.

Gates: This Washington game of is it a civil war or isn't it -- this characterization is a problem because it oversimplifies. The reality is that stoking sectarian violence is a very specific strategy on the part of al-Qaeda and the insurgents. That was behind the bombing of the [al-Askariya mosque in Samarra]. It's behind their efforts today. And they make no bones about the fact that it's their strategy. You don't have thousands of Shia and Sunnis falling in on each other or attacking each other. You have hit squads going around the city. So this is a purposeful strategy. It seems to me there is the opportunity to create a political environment in which these issues can be sorted out among the Iraqis themselves, and that's what we're trying to do.

Gates is probably used to incredibly ignorant journalists who think they know more than anyone else, so he has to explain what al-Qaeda's strategy is to Schieffer. But we know from the articles by <#inc ww2010.weblog.ref e070114b "Jeff Stein, national security editor for Congressional Quarterly,"#> Washington journalists, analysts and politicians have no idea what's going on in Iraq. I doubt very much that Schieffer even knows what the words "Sunni" and "Shia" mean, except that someone must have told him that they're fighting each other. In his simpleminded thoughts, there's nothing else going on. So Gates explains to him that Shia and Sunnis aren't killing each other, but there's an explicit al-Qaeda strategy to make him think they are. Obviously, al-Qaeda has succeeded with Schieffer.

Schieffer: But I think [Vice Admiral John Michael McConnell], the head of National Intelligence, testified the other day on the hill. [He was asked whether], if we pulled out troops back, would they pursue our troops, and he said that's not likely, which suggests that they're gonna stay there and fight one another.

In other words, simpleminded Schieffer, who may be going senile, essentially asks again whether the Iraqis are going to stop fighting each other long enough to attack the American troops. What the hell is he thinking?

Gates: First of all, I think that they are not going to follow our troops into Kuwait. The notion that al-Qaeda is going to follow our troops is probably not right. But I would say that it'd been clear all along that Zarqawi -- [Abu Musab al-Zarqawi] is Jordanian, the current leader of al-Qaeda in Iraq is an Egyptian -- and they've made no bones about the fact that once they've been able to establish a firm base in [Iraq's Anbar province] or in Iraq more broadly, that they intend to try and destabilize the neighbors and eventually attack the United States. They've not made any secret about that.

From the point of view of Generational Dynamics, what Gates is describing is exactly what's to be expected of a country in a generational Awakening period. No country in history, as far as I can tell, has ever had a civil war in an Awakening era, with a few exceptions that fizzled out quickly. The primary example of that type is Julius Caesar's famous "crossing the Rubicon" civil war, that ended almost before it began. I've been saying for years that a civil war is impossible at this time. The reason is that, in a generational Awakening era, the people themselves don't want any part of a war. I knew that, sooner or later, it would be the Iraqi people who would turn against the "civil war" concept, and now it's happening. The Iraqi people were stirred up by Iran and al-Qaeda, but finally it all seems to be fizzling out, and Iraq is settling down to a normal Awakening era country. Incidentally, while I'm on this subject, I might as well repeat that I also said this of Lebanon, which is also in a generational Awakening era. For months last fall and winter, you could hardly turn on CNN or the BBC without hearing them predict that there was going to be another civil war in Lebanon. It was a steady drumbeat, and it was predicted by pundits around the world. I said, and I'll say it again, a country CANNOT have a civil war in an Awakening era. Since 2003 I've posted hundreds of articles, and most of them contain Generational Dynamics predictions. NOT A SINGLE ONE has turned out to be wrong. People called me "ideological" (without telling me what ideology they believe I followed) because I said that a civil war in Iraq is impossible, and I've been proven right over and over, while all the highly-paid analysts and pundits have been proven wrong time after time. People used to call me "crazy" because I predicted in 2003 that <#hreftext ww2010.i.may01 "Yasser Arafat's death"#> would signal a generational change that would lead the Mideast into war, and there's hardly been a day since Arafat's death that the level of Mideast conflict hasn't gotten worse. People used to call me "hysterical" when I said, as far back as 2002, that we're entering a new 1930s style Great Depression, probably by the 2006-2007 time frame. Now, with the housing bubble meltdown in full progress, there are a lot of "hysterical" people, just like me. Being hysterical is almost (but not quite) mainstream. I said in 2004 that the U.N. was completely irrelevant to the Darfur genocide, and they would never stop it until it reached a climax. Now, three years later, the ongoing genocide is as bad as ever, and people are still holding vigils and such to get the U.N. to "stop the genocide." Sorry folks, genocide is as important to being a human being as sex is. Generational Dynamics has proven itself to be right, time after time. Not every Generational Dynamics prediction has yet come true, but they're all getting close, and not a single one has been proven wrong. I like to say that it's easy to get a million predictions right -- just make two million predictions. That's what the pundits do; their predictions are no better than chance guesswork, but even a stopped clock is right twice a day. But Generational Dynamics predictions are never wrong. I've challenged everyone to find a web site anywhere in the world with anything close to the predictive success that this web site has had. No has ever pointed one out to me, because none exists. I thank all my readers for continuing to come back, making this an increasingly popular web site for people who really want to understand what's going on in the world. I'm still keeping up with the e-mail questions, though sometimes it takes a few days to answer, so as before you're welcome to send me a question or click on the COMMENT link at the top of the page. =eod =// &&2 e070318b Pakistan's President Musharraf faces crisis =data ww2010.weblog.y2007.e070318b.head Pakistan's President Musharraf faces major crisis =data ww2010.weblog.y2007.e070318b.keys pakistan, india, pervez musharraf, Manmohan Singh, kashmir, jammu, islamist extremism, Shaukat Aziz, Muhammad Chaudhry =data ww2010.weblog.y2007.e070318b.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070318b.date 18-Mar-07 =data ww2010.weblog.y2007.e070318b.txt1 The remarkable détente between India and Pakistan may go down with Musharraf. =data ww2010.weblog.y2007.e070318b.txt2 <#inc ww2010.pic g070318a.jpg right "" "Chief Justice of Pakistan (CJP) Iftikhar Muhammad Chaudhry (Source: BBC)"#> A major political and constitutional crisis in Pakistan has been triggered by the <#stdurl http://news.bbc.co.uk/2/hi/south_asia/6457019.stm "March 9 suspension,"#> by President Pervez Musharraf of the country's Chief Justice Iftikhar Muhammad Chaudhry for abuse of office. The suspension has triggered large riots by, of all people, lawyers. It's really hilarious to see these men in suits and ties reliving their childhoods: <#inc ww2010.pic g070318b.jpg center "" "Rioting lawyers, complete with suits and ties, in Islamabad, Pakistan (Source: BBC)"#> Nonetheless, even if the scenes are funny, the situation is serious. There appears to be <#stdurl http://www.pakistanlink.com/Headlines/March07/17/11.htm "a growing level of protest against Musharraf,"#> especially after the police used teargas and rubber bullets against the rioting lawyers, and the police entered the offices of Geo TV, an opposition TV station, kicking down doors and wrecking property. The CJP (chief justice of Pakistan) himself appears to be <#stdurl http://www.thenews.com.pk/daily_detail.asp?id=47234 "turning into something of a folk hero."#> Musharraf has <#stdurl http://www.arabnews.com/?page=4§ion=0&article=93810&d=18&m=3&y=2007 "defended his actions,"#> saying that his family loves the CFP's family, and that he was only responding to specific charges of judicial abuse sent to him by Prime Minister Shaukat Aziz. He said that the violent police actions were not authorized by him, and that the perpetrators would be punished. "I am blamed for everything," he said. The question to be answered this week is whether the crisis will grow. The Lahore lawyer's association is planning <#stdurl http://www.dailytimes.com.pk/default.asp?page=2007%5C03%5C18%5Cstory_18-3-2007_pg13_1 "a complete strike on March 22."#> However, reading all the press reports of the situation, I'm unable to find any evidence of widespread public opposition to Musharraf. As I've said many time, Generational Dynamics explains and predicts the behaviors and attitudes of large masses, entire generations of people. The attitudes and behaviors of a small group of lawyers do not necessarily reflect the attitudes of the public at large. India and Pakistan are both nuclear powers, and they almost went to war in 2002, but they drew back, thanks to a remarkable détente that Pakistan's President Pervez Musharraf and India's Prime Minister Manmohan Singh have engineered over the last few years. Musharraf, born 1943, and Singh, born 1932, are both survivors of World War II and the subsequent genocidal war between Pakistan and India over Kashmir and Jammu, a dispute that still seethes today, even though the United Nations partitioned the region into Indian and Pakistani regions in 1947. (Birth years corrected on 24-May) As survivors of the last crisis war, both men have spent their lives doing everything possible to guarantee that their children and grandchildren will never have to go through any similar experience. This explains why Singh and Musharraf pushed so hard, and succeeded in forging the détente between the two countries, and have maintained peace, so far, over Kashmir and Jammu. =inc ww2010.cf.cf060209 p left It's because of this détente that I set the risk level for Kashmir at Yellow (2, medium risk). However, if either Singh or Musharraf disappears, for whatever reason, then he will be replaced by someone from a younger generation who will be much more militant towards the other country, especially over Kashmir and Jammu, and the probability of nuclear war will increase substantially. <#inc ww2010.pic india5.gif right "" "Indian subcontinent, showing the disputed regions of Kashmir and Jammu."#> Furthermore, within Pakistan itself, Islamist <#inc ww2010.weblog.ref e050721 "extremism has risen greatly recently,"#> largely spurred on the "success" of the London subway bombings, perpetrated by young British Muslims trained in Pakistan. Musharraf has been working effectively to control this extremism, but a younger generation Pakistani president would be far less motivated and effective. Generational Dynamics predicts there will indeed be a new genocidal crisis war between India and Pakistan, and since both countries possess nuclear weapons, there's little doubt that they will be used. It's impossible to predict when such a war would begin, but if Musharraf disappears and is replaced by someone from a younger generation, things will certainly start moving along. =eod =// &&2 e070318 Activists accuse Fox's '24' of promoting torture. =data ww2010.weblog.y2007.e070318.head Activists accuse Fox's '24' of promoting torture. =data ww2010.weblog.y2007.e070318.keys 24, Fox's 24, Jack Bauer, l brent bozell, jane mayer, clyde haberman, dell comics, superman, kojak, james dobson, ted bundy, christian right, feminists, media violence, paul simon, anger retaliatory rapists, child abuse, child sexual abuse, sexual abuse, rape, porn, violent porn, child porn, the music man =data ww2010.weblog.y2007.e070318.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070318.date 18-Mar-07 =data ww2010.weblog.y2007.e070318.txt1 In the end, it's just another way to bash our troops. =data ww2010.weblog.y2007.e070318.txt2 It's a familiar argument to me: TV is taking over our children's minds and causing them to become violent. I've heard such things many times, usually coming from an unholy alliance of the left and the right. On the right this time, we have conservative media critic <#stdurl http://www.nationalledger.com/artman/publish/article_272611879.shtml "L. Brent Bozell III,"#> saying that "24" showed 67 scenes of torture in its first five seasons. He made a particularly tortuous argument to claim that torture scenes are harming children: He said that they're OK in movie theatres, where kids won't accidentally see them, but not on TV. On the left, Jane Mayer from the New Yorker and Clyde Haberman from the New York Times used the "24" controvery to <#stdurl http://media.www.nyunews.com/media/storage/paper869/news/2007/03/08/News/Tracing.24.Tv.Torture.To.The.Battlefield-2764374.shtml "bash the armed forces."#> "I finally did start watching '24,'" says Mayer, "and there, every week, it was the best advertisement you could ever run for torture." According to Mayer, the "military elite" (whatever that means) are getting concerned about the depiction of torture in "24." Mayer reported on the growing dissent among military elite about the depiction of torture in "24," and that its portrayal of Jack Bauer is "influencing soldiers to use torture methods." "He cuts through the red tape," said Mayer. "And the red tape in this case happens to be the U.S. Constitution." (Incidentally, you can see a number of "24" torture clips, narrated by Mayer, on the <#stdurl http://www.newyorker.com/online/video/2007/02/19/070219_Mayer "New Yorker web site."#>) I suppose I shouldn't be surprised by what's happening. Senator John Kerry has repeatedly affirmed his belief that American soldiers are <#inc ww2010.weblog.ref e061103 "torturers, rapists and murderers,"#> and journalist Seymour Hersh (like Jane Mayer, from the New Yorker) thinks that they're Nazis. Kerry also thinks that they're stupid because they got "stuck in Iraq," so it's not surprising the Jane Mayer thinks that they're too stupid to distinguish television fantasy from real life. (I wonder if Mayer has taken to torturing people, now that she's watching "24"? Have any of her children or pets been murdered or hospitalized recently? It's worth checking out.) I've been hearing nonsense like this my whole life. When I was growing up in the 1950s, my favorite comic book was Superman. One day I saw a newspaper headline about how comics were causing children to become violent. I knew what comics they must have been talking about -- those comic books with ugly monsters on the covers. I never read those, so I knew I was safe until I read the article and learned the Superman comics were among those driving children to violence. It was thus at an early age that I learned what morons some politicians can be. Anyway, this gave rise to the whole "Dell comics are GOOD comics" advertising campaign. Dell comics featured the likes of Donald Duck and Woody Woodpecker. They were OK, but they were no Superman. By the way, didn't some of these cartoon characters occasionally fall off of cliffs or get hit by anvils? Shouldn't we be afraid that this teaches kids that it's ok to push people off cliffs or hit people with anvils? We have to be vigilant, don't we? In the 1970s, it was the TV crime drama Kojak that was turning our kids to violence. Then, in the 1980s, an unholy violence between the Christian right and the feminist left started a man-bashing campaign to claim that "sexually exploitive material" was driving men to "objectify" women, turning them into enraged robots that abuse children and rape women. The main "evidence" of this was Christian right anti-porn crusader Dr. James Dobson's interview with Ted Bundy. Bundy had tortured, raped, sodomized and murdered 30 girls and women. The interview, was conducted in 1989, just hours before Bundy was executed in an electric chair for his crimes. Bundy blamed his crimes on having read sexual materials. In other words, Bundy wasn't responsible for his crimes, since the porn made him do it. It's like a rapist blaming the crime on the victim's tight sweater. Here a comment from a <#stdurl http://www.medialit.org/reading_room/article594.html "a 1985 article"#> explaining why media violence is causing people to be violent:

Sen. Paul Simon, (D) Illinois: "The evidence appears overwhelming that witnessing violence on television contributes to violent behavior in real life. There may be isolated instances of individuals who repeat a violent image. But the major problem is the child who sees it day after day and becomes confused about the consequences of violence in a TV world in which the good guys are rarely hurt or killed and the 'bad guys' aren't always identified."

Senator Simon is talking through his hat. There is absolutely no such evidence whatsoever. Several years ago, I actually researched the evidence about this subject, and there's no evidence whatsoever that violence or sexuality in media causes rape or any other crime. It turns out that there IS evidence that the worst pathological "anger retaliatory rapists" are likely to have been badly abused by their mothers, but that fact somehow never makes it into the mainstream newspapers. Another fact that you never hear about in the newspapers has to do with the explosion of porn, child porn, and violent porn on the Internet in the 1990s. Violent and child porn is illegal, and there was very little of it around in the 1980s. But with online services first, and then the World Wide Web internet, all these materials became widely available. During the dot-com bubble, when everyone was spending huge amounts of money on companies with no income, it used to be said jokingly -- but truthfully -- that the only companies making a profit on the Internet were porn companies. In the 1990s, the Christian right and the feminist left were in a full-scale man-bashing jihad mode. They predicted that the flood of violent and child porn would turn men into robots who would mindlessly rape and abuse women and children. Well, the opposite happened. Rapes fell dramatically, as did all violent crimes in the 1990s. And, in a <#stdurl http://www.ncjrs.gov/html/ojjdp/jjbul2001_1_1/contents.html "2001 study by the Dept. of Justice,"#> child sexual abuse dropped enormously in the 1990s. Between 1992 and 1998, substantiated cases of child sexual abuse fell 31% -- almost a third. All forms of child abuse decreased, but child sexual abuse fell much farther than the rest. This is an incredible result, especially given the hysterical claims of the Christian right and the feminist left about violent and child porn. And yet, surprise! surprise! I've never heard or seen this enormous decline discussed in the mainstream media. Was this dramatic decline in gender-based crime caused by the sudden explosive availability of child porn and violent porn on the Internet? That's probably part of it, and it indicates that if officials really wanted to protect women and children (which they don't) then they would decriminalize these things. It seems perfectly reasonable that psychotic men who rape and abuse women and children can be satisfied by porn in some cases, thus reducing crime against women and children. But the main reason for the reduction in crime in the 1990s is the generational reason. Crime declined in the 1990s because most crime is perpetrated by people aged 15-25, and people in Generation-X moved past this age range. Children who grow up during generational Awakening eras, like <#hreftext ww2010.i.sixties040501 "America's 1960s-70s,"#> become victims of the social convulsion that occurs in that time. In their book The Fourth Turning, historians William Strauss and Neil Howe call this the "Nomad archetype," because the social turmoil surrounding them causes them to become angry, disaffected and alienated from society. Strauss and Howe found that crime and violence were reduced in the two decades preceding the civil war, and in the two decades preceding World War II, when those Nomad archetype generations became older. So crime and violence are much more related to generational changes than to anything else. But that doesn't stop the hucksters who use scare tactics to raise funds for their organizations by blaming the media, or comic books or television. In The Music Man, the root of all evil was the pool table. Here are a few lines from the song, "You Got Trouble" about the new pool hall in town in 1890s Iowa:

    Now, I know all you folks are the right kinda parents.
    I'm gonna be perfectly frank.
    Would you like to know what kinda conversation goes
    On while they're loafing around that Hall?
    They'll be trying out Bevo, trying out cubebs,
    Trying out Tailor Mades like Cigarette Fiends!
    And bragging all about
    How they're gonna cover up a tell-tale breath with Sen-Sen.

    One fine night, they leave the pool hall,
    Heading for the dance at the Armory!
    Libertine men and Scarlet women!
    And Rag-time, shameless music
    That'll grab your son and your daughter
    With the arms of a jungle animal instinct!
    Mass-staria!
    Friends, the idle brain is the devil's playground!

    Trouble, oh we got trouble, right here in River City!
    With a capital "T" and that rhymes with "P"
    And that stands for Pool, that stands for pool.
    We've surely got trouble! Right here in River City, Right here!
    Gotta figger out a way to keep the young ones moral after school!

In the play, "Professor" Harold Brown uses this tactic to sell the town 76 trombones and dozens of other musical instruments for the boys band. Today, we have hucksters on the right and the left frightening people in the same way. They never have a shred of evidence to back up their claims, but they frighten people into paying them or their organizations. Charles Dobson's career really took off after the Bundy interview. Andrew Dworkin and other pathologically ill feminists made millions by writing books claiming that all men are rapists and batterers, or that all sex is rape. I have to say a word about video games. About ten years ago, I saw a television news panel talking about how video games were supposedly driving kids to violence. One guy was really fired up. He was talking about how kids are unable to distinguish "reality" from the video game, and they think that if it's OK to kill things in a video game then it must be OK to kill in real life. He worked up to a crescendo and shouted his main point: "When kids are killing Martians in a video game, those are REAL Martians." The faces of the other tv panelists remained appropriately grim, but I couldn't stop laughing hysterically. So now it's "24." We have fund raisers and pseudo-journalists worried because "other people" are too stupid to recognize the difference between a tv script and real life. These fund raisers and pseudo-journalists don't have trouble with this, of course; it's the hoi polloi who are too dumb to know. And sure enough, this nonsense will sell magazines and bring in lots of donations. There's one final point. Mayer and others have claimed that torture has become more acceptable to Americans since 9/11, and they say that "24" is the cause. Well, they're half right. Torture HAS become more acceptable to Americans, but not because of "24." America is heading deep into a "generational Crisis" era, 62 years after the end of World War II. As I've said many times on this web site, when a country enters a generational crisis era, the value of a human life goes down. By the climax of the crisis war, the only important value is personal and national survival, the value of an individual human life is essentially zero, and genocide becomes acceptable. The fact that torture is becoming more acceptable to Americans (as it also is to other nations in crisis eras) is just another sign of what a generational crisis era is like. Furthermore, the new season of "24" begins with major terrorist attacks in Los Angeles and elsewhere on American soil. Anything like that happening in America now would immediately panic the entire country. The political squabbles we see today would disappear. Instead, Americans would be so furious that war, torture and genocide would all become instantly acceptable. In that sense, "24" is very realistic. =eod =// &&2 e070317b Wall Street Journal complains about Hashemite Hokum =data ww2010.weblog.y2007.e070317b.head The Wall Street Journal complains about "Hashemite Hokum" =data ww2010.weblog.y2007.e070317b.keys Jordan, king abdullah, iran, trilateral commission, henry kissinger, standard oil, john d rockefeller, nelson rockefeller, david rockefeller, paul volcker, hashemite kingdom, wall street journal =data ww2010.weblog.y2007.e070317b.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070317b.date 17-Mar-07 =data ww2010.weblog.y2007.e070317b.txt1 And readers complain to me about oil and Iran and my Conflict Risk Graphic. =data ww2010.weblog.y2007.e070317b.txt2 Last week, <#inc ww2010.weblog.ref e070308 "Jordan's King Abdullah"#> told a joint session of Congress that the Palestinian issue is the core issue in the Mideast. Abdullah gets nothing but abuse from stupid Americans when he says this. I've pointed out many times how ABC's George Stephanopoulos looked like an idiot in November because <#inc ww2010.weblog.ref e061126 "Jordan's King Abdullah had to tell him five times"#> of the importance of the Israeli/Palestine situation, but he was still clueless. Just to show that this is independent of politics, the stupidity of the liberal George Stephanopoulos has now been matched, and more, by <#stdurl http://online.wsj.com/article/SB117340935816631788.html?mod=todays_us_opinion "an editorial"#> on the conservative editorial page of the Wall Street Journal. The writer left the editorial unsigned, which was probably the only smart this moron did. <#inc ww2010.pic g070307.jpg right "" "Jordan's King Abdullah II, addressing a joint session of Congress on March 7 (Source: CNN)"#> The editorial is called "Hashemite Hokum," referring to the Hashemite ethnic group. King Abdullah is Hashemite, and the official name of his country is the Hashemite Kingdom of Jordan. So the WSJ editorial writer not only exhibited his ignorance and stupidity, he did it in a way that is ethnically offensive. No wonder so many people hold Americans in general and American journalists in particular in such contempt. I wouldn't approve of foreign journalists making ethnic slurs about an American president, and I don't approve of American journalists making an ethnic slur about the leader of a foreign country, a staunch ally to boot. Here's part of the editorial:

"This is not the first time such sentiments have been expressed, nor is King Abdullah the only one who believes them. For decades, conventional wisdom held that the conflict between Arabs and Israelis lay at the heart of most of the Middle East's troubles. Does anyone seriously believe that anymore? On Monday, 38 Iraqis were killed and 100 injured by a car bomb in downtown Baghdad. Apparently, King Abdullah would have us believe that the Sunni terrorists behind that massacre of their fellow Arabs were registering a protest against Israel's occupation of the West Bank. Perhaps he also thinks that the murder in 2005 of former Lebanese premier Rafik Hariri was a function of Israeli policies, and not of Syria's desire to dominate its neighbor. Ditto for the internecine fighting among Palestinians, repression in Egypt and al Qaeda's efforts to unseat the House of Saud. Jordan is a friend of America; it played a significant role in killing Abu Musab al-Zarqawi last year. Too bad its king can't match the hard-headedness he's shown in private with some candid public speaking about the real source of the Arab world's woes."

You can see how these "great thinkers" of our time reduce everything to trivial politics. The Democrats think that al-Qaeda has nothing to do with what's going on in Iraq or the world, but if we'd only invade Pakistan and find Osama bin Laden, then all our problems will be solved. <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries. Somalia and Eritrea are in east Africa."#> The Republicans think that al-Qaeda is the ONLY problem, and that if we'd only invade Syria and kill them, then all our problems will be solved. These politicians, in both parties, are so stupid that it's amazing to me that they can figure out how to get out of bed in the morning. Anyone who just looks at the adjoining map of the Mideast can see what the problem is. Except for the orange of the Orthodox Christians in the north, the entire region is massively green -- representing Muslims -- except for that tiny red dot in the middle, representing Israel. American politicians have no sense of all of this; to them the entire Mideast is neither red nor green, but uniform grey, which means they see nothing. But to someone who lives in the midst of this region, let's say hypothetically the King of Jordan, that red dot has enormous significance. I guess what amazes me, besides the sheer stupidity of these politicians, is their unwillingness to at least give a little deference to King Abdullah. Instead of treating him like a hack politician, it would be nice if they thought about his arguments, and even wondered if he might possibly know something that they don't. But no, Washington politicians know everything. They're in the center of the universe, and their words are the Golden Words of Truth, even when they change their minds five times a week. These people are supposed to be our leaders. They're supposed to know what they're talking about, so that the citizens of our country can listen to them and know what's going on in the world. The stupidity of politicians came to public attention in November, when <#inc ww2010.weblog.ref e070114b "Jeff Stein, national security editor for Congressional Quarterly, wrote an article"#> showing that Washington politicians and analysts, even analysts specializing in the Mideast, don't know even the simplest facts about what's going on. So it's no wonder that my readers, who are not required to be experts, are so confused about what's going on. What are they supposed to think when politicians insult the King of the Hashemite Kingdom of Jordan, or when politicians come up with one moronic, hysterical policy proposal after another about "getting out of Iraq"? What is any citizen supposed to think, when Washington is populated by clowns? One thing that I sometimes hear from readers, and have been told by more than one friend in person, is that oil is the only important thing in the world. One person in a blog recently wrote that my site talks about "a world war over oil." Geez, where did I say that? I rarely even talk about oil. The obsession with oil is common to both parties, but it's expressed mostly on the left, and it's part of the paranoia that Halliburton is controlling the world. This leftist paranoia has its roots in the early 1900s, when <#stdurl http://en.wikipedia.org/wiki/John_D._Rockefeller "John D. Rockefeller"#> gained monopoly control of the oil market through his company, Standard Oil, and became a hated symbol of the right in the 1900s. He became the world's first billionaire, and when he died he gave a great deal of money away to philanthropic organizations. This is where the oil paranoiacs get the phrase "oil money"; anything coming from Rockefeller's century old fortune is considered to be as evil as they believe he was. The oil paranoia was given a boost in 1974 when John's grandson, Nelson Rockefeller, became Vice President of the United States after Richard Nixon's resignation. Nelson's father, David Rockefeller, had just formed <#stdurl http://en.wikipedia.org/wiki/Trilateral_Commission "the Trilateral Commission,"#> a worldwide philanthropic organization with members from many ideologies and countries. If you read stuff from the paranoics of the time, you'll see (as I recall) that they were saying that Nelson Rockefeller, Henry Kissinger and Paul Volcker were amassing wealth for themselves by controlling all the oil in the world. As I recall, the paranoics even claimed that the Trilateral Commission was controlling the White House and the world; this belief was expressed when it turned out that several members of the Trilateral Commission were in President Carter's administration, and that Carter himself was a member. If you'd like to read some of this paranoic stuff about the Rockefellers, oil, and controlling the world, just type the words "rockefeller oil" into google, and you'll get many examples. However, coming back to reality, oil is important in today's world, but it's about 10th or 20th on the list of important things. The Palestinian issue is way more important. The <#inc ww2010.weblog.ref e070208 "price of tortillas"#> is more important than oil; in fact, food in general is far more important than oil (food is becoming increasingly expensive, and you can't eat oil). Water is far more important than oil (there's a growing water shortage, and you can't drink oil). The increasingly rapid militarization of China is more important than oil. The fact that America owes China hundreds of billions of dollars is more important than oil. Russia's increasing xenophobia is more important than oil. I could go on and on, and after naming five or ten more important issues, I'd probably come to oil. Another complaint I hear, though less often, has to do with Iran. The issue was best expressed by this message from a reader, who wondered why Iran doesn't appear on my Conflict Risk Index graphic:

"I sit in wonder how is it Generational Dynamics has the Arab/Israeli conflict at high risk 3 but you have NOT even listed the America/Iran risk???? In my opinion, this is ONLY the most dangerous situation in the world today but you think it is not even worthy of a rating????? It is a 3 easily, in my opinion -- that is if one frees oneself of Cognitive Dissonance over the the strong prevailing view that war with Iran just has "what me worry?" status (sorry about the snarky that remark)."

I've only changed the risk levels on the Conflict Risk Index graphic once, and it's now been over a year since I've changed the risk levels on the current graphic. Here's how I set <#inc ww2010.weblog.ref e060210 "the risks on February 9, 2006:"#> =inc ww2010.cf.cf060209 p center When I originally <#inc ww2010.weblog.ref e050530 "defined the Conflict Risk Index on May 30, 2005,"#> here's how it stood at that time: =inc ww2010.cf.cf050530 p center If you compare the two, you'll see that I made three changes: I lowered the risk level for North Korea, and I raised the risk level for Arab/Israeli and Kashmir. You can read the <#inc ww2010.weblog.ref e050530 "referenced article"#> for the reasons. But why isn't Iran even on this graphic? Isn't war with Iran far more likely than some of the others, as the reader claims? Aren't American or Israeli warplanes just about to bomb Iran almost any moment now, if only to get their oil, as many on the left including nutcases like Seymour Hersch believe, and isn't that riskier than anything else on the graphic? From the point of view of Generational Dynamics, the danger from Iran isn't even close to the danger from the others on the graphic. If you read my long, rambling <#inc ww2010.weblog.ref e070317 "analysis of Iran"#> that I just wrote, you'll see that a lot of the problems with Iran have to do with the President, Mahmoud Ahmadinejad. The situation with Iran may look highly risky for political reasons, but from the point of view of Generational Dynamics, it's not. That's because Iran is in a generational Awakening era. Even if America or Israel bombed Iran (which is far from certain, despite views of political pundits), it would not with certainty trigger a wider war, any more than the Iraq war or the summer Lebanon war did. The six regions shown on that graphic were chosen because those are the six regions where a regional war would lead to a world war. (See my November, 2004, article<#hreftext ww2010.i.danger041120 ""The Six Most Dangerous Regions in the World.""#>) That's because of (1) international treaties, and (2) the participants are in generational Crisis eras. Neither of those conditions holds in the speculative scenario of bombing Iran. Now, the semantic/philosophical issue is, what does it mean to "trigger" or "lead to" a wider war? You could argue that bombing Iran would bring in China or the Palestinians; but they have no treaty obligation to join the war, so there's no imperative. You could argue that they might come in anyway, but in that sense, anything could be a trigger, as <#inc ww2010.weblog.ref e060206 "the Danish cartoon controversy"#> has shown. I'm certainly not saying the Iran situation isn't dangerous. Of course it is. But it's not nearly as dangerous as, for example, the situation between the Jews and Palestinians. A war between them would certainly lead to a world war, but bombing Iran would probably not. In fact, the irony of the situation is that the chances of bombing Iran are made more likely by the fact that everyone understands that it wouldn't lead to wider war; but bombing North Korea is less likely, because everyone understands that it WOULD lead to a wider war. As I've developed Generational Dynamics over the past 5+ years, it's become increasingly apparent to me that many of its conclusions are counter-intuitive. This has been true in the Mideast, in Darfur, in Iraq, and in other cases as well. It's like being in the middle of a cold wave and predicting that the weather will get hotter next summer: It just doesn't seem possible when you're freezing your butt off, but the long-term trend predictions are more important than today's thermometer reading. Right now, there's little doubt that the Israeli/Palestinian issue is the most dangerous situation in the world, though the relations between China and Taiwan are a close second (and I really ought to change my Conflict Risk Index graphic to reflect that). If you believe that al-Qaeda is the only evil we have to deal with, then you should be aware that Hamas is closely related to Egypt's radical Muslim Brotherhood, which is increasingly closely linked with al-Qaeda. It's tempting to blame all the world's woes on our presence in Iraq, but every Muslim in the world knows that we just want to "pull out" and go home; al-Qaeda's objective is to humiliate us as much as possible in doing so. But every Muslim in the world also knows that Israel is not going to "pull out." Muslims know that unless Israel is destroyed militarily, it will be there forever. That's why al-Qaeda's goal is not to humiliate Israel, but to destroy Israel. And a war between Palestinians and Jews would draw in one country after another in the region, and numerous countries around the world including, of course, America. That's why the Arab/Israeli conflict has a Risk Level of High, even though Iran and oil aren't even on the graphic. The Hashemite King of Jordan knows that, but our stupid politicians, analysts and journalists in Washington don't have a clue. =eod =// &&2 e070317 Iran and Russia at odds over Iran's nuclear development =data ww2010.weblog.y2007.e070317.head Iran and Russia increasingly at odds over Iran's nuclear development =data ww2010.weblog.y2007.e070317.keys Iran, Russia, Mahmoud Ahmadinejad, Shah of Iran, Iran/Iraq war, Constitutional Revolution, Israel, John Kennedy, fall of constantinople =data ww2010.weblog.y2007.e070317.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070317.date 17-Mar-07 =data ww2010.weblog.y2007.e070317.txt1 Saying that Moscow "will not play anti-American games" with Iran, =data ww2010.weblog.y2007.e070317.txt2 Russia gave Iran a <#stdurl http://www.kommersant.com/p749221/r_542/Iran_IAEA_Bushehr/ "strongly worded warning"#> on Monday: If Tehran does not meet the demands of the U.N. International Atomic Energy Agency (IAEA), then Moscow will withdraw its support. "For us, Iran with a nuclear bomb or the potential to make one is unacceptable. We will not play anti-American games along with them," said the Russians. "Unfortunately, the Iranians are abusing our constructive relations and have done nothing to convince our colleagues of the consistency of Tehran's policies." Russia backed up its threat by <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2007/03/12/AR2007031201296.html "canceling delivery of nuclear fuel"#> to the Russian-built Bushehr nuclear power plant. Russia has been building the plant since 1995, but is now canceling the scheduled September opening. Russia gives failure to pay $25 million monthly payments as the reason. This is only the latest in a long series of humiliations for Iran, and especially for its colorful president, Mahmoud Ahmadinejad. Ahmadinejad has done one thing after another to inflame world opinion against himself and Iran -- threats to wipe Israel off the face of the earth, a moronic holocaust denial conference, and game-playing with the UN agencies, the EU and the US over nuclear development. Ahmadinejad is being strongly criticized, <#stdurl http://www.guardian.co.uk/iran/story/0,,2022029,00.html "even by former supporters"#> in Iran, for having gotten the world so angry. The holocaust denial conference brought from Iranian students. His power appears to have taken a major nosedive in <#stdurl http://www.citymayors.com/politics/iran_elections_06.html "December 15, 2006, municipal elections,"#> which saw defeat for many of Ahmadinejad's allies. Long-time readers of this web might possibly have noticed that I've avoided discussing a lot of issues about Iran. This is because I've been confused about where Iran is going, since Iran seems to be contradicting itself in a sense. I'd now like to provide some additional analysis. I apologize for the long, rambling nature of this article, but there's a lot to be said. The main contradiction is that Iran under Ahmadinejad has been far more belligerent than is appropriate for a country in a "generational Awakening" era. During such an era, like <#hreftext ww2010.i.sixties040501 "America's last Awakening era,"#> in the 1960s, the public has little or no taste for war, except to prevent a worse war. When Ahmadinejad started repeatedly and so aggressively talking about wiping Israel off the face of the earth, I realized that something was going on that I didn't completely understand. Why would a country in a generational Awakening era be trying to provoke a war with Israel, a country which was not its enemy? That's something that might happen during a generational Crisis era, but not an awakening era. Generally speaking, Generational Dynamics analyzes and predicts the behaviors and attitudes of large masses of people, entire generations of people. It does not attempt to analyze the attitudes of individuals or small groups of people, even groups of politicians, because any individual has a free will to do what he wants. It's only the behaviors and attitudes of large masses of people that go in repeatable cycles. The attitudes of politicians are not important except insofar as they reflect the attitudes of the masses of people. So the first time that Ahmadinejad talked extremely belligerently about Israel in this way, I assumed it was simply a gaffe, and that it wouldn't be repeated. But when he kept <#inc ww2010.weblog.ref e060111 "repeating the same threat"#> over and over and over again, I made the following assumption: That he must have the support of large masses of people in this threat. It must be the will of large masses of Iranian people to wipe Israel off the face of the earth. It still didn't make sense to me that this would happen in an Awakening era, but I thought there must be some issue with Israel that I wasn't recognizing. Now, 1½ years after Ahmadinejad starting making these threats, I'm beginning to understand more clearly what's going on. The key is to look at where Ahmadinejad is succeeding, and where he's failing. From the beginning, I've tried to understand Ahmadinejad by comparing him with President John Kennedy. Some people have found this strange, but it's actually a highly relevant comparison: Ahmadinejad became president at the start of Iran's Awakening era, and Kennedy became president at the beginning of America's Awakening era, at a time when the public was still very fearful of a third world war against the Soviet Union and China. Let's begin by quoting some of President Kennedy's inauguration speech:

This was not an "antiwar" speech by Kennedy; it was actually a very idealistic statement, in the context of the <#hreftext ww2010.i.awakening060919 ""Truman Doctrine,""#> that under his leadership, Communism would not be allowed to spread. The context of this speech was that Kennedy was a young President, the from the Hero generation of World War II, and he and other Americans saw his job as stopping Communism. (It was widely believed that World War II could have been avoided if Hitler had been stopped early. Generational Dynamics tells us that this isn't true, but it was still widely believed, and is still believed today. Thus, people believed that stopping Communism meant preventing World War III.) His belief that by stopping Communism, America could "truly light the world" is particularly ironic in view of what happened. First, when Fidel Castro took over Cuba, right off America's shore, Kennedy's promise was put to the test, a test that he believed that he could not fail. President Kennedy launched TWO pre-emptive wars against Cuba -- the first, based on faulty CIA intelligence, led to the "Bay of Pigs disaster," and the second, the blockade of Cuba, risked nuclear war with Russia. Then, when a Communist government in North Vietnam threatened to spread Communism to South Vietnam, Kennedy launched the Vietnam War, which led to America's first defeat. Looking at Kennedy's actions in light of our understanding that America was in a generational Awakening era helps us understand Ahmadinejad's actions in Iran's Awakening era today. Iran's last generational Crisis war was the Iran/Iraq war of the 1980s. But let's go back to some of the previous crisis wars of Persia, as it was then known. The Battle of Chaldiran, occurring on August 13, 1514, was the major battle that established the borders between two great empires -- the Ottoman Empire, practicing Sunni Islam, and the Persian Empire, practicing Shia Islam. In fact, it's always important to remember that several great civilizations meet in the Mideast. Constantinople had fallen to the Ottomans in 1453, causing the seat of Orthodox Christianity to move permanently to Moscow. In later wars, the Sunni Muslim Ottomans would fight major wars against Christians in the Balkans and in the Caucasus. Persia also fought major wars with the Russians (Orthodox Christians), especially in the Caucasus. The Persians defeated Russia's Peter the Great in a crisis war that ended in 1723, and the Russians defeated the Persians in a crisis war that ended in 1813. The war that ended feudal rule in Persia was the Great Constitutional Revolution of 1906-1911. This war transformed Iran into a modern parliamentary state, ruled by the Pahlavi Shahs who were allied with the West and with the United States in particular. The Shah of Iran was overthrown by the 1979 Islamic Revolution civil war, and this was followed by the Iran/Iraq war. From the point of view of Generational Dynamics, it's a crisis war that sets a country's agenda for decades to come. A crisis war is so horrible that it becomes the survivors' lifetime goals that their children and grandchildren should never have to suffer like that. The survivors impose austere rules and create new institutions to guarantee that the (alleged) mistakes that led to the crisis war should not be repeated. Problems arise with the generation born after the war. These kids have no patience with the austere rules that are being imposed on them, and this leads to the "generation gap," and huge political battles that occur during the country's Awakening era. So we can list some of the major factors for Iran that went into this period, because these are the factors that are influencing Iran as they enter an Awakening era:

The new Islamic revolutionaries hated their enemies, the Pahlavi Shahs, and also hate the US, whose government had supported the Shahs for decades. They blamed much of the genocide that occurred during the civil war to US interference in Iranian affairs.
The Islamists initiated the "Iran hostage crisis," something that continued off and on for several years, and seared anti-Iranian attitudes into the minds of most Americans.
The Iranians were shocked, surprised and humiliated by Saddam Hussein's Iraqi invasion of Iran, and by Iraq's early successes in the war. The US support of Saddam further polarized mutual attitudes. Iraq is considered the winner of the war, and the Iranians blame the US for that.
Thus, a harsh fault line between Iran and the US has existed for decades. This fault line explains why Bush called Iran a member of the "Axis of Evil," and why Ahmadinejad has called for the end of American interference in the Mideast. Since Israel is America's close ally, Ahmadinejad has also called for wiping Israel off the face of the earth, transferring all the citizens to Europe or America.
However, just as America's post-war Boomer generation rioted and rebelled against their parents' anti-Communist programs in the 1960s, Iran's post-war generation, now at or past college age, has been rebelling against their parents' anti-American programs in the 2000s decade. Iranian college students actually held pro-American demonstrations early in the decade, and strongly <#stdurl http://www.opinionjournal.com/editorial/?id=95001828 "supported President Bush"#> when he named Iran as part of the "axis of evil." The demonstrations became somewhat muted after America's 2003 ground invasion of Iraq, but young Iranians are far more pro-American and far less anti-Israeli than their hardline parents.
During the Iran/Iraq war, the Iranians were shocked and surpised by the Iraqi's use of poison gas, as well as their development of nuclear weapon technology. (Recall that Israeli bombers destroyed an Iraqi nuclear weapons factory in 1982.)
Thus today, Iranians are determined to develop their own nuclear weapons. They see this as a necessary defensive measure when surrounded by nuclear countries -- Pakistan, India, Israel. This view is held by all generations, who ask, "If all these other countries are allowed to have nuclear weapons, why can't we?"
There is also a great deal of nationalism in today's Iranian culutre. Persia has long been one of the major empires in the Mideast, and Persian culture has influenced the whole world. There is a strong feeling among Iranians today that Iran should take its place as the leading power in the Mideast again.
This has created an important contradiction in Iran's goals. Persia's traditional enemies have been the Sunni Muslims and the Orthodox Christians. The West (including Western Christianity) has NOT been a traditional enemy of Persia. But ejecting America and Israel from the Mideast requires allying with Sunni Muslims; becoming the major power in the Mideast requires conquering or subduing Sunni Muslims, including the Sunni Iraqis, the Paleastinians, the Saudis, and other Arab peoples. It's easy to see that this is not consistent with Iran's (Persia's) history. Nonetheless, Ahmadinejad has been attempting to pursue this contradictory policy.
However, just as Kennedy went too far in trying to stop Communism in Cuba and Vietnam, Ahmadinejad has gone too far in trying to stop American influence in the Mideast. This kind of politics is not unusual at the beginning of a nation's Awakening era, and it does much to fuel the subsequent riots and demonstrations by the young college-age generation.
Even prior to the presidential election, Ahmadinejad was already unpopular with young college-age students. As the election was approaching in June, 2005, <#inc ww2010.weblog.ref e050623 "I wrote at the time"#> above how students were using text messaging to flummox the older clerics. The ultra-conservative mullahs were trying to control the media, while the students were messaging jokes to one another, like, "Ahmadinejad announces his ministries: ministry of the evil, ministry of censorship, ministry of the Revolutionary Guard, ministry of religious paramilitaries." This infuriated the conservative hard-liners, who accused the students of trying to create a crisis and a new civil war like the 1979 revolution. This is, of course, the essence of an Awakening era, where the college-age generation rebels against the austere rules of the older generation.
Ahmadinejad has become extremely unpopular over women's issues, especially those limiting public contact between males and females. Furthermore, the women of Tehran are considered among the most stylish in the world, and not only is Western apparel popular in Iran, but Iranian apparel is popular in Europe when it's available. "Women's lib" or women's issues or gender issues are almost always an important political feature of a country's Awakening era, as it was in America's Awakening era in the 1960s. And as any man can tell you, once you have the women mad at you, you're really in trouble.
Ahmadinejad <#inc ww2010.weblog.ref e050625 "won the June 2005 by a landslide"#> presidential election mainly by appealing to poor people in the cities. He said that the way to do this was to return to fundamental Islamic values. He wanted to return to "pure" Iran culture, and not permit Western culture "pollute" Iran. He wanted men to grow beards. He wanted women to dress modestly. He didn't want men and women to speak to one another in public. This fundamental values, he claimed, would make the country prosperous again.
Instead, Ahmadinejad's actions are turning Iran's economy into a basket case. By provoking harsh American sanctions, Iran's economy has suffered enormously. <#stdurl http://www.guardian.co.uk/worldbriefing/story/0,,2011594,00.html "The oil industry in particular"#> has been hurt badly. It provides 70% of state revenues, but it has suffered from years of underinvestment, and never has fully recovered from the Iran/Iraq war. (Iran's oil was Saddam's target in invading Iran at that time.) Throw in the American sanctions, and Iran's economy is suffering badly, causing even his former supporters to turn against him.
Ahmadinejad's massive funding of Hizbollah during the summer Lebanon war has provoked additional controversy. From the point of view of Iran, the war didn't accomplish anything, and the huge war expenditures only made the Iranian economy worse.
Thus, losing the December 15, 2006, municipal elections was a major humiliation for Ahmadinejad. This followed another major humiliation, the anti-Ahmadinejad demonstrations at Amir-Kabir University on December 7, where Ahmadinejad was speaking. You can see Ahmadinejad being booed and ridiculed at Amir Kabir University <#stdurl http://www.youtube.com/watch?v=9k1j8qtXn6E "in this video:"#>
All of the issues that I've just described are coming together in what is currently an Iranian foreign policy crisis: Continued nuclear development versus the threat of UN sanctions. The great majority of the Iranian people believe that nuclear development and nuclear weapons would be in Iran's best interests for defensive purposes.

I'll next reach some conclusions about where Iran is going, but first I'd like to summarize the methodology I've been using. There are mobs of journalists, analysts and pundits in Washington who have written analysis pieces on Iran in the recent past, and they're all the same. They say that what happened in 2006 was caused by what happened in 2005. What happened in 2005 was caused by what happened in 2004. Or else, what happened in 2005 was because of something that Bush said in 2005. This is true of serious analysts as it is of popular writers like New York Times columnist Thomas Friedman. The Generational Dynamics methodology correctly identifies relevant events from decades or even centuries back, and relates them to what's happening today. These historical events aren't selected at random; they're selected according to solidly established generational principles. The analysis of Iran given above illustrates this methodology. I want to single out the importance of the Iran/Iraq war of the 1980s. There must be hundreds of journalists and analysts who write so-called "analyses" of Iran, Iraq or the Iraq war without even understanding how important the Iran/Iraq war is to these topics today. If they'd only stop and think for a moment, they'd realize, for example, how important our own Declaration of Independence and Bill of Rights are to American's strategic thinking, especially since politicians and journalists invoke them all the time. Well, why wouldn't similar historical concepts apply to Iran and Iraq? Having completed the generational timeline analysis above, we can now speculate on possible future directions for Iran, and we have to imagine two possibilities: Iran with Ahmadinejad, and Iran without him. An Iran like Ahmadinejad will continue the same contradictory policies, because Ahmadinejad will force them as long as he can. He will make more and more mistakes, just as Presidents Kennedy and Johnson did in 1960s America, when they pursued confrontation with the Communists, first in Cuba then in Vietnam. Ahmadinejad will be forced to abandon his unpopular policies either because he'll be driven from office or because the people will force him to. Generational Dynamics tells us that the only policies Iran will continue to follow will be those supported by the masses of the Iranian people; the other policies put forth by Ahmadinejad will not last long. In fact, a web site reader referred me to a <#stdurl http://edition.cnn.com/2007/WORLD/meast/02/21/btsc.iran.amanpour/ "interview by CNN's Christiane Amanpour"#> with a "very high level official" in the Iran government. The interview apparently assumed that Ahmadinejad would be gone; at least, he wasn't mentioned in the article. According to this article, Iran and the U.S. are "natural allies," because "The one country that never invaded us was America." And he added, "We are natural allies. Why? Because now the major threat for both Iran and the U.S.A. is al Qaeda." This is exactly right, and it exposes once again the major contradiction in Ahmadinejad's policies: He's siding with and supporting Palestinians and other radical Sunni groups that have been Iran's enemies for centuries. America is not Iran's enemy, and neither is Israel. Sunni Arabs are Iran's enemies, and Ahmadinejad is supporting them in their conflict with Israel. Let's return to Amanpour's interview and focus on two points: nuclear weapons and Israel. First, nuclear weapons:

"Indeed, this senior government official told me the first step between Iran and the United States must be for each side to accept that the other is secure, and to say so. "We do not want to have to prove that we are strong. Our nuclear program is not to show the U.S. we are strong. It is because of our previous centuries of threats and invasions," he said. Aha, I intervened, "so you do want the bomb?" The official replied: "No, our nuclear program is not about the bomb it's about power. We want to say -- that without the UK, U.S., France, Russia, Germany -- we have done this ourselves [set up a peaceful nuclear program].That is our strength." He said the need to show power was "just common sense after 300 recent years looking over our shoulder," running through the list of those who have sent armies into Iran -- from Alexander the Great to the Mongols to the Ottomans to Russia to Saddam Hussein. Then he paused. "The one country that never invaded us was America."

Here you can see how utterly foolish are all the so-called analyses written by almost every Washington analyst or journalist, and why Washington politicians are completely ignorant when they spout suggested policies about Iran (or Iraq). This Iranian official is listing important historical events, and EVERY SINGLE ONE of those historical events relates to a Generational Crisis War. Ordinary journalists and analysts don't have a clue about any of this. But Generational Dynamics also tells us that the Iranian official is not telling the truth about not wanting the bomb (though he didn't really say they didn't, did he?). Iran wants security, and they believe that getting a bomb is the way to gain security. This is what Iran learned from the Iran/Iraq war. However, it does show the way to gain a TEMPORARY postponement of Iran's nuclear weapons development. Today the assumed threat is that either America or Israel will bomb Iran's nuclear facilities if they pass the "point of no return" for weapons development. If America and Iran became allies, then America could provide security for Iran against their common enemy: al-Qaeda and hardline Sunni extremists. How could America and Iran become allies? Once again, we have to go back to the Iran/Iraq war to see. We would have to "forgive" Iran for the Iranian hostage crisis; this would not be easy, but it could be done. If we can do business with Vietnam, then we can do business with Iran. For its part, Iran would have to "forgive" America for supporting the Shah. Once again, this would not be easy. This brings us to the second major issue: Israel. Israel has never invaded Iran either. Even though Amanpour's interviewee called Israel "my enemy," Iran has no historical reason to be enemies with Israel. In its brief existence, Israel's enemies have always been the Palestinians, the Arabs, the Sunnis, but not the Persians, not the Shia. An American alliance with Iran would also require an alliance between Iran and Israel. This would not be easily accepted by EITHER Iran or Israel -- and just the thought of it would dumbfound al-Qaeda and the entire Arab community. So this scenario seems very unlikely at first, but there's one more factor that makes it possible: There's Clash of Civilizations World War coming, and one component of this war will be Arabs versus Persians. Most Arabs will be on the side of al-Qaeda, against Israel. But they will not want Iran to become the dominant power in the region, so they'll be fighting against Iran, as well. Iran is in a generational Awakening era, and is in no way desirous of another crisis war, being still traumatized by the Iran/Iraq war. But a crisis war is about to forced upon them, whether they like it or not, and one thing about crisis wars is that you have to choose sides. When Iran is forced to choose sides, they may well choose to ally with Israel. However, the larger consideration will be their alliance with Pakistan and China, so there are a lot of possibilities. I apologize for the long, rambling nature of this article, but Iran is much more confusing to analyze than other countries. There are two reasons: Most countries today, 62 years after the end of World War II, are in a generational crisis era, while Iran is in a generational Awakening era, and Awakening eras are harder to evaluate for predictions; and second, Iran is currently following a contradictory policy, thanks to Mahmoud Ahmadinejad, and it's not clear how the contradictions will resolve themselves. =eod =// &&2 e070314 Palestinian 'unity government' leading soon to new crisis with Israel =data ww2010.weblog.y2007.e070314.head Palestinian "unity government" leading soon to new crisis with Israel =data ww2010.weblog.y2007.e070314.keys =data ww2010.weblog.y2007.e070314.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070314.date 14-Mar-07 =data ww2010.weblog.y2007.e070314.txt1 As the young generation of Palestinians become increasingly "lost and desperate," =data ww2010.weblog.y2007.e070314.txt2 and the "most radical, the most accepting of violence and the most despairing," their leadership is moving ahead with a "unity government" that will only disillusion them even more. A widely anticipated <#stdurl http://www.ipc.gov.ps/ipc_new/english/details.asp?name=18425 "Sunday meeting"#> between Palestinian president Mahmoud Abbas and Israeli prime minister Ehud Olmert ended up as being nothing more than a mutual exchange of unacceptable demands. Abbas demanded that various roadblocks and guarded crossings in the West Bank be opened, to allow free travel. That's not going to happen because the Israelis are afraid (with justification) that freeing travel would permit more suicide bombings in Israel. Olmert demanded that the new unity government recognize Israel and renounce violence. That's not going to happen because the Palestinians are afraid (with justification) would make a major concession to Israel with nothing in return. The context is the aftermath of the signing of the <#inc ww2010.weblog.ref e070210 "Mecca peace agreement"#> last month between Fatah and Hamas. This agreement, which included the first steps toward a unity government, appears to have succeeded in ending the Palestinians' civil war, at least for the time being. The unity government has not yet been fully formed, but there is an upcoming <#stdurl http://www.haaretz.com/hasen/spages/836489.html "Arab League summit meeting,"#> planned for March 28. At that point, the Palestinians' new "unity government" will be represented at the meeting by delegates from both Hamas and Fatah. If the unity government does not recognize Israel or renounce violence -- which it almost certainly won't -- then Israel will not recognize it, and that will, I assume, trigger a major new political disagreement. These machinations by old men from Hamas and Fatah are just the fumblings of dinosaurs from the point of view of the young, college-age generations of Palestinians. To these kids, many of whom own stashes of guns, missiles and ammunition for use against Israelis or other Palestinians, the Palestinians are wasting their time negotiating with Israel. That's the conclusion of a New York Times <#stdurl http://www.nytimes.com/2007/03/12/world/middleeast/12intifada.html "survey of Palestinian youth,"#> whom their parents call them "the lost generation of Palestine":

"They are the children of the second intifada that began in 2000, growing up in a territory riven by infighting, seared by violence, occupied by Israel, largely cut off from the world and segmented by barriers and checkpoints. To hear these young people talk is to listen in on budding nihilism and a loss of hope."

The article emphasizes how dramatically things have changed since the 1980s and 1990s:

"While generations of young Palestinians have grown up stateless, seething at Israel as the visible agent of oppression, this generation is uniquely stymied. Israeli checkpoints, barriers and closures, installed to protect Israelis from Palestinian suicide bombers, have lowered these young people's horizons, shrunk their notion of Palestine and taken away virtually any informal interaction with outsiders, let alone with ordinary Israelis. The security measures have become even tighter since the election to power a year ago of the Islamist group Hamas, which preaches eternal "resistance" to Israeli occupation and rejects Israel's right to permanent existence on this land."

During most of the 1980s and '90s, as many as 150,000 Palestinians came into Israel daily to work, study and shop. While they were not treated as equals, many learned Hebrew and established relationships. Now, the only Israelis whom Palestinians see are armed - soldiers and settlers. The West Bank is cut into three parts by checkpoints; Gazan men under 30 are virtually unable to leave their tiny, poor and overcrowded territory. Few talk of peace, only of a lifetime of "resistance." It's tempting to believe that the young Palestinians' bitterness is CAUSED by Israeli actions, and that if Israel would only mend its ways, then young Palestinians would be happy. But Generational Dynamics tells us that that isn't true. This kind of bitterness is caused by generational changes. You can see it in London, where young Muslims have plenty of opportunities and no checkpoints preventing them from traveling. But a Muslim cell still blew up several London subway cars in July 2005. Putting this into a larger generational framework, this is the kind of thing that happens in a civil war fault line situation, where two identity groups (differing by religion, ethnicity, color or language, for example) occupy the same physical land. After a crisis war, in this case the 1948-49 genocidal war between Arabs and Jews, there is often a period of mutual agreement, with the objective of never having such a horrible war again. In particular, if one of the groups is dominant, then it often guarantees that the less dominant group will always have adequate food, jobs, homes, and so forth. Once again, the objective is to prevent any such war from recurring. As the decades go by, two things happen: First, both populations grow, to the extent that the dominant group has increasing difficulty meeting its guarantee of adquate of food, jobs and homes. And second, younger generations in both groups, with no personal memories of the horrors of the crisis war, develop increasingly negative attitudes towards the other group. What Generational Dynamics shows is that once 3 or 4 generations pass since the last crisis war, the non-dominant group is going to feel the same bitterness towards the dominant group. You may ask, "But what about cases where two groups have a civil war, and then they don't have another civil war 3 or 4 generations later. Doesn't that disprove what you're saying?" That in fact does sometimes happen. The American Civil War is a good example. And it's worth remembering that the American civil war was not a war between blacks and whites; it was a war between Northern people and Southern people. The key difference is not that there are different ethnic, racial or religious groups; the most important difference is whether social status is fixed at birth. In America, and in other free capitalist countries, a couple will accept their own poverty if they believe that their children can break free and do well. (I'm ignoring Mexican immigrants in that statement.) But in the Mideast, or in countries like China, the Phillipines or Latin America, for example, your children will be just as poor as you are, with few exceptions. What America has done, whether by genius or by luck, is to have created a true "melting pot," where birth does not limit your future. Even the European countries have not succeeded as well as we have. European Muslims complain bitterly that they're confined to ghettoes, restricted to inferior jobs, and consigned to poverty -- simply because they were born Muslims. By contrast, there have never been any particular limitations on American Muslims, although that changed a little after the 1980s Iranian hostage crisis, and a bit more after 9/11. But for Palestinian youth, there is no such freedom. Generational Dynamics tells us that the Mideast is heading for a major new war between Palestinians and Jews, and that nothing can be done to stop it. =eod =// &&2 e070313 Massachusetts issues criminal investigation subpoenas to analysts =data ww2010.weblog.y2007.e070313.head Massachusetts issues criminal investigation subpoenas to analysts =data ww2010.weblog.y2007.e070313.keys =data ww2010.weblog.y2007.e070313.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070313.date 13-Mar-07 =data ww2010.weblog.y2007.e070313.txt1 This is the beginning of a flood. It's time to put your affairs in order. =data ww2010.weblog.y2007.e070313.txt2 On Tuesday afternoon, Massachusetts <#stdurl http://www.boston.com/news/local/massachusetts/articles/2007/03/13/mass_regulator_subpoenas_wall_street_firms_over_lending_research_1173818959/ "issued subpoenas"#> to UBS Securities LLC and Bear Stearns & Co. Inc. <#inc ww2010.pic g070313.jpg right "" "Mass. Sec'y of State William Galvin on CNBC, announcing criminal investigation of analysts. (Source: CNBC)"#> As I <#inc ww2010.weblog.ref e070312b "wrote yesterday,"#> this is hardly a surprise. Analysts gave New Century Financial Corp. an upgraded rating, even as it was obvious that the market was collapsing and New Century's exposure was growing. Appearing on CNBC on Tuesday afternoon, here's what Massachusetts Secretary of State William Galvin said:

"We've taken note of the fact that in these two cases, despite the fact the New Century restated its earnings on February 7, they got an upgrade from UBS on February 23; despite the fact that on March 1, New Century indicated they were going to delay their annual report, they got an upgrade from Bear Stearns. These raise some very serious questions for us. We were very involved in the research analysts cases of 2003 and the global settlement - we were among the lead states. We thought we'd put thsese types of problems behind us. But this type of activity raises some very serious questions. What relationships would cause such a grievous error. Were the relationships transparent? Were there other relationships between these two firms and New Century. Was there something else that was coloring these recommendations. Was their independent research relied upon, as there was supposed to be under the global settlement?"

The "global settlement" refers to the what happened after the Nasdaq crash in 2000. Leading up to that crash, analysts were giving glowing reports to stocks that were clearly overvalued, and the analysts were accused of having lied on their reports in order to aid the analyst firm in getting investment management business. In 2003, a "global settlement" was reached between several states and several analyst firms, in which the analyst firms insisted they had never done anything like that, and that they wouldn't do it again. Now they're being accused of doing it again. Galvin was asked whether there was any additional evidence:

"The fact that their reserves were combined - a very critical issue when it comes to matters relating to a firm like this. Their reserves to deal with problem issues were combined shortly beforehand - which should have been a red flag - was ignored. There seems to be a real problem here. And obviously, we're concerned because our past experience suggests when we see a problem in one area, there are problems in other areas."

I don't know what the "reserves were combined" issue is. It should appear in Wednesday's papers. Galvin was asked about the "most sinister interpretation":

"The most sinister interpretation is that something was corrupting the analysis -- that the coverage was being corrupted by some other factor. We don't know that - that's why we've issued subpoenas. We can only find that out by issuing subpoenas. We feel there's a reason to be concerned because of the impact that this is going to have. And it's not just the impact on the market - frankly here in Massachusetts we've seen a dramatic surge in foreclosures - this is hurting real people as well. The activities that apparently were condoned by these coverage houses. We thought we'd put this kind of mistake behind us after the tech bubble of the early 2000s that we dealt with - we were one of the lead states dealing at the time with Credit Suisse. We have an obligation I think to do the follow-up. It's one thing to announce a global settlement, but if it's not being followed then that's a serious problem. We expect them to cooperate. We think that it's urgent that we move on this as rapidly as possible. The potential for contamination here is quite great. The impacts it's having on the marketplace is obvious. The impact on individual citizens certainly here in Massachusetts is significant. So for all these reasons, we want to move on as rapidly as possible. I think the relationships between the houses in this sector, the subprime sector, has to be vigorously reviewed."

There's no doubt that these crimes occurred. The craziness and stupidity of investors, analysts and journalists alike can't be explained any other way. The global investment industries have turned into <#inc ww2010.weblog.ref e061230 "a worldwide pyramid scheme (or Ponzi scheme),"#> and there will be plenty of opportunity for investigations into criminal activity. The Massachusetts investigation is only the beginning of what is going to be a huge flood of investigations. The criminal investigations will extend to anyone who violated a professional or fiduciary duty in making an investment recommendation that turns out, in retrospect, to have been wrong. Other obvious things, such as misuse of money, will also be prosecuted. It may seem unfair to hold analysts to their opinions retrospectively, but no one can be convicted without evidence. One of the biggest sources of evidence will be answers to this question: Did the professional follow his own advice, and suffer along with his clients, or did the professional save himself at the expense of his clients. Here are some examples of people who will be targets of investigation:

Financial advisors who tell their clients that the market is doing great and they should "buy." If the adviser makes money in any way from this, especially earning commissions from clients who "buy," then he will be under suspicion, and will be subject to lawsuits from clients. If it turns out that he saved himself by deciding to "sell," as he was telling his client to "buy," then he will go to jail.
Analyst firms that provide positive advice for failing companies, in order to gain consulting or investment clients.
Individual homeowners who lied or exaggerated on their mortgage applications.
Construction firms or real estate brokers who overprice real estate in order to earn larger commissions or kickbacks.
Individuals who "borrow" money inappropriately, hoping not to be noticed. They'll end up being charged with embezzlement.

If you fit in any of the above categories, or any other category where you gave questionable advice for pay, or misued money for personal gain, then you should take action immediately. Decide that it's time to cut your losses. You are going to go bankrupt, no matter what you do. You're going to lose your home, no matter what you do. Do you want to be a criminal as well? You should see a lawyer right away and determine what your options are. In some cases, admitting your crime or changing your ways now may save you. Incidentally, it's perfectly OK to call a lawyer's office and ask to have an initial consultation for no charge. You can then tell the lawyer your story and get some advice. If the lawyer continues representing you, then of course you'll have to pay him. Whatever you do, do NOT NOT NOT admit any crimes to family or friends, other than lawyers. This is VERY IMPORTANT. Don't tell someone, "I feel very guilty; I took some money from an escrow account and I can't pay it back. I don't know what to do. Sob." If you do that, then, in many cases, your friend has an obligation to report your crime. If he does not, he will become an accessory after the fact, and may also go to jail. So do NOT put your friends' future in jeopardy by confessing to them. And it goes without saying that you should NOT send me an e-mail message confessing to a crime. I'm not a lawyer, so I couldn't help you anyway. Go talk to a lawyer. At least it will give you some peace of mind. =eod =// &&2 e070312b New Century close to bankruptcy =data ww2010.weblog.y2007.e070312b.head New Century, country's second largest subprime mortgage lender, close to bankruptcy =data ww2010.weblog.y2007.e070312b.keys new century financial corp., countrywide financial corp., john kenneth galbraith, david lereah, enron scandal, french revolution, reign of terror =data ww2010.weblog.y2007.e070312b.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070312b.date 12-Mar-07 =data ww2010.weblog.y2007.e070312b.txt1 Analysts with rosy predictions are getting closer to jail. =data ww2010.weblog.y2007.e070312b.txt2 New Century Financial Corp., the nation's second-biggest subprime lender (behind first place Countrywide Financial Corp.), said on Monday that it's defaulting on loans to lenders, and <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aVr_mJBUCFVo&refer=home "can't make the required payments."#> For an ordinary person, this would mean personal bankruptcy. For New Century, it may well bankruptcy as well. However, keep in mind that old saying, "If you owe the bank $10,000 and can't pay it, then you're in trouble; if you owe the bank $10,000,000 and can't pay it, then the bank's in trouble." In New Century's case, the "banks" include Morgan Stanley, Citigroup Inc. and Goldman Sachs Group Inc. They may get together and come up with a plan to keep New Century in business, or they may divide up New Century's assets. We should know by the end of the week. Monday's New York Times has <#stdurl http://www.nytimes.com/2007/03/11/business/11mortgage.html "an article"#> making the intriguing comparison between the current mortgage loan situation and technology stocks in the hi-tech bubble that ended in 2000:

"On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks. What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21. The analyst’s untimely call, coupled with a failure among other Wall Street institutions to identify problems in the home mortgage market, isn’t the only familiar ring to investors who watched the technology stock bubble burst precisely seven years ago. Now, as then, Wall Street firms and entrepreneurs made fortunes issuing questionable securities, in this case pools of home loans taken out by risky borrowers. Now, as then, bullish stock and credit analysts for some of those same Wall Street firms, which profited in the underwriting and rating of those investments, lulled investors with upbeat pronouncements even as loan defaults ballooned. Now, as then, regulators stood by as the mania churned, fed by lax standards and anything-goes lending."

The implication is clear that the analysts who wrote these recent "upbeat reports" are going to be in serious trouble. More and more, we're seeing articles on "predatory lending" that blames the lending institutions themselves. But we're also seeing articles directed at other people, such as investors who <#inc ww2010.weblog.ref e070206 "collude with builders"#> by purchasing a home at inflated prices, obtain a mortgage fraudently, and then split the proceeds with the builder. But we've also seen an increase in articles that target analysts and economists. The most visibly ridiculed among these people is <#inc ww2010.weblog.ref e070206 "David Lereah,"#> the chief economist at the National Association of Realtors, who predicts a housing upturn no matter what the data says. As an aside, recent press reports indicate that the spring, which is normally the best home selling season of the year, has been extremely disappointing for the real estate market analysts. It will be interesting to see if Lereah and others finally change their tunes. However, the NY Times article quoted above hints that a much wider range of analysts are going to be investigated and targeted by prosecutors. The article says that "bullish stock and credit analysts for some of those same Wall Street firms, which profited in the underwriting and rating of those investments, lulled investors with upbeat pronouncements even as loan defaults ballooned." In other words, these analysts published upbeat reports so that their own firms would make more money. This has implications of civil or criminal fraud. However, government employees will be targeted as well: "Now, as then, regulators stood by as the mania churned, fed by lax standards and anything-goes lending." So we have several groups of people -- lending institutions, analysts, regulators, investors -- all of whom are going to be investigated for criminal practices. And each of these groups will be saying, "It's not my fault -- it's the other groups' fault." I've quoted this passage before, but it's worth repeating. John Kenneth Galbraith described what will happen in his 1954 book, The Great Crash - 1929, as follows:

"[Before the crash], to the normal needs for money, for home, family and dissipation, was added, during the boom, the new and overwhelming requirement for funds to play the market or to meet margin calls. Money was exceptionally plentiful. People were also exceptionally trusting. A bank president [was] unlikely to suspect his lifelong friend the cashier. In the late twenties the bezzle grew apace. Just as the boom accelerated the rate of growth, so the crash enormously advanced the rate of discovery. Within a few days, something close to universal trust turned into something akin to universal suspicion. Audits were ordered. Strained or preoccupied behavior was noticed. Most important, the collapse in stock values made irredeemable the position of the employee who had embezzled to play the market. He now confessed. ... Each week during the autumn more such unfortunates were reveled in their misery. Most of them were small men who had taken a flier in the market and then become more deeply involved. Later they had more impressive companions. It was the crash, and the subsequent ruthless contraction of values which, in the end, exposed the speculation by [financial firms] with the money of other people. Should the American economy ever achieve permanent full employment and prosperity, firms should look well to their auditors. One of the uses of depression is the exposure of what auditors fail to find. Bagehot once observed: "Every great crisis reveals the excessive speculations of many houses which no one before suspected."" [pp. 133-35]

Galbraith's point was that there were many criminal activities going on before the 1929 crash, but nobody cared, as long as everyone was making money. But once the crash occurred, any irregularity was viewed with suspicion and led to an investigation. These investigations turned up many cases of embezzlement -- people who had "temporarily borrowed" money that wasn't theirs to invest in the stock market, and then got caught in the crash. By the way, this may be an additional reason why investors keep enlarging a bubble after it's increasingly clear that the bubble will be bursting. As I explained in <#inc ww2010.weblog.ref e070312 "my previous article,"#> about how increased investor risk aversion leads, strangely enough, to higher stock prices. This is caused by the increased availability of money and a belief by the investor that he can get out of the market in time to avoid getting caught. However, Galbraith's point about embezzlement provides additional reasoning: As credit becomes more and more available just before a crash, more and more people get over their heads in debt. Thus, investing in the stock market becomes an act of desperation, because the investor has to make enough money, before the bubble bursts, to pay off his creditors. Thus, "temporary" embezzlement becomes a tempting expediency. The investor may even reason, "Well, I'm already looking at bankruptcy and homelessness, so I really have nothing to lose by embezzling money." So we can assume that there's lots and lots of embezzlement going on today. Perhaps you, dear reader, have embezzled some money in the hopes of escaping a desperate situation; or, if not you, perhaps the person sitting at the desk next to you. What history has shown is that it's a lot more common than people think, especially in these times of huge bubbles about to burst. Basically, normally honest people are so far in over their heads, that they believe that they've already lost everything and have nothing more to lose. These crimes are mostly not being investigated yet, but the level of investigations is going to increase, with absolute certainty. And what does the public think of the analysts, investment firms, and regulators who allowed all this to happen? Think back to 2000, when the Enron scandal began. At that time, much of the public wanted to see every corporate CEO, even the ones who had been honest, go to jail. Or, better yet, think back to my own favorite example, the bankruptcy of the French Monarchy in 1789 that led to the French Revolution. In the Reign of Terror that followed, any person who was an aristocrat, a relative of an aristocrat, a friend of an aristocrat, a servant of an aristocrat, or even had a resemblance to an aristocrat, would be tried and quickly convicted and sentenced to the guillotine. As I've said before, if you're an economics expert, journalist, investment broker, mortgage lender, analyst, regulator, pundit or politician whom the public decides is blameworthy for the major coming crisis, then I suggest that you'd better have your underground bunker picked out, because people are going to be coming after you, and the guillotine is going to seem mild compared to the punishment that they're going to want to inflict on you. =eod =// &&2 e070312 A conundrum: How increases in 'risk aversion' lead to higher stock prices =data ww2010.weblog.y2007.e070312.head A conundrum: How increases in 'risk aversion' lead to higher stock prices =data ww2010.weblog.y2007.e070312.keys michael metz, robert j barro, david miles, great depression, T.A. Rietz, Tulipomania bubble, R. Mehra, E.C. Prescott =data ww2010.weblog.y2007.e070312.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070312.date 12-Mar-07 =data ww2010.weblog.y2007.e070312.txt1 Maybe because the global financial markets are increasingly "accident-prone." =data ww2010.weblog.y2007.e070312.txt2 As one pundit after another explains why the markets are in wonderful shape, and why last week's fracas was a momentary blip, and why the markets are poised to reach new high after new high, with no end in sight, it's always interesting to listen to the one or two mainstream pundits who are saying something different. Michael Metz, chief investment strategist at financial investment firm <#stdurl www.opco.com "Oppenheimer & Co.,"#> was Friday's token "bear" at CNBC. Here's what he said:

"You have margin debt at an all-time high. You have a great speculative boom in almost every equity market in the world. You have money dirt cheap - people leveraging. It's going to result in some sort of accident - we've had one accident already. How serious an accident the next one is I don't know, but it's an accident prone system."

He's saying what should by now be completely obvious to regular readers of this web site -- with bubbles pushed to all-time highs around the world, thanks to massive amounts of private debt (not to mention public debt), all it takes is some kind of "accident" to bring things down. It's an interesting way of putting it. But here's a strange question: Why have these bubbles continued to get bigger and bigger? As we've said, investors have been getting <#inc ww2010.weblog.ref e070306 "increasingly risk averse."#> So why are they investing in larger and larger bubbles? Why has the stock market has continued to go up for several years now? A partial answer is given an interesting piece by <#stdurl http://www.morganstanley.com/views/gef/archive/2007/20070308-Thu.html#anchor4536 "Morgan Stanley economist David Miles,"#> The piece is entitled, "What Happens When We All Get More Pessimistic and Think There Is More Risk?," and it's an attempt to analyze how the increasing risk aversion of investors is going to affect the marketplace. Warning: The reasoning is complicated and even mind-boggling, but I'm going to go through it here step by step for two reasons: So that I can understand it better, and so that readers who are interested in macroeconomics can understand it better. Those interested in further information about integrating generational dynamics concepts into mainstream macroeconomics should read my October article, <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory.""#> Miles starts by reminding us that "Equities have fallen quite a lot pretty much everywhere across the world," and says, "The reason? Overwhelmingly the favourite answer is: a combination of a bit more pessimism about economic fundamentals and a lot more worrying about risk." But he points out that it's a lot more complicated than that.

Miles: "If we are more pessimistic on growth, the likely increase in corporate earnings is lower — this is a negative for stocks." [Call this PRINCIPLE #1.] This is the obvious reasoning that people have been using. If I'm pessimistic about the economy, then I believe that corporate earnings are going to be lower. If I think that the corporate earnings are going to be lower, then I'm not willing to pay as much for that company's stock, and if I believe that for the economy as a whole, then the entire stock market goes down.
Miles: If we're more risk-averse, then "we get a fall in the safe real rate of return...." Now this is a lot more subtle, and requires a more lengthy explanation. You may recall that early in 2005, Fed Chairman Alan Greenspan <#inc ww2010.weblog.ref e050217 "identified a "conundrum":"#> Long-term interest rates around the world were lower than short-term interest rates. Why were long-term interest rates so low? That was the conundrum. It turns out that economists started working to figure out an answer to Greenspan's conundrum, and they came up with an answer late in 2005 -- a controversial answer, as we'll see. Now, Miles refers to the "safe real rate of return," which he defines that as the rate of return (interest rate) on investments in "inflation-proof government bonds." These interest rates are very strange these days, because the yields (interest rates) are inverted. In "normal" times, long-term bonds pay higher yields than short-term bonds, but just the opposite is true today. So, the Fed overnight rate today is 5.25%, but a 3-month Treasury bond <#stdurl http://finance.yahoo.com/bonds/composite_bond_rates "pays 4.92%,"#> and a 10-year Treasury bond pays 4.57%. This is the conundrum -- in "normal" times, longer investment periods carry higher risks, so interest rates should be higher, not lower. In fact, all of these rates should be above the Fed Funds rate of 5.25%. So why are they lower? That's the point: When investor risk-aversion increases, "We get a fall in the safe real rate of return ..." In other words, the interest rates on bonds falls -- in today's world, very, very sharply. Explanation: When investors become risk averse, then they move their money into safe investments (government bonds). This increases the demand for government bonds, which means that their purchase price goes up (law of supply and demand), which means that their yield (interest rate) goes down. The higher the price of a bond, the lower the yield. [Suppose a bond pays $1000 ten years from now. If you buy it for $100 then you'll get a higher annual rate of interest than if you buy it for $90 -- the higher the price, the lower the yield.]
Next, Miles says that the lower interest rates on government bonds "is a positive for the value of all financial assets." Incredibly, this means that stock prices go UP. [Call this PRINCIPLE #2.] This is the mind-blowing step, the one that you may have to sleep on, as I did. If the "safe real rate of return" goes down, that means that if you want to make an investment that pays decent rate of interest, then you have to invest in something "non-safe," or rather, less safe. This is the way it works in "normal" times, too: Safe investments pay lower interest rates than non-safe investments. So you have investors who want a decent return on investment to purchase stocks instead of safe bonds that pay little or no interest.
So now we have two factors pulling stock prices in different directions: Principle #1 says that stock prices go down, while Principle #2 says that stock prices go up. Which of these factors is dominant? We have the answer empirically: Stock prices go up, and so Principle #2 is the dominant one. We can see that today, just by noticing that the stock market keeps going up. So why is Principle #2 the dominant one? For this, Miles refers to <#stdurl www.econ.umn.edu/macro/2005/barro.pdf "a 2005 paper by Robert J. Barro,"#> a Harvard economist, called "Rare Events and the Equity Premium." By "rare event," Barro means things like World War I and II and the Great Depression. Barro builds a macroeconomic model that takes into account investors belief that there may be a "rare event" coming.
Barro finds that if investors believe that there's a 1.0% probability of a "rare event" within the next year then, under this assumption, then Principle #2 dominates by a substantial amount, so that stock prices go up. He shows this through his macroeconomic model, and he also supports it empirically by examining what happened in about 20 countries when they suffered these "rare events." Barro quantifies this by identifying two values for a given set of conditions: The risk-free interest rate (the yield that government bonds pay) and the "spread." The spread is the additional effective yield (interest rate) that an investor can expect to earn by investing in "risky" stocks rather than risk-free bonds. If p=.01 (i.e., p=1.0%) is the probability of a disastrous event in the next year, then the risk-free interest rate is 2.3%, and the spread is 3.6%, and so the expected yield from "risky" investments is (2.3%+3.6%) = 5.9%. The following table lists the values of interest when the perceived probability of a "rare event" goes from p=0=0% to p=0.015=1.5%:
```
        | Perceived probability | risk-free |        |  "risky" |
        |     of "rare event"   |   rate    | spread |    rate  |
        | --------------------- | --------- | ------ |  ------- |
        | p = 0.0%              |  9.3%     |  0.1%  |   9.4%   |
        | p = 0.5%              |  5.8%     |  1.9%  |   7.7%   |
        | p = 1.0%              |  2.3%     |  3.6%  |   5.9%   |
        | p = 1.5%              | -1.2%     |  5.4%  |   4.2%   |

        Note: Column 4 = the sum of columns 2 and 3.
```
As you can see from this table, when there is no perceived danger of a "rare event," the spread is close to 0, which means that there is little difference between investing in risk-free and risky investments. As an aside, a near-zero spread is the predicted result of macroeconomic models that don't account for rare events. That's Alan Greenspan's "conundrum," and why this situation has puzzled economists at least since the 1970s. No one could account for the fact that in the "real world," the spread was nowhere near 0, when the models predicted it should be close to zero. As the table above shows, when the probability of a "rare event" increases from 0% to 0.5%, 1.0% and then to 1.5%, the risk-free rate falls, even going negative, and the spread increases. Thus, the more fearful people are of a stock market crash, the more likely they are to invest in stocks. Huh? Did I really just type that? That's the conclusion of Barro's model, and it's also supported by the data he collected from 20 countries over the last century. It's also what's happening today. Many people have been getting more concerned about a stock market crash, and yet the stock market keeps going up, and "risk-free" bond yields stay comparatively much lower. We'll have a lot more to say about this conclusion below.
Now let's return to David Miles' original article. He says,
"On the other hand, we might just stop and wonder a bit whether what appears to be a nice logical "explanation" for falls in stock prices -- like "people got worried about risk and more pessimistic about growth" -- really does explain very much at all about what just happened."
Miles is making the point that Barro's model doesn't explain what happened in the last two weeks: Why did the stock fall, instead of continuing to go up? That, of course, has a generational explanation, which we'll get to below.

From the point of view of Generational Dynamics, Barro's article is very important because it comes very close to recognizing generational theory. Of course, it doesn't mention anything generational, but once you start talking about and analyzing "rare events," then the next step is to wonder how often "rare events" really occur, and from there, the only answer is generational theory. I've said many times on this web site that pundits, analysts and economists seem congenitally unable to recognize generational effects, even the most obvious ones. Barro mentions in his paper that the "rare event" theory that he's developing, based on work done by T.A. Rietz in the 1980s, has received a very unenthusiastic reception from other economists. That's exactly the same as the unenthusiastic reception that Generational Dynamics gets. Barro's paper could potentially be important to Generational Dynamics for other reasons. It provides a model for today's stock market debauchery, and this model could be enhanced with generational concepts to become a very powerful explanation of what's going on in the world today. The following notes show how generational theory should be incorporated into Barro's work. Some of these notes are corrections, but most of them indicate improvements, including answers to questions that Barro himself asks.

There's an apparent contradiction in Barro's results. There are layers and layers of analysis and formulas to show that the risk-free interest rate goes down and the spread goes up, with the result that both bond prices and stock prices go up. And there's a contradiction: In order for bond prices to go up, you need people to be moving their money from stocks to bonds (for increased safety). In order for stock prices to go up, you need people to be moving their money from bonds to stocks (for increased return). So you need people to be moving in both directions simultaneously, which is impossible. However, it becomes possible when you realize it isn't that people have to move in both directions. What's needed is a lot more money in the system, buying BOTH stocks and bonds. In order for bond and stock prices to go up, you need demand for BOTH to increase, which means you need more money in the system. When is there more money in the system? Well, the drop in bond prices automatically means that there's more money in the system, because the fall in bond prices means an increase in the supply of bonds from the Fed. But more important, you need more liquidity in the system through credit -- through higher margin or other credit mechanisms. So, for example, people bought those "tulip futures" in the 1630s for the Tulipomania bubble. A tulip future was a certificate that you bought in the fall. It gave you ownership to a particular tulip that would be grown in the spring. People must have borrowed money to purchase these certificates, secure in the "knowledge" that they'd end up making money, because the tulip would be even more valuable, which it was, until the bubble burst. But before that, the circulation of borrowed money would have increased liquidity, lowering interest rates. Use of credit has to be added to Barro's model for it to make sense. Also, use of credit is a generational variable, since the willingness to use credit varies by generation, based on whether or not the generation lived through the previous "rare event" debt bubble crash.
In fact, Barro does consider the role of credit, but he discards it. He adds leverage rates (margin rates) to the model -- 20% and 40% -- and finds that they make little difference to the final results. He concludes that leverage (or margin or credit) is not an important factor. This is a mistake because you need credit to resolve the contradiction just described above. Furthermore, a moment's thought reveals that the use of credit is intuitively crucial to Barro's model. The model is based on the "perception" of the probability of a rare event such as a stock market crash. What would cause investors to increase that probability? Obviously widespread use of credit would do it. Barro's results may make sense with leverage values at 20% or 40%, but we're way beyond that today. The hedge fund industry <#inc ww2010.weblog.ref e061230 "is a worldwide pyramid scheme (or Ponzi scheme),"#> and many investors realize this, even if they won't say so out loud. And today's leverage amounts in the hedge fund industry are way above 40% -- well above 100% and probably over 1000%. In fact, there's no obvious way to find out whether the "p=1.0%" probability figure makes sense, or whether the value should be should be measured in some way. It may turn out that the best way to measure it is by means of the use of credit, and of course the willingness to use credit is clearly a generational variable.
Barro uses economic data of most of the last century from 20 countries around the world in order to test his model and support the model's results. In interpreting the data, he makes several errors that he would have handled correctly if he understood Generational Dynamics:
- In analyzing each of the two World Wars, he mixes together all countries that fought in that war without distinguishing whether it's a generational crisis war or non-crisis war. For almost all countries, either WW I or WW II was a crisis war; there are no countries for which both wars were crisis wars.
- In analyzing data over a long period, Barro mixes completely independent data series together, which makes as much sense as adding together basketball scores and bowling scores. As far as I know, there are only two long-term cycles in economic data: The generational cycle (70-80 years) and the Kondratiev cycle (40-50 years), which appears to be technology related. These two cycles are completely independent of one another; sometimes they reinforce each other, and sometimes they cancel each other out. Today they're reinforcing each other. Beyond that, the only cycles are short-term. In the US, there is a four-year cycle synchronized with the US Presidential elections. Every researcher I've seen on these subjects makes the same damn mistake -- they add together all economic data without separating out the independent series. Without separating out the the different series, the results are gibberish. If Barro recomputes his results and separates the independent series, then I believe that he'll get very significant results.
Several paragraphs back I wrote, "Thus, the more fearful people are of a stock market crash, the more likely they are to invest in stocks." The model seems to support this. Why is this remarkable result true? Here's how Barro explains it:
"Intuitively, a rise in p motivates a shift toward the risk-free asset and away from the risky one—this force would lower the equity price. However, households are also motivated to hold more assets overall because of greater uncertainty about the future. ... In any event, the risk-free rate falls by more than the risky rate, so that the spread increases."
(Recall that "a rise in p" means that the perceived probability that stock market crash will occur is rising.) Barro's explanation isn't very satisfying. In the face of increased belief that a stock market crash is coming, why would "households [also be] motivated to hold more assets overall because of greater uncertainty about the future"? That doesn't make sense to me. In fact, this is another apparent contradiction: Once the stock prices have gone up, if you're expecting a crash, then why wouldn't you sell your stocks at that point? The answer, of course, is that you expect them to keep going up. If you're in a bubble, then you expect the bubble to keep expanding. This is a subject that I keep railing about on this web site. I keep expressing shock and surprise that investors are so stupid as to keep investing in a bubble. Don't they know they're going to lose everything in a crash -- a crash that they expect? Well, Barro's model tells us that what is happening today is what we should expect. The giddy craziness of today's global financial system is exactly what we should expect. But why? The only way to make sense of this is to incorporate a generational view of the willingness to use credit. In the decades immediately after a crash, a society's use of credit is very limited, because of fear of another crash; but as the survivors of the last crash retire or die, the use of credit increases. Now, as we said a few paragraphs ago, it may be that the best way to measure the value of p (the perceived probability of a stock market crash) is through the use of credit; as society uses more and more credit, resulting in bigger and bigger bubbles, there's a two-way pull on investors:
- Investors increasingly fear a crash (p rises), and so they're motivated NOT to buy more stocks;
- Credit is increasingly available (along with p), so investors are motivated to use credit to buy more stocks.
This is another example of a "push-pull" kind of thing that can be modeled, once the generational cycles are sorted out and put into the model. It should then be possible to show that the second of these two factors dominates the first one. There's only one more thing that has to be added: People stay in the market, even though they fear a crash, because they believe that they can see the crash coming and get out in time. In fact, here's a twist: You may wonder, as I have, why investors didn't learn from the Nasdaq crash in 2000. The answer is, I believe that they're kicking themselves because they should have seen what's coming and didn't get out in time, and having lived through that crash, they think that they know how to beat the next one.
Barro says that to test his model, you should analyze different values of p (along with another of his disaster variables, q):
"However, the results also show the effects from permanent changes in any of the parameters, such as the disaster probabilities, p and q. In this and the following sections, I use the model to assess the effects from changes in p and q. However, in a full analysis, stochastic variations in p and q -- possibly persisting movements around stationary means -- would be part of the model."
His suggestion of using "stochastic variations" means that random values of p would be chosen in the model, as it moves forward through time. This is the usual naïve technique, used by someone with no concept of generational cycles (which means just about everybody). The most effective model would be one that shows p having a low value shortly after after a stock market crash, and then rising gradually through the entire 80-year period. Furthermore, the value of p should be correlated with the use of credit (or leverage).
Barro describes objections to his type of model posed by economists R. Mehra and E.C. Prescott. Here is his summary of their objections (where Rietz is an earlier researcher on the "rare event" theory):
"For example, the perceived probability of a recurrence of a depression was probably high just after World War II and then declined. If real interest rates rose significantly as the war years receded, that would support the Rietz hypothesis. But they did not."
Barro says that "I am skeptical that this probability varied over time in the way suggested by Mehra and Prescott," and indeed he should be. There is absolutely no way that the "perceived probability of a depression was ... high just after World War II." At that time, the survivors of the Great Depression knew exactly why it had occurred: It was caused by the evil of buying stocks on margin, or using credit. And after World War II, almost no one used credit. Anyone who understood the use of credit would not have expected a recurrence of the depression.
Barro uses economic data from 20 countries to support his model, but the way in which he interprets that data is very confusing to me. Here is one paragraph where he discusses this:
"Changing probabilities of a depression would likely isolate the effect of changing p, but the analysis depends on identifying the variations in depression probability that occurred over time or across countries. From a U.S. perspective, the onset of the Great Depression in the early 1930s likely raised p (for the future). The recovery from 1934 to 1937 probably reduced p, but the recurrence of sharp economic contraction in 1937-38 likely increased p again. Less clear is whether the end of World War II had an effect on future probability of depression."
He's correlating values of p to economic expansion and contraction, but he admits it's only guesswork. In fact, one could just as easily argue the opposite: When the stock market rises, someone might expect a crash, but when the stock market begins to fall again, someone might think that the danger is past. In fact, I believe that, in the end, it will turn out that p increases almost monotonically in the 70-90 year period from one crash to the next, and then falls sharply when the crash occurs, beginning the cycle all over again.
Finally, let's get back to David Miles' original posting. In that posting, he's looking for an explanation of the stock market fall in the last couple of weeks. He concludes with this:
"What all this means is that a pretty standard economic model can generate the prediction that more pessimism about average future growth and greater uncertainty about future growth will take stock prices a bit higher. All this may seem largely academic and of little value to practical people who have to make money in financial markets. It may remind some of the old joke made at the expense of the head-in-the-clouds academic who on seeing some real world phenomenon observed that it was all very well in practice but it shouldn't work in theory. On the other hand, we might just stop and wonder a bit whether what appears to be a nice logical "explanation" for falls in stock prices --- like "people got worried about risk and more pessimistic about growth" --- really does explain very much at all about what just happened."
As Miles points out, Barro's theory explains why stock prices keep rises, but it doesn't explain why the recent falls occurred, or why crashes occur at all. The answer to that is simply that, sooner or later, the bubble has to burst. Barro's theory, when generational theory is added, is really quite a remarkable explanation of why a bubble occurs in the first place. The fear of a "rare event" (stock market crash) is more than offset by the availability of credit that pulls investors into a larger bubble. There certainly are people today who recognize the danger. At the beginning of this article, we quoted Oppenheimer's Michael Metz as saying that he's expecting "some sort of accident" in what is "an accident prone system." In <#inc ww2010.weblog.ref e070305 "an article I posted last week,"#> I quoted Douglas A. Kass of Seabreeze Partners Management as saying, "I think that there's a very good chance that the market, rather than test its low, crashes in the next several months." What happened in the last couple of weeks is that the "perceived probability of a rare event" has really begun to catch up with investors. Many investors believe (or, at least, fear) that a crash is coming, and must also believe that they're going to be especially clever and get out in time, because they'll see in advance all the signs that they didn't bother to see during the Nasdaq crash in 2000. Thus, when there's some kind of scare (caused by a chaotic, unpredictable event), all of these investors immediately believe that they've seen the sign, and they want to get out right away. Well, of course, when a real crash happens, the huge numbers of sell orders will swamp all the computer systems of all the banks, investment houses, and exchanges, so that few people will actually get out in time. The rest will lose pretty much every penny they own, and most will be left with a mortgage debt and credit card debts they can't pay. Since many companies will go out of business, many people will become unemployed, bankrupt, and homeless. The ones who owe child support will all be sent to jail for failure to pay. Others will simply be dumped on the street to live under bridges and in cardboard boxes. Those are the missing pieces that David Miles was looking for. Barro's theory explains what happens up to the point of the crash, and then full-scale panic explains the crash itself.

From the point of view of Generational Dynamics, Barro's paper presents an exciting theory that integrates very well with the rest of Generational Dynamics, and explains a great deal. Those interested in further information about integrating generational concepts into mainstream macroeconomics should read my October article, <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory.""#> =eod =// &&2 e070310 The Daylight Savings Time mess =data ww2010.weblog.y2007.e070310.head The Daylight Savings Time mess =data ww2010.weblog.y2007.e070310.keys daylight savings time, standard time, leap second =data ww2010.weblog.y2007.e070310.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070310.date 10-Mar-07 =data ww2010.weblog.y2007.e070310.txt1 Plan on spending time on Sunday, and again in three weeks, dealing with this. =data ww2010.weblog.y2007.e070310.txt2 Congress has been pretty incompetent for several years, ever since the Boomers took over, and the little that they accomplish is based on sheer ignorance of any actual facts. No other description could possibly apply to the "The Energy Policy Act of 2005," which moved up the date of Daylight Savings Time in the U.S. by three weeks, starting this weekend. I shuddered when I first heard about this in 2005 because I couldn't believe that even Congress could be that stupid, but never underestimate the stupidity of Congress. Today is the day we'll have to pay. Here are some of the consequences:

We're the only country in the world doing this, so we'll be out of sync with every other country. Thus, if you telephone someone in another country, there'll be an unexpected time difference. (A reader has informed me that Canada is also adopting the same change. I took the word of a TV anchor that we were the only country making this change, but that's no excuse - I should have researched it on my own. I apologize for the error.)(Last sentences added on 11-Mar)
If you travel to another country by plane, you may miss a plane connection.
If you purchased a computer prior to 2005 and it hasn't been patched, then you'll have to manually adjust the date.
If you purchased a VCR prior to 2005, then you'll have to manually adjust the date.
There's a whole raft of other devices -- hand-held computers, DVD players, alarm clocks, thermostats, etc., etc. -- that can't be patched, and so you'll have to change the date manually if they were manufactured before 2005.
If you miss one of these devices, it will operate at the wrong time. If it's your alarm clock, they you'll get up an hour late.
And if that isn't bad enough, then get this: These devices will try to adjust to DST three weeks from now, since that's what they're supposed to do. So, on Sunday morning in three weeks, you'll have to go and reset all those devices again.
If you forget to adjust your alarm clock three weeks from now, then you'll get up an hour too early.
And when fall comes, you'll have to go through these two sets of adjustments all over again.

So have fun, folks. All these devices were designed so that consumers wouldn't have to remember to make all these changes, and wouldn't have to figure out how to adjust all of them. That's how progress is supposed to work -- we have engineers design these high-tech devices to work properly. For the last ten years or so, devices containing clocks have been properly adjusting for DST. So Congress has just set technology back ten years. I have an anecdote related to this issue. Back in the 1970s, I was in a group of programmers developing IBM's mainframe operating system VM/CMS. Clyde, a friend of mine on the team was responsible for writing all the timing algorithms. Well, he was furious at the government because of "leap seconds." Now, a <#stdurl http://en.wikipedia.org/wiki/Leap_second "leap second"#> is a one second adjustment that <#stdurl http://tf.nist.gov/general/leaps.htm "NIST"#> makes every now and then to account for tiny irregularities in the earth's orbit. The first leap second was added on June 30, 1972. There have been a total of 23 leap seconds added, most recently on December 31, 2005. (Remember how that New Year's Eve party seemed longer than usual? That's because you had to wait an extra second for the new year!) Well, Clyde was angry because there's no way to predict when the next leap second will occur, and so there was no way to program the operating system in advance to handle them properly. If you're writing a computer operating system that might have to schedule things far in advance, and schedule them to the precise second, then leap seconds matter very much. I don't remember how Clyde resolved the leap second problem, but there's a big difference between that problem and the DST change: The leap second was implemented by international agreement, while the DST change was mandated by Congress in 2005. Congress has created a big mess, one of many. Get your fingers warmed up to re-set the correct time on all these devices, because you're going to have to spend a lot of time doing it. And if you're looking for someone to blame, then blame the Boomers. But don't blame me, even though I'm a Boomer, because I'm as furious as anyone about it. =eod =// &&2 e070308 Jordan's King Abdullah tells Congress that Palestinian issue is the core issue =data ww2010.weblog.y2007.e070308.head Jordan's King Abdullah tells Congress that Palestinian issue is the core issue =data ww2010.weblog.y2007.e070308.keys =data ww2010.weblog.y2007.e070308.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070308.date 8-Mar-07 =data ww2010.weblog.y2007.e070308.txt1 Unfortunately few in Congress know what he's talking about. =data ww2010.weblog.y2007.e070308.txt2 In a <#stdurl http://www.maximsnews.com/107mnunmarch08jordankingabdullahaddresstouscongress.htm "half-hour address to a joint session of Congress on Wednesday,"#> Jordan's King Abdullah II exhorted America to help bring peace to the Israelis and Palestinians. Here are some excerpts:

"I must speak about a cause that is urgent for your people and for mine. I must speak about peace in the Middle East . I must speak about peace replacing the division, war, and conflict that have brought such disaster for the region and for the world. ... <#inc ww2010.pic g070307.jpg right "" "Jordan's King Abdullah II, addressing a joint session of Congress on Wednesday (Source: CNN)"#> I come to you today at a rare, and indeed historic, moment of opportunity, when there is a new international will to end the catastrophe. And I believe that America , with its enduring values, its moral responsibility, and yes, its unprecedented power, must play the central role. ... The status quo is also pulling the region and the world towards greater danger. As public confidence in the peace process has dropped, the cycle of crises is spinning faster, and with greater potential for destruction. Changing military doctrine and weaponry pose new dangers. Increasing numbers of external actors are intervening with their own strategic agendas, raising new dangers of proliferation and crisis. These are groups that seek even more division: faith against faith, nation against nation, community against community. Any further erosion in the situation would be serious for the future of moderation and coexistence, in the region and beyond. Have we all lost the will to live together in peace celebrating one another’s strengths and differences? ... Some will say: ‘This is not the core issue in the Middle East.' I come here today as your friend to tell you that this is the core issue. And this core issue is not only producing severe consequences for our region, it is producing severe consequences for our world. The security of all nations and the stability of our global economy are directly affected by the Middle East conflict. Across oceans, the conflict has estranged societies that should be friends. I meet Muslims thousands of miles away who have a deep, personal response to the suffering of the Palestinian people. They want to know how it is, that ordinary Palestinians are still without rights and without a country. They ask whether the West really means what it says about equality and respect and universal justice. Yes, my friends, today I must speak. I cannot be silent. Sixty years of Palestinian dispossession, forty years under occupation, a stop-and-go peace process, all this has left a bitter legacy of disappointment and despair, on all sides. It is time to create a new and different legacy, one that begins right now; one that can set a positive tone for the American and Middle East relationship; one that can restore hope to our region’s people, to your people, and to the people of this precious world. Nothing can achieve that more effectively, nothing can assert America’s moral vision more clearly, nothing can reach and teach the world’s youth more directly, than your leadership in a peace process that delivers results not next year, not in five years, but this year. ... But we need all hands on deck. The international community, especially the United States , must be engaged in moving the process forward to achieve real results. Above all, we must make our process serve our purpose. We must achieve an agreed solution to the conflict. ... Your responsibility today is paramount. Your potential to help Palestinians and Israelis find peace is unrivalled. This is because the people of the region still regard the United States as the key to peace, the one country most capable of bringing the two sides closer together, holding them accountable, and making a just settlement reality. ... We look to you to play an historic role. Eleven American presidents and thirty American congresses have already faced this ongoing crisis. For not the future generation, but the generation alive today, let us say together: No more! Let us say together: Let’s solve this! Let us say together: Yes, we will achieve this! ... The next time a Jordanian, a Palestinian, or an Israeli comes before you, let it be to say: Thank you for helping peace become a reality."

This was a desperate plea by King Abdullah. The <#hreftext ww2010.i.may01 "May, 2003, Generational Dynamics prediction"#> was that Yasser Arafat's disappearance would be part of a generational change that would lead the Mideast into a massive new crisis war (between Jews and Arabs), re-fighting the bloodbath war in 1948-49 following the partitioning of Palestine and the creation of the state of Israel. In fact, hardly a day has gone by since Arafat's death that the chaos in the Mideast has gotten worse than it was the previous day, and at this point almost anyone can see that it's headed for a major war. King Abdullah sees it best of all because he lives in the middle of it. He sees what's going on, and understands its significance. So when he says, "The status quo is also pulling the region and the world towards greater danger. As public confidence in the peace process has dropped, the cycle of crises is spinning faster, and with greater potential for destruction," he means exactly that. Unfortunately, he's talking to an audience of morons who have no idea what's going anywhere in the world outside their own bedrooms. I've pointed this out many times, especially when ABC's George Stephanopoulos looked like an idiot in November because <#inc ww2010.weblog.ref e061126 "Jordan's King Abdullah had to tell him five times"#> of the importance of the Israeli/Palestine situation, but he was still clueless. The clincher was when <#inc ww2010.weblog.ref e070114b "Jeff Stein, national security editor for Congressional Quarterly, wrote an article"#> about how he'd inverviewed Silvestre Reyes, whom Nancy Pelosi had selected to be chairman of the House Intelligence Committee, and Reyes didn't even know whether al-Qaeda was a Sunni or Shia organization. And this isn't a political thing: Stein found the same level of ignorance across parties, even among analysts who were supposedly experts on the subject they couldn't answer questions about. And if you don't know that al-Qaeda is a Sunni organization, then you cannot possibly know anything about what's going on in Iraq. It's impossible. And Reyes has been on the House Intelligence Committee for five years, since 9/11. And yet, members of Congress go on television and spout ridiculous proposals about Iraq based on little or no knowledge at all. So it's pretty safe to assume that few members of Congress had any idea what King Abdullah was talking about. In fact I'd bet that few members of Congress even bothered to attend. The same is true of journalists. Here's a paragraph from <#stdurl http://uk.reuters.com/article/worldNews/idUKN0723981920070307 "the Reuters coverage of the speech:"#>

"Washington, struggling with an unpopular war that the Bush administration started in Iraq nearly four years ago, is under pressure from European and Arab allies to get more involved in resolving the Israeli-Palestinian conflict. Peace talks collapsed in 2000."

This is the Reuters interpretation of the speech - it's simply political, nothing else. There's no discussion of whether Abdullah was right or wrong. They simply assume that he's wrong, but he's making a political play. Judging from the coverage I've heard elsewhere, all the journalists assumed that. I was thinking, I've mentioned the 1947 "Truman Doctrine" in <#hreftext ww2010.i.awakening060919 "an article"#> or two. This was a speech given to Congress. It contained phrases like, "As in the case of Greece, if Turkey is to have the assistance it needs," and "intimidation in violation of the Yalta agreement in Poland, Rumania, and Bulgaria." You know, a speech like that couldn't be given to Congress today, because they wouldn't understand it. Places like Greece, Turkey, Poland, Rumania and Bulgaria are just names to people in Congress today; I doubt that many of them could find these countries on a map if they had to. As the great satirist Ambrose Bierce said, "War is God's way of teaching Americans geography." Since we're having a war in Iraq, most Congressmen could probably find Iraq on a map, but that's it. Anyway, getting back to Abdullah's speech, it sounded desperate, didn't it? He sees the danger -- that the Mideast is descending into a chaos that will affect the world. And he's asking America to solve the problem. But how? He doesn't say. He has no idea. He's just like every one of the American Boomers, who expect their parents to take care of everything for them. He has no idea how to fix the problem himself, or how American fix the problem, but he just wants it done, like a child who cries and asks his parents, "Please cure my poison ivy." As I've pointed out many times on this web site, the Gaza strip is densely populated and <#stdurl https://www.cia.gov/cia/publications/factbook/fields/2177.html "the median age in the Gaza strip is 15.8."#> Thus, the Gaza strip is run by a generation of children with guns and missiles. It doesn't matter what America does or what President Bush or what King Abdullah does. The fate of the Mideast is not in the hands of the leadership of Israel, nor either the Fatah or Hamas leadership of the Palestinians. None of them matters much. The fate of the Mideast is in the hands of a generation of children with guns and missiles, children who couldn't care less about the nuances of international diplomacy. At some point they'll decide that there'll be war, and then there'll be war. It's amazing to me that nobody seems to understand this. I've often said here that politicians, pundits, high-priced analysts and journalists can't recognize any generational concept, no matter how obvious. It's just too abstract for them to understand. And this situation is certainly pretty obvious to anyone who understands what the phrase "median age" means. Apparently the people at the BBC don't have any idea. I recently stumbled across <#stdurl http://news.bbc.co.uk/2/hi/middle_east/5122404.stm "the BBC's Gaza Strip Profile."#> The profile describes the difficult life on the Gaza strip, and spends many paragraphs talking about the population. But does the BBC mention that the median age is 15.8, and draw any conclusions from that? No, that concept is too abstract for the writers at the BBC to understand. The only paragraph that even gives a hint of the ages of the people in the Gaza Strip is this one:

"The majority of Gaza's residents are refugees who fled or were expelled in 1948 from the land that became Israel. Most Gazans live in eight refugee camps to which the United Nations delivers health, education and other humanitarian services."

Wow! That means, ummmmmmmm, that the majority of the Gaza residents are, ummmmmmmmmmmmmmmm, over 58 years old. Gee, I wonder how you get a median age of 15.8 out of that? But that's what I mean. The BBC reporters, some of whom work right in the Gaza Strip, are unable to see even the most obvious and simple generational reality. They're too tied up with their bigotry and biases to see anything that simple. Here's <#stdurl http://today.reuters.co.uk/news/CrisesArticle.aspx?storyId=L25720848&WTmodLoc=World-R5-Alertnet-3 "an article by Reuters"#> that contains the same stupid error. In fact, the only article I've seen that even recognizes this situation was <#inc ww2010.weblog.ref e061210 "the one in the Boston Globe in December"#> that actually contains interviews with young Gazans. One 20-year-old said, "For 12 years we have been in peace negotiations, we have given up many things, but achieved nothing. We don't believe in a political solution, because Israel will never respect it. So we are forced to seek a military solution, even though Israel is stronger. There will be no peace in the Palestinian territories." Another was more succinct: "The Jews will not leave the land unless they are killed." From the point of view of Generational Dynamics, what's coming is pretty obvious. King Abdullah can see it plainly. The people who can't see it are the journalists and the politicians. The fate of the Mideast is in the hands of the young Palestinians and their young Israeli counterparts. As these younger generations grow in size, the Mideast edges closer to all-out war, which is what we've been seeing for over two years now. Abdullah said that the Mideast "is pulling the region and the world towards greater danger. As public confidence in the peace process has dropped, the cycle of crises is spinning faster, and with greater potential for destruction." Abdullah's prediction is coming closer to fruition every day. The one thing he's wrong about is his belief that there's any possible way to stop it from happening. =eod =// &&2 e070307 Japan and China in confrontation over comfort women =data ww2010.weblog.y2007.e070307.head Japan and China in confrontation over comfort women =data ww2010.weblog.y2007.e070307.keys =data ww2010.weblog.y2007.e070307.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070307.date 7-Mar-07 =data ww2010.weblog.y2007.e070307.txt1 Meanwhile, countries throughout region are increasingly anxious as China makes major new military announcements. =data ww2010.weblog.y2007.e070307.txt2 <#inc ww2010.pic g070306a.jpg right "" "Scenes from China's National People's Congress and Premier Wen Jiabao's State of the Union speech (Source: CNN)"#> China announced a major <#stdurl http://timesofindia.indiatimes.com/NEWS/India/China_hikes_arms_budget_to_44_bn/articleshow/1726841.cms "17.8% increase in its military budget for 2007"#> in conjunction with the annual National People's Congress meeting in Beijing. India expressed concern about the increase, the largest in almost ten years, not only because of the danger from China itself, but also because of China's military partnerships with Pakistan and other countries around India -- Myanmar, Sri Lanka, Bangladesh, Maldives, Seychelles and the like. Taiwan's Foreign Ministry said that <#stdurl http://english.rti.org.tw/Content/GetSingleNews.aspx?ContentID=32435 "the increase will affect regional stability and peace,"#> and demanded a credible explanation. An <#stdurl http://www.taipeitimes.com/News/editorials/archives/2007/03/07/2003351320 "editorial in a leading Taiwanese newspaper"#> put it this way:

"News of double-digit growth in China's military spending is nothing new; after all, Beijing's military budget has been increasing more than 10 percent annually since 1993. But the curious thing is that China has no hostile neighbors and does not face any immediate threat, nor do there appear to be any potential ones. So what is Beijing's motivation for spending so much on military hardware when it faces a host of more pressing problems, such as declining health standards, inadequate education and social infrastructure. What is it pointing its guns at? This is the real cause for concern. China's military expansion is clearly not of a defensive nature, and Taiwan is planted firmly in its crosshairs. China already has more than 900 missiles aimed at Taiwan along its eastern seaboard and has established a legal pretext for using them -- along with other types of military force -- by passing the "Anti-Secession" Law in 2005."

The last sentence refers to the <#inc ww2010.weblog.ref e050327 "China's 2005 "Anti-secession law,""#> which provoked massive anti-Chinese riots in Taiwan at that time. The editorial continued:

"Japan should also be worried. Concomitant with next year's Beijing Olympics, Chinese nationalism is reaching a fever pitch and Japan is China's first target in its quest for supremacy in the Asia-Pacific region. This, compounded by competition for oil reserves and influence in Southeast Asia, as well as continuing friction over Japan's role in World War II, has allowed the Chinese Communist Party to portray Japan as a national enemy. China can't be top dog until it has forced Japan into submission."

Indeed, Japan IS very worried. In the past, Japan has <#inc ww2010.weblog.ref e051222 "called China a considerable military threat."#> And in January, Japan expressed great concern when <#inc ww2010.weblog.ref e070119 "China successfully tested an anti-satellite weapon"#> =inc ww2010.xr.related2 right japan 2 china 1 Last week, new intelligence revealed that <#stdurl http://washingtontimes.com/national/20070302-012440-4462r.htm "China is engaged in a major buildup of its submarine fleet,"#> with new submarines capable of launching missiles at Japan or the United States. Japan, which is trying to establish better relations with China, officially expressed muted concern. At a press conference, <#stdurl http://www.bloomberg.com/apps/news?pid=20601101&sid=aNPZHAOy06Lc&refer=japan "Japan's Chief Cabinet Secretary Yasuhisa Shiozaki said"#> that China should be clearer militarily. "China needs to try harder to make its defense policy more transparent," he said. The backdrop was a statement last week by Japanese president Shinzo Abe that the Japanese would no longer apologize for the use of "comfort women" during WW II. Some historians estimate that, during World War II, as many as 200,000 women, mostly from Korea but also from China, the Philippines, Thailand, Vietnam, Malaysia and Indonesia, were forced to serve as sex slaves for Japanese soldiers. <#inc ww2010.pic g070306b.jpg left "" "Pregnant World War II comfort women"#> On March 1, Abe said that <#stdurl http://www.bloomberg.com/apps/news?pid=20601100&sid=aitW1DGvsh2I&refer=germany "that there was "no evidence" that the women were forced"#> into prostitution, and that they participated voluntarily. Abe also said that he stands on a 1993 Japanese government apology for the use of comfort women. This has caused <#stdurl http://www.greenleft.org.au/2007/701/36409 "outrage of surviving comfort women survivors"#> of several countries. Several countries, including the United States, have urged the Japanese to accept full responsibility. Abe's position is supported by 120 members of Abe's Liberal Democratic Party, who demand that the 1993 apology be reversed. The situation is further complicated that many of the women expressing outrage are demanding financial compensation for being victims of the comfort women program, which clouds everyone's motives in the matter. From the point of view of Generational Dynamics, there's no doubt that activities of these types occur in crisis wars. Voluntary prostitution is common in a crisis war, as is involuntary rape. What often happens is that the victors of a battle mass-murder the men and mass-rape the women. This is part of what makes us human -- the built-in mechanisms for the victor to demand that their sperm be used to create the next generation, and for women to be attracted to the male victors. All these things are part of the overall "survival of the fittest" mechanism, and if they didn't occur, the human race would not exist today. All of these activities <#inc ww2010.weblog.ref e061211 "are occurring today in Darfur,"#> the only crisis war going on today. The issue of comfort women is especially sensitive in relations between China and Japan. There is a major fault line between the two countries, and Generational Dynamics predicts that they will be at war with almost 100% certainty. Japan became a pacifist nation following World War II, and remained so as long as the survivors of WW II remained in power in the government. But in the last few years, <#inc ww2010.weblog.ref e050628 "a new generation of leaders, born after WW II,"#> has been taking power, with the result that <#inc ww2010.weblog.ref e061218 "Japan has been increasingly renouncing its postwar pacifism."#> In December, Japan upgraded its Defense Agency and passed legislation calling for increased patriotism, asking teachers to instill thinking among students "respecting tradition and culture and loving the nation and homeland." The same generational change has occurred on both sides of the Sea of Japan. <#hreftext ww2010.i.051023japan "China and Korea are increasingly confrontational with Japan,"#> and Japan's new <#inc ww2010.weblog.ref e060927b "Prime Minister Shinzo Abe, born in 1954, who is considerably more hawkish"#> than Junichiro Koizumi, the man he succeeded in September, 2006. However, Abe has been openly seeking to improve relations with China, and there's still a bit of a honeymoon between the two countries, especially since they're united behind negotiations to get North Korea to reverse its development of nuclear weapons. Relations were extremely bad in early 2005, when there were <#inc ww2010.weblog.ref e050416 "massive anti-Japanese riots in Chinese cities."#> At that time, Chinese Premier Wen Jiabao made extremely strong anti-Japanese remarks: "The core issue in China-Japan relations is that Japan needs to face up to history squarely. ... Only a country that respects history, takes responsibility for past history and wins over the trust of people in Asia and the world at large can take greater responsibility in the international community." Now Wen, who can be seen in the adjacent picture giving the "State of the Union" speech to China's National People's Congress earlier this week, will be visiting Japan in a few weeks. Wen did not mention the comfort women issue in his speech, but <#stdurl http://news.xinhuanet.com/english/2007-03/06/content_5808569.htm "Foreign Minister Li Zhaoxing gave a separate press conference on Tuesday,"#> repeating Wen's 2005 warning, calling on Japan to face up to history and take responsibility for the comfort women. From the point of view of Generational Dynamics, all the pieces are falling into place for the Asian and Pacific theatre of the Clash of Civilizations World War. China is becoming more of a military state almost daily; Japan, Taiwan and India feel increasingly targeted by China, especially as China allies militarily with numerous other nations in the region. We're very close to the point where a miscalculation on almost anyone's part -- Japan's, Taiwan's, China's or America's -- will be the only thing necessary to create a situation that can quickly spiral out of control into a major regional war, and then a world war. =eod =// &&2 e070306 Pundits are suddenly talking about (gasp!) "risk aversion" =data ww2010.weblog.y2007.e070306.head Pundits are suddenly talking about (gasp!) "risk aversion" =data ww2010.weblog.y2007.e070306.keys =data ww2010.weblog.y2007.e070306.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070306.date 6-Mar-07 =data ww2010.weblog.y2007.e070306.txt1 Fearing full-scale panic in the mortgage loan marketplace, =data ww2010.weblog.y2007.e070306.txt2 as <#stdurl http://www.marketwatch.com/news/story/subprime-panic-takes-hold-investors/story.aspx?guid=%7B75E1EE31-0F63-422D-8715-2CB945DFF410%7D "shares of several mortgage lenders fell 20-30% on Monday."#> Fremont General Corp. <#stdurl http://www.bloomberg.com/apps/news?pid=20601103&sid=a3VlHMTZLhs0&refer=news "sent employees home after being informed of a federal criminal probe."#> As <#inc ww2010.weblog.ref e070305 "I've recently said,"#> history tells us that we should expect many people to go to jail before all this is over. <#stdurl http://www.bloomberg.com/apps/news?pid=20601103&sid=a0j4oiYE3Bfw&refer=us "Morgan Stanley, Goldman Sachs and Merrill Lynch have just had their bond ratings lowered to Baa2"#> -- almost "junk" status, because these investment firms have major exposures to losses in subprime mortgages. The subprime mortgage marketplace has, for all practical purposes, been shut down for the time being. The collapse of subprime mortgages may or may not be spilling over into prime mortgages, and there's <#stdurl http://www.reuters.com/article/bondsNews/idUSN0531845520070305 "even some worry about the normally solid commercial mortgage market."#> Pundits on television pretty much expressed the opinion is mostly that "there's nothing to worry about," but there was a change on Monday: The appearance of the phrase "risk aversion." This is a phrase I've used on this web site for years, but it's the first time I recall hearing it or reading it among the financial pundits. And I heard it several times on Monday. It reflects that <#stdurl http://www.ft.com/cms/s/c86b07be-cabd-11db-820b-000b5df10621.html "investors are less willing to take risk"#> than they were even a few days ago. They were really shaken up by last week's stock market turmoil. I look at this question of risk aversion over a much longer time period. My mother, who was forced to get find a job for $8.00 per week when her father's candy store went bankrupt during the 1930s was a risk-averse person. She never spent an unnecessary dime, and shunned credit. Most people who lived through the horrors of the Great Depression were extremely risk-averse. When those risk-averse people were investors and financial managers, our whole economy was run on a sound basis. But when the Baby Boomer generation took over as senior financial managers, risk aversion was thrown about the window. The result was the stock market bubble of the late 1990s, and the following housing, commodity and credit bubbles. I've been using my own informal method for measuring risk aversion, or lack of it. At the bottom of the <#hreftext ww2010.home "home page"#> of this web site, there's a graph that changes weekly showing the S&P 500 price/earnings index for the last ten years. Here's the chart as of Mar 2: <#inc ww2010.pic pe070302.gif center "" "S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 2-Mar-2007. (Source: MarketGauge ® by DataView, LLC)"#> The top part of this graph shows the S&P 500 Price/Earnings ratio for the last ten years. During this period, investors have been willing to far overpay for stocks. We can think of the willingness to overpay for stocks as lack of risk aversion. Since 1995, and continuing until the beginning of 1994, P/E ratios were astronomical, indicating that investors were vastly overpaying for stocks. At the beginning of 2004, the unexpected failure of unemployment to fall frightened investors, and they became more risk-averse than the had been. So, I hope you get the idea: The lower the P/E ratio, the higher the risk aversion of investors. So risk-aversion has continued at this high level since 2004, going a little higher as the P/E ratio goes down. Now, if you look at the results of last week, you'll see that the P/E ratio has fallen again, slightly, indicating that investors have become slightly more risk-averse than they were the week before. This is an informal way of looking at risk-aversion, of course, but it makes a very important point that the pundits are not seeing: The increased risk-aversion began in 2004, not last week. It's clear that the pundits are confused about this, because many of them expect the market to start reaching new highs again in only a few weeks. But reaching new highs again requires that investor risk-aversion decrease again. Indeed, with recent earning increases lower than they've been in recent years, it should take a very great deal less risk-aversion for the market to reach new highs. Now, I've been surprised time and again by the genuine craziness of today's investor, pushing bubbles to newer and newer heights with reckless abandon, and with no appreciation that the higher they are, the harder they'll fall. Who knows -- maybe I'll be surprised once more, and somehow the stock market bubble will again expand to an even more ridiculous size, and the stock market again will reach yet another new high. But with risk-aversion increasing pretty steadily for three years now, I would not expect risk-aversion to fall again, and I would not expect a new stock market high again. From the point of view of Generational Dynamics and this web site, it's interesting to see the slow but steady increase of risk-aversion, just as it steadily decreased in the years when the Boomer generation were first taking over. The cycle is progressing and heading for a final climax. =eod =// &&2 e070305 Last week on Wall Street =data ww2010.weblog.y2007.e070305.head Last week on Wall Street =data ww2010.weblog.y2007.e070305.keys =data ww2010.weblog.y2007.e070305.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070305.date 5-Mar-07 =data ww2010.weblog.y2007.e070305.txt1 Investors are disappointed that the market didn't "feel some panic." =data ww2010.weblog.y2007.e070305.txt2 After three days of massive swings in the market, things settled down a little on Friday morning, giving pundits a chance to debate where the market is going. My interest on this web site is mainly in analyzing attitudes how of pundits and investors change. In particular, I want to track the developments predicted by the Principle of Maximum Ruin -- that the maximum number of investors will be ruined the maximum amount. The Principle of Maximum Ruin is really starting to kick in now. The big debate among the pundits on Friday was this: How much further will the market fall? Some said 7-10% of the next few weeks, and others said it had already bottomed out, and would be hitting new highs within a couple of weeks. There was one person, Doug Kass, who was predicting a "crash," but he was quickly ignored. However, he had some very interesting analysis, so I'll come back to his remarks later in this article. <#inc ww2010.pic g070304a.jpg left "" "The lovely CNBC anchor Erin Burnett explains why the "big money" is disappointed that the market didn't go lower. (Source: CNBC)"#> The other interesting remark was this, stated on Thursday and Friday by CNBC anchor Erin Burnett, in answer to the question, what do the "big money" investors think of what happened this week:

Now think about what this means. First, the "big money" thinks, with absolutely certainty, that the worst will soon be over, and that the worst that will ever happen is that the market will lose 7-10%. Furthermore, these experts will KNOW when it's over because they'll "see and feel some panic" in the marketplace. They're really confident of themselves, aren't they? As the old saying says, "Pride goeth before the fall." This is important -- the "atmospherics" changed drastically on Friday -- much different than on the preceding three days. On the preceding days, the discussion was whether the market was having a complete meltdown. By Friday, the only discussion was whether the selloff would be 7%, 10%, and 20%. Furthermore, the rest of the discussion was over whether the market would be reaching new highs again in two weeks, two months, or six months. Before Friday, no one had any idea what was going to happen; by Friday, there was no longer any doubt that things would quickly return to "normal." It took only three days for pundits and investors to completely forget the lessons of Tuesday. Then the <#inc ww2010.weblog.ref e070303 ""cant and incantation" that I described"#> was operating in full force. =inc ww2010.h2 break "Entertainment Break #1" Now, let's take an entertainment break. I'm grateful to <#stdurl http://housingpanic.blogspot.com/ "the Housing Panic Blog"#> for pointing out two interesting videos, both well worth viewing. <#stdurl http://www.youtube.com/watch?v=Ubsd-tWYmZw "Suzanne Researched This Commercial"#> This was a sickening commercial when it first aired, and it's even more sickening today.

<#stdurl http://www.youtube.com/watch?v=pLjo7-J1qho "Housing Bubble vs. Great Depression"#> This is an excellent comparison of today's world with 1929.

Feel free to sing along with the second video:

    I'm forever blowing bubbles,
    Pretty bubbles in the air,
    They fly so high, nearly reach the sky,
    Then like my dreams they fade and die.
    Fortune's always hiding,
    I've looked everywhere,
    I'm forever blowing bubbles,
    Pretty bubbles in the air.

These two videos show the creeping perniciousness of the Principle of Maximum Ruin. This is what's going on today. It doesn't matter how bad things get, you will always get politicians and analysts telling you how good things are and economists telling you whatever you want to hear. =inc ww2010.h2 kass "Douglas A. Kass, Seabreeze Partners Management" <#inc ww2010.pic g070304b.jpg right "" "Douglas A. Kass, Seabreeze Partners Management (Source: CNBC)"#> Douglas A. Kass of <#stdurl http://www.seabreezepartners.net/default.asp "Seabreeze Partners Management"#> was the only analyst I saw who predicted an extremely negative outcome. Kass runs a "short fund," meaning that his fund is for people who believe that the market is going down. That gives him a reverse bias from all the other analysts. However, since the he's the only person with this bias, it's worth seeing what he has to say. Kass had a lucky break this week. His fund normally is 60% "short" (bets that stocks will go down) and 40% "long" (the standard stock ownership, bets that stocks will go up). But he appeared on television on Monday and said that things looked so bad that his fund was now 100% "short." The big stock market selloff occurred the next day, so he appeared on CNBC on Friday morning to explain why he had been so prescient. Here's what he said:

"I think that there's a very good chance that the market, rather than test its low, crashes in the next several months. [Asked, how big a drop?] I don't know, everyone's definition of "crash" is a little bit different. [what's yours?] but certainly a decline of well over 10 or 15 -- ten percent, let's say."

I want to pause here and describe the body language. Anyone who's believes that there'll be a "crash" and <#hreftext ww2010.i.050711eleven "has done all the math"#> knows that the the market will fall 50-75%. Kass must have known this. But people who give a figure that high are treated as crazy (as I can testify from personal experience). So Kass really hesitated on this answer, then mumbled "10 or 15," and then finally settled on "10%, let's say." But there's no doubt in my mind that he had a much higher figure in mind. He said that there were "three catalysts" that led him to believe this, and he listed them. Here's the first catalyst:

"Everyone's looking at China - I was looking at the developing bust in the Indian equity market. I was looking at what appeared to be a clear second leg down in housing; thirdly, a further erosion in the fungus among us subprime credits, which would lead to less mortgage credit availability, and on Monday night you'll remember, Freddie Mac tightened their lending standards. Credit is the lifeblood of our economic well-being. and mortgage availability correlates very well with personal consumption expenditures. So that consumer that spent up, not pent up, and very levered, is going to get hit over the very short term."

Kass's first catalyst mentions three factors. The BSE (Bombay Stock Exchange in Mumbai, India) had started falling rapidly after reaching a high of February 7 of 14643. By Monday it had fallen 1000 points to 13649, and by Friday it as 12886, a total 12% decline within a month. The other factors have to do with housing boom bust, and the collapse of the subprime mortgage. These are going to have major impacts on the availability of consumer credit. This will heavily impact consumer spending, and that will have a major effect on the stock market. Here's his second catalyst:

"But there are other considerations. Every bull that comes on, Joe, says the same thing: the S&P is cheap at 15 1/2 times '07 earnings, but he doesn't take into account the heavy weighting of finance and energy stocks, which have inherently 10 or 12 multiples which weigh down the number. I prefer to look at a broader slice, and I look at Value Line's medium P/E of 3000 largest companies, and that's at 20 1/2 times, compared to the secular peak in the fall of 2000 when the market peaked at only 14 times."

Now this is very interesting. Regular readers of this web site know that I'm constantly complaining that pundits, journalists and analysts out-and-out lie about price/earnings ratios, usually by exaggerating earnings enormously. Pundits also err by ignoring <#inc ww2010.weblog.ref e060122 "the law of "Mean Reversion,""#> which says that even if it were true that P/E ratios had returned to their historic averages (which they haven't), then they still have to make up for 12 years of being far above average by going far below average for a number of years. But Kass raises a different issue that I've never considered before: That the S&P 500 are heavily weighted to financial and energy stocks, and that they've had lower P/E ratios. He says that when you look at 3000 stocks, then P/E ratios are 20 1/2, which is very high. This is a question that needs further investigation. Here's his third catalyst:

"The final thing is, everyone's looking at hedge funds. Hedge funds have increased their net long invested positions to the highest level since 2004. Sentiment studies have the lowest level of bear since December 2004. But what is even more important, and what you'll pick up in the next several weeks, and what could serve to take the market down, just like portfolio insurance did in October of '87, is the fund to fund communities which provides the equity capital by and large to hedge funds. And they are much more levered, particularly over in Europe, and particularly in Switzerland into these hedge funds. They multiply their equity investment in Pequot or SAC by multiples, and they're gonna start pointing to the shoulder of these guys, and they're gonna say, we're getting destroyed because we've multiplied your performance."

I don't completely follow this, but if a chain is as strong as its weakest link, he appears to be saying that he's found the weakest link. The hedge fund industry <#inc ww2010.weblog.ref e061230 "is a worldwide pyramid scheme (or Ponzi scheme)."#> Any pyramid scheme has to collapse sooner or later, and Kass appears to be saying that the point of collapse is going to be in Switzerland, and that it could "take the market down." He adds:

"Look to the people who are supplying to these hedge funds - that's where you should look at supply and demand. That's where you see forced selling. And that's what takes markets down, and that's what makes markets crash."

That's a pretty startling scenario. It's something to watch for. =inc ww2010.h2 joke "Entertainment Break #2" A reader sent me this joke: Three high school students are taking an exam that requires a mathematical computation. The mathematician's son does the entire computation, and finds the correct answer. He writes the answer at the bottom of the page, and draws a circle around it. The engineer's son doesn't do the computation, but performs an estimate, and comes up with a possible range of answers. He writes the range of answers on the bottom of the page, and draws a circle around it. The economist's son just writes the following on the bottom of the page, "Anything you want the answer to be." =inc ww2010.h2 berner "Morgan Stanley's economist Richard Berner" On Friday, one of Morgan Stanley's top economists, posted <#stdurl http://www.morganstanley.com/views/gef/archive/2007/20070302-Fri.html#anchor4497 "an article called "Does Market Turmoil Change the Outlook?""#> This article illustrates everything that's wrong with economists. This is an incredibly shoddy piece of work. It's so bad that I was tempted to name Richard Berner this week's Idiot of the Week, but I decided that it would be unfair to single him out, when so many economists are idiots. Berner fills an important role at Morgan Stanley - the role of saying that everything is going to be OK, so that clients will still pay for Morgan Stanley's services. Someone has to do that because Berner's boss is Morgan Stanley's chief economist <#inc ww2010.weblog.ref e060502 "Stephen Roach, who is well known as a "bear.""#> So Berner has undoubtedly been ordered to be Pollyannaish at all costs. Berner wants to prove that there's no reason to modify his previous rosy outlook, even after the week's turmoil on the stock market. To do this, he discusses his preferred macroeconomic model that proves that everything is all right. So when you read Richard Berner's Friday column, where he discusses different macroeconomic models, you quickly realize what nonsense mainstream macroeconomics is, and what charlatans mainstream economists are. Look at this paragraph:

"How do we calibrate that financial stimulus? Some compile a financial conditions index as a weighted composite of changes in asset prices. We prefer a combination of models assessing interest rate, currency and wealth effects, and judgment. Financial conditions indexes do help us cross check our judgment and models; for example, a model-based index from Macroeconomic Advisers was still in positive territory at the end of 2006. But even such sophisticated indexes may understate the financial prop to growth, because they miss the contribution from tighter lower-rated credit spreads and credit availability."

Here's what Berner is doing: He's saying that various macroeconomic models produce results that he doesn't like, so he's going to devise a different macroeconomic model. A "weighted composite of changes in asset prices" isn't good enough for him. Neither is the computerized model developed by Macroeconomic Advisers. So he's made up his own model -- with "interest rates" and "currency" and "wealth effects" and -- wait for it -- and judgment!! The macroeconomic model he likes is the one that lets him say any damned thing he pleases. And where did he develop that judgment? During the 1990s when there was a stock market bubble? During the early 2000s when there was a housing bubble? How can he have developed "judgment" that applies to a time when the housing bubble is bursting and the subprime mortgages are melting down? It's not possible. In fact, this is a problem that's wrong with all mainstream macroeconomic modeling, as I explained in last October's article, <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory.""#> Have you ever watched TV when there was a hurricane headed for the southeastern coast of the U.S.? They have a guy from the NOAA come on, and he typically explains how they use three different computer models: one model predicts that the hurricane will make landfall in Virginia, another predicts Florida, and another predicts Louisiana. Those computer models were developed by modeling hundreds of hurricanes over a few decades, and even so, the model isn't very good. Well, at least the hurricane models are based on the earth, and the earth tends to stay the same from year to year and decade to decade. But that can't be said of macroeconomic models. The underlying assumptions are constantly changing. Today's economy, with the hedge fund explosion, the housing collapse, the mortgage industry collapse, and America's huge global debt is completely different from the underlying economy when the current generation of macroeconomic models were built. Macroeconomists are always fighting the last war simply because their models are all from the last war. So now let's come back to Richard Berner. What he wrote is total, utter nonsense. He sat down at his computer and he typed in a piece of crap. There's no other way to describe it. It's meaningless garbage. And now get this for the real kick: <#stdurl http://www.bloomberg.com/apps/news?pid=20601103&sid=a0j4oiYE3Bfw&refer=us "Bloomberg has just published an article"#> saying that Morgan Stanley, Goldman Sachs and Merrill Lynch have just had their bond ratings lowered to Baa2 -- almost "junk" status. Why? Because these investment firms had invested in mortgage banks that have now gone bankrupt. And Berner's a top economist at Morgan Stanley. Well, if these guys are so stupid that they drive themselves into junk status, then what reason do we have to believe that they're any less stupid now? If these guys define their "Macroeconomic" models, then I'd like to define the Xenakis "Macroeconomist" Model. Go back and determine the results of each economist's predictions, and use those results to estimate how much of a moron he is. Most of these people have a fiduciary responsibility to their clients. That means that if Berner thinks that the market is going down, he has a fiduciary responsibility to say so. Professionally, these guys don't have the "right" to make up macroeconomic models that bring in the greatest levels of income. I call these people stupid because I hold them to a much higher standard than I hold an ordinary person. They're supposed to be experts. So either they don't know what they're talking about, which makes them stupid, or they know what they're doing and thereby risking going to jail, which also makes them stupid. History shows that by the time that this is all over, a lot of these people will indeed be in jail. =eod =// &&2 e070303 Where should I put my money? =data ww2010.weblog.y2007.e070303.head Where should I put my money? =data ww2010.weblog.y2007.e070303.keys =data ww2010.weblog.y2007.e070303.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070303.date 3-Mar-07 =data ww2010.weblog.y2007.e070303.txt1 Answers to financial questions from readers. =data ww2010.weblog.y2007.e070303.txt2 I've been receiving a lot of financial questions from concerned readers lately. Some of these questions would require an operational crystal ball to answer, and others can be probabilistically answered, based on trends identified by Generational Dynamics forecasting. I have always been very reluctant to give financial advice, and that's still true today, but I'll try to say as much as I can. Almost every journalist, pundit, analyst, and advisor has some financial stake in today's market, and their answers to financial advice questions are influenced by what is most likely to make money for them. I have nothing at stake except my own credibility, so my answers will be a lot more cautious than answers by others. This article is meant to be comprehensive, so it will repeat material I've given in other articles. In particular, I want to give the theoretical explanation of what things can and cannot be predicted, so that readers can draw their own conclusions about the validity of the predictions.

Q:	You've been saying for years that "the stock market will fall to the Dow 3000-4000 range, probably in the 2006-2007 time frame." If it doesn't happen in 2007, does that mean you simply move the time frame to 2008? Is it ever possible for you to be wrong?
A:	There's no way to predict the date of a generational panic. If I knew of a way, then I'd be wealthy, instead of being an unemployed senior IT consultant who is just getting by. I'm very, very aware of the problem you mention, so what I do instead is point to imbalances that can't continue. In my article, <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory,""#> I show that macroeconomic theory doesn't get anything right, and so at least I'm no worse than mainstream macroeconomics (though admittedly that isn't a very high bar). But more important, I've pointed out that mainstream macroeconomics predicts that various things should be leveling off and falling - public debt, balance of payments, etc. -- but they keep growing exponentially. With hedge funds, I've shown that <#inc ww2010.weblog.ref e061230 "the global economy has turned into a giant pyramid scheme (or Ponzi scheme)"#> -- and you can't predict when a pyramid scheme will crash either, but you know for sure that it has to crash. So I use the terminology "it could happen next week, next month, next year, or thereafter, but probably sooner rather than later," to convey a sense of urgency without committing to a date. But the point is that the imbalances cannot continue. It's mathematically impossible. So that's the best I can do for a date, until I can find someone who can repair my fortune telling globe. So my answer to the complaint that my forecast can never be proven wrong is as follows: If public debt and global account balances and hedge fund market values actually start falling, instead of growing exponentially as they've been doing for years, then you can declare me "wrong."
Q:	While your comments regarding the stock market are very interesting I miss any remarks about currency issues. Will we get deflation or inflation? Will gold rise? Will the dollar do better or worse than the yen? Isn't the real bubble in emerging markets?
A:	Normally I can't make any such specific predictions, because that's not what Generational Dynamics is all about. The comparison to weather forecasting is as follows: A weatherman will see that the barometer is falling, and from the thermometer that the temperature is freezing, and conclude that it's probably going to snow. The predictions that I make are of a different kind: No matter what the thermometer or the barometer say today, the weather is going to get warmer over the next few months because summer's coming. Simple, huh? In other words, Generational Dynamics identifies trends that are decades or even centuries long and applies them to today. The methodology for making the resulting forecasts is what I've been working on for five years. My web site has been an open experiment since 2003: every article I've written, every prediction I've made is still on the web site, where anyone can go back and read it to make sure that I'm not fudging. Of the variables you've mentioned above, I believe the only one that I've commented on is the inflation rate, where I've said that <#hreftext ww2010.i.fed050324 "we're in a long-range deflationary trend,"#> and that I expect prices to fall 30% by 2010. However, relative currency values over the next two decades will probably depend on who wins the war. From the point of view of Generational Dynamics, I can't narrow things down too much. Generational Dynamics predictions are based on the attitudes and behaviors of large masses of people, entire generations of a population. Every individual has free will. The attitudes and behaviors of one person or a small group of people, including a group of politicians, cannot be predicted. However, entire generations of people act in predictable and cyclical manners, and the attitudes and behaviors of entire generations of people can be predicted, in some cases rather precisely. So the "real bubble" is not one particular market or one particular asset. The "real bubble" is that entire generations of people alive today have lost all semblance of risk aversion, and they'll use whatever tools are available -- Wall Street, emerging markets, hedge funds, whatever -- to exhibit this wild, debauched, unprincipled financial behavior. When you ask whether the "real bubble" is in emerging markets or Wall Street, you're asking about the tools the investors are using, not about the generational attitudes and behavior. And there's no way to predict what tools will be used, except that if a tool is available, it will be used.
Q:	How come financial analysts on television can make specific forecasts?
A:	As I said, they're like weather forecasters. They can tell you whether it will rain tomorrow, but they can't tell you whether it will rain next week. These are short-term forecasts. Let me give an example from Friday on CNBC. Host commentator Larry Kudlow was arguing with several people -- consultant Steve Liesman, and guest Nouriel Roubini -- about whether the economy is going into a recession. Now, there are several so-called "economists" who make predictions based on political inclinations. Two of the worst miscreants in this regard are Larry Kudlow, who is biased to the right, and Paul Krugman, who is consistently to the left. It was amusing to see Kudlow criticize pro-Democratic anti-Bush Krugman on Friday for predicting nine recessions in the last four years, while the pro-Republican pro-Bush Kudlow invariably predicts that things are always going to do well. These are all political forecasts, and they're worse than useless. Now, in his discussions with the other economists, Kudlow wanted to make the point that there are many indicators that we're headed for a boom economy, and few indicators that we're headed for a bust. Without attempting to comment on them, here's his list of the indicators that we're headed for a boom economy: JoC [Journal of Commerce] Industrial Metals Index, CRB [Commodity Research Bureau] Futures Index, CRB Spot Index, Dollar Index, Yen Carry Trade, Emerging Markets Spread, OFHEO [Office of Federal Housing Enterprise Oversight] Home Price Index, ISM [Institute for Supply Management] Manufacturing Index, Junk Spread/Baa Spread, Profits/Profit Margins, Low Unemployment/High Wages, Record Low Margin Tax. And here's his much shorter list of "bust" indicators: Gold, Copper, Yield Curve Spread, 10-Year Yield. (Why isn't the housing bubble bust on this list? I don't know.) The point I want to make is that it's ALWAYS possible to prepare two lists like this. Even in the depths of the Great Depression, I'm sure that there were some indicators of a "boom." So all the economists end up doing is choosing their favorite short-term indicators and talking about them. Someone on the other side of the issue chooses from his opposing list of indicators. That's why these economists can make specific predictions, and that's why their predictions have no better probability than chance of being right. The analogy to weather forecasting is this: They see that the outside temperature was in the 40s last week, and is in the 30s this week, and so they predict that the temperature will be in the 20s next week. (This analogy is a very accurate one, incidentally.) They use short-term indicators, and completely ignore the long-term trend that indicates that summer is coming. Generational Dynamics predictions are not like that. (Recall the weather forecasting analogy -- predicting that it's going to be hot this summer). That's why Generational Dynamics predictions are always right, even though the time frame cannot be predicted with certainty. However, the forecasting methodology that I've been developing these last five years does use current economic indicators, but in a different way than the pundits. Generational Dynamics long-term forecasting alone tells me the final destination, but not what route we'll take or the timeline indicating how long it will take. The full forecasting methodology combines the long-term predictions, giving us the destinations, with short-term economic indicators and events, to identify the route and the timeline. This is what I've been developing all these years, and everything I've done is posted on this web site (or, in the case of more theoretical matters, in the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 ""Objections to Generational Dynamics" thread"#> of the Fourth Turning forum). The weather forecasting analogy is this: We know that summer is coming, but we're not sure when. So we look at the thermometer and the temperature trends, and we use that information to determine how close we are to summer. This is a very different way of using the thermometer than the pundits do. Incidentally, I've used the same forecasting technique in politics as well. For example, in the Israel/Palestine region, the <#hreftext ww2010.i.may01 "May, 2003, Generational Dynamics prediction"#> was that Arafat's disappearance would be part of a generational change that would lead the Mideast into a massive new crisis war (between Jews and Arabs), re-fighting the bloodbath war in 1948-49 following the partitioning of Palestine and the creation of the state of Israel. Since then, I've been tracking events to correlate them with the Generational Dynamics prediction, in order to narrow the time frame and determine the scenarios.
Q:	Perhaps you can make some forecasts based on long-term trends. The value of the U.S. dollar went up in the 1930s Great Depression. Will that happen again in a new Great Depression? How will it do against the yen and the euro?
A:	It's impossible to predict. Remember that the U.S. was enormously a creditor nation in 1929 and throughout the 1930s, while today we're enormously a debtor nation. Many economists today believe that the yen is substantially undervalued, so it might end up doing the best. I suspect that there is a lot of merit to this claim, but this is not an issue I've studied. The euro looks strong today, but it has very weak fundamentals because its continued existence depends on agreement and support by many euroland countries, and the EU countries are bitterly divided over the EU constitution. After all these years, Britain still uses a national currency instead of the euro. When a real financial crisis arrives, it's quite possible that several euroland countries will drop the euro and return to their national currencies. In fact, <#inc ww2010.weblog.ref e040815b "Morgan Stanley warned about exactly that in 2004."#>
Q:	If the market is going to fall, should I sell short?
A:	For those who don't know, "selling short" is a technical method for betting that a particular stock, or the stock market as a whole, is going to fall. In its simplest form, it works like this: You borrow some shares of stock, and you sell them at the current price. Three months later, you're required to buy the same number of shares at the price at that time, so you can repay the stock loan. If the price has gone down in the meantime, then you've made money. In the current market, there are two big problems with selling short: Perhaps the market will recover from last week's havoc, and the stock market bubble will grow even larger for a few months. Then you would lose a great deal of money in the meantime. When the actual generational panic occurs, and the stock market starts falling for real, then most investors will be unable to meet their obligations. Since someone else will be holding your money in escrow during the period before you return the stock, you may end up losing your entire investment anyway. Even in the best of times, selling short should be attempted only by investors who REALLY know what they're doing.
Q:	What should I buy when I sell my stocks? Should I buy gold?
A:	The price of gold will depend on so many chaotic factors that it's impossible to predict what will happen. In the case of a major financial crisis, when factories are closing, the value of gold may go down along with other commodities. On the other hand, if the Clash of Civilizations World War begins, then the value of gold will probably spike up, at least for a while. But then there's the other problem: If you have gold in a crisis, what will you do with it? You can't eat it, so you have to exchange it for cash or food, and that may be a problem. It's even possible in some scenarios that the government will confiscate all gold, so your gold would be useless.
Q:	I buy and sell stocks on my desktop computer. Suppose I keep my money invested, but sell everything the moment that things look really bad. I can do it right away at any time, since I'm always at my computer.
A:	There are two things wrong with this strategy. First, you won't necessarily follow through. This kind of day trading is a gambling addiction, and you won't want to sell out so easily. You may decide to wait a little longer to see if the market goes up again, and then you'll lose even more. Second, you won't be able to sell. When a generational panic occurs, as in 1929, the computer systems of every bank, broker and exchange will be overwhelmed with sell orders. It's likely that the markets will have to shut down for a few hours, or for a day or two. So the market will keep falling, and you'll be stuck using your desktop computer to run a spreadsheet computing how much money you're losing every minute.
Q:	=inc common.name maximumruin What's the "Principle of Maximum Ruin"?
A:	The Principle of Maximum Ruin is my name for a phenomenon that economist John Kenneth Galbraith described in his 1954 book The Great Crash - 1929, summarized in the following passage: "A common feature of all these earlier troubles [previous panics] was that having happened they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune." (p. 108) In other words, all the experts were fooled, because nothing like it had happened in their lifetimes. That's Generational Dynamics in action. Galbraith showed how, after the initial crash on October 24, 1929, "In the first week the slaughter had been of the innocents," in the second week it was "the well-to-do and the wealthy" who were slaughtered (p. 113), and then more and more people were sucked into ruin during the years that followed. Maximum ruin for the maximum number of people. This process has already begun again, and today it's in full swing.
Q:	What are "cant" and "incantation"?
A:	These are the words used by Galbraith in the book just referenced to describe how government officials and financiers believe that they can keep the economy sound. Almost all commentators have an enormous bias: They MUST predict an improving economy if they want to keep their jobs. A stockbroker, a pundit, a journalist, a politician will lose his job or be shunned if he predicts a financial crisis, or even a recession. This was clear in the past week from the harsh condemnations of Alan Greenspan, whose remarks saying that a recession was a possibility could hardly be arguable. Galbraith gave dozens of examples of this. His point was quite similar to mine: That the commentators and analysts don't have the vaguest idea what they're talking about. Here's what he wrote about the comments of the great financier Andrew W. Mellon: "In any case, ... reassurance came from still higher authority. Andrew W. Mellon said, "There is no cause for worry. The high tide of prosperity will continue." Mr. Mellon did not know. Neither did any of the other public figures who then, as since, made similar statements. These are not forecasts; it is not to be supposed that the men who make them are privileged to look farther into the future than the rest. Mr. Mellon was participating in a ritual which, in our society, is thought to be of great value for influencing the course of the business cycle. By affirming solemnly that prosperity will continue, it is believed, one can help insure that prosperity will in fact continue. Especially among businessmen the faith in the efficiency of such incantation is very great." (p. 15-16) Galbraith uses the words "cant" or "incantation" to describe what's going on. The <#stdurl http://dictionary.reference.com/browse/cant "dictionary defines "cant""#> as: "insincere, esp. conventional expressions of enthusiasm for high ideals, goodness, or piety." The <#stdurl http://dictionary.reference.com/browse/incantation "dictionary defines "incantation""#> as either "the chanting or uttering of words purporting to have magical power," or "repetitious wordiness used to conceal a lack of content; obfuscation." This exactly describes the situation. Long-time readers of this web site may recall from 2004 how shocked I was that <#inc ww2010.weblog.ref e040917 "Bernanke congratulated the Fed's jawboning policy"#> for improving the economy. In other words, as incredible as it seems, he believes that the viability of the economy depends on what he and the Fed governors SAY. Fundamentals make no difference at all. Reading it, I couldn't believe my eyes. And, as I've said in previous articles, that's the piece that's really crazy about today's leading "experts." No one asks, "What is the REAL value of the stock market?" because the <#hreftext ww2010.i.050711eleven "only possible answer to that question is around Dow 4500-5000."#> And so, the "experts" don't think about that, but simply worry about what people say, as if that's all that matters. There's almost no common sense; just cant and incantation. And cant and incantation are very important factors in the Principle of Maximum Ruin.
Q:	What is "volatility," and why does high volatility indicate that a panic may be near?
A:	Officially, the VIX is the "Volatility Index," computed by the <#stdurl http://www.cboe.com/micro/vix "Chicago Board Options Exchange (CBOE)."#> Intuitively, volatility means that the stock market as a whole is making wild swings up and down. This occurred earlier this week, on Tuesday, when the market swung through a range of over 500 (Dow) points. By Friday, the volatility had gone down, and Friday was a fairly quiet day. In "normal times," investors make buy/sell decisions by examining individual stocks. When investors take individual paths, betting on individual stocks, then one investor's gains are canceled out by another investor's losses, so the market as a whole remains steady, and volatility is very low. But when volatility spikes up, it means that investors are now betting on the market as a whole, rather than on individual stocks. It's a state of frantic, high anxiety, because investors are panicking, for fear that the entire market will fall further, and they'll lose money, or that the entire market will go upward, and they'll lose the opportunity to make money. When investors get into this state, they're essentially treating the entire market as a single stock, and they either buy the market or sell the market. Now, the point is that, even in normal times, an individual stock is much more volatile than the market as a whole. A scandal could force an individual stock to fall 50%, or an unexpected merger rumor could double the stock value. When investors are so frantic that they treat the entire market as a single stock, then the stock market as a whole can become extremely volatile, subject to any bit of news or commentary. That's when the volatility is high. So it becomes a cycle. Bad news makes the investors anxious. Anxious investors sell off, and the selloff becomes more bad news that makes investors even more anxious. Under the right conditions, the anxiety reaches a tipping point and turns into full-scale panic. Those are very dangerous times. Just as an individual stock could fall 25% in a day or two, when investors treat the whole stock market as if it were an individual stock, then the whole stock market could fall 25% in a day or two, as happened in 1929 and 1987.
Q:	Can you say anything at all? Where should I put my money?
A:	There are a few things that I've told people to do. These are forecasts I can make because of long term trends. For most people, the best bet is to keep your money in cash in a local bank you can get to quickly, or else stick it in your mattress. Another alternative is to put your money into short-term 6-month Treasury bonds. You can purchase them online for no commission from <#stdurl treasurydirect.gov#> . They're almost entirely risk-free, and pay around 5% interest. However, keep some cash around, since you may not have any internet access during a crisis.
Q:	What about long-term Treasury bonds, 10 year or 30 year?
A:	I've had arguments with people over this. There are <#stdurl http://www.ustreas.gov/tic/mfh.txt "more than two trillion dollars"#> of these long-term bonds sitting in central bank vaults around the world, especially in Japan, China and the UK. Furthermore, this amount continues to grow exponentially. As a result, "everybody" knows the U.S. Treasury will never be able to redeem all those bonds. People tell me, "Of course they'll all be redeemed. The Treasury can print as much money as it wants, and it could redeem them all tomorrow." But my intuition tells me that when the world is flooded with some trillions of some particular item, and that the number of trillions keeps growing exponentially, and that those trillions of items could go on the market at any time, then those items may turn out not to be very valuable. During a crisis or a war, China or another country may put several hundred billion dollars worth of these long-term bonds on the market in order to destabilize the American economy. At that point, if you happen to have some of these bonds, they'll be worthless. So, if you're going to buy Treasury bonds at all, the best bet is probably short-term, 6-month Treasury bonds.
Q:	What's a "generational panic"?
A:	If you go back through history, there are of course many small or regional recessions. But since the 1600s there have been only five major international financial crises: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857 (or Panic of 1857), and 1929 Wall Street crash. Each of these major international crises occurred roughly 70-80 years after the previous one. What you find is that each new "debt bubble" occurs at exactly the time that the generation of people who grew up during the previous financial crisis all disappear (retire or die), all at once. Thus, the length of time between these "generational" financial crises is approximately equal to the length of a maximum human lifetime. Our 70-80 year interval is pretty much over. The next major 1930s style Great Depression is just around the corner, with 100% certainty. Nothing can be done to stop it. All we can do is prepare for it. As we've been saying since 2002, it's possible to prove that <#hreftext ww2010.i.050711eleven "a major 1930s style Great Depression is coming,"#> simply by noting that the stock market is overpriced by a factor of over 200%. Price/earnings ratios have now averaged 20 or more since 1995, and this alone shows that a crash is coming, since P/E ratios always fall close to 5 every decade or two, the last time in 1982. Today, you can look at various variables -- public debt, trade balances, hedge fund market -- and note that these variables have been growing exponentially, with no sign of leveling off and falling, and no willingness in Central Banks to force them to level off and fall. You can show mathematically that this situation cannot continue. So it's easy to prove that we're close to a major financial crisis, but it's impossible to know exactly when. When it happens, it will be triggered by a generational panic, the first since 1929. It will be a massive loss of confidence throughout the country and the world, total destruction of self-confidence, replaced by a corrosively growing fear, leading to panic, massive homelessness and bankruptcies. We're actually overdue for that, just as we're overdue for a flu pandemic. It's impossible to predict when this panic will occur, or what will trigger it. There have been some times in the last couple of years when I've warned my readers to be especially cautious, since the markets seemed particularly nervous. This was especially true following <#inc ww2010.weblog.ref e060118 "the LiveDoor collapse a year ago,"#> and again in May, when <#hreftext ww2010.i.060530panic "synchronized markets around the world fluctuated wildly."#> However, investors have always returned to their previous levels of starry-eyed giddiness, pushing the market bubbles even higher. Right now, and for the next few months, is another time of extreme danger. It is the wrong time to be in the stock market.
Q:	So where should I put my money?
A:	I never did answer that question, did I? The truth is that we're headed for a time of financial crisis and war that few people alive today have ever seen before. The last time was the 1930s and early 1940s, and the time before that was the late 1850s and early 1860s. At times like this, there's no guarantee of anything. You have to look at the options available to you, and find what looks best in your situation. Try to remain flexible, and be prepared for anything. Treasure the time you have left, and use the time to prepare yourself, your family, your community and your nation.

Web site readership has been greatly increasing in the last couple of months. I thank all of you for continuing to come back, and I appreciate the opportunity to present the information on this web site as a public service. I'm still managing to keep up with all e-mail questions sent to me, though it sometimes takes a few days for me to get back with a response, depending on volume of e-mail. So if you have a question, by all means send me an e-mail message, or use the "Comment" link at the top of this page. If you want to have a more open debate, you can do so in the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 ""Objections to Generational Dynamics" thread"#> of the Fourth Turning forum. That thread tends to get somewhat theoretical and esoteric sometimes (when there isn't a flame war going on), but it's still a good place to ask any kind of question on this subject that interests you. =eod =// &&2 e070302 Today's college students excessively narcissistic and money-oriented =data ww2010.weblog.y2007.e070302.head Researchers say that today's college students are excessively "narcissistic" and money-oriented =data ww2010.weblog.y2007.e070302.keys millennials, generation y, narcissism, narcissistic personality inventory, jean twenge, civic generation, hero generation, fourth turning, strauss and howe, william strauss, neil howe =data ww2010.weblog.y2007.e070302.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070302.date 2-Mar-07 =data ww2010.weblog.y2007.e070302.txt1 I hope taxpayers didn't pay for this nonsense. =data ww2010.weblog.y2007.e070302.txt2 According to the study, <#stdurl http://abcnews.go.com/Health/wireStory?id=2909034 "today's college students are more narcissistic and self-centered"#> than their predecessors. This conclusion is based on the responses of 16,475 college students nationwide who completed an evaluation called the Narcissistic Personality Inventory between 1982 and 2006. The new report follows <#stdurl http://www.gseis.ucla.edu/heri/norms06.php "a study released by UCLA last month"#> which found that nearly three-quarters of the freshmen it surveyed thought it was important to be "very well-off financially." That compared with 62.5 percent who said the same in 1980 and 42 percent in 1966. According to the new study's author, Professor Jean Twenge of San Diego State University, "We need to stop endlessly repeating 'You're special' and having children repeat that back. Kids are self-centered enough already." Can you believe this garbage? This woman obviously doesn't like kids -- let's hope she doesn't have any. Today's college-age kids are great. (This includes my own college-age kid, by the way. It also includes other college-age kids that I've met.) What I've learned in the past few years is that when someone complains about college-age kids being too self-centered, it's because they're pissed because college-age kids don't support the Boomer political issues. First, <#hreftext ww2010.i.060601antiwar "college students don't support the "antiwar movement,""#> which is hugely upsetting to the Boomer left in Washington, since they can't seem to muster more than a few hundred of them to attend their political events in Washington. Second, young college-educated women want, more and more, <#inc ww2010.weblog.ref e041011 "to stay at home and take care of the kids,"#> rather than work while the kids are in day care. Words can't describe how much this has freaked out the feminists. These two "problems" particularly have convinced many Boomers and Generation-Xers that there's something wrong with today's college-age students. Actually, what happened is that today's college-age children grew up during a "generational Unraveling era," the 1980s and 1990s, a time when there were almost no societal rules or structure. During this time, feminist-led programs deprived children of their fathers altogether, or for all but at most a few hours per month. Living with their single mothers, children were exposed much more, on a statistical basis, to child abuse, starvation, and sexual abuse by their mothers and mothers' boyfriends. The worst victims have been black children, who grew up in homes without their fathers over 70% of the time, though the nationwide figure of 33% is bad enough. Boys were particularly victimized during this period, as I frequently saw in dealing with female teachers and social workers when my son was growing up. These "professional" women uniformly knew NOTHING about boys -- and I mean absolutely NOTHING - their ignorance was truly abysmal -- and they treated boys as if they were simply defective girls. The result of this upbringing can be seen in another conclusion of the study, that college-age children are "more likely to have romantic relationships that are short-lived, at risk for infidelity, lack emotional warmth, and to exhibit game-playing, dishonesty, and over-controlling and violent behaviors." They're only doing what they saw their mothers and fathers doing. The chaotic family life (or lack of family life) has resulted in what Jean Twenge is now calling narcissism. When she says, "We need to stop endlessly repeating 'You're special' and having children repeat that back. Kids are self-centered enough already," this reaction to chaotic single-parent upraising must be what she's referring to. This current generation of college-age kids, sometimes called "Generation Y" or "Generation Next," sometimes called "Millennials," follow a particular generational archetype that has occurred in every society throughout history. In their book <#stdurl http://www.fourthturning.com "The Fourth Turning,"#> historians William Strauss and Neil Howe identified this as the "civic generation" and also the "Hero generation." They turn into hard-working "civics," because they see how incompetent their parents (Boomers and Gen-Xers in our case) are at running the country and the world, and they're sick of the fact that all their parents do is argue with each other, both at home and in government and society. They become the generation that's determined to actual DO something, instead of just complaining about other people. They turn into "Heroes," because they lead the nation into the next crisis war, which they embrace bravely and selflessly, with little or no fear of death. The last Hero generation were the G.I.'s that fought and beat the Nazis. The new Millennial generation is destined to become our next "Greatest Generation" that will fight the Clash of Civilizations World War. After the war is over, they'll return to their "civic" roots and rebuild the country and the world, setting up new institutions designed to guarantee that their children and grandchildren will never have to fight any such war again, just as the G.I. generation did. What are the psychological characteristics of the new Millennial generation? Well, since Ms. Twenge has found that they score so high on a narcissistic scale, I was curious to see the questions that they were answering. The following is the list of questions from the standard 40 question subset of 54-question <#stdurl http://www.columbia.edu/~da358/npi16/raskin.pdf "Narcissistic Personality Inventory:"#>

 2. I have a natural talent for influencing people.
 3. Modesty doesn't become me.
 5. I would do almost anything on a dare.
 7. I know that I am good because everybody keeps telling me so.
 8. If I ruled the world it would be a much better place.
10. I can usually talk my way out of anything.
12. I like to be the center of attention.
13. I will be a success.
14. I think I am a special person.
15. I see myself as a good leader.
16. I am assertive.
17. I like to have authority over other people.
19. I find it easy to manipulate people.
20. 1 insist upon getting the respect that is due me.
21. I like to display my body.
22. I can read people like a book.
23. I like to take responsibility for making decisions.
25. I want to amount to something in the eyes of the world.
26. I like to look at my body.
28. I am apt to show off if I get the chance.
29. I always know what I am doing.
30. I rarely depend on anyone else to get things done.
32. Everybody likes to hear my stories.
34. I expect a great deal from other people.
35. I will never be satisfied until I get all that I deserve.
36. I like to be complimented.
38. I have a strong will to power.
39. 1 like to start new fads and fashions.
42. I like to look at myself in the mirror.
44. I really like to be the center of attention.
45. 1 can live my life in any way I want to.
46. People always seem to recognize my authority.
47. I would prefer to be a leader.
48. I am going to be a great person.
49. I can make anybody believe anything I want them to.
50. I am a born leader.
51. I wish somebody would someday write my biography.
52. I get upset when people don't notice how I look when I
    go out in public.
53. I am more capable than other people.
54. I am an extraordinary person.

You know, I read through the above list, and what I see are exactly the characteristics that are going to be needed by the new "Greatest Generation." From the point of view of Generational Dynamics, we're headed for a new Clash of Civilizations World War with absolute certainty. The good news is that the people who will be fighting to protect our nation will be from the generation with the narcissistic characteristics indicated by the list of questions above. The bad news, of course, is that China and other nations that we'll be fighting will be from a generation with the same characteristics. =eod =// &&2 e070301b China replies to 'China threat' to US and Japan =data ww2010.weblog.y2007.e070301b.head China's Foreign Minister replies to "China threat" to US and Japan =data ww2010.weblog.y2007.e070301b.keys china, japan, south korea, taiwan =data ww2010.weblog.y2007.e070301b.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070301b.date 1-Mar-07 =data ww2010.weblog.y2007.e070301b.txt1 And China changes the official transcript to hide what he really said. =data ww2010.weblog.y2007.e070301b.txt2 At a press conference on Wednesday, Qin Gang, China's Foreign Minister (like our Secretary of State), gave a press conference at which he was asked about <#inc ww2010.weblog.ref e070223b "Vice President Dick Cheney's remarks last week,"#> in Australia, criticizing China's military buildup. Qin was also responding to some remarks from Japan: <#stdurl http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=135356&version=1&template_id=45&parent_id=25 "Shoichi Nakagawa, policy chief of the ruling Liberal Democratic Party,"#> echoed Cheney's remarks in questioning China's future intentions with its military:

"If something goes awry in Taiwan in the next 15 years, then within 20 years Japan might become just another one of China’s provinces. If Taiwan comes under (China’s) complete rule, Japan could be next."

Nakagawa's point is this: China says repeatedly that Taiwan is part of China, and if there is any hint in Taiwan of a move toward independence, then China will take military action to forcibly annex Taiwan. Furthermore, <#stdurl http://today.reuters.com/news/articlenews.aspx?type=inDepthNews&storyID=2007-02-28T175949Z_01_HKG53810_RTRUKOC_0_US-CHINA-PARLIAMENT-MILITARY.xml&WTmodLoc=NewsHome-C3-inDepthNews-2 "China's military buildup has particularly targeted force against Taiwan."#> Therefore, if anything "goes awry" in Taiwan at any time, then China will annex Taiwan by force, and then China will move on to annex Japan, according to Japanese minister Nakagawa. There was a conciliatory response from Japanese Prime Minister Abe Shinzo:

"It is meaningless to discuss just a part of the entire speech. It’s also been said in the past that Japan would become the 51st state of the United States."

Har, har. In passing, it's worthy of note that <#stdurl http://www.msnbc.msn.com/id/17311795/site/newsweek/ "Abe Shinzo has been plummeting in the polls."#> He was looking good when he was first elected in September, but now his government apparently has no clear objective, economic and unemployment problems are mounting, and two top officials have been forced to resign over financial scandals. One reason for the "chaos" is clear, according to Newsweek: He's surrounded by young and inexperienced advisers who don't know what the hell they're doing. They're from the <#inc ww2010.weblog.ref e070216 "the same young South Korean generation of advisers"#> who are over their head in dealing with the nuances of the North Korean nuclear problem. Thus, Japan joins the list of countries that are increasingly becoming paralyzed and dysfunctional -- including the U.S., UK, Israel, all of the EU, China, South Korea, and now Japan. <#inc ww2010.pic g070301.jpg left "" "China's Foreign Minister Qin Gang (Source: China Foreign Ministry)"#> Returning now to Qin Gang's press conference in China, here's how <#stdurl http://english.people.com.cn/200702/28/eng20070228_353045.html "China Daily described the Qin's response to the "China threat" question:"#>

"China adheres to the 'path of peace' China adheres to the path of peaceful development and is "an important force in the maintenance of peace and stability in the world and the region", Foreign Ministry spokesman Qin Gang told a regular press briefing yesterday. ... Rejecting Cheney's criticism, Qin said China's constructive role in the Six-Party Talks to make the Korean Peninsula nuclear free is clear evidence of China's commitment to world peace. He reiterated China's stance against weapons of mass destruction and stressed that the country has been promoting the peaceful use of outer space. Qin also rejected charges made by Japanese politician Shoichi Nakagawa on Monday against China's military spending. .. While reiterating that the Taiwan question is China's internal affair, Qin said China is a big sovereign country with a long borderline and coastline, and thus its maintenance of a certain military force is "beyond reproach".

That's nice. Now let's take a look at <#stdurl http://www.fmprc.gov.cn/eng/xwfw/s2510/t300100.htm "the official transcript, from China, of the press conference:"#>

"Q: Shoichi Nakagawa, Chairman of the Policy Research Council of the Liberal Democratic Party of Japan said yesterday that Japan might become another province of China within the following two decades if Taiwan were united into the mainland in the next 15 years. Moreover, China's growing military expenditure is a grave issue. Do you have any comment? Secondly, the US Vice President Cheney expressed concern over China's growing military power, deeming it incompatible with China's peaceful development and criticized China's outer space test. Do you have any comment? A: As for your first question, it must be pointed out that the Taiwan question is China's internal affairs which brooks no interference from any foreign or outside forces. Japan has made explicit commitment on the Taiwan question in the three political documents between China and Japan. We hope Japan can adhere to its commitment and ensure healthy and normal development of our bilateral relations. Regarding the so-called China's military build-up and intransparency of military expenditure in his statement, we have actually made clear our position and proposition on many occasions. Japan is clear about it. As a sovereign state with a long border on land and the sea, it is beyond questioning for China to maintain a certain level of national defense strengthen just to safeguard its own sovereignty and territorial integrity as well as national unity. Whereas Japan, a country with 1/25 of China's size and with 1/10 of China's population, has maintained a huge military expenditure. China's military expenditure is only 67% that of Japan and only 7% that of Japan in per capita terms. A country with a much smaller population and size than China keeps such a titanic military expenditure and constantly cries out "China Threat". What is its real intention? Isn't it strange? Japan has always asked China to increase transparency. So we also ask Japan to do the same and tell us their real intention is. Can they explain the real motives behind series of their military moves such as trying to include China's Taiwan into Japan's Contingency Plan and the above-mentioned remarks on Taiwan? I will reiterate that China is a peace-loving country committed to the road of peaceful development. China's development is conducive to regional and world peace and stability. We will not threaten any one, nor do we hope or allow to be blackmailed or threatened by others. As for your second question, China firmly pursues a path of peaceful development and is an important force to safeguard world peace and promote common development. ... We are ready to work with the US to implement the important consensus reached by the two heads of state, strengthen dialogues, exchanges and cooperation in all fields and properly address differences, so as to promote continuous, healthy and stable development of China-US constructive and cooperative relations."

As usual, this is a standard boilerplate response to this type of question, making the following points implicitly or explicitly:

We're a peace-loving country, on a path of peace, committed to constructive and cooperative relations, blah, blah, blah. But never a statement that they're not planning for war with Taiwan, Japan or the U.S.
It's nobody's goddam business why China is expanding its military. It's our right to do so.
Taiwan is part of China, and we will annex it by force if necessary. If anyone interferes, there will be war.
We are very suspicious of some of Japan's policies, which seem to support Taiwan's independence.
We are warning the U.S. not to interfere in Taiwan, or there will be war.

Finally, let's take a look at the <#stdurl http://www.abcnews.go.com/Politics/wireStory?id=2914261 "report by a Reuters reporter who was actually present at the press conference:"#>

"If someone always tears through your clothes and even wants to lift open your underwear, saying 'Let me see what's inside', how would you feel? Would you want to call the police? ... China maintains a reasonable national defense strength to protect our sovereignty, security, territorial integrity and national unity. Not for expansion, and certainly not for wars of aggression abroad."

This is a lot nastier and harsher than the official transcript. It reminds one that Hitler said one thing to the British Prime Minister ("peace in our time") at the same time that <#inc ww2010.weblog.ref e061010 "he was secretly meeting with Mussolini"#> to make specific plans for war with Britain. At the very least, it shows that the Chinese government won't hesitate to lie to downplay their intentions. However, I wanted to point out this subterfuge for another reason: It's clear that Qin was expressing a great deal of personal anger at the U.S. for questioning China's military buildup. This is not the first time we've noticed this. There was the <#inc ww2010.weblog.ref e050716 "2005 warning given by top-level Chinese army officer General Zhu Chenghu"#> if America interfered with Taiwan: "If the Americans are determined to interfere [then] we will be determined to respond. We . . . will prepare ourselves for the destruction of all of the cities east of Xian [a city in central China]. Of course the Americans will have to be prepared that hundreds . . . of cities will be destroyed by the Chinese." And just this past August, <#inc ww2010.weblog.ref e060818 "Sha Zukang, the Chinese ambassador to the U.N., furiously and harshly threatened the U.S. over Taiwan."#> He was literally screaming in an interview with a BBC reporter:

"The moment that Taiwan declares independence, supported by whomever, China will have no choice but to [use] whatever means available to my government. Nobody should have any illusions on that. ... It's not a matter of how big Taiwan is, but for China, one INCH of the territory is more valuable than the LIVES of our people." [With regard to the U.S.'s constant criticism of China's rapid militarization:] It's better for the U.S. to shut up, keep quiet. That's much, much better. China's population is 6 times or 5 times the United States. Why blame China? No. forget it. It's high time to shut up. It's a nation's sovereign right to do what is good for them. But don't tell us what's good for China. Thank you very much."

This intense fury is similar to <#inc ww2010.weblog.ref e070219 "Senator Ted Kennedy screaming angrily at the top of his lungs"#> two weeks ago, and <#inc ww2010.weblog.ref e070114 "NBC reporter Chris Matthews was screaming hysterically"#> a month earlier. As <#inc ww2010.weblog.ref e070212 "I recently discussed,"#> this is caused by "cognitive dissonance," as Boomers' fundamental beliefs, developed when they were college kids burning their draft cards while their girlfriends were burning their bras, are now being challenged by intractable events in Iraq. The result is hysteria, paralysis, and a collection of idiotic proposals emanating from pundits and Congress. So now we see the same thing happening in Japan and China. It's a fair question to ask, what is the source of the cognitive dissonance in their cases? What are their fundamental decades old beliefs that are being challenged by current events? In the case of Japan, it's fairly obvious. For decades, they believed that their pacifist policies, combined with an umbrella of protection from the United States, would protect them from another war like World War II. In the case of China, it's more complicated. I can't give you detailed sources on this, but it's the impression I've gained from reading hundreds of articles about China in the last few years:

The only reason that America originally committed to Taiwan's defense is because of bitter feelings from the 1950s Korean War.
The only reason that America has continued with that policy is because they could -- they were militarily much more powerful than China.
Therefore if China builds its military to parity with America, then America will no longer be committed to defending Taiwan.
Furthermore, after seeing how America backed down in the 1993 Somalia debacle, and other similar retreats, Americans won't even WANT to defend Taiwan. (In recent years, this has been replaced by a belief that America is too overcommitted in Iraq to want to defend Taiwan.)
Even if a war begins with America, China will beat them quickly, thanks to America's military weaknesses -- <#inc ww2010.weblog.ref e070223b "so-called "acupuncture warfare.""#>
Finally, there wouldn't even be a need for a war, because the Taiwanese people would WANT to be part of a powerful, prosperous mainland China.

These are the fundamental, axiomatic, core beliefs of China's post-war generation (corresponding to our Boomers). They have spent their lives looking ahead to a future where they would be the peer of the United States, perhaps replacing the Soviets as the world's second superpower, well-respected, and in control of their own boundaries, including the island across the Straits of Taiwan. These fundamental beliefs are being challenged by current events in two ways:

The Taiwanese people are <#inc ww2010.weblog.ref e060103 "becoming more "Taiwanese" and less "Chinese,""#> as people in older generations retire and die, and people in younger generations assume power.
The United States not only is not backing down from its defense of Taiwan, but is even showing contempt (as opposed to respect) for China's increasing militarization.

So when Sha Zukang, the Chinese ambassador, was screaming furiously, and said, "one INCH of the territory is more valuable than the LIVES of our people," and "It's high time to shut up. It's a nation's sovereign right to do what is good for them. But don't tell us what's good for China," he was reacting with total disbelief that America could possibly be pursuing its course. The screaming was an expression of desperation. Nobody wants a war, not the Chinese, not the Japanese, not the Americans, especially the kind of war we're headed for. And yet wars happen all the time. That's the contradiction that most people don't understand. Japan and America are headed for war with China because none of us has any choice. China MUST annex Taiwan. America MUST defend Taiwan. From the point of view of Generational Dynamics, a war with China is coming with absolute certainty, and probably sooner rather than later. It will be a major component of the coming "clash of civilizations" world war. =eod =// &&2 e070301 Investors breathe sigh of relief after "one-day blip" in stock market =data ww2010.weblog.y2007.e070301.head Investors breathe sigh of relief after "one-day blip" in stock market =data ww2010.weblog.y2007.e070301.keys =data ww2010.weblog.y2007.e070301.loc ww2010.weblog.log0703 =data ww2010.weblog.y2007.e070301.date 1-Mar-07 =data ww2010.weblog.y2007.e070301.txt1 Did it all happen because Alan Greenspan opened his mouth? =data ww2010.weblog.y2007.e070301.txt2 I really thought that analysts and pundits would be more cautious on Wednesday. But no, they were giggling and giddy all day long. Tuesday was just an aberration, they said. "It had to happen some time, but look what happened today (giggle)." Well, on Wednesday the New York markets recovered about 1/8 of what they lost on Tuesday. <#inc ww2010.pic g070228.jpg right "" "Fed Chairman Ben Bernanke gave his soothing, professorial testimony on Wednesday morning (Source: CNN)"#> The pundits gave a lot of the credit to the new Fed Chairman, <#stdurl http://www.nytimes.com/2007/03/01/business/01fed.html?_r=1&oref=slogin "Ben Bernanke, who testified to Congress in the morning."#> He was very soooooooooooothing. He calmed things down. "Don't worry, people," he seemed to say. "We're watching it verrrry closely, and nothing bad is going to happen." The pundits knew who the real villain was. "He was the cause of all our problems yesterday," said a few pundits. Who was this evil man? Why, none other than former Fed Chairman Alan Greenspan, who had, coincidentally, said on Monday that there might be a recession later this year. People say things like that all the time, and <#hreftext ww2010.i.051029bernanke "Greenspan came close to predicting a stock market crash several times"#> when he was still Fed Chairman, but that didn't matter then. But fear not. <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=ankK4CAR4xGk&refer=home "Greenspan has just recanted,"#> and now he says that a recession is "possible, but not probable." Phewwww. You know, this panic business is a funny thing. There have been various regional stock market collapses in countries around the world, with no great ripple on Wall Street. This Shanghai index isn't even all that important in China, so why should it be so important on Wall Street? There's no answer to that question except timing: Investors are ready to panic. The markets are very dangerous right now, because while investors are giggling, they're also scared to death. They don't know what's going on, the ride is spinning faster and faster, they're getting dizzier and dizzier. They're afraid of what will happen if they stay on the ride, but they're afraid they'll look like fools if they get off the ride. Be very cautious for the next few days and weeks. A generational panic and meltdown has to come soon, for reasons I've been giving for years. =eod =// &&2 e070227c Analysts flummoxed by Tuesday's financial bloodbath. =data ww2010.weblog.y2007.e070227c.head Analysts and pundits totally flummoxed by Tuesday's financial bloodbath. =data ww2010.weblog.y2007.e070227c.keys =data ww2010.weblog.y2007.e070227c.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070227c.date 27-Feb-07 =data ww2010.weblog.y2007.e070227c.txt1 The Dow fell 200 points in four minutes around 3 pm. =data ww2010.weblog.y2007.e070227c.txt2 I don't take very many risks on the web site, because of my concern for credibility. I reference only the most credible sources. I make predictions only when I'm absolutely certain, which is why all of my predictions have been right. And I very rarely talk about what I "feel" is going to happen, and when I do, I clearly label that as my "opinion" or "feelings," subject to change. So I will say this: It's very hard not to "feel" that something significant happened on Tuesday. And it's not what the analysts and pundits were talking about. Investors panicked at little, but not much. But an experience like this cuts into the Boomer investors' giddy overconfidence. Whereas investors were "looking for reasons to buy" in past years, now they're "looking for reasons to sell." Things looked really bad all day. The analysts were saying, "There's a flight to safety ... There's a low appetite for risk. ... This is a good thing because investors have been too complacent. ... People I've called on Wall Street say that this is a buying opportunity." But then at 2:58 pm something happened: <#inc ww2010.pic g070227a.gif center "" "Four North American markets on February 27, depicting the 200-point collapse in 4 minutes beginning at 2:58 pm"#> At 2:55 pm, when the Dow was down 260, I heard: "If you put this little dip in context, it isn't that significant." At 3:01 pm, when the Dow was down 470, I heard things like: "There's a lot of noise and shouting on the floor. At first we thought it was an error, but it's holding. ... We're moving to 500 point decline." <#inc ww2010.pic g070227b.jpg left "" "The lovely CNBC anchor Rebecca Jarvis points aaaalllll the way back to 2001, the last time the market was this shocking. (Source: CNBC)"#> Soon thereafter, we heard CNBC's anchor Rebecca Jarvis say, "I'm shaking my head because this is just shocking. You have to all the way back to 2001, one of the worst years for this exchange, to even find a down day like this." For the rest of the afternoon, the comments went something like this: "Huh? What happened? ... I've never seen anything like this. ... There's no reason for this much of a selloff. ... The economy is strong, the fundamentals are good. ... This isn't time to panic. ... The market was overdue for a correction. ... I've never seen anything like this before - it reminds me of 1987." The fact is that no one had any idea what was going on. They took guesses. As I explained at length in my comprehensive analysis of macroeconomic theory that I wrote last year, <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory,""#> economists have been wrong about everything, at least since the start of the bubble in 1995. They didn't explain or predict the bubble or its timing. They failed to predict low inflation or high unemployment in the early 2000s. They didn't predict or explain productivity increases. They didn't predict or explain the low interest rate "conundrum." They didn't predict or explain the housing bubble. They've been consistently wrong about almost everything. I must have heard dozens of analysts, economists, pundits and journalists today. Not a single one mentioned the price/earnings ratio index. NOT A SINGLE ONE. The P/E ratio has been at 19 or above since 1995, and so a fall is overdue. The P/E ratios fall to the 5-10 range every decade or two. They did so six times in the last century, most recently in 1982. You have to be a total moron to think it won't happen again, and yet, there they all were, arguing over whether it would be a one-day or one week phenomenon before the market started going up again. So let's make this clear: <#hreftext ww2010.i.050711eleven "a major 1930s style Great Depression is coming,"#> because the stock market is overpriced by a factor of about 250%, same as in 1929. (In 1987, when a brief panic occurred, the stock market was underpriced.) For reasons that I've repeatedly discussed on this web site since 2002, we're headed for a new 1930s style Great Depression, complete with massive unemployment, bankruptcies and homelessness. There is nothing can be done to stop this. If you listen to the airheads on TV, including the airheads that I've been quoting, you will be screwed. If you go back through history, there are of course many small or regional recessions. But since the 1600s there have been only five major international financial crises: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash. Each of these major international crises occurred roughly 70-80 years after the previous one. What you find is that each new "debt bubble" occurs at exactly the time that the generation of people who grew up during the previous financial crisis all disappear (retire or die), all at once. Thus, the length of time between these "generational" financial crises is approximately equal to the length of a maximum human lifetime. Our 70-80 year interval is pretty much over. The next major 1930s style Great Depression is just around the corner, with 100% certainty. Nothing can be done to stop it. All we can do is prepare for it. Perhaps the market will work its way out of the current crisis, as it has in the past. Perhaps things will settle down again. It's possible, but it doesn't fix the real problem. The market will still be overpriced by about 250%, and a collapse cannot be avoided. A panic must occur before too much longer, because of all the huge and growing imbalances in the global economy. There's a significantly high probability that we're seeing the beginning of it right now, right today, but if not, then we'll see it soon. One more thing. Wall Street IT systems became overwhelmed today around 3:45 pm ET (15 minutes before the market closed) because of the high volume of sell orders. There are "tons" (one analyst's word) of sell orders left over that haven't been processed, and won't be until Wednesday morning. This means that if you're planning to get out of the market "just before" the final crash, you may find yourself stuck for a couple of days. That's because there will be so many sell orders that the computers systems will be overwhelmed, and the market will shut down. You'll have to sit there watching TV as your positions are frozen and the market falls. I strongly urge my readers to get out of the market now, before you get caught. Keep your money in cash, or in 6-month Treasury bills. Don't reenter the market until its clear that things have settled down. =eod =// &&2 e070227b Shanghai stock market index falls 8.8%, pulling down Hong Kong and Europe =data ww2010.weblog.y2007.e070227b.head Shanghai stock market index falls 8.8%, pulling down Hong Kong and Europe =data ww2010.weblog.y2007.e070227b.keys =data ww2010.weblog.y2007.e070227b.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070227b.date 27-Feb-07 =data ww2010.weblog.y2007.e070227b.txt1 We're seeing more and more investor panic on the fringes. =data ww2010.weblog.y2007.e070227b.txt2 The <#stdurl http://www.iht.com/articles/ap/2007/02/27/business/AS-FIN-MKT-Asian-Markets.php "Shanghai Composite stock market index fell 8.8%"#> on the February 27 session that ends at 2:30 am ET. This is Shanghai's biggest loss in ten years. As <#inc ww2010.weblog.ref e070226 "we recently discussed,"#> the Shanghai market has experienced an enormous bubble, especially since mid-2006, with the index almost doubling. Millions of people spending all day watching stock prices go up and down in crazy day-trading sessions, just like America in 1999. Even Chinese officials have expressed concern about a collapse. With so much concern about a Shanghai bubble, everyone is nervous, and today's 8.8% fall may lead to further panic. Such things are impossible to predict with certainty, but this is certainly a time for caution. The Shanghai results had a small domino effect. The Hong Kong index fell 1.8%, but other Asian stocks fell only slightly. European stock markets are experiencing a greater effect. As of this writing (Tuesday morning Eastern Time), the European markets are still open, and have been falling uniformly 1-2%, to their lowest levels in over 4 weeks. The reason given is that <#stdurl http://www.iht.com/articles/2007/02/27/business/web-0227-eu-etocks.php "mining stocks are pulling the European market down."#> The reason that mining stocks are pulling the market down; the reason that mining stocks are falling is that investors fear that the Shanghai collapse will mean the end of China's meteoric growth and the concomitant demand for metals. Wall Street hasn't opened as of this writing, but stocks are expected to open sharply lower, according to the <#stdurl http://wsj.com "according to the Wall Street Journal."#> On Monday, there was an additional slight fall in <#inc ww2010.weblog.ref e070225 "the ABX index, that measures investor confidence in real estate mortgage repayments."#> This index fell at panic levels last week. What we're seeing could be called "panic at the fringes." This panic might grow, or it might settle down again, as it has in the past. From the point of view of Generational Dynamics, a total generational panic is to be expected. As we've been saying since 2002, it's possible to prove that <#hreftext ww2010.i.050711eleven "a major 1930s style Great Depression is coming,"#> simply by noting that the stock market is overpriced by a factor of over 200%. Price/earnings ratios have now averaged 20 or more since 1995, and this alone shows that a crash is coming, since P/E ratios always fall close to 5 every decade or two, the last time in 1982. Today, you can look at various variables -- public debt, trade balances, hedge fund market -- and note that these variables have been growing exponentially, with no sign of leveling off and falling, and no willingness in Central Banks to force them to level off and fall. You can show mathematically that this situation cannot continue. So it's easy to prove that we're close to a major financial crisis, but it's impossible to know exactly when. When it happens, it will be triggered by a generational panic, the first since 1929. It will be a massive loss of confidence throughout the country and the world, total destruction of self-confidence, replaced by a corrosively growing fear, leading to panic, massive homelessness and bankruptcies. We're actually overdue for that, just as we're overdue for a flu pandemic. It's impossible to predict when this panic will occur, or what will trigger it. There have been some times in the last couple of years when I've warned my readers to be especially cautious, since the markets seemed particularly nervous. This was especially true following <#inc ww2010.weblog.ref e060118 "the LiveDoor collapse a year ago,"#> and again in May, when <#hreftext ww2010.i.060530panic "synchronized markets around the world fluctuated wildly."#> However, investors have always returned to their previous levels of starry-eyed giddiness, pushing the markets even higher. That may happen again with the "fringe" panicking we're seeing right now. Perhaps the ABX index and the Shanghai stock exchange will settle down, and investors will return to creating an even more unbalanced and extravagant bubble than they have now. So I'm warning my readers, once again, that this is a time for great caution. A major crash is coming sooner or later. The panic may begin tomorrow, next week, next month, or next year. The current "fringe" panicking should be watched closely. =eod =// &&2 e070227 Srebrenica: Court blames Serbian people, not country =data ww2010.weblog.y2007.e070227.head U.N. Court blames Serbian people, but not country of Serbia, for 1995 Srebrenica genocide =data ww2010.weblog.y2007.e070227.keys =data ww2010.weblog.y2007.e070227.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070227.date 27-Feb-07 =data ww2010.weblog.y2007.e070227.txt1 This is the essence of a generational "crisis war." =data ww2010.weblog.y2007.e070227.txt2 In a lengthy ruling, the International Court of Justice said that the Serbian state <#stdurl http://www.timesonline.co.uk/tol/news/world/europe/article1441632.ece "did not order the massacre,"#> but was responsible for failing to prevent it. =inc ww2010.xr.related2 right srebrenica 3 darfur 1 "The court finds that the acts of genocide at Srebrenica cannot be attributed to the respondent's (Serbia) state organs." This was true although the Serbian government in Belgrade "should have made the best effort within their power to try and prevent the tragic events then taking shape." The 1995 Srebrenica massacre was a shock to all of Europe. The war in Bosnia had been going on since 1992, and it was brutally genocidal from the start. Amy Chua describes the war in her book World on Fire: "In the Serbian concentration camps of the early 1990s, the women prisoners were raped over and over, many times a day, often with broken bottles, often together with their daughters. The men, if they were lucky, were beaten to death as their Serbian guards sang national anthems; if they were not so fortunate, they were castrated or, at gunpoint, forced to castrate their fellow prisoners, sometimes with their own teeth. In all, thousands were tortured and executed." From the point of view of Generational Dynamics, this is what happens in crisis wars. The great majority of wars are non-crisis wars, where there are usually specific, clear objectives, such as the repatriation of land. But crisis wars are visceral, driven by panic by entire generations of people who have never seen anything like it before and are therefore are willing to accede to mass slaughter of enemy soldiers and civilians alike. That's why the decision by the Court of Justice makes sense. Non-crisis wars come from the politicians, the governments; crisis wars come from the people. The Court of Justice found that the Serbian army in Bosnia -- the "people" -- were responsible for the massacre, not the Serbian government in Belgrade. The Court of Justice did blame the Belgrade government for not stopping the genocide, but here I disagree with the Court; a crisis war genocide of this type cannot be stopped. It's a primal force of nature. That's why the U.N. couldn't stop the Srebrenica genocide either, and that's why the U.N. couldn't have stopped the Rwanda genocide, and can't stop the Darfur genocide today. This is another important difference between crisis and non-crisis wars: Non-crisis wars are usually politically unpopular, and they often just peter out, or quickly end when a specific objective is reached or as a result of mediation. But crisis wars cannot be mediated, and they don't just peter out. They continue to build in energy like a huge unstoppable rock rolling down a hill until it crashes into something with explosive force. The climax of a crisis war is always such an explosion, something that sears the memory of the participants for decades or even centuries. In the case of the Bosnian war, this explosive conclusion was the massacre at Srebrenica. Tens of thousands of <#stdurl http://news.bbc.co.uk/2/hi/europe/675945.stm "Bosnian Muslims had taken refuge in the Bosnian town of Srebrenica,"#> which had been designated as a "United Nations Safe Area" in 1993. In July, 1995, the Bosnian Serb army claimed that the Muslim army was hiding out in Srebrenica, and began shelling the town. The Serbs distributed candy to the children as a trick to separate the men from the women and children. 23,000 women and children were bussed away, while the men were held in trucks and warehouses. By the time it was over, 7,000-8,000 men were massacred. 100,000 were killed during the entire war. Videos of the massacre are available on YouTube -- just type the word Srebrenica into the search engine. <#stdurl http://youtube.com/watch?v=HdMOG3gJvYs "Here is one from a Muslim point of view"#> that takes you through the major events, but doesn't contain any explicit violence. Also, <#stdurl http://news.bbc.co.uk/media/news_web/video/41292000/nb/41292777_nb_16x9.ram "here's a link to a BBC file for RealPlayer"#> that tells the story with original BBC broadcasts. There is a great deal of guilt among the Europeans for the Srebrenica massacre, since it was in their backyard and they didn't try to stop it either, which means, in the logic of court decision, that the European community is just as guilty as the Serbian government. As part of its action in capturing Srebrenica, the Serbian army captured 14 Belgian U.N. "peacekeepers," and kept them as hostages. The Serbs threatened to kill the hostages, resulting in the termination of any U.N. air action to stop the massacre. Then, to get its peacekeepers back, <#stdurl http://news.bbc.co.uk/2/hi/europe/675945.stm "the U.N. exchanged 5,000 Muslims it was sheltering for the 14 Belgians."#> The 5,000 Muslims were presumably slaughtered. Furthermore, all of this happened just a year after the explosive conclusion to the Rwanda civil war when, in three months in 1994, one million Tutsis were raped, murdered, tortured and dismembered by their Hutu neighbors, friends and family. The U.N. had made no attempt to stop that genocide. Today, the <#inc ww2010.weblog.ref e060912b "only full-fledged crisis war"#> going on in the world is the genocide in Darfur. As <#inc ww2010.weblog.ref e040628 "I wrote when the world first became came aware of Darfur in 2004,"#> the U.N. is completely irrelevant, and that the genocide cannot be stopped until it's run its course. That prediction has certainly come true, but when will the Darfur genocide have run its course? The answer to that question is when the climax occurs. It will have to be something so explosive, like the Srebrenica massacre or the atomic weapons blasts at Hiroshima and Nagasaki that ended World War II, that people will never forget it. So far, nothing like that has happened in Darfur, as far as I'm aware. <#inc ww2010.pic g070226a.jpg left "" "File footage: Ratko Mladic and Radovan Karadzic at a peace signing in 1995. (Source: BBC)"#> Meanwhile, the Srebrenica story is far from finished. If you think that the bitterness between Jews and Arabs is great, then you don't know the Serbs and Muslims. Here's an example of what I stumbled across in a blog, doing research for this story: "Who are you to talk - you have no history other then begging the USA for help. The US should drop condoms on you so when you f--k with your sisters you don't multiply like animals. You are aware that it takes your mother 9 months to throw out the garbage." I toned that down a little, but you get the idea. The feelings are similar on the other side. Given that feelings still run so deep, you won't be surprised to learn that the Serbian government is <#stdurl http://news.bbc.co.uk/2/hi/europe/4079642.stm "preventing the capture of Ratko Mladic and Radovan Karadzic,"#> the Serb leaders who masterminded the 1995 massacre. Which just goes to show the truth of that saying: One man's terrorist or mass murderer is another man's freedom fighter and hero. =eod =// &&2 e070226 China: Shanghai stock market bubble appears close to bursting =data ww2010.weblog.y2007.e070226.head China: Shanghai stock market bubble appears close to bursting =data ww2010.weblog.y2007.e070226.keys =data ww2010.weblog.y2007.e070226.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070226.date 26-Feb-07 =data ww2010.weblog.y2007.e070226.txt1 People have been pawning their homes and borrowing money from friends and family =data ww2010.weblog.y2007.e070226.txt2 to invest in the stock market. <#inc ww2010.pic g070225a.gif right "" "Shanghai stock market index, past 5 years (Source: MarketWatch)"#> Cheng Siwei, vice-chairman of the National People's Congress, has <#stdurl http://www.marketwatch.com/news/story/really-chinese-equity-bubble-waiting/story.aspx?guid=%7BD5CD7DDF-4D3E-4DA1-9437-251E41C4951B%7D&dist= "warned of investors' "blind optimism" and a stock market bubble."#> The reasons are obvious when you see the adjoining <#stdurl http://www.marketwatch.com/tools/quotes/intchart.asp?symb=XX:1801730&sid=123443&dist=TQP_chart_date&freq=1&time=8 "graph of the past 5 years' performance of the Shanghai stock market."#> The index started taking off in the first half of 2006, and became practically vertical since mid-year. <#inc ww2010.pic g070225b.jpg left "" "Crazed day-trading Chinese investors watch minute-by-minute changes in stock prices at Beijing Stock Exchange (Source: CNN)"#> There are 80.5 million open stock trading accounts, with 90,000 new accounts are opened every day, overwhelmingly "retail" accounts for ordinary citizens. According to <#stdurl http://www.latimes.com/business/la-fi-chinastocks16feb16,0,4095761,print.story?coll=la-home-business "an analysis by the Los Angeles Times,"#> millions of Chinese have mortgaged their homes, and borrowed money from any source available, including their family and friends, in order to day-trade stock. This is very much like the day-trading insanity of 1999 in the United States, prior to the bursting of the Nasdaq bubble in 2000. But it's even worse in China because the Shanghai market is closed to outside investors. The result, according to Chinese analysts, is that the value of the stock market is "totally unrelated" to the companies. I had to chuckle when I heard this last remark on CNN, because <#hreftext ww2010.i.050711eleven "this is EXACTLY the observation"#> that I've been making about Wall Street, and <#inc ww2010.weblog.ref e061230 "hedge funds are completely out of control."#> China's entire <#inc ww2010.weblog.ref e060126 "economy has been growing into a bubble for 25 years,"#> with a 10% growth every year for that long. This has made the entire economy dependent on this continued growth, so even a minor recession could cause social problems throughout China. During the last year, the bubble has gone out of control, as it has with hedge funds and other aspects of the global economy. <#inc ww2010.pic g070225c.jpg right "" "Chinese artist Liu Xiaodong standing in front of painting Hot Bed. The painting sold for $2.5 million. (Source: theaustralian.news.com.au)"#> In China, it affects everything, even art. Paintings by Chinese artists are selling in the millions, and prices are growing just as quickly as the Shanghai stock market index. One person says that, bubble or no bubble, the skyrocketing prices are OK. "Even if it does crash, everything goes in cycles, and out of that will come something new. Chinese art is not going away," she says. Obviously, these people are in for a great deal of pain, but in the case of China it's much more ominous than that. From the point of view of Generational Dynamics, China is becoming increasingly unstable and is <#hreftext ww2010.i.china050116 "approaching a massive civil war as its bubble economy unravels,"#> along with the rigid social structure originally set up by Mao Zedong in the 1950s and 60s. Today, there are over 100 million migrant workers (15-20% of the entire workforce), mostly peasants who have lost their farms to corrupt land deals by CCP officials, who take any jobs they can find in the cities and send money back to their families in vast poverty-stricken rural areas. Exactly what event will trigger this civil war cannot be predicted, but it could happen next week, next year or after, but will probably happen sooner rather than later. =eod =// &&2 e070225 How to interpret and price the ABX derivative table =data ww2010.weblog.y2007.e070225.head How to interpret and price the ABX derivative table. (Corrected) =data ww2010.weblog.y2007.e070225.keys =data ww2010.weblog.y2007.e070225.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070225.date 25-Feb-07 =data ww2010.weblog.y2007.e070225.txt1 As investors panic over the rapid housing bubble collapse in the subprime mortgage loan market, =data ww2010.weblog.y2007.e070225.txt2 analysts are closely watching the <#stdurl http://www.markit.com/abx.jsp "the daily postings of the ABX index"#> as they appear around 3 pm ET each business day. The collapse began in December, accelerated slightly in January, and turned to total panic at the beginning of February. Here is the complete table, posted on Friday, February 23, 2007:

23-Feb-07 Overview
|Index   Series    Version   Coupon RED ID   |Price|High  |Low	|
|----------------- --------- ------ ---------|-----|------|-----|
|ABX-HE-AAA 07-1   7       1   9    0A08AHAC6|99.15|100.09|99.15|
|ABX-HE-AA 07-1    7       1  15    0A08AGAC8|99.15|100.09|99.15|
|ABX-HE-A 07-1     7       1  64    0A08AFAC0|92.50|100.01|92.50|
|ABX-HE-BBB 07-1   7       1 224    0A08AIAC4|75.21| 98.35|75.21|
|ABX-HE-BBB- 07-1  7       1 389    0A08AOAC1|68.50| 97.47|68.50|
|ABX-HE-AAA 06-2   6       2  11    0A08AHAB8|99.15|100.12|99.15|
|ABX-HE-AA 06-2    6       2  17    0A08AGAB0|99.15|100.12|99.15|
|ABX-HE-A 06-2     6       2  44    0A08AFAB2|92.69|100.12|92.69|
|ABX-HE-BBB 06-2   6       2 133    0A08AIAB6|76.80|100.58|76.80|
|ABX-HE-BBB- 06-2  6       2 242    0A08AOAB3|69.39|100.94|69.39|
|ABX-HE-AAA 06-1   6       1  18    0A08AHAA1|99.54|100.38|99.54|
|ABX-HE-AA 06-1    6       1  32    0A08AGAA9|99.76|100.73|99.76|
|ABX-HE-A 06-1     6       1  54    0A08AFAA7|96.20|100.51|96.20|
|ABX-HE-BBB 06-1   6       1 154    0A08AIAA4|88.50|101.20|88.50|
|ABX-HE-BBB- 06-1  6       1 267    0A08AOAA2|85.17|102.19|85.17|

Here's the definition of the various columns:

Index. This is ABX-HE, the index for mortgage loan insurance derivatives.
Series. This incorporates two subfields:
- Tranch. The values are: AAA, AA, A, BBB, BBB- . These are the investment grades. "AAA" is the highest investment grade, representing loans to the most creditworthy corporations. "A" is the investment grade for standard prime mortgages (the old fashioned kind, where you put down a 20-30% down payment, and then make monthly payments based on a fixed interest rate). "BBB" and "BBB-" are the investment grades for the riskiest subprime mortgage loans, with "BBB-" being the riskiest.
- Version. The values are: 06-1, 06-2, 07-1. 06-1 refers to loans made prior to the first half of 2006 (H1 2006 or 1H2006). 06-2 refers to loans made prior to the second half of 2006 (2H2006). 07-1 refers to loans made prior to the first half of 2007 (1H2007). (Corrected 23-Jun-2007) The launch date for the index is determined by the Version: 06-1 was launched on January 19, 2006; 06-2 was launched on July 19, 2006; 07-1 was launched on January 19, 2007.
Coupon. This is the annual payment. When you purchase this insurance, you have to pay this percent of the amount being insured at the beginning of each year.
RED ID. This is the index code identifier.
Price. This is the current index value, and it represents an additional premium price above the Coupon percentage. This price index is always 100 on the day that the index is launched. As investor confidence changes, this value increases as confidence increases, and decreases as confidence decreases. This is the value that analysts are watching, because it's been dropping like a stone.
High and Low. These are the high and low daily values of the index price since the index was launched.

Now, let's take an example. Let's suppose that you're a bank, and you have $10 million in high-grade "AAA" mortgage loans on your books, and another $10 million in "BBB-" subprime mortgage loans. You're afraid that some of your borrowers won't be able to pay, and you want some insurance. If you buy that insurance on the day that the index is launched, July 19, 2006, then you pay only the Coupon price. In the case of the highest rated "AAA" loans, the Coupon value is "11", and so you pay (0.11% x $10 million), or $11,000 for $10 million in "AAA" loans. The rest of your loans are "BBB-" quality, and there the Coupon value is "242", and so you pay (2.42% x $10 million), or $242,000 for the same kind of insurance on your "BBB-" loans. Quite a difference. That's what happens on the first day (July 19, 2006), because the Price index is always 100. =inc ww2010.blocking.start <#inc ww2010.pic g070224a.gif right "" "Index price of ABX-HE-AAA 06-2 from August 2006 to Feb 23, 2007 (Source: Markit.com)"#> But now let's suppose that you waiting until this past Friday, February 23, 2007, to buy the insurace. (These are still loans that were granted in the second half of 2006, and so the "06-2" version is still what we want.) On Friday, February 23, the price index for ABX-HE-AAA 06-2 (from the table above) was 99.15. You still have to pay the $11,000 Coupon price, but you also have to pay an additional ((100% - 99.15%) x $10 million) = $85,000. So, if you bought the insurance on Friday, you would pay a total of ($11,000 + $85,000) = $96,000. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic g070224b.gif left "" "Index price of ABX-HE-BBB- 06-2 from August 2006 to Feb 23, 2007 (Source: Markit.com)"#> Now, what about the subprime "BBB-" tranch? On Friday, February 23, the price index for ABX-HE-AAA 06-2 (from the table above) was 69.39. You still have to pay the $242,000 Coupon price, but you also have to pay an additional ((100% - 69.39%) x $10 million) = $3,061,000 So, if you bought the insurance on Friday, you would pay a total of ($242,000 + $3,061,000) = $3,303,000. =inc ww2010.blocking.end Here's a summary of all four computations: =inc ww2010.blocking.start

Date 	   Index           Coupon Price  Total payment computation
---------  ---------------- ---- ------  --------------------------------------------
19-Jul-06  ABX-HE-AAA 06-2   11  100.00  $10M x (0.11% + (100%-100.00%)) =    $11,000
19-Jul-06  ABX-HE-BBB- 06-2 242  100.00	 $10M x (2.42% + (100%-100.00%)) =   $242,000

23-Feb-07  ABX-HE-AAA 06-2   11   99.15  $10M x (0.11% + (100%- 99.15%)) =    $96,000
23-Feb-07  ABX-HE-BBB- 06-2 242   69.39	 $10M x (2.42% + (100%- 69.39%)) = $3,303,000

=inc ww2010.blocking.end =// This corrects the erroneous $1.1 million computation: =// 19-Jan-07 ABX-HE-BBB- 07-1 389 100.00 $10M x (2.42% + (100%-100.00%)) = $242,000 =// 23-Feb-07 ABX-HE-BBB- 07-1 389 68.50 $10M x (2.42% + (100%- 68.50%)) = $3,392,000 What this computation shows is that even hiqh quality tranches are being affected. The price for the "AAA" quality insurance went from $11,000 to $96,000, a factor of a little less than 9. The price for the "BBB-" tranch insurance went from $242,000 to $3,303,000, a factor of 14. Both of these changes are exceptionally high. What makes them have the appearance of a "panic," though, can be seen from the two graphs shown above. As you can see, the huge drop in both these indexes has occurred mostly in the last couple of weeks. Generational Dynamics has been predicting since 2002 that America is headed for a new 1930s style Great Depression. As happened in 1929, this crash will begin with a panic, with the stock market falling to Dow 3000-4000. This panic might occur tomorrow, next week or next year. There's no way to predict exactly what will trigger it, but the current collapse in the ABX index bears close watching. =eod =// &&2 e070224 This week's idiot of the week: Israeli defense minister Peretz =data ww2010.weblog.y2007.e070224.head This week's idiot of the week: Israeli defense minister Peretz =data ww2010.weblog.y2007.e070224.keys =data ww2010.weblog.y2007.e070224.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070224.date 24-Feb-07 =data ww2010.weblog.y2007.e070224.txt1 What the hell was this guy thinking? =data ww2010.weblog.y2007.e070224.txt2 <#inc ww2010.pic g070223c.jpg right "" "Israel's Defense Minister Amir Peretz (right) looks through binoculars with the lens cap on. On the left is the army's new Chief of Staff, Lt. Gen. Gabi Ashkenazi. They're reviewing a military drill in the Golan Heights. (Source: msnbc.com)"#> Israeli Defense Minister Amir Peretz was photographed and videotaped on Friday <#stdurl http://www.msnbc.msn.com/id/17294091/ "looking through binoculars with the lens cap on."#> CNN showed him raising the binoculars to his eyes three separate times -- each time with the lens cap on. Do you know who this guy is? He's Israel's Defense Minister. This is the guy who was in charge of Israel's military last summer, <#inc ww2010.weblog.ref e061223 "when Israel panicked and launched the Lebanon war within four hours,"#> with no plan and no objectives. In the scene photographed above, Peretz is reviewing a military drill in the Golan Heights. The army's new Chief of Staff, Lt. Gen. Gabi Ashkenazi, is explaining what's going on and pointing out the manoeuver's fine points. Several times, Peretz raises his binoculars and looks through them, but of course he can't see anything because the lens cap is on. Is this guy a total moron? Has he never used binoculars before? Can he not ask what the problem is? It never ceases to amaze me how ignorant politicians are about subjects that they're supposed to be their jobs. I've pointed out several times on this web site how journalists and politicians are looking more and more like complete idiots. ABC's George Stephanopoulos looked like an idiot in November because <#inc ww2010.weblog.ref e061126 "Jordan's King Abdullah had to tell him five times"#> of the importance of the Israeli/Palestine situation, but he was still clueless. NBC's Chris Matthews exhibited vitriolic partisanship and <#inc ww2010.weblog.ref e070114 "sheer stupidity after President Bush's speech,"#> making it clear that he knows nothing about such things as the Iran/Iraq war or the Truman Doctrine. CNN's Michael Ware, talking about the Iraq war, said <#inc ww2010.weblog.ref e061204 ""If this isn't a civil war, then I'd hate to see a real civil war,""#> apparently completely unaware that there is a real civil war going on Darfur, and that the Iraq war is nothing like that. The stupidity of politicians came to public attention in November, when <#inc ww2010.weblog.ref e070114b "Jeff Stein, national security editor for Congressional Quarterly, wrote an article"#> about how he'd inverviewed Silvestre Reyes, whom Nancy Pelosi had selected to be chairman of the House Intelligence Committee, and Reyes didn't even know whether al-Qaeda was a Sunni or Shia organization. And this isn't a political thing: Stein found the same level of ignorance across parties, even among analysts who were supposedly experts on the subject they couldn't answer questions about. Now, if you don't know that al-Qaeda is a Sunni organization, then you cannot possibly know anything about what's going on in Iraq. It's impossible. And Reyes has been on the House Intelligence Committee for five years, since 9/11. I don't know how it's possible to be involved in that subject for five years without accidentally learning something, but he and other politicians succeeded in learning nothing. And now we have the dysfunctional defense minister, Amir Peretz, of <#inc ww2010.weblog.ref e070118 "the dysfunctional Israeli government,"#> who can't even figure out how binoculars work. When you see any of these politicians on television, pretending to know something -- just remember this: they're idiots. =eod =// &&2 e070223b Vice President Dick Cheney, in Australia, criticizes China's military buildup. =data ww2010.weblog.y2007.e070223b.head Vice President Dick Cheney, in Australia, criticizes China's military buildup. =data ww2010.weblog.y2007.e070223b.keys =data ww2010.weblog.y2007.e070223b.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070223b.date 23-Feb-07 =data ww2010.weblog.y2007.e070223b.txt1 Cheney repeats Donald Rumsfeld's similar warning in Singapore in 2005. =data ww2010.weblog.y2007.e070223b.txt2 In June 2005, Secretary of Defense Donald Rumsfeld gave a <#inc ww2010.weblog.ref e050604 "speech at a conference in Singapore,"#> including comments on China's rapid and accelerating militarization:

"[A DOD report] concludes that China’s defense expenditures are much higher than Chinese officials have published. It is estimated that China’s is the third largest military budget in the world, and clearly the largest in Asia. China appears to be expanding its missile forces, allowing them to reach targets in many areas of the world, not just the Pacific region, while also expanding its missile capabilities within this region. China also is improving its ability to project power, and developing advanced systems of military technology. Since no nation threatens China, one must wonder: Why this growing investment? Why these continuing large and expanding arms purchases? Why these continuing robust deployments?

"Later today I'm going to meet with some members of the Australian military. My purpose is simply to thank them and their comrades for extraordinary service in a time of testing. Americans know that for this country, "standing by your mate when he's in a fight" are more than words in a song, and they signify a way of life. Having Australia's friendship makes my country very grateful and very proud. As leading democracies, Australia and the United States feel a deep sense of responsibility for security and peace in our world. The cooperation between our governments has risen to a new level, with stronger ties of defense and counterterrorism, and much broader cooperation on intelligence and information sharing. We're working closely on the Joint Strike Fighter and on Ballistic Missile Defense. Together with other nations, we founded the Proliferation Security Initiative, with the urgent business of keeping nuclear technology out of irresponsible hands. To this end, the six-party process has produced agreement on specific actions that will bring us closer to a Korean Peninsula free of nuclear weapons. We go into this deal with our eyes open. In light of North Korea's missile tests last July, its nuclear test in October, and its record of proliferation and human rights abuses, the regime in Pyongyang has much to prove. Yet this agreement represents a first hopeful step towards a better future for the North Korean people. China has played an especially important role in the six-party process, because the Chinese understand that a nuclear North Korea would be a threat to their own security. We hope China will join us in our efforts to prevent the deployment and the proliferation of deadly technologies, whether in Asia or in the Middle East. Other actions by the Chinese government send a different message. Last month's anti-satellite test, and China's continued fast-paced military buildup are less constructive and are not consistent with China's stated goal of a "peaceful rise." For our part, the United States and Australia have the same hopes for the future of China -- that its people will enjoy greater freedom and prosperity; that its government will be a force for stability and peace in this region."

Cheney was referring in general to China's rapidly growing buildup in high-tech military weapons clearly targeting Taiwan and the United States. These include a new generation of submarines fitted with nuclear-tipped ballistic missiles capable of reaching any American city. This buildup is consistent with a 2005 <#inc ww2010.weblog.ref e050716 "warning given by top-level Chinese army officer General Zhu Chenghu"#> if America interfered with Taiwan: "If the Americans are determined to interfere [then] we will be determined to respond. We . . . will prepare ourselves for the destruction of all of the cities east of Xian [a city in central China]. Of course the Americans will have to be prepared that hundreds . . . of cities will be destroyed by the Chinese." For about ten years, <#stdurl http://www.atimes.com/atimes/China/HJ20Ad01.html "China's military strategists have been discussing "acupuncture warfare":"#> Striking at key points of vulnerability where a single jab would paralyze the entire nation. Such acupuncture points include the US electricity grid, the Internet, oil supply routes, and its communications and spy satellites. A month ago, in a test clearly targeting the United States, <#inc ww2010.weblog.ref e070119 "China successfully tested an anti-satellite weapon"#> by blowing one of its own aging satellites out of the sky. It's believed that, in case of war, China could use this technology to destroy 50-100 American satellites within a few hours. That's why Cheney particularly mentioned this anti-satellite test in his speech. If China has only peaceful intentions, why is it testing technology whose only apparent use is to destroy American satellites? China is in the middle of New Year's celebrations, and so there was no official Chinese response to Cheney's statement. <#inc ww2010.pic g070223b.jpg right "" "During the interview with Lin Shaowen, the BBC showed file footage of Chinese military exhibitions. (Source: BBC)"#> But the BBC contacted Lin Shaowen, deputy director of the English service of China Radio International, and interviewed him by phone. Here's what he said:

"Well this sounded striking to us at this moment, because while at the same time he was recognizing China's efforts in bringing the six parties together - and achieving the FIRST MAJOR BREAKTHROUGH [raised voice] on substantial issues in the six party talk on the N. Korea nuclear issue, at the same time he was laboring china as again a potential threat or again a potential enemy to be contained. so far, at the moment, because of the three??? festival holidays, there's no immediate comment from the Chinese Foreign Ministry in response to Mr. Cheney's remarks made this morning in Australia. But I can only refer you back a statement by a spokesman made 15 days ago, when he said simply, 3 elements: that test last month was not targeting any country, posing no threat to any country, and violate no international treaty. So he made it simple. When I discussed with my colleagues the remarks made by Mr. Cheney, the only interpretation could be that he was trying to find an excuse to re-arm for military redeployment - especially in the tiny island of Guam, which is quite close to this side of the Pacific, because the United States very much has in mind of building up militarily in this part [of the world].... This may actually give Australia and countries like this a very awkward time in making a painful decision of fighting EITHER the United States or China. The world is painted as black and white. Actually, these two countries could sit together.

This is pretty much a boilerplate response. The reference to Guam was probably made because Cheney's next travel stop will be Guam. However, notice the following: Lin Shaowen does not deny that China is planning for war with America. He could have said, "Cheney is completely wrong; we would never want to have a war with the United States." No one from China ever says anything like that. However, the Chinese frequently say that a war is certain if America interferes with China's intention to reunite Taiwan with mainland China. Of course, the U.S. would be required to "interfere," since we're bound by a defense agreement with Taiwan. Another thing to notice is this sentence from Lin's response: "This may actually give Australia and countries like this a very awkward time in making a painful decision of fighting EITHER the United States or China." This sounds to me like a warning to Australia that in any upcoming war, they should side with China rather than with the U.S. That, of course, is not going to happen. <#inc ww2010.pic neville.jpg left "" "Neville Chamberlain, returning from a 1938 meeting with Hitler, promising "peace in our time," holding up a signed agreement"#> I found it interesting that, as they were broadcasting Lin's live telephone interview, the BBC showed file footage of Chinese military exhibitions. (See screen shots above.) It's well worth remembering that the British have been through this before. In 1938, British Prime Minister <#inc ww2010.weblog.ref e061010 "Neville Chamberlain returned from a meeting with Hitler"#> and declared:

"My good friends, for the second time in our history, a British Prime Minister has returned from Germany bringing peace with honour. I believe it is peace for our time. Go home and get a nice quiet sleep."

It later turned out that Hitler was planning war with Britain on the same day that he signed that agreement. The fact that the BBC was showing Chinese military footage shows that, unexpectedly, the BBC producers may have learned something after all. Finally, I'd like to quote from the end of Cheney's speech, to make a point about the wrong view of history:

Ladies and gentlemen, our two countries have great objectives before us, and our alliance is as important now as it has ever been. One of America's great historians, David McCullough, has noted that "among the most difficult and important concepts to convey in teaching or writing history is the simple fact that things never had to turn out as they did. Events past were never on a track. Nothing was foreordained any more then than now." Whether in Battle of Hamel in 1918, or 65 years ago in the Coral Sea, Americans and Australians were not mere witnesses to the unfolding of events. They were acting -- bravely, decisively, and together -- to turn events toward victory. And so much of the life we know today is a credit to the decisions and the actions of those who came before. Our generation, here and now, is also writing history. Present events are not on a track. In the war on terror, one side will win and the other will lose. Civilization will continue its upward course, or go in different direction. It can be sobering to take stock of all the serious work that needs doing; to realize all the duties that fall to us in a perilous time. Yet it's no reason to be afraid. Rather, it's a reason to be confident. We are not hostages to fortune. Our forbears were not the sort to be intimidated, or worn down by adversaries -- and neither are we. Today, as before, Australians and Americans are people of determination, of moral courage, and decency. We are strong countries that have sacrificed greatly for peace and freedom at home and on distant shores. Our purposes in this world are good and right. So we have made our decision. Once again, we choose to face challenges squarely. And once again, we go forward -- as allies, as comrades-in-arms, and, above all, as friends.

This view of history that major wars can be prevented or avoided is simply wrong, as Generational Dynamics has shown. In fact, it's very easy to show that great genocidal wars are unavoidable: Just note that the world population grows faster than the world food supply. Huge genocidal wars like World War II have a specific purpose: To kill enough people so that there'll be enough food for the survivors. But after a while, the population catches up to and surpasses the food supply again, and it's time for another genocidal war. Generational Dynamics predicts that we're headed for a Clash of Civilizations World War, and that a major component will be a genocidal war between China and the United States. This war could begin next month, next year, or thereafter, but the rapidly rising militarism of China means it can't be too far off. Here's what I keep telling people: What's going on in the world is like a tsunami that was launched decades ago, and can't be stopped or affected by any politician. You can't stop what's going to happen, but you can prepare for it. Treasure the time that you have left, and use it to prepare yourself, your family, your community and your nation. =eod =// &&2 e070223 CNBC reports that subprime ABX derivative index is crashing =data ww2010.weblog.y2007.e070223.head CNBC reports that subprime mortgage ABX index is crashing =data ww2010.weblog.y2007.e070223.keys =data ww2010.weblog.y2007.e070223.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070223.date 23-Feb-07 =data ww2010.weblog.y2007.e070223.txt1 They worry whether the subprime mortgage problems will spread to other parts of the economy =data ww2010.weblog.y2007.e070223.txt2 Mainstream journalists and economists are getting very worried about the apparently unstoppable crash in the ABX index that <#inc ww2010.weblog.ref e070222 "we've been following."#> CNBC this (Friday) morning reports that the index has already fallen very sharply from yesterday's levels. Official figures won't be available until late this afternoon. The pundits and analysts expressed two major worries:

That the severe problems with defaults and foreclosures in subprime mortgages (mortgage loans given to people who are poor credit risks) will start to spread into other parts of the economy. However, they noted that, so far, there have been no significant problems with prime mortgages (traditional mortgages).
The stock market has not had a 10% adjustment (a bear market fall of 10% or more) in several years. Furthermore, there hasn't been a 2% single-day fall in several years. (There were five such days in early 2003, but there hasn't been another one since the Dow fell 2.14% on May 19, 2003.) Furthermore, with Nasdaq 100 stocks trading at 40 times earnings (price/earnings ratio above 40). This portends that a major correction is overdue.

Here is a word of caution: When the journalists and pundits get concerned about something, that may well mean that it's disappearing as a problem. According to this philosophy, the ABX should start turning up again soon. However, the fundamentals are far too weak to make this assumption. Some <#stdurl http://ml-implode.com/ "23 mortgage financing firms have gone away"#> since December. Liquidity is decreasing, and credit rules are tightening, meaning that money is much less available to bail out subprime mortgage borrowers, so the number of defaults and foreclosures seems certain to continue climbing. Here's one bit of comic relief: We're beginning to see signs of the "lipstick reaction": In the retail sector, some investors are buying accessory and footware stocks, because during a recession women purchase lipstick and low-cost shoes and accessories to feel good. =eod =// &&2 e070222 Global markets skyrocket to all-time highs, while housing keeps tanking =data ww2010.weblog.y2007.e070222.head Global markets skyrocket to all-time highs, while housing keeps tanking =data ww2010.weblog.y2007.e070222.keys =data ww2010.weblog.y2007.e070222.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070222.date 22-Feb-07 =data ww2010.weblog.y2007.e070222.txt1 Another mortgage lender, NovaStar, reveals that it's in trouble. =data ww2010.weblog.y2007.e070222.txt2 Mortgage lender NovaStar Financial Inc. <#stdurl http://ir.novastarmortgage.com/phoenix.zhtml?c=84748&p=irol-newsArticle&t=Regular&id=965209& "announced a $14.4 million loss for the fourth quarter of 2006"#> on Wednesday. This was expected, but what really spooked the market was the additional unexpected announcement that NovaStar expects to "recognize little, if any, taxable income" for the next four years (though, in <#stdurl http://ir.novastarmortgage.com/phoenix.zhtml?c=84748&p=irol-newsArticle&t=Regular&id=965772& "follow-up announcement,"#> they point out that hey, we're still going to make some non-taxable income.) Panicking investors <#stdurl http://www.businessweek.com/investor/content/feb2007/pi20070221_154714.htm?chan=top+news_top+news+index_businessweek+exclusives "sold off NovaStar, causing the stock to fall 41% in one day."#> <#inc ww2010.pic g070222.gif right "" "Index price of ABX-HE-BBB- 06-2 from August to Wednesday, Feb 21 (Source: Markit.com)"#> In addition, as shown in the adjoining graphic, the ABX housing mortgage default loan index continues its precipitous collapse. We've been <#inc ww2010.weblog.ref e070213 "discussing the collapse of this index"#> in the past. This is a "derivative" index that allows an investor to buy a kind of "insurance" that a mortgage loan will be repaid. The dramatic fall of the index measures the rapidly decreasing faith that investors have that subprime mortgage borrowers will actually repay their mortgage loans. The subprime loans are made to borrowers who payer a higher interest rate because they have poor credit. The collapse of this index value reflects the continuing bad news of increases in late payments and foreclosures on these loans. The signs indicate that the rate of foreclosures will continue to increase through 2007. Here's an example to show what this means to real investors: A month ago, you could have purchased an <#stdurl http://www.markit.com/abx.jsp "ABX-HE-BBB- 07-1 "insurance policy""#> on a $10 million subprime mortgage loan for $389,000. Today, <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=avEt.7ldbFGM&refer=home "the same insurance policy costs $1.1 million."#> Meanwhile, the TV financial analysts are still burbling about how great the global financial system is going. One especially giddy report at 10 am Thursday on CNBC told us that "We're in the middle of a global rally." Stock markets around the world are reaching all-time highs: Mexico and Brazil in Latin America, Germany in Europe, and Japan and Korea in Asia. The reporter chortled that China would also be at an all-time high, but they're closed this week for the new year's celebrations. <#inc ww2010.pic g070222b.jpg left "" "Lovely CNBC anchor Rebecca Jarvis points to the Nasdaq all-time high in 2000, to show how today's value is around 50%. (Source: CNBC)"#> =// \download\temp\SNAG-0171.jpg That was followed by another bubbly report: The Nasdaq index is at at a six-year high!! At 50% of it's all time high in the year 2000!! It never even occurred to anyone to ask the question: Well, if there was a crash six years ago after an enormously skyrocketing bubble stock market, can't it happen again today? I mean, we keep having stock market rally after stock market rally, not just on Wall Street, but around the world, even though we're seeing a segment of the housing mortgage market collapse before our eyes. It's the same as it was in 2000 ... and in 1929. Isn't it? =eod =// &&2 e070221 Generational Dynamics web site down on Tuesday evening 20-Feb - Please resend e-mail. =data ww2010.weblog.y2007.e070221.head Generational Dynamics web site down on Tuesday evening 20-Feb - Please resend e-mail. =data ww2010.weblog.y2007.e070221.keys =data ww2010.weblog.y2007.e070221.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070221.date 21-Feb-07 =data ww2010.weblog.y2007.e070221.txt1 Ironically, web site host "Web.com" just won a reliability award. =data ww2010.weblog.y2007.e070221.txt2 This web was down for several hours on Tuesday evening, February 20, 2007. In addition, all e-mail messages sent to me (at any e-mail address) from 6 p.m. ET Tuesday to 8 a.m. ET Wednesday apparently have been lost. Please re-send any e-mail messages sent during that time. -- I'll take this opportunity to briefly mention some recent changes to this web site. I've changed the format of the "Permanent Link" URL for an article so that it's shorter, and so that it goes to a page containing that article alone. This makes this web site more consistent with other web log sites on the internet. However, I've made certain that the old URLs still work, so if you've saved a pointer to a specific article, it's still valid for the foreseeable future. In addition, I'm experimenting with running some ads. Hopefully these will not interfere with reading the articles. Web site readership has been increasing in the last couple of months. I appreciate all my readers, and for the opportunity to present the information on this web site as a public service. I'm still managing to keep up with all e-mail questions sent to me, though it sometimes takes a couple of days for me to get back with a response, depending on volume of e-mail. So if you have a question, by all means send me an e-mail message, or use the "Comment" link at the top of this page. If you want to have a more open debate, you can do so in the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 ""Objections to Generational Dynamics" thread"#> of the Fourth Turning forum. And once again, if you sent me anything in the last 24 hours, please send it again. -- The outage was caused by the web site hosting company, "Web.com," which changed its name from Interland in March 2006. Even "Web.com's" own <#stdurl http://web.com "sales web site"#> was down. Ironically, "Web.com" just <#stdurl http://news.netcraft.com/archives/2007/02/04/new_york_internet_webcom_and_iweb8_most_reliable_hosting_companies_in_january_2007.html "won a reliability reward for January, 2007."#> Which reminds me of that old saying: It's nice what you did for me in the past, but what have you done for me lately? =eod =// &&2 e070220 Japan's real estate crash may finally end after 16 years =data ww2010.weblog.y2007.e070220.head Japan's real estate crash may finally end after 16 years =data ww2010.weblog.y2007.e070220.keys =data ww2010.weblog.y2007.e070220.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070220.date 20-Feb-07 =data ww2010.weblog.y2007.e070220.txt1 To see where America is going, look what happened in Japan. =data ww2010.weblog.y2007.e070220.txt2 During the 1980s, real estate prices in Japan skyrocketed in a huge real estate and stock market bubble. Both bubbles collapsed starting on January 4, 1990. Economist Michael ("Mish") Shedlock in his blog has provided a graphical comparison to America's current real estate bubble to Japan's real estate bubble of the 1980s: <#inc ww2010.pic g070219b.gif center "" "Japan nationwide land prices, 1979-2004"#> The above graphic shows Japanese land prices since 1979. The blue annotations are the things the Shedlock imagined people were saying in Japan at each point in the bubble. The red annotations show where in the Japanese bubble the American bubble is at different times. He first posted this graph in Spring of 2005. At that time there was only one red label, the one for Spring 2005 (duh!). He's updated it every six months or so. The latest update <#stdurl http://globaleconomicanalysis.blogspot.com/2006/09/updating-arrow-after-home-prices-drop.html "appeared in September, 2006."#> As you can see, we have a very long way to go in our own real estate bubble crash. It's interesting to look back over the last 20 years to news articles that came out at different times concerning Japanese land prices.

Here's <#stdurl http://query.nytimes.com/gst/fullpage.html?res=940DE3DD1138F937A35757C0A96E948260 "an article from 1988"#> as prices were still rising:
"Land prices skyrocketed in Japan in 1987, the Government reported, with residential real estate rising 68.9 percent in Tokyo, nearly twice the previous high of 35.9 percent in 1973 and almost triple the 1986 increase of 23.8 percent. The National Land Agency, a Government office, released the 1987 statistics Thursday, the last day of the fiscal year in Japan.
Now, 18 years later, we can read <#stdurl http://query.nytimes.com/gst/fullpage.html?res=9502E3DB1730F937A15750C0A9609C8B63 "this article, published on March 24, 2006:"#>
"Japan: Land Prices Up In Big Cities Commercial land prices in Tokyo rose last year for the first time in 15 years, while nationwide land prices fell at a slower rate amid a rebound in the country's economy, the government said. In the Tokyo area, commercial land prices rose 1 percent in 2005, according to data released by the Ministry of Land, Infrastructure and Transport. Prices in Osaka and Nagoya, two other major cities, also posted gains."
This appears to have been focusing on the positive, which is what always seems to happen.
In 1998, the mainstream media was still hopeful. Here's something from the <#stdurl http://www.highbeam.com/doc/1G1-21051914.html?refid=ip_hf "August 22, 1998, edition of The Economist:"#>
The plot thins.(sixth year of falling land prices in Japan) BANKERS in Japan keep hoping that they have seen the worst of their bad-loan problems. And they keep being disappointed. That was the case once again this week, as the National Tax Administration Agency revealed that land prices in Japan have fallen for the sixth year in a row. This matters. The banks are sitting on at least YEN 87 trillion ($600 billion) and possibly as much as YEN 140 trillion of suspect loans collateralised almost exclusively by land. As land prices spiral downward, the amount the banks can reasonably hope to recover is spiralling downward as well.
It just went on, year after year. Here's <#stdurl http://findarticles.com/p/articles/mi_go1894/is_200303/ai_n7615612 "from March, 2003":#>
Japan's land prices fall for 12th straight year. Land prices in Japan fell for both residential and commercial areas in the year to Jan. 1, 2003, for the 12th straight year, reflecting the nation's prolonged economic slump, the Land, Infrastructure and Transport Ministry said in a report released Monday. Residential land prices fell an average of 5.8%, a decline larger than the previous year's 5.2%....
Finally, here's <#stdurl http://news.bbc.co.uk/2/hi/business/5234478.stm "news story from August 1, 2006, just six months ago:"#>
Japanese land prices bounce back Japanese land prices increased for the first time in 14 years in 2005, in another sign the world's second largest economy is continuing its recovery. Prices had fallen since the "bubble economy" burst in the early 1990s. Nationwide land prices on 1 January were up an average 0.9% from a year before, the National Tax Agency said. ... Overall all Japanese land prices had fallen 3.4% in 2004. ... The rise in prices was largely driven by increases in urban areas, such as Tokyo, Osaka and Kyoto, while prices in most rural areas remained on the slide.

So Shedlock's graph represents something real, not a manufactured story. However, there's more to be told in comparing Japan to America. Recall the reason that America's 1990s stock market bubble occurred in 1995: That was precisely the time that the generation of risk-averse senior financial managers who had lived through the 1930s Great Depression all disappeared (retired or died), leaving behind new risk-seeking financial managers. Thus, the new bubble occurred about 66 years after the 1929 crash. <#inc ww2010.pic g070219c.gif right "" "Nikkei 225 Index -- Tokyo Stock Exchange -- 1984-2007 and 1914-2007."#> Now take a look at the adjoining graphs. The top graph shows the Tokyo Stock Exchange's (TSE's) most recent stock market crash. The crash began on January 4, 1990. The Nikkei index had been 38915, and fell to a low of 7607 on December 31, 2003. That's an 80% fall over a 16 year period. Now here's the point: This wasn't the TSE's first major stock market crash. The TSE's previous major stock market crash occurred in 1919, as shown by the lower graph. Then, 65 years later, the next stock market bubble began in 1984. Did you get that? Wall Street: Crash in 1929, new bubble in 1995, 66 years later; Tokyo Stock Exchange: Crash in 1919, new bubble in 1984, 65 years later. Once again, you can see Generational Dynamics in action. A new bubble occurs as soon the generation of people who lived through the last crash are gone. I've said many times on this web site that analysts, journalists, and pundits are totally blind to even the simplest generational relationships, no matter how obvious they are. Well, this one is about as obvious as it can get. This is the first time I've been able to track down the historical Nikkei index values, but once you have them, these generational relationships are pretty obvious. =eod =// &&2 e070219b Al-Qaeda resurging in Afghanistan and Pakistan =data ww2010.weblog.y2007.e070219b.head Al-Qaeda resurging in Afghanistan and Pakistan =data ww2010.weblog.y2007.e070219b.keys =data ww2010.weblog.y2007.e070219b.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070219b.date 19-Feb-07 =data ww2010.weblog.y2007.e070219b.txt1 Al-Qaeda's greatest threat is to Britain and Europe. =data ww2010.weblog.y2007.e070219b.txt2 CNN's terrorism expert Peter Bergen, appearing on CNN International on Monday, gave a lengthy report on al-Qaeda's resurgence in Afghanistan and Pakistan. Here's what he said (sometimes paraphrasing): <#inc ww2010.pic g070219.jpg right "" "Top: CNN terrorism expert Peter Bergen. Bottom: File footage of al-Qaeda training camp. (Source: CNN)"#>

"There are about 2000 foreign al-Qaeda fighters in the region along the Pakistan-Afghan border. They're in small training camps that can't be detected from the air -- 10 to 20 dedicated al-Qaeda fighters in each one, training in such things as burning bombs. The July 7, 2005, London subway bombing attacks are increasingly seen as an al-Qaeda operation, not just a bunch of guys who got radicalized by visiting madrassas in Pakistan. The guys actually trained in Afghanistan, and later met with al-Qaeda leaders on the Pakistan-Afghan border. If this were a Mafia organization they'd be out of business, because all you have to do is take out the leadership. But al-Qaeda is a much stronger organization, because it has strong religious beliefs and it's also derived a great deal of strength from insurgencies. And we've got two major insurgencies going on, one on the Afghan-Pakistan border, and the other one in Iraq. According to the U.S. Marines' assessment, which was leaked to the Washington Post in December, al-Qaeda actually controls Anbar province, which is a huge province in Western Iraq. And al-Qaeda now has a very strong presence in the tribal areas along the Afghan-Pakistan borders. So unfortunately this group, where the conventional wisdom is that they were sort of out of business, unfortunately is back in business. What that means for American security isn't really clear. What it means for British security is very clear already. They've launched one attack in July 2005, an al-Qaeda operation, they also tried to bring down ten American airliners in August of last year - that plan luckily didn't work out. But the head of the Defense Intelligence Agency recently testified that that plan was directed from al-Qaeda in Pakistan."

From the point of view of Generational Dynamics, many of Britain's young Muslims have set up a "Hero/Prophet" relationship with the radical clerics in Pakistan. When I <#inc ww2010.weblog.ref e061113 "described this relationship at length in an article in November,"#> I pointed out that this relationship is the visceral basis by means of which new genocidal crisis wars begin. There's an emotional connection between the elder Prophet generation (the idealistic generation born after the last crisis war) and the impatient college age Hero generation (the soldiers who will be fighting the new crisis war). At the time that I wrote that article, it was unclear how that relationship was structured. This new information makes it very clear that the young British Muslims are particularly connected to the al-Qaeda leadership on the Afghan-Pakistan border. The 2005 London subway bombing is a very powerful recruiting tool for al-Qaeda leaders to use with these disaffected young men, particularly because it's now clear that the London subway attacks and the 9/11 attacks were masterminded by the same generational Prophet generation, and the young men are more than willing to commit "altruistic suicide," in order to become Heroes to other radical Muslims. The CNN anchor, Jim Clancy, then asked why Pakistan hasn't taken these training camps out.

"Well, Pakistan is in a very difficult situation. They've gone in there in the past and they've lost hundreds of their soldiers going after militants in the tribal areas. They've now conducted some peace agreements with a number of the militants in these tribal areas. These have not been particularly useful in terms of security in Afghanistan. Because of these peace agreements, we've seen a surge of attacks in Afghanistan coming out of these tribal areas into Afghanistan, against Afghan targets, U.S. military and Nato targets. So neither policy has really worked; appeasement hasn't really worked with these militants, nor has the strong military action that the Pakistani military took in the last several years. So I'm not sure what the answer is. There is definitely a problem."

Then Jim Clancy asked: "Should we be worried about this? Should we be demanding the SOMEBODY come up with a solution?" Note that this is a very interesting way of phrasing the question. Clancy is a Boomer (America's current Prophet generation), and like all Boomers, he's waiting for someone else, anybody else, to do something. This was similar to <#inc ww2010.weblog.ref e070219 "Senator Richard Lugar's suggestion Sunday"#> that Republicans and Democrats ought to form a committee to figure out what to do about Iraq. All of these Boomers, Republican and Democrat alike, have no skills except to bicker, and have no idea how to govern. Really, the only person in Washington who's trying to govern is President Bush, but the rest of the Boomers have made it their full time job to make governing impossible. So, here's what Peter Bergen said:

"We should be very worried. The 9/11 attack came out of the area, the Cole attack in Yemen, embassy attacks in 98 in Africa, and if this group is reorganizing then that's a big problem. And it's not just a problem for the United States; it's also a problem for countries in Nato, it's a problem for Afghanistan. It's also really a problem for Pakistan. I mean just in the last month we've had six suicide attacks in Pakistan itself, coming from the militants who are regrouping in this area."

The significance of all this is that it presents a very different picture of the "war on terror" than most people think. Most people view terrorists as a bunch of roving criminals, blowing themselves or airplanes up willy-nilly. What we've been seeing more and more is an al-Qaeda plan to coalesce into a major fighting force, and to install itself as the government of an actual country, whether Somalia, Egypt, Palestine, Iraq, Afghanistan or Pakistan. I'll close this article with some pure speculation. A reader (not an American) has written to me saying that Americans are lacking in resolve and that our entire foreign policy is based on oil. He then suggested that what America should do is abandon our support for Israel and ally ourselves with Iran, in order to keep the oil flowing. "I think we all know that Americans would throw Israel overboard," he wrote, "if it were a choice between Israel and keeping our car gastanks full and not waiting in riotous gas lines and rationing." I can only shake my head at this bizarre, offensive view of Americans which, unfortunately, is shared by a lot of leftist non-American anti-Americans. I wrote back to him that America could not "throw Israel overboard" because <#hreftext ww2010.i.awakening060919 "Americans have a deep spiritual connection to Israel,"#> because of our defense of freedom of religion, and because America has defense agreements with Israel and a number of other countries, and those treaties cannot be abrogated. However, this whole discussion raises an interesting question: Are there any circumstances where we might be allied with Iran in the Clash of Civilizations World War? From the point of view of Generational Dynamics Forecasting Methodology, there are trend events that can be predicted with absolute certainly, although with a lack of certainty as to timing. Other predictions have a much narrower time frame, but are only probabilistic. A lot of the theoretical work that I've been doing on this web site and in the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 ""Objections to Generational Dynamics" thread"#> of the Fourth Turning forum is to improve the Forecasting Methodology to produce more accurate forecasts in narrower time frames. This is generally done by relating long-term trends to recent news events, as I've been doing many times (without always saying so) on this web site. Now, the Clash of Civilizations World War is an unavoidable trend event that will occur with absolute certainty. =inc ww2010.cf.cf060209 p left The little "conflict risk graphic" that appears on the home page of this web site lists what are, in my opinion, the eight greatest risks to triggering this world war in the near future. It might be a war in the Mideast, or it might be a financial crisis that completely destabilizes China and other parts of Asia. The war is coming with certainty; the scenario leading up to the war can only be estimated probabilistically, since it depends on many chaotic events (in the sense of Chaos Theory). In the past, I've speculated that Iran would be allied with China against us. There's no doubt that China will be our enemy, because that trend has been building for decades. But I've always felt a little discomfort in including Iran in that category because (a) the Iranian people are much more pro-American than their leaders, and (b) the Iranian people are much less anti-Israel than their leaders. There's no doubt that the mullahs and Iranian president Mahmoud Ahmadinejad would like to "wipe Israel (and America) off the map," but that's far from true of the Iranian people. During ordinary times, a country has some freedom to be everyone's ally, even play one ally against another. But when a massive war begins, everyone is forced to choose a side. It's rare that any country can manage for long to remain "neutral," as Switzerland did in World War II. Events are rarely that kind. Instead, it becomes necessary to ally with one side and to attack (and be attacked by) the other side. The resurgence of al-Qaeda is significant because al-Qaeda is as much an enemy of Iran as it is of the United States. So the speculation is that Iran might end up siding with America and Israel and Russia and India against al-Qaeda, Pakistan and China. From the point of view of Generational Dynamics, we're headed for a Clash of Civilizations World War with nearly mathematical certainty. As we head for war, we can only watch and wait to see what events trigger the surprises and the conflicts that eventually lead to that war. =eod =// &&2 e070219 Anger and confusion dominate the Sunday news talk shows =data ww2010.weblog.y2007.e070219.head Anger and confusion dominate the Sunday news talk shows =data ww2010.weblog.y2007.e070219.keys =data ww2010.weblog.y2007.e070219.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070219.date 19-Feb-07 =data ww2010.weblog.y2007.e070219.txt1 Democrats are agitated and enraged, nervous Republicans are crossing their fingers. =data ww2010.weblog.y2007.e070219.txt2 A week of Congressional bumbling that seems to have accomplished little and satisfied almost no one ended with Sunday talk shows that were equally useful. The Senate this past week failed to pass that "non-binding resolution" opposing the President's "surge" policy. Finally it passed in the House, and then went back to the Senate, where it failed again. Democratic party Senators were almost crazed with rage, once the resolution failed to pass, reminding me again of the <#inc ww2010.weblog.ref e070114 "vitriolic hysteria of NBC's Chris Matthews."#> The Republicans didn't get hysterical, but it was obvious that they were just as confused and depressed as the Democrats. <#inc ww2010.pic g070218a.jpg left "" "Republican Senator Richard Lugar of Indiana on Face the Nation on Sunday. (Source: CBS)"#> Republican Senator Richard Lugar from Indiana, who voted against the non-binding resolution, didn't say anything about supporting the President's plan on Face the Nation. He advocated the development of a bipartisan plan for Iraq with the President and leaders from both parties. He particularly referred to the joint bipartisan effort in the 1980s where Democrats and Republicans reached an agreement to save the social security system. I've <#inc ww2010.weblog.ref e061023 "written about this several times before."#> In fact, the Republicans and Democrats did get things done in the 1980s. The Democrats and Republicans got together and passed a tax reform law. They cooperated with each other to change the Social Security system to make it a sounder system. After that, they cooperated again to specify new rules to control the budget deficit. Even as late as 1996, Democratic President Bill Clinton cooperated with the Republican congress to eliminate the welfare entitlement. However, those things happened with the nation's leaders were in the G.I. and Silent generations, the generations that survived World War II. Today's leaders are from the Boomer generation, and the Boomer Democrats and Republicans are so incompetent that they can barely agree on anything. The only thing about it that's funny is that <#inc ww2010.weblog.ref e070131 "they can't even agree enough to vote themselves a pay raise."#> So Senator Lugar's wistful hope of a bipartisan agreement to save the day is completely unrealistic, and won't happen. <#inc ww2010.pic g070218b.jpg right "" "Sen. Ted Kennedy, screaming at the top of his lungs in Senate on Saturday. (Source: Fox News)"#> Democratic Senator Ted Kennedy from Massachusetts was screaming hysterically at the top of his lungs on the Senate floor on Saturday, saying the following:

"We on this side are interested in protecting American servicemen from the crossfire of a civil war. Some on the other side are more interested in protecting the President from a rebuke."

Kennedy is essentially saying that the Republicans and the President are guilty of treason because they're allowing American soldiers to be killed gratuitously, just to keep the non-binding resolution from passing. Apparently Kennedy believes that the President would permit any number of our soldiers to be killed, rather than be embarrassed by a non-binding resolution. This doesn't make much sense, though. Did passing the non-binding resolution in the House change the number of American soldiers being killed in Iraq? Then how would passing it in the Senate have changed the number of soldiers being killed? And of course there's always the counter-argument used by pundits: Passing the non-binding resolution only encourages the enemy to kill more Americans. So Senator Kennedy's screaming tirade, accusing anyone who disagrees with him as treasonous, doesn't make much sense. Democratic Senate majority leader Harry Reid was not screaming. He was cold and deadly as he said to CNN's Wolf Blitzer:

"This war is a serious situation. It involves the worst foreign policy mistake in the history of this country. So we should take everything serious. we find ourselves in a very deep hole, we need to find a way to dig out of it."

<#inc ww2010.pic g070218c.jpg left "" "Democratic Senators Harry Reid and Carl Levin (Source: CNN and Fox News)"#> Blitzer asked him, "Maybe I misheard you, but you're saying this is the WORST foreign policy blunder in American history?" His response: "That's what I said." (That's funny. Wasn't the purchase of Alaska the biggest foreign policy blunder in American history? <#stdurl http://library.advanced.org/22550/1867_2.html "Here's how it was described:"#> "Seward's Folly. After the astonishing purchase of Alaska [from Russia, in 1867] for about 2 cents an acre, the public began to insult the purchase and the involvement by William Seward. The press and various newspaper companies started announcing Alaska as a worthless piece of real estate with its cold temperature, frozen waste land, and rugged terrain. Seward and the purchase later were termed "Seward's Folly" because of his part in the supposedly wasted purchase. He also received other ridicules as it was also called "Walrussia" and "Seward's icebox". Later William H. Seward left office and died in 1872. Not soon after, it would be shown that this no-good wasted piece of land was rich and abundant in every area ranging from natural resources and numerous species of wild animals.") Anyway, Democratic Senator Carl Levin from Michigan was equally cold on Fox News when he was presented with an interesting political conundrum. Moderator Chris Wallace played an video clip from White House press secretary Tony Snow, saying this: "Members of Congress are taking their own gamble here - they're gambling on failure - some members at least." Wallace then asked Levin, "Senator, aren't some democrats in effect gambling that the surge will fail, and won't you end up looking foolish if it should actually succeed." Levin responded thus:

"The course that the President is on is a failing course. It's been failing for four years. We're trying to change that course to one that has the maximum chance of success. And the maximum chance of success is to limit our mission to get us out of a sectarian civil war, so it's the President's course which is a course towards failure."

And this is perhaps the whole point: That the Democrats are not only gambling on failure, they're politically committed to failure. Every one of these Senators affirmed this in one way or another. They've committed their political futures to American failure in Iraq. The Republicans, I suppose, aren't much better. Many of them expect failure, but at least they're hoping for success. The Democrats responses indicate not only that they expect failure, but that they're hoping for failure. Isn't it amazing that it's come down to this - that one party is hoping for our country's failure in a war? When <#inc ww2010.weblog.ref e050702 "Sandra Day O'Connor stepped down from the Supreme Court"#> in 2005, I wrote about how acrimonious things had become, and that they were going to get a lot worse. That's what happens to a country during a generational Crisis era, such as the one we're in now. We can see how people are becoming increasingly confrontational and less willing to compromise. During America's last generational crisis period, in the 1930s, the acrimony directed against President Franklin Roosevelt was enormous. He was accused of one thing after another, including treason. Just google the phrase "fdr scandal" to see what happened. Republicans were extremely critical of Roosevelt's handling of WW II. In America's previous generational crisis period, the Civil War, Democrats were very acrimonious about President Lincoln's pursuit of the war, and as late as 1864, the Democratic platform called for peace negotiations with the South, to end the war as quickly as possible. So this kind of hatred and vitriol is, unfortunately, very common in times like these. It ends when some major event or events (like the bombing of Pearl Harbor) shock the nation into coming together for their continued survival. In Generational Dynamics, such a time is called the "regeneracy," because these shock events regenerate national unity. It's impossible to predict what events will trigger an American regeneracy at this time, but possibilities include a major terrorist attack on American soil or a devastating military reversal. <#inc ww2010.pic g070218d.jpg right "" "Richard Engel, NBC News Mideast Bureau Chief, on Meet the Press (Source: NBC)"#> Amidst all the nonsense that was spoken on the Sunday morning talk shows, there was one moment worth repeating. NBC news Mideast bureau chief Richard Engel has just returned from several years in Iraq. Here's what he has written recently, as quoted on Meet the Press:

"As Iraq has changed, I have changed. The war has cost me my marriage. I have had friends killed and kidnapped, survived bombings and attempts on my life. I have seen Iraqis freed from the numbing, terrifying fetters of totalitarianism, and had their lives destroyed by the religious bigotry, ignorance, greed and opportunism unleashed by this war. It has changed my outlook. Violence and cruelty now seem, to me, to come easily to mankind, a new belief that disturbs me. But I am also more appreciative of how quickly life can turn for the better, or for the worse."

Engel has gone through a very interesting transformation, an understanding of what happens in a generational Crisis War, like our Civil War or World War II. During these periods, torture and cruelty to one another are the rule. It's part of being human, but a part that's only exposed once in a lifetime, during a crisis war. This is why there's such a major difference in world view between people who live through a crisis war (like our G.I. and Silent generations) and those who are born afterwards (like our Boomers and Generation-X). That's why there's such an enormous political clash between generations during generational Awakening eras, like America in the 1960s. The older generations understand that "violence and cruelty come easily to mankind," as Engel said, while the younger generations are without a clue. Today, the Boomers are the nation's leaders, but they still don't have a clue how the world works. That's why all of them, Republicans and Democrats alike, are so confused about what's going on. As we approach the Clash of Civilizations World War, it's well to remember that, before it's over, all Americans who survive will undergo the same transformation that Richard Engel has already experienced. =eod =// &&2 e070217b Bird flu spreading rapidly in Asia during New Year's celebrations =data ww2010.weblog.y2007.e070217b.head Bird flu spreading rapidly in Asia during New Year's celebrations =data ww2010.weblog.y2007.e070217b.keys =data ww2010.weblog.y2007.e070217b.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070217b.date 17-Feb-07 =data ww2010.weblog.y2007.e070217b.txt1 This is the most dangerous time of the year for possible pandemic mutation. =data ww2010.weblog.y2007.e070217b.txt2 China's <#stdurl http://www.cctv.com/english/20070217/100593.shtml "biggest celebration of the year happens on Saturday evening, New Year's Eve,"#> preparing for the Year of the Pig that begins on Sunday. Pigs symbolize abundance and wealth to Chinese people. To welcome the auspicious year, there are fireworks, and family reunion dinners. There is a Year of the Pig every 12 years. Unfortunately, the Year of the Pig is <#stdurl http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20070217/pig_year_070217/20070217?hub=TopStories "also known for disasters,"#> as fortune tellers can explain. Although it's lucky to be born in the Year of the Pig, it's unlucky to have to live through it. Pig years can be turbulent because they are dominated by fire and water, conflicting elements that tend to cause havoc, according to fortune tellers. "Fire sitting on water is a symbol of conflict and skirmish. We'll also see more fire disasters and bombings." Well I don't know if the fortune tellers have been reading this web site, but experts from the <#stdurl http://www.iht.com/articles/ap/2007/02/14/asia/AS-GEN-Asia-Bird-Flu-New-Year.php "World Health Organization (WHO) are warning of other dangers."#> Overall, there have been 273 cases of human bird flu across the world, with 166 deaths. There have been multiple new outbreaks of bird flu among birds in Vietnam, South Korea, Japan and Thailand. <#inc ww2010.pic g070216d.jpg right "" "Tens or hundreds of thousands of these crates are being shipped around China. Guess what's in them? Hint: It's alive. (Source: BBC)"#> Right now, the H5N1 high potency avian influenza (HPAI) virus is easily transmitted from bird to bird, but not easily from human to human. Mutations have been occurring frequently, including <#inc ww2010.weblog.ref e070119b "a mutation that makes the Egyptian strain resistant to Tamiflu,"#> but no mutation has yet occurred that makes it easy for the virus to move from human to human. This would cause a worldwide human pandemic. The most likely time of the year for such a mutation is February, for two reasons. First, it's the height of winter in the northern hemisphere, and cold temperatures promote the spread of any virus. And second, the new year's celebrations throughout Asia are causing hundreds of millions of people and probably billions of chickens to travel around and mix with one another. This mixing makes the changes of a deadly permutation more likely. Right now, there have been <#stdurl http://www.whatson-expat.com.ph/articles/2007/feb18/headlines.htm "only three Asian countries that have remained bird-flu free so far:"#> Philippines, Singapore and Brunei. There have been new H5N1 outbreaks throughout Asia, Europe and Africa. There have been <#stdurl http://en.rian.ru/russia/20070217/60891083.html "several bird flu outbreaks in the Moscow area."#> The virus was evidently spread by bird purchases from a single large market. A year ago, <#inc ww2010.weblog.ref e060209 "bird flu became endemic and firmly established in Turkey,"#> and this year it's <#stdurl http://www.alertnet.org/thenews/newsdesk/L16748713.htm "it's already spread to 10 villages in southeast Turkey."#> In Egypt, a <#stdurl http://www.allheadlinenews.com/articles/7006494917 "a 5-year-old boy and a 37-year-old woman died of bird flu"#> this week. In Western Africa, Côte d'Ivoire (Ivory Coast) <#stdurl http://www.alertnet.org/thenews/newsdesk/IRIN/e2c39faa9dd9b9fcef33242f00f9bb39.htm "is stepping up surveillance,"#> following the death of a Nigerian woman who died of the disease last month. Britons are still in state of shock over a <#stdurl http://www.dailyrecord.co.uk/news/tm_headline=bird-flu-farm-had-long-list-of-failings-&method=full&objectid=18634319&siteid=66633-name_page.html "bird flu outbreak among turkeys in a large, completely enclosed building"#> run by a major distributor of turkey meat (Bernard Matthews plant in Holton, Suffolk). For several weeks, British health authorities have been investigating possible causes, and they've identified a number of "serious bio-security lapses," including meat scraps in open bins that gulls feed on, and holes in the building itself allowing entry by small birds, rodents and rats. However, what is considered the most likely cause is the importation of meat to Britain from Hungary, where a bird flu outbreak occurred a couple of months ago. However, this had led to <#stdurl http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=133234&version=1&template_id=38&parent_id=20 "feuding between the two countries,"#> as Hungary denies that such contamination could have occurred. Keep in mind that there may be outbreaks that haven't yet been discovered. <#inc ww2010.weblog.ref e060209 "Experiences last year show that surveillance is very poor"#> in most countries, and no outbreak is reported until someone reports seeing a large number of dead birds in one place. That means that an outbreak can spread for a while before it's discovered. We now take a break from this story to provide today's Generational Dynamics Culture Segment. I don't really know who rock star M.I.A. is, since I haven't yet gotten over the death of Karen Carpenter. However, I wanted to check <#stdurl http://www.youtube.com/watch?v=VDSnLcu2HTI "M.I.A.'s new video, entitled "M.I.A. - Bird Flu":"#>

It's turns out that M.I.A. is a very hot chick, and as pleasant as it is to watch her prancing around with kids and chickens, this video is almost completely incoherent. You can check out <#stdurl http://www.miauk.com/bird-flu-lyrics.html "the lyrics,"#> and find that they contain such scintillating lines as, "put away shots for later / so I’m stable / live in trees chew on feet / watch lost on cable / bird flu gonna get you / made it in my stable / from the crap you drop / on my crop when they pay you." Clues may be found on <#stdurl http://en.wikipedia.org/wiki/M.I.A. "her Wikipedia page"#> and her <#stdurl http://www.myspace.com/mia "MySpace web site."#> It turns out that the song is a protest song against <#inc ww2010.weblog.ref e060512 "the Sri Lanka government, which is currently in a civil war with the Tamil Tiger rebels."#> M.I.A. is 29 year old Mathangi "Maya" Arulpragasam, the daughter of a Tamil Tiger militant. Maya decided to release this video in order to educate young people about what's happening to her people in Sri Lanka. The "bird flu" refers to "crap" from the Sri Lanka armed forces, or something like that. Unfortunately, trying to educate college students about anything going on in the world today is a hopeless task <#hreftext ww2010.i.060601antiwar "though for very good generational reasons."#> Take a look, for example, at <#stdurl http://www.thecrimson.com/article.aspx?ref=517068 "this review by a Harvard student, Nayeli E. Rodriguez,"#> who has no idea what's going on in the video except that Sri Lanka might be a third world country. That ends our Culture Segment. Back to the original story. Bird flu has not yet reached North America, as far as is known, but <#stdurl http://www.alertnet.org/thenews/newsdesk/N16331452.htm "Mexico is upgrading its animal health rules in preparation."#> As I always do, I once again remind the reader that it's impossible to predict when a particular mutation will permit easy human-to-human transmission, which would result in a worldwide pandemic. This could happen next week, next month, next year, or thereafter. Once again, as I always say, you and your family should prepare immediately for a possible pandemic. If human to human transmission became public next week on Monday, then by Tuesday all the shelves in grocery stores would be bare. If you stock up on food now, then you'll be sure to have what you need. Even if you think that you can beat the crowds to the grocery store, you should still stock up in advance. If you get your canned food after the panic begins, then you're depriving somebody else of food. But if you stock up in advance, then the shelves will be restocked, and you won't deprive someone else of food. I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e070217 It's the Year of the Pig in North Korea =data ww2010.weblog.y2007.e070217.head It's the Year of the Pig in North Korea =data ww2010.weblog.y2007.e070217.keys south korea, north korea =data ww2010.weblog.y2007.e070217.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070217.date 17-Feb-07 =data ww2010.weblog.y2007.e070217.txt1 On Kim Jong-il's birthday, he gloats about humiliating the U.S. =data ww2010.weblog.y2007.e070217.txt2 It's the time of the year for New Year's celebrations in Asia, and Friday was North Korean President Kim Jong-il's birthday. Poverty and starvation are rampant in North Korea, but nothing is too good for Kim's birthday. As <#inc ww2010.weblog.ref e070216 "happened on Wednesday,"#> on Friday morning BBC's Charles Scanlon gave an interesting commentary containing things that don't appear online: <#inc ww2010.pic g070216c.jpg right "" "Celebrating throngs at Kim Jong-il's birthday celebration on Friday (Source: BBC)"#>

"This is not a leader who has to worry about opinion polls. Adulation, bordering on worship is the required response when Kim Jong-il meets his subjects. The footage is being played repeatedly on North Korean television, helping whip up enthusiasm for the man they call The Great General. This year, the birthday celebrations have an extra kick. Kim Jong-il is being credited with giving his country nuclear weapons, and then wrestling the united states into a humiliating climbdown. ... Despite appearances, this is a regime fighting for survival. Kim Jong-il's genius is to project an image of strength, and make the very best of a weak hand. After testing a nuclear device, he's now looking to extract tribute from nervous neighbors and the United States. The North Korean people have been told there'll only be a temporary freeze of the nuclear reactor, in return for generous rewards from the outside world. The regime said nothing about giving up the nuclear weapons it's already built, or about dismantling, once and for all, its nuclear capabilities. Desperately needed aid from South Korea is now likely to resume, and the US financial squeeze will be scaled down. That's good news for the citizens of Pyongyang, out today to celebrate their leader's birthday. It could also leave little incentive to give up a residual deterrent to keep the regime feeling secure in a hostile world.

As I've written several times on this web site, Kim Jong-il has been masterful in manipulating the world, and for repeatedly making promises with no intention of keeping them. <#inc ww2010.pic koreabb.jpg center "" "Prominent billboard in Pyongyang, North Korea, 2003. The right-most frame shows a North Korean spearing an American with a bayonet."#> Kim has essentially promised his people that he will not honor this week's nuclear accord, and has essentially said that it's a ruse to humiliate the United States and to "extract tribute" in the form of aid. Part of the nuclear accord requires North Korea to "permanently" disable all nuclear facilities. It will be interesting to see how Kim gets out of that commitment, and how he will arrange for the world to blame the United States. =eod =// &&2 e070216b Stock market margin debt reaches March 2000 all-time high =data ww2010.weblog.y2007.e070216b.head Stock market margin debt reaches March 2000 all-time high =data ww2010.weblog.y2007.e070216b.keys =data ww2010.weblog.y2007.e070216b.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070216b.date 16-Feb-07 =data ww2010.weblog.y2007.e070216b.txt1 The manic stupidity of investors today continues to duplicate 1929. =data ww2010.weblog.y2007.e070216b.txt2 <#inc ww2010.pic g070216.jpg right "" "Margin Debt - $ billions - 1960-2006 (Source: Sudden Debt blog)"#> I'm grateful to <#stdurl http://suddendebt.blogspot.com/2007/02/margin-debt-margin-debt-tracked-by-nyse.html "Friday's entry in the Sudden Debt blog"#> for pointing out that margin debt has reached its previous all-time high, just prior to the Nasdaq crash in 2000. Margin is the amount of money that an investor must pay the broker in order to purchase stock. In the 1920s, typical margin rates were 10-25%, which meant that the broker loaned the investor 75-90% of the price of the stock. Seeing this blog entry motivated me to return to John Kenneth Galbraith's 1954 book, The Great Crash - 1929, to see what he had to say about margin debt in the 1920s. Galbraith gives the following as the purpose of margins:

"The purpose is to accommodate the speculator and facilitate speculation. But the purposes cannot be admitted. If Wall Street confessed this purpose, many thousands of moral men and women would have no choice but to condemn it for nurturing an evil thing and call for reform. Margin trading must be defended not on the grounds that it efficiently and ingeniously assists the speculator, but that it encourages the extra trading which changes a thin and anemic market into a thick and healthy one. At best this is a dull by-product and a dubious one. Wall Street, in these matters, is like a lovely and accomplished woman who must wear black cotton stockings, heavy woolen underwear, and parade her knowledge as a cook because, unhappily, her supreme accomplishment is as a harlot."

Well, if the 1929 stock market was a harlot, then I can't even imagine what words we'd have to use to describe the incredible level of financial depravity and debauchery exhibited today by financial advisors, hedge fund managers, and real estate public relations people today. About the only positive thing that can be said is that <#inc ww2010.weblog.ref e070206 "a lot of these people will be going to jail."#> <#inc ww2010.pic g070216b left "" "Margin Debt - $ billions - 1920-1929 (Source: John Kenneth Galbraith)"#> Galbraith doesn't give a complete set of figures for the amount of margin debt leading up the 1929 crash, but he does give some figures buried in the text. Combining those figures with a couple of inferences, we get the adjoining graph for the level of margin debt throughout the 1920s. The New York Stock Exchange web site has <#stdurl http://www.nysedata.com/nysedata/asp/factbook/viewer_edition.asp?mode=tables&key=50&category=8 "a page giving history margin debt amounts,"#> but it only goes back to 1959. However, it is worth noting that in 1959, total margin debt was just $3.4 billion, same as in 1927. That shouldn't be surprising when you recall that the stock market itself didn't return to its 1929 peak until 1954. In reading Galbraith's book, I re-discovered something I had completely forgotten -- that there WAS a trigger after all to the 1929 Wall Street Crash. Recall that <#inc ww2010.weblog.ref e070210 "that I wrote a few days ago"#> that the Hamburg crisis of 1857 (panic of 1857) was triggered by a small event -- an employee of the New York branch of the Ohio Life Insurance and Trust Company was found to have embezzled money. I added that no one, to my knowledge had identified any "small event" that triggered the Wall Street crash of 1929. In his book, Galbraith actually does identify a "small event" that triggered the crash:

"On September 3, by common consent, the great bull market of the nineteen-twenties came to an end. Economics, as always, vouchsafes us few dramatic turning points. Its events are invariably fuzzy or even indeterminate. On some days that followed -- a few only -- some averages were actually higher. However, never again did the market manifest its old confidence. The later peaks were not peaks but brief interruptions of a downward trend. On September 4, the tone of the market was still good, and then on September 5 came a break. The Times industrials dropped 10 points, and many individual stocks much more. The blue chips held up fairly well, although Steel went from 255 to 246, while Westinghouse lost 7 points and Tel and Tel 6. Volume mounted sharply as people sought to unload, and 5,565,280 shares were traded on the New York Stock Exchange. The immediate cause of the break was clear -- and interesting. Speaking before his Annual National Business Conference on September 5, Roger Babson observed, "Sooner or later a crash is coming, and it may be terrific." He suggested that what had happened in Florida would now happen in Wall Street, and with customary precision stated that the (Dow-Jones) market averages would probably drop 60-80 points. In a burst of cheer he concluded that "factories will shut down ... men will be thrown out of work ... the vicious circle will get in full swing and the result will be a serious business depression." This was not exactly reassuring. Yet it was a problem why the market suddenly should pay attention to Babson. As many hastened to say, he had made many predictions before, and they had not affected prices much one way or another. Moreover, Babson was not a man who inspired confidence as a prophet in the manner of Irving Fisher or the Harvard Economic Society. As an educator, philosopher, theologian, statistician, forecaster, economist, and friend of the law of gravity, he had sometimes been thought to spread himself too thin. The methods by which he reached his conclusions were a problem. They involved a hocus-pocus of lines and areas on a chart. Intuition, and possibly even mysticism, played a part. Those who employed rational, objective, and scentific methods were naturally uneasy about Babson, although their methods failed to foretell the crash. In these matters, as often in our culture, it is far, far better to be wrong in a respectable way than to be right for the wrong reasons." [pages 84-85]

As Galbraith indicates, Babson was not exactly well known as an economist or financier. He's an interesting person, having founded Babson College here in Massachusetts in 1919, and also founded the <#stdurl http://www.gravityresearchfoundation.org/ "Gravity Research Foundation"#> in 1948. He gave many speeches at many different times, and presumably had predicted a financial crisis in those speeches as well, but it was this particular speech at this particular time that triggered the 1929 Wall Street crash. This illustrates the point of why I keep mentioning Chaos Theory on this web site. Most people have heard of the "Butterfly Effect" in weather forecasting: if a butterfly in China flaps its wings, then it can start a chain reaction that leads to a hurricane in America a week or two later. This idea, that a tiny event can lead to major consequences, was popularized in the 2004 movie, <#stdurl http://www.imdb.com/title/tt0289879/ "The Butterfly Effect, starring Ashton Kutcher."#> In this case, the "tiny event" was Babson's speech. Last year, a "tiny event" -- the decision by a Danish magazine to <#inc ww2010.weblog.ref e060206 "publish cartoons depicting Mohammed"#> exploded into the "Danish cartoon controversy," with worldwide confrontations between Muslims and Westerners. Last week I went into detail about how another "tiny event," <#inc ww2010.weblog.ref e070210 "Ariel Sharon's visit to the Temple Mount in Jerusalem in 2000"#> triggered the second Palestinian Intifada. Now, Galbraith writes, "The immediate cause of the break was clear ...." He identifies Babson's speech as the CAUSE of the 1929 crash, or at least the "immediate cause." I use the word "trigger," rather than cause. Other possible words are "catalyst" or "incitement" or "impetus." The conditions for the 1929 crash were already there -- the generational changes that led to the abuse of public and private debt, resulting in a vastly overpriced stock market. All it took was the right trigger to cause the bubble to explode. As we careen towards a new international financial crisis, there's no way to predict, of course, what "little event" will trigger the worldwide panic that will bring it about. It might be something that someone in Chicago says, or it might be some financial data out of Ecuador, or it might be something stupid that someone in China does. There's no way to predict either the event or the timing. It might happen next week, next month, or next year. But the global financial system becomes more imbalanced every day, with the imbalances growing exponentially quickly, so it can't be too far off. Here's something that made me chuckle. On Friday morning a little after 10 am, the Census Bureau announced that <#stdurl http://www.bloomberg.com/apps/news?pid=20601103&sid=aOGXtE3CRLq8&refer=us "housing starts had fallen 14.3% in January,"#> far lower than economists had predicted, and were at the lowest level since 1997. CNBC reported this just after 10 am, and CNBC economics guru Steve Liesman looked very glum as he relayed the bad news. Economists had been fearing a fall in housing construction, because of its domino effect throughout the economy -- on lumber, pipes, copper, furniture, craftsmen, community welcome wagons, and so forth, with a deleterious on employment and production. But it took less than five minutes for another CNBC analyst to say (paraphrasing): "Hey! This is good news! This will reduce the inventory of unsold homes, and housing prices will start rising again!!" It was another one of those bizarre moments that have become so common. If housing starts had risen 14.3%, they would have been talking about how great it was that the economy was expanding. But it fell 14.3% and it's still wonderful news. There's never any bad news on Wall Street. An even more ridiculous example is <#stdurl http://www.thestreet.com/_googlen/markets/activetraderupdate/10339227.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA "an article by CNBC comedian/analyst James J. Cramer."#> As <#inc ww2010.weblog.ref e070213 "we've written several times,"#> many homeowners are defaulting on subprime mortgage loans, and they're losing their homes. The rate of default has been increasing dramatically. Well, to Jim Cramer, this is not just good news, it's VERY GOOD news:

"I wish the bears understood how important subprime lending is to my thesis about the market going higher. But then again, if they did, they would be forced to cover everything. For as long as I have been at this game, it has taken a crisis for the Federal Reserve to move. The Fed is always reluctant to move because it needs the crisis as a cover so it doesn't look like it's soft on inflation. ... When you have the housing industry building a fraction of the homes it was building and credit hard to come by, you are giving Benanke the crisis cover he needs. Some of my friends who read RealMoney are freaking out about the negative columns that are being written about how dangerous this subprime crisis is. I'm taking those columns very seriously, which is why I am growing more bullish by the day. The fact that the Fed chairman bought into it today in front of the House of Representatives shows me that the Congressional drumbeat -- remember, prime is Republican, subprime is Democrat -- could be building and building fast. ... If anything, they're saying there might be a fire. I say it's raging, which is why I believe the crisis is about to give us that May cut that I am counting on to take the Dow up 17% this year."

In other words, if the subprime mortgage collapse causes a real financial crisis, then the Fed will have to cut interest rates, and the market will start going up again. I don't even know what to say because I just can't stop laughing at this. I'll leave it to the reader to figure out what's wrong with this reasoning. So, once again, we see <#inc ww2010.weblog.ref e070206 "the Principle of Maximum Ruin"#> in action. In the quote above from Galbraith's book, he alluded to a housing bubble that had occurred in Florida starting in 1925. Here's what he writes about it:

"On that indispensable fact men and women had proceeded to build a world of speculative make-believe. This is a world inhabited not by people who have to be persuaded to believe but by people who want an excuse to believe. In the case of Florida, they wanted to believe that the whole peninsula would soon be populated by the holiday-makers and sun-worshippers of a new and remarkably indolent era. So great would be the crush that beaches, bogs, swamps, and common scrubland would all have value. The Florida climate obviously did not insure that this would happen. But it did enable people who wanted to believe it would happen so to believe." [pages 3-4]

According to Galbraith, areas of land were subdivided into small plots. A plot of land that might have sold for a few hundred dollars in the early 1920s might sell for thousands of dollars in 1925. Some of the better seashore sites sold for $20-75,000. Prices began leveling off in 1926, but then two hurricanes hit Florida in fall, 1926, killing hundreds of people and destroying thousands of houses. By 1928, the bubble had completely collapsed, and prices fell by as much as 75%. Unfortunately, investors didn't learn the lesson of the bubble.

"The Florida boom was the first indication of the mood of the twenties and the conviction that God intended the American middle class to be rich. But that this mood survived the Florida collapse is still more remarkable. It was widely understood that things had gone to pieces in Florida. While the number of speculators was almost certainly small compared with the subsequent participation in the stock market, nearly every community contained a man who was known to have taken "quite a beating" in Florida. For a century after the collapse of the South Sea bubble, Englishmen regarded the most reputable joint stock companies with some suspicion. Even as the Florida boom collapsed, the faith of Americans in quick, effortless enrichment in the stock market was becoming every day more evident." [pages 6-7]

Galbraith's statements apply to an even greater extent today. You'd think that investors would have learned something from the 1990s stock market bubble, and 2000 Nasdaq crash. But incredibly, they learned absolutely nothing. Lots of people took "quite a beating" in 2000, but it makes no difference. The "faith of Americans in quick, effortless enrichment in the stock market [is] becoming every day more evident," just as it did in 1929 prior to the crash. =eod =// &&2 e070216 South Korean politicians are 'euphoric' over North Korea nuclear deal =data ww2010.weblog.y2007.e070216.head South Korean politicians are 'euphoric' over North Korea nuclear deal =data ww2010.weblog.y2007.e070216.keys south korea =data ww2010.weblog.y2007.e070216.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070216.date 16-Feb-07 =data ww2010.weblog.y2007.e070216.txt1 The young "386 generation" that run the government may well be in over their heads. =data ww2010.weblog.y2007.e070216.txt2 I transcribed Wednesday morning's very interesting BBC commentary by Charles Scanlon in Seoul, where he said things that don't appear in the BBC's online coverage:

"We are seeing something approaching euphoria, from at least among some members of the South Korean government, in reaction to this agreement that was signed in Beijing. The Unification Minister who's reponsible for relations with the North said this could be a turning point in the establishment of a peace regime on the Korean peninusula. And certainly the South Koreans do feel to some extent vindicated by what has been in effect a major change in U.S. policy toward North Korea. They've been urging a more conciliatory approach from the very beginning, and they're certainly very relieved that the Americans now do seem serious about getting a negotiated settlement with the North Koreans, and they've softened some of their pressure tactics. The president, Roh Moo-hyun, said he's expecting a very easy implementation of this accord. I think there we are seeing really wishful thinking on the President's part, because after all any agreement with the North Koreans is not going to come easy. They're going to haggle down to the last moment on all the terms, and of course, it is a fairly vaguely worded agreement. the North Koreans have said nothing at this stage about giving up the nuclear weapons that they've already built. They're just talking about shutting down the reactor at Yongbyon, and there's been nothing about the alleged second secret nuclear program that the Americans say they've been running. But either way, the South Koreans do see an opportunity in this to push ahead with their policy of reconciliation. They're going to be meeting with the North Koreans in the next few days, and I think we're likely to see some generous food aid and other assistance from the South Koreans, even before the aid gets shipped in related specifically to the deal."

It certainly would not be surprising if South Koreans are in a much worse state of anxiety than Americans are. After all, we may be stuck in Iraq, and we may fear terrorist attacks, but those all seem very distant. But for South Koreans, the danger is right on their doorstep. With a population of 10.3 million, Seoul is the fifth largest megacity in the world, and is only about 50 miles from the North Korean border. Thus, a decision by North Korea's unpredictable president Kim Jong-il to invade South Korea could bring conventional missiles to Seoul in a matter of minutes, and ground troops within an hour or two. And now, with nuclear weapons in the picture, it's quite reasonable that the people in Seoul are going to be much more anxious than the people in Washington. From the point of view of Generational Dynamics, Seoul is suffering from the same level of incompetence as Washington, because the same post-World War II generations are in charge. But in Seoul it's actually worse because the leadership skipped a generation, creating an enormous amount of turmoil. So it's not the least surprising that the BBC reports find South Korean leaders "euphoric" over a plan with little chance of succeeding, or that President Roh Moo-hyun's expectation of a "very easy implementation" is just "wishful thinking." Seoul is very much like Washington these days, only worse -- there's bickering, only more of it; there's incompetence, only more of it; and there's the same manic-depressive, depending mainly on the current status of relations with North Korea. =inc ww2010.h2 hist "Brief history of S. Korea since World War II" Korea is one of the oldest nations on earth, with some 4000 years of history. Here we can only give a brief summary of its extremely tumultuous history in the 1900s:

Japanese occupation. Japan invaded and colonized Korea in 1905, and was only expelled when Japan was defeated in World War II. <#inc ww2010.weblog.ref e050318 "Korea's attitude toward Japan remains bitter to this day,"#> especially because of the use of Korean "comfort women" by the Japanese army during World War II.
Korean War. South Korea's last crisis war was World War II, but the country's Recovery era was delayed because it was followed soon after by a non-crisis war ignited by the Communist Soviets. Known to us as the Korean War, it became a proxy war between United States / United Nations forces in the south versus Russian and Korean forces, and eventually Chinese forces as well in the north. The fighting ended in a 1953 armistice, but the war never ended, and the border between North and South Korea is heavily guarded to this day, with both sides having orders to kill on sight. (See my recent article on South Korean plans to <#inc ww2010.weblog.ref e070203 "deploy deadly robots on border with North Korea."#>) People who lived through the Korean War mostly tend to be highly pro-American, and value the American forces still in South Korea as protection from North Korean forces.
April 19 Revolution (1960). The U.S. military ruled S. Korea from 1945-48, when the First Republic of South Korea was established. Like subsequent governments, this government was extremely repressive and used violence against demonstrators and jailing of dissidents freely to maintain control. As the country entered its generational Awakening era in 1960, student demonstrations protested what it claimed was a corrupt election on March 15. Police started shooting at rock-throwing students. On April 11, a student's body was found on the beach. The skull had been penetrated by a tear gas grenade. Massive student demonstrations brought down the government, including the suicide of the Prime Minister and his family.
President Park Chung-hee (1961-79) President Park dominated South Korea for almost 20 years, through the Second, Third and Fourth Republics of South Korea, several constitutional changes, and several assassination attempts. Park's detractors refer to his oppressive government, while his champions credit him with the modernization of South Korea, greatly raising the standard of living, and turning it into one of the most powerful economies in the world, Park was assassinated on Ocober 26, 1979, by the chief of the Korean Central Intelligence Agency; the KCIA had been established by Park himself in 1961 in his fight against Communist and North Korean infiltration.
12/12 coup d'état (1979) and Kwangju massacre (1980). Following Park's assassination, violence within the government led to a coup d'état on December 12, 1979. This aroused massive student demonstrations against the government in the city of Kwangju (Gwangju) on May 18, 1980. The demonstrations were brutally suppressed through a declaration of martial law. Later investigations found that hundreds of students were killed, and there were unproved allegations of involvement of U.S. forces on behalf of the government.
"Kwangju generation" defeats "April 19" generation (1987). In American terms, this is Generation-X versus the Boomers. But in Korea, it was a new, but minor coup d'état. The Kwangju massacre had galvanized the college age generation (like America's Generation-X), and massive riots beginning on June 10, 1987, forced the previous generation's military regime to resign, in favor of new elections, leading to the formation of the Sixth Republic of South Korea. (Paragraph corrected - 11-Jun-2008)
Kim Dae-jung and the "Sunshine Policy" (1997). 1997 saw the first transfer of the government between parties by peaceful means, as Kim Dae-jung won the Presidential election. His policies reflected the new-found power of the Kwangju generation and, in particular, brought a fundamental change of policy towards North Korea known as the "Sunshine Policy." Kim attempted to reconcile with the North, and held a summit meeting with Kim Jong-il, for which Kim Dae-jung received the Nobel Peace Prize in 2000.
The 386 Generation and and President Roh Moo-hyun (1999-present). The generation that we've been calling the "Kwangju generation" gave itself a new name in the late 1990s: the "386 Generation" or the "386ers". This name was chosen because they were all in their 30s (at that time), they had been activists in the 1980s, and they had been born in the 1960s. Roh Moo-hyun, born in 1946, is not strictly a 386er, but he supports their policies and is considered one of their own. The 386ers got Roh elected President in 2002, and forced a further radicalization of the government in 2003, with some 20 386ers in high positions of power in the government. However, a major financial scandal late in 2006 has thrown the government into a crisis from which it has not yet extricated itself.

=inc ww2010.h2 cognitive "Cognitive Dissonance in Roh's administration" There are clear, sharp differences between the 386ers policies, as implemented by Roh Moo-hyun, and the previous generation's policies, as implemented by President Park Chung-hee before his 1979 assassination. Thus, Park's generation grew up during the extreme poverty of the Korean War. The 386ers have known nothing but peace and prosperity.

Park's generation was wary of a new invasion by North Korea. The 386ers are not afraid of North Korea, and want to pursue a policy of reconciliation and eventual reunification.
Park's generation was anti-Communist and anti-Chinese. They were afraid that a new North Korean invasion would be supported by the Chinese, who had supported North Korea during the Korean War. The 386er's are pro-Chinese and anti-American. They blame Americans for the division between North and South Korea.
Park's generation reconciled with Japan in the 1960s, and welcomed Japanese investments in Korea's economy, as a kind of "war reparation." These investments did a great deal to make Korea into an economic powerhouse. The 386ers have an increasingly hard-line policy toward the Japanese, and are demanding additional Japanese apologies for their actions in World War II.

We thus have a situation where the government is being run by fairly young ministers with little experience in governing, with an ideological policy of reconciling with North Korea, a country that may be about to invade them. That explains <#inc ww2010.weblog.ref e070212 "the "cognitive dissonance"" of Korea's leaders,"#> and why they are "euphoric" over this week's accord, and why President Roh is engaging in "wishful thinking." They're suffering from the same manic-depression disease as Washington, and they'll be moving from a manic phase to a new depressive phase before long. <#inc ww2010.pic nkorea2b.jpg right "" "Smiling North Korean news anchor announces successful nuclear weapons test in a gleeful, happy voice in October, 2006 (Source: CNN)"#> We know a lot less about how the North Koreans are feeling, but we can be pretty sure that they have their manic periods as well. You'll recall that when the <#inc ww2010.weblog.ref e061009 "North Koreans announced their nuclear test last October,"#> they were positively ebullient, as illustrated by the grins and smiles on the lady reading the news in the adjoining graphic. Needless to say, that test threw both South Korea and Japan into a panic. =inc ww2010.h2 agreement "The Agreement" It's well to remember that this is not the first time that North Korea has agreed to end its nuclear program. They <#inc ww2010.weblog.ref e050921 "played a little joke on the world"#> in September, 2005, when they announced that they would end their nuclear program. President Bush said, "Five nations have spoken and said it is not in the world's interests that North Korea have a nuclear weapon. And now there's a way forward. And part of the way forward is for the North Koreans to understand that we're serious about this and that we expect there to be a verifiable process. In other words they have said, in principle, that they will abandon their weapons programs." It took only one day for the North Korean Foreign Ministry to issue a statement saying, "The U.S. should not even dream of the issue of North Korea's dismantlement of its nuclear deterrent before providing light-water reactors. This is our just and consistent stand as solid as a deeply rooted rock." So now, North Korea has once again agreed to end its nuclear development program. They didn't say what they would do with the 5 or 10 nuclear weapons they already have, but they have agreed to stop their nuclear program in return for massive amounts of food and oil aid from the West. <#inc ww2010.pic g070215.jpg right "" "I thought this was a nice picture of the East Room of the White House during the Feb 14 press conference."#> Here's <#stdurl http://www.whitehouse.gov/news/releases/2007/02/20070214-2.html "President Bush's statement at a Wednesday press conference:"#>

"Before I'm going to take some questions, I'd like to comment about one other diplomatic development, and that took place in the Far East. At the six-party talks in Beijing, North Korea agreed to specific actions that will bring us closer to a Korea Peninsula that is free of nuclear weapons. Specifically, North Korea agreed that within 60 days it will shut down and seal all operations at the primary nuclear facilities it has used to produce weapons-grade plutonium. It has agreed to allow international inspectors to verify and monitor this progress. It is committed to disclosing all of its nuclear programs as an initial step toward abandoning these programs. In exchange, five other parties at the table -- that would be China, Russia, Japan, South Korea and the United States -- have got commitments. We will meet those commitments as this agreement is honored. Those commitments include economic, humanitarian and energy assistance to the people of North Korea. This is a unique deal. First of all, unlike any other agreement, it brings together all of North Korea's neighbors in the region, as well as the United States. The agreement is backed by a United Nations Security Council resolution. That resolution came about -- the sanctions came about as a result of the resolution because of a unanimous vote in the Security Council. This is good progress. It is a good first step. There's a lot of work to be done to make sure that the commitments made in this agreement become reality, but I believe it's an important step in the right direction."

A lot of other people are skeptical, including former U.S. ambassador to the United Nations, John R. Bolton. "It is rewarding bad behavior of the North Koreans by promising fuel oil," <#stdurl http://washingtontimes.com/national/20070214-120013-3871r.htm "he said."#> "It's a bad signal to North Korea and it's a bad signal to Iran. ... The message to would-be arms proliferators around the world is that if you hold out long enough and wear down the State Department negotiators, eventually you get rewarded." From the point of view of Generational Dynamics, the trend prediction is that North and South Korea are headed for a major genocidal war with each other to decide who will rule the country after reunification. Since we have a defense agreement with South Korea, we'd be drawn into such a war, as would China and Japan. This trend prediction indicates that the nuclear accord reached this week will not survive. It's lasted longer than one day, which was the life of the previous agreement, but it's very unlikely to last long. The North Koreans have repeatedly used subterfuge and nuclear blackmail to get what they want from the West. This time, they've been promised a very great deal of foreign aid, but they have to meet specific commitments for that aid to continue. Let's wait and see how they'll manage that situation. Meanwhile, we can't expect much from the South Koreans with their current government. The 386er generation, which runs the government, is too young to handle the situation's nuances, and the danger of miscalculation is very high. It's hard to know how they'll react if, for example, the North Koreans test another nuclear weapon. =eod =// &&2 e070214 Sorry, Ladies, you'll have to do without flowers on Valentine's day. =data ww2010.weblog.y2007.e070214.head Sorry, Ladies, you'll have to do without flowers on Valentine's day. =data ww2010.weblog.y2007.e070214.keys =data ww2010.weblog.y2007.e070214.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070214.date 14-Feb-07 =data ww2010.weblog.y2007.e070214.txt1 They're bad for global warming, for the environment and for you. =data ww2010.weblog.y2007.e070214.txt2 First off, if you're going to buy flowers, you should buy African flowers, <#stdurl http://news.bbc.co.uk/1/hi/uk_politics/6356383.stm "according to UK's International Development Secretary Hilary Benn"#>, who notes that Kenya is the world's largest flower exporter:

"People want to buy ethically and do their bit for climate change, but often don't realise that they can support developing countries and reduce carbon emissions. Recent research shows that flowers flown from Africa can use less energy overall than those produced in Europe because they're not grown in heated greenhouses. So, this Valentine's day, you can be a romantic, reduce your environmental impact and help make poverty history. This is about social justice and making it easier, not harder, for African people to make a decent living."

Maybe so, but ANY Valentine's bouquet is "bad for the planet," <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/02/10/nbouquet10.xml "according to Andrew Sims, the policy director of the New Economics Foundation,"#> an environmental group. "Air freighting flowers half way round the world contributes to global warming," he said. "You can argue the planes would be flying anyway but the amount of greenhouse gases pumped out depends on the weight of the cargo." So unless you grow flowers yourself, forget flowers, ladies. But what about Americans? The second largest flower exporter is the Netherlands, and third is Colombia. Colombia isn't so far away, and they produce 62% of all flowers sold in the United States. Can't we give those flowers for Valentine's Day? According to <#stdurl http://www.time.com/time/health/article/0,8599,1588872,00.html "Time Magazine's online site,"#> the answer is no. Colombian flowers, it turns out, are loaded with toxic chemicals, so that they'll still be "fresh" when the guy presents them to his loved one. The chemicals are various pesticides and fungicides, to keep away the different kinds of pests and fungi. Now, we know how important it is for each of us to worry about global warming. The way we know that is that Europeans keep telling us how evil America is for not ratifying the Kyoto Treaty, even though <#inc ww2010.weblog.ref e060104 "Europeans have done almost nothing to reduce emissions,"#> and just want to bash Americans. And, of course, China will soon be the world's greatest contributor to global warming, but that's beside the point too. So ladies, do your part, and tell you husbands and boyfrieds to absolutely not give you flowers. Hey it might work out OK -- maybe you'll get a diamond instead! =eod =// &&2 e070213 ABX Housing mortgage default loan index dives faster =data ww2010.weblog.y2007.e070213.head ABX Housing mortgage default loan index takes another big dive =data ww2010.weblog.y2007.e070213.keys =data ww2010.weblog.y2007.e070213.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070213.date 13-Feb-07 =data ww2010.weblog.y2007.e070213.txt1 Economists are debating how much "spillover" will occur, but "Contrary Investor" does it right. =data ww2010.weblog.y2007.e070213.txt2 The ABX index, that <#inc ww2010.weblog.ref e070209 "we discussed a few days ago,"#> measures investor confidence that subprime mortgage borrowers will default. On Monday of last week, the value of this index, <#stdurl http://www.markit.com/abx.jsp?Index=ABX-HE-BBB-+06-2 "known as "ABX-HE-BBB- 06-2,""#> stood at 89.63. On Thursday, after the surprise negative earnings restatements at mortgage lenders HSBC and New Century, it fell to 86.00. On Friday it fell sharply to 82.68, and on Monday it fell again to 80.35. <#inc ww2010.pic g070212.png center "" "Index price of ABX-HE-BBB- 06-2 from August to Monday, Feb. 12 (Source: Markit.com)"#> Subprime mortgages are those granted to home buyers with poor credit under the assumption that almost anything is safe when home prices are skyrocketing. But now that the housing bubble has been deflating for over a year, foreclosures are skyrocketing. Home sales haven't crashed as much as they might have, but prices are a lot lower, so homes are being sold at desperation prices. (A web site reader wrote to me to say that I haven't justified the "desperation prices" claim. I guess it depends on how you look at it. If you have to sell your house for $50,000 less than you bought it for, because you can no longer afford your adjustable rate mortgage, you would consider yourself desperate, wouldn't you? Well, there are a lot of people in that situation right now.) (Added on 13-Feb) There is little good news to be found anywhere, and a seemingly unlimited supply of bad news. Take a look each day at <#stdurl http://thehousingbubbleblog.com/ "the housing bubble weblog."#> Each day, this site summarizes news stories from around the country on what's going on. Here's a sample: Someone buys a home in 2005 for $800,000. He gets an "interest-only" adjustable-rate mortgage (ARM), so he only has to pay $1000 a month in mortgage payments. However, that payment schedule is for two years only, and it's expiring now. He now has to make both interest and principal payments on the mortgage loan, and the "adjustable rate" kicks in, since interest rates are higher now than in 2005. The result: Their monthly mortgage payment goes from $1000 to $4000. Furthermore, their home is no longer worth $800,000. It's now worth only $600,000. These people are SCREWED, but at least they didn't commit fraud. There are plenty of other people who lied on their mortgage applications, planning to keep the home for a few months, and then "flip" it by reselling at a higher price. Trouble is, the bubble has burst and it's not worth as much any more. Many people who closed these deals in 2006 didn't even make their first mortgage payment, and they're going to be charged with fraud. Dear reader, have you ever heard the phrase "predatory lending"? That's a new word in Washington these days. Congress is investigating whether mortgage loan companies are guilty of making it too easy to get mortgage loans. Get it? "Predatory lending." Ha, ha! (A web site reader has written to ask me what the joke is in the preceding paragraph. The joke is that "predatory" usually means either preying on someone by plunder or pillage or by eating them, or else forcing them to do something against their will. So how can making it too easy to get a mortgage loan be predatory? Ha, ha.) (Added on 13-Feb) The crap is really going to hit the fan before long. We're going to see home owners, loan officers, bank managers, investors, and hedge fund managers charged with unprofessional conduct, civil fraud, and criminal fraud. Even mainstream economists are actually beginning to get alarmed, and they're debating about the spillover concept. The question is: Will a collapse of the subprime mortgage market spill over into other sectors of the economy? <#stdurl http://www.morganstanley.com/views/gef/archive/2007/20070212-Mon.html "Two economists on the Morgan Stanley web site"#> argue both sides of the issue. Richard Berner takes the optimistic argument, that "worries about a wider credit crunch are dramatically overblown." Strangely, Berner confines his spillover argument to the effect on the broader credit market, apparently believing that: as goes the credit market, so goes the economy:

"Soaring defaults signal that the long-awaited meltdown in subprime mortgage lending is now underway, and it likely has further to go. Fears are rising that this so-far idiosyncratic credit bust will morph into a broader, systemic credit crunch as foreclosures rise, lenders grow cautious, and Congressional efforts to rein in predatory lending further choke off supply. A credit crunch occurs when lenders deny even creditworthy borrowers access to borrowing. What are the risks of such a scenario? ... But in my view and in the opinion of my colleagues Ken Posner and Suzanne Schiavelli, who cover the mortgage lenders, early payment defaults are symptomatic of and confined to aggressive lenders that stretched to maintain origination volume to cover a high fixed-cost business model. “Stretching” in this case means originating or buying so-called stated-income loans — those for which there is no documentation concerning the borrower’s ability to repay, only his or her statement. Fraudulent representation appears to account for much of the early payment defaults. In contrast, disciplined industry leaders have experienced almost no early payment defaults, in line with the modest deterioration in overall mortgage credit quality described above."

The pessimistic side of the argument is taken by the Stephen Roach. Roach's spillover argument focuses mainly on the potential spillover to consumer spending, evidently believing that: as goes consumer spending, so goes the economy:

"One of today’s great paradoxes is the perceived lack of spillovers. Macro theory stresses interrelationships within economies, between markets, and across borders. Yet most financial market participants now believe in the theory of containment -- that disruptions in one sector, one market, or even one economy can, in effect, be walled off from the rest of the system. Whether it’s the bursting of the US housing bubble, carnage in sub-prime mortgage lending, or a slowing of Chinese investment, these events are quickly labeled as “idiosyncratic” -- unique one-off disturbances that are perceived to pose little or no threat to the larger whole. The longer a seemingly resilient world withstands such blows, the deeper the conviction that spillover risk has all but been banished from the scene. Therein lie the perils of a dangerous complacency. ... Asset effects are also likely to keep putting pressure on American consumers. A personal saving rate that has now been in negative territory for two years in a row leaves little doubt of the asset-dependent support to US consumption. ... Looking through the noise of energy-related gyrations to headline prices and inflation-adjusted household purchasing power, I remain highly skeptical of the consumer resilience call in a post-housing-bubble climate. And if the consumer finally fades, as I suspect, capital spending will be quick to go as well. I draw no comfort from ever-abundant coffers of corporate cash flow. If the demand outlook turns shaky due to spillover effects from housing to consumption, businesses will rethink expectations of future pressures on capacity utilization -- and cut back plans to expand capacity accordingly."

Unfortunately, both arguments are fundamentally wrong because they exhibit all that's wrong with current mainstream macroeconomics theory. They look at a few numbers from the past year or two and they draw conclusions from those. I'll repeat an analogy I've used before. These two analyses are like the following weather forecast: "The outdoor temperature last week was in the 40s, this week it's in the 30s, therefore I predict that next week it will be in the 20s." This is obviously wrong, since if you look at long term trends then you know that the temperature's going to go up because summer's coming. In the comprehensive analysis of macroeconomic theory that I wrote last year, <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory,""#> I showed why the "static" view of macroeconomics that Berner and Roach are using cannot possibly work, and in fact hasn't worked -- it's called everything wrong for at least the last ten years, starting with the late 1990s stock market bubble. Macroeconomic theory has simply been wrong, time after time after time. The world economy is driven by powerful generational patterns that pulse through the centuries. This really isn't so unreasonable even to someone who hasn't studied the subject; the length of a maximum human lifetime is around 80 years, so why should things like global finances resonate with that time frame? Any engineer will tell you that that makes perfect sense. If you want to understand what's happening today, you have to look back farther than a couple of years. 1965 and 1975 are just as important as 2005 in understanding what's happening today. Trends that occurred over long periods can be even more relevant. An astute web site reader has recently pointed out to me that the <#stdurl http://www.contraryinvestor.com/mo.htm "February, 2007, issue of the Contrary Investor newsletter"#> does exactly that, at least back to 1945. This newsletter says that "what we are seeing in these charts is an intergenerational change in attitudes toward leverage," and shows that the Boomer generation are going to be in serious financial trouble as they retire. (Gee, do you think they've seen my web site?) <#inc ww2010.pic g070212b.png right "" "Owner's equity as % of market value of real estate, 1945-present (Source: contraryinvestor.com)"#> Take a look at the adjoining graph, which shows what percentage of their homes that people really owned (owner's equity versus real market value). You can see from this graph that in 1945, the average American homeowner owned 85% of his home, with the other 15% mortgaged out; today he owns only about 53% of his home. This is the point that I've made frequently on this web site -- that the generations of people who lived through the 1929 crash and the horrors of the Great Depression were very cautious, risk-averse investors. As those people were replaced by Boomers and younger generations with no personal memory of the Depression, credit standards have become increasingly sloppy, so much so that <#inc ww2010.weblog.ref e061230 "the global economy has turned into a giant pyramid scheme."#> The point of looking at economic figures back to 1945 is that things like public debt, balance of payments and other global imbalances have been growing exponentially since then, with no sign of leveling off (despite the fact that mainstream macroeconomic theory predicted that they should have leveled off and fell long ago). This is actually proof that we're headed for a crash, because it's mathematically impossible for these imbalances to continue as they have. Generational Dynamics has been predicting since 2002 that we're entering a new 1930s style Great Depression, with a stock market crash most likely by the 2006-2007 time frame. A crash could come next week, next month or next year, but we can be sure that the "spillover" is going to be a lot worse than either Berner or Roach expect. =eod =// &&2 e070212 This week's idiot of the week: Robert Reich =data ww2010.weblog.y2007.e070212.head This week's idiot of the week: Robert Reich =data ww2010.weblog.y2007.e070212.keys =data ww2010.weblog.y2007.e070212.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070212.date 12-Feb-07 =data ww2010.weblog.y2007.e070212.txt1 "Cognitive dissonance" is turning people from the Boomer generation into fanatics. =data ww2010.weblog.y2007.e070212.txt2 First, let me make it clear that this stuff about fanatics is a generational thing, not a political thing. The Republican Boomer "neocons" were wrong that the Iraq war would bring democracy to the Mideast, and they blame that on Bush's mistakes rather than a fundamental error in reasoning. Also, as <#stdurl http://www.lewrockwell.com/rozeff/rozeff99.html "Democratic bloggers and columnists often point out,"#> many Boomer neocons are now advocating military strikes on Iran to bring democracy to the Mideast, which is a sign of neocon fanaticism. So this is not about politics. The "common wisdom" in Washington these days, especially after the November election, is that the Boomer neocons were fanatics whom history proved wrong. The subject of this article is that the leftist Boomers have also turned into fanatics, and to explain why Boomers are turning into fanatics irrespective of political beliefs. I've pointed out several times on this web site how journalists and politicians are looking more and more like complete idiots. ABC's George Stephanopoulos looked like an idiot in November because <#inc ww2010.weblog.ref e061126 "Jordan's King Abdullah had to tell him five times"#> of the importance of the Israeli/Palestine situation, but he was still clueless. NBC's Chris Matthews exhibited vitriolic partisanship and <#inc ww2010.weblog.ref e070114 "sheer stupidity after President Bush's speech,"#> making it clear that he knows nothing about such things as the Iran/Iraq war or the Truman Doctrine. CNN's Michael Ware, talking about the Iraq war, said <#inc ww2010.weblog.ref e061204 ""If this isn't a civil war, then I'd hate to see a real civil war,""#> apparently completely unaware that there is a real civil war going on Darfur, and that the Iraq war is nothing like that. Incidentally, Chris Matthews has done it again. In a telephone interview on <#stdurl http://newsbusters.org/node/10671 "Wednesday on MSNBC and on "Imus in the Morning" radio show,"#> Chris Matthews said, "We love good mayors because we love our cities and Giuliani is the city guy, and I’m so sick of southern guys with ranches running this country. I want a guy to run for president who doesn’t have a f--king — I’m sorry, a ranch." Matthews used explicit over-the-top language to refer to both of the President Bushes, and he said it on nationwide radio and television news programs (although his swear word was apparently bleeped on MSNBC). On Sunday's news shows this week, the unchallenged assumption was that Iraq is in a civil war and headed for a bloodbath, with a few Republicans expressing the hope that the "surge" will prevent a bloodbath. As <#inc ww2010.weblog.ref e070205 "I've explained many times on this web site,"#> Iraq cannot possibly be headed for a civil war bloodbath, because Iraq is in a generational Awakening era. I won't go over the reasoning again today, except to note that everybody is making policy recommendations based on assumptions that are completely wrong, with the result that the policies are almost certain to be wrong. It must be very depressing to these Boomers that their predictions of a bloodbath keep turning out to be wrong, but that's life. But let's now turn to the idiot of the week. <#inc ww2010.pic g070211.jpg right "" "Robert Reich on This Week With George Stephanopoulos (Source: ABC)"#> On Sunday morning on the ABC news talk show, the guest pundit was Robert Reich, President Clinton's Secretary of Labor and now a professor at the University of California at Berkeley. Reich predicted that the Iraq war was headed for a bloodbath civil war, and added, "I hope I'm wrong, but the surge is not going to work, and [the situation in Iraq] will be worse." In fact, Reich has been predicting a bloodbath for a while now. In <#stdurl http://robertreich.blogspot.com/2006/11/john-mccains-real-plan-for-iraq.html "a November entry in his blog,"#> he wrote: "I think McCain knows Iraq is out of our hands – it’s disintegrating into civil war, and by 2008 will be a bloodbath." Now, speaking as someone who makes predictions, this is a very foolish prediction. Even if you ignore the fact that Generational Dynamics says that a bloodbath civil war is impossible at this time in history, Reich is <#inc ww2010.weblog.ref e070210 "making a prediction based on unpredictable chaotic events,"#> and so there's no way that this prediction could be anything more than a wishful guess. And now look at <#stdurl http://robertreich.blogspot.com/2007/01/paradox-of-iraq-escalation-or-what-can.html "a recent entry in Robert Reich's blog,"#> where he wrote the following:

"Question: Why is Bush willing to risk his party’s future, as well as his own legacy, by putting more troops into Iraq when it’s clear to almost everyone – including top military brass, foreign policy experts, and most analysts and journalists on the ground there – that Iraq is descending so quickly into civil war that more troops won’t make a bit of difference except causing more American deaths and instigating more violence? (Choose one): A. It’s a [political] delaying tactic [to allow him to delay exiting the war until the end of his term.] ... B. It’s a predicate for extending the war into Iran. ... We’ve been this route before. Bush preemptively launches a missile into Iran to wipe out its nuclear facilities. The American public forgets the quagmire in Iraq, Sunni Arab nations and Israel rush to defend Bush’s preemptive move, and Bush calls for a regional solution. By this point he claims vindication and turns the even bigger problem over to the next president. C. Bush is clueless. He doesn’t know how bad the situation is in Iraq because he has surrounded himself with people who tell him what he wants to hear, the only TV he watches is Fox News, and the only radio is the Rush Limbaugh Show."

Now really, dear reader, for those of you who criticize me for sometimes calling politicians, pundits and journalists idiots, can you really blame me for calling Reich an idiot? This has got to be one of the stupidest things I've ever seen, and it's amazing to me that he hasn't disowned it as a relic of temporary insanity. So he's making a lot of hysterical claims based on two false, unsupported assumptions: that Iraq is headed for a bloodbath civil war, and that the Administration is planning to launch a war against Iran. In the process he calls President Bush "clueless," when it's perfectly clear that Bush is smarter than Reich. In fact, as we said, Reich is a moron. However, here's the interesting part: I went back through <#stdurl http://robertreich.blogspot.com/ "Robert Reich's blog,"#> which he began in April, 2006, and through <#stdurl http://www.prospect.org/columns/reich/ "a bunch of Reich's columns dating back to 2001."#> I wanted to see when it was that Reich started predicting that Iraq was a civil war bloodbath. Well, apparently he never made that claim prior to his November blog entry, quoted above. Maybe he thought it, but he never said it publicly, as far as I've been able to find. In fact, skimming through all his articles back over six years, he never made any predictions whatsoever prior to the November election. (Actually, to be more precise, the earliest prediction I could find was his <#stdurl http://robertreich.blogspot.com/2006/08/farewell-joe-lieberman.html "incorrect 4-Aug-2006 prediction that "Senator Joe Lieberman will soon be former Senator Joe Lieberman.""#>) Prior to that, I can't find any predictions whatsoever. He writes about the economy, the labor market, the Iraq war, and is always critical of the Bush administration, but never predicts anything! Why is that? What changed in November? I honestly don't believe that this change is a figment of my imagination. There are too many things -- many of which I've already commented on on this web site -- that indicate that something has happened. For example, I've seen Chris Matthews on MSNBC many times over the years, and I've never seen him come unhinged the way he has recently. I've <#inc ww2010.weblog.ref e070205 "noted that Boomer politicians appear to more angry and desperate"#> than before, and that they seem to almost manic-depressive, recalling <#inc ww2010.weblog.ref e061207 "their giddy, giggling manic stage,"#> that I described on December 7. As I also mentioned, I've seen this same kind of behavior in friends, as well, both personally and online. There's a kind of desperate fanaticism, as they panic and almost become crazy. It happened recently to the entire city of Boston, as people <#inc ww2010.weblog.ref e070202 "exploded over the cartoon hoax,"#> which I compared to the 1938 "War of the Worlds" radio show panic. I've come to relate this to a situation known as "cognitive dissonance." The thing that characterizes the Boomer generation, as opposed to the older Silent generation and the younger Generation X and Millennial generation, is that Boomers are absolutely certain that they're right. Boomers developed this opinion of themselves in the 1960s and 1970s, when their concerted action forced two Presidents to leave office in disgrace -- Presidents Johnson and Nixon. Today, Boomers are totally convinced that they're right (no matter how many times they change their minds). They're so certain they're right that their minds don't even have room to question their assumptions. Their minds can't handle "disconfirmation," proof that their assumptions are wrong. That's cognitive dissonance. The craziness of the leftist Boomers is totally apparent. To them, Bush is evil, Obama is good, Hillary Clinton is evil. The leftist Boomers overwhelmingly supported the Iraq war when it began, and now have decided that they should overwhelmingly have opposed the war. Their minds can't handle this conflict, resulting in the fury and anxiety and idiocy that I've been talking about. The term "cognitive dissonance" was coined in the 1950s by Leon Festinger, who performed a fascinating experiment, described in <#stdurl http://www.amazon.com/When-Prophecy-Fails-Social-Psychological/dp/0061311324 "his fascinating book, When Prophecy Fails."#> Two members of Festinger's team infiltrated a religious sect predicting the end of the world by a specific date. The predictions were based on messages from extraterrestials known as the "Guardians" that one cult member, Mrs. Marian Keech, started receiving [p. 32]. The members of the sect would be rescued by flying saucers and then, four days later, there would be a huge flood drowning everyone left behind. The members of the sect were highly committed to this belief: Many had given up their families and all worldly belongings to join the other sect members in a vigil in a member's home, waiting for the end. The first disconfirmation came when the flying saucers didn't show up at the predicted time. There were four wrenching days of waiting, as the saucers failed to come at each newly predicted hour, as specifed by Mrs. Keech as she continued to receive "messages." The final and biggest disconfirmation came after the four days were up, and the world did not end. Although the group were a private sect, what they were doing had become known, and they received ridicule through the newspapers, and they received visits by people who believed them and people who ridiculed them. During the four-day wait, a couple of people, the people who had joined most recently, left the group, but everyone else stayed. Here's what happened:

Chaotic though they may seem, the days immediately preceding December 21 [the day that the floods were supposed to appear] were at least loosely organized around a dominant theme -- cataclysm and salvation. By dawn on the 21st, however, this semblance of organization had vanished as the members of the group sought frantically to convince the world of their beliefs. In succeeding days, they also made a series of desperate attempts to erase their rankling dissonance by making prediction after prediction in the hope that one would come true, and they conducted a vain search for guidance from the Guardians." [p. 174]

This is beginning to look very much like the behavior of today's leftist Boomers. Another change of behavior was equally familiar today: Led by Mrs. Keech, the cult members began actively proselytizing. They had previously kept information about the cataclysm secret, "in order to prevent panic." [p. 129,182] But now they sought out even the most skeptical nonbelievers, in order to convert them. For example, one sarcastic commentator whom Mrs. Keech had repeatedly refused to speak with suddenly was welcomed with open arms. In fact, Mrs. Keech couldn't stop talked, as he recorded the interview, and answered all his questions in detail. [p. 175] Another reporter who hosted a program on women's issues asked her to comment, and she spoke at length on what's wrong with education, and how the messages from the Guardians explained how to straighten it out. [p.176] Hordes of reporters and visitors came to the house, resulting in an "amiable, manic uproar." [p. 177]

One further trend was noticeable on December 21. As the day wore on, Mrs. Keech began to make more and more of the importance of some recent news items. The morning newspapers contained an article about an earthquake in Nevada that had occurred about five days earlier, pointing out that if the quake had happened in a populated area, the destruction would have been enormous. Mrs. Keech showed the story excitedly to the members of the group, emphasizing the fact that, indeed, catalysms were happening.... Here, she declared, was evidence for the validity of the prediction. This theme ... grew in importance in reponse to further disaster news. At about 2 p.m. both the Associated Press and the United Press called [Mrs. Keech] to inform her of earthquakes that had occurred that very day in Italy and in California. She took this news in stride, telling the inquiring editors that "it all ties in with what I believe." [p. 180]

The next day, the group put out a press release:

Press Release. "Due to the confusion which has arisen from the prophecy we have decided to unite forces to complete the prophecy. It wa reported on the 21st that the cataclysm was stayed by the hand of the God of Earth. The date was given in order to alert the people to the possibilities in case of a disturbance so that we could avoid panic. It has come to our attention that the Flying Saucers, or more correctly, the 'Guardians of Earth,' are here for a definite purpose. They have been surveying the earth where there are faults in the earth's surface and they are prepared to land in case of an impending emergency and evacuate some of the people before the disturbance occurs. It is necessary for the people to be prepared and alert to the possibilities in order to avoid panic." ... We wish to call the people's attention to the fact that there have been a number of violent disturbances in the past few years, particularly the one several years ago in Assam and Tibet, and more recently in the Mediteranean area and Wesstern United States." [p. 182]

We'll quote one more incident from the book, and as you read this, please think of the name: "Barack Obama."

On December 24 a new participant observer was introduced into the group. We shall describe his reception in some detail, for it stands in vivid contrast to the treatment accorded [previous visitors]. They were received politely, but somewhat distantly. The new observer was dined, wooed, and made the center of attention. As the reader will see, the warmth of his welcome is attributable in good measure to the hope and expectation that he, at last, would bring the group their orders, would give them a plan for the future. Had he done so, it would have provided independent verification of their beliefs. The new observer knocked at the door ... and asked to speak to Mrs. Keech. He was ushered inside where he immediately became the center of attention. Let him tell the story in his own words: "Mrs. Keech asked me why I had called and I told her I read about her in the papers and wanted to know more. [They] picked up pads of paper and with pencils poised and were apparently ready to record our conversation. "The significance of this didn't immediately occur to me although I realized quite soon that what they were looking for was a sign of some kind, and thought I had a special kind of message to deliver. ... I said that one of my courses had dealt with a little astronomy and that this had aroused my interest in space travel and I wanted to learn more.... At this point she looked at me and suggested that there were perhaps some things that I could tell her and this increased my feeling of being on the spot.... I, of course, said that I had nothing to tell her and that I knew nothing, but wanted to learn.... The role that I assumed ... was that of a person who was somewhat confused by the times and was lonely and sought guidance and understanding of many of the things that are happening today. [I was asked] if I had ever felt if I didn't belong on this planet.... I answered, of course, that I had [no such knowledge], but simply that I thought that I had been born in the same way that everyone else is born. This brought a smile from Mrs. Keech who looked at me again with a very knowing look.... [In a phone call with a friend that evening, Mrs. Keech said], "And we had a very, very, very, very, very special guest for dinner.... So it has been the most joyous, the most joyous Christmas that any of us have ever known." ... [There were repeated visits from the stranger, and Mrs. Keech kept pressing him for information. After several days, he finally met with Mrs. Keech alone and later described their conversation this way:] "She said in a very, kind of last-straw voice -- that's the only way I can describe it -- she seemed sort of at the end of her rope and she said, 'Are you sure that you have no message for me? Now that we are alone, we can talk.' And I said, 'Gee, I'm sorry, I just don't know of any message that I have.' She said, 'Do you feel that there are any disturbing influences around? Anything that's disrupting your giving me a message?' I, of course, answered that I wasn't aware of anything of this sort." ... The experiences of this observer well characterize the state of affairs ... -- a persistent, frustrating search for orders. [pp. 190-192]

There are many, many similarities in this story to the way in which the leftist Boomers are acting today. The manic-depressive behavior that I've documented on this web site is reflected in this story. The manic period began when the stranger arrived: "And we had a very, very, very, very, very special guest for dinner.... So it has been the most joyous, the most joyous Christmas that any of us have ever known." The whole episode illustrates that we've seen in leftist Boomers, culminating in a depressive state with "a persistent, frustrating search for orders," or a persistent, frustrating search for a solution to the problem in Iraq, reflected in the unrealistic hopes that many on the left are placing in Barack Obama. A couple of weeks ago, a Chicago Tribune columnist <#stdurl http://www.chicagotribune.com/news/columnists/chi-0701170099jan17,1,1304898.column?coll=chi-newsnationworld-hed "wrote this about the attitude toward Obama:"#>

From now on, and especially when he formally announces his candidacy on Feb. 10, he'll have mobs around him, security people and media people, and handlers, and party and money people, and the Daleys, and reporters, all prancing about, endlessly excited. Not all reporters prance when Obama's name is mentioned, but there are more than a few. I'm thinking of those who are so enraptured that they write in prose evoking the excited shrieks of adolescent girls squealing at the Beatles when Obama was a child. National media coverage of the man has become so ridiculous, all but embarrassing, and he knows it, what with a veteran political writer longing to follow him into a locker room, to glimpse those pecs made famous in a People Magazine photo."

What I especially want to emphasize is the changes in behavior of the committed sect members after the disconfirmations. Leon Festinger describes several ways in which the group members started proselytizing, starting with publicity seeking: "Most dramatic, of course, was the precipitous change in attitude toward the press." [p. 209] Whereas previously they had maintained secrecy and avoided the press, "This situation reversed itself with explosive immediacy within minutes after the group had developed the rationalization for the major disconfirmation on December 21." [p. 210] The visit by the stranger was especially striking: "In part, his reception is attributable to their clear need for guidance; in part, to their hope of confirmation, so desperate that a complete stranger is nominated as one of their elect -- a Guardian." [p. 211] This is the behavior that I've been seeing over and over. Chris Matthews, who might previously have thought certain things without saying them, now is melting down, ranting and raving, invested in the belief that the President is evil and stupid. Robert Reich, who never predicted anything prior to last August, now desperately and openly predicts a bloodbath in 2008 in the hope of gaining confirmation for his political beliefs. And the entire Boomer left is going through a manic-depressive process which might end up anywhere. However, as I said at the start, this article uses the Boomer left as examples, but its about the Boomer generation, not just one part of it. In fact, it's not even just about the Boomers. The "Baby Boomer" generation is America's name for the generation born after World War II. For Generational Dynamics, the any generation born right after a crisis war is called a "Prophet generation," because they end up guiding the society or nation into the next crisis war. What we're seeing here is the transformation of the Boomer generation into a generation of angry, desperate fanatics. Why is this a problem? Because it's very, very dangerous. This fanaticism is a disease that can lead to disaster:

This fanaticism caused Germany's 1930s Prophet generation to conclude that Jews are evil and must be exterminated.
This fanaticism caused America's 1930s Prophet generation to conclude that any talk of danger from Japan was nonsense, resulting in the greatest military disaster in American history, when the Pacific fleet was almost entirely destroyed in a couple of hours.
This fanaticism caused Japan's 1940s Prophet generation to conclude that bombing Pearl Harbor was a good idea, even though America is several times bigger than Japan.
This fanaticism caused America's 1860s Southerner Prophet generation to conclude that it was OK to start the Civil War, even though the North was three times as large as the South.
This fanaticism caused Israel to go into total panic and begin the summer 2006 Lebanon war within four hours, with no planning and no objective. The war was a disaster for Israel. What was fanatical belief in this case? This is partly speculation, but I believe it's something like this: "Hizbollah cannot abduct Israeli soldiers, because we can easily destroy them."
This fanaticism caused America's 1930s Prophets to panic over the "War of the Worlds" radio show, and the 2006 Prophets <#inc ww2010.weblog.ref e070202 " in Boston to panic over cartoon figures"#> made of neon lights.
All around the world, countries are exhibiting increasing xenophobia, as Prophet generations come into power as leaders of countries that fought in World War II as a crisis war.

What we've all seen is that the Washington Boomer population really is in a state close to total hysteria and fanaticism. Everyone was giddy on December 6. Now, like a bunch of manic-depressive people drug addicts, the Boomers in Washington have gone thoroughly into the depressive phase. Everything is now a disaster and chaos. All is lost. Death is the only possibility. The Washington crowd are in a depressive phase, and anyone who's depressed will grasp at anything to relieve their anxiety, and so Obama has been getting the "manic" treatment. Sooner or later the press will turn on Obama, and then he'll see what it's like to get the depressive treatment. Friedrich Nietzsche, the German philosopher, lived through the Franco-Prussian war and the extremely bloody Paris Commune civil war in 1871, and saw the same craziness; that's presumably what he meant when he said, "Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule." And at some point we'll see the result. Any international crisis in any country with Prophets as leaders will exhibit the same insanity that Nietzsche described. Any international political crisis, any bursting of any of the many financial bubbles that are currently extant, could cause a chain reaction. The United States would be blamed immediately (isn't it always?), the Prophet generation would quickly turn into a bunch of raving lunatic fanatics (as had already happened in Washington, incidentally), and our young Hero generation will start packing for war. =eod =// &&2 e070210 Fatah/Hamas peace / violence in Jerusalem escalates =data ww2010.weblog.y2007.e070210.head Palestinians rejoice over Fatah/Hamas peace as Arab/Jewish violence in Jerusalem escalates =data ww2010.weblog.y2007.e070210.keys =data ww2010.weblog.y2007.e070210.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070210.date 10-Feb-07 =data ww2010.weblog.y2007.e070210.txt1 Gazans were dancing in the street on Friday, =data ww2010.weblog.y2007.e070210.txt2 as word came from Mecca that Saudi King Abdullah succeeded in <#stdurl http://news.bbc.co.uk/2/hi/middle_east/6346551.stm "brokering a peace deal between Fatah and Hamas, creating a unity government."#> According to <#stdurl http://news.bbc.co.uk/2/hi/talking_point/6346121.stm "a University professor in Gaza:"#> "The vast majority of people are really jubilant. We could hardly sleep last night because of the celebrations on the streets. People who were shooting at each other a few days back were hugging and kissing and chanting unity slogans; flying the Palestinian flag together. I hope this will lead to the end of the financial boycott. But wishes do not always come true." It's the professor's last point that highlights a lot of problems. The peace deal did indeed create a unity government, specifying which ministers are going to be from Hamas and which from Fatah. The whole purpose of a unity government, at least as far as the West is concerned, is that the unity government would recognize Israel and renounce violence. Unfortunately, the peace deal doesn't even mention these questions, which will be a problem for the Palestinians. The whole purpose of a unity government, as far as the Palestinians are concerned, is that the U.S., Europe and Israel would finally remove the financial boycott that began in January of last year, when Hamas took control of the government. But it seems unlikely that the West will back down from their principle demands that the unity government recognize Israel and renounce violence. From the point of view of Generational Dynamics, this peace agreement is almost completely meaningless, and may actually make things worse. The reasoning behind this conclusion is as follows: The Palestinians are in a generational Crisis period, and the fighting between Fatah and Hamas comes not from the senior leaders, but from the college age youths. (Recall that Gaza is very densely populated, and the median age is 15.8, and so Gaza is essentially run by children with guns and missiles.) So a peace agreement that assigns ministerial positions to various Fatah and Hamas dinosaurs will not resolve the issues of the youthful warriors. Even worse, if the unity agreement doesn't bring forth an end to the Western boycott, then it will be completely meaningless to them. In one scenario, it could re-direct the anger of the youthful warriors away from each other toward Israel. That's because the refusal of the West to lift the financial boycott might convince them that the time had come to smash a hole in the barrier and attack the Israelis. That gives greater significance to the rioting that occurred in Jerusalem on Friday afternoon, when <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-6405996,00.html "200 Israeli riot police used tear gas and stun grenades against 3000 rock-throwing Muslim worshippers."#> The rioting occurred at a construction project to repair a ramp leading to the Al Aqsa mosque, the third holiest site in Islam, where it is believed that the prophet Mohammed ascended to heaven. However, it's also known as Temple Mount, and its Western Wall is the holiest site in Judaism. As far as I can tell from the news stories, the contruction project is a perfectly reasonable one. The Israelis claim that the existing ramp is in need of repair and could collapse and harm anyone visiting the mosque. The Israelis claim that they're not digging anywhere near the Mosque, but some Palestinians are claiming that the Israelis are using the construction project as a cover to dig a tunnel under the Mosque, though I don't know why they'd want to do that. As a footnote to this situation, I have to question what the BBC is doing. I heard several BBC reports on the situation on Friday, and they all said some variation of the following: "When Muslims around the world see these pictures of violence in Jerusalem, the entire Muslim world will be inflamed." If that's true, then why is the BBC showing the pictures? The way they kept saying the same thing over and over really gave me the feeling that they were trying to incite violence in Muslims. Well, who knows what's going through the screwy minds of the BBC producers anyway? At any rate, the Jerusalem riots petered out within a few hours, though they may revive on Monday when construction begins again. The most likely explanation of the protests to the ramp project is that they come from more extreme Palestinians who are hoping that it will trigger a "third Intifada" against Israel. The first Intifada began in 1989, and consisted of Palestinians throwing rocks at Israelis. It ended with the Oslo peace agreement in 1993. The second Intifada began in 2000, and was triggered by a really trivial event: a visit to the same Temple Mount by Israeli opposition leader Ariel Sharon. Now, when a trivial event triggers a major result, it's always something of great interest to Generational Dynamics, because it signals a generational change in attitude and behavior that has been building for some time. The trivial event is not the "cause" of the major result. The trivial event can be looked on in several ways: As the "straw that breaks the camel's back," or even as "an excuse" for a new generation to make itself heard. The most interesting example of this for Americans is the Boston Tea Party of 1773. This was a really trivial event -- a bunch of kids who wanted to protest the British tea tax dumped some tea into the sea as a prank. At almost any other time and place in history, this would have "caused" nothing but the arrest of the kids. But instead it symbolized a massive generational change that's remembered in history as leading to America's Revolutionary War. Within Generational Dynamics theory, we look on these things from the point of view of Chaos Theory. Most readers have probably heard of the "Butterfly Effect" in weather forecasting: if a butterfly in China flaps its wings, then it can start a chain reaction that leads to a hurricane in America a week or two later. This idea, that a tiny event can lead to major consequences, was popularized in the 2004 movie, <#stdurl http://www.imdb.com/title/tt0289879/ "The Butterfly Effect, starring Ashton Kutcher."#> What the butterfly effect means to weather forecasting is that we'll never be able to forecast the weather any better than we can today. No matter how good the science is, no matter how fast the computers are, it's mathematically impossible to predict the weather accurately for more than a few days in advance, since even the tiniest perturbation can cause major changes to the forecast. Exactly the same principle is true in political forecasting. The reason that all the analysts, journalists and pundits constantly get their predictions wrong is because their predictions are always defeated by some chaotic event, some unforeseeable little thing that has big consequences. The reason that the Generational Dynamics predictions on this web site are always right is because we stick to trend predictions, like <#hreftext ww2010.i.may01 "the May, 2003, prediction that the disappearance of Yasser Arafat"#> would be part of a generational change that would lead to a major genocidal war between Arabs and Jews. In terms of weather forecasting, this prediction is like saying that summer is hotter than winter; it's a trend prediction that's almost mathematically certain. Analysts and pundits don't do that. Their predictions are all guesses, and those predictions are as good as flipping a coin. Most analysts' predictions are like the following: "The outdoor temperature last week was in the 40s, this week it's in the 30s, therefore I predict that next week it will be in the 20s." This kind of prediction is obviously wrong, but it's what the analysts all do. That's why the great and admired pundits of our time, such as Thomas Friedman or Andrew Sullivan or Chris Matthews say such meaningless things that turn out to be wrong time after time after time. If you want to predict the weather more than a few days in advance, you have to use trend predictions. You can say, "we're headed towards summer, so the temperatures each week will be 'attracted' to increasing warmth, and so temperatures are likely to rise each week from now on." That doesn't tell you what the temperature will be next week, but it does tell you the most probable direction that the temperature will go in. Similarly, if you want to make political predictions, you have to use trend predictions. The trend is for Arabs and Jews to head for a new genocidal war, re-fighting the war of the late 1940s when Palestine was partitioned and the state of Israel was created. And so I've predicted many times that things will only get worse in the Mideast, and that's exactly what happened, especially since the death of Yasser Arafat. You can go back and look at the history on a day to day basis, and you'll find that on almost every day since then, with very few exceptions, the Palestine region has descended further and further into chaos, moved closer and closer to war. This is as predictable as the increase in temperature as summer approaches. However, now let's take a look at the other side of the "butterfly effect." Suppose you see a butterfly sitting on a leaf and you blow on it to make it flap its wings. Does that mean we'll have a hurricane? No, of course not. It might cause a hurricane, but the chances are very small. There's no way to predict when any "small event" will have big consquences; in fact, you can predict with almost certainty that no small event you can think of will have big consequences. The big consequences all seem to be caused by small events that no one ever thought about before. And all this theoretical stuff is important, because it tells us something about what was going on in Jerusalem on Friday. The reason that Palestinian agitators were trying to stir up trouble at the Al Aqsa Mosque on Friday is because they were hoping to trigger a "third Intifada," just as Ariel Sharon's visit triggered the second Intifada. But that's completely wrong. Just as blowing on a butterfly almost certainly won't cause a hurricane, stirring up trouble at Al Aqsa almost certainly won't cause a new Intifada. That's where the BBC was making its mistake as well. They kept showing the same pictures of violence over and over, and they kept blathering, "These pictures are going to inflame Muslims around the world." They assume that if Sharon's visit in 2000 caused the second Intifada, then the current problems will have some similar effect. But in fact, a simple understanding of Chaos Theory shows that they're dead wrong. And that's why the BBC is wrong about so many things, just as all the major esteemed analysts and pundits are wrong about so many things. Incidentally, this isn't the first time that someone hoped to trigger widespread violence by demonstrating at this same location. Exactly the same kind of thing happened in April, 2005, but this time it was <#inc ww2010.weblog.ref e050409 "Jewish extremists who tried to use Temple Mount to trigger violence by Palestinians."#> The Jewish extremists were trying to force Prime Minister Sharon to back down from his plans to evacuate Jewish settlements in Gaza, and they hoped that a new Palestinian Intifida would accomplish exactly that. So these Jewish extremists made the same mistake that the Palestinian extremists made this week, the same mistake that the BBC and other pundits are making -- the assumption that a repeat of a previous "small event" will have big consequences again. That almost never happens. There is one other example of a "small event" that inflamed the Muslim world. I'm referring, of course, to <#inc ww2010.weblog.ref e060206 "the Danish cartoon controversy."#> In this case, a tiny decision by a Danish magazine to publish cartoons depicting Mohammed exploded into worldwide confrontations between Muslims and Westerners. That's another "butterfly effect" that no one could have predicted before it happened. While we're at it, let's relate this to the prediction of an international panic and financial crisis that <#inc ww2010.weblog.ref e070209 "we've been predicting."#> The Hamburg crisis of 1857 (panic of 1857) was triggered by a small event -- an employee of the New York branch of the Ohio Life Insurance and Trust Company was found to have embezzled money. As for the Wall Street crash of 1929, no one, to my knowledge, has identified any "small event" that triggered that crash; perhaps the event was so small that no one even noticed. Today, with so many huge and growing global financial imbalances, we're overdue for a new international financial crisis, but it's impossible to predict what "small event" will cause the generational panic leading to this crisis. We can only be certain that it's coming. From the point of view of Generational Dynamics, the Mideast is headed for a major genocidal war between Arabs and Jews. Only this final result can be predicted; none of the scenario details leading up to that war can be predicted or will be known until they happen. All of the "small events" that will trigger big changes will be recognized only after they occur. No one can "make it" happen before it's time has come. We can make a probabilistic prediction that the Mideast will descend further into chaos each and every day, with few exceptions. But the final trend result, a major genocidal war between Arabs and Jews leading to and part of the Clash of Civilizations World War can be predicted with absolute certainty. =eod =// &&2 e070209 Rapid collapse of ABX index indicates that investors may be starting to panic =data ww2010.weblog.y2007.e070209.head Rapid collapse of ABX index indicates that investors may be starting to panic =data ww2010.weblog.y2007.e070209.keys =data ww2010.weblog.y2007.e070209.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070209.date 9-Feb-07 =data ww2010.weblog.y2007.e070209.txt1 Reacting to news from two major banks about sharp losses from their subprime mortgage businesses, =data ww2010.weblog.y2007.e070209.txt2 investors began running for cover on both financial stocks and related credit derivatives. HSBC Holdings plc, an international banking firm headquartered in Europe with over 125 million customers worldwide, issued <#stdurl http://www.hsbc.com/hsbc/news_room/news/news-archive-2007?cp=/public/groupsite/news_room/2007_archive/hsbc_trading_update_us_mortgage_services.jhtml&isPc=true "a press release on Thursday"#> stating that it was now expecting to have $1.75 billion in bad debts that it hadn't previously anticipated. The culprit was a subsidiary, Household Finance Corp., a venerable old American consumer credit firm that HSBC acquired in 2003. Now known as HSBC Finance Corp., the subsidiary had written a bunch of subprime mortgage loans that are turning out to be bad. Subprime mortgage loans are those offered to people with poor credit who are willing to pay higher interest rates. As <#inc ww2010.weblog.ref e070206 "we described earlier this week,"#> these loans have been abused, so much so that loan officers may be held accountable for fraud when the crash occurs. Here's how HSBC described the situation in <#stdurl http://www.hsbc.com/hsbc/news_room/news/news-archive-2007?cp=/public/groupsite/news_room/2007_archive/hsbc_trading_update_us_mortgage_services.jhtml&isPc=true "their press release:"#>

"The impact of slowing house price growth is being reflected in accelerated delinquency trends across the US sub-prime mortgage market, particularly in the more recent loans, as the absence of equity appreciation is reducing refinancing options. Slower prepayment speeds are also highlighting the likely impact on delinquency of higher contractual payment obligations as adjustable rate mortgages reset over the next few years from their original lower rates."

Don't you just love that kind of language? HSBC's stock fell 2.4% on Thursday. At almost the same time, another major institution, New Century Financial Corporation, <#stdurl http://investorrelations.ncen.com/phoenix.zhtml?c=73989&p=irol-newsArticle&ID=960333&highlight= "issued its own press release,"#> saying that it was going to have to revise its financial statements from the last two quarters of 2006, and that it now expected to lose money. Here's how they put it:

"The increasing industry trend of early-payment defaults and, consequently, loan repurchases intensified in the fourth quarter of 2006. The company continued to observe this increased trend in its early-payment default experience in the fourth quarter, and the volume of repurchased loans and repurchase claims remains high. In addition, the company currently expects to record a fair value adjustment to its residual interests to reflect revised prepayment, loss and discount rate assumptions with respect to the loans underlying these residual interests, based on indicative market data. While the company is still determining the magnitude of these adjustments to its fourth quarter 2006 results, the company expects the combined impact of the foregoing to result in a net loss for that period."

Its stock fell 36% on Thursday. In fact, <#stdurl http://www.abcmoney.co.uk/news/08200720671.htm "shares of mortgage lenders fell across the board Thursday."#> Countrywide Financial Corp. and IndyMac Bancorp., the two biggest independent U.S. mortgage lenders, each fell more than 2 percent. Novastar Financial Inc. fell 13 percent to a new 52-week low. In fact, the entire financial services sector was hit hard, including firms like Citigroup Inc. and JPMorgan Chase & Co. Why did the prices of these stocks go down on Thursday? Because investors concluded that they'd earn less money than they'd previously thought, the price that investors are willing to pay for stocks bears some relationship to the amount that the underlying company earns. So, do you follow this so far, dear reader? Because we're now going to take a turn into a magic world, the world of credit derivatives. Because the difference between the stocks of those companies and the derivatives we're going to talk about now is that these derivatives have no underlying value whatsoever. Their value is whatever anyone is willing to pay for them. There's one particular credit derivative we want to describe. It's the ABX-HE credit derivative. It permits the investor to make a bet on whether or not people are going to repay their mortgage loans. What? A bet? Is this Las Vegas or something? No, it's Wall Street. The ABX-HE derivative was created in January, 2006. Here's how <#stdurl http://www.creditmag.com/public/showPage.html?page=323419 "someone quoted in an article from last April described it:"#>

"It is a new liquidity pool focused around the idea of the credit of an entity or a structure: an entity meaning a corporate and a structure meaning an ABS. It broadens the ability to begin trading credit as well as people's ability to take or lay off risk around a specific credit."

It's a superlative example of English language speech, isn't it. But let's just focus on a few words: "It is a new liquidity pool." What that means is that a <#inc ww2010.weblog.ref e061230 "bunch of investors throw their money into a pot,"#> and some of them make money and some of them lose money. It might be a bet on a horse race, or it might be a bet on a roulette wheel. But it's none of those; it's a bet that someone else will or will not default. When you bet your money on this crapshoot ..... errr, I mean credit derivative, you get shares in return. These shares can be bought and sold, with the following intent: If the price of the shares go up, then we believe people are going to be paying off their mortgage loans; if the price goes down, then we believe that people are going to default on their mortgage payments. The current price of these derivatives can be found on <#stdurl http://www.markit.com/abx.jsp#>. We're going to focus on just one of these shares, the ones that were issued for sub-prime mortgages being issued in July, 2006. That index has the name: "ABX-HE-BBB- 06-2". Here's <#stdurl http://www.markit.com/abx.jsp?Index=ABX-HE-BBB-+06-2 "the graph of the index price from August to Thursday"#>: <#inc ww2010.pic g070208.png center "" "Index price of ABX-HE-BBB- 06-2 from August to Thursday, 8-Feb. (Source: Markit.com)"#> The index price of these shares has been falling since August, and on Thursday took another extremely sharp fall, quite possibly a record fall. If you're an investor, one way to use these derivatives is to buy insurance that someone else is going to pay off their mortgage loans. Last July, it cost $242,000 to purchase this kind of insurance on $10 million of subprime loans. At the current price, <#stdurl http://www.bloomberg.com/apps/news?pid=20601103&sid=a3ztUp9Z6_UE&refer=us "it now costs $686,000 to purchase insurance for the same thing."#> It was was around $600,000 just a couple of days ago. Thursday's <#stdurl http://www.msnbc.msn.com/id/17052820/ "collapse in the ABX index"#> is being called a "very violent bearish reaction" by one ABX trader. In fact, Thursday's price fall was actually much greater than was justified by the problems at HSBC and New Century. That means that investors are panicking. Now, maybe investors will regain their confidence tomorrow, or maybe they'll look at the massively increasing default and foreclosure rate and decide to panic even more. It's hard to predict panic. Web site readers often ask me to provide them with the exact date that I expect a crash to occur, and after much experimenting with different wordings, I finally came up with the words that I use very often on this web site: It might be tomorrow, next week, next month, next year, or thereafter, but probably sooner rather than later. It's a phrasing that allows me to convey a sense of urgency without specifying an exact date. But lately several readers have asked a different question: What exactly is going to happen? Is there a specific stock market index we should look for, or what? There will, of course, be a sharp fall in stock prices, but that's the point. What's going to happen is something that we haven't seen in this country since 1929: A "generational crash." The first one that historians have documented is known as "Tulipomania." The high-tech item of the early 1600s were tulips. Dutch botanists succeeded in using breeding techniques to create tulips with spectaculars colors that were sought by the wealthy. Investors all over Europe soon purchased a kind of "tulip future," a certificate purchased in the fall which can be traded for a specific actual tulip to be grown the following spring. Sounds like an ABX certificate, doesn't it? In 1636, speculation in tulip futures went through the roof, and on February 3, 1637, the tulip market suddenly crashed, causing the loss of enormous sums of money, even by ordinary people. Everyone who lived through that horror never forgot it, but by the 1710s decade, all those people were gone. There was a similar generational crash of the South Sea Bubble in 1721. Then there was the bankruptcy of the French Monarchy in 1789, leading to the French Revolution and the Reign of Terror. Then there was the Hamburg Crisis of 1857, called the Panic of 1857 in America. And then there was the Wall Street crash of 1929. There have been, of course, many small or regional economic recessions, but there have been only five major international financial crises, the generational crashes. Each one occurred roughly 70-80 years after the previous one, just when there's no one left who remembers the last one. What's a generational crash like? We saw a little bit of it a year ago, when <#inc ww2010.weblog.ref e060122 "a high-flying Japanese internet portal firm, LiveDoor,"#> came under suspicion for financial irregularities. Investors panicked, causing a bloodbath in both Japan and New York, with stock markets around the world suffering similar shocks. However, the loss of confidence didn't continue, and the markets worked there way back. With a generational crash, what I'm talking about is a massive loss of confidence throughout the country and the world, total destruction of self-confidence, replaced by a corrosively growing fear, leading to panic, massive homelessness and bankruptcies. We're actually overdue for that, just as we're overdue for a flu pandemic. When that happens, you'll know it. And yes, it might happen tomorrow, next week or next year, but probably sooner rather than later. =eod =// &&2 e070208 In Mexico, violent crime from drug cartels increases with tortilla prices =data ww2010.weblog.y2007.e070208.head In Mexico, violent crime from drug cartels increases with tortilla prices =data ww2010.weblog.y2007.e070208.keys =data ww2010.weblog.y2007.e070208.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070208.date 8-Feb-07 =data ww2010.weblog.y2007.e070208.txt1 After Acapulco incident, Canada may advise citizens not to travel to Mexico. =data ww2010.weblog.y2007.e070208.txt2 In a brazen crime on Monday in Acapulco, <#stdurl http://www.kansascity.com/mld/kansascity/news/world/16638473.htm "killers from drug cartels dressed as soldiers"#> came to do a "weapons inspection" at two police stations. After disarming the policemen, they then killed several police officers and a police commander. To add insult to injury, the drug cartels videotaped the crime, though the videotape has not yet been "released." This is only the latest in an increasing level of violence occurring throughout Mexico. Many of these incidents have harmed Canadian tourists and Canadian Foreign Affairs Minister <# stdurl http://toronto.ctv.ca/servlet/an/local/CTVNews/20070207/mackay_mexico_alert_070207/20070207?hub=TorontoHome "Peter MacKay was in Mexico City"#> on Wednesday to discuss, among other issues, whether or not Canada should issue a travel advisory, advising Canadians not to travel to Mexico unless absolutely necessary. In fact, if you look at the Canadian government's <#stdurl http://www.voyage.gc.ca/dest/report-en.asp?country=184000 "current travel advisory for Mexico,"#> it's quite chilling. It warns of being drugged, assaulted, raped, robbed, or car-jacked. A common crime is to force someone to go to an ATM and use a credit card to withdraw money, which is then taken. Even legitimate police officers extort money from tourists. (Similar warnings are provided on the <#stdurl http://travel.state.gov/travel/cis_pa_tw/cis/cis_970.html "American State Dept. travel advisory for Mexico."#>) The increase in crime is related to increasingly powerful drug cartels. President Felipe Calderón has announced an effort to control drug cartels with thousands of troops, but Tuesday's murders in Acapulco police stations were a clear message from the drug cartels that they can murder whomever they want despite the government's attempts. The increase in crime has gone hand in hand with increases in Mexican poverty. Mexico still has huge pockets of poverty, as population has become increasingly dense and its oil revenue seems to have peaked. <#inc ww2010.pic g070207.jpg right "" "Tortillas"#> Now, a truly bizarre situation has arisen having to do with the sudden rise in the price of tortillas. The price of Mexican tortillas has almost doubled in the last year. This is causing big problems because tortillas are a dietary staple of the entire Mexican population, both rich and poor, just like rice for the Chinese and donuts for Americans. Tortillas are made of corn. The price of tortillas has risen because the price of corn has risen. Why has the price of corn risen? Because, believe it or not, <#stdurl http://www.mexidata.info/id1243.html "many U.S. states are requiring automobile fuel to contain 10%-85% ethanol"#> added to the gasoline, to meet clean air standards. In 2006, the use of ethanol skyrocketed, and it will increase even more in 2007. So what? Well, ethanol is made from corn, and the increased diversion of corn into ethanol is causing prices to increase sharply. This would be funny if it weren't so serious, and the problem is going to get worse. Last week, <#stdurl http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-mexecon_04bus.ART0.State.Edition1.1cbccff.html "hundreds of thousands of protestors"#> were in Mexico City protesting economic problems, especially tortilla prices. President Calderón is attempting to implement a "tortilla pact" with business to control tortilla prices, but it probably won't work if corn prices keep going up. Mexico's last crisis war was the Mexican Revolution, running from 1910-1922, so Mexico is deep into a generational Crisis era, and overdue for a new crisis war. Mexico is like other Latin American countries in that the major fault lines are between the indigenous peoples ("Amerindians") and the people of European ancestry. The indigenous peoples in Mexico are the Mayans in the south and the Aztecs and Commancheros in the north. The Europeans -- descendants of Spanish or French -- generally live in the center, around Mexico City. During the Mexican Revolution of the 1910s, Pancho Villa (from the south) was the leader, along with Emiliano Zapata, of the indigenous rebel insurgency groups. From the point of view of Generational Dynamics theory, Mexico presents a puzzle, because it's gone 84 years without a crisis war, and we'd like to understand why. Actually, 84 years isn't exceptionally long, since historically some 15% of all crisis wars have begun 80 or more years after the end of the previous one, but it is above average, and we'd like to understand better what are the factors that increase the number of years between crisis wars. The following table summarizes the historical findings, and also identifies several countries currently in each generational era: LENGTH OF INTER-CRISIS PERIOD Fraction #years of total Generational Era Country examples today ------ -------- ------------------------- ----------------------------- 0- 40 0% Recovery, Awakening Iran, Iraq, Syria, Lebanon, Vietnam 41- 49 11% First half of Unraveling Colombia, Venezuela 50- 59 33% Second half of Unraveling Israel, Palestine, China 60- 69 25% First half of Crisis U.S., Europe, Japan 70- 79 16% Second half of Crisis Russia, Saudi Arabia, Morocco 80+ 15% "Fifth Turning" Mexico, Haiti This table shows the %-age of crisis wars that historically have occurred in each of the generational eras, based on the number of years since the end of the previous crisis war. The last column lists examples of countries that are in that generational era today.
There are several countries today that are overdue for a crisis war, and what they all appear to have in common is unexpected money. These include Saudi Arabia, Morocco, and Russia (oil money), Haiti and Gaza (international contributions), Mexico (oil, drug cartel and remittance money from U.S.) and China (export sales, bubble economy). China has a stated policy of providing as much food as possible to everyone, in order to prevent a massive national rebellion. China is very paranoid about this (as <#hreftext ww2010.i.china050116 "they should be, given their history"#>), and has had tens of thousands of regional rebellions every year for several years now. The only "weapon" that China has to prevent a nationwide rebellion is plenty of food distribution, and that requires plenty of money, which they have right now, thanks to their bubble economy. Gaza is not overdue for a crisis war yet, but it's possibly the most densely populated region in the world, with large pockets of poverty. It's believed that high population density and poverty tend to cause crisis wars to occur earlier, while plenty of money can delay crisis wars. The Palestinians have depended on large international contributions, mostly from Europe and the U.S., but those were cut off in January, 2006, when an election gave Hamas control of the government, and the region now appears to be very close to a civil war between Fatah and Hamas. Saudi Arabia has called representatives of Hamas and Fatah to Mecca for a "last chance" meeting to hammer out a peace accord. Rumor has it that the representatives won't be allowed to leave the room until they agree to a unity government. One particularly contentious possible outcome is that Saudi Arabia may agree to make up the international contributions out of its oil income, and they <#stdurl http://www.debka.org/headline.php?hid=3812 "won't demand that the unity government recognize Israel or renounce violence."#> This would be an extremely ominous outcome, though probably no more ominous that having a full-scale civil war between Fatah and Hamas. So there's a common thread here: From the point of view of Generational Dynamics theory, we believe that more money postpones crisis wars, and poverty speeds them up. The reason that genocidal crisis wars are necessary is that the population grows faster than the food supply. People who sing "Kumbaya" and hug and talk of everyone loving one another and living without war don't understand that when one person lives, another person must die because there isn't enough food for both of them. The problem has been made much worse in the last century because of dramatic declines in infant and child mortality, resulting in much faster population growth. From the point of view of Generational Dynamics, we're approaching the Clash of Civilizations world war, at a time when infant mortality has fallen far, leading to masses of people, packed by the millions into large megacities, in a fragile world where any economic dislocation can cause mass starvation, creating huge pools of young men ready for war. And one of the largest megacities in the world is Mexico City, the capital of Mexico, with some 20 million people. When the price of tortillas goes up, it might almost seem like a joke to us (since comedians will tell you that "tortilla" is a "funny word"), but in Mexico City it could literally mean starvation for hundreds of thousands of people. A major financial crisis will strike Mexico very hard (as well as many other countries with poverty-stricken megacities). Generational Dynamics predicts that Mexico is headed soon for a new civil war along the European/indigenous fault line, and that this civil war will spill over into the southwestern U.S., especially in California where 1/3 of the population is Mexican. =eod =// &&2 e070206 As housing collapses, subprime mortgage loan officers may held accountable for fraud =data ww2010.weblog.y2007.e070206.head As housing collapses, subprime mortgage loan officers may be held accountable for fraud =data ww2010.weblog.y2007.e070206.keys =data ww2010.weblog.y2007.e070206.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070206.date 6-Feb-07 =data ww2010.weblog.y2007.e070206.txt1 The Realtors' economist David Lereah illustrates the Principle of Maximum Ruin. =data ww2010.weblog.y2007.e070206.txt2 While the housing market continues to slip, most investor attention is being focused on a particular aspect: The extremely high failure rate of subprime mortgage loans. In the "old days," when financial managers were still people who had lived through the horrors of the 1930s Great Depression, you would buy a house by paying 30% of the purchase price (the "down payment") in cash (from your savings account), and you would pay the other 70% by obtaining a mortgage loan from a bank, to be repaid by means of monthly payments for 30 years. You would use the house as collateral, meaning that if you were unable to make the monthly payments, then you would lose the down payment and the house. The bank would take possession of the house, evict you, and then auction the house off to someone else for as much money as they could get. When the Boomers started taking over leadership positions in the 1980s, credit became much easier to obtain. The amount of required down payment was reduced to 20%, sometimes as little as 10% or even 0%. This was justified by the fact that the homes were gaining in value, so the mortgage principal would (theoretically) equal 80% of the home's increased value within a year or two anyway. But lenders still verified that borrowers had enough income to make the monthly payments. Another recent change was "no documentation loans," which permitted people, such as people who work on commission and can't prove their income, to qualify for a mortgage loan by paying a higher interest rate. That phrase isn't always entirely accurate though, because often the banker would require alternate documentation instead of no documentation. For example, even if a borrower isn't required to prove his income, he may still be required to list his assets and debts. However, things have completely unraveled in the last three years, thanks to the housing bubble. With housing values increasing 10-20% per year, why worry about anything? The buyer could "flip" the house by holding it for a few months without even living in it, and then sell it for a lot more money. If the buyer didn't make his payments, the bank could "flip" the house in the same way. The result is that lending institutions have become even more careless about verifying buyer documentation, with the result that many subprime mortgage borrowers cannot afford the payments. Now, at the beginning of 2007, it's been over a year since the housing bubble began to deflate. It <#inc ww2010.weblog.ref e060825b "was already fully apparent in August, 2006,"#> that the housing market was collapsing faster than economists had expected. Housing prices fell throughout most of 2006, obliterating the assumptions under which the careless lending rules were devised. As a result, buyer defaults have been increasing, and <#stdurl http://www.ocregister.com/ocregister/money/article_1556536.php "a study by UBS Investment Bank of subprime mortgages made in 2006"#> found that the default rate is so high that subprime loans made in 2006 are on track to be the worst-performing class of loans ever issued. In fact -- and this is really a killer issue -- many buyers are unable to make even the FIRST PAYMENT of the loan. From the buyer's point of view, the plan was to purchase the house with no investment at all, flip the house and sell it at a higher price. But if prices are falling, then the buyer realizes that any mortgage payments he makes are simply lost money, so rather than make even one payment, he defaults and lets the bank take posession. "First payment defaults" are considered a special category of default because they may be a sign of fraud; that is, if a buyer never intended to make payments on the mortgage loan, then he's defrauded the mortgage lender. Who makes money in this situation? An intermediary like a loan broker does. He brings the home buyer and mortgage lender together, and makes sure all the proper paperwork gets filed. By the time that the buyer has defaulted, the loan broker has already made his commission on the mortgage loan. In fact, the amount of outright fraud is higher than most people think. In some regions, <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aFGf71vlQkWM&refer=home "fraud may have been involved in as much as one-third of all subprime loans."#> One type of fraud involves the use of "straw buyers," people who have no intention of living in the home they're buying or even "flipping" it and reselling. They collude with homebuilders to purchase the house at inflated rates, and then immediately default on the mortgage loan. The homebuilder and the straw buyer split the proceeds from the fraudulent sale, and the bank is stuck with the overpriced house. Now, <#stdurl http://www.nationalmortgagenews.com/columns/hearing/ "an article in National Mortgage News"#> is beginning to ask the question: Should loan brokers be held accountable when the buyer defaults on an early payment? This could mean that he could be required to provide restitution to the lending institution of any money they've lost, and it could even mean criminal fraud charges against the loan broker for conspiring in the fraud. I've already written several times that <#inc ww2010.weblog.ref e070121 "many hedge fund managers and investment advisers may be guilty of criminal fraud."#> These advisers have a fiduciary duty to their clients to provide the best advice. If however, an investment advisor or hedge fund manager protects himself while collecting commissions from clients whom he advises to invest more, and then a major international financial crisis occurs causing clients to lose their investments, the fact that the adviser protected himself can be considered evidence that he purposely misled his clients, and that would be criminal fraud. And you can be sure that furious clients will be only too delighted to see all such people get skewered as painfully as possible. Now we see where these charges can also extend to loan officers. If, for example, a buyer lied on his application in order to qualify for a loan, but the loan officer didn't check that the application was valid, then the lending institution can claim that the loan officer purposely avoiding checking in order to collect a commission. Once again, that's criminal fraud. In fact, the mortgage lending industry is getting hit very hard. A new web site, <#stdurl http://ml-implode.com/ ""The Morgage Lender Implode-O-Meter,""#> has been tracking the collapse of mortgage lending firms as they occur, and as of this writing, 18 lenders have gone out of business since December, 2006. That lenders are going bankrupt won't be surprising when you realize that <#stdurl http://www.realtytrac.com/gateway_co.asp?accnt=64847&ItemID=1855 "the number of foreclosures in 2006 is up 42% from 2005."#> Much of this is caused by incompetence by loan brokers, and complicity in fraud by buyers. And we can't end this article without talking a moment about <#stdurl http://www.realtor.org/Research.nsf/Pages/LereahD "Mr. David Lereah, the chief economist at the National Association of Realtors."#> Each month, when the Realtors' housing report comes out, Lereah provides commentary on the real estate market. He's become the butt of a number of jokes because his commentary is always the same: The housing market is getting better. He's been wrong almost every month for over a year. A <#stdurl http://www.marketwatch.com/news/story/commentary-realtors-economist-stayed-sunny/story.aspx?guid=%7BEBC34E29-49EE-4925-A69A-52807DBE0C1E%7D "recent article by MarketWatch"#> has tracked some of the unrealistic statements made by Lereah in the past year: "The market is in the process of normalization" in January; "Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau" in April; "The market should even out just below present levels" and "The market is stabilizing" in July; and finally, "The good news is that the steady improvement in sales will support price appreciation moving forward" and "It appears we have established a bottom" last month. Each month's statement has turned out to be overly optimistic and wrong. But David Lereah hasn't just become famous now. One person has been tracking his optimistic statements in a <#stdurl http://davidlereahwatch.blogspot.com/ "David Lereah Watch blog"#> since August, 2005. Will David Lereah be charged with criminal fraud after a housing bubble crash? I don't know the answer to that question; it probably depends on whether he's lying or incompetent. What we're seeing here are examples of what I've been calling "The Principle of Maximum Ruin." This principle states that the maximum number of people will suffer the maximum amount of ruin in a crash. That's because people like David Lereah will convince people to continue to make unwise investments. I devised this principle after reading what happened in the 1929 stock market crash, as described by economist John Kenneth Galbraith in his 1954 book The Great Crash - 1929:

Galbraith shows what happened after the initial crash on October 24, 1929: "In the first week the slaughter had been of the innocents," in the second week it was "the well-to-do and the wealthy" who were slaughtered (p. 113), and then more and more people were sucked into ruin during the years that followed. People like David Lereah and overly optimistic financial advisers convince more and more people to invest more and more money, especially when buying stocks on margin (credit):

"The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. ... The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or fourth of the purchase price in the next twenty-four months. ... The ruthlessness of [the stock market was] remarkable." (p. 109)

From the point of view of Generational Dynamics, we're in the first stages of this same process. Advisers who stand to make commissions by providing overly optimistic advice draw more and more people into the bubble market, whether it's the housing bubble market or the stock bubble market. No matter what happens, these advisers always say that everything is OK, and they draw in more money and more investors, until the maximum number of investors suffer the maximum amount of ruin. The Principle of Maximum Ruin. =eod =// &&2 e070205 Politicians are behaving increasingly anxious and desperate =data ww2010.weblog.y2007.e070205.head Politicians are behaving increasingly anxious and desperate =data ww2010.weblog.y2007.e070205.keys =data ww2010.weblog.y2007.e070205.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070205.date 5-Feb-07 =data ww2010.weblog.y2007.e070205.txt1 Once again, there was little that made sense on the Sunday news talk shows. =data ww2010.weblog.y2007.e070205.txt2 Senator John McCain, speaking on the ABC show, explained what would happen if we withdraw from Iraq:

"If we withdraw, you'll see a level of violence that will exceed anything that we have seen. You'll see a bloodletting in Baghdad that makes Srebrenica look like a Sunday school picnic. If we leave, we'll have to come back at some time, because the Sunnis, Turks and Kurds will be involved."

Well, as it turns out I wrote <#inc ww2010.weblog.ref e050712 "an article on the Srebrenica massacre,"#> when the survivors were commemorating the 10th anniversary in 2005. But, as I've explained too many times to count, Iraq is not in a civil war, and even if you insist on calling what's going on today a "civil war," it still can't spiral up into a Srebrenica-like massacre for many decades. That's because Iraq is in a generational "Awakening" era, and a Srebrenica-type massacre is impossible except in a generational "Crisis" era, and Iraq is decades away from that. So once again, we went through another day of discussion based on entirely wrong assumptions. This means that many possible solutions are being discarded because of the supposed danger of a Srebrenica-like massacre. This is a HUGE PROBLEM in today's government policy-making, and mistakes like this can cause disasters. <#inc ww2010.pic g070204.jpg right "" "Senators Hillary Clinton and Chris Dodd express look anxious and furious as they addressed their Democratic party colleagues on Friday. (Source: ABC)"#> America is, of course, currently in a generational "Crisis" era, and one way to see that is how desperate and angry the politicians are getting. This was very apparent on Friday, as can be seen from the adjacent screen shots, depicting their facial expressions when they were addressing their fellow Democrats on Friday. Typical comments were to the effect: "George Bush is incompetent" and "George Bush is stupid" and "George Bush sucks." It's not too easy to tell the speeches apart. This has its humorous side, of course, and the politicians are so paralyzed by their own bickering that <#inc ww2010.weblog.ref e070131 "they can't even vote themselves a pay raise."#> This is one of the few things about today's situation in Washington that still gives me a chuckle. Actually, I got another chuckle on Sunday morning when George Will described how the Democrats are competing in a kind of auction to decide who can be the first to end the war:

There's an auction underway. There's a bidding war. Hillary Clinton said this (on Friday): "If we in Congress don't end this war before January of 2009, as president, I will." That means, she said [she'll end the war in] 23 months. Edwards says, bring 50,000 out now, and the rest within 18 months. Senator Obama said, "Pikers! No, 14 months." Governor Richardson in New Mexico said he wants them out in this calendar year. That's a little bit less than 11 months. But Mr. Vilsack, not to be outdone, says he wants them out immediately. The only way you top that is by saying you want the troops out by last Thursday. And I assume that someone will say that soon.

One reason that George Will's speech is so funny is because the politicians look like morons doing this, especially since none of them is willing to challenge the belief that if we withdraw then we'll have that Srebrenica-type massacre that John McCain was talking about. That's part of the "common wisdom" in Washington now. The other reason that this is so funny is because all they're doing anyway is screaming and yelling at each other like a bunch of teenage girls, since the most they're going to do about it is pass a non-binding resolution whining about the war, and they probably won't even be able to do that. I used to have a little respect for Hillary Clinton because she took a principled position on the Iraq war in 2003 and stuck to it, unlike her peers who simply jumped into the mud en masse to grovel after the latest poll results. But now she's down in the mud with the rest of them. Is there anyone who really likes this bunch? It's hard for me to believe. John Edwards on Meet the Press very harshly blamed the incompetence of the Bush administration, but seems to have absolved them of the charge of lying about weapons of mass destruction (WMDs). He says that in 2002, when the intelligence was being discussed, he spoke with his contacts from the Clinton administration, and they all agreed that the there were WMDs in Iraq. Here's another quote, from Senator Dianne Feinstein on CNN: "[The Iraqi government] refuses to do what's necessary to stem the tide of this civil war. Therefore the American presence becomes a buffer in the middle of Shia against Shia, Shia against Sunni, al-Qaeda foreign fighters, and a huge conflagration that's building." No, Senator Feinstein, there's no huge conflagration building. I wrote down another quote: "This place could go chaotic, no matter what you do." But I must have forgotten to write down who said it. Tsk. I'll have to be more careful in the future, but what's the difference? Any of them might have said it. Conservative pundit Bill Kristol, speaking on the Fox News show, described the Democrats' behavior as "desperate." I have to agree, since that's exactly what I was thinking. I've come to recognize what's going on, as more examples pile up. Do you remember, dear reader, what <#inc ww2010.weblog.ref e061207 "I wrote about on December 7."#> I described it as possibly the most bizarre day even Washington had ever seen. You had Jim Baker, head of the Iraq Study Group, holding up his index finger and saying, "Flip Syria! Flip Syria! Flip Syria!" You had Bob Gates being confirmed as the new Secretary of Defense, saying, "We're not winning the war, we're not losing the war, but the present policy isn't working." Do you remember what Senator Ted Kennedy said to that remark? He congratulated Bob Gates for the "great atmospherics." And we had journalist David Gergen say this on CNN: "This is the best moment we've had in over three years." Yes, people were giddy, giggling, jivin', hangin' loose, and everyone was happy. But oh, they aren't happy any more. They're a bunch of manic-depressives who were in a manic state two months ago, but are now in a depressive stage. Can't they just take a pill? Instead, they're just yelling. "George Bush is an idiot." "End the war now." "George Bush sucks." In fact, we really saw this a couple of weeks ago, after George Bush's "library" speech, when NBC "journalist" <#inc ww2010.weblog.ref e070114 "Chris Matthews melted down on MSNBC,"#> and ranted and raved about the stupidity of George Bush for half an hour, when it was perfectly clear that Matthews had no idea what he was talking about. I've seen this same kind of behavior in friends, as well, both online and analog. There's a kind of desperate fanaticism, as they panic and almost become crazy. It happened last week to the entire city of Boston, as people <#inc ww2010.weblog.ref e070202 "exploded over the cartoon hoax."#> Well, that's not quite right, is it. It was the college-age fans of the cartoon show who were laughing and ridiculing the Boomers, and it was the Boomers who were furious. Same with all the other examples -- it's always the Boomers who are bickering and yelling at each other, and it's the same Boomers who are now melting down, as their anxiety turns to panic and fury and fanaticism. Washington is in a very dangerous place right now. It's filled with Boomers who think they know everything but are very ignorant, who think they know what's right but are having their core beliefs challenged at every turn, who think they're good at politics, but are ready to strike out in fury at anyone who challenges them. And, as I've pointed out before, it's not just America. Pretty much every country that fought in World War II is in a similar state of anxiety, panic and fury. Something that we don't like may very well be happening soon. =eod =// &&2 e070204 'Palestinians don't deserve a state' =data ww2010.weblog.y2007.e070204.head "Palestinians don't deserve a state" =data ww2010.weblog.y2007.e070204.keys =data ww2010.weblog.y2007.e070204.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070204.date 4-Feb-07 =data ww2010.weblog.y2007.e070204.txt1 Even the most optimistic Palestinians are despairing that their dream is slipping away. =data ww2010.weblog.y2007.e070204.txt2 Generational Dynamics tells us that what politicians think matters little; what's really important is what large masses of people think. In particular, major shifts in opinion often signal important generational changes. That's why I really homed into an <#stdurl www.jpost.com/servlet/Satellite?cid=1170359774215&pagename=JPost%2FJPArticle%2FShowFull "article in Sunday's Jerusalem Post"#> saying that the burgeoning street fights between Hamas and Fatah, especially in Gaza, is causing the international community to turn against the Palestinians, and even that the Palestinians no longer even deserve to have a Palestinian state side-by-side with Israel. Here are some excerpts from the article:

"Everyone here is disgusted by what's happening in the Gaza Strip," said Shireen Atiyeh, a 30-year-old mother of three working in one of the Palestinian Authority ministries. "We are telling the world that we don't deserve a state because we are murdering each other and destroying our universities, colleges, mosques and hospitals. Today I'm ashamed to say that I'm a Palestinian." ... Hafez Barghouti, editor of the PA-funded daily Al-Hayat Al-Jadeeda, said he was concerned that the fighting would tarnish the image of the Palestinians. "Tens of millions of people now look at us as worthless gangsters with no values," he complained. ... Columnist Mahmoud Habbash also acknowledged that the fighting had caused grave damage to the Palestinians on the international arena. The internal fighting, he said, has distorted the image of the Palestinians in the eyes of the world. "The world is watching how the Palestinians are destroying their institutions and achievements with their own hands. They see how we are mercilessly slaughtering innocent people. We are losing the sympathy of the world. I'm afraid the world will now view us differently." Reflecting the gloomy mood on the Palestinian street, political analyst Ikrimah Thabet said: "There is no reason for optimism. This is a real conflict stemming from two contradictory programs and political and ideological discord. The divisions are so deep that no temporary cease-fire will help. The bloody events have caused enormous damage to the reputation of the Palestinians, especially in light of the filthy and painful violence that has claimed the lives of children, activists, leaders and innocent civilians."

It's too early to tell whether this new attitude is temporary, or if it reflects a new and continuing reality. At the very least it can be said that the increasing street fighting is giving support to those in the international community who claim that all Palestinians are terrorists and we shouldn't be supporting them at all. It also gives support to those within the Palestinian community who claim that there's no point in negotiating with Israel or the west, since no compromise that supports Israel will ever receive enough popular support among the Palestinians. By giving support to both of these groups, support is taken away from groups that want less violence. Thus, these new feelings of hopelessness could easily metastasize into an increased acceptance of violence. Incidentally, you may have missed this on Saturday, but Hamas and Fatah signed another peace treaty, and <#stdurl http://www.imemc.org/article/46849 "this one had seven items in it."#> Unfortunately, it didn't make big news because it was the second ceasefire within 24 hours, the previous one having lasted less than an hour. The Mideast has been deteriorating constantly since Yasser Arafat's death, as <#hreftext ww2010.i.may01 "predicted in May, 2003,"#> based on the generational changes that would occur with the disappearance of Arafat. The civil war among the Palestinians does not appear to be very far off, and a major new war between Arabs and Jews cannot be avoided. =eod =// &&2 e070203 South Korea to deploy deadly robots on border with North Korea =data ww2010.weblog.y2007.e070203.head South Korea to deploy deadly robots on border with North Korea =data ww2010.weblog.y2007.e070203.keys =data ww2010.weblog.y2007.e070203.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070203.date 3-Feb-07 =data ww2010.weblog.y2007.e070203.txt1 This is the scariest video you've ever seen. =data ww2010.weblog.y2007.e070203.txt2 Samsung's Techwin division will shortly begin selling <#stdurl http://www.vnunet.com/vnunet/news/2168669/samsung-shows-robot-sentry "heavily armed robot sentries"#> that can identify and shoot a target automatically from over two miles away. They will cost $200,000 per unit, and the company expects to sell 1,000 in the first year. Unlike human guards who can succumb to fatigue or inclement weather, the <#stdurl http://news.com.com/2300-11394_3-6140088-1.html "automated system will guarantee "perfect guarding operation.""#> The robot has two cameras, one for daytime and infrared for nighttime, along with a laser rangefinder. The robot uses pattern-recognition technology to sort out fleshy targets from nonhuman objects. It can be programmed to recognize words of surrender from someone who doesn't want to be shot. (Hopefully, he won't accidentally cough or something.) It can be programmed to shoot automatically, or to wait for a wireless command from a remote operator. Here's <#stdurl http://www.youtube.com/watch?v=pMkV8E2re9U "the promotional video for the product."#> You've gotta see this:

This is the first of what is bound to be a flood of these robots appearing on battlefields, and eventually on city street corners and even as private guards in people's homes. Every country in the world will be developing and deploying them, and we can be certain that China already has many ongoing projects. American armed forces are already using remote controlled robots to disarm IEDs (improvised explosive devices) used in roadside bombs in Iraq. However, the really big project is the <#inc ww2010.weblog.ref e050228 ""Future Combat System""#> which calls for autonomous robot soldiers by 2014. The Army <#stdurl http://www.army.mil/-news/2007/02/02/1636-soldiers-testing-fcs-technology-give-thumbs-up "completed the first live-fire exercise"#> earlier this week at Fort Bliss, Texas. A platoon of 36 Soldiers tested such FCS technology as Urban and Tactical Unattended Ground Sensors and unmanned vehicles designed to clear roads and buildings, as well as detect persons and objects that may enter a building occupied by soldiers. Robotics and unmanned vehicles help clear buildings without sending actual soldiers inside. This is part of the most comprehensive Army modernization effort in more than half a century. You're not gonna believe this, but if the above video wasn't enough excitement for you, then you can <#stdurl http://www.army.mil/fcs/f2c2/index.html "download a free PC game called F2C2 (Future Force Company Commander):"#> "Welcome to the battlefield of the future! F2C2 was created by Science Applications International Corporation (SAIC) to help explain the Future Combat Systems (FCS) program to soldiers in an interactive environment. The game depicts the 18 FCS systems, all connected via the FCS System of Systems Common Operating Environment, supporting the 21st century soldier. Although F2C2 is best experienced when the player has a working knowledge of Army concepts and terminology, anyone can play! F2C2 may seem hard at first if you haven’t had Army training, but there are tutorials available. Prepare to be challenged!" From the point of view of Generational Dynamics, this is one more step in the develop of super-intelligent computers that will, within ten years or so, <#hreftext ww2010.i.robot040709 "be more intelligent than human beings."#> These robots will serve not only as soldiers, but also in a variety of tasks from being a plumber to being a 24 hour a day nurse. In the late 2020s, super-intelligent robots will reach the point, known as The Singularity, where they're able to do the necessary research and development to develop new versions of themselves. After that they will quickly become far more intelligent than humans, and the future existence of the human race cannot be predicted. =eod =// &&2 e070202c Robert Gates on "civil war" in Iraq. =data ww2010.weblog.y2007.e070202c.head Robert Gates on "civil war" in Iraq. =data ww2010.weblog.y2007.e070202c.keys =data ww2010.weblog.y2007.e070202c.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070202c.date 2-Feb-07 =data ww2010.weblog.y2007.e070202c.txt1 Following the release of the Iraq National Intelligence Estimate on Friday, =data ww2010.weblog.y2007.e070202c.txt2 Secretary of Defense Robert Gates and and Chairman Of Joint Chiefs Of Staffs Gen. Peter Pace held a joint press conference at Pentagon. <#inc ww2010.pic g070202.jpg right "" "Secretary of Defense Robert Gates (Source: CNN)"#> He was asked whether he felt the war in Iraq was a "civil war":

"When I think of a civil war, I think of thousands of people out on the streets killing each other. What I see in Iraq and the sectarian conflict are gangs of killers going after specific neighborhoods, going after specific targets, either individuals or other groups, or terror attacks in marketplaces to inflict casualties. This isn't a divided army, or a divided government in the sense that I ever thought of as a civil war."

This is a pretty good, concise definition, probably better than I've come up with. It makes it as clear as possible, in just a few words, how unlike a civil war the Iraq war is. You'd think that the "anti-war" Boomer crowd in Washington would be happy about this. After all, then they can claim that it's all right to pull out of Iraq and it won't cause a bloodbath. But they've turned into such fanatics that reason doesn't matter much, even when it helps their own cause. At any rate, after the <#inc ww2010.weblog.ref e061108 "departure of Donald Rumsfeld,"#> it's a great relief to me to know that our new Secretary of Defense isn't listening to the idiots in Washington. =eod =// &&2 e070202b The U.S. vs Iran debate may be unifying the Iraqis =data ww2010.weblog.y2007.e070202b.head The U.S. vs Iran debate may be unifying the Iraqis =data ww2010.weblog.y2007.e070202b.keys =data ww2010.weblog.y2007.e070202b.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070202b.date 2-Feb-07 =data ww2010.weblog.y2007.e070202b.txt1 Iraqis don't want interference from either America or Iran. =data ww2010.weblog.y2007.e070202b.txt2 Recent terrorist acts against Americans in Iraq have given rise to a debate about Iran's activities in Iraq. The debate has both an American and Iraqi point of view. I'd like to quote from two interviews that focus on this issue from Iraq's point of view. The first, which appeared on MSNBC on Wednesday morning, was with Brad McGuinn, a professor at University of Miami:

Q: Is Iran's efforts to spend money on things like hospitals and humanitarian assistance in the end as big an influence to the U.S. in the region as its military efforts? A: Iran has gravity on its side -- it's there. It also has very deep and lasting relationships with the Shia populations of Iraq and of Lebanon, and to a large extent this is a reflection of their missionary work -- health care, education -- and it reflects a general trend in Iranian policy to deepen its influence in the broader Middle East. So yes, between the United States and Iran there is a competition, a confrontation really, for the hearts and minds of the Shia of the Middle East. Q: Is Iran succeeding in building support among the Iraqi people? A: It is with a component of the Iraqi people. Iran had a [kind of] traumatic moment that confronted it when the United States came into Iraq because of the transformation of Iraq into a Shia-dominated state that would be perhaps friendly to the United States was for Iran a major threat, because for the first time there would be another Shia state that would be able to challenge Iran for seniority within that Shia community. So from Iran's perspective, yes, it is a "playing for keeps" proposition. Q: Do you think there's a point where the Shia in Iraq think that Iran is a better ally than the U.S.? A: No, I don't they will, because between the Iraqi Shia and Iran there exist many points of convergence, but fundamental points of divergence. There is, at the end of the day, something of Arab-ness, something of Iraqi-ness, that separates the Shia of Iraq from Iran. Which is not to say that in the security vacuum, in the economic catastrophe that exists, there in Iraq as well as in Lebanon, that Iran does not have a fertile field. But at the end of the day, the Shia of Iraq are Iraqis. Q: What does Iran want? A: Influence. And it wants to be sure, as well, that the Shia of Iraq do not come to reflect a pro-Western tendency. They don't want to see the United States gaining an influence with the Shia community there, and then therefore be able to use this Shia alliance as a wedge in the broader Middle East in terms of the sectarian dynamic between the Sunni and the Shia. It's a battle, really, for that population, between the United States and Iran.

I'd like to call your attention especially to this sentence in the second answer: "There is, at the end of the day, something of Arab-ness, something of Iraqi-ness, that separates the Shia of Iraq from Iran." This captures a concept that I was trying, not very successfully, to convey in <#hreftext ww2010.i.060807iraqcivil "article last August on Washington hysteria"#> over an Iraqi civil war: That when the chips are down, Iraqis put Iraqi nationalism above religious differences. I quoted the <#stdurl http://lcweb2.loc.gov/frd/cs/iqtoc.html#iq0019 "Library of Congress (LOC) history of Iraq"#> as saying the following, talking about the Great Iraqi Revolution of 1920:

"Ath Thawra al Iraqiyya al Kubra, or The Great Iraqi Revolution (as the 1920 rebellion is called), was a watershed event in contemporary Iraqi history. For the first time, Sunnis and Shias, tribes and cities, were brought together in a common effort. In the opinion of Hanna Batatu, author of a seminal work on Iraq, the building of a nation-state in Iraq depended upon two major factors: the integration of Shias and Sunnis into the new body politic and the successful resolution of the age-old conflicts between the tribes and the riverine cities and among the tribes themselves over the food-producing flatlands of the Tigris and the Euphrates. The 1920 rebellion brought these groups together, if only briefly; this constituted an important first step in the long and arduous process of forging a nation-state out of Iraq's conflict-ridden social structure. The 1920 revolt had been very costly to the British in both manpower and money."

I quoted further passages to show that once this crisis war ended, Iraq became a chaotic independent nation:

"On October 13, 1932, Iraq became a sovereign state, and it was admitted to the League of Nations. Iraq still was beset by a complex web of social, economic, ethnic, religious, and ideological conflicts, all of which retarded the process of state formation. The declaration of statehood and the imposition of fixed boundaries triggered an intense competition for power in the new entity. Sunnis and Shias, cities and tribes, shaykhs and tribesmen, Assyrians and Kurds, pan-Arabists and Iraqi nationalists--all fought vigorously for places in the emerging state structure. Ultimately, lacking legitimacy and unable to establish deep roots, the British-imposed political system was overwhelmed by these conflicting demands. ... The arbitrary borders that divided Iraq and the other Arab lands of the old Ottoman Empire caused severe economic dislocations, frequent border disputes, and a debilitating ideological conflict.

The point I was trying to make at that time was that Iraq is a chaotic country when they're left by themselves, but Iraqis stick together as Iraqis when outsiders are interfering. Now I'll quote another interview from Wednesday, this time with Iraqi's Prime Minister Nuri al-Maliki, on CNN International:

Q: What is the nature of Iranian interference in Iraq today? A: All the regional countries want to interfere in Iraq - Iran, Turkey, Arabic countries like Jordan and Saudi, and each one of them has his own reason to interfere in Iraq. Some of them come from the position of facing America in iraq. For some of them, it's about the sectarian confrontation in iraq, and for others from the position of political confrontation in Iraq. Interference exists in Iraq, and we have talked about it frankly and clearly, whether it was by trafficking weapons, or supporting specific sides. And when our delegations go to those countries, the message is, "Stop your interference in Iraq." Because we will not allow you, no matter how good our relations are. For example, Iran is Shiite, and we are Shiite, and we have many Shiites in Iraq. But this does not justify Iran interfering in Iraq. We respect this relationship and we will not allow this interference to exist. Also, Iraq is an Arab country, the majority are Arabs. But this also will not justify for Arab countries to interfere in Iraq. Q: Is American intelligence wrong when it says Iran is working to kill American soldiers in your country? A: I didn't say that it does not exist, and the Americans, when they say what their intelligence is saying that Iranians are killing their soldiers - it means that their intelligence is based on information that they got. And this is not an obscure thing - there is a struggle between Iran and America. And we have told the Americans and the Iranians - we know that you have a problem with each other, but we're asking you, please, solve your problems outside of Iraq. We do not want the American forces to take Iraq as a field to attack Iran or Syria, and we will not accept Iran to use Iraq to attack the American forces. But does this [Iranians killing American soldiers] exist? It exists. And I assure you that it exists. But it's based on the struggle between the two countries. And from our side, we're trying to stop the effort to have a struggle in Iraq. We're always encouraging the two sides to negotiate, and to try to find an agreement away from Iraq. Iran and America: We're ready to pay efforts to solve the problems between them if it's possible, but not on the account of Iraq. Iraq has nothing to do with the American-Iranian struggle. And we will not let Iran play a role against the American army, and we will not allow America to play a role against the Iranian army. And everyone should respect the sovereignty of Iraq.

One thing that Malikis words do is throw cold water on a bit of nonsense we keep hearing from Washington journalists, pundits and "experts" is that "the division between Sunnis and Shia is 1400 years old [dates from the 660s AD], and nothing we can do today will change that." Well, we could also say that "the division between Western and Orthodox Christians is 2000 years old, and nothing will change that," or "the division between Catholics and Protestants is 600 years old, and nothing will change that" or "the division between Christians and Jews is 2000 years old, and nothing will change that." There's an amusing aspect to all of this. A lot of Washingtonians were extremely embarassed by all the publicity that <#inc ww2010.weblog.ref e070114b "they're ignorant of even the most basic aspects of the Mideast,"#> unable to answer such questions as "What's the difference between Sunni and Shia?" and "Is al-Qaeda Sunni or Shia?" As a result, there's been a spate of articles and TV news segments presenting some of the major sound bites. Now let's hope that nobody asks them the difference between Persian and Arab. Unfortunately, these journalists, pundits and "experts" seem to have settled on only one sound byte: that Sunnis and Shia have been fighting for 1400 years, and therefore the Iraqi "civil war" will proceed into a bloodbath, unless we do X (where "X" depends on the speaker's political or ideological position). Now, it's true that there are Sunni vs Shia wars, just as there are Orthodox vs Western Christianity wars, and Catholic vs Protestant wars, and Jew versus Christian wars. But things don't stop there. Groups of people align themselves into identity groups in different ways, and it's not always the simple way that Washingtonians describe in a sound byte. As I said above, Iraq's history since the 1920 Iraqi Rebellion quite clearly shows that Iraqis have put nationalism ahead of religious differences when it comes to war. That's not to say that there is no Sunni vs Shia violence -- obviously, there's a great deal of it today -- but in view of Iraq's history there's no reason to believe that Iraqi nationalism won't reassert itself as it has before. Thus, if we examine Prime Minister Maliki's statement in that way, what we see is a trend in that direction, the direction of reasserting Iraqi nationalism. He's not denying that Iranians have been killing Americans on Iraqi soil, but he's taking a "plague on both your houses view": He doesn't want either country committing violence on Iraqi soil. This is also consistent with what we've been saying for years -- Iraq is in a generational "Awakening" era, and all countries in these eras have the same characteristics: Extremely chaotic political battles, but a very strong aversion to war (unlike countries in generational "Crisis" eras, where the population is drawn to war). Maliki is saying that if America and Iraq are going to have military confrontations, then "please, solve your problems outside of Iraq." It would be interesting to know what place Maliki has in mind, but at any rate he means not in Iraq. I'll give this one thing to the "Iraq is in civil war" crowd: I'm not saying that there could NEVER be a bloodbath civil war between Sunnis and Shia in Iraq; I'm only saying that it can't happen NOW. What has happened throughout history is that new ideas are born during generational Awakening eras, and then implemented during generational Crisis eras. It's possible that what we're seeing now presages a Sunni vs Shia civil war decades from now. But definitely not before then. However, that's not the scenario that I expect and, in fact, I have absolutely no reason to change my <#hreftext ww2010.i.aug19 "August 19, 2003, analysis and predictions about Iraq,"#> when I said that there would be no major uprising or civil war in Iraq unless it became a "theatre of war by outside forces." That's what both al-Qaeda and Iran have been attempting, as they fight a proxy war in Iraq, but Maliki wants no part of it. The events happening today that are most relevant to the Iraqi situation are not taking place in Iraq. The most relevant events are in the Gaza Strip, where <#inc ww2010.weblog.ref e070201b "Fatah and Hamas are substantially escalating the level of war every day,"#> and a major civil war seems very close. Such a war would draw in Egypt, Israel, Jordan, Iran, and the entire Mideast, and some of that war would take place on Iraqi soil whether Maliki likes it or not. =eod =// &&2 e070202 Boston cartoon bomb hoax exposes Boomers to more ridicule =data ww2010.weblog.y2007.e070202.head Boston cartoon bomb hoax exposes Boomers to more ridicule =data ww2010.weblog.y2007.e070202.keys =data ww2010.weblog.y2007.e070202.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070202.date 2-Feb-07 =data ww2010.weblog.y2007.e070202.txt1 In a media event reminiscent of Orson Welles' 1938 "War of the Worlds" radio show, =data ww2010.weblog.y2007.e070202.txt2 blinking neon signs representing characters in the Cartoon Network show <#stdurl http://www.adultswim.com/shows/athf/ "Aqua-Teen Hunger Force"#> were placed on Boston highways and bridges, where they were mistaken for bombs. The cartoon show characters include a talking milkshake, a box of fries and a meatball. <#inc ww2010.pic g070201a.gif right "" "The characters from the Cartoon Network show Aqua-Teen Hunger Force"#> The neon signs have been place in nine cities around the country over the past several weeks, but in Boston the signs suddenly <#stdurl http://www.forbes.com/feeds/ap/2007/02/01/ap3387951.html "sent a wave of panic across the city,"#> bringing out bomb squads, and causing highways and bridges to be shut down. <#inc ww2010.pic g070201b.jpg left "" "One of the neon signs, depicting the ATHF cartoon character Mooninite giving the public the finger. (Source: Fox News)"#> The hoax was revealed when the Cartoon Network called to admit it. Spokeswoman Shirley Powell said that the devices had been up for two weeks without incident. "We were simply promoting a TV show," she said. "If we had ever perceived this to be something threatening safety, we would never have proceeded with it." In fact, the young men, aged 18-24, in the target audience of the marketing gambit seem to think the whole thing is a joke, and some ridiculed Boomers for falling for it. Popular Boston Herald <#stdurl http://news.bostonherald.com/columnists/view.bg?articleid=180462 "columnist Howie Carr quoted one young person"#> as saying, "Anyone under the age of 35 knew this was a joke the minute they saw it." Tobe Berkowitz, an advertising professor at Boston University, said <#stdurl http://www.forbes.com/feeds/ap/2007/02/01/ap3387951.html "that it's easy to understand why there is a generational gap."#> "For people who are hip and live in the world of blogs and all sorts of cool alternative media, it's one thing," he said. "But for the rest of us ... they don't get it as a marketing or a clever event, they see it as a huge disruption of their lives." The Boston Globe found that the marketing ploy <#stdurl http://www.boston.com/news/local/articles/2007/02/01/marketing_gambit_exposes_a_wide_generation_gap ""exposed a wide generation gap" among the citizens of Boston."#> One 22-year-old design student said he first saw them two weeks ago. "I knew it was art, and I knew it was part of the [cartoon show] ads, because I saw a billboard for the same thing. I see it in New York all the time." A local 29-year-old blogger wrote sarcastically, "Repeat after me, authorities. L-E-D. Not I-E-D. Get it?" (An LED is a "light emitting diode," commonly used in digital clocks; an IED is an "improvised explosive device" of a kind used in roadside bombs by Iraqi terrorists.) So those of us in the Boomer generation just have to suffer more ridicule and abuse, I guess. But from the point of view of Generational Dynamics, this illustrates the tension and anxiety present in a generational Crisis era. If these devices had been planted ten years ago, no one would have cared, and any hint that they were bombs would have been treated as ridiculous. The reaction to the blinking signs is an example of mass hysteria, and the best example of that is <#stdurl http://en.wikipedia.org/wiki/The_War_of_the_Worlds_(radio) "Orson Welles' 1938 radio adaptation of H. G. Wells' story, War of the Worlds."#> Today's America is like 1938 America in many ways. In both cases it's a generational Crisis era. Today American's are anxious about terrorism and the economy. Americans were also very anxious in 1938, as they were still in the depths of the Great Depression. Radios were selling at a record pace, as Hitler was rallying his forces in Europe, having already taken control of the Sudetenland area in Czechoslovakia. On the other side of the world, the Japanese had invaded China and were in the process of taking over. Many Americans were extremely anxious about war. In this atmosphere, the radio program appeared to be a music program interrupted by news bulletins reporting on an invasion of Martians in cities around the country. Although announcements during the program informed listeners that it was fiction, tens or hundreds of thousands of listeners panicked, believing that a real invasion was taking place. A substantial minority believed that it was a German invasion rather than a Martian invasion. This is a good example of mass hysteria, because it illustrates how large masses of people can react irrationally to threats of war during crisis periods. If that much panic occurred among a relatively few listeners to a radio program describing a fictional event, imagine how much greater the panic would have been if the story had been about a REAL German or Japanese invasion. Mass hysteria can occur in other than generational Crisis eras. The well-known <#stdurl http://en.wikipedia.org/wiki/Salem_witch_trials "1692 Salem witchcraft trials"#> occurred during a generational Awakening period, when four teenage girls appeared to have epileptic fits, and accused several neighbors of witchcraft. By the time it was all over, dozens of people had been jailed and 20 had died. You can also see mass hysteria in something as ordinary as rock concerts, for Frank Sinatra in the 1940s or the Beatles in the 1960s, where young girls are the main actors screaming at every word. Young girls and women, especially when grouped in schools or social circles, are highly susceptible to mass hysteria. Men are much less susceptible because they're much less social, but they do become "infected" by the women in their lives, or by unambiguous violence or threats of violence. So mass hysteria can occur at any time, during any generational era. But it's especially important during generational Crisis eras because it can lead to war. Last summer's Lebanon war between Israel and Hizbollah was a tragedy for all involved, but it's provided a wealth of insight and information for Generational Dynamics. In this case, the Hizbollah missiles coming from Lebanon caused a nationwide panic among the Israelis that led them to go to war within four hours with no clear plan or objective. In the end, the war was a disaster. There are people who believe that Americans have somehow "recovered" from 9/11, and that we're no longer anxious and concerned about terrorism. Nothing could be farther from the truth. In fact, the opposite is happening, as more and more WW II survivors disappear, leaving the world to be run by Boomers who have no skills at doing anything but arguing. Americans panicked at Orson Welles' War of the Worlds in 1938, and Bostonians panicked at neon cartoons on Wednesday. Now imagine how Americans will react if there are REAL terrorist bombs involved. Don't think that Americans won't panic in an instant; it happened this week in Boston, and in Israel last summer. It can happen again at any time, and it can lead to war. And it can happen to any of the countries that fought in World War II, since all of these countries are now in generational Crisis eras. That's how crisis wars get started. =eod =// &&2 e070201b Fatah storms Hamas stronghold in Gaza =data ww2010.weblog.y2007.e070201b.head Fatah storms Hamas stronghold in Gaza =data ww2010.weblog.y2007.e070201b.keys =data ww2010.weblog.y2007.e070201b.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070201b.date 1-Feb-07 =data ww2010.weblog.y2007.e070201b.txt1 Palestinian President Mahmoud Abbas appears to be carrying out his ultimatum to Hamas, =data ww2010.weblog.y2007.e070201b.txt2 issued several days ago, to <#inc ww2010.weblog.ref e070129b "accept previous agreements or face war."#> According to a report by Debka at that time, Abbas's Fatah security force is willing to sustain 200 to 500 dead to win total control of Gaza. In a shock to Hamas' leadership, <#stdurl http://news.bbc.co.uk/2/hi/middle_east/6321411.stm "Fatah's forces stormed the Islamic University campus in Gaza,"#> a bastion of the Hamas movement. Earlier on Thursday, six people died when Hamas militants hijacked a convoy delivering supplies to the Fatah-allied security forces. All in all, six people died and 70 people were injured on Thursday in Fatah-Hamas fighting. In an event of possibly even broader significance, Ynet reports that <#stdurl http://www.ynetnews.com/articles/0,7340,L-3360009,00.html "Fatah captured seven Iranian citizens during the raid,"#> and another Iranian committed suicide. The issue of Iranian intervention in Iraq, Lebanon, Syria and Gaza is continually raising the stakes in an increasingly hostile relationship between the U.S. and Iran. A last-ditch peace agreement earlier this week led to three days of relative peace between Fatah and Gaza. This was the latest in a series of peace agreements that failed almost as soon as they were sign. It seems unlikely that there's anyone left who serious believes that any further peace agreement will prevent a Palestinian civil war for long. =eod =// &&2 e070201 Boys, boys, boys! China is running out of girls. =data ww2010.weblog.y2007.e070201.head Boys, boys, boys! China is running out of girls. =data ww2010.weblog.y2007.e070201.keys =data ww2010.weblog.y2007.e070201.loc ww2010.weblog.log0702 =data ww2010.weblog.y2007.e070201.date 1-Feb-07 =data ww2010.weblog.y2007.e070201.txt1 A look inside a Chinese maternity ward =data ww2010.weblog.y2007.e070201.txt2 is the subject on a report on CNN International on Wednesday. <#inc ww2010.pic g070131.jpg right "" "Chinese maternity ward: Five boys (white) and three girls (pink) (Source: CNN)"#> There are 118 boys born for every 100 girls in China. The reason: Because of China's "One-child policy," women opt for sex-selective abortion and infanticide because they prefer having a boy to a girl. The imbalance is even greater in the countryside: In rural areas, the ratio is 130 boys for every 100 girls. The situation is more critical in rural areas, since couples need a son to care for them in their old age, according to Chinese cultural customs. Under normal circumstances, humans will give birth to 105 boys for every 100 girls. There are naturally more boys to compensate for the fact that males are more likely to get killed in wars. So a ratio of 130 boys to 100 girls cannot be an accident. There's already a huge gender imbalance in China, and it keeps growing. The one-child policy was established in 1980 to keep the population of China from growing even larger, but families have used abortion and infanticide to guarantee, when possible, that the one child is a son who can support them later. China has been trying for years <#inc ww2010.weblog.ref e040715 "to enforce policies that would produce more girls,"#> but these policies, which include making ultrasound illegal, have obviously not been working very well. (Last sentence added on 4-Mar) From the point of view of Generational Dynamics, China is becoming increasingly unstable and is <#hreftext ww2010.i.china050116 "approaching a massive civil war as its bubble economy unravels,"#> along with the rigid social structure originally set up by Mao Zedong in the 1950s and 60s. The surplus of unattached males only exacerbates the social breakdown, increasing the incidence of prostitution and leaving the males little incentive to "settling down," as opposed to joining violent gangs or going to war. Today, there are over 100 million migrant workers (15-20% of the entire workforce), mostly peasants who have lost their farms to corrupt land deals by CCP officials, who take any jobs they can find in the cities and send money back to their families in vast poverty-stricken rural areas. Exactly what event will trigger the civil war cannot be predicted, but it could happen next week, next year or after, but will probably happen sooner rather than later. =eod =// &&2 e070131 Today's Schadenfreude: The Congressional pay raise is blocked. =data ww2010.weblog.y2007.e070131.head Today's Schadenfreude: The Congressional pay raise is blocked. =data ww2010.weblog.y2007.e070131.keys =data ww2010.weblog.y2007.e070131.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070131.date 31-Jan-07 =data ww2010.weblog.y2007.e070131.txt1 Congress is so paralyzed, they can't even raise their own salaries! =data ww2010.weblog.y2007.e070131.txt2 Lawmakers will have to make do with their $165,200 salary this year, thanks to <#stdurl http://www.time.com/time/nation/article/0,8599,1583519,00.html "political bickering that's causing their usual 1.7% cost of living increase to be cancelled."#> The details are too boring for any but the politically obsessed to care, but basically it's that the Democrats screwed the Republicans last year when the Republicans were in power, so now the Republicans want to screw the Democrats when the Democrats are in power. My reason for mentioning this is to tie it into what I've been saying frequently: governments of countries that fought in World War II are all becoming increasingly paralyzed. That's because the various government agencies and infrastructures were set up by the survivors of the war, with the purpose of keeping any new war from happening again. The generation of people born after the war (like America's Baby Boomer generation) don't have the skills to effectively operate these agencies, now that the people who set them up are gone, and only know how to argue. We can see this happening in the European Union, which is unable to agree on a new constitution, we can see it in Britain, where Prime Minister Tony Blair is being forced to step down under fire, and we can see it here in America, where members of Congress, now mostly from the Boomer generation, are crippling the government and preventing President Bush from governing, without providing any alternative. We can see this in Israel, mired in scandals over the Lebanon war, and in the Palestinian government, which is close to civil war. Even <#inc ww2010.weblog.ref e060317 "China's People's National Congress was paralyzed"#> by ideology last year. So it's not surprising to me that the U.S. Congress can't even pass it's own pay raise, though it causes a good laugh to hear it. I'm going to be interested in seeing whether Congress is capable of doing ANYTHING this year. Will they pass a minimum wage bill? Will they even be able to pass that famous non-binding resolution against the Iraq war "surge" that everyone on TV has been talking about? We'll have to wait and see. But there's one thing for sure: whatever happens, the Democrats and Republicans will be passing gas blaming each other for it. So, for those of you who are partisans on one side or the other, your fun has only just begun. And this thing about the Congressional pay raises is certainly something we can all enjoy. =eod =// &&2 e070129c When did lending standards start changing so much? =data ww2010.weblog.y2007.e070129c.head When did lending standards start changing so much? =data ww2010.weblog.y2007.e070129c.keys =data ww2010.weblog.y2007.e070129c.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070129c.date 29-Jan-07 =data ww2010.weblog.y2007.e070129c.txt1 The world was a very different place right after World War II, =data ww2010.weblog.y2007.e070129c.txt2 according to a comment posted by "Olive," a reader of the <#stdurl http://thehousingbubbleblog.com/?p=2253 "the Housing Bubble blog,"#> in response to a comment I posted. Here's <#stdurl http://thehousingbubbleblog.com/?p=2253#comment-395959 "the comment by Olive:"#>

"It seems the lending standards have been loosening gradually as part of the ongoing economic cycle, as stated by John X, since the last depression. Although you could buy Model T Fords on credit in the twenties, by the late 1950’s/early 60’s when my dad was a banker (in Canada), he says there was no such thing at that time as a car loan. If you wanted a car - you paid for it in cash. No one had credit cards. I recall in the mid 1980’s when I was coming of age, you had to prove your credit worthiness before you were allowed the honour of getting a credit card. Ten years later, university students without jobs were getting them. Finally today total credit insanity has taken over! No doubt after this blows up the lending standards will go back to how they were in the 1930’s and 40’s and it will all start over again…."

I thought this was interesting because I had forgotten that car loans are such a new thing (or rather, a new thing since WW II). I do remember my father buying a car in the 1950s and paying for it with a check, but it was a used car, and the cost was just $250! Later, around 1960, they bought a new car. I don't recall the cost, but they paid for it out of savings. Of course my parents lived through the 1929 crash and the Great Depression. My mother, who insisted that everyone (including me) call her Roxie, often told the story of her father's candy store. These were high quality candies, and the store did very well in the 1920s, but people simply stopped buying candy in the 1930s. Roxie said that her father could hardly sleep for months until the day that he lost the candy store to bankruptcy, and then "that night he slept like a baby." After that, Roxie managed to get a job by lying about being able to operate the business machines of the day, but she figured them out on the job. Her pay? $8 per week. By the 1950s, when I was growing up, Roxie had become a full-charge bookkeeper, and eventually the equivalent of the CFO for a midsized manufacturing firm. But she never stopped fearing a new Great Depression. Every bit of bad business news raised her concerns - "Is this a Depression again?" It affected every decision my parents made. I recall the day that Roxie was absolutely furious. They had enough savings to prepay the remaining balance on their home mortgage. They had just come back from the bank, and the bank manager had told them that they would be charged a "prepayment fee." She just couldn't believe that the bank had the nerve to do that, but somehow my parents had talked the bank manager into accepting the prepayment without the fee. When Roxie fell ill in 1995, I had the gut-wrenching job of reviewing her finances, and I was utterly astounded by what I found. She lived on almost nothing. She paid rent for a decent apartment, she paid the electric and phone bills, and she subscribed to TV Guide, and that was it. I mean that literally -- she had no more recurring expenses. Her only other expenses were for groceries, cigarettes, her (1972) car, and occasional clothing. Her Depression-era experiences caused her to count every penny as if it were her last. No one born after 1940 would ever live like that -- although we may have to learn to as the next few years progress. A fascinating example of this from literature is Charles Dickens' 1843 novel, A Christmas Carol, which describes a <#hreftext ww2010.i.dickens041205 "generational struggle between an old skinflint, Ebenezer Scrooge, and his struggling employee, Bob Cratchit,"#> who has a crippled son, Tiny Tim. Almost every depiction of this story portrays Scrooge as a skinflint who hoards money to the point of being evil about it. But in fact, Scrooge's miserliness was quite justified, according to what the novel tells us about his past. The bankruptcy of the French Monarchy had impoverished all of Europe, and many people starved to death or went to debtors' prison. In fact, Ebenezer Scrooge's own father had died in poverty, and Scrooge had been separated from his sister because of poverty. So Scrooge's whole life was shaped by the horrors of his experiences with the bankruptcy, and he was perfectly justified in saving every penny. The three ghosts ("Christmas past," "Christmas present," and "Christmas future") represent the voices of the younger generation of arrogant, self-assured people who were born after the war. The period following a crisis war (like WW II) is almost always a time of great prosperity, since so many people have been killed by the war that there is plenty of food and other resources for the few that survive. These people (like our Boomer generation) see no need to suffer by saving every penny, and they despised and ridiculed the Ebenezer Scrooges of the world. Over the years, I've come more and more to appreciate Scrooge. He was a man who knew what he had to do, ran his life that way, and didn't let other people talk him into stuff he didn't believe in. Of course, he let himself slip for a day after that psychotic episode with the three ghosts, but hopefully it was only a brief episode, and he was back to his old self by December 26. Anyway, those stories, together with Olive's, illustrate the vast differences in world view between the generations that lived through the 1930s Great Depression, and the Boomer generation, who believe that there are no risks left, since somebody else will take care of everything. What almost everyone in my generation of Boomers is clueless about is that those "someone elses" are all gone now. Incidentally, here's <#stdurl http://thehousingbubbleblog.com/?p=2253 "the question originally posed by the Housing Bubble blog:"#>

"[W]hen did lending standards start changing so much? I was involved in real estate 20 years ago, mostly as a property manager, but also doing some sales in Capitol Hill/DC, a lot of shells and distressed stuff that was being rehabbed by investors. I remember how difficult it was to get ‘investor’ loans back then, and that rental income was really discounted in terms of qualifying, etc.; as a result, we did a lot of seller-financed deals with a balloon in 3 to 5 years (usually paid off in a year or two when the property was rehabbed and sold). When did it start becoming easy for folks to get these low- and no- doc loans and by 3, 5, 10 — whatever — properties to try and flip? I’d love a history of the change in standards if someone has some good insight — who (agencies/companies) started this shift?"

And here's <#stdurl http://thehousingbubbleblog.com/?p=2253#comment-395374 "the comment that I posted in response:"#>

"The answer to your question is that it's completely generational. The people who were born before the 1929 crash, and who lived through the 1930s Great Depression and its horrors -- homelessness, starvation, bankruptcy -- were extremely cautious investors. That generation of people all disappeared (retired or died) all at once in the early 1990s, and suddenly the senior financial managers and investors were from the Baby Boomer generation, with absolutely no fear of credit, and convinced that "Great Depressions" went out with dinosaurs. If you go back through history, there are of course many small or regional recessions. But since the 1600s there have been only five major international financial crises: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash. Each of these major international crises occurred roughly 70-80 years after the previous one. What you find is that each new "debt bubble" occurs at exactly the time that the generation of people who grew up during the previous financial crisis all disappear (retire or die), all at once. Thus, the length of time between these "generational" financial crises is approximately equal to the length of a maximum human lifetime. Today, the GI and Silent generations are gone, and the Boomer generation has been loosening lending standards ever since it took over, starting with loose credit card requirements in the 80s and 90s. It's this generational change that answers your questions about "when." Our 70-80 year interval is pretty much over. The next major 1930s style Great Depression is just around the corner, with 100% certainty. Nothing can be done to stop it. All we can do is prepare for it."

=eod =// &&2 e070129b Palestinian civil war between Hamas and Fatah now seems inevitable =data ww2010.weblog.y2007.e070129b.head Palestinian civil war between Hamas and Fatah now seems inevitable =data ww2010.weblog.y2007.e070129b.keys =data ww2010.weblog.y2007.e070129b.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070129b.date 29-Jan-07 =data ww2010.weblog.y2007.e070129b.txt1 Peace talks and ceasefires seem close to being over for good. =data ww2010.weblog.y2007.e070129b.txt2 Sixty Palestinians have died in <#stdurl http://www.canada.com/topics/news/world/story.html?id=070b6f3f-1c7e-46c5-93f0-a220b6095f2d&k=17101 "on-and-off street fighting in Gaza and the West Bank in January,"#> 29 in the upsurge that began four days ago. The clashes between Hamas and Fatah involved mortars, grenades, bombs and assault rifles. Both sides accepted <#stdurl http://www.swissinfo.org/eng/international/ticker/detail/Palestinians_agree_to_Mecca_talks.html?siteSect=143&sid=7471137&cKey=1170022975000 "an invitation from Saudi Arabia's King Abdullah to mediate peace between the two sides,"#> but no date has yet been set for a meeting. However, for the last few months, there have been several peace meetings and cease-fires, with the meetings separated by a resumption of hostilities. The Mideast has been deteriorating constantly since Yasser Arafat's death, as <#hreftext ww2010.i.may01 "I predicted in May, 2003,"#> based on the generational changes that would occur with the disappearance of Arafat. But it's clear from the news reports that even people close to the action don't understand what's going on. A former <#stdurl http://www.csmonitor.com/2007/0129/p11s01-wome.html "Hamas official, Nashat Aqtash, is quoted as saying,"#> "We are going from bad to worse. I'm not optimistic that the fighting will stop by this weekend. It will take a few weeks more. They are taking the long way, and are fighting to win. Winning means controlling the streets" or losing power altogether. How can Aqtash believe that things are going to settle down in a few weeks? Things have been getting worse daily for over two years, and the trend isn't going to change now. Here's a <#stdurl http://www.canada.com/topics/news/world/story.html?id=070b6f3f-1c7e-46c5-93f0-a220b6095f2d&k=17101 "quote from Shlomo Brom, an Israeli analyst and a retired army general:"#> The Gaza muddle is likely to continue because, "The probability of a full-scale war is low, because the two parties understand the consequences and they understand there will be no clear winner." This is an example of somebody who has no idea what's going on. If people actually followed this philosophy then, for example, the American civil war would never have occurred. The error that Brom is making is that he believes that the leaders ship of Fatah and Hamas are going to make the decision to go to war with each other. It's the generation of kids who will make that decision, especially in the Gaza strip, which is densely populated with a median age of 15.8, and is <#inc ww2010.weblog.ref e061210 "run by children who couldn't care less about the "consequences,""#> and who don't believe for a second that there'll be no clear winner. Another quote, from <#stdurl http://www.csmonitor.com/2007/0129/p11s01-wome.html "a Fatah official, Gaza Maher Miqdat,"#> said: "There is a bloody stream in Hamas that insists on provoking the fights because they don't believe in political partnership, and they want to impose an external agenda on the Palestinians." Well, that "bloody stream" is the kids. Other developments show that the region is headed for an extremely violent civil war. According to Fatah security sources, <#stdurl http://today.reuters.co.uk/news/CrisesArticle.aspx?storyId=L2827567&WTmodLoc=World-R5-Alertnet-3 "thousands of weapons are being amassed by Fatah,"#> in preparation for a battle with Hamas. In fact, <#stdurl http://www.canada.com/topics/news/world/story.html?id=070b6f3f-1c7e-46c5-93f0-a220b6095f2d&k=17101 "both sides have been amassing rifles, missiles, ammunition and explosives,"#> in preparation for a battle. The weapons have been pouring inth Gaza through tunnels under the border with Egypt. Ironically, high-quality Kalashnikov assault rifles, which used to be easily available in the Palestinian territories, are now becoming increasingly scarce. Why? Because Fatah and Hamas are hoarding them, so that they're no longer available on the street. According to <#stdurl http://www.debka.org/headline.php?hid=3774 "unconfirmed intelligence obtained by Debka,"#> Fatah has given Hamas an ultimatum: Either accept their previous "peace agreements," or there will be war, and Fatah is willing to sustain 200 to 500 dead to win total control of Gaza. In summary: First, the repeated and continuing deterioration of the situation since the death of Yasser Arafat is consistent with the <#hreftext ww2010.i.may01 "May, 2003, Generational Dynamics prediction"#> that Arafat's disappearance would be part of a generational change that would lead the Mideast into a massive new crisis war (between Jews and Arabs), re-fighting the bloodbath war in 1948-49 following the partitioning of Palestine and the creation of the state of Israel. It now appears that the most likely scenario will be a Palestinian civil war leading into a war with the Israelis. Second, the massive hoarding of weapons by both sides indicates that the civil war cannot be far off. They would not be hoarding weapons if they didn't plan to use them soon. And third, if the Debka story is true, then it could all start within the next few days. Here's one final word for people who aren't regular readers of this web site: Lebanon and Iraq are in generational Awakening eras, and so a civil war is impossible in those countries, as <#inc ww2010.weblog.ref e070126b "I've explained many times."#> These countries had their last crisis wars in the 1980s, and so their population today is "attracted" (in the sense of <#inc ww2010.weblog.ref e060626 "a Chaos Theory attractor"#>) away from war. However, the Palestinians, Israel and Jordan are in a generational crisis period, since their last generational crisis war was in the 1940s, and so they're "attracted" toward a new war. That's why I'm able to predict that Lebanon is NOT close to civil war, while the Palestinians ARE. =eod =// &&2 e070129 Journalists complain about closing of foreign bureaus =data ww2010.weblog.y2007.e070129.head Journalists complain about closing of foreign bureaus =data ww2010.weblog.y2007.e070129.keys =data ww2010.weblog.y2007.e070129.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070129.date 29-Jan-07 =data ww2010.weblog.y2007.e070129.txt1 And yet, I have no difficulty reporting foreign news on this web site. =data ww2010.weblog.y2007.e070129.txt2 The complaints have centered about <#stdurl http://www.boston.com/business/ticker/2007/01/boston_globe_to.html "last week's announcement by the Boston Globe"#> that it is closing it's last foreign bureaus, in Jerusalem, Berlin and Bogota, Colombia. The reason for the cuts is to save money, at a time when newspapers are making less money, as people turn more and more to the Internet for their news. Journalists have been expressing regrets about this, such as on the Boston local PBS media show, Beat the Press. On Sunday morning on CNN's media show Reliable Sources, Howard Kurtz pointed out that CNN still have many foreign bureaus, as do many major newspapers, including the New York Times, the Los Angeles Times, the Washington Post, and the Wall Street Journal. But midsize newspapers, such as the Boston Globe, New York's Newsday, the Baltimore Sun, the Philadelphia Inquirer, have closed all their foreign bureaus. Other newspapers, such as the Pittsburgh Post-Gazette and the Toledo Blade have even closed their Washington DC bureaus. "Don't you think that readers of the Boston Globe or Philadephia Inquirer or Baltimore Sun took pride in reading world-class newspapers, whose vision extended beyond the immediate suburbs?," asked Howard Kurtz. He concluded, "You won't see much [more] of that. Their owners have downsized their dreams." The ironic thing about Kurtz's remarks is that they were immediately followed by one of CNN's "Now in the News" news briefs, featuring a report from one of their foreign reporters in Iraq. The brief showed three video segments: a grainy scene of American soldiers running across a field, a blackened car that had been demolished by a terrorist suicide bomber, and a school that had been the targeted by terrorist missiles. Now, what's the point of claiming that you need foreign bureaus and foreign reporters, if all they're going to do is show the gore resulting from terrorist attacks? And if you look at almost any mainstream media news report, that's most of what they do. Ironically, there was a truly major story on Sunday that was barely mentioned. The level of conflict between Hamas and Fatah in the Palestinian territories has escalated sharply in the last few days, and a major Palestinian civil war at any time would not be a surprise. This will affect America and the world far more than a terrorist act in Iraq, but these news organizations have their priorities, and it isn't the news. This web site, GenerationalDynamics.com, isn't primarily a news site, but I do report a lot of relevant news, and it's perfectly obvious to me that you can use Internet sources to do excellent international reporting, certainly much better than CNN's reporting on Iraq. If you happen to doubt this, dear reader, let me assure you that it's absolutely true. I've done articles on this web site and prepared for it by collecting as many as 40 or 50 stories from mainstream news sites around the world, allowing me to get points of view from dozens countries. Since 2003 alone, I've collected over 15,000 stories and articles from the web, and they're all indexed and available to me on my computer at any time. This is a capability that's far superior, and produces far superior results, compared to getting the point of view of just one foreign bureau reporter. So Howard Kurtz's poetic claims about newspapers' "vision extended beyond the immediate suburbs" falls flat with me. What reporters are really complaining about is that they can't get expense-paid trips abroad where they get to use their nationwide news platform to express their personal political opinions. I began noticing a change in journalism about ten years ago, when several people over the course of a couple of years sent me e-mail messages containing articles they'd written, asking me to critique their writings and about getting published. The e-mail conversation usually went something like this:

In my critique, I would write, "Your article says X, Y and Z, which are unsubstantiated claims."
The writer would reply, "This is an opinion article, not a news article. I don't have to provide substantiation."
I had to write back, "You've got it wrong. Opinion pieces have to follow the same journalistic standards as news articles, except that you're allowed to add your own interpretation of the facts."

And this is, in fact, the journalistic standard. If you write an opinion piece, you have to provide substantiation for all your facts as if it were a news story. You're allowed to add your own interpretation, provided that it's clear from the wording that it's your opinion. So an opinion piece can contain facts and opinions, but they have to be clearly separated, and the facts have to be substantiated. On this web site, I actually have a larger problem, since I have to distinguish between four different classes of information, and I have to maintain as high a level of credibility as possibility:

Facts, which I always try to substantiate with stories from mainstream media Internet sources.
My opinions and interpretation.
Generational Dynamics trend predictions, which are certain (such as "an all-out civil war in Iraq is impossible" or "the U.N. won't be able to stop the genocide in Darfur").
Generational Dynamics probabilistic predictions, which are likely but not certain, and are usually signaled with such words a "likely scenario" or "probably."

However, journalistic standards of this sort are of little concern to many of today's journalists. We say that two weeks ago when <#inc ww2010.weblog.ref e070114 "NBC's Chris Matthews melted down on MSNBC,"#> expressing the view that he knows more than anyone else when in fact he knows little of what's happening in the Mideast. And we see it on the front pages of newspapers every day, when supposedly professional journalists feel free to allow their political biases affect the reporting, as desired. We also see it on the BBC every day, whose every report seethes with fanatical anti-Americanism. So it's too bad that Howard Kurtz thinks that newspapers have "downsized their dreams," but it seems to me that their dreams SHOULD be downsized. =eod =// &&2 e070128b Computer chip speed breakthrough brings the Singularity closer =data ww2010.weblog.y2007.e070128b.head Computer chip speed breakthrough brings the Singularity closer =data ww2010.weblog.y2007.e070128b.keys =data ww2010.weblog.y2007.e070128b.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070128b.date 28-Jan-07 =data ww2010.weblog.y2007.e070128b.txt1 Announcements by Intel and IBM replace silicon for the first time in 40 years =data ww2010.weblog.y2007.e070128b.txt2 The <#stdurl http://www.intel.com/technology/silicon/new_45nm_silicon.htm "new announcement"#> means that it will soon be possible to pack more transistors on a chip, making the chips much faster. The first commercial computers, made in 1950s, used components "vacuum tubes," some of which were as large as Anjou pears. By 1965, these components had been miniaturized into transistors in such a way that many transistors could fit on a single computer chip. These components were made of silicon, and this has been the basic technology for 40 years. During that 40 years, engineers have constantly worked to improve the speed of these computer chips (and hence the computer) by making the components smaller, so that they can be packed more densely on a chip. The reason that this speeds up the chip's performance is as follows: The speed of operation of a chip is limited by the speed of light, since the performance is determined by how quickly the electrons can move around the chip from transistor to transistor. If the components are packed closer together, then the electrons have a smaller distance to travel, and so the chip runs faster. The rate of improvement has been dictated by Moore's law. Moore's Law was was written in <#stdurl "http://www.intel.com/technology/mooreslaw/index.htm" "a paper by Gordon Moore of Intel Corp."#> in the early 1960s. It predicted that the number of transistors on a computer chip would grow at an exponential rate. History has shown that the number of transistors on a computer chip has been doubling every 18 months or so since then, and so the power of computers has been doubling every 18 months. The size of a transistor is measured by its width at a certain point. Today, most industry chips use 90-nanometer technology (a nanometer is one-billionth of a meter). At that scale, about 1,000 transistors would fit in the width of a human hair. Starting in 2005, 65 nanometer chips became available. As chips became smaller and more densely packed, the separations became so small that they suffered "current leakage," meaning that electrons would leak from their intended path, making the transistor hotter and slower. The transistor is attached to the chip's silicon through a "gate," itself made of silicon. The new breakthrough is to manufacture the gate out of a metal oxide, rather than silicon. Using these new materials, the 65 nanometer technology can now be replaced by 45 nanometer transistors. The new transistors can be packed on chip with twice the density of the old transistors. The transistors are so small, that 2,000 of them fit could fit across a human hair, 30,000 of them could fit on the head of a pin. Interestingly enough, Intel isn't saying what the performance improvement will be, but it should approximately double. What all this shows is that computers continue to improve according to Moore's Law. Physicists and engineers keep finding new tricks and techniques to that the size of the transistor keeps getting smaller, and computer performance keeps doubling every 18 months. However, the density of transistors on a computer chip is going to reach physical limits shortly after 2010. After that, different technologies will be used to continue the same exponential growth path in computer power. These will include biotechnology, nanotechnology, protein folding technology, molecular technology, and quantum technology -- under development to take the place of integrated circuits and keep the power of computers growing steadfastly, as history shows will happen. Within a few years, it will be possible to build supercomputers that are as powerful as the human brain, and then it will be possible to develop computer software that, within a few years, make the computer as intelligent as a human being. At some point, probably some time in the late 2020s, computers will be intelligent enough so that they'll be responsible for their own research and development as necessary to invent new, more powerful versions of themselves. At this point, known as the Singularity, computers will quickly become so much more intelligent than humans that they'll displace humans as the major "species" on earth. Whether the human race will survive long after 2030 is not known, and is impossible to predict. <#inc ww2010.pic irobot1.jpg right "" "Robot from I, Robot"#> When <#hreftext ww2010.i.robot040709 "the movie I, Robot was released in 2004,"#> I thought that the movie would stimulate a public discussion of the Singularity, and would motivate philosophers and religious scholars to begin to thing about its meaning for humanity. However, I've learned from many conversations with various people that almost no one wants to think about the Singularity. That's not surprising, I guess, since investors don't seem to want to think about the global financial crisis, and politicians don't seem to want to think about the coming Clash of Civilizations World War. Nonetheless, the Singularity is coming, whether we like it or not, and there's still time enough to prepare for it. =eod =// &&2 e070128 Antiwar rally in Washington fails to stir passions or crowds =data ww2010.weblog.y2007.e070128.head "Antiwar" rally in Washington fails to stir passions or crowds =data ww2010.weblog.y2007.e070128.keys =data ww2010.weblog.y2007.e070128.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070128.date 28-Jan-07 =data ww2010.weblog.y2007.e070128.txt1 Thousands of aging Boomers got together Saturday to commemorate the huge 1960s rallies, =data ww2010.weblog.y2007.e070128.txt2 when several hundred thousand demonstrators would come to the Washington mall to hear fiery speeches by young Boomer antiwar protestors. <#inc ww2010.pic g070127.jpg right "" "Sparse crowd at Saturday's "antiwar" rally in Washington (Source: CNN)"#> The crowd on Saturday appeared to be sparse, and was estimated at "thousands" by some news stories, "tens of thousands" by others. The crowd came on Saturday to listen to boring speeches by aging Boomer antiwar protesters. An old guy led the crowd chanting, "Hey, hey, Uncle Sam! We remember Vietnam!" A group called the Raging Grannies sang songs reminiscient of the 1960s. <#inc ww2010.pic g070127b.jpg left "" "Aging Boomer antiwar protester and activist, Jane Fonda (Source: CNN)"#> The star of Saturday's protest was Jane Fonda, the resuscitated antiwar activist from the 1960s. More about her in a minute. Boomer journalists and pundits on Saturday were completely clueless as to why college students had little or no interest in joining the demonstrations, since they remembered fondly the fun and eroticism of the "summer of love," the women's lib parties where the guys burned their draft cards and the girls burned their bras, the weekly demonstrations on colleges across the country, and the huge crowds at the antiwar rallies in Washington and other major cities. Commentary from <#stdurl http://www.cnn.com/CNN/anchors_reporters/schneider.bill.html "Bill Schneider, CNN's senior political analyst,"#> who has a doctorate in political science from Harvard University and has taught at several prestigious colleges, just couldn't figure it out. He gave two reasons why college students weren't participating the way they did in the 1960s:

"There's no draft." The theory here is that students demonstrated in the 1960s because they were being drafted into the army, but with today's volunteer army, there's no such motivation. The problem with that explanation is that it doesn't account for all the other massive and repeated demonstrations -- the anti-racism demonstrations, the environmental demonstrations, the women's lib demonstrations, and so forth. Today, there are no large, frequent demonstrations of any type.
"Now they protest on the Internet." The theory here is that they now have Internet weblogs, so they don't have to go outdoors to protest. This argument is even weaker. A passionate anti-war activist just isn't going to be satisfied sitting in a chair typing into a computer. And anyway, the "Raging Grannies" and other Boomers have weblogs too, but some of them still demonstrate.

As I've been saying for years, a 1960s-style antiwar movement today is impossible, because there's no "generational gap" today, as there was in the 1960s. I wrote <#hreftext ww2010.i.060601antiwar "a lengthy analysis of this in June, 2006."#> It was particularly distasteful to see Jane Fonda again. In the 1960s and 1970s, antiwar protestors, led by the likes of Jane Fonda, would spit on soldiers, call them war criminals and baby killers, and even become violent with them. Fonda became known as "Hanoi Jane," because she went to have her picture taken with the North Vietnamese enemy. <#inc ww2010.pic fonda2.jpg right "" "Jane Fonda, back from Hanoi, wearing a necklace gift from the North Vietnamese. The necklace was made from the melted parts of a U.S. B-52 shot down by Hanoi."#> Fonda <#inc ww2010.weblog.ref e050411 "gave a half-hearted, selective apology in 2004"#> for going to Hanoi, and she said she regretted the picture the moment it was taken. But it's obvious that Fonda was lying, because she later began wearing a necklace made from the melted parts of a U.S B-52 shot down by Hanoi, as shown in the adjoining picture. As I've been saying for years, there is no antiwar movement to speak of today, and there won't be. But Jane Fonda's hatred of America is palpable, and having her lead an antiwar demonstration only turns a weird relic of past days into a disgusting relic. =eod =// &&2 e070126b Iraqi soldiers show contempt for American soldiers in Baghdad =data ww2010.weblog.y2007.e070126b.head Iraqi soldiers show contempt for American soldiers in Baghdad =data ww2010.weblog.y2007.e070126b.keys =data ww2010.weblog.y2007.e070126b.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070126b.date 26-Jan-07 =data ww2010.weblog.y2007.e070126b.txt1 This is the other side of the question, "What's REALLY happening in Iraq." =data ww2010.weblog.y2007.e070126b.txt2 A <#stdurl http://www.nytimes.com/2007/01/25/world/middleeast/25haifa.html?_r=2&oref=slogin&oref=slogin "story in Friday's NY Times"#> shows the contempt that many Iraqi soldiers have for the effort to remove the insurgents from Baghdad. In this situation, American forces arrived on Haifa Street in Baghdad planning to join up with Iraqi forces to dislodge Sunni insurgents and Shiite militias, but the Iraqi forces didn't show up! Here's what happened, according to the embedded reporter:

"When the Iraqi units finally did show up, it was with the air of a class outing, cheering and laughing as the Americans blew locks off doors with shotguns. As the morning wore on and the troops came under fire from all directions, another apparent flaw in this strategy became clear as empty apartments became lairs for gunmen who flitted from window to window and killed at least one American soldier, with a shot to the head. ... Many of the Iraqi units that showed up late never seemed to take the task seriously, searching haphazardly, breaking dishes and rifling through personal CD collections in the apartments. Eventually the Americans realized that the Iraqis were searching no more than half of the apartments; at one point the Iraqis completely disappeared, leaving the American unit working with them flabbergasted. “Where did they go?” yelled Sgt. Jeri A. Gillett. Another soldier suggested, “I say we just let them go and we do this ourselves.” Then the gunfire began. It would come from high rises across the street, from behind trash piles and sandbags in alleys and from so many other directions that the soldiers began to worry that the Iraqi soldiers were firing at them. Mortars started dropping from across the Tigris River, to the east, in the direction of a Shiite slum. The only thing that was clear was that no one knew who the enemy was. “The thing is, we wear uniforms — they don’t,” said Specialist Terry Wilson."

This is the other side of the story of what's happening in Iraq. To analyze this situation, once again we start from the point that Iraq is in a generational Awakening era, as we've discussed many, many times. In simplest terms, this means that the Iraqi people don't want any part of a war, certainly not an all-out civil war that the idiots in Washington can't stop talking about. We've shown how this works out in Lebanon, which is also in a generational Awakening era: In the summer war, Hizbollah fought the war with Israel <#hreftext ww2010.i.060724hizbollah "as a "war from the comfort of home,""#> launching missiles toward Israel and then returning home to their wives. And then, Hizbollah chief Nasrallah's attempt to overthrow the government in Lebanon has caused <#inc ww2010.weblog.ref e070126 "Nasrallah to lose support among his own Lebanese supporters,"#> in reaction to the 1980s civil war. And yesterday, we showed <#inc ww2010.weblog.ref e070126 "how this works in Iraq:"#> Al-Qaeda cannot get Iraqi jahidists to fight, except when paid. So they have to import suicide bombers and other jihadists from other countries, mostly from Saudi Arabia, which is deeply into a generational Crisis era. The New York Times article quoted above shows that the American forces have exactly the same problems with Iraqis: They simply don't want to fight. They'd just as soon let the Sunni jihadists and Shia death squads kill each other. Surely this convinces anyone who is not yet convinced that there's nothing resembling a civil war going on in Iraq, except for the airheads in Washington most of whom believe whatever supports their political position. However, the fact that it means there's no civil war doesn't mean that it's good news. The war in Iraq is a proxy war between al-Qaeda and Iran. If the Iraqis aren't willing to fight for the Sunni jihadists (or the Shiite militias), then they aren't willing to fight against the Sunni jihadists or the Shiite militias. In simplest terms, this affects our strategy in Iraq as follows:

If we withdraw from Iraq, there won't be a bloodbath civil war, as almost all the airheads in Washington are assuming. (Isn't it amazing how the entire political debate in Washington is based on an assumption that's completely wrong? Amazing.) But if we withdraw from Iraq, then al-Qaeda and Iran will rush in to fill the vacuum, and other countries (especially Turkey and Saudi Arabia) will rush in as well.
If we continue to fight in Iraq, which is what we're doing, then we have to focus on removing the imported Sunni jihadists and Shiite death squads, and we can't count on disciplined support from the Iraqi forces. But the good news is that we only have to clean out a few hundred people, and we aren't in the middle of a civil war as the Washingtonians claim.

Always keep in mind, though, that when historians look back at this period, the Iraq war will be a minor sideshow. The main show, the center ring of the circus, is still in Israel and the Palestinian territories. The situation in those two regions continues to deteriorate every day almost without fail, and a major war cannot be far off. And that war will engulf the entire region, with Iraq becoming far less important than it seems today. =eod =// &&2 e070126 Three killed in student riots at Beirut Lebanon's Arab University =data ww2010.weblog.y2007.e070126.head Three killed in student riots at Beirut Lebanon's Arab University =data ww2010.weblog.y2007.e070126.keys =data ww2010.weblog.y2007.e070126.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070126.date 26-Jan-07 =data ww2010.weblog.y2007.e070126.txt1 However, there are signs of diminishing violence in both Lebanon and Iraq. =data ww2010.weblog.y2007.e070126.txt2 At least two students are dead and 30 injured in <#stdurl http://www.abcnews.go.com/International/story?id=2823543&page=1 "street battles at the Beirut Arab University on Thursday,"#> resulting in army intervention. <#inc ww2010.pic g070125b.jpg right "" "Street battles at Beirut Arab University (Source: CNN)"#> The mainstream media have been continuing their incessant talk of impending civil war even though, as regular readers of this web site know, Lebanon is in a generational Awakening era, since only one generation has passed since the crisis civil war of the 1980s, and a new crisis civil war is impossible in a generational Awakening era. One can see this generational concept in action today in Lebanon. The amount of horror and concern over the possibility of a new civil war is palpable, so much so that it serves to inhibit anything resembling a new civil war. For example, one <#stdurl http://www.abcnews.go.com/International/story?id=2823543&page=1 "pro-government official said:"#> "I hope that the memory of the Lebanese civil war was still strong enough in the memory of most to deter them from repeating the same mistake." Strangely, the memory of the 1980s civil war has been the greatest factor in the public attitude toward Hizbollah chief Sheik Sayyed Hassan Nasrallah. <#inc ww2010.pic g070125a.jpg left "" "Hizbollah chief Sheik Sayyed Hassan Nasrallah on Lebanese television Thursday, telling his supporters to stop fighting and go home. (Source: CNN)"#> Many Lebanese were actually opposed to the summer war when it was actually on, but they sided with Nasrallah and Hizbollah because it was considered of utmost important that the Lebanese people be unified, in contrast to what happened in the 1980s. Many people would have liked to complain, especially since their entire country was being torn up, but their sense of purpose in maintaining unity caused many people to support Hizbollah when they otherwise wouldn't have. But now, six months later, things have changed. Recently, Nasrallah has been directing his fury not at Israel, but at the Lebanese government, insisting that he be given veto power over lawmaking. He called massive demonstrations and riots, and they just kept on without much happening. Then on Tuesday <#inc ww2010.weblog.ref e070124 "he held the nation wide strike that shut down the country,"#> and this was too much for many in the public. It was one thing to support Nasrallah when he was fighting Israel, but there's no patriotic duty at all to support Nasrallah when he's fighting the Lebanese government. Media reports from Lebanon on Wednesday and Thursday have been filled with people expressing loss of confidence in Nasrallah, most significantly from his formerly devoted Shiite supported. In one report, <#stdurl http://inbrief.threatswatch.org/2007/01/hizballah-pulls-back-as-suppor/ "a Lebanese woman says,"#> "I was a supporter. Before, (Hezbollah leaders) acted in a more transparent way. But I am very much against what they did yesterday – destroying roads, traffic lights and everything else." Another former supported said his sympathy for Nasrallah "died yesterday. They take advantage of our religious loyalties … but turn the streets into military zones." MEMRI translated a <#stdurl http://www.memritv.org/Transcript.asp?P1=1364 "a series of interviews appearing on Lebanese TV."#> One woman said, "They said they would take to the streets in a civilized and peaceful manner. It has become evident just how civilized and peaceful they are in their attack against us and against our children, in their beating and killing them. Never mind, all we hope is for that hole-dweller, that 'Abu Lahb' ... We hope that this mouse will come out of his hole. Then we will show him what he's worth. That's it." Another said, "I want to tell him that we won't let anyone turn this place into a second Israel-Palestine with stones, and with all the war fatwas he issues all the time. He says he wants national unity, but this is not national unity. He got it wrong." Another summed it up by saying, "Nasrallah, are you happy now? You've driven the Lebanese to fight one another. Are you happy now, Nasrallah?" What you're seeing here is Generational Dynamics theory in action. People frequently ask me, how can you be so certain that there won't be a civil war in Iraq (as I've been saying since 2003) and Lebanon? The theoretical answer is that you can't have a crisis civil war in an Awakening era. But for a "street answer," just look at what's happening. You have college students rioting and fighting at Beirut Arab University. College students rioting is a standard fixture of Awakening eras, as anyone knows who remembers <#hreftext ww2010.i.sixties040501 "what happened during the 1960s, America's last generational Awakening era."#> The reason that there are always college students rioting during Awakening eras is because they're in the first generation born after the previous crisis war, so they have no personal memory of its horrors. And so, being young, they fight with each other and with their parents. (Later, they grow up into a generation like our Boomers, who still fight with each other and never do anything else.) But during an awakening era, you can see from the above quotes how greatly their parents and their leaders pressure them to stop fighting. People in the older generations typically are so traumatized from the crisis war that they've vowed that their children and grandchildren will never have to go through anything like it. Now we're finally beginning to see that kind of pressure being applied in Iraq. It's been a long time coming, but an <#stdurl http://www.nysun.com/article/47363 "analysis by Hudson Institute fellow Nibras Kazimi,"#> says that "al Qaeda is about to run out of steam" in Iraq:

"What needs to be understood is the central role that Al Qaeda — or more accurately its successor organization, a group called the Islamic State of Iraq — is playing on these fronts and the diminishing role of all the other insurgent groups. The wider Sunni insurgency — the groups beyond Al Qaeda — is being slowly, and surely, defeated. The average insurgent today feels demoralized, disillusioned, and hunted. Those who have not been captured yet are opting for a quieter life outside of Iraq. Al Qaeda continues to grow for the time being as it cannibalizes the other insurgent groups and absorbs their most radical and hardcore fringes into its fold. The Baathists, who had been critical in spurring the initial insurgency, are becoming less and less relevant, and are drifting without a clear purpose following the hanging of their idol, Saddam Hussein. Rounding out this changing landscape is that Al Qaeda itself is getting a serious beating as the Americans improve in intelligence gathering and partner with more reliable Iraqi forces. In other words, battling the insurgency now essentially means battling Al Qaeda. This is a major accomplishment."

Other reports have indicated that al-Qaeda has been forced to import many jihadists from other countries, mostly from Saudi Arabia and Jordan, because native Iraqis were unwilling to fight unless they were paid to do so, and were unwilling to risk death. In particular, almost all suicide bombers have been imported; almost none have been Iraqis. This is typical behavior for people in a country in an Awakening era. So Kazimi's analysis makes it clear that al-Qaeda hasn't gotten a break in Iraq. They've had lukewarm support from Iraqi Sunnis, and they've had to face American weapons. Not a pleasant environment. The insurgency was actually beginning to diminish at the end of 2005, but grew again after <#inc ww2010.weblog.ref e060223 "Sunni groups bombed the Shiite al-Askariya shrine in Samarra in February, 2006."#> This inflamed the Shiites, who had previously been restrained, to the extent that they began launching death squads against the Sunni jihadists. Now, ten months later, Kazimi describes the result:

"Sadly, it took many thousands of young Sunnis getting abducted by death squads for the Sunnis to understand that in a full-fledged civil war, they would likely lose badly and be evicted from Baghdad. I believe that the Sunnis and insurgents are now war weary, and that this is a turnaround point in the campaign to stabilize Iraq."

Of course, not all of the Mideast is in a generational Awakening era. In particular, Saudi Arabia is deeply into a crisis era, and Palestine is also in a generational Crisis era. And there's no pulling away from war there. The Israeli people are anxious and frightened, and are willing to go to war at the slightest provocation, as happened last summer in the war with Hizbollah, when <#inc ww2010.weblog.ref e061223 "Israel panicked and rushed to war in four hours,"#> with no plan and no clear objective. That's how countries in generational Crisis eras act. And there's no pulling away from war for the young Palestinians in the terrorities, especially in Gaza where the median age is 15.8, making Gaza a densely packed region that's run by children with guns and missiles. In 2003, I predicted that <#hreftext ww2010.i.may01 "the Palestine region would descend into chaos and finally war,"#> once Yasser Arafat and Ariel Sharon are out of the picture, and I predicted that there would be no major civil war or uprising in Iraq <#hreftext ww2010.i.aug19 "unless it became a theatre of war by outside forces,"#> especially Palestinian and "mujahadeen" terrorists moving into Iraq to fight the war. Those were my predictions in 2003, and they've come true as predicted. I don't see how those predictions could have been any better, given the available knowledge at the time. I've gotten one prediction after another completely correct, unlike ordinary "experts" whose predictions are no better than throwing a dart. I've repeatedly challenged anyone to find any web site in the world with a prediction record that comes even close to mine, and no one has. Generational Dynamics thus gives a very accurate country-by-country picture of what's happening and what's going to happen in the Mideast and any other regions of the world. The traffic to this web site has been growing steadily since I put it up in 2002. There are now over 500 unique visitors per day (not including search engines), which probably equates to 2-3000 regular or occasional visitors. But it frustrates me to have so many web site readers, and still not be able to attract the attention of the people in the State Dept. or the Dept. of Defense, especially when I know that this material and this methodology would be extremely valuable to our government. So I'm asking my readers: If you are from the Federal government, or if you know somebody who is, please contact me and give me an opportunity to make this material available where it can do a lot of good. =eod =// &&2 e070125 A great parody of Tuesday's State of the Union speech. =data ww2010.weblog.y2007.e070125.head A great parody of Tuesday's State of the Union speech. =data ww2010.weblog.y2007.e070125.keys =data ww2010.weblog.y2007.e070125.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070125.date 25-Jan-07 =data ww2010.weblog.y2007.e070125.txt1 Don't miss the "Democratic response" at the end, =data ww2010.weblog.y2007.e070125.txt2 starting at around 6:00.

=eod =// &&2 e070124 Hizbollah leader Nasrallah's latest coup attempt collapses again =data ww2010.weblog.y2007.e070124.head Hizbollah leader Nasrallah's latest coup attempt collapses again =data ww2010.weblog.y2007.e070124.keys =data ww2010.weblog.y2007.e070124.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070124.date 24-Jan-07 =data ww2010.weblog.y2007.e070124.txt1 A general strike against the government on Tuesday paralyzed the government for several hours, =data ww2010.weblog.y2007.e070124.txt2 but <#stdurl http://www.dailystar.com.lb/article.asp?edition_id=1&categ_id=2&article_id=78890 "was called off by the Hizbollah-led opposition"#> when it was clear that it would not bring down the government. Prime Minister Fouad Siniora - issued a brief, firm address to the nation in which he stood his ground and announced he would remain in office. I find myself in a familiar situation, explaining why there's no civil war coming, even though everyone else is predicting one. From the point of view of Generational Dynamics, a civil war in Lebanon is impossible, since only one generation has passed since the civil war bloodbath of the 1980s. And yet, the mainstream media appears to be unanimous in saying that the country is on the edge of civil war. <#inc ww2010.pic g070123.jpg center "" "Scenes from BBC coverage of Tuesday's Lebanon protests. (Source: BBC)"#> The BBC really hyped the violence and the five or so deaths that occurred. However, the dramatic pictures weren't buildings burning, but only tires burning in the middle of the road. An <#stdurl http://www.csmonitor.com/2007/0124/p01s03-wome.html?s=hns "article in the Christian Science Monitor"#> says that, "Violence at sectarian flash points during a Hizbullah-backed opposition strike prompts fears of renewed civil war." The virulently anti-American Robert Fisk of the London Independent found nothing to blame America for, but <#stdurl http://www.lebaneselobby.org/News__index/news%202007/01%2024%2007%20Robert%20Fisk%20I%20never%20believed%20I%20would%20see%20Lebanon.html "appeared to be close to tears in his article:"#>

"So the worst nightmare years may have begun again. There were thousands of them - Christians fighting Christians north of Beirut, Sunni and Shia Muslims in the capital, a rain of stones, shrieks of hatred and occasionally even gunfire - that turned Lebanon into a sectarian battleground yesterday. At the corner of a street off Corniche al-Mazraa, I watched what historians may one day claim was the first day of Lebanon's new civil war, huge mobs of young men, supporters and opponents of Fouad Siniora's government screaming abuse and throwing tens of thousands of rocks at each other as a wounded Lebanese soldier sat next to me and wept. For the army of this tragic country is now the thin red line - some actually were wearing red berets - that stands between a future for Lebanon and the folly of civil conflict. After 31 years in this country, I never truly believed I would see again what I witnessed on the streets of Beirut yesterday, thousands of Shia and Sunni Muslims, the first supporting the Hizballah, the second the government once led by the murdered ex-prime minister Rafiq Hariri, hurling stones and hunks of metal at each other. They crashed down around us, smashing the road signs, the advertisement hoardings, the windows of the bank against which seven Lebanese soldiers and I were cowering. Again and again, the soldiers ran into the roadway to try - with a desperation all of them understood, and they were brave men - to drag the youths from each other. Some of the Shia men, Amal members, loyal (heaven spare us) to the Speaker of Parliament, wore hoods and black face masks, most wielding big wooden clubs. Their predecessors - perhaps their fathers - were dressed like this 31 years ago when they fought in these same streets, executioners-to-be, all confident in the integrity of their cause. Perhaps they were even wearing the same hoods. Some of the troops fired into the air; they shouted at the stone throwers. "For God's love, stop," one young soldier screamed. "Please, please."

I should mention that, as much as I've castigated the vast majority of journalists for being abysmally ignorant of the Mideast, that's not true of Fisk, who is truly an expert and is worth listening to even when he's ranting against America. But he's wrong that Lebanon is close to civil war. The key to understanding this is the last sentence above: "For God's love, stop," one young soldier screamed. "Please, please." The Lebanese are terrified of another civil war. This is true of every country in a generational Awakening era. In this case, the survivors who lived through the 1980s are still, to this day, completely traumatized and horrified because of the barbarity of what ordinary Lebanese people did to each other. This was especially true in the explosive climax in 1982 when Christian Arab forces <#stdurl en.wikipedia.org/wiki/Sabra_and_Shatila_massacre "massacred and butchered hundreds or perhaps thousands of Palestinian refugees in camps in Sabra and Shatila."#> It's this horror and fear of repeating the atrocities of the last crisis war that prevent the survivors from ever taking part in a new crisis war. That's the essence of a generational Awakening era. Once again, let's remember <#hreftext ww2010.i.sixties040501 "what happened during the 1960s, America's last generational Awakening era."#> It began in August 1963, when Martin Luther King led a march on Washington in which over 200,000 people participated. Later, President Kennedy was assassinated, and so was King. There were numerous demonstrations and riots throughout the country, some of them shutting down the government in Washington. There were "long, hot summers," led by the Black Panthers, and there were bombings and declarations of war against the government, led by the Weather Underground. President Lyndon Johnson was driven from office, and the climax was when President Richard Nixon was forced to resign. This is the kind of thing that happens to every nation in a generational Awakening era, one generation past a crisis war, and it's what's happening in Lebanon today. Hizbollah leader Hassan Nasrallah, with plenty of support and funding from Syria and Iran, has been attempting to overthrow the existing Lebanese government since the summer. He's called for several huge demonstrations, as well as Tuesday's general strike, but he's failed repeatedly. Nasrallah has had one failure after another, and now <#stdurl http://www.khaleejtimes.com/DisplayArticleNew.asp?xfile=data/middleeast/2007/January/middleeast_January185.xml§ion=middleeast&col= "even the Shia in Southern Lebanon are turning against him."#> So what's going to happen in Lebanon? It's impossible to predict, except that it will be a political battle. At some point, a political winner will be declared -- either the current government or Hizbollah. But there won't be a civil war. =eod =// &&2 e070123 Barack Obama to Boomers: Drop dead! =data ww2010.weblog.y2007.e070123.head Barack Obama to Boomers: Drop dead! =data ww2010.weblog.y2007.e070123.keys =data ww2010.weblog.y2007.e070123.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070123.date 23-Jan-07 =data ww2010.weblog.y2007.e070123.txt1 Most Boomers don't realize how much Gen-Xers hate us. =data ww2010.weblog.y2007.e070123.txt2 According to a <#stdurl http://www.nytimes.com/2007/01/21/weekinreview/21broder.html?_r=1&oref=slogin "a New York Times article on Sunday,"#> Barack Obama believes that Americans are sick of feuding Boomers, and ready to turn to Generation X, "after the campus culture wars between freaks and straights, and after young people had given up on what überboomer Hillary Rodham Clinton called in a 1969 commencement address a search for 'a more immediate, ecstatic and penetrating mode of living.'" "In the back and forth between Clinton and Gingrich, and in the elections of 2000 and 2004," writes Obama, "I sometimes felt as if I were watching the psychodrama of the baby boom generation — a tale rooted in old grudges and revenge plots hatched on a handful of college campuses long ago — played out on the national stage." No question he's right about that. Boomers are arrogant and narcissistic, as I've said many times. They have no skills except the ability to argue with each other. A lot of people are, like Obama, sick of them. Unfortunately, what Obama doesn't mention is that Gen-Xers aren't any better. The reason that Xers don't like Boomers is that Xers grew up in Boomers' shadows for decades. =// New url: http://www.superseventies.com/worstgen.html 12/31/11 Here's what Democratic Party strategist and Clinton aide Paul Begala said in <#stdurl http://www.keepmedia.com/pubs/Esquire/2000/04/01/171887?extID=10026 "an article he wrote in Esquire in 2000,"#> entitled "The Worst Generation" (a different and free version is available <#stdurl http://www.superseventies.com/worstgen.html "here)"#>:

"I hate the Baby Boomers. They're the most self-centered, self-seeking, self-interested, self-absorbed, self-indulgent, self-aggrandizing generation in American history. As they enter late middle age, the Boomers still can't grow up. Guys who once dropped acid are now downing Viagra; women who once eschewed lipstick are now getting liposuction. I know it's a sin to hate, so let me put it this way: If they were animals, they'd be a plague of locusts, devouring everything in their path and leaving but a wasteland. If they were plants, they'd be kudzu, choking off ever other living thing with their sheer mass. If they were artists, they'd be abstract expressionists, interested only in the emotions of that moment -- not in the lasting result of the creative process. If they were a baseball club, they'd be the Florida Marlins: prefab prima donnas who bought their way to prominence, then disbanded -- a temporary association but not a team."

He concludes his article as follows:

"Greatest Generation chronicler Tom Brokaw has the difference pegged: "The World War II generation did what was expected of them. But they never talked about it. It was part of the Code. There's no more telling metaphor than a guy in a football game who does what's expected of him -- makes an open-field tackle -- then gets up and dances around. When Jerry Kramer threw the block that won the Ice Bowl in '67, he just got up and walked off the field." That kind of self-effacing dignity is wholly alien to the Boomer elite. But when that day comes, when they finally walk off the field -- or what's left of the field -- a few of us who've been trailing behind them will be doing a little dance of our own."

So, it looks like Obama is consciously or subconsciously taking advice from his pal, Paul Begala. What they don't realize is that Xers are even worse than Boomers. There's no question that we Boomers are can't do anything but argue, but we're good-hearted folks who care about individuals. But Xers have no skills either. Since they're so frustrated and furious with Boomers' inaction, Xers are ready to charge in and get things done. But how do they know what to do if they have no skills? Easy. Since they hate the Boomers, they just do the opposite of whatever the Boomers would like to do. And that's not always the best thing. In a generational Crisis period, like the one America is in today, there's a tremendous amount of craziness and insanity around. As I've said before, it's amazing what the survivors of World War II did. They carefully set up worldwide organizations -- the United Nations, the World Bank, the World Health Organization, the Food and Agriculture Organization, etc. -- whose purpose was, most of all, to prevent another world war. They accomplished huge things. They set up country boundaries, set up world monetary policies, as well as trade and commerce policies. They made sure everyone would be fed. They attacked all of the miseries of the World Wars -- poverty, famine, disease and war -- so that nothing like World War II would ever happen to their children or grandchildren. But those people are all gone now, and what we have for leadership today are the Boomers and Xers -- the blind leading the blind. Obama is obviously making this advance to contrast himself with Boomer Hillary Clinton. So now you have a choice if you're a Democrat: a confused, arrogant Boomer fanatic, or a furious, hysterical Gen-Xer fanatic. The bad news is that these leaders will stumble around and get us into a new Clash of Civilizations World War. The good news is that once the war is over, the survivors will have a brand new, saner world in which to start over. =eod =// &&2 e070122 Iraq war rhetoric summary on Sunday news talk shows =data ww2010.weblog.y2007.e070122.head Iraq war rhetoric summary on Sunday news talk shows =data ww2010.weblog.y2007.e070122.keys =data ww2010.weblog.y2007.e070122.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070122.date 22-Jan-07 =data ww2010.weblog.y2007.e070122.txt1 Supporters of President's Iraq strategy were as scarce as hen's teeth. =data ww2010.weblog.y2007.e070122.txt2 Generally, each speaker on the Sunday programs started from the same assumption: That Iraq is in a "tribal sectarian civil war," and that if you don't do what the speaker says, then Iraq will spiral out of control into "anarchy" and "chaos" and millions of Sunnis and Shia will be killing each other in a huge bloodbath. This is everyone's assumption, but it's completely wrong: Iraq is NOT in a civil war, and there's no chance whatsoever of it spiraling out of control into a huge bloodbath, no matter what we do, since Iraq is in a generational Awakening era. I'll come back to this point later. So people like Republican Senator Chuck Hagel (Neb), and Democratic Senators Ted Kennedy (Mass) and Joe Biden (Del) used the incorrect assumption as follows: "It's crazy to put more troops into a civil war situation." And Republican Senators John McCain (Az) and Lindsey Graham (S.C.) used the incorrect assumption as follows: "If we pull out, the huge civil war bloodbath will force us back in right away." Another completely wrong assumption is that the Iraq war is like the Vietnam war. The reason that this is completely wrong is that Iraq today is in a generational Awakening era, while Vietnam in the 1960s and 1970s was in a generational Crisis era, and so comparisons are almost completely irrelevant. So the Democrats used this incorrect comparison as follows: "We're hearing the same arguments that we heard in Vietnam. We should have pulled out of Vietnam earlier, and we should pull out of Iraq right away." The Republicans used this incorrect comparison as follows: "When we pulled out of Vietnam, the Vietnamese civil war expanded into Cambodia, killing millions of people, and we can't let the same thing happen in the Mideast." Democrats also used this argument: "The Administration has gotten every prediction wrong so far, and there's no reason to believe that their predictions on the 'surge' proposal will be right." This last argument really makes me laugh, because almost all the Democrats supported the war in 2003, so EVERYONE's predictions were wrong. The same is true of most of the "anti-war" pundits today, almost all of whom initially supported the war, and are now acting like reformed drunks who want to burn down every liquor store. The only consistently correct predictions that I know of are the Generational Dynamics predictions on this web site. In August 2003, when the terrorist attacks were beginning and terrorists blew up the United Nations building in Baghdad, pundits and politicians immediately started predicting a massive uprising against Americans and a massive civil war. I explained that these things are impossible, since Iraq is in a generational Awakening era, and I <#hreftext ww2010.i.aug19 "made the following predictions on August 19, 2003:"#>

"That's why you're seeing massive riots and demonstrations among the Shi'ites in southern Iraq, but you're not seeing massive violence against the American occupiers. There's no "Tet offensive" and no Vietnam-like "quagmire" in the cards for the Americans. ... That's not to say there aren't dangers, and here we'll point out two major ones: First, the terrorist attacks may continue and get worse. Terrorism is more a political technique rather than a military technique. Al Qaeda may succeed in increasing the level of terrorist attacks in order to influence American public opinion. And second, the terrorist acts may presage a larger regional war involving the Palestinian Arabs and the al Qaeda against Americans in Iraq. Iraq is in an awakening period, but the Palestine region is just about to enter a crisis period. Some analysts claim that the terrorist acts are being perpetrated by Palestinian Arabs and "Mujahadeen" being paid thousands of dollars each, funded by Saddam and Osama bin Laden, arriving from Syria and Saudi Arabia. The really dangerous scenario is that large numbers of Palestinian and "mujahadeen" terrorists will be motivated by identity group relationships to move into Iraq as a theatre of war against the Americans. That isn't happening now, but it's one of several possible scenarios that may unfold in the Mideast region during the next few months and years."

This is exactly what has happened. Given the information that I had at the time, I'm not aware of how I could have had a more accurate prediction for Iraq. And it wasn't a lucky guess -- it was based entirely on Generational Dynamics principles. The only major change today is that terrorist attacks are coming from the Shiite/Iran side as well as from the Sunni/al-Qaeda side. As I mentioned recently, I'm working on a major status report on the Iraq war. I'm still working on it, but I've reached the point where I believe I can summarize what's going on in Iraq: The question is: If the Iraq war isn't a civil war, then what kind of war is it?

The easiest way to understand it is that the Iraq war is proxy war between al-Qaeda (Sunni) and Iran (Shiite), and being funded by those two entities that are external to Iraq.
The al-Qaeda goal is to transform Iraq into a Sharia nation, and to do the same in other countries (Afghanistan, Somalia, etc.). Another goal is to bring terrorism to America through al-Qaeda cells.
Iran's goal is to tie down America in Iraq, destroy Israel, and gain hegemony over the entire Mideast, via secular governments under the control of an Ayotollah. Another goal is to bring terrorism to America through Hizbollah.
The ordinary Iraqi people are not willing to fight in this war, except when they're paid for it. (This is what you would expect of the population of a country in an Awakening era). The pay for planting a roadside bomb is $500-1500, for example.
Iraqis are completely unwilling to be suicide bombers, and are unwilling to die in combat.
Thus, al-Qaeda in Iraq and other Mujahideen Shura Council groups have to import people to serve as suicide bombers from generational Crisis era countries, like Jordan, Saudi Arabia, and the Palestinian territories.
Iran is supplying money, training, and IEDs (bombs) to the the Mehdi Army led by Moqtada al-Sadr. Outside of Iraq, Iran is supplying money, training and rockets to Hizbollah in Lebanon and to Hamas in Gaza.
The insurgency was winding down until February, 2006, when the Sunni groups bombed the al-Askariya shrine in Samarra. Up till then, the Shia were restrained; after that, the Mehdi Army began with revenge killings. Since that time, Sunni and Shia militia groups have been fighting on a block-by-block basis to take control of Baghdad.
The insurgency has once again changed character in recent weeks, as Iraqi Sunnis have begun to desert al-Qaeda in Iraq and other Mujahadeen groups, realizing that those groups are interested in other goals, not what's best for Iraq.
And again, the situation is changing character with the introduction of the American "surge" troops, and the commitment by the al-Maliki government to go after Shiite militia groups. Sunday's news that al-Sadr is ending his boycott of the central government is potentially significant.

Thus, there is a unique situation today. Those, like Biden and Kennedy, who claim that there's a civil war and that nothing's changed are simply wrong. A lot has changed in the last few months, and there truly is a new situation in Iraq today. Does that mean that President Bush's new "escalation" policy will work to stabilize the government? There's no way to predict. But if you ignore the political hysteria, it's a reasonable thing to try. What would happen if Americans withdrew from Iraq? When Americans withdrew from Vietnam, the Vietnamese civil war spiraled out of control and spread to other countries. That can't happen in today's Iraq, because there's no civil war to spiral out of control. Instead of a civil war spreading OUTWARD, the external groups funding the insurgency would converge INWARD. Iran, Turkey and Saudi Arabia would certainly intervene. Whether that resulted in a major war cannot be predicted. However, the most important point is within the framework of the entire Mideast, the Iraq war is just a sideshow. The main show, the center ring of the circus, is still in Israel and the Palestinian territories. The situation in those two regions continues to deteriorate every day almost without fail, and a major war cannot be far off. And that war will engulf the entire region, with Iraq becoming far less important than it seems today. =eod =// &&2 e070121 Financial Times discovers that something's wrong with hedge funds =data ww2010.weblog.y2007.e070121.head Financial Times discovers that something's wrong with hedge funds =data ww2010.weblog.y2007.e070121.keys =data ww2010.weblog.y2007.e070121.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070121.date 21-Jan-07 =data ww2010.weblog.y2007.e070121.txt1 It looks more and more like massive fraud by hedge fund managers. =data ww2010.weblog.y2007.e070121.txt2 Gillian Tett, a senior economics writer for Financial Times, says <#stdurl http://www.ft.com/cms/s/92f7ee6a-a765-11db-83e4-0000779e2340.html "in an article on Friday"#> that she received an e-mail message from a "senior banker":

"Hi Gillian. I have been working in the leveraged credit and distressed debt sector for 20 years . . . and I have never seen anything quite like what is currently going on. Market participants have lost all memory of what risk is and are behaving as if the so-called wall of liquidity will last indefinitely and that volatility is a thing of the past. I don't think there has ever been a time in history when such a large proportion of the riskiest credit assets have been owned by such financially weak institutions . . . with very limited capacity to withstand adverse credit events and market downturns. I am not sure what is worse, talking to market players who generally believe that 'this time it's different', or to more seasoned players who . . . privately acknowledge that there is a bubble waiting to burst but . . . hope problems will not arise until after the next bonus round. ... The degree of leverage at work . . . is quite frankly frightening. Very few hedge funds I talk to have got a prayer in the next downturn. Even more worryingly, most of them don't even expect one."

This is interesting on several levels. The first paragraph says, "Market participants have lost all memory of what risk is...." This is wrong. Today's market participant were born well after the Great Depression, and so they never had a memory of what risk is. This is something that analysts and journalists don't understand: what's happening today is caused by generational changes. What he's essentially describing is a pyramid scheme, which is what I've been saying for years, and as <#inc ww2010.weblog.ref e061230 "I recently described in detail."#> However, I want to call your attention to a few sentences that I'm repeating here:

"I am not sure what is worse, talking to market players who generally believe that 'this time it's different', or to more seasoned players who . . . privately acknowledge that there is a bubble waiting to burst but . . . hope problems will not arise until after the next bonus round. ... Very few hedge funds I talk to have got a prayer in the next downturn. Even more worryingly, most of them don't even expect one."

This text makes very clear that there are two kinds of investors: Those who don't know that there's a crash coming, and those that do know, but are still earning commissions by convincing the first kind to keep buying into the bubble. This is out and out fraud. Ms. Gett doesn't seem to realize this, but what her article shows is that hedge fund managers in particular are committing fraud. They are making promises of / hinting at big returns when they know that those promises / hints won't be met. Managers and advisors have a fiduciary duty to their clients to give them the best professional advice available. Any advisor or manager who makes money by purposely giving incorrect advice is committing criminal fraud. These advisors and managers think that they're safe, because all their clients have signed multi-page small print contracts that say that the client is responsible for all losses. But those contracts won't protect the managers and advisors from charges of criminal fraud. Furthermore, no contract in the world will protect these managers and advisors from angry investors when they find out that the advisors protected themselves financially but didn't protect their clients. I've pointed this out before, but it's worth repeating. Do you remember what happened in 2001 after the Nasdaq crash and the Enron scandal? People wanted to put CEOs in jail -- ALL CEOs, even perfectly honest ones. People were going crazy. Well, it's going to happen again. The Enron scandal is one historical example, but a better example might be the bankruptcy of the French Monarchy in 1789 that led to the French Revolution. In the Reign of Terror that followed, any person who was an aristocrat, a relative of an aristocrat, a friend of an aristocrat, a servant of an aristocrat, or even had a resemblance to an aristocrat, would be tried and quickly convicted and sentenced to the guillotine. So I have some advice for the economics experts, journalists, professors, investors, central bankers, pundits and politicians that have been telling us that everything OK and getting better: You'd better have your underground bunker picked out, because people are going to be coming after you, and the guillotine is going to seem mild compared to the punishment that they're going to want to inflict on you. =eod =// &&2 e070119b Mutation creates Egyptian bird flu strain resistant to Tamiflu =data ww2010.weblog.y2007.e070119b.head Mutation creates Egyptian bird flu strain resistant to Tamiflu =data ww2010.weblog.y2007.e070119b.keys =data ww2010.weblog.y2007.e070119b.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070119b.date 19-Jan-07 =data ww2010.weblog.y2007.e070119b.txt1 Egypt's 19th human case of H5N1 high potency avian influenza (HPAI) was identified on Thursday. =data ww2010.weblog.y2007.e070119b.txt2 A total of <#stdurl http://allafrica.com/stories/200701180285.html "19 cases have been identified in Egypt to date,"#> and 10 have been fatal. Worldwide, there have been 161 fatalities among 267 known cases since 2003, according to the World Health Organization (WHO). In additional news, two people who died of bird flu in Egypt last month had a strain of the H5N1 virus <#stdurl http://today.reuters.co.uk/news/CrisesArticle.aspx?storyId=L18162662&WTmodLoc=World-R5-Alertnet-5 "containing a mutation that made it resistant to Tamiflu,"#> the principal antiviral medicine available. "[T]his is a major concern if the [mutation] is widespread because there have already been problems reported [of] associated resistance of H5N1 to Tamiflu," according to <#stdurl http://www.recombinomics.com/News/01180703/H5N1_Egypt_N294S_Ducks.html "an analysis on Henry Niman's Recombinomics web site."#> "[Drug resistance] has already developed in patients treated sub-optimally with Tamiflu, and many countries have increased the H5N1 treatment dosage. The newly reported change would raise serious questions about the use of Tamiflu for both treatment and prevention of H5N1 containing [the mutation]." Although the virus is mutating, it's impossible to predict when a particular mutation will permit easy human-to-human transmission, which would result in a worldwide pandemic. This could happen next week, next month, next year, or thereafter. Once again, as I always say, you and your family should prepare immediately for a possible pandemic. If human to human transmission became public next week on Monday, then by Tuesday all the shelves in grocery stores would be bare. If you stock up on food now, then you'll be sure to have what you need. Even if you think that you can beat the crowds to the grocery store, you should still stock up in advance. If you get your canned food after the panic begins, then you're depriving somebody else of food. But if you stock up in advance, then the shelves will be restocked, and you won't deprive someone else of food. I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e070119 China: Successfully tests anti-Satellite weapon =data ww2010.weblog.y2007.e070119.head China successfully tests an anti-satellite weapon =data ww2010.weblog.y2007.e070119.keys =data ww2010.weblog.y2007.e070119.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070119.date 19-Jan-07 =data ww2010.weblog.y2007.e070119.txt1 In a military escalation clearly targeting the United States, =data ww2010.weblog.y2007.e070119.txt2 China has <#stdurl http://www.aviationnow.com/avnow/news/channel_space_story.jsp?id=news/CHI01177.xml "destroyed one of its old weather satellites by means of an anti-satellite weapon,"#> according to a report on the Aviation Week & Space Technology website on Thursday. The technology used was a "kinetic kill vehicle." A ballistic missile was launched from earth. When it reached the correct altitude, it launched the KKV in the direction of the satellite to be destroyed. The KKV strikes the satellite with a great deal of force, destroying it. This was not the first test of this type by the Chinese. Several months ago, the Chinese attempted to blind US spy satellites by means of ground-based lasers. It seems extremely likely that the Chinese are developing a number of other technologies as well. The current test is a very big deal and is raising alarm bells around the world. The United States, Australia and Canada have <#stdurl http://english.aljazeera.net/NR/exeres/0B0F1278-232B-4898-9F18-5535B4149DD3.htm "voiced concern over the implications of this test for a new space weapon race,"#> as well as for the debris and space junk that the destroyed weather satellite will create. A great deal of the U.S. military's strategic advantage relies on space technology. The U.S. uses space satellites to take photographs, guide missiles through the Global Positioning Satellite (GPS) system, as well as for communication and varied forms of intelligence. Thus, in a war with China, a series of successful strikes incapacitating our satellites would seriously degrade many of our military capabilities. From the point of view of Generational Dynamics, a war with China is coming with absolute certainty, and probably sooner rather than later. It will be a major component of the coming "clash of civilizations" world war. =eod =// &&2 e070118c CNN: Iraqi man was forced to become suicide bomber =data ww2010.weblog.y2007.e070118c.head CNN: Iraqi man was forced to become suicide bomber =data ww2010.weblog.y2007.e070118c.keys =data ww2010.weblog.y2007.e070118c.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070118c.date 18-Jan-07 =data ww2010.weblog.y2007.e070118c.txt1 This helps us understand what's going on in Iraq. =data ww2010.weblog.y2007.e070118c.txt2 A CNN International report today was about an Iraqi family man named al-Khaqani. He was kidnapped by terrorists, and secured into the drivers seat of a car loaded with bombs. Somehow (I didn't quite understand how from the report), the car was aimed at a crowd of people. However, the man was able to scream out the window that he was about to blow up and the people scattered. The driver was killed, and only one or two in the crowd were injured. The driver is considered a hero. This is significant because of something that most people don't realize -- there are no Iraqi suicide bombers. This is never mentioned in the mainstream media reports, and you have to dig it out of original source documents, as I've done. As I mentioned a couple of days ago, I'm working on an analysis of what the war in Iraq is really about. The network and other mainstream media reporters apparently don't even know something as simple as whether al-Qaeda is Sunni or Shiite, so they don't have a clue. They just assume in their stupidity that it's exactly the Vietnam war. However, the picture I'm increasingly getting is that the Iraq war is a proxy war between al-Qaeda and Iran. The ordinary Iraqi people do not want any part of a war, since the country is in a generational Awakening era, just one generation past the Iran/Iraq war of the 1980s. They're willing to take part in the war only if they're paid to do so, and they're not willing to get killed. Therefore, the suicide bombers, who are mostly al-Qaeda, require people imported from other countries, mostly Saudi Arabia, Jordan, and the Palestinian terrorities, three regions that are in generational Crisis eras. At some level, this must be embarassing to the al-Qaeda terrorists, especially since our armed forces intelligence people are aware of it. So I interpret the event reported by CNN to be an attempt by al-Qaeda to change the picture. By forcing an Iraqi family man to appear to be a suicide bomber (who, incidentally, would not be around later to tell what happened), al-Qaeda can make it appear that Iraqis themselves are more willing to be suicide bombers. The mainstream media is acting completely shamefully over this whole thing. It's perfectly obvious that the terrorists are perpetrating one or two suicide bombings every day because they know for a certainty that the mainstream media will showcase them. And you can count on it -- every mainstream media newscast puts the latest suicide bombing on as the lead story, every time every day, without fail. It's just amazing to me what dupes these media people are, and how ignorant they are, as <#inc ww2010.weblog.ref e070114b "I've discussed before."#> The CNN story should have mentioned the Iraqi suicide bomber angle, but if they're even aware of it, I'm sure they would have decided that to do so would be carrying water for the Administration. No, they're committed to carrying water for the terrorists and only the terrorists. However, the story is potentially quite significant. It indicates a level of desperation on the part of al-Qaeda, and if it's repeated, then it indicates a significant new direction for the terrorists. =eod =// &&2 e070118b Australian Muslims go ga-ga over the Burkini =data ww2010.weblog.y2007.e070118b.head Australian Muslim women go ga-ga over the Burkini =data ww2010.weblog.y2007.e070118b.keys =data ww2010.weblog.y2007.e070118b.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070118b.date 18-Jan-07 =data ww2010.weblog.y2007.e070118b.txt1 What do you wear on the beach if you're too modest for an ordinary swimsuit? =data ww2010.weblog.y2007.e070118b.txt2 <#inc ww2010.pic g070118.jpg right "" "Woman on right is wearing a Burkini."#> Many Muslim women are expected or required to wear a Burka, a garment that covers them from head to foot, exposing only their faces. But the beach presents a problem, since a robe can be uncomfortable, and doesn't permit swimming. The answer is <#stdurl http://www.wnbc.com/news/10754064/detail.html "the Burkini, which has become a craze in Australia,"#> where 9,000 garments have been sold for US$125-160. <#inc ww2010.pic g070118b.jpg left "" "Victorian swimwear"#> The Burkini is actually very similar to <#stdurl http://www.fashion-era.com/early_swimwear.htm "swimware from the Victorian age,"#> the time in the 1800s when Queen Victoria ruled Britain and women wore much more modest clothing generally. =eod =// &&2 e070118 Israeli army chief of staff resignation threatens entire government =data ww2010.weblog.y2007.e070118.head Israeli army chief of staff resignation threatens entire government =data ww2010.weblog.y2007.e070118.keys =data ww2010.weblog.y2007.e070118.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070118.date 18-Jan-07 =data ww2010.weblog.y2007.e070118.txt1 Israel is still reeling from the disastrous performance in the summer Lebanon war =data ww2010.weblog.y2007.e070118.txt2 of the Israeli Defense Forces (IDF), a war which is widely perceived to be a humiliating defeat for Israel. With public dissatisfaction with the government extremely high, the IDF chief of staff was forced to resign yesterday, and it's possible that the entire government of Prime Minister Ehud Olmert may fall as well. As <#inc ww2010.weblog.ref e061223 "we reported in our analysis of the war last month,"#> the IDF has been conducting an intensive investigation of what went wrong. The <#stdurl http://www.ynetnews.com/articles/0,7340,L-3347033,00.html "report won't be released until February."#> But some conclusions of what is to be called the Winograd Commission Report were <#stdurl http://www.infoisrael.net/cgi-local/text.pl?source=2/a/viii/170120071 "released to the Knesset on Tuesday."#> Some of those conclusions, where are consistent with the rumored conclusions we discussed last month, are as follows:

"The prime minister instructed the army to halt the rocket fire on Israel but the army failed to translate it into a military objective."
There was no objective. "Everything was basically okay, but those who were supposed to provide the army with the objective it was fighting for experienced a mental collapse and didn’t do so until the last day."
Israel's leadership made the wrong decision to rely too heavily on the United Nations to control Hizbollah.

Basically, <#inc ww2010.weblog.ref e061223 "as we've discussed,"#> Hizbollah abducted two Israeli soldiers, the Israeli government panicked and went to war in four hours, with no clear plan or objective. These preliminary conclusions led to <#stdurl http://www.israelnewsagency.com/danhalutzamirperetzisraelidflebanonwarresigns4877011707.html "the resignation of IDF Chief of General Staff Lt.-Gen. Dan Halutz."#> He said that his decision to resign was based on "deep-rooted values, those of strong ethics, loyalty to the organization and integrity." "I served the army responsibly for over four decades, and this responsibility continued in the last few months. It is this responsibility that led me to announce my resignation." Public pressure for Prime Minister Ehud Olmert and his Defense Minister Amir Peretz to resign is expected to increase, as the time for the release of the full report approaches. Olmert's troubles are increased by the fact that he's become the target of a criminal probe for his part in a financial scandal that took place in 2005, when he was finance minister. As we've said several times in the past, governments of countries that fought in World War II are all becoming increasingly paralyzed. That's because the various government agencies and infrastructures were set up by the survivors of the war, with the purpose of keeping any new war from happening again. The generation of people born after the war (like America's Baby Boomer generation) don't have the skills to effectively operate these agencies, now that the people who set them up are gone, and only know how to argue. We can see this happening in the European Union, which is unable to agree on a new constitution, we can see it in Britain, where Prime Minister Tony Blair is being forced to step down under fire, and we can see it here in America, where members of Congress, now mostly from the Boomer generation, are crippling the government and preventing President Bush from governing, without providing any alternative. And the government in the most chaos of all is, of course, the Palestinian government, which is close to civil war. If the current Israeli government falls, where will it go next? We can only guess: The Israeli people are furious about the summer Lebanon war, and they're extremely anxious and frightened because of Hizbollah and Hamas are planning for war, with Iran's support. The absolutely highest priority for the people of Israel is security, and a new government has to be in a direction that's increasingly militaristic and confrontational, and less tolerant of compromise with the Palestinians. From the point of view of Generational Dynamics, this is the culmination of the generational cycle, leading to a new crisis war. As we described above, the survivors in the countries that fought in World War II set up organizations like the United Nations to prevent another such war, and set up compromises and austere rules for the same reason. The generations of people born after the war spend their young adulthood angrily objecting to the austere rules, with a "generation gap" that leads to a great deal of political chaos. This is called a "generational Awakening era." America's last Awakening era occurred in the 1960s and 1970s. But today, 61 years after WW II ended, the survivors of the war are all gone, and the generations born after the war (Baby Boomers and Generation X) are literally incompetent to take their place, since they don't have the wisdom that comes from having lived through the crisis war. That's when things start falling apart, new chaos ensues, and a new world war begins. Today we're seeing that happen before our eyes. There's no way to stop the "clash of civilizations" world war that's approaching; all we can do is prepare for it. =eod =// &&2 e070114b Guess what? British politicians and journalists are just as ignorant as Americans =data ww2010.weblog.y2007.e070114b.head Guess what? British politicians and journalists are just as ignorant as Americans =data ww2010.weblog.y2007.e070114b.keys =data ww2010.weblog.y2007.e070114b.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070114b.date 14-Jan-07 =data ww2010.weblog.y2007.e070114b.txt1 Gloating by Brits about dumb Americans turns out to be inappropriate. =data ww2010.weblog.y2007.e070114b.txt2 A <#stdurl http://www.timesonline.co.uk/article/0,,2087-2534980,00.html "survey by the London Times newspaper,"#> in which they informally quizzed 30 politicians and "Middle East" experts in the British government, showed that they were abysmally ignorant of even the simplest facts regarding the Middle East. Typical questions were, "What's the difference between Sunnis and Shiites?" and "Is al-Qaeda Sunni or Shiite?" and "Is Hizbollah Sunni or Shiite?" In almost cases, the politicans and experts guessed, or had no idea. The article is a response to gloating by some UK journalists to a similar survey conducted in America. In <#stdurl http://news.bbc.co.uk/2/hi/uk_news/magazine/6224467.stm "article last week by BBC journalist Brian Walden,"#> published before the Times article, Walden claims, "I mention this disturbing religious and political illiteracy not because I want to make the point: 'Look at the stupid Americans. Aren't we lucky to be British and cleverer than they are?'" But he then goes on to claim, in effect, "Look at the stupid Americans. Aren't we lucky that I'm British and cleverer than anyone." <#inc ww2010.pic mirror.jpg right "" "Daily Mirror front page, November 4, 2004"#> Actually, we all know what the British think of Americans. After the 2004 election, <#inc ww2010.weblog.ref e041104 "the London Daily Mirror tabloid's front page headline"#> was: "How can 59,017,382 people be so DUMB?" And the BBC is so anti-American that in January, 2004, the BBC was reprimanded after a long investigation resulting in <#inc ww2010.weblog.ref e050919 "the Hutton Report."#> The investigation found that the BBC had purposely lied in news stories in order to make Tony Blair's administration look bad in pursuing the Iraq War. So it's not surprising when BBC reporter Brian Walden says, "I happen to believe that the war in Iraq was a blunder of the first magnitude," but he provides no evidence whatsoever of this, except to quote polls. In fact, Walden simply shows his own ignorance:

He's apparently unaware that the war began in 1991, not 2003; that it escalated substantially in 1999, when the Clinton administration began daily bombings of no-fly zones, and escalated again in 2003.
He doesn't address the fact that if we hadn't invaded in 2003, we wouldn't know to this day whether or not Saddam has or is manufacturing WMDs, and whether he was planning to use them on Israel, American interests, Europe, Iran (again), or his own people (again).
He doesn't address the point that President Bush made in his private briefing with reporters last week: If Saddam were still in power, then Iraq and Iran would be in a race to develop nuclear weapons.

The reason that Walden doesn't address these points is that he's as ignorant of history as he claims that Americans are: He obviously knows nothing about the Truman Doctrine and its importance to American policy; and he obviously knows nothing about the Iran/Iraq war, and its effect on the regional politics today. (See discussion of the Truman Doctrine and the Iran/Iraq war in <#inc ww2010.weblog.ref e070114 "the weblog entry on Chris Matthews."#>) Walden quotes for support an American analyst who says that the Bush Administration "naively assumes that US military power can still be used to create a stable and unified democracy." This is another unsupported statement, especially since American power did exactly that in countries like Kuwait, Germany, Italy and Japan. Of course, British military power helped out, but the fact that Walden doesn't remember even that makes him look even more stupid. He says, "We're at a new year, and I see no sign that official circles in Washington and London have learnt the lessons that will prevent us making a similar mistake again." What mistake is he referring to? Is he referring to the mistakes that people like him made in underestimating Hitler, and ended up being called appeasers? See, look: This BBC reporter Walden is an ideologue. He knows little about history, and the history he does know or apply is selective. What makes him a fool is that he thinks he actually knows more than other people. His gloating came about, as we said, because of a similar survey of American politicians and analysts. That survey was conducted by Jeff Stein, national security editor for Congressional Quarterly. He wrote <#stdurl http://www.nytimes.com/2006/10/17/opinion/17stein.html?ex=1318737600&en=c5709ea7c5631b3f&ei=5088&partner=rssnyt&emc=rss "an article for the New York Times in October 2006,"#> and <#stdurl http://public.cq.com/public/20061211_homeland.html "a December article in Congressional Quarterly."#> Stein was interviewing Silvestre Reyes, whom Nancy Pelosi had selected to be chairman of the House Intelligence Committee. At the end of the interview he asked Reyes whether al-Qaeda was a Sunni or Shiite organization. He said, "Predominantly — probably Shiite." Completely wrong. Al-Qaeda is a Sunni organization. So get this: A 5-term congressman, who's been on the House Intelligence Committee for five years, and is now about to become its chairman, couldn't answer a simple question about the Mideast. This reminded me of an incident involving Nancy Pelosi just after the election. A reporter asked to respond to something or other that President Bush had said about al-Qaeda in Iraq. She said something about Bush lying again because the 9/11 Commission had found that there was no al-Qaeda in Iraq. Of course there is, at this time al-Qaeda in Iraq, but everyone assumed, including me, that she had simply misunderstood the question. I now realize that she knows nothing at all about al-Qaeda. This isn't restricted to Democrats. Jeff Stein found that both Democrats and Republicans in Congress were abysmally ignorant about the Mideast. He even found that some CIA agents who specialized in Mideast affairs were extremely ignorant. What all of these newspaper articles fail to mention is that journalists are just as ignorant. I've pointed this out numerous times on this web site. ABC's George Stephanopoulos looked like an idiot in November because <#inc ww2010.weblog.ref e061126 "Jordan's King Abdullah had to tell him five times"#> of the importance of the Israeli/Palestine situation, but he was still clueless. NBC's Chris Matthews exhibited vitriolic partisanship and <#inc ww2010.weblog.ref e070114 "sheer stupidity after President Bush's speech,"#> making it clear that he knows nothing about such things as the Iran/Iraq war or the Truman Doctrine. CNN's Michael Ware, talking about the Iraq war, said <#inc ww2010.weblog.ref e061204 ""If this isn't a civil war, then I'd hate to see a real civil war,""#> apparently completely unaware that there is a real civil war going on Darfur, and that the Iraq war is nothing like that. And there's Brian Walden, the BBC reporter I discussed earlier in this article. The <#inc ww2010.weblog.ref e061008 "worst example is Bob Woodward"#> who, I suspect, knows so little that he'd have difficulty picking out Iraq on a map, but still wrote a whole book, State of Denial, in which he claimed he knows more than everyone. You know, dear reader, you may find this hard to believe, but more than one person has actually criticized me for referring to these people as morons. But really, what am I supposed to say about people who know so little, then go on television to shout their ignorance to anyone will listen, and then claim that they're the only ones who know what's really going on? I could repeat Abraham Lincoln's quote: "Better to remain silent and be thought a fool than to speak out and remove all doubt." Lincoln was probably talking about journalists, because these people are the dumbest and loudest of all. Remember that one of the questions asked was: "Is al-Qaeda a Sunni or Shiite organization?" This is one of these questions that the politicians couldn't answer, and I'm sure the journalists are the same. But if you don't understand that, then you can't possible have any idea what's going on in Iraq. These "experts" always talk about a civil war with Sunnis and Shiites shooting at each other, but have no idea what that means. (I remember Stephanopoulis saying that to King Abdullah; what an idiot.) I've been trying to answer the question myself: If the Iraq war isn't a civil war, then what is it? I've been studying dozens of historical accounts and on the scene reports, things that most journalists are clueless about. And what's increasingly clear is that the war in Iraq is a proxy war between al-Qaeda and Iran. I'm writing an analysis on this subject, and I hope to post it within the next few days. You know, dear reader, before 9/11 I didn't know much about the Mideast either. But in order to develop Generational Dynamics, and in order to write a book, and in order to do this web site, I've had to read and absorb literally hundreds of history books. I've written about the Mideast hundreds of times, and each time I've had to learn something new. I've had to do this because, if for no other reason, if I make a mistake in history on this web site, then I look like an idiot, and someone always writes to me and tells me so. So of course I know the difference between Sunnis and Shiites -- I made a point of learning it and writing about it in my first book. I studied the Quran, the life of Mohammed, the Muslim conquests, the Ottoman Empire, and so forth. How many journalists today have the vaguest idea, for example, that the construction of Mosques in Spain today is raising fears related to the Muslim occupation of Spain prior to 1492 - the same year the Columbus sailed the ocean blue? That's just one example of a thousand things you have to know to understand what's going on today. In fact, I've written about dozens of countries on this web site, and each time I write about a new country, I have to go and study the history of that country, in order to understand how it got to where it is today. Because you can't understand today's world until you understand yesterday's world. And journalists are even more abysmally ignorant about yesterday's world than they are about today's world. When I began this project, shortly after 9/11, it was simply to try to figure out what's going on in the world. I've had many shocks and surprises in the 5+ years since then, but probably no more shocking than the realization that I now know more about the history and current events about the world than do 99.9% of the politicians, analysts, journalists, pundits and others in Washington. This is a reflection on how much work I've done, but it's even more a reflection of the sheer arrogance and stupidity that pervades Washington. It's also worth pointing out that these politicians, journalists and others always get things wrong. They make predictions that are no more than sheer guesswork, and their predictions produce no better results than flipping a coin. They get one prediction after another wrong, but that doesn't stop them from making more wrong predictions, and then asserting that they actually know more about what's going to happen than anyone else does. They know nothing, as their record shows. Speaking of predictions, this web site has correctly predicted what would happen <#hreftext ww2010.i.aug19 "in Iraq in August, 2003,"#> what would happen <#hreftext ww2010.i.may01 "in the Mideast in May, 2003,"#> what would happen <#inc ww2010.weblog.ref e040628 "in Darfur in June, 2004,"#> and what would happen <#hreftext ww2010.i.antiwar "to the "anti-war movement" in February, 2003."#> There have been no Generational Dynamics predictions that have turned out to be wrong. I've repeatedly challenged anyone to find any web site anywhere in the world with a predictive success record anywhere close to this web site's record. There is none. If you want to know what's going on in the world, this is the one and only web site that will tell you. From the point of view of Generational Dynamics, the arrogance of and stupidity of the people running Washington today is to be expected, because they're all in the Baby Boomer generation. The <#stdurl http://www.timesonline.co.uk/article/0,,2087-2534980,00.html "the London Times article"#> that I referenced above quotes Ali Ansari, director of the British Institute of Persian Studies at St Andrews University as saying this:

"When you are making decisions about life and death, war and peace, it behoves our representatives to brush up a bit on aspects on the Middle East. When it comes to the opposition parties, I really would expect them to have more of a handle of the issues. Anthony Eden, for all his woes, did have a first in oriental studies from Oxford. He spoke Persian and Arabic fluently. I have to say I think our politicians from 50 years ago were probably a more worldly aware bunch than now."

The speaker refers to Anthony Eden, who became British Prime Minister in 1955. Of course all the people who had lived through World War II and survived it knew what was going on in the world. It's amazing what the survivors of World War II did. They carefully set up worldwide organizations -- the United Nations, the World Bank, the World Health Organization, the Food and Agriculture Organization, etc. -- whose purpose was, most of all, to prevent another world war. They accomplished huge things. They set up country boundaries, set up world monetary policies, as well as trade and commerce policies. They made sure everyone would be fed. They attacked all of the miseries of the World Wars -- poverty, famine, disease and war -- so that nothing like World War II would ever happen to their children or grandchildren. But the generations of people who set up those organizations and did those great things are gone now, and the people left behind don't have the skills to make them work effectively. The Baby Boomers certainly don't have those skills. Boomers have no skills except to argue. They've spent their whole lives expecting the older generations -- the WW II survivors -- to take care of them. But there's no one else left. And the Generation Xers are even worse -- they're just furious at the Boomers. So that's where we stand today. I have no idea whether the "surge" of new troops into Iraq is going to work or not, but here's what I do know:

The politicians, analysts, and journalists in Washington don't know whether it's going to work either, and in fact they know a lot less than I do about what's going on.
The politicians, analysts, and journalists in Washington have only one skill, that they learned when they were kids in college in the sixties: How to argue, riot and demonstrate. They have no other skills, and very little knowledge, but believe that they know more than anyone else.
This is all illustrated by the fact that the Democrats, the journalists, etc., have not come up with any plan whatsoever except to withdraw, and there hasn't been a single discussion among them of the cataclysmic consequences of withdrawing.
Those who say that the Iraq was "the biggest policy blunder in history," or something like that, are abysmally ignorant about such things as the Iran/Iraq war and the Truman Doctrine, and don't have the vaguest idea what they're talking about.
Those who say that the Iraq war was a mistake never address these issues: If Saddam were still in power, then we still wouldn't know to this day whether he was manufacturing and stockpiling WMDs; and, as President Bush pointed out, Iraq and Iran would be in a race to develop nuclear weapons.
In fact, the decisions about Iraq will have chaotic (in the sense of Chaos Theory) results that no one can predict, and so anyone who thinks he knows what the troop surge will do is simply wrong.
The President is attempting to govern, and to steer a path through the Iraq mess. He has huge sources of intelligence and analysts, and he knows a thousand times more than anyone in the press or the Congress does. He should be allowed to govern because, like him or not, he's the best bet we have.

As we approach the "clash of civilizations" world war, we'll soon reach the point anywhere where we won't have any choice but to let the President govern, since anything resembling the current paralysis of government would be a disaster. =eod =// &&2 e070114 Chris Matthews exhibits abysmal ignorance and vitriolic partisanship =data ww2010.weblog.y2007.e070114.head NBC News reporter Chris Matthews exhibits abysmal ignorance and vitriolic partisanship =data ww2010.weblog.y2007.e070114.keys =data ww2010.weblog.y2007.e070114.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070114.date 14-Jan-07 =data ww2010.weblog.y2007.e070114.txt1 Commenting on the President's speech, Matthews was the worst of a bad bunch of ignorant journalists. =data ww2010.weblog.y2007.e070114.txt2 <#inc ww2010.pic g070114.jpg right "" "NBC News reporter Chris Matthews commenting on President Bush's speech (Source: MSNBC)"#> Chris Matthews, NBC News reporter and the moderator of MSNBC's Hardball, exhibited abysmal ignorance of what's happening the Mideast as well as American history in his comments following President Bush's speech on Wednesday evening. This is fairly typical of Washington's politicians and journalists, but Matthews exhibited the most ignorance, and then insulted the knowledgeable viewer by claiming that he knew more than anyone. I've never taken any position on whether we should have pursued the 2003 war in Iraq, and I'm certainly taking no position on whether it's good or bad to pursue the "surge" that President just announced. These decisions will have chaotic (in the sense of Chaos Theory) results that no one can predict, which hasn't stopped journalists and politicians from making ridiculous, random predictions all week. But I do take a position that Washington politicians, journalists and pundits should earn their salaries and not act like partisan morons. Matthews' comments were based on the speech, and also on an hour-long briefing by the President that many Washington reporters had attended on Wednesday afternoon. Matthews was not at the briefing, but NBC reporter Tim Russert attended. According to Russert, Bush said, "I'm glad Saddam is gone, because if he were still there, he and Iran would be in a race to acquire a nuclear bomb, and if he didn't stop him, Iran would be going to Pakistan or China, and things would be much worse." Russert added, in a tone of voice that indicated his contempt for President Bush, "That's the way he sees the world." Russert also paraphrased Bush as saying that he wished he could reveal all the intelligence they had received. "If you knew what we know, you would understand why we have to go on," Russert paraphrased Bush. Chris Matthews went ballistic, because of this and because of Bush's mention of Iran and Syria in his televised speech. "A lot people are going to go to bed tonight terrified. I'm worried that the President maintains that neo-conservative aggressiveness, the same attitude that we have to go into countries when we don't like their weapon systems. If we're going to attack Iran, that's serious business." Actually, Bush didn't say we were going to attack Iran. "He still thinks like that," Matthews continued angrily, shouting at times. "He still thinks in terms of a hair trigger -- we're gonna go in their and knock it out -- we're gonna go in there the minute they do something , we're gonna look and see if they're interacting in any way with Iraq, and then we're going to war with them." Matthews reacted particularly angrily to Bush's wish that the journalists had access to all the intelligence he gets. "The possibility exists," enunciated Matthews, "that we know more than he knows." And although I didn't hear it myself, I understand that Matthews continued his furious assault on Thursday morning on the Imus show on MSNBC, when he said, "We have Cheney, who always wants to kill." There's no question that there's a great deal of animosity and partisanship in the Washington press, targeted at President Bush, and it's true that most journalists, politicians and analysts are abysmally ignorant of even basic facts about what's going on in the Mideast, but Matthews' vitriolic performance was particularly egregious, given his incredible ignorance of what's happening in the Mideast today and what's been happening in America for the last 60 years. Let's begin with the latter point. =inc ww2010.h2 truman "Truman Doctrine and Iran/Iraq War" We don't get much appreciation for it, even by our own people, but America is "policeman of the world." This is not something that George Bush made up; it was enunciated by President Harry Truman in the <#stdurl http://www.americanrhetoric.com/speeches/harrystrumantrumandoctrine.html "Truman Doctrine of 1947,"#> where President Harry Truman said that America had to be the country guaranteeing freedom around the world. Truman defended the doctrine by saying that, no matter how expensive it would be, it would be a lot cheaper than World War II was. Every President since then has followed the Truman Doctrine. Truman himself launched the Korean war. President John F. Kennedy, whom Chris Matthews idolizes, launched TWO pre-emptive wars against Cuba -- the first, based on faulty CIA intelligence, led to the "Bay of Pigs disaster," and the second, the blockade of Cuba, risked nuclear war with Russia. Then Kennedy launched the Vietnam War, which led to America's first defeat. Skipping ahead, we have the Bosnian war and the Kosovo war in the 1990s, and the Afghan war in 2002. So there have been lots of pre-emptive wars, and President Bush is not uniquely evil in the history of the world in pursuing the war in Iraq. Matthews is also too ignorant to remember that the Iraq war didn't start in 2003. It started in 1991, after Saddam invaded Kuwait. It <#stdurl http://www.nytimes.com/library/world/mideast/081399iraq-conflict.html "escalated sharply in 1999, with Pres. Clinton's daily bombing of no-fly zones,"#> after Saddam expelled the U.N. weapons inspectors. It escalated again with the 2003 ground war, but if we hadn't done that, then we'd still be bombing no-fly zones, and we still wouldn't know whether or not Saddam had weapons of mass destruction (WMDs). And this brings us to the other area of Matthews' ignorance. He and Russert were obviously contemptuous of President Bush's claim that if Saddam were in power, then Iraq and Iran would be competing to develop a nuclear weapon. That this claim is correct is perfectly obvious to anyone who is familiar with the extremely vicious, bloody Iran/Iraq war of the 1980s, that killed 1½ million people. Actually, few Americans are. The Iran/Iraq war was a major historical war in Arab/Persian relations, and it greatly impacts events today. Briefly, Saddam shocked and surprised by the fury of Saddam's attack, and especially by his WMDs -- he used poison gas on the enemy and was developing nuclear weapons technology. Iranians today note that they're surrounded by countries -- Pakistan, Israel, India, Russia -- that have nuclear weapons. Having been attacked by WMDs during the Iran/Iraq war, they believe that they need nuclear weapons (and perhaps other WMDs) to defend themselves. Animosity between Iran and Iraq has continued after the war, and if Saddam were still in power, there's little question is that he would be in competition with Iran to develop nuclear weapons. So what President Bush told Russert in the background briefing was not worthy of his contempt, and it was almost certainly true. On CBS's "Late Show with David Letterman" a few days ago, Letterman told the following as a strange but true "miscellaneous fact": The cause of the Iran/Iraq war was that Iran and Iraq couldn't agree whether to call it the 'Iran/Iraq war' or the 'Iraq/Iran war.'" Letterman's statement was a joke, of course, but I doubt that Chris Matthews or any of the Washington journalists knows much more about the Iran/Iraq war than that joke. So Chris Matthews pursued his ridiculous rant, shouting about how everybody is going to go to bed tonight terrified, and even claiming that he knows more than anyone in the Administration, and it turns out that Chris Matthews is just an ignorant loudmouth. Not all of the politicians and journalists in Washington are as much loudmouths, but unfortunately almost all of them are equally ignorant. This is discussed further in <#inc ww2010.weblog.ref e070114b "the next web log item,"#> which describes, among other things, how British politicians and journalists are just as ignorant as American politicians and journalists. =eod =// &&2 e070109 Senator Ted Kennedy compares Iraq war to Vietnam War. =data ww2010.weblog.y2007.e070109.head Senator Ted Kennedy compares Iraq war to Vietnam War. =data ww2010.weblog.y2007.e070109.keys iraq, vietnam =data ww2010.weblog.y2007.e070109.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070109.date 9-Jan-07 =data ww2010.weblog.y2007.e070109.txt1 In a speech demanding total withdrawal from Iraq, =data ww2010.weblog.y2007.e070109.txt2 Kennedy said that the American people demanded withdrawal in the recent election. The Massachusetts Democrat gave his speech on Tuesday afternoon to the National Press Club. <#inc ww2010.pic g070109.jpg right "" "Senator Ted Kennedy at National Press Club (Source: CNN)"#> He said the following:

This is an interesting comparison. What Kennedy fails to mention is that Lyndon Johnson was absolutely right about what would happen if we faltered. After America withdrew, there was a huge genocidal war engulfing the entire region, with millions of people killed in Vietnam, and then in the "killing fields" of Cambodia. So if I could ask Senator Kennedy a question, I would ask him this question: "Are you prepared to allow what happened in Vietnam to happen in the Mideast -- a huge war, engulfing the entire region, with millions of people killed?" Unfortunately, none of the hotshot journalists at the National Press Club will think to ask that question. However, none of this matters, because Senator Kennedy is partially correct as well. From the point of view of Generational Dynamics, the genocidal war in Vietnam and Cambodia would have occurred no matter what the U.S. did; their previous crisis war was the French conquest of Indochina (1865-1885), and so a new crisis war in the region was overdue. In the Mideast today, there's going to be a huge genocidal war between Jews and Arabs, with the survival of Israel not guaranteed (and perhaps not even likely, at least in its current form), and this will happen no matter what the U.S. does. So what should we do about this? How do you make policy when you know that a cataclysm can't be prevented? Suppose that President Bush understood and accepted the conclusions of Generational Dynamics. What would then be the correct policy decision? Should we withdraw from Iraq and Mideast and let the war occur -- just get it over with, like a dentist appointment? There's a big historical downside to that policy: History would blame the U.S. for anything that happened. Or should we continue our current policy, so that at least we won't be blamed? Of course there's no rationality to any of this. Kennedy believes that the "American people" want withdrawal from Iraq, but he's talking only for Boomers. Younger generations want the Iraq problem solved, but will not tolerate a major American defeat, such as happened in Vietnam. Boomers are on the decline today. More and more, the leaders are Generation X, as well as the new college-age generation (the "Millennial generation" or "Generation Y"). In the end, it's not Kennedy's Boomers who will make the decision, and it's not even President Bush. It's the younger generations who will decide, through polls, letters to Congress, and elections. And chances are that it will be like <#inc ww2010.weblog.ref e061223 "Israel's summer war with Hizbollah:"#> a decision made in total panic, with little or no advance planning. =eod =// &&2 e070108 Sunday news talk shows exhibit craziness and politics =data ww2010.weblog.y2007.e070108.head Sunday news talk shows exhibit craziness and politics =data ww2010.weblog.y2007.e070108.keys =data ww2010.weblog.y2007.e070108.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070108.date 8-Jan-07 =data ww2010.weblog.y2007.e070108.txt1 Will the U.S. come as close to anarchy as Israel is? =data ww2010.weblog.y2007.e070108.txt2 As you read this article, remember this: There is no solution to the Iraqi situation. Iraq is increasingly a theatre of war for the larger war between Iran and al-Qaeda, thanks mainly to the Israeli/Palestinian situation, and that's not going to change. <#inc ww2010.pic g070108a.jpg right "" "Brent Scowcroft on This Week With George Stephanopoulos (Source: ABC)"#> Most of the interviews and discussion on yesterday's Sunday morning news talk shows were blathering political nonsense. The only interview that I saw that had any substance was the one with Brent Scowcroft on This Week With George Stephanopoulos. In <#stdurl http://www.nytimes.com/2007/01/04/opinion/04scowcroft.html "an op-ed in the New York Times on Thursday,"#> Scowcroft recommends solving the Palestinian/Israeli problem, and then the Iraqi problem will fall into place. "Most of the elements of a settlement are already agreed as a result of the negotiations of 2000 and the 'road map' of [2003]," he wrote. "What is required is to summon the will of Arab and Israeli leaders, led by a determined American president, to forge the various elements into a conclusion that all parties have already publicly accepted in principle." Stephanopoulos asked:

"The heart of your argument is that the US has to get re-engaged in the overall process for Arab-Israeli peace, as a way to decrease tension thruout the mideast. But even if Israel gave back the West Bank tomorrow, even if the Palestinians promised to disarm and recognize israel, how would that stop Sunnis and Shiites from killing each other in Baghdad."

Now, we've been here before. Stephanopoulos does not have a clue about what's going on in the Mideast, or the effect of the Palestinian issue on the entire region. George Stephanopoulos looked like an idiot in November because <#inc ww2010.weblog.ref e061126 "Jordan's King Abdullah had to tell him five times"#> of the importance of the Israeli/Palestine situation, but he was still clueless. This is an incredible situation, but it's the result of Boomers not being able to think in any terms other than ideology. Brent Scowcroft replied:

"That's the obvious question. What it would do is change the psychological climate of the region. What we have is a number of different issues coming together, and the region is in great turmoil. and there's a great sense in the region of historical injustice on the part of the Muslims. This would change that. This would see us as participating and helping in a problem which is central to the region, which has been a gnawing sore for Muslims for 50 years. It would give the Arabs the incentive to do what is in their interest to do and that is help deal with the issue of Iran. Because this is their neighborhood - they want to help. They helped us in the first Gulf War, enormously, with troops, with money. They're sitting on their hands now. Why? Because it's dangerous to be seen helping the U.S. now. This would change all that."

Stephanopoulos:

"You talk about the turmoil in the region. Part of that turmoil now inside the Palestinian territoris is Palestinians fighting each other, Hamas and Fatah, basically on the verge of civil war. Don't the Palestinians have to make peace with themselves for Israel to make peace with them?"

Scowcroft:

"Yes of course they do, and that's a major part of dealing with the peace process. I think it can be done. It can be done if we can get the Egyptians, the Saudis, thoroughly engaged in dealing with the Palestinian sectarian problem, between Hamas and Fatah. It won't be easy but I think it is doable. And the other [problematical] aspect of this [is that we treat Iraq nonchalantly]. If we get it ok, then fine; if we don't then we'll just leave. It's not that easy. We will be seen as abandoning the region, abandoning our friends, abandoning the people who have put our faith in us. And the results will be a dreadful region."

Except for one tiny thing, Scowcroft's reasoning is absolutely correct. If we're perceived to be abandoning Iraq by any means -- withdrawal, redeploying, whatever -- we'd be universally condemned by your friends and allies, and our enemies would humiliate us unmercifully. (Incidentally, we're in same situation with other countries with whom we have defense treaties, including Israel, Japan, South Korea. If we're perceived to abandon any of them, it would cause an international crisis. That's because we're policemen of the world, because of <#stdurl http://www.americanrhetoric.com/speeches/harrystrumantrumandoctrine.html "the Truman doctrine."#>) So Scowcroft's reasoning is right, except for one tiny thing: There isn't a snowflake's chance in hell of any peace process working. As you can see from <#inc ww2010.weblog.ref e070107b "yesterday's item,"#> the Palestinians are getting closer to an all-out crisis, and the Israeli government is close to anarchy. Like almost everyone in Washington, Scowcroft is living in the past, and has no idea of the effect of generational changes. Stephanopoulos continued:

"At what point do you say though that we've done all that we can, that there's no more good that can be done. We can't be held hostage to the decisions that the Iraqis make."

Scowcroft:

"We're not being held hostage to it. But we have a responsibility now to the region. Because, like it or not, the region is much more unsettled, much more in turmoil. The Iranians are on the offensive - they're stimulating Hizbollah, they're stimulating Hamas. The Sunnis are afraid of a Shia crescent, and so on and so forth. Six or seven years ago they weren't. That is a result of US actions. We have to try to produce stability in the region. What I'm suggesting is the moves toward the Palestinian peace process would help both in Iraq and stabilizing."

This is a very peculiar statement. What's he talking about? The Sunnis weren't afraid of the Shias six or seven years ago, and they are now because of the Iraq war? One hardly knows where to start. The Sunni vs Shia wars have been going on for 1½ millennia. The 1980s Iran/Iraq war was a major historical event in Arab/Persian and Sunni/Shia relations. Iran was caught relatively unprepared by Saddam's invasion in the 1980s, and they were particularly unprepared for Saddam's use of weapons of mass destruction -- and that's the reason why Iran today is absolutely determined to develop nuclear weapons. Finally, the Iraq war didn't begin in 2003; the Iraq war began in 1991, and escalated sharply in 1999 with almost daily bombing of no-fly zones. The 2003 ground war was another escalation, but if we hadn't done it, we'd still be bombing no-fly zones, and that would infuriate the jihadists just as much. Furthermore, if Saddam were still in power, we (and Iran) still wouldn't know whether or not Saddam had WMDs, and the tension between Iran and Iraq would be enormous, and might be as destabilizing an issue in the Mideast as the Palestinian/Israeli issue is. Stephanopoulos and Scowcroft believe two completely different things, both wrong. Stephanopoulos believes that Iraq is on a separate island, completely unconnected to the Israeli/Palestinian problem, and so there's no point in focusing on that problem. Scowcroft sees the connection, but believes that we can solve that problem, even though a number of Admistrations have failed to do so. Neither Stephanopoulos nor Scowcroft has any concept about the generational changes taking place, or even realizes that the Gaza strip, which is densely populated with a median age of 15.8, <#inc ww2010.weblog.ref e061210 "is being run by children who couldn't care less about any peace plan whatsoever."#> At least that segment had some substance. Pretty much all other segments on the Sunday news talk shows were filled with political nonsense, mostly by Boomer politicians who claimed to be speaking "for the people," but who had no idea what people of any generation other than Boomers were thinking. According to the speculation, the Administration is planning to propose a "surge" of 20,000-40,000 addition forces into Baghdad, accompanied by a $1 billion "jobs program" in Baghdad to give the young jihadists jobs. Most of the discussion began with <#stdurl http://www.speaker.gov/newsroom/pressreleases?id=0021 "this letter from Nancy Pelosi and Harry Reid"#> to the President on Friday:

"Surging forces is a strategy that you have already tried and that has already failed. Like many current and former military leaders, we believe that trying again would be a serious mistake. They, like us, believe there is no purely military solution in Iraq. There is only a political solution. Adding more combat troops will only endanger more Americans and stretch our military to the breaking point for no strategic gain. And it would undermine our efforts to get the Iraqis to take responsibility for their own future. We are well past the point of more troops for Iraq. ... Rather than deploy additional forces to Iraq, we believe the way forward is to begin the phased redeployment of our forces in the next four to six months, while shifting the principal mission of our forces there from combat to training, logistics, force protection and counter-terror. A renewed diplomatic strategy, both within the region and beyond, is also required to help the Iraqis agree to a sustainable political settlement . . In short, it is time to begin to move our forces out of Iraq and make the Iraqi political leadership aware that our commitment is not open ended, that we cannot resolve their sectarian problems, and that only they can find the political resolution required to stabilize Iraq."

This letter is straight out of the Vietnam era, with a couple of names changed. Pelosi is calling for a Vietnam-style withdrawal from Iraq and a Vietnam-style military defeat. However, even Boomers remember that a huge genocidal war followed the American withdrawal from Vietnam, with millions of people killed in Vietnam and then in the "killing fields" of Cambodia. A big question in Washington these days is whether a withdrawal from Iraq will cause a similar cataclysmic war in the Mideast. There's a little black humor in this situation. Ideologues are continuing to insist that the war in Iraq is a "civil war," even though it's clearly not, for reasons I've given many times. But the interesting thing now is that the use of the "civil war" phrase has moved from the left to the right. In the past, leftists used it to attack Bush's performance in Iraq. Now, people on the right are using it to attack the Democrats' withdrawal plans, with words like this: "If we withdraw from Iraq, then we'll have a full-scale civil war that will affect the entire region, so we can't withdraw from Iraq." What goes around comes around. <#inc ww2010.pic g070108b.jpg left "" "Nancy Pelosi on Face the Nation with Bob Schieffer (Source: CBS)"#> On Face the Nation, host Bob Schieffer interviewed Nancy Pelosi and tried repeatedly to pin down Pelosi on her strategy for Iraq. However, no matter how many times Schieffer tried, Pelosi kept evading the question. Q: Won't a withdrawal cause chaos? A: It's chaos now. Q: Won't American interests be harmed? A: They're being harmed now. Q: What would be your plan? A: Bush has no plan. Q: Are you going to cut off funding for the war? A: We'll continue to support the troops. Schieffer tried over and over again to get Pelosi to provide some substance, but nothing ever came out of Pelosi's mouth but political crap. So what are the Democrats going to do? There were numerous discussions of that question, but only one answer: The Democrats will "provide oversight" of the war, will hold hearings questioning every decision, past and present, and will be looking for misjudgments and scandals. In other words, they're just acting like Boomers, with no skills whatsoever except to brawl. Every single politician I saw on Sunday did the same thing Pelosi did: Emit political crap. A year ago, I pointed out that <#inc ww2010.weblog.ref e060322 "the Congressional calendar was just 97 days for all of 2006,"#> because the Congress was going to do nothing. The only person who <#inc ww2010.weblog.ref e061108 "was actually doing something was Donald Rumsfeld."#> Rumsfeld was born in 1932, and is from the Silent generation, a generation of people who actually have skills besides arguing. Rumsfeld has been restructuring the armed forces to prepare the country for the coming Crisis. He was replaced by former CIA director Robert M. Gates, a bureaucratic Boomer. We have yet to see whether Gates is able to actually do anything to help the country. It's for certain that the Boomer Democrats elected to Congress won't. They don't even claim to have any plans except to brawl with the President. They don't even claim to be making a positive contribution. I listened to all of them on Sunday, and they never claimed to have anything but a "f--k you" attitude toward any attempt to govern. There was nothing else from any of them. My question is whether America is going to get as bad off as the Palestinians and Israelis. As <#inc ww2010.weblog.ref e070107b "I described a couple of days ago,"#> the Palestinians are so paralyzed that they're close to civil war, and the Israelis are so paralyzed that they're close to anarchy. Right now, it looks like the results of the November election will be to bring the country as close to anarchy as the Israeli government. I'll mention two things that some politicians mentioned in terms of a possible improvement. A couple of Democratic politicians pointed out that the Social Security reform that happened in the 1980s took place in an environment of divided government (Republican President, Democratic Congress). They said that, for that reason alone, the new divided goverment may be able to get things done. We'll see. A couple of Republican politicians pointed out that "the President is not doing the popular thing, and he's not doing the easy thing; there's only one possibility left: he's trying to do the right thing." It's certainly true that the proposal to surge troops into Baghdad is neither easy nor popular. It may or may not be right, but historians probably won't know for sure for ten years or so. But at least President Bush is still attempting to govern. At times like this we can appreciate the fact that we don't have a Parliamentary form of government because, if we did, then Bush would immediately be replaced by someone of the same party as the election winner, and we'd be totally paralyzed, like Israel. This situation will not last long. William Strauss and Neil Howe, the founders of generational theory, analyzed these political cycles in their 1997 book, The Fourth Turning. When a country is in a Crisis era, as we are now, the political bickering becomes almost unbearable, as it is now. This certainly happened prior to Pearl Harbor in Franklin Roosevelt's administration, which was riddled with scandal from top to bottom. But once Pearl Harbor was bombed, and once the country suffered the disastrous loss in the Philippines and the Bataan death march (February-April, 1942), the country was unified and the political brawling mostly stopped. Strauss and Howe call this time the "regeneracy," because national unity is regenerated after decades of degenerating. What we're waiting for is an event similar to Pearl Harbor to unify the country and cause a "regeneracy" today. It might be a terrorist attack or a big military loss overseas. Strauss and Howe describe what happens as follows:

"Collective action is now seen as vital to solving the society's most fundamental problems. ... A Crisis mood does not guarantee that the new governing policies will be well designed or will work as intended. To the contrary: Crisis eras are studded with faulty leadership and inept management -- from President Lincoln's poor record of choosing generals to President Roosevelt's collossal blunders with such alphabet soup agencies as the AAA, NRA and WPA. What makes a Crisis special is the public's willingness to let leaders lead even when they falter and to let authorities be authoritative even when they make mistakes. Amid this civic solidarity, mediocre leaders can gain immense popular following; bad policies can be made to work (or, at least, be perceived as working); and, as at Pearl Harbor, even a spectacular failure does not undermine public support. Good policy choices pay off quickly. (In an Awakening, by contrast, even the best leaders and plans can fail, and one misstep can destroy public confidence.)" [The Fourth Turning, pp 257-258]

It's impossible to predict exactly what kind of event will trigger this "regeneracy" of public unity today, but we'll know it when we see it, because it will be as disastrous as the Bataan Death March in WW II or the Battle of Bull Run in the Civil War. And it will unify the country behind George Bush (or whoever takes office in 2009), just as those events unified the country behind Franklin Roosevelt and Abraham Lincoln. I'll close this article with one moment of levity in the Sunday News Shows. <#inc ww2010.pic g070108c.jpg right "" "Hysterical laughter on This Week With George Stephanopoulos (Source: ABC)"#> On the pundit panel portion of This Week With George Stephanopoulos, the guest pundit was Harold Ford Jr., former Democratic congressman from Tennessee. Stephanopolous asked him a question about taxes, the point of which was that the new Congress cannot possibly fulfill all the contradictory promises that they've made. Ford immediately began: "The thing is that they're off to a different start, a new direction." This response was so ridiculous that Cokie Roberts and George Will, both of whom have been around Washington for many decades, broke out into hysterical laughter, while Ford did his best to keep a straight face. But one shouldn't single out Ford; every politician's response on Sunday was equally ridiculous. =eod =// &&2 e070107b Palestinians' Fatah/Hamas crisis increases as Israeli government is close to anarchy =data ww2010.weblog.y2007.e070107b.head Palestinians' Fatah/Hamas crisis increases as Israeli government is close to anarchy =data ww2010.weblog.y2007.e070107b.keys =data ww2010.weblog.y2007.e070107b.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070107b.date 7-Jan-07 =data ww2010.weblog.y2007.e070107b.txt1 The possibility of a Hamas vs Fatah civil war in the Palestinian territories appears to be increasing by the day. =data ww2010.weblog.y2007.e070107b.txt2 The murder of a senior Fatah official caused Palestinian President Mahmoud Abbas, who is also head of Fatah, to <#stdurl http://www.imemc.org/article/46449 "to outlaw the Executive Force, Hamas' militia."#> In response, Hamas declared that their Executive Force militia is perfectly legal, and announced plans to <#stdurl http://www.boston.com/news/world/middleeast/articles/2007/01/07/fatah_holds_huge_rally_in_gaza_stadium/ "double the size of its militia."#> An <#stdurl http://www.debka.org/headline.php?hid=3704 "uncomfirmed DEBKA story"#> reports that <#inc ww2010.weblog.ref e061216 "Mohammed Dahlan, a radical Fatah leader,"#> has enlisted a terrorist group, the Palestinian Army of Islam, to join Hamas in the fight against Hamas. The Palestinian Army of Islam is a <#stdurl http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=51759 "radical Gaza militia group"#> independent of either Fatah or Hamas, but is pro-Fatah, especially since December, when two of its leaders were murdered by Hamas gunmen. Dahlan, who may be leading the Fatah side into civil war, also led a huge Fatah rally in Gaza, marking the 42nd anniversary of Yasser Arafat's founding of the Fatah movement. "Let Hamas shoot me," <#stdurl http://www.cbsnews.com/stories/2007/01/07/ap/world/mainD8MGG0V80.shtml "he said to the tens of thousands of cheering Gazans."#> "If they think the murderers will not be punished, they are mistaken. If they attacked one Fatah person, we'll attack two more." You'll notice something about this rhetoric, dear reader. If you look at the rhethoric between Arab and Israeli leaders, you don't hear anything this inflammatory. The kind of inflammatory rhetoric that Dahlan is using indicates that the value of an individual human life is decreasing, which is part of the path to a crisis war. All of these events followed a semi-comical series of joint announcements from Hamas and Fatah during the previous few weeks. The leaders would have a meeting, and announce a cease fire. The ceasefire would last 2-3 days, and then violence would spiral up to previous levels or higher. Then they'd have another meeting. This went through four or five cycles. They've stopped having these meetings lately, and it appears that both sides are girding for a real battle. Meanwhile, the Israeli government continues on its path to total paralysis, thanks to financial scandals and <#inc ww2010.weblog.ref e061223 "the military's poor performance in the Lebanon summer war against Hizbollah."#> The fallout from the Lebanon war continues to increase. <#stdurl http://www.haaretz.com/hasen/spages/810132.html "A new report, published on Sunday,"#> says that Israel's Military Intelligence during the war was "unprofessional," and "mediocre to inferior." This adds to the condemnation of the Israeli Defense Force (IDF) during war, which is <#inc ww2010.weblog.ref e061223 "perceived to have panicked and rushed to war quickly,"#> without adequately planning or even any realistic objectives. <#inc ww2010.pic g070107.jpg right "" "Ehud Olmert is in Ariel Sharon's shadow. (Source: Spiegel)"#> According to <#stdurl http://www.spiegel.de/international/0,1518,458033,00.html "an analysis in the German publication Der Spiegel,"#> Israelis consider the current Prime Minister Ehud Olmert to be incompetent and indecisive, especially compared to the man he replaced. Ariel Sharon, who was often hated, is now highly respected and missed, since he went into a coma a year ago. According to Spiegel:

"Sharon ... -- as even some of his enemies are willing to admit -- was a master at crisis management. Indeed, even some of his most ardent opponents miss his steady hand these days. Amos Oz for example. A year ago, Oz praised Sharon for his "mysterious transformation" which made him suddenly sound less like the military leader he had been throughout his career and more like a pacifist from the left. Sharon's unilateral decision to pull out of the Gaza Strip not only represented a dramatic new course for Israel, but also had to be pushed through against bitter resistance from the right. Olmert, by comparison, seems to have little in the way of a political vision. The main policy he campaigned on -- that of withdrawing from parts of the West Bank and dismantling some of the settlements there -- was left behind months ago. Instead of fulfilling his campaign promises, he shuffled his coalition government to include the right-wing politician Avigdor Lieberman, a man not exactly known for his willingness to compromise with Israel's Palestinian neighbors."

The problems going on in Israel and in the Palestinian territories are no surprise. This web site has documented the fall of the Palestinian region into chaos on almost a daily basis, just <#hreftext ww2010.i.may01 "as I predicted in May, 2003."#> That prediction was no accident and no guess; it was derived from solid generational principles, based on the fact that the region was re-fighting the genocidal war between Arabs and Jews that occurred in the late 1940s, following the partitioning of Palestine and creation of the state of Israel. As I wrote at the time, it was Yasser Arafat and Ariel Sharon who were keeping the region from slipping back into a total crisis war, and their disappearance would lead to total war, probably within a copule of years. That appears to be what's happening. The new Mideast war will pull in every country in the region, including the United States, and will be part of the fabric of the new "clash of civilizations" world war that's quickly approaching. If you get the impression, dear reader, that the entire Mideast is increasingly in total chaos, with no one having any idea what's going on or what to do next, you're right. This state of near-anarchy cannot continue much longer. (And incidentally, if you've been watching what's been going on in Washington this past week, you'll see that the United States government may also be approaching a similar chaos.) The new Mideast war will pull in every country in the region, including the United States, and will be part of the fabric of the new "clash of civilizations" world war that's quickly approaching. =eod =// &&2 e070107 Vietnam's bird flu resurgence called a "huge threat" =data ww2010.weblog.y2007.e070107.head Vietnam's bird flu resurgence called a "huge threat to public safety" =data ww2010.weblog.y2007.e070107.keys bird flu, vietnam =data ww2010.weblog.y2007.e070107.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070107.date 7-Jan-07 =data ww2010.weblog.y2007.e070107.txt1 We're now at the most dangerous time of the year. =data ww2010.weblog.y2007.e070107.txt2 Margaret Chan, the new chief of the United Nations World Health Organization (WHO) <#stdurl http://news.bbc.co.uk/1/hi/world/asia-pacific/6233283.stm "has warned that bird flu remains a global threat,"#> and that the danger was particularly severe in poor countries. "We must not let our guard down. We must maintain our vigilance," she said. The latest warning comes about because of <#stdurl http://www.thanhniennews.com/healthy/?catid=8&newsid=23971 "a resurgence of bird flu in Vietnam,"#> after a one-year absence. Dr. Chan is the first Chinese agency to head WHO. She expects that her Chinese origin will help in dealing with Chinese authorities, who have often been reluctant to reveal the details of bird flu outbreaks. "I think of all people I would be in a better position to work with the Chinese government," she told the BBC. The new outbreaks come at the worst time of the year. In a few weeks, Vietnam will begin its Lunar New Year festival of Tet, and Chinese will have their Lunar New Year celebrations. Both of these celebrations involve massive increases in handling, transporting and slaughtering poultry. The number of bird flu cases spikes during these celebrations, because of large increases in transportation of potentially infected birds, allowing quick spread to other birds. This intermingled of potentially infected birds also makes this the time when the possibility of a mutation leading to a human bird flu pandemic is most likely to occur. As I've said before, you and your family should prepare immediately for a possible pandemic. If human to human transmission became public next week on Monday, then by Tuesday all the shelves in grocery stores would be bare. If you stock up on food now, then you'll be sure to have what you need. Even if you think that you can beat the crowds to the grocery store, you should still stock up in advance. If you get your canned food after the panic begins, then you're depriving somebody else of food. But if you stock up in advance, then the shelves will be restocked, and you won't deprive someone else of food. I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e070105 Government employment report shows December surge in job growth =data ww2010.weblog.y2007.e070105.head Government employment report shows December surge in job growth =data ww2010.weblog.y2007.e070105.keys =data ww2010.weblog.y2007.e070105.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070105.date 5-Jan-07 =data ww2010.weblog.y2007.e070105.txt1 Confused economists, whose predictions have been up and down like a yoyo, =data ww2010.weblog.y2007.e070105.txt2 have gone back to the drawing board again, after Friday's government employment report from the <#stdurl http://www.bls.gov/news.release/empsit.toc.htm "Bureau of Labor Statistics (BLS) showed a surge of 167,000 jobs in December."#> Economists at first had projected a growth of 150,000 jobs, but changed their minds after the <#inc ww2010.weblog.ref e070104 "ADP National Employment Report"#> predicted a loss of 40,000 jobs. At that point, the consensus forecast went to the 100,000-110,000 range. The increase of 167,000 jobs is higher than any of the mainstream economists predicted. Since 2004, the unemployment rate has been steadily going down, and employment data (total number of jobs) has been steadily increasing: <#inc ww2010.pic g070105a.gif center "" "Employment/unemployment data, 2004-Present (Source: BLS)"#> However, the job mix has been shifting, as manufacturing jobs have fled to China and other countries. In December, the economy lost 12,000 manufacturing jobs, but gained 178,000 service-producting jobs. Service-producing jobs include things like consulting, accounting, legal services, and financial services. The December employment number is always the most volatile, mainly because of the seasonality of holiday employment. Weather may also have played a factor: Temperatures have been unseasonably high from the midwest to New England. Listening to economists debate these figures this morning on CNBC, it's obvious that they were all pretty flummoxed by the unexpectedly high jobs data. <#inc ww2010.pic g070105b.jpg right "" "Liz Miller, Trevor Stewart Burton & Jacobsen (Source: CNBC)"#> However, one person's analysis really caught my interest. She referred to price/earnings (P/E) ratios, and her expectation of "P/E expansion," or P/E increases. Liz Miller, of <#stdurl http://www.tsbjinc.com/ "Trevor Stewart Burton & Jacobsen,"#> said the following:

"We're going to see some P/E expansion. We've had the lowest P/E in ten years, and we're going to see that improve. ... [W]e're somewhere around 18 right now, so let's say we start brushing the bottoms of 20. I'm not talking about going from 18 to 22."

She added that she expects the market to increase by 11-14% this year, thanks to "stabilizing P/E's." Now Ms. Miller is a cute young chick, but being a woman obviously hasn't made her any smarter than all the airhead male analysts of her generation, all of whom apparently believe that the world was created ten years ago. Why else would she say, "We've had the lowest P/E in ten years"? <#inc ww2010.pic pr070105.gif right "" "S&P 500 Price/Earnings Ratio (P/E1) 1871-2006"#> I've <#hreftext ww2010.i.050711eleven "discussed P/E ratios"#> on this web site many times. As you can see from the adjoining graph, the P/E ratio has indeed been very high for the last 10 years -- that's because of the stock market bubble that began in 1995. But if you look at the graph prior to the bubble, you see that the average P/E index is about 14, and that the values are normally in a range between 10 and 20, but it's averaged 25.12 since the bubble started. Furthermore, the index has gone well below 10 six times in the last century. And this isn't exactly ancient history -- it was around 7 in the early 1980s. This is exactly one of the reasons why a stock market panic is overdue. With stocks overpriced by a factor of 240%+, we can expect a panic that will drive stock prices down to the Dow 3000-4000 range. But I guess this IS ancient history to Ms. Miller, because Ms. Miller doesn't care about anything that happened prior to 1995. That's why I say that she apparently believes that the world was created 10 years ago, and she believes that we'll be in a bubble forever. What's apparent from the graph is this: The P/E ratio index has been far above average since 1995, and has been generally falling since 2001, and will presumably keep falling. At any rate, there's certainly no reason to predict, as Ms. Miller does, that we're going to have "P/E expansion," and that it will go up above 20 again. The index has been going down, and almost certainly it will keep going down. It's much worse than that. The long-term average is 13.91, but it's averaged 25.12 since 1995. In order to compensate for the huge P/E values since 1995, the index will have go far below its average value for a comparably long time, or over ten years. This is the principle of "mean reversion," and it's as certain a law as the Law of Gravity or the Law of Supply and Demand. You know, this isn't exactly rocket science; it's much closer to simple arithmetic. And high-paid analysts like Liz Miller should know this stuff, because it's their job to know it. Instead, these analysts say incredibly stupid things as a matter of course. Generational Dynamics has been predicting since 2002 that we're entering a new 1930s style Great Depression, with a stock market crash most likely by the 2006-2007 time frame. What's happened since 2001 is that the world's central banks have pumped huge amounts of money into the world economy. This prevented a stock market crash in 2002, but it created huge bubbles in stocks, real estate and commodities. If the central banks hadn't done that, we'd have had a crash, but the worst of it would have been over by now. Now we're going to have a FAR WORSE crash that will last FAR LONGER. The real estate bubble has been deflating since October, 2005, and commodity prices (for oil, copper and others) have been falling sharply in the last few weeks. A stock market crash could begin next week, next month, next year or thereafter, but the deflation of these bubbles, combined with the idiocy of the current generations of stock analysts, indicates that the time is probably approaching quickly. =eod =// &&2 e070104 ADP Employment Report indicates abrupt fall in employment =data ww2010.weblog.y2007.e070104.head ADP Employment Report indicates abrupt fall in employment =data ww2010.weblog.y2007.e070104.keys =data ww2010.weblog.y2007.e070104.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070104.date 4-Jan-07 =data ww2010.weblog.y2007.e070104.txt1 This differs sharply from mainstream economist projections. =data ww2010.weblog.y2007.e070104.txt2 The nation lost 40,000 nonfarm jobs in December, according to <#stdurl http://www.adpemploymentreport.com/report_analysis.aspx "the ADP National Employment Report."#> Typically, this index shows a gain of 50,000 to 200,000 jobs per month. This was the first time that a loss of jobs was indicated since 2003. An abrupt turnaround to a substantial loss could be the first signal of a fairly substantial recession. The official government jobs report from the Bureau of Labor Statistics (BLS) will be available this Friday, when the monthly employment report is published. If the BLS report also comes in negative, a lot of mainstream economists will be surprised, since they're expecting a gain of 150,000 jobs in December. Like the ADP figure, the BLS figure has not been negative since 2003. The official BLS figure is computed each month through a government survey of hundreds of thousands of employers. The ADP National Employment Report is computed each month from data collected by <#stdurl http://www.adp.com/ "ADP Employer Services,"#> which provides payroll services to 500,000 U.S. businesses. This data is made available to the private forecasting firm, <#stdurl http://www.macroadvisers.com "Macroeconomic Advisers,"#> which aggregates the data and publishes its monthly report a few days ahead of the BLS report. The ADP report has fairly accurately predicted the BLS report for several years, but not always. The following graph compares the two: <#inc ww2010.pic g070103.gif center "" "ADP National Employment Report versus BLS Government Report -- historical comparison"#> The above graph shows both the ADP numbers (red stars) and the BLS numbers (blue circles) back to January, 2001. (The other two symbols represent sums that aren't of interest to us today.) The graph shows that the ADP figures correctly predict the BLS figures pretty closely most of the time, and differences mostly cancel each other out over a period of several months. However, there are individual months where the two are diverge widely. Thus, it's possible that the ADP figures are simply wrong this time. In fact, there's a greater chance of this than usual, due to the fact that December employment figures are very hard to gather accurately, since holiday seasonal employment can easily skew the results. The December BLS figures will be released on Friday. If the BLS figures come in negative, and they're sustained in the next month or two, then it means we're at beginning a hard recession, which <#inc ww2010.weblog.ref e061206b "many (though not all) mainstream economists have been predicting anyway."#> Generational Dynamics predicts that we're entering a 1930s style Great Depression that will begin with a generational panic and stock market crash. Major <#hreftext ww2010.i.macro061025 "international financial panics have occurred throughout history"#> at regular 70-80 year intervals. The major financial crises since the 1600s have been identified as follows: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857 (Panic of 1857), and 1929 Wall Street crash. At the present time, <#hreftext ww2010.i.050711eleven "the stock market is overpriced by a factor of over 240%,"#> and with price/earnings ratios around 20 or higher since 1995, a panic is long overdue. Such a panic is expected to lead to a fall to the Dow 3000 range, with the price/earnings ratio index falling well below 10. Note that the P/E ratio index has fallen below 10 several times in the 20th century, most recently in 1982, so this is a common occurrence. The exact timing cannot be predicted; it might occur next week, next month, next year or thereafter, but with global imbalances increasing so quickly, the chances that it will happen sooner rather than later. The stock market has been experiencing an enormous bubble, propelled by hundreds of trillions of dollars (market price) of overpriced hedge funds, with no intrinsic value beyond the market price of other overpriced hedge funds. The largest single component of these hedge funds is the "financial derivatives" component. Financial derivatives provide a kind of insurance against loan defaults, and are being hugely overused by financial institutions who are willing to take any amount of risk to make money, believing that the financial derivatives will protect them. A hard recession in the American economy could be the trigger for panic selling that will lead to the generational panic described above. =eod =// &&2 e070103 Sunnis riot and demonstrate over mocking taunts during Saddam's execution =data ww2010.weblog.y2007.e070103.head Sunnis riot and demonstrate over mocking taunts during Saddam's execution =data ww2010.weblog.y2007.e070103.keys =data ww2010.weblog.y2007.e070103.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070103.date 3-Jan-07 =data ww2010.weblog.y2007.e070103.txt1 This is probably not as bad as it sounds. =data ww2010.weblog.y2007.e070103.txt2 As remarkable as any execution of Saddam Hussein would be, a series of even more remarkable ancillary events have caused puzzlement and outrage: <#inc ww2010.pic g070102.jpg right "" "Thousands of people riot and demonstrate in Tikrit, protesting the execution of Saddam Hussein. (Source: AP/New York Times)"#>

The <#inc ww2010.weblog.ref e061229c "was rushed to be completed before sunrise Saturday,"#> so that it wouldn't occur on the Eid Al-Adha (Feast of Sacrifice) holiday, the most important feast on the Muslim calendar.
The Iraqi government released a silent video of Saddam's trip to the gallows. The video stopped just after the noose was put around his neck, but before the lever was pushed to open the trap door beneath Saddam's feet.
However, one of the people watching the execution had a cell phone with him, and was able to take a separate video. This was a poor quality video, but it has sound and shows the entire execution. It was put onto an Iraqi internet site.
The unauthorized video revealed that Saddam was taunted and verbally abused by his guards during the entire process.
The abusive remarks outraged Saddam's supporters, and the unauthorized video is available now on many internet sites, including <#stdurl http://www.youtube.com/watch?v=6tVG5_F5Ado "YouTube"#> and Google Videos. (Warning: The video contains violent, explicit images.)

Nobody could have made this stuff up. Anyway, is this the fuse that's going to going to light up Iraq into full-scale civil war? That's how the media's playing it. According to <#stdurl http://www.nytimes.com/2007/01/02/world/middleeast/02Iraq.html?_r=1&ref=world&oref=slogin "an AP/New York Times story,"#>

"Angry Protests in Iraq Suggest Sunni Arab Shift to Militants Enraged crowds protested the hanging of Saddam Hussein across Iraq’s Sunni heartland on Monday, as a mob in Samarra broke the locks off a bomb-damaged Shiite shrine and marched through carrying a mock coffin and a photo of the executed dictator. ... The Sunni protests, which appeared to be building, could signal a spreading militancy."

As is so common with the mainstream media stories, this is pure unadulterated guesswork. They say that the protests "suggest" a shift to "a spreading militancy." Well, what if the protests die down in a few days. Will that "suggest a shift AWAY from militancy?" Now, I have no way of knowing of whether the unauthorized video is going to spur further violence of cause a shift to "a spreading militancy." The point is that neither do the journalists. This is the pathetic ideological state that the mainstream media has come to. At least in the past, they would have gone to the trouble to dig up an "expert" they could quote to make the ideological statement; "'This will call a shift to a spreading militancy,' says Imanut Case, an Iraq expert." But now they don't even bother with that. The "journalist" writing the article simply states his own ideological beliefs as news. From the point of view of Generational Dynamics, these kinds of riots and protests are exactly what you would expect of <#hreftext ww2010.i.sixties040501 "a country in a "generational Awakening" era."#> I discussed this point a month ago in connection with the <#inc ww2010.weblog.ref e061201 "Hizbollah's massive protests in Lebanon,"#> which mainstream journalists were calling a sign of impending civil war. (In case you've wondered, there's no civil war in Lebanon, and the protests seem to be petering out.) Remember what happened during <#hreftext ww2010.i.sixties040501 "the 1960s, America's last generational Awakening era."#> It began in August 1963, when Martin Luther King led a march on Washington in which over 200,000 people participated. Later, President Kennedy was assassinated, and so was King. There were numerous demonstrations and riots throughout the country. There were "long, hot summers," led by the Black Panthers, and there were bombings and declarations of war against the government, led by the Weather Underground. President Lyndon Johnson was driven from office, and the climax was when President Richard Nixon was forced to resign. These kinds of massive protests have happened in every society and country throughout history during "generational Awakening" eras. What these eras all have in common is a "generation gap," a big political struggle between the college-age generation and their parents' generation. In this case, the execution of Saddam Hussein has provided a perfect excuse: the rioters are young, and they're rioting against the government that executed Saddam, as well as the government's American allies. It's a perfect combination. There is no civil war between Sunnis and Shiites in Iraq. What we're seeing more and more is increasing use of death squads and foreign suicide bombers on both sides, with Sunni money, training and weapons from al-Qaeda and Shiite money, training and weapons from Iran. From the point of view of Generational Dynamics, the real source of conflict in the Mideast has been the same for decades: The Israeli/Palestinian conflict, which is serving as a driving force for both sides (Iran and al-Qaeda). As the Israeli/Palestinian conflict heads inevitably for a major war, Iraq is increasingly becoming a theatre of that war, on the road to a "clash of civilizations" world war. =eod =// &&2 e070102 Ethiopians crush Islamists in Somalia, forcing retreat to Kenya =data ww2010.weblog.y2007.e070102.head Ethiopians crush Islamists in Somalia, forcing retreat to Kenya =data ww2010.weblog.y2007.e070102.keys =data ww2010.weblog.y2007.e070102.loc ww2010.weblog.log0701 =data ww2010.weblog.y2007.e070102.date 2-Jan-07 =data ww2010.weblog.y2007.e070102.txt1 The problem is that Somalia may still not have a stable government. =data ww2010.weblog.y2007.e070102.txt2 <#inc ww2010.pic afrihorn.gif right "" "Horn of Africa"#> Fears of a major regional war have been quelled as the <#stdurl http://allafrica.com/stories/200701010027.html "forces controlled by the Islamic Courts Union (ICU) collapsed,"#> with many changing sides or returning to their former warlords. Somalia's internationally recognized Premier, Ali Mohammed Gedi, has called on people in Mogadishu (the Somali capital) to disarm themselves, and has <#stdurl http://allafrica.com/stories/200701010038.html "asked the Kenyan government to close its border to escaping Islamists."#> Of particular interest are <#stdurl http://www.timesonline.co.uk/article/0,,3-2526295,00.html "three al-Qaeda terrorists wanted in the 1998 bombings of American embassies"#> in Nairobi, Kenya, and Dar es Salaam, Tanzania. The ICU has been harboring these terrorists, and Gedi's government forces would like to capture them before they cross the border into Kenya. The Islamic Courts Union (ICU) is a radical Islamist group that captured Somalia's capital, Mogadishu, on June 6, and had been increasing in power and control ever since. The ICU had defeated the internationally recognized Transitional Federal Government (TFG), formed in 2000 as a confederation of the warlords who rule the various ethnic groups that have existed for centuries and had fought each other frequently. Somalia has taken on increasing international strategic value since 9/11, since it's believed that al-Qaeda has been using the country for training camps for terrorists. In fact, al-Qaeda training in <#inc ww2010.weblog.ref e050801 "Somalia was linked to the 2005 London subway bombings."#> It has been feared that, under ICU's control, Somalia would turn into a full-fledged terrorist state like Afghanistan prior to 9/11. As the ICU increased in power, it was considered a threat to Ethiopia, a mostly Christian nation on its border. This caused Ethiopia, with American encouragement, to intervene, finally leading to <#inc ww2010.weblog.ref e061221 "full-scale war between Ethiopia and Somalia."#> However, the war ended quickly in the ICU's defeat, and a major regional war was avoided. Unfortunately, this is not the end of it. The TFG was not a stable government prior to the ICU takeover, and it won't be a stable government now that the war has ended. The Islamists are now <#stdurl http://euronews.net/create_html.php?page=detail_info&article=398767&lng=1 "warning they will start an Iraq-style insurgency,"#> so we should not expect to hear the end of the story of Somalia for some time. =eod =// &&2 e061231 Coordinated bombings across Bangkok cancel Thailand's New Year's Eve celebrations =data ww2010.weblog.y2006.e061231.head Coordinated bombings across Bangkok cancel New Year's Eve celebrations =data ww2010.weblog.y2006.e061231.keys =data ww2010.weblog.y2006.e061231.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061231.date 31-Dec-06 =data ww2010.weblog.y2006.e061231.txt1 New Year's celebrations are usually pretty big in Thailand, =data ww2010.weblog.y2006.e061231.txt2 but they were canceled for thousands of party goers when <#stdurl http://news.bbc.co.uk/2/hi/asia-pacific/6221177.stm "bombs exploded shortly before midnight."#> Two people were killed, and 34 were injured. <#inc ww2010.pic thai3.gif right "" "Locations of nine bombs in Bangkok, Thailand (Source: BBC)"#> It's a good thing they were cancelled, because additional bombs went off shortly afterward, and would have killed many more people. Thailand is primarily Buddhist, but the southern portion of the country, bordering Malaysia, is Muslim. <#inc ww2010.weblog.ref e051005 "An Islamist insurgency began in the south in 2004,"#> and repeated terrorist attacks have killed thousands. However, no one has claimed responsibility for Sunday's Bangkok bombing, and it is not certain that Islamists are responsible. Thailand is currently run by a military government that took forced Prime Minister Thaksin Shinawatra from office in September, following a financial scandal. The bombings may have been perpetrated by opponents of the new military government. =eod =// &&2 e061230 Financial analysts gush at stock market's meteoric rise =data ww2010.weblog.y2006.e061230.head Financial analysts gush at stock market's meteoric rise =data ww2010.weblog.y2006.e061230.keys =data ww2010.weblog.y2006.e061230.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061230.date 30-Dec-06 =data ww2010.weblog.y2006.e061230.txt1 Meanwhile, more sober commentators worry about credit derivatives =data ww2010.weblog.y2006.e061230.txt2 The meteoric rise of the stock market this year, especially during the last six months, has led to pundits' predictions of similar rises next year, continuing into the future. <#inc ww2010.pic g061229b.jpg right "" "Jack Bouroudijian of Brewer Investment Group gushes over stock market (Source: CNBC)"#> Here's what Jack Bouroudijian of the <#stdurl http://www.investwithbig.com/ "Brewer Investment Group"#> said on Friday morning on CNBC:

The mention of Bill Miller refers to the fact that his <#stdurl http://www.leggmason.com/funds/ourfunds/factsheets/value_trust.asp "Legg Mason Value Trust Fund"#> has done less well than the overall stock market for <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2006/12/28/AR2006122800878.html "only the first time in 16 years."#> Apparently Bouroudijian believes that since a "superstar" like Miller didn't do as well as expected, it means that the market can go even higher. His reasoning is a little obscure, but here's what he apparently means: Miller wasn't clever enough to beat the market in 2006. Therefore, if he and people like him had just been a little more clever, then they would have beaten the market and pushed it up even higher. Now they've learned their lessons, and next year they'll be even more clever, and so the market will continue to go up. I have to tell you, dear reader, that I just never cease to be absolutely, totally astounded by these statements. This guy probably makes a few million dollars a year in salary, and probably just received another few million in year-end bonuses. And yet, his gushing is one of the stupidest statements I've ever heard. Though really I should hedge this last sentence by saying that I can't be sure, since I've been hearing so many incredibly stupid statements by high-paid financial consultants. It's almost beyond belief. <#inc ww2010.pic g061229c.jpg right "" "Randall Dodd, director of the Financial Policy Forum (Source: CNBC)"#> Shortly after Bouroudijian spoke, another financial pundit, Randall Dodd, director of <#stdurl http://www.financialpolicy.org/ "The Financial Policy Forum,"#> came on to CNBC and gave a much more sober assessment of the marketplace. The discussion centered on risks that might affect the stock market next year. CNBC economics expert Steve Liesman asked Dodd: "If we're going to have some kind of meltdown or crisis next year, how does it happen, where would you be looking for to be the source of it?" Dodd answered as follows:

The reason for Dodd's obscure language is that he doesn't want "to be alarming." This kind of obfuscation was also a speciality of Alan Greenspan. Dodd is referring to derivatives in general and credit derivatives in particular, as used by hedge funds. This is an issue that <#inc ww2010.weblog.ref e061110 "I discussed in detail"#> last month, and for those financial analysts who are still capable of rational thought, this is where most of them expect a meltdown to be triggered. What Dodd is describing is some of the elements that make the current financial market into a pyramid scheme. If you look at the <#stdurl http://en.wikipedia.org/wiki/Pyramid_scheme "the Wikipedia article on pyramid schemes,"#> you can see that it lists a number of different types, and gives the following list of "key identifiers" of a pyramid scheme:

"A highly excited sales pitch (sometimes including props and/or promos)." Well, just take a look at Jack Bouroudijian's gushing statement above. It's worth remembering that investment advisors have a major conflict of interest that biases their view on the stock market. If they say that things look bad, then people won't make investments, and the investment advisor won't make a commission; by hyping the stock market, they encourage more investments, and their commissions are much higher. Don't ever think that these people are neutral, unbiased observers; their entire income depends on hyping, and lying if necessary. (Incidentally, I personally have nothing on the line except my own credibility. I sold my home and moved into an apartment just before the real estate bubble burst, and my financial situation will not be materially affected by whether I'm right or wrong. However, almost all investment advisors have a big financial stake in hyping.)
"Little to no information offered about the company unless an investor purchases the products and becomes a participant." As Dodd points out in his statement above, hedge funds have no capital requirements, and in fact are not regulated at all. Hedge fund managers are generally very secretive, and of the 10,000 or so known hedge funds, 8,000 are registered in the Cayman Islands where they don't have any regulatory requirements.
"Vaguely phrased promises of limitless income potential." Once again, that's what Bouroudijian says. Other financial pundits predict even higher results. The worst and most irresponsible is Harry S. Dent, who has predicted that <#stdurl http://www.hsdent.com/testimonials.html "the market would go up to Dow 35000-40000 by 2008,"#> though he's partially tempered those predictions recently to 20000 by 2009. But the promises of limitless income potential are abounding in today's stock market.
"No product, or a product being sold at a price ridiculously in excess of its real market value. As with the company, the product is vaguely described." What's the "real market value" of a share of stock? Today's investment advisors don't recognize any such "real value." To them, a share of stock has no intrinsic value, but is valued at whatever someone is willing to pay. That explains Bouroudijian's idiotic remark about Bill Miller. Up until the 1980s, when the last generation of people who lived through the Great Depression were still around, investors did worry about real market value, and the only valid measure is the Price/Earnings ratio (P/E ratio). At the present time, <#hreftext ww2010.i.050711eleven "the stock market is overpriced by a factor of about 240%,"#> with price/earnings ratios around 20 or higher since 1995. A fall in P/E ratios to below 10 is long overdue. Note that the P/E ratio index has fallen below 10 several times in the 20th century, most recently in 1982, so this is a common occurrence. But none of this matters to giddy investors. If you went to the market and bought a dozen eggs for $1.50 one week, and then they cost $3.00 the next week, you'd wonder what the hell was going on. But when stock markets go up like that, idiot investors only cheer.
"An income stream that chiefly depends on the commissions earned by enrolling new members or the purchase by members of products for their own use rather than sales to customers who are not participants in the scheme." This is exactly the case for investment advisors. They earn money on sales commissions, so they're highly biased to claim the stock market will rise.
"A tendency for only the early investors/joiners to make any real income." True. If you purchased your stocks prior to 1995, the beginning of the stock market bubble, then you may be OK.
"Assurances that it is perfectly legal to participate." Yes, this particular pyramid scheme is legal.

You should understand that you could start your own hedge fund and make a great deal of money. You borrow $100 million, and purchase $100 million in shares of other hedge funds, and put them all into a pool, and register in the Cayman Islands, and call your company MyHedge. Then create 200 shares of your pool, so that there are now 200 MyHedge shares available. Keep 100 shares for yourself, and use your magnificent sales skills to sell the other 100 shares to investors for $1 million each. You've now already made back the $100 million you borrowed, and you still own 100 shares of your pool, which have a market value of another $100 million (since that's what investors paid -- 100 shares at $1 million per share). Now remember those $100 million in shares from other hedge funds that you purchased? Well, if you invested prudently, then those hedge funds will increase in value -- let's say to $300 million. Now the 200 outstanding MyHedge shares are worth $300 million -- $150 million for you and $150 million for your investors. Then you can use your magnificent publicity skills to convince investors that MyHedge shares are worth a lot more. Your investors will start selling them to other investors for more money -- let's say $3 million per share. So now your 100 shares are worth $300 million (market value), and your investors' 100 shares are worth $300 million (market value), for a total of $600 million, even though the value of the underlying hedge funds is only $300 million, inflated from $100 million. So you started out by borrowing $100 million, which you've already paid back. But you have a market value of $300 million, and your investors have a market value of $300 million. So you've made $600 million for yourself and your investors. But more than that, you've "made money." I mean that literally. It's as if you had a printing press. You created $600 million of new money that didn't exist before. Of course you have that money in the form of MyHedge shares, but that's no problem: Just sell them to other investors and get cash. That's what's been going on. Here's a summary of the financial marketplace for the last decade or so:

You start with real, actual companies, and their "real value." Today, that's about $30 trillion for all companies.
Then you have the stock market, which contains shares of real actual companies. The total of all stock market shares is around $65 trillion.
Next, you have investment funds. These are funds that purchase stock market shares, put them into a pool, and sell shares to investors. In the 1920s, these were called "investment trusts," and because of huge abuses leading to the 1929 crash, investment trusts were heavily regulated in the 1930s. Today they go by various names, usually ending in the word "Fund," such as the "Legg Mason Value Trust Fund" that we mentioned earlier. These funds are normally considered to be good guys.
Next you have "funds of funds." These funds purchase shares in other funds, pool them, and sell shares in the pool. Some of these are regulated.
Then you have "hedge funds," which are funds containing shares of almost anything else. They're almost completely unregulated, especially when they're registered in the Cayman Islands. As of June 2006, all hedge funds together are worth $370 trillion, up from $300 trillion at the beginning of the year.

That's what's going on in today's world economy. The hedge fund industry has "made money" -- literally, as if they had a printing press. We end up with this table:

    Item                          Value ($ trillion)
    ----------------------------- ------------------
    All public firms-"real value"   30
    All stock market shares         65
    All hedge fund shares          370 (June, up from 300 in Jan)

[[Correction: "All hedge fund shares" should have read "all credit derivative securities."]] (Correction made on 13-Nov-2007) Where did all that money come from? It came from exactly the kind of trading that I described above with your MyHedge shares. You have hedge funds based on hedge funds based on hedge funds based on hedge funds, and all with little or no intrinsic value. Every time they trade shares with each other at higher prices, the total market share goes up, so the "value" of all hedge funds keeps going up. Now go back and read some more about pyramid schemes. Just type the words "pyramid scheme" into a search engine and read about it. You'll see that the current financial markets are, quite literally, nothing more than a huge, worldwide pyramid scheme. This worldwide pyramid scheme is "making money" and injecting it into the system. It "made" $70 trillion just between January and June of 2006 alone. Now, where do credit derivatives fit into all this? Recall from the MyHedge example that you had to start out by borrowing $1 million. Why would a bank lend you $1 million? Because they can "protect" themselves using credit derivatives. As <#inc ww2010.weblog.ref e061110 "we've explained in detail several weeks ago,"#> credit derivatives are a kind of insurance against loan defaults. So banks can loan money to investors and then purchase credit derivatives to protect themselves against the borrower-investors' defaults. In "normal" times, banks are required to keep a certain amount of money -- so-called "capital requirements" -- in their vaults at all times, as a cushion against such things as loan defaults. But banks and other financial institutions aren't doing that any more, according to Randall Dodd. Let's repeat one sentence from the lengthy quote above:

"So you have financial institutions with capital requirements reducing the amount of capital they use by moving that credit risk into hedge funds which have no capital requirements and often use very high leverage to manage their credit risk of selling credit protection through this credit derivatives market."

According to Dodd, banks no longer have that financial cushion. Instead of keeping, say, $10 million in their vaults as a cushion against emergencies, they've simply spent $1 million to purchase credit derivative hedge funds as "insurance" against emergencies, leaving the other $9 million free to loan out. By spending $1 million instead of keeping $10 million, they've "used very high leverage to manage their credit risk," in Dodd's words. So credit derivatives turn out to be the grease that keep keeps the hedge fund markets churning. Anyone can create a new hedge fund, a new kind of financial derivative, a new kind of financial derivative hedge fund, and mistakes can be papered over by borrowing more money from banks that "protect" themselves by purchasing credit derivatives. These new hedge funds create new shares that are sold back and forth among other hedge funds, increasing their market value each time (though they have little or no intrinsic value), essentially "making money" in the form of this manufactured market values. Let's take a moment and go back to the simpler times of the 1950s. I was in school then, and my teachers always talked about the Great Depression. They talked about how greedy people were in the 1920s. They said that people were so greedy that even if they were rich, they'd borrow more and more money so that they could make even more money. My teachers often referred to the greatest evil of them all: margin. A greedy investor could buy stocks and pay only 10% of the purchase price. The 10% was called "margin," and the other 90% was borrowed. My teachers emphasized how evil this was, that some greedy rich person would pay only 10% of the price of a share of stock in order to make more money. I can almost still hear one of my teachers saying: "Thank God! They've made it illegal to buy stocks on that margin like that! Those greedy investors will have to pay for the stocks they buy, so we'll never have a Great Depression again!" That generation of teachers is long gone now. Fast forward a couple of generations to today, when the Fed Chairman Ben Bernanke is also a teacher, a Professor of Economics at Princeton University, and he's not worried about anything. As I explained in <#hreftext ww2010.i.051029bernanke ""Ben S. Bernanke: The man without agony,""#> Bernanke doesn't believe in bubbles. When speaking about America's astronomical and exponential growing debt to other countries in March, 2005, Bernanke <#inc ww2010.weblog.ref e050314 "blamed America's debt on "global savings glut" in other countries."#> That's the difference between teachers in the bad old 1950s, teachers who had actually lived through the horror of the Great Depression, and teachers in the 2000s, who think we're too smart today to ever let it happen again. This is Generational Dynamics in action. But I wonder what my 1950s teachers would say if they could see what's going on today. Talk about greed! Remember in the MyHedge example that I gave above, you get your $1 million back right away? That should give you a clue that hedge fund managers always make sure of one thing: That they make their money up front. Hedge funds are pretty much completely unregulated, so each hedge fund manager gets to write his own regulations. And you can be sure that his own regulations say that he gets his money up front, and all the people who invest in his hedge fund take all the risk. My 1950s teachers would consider these hedge fund managers to be out and out criminals. In fact, there are a lot of people in the financial community today whom my 1950s teachers would consider as out and out criminals. Take stock brokers and financial managers who say that the stock market can only go up, or even the most irresponsible ones, like Harry Dent, who said (until recently) that the market would be at Dow 35000 by 2008. Or how about mainstream economists, like Bernanke, who doesn't believe in bubbles. How about financial journalists and pundits, at the Wall Street Journal and CNBC and other media, publishing false and misleading information, especially <#hreftext ww2010.i.050711eleven "phony price/earnings ratio computations,"#> that dupes millions of ordinary people to make unwise investments. I never really paid much attention to the stock market bubble until one day, shortly after 9/11, when the stock market was down around Dow 8000, I opened the Boston Globe one day and on the first page of the business section, there was a headline "Nowhere to go but up," and a graph of the Dow back to the 1920s. I took one look at that graph and said to myself, "Omigod we're going to have a stock market crash like 1929." The reason was because, generally speaking, financial series must grow at steady exponential growth rates, no slower, no faster, and any variation must be corrected by "mean reversion." Since the stock market had grown "too fast" since 1995, a 1929-type crash and subsequent 1930s-style Great Depression cannot be avoided. Since then, I've done a lot more analytic work and supported this conclusion in many different ways. I don't expect the average man on the street to understand all these things, or even the average investor. But I do expect major financial analysts, professors of economics, financial journalists and pundits to understand them. But what's happened in the last five years is so overwhelming that it can barely be grasped by the human mind. An ordinary 1990s stock market bubble, as bad as it was, has been turned, with the connivance of economic experts, journalists, professors, investors, central bankers, pundits and politicians, into a worldwide bubble of incredibly fastastic proportions that's so huge and so obvious that every expert should see it. Or maybe it's like the whole planet earth has turned from being an ordinary planet into a huge bubble planet, so that it's impossible to see what's going on any more. Do you remember what happened in 2001 after the Nasdaq crash and the Enron scandal? People wanted to put CEOs in jail -- ALL CEOs, even perfectly honest ones. People were going crazy. Well, it's going to happen again. The Enron scandal is one historical example, but a better example might be the bankruptcy of the French Monarchy in 1789 that led to the French Revolution. In the Reign of Terror that followed, any person who was an aristocrat, a relative of an aristocrat, a friend of an aristocrat, a servant of an aristocrat, or even had a resemblance to an aristocrat, would be tried and quickly convicted and sentenced to the guillotine. So as we enter 2007, I have some advice for the economics experts, journalists, professors, investors, central bankers, pundits and politicians that have been telling us that everything is OK and getting better: You'd better have your underground bunker picked out, because people are going to be coming after you, and the guillotine is going to seem mild compared to the punishment that they're going to want to inflict on you. =eod =// &&2 e061229c Will Saddam become a Sunni martyr? =data ww2010.weblog.y2006.e061229c.head Will Saddam become a Sunni martyr? =data ww2010.weblog.y2006.e061229c.keys =data ww2010.weblog.y2006.e061229c.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061229c.date 29-Dec-06 =data ww2010.weblog.y2006.e061229c.txt1 Saturday is the Eid Al-Adha (Feast of Sacrifice), the most important feast =data ww2010.weblog.y2006.e061229c.txt2 of the Muslim calendar. It lasts for four days and <#stdurl http://www.religionfacts.com/islam/holidays/adha.htm "commemorates Abraham's willingness to obey God"#> by sacrificing his son Ishmael to God. In the Old Testament story (which actually refers to Ishmael's brother Isaac), God relents and allows Abraham to sacrifice a ram instead of his son. =inc ww2010.pic g061229.jpg right "" "Saddam Hussein" As I write this, just after noon ET on Friday, it's late evening in Baghdad. If Saddam is hanged after Saturday sunrise, then the Sunnis may claim that his hanging is related to Abraham's sacrifice, which might have a symbolic significance. On the other hand, if Saddam is hanged in the next few hours, before sunrise, then there would be no apparent symbolism. The world is waiting ... =eod =// &&2 e061229b Hundreds of Iraqis apply to be Saddam's hangman =data ww2010.weblog.y2006.e061229b.head Hundreds of Iraqis apply to be Saddam's hangman =data ww2010.weblog.y2006.e061229b.keys =data ww2010.weblog.y2006.e061229b.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061229b.date 29-Dec-06 =data ww2010.weblog.y2006.e061229b.txt1 Word is that Saddam will be hanged within a couple of days. =data ww2010.weblog.y2006.e061229b.txt2 If you're Iraqi, then you'd better hurry if you want to be Saddam's hangman. Iraqi officials are saying that <#stdurl http://www.maltastar.com/pages/msFullArt.asp?an=8749 "hundreds of Iraqis have applied to act as Saddam's hangman."#> It's easy work, and apparently very satisfying. You have to wear a black hood, which has openings for your eyes. When Saddam arrives, he'll have a hood over his head, with no holes. You lower the noose around Saddam's head. Then you just push a lever. A metal trap door screeches open, and Saddam drops 15 feet through the trap door. He'll die immediately. There's no word on how much the job pays. Both CNN International and BBC are reporting that Saddam may hang by Sunday, two days from now. =eod =// &&2 e061229 McKinsey's Predictions: Ten Trends of 2006 =data ww2010.weblog.y2006.e061229.head McKinsey's Predictions: Ten Trends of 2006 =data ww2010.weblog.y2006.e061229.keys =data ww2010.weblog.y2006.e061229.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061229.date 29-Dec-06 =data ww2010.weblog.y2006.e061229.txt1 How accurate were their predictions for the past year? =data ww2010.weblog.y2006.e061229.txt2 A year ago, <#stdurl http://www.mckinseyquarterly.com/ "McKinsey Quarterly Magazine"#> published an article on the "Ten Trends for 2006." The article is authored by Ian Davis, managing director of McKinsey & Company and Elizabeth Stephenson is a McKinsey consultant. Now, they've <#stdurl http://www.mckinseyquarterly.com/article_page.aspx?ar=1734&L2=21&L3=114&srid=190&gp=0 "re-published the same article,"#> adding in links to other relevant articles in 2006. Apparently they would like people to evaluate their predictions, and I'll be happy to do that. As readers know, I've claimed that, for the last three years, this web site is the best predictive web site in the world, and I've challenged everyone to find one with a better record. None exists. So let's take a look at McKinsey's predictions, and comment on them:

"Macroeconomic Trends: Centers of economic activity will shift profoundly, not just globally, but also regionally. As a consequence of economic liberalization, technological advances, capital market developments, and demographic shifts, the world has embarked on a massive realignment of economic activity. ... The story is not simply the march to Asia. Shifts within regions are as significant as those occurring across regions. The United States will still account for the largest share of absolute economic growth in the next two decades." This is a fine prediction because it doesn't say anything except that things will change. Here's what they don't mention: That public debt and the balance of trade deficit continue to increase exponentially at unsustainable levels, that the stock market bubble continues to grow dangerously, and that the housing bubble is bursting. You don't have to be a rocket science to see that any financial shock could launch the entire world into a major financial crisis. Generational Dynamics has predicted since 2002 that we're entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range, probably by the 2006-2007 time frame. What we're waiting for is a major generational panic. I estimated that the probably was 50% that it would occur in 2006, and obviously that didn't happen. Thus, I would estimate that the probability is higher than 60-70% that it will occur in 2007.
"Public-sector activities will balloon, making productivity gains essential. The unprecedented aging of populations across the developed world will call for new levels of efficiency and creativity from the public sector. Without clear productivity gains, the pension and health care burden will drive taxes to stifling proportions." This one is bizarre. They understand that local and state governments are going bankrupt because of pension plans for aging populations, but they incorrectly predict that something will be done to fix the problem, and that the fix will involve productivity gains in the public sector. I don't think the public sector labor unions would like that idea, even if it were feasible. At any rate, nothing has gotten done, and nothing will get done. The McKinsey people are probably Boomers, and, like all Boomers, they don't have any idea how to do anything except argue, and wait for someone else to solve their problems. What they don't understand is that the generations of people who actually DO know how to get things done (the G.I. and Silent generations that survived World War II) are gone now. Boomers will do nothing until a financial crisis forces them to unite and actually get things done.
"The consumer landscape will change and expand significantly. Almost a billion new consumers will enter the global marketplace in the next decade as economic growth in emerging markets pushes them beyond the threshold level of $5,000 in annual household income..." Once again, we have a "prediction" that says nothing except that population is growing and kids grow older.
"Social and environmental trends: Technological connectivity will transform the way people live and interact. The technology revolution has been just that. Yet we are at the early, not mature, stage of this revolution. Individuals, public sectors, and businesses are learning how to make the best use of IT in designing processes and in developing and accessing knowledge." Whew, that's hard-hitting. Umm, except that I've been hearing that prediction, or a variation, for decades. There's nothing particularly special about this recent technology developments, except that they're trend extensions of computer technologies that were developed long ago.
"The battlefield for talent will shift. Ongoing shifts in labor and talent will be far more profound than the widely observed migration of jobs to low-wage countries. The shift to knowledge-intensive industries highlights the importance and scarcity of well-trained talent." The reminds of the Y2K problem, which was caused by 1970s COBOL computer programs that used only two digits (e.g., 78 for 1978) to represent years. A failure was going to occur in computer software around the world as soon as it was necessary to represent the date 2000. Information Technology departments became acutely aware of this problem in the mid-1990s, and started spending hundreds of millions of dollars to remediate their software. At that time India became major international consultants. An American corporation would hire Indian consultants to help them with the remediation effort. Since everyone had to work on the same mainframe computer, the Americans would use the computer during the day, and the Indians would use the same computer via satellite link during the night (which of course was daytime in India). This was one of the most amazing projects in history. By the time January 1, 2000, almost every single computer program in the world was properly remediated. This project was so successful that some idiots actually believe that there was never a problem to begin with; believe me, there was. At any rate, that would have been the time to predict that "ongoing shifts in labor in talent will be far more profound than the widely observed migration of jobs to low-wage countries." Today, that's not a prediction; it's ten year old news.
"The role and behavior of big business will come under increasingly sharp scrutiny. As businesses expand their global reach, and as the economic demands on the environment intensify, the level of societal suspicion about big business is likely to increase." Now, this is an interesting prediction. Nothing like this prediction has happened or is likely to happen as things stand. But once the stock market panic occurs, there will be an enormous effort to identify scapegoats, and many corporate executives will go to jail.
"Demand for natural resources will grow, as will the strain on the environment. As economic growth accelerates—particularly in emerging markets—we are using natural resources at unprecedented rates. ... In China, for example, demand for copper, steel, and aluminum has nearly tripled in the past decade." This is true, of course, but it was old news when the prediction was made.
"Business and industry trends: New global industry structures are emerging. In response to changing market regulation and the advent of new technologies, nontraditional business models are flourishing, often coexisting in the same market and sector space." This was big news in the 1980s when personal computers flattened the corporate management tree from 8 levels to 3 levels. Or it was big news in the 1990s when ERP (Enterprise Resource Management) system revolutionized relations between manufacturing, marketing, vendors and distributons. Today it's not so new.
"Management will go from art to science. Bigger, more complex companies demand new tools to run and manage them. Indeed, improved technology and statistical-control tools have given rise to new management approaches that make even mega-institutions viable. Long gone is the day of the "gut instinct" management style. Today's business leaders are adopting algorithmic decision-making techniques and using highly sophisticated software to run their organizations. Scientific management is moving from a skill that creates competitive advantage to an ante that gives companies the right to play the game." This is science fiction. There's no such thing.
"Ubiquitous access to information is changing the economics of knowledge. Knowledge is increasingly available and, at the same time, increasingly specialized. The most obvious manifestation of this trend is the rise of search engines (such as Google), which make an almost infinite amount of information available instantaneously. Access to knowledge has become almost universal. Yet the transformation is much more profound than simply broad access." Once again, there's nothing new here. Google's been around for almost ten years now.

So these are fun predictions, but they don't really say much, and they miss the world war and financial crisis that are coming. As I've said before, this is the only web site in the world that tells you what's going on in the world, and what's coming. =eod =// &&2 e061227 Forgotten news stories of 2006 =data ww2010.weblog.y2006.e061227.head Forgotten news stories of 2006 =data ww2010.weblog.y2006.e061227.keys =data ww2010.weblog.y2006.e061227.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061227.date 27-Dec-06 =data ww2010.weblog.y2006.e061227.txt1 Some important stories have been ignored. =data ww2010.weblog.y2006.e061227.txt2 <#inc ww2010.pic g061227.gif right "" "Top news interest stories of 2006 (Source: Pew Research)"#> A recent <#stdurl http://pewresearch.org/obdeck/?ObDeckID=110 "report by Pew Research"#> lists the most popular (most closely followed) news stories of 2006, and follows up by listing stories that were ignored. We found the list of ignored stories much more interesting. The most popular stories were as you'd expect: Stories about Iraq, gas prices, midterm elections. Even some international stories made the list -- British officials stopping a terrorist plot to blow up planes flying to the U.S., Iran's and North Korea's nuclear programs, and the Lebanon war between Israel and Hizbollah. Here are some of the stories that the Pew reports lists as "The Dogs that Didn't Bark" in 2006:

An Unread Report. For months, Democrats and Republicans alike were hoping that Jim Baker's Iraq Study Group (ISG) report would provide a solution to the Iraq problem, but Pew found that only half of Americans even paid any attention when the report finally came out. Since the report's publication, plans appear to be coalescing for a "troop surge" into Iraq, and everyone is waiting for President Bush's announcement in January.
Immigration Indifference. Pew found that attitudes towards immigration peaked in May, around the time of the <#inc ww2010.weblog.ref e060328 "mass Latino demonstrations,"#> protesting the immigration bill, and there's been little interest since then. This is going to change. Most Americans are completely oblivious to the turmoil that continues to grip Mexico. In most of Latin America, the fault line is between generally poor indigenous ("AmerIndian") people and generally better off European descendants. In Mexico, the new president Felipe Calderón represents the descendants of the Spanish and French invaders, and Andrés Manuel López Obrador is the would-be Pancho Villa of the new century, representing the Mayans in the south and Aztecs and Commancheros in the north. In addition, there are large out-of-control drug cartels operating out of Nuevo Laredo and Tijuana. This turmoil is spilling over into the U.S., and from the point of view of Generational Dynamics, immigration is almost always a major political issue in countries in "generational crisis" eras. This is certainly true today in almost every country in Europe, for example. Expect to see immigration become a more important issue next year.
No Terrorism Panic. Pew found that Americans are very complacent about possible future terrorist attacks, even in the face of terrorism and terrorist plots in other countries. This is not surprising. Americans were similarly unconcerned when the British were fighting Hitler in WW II, thinking that America's physical isolation, surrounded by two major oceans, guaranteed that they would be safe. The Pearl Harbor attack destroyed that view. From the point of view of Generational Dynamics, Americans today are anxious and worried, but seemingly unconcerned about terrorism. A major new terrorist attack on American soil will turn the anxiety to panic, quite possibly leading to war very quickly.
Death in Darfur. Despite huge publicity by rock stars, the U.N., and humanitarian groups of atrocities and genocide in the civil war in Darfur, only 13% of Americans have followed the news on the subject, in each of the last three years.
Other issues: Gay Marriage, Abramoff scandal, fall of gas prices, and Katie Couric as CBS News anchor were also all yawners for Americans.

Finally, here are two major issues that are more important than any of the above issues, but aren't mentioned in the Pew Report:

Palestine's descent into chaos. Americans paid attention to the Lebanon war between Israelis and Hizbollah, but are oblivious as to what else is happening in the Mideast. The Palestinians are unable to form a viable government, and a civil war is a real possibility. Furthermore, with Iran supplying funding, training and weapons, the Palestinians are planning war with Israel. Americans are fairly oblivious to this threat, and have become even more so since this past summer's Lebanon war, since they automatically assume that a war in the Israel/Palestinian region would not affect America much, an assumption that's unlikely to remain true.
China's massive militarization. In 2006, China continued its massive development of sophisticated weapons systems, including amphibious vehicles for the capture of Taiwan and submarine-based nuclear weapons for direct war with America. Americans are totally oblivious to this threat.

For the last week, the story that's gotten wall to wall coverage on all the news networks is about rape allegations against members of a college lacrosse team. It reminds me of the summer of 2001, when the major news story was about the affair between California congressman Gary Condit and Washington DC intern Chandra Levy, after the latter disappeared. The Condit story filled some 90% of the news for months, until 9:50 am, September 11, 2001. =eod =// &&2 e061225 Merry Christmas! =data ww2010.weblog.y2006.e061225.head Merry Christmas! =data ww2010.weblog.y2006.e061225.keys =data ww2010.weblog.y2006.e061225.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061225.date 25-Dec-06 =data ww2010.weblog.y2006.e061225.txt1 As you gather together with your family (if you can) to celebrate the holiday, =data ww2010.weblog.y2006.e061225.txt2 whether you're Christian or not, it's a good time to feel grateful for the time you have together, in an increasingly darkening world. =inc ww2010.pic xmastree.gif right "" "" The classic movie "Meet Me in St. Louis" is set in the year 1900, but it was released in 1944, and at times reflects much of the sadness of families torn apart by World War II. This was particularly true in the song, "Have Yourself a Merry Little Christmas," in the original lyrics, as sung by Judy Garland in the movie:

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

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

As I've said before, treasure the time you have left, and use the time to prepare yourself, your family, your community and your nation. And, once again, Merry Christmas! =eod =// &&2 e061224b Ethiopia launches air war against Somali Islamists =data ww2010.weblog.y2006.e061224b.head Ethiopia launches air war against Somali Islamists =data ww2010.weblog.y2006.e061224b.keys =data ww2010.weblog.y2006.e061224b.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061224b.date 24-Dec-06 =data ww2010.weblog.y2006.e061224b.txt1 On Sunday, in a significant escalation of the war in Somalia, =data ww2010.weblog.y2006.e061224b.txt2 <#stdurl http://allafrica.com/stories/200612240137.html "Ethiopian bombers have attacked positions in Somalia"#> held by the Islamic Courts Union (ICU), the Islamist group that has taken control of most of southern Somalia in recent months. =inc ww2010.xr.related1 left somalia 2 In a Sunday televised address to his people, <#stdurl http://english.aljazeera.net/NR/exeres/38E32490-D560-4D20-A9A2-249D64FF65B3.htm "Ethiopian Prime Minister Meles Zenawi, said:"#> "Ethiopian defence forces were forced to enter into war to the protect the sovereignty of the nation and to blunt repeated attacks by Islamic Courts terrorists and anti-Ethiopian elements they are supporting. Our defence forces will leave as soon as they end their mission." <#inc ww2010.pic afrihorn.gif right "" "Horn of Africa"#> In return, Islamic Courts hardliners are <#stdurl http://observer.guardian.co.uk/world/story/0,,1978424,00.html "calling on foreign Muslims to take up a Jihad against Ethiopia."#> Islamist Yusuf Mohamed Siad Inda'ade said, "Let them fight in Somalia and wage jihad and, God willing, attack Addis Ababa [the capital of Ethiopia]. We told the world to stop this problem. We told them to do something before it becomes a blazing fire that would engulf the region." Ethiopian's mortal enemy, Eritrea, has already sent soldiers and weapons to Somalia. Numerous countries have been pouring weapons into the region, <#inc ww2010.weblog.ref e061110b "according to a U.N. report,"#> and the fear is that the war will spread into a major regional war. =eod =// &&2 e061224 Channel Tunnel is planned target of al-Qaeda terrorist attack =data ww2010.weblog.y2006.e061224.head Channel Tunnel is planned target of al-Qaeda terrorist attack =data ww2010.weblog.y2006.e061224.keys =data ww2010.weblog.y2006.e061224.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061224.date 24-Dec-06 =data ww2010.weblog.y2006.e061224.txt1 According to information from French and American intelligence, obtained by "The Observer," =data ww2010.weblog.y2006.e061224.txt2 there is <#stdurl http://observer.guardian.co.uk/world/story/0,,1978642,00.html "a "sky high" terrorist threat to the Channel Tunnel"#> to cause "maximum carnage" during the holiday season. "It's a far graver threat in terms of civilians than either the Cold War or the Second World War," according to Sir Ian Blair, the head of London's Metropolitan Police. The attack may come as early as Christmas day. Young British-born Pakistanis, the same group that perpetrated the July 7, 2005, London subway bombings under direction of radical clerics in Pakistan, are thought to be the intended perpetrators of the new plan. The problem for law enforcement officials is that such a terrorist attack is hard to prevent, even if you know it's coming. Christmas Eve is the time of highest traffic for the year, and it may not be possible to check every car or the luggage of every train passenger. The "Chunnel," or Channel Tunnel is 31 miles long. It runs under the English Channel and connects England to France, carrying both train and automobile traffic. It's the largest underwater train tunnel in the world. =eod =// &&2 e061223 How Israel panicked in pursuing the summer Lebanon war with Hizbollah =data ww2010.weblog.y2006.e061223.head How Israel panicked in pursuing the summer war with Hizbollah =data ww2010.weblog.y2006.e061223.keys =data ww2010.weblog.y2006.e061223.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061223.date 23-Dec-06 =data ww2010.weblog.y2006.e061223.txt1 The contrast between Israel and Hizbollah couldn't be greater. =data ww2010.weblog.y2006.e061223.txt2 The summer war in Lebanon provided an exceptional opportunity to do further theoretical development in Generational Dynamics in the context of a brief, transparent war. Of particular interest was the sharp contrast in "fighting styles" between the two belligerents, based on the fact that they were in completely different generational eras. The war began after Hizbollah abducted two Israeli soldiers on the southern Lebanon border, resulting in an Israeli response, and a Hizbollah counter-response:

Israel is in a generational Crisis era. They fought it as an "existential" war, and with a great deal of fury and passion and panic. At first Israel was planning to use air power alone; then they started calling up reservists, turning it into a ground war. The size of the ground war kept increasing, as Israel had to change course and bring up more reservists. After the U.N. passed the ceasefire resolution, Israel increased the ground war still further to gain as much ground as possible before the ceasefire took effect.
Lebanon is in a generational Awakening era, and therefore so are the terrorists of Hizbollah. They fought the war, as <#hreftext ww2010.i.060724hizbollah "I described in my analysis as the war was starting,"#> as "a war from the comfort of home." They sent thousands of missiles into Israel, launching from sites near their own homes. Hizbollah approached the war in a cool, methodical manner, implementing plans that had been in place for years, in contrast to Israel's "hot," panicky war style. Note that if Hizbollah had adopted Israel's war style, then the terrorists would have crossed the border to attack and kill Israeli families in their homes.

What's amazing is how faithfully both belligerents followed their generational scripts in their fighting styles. And the perception of most people is that Hizbollah won the war. This means that Hizbollah's "cool," methodical fighting style won over Israel's "hot," furious fighting style. But now a new analysis of the war, based on the findings of a military investigation committee, indicates that Israel was even more panicky and wild than was previously thought. According to <#stdurl http://www.metimes.com/storyview.php?StoryID=20061218-062028-8580r "an article by Uri Avnery, journalist and former Knesset member:"#>

After Hizbollah abducted the soldiers, Israel rushed into war within four hours.
There was no clear objective. According to Avnery, the Israelis named one aim after another, often mutually conflicting, including the following:
- The release of the two captured soldiers;
- The destruction of Hizbollah;
- The elimination of the arsenal of missiles in southern Lebanon;
- Pushing Hizbollah away from the border.
There was no plan to achieve any of these objectives. According to Avnery, no plan could have achieved all of these objectives anyway.
Some of the aims -- the destruction of Hizbollah or the elimination of the missiles -- were impossible anyway.
Contingency plans that had been prepared in advance were ignored, and the war was conducted by improvisation.
When it finally became evident that air power alone was not accomplishing anything, troops were sent into Lebanon in a haphazard way, with no plans and no timetables. As a results, the ground operations were completely ineffective.
"It is a picture of utter confusion," according to Avnery: "improvised operations, an anarchic command structure, misunderstanding of orders, orders that were issued, canceled, and issued again, General Staff officers giving orders directly to subordinate commanders bypassing the chain of command."

This is exactly what happens to a population when it enters a Generational Crisis era, when the survivors of the previous Crisis War have almost all disappeared. The post-war generations have lost their parents, and they've also lost the only people in their lives who know what's going on in the world. As a result, when something goes wrong in a Crisis Era, the people get anxious, and eventually panicky. That's the difference between a crisis and non-crisis war. In the 1991 Gulf War (a non-crisis war), we had a specific objective (eject Iraq from Kuwait), we went in with a plan, and when we reached that goal we stopped, resisting the temptation to go after Saddam Hussein. The 2003 Gulf War occurred early enough in the Crisis Era so that there was still plenty of clear planning, but many people would now claim that the planning was insufficient. And now Americans are showing signs of the same kind of panic that the Israelis showed: There's talk of sending tens of thousands more soldiers into Iraq without a completely clear and attainable objective. Avnery points out that, thanks to generational changes, today's military leaders are much less capable than those who won Israel's "Six Day War," fought in 1967: "In today's army, there is no officer on active service who remembers the Israel Defense Forces from before the occupation - the army that grew up in the "small" Israel within the Green Line, which defeated five Arab armies in six days, commanded by the brilliant General Staff under Yitzhak Rabin. All the commanders of the Second Lebanon War started their career when it was already an occupation army. The last military success of the Israeli army was achieved early in the occupation period, a generation ago, in the Yom Kippur war." Of course, the officers who fought the 1967 war were the survivors of the 1940s crisis war fought with the Arabs when Palestine was partitioned and Israel was created. Remarkably, and unusually, Avnery is making a Generational Dynamics point: That once the survivors of the previous crisis war are gone, the new leaders are far more uncertain, far more anxious, and far less competent. As I've said many times, America's Boomer generation literally has no skills (except technical skills). The previous generation of Americans defeated the Nazis and beat the Depression, then set up structures like the United Nations, World Bank, and World Health Organization to manage the world, and then ran them for decades. The new generation of Boomers not only can't form such organizations, they can't even run them. A similar show of generational incompetence occurred prior to our last crisis war, World War II. At that time, we were totally unprepared for the attack on Pearl Harbor. We had plenty of aircraft to defend ourselves, but they remained on the ground, huddled together for warmth, while their pilots were lounging in bed with their girlfriends. We had plenty of anti-aircraft weaponry on the ships docked in Pearl Harbor, but the sailors who were supposed to be manning them were down in the game room arguing over who'd scored the last point. We even had radar. There was an experimental radar installation on Pearl that actually spotted the Japanese aircraft long before they arrived, but no one actually believed that it was possible, so the sightings were ignored. Thanks to this generational incompetence, the Japanese destroyed almost the entire Pacific fleet in a few hours, before we even had a clue what was going on. Donald Rumsfeld, who was born in 1932 and remembers well from his childhood how shocked everyone was about Pearl, <#inc ww2010.weblog.ref e061108 "is gone now,"#> replaced by Robert Gates, a fine man but a Boomer, because the Boomer politicians and journalists in Washington wanted someone as incompetent as they are running the Department of Defense. Earlier this week I heard a pundit on TV -- I think he must have been a conservative, and he was certainly a Boomer -- complaining that the Iraq war shows that America is losing its will to fight a war, and that if there's a terrorist attack or some other setback, Americans still won't have the will to fight back. Boy is that wrong. These guys have no idea at all what's going to happen. Say there's another major terrorist attack on American soil. Americans will be absolutely furious and demand revenge. Far from being unwilling to fight, their anxiety will turn to panic, and we'll be at war before you can say Jack Robinson. Not possible, you say? Well, that's what happened in Israel this past summer, isn't it? They panicked and they were at war, without a plan, in four hours. And it was about as close to a disaster as can be without actually being a disaster. And to this day, the abducted soldiers still haven't been returned to Israel. That's what a generational crisis war is all about. It started out pretty bad for America in the last world war, but in the end we won anyway. Let's watch and see how it works out for the next world war. =eod =// &&2 e061221b London braces for a new terrorist attack over the holidays =data ww2010.weblog.y2006.e061221b.head London braces for a new terrorist attack over the holidays =data ww2010.weblog.y2006.e061221b.keys =data ww2010.weblog.y2006.e061221b.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061221b.date 21-Dec-06 =data ww2010.weblog.y2006.e061221b.txt1 According to ABC News investigative reporter Brian Ross, =data ww2010.weblog.y2006.e061221b.txt2 British intelligence and law enforcement officials are seeking 18 suicide bombers involved in at least six ongoing plots that have been in the planning stages for at least three years. The report appears on <#stdurl http://blogs.abcnews.com/theblotter/2006/12/london_braces_f.html "Brian Ross's online blog on ABCNews.com."#> Investigative reporter Richard Esposito is co-author of the report. "It will be a miracle if there isn't a terror attack over the holidays in London," according to a senior American law enforcement official familiar with the British intelligence report. Just as in the case of the July 7, 2005, London subway bombing, the plots are being directed by radical clerics in Pakistan, directing the activities second and third generation Pakistanis living in England. This is consistent with <#inc ww2010.weblog.ref e061113 "the speech given last month by Dame Eliza Manningham-Buller, the Director-General of MI5:"#>

As we explained at that time, this fits into a specific generational model identified by Generational Dynamics that explains the motivation and development of the young generation of "Heroes" that perform these kinds of terrorist acts. In this case, there's an emotional link between the young British Pakistanis (who consider themselves to be "Heroes"), with the radical al-Qaeda clerics running the madrassas in Pakistan serving the role of "Prophets." In this model, the "Prophets" direct the activities of the young "Heroes," starting with these terrorist acts and eventually leading them into war. =eod =// &&2 e061221 War begins between Somalia Islamists and Ethiopia =data ww2010.weblog.y2006.e061221.head War begins between Somalia Islamists and Ethiopia =data ww2010.weblog.y2006.e061221.keys =data ww2010.weblog.y2006.e061221.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061221.date 21-Dec-06 =data ww2010.weblog.y2006.e061221.txt1 Let's catch up on all the wars we've been following. =data ww2010.weblog.y2006.e061221.txt2 A low-level <#stdurl http://news.bbc.co.uk/2/hi/africa/6195863.stm "war began in Somalia on Wednesday"#> between the forces controlled by the Islamists and the forces controlled by the "official" government, along with supporting troops provided by Ethiopia. So far, it's only low-level violence, but there is great concern that other nations will join in the fighting, causing the war to spiral into a major regional war. <#inc ww2010.pic g061221.jpg right "" "European envoy Louis Michel heads peace meeting, while fighting with rockets and heavy weapons continues just a few miles away. (Source: BBC)"#> As the fighting progressed, <#stdurl http://www.timesonline.co.uk/article/0,,3-2513604,00.html "Louis Michel, a European envoy, flew into Somalia"#> and got both sides to agree to "talk," while the fighting continues. Whether Michel will pull a truce of the hat has to be seen, but if he does, then it's doubtful that the truce will last long. Let's take a look at the current status of some other wars we've been following:

Sri Lanka. This low-level <#inc ww2010.weblog.ref e061020b "civil war resumed last year,"#> when the 2002 peace agreement collapsed, and now appears to be escalating into a full-fledged crisis civil war. From the point of view of Generational Dynamics, the way to recognize this kind of escalation is to identify a gradual increase in genocidal acts -- which means that civilian lives have less and less value. The Sri Lanka government is using its air force to <#stdurl http://www.alertnet.org/thenews/newsdesk/COL108806.htm "drive Tamil civilians out of rebel-held areas,"#> and the rebels, who have perpetrated a number of terrorist acts already, recently <#stdurl http://www.gulfnews.com/world/Sri_Lanka/10091033.html "abducted hundreds of children."#> With the level of genocidal violence gradually increasing, the escalation of this war into full-scale genocidal civil war is coming into sight.
Gaza. During the last week, Hamas and Fatah have signed three peace agreements, the latest on Tuesday, and each has failed. As of Wednesday, there were still violent gunfights throughout Gaza. This war is reaching the point where a new trigger could cause it to spiral out of control. From the point of view of Generational Dynamics, the region is headed for a full-scale war between Arabs and Jews, and a Palestinian civil war could be the next step on the road to that war. A <#stdurl http://www.zogby.com/news/ReadNews.dbm?ID=1220 "recent Zogby poll"#> shows that Arab hostility toward the United States has deepened in the last year. The poll, which was conducted in five Arab countries, shows that the major reason is America's Israeli/Palestinian policy, with the Iraq situation well behind in importance. You'll recall that last month I said that I said that George Stephanopoulos looked like an idiot because <#inc ww2010.weblog.ref e061126 "Jordan's King Abdullah had to tell him five times"#> that the Israeli/Palestine situation was far more important than Iraq, but Stephanopoulous and his politican guests and journalist pundits were all totally clueless. The Zogby poll proves my point.
Darfur. Humanitarian organizations around the world are <#inc ww2010.weblog.ref e061211 "bemoaning the fact that no troops have been sent in to stop the massive genocide"#> currently going on in Darfur, but as I've said repeatedly on this web site, this is a crisis civil war, and it can't be stopped any more than a tsunami can be stopped. The world will have to wait until it's run its course.
Lebanon. At the beginning of this month, <#inc ww2010.weblog.ref e061201 "Hizbollah started staging massive anti-government protests,"#> and those protests have continued, as have smaller counter-demonstrations by pro-government people. Pundits were predicting full scale civil war for Lebanon but, as regular readers of this web site know, Lebanon is in a generational Awakening era, and a civil war is impossible. However, a bloodless political coup is a possibility, although so far the anti-government protests have not had much effect besides blocking traffic.
Iraq. Wednesday's news from Iraq was that 40 people were killed by two separate incidents of suicide car bombing. This "proved" to the idiot MSNBC reporter that Iraq was in a civil war, even though the terrorists driving the cars were almost certainly not Iraqis and the bombings were almost certainly sponsored by al-Qaeda, which makes the suicide bombings terrorist attacks, like the attacks on 9/11. On CNN International today, I heard one pundit, Ken Pollack of the Brookings Institute, say this: "Iraq is in a dangerous state, and it's headed for a Bosnia or Lebanon state of all-out civil war." Now this is exactly what Generational Dynamics tells is impossible. Iraq is in a generational Awakening era, just one generation past the genocidal Iran/Iraq war of the 1980s. Now, you can call anything a civil war if you want, and if you want to call terrorist acts by non-Iraqis a civil war, then you can do it. But it is ABSOLUTELY IMPOSSIBLE for Iraq to spiral into a state of all-out civil war like Bosnia in the 1990s or Lebanon in the 1980s. It has never happened in history, during a generational Awakening era, and cannot happen now. This is why journalists, pundits and politicians keep getting their predictions wrong. You'd think that Ken Pollack was some sort of expert, but he has NO IDEA what's going on. He simply made that "fact" up, because he and all these other journalists and pundits make ideological predictions, and they have as much chance of getting them right as if they flipped a coin. As <#inc ww2010.weblog.ref e061217 "I wrote a few days ago,"#> Thomas Friedman and other pundits have gotten one prediction wrong after another. Generational Dynamics is the only methodology which has produced correct predictions, and this is the only web site in the world that tells you what's going on in the world, and what's going to happen.

Of the wars that I discussed above, the Somalia and Gaza wars are the most dangerous, with the Sri Lanka war close behind. If a full-fledged crisis war begins in any of these regions, then a spread to other regions will not be far behind. On the other hand, Darfur is already in a massive, full-fledged civil war, but it hasn't affected other regions outside of Africa. =eod =// &&2 e061219 Deadline passes with immediate war threat receding in Somalia =data ww2010.weblog.y2006.e061219.head Deadline passes with immediate war threat receding in Somalia =data ww2010.weblog.y2006.e061219.keys =data ww2010.weblog.y2006.e061219.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061219.date 19-Dec-06 =data ww2010.weblog.y2006.e061219.txt1 International officials are breathing a sigh of relief =data ww2010.weblog.y2006.e061219.txt2 as the radical Islamists' one-week threat deadline to Ethiopia - remove all your troops or face Jihadist war -- <#stdurl http://www.alertnet.org/thenews/newsdesk/L19259284.htm "passed on Tuesday, with the Islamists appearing to back down."#> They now say that they would not attack first, but would only fight a defensive war. <#inc ww2010.pic afrihorn.gif right "" "Horn of Africa"#> The situation is still extremely tense, however. The <#inc ww2010.weblog.ref e061213b "threat was issued a week ago,"#> and tens of thousands of Islamist and Ethiopian troops still face each other, separated by only a few miles. The region is considered strategically very important by both the West and by al-Qaeda, because of it's proximity to the Mideast. A <#inc ww2010.weblog.ref e061110b "UN report says that 11 countries are pouring weapons into the region,"#> and eyewitnesses say that military forces of both countries are prepared for war. However, al-Qaeda influence is still thought to be fairly low. =eod =// &&2 e061218 Japan comes closer to renouncing its postwar pacifism =data ww2010.weblog.y2006.e061218.head Japan comes closer to renouncing its postwar pacifism =data ww2010.weblog.y2006.e061218.keys =data ww2010.weblog.y2006.e061218.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061218.date 18-Dec-06 =data ww2010.weblog.y2006.e061218.txt1 Japan stirs fears of increased militarism by upgrading its Defense Agency =data ww2010.weblog.y2006.e061218.txt2 to a full ministry, after legislative action on Friday. In addition, the bill calls for increased patriotism by asking teachers to <#stdurl http://news.bbc.co.uk/1/hi/world/asia-pacific/6182087.stm "instill thinking among students "respecting tradition and culture and loving the nation and homeland.""#> =inc ww2010.xr.related1 right japan 2 After a series of brutal crisis civil wars in the 1860s, culminating in the 1868 Meiji Restoration that changed its 250 year old form of government, Japan became increasingly militaristic and imperialistic. The motivation at that time was simple: If the Europeans could succeed in empire-building through colonization, then so could the Japanese. By the time Japan transitioned from its "generational unraveling" era in the 1920s into a "generational crisis" era in the 1930s, the relatively benign concept of win-win colonization had transformed into a philosophy of full-fledged militaristic conquest, leading to the attack on Pearl Harbor and World War II. Just as the 1860s crisis war transformed Japan from an isolationist country to an imperialistic country, the 1940s crisis war transformed it again, this time to a pacifist country, governed by a 1947 U.S.-drafted Constitution that forbids Japan from military action except in self-defense. Integral to that decision was a mutual defense treaty with the U.S. that says that, essentially, Japan doesn't need armed forces because the U.S. will protect the country if necessary. Now that Japan is, once again, entering a new "generational crisis" era, its pacifism is unraveling. Generational changes are turning leadership positions over to Japanese born after World War II, with the result that <#inc ww2010.weblog.ref e050628 "the leadership is increasingly confrontational with Japan and Korea,"#> just as <#hreftext ww2010.i.051023japan "China and Korea are increasingly confrontational with Japan."#> This generational change extends to Japan's new <#inc ww2010.weblog.ref e060927b "Prime Minister Shinzo Abe, born in 1954, who is considerably more hawkish"#> than Junichiro Koizumi, the man he succeeded earlier this year. The calls for increased patriotism and military readiness, sponsored and promoted by PM Abe, are <#stdurl http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2006/12/16/MNGM8N0O7I1.DTL&type=politics "infuriating his pacifist political opponents,"#> who claim that Japan is returning to its prewar imperialism, including the the state-sponsored indoctrination of children. China and Korea haven't yet responded to the new law, since there's still a "honeymoon period" with the new Prime Minister, and because China and Japan are now cooperating on the issue of North Korea nuclear weapons. But expect that to change in the months to come. From the point of view of Generational Dynamics, Japan and China are heading for war with 100% certainty. As the generation of people who grew up during the war and have personal memory of the horrors of World War II all retire or die, the younger generations will increasingly reject compromise and containment of problems, and adopt solutions involving confrontation. =eod =// &&2 e061217b Tehran becomes nose job center of the world =data ww2010.weblog.y2006.e061217b.head Tehran becomes the "men's nose job center of the world." =data ww2010.weblog.y2006.e061217b.keys =data ww2010.weblog.y2006.e061217b.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061217b.date 17-Dec-06 =data ww2010.weblog.y2006.e061217b.txt1 According to a report by the BBC, =data ww2010.weblog.y2006.e061217b.txt2 plastic surgery is becoming a huge business in Iran. =inc ww2010.blocking.start <#inc ww2010.pic g061217a.jpg right "" "Iranian magazines stuffed with advertisements for cosmetic surgery. (Source: BBC)"#> "You might have thought a country ruled by religious precepts would frown on plastic surgery as an unnecessary vanity," says the report. "Not so. These Iranian magazines are stuffed with advertisements for cosmetic surgery. And it's mostly the new rich involved in business who go for it." According to the BBC report, "It's become a fashion for middle-aged men chasing younger women, and an amusement for wealthy young men with nothing better to do." =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic g061217b.jpg left "" "Advertisement for nose job in Iranian magazine. (Source: BBC)"#> The report quotes a Tehran plastic surgeon as saying: "You don't see men with nose jobs in London or in Paris -- Tehran is the world's center for men with nose jobs." =inc ww2010.blocking.end =eod =// &&2 e061217 Likely result of the midterm elections: Iraq escalation =data ww2010.weblog.y2006.e061217.head Likely result of the midterm elections: War in Iraq may escalate with "troop surge" =data ww2010.weblog.y2006.e061217.keys =data ww2010.weblog.y2006.e061217.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061217.date 17-Dec-06 =data ww2010.weblog.y2006.e061217.txt1 Is this what you expected or voted for? =data ww2010.weblog.y2006.e061217.txt2 Elections are always fascinating because they allow us to clearly gauge public mood changes, and large public mood changes almost always reflect generational changes. In the case of our midterm elections, the young college-age "Generation Y" or "Millennial Generation," as they're currently called, spoke for the first time. We're now beginning to see the likely results of the recent election: Tens of thousands more American troops will be pouring into Iraq. In fact, the <#stdurl http://www.iht.com/articles/ap/2006/12/16/america/NA_GEN_US_Iraq.php "first movement of new troops will begin early in January."#> Is this what you expected just a few weeks ago, when you voted in the election? Did you think that you were voting for a Vietnam-style withdrawal? If you did, you're not getting what you expected. But if you've been a regular reader of this web site, then you're getting exactly what you expected. As I've been saying for years, <#hreftext ww2010.i.060601antiwar "there's no "anti-war movement" in America today."#> In fact, America is in a "generational crisis" era today and so will be getting increasingly confrontational, just the opposite of what happened during the 1960s Vietnam War era, <#hreftext ww2010.i.sixties040501 "which was a "generational Awakening" era."#> We're now beginning to get a better picture of what the new college-age generation want: They want the Iraq war problem solved, but they don't want America to lose the war. There's only way to satisfy (or appear to satisfy) that demand: Send in more troops. And that's what's happening. That's the kind of thing that always happens, in every country, during a "generational crisis" period, when the new college-age "Hero" generation begins to be heard. They're much more confrontational than their Boomer and Xer parents, they have no fear of war, and they're prepared to become the new "greatest generation" in the coming "clash of civilizations" world war, like the generation of Heroes that won World War II. As I've said before, these Heroes are our young darlings. When the time comes and the nation is facing its greatest danger, these Heroes will go off to war fearlessly and do their duty. Without any thought for themselves, they'll go proudly and valiantly into battle, and they won't even be sad about it. It's their parents in the Xer and Boomer generations who'll be standing on the shore in tears, waving goodbye as their ships disappear over the horizon, knowing that we'll never see many of them again, but also knowing that there's no choice. Let's go back to October, a month before the elections, and recall <#inc ww2010.weblog.ref e061023 "what pundits were saying at that time"#> would happen if the Democrats won: The anti-war movement will grow, the Democrats will pass laws restricting spending on the Iraq war, in order to force the Administration to end the war, and the Democrats will investigate every nook and cranny of the Bush administration. Almost without exception (and I think I can even remove the "almost"), every pundit I heard made this kind of prediction. It was a prediction that we would see a repeat of what happened in 1973-74, when Congress and massive anti-war demonstrations forced President Nixon to withdraw American forces from Vietnam and then used its investigative power to force President Nixon to resign from office. But the Iraq war is nothing like the Vietnam war. We'll have to see what happens in January, but I expect no significant opposition to the plan to increase American troop strength in Iraq -- escalating the war, rather than ending it. The reason is simple, and it's the reason I've given: The college-age Millennial generation wants the Iraq problem to be solved, but will not tolerate a Vietnam-like defeat. The option that Bush appears to be taking is the only one remaining: Pour more soldiers into Iraq in order to get something that passes for victory. This is once again a situation where the pundits have been uniformly wrong, and this web site has been absolutely right, based on Generational Dynamics forecasting. This web site has correctly predicted what would happen <#hreftext ww2010.i.aug19 "in Iraq in August, 2003,"#> what would happen <#hreftext ww2010.i.may01 "in the Mideast in May, 2003,"#> what would happen <#inc ww2010.weblog.ref e040628 "in Darfur in June, 2004,"#> and what would happen <#hreftext ww2010.i.antiwar "to the "anti-war movement" in February, 2003."#> There have been no Generational Dynamics predictions that have turned out to be wrong. I've repeatedly challenged anyone to find any web site anywhere in the world with a predictive success record anywhere close to this web site's record. There is none. =inc ww2010.bugcomment right Consider New York Times foreign affairs columnist Tom Friedman. Friedman is considered by many to be the best and most knowledgeable Middle East pundit in America. He's written several books, he's considered a top expert, and his predictions are treated with enormous respect. And yet, as <#stdurl http://www.fair.org/index.php?page=2884 "this web page on fair.org"#> shows, Friedman has made one error after another. His predictions have simply been wrong. Now, you can read Mr. Friedman's columns. Some of them may make you happy, others may make you angry. But whether you're happy or angry, what he tells you is happening is quite likely to be wrong. You can read the columns on this web site. You probably won't feel either happy or angry after reading one of these columns; most likely you'll feel anxious. The predictions will often be complex and counter-intuitive. But they'll be right, time after time after time. If you want to know what's going on in the world, and what's going to happen, this is the only web site that will tell you. I set up this web site in 2002, and I started making predictions seriously in 2003. I specifically decided that all predictions would remain on the web site, so that I can never get away with "selective memory bias" in recalling what I predicted in the past. Enough time has passed now that I can responsibly claim that the Generational Dynamics forecasting methodology is working. It has to be used carefully, it requires some knowledge of mathematical concepts, and it permits only certain types of predictions, not permitting others (for "chaotic" events, in the sense of Chaos Theory). But when it makes a prediction, the prediction is correct. =inc ww2010.cf.cf060209 p left Unfortunately, as regular readers of this web site know, the news isn't good. It's now been 61 years since the end of World War II, which means that almost all the people in the generations who lived through WW II, and remember the panic and horror that everyone felt, are now gone. They've left behind the Baby Boomer generation, people who have no idea how to get things done, but only how to argue with and mow down other people who actually do know how to get things done. That's why countries around the world that fought in WW II, including America, are paralyzed and frozen by constant bickering and arguing, and why it's the young Millennial Generation, the new Hero Generation, that's really making the decisions, and making their voices felt through polling or elections. And that's why we're sending tens of thousands more troops into Iraq, and why we're headed for a new world war, a "clash of civilizations" world war. In America, Europe, Gaza, Israel, China and Japan, it's the young people who are leading their countries to being increasingly confrontational, and why this new world war is no longer very far off. =eod =// &&2 e061216b Desperation gamble, Abbas calls for new elections =data ww2010.weblog.y2006.e061216b.head In desperation gamble, Mahmoud Abbas calls for new Palestinian elections =data ww2010.weblog.y2006.e061216b.keys =data ww2010.weblog.y2006.e061216b.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061216b.date 16-Dec-06 =data ww2010.weblog.y2006.e061216b.txt1 Hoping to end political deadlock and head off a Palestinian civil war, =data ww2010.weblog.y2006.e061216b.txt2 Palestinian President Mahmoud Abbas responded to <#inc ww2010.weblog.ref e061216 "the incendiary events of the last few days"#> by announcing his intention to <#stdurl http://today.reuters.com/news/articlenews.aspx?type=politicsNews&storyID=2006-12-16T171351Z_01_N16433883_RTRUKOC_0_US-PALESTINIANS-USA.xml&WTmodLoc=NewsHome-C3-politicsNews-3 "call for new Presidential and Parliamentary elections,"#> in a speech in Ramallah. The U.S. government welcomes this call. What's the purpose of this call? Because of the desperate hope that Fatah will win both the Presidential and Parliamentary elections, creating a government that will recognize Israel and receive Western aid again. President Abbas is supported by Western nations, including the U.S. and Europe, and heads Fatah. Hamas, considered a terrorist organization by Western nations, <#inc ww2010.weblog.ref e060127 "surprised everyone by winning the legislative elections"#> in January. Western nations reacted by cutting off hundreds of millions of dollars in aid to the Palestinians, unless Hamas renounces violence and recognizes the existence of Israel, things that will happen when pigs fly. Now that political differences between Fatah and Hamas have grown into escalating violence, and civil war seems near, Abbas is taking a desperate gamble that Fatah will be the big political winner. I don't predict elections, since election results are chaotic events (in the sense of Chaos Theory), and so election results can be affected by even tiny, minor surprises. But having said that, it's most likely that Hamas will win both sets of elections. <#inc ww2010.weblog.ref e061210 "Young, radical Palestinians, especially in the Gaza strip,"#> are increasingly in control of what happens, much more so than in the near two years since Abbas won the last Presidential election. These young people aren't in love with Hamas, whom they consider to be too moderate, but they certainly won't vote for the old dinosaur Abbas. Thus, the desperation call for elections is only likely to increase the militancy of the Palestians, and hasten the route to civil war. In fact, Hamas has already said that <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-6285239,00.html "the call for elections is a coup,"#> and threatened immediate further violence. On Saturday evening, several hours after Abbas' speech, <#stdurl http://www.imemc.org/content/view/23255/1/ "tens of thousands of supporters of Fatah and Hamas, respectively, demonstrated and clashed"#> with one another, wounding five residents in the city of Rafah in Gaza. Generational Dynamics predicts that the Mideast is headed for a new genocidal war, replaying the crisis war between Arabs and Jews of the 1940s. As <#hreftext ww2010.i.may01 "I wrote in 2003,"#> the disappearance of Yasser Arafat and Ariel Sharon would signal a generational change that would lead to a major conflagration within a few years, engulfing the entire region. This prediction has been trending true, and it now appears that a Palestinian civil war may be the first step on the road to that major regional crisis war. =eod =// &&2 e061216 Will Mohammed Dahlan trigger a Palestinian civil war? =data ww2010.weblog.y2006.e061216.head Will Mohammed Dahlan trigger a Palestinian civil war? =data ww2010.weblog.y2006.e061216.keys =data ww2010.weblog.y2006.e061216.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061216.date 16-Dec-06 =data ww2010.weblog.y2006.e061216.txt1 Hamas blames the young Fatah terrorist for the near-assassination of Prime Minister Haniyeh. =data ww2010.weblog.y2006.e061216.txt2 Tension is boiling between Fatah, the moderate militia group under the control of Palestinian President Mahmoud Abbas, and Hamas, the radical militia group whose political arm won the legislative elections earlier this year. On Monday, three boys aged 6-9, sons of a Fatah leader, were shot dead by gunmen. <#inc ww2010.pic g061215a.jpg right "" "Palestinian Prime Minister Ismail Haniyeh at Hamas rally, yells, "We joined this movement to become martyrs, not ministers!" (Source: BBC)"#> On Thursday, the Palestinian Prime Minister, <#stdurl http://www.timesonline.co.uk/article/0,,3-2506763,00.html "Ismail Haniyeh, was attacked by gunmen as his motorcade crossed from Egypt into Gaza."#> The gunmen killed Haniyeh's bodyguard and wounded his son, but Haniyeh was unhurt. At a massive celebration on Friday, celebrating the 19th anniversary of the founding of Hamas, Haniyeh blamed Mohammed Dahlan for the attempted murder. In his fiery speech, he defiantly yelled, "We joined this movement to become martyrs, not ministers!" to a large, enthusiastic crowd. He was referring the willingness of all Hamas members to become suicide bombers against Israel. <#inc ww2010.pic g061215b.jpg left "" "Massive crowds at Hamas rally. (Source: CNN)"#> Born in 1961, Mohammed Dahlan was the youngest of the top leaders in Yasser Arafat's Fatah, <#inc ww2010.weblog.ref e061210 "and much more radical and militant."#> He's been the face of Palestinian terrorism many times, and has expressed the goal of war with Israel. Now, with the Fatah and Hamas power struggle deepening and violence increasing for many months, he may well be behind an effort an effort to trigger a civil war among the Palestinians, expecting it soon to draw in Israel as a combatant. We should know within a few days. <#inc ww2010.pic g061215c.jpg right "" "Clashes between Fatah and Hamas in West Bank town of Ramallah. (Source: New York Times)"#> However, with Dahlan was the perpetrator or not, the assassination attempt has triggered <#stdurl http://www.nytimes.com/aponline/world/AP-Israel-Palestinians.html?hp&ex=1166245200&en=8bd257c938ac970f&ei=5094&partner=homepage "full-scale clashes between Fatah and Hamas in Gaza City and in the West Bank town of Ramallah."#> Alarmed <#stdurl http://news.bbc.co.uk/2/hi/middle_east/6184951.stm "Egyptian officials are trying to mediate a deal"#> between Fatah and Hamas, but that attempt has actually been going on for months, and success is not expected now. Generational Dynamics predicts that the Mideast is headed for a new genocidal war, replaying the crisis war between Arabs and Jews of the 1940s. As <#hreftext ww2010.i.may01 "I wrote in 2003,"#> the disappearance of Yasser Arafat and Ariel Sharon would signal a generational change that would lead to a major conflagration within a few years, engulfing the entire region. This prediction has been trending true, and it now appears that a Palestinian civil war may be the first step on the road to that major regional crisis war. =eod =// &&2 e061214 Bird flu spread off to a slow start this year =data ww2010.weblog.y2006.e061214.head Bird flu spread off to a slow start this year =data ww2010.weblog.y2006.e061214.keys =data ww2010.weblog.y2006.e061214.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061214.date 14-Dec-06 =data ww2010.weblog.y2006.e061214.txt1 Was last year's rapid worldwide spread a one-time incident? =data ww2010.weblog.y2006.e061214.txt2 Last season, bird flu spread rapidly from Vietnam and eastern China, moving west through Asia, then to Europe, the Mideast and Africa. It <#inc ww2010.weblog.ref e060407 "reached birds in 30 new countries"#> in the first four months of 2006 alone. It was expected to reach North America during the spring migration, but apparently it hasn't. So far there's no sign of a human pandemic. In mid-2006, the virus mutated in Indonesia enough to permit human to human transmission through skin contact, but the mutations that would permit easy transmission through the air, thus causing a pandemic, have not yet occurred. On the other hand, South Korea, which hasn't seen a bird flu outbreak since 2003, now has a major new outbreak on its hands, and is culling (killing) hundreds of thousands of quails and chickens. Now some <#stdurl http://www.iht.com/articles/ap/2006/12/11/europe/EU_GEN_World_Bird_Flu.php "some experts are wondering,"#> "Where did it go?" Unfortunately, the danger is far from over. Perhaps its spread has been slowed by what has been a mild winter so far. Perhaps we've just been lucky. But there's no reason to believe that the danger has disappeared or even lessened. The outbreaks in South Korea show that. Perhaps there'll be a pause of a few months or even a year. Or a human pandemic may start next week. It's impossible to predict. Winter will arrive next week, and with it the cold weather that can cause a rapid spread again. The bitter January and February weather, when Vietnam and China have large new year's celebrations that spur large migrations of chickens, are the most dangerous times of the year. As I've said before, you and your family should prepare immediately for a possible pandemic. If human to human transmission became public next week on Monday, then by Tuesday all the shelves in grocery stores would be bare. If you stock up on food now, then you'll be sure to have what you need. Even if you think that you can beat the crowds to the grocery store, you should still stock up in advance. If you get your canned food after the panic begins, then you're depriving somebody else of food. But if you stock up in advance, then the shelves will be restocked, and you won't deprive someone else of food. I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e061213b Somalia's radical Islamists threaten Ethiopia with war within a week =data ww2010.weblog.y2006.e061213b.head Somalia's radical Islamists threaten Ethiopia with war within a week =data ww2010.weblog.y2006.e061213b.keys =data ww2010.weblog.y2006.e061213b.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061213b.date 13-Dec-06 =data ww2010.weblog.y2006.e061213b.txt1 They demand the withdrawal of thousands of Ethiopian troops. =data ww2010.weblog.y2006.e061213b.txt2 <#inc ww2010.pic afrihorn.gif right "" "Horn of Africa"#> As we described in October, <#inc ww2010.weblog.ref e061028 "Somalia and Ethiopia are close to full-scale war,"#> after a takeover of Somalia by the radical Islamic Courts Union (ICU). From the point of view of Generational Dynamics, the highly strategic Horn of Africa will play an important role in the coming "clash of civilizations" world war. Now, <#stdurl http://today.reuters.com/news/articlenews.aspx?type=worldNews&storyID=2006-12-12T120842Z_01_L12869833_RTRUKOC_0_US-SOMALIA-CONFLICT.xml&WTmodLoc=IntNewsHome_C2_worldNews-3 "Somalia's radical Islamists are promising war within a week,"#> unless Ethiopia withdraws 20-30,000 troops protecting the old government. Ethiopia denies the existence of these troops. However, <#inc ww2010.weblog.ref e061110b "a UN report says that 11 countries are pouring weapons into the region,"#> and eyewitnesses say that military forces of both countries are massing and preparing for war. =eod =// &&2 e061213 Ahmadinejad holds two-day Holocaust denial conference =data ww2010.weblog.y2006.e061213.head Iran's President Mahmoud Ahmadinejad holds two-day Holocaust denial conference =data ww2010.weblog.y2006.e061213.keys =data ww2010.weblog.y2006.e061213.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061213.date 13-Dec-06 =data ww2010.weblog.y2006.e061213.txt1 He says that Israel "will soon be wiped out." =data ww2010.weblog.y2006.e061213.txt2 <#inc ww2010.pic g061212.jpg right "" "Iranian President Mahmoud Ahmadinejad (the short one on the right) shakes hands with former Ku Klux Klan Imperial Wizard David Duke"#> It's drawn holocaust skeptics, deniers and kooks from around the world to Tehran, and it's drawn outrage as well. The <#stdurl http://adelaideinstitute.org/2006December/contents_program1.htm "conference program for the "Holocaust: Global Vision" conference"#> lists dozens of sessions and speakers. An incredulous <#stdurl http://news.independent.co.uk/world/middle_east/article2070190.ece "Tony Blair called the conference"#> "shocking beyond belief," and said, "To go and invite the former head of the Ku Klux Klan to a conference in Tehran which disputes the millions of people who died in the Holocaust. ... What further evidence do you need that this regime is extreme?" Actually, I don't think Tony Blair is the intended audience. This conference on holocaust denial is exactly the right thing to do for a country planning a war to annihilate Israel. At the closing session, Iranian President Mahmoud Ahmadinejad said, "Just as the Soviet Union was wiped out and today does not exist, so will the Zionist regime soon be wiped out." These statements are directed at Arabs, primarily Palestinians, who consider Ahmadinejad to be something of a folk hero. They're also directed to the Hizbollah and Hamas organizations, to whom he's supplying training, missiles and other weapons in preparation for a new war with Israel in the next few months. Iran itself is in a "generational awakening" era, since only one generation has passed since the genocidal Iran/Iraq war. This means that the people of the country will not want to fight in any wars at this time, but this will not stop Ahmadinejad from fighting a proxy war through the Hizbollah and Hamas. The steady stream of messages about "wiping Israel off the map" and denying the holocaust prepare the Iranian people for the war to come. As has happened almost every day since the death of Yasser Arafat, things continue to get worse on the Gaza Strip. On Monday, <#stdurl http://www.alertnet.org/thenews/newsdesk/L12884896.htm "three boys, aged 6-9, where shot dead by gunmen"#> as they were being dropped off at school. The boys were the sons of a Fatah leader; Hamas has been blamed for the shooting, but they deny it. But there are plenty of other "minor" Palestinian militia groups that might have done it. Generational Dynamics predicts that the Mideast is headed for a new genocidal war, replaying the crisis war between Arabs and Jews of the 1940s. As <#hreftext ww2010.i.may01 "I wrote in 2003,"#> the disappearance of Yasser Arafat and Ariel Sharon would signal a generational change that would lead to a major conflagration within a few years. That <#inc ww2010.weblog.ref e061210 "generational change is now occurring rapidly."#> =eod =// &&2 e061212 Kofi Annan visits the Truman Library to bad-mouth America again =data ww2010.weblog.y2006.e061212.head Kofi Annan visits the Truman Library to bad-mouth America again =data ww2010.weblog.y2006.e061212.keys =data ww2010.weblog.y2006.e061212.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061212.date 12-Dec-06 =data ww2010.weblog.y2006.e061212.txt1 Ironically, President Truman would consider him a fool. =data ww2010.weblog.y2006.e061212.txt2 In his <#stdurl http://www.un.org/apps/sg/sgstats.asp?nid=2357 "last speech as Secretary-General of the United Nations,"#> Kofi Annan chastised the United States and President Bush. Annan went to the Truman Library to honor President Harry S. Truman, who was the guiding force in the creation of the United Nations in 1947. "And states need to play by the rules towards each other, as well as towards their own citizens," said Annan, in a rebuke to the United States. "That can sometimes be inconvenient, but ultimately what matters is not inconvenience. It is doing the right thing. No state can make its own actions legitimate in the eyes of others. When power, especially military force, is used, the world will consider it legitimate only when convinced that it is being used for the right purpose – for broadly shared aims – in accordance with broadly accepted norms." And, in a personal rebuke to President Bush, Annan said: "And in order to function more effectively, the system still cries out for far-sighted American leadership, in the Truman tradition." What Annan is evidently not aware of is the Truman Doctrine, which was formulated to guarantee that there would never be another war like World War II. In 1947, a crisis between Turkey and Greece led President Truman the formulate the "Truman Doctrine," which essentially made America the Policemen of the World. Here's an excerpt from <#stdurl http://www.americanrhetoric.com/speeches/harrystrumantrumandoctrine.html "President Truman's speech to a joint session of Congress:"#>

"We have considered how the United Nations might assist in [the Turkey / Greece] crisis. But the situation is an urgent one, requiring immediate action, and the United Nations and its related organizations are not in a position to extend help of the kind that is required. ... As in the case of Greece, if Turkey is to have the assistance it needs, the United States must supply it. We are the only country able to provide that help. ... The peoples of a number of countries of the world have recently had totalitarian regimes forced upon them against their will. The Government of the United States has made frequent protests against coercion and intimidation in violation of the Yalta agreement in Poland, Rumania, and Bulgaria. I must also state that in a number of other countries there have been similar developments. At the present moment in world history nearly every nation must choose between alternative ways of life. The choice is too often not a free one. One way of life is based upon the will of the majority, and is distinguished by free institutions, representative government, free elections, guarantees of individual liberty, freedom of speech and religion, and freedom from political oppression. The second way of life is based upon the will of a minority forcibly imposed upon the majority. It relies upon terror and oppression, a controlled press and radio, fixed elections, and the suppression of personal freedoms. I believe that it must be the policy of the United States to support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures. I believe that we must assist free peoples to work out their own destinies in their own way. I believe that our help should be primarily through economic and financial aid which is essential to economic stability and orderly political processes. The world is not static, and the status quo is not sacred. But we cannot allow changes in the status quo in violation of the Charter of the United Nations by such methods as coercion, or by such subterfuges as political infiltration. In helping free and independent nations to maintain their freedom, the United States will be giving effect to the principles of the Charter of the United Nations."

President Truman made the additional point that, no matter much it cost the United States to provide this help, the cost would be far less than the cost of World War II. This has been a major principle guiding American foreign policy since President Truman enunciated it. It provided the justification for Truman's intervention in the Korean War, for President Kennedy's intervention in the Vietnam War. In fact, President Kennedy launched TWO pre-emptive wars against Cuba -- the first, based on faulty CIA intelligence, led to the "Bay of Pigs disaster," and the second, the blockade of Cuba, risked nuclear war with the Soviet union. These are exactly the same principles that President Bush followed in the Iraq intervention. That's why President Truman would consider Kofi Annan to be a fool. In another ironic twist, Annan chided the U.S. and other world powers for not intervening in the Darfur civil war. Annan said: "And when I look at the murder, rape and starvation to which the people of Darfur are being subjected, I fear that we have not got far beyond 'lip service.' The lesson here is that high-sounding doctrines like the 'responsibility to protect' will remain pure rhetoric unless and until those with the power to intervene effectively – by exerting political, economic or, in the last resort, military muscle – are prepared to take the lead." In other words, in the same speech in which criticizes America for intervening in Iraq, he also criticizes America for not intervening in Darfur. And if we did intervene in Darfur, and things started to go wrong, what would Annan say then? He'd be rebuking us again, this time for intervening in Darfur. As I said, Kofi Annan is a fool. =eod =// &&2 e061211b Political pundits are all over the map in Iraq predictions =data ww2010.weblog.y2006.e061211b.head Political pundits are all over the map in Iraq predictions =data ww2010.weblog.y2006.e061211b.keys =data ww2010.weblog.y2006.e061211b.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061211b.date 11-Dec-06 =data ww2010.weblog.y2006.e061211b.txt1 Everyone starts from the same place: "The situation in Iraq is grave and deteriorating," =data ww2010.weblog.y2006.e061211b.txt2 which is the first sentence of the <#stdurl http://www.bakerinstitute.org/index_home.html "Iraq Study Group (ISG) report,"#> issued this past week by a committee headed by Jim Baker and Lee Hamilton. However, from that point on, all the pundits go off in wildly different directions in terms of predictions and recommendations for the future of Iraq. Andrew Sullivan is a liberal pundit who first aggressively supported the war in Iraq, but has taken the mainstream liberal position that Bush mishandled the war. His <#stdurl TrackBack=1 http://time.blogs.com/daily_dish/2006/12/the_gathering_s.html "article is titled "The Gathering Storm,""#> using the phrase that Winston Churchill used to characterize the late 1930s. He makes a novel comparison between the situation in the Mideast and the so-called European religious wars of the 1500-1600s:

"My own darkest fear is that the Middle East is at the beginning of its own period that Europe experienced in the sixteenth and seventeenth centuries: a massive, sectarian, regional bloodbath. I hope this won't happen. I hope to be proven wrong again. But I fear the process is already underway. ... The major powers in the Middle East, in other words, are on the verge of behaving like the major powers in Europe centuries ago: they will act as expressions of national interest but also of sectarian theology. And they will fight a terrible war before they agree on a chastened peace. The difference between now and the sixteenth and seventeenth centuries in Europe is that this regional war within a divided monotheism will take place in a time of vastly greater technological capacity for destruction. So the consequences of such a war may be far more ominous than the massacres, burnings and civil wars that beset Europe in the past."

Sullivan misses the point that there have been lots of major wars since the 1600s -- the Crimean War, World War I, World War II, for example -- which were also fought at least partially along religious and sectarian lines, with the warring religions including Western Christianity, Orthodox Christianity, Islam and Judaism, as well as sects thereof. In fact, the 1990s Bosnian war was a "massive, sectarian, regional bloodbath," and that was only a few years ago, with the Orthodox Serbs butchering the Catholic Croatians and the Muslim Bosnians. But when a pundit is making an ideological point, historical facts don't matter much. Anyway, what's Sullivan's cure? Here's what he says:

"The best hope for Iraq is perhaps a temporary surge in U.S. troops to make one last effort at some effort at a relatively peaceful de facto partition, before the near-inevitable U.S. withdrawal and subsequent involvement of Saudis and Egyptians in support of the Sunnis and the Iranians on the side of the Shia. (At this point, I'd be relieved if we can save the Kurds.)"

Now, this is really all messed up. The Iraqis won't agree to this partition, for one thing. But the main problem is that "the gathering storm" is not taking place in Iraq; it's taking place in Lebanon and Gaza, as <#inc ww2010.weblog.ref e061210 "the young militants in the "Young Guard" gear up for total war against Israel,"#> with the help of Iran and Syria. Well, so much for that. Now let's turn to conservative columnist Pat Buchanan. Like every other pundit, Buchanan believes that we're reliving the Vietnam War, and this has caused him to make one error after another in his punditry in the last few years. He worked for President Nixon as a speechwriter, and he suffered through the time when widespread anti-war riots and demonstrations forced America to withdraw its forces from Vietnam, leading to America's defeat. Buchanan has repeatedly predicted that soon college students would begin rioting and protesting against the Iraq war, and that we would be forced to withdraw from Iraq in the same way, leading to America's defeat. (Like other journalists and pundits, Buchanan has no idea why <#hreftext ww2010.i.060601antiwar "college students haven't protested against the Iraq war,"#> and why there's been no effective antiwar movement.) But even though Buchanan has been repeatedly wrong, he keeps going down the same path. His article, <#stdurl TrackBack=1 http://www.townhall.com/columnists/patrickjbuchanan/2006/12/08/withdraw_to_victory =// http://www.townhall.com/columnists/column.aspx?UrlTitle=withdraw_to_victory&ns=PatrickJBuchanan&dt=12/08/2006&page=full&comments=true "entitled "Withdraw to victory?""#>, says that the ISG report does exactly what he's been predicting -- it forces a withdrawal from Iraq and a defeat for America:

"Yet the brutal honesty of the Baker-Hamilton commission about the situation in Iraq is accompanied by recommendations that are almost utopian in their unreality. ... What is its principal recommendation? That the United States begin to pull all its forces out of combat and out of Iraq by early 2008, and turn the war over to the Iraqi army and police. But if 150,000 U.S. Marines and Army troops have failed in four years to defeat al-Qaida, the Sunni insurgency, the Mahdi Army, the sectarian militias and the criminal elements of Iraq, how is the Iraqi army going to succeed? Are we to believe that rag-tag army is going to win a war the finest army on earth has all but lost?"

He ends with a very downbeat prediction:

"When U.S. combat forces leave, Iraq is going to be lost to those who ran us out. Our friends there are going to endure what our abandoned friends in Vietnam and Cambodia endured. The forces of Islamic radicalism will be emboldened to take down our remaining allies in the Middle East. Our days as a superpower will be over."

To me, this comes across as being close to an obsession with his Vietnam experience. What Buchanan and a lot of other people don't understand is that America today bears no resemblance to the 1970s Vietnam days -- except to aging Boomers who lived through that time. Although the kind of withdrawal that Buchanan talks about is a remote possibility, I see little chance that it will be called for, despite the hysteria we've been seeing in Washington the last week. We've now had two major generational changes since the 1970s, and today's young people will not tolerate a defeat in Iraq like the ones that their Boomer parents lived through in the 1970s. To see this further, let's take a look at a <#stdurl http://www.foxnews.com/story/0,2933,235767,00.html "third column, this one by liberal Susan Estrich."#> The title tells it all: "President Bush: State of Denial About Iraq." It's a fairly standard Democratic party criticism by typical people in Washington who know nothing of what's going on in the world:

"Denial is the first stage in dealing with death. The president still has to get through anger, bargaining, and depression before he reaches acceptance. And there is no sign that he is listening to anyone. He didn’t listen to the voters, who gave him a thumping because of Iraq. So much for democracy. He isn’t listening to his own new defense secretary, who has testified that his Iraq policy isn’t working and won’t work. So much for his own advisers. And he certainly isn’t listening to the Iraq Study Group, which most people have characterized as the last, best hope, or at least the best cover, for a change of policy. So much for blue ribbon bipartisanship. What will it take to get through to this president? ... And as long as he is in a state of denial, the country is bound to be in a state of war that we cannot win. It will be a long two years until the next election, and George W. Bush’s attitude all but ensures that we will spend it debating the war in Iraq. Exactly."

Estrich criticizes the President, but doesn't offer any proposals to withdraw the troops. The other liberal, Andrew Sullivan, proposes a short-term increase in troops. If there are any proposals to do a "Vietnam-style" withdrawal, I haven't seen them. Perhaps the statement that best captures the mood of Washington is Trent Lott's statement on Sunday's Meet the Press: "I agree a little bit with everybody. I agree with some of what the commission has said. I agree with Senator McCain that we should have some surge capability, which Jim Baker just referred to to get Baghdad a little bit better under control, I do think diplomacy is a good idea ... [As for more troops,] it would depend on the cirumstances - is it surge capability to try to deal with an immediate potential problem but just recognizing that more troops in the long term is probably not the answer we're looking for." So there you have it. Nobody has any idea what to do. From the point of view of Generational Dynamics, this is the kind of generational paralysis that we're seeing around the world in countries that fought in World War II and are now entering a generational crisis period. George Bush said he was "the decider," and he's going to make some specific proposals soon, but he isn't the decider. The real deciders are the new generation of young voters. As I described <#inc ww2010.weblog.ref e061210 "when discussing the young militants in Gaza,"#> the "old men" in Hamas and the government are irrelevant to the real decision-makers. The same is true in America. The young generation of voters already sent one message in the recent midterm elections, but we're still waiting to see what the next message will be. It's impossible to predict what that message will be, except in one regard: It will not be an anti-war message like the one sent by the young generation of the 1960s (the Boomers). Instead, it will be a message to take whatever steps are necessary, even war, to solve the problem. What's the problem? That will depend on breaking events. A new terrorist act will trigger one message, or a new war in Lebanon or Gaza will trigger a different message. From the point of view of Generational Dynamics, the Boomer generation is becoming more and more irrelevant every day. The Generation-Xers don't know what to do either, but they're angry at the Boomers for getting nothing done. It's the young generation, the Millennial generation or Generation Y, that will decide what we do next, through their voice and their votes. Until we know what that message is, the nation will continue in a state of confusion and paralysis. =eod =// &&2 e061211 Women's groups protest rape as a weapon of war in Darfur =data ww2010.weblog.y2006.e061211.head Women's groups protest rape as a weapon of war in Darfur =data ww2010.weblog.y2006.e061211.keys =data ww2010.weblog.y2006.e061211.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061211.date 11-Dec-06 =data ww2010.weblog.y2006.e061211.txt1 As the civil war in Darfur continues to grow more violent, =data ww2010.weblog.y2006.e061211.txt2 and even spreads to neighboring countries Chad and Central African Republic, <#stdurl http://commentisfree.guardian.co.uk/peter_tatchell/2006/12/rape_as_a_weapon_of_war.html "worldwide demonstrations were held on Sunday"#> to protest violence against women in Darfur. One woman, <#stdurl http://www.guardian.co.uk/uklatest/story/0,,-6271256,00.html "protesting outside of Downing Street in London,"#> said: "Rape is not an inevitable part of war. It can be stopped if military leaders, governments and the international community make clear that it will be punished as severely as any other war crime." This is silly. Military leaders no more worry about vague future threats of war crime trials than ordinary consumers worry about future bills when they overspend on their credit cards. Rape IS an inevitable part of war -- at least of generational crisis wars. "To the victor go the spoils," is the old saying, and when you're winning a war you get to kill the men and rape the women. Actually, women aren't the only sexual violence victims. In her book, World on Fire, here's how author Amy Chua describes the Bosnian war: "In the Serbian concentration camps of the early 1990s, the women prisoners were raped over and over, many times a day, often with broken bottles, often together with their daughters. The men, if they were lucky, were beaten to death as their Serbian guards sang national anthems; if they were not so fortunate, they were castrated or, at gunpoint, forced to castrate their fellow prisoners, sometimes with their own teeth. In all, thousands were tortured and executed." So women aren't unique when it comes to genocidal sexual torture. The Darfur problem first began to get worldwide attention in 2004, shortly after the 10-year commemoration of the 1994 Rwanda genocide. At that time there were big get-togethers of high-level officials from the U.N. and from various countries, making official pronouncements that the violence must stop. At the commemoration, U.N. Secretary General Kofi Annan promised "Never again." I wrote at the time that <#inc ww2010.weblog.ref e040628 "the U.N. is completely irrelevant to the Darfur genocide,"#> and that it would not be stopped until it's run its course. My prediction that the U.N. would be able to do nothing to stop the Darfur genocide has been shown to be completely true, one of the many predictions on this web site that have been shown to be true. And this was not a guess; it was based on solid generational principles. A non-crisis war can be stopped -- by the use of peacekeepers, or by negotiations with politicians. That's because non-crisis wars come from the politicians, not from the people. But generational crisis wars come from the people, from whole generations of people, from masses of people, and masses of people cannot be stopped. Negotiating with a political leader to stop a crisis war won't do any good for more than a short while because the political leader is not in control of the situation. In Leo Tolstoy's monumental work War and Peace, which describes Napoleon's invasion of Russia, I love Tolstoy's response to historians who claim that the battle of Borodino was lost because Napoleon had a cold:

"The French soldiers went to kill and be killed at the battle of Borodino, not because of Napoleon's orders but by their own volition. The whole army - French, Italian, German, Polish, and Dutch - hungry, ragged, and weary of the campaign, felt at the sight of an army blocking their road to Moscow that the wine was drawn and must be drunk. Had Napoleon then forbidden them to fight the Russians, they would have killed him and have proceeded to fight the Russians because it was inevitable. ... And it was not Napoleon who directed the course of the battle, for none of his orders was executed and during the battle, he did not know what was going on before him. So the way in which these people killed one another was not decided by Napoleon's will but occurred independently of him, in accord with the will of hundreds of thousands of people who took part in the common action. It only seemed to Napoleon that it all took place by his will. And so the question whether he had or had not a cold has no more historic interest than the cold of the least of the transport soldiers."

Tolstoy's point that the battle of Borodino could not be stopped by Napoleon because it was "the will of hundreds of thousands of people who took part in the common action" is relevant today in discussing Darfur because the Darfur genocide -- including the rapes, mutilation and torture -- is the will of millions of people who are taking part in the common action. That's why I said in 2004 that it would not be stopped until it's run its course, and that's why I say the same thing today. I often get the feeling that Americans (and other Westerners) have a certain prejudice that comes over them when talking about things like the Darfur genocide. I get this feeling when people talk about the civil war in Darfur, or other massive African wars, that they believe that this kind of wanton slaughter is the ordinary way of life of those "uncivilized" black tribes doing what they do naturally -- killing each other all the time. I get the same feeling when I hear people talking about those "AY-rabs," that wanton slaughter of each other is their way of life, and that it's therefore to be expected in Iraq and elsewhere in the Mideast. And yet, Americans and Westerners don't look at WW II in the same way. Americans consider WW II to be some sort of anomaly, a unique situation created by one madman that can't and won't be repeated. Once again this is a prejudice, the mirror image of the prejudice about Arabs and Africans that I just described. Of course none of that can be supported. The Western world is just as "uncivilized" as the Arabs and Africans are, and they're just as prone to "wanton slaughter" as the other two groups. But the reason for the widespread prejudices is just a matter of timing: Lebanon and Iraq had their genocidal crisis wars in the 1980s, at a time when the West was relatively at peace, so it only SEEMS that we're more civilized than they are. Similarly, the Rwanda and Darfur crisis wars have come in the last 15 years, once again at a time of peace in the West. (The prejudice also ignores the the Bosnian crisis war, which took place in Europe, but that's another prejudice.) Once we get past these prejudices, and realize that we're all uncivilized people who wantonly slaughter each other, then it's easier to see the generational patterns in history. This would be good to remember as we continue to approach the "clash of civilizations" world war which, as Generational Dynamics predicts, is not too far off. =eod =// &&2 e061210b China: mass incidents threaten CCP =data ww2010.weblog.y2006.e061210b.head China says that increasing numbers of "major mass incidents" threaten government =data ww2010.weblog.y2006.e061210b.keys =data ww2010.weblog.y2006.e061210b.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061210b.date 10-Dec-06 =data ww2010.weblog.y2006.e061210b.txt1 Lauding the Chinese Communist Party's "courage to confront realities," =data ww2010.weblog.y2006.e061210b.txt2 the <#stdurl http://www.chinadaily.com.cn/china/2006-12/09/content_754796.htm "official government commentary"#> says that "The prevention and proper handling of mass incidents is a major test for the [CCP's] governing ability." This has been an increasing worry for the CCP. In January of this year, <#inc ww2010.weblog.ref e060124 "China's prime minister warned"#> that the country was becoming increasingly unstable, thanks to a "historic error" caused by corruption in local governments -- where local governments simply confiscate local peasants' lands for their own purposes, without properly compensating the peasants. However, <#inc ww2010.weblog.ref e060317 "China's People's National Congress"#> failed to pass a law protecting peasants' rights. The People's National Congress is paralyzed by ideological disputes. This is exactly what happens to a country when it enters a generational crisis era. It's the same kind of ideological paralysis we're seeing in Washington today over the situation in Iraq. The situation is getting so bad that <#inc ww2010.weblog.ref e061206 "dissident news sources from China"#> are reporting that membership in the CCP has fallen so sharply since the 1989 Tiananmen Square massacre that "CCP officials are panicking." The CCP officials should be panicking. These kinds of mass riots are hardly new to China. The real (and unavoidable) danger is that these regional mass riots will merge into a nationwide rebellion, like the White Lotus Rebellion (1795-1805), the Taiping Rebellion (1852-62), and Mao's Long March and Civil War (1934-49). The last two civil wars killed tens of millions of people, and the next one is expected to continue the pattern. The new government commentary says, "China is harmonious and stable in general, but it is undergoing profound changes in social and economic structures with many destabilizing factors." What Chinese officials don't understand, but that readers of this web site do understand, is that those "profound changes" are caused by generational changes. The generation of people who fought in the 1940s civil war are quickly disappearing, replaced in the population by young people whose only knowledge of the CCP was the 1989 massacre. According to the new government commentary,

"China's booming economic development has largely improved people's living standard, but in the meantime the gaps between the rich and poor, urban and rural have been widened. Against this background, major mass incidents have been increasing and having wider impact. Among these incidents, some economic disputes had been politicized, and violent confrontation has increased so much that any inappropriate dealing would cause bloodshed. Meanwhile, hostile forces inside and outside China are trying all means to intervene and take advantage of mass incidents to instigate and create turbulence. The Party should put priority to solving the problems and difficulties of laid-off workers, land-lost farmers, emigrants from the Three Gorges Dam area, migrant workers, and the poor in both urban and rural areas."

Note the remark about "hostile forces" trying to "intervene and take advantage of mass incidents." This is a warning to all dissidents, especially followers of the Falun Gong. This spiritual movement was formed after the Tiananmen Square massacre, and drew millions of adherents. Older people would get together to meditate and do exercises. Beijing became alarmed, and declared in 1999 that practicing the Falun Gong was illegal. Millions of Chinese have been jailed simply for doing the equivalent of Richard Simmons exercises. The reference to "hostile forces" renews that threat. From the point of view of Generational Dynamics, China is becoming increasingly unstable and is <#hreftext ww2010.i.china050116 "approaching a massive civil war as its bubble economy unravels,"#> along with the rigid social structure originally set up by Mao Zedong in the 1950s and 60s. Today, there are over 100 million migrant workers (15-20% of the entire workforce), mostly peasants who have lost their farms to corrupt land deals by CCP officials, who take any jobs they can find in the cities and send money back to their families in vast poverty-stricken rural areas. Exactly what event will trigger this civil war cannot be predicted, but it could happen next week, next year or after, but will probably happen sooner rather than later. =eod =// &&2 e061210 Interviews with young Gazans spotlight road to war =data ww2010.weblog.y2006.e061210.head Interviews with young Gazans spotlight road to war =data ww2010.weblog.y2006.e061210.keys =data ww2010.weblog.y2006.e061210.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061210.date 10-Dec-06 =data ww2010.weblog.y2006.e061210.txt1 For these young fighters, attacking Israel is an end, rather than a means to a political end. =data ww2010.weblog.y2006.e061210.txt2 The interviews appeared in <#stdurl http://www.boston.com/news/world/articles/2006/12/02/zeal_for_combat_filling_the_palestinian_ranks "an article in the Boston Globe last week."#> It's so rare for the mainstream media to report on any generational issue, no matter how obvious and important it is, that I was startled to see this article. According to the article,

"Interviews with the militants reveal a bleak insight, casting doubt on the prospects for peace as autonomous militant groups show complete disregard for political action, and their way of thinking increasingly dominates their factions' leadership. "For 12 years we have been in peace negotiations, we have given up many things, but achieved nothing," said Abu Ali, 20, who said he was a fighter in the Al Aqsa Martyrs' Brigades, ostensibly the most moderate militant faction because of its link to Fatah, which recognizes Israel. "We don't believe in a political solution, because Israel will never respect it," Abu Ali said. "So we are forced to seek a military solution, even though Israel is stronger. There will be no peace" in the Palestinian territories, he said."

The young militants expressed a range of views. A relatively mild view is that they use violence "to erect a balance of fear with the Israelis." A more extreme view is that "The Jews will not leave the land unless they are killed." This is what people don't understand, and it's a major finding of Generational Dynamics research: That these major genocidal crisis wars that I'm always talking about are not started by adults most of the time; instead, they're started by a young generation of militants. As the article says, "their way of thinking increasingly dominates their factions' leadership." We can now identify three distinct generational groups within the Palestinians, especially within Gaza:

The Old Guard. These are people born before 1949, including Yasser Arafat and Mahmoud Abbas. Having lived through and survived the genocidal 1940s war between Jews and Arabs, they've made it their life goal to keep any such war from occurring again. They negotiated the 1994 Oslo peace agreement with Israel. Arafat died in 2004, and Abbas is now 71. This generation has all but disappeared.
Hamas Generation. Born in the decades following the 1940s war, they have no personal memory of its horrors. Hamas was formed in the early 1980s. It began the first Intifada, starting in 1989. They agreed to a ceasefire when the Oslo agreement was signed, but refused to honor the agreement or recognize Israel. Today, they're more and more the generation in charge, as the Old Guard generation disappears. They use violence against Israel for political ends.
The Young Guard. This is the generation of young militants described above. Born since 1980, they consider violence against Israelis as an end in itself, and many (or perhaps most) are committed to the destruction of Israel.

According to <#stdurl http://www.foreignaffairs.org/20020101faessay6559/khalil-shikaki/palestinians-divided.html "a 2002 article in Foreign Affairs magazine,"#> "Yasser Arafat has been neither an orchestrator nor a spectator of the second intifada; he has been its target. A young guard of Palestinian nationalists, angry at both Israel and the corrupt Palestinian Authority, lies behind the violence. Arafat must reform his government and secure a credible peace process -- before it's too late." I love the phrase "before it's too late." Journalists and politicians use it all the time as a cliché. Well, the government was never reformed, so now presumably "it's too late." Furthermore, as I've pointed out many times, the <#stdurl https://www.cia.gov/cia/publications/factbook/fields/2177.html "median age of the Gaza population is 15.8,"#> so it's pretty much the Young Guard generation that's running Gaza. The Boston Globe article summarizes their attitude toward Hamas as follows: "While the political leadership of Hamas and the other groups occasionally lays out terms for negotiating with Israel, such as the release of Palestinian prisoners or the cessation of attacks, the young fighters say they see politics as a dead end, an old man's game." This is one of the very few mainstream media articles I've read that show any insight into this situation, although it doesn't draw the obvious conclusions: That there's no point in negotiating with either Abbas or Hamas, since anything that these old men do or agree to is irrelevant to the young militants. Some people appear to believe that as the young militants grow older, they'll "mellow." According to Generational Dynamics research, that will not happen. As they grow older they'll retain the same attitude. This means that the number of "moderates" goes down every day, and the number of "militants" increases every day. Generational Dynamics predicts that the Mideast is headed for a new genocidal war, replaying the crisis war between Arabs and Jews of the 1940s. As <#hreftext ww2010.i.may01 "I wrote in 2003,"#> the disappearance of Yasser Arafat and Ariel Sharon would signal a generational change that would lead to a major conflagration within a few years. This prediction has been trending true with a vengeance. After Yasser Arafat died, there was a period of a few weeks, culminating in the election of Mahmoud Abbas as Palestinian President, when things appeared to be getting "hopeful." But since January, 2005, hardly a single day has passed when the situation hasn't gotten measurably worse. Israel's unilateral withdrawal from Gaza and the Palestinian legislative elections were events that were supposed to bring peace and freedom; instead, they were disastrous in just about every way possible. Generational Dynamics predicts that this descent into chaos will continue, irrespective of any of the 79 proposals in the Iraq Study Group report. =eod =// &&2 e061207 Can we 'flip Syria' and solve all the Mideast problems? =data ww2010.weblog.y2006.e061207.head Can we "Flip Syria" and solve all the Mideast problems? =data ww2010.weblog.y2006.e061207.keys =data ww2010.weblog.y2006.e061207.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061207.date 7-Dec-06 =data ww2010.weblog.y2006.e061207.txt1 Even by Washington standards, Wednesday was possibly the most bizarre day on record. =data ww2010.weblog.y2006.e061207.txt2 Journalist David Gergen was heard on CNN saying this on Wednesday: "This is the best moment we've had in over three years." His remark reflects the giddy mood throughout Washington, as Robert Gates was confirmed to replace Donald Rumsfeld as Secretary of Defense, and the Iraq Study Group released its report. I frequently heard the word "atmospherics." This refers to how much better things are today than they used to be. The evil monsters, George Bush and Don Rumsfeld, have been slain. Well, George Bush has been only partially slain, but if he doesn't shape up fast, he'll be fully slain by Christmas. The new "atmospherics" are great. It's because Bob Gates says "We're not winning the war, we're not losing the war, but the present policy isn't working." Why, that sentence alone prompted a "great atmospherics" remark from, of all people, Senator Ted Kennedy during the confirmation hearings. And Gates promised he'd confer with the Senators. Well, gawrsch, that's just what they were hoping to hear! It's a swell world now, isn't it. And that was just Tuesday. By Wednesday, when the new Iraq Study Group report was released, the mood of atmospherics had gone from giddiness to daffiness. The report has 79 recommendations. (For a PDF of the report, go to <#stdurl http://www.bakerinstitute.org/Pubs/iraqstudygroup_findings.pdf #>.) It says that there are no easy solutions. It says that we can't withdraw troops precipitously, or we'll create a calamity. It says we shouldn't stay there too long. So we're going to withdraw troops slowly, maybe by 2008. And we'll embed more American soldiers within Iraqi units so that we can train them better. It says we may win or we may lose, cause we don't know. Thus have we slain the evil Rumsfeld monster and his and Bush's evil "stay the course" policy, and replaced them with a brand new, wonderful, exciting policy to be administered by the wonderful, accommodating Bob Gates. Well, famous "anti-war" Democrat John Murtha, who wants all the troops pulled out of Iraq immediately and moved to Okinawa, did say, "Hey wait a minute. This is no different from the old policy!" But who cares about that. Murtha is a hero of the Democratic Party, one of the great monster-slayers. But he's got to get with the program. We don't worry about details any more. We're all into "atmospherics." To repeat what David Gergen said, "This is the best moment we've had in over three years." And indeed it is. No one could ever hope to top this, even in a TV situation comedy. There was one recommendation in the report that would represent a major change to existing policy, and that's the suggestion that we "talk to Iran and Syria," and get them to help us, which they'll be only too glad to do, of course. Actually, Jim Baker said that he doesn't have that much hope for Iran, but he did think we could "flip Syria" over to our side. Here's how he explained it in an interview with Fox News Channel's Brit Hume:

"If we could flip Syria away from Iran and toward their Sunni neighbors with which they used to have good relations, and towards the United States, we could cure Israel's Hizbollah problem and furthermore we could get the Syrians -- I'm convinced we could do this -- get the Syrians to convince Hamas to accept Israel's right to exist and that would give Israel a negotiating partner for the Palestinian track."

According to Hume, once they were off-camera, Baker held up his index finger and said, "Flip Syria! Flip Syria! Flip Syria!" It's just been a grand day. Well, let's see. Syria despises Israel. Syria is actively aiding Hizbollah and Hamas in their planned war with Israel, likely to occur within the next six months or so. And yet, Baker thinks the Syrians are going to see the error of their ways, and suddenly side with us. Well, I hope George Bush sends him over there to take a shot at it. It'll be fun to watch, anyway. But I could hardly believe my ears when he said, "Get the Syrians to convince Hamas to accept Israel's right to exist." Now, we've already told Hamas that they can get hundreds of millions of dollars in aid, if only they'll just recognize Israel's right to exist. Instead, Hamas is importing weapons as fast as possible through the porous border between Gaza and Egypt, preparing to join Hizbollah in the next assault. Furthermore, as I've pointed out many times, Gaza is run by children. The <#stdurl https://www.cia.gov/cia/publications/factbook/fields/2177.html "median age of the Gaza population is 15.8,"#> so it'll be kids making the decisions. And those kids couldn't be convinced to recognize Israel if a thousand Syrias asked them to. One more thing. What are we going to give Syria as an inducement to "flip"? We're going to give them the Golan Heights, the region adjacent to Syria that Israel won in the 1967 war and currently controls. Israel won't object to this because they're not invited to the negotiations that we'll supposedly be holding with Syria. The Israelis can learn about what happens by reading the newspapers. (Paragraph added on 7-Dec) Yes, folks, David Gergen said, "This is the best moment we've had in over three years." But maybe he's wrong. This may be the best moment we've ever, ever, EVER had. This is the way our country is going, folks. When I was a kid in the 50s watching Disneyland on TV, hosted by the real Walt Disney, my favorite land was Fantasyland, because that's where all the fun was, where the best atmospherics were. When I grew up, I thought I had given up Walt and Fantasyland. Little did I know at that time that I would one day start this web site, and that I would be writing about our own little Fantasyland, right here in good old Washington DC. =eod =// &&2 e061206c Deep Fritz computer beats world chess champion Kramnik, 4-2. =data ww2010.weblog.y2006.e061206c.head Deep Fritz computer beats world chess champion Kramnik, 4-2. =data ww2010.weblog.y2006.e061206c.keys =data ww2010.weblog.y2006.e061206c.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061206c.date 6-Dec-06 =data ww2010.weblog.y2006.e061206c.txt1 The world champion fought hard but was clearly outplayed overall =data ww2010.weblog.y2006.e061206c.txt2 in <#stdurl http://chessbase.com/newsdetail.asp?newsid=3524 "the six-game match."#> <#inc ww2010.pic g061206c.gif right "" "Kramnik vs Deep Fritz 10 - final scoreboard"#> Human world chess champion Vladimir Kramnik played remarkably well, often playing deeply intuitive and positional moves that frustrated Deep Fritz's attempt to defeat him on a purely tactical basis. Indeed, he may have had a winning position in game 2, but <#inc ww2010.weblog.ref e061130 "played an incredible blunder"#> that permitted mate in one. Games 1, 3, 4 and 5 were all hard-fought drawn games. <#inc ww2010.pic g061206d.jpg left "" "Human world chess champion Vladimir Kramnik (Source: SourceBase.com)"#> In Game 6, Kramnik went all out to try to win a game. As Black, he played the Sicilian Defense, an opening that provides lots of opportunities for a Black win, but is loaded with highly dangerous tactical opportunities for both sides. Frederic Friedel, spokesman for technical team that developed the <#stdurl http://www.chessbase.com/shop/product.asp?pid=304 "Deep Fritz software,"#> gave a prediction early in the game during the online real-time commentary led by Grandmaster Yassir Seirawan. He said (paraphrasing), "I'm going to make a prediction of what's going to happen -- not what I want to happen, but what will happen. Kramnik will play an even game with the computer, but sooner or later he's going to become aggressive and try to win. If he does that then he'll make a mistake, and Fritz will take the game." In an ordinary human versus human game, it's quite common for both sides to make tactical errors, and the advantage often passes back and forth between the two players. But "it's very hard to win against Fritz," according to Friedel. "To win the game, you have to beat Fritz on every move in the opening, in the middle game, and in the end game. Just one slip, and Fritz will win." That's pretty much what happened in this match. Kramnik's sophisticated powerful positional and intuitive play constantly kept Deep Fritz at bay, even gaining a small advantage in three of the games. But in the last game, wanting to win at least one game, he took a big risk and played a complex tactical opening. He made a couple of mistakes in the middle game, and Fritz was able to capitalize on those mistakes, finally exchanging Queens and transitioning into a clearly won endgame for Fritz. Friedel made a couple of other comments of great interest. He runs the ChessBase web site, which permits people around the world to play chess online with each other. He said that they've developed "secret" technology that allows them to detect whether a player is using a home computer to play his games on ChessBase. This technology watches several of the player's games and, if repeated use of a computer is detected, then the user is banished from the system. The current version of the computer software is Deep Fritz 10, with many sophisticated enhancements to earlier versions of the Fritz chess program. Earlier versions of the software were a lot weaker chess programs than the current version. However, Friedel pointed out that even earlier versions of Fritz are very strong today. "Fritz 3 was a weak chess player when it came out, but it's a very strong player today because computers have become so much more powerful." This emphasizes the point that <#inc ww2010.weblog.ref e061130 "I made last week"#> that the sophistication of the computer software is much less important than the speed of the computer. With an older computer, Fritz 3 may only have had time to look ahead 5 or 6 moves, but with newer, faster computers, it might look ahead 10-12 moves, making it a much more powerful chess player, even though the software algorithms are the same. According to Friedel, chess software running on a slower computer almost always plays the same moves as on a much faster computer, but there will be perhaps 2 or 3 moves in the whole game where the software plays a different move on a faster computer -- and those 2 or 3 moves make all the difference between winning and losing. This remark shows the way how computers and humans can play in the future. It had been thought that once computers got to be better than humans, then they would quickly become so much better that there would be no point in a human ever trying to play against a computer again. But this problem can be easily fixed by "handicapping" the computer, and giving it less time to "think." In the match just completed, each side had two hours to make 40 moves, averaging 2½ minutes per move, and with this timing the computer was able to defeat the world champion. Next time, we could allow the human champion to have two hours to make 40 moves, but limit the computer to only one hour for 40 moves. The would presumably weaken the computer's play enough to make it an even match. For many years, I've heard people say that a computer would never beat the best human chess players, because computers don't have "intuition." The current victory puts that argument to rest, especially because Kramnik is considered to be the best "intuitive" player in the world. This match also pretty much puts to rest the argument that "a computer will never be as intelligent as a human being, because the human mind has potentially infinite capabilities." Actually, the human mind has nowhere near infinite capabilities. A human being getting through the day has only a few choices to make at each point: "Do I drive to work, or take the bus?" A soldier in a war also has only few choices: "Do I shoot at one of those enemy soldiers -- and if so, which one? -- or do I retreat?" Computer chess software today uses the same "minimax algorithm" that the first computer chess program used in the 1960s. This algorithm says, "I can make moves A, B, C or D. What will my opponent do in each case? If I do B then will my opponent do X, Y or Z? In each case, I want to MAXIMIZE my chances, and MINIMIZE my opponents' chances." This analysis can continue to any depth, depending on the time available. A super-intelligent computer will be able to "think" using a similar minimax algorithm. "What will happen if I do A, B, C or D? If I do B, then either X, Y or Z will happen. What do I do next in each case?" Of course there are more choices to make during a day than the number of moves in a chess position, but not infinitely more. Computers double in computational power every 18 months, and by 2010 or shortly thereafter, computers will be more powerful than the human brain. By 2020, we'll have intelligent robots doing chores that humans don't want to do -- cleaning up waste sites, 24-hour nursemaids, and so forth. Within a few more years, intelligent robots will also be doing scientific research to develop improved versions of themselves, so that intelligent robots will eventually be far more intelligent than human beings. The point in time where intelligent robots are essentially in control of their own destiny is called "The Singularity," because there will be a bend in the exponential growth technology curve. There is no way to have any idea what's going to happen to the world after that point. The development of a world champion chess playing computer lights the pathway that will lead to those events. =eod =// &&2 e061206b Hans Redeker predicts "hard landing" recession 2007 =data ww2010.weblog.y2006.e061206b.head Hans Redeker predicts "hard landing" recession to hit early in 2007 =data ww2010.weblog.y2006.e061206b.keys =data ww2010.weblog.y2006.e061206b.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061206b.date 6-Dec-06 =data ww2010.weblog.y2006.e061206b.txt1 In the most negative mainstream media economic forecast I've seen, =data ww2010.weblog.y2006.e061206b.txt2 Hans Guenter Redeker has predicted a serious recession in the United States early in 2007. Redeker is Global Head of Foreign Exchange Strategy at BNP Paribas, the largest European banking group. He made his comments this morning on CNN International. <#inc ww2010.pic g061206a.jpg right "" "Hans Guenter Redeker (Source: Bloomberg video)"#> Mainstream economists recently have been predicting a slowdown in growth or, at worst, a "soft landing," meaning a recession so small we'd hardly feel it. Even normally upbeat economists lowered their forecasts over the weekend, following <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aJ07TizPV.7g&refer=home "a report last Friday from the Institute for Supply Management (ISM)"#> indicating an unexpected shrinking of manufacturing in the U.S. The fall in manufacturing is attributed to the secondary effects of the housing market collapse, as related industries (furniture, appliances, etc.) are also affected. However, Redeker predicts that the effects of the housing market collapse are worse than most economists are predicting. He indicated that the effects may start to become evident on Friday when the November employment report comes out. <#inc ww2010.pic g061206b.gif left "" "Euro to Dollar exchange rate for last year"#> The value of dollar against the euro has fallen sharply in the last year, as shown in the adjoining graph (which shows that the value of euro against the dollar has been rising). This fall in the dollar, which Redeker says has been expected for a while, has been accelerating in the last few weeks. Redeker says that BNP Paribas' forecast is that the dollar will continue to fall, to $1.35 per euro in the first quarter, and to $1.40 per euro in the second quarter. Redeker is also deviating far from mainstream Fed forecasts. He's predicting that the Fed will lower interest rates very rapidly next year, totaling a 2.5% reduction by the end of 2007. He says that for the first time in years, interest rates in Europe may be higher than those in America. From the point of view of Generational Dynamics, the piece missing from all this is the piece whose timing can't be explicitly predicted: A generational panic and stock market crash. Major <#hreftext ww2010.i.macro061025 "international financial panics have occurred throughout history"#> at regular 70-80 year intervals. The major financial crises since the 1600s have been identified as follows: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857 (Panic of 1857), and 1929 Wall Street crash. At the present time, <#hreftext ww2010.i.050711eleven "the stock market is overpriced by a factor of about 240%,"#> and with price/earnings ratios around 20 or higher since 1995, a panic is long overdue. Such a panic is expected to lead to a fall to the Dow 3000 range, with the price/earnings ratio index falling well below 10. Note that the P/E ratio index has fallen below 10 several times in the 20th century, most recently in 1982, so this is a common occurrence. The world is changing very, very rapidly right now. As I'm writing this, the Iraq Study Group report is being released. Despite the giddy expectations that politicians and journalists have for this report, it apparently has no great solutions, and doesn't call for any scheduled withdrawal. This is no surprise to any regular readers of this web site, but there may be a strong public reaction when it sinks in that we're still "trapped in Iraq." Public opinion is changing rapidly these days, moving in the direction of becoming increasingly confrontational, and a "hard landing" recession can only accelerate the confrontational mood even more. =eod =// &&2 e061206 China says that its economy is "sound and stable" =data ww2010.weblog.y2006.e061206.head China says that its economy is "sound and stable" =data ww2010.weblog.y2006.e061206.keys =data ww2010.weblog.y2006.e061206.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061206.date 6-Dec-06 =data ww2010.weblog.y2006.e061206.txt1 But dissident newspaper "Epoch Times" says China's economy and Communist Party are crumbling. =data ww2010.weblog.y2006.e061206.txt2 Not only is China's economy "sound and stable," according to official Chinese publications, but the one problem it has had -- overheated growth during the last few years -- has been "reined in" by China's "macro economy regulation [that] has been timely, effective, and without drastic fluctuations." "The macro economic regulation policies will continue and remain stable in the fourth quarter and the near future to build a solid foundation for economic development next year," said Zhu Hongren, a senior official with the National Development and Reform Commission, as reported in <#stdurl http://www.chinadaily.com.cn/china/2006-11/27/content_743153.htm "a story in China Daily,"#> an official government English-language news publication. On this web site I normally reference only the most widely distributed mainstream media sources, in order to maintain the highest possible level of credibility. However, that's a problem with China, a society that's almost completely opaque to the outside world, and whose news publications and even Internet postings are tightly controlled by the government, which is in turn controlled by the Chinese Communist Party (CCP), the only legal political party. China's mainstream news publications are thus all required to present the most positive possible picture of China's society and economy. Thus, we only learn about massive regional rebellions when news leaks out from dissident sources, and China has even had a long record of refusing to release full data on health emergencies, including dangerous diseases like SARS and bird flu. The situation has actually been getting worse recently, if that's possible. The 2008 Olympic games will be played in Beijing, and the CCP has been going overboard to project a favorable image of a modern country as 2008 approaches. Outside of China, the best known dissident paper <#stdurl http://www.theepochtimes.com/ "The Epoch Times,"#> which claims to have 1.4 million readers. The paper was originally launched in May 2000 as part of the Falun Gong dissident movement which, itself, was launched after the 1989 Tiananmen Square massacre, where thousands of college students demonstrating against CCP policies were massacred. Since then it's become an international "human rights" newspaper, emphasizing China. =inc ww2010.h2 fallout "Fallout from Tiananmen Square massacre" The Tiananmen Square massacre has been almost forgotten in America, and has been "erased from history" by the CCP, as much as it can, but it's China's most significant and far-reaching cultural event for many decades, and it spawned the massive Falun Gong dissident movement in China. Since it's illegal to form another political party in China, Falun Gong can almost be considered a dissident political party. Of course belonging to the Falun Gong movement is also illegal in China -- and harshly punishable. On Taiwan, there was a parallel development. Although Taiwan freely permits opposition political parties, the Kuomintang Party (KMT) had won every election since it was formed by nationalist group fleeing China after losing the civil war with Mao Zedong. However, the Tiananmen Square massacre spawned in 1990 the student-led Wild Lily rebellion, favoring Taiwanese independence from China, and led to the formation of the Democratic Progressive Party (DPP), which has been in power since it won in 2000. So the Tiananmen Square massacre of 1989 has led to powerful dissident movements in both China and Taiwan, as well as to dissident sources of information, including the Epoch Times. These occurred as a reaction to the massacre but also because of major generational changes: By the 1990s, the generation of people who fought the 1940s civil war in China were mostly gone, replaced by younger generations of people who, as usual, are far more assertive and risk-seeking, and are uninterested in the "old men's parties," China's CCP and Taiwan's KMT. =inc ww2010.h2 panic "Panic over loss of CCP membership" So when Epoch Times publishes <#stdurl http://www.theepochtimes.com/news/6-12-4/48925.html "publishes an article claiming that CCP officials are panicking over loss of membership,"#> the claim is consistent with generational theory and is quite credible. After all, the Chinese are very well aware that Russian Communism collapsed in 1991, and they fear the same thing in China. The article quotes published figures showing a dramatic loss of CCP membership in the 1985-91 time frame, which makes sense after the Tiananmen Square massacre. It claims that membership has continued to fall since then, and that also makes sense, thanks to generational changes. The loss of CCP membership in China parallels loss of KMT membership in Taiwan, and also parallels loss of membership of "older generation" American organizations, such as labor unions and feminist enterprises, during recent decades. The dismal state of the economy is the subject of <#stdurl http://www.theepochtimes.com/news/6-12-4/48913.html "another article,"#> where the paper quotes government sources that indicate that unemployment is very high and becoming increasingly serious. According to the article, China's Minister of Labour and Social Security, Tian Chengping, "said that the severity of China's unemployment problems and the complexity of the situation have not been experienced by any other country... [T]he grim situation is the result of a severe imbalance between supply and demand and an outdated labour market structure. The rapid influx of workers from rural areas to urban centers worsened the situation in cities that were already bulging with unemployed workers." These claims are quite credible. It's well known that well over a hundred million peasants have flooded into the cities as itinerant workers looking for factory work, to make money to send back to their poverty-stricken families on the farm. China has been aggressively eliminating state-owned enterprises in recent years, and the article points out that this has caused a great deal more unemployment. In addition, the number of unemployed university graduates is at least 5-6 million. =inc ww2010.h2 optimism "The optimistic view of the economy" The dire unemployment state in China contrasts not only to the "sound and stable" description given by government-controlled media, but also contrasts with the extremely optimistic views held by Chinese leaders, according to <#stdurl http://www.morganstanley.com/views/gef/archive/2006/20061201-Fri.html#anchor4026 "an analysis by Stephen S. Roach,"#> Chief Economist at Morgan Stanley. In his recent trips to China, Roach found that the Chinese are not facing up to the dangers that global problems would present to China's "seemingly Teflon-like economy." "With visible signs of the boom literally everywhere you turn and an IPO-led stock market surging its way back toward the highs of early 2001, the mood remains as ebullient as ever," says Roach. "While the latest monthly data are flashing signs of a slowdown, you would never know that in meeting with key decision-makers in Beijing. The Chinese seem to be paying lip-service to the rebalancing imperatives that I and other macro types continue to stress...." This is an interesting statement in view of what Roach wrote in May of this year, <#inc ww2010.weblog.ref e060502 "when he suddenly turned "optimistic on the world economy.""#> Why? Because "the world is finally taking its medicine -- or at least considering the possibility of doing so." In other words, central banks for the first time were talking about taking the steps to correct global imbalances. I mocked this change of heart, pointing out that talking is different from doing. At any rate, Roach now seems to have fully recovered from his momentary state of denial, as he says that "The Chinese seem to be paying lip-service to the rebalancing imperatives...." In other words, they've been talking, but not taking action. The most serious of the global imbalances to which Roach refers are exports from China to America. Exports account for a huge 35% of China's economy, "making it, by far, the most externally dependent major economy in the world today," and America is China's largest export market. A reduction in those exports would deal a severe blow to China's economy, with severe implications for unemployment. He points to two major dangers to the Chinese economy that are "American-made":

The high risk of Washington-led trade protectionism, supposedly to protect American jobs. "China doesn’t fully grasp the significance of the coming political power change [resulting from the recent Congressional election] and the deeply-rooted bipartisan anti-China sentiment that pervades both houses of the US Congress." This protectionism will be considered extremely offensive to the Chinese, and will, of course, reduce the level of exports. It's worth remembering that in 1930, a year after the 1929 stock market crash, Congress passed the Smoot-Hawley Tariff act against the advice of almost all economists. This act shut down Japan's silk exports to America, infuriating them and triggering a series of events that led to the bombing of Pearl Harbor in 1941.
The second danger is a sharp slowdown in the American economy, as is being predicted by more and more mainstream economists. There are a number of reasons a downturn is considered increasingly certain: A big decline in the housing market, a big downward revision to personal income in the third quarter, and a major collapse in capital spending activity in October. This slowdown would strike at the heart of China's exports to America.

Roach concludes: "China’s performance has been so impressive for so long that I sense a growing tendency to take the boom for granted. Reflecting this belief, I am starting to detect an important shift in the Chinese mood, with long-entrenched feelings of self-doubt now giving way to a new-found confidence. There’s nothing wrong with confidence -- it can be a critical element of any successful economic development strategy. But confidence must be on solid ground to fuel sustainable growth. Lacking in support from internal private consumption, the Chinese confidence factor is increasingly dependent on a powerful export-led growth dynamic and associated gains in fixed investment -- both very much tied to the open-ended expansion of China’s outward-looking export production platform. This could turn into a surprisingly precarious situation. What happens if the narrow underpinnings of China’s growth strategy are undermined by the twin surprises of Washington-led protectionism and a sudden deterioration in the US economy? Beijing is unprepared for either of those possibilities -- as is, I’m afraid, the rest of the world." In other words, China's leaders are totally in a "state of denial." =inc ww2010.h2 generation "Generational splits in China" People are always very startled when I tell them that we're heading for a major war with China, but from the point of view of Generational Dynamics, all the pieces are falling into place. According to Epoch Times, the <#stdurl http://www.theepochtimes.com/news/6-12-4/48925.html "CCP is so concerned about loss of membership"#> that it's going all out on a public relations campaign. The Central Committee of the CCP are requiring all Chinese officials at or above the county level to watch a movie scripted by a friend of Chinese President Hu Jintao. Entitled "Peace with Sword in Hand: The Historical Lesson from the Collapse of the Soviet Union Communist Party," the movie purports to draw lessons from the collapse of Communism in Russia, in order to prevent a similar crisis in China. The movie criticizes Russia's discarding of the teaching of Josef Stalin who, as we know, joins Hitler and Mao as the three bloodiest tyrants of the 20th century, causing the deaths of tens or hundreds of millions of people. However, the movie praises Stalin, and concludes that the reason for the collapse of Russian Communism came from loss of control in ideology, causing changes in "the opinion of their carefully educated elites. These elites, along with some institutional and economy management officials, some gray economic powers as well as crime forces became gravediggers for [Russian Communism]." The movie's conclusion, based on the ideology that "USA-led global capitalism would finally be replaced by CCP-led global socialism" in the 21st century, the ultimate goal is to "liberate the entire human race." The CCP has stated repeatedly that in order to achieve "global socialism" and "control the world," the only means is to resort to "military power." This sentiment is very similar to the one in a North Korean billboard whose picture <#inc ww2010.weblog.ref e060719 "I posted a few months ago:"#> <#inc ww2010.pic koreabb.jpg center "" "Prominent billboard in Pyongyang, North Korea, 2003. The right-most frame shows a North Korean spearing an American with a bayonet."#> North Korea is a country on the verge of starvation, for which they blame the United States, and so the attitude towards Americans is absolutely lethal. Kim Jong-il encourages that attitude so that angry citizens won't blame his government. The Chinese people's attitudes aren't yet as lethal as the Koreans, but the Chinese elite are preparing them. Meanwhile an internal conflict is building within China itself. Leading it are people from China's "Miserable Generation," the post-war generation (arrogant and narcissistic, like our Boomers) that starved in the 1950s because of Mao's "Great Leap Forward," and got no education in the 1960s because of Mao's "Great Cultural Revolution." These people form the heart of the Falun Gong dissident movement, supported by the college-age generation of itinerant kids who are struggling to make a buck .. I mean a Yuan, to send back to their starving families on the farm. Arrayed against them are the wealthy CCP elites and their relatives and friends who own the property and have the privileged jobs. This is exactly the kind of generational mix that leads to crisis wars, especially when combined with China's aggressive militarization program of the last ten years. A financial problem will quickly exacerbate China's economic problems, with massive unemployment and poverty, especially rural poverty. The CCP will work to turn the widespread fury against Japan and America. China's declaration of war against America will be met with widespread happiness and jubilation. What, you didn't know? When these wars start, the immediate reaction among the people is anticipatory celebrations of victory, and pleasure at the coming humiliation of the hated enemy, as described by historian Wolfgang Schivelbusch. It's only at the first major battlefield loss that the public begins to feel a complete crushing of self-confidence, followed by almost complete paralysis, in the words of historian Carl von Clausewitz. These kinds of hysterical reactions are what makes the difference between generational crisis wars, and ordinary non-crisis wars such as the Iraq and Afghan wars. The Chinese, the Koreans, the Japanese and Americans will all go through this roller coaster ride of from jubilation to panic and paralysis, and this pure visceral emotion is what makes crisis wars far worse than anyone who hasn't live through one can ever imagine. =eod =// &&2 e061204 A letter to CNN's Reliable Sources =data ww2010.weblog.y2006.e061204.head A letter to CNN's "Reliable Sources" =data ww2010.weblog.y2006.e061204.keys =data ww2010.weblog.y2006.e061204.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061204.date 4-Dec-06 =data ww2010.weblog.y2006.e061204.txt1 On Sunday's show, host Howard Kurtz requested e-mail comments on the "civil war" question. =data ww2010.weblog.y2006.e061204.txt2 The show is supposed to be a "critical look at the media." Here's the e-mail message I sent:

From: John J. Xenakis 
To: Howard Kurtz 
Subject: The "civil war" question

Dear Mr. Kurtz,

I take strong exception to the conclusions reached by your Sunday
discussion on the "civil war" question.

Your reporter listed "facts that cannot be denied" about the war in
Iraq, but her selected "facts" were carefully chosen.

Let's look at some "facts that can't be denied" that she and you
ignored:

(*) The Thanksgiving day attack on Sadr City with 5 car bombs has
    nothing to do with a civil war; it was a terrorist attack,
    conducted by suicide bombers who weren't even Iraqis.  It's
    similar to the 9/11 attacks on our WTC, and that wasn't a civil
    war either.

    Why didn't you ask about that "fact that can't be denied"?

(*) After the attack, al-Sadr gave a press conference in which he
    blamed al-Qaeda, not the Sunnis.  If there's a civil war going
    on, why didn't he blame the Sunnis?  Another fact that you
    ignore.

(*) A couple of days later, al-Sadr announced that for two months
    he's been working with Sunni leaders to create a "national front"
    government bloc with Sunnis, Shiites and Christians, to challenge
    the Maliki government politically.

    If there were a real civil war going on, that kind activity would
    be impossible.  You can't simultaneously be killing people and
    forming an alliance with them.

    That's another "fact that can't be denied" that you ignored.

(*) You quoted Michael Ware as saying, "If this isn't a civil
    war, then I'd hate to see a real civil war."  What, is this guy a
    moron? There's a civil war going on today in Darfur.  Does this
    guy have any idea what's going on in the world?

    Why haven't you used the REAL civil in Darfur to challenge your
    guests?  Or how about the REAL civil war in Rwanda in 1994?

(*) NBC's "civil war" announcement was not just "grandstanding,"
    as your guest cravenly described it. NBC's admitted intention was
    to create a "Walter Cronkite moment" by giving a political
    advantage to America's enemy, to cause support for the war to
    "erode," so that America will lose the war, as it lost the Vietnam
    war.

    NBC didn't have to make a big announcement, but they did
    admittedly to harm America.  Why didn't you ask the NBC
    representative why they want America to lose the war?

    You don't think that's fair?  Well why not, when all of your
    guests repeatedly question the motives of the Administration in
    the most offensive way possible?  Why don't you ever question the
    motives of your guests?

(*) A related matter: On 11/26, Jordan's King Abdullah had to
    lecture George Stephanopoulos on the importance of the critical
    Israeli/Palestinian problem.  Abdullah had to repeat it five
    times, and still Stephanopoulos didn't have a clue what he was
    saying. Later, Stephanopoulos smirked and joked about what
    Abdullah had said. To me, Stephanopoulos looked like an idiot, and
    I'm sure he did to King Abdullah as well.

    Why don't you cover that debacle on your program?

These are all questions and "facts that can't be denied," but you and
your guests are so steeped in ideology that you don't ask anything
that's the slightest bit confrontational.  You're not there to be
critical of journalists; you're there to condone and excuse even the
most opprobrious behavior of journalists.

You and your reporters are very quick to identify "facts" that
support your ideology, and quick to ignore those that don't.

If you'd like more details on the above matters, I invite you to read
my web site, where more details are given, and links are provided to
the mainstream media news sources:

Al-Sadr and Sunni alliance:
http://www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.weblog&i=e061201#e061201

NBC Announcement:
http://www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.weblog&i=e061129#e061129

King Abdullah and Stephanopoulos:
http://www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.weblog&i=e061126#e061126

I took a lot of time to write this message, and it's a valid
criticism of your program and of journalists in general.  I would
appreciate a response.

Sincerely,

John J. Xenakis

I requested a response, but I won't be holding my breath. As a separate matter, United Nations Secretary-General Kofi says that Iraq is "worse than a civil war," in <#stdurl http://news.bbc.co.uk/2/hi/in_depth/6205056.stm "an interview that the BBC can't stop talking about."#> So what does that mean? Is Iraq worse than the civil war going on in Darfur, where hundreds of thousands of people have been killed, and millions have been displaced, starved and raped? Is it worse than the civil war in 1994 in Rwanda, where one ethnic group rose up and killed a million of their neighbors of another ethnic group? Is it worse than the 1970s "killing fields" civil war in Cambodia, where the Communist Khmer Rouge forced millions of people out of the city into labor camps, where they were starved, tortured and killed? Ironically, Annan did talk about the Darfur genocide in another part of the interview, conveniently neglecting to compare that civil war to the so-called "worse than civil war" in Iraq. All these examples show how far-gone today's journalists and politicians are in the sewer of ideology. Nothing makes any difference except for politics. From the point of view of Generational Dynamics, this is lead-up to every major crisis war. When the major "clash of civilizations" world war begins, a lot of this idological nonsense will stop. =eod =// &&2 e061201 Lebanon: Hizbollah calls for massive protests on Friday =data ww2010.weblog.y2006.e061201.head Lebanon: Hizbollah calls for massive protests on Friday to bring down government. =data ww2010.weblog.y2006.e061201.keys =data ww2010.weblog.y2006.e061201.loc ww2010.weblog.log0612 =data ww2010.weblog.y2006.e061201.date 1-Dec-06 =data ww2010.weblog.y2006.e061201.txt1 Moqtada al-Sadr tries to do the same in Iraq =data ww2010.weblog.y2006.e061201.txt2 <#inc ww2010.pic nasral3.jpg right "" "Hezbollah leader Hassan Nasrallah, on television Thursday calling for demonstrations in Beirut on Friday (Source: CNN)"#> Hassan Nasrallah, the leader of Hezbollah, <#stdurl http://english.aljazeera.net/NR/exeres/8F0A41D6-900E-4BA7-81B0-D6A74CAFD47D.htm "gave a televised speech on Thursday:"#> "We appeal to all Lebanese, from every region and political movement, to take part in a peaceful and civilised demonstration on Friday to rid us of an incapable government that has failed in its mission." Street action is to begin at 3 pm (1300 GMT, 9 am ET) in central Beirut. I'm watching CNN International as I'm typing this, and they're giving it cataclysmic coverage. I'm a lot more sanguine about this than many people are. After the <#inc ww2010.weblog.ref e061122 "recent assassination of Lebanese Minister cabinet minister Pierre Gemayel,"#> many people fear that this kind of action could lead to a civil war, as <#inc ww2010.weblog.ref e061126 "Jordan's King Abdullah warned last weekend."#> However, dear reader, if you've been reading this web site for a while, then you know very well that a civil war in Lebanon is impossible at this time because Lebanon is in a generational Awakening era, just one generation past the bloody civil war of the 1980s. In fact, this kind of political chaos is typical of generational Awakening eras in any country. Look what happened during <#hreftext ww2010.i.sixties040501 "the 1960s, America's last generational Awakening era."#> It began in August 1963, when Martin Luther King led a march on Washington in which over 200,000 people participated. Later, President Kennedy was assassinated, and so was King. There were numerous demonstrations and riots throughout the country. There were "long, hot summers," led by the Black Panthers, and there were bombings and declarations of war against the government, led by the Weather Underground. President Lyndon Johnson was driven from office, and the climax was when President Richard Nixon was forced to resign. The same thing is going on in Lebanon right now, and it doesn't mean a massive civil war, or a "failed state," as some pundits are calling it. It's just political turmoil of a kind that always happens in generational Awakening eras. If it leads to a new government in Lebanon, that's not necessarily a disaster. <#inc ww2010.pic alsadr2.jpg left "" "Shiite cleric Moqtada al-Sadr at a press conference on Thursday (Source: CNN)"#> For the same reason, I'm not particularly worried about the latest announcement by Iraqi Shiite cleric <#stdurl http://www.cnn.com/2006/WORLD/meast/11/30/iraq.politics/ "Moqtada al-Sadr to form an alliance with Sunnis and Christians,"#> and replace the government. <#hreftext ww2010.i.sixties040501 "Iraq is also in a generational Awakening era,"#> and a new government would be like the forced resignation of President Nixon in 1974 America. In fact, it might bring together Sunni and Shiite factions that are now part of the insurgency and reduce the level of violence. You know, there's a part of the Iraqi story that I never hear about, even though it must be there -- like the Sherlock Holmes' story about "The dog that didn't bark." Why haven't the Iraqi people themselves found a way to end all this violence? None of the suicide bombers are Iraqis, but they're supported by criminal organizations within Iraq itself that are killing Iraqis. Well, perhaps this proposal by al Sadr is the way. Come to think of it, it took several years for the FBI to bring down Al Capone, and several decades to decimate the Mafia, so maybe this proposal is the process by which it will happen in Iraq. So, as I said, I wouldn't actually be that concerned if al Sadr ended up leading a new government in Iraq. But that's not to say that all is well. The core problem in the Mideast is still the Israeli/Palestinian problem, and the Palestinians and Israelis are in a generational Crisis era, heading soon for a major genocidal war. Thus the latest news -- that <#stdurl http://www.ynetnews.com/articles/0,7340,L-3334801,00.html "Palestinian President Mahmoud Abbas (Abu Mazen) has given up"#> trying to form a "unity government" of Fatah and Hamas, and may himself be planning to resign as President -- is considerably more ominous. Any governmental change among the Palestinians will give additional government control to Hamas and to the radical Palestinian kids, especially in Gaza where the <#stdurl https://www.cia.gov/cia/publications/factbook/fields/2177.html "the median age is 15.8,"#> and the kids with guns and missiles are running things. Furthermore, new governments in Lebanon and Iraq, while perhaps not a problem by themselves, would probably be closer to Iran. Currently, the governments in Lebanon and Iraq are considered to be U.S. allies; new governments, especially a Hizbollah-based government in Lebanon, would not be. From the point of view of Generational Dynamics, none of this really matters. Generational Dynamics predicts that the Mideast is headed for a major genocidal war between Israelis and Arabs that will engulf the entire region. As usual, Generational Dynamics tells us where we're going, but not how we're getting there. If new governments in Iraq and Lebanon are part of the scenario, then all we can do is watch and wait. =eod =// &&2 e061130 Deep Fritz 10 vs Kramnik: 2-1 after 3 games =data ww2010.weblog.y2006.e061130.head The computer is beating world chess champion 2-1 in the "last opportunity" for human being to win =data ww2010.weblog.y2006.e061130.keys =data ww2010.weblog.y2006.e061130.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061130.date 30-Nov-06 =data ww2010.weblog.y2006.e061130.txt1 With three games yet to go, the match spotlights the strengths of computers and humans. =data ww2010.weblog.y2006.e061130.txt2 It's called <#stdurl http://www.rag.de/microsite_chess_com/index.html "The World Chess Challenge -- Man vs. Machine."#> In one corner is the <#stdurl http://www.kramnik.com/default.aspx "human world chess champion, Vladimir Kramnik."#> In the other corner is the <#stdurl http://chessbase.com/newsdetail.asp?newsid=3511 "computer world chess champion, Deep Fritz 10."#> Before the match began last Saturday, <#stdurl http://www.kramnik.com/eng/news/viewarticle.aspx?id=111 "Kramnik characterized the match as follows:"#> "My match against the Fritz-10 computer program may be decisive, as it may well be the last chance that a human has to defeat the machine." He explained, "It is very important for me, but I understand that the task in front of me is very hard, as computers are playing very strongly, and they improve each year. It is also a decisive match, as maybe it will be the last chance for a human being to defeat a machine. But even though I am very enthusiastic I know that it will be very difficult, as the computer is capable of calculating an incredible number of moves." Indeed, Deep Fritz can examine 1.8 million chess positions per second, while a human being can only hope to think about a few dozen per minute. How can a human being have any hope of winning a game? Because humans have intuition and instinct, capabilities that are hard to program in a computer. You can review all three games so far by going to the <#stdurl http://www.spiegel.de/static/chessbase/index-en.html "Spiegel Online Man vs Machine site."#> At the same site, you'll also be able to follow the remaining games live, as they're being played in Bonn, Germany. The remaining games will be played on Friday, Sunday and Tuesday, December 1, 3 and 5, with each game beginning at 3 pm in Germany (9 am, New York time). <#inc ww2010.pic g061129b.gif right "" "Kramnik vs Deep Fritz 10 - scoreboard after 3 games"#> According to experts, <#stdurl http://www.iht.com/articles/ap/2006/11/29/europe/EU_GEN_Germany_Chess.php "Kramnik outplayed the computer for most of the first two games,"#> and played equally well as the computer in the third game. So why is the computer ahead, two games to one? Because of an incredible blunder, an oversight by Kramnik in game 2. <#inc ww2010.pic g061129.gif center "" "White has just captured Black's Rook on f8 with his Knight. Incredibly, Black played Qe3??, completely overlooking White's Qh7 checkmate!"#> Kramnik had played very carefully and was in a drawn position, when he was hit by "chess blindness," and overlooked mate in one! This kind of blunder is very rare among chess grandmasters, but it does happen. After all, they're only human! This illustrates one of the many advantages that computers have over humans: They don't get chess blindness. They get don't tired. They don't get cute. They just compute their best move and play it, with computer-like efficiency. <#inc ww2010.pic theturk.gif left "" "The Turk - Chess Playing Automaton"#> Chess is a game with a long history, centuries old, and the search for a chess playing machine is almost as old. Chess history is replete with stories of attempts to build automata that could play chess, carnival hucksters that fascinated gullible townfolk with large mechanical contraptions that could mysteriously make moves on chessboards, but which really contained a chess playing dwarf inside. The most famous was "The Turk," an enormous contraption that toured Europe and America in the late 18th and early 19th centuries, defeating such luminaries as Benjamin Franklin and Napoleon, and apparently fooling everyone. Edgar Allen Poe wrote that something isn't right about the Turk, since it occasionally made mistakes and a true machine would play flawless chess and would always win. When the field of "artificial intelligence" (AI) was invented in the 1950s, the game of chess was considered a goal within reach. In 1957, AI researchers expected a chess-playing computer to be world champion within ten years or so. And yet by 1970, the best chess-playing computer was little better than a beginner. The researchers were unable to develop algorithms and heuristics that could mimic the reasoning of a chess master or grandmaster. Nonetheless, today's chess-playing computers play at world champion level. How did computers get so good in 30 years? It turns out that the chess-playing algorithms used in today's computers are really not much different from the algorithms used in 1970. So why are they doing so much better today? It's because computers are much more powerful. A chess-playing algorithm could only look 3 or 4 moves ahead in 1970, but can look 8 to 12 moves ahead today, because computers are much more powerful. This example illustrates, in a sense, how much of a failure artificial intelligence research has been. Back in the 50s, 60s, and 70s, researchers were expecting to find elegant algorithms and heuristics that would make computers match humans in a variety of areas -- game playing, voice recognition, natural language processing, computer vision, theorem proving, and so forth. But the fact is that AI researchers have failed to do so in every area. Instead, they've had to fall back onto "brute force" algorithms. The phrase "brute force" was meant to be pejorative, but now it's really become the only game in town. What "brute force" means is to use the power of the computer to try every possibility until one works. Kramnik believes that his match with Deep Fritz is decisive because it may "be the last chance for a human being to defeat a machine." That's because computers get more powerful each year. They double in computational power every 18 months. Soon they'll be far more powerful than the human brain. As <#hreftext ww2010.i.robot040709 "we discussed in conjunction with the release of the movie I, Robot in 2004,"#> supercomputers will be as intelligent as human beings by 2010 or so, and autonomous super-intelligent desktop or mobile computers will be surging in the 2020s, and will take over a variety of jobs: a computer plumber, a computer nursemaid, a computer soldier. Even more striking is that the Army is planning to deploy its <#inc ww2010.weblog.ref e050228 ""Future Combat System""#> which calls for autonomous robot soldiers by 2014. In fact, the development of super-intelligent computers is proceeding rapidly in countries around the work. <#inc ww2010.pic singul1.gif right "" "The Singularity"#> By the 2020s, intelligent robots will also be doing scientific research to develop improved versions of themselves, so that intelligent robots will eventually be far more intelligent than human beings. The point in time where intelligent robots are essentially in control of their own destiny is called "The Singularity," because there will be a bend in the exponential growth technology curve, as shown in the adjoining graphic. There is no way to have any idea what's going to happen to the world after that point. From the point of view of Generational Dynamics, the human race is about to face its greatest challenge in history. First, we'll see the "clash of civilizations" world war. Then we'll see a period "easy living," as intelligent computerized devices, from computer nurse to computer plumber, will take over all the difficult jobs we hate to do. Then the Singularity will occur, and humans will no longer be the most intelligent entities on earh. <#inc ww2010.pic future.gif center "" "The Future"#> My own estimate is that the Singularity will occur between 2025 and 2030, though other analysts' estimates put it as late as 2040 or 2050. =eod =// &&2 e061129 News as theatre: NBC announces it will call Iraq war a 'civil war' =data ww2010.weblog.y2006.e061129.head News as theatre: NBC announces it will call Iraq war a "civil war" =data ww2010.weblog.y2006.e061129.keys =data ww2010.weblog.y2006.e061129.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061129.date 29-Nov-06 =data ww2010.weblog.y2006.e061129.txt1 On Monday morning on the "Today Show," =data ww2010.weblog.y2006.e061129.txt2 <#stdurl http://www.msnbc.msn.com/id/15925399/ "Matt Lauer announced,"#> "NBC News has decided a change in terminology is warranted -- that the situation in Iraq with armed militarized factions fighting for their own political agendas -- can now be characterized as a civil war." Once again, we're dealing with a situation that's so bizarre that it's laughable. Remember the caliber of people we're dealing with: On Sunday's This Week With George Stephanopoulos, <#inc ww2010.weblog.ref e061126 "King Abdullah II of Jordan explained FIVE TIMES to Stephanopoulos"#> that the "core problem" in the Mideast was the Israeli/Palestinian problem, and Stephanopoulos and an assortment of reporters, pundits and US Senators simply had no idea what he was talking about. These people are have dived so deep into the sewer of ideology that they have no idea what's going on in the world. We want to consider two questions: Why did NBC made this announcement at this time, and why does NBC believe that the Administration dir NOT call it a civil war. Taking the second question first, <#stdurl http://www.msnbc.msn.com/id/15925399/ "the MSNBC story"#> says: "Bush administration officials fear that when most Americans hear the term civil war, they associate it with out own war between the states 140 years ago. That was a conflict between the Union North and the Confederate South that produced 650,000 casualties, or one out of every 50 Americans at the time. To this day, the U.S. Civil War remains a force in America's historical identity and psyche." Well, this is a joke. Most Americans are aware that there was a civil war at some time in the past (they're not sure when), and they know that "Lincoln freed the slaves" (they have no idea how). Other than that, few Americans will make any connection between the current Iraq war and the American civil war. No, that's not it. Here's the real reason that the NBC people believe that the Bush administration doesn't want to "admit" that the Iraq war is a civil war -- and I've heard this reason given a couple of times by NBC reporters speaking on MSNBC: The reason that the Bush administration doesn't want to "admit" it's a civil war is because, according to MSNBC, admitting it will "erode support" for the war. Why do they believe that? To answer that, let's go back to the first question above: Why did NBC make this announcement at this time? And this is truly remarkable. The first hint came soon after the Today show announcement on the Don Imus show (which, ironically, airs on MSNBC opposite Today): <#stdurl http://www.mediabistro.com/tvnewser/nbc/does_nbc_think_this_is_going_to_have_the_same_impact_as_cronkite_imus_48157.asp "On Monday, Don Imus said:"#> "He and Brian Williams and all those other nitwits and Griffin, they all sit around and they make this command decision.... Do these nitwits at NBC News think this is going to have the impact of when Walter Cronkite came back in Vietnam and said we can't win, and Lyndon Johnson famously said 'well if we've lost Walter Cronkite, we've lost the country?'" Now, Boomers know what this means, but probably few people younger than Boomers do. This refers to the <#inc ww2010.weblog.ref e061020 "Vietnam war Tet Offensive,"#> which was a huge military victory for the American forces, but was nonetheless a major political victory for the North Vietnamese because of Walter Cronkite's statement. In other words, NBC News is making this announcement at this time because they hope to repeat Walter Cronkite's success in giving a huge political victory to our enemy today. Could that really be true? Are the people at NBC News really that stupid? Yes, Virginia, they really are that stupid. It was confirmed on Monday's flagship news show, NBC Nightly News with Brian Williams, when <#stdurl http://www.mrc.org/cyberalerts/2006/cyb20061128.asp#1 "star reporter Andrea Mitchell said:"#> "Today the administration objected strongly to news organizations calling it a civil war. Many experts say that the White House has a huge incentive to avoid that term because it could further erode public support for keeping U.S. troops in Iraq." It was supported by <#stdurl http://www.usatoday.com/life/television/news/2006-11-27-nbc-iraq-civil-war_x.htm "Tom McPhail, a journalism professor at the University of Missouri/St. Louis,"#> who says NBC's move is "a defining and negative moment" in the war in Iraq, "like when Walter Cronkite said on air that the Vietnam War was lost." The whole thing was confirmed by MSNBC's chief anti-American moonbat, Keith Olbermann, when he gave a lengthy talk comparing the NBC decision to Cronkite's announcement. Calling this <#stdurl http://newsbusters.org/node/9290 "a "Walter Cronkite Moment,""#> he said, "[A]fter years of erring on the side of caution about Vietnam, Walter Cronkite, on February 27, 1968, truly matched his signoff 'And that's the way it is,' and America never saw that war the same way." So NBC News believes that it can repeat Walter Cronkite's coup, and they believe that their announcement will erode public support of the war, and they believe that that's the reason why the Administration refuses to call it a civil war. This is wrong on so many levels that it's hard to sort them all out. First, NBC News is consciously making it a goal to give a victory to America's enemies. This is the standard to which many news organizations have fallen, as illustrated by the New York Times taking every opportunity it can publish information useful to the terrorists. (I'm alluding here to the Times' gloating publication of top secret information about such things as methods for tracking terrorists' financial transactions.) Second, NBC News is purposely trying to make itself into the news story, rather than reporting on the news. Third, they're completely wrong in their belief that their huge announcement will "erode support" or have any other effect on the American public. This is the same as their wishful thinking about an "antiwar movement." For five years now, the mainstream media has been predicting an imminent return to the massive antiwar riots and demonstrations against the war. They're too stupid to learn that it isn't going to happen, and they're <#hreftext ww2010.i.060601antiwar "completely baffled as to why it isn't happening."#> (The airheads have apparently settled on the reason that college students aren't rioting against the war because there's no draft. That's one reason you're hearing so much about a draft these days from the likes of Charley Rangel.) So now the people at NBC News believe that their pathetic announcement will "erode support" in the same way, stimulating an antiwar movement. At this point, anyone can see that isn't going to happen. The young college generation doesn't even care about the Iraq war in general, and in particularly couldn't care less what the dinosaurs at NBC News announce. Most Generation-Xers are the same. The Boomer generation is fully invested in this battle, but all minds have already been made up, so NBC News isn't going to change any minds. So no support is going to be "eroded" by NBC's dimwit move. Fourth, and finally, there is no civil war in Iraq. I've discussed this so many times that I'll just mention a couple of new things. I'll point out again that Shiite cleric Moqtada al-Sadr himself does not blame the Sunnis for the five car bombs last week that killed some 200 of al-Sadr's supporters; instead he blames al-Qaeda, as indicated by <#inc ww2010.weblog.ref e061126 "his press conference that I quoted a couple of days ago."#> One of the major mistakes made by all these politicians and journalists who insist that the Iraq war is a civil war is that they expect it to "spiral out of control." The words "out of control" occur all the time in these statements. Interestingly, one reporter on MSNBC on Monday said she was surprised this weekend because she had expected al-Sadr to respond to the car bombings with a much more massive attack on the Sunnis. This is what these reporters have in mind when they talk about a civil war. But it's exactly this "spiral out of control" reaction that Generational Dynamics says CAN'T happen. <#hreftext ww2010.i.sixties040501 "Iraq is in a "generational awakening era,""#> meaning that most of today's population lived through and survived the horrors of the genocidal Iran/Iraq war of the 1980s, and will do anything to keep it from happening again. They've seen what happens when a population "spirals out of control" into genocidal war, and as long as they're alive, they'll keep it from happening again. This "spiraling out of control" is precisely the defining characteristic of a generational crisis war, and it can't happen in a generational Awakening era. Now you can call anything you want a "civil war," but if you're expecting to see Iraq "spiral out of control" into a war between Sunnis and Shiites, it's just not going to happen. I also want to call the reader's attention to a <#stdurl http://www.nytimes.com/2006/11/26/world/middleeast/26insurgency.html "report that appeared in Sunday's New York Times."#> Remember that I <#hreftext ww2010.i.060807iraqcivil "wrote several months ago"#> that the Iraqi insurgency was funded by hundreds of millions of dollars per year from al-Qaeda and Iran, supplemented by organized crime activities within Iraq itself. Quoting an online correspondent involved in Army intelligence, kidnappings generate an enormous amount of revenue for MSC. "Some of [the ransom rings] targeted foreigners at first, but they quickly found that targeting Iraqi contractors was lucrative as well. Kidnapping for profit quickly became a daily reality -- just as in the rest of the third world. Almost every segment of the insurgency engages in kidnapping for profit, including Al-Qaeda." Other kinds of organized crime involves automobiles, alcohol, black market gasoline sales, theft and protection rackets. "In fact, the one thing that I was amazed by was the extent to which terrorist organizations (including Al-Qaeda) were involved in these activities. Once again, it's ultimately a matter of volume -- just like the mafia." The New York Times confirms this analysis, and says that now the hundreds of millions of dollars being derived from organized crime activities is, by itself, enough to sustain the insurgency. "The insurgency in Iraq is now self-sustaining financially, raising tens of millions of dollars a year from oil smuggling, kidnapping, counterfeiting, connivance by corrupt Islamic charities and other crimes that the Iraqi government and its American patrons have been largely unable to prevent, a classified United States government report has concluded," according to the Times article. It says that "groups responsible for many insurgent and terrorist attacks are raising $70 million to $200 million a year from illegal activities. It says $25 million to $100 million of that comes from oil smuggling and other criminal activity involving the state-owned oil industry, aided by 'corrupt and complicit' Iraqi officials. As much as $36 million a year comes from ransoms paid for hundreds of kidnap victims, the report says. It estimates that unnamed foreign governments — previously identified by American officials as including France and Italy — paid $30 million in ransom last year." In other words, what's going on in Iraq is not a civil war, but a large organized crime movement. This is similar to organized crime organizations in the United States, such as the Mafia, Hells Angels, Juárez Cartel, Medellín Cartel, Cali Cartel, and so forth. Wikipedia provides a similar list of <#stdurl http://en.wikipedia.org/wiki/Iraqi_insurgency "Iraqi insurgency organizations:"#>

"Mujahideen Shura Council, Mahdi Army, Badr Organization, Fedayeen Saddam, Al-Qaeda in Iraq, Jaish Ansar al-Sunna, Mohammad's Army, Islamic Army in Iraq, Iraqi National Islamic Resistance, Islamic Resistance Movement, Islamic Front for the Iraqi Resistance, Jaish al-Mujahideen, Jaish al-Rashideen, Asaeb Ahl el-Iraq, Black Banner Organization, The Return, Nasserites, Wakefulness and Holy War, Mujahideen Battalions of the Salafi Group of Iraq, Liberating Iraq's Army, Abu Theeb's group, Jaish Abi Baker's group, Islamic Salafist Boy Scout Battalions"

and <#stdurl http://en.wikipedia.org/wiki/Organized_crime "describes U.S. organized crime as follows:"#>

"Criminal organizations keep illicit actions secret, and members communicate by word of mouth, telephone, or Internet. Many organized crime operations have substantial legitimate businesses, such as licensed gambling, building construction, trash hauling, or dock loading enterprises, which operate in parallel with and provide cover for drug trafficking, money laundering, prostitution, extortion, hijacking, fraud, and insider trading, among many other possible criminal activities. In order for a criminal organization to prosper, some degree of support is required from the society in which it lives. Thus, it is often necessary to corrupt some of its respected members, most commonly achieved through bribery, blackmail, and the establishment of symbiotic relationships with legitimate businesses. Judicial and police officers and legislators are especially targeted for control by organized crime via bribes, threats, or a combination. Financing is made easier by the development of a customer base inside or outside the local population, as occurs for instance in the case of drug trafficking. In addition, criminal organizations also benefit if there is social distrust of the government or the police. As a consequence, criminal organizations sometimes arise in closely-knit immigrant groups who do not trust the local police. Conversely, as an immigrant group begins to integrate into the wider society, this generally causes the organized crime group to weaken. Lacking much of the paperwork that is common to legitimate organizations, criminal organizations can usually evolve and reorganize much more quickly when the need arises. They are quick to capitalize on newly-opened markets, and quick to rebuild themselves under another guise when caught by authorities. Globalization occurs in crime as much as it does in business. Criminal organizations easily cross boundaries between countries. This is especially true of organized groups that engage in human trafficking."

If you adapt this description to the climate in Iraq, it makes a lot of sense to describe the insurgence as this kind of organized crime situation. And the New York Times article appears to confirm it. Not surprisingly, I haven't heard a single pundit, journalist or politician comment on the New York Times article since it appeared. These dimwits are buried in ideology, and the Times article doesn't fit their ideology, so they ignore it. Just like Stephanopolous and crew are ignorant of the importance of the Israeli/Palestine issue, even after Jordan's King Abdullah tried to explain it to them FIVE TIMES. Even if you, dear reader, believe that I'm wrong and that Iraq is in a "civil war," then you would still have to agree to the following: The mainstream media isn't even debating the organized crime interpretation, and they completely ignore it, including the Times article, just as they ignore the Israeli/Palestine issue. As I said, these guys appear to me to be a bunch of ideological morons, but you can believe whom you want. At any rate, the NBC News announcement will not have anything like the huge impact that they're fantasizing about and, in fact, will probably be forgotten by next week. As I said a couple of days ago, I can understand ordinary citizens not understanding the details of what's going on in the world (though it would be nice if they did), but these journalists, analysts, Senators and other politicians, both Democrats and Republicans, are all supposed to be experts. It's pathetic and frightening that all our lives are in the hands of these self-aggrandizing idiots. =eod =// &&2 e061126 Jordan's King Abdullah warns of explosion in Palestine and Lebanon =data ww2010.weblog.y2006.e061126.head Jordan's King Abdullah warns of explosions in Palestine and Lebanon =data ww2010.weblog.y2006.e061126.keys =data ww2010.weblog.y2006.e061126.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061126.date 26-Nov-06 =data ww2010.weblog.y2006.e061126.txt1 Abdullah repeatedly chided the ABC News interviewer Stephanopolous, who remained completely oblivious =data ww2010.weblog.y2006.e061126.txt2 to what Abdullah was saying. Regular readers of this web site know that I'm frequently critical of Washington journalists, analysts and politicians, but this was the most sickening display of the sheer stupidity of a bunch of airheads that I've seen in a while. ABC News should be so ashamed of this show that they should never speak of it again. The first guest on <#stdurl http://abcnews.go.com/ThisWeek/News/story?id=466 "Sunday's This Week With George Stephanopoulos"#> was King Abdullah II of Jordan. I'm going to quote extensively from what he said, because it's something that Americans need to hear and understand. No matter what the subject, journalists and politicians today immediately bring it back to Washington politics, as if there were nothing in the world that wasn't controlled by Washington politics. The biggest political issue today continues to be the so-called Iraqi "civil war." In fact, there was a lot of talk today about "civil wars." I'll come back to this subject later. So Stephanopolous began by asking, "Is there a civil war in Iraq right now?" Abdullah immediately began to try to get Stephanopolous to understand that there were other things going on in the world, but to no avail.

Abdullah: "George, the problem we're tackling here is we're juggling the strong potential of three civil wars -- whether it's the Palestinians, Lebanon or Iraq. I hope that my discussions at least with the President will provide whatever we can do for the iraqi people, but at the same time we want to concentrate ourselves on the core issues, which we believe are the Palestinians and the Palestinian peace process, because that is a must today, as well as the tremendous concern we've had over the past several days over what's happening in Lebanon. We can possibly imagine going into 2007 and having 3 civil wars on our hands. And therefore it's that we take a strong step forward as part of the international community and make sure we avert the Middle East from a tremendous crisis that I fear and I see could possibly happen in 2007."

<#inc ww2010.pic g061126a.jpg right "" "George Stephanopolous scrunches up his face as King Abdullah doesn't tell him what he wants to hear. (Source: ABC News)"#> Three civil wars! Stephanopolous was almost dumbfounded. He sure wasn't expecting that. But he simply pulled it back to Washington politics, this time by implying that all three civil wars are the fault of the Bush administration for advocating democracy in the Mideast. "That is a frightening prospect, the prospect of 3 civil wars," said Stephanopolous. "All 3 of those societies, Iraq, Lebanon, the Palestinian Authority have had elections over the last couple of years, and now we're seeing the prospect of civil war. Did the United States push too fast, too hard for democracy?" Once again, Abdullah tried to pry Stephanopolous' mind loose from its one ideological track, and once again to no avail.

Abdullah: "The issue is not whether you're pushing one agenda or another. The issue is that we have not been able to deal with the core problem of the Middle East. Now I know that people will say that there are several core problems in the Middle East. Obviously the closest to American minds because of your commitments of soldiers is Iraq. But for the majority of those of us living in this part of the world, it has always been the Israeli/Palestinian and the Israeli/Arab problem, and I fear that if we don't use the next couple of months to really push the process forward, I don't believe that there will be anything to talk about. In other words, there will not be enough of a circumstance to be able to create a two-state solution, in other words, Israel and Palestine living side-by-side in peace and harmony. If we don't solve the Israeli/Palestinian problem, then how can we solve the Israeli/Arab problem. And I don't believe that beyond 2007, if we don't get the process going, there will be anything of a Palestine to talk about, and therefore, do we resign this entire region to another decade or two of violence, which none of us can afford."

King Abdullah knows that he has to be patient when talking to narcissistic Americans who believe that they're the center of the universe, and he tried to be diplomatic by saying that it's understandable that Americans think that Iraq is the only problem in the world, since American soldiers are there. But he was trying to explain to somewhat dim-witted Stephanopolous that there are much more important problems in the world than Iraq. Stephanopolous then asked one of the stupidest questions I've heard on TV lately: "But help me out here - doesn't the situation in Iraq have a logic of its own with the Sunnis and the Shiites killing each other in an uncontrolled manner. What does have to do with what's going on in Palestine?" Is it really possible that Stephanopolous is so clueless that he thinks that the Palestine and Iraq situations have nothing to do with each other? Actually he is -- and I've commented on this before during the election run-up. I can just imagine what went through King Abdullah's head -- how can Americans be so stupid? He tries once again to tell Stephanopolous what the situation is.

<#inc ww2010.pic g061126b.jpg left "" "King Abdullah smiles as he explains to the airhead Stephanopolous what's going on in the Mideast. (Source: ABC News)"#> Abdullah: "Well, the thing is that as we look at the 3 potential flash points .... Before, I believe, the Lebanese war this summer, I would have put Iraq in the number 1 position. After the Lebanese war, the Palestinian scenario was in the number one position, followed very closely in the last several weeks, I would say that the Lebanese problem and the Palestinian ones are neck in neck. They're all extremely important, solving all three of them are going to be critical, but the priority today and the critical one is the Israeli/Palestinian one because it resonates beyond the borders of Iraq, beyond the borders of the Arab and the Muslim world. You know, you've been with this issue for many years, it is still the emotional core issue for our part of the world. The problem sometimes when we discuss this with an American public, they say, no, this is just an excuse because there are other problems in the Middle East. But the emotional impact that the Israeli/Palestinian problem has on the ground can be translated to the insecurity and frustrations throughout the Middle East and the Arab world. For me that is the priority. When it comes to things exploding out of control, I would put today, as we stand, Palestine and probably a close tie with Lebanon. Iraq funnily enough, although as concerned as I am of Iraq and the major problems that that might bring to us, is in third position. Obviously this is all relative."

Stephanopolous still has no idea what Abdullah is talking about. He changes the subject: "One of the ideas of dealing with all three of these issues is an international conference that would include Jordan, would include Saudi Arabia, would include Egypt, would include the United States, but also Syria and Iran. Do you think it would be useful to include Syria and Iran in that kind of a conference right now, and what kind of leverage does the US have over them." Once again, King Abdullah tried to be diplomatic, but bring Stephanopolous back to the subject:

Abdullah: "Well, look, we always believe that dialog is a way of reaching out to each other. As we continue to push each other into corners, then the only alternative is to have more of a violent reaction than common sense leading the way. I do believe that there are feelers going to different countries to see if we can come together on the issue of Iraq. But I believe that America has to look at it in the total picture. It's not just one issue by itself. I keep saying, Palestine is the core, it is linked to what is going on in Iraq, it is linked to what's going on in Lebanon, it is linked to the issues we find ourselves with the Syrians. So if you want to do comprehensive, then comprehensive means bringing all the parties of the region together."

Stephanopolous never did understand what Abdullah was talking about. =inc ww2010.cf.cf060209 p left I've been saying repeatedly on this web site for years that we're headed for a "clash of civilizations" world war, and that this war will be driven mainly by the regions in the adjoining table. Every year on May 15, the Palestinians commemorate Al Naqba - Catastrophe Day - the anniversary of the creation of the state of Israel on May 15, 1948. I just can't get over how our supposedly knowledgeable journalists and politicians don't have a clue about any of this. In their minds, the entire problem in the Mideast began with the Iraqi ground war 3½ years ago. They neglect that the fault line between Jews and Palestinians has existed in virulent form since 1948, and in a less virulent form, with only occasional violence, for centuries. But people like Stephanopolous are so deeply sunk in the sewer of ideology that they can't think of anything else. They think that every event in the world turns on political events in Washington. Following the interview with Abdullah, Stephanopolous interviewed two Senators, Democrat Dick Durban (Ill) and Republican Sam Brownback (Kan). I've gotten to the point where I find that most politicians are such morons that I can't even stand listening to them, but I forced myself this time to see if they would even mention the Palestinian problem. They didn't disappoint me. They didn't say a single thing that wasn't supremely stupid. They made totally meaningless statements about Iraq, until the interview thankfully ended. Probably the highlight of the interview was when Sen. Brownback raised his voice and said in stirring tones, "Clearly things have to be different and things have to move in a different direction!!" Such is the pathetic nature of the people who are running our country in Washington. The Israel/Palestine situation came up only once during the rest of the show, at the beginning of the pundit panel. <#inc ww2010.pic g061126c.jpg right "" "George Stephanopolous smirks as he summarizes what King Abdullah said. (Source: ABC News)"#> And wait till you read this. Stephanopolous had a smirk on his face, as if to show how much smarter he is than the King, and he said this to pundit George Will: "You heard King Abdullah - he says we're now facing the potential of 3 civil wars in the region, and he says the only way to deal with it -- all 3 wars -- is to deal with all 3 wars at the same time -- a comprehensive solution - I knew you would not like that." George Will rolled his eyes and responded, "When you have three problems you can't solve, you say let's solve them all at once with a comprehensive solution. There's no commonality here. The King would have us believe that if, somehow, we waved a wand and there were peace between the Israelis and the Palestinians, that the Shias and the Sunnis would stop killing one another in Iraq? I don't think so. The Shia and Sunni traditions go back to the death of Mohammed - that's 1374 years ago." I guess George Will thinks that King Abdullah doesn't know the history of the Shiites and Sunnis. You have to laugh, it's so pathetic. Of course Abdullah didn't say anything like that. What he did say was that the Palestinian problem was the core problem, and far more important than the Iraq problem. He said it five times. But both Stephanopolous and Will ignored him. It's incredible. And then -- get this -- Stephanopolous said, "His point was that that might help the American image." Can you believe this? Abdullah wasn't talking about the American image. He was talking about a brewing catastrophe among the Israelis, Palestinians, and Lebanese. I'm sorry, I just can't get over this. I can understand ordinary citizens not understanding the details of the Mideast (though it would be nice if they did), but these people are all supposed to be experts. It's pathetic and frightening that all our lives are in the hands of people like these. The Three Civil Wars Abdullah said that there might be three civil wars by 2007 -- in Palestine, in Lebanon, and in Iraq. A civil war among the Palestinians, between the Fatah and Hamas groups, is a real possibility. The Palestinians and Israelis are in a generational crisis era, and they're headed for a major genocidal war, one way or another. But the other two civil wars will not happen, because both Lebanon and Iraq are in generational Awakening eras. Lebanon's government is in a state of chaos, thanks to <#inc ww2010.weblog.ref e061122 "the assassination of Pierre Gemayel earlier this week,"#> following threats by Hizbollah to take over the government, and this is on top of recovering from the summer war with Israel. It's possible that Hizbollah will execute some kind of political coup that will give them control of the Lebanese government, but if it happens, it will be political rather than war. The Lebanese are still traumatized by what they did to each other in the 1980s civil war, and will not do anything like it again. The so-called Iraq "civil war" is receiving plenty of pundit attention these days. Actually, they almost can't talk about anything else. CNN has really gone over to the dark side. Their reporters speak contemptuously of anyone who doesn't call it a civil war now, and Michael Ware, their Tehran reporter, spends 10-15 minutes on air every day doing everything possible to emphasize the gore. He's no longer reporting facts; he's reporting a point of view. People always talk about Fox News being on the right politically, and that's true, but CNN has gone waaaaay over to the left, and is in danger of losing all credibility. But the fact is that there's no civil war in Iraq, and there won't be. The talk picked up this week when five car bombs exploded in Sadr City, killing 150-200 people. Car bombs and terrorist acts are no more signs of civil war than was the 9/11 attack on the World Trade Center that killed 3000 people. For Iraq to be in a civil war, you'd need to see large masses of Sunnis and Shiites murdering each other, not a series of well-planned terrorist attacks, no matter how gory. <#inc ww2010.pic g061126e.jpg left "" "Shiite cleric Moqtada al-Sadr (Source: SumariaTV)"#> Mainstream media news sources constantly play up the violence and gore in order to reach ideological conclusions about civil war. That's why it's instructive to read what Moqtada al-Sadr himself said in a press conference following the car bombings. The <#stdurl http://www.alsumaria.tv/SumariaTV/default_english.aspx?page=newsdetails&news_id=1483 "following article is from an Iraqi source,"#> and it just reports what al-Sadr said, without festooning it with all the ideological crap that Western media uses:

"Cleric Muqtada Sadr pleaded Muslim Scholars Association Secretary General, Hareth Dari to encircle the crisis and issue a Fatwa banning the affiliation to Al Qaeda organization and killing Shiites. He strongly slammed Sadr City attacks reiterating his call for US forces to withdraw from Iraq so the country would be reunited. Moreover, Cleric Saleh Haydari, Al-Khallani Mosque Imam, accused some groups of providing shelters to armed squads infiltrating from other countries of breaching Mecca paper. He underlined the call of Sistani to restrain anger and pleaded the government to enhance the terrorism fighting law and provide security and stability in the country. "Meanwhile Sadr Bloc threatened to suspend its membership with the Iraqi parliament if Iraqi President Nuri Al Maliki met with US President Bush in Jordan. After holding US forces responsible for Sadr City incidents, Sadr Bloc called Coalition forces to withdraw from the country and urged politicians to stop violence fomenting statements."

Notice what al-Sadr DIDN'T say: He didn't say that his people should go out and kill all the Sunnis. That's what he would say if there were a real civil war. Instead, he ascribed the terrorist act not to Sunnis but to al-Qaeda, the same group that was responsible for our 9/11 attacks. And as we said, last week's attacks were no more civil war than the 9/11 attacks were. Al-Sadr also called for the withdrawal of American troops and threatened political retaliation against Iraqi President Nuri Al Maliki. This is exactly the kind of political and social upheaval that takes place during an Awakening era. If you haven't read my <#hreftext ww2010.i.sixties040501 "2004 article comparing Iraq's current Awakening era to 1960s America,"#> in a while, then take another look at it. It's true that the huge number of murders taking place in Iraq today is horrible, but it's not a civil war. Henry Kissinger <#inc ww2010.pic g061126d.jpg right "" "Henry Kissinger, on an increasingly crowded CNN screen (Source: CNN)"#> Getting back to the Palestine issue, I only heard one pundit on any of the Sunday talk shows mention it, and that was Henry Kissinger on CNN. Wolf Blitzer asked the same question that Abdullah was asked -- namely whether it was America's push for democracy that caused the trouble in the Mideast. He also asked whether we should now admit our mistake and withdraw. Here are excerpts of his answer:

"I've been arguing that imposing a democracy is beyond our capacity in many parts of the world. On the other hand, standing for democracy is inevitable. The purpose in going in Iraq was related to our perception of the war on terror and on the danger of a Jihadist movement throughout the region. Undoubtedly mistakes have been made, but the issue we're facing now, is whether if we withdraw under conditions in which the radicals can say they drove the Russians out of Afghanistan, they drove the Americans out of Iraq, and there is no vestige of an American position left. This is bound to have serious consequences, not only throughout the region, but wherever there are significant Islamic minorities that have radical cells implanted in them, including in countries like India, and some of the European countries. So I believe that any change in policy, which on the whole I favor, has to be done in a measured way and related to a strategic concept, and not simply say that we made a mistake a few years ago, which I also don't agree with in such absolute terms, and therefore we're simply going to get out. We have to create a framework for the next phase, in which America remains relevant. ... I, as you know, have always questioned whether it is possible to develop democracy at the same time scale as it was necessary to deal with the strategic issues in the region, but I don't believe that the commitment to democracy is the cause of the difficulties - the cause of the difficulties say in Lebanon is the creation by Iran of a paramiltary organization - they've called the Hezbollah, which is better armed, better trained than the Lebanese government. Therefore, it's not the aspiration to democracy, but the rejection of democracy by a significant group that wants to establish itself by force."

So, all in all, the Sunday news shows were very discouraging, because only Jordan's King Abdullah and Henry Kissinger said anything that wasn't completely idiotic. P.S.: Just one more thing. I keep hearing statements that the "Iraq war has now gone on longer than World War II." Once again, our politicians, journalists and pundits can't be faulted for not being stupid enough. The Iraq war has been going on a lot longer than that. It began in 1991, after Iraq invaded Kuwait. This 16-year war has undergone several phases. First, Iraq was ejected from Kuwait. Then there were several years of overflights to protect the Kurds and Sunnis from Saddam. The latest phase began in earnest in December, 1998, when Saddam expelled the U.N. weapons inspectors. The <#stdurl http://www.nytimes.com/library/world/mideast/081399iraq-conflict.html "Clinton/Gore administration immediately began furiously bombing Iraq,"#> and that bombing continued on almost a daily basis, into the next administration. The war escalated again in 2003, with the ground war in the Bush/Cheney Administration. =eod =// &&2 e061125 Israel and Palestinians agree to a cease-fire in Gaza Strip =data ww2010.weblog.y2006.e061125.head Israel and Palestinians agree to a cease-fire in Gaza Strip =data ww2010.weblog.y2006.e061125.keys =data ww2010.weblog.y2006.e061125.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061125.date 25-Nov-06 =data ww2010.weblog.y2006.e061125.txt1 Is it a ploy? =data ww2010.weblog.y2006.e061125.txt2 The <#stdurl http://www.iht.com/articles/ap/2006/11/26/africa/ME_GEN_Israel_Palestinians.php "Gaza Strip cease-fire agreement will go into effect"#> at 6 am Sunday (local time), or 11 pm Saturday evening ET. <#inc ww2010.pic g061125.jpg right "" "Abbas spokesman Nabil Abu Rudainah announcing the peace agreement. (Source: CNN)"#> Abbas spokesman Nabil Abu Rdeneh (or Rudainah) said from Gaza City that a truce reached in Egypt in February 2005 would be revived. "There is a signed agreement between the president and [Hamas] Prime Minister (Ismail) Haniyeh and all the Palestinian factions to resort to the agreement of the factions in Cairo in 2005, including ceasing all the military activity from Gaza, starting from Sunday morning. The Israeli prime minister has agreed, and it is going to start tomorrow morning." Israeli intelligence sources <#stdurl http://www.debka.org/headline.php?hid=3544 "believe that the peace treaty is a Hamas ploy"#> to give them time to prepare for the next war. Indeed, it appears that new weapons are pouring into Gaza through the porous border with Egypt. From the point of view of Generational Dynamics, this peace treaty doesn't change the prediction that the Mideast is heading for a major crisis war between Arabs and Jews that will engulf the entire region. Actually, it's fairly common for two sides to sign a peace treaty in the lead-up to a crisis war. There may be years of low-level violence as long as the leaders on both sides were survivors of the previous crisis war. But when those people go (retire or die), and the new leaders are from the generation born after the previous crisis war, then it becomes clearer to everyone that the low-level violence might now spiral out of control into full scale war. At that point it's not unusual for the sides to sign a peace deal under international pressure. This is what happened six months before the 1994 Rwanda genocide. The UN-sponsored Arusha accords, agreed by the Hutus and Tutsis, supposedly ended the civil war. But the agreement infuriated the Hutus, leading to the genocide. The Tamil Tiger rebels signed a peace treaty with the Sri Lanka government in 2002, under outside mediation, but the peace deal fell apart in 2004, and <#inc ww2010.weblog.ref e061020b "Sri Lanka now appears close to a major civil war."#> In fact, there have been several failed peace treaties between the Arabs and Jews, including the failed 1994 Oslo Peace Treaty. So, maybe the new Gaza peace treaty is a ploy by Hamas, or maybe it's a sincere effort by both sides to stop what is quickly becoming an uncontrolled spiral of violence. Either way, it won't prevent the generational changes that will soon lead a major war between Arabs and Jews that will engulf the entire region. =eod =// &&2 e061123 Americans give thanks as desperation sinks in =data ww2010.weblog.y2006.e061123.head Americans give thanks as desperation sinks in =data ww2010.weblog.y2006.e061123.keys =data ww2010.weblog.y2006.e061123.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061123.date 23-Nov-06 =data ww2010.weblog.y2006.e061123.txt1 The Armed Forces are stretched to the limit and, as Kofi Annan says, we're "trapped in Iraq." =data ww2010.weblog.y2006.e061123.txt2 A new generation, a young generation of voters made itself felt in the recent election. This generation is sometimes called the "Millennials" or "Generation Y" (its final name won't be assigned until after the war). The Millennials voted for "change" and for a "solution to the Iraq problem" in the recent election. But now there's a growing feeling of desperation as Americans realize that there is no solution. U.N. Secretary General Kofi Annan put it this way <#stdurl http://www.un.org/apps/sg/offthecuff.asp?nid=952 "in a press conference on Tuesday:"#>

"On the question of the military presence, obviously it is a difficult issue. The US in a way is trapped in Iraq, trapped in the sense that it cannot stay and it cannot leave. There are those who maintain that its presence is a problem, and there are those who say that if they leave precipitously, the situation would get worse, and that they should stay on to help calm and stabilize the situation before they leave. I think the US obviously will have to think through this very, very carefully, but the timing of its departure will have to be optimal in the sense that it should not lead to further deterioration of the situation but try and get it into a level that when it leaves, when it withdraws, the Iraqis themselves will be able to continue to maintain a situation that would ensure a reasonable secure environment."

The Pentagon, <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2006/11/19/AR2006111901249.html "in a leaked secret report,"#> is planning for three possible options, dubbed "Go Big," "Go Long" and "Go Home." The first option, "Go Big," calls for a big increase in American troop presence to crush the insurgency as quickly as possible. Americans are now beginning to realize that we couldn't do it that way even if we wanted to: The armed forces are already stretched too thin, and the soldiers and marines necessary for that option are simply not available. The third option, "Go Home," is being recommended by the so-called "anti-war Democrats," but it's being rejected by the mainstream everywhere I can see. There's <#hreftext ww2010.i.060601antiwar "never been much of an "antiwar" movement over the Iraq war,"#> and I don't expect one to start now. The leaves the second option: "Go Long." The word "Long" means we'll be there for a long time. There'll be some changes, of course -- focusing more on training Iraqis to be better soldiers -- but basically this policy will be perceived as a continuation of the existing policy. Sooooo, what to do? We've gotten so desperate that we're consider negotiations with Iran and Syria to get their help. <#stdurl http://www.csmonitor.com/2006/1122/p01s04-woiq.html "Tony Blair has called for some sort of negotiations,"#> and <#stdurl http://www.timesonline.co.uk/article/0,,2088-2459986,00.html "Henry Kissinger is advocating an extensive negotiation program,"#> but only after we figure out a way to avoid negotiating from weakness. Of course there's no way to negotiate with Iran and Syria over Iraq except from a position of weakness. We want THEIR help in saving us from being "trapped in Iraq"? We're so desperate that they must be screaming with laughter in their private government conferences. I'm surprised we haven't heard any sarcastic remarks from Iranian President Mahmoud Ahmadinejad yet. Oh wait ... Iran has already beaten us to the punch. Iraq and Iran have restored diplomatic relations, and <#stdurl http://www.csmonitor.com/2006/1122/p01s04-woiq.html "Iran is holding a "Iraq summit meeting" this weekend."#> We'll be hearing some comments from Ahmadinejad soon, I'm sure. <#inc ww2010.pic e061123.jpg right "" "Hundreds of thousands of Lebanese join (anti-Syrian, pro-government) funeral procession in downtown Beirut on Thursday. (Source: Spiegel)"#> The Mideast is changing very rapidly right now. The <#stdurl http://www.spiegel.de/international/0,1518,450352,00.html "rift between pro- and anti-Syrian forces in Lebanon is deepening,"#> following Tuesday's <#inc ww2010.weblog.ref e061122 "assassination of cabinet minister Pierre Gemayel."#> Jihadists are furious that today's planned pro-Hizbollah demonstrations had to be postponed, in favor of a huge funeral procession consisting of hundreds of thousands of mostly pro-government mourners. The war in Gaza is still escalating. Israel continues to bomb Palestinian homes suspected of being weapons caches, in order to prevent Palestinian missiles from being launched into Israeli cities. But now the <#stdurl http://news.bbc.co.uk/2/hi/middle_east/6173850.stm "Palestinians are using "human shields" to protect the homes."#> More worrisome is that the border between Gaza and Egypt has become considerably more pourous in the last few months, permitting more sophisticated weapons, including more sophisticated missiles, to enter Gaza. And fighting between Palestinian factions (Hamas and Fatah) is continuing. The Israelis are feeling even more desperate than Americans do. In April, the Israeli voters voted, essentially, to hide behind their security wall and just shut the Palestinians out. Then came thousands of Hizbollah missiles in the summer war, and the continuing stream of missiles from Gaza. And now Iran is becoming a regional leader, and Iran's President has vowed to wipe Israel off the map. Here in America (as in Israel and Palestine), the new generation of young voters is driving the changes that we're seeing. They voted for "change" and for a "solution to the Iraq problem" in November, and they're not getting it. The cast of politicians may have changed, but we're still "trapped in Iraq." And the war in Afghanistan is becoming considerably more dangerous, with a resurgence of the Taliban in the south. Americans are feeling desperate, but it hasn't yet reached the point where they realize how bad things are. They still see Afghanistan, Iran, Iraq, Lebanon and Gaza as separate, distinct issues, with little crossover, and with "trapped in Iraq" being our only real problem. What most Americans, including most politicians in Washington, don't understand the rising tide of violence in each country is part of the same ocean of violence that's headed for the region. As America heads for a "clash of civilizations" world war, Thanksgiving is a good day to remember: Treasure the time you have left, and use it to prepare yourself, your family, your community and your nation. =eod =// &&2 e061122 Assassination of Lebanese Minister threatens viability of Lebanon government =data ww2010.weblog.y2006.e061122.head Assassination of Lebanese Minister threatens viability of Lebanon government =data ww2010.weblog.y2006.e061122.keys =data ww2010.weblog.y2006.e061122.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061122.date 22-Nov-06 =data ww2010.weblog.y2006.e061122.txt1 Independence Day celebrations were canceled on Wednesday as thousands mourned =data ww2010.weblog.y2006.e061122.txt2 the <#stdurl http://www.iht.com/articles/2006/11/23/africa/web.1123lebanon.php "murder of cabinet minister Pierre Gemayel,"#> a strong opponent of Syrian influence in Lebanon. The murder occurred as Gemayel was <#stdurl http://news.independent.co.uk/world/fisk/article2007485.ece "arriving to pay condolences to the family"#> of an old woman who had died. Gemayel's face was destroyed by a dozen bullets. The murder comes 1½ years after a powerful car bomb blast in Beirut <#inc ww2010.weblog.ref e050216 "killed the beloved former Prime Minister Rafiq Hariri."#> Hariri was a strong supporter of Lebanese nationalism -- that is, a Lebanon not under Syrian control. Most people blamed Syria for the assassination, and international pressure forced Syria to withdraw its army units from Lebanon. The Lebanese became polarized into pro-Syria and anti-Syria factions, with the militia group Hizbollah leading the pro-Syria group. Since then, there have been 6 more assassinations of public officials -- all of them opposed to Syrian influence -- culminating in Gemayel's assassination. As if that weren't enough suffering for this poor little country, it became the theatre of war for 34 days this past summer, when pro-Syrian Hizbollah started shooting missiles into Israel, and Israel brought its air force into Lebanon to flatten Hizbollah -- though in the end it may have flattened every EXCEPT Hizbollah. Hizbollah chief Sheik Sayyed Hassan Nasrallah has been claiming that it won the war against Israel, and has been demanding control of the Lebanese government. Nasrallah precipitated a crisis two weeks ago by withdrawing the six ministers he controls from the Lebanese cabinet, and Thursday was the day he had threatened massive anti-government demonstrations. That's on hold now -- at least for a while. But the government and the people of Lebanon have been thrown into political chaos. Many Lebanese are fearing a return to the violence genocidal civil war of the 1980s, but regular readers of this web site already know that's impossible -- you can't have a new crisis war now since only one generation has passed since the end of the last one. Still, the current chaos could lead to Nasrallah having significantly more power in Lebanon's government, as now seems possible in some scenarios. This it would effectively mean Syrian and Iranian control of Lebanon, and Iran's use of Lebanon as a base of operations in the coming regional Mideast war between Arabs and Jews. =eod =// &&2 e061121 South Vietnamese warmly welcome George Bush, goading the Communists in Hanoi =data ww2010.weblog.y2006.e061121.head South Vietnamese warmly welcome George Bush, goading the Communists in Hanoi =data ww2010.weblog.y2006.e061121.keys vietnam =data ww2010.weblog.y2006.e061121.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061121.date 21-Nov-06 =data ww2010.weblog.y2006.e061121.txt1 In contrast to muted welcome in Hanoi, and angry demonstrations in Jakarta, =data ww2010.weblog.y2006.e061121.txt2 President <#stdurl http://today.reuters.com/news/articlebusiness.aspx?type=tnBusinessNews&storyID=nN9847362&imageid=&cap=&from=business "Bush received a very warm welcome in Ho Chi Minh City (Saigon)."#> Crowds of onlookers lined the streets, waving and cheering as Bush's motorcade rolled past. The cheers were led by young people born after the Vietnam war with America. These young people correspond to our Baby Boomer generation, born after World War II, who rioted and demonstrated in 1960s and 1970s in FAVOR of the North Vietnamese Communists. Now the young post-war South Vietnamese youth are turning the tables and sticking it to the North Vietnamese Communist occupiers by cheering for American President George Bush. The highlight of Bush's visit to the former Saigon was to needle Hanoi further by a trip to Vietnam's stock exchange, a capitalist, free market symbol. To understand what's happening in South Vietnam today, it's necessary to look back a few centuries. North and South Vietnam have had different ethnic origins, with North Vietnam (Vietnamese Kingdom) originally populated by ethnic Chinese, and South Vietnam (Champa Kingdom) populated by Polynesian settlers from Indonesia and Malaysia. Generational crisis wars in 1471 and 1545 finally ended the Champa Kingdom in the south, and also drove out the Chinese Army from the north. However, the country remained partitioned, with the Nguyen family controlling the South, and the Trinh family controlling the North. The greatest and most celebrated military event in Vietnamese history is the Tay-Son Rebellion, 1771-1790. It was started by three brothers, led by legendary hero Quang Trung. They first defeated the Nguyen regime in the south, then defeated the Trinh in the north, and repelled an invading Siamese force. The most significant battle of the Tay-Son Rebellion crisis war was its explosive climax in 1789. Quang Trung led his troops in a brilliant battle against a much larger Chinese army and repelled them. <#stdurl http://www.historynet.com/magazines/vietnam/3027111.html "Quang Trung is a military hero"#> who had reunited Vietnam, for the first time in 200 years, repelled the Siamese and saved his country from Chinese domination. From the point of view of Generational Dynamics, a country's crisis wars occur roughly every 70-90 years, and midway between two crisis wars is a "generational awakening era." This is a time of social upheaval, but also a time of spiritual development. Throughout history, great ideas and religions are born during Awakening eras, and are either actualized or extinguished during Crisis eras. Vietnam's Awakening era that followed the Tay-Son rebellion changed the country enormously. During the 1800s, under Emperor Tu-Duc, cultural development blossomed, making it the high point of literary culture in Vietnamese history. Thanks to the French, Christianity bloomed, with hundreds of thousands of Catholic conversions from Confucianism and Buddhism. However, things changed rapidly in 1857, when Tu-Duc executed a Spanish Bishop. France responded by capturing Saigon, leading Tu-Duc to start relentlessly suppressing Christianity, sanctioning thousands of executions. This led to the next crisis war, the French conquest of Indochina in 1865-1885. Under the French, <#stdurl http://www.haivenu-vietnam.com/vietnam-religion-christianity.htm "the Catholic Church flourished,"#> opening missions, schools and hospitals all over the country. Vietnam's next Awakening era featured riots and demonstrations directed at the French colonialists, and the rise of Ho Chi Minh. Ho took part in the founding of the French Communist Party in 1920, and formed the Revolutionary Youth League in Vietnam in 1925. Ho led numerous anti-colonial uprisings in the following decades, and during WW II, Ho formed the Viet Minh political / relief organization, for people starving to death thanks to confiscation of goods by the occupying Japanese. After WW II, Ho Chi Minh led the effort to drive the French from Vietnam, and succeeded with human wave assaults against a large French encampment at Dien Bien Phu in 1954. With the French gone, Vietnam was once again partitioned into North and South. Ho controlled the North, with support from the Soviet Union and China, and over half a million Catholics migrated from the North to the South. America feared that South Vietnam would also fall under Communist control. This was the time when America had fought two world wars, and was desperately fearful of a third one on the horizon, this time with the Communists. It was considered essential to stop Communism before it could become too threatening, and so America endeavored to stop Communism from spreading from North to South Vietnam. American began providing advisors in the 1950s, growing to full-scale armed intervention in the 1960s. The North-South crisis civil war finally ended in 1974, with the Hanoi's victory. After that, Hanoi conducted a reign of terror. There were mass executions, as political, religious, economic and press freedoms were brutally repressed. But now, 30 years later, Vietnam is well into a yet one more Awakening era. This time it's the Communists of the North who are the occupiers, and the people of the South are becoming restive. weary of the lack of religious, economic and press freedoms. So when the young people lined the streets of the former Saigon and cheered wildly as George Bush's limousine went by, the cheers were expressing admiration for America, and also hostility towards their Hanoi masters. =eod =// &&2 e061119b World leaders pose for pictures in Hanoi =data ww2010.weblog.y2006.e061119b.head World leaders pose for pictures in Hanoi =data ww2010.weblog.y2006.e061119b.keys =data ww2010.weblog.y2006.e061119b.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061119b.date 19-Nov-06 =data ww2010.weblog.y2006.e061119b.txt1 President Bush is attending the Asia Pacific Economic Cooperation =data ww2010.weblog.y2006.e061119b.txt2 (APEC) summit in Hanoi, Vietnam. By tradition, the summit's host country is permitted to select the clothing to be worn for the group picture. In this case, the clothing consists of traditional colored robes. <#inc ww2010.pic g061119b.jpg center "" "George Bush, Russian President Vladimir Putin and Chinese President Hu Jintao enjoy a moment of cheer together at APEC, dressed in traditional "ao dai" robes"#> <#inc ww2010.pic g061119c.jpg center "" "The entire group of leaders is waiting to be beamed up to a waiting spaceship."#> =eod =// &&2 e061119 Stocks, credit and risk continue their bubblicious rise =data ww2010.weblog.y2006.e061119.head Stocks, credit and risk continue their bubblicious rise =data ww2010.weblog.y2006.e061119.keys =data ww2010.weblog.y2006.e061119.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061119.date 19-Nov-06 =data ww2010.weblog.y2006.e061119.txt1 The stock market has reached a fresh record high almost every day =data ww2010.weblog.y2006.e061119.txt2 in the last couple of weeks. The Dow Jones Industrial Average (DJIA) closed at 12343 on Friday, <#hreftext ww2010.i.djia "overpriced by a factor of 242%,"#> according to <#hreftext ww2010.i.050711eleven "long-term exponential growth projections."#> This level of overpricing (240%+) was reached on 16-Aug-1929, two weeks before the stock market crash, and then again in July, 1997, three years before the Nasdaq crash of 2000. What I find to be really startling is that price/earnings ratios are starting to rise again, after falling steadily for over 2½ years. <#inc ww2010.pic pe061117.gif center "" "S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 17-Nov-2006. (Source: MarketGauge ® by DataView, LLC)"#> This increase, which began about a month ago, means that investors are suddenly becoming increasingly risk-seeking, and so increasingly giddy in their investment decisions. Is this a sign of investor overconfidence, or a sign of investor desperation? Time will tell which. The stock market isn't the only place where bubblicious giddiness is evident. The global <#stdurl http://www.theaustralian.news.com.au/story/0,20867,20785202-36375,00.html "derivatives market grew by 25% in the first half of this year,"#> a phenomenal rate of growth. As <#inc ww2010.weblog.ref e061110 "we described a couple of weeks ago,"#> $300 trillion in derivatives is based on just $65 trillion of underlying stocks and bonds. Now we learn that the derivatives market rose to $370 trillion by the end of June, 2006. The stock market bubble is gradually becoming larger and larger, but the derivatives bubble is blowing up at a phenomenally rapid rate. It's no exaggeration to say that the global financial market today is almost completely controlled by the derivatives market, not by stocks and bonds. The fastest growing and largest segment of the derivatives market is credit derivatives, <#stdurl http://www.theaustralian.news.com.au/story/0,20867,20785202-36375,00.html "capturing $262 trillion of the total $370 trillion."#> Credit derivatives permit investors to spread risk around, presumably making the global financial markets more stable. In simplest terms, credit derivatives allow an investor to bet whether interest rates are going to go up or down. That's like betting Red or Green on a roulette wheel. How could that possibly make the global financial markets more stable? At least when everyone is investing in stocks and bonds, then it's possible (and likely, over the long term) that EVERYONE will make money. But when you bet on a roulette wheel, you're simply gambling on chance, and one man's gain is another man's loss. And since these credit derivative instruments are sold and resold, often to the same people, at increasingly high prices, you actually have a worldwide pyramid scheme based on a worldwide gambling enterprise. The argument that the derivatives market makes the financial system more stable is very widely believed among investors. Alan Greenspan has made that claim several times. The <#stdurl http://www.theaustralian.news.com.au/story/0,20867,20785202-36375,00.html "head of an industry group says,"#> "Derivatives are a power for the good of the financial system as a whole. Not only do they help individual businesses better adapt their risk profiles but they benefit the financial system by disaggregating risk more broadly." That derivatives make the global financial system more stable is far from clear, at least to me, but one thing's for sure: A lot of people BELIEVE that derivatives make the global financial system more stable. And since a lot of people believe that the financial system is more stable, investors are willing to take more and more risks, thus making the financial system LESS stable. That's why we see the very risky derivatives market exploding, and that's probably why we're seeing price/earnings ratios rise again. <#inc ww2010.pic g061119.jpg right "" "Household credit market debt has grown exponentially since the end of WW II. (SAAR=seasonally adjusted annual rate) (Source: leap2020.eu)"#> Meanwhile, household debt continues to skyrocket. That adjoining graph shows that it's been growing exponentially since the end of World War II. Mainstream macroeconomics is completely unable to explain or predict any of these phenomena. The explosive growth of derivatives, the rise in price/earnings ratios and the continued exponential growth of credit represent complete failures in mainstream macroeconomics. As I wrote in <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory,""#> these phenomena are rather directly explained when you incorporate System Dynamics and generational patterns into macroeconomics theory. Mainstream macroeconomics predicts that debt levels should decrease as interest rates increase, and the opposite has happened. This is complete failure of mainstream macroeconomics theory. The growth of household credit is explained by the fact that, following WW II, the percentage of people in the investor population who had personal memory of the horrors of the Great Depression ketp going down, and the younger generations were much more willing to take investment risks. By the 1990s, all the senior financial executive positions were taken by people from these younger generations, and that's why the stock market bubble began in 1995. For the same reason, investors are still becoming increasingly risk-seeking. Led on by assurances that the financial system is stable, they've take more and more risks, and have created a worldwide pyramid scheme of highly inter-dependent high-risk investments, which has become as weak as its weakest investment. It would take only one or two major failures to collapse the entire system. Generational Dynamics has been predicting since 2002 that we're entering a new 1930s style Great Depression, with a stock market crash most likely by the 2006-2007 time frame. This could happen next week, next month, next year or after that, but with the derivatives market, investor risk and household credit all growing faster and faster, with nothing to stop further growth, the current "stability" cannot last much longer. =eod =// &&2 e061118 The Democrats tackle the Iraq war =data ww2010.weblog.y2006.e061118.head The Democrats tackle the Iraq war =data ww2010.weblog.y2006.e061118.keys =data ww2010.weblog.y2006.e061118.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061118.date 18-Nov-06 =data ww2010.weblog.y2006.e061118.txt1 Democrats and Republicans alike are hoping that Jim Baker will bail them out. =data ww2010.weblog.y2006.e061118.txt2 New Speaker of the House Nancy Pelosi says that ending the war is her highest priority. But how? As regular readers of this web site know, I've frequently argued that George Bush had no choice politically but to pursue a ground invasion of Iraq in 2003, and if Al Gore had been President after 9/11, he would have done the same thing. Either way, we'd be in generally the same situation today. The current situation provides a kind of test. With the Democrats now in power, and presuming to have a mandate to end the war, we can see if they succeed. So far, the signs don't indicate that they can even come up with plan. The proposals are as follows:

Just start pulling troops out, either immediately or in a few months. But if that happens, argue the naysayers, then there'll be full-scale "civil war" in Iraq, and Iran and Turkey will rush in and take control of the country.
Pull the troops out, but stage them in a nearby country so that they can rush back in, in case there's trouble. But what country would even be willing to stage over 100,000 American troops? And the naysayers point out that the insurgency in Iraq would immediately get worse, so the troops would have to rush back in right away.
Just set a deadline for the Iraq government to get its house in order, and threaten to pull out the troops if they don't meet the deadline. But the naysayers point out that setting a deadline is no different than the preceding two options. The insurgents will know that all they have to do is hold out until the deadline passes.
Increase the number of troops, and defeat the insurgency, and win the war once and for all. But the naysayers point out that that will only make it easier for the Iraqis to remain dependent on American troops. It's better to keep the troops at their current level and force the Iraqis to build up their own army and police force, with American training help.

<#inc ww2010.pic abizaid.jpg right "" "Army General John Abizaid, speaking at Harvard University's Kennedy School of Government on Saturday. (Source: Reuters)"#> Actually, when I talk about "naysayers," I mean one naysayer in particular: Army General John Abizaid, who testified before the Senate Armed Services Committee on Wednesday. The list above summarizes some of the major questions and responses. One thing was pretty clear: No one has any idea what to do next except to try to fight the war to victory. Although there are a few "anti-war" Democrats who are demanding early withdrawal of troops, there's little support even from Democrats for such a move. This is what I mean: There may be a new set of politicians in town, but there's no choice but to follow the same policy. Speaking at Harvard University's Kennedy School of Government on Saturday, <#stdurl http://www.gulfnews.com/region/Middle_East/10083765.html "General Abizaid compared al-Qaeda to the rise of the Nazis in 1930s Europe."#> "If we don't have guts enough to confront this ideology today, we'll go through World War Three tomorrow," he said. If not stopped, the extremists would be allowed to "gain an advantage, to gain a safe haven, to develop weapons of mass destruction, to develop a national place from which to operate. And I think that the dangers associated with that are just too great to comprehend". Abizaid said the world faces three major hurdles in stabilizing the Middle East region, and all three of them come together in Iraq: Easing Arab-Israeli tensions, stemming the spread of militant extremism, and dealing with Iran. There's a new political twist to threats of an Iraqi "civil war." As I've said zillions of time on this web site, you can call anything you want a civil war, but a real civil war in Iraq is impossible at this time, because only one generation has passed since the genocidal Iran/Iraq war of the 1980s. From the point of view of Generational Dynamics, a war where you have massive numbers of Sunnis and Shiites killing each other is not possible for several more decades. In fact, <#stdurl https://www.cia.gov/cia/public_affairs/speeches/2006/DCIA_SASC_Testimony.html "CIA director Gen. Michael V. Hayden told the Armed Services Committee"#> that "No single narrative is sufficient to explain all the violence in Iraq today." "No single narrative is sufficient to explain all the violence we see in Iraq today," Gen. Michael V. Hayden, the CIA director, told the Senate Armed Services Committee on Wednesday. Attempting to describe the enemy, Lt. Gen. Michael D. Maples, the DIA director, listed "Iraqi nationalists, ex-Baathists, former military, angry Sunni, Jihadists, foreign fighters and al-Qaeda," who create an "overlapping, complex and multi-polar Sunni insurgent and terrorist environment." He added that "Shia militias and Shia militants, some Kurdish pesh merga, and extensive criminal activity further contribute to violence, instability and insecurity." A more detailed <#stdurl http://www.dia.mil/publicaffairs/Testimonies/statement25.html "description was given by Defense Intelligence Agency Director"#> Lt. Gen. Michael D. Maples:

"The conflict is unquestionably complex and difficult. The fight to define post-Saddam Iraq has been primarily an intra-Arab struggle to determine how power and authority will be distributed. Iraqi nationalists, Baathists, former military, angry Sunni, Jihadists, foreign fighters, and al Qaida provide an overlapping, complex and multi-polar Sunni insurgent and terrorist environment. Shia militias and Shia militants, and extensive criminal activity further contribute to violence, instability, and insecurity. The U.S. presence obscured the true nature of this fight between and among competing groups for power as observers focused on insurgent attacks and rhetoric directed at the United States. Today, DIA assesses the conditions for the further deterioration of security and instability exists within this ongoing, violent struggle for power. Although a significant breakdown of central authority has not occurred, Iraq has moved closer to this possibility primarily because of weak governance, increasing security challenges, and no agreement on a national compact."

As you can see from Gen. Maples testimony, the situation is extremely complex, and he believes, as many do now in Washington, that there is the potential for full-scale civil war now in Iraq. He doesn't say that it's happened yet, or that it's happening now, but that it's "moving closer." The thing is that it never does get there. Iraq is in a "generational awakening" period, and there's a powerful generational pull back from full-scale civil war. You can call this kind of violence a civil war if you want, but if you're expecting the kind of all-out civil war that's occurring in Darfur today, or Rwanda or the Balkans in the early 1990s, then it's not going to happen, because it's impossible during a generational awakening era. But now we can see what the new political twist is. During the last couple of years, it's the Democrats who have been promoting the view that Iraq is moving toward civil war, arguing that the Administration policy has been a failure, and now we should just pull out and let them fight the civil war themselves. This is what we did in Vietnam, isn't it, and that worked out OK, didn't it? (Ignoring the massive genocide that occurred in Cambodia following the American withdrawal.) But now the "civil war argument" comes from the other side. It's the Administration side that's saying that if we pull out now, then there'll be massive civil war in Iraq, and this will result in the World War III that I quoted Abizaid above as referring to. This whole "civil war" argument is really beginning to bemuse me, but of course the situation is very serious. I first wrote about this "civil war" fear on August 19, 2003, <#hreftext ww2010.i.aug19 "just after the United Nations building in Baghdad had been bombed."#> Here's what I said:

"The really dangerous scenario is that large numbers of Palestinian and "mujahadeen" terrorists will be motivated by identity group relationships to move into Iraq as a theatre of war against the Americans. That isn't happening now, but it's one of several possible scenarios that may unfold in the Mideast region during the next few months and years."

This is what's happening now. Iraq is, more and more, becoming a "theatre of war" for outside Muslim terrorist groups. Tony Blair said something similar in <#stdurl http://news.scotsman.com/politics.cfm?id=1714112006 "an interview on Saturday:"#>

"[You] see what I say to people is why is it difficult in Iraq? It's not difficult because of some accident in planning, it's difficult because there's a deliberate strategy - al-Qaeda with Sunni insurgents on one hand, Iranian-backed elements with Shia militias on the other - to create a situation in which the will of the majority for peace is displaced by the will of the minority for war."

From the point of view of Generational Dynamics, we're headed for a "clash of civilizations" world war, it's increasingly clear that Iraq will be an important theatre of war for that world war. In the meantime, the government is becoming increasingly paralyzed. That's because the government is currently run by the Boomer generation, the generation born after WW II, the generation that has no skills except the ability to make vitriolic statements about people who DO try to get something done. The only person who <#inc ww2010.weblog.ref e061108 "was actually doing something was Donald Rumsfeld."#> Rumsfeld was born in 1932, and is from the Silent generation, a generation of people who actually have skills besides arguing. Rumsfeld has been restructuring the armed forces to prepare the country for the coming Crisis. His replacement by a bureaucratic Boomer is an enormous loss to the nation and will cost us. No one in Washington knows what to do about Iraq, but what's really funny is that, between making vitriolic statements, everyone, Republican and Democrat alike, is hoping and praying that Jim Baker will bail them out. Jim Baker is heading up a bi-partisan committee to make recommendations on Iraq, and he'll be making his recommendations in December. Why is this funny? Because Baker is another Silent, born in 1930, and is one of the few people left in Washington who can still get things done. But Baker's report will be non-binding, so it's unlikely that anything difficult in it will be implemented. There's another important principle of Generational Dynamics (applying concepts of Chaos Theory): No political decision can have a predictable effect on the coming "clash of civilizations" world war. So it's possible that withdrawing our troops will speed up the start of the world war, and it's possible that NOT withdrawing our troops will speed up the start of the world war. It's impossible to predict. So my expectation is that last week's Democratic victory won't lead to any major change in policy in Iraq, but the effect of any such policy change is unpredictable anyway, so it doesn't really matter, does it. As I've said many times, Generational Dynamics tells you the final destination, but doesn't tell how you get there. So we don't know how we'll get to the "clash of civilizations" world war, by my expectation continues to be that we won't withdraw our troops until some larger war elsewhere (Palestine/Israel, Taiwan, etc.) forces us to do so. =eod =// &&2 e061113 MI5 chief: U.K. flooded with Islamic terrorists / sympathizers =data ww2010.weblog.y2006.e061113.head MI5 chief: U.K. is flooded with Islamic terrorists and sympathizers =data ww2010.weblog.y2006.e061113.keys =data ww2010.weblog.y2006.e061113.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061113.date 13-Nov-06 =data ww2010.weblog.y2006.e061113.txt1 Over 100,000 young British Muslims call the 7/7 London subway bombings "justifiable," =data ww2010.weblog.y2006.e061113.txt2 according to a speech last week by Dame Eliza Manningham-Buller, the Director-General of MI5, Britain's equivalent of the CIA. <#inc ww2010.pic dameeliz.jpg right "" "Dame Eliza Manningham-Buller, the MI5 Director-General"#> Introducing herself "not as a politician, nor as a pundit, but as someone who has been an intelligence professional for 32 years," Dame Eliza said that hundreds of young British Muslims are being radicalised, groomed and set on a path to mass murder. The following are extracts from <#stdurl http://www.mi5.gov.uk/output/Page568.html "the speech she gave last week:"#>

"What I can say is that today, my officers and the police are working to contend with some 200 groupings or networks, totalling over 1600 identified individuals (and there will be many we don't know) who are actively engaged in plotting, or facilitating, terrorist acts here and overseas."
"The extremists are motivated by a sense of grievance and injustice driven by their interpretation of the history between the West and the Muslim world. This view is shared, in some degree, by a far wider constituency. If the opinion polls conducted in the UK since July 2005 are only broadly accurate, over 100,000 of our citizens consider that the July 2005 attacks in London were justified." [Dame Eliza is referring to the terrorist bombings on the London subway system on July 7, 2005. - JX]
"What we see at the extreme end of the spectrum are resilient networks, some directed from Al-Qaida in Pakistan, some more loosely inspired by it, planning attacks including mass casualty suicide attacks in the UK. Today we see the use of home-made improvised explosive devices; tomorrow's threat may include the use of chemicals, bacteriological agents, radioactive materials and even nuclear technology. More and more people are moving from passive sympathy towards active terrorism through being radicalised or indoctrinated by friends, families, in organised training events here and overseas, by images on television, through chat rooms and websites on the Internet."
"The propaganda machine is sophisticated and Al-Qaida itself says that 50% of its war is conducted through the media. In Iraq, attacks are regularly videoed and the footage downloaded onto the internet within 30 minutes. Virtual media teams then edit the result, translate it into English and many other languages, and package it for a worldwide audience."
"And, chillingly, we see the results here. Young teenagers are being groomed to be suicide bombers. We are aware of numerous plots to kill people and to damage our economy. What do I mean by numerous? Five? Ten? No, nearer....... thirty that we know of. These plots often have links back to Al-Qaida in Pakistan and through those links Al-Qaida gives guidance and training to its largely British foot soldiers here on an extensive and growing scale. And it is not just the UK of course. Other countries also face a new terrorist threat: from Spain to France to Canada and Germany."
"There has been much speculation about what motivates young men and women to carry out acts of terrorism in the UK. ... Al-Qaida has developed an ideology which claims that Islam is under attack, and needs to be defended. This is a powerful narrative that weaves together conflicts from across the globe, presenting the West's response to varied and complex issues, from long-standing disputes such as Israel/Palestine and Kashmir to more recent events as evidence of an across-the-board determination to undermine and humiliate Islam worldwide. Afghanistan, the Balkans, Chechnya, Iraq, Israel/Palestine, Kashmir and Lebanon are regularly cited by those who advocate terrorist violence as illustrating what they allege is Western hostility to Islam."
"The video wills of British suicide bombers make it clear that they are motivated by:
- perceived worldwide and long-standing injustices against Muslims;
- an extreme and minority interpretation of Islam promoted by some preachers and people of influence;
- their interpretation as anti-Muslim of UK foreign policy, in particular the UK's involvement in Iraq and Afghanistan.
Killing oneself and others in response is an attractive option for some citizens of this country and others around the world."
"That threat is serious, is growing and will, I believe, be with us for a generation. It is a sustained campaign, not a series of isolated incidents. It aims to wear down our will to resist."

With regard to Dame Eliza's points on the motivations of the terrorists, Generational Dynamics explains a lot of the motivations of suicide bombers. Generational Dynamics cannot predict the attitudes and behaviors of any individual, since each individual is free to do what he or she wants. But Generational Dynamics can and does predict much about the attitudes and behaviors of generations of people. We're seeing that suicide bombers only come from societies that have entered generational crisis periods, and not before. This indicates that the generational crisis period changes society so that it makes the creation of suicide bombers possible. (It's remarkable that with so many suicide bombings going on in Iraq, almost none of the actual suicide bombers are Iraqis.) Further findings, obtained by combining Generational Dynamics research with <#hreftext ww2010.i.050718pape "Robert Pape's study of suicide bombers, published in the book Dying to Win,"#> we find that suicide bombers justify their terrorist acts as "altruistic suicide." Pape found that suicide bombers most likely come from countries occupied by another country, and his research shows that they come overwhelming from countries that have passed through a generational crisis era without having a crisis war. In these countries, the parents have accepted the occupation, albeit bitterly and reluctantly. But their impatient children take it upon themselves to free their parents' generation from this occupation by this unique form of altruistic suicide. These studies have led to a "Hero / Parent / Prophet" generational model that explains the motivation and development of terrorist acts and crisis wars that are led by a young generation of "Heroes": There's a group of "Prophets" that teenagers listen to; these are usually (but not always) elders, and they might be government officials, religious clerics, or even media personalities (like Jon Stewart of Comedy Central's Daily Show). Each of these prophets presents a different political philosophy to teenagers. Groups of teens select from among these alternative Prophet political philosophies in the same way that they might select a rock star or fashion item. Rebellious groups select political philosophies that provide for action against society, and the most extreme of these rebellious groups select political philosophies that call for terrorist acts and suicide bombings. These rebellious teen groups become "Heroes" by altruistic suicide (killing themselves for the good of the greater community). Do their parents have any influence? Yes, but in an unexpected manner: In a formula described by Hannah Arendt, they become Heroes by adopting "the attitudes and convictions of the bourgeoisie, cleansed of hypocrisy." In Arendt's formulation, the parents are the bourgeoisie with the message: "We hate the occupiers, but we have to get along with them and do business with them." Their "Hero" children cleanse this message of hypocrisy, changing it to: "We hate the occupiers, and we must take action to correct the situation." Depending on the circumstances, the action can be in the form of riots and demonstrations, terrorist acts and suicide bombings, or full-scale war. Based on Dame Eliza's speech, and on other information that's been published since the July 7, 2005, London subway bombings, the "Prophets" that the young generation of British Muslims have selected are the radical clerics running the madrassas in Pakistan. Furthermore, the "success" of the 7/7 subway bombings has served to popularize the clerics even more. It's important to understand that the selection of radical Pakistani prophets is an emotional decision, a form of mass hysteria not unlike young girls screaming their love for the Beatles or another pop star. There is now a very strong emotional link between young British Muslims and these Pakistani radicals. The young Muslims don't listen to anyone else, just as many Americans and Britons don't listen to George Bush or Tony Blair. It's only the message of the Pakistani radicals that they hear or want to hear. That's why radical Islamic attitudes are spreading so quickly through the UK population. Dame Eliza says that the number of terrorist plots is constantly growing, and that over 100,000 British citizens now consider the 7/7 subway bombings to be "justified." As I frequently say on this site, I'm always looking for massive changes in behavior and attitude in any country, because that almost always signals a major generational change. That's the case in Britain, where the new generation of young "Hero" Muslims is massively adopting a radical Islamist view. Question: What can be done to stop this trend? Answer: It can't be stopped. I'll use the same rhetoric that I use to explain why Darfur's genocidal crisis war cannot be stopped: A generational crisis war cannot be stopped any more than a tsunami can be stopped. Similarly, this shift in attitudes and behaviors of young British Muslims favoring terrorist acts and suicide bombings in Britain and other places is a massive generational change that cannot be stopped any more than a tsunami can be stopped. All we can do is see that the tsunami is coming, and prepare for it. More and more today, I tell people: Treasure the time you have left, and use it to prepare yourself, your family, your community and your nation. Dame Eliza's speech indicates that there may not be much time left. =eod =// &&2 e061111 In Flanders Fields =data ww2010.weblog.y2006.e061111.head In Flanders Fields =data ww2010.weblog.y2006.e061111.keys =data ww2010.weblog.y2006.e061111.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061111.date 11-Nov-06 =data ww2010.weblog.y2006.e061111.txt1 =data ww2010.weblog.y2006.e061111.txt2 <#inc ww2010.pic poppy.jpg center "" "Source: http://marcoaliaslama.tripod.com/paint/index.album?i=16"#> In Flanders Fields
By: Lieutenant Colonel John McCrae, MD (1872-1918)
Canadian Army

IN FLANDERS FIELDS the poppies blow
Between the crosses row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields. =eod =// &&2 e061110b UN: 11 countries are pouring weapons into Somalia =data ww2010.weblog.y2006.e061110b.head UN: 11 countries are pouring weapons into Somalia, as it prepares for war =data ww2010.weblog.y2006.e061110b.keys =data ww2010.weblog.y2006.e061110b.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061110b.date 10-Nov-06 =data ww2010.weblog.y2006.e061110b.txt1 Iran has provided 250 anti-aircraft missiles, while Syria, Libya, Sudan, Egypt, Eritrea, Djibouti and Saudi Arabia =data ww2010.weblog.y2006.e061110b.txt2 also give military support to the radical Islamists, according to <#stdurl http://www.alertnet.org/thenews/newsdesk/L10884941.htm "an arms embargo violations report to the U.N. Security Council,"#> due out next week. <#inc ww2010.pic afrihorn.gif right "" "Horn of Africa"#> As we described last month, <#inc ww2010.weblog.ref e061028 "Somalia and Ethiopia are close to full-scale war,"#> after a takeover of Somalia by the radical Islamic Courts Union (ICU). From the point of view of Generational Dynamics, the highly strategic Horn of Africa will play an important role in the coming "clash of civilizations" world war. The military support includes anti-aircraft guns, assault rifles, heavy weapons, uniforms, food, fuel and other necessary items for war. Ethiopia, Uganda and Yemen are <#stdurl http://www.alertnet.org/thenews/newsdesk/L10757136.htm "giving military support to the Transitional Federal Government (TFG),"#> the internationally recognized confederation of warlords formed in 2000. Other factions in Yemen are also supplying the Islamists. The two sides are forming coalitions along Muslim-Christian lines. According to the UN report, Somalia's powerful Islamist movement has in its ranks about 1,000 battle-hardened foreign jihadists and volunteer trainers expert in assassination, suicide bombing and sniping from militant groups including Lebanon's Hezbollah. =eod =// &&2 e061110 As stock market bubble skyrockets, risk premiums are collapsing =data ww2010.weblog.y2006.e061110.head As stock market bubble skyrockets, risk premiums are collapsing =data ww2010.weblog.y2006.e061110.keys =data ww2010.weblog.y2006.e061110.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061110.date 10-Nov-06 =data ww2010.weblog.y2006.e061110.txt1 Desperate investors appear willing to take any risk these days to get returns. =data ww2010.weblog.y2006.e061110.txt2 And the way we know that is because of the collapse, this past week, in the price of "credit default swap" (CDS) derivative instruments. We'll take a moment to explain what this means. "Derivatives" are investments that allow you to make "bets" that something will or won't happen. For example, if you want to bet that winter will be especially cold, you can purchase a weather derivative based on energy stocks. If winter is cold, then the energy stocks will go up, and the weather derivative will go up. So buying the weather derivative lets you bet that the weather will be cold. Hedge funds often make multiple investments, so that a loss in one investment will be hedged by a gain in another investment. For example, if you invest in retail stocks in the Christmas season, and you're afraid you'll lose money because the weather will be too cold and people won't go shopping, then you can also buy the above weather derivative as a hedge. If you structure it very, very cleverly, then you'll make money if the weather is cold or not. Another investment you can make is that you can buy corporate debt or corporate bonds, essentially making a loan to a corporation. But what if the corporation defaults or goes bankrupt? Then you would lose your entire investment. So you take out some insurance. You make a second investment, in "credit default swap" (CDS) derivatives. If lose money in the first investment, then the second investment will pay off. Once again, you have to be very, very, very clever to make sure that you'll make money no matter what happens. Well, what's happened in the last two weeks is that investors have stopped buying CDSs, and so <#stdurl http://www.theaustralian.news.com.au/story/0,20867,20712325-36375,00.html "the price of CDSs has collapsed, falling more than 16%."#> And for hedge fund firms that own these CDSs, there's "panic selling" going on, as the CDSs fall in value. Why would investors stop buying CDSs? Apparently it's because they don't believe there's anything to be afraid of. They're certain that corporations will be able to repay their debts. What's the point of buying fire insurance if you're sure that your house won't burn down? Another possibility is that investors are desperate. If you think you're going to lose your house anyway, you might not bother with fire insurance. If you think you might go bankrupt anyway, you might gamble on a risky investment without buying any insurance. Either way, investors are suddenly becoming more risk-seeking, and less risk-averse. There's an easier way to see that investors are suddenly becoming more risk-seeking. <#inc ww2010.pic pe061103.gif center "" "S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 3-Nov-2006. (Source: MarketGauge ® by DataView, LLC)"#> The above graphic is the November 3 version of the graphic that appears on the bottom of the home page for this web site. It shows the price/earnings ratio index for the S&P 500. As the graphic shows, investors have been getting increasingly risk-averse for the last few years, but in the last couple of weeks the index suddenly began to increase. Thus, investors are willing to pay more for stocks with the same corporate earnings. Both the increasing price/earnings ratios and the collapse of CDS prices indicate the same thing: That investors are again becoming risk-seeking, and are pushing the stock market bubble up even higher. With the derivatives market <#stdurl http://www.marketwatch.com/news/story/Story.aspx?guid=%7B63087831%2D5F18%2D4339%2D9E49%2D0071DBEA18F1%7D&siteid= "soaring and almost completely unregulated,"#> global finance is getting crazier and crazier almost every day. Consider these figures:

The derivatives market has reached nearly $300 trillion in value.
The total value of the stock and bond markets is only $65 trillion.

How do you suppose it's possible for $300 trillion of derivatives to be based on just $65 trillion of underlying stocks and bonds? Well, that's how a bubble works. The derivatives instruments are sold and resold, sometimes to the same people. Each selling raises the price of the instrument. If anyone else were doing this, it would be called an illegal pyramid scheme. Derivatives and hedge funds have grown explosively in the last five years, and credit derivatives (like CDSs) have been the fastest growing type of derivative. Financial firms have created so many different kinds of derivatives, allowing investors to "bet" on so many different things, that regulators don't even understand all the kinds, let alone keep track of all the firms offering them. And incidentally of the 10,000 or more hedge funds available today, 8,000 are registered in the Cayman Islands. Many officials are increasingly calling them <#stdurl http://mondediplo.com/2006/10/02finance ""weapons of mass financial destruction.""#> Generational Dynamics has been predicting since 2002 that we're entering a new 1930s style Great Depression, with a stock market crash most likely by the 2006-2007 time frame. This could happen next week, next month, next year or after that, but explosion of derivatives and the decrease in risk-averseness of investors is making the global financial structure increasingly unstable. =eod =// &&2 e061108 Donald Rumsfeld's resignation significant generational =data ww2010.weblog.y2006.e061108.head Donald Rumsfeld's resignation brings significant generational change to Pentagon leadership =data ww2010.weblog.y2006.e061108.keys =data ww2010.weblog.y2006.e061108.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061108.date 8-Nov-06 =data ww2010.weblog.y2006.e061108.txt1 Robert Gates will be more confrontational but less focused. =data ww2010.weblog.y2006.e061108.txt2 President Bush <#stdurl http://www.voanews.com/english/2006-11-08-voa58.cfm "announced that Donald Rumsfeld will leave as Secretary of Defense,"#> and that <#stdurl http://en.wikipedia.org/wiki/Robert_Gates "former CIA director Robert M. Gates"#> will replace him. I've <#inc ww2010.weblog.ref e060417 "said several times on this web site"#> that Donald Rumsfeld is just about the only person in Washington that I trust to know what's going on in the word and is preparing the nation for it. <#inc ww2010.pic g061108a.jpg right "" "Donald Rumsfeld (Source: CNN)"#> He's in the Silent generation, born in 1932. He grew up at a time when the West was oblivious to the threats posed by Germany and Japan, and so he understands the danger posed by the rapid militarization of China and Iran today. In particular, Rumsfeld was 9 years old on the day of the biggest military disaster in American history, when the Japanese destroyed almost the entire Pacific fleet in a single day on November 7, 1941. Rumsfeld remembers well how unprepared we were for that attack, and he remembers the anxiety and fear that all Americans felt on that day when they realized that America's major Pacific defenses had all been stripped away in one day, and that the country was now open and vulnerable to Japanese and even German attacks. Now Rumsfeld's life has come first circle, and as Secretary of Defense it's been his responsibility to make sure that we aren't unprepared again. To that end he's spent his six-year term reorganizing the armed forces into a high-tech force, and he's refocused the armed forces to be fully prepared for a war in the Pacific. This reorganization has gotten a lot of noses out of joint in the Pentagon bureaucracy, and you can bet that a lot of the Washington opposition to Rumsfeld was from people losing their pet projects in the reorganization, and you can also bet that many parts of the armed forces are just as oblivious today to the danger from China as they were in 1941 to the dangers from Japan. But Rumsfeld's personal memories of the 1941 horror have kept him focused on this difficult job of making sure that the nation is prepared for the dangers we face. The mainstream media is totally ignoring this point, but <#stdurl http://www.whitehouse.gov/news/releases/2006/11/20061108-4.html "President Bush spoke of it at length at today's announcement:"#>

"America is safer and the world is more secure because of the service and the leadership of Donald Rumsfeld. As he led the Pentagon in an unprecedented war, Don never took his eye off another vital responsibility, preparing America for the threats that await us as this new century unfolds. He developed a new defense strategy. He established a new Northern Command to protect the homeland, a new Joint Forces Command to focus on transformation, a new Strategic Command to defend against long-range attack, and transformed the U.S. Special Operations Command for the war on terror. He led our efforts to create a new NATO Response Force that allows NATO to deploy rapidly anywhere in the world. He undertook the most sweeping transformation of America's global force posture since the end of World War II. He revitalized America's efforts to develop and deploy ballistic missile defenses, and led a comprehensive review of America's nuclear forces that has allowed us to undertake dramatic reductions in offensive nuclear weapons. Don's work in these areas did not often make the headlines. But the reforms that he has set in motion are historic, and they will enhance the security of the American people for decades to come."

Rumsfeld prosecuted his job with brutal energy. I still remember Rumsfeld at press conferences during the Afghan and Iraq wars, responding to a reporter's question with something like the following: "We aren't trying to be nice to these people; what we want is to kill them." No one could ever doubt Rumsfeld's steely determination to get the job done. Robert M. Gates is a member of the Boomer generation, born in September, 1943. (The mainstream definition of "Baby Boomer" starts in the year 1945, but for the purposes of Generational Dynamics, the Boomer generation begins in 1942, the first birth year of people with no personal memory of World War II.) <#inc ww2010.pic g061108b.jpg left "" "Robert M. Gates (Source: CNN)"#> Bob Gates has served 26 years in the Central Intelligence Agency and the National Security Council, and so is very well aware of the growing and approaching danger from China. Gates' top goals will certainly be the same as Rumsfeld's -- make sure that the nation is prepared for the inevitable world war with China and Iran. But Gates is much more of a politician. He'll be confrontational, like any Boomer, but in the end he'll be driven more by the need for consensus -- within the armed forces and with Congress. Gates will not have Rumsfeld's single-minded, relentless focus on preparing and protecting the nation, and will occasionally compromise in places where Rumsfeld wouldn't have. From the point of view of Generational Dynamics, the replacement of Don Rumsfeld with a Boomer is possibly the most significant political decision of 2006, even more significant than yesterday's election. Whether the nation suffers for it is something that historians will have to decide in the decades to come. Generational Dynamics, Baby Boomers, Crisis Wars, Fourth Turning, Generation X, =eod =// &&2 e061106 Liberal Boomers feel victory in their grasp in tomorrow's Congressional elections. =data ww2010.weblog.y2006.e061106.head Liberal Boomers feel victory in their grasp in tomorrow's Congressional elections. =data ww2010.weblog.y2006.e061106.keys =data ww2010.weblog.y2006.e061106.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061106.date 6-Nov-06 =data ww2010.weblog.y2006.e061106.txt1 But there's a generational disconnect that leaves the future in doubt. =data ww2010.weblog.y2006.e061106.txt2 Liberal Boomers are exultant, feeling victory in their grasp. One says, "Finally, the country's problems will get solved after Tuesday!" Conservative Boomers (people in the "Baby Boomer" generation, born after World War II) are depressed, and warning of coming disaster if the Democrats win as expected. <#inc ww2010.pic g061106.gif right "" "Expected election results as of Monday, November 6, 2006"#> Polls continue to show substantial leads for Democrats. It's now considered almost certain that the Democrats will control the House of Representatives, and at least possible that Democrats will control the Senate. I report on dozens of different countries on this web site and, from the point of view of Generational Dynamics, I'm always looking for massive changes in public opinion, since they almost always mean significant generational changes. Now it's America's turn. There seems to be a massive move toward the Democratic party in this election. But there's a big disconnect in what's going on: The issues are dominated 99.9% by Boomer issues, but a generational change means that it's people in the younger generations that will be dominating the voting. So there's a big question: What's going to happen after the election, if the polls hold and there's a big Democratic win? Will things be as wonderful as the liberal Boomers think, or as disastrous as the conservative Boomers warn about? The thing that's really amazing me is the extent to which Boomers are reliving the 60s. Its about as Freudian as you can get.

A couple of weeks ago, <#inc ww2010.weblog.ref e061023 "I wrote about what they were saying on Sunday's This Week With George Stephanopoulos"#> -- multiple Congressional investigations of the Bush administration, restricting war spending to force withdrawal from Iraq. Well, that's EXACTLY WHAT HAPPENED IN VIETNAM.
Bob Woodward wrote <#inc ww2010.weblog.ref e060930 "his State of Denial book,"#> saying almost EXACTLY THE SAME THINGS HE SAID ABOUT NIXON in the 70s.
John Kerry <#inc ww2010.weblog.ref e061103 "trashes the armed forces,"#> which is EXACTLY WHAT HE DID IN THE 70s.
Seymour Hersh <#inc ww2010.weblog.ref e061103 "talks darkly about massacres by American soldiers,"#> which is EXACTLY WHAT HE DID IN THE 60s, when he wrote about My Lai. One of the many things that are completely different today from the 60s and 70s is that the Vietnam soldiers were HATED. They were not considered heroes; they were considered murderers. Many of them hid their Vietnam experiences for years. That's the attitude that Kerry and Hersh are reliving.
A <#stdurl http://www.boston.com/news/education/higher/articles/2006/11/05/wheres_the_protest "long article in Sunday's Boston Globe"#> bemoans the fact that there are no massive demonstrations against the Iraq war:
"In 1969, as George Herring, an emeritus professor of history at the University of Kentucky and a leading authority on the Vietnam War, points out, "there were big demonstrations not only in San Francisco and Boston, but in cities like Lexington." And when the bombing of Cambodia began, "there were protests all over, campuses closed down all over the country, even in its most conservative areas." Why is it, then, that at a time when the Iraq war has grown as unpopular as Vietnam was in the late 1960s, we don't see the same sort of antiwar movement? Historians, political scientists, and activists offer a mix of answers: There's no draft; Iraq is a thornier problem than Vietnam; the '60s, politically and socially, were an anomaly."
Of course, as I've written many times on the web time, including <#hreftext ww2010.i.060601antiwar "a lengthy analysis in June,"#> antiwar demonstrations don't interest today's college students; the only people who are interested are Boomers, the same Boomers who protested the Vietnam war, but are now 40 years older. Following up on Monday is the <#stdurl http://www.boston.com/news/globe/editorial_opinion/oped/articles/2006/11/06/what_it_will_take_to_end_war/ "Boston Globe's regular op-ed columnist, liberal Boomer James Carroll,"#> saying that it's a "harsh fact that the only way out of the war is to accept defeat" -- just like Vietnam.

This is increasingly bizarre to me, but I guess it's part of the real "state of denial" that most Boomers are in. They're trying to relive the excitement of when they were children, just as old soldiers in the 60s were trying to relive WW II. Just as a general rule of life, there is absolutely no chance that things today are going to go the same way that they did in the 60s and 70s. It just never happens that way. In particular, I've said many times that my personal expectation is that we'll still be in Iraq until we're forced to withdraw by the "clash of civilizations" world war. And this is the point of the disconnect. All anyone ever talks about is Boomer issues -- the "quagmire" in Iraq, the gay sex scandals, abortion, cost of the war, feminism, health insurance. Some people would argue that these issues are important to people in younger generations as well. But if you make an analogous argument for the 1960s, then you could list important issues -- preventing World War III, stopping Communism, fiscal discipline -- that were important to the old soldiers at the time, and arguably should have been important to the people in the younger generations of the 1960s (i.e., the Boomers). Only, as it turned out, those issues weren't important to them after all. The only way to understand the 1960s-70s protests is through the "generation gap." Boomers didn't hate the Vietnam war so much as they hated their overbearing parents, who feared another Great Depression and another World War. For a 1960s Boomer, hating your father meant hating the Vietnam war. Hating your father meant hating soldiers in Vietnam who were collaborating with your father. Hating your mother meant burning your bra. Today, those same people are 40 years older, and they have a new "anti-war" movement. Today, hating your father means hating George Bush. However, younger generations today have none of these motivations. Generation-Xers tend to be more motivated by fury at Boomers than anything else. And the kids in today's college-age generation don't hate their parents at all; it's more likely that they worry about whether their parents will be OK. They aren't motivated by any of the emotions that drive Boomers and Xers, but are sick and tired of all the arguing. Few college-age kids are against the war at all, and most are willing to serve, if necessary. So there's plenty wrong with this picture. The liberal Boomers feel victory in their grasp, thanks to shifts in opinion by younger generations of people who don't share the liberal Boomers' motivations. And if they don't have the same motivations, can they really agree on the issues? I don't think so, and that's another reason why we should expect the government to continue to be paralyzed, and the vitriolic arguing to get only worse. =eod =// &&2 e061103 John Kerry and Seymour Hersh trash the armed forces. =data ww2010.weblog.y2006.e061103.head John Kerry and Seymour Hersh trash the armed forces. =data ww2010.weblog.y2006.e061103.keys =data ww2010.weblog.y2006.e061103.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061103.date 3-Nov-06 =data ww2010.weblog.y2006.e061103.txt1 These morons are a disgrace to the nation. =data ww2010.weblog.y2006.e061103.txt2 This isn't a political assessment. Hillary Clinton would NEVER savage the armed forces the way Kerry does. Neither would Al Gore. Neither would Ted Kennedy, the other Senator from Massachusetts. In 1971, Kerry said that American soldiers were committing war crimes "on a day-to-day basis with the full awareness of officers at all levels of command." These atrocities included rape, torture, and cutting off ears, heads and limbs. He compared the actions of our armed forces to those of Genghis Khan. When <#inc ww2010.weblog.ref e040827b "I wrote about this during the 2004 Presidential campaign,"#> I said that I didn't care what Kerry said decades ago, but I wanted to know what he believes today. I pointed out that John Kerry couldn't be President, leading the nation in the war against terror, if he believes that the American armed forces are worse than the terrorists. Well, I finally have my answer. On Wednesday, <#stdurl http://msnbc.msn.com/id/15512797/ "Kerry called in to the Don Imus radio show,"#> and made the following remarks:

"But I'm not going to stand back from the reality here, which is they're trying to change the subject. It's their campaign of smear and fear. They're going at---and, incidentally, when you say I've done something in the past. I've told the truth in the past. I've never done anything except tell the truth. And I'm not going to take anybody's comment to suggest that somehow my telling the truth was a mistake. The American people rely on the truth. And when I came back from Southeast Asia, I told the truth. And I'm proud that I stood up and told the truth then, and I've told the truth about Iraq every single step of the way."

So now we know. Kerry STILL believes that the American armed forces are nothing but rapists and terrorists who go around killing and mutilating people. In 1972, when he ran for the House, Kerry filled out a questionnaire saying that he opposed the draft but considered a volunteer army "a greater anathema," <#stdurl http://www.boston.com/news/local/massachusetts/articles/2006/11/02/kerrys_72_campaign_comments_on_army_mirror_latest_flap/ "and added the following explanation:"#>

"I am convinced a volunteer army would be an army of the poor and the black and the brown. We must not repeat the travesty of the inequities present during Vietnam. I also fear having a professional army that views the perpetuation of war crimes as simply 'doing its job.'"

So, with that background, it shouldn't be a surprise that John Kerry believes that the people in our armed forces are stupid. Here's <#stdurl http://www.cnn.com/2006/POLITICS/10/31/kerry.mccain/ "what he said, earlier this week:"#>

"You know, education -- if you make the most of it, you study hard and you do your homework and you make an effort to be smart, you can do well. If you don't, you get stuck in Iraq."

This comment is completely consistent with his 1972 remarks on the volunteer army, so I have no reason to believe that he didn't mean it. He's released <#stdurl http://blog.johnkerry.com/2006/11/a_statement_from_john_kerry.html "a statement on his web site"#> saying that it was "a verbal slip," and on the Don Imus show he called it a "botched joke," saying that he meant to call George Bush stupid, not the troops. However, this doesn't make sense either, since both John Kerry and George Bush went to Yale, and Bush got higher grades. John Kerry may have been taking a cue from New Yorker magazine journalist Seymour Hersh, <#stdurl http://www.mcgilldaily.com/view.php?aid=5450 "who said the following last week:"#> "In Vietnam, our soldiers came back and they were reviled as baby killers, in shame and humiliation. It isn't happening now, but I will tell you -- there has never been an [American] army as violent and murderous as our army has been in Iraq." Two years ago, Seymour Hersh <#stdurl http://transcripts.cnn.com/TRANSCRIPTS/0405/09/le.00.html "compared the American armed forces to Nazi Storm Troopers in Hitler's Third Reich."#> Beyond the sheer stupidity of these two jackasses, John Kerry and Seymour Hersh, Kerry is a disgrace to Massachusetts, Hersh is a disgrace to journalism, and they're both a disgrace to the nation. Fortunately for the nation, there are no other major journalists or politicians, Democrat or Republican, that I know of, spouting this kind of hate speech. Fortunately, the men and women in our armed forces have a much better sense of humor than I have: <#inc ww2010.pic irakcar.jpg center "" "Members of the Minnesota National Guard's 34th Infantry Division with a sign mocking John Kerry. It says, "HALP US JON CARRY - WE R STUCK HEAR N IRAK" (Source: Drudge Report)"#> This picture has been widely circulated on the Internet. =eod =// &&2 e061101 Hard-right politician Avigdor Lieberman joins Israeli cabinet =data ww2010.weblog.y2006.e061101.head Hard-right politician Avigdor Lieberman joins Israeli cabinet =data ww2010.weblog.y2006.e061101.keys =data ww2010.weblog.y2006.e061101.loc ww2010.weblog.log0611 =data ww2010.weblog.y2006.e061101.date 1-Nov-06 =data ww2010.weblog.y2006.e061101.txt1 Like the Palestinians, the Israelis are daily becoming increasingly ungovernable. =data ww2010.weblog.y2006.e061101.txt2 When <#inc ww2010.weblog.ref e060403 "I wrote about the Israeli election in April,"#> I remarked that a huge shock was the 11-seat third place win of the Yisrael Beiteinu party headed by Avigdor Lieberman. Lieberman is considered a racist because of a specific proposal he has: Give up some portions of Israel occupied mostly by Arabs back to the Palestinians, in exchange for other Palestinian lands occupied mostly by Jews. Lieberman's objective is to keep Israel as purely Jewish as possible, with as few Arabs as possible. The Beiteinu party is considered to be far right and racist because of this proposal, and so its capture of 11 Knesset seats after never winning even one seat before indicates a sharp turn of the Israeli electorate to the right. The April election reflected a sharp change in direction anyway. I call it a "bunker mentality" election, because it the voters seemed to make it clear that they wanted to have close themselves behind their security fence and have as little to do with the Palestinians as possible. The centerpiece was a plan by the new Prime Minister Ehud Olmert called "convergence" or "consolidation." Under this plan, all West Bank Jewish settlements would be relocated close to Jerusalem, behind the security fence, and the Palestinians could do what they want in the West Bank, as they could in Gaza. Then came the summer and the Lebanon War. Thousands of Hizbollah missiles poured into Israel from Lebanon, joining a few Hamas missiles flying over the security fence from Gaza. It became clear that the security fence offered little or no protection. The "convergence" plan has been abandoned, and Israelis are living in increasing anxiety and fear. The appointment of Lieberman to head Israel's Ministry of Strategic Threats reflects that increased anxiety, and signals an increased readiness to go to war, if necessary. Much commentary on Lieberman's appointment has been scathing. <#stdurl http://www.metimes.com/storyview.php?StoryID=20061030-085348-2187r "Arab commentator Nicola Nasser says"#> that the Lieberman appointment "threatens to destabilize the already explosive regional situation and preempts any credible prospects for initiating a new peace process if not reviving the old road map-based process." An <#stdurl http://www.haaretz.com/hasen/spages/778468.html "editorial in the left-leaning Israeli paper Haaretz,"#> calls it "a cynical move with few parallels in Israeli politics." It echoed the Arab commentary by saying, "Lieberman's lack of restraint and his unbridled tongue, comparable only to those of Iran's president, are liable to bring disaster down upon the entire region threatens to destabilize the already explosive regional situation and preempts any credible prospects for initiating a new peace process if not reviving the old road map-based process threatens to destabilize the already explosive regional situation and preempts any credible prospects for initiating a new peace process if not reviving the old road map-based process." The comparison to Iranian president Mahmoud Ahmadinejad is quite common, and shows that the Palestinians may feel as threatened by Lieberman as the Israelis do by Ahmadinejad. The world has gone through a long period of relative stability, but there's a big irony about stability: Too much stability is destabilizing. If there's too much stability for too long, then people, especially younger people, decide that it's safe to take greater and greater risks. And every time a government takes an additional risk, the world becomes less stable again. From the point of view of Generational Dynamics, this is especially true at this time, 61 years after the end of WW II, and 57 years after the end of the genocidal war between Arabs and Jews. At this time, the generations of people who lived through those wars are almost all gone. The people in charge now (like America's Baby Boomer generation) were born after the war, and have few skills other than arguing other people. That's why America's politics are in gridlock, and why Israel's politics is approaching gridlock. The Palestinians are in the worst shape, if that's possible. According to <#stdurl http://weekly.ahram.org.eg/2006/815/fr3.htm "a commentary by an Arab writer,"#>

"Civil war in Palestine looks in danger of becoming a self-fulfilling prophecy. Infighting between Fatah and Hamas is no longer confined to mutual recriminations and staged demonstrations but has escalated into street fighting with no-holds-barred. And as attempts to peacefully resolve outstanding problems between the two diametrically opposed Palestinian factions fail extremists on both sides have come to the fore. Unlike previous fights between Hamas and Fatah, which erupted spontaneously and were rapidly contained, this time round premeditation and deliberate incitement characterise the escalating conflict."

The same process that I've written about several times is now occurring in both Israel and Palestine. I've explained this in terms of chaotic "attractors" (from Chaos Theory). Day to day political events are chaotic events that fall like snowflakes in random ways. But just as millions of snowflakes get "attracted" to large snow drifts, millions of individual political events get attracted to the impending Mideast war, since war is a "chaotic attractor" at this time, 57 years after the end of the 1940s genocidal war between Arabs and Jews. The theoretical concept of "attractor" comes true on a day to day basis. It's been happening every day since Yasser Arafat died, and has evidently accelerated ever since Ariel Sharon became incapacitated. Looking at the day to day political events as they've occurred in the last year and a half, you can pick almost any day and look at the headlines for that day, and you'll see that it most likely moves the Mideast in the direction of war. There are a few exceptions of course, like the period when Mahmoud Abbas was elected and took office, and hopes were raised at that time. But those brief intervals are like a heat wave in New York City in November -- just because the weather gets warm for a few days doesn't mean that winter isn't coming. Once the heat wave is over, the weather starts getting much colder again. Similarly, there are brief periods when things seem to get better, but they pass quickly, and then political events move back towards war. That what "attractor" means in Chaos Theory. It doesn't mean that every political event brings the Mideast closer to war; it means that political events float around in all directions, at random, but most of them, not necessarily all of them, are attracted to Mideast war. That's really the only way to interpret the addition of Avigdor Lieberman. Even if he's not the troublemaker that people claim, he's still a symbol that infuriates the Palestinians. =eod =// &&2 e061028 Somalia and Ethiopia close to full-scale war =data ww2010.weblog.y2006.e061028.head Somalia and Ethiopia close to full-scale war, according to leaked UN report =data ww2010.weblog.y2006.e061028.keys =data ww2010.weblog.y2006.e061028.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061028.date 28-Oct-06 =data ww2010.weblog.y2006.e061028.txt1 Thousands of refugees are fleeing Ethiopia into Kenya to escape war =data ww2010.weblog.y2006.e061028.txt2 <#inc ww2010.pic afrihorn.gif right "" "Horn of Africa"#> There are two sides within Somalia itself:

The internationally recognized Transitional Federal Government (TFG), formed in 2000 as a confederation of the warlords who rule the various ethnic groups that have existed for centuries and had fought each other frequently;
The Islamic Courts Union (ICU), a radical Islamist group that captured Somalia's capital, Mogadishu, on June 6, and has been increasing in power and control ever since.

The ICU has been gaining ground on the TFG for several months, despite TFG pleas for international assistance, especially from the United States. And now, arch-enemies Ethiopia and Eritrea are getting into the act. According to <#stdurl http://www.guardian.co.uk/international/story/0,,1933788,00.html "a leaked confidential UN report on Somalia,"#> Somalia, with support from Eritrea, is close to all-out war with Ethiopia, a US ally. The confidential report says that Ethiopia, Uganda and Yemen are supporting the TFG, while Iran, Libya, Saudi Arabia and Gulf states are supporting the ICU. There are already some 300,000 Somalian refugees in camps in Kenya, and the new threats are adding thousands more. There have been polio outbreaks in Somalia in the last few years, and there's a great fear that <#stdurl http://english.people.com.cn/200610/21/eng20061021_313946.html "polio will spread through the densely packed refugee camp in Kenya."#> <#inc ww2010.pic afrn1.gif left "" "Africa, with Ivory Coast and Darfur highlighted"#> Somalia has taken on increasing international strategic value since 9/11, since it's believed that al-Qaeda has been using the country for training camps for terrorists. In fact, al-Qaeda training in <#inc ww2010.weblog.ref e050801 "Somalia was linked to last year's London subway bombings."#> Previously, al-Qaeda links are considered likely for the the 1998 bombings of US embassies in Kenya and Tanzania and the 2002 attacks on Israeli tourists in Kenya. From the point of view of Generational Dynamics, Islamist control of Somalia, if it continues to take hold, would have major strategic significance in the coming "clash of civilizations" world war. Somalia is strategically located a short boat ride from the Arabian peninsula, and could be used as a base of operations against Israel or oil facilities in Saudi Arabia. Within Africa itself, the entire northern tier of African countries -- those just below the Sahara Desert -- from Côte d'Ivoire to Sudan to Somalia -- are either in a crisis war or approaching one. The countries of southern Africa are on a different generational timeline, launched by <#hreftext ww2010.i.africa040822 "the huge Mfecane war of the early 1800s,"#> had their most recent crisis wars in the 1960s. But the northern African countries are on the World War II generational timeline, and have fault lines either between Muslims and Christians or between Arabs and indigenous Africans, or between different ethnic groups, and all are headed for full-scale war within the next decade. =eod =// &&2 e061025 Alan Greenspan blames the housing bubble on the fall of the Berlin Wall =data ww2010.weblog.y2006.e061025.head Alan Greenspan blames the housing bubble on the fall of the Berlin Wall =data ww2010.weblog.y2006.e061025.keys =data ww2010.weblog.y2006.e061025.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061025.date 25-Oct-06 =data ww2010.weblog.y2006.e061025.txt1 Meanwhile, the stock market keeps skyrocketing and appears unstoppable to many investors. =data ww2010.weblog.y2006.e061025.txt2 I've been wanting for a long time to write a comprehensive exposition of a "Generational Dynamics theory of macroeconomics," and I finally posted it today as <#hreftext ww2010.i.macro061025 ""System Dynamics and the Failure of Macroeconomics Theory.""#> I hope any web site readers with an interest in macroeconomics theory will read it and let me know what you think. The economy is so crazy these days that it's hard to see where any theory has anything to do with it. Just when the market has gone so high up into bubble territory that I think that investors can't possibly be such fools as to buy, they push it up higher. The Dow advanced a huge 114 points on Monday, and 11 more today. On Monday, the <#hreftext ww2010.i.djia "long-term trend value of the DJIA"#> was 5074, and the market closed at 12117, which is 238% of the trend value. The figure 238% indicates how high the bubble is. In 1929, the market peaked at 254% of trend value, so maybe that means that the Dow has another 1000 points or so to go before the bubble bursts. Even so, this stock market panic is well overdue, even though it's impossible to predict the exact date of a stock market panic. On Friday, I heard a TV financial pundit say that the market is doing so well that small investors are coming back in. Maybe that's where all the new investor money is coming from. Isn't that wonderful? Ordinary people who lost big after the Nasdaq crash in 2000 are now betting their pensions and 401k's again, now that the market is near the top of a new bubble. =inc ww2010.h2 berlin "Greenspan and the Berlin Wall" And now, if things aren't crazy enough, Alan Greenspan is giving a brand new reason for the real estate bubble: "I don't think that the [real estate] boom came from a 1 per cent Fed funds rate or from the Fed's easing. It came from the collapse of the Berlin Wall," said <#stdurl http://msnbc.msn.com/id/15199143/ "Alan Greenspan to a private Canadian audience on Friday."#> Ten months after leaving the Fed, he appears to want to rewrite his legacy. Here's a summary of the reasoning that Greenspan used:

The collapse of Communism in eastern Europe and the shift towards more market-based economies in China and other parts of the developing world brought "billions of cheap laborers onto the scene."
Thanks to this flood of cheap labor, manufacturing and other labor costs became much cheaper, and prices of good came down -- in other words, this caused disinflation, rather than the inflation that we usually hear about caused by increasing labor costs.
Because of disinflation, long-term interest rates also came down.
Lower long-term interest rates caused a decline in mortgage rates.
Lower mortgage rates mean that a real estate property is more valuable, since a buyer can afford to pay more for the property and still have the same monthly payment to the bank.
This caused the market value of real estate to grow quickly, creating a bubble.

This represents a substantial evolution in Greenspan's thinking. =inc ww2010.h2 conundrum "Greenspan has solved his 'conundrum'" If you've been following Greenspan for a while, then you may recall the word "conundrum." <#inc ww2010.weblog.ref e050217 "In a speech early in 2005,"#> Greenspan said that long-term interest rates and bond yields were exceptionally low in countries around the world, and that this "remains a conundrum." Here's what he said:

"There is little doubt that, with the breakup of the Soviet Union and the integration of China and India into the global trading market, more of the world's productive capacity is being tapped to satisfy global demands for goods and services. Concurrently, greater integration of financial markets has meant that a larger share of the world's pool of savings is being deployed in cross-border financing of investment. The favorable inflation performance across a broad range of countries resulting from enlarged global goods, services and financial capacity has doubtless contributed to expectations of lower inflation in the years ahead and lower inflation risk premiums. But none of this is new and hence it is difficult to attribute the long-term interest rate declines of the last nine months to glacially increasing globalization. For the moment, the broadly unanticipated behavior of world bond markets remains a conundrum. Bond price movements may be a short-term aberration, but it will be some time before we are able to better judge the forces underlying recent experience."

Notice this sentence in particular: "But none of this is new and hence it is difficult to attribute the long-term interest rate declines of the last nine months to glacially increasing globalization." Well, guess what, folks? Greenspan has changed his mind. He's resolved his conundrum. He's now decided that the long-term interest rate declines that caused the housing bubble were in fact caused by the cheap labor resulting from globalization. The problem is that this makes no sense at all, for the reason given by Greenspan in this same sentence: "But none of this is new ...." Cheap labor has been around for decades, even from China, as well as many other countries. There was no significant difference between 1983, 1993 or 2003 with regard to cheap labor, but it didn't cause a real estate bubble in those other times. (This is the kind of argument that we use all the time in generational theory. Terrorist events and acts of war happen all the time; what changes is the generational era, and that affects the reactions of the population to the events. Cheap labor has been around all the time, but what's different now is America, not the cheap labor.) There's really little doubt what caused the real estate bubble. It was caused by the Fed's near-zero interest rate policy, which poured money into the economy, and to the fact that other central banks around the world followed the Fed's lead in that regard, leading to a huge money liquidity around the world. It's particularly worthwhile to note that the Chinese currency was pegged to the dollar until recently, and so the Fed's near-zero interest rate effectively became the near-zero interest rate of the People's Bank of China. =inc ww2010.h2 diffuse "Diffusing the bubble" Greenspan made some more news at this meeting. Greenspan was asked why he didn't raise interest rates to dampen down the stock market bubble of the late 1990s. His answers contain some completely new information. He said, "we tried that in 1994/1995 and failed," and added that the tightening cycle from 1994 to 1995 was "highly disruptive" but failed to rein in stock prices. A little history: The year 1994 was a pivotal year for the Fed because the Fed decided to raise interest rates to keep inflation under control at that time. However, something went wrong, and there were some spectacular bankruptcies, the most visible of which was the bankruptcy of Orange County, California. Many people blamed Greenspan for these bankruptcies, and Greenspan is now blaming the 1994 experience for failing to stop the 1990s bubble. "We didn't diffuse the bubble, we made it worse," he said. "The stock market was flat during the tightening period and when the tightening ended in 1995 the stock market took off. We learned that the Fed could not incrementally diffuse a bubble." <#inc ww2010.pic sp5010.gif right "" "S&P stock prices, 2000 dollars, with long-term exponential growth trend line"#> There's a small surprise here -- that Greenspan appears to be saying that the bubble started in 1994 rather than 1996. It was at the end of 1996 that Greenspan gave his <#stdurl http://www.federalreserve.gov/BoardDocs/speeches/1996/19961205.htm ""irrational exuberance"" speech,"#> wherein he stated publicly that the bubble was on. Furthermore, if you look at the adjoining graph, you can see that it was in 1995 that stock prices, which had been leveling off, took a sharp upward turn, indicating a bubble. It probably doesn't matter much whether the bubble began in 1994, but was held down by the 1994 tightening, or whether it actually began in 1995, but it's something worth more research. At any rate, Greenspan is now saying that he was shocked by the 1994 experience, and realized that the stock market bubble could not easily be stopped. He now says he realized that "unless we tightened aggressively enough to hurt the economy and profitability the market bubble wouldn't diffuse. Rates would have had to go up 10 to 12 percentage points to break the back of the stock market, which would destroy the economy." He now gives this as his reason for not stopping the bubble, but he gave a quite different reason in his <#inc ww2010.weblog.ref e041124 "Wall Street Journal interview in November, 2004."#> At that time, he didn't think that the bubble was important because it was caused by increased productivity from hi-tech investments. He even got two of his interns to gin up a report supporting that view. But as anyone knows who was in the computer industry, as I was, productivity was way DOWN from information technology (IT) investments. IT was a monetary black hole. IT investments didn't become productive until after the Nasdaq crash in the early 2000s. However, his new reasoning is consistent with a view that he's often expressed: The Fed decided not to deal with the bubble, but to deal with its aftermath instead. That's why interest rates were lowered to near-zero levels after 2000. And that's what caused the various bubbles -- the new stock bubble, the bonds bubble, the real estate bubble, the commodity bubble. Greenspan is going to have a tough hill to climb if he wants to now convince people that these bubbles were all due to the fall of the Berlin Wall, especially when he's never mentioned that before. =inc ww2010.h2 agony "The agony of Alan Greenspan" As I wrote last year in <#hreftext ww2010.i.051029bernanke ""Ben S. Bernanke: The man without agony,""#> Greenspan became increasingly agonized over the years about his 1996 decision. In January, 2004, <#hreftext ww2010.i.greenspan040108 "Greenspan was quite positive and hopeful when he bragged in a speech:"#>

"There appears to be enough evidence, at least tentatively, to conclude that our strategy of addressing the bubble's consequences, rather than the bubble itself, has been successful. Despite the stock market plunge, terrorist attacks, corporate scandals and wars in Afghanistan and Iraq, we experienced an exceptionally mild recession, even milder than that of a decade earlier." -- Alan Greenspan to the American Economic Association's annual meeting.

During the next two years, Greenspan's remarks reflected an increasing level of concern, then alarm -- and agony that he was going to be blamed. By August, 2005, he <#inc ww2010.weblog.ref e050830 "warned about the stock market and housing bubbles:"#>

When Greenspan says that "history has not dealt kindly," he's referring to the 1930s Depression. This was one of Greenspan's final speeches as Fed Chairman, and it was his most explicit warning that we're headed for a new Great Depression. In his new remarks, he now seems to be returning to his January, 2004, position, that everything is OK. At his Friday meeting, he even said that the worst of the real estate bubble correction may be over, something that will be surprising news to home sellers, as the housing bubble bursts, and home prices continue to fall. =eod =// &&2 e061023 Pundits are predicting major policy changes after the Democratic election win =data ww2010.weblog.y2006.e061023.head Pundits are predicting major policy changes after the Democratic election win =data ww2010.weblog.y2006.e061023.keys =data ww2010.weblog.y2006.e061023.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061023.date 23-Oct-06 =data ww2010.weblog.y2006.e061023.txt1 But no one is saying what they might be. =data ww2010.weblog.y2006.e061023.txt2

<#inc ww2010.pic g061022.gif right "" "Expected election results as of Sunday, Oct 22, 2006"#>

<#inc ww2010.pic g061015.gif right "" "Last week's results (Oct 15, 2006)"#>

To take one example, I listened to the This Week With George Stephanopoulos pundit panel on Sunday morning. It went on for about 15 minutes, saying the same things over and over:

The Democratic win will be huge
The Democrats will force policy changes
The Democrats will investigate every nook and cranny of the Bush administration.
The Democrats will pass laws restricting spending on the Iraq war, in order to force the Administration to end the war.

This panel, like almost all the other pundits I heard, are predicting that everything will proceed exactly as it did in the 1970s, when the Democratic-led Congress did all of the above things. In other words, they're predicting an exact replay of the end of the Vietnam war. There's one very big thing missing, however: There is no widespread call for immediate withdrawal from Iraq, as there was for the Vietnam war. During CNN's Sunday news show (with Wolf Blitzer) I made some quick notes about what various politicians said on the question of what we should do next.

Republican Senator Arlen Specter said this (paraphrasing): "We have to start setting timetables. Tell the Iraqis they'll have to take a larger role in their own security, make progress on sectarian violence. Consider looking at the option of splitting Iraq into 3 parts -- Shiite, Sunni and Kurd -- so that these warring factions will stop killing each other." Now that's a really hard-hitting statement. I really get goose bumps just reading it.
Democratic Senator Jack Reed: "Begin redeployment of American forces, first within Iraq and then outside Iraq, coupled with putting pressure on the Iraqi government, along with continued efforts by us for reconstruction. The strategy of the administration has not worked." Wow! It's a good thing we have someone like Senator Reed to provide this nitty-gritty advice to the Bush administration, since the people in the Bush administration are clearly too stupid to have ever thought of anything so clever.
Republican Senator Olympia Snow: "The patience of the Congress and the American people is finite and our presence there is neither unlimited nor unconditional. The congress and the administration must be open to considering alternative plans for the future role of the U.S. in Iraq." Honestly, these people are full of great ideas that no one ever thought of before!
Republican Sen. Kay Bailey Hutchison on splitting Iraq into three parts: "Yes, it would be hard to do, but it would be worth trying ... People say, 'Well, that would balkanize the country.' Well, things are pretty stable in the Balkans right now. It's looking better than Iraq." Now get this, folks. Senator Hutchison thinks we ought to go in and tell the Iraqis how to split up their country. Iranian President Mahmoud Ahmadinejad would be so supportive! And she's comparing it to the Balkans. When Yugoslavia was split up in the early 1990s, there was a genocidal "ethnic cleansing" war in Bosnia that lasted several years. So maybe "things are pretty stable" in the Balkans right now, but that's a decade after the bloodbath ended. Another gifted genius politician.
Carter administration security advisor Zbigniew Brzezinski launched an extremely vitriolic statement about the stupidity of the Bush administration, and the total disaster he's causing. I used to respect this guy, but he's become increasingly gross and disgusting. It's worth remembering that Brzezinski was strongly opposed to the war in Iraq in 1991, after Saddam had invaded and taken over Kuwait, at a time when we knew for a fact that Saddam had used chemical weapons in the Iran/Iraq war, and was developing nuclear technology. If Brzezinski had had his way, then Kuwait would be part of Iraq, and Saddam would have had 15 years to further develop chemical and nuclear weapons. Interestingly, Brzezinski criticized Hillary Clinton and other Democratic leaders for never specifying any alternative action in Iraq.

Only one person said anything on Sunday that was actually interesting. When Wolf Blitzer said, "If the public thinks the government is broken with a Republican president and a Republican house and a Republican senate, wait till there's a Democratic house of representatives, maybe even Senate, then this notion of a broken government could even escalate. Ed Henry, CNN's White House correspondent, said this:

"We interviewed Dan Rostenkowski, former Ways and Means chairman, [who] talked about the days when Ronald Reagan was President and then Democrats ran the hill, and you would assume that they got absolutely nothing done. They fought like cats and dogs, but they still legislated, still governed. They had a major compromise in tax reform, for example, in 1986. You never would have thought that someone as conservative as Ronald Reagan and as liberal as Rostenkowski and Tip O'Neill could work together. but the fact is they did. And so, I think you can turn that notion on its head a bit, and say that sometimes divided government, when the Democrats have one part of government and the Republicans have the other, sometimes both sides have a stake in getting things done."

This is something that <#inc ww2010.weblog.ref e060317 "I've talked about before:"#> That the federal government is paralyzed, not only in America, but in countries around the world. Even <#inc ww2010.weblog.ref e051204 "Alan Greenspan said the budget was out of control,"#> and that Congress was doing nothing. In the early 1980s, it was quite a joke that Republican President Ronald Reagan and Democratic Speaker of the House Tip O'Neill would say nasty things about each other at press conferences, but that the two Irishmen would get together in the evening, have beers and tell jokes to one another. In fact, the Republicans and Democrats did get things done in the 1980s. As Ed Henry said, the Democrats and Republicans got together and passed a tax reform law. They cooperated with each other to change the Social Security system to make it a sounder system. After that, they cooperated again to specify new rules to control the budget deficit. Even as late as 1996, Democratic President Bill Clinton cooperated with the Republican congress to eliminate the welfare entitlement. This was all accomplished by people in the G.I. generation that fought in World War II, and by others who survived WW II. These people defeated the Nazis and beat the Depression, and they set up structures like the United Nations, World Bank, and World Health Organization to manage the world. Those organizations worked as long as they were being run by the Heroes of World War II. Today they're being run by Boomers and Xers (people in the Baby Boomer generation, born after the war, and Generation X, born in the 60s and 70s) who have no idea how to run these organizations, or how to get things done. Boomers are arrogant and narcissistic, and don't know how to do anything but argue with people. Xers are angry and alienated, and also don't know how to do anything but argue with Boomers. So the result is the near-total gridlock paralysis we see, and the extremely vitriolic, hate-filled political atmosphere. And the same kind of thing is happening in all the countries that fought in WW II. <#inc ww2010.pic pelosi.jpg right "" "Nancy Pelosi on 60 Minutes, Sunday, Oct 22, 2006"#> If the Democrats take over the House, then Nancy Pelosi will replace Dennis Hastert as Speaker. Can you imagine Nancy Pelosi getting together with George Bush and telling jokes to one another? I can't imagine that scene. I CAN imagine scenes where the Secret Service would have to protect Bush from being stabbed in the balls with a fork. Nanci Pelosi has promised to "restore civility" to Washington if she becomes Speaker of the House, but on 60 Minutes on Sunday evening, Leslie Stahl said this to Pelosi in an interview: "You have called your Republican colleagues - these are quotes - immoral, corrupt, you say they're running a criminal enterprise -- I mean, you're one of the reasons we have to restore civility in the first place." Pelosi replied, "Well actually when I called them those names, I was being gentle. There are much worse things I could have said about them." So much for improved civility. The same kind of thing also happened in America during our previous generational crisis periods. The Republicans were vitriolic against Franklin Roosevelt in WW II, and the Democrats were vitriolic against Abraham Lincoln in the Civil War. But even though the level of vitriol and hatred in Washington will only get worse, and possibly much worse, and even though the gridlock and paralysis will only continue, or get worse (if that's possible), it's probably still better if the Democrats win control of both houses of Congress. The reason is that the "clash of civilizations" world war is inevitable, and it will be better for the country if both parties are forced to cooperate with one another, as we're forced to make decisions that will affect the survival of America. =eod =// &&2 e061020c Iranian president Mahmoud Ahmadinejad threatens Europe and Israel =data ww2010.weblog.y2006.e061020c.head Iranian president Mahmoud Ahmadinejad threatens Europe and Israel =data ww2010.weblog.y2006.e061020c.keys =data ww2010.weblog.y2006.e061020c.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061020c.date 20-Oct-06 =data ww2010.weblog.y2006.e061020c.txt1 He also says he has a "connection with God" =data ww2010.weblog.y2006.e061020c.txt2 France, Germany and Britain appear to be <#stdurl http://www.timesonline.co.uk/article/0,,251-2413982,00.html "close to completing a UN Security Council resolution"#> on sanctions for Iran for its refusal to halt nuclear development. <#inc ww2010.pic ahmad2.jpg left "" "President Mahmoud Ahmadinejad of Iran(Source: Mardomyar.ir )"#> In response, Iranian president Mahmoud Ahmadinejad warned Europe to stop its support of Israel. "You should believe that this regime (Israel) cannot last and has no more benefit to you. What benefit have you got in supporting this regime, except the hatred of the nations?" said Ahmadinejad. "We have advised the Europeans that the Americans are far away, but you are the neighbours of the nations in this region. We inform you that the nations are like an ocean that is welling up, and if a storm begins, the dimensions will not stay limited to Palestine, and you may get hurt." In a <#stdurl http://memri.org/bin/latestnews.cgi?ID=SD132806 "speech by Ahmadinejad given on October 14,"#> he said that the U.N. will not be able to prevent Iran from further nuclear development. "I have a connection with God, since God said that the infidels will have no way to harm the believers," said Ahmadinejad. "We have [only] one step remaining before we attain the summit of nuclear technology." He added that after that, the West "will not dare to attack us." =eod =// &&2 e061020b Australian Govt. warns citizens to avoid Sri Lanka =data ww2010.weblog.y2006.e061020b.head Australian Govt. warns citizens to avoid Sri Lanka =data ww2010.weblog.y2006.e061020b.keys =data ww2010.weblog.y2006.e061020b.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061020b.date 20-Oct-06 =data ww2010.weblog.y2006.e061020b.txt1 The war between Tamil Tiger rebels and Sri Lanka government continues to escalate, =data ww2010.weblog.y2006.e061020b.txt2 and has spread into formerly "safe" regions containing tourist attractions. <#inc ww2010.pic sri2.gif right "" "Areas of conflict in Sri Lanka (Source: The Economist)"#> On Wednesday, Tamil Tigers posing as fisherman blew up two boats in a suicide attack on a naval base Wednesday in the historic resort town of Galle, killing at least one sailor. The most spectacular terrorist attack occurred on Monday. A military convoy of buses carrying sailors on leave had stopped briefly by the side of the road in a supposed safe town of Habarana. A suicide bomber rammed an explosives-packed truck into the buses, with at least 150 casualties. In retaliation, government jets bombed a rebel camp on Monday, evidently <#stdurl http://news.scotsman.com/international.cfm?id=1537872006 "killing two young girls."#> Australia's Dept. of Foreign Affairs and Trade has <#stdurl http://www.hindu.com/thehindu/holnus/001200610201659.htm "issued a travel advisory, saying,"#> "We strongly advise you not to travel to Sri Lanka at this time because of the deteriorating security situation and the high risk of further terrorist attacks." The <#stdurl http://www.theage.com.au/news/World/Violent-exchanges-continue-in-Sri-Lanka/2006/10/20/1160851128809.html "U.S. State Department says,"#> "there should be an immediate cessation of violence. It is more important to talk now than ever as Sri Lanka is in danger of going to all-out war." <#inc ww2010.pic india5.gif left "" "Indian subcontinent, with the island of Sri Lanka off the southern tip of India."#> As I keep struggling to figure out exactly what's going on in the Iraq situation, the Sri Lanka situation provides a contemporary example to use as a contrast (in addition to the Darfur war and the recent war in Lebanon). =inc ww2010.xr.related1 right lanka 2 There are many differences. Sri Lanka is in a generational crisis era, and so is quite susceptible to a crisis civil war, and that appears to be happening. As <#inc ww2010.weblog.ref e060803 "I described a couple of months ago,"#> Sri Lanka has had intermittent violence, including a brief non-crisis civil war in the 1980s, between two ethnic groups: The Sinhalese, who run the government, and Tamils (Liberation Tigers of Tamil Eelam or LTTE), who are demanding a separate state of their own in the north. A peace agreement was signed in 2002, but that's completely fallen apart now. The level of violence, including the massacring of civilians, has been increasing steadily this year. There's no ambiguity in Sri Lanka, as there is in Iraq, about whether the massacring is being done by outsiders. Both the Sinhalese government forces and the Tamil rebels are clearly Sri Lankans, and the increasing massacring of civilians points to a building crisis civil war. Of course, there's a "peace process" going on. Norwegian mediators <#stdurl http://www.lankaeverything.com/vinews/srilanka/20061020010034.php?PHPSESSID=a14ab72b7a263b513ea6aff4d366cc8b "are 'confident' that peace can be restored,"#> but this I have to see. And U.S. State Dept. envoy Richard Boucher is also visiting Sri Lanka. As these various conflicts continue -- in Sri Lanka, Iraq and Darfur -- we'll continue to try to compare and contrast them, as we did with the war in Lebanon, to make sense out of what's really going on in each of them. =eod =// &&2 e061020 President Bush's reference to Vietnam War "Tet Offensive" has journalists in a tizzy =data ww2010.weblog.y2006.e061020.head President Bush's reference to Vietnam War "Tet Offensive" has journalists in a tizzy =data ww2010.weblog.y2006.e061020.keys vietnam =data ww2010.weblog.y2006.e061020.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061020.date 20-Oct-06 =data ww2010.weblog.y2006.e061020.txt1 Airhead journalists have completely missed the point, and the real danger. =data ww2010.weblog.y2006.e061020.txt2 <#inc ww2010.pic g061020.jpg right "" "President Bush" (Source: ABC News)"#> Journalists were excited all day saying that President Bush "admitted" that the current rise in violence in Iraq may be similar the Tet Offensive in the Vietnam War. The Independent, for example, <#stdurl http://news.independent.co.uk/world/americas/article1904952.ece "said in what was supposed to be a news story,"#> "The allusion to the Tet Offensive was a real departure for Mr Bush, who hitherto refused to accept any similarities between Iraq and the war in Vietnam, which lasted eight years and claimed more than 55,000 American lives." I feel pretty confident that the story author, Rupert Cornwell, has no idea what the Tet Offensive was. This reflects the general level of ignorance exhibited by journalists, something I've commented on frequently, especially with respect to economics and global finance, and the willingness of most reporters today to say the stupidest things they can to support their political beliefs. Here's what President Bush actually said in <#stdurl http://abcnews.go.com/WNT/story?id=2583579 "the ABC News interview,"#> when asked whether he agreed with the opinion that the situation in Iraq may be equivalent to the Tet offensive in Vietnam almost 40 years ago. "He could be right. There's certainly a stepped-up level of violence, and we're heading into an election." When asked what his "gut" tells him he said, "George, my gut tells me that they have all along been trying to inflict enough damage that we'd leave. And the leaders of al Qaeda have made that very clear. Look, here's how I view it. First of all, al Qaeda is still very active in Iraq. They are dangerous. They are lethal. They are trying to not only kill American troops, but they're trying to foment sectarian violence. They believe that if they can create enough chaos, the American people will grow sick and tired of the Iraqi effort and will cause government to withdraw." Bush added that there wouldn't be a withdrawal before the end of his Presidency. In other words, Bush was criticizing those who are calling for a withdrawal from Iraq, not because America was losing, but because al-Qaeda is "trying to inflict enough damage that we'd leave." He was indirectly criticizing the press for supporting al-Qaeda. In other words, he wasn't saying "We're losing in Iraq like we did in Vietnam"; he was saying, "We're not losing in Iraq, and we're not going to just leave like we did in Vietnam." From the point of view of Generational Dynamics, both pro-Bush and anti-Bush pundits are completely misreading the situation, and the significance of the Tet Offensive. So let's review. =inc ww2010.xr.related1 left iraqcivil 2 The Tet Offensive occurred in January 1968, while Lyndon Johnson was President. The Vietnam War really was a civil war (unlike the current war in Iraq), fought along historical fault lines separating indigenous peoples in South and North Vietnam, respectively. South Vietnam had historically aligned with the West, thanks to a century of French occupation and control. North Vietnam was aligned with Communist China. Thanks to <#hreftext ww2010.i.awakening060919#truman "the Truman Doctrine,"#> when President John Kennedy took office in 1960, he decided that Communism had to be stopped at the South Vietnamese border. He began increasing American involvement during his term. After he was assassinated, President Johnson continued increasing American forces. America at that time was in a <#hreftext ww2010.i.sixties040501 "generational Awakening era,"#> and the anti-war movement was fierce, especially among college students. Anti-war riots and demonstrations occurred on campuses around the country on almost a weekly basis, and in the summer of 1967, thousands of anti-war students converged in San Francisco to celebrate <#stdurl http://en.wikipedia.org/wiki/Summer_of_Love "the Summer of Love."#> In this climate, President Johnson's administration was constantly on the political defensive, but promises of "light at the end of the tunnel" seemed to keep most voters in line. Then the North Vietnamese made an <#stdurl http://en.wikipedia.org/wiki/Tet_offensive "explosive military move during the January 1968 Tet holiday."#> (Tet is the Vietnamese new year.) They attacked American and South Vietnamese forces in coordinated attacks in dozens of cities simultaneously. They caught the US forces by surprise. Nonetheless, the US forces repelled the attacks. The Tet Offensive was a total military disaster for the North Vietnamese. But it was total political victory for the North Vietnamese. The media called it a military victory for the North Vietnamese, which it wasn't. CBS newsman Walter Cronkite said that the U.S. was "mired in a stalemate" and called for a negotiated end to the conflict. Cronkite's report was especially a political disaster for President Johnson. 1968 was an election year, and his poll results started falling dramatically. In March 1968, a distraught President Johnson announced that he would not run for re-election. This is the moment that today's journalists wish to re-create. That's why they want to call the Iraq war a civil war (so it would be like Vietnam). That's why they use words like "quagmire" and "stalemate," hoping to turn the American public against the war. That's why journalists are so overwhelmingly opposed to Bush, hoping to repeat their 1968 victory. But things are very different today. As I've been saying for years, <#hreftext ww2010.i.060601antiwar "there's no anti-war movement in America today."#> There are no riots and demonstrations on college campuses. No Democrats, except those farthest on the left, are calling for a withdrawal or for negotiation with al-Qaeda. In fact, nobody is offering any realistic proposal for ending the war in Iraq. OK, so political events can't be predicted because they're chaotic events (in the sense of Chaos Theory), but it's very unlikely that the current rising violence in Iraq will have anything remotely like the same effect that the Tet Offensive. We're in a generational crisis era now, not an awakening era, so the rules are completely changed. This means that the dreams and fantasies of the journalists who are hoping to bring about this result are going to have their dreams crushed. So let's leave politics aside, and do a Generational Dynamics analysis of the war itself. What does the current increase in violence mean to the war? To explain this, we're going to compare the Iraq war to two other wars: the Vietnam war, of course, and also the recent war between Israel and Lebanon. Let's start with the Lebanon war. Recall that when I wrote about <#inc ww2010.weblog.ref e060906 "the winners and losers"#> of the Lebanese war, I contrasted the war styles of the two parties. Israel fought in a typical crisis era "hot" war style, furiously bombing infrastructure, calling up new reserves every day, confronting Hizbollah terrorists on their own soil, and feeling very anxious about the U.N. peace deal after the war. If Hizbollah had fought in a "hot" style, they would have crossed the border into Israel and killed Israelis in their own homes. Instead, Hizbollah fought the war in a "cool," methodical non-crisis war style. They launched missiles from their home soil, retreating to their homes or to bunkers as needed. They methodically goaded Israeli into supplanting their air-only war with a ground war, requiring thousands of Israeli soldiers to fight on Lebanese soil. The goaded the Israelis into destroying Lebanese infrastructure, and killing Lebanese civilians, including women and children. The reasons for these differences in style are that Israel is in a generational crisis era, while Lebanon (along with Hizbollah) is in a generational awakening era. This difference between "hot" and "cool" styles is typical of countries in these two different eras. Now let's turn to the Vietnam war and the Tet Offensive. The Tet Offensive was, to say the least, a "hot" style. It was an enormously risky attack, and, in fact, it was a military disaster. In fact, the Vietnamese were in a generational crisis era at their time, their last crisis war having been fought against the French in the 1890s. Militarily, North Vietnam should have lost the war after the Tet Offensive, but they won because America, in an awakening era, defeated itself politically. OK, now let's return to the Iraq war. The increase in violence by a "Tet Offensive" style of fighting, if that's really true, is obviously extremely aggressively -- definitely a "hot" war style. But Iraq is in a generational awakening era. So how could it be a "hot" war style? I won't explain again what <#inc ww2010.weblog.ref e061017 "I've explained many, many times,"#> why a civil war between Sunnis and Shiites in Iraq is impossible. A civil war must be an extremely energetic, genocidal effort, such as is going on in Darfur at the present time, and that's impossible in an awakening era. There's a lot of violence going on in Iraq, but not the genocidal violence going on in Darfar. This is how I can be so sure that the source of any really genocidal violence is from outside Iraq. The most murderous and violent of the belligerents, the suicide bombers, are known to be 95-100% foreigners, from Saudi Arabia or Jordan mostly. If there were a civil war going on, why would they need outsiders to conduct suicide bombings? Some percentage of the Sunnis and Shiites are Iraqi people, but from the point of view of Generational Dynamics, it's not possible that these people could be generating this kind of violence. If, as the gleeful journalists claim, the current surge in violence is like the Tet Offensive, then it means that the regional war is beginning to take hold. This is what <#hreftext ww2010.i.aug19 "I wrote in August 2003, as the terrorist bombings began:"#>

If the violence is increasing as it did with the Tet Offensive, then from the point of view of Generational Dynamics, this is what it must mean. Iraq is increasingly becoming a theatre of war. The analysis of what's going on in Iraq has been really difficult, and I've been struggling with it and trying to refine it as time has gone on. What makes it difficult is that there are so many things going on at the same thing, and the news reports treat them all equally. If there were a news report of a Sunni village and a Shiite village massacring each other, that would be a genocidal style of war, but we never hear anything like that. What we hear about are bombings that may kill people, but are not the close combat genocidal violence that occurs in crisis wars. The militia battles that occur in Iraq do not appear to be massacres that would indicate a crisis war; instead, they appear to be brief actions in support of political objects, and that would indicate a non-crisis war battle. The real war will be in the countries that are in or entering generation crisis eras -- Israel, Palestine, Egypt, Saudi Arabia, Pakistan, and others. Iraqis will not want any part of the war, having just survived the genocidal Iran/Iraq war of the 1980s, but Iraq will increasingly be a theatre of war, as the "clash of civilizations" world war approaches. I started out this essay by criticizing journalist Rupert Cornwell for saying stupid things. Let me finish up by commenting on some of the other pundits' statements I've heard and read today:

If it hadn't been for Walter Cronkite, we would have won the Vietnam War. No. America was in an awakening era, and we would have lost the war politically, even without Walter Cronkite.
If George Bush hadn't been President, we wouldn't be at war with Iraq. No. If Al Gore had been President after 9/11, the ground war would have begun in his administration as well, and we'd be in exactly the same place today. Remember that Iraq war actually began in 1991, not 2003, and escalated in 1999 in the Clinton Administration. President Gore would have continued that policy.
If it weren't for Iraq, Bush's approval rating would be very high. No. During generational crisis eras, the political fighting is always extremely bitter. It was during America's two previous crisis periods, and the vitriolic attacks on George Bush are no worse than those directed at President Franklin Roosevelt or President Abraham Lincoln.
The economy is strong, so the Republicans should do well in the mid-term elections. No. It's a bubble economy, and the bubble could burst at any time with a panic. Right now it appears that the Democrats will have a major victory, but if I have any misgivings about that expectation, it's because it's so widely believed by the airhead press, and those airheads are wrong more often than they're right.
Gas prices are back down. Sure. Oil used to sell for $30 a barrel a few years ago. A few weeks ago it was selling at $76 per barrel. Now it's back down to $60 a barrel, but that's still twice as much as it sold for previously. Still, the commodities bubble still appears to be deflating, and if there's a worldwide financial crisis, then the price of oil and gas should come way down, since no one will have any money to pay for it.
Al-Qaeda is on the run. No. Al-Qaeda is getting stronger, and according to <#stdurl http://politics.guardian.co.uk/terrorism/story/0,,1925700,00.html "a report in the Guardian,"#> the UK is al-Qaeda's number one target. The UK is a much easier target than the US because tens of thousands of British citizens visit Pakistan each year, and that provides al-Qaeda with plenty of opportunity to build up cells like the one that perpetrated the July 7 London subway bombings last year. Al-Qaeda will continue to get stronger until the "clash of civilizations" world war begins, and then it's anyone's guess how things will go.

=eod =// &&2 e061017 Questions and answers from readers =data ww2010.weblog.y2006.e061017.head Questions and answers from readers =data ww2010.weblog.y2006.e061017.keys =data ww2010.weblog.y2006.e061017.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061017.date 17-Oct-06 =data ww2010.weblog.y2006.e061017.txt1 Iraq civil war, feeding Africa, Israel's survival, and answering user comments. =data ww2010.weblog.y2006.e061017.txt2 It's been a couple of years since <#inc ww2010.weblog.ref e050209 "my last question and answer column,"#> so I thought that it might be time. =inc ww2010.h2 civil "Iraq civil war?"

How can you keep saying that there's no civil war in Iraq, when dozens of people are being killed every day in sectarian violence?

There's something horrible going on in Iraq, and I admit that I don't completely understand it. But there's one thing I'm sure of: It's absolutely NOT a civil war. Those of you who were around in the late 1960s will remember that many people thought that the U.S. was in or close to civil war at that time. There were large riots and demonstrations in the ghettos and on college campuses and the Black Panthers and Weather Underground were calling for violence and insurrection and were setting off bombs around the country. That violence wasn't as bad as we're now seeing in Iraq, but those groups didn't have millions of dollars of funding from al-Qaeda or Iran or organized crime to spend on weapons and hire recruits either. The fact is that there's no fixed definition of the term "civil war," and you can call anything you want a "civil war." But from the point of view of Generational Dynamics, a "crisis civil war" means something specific: A burst of genocidal energy that causes groups in an entire population to try to exterminate each other through massive bloodshed. This is what's happening today in Darfur, it happened in the 1990s in Bosnia and Rwanda, in the 1980s in Lebanon, and in the 1970s in the Cambodian killing fields. Nothing even close to those situations is what's happening today in Iraq. It's important to make these distinctions, because we're seeing real civil wars building in other regions today, regions that are in a "generational crisis" period. Regions in this category that I've mentioned on this web site Palestine/Israel, Sri Lanka, Côte d'Ivoire (Ivory Coast) and the entire nation of China. As the "clash of civilizations" world war approaches, there will be more. Most of the debate over the term "civil war" is purely political jabber. If you have such a need to call Iraq a "civil war" then by all means do what you have to do. But from the point of view of Generational Dynamics, it isn't a civil war, and isn't even close.

=inc ww2010.h2 h5n1 "H5N1 bird flu in Ohio"

There was a news report last week of H5N1 bird flu found in birds in Ohio. Should we be concerned?

The report was for "low pathenogenic avian influenza (LPAI) H5N1 virus, which is different from the "highly pathogenic" H5N1 that spread like wildfire last winter in birds across Asia, into Europe, the Mideast and Africa. As far as we know, it still hasn't reached North American shores, but there's a good chance it will in the fall. So far there's no sign of a human pandemic. In the last few months, the virus has mutated in Indonesia enough to permit human to human transmission through skin contact, but the mutations that would permit easy transmission through the air, thus causing a pandemic, have not yet occurred. In the meantime, it's not too early to start planning. You should stock up on enough dried or canned food, medicines, water, batteries and other supplies so that you and your family can survive for a month or two without leaving home. By the way, <#stdurl http://www.newsday.com/news/health/wire/sns-ap-bird-flu-plan%2C0%2C6148052.story?coll=sns-ap-health-headlines "Harvard researchers are studying stay-at-home quarantine plans"#> as one of the methods for buying time in a bird flu pandemic.

=inc ww2010.h2 africa "Feeding Africa"

I think it was great to make people aware of the physical hugeness of Africa; however it's not correct that <#inc ww2010.weblog.ref e061004b "there isn't enough money in the world"#> to cure hunger in Africa. It's the population size that represents the actual cost of feeding. Africa is 13.8% of the world population, under one billion people, and not all of them need to be fed. Food aid costs at most $1 per person per day, or at most $365 billion per year to feed everyone in Africa, and so it wouldn't take very many of the G-8's pennies at all to feed every single African.

<#inc ww2010.pic afribig.gif right "" "Africa is larger than Europe, America, Alaska, China, and New Zealand (not shown) combined. (Source: Boston Univ)"#> The size of Africa absolutely does matter. It may cost only $1.00 per day to deliver food aid to Johannesburg, but distribution costs are many times greater the bare cost of the food. The larger the region, the higher the distribution costs and the costs to transport food from country to country to city to city to town to tribe, through the savanna and the rain forest, would be extremely expensive, but it's actually much worse than that. In America we have government agencies like FEMA to distribute food aid in emergencies, but nothing like that exists almost anywhere in Africa. So we'd have to use local governments and organizations to distribute the food. And every person in every one of those organizations would SELL the food rather than giving it away. (In America, this would be called "corruption.") The elite and and bourgeoisie would make tons of money from the food aid, and none of the food would reach the poor peasants and workers. Actually, it would be even more disastrous than that. The food aid wouldn't reach the peasants, but the influx of food would depress food prices, bankrupting farmers and turning them into paupers. So disaster would pile upon disaster. Incidentally, this problem isn't unique to Africa. Around the world there are "megacities," each containing tens of millions of people with no access to farmland. Families in poverty in those cities often survive by foraging in large garbage dumps for scraps of food left over by people who can afford to buy food. As population continues to grow faster than the food supply, this problem of megacities will multiply. These problems have occurred in cycles throughout human history, and have gotten many times worse in the last two centuries because medical discoveries have lowered the infant mortality rate from 40-50% to 1-2%. After the "clash of civilizations" world war, the world population will be thinned enough so that everyone will be properly fed for a few decades.

=inc ww2010.h2 israel "Israel in ten years"

Q:	Comment - You asked whether Israel will exist in ten years. I absolutely think Israel will exist in ten years, but I'm not so sure about the Pals. They are destroying themselves.
A:	Well, Israel might exist in ten years, but it depends on what comes out of the war. There are millions of Arabs and Persians who want Israel gone, so even if you're right about the Palestinians, that wouldn't be the end of it. On the other hand, when there's a grand peace conference after it's all over, they may decide to put Israel back together again in some way. So, who knows?

=inc ww2010.h2 comments "User comments on articles"

Why don't you allow user comments on each of your articles, as other blogs do? Are you afraid?

All my web site software was developed by me in Perl. I've started writing software that would allow these user comments, but I want to do it right, and that means allowing users some options, distinguishing between users who need to be moderated and those who don't, protection from hackers, and so forth. I've started writing the code, and I may even get it done some day, but it's not done now. =inc ww2010.bugcomment right In the meantime, you have other options. You can send me an e-mail message (or use the comment boxes). It sometimes takes me a few days to get back, but so far I've kept up with all the e-mail messages. If you want to get into a public argument with me, I take on all comers in the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 ""Objections to Generational Dynamics" thread"#> of the First Turning forum. If your interest is the Singularity and super-intelligent computers, then go to the the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=830 ""Singularity" thread."#> However, that thread's been fairly inactive for a few months.

=eod =// &&2 e061015 Extremely bitter midterm elections - Democratic victory =data ww2010.weblog.y2006.e061015.head Extremely bitter midterm elections appear to head for overwhelming Democratic victory =data ww2010.weblog.y2006.e061015.keys =data ww2010.weblog.y2006.e061015.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061015.date 15-Oct-06 =data ww2010.weblog.y2006.e061015.txt1 It now appears likely that Democrats will control the House and may control the Senate, =data ww2010.weblog.y2006.e061015.txt2 after the November 7, 2006, elections. <#inc ww2010.pic g061015.gif right "" "Expected election results as of Sunday, Oct 15, 2006"#> It won't much difference in terms of policy, since America has almost no policy alternatives today. And it won't make much difference in terms of rhetoric, since both Democrats and Republicans are saying any stupid thing that comes into their minds. What is of interest in extreme bitterness and acrimony accompanying the campaign. As <#inc ww2010.weblog.ref e050702 "I've said several times before"#> on this web site, when a country enters a "generational crisis" period, the great mass of people become increasingly confrontational and less willing to compromise. During America's last generational crisis period, in the 1930s, the acrimony directed against President Franklin Roosevelt was enormous. He was accused of one thing after another, including treason. Just google the phrase "fdr scandal" to see what happened. Republicans were extremely critical of Roosevelt's handling of WW II. In America's previous generational crisis period, Democrats were very acrimonious about President Lincoln's pursuit of the war, and as late as 1864, the Democratic platform called for peace negotiations with the South, to end the war as quickly as possible. So what's happening today is nothing new. William Strauss and Neil Howe, the founders of generational theory, found that the same kind of acrimony in all the Anglo-American crisis periods they analyzed, as described in their 1997 book, The Fourth Turning. Let's briefly address some of the political arguments we're hearing today:

Who's to blame for the North Koreans having a nuclear weapon -- the Republicans or the Democrats? Can you imagine a stupider question? But that's all the politicians have been talking about. Kim Jong-il is determined to get nuclear weapons and to make money by selling the weapons to other countries. This has been North Korea's policy since at least the early 1990s. President Clinton tried to stop them <#inc ww2010.weblog.ref e061010 "using an "appeasement" strategy"#> -- which was perfectly OK and appropriate for America's generational unraveling era in the 1990s -- and the North Koreans simply cheated on it. President Bush has been using a more confrontational approach -- which is perfectly OK and appropriate for America's current generational crisis era, and Kim simply continued what he was doing. Politically, Kim follows the same policy as Iran and al-Qaeda: Just blame everything on America, and our morons in the media seem to just eat that up. We saw this on Saturday, after the United Nations Security Council unanimously voted to sanction North Korea. <#inc ww2010.pic g061015b.jpg left "" "North Korean ambassador Pak Gil Yon reading a very bitter response to Security Council sanctions. (Source: CNN)"#> In response to the unanimous vote, the North Korean ambassador read a very bitter and angry statement directed entirely at the United States. He said that the Security Council was "gangster-like," manipulated by the U.S. He said, "If it weren't for the United States, we wouldn't be developing nuclear weapons," and added, "If the U.S. increases pressure on [North Korea] persistently, then [North Korea] will continue to take countermeasures, considering it a declaration of war." But it really makes no difference what we do: Kim is going to develop nuclear weapons, sell them and use them, and nothing but war will stop them.
"Will Iraq become peaceful if America pulls its troops out?" This week we had a British group from the Lancet publication claim, based on a polling sample of 1800 people that <#stdurl http://www.guardian.co.uk/Iraq/Story/0,,1892888,00.html "655,000 Iraqis have died as a result of the war."#> Publication of this study was, according to an interview with one of the authors that I saw on TV, sped up to get it out before the American elections. I certainly can't judge whether this poll-based result is correct, or the official numbers of 30-50,000 are correct, but I will say that I believe almost nothing that any politically-oriented group says today. However, what I can't understand is why the anti-American politicians and press are so gleeful about this number. If the high number is true, it means that the tide of violence throughout the Mideast is much higher than anyone suspected, and that the Mideast war is already well in progress. If government estimates in Iraq are off by 1000%, then so are estimates in Afghanistan, the Gaza strip, and other Mideast nations. This UK poll came in the same week that <#stdurl http://www.iht.com/articles/ap/2006/10/15/europe/EU_GEN_Britain_Iraq.php "British military chief Gen. Richard Dannatt said"#> that British troops should "get ourselves out sometime soon because our presence exacerbates the security problems." It's really hard for me to understand how so many people can view the Afghanistan war as a "good" war, and the Iraq war as a "bad" war, and then claim that Islamist terrorist groups use the Iraq war, but not the Afghan war, as a recruiting tool. It's a dizzying argument, put forth by people who have given up all their professional credibility and self-respect to polemical political arguments. The violence in the Mideast has been growing steadily for three decades. The American war with Iraq began in 1991, and <#stdurl http://www.nytimes.com/library/world/mideast/081399iraq-conflict.html "substantially escalated in 1999 with the bombing of no-fly zones"#> during the Clinton administration. The war escalated to a ground war in 2003, but it didn't start in 2003. Violence in Palestine, Afghanistan and the Arabian peninsula has also been increasing steadily for decades. From the point of view of Generational Dynamics, the entire Mideast is headed for a major regional war, with components of Arabs versus Jews and Sunnis versus Shiites. It doesn't really matter what we do to try to stop it; we can't stop it any more than we could stop a tsunami. As I've said several times in the past, my expectation is that we will NOT withdraw from Iraq until the general "clash of civilizations" world war begins in earnest, and then we'll withdraw the troops to fight in other theatres.

This is an extremely dangerous time for our country, and we need to be preparing for what's coming, instead of bickering over nonsense. From a policy point of view, it really doesn't make much difference which party is in control of Congress, but in one sense I'm relieved that the Democrats will be taking over. At that point they may have to take some responsibility for getting things done, rather than just acrimonious criticisms of people who are trying to get things done. Perhaps I'm just fooling myself in the hope that the level of acrimony will come down, but for the time being I'd prefer to hold onto that hope, even though it may mean that I too am in a "state of denial." =eod =// &&2 e061012 August trade deficit high -- that's GOOD NEWS, say economics =data ww2010.weblog.y2006.e061012.head August trade deficit reaches fresh historic high -- that's GOOD NEWS, say economists =data ww2010.weblog.y2006.e061012.keys =data ww2010.weblog.y2006.e061012.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061012.date 12-Oct-06 =data ww2010.weblog.y2006.e061012.txt1 The deficit, up 2.7% from July's historic high, exceeds even the highest of economists' estimates, =data ww2010.weblog.y2006.e061012.txt2 according to <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=a0QTRRO1uY7s&refer=home "a Bloomberg survey of 66 economists."#> Both exports and imports increased in August, but this is the <#inc ww2010.weblog.ref e060311 "same old story that I've described before"#> as each new record high deficit was reached: Exports are growing exponentially, and imports are growing exponentially, but the growth rate for exports is higher than for imports, so the trade deficit continues to grow exponentially. These concepts obviously are beyond the understanding of most economists, since they keep getting their forecasts drastically wrong. Just what kinds of airheads these economists are can be seen from the Bloomberg summary:

"The deficit rose 2.7 percent from a $68 billion gap in July, the Commerce Department said in Washington, and exceeded the highest estimate in a Bloomberg News survey of economists. U.S. companies imported more computers, consumer goods and oil even as they shipped a record amount abroad. The report was read as good news by economists, who said the gain in imports showed that consumer spending is holding up even as the economy slows. A weaker dollar and expansion in Europe and Asia are helping boost exports; at the same time a reduction in the deficit will be gradual because the economy is still growing faster than many of its counterparts. "Strength in imports is typically associated with strong domestic demand," said Jim O'Sullivan, a senior economist at UBS Securities in Stamford, Connecticut. "Both imports and exports are growing solidly lately, which very broadly is a sign of growth." Consumer spending, which accounts for two-thirds of the economy, "increased more quickly in a number of districts," the Federal Reserve said today in its survey known as the beige book for the color of its cover. Four of the Fed's 12 districts reported that "economic growth firmed" in the last month. The August deficit compares with the $66.7 billion median estimate in a Bloomberg News survey of 66 economists. The dollar weakened in the minutes after the report was released before retracing much of its drop. Stocks advanced."

I read these reports all the time, and listen to reports on CNBC, CNN, and other stations, and I have to say that this is just about the stupidest I've ever seen. It's unbelievable that we've come to the point where a financial service like Bloomberg could publish an article as truly moronic and idiotic as this, quoting dozens of economists who make decisions about all our finances. According to standard macroeconomic theory that's been around for decades, consumer spending should have come down years ago, and economists have been predicting it would. Why? Because loss of assets in the Nasdaq crash of the early 2000s gave consumers less money to spend. Then a rise in unemployment and loss of income gave consumers less to spend. On top of that, gasoline prices have risen from a $1.00-$1.25 range to a $2.00-$3.00 range, giving consumers less money to spend. With less money to spend, consumers should spend less. And they should import less from China and other countries. That's all standard macroeconomic theory. And it's been proven totally wrong. Consumers have been spending more and more, by going into increasing levels of debt. Nothing in macroeconomic theory prior to this decade has come anywhere near predicting this result. Of course, if consumer spending had gone down, the corporate earnings would have gone down, and the stock market would have fallen. So the "state of denial" in which these moronic economists, macroeconomists, journalists, politicians and high-priced analysts has reached even more dizzying heights: The record high and exponentially growing trade deficit is wonderful news because it means that consumers are importing more stuff, even though it means that consumers are going ever deeper into historically high debt to buy this stuff. And of course, analysts and newscasters on TV are visibly drooling over the possibility of the Dow reaching 12000, thus pushing the stock market bubble even higher -- on the same day that the trade deficit reaches a historic high. Why? Because an exponentially growing trade deficit is a GOOD thing. =eod =// &&2 e061010b How to raise your son to be a terrorist =data ww2010.weblog.y2006.e061010b.head How to raise your son to be a terrorist =data ww2010.weblog.y2006.e061010b.keys =data ww2010.weblog.y2006.e061010b.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061010b.date 10-Oct-06 =data ww2010.weblog.y2006.e061010b.txt1 A Hamas website provides some helpful tips. =data ww2010.weblog.y2006.e061010b.txt2 The <#stdurl http://memri.org/ "Middle East Media Research Institute"#> regularly translates documents from Islamic websites into English so that Westerners can read them. MEMRI provides <#stdurl http://memri.org/bin/latestnews.cgi?ID=SD131206 "a translation of an article"#> on a web site for the military wing of Hamas. The article contains a series of images showing how to imbue children with terrorist aspirations. The first image is a montage showing an infant in the center, with a picture of Osama bin Laden on the right, and the image of Yahya Ayyash, the legendary Hamas explosives engineer, on the left. The infant is wearing a green Kata'ib Al-Qassam (Al-Qassam Brigades) ribbon on his forehead. <#inc ww2010.pic g061010a.jpg center "" "The caption on the picture of the three horsemen is "The horses' backs were our cradles, and on them we followed our ancestors [in Jihad].""#> <#inc ww2010.pic g061010c.jpg center "" "Have your son watch computer screens displaying scenes of Jihad."#> <#inc ww2010.pic g061010d.jpg center "" "When it's bedtime, have him cuddle up with a picture of Osama bin Laden."#> =eod =// &&2 e061010 "Appeasement Conundrum": alternative to appeasing Hitler? =data ww2010.weblog.y2006.e061010.head The "Appeasement Conundrum": What was the alternative to appeasing Hitler? =data ww2010.weblog.y2006.e061010.keys =data ww2010.weblog.y2006.e061010.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061010.date 10-Oct-06 =data ww2010.weblog.y2006.e061010.txt1 President Bush calls for an "immediate response" to North Korea's nuclear weapon test, =data ww2010.weblog.y2006.e061010.txt2 but what kind of response is available? <#inc ww2010.pic neville.jpg right "" "Neville Chamberlain, returning from a 1938 meeting with Hitler, promising "Peace in our time," holding up a signed agreement"#> One of the most reviled men of the twentieth century, besides dictators like Adolf Hitler himself, is British Prime Minister Neville Chamberlain who, in 1938, "appeased" Adolf Hitler. When I was in school in the 1950s, and then later in college and in bitter politics of the 1970s, I heard Neville Chamberlain's name over and over. He had appeased Hitler. Hitler had fooled him. He had permitted Hitler to annex Austria in <#stdurl http://en.wikipedia.org/wiki/Anschluss "the Anschluss,"#> then the Rhineland and Sudetenland. He should have listened to Winston Churchill, an MP (Member of Parliament) who kept warning his colleagues about Germany's rapid militarization. This is what we were told many times. It's worthwhile taking a look at what happened. Chamberlain met with Hitler in Munich. He returned to Croydon Airport on Sept. 30, 1938, waving the piece of paper with the agreement that he and Hitler had signed. (See picture.) When he arrived at 10 Downing Street, <#stdurl =// http://eudocs.lib.byu.edu/index.php/Neville_Chamberlain%27s_%22Peace_For_Our_Time%22_speech http://eudocs.lib.byu.edu/index.php/Neville_Chamberlain%27s_"Peace_For_Our_Time"_speech "he read the written agreement and made this statement:"#>

The written agreement said the following:

We, the German Führer and Chancellor, and the British Prime Minister, have had a further meeting today and are agreed in recognizing that the question of Anglo-German relations is of the first importance for our two countries and for Europe. We regard the agreement signed last night and the Anglo-German Naval Agreement as symbolic of the desire of our two peoples never to go to war with one another again. We are resolved that the method of consultation shall be the method adopted to deal with any other questions that may concern our two countries, and we are determined to continue our efforts to remove possible sources of difference, and thus to contribute to assure the peace of Europe."

This agreement was met with worldwide praise, because a peaceful solution had been found by means of diplomacy and negotiation. What the world didn't know was that Hitler was actively planning for war; on the same day that Hitler met with Chamberlain, he also met with Mussolini to plan the invasion of Britain. But what else could Chamberlain have done? Suppose one of his aides in Munich accidentally overheard Hitler telling plans to someone. What could Chamberlain have done differently? If he'd repeated what his aide heard, he'd have been told he was mistaken. If he'd suggesting invading Germany to kill Hitler or force "regime change," he'd have received worldwide condemnation. Chamberlain could have done nothing other than what he did. <#inc ww2010.pic nkorea2b.jpg right "" "Smiling North Korean news anchor announces successful nuclear weapons test in a gleeful, happy voice. (Source: CNN)"#> Today we're faced with another crazy dictator, Kim Jong-il of North Korea, with a huge army, an huge array of conventional weapons, and now nuclear weapons. President Bush is certainly not trying to appease Kim, at least not today. In <#stdurl http://www.whitehouse.gov/news/releases/2006/10/20061009.html "President Bush's statement on Monday morning,"#> he was confrontational:

"This was confirmed this morning in conversations I had with leaders of China, and South Korea, Russia, and Japan. We reaffirmed our commitment to a nuclear-free Korean Peninsula, and all of us agreed that the proclaimed actions taken by North Korea are unacceptable and deserve an immediate response by the United Nations Security Council. The North Korean regime remains one of the world's leading proliferator of missile technology, including transfers to Iran and Syria. The transfer of nuclear weapons or material by North Korea to states or non-state entities would be considered a grave threat to the United States, and we would hold North Korea fully accountable of the consequences of such action."

This statement is interesting because it comes in two parts. The first mentions an "immediate response by the United Nations Security Council," without mentioning what that response might be. This appears to be an empty threat, but we'll see. The second paragraph is much more confrontational. It threatens a response from the United States (as opposed to the United Nations) if nuclear material is transferred to other countries (like Iran). What would that response be? I listened to many commentators on Monday, and nobody mentioned anything stronger than vague economic sanctions. When military action was mentioned, it was described as impossible for various reasons. Let's try to generalize this, and look at some responses that might be used in various situations.

Appeasement. This really isn't a bad option at some times. Very often you can offer a country incentives to step back from something. In fact, appeasement worked with North Korea in the 1990s. Why? Because they were in a generational unraveling period at a time that, like us, problems are contained and compromises are possible. But once a country enters a generational crisis period, where North Korea is today, then appeasement is treated simply as a sign of weakness. Appeasement doesn't always work even in non-crisis periods, and here I'm specifically returning to the many attempts to appease Iranian President Mahmoud Ahmadinejad with respect to Iran's nuclear development problem. Iran is in a <#hreftext ww2010.i.sixties040501 "generational awakening era, like America in the 1960s,"#> and there have actually been times in the last year when I thought that Iran might back off. But nuclear development has become a core national goal for Iran, so backing off is not possible.
Sanctions. Probably the United Nations Security Council will discuss imposing some kind of economic sanctions against North Korea and Iran. But this is unlikely to work for the same reasons that appeasement doesn't work. Sanctions do sometimes work. For example, one commentator on Monday referred to the breakup of the apartheid government in South Africa after economic sanctions were imposed as a model for dealing with North Korea. However, the collapse of South Africa's apartheid government was the climax of their generational awakening era, and something like it would have happened with or without sanctions. Sanctions did not work after Japan had invaded Manchuria and China in the 1930s. That was a generational crisis era for them, and sanctions only infuriated them. In 1933, they walked out of the League of Nations. Both Iran and North Korea are aware of this, and several times both countries have threatened to walk out the U.N. if sanctions are imposed. That's one possible scenario that we may see.
Military confrontation. This means war. If the target country is in a generational awakening or unraveling era, a quick war might work well. If the target country is in a generational crisis era, as most of the world is today, since it's 61 years past the end of World War II, any war can quickly spiral into a full-fledged crisis war.

So those are the options that are available to the U.N. Security Council and the United States today. Unfortunately, it's pretty clear that none of them is going to work. There's nothing that either North Korea or Iran is willing to trade for the development of nuclear weapons. We can offer incentives, we can threaten sanctions, we can have six-party talks, we can have bilateral talks, we can describe Kim as a "nice guy," or we can describe Kim as an evil dictator. Same with Ahmadinejad. It doesn't matter. They're determined to have nuclear weapons, and nothing will stop them. There's another option that we haven't mentioned yet: Preparation. In this option you accept the inevitability of a coming war, and you prepare for it. Today I tell people: Treasure the time you have left, and use it to prepare yourself, your family, your community and your nation. Think of what's coming from China, Iran and North Korea as a tsunami. We can't stop the tsunami with appeasement, sanctions or a military strike. We can't stop the tsunami at all. But if we know that it's coming we can prepare for it. The country certainly wasn't prepared for World War II. When the Japanese bombed Pearl Harbor on November 7, 1941, they destroyed the entire Pacific Fleet -- the greatest military disaster in American history. This mistake might have caused us to lose the entire war (How do you say "What's for lunch?" in Japanese?) if we weren't several times bigger and more powerful than Japan. We can't afford that today. We're facing war with China, North Korea and Iran, and anything like the Pearl Harbor loss would possibly be irrecoverably disastrous. As I see the actions of the Administration -- President Bush, Vice President Dick Cheney, Secretary of State Condoleezza Rice, and Secretary of Defense Donald Rumsfeld -- I see people who appear to me to be preparing the country for this war, as much as can be done. I don't want to make this a partisan statement; I have no doubt that an administration led by President Al Gore or President Hillary Clinton would similarly lead / have led the nation to prepare for war in the same way. It's something that any administration understands better today than in 1941. But I do want to respond to a web site reader's question that arrived last week: "You often support Rumsfeld because he is a Silent. Why? I have not read anyone who supports Rumsfeld in about five years. I am not asking this question out of political conviction, just curiosity. Perhaps you could write more on this subject." The air is filled with political nonsense, and 99.9% of the political stuff we hear today is disgusting crap. I'm not just talking about the sex scandal; I'm talking about all the ridiculous nonsense we hear about the Iraq war. Few people understand the huge value that the Iraq war has been for us. We've developed an extensive array of high-tech weaponry that we've been able to test out in Iraq and Afghanistan, and the "lessons learned" in actual battle have been invaluable. China, by contrast, have developed similar kinds of high-tech weaponry, but they have absolutely no live battle experience. This alone gives us a big edge over China. I've said a few times that about the only person in Washington that I trust to know what's actually going on in the world and is preparing the nation for it is <#inc ww2010.weblog.ref e060417 "Secretary of Defense Donald Rumsfeld,"#> who was born in 1932, and is in the Silent Generation. He grew up when Hitler was militarizing in Europe, and undoubtedly has a personal memory from his childhood when Neville Chamberlain made his "peace in our time" statement. Rumsfeld's personal memory of these events from his childhood give him an insight into today's world that someone younger would not have. That's why I've said many times that I dread the day when Rumsfeld is replaced by someone from the Boomer generation or Generation-X, since no one in those generations in either party will have a clue what to do. And once again, this isn't a political statement. It's quite reasonable to believe that a President Al Gore would have appointed a similarly qualified person from the Silent Generation. President Gore might even have appointed Rumsfeld himself, since Rumsfeld appears to me to be almost completely non-political and non-ideological. He's extremely wealthy, and is doing the current very stressful and important job out of service to his country, understanding the enormous danger that we'll soon be facing. Rumsfeld has struck exactly the right note, it seems to me, in response to China's rapid and accelerating militarization. At <#inc ww2010.weblog.ref e050604 "a conference in Singapore last year, he said:"#>

China criticized Rumsfeld for this statement as being a "war-monger." This shows what a screwed up world we live in, when China can spend exponentially increasing amounts of money on massive weapons systems, and it's Rumsfeld rather than China who's the "war-monger." Rumsfeld has not made similar statements again, but has been quietly refocusing our armed forces for the coming war with China. This is what needs to be done to prepare our country for what's coming. Rumsfeld knows that appeasement won't work with China, and sanctions won't work with China, just as it didn't work with Hitler. War is the tsunami that's coming, and it can't be stopped. We can only prepare for it. That's why Rumsfeld's job is incredibly important, since it affects the entire survival of our nation, and indeed affects the world. The garbage we hear about the Iraq war is so ridiculous and fatuous that, as a nation, we should be ashamed of ourselves for generating so much of it. =eod =// &&2 e061009 North Korea announces a nuclear weapon test. =data ww2010.weblog.y2006.e061009.head North Korea announces a nuclear weapon test. =data ww2010.weblog.y2006.e061009.keys =data ww2010.weblog.y2006.e061009.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061009.date 9-Oct-06 =data ww2010.weblog.y2006.e061009.txt1 Has Pyongyang passed the point of no return? =data ww2010.weblog.y2006.e061009.txt2 North Korea's state news agency announced that <#stdurl http://news.bbc.co.uk/2/hi/in_depth/6032525.stm "it has carried out its first ever test of a nuclear weapon."#> In recent days, pretty much every country in the region, including China, has joined America in telling North Korea that such a test is not acceptable. Warnings to North Korea have been particularly stark in the last few days. US Assistant Secretary of State Christopher Hill has gone so far as to say that North Korea "can have a future, or it can have these weapons. It cannot have both". Significantly, even China has expressed severe displeasure at North Korea's plans, and North Korean diplomatic sources claim that these statements have angered North Korean generals, who wanted to teach Beijing a lesson, <#stdurl http://www.kommersant.com/p711322/ "according to an analysis by Russian newspaper Kommersant."#> Analysts on Sunday evening were discussing the following issues:

That Japan will re-arm and develop its own nuclear weapons.
That South Korea will re-arm and develop its own nuclear weapons.
That North Korea will sell nuclear weapons technology to other countries.
That Iran will be further emboldened to develop its own nuclear weapons. North Korea has already sold long-range missile technology to Iran.

Most of the analysts are talking in terms of "the U.S. has a problem," but I consider the conflict with China to be much more significant than the conflict with the United States. China, in my opinion, is trying to align with Iran, Pakistan and North Korea to gain hegemony over Asia and the Pacific. A disobedient North Korea is going to suffer some kind of sanction from China. Indeed, positions in Washington, Tokyo, Europe and the United Nations have hardened so much in recent days and weeks that it's hard to see how it's possible to avoid severe international sactions against North Korea, without the U.N. and the West looking like a complete bunch of boobs. At this point, there's no talk of any military response against North Korea. =inc ww2010.cf.cf060209 p left With regard to my little risk conflict graphic, the problem as <#inc ww2010.weblog.ref e061006 "the one I described for the Caucasus"#> last week. The North Korea situation is shown at "yellow - medium risk," level 2. The current situation raises it to a 2.5. We'll have to watch and see whether the situation settles down, or whether it escalates to risk level to "red - high risk," level 3. The situation between Russia and Georgia, incidentally, has not escalated further over the weekend, so things may be settling down there. =eod =// &&2 e061008 Learning-disabled journalists and politicians continue to predict Iraq civil war =data ww2010.weblog.y2006.e061008.head Learning-disabled journalists and politicians continue to predict Iraq civil war =data ww2010.weblog.y2006.e061008.keys =data ww2010.weblog.y2006.e061008.loc ww2010.weblog.log0610 =data ww2010.weblog.y2006.e061008.date 8-Oct-06 =data ww2010.weblog.y2006.e061008.txt1 Occasionally journalists take a break from their heavy-breathing over Congressional pages, =data ww2010.weblog.y2006.e061008.txt2 and when they do, they go back to predicting a civil war in Iraq. <#inc ww2010.pic zakar.jpg right "" "Panelist Fareed Zakaria on Sunday's This Week With George Stephanopoulos (Source: ABC)"#> Fareed Zakaria, Newsweek International editor appearing on ABC, said that the Iraqi government has failed and the American mission has failed. "If you look at the last 3-4 months, it's absolutely clear that a civil war dynamic has set in," said Zakaria on Sunday. "This is happening. ... The trend is moving in the wrong direction on every issue that relates to a building civil war." If I'm not mistaken, Zakaria has been saying almost exactly the same thing for several years. If he predicts a civil war week after week, and a civil war never materializes, you'd think that he'd learn. Zakaria is a "Generation-Xer," born in Mumbai (Bombay), India, in 1964. Most Indians I've known have been extremely intelligent, and I recall from my days as a mathematician studying at MIT that <#stdurl http://en.wikipedia.org/wiki/Srinivasa_Aaiyangar_Ramanujan "Srinivasa Aaiyangar Ramanujan"#> is considered by many to be the greatest and most brilliant number theorist in the history of mathematics. But that brilliance hasn't rubbed off on Zakaria. Obviously he must be learning-impaired. When a two-year-old baby fails to balance one ball on top of another a few times, sooner or later he realizes it isn't going to happen. But this guy keeps trying to balance the ball week after week, repeating his civil war theory, and just can't seem to learn, a fairly frequent problem among Boomers and Generation Xers that I've known. The learning impairment includes an inability to connect closely related events. If he'd read his own magazine this week, he would have found <#stdurl http://msnbc.msn.com/id/15176449/site/newsweek/ "an interview with Jimmy Carter"#> saying, "I would say that in the last 30 years or so one of my main commitments in life has been to bring peace to Israel. But I am frustrated when terrorist activities cause a serious setback as they have among the Palestinians, and by Hizbullah and the reluctance of Israel to withdraw from occupied territories." Or, if he'd read the competing Time Magazine, he would have found an <#stdurl http://www.time.com/time/magazine/article/0,9171,1543878,00.html "article saying, "dreams of peace are fading fast" in Gaza."#> It says,

Newsweek International

Newsweek

On May 1, 2003, when the "Mideast Roadmap to Peace" was announced, <#hreftext ww2010.i.may01 "I predicted:"#> The Roadmap would fail, and the disappearance of Ariel Sharon and Yasser Arafat would signal a major generational change that would lead the region into massive regional war, probably within a couple of years after Arafat's death.
Then, on August 19, 2003, after the terrorist attacks had begun and the terrorists blew up the United Nations building in Baghdad, <#hreftext ww2010.i.aug19 "I predicted:"#> There would not be massive uprisings against the Americans or a civil war. If the terrorist attacks continue and get worse, it won't be because of civil war; it will be because of funding by Palestinian groups or other external groups, and that large numbers of Palestinian and "mujahadeen" terrorists are moving into Iraq, making it a theatre of war for the larger regional war involving the Palestinian Arabs and the al Qaeda against Americans in Iraq.

Troy

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

(Source: Boston Univ)

State of Denial

"That's why you're seeing massive riots and demonstrations among the Shi'ites in southern Iraq, but you're not seeing massive violence against the American occupiers. There's no "Tet offensive" and no Vietnam-like "quagmire" in the cards for the Americans. Terrorist acts during this period can thus have the effect of backfiring against the terrorists. The young people taking part in massive demonstrations and riots sometimes take a deep breath and say, "Whoa! This is farther than we wanted to go." The result is that public opinion begins to turn against the terrorists rather than (in this case) the Americans. That's not to say there aren't dangers, and here we'll point out two major ones: First, the terrorist attacks may continue and get worse. Terrorism is more a political technique rather than a military technique. Al Qaeda may succeed in increasing the level of terrorist attacks in order to influence American public opinion. And second, the terrorist acts may presage a larger regional war involving the Palestinian Arabs and the al Qaeda against Americans in Iraq. Iraq is in an awakening period, but the Palestine region is just about to enter a crisis period. Some analysts claim that the terrorist acts are being perpetrated by Palestinian Arabs and "Mujahadeen" being paid thousands of dollars each, funded by Saddam and Osama bin Laden, arriving from Syria and Saudi Arabia. The really dangerous scenario is that large numbers of Palestinian and "mujahadeen" terrorists will be motivated by identity group relationships to move into Iraq as a theatre of war against the Americans. That isn't happening now, but it's one of several possible scenarios that may unfold in the Mideast region during the next few months and years."

60 Minutes

According to Woodward, insurgent attacks against coalition troops occur, on average, every 15 minutes, a shocking fact the administration has kept secret. "It’s getting to the point now where there are eight-, nine-hundred attacks a week. That's more than 100 a day. That is four an hour attacking our forces," says Woodward. The situation is getting much worse, says Woodward, despite what the White House and the Pentagon are saying in public. "The truth is that the assessment by intelligence experts is that next year, 2007, is going to get worse and, in public, you have the president and you have the Pentagon [saying], 'Oh, no, things are going to get better,'" he tells Wallace. "Now there’s public, and then there’s private. But what did they do with the private? They stamp it secret. No one is supposed to know," says Woodward. "The insurgents know what they are doing. They know the level of violence and how effective they are. Who doesn't know? The American public," Woodward tells Wallace.

The entire region is heading for a major genocidal war, between Jews and Arabs, between Sunni and Shiite Muslims, and Muslims and Hindus, and between Muslims and Orthodox Christians. Iraq is at geographically located at the center of this region, and will be a major battlefield of the war, even though the Iraqis themselves do not want a war.

Although we cannot measure the extent of the spread with precision, a large body of all-source reporting indicates that activists identifying themselves as jihadists, although a small percentage of Muslims, are increasing in both number and geographic dispersion.
If this trend continues, threats to US interests at home and abroad will become more diverse, leading to increasing attacks worldwide.
We assess that the operational threat from self-radicalized cells will grow in importance to US counterterrorism efforts, particularly abroad but also in the Homeland.
The jihadists regard Europe as an important venue for attacking Western interests.
The Iraq conflict has become the cause célèbre for jihadists, breeding a deep resentment of US involvement in the Muslim world and cultivating supporters for the global jihadist movement. Should jihadists leaving Iraq perceive themselves, and be perceived, to have failed, we judge fewer fighters will be inspired to carry on the fight.

cause célèbre

causes célèbres

cause célèbre

State of Denial

(Source: AP)

"[R]oughly seven-in-ten Japanese express an unfavorable view of China and an equal number of Chinese dislike Japan. ... Anxiety about the growing strength of China's military is nearly universal in Japan. That concern is shared with others among China's neighbors - large majorities in both Russia and India see this as a threatening trend. The Chinese, however, have a very different view: 95% say their rising military might is a good thing. In China, much of the antipathy toward Japan is rooted in history - overwhelmingly, the Chinese believe Japan has yet to atone for its militaristic past. Eight-in-ten Chinese (81%) believe Japan has not apologized sufficiently for its military actions during the 1930s and 1940s. ... Moreover, the Chinese and Japanese tend to associate negative characteristics with the people of the other country. In particular, both countries consider the other competitive, greedy, and arrogant. The Japanese are especially likely to say the Chinese are nationalistic and selfish, while the Chinese tend to see the Japanese as male-dominated."

The Israelis voted for Ehud Olmert, expecting him to solve the "Palestinian problem" through his "convergence" proposal. That proposal failed, and the "Palestinian problem" is unsolved.
The Palestinians voted for Hamas, expecting them to solve the "Israel problem." But with an ungovernable Gaza now in total chaos, Hamas can't even govern, and so the "Israel problem" is unsolved.

At long last, signs of cooling of China's economy. China's economy has been <#inc ww2010.weblog.ref e060728 "growing at an incredible 10% a year for twenty years,"#> and the biggest reason for the rise in commodity prices in the last few years is that China has been sucking up huge amounts of basic materials -- oil, copper, iron ore and so forth -- to feed its factories. Everyone knows that China has to have a recession sooner or later, and for five years <#inc ww2010.weblog.ref e040715b "the Chinese have been trying to slow down their economy,"#> just enough to stablize it for a "soft landing," but not too much, which might cause a "hard landing." But the Chinese have repeatedly failed to find a way to cool down their economy -- until now. Finally, the economy seems to be cooling, which means that China will suck up smaller amounts of basic materials, reducing the demand for these materials, and so prices have been falling.
The collapse of the housing bubble. The <#inc ww2010.weblog.ref e060825b "housing market continues to collapse faster than expected,"#> and this is affecting commodities in two ways. First, lots of basic materials go into new homes; for example, 46% of domestic copper goes to building construction. And second, consumers can no longer use refinancing to borrow money on their homes, and can purchase fewer manufactured goods. The collapse of the housing bubble is the main reason that almost all mainstream economists are predicting slower growth or a downturn this fall.
The transformation of the commodities market itself. This is the most unexpected of the reasons that Roach gives for the fall in commodity prices, and is based on the observation that more and more people are investing in commodity futures. (This is how you invest in commodities. For example, a "copper future" is a piece of paper that can be redeemed at a certain future date for actual copper.) It used to be that no one except narrow specialists would ever buy commodity futures, which meant that commodity prices could be used as a predictor of future economic activity. But in the last few years, ordinary investors have treated the commodities market as simply another ordinary investment. Money has poured into commodities in the same way that it's poured into stocks, resulting in a sharp increase in commodity prices, and those prices can fall as they can for any other bubble. This is a very interesting way of looking at it, and how a bubble feeds on itself. Investors went into commodities because they were priced low, and promised high returns. This pushed prices up and made commodities a bubble, and the rising prices only encourage investors to invest some more, in hopes of even higher returns. This cycle keeps repeating until there's a loss of confidence, and the bubble bursts. That's what's happening now.

"We have all heard the latest, deeply dismaying reports of renewed fighting, particularly in North Darfur, among the various factions. Thousands of Sudan Armed Forces troops have been deployed to the area, in clear violation of the Darfur Peace Agreement. Even worse, the area has been subjected to renewed aerial bombing. I strongly condemn this escalation. The Government should stop its offensive immediately and refrain from any further such action. ... Once again, people have been displaced. The total number of displaced now stands at 1.9 million. Nearly 3 million people in Darfur depend on international aid for food, shelter and medical treatment."

"As access gets harder, the humanitarian gains of the past two years are being rolled back. Unless security improves, we face the prospect of having to drastically curtail an acutely needed humanitarian operation. Can we, in conscience, leave the people of Darfur to such a fate? Can the international community, having not done enough for the people of Rwanda in their time of need, just watch as this tragedy deepens? Having finally agreed just one year ago that there is a responsibility to protect, can we contemplate failing yet another test? Lessons are either learned or not; principles are either upheld or scorned. This is no time for the middle ground of half-measures or further debate."

"Once again, therefore, I urge the Government of Sudan to embrace the spirit of resolution 1706, to give its consent to the transition, and to pursue the political process with new energy and commitment. The consequences of the Government's current attitude -- yet more death and suffering, perhaps on a catastrophic scale -- will be felt first and foremost by the people of Darfur. But the Government itself will also suffer, if it fails in its sacred responsibility to protect its own people. It will suffer opprobrium and disgrace -- in the eyes of all Africa, and the whole international community. Moreover, neither those who decide such policies, nor those who carry them out, should imagine that they will not be held accountable."

"But I wanted to lay particular emphasis, as I think you did, on the fourth aspect of our discussion together, and that is on the Israel-Palestine conflict. I think it is important, as I have been saying these past two days, that we do everything that we can to re-energise that process, to give ourselves the best chance of achieving a lasting comprehensive settlement of that issue, with two states living side by side in peace together. I believe that it can be done, and furthermore I commit myself for the remainder of my time in office to do everything I can to bring that about. It is I believe of huge importance, of course primarily to Israelis and to Palestinians, but also as we can see to the whole of the region and indeed to the world."

(Source: CNN)

"When you walk around in Gaza, you cannot help but avert your eyes from what you see: indescribable anarchy, policemen that nobody cares about, youth proudly carrying weapons, mourning tents set up in the middle of main streets, and from time to time you hear that so-and-so was murdered in the middle of the night, and the response comes quickly the next morning. Large families carry weapons in tribal wars against other families. Gaza has turned into a garbage dump, there is a stench, and sewage flows [in the streets]."

When Israel unilaterally withdrew from Gaza in summer of 2005, voluntarily ending its occupation, it was hoped around the world that the Palestinians and Israelis would now settle down into a pattern for peace, leading to side-by-side Palestinian and Jewish states. I wrote that <#inc ww2010.weblog.ref e050816 "Generational Dynamics predicts that this pattern for peace couldn't happen."#> Today, I doubt that there are any Pollyannas left who believe that the region is headed in any direction even remotely resembling peace.
When Hamas, labeled a terrorist organization by the U.S. and other Western governments, unexpectedly won an overwhelming victory in the legilative elections, it became Hamas' responsibility to govern the Palestinians. In <#inc ww2010.weblog.ref e060127 "the analytical article that I wrote at the time,"#> I quoted someone as saying, "The Hamas victory in the Palestinian elections may be a blessing in disguise. Now that they are in power, Hamas will have to take responsibility for the future. They will have to become more moderate. Now they are part of the democratic game and they will have to play by the democratic rules." Now, eight months later, Hamas does appear to have moderated, but the Palestinians have been ungovernable, especially in Gaza.

"The question is: Why did we not keep Gaza's freedom? ... The government cannot do anything, the opposition [Fatah] looks on from the sidelines, engaged in internal bickering, and the president has no power... We are walking aimlessly in the streets. The reality in which we are living in Gaza can only be described as miserable and wretched, and as a failure in every sense of the word. We applauded the elections and the unique democratic experience, but in reality there has been a great step backwards. We spoke of national consensus, [but] it turned out to be like a leaf blowing in the wind..."

Gaza has dropped from world view during a period when <#stdurl http://weekly.ahram.org.eg/2006/811/re61.htm "living conditions have gotten "beyond desperate.""#>
The Israeli government has learned a lesson: It withdrew voluntarily from south Lebanon in 2000, and that permitted Hizbollah to conduct this summer's war; it withdrew voluntarily from Gaza in 2005, and that permitted the chaotic situation in Gaza to develop, as well as the <#stdurl http://www.haaretz.com/hasen/spages/759174.html "increased freedom for terrorist groups to import powerful anti-tank missiles and other weapons"#> into the region. Therefore, the lesson is that withdrawal was a bad idea. The first consequence is that Israel is effectively reoccupying Gaza, <#stdurl http://voanews.com/english/2006-09-06-voa5.cfm "with airstrikes and tanks targeting Hamas terrorists."#> The second consequence is that Israeli Prime Minister Ehud Olmert's "convergence" or "consolidation" plan for the West Bank has been abandoned. Under this plan, Israel would voluntarily withdraw from many of the West Bank settlements, consolidating them with others close to Jerusalem. This is now considered way too dangerous. The abandonment could be considered remarkable because it was just five months ago that <#inc ww2010.weblog.ref e060403 "Olmert won the election specifically on the platform of convergence,"#> a platform that I characterized as an Israeli "bunker mentality" of withdrawing, with the intention of having nothing to do with the Palestinians. Obviously, this entire "bunker mentality" concept is now dead after the Lebanon war and the increasing belligerence of Iran. Instead, <#inc ww2010.weblog.ref e060906 "the Israelis are becoming increasingly anxious and panicky,"#> and may be reaching some kind of "tipping point" where they take preemptive action against someone (Iran). As an aside, Generational Dynamics would describe what's happening in a similar way to the Gazans. As the Israelis become increasing anxious and panicky, the population, especially the youth, will be looking for a "Prophet" to solve the problem. This could happen in many ways, the most likely being the dissolution of the Olmert government, and its replacement with a new Prime Minister who will promise to "solve the Palestinian / Iranian problem," without necessarily saying how.
The Mideast is becoming increasingly internationalized. This is a very significant development that almost no one is commenting on. For decades, it's been a policy of many countries -- the U.S., Europe, Egypt, and so forth -- to keep their troops out of the Mideast at any cost, for fear of being drawn into a war between the Israelis and the Palestinians. But now the new U.N. south Lebanon buffer force is full of international forces, the <#stdurl http://www.jpost.com/servlet/Satellite?cid=1154526030545&pagename=JPost%2FJPArticle%2FShowFull "United Nations is calling for an international presence in Gaza."#> What happens if a French soldier has to fire on a Palestinian? What happens if a Malaysian soldier has to fire on an Israeli? It takes only a few incidents of this type before events start spiraling out of control. So this international force could easily be the nucleus of the major international war in the Mideast.

Israel

On War

"The effect of defeat outside the army -- on the people and on the government -- is a sudden collapse of the wildest expectations, and total destruction of self-confidence. The destruction of these feelings creates a vacuum, and that vacuum gets filled by a fear that grows corrosively, leading to total paralysis. It's a blow to the whole nervous system of the losing side, as if caused by an electric charge. This effect may appear to a greater or lesser degree, but it's never completely missing. Then, instead of rushing to repair the misfortune with a spirit of determination, everyone fears that his efforts will be futile; or he does nothing, leaving everything to Fate."

really

Lebanon

Hizbollah

"Hot" vs "Cool" war style

The Arabs

The Palestinians

Syria

The future

"The war we fight today is more than a military conflict; it is the decisive ideological struggle of the 21st century. On one side are those who believe in the values of freedom and moderation -- the right of all people to speak, and worship, and live in liberty. And on the other side are those driven by the values of tyranny and extremism -- the right of a self-appointed few to impose their fanatical views on all the rest. As veterans, you have seen this kind of enemy before. They're successors to Fascists, to Nazis, to Communists, and other totalitarians of the 20th century. And history shows what the outcome will be: This war will be difficult; this war will be long; and this war will end in the defeat of the terrorists and totalitarians, and a victory for the cause of freedom and liberty. <#inc ww2010.pic bush0831.jpg right "" "President George Bush, speaking to American Legion National Convention (Source: CNN)"#> We're now approaching the fifth anniversary of the day this war reached our shores. As the horror of that morning grows more distant, there is a tendency to believe that the threat is receding and this war is coming to a close. That feeling is natural and comforting -- and wrong. As we recently saw, the enemy still wants to attack us. We're in a war we didn't ask for, but it's a war we must wage, and a war we will win."

"I think when the President links what's happening in Iraq with what has been the standard process in American foreign policy and domestic policy since World War II, he does strike a chord with voters 50 years of age or older -- and voters 50 years of age or older can be close to half of the people who turn out on election day. So when he puts this into a historical context, I think he's making progress in his arguments, and let's face it, he's arguing uphill. It's tough for him on Iraq now."

"The status quo in the Middle East before September the 11th was dangerous and unacceptable, so we're pursuing a new strategy. First, we're using every element of national power to confront al Qaeda, those who take inspiration from them, and other terrorists who use similar tactics. We have ended the days of treating terrorism simply as a law enforcement matter. We will stay on the offense. We will fight the terrorists overseas so we do not have to face them here at home."

(Source: CNBC)

Wall Street Journal

"If profits come down, you could make a decent argument for multiples coming up. It's all about ME (multiples expansion). Multiples have been in the 14-15 range. You could make an argument they should be in the 17-18 range. You guys out there have to work the numbers -- figure out what a lower profit outlook combined with perhaps a higher multiple might look like to stock values."

(Source: MarketGauge ® by DataView, LLC)

(Source: BBC)

The Fourth Turning: An American prophecy; What the cycles of history tell us about America's next rendezvous with destiny

(I'm always loathe to recommend yahoo to anyone. The service is dishonest and shoddy. Whatever you do, don't ever give them a credit card number. If you buy a service from them, and it doesn't work -- which happens frequently -- then there's absolutely no customer service, but they'll still keep charging your credit card. If you absolutely have to give them a credit card number, then get a "virtual credit card number" from Citibank, since you can cancel it at any time.)

<#stdurl http://fourthturning.com/forums/viewtopic.php?t=1331

<#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 "Objections to Generational Dynamics"#> - for a discussion of Generational Dynamics theory.
<#stdurl http://fourthturning.com/forums/viewtopic.php?t=909
<#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=830 "The Singularity"#> - for a discussion of super-intelligent computers and the Singularity.

If you try these web pages today, you'll be redirected to an error page, since these system is still down. But they should be available soon. =eod =// &&2 e060823 Debate over civil war in Iraq rages over semantics =data ww2010.weblog.y2006.e060823.head Debate over civil war in Iraq rages over semantics =data ww2010.weblog.y2006.e060823.keys Iraq, civil war, Darfur, Suday =data ww2010.weblog.y2006.e060823.loc ww2010.weblog.log0608 =data ww2010.weblog.y2006.e060823.date 23-Aug-06 =data ww2010.weblog.y2006.e060823.txt1 An actual crisis civil war in Iraq is impossible, but it's now embroiled in the November elections, =data ww2010.weblog.y2006.e060823.txt2 and so nothing that's said has any meaning at all. =inc ww2010.xr.related1 right iraqcivil 3 I'm not going to go over all the arguments again, since <#hreftext ww2010.i.060807iraqcivil "I've done so many times on this web site."#> I'll just comment on some of the new twists and turns. The debate has gone completely away from what the "real" definition of a civil war is into whether the term "civil war" can be redefined for political purposes. With suicide bombers and roadside bombs killing some 100 Iraqis a day, there's certainly plenty of room for politicians to make hay. The simple answer is this: the violence going on today in Iraqi is being driven by money -- money from al-Qaeda on the Sunni side and from Iran on the Shiite side -- as <#hreftext ww2010.i.060807iraqcivil "I've previously explained in detail."#> A real civil war is driven by the people -- by massive hatred between the groups supposedly at war. I've seen no evidence in the press that ordinary Iraqi Sunnis and Shiites hate each other; every story seems to indicate that they want to live together in peace. If this were a real civil war, then ordinary Iraqi Sunnis and Shiites would want to kill each other. It's as simple as that, and nothing remotely like that is happening. We have an actual crisis civil war going on today in Sudan, where government-sponsored Arab militias are slaughtering, starving and raping millions of non-Arab people in Darfur. Nothing like that is happening in Iraq. Another recent real civil war was the Bosnian war in the 1990s. I'd like to repeat Amy Chua's description of this war, given in her book World on Fire: "In the Serbian concentration camps of the early 1990s, the women prisoners were raped over and over, many times a day, often with broken bottles, often together with their daughters. The men, if they were lucky, were beaten to death as their Serbian guards sang national anthems; if they were not so fortunate, they were castrated or, at gunpoint, forced to castrate their fellow prisoners, sometimes with their own teeth. In all, thousands were tortured and executed." That's the kind of emotion we'd have to see to conclude that there's a civil war in Iraq. But what we're seeing today is a debate of the political definition of civil war which, like so many things that politicians talk about, has absolutely nothing to do with reality. =eod =// &&2 e060822 Iran and Ahmadinejad are waiting for the Mahdi =data ww2010.weblog.y2006.e060822.head Iran and Ahmadinejad are waiting for the Mahdi =data ww2010.weblog.y2006.e060822.keys Iran, Ahmadinejad, Mahdi =data ww2010.weblog.y2006.e060822.loc ww2010.weblog.log0608 =data ww2010.weblog.y2006.e060822.date 22-Aug-06 =data ww2010.weblog.y2006.e060822.txt1 Most people know about the belief by Christian fundamentalists about the Second Coming of Christ, =data ww2010.weblog.y2006.e060822.txt2 and the fact that some Christians believe that the second coming is near. However, what few Americans know is that Shi'ite Islam has a similar belief -- <#stdurl http://www.csmonitor.com/2006/0104/p07s02-wome.html "the Mahdaviat -- the belief that the Mahdi is coming to save mankind."#> Iranian ideologues believe that the Islamist overthrow of Iran's secular government in 1979 was the sign that the Mahdi is coming soon. Iranian President Mahmoud Ahmadinejad is one of those ideologues, and he said as much in his <#stdurl http://www.globalsecurity.org/wmd/library/news/iran/2005/iran-050918-irna02.htm "speech to the U.N. General Assembly on Sept. 17, 2005:"#>

"From the beginning of time, humanity has longed for the day when justice, peace, equality and compassion envelop the world. All of us can contribute to the establishment of such a world. When that day comes, the ultimate promise of all Divine religions will be fulfilled with the emergence of a perfect human being who is heir to all prophets and pious men. He will lead the world to justice and absolute peace. O mighty Lord, I pray to you to hasten the emergence of your last repository, the promised one, that perfect and pure human being, the one that will fill this world with justice and peace."

This is evidently a strongly held belief by Ahmadinejad, and it partially explains his single-minded devotion to the destruction of Israel. Ironically, not all Iranians agree with Ahmadinejad's direction. Now that the Lebanon war is over, at least for the time being, Iran is moving quickly to solidify Hizbollah's position in Lebanon. Iran is <#stdurl http://www.theaustralian.news.com.au/story/0,20867,20192187-2703,00.html "pouring hundreds of millions of dollars into Hizbollah's coffers"#> to be given away to Lebanese citizens whose homes were bombed during the war. In addition, Iran is <#stdurl http://www.ynetnews.com/articles/0,7340,L-3293777,00.html "huge quantities of weapons to Hizbollah,"#> to replace those that were used or destroyed during the war. But many <#stdurl http://themedialine.org/news/news_detail.asp?NewsID=14818 "Iranians are angered by the huge amounts of money being spent in Lebanon."#> The anger is especially severe in regions destroyed by the Iran/Iraq war of the 1980s, and by <#stdurl http://news.bbc.co.uk/2/hi/middle_east/3348613.stm "the huge earthquake hit Iran in 2003."#> Iranians are furious that money is being spent to rebuild Lebanon, but nothing is being spent to help these Iran regions rebuild. From the point of view of Generational Dynamics, none of this is surprising. Like <#hreftext ww2010.i.sixties040501 "America in the 1960s and 1970s,"#> when it was one generation past the end of World War II, Iran today is entering a "generational awakening" era, one generation past the Iran/Iraq war of the 1960s. During the 1960s, America went through massive riots and demonstrations over racial issues, the Vietnam war, and other "individual rights." Every country goes through generational awakening eras at regular intervals, and when that happens the country moves in the direction of supporting individual rights, and away from national unity. <#inc ww2010.pic ahmad2.jpg left "" "President Mahmoud Ahmadinejad of Iran(Source: Mardomyar.ir )"#> That's happening more and more in Iran today, as Iran becomes <#stdurl http://www.smh.com.au/news/world/the-changing-face-of-iran/2006/08/18/1155408022626.html ""a country at war with itself,""#> according to one description. During such a period, there's always a "generation gap," where many young people reject the harsh compromises and restrictions imposed by the older generation to prevent the previous crisis war (in this case, the Iran/Iraq war) from ever happening again. We already saw this last year, shortly after the election of Ahmadinejad, when <#inc ww2010.weblog.ref e050815 "college-age women started rioting in the streets"#> for feminist rights. Women often lead the way during generational awakening periods, just as men tend to lead the way during generational crisis periods. Although Hizbollah's evident public relations victory in Lebanon is widely praised in Iran and throughout the Muslim world, it has a cost, and we can expect to see increasing political turmoil over Ahmadinejad's policies, as he tests his belief that the Mahdi will be coming soon to save mankind. =eod =// &&2 e060818 Furious Chinese ambassador harshly threatens U.S. over Taiwan =data ww2010.weblog.y2006.e060818.head Furious Chinese ambassador harshly threatens U.S. over Taiwan =data ww2010.weblog.y2006.e060818.keys China =data ww2010.weblog.y2006.e060818.loc ww2010.weblog.log0608 =data ww2010.weblog.y2006.e060818.date 18-Aug-06 =data ww2010.weblog.y2006.e060818.txt1 BBC anchor Carrie Gracie must have really pissed off Sha Zukang, =data ww2010.weblog.y2006.e060818.txt2 China's ambassador to the United Nations in Geneva, because he was shouting angrily, when he answered Gracie's questions during <#stdurl http://news.bbc.co.uk/2/hi/asia-pacific/4797903.stm "an interview, a portion of which was broadcast on Thursday."#> (The full interview can be <#stdurl http://www.bbc.co.uk/worldservice/programmes/the_interview.shtml "heard online starting on Saturday.)"#> "The moment that Taiwan declares independence, supported by whomever, China will have no choice but to [use] whatever means available to my government," he said. "Nobody should have any illusions on that." Interviewer Gracie said that there would be "a high price to pay" to have a war over a small island. "You are right, you are right," he shouted. "I said 'any cost.' It's not a matter of how big Taiwan is, but for China, one INCH of the territory is more valuable than the LIVES of our people." This warning is consistent with <#inc ww2010.weblog.ref e060420 "the warning that Chinese President Hu Jintao gave to President Bush"#> last year. It's also consistent with last year's <#inc ww2010.weblog.ref e050716 "warning given by top-level Chinese army officer General Zhu Chenghu"#> if America interfered with Taiwan: "If the Americans are determined to interfere [then] we will be determined to respond. We . . . will prepare ourselves for the destruction of all of the cities east of Xian [a city in central China]. Of course the Americans will have to be prepared that hundreds . . . of cities will be destroyed by the Chinese." I mention all this because I've had several conversations with people recently who thought that China would never risk a war with America, and even said that talking about it is hyperbole. One person said that Taiwan and China would never want to have a war, because it would be bad for business. Of course if that were true, then nobody would ever have any wars. In this case there's absolutely no doubt: If Taiwan moved toward independence, then China would make a military move on Taiwan, and America would come to Taiwan's defense, and there would be full-scale war. From the point of view of Generational Dynamics, a major crisis war with China cannot be avoided, and probably sooner rather than later. Taiwan is only one of the reasons. Another reason is the growing tension between China and Japan, which is going to lead to a war that will draw America in. A third reason is North Korea, which is determined to reunite with South Korea under North Korean control; America would defend South Korea, and China would defend North Korea, once again leading to full-scale war. Returning to the interview with Chinese Ambassador Sha, he was furious about something else too: the West's constant criticism of China for its rapid militarization, with double-digit budget increases for the last few years. This is extremely ominous, since there's no doubt that they're preparing for war with America, with huge investments in submarines and missiles. Ambassador Sha was quite blunt: "It's better for the U.S. to shut up, keep quiet. That's much, much better." He added, "China's population is 6 times or 5 times the United States. Why blame China? No. forget it. It's high time to shut up. It's a nation's sovereign right to do what is good for them. But don't tell us what's good for China. Thank you very much." And thank you too, Mr. Sha. From the point of view of Generational Dynamics, a war with China will occur with absolute certainty, as part of the approaching "clash of civilizations" world war. We're already beginning to see the outlines of the two sides. =inc ww2010.cf.cf060209 p left China has close military ties with Iran, Pakistan and North Korea, and these countries are all sharing missile and nuclear technology. These countries and their allies will form the new "axis" in the war, to fight against America, India, Russia and the UK and their allies. The fury that was exhibited by a Chinese ambassador is quite startling, because we have to assume that his anger is part of the "message" that he wants to impart to the West. The message is this: "We're becoming increasingly impatient with humiliating remarks by the West and by the West's interference with Taiwan. We're not going to tolerate it much longer." This message fits in very well with Iran's plans, clearly expressed by <#inc ww2010.weblog.ref e060814 "Iran's charismatic leader Mahmoud Ahmadinejad,"#> to wipe Israel off the map. =eod =// &&2 e060817 Jackie Chan selected by UNICEF to warn the world of bird flu =data ww2010.weblog.y2006.e060817.head Jackie Chan selected by UNICEF to warn the world of bird flu =data ww2010.weblog.y2006.e060817.keys bird flu, Indonesia, Henry Niman =data ww2010.weblog.y2006.e060817.loc ww2010.weblog.log0608 =data ww2010.weblog.y2006.e060817.date 17-Aug-06 =data ww2010.weblog.y2006.e060817.txt1 The movie star and martial arts expert will star in a public service announcement =data ww2010.weblog.y2006.e060817.txt2 (PSA), according to the <#stdurl http://www.unicef.org/media/media_35345.html "UNICEF press announcement."#> <#inc ww2010.pic chan.jpg right "" "Jackie Chan in bird flu PSA (Source: UNICEF)"#> In the one minute ad, Chan and six children use colorful origami birds to convey the message to stay away from sick and dead birds, especially chickens. It ends with, "But playing with paper birds is fine." Highly pathenogenic H5N1 bird flu has continued to spread throughout Asia in both birds and humans. Bird flu appears to be endemic throughout Indonesia, where people are taking few precautions to prevent spreading. And among humans, <#stdurl http://www.who.int/csr/don/2006_08_14a/en/index.html "there have been 57 H5N1 bird flu infections,"#> of which 44 have been fatal. Last year, <#inc ww2010.weblog.ref e050923 "Indonesians were nearing panic as bird flu spread,"#> but today, they seem to have accepted it as a permanent part of their lives. Yesterday, China reported <#stdurl http://www.dnaindia.com/report.asp?NewsID=1047588 "a fresh outbreak of bird flu, leading to the slaughter of over 200,000 fowl."#> The outbreak was the first in China since July 14 and the 38th reported among poultry nationwide since October last year. As expected, the spread of bird flu has slowed since the end of Spring. Last year at this time, bird flu was mostly confined to eastern Asia. But last winter, <#inc ww2010.weblog.ref e060407 "bird flu was spreading at lightning speed around globe."#> It moved west through China and into Russia, then into the Mideast and Europe, and finally into Africa. <#inc ww2010.pic flywayss.gif center "" "Major flyways, bird flu status (Source: UN FAO)"#> The disease has spread rapidly among birds around the world. Ever since Spring 2005, when H5N1 <#inc ww2010.weblog.ref e050707 "was found to have infected birds at Lake Qinghaihu,"#> the mid-China international meeting point and breeding ground for migratory birds, bird flu was poised to spread around the world. The <#stdurl http://www.fao.org/ag/againfo/subjects/en/health/diseases-cards/avian_HPAIrisk.html "Fall 2005 migration"#> already spread it to west Asia, the Mideast, Europe and Africa within a few short months. Miraculously, North America has escaped so far. It was <#inc ww2010.weblog.ref e060303 "expected to reach North America before summer,"#> spread by migrating birds traveling from Africa along the Atlantic flyways. However, as far as is known, this hasn't happened. (The reason for the uncertainty in the last sentence is because an infected bird may have reached North America, but died before spreading it, or only spread it to a small group of birds that haven't been discovered.) Making the public service announcement with Jackie Chan is happening at exactly the right time, since the Fall migration will be starting up at the end of August. In the weeks and months that follow, hundreds of millions, perhaps billions of birds will migrate along the various flyways. It's more likely than not that bird flu will reach North America during the coming Fall and Winter season. In the human bird flu cases in Indonesia, it appears all but certain that human to human transmission has been occurring, although such transmission is still very inefficient, requiring physical contact. This human to human transmission has been made possible by mutations in the H5N1 virus itself. =inc ww2010.cf.cf060209 p left The big concern is that further mutations in the virus will permit efficient human to human transmission, such as happens with "ordinary" human flu. In this case, there would a worldwide bird flu pandemic, resulting in tens or hundreds of millions of deaths, and <#inc ww2010.weblog.ref e050825b "a worldwide financial crisis."#> I've been including "bird flu" as one of the items on my little conflict risk graphic because, although it's not a war by itself, it would undoubtedly quickly bring on a world war. Meanwhile, iconoclastic flu researcher Dr. Henry Niman has used his <#stdurl http://www.recombinomics.com/whats_new.html "Recombinomics web site"#> to document cases of human to human transmission and mutations in the virus. Those who wish to follow the progress of the spread of bird flu should check out that web site. Mainstream researchers disagree on when a worldwide bird flu epidemic is coming, but all agree that it's overdue, and could come at any time -- next week, next month, next year or thereafter. The time can't be predicted, but once it begins, it will spread around the world fairly quickly. As I've said before, you and your family should prepare immediately for a possible pandemic. If human to human transmission became public next week on Monday, then by Tuesday all the shelves in grocery stores would be bare. If you stock up on food now, then you'll be sure to have what you need. Even if you think that you can beat the crowds to the grocery store, you should still stock up in advance. If you get your canned food after the panic begins, then you're depriving somebody else of food. But if you stock up in advance, then the shelves will be restocked, and you won't deprive someone else of food. I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e060814 Mahmoud Ahmadinejad is a very charismatic leader =data ww2010.weblog.y2006.e060814.head Iranian President Mahmoud Ahmadinejad is a very charismatic leader =data ww2010.weblog.y2006.e060814.keys Israel, Lebanon =data ww2010.weblog.y2006.e060814.loc ww2010.weblog.log0608 =data ww2010.weblog.y2006.e060814.date 14-Aug-06 =data ww2010.weblog.y2006.e060814.txt1 In his 60 Minutes interview, he was witty, charming, confident and deadly. =data ww2010.weblog.y2006.e060814.txt2 <#inc ww2010.pic ahmad4.jpg right "" "Mahmoud Ahmadinejad on 60 Minutes, 13-Aug-2006 (Source: CBS)"#> <#stdurl http://www.cbsnews.com/stories/2006/08/09/60minutes/printable1879867.shtml "Mike Wallace joked with Iranian President Mahmoud Ahmadinejad,"#> complimented him, sucked up to him -- all to get him to answer as many questions as possible. Ahmadinejad didn't fall for any of it. He accepted the compliments as if he obviously deserved them, he ducked the suck-ups, he was forceful when he wanted to be forceful, and evasive when he wanted to be evasive. He totally charmed Wallace and the audience. Even speaking through an interpreter, he easily controlled the interview. I've previously <#inc ww2010.weblog.ref e060111 "compared Ahmadinejad to President John F. Kennedy."#> Kennedy took office in 1960, one generation past World War II, as a young, charismatic leader of a new generation, with to lead with a new vision for America. Ahmadinejad is the same, one generation past the genocidal Iran/Iraq crisis war of the 1980s. But Ahmadinejad's vision, of course, is to "wipe Israel off the map," and displace America as the leading superpower in the entire Mideast. Ahmadinejad was at his most deadly when he gave the answer to the question of why he wanted to wipe Israel off the map. He says that the state of Israel was created because of alleged atrocities (the Holocaust) that Jews suffered in Europe. <#inc ww2010.pic ahmad4b.jpg left "" "Mahmoud Ahmadinejad on 60 Minutes, 13-Aug-2006 (Source: CBS)"#> "Well, if an atrocity was committed in Germany or Europe for that matter, why should the Palestinians answer for this?" he said. "They had no role to play in this. Why on the pretext of the Holocaust they have occupied Palestine? Millions of people have been made refugees. Thousands of people to-date have been killed, sir. Thousands of people have been put in prison. Well, at the very moment, a great war is raging because of that." Wallace was clearly nettled by this response, as he asked Ahmadinejad to keep his answers concise. What a feeble response. The fact is that this a very powerful argument: Why should Palestinians suffer, become refugees and be killed because of something that happened in Europe? This argument can be answered by explaining what happened in Palestine in the 1800s and 1900s, and explaining how and why Palestine was partitioned in 1948, creating the state of Israel. But that means that there's no answer to the argument. If you have to answer that argument with a 15 minute history lesson, then you've automatically lost the argument. At the end of Ahmadinejad's answer given above, he says, "Well, at the very moment, a great war is raging because of that." He's referring, of course, to the Lebanese war, going on at this time. The ceasefire is scheduled to go into effect at 1 am Eastern time. As I'm writing this article, on Sunday evening, nobody knows whether there really will be a ceasefire in a couple of hours, and if there is, how long it will hold. For most of you readers, by the time that you read this, you'll know the answer, but I don't at this time. Both the Israeli and Hizbollah fighters have been firing artillery and rockets at each other. Both sides have escalated the fight in the last hours in order to gain as good a position as possible when/if the ceasefire takes place. One part of the U.N. ceasefire resolution already seems doomed. A <#stdurl http://www.alertnet.org/thenews/newsdesk/L1379947.htm "Lebanese cabinet meeting was postponed on Sunday"#> because Hizbollah refused to agree to disarming. Unless Hizbollah's leaders change their minds (and why should they?), it will not be possible for the Lebanese army to move into the buffer zone. This brings us back to Ahmadinejad and Iran. CNN is reporting that Iran has been giving $300 million per year to Hizbollah, though Iran claims that any money given is for social services, not weapons. Whatever the military outcome of the Lebanese war, it's clear that the Ahmadinejad is clearly and indisputably the public relations winner, at least so far. But Ahmadinejad clearly failed in one thing, at least so far: He had hoped to provoke the Palestinians in joining Hizbollah in the fight against Israel, but failed to do so. True, the Palestinians are cheering Hizbollah and Ahmadinejad for standing up the Israelis, but that's all they're doing -- cheering. They're not fighting. That's because they want Hizbollah to do well, but not too well. The (Sunni) Arabs in general, and the Palestinians in particular, do not want (Shiite) Hizbollah and Iran to have too big a victory. As I indicated before, in <#hreftext ww2010.i.060724hizbollah "my lengthy analysis of the Lebanese war,"#> from the point of view of Generational Dynamics, the single most important thing to be watching for is changes in attitudes and behaviors of the Palestinian people. Without the Palestinians' involvement, the Lebanese war really does have no point, even for Iran. Iran, Ahmadinejad and Hizbollah have only objective -- wiping Israel off the map -- and they need the Palestinians to do that. By failing to provoke the Palestinians to war, Ahmadinejad failed in his major objective. But the day is still young. A war between Jews and Arabs is coming, with absolutely certainty, for reasons that I've <#hreftext ww2010.i.may01 "explained many times since 2003."#> In order to motivate a war, politicians have to provide a justification to the people. And now we have a good idea what that justification will be: Why should Palestinians suffer, become refugees and be killed because of something that happened in Europe? =eod =// &&2 e060813 UN Security Council declares Lebanon peace while war expands =data ww2010.weblog.y2006.e060813.head UN Security Council declares Lebanon peace while war expands =data ww2010.weblog.y2006.e060813.keys Israel, Lebanon =data ww2010.weblog.y2006.e060813.loc ww2010.weblog.log0608 =data ww2010.weblog.y2006.e060813.date 13-Aug-06 =data ww2010.weblog.y2006.e060813.txt1 Israel, Lebanon and Hizbollah have promised to end the war on Monday. =data ww2010.weblog.y2006.e060813.txt2 It's a strange world when everyone celebrates a ceasefire, and the war gets worse than ever. But that's what's been happening since Friday evening, when <#stdurl http://www.un.org/apps/news/story.asp?NewsID=19492&Cr=leban&Cr1= "the United Nations Security council resolution was adopted unanimously."#> Immediately afterwards, <#stdurl http://www.timesonline.co.uk/article/0,,2089-2310646,00.html "Israel substantially expanded its military assault,"#> tripling its ground forces in Lebanon to as many as 30,000, and increased the rate of air strikes. During the day Saturday, Israel, Lebanon and Hizbollah all reluctantly agreed to abide by the ceasefire, which is to take effect on Monday morning at 1 am, New York time. Israel's intention in expanding its military assault was to get as much accomplished by Sunday evening as possible, before the ceasefire took effect, and to control as much territory in southern Lebanon as possible. Here are the key points of <#stdurl http://news.bbc.co.uk/1/hi/world/middle_east/4785963.stm "the U.N. Security Council resolution:"#>

Hizbollah must immediately stop raining missiles on Israel.
Israel must immediately end offensive military operations in Lebanon. This means that Israel reserves the right to continue "defensive" military operations if Hizbollah fires more missiles on Israel. Lebanon and the Arab League had wanted the resolution to require Israel to immediately withdraw all forces from southern Lebanon, but Israel refused, and also increased the tempo of air strikes on Lebanon infrastructure to make the point that the air strikes will continue if the Arabs continue to insist on this position.
The United Nations will provide 15,000 peacekeepers to enforce the ceasefire. This is the creation of the "buffer zone" that <#inc ww2010.weblog.ref e060805 "I wrote about a few days ago."#> At that time, the plan was that the U.N. forces would be led by the French, though I expressed the view that the French would do all they could do avoid that. At any rate, the makeup of the U.N. peacekeeper force has now been left open, and the resolution requires that a decision be made within 30 days. Incidentally, Hizbollah was opposed to this clause, but received pressure from all sides to give in.
In addition, the Lebanese army will deploy 15,000 troops to southern Lebanon, for a total of 30,000 troops in the buffer zone. Israel believes that the Lebanese army really supports Hizbollah, and doesn't trust it.
Israel will withdraw troops as the U.N. international force is deployed. Lebanon, Hizbollah and the Arab League are furious about waiting so long, but it's the only condition under which Israel would agree to a ceasefire.

As I indicated before, in <#hreftext ww2010.i.060724hizbollah "my analysis of the Lebanese war,"#> from the point of view of Generational Dynamics, the two belligerents have been using sharply contrasting styles in the war. Israel has been fighting in a "hot" crisis war style, furiously bombing infrastructure, calling up new reserves every day, confronting Hizbollah terrorists on their own soil, and now feeling very anxious about the U.N. peace deal. Iran/Hizbollah terrorists have been fighting in a "cool" non-crisis war style, planning for six years, launching missiles from the comfort of home, manipulating and drawing in Israel, forcing them to kill civilians, and now methodically using the U.N. deal as a pawn to advance its longer-term strategy. Either style might win, as I discussed in <#inc ww2010.weblog.ref e060803 "contrasting this war to the burgeoning civil war in Sri Lanka."#> Many commentators have been claiming that Hizbollah has been winning the war, simply by surviving Israel's assault. In fact, <#stdurl http://news.bbc.co.uk/1/hi/world/middle_east/4784801.stm "a recent poll conducted in Israel"#> indicates that Israelis still strongly support the war, but are questioning the conduct of the war. On the other hand, Israel itself has claimed that it's struck massive blows to Hizbollah. It will be VERY interesting to see how all of this rolls out in the next week. There's only one thing we can be absolutely certain of: This ceasefire won't last. =eod =// &&2 e060810 Sophisticated plot to blow up 9 aircraft may be related to July 7 =data ww2010.weblog.y2006.e060810.head Sophisticated plot to blow up 9 aircraft may be related to July 7, 2005, London subway bombings =data ww2010.weblog.y2006.e060810.keys =data ww2010.weblog.y2006.e060810.loc ww2010.weblog.log0608 =data ww2010.weblog.y2006.e060810.date 10-Aug-06 =data ww2010.weblog.y2006.e060810.txt1 First reports indicate that suspected perpetrators are =data ww2010.weblog.y2006.e060810.txt2 <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aNtKKb8rRstc&refer=home "believed to be British citizens of Pakistani origin, linked to al-Qaeda."#> If the Pakistani origin is confirmed, it would hardly be a surprise, in view of what's come out in <#inc ww2010.weblog.ref e050715 "investigations following the July 7, 2005, London subway bombings."#> There's a <#inc ww2010.weblog.ref e060707b "clear generation gap among Muslims in London."#> Many young Muslims, British citizens born of immigrants from Pakistan and other Muslim countries, grow up in the same homes as their parents, but in a completely different world nonetheless. To them, the British are responsible for the London subway bombings, because they're also responsible for the suffering of Muslim Palestinians, Muslims in Kashmir, and suffering Muslims elsewhere in the world. These young teen Muslims are taught these concepts in classes associated with London mosques. Kashmir is of particular importance to Pakistani immigrants, since the Kashmir region is disputed by (mostly Muslim) Pakistan and (mostly Hindu) India. The London subway bombings were a shock to everyone, but no more so than to the people living in the same neighborhood of the bombers. One Muslim man told CNN that he was worried about the attitudes of his own children. "The bombers were just like us. And if they're just us, then more of them could be anywhere, couldn't they?" However, teaching ideology isn't enough, as training is required. The four London subway bombers had recently visited Pakistan and received training from al-Qaeda. The new terrorist plot is extremely sophisticated, and obviously required a great deal of training. Based on information that Scotland Yard has released so far, the plot would blow up 9 planes in three waves, as follows: The suicide bombers would carry explosive liquids in soda bottles on to planes traveling from England to America. Three aircraft would explode nearly simultaneously in midair, and the wreckage would fall into the ocean, where the source of the explosives could not be identified. Then, a few days later, when things have calmed down, they would launch a second attack, and then perhaps a third attack a few days later. Such a sophisticated attack would have required a fair amount of training and coordination. As details of the investigation come out, it will be of interest to see where the would-be bombers received both ideological and terrorist training. From the point of view of Generational Dynamics, this incident provides further opportunity to investigate the dynamics that lead to terrorist acts and to crisis war. By studying the stories behind terrorist acts of the last few years, as well as historical acts such as the development of anti-Jewish attitudes in 1930s Germany, we're developing what I call the "Hero / Parent / Prophet" model. In brief, it works as follows: There's a group of "Prophets" that teenagers listen to; these are usually (but not always) elders, and they might be government officials, religious clerics, or even media personalities (like Jon Stewart of Comedy Central's Daily Show). Each of these prophets presents a different political philosophy to teenagers. Groups of teens select from among these alternative Prophet political philosophies in the same way that they might select a rock star or fashion item. Rebellious groups select political philosophies that provide for action against society, and the most extreme of these rebellious groups select political philosophies that call for terrorist acts and suicide bombings. These rebellious teen groups become "Heroes" by altruistic suicide (killing themselves for the good of the greater community). Do their parents have any influence? Yes, but in an unexpected manner: In a formula described by Hannah Arendt, they become Heroes by adopting "the attitudes and convictions of the bourgeoisie, cleansed of hypocrisy." The development of this "Hero / Parent / Prophet" model is ongoing, but unfortunately the only person in the world working on it is yours truly. Anyone who has done or would like to do research in this area is invited to contact me. =eod =// &&2 e060805 Will there REALLY be French troops separating Israeli and Hizbollah forces? =data ww2010.weblog.y2006.e060805.head Will there REALLY be French troops separating Israeli and Hizbollah forces? =data ww2010.weblog.y2006.e060805.keys Palestine, Lebanon, Israel, Sri Lanka, Darfur =data ww2010.weblog.y2006.e060805.loc ww2010.weblog.log0608 =data ww2010.weblog.y2006.e060805.date 5-Aug-06 =data ww2010.weblog.y2006.e060805.txt1 Stranger things have happened, but I'll believe this only when I see it. =data ww2010.weblog.y2006.e060805.txt2 Israel's continued destruction of Lebanon's buildings, bridges and highways, and the mounting civilian deaths, have horrified people around the world. <#inc ww2010.pic g060804.jpg right "" "Tens of thousands of Shiites have pro-Hizbollah riots in Bagdad, Iraq (Source: CNN)"#> Jordan's King Abdullah says that the Arab world has been so polarized that even if Hizbollah is destroyed, <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2006/08/03/AR2006080301033.html "another similar group would pop up immediately."#> On the other side, a daily rainstorm of hundreds of Hizbollah missiles have terrified millions of anxious Israelis, and displaced then from their homes or forced them to live in bomb proof shelters for three weeks so far. Increasingly furious Israelis have believe that their country is fighting or its existence, as Hizbollah's main arms supplier, Iranian president Mahmoud Ahmadinejad, attending a summit of Muslim nations in Malaysia, <#stdurl http://english.aljazeera.net/NR/exeres/4CC21D25-66EA-45BC-B627-168C47D936CF.htm "said, "The real cure for the conflict is the elimination of the Zionist regime.""#> Both sides are escalating. Hizbollah's missiles have increased in power and volume, and Israel's air strikes have destroyed more of Lebanon's infrastructure. So what's the solution? Actually, everyone agrees on the solution: Move thousands of international troops into a buffer zone separating Hizbollah and Israeli troops, and have those troops enforce a peace between the two sides. And everyone agrees that this has to be a tougher force than the U.N. force that's been in place since 1978 -- those people are just "peacekeepers," but they're just sitting around now dodging missiles, since there's no peace to be kept. This time the international forces have to be more than peacekeepers: they have to be peacemakers. Fortunately, everyone seems to agree that American troops shouldn't be part of the international force. Normally, the unctuous U.N. diplomats like to demand that America solve every world problem, so that they (the diplomats) can sit back and criticize everything America does. But this time everyone agrees that isn't an option. America is already fully committed in Iraq, and American troops would be considered to be too "pro-Israel" to be suitable. So what's really hilarious is that it's France, the country with the most unctuous diplomats of all, that's being cornered into leading the international troops, mainly because of the close relationship that the French have had with Lebanon in the past. And the American diplomats -- U.N. representative John Bolton and Secretary of State Condi Rice -- have been really sticking it to the French by saying repeatedly that they expect to have a complete agreement within "days, not weeks." Needless to say, the French are sweating, and are doing their best to squirm out of this. The argument is that you have to have a ceasefire before you can send the international troops in, which is the usual way of doing such things. But the Israelis won't agree to this, because they claim that Hizbollah will use the ceasefire as an opportunity to be re-armed by Hizbollah. Israelis have agreed to this type of compromise before, but they're less likely to do so now because they're in a generational crisis period, which means that they're much less willing to compromise and contain problems than they were before. This is supported by the fact that polls show that over 80% of Israelis fully support the IDF (Israeli Defense Forces) actions, and don't want any ceasefire. In fact, from the point of view of Generational Dynamics, we're seeing a two enemies fighting two different wars with each other:

Lebanon is in a generational awakening era, so Hizbollah is <#inc ww2010.weblog.ref e060803 "fighting a non-crisis war."#> Hizbollah has planned for this war for six years, and is fighting it very methodically but without a lot of energy. Hizbollah's Hassan Nasrallah is willing to agree to a ceasefire because he can methodically work it into Hizbollah's strategy.
Israel is in a generational crisis era, so Israel is fighting a crisis war. Israel also planned for this war, but is fighting it very energetically and passionately, sending thousands of its soldiers into Lebanon to face Hizbollah. A ceasefire would be very frustrating for Israel, since it would break their energy.

The Israelis are claiming that they're systematically destroying Hizbollah, and pundits with knowledge of the Israeli strategy are saying that they'll be able to destroy enough of Hizbollah so they can agree to a ceasefire within a couple of weeks. On the other hand, Hizbollah's Hassan Nasrallah is claiming that Israel has not affected Hizbollah's capability at all. To prove it, the number of missiles per day landing in northern Israel has doubled in the last couple of days. So for the purpose of doing Generational Dynamics research, watching the Lebanon war is very instructive. We should know within a few weeks which was more successful: The passionate crisis war strategy, or the methodical non-crisis war strategy. No matter how it turns out, I'll believe French troops will head to Lebanon when I see it. =eod =// &&2 e060803 While world watches Lebanon, Sri Lanka goes to war =data ww2010.weblog.y2006.e060803.head While world watches Lebanon, Sri Lanka goes to war =data ww2010.weblog.y2006.e060803.keys Palestine, Lebanon, Israel, Sri Lanka, Darfur =data ww2010.weblog.y2006.e060803.loc ww2010.weblog.log0608 =data ww2010.weblog.y2006.e060803.date 3-Aug-06 =data ww2010.weblog.y2006.e060803.txt1 Tamil Tiger rebels have engaged Sri Lanka government forces in heavy fighting =data ww2010.weblog.y2006.e060803.txt2 for 9 days now, with dozens of casualties, mostly civilian. <#inc ww2010.pic india5.gif right "" "Indian subcontinent, with the island of Sri Lanka off the southern tip of India."#> The major feature of the current hostilities is that the <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2006-08-03T025031Z_01_SP137843_RTRUKOC_0_UK-SRILANKA.xml "Tamil rebels have closed a sluice gate that provides water to 50,000 people."#> The Sri Lanka army has advanced to take control of the sluice gate, leading to the recent fighting. There's supposedly a peace agreement, signed in 2002, but a rebel leader has declared it to be void. However, the Sri Lanka government says that the agreement is still in force. From the point of view of Generational Dynamics research, I've discussed three wars on this web site that are crisis wars or near-crisis wars. Crisis wars are the worst wars that a society can endure. These wars are so bad and so genocidal that, when they end, the survivors decide to do everything possible to prevent their children or grandchildren from ever having to go through such a horrible experience. About 55-60 years later, when the generation of people who survived that war all disappear (retire or die), all at once, leaving behind the increasingly confrontational and risk-seeking generations born after the war, a new crisis war begins. Generally speaking, a civil war is almost always a crisis war. Depending on the society, there may be low-level violence in the society between crisis wars, sometimes taking the form of terrorism. Sometimes, terrorism begins right after the end of a crisis war by factions that are unhappy with the settlement. Or it begins during the chaos of the awakening era and continues in the form of low-level violence for decades, sometimes turning into a non-crisis civil war. Often there's an uneasy "peace" settlement during the unraveling era, because both sides (the terrorists and the government) realize that things are getting very serious, and neither side wants a full-blown crisis war. This sets up an equilibrium that both sides can live with until further generational changes <#hreftext ww2010.i.060717nash "disturb the equilibrium enough to trigger a new crisis war."#> So, all in all, you can have several decades of on and off low-level violence, finally bursting into full scale crisis war. This pattern has been playing out in different places today, and with the upsurge of the Sri Lanka and Lebanon wars, we have an opportunity to study how crisis wars come about.

Darfur war -- civil war in Sudan. The Darfur genocide is a crisis civil war between black non-Arab Muslims in Darfur, (western Sudan) and lighter-skinned Arab Muslim government forces in northern Sudan. The Arab Muslim Janjaweed militias, agents of the Sudan government, have been killing the men and raping the women in Darfur, forcing the displacement of millions of people. =inc ww2010.xr.related2 right darfur 1 lanka 1 (At the suggestion of a web site reader, I've changed the characterization of the two sides from "white Muslim versus black Muslim." Because of centuries of intermarriage, the two sides have become physically similar.) The Darfur conflict began in the 1980s with recurrent low-level violent clashes between Arab militias and village self-defense groups. In April 2004 a peace agreement was signed, but by June it was clear that the peace agreement had failed and that the war was increasing in intensity. At that time there were big get-togethers of high-level officials from the U.N. and from various countries, making official pronouncements that the violence must stop. (This happened shortly after the 10-year commemoration of the 1994 Rwanda genocide. At the commemoration, U.N. Secretary General Kofi Annan promised "Never again." I wrote at the time that <#inc ww2010.weblog.ref e040628 "the U.N. is completely irrelevant to the Darfur genocide,"#> and that it would not be stopped until it's run its course.) A new peace deal was signed in May of 2006 but, as I recently wrote, <#inc ww2010.weblog.ref e060707 "the fighting in Darfur only increased since the peace deal."#> The fighting in Darfur is still characterized by massive slaughter, rape and starvation. The United Nations has done nothing about it, not even officially designating a "genocide," since that would obligate the U.N. to try to stop it. The United States has been alone in designing the Darfur war a genocide. This is a typical example of how crisis wars run. Many such wars were part of World War II, and so you can realize why no parent would ever want his children to have to go through such a war. That's why the Silent Generation, the generation that grew up during WW II, and were the nation's leaders in the 1990s, did everything they could to compromise and contain problems. But today the Silents have mostly disappeared, and the risk-seeking Boomer generation, born after the war, is leading us to a new "clash of civilizations" world war. When I describe the Darfur war to Boomers or Generation-Xers, they automatically assume that it can't happen any more in the "civilized world." They attribute it to something about the tribal nature of Africa or the warlike nature of Muslims. They forget that a similar war happened in white, cosmopolitan Bosnia in the 1990s. (It's worth mentioning again that the Iraqi insurgency is no crisis civil war, and there is <#inc ww2010.weblog.ref e060224 "absolutely no chance whatsoever that it will become one,"#> as I've written many, many times.) Five years ago, there were no crisis wars going on in the world. Today, the Darfur war is in progress, and the Mideast and Sri Lanka wars are approaching full crisis war fury.
Sri Lanka civil war. This war is fought between two ancient races: The Sinhalese (Buddhist) and the Tamils (Hindu). WW II was a crisis war for India and for Ceylon, the former name of Sri Lanka. There was relative peace on the island until 1976, when the Tamils began demanding a separate Tamil state, and formed a separatist group called the Liberation Tigers of Tamil Eelam (LTTE), or just "Tamil Tigers." A non-crisis civil war began in 1983, and the low-level violence continued until a peace treaty was signed in 2002. In the last few months, the peace treaty has been unraveling, and in the last couple of weeks it appears closer to a full-scale crisis civil war.
Mideast War - Lebanon, Palestine, Israel. The Lebanon war between Israel and Hizbollah is quite different from the Sri Lanka situation, as I recently described in <#hreftext ww2010.i.060724hizbollah "my lengthy analysis of this war."#> The war between Israel and Lebanon is not headed for a crisis war, because the Lebanese are in a generational awakening period, not a generational crisis period. That's because only one generation has passed since the Lebanese civil war of the 1980s. This is a very good example of the difference between crisis and non-crisis wars. The Israelis are very aggressive and energetic -- sending thousands of troops into Lebanon, and bombing much of the Lebanese infrastructure. This illustrates the energy with which a crisis war is waged. Hizbollah is not fighting with anything remotely like the same level of energy. They've been planning for this war for six years, and they're prepared with 10-15000 missiles that they launch from their homes. You don't see Hizbollah terrorists pouring into Northern Israel to rape and kill Israelis, which is what they'd be doing if they were in a crisis era. Is a country more likely to win a war in a crisis period or in an awakening period? It can go either way. America lost the Vietnam war in the 1960s-70s -- that was an awakening era war for America and a crisis war for the Vietnamese. On the other hand, when Napoleon invaded Russia in 1812, it was a crisis war for the French, but a non-crisis war for the Russians. Napoleon's army charged into Russia, expecting to meet the Russian army. But the Russians simply retreated from Moscow, and let the French occupy it without opposition. The French army lost discipline and fell apart. These two examples illustrate some of the differences. Crisis wars are more emotional and genocidal, and fought with a great deal of energy; but non-crisis wars are fought more systematically and carefully. Depending on circumstances, either side might win. What I've been watching for in the Mideast is a change in attitude between the Israelis and the Palestinians. I was thinking of this last Sunday during a news report that rioting Palestinians were wrecking the United Nations building in Gaza. The United Nations building? If the Palestinians were developing crisis war fury, they would be wrecking the barrier that the Israelis erected to separate Israel from the Palestinians. So there's still a great deal of restraint being shown on all sides in the Mideast war. That's not to say that people aren't being killed; but it is to say that it's not anywhere near the Darfur war yet, or even anywhere near the Sri Lanka war. Keep your eye on the attitudes that Israelis and Palestinians have for one another; as attitudes continue to exhibit more and more fury, the region will slide into a crisis war.

=inc ww2010.cf.cf060209 p right From the point of view of Generational Dynamics, what's happening today is that there's a "gathering storm" of increasing violence in the world. Darfur is already in a crisis war, and both Sri Lanka and the Mideast are headed in that direction, with 100% certainly. This is to illustrate again the concept of "chaotic attractor," in the sense of Chaos Theory. Political events are random, but in a generational crisis period, political events are "attracted" to war. This has been lucidly illustrated in the Mideast, where hardly a day has gone by in the last 18 months where political events haven't measureably brought the region closer and closer to war. The same thing is happening in Sri Lanka. As I <#hreftext ww2010.i.may01 "predicted in May, 2003, when the "Mideast Roadmap to Peace" came out,"#> the disappearance of Yasser Arafat and Ariel Sharon from the scene has removed the last major generational inhibitions to full-scale war. =eod =// &&2 e060730 Investors cheer at the good news: The economy's sinking. =data ww2010.weblog.y2006.e060730.head Investors cheer at the good news: The economy's sinking. =data ww2010.weblog.y2006.e060730.keys =data ww2010.weblog.y2006.e060730.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060730.date 30-Jul-06 =data ww2010.weblog.y2006.e060730.txt1 The stock market perversely took a big jump on Friday on news that GDP growth was sharply lower. =data ww2010.weblog.y2006.e060730.txt2 The economy <#stdurl http://www.bloomberg.com/apps/news?pid=20601087&sid=aopx6khBpDXI&refer=home "grew at an annual rate of 2.5%"#> in the second quarter, substantially lower than the 3-4% that had been predicted by economists. The downturn is attributed to reduced spending by consumers, resulting from high energy prices and the increasing cost of credit. The <#stdurl http://www.bea.gov/bea/newsrelarchive/2006/gdp206a.htm "Dept. of Commerce report"#> specifically mentions deceleration in exports, and reduced consumer demand for durable goods (especially computers and cars), and a downturn in federal government spending. Also mentioned was a decrease in residential fixed investment. This reflects the end of the housing bubble, and reduced ability of consumers to refinance their homes. Most of these negative factors are likely to continue. The price of credit has been going on and will not go down soon. The price of a barrel of oil in the last few years has gone from the $20s, then the $30s, then the $40s, then the $50s, then the $60s, and now has been over $70 per barrel for the last couple of months. A return to the good ol' days of cheap oil (and energy and gas) does not seem likely to happen. So the factors that contributed to fall in GDP growth are likely to continue, and should continue to have a negative effect on the economy. And yet, exuberant investors saw this as a reason to give the stock market a major boost. Major indexes increased by 1-2%. The DJIA rose 3.2% for the week, the highest weekly gain since November, 2004. Why is bad news for the economy good news for investors? Because bad news for the economy means that is less likely to raise interest rates further, and raising interest rates further might be bad for the economy, so not raising interest rates further would be good for the economy. If you think that doesn't make sense, you're right. Investors aren't thinking anywhere nearly that much. They've learned through experience that when some pundit says that the Fed will continue to raise rates, then the stock market goes down; if the pundit says that the Fed will stop raising rates, then the stock market goes up. If the news changes the next day, then the stock market reverses the next day. We sometimes see the same thing with the price of oil. When oil was in the $40s per barrel, the stock market went up when oil went down, and vice versa. Well, if oil is now over $70 per barrel, then why isn't the stock market a lot lower than when oil was $45 a barrel? On this web site, I frequently complain that no one considers anything important that happened before they were born. But investors are much worse than that -- they can't even remember what happened yesterday. As usual, the question is: What's the real, actual value of a share of stock today, or the stock market as a whole? This is a question that no one ever seems to ask. If you buy a car, then you have an idea in advance what you want to pay. If the price is higher than you expect, then you demand to know why. Well, why don't investors ever demand to know why stock prices are higher? There are two possibilities: Either you believe that stock market prices should be whatever the market determines, or you believe that stocks have "real" values like cars and other tangible goods. The market today is priced at around Dow 11000. Is that the right price? If you believe that stock market prices should be at whatever the market determines, then why not Dow 20000? Dow 50000? Dow 1 million? What's the difference? But if that's true, then of course it could also be Dow 10000, Dow 5000, Dow 1000? In this case, the stock market is no different than roulette wheel. If you believe that the stock market has a "real" value, based on earnings, then there's no question where that computation comes out: <#hreftext ww2010.i.050711eleven "The value of the stock market is around Dow 4500."#> The stock market today is overpriced by more than 200%, same as in 1929. Either way, the stock market is overdue for a huge fall. From the point of view of Generational Dynamics, we're been predicting since 2002 that the stock market would fall to the Dow 3000-4000 range. The fact that it will fall below 4500 is based on <#inc ww2010.weblog.ref e060122 "the law of "Mean Reversion.""#> We're still on the path for an early stock market crash, as I described in my <#hreftext ww2010.i.060530panic "May 30 essay, "Speculations about a stock market panic and crash.""#> Last month, I said that <#inc ww2010.weblog.ref e060615 "there are three possible ways to get off that path."#> None of those conditions have occurred. What we're seeing is that investors are not investing in individual stocks, but in the stock market as a whole, based on ridiculous reasoning like: If GDP growth is down, then the Fed won't raise interest rates, so it's time to buy. A stock market panic could occur tomorrow, next week, next year, or thereafter, but right now it still looks like a 50-50 chance that it will occur in the next few months, before the end of this year. =eod =// &&2 e060728 International concern over China's "overheating" economy =data ww2010.weblog.y2006.e060728.head International concern is growing over China's "overheating" economy =data ww2010.weblog.y2006.e060728.keys Cina =data ww2010.weblog.y2006.e060728.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060728.date 28-Jul-06 =data ww2010.weblog.y2006.e060728.txt1 It was only supposed to grow 8%, but it grew 11.3% in the second quarter. =data ww2010.weblog.y2006.e060728.txt2 In 2004, in <#hreftext ww2010.i.stocks040517 "an article stock market volatility,"#> I mentioned China's economy in passing: "During the last three weeks, the Chinese government has been applying harsh controls to 'cool down' the economy, with the goal of achieving a 'soft landing.' China has been growing at 9% per year for almost 20 years, and international economists have been expressing concern about overheating since early 2003. China appears to be in a generational 'unraveling' period stock market bubble that has to burst at some point, and that a bursting bubble is very hard to control with a 'soft landing.'" Now, two more years have passed, and not only has the Chinese economy not slowed down, it's accelerating even faster. It grew at 10.9% in the first half of 2006, and an even faster 11.3% in the second quarter. Normally, the Chinese don't make any negative comments on the economy, since to do so would be to admit that the Communist Party is not in control. However, things have gotten so bad that <#stdurl http://business.timesonline.co.uk/article/0,,8209-2287582,00.html "Prime Minister Wen Jiabao has publicly stated that the economy needs to be 'rebalanced.'"#> From the point of view of Generational Dynamics, China is going through an economic unraveling that's very similar in many ways to the type of unraveling that America went through in the late 1990s, when crazed investors created an enormous "tech bubble," which finally collapsed with the Nasdaq crash of 2000. But the story doesn't stop there. After the Nasdaq crash, the Fed lowered interest rates to near-zero, causing the tech bubble to <#hreftext ww2010.i.051029bernanke "morph into a general stock market bubble, a credit bubble, a real estate bubble, and a commodity bubble."#> The bubbles might have started collapsing in 2004, when the Fed started raising interest rates again, if it hadn't been for the Chinese economy. China's unraveling era really began in earnest around the same time. For several years, China has been purchasing enormous amounts of American debt (usually in the form of ten-year Treasury bonds), pouring money back into the American economy that could be used to purchase Chinese textiles and other goods. Today, with even <#stdurl http://www.financialexpress-bd.com/index3.asp?cnd=7/25/2006§ion_id=22&newsid=32105&spcl=no "Chinese economists calling economic growth "alarmingly high,""#> China holds an incredible $941.1 billion in US dollar reserves as of the end of June -- soon to be over $1 trillion. As I said, China's been trying to bring about this "soft landing" for four years now, and has failed for four years. Not only is the unraveling not being controlled, it's actually getting worse at an accelerating rate. As I've described many times before, China is becoming increasingly unstable and is <#hreftext ww2010.i.china050116 "approaching a massive civil war as its bubble economy unravels."#> America's economy is also in a precarious situation, because of the astronomically high and exponentially increasing public debt, and because of the <#hreftext ww2010.i.050711eleven "vastly overpriced stock market."#> =inc ww2010.cf.cf060209 p right A financial crisis in either China or America or, for that matter, in Europe or Japan will cause a "domino effect" that will precipitate financial crises around the world, and trigger a civil war in China, which will lead to war crises around the world. Generational Dynamics predicts that we're at a unique time in history, 60 years after the end of World War II, and that we'll soon have a new "clash of civilizations" world war. =eod =// &&2 e060727b Which war came first, Korea or Vietnam? =data ww2010.weblog.y2006.e060727b.head Which war came first, Korea or Vietnam? =data ww2010.weblog.y2006.e060727b.keys Israel, Hizbollah, Lebanon, Nasrallah, vietnam, north korea, south korea =data ww2010.weblog.y2006.e060727b.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060727b.date 27-Jul-06 =data ww2010.weblog.y2006.e060727b.txt1 This is the kind of question that today's journalists typically need help with, =data ww2010.weblog.y2006.e060727b.txt2 if we're to judge by an article about <#stdurl http://www.usatoday.com/life/columnist/mediamix/2006-07-24-media-mix_x.htm "NPR's 90-year-old senior news analyst Daniel Schorr."#> According to the article, it's not unusual for NPR producers to ask Schorr, on deadline, "Which war came first, Korea or Vietnam?", not having even a clue that the Korean war was in the 1950s, while the Vietnam war was in the 1960s-70s. Or to ask Schorr, "You covered the Spanish-American War, didn't you?" not realizing that even a 90-year-old couldn't have covered an 1898 war. To someone in my (Boomer) generation, for someone who receives a salary to write or report the news not to even know in what order the Korean and Vietnam war occurred is incredible. Don't you need to know stuff like that to graduate from high school? Perhaps it's true that this isn't a REALLY important question, like whether Elvis or the Beatles came first, or how many times Britney Spears has gotten pregnant, but these are WARS for heaven's sake. And the fact that it's NPR producers asking the questions doesn't mean that NPR is worse than the NY Times or USA Today or any other news organization. The fact is that most journalists working journalists today are young enough to have no personal knowledge of the Vietnam War. Some of them don't even know anything about the Gulf War. Here's a quiz. For each of the following American wars, listed in alphabetical order, tell when it happened (approximately), and what the war was about (anything you know):

<#stdurl http://en.wikipedia.org/wiki/United_States_war_in_Afghanistan "Afghanistan War"#>
<#stdurl http://en.wikipedia.org/wiki/American_Civil_War "Civil War"#>
<#stdurl http://en.wikipedia.org/wiki/Cold_war "Cold War"#>
<#stdurl http://en.wikipedia.org/wiki/Great_War "Great War"#>
<#stdurl http://en.wikipedia.org/wiki/Gulf_war "Gulf War"#>
<#stdurl http://en.wikipedia.org/wiki/Iraq_war "Iraq War"#>
<#stdurl http://en.wikipedia.org/wiki/Korean_war "Korean War"#>
<#stdurl http://en.wikipedia.org/wiki/Mexican-American_War "Mexican-American war"#>
<#stdurl http://en.wikipedia.org/wiki/American_revolutionary_war "Revolutionary war"#>
<#stdurl http://en.wikipedia.org/wiki/Spanish-american_war "Spanish-American war"#>
<#stdurl http://en.wikipedia.org/wiki/Vietnam_war "Vietnam War"#>
<#stdurl http://en.wikipedia.org/wiki/War_of_1812 "War of 1812"#>
<#stdurl http://en.wikipedia.org/wiki/War_Between_the_States "War between the states"#>
<#stdurl http://en.wikipedia.org/wiki/American_Civil_War "War of Southern Liberation"#>
<#stdurl http://en.wikipedia.org/wiki/War_of_Northern_Aggression "War of Northern Aggression"#>
<#stdurl http://en.wikipedia.org/wiki/War_on_Terrorism "War on Terrorism"#>
<#stdurl http://en.wikipedia.org/wiki/War_to_end_all_wars "War to end all wars"#>
<#stdurl http://en.wikipedia.org/wiki/World_war_i "World War I"#>
<#stdurl http://en.wikipedia.org/wiki/World_war_ii "World War II"#>

Chances are that you'll know something about any war that you actually lived through, so if you're younger than 55, you probably won't know anything about the Korean War. Of the wars that occurred before you were born, there are probably three that you know something about: For World War II, you'll probably know something about Hitler and Pearl Harbor; for the Civil War, you probably know that it was fought between the North and the South and that slavery was an issue; and for the Revolutionary War, you probably know that it was the war of independence from England. There are other wars that you may remember by name, but really know nothing about; the Vietnam War and World War I are in that category. You may also have been able to guess when the War of 1812 took place. And did you get the trick questions? In two different cases, the above list contains three different names for the same war. From the point of view of Generational Dynamics, there are good reasons for this. We frequently talk about "crisis wars" on this web site. These are the worst kinds of wars, the genocidal wars, If you want recent examples of crisis wars, think of the Darfur genocide going on today or the Rwanda civil war of 1994 or the Bosnian war of the 1990s. These were crisis wars for other countries, though not for America. America has been in two crisis wars since the Revolutionary War that founded it: The Civil War, in which Northern General Sherman marched through the South, and conducted the world's first "scorched earth" war campaign, burning all buildings and crops to the ground; and World War II, in which we firebombed Dresden and Tokyo, killing millions of civilians, and dropped nuclear weapons on two other Japanese cities. (I'm not blaming America for this, only stating that it occurred.) This brings me back to the quiz: Chances are that the only wars you know anything about are the crisis wars. Non-crisis wars tend to become forgotten or near-forgotten very quickly -- within a decade or two of when they occur. But crisis wars are remembered for much longer periods, often centuries. These are wars that make cataclysmic changes to history. Incidentally, if you're Mexican, they you probably know something about the Mexican-American War. That's because the Mexican-American war was a crisis war for Mexico, though not for America. Similarly, World War I was a crisis war for Russia (through the Bolshevik Revolution), but not for America. Now we're headed for another war, a "clash of civilizations" world war that will make cataclysmic changes to history. We can see that war gathering steam today in Lebanon, Iraq and Afghanistan. We call already see terror groups (like al-Qaeda and Hizbollah) and their sponsors (Iran, China, North Korea) begin to exhibit genocidal fury, including a wanton disregard for the lives of civilians, and a willingness to target and kill women and children in brutal, humiliating ways as a war tactic. And we can also see Israel, <#hreftext ww2010.i.060724hizbollah "desperately fighting an "existential war,""#> beginning to show increasing signs of the same "crisis era fury": destroying civilian infrastructure, but still careful to harm as few civilians as possible. The turning point will be some kind of trigger -- a chaotic event of some kind that will infuriate either the Israelis or the Palestinians, triggering an Israeli-Palestinian crisis war. It might be something explosive (think of bombing Pearl Harbor) or it might be something extremely humiliating (think of the Bataan death march of World War II). Soon these regional wars in Lebanon, Iraq and Afghanistan will spread to other regions. The reason that this is happening is because three generations have passed since the end of World War II, and all the people who remember how horrible that war was are disappearing rapidly and are almost gone. That's the mechanism by which Generational Dynamics works. People don't remember non-crisis wars that happened before they were born. But people also don't remember the crisis wars that happened before they were born. All they remember is a series of sound bytes, like, "The Civil War was started because Abraham Lincoln wanted to free the slaves," which is completely untrue. Even when people remember a crisis war, they don't remember the horror and anxiety of it. What's happening in the world today is both exciting and horrific. It's exciting because we all get to see, first hand, how a crisis war builds -- the anxieties and self-doubts, the rising outrage and fury -- and we can see it build step by step. It's thrilling to see how we're witnesses to what is the greatest event world history. And it's most thrilling for you, dear reader, because this web site tells you what's going on in a way that no other web site in the world does. And it's horrific because of the consequences it will mean for all of us. It would be nice if today's journalists knew enough history to know that the Korean War came before the Vietnam War, but Generational Dynamics tells us that people never know much of anything that happened before they were born, and that's why "clash of civilization" crisis wars are still necessary. =eod =// &&2 e060727 Lebanon: Storm over airstrikes on UN observer post has a darker side =data ww2010.weblog.y2006.e060727.head Lebanon: Storm over airstrikes on UN observer post has a darker side =data ww2010.weblog.y2006.e060727.keys Israel, Hizbollah, Lebanon, Nasrallah =data ww2010.weblog.y2006.e060727.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060727.date 27-Jul-06 =data ww2010.weblog.y2006.e060727.txt1 The presence of Chinese observers was previously unreported. What are they doing there? =data ww2010.weblog.y2006.e060727.txt2 UN secretary general Kofi Annan and Israel <#stdurl http://www.guardian.co.uk/israel/Story/0,,1831067,00.html "swapped bitter accusations on Wednesday,"#> following the killing of four international observers by Israeli airstrikes. The observers were from China, Austria, Finland and Canada. Kofi Annan condemned the "apparently deliberate targeting" of the UN observer post by Israel, and defended this choice of words by the fact that the UN had made several requests to stop bombing in the area. Israel expressed "deep regret," but condemned Annan's implication that the Israelis killed the UN observers purposely. There will be an investigation. However, <#stdurl http://www.debka.org/article.php?aid=1191 "an analysis by Debka"#> points out that the presence of Chinese observers has never previously been reported, and it's likely that they're "observing" as spies. "Our intelligence experts compare the incident to the inadvertent US bombardment which destroyed the Chinese embassy in Belgrade in 1998," killing a number of Chinese 'diplomats,'" according to the analysis. "It was discovered that from that building the Chinese had operated sophisticated surveillance to track the performance of American warplanes, missiles and smart bombs." We'll have to wait and see if any sophisticated Chinese spy equipment is found in the ruins of the UN outpost. =eod =// &&2 e060726 Lebanon war escalates =data ww2010.weblog.y2006.e060726.head Lebanon war escalates as UN officials are killed and Nasrallah threatens deeper strikes in Israel =data ww2010.weblog.y2006.e060726.keys Israel, Hizbollah, Lebanon, Nasrallah =data ww2010.weblog.y2006.e060726.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060726.date 26-Jul-06 =data ww2010.weblog.y2006.e060726.txt1 Kofi Annan accused of Israel of "apparent deliberate targeting" of a lookout post =data ww2010.weblog.y2006.e060726.txt2 in southern Lebanon where UN officials were stationed. Four UN observers were killed. As I concluded in the <#hreftext ww2010.i.060724hizbollah "the lengthy analysis of the Israel-Lebanon war"#> that I posted yesterday, the best scenario that can be hoped for is a stopgap return to an equilibrium, but an equilibrium that will continue to degrade into full-scale war. The events of the last 24 hours are exactly on that path. United Nations Secretary General <#stdurl http://www.alertnet.org/thenews/newsdesk/L25624223.htm "Kofi Annan accused Israel of "apparently deliberate targeting""#> the post. "This coordinated artillery and aerial attack on a long established and clearly marked U.N. post at Khiam occurred despite personal assurances given to me by Prime Minister Ehud Olmert," Annan said. But Israeli officials called Annan's accusations outrageous and demanded an apology. They promised a thorough investigation. =inc ww2010.mappic israel.gif right "" Israel Almost simultaneously with these events, Hizbollah leader Sayyed Hassan <#stdurl http://www.ynetnews.com/articles/0,7340,L-3281439,00.html "Nasrallah defiantly promised deeper missile attacks of Israeli civilians."#> It appears that Nasrallah is threatening to target the densely populated city of Jerusalem. Beyond the atrocity of the killing of UN observers, even the accidental deaths of the UN observers is a public relations disaster for Israel, but good ol' Nasrallah's speech, confidently promising to target and kill even more Israeli civilians, continues to make Israel into a public relations victim. This makes it impossible for the world community to pressure Israel to accept a ceasefire, and so risks further escalation. If Hizbollah does indeed land a missile, killing civilians in Tel Aviv, the level of fury among the Israeli people is liable to rise even further, raising the stakes in the confrontation between Hizbollah and Israel. The level of fury is also rising among Arabs, according to Saudi King Abdullah. "If the option of peace fails as a result of Israeli arrogance, then the only option remaining will be war, and God alone knows what the region would witness in a conflict that would spare no one," <#stdurl http://english.aljazeera.net/NR/exeres/9676C64C-CC57-4F37-BE72-737AF52D34E0.htm "said Saudi King Abdullah."#> "It must be said that patience can't last forever, and if the brutal Israeli military continues to kill and destroy, no one can foresee what may happen." A worried international community is scrambling to find a solution, by means of <#stdurl http://www.iht.com/articles/2006/07/25/news/diplo.php "an international conference to be held in Rome"#> starting today. The plan is to put together an international force that will guard the border and separate Hizbollah from the Israelis. They'll be desperately trying to <#hreftext ww2010.i.060717nash "restore the "Nash equilibrium""#> that so far has prevented a world war. As <#hreftext ww2010.i.060724hizbollah "I wrote yesterday,"#> there isn't a snowflake's chance in hell that Iran and Hizbollah will allow this for long, or at all. Iran has already invested in hundreds of millions of dollars in Hizbollah, whose sole purpose is to play a role in "wiping Israel off the map." Meanwhile, let's not forget that the confrontation with the Palestinians continues as before. On Wednesday, <#stdurl http://www.jpost.com/servlet/Satellite?cid=1153291998039&pagename=JPost%2FJPArticle%2FShowFull "50 tanks moved into northern Gaza"#> while the air force carried out three air strikes, killing or wounding several Hamas operatives. Palestinian Authority President Mahmoud Abbas, once identified by the world as the great hope to implement the "Roadmap to Peace" with side-by-side Palestinian and Jewish states, is now almost completely irrelevant to the events unfolding in the Mideast. =inc ww2010.cf.cf060209 p left In the year 2000, Israel pulled all its forces out of southern Lebanon. Hizbollah used the six years since then to prepare for war with Israel. In 2005, Israel pulled all its forces out of Gaza, and Hamas used the last year to prepare for war with Israel. Listening to tv pundits the last few days, I've been hearing something new: People are beginning to openly question whether Israel should continue to exist, whether a Jewish state could possibly ever exist peacefully in the midst of so many Muslim states. From the point of view of Generational Dynamics, the Mideast is headed for all-out war between Palestinians and Israelis. Generational Dynamics tells us that the war is coming, but doesn't tell us when. However, as events develop on a day to day basis, it looks like the time isn't too far off any more. As to the question of whether a Jewish state could possibly ever exist peacefully in the midst of so many Muslim states, Generational Dynamics tells us that the region will be at war at regular intervals whether there's a Jewish state or not. =eod =// &&2 e060721b Some random notes on the Mideast crisis =data ww2010.weblog.y2006.e060721b.head Some random notes on the Mideast crisis =data ww2010.weblog.y2006.e060721b.keys Israel, Hizbollah, Lebanon, Nasrallah =data ww2010.weblog.y2006.e060721b.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060721b.date 21-Jul-06 =data ww2010.weblog.y2006.e060721b.txt1 First off, dislodging Hizbollah from the Israeli border is almost impossible. =data ww2010.weblog.y2006.e060721b.txt2 That's just one conclusion I've reached today, listening to the coverage of the Mideast crisis on CNN International, Fox news, and BBC. (Sorry, no MSNBC yesterday.) Here's why:

Hizbollah is part of the Shiite population in southern Lebanon. There's no real distinction between "civilians" and "terrorists."
Hizbollah has been preparing for this war since 2000, ever since Israel voluntarily vacated Southern Lebanon. Hizbollah considered that to be a major victory for suicide bombing. They never saw it as any sort of "give and take" agreement with Israel; they saw it as <#hreftext ww2010.i.oct10 "a total victory over Israel, and a precursor to total destruction of Israel."#>
Hizbollah has spent tens of millions of dollars, provided by Syria and Iran, in building a terrorist infrastructure in Southern Lebanon. This infrastructure includes hardened bunkers where terrorists can hide with their 13,000 missiles.
Hizbollah's entire infrastructure is based on using civilians as human shields. Terrorists can launch rockets into Israel from locations that are surrounded by families with women and children, so an Israeli air force strike would therefore kill women and children.
Israel would like to destroy Hizbollah using only its air force, but every military pundit on tv said that it's impossible. So Israel will have to send ground troops into Lebanon -- for the first time since 2000.
But, to repeat, Hizbollah has been preparing for this since 2000, and they're prepared to inflict many casualties on Israeli ground troops. Even so, at the end, Hizbollah won't be dislodged.
Nonetheless, news reports indicate that <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-5965380,00.html "Israel is preparing for a massive ground invasion,"#> and it may already have started.
U.N. Secretary General Kofi Annan <#stdurl http://www.swissinfo.org/eng/international/ticker/detail/Annan_urges_quick_end_to_Israel_Lebanon_fighting.html?siteSect=143&sid=6911096&cKey=1153412575000 "called for an immediate ceasefire,"#> which is the kind of moronic stuff you expect from Annan, since Hizbollah would ever honor any such commitment.
However, Annan also called for an international military force to enter Southern Lebanon to separate the Israelis from Hizbollah. But, to say it again, Hizbollah has been preparing for this war since 2000, and any international "peacekeeping" force would be even more vulnerable than Israeli ground forces, and would quickly be driven out.
Finally, there's a very big money factor. Hizbollah is a huge organization, with thousands of employees (from building contractors to doctors to terrorists) that have to be paid every week. This money comes from Iran and Syria. Even if Israel managed somehow to make a dent in Hizbollah, the organization would be quickly restored simply because that's where the money is.

All day Thursday, a big topic of discussion was this: What about the Lebanese people outside of Hizbollah? Are they pro-Hizbollah or pro-Israel? The answer appears to be that the country is split on being pro-Hizbollah or anti-Hizbollah, but either way, the people are anti-Israel. The population is increasingly furious at Israel because of the civilian deaths and the destruction of the infrastructure. Things have gotten so bad in Lebanon that the Lebanese defense minister has announced that the <#stdurl http://www.kuna.net.kw/home/Story.aspx?Language=en&DSNO=888758 "Lebanese army will fight with Hizbollah against Israeli forces,"#> if Israel ground forces invade. However, a Lebanese pundit in Beirut told CNN that there's another possibility: If the Lebanese army moves into southern Lebanon to join Hizbollah in the fight against Israel, Lebanese army may end up bringing Hizbollah under control. I can't tell whether that's a realistic hope or wishful thinking, but it's the one thing I heard all day that might bring an end to the fighting. One interesting thing about the discussion of the Lebanon people is that the pundits were discussing all day whether to expect a renewal of the civil war in Lebanon, the civil war that ended in the 1980s. From the point of view of Generational Dynamics, regular readers of this web site know that since only one generation has passed since the 1980s crisis civil war, a new civil war is impossible, for the same reason that a civil war in Iraq is impossible. I've written dozens of times on this web site why a civil war in Iraq is impossible, and I won't repeat the reasons here. In a BBC report on Wednesday, the reporter in Beirut was asked by the London anchor whether he thought that there was a new civil war building. He said that every Lebanese he's spoken to has said that nothing of the sort is happening, which is exactly what Generational Dynamics would predict. Incidentally, since I'm posting "random notes" on the Mideast crisis, let me post a random note on something else. A major situation has been developing in Somalia as the country's government is being overthrown by radical Islamists, turning the country into yet one more stronghold for radical terrorists. Yesterday, the neighboring country <#stdurl http://www.iht.com/articles/ap/2006/07/20/africa/AF_GEN_Somalia.php "Ethiopia, has sent troops into Somalia to oppose the Islamists."#> This is a very dangerous situation, but I simply haven't had time yet to put together an article on it. But readers of this web site should at least be aware of the situation, and keep any eye on it. =eod =// &&2 e060721 Iranian representatives witnessed North Korea's July 4 missile tests =data ww2010.weblog.y2006.e060721.head Iranian representatives witnessed North Korea's July 4 missile tests =data ww2010.weblog.y2006.e060721.keys =data ww2010.weblog.y2006.e060721.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060721.date 21-Jul-06 =data ww2010.weblog.y2006.e060721.txt1 According to Assistant Secretary of State Chris Hill, =data ww2010.weblog.y2006.e060721.txt2 "it is our understanding" that <#stdurl http://www.voanews.com/english/2006-07-20-voa46.cfm "one or two Iranian officials attended the multiple missile tests"#> that North Korea conducted on July 4, after being warned by the international community not to do so. Last week, the U.N. Security Council unanimously approved a resolution condemning North Korea, and demanding an end to nuclear weapons development. As <#inc ww2010.weblog.ref e060719 "I wrote recently,"#> I believe that China voted for this resolution to humiliate North Korea, in retaliation for North Korea's humiliating China by launching the missile tests after being told not to. But the fact that Iranians were present at the missile test, if confirmed, seals the issue that North Korea, China and Iran are working together to plan the results of the "clash of civilizations" world war that's approaching. My reading is that China is going to have some problems keeping the control it wants over its recalcitrant "kids," Iran and North Korea. =eod =// &&2 e060720 Online video available for June 5 TV appearance =data ww2010.weblog.y2006.e060720.head Online video available for June 5 TV appearance =data ww2010.weblog.y2006.e060720.keys Jim Pillsbury =data ww2010.weblog.y2006.e060720.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060720.date 20-Jul-06 =data ww2010.weblog.y2006.e060720.txt1 On June 5, I appeared on Jim Pillsbury "Live", a cable local-access interview show. =data ww2010.weblog.y2006.e060720.txt2 I've just become aware that a video of the show is available online, at the following URL: <#stdurl http://video.google.com/videoplay?docid=-4966781226465200552&q=jim+pillsbury+live #> I was the second of two guests in the one-hour interview show, so my interview starts at 35:29 (35 minutes, 29 seconds). The interview took place prior to the recent Mideast crisis, and most of the discussion was about Iran and the antiwar movement. I'm scheduled to appear on the Jim Pillsbury show again on Monday, July 24, to talk about Lebanon, Israel and the Mideast crisis. I'll post a notice when the video becomes available online. If you live in Eastern Massachusetts, you can watch the show on most cable systems. The show times schedule is at: <#stdurl http://www.jimpillsbury.org/show-times.html#> =eod =// &&2 e060719 Why did China agree to U.N. resolution on North Korea? =data ww2010.weblog.y2006.e060719.head Why did China agree to join a U.N. Security Council resolution condemning North Korea? =data ww2010.weblog.y2006.e060719.keys Israel, Hizbollah, Lebanon, Nasrallah =data ww2010.weblog.y2006.e060719.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060719.date 19-Jul-06 =data ww2010.weblog.y2006.e060719.txt1 Henry Kissinger has one theory, but mine is quite different. =data ww2010.weblog.y2006.e060719.txt2 Much to many people's surprise, on Saturday <#stdurl http://english.donga.com/srv/service.php3?bicode=060000&biid=2006071774688 "the U.N. Security Council voted unanimously to condemn North Korea"#> for continuing to develop nuclear weapons. The big surprise was that China voted to go along with the resolution. The Chinese had frequently said that they opposed any Security Council resolution, and indicated that they would veto any such resolution. Even though the final resolution was watered down from what the U.S. and Europe originally wanted, this is nonetheless being considered a major victory for the U.N., and an indication that the nuclear proliferation issue is on its way to a solution. <#inc ww2010.pic kiscnn1b.jpg right "" "Henry Kissinger"#> One of the strongest such statements was provided by Henry Kissinger on Monday, when he was interviewed on CNN's "Lou Dobbs Tonight" program. Here's an excerpt:

" Dobbs: US policy seems to be ad hoc, disjointed, against what is a global effort on the part of the radical Islamist terrorists to take on new targets. Is that an incorrect perception? Kissinger: I look at the events of this week, painful as they are, as a kind of a turning point. We have the UN resolution on Korea. And I think that should be a landmark on the road to bringing the Korean issue to some conclusion. We've been negotiating now for two years - now we have a unanimous United Nations resolution on the the missile issue. The missile issue is only the tip of the iceberg. What we really have to deal with is the nuclear issue. It seems to me that the nations involved in the negotiation now have to face he choice of whether they want to demonstrate their impotence, and demonstrate that we're living in a lawless world. The same would apply to Iran. Everyone is arguing which kind of sanctions we should have. But the fact of the matter is that six nations have said, "There should be no enrichment." If the enrichment issue is not resolved in a reasonable time, what is the conclusion the world can draw? Dobbs: Is there, in your judgment, an intelligent, well-centered -- and by centered I mean an expression of concern about us interests -- in our geopolitical policy globally - because these events seem disjointed but they seem united, except for the case of North Korea, by radical Islamist terrorist. Kissinger: There has never been a period in history in which so many changes have been were taking place simultaneously, and it's not easy to form an overriding geopolitical concept. I think we've done well getting the Iranian negotiation to this point, in which we've united the six countries. We've got the Korean negotiation to that point -- this I consider a good design. Now the question is - can we go from here to the next step - which is to implement the design, and that is going to be the tough decision."

Henry Kissinger is considered by many -- myself included -- to be one of the greatest minds on geopolitical policy in the world. His greatest successes occurred during the Nixon administration. He developed the policy of "détente" with the Soviet Union, he engaged in <#stdurl http://en.wikipedia.org/wiki/Shuttle_diplomacy ""Shuttle Diplomacy""#> to resolve disputes in the Middle East between Israel and Egypt, and he used <#stdurl http://en.wikipedia.org/wiki/Ping_Pong_Diplomacy ""Ping Pong Diplomacy""#> to open up diplomatic relations to China, by setting up a match between the American and Chinese Table Tennis teams. His geopolitical philosophy worked during the 1970s, when much of the world was in a "generational awakening" era, a time when countries are willing to compromise. The willingness to compromise is a basic assumption of Kissinger's philosophy, as it is in the case of many other politicians. But that philosophy doesn't work at other times. I remember well a particular time when Kissinger got something majorly wrong. In 1990, after Saddam Hussein invaded and conquered Kuwait, there was a great debate in Congress over whether we should go to war to free Kuwait. I was particularly interested in the testimony of two people: Henry Kissinger, the Republican expert from the Nixon and Ford administrations, and Zbigniew Brzezinski, the Democratic expert from the Carter administration. I knew that the politicians would just have political spin positions, while Kissinger and Brzezinski would give principled opinions, so their opinions would be the most valuable. Brzezinski said that we shouldn't invade, and Kissinger said we should. So, in retrospect, Brzezinski was wrong and Kissinger was right. Right? Well, no. Kissinger was wrong too. Kissinger strongly urged going ahead with the invasion, but he firmly believed that Saddam would back down at the last minute, and President Bush would have to call off the invasion. Kissinger said that repeatedly before the 15-Jan-1991 invasion, and after the invasion began, Kissinger said how shocked he was that Saddam didn't back down after all. What Kissinger didn't understand was that, having just gone through the genocidal Iran/Iraq war, Saddam and the Iraqi people were in no mood to compromise on anything that they didn't feel was in their interest. Today, he's making the same mistake as he interprets the situation with China and North Korea. He's very pleased that China changed its mind and backed the U.N. Security Council resolution because he believes that by creating the right geopolitical design and applying it, the North Korea problem is on its way to a resolution. But you don't have to be an expert on Generational Dynamics to see that there's no resolution in sight. Could Kissinger really believe that North Korea is going to stop building nuclear weapons because of a U.N. Security Council resolution and because China didn't veto the resolution? Actually, that might be possible in a generational awakening or unraveling period, times when the desire to compromise and contain problems is highest. But China and North Korea are in generational crisis periods, times when compromise and containment give way to confrontation. The attitude of the North Koreans toward Americans is very clearly shown by the following picture, snapped by an American Congressman, of a <#stdurl http://www.nationalreview.com/miller/miller061903.asp "billboard appearing prominently in Pyongyang, North Korea, in 2003:"#> <#inc ww2010.pic koreabb.jpg center "" "Prominent billboard in Pyongyang, North Korea, 2003. The right-most frame shows a North Korean spearing an American with a bayonet."#> Note on the right, the bayonet spearing an American soldier. Especially during a generational crisis period, this billboard represents a level of hatred that will not be changed by any U.N. resolution. So why did China abruptly change directions and agree to the Security Council resolution? Here's my analysis and my guess:

Both China and North Korea are at the beginning of a "generational crisis" period. They're in very confrontational moods, not compromising moods. Furthermore, China is determined to reunify with Taiwan, by force if necessary, and North Korea is determined to reunify with South Korea, by force if necessary. They both plan revenge against Japan for what they consider to be World War II atrocities.
North Korea is a client of China, and is subordinate to China, not only because China is much more powerful, but also because China gives enormous amounts of food aid to North Korea. Therefore, China expects North Korea to do as China says.
China was really pissed off when North Korea launched those 8 medium and long-range ballistic missiles on July 4, since China had said "Don't do it."
China got even by humiliating North Korea in the U.N. Security Council.

So the whole U.N. Security Council resolution was not the culmination of some grand geopolitical design and strategy, leading to a great solution of the nuclear proliferation problem, as Kissinger believes. No, it was just international geopolitical game-playing, grand theatre that means nothing in terms of where the world is going. Furthermore, the North Korean situation is highly related to the crisis in the Mideast that's been going on for the last week or two. According to a <#stdurl http://www.time.com/time/world/article/0,8599,1216129,00.html "Time Magazine article credulously titled, "Why the U.N. North Korea Resolution Might Really Work,""#> a State Department official wishfully says, "North Korea's two biggest customers for missiles and missile technology are Iran and Syria. Those states would also be prohibited from any kind of missile cooperation with North Korea. They'll try to get around it, but they'll be in violation of a Security Council mandate." These are presumably the missiles that have been supplied to Hizbollah in the latter's war to "wipe Israel off the map." From the point of view of Generational Dynamics, we're headed for a new "Clash of Civilizations" world war. In this war, we can see how the new "axis of evil" is forming itself: North Korea, China, Iran, Syria and Pakistan. Hizbollah will form an important part of their strategy is tying down American and Allied forces in the defense of Israel. Unlike what Kissinger and other pundits are saying, the U.N. resolution is in no way a resolution to any problem. Instead, it's a power play by China that shows that China will be calling the shots and deciding when the "Clash of Civilizations" world war will begin. =eod =// &&2 e060717 Mideast war centers around Hizbollah's Hassan Nasrallah =data ww2010.weblog.y2006.e060717.head Mideast war now centers around Hizbollah's Hassan Nasrallah =data ww2010.weblog.y2006.e060717.keys Israel, Hizbollah, Lebanon, Nasrallah =data ww2010.weblog.y2006.e060717.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060717.date 17-Jul-06 =data ww2010.weblog.y2006.e060717.txt1 Nasrallah splits the Arab world and draws international support for Israel =data ww2010.weblog.y2006.e060717.txt2 <#inc ww2010.pic nasral2.jpg right "" "Hizbollah chief Sheik Sayyed Hassan Nasrallah, gloating about missile strikes on Israeli civilians. (Source: al-Jazeera via youtube.com)"#> Hizbollah has launched over 1000 missiles on northern Israeli cities, but it was the sight of Hizbollah chief Sheik Sayyed Hassan Nasrallah on tv with a shit-eating smile, <#stdurl http://www.kuna.net.kw/home/story.aspx?Language=en&DSNO=887234 "gloating about missile strikes on Israeli civilians and promising more of them,"#> that seems to have done the impossible -- made almost everyone agree that Israel is the victim. "We are at the beginning of the confrontation with Israel", Nasrallah said, adding, "the Islamic world has the opportunity to be victorious against the Israeli enemy." Hizbollah is known to have thousands of missiles, supplied by Syria and Iran, pointed at northern Israel, but observers have been surprised that some of these missiles have been capable of reaching as much as 40 to 50 miles into Israel. "The enemy doesn't know our capabilities or what we have," said Nasrallah. France, which had formerly been condemning Israel, <#stdurl http://www.israelnn.com/news.php3?id=107516 "agreed that "Israel has a right to defend itself.""#> U.N. Secretary General Kofi Annan <#stdurl http://www.bloomberg.com/apps/news?pid=20601082&sid=aFbMIRqlttwA&refer=canada "made a middle of the road statement"#> by saying, "I appeal to all parties to spare civilian life and civilian infrastructure," referring to Hizbollah's missiles and Israel's strikes at Lebanon's roads and bridges. This followed a <#stdurl http://www.alertnet.org/thenews/newsdesk/IRIN/9ac70c1b69de90386b1dc5a415310511.htm "bitterly confrontational emergency summit meeting of the Arab League"#> in Cairo on Saturday. The emergency meeting had been called to deal with the situation in Lebanon, but failed to produce any consensus. The underlying issue was differences between Shia Muslims and Sunni Muslims. (These are the same two branches of Islam that have opposed each other in Iraq.) More and more, Nasrallah's adventure is being seen as a means for <#stdurl http://www.timesonline.co.uk/article/0,,3-2273521,00.html "Iran to use Shia Islam to penetrate the mostly Sunni Arab world."#> Hizbollah is considered to be a creation of Iran with support from Syria, and receives $100 million funding per year from Iran. Hizbollah's weapons are clearly from Iran, and Hizbollah shares with Iran the goal of wiping Israel off the map. Thus, Sunni Arab countries, including Jordan, Saudi Arabia, and Egypt, are not willing to give carte blanche to Shia Hizbollah, supported by Shia countries Syria and Iran. The centuries-old violence between Shia and Sunni Islam is just as great as the centuries-old violence between Islam and Christianity. So we have a war between Israel and Hizbollah. Where is it going? From the point of view of Generational Dynamics, what I'm watching for in this situation is what I'm always watching for -- changes in attitude in large masses of the public. While the mainstream media always focus on what the politicians do, what's really always important to Generational Dynamics is how the masses of people react. Mainstream journalists and politicians and pundits really have very little understanding of how little influence politicians have on world events. It's the shifts in public opinion that tell what's really coming, since politicians are always forced to follow public opinion. In this case, the Hizbollah missiles have unified the Israeli public in support of the IDF (Israeli Defense Forces), for the first time in a long time. This isn't so significant, however, since the public is unified against the politician Nasrallah and his band of men launching missiles from people's homes in southern Lebanon. What's still missing, and what I still haven't seen, is any massive shift in the level of animosity between Israelis and Palestinians. That shift has been taking place gradually, to be sure, over a period of months, but the point is that the current war does not appear to have made a difference in that picture. So as <#inc ww2010.weblog.ref e060715 "I wrote a couple of days ago,"#> this situation does not appear to be heading for a major regional war. The problem is that there's no clear way for the current war to reach a ceasefire, since neither Hizbollah nor Israel appears willing to back down. The <#stdurl http://www.bloomberg.com/apps/news?pid=20601082&sid=aFbMIRqlttwA&refer=canada "United Nations is putting together a peace force,"#> and U.S. Secretary of State Condoleezza Rice will travel to the region to broker a ceasefire, but whether that will be achieved in hours, days or weeks is unknown. With so many missiles flying around, the possibility for miscalculation is enormous, and some event, possibly even some "little" event, a chaotic event with big consequences, could change public opinion very quickly. We saw something like this a few months ago when <#inc ww2010.weblog.ref e060220 "massive Muslim rioting occurred over the Danish cartoon controversy."#> The region is ripe for exactly that kind of trigger to occur. From the point of view of Generational Dynamics, a massive regional war between Jews and Arabs is 100% certain, but what will trigger that war, and when it will occur, cannot yet be predicted. =eod =// &&2 e060715 Israel and Hizbollah declare war =data ww2010.weblog.y2006.e060715.head Israel and Hizbollah declare war =data ww2010.weblog.y2006.e060715.keys Israel, Hizbollah, Lebanon =data ww2010.weblog.y2006.e060715.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060715.date 15-Jul-06 =data ww2010.weblog.y2006.e060715.txt1 However, the Palestinians are staying out of it so far =data ww2010.weblog.y2006.e060715.txt2 I heard someone on the news today debating whether the Mideast is at war, with one person claiming that this isn't a real war yet. That's a semantic argument, but one thing's for sure on the ground: We don't have any large armies fighting each other yet. We have the Israelis, led by Ehud Olmert, bombing Lebanese infrastructure, destroying roads and bridges, to prevent Hizbollah from importing more weapons from Iran. And we have Hizbollah, led by Sheik Hassan Nasrallah, launching hundreds and perhaps thousands of missiles on Israeli cities. And finally, we have Nasrallah's patrons, Syrian President Bashar al-Assad and Iranian President Mahmoud Ahmadinejad, who supply Hizbollah with the thousands of missiles that are now being aimed at Israeli cities. According to <#stdurl http://english.people.com.cn/200607/14/eng20060714_282913.html "a report by Chinese news agency Xinhua,"#> al-Assad and Ahmadinejad have been discussing the situation on the phone. Ahmadinejad has repeatedly and very vocally stated that he wants Israel "wiped off the map." But there's a big piece missing from all this -- a war between PEOPLE, as opposed to a war between POLITICIANS. This distinction is not always clear, but it's crucially important from the point of view of Generational Dynamics, because the worst wars, the crisis wars, come from the people, while non-crisis wars come from the politicians. In particular, I'm not hearing rage and fury from the Israeli people or the Palestinian people. The Israelis are fleeing from cities near the Lebanese border, to avoid Hizbollah's missiles. And the Palestinians in Gaza are dealing with crowded, electricity-free world with difficulty. But we don't hear the Israelis say, "Kill the Palestinians," and we don't hear the Palestinians say, "Kill the Israelis." As <#inc ww2010.weblog.ref e060712 "I described at length a couple of days ago,"#> Lebanon, Syria and Iran had their last crisis wars in the 1980s. Only one generation has passed since then, so they're far from ready for a new crisis war, unless it's forced on them. You won't see large armies of Iranians, Syrians or Lebanese any time soon. But for the Palestinians and Israelis, the last crisis war was the genocidal crisis war between Arabs and Jews in 1948-49, triggered by the partitioning of Palestine and the creation of the state of Israel. This is a generational crisis era for Arabs and Jews, and it would just take a "sufficient outrage" to launch either side into a crisis war. What's a "sufficient outrage"? It could be any chaotic event, but an example would be that one side kills several hundred civilians on the other side and says that they deserved to die. Meanwhile, poor Lebanon is being battered and bashed by all sides. In a very emotional speech just carried live (through a translator) on CNN, Lebanese Prime Minister Fouad Siniora said that "Lebanon is a disaster zone," and he asked for international help for his country and to rescue his people. He said that the Lebanese people are "pained, angry, determined and patient," and that they will survive. So we now see two possible scenarios for the near future:

A continuation of the current "politicians' war," probably slowing down in a few days.
A full scale war between the Israeli and Palestinian people, triggered by some major act of outrage on one side or the other.

Of course, these two scenarios aren't mutually exclusive. We might have the first scenario for a few days, and then the second scenario. From the point of view of Generational Dynamics, the second scenario must occur sooner or later. =eod =// &&2 e060713 July 11 coordinated railway bombings on Mumbai (Bombay) =data ww2010.weblog.y2006.e060713.head July 11 coordinated railway bombings on Mumbai (Bombay) infuriate people of India =data ww2010.weblog.y2006.e060713.keys India, Mumbai, Pakistan =data ww2010.weblog.y2006.e060713.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060713.date 13-Jul-06 =data ww2010.weblog.y2006.e060713.txt1 Indians wonder: Should Pakistan be blamed? =data ww2010.weblog.y2006.e060713.txt2 =inc ww2010.blocking.start <#inc ww2010.pic g060711.gif right "" "Approximate locations of the seven Mumbai train attacks on 7/11. (Source: BBC)"#> On Tuesday, July 11, <#stdurl http://news.bbc.co.uk/2/hi/south_asia/5172586.stm "seven bombs exploded in Mumbai railway stations across the city,"#> within a few minutes of each other. It's believed that they were detonated by timers. Over 200 people have died, with over 700 injuries. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic india3.gif center "" "India, Pakistan, Bangladesh and Kashmir. Mumbai (Bombay) is a large city on the Arabian Sea coast. (Source: Peter N. Stearns)"#> Although the perpetrators have not been identified, two Kashmir separatist groups (<#stdurl http://en.wikipedia.org/wiki/Lashkar-e-Toiba "Lashkar-e-Taiba or Lashkar-e-Toiba (LeT)"#> and <#stdurl http://en.wikipedia.org/wiki/Jaish-e-Mohammad "Jaish-e-Mohammad (JeM)"#>) are considered the most likely. These two groups use this kind of terror to attempt to further their cause of removing Indian control of the provinces of Kashmir or Jammu. In fact, the July 7, 2006, <#inc ww2010.weblog.ref e060707b "London subway bombers were also associated with Kashmir"#> separatist movements. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic g060712b.jpg left "" "India's prime minister, Manmohan Singh on 7/11. (Source: CNN)"#> "No one can make India kneel," said India's prime minister, Manmohan Singh. "No one can come in the path of our progress. We will win this war against terror. Nothing will break our resolve." Beyond the fact of the bombings themselves, the major issue is the effect of the bombings on relations between India and Pakistan. =inc ww2010.blocking.end Generational Dynamics has been predicting for some time that India and Pakistan were headed for certain war over the disputed Kashmir region, but the two countries have maintained friendly relations because of a remarkable détente that Pakistan's President Pervez Musharraf and India's Prime Minister Manmohan Singh have engineered over the last few years. The détente survived <#inc ww2010.weblog.ref e060310 "a major terrorist attack in March of this year,"#> and will probably survive this event as well. However, <#stdurl http://www.abc.net.au/news/newsitems/200607/s1685485.htm "both Pakistan and India have taken shots at each other over the bombings."#> Many of India's people are blaming Pakistani Muslims for harboring terrorist groups, and Pakistan's Foreign Minister Khurshid Mahmud Kasuri hinted that the bombings were caused by India's intransigence in Kashmir. However, mainstream media reporters are beginning to notice that something is happening in the world. Speaking to another anchor, CNN's Wolf Blitzer said, "Are you getting the sense that with the situation in North Korea, Iraq, Iran, India, Israel, Lebanon, that the world is falling apart?" A number of reporters on CNN and Fox on Wednesday evening remarked about the speed with which the situation in the Mideast has deteriorated. "I've seen things get bad here, but never this bad so quickly," said one person reporting from Gaza. But that's just because they haven't been noticing. As I've pointed out many, many times, hardly a day has gone by in many months that the situation in Gaza hasn't gotten measureably worse than it was the day before. And <#inc ww2010.weblog.ref e060626 "as I pointed out a few weeks ago,"#> the descent to war started out fairly slowly following Yasser Arafat's death, but has been accelerating ever since. It's like a huge tsunami that everyone has ignored until it's too late to run for higher ground. =inc ww2010.cf.cf060209 p left The same thing is going to happen in all the other regions in my little conflict risk graphic. The North Korean missile crisis is speeding up militarization plans in Japan, and presumably in China as well. And the Mumbai bombings are almost certain to increase the historic tension between Hindus and Muslims. From the point of view of Generational Dynamics, the world is headed for a new "Clash of Civilizations" world war, 60 years after the end of World War II, just as all the people who lived through World War II are all disappearing (retiring and dying), all at once. With the bombings in Mumbai, and with events moving more and more quickly in the Mideast, it looks more and more that the world will be a very different place within a few more months. =eod =// &&2 e060712 Israel mobilizes reserves and invades Lebanon =data ww2010.weblog.y2006.e060712.head Israel mobilizes reserves and invades Lebanon =data ww2010.weblog.y2006.e060712.keys Israel, Palestine, Lebanon, Hizbollah =data ww2010.weblog.y2006.e060712.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060712.date 12-Jul-06 =data ww2010.weblog.y2006.e060712.txt1 Calling Hizbollah capture of Israeli soldiers an 'act of war', Olmert promises "very painful and far-reaching" response. =data ww2010.weblog.y2006.e060712.txt2 Israel's <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=topNews&storyID=2006-07-12T123737Z_01_L104489_RTRUKOC_0_UK-MIDEAST.xml "incursion into Lebanon"#> is just one of several escalations to the Mideast situation in the last day. For several days, there have been news reports of IDF (Israeli Defense Force) plans for a new "major assault" into Gaza, and it began on Tuesday evening with an incursion into central Gaza that cut the strip in two. Several Hamas officials, but also several civilians, were killed when <#stdurl http://msnbc.msn.com/id/13165159/ "Israel dropped a quarter-ton bomb on the Gaza home of a Hamas official."#> On Wednesday morning, the Lebanese militia group Hizbollah <#stdurl http://news.bbc.co.uk/2/hi/middle_east/5172760.stm "crossed the Lebanese border into northern Israel,"#> killed three Israeli soldiers and took two more as hostages, bringing them back to a "safe place" in Lebanon. =inc ww2010.blocking.start <#inc ww2010.pic g060712.gif left "" "How the day unfolded, July 12, 2006 (Source: Times Online)"#> What makes Olmert's declaration that the capture of the Israeli soldiers is an "act of war" is particularly significant because Olmert is accusing the Lebanese government, as opposed to the Hizbollah militia, of an act of war. (Evening update: According to an <#stdurl http://www.timesonline.co.uk/article/0,,251-2267846,00.html "analysis by Times Online,"#> Hizbollah's actions today are "hugely popular" among Arabs increasingly furious about the Israeli incursion into Gaza. Hizbollah's actions are fully supported by Syria and Iran, supporting the view given below that these countries, especially Iran, are interested in provoking a war, with Iran to be left as "the last country standing.") However, the Lebanese government has little control over Hizbollah, which actually has close relations to Syria, Lebanon's perennial enemy, and to Iran. From the point of view of Generational Dynamics, there's a patchwork quilt of differences among these countries. =inc ww2010.blocking.end <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> Iran, Iraq, Syria and Lebanon are all on the World War I timeline, having all been part of the (Muslim) Ottoman Empire centered in Turkey. The Ottoman Empire was destroyed in the aftermath of WW I. As regular readers of this web site know, genocidal crisis wars tend to come in 70-90 year cycles, and all of these countries have had their next crisis wars. I've discussed <#hreftext ww2010.i.sixties040501 "the Iran/Iraq war of the 1980s"#> many times on this web site. A crisis civil war began in Lebanon in 1975, and it became a war with Syria in 1976. Israel was an off-and-on participant, and the war reached an explosive climax in 1982 when Christian Arab forces, allied with Israel, <#stdurl en.wikipedia.org/wiki/Sabra_and_Shatila_massacre "massacred and butchered hundreds or perhaps thousands of Palestinian refugees in camps in Sabra and Shatila."#> Thus, all four of these nations -- Iran, Iraq, Syria and Lebanon -- have all had relatively recent generational crisis wars, and the traumatized populations are in no mood for another genocidal experience. Thus, using the terminology of "chaotic attractors" (in the sense of Chaos Theory) that I've <#inc ww2010.weblog.ref e060410 "explained many times on this web site,"#> political events in Palestine and Israel are "attracted to war," but political events in Iran, Iraq, Syria and Lebanon are "attracted away from war." But that wouldn't prevent any of these nations from participating in the Israeli-Palestinian war by proxy -- by supplying weapons or other support, and this appears to be what's happening. The Lebanese government actually has good relations with the United States, and is <#stdurl http://www.canada.com/topics/news/world/story.html?id=07d9c013-82f0-457d-b0dc-8b2a59af5d3c&k=1731 "cooperating with the FBI investigation of the recently revealed al-Qaida plot to blow up New York's train tunnels."#> Lebanon arrested the prime suspect, Assem Hammoud, and made information from Hammoud's computer available to the FBI. =inc ww2010.xr.related2 right chaos 2 lebanon 2 However, Lebanon became sharply split last year when <#inc ww2010.weblog.ref e050216 "beloved former prime minister Rafiq Hariri was killed"#> by a suicide bomber in Beirut. Most Lebanese blamed the killing on Syria, and the Lebanese became polarized into pro-Syria and anti-Syria factions, with the militia group Hizbollah leading the pro-Syria group. Since that time, <#stdurl http://news.bbc.co.uk/2/hi/middle_east/5172760.stm "Hizbollah has been developing a close 'mentor' relationship with Hamas,"#> and is encouraging further Palestinian terrorist attacks on Israel. Iran, through its President Mahmoud Ahmadinejad, has repeatedly expressed the intention to "wipe Israel off the map." As we wrote last January, <#inc ww2010.weblog.ref e060111 "Iran is positioning itself to be the "last country standing""#> after an Israeli-Palestinian war, to gain hegemony over the entire Mideast for decades to come. In addition, <#inc ww2010.weblog.ref e060704b "Iran appears to be joining with China"#> as part of a new "axis" in the coming "Clash of Civilizations" world war, undoubtedly making plans to split the world between them. The situation between Israelis and Palestinians moves measurably towards war each and every day, and full-scale war cannot be much farther off, as Israelis and Palestinians become increasingly enraged with each other. From the point of view of Generational Dynamics, we can see that the war between Israelis and Palestinians will be bloody and genocidal, like the war they fought in the late 1940s, after the partitioning of Palestine when the state of Israel was created, and also <#inc ww2010.weblog.ref e060707 "very much like the 1994 Rwanda genocide, and the genocidal war being fought in Darfur today."#> Of course, America and Europe will also be drawn into a major Mideast war as well. But the role of Hizbollah, Lebanon, Syria and Iran remains to be seen. They'll certainly be supplying weapons and logistics to the Palestinians, but whether they also supply armies to the Palestinians remains to be seen. On the other hand, with so much violence spreading so quickly, undoubtedly including the use of weapons of mass destruction, it may not make any difference what they'd like. =eod =// &&2 e060711b Shamil Basayev is dead =data ww2010.weblog.y2006.e060711b.head Shamil Basayev is dead =data ww2010.weblog.y2006.e060711b.keys Shamil Basayev, Chechnya, Beslan =data ww2010.weblog.y2006.e060711b.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060711b.date 11-Jul-06 =data ww2010.weblog.y2006.e060711b.txt1 The Chechen terrorist responsible for the Beslan school massacre =data ww2010.weblog.y2006.e060711b.txt2 in September 2004, in which 330 hostages, half of them children, died is <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/07/11/wchech11.xml "now dead himself, a victim of a huge explosion."#> There is evidence that he died in the midst of preparing for a new terrorist attack to coincide with this week's G-8 summit in St. Petersburg. In another terrorist attack, Basayev was responsible for the downing of two passenger planes in flight from Moscow by "black widows," women carrying bombs. =inc ww2010.xr.related1 left basayev 3 In June 1995, Basayev-led terrorists entered Budyonnovsk, a small town in southern Russia, where they captured a large hospital and took over 1,800 people hostage. In the end, more than 100 hostages were killed, and Basayev and his men were allowed to retreat safely back to Chechnya, using hostages as human shields. In an <#inc ww2010.weblog.ref e050729 "ABC News interview with Basayev"#> conducted soon after the Beslan massacre, Basayev said that there would be many more attacks similar to Beslan. “It’s not the children [of Beslan] who are responsible,” Basayev said. “Responsibility is with the whole Russian nation... If the war doesn’t come to each of them individually, it will never stop in Chechnya.” Asked if a Beslan-type attack could occur again, Basayev said: “Of course ... As long as the genocide of the Chechen nation continues, as long as this mess continues, anything can happen.” The fact that ABC News gave air time to such a bloody, ruthless terrorist may be surprising, but it seems to be typical of today's arrogant Boomer-led media, who seem to know little of what's going on in the world. The interview absolutely infuriated Putin and the Russian people, and <#inc ww2010.weblog.ref e050802c "Russia barred ABC News reporters from Russia."#> I don't know whether the interdiction is still in effect today. The death of Basayev is bringing relieved smiles to the faces of many Russians. Russian President <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/07/11/wchech11.xml "Vladimir Putin was 'jubilant' at the news."#> "For the bandits, this is just retribution for our children in Beslan … and for all the terrorist attacks they carried out in Moscow and other regions of Russia," he said. Unfortunately, many Russian commentators are in a state of denial. "I think Russia's latest Caucasian war is over," <#stdurl http://en.rian.ru/analysis/20060711/51199330.html "says political commentator Pyotr Romanov,"#> "and the killing of warlord Shamil Basayev is yet another serious argument in favor of this opinion. Individuals have always played a particularly important role in the Caucasus. Now that Basayev is dead, there is no one else in the region to hate Russia and despise life, his own and the lives of others, as much as he did." Well, that's surely a vain hope. The Causasus is a region of major, repeated crisis wars between Orthodox Russians and Muslims for many centuries, and a new crisis war is overdue. The death of Basayev will no more stop the terrorist attacks or prevent a war in the Caucasus than the death of Abu Musab al-Zarqawi stopped the terrorist acts in Iraq or prevented a war in the Mideast. =inc ww2010.cf.cf060209 p right From the point of view of Generational Dynamics, it's impossible to predict the effect of the death of as powerful a figure as Basayev. His death may trigger a power struggle that ends up launching a major crisis war, or things may settle down for a while. The one thing that's certain is that a new major crisis war in the Caucasus in the near future cannot be avoided. =eod =// &&2 e060711 To everyone's surprise, tax receipts skyrocketed in 2005 =data ww2010.weblog.y2006.e060711.head To everyone's surprise, tax receipts skyrocketed in 2005, lowering the deficit =data ww2010.weblog.y2006.e060711.keys =data ww2010.weblog.y2006.e060711.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060711.date 11-Jul-06 =data ww2010.weblog.y2006.e060711.txt1 Similar surprises occurred in 1996 and 2000 =data ww2010.weblog.y2006.e060711.txt2 Tax revenue <#stdurl http://www.iht.com/articles/2006/07/09/news/deficit.php "from corporations and wealthy investors rose steeply"#> in 2005, catching everyone by surprise. Needless to say, the air is thick with political spin. The <#stdurl http://www.whitehouse.gov/news/releases/2006/07/20060711.html "White House press release"#> attributes it to "strong economic growth and fiscal discipline," which is silly because economic growth has been weak, and there's no sign of fiscal discipline anywhere in Washington. The <#stdurl http://www.democrats.org/a/2006/07/bushs_budget_de.php "Democratic National Committee press release"#> says that "the Administration that inherited record surpluses has turned them into record deficits," and that's also silly because the problem began in the Clinton administration. <#inc ww2010.pic fedbudl.gif center "" "Federal income and outlays as percentage of GDP - 1930-2005"#> The above graph shows the federal budget income and outlays as a percentage of the GDP (Gross Domestic Product), going back to 1930. As you can see, government outlays reached 44% of GDP during World War II, but then settled into the 15-25% range since then. Outlays today are around 20% of GDP, about average by historical standards since World War II. Now let's focus on the last 25 years: <#inc ww2010.pic fedbud.gif center "" "Federal income and outlays as percentage of GDP - 1980-2005"#> What this graph shows is that the current high deficit is not caused by exceptionally high spending, even with the Iraq war going on. It's caused by a steep drop in receipts that began in the year 2000. My main reason for wanting to post this graph is to show that what's going on could not possibly have had anything to do with any politician, and that all political spin is nonsense. So now we have three surprises in the last ten years:

In the State of the Union speech in January, 1996, President Clinton announced that "The era of big government is over," believing, as most people did, that high deficits were forcing government cutbacks. Everyone was shocked when corporate tax receipts rose steeply, apparently because of the beginning of the huge 1990s stock market bubble.
Since 2000, tax receipts dropped sharply, every year through 2004. This generated high deficits, but could not possibly have been caused the current administration because it began in the previous administration.
Now we have a new surprise, with tax receipts recovering slightly. The administration is taking credit, but it's much more likely related to the recent stock market, real estate and commodities bubbles.

The collapse in tax receipts since 2000 appears to be related to the loss of jobs to China and India since then. A factory in America pays taxes to America, while a factory in China pays taxes to China, so the massive shift of jobs to China and India would explain the drop in tax receipts. The unexpected rise in tax receipts in 2005 is not substantial, and cannot be expected to continue. As <#hreftext ww2010.i.050711eleven "we've previously discussed,"#> corporate earnings have increased at more than double historical rates of increase during the last 10-20 years, and by <#inc ww2010.weblog.ref e060122 "the principal of mean reversion,"#> earnings must drop sustantially, possibly this year. From the point of view of Generational Dynamics, we're entering a new 1930s style Great Depression, as I've been reporting since 2002. The major surprises in tax receipts are all related to the generational patterns triggered in the 1990s when the generation of senior financial managers with personal memory of the horrors of the 1930s Great Depression all disappeared (retired or died) all at once, leaving behind a new generations (Boomers and Xers) with little or no instinctual ability recognize risky investments. =eod =// &&2 e060707b July 7 + 1 year, generational gap in North London mosques =data ww2010.weblog.y2006.e060707b.head A year after the July 7 London subway bombing, a generational gap in North London mosques =data ww2010.weblog.y2006.e060707b.keys =data ww2010.weblog.y2006.e060707b.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060707b.date 7-Jul-06 =data ww2010.weblog.y2006.e060707b.txt1 Young radical Islamists meet in a room next door to the main mosque. =data ww2010.weblog.y2006.e060707b.txt2 Someone named Abu Muwaheed, who looks like a teenage boy with a head scarf, leads a large group of more teenage boys with head scarfs in a discussion of the "Saviour Sect." The subway bombings were, he explains, the fault of the British government, as well as the fault of the British people who elected that government. There's a multimedia presentation showing scenes of wounded Iraqis and messages from Osama bin Laden. The crowd cheers when 9/11 is mentioned. =inc ww2010.xr.related1 right londonsubway 2 Next door, in the Lea Bridge Road Mosque, Imam Ghulam Rabbani says that he was unaware of the tenor of these meetings, and is shocked at what's occurring. When Rabbani preaches in the main mosque, the average age of the people in his audience appears to be around 50. This report appeared on Friday afternoon on CNN International, during the extensive coverage commemorating the London subway bombings of a year ago, on July 7. <#inc ww2010.pic tanweer.jpg left "" "Suicide bomber Shehzad Tanweer (Source: The Sun)"#> As I <#inc ww2010.weblog.ref e050715 "explained in detail last year,"#> the London bombers were ordinary Muslim British citizens, born near London, but radicalized by trips to Pakistan, their parents having come from the explosive Kashmir region disputed by Pakistan and India. One of the suicide bombers, <#inc ww2010.weblog.ref e060109 "Shehzad Tanweer, was a very wealthy young man."#> In a moved timed to coincide with the July 7 commemoration, <#stdurl http://www.24dash.com/content/news/viewNews.php?navID=7&newsID=7811 "an Islamic website associated with al-Qaeda released a video of Tanweer,"#> identifying him as having been trained by al-Qaeda. The bombings were a shock to everyone, but none more so than the mortified Muslim parents of kids living in the same neighborhood. "What if my son decides to do the same thing?" they wondered. This generational gap is a good example of where things are going, and it shows why I keep reminding readers that <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html "the median age in the Gaza strip is 15.6."#> =inc ww2010.bugcomment left Most people think that "children learn from their parents." That's true to some extent, but the whole point of Generational Dynamics is that children don't learn from the parents or, more precisely, learn the wrong things from their parents. From the point of view of Generational Dynamics, it's this younger generations, in cultures around the world, that are going to lead the world into the next world war, the "Clash of Civilizations" world war. As we see London-born youngsters become increasingly radicalized, and as we see the violence escalate in the Mideast, we have to realize that the time cannot be very far off. =eod =// &&2 e060707 Fighting in Darfur has increased since a peace deal was signed in May. =data ww2010.weblog.y2006.e060707.head Fighting in Darfur has increased since a peace deal was signed in May. =data ww2010.weblog.y2006.e060707.keys =data ww2010.weblog.y2006.e060707.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060707.date 7-Jul-06 =data ww2010.weblog.y2006.e060707.txt1 Palestinians and Israelis will soon go the way of the people of Sudan and Darfur. =data ww2010.weblog.y2006.e060707.txt2 Janjaweed militias continue to murder Darfur civilians, and all deadlines for implementing May's peace agreement have been missed, leading <#stdurl http://news.bbc.co.uk/2/hi/africa/5155984.stm "Jan Pronk, the U.N. envoy to Darfur and Sudan,"#> to say that the situation was "worse" than it was before the peace deal. =inc ww2010.xr.related1 right darfur 2 Early in 2004, the United Nations held a conference commemorating the tenth anniversary of the 1994 Rwanda genocide, At that time, there were two ethnic groups in Rwanda -- the Hutus and the Tutsis. They had lived together for decades, had intermarried, had their kids play games with each other and so forth. Then one day, a Hutu leader announced over the radio, "Cut down the tall trees." The radio announcement, which was heard all over the country was some sort of prearranged signal. On cue, each Hutu did something like the following: Picked up a machete, went to the Tutsi home next door, or down the street, murdered and dismembered the man and children, raped the wife and then murdered and dismembered her. Close to a million Tutsis were tortured, raped and murdered in a three month period. So at the 2004 United Nations conference, Kofi Annan said "never again." It was only weeks later that "never again" was challenged by the situation in Darfur. Kofi Annan called on the world to stop the genocide there. I wrote that <#inc ww2010.weblog.ref e040628 "the U.N. is completely irrelevant to the Darfur genocide,"#> and that it would not be stopped until it's run its course. Now, two years later, it still hasn't run its course. From the point of view of Generational Dynamics, the Darfur war is a "crisis war." I like to compare a crisis war to a tsunami, because a crisis war is propelled by a huge wave of people, motivated by hatred and fury, who can no more be stopped than a tsunami can. And sure enough, the Darfur war is now being <#stdurl http://www.theage.com.au/news/National/Crisis-in-Darfur-like-Rwanda-genocides/2006/07/07/1152175757722.html "compared to the 1994 Rwanda genocide,"#> and is nowhere near close to being stopped. If you wish to understand what's close to happening between the Arabs and the Jews, just look to Darfur, because the same kinds of emotions are involved. The trigger won't be "cut down the tall trees," but there'll be some trigger. (In fact, the trigger may already have occurred -- the kidnapping of the Israeli soldier.) I hear talking heads on TV talk about a possible war between Israelis and Palestinians as being some minor thing -- a few people will be killed, the rest of the world will go on with life as usual. Well, the war in Darfur can be ignored, because none of the major superpowers have any emotional connection to Darfur. Even among American blacks, there are few who feel a connection to Darfur. But anyone can see how different the situation is with Israel. America has a strong emotional connection to Israel, and countries like Egypt, Jordan and Iran have strong emotional connections to the Palestinians. The coming war between Israelis and Palestinians will be like the Darfur war -- as unstoppable as a tsunami. But unlike Darfur, the Palestinian / Israeli tsunami will drown a lot of Americans as well. =eod =// &&2 e060705 Olmert promises retaliation after missile lands in Israeli city =data ww2010.weblog.y2006.e060705.head Olmert promises retaliation after missile lands in Israeli city =data ww2010.weblog.y2006.e060705.keys Israel, Gaza =data ww2010.weblog.y2006.e060705.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060705.date 5-Jul-06 =data ww2010.weblog.y2006.e060705.txt1 Another day, another escalation. =data ww2010.weblog.y2006.e060705.txt2 While the world's attention is focused on test missiles fired by North Korea (and there were SEVEN of them, not just six), an escalating situation is occurring in the Mideast, thanks to a REAL missile. The level of panic among Israelis was turned up a few notches on Tuesday, when <#stdurl http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nL04802599&imageid=&cap= "a rocket from Gaza hit Israeli city of Ashkelon."#> The rocket, evidently fired by Hamas' military wing, uses slightly more advanced technology than previous rockets, and so reached farther into Israeli territory. It landed near a school, but no one was hurt. Even so, Prime Minister Ehud Olmert called the rocket attack a "major escalation." An <#stdurl http://www.haaretz.com/hasen/spages/734652.html "editorial in the Israeli newspaper Ha'aretz"#> says that the missile "constitutes an unequivocal invitation by Hamas to war." Israeli diplomatic sources <#stdurl http://www.ynetnews.com/articles/0,7340,L-3271320,00.html "are said to be planning "a very harsh response""#> to the incident. Uri Ariel, a conservative member of the Knesset (Israeli parliament) called on <#stdurl http://www.israelnationalnews.com/news.php3?id=106622 "Prime Minister Ehud Olmert to "stop the games and begin taking serious action""#> to stop the rocket attacks. After a Wednesday morning meeting with his security cabinet, Prime Minister Olmert has <#stdurl http://today.reuters.com/news/newsArticle.aspx?type=topNews&storyID=2006-07-05T131248Z_01_L04812837_RTRUKOC_0_US-MIDEAST.xml "ordered the army to expand its offensive against Hamas."#> According to a statement from Olmert's office, "Given the abduction and continued ballistic salvoes, including the (rocket) launched at Ashkelon, the rules of the game in dealing with the Palestinian Authority and Hamas must be changed." The statement said that strikes against Hamas Islamists in Gaza and the West Bank will focus on "institutions and infrastructure facilitating terrorism". =inc ww2010.xr.related1 right chaos 2 From the point of view of Generational Dynamics, the Mideast is in a "generational crisis" period and is heading, with 100% certainty, to a new major genocidal war between Arabs and Jews, 57 years (almost three generations) after the end of the the major war that was fought in the late 1940s, following the partitioning of Palestine and the creation of the state of Israel. This is to illustrate again the concept of "chaotic attractor," in the sense of Chaos Theory. Political events are random, but in a generational crisis period, political events are "attracted" to war. This has been lucidly illustrated in the Mideast, where hardly a day has gone by in the last 16 months where political events haven't measureably brought the region closer and closer to war. As I <#hreftext ww2010.i.may01 "predicted in May, 2003, when the "Mideast Roadmap to Peace" came out,"#> the disappearance of Yasser Arafat and Ariel Sharon from the scene has removed the last major generational inhibitions to full-scale war. =eod =// &&2 e060704b North Korea launches multiple test missiles towards Japan =data ww2010.weblog.y2006.e060704b.head In an Independence Day surprise, North Korea launches multiple test missiles towards Japan =data ww2010.weblog.y2006.e060704b.keys =data ww2010.weblog.y2006.e060704b.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060704b.date 4-Jul-06 =data ww2010.weblog.y2006.e060704b.txt1 Sticking its thumb in the eye of the United Nations and the United States, =data ww2010.weblog.y2006.e060704b.txt2 North Korea has launched not just one, not two, not three, not four, not just five, but SIX missiles. <#stdurl http://www.voanews.com/english/2006-07-05-voa6.cfm "The test missiles were launched in the direction of Japan,"#> but fell into the Sea of Japan between the two countries. One of the six missiles was <#inc ww2010.weblog.ref e060621 "the long-range Taepodong-2 missile,"#> but apparently it malfunctioned shortly after takeoff. Since the launchings were apparently tests that posed no immediate danger to America or Japan, this might be similar to <#inc ww2010.weblog.ref e050921 "the little joke that President Kim Jong-il played on the world"#> last September, when it first promised to end nuclear testing, and then said "ha, ha, we were just kidding" a few days later. Nonetheless, this is the same kind of "screw you" tactic as was <#inc ww2010.weblog.ref e060413 "used by Iranian President Mahmoud Ahmadinejad announced in April"#> when he announced that Iran is going to enrich uranium. That particular announcement came after statements that Israel "should be wiped off the map." Both Kim and Ahmadinejad are adopting postures of complete contempt towards America, Europe and the West, including the United Nations. All the silly chatter on television right now is whether the Bush administration offered the right collection of carrots and sticks, and whether the Clinton administration coddled the North Korea regime. You'd have to be a total moron to believe that North Korea's decision to continue or abandon an aggressive weapon system depends on the number of people sitting in on peace negotiations, or on whether Bush said the right "magic words" to Kim in the past, but that's what we're hearing on TV this evening. But from the point of view of Generational Dynamics, the Bush administration has little or no ability to affect either situation. North Korean President Kim Jong-il and Iranian President Mahmoud Ahmadinejad are both saying the same thing: "We're going to do what we want, and there's nothing you can do about it." Actually, it was just a couple of weeks ago that <#inc ww2010.weblog.ref e060614 "the United States warned North Korea of "countermeasures,""#> if the missile tests were continued. I guess now we get to see what those "countermeasures" are, if any. If there are any military countermeasures (such as bombing a Korean missile launcher), then China will be angered. If the "countermeasures" are just words, or complaining to the useless United Nations Security Council, or if there are no countermeasures at all, then the Americans will look like idiots, and the Japanese will be scared to death. Actually, it's pretty certain that the Japanese, who are just waking up on Wednesday morning, are going to be pretty frightened anyway. The Japanese were freaked out in 1988 when North Korea launched a missile that overflew Japan and landed in the Pacific Ocean. Japan's relations with the Koreans and Chinese <#hreftext ww2010.i.051023japan "have been deteriorating sharply"#> in the last two years. This incident is sure to raise the level of anger. Japan <#stdurl http://seattlepi.nwsource.com/national/1104AP_Japan_Troubled_Waters_LH1.html "has territorial disputes on all sides, with Korea, China and Russia,"#> and has been increasing its military capabilities, preparing to defend its territory. In addition, Japan and America have been speeding up plans to <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2006/06/26/AR2006062601256.html "deploy American Patriot missiles on Japanese soil,"#> to counter the North Korean threat. On the other hand, Iran, North Korea and China have been developing closer diplomatic relationships in recent months, and there have been uncomfirmed reports that Iran is purchasing nuclear technology from North Korea. Furthermore, since China gives a great deal of food and energy aid to North Korea, it seems safe to assume that China could have prevented the multi-missile launch, but chose not to. =inc ww2010.cf.cf060209 p left Thus, as <#inc ww2010.weblog.ref e060623 "I mentioned in passing a couple of weeks ago,"#> it appears that China, Iran, Pakistan and North Korea are forming a new "axis," corresponding to the Germany-Italy-Japan axis of World War II. This axis, headed by China, would be opposed to the new allies -- Japan, Australia, India, Russia, UK, led by America. At the present time, I'm still leaving China and North Korea at level 2, medium risk, on my little "Conflict Risk" graphic, because I don't yet hear the drums of war from either of those countries, and I don't see this situation spiraling out of control the way the situation in Gaza is. But that could change any day, if this kind of confrontation continues. =eod =// &&2 e060704 Whose side will Germany be on in the world war? =data ww2010.weblog.y2006.e060704.head Whose side will Germany be on in the "Clash of Civilizations" world war? =data ww2010.weblog.y2006.e060704.keys =data ww2010.weblog.y2006.e060704.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060704.date 4-Jul-06 =data ww2010.weblog.y2006.e060704.txt1 A reader of this web site offers an opinion. =data ww2010.weblog.y2006.e060704.txt2 People I talk to are almost always stupefied when I talk about a new West European war, the first since World War II. They act as if such things were as scarce as hen's teeth, even though there have been such wars as regularly as clockwork for millennia, and nobody so far has been able to point out a new Law of Nature that would keep such a war from happening again, now that we're coming close to the next "clockwork" cycle. <#inc ww2010.pic chir.jpg right "" "Defiant French President Jacques Chirac in June, 2005 (Source: LeMonde)"#> At this point, the question of who will be fighting whom is largely speculation. Based on history, we can reasonably assume that one of the three countries UK, France and Germany, will be at war with the other two. However, this assumption must be heavily qualified by the fact that a clash on European soil between indigenous Europeans and Muslims from Turkey and North Africa is shaping up to be a certainty. However, the heavy recriminations between Britain and France in 2003 in the U.N. Security Council over the Iraq war, and then again in June, 2005, over the European Union budget, makes it pretty clear that the wars that have occurred regularly since 1066 between England and France will be repeated. (Ironically, as I'm writing this, I'm listening to the July 4 Boston Pops concert playing the 1812 Overture, with its intermingled strains of the French national anthem, <#inc ww2010.weblog.ref e050401 "La Marseillaise."#> How things can change in a mere 200 years.) That leaves the question of whom Germany will side with. A web site reader offers the following opinion:

"Germany and Britain up until the First World War were allies. The German nations (Prussia, Hanover, Hesse specifically) either worked for Britain or supplied Royalty to Britain. The current ruling family of Britain is of German descent and so were Kings George I,II and III (Hanover). I would expect Germany to fight alongside Britain and the US in a future conflict."

Well, if this is true, then why did Germany fight Britain in World Wars I and II?

"Things changed between Germany and Britain after the 1880's or so. Once Germany was unified, they quickly became a rival to Britain economically. It was the economic rivalry as well as the web of political alliances that led to Britain and Germany fighting in WW I. Many of the British royalty changed their names during this time to hide their German heritage (Mountbatten's real family name is Battenberg). ... Hitler did not want to fight Britain and regarded them as "Aryans." He ended up doing so because of Britain's pledges to Poland. The two nations have historically been allies rather than enemies and given that we seem to be returning in some ways to old rivalries, it stands to reason that Britain and Germany would most likely be allied against France if they ever came to blows."

=inc ww2010.bugcomment left I'm not taking sides on this question until more facts emerge except to say, as I've mentioned once or twice in the past, that when I spent quite a bit of time in Europe in the 1970s, it was perfectly clear even then that the Germans liked Americans and the French hated Americans. This seems a good time to mention that comments and questions and e-mail messages are welcome. (If you prefer, you can also post a message in the <#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 "Objections to Generational Dynamics"#> thread of the Fourth Turning forum.) So far I've been able to keep up with answering all of them, although when the load is too heavy it sometimes takes me a week or two. I know from the web logs that I have 1,000-2,000 regular readers out there. I don't know who you are, but I'm always happy to hear from you, if you don't mind the fact it may take me a day or a few days to answer. =eod =// &&2 e060703 The European Union is "extremely concerned" about Mideast tensions =data ww2010.weblog.y2006.e060703.head The European Union is "extremely concerned" about Mideast tensions =data ww2010.weblog.y2006.e060703.keys European Union, Mideast =data ww2010.weblog.y2006.e060703.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060703.date 3-Jul-06 =data ww2010.weblog.y2006.e060703.txt1 But guess what the EU politicians express "particular concern" about! =data ww2010.weblog.y2006.e060703.txt2 On Monday, the <#stdurl http://www.alertnet.org/thenews/newsdesk/L03691598.htm "European Union issued a statement"#> expressing extreme concern about the situation in the Mideast -- as well they might, inasmuch as the level of confrontation and hostility gets measurably worse every day, and the region appears to be speeding to war in the near future. But what was the EU's greatest concern? Was it the fate of the Israeli soldier abducted by Palestinian militants? Was it the fate of the Gaza people, living without electricity, with little money or food? Was it the fate of the West Bank Israeli settler who was killed by militants? Was it the fate of the Gaza civilian, killed on Monday by an Israeli airstrike? Those were all areas of concern, but none of them was the area of greatest concern. What was the area of greatest concern? The EU politicians expressed "particular concern" about Hamas politicians in the West Bank that the Israelis had detained. I guess EU politicians are just like everyone else -- they really don't care about anyone but "their own kind." =eod =// &&2 e060702 Politicians commemorate Battle of the Somme, July 1, 1916 =data ww2010.weblog.y2006.e060702.head Politicians commemorate Battle of the Somme, July 1, 1916 =data ww2010.weblog.y2006.e060702.keys =data ww2010.weblog.y2006.e060702.loc ww2010.weblog.log0607 =data ww2010.weblog.y2006.e060702.date 2-Jul-06 =data ww2010.weblog.y2006.e060702.txt1 "Lions led by donkeys," as the British army were slaughtered like cattle =data ww2010.weblog.y2006.e060702.txt2 is how people started portraying World War I in the months following the slaughter of over a million British soldiers, 20,000 in one day alone, July 1, 1916, the Battle of the Somme. =inc ww2010.blocking.start On Saturday, <#stdurl http://news.bbc.co.uk/2/hi/europe/5136064.stm "hundreds of English, French, Germans, Canadians, and people from other nations"#> memorialized the massive deaths in the battle that triggered and reinforced anti-war movements in both Britain and Germany. <#inc ww2010.pic somme.jpg right "" "British soldiers in trenches at Battle of the Somme"#> The British Generals botched the situation badly, so badly that by the 1920s, many veterans were describing the entire war a "Lions led by Donkeys." By 1916, the War had been going on for two years, and the British politicians were demanding a quick victory to end the war against the Germans. But they made obvious preparations for the battle the entire week before, thus telegraphing their intentions to the Germans. The Germans were prepared for their overconfident assault, and slaughtered them. =inc ww2010.blocking.end =inc ww2010.h2 antiwar "The anti-war movement (World War I)" Antiwar writings began appearing in both countries. In England in 1917, Wilfred Owen, a 24-year-old soldier, wrote "Anthem for Doomed Youth":

Not in the hands of boys, but in their eyes

The pallor of girls' brows shall be their pall;

Ironically, Owen died in 1918 in the same week that WW I ended. The war was botched on the German side as well. They were pulled into the war unwillingly, because of a defense treaty with Austria. Then they hoped to overrun France quickly, as they'd done in the 1869 in the Franco-Prussian war, and in August 1914, Germany planned a quick, total victory over France, requiring only six weeks -- too quick for the British troops to be deployed to stop the advance into France. The plan went fantastically well for about two weeks -- but then the Germans sent two corps of soldiers to the eastern front to fight the Russians. Without those soldiers, Germany's rapid sweep was halted by the French long enough to give the British troops time to reinforce the French. Both the German and French sides dug themselves into static trenches. There was even a <#stdurl http://www.firstworldwar.com/features/christmastruce.htm "famous "Christmas truce.""#> During the Christmas season of 1914, the German high command shipped thousands of Christmas trees to the front lines, cutting into its ammunition shipments. This led to a widely publicized Christmas truce between the British and German troops, where soldiers and officers on both sides all got together and sang Christmas carols. By 1918, the German people were sick of the war, and when the Americans joined the war, that was the last straw for the German people, who forced their country's leaders to capitulate. After the war, the young German soldier Erich Maria Remarque wrote <#stdurl http://en.wikipedia.org/wiki/All_Quiet_on_the_Western_Front "Im Westen Nichts Neues (All Quiet on the Western Front),"#> depicting the heroic soldiers as becoming a "lost generation," following a completely pointless war. Today there are few people, even among historians (as I've discovered), who have any idea what the Great War (WW I) was about. Most people seem to believe that WW I was the same as WW II -- some pre-Hitler Hitler-type decided to invade France and started a world war. But the botched prosecution of WW I in Western Europe is one of the signs that it was quite different from WW II. It was principally an East European war, leading to genocide in the Balkans, the Bolshevik Revolution, and the destruction of the Ottoman (Muslim) Empire. In Western Europe, World War I was a non-crisis war (in the sense defined by Generational Dynamics), for both England and Germany -- and for America as well. That's why it's wrong to compare World War I to World War II for America or Western Europe. The correct comparison is World War I and the Vietnam War, both non-crisis wars for America. In both cases there was huge political opposition to the war, and although the soldiers fought bravely, the prosecution of the war was sloppy and faulty. =inc ww2010.h2 iraq "World War I and the Iraq War" If you google the phrase, "lions led by donkeys," you'll get mostly two kinds of results:

Histories of World War I
Political opinion that the Iraq war is ALSO being botched, like World War I, and is also being fought by lions led by donkeys (the main donkey being President Bush).

This comparison of the Iraq war to WW I makes as little sense as comparing it to the Vietnam War. I discussed this at length in <#hreftext ww2010.i.060601antiwar ""Why aren't college students protesting against the Iraq war?""#> Wilfred Owen and Erich Maria Remarque were young men, both soldiers who fought in the war. Today's anti-war protesters are old folks like John Kerry and Cindy Sheehan -- the same old folks who, as young folks 30-40 years ago, had protested against the Vietnam war. Today's young folks are not anti-war protesters. They care about their parents and their country. They will be the next "Greatest Generation." =inc ww2010.h2 cattle "Infant Mortality and Dying as cattle" "What passing-bells for these who die as cattle?" was the line by Wilfred Owen that we quoted above. Why did so many people die in both World War I and World War II? For centuries prior to the 1900s, the death rate for major wars was something like 80 per 100,000 population. But in World War I, the death rate suddenly jumped to 300 per 100,000 population, and in World War II it was 700 per 100,000. In other words, after centuries of fairly constant death rates, the death rate jumped by a factor of almost 10 in the 1900s. Why did that happen? Why did so many more people die in the 1900s than in earlier centuries? You might guess that it was due to new technologies, and indeed that's the reason that Prince Charles gave at Saturday's commemoration of the Battle of the Somme: "For the first time in our history, we put mere boys into an assault against the bomb, bullets and the terrible wire entanglements, equipped with little more than raw courage," <#stdurl http://news.bbc.co.uk/2/hi/europe/5136064.stm "the prince said."#> "It is impossible not to be overwhelmed by a mix of deep emotion, humiliation and awe, sadness and pride." But there had been new technologies in earlier centuries as well, with no great effect on the number of war dead. The "bomb, bullets and terrible wire entanglements" might have had some increase in war dead, but doesn't explain a factor of four or five. It turns out that a more relevant question is this: Where did all those soldiers come from? The stories of the Battle of the Somme are horrifying -- fields packed with dead bodies, soldiers forced to walk over those dead bodies for the next assault on the enemy. Well, where did all those soldiers come from, all of a sudden? <#inc ww2010.pic mortal1.gif right "" "Estimated infant mortality rates - 1870-1999 - in Chicago"#> The answer is dramatic. It took me a long time to connect the dots on this issue, but the short answer is provided by looking at the adjacent graph. Prior to 1870, some 30% of all infants died before their first birthday. (By age 5, the figure was about 50%.) But infant and child mortality fell dramatically in the 1890s, and again in the 1920s, as you can see from the graph. This fall in infant mortality meant that a lot more infants lived long enough to become soldiers. That's why there were so many more soldiers in WW I, and then again in WW II. And that's why so many more soldiers to be killed. =inc ww2010.h2 clash "The Clash of civilizations" I've mentioned many times in this web log that the median age in the Gaza Strip is 15.6. Gaza is also one of the most densely populated regions in the world. And although Gaza is not the subject of this particular essay, it's worth pointing out that the latest conflict with Israel has left many parts of Gaza as a large prison with no electricity or running water, and little money. Gasoline and food are running out. No matter how justified the Israeli missile strikes are, they're leaving behind this large, crowded, young population of virile and increasingly angry young men with increasingly deprived angry young girlfriends and wives. The situation in the Mideast gets measurably worse each and every day, and these young men will soon lead the Palestinians into a war against Israel, and this war will end up engulfing the region. The population situation in Gaza might have come about anyway, but it was certainly helped by the advances in medicine that have reduced the level of infant mortality still further since 1950. And Gaza is not unique. There are highly densely populated regions around the world, as women give birth to more and more babies, and these babies survive into young adulthood, where they might have died in infancy in the past. There's no longer enough farmland for these huge masses of people, and so more and more people are crowding into densely populated rural areas. This year, for the first time in history, there are more people on earth living in cities than in rural areas. This has been made possible by the rise of huge, densely packed "mega-cities" around the world. According to the book Planet of Slums, by Miles Davis, in 1950 there were 86 cities in the world with a population of more than one million; today there are 400. Large cities breed (in both senses) even larger cities. Today, there are six cities -- Mexico City, Seoul-Injon, New York, São Paulo, Mumbai (Bombay), and Delhi -- with populations around 20 million. These are not cities of people living in glamorous apartments; they're often people living in slums. If you live in a home with a back yard, you can at least grow some crops of your own to survive if necessary. But in a crowded city, that's impossible, and an economic recession that hits the entire region can cause the starvation of tens or hundreds of thousands of people. Manila is a city of 14.3 million. Here's how Amy Chua, in her book World on Fire (pp. 3-4), describes life in Manila:

"In the Philippines, millions of Filipinos work for Chinese; almost no Chinese work for Filipinos. The Chinese dominate industry and commerce at every level of society. Global markets intensify this dominance: When foreign investors do business in the Philippines, they deal almost exclusively with Chinese. Apart from a handful of corrupt politicians and a few aristocratic Spanish mestizo families, all of the Philippines' billionaires are of Chinese descent. By contrast, all menial jobs in the Philippines are filled by Filipinos. All peasants are Filipinos. All domestic servants and squatters are Filipinos. in Manila, thousands of ethnic Filipinos used to live on or around the Payatas garbage dump: a twelve-block-wide mountain of fermenting refuse known as the Promised Land. By scavenging through rotting food and dead animal carcasses, the squatters were able to eke out a living. In July 2000, as a result of accumulating methane gas, the garbage mountain imploded and collapsed, killing something over a hundred people, including many young children."

This is not a rare situation, but a situation that's occurring around the world. And it's a situation that's come about for a number of reasons, but one of the major reasons is a reduction in infant and child mortality. The last 20 years have been a time of exceptional worldwide prosperity, especially during the last ten years, thanks to the various bubbles -- the stock market bubble, the real estate bubble, the credit bubble, and so forth. But if there's a worldwide recession -- and there must be sooner or later, and probably sooner -- then poverty levels around the world will increase quickly, and suddenly tens or hundreds of millions of men will no longer be able to feed themselves or their families. And when a young man can no longer afford to feed himself or his family, then he has little reason not to go to war. These young men will go to war against those whom they perceive to be wealthy oppressors -- whether it's the Palestinians against Israel, Mexican immigrants against American Anglos, North Koreans against South Koreans, or Chinese peasants against wealthy, corrupt government officials. The United Nations has many conflicting goals, and two of the most prominent are: Reduce poverty and starvation around the world; and reduce infant mortality around the world. Unfortunately, reducing infant mortality increases the population so much that there's not enough food to feed them, and so the reduction of poverty and starvation become an unrealistic goal. It would be nice if it were possible for human beings to create a "paradise on earth," where everyone was healthy and everyone was well fed. But that's impossible, because you always run out of food, and then there has to be war. We're approaching the Clash of Civilizations world war, at a time when infant mortality has fallen far, leading to masses of people, packed by the millions into large megacities, in a fragile world where any economic dislocation can cause mass starvation, creating huge pools of young men ready for war. So the Battle of the Somme, and the slaughter of masses of "these who die as cattle" still has a lot to teach us today. The earth currently has about 6.5 billion people. If we want to have the same amount of food per person as we had in 1950, then the Clash of Civilizations world war will have to reduce the population to about 4 billion, meaning that 2.5 billion people will have to die. And with the world getting more and more crowded each day, that world war cannot be too far off. =eod =// &&2 e060629 Israeli Air Force buzzes Syrian President's Palace as Israeli settlers are kidnapped =data ww2010.weblog.y2006.e060629.head Israeli Air Force buzzes Syrian President's Palace as Israeli settlers are kidnapped =data ww2010.weblog.y2006.e060629.keys Israel, Gaza, Palestinians =data ww2010.weblog.y2006.e060629.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060629.date 29-Jun-06 =data ww2010.weblog.y2006.e060629.txt1 As the level of brinksmanship increases, so does the risk of miscalculation. =data ww2010.weblog.y2006.e060629.txt2 Israeli tanks and soldiers pushed across the border into the southern Gaza Strip on Tuesday and Wednesday. According to the Israelis, their objective is to rescue the Israeli soldier hostage, Gilad Shalit, being held by Hamas militants. <#stdurl http://www.ft.com/cms/s/b6c73f58-070b-11db-81d7-0000779e2340.html "Israeli air strikes destroyed bridges that provide access in and out of Gaza City, and also fired on a power station."#> According to the Israelis, the objective was to prevent movement of the hostage. "We have no intention of recapturing the Gaza Strip. We have no intention of staying there," said Israeli Prime Minister Ehud Olmert. Palestinian militias kidnapped two Israeli settlers in the West Bank. Late reports are that they've been killed. No reason was given for the kidnappings. Israeli jets made low passes over the summer home of Syrian President Bashar al-Assad, and Syrian forces fired on the jets. Israelis say that much of the Hamas military leadership lives in Syria, and receives protection from Syria, and this is acknowledged by Hamas. According to the Syrians, Syria has played no part in the kidnapping of the soldier, and does not know where the hostage is being held. The living situation is Gaza is getting increasingly worse. The power station had provided most of Gaza's electric power, and now many homes and businesses, including hospitals, are dark. Because of sharp security restrictions imposed by the Israelis, almost no travel is allowed into or out of Gaza, and the destruction of the two bridges limits travel within Gaza as well. On the bright side, the Israeli incursion has, so far, not killed or wounded any Palestinians. On the Israeli side, a brief segment aired by CNN on Wednesday showed high approval by Israelis of the military incursion. Another day has gone by, and each day that goes by makes the situation worse in the Mideast. The trend path is that we should expect full scale war before too much longer, although mediators from Egypt, Europe and America are trying their best to head this off. Of all the events described above, there are two things to focus on if you want to understand the trend line:

Both Israelis and Palestinians are becoming increasingly angry at each other. Positions are hardening even more than before. New lines are being crossed all the time, with the approval of the respective sides. As this trend continues, all-out war between Arabs and Jews will not be far behind.
The involvement of Syria is particularly significant. A war between Palestinians and Jews is one thing, but if Syria is drawn in, then Iran and Egypt will also be drawn in. This would inevitably draw the United States in.

=inc ww2010.cf.cf060209 p left Please note that I'm NOT saying that these two results can be avoided. Quite the contrary, this is the kind of thing that I <#hreftext ww2010.i.may01 "predicted in May, 2003, when the "Mideast Roadmap to Peace" came out."#> As each day brings new surprises and counter-surprises, the chances of miscalculation on either side could bring events to spiral out of control into full-scale war. In 2004, I identified <#hreftext ww2010.i.danger041120 "the six most dangerous regions in world,"#> six regions of the world where a regional war was likely and where a regional war would lead to a world war. These regions are shown on the adjoining graphic. Using Generational Dynamics forecasting techniques, I computed the probability that a war would break out in one of these regions to be approximately 22% in 2005, and slightly higher in 2006. At that time I didn't know which of the six regions would break into war first, and in fact considered major war in the Caucasus to be the most likely. But now it looks more and more that the Mideast will be first, and that war will be coming pretty soon. It's impossible to predict whether full scale war will break out next week, next month or next year, but it looks more and more that it will happen sooner rather than later. =eod =// &&2 e060626 Israeli armed forces mass on Gaza border / soldier's kidnapping =data ww2010.weblog.y2006.e060626.head Israeli armed forces mass on Gaza border after soldier's kidnapping =data ww2010.weblog.y2006.e060626.keys =data ww2010.weblog.y2006.e060626.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060626.date 26-Jun-06 =data ww2010.weblog.y2006.e060626.txt1 Egyptian mediators are attempting to head off a "large scale military offensive" =data ww2010.weblog.y2006.e060626.txt2 by Israel <#stdurl http://www.haaretz.com/hasen/spages/731476.html "to recover the kidnapped soldier."#> The soldier was kidnapped by Hamas' military wing. There is a security fence along the border between Gaza and Israel, but the Hamas cells spent several weeks <#stdurl http://www.haaretz.com/hasen/spages/731197.html "digging a tunnel, 530 meters (580 yards) long, underneath the security fence."#> On Sunday morning, the cell crossed through the tunnel into Israel and caught an Israeli tank with three soldiers by surprise. Using anti-tank weapons, the Palestinians killed two soldiers, and kidnapped the third. Palestinians are generally thrilled by this and Israelis are furious -- not only at the Palestinians but also at their own IDF (Israeli Defense Forces) for permitting it to happen. As <#inc ww2010.weblog.ref e060517 "I've written about repeatedly on this web site,"#> but no pundit, journalist or analyst seems to be capable of understanding, is that political events in the Mideast are "attracted" (in the sense of a "chaotic attractor" in Chaos theory) to war. Events prove this out almost every day. <#inc ww2010.weblog.ref e060621b "Tensions have been boiling among Palestinians and Israelis,"#> and the situation has gotten worse on almost a daily basis. You can go back 16 months to the election of Mahmoud Abbas as President, and almost every day since then you can find some event that brought the region closer to war, but rarely an event that helped the (laughable) "peace process." The current crisis has wide ramifications, even if the Egyptians can work their magic and find a way to talk the Israelis out of military action in Gaza:

Palestinian President Mahmoud Abbas and Hamas Prime Minister Ismail Haniyeh were in the midst of complex negotiations which might have led to power-sharing agreement between Fatah and Hamas. It was thought that the negotiations might even lead to an agreement to recognize the state of Israel. That's not going to happen now, any time soon.
Israeli Prime Minister Ehud Olmert has been pressing to move forward with his "convergence" or "consolidation" plan. Under this plan, many Israeli settlements in the West Bank would be closed down, and consolidated with settlements closer to Jerusalem. As a by-product, the result would be a de facto unilateral setting of Israel's borders, something that has drawn mixed or hostile reaction from the West.
Last year's Israeli unilateral evacuation of Gaza was widely praised when it happened, but Olmert will now be under even more pressure to make no further concessions to the Palestinians.
Any international agreement to restore aid to Palestinians will now remain off the table for the time being.
Palestinian President Mahmoud Abbas is now going to be under enormous pressure to bring Hamas violence under control, but if he tries, the result would be violence, possibly leading to civil war, between the Fatah and Hamas militias.

Obviously, the terrorist cells that carried out this kidnapping, had some or all of these results as objectives. One thing that people don't understand is that during a generational crisis period, young people have no fear of war. That's true of young Americans, just as it's true of young Israelis and young Palestinians. The median age of the entire population of the Gaza Strip is 15.6, and yet not one news or analytical article ever mentions this fact, or its consequences. You don't have to be a rocket scientist or know anything about Generational Dynamics to understand that a media age of 15.6 means that the Gaza strip is being run by children. We know that young people in the US get all their news from the Comedy Channel, and we can assume that young people in the Gaza strip get their news from something similar. And so, the Gaza strip is not being run by Abbas or Fatah or Hamas -- it's being run by children who learn about world events from the Palestinian Comedy Channel. You can see the consequences here. Even if Hamas Prime Minister Ismail Haniyeh would like to see the Israeli hostage freed (and he says that he would), it's not up to him. It's up to the children who are holding the hostage, and it depends on whether Haniyeh and the Egyptian mediators can threaten or seduce or cajole these children into freeing him. The children holding the hostage belong to <#stdurl http://today.reuters.com/news/newsArticle.aspx?type=topNews&storyID=2006-06-26T175855Z_01_SCH354578_RTRUKOC_0_US-MIDEAST.xml "Hamas's Izz el-Deen al-Qassam Brigades, the Popular Resistance Committees and the Islamic Army."#> This group is demanding the release of hundreds of Palestinian women and children in Israeli jails, in exchange for release of the hostage. Israeli Prime Minister Ehud Olmert rejected the demand, saying that, "The time is approaching for a comprehensive, sharp and severe Israeli operation. We will not wait forever. We will not become a target of Hamas-terrorist blackmail." From the point of view of Generational Dynamics, the "attraction" of day to day political events to a state of total war appears to be accelerating. It was fairly slow in the period following Yasser Arafat's death, and really began to speed up following the Israeli evacuation of Gaza. Today, events in the Mideast appear to be spiraling out of control very rapidly. =eod =// &&2 e060623 Are Germans now proud to be Germans? =data ww2010.weblog.y2006.e060623.head Are Germans now proud to be Germans? =data ww2010.weblog.y2006.e060623.keys Germany =data ww2010.weblog.y2006.e060623.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060623.date 23-Jun-06 =data ww2010.weblog.y2006.e060623.txt1 World Cup euphoria may be making the difference. =data ww2010.weblog.y2006.e060623.txt2 From the point of view of Generational Dynamics, the most fascinating things are large changes in attitudes or behavior by large masses of people. The attitudes of politicians are endlessly fascinating to journalists and pundits, but fairly useless in telling us what's going on in the world. But when an entire population changes its attitude about something, it almost always has a major generational significance, and it almost signals that the world is about to change significantly. But this change is remarkable enough that even the journalists are noticing it. <#inc ww2010.pic germflag.gif left "" "Official German Flag and colors -- black, red and gold"#> For the first time in decades, <#stdurl http://www.dw-world.de/dw/article/0,2144,2064689,00.html "Germans are being openly patriotic again."#> German flags are flying all over the place, around the sites of the World Cup (soccer) games. Germans are even openly singing their national anthem again -- at least the third verse, since the other first two verses were banned after World War II. This is a dramatic change. For almost 60 years, since the end of World War II, the German people have been associated around the world with Hitler and with Auschwitz and other concentration camps, where Jews were exterminated. The time is right for a change, from the point of view of Generational Dynamics. Like every nation that fought in WW II as a crisis war, the German population is finally losing the generations of people who lived through that war. Even today's senior leaders were, for the most part, in the generational born after the war, meaning that they could not have fought in the Nazi army, could not even been part of the Nazi youth. It's easier to be a patriotic German when the sins of the past can really be placed firmly in the past, and that's what's happening. However, it's important to note that the change in public opinion is still ongoing. It was <#inc ww2010.weblog.ref e060525 "just a month ago that we discussed a new poll"#> that described a different change in public opinion: that Germans believe "clash of civilizations" with Muslims is coming. So it remains to be seen how increased German patriotism and changing German attitudes towards Muslims will combine to form a merged world view. Both the German flag and the German national anthem have had turbulent histories. The modern German flag, shown above, was <#stdurl http://news.bbc.co.uk/2/hi/uk_news/5108134.stm "created in 1848, at a time when the united nation of Germany was just being formed."#> The colors represented the unity of the Germans: the black of Prussia, the red of Austria and the gold representing the other states. <#inc ww2010.pic germswas.gif right "" "German flag with Nazi Swastika adopted by Hitler"#> However, when Hitler came to power he adopted a different flag, the Nazi Swastika. When the war ended, the earlier flag was re-adopted. The melody of the German national anthem was <#stdurl http://german.about.com/library/blmus_deutschland.htm "originally composed by Franz Joseph Haydn in 1797, and put to words in 1841,"#> to create "Das Lied der Deutschen." The anthem has three verses. The first verse celebrates the unification of Germany, as it was contemplated in the mid 1800s. It begins "Germany, Germany above all, above everything in the world," and talks about Germans standing together to protect one another. This verse was adopted by Hitler as an official Nazi anthem. The concept of German unity for mutual protection suddenly was reinterpreted as a desire for German conquest of the world. So, in 1952, the first verse was officially removed from the German national anthem. The second verse is a sweet homage to "German women, German loyalty, German wine and German song." It's a tribute to German life and German values in a unified Germany, but because it seemed almost humorous in 1952, the second verse was also banned from the national anthem. Today the official anthem consists of the third verse and only the third verse, which begins "Unity and law and freedom for the German Fatherland." Finally, there's a verse that made sense in the mid 1800s in the context of a desire for German unity, and also made sense in the mid 1900s in the context of a desire to end war and replace it with freedom and the rule of law. Here are the three verses of the original German national anthem, and <#stdurl http://german.about.com/library/blmus_deutschland.htm "their literal English translation:"#>

Das Lied der Deutschen	Song of the Germans
Deutschland, Deutschland über alles, Über alles in der Welt, Wenn es stets zu Schutz und Trutze Brüderlich zusammenhält, Von der Maas bis an die Memel, Von der Etsch bis an den Belt - Deutschland, Deutschland über alles, Über alles in der Welt.	Germany, Germany above all, Above everything in the world, When always, for protection, We stand together as brothers. From the Maas to the Memel From the Etsch to the Belt - Germany, Germany above all Above all in the world.
Deutsche Frauen, deutsche Treue, Deutscher Wein und deutscher Sang Sollen in der Welt behalten Ihren alten schönen Klang, Uns zu edler Tat begeistern Unser ganzes Leben lang. Deutsche Frauen, deutsche Treue, Deutscher Wein und deutscher Sang	German women, German loyalty, German wine and German song, Shall retain in the world, Their old lovely ring To inspire us to noble deeds Our whole life long. German women, German loyalty, German wine and German song.
Einigkeit und Recht und Freiheit für das deutsche Vaterland! Danach lasst uns alle streben Brüderlich mit Herz und Hand! Einigkeit und Recht und Freiheit Sind des Glückes Unterpfand; Blüh' im Glanze dieses Glückes, Blühe, deutsches Vaterland.	Unity and law and freedom For the German Fatherland Let us all strive for that In brotherhood with heart and hand! Unity and law and freedom Are the foundation for happiness Bloom in the glow of happiness Bloom, German Fatherland.

The first verse of the original anthem is still controversial, and has been <#stdurl http://www.news24.com/News24/World/News/0,,2-10-1462_1940206,00.html "associated with racial attacks against foreigners."#> This fact only exposes the intensity of the changes that are occurring in German attitudes and behaviors, as Germans once again are willing to say that they're proud to be Germans. =inc ww2010.cf.cf060209 p left From the point of view of Generational Dynamics, Europe is headed for another major genocidal crisis war. People who doubt this refuse to learn from history - there have been genocidal European wars for millennia, most recently in the 1940s, and there's absolutely no reason on earth to believe that it will never happen again. In Asia, we can see China, Iran and Pakistan forming a new axis, opposing the new allies - Japan, India, Russia, and America. But the details of the European war are still not completely clear, at least to me. As I've said before, the level of vicious animosity that the British and French hold for each other is a strong trend indication that the French and the British will be fighting each other in the next European war. But the role of Germany in such a war is still unclear. Also unclear is how this war will interact with the war between Europeans and Muslims that will occur at the same time on European soil. All we can do at this time is watch developments, like the current change in German attitudes, and see how the trends develop. =eod =// &&2 e060621b Tensions boiling among Palestinians and Israelis =data ww2010.weblog.y2006.e060621b.head Tensions reaching the boiling point among Palestinians and Israelis =data ww2010.weblog.y2006.e060621b.keys Palestine, Israel =data ww2010.weblog.y2006.e060621b.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060621b.date 21-Jun-06 =data ww2010.weblog.y2006.e060621b.txt1 So-called "pinpoint" Israeli missile strikes have killed several civilians, including children =data ww2010.weblog.y2006.e060621b.txt2 in the Gaza strip, as the Israeli Defense Force (IDF) attempts to kill terrorist leaders selectively with missiles. This is increasingly infuriating the Palestinians, at a time when the tensions between the two major Palestinian government factions -- Mahmoud Abbas' Fatah and Hamas -- are also increasing enormously. There's a growing sense that no one is in charge anymore, according to <#stdurl http://www.ariga.com/2006-06-21.shtml "Robert Rosenberg's Ariga column."#> "And with tensions running so high -- between Hamas and Fateh, as well as Israel and the Palestinians -- each passing day without a deal carries the risk of an outbreak of internecine hostilities inside Gaza," says Rosenberg, "as well as escalation of Palestinian attacks on Israel iin retaliation for Israeli retaliations for those attacks." From the point of view of Generational Dynamics, this increasingly unfortunate situation is exactly what was expected and has been frequently predicted on this web site. As <#hreftext ww2010.i.may01 "predicted in May, 2003, when the "Mideast Roadmap to Peace" came out,"#> not only did the "Roadmap" fail, but the Mideast is descending into increasing chaos on almost a daily basis. This has only accelerated since the death of Palestinian president Yasser Arafat and the incapacitation of Israeli prime minister Ariel Sharon. Recall that for many years, the West blamed Yasser Arafat for sabotaging any peace process and for encouraging Palestinian terrorism. This mantra was repeated over and over again by politicians, pundits and journalists, none of whom understood, or were capable of understanding, even the simplest, most elementary concepts of how generational changes work. This lack of understanding of simple generational theory explains why politicians, analysts and pundits of all political parties make so many stupid mistakes, and constantly get things wrong. For some reason, which constantly escapes me, these politicians, analysts and pundits just can't seem to get their head around the concept that policy isn't being made by the dinosaur Palestinian and Israeli politicians whom everyone credits or blames when anything happens. Like in America, these politicians have to answer to their constituencies, and in the Mideast, these constituencies are increasingly young kids with little or memory of anything in Mideast politics but Palestinian terrorism and Israeli military strikes. In the most extreme case, the Gaza strip, <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html "the median age is 15.6,"#> meaning that policy is being set by children who really couldn't care less about any of nuances of international politics that politicians, analysts and pundits seem to prattle on and on and on about endlessly. From the point of view of Generational Dynamics, the increasing chaos and lack of political control is what's expected. As <#inc ww2010.weblog.ref e060307 "I wrote about in March at length,"#> the Palestinian government was already dysfunctional, and with the incapacitation of Sharon, Israel is also becoming increasingly dysfunctional. In simplest terms, this is because the complex political infrastructures that were set up by the generation of Heroes who fought in World War II are now old and creaky, encrusted with bureaucracy and so fragile that almost any crisis will shatter them. This is true of international organizations, like the United Nations, and it's also true of political organizations in every country that fought in WW II as a generational crisis war. The level of threat and confrontation is growing around the world, but probably no more so than in the Mideast. The Palestinian Liberation Organization (PLO) when led by Yasser Arafat was able to maintain order among the Palestinians, but now it's crumbling into a pile of dust that would be a joke if it weren't so serious. And the Israeli parliamentary structure, once led by Liberal or Conservative war heroes like Yitzhak Rabin (1922-1995), Menachem Begin (1913-1992), or Ariel Sharon (1928-), is now being run by Ehud Olmert (1945-), who is a perfectly capable guy but with little understanding of the horrors of a crisis war, and by the abortive Kadima party, where Kadima means "forward," but might also mean "joke." A new genocidal crisis war between Arabs and Jews cannot be avoided -- Generational Dynamics tells us that with 100% certainty, and you can see it with your own eyes as each day goes by. We can't prevent such a war, but we CAN prepare for it. And every day we sit around talking about a non-existent "peace" process, and every day we nurture "hopes" that the Palestinians and Israelis will fall in line, like at teenage boy "hoping" that the pretty girl across the room will come over and ask him out, is another wasted day that we could have spent preparing ourselves and our nation for the worst - which is what's coming, whether we like it or not. =eod =// &&2 e060621 US activates its missile defense system over North Korea crisis =data ww2010.weblog.y2006.e060621.head US activates its missile defense system over North Korea crisis =data ww2010.weblog.y2006.e060621.keys North Korea =data ww2010.weblog.y2006.e060621.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060621.date 21-Jun-06 =data ww2010.weblog.y2006.e060621.txt1 The U.S. may try to shoot down any test missile launched by the North Korea, =data ww2010.weblog.y2006.e060621.txt2 using a ground-based missile defense system that's still under development. <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2006-06-20T164018Z_01_SP196218_RTRUKOC_0_UK-KOREA-NORTH.xml "A U.S. defence official confirmed"#> that the Pentagon had switched the missile-defense system from test mode to operational. Michael Kucharek, a spokesman for US Northern Command, would not comment on the status of the missile defence system. A spokesman for the <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/06/21/weapons21.xml&sSheet=/news/2006/06/21/ixnews.html "U.S. Northern Command"#> said, "As the command tasked with homeland defence, we are prepared to do what is necessary to defend this nation on land, sea, air and in space." The long-range <#stdurl http://www.dailytimes.com.pk/default.asp?page=2006%5C06%5C21%5Cstory_21-6-2006_pg4_10 "Taepodong-2 missile can travel far enough from North Korea to reach Alaska."#> They may have an upgraded version capable of reaching Washington state. At one level, this is all grand theatre. The North Koreans gain some attention, and may or may not get to test out their missile technology. And the United States gets to test its missle-defense system -- at least the tracking technology even if no attempt is made to intercept the Korean missile. Still, were talking about a real missile, being tested by a country that has a nuclear weapon capablity. And what makes many countries especially nervous the North Korean situation is its linkage to the Iran situation. If the world doesn't stand up to the North Koreans, then the Iranians can assume they have a free hand. =inc ww2010.cf.cf060209 p left From the point of view of Generational Dynamics, all this is just one more step on the road to a crisis war on the Korea Peninsula to reunify North and South Korea -- a war that we'll be drawn into because of our defense treaties with South Korea, that Japan will be drawn into because the Japanese and the Koreans are headed for a revenge war, that China will be drawn into because North Korea is on China's border. =eod =// &&2 e060618 Massacre of civilians in Sri Lanka leading to crisis war =data ww2010.weblog.y2006.e060618.head Massacre of civilians in Sri Lanka leading the way to a crisis war =data ww2010.weblog.y2006.e060618.keys Sri Lanka, Tamil Tigers =data ww2010.weblog.y2006.e060618.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060618.date 18-Jun-06 =data ww2010.weblog.y2006.e060618.txt1 From the point of view of Generational Dynamics, the gratuitous murder of civilians in a war =data ww2010.weblog.y2006.e060618.txt2 indicates that the genocidal level of the war is increasing, and this indicates that a crisis war is building. This is an extremely dangerous and rapidly changing situation, because, <#inc ww2010.weblog.ref e060616 "as I discussed the other day,"#> a genocidal war between Tamils and Sinhalese could easily spread from Sri Lanka to India, and from there to a larger region. <#inc ww2010.pic india4.jpg left "" "Indian subcontinent, with the island of Sri Lanka off the southern tip of India."#> The latest incidents incidents illustrate this. Three days ago, a bus was bombed, killing 64 people, including children. Yesterday, a church with 200 civilian Tamils, including children, was bombed, killing 7 people. The government blames the Tamils for the bus bombing, but the Tamils deny responsibility. The Tamils blame the government for the church bombing, but the government denies responsibility. But civilians are being killed on both sides, and that's really all that matters right now. I'd like to use this as an opportunity to discuss some things about crisis wars in general, in order to emphasize why the situation in Sri Lanka is so dangerous. The meanings of "crisis era" and "crisis war" are very complex and subtle, which explains why I get questions from readers on the subject. Even people familiar with generational theory find the concepts confusing. Right now, today, the question often is this: If America is currently in a "generational crisis" period (which it is), does that mean that the Iraq war is a "genocidal crisis war" that we're waging against the Iraqi people? This question is currently being discussed in <#stdurl http://corner.nationalreview.com/post/?q=NTE5MmM0YzY0YjI5NGM4MGNlZDY1NDIyNDczOTcxNTA= "John Derbyshire's postings on the National Review online blog,"#> in a discussion comparing the Iraq war to the Vietnam war. (On that page, the underlined phrase, "This is an optional war, not a "crisis war"" is an indirect link to my book on Amazon.) So are we pursuing the Iraq war as a genocidal war? Obviously not, since we go to a lot of trouble to avoid killing civilians, except by accident; and when it appears that our armed forces may have intentionally killed civilians, then it becomes a criminal investigation and an international news story, as in <#stdurl http://www.politicalgateway.com/news/read/16746 "the Hadith scandal, currently under way."#> So we appear to have a contradition in Generational Dynamics: How could this be a "generational crisis period," if the Iraq war is not a genocidal crisis war? The answer is that generational crisis periods build slowly. What characterizes crisis eras is that the generation of risk-averse people who grew up during the previous crisis war all disappear (retire or die), all at about the same time, leaving behind younger generations of confrontational people, who take the country to a new crisis war. Early in a crisis era, there are still a few people around in the generation that grew up in the previous crisis war. (In our case today, this refers to the Silent generation that grew up during World War II. <#inc ww2010.weblog.ref e060417 "Secretary of Defense Donald Rumsfeld"#> is in the Silent generation, and <#inc ww2010.weblog.ref e060420 "Chinese President Hu Jintao is in the corresponding generation"#> for China.) As long as enough of these people are in power, then wars can begin and be pursued with vigor, but the "rules of war" will be followed, and care will be taken, for the most part, to protect the lives of innocent civilians. However, as crisis eras progress, and people from this generation continue to die off, then the population becomes increasingly willing to "cross lines" and risk various kinds of brinksmanship, including the killing of civilians as collateral damage. This raises the stakes in a non-genocidal war, so that a "tit for tat" pattern arises. A certain "tipping point" occurs in every crisis war, when the public becomes so anxious, furious and outraged by acts (real or perceived) on the other side that the desire to win and to protect one's nation and way of life become more important than anything else. This point is called the "regeneracy," because the public forgets about political differences, and starts worrying about national survival. It's the time of regeneration of civic unity, and, in a sense, it's the time of regeneration of the entire nation. In the American Civil War, it was the Battle of Bull Run that turned the war from a spectator sport into a serious war, and led to the bloody Battle of Gettysburg and Sherman's "scorched earth" March through Georgia. In WW II, it was the Bataan Death March that infuriated and united the country, and let to the Allies' saturation bombing of civilians in Germany and Japan. Unlike the Civil War and WW II, the Vietnam war was an "awakening era" war for America, not a crisis war, and so the nation acted very differently. In 1967, the North Vietnamese "Tet Offensive" was a military disaster for them, but it invigorated and united the North Vietnamese against us, since this war was a crisis war for them. But it was an awakening era war for America, so the Tet offensive only served to heighten the "generation gap" that split America politically, and led to the American defeat. That's why the online discussion, mentioned above, comparing the Iraq and Vietnam war, is so completely, totally meaningless. It's like saying, "Apple blossoms grow in the spring. Why don't they grow in the fall?" Or, "Leaves blow off of trees on windy days in the fall. Why don't they blow off of trees on windy days in the spring?" America today is in a generational crisis era. During <#hreftext ww2010.i.sixties040501 "the 1960s, when America fought the Vietnam war,"#> America was in a generational awakening era. It's nonsense to compare the Vietnam War to today's Iraq war, just as it's nonsense to compare apple blossoms in the spring with apple blossoms in the fall. It just doesn't make sense. It astounds me that almost no one, including people who should know better, sees the vast differences. For example, the massive anti-war protestors against the Vietnam war were from the college-age Baby Boomer generation, and they were protesting against their parents. Today's tiny collection of anti-war demonstrators are old crones and geezers from the geriatric Baby Boomer generation, and they're protesting against George Bush, reliving their childhoods. This is as plain as the nose on your face, and the implications are profound, but it never ceases to astound me that journalists, pundits, analysts and politicians just can't see this. It's as if somebody had pounded a nail into the portion of their brains that can figure such things out. This brings us back to the genocidal violence in Sri Lanka. This civil war is occurring in what is definitely a crisis era, since the last crisis war occurred just after the end of WW II. But the civil war violence has been mostly "low-level," and even resulted in a peace agreement in 2002. But, in the last few months, the violence has increased. But more than that, we're beginning to see lines being crossed, both sides are practicing brinksmanship. The bombing of a bus and then a church filled with civilians, including children, are major lines being crossed. If this weren't a crisis era for Sri Lanka, then the violence might stop there. As long as there are plenty of people around who lived survived the last crisis war, then "cooler heads will prevail." Old people who remember the last crisis war will say, "Let's simmer down for a while until we see who's responsible for these bombings, and we'll decide what to do next." But a population in a crisis era is like a tigress in heat, and a crisis war is like wild, uncontrollable sex. There's no rational thought, just a desire to take action based on blind emotions. And I'm not exaggerating or joking when I compare crisis wars to sex. They are both totally irrational and guided by gut emotions -- unlike non-crisis wars, which are much more guided by reason and rationality. Talking about "mission creep" in a crisis war makes as much sense as talking about "mission creep" in sex. So now we can answer some of the questions we raised at the beginning of this essay. Are we pursuing the Iraq war as a genocidal war? No, because it's early in America's crisis era. Wait until some horrible surprise happens -- a large terrorist attack on American soil, a substantial military loss overseas, or a nuclear missile or two landing on American cities, for example. This would launch American into a war of revenge and retribution and, with today's high-tech weaponry it would be a war like none the world has ever seen. Why is the Sri Lanka war so dangerous? Because the entire Indian sub-continent is in a generational crisis era right now, 61 years past the end of World War II, and a genocidal war in Sri Lanka might quickly spread to a war in the entire sub-continent, and then to a world war. =eod =// &&2 e060616 Violence leading to Sri Lanka war is increasing =data ww2010.weblog.y2006.e060616.head Violence leading to Sri Lanka war is increasing =data ww2010.weblog.y2006.e060616.keys Sri Lanka, Tamil Tigers =data ww2010.weblog.y2006.e060616.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060616.date 16-Jun-06 =data ww2010.weblog.y2006.e060616.txt1 Tamil Tiger rebels are being blamed for a mine attack on a bus, killing 60 people including children. =data ww2010.weblog.y2006.e060616.txt2 In retaliation, the <#stdurl http://news.bbc.co.uk/2/hi/south_asia/5085740.stm "government Air Force is stepping up raids on Tamil positions."#> <#inc ww2010.pic india4.jpg right "" "Indian subcontinent, with the island of Sri Lanka off the southern tip of India."#> As we wrote in <#inc ww2010.weblog.ref e060512 "last month's analysis of the approaching Sri Lanka war,"#> this war would not necessarily involve other countries, since Sri Lanka is an island nation off the southern coast of India. However, both ethnic groups, the Sinhalese and the Tamils, are linked to larger populations within India itself. So a genocidal crisis war between the Sinhalese and the Tamils might well have consequences within India itself. In the worst scenario, it would trigger a civil war within India, as well as a war with Pakistan. =eod =// &&2 e060615 Jubilation as stock markets "panic upward" around the world =data ww2010.weblog.y2006.e060615.head Jubilation as stock markets "panic upward" around the world =data ww2010.weblog.y2006.e060615.keys stock market crash, Great Depression, volatility =data ww2010.weblog.y2006.e060615.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060615.date 15-Jun-06 =data ww2010.weblog.y2006.e060615.txt1 Suddenly stocks are gaining sharply in synchronized markets in North America, Europe and Asia. =data ww2010.weblog.y2006.e060615.txt2 After big gains on Wednesday, markets around the world had a second day of major gains on Thursday. New York markets gained another 2% on Thursday, topping 11,000, and the S&P index had its biggest one-day gain in several years. European markets gained 2-4% on Thursday. As of midday Friday, Asian markets are up 3-4%. News anchors and analysts are smiling broadly, expressing open relief that those crazy, panicky investors who caused sharp selloffs have now come to their senses and buying back into the stock market. I'm sure that champagne corks are popping somewhere. Unfortunately, this "upward panic" is just as dangerous as a sharp selloff. Panicky investors buy when they're afraid of missing out on a big rally, and they sell when they're afraid of getting stuck in a big selloff. Both kinds of behavior are equally dangerous, and could lead to a full scale panic. In fact, what we're seeing is that all markets in the world are synchronized, all going up or down together. Investors are no longer making buy or sell decisions based on the valuation of any particular stock. If you're going to buy, then what difference does it make if you buy IBM or Johnson & Johnson, since all stocks are rising and falling together? We no longer have a million different stocks. We have only one stock: call it "stock market." Investors are making decision in unison eithr to buy shares of "stock market," or sell shares of "stock market." And just like any single stock, if it can go up or down 2-3% in one day, then it can go up or down 20-30% in one day. I know it would be exciting if the entire stock market went up 20% in one day, but that's never happened, and anyway, <#hreftext ww2010.i.050711eleven "the stock market is overpriced by over 200%, same as in 1929."#> We're still on the path for an early stock market crash, as I described in my <#hreftext ww2010.i.060530panic "May 30 essay, "Speculations about a stock market panic and crash.""#> What would it take to get off that path? <#inc ww2010.weblog.ref e060531 "On May 31, I said that"#> there are three major possible ways:

A sustained rally. But this is actually pretty much impossible now, since interest rate hikes in Washington, Japan and Europe have substantially reduced the amount of liquidity in the world, and because investors' risk-averseness is much higher these days.
A sharp reduction in volatility. But this obviously isn't happening. If anything, volatility is increasing, with ever larger market increases and decreases.
A "de-synchronization" of the world's markets -- e.g., Asia goes up when Wall Street goes down. This would indicate that money is flowing from market to market, rather than being pulled out of all markets. But obviously this isn't happening either, as worldwide markets remained closely synchronized.

Any one of these three things would take us off the path to a major stock market panic, but none of them is happening. If anything, we're more firmly on this path every day. As I've said many times, a stock market panic is a chaotic event, so it's impossible to predict the exact date of a stock market panic. But we're in a very dangerous time now, with increasing volatility, and all the markets synchronized in lock-step. A major "generational panic" in the stock markets would not be a surprise to me, and should not be a surprise to any readers of this web site, but obviously it would be to Ben Bernanke and to champagne-cork popping investors around the world. =eod =// &&2 e060614 US 'countermeasures' over N. Korea missile test =data ww2010.weblog.y2006.e060614.head US warns North Korea on "countermeasures" over missile test =data ww2010.weblog.y2006.e060614.keys North Korea, missiles =data ww2010.weblog.y2006.e060614.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060614.date 14-Jun-06 =data ww2010.weblog.y2006.e060614.txt1 North Korea appears to be making preparations for a long-range missile test. =data ww2010.weblog.y2006.e060614.txt2 The missile being tested would presumably be capable of carrying a nuclear weapon to the US mainland. Lee Tae Sik, South Korea's ambassador to Washington, <#stdurl http://www.iht.com/articles/2006/06/14/news/missile.php "said that the situation was "very worrisome.""#> Ban Ki Moon, South Korea's foreign minister, said his ministry "was in discussions with related departments on possible measures" against a North Korean test. Alexander Vershbow, American's amabassador to South Korea, said that a missile test "would be viewed as a very serious matter and we would have to take appropriate measures in response." Vershbow didn't say what the "appropriate measures" would be. Presumably it would be something like saying, "Damn you, North Korea!" or something equally consequential. It's worth taking a moment to step back and ask ourselves: What have been the accomplishments of international diplomacy in the last few years? Let's list some items:

The U.S. and the United Nations have been trying for years to get North Korea to halt it's nuclear weapons program, with no success at all. <#hreftext ww2010.i.korea "(I said in 2003 that North and South Korea are headed for a certain reunification war,"#> and that it would involve nuclear weapons.
The "Mideast Roadmap to Peace" has gone nowhere, and the Mideast's descent into war appears to be accelerating every day. <#hreftext ww2010.i.may01 "(I predicted in 2003 that this would happen.)"#>
Despite numerous speeches and lots of handwringing, the U.N. has done nothing to stop the genocide in Darfur, and now it's as bad as ever, spreading into Chad. (<#inc ww2010.weblog.ref e040628 "(I predicted in 2004 that it was a crisis war, a force of nature that could not be stopped.)"#>
Iran is going ahead with its nuclear program, despite international demands that it stop.

My point is that nothing has been done in one international crisis after another. Oh, there's been plenty of talk -- there's always a lot of that. But nobody is able to DO anything to prevent the worldwide rush to world war. There's only real exception to that statement: No matter what you think of the Iraq war, the American decision to invade was the last time anyone was able to actually DO anything to draw the world back from world war (by preventing Iraq from developing or using weapons of mass destruction). Since then, no one has been able to DO anything. In fact, since then America is now as politically paralyzed as the rest of the world, and is no longer able to DO anything any more either. That's the explanation for my joke above. Will America or anyone else DO anything if North Korea tests a missile? Or will there just be empty rhetoric? I expect the latter. Actually, I was discussing this with a friend earlier today, and he mentioned an intriguing possibility: When Vershbow said that we would take "appropriate measures in response," he might have meant a military action to blow the missile out of the sky with American anti-missile technology of some kind. This action would illustrate a different point: That as the world becomes politically and socially more and more paralyzed, the only options left are in the realm of military brinksmanship. North Korea will launch a missile, thinking that we can't do anything about it. We knock the missile out, thinking that they can't do anything about. As military brinksmanship continues, the steps get more and more aggressive, until a miscalculation occurs and they spiral out of control into war. That's certainly what's happening today in the Mideast, with the military brinksmanship increasing on a daily basis between the two major Palestinian factions, as well as between the Palestinians and Israelis. =inc ww2010.cf.cf060209 p right In my current "world risk level" graphic, I've placed North Korea at "Medium Risk" because I don't think that they're yet prepared to launch an attack on South Korea or Japan. I still think that's true, but the current situation with the missile test shows that a war could really begin at any time through miscalculation. Anyway, a Mideast war appears to be far more imminent than a war in Korea right now. =eod =// &&2 e060612 Trade deficit continued to grow in April =data ww2010.weblog.y2006.e060612.head Trade deficit continued to grow in April =data ww2010.weblog.y2006.e060612.keys trade deficit =data ww2010.weblog.y2006.e060612.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060612.date 12-Jun-06 =data ww2010.weblog.y2006.e060612.txt1 What passes for good news in Washington is that it grew less than expected. =data ww2010.weblog.y2006.e060612.txt2 Economists <#stdurl http://www.theaustralian.news.com.au/story/0,20867,19437462-36375,00.html "had expected"#> that the trade deficit would increase to $65 billion. Instead, it <#stdurl http://www.bea.gov/bea/newsrelarchive/2006/trad0406.htm "increased a mere $63.4 billion, only $1.9 billion larger than in March,"#> according to the Dept. of Commerce. According to <#stdurl http://www.theaustralian.news.com.au/story/0,20867,19437462-36375,00.html "a Financial Times analysis,"#> "Many economists believe that the underlying deterioration of the trade position should moderate as US consumers tighten their belts and growth picks up in Europe and Japan. In recent weeks there has been mounting evidence that the long-awaited cooling of the US economy is under way." There's a great deal of irony in this so-called analysis. First off, economists have been saying for three or more years that "the underlying deterioration of the trade position should moderate," meaning that the size of the trade deficit should start to come down. But US consumers never do seem to "tighten their belts," do they? They just keep going deeper into debt. Second, the "mounting evidence that the long-awaited cooling of the US economy is under way" is highly correlated to the recent selloff in the stock market. More of the "long-awaiting" cooling will mean more stock market selloffs. The reason that I mention the trade deficit every now and then is because it shows that the mainstream economists, politicians, journalists and pundits don't know what they're talking about. If they did, the trade deficit would have been coming down for at least a year or two. From the point of view of Generational Dynamics, the way to understand what's going on is to understand that a business, or any organization, starts out as "lean and mean," very efficient and energetic. But as time goes on, senior managers establish bureaucracies, products and services become institutionalized, and the organization becomes increasingly inefficient and inflexible, and vulnerable to attack by competitors. In the case of America, this has happened to the country as a whole. During the Great Depression of the 1930s, almost every organization went bankrupt or renewed itself completely. But as time has gone on, many organizations -- federal, state and local governments, businesses, labor unions, public schools, colleges, financial institutions, military, and so forth -- have become increasingly bureaucratic. Averaging all these organizations together, the country as a whole is increasingly bureaucratic and inefficient, and has been losing manufacturing jobs to a more efficient China and service jobs to a more efficient India. This trend continues, so exports continue to level off, while imports continue to increase. The only way to resolve this situation is another "cleansing depression" that forces most organizations into bankruptcy again, like the 1930s, so the cycle can start again. <#inc ww2010.pic trad0406.gif right "" "Trade deficit (imports minus exports) continued to grow in April 2006 (Source: Dept. of Commerce)"#> The adjoining graph shows the story. The gap between imports and exports shows no sign of leveling. If you look carefully at the blue line (Exports), you can see that it's leveling off, indicating that, if anything, the trade gap is likely to increase if this trend continues. Generational Dynamics predicts that we're entering a new 1930s style Great Depression, and the crisis is expected sooner, rather than later. =eod =// &&2 e060611 Hamas reopens missile strikes into Israel after beach picknickers are killed =data ww2010.weblog.y2006.e060611.head Hamas reopens missile strikes into Israel after beach picknickers are killed =data ww2010.weblog.y2006.e060611.keys =data ww2010.weblog.y2006.e060611.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060611.date 11-Jun-06 =data ww2010.weblog.y2006.e060611.txt1 Abbas announces a July 26 referendum, bitterly opposed by Hamas, on recognizing Israel's existence. =data ww2010.weblog.y2006.e060611.txt2 A major rise in tensions was expected soon anyway. A report by the Israeli Defense Forces (IDF), to be released next month, says that <#stdurl http://worldnetdaily.com/news/article.asp?ARTICLE_ID=50541 "Israel is headed toward a major, violent war with the Palestinians."#> This assessment follows a series of interviews by World Net Daily with leaders of major Palestinian terror organizations, saying that <#stdurl http://www.ynetnews.com/articles/0,7340,L-3148681,00.html "they're ready to launch a 'third intifida', a violent attack on Israel."#> (The first intifida, or "uprising," occurred from 1987-93 and the second went from 2000 to 2004.) The third intifada will be directed against the security fence, will make increased use of suicide bombers, and will use increasingly accurate armed missiles against Jewish communities. "The new intifada is only a question of time and this will be the hardest and the most dangerous one," said Abu Nasser, a senior leader of Al-Aqsa Brigades. "It's just about timing until the order to blow up a new wave of attacks will be given." Hamas, Al-Aqsa and other terrorist groups agreed to an Egyptian-brokered ceasefire with Israel 16 months ago. But two groups, the Popular Resistance Committee and Islamic Jihad, never agreed to the ceasefire, and so violence has continued all along. On the Palestinian side, this has mostly consisted of the firing of Qassam missiles from Gaza into Israel, but these missiles have rarely done much damage because they lack a guidance system. On the Israeli side, the violence consisted mostly of shelling suspected Qassam sites. On Friday, one of Israel's shells landed on a Gaza beach, killing ten people, including a family with three children. One girl survived because she had been swimming in the sea when the shell landed. Highly compelling video of this screaming girl is being widely shown on television. This has outraged the Palestinians, and led Hamas to <#stdurl http://www.forbes.com/technology/feeds/ap/2006/06/09/ap2806041.html "call off the ceasefire."#> Hamas <#stdurl http://english.aljazeera.net/NR/exeres/40A27227-DB30-499F-9A7F-F613C625160A.htm "immediately began cross-border rocket and mortar attacks on Saturday."#> Israeli Defense Minister Peretz then announced that it would target attacks against Hamas leaders. Also on Saturday, President Mahmous Abbas condemned the Israeling shelling of the Gaza beach, calling it a "massacre," but at the same time he <#stdurl http://abcnews.go.com/US/wireStory?id=2061961 "set July 26 as the date of the referendum on the "prisoners’ document.""#> This referendum is bitterly opposed by Hamas because, <#inc ww2010.weblog.ref e060605 "as I described last week,"#> a side effect of accepting the Prisoners' document would be recognizing Israel. I've heard some news reports describe the referendum as the "current hope for peace" and a way "to continue he peace process." Actually, there is no peace process, and the referendum is more likely to increase tensions leading to civil war among the Palestinians. <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> I normally don't go into this much detail about political goings on, but I want to show how almost every political detail is heading the region for war. It's like that old joke, "If he didn't have bad luck, he wouldn't have any luck at all." This is to illustrate again the concept of "chaotic attractor," in the sense of Chaos Theory. Political events are random, but in a generational crisis period, political events are "attracted" to war. The underlying cause, in this case, is a young generation of Palestinians in Gaza where the median age for the entire population is 15.6. From the point of view of Generational Dynamics, the Mideast is entering a "generational crisis" era, since 57 years have passed since the end of the genocidal crisis war between the Arabs and Jews triggered by the 1948 partitioning of Palestine and the creation of the state of Israel. When the Mideast "Roadmap to Peace" was put forward in May 2003, <#hreftext ww2010.i.may01 "I predicted that the Roadmap would / could never succeed,"#> and that the Mideast would move closer and closer to war as soon as Yasser Arafat and Ariel Sharon were out of the picture. That appears to be exactly what's happening, as the region moves closer each day to re-fighting the genocidal war of the 1940s, a war that will engulf the entire region. =eod =// &&2 e060608 "Searching for a bottom." - to stock market fall =data ww2010.weblog.y2006.e060608.head "Searching for a bottom." =data ww2010.weblog.y2006.e060608.keys =data ww2010.weblog.y2006.e060608.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060608.date 8-Jun-06 =data ww2010.weblog.y2006.e060608.txt1 I'm told by a friend who does a lot of Internet-based day-trading that =data ww2010.weblog.y2006.e060608.txt2 we're seeing a familiar pattern almost every day: The market starts the day by rallying, and institutional investors jump on it and buy, hoping that the market has "found a bottom," meaning that it'll start to go up again. <#inc ww2010.pic dj0607.gif right "" "Dow Jones Industrial Average (DJIA), Jan 2005 to June 7, 2006"#> Then it slips a little around midday, and institutional investors get nervous and sell what they bought that morning, causing the market to fall further, so that they end up losing money. This is getting closer and closer to full-scale panic behavior. It appears that the <#hreftext ww2010.i.060530panic "panic scenario that I described last week"#> is still being followed. The markets are still plummeting worldwide, the volatility is still very high, and the markets are still synchronized with one another. As I <#inc ww2010.weblog.ref e060531 "said a few days ago,"#> this pattern has to be broken if a full-scale panic is to be avoided. There is no sign of this pattern breaking, and the up-down intraday pattern is like a mini-panic. As of this writing, around midday Thursday in Asia, Tokyo's Nikkei is falling like a stone, down about 2.9%, below 15000 for the first time this year. Other Asian markets are also plummeting, though Europe had a small rally on Wednesday. The Dow fell only a "modest" 0.65% on Wednesday. (It's now a few minutes later, and the Nikkei at first was down only 2.5%, but then started plummeting again, and is now down 3.3%. That's 1% variation in just a few minutes - talk about volatility!) A web site reader wrote to me yesterday wondering about the Nasdaq crash in 2000. "You list the 2000 NASDAQ bubble crash as one of the major financial crises," she said. "Why isn't your generational clock restarted, thereby expecting another crash in 2070 instead sometime before 2010?" The answer is that the Nasdaq crash was bad, and a lot of people lost money, but it was really a gradual decline, and wasn't a generational crash, in the same way that some wars aren't generation wars. I guess at this point it's hard to explain, but if there's a real panic in the near future, then believe me, you'll see the difference. The market will fall 20% in a day or a few days, and investors will go into, well, full-scale unmistakable panic. It will immediately be followed by stories of suicides, of congressional investigations, and of demands to blame anyone who can be blamed. The same answer applies to another question -- someone asked me whether the market has "crashed" already, since it's fallen so far in the last few weeks. The answer is that this is nothing compared to a full-scale panic. As always, it's impossible to predict the date of a full-scale panic. It could happen tomorrow, next week, next month or next year. However, as long as the current market behavior continues -- high volatility, synchronized markets around the world, and evidence of panicky intra-day behavior, then a panic must be close. In other words, the wild behavior of the last few weeks simply can't continue forever. Either this behavior will change, or a panic will occur. =eod =// &&2 e060606 Is Bernanke an idiot? =data ww2010.weblog.y2006.e060606.head Is Bernanke an idiot? Some investors are saying so. =data ww2010.weblog.y2006.e060606.keys =data ww2010.weblog.y2006.e060606.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060606.date 6-Jun-06 =data ww2010.weblog.y2006.e060606.txt1 As of noon Tuesday, the Dow continues to plummet, following sharp selloffs in Asia and Europe =data ww2010.weblog.y2006.e060606.txt2 earlier today. According to the <#stdurl wsj.com#>, "THE DOW INDUSTRIALS SANK below 11000 as rate fears lingered, extending a broad selloff stoked by Bernanke's surprisingly hawkish comments on inflation." Actually, the comments by new Fed Chairman Ben S. Bernanke weren't really all that unusual, but these are very anxious times. People are beginning to blame Bernanke. One web site reader just wrote to me: "Bernanke, you're an idiot. Resign before you run us into a crash." This remark seems to reflect most pundits' beliefs right now. The crash is inevitable, either now or soon, as I've been saying since 2002, because <#hreftext ww2010.i.050711eleven "the stock market is overpriced by over 200%, same as in 1929."#> It won't be Bernanke's fault, because there's nothing he can do or could have done to prevent it. But it's just possible that "History" is going to put the blame on Bernanke. It's an outcome that would be loaded with irony, since <#hreftext ww2010.i.051029bernanke ""Ben S. Bernanke: The man without agony,""#> may end up suffering the most agony of all. =eod =// &&2 e060605 James Woolsey says Gaza pullout worst result =data ww2010.weblog.y2006.e060605.head Ex-CIA chief James Woolsey says Gaza pullout was "Worst result possible" =data ww2010.weblog.y2006.e060605.keys James Woolsey, Gaza =data ww2010.weblog.y2006.e060605.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060605.date 5-Jun-06 =data ww2010.weblog.y2006.e060605.txt1 Five bystanders, including a pregnant woman, were killed by Palestinian gunmen =data ww2010.weblog.y2006.e060605.txt2 Sunday in <#stdurl http://today.reuters.com/news/newsArticle.aspx?type=worldNews&storyID=2006-06-04T205713Z_01_L04740652_RTRUKOC_0_US-MIDEAST-VIOLENCE.xml&archived=False "a shootout in Gaza between the two rival militias."#> The two armies <#inc ww2010.weblog.ref e060523 "loyal to Hamas and Mahmoud Abbas' Fatah groups, respectively,"#> were deployed in mid-May as the two rival governments compete for power. Tension and violence between the two groups appear to be increasing, especially in Gaza, and there are worldwide fears of a Palestinian civil war. Mahmoud Abbas (Abu Mazen), considered by the west to be pretty much the only "good guy" in the increasingly chaotic Palestinian situation, has been scoring some significant political victories recently:

Over the weekend, <#stdurl http://archive.gulfnews.com/articles/06/06/04/10044640.html "Abbas deployed a 2,500 man militia in Jenin, on the West Bank,"#> as a response to Hamas' deployment of a militia in Gaza. The soldiers are wearing T-shirts depicting Yasser Arafat, Abbas' predecessor. This is infuriating Hamas. A Hamas official said, "It is unacceptable for any faction to field a militia in support of the security apparatus."
Israeli Prime Minister Ehud Olmert has agreed <#stdurl http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=89615&version=1&template_id=37&parent_id=17 "to meet with Abbas by the end of June."#> Previously, Olmert had described Abbas as a great person, but too weak to serve as a partner for peace. Olmert's announcement, made following a meeting with President Bush, marks a turnaround, and a coup for Abbas.
In a stunning bombshell, Abbas announced last week that he would call for a Palestinian referendum on whether to recognize the country of Israel. Hamas has refused to recognize Israel, or to renounce violence against Israel, and apparently is fearful of losing the referendum, since they're declaring it illegal. Hamas has reason to be afraid. What makes the referendum call a real bombshell is that he called for <#stdurl http://www.ynetnews.com/articles/0,7340,L-3250407,00.html "ratification of what's known as the "prisoners’ document.""#> This proposal was originally drawn up by prisoners in Israeli jails, members of both Hamas and Fatah militias, and jailed for terrorism. The document calls for side-by-side Palestinian and Israeli states, with Israel withdrawing to its pre-1967 borders. Now, the proposal was drawn up to embarass Israel, since there's no chance that Israel will agree to withdraw to its borders prior to the 1967 war. But since it calls for side-by-side states, it implictly recognizes the nation of Israel. Furthermore, since these Israeli prisoners are considered heroes to the Palestinians, many will vote for the referendum just to honor the prisoners.

=inc ww2010.xr.related1 right chaos 2 So Abbas has scored a few points against Hamas, but it's clear that there are now two separate, competing governments attempting to rule the Palestinians. As I've repeatedly described, <#inc ww2010.weblog.ref e060517 "using concepts of Chaos Theory,"#> that the Mideast is headed for a major regional war, and individual political events are "attracted" to war. This is what's been happening since Yasser Arafat died. Things have continued downhill and have gotten so bad that former CIA director <#stdurl http://www.opinionjournal.com/extra/?id=110008442 "James Woolsey has expressed surprise that things are going so badly:"#>

"The approach Israel is preparing to take in the West Bank was tried in Gaza and has failed utterly. The Israeli withdrawal of last year has produced the worst set of results imaginable: a heavy presence by al Qaeda, Hezbollah and even some Iranian Revolutionary Guard units; street fighting between Hamas and Fatah, and now Hamas assassination attempts against Fatah's intelligence chief and Jordan's ambassador; rocket and mortar attacks against nearby towns inside Israel; and a perceived vindication for Hamas, which took credit for the withdrawal. This latter almost certainly contributed substantially to Hamas's victory in the Palestinian elections."

Well, he's right about all the things that have gone wrong. In fact, he extends this list of problems back to the peace treaty Israel signed with the Palestinians in 1993:

"Three major Israeli efforts at accommodation in the last 13 years have not worked. Oslo and the 1993 handshake in the Rose Garden between Yitzhak Rabin and Yasser Arafat produced only Arafat's rejection in 2000 of Ehud Barak's extremely generous settlement offer and the beginning of the second intifada. The Israeli withdrawal from southern Lebanon in 2000 has enhanced Hezbollah's prestige and control there; and the withdrawal from Gaza has unleashed madness. These three accommodations have been based on the premise that only Israeli concessions can displace Palestinian despair. But it seems increasingly clear that the Palestinian cause is fueled by hatred and contempt."

It's interesting to see how these politicians think. This is a guy who used to run the CIA, and yet he has no concept of how generational forces could be causing the problems he's listed. The Gaza Strip is the most densely population place in the world and <#inc ww2010.weblog.ref e060127 "as I've been pointing out for a long time,"#> and many times since the first time, <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html "the median age in the Gaza strip is 15.6,"#> and only slightly higher in the West Bank. That figure comes from <#stdurl http://www.cia.gov/cia/publications/factbook "the CIA World Factbook,"#> so you'd think that Woolsey might be aware of it and think of its consequences. So, instead of making a facile statement like "it seems increasingly clear that the Palestinian cause is fueled by hatred and contempt," he might try to draw some reasonable conclusions from the fact that -- demographically -- the Palestinians are being run by children. That's what a median age of 15.6 means. Even if the leaders of Hamas are senior, sophisticated politicians, they're dealing with huge mobs of their constituents, and if these constituents are children, then Hamas has to cater to children. This is what keeps bothering me about these people -- these politicians, these analysts, these journalists, these pundits. It never even occurs to them to ask the obvious questions -- like what happens when children are running things. And this is a former CIA chief, so you'd think that at least think about some of this stuff. So, what are Woolsey's conclusions:

"A two-state solution can become a reality when the Palestinians are held to the same standards as Israelis -- to the requirement that Jewish settlers in a West Bank-Gaza Palestinian state would be treated with the same decency that Israel treats its Arab citizens. Until then, three failures in 13 years should permit us to evaluate the wisdom of further concessions."

This is the last paragraph of his essay, and it's total nonsense. It's like saying that a two-state solution can become a reality when pigs fly. This kind of thing explains a number of mistakes that the CIA and the administration have made in recent years. The "neo-conservative" strategy of assuming that the Iraqi invasion would lead to a string of democracies in the Mideast has been crazy from the beginning, but not for the ideological reasons that its opponents have given. It's been crazy because the Mideast nations have been in the wrong generational places. That's why I've been hoping that someone from DoD or the State Dept. or the CIA would pick up on some of this stuff. It could mean a great deal as the nation enters a time of great peril. Anyway, there is one thing, at least, that I like about what's going on. I LOVE the idea of a referendum, because a referendum tells us a lot about what the people are thinking, and what generational changes are occurring, especially if we can get exit poll data breaking down the vote by age group. =eod =// &&2 e060603 Web site RSS feed is working again =data ww2010.weblog.y2006.e060603.head Web site RSS feed is working again =data ww2010.weblog.y2006.e060603.keys RSS =data ww2010.weblog.y2006.e060603.loc ww2010.weblog.log0606 =data ww2010.weblog.y2006.e060603.date 3-Jun-06 =data ww2010.weblog.y2006.e060603.txt1 Sorry for the outage last week, =data ww2010.weblog.y2006.e060603.txt2 folks. Apparently a bad character slipped into my May 24 item, and that made the entire feed invalid. I had no idea until a reader let me know. =inc ww2010.blocking.start =inc ww2010.bugcomment right While I was at it, I fixed some other problems in the two RSS feeds, and then I ran them through the <#stdurl http://validator.w3.org/feed/check.cgi "World Wide Web Consortium (W3C) Feed Validation Service,"#> and as of today both feeds are fully validated. If any reader has any trouble with the RSS feed, or with any other aspect of the web site or its content, don't hesitate to let me know. =inc ww2010.blocking.end =eod =// &&2 e060531 Stock markets continue to fall worldwide =data ww2010.weblog.y2006.e060531.head Stock markets continue to fall worldwide =data ww2010.weblog.y2006.e060531.keys stock market crash, Great Depression, volatility =data ww2010.weblog.y2006.e060531.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060531.date 31-May-06 =data ww2010.weblog.y2006.e060531.txt1 Wall Street fell 1.5-2% on Tuesday, Europe fell 2-3%, and Asia is currently falling 1.5-2%, =data ww2010.weblog.y2006.e060531.txt2 as of this writing (around midday Wednesday, Tokyo time). We're still on the path for an early stock market crash, as I described in my <#hreftext ww2010.i.060530panic "May 30 essay, "Speculations about a stock market panic and crash.""#> What would it take to get off that path? There are three major possibilities:

A sustained rally -- very unlikely right now.
A sharp reduction in volatility -- a steady market for a couple of weeks. This is a possibility.
A "de-synchronization" of the world's markets -- e.g., Asia goes up when Wall Street goes down. This would indicate that money is flowing from market to market, rather than being pulled out of all markets.

Any of these three things would "break the spell," at least for now, and make a stock market panic and crash less likely for now. A brief rally alone would not be enough to "break the spell"; indeed, it would actually be directly on the path that we described in the May 30 article, since it would be a "second peak." A stock market panic is a chaotic event, so it's impossible to predict the exact date of a stock market panic. But as long as things continue the way they are now -- with all markets synchronized and high volatility continuing -- then a stock market panic could occur at any time. =eod =// &&2 e060525 Germans believe "clash of civilizations" with Muslims is coming =data ww2010.weblog.y2006.e060525.head Germans believe "clash of civilizations" with Muslims is coming =data ww2010.weblog.y2006.e060525.keys Germany, immigration =data ww2010.weblog.y2006.e060525.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060525.date 25-May-06 =data ww2010.weblog.y2006.e060525.txt1 A "spiral of conflict" is starting in Germany, according to a study =data ww2010.weblog.y2006.e060525.txt2 by <#stdurl http://www.ifd-allensbach.de/ "Allensbach Institute"#> for Public Opinion Research and sponsored by the Frankfurter Allgemeine Zeitung newspaper, described in <#stdurl http://www.faz.net/s/RubFC06D389EE76479E9E76425072B196C3/Doc~E2D1CB6E9AA1045B291A1FC21272D467D~ATpl~Ecommon~Scontent.html "an article"#> published last week. (The study was also the subject of articles in <#stdurl http://www.expatica.com/source/site_article.asp?subchannel_id=52&story_id=30134&name=Germans+negative+on+Islam%2C+poll+shows "the Netherlands"#> and <#stdurl http://www.jpost.com/servlet/Satellite?cid=1148287850849&pagename=JPost%2FJPArticle%2FShowFull "Israel"#>.) The hostility between Germans and Muslims is very old and runs very deep. For centuries, the Muslim Ottomans in Turkey won victory after victory against the Christians -- both Western and Orthodox Christians. The turning point came in 1683 when the Germans led the Holy League to an overwhelming defeat of the Ottoman army. To this day, Muslim historians consider this to have been "a calamitous defeat of such magnitude that there has never been its like." Like a pool ball rolling and bouncing all around a pool table, the bitterness of that war has bounced around further wars. <#inc ww2010.pic g060524a.gif left "" "Tensions in Germany. Do you believe that tensions are increasing with the Muslim people? Red: Yes, I believe that. Blue: Nothing to be afraid of. (Source: Frankfurter Allgemeine Zeitung)"#> So Germans and Muslims really don't like each other too much, so it's not surprising that they've had a difficult relationship, even in the best of times. But these aren't the best of times, and German conceptions of Muslims have gotten noticeably more negative since 9/11, and were driven down further by outrage over the <#inc ww2010.weblog.ref e040904 "the 2004 Beslan school massacre,"#> in which 330 hostages, half of them young children, were killed. Today, Germans increasingly believe that living peacefully with the Islamic world is impossible for the long term, according to <#stdurl http://www.faz.net/s/RubFC06D389EE76479E9E76425072B196C3/Doc~E2D1CB6E9AA1045B291A1FC21272D467D~ATpl~Ecommon~Scontent.html "the article."#> When the 1000+ Germans polled were asked, "Do you believe that Christianity and Islam can exist peacefully, side by side, or are these religions so different that there will be repeated major conflicts," 61% believed that there would be repeated major conflicts. The study compared poll results in May 2006 with the results of a similar poll conducted in 2004, and found that German attitudes toward Islam to be increasingly negative, while views of Christianity remain positive:

				2004		2006
    -------------------------	----		----
    I believe that Islam ...
	harms women		85%		91%
	is based on fanaticism	75%		83%
	is backwards-looking	49%		62%
	is intolerant		66%		71%
	is undemocratic		52%		60%

    I believe that Christianity ...
	is based on love			80%
	supports human rights and charity	71%
	is peaceful				65%
	is tolerant				42%

<#inc ww2010.pic g060524b.gif right "" "Culture wars. Are we now having a culture war between Christianity and Islam? Red: We're having a war of cultures. Blue: No one can say. (Source: Frankfurter Allgemeine Zeitung)"#> As the two graphics show, in the just last few weeks, Germans have moved sharply to the belief that there's a "culture war" going on, and that "tensions are increasing." Beyond that, 46% believe that terrorist attacks will come soon to Germany, and 42% agree with the statement, "So many Muslims live with us in Germany that I fear that there are many terrorists among them." These have led the researchers to conclude that Germany is in the midst of a "conflict spiral" that will lead relations between Germans and Muslims to continue to get worse. What's happening in Germany is what's happening around the world in countries that fought in World War II, since all those countries are now in a "generational crisis" period, since the generations of people who grew up during WW II have all disappeared (retired or died), all at once, in the last few years. During generational crisis periods, populations develop various kinds of xenophobia, and immigration issues come to the fore. This is certainly what's happening in America, with respect to immigration from Latin America, and in Britain, where the <#inc ww2010.weblog.ref e060423 "anti-immigration British National Party has suddenly surged in popularity."#> But this situation is particularly disturbing for Germans, since they are still acutely aware of and distressed over the behavior of Nazi Germany. In this sense Germany and Japan are quite different. The Japanese appear to reached a point of being at peace with themselves over their actions prior to and during WW II, even though this self-acceptance is infuriating the Koreans and Chinese, and relations with both countries <#hreftext ww2010.i.051023japan "have been deteriorating sharply."#> But the Germans have never been at peace with themselves. As one German was recently quoted on the BBC World Service (paraphrasing), "Germans are no longer proud to be Germans. Because of Hitler, we've lost our identity. Some day we'll be able to stand up and say, 'I'm German, and I'm proud to be German.' But that day hasn't yet arrived." So the idea that Germany is reliving the 1930s, this time with Muslims instead of Jews, is extremely disturbing to many Germans today. This uneasiness was reflected in the <#stdurl http://www.faz.net/s/RubFC06D389EE76479E9E76425072B196C3/Doc~E2D1CB6E9AA1045B291A1FC21272D467D~ATpl~Ecommon~Scontent.html "the FAZ article itself,"#> which began with a long philosophical dissertation that's worth quoting at length (rough translation):

"How do conflicts, wars between different populations actually develop? History teaches that often a long time of the alienation precedes the open outbreak of a conflict. Each of the involved populations determines that its goals are inconsistent with the other's; each has less understanding of the other's desires; the two parties speak less and less with one another; distrust develops and grows. Each one's perception of the other side is increasingly shaped by rumors and stereotyped simplications, and each side uses buzzwords to describe the other side. Finally the intentions of the other side, which are increasingly regarded as a threat to one's own goals, must be resisted with every means possible. Moral and even human characteristics of the other side are eventually denied. Beginning of a spiral of conflict When the American political scholar Samuel Huntington published The Clash of Civilizations more than a decade ago, it got much attention and also much criticism. He seemed too unwilling to accept the idea that at some time after the end of the cold war, conflicts between different cultural regions of the world would give way to a peaceful future. Historians have reckoned that by far most historical conflicts have taken place along cultural fault lines. If one studies the results of the current inquiry into the attitude of Germans to Islam..., one can't resist the impression that in Germany the very process of alienation between Westerners and the Islamic world -- just like what also takes place between indigenous people and Muslims living in the same country -- can be regarded pessimistically as the beginning of a spiral of conflict. ... Since the end of the Second World War the German population has always clearly demonstrated a repugnance toward war, as they've shown by example time after time. One could even say that the Germans are overwhelmingly needy -- for harmony. None of this has changed today, but regarding Islam, the obstacles are much greater."

This is a very interesting exposition, not only because it reflects sadness with which many Germans are feeling because of these poll results about themselves, but also because it describes rather directly how crisis wars begin, and how the current situation is rapidly deteriorating. Because, like it or not, this kind of xenophobia is what happens during generational crisis periods. More and more, we're seeing the buildup of forces that will lead to a new war in Western Europe, led by Britain, France and Germany, but including other countries as mutual combatants as well. =inc ww2010.cf.cf060209 p left If Germany is in the midst of "a conflict spiral" that's spiraling downward, when will things come to a head? The trigger is almost always a financial crisis. As long as everyone has money, then there's little desire to fight a war; but if there's <#inc ww2010.weblog.ref e060521 "a stock market crash or other financial crisis,"#> then the xenophobia turns into hatred and jealousy, leading to a desire for revenge. If the financial situation is so bad that a man can't even feed himself and his family, then he'll have little to lose by going to war. In fact, tensions between Germans and Muslims are already ratcheting up because of high unemployment in Germany and resulting economic problems for everyone, as an e-mail message from a reader of this web site points out. It adds, "I have been told that anti-US attitudes are also running very high in Germany." My view of this last point is different, and is based on the time I spent in Europe on business in the 1970s. What was always clear to me at that time was that the Germans really like Americans, and the French really hate Americans. What is certainly true, however, is that many Germans dislike President Bush and the Iraq war policy. From the point of view of Generational Dynamics, the widening chasm between Germans and Muslims is just one more step on the way to a new West European war, and to the inevitable "clash of civilizations" world war that will engulf all of us. (This article was updated late on 25-May to more quotes and a reader comment.) =eod =// &&2 e060524 New Pentagon report details China's preparations for war =data ww2010.weblog.y2006.e060524.head New Pentagon report details China's preparations for war =data ww2010.weblog.y2006.e060524.keys China =data ww2010.weblog.y2006.e060524.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060524.date 24-May-06 =data ww2010.weblog.y2006.e060524.txt1 "China's leaders have yet to adequately explain the purposes =data ww2010.weblog.y2006.e060524.txt2 or desired end-states of their military expansion," says <#stdurl http://www.defenselink.mil/pubs/china.html "the Pentagon's annual report to Congress"#> on "The Military Power of the People's Republic of China." <#stdurl http://www.defenselink.mil/pubs/pdfs/China%20Report%202006.pdf "The report (PDF)"#> adds, "Estimates place Chinese defense expenditure at two to three times officially disclosed figures. The outside world has little knowledge of Chinese motivations and decision-making or of key capabilities supporting PLA modernization." <#inc ww2010.pic chinadef.gif center "" "According to the Pentagon, China is spending two to three times what they announce for defense, weapons, and war preparation."#> The report quotes Deng Xiaoping, Chinese leader in the 1980s, as saying “Observe calmly; secure our position; cope with affairs calmly; hide our capacities and bide our time; be good at maintaining a low profile; and never claim leadership.” As the report describes, that's exactly what China is doing. China is quietly deploying new military hardware capable of challenging America, and changing the balance of power throughout Asia. Already China is introducing intercontinental range ballistic missiles (ICBMs) that can target most of the world, including the continental United States. These are supplemented by shorter range ballistic missiles that can be launched from China's new fleet of submarines anywhere in the world. In addition, China has hundreds of older technology missiles, mostly targeting Taiwan in preparation for an attack to force Taiwan to join China, and also has hundreds of combat aircraft capable of attacking Taiwan. As I read through the report, what I found interesting is that all this is parallel to the rise of Adolf Hitler and Nazi Germany. Not that the report mentions Hitler of course, but the point is that China is going through the same sequence. 1930s Germany hid its manufacture of bomber aircraft almost until WW II began, and Hitler promised "Peace in our time" even as he was preparing for war. From the point of view of Generational Dynamics, this kind of stealth preparation for war is the most ominous and dangerous situation. To give a contrasting example, think back to our own invasion of Iraq (either time, 1991 or 2003). In each case, we gave Iraq months of warning, and we kept harm to civilians to a minimum. But when a country prepares for a crisis war by massive stealth military preparation, it signals the intention of launching the most vicious genocidal war possible. This is something that Secretary of Defense Donald Rumsfeld understands. He was born in 1932, and was growing up during Hitler's rise to power, so he's very well aware that what China is doing today is a replay of what Germany was doing in the late 1930s. As I've <#inc ww2010.weblog.ref e060417 "discussed several times before,"#> I dread the day that Rumsfeld leaves office and is replaced by someone from the Boomer or GenX generation, since no one in these younger generations will have anything like the intuitive grasp of world affairs that Rumsfeld has. The narrative of the Pentagon report clearly has Rumsfeld's stamp on it, because he lived through these events before. According to the report,

"Although the principal focus of China’s military modernization in the near term appears to be preparing for potential conflict in the Taiwan Strait, the writings of Chinese military strategists suggest Beijing is also surveying the strategic landscape beyond Taiwan. Some Chinese analysts have expressed the view that control of Taiwan would enable the PLA Navy to move its maritime “defensive” perimeter farther seaward and improve Beijing’s ability to influence regional sea lines of communication. For example General Wen Zongren, then-Political Commissar of the elite PLA Academy of Military Science, stated in March 2005 that resolving the Taiwan issue is of “far reaching significance to breaking international forces’ blockade against China’s maritime security.... Only when we break this blockade shall we be able to talk about China’s rise.”

Even if you believe that China doesn't have the intention of launching a pre-emptive war, the mere fact of the aggressive military buildup by itself raises the probability of war -- through miscalculation, according to the report:

"[As People's Liberation Army (PLA)] modernization progresses, there are twin misperceptions that may lead to miscalculation or crisis. First, other countries may underestimate the extent to which Chinese forces have improved. Second, China’s leaders may overestimate the proficiency of their forces by assuming that new systems are fully operational, adeptly operated, adequately supplied and maintained, and well integrated with existing or other new capabilities."

This last point is one I made several weeks ago, when I discussed <#inc ww2010.weblog.ref e060501 "China's plans for war with America."#> The war in Iraq has given the American military a great deal of "lessons learned" knowledge in deploying new leading-edge technology weaponry, but China doesn't have that experience, and will make plenty of mistakes, at least initially. According to the report, China is going beyond the above by developing new kinds of high-tech and "star wars" weaponry, including the following:

Computer networks. "Chinese military analysts have concluded from studying U.S. and Coalition military operations over the last 15 years that logistics and mobilization are potential vulnerabilities in modern warfare, given the increased requirements for precisely coordinated transportation, communications, and logistics networks. PLA writings suggest a successful computer network attack against these systems could have a disruptive effect on an adversary’s ability to generate its forces."
Radio Frequency Weapons. "Long-range beam weapons would use narrow radio frequency (RF) beams to engage targets such as aircraft or precision guided munitions (PGMs). Short-range systems would be packaged into missiles or artillery shells and launched into the vicinity of targets such as radars or command posts before releasing an RF pulse. In recent years, the application of RF weapons has expanded to include deployment on small vehicles or in suitcases for targeting critical military or civilian infrastructures where close access is possible. "PRC officials have publicly indicated their intent to acquire RF weapons as a means of defeating technologically advanced military forces. Chinese writings have suggested that RF weapons could be used against C4ISR, guided missiles, computer networks, electronically-fused mines, aircraft carrier battle groups, and satellites in orbit. "Analysis of Chinese technical literature indicates a major effort is underway to develop the technologies required for RF weapons, including high-power radiofrequency sources, prime-power generators, and antennas to radiate RF pulses. Chinese scientists are also investigating the effects of RF pulses on electronics and the propagation of these pulses through building walls and through the atmosphere. "Furthermore, China appears to be assessing its own vulnerability to RF weapons and exploring ways to “harden” electronics."
Laser weaponry. "China is also involved in advanced, state-of-the-art research and development in laser technologies, including both low- and high-energy lasers. While much of China’s efforts are commercial in nature, the PLA and the government directly support some of this research, suggesting that discoveries or fi ndings could be used to develop future laser weapons. Moreover, China has fielded in its own forces and marketed for sale abroad low energy laser weapons. Non-weapon military lasers are already widespread in the PLA."

When I discuss the China situation with people, something I hear all the time is that China is incapable of subduing the island of Taiwan without completely destroying it (with nuclear weapons). However, the report describes how China could invade and capture Taiwan by means of an amphibious invasion:

"Publicly available Chinese writings on amphibious campaigns offer different strategies for an amphibious invasion of Taiwan. "The most prominent of them describe what it called the Joint Island Landing Campaign. The objective of a Joint Island Landing Campaign is to break through or circumvent shore defenses, establish and build a beachhead, and then launch an attack to split, seize and occupy the entire island or important targets on the island. To achieve the final objective of the Joint Island Landing Campaign, a series of sub-campaigns, such as electronic warfare, naval, and air campaigns – including the underlying logistics and mobilization – must be executed. "Amphibious operations are logistics-intensive and rely for success upon air and sea superiority in the vicinity of the operation, the rapid buildup of supplies and sustainment on shore, and an uninterrupted flow of support thereafter. The Joint Island Landing Campaign would tax the lift capacities of China’s armed forces and maritime militia, posing challenges to those charged with providing sustainment for, and the commanders charged with leading, this campaign. Add to these strains the combat attrition of China’s forces, and an amphibious invasion of Taiwan would be a significant political and military risk for China’s leaders."

So the report indicates that an invasion of Taiwan is quite doable, but with numerous risks. From the point of view of Generational Dynamics, a war with China is coming with absolute certainty, and probably sooner rather than later. It will be a major component of the coming "clash of civilizations" world war. =eod =// &&2 e060523 Hamas and Fatah armies gearing up for Gaza confrontation =data ww2010.weblog.y2006.e060523.head Hamas and Fatah armies gearing up for major confrontation in Gaza Strip =data ww2010.weblog.y2006.e060523.keys Gaza Strip =data ww2010.weblog.y2006.e060523.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060523.date 23-May-06 =data ww2010.weblog.y2006.e060523.txt1 Egypt and Lebanon are also being increasingly threatened by the escalating violence. =data ww2010.weblog.y2006.e060523.txt2 Gaza City was turned into <#stdurl http://abcnews.go.com/International/wireStory?id=1991376 "a chaotic battlefield for two hours on Monday,"#> as armies loyal to Hamas and Mahmoud Abbas' Fatah groups, respectively, assaulted each other with assault rifles and rocket-propelled grenades. This was the worst violence since the <#inc ww2010.weblog.ref e060517 "two groups -- Hamas and Fatah -- deployed rival armies"#> last week. Mahmoud Abbas is the democratically-elected head of the Palestinian Authority, and also head of the Fatah militia. Hamas has been named a terrorist group and is the democratically-elected political group in control of the Palestinian parliament. The two groups appear to be headed for a major confrontation, with a civil war inevitable. Because of the danger, <#stdurl http://english.wafa.ps/body.asp?id=6351 "Egypt has been attempting to mediate between Hamas and Abbas,"#> with little success so far. The situation is further complicated by the fact that Hamas receives funding from Muslim Brotherhood, a large terrorist group in Egypt. So a civil war in Gaza could lead to a civil war in Egypt. Iran is promoting a civil war in Gaza, <#stdurl http://www.ynetnews.com/articles/0,7340,L-3253730,00.html "according to Lebanon's Druze leader Walid Jumblatt."#> "The Iranians are trying to use some part of Hamas and other Palestinian groups to threaten the Lebanese independence at same time (as threatening) Jordan and Egypt. The Iranians, are trying to use all kinds of groups, including Hamas, to destabilize the area." =inc ww2010.cf.cf060209 p left Of the eight items on my little conflict risk graphic, two of the eight seem to be accelerating faster and faster toward an eruption. On Monday, the increased violence indicates that Gaza seems to be getting closer and closer to civil war, to engulf Egypt, Lebanon and the entire region, and also on Monday, stock markets around the world continued to tumble. Both situations appear to be heading quickly toward crisis. =eod =// &&2 e060521 Stock markets melt down: Where is money going? =data ww2010.weblog.y2006.e060521.head As stock markets melt down, the question is: Where's all the money going? =data ww2010.weblog.y2006.e060521.keys =data ww2010.weblog.y2006.e060521.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060521.date 21-May-06 =data ww2010.weblog.y2006.e060521.txt1 For the first time, analysts are debating whether the stock market is crashing. =data ww2010.weblog.y2006.e060521.txt2 If you've been reading or watching the business news this week, you might have thought that the stock market fell a little, but it's just been "more of the same" that we've seen over and over again. But the business news programs have not been fully straightforward about this. This past week has NOT been "more of the same." Stock markets around the world have been going up steadily for about 2-3 years now. Whenever one market fell, another market would pick up the slack, and then the upward trend would continue. Sometimes you could almost trace how the money moved from market to market. But not the past couple of weeks. Markets around the world ALL fell, usually by 2-6%. The question of a stock market crash is being raised, and even normally optimistic analysts are talking about a "healthy correction" during the next 3-6 months, and occasionally <#stdurl http://business.guardian.co.uk/story/0,,1779348,00.html "you even hear a debate about whether we're headed for a crash."#> Let's take a look at some examples of what's been happening: <#inc ww2010.pic2 dj0519.gif tsx0519.gif center "Left: Dow Jones Industrial Average (DJIA) reached 11642.65 on 10-May, fell 4.5% to 11114.06 by 19-May.
Right: Toronto Stock Exchange composite index (S&P/TSX) reached 12487.32 on 19-Apr, fell 7.5% to 11545.77 by 19-May."#> On May 10, the Dow Jones Industrial Average (DJIA) reached 11642.65, and appeared to be within reach of the all-time high of 11723 that it reached on January 14, 2000. Instead, it fell 4.5% to 11128 on Thursday, before recovering slightly on Friday. The Toronto Stock Exchange (TSX) did even worse, falling 6.4% over the last 8 days, and 7.5% since it reached its peak on April 19. This is a very big deal for Canada, which has some 70% of the entire nation's assets in the TSX, and so a meltdown affects every Canadian. <#inc ww2010.pic2 fts0519.gif bse0519.gif center "Left: London's FTSE (Financial Times Stock Exchange) index reached 6132.70 on 21-Apr, and fell 7.8% to 5657.40 by 19-May.
Right: Mumbai's Bombay Sensex index reached 12612.38 on 10-May, and fell 13.3% to 10938.61 by 19-May."#> While the Wall Street markets fell around 2% this past week, the European markets uniformly lost 4-5% during the past week alone. The London FTSE index fell 7.8% since it peaked on April 21. It was just one short month ago that India's financial analysts <#inc ww2010.weblog.ref e060421 "were wildly cheering and celebrating the BSE index passing 12,000."#> The index continued going up and peaked at 12612.38 on May 12. What was especially remarkable is that the BSE had gone from 11,000 to 12,000 in just one month, the fastest 1000 point increase in history, but by May 19 it had fallen 13.2% or over 1500 points in just nine short days. <#inc ww2010.pic2 nik0519.gif nikx0519.gif center "Left: Tokyo's Nikkei index reached 17563.37 on 7-Apr, and fell 8.0% to 16155.45 by May 19.
Right: Nikkei index rose to 38916 in a huge 1980s bubble that burst on December 29, 1989, but still hasn't recovered after 16 years, and is currently at only 42% of its peak value."#> The Tokyo Stock Maket's Nikkei is a bellwether for Asian stocks, and it's also been falling sharply. Tokyo is an interesting case because they've already suffered an enormous crash. During the 1980s there was a stock market bubble and also a real estate bubble, and by the end of the decade the value of Tokyo's real estate was greater than the value of all the real estate in the United States! The Nikkei was at 38916, and then fell sharply and deeply, starting on January 1, 1990, and continued falling for years, reaching an all-time low of 7607 on April 28, 2003. As you can see from the above examples that markets around the world fell last week, as investors pulled out their money. Where did the money go? Where did they put their money after pulling it out of stocks? Did they put their money into commodities? Well, no. commodity prices melted down last week too. Take a look at gold prices: <#inc ww2010.pic gold0519.gif center "" "Gold prices skyrocketed to $725 on 12-May, and then fell 10.1% to $651.50 by 19-May"#> The collapse in gold prices should be quite a surprise to a lot of people. The various "gold bugs" have been predicting that gold would continue to rise through the roof, as the dollar collapses, a claim that I've always found dubious, even in the face of a stock market crash. At any rate, gold prices fell the same as stocks. The same is true of oil, copper, and other commodities. In fact, all of the above graphs look pretty similar, and that's the point: What's happening in Wall Street is happening around the world. So what happens now? In the last week, markets all over the world have fallen 2-6%, and the underlying fundamentals haven't changed -- the enormous American debt, the increasing instability of China, the fact that the Gaza Strip is very close to civil war, the unraveling of global carry trade and hedge fund positions as Japan moves to abandon its "zero interest rate" policy, the end (last October) of the housing bubble, and so forth. Long-time readers of this web site know that since 2002 Generational Dynamics has been predicting a stock market crash to the 3000-4000 range, probably by 2006 or 2007. But that prediction has always "felt" far off -- until this year. And now, with markets falling around the world, it seems closer than ever. What's certain is that investors are increasingly risk-averse. I've <#inc ww2010.weblog.ref e060402 "pointed this out several times in the last few weeks,"#> and when you see money being pulled out of markets around the world, the only possible conclusion is that risk-averseness is increasing. In fact, investors appear to be completely unraveling their positions, and taking profits before things get worse. This will cause the pyramid to collapse. Recently Warren Buffett, considered by many to be the most astute investor in the world, <#stdurl http://www.fool.com/news/commentary/2006/commentary06051511.htm "described bubbles as follows:"#>

"Speculators are like Cinderella at the ball having a great time, but at midnight everything turns to pumpkins and mice. As midnight approaches the party gets to be more fun, and everyone thinks they'll get out before midnight. The problem for Cinderella is that there are no clocks on the wall."

What's going on now is that a group of investors have decided that it's almost midnight, and they've decided to get out. It's not a stampede, because there are still plenty of people at the ball. When the stampede occurs, everyone will know it, because there'll be a big, old fashioned stock market panic. Here are graphs showing the last two major Wall Street panics, the panics of 1929 and 1987, for comparison to the previous graphs: <#inc ww2010.pic2 dj2829.gif dj8687.gif center "Left: The Dow Jones Industrial Average (DJIA) at the start of the 1929 stock market crash.
Right: the DJIA at the start of the "false panic" of 1987."#> The above two graphs appear to be rather similar, and you would expect the follow-on to the panics of 1929 and 1987 to be similar, but in fact they were quite different. The following two graphs show what happened in the four years following each of the panics: <#inc ww2010.pic2 dj2934.gif dj8792.gif center "Left: The Dow Jones Industrial Average (DJIA) after the 1929 stock market crash.
Right: the DJIA after the "false panic" of 1987."#> From these two graphs you can see why I call the 1987 panic a "false panic": recovery was rather swift. What's the difference between the two situations? As <#inc ww2010.weblog.ref e060518 "I explained a few days ago,"#> the big difference between the two is that stocks were far overpriced prior to the panic of 1929, as measured by price/earnings ratios, so they had very far to fall, and in 1987 stocks were underpriced or moderately priced, so really didn't have anywhere far to fall. But what's happened is that the false panic of 1987 had a mesmerizing effect on analysts. The older generations had been preaching caution, because they had lived through the Great Depression, and the younger generations were sick of all the preaching. 1987 was 58 years after the crash of 1929, exactly the time when the the older generation retired. The quick recovery from the false panic allowed the younger generations to say, "I knew you were just blowing smoke" to the older generations. And that was the end of the decades of caution following the Great Depression. That led to one crazy investment after another, causing the great bubble of the late 1990s, and it led people like new Fed Chairman Ben Bernanke to believe that stock market crashes were old things, no longer anything to worry about. However, thanks to to the 1990s bubble and the Fed's near-zero interest policy of the last few years, <#hreftext ww2010.i.050711eleven "stocks are again way overpriced"#> according to price/earnings ratios, and have been so for over ten years. So we're headed for a panic and major new 1930s style Great Depression with absolute certainty. The only remaining question is when the next panic will occur. A panic is a "chaotic event," and it's impossible to predict the date of a chaotic event. One can only estimate the probability of the panic occurring during a range of time. We now have the following collection of facts that I've discussed here and in previous postings: a stock market crash must occur, almost certainly within the next year or two; the national and global financial situation continues to deteriorate; markets around the world have fallen sharply, though we haven't yet had an official "panic"; and even optimistic analysts are predicting 3-6 months of further volatility and weakness in the stock markets. From these facts, it's possible to conclude that a full-scale panic will probably occur within the next few weeks or months, possibly as early as Monday or next week. This is not a certain prediction, but a probabilistic prediction -- it now appears that the probability is greater than 50% that a panic will occur within the next few months, possibly very soon. I try to maintain a strict discipline on this web site, so that readers will know what's coming as well as it's humanly possible to know. I make no money from this web site (except for a very rare book sale), and I don't give investment advice, except informally. So I have nothing at stake except my credibility. There is no other web site in the world that does this, and no other web site with the 100% success record with predictions that this one has had. So for all the Cinderellas out there reading this, what I'm telling you is that if there were a clock on the wall it would be telling you that midnight is approaching, and it's time to head for the door. =eod =// &&2 e060518 Worldwide stock market selloff - housing effect =data ww2010.weblog.y2006.e060518.head Worldwide stock market selloff partially triggered by quirky housing effect =data ww2010.weblog.y2006.e060518.keys =data ww2010.weblog.y2006.e060518.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060518.date 18-May-06 =data ww2010.weblog.y2006.e060518.txt1 A substantial week-long selloff in stock markets around the world is resulting from =data ww2010.weblog.y2006.e060518.txt2 a number of things coming together. The market selloffs on Wednesday were dramatic. The Dow fell almost 2%; European stock markets fell 2-4%; and as of this writing (midday Thursday in Asia), Asian stock markets are falling 1.5-2%. And this is after a week that's been generally down anyway. A number of analysts are blaming this partially on the trouble in the housing market. <#inc ww2010.weblog.ref e060326 "The housing bubble appears to have burst last October,"#> housing sales and housing prices have been falling, albeit slowly, and this has <#stdurl http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=google&guid=%7B06FC27E0-AFD4-4555-86A6-B74788186F41%7D&keyword= "helped cause the current stock market meltdown"#> according to the following logic:

With home sales down, more people are renting, pushing rents up.
Housing costs are a big part of the government's computation of the Consumer Price Index.
Therefore, the CPI is higher than it really should be, since the high rental costs are making it artificially higher.
The higher CPI makes it look like inflation is returning. There was a new CPI report this week, making it look like inflation is increasing.
Thanks to the apparent rise in inflation, the Fed will continue to increase interest rates, more than they would otherwise.
The further increase in interest rates is bad for business, which will depress corporate earnings, and that sparked the selloff.

This chain of logic, which I gather is widely believed among analysts, really makes almost no sense at all, but it's probably as sensible as any analyst reasoning we hear today. It always amazes me that inflation is the only danger that analysts even think of. That's because inflation was high during the 1970s, and so they think that's all that can happen. This is Generational Dynamics in action. The generations of people who lived through the 1930s Great Depression are pretty much dead and gone today, and today's analysts and financial managers have never personally seen anything like it, so they don't even bother to think of it. I remember well in the 1950s, when I was growing up, and also in the 1960s and 1970s, analysts were actually worried about things like price/earnings ratios and the danger of another stock market collapse. The turning point was the "false panic" of 1987. The stock market fell over 20% in one day, and then recovered quickly. Alan Greenspan, who had just taken over as Fed chairman, was given the credit for the quick recovery, because he reacted quickly and loaned large amounts of money to financial institutions to get them through the crisis. As a result, younger generations of investors, analysts and financial managers concluded that there wasn't any danger from stock market panics. The Fed can just do what Greenspan did. Right? What these people are too dense to realize is that in 1987 the market was just coming out of a long period of low price/earnings ratios -- that is, stocks had been underpriced for most the preceding decade. But today, price/earnings ratios have been astronomically high for over a decade, and stocks today are waaaay overpriced, more so than even in 1929. So what worked in 1987 can't possible work today, just as it couldn't have worked in 1929. New Fed Chairman Ben Bernanke has repeatedly said that there's no danger of a stock market crash at all. This coming from a guy who used to be Professor of Economics at Princeton, but even so doesn't have the vaguest idea how long term trends work. I summarized all this in my essay, <#hreftext ww2010.i.051029bernanke ""Ben S. Bernanke: The man without agony.""#> I contrasted Bernanke's "What? Me worry?" attitude with Alan Greenspan's much more sober and somber attitude. Long-time readers of this web site know that I frequently quoted and analyzed the statements by Alan Greenspan many, many times in this web log. I really enjoyed Greenspan's statements because there were so nuanced and insightful. Analysts used to claim that Greenspan was inscrutable, but that was never true; they just didn't want to hear what he had to say, just as they don't want to hear about price/earnings ratios any more. In fact, Greenspan was always very precise and very clear, and he managed to convey his agony over the possibility of a coming stock market crash in a way that didn't risk allowing his words to trigger a panic. But I have little desire to read Bernanke's speeches. His speeches are so shallow, they almost fall to the level of investment firm boilerplate. This is a guy who, typical of people in his generation, really has no idea what's going on. <#inc ww2010.pic cpi.gif right "" "Consumer price index (CPI) from 1870 to present, with an exponential growth trend line. The CPI is 185 in 2003, and 2010 has a trend value of 129."#> As for the danger of inflation, Generational Dynamics tells us, as we've been saying since 2002, that we're in a long term deflationary period, and that prices will be falling by 30% in the next few years. This assessment is based on the adjoining graph of CPI from 1870 to the present, along with an exponential growth trend. What most people don't seem to understand is that almost all growth trend values must maintain the long term trend; this is <#inc ww2010.weblog.ref e060122 "the law of "Mean Reversion,""#> that we've discussed before. Since the CPI is well above the trend line today, it has to start falling soon, and stay below the trend line long enough to balance things out. I hope you understand that, dear reader, and if you do, then you're smarter than Ben Bernanke, because he doesn't have a clue. So with the market meltdown going on the last few days, is this the "big one"? Well maybe, or maybe not. You can't predict the exact date of a stock market panic until it happens. Maybe the markets will be steady for a while, or maybe they'll even recover. But Generational Dynamics tells us that a stock market crash is coming, and coming sooner rather than later. There are many factors that are negatively affecting the stock market today, and they all have to do with reduced monetary liquidity worldwide. Here are some examples:

The Fed has been raising interest rates, which reduces business earnings.
With interest rates going up, mortgage rates have also been going up, and that leaves consumers with less money to spend, which negatively affects business.
A federal law that took effect in January requires credit card companies to charge consumers three times the minimum payment that was required last year. This has the same effect as the previous point.
International oil prices have gone, in the period of a few years, from $25 a barrel to $35, then $45, then $55, then $65, and recently $75 per barrel. This affects the cost of doing business, and it also affects takes money out of consumers' pockets, once again leaving them with less to spend.
Oil, food, metals, and other commodity prices have been going up because China has been sucking everything up. This has the same result as above.
China is appreciating its currency, and since much of what we buy today comes from China, this means that many consumer goods are more expensive today.

So there's a lot going on today. What's also happening is that investors are becoming increasingly nervous and risk-averse. Think of it this way: During the 1990s stock market bubble, investors were so risk-seeking that they'd go for anything, no matter how ridiculous. Well, the opposite is happening today. Investors are changing from risk-seeking to risk-averse, and they're continuing to be just as irrational as ever. "Irrational exuberance" has been replaced with "irrational revulsion." At some point, this risk-averseness will trigger a stock market panic. It might be next week, next month, or next year, but it's coming, and sooner rather than later. Generational Dynamics has been predicting since 2002 that we're entering a new 1930s style Great Depression, and that stocks will fal to the Dow 3000-4000 level, most likely by the end of 2007. =eod =// &&2 e060517 Palestinian Authority and Hamas deploy rival armies in Gaza =data ww2010.weblog.y2006.e060517.head Palestinian Authority and Hamas deploy rival armies in Gaza =data ww2010.weblog.y2006.e060517.keys Palestine, Israel =data ww2010.weblog.y2006.e060517.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060517.date 17-May-06 =data ww2010.weblog.y2006.e060517.txt1 In open defiance of PA president Mahmoud Abbas, Hamas mounted an illegal 3,000 man militia force =data ww2010.weblog.y2006.e060517.txt2 in Gaza, after <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2006/05/17/AR2006051701378.html "a Hamas security force was vetoed by Hamas last month."#> In response, Abbas' Palestinian Authority is deploying its own several thousand man army in Gaza. In both cases, the reason given for the deploying the armies is to police the Gaza Strip, where violence has been increasing steadily, ever since Israel withdrew its settlers and soldiers last summer. "There has never been a grimmer situation," <#stdurl http://voanews.com/english/2006-05-17-voa48.cfm "says analyst Aaron David Miller, a Public Policy Scholar at the Woodrow Wilson Center."#> Miller described what he calls the "four no's" of the degrading situation:

No trust between Israelis and Palestinians.
No effective and empowered contacts or negotiations between Israelis and Palestinians.
No governing set of principles, mutually acceptable or accepted by Israelis and Palestinians that constrain or regulate their behavior.
No third party willing and or able to play an effective and meaningful role in response to either crisis or opportunity.

As ominous as the four no's are, the formation of these rival armies is the most significant event of all. As <#inc ww2010.weblog.ref e060505 "I've described in the past,"#> random political events in the Mideast are "attracted" (in the sense of a chaotic attractor in Chaos Theory) in the direction of war, and for the last couple of years I've been describing on this web site the day to day political events moving the Mideast closer and closer to war. Once again, the same sad story is being repeated. The formation of rival armies, sponsored respectively by two branches of government, even when they're called "security forces," moves Gaza significantly closer to civil war. Even with the best of intentions, these two armies will stumble over each other in their "peacekeeping" duties and create an "incident," but nobody is exhibiting the best of intentions. An incident could bring in other groups, forcing even civilians to choose sides, causing the situation to spiral out of control. It's worth pausing for a moment, to compare this to the situation in Iraq, and to note that nothing like formation of rival government-sponsored armies in Iraq. I've frequently been very critical of politicians, journalists and pundits <#inc ww2010.weblog.ref e060321 "making moronic statements that Iraq is close to civil war."#> As I've been saying since 2003, a civil war since is impossible in Iraq, because only one generation has passed since the genocidal Iran/Iraq crisis war of the 1980s, meaning that Iraq is entering a <#hreftext ww2010.i.sixties040501 "generational awakening era,"#> and a civil war is impossible at the beginning of a generational awakening era. In mathematical terms, political events are "attracted away" from war, and so any kind of civil conflict quickly fizzles out. However, the Mideast is in a "generational crisis" era, since 57 years have passed since the end of the genocidal war between Arabs and Jews in the late 1940s when Palestine was partitioned and the state of Israel was created. When the Mideast "Roadmap to Peace" was put forward in May 2003, <#hreftext ww2010.i.may01 "I predicted that the Roadmap would / could never succeed,"#> and that the Mideast would move closer and closer to war as soon as Yasser Arafat and Ariel Sharon were out of the picture. Not everything is bad news, of course. Abbas recently met with Russian President Vladimir Putin, and <#stdurl http://en.rian.ru/analysis/20060517/48256779.html "Putin promised $10 million in aid to Abbas."#> That's one small piece of good news (assuming, of course, that the promised money actually reaches Abbas). But if you look back over the 18 months or so since Arafat died, you'd find it very hard to think of many political events that were good news, but you'd have no difficulty finding dozens of political events that moved the region toward war. =inc ww2010.cf.cf060209 p right The formation of rival armies is the latest, and in many ways the most dangerous. Right now the two armies have only a few thousand people each, but they're only going to grow. From the point of view of Generational Dynamics, things are going as expected. Generational Dynamics predicts that the Mideast is headed for a new major genocidal war between Arabs and Jews. A civil war among the Palestinians is certainly one plausible scenario for leading into that war, since sooner or later Israel will be drawn into it. In fact, Generational Dynamics predicts that the entire region will be drawn into it, and that it will be one component of a new "clash of civilizations" world war, the first world war in six decades. =eod =// &&2 e060514 H5N1 bird flu in Indonesia =data ww2010.weblog.y2006.e060514.head H5N1 bird flu appears to be spreading very slowly in families in Indonesia =data ww2010.weblog.y2006.e060514.keys Indonesia, bird flu =data ww2010.weblog.y2006.e060514.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060514.date 14-May-06 =data ww2010.weblog.y2006.e060514.txt1 Although human to human transmission, if confirmed, is still very inefficient, =data ww2010.weblog.y2006.e060514.txt2 the situation in Indonesia indicates that the virus has taken an additional mutation step on the road to full-fledged efficient human to human transmission. If the virus continues to mutate in the same direction, the situation would quickly expand into a full-fledged worldwide bird flu pandemic. This could happen next week, next year, or after that - there's no way to predict. What's causing concern among Indonesian and World Health Organization officials is <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2006/05/14/AR2006051400390.html "a large familial "cluster" of bird flu cases."#> After attending a recent family gathering, <#stdurl http://online.wsj.com/article/SB114760647060852360.html "eight family members living on Sumatra island fell ill,"#> and six have died. The other two are still alive, and are hospitalized. There have been smaller 2-3 person clusters in the past, so this is a much larger cluster than has been seen so far. With smaller clusters, it's not always possible to determine whether human to human transmission has occurred. For example, if three family members all get bird flu, then it's possible that they all acquired the virus from the same animal source, say, an infected chicken living in the house or back yard. But in this case, where the cluster size is eight, it's almost impossible for all eight to have contracted the disease from the same source. It's much more likely that one person got the disease from an animal and got sick -- this would be called the "index case" of the cluster -- and that the other seven contracted the disease from the index case through personal contact. The timing of the infections also raises the likelihood that human transmission is involved, according to <#stdurl http://www.recombinomics.com/News/05120604/H5N1_Medan_12.html "analysis on Henry Niman's Recombinomics web site."#> The first fatality was on May 4, followed by deaths on May 9, 10, two deaths on May 12, and one on May 13. If all the deaths had occurred at the same time, that would indicate that they probably all contracted the disease at the same time, from the same animal source. But since the second and third deaths occurred 5 days after the first one, it's most likely that these two people contracted their cases from the first patient, the index case, since it takes about five days after contracting the disease to show symptoms. As I said above, this does not mean we're facing a human pandemic tomorrow. But it does mean it's possible, since one more step along that path has been taken. A human pandemic could begin at any time -- next week, next month, next year, or after that. As I've said before, you and your family should prepare immediately for a possible pandemic. If human to human transmission became public next week on Monday, then by Tuesday all the shelves in grocery stores would be bare. If you stock up on food now, then you'll be sure to have what you need. Even if you think that you can beat the crowds to the grocery store, you should still stock up in advance. If you get your canned food after the panic begins, then you're depriving somebody else of food. But if you stock up in advance, then the shelves will be restocked, and you won't deprive someone else of food. I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e060512 Sri Lanka appears close to war =data ww2010.weblog.y2006.e060512.head Sri Lanka appears close to war =data ww2010.weblog.y2006.e060512.keys Sri Lanka, Tamil Tigers =data ww2010.weblog.y2006.e060512.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060512.date 12-May-06 =data ww2010.weblog.y2006.e060512.txt1 A naval attack by Tamil Tiger rebels and government retaliation by air may spiral into full-scale war. =data ww2010.weblog.y2006.e060512.txt2 <#inc ww2010.pic sri1.gif right "" "Ethnic map of Sri Lanka, around 1975."#> They're both ancient races: The Sinhalese came to the island of Ceylon from northern India around 500 BC, and adopted the Buddhist religion around 300 BC, developing a great civilization. They speak the language Sinhala, and today they're about 70% of the population of Sri Lanka (the modern name for Ceylon). The other is the Tamils, who occupied the southern tip of India as early as 1000 BC, in what is now the Indian province of Tamil Nadu. They adopted the Hindu religion, and came to Ceylon in the 7th century AD. In the 14th century, they seized power in northern Ceylon and established a Tamil kingdom. They speak the Tamil language, and today they're about 10% of the population of Sri Lanka. (Muslims and Christians comprise the remainder of the population.) <#inc ww2010.pic india5.gif left "" "Indian subcontinent, with the island of Sri Lanka off the southern tip of India."#> World War II was a generational crisis war for Ceylon, as it was for the entire Indian subcontinent. Ceylon became an independent state after World War II, and ethnic tension between the Sinhalese and Tamils began almost immediately. The split became very sharp after 1972, when Ceylon changed its name to Sri Lanka and Buddhism was given primary place as country's religion. In 1976, a separatist rebel group was formed, demanding a separate Tamil state. The group called itself the Liberation Tigers of Tamil Eelam (LTTE), and were called the "Tamil Tigers" for short. A non-crisis civil war between the Tamil rebels and Sri Lankan army began in 1983, and continued until 2002, when a peace treaty sponsored by Norway was signed by the warring parties. The world breathed a sigh of relief and assumed that Sri Lanka was on the road to permanent peace, after 20 years of war. As usual, the "world" had no idea what was going on. The 2002 peace treaty was the last gasp of the Sri Lanka's "generational unraveling" period, the time when both Sri Lanka and the rebels were led by people who had grown up during the last crisis war (WW II). These leaders could see that a new genocidal war was on the horizon, and they wanted to prevent it by signing a peace treaty. Signing this peace treaty can only be described as a desperate act, a desperate attempt to prevent massive bloodshed. They played nicey-nice for a while. The Tamil Tigers dropped their demand for a separate state, the Government lifted its ban on the Tamil Tigers, and both sides exchanged prisoners of war in 2003. It was sweet. =inc ww2010.xr.related1 right lanka 2 The peace treaty began running into serious trouble in 2004, when a splinter group broke off from the Tamil Tigers. The splinter group was headed by "Colonel Karuna" (Vinayagamoorthi Muralitharan), a Tamil hero of the last war. Suddenly there was violence within the Tamil community itself, and there's plenty of reason to believe that <#stdurl http://news.bbc.co.uk/2/hi/south_asia/4764521.stm "this Colonel Karuna was supported and encouraged by the Sri Lankan government,"#> as a way of bringing the Tamils under control. So the peace treaty was running into trouble anyway, when the Indian Ocean tsunami struck in December, 2004, killing 30,000 people, and destroying coastal communities. This was viewed as an opportunity for all sides to play nice again, as the government and the Tamils had to cooperate and share the aid that was pouring in. Although low-level violence increased again in 2005, the peace treaty appeared to be mostly holding -- until last month. In April, a series of suicide bombings killed dozens of people. The bombings were blamed on the Tamil Tigers. The death knell of the peace process may have occurred on Thursday. <#stdurl http://www.dnaindia.com/report.asp?NewsID=1028819&CatID=9 "Tamil Tiger rebels used suicide boats to sink two navy gunboats"#> in separate incidents on Thursday and were firing at a ferry transporting some 700 troops. The military retaliated by <#stdurl http://www.dawn.com/2006/05/12/top13.htm "calling in jets to bomb suspected Tamil Tiger positions,"#> while the navy also engaged coastal bases of the Tigers elsewhere. So the government may have supported Colonel Karuna's intra-Tamil rebellion against the Tamil Tigers, as a way of controlling the Tamils, but now it's becoming increasingly clear that the Tamil fighting is going to spread to more warfare against the Sri Lankan government. News stories that talk about the possibility of war almost always do so by talking about a "resumption" of the previous war. But that's not what will happen. The last war occurred during a generational unraveling period, and was not particularly genocidal. But now a new generation is in place, a generation of young people ready and willing to go to war. The next war will be a generational crisis war, much more violent than the 20-year non-crisis civil war. From the point of view of Generational Dynamics, this is a typical situation. Sri Lanka has entered a "generational crisis" period, as the island's leaders are dominated by people born after the last crisis war, and have no fear of a new genocidal war. It's possible that the current situation will settle down after a few days, but if so it will be only temporary. Sooner or later, and probably sooner, there will be a full-scale genocidal war between the government forces and the Tamil Tiger rebels. =inc ww2010.cf.cf060209 p right I haven't included the Sri Lanka situation on my conflict risk graphic because I'm assuming that a genocidal Sri Lankan civil war will not automatically trigger a world war, the way a Chinese civil war would, for example. Nonetheless, a full-scale war in Sri Lanka could spread to India, especially with <#inc ww2010.weblog.ref e060409 "Maoist rebels bringing chaos to Nepal,"#> on the other side of India. If that happens, then it may still be Sri Lanka that triggers the "clash of civilizations" world war which Generational Dynamics predicts will be coming in the near future. =eod =// &&2 e060507 Saudi and other Mideast stock markets appear to be crashing =data ww2010.weblog.y2006.e060507.head Saudi and other Mideast stock markets appear to be crashing =data ww2010.weblog.y2006.e060507.keys TASI, Talawud All-Stock Index, Saudi stock market =data ww2010.weblog.y2006.e060507.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060507.date 7-May-06 =data ww2010.weblog.y2006.e060507.txt1 While Wall Street is rocketing toward a historic new high, =data ww2010.weblog.y2006.e060507.txt2 the Saudi stock market has been plummeting precipitously, and other Mideast stock markets have followed. <#inc ww2010.pic tasi0507.gif right "" "Saudi Arabia's Tadawul All-Stock Index (TASI) as of May 7, 2006"#> On February 25, the TASI (Tadawul All-Stock Index) for the Saudi stock market reached its all-time peak value of 20634, after a long period of spectacular bubble growth. The TASI then fell 4.7% in one day on 2/26, and has been falling almost steadily ever since. Notice that the fall hasn't been steady. There was a partial recovery from 3/13 to 4/8, and a shorter one from 4/23 to 4/26. This is a typical pattern in a bubble crash, related to the "Principle of Maximum Ruin," which causes the maximum number of people to suffer the maximum amount of ruin. These pauses bring more people back into the market, so that more people will lose more money. <#stdurl http://www.menafn.com/qn_news_story_s.asp?StoryId=1093111787 "According to an analysis in Arab News,"#> Dr. Abid Al-Abdali, an economist at Um Al-Qura University in Makkah, said he believed that the index would receive a big boost within two months, when traders would be compensated for their losses. This is exactly the kind of thing that happened after the Wall Street crash of 1929 -- analysts kept predicting that the market would rise again, and everyone would make their money back. It didn't stop falling sharply until 1933, by which time practically every investor in America had lost every cent he had. As economist John Kenneth Galbraith (who died last week at age 97) described the situation in his 1954 book The Great Crash - 1929, "The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune." It's impossible to predict the further path of the TASI, but it fell 6.1% in the week ending Friday, and then <#stdurl http://www.ameinfo.com/85242.html "fell 9.6% on Saturday and 4.3% more on Sunday."#> On Sunday, the Kuwaiti Stock Market (KSE) index fell over 20%, and <#stdurl http://www.ameinfo.com/85235.html "Dubai stock markets fell 6%."#> By the way, <#inc ww2010.weblog.ref e060421 "in India, the Bombay Sensex (BSE)"#> is still rocketing upward as well, despite fears of a bursting bubble. After passing 12000 on April 20, it's now at 12359 and still rising. <#inc ww2010.pic dj0505.png right "" "Dow Jones Industrial Average (DJIA) as of May 5, 2006 (Source: yahoo.com)"#> Meanwhile, Wall Street is still rocketing upward, with the DJIA rising 1.2% to 11577 on Friday. Investors are looking forward to passing the previous all-time high of 11723, reached on January 14, 2000. As I've been saying since 2002, Generational Dynamics predicts that America is entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range by the 2007 time frame. The collapse of the Mideast stock markets might be the leading indicator that the time may be getting near. =eod =// &&2 e060505 Game of "chicken" / Gaza / James Wolfensohn =// &&2 e060505 International game of 'chicken' leading to disaster in Gaza =data ww2010.weblog.y2006.e060505.head International game of "chicken" leading to disaster in Gaza =data ww2010.weblog.y2006.e060505.keys =data ww2010.weblog.y2006.e060505.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060505.date 5-May-06 =data ww2010.weblog.y2006.e060505.txt1 Mideast envoy James Wolfensohn quits in disgust with all participants in the so-called "peace process." =data ww2010.weblog.y2006.e060505.txt2 Wolfensohn had been appointed by the "Quartet" of nations (the U.S., European Union, United Nations and Russia) that put forth the Mideast Roadmap to Peace in 2003. His job was to <#stdurl http://www.thestate.com/mld/thestate/news/world/14451239.htm "help the negotiation process between Jews and Palestinians,"#> and specifically to make sure that last year's Israeli withdrawal from the Gaza Strip went smoothly and brought prosperity to the Palestinians living there. There's no question that Wolfensohn did his best. He negotiated several agreements between the parties. And, as former President of the World Bank, he used his formidable list of contacts to get investors to purchase dozens of greenhouses left behind by Israeli settlers, so that Palestinians could use them right away to get hard currency by growing food for exports. Unfortunately, the commitments in the agreements weren't always honored. As for the greenhouses, several were looted by Palestinian militias, and the food grown at the other greenhouses couldn't be exported because the Israelis had closed the borders for security reasons. Finally he'd had enough, according to <#stdurl http://www.ariga.com/2006-05-03.shtml "Robert Rosenberg's Ariga column for Wednesday:"#>

"But Wolfensohn is leaving in apparent disgust with the Israelis, the Palestinians, and the international community, regarding the entire effort to isolate the Hamas government a punishment of the Palestinians, which will only lead to more despair and intransigence on the Palestinian side. Ever the diplomat, he is not stating outright how disgusted he is, but he has made clear that he is furious about broken Israeli promises to take steps to ease conditions for the Palestinians, particularly Gazans, where half the population is now living beneath the World Bank's own measure of poverty -- less than $2 a day. He's no less frustrated by the Palestinians, particularly their inability to rein in the lawlessness that took over in Gaza. Indeed, while some of the greenhouses he purchased were successfully handed over to Palestinians (who are going bankrupt because of Israeli security restrictions that make agricultural exports out of Gaza extremely slow and difficult) others were ruined by in fighting by rival gangs that nobody in Gaza can control. As for the international community, which 'hired' him as an expert in economic development, he is disgusted with its inability to intervene with anything other than isolation of the Hamas government."

What's happening is a truly incredible <#stdurl http://en.wikipedia.org/wiki/Game_of_chicken "international game of chicken."#> Are you old enough to remember how this game became popular in the 1940s and 1950s? Two teenagers would drive their cars full speed straight towards each other from opposite ends of the field. The first driver to swerve to avoid an accident is the "chicken." That's what's going on now. On one side you have the West -- Israel, the U.S., the E.U. and Russia -- who have cut off aid to the Palestinians, believing that it will force the new Hamas government to recognize Israel and bring the terrorism under control. Careening down the field from the other direction is the Hamas leaderhip itself, who believe that the West won't let the Palestinians starve to death, and will have to give in and provide aid after all. Of course, in the game of chicken it's possible that neither driver will swerve, and then everyone gets killed. I'm sure, dear reader, that I don't need to continue this analogy for you. As I've <#inc ww2010.weblog.ref e060410 "explained many times on this web site,"#> day to day political events are chaotic events that fall like snowflakes in random ways. But just as millions of snowflakes get "attracted" to large snow drifts, millions of individual political events get attracted to the impending Mideast war, since war is a "chaotic attractor" at this time, 57 years after the end of the 1940s genocidal war between Arabs and Jews. I keep documenting these incidents because it's so remarkable to see this work. Applying Chaos Theory to political events was something I developed and wrote about a year or two ago (see the chapter on Chaos Theory in my new book, a draft of which can be reached from the home page). But that's really all it was when I developed it - a theory. Now we can see this theoretical concept of "attractor" come true on a day to day basis. It's been happening every since Yasser Arafat died, and has evidently accelerated ever since Ariel Sharon became incapacitated. Look at the day to day political events as they've occurred in the last year and a half. Pick almost any day and look at the headlines for that day, and you'll see that it most likely moves the Mideast in the direction of war. There are a few exceptions of course, like the period when Mahmoud Abbas was elected and took office, and hopes were raised at that time. But those brief intervals are like a heat wave in New York City in November -- just because the weather gets warm for a few days doesn't mean that winter isn't coming. Once the heat wave is over, the weather starts getting much colder again. Similarly, there are brief periods when things seem to get better, but they pass quickly, and then political events move back towards war. That what "attractor" means in Chaos Theory. It doesn't mean that every political event brings the Mideast closer to war; it means that political events float around in all directions, at random, but most of them, not necessarily all of them, are attracted to Mideast war. It's an exciting theoretical development and an exciting application of the theory. At moments like this I only wish that there weren't so much at stake that's it's impossible to enjoy this kind of discovery. =eod =// &&2 e060504 Mainstream media notices Eur governments are paralyzed =data ww2010.weblog.y2006.e060504.head Mainstream media suddenly notices that European governments are paralyzed =data ww2010.weblog.y2006.e060504.keys Angela Merkel, Germany, France, Mideast =data ww2010.weblog.y2006.e060504.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060504.date 4-May-06 =data ww2010.weblog.y2006.e060504.txt1 Saying that the recent Italian election means there's "a crisis of the democratic model," =data ww2010.weblog.y2006.e060504.txt2 an <#stdurl http://www.csmonitor.com/2006/0503/p01s02-woeu.html?s=hns "an article in CS Monitor"#> points out that one European country after another is going through governmental turmoil, similar to America's 2000 Presidential election, which wasn't decided for weeks. "People are disillusioned with politics, disappointed in whichever government they've got, and generally disenchanted with democracy," says one analyst, commenting on European politics:

Last month Romano Prodi won the election as Italian premier by putting together a nine-party alliance that won by a mere 25,000 votes out of 38 million cast. The election was in doubt until this week when the losing candidate, former premier Silvio Berlusconi, finally conceded after five weeks.
Late last year, Angela Merkel lost a close election for German Chancellor only by forming alliances with political enemies and abandoning her campaign promises for major economic reforms to bring down Germany's double-digit unemployment rate.
Last month, <#inc ww2010.weblog.ref e060411 "French President Jacques Chirac caved in to street protests"#> and withdrew plans for economic reforms to bring down France's double-digit unemployment rate.
British Prime Minister Tony Blair has been forced to back off on plans to reform education and health care.

One political analyst says that European voters have no clear vision to inspire them. "People don't ask themselves who they are for, but who they are least against. It is democratic confusion, and loss of morale, which is very important." An <#stdurl http://online.wsj.com/article/SB114661999513342225.html?mod=hpp_us_pageone "article in Wednesday's Wall Street Journal"#> focuses on Angela Merkel, but makes the same point governments throughout Europe: "The story of Ms. Merkel, who is meeting with President Bush in Washington this evening, reflects Europe's economic quagmire. Challenged by low-cost labor abroad, Western Europe desperately needs to become more competitive to escape from a trap of low economic growth and high unemployment. Most business leaders and economists agree that strong moves are needed to overhaul inflexible labor codes and trim the costly social safety net. What's missing are strong leaders to carry them out." Regular readers of this web site know that this is a point that I've been making for a long time now. One country after another is becoming paralyzed, and unable to accomplish anything. The reason is generational. The people who fought in World War II almost literally reconstructed the world, accomplishing huge things -- setting up country boundaries, deciding world monetary, trade and commerce policies, making plans to make sure everyone is fed, constructing world health policies, and even setting up the United Nations to make sure that nothing like WW II ever happens to their children or grandchildren. Even after WW II, the people who fought and grew up during WW II continued to look after the world through the institutions that they had set up at that time. But as the decades went by, those generations disappeared in every country until finally, today, there are few of them left, and almost none of them left in leadership positions. The generations that follow haven't experienced the the enormous accomplishments of WW II, and they don't know how to carry those accomplishments forward. The Baby Boomer generation can't do anything but argue, and the Generation Xers are full of energy but can't do anything but get angry. The kids in the young Millennial generation (Generation Y) don't know what to do either, but they want most of all to see their Xer and Boomer parents to stop being so angry and frustrated. It's these kids that will now set the direction for the world. They won't do it based on the experience of their grandparents who were around during WW II, because they don't know or understand anything of that experience. Instead, as kids, they'll settle on something in the same way they settle on a fashion item or a rock star. And each country's leaders will have no choice but to follow, or be voted out of office. And in one country or another, that path will be to war, ahd that will create the chain reaction. There is probably no more dramatic example of this in the world today than the Palestinians. Yasser Arafat and Ariel Sharon lived through the genocidal Arab-Jewish wars of the 1940s, and as long as they were alive, both the Palestinians and Israelis had strong leadership. But as <#hreftext ww2010.i.may01 "I predicted when the Mideast roadmap was published in 2003,"#> the Mideast has been descending into chaos ever since, and will continue to do so until there's a new genocidal war. Why? One reason is that <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html "the median age in the Gaza strip is 15.6."#> The Palestinian people are being led by children. That's why, for example, it's IMPOSSIBLE for Hamas to recognize Israel. If Hamas's leaders did so, the Gaza children would through Hamas out in a minute. But the fact that the Palestinian situation is the most dramatic doesn't mean it's unique. The reason that all the European countries are paralyzed, and America is paralyzed, and Israel is paralyzed, and even China is paralyzed is because the children haven't made up their minds yet. But when they do, in most cases we won't like the result. From the point of view of Generational Dynamics, this is all leading to a new world war, a "clash of civilizations" world war. At some point the kids in one country will decide it's time to go to war. Their parents and grandparents will follow, the kids in other countries will decide to get revenge, and it will be on. This might start next week, next month or next year, but it will happen with 100% certainty. So it's nice that the mainstream media is suddenly discovering that these governments are becoming paralyzed. As I've said many times, journalists, politicians and analysts are incapable of seeing even the most elementary and obvious generational explanations of events, and in this case the generational explanations are pretty subtle. It's a shame, because if these people were only able to dig a bit deeper, then they might put together an even more accurate picture of what's going on in the world. =eod =// &&2 e060502 Holy cow! Stephen Roach has suddenly gone bullish! =data ww2010.weblog.y2006.e060502.head Holy cow! Stephen Roach has suddenly gone bullish! =data ww2010.weblog.y2006.e060502.keys Stephen Roach =data ww2010.weblog.y2006.e060502.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060502.date 2-May-06 =data ww2010.weblog.y2006.e060502.txt1 Let's take a look at his reasons for changing his mind. =data ww2010.weblog.y2006.e060502.txt2 Stephen Roach, the Chief Economist at international investment firm Morgan Stanley, has been the iconic "bear" for several years, predicting a severe downturn in the economy. And in November 2004, he was privately telling clients that America has no better than a 10 percent chance of avoiding "economic Armageddon," according to <#stdurl "business.bostonherald.com/businessNews/view.bg?articleid=55356" "a Boston Herald news report."#> But now he's changed his mind. In <#stdurl =// http://www.morganstanley.com/GEFdata/digests/20060501-mon.html http://www.morganstanley.com/views/gef/archive/2006/20060501-Mon.html#anchor0 "Monday's edition of his regular commentary,"#> `Roach begins by saying,

"It seems like eternity since I was last optimistic on the world economy. It was back in 1999 when I argued that "Global Healing" would allow the world to make a stunning comeback from the ravages of the worst financial crisis in 60 years. My enthusiasm was short-lived, however, as the cure led to the mother of all liquidity cycles, multiple asset bubbles, and an unprecedented build-up of global imbalances. While an unbalanced world has yet to shake its hangover from global healing, I must confess that I am now feeling better about the prognosis for the world economy for the first time in ages."

So he starts by telling us that the last time he felt optimistic about the economy was just before the Nasdaq crash of 2000. I'm not sure why he felt the need to share that with us as his first thought. Maybe he's trying to tell us indirectly that he secretly thinks we're about to have a new stock market crash, now that he's suddenly optimistic about the economy again.

"The reason: The world is finally taking its medicine -- or at least considering the possibility of doing so. Central banks are carefully adjusting the liquidity spigot -- taking advantage of the luxury of low inflation to move very slowly in doing so. This delicate normalization procedure is necessary to prevent wrenching financial market crashes that would spell curtains for an asset-dependent world. Meanwhile, the stewards of globalization -- especially the G-7 and the IMF -- have finally come to grips with the imperatives of facing up to the perils of global imbalances. They are now hard at work in developing a multilateral solution to a multi-economy problem. At the same time, orderly currency adjustments appear to have resumed -- and this time, in the right direction. Ever so slowly, the dollar is being managed lower -- in keeping with the relative price shift that a long-overdue US current account adjustment needs. As always, there are still plenty of serious risks -- especially oil, geopolitics, fiscal paralysis, and protectionism. But the world now appears to be getting its act together, and that encourages me."

This is what's really mind-boggling. He's changed his mind not because anything fundamental has changed, but because people are talking about change, and it appears that things might change. Just because people are talking about things doesn't mean anything is going to happen, and I've given plenty of examples of that on this web site:

Last June, the leaders of the G-8 countries, the "richest" countries of the world, vowed to cure poverty in Africa during the next decade. But the sheer size of Africa makes that mathematically impossible, <#inc ww2010.weblog.ref e050612 "as I explained at length at the time,"#> and the politicians know it. But they all patted themselves on the back for making promises that they knew could not be fulfilled.
In March, the <#inc ww2010.weblog.ref e060317 "China's People's National Congress was paralyzed by ideology"#> trying to institute land reforms.
In America, <#inc ww2010.weblog.ref e060131 "personal savings have plummeted to Great Depression levels,"#> and public debt is growing exponentially, but all that the Washington politicians can do is call each other names. In fact, the Congressional calendar this year is <#inc ww2010.weblog.ref e060322 "just 97 days long,"#> because the Boomers and GenXers in Congress are unable to get anything done.
For four years, China's central government has been trying to slow down the country's 10% bubble-level rate of growth to a "soft landing" of around 7%, and they've failed completely.

And there are many other examples as well. The point I'm making is that talk means nothing. Roach should know that. So I'm glad that Roach "feels" good, but the public debt level is still growing exponentially. At the end, he agrees that there are still many dangers:

"Lest I be accused of succumbing to the ravages of terminal jet leg, I assure you that I am still mindful of the ever-present risks that beset a very fragile world."

He then mentions the growing price of oil, the housing bubble, consumer debt, public debt, and a blowup of the "Iran problem." In other words, nothing much has changed. I'm very disappointed in Roach. I thought he was one of the few people who actually had some sense and had the ability to analyze long-term economic trends without simply going with the financial statistic du jour. Instead, he's caught up in the same general level of giddiness and credulity that we're seeing everywhere else. The reasons he gives for changing his mind are nonsense. The most charitable thing I can say is that he's selling out because he wants to keep getting big consulting fees from the Chinese. And that's not very charitable, is it. I guess Morgan Stanley's chief economist has been beaten down by all the people calling him crazy. But you're lucky, dear reader, because I don't get beaten down no matter how many people call me crazy. =eod =// &&2 e060501 China's plans for war with America =data ww2010.weblog.y2006.e060501.head China's plans for war with America =data ww2010.weblog.y2006.e060501.keys China =data ww2010.weblog.y2006.e060501.loc ww2010.weblog.log0605 =data ww2010.weblog.y2006.e060501.date 1-May-06 =data ww2010.weblog.y2006.e060501.txt1 China is openly making plans for all-out war with the United States, =data ww2010.weblog.y2006.e060501.txt2 according to documents that several readers referred me to after reading <#inc ww2010.weblog.ref e060420 "last week's article on Chinese President Hu's visit,"#> describing Hu's gift to Bush, a silk copy of Sun Tzu's classic The Art of War. <#inc ww2010.pic warfare.jpg right "" "Unrestricted Warfare, 1999, by Qiao Liang and Wang Xiangsui, colonels in the People's Liberation Army"#> The book <#stdurl http://en.wikipedia.org/wiki/Unrestricted_Warfare "Unrestricted Warfare, published in 1999 by Qiao Liang and Wang Xiangsui,"#> colonels in the People's Liberation Army, lays out a complete strategy for a "war without limits" with America, starting with, "The first rule is that there are no rules, with nothing forbidden." (A 200-page excerpt can be found <#stdurl http://www.terrorism.com/documents/TRC-Analysis/unrestricted.pdf "here in PDF form"#> and <#stdurl http://www.cryptome.org/cuw.htm "here in HTML form."#>) Like The Art of War, Unrestricted Warfare emphasizes the need to win wars without actual warfare, a common theme in Chinese culture. Accordingly, it recommends a collection of extra-warfare technology, such as terrorism, using China's enormous economic power for economic warfare, and technology warfare attacking networks. The authors have something in common with Osama bin Laden: Like bin Laden, they believed that America had become to weak too fight a war, based on our military action in 1993, where we fled from the scene once one soldier had been killed. OBL believed that America would never respond to a terrorist attack, and Qiao and Wang believed the same. From the point of view of Generational Dynamics, these people are all making the same mistake because they don't understand generational patterns. During the 1990s, America was still in a "generational unraveling" period, the era between the awakening and crisis eras. Unraveling eras are the times that a nation's public are the least willing to wage war, even less than in an awakening era. But that all changed around 2000, when all the people in the Silent generation (the people who grew up during WW II) all disappeared (retired or died), all at once. That's what makes the difference. That's why, after 9/11, President Bush received full support from almost the entire American public for the invasion of Afghanistan. Today, well into its crisis period, America has virtually no fear of war. A terrorist attack on American soil, for example, would bring immediate demands for a retaliatory military strike. This doesn't mean that Qiao and Wang's work is wrong, since the lengthy book is still devoted to all kinds of actual warfare. But it means that America will be much more ruthless than the Chinese expect, just as the Chinese will be much more ruthless than the Americans expect. More up to date is a recent lengthy analytical articled called, <#stdurl http://atimes.com/atimes/China/HD20Ad03.html ""If it comes to a shooting war with China.""#> This article details various scenarios how China could cripple America's armed forces, and go on to win the war. There's no doubt that China is thinking in terms of war with America, especially over Taiwan. In fact, it was last year in July that General Zhu Chenghu, a top-level officer in China's People's Liberation Army (PLA) <#inc ww2010.weblog.ref e050716 "threatened America with nuclear war if America interfered with Taiwan."#> Speaking to a group of foreign journalists, General Zhu said,

"If the Americans are determined to interfere [then] we will be determined to respond. We . . . will prepare ourselves for the destruction of all of the cities east of Xian [a city in central China]. Of course the Americans will have to be prepared that hundreds . . . of cities will be destroyed by the Chinese."

So, from the point of view of Generational Dynamics, there's no doubt that a war with China is coming, and possibly quite soon. How is that war going to turn out? For years, China has been furiously preparing for a major war with America. It has huge and hugely increasing military budgets, rapidly building up its war machine. The money is going for the most advanced high tech weaponry, including sophisticated aircraft, missiles, submarines, and WMDs. The initial objectives are the reunification of Taiwan, the destruction of Japan, control of the Pacific and Indian Ocean sea lanes, and eventually destruction of the United States. The Chinese are smarter than we are and there are a hell of a lot more of them than us, so they will succeed in that plan. Based on that information, the best we can hope for is to slow the Chinese warmaking down for a while, until the 2020s when <#hreftext ww2010.i.robot040709 "the robots and computers will start taking everything over,"#> and war with China won't matter much anyway. In fact, these books and articles overlook some very substantial advantages that America has, probably enough to protect us for at least a couple of decades.

China is becoming increasingly unstable and is <#hreftext ww2010.i.china050116 "approaching a massive civil war as its bubble economy unravels."#> With China five times as big as America, they're capable of waging an external war while a civil war is in progress, but at the very least, a civil war will be a huge distraction, and a big help to America.
China will have other powerful enemies, and will also be at war with Japan and India. In fact, <#stdurl http://www.bharat-rakshak.com/SRR/Volume12/sahgal.html "analysts in India are also publishing analytical papers on war with China,"#> just as China is publishing analytical papers on war with America.
China has little or no experience with foreign wars, and no experience with overseas wars, since China has been plagued by centuries of civil war. It's true that China is developing the latest high-tech weaponry, including submaries and naval vessels, but there'll be a big learning curve.
By contrast, America has had a great deal of experience with overseas wars. No matter what you think of the Afghan and Iraqi wars, American forces have absorbed an enormous amount of "lessons learned" material from those experiences.
Furthermore, the American forces have been using very sophisticated computer simulations to "practice" war with China for years. Any scenarios that anyone else has thought of has also been dealt with in these sessions, along with all the possible counter-scenarios

I certainly don't wish to give the impression that this will be easy. As General Zhu said, we may have as many as 100 American cities destroyed with nuclear weapons, and that doesn't even count biological or chemical weapons. Worldwide, there will only be 2-3 billion people left of the current 6.5 billion people. So win or lose, the upcoming war will the be the worst the world has ever known. Because of it's enormous size, China could expect, sometime in this century, to beat America in a major genocidal war and then permanently occupy North America. However, with a takover by super-intelligent computers expected within two to three decades, it's doubtful that they'll reach that point. =eod =// &&2 e060430 Immigration: Xenophobia / paranoia / Great American Boycott / Mexico =data ww2010.weblog.y2006.e060430.head Immigration: Xenophobia and paranoia growing rapidly as "Great American Boycott" approaches =data ww2010.weblog.y2006.e060430.keys Great American Boycott, Mexico =data ww2010.weblog.y2006.e060430.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060430.date 30-Apr-06 =data ww2010.weblog.y2006.e060430.txt1 In what appears to be a sea change in public attitude, =data ww2010.weblog.y2006.e060430.txt2 similar to the <#inc ww2010.weblog.ref e060423 "sudden growth in popularity of the British National Party"#> in the UK, a new Rasmussen poll finds that <#stdurl http://www.rasmussenreports.com/2006/April%20Dailies/Election%202008.htm "strict enforcement of immigration and border control laws"#> is becoming a potent issue in the 2006 Congressional elections and the 2008 Presidential elections. On the other side, immigrants are suddenly staying out of work and schools for fear of federal roundups and deportations. This combination of xenophobia and paranoia is quickly beginning to dominate the immigration debate as we approach Monday's Great American Boycott, which calls on immigrants and immigration supporters to skip work and school and take part in demonstrations. Organizers are hoping for huge turnouts in Los Angeles and in cities across the country. Immigration has not been an important issue until recently, but in the last few months we've seen it become almost the dominant feature of the American political debate. And now poll results are highlighting its importance in various ways:

57% of Americans favor building a barrier along the Mexican border.
Only 26% of Americans have a favorable opinion of those who have marched and protested for immigrant rights, while 54% have an unfavorable view.
40% of Americans favor "forcibly" requiring all 11 million illegal immigrants to leave the United States.
For the 2008 Presidential election, a generic Democrat wins 44%-32% over a Republican. But when respondents were asked how they would vote if "a third party candidate ran in 2008 and promised to build a barrier along the Mexican border and make enforcement of immigration law his top priority," then the vote became Democrat 31%, third party candidate 30%, and Republican 21%.

From the point of view of Generational Dynamics, it's not surprising that this swing in publc opinion is happening in both Britain and the U.S. at almost exactly the same time. That's because this kind of xenophobia is typical of any society in a "generational crisis" period, and World War II ended at almost exactly the same time for Britain and the U.S. As we pointed out last week in the discussion of the British National Party, the same thing is happening as well in other countries that fought in WW II. Many people appear to believe that these sudden changes in attitudes among American and British voters are temporary, and that once a few political issues are settled, then attitudes will revert back. But that isn't how it works. What we're actually seeing is the early days of a growing change in public opinion. Instead of reverting, positions will continue to harden, perhaps rather quickly, and the only way to resolve the issues will be war. It would be helpful to have similar opinion polls within the immigrant community, but even without polls it's clear that opinions are also hardening on the immigrant side -- as can be seen simply from the fact that the crowds at pro-immigrant demonstrations have been growing. We can also see that <#stdurl http://www.app.com/apps/pbcs.dll/article?AID=/20060428/NEWS/60428018 "immigrants are becoming more fearful of federal raids"#> of workplaces and forced deportation. So increasing American xenophobia is being complemented by increasing immigrant paranoia. Hispanics are also much more willing than before to be confrontational. This is clear from the confrontational nature of Monday's planned boycott -- where supporters are being encouraged to shut down businesses by staying out of work. One novel development is the release of "Nuestro Himno" (Our Anthem), the "Star-Spangled Banner" in Spanish. This has brought <#stdurl http://www.mercurynews.com/mld/mercurynews/news/politics/14455495.htm "a sharp response from the President:"#> "I think the national anthem ought to be sung in English. People who want to be a citizen of this country ought to learn English, and they ought to learn to sing the national anthem in English." If <#stdurl http://www.npr.org/templates/story/story.php?storyId=5369145 "the Spanish version had been a true translation,"#> there probably wouldn't be so much outrage. Instead, the composers changed the song substantially. I've always loved the Star-Spangled Banner, especially its visual imagery. Francis Scott Key wrote the song as he was being held as a prisoner of war during an overnight battle. He knew that if the Americans lost the battle, then the American flag would be taken down. Hence the words: "And the rockets red glare, the bombs bursting in air, gave proof through the night that our flag was still there." However, this visual imagery has been removed, as has the phrase, "Home of the brave." The Star-Spangled Banner is kind of a sacred song, and the translation changes it from a war song to some kind of brotherly love song. Many people (including me) consider this to be inappropriate. If the Spanish version were a straight translation, and if immigration supporters sang that straight translation version as they marched and demonstrated that they're Americans too, then this might have actually improved relations with immigrants. Instead, they turned this sacred song into a cheap political stunt, and that's not going to help. Adam Kidron, the producer of "Nuestro Himno," says that he thinks that the effort is <#stdurl http://www.timesonline.co.uk/article/0,,2089-2158064,00.html "" really cool to do something that was artful, emotional and, to some extent, patriotic.""#> Obviously it isn't being accepted that way by Americans, and that's how things work during "generational crisis" periods. During the 1960s, when America was in a <#hreftext ww2010.i.sixties040501 "generational awakening era,"#> and even as late as the 1990s, "Nuestro Himno" might indeed have won a popular political following as a "multicultural" tool. But multiculturalism always disappears during generational crisis periods, in every country and at every time in history, because an individual at that time becomes concerned about the welfare of himself and his family, and about the viability of his country and its way of life, and these factors have higher priorities than multiculturalism. One more point: A reader has sent me an e-mail message discussing the situation and expressing the belief that poor blacks will join with the Latinos, and will fight with the Mexicans rather than with the Americans. There will, in fact, <#stdurl http://news.xinhuanet.com/english/2006-04/30/content_4494240.htm "some support for the boycott from the black community."#> I guess this point is arguable, but I see very little chance of a lasting coalition between blacks and Mexicans, since blacks have no connection to Mexico, and Mexicans have no real use for blacks. From the point of view of Generational Dynamics, the increasing xenophobia shows that we're headed for war between America and Mexico. Violence is increasing throughout Mexico anyway, and <#inc ww2010.weblog.ref e050825 "and the country is already headed for a civil war"#> between the descendants of the indigenous people (Aztecs, Mayans, Commancheros) and the descendants of the Spanish conquerors. Within the United States, the immigration issue will become increasingly polarizing, just as the rise of the British National Party will be increasingly polarizing in Britain. All of these conflicts will eventually become parts of the "clash of civilizations" world war. =eod =// &&2 e060429 UN World Food Program will cut Darfur humanitarian rations in half =data ww2010.weblog.y2006.e060429.head UN World Food Program will cut Darfur humanitarian rations in half =data ww2010.weblog.y2006.e060429.keys housing bubble =data ww2010.weblog.y2006.e060429.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060429.date 29-Apr-06 =data ww2010.weblog.y2006.e060429.txt1 This continuing genocide is a very sad situation, but it can't be stopped. =data ww2010.weblog.y2006.e060429.txt2 <#inc ww2010.pic g060429.jpg left "" "George Clooney in the company of two senators. (Source: NZ Herald)"#> There's a big movie star involved. <#stdurl http://abcnews.go.com/International/wireStory?id=1902982 "George Clooney, who's just returned from a trip to Darfur,"#> says "What we cannot do is turn our heads and look away and hope that this will somehow disappear. If we do ... an entire generation will be gone and then only history will be left to judge us." Yes, Darfur is in the news again, after being mostly ignored for the last year. Suddenly there's <#stdurl http://www.alertnet.org/thenews/newsdesk/N2897395.htm "a big push to "Save Darfur.""#> <#inc ww2010.pic sudan1.gif right "" "Darfur - southwest region of Sudan (Source: BBC)"#> The conflict became genocidal in 2004, roughly around the time that UN Secretary General Kofi Annan said, at a huge ceremony memorializing the Rwanda genocide of 1994, said that nothing like that must ever be permitted to happen again. In June 2004, Annan called on the world to stop the new genocide that was occurring in Darfur, where white Muslims sponsored by the government of Sudan in Khartoum were slaughtering black Muslims in the western province of Darfur. In an article called, <#inc ww2010.weblog.ref e040628 ""Darfur genocide: The UN is completely irrelevant,""#> I predicted that the Darfur genocide would not be stopped, and that in the months to follow close to a million people would die. Well, that's pretty much what's happened, though so far "only" 180,000 people have been killed. But the worst may not be over. Some two to three million people are living in tents in camps set up by the United Nations. These people were forced to move from their homes by a combination of attacks from the air by Sudanese attack helicopters and attacks on the ground by large groups of armed Arabs known as Janjaweed militias. Here's <#stdurl http://allafrica.com/stories/200603170100.html "a typical recent scene,"#> of the type that's been going on for two years now:

"Last month, in the town of Mershing, South Darfur, there was chaos and carnage. On a scorching day in February, four hundred Janjaweed militiamen attacked, firing indiscriminately on civilians, destroying homes, and looting livestock. Eight hours after the initial onslaught, the Janjaweed returned for a second round of mayhem, assaulting women and children and looting the town's main market. Following a terror-filled night, the 55,000 residents of Mershing fled for their lives. Thirteen infants were trampled to death and 220 children separated from their families in the exodus."

This is the kind of thing that always happens in genocidal civil wars. It happened in Rwanda in 1994, it happened with the "ethnic cleansing" in Bosnia in the early 1990s, it happened in the Iran/Iraq war of the 1980s, it happened in the killing fields of Cambodia in the mid-1970s, and it happened in many places in World War II. Whether we like it or not, what the Janjaweed militia are doing is an integral part of being human, buried deep in our "survival of the fittest" mechanism without which the human species would never have even survived this long. Genocidal war is as essential to the survival of the human species as sex is, and neither can be stopped. Sex and genocidal war are closely linked. Genocidal war usually goes according to a standard script: The men are mass-murdered, and the women are raped. The purpose of genocidal war is to determine which of two tribes or ethnic groups or religious groups can exterminate the other. The winner gets a reward - the right to spread his genes around in the losing side's women. There's a good reason for all this: Population always grows faster than available food. The population of Sudan has been growing at close to 3% per year for a long time, and that rate a genocidal war in Sudan sooner or later was literally a mathematical certainty. The last few years have been a political farce in the United Nations, with every country passing the buck to other countries. The most cynical act occurred when <#inc ww2010.weblog.ref e050201 "the UN declared that the Darfur war was not genocide."#> According to the UN charter, such a declaration would have required the UN to act. That left only one solution: say that it isn't genocide. And speaking of food, the U.N. World Food Program (WFP) has just announced that <#stdurl http://abcnews.go.com/International/wireStory?id=1902982 "food rations to those 2-3 million people living in camps are about to be cut in half"#> -- from 2000 calories per day to 1000 calories per day. This will cause thousands or tens of thousands of additional deaths by starvation. What's going on? Because donations to the WFP are far below what was hoped for and expected. Donor governments have given the World Food Program only $238 million of the $746 million the agency needs this year. The main problem is that the worldwide price of food has gone up substantially in the last few years. The reason is that the population grows much faster than the food supply. According to <#hreftext ww2010.i.food040628 "my own computations,"#> food production increases by at most 0.96% per year, while population grows at 1.72%. Therefore, the amount of food per person keeps decreasing, and so food becomes scarcer and, by the law of supply and demand, the price of food keeps going up. In fact, the worldwide price of food has been skyrocketing in the last couple of years, thanks to massive feeding programs in China. As the price of food goes up, poverty increases in large marginal populations around the world. The one thing we can be grateful for in the Darfur situation is that, for once, America isn't the "evil giant." The United Nations refuses to call the Darfur war genocide, but the United States has officially designated it as genocide. And of the $238 million that has been donated this year to the WFP, $188 million was donated by the United States. The European Union and China have given next to nothing. This causes problems for people like George Clooney, who are going around saying that the George Bush administration has to do more to stop the genocide in Darfur. What more can we do? In an interview on CNN Friday, Clooney was asked what he wanted the Bush administration to do. "Do you want the administration to send American troops into Darfur?" This is a loaded question, since Clooney is one of the critics of our war in Iraq. That hasn't stopped some people. For example, that great anti-war activist <#inc ww2010.weblog.ref e040727 "Jesse Jackson called for sending American troops to Darfur"#> in the same interview in which he criticized sending troops to Iraq. What this goes to prove is that no one is truly against war; everyone has a war they like. But George Clooney wasn't so dissembling. He fumbled over his answer for a while, saying "no American troops," but then saying that George Bush should work through Nato to stop the genocide in Darfur. Well, how's that going to work? If the Europeans can't even send money to the World Food Program, are they really going to send troops to Darfur, just because George Bush asks? I don't think so. There's going to be <#stdurl http://www.nzherald.co.nz/section/story.cfm?c_id=2&ObjectID=10379341 "a major rally in Washington DC on Sunday,"#> led by Clooney and a coalition of 160 religious and political groups, to demand that Bush press for a stronger multinational force in Darfur. They're hoping that tens of thousands of people will attend the rally -- we'll have to see if anything like that happens, or whether only a few thousand will show up. From the point of view of Generational Dynamics, what's going on in Darfur is a "generational crisis war," and generational crisis wars cannot be stopped. Since its founding, America has had two crisis wars, the Civil War and World War II. Neither of those wars could be stopped, and neither will the Darfur war be stopped until it runs its course. Now, 61 years after the end of World War II, when all the people in the generations that fought and lived through WW II are almost completely gone, Generational Dynamics predicts that we're headed for a new world war, a "clash of civilizations" war that will involve almost every country in the world. This war might begin this year, next year, or after that, but each year the probability of war that year is higher than for the year before. In <#hreftext ww2010.i.danger041120 "a 2004 article called "The six most dangerous regions in world,""#> I did a rough calculation that the probability of a new world war beginning in 2005 was a little less than 21%, that it's a little more than 21% in 2006, and that it goes up a little bit more each year. From the point of view of Generational Dynamics, we can only give a probabilistic estimate of when the world war will begin, but we can say with certainty that it can't be stopped, any more than the war in Darfur can. =eod =// &&2 e060428 Housing prices continue to fall =data ww2010.weblog.y2006.e060428.head Housing prices continue to fall =data ww2010.weblog.y2006.e060428.keys housing bubble =data ww2010.weblog.y2006.e060428.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060428.date 28-Apr-06 =data ww2010.weblog.y2006.e060428.txt1 Sales volume partially recovered, indicating that you can still sell, if you lower the price enough. =data ww2010.weblog.y2006.e060428.txt2 <#inc ww2010.pic hou0603b.gif left "" "New home sales and prices, seasonally adjusted, January 2000 to March 2006"#> According to a <#stdurl http://www.census.gov/const/www/newressalesindex.html "new report by the Census Bureau and Dept. of Commerce"#> <#stdurl http://www.census.gov/const/newressales_200603.pdf "(PDF),"#> new home sales rose 13.8% in March, after falling for four months in a row. Median prices fell 3% in March to $224,200, down 8% from the October peak of $243,900. Total sales have fallen 3% since October. <#inc ww2010.pic hou0603a.gif right "" "Housing inventory in number of months, seasonally adjusted, January 2000 to March 2006"#> Housing inventories fell slightly to 5.5 months from 6.3 months, but still considerably higher than the typical inventory of around 4 months. What appears to have happened is that demand built up since the housing bubble burst in October, and now sales are partially recovering because prices have fallen substantially, proving that you can still sell a home if you're willing to lower the price enough. For existing home sales, <#stdurl http://www.realtor.org/PublicAffairsWeb.nsf/Pages/MarchEHS06?OpenDocument "March sales rose 0.3%,"#> while prices remained steady. In Sydney, Australia, the housing prices peaked in 2003, and then started falling, and <#stdurl http://www.smh.com.au/news/national/slump-hits-home/2006/02/06/1139074171442.html# "a recent study"#> describes the effects today -- a big increase in defaults, and a big drop in government services. The economy of the entire state of New South Wales is affected. Actually, the fall in housing prices has only been modest so far, and the Australian national economy hasn't been hurt too much, thanks to huge Chinese demand for Australian minerals. In fact, Sydney housing prices have a long way to fall, according to <#stdurl http://www.demographia.com/ "the latest Demographia Inc. International Housing Affordability Survey."#> Sydney was still the 7'th least affordable housing market in the survey! This indicates that a housing price crash hasn't really affected Sydney yet, since houses are still way overpriced. Demographia measures housing markets by computing the "Median Multiple," which equals the Median House Price for the region divided by the Median Household Income for the region. A typical index value is around 3.0, meaning that median house prices equal three times the median household income. (For example, if the median household income is $50,000 and the median house price is $150,000, then the "median multiple" is 3.0.) The countries surveyed were Australia, Canada, Republic of Ireland, New Zealand, United Kingdom, and the United States. In those countries, the least affordable housing markets were:


          20 Least affordable housing markets

          Rank  Housing Market                    Median Multiple
          ----  --------------------------------  ---------------
           1      US              Los Angeles             11.2
           2      US              San Diego               10.8
           3      US              Honolulu                10.6
           4      US              Ventura County           9.6
           5      US              San Francisco            9.3
           6      US              Miami                    8.8
           7      Australia       Sydney                   8.5
           8      US              New York                 7.9
           9      US              Riverside                7.7
          10      US              San Jose                 7.4
          11      UK              London                   6.9
          12      UK              Bristol                  6.8
          12      US              Fresno                   6.8
          12      US              Sacramento               6.8
          15      NZ              Auckland                 6.6
          15      Australia       Hobart                   6.6
          15      Canada          Vancouver                6.6
          18      Australia       Adelaide                 6.5
          19      US              Las Vegas                6.4
          19      Australia       Melbourne                6.4

However, there's another side to this survey: there are still many affordable housing markets, and some of the most affordable are in the United States:


          24 most affordable housing markets

          Rank  Housing Market                    Median Multiple
          ----  --------------------------------  ---------------
           1      US              Buffalo                  2.2
           1      US              Rochester                2.2
           3      US              Indianapolis             2.4
           3      Canada          Winnipeg                 2.4
           5      US              Akron                    2.5
           5      US              Omaha                    2.5
           5      US              Pittsburgh               2.5
           8      US              Grand Rapids             2.6
           8      US              St. Louis                2.6
           8      US              Tulsa                    2.6
          11      US              Dayton                   2.7
          11      US              Kansas City              2.7
          11      US              Oklahoma City            2.7
          14      US              Atlanta                  2.8
          14      US              Austin                   2.8
          14      US              Cincinnati               2.8
          14      US              Dallas-Fort Worth        2.8
          14      Canada          Edmonton                 2.8
          14      US              Louisville               2.8
          14      Canada          Quebec                   2.8
          21      US              Columbus                 2.9
          21      US              Houston                  2.9
          21      US              San Antonio              2.9
          24      US              Cleveland                3.0

These results show that there are still housing markets that aren't overpriced. But once a major financial crisis occurs, everyone wil suffer. =eod =// &&2 e060426 Who's responsible for the Egypt tourist resort bombings? =data ww2010.weblog.y2006.e060426.head Who's responsible for the Egypt tourist resort bombings? =data ww2010.weblog.y2006.e060426.keys Egypt, Dahab =data ww2010.weblog.y2006.e060426.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060426.date 26-Apr-06 =data ww2010.weblog.y2006.e060426.txt1 Monday's was the third seaside resort bombing in two years, =data ww2010.weblog.y2006.e060426.txt2 and officials are uncertain exactly whom to blame. <#inc ww2010.pic dahab.jpg right "" "Seaside tourist resort Dahab, in Sinai desert, Egypt (Source: Toronto Star)"#> On Monday, <#stdurl http://www.kommersant.com/page.asp?id=669771 "three buildings were bombed"#> at the packed tourist resort of Dahab in the Sinai desert on the Red Sea: a restaurant, a cafe and a supermarket. 24 people were killed, mostly Egyptians on vacation, and 80 were wounded. Dahab is a vacation resort for backpackers, surfers and scuba divers, while the two previous bombing sites -- Taba in 2004 and Sharm el Sheikh in 2005 -- had far more luxurious five-star hotels, where 34 and 70 were killed, respectively. Ten people have been arrested as suspects in the bombings, but who's masterminding them? Although al-Qaeda is the obvious suspect for the mastermind, there's a completely different group suspected in this case. It's a small militant group called Al Tawhid Wal Jihad ("Monotheism and Jihad"), drawn from Bedouin tribes in the Sinai. The idea that a local Bedouin group is responsible for the bombings is supported by the fact that all three bombings occurred on Egyptians national holidays - days when the resorts are sure to be crowded with Egyptian vacationers. The day of the Taba attack fell on October 5 when Egyptians commemorate the 1973 Arab-Israeli War. The Sharm el Sheikh bombs exploded on July 22, Egyptian Independence Day. And the latest bombing occurred during a holiday period celebrating the Israeli withdrawal from Sinai. Who are the Bedouins? They've been around longer than anyone. They're nomadic tribes that have lived on the Arabian peninsula since time immemorial. Their way of life survived until well into the 20th century, and they were pretty much the sole inhabitants of the Sinai desert until Israel and Egypt signed a peace treaty in 1979. That's when the <#stdurl http://www.alertnet.org/thenews/newsdesk/L25773030.htm ""Nile Valley people" of Egypt started pouring into the Sinai,"#> and dominated the police, the government and the tourist industry. Thus, we see the same textbook situation that we've described in countries around the world -- two distinct cultures, one wealthy one poor, trying to share the same piece of land. Bedouins live throughout the Arabian peninsula, and there's one more interesting fact to know about them: Arab Bedouins are the only <#stdurl http://www.amin.org/eng/elias_zananiri/2002/jan/jan13.html "Arabs that can serve in the Israeli Army."#> There's also a Bedouin member of the Israeli Knesset. That's not to say that the Israelis and Bedouins get along particularly well, but they do have long-standing relationship dating back to the formation of Israel, and that makes the the objects of even greater suspicion on the part of the Egyptians, with the result that the Israelis are the lesser of two evils when compared to the Egyptians. Thus, the Bedouins are the logical suspects for bombings that target Egyptian vacationers at lucrative Egyptian seaside resorts on Egyptian holidays. But even if the Bedouins are directly responsible for the Dahab attacks -- and that's far from proven -- that still doesn't mean that al-Qaeda wasn't involved. Egypt's Muslim Brotherhood, which is at least loosely linked with al-Qaeda, is a radical Islamist group determined to turn Egypt into an Islamic theocracy. With regard to that 1979 peace treaty mentioned above: When Egypt's president at that time, Mohammed Anwar El-Sadat, signed the peace treaty with Israel, it was considered a traitorous act in the Arab world. Egypt was expelled from the Arab League for ten years, and El-Sadat was assassinated in 1981 by a member of the Muslim Brotherhood. El-Sadat was succeeded by the current president, Hosni Mubarak, whom the Muslim Brotherhood considers to be almost as much an infidel as George Bush, if only because Mubarak has continued good (though strained) relations with Israel. By the way, Hamas is a military offshoot of the Muslim Brotherhood, and even if there were no other reason, that reason alone would explain why it's impossible for the Hamas-led Palestinian government cannot possibly recognize Israel. Nonetheless, in a Monday press release, <#stdurl http://www.jpost.com/servlet/Satellite?c=JPArticle&cid=1143498915248&pagename=JPost%2FJPArticle%2FShowFull "the Hamas government said that the Palestinians "strongly condemn the criminal act"#> which goes against religious beliefs and is against Arab interests." Still there's no doubt that the Bedouin group Al Tawhid Wal Jihad could have links to either the Muslim Brotherhood or al-Qaeda or both, and could have received money or weapons from either. As the Mideast continues its accelerating descent into total chaos, the Bedouins and Al Tawhid Wal Jihad in particular are two more groups that will be playing a part. =eod =// &&2 e060423 British National Party suddenly surges in popularity =data ww2010.weblog.y2006.e060423.head The far right anti-immigration British National Party suddenly surges in popularity =data ww2010.weblog.y2006.e060423.keys British National Party, BNP =data ww2010.weblog.y2006.e060423.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060423.date 23-Apr-06 =data ww2010.weblog.y2006.e060423.txt1 Supporters say that Britain "seems like a foreign country," =data ww2010.weblog.y2006.e060423.txt2 in a <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/04/21/npoll21.xml&sSheet=/portal/2006/04/21/ixportaltop.html "a poll sponsored by the Sunday Telegraph,"#> ahead of the local elections to be held on May 4. <#inc ww2010.pic ukbnp.gif right "" "Poll shows sudden and dramatic new support for the British National Party (Source: telegraph.co.uk)"#> The poll confirms what had been considered to be <#stdurl http://www.telegraph.co.uk/news/main.jhtml;jsessionid=QNMJ53YMPXZDDQFIQMGSFGGAVCBQWIV0?xml=/news/2006/04/16/nbnp16.xml "a shocking and sensational claim by Margaret Hodges, UK's employment minister,"#> and a close associate of Prime Minister Tony Blair:

"They can't get a home for their children, they see black and ethnic minority communities moving in and they are angry. When I knock on doors I say to people, 'are you tempted to vote BNP?' and many, many, many - eight out of 10 of the white families - say 'yes'. That's something we have never seen before, in all my years. Even when people voted BNP, they used to be ashamed to vote BNP. Now they are not." Mrs Hodge said the pace of ethnic change in her area had frightened people. "What has happened in Barking and Dagenham is the most rapid transformation of a community we have ever witnessed. "Nowhere else has changed so fast. When I arrived in 1994, it was a predominantly white, working class area. Now, go through the middle of Barking and you could be in Camden or Brixton. That is the key thing that has created the environment the BNP has sought to exploit. It is a fear of change. It is gobsmacking change."

The poll firmed up these comments, and shows that 7% of the voters have already decided to vote for BNP and that 24% are considering it. Among those people who are considering voting for the BNP, they give the following reasons (where each voter can check more than one reason):

Reason	% of potential BNP voters
Britain nowadays seems almost like a foreign country	71
We should take tougher action against Muslims who want to destroy this country	67
None of the major parties is prepared to stand up for this country	64
The local council often gives black and Asian people preference over white people who have lived locally for many years.	61
I want to let those who run this country know that from now on they have to pay attention to people like me	56
Too many black and Asian people have been let into this country	48
All the major parties, including Labour, have deserted the working class	45

From the point of view of Generational Dynamics, this kind of sudden change in public opinion is upsetting, but unfortunately is completely expected. We're at a unique time in history, a "generational crisis" period, 60 years after the end of WW II, just as the people of last generation that actually lived through that war are almost completely gone (dead or retired). The kind of xenophobia we're seeing in Britain always occurs during generational crisis periods. In fact, we're seeing it around the world.

Polls show that an equally sudden change of public opinion is occurring in Norway. Norwegian voters narrowly elected a left-center coalition government just last fall, but <#stdurl http://www.aftenposten.no/english/local/article1287490.ece "new polls shows that the anti-immigration Progress Party is now the most popular party."#>
Xenophobia in Russia is becoming an international news story. <#stdurl http://www.upi.com/SecurityTerrorism/view.php?StoryID=20060420-035335-3356r "An ethnic Russian Nazi "skinhead" group, centered in St. Petersburg,"#> has been growing in size for 2½ years. Assaults of people of other ethnic groups, especially Jews, Tajiks and Kazaks, are becoming increasingly common, and Russian police don't seem too concerned when it happens. Kazakhstan itself is increasingly the scene of <#stdurl http://jamestown.org/edm/article.php?article_id=2371011 "tension between ethnic Russians and Kazaks."#>

The same thing is happening here in America. We saw it a few weeks ago with the nationwide hostility to Muslims in the "Dubai Port" deal. Possibly more important, take another look at the table above listing the reasons why voters are supporting the BNP. Now imagine American voters giving the same reasons why they're concerned about Latino immigrants. Polls have shown decreasing support for immigrants over the years:

                        Increasing Immigration Worries

                                                   Sept   Dec    Mar
    Immigrants today...                            2000   2005   2006
    ---------------------------------------------- ----   ----   ----
    Are a burden because they take jobs, housing    38%   44%    52%
    Strengthen the US with their hard work/talents  50%   45%    41%
    Don't know                                      12%   11%     7%
    ---------------------------------------------- ----   ----   ----
                                                   100%  100%   100%
    Source: Pew Research Center
    <#stdurl http://people-press.org/reports/display.php3?ReportID=274
           http://people-press.org/reports/display.php3?ReportID=274#>

The above table shows that the percentage of Americans that believe that immigrants "are a burden" has been increasing steadily in the last six years, while the number who believe that they "strengthen the US" has been going down. More and more we're hearing Americans express increasing xenophobia. Here's an <#stdurl http://www.publicopiniononline.com/apps/pbcs.dll/article?AID=/20060422/OPINION03/604220305/1014/OPINION "opinion piece"#> of a type we see and hear more often these days:

We must keep illegal immigrants out I served my country in World War II for 31¼2 years, to protect America and keep America free. I don't think much of illegal immigration from a foreign country, waving and marching with foreign flags and shooting insults about America. I don't welcome them in America. If they don't like it in America, they can start walking and go back where they belong in Mexico. U.S. taxpayers ain't your nursemaids. Hillary's, Kennedy's and McCain's plan for immigration is no good. First we must control our borders. Lou Dobbs would make a good president. Keep up the good work. God bless America. Robert Gallagher, Willow Hill (PA) Originally published April 22, 2006 The sentence, "Lou Dobbs would make a good president" refers to CNN TV journalist Lou Dobbs, who has made his Monday-Friday 6-7pm ET television show a daily harangue against illegal immigration. Dobbs appears to want to make himself a hero to the anti-immigration political movement. From the point of view of Generational Dynamics, there is only one possible conclusion to all this. California had been part of Mexico prior to the Mexican-American war of the 1840s, and that war is going to have to be re-fought. The Mexican population of California is already so large that a war cannot be avoided. Violence is increasing throughout Mexico anyway, and <#inc ww2010.weblog.ref e050825 "and the country is already headed for a civil war."#> The clash with Americans in the United States parallels the clash of Europeans with Muslims, and the increasing support for anti-immigration laws parallels the rise of the BNP in Britain. As we head for a new "clash of civilizations" world war, these will be new and and unwelcome components. =eod =// &&2 e060421 India Sensex stock market reaches historic high =data ww2010.weblog.y2006.e060421.head India Sensex stock market reaches historic high in record time. =data ww2010.weblog.y2006.e060421.keys India, Sensex, BSE =data ww2010.weblog.y2006.e060421.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060421.date 21-Apr-06 =data ww2010.weblog.y2006.e060421.txt1 Startled analysts are debating whether the market is close to a crash. =data ww2010.weblog.y2006.e060421.txt2 The Bombay Sensex (BSE) stock market index shot past 11,000 on March 21, and then picked up speed and <#stdurl http://www.telegraphindia.com/1060421/asp/business/story_6126261.asp "raced past 12,000 yesterday, to land at 12,053.74."#> That was the fastest 1,000 point rally in history. Is this a bubble? Not according to Indian government officials. “I don't think there is any bubble (in the stock market),” a top finance ministry official said. Others aren't so sanguine. Saying that the Sensex resembles the American stock market of 1929, an <#stdurl http://www.indiadaily.com/editorial/8130.asp "editorial in India Daily"#> says, "The fundamentals of India's real fiscal situation is bleak. The trade deficit, 75% of imported oil and gas bill with oil at $75 and pseudo buying of stocks by foreign financial institutions and hedge funds all point to an imminent crash of Indian stock market that may follow a protracted long term severe slow down in Indian economy." <#inc ww2010.pic bse0419.png right "" "Bombay Sensex (BSE) 30 index as of April 19, 2006 (Source: yahoo.com)"#> That's what it looks like to me from the adjoining chart. For whatever reason, investors have frantically poured money into the BSE, pushing prices sky high. (Remember how a bubble works: If I pay $100 for a share of stock, sell it to you for $200, and you sell it back to me for $300, then we've both somehow made $100 each, even though the underlying value of the share of stock is still only $100.) But we don't have to go all the way to India to see a stock market bubble. The Dow Jones Industrial Average (DJIA) closed today at 11342.89, just above the 2001-May-21 index of 11337, the highest it's been since January 2000. And the DJIA is now within striking distance of 11723, the all-time high, that it reached on January 14, 2000. What a glorious day it will be when the DJIA tops 11723! Oh, how the champagne corks will be popping! There is absolutely no rational explanation for what's going on. Oil prices have more than doubled in the last few years, and keep on rising. Interest rates are rising, so credit is becoming less available. This is happening at a time when <#inc ww2010.weblog.ref e060402 "investors are becoming increasingly risk-averse."#> The <#inc ww2010.weblog.ref e060326 "real estate bubble appears to have burst last October."#> the stock market is increasingly overpriced; the <#inc ww2010.weblog.ref e060311 "the trade deficit keeps increasing exponentially;"#> and Japan's plans to raise interest rates are <#inc ww2010.weblog.ref e060227 "threatening the "carry trade" bubble."#> It's like the world has gone crazy, just like the world went crazy in 1929. This is what I've been calling <#hreftext ww2010.i.djia "The Principle of Maximum Ruin."#> Government officials, journalists, pundits and high-priced analysts tell everyone that the market can only continue to go up. This draws more and more people into the market, and each person invests more and more of his money. When the bubble bursts and the crash occurs, then the maximum number of people are ruined. But that's not all. The crash doesn't occur all at once. In 1929 the stock market kept falling for four full years. During that four years, more and more people were ruined. The following paragraph from John Kenneth Galbraith's book, The Great Crash - 1929 explains how it worked:

So even after the initial crash occurs, the same government officials, pundits, journalists and high-priced analysts keep predicting that the worst is over. "The fundamentals are solid" is a commonly held statement put forth by analysts during these times. These statements draw more and more people and more of their money into a falling market, thus causing continuing and increasing ruin for a long time to come. Even Alan Greenspan, now freed from the restrictions imposed by being Federal Reserve Chairman, <#stdurl http://business.timesonline.co.uk/article/0,,16849-2131863,00.html "is warning of sharp falls in financial asset values."#> As I've been saying since 2002, Generational Dynamics predicts that America is entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range by the 2007 time frame. I certainly have no reason to change this prediction now. =eod =// &&2 e060420 Eerie similarity: Chinese President Hu Jintao and Donald Rumsfeld =data ww2010.weblog.y2006.e060420.head An eerie similarity: Chinese President Hu Jintao and Donald Rumsfeld =data ww2010.weblog.y2006.e060420.keys China, Taiwan, Hu Jintao, Donald Rumsfeld =data ww2010.weblog.y2006.e060420.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060420.date 20-Apr-06 =data ww2010.weblog.y2006.e060420.txt1 Hu gives President Bush a copy of Sun Tzu's "The Art of War" when they meet on Thursday. =data ww2010.weblog.y2006.e060420.txt2 Pundits are saying that <#stdurl http://www.theaustralian.news.com.au/story/0,20867,18866767-2703,00.html "Hu wants to help Bush learn how to fight the Iraq war,"#> but it seems more likely to me that he's warning Bush about Taiwan. <#inc ww2010.pic suntzu.jpg right "" "Sun Tzu"#> The Art of War, written in the sixth century BC, is probably <#stdurl http://en.wikipedia.org/wiki/The_Art_of_War "the most famous book on military strategies and tactics ever written."#> The silk edition given to Bush is a powerful message. Taiwan is the number one issue on Hu's mind these days, because <#stdurl http://www.zeenews.com/znnew/articles.asp?aid=282625&sid=WOR "60% of Chinese people believe that it's the #1 Sino-U.S. issue,"#> and other polls have shown most Chinese believe that the U.S. and China will have a war over Taiwan. The warning to Bush comes from a Chinese leader <#stdurl http://www.csmonitor.com/2006/0419/p01s02-woap.html?s=hns "who is genial, well-liked, but enigmatic:"#>

Yet in this sense, Hu reflects present-day China: As leader, he has not yet found a clear pathway, sources say. His country is at a major juncture of greater expectation, but with no clear direction or footing, socially or politically. Hu is not a zealous ideologue, a visionary economist, nor is he ready to force a war over Taiwan. He is cautious, lawyerly, a survivor, say numerous scholars, diplomats, and party sources. To the Chinese, he is as much a mystery as he is to the foreign community in Beijing. Whether he has yet consolidated power in China's secretive leadership enclave is still speculated about. Now think about our own generational differences here in America. This description of Hu doesn't sound like someone from the G.I. generation, the decisive people that won World War II, nor from the Baby Boomer generation, the self-absorbed people that can't do anything but argue. <#inc ww2010.pic hujintao.jpg left "" "Hu Jintao"#> No, Hu Jintao sounds like someone from our Silent generation, the people who grew up during the Great Depression and World War II. William Strauss and Neil Howe, in their book Generations, describes people of the Silent generation as problem solvers. But, "their solutions -- fairness, openness, due process, expertise -- reflect a lack of surefootedness, but also a keen sense of how and why humans fall short of grand civic plans or ideal moral standards. Silent appeals for change have seldom arisen from power or fury, but rather through a self-conscious humanity and tender social conscience.... Lacking an independent voice, they have adopted the moral relativism of the skilled arbitrator, mediating arguments between others -- and reaching out to people of all cultures, races, ages, and handicaps." (Generations, p. 282) Any generation that grows up during a crisis war is called an "Artist generation," because of their sensitivity to the needs of other people. Hu Jintao is deeply embedded in China's last Artist generation. He was born in 1942, seven years before the end of China's last crisis war, the violent, genocidal civil war that began with Mao Zedong's "Long March" in 1934, and ended in 1949, after the deaths of tens of millions of Chinese, with the flight of Chiang Kai-shek and his defeated army to the island of Taiwan. =inc ww2010.cf.cf060209 p right In my conflict risk graphic, I've often considered increasing the risk level for China from 2 (medium risk) to 3 (high risk), but one of the factors holding me back was that China's President is from the Artist generation, and is very unlikely to make an actual decision to wage war preemptively. These are the things that lead me to make a comparison between Hu and Secretary of Defense Donald Rumsfeld. Rumsfeld is also <#inc ww2010.weblog.ref e060417 "in an Artist generation -- America's Silent Generation."#> No matter what one may think of him, there's no doubt that Rumsfeld extremely genial, and always manages to maintain his sense of humor, even under the most hostile questioning by the Wasington press corps. Rumsfeld is also a very unlikely person to initiate a war; he certainly didn't make the decision to invade Iraq. But here's the point: Once the decision had been made by President Bush, Rumsfeld prosecuted the war with brutal energy. I still remember Rumsfeld at press conferences during the Afghan and Iraq wars, responding to a reporter's question with something like the following: "We aren't trying to be nice to these people; what we want is to kill them." Rumsfeld can say that without flinching because he grew up at a time when there were only two choices: kill the Germans and the Japanese, or be killed by them. I always felt a great deal of sadness in Rumsfeld as I watched the press conferences, but a ruthlessness as well. Similarly, Hu Jintao may never be the one who makes the decision to go to war over Taiwan, but he won't have to - the decision will be made by the Communist Party's Central Committee, by people who are in younger generations and quite willing to declare war. Once the decision is made, Hu will be like Rumsfeld -- he'll pursue the war energetically and ruthlessly. So what I'm imagining about Hu Jintao as he meets Bush is that, as an Artist, he'll be reaching out with sadness, hoping to prevent a war over Taiwan. But he'll also be warning Bush that the war will be pursued ruthlessly. How ruthlessly? Consider the following commentary in <#stdurl http://www.gutenberg.org/etext/132 "Lionel Giles' 1910 translation of The Art of War:"#>

Sun Tzu Wu was a native of the Ch`i State. His ART OF WAR brought him to the notice of Ho Lu, King of Wu. Ho Lu said to him: "I have carefully perused your 13 chapters. May I submit your theory of managing soldiers to a slight test?" Sun Tzu replied: "You may." Ho Lu asked: "May the test be applied to women?" The answer was again in the affirmative, so arrangements were made to bring 180 ladies out of the Palace. Sun Tzu divided them into two companies, and placed one of the King's favorite concubines at the head of each. He then bade them all take spears in their hands, and addressed them thus: "I presume you know the difference between front and back, right hand and left hand?" The girls replied: Yes. Sun Tzu went on: "When I say "Eyes front," you must look straight ahead. When I say "Left turn," you must face towards your left hand. When I say "Right turn," you must face towards your right hand. When I say "About turn," you must face right round towards your back." Again the girls assented. The words of command having been thus explained, he set up the halberds and battle-axes in order to begin the drill. Then, to the sound of drums, he gave the order "Right turn." But the girls only burst out laughing. Sun Tzu said: "If words of command are not clear and distinct, if orders are not thoroughly understood, then the general is to blame." So he started drilling them again, and this time gave the order "Left turn," whereupon the girls once more burst into fits of laughter. Sun Tzu: "If words of command are not clear and distinct, if orders are not thoroughly understood, the general is to blame. But if his orders ARE clear, and the soldiers nevertheless disobey, then it is the fault of their officers." So saying, he ordered the leaders of the two companies to be beheaded. Now the king of Wu was watching the scene from the top of a raised pavilion; and when he saw that his favorite concubines were about to be executed, he was greatly alarmed and hurriedly sent down the following message: "We are now quite satisfied as to our general's ability to handle troops. If we are bereft of these two concubines, our meat and drink will lose their savor. It is our wish that they shall not be beheaded." Sun Tzu replied: "Having once received His Majesty's commission to be the general of his forces, there are certain commands of His Majesty which, acting in that capacity, I am unable to accept." Accordingly, he had the two leaders beheaded, and straightway installed the pair next in order as leaders in their place. When this had been done, the drum was sounded for the drill once more; and the girls went through all the evolutions, turning to the right or to the left, marching ahead or wheeling back, kneeling or standing, with perfect accuracy and precision, not venturing to utter a sound. Then Sun Tzu sent a messenger to the King saying: "Your soldiers, Sire, are now properly drilled and disciplined, and ready for your majesty's inspection. They can be put to any use that their sovereign may desire; bid them go through fire and water, and they will not disobey." But the King replied: "Let our general cease drilling and return to camp. As for us, We have no wish to come down and inspect the troops." Thereupon Sun Tzu said: "The King is only fond of words, and cannot translate them into deeds." After that, Ho Lu saw that Sun Tzu was one who knew how to handle an army, and finally appointed him general. In the west, he defeated the Ch`u State and forced his way into Ying, the capital; to the north he put fear into the States of Ch`i and Chin, and spread his fame abroad amongst the feudal princes. And Sun Tzu shared in the might of the King. This anecdote should make it clear that any war with China will be far more savage than most people expect. Unfortunately, Generational Dynamics predicts that such a war over Taiwan will occur with 100% certainty. It may begin this year or next year or after, but it's likely to occur sooner rather than later. =eod =// &&2 e060418 Hamas calls Monday's Tel Aviv bombing "justified" =data ww2010.weblog.y2006.e060418.head Hamas calls Monday's Tel Aviv bombing "justified" =data ww2010.weblog.y2006.e060418.keys Israel, Palestine =data ww2010.weblog.y2006.e060418.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060418.date 18-Apr-06 =data ww2010.weblog.y2006.e060418.txt1 The Mideast slide toward all out war appears to be accelerating, =data ww2010.weblog.y2006.e060418.txt2 because the forces holding the region back from war are quickly disappearing. In the past few days, the following have happened:

<#stdurl http://www.tmcnet.com/usubmit/-japan-halt-funding-hamas-led-government-/2006/04/17/1578555.htm "Western aid to the Palestinian Authority has all but ended."#> Iran, Qatar and other Mideast countries have picked up some of the slack, but the PA's treasury is still empty. This means a lot more poverty, increasing the likelihood of war, since men will readily go to war rather than let themselves or their families starve.
Furthermore, the Palestinians no longer have to pay attention to Western demands in exchange for receiving aid, since they're no longer receiving aid.
Furthermore, the Palestinians view the Western call for democratic elections as hypocritical, since Western nations are refusing to accept Hamas' election victory.
Hamas <#stdurl http://www.ynetnews.com/articles/0,7340,L-3240764,00.html "defended Monday's suicide bombing in Tel Aviv,"#> saying "Our public is carrying out defensive fighting and it has every right to use all means to defend itself." This kind of justification prepares the Palestinians for war when it comes.
Iranian President Mahmoud Ahmadinejad's frequent statements about the end of Zionism and Israel are providing moral support to the Palestinians.

Meanwhile, a similar reaction is occurring in Israel. The <#inc ww2010.weblog.ref e060403 "Israeli "bunker mentality""#> -- the desire to hide behind a security barrier and have nothing to do with the Palestinians -- has been badly eroded by Monday's terrorist success. Thus, both sides are feeling increased justification for increased violence. Hamas feels justified for more suicide attacks, and Israel feels justified for greater retaliation. These are good examples of the Chaos Theory aspect of what's going. As <#inc ww2010.weblog.ref e060410 "day to day political events are "chaotic events" that fall like snowflakes"#> in random ways, but the events "attracted" to the impending Mideast war. Every one of the political events that I listed above move toward war, and you would be hard-pressed to think of any political event that moves away from war. That's how it works. There is no end to this process except an actual war. Generational Dynamics predicts that there'll be a major genocidal war between Arabs and Jews that will engulf the entire region. The path to that war appears to be accelerating. =eod =// &&2 e060417 Secretary of Defense Donald Rumsfeld under fire =data ww2010.weblog.y2006.e060417.head Secretary of Defense Donald Rumsfeld under fire =data ww2010.weblog.y2006.e060417.keys Donald Rumsfeld =data ww2010.weblog.y2006.e060417.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060417.date 17-Apr-06 =data ww2010.weblog.y2006.e060417.txt1 Rumsfeld is the only person in Washington, Republican or Democrat, who knows what's going on in the world =data ww2010.weblog.y2006.e060417.txt2 and is in a position to do something about it. As I've said before, <#inc ww2010.weblog.ref e051024 "Rumsfeld was born in 1932, and is a member of the "Silent Generation""#> that grew up during the Great Depression and World War II. Rumsfeld was old enough to understand that the militarization of Hitler's Germany in the mid 1930s led to the most violent war the world has known, and Rumsfeld can see the same thing happening in China's aggressive militarization today. Thus, he's been modernizing the armed forces and refocusing it on the Pacific, in preparation for a preemptive war by China. We should thank our lucky stars that we have the services of this highly skilled person from the Silent generation. Given the cataclysmic world war that's coming soon, Donald Rumsfeld may be uniquely able to prepare the armed forces and the country for this war, especially given today's nasty political climate. I absolutely dread the day that Rumsfeld is replaced as Secretary of Defense by a Boomer or Generation-Xer. No Boomer or Xer of either political party could yet possibly understand the world as well as Rumsfeld. I normally don't comment on politics because, frankly, it doesn't make any difference. My view is that Al Gore would have been a fine President, George Bush is a fine President, and Hillary Clinton or whoever is elected in 2008 will be a fine President. And if Al Gore had been President after 9/11, then we'd be just as deeply into Iraq today as we are under Bush. It couldn't have happened any other way. But the fact that I rarely comment on politics doesn't mean that I don't feel enormous distaste and disgust at the level of political debate that we hear every day in the news. This is particularly true these days when we have people on the left accusing the administration of planning to attack Iran with nuclear weapons, with the accusations led by Seymour Hersh, a man who <#stdurl http://transcripts.cnn.com/TRANSCRIPTS/0405/09/le.00.html "compares the American armed forces to Nazi Storm Troopers in Hitler's Third Reich."#> (This is comparable to Massachusetts Senator John Kerry who apparently <#inc ww2010.weblog.ref e050411 "believes that American soldiers in Vietnam were the equivalent of Nazi Storm Troopers"#> of World War II who committed atrocities against the Jews. How we can take any such people seriously is beyond me.) From the point of view of Generational Dynamics, this kind of destructive and fatuous political nonsense is typical of generational crisis periods. This is certainly what happened during America's last two generational crisis wars, the Civil War and World War II. Abraham Lincoln was bitterly criticized during the Civil War in the 1860s. The early battles were "disasters" and "quagmires" for the North. The most vicious criticisms came from the "Copperheads" - Peace Democrats who despised Lincoln and argued that the civil war was his fault. The <#stdurl http://www.sonofthesouth.net/union-generals/mcclellan/democratic-platform-1864.htm "1864 Democratic Party Platform"#> called for peace negotiations with the South, to end the war as quickly as possible, "after four years of failure to restore the Union by the experiment of war, during which, under the pretence of military necessity, ... the Constitution itself has been disregarded in every part, and public liberty and private right alike trodden down." As for Franklin Roosevelt, the Republicans were able to accuse the President of one scandal after another. Just google the words "fdr scandal" to get a sense of how those scandals are still remembered today. This kind of political egg-throwing is not unique to America. It corresponds to something I've talked about frequently -- that country after country around the world gets mired in politics and is unable to accomplish anything. It happens when people in the previous postwar generation -- in our case the Baby Boomers -- take leadership positions some 55-60 years after they're born. (The last time I discussed this, I was pointing out that <#inc ww2010.weblog.ref e060322 "the Congressional calendar this year is just 97 days."#>) William Strauss and Neil Howe, the founders of generational theory, analyzed these political cycles in their 1997 book, The Fourth Turning. Just after any crisis war, like WW II, the society is fully unified. Political strife begins with the "generational awakening" era, such as <#hreftext ww2010.i.sixties040501 "1960s America,"#> when the first postwar generation (the Boomers, in our case) comes of age. From that point on, society continues to unravel until we reach the current stage, where we have a maximum of political brawling, and a minimal capability to get anything done. However, this level of political discord does not continue forever. A generational crisis, such as we're in now, is characterized by a series of unpleasant shocks, of which the 9/11 attacks was only the first. Eventually one of these shocks turns the public around, and makes people realize that their country and their entire way of life are in danger. That point, which occurs in every crisis war, is called the "regeneracy," because it signals the regeneration of civic unity. They describe what happens as follows:

What kind of event causes this kind of regeneracy of civic unity? From history we know that it's a shock of such enormous magnitude that it make all political considerations irrelevant. In 1861, it was the disastrous Union loss at the Battle of Bull Run. In 1941, it was the disastrous Pearl Harbor attack, which wiped out almost all of America's entire Pacific fleet. It's impossible, of course, to predict what event will cause the regeneracy of civic unity in 2000s America. It might be a huge terrorist attack on American soil, it might be a bird flu pandemic, or it might be a disastrous military loss overseas. But when it comes, it will cause a tremendous national reaction, a rejection of all the petty political disputes we see today, and the public unifying behind their leaders. In the meantime, all we can do is prepare. I've repeatedly <#inc ww2010.weblog.ref e060407 "urged all my readers to prepare for a bird flu pandemic."#> And while these preparations are nominally for a pandemic, the same preparations will help you and your family in other kinds of emergencies. It's also necessary for the nation to prepare. In our current hateful political atmosphere, it's very hard for anyone to get anything done at all, let alone restructure our armed forces to prepare for a 21st century world war. But Donald Rumsfeld has been doing that for five years, and continues to do it. We're lucky to have him, and every day that he's in office represents one more day of preparation for what's to come. =eod =// &&2 e060413 Ahmadinejad announces that Iran is enriching uranium =data ww2010.weblog.y2006.e060413.head Allah Akbar!! Ahmadinejad announces that Iran is enriching uranium =data ww2010.weblog.y2006.e060413.keys Iran, Ahmadinejad =data ww2010.weblog.y2006.e060413.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060413.date 13-Apr-06 =data ww2010.weblog.y2006.e060413.txt1 Clearly trying to provoke an Israeli or American military attack on Iran, =data ww2010.weblog.y2006.e060413.txt2 Iranian President Mahmoud Ahmadinejad announced "good news," and gave a triumphant press conference announcing that Iran was producing enriched uranium, "for peaceful purposes," and would soon be producing much more. His announcement was met with wild excitement and cheers of "Allahu Akbar" (Allah is the greatest) from the largely Iranian audience. Quoting from <#stdurl http://www.irna.ir/en/news/view/line-24/0604124747105440.htm "an Iranian press release:"#>

"With the blessings of God Almighty and with the help of Iran's youth, today we perfected the A to Z of technology that is used to produce nuclear fuel and we have the capability to produce it," said the president proudly. Noting that Iran's success in the production of nuclear fuel is still on the laboratory scale, Ahmadinejad added: "Based on our wise plans, God willing we will move on quickly to the level of industrial production (of nuclear fuel). "This will, of course, make our enemies angry because today, real power is in the persistence, knowledge, culture and civilization of nations," the president said. That is why, he went on to say, "when the Iranian nation made the decision (to pursue nuclear energy) global equations were changed." Ahmadinejad, recalling years of sanctions imposed by the enemies, said: "When we were weak, the enemies were not able to cause us any harm. Now that our nation has added to its successes, we will move on in this long, honorable track."

This is what Ahmadinejad said to wildly enthusiastic Iranians. I've quoted this at length so you can get a feel for what's going on. So imagine you hear <#stdurl http://www.knoxstudio.com/shns/story.cfm?pk=IRAN-04-12-06&cat=WW "a pundit say something like the following:"#> "We have time to try diplomacy. The right combination of carrots and sticks could work with Iran just as it worked with Libya. We should be looking to change this regime's behavior, not to overthrow the regime." This is typical of the most naïve statements by pundits who are supposed to know what they're talking about, though why anyone would think they did is beyond me, since just reading about Ahmadinejad's press conference makes it clear that nothing short of force is going to make him back down. And what about force? <#inc ww2010.weblog.ref e060111 "As I wrote in January,"#> Ahmadinejad and Iran are evidently trying to be as provocative and threatening as possible, with the intention of goading or provoking the West into the bombing of Iran's nuclear facilities. <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries. Somalia and Eritrea are in east Africa."#> It started last October when he spoke to students at a conference, "The World Without Zionism," he called for Israel to be "wiped off the map," and called for a new wave of Palestinian attacks to "wipe off this stigma from the face of the Islamic world." Later, Ahmadinejad said that Israel should be pushed into the sea, that the Holocaust never happened, and that the entire state of Israel should be moved to Europe or Alaska. Lately he's been sticking his thumb in the eye of the world by his provocative announcements of nuclear technology and missile weaponry. So we can assume through his goading that he's not afraid of a military attack on Iran, and would actually welcome it. Why? Because he would then be free to retaliate in any number of ways -- bomb oil fields in other countries, bomb ships at sea, or provide terrorist group Hizbollah with weapons to start a war with Israel. As we speculated in January, it's because Ahmadinejad and his Muslim cleric superiors have concluded that if they can provoke a major regional war between Arabs and Jews, and if they can drive America out of Iraq, then Iran will be the superpower with hegemony over the entire region. So, diplomacy won't work, threats of force won't work, and actual force won't work. What about doing nothing? Then Iran will continue with its nuclear development program, and develop nuclear bombs. From the point of view of Generational Dynamics, it actually doesn't matter much what we do to Iran, or what Iran does. The Mideast is heading a major genocidal war between Jews and Arabs anyway, as we've discussed many times before, and Iran will supply weapons to the Arabs anyway, so whether we use diplomacy, threat of force, actual force, or we do nothing, the results will be the same. This brings me to an important point having to do with politics. There's the usual nasty political debate going on over <#stdurl http://www.newyorker.com/printables/fact/060417fa_fact "an article in New Yorker Magazine by Seymour Hersh"#> about how the Pentagon has made contingency plans for a military strike on Iran's nuclear development facilities. So what should we do -- bomb or not bomb? Does Generational Dynamics provide any guidance? Well, the argument against bombing is that there'll be a catastrophe, because Iran will retaliate furiously causing a Mideast cataclysm. However, this argument overlooks the fact that the Mideast is headed for war anyway, and Iran will find some excuse to cause the same kind of Mideast cataclysm anyway. So both of these are bad, but which is worse? Here we bring in some of the concepts of Chaos Theory. I assume you've heard of the "butterfly effect": If a butterfly in China flaps its wings, then that might cause a hurricane in America. However, you can never be sure. If someone sees a butterfly flap its wings in Beijing one day, and a few days later there's a hurricane in America, did the butterfly cause the hurricane? Maybe so, maybe not. There's no way to tell. Similarly, there's no way to tell whether bombing Iran will make things better or worse. The results of bombing or not bombing Iran are completely unpredictable, completely chaotic. It might make things worse, it might make things better, but we won't know which until it's over, and even then we may not know. We may never know. As an aside, there's no way to predict what effect Ahmadinejad's glitzy shenanigans will have, either. Maybe he'll goad America into a bombing, or maybe it will make people think he's bluffing. Chaos Theory and Generational Dynamics tell us that there's no predictable result to any of it. So Generational Dynamics is of no help at all in trying to decide whether or not to bomb Iran, and neither is anything else. All we know for sure is that the Mideast is headed for a major new genocidal war that will engulf the entire region. But how that war will come about cannot be predicted. Allah Akbar. =eod =// &&2 e060411 France: Jacques Chirac caves in to street protests =data ww2010.weblog.y2006.e060411.head French President Jacques Chirac caves in to the million-student street protests =data ww2010.weblog.y2006.e060411.keys France, riots =data ww2010.weblog.y2006.e060411.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060411.date 11-Apr-06 =data ww2010.weblog.y2006.e060411.txt1 In dramatic political reversal, Chirac rescinded a youth employment law on Monday, =data ww2010.weblog.y2006.e060411.txt2 giving in to <#stdurl http://quote.bloomberg.com/apps/news?pid=10000006&sid=a.sXNYrENjJ8&refer=home "riots and demonstrations by over a million people, mostly students."#> Monday's TV appearances by French President Jacques Chirac and then by his Prime Minister Dominique de Villepin couldn't have been more dramatic. De Villepin in particular had staked his reputation on the law, vowing last week that he would not back down. The law, known as the CPE, that was rescinded would have permitted French employers to fire an employee under 26 years of age, if he's been employed for less than 2 years. Amazingly enough, a young French person who once gets a job has virtually a guarantee of holding that job for life. The result is that employers are afraid to hire young people, and the unemployment rate is 9.6% overall, but 22.2% for young people. The new law would have given young people less job security, but would hopefully have reduced youth unemployment. <#inc ww2010.pic conf.gif right "" "Fault Line and Generational Conflicts"#> =inc ww2010.h2 riots "Kinds of conflicts" From the point of view of Generational Dynamics, there are two kinds of mob conflicts:

Fault-line conflicts, where people of one class or religious or national or ethnic group make demands of another class or religious or national or ethnic group. When large demonstrations of this type occur during generational crisis periods, the demonstration is usually the precursor to a crisis war (civil war or external war, depending on the circumstances).
Generational conflicts, where college-age students make political demands of their parents and politicians in their parents' generation. These are caused by "generation gaps," and they're the typical kinds of mobs that occur during "generational awakening" eras, such as <#hreftext ww2010.i.sixties040501 "1960s America."#>

We've been seeing both kinds of mob conflicts recently:

The latest French protests appear to be purely generational, very much in the spirit of the "68ers," the massive student protests that occurred in 1968 during France's awakening era.
On the other hand, when young Muslims <#inc ww2010.weblog.ref e051102 "rioted and demonstrated in massive numbers"#> in the Paris suburbs last November, those were clearly Muslim versus ethnic French fault-line demonstrations.
Last week and this, <#inc ww2010.weblog.ref e060328 "over half a million Latinos demonstrated in Los Angeles"#> and other cities, many of them carrying Mexican flags. Once again, these were fault-line demonstrations, Latinos versus non-Latino Americans. (There is a political component, directed at Washington politicians making or not making immigration laws, but this aspect seems secondary to the ethnic fault line aspect.)
As I've been discussing quite a bit lately, the <#inc ww2010.weblog.ref e060410 "Palestinian government is being controlled college-age children,"#> especially in Gaza where the <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html "the median age is 15.6."#> This mob conflict is directed against Israel. There is a political or generational component, with the young Gazans in conflict with the Hamas elders, but the predominant factor is fault line conflict.

During awakening eras, such as America or France in the 1960s, political / generational conflicts tend to grow in intensity, while fault line conflicts tend to sputter and die. But in crisis eras, like today, the opposite is true: generational conflicts tend to sputter, while fault line conflicts tend to grow in intensity, and even spiral into a full-scale crisis war. =inc ww2010.h2 next "What's next for France?" There's something that bothers me about the Paris street riots of the last two weeks: They seem way out of proportion to the issue. Yes, I realize that we have young French people talking about how awful the "Anglo-Saxon" model is, and how the French system is so much more caring, and how awful it would be if some 25 year old lost one 37-hour-per-week job and had to go out and look for another 37 hour per week job. It's a terrible cross for them to bear, I know. But even so, I just don't see a million students rioting over this one issue. It's too many people for too small an issue. This brings me back to last autumn's street riots by suburban Muslims, many of them youthful. They were demanding jobs. A major complaint of the Muslims at that time was that employers were reluctant to hire young Muslims -- for exactly the same reasons that they're reluctant to hire any young person. But it's worse for the Muslims because not only are they young, but also they suffer from ethnic discrimination. If the new law, the CPE, were implemented, then employers would be more willing to hire young people -- including young Muslims. So the new law would benefit young Muslims, possibly at the expense of the young students who were rioting the last two weeks. Implementing the CPE would eliminate a major source of bias that favors ethnic Frenchmen over Muslims. If I can figure that out, then so could those students, and their various supporters -- labor unions, educators, and so forth. Thus, the street riots of the past two weeks were directed more against Muslims than against politicians. The street riots appeared to be a generational conflict, but they really represent an ethnic conflict in disguise. We see growing fault line conflicts between Muslims and ethnic French in France, Arabs and Jews in the Mideast, and Latinos and non-Latinos in America. From the point of view of Generational Dynamics, all of these conflicts will continue to grow in intensity, and eventually lead to full scale war. And the way things are going in the world, this will occur sooner, rather than later. =eod =// &&2 e060410 Crunch time for Hamas, as American/European aid is cut off to Palestinians. =data ww2010.weblog.y2006.e060410.head Crunch time for Hamas, as American and European aid is cut off to Palestinians. =data ww2010.weblog.y2006.e060410.keys Palestine, Israel, Hamas, Mahmoud Abbas =data ww2010.weblog.y2006.e060410.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060410.date 10-Apr-06 =data ww2010.weblog.y2006.e060410.txt1 Will they "cry uncle" and recognize Israel in exchange for financial aid? =data ww2010.weblog.y2006.e060410.txt2 To Palestinian youth, that would look like the ultimate hypocrisy and a total sellout -- especially in Gaza, where the especially in Gaza where the <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html "the median age of the entire population is 15.6."#> These are children who elected Hamas, a government of terrorists, and they will not tolerate hypocrisy in that government for long. And yet it would seem that Hamas has no choice. On Sunday, <#stdurl http://www.jpost.com/servlet/Satellite?cid=1143498827329&pagename=JPost%2FJPArticle%2FShowFull "Norway discontinued foreign aid to Palestinians."#> The <#stdurl http://www.dw-world.de/dw/article/0,2144,1964250,00.html "European Union is expected to do the same on Monday."#> America is doing the same. And we're talking about a lot of money -- $1.1 billion per year. Some people think that the <#stdurl http://www.ynetnews.com/articles/0,7340,L-3237990,00.html "purpose of cutting off aid is to bring down Hamas,"#> and to force a a new election (as if that would change anything). That's certainly what Palestinian Prime Minister <#stdurl http://www.voanews.com/english/2006-04-08-voa14.cfm "Ismail Haniyeh believes - calling it "blackmail.""#> He vows that Hamas will not change its policies -- even though the Palestinian Authority is broke, and can't pay the March salaries of 140,000 government employees. The Palestinians have received have some <#stdurl http://www.theglobeandmail.com/servlet/story/RTGAM.20060408.wxhamas0408/BNStory/International/home "promises of money from Arab countries"#> -- from Saudi Arabia, Kuwait and United Arab Emirates -- but it's a lot less than they need, and it's already late. Meanwhile, the Gaza strip continues its descent into total chaos and lawlessness. Ever since the Israelis pulled out of Gaza last summer, the old settlements have become a <#stdurl http://www.mercurynews.com/mld/mercurynews/news/world/14304147.htm "paradise for scavengers,"#> who dig up and sell everything from trees to pipes. Palestinian militias in Gaza are firing a dozen or so Qassam missiles into Israel every day, occasionally killing someone. In return, the Israeli air strikes and artillery barrages have killed several Palestinians, mostly militants. As for the "peace process," it's hard to discern any. Israel's new Prime Minister Ehud Olmert has adopted a policy known as "convergence" (the Hebrew word also means "consolidation") -- Israel will <#stdurl http://www.ynetnews.com/articles/0,7340,L-3237649,00.html "withdraw its West Bank settlements back into "blocs""#> within Israel, and will complete the security fence/barrier, thus unilaterally defining Israel's borders. This kind of unilateral action will not be acceptable, according to Palestinian President <#stdurl http://www.ynetnews.com/articles/0,7340,L-3237526,00.html "Mahmoud Abbas, who says it will "lead to war""#> within a few years. So this is crunch time, and given the current situation, it's hard to see where the "give" is. Something has to snap, somewhere. Either Hamas will recognize Israel and renounce terrorism, or America and EU will find some formula for resuming aid without that assurance, or the Palestinian government will collapse in some way. From the point of view of Generational Dynamics, Jews and Arabs are headed for a major regional crisis war, refighting the genocidal 1940s war that followed the partitioning of Palestine and the creation of the state of Israel. As usual, Generational Dynamics tells where you're going, but not the path that will take you there. So there's no way to predict how the current "crunch" will be resolved. All we can do is make some generalities. Using the language of Chaos Theory, day to day political events are "chaotic events" that fall like snowflakes in random ways. The impending regional war is a "chaotic attractor," meaning that the chaotic day-to-day political events are "attracted" by the impending war. We've seen this over and over again since the death of Yasser Arafat. His death was supposed to bring peace, but it didn't. The election of Mahmoud Abbas as Palestinian President brought a temporary respite from the chaos, but today Abbas is powerless and irrelevant. Israel's withdrawal from Gaza was supposed to bring peace and prosperity, but instead Gaza is increasingly chaotic. The parliamentary elections were supposed to provide the Palestinian Authority with a working government, but instead they put Hamas in control. In each case, political events were "attracted" in the direction of the upcoming war. The current "crunch" will do the same. Those Pollyannas who hope that the current crisis will bring about the failure of Hamas, and a resurgence Abbas and the Palestinian Authority are dreaming. The highest probability goes to the options that bring the region closer to war, and even if something "positive" happens, then it can't last. If something as abstract as Chaos Theory doesn't please you, then let's make it more concrete. As we said, Gaza is being run by children, children with a high intolerance for anything that smells of hypocrisy. They've already given up on Abbas because they consider him to be an irrelevant dinosaur. They've given Hamas a chance because they want a solution, not hypocrisy. If the Pollyannas get their wish and Hamas is brought down, then it will be replaced by some less moderate, more militant than Hamas. That's what happens when you have teenagers making all the decisions. =eod =// &&2 e060409 Maoist rebels bringing chaos to Nepal and region =data ww2010.weblog.y2006.e060409.head Maoist rebels bringing chaos to Nepal and the entire region =data ww2010.weblog.y2006.e060409.keys Nepal, India =data ww2010.weblog.y2006.e060409.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060409.date 9-Apr-06 =data ww2010.weblog.y2006.e060409.txt1 Nepal orders all-day curfew in Kathmandu for second day =data ww2010.weblog.y2006.e060409.txt2 in order to prevent more protests demanding that King Gyanendra step down. The <#stdurl http://timesofindia.indiatimes.com/articleshow/1483125.cms "massive protests are led by Maoist rebels."#> The Maoist insurgency began in 1995 when the Nepal Communist Party left the government and started a rural rebellion. <#inc ww2010.pic nepal.jpg right "" "Nepal"#> What's a Maoist rebel? That's a good question, with Mao Zedong long gone. Even China isn't Maoist these days, so it's hard to see what a Maoist is, and anyway, China is supporting the King, not the rebels. Nepal is a small, landlocked central Asian country in the midst of the Himalayan mountains. It's nestled right between China and India, and that fact reveals the strategic importance of Nepal and the current rebellion. <#inc ww2010.pic nepalroy.jpg left "" "Nepal's royal family before being killed in 2001 (Source: BBC)"#> The country of Nepal isn't exactly on the radar of most Americans, but if you have a long memory, then you may remember when Nepal was headline news even here. In 2001, Crown Prince Dipendra got drunk at a party and gunned down the entire royal family, and then killed himself. <#inc ww2010.pic devyana.jpg right "" "Devyani Rana, Crown Prince Dipendra's girlfriend. (Source: BBC)"#> Dipendra's motive turned out to be that <#stdurl http://news.bbc.co.uk/2/hi/south_asia/1386585.stm "he had wanted to marry his girlfriend, Devyani Rana,"#> but his parents had refused. Anyway, Prince Gyanendra was soon crowned the new King of Nepal, and this apparently triggered a renewal of the Maoist insurgency. By 2005, the violence had increased to the point that King Gyanendra took dictatorial control of Nepal, and that a major issue in today's anti-King demonstrations. See what can happen when a Crown Prince falls in love with the wrong girl? More important though is that the Naxal terrorists, as the Maoist rebels are called, <#stdurl http://news.moneycontrol.com/india/news/politics/jahanabadjharkand/indiamaybebreedingnaxaliteresurgency/19/17/article/208523 "are linking up with the People's War Group in India, also Maoist rebels."#> What ties them together, besides the name "Maoist," is that the rebels are mostly from lower castes in both countries, including <#hreftext iv2010.art.india0307a "the "untouchable" Dalits in India."#> This has led to increased instability in Nepal and India, which <#stdurl http://www.pinr.com/report.php?ac=view_report&report_id=433 "China is taking advantage of in order to gain influence in the region at India's expense."#> Generational Dynamics predicts that we're heading for a "clash of civilizations" world war. Although this is commonly thought of as a war between countries in the Muslim civilization and the West, there are many possible scenarios. Another component will certainly be something like a war in the Pacific involving China against Taiwan, Japan and America. India will be an ally of America and the West, if only because of its long-standing relationship with Great Britain as an English colony. The rise of Maoist violent -- the Naxal group in Nepal and the People's War Group in India -- will play a part leading up to that war. =eod =// &&2 e060407 Bird flu spreading at lightning speed around globe =data ww2010.weblog.y2006.e060407.head Bird flu spreading at lightning speed around the globe =data ww2010.weblog.y2006.e060407.keys bird flu =data ww2010.weblog.y2006.e060407.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060407.date 7-Apr-06 =data ww2010.weblog.y2006.e060407.txt1 Expected to reach North America within weeks, the US and Canada are stepping up detection programs. =data ww2010.weblog.y2006.e060407.txt2 "This is a really serious global situation. During the last three months globally, there has been an enormous and rapid spread of H5N1." That's <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-5733144,00.html "the assessment of Dr. David Nabarro,"#> the U.N.'s chief coordinator for avian influenza. It's now reached 30 new countries in 2006 alone, spreading "at lightning speed," according to Nabarro. The UK is the <#stdurl http://www.alertnet.org/thenews/newsdesk/L06700858.htm "latest European country to be struck by the lethal H5N1,"#> when a wild swan in Scotland was confirmed to have been killed by the virus. Within a few weeks, millions of birds will migrate from Asia, over the Bering Straits into Alaska and Canada. The spread of H5N1 to North America at that time is all but certain. U.S. agencies <#stdurl http://www.actualites-news-environnement.com/20060326-united-state-avian-influenza.php "have announced an early detection program."#> The main focus will be on <#stdurl http://www.adn.com/life/health/birdflu/story/7596072p-7506332c.html "studying about 15,000 eiders and geese among 28 bird species that arrive in Alaska from Asia."#> Alaskans who see any strange or dead birds are asked to call the hot line at 1-866-527-3358. However, H5N1 has <#stdurl http://www.recombinomics.com/News/04060604/H5N1_Lagos_Confirmed.html "has now been confirmed in the African country Lagos,"#> which is on the East Atlantic Flyway of migratings. This means that H5N1 can also enter North America through northeastern Canada, and at other migration points across the Atlantic. Other recent related news includes the following:

A scientific advisory panel has said that <#stdurl http://msnbc.msn.com/id/12173519/ "all poultry should now be cooked to a temperature of 165 degrees or more"#> -- hot enough to kill any lingering virus. Officials have ordered about 80 companies to change their packaging labels to make this clear.
People who live near any region where bird flu has been found are <#stdurl http://msnbc.msn.com/id/12166066/ "urged to keep their cats indoors."#> What happens is this: Migrating birds drop infected feces almost anywhere, and anyone can pick up the infection on his shoes and carry it indoors. However, cats are even more likely to spread H5N1, because they can give it to other cats.
Bird watchers are particularly urged <#stdurl http://wwmt.com/engine.pl?station=wwmt&id=25223&template=breakout_local.html "to be on the lookout for sick or dead birds,"#> since that can be a sign of H5N1.

With regard to the possibility of human to human transmission, nothing has changed. It's mainly a numbers game, and as H5N1 has spread farther and farther around the world, the opportunities for a mutation or recombination that will permit the virus to spread easily from human to human becomes more likely. A human pandemic could begin at any time -- next week, next month, next year, or after that. As I've said before, you and your family should prepare immediately for a possible pandemic. If human to human transmission became public next week on Monday, then by Tuesday all the shelves in grocery stores would be bare. If you stock up on food now, then you'll be sure to have what you need. Even if you think that you can beat the crowds to the grocery store, you should still stock up in advance. If you get your canned food after the panic begins, then you're depriving somebody else of food. But if you stock up in advance, then the shelves will be restocked, and you won't deprive someone else of food. I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e060403 Israel votes to move from occupation to withdrawal =data ww2010.weblog.y2006.e060403.head Israel votes to move from occupation to withdrawal =data ww2010.weblog.y2006.e060403.keys Israel =data ww2010.weblog.y2006.e060403.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060403.date 3-Apr-06 =data ww2010.weblog.y2006.e060403.txt1 Israel's increasing bunker mentality complements the Palestinians' increasing belligerence. =data ww2010.weblog.y2006.e060403.txt2 <#inc ww2010.pic g060329.gif right "" "Israeli March 28 election results. (Source: csmonitor.com)"#> The Israelis have just elected a group of leaders <#stdurl http://www.csmonitor.com/2006/0330/p06s01-wome.html "committed to having as little to do with Palestinians as possible."#> The net of the election, according to analysts, is that the voters want to continue on the path laid out by former Prime Minister Ariel Sharon. Of course Ariel Sharon became comatose in January, so we have to guess what Sharon would be doing if he were still in charge, and that means that Sharon's policies are colored by current politicians' views, and those views in turn are colored by what these politicians heard from the voters during the election campaign. One of the biggest shocks of the election was the third place winner: the double-digit win of the Yisrael Beiteinu party headed by Avigdor Lieberman. Lieberman is considered a racist because of a specific proposal he has: Give up some portions of Israel occupied mostly by Arabs back to the Palestinians, in exchange for other Palestinian lands occupied mostly by Jews. Lieberman's objective is to keep Israel as purely Jewish as possible, with as few Arabs as possible. The Beiteinu party is considered to be far right and racist because of this proposal, and so its capture of 12-14 seats after never winning even one seat before indicates a sharp turn of the Israeli electorate to the right. As I <#inc ww2010.weblog.ref e060321b "wrote a couple of weeks ago,"#> Israel is on the verge of changing direction, and the new direction will not be decided by the politicians of any of the parties. The new direction is determined by the young generation, the teens coming into adulthood. And the change of direction will be chosen almost like a new fashion accessory. There's a formula for predicting what choice the young generation will make, or at least for narrowing down the list of choices. The formula was devised by Hannah Arendt in her monumental study of the Holocaust, in the book, The Origins of Totalitarianism.. Arendt describes this change of direction in the following way: The young generation's attitudes and convictions are actually "the attitudes and convictions of the bourgeoisie cleansed of hypocrisy." Today we can use the term "political correctness." In other words, if you hate the Jews but still make peace with them, then "cleansing of hypocrisy" or removal of political correctness means killing them. That, in essense, is how Arendt described how opinions developed in 1920s and 1930s Germany, and that's where the Palestinians are going today. It's pretty clear that the Palestinians and Jews hate each other, that they hold each other in contempt, and consider each other pretty worthless. It's also pretty clear that the politically correct statement of that fact is "we don't always get along with them, but we have to live with them, so let's look for a peace process that let's us live together." That's the politically correct statement of the Jewish elders and the Palestinian elders. Now, what happens when you strip those opinions of hypocrisy, of political correctness? There are several choices in each case, but given the respective electoral successes of Hamas for the Palestinians and Lieberman for the Israelis, we can begin to narrow down the choices. =inc ww2010.h2 messages "The messages of the young Palestinians and Israelis" For the young Palestinians, we've already seen part of the message: A refusal to accept unilateral decisions by the Israelis, a willingness to "encourage" further suicide bombings and other terrorist acts against the Israelis. The young Palestinians see last year's Israeli withdrawal from Gaza as a Palestinian victory caused by terrorist acts, and many feel that similar acts will drive Israel away altogether. For the young Israelis, we're now seeing a part of their message: A desire to disengage completely from the Palestinians, a willingness to let them suffer economically, a willingness to use the armed forces (the IDF) to strike back at the Palestinians for any terrorist act. The young Israelis see the withdrawal from Gaza as a victory because it means less contact with the Palestinians, and they're willing to give up some West Bank settlements to have even less contact, as long the IDF is available for protection. So where is this going next? If you're like several pundits I've heard in the last few days, then you think that "pragmatism" will rule. According to these pundits, both the Israelis and Palestinians will realize that they have to get along with each other, and they'll become "pragmatic," and come to an agreement. That, unfortunately, is not how it works. Maybe the Palestinian Authority President Mahmoud Abbas would like to be "pragmatic," and maybe Israeli Prime Minister Ehud Olmert would like to be "pragmatic," but pundits who say that don't understand anything about the generational change that's taking place. The "pragmatic" older generation leaders are no longer in charge. It's the young generations that are now in charge. And it's the young generations that are deciding policy. And the young generations are deciding policy by means of Hannah Arendt's formula: They take the attitudes and beliefs of their elders and strip away the hypocrisy, strip away the poltical correctness. Now we've just described the young Palestinian and young Israeli messages so far. These messages will continue in the direction that they've already been going, rather than in the direction of "pragmatism." What are those messages? As long as there are choices, then it's impossible to predict. But if you look at the messages so far, then it's not hard to narrow the choices. For the Palestinians, it's more and more terrorist violence. For the Israelis, it's more disengagement except for the IDF as needed. For both, it's increasing contempt and hatred for the other side. From the point of view of Generational Dynamics, I've been saying for years that <#hreftext ww2010.i.may01 "it was Yasser Arafat and Ariel Sharon that have kept the Mideast at peace,"#> despite the fact that they hated each other, and that once they were out of the picture, the Mideast would descend into chaos. Generational Dynamics predicts that the Mideast will re-fight the violent, genocidal war between Arabs and Jews that occurred in the 1940s, surrounding the partitioning of Palestine and the creation of the state of Israel. And, as always, Generational Dynamics tells you the final destination, but doesn't tell you that path that will take you there. But now we're beginning to see the path more and more clearly. The recent Palestinian and Israeli elections are clearly revealing the attitudes and convictions of the younger generation, and it's that generation that we have to understand if we want to know where the Mideast is going. Hanna Arendt's formula, the elder generation's attitudes and convictions stripped of hypocrisy and political correctness, gives you the answer. In the weeks and months to come, I'll be writing about this formula as applied to other countries as well. But you can figure it out for yourself. I like to brag that I've posted many, many predictions on this web site for over three years, and not a single one has been proven wrong. After all, it's easy to get a million predictions right -- just make two million predictions. What's hard is to make predictions and not get any wrong, and that's what I've done on this web site. Many of the predictions have been proven right, and some are still pending, but not a single one has turned out to be wrong. I achieved this even though I'm not a psychic or a soothsayer or anything of the sort. I'm just applying the Generational Dynamics theory to real live situations. The purpose of this web site is not only to make these predictions, but also to teach other people how to do the same thing. That's why I occasionally repeat various aspects of the theory -- partly to help new people, and partly to further educate regular readers. =inc ww2010.h2 homework "Homework problems for you" So now you should be able to figure out for yourself where several situations are going. Here are some "homework problems" for you to work on:

Last week, <#inc ww2010.weblog.ref e060328 "over half a million Latinos demonstrated in Los Angeles"#> and other cities, many of them carrying Mexican flags. What message were they sending, and where is that message going next?
Polls show that most Americans would like to see millions of Mexicans jailed or deported back to Mexico - as far out of sight as possible. And they want a fence along the entire US-Mexican border. What message are they sending, and where is that message going next?
In France, young Muslims <#inc ww2010.weblog.ref e051102 "rioted and demonstrated in massive numbers"#> in the suburbs last November. In the last two weeks, those riots and demonstrations reached Paris. In both cases, they were demonstrating over the hypocrisy of the French social model, which supposedly guarantees everyone a well-paying 37 hour per week job for life. What message were the rioters sending, and where is that message going next?

If you'd like, send your homework answers to me at <#stdurl mailto:homework@GenerationalDynamics.com#> and I'll write back and let you know how you did. This will also give me a chance to see how well my readers are understanding what I'm talking about. =eod =// &&2 e060402 Gold skyrockets to $588 per ounce, highest in 25 years =data ww2010.weblog.y2006.e060402.head Gold skyrockets to $588 per ounce, highest in 25 years =data ww2010.weblog.y2006.e060402.keys gold price =data ww2010.weblog.y2006.e060402.loc ww2010.weblog.log0604 =data ww2010.weblog.y2006.e060402.date 2-Apr-06 =data ww2010.weblog.y2006.e060402.txt1 It's one more sign that investors are becoming increasingly risk-averse. =data ww2010.weblog.y2006.e060402.txt2 <#inc ww2010.pic gold1.gif right "" "Gold Prices - 2002 to present"#> As the adjoining graph shows, the price of gold in mid 2005 was about the same as it had been at the beginning of 2004, 18 months earlier. Then it began to increase dramatically, and has been reaching successive highs since then. On Friday, <#stdurl http://news.bbc.co.uk/2/hi/business/4864098.stm "gold reached its highest price in 25 years, $588 per ounce."#> There are many things that affect the price of gold, since it has many industrials uses as well as being an investment vehicle. And we have to remember that the price of other commodities has been going up in the last two years, mainly because China has been sucking all the oil and metals that it can acquire. For those reasons, this increase in the price of gold as an isolated event wouldn't necessarily be significant. But when combined with all the other indicators of increasing investor risk-averseness, we have to add this to the list:

New home sales and prices have fallen dramatically for four months, indicating that <#inc ww2010.weblog.ref e060326 "the housing bubble burst last October."#>
As I last <#inc ww2010.weblog.ref e060122 "last described in January,"#> the stock market composite P/E ratio started falling. This indicates that "something happened last October" to cause investors to be willing to risk less money for a given return.

Now, in the same time frame, the price of gold started rising rapidly. Putting these together indicates that towards the end of last year investors became increasingly nervous. This is exactly what Alan Greenspan warned about last year in August. He <#inc ww2010.weblog.ref e050830 "warned about the stock market and housing bubbles as follows:"#>

“To some extent, those higher [stock and housing] values may be reflecting the increased flexibility and resilience of our economy. But what [investors] perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.” What Alan Greenspan described is happening. Investors are becoming more cautious, and will support demands for loans to be paid off. He says that "history has not dealt kindly" with the situation we're in, and a financial crisis could develop next week, next month or next year. As I've been saying since 2002, Generational Dynamics predicts that America is entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range by the 2007 time frame. I certainly have no reason to change this prediction now, especially with public debt and the trade deficit continuing to grow uncontrollably and exponentially, and with investors becoming increasingly risk-averse. Even Alan Greenspan might agree. It's now the beginning of the second quarter, and corporate earnings reports will be coming in. <#hreftext ww2010.i.050711eleven "Corporate earnings have been astronomically and unsustainably high"#> for over ten years now. As these reports come out over the next few weeks, we'll see if they continue their high-wire act, and whether investors continue to put their faith in the stock market. =eod =// &&2 e060329 When can a Muslim lie without being immoral? =data ww2010.weblog.y2006.e060329.head When can a Muslim lie without being immoral? =data ww2010.weblog.y2006.e060329.keys Zacarias Moussaoui =data ww2010.weblog.y2006.e060329.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060329.date 29-Mar-06 =data ww2010.weblog.y2006.e060329.txt1 We have the answer from court testimony by Zacarias Moussaoui, =data ww2010.weblog.y2006.e060329.txt2 the admitted terrorist who claims that he was to have piloted an airliner into the White House on September 11, 2001. <#inc ww2010.pic moussa.jpg right "" "Zacarias Moussaoui"#> During his testimony, <#stdurl http://www.nytimes.com/2006/03/27/politics/27cnd-moussaoui.html?ex=1301115600&en=579cfe4468d6463d&ei=5090&partner=rssuserland&emc=rss "Moussaoui said there were times when a Muslim can lie without being immoral:"#>

to reconcile Muslims
to answer "yes" when a wife asks, "Am I beautiful?"
and to carry out jihad.

Moussaoui was asked whether he lied after his arrest in August 2001 because still dreamed of being a jihadist. He didn't disagree. "You're not dead until you're dead," he said. =eod =// &&2 e060328 Mass Latino demonstrations / immigration bill =data ww2010.weblog.y2006.e060328.head Mass Latino demonstrations protest proposed immigration bill =data ww2010.weblog.y2006.e060328.keys Latinos, Mexico, immigration =data ww2010.weblog.y2006.e060328.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060328.date 28-Mar-06 =data ww2010.weblog.y2006.e060328.txt1 The fury between Latinos and non-Latinos has substantially increased in the last few months, =data ww2010.weblog.y2006.e060328.txt2 especially since plans for a new immigration bill, including a fence separating Mexico from the United States, were announced last year. You just have to listen to economics journalist Lou Dobbs and pundit Jack Cafferty rant and rave on their respective slots on CNN to understand how deep the hostility towards Mexicans has become among many Americans. <#inc ww2010.pic g060327.jpg right "" "There were over 500,000 Latino marchers in Los Angeles (Source: aztlan.net)"#> And you just have to see how <#stdurl http://www.fortwayne.com/mld/newssentinel/news/local/14200372.htm "mobs of Latinos in cities across the country"#> -- over half a million in Los Angeles on Saturday, many carrying Mexican flags -- are protesting the proposed legislation and demanding immediate citizenship for undocumented Mexicans. The debate going on in Washington is not "whether" to crack down on undocumented Mexican workers, but on how hard to crack down. The most aggressive legislation would (supposedly) erect a wall all along the Mexican-American border, and would (supposedly) make it a felony to be an undocumented worker. The more easy-going legislation, supported by political enemies President George Bush and Senator Ted Kennedy, would permit undocumented workers to continue working under strictly defined rules, and eventually qualify for citizenship over a 12-year period. From the point of view of Generational Dynamics, all such legislation is a waste of time. With millions of legal and illegal Mexican immigrants living and working in the American Southwest and in other American cities, and millions more pouring across the border, there's no longer any legislative solution to the increasing level of conflict, short of war. The idea of building a fence is so ridiculously impossible, you'd think that a politician would be embarassed to even mention it, but being stupid has never stopped a politician before. What's more important is the increasing hostility on both sides. The legislation being discussed today is much harsher than anything that would have been considered even a year or two ago. And <#stdurl http://www.csmonitor.com/2006/0328/p01s01-uspo.html?s=hns "Latinos have been mobilizing as never before."#> Of particular significance is a shift in loyalty of the second-generation native-born Latinos. Formerly they identified more with white Americans, but now they're identifying more with undocumented Hispanics. Thus we see a classic fault line forming between two identity groups -- the non-Lation Americans and the Mexican community - legal immigrants, illegal immigrants, and native-born second-generation Mexican immigrants. As <#inc ww2010.weblog.ref e050825 "we wrote last August,"#> violence is increasing throughout Mexico, with a fault line between the indigenous peoples and those of European ethnicity. From the point of view of Generational Dynamics, Mexico is well into a generational crisis period. Mexico's last crisis war was the Mexican Revolution of 1910-20. Historically, 87% of all crisis wars begin less than 85 years after the previous crisis war, and so Mexico is more than ready for a new crisis war. This war will have two components: a civil war between Mexican factions, and a war with Americans in the Southwest. Of course it's impossible to predict the outcome of such a war, but one possible scenario is that Mexico may regain some of the land that it lost in the Mexican-American war of the 1840s. =eod =// &&2 e060326 New home sales and prices fall dramatically =data ww2010.weblog.y2006.e060326.head New home sales and prices fall dramatically four months in a row =data ww2010.weblog.y2006.e060326.keys Housing bubble, great depression =data ww2010.weblog.y2006.e060326.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060326.date 26-Mar-06 =data ww2010.weblog.y2006.e060326.txt1 This appears to confirm that the housing bubble burst four months ago. =data ww2010.weblog.y2006.e060326.txt2 According to a <#stdurl http://www.census.gov/const/newressales_200602.pdf "new report by the Census Bureau and Dept. of Commerce,"#> new home sales fell 10.5% last month, the biggest decline since April 1997, and <#stdurl http://www.businessweek.com/ap/financialnews/D8GI5S9G0.htm?campaign_id=apn_home_down&chan=db "far bigger than the 2% decline that analysts had predicted."#> The decline is the fourth in a row, and follows a 5.3% decline in January. Along with the decline in sales, prices for new homes have been falling as well. Median prices fell 1.6% from January to $230,400, down from the all-time high of $243,900 in October. <#inc ww2010.pic hou0602b.gif center "" "New home sales and prices, seasonally adjusted, January 2000 to February 2006"#> The above graph, based on Commerce Dept. figures, shows that sales and prices have generally been increasing steadily since 2000, during the heart of the "housing bubble," but that they both started a sharp decline in October. <#inc ww2010.pic hou0602a.gif right "" "Housing inventory in number of months, seasonally adjusted, January 2000 to February 2006"#> The adjoining graph shows the same thing a different way. Since 2000, the housing inventory has remained steady at about four months, meaning that it takes about four months to sell a home once it comes on the market. Starting in June, the housing inventory began to build, and in February it was well over six months. This two-month increase in housing inventory implies that the fall in sale and prices is likely to continue. There are an increasing number of unsold new houses on the market. If sales are still dropping off, even in that atmosphere, then buyer psychology must have changed significantly. Pundits are generally unfazed by these developments. On Saturday, I watched a young girl on CNN, whom I won't name to spare her further embarassment, bubble and gush about how wonderful the economy was, with the stock market going up and the sales of existing homes going up. The stock market, as I've written a number of times, is still <#hreftext ww2010.i.050711eleven "overpriced by a factor of over 220%,"#> over its book value of DJIA 4500, so that an increase makes it even more overpriced. <#inc ww2010.pic g060325.gif left "" "Existing home sales through February, 2006 (Source: CNN.com)"#> As for sales of existing homes, they don't quite tell the story the the pundits are claiming, as the adjoining graph shows. It's true that <#stdurl http://money.cnn.com/2006/03/23/news/economy/homesales/index.htm "existing home sales were sharply up in February,"#> that followed two months of even sharper declines. The February figure is still well below the November figure, which itself is down from the peak in September and October. It's also worth understanding that existing home sales figures are often less reliable than new home sales. The reason is that new home sales are counted when the contract is signed, while existing home sales are counted when the final closing takes place, which is often two months later. Thus, existing home sales figures are often two months out of date, and new home sales figures serve as leading indicators of what's coming. Frankly, the first two graphs above seem very dramatic to me. A sharp fall in sales and prices for one or two months is typical of market fluctuations, but when it lasts four months and appears to be accelerating, then something beyond a simple fluctuation seems to be happening. Since 2002, Generational Dynamics has predicted that we're entering a new 1930s style Great Depression. This is an example of a "long-range prediction," in that it's based on analyzing patterns over many decades or even centuries. It tells you something that's going to happen with 100% certainty, but does not give a time frame more precise than a couple of decades. Predicting a specific time for a financial crisis is impossible, as can be proved using the mathematics of Chaos Theory. But what can be done is to combine short-term trends with long-term forecasting to come up with a probabilistic short term forecast -- that is, a prediction that's less than 100% certain, but which provides a more specific time frame. It's this trade-off between time frame and probability that I've been developing on this web site, and it's why I've never gotten a prediction wrong. As long as you don't follow the rules dictated by Chaos Theory, then you can be successful making predictions. So what we have now is this: A prediction of major financial crisis that's 100% certain but not specific as to time; but there's more, as time goes by, it becomes increasingly probably on a month by month or day be day basis. We also have various "short-term" indicators: the stock market is increasingly overpriced; the housing bubble seems to have burst, and sales and prices seem to be falling rapidly; the <#inc ww2010.weblog.ref e060311 "the trade deficit keeps increasing exponentially;"#> <#inc ww2010.weblog.ref e060118 "the Tokyo stock exchange is becoming increasingly volatile;"#> and Japan's plans to raise interest rates are <#inc ww2010.weblog.ref e060227 "threatening the "carry trade" bubble."#> These short-term indicators are all trending in the same direction, and they're all supportive of the long-term prediction (financial crisis, 1930s style Great Depression). Perhaps all the short-term indicators will turn around, and the financial crisis won't begin until next year or later; but the probability is increasingly higher that the financial crisis will begin much sooner than that. =eod =// &&2 e060322 The Congressional calendar this year is just 97 days =data ww2010.weblog.y2006.e060322.head The Congressional calendar this year is just 97 days =data ww2010.weblog.y2006.e060322.keys Congressional calendar =data ww2010.weblog.y2006.e060322.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060322.date 22-Mar-06 =data ww2010.weblog.y2006.e060322.txt1 It's the shortest Congressional calendar in 60 years, =data ww2010.weblog.y2006.e060322.txt2 according to a report on CNN. In weeks that they're in town at all, they're only in from Tuesday night through Thursday. But most weeks they're not in Washington at all. They take 2-3 weeks off for any holiday - President's day, Saint Patrick's day, Easter, Memorial Day, Independence Day, and so forth. In January they were in session just one day -- for the State of the Union address. And in August, they're not in session at all. This all ties in with the theme I've been exploring: The countries around the world that fought in World War II are now almost in a state of paralysis, now that the generations of heroes who fought in that war are almost completely gone. Last week I described <#inc ww2010.weblog.ref e060317 "the ideological paralysis in China's People's National Congress."#> Before that, I described how <#inc ww2010.weblog.ref e060307 "Israel is becoming increasingly dysfunctional."#> <#hreftext ww2010.i.eu050601 "France rejected the proposed EU constitution on a generational vote."#> In America, <#inc ww2010.weblog.ref e060131 "personal savings have plummeted to Great Depression levels,"#> and public debt is growing exponentially, but all that the Washington politicians can do is call each other names. This actually isn't surprising, according to Generational Dynamics principles. The problem is that the people in charge today are from the Baby Boomer generation, born after World War II. They because adults in the 60s and 70s where they achieved their greatest glories by winning political battles against their war hero parents. Meanwhile, their war hero parents took care of things, made sure that the country was safe and solvent. Now the Boomers are in charge, and they never developed the skills to actually do anything, except to complain what other people do. Since the same thing is happening in all countries that fought in WW II, the same sort of paralysis setting in in all these countries. =inc ww2010.cf.cf060209 p left This paralysis won't last forever, of course. Sooner or later one of these crises will occur, and then everything will start to change very, very quickly. In the meantime, that's why the Congressional calendar is only 97 days long this year. If all you're going to do is call each names, what's the point of sticking around? =eod =// &&2 e060321b Is the Israeli election campaign too dull? =data ww2010.weblog.y2006.e060321b.head Is the Israeli election campaign too dull? =data ww2010.weblog.y2006.e060321b.keys Israel =data ww2010.weblog.y2006.e060321b.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060321b.date 21-Mar-06 =data ww2010.weblog.y2006.e060321b.txt1 Things will get exciting again when another generational shoe drops. =data ww2010.weblog.y2006.e060321b.txt2 According to a news report on NPR yesterday morning, people are getting bored with the election campaign. There are three parties: The leftist Labor party, let by Amir Peretz; the rightist Likud party, led by Benjamin Netanyahu; and the centrist Kadima party, created by former Likud leader Ariel Sharon just before he became comatose in January, now led by Ehud Olmert. Polls have been holding steady, saying that Kadima is going to win on March 28. The Israelis interviewed yesterday morning complained that all these candidates are boring. They griped that there's no great leader running -- someone like Yitzhak Rabin (1922-1995), Menachem Begin (1913-1992), or even Ariel Sharon (1928-). These choices aren't surprising -- these are some of the great heroes in the creation of the state of Israel and the war against the Palestinians in the late 1940s. But alas, that generation is gone now, and no one in the generations born since 1949 can hope to measure up. The Palestinian side was boring for a long time too, after Yasser Arafat died. Mahmoud Abbas replaced Arafat as President of the Palestine Authority, but Abbas was also pretty boring, wasn't he. But the Palestinian side has gotten quite exciting in the last few weeks. That's because the younger generation has spoken, and elected the candidates from the Hamas militia party, whose platform calls for the destruction of Israel. The reason that the Israeli election is boring is because Israeli youth haven't yet similarly spoken. That may happen on March 28 or it may happen later, but when the young adult generation speaks, they'll coalesce around a candidate who will take Israel into an entirely new direction. It's impossible to predict for sure what that direction will be, but chances are it will be a sharp turn to the political right, with a heavy emphasis on security and no compromise with the Palestinians. An Israeli turn to the right will re-energize the young Palestinians to turn sharply against Israel, especially in Gaza where the <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html "the median age is 15.6."#> These are the generational shoes that we can expect to drop in the next few months, and the inevitable slide toward all out war will become obvious even to the most brain-dead politician or journalist. When the Bush administration announced the Mideast Roadmap to Peace three years ago, politicians, journalists and pundits were certain that the only thing preventing its success was Yasser Arafat himself. I wrote that Ariel Sharon and Yasser Arafat might hate each other, but they'd each survived the genocidal Arab-Jewish wars of the late 1940s when Palestine war partitioned and the state of Israel was created, and they would do anything to keep such a war from happening again. Now that these two leaders are gone (well, one is almost gone), a generational change is in order, and the region is descending into chaos. Generational Dynamics predicts, with near mathematical certainty, that the Arabs and Jews are headed for a new genocidal war that will eventually engulf all the countries in the entire region. If the current Israeli election is too boring, then perhaps the best thing to do is to enjoy the boredom while it lasts. =eod =// &&2 e060321 Journalists have Iraq civil war orgy =data ww2010.weblog.y2006.e060321.head Journalists have a 'civil war in Iraq' orgy over the weekend =data ww2010.weblog.y2006.e060321.keys Iraq, civil war, Darfur =data ww2010.weblog.y2006.e060321.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060321.date 21-Mar-06 =data ww2010.weblog.y2006.e060321.txt1 It's hard to remember when news shows had so much sheer non-stop nonsense =data ww2010.weblog.y2006.e060321.txt2 as I heard all weekend. The trigger was <#stdurl http://news.bbc.co.uk/2/hi/middle_east/4821618.stm "a statement by an Iraqi politician:"#>

"It is unfortunate that we are in civil war. We are losing each day as an average 50 to 60 people throughout the country, if not more - if this is not civil war, then God knows what civil war is" - Iyad Allawi, former interim Iraqi Prime Minister

The news shows couldn't talk about anything else all weekend, and the only question worth debating was whether a civil war was already in progress or whether it was just about to come. There were other Iraqi politicians who said there was no civil war, and there were Army generals who said there was no civil war, but the journalists I saw all made it clear that those views were to be disregard, presumably because they have some "agenda." Oh no. The only one who's telling the truth is a 2nd rate Iraqi politician who's running for office. But it's much, much worse than that. There were two other important stories in the news last week:

The civil war in Darfur, Sudan, has <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2006-03-17T133614Z_01_L17497238_RTRUKOC_0_UK-SUDAN.xml&archived=False "already resulted in tens of thousands of deaths"#> and hundreds of thousands of forced relocations, thanks to the Janjaweed militia going from village to village, killing the men and children, raping the women, and burning the buildings to the ground.
<#inc ww2010.weblog.ref e060314 "Slobodan Milosevic's death"#> and funeral last week reminds the world that in the Balkans, men were mass murdered and buried in mass graves and women were mass raped, so that they'd get pregnant with the sperm of their conquerors. The "ethnic cleansing" campaign went on for years.

Now, 50-60 deaths in the entire country of Iraq is not good, but there are some large cities that have experienced that many murders in a single weekend. What's happening in Iraq isn't a civil war in any way whatsoever. When Allawi says, "If this is not civil war, then God knows what civil war is," I'm going to suggest Darfur and the Balkans. I listened to a lot of CNN's Wolf Blitzer on Sunday. This guy's supposed to be a seasoned senior journalist, to be held to a high standard. Is he really so stupid or incompetent that he can't make the obvious connection between the Iraq 'civil war' story and the real civil wars in Darfur and the Balkans? And I don't mean to pick on just Blitzer. They all did it -- FOX, MSNBC, BBC, and network newscasts. Once again what we're seeing are the fantasies of the journalists who are so incredibly anti-American that they'll fall for anything that makes America look bad, no matter how unprofessional it makes them. As I've <#inc ww2010.weblog.ref e060224 "explained many times in the last three years,"#> Generational Dynamics says that a civil war in Iraq is impossible because only one generation has passed since the genocidal Iran/Iraq war of the 1980s, and it's impossible for a new genocidal crisis war to begin less than two generations after the end of the previous one. =eod =// &&2 e060317 China's People's National Congress paralyzed by ideology =data ww2010.weblog.y2006.e060317.head China's People's National Congress paralyzed by ideology =data ww2010.weblog.y2006.e060317.keys China, mass riots, People's National Congress =data ww2010.weblog.y2006.e060317.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060317.date 17-Mar-06 =data ww2010.weblog.y2006.e060317.txt1 China's top officials were unable to stop from committing a "historic error" =data ww2010.weblog.y2006.e060317.txt2 when they were unable to agree on a plan to end the country's mass riots. Two months ago that China's Prime Minister <#inc ww2010.weblog.ref e060124 "warned that the country was already becoming unstable,"#> thanks to a "historic error" caused by corruption in local governments -- where local governments simply confiscate local peasants' lands for their own purposes, without properly compensating the peasants. A recession which caused massive unemployment might well be the trigger leading to a massive rebellion. According to China's Ministry of Public Security, <#stdurl http://www.chinapost.com.tw/asiapacific/detail.asp?GRP=C&id=75667 "there were 87,000 mass incidents in China in 2005,"#> up from 74,000 in 2004 and 58,000 in 2003. "Mass incidents" are "public order disturbances, obstructions of justice, gathering of mobs and stirring up of trouble." These increasing numbers of mass riots are like 9/11 in America. They're causing a great deal of anxiety, especially since China has a history of national rebellions that kill tens of millions of people. So the desire is high to find a way to reduce the number of regional riots. The solution was felt to be a new law that would protect peasants' property rights and require adequate compensation for confiscation of land. The <#stdurl http://www.voanews.com/english/2006-03-13-voa20.cfm "new law was to be passed at the recent meeting of the National People's Congress."#> But the meeting ended Tuesday with no such law being passed. Instead, the Congress broke down on ideological grounds. On one side, the "capitalists" wanted peasants to have the right to sell their property on the open market, and to receive proper compensation when the government confiscates their property; on the other side, the "socialists" wanted land to "belong to the people," with no property rights for peasants, just like in the good ol' days of Mao Zedong. Thanks to the ideological arguments, the National People's Congress is paralyzed, unable to move. This is a theme that I've repeated often in the last year: <#inc ww2010.weblog.ref e060307 "Israel is becoming increasingly dysfunctional following the loss of Ariel Sharon,"#> just as the Palestinians are becoming increasingly dysfunctional following the death of Yasser Arafat. <#hreftext ww2010.i.eu050601 "France rejected the proposed EU constitution on a generational vote."#> In America, <#inc ww2010.weblog.ref e060131 "personal savings have plummeted to Great Depression levels,"#> and public debt is growing exponentially, and Washington politicians are paralyzed by moronic political name-calling. This kind of paralysis is happening around the world to companies that fought in World War II. This paralysis part of the cyclic pattern that occurs to every nation every 80 years or so, when they approach a new crisis war. To understand why it happens, here's why it's happening in America: The G.I. generation that won World War II vowed that nothing like that should ever happen again and, in particular, their children should never have to fight in any such war. They believed (incorrectly) that if they had killed Hitler in 1935, then there would have been no WW II, and they decided that they must stop Communism before it leads to a new world war. This policy led to the Vietnam War. However, the kids in the Boomer generation, born after the war, had no such fear of Communism. This caused a "generation gap," and they <#hreftext ww2010.i.sixties040501 "rioted and humiliated their G.I. parents during America's "generational awakening" period in the 1960s-70s."#> The same kind of generation gap happened in every country that had fought in World War II. For example, they were called "'68ers" in France and Germany because of the massive riots in 1968. There was an "awakening era" and a generation gap in country after country. The isues may have differed from country to country, but there was always a generation gap, and intergenerational rioting and political fighting. This generation gap showed itself in other ways. In particular, Boomers kept complaining and arguing, but never actually did anything, since they left it up to their G.I. parents to take care of things. In the 1980s, the Republicans and the Democrats cooperated with each other to change the Social Security system to make it a sounder system. After that, they cooperated again to specify new rules to control the budget deficit. And in 1996, Democratic President Bill Clinton cooperated with the Republican congress to eliminate the welfare entitlement. This was all accomplished by those in the G.I. generation. Today, the G.I. generation is gone. Public debt is increasing exponentially, but the Boomers can't do anything but call each other names, since they don't know how to actually do anything, and they assume that everything will automatically be taken care of for them. The people in Generation X, the generation just behind the Boomers that grew up in the 60s and 70s, hate the Boomers' uselessness, but the GenXers don't know how to do anything either. So the result is the near-total paralysis we see. And the same thing is happening in all the countries that fought in WW II. There is one generation that can do something -- it's the millennials, born in the 1980s and 1990s. They have no fear of anything, but they're furious at any poverty, bigotry or other injustice that they suffer. That's why kids are rioting in Paris, in the Gaza Strip, in Pakistan, in India, in China, in Indonesia, and in many other countries. Their Boomer and Xer parents are paralyzed, and can't do anything to stop the violence. This violence is growing, and at some point it will spiral out of control in some country. From the point of Generational Dynamics, the world is headed for a "clash of civilizations" world war with near 100% certainty. It could begin next week, next month, next year or thereafter, but as world tensions mount, it's likely to begin sooner rather than later. =eod =// &&2 e060314 Slobodan Milosevic's death / World War I =data ww2010.weblog.y2006.e060314.head Slobodan Milosevic's death on Saturday reminds us of the relevance of World War I =data ww2010.weblog.y2006.e060314.keys Slobodan Milosevic, genocide, World War I =data ww2010.weblog.y2006.e060314.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060314.date 14-Mar-06 =data ww2010.weblog.y2006.e060314.txt1 Found dead in his cell during his trial for war crimes in Bosnian war, =data ww2010.weblog.y2006.e060314.txt2 the death of the former Serb leader has evoked the strongest emotions among Europeans. He's being tried with 66 counts of genocide, crimes against humanity and war crimes. <#inc ww2010.pic milo.gif right "" "Slobodan Milosevic"#> When you were in high school, you probably learned how World War I started -- the assassination in 1914 of Austrian Archduke Franz Ferdinand by a Serb high school student, as part of a <#stdurl http://www.firstworldwar.com/features/balkan_causes.htm "conspiracy involving Muslims and Orthodox Christians Bosnian students."#> The resulting war, which pitted Muslims and Orthodox Christians against Western Christians (Catholics and Protestants), and then spread to (Orthodox) Russia, to (Western Christian) Germany and France, and to (Muslim) Turkey. Today we talk about a "clash of civilizations" between Muslim and Western civilizations as if that were a new thing. Actually, there are three different major civilizations involved, and it's been going on periodically for centuries. When most Americans refer to "Europe" they're almost always talking about Western Europe -- U.K., France, Germany, Italy, and so forth. Furthermore, most Americans assume that Eastern Europe is pretty much like Western Europe. Finally, most Americans think that World War I was pretty much the same as World War II in Europe, with the Germans attacking France and all. Most of that is completely wrong. Eastern Europe is Christian, but not Catholic or Protestant; Eastern Europe is part of the Orthodox Christian civilization, extending further east into Russia and Asia, where the Russian Orthodox religion is practiced. <#inc ww2010.pic eeur.gif left "" "Eastern Europe / Western Asia, showing major Orthodox/Muslim fault line regions: Balkans, Crimea, and Caucasus (mountains). Not shown: Muslim Bosnia, east of Serbia in Balkans."#> Any "clash of civilizations" between Christians and Muslims mostly involved Orthodox Christians, and those crisis wars most took place in three regions: The Balkans, the Crimea and the Caucasus. WW I heavily involved all three of those regions, and I hardly involved Western Christianity at all, even though Germany, France and UK were marginally involved. WW I was mainly an East European war, with enormous consequences for both the Orthodox and Muslim civilizations: Russia had its Bolshevik Revolution, ending its 500 year old Czarist empire, replacing it with a Communist state. And the Ottoman Empire, the Turkish empire that had conquered countries across Africa, Europe, Mideast and Asia under Muslim control, collapsed completely. From the point of view of Generational Dynamics, all the major battles of WW I have been getting re-fought. There was the Iran/Iraq war of the 1980s, the war between Syria and Lebanon in the late 70s and early 80s, the war between Turkey and PKK Kurds that ended in 2001. =inc ww2010.cf.cf060209 p right Some major WW I battles have yet to re-fought. A good example is the Caucasus war. I've listed this region as one of the <#hreftext ww2010.i.danger041120 "The Six Most Dangerous Regions of the World"#> because it's overdue to explode into a full-fledged regional crisis war that will trigger the "clash of civilizations" world war. But the Balkans war has been re-fought, right on schedule in the 1990s, almost exactly 80 years after the previous Balkans crisis war (the one that started WW I). This brings us back to Slobodan Milosevic. Milosevic led the Serbs in a series of "ethnic cleansing" wars against the Croats and Bosnians. The Serbs are Orthodox, the Croats are Catholic and Protestant, and the Bosnians are Muslim. Those three groups have been fighting crisis wars at regular intervals for centuries. The 1990s Balkans war had to happen, because crisis wars always happen again, 60-90 years later, when the generation of people who lived through the horrors of the preceding crisis war all disappear (retire or die), all at once. And the 1990s wars were unbelievably brutal. A few weeks ago, I quoted a description of these wars by Amy Chua, in her book, World on Fire, about the 1990s Balkans wars. It's worth repeating:

"In the Serbian concentration camps of the early 1990s, the women prisoners were raped over and over, many times a day, often with broken bottles, often together with their daughters. The men, if they were lucky, were beaten to death as their Serbian guards sang national anthems; if they were not so fortunate, they were castrated or, at gunpoint, forced to castrate their fellow prisoners, sometimes with their own teeth. In all, thousands were tortured and executed."

When <#inc ww2010.weblog.ref e060228 "I quoted this description last month,"#> it was in the context of explaining why there wasn't, and couldn't be, a civil war in Iraq, no matter what nonsense you hear from the journalists hoping to make America look as bad as possible. There can't be a civil war in Iraq because the Sunnis and Shiites don't hate each other nearly enough. That's the difference between crisis wars and non-crisis wars in Generational Dynamics: non-crisis wars can be deadly, but they're logical, methodological and political. But crisis wars are driven by genocidal fury, pure visceral hatred. Since the Balkans wars had to happen, it seems strange to blame Milosevic for being its cause. And it seems even stranger to say, <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2006/03/13/AR2006031301478.html "as a Washington Post editorial"#> said, that he was "one individual [who] can shape the course of history." He was the agent, the person who was in the right place at the right time. If he'd never been born, then someone else would have led the wars, and they would have been been the same. Here's something else that's strange: The <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=topNews&storyID=2006-03-11T214033Z_01_LA749012_RTRUKOC_0_UK-WARCRIMES-MILOSEVIC.xml "news coverage on TV and on the 'net"#> often said something like, "the 1995 massacre of 8,000 Muslims in Srebrenica was the worst atrocity in Europe since World War II." That was a bad atrocity, but there have been plenty of worse atrocities since WW II, though not in Europe; there was the murder of close to a million Tutsis in Rwanda in 1994; there were thousands of Palestinian refugees butchered in Sabra and Shatila in 1982; 1 1/2 million deaths in the Iran/Iraq war of the 1980s, where poison gas was used; and there were millions slaughtered in the Cambodian killing fields in the mid-1970s. There are <#stdurl http://en.wikipedia.org/wiki/Genocides_in_history "many more examples of genocide since WW II."#> All these different genocides were in different countries, on different generational timelines, with several of them on the WW I timeline. World War II began roughly 20-25 years the genocides of WW I, and today we're roughly 10-25 years past many of the genocides of re-fought battles on the WW I timeline. Today we're about to re-fight the leftover battles of WW I, especially the Russian Revolution, and we're about to re-fight all of the battles of WW II. As Slobodan Milosevic goes to his funeral, he's considered to be a unique monster. As we head for a new "clash of civilizations" world war, we're undoubtedly going to see a number of additional similar monsters. =eod =// &&2 e060311 Trade deficit again worse than expected =data ww2010.weblog.y2006.e060311.head Trade deficit again worse than expected, reaches a fresh historic high =data ww2010.weblog.y2006.e060311.keys Trade deficit, carry trade, housing bubble =data ww2010.weblog.y2006.e060311.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060311.date 11-Mar-06 =data ww2010.weblog.y2006.e060311.txt1 Related: US Treasury bond prices fall dramatically on news from Japan =data ww2010.weblog.y2006.e060311.txt2 <#inc ww2010.pic g060310b.gif center "" "Imports and exports (Source: Dept. of Commerce)"#> The above diagram from the <#stdurl http://www.bea.gov/bea/newsrelarchive/2006/trad0106.htm "Bureau of Economic Research press release"#> tells the story:

Total January exports were $114.4 billion in January, up 3.5% from December.
Imports reached $182.9 billion, up 5.3% in December.
The difference, $68.5 billion, is the highest trade deficit in history.
Thus, the trade deficit continues to grow exponentially, despite the fact that, for years, economists, journalists and high-priced analysts have been predicting that the trade deficit would start leveling off because we have a "self-correcting" economy.

Economists <#stdurl http://quote.bloomberg.com/apps/news?pid=10000006&sid=aIFwkXB4jp2s&refer=home "had expected a $66.5 billion deficit."#> Brian Bethune, an economist at forecasting firm Global Insight told Bloomberg that the trade gap "is one of the symptoms of a U.S. economy growing faster than other countries." I've seen these Global Insight guys quoted from time to time, and they always say such sugary nonsense they give the impression of airhead. This time, the exponentially growing account deficit supposedly means that the American economy is growing fast. By that logic, borrowing more and more and more on my credit card, letting my credit card debt grow exponentially, means that I'm a better and better worker. I don't see the connection. Do you? What's happening is that other countries -- Japan, China, Europe -- have been purchasing US Treasury bonds in massive volumes. We use the money they give us to pay for our exports, to pay for our war in Iraq, to pay for Katrina benefits, and so forth. See? For those of you who are angry about all the money we're spending to fight the wars in Iraq and Afghanistan, don't worry about it -- China's paying for it, not us. I'll admit that I didn't think this could go on as long as it has. I figured that China would begin to get fed up with this by now, but they're as addicted as we are. By giving us money in exchange for Treasury bonds, we buy Chinese exports, which lets them keep their own bubble economy going. It's incredibly bizarre. But now, there's been a change in the last week. One of the biggest mechanisms for this purchase of bonds has been the "carry trade." As <#inc ww2010.weblog.ref e060227 "I explained a few weeks ago,"#> hedge fund investors have been borrowing Japanese yen at 0% interest, converting them to dollars, and lending the dollars to American investors at 4.5% interest or more. This has been going on for years, since the Japanese bank rate has been 0% for years. But on Wednesday, the Bank of Japan announced that <#stdurl http://news.ft.com/cms/s/af1e51d4-afa3-11da-b417-0000779e2340.html "it's ending its "quantitative easing"" policy"#> that made huge amounts of money available (increased liquidity), and maintained zero interest rates. The policy was first instituted in 1999, when Japan was in a period of deflation. As you read articles about the BOJ's announcement, you quickly learn that no one has any idea what's going to happen. One reason is that no one has any idea just how big the "carry trade" is, and how interlocked the carry trade investments are with one another. The danger is that the sudden loss of liquidity will cause one hedge fund to collapse, and that will cause a chain reaction that will bring down thousands of other hedge funds, one after another. One thing that's already happens is a sharp fall in the demand for long-term US Treasury bonds. The high demand for these bonds had been so high that prices had been pushed up significantly, with the result that yields were down, lower than the yields on two-year treasury bonds. In anticipation of the Japanese move, demand for these bonds has fallen so much that yields have risen from 4.58% to 4.75% in the last month alone. (Sorry about that last paragraph. Here's an explanation: A bond pays a fixed amount of money after 10 years or 2 years, respectively. The more money you have to pay to buy a bond, the lower the "yield" or interest rate you're going to earn. So prices of bonds go up as yields go down, and vice versa. Demand had been going up, so prices went up, and yields were low, at 4.58% a month ago. In the last month, demand has fallen so prices have fallen, and yields have risen to 4.75%.) This sharp fall in demand for US Treasury bonds might level off, or it might the first sign of a more precipitous fall. From the point of view of Generational Dynamics, we're headed for a financial crisis that could begin tomorrow, next week, next month or next year. The stock market today is still <#hreftext ww2010.i.050711eleven "overpriced by a factor of over 220%,"#> making it highly vulnerable to a panic. There's a housing bubble making homes as much as 100% overpriced in some regions. And there's a "carry trade" bubble of unknown size, except that it's known to be huge. If one of these bubbles bursts, then it will trigger bursting of the other bubbles as well, creating a worldwide 1930s style Great Depression. With the US trade deficit growing exponentially with no signs of stopping, the crisis will occur sooner rather than later. =eod =// &&2 e060310 Terrorist bomb blasts in Vanarasi, India =data ww2010.weblog.y2006.e060310.head Terrorist bomb blasts in India's holiest city polarize Hindu-Muslim relations =data ww2010.weblog.y2006.e060310.keys Varanasi, India, Pakistan =data ww2010.weblog.y2006.e060310.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060310.date 10-Mar-06 =data ww2010.weblog.y2006.e060310.txt1 Just a few days after President Bush's warm visit to India and his cold visit to Pakistan, =data ww2010.weblog.y2006.e060310.txt2 <#inc ww2010.pic varanasi.jpg right "" "(Source: time.com)"#> Muslim terrorists on Tuesday <#stdurl http://www.time.com/time/world/article/0,8599,1171112,00.html "blew up the Sankat Mochan temple, built in 1776, one of Hinduism's holiest shrines."#> The blasts took place in Varanasi, Hinduism's holiest city, on a Tuesday, Hinduism's holiest day of the week, when the Temple was packed with people. There were simulataneous blasts at the Varanasi railroad station. In all, more than 20 people were killed. The country breathed a sigh of relief when the bombings did not trigger another round of Hindu-Muslim rioting, as has occurred in the region frequently in the past, although <#stdurl http://www.alertnet.org/thenews/newsdesk/DEL332313.htm "armed police were standing vigil across the country,"#> especially at temples and public places. Still, a number of commentators pointed out numerous signs that relations between Hindus and Muslims are becoming increasingly suspicious and hostile. This was becoming apparent anyway last month when <#inc ww2010.weblog.ref e060220 "massive Muslim rioting occurred over the Danish cartoon controversy."#> But the most remarkable reaction was the political exploitation by <#stdurl http://news.bbc.co.uk/2/hi/south_asia/4786328.stm "India's opposition leader, LK Advani, who belongs to the Hindu nationalist Bharatiya Janata Party (BJP),"#> who blamed Pakistani Muslims for the bombings, saying "People of India will not feel assured until the terrorist infrastructure across the border is fully dismantled." Pakistan quickly rejected the charges, but this is one more sign that relations between India and Pakistan have been deteriorating. =inc ww2010.cf.cf060209 p left Generational Dynamics has been predicting for some time that India and Pakistan were headed for certain war over the disputed Kashmir region, but the two countries have maintained friendly relations because of a remarkable détente that Pakistan's President Pervez Musharraf and India's Prime Minister Manmohan Singh have engineered over the last few years. The détente has been getting frostier recently, and this became apparent last week when President Bush received a very friendly reception when he visited India, and was met by PM Singh at the airport, after which the two leaders signed a very significant nuclear cooperation treaty. Indeed, in a world where America is less and less popular, India is the countries where Americans are still the most popular. When President Bush moved on to Pakistan, he was met at the airport by President Musharraf's daughter. The two leaders were openly friendly, but President Bush "hinted" that Musharraf could be doing more to stop terrorists, and <#stdurl http://story.malaysiasun.com/p.x/ct/9/cid/b8de8e630faf3631/id/fb5c032b9443f32d/ "Musharraf openly expressed anger at Afghanistan president Hamid Karzai"#> for giving intelligence information to the media. Returning now to the Varanasi bombings, the political exploitation by BJP head LK Advani is just one sign of increasing anger between Hindus and Muslims. The new bombings appear to be similar to the <#inc ww2010.weblog.ref e051031 "coordinated bomb blasts across New Delhi"#> last October. In an <#stdurl http://www.hindustantimes.com/news/181_1645821,0008.htm "analysis by Hindu opinion writer Vir Sanghvi:"#>

And yet, the political and public response to the Varanasi incident has been completely different from the way in which the Delhi blasts were regarded. Then, nobody played up the Islamic angle. There was a stoic unity within the political establishment. And there was a quiet recognition that though Islamic terrorist groups would attack Indian civilians, Indian society would unite to fight the threat. This time around, however, the response has been framed in Hindu-Muslim terms. The BJP has sought to link the Varanasi bombings to what it regards as the Muslim-appeasement policies of both the UPA government at the Centre and the Samajwadi Party ministry in Lucknow. On the night of the bombings, as the blood congealed on the floor of the Sankat Mochan temple, LK Advani went on TV to declare that these blasts could not be delinked from the protests against the Danish cartoons. His successor as BJP president, Rajnath Singh, blamed government policies towards Muslims. ... So, what has made the difference? ... My fear is that the increased communalisation of the response to the Varanasi attacks — as compared to the more secular reaction to the Delhi bombs — tells us something about the manner in which many Hindus are beginning to perceive Muslim extremism. ... [And on the Muslim side,] I am reminded of the US invasion of Afghanistan which removed the odious Taliban regime and pushed bin Laden into hiding. While the rest of India applauded the initiative, the tiresome Shahi Imam of Jama Masjid declared that he was on the side of the Taliban and wanted to help them. <#inc ww2010.pic g060310.gif right "" "Poll: Negative perception of Islam is increasting (Source: Washington Post)"#> The same kind of thing is happening in America, according to <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2006/03/08/AR2006030802221.html "a new Washington Post-ABC News poll."#> The poll was something of a surprise to me. Right after 9/11, the American view of Muslims was in the cellar, but I thought that Americans had been developing a more positive view of Muslims. Not true. The poll found that 46% of Americans have a negative view of Islam, up from 39% in the moths after 9/11/2001. So even without terrorist acts on American soil, the American view of Muslims continues to degrade. I guess nothing shows this more clearly than the recent widespread outrage to the port terminal takeover by Dubai Port World. From the point of view of Generational Dynamics, this is all to be expected, as we head for a "clash of civilizations" world war. Muslims around the world are <#inc ww2010.weblog.ref e060220 "forming identity groups with one another,"#> with negative attitudes toward America, Europe and the West. America, Europe and the West (including India) are returning the favor. =eod =// &&2 e060307 Israel is becoming increasingly dysfunctional =data ww2010.weblog.y2006.e060307.head Israel is becoming increasingly dysfunctional =data ww2010.weblog.y2006.e060307.keys Israel, Palestine, Hamas =data ww2010.weblog.y2006.e060307.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060307.date 7-Mar-06 =data ww2010.weblog.y2006.e060307.txt1 With Sharon in a coma, elections coming soon, and growing Hamas influence, =data ww2010.weblog.y2006.e060307.txt2 Israel's government is less and less able to make it through the day. In May, 2003, when the Mideast Roadmap for Peace was announced, Yasser Arafat and Ariel Sharon were leading the Palestinians and Israelis, respectively. <#hreftext ww2010.i.may01 "I wrote that,"#> contrary to what everyone else was saying, these two men were holding back their respective populations from war, and that when they were gone, the region would descend into chaos and war. <#inc ww2010.weblog.ref e041114 "When Arafat died,"#> Mahmoud Abbas took over as Palestinian Authority president, and the West Bank and especially Gaza, became increasingly unruly and ungovernable. When Ariel Sharon collapsed, <#inc ww2010.weblog.ref e060105 "I wrote that no one could replace Sharon,"#> and that Israel would also become ungovernable, just like the Palestinians. That's what happening. The main problem is how to deal with Hamas, the Palestinian terrorist group that recently when <#inc ww2010.weblog.ref e060127 "won a major election victory."#> "Trouble is, it is not at all clear what government policy is nowadays, since practically every Kadima [the political party in power] politician has a different approach to dealing with Hamas, ranging from [the] promise to either arrest the designated Hamas prime minister, Ismail Haniye, ... to Shimon Peres’ insistence that Israel engage PA President Mahmoud Abbas (Abu Mazin) in talks aimed at reaching some agreement," according to <#stdurl http://www.ariga.com/2006-03-06.shtml "Robert Rosenberg's Ariga column for Monday."#> Even more important, Israel's "defense establishment is recommending more unilateral steps meant to isolate the Palestinians -- including cutting off fuel supplies to them, ... and cutting any ties between Gaza and the West Bank," according to Rosenberg. "The goal of such moves is not clear, other than to punish the Hamas for getting elected. ... Israel would reduce to an absolute minimum any cooperation with several key humanitarian agencies, including the Red Cross and UNRWA, while maintaining just enough cooperation with the Palestinian health services to prevent catastrophe. Israel, of course, would not transfer any funds to the PA -- lest it be used for salaries a Hamas government would have to pay. ... [The] generals are recommending large-scale withdrawals in the West Bank, retaining ‘security zones,’ including all of the Jordan Valley, and several settlement blocs, including an enlarged Maale Adumim, effectively cutting the West Bank in half. These are all recommendations to the political echelon, of course, not final decisions made by the government." The reason that Israelis without Ariel Sharon are frozen into indecision is because they're waiting to see what Hamas is going to do. Yasser Arafat recognized Israel as a legitimate state. Will Hamas repudiate Arafat's recognition of Israel? Hamas leaders recently visited Vladimir Putin in Moscow, where they were told that they had to recognize Israel. But so far, <#stdurl http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=75411&version=1&template_id=57&parent_id=56 "standing firm, refusing to do so."#> The Palestinians, in turn, are unable to make decisions either. The <#stdurl http://www.iht.com/articles/2006/03/06/news/mideast-5823426.php "first meeting of the new Palestinian Parliament"#> broke up in a bitter walkout by members of Fatah, the party that had lost to Hamas in the elections. Fatah's leader is Abbas, and the split between Fatah and Hamas may be mean that Abbas may not last long as Palestinian Authority President. And Hamas itself doesn't speak with a single voice. The leaders of Hamas, the ones who visited Putin in Moscow, are in an older generation sitting in the West Bank, as is appropriate for the potential leaders of the Palestinians. The problem is, as I've mentioned before is that <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html " the median age"#> in the Gaza Strip is 15.6. The Palestinians are a society of children -- literally -- when you consider their ages. (I've read many, many articles on the Gaza Strip in recent weeks, and not a single one has mentioned this remarkable demographic fact. As usually, the journalists, politicians, pundits and high-priced analysts are oblivious to the simplest, most obvious generational facts.) So the Hamas leaders can't just do what they want. They have to satisfy their major consituencies, one of which is a large group of children living in Gaza. These children will freak out if their Hamas leaders recognize Israel. That's why it's not going to happen. Did you follow the chain I've been developing? The Israelis are frozen because of the upcoming election and because they're waiting to see whether the new Palestinian government is going to recognize Israel. The Palestinian government is embroiled in a bitter split between the majority Hamas and the now-minority Fatah. And Hamas has to respond to the demands of the children in Gaza. Follow that logic, and you see that it's those crazy kids in Gaza that are running the show. What it comes down to is that everyone is waiting to see whether they'll settle down and behave, like good little boys and girls, or whether they'll explode into violence. This is where Generational Dynamics guides us. These kids in this generation are ready to get it on with Israel. The genocidal war between Arabs and Jews in the late 1940s is as meaningless to them as the fall of the Roman Empire. And we haven't even mentioned Iran -- which is calling for the destruction of Israel and is supplying weapons to Lebanese terrorist group Hizbollah. Generational Dynamics predicts that there'll be a major new genocidal war between Arabs and Jews, and it will engulf the entire region, leading to a new world war, if one hasn't already begun in Asia or elsewhere. =eod =// &&2 e060303 Bird flu expected in North America this spring =data ww2010.weblog.y2006.e060303.head Bird flu expected in North America this spring =data ww2010.weblog.y2006.e060303.keys bird flu =data ww2010.weblog.y2006.e060303.loc ww2010.weblog.log0603 =data ww2010.weblog.y2006.e060303.date 3-Mar-06 =data ww2010.weblog.y2006.e060303.txt1 Implications for you and your pets =data ww2010.weblog.y2006.e060303.txt2 H5N1 bird flu has been <#stdurl http://today.reuters.com/news/newsArticle.aspx?type=scienceNews&storyID=2006-02-28T220245Z_01_L17684842_RTRUKOC_0_US-BIRDFLU.xml "in 20 new countries in Europe and Africa"#> in the last month alone, and is now pretty well established throughout Europe, the Mideast and Africa. About 100 humans worldwide have died from bird flu, but it's still very difficult for a human to contract the disease. The feared mutation that would permit easy (through the air) human to human spread, causing a worldwide pandemic, has not yet happened, though many experts believe it could happen any day, or next season if not this season. However, <#stdurl http://www.bloomberg.com/apps/news?pid=10000086&sid=a.whrXAnlf8U&refer=latin_america "the rapid spread of bird flu among birds in Africa"#> means that the spread to North America birds cannot be far off. There will be a large migration of birds from Africa to North America this spring through the "Atlantic Americas Flyway," and the countries on this side of the Atlantic are just as vulnerable as countries on the other side. In fact, <#stdurl http://www.bloomberg.com/apps/news?pid=10000086&sid=a.whrXAnlf8U&refer=latin_america "dead birds recently found in the Bahamas are causing concern"#> that it may have already arrived, though Bahamian officials downplayed the concern. The arrival of bird flu may or may not be detected for some time after it happens. There's evidence that bird flu was already in several European countries for a couple of months before it was detected, Now, based on the fact that <#stdurl http://www.recombinomics.com/News/03010601/H5N1_Bahamas.html "North American gene sequences have been found in Astrakhan"#> (in Russia, on the Caspian sea), some researchers believe that H5N1-infected birds have already been to North America and back to Asia. In Germany, a cat has died of confirmed H5N1. The cat apparently caught the disease by eating an infected bird. The death from H5N1 of the cat has raised concerns in Europe that house pets, dogs as well as cats, are especially vulnerable. Hundreds of Germans <#stdurl http://www.iol.co.za/index.php?set_id=1&click_id=31&art_id=qw1141322401789B216 "are dumping their cats in shelters,"#> for fear of contracting the disease from their pets. As a result, German authorities have ordered pet owners in all bird flu-hit regions to keep cats indoors and dogs on leashes. <#inc ww2010.pic flyways.gif center "" "Major flyways, bird flu status (Source: UN FAO)"#> The disease is spreading rapidly among birds around the world. Ever since last spring, when H5N1 <#inc ww2010.weblog.ref e050707 "was found to have infected birds at Lake Qinghaihu,"#> the mid-China international meeting point and breeding ground for migratory birds, bird flu was poised to spread around the world. The Fall 2005 migration has already spread it to west Asia, the Mideast, Europe and Africa within a few short months. When the Spring migration begins in a few weeks, tens of billions of birds will fly along the world's major flyways. It's likely that all remaining continents will be reached, including the Americas. China alone is <#stdurl http://mdn.mainichi-msn.co.jp/international/news/20060302p2g00m0in016000c.html "expecting major new outbreaks of bird flu throughout the country."#> In just Jiangsu province, almost 10 million migratory birds will pass through, requiring the officials to set up a huge monitoring program involving 1,000 workers. What's happening in Jiangsu province is being repeated all over the world. This will provide infinitely many more opportunities for different versions of the virus to intermix, greatly increasing the probability of a recombination that will <#inc ww2010.weblog.ref e060214 "create the mutations that allow the virus to pass easily from human to human,"#> creating a worldwide human pandemic. Whether a human pandemic happens or not, it's still necessary to prepare for the all-but-certain spread into North America. Here are some questions and answers: Should I stop eating chicken? All chicken for sale in the developed world is being tested for bird flu (and other diseases as well), so any packaged products you get from a supermarket are safe. At any rate, thoroughly cooking chicken or eggs would kill any virus anyway. However, just to be safe, it's not a good idea to eat raw or undercooked chicken or eggs, but that's really never been a good idea anyway. What about handling and preparing chicken? If you live in Africa or Asia, or if you obtain chicken from your own or a friend's farm, then you should exercise sensible caution. Seek out instructions for proper handling and preparation to keep any disease from infecting you, or staying behind on tables, dishes, utensils, and other surfaces. Incidentally, a lot of people in Europe <#stdurl http://www.iht.com/articles/2006/03/02/news/birds-5815240.php "are refusing to eat chicken, with the result that chicken prices are coming down sharply."#> Since chicken is completely safe if proper precautions are taken, you can save a chunk of money on your food bill. I have pet birds. Plan on keeping them indoors permanently. I have a cat or dog or other pet If bird flu is detected anywhere near you, keep these pets indoors. How long will this be going on? Bird flu will probably become endemic around the world, meaning that we'll have it for years. =inc ww2010.cf.cf060209 p right What does this have to with Generational Dynamics? Nothing, really, except that a human bird flu pandemic would probably trigger the other major conflict risks, including a major financial crisis and a world war. How can I protect myself and my family? I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e060228 CNN International - threat of civil war is over =data ww2010.weblog.y2006.e060228.head I just heard on CNN International: "The threat of civil war in Iraq is over." =data ww2010.weblog.y2006.e060228.keys Iraq =data ww2010.weblog.y2006.e060228.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060228.date 28-Feb-06 =data ww2010.weblog.y2006.e060228.txt1 Surprise! Surprise! The press corps was 100% wrong, and I was right. =data ww2010.weblog.y2006.e060228.txt2 I really have to chuckle at this. There was NEVER any chance of a civil war in Iraq, <#inc ww2010.weblog.ref e060224 "for reasons that I explained in detail last week."#> All that existed were the fantasies and wet dreams of a press corps so incredibly anti-American that they've lost any shred of objectivity, and have little professional integrity remaining. You don't have to be an expert in Generational Dynamics to see that Iraq is not heading for a civil war. The easiest way to see that is to compare the situation in Iraq with the situation in Palestine:

In Iraq we were seeing large rallies and demonstrations, sometimes attended by tens of thousands of Iraqis, including both Sunnis and Shiites. In Palestine, you never anymore see any large demonstrations that include both Palestinians and Jews. The mixed rallies in Iraq are reminiscent of the anti-racial demonstrations in 1960s America, attended by both whites and blacks.
In Iraq we're not seeing any signs whatsoever of fault-line hatreds between Sunnis and Shiites. I have not heard of a single Sunni clerics calling for the murder of Shiites, or vice-versa. Not a single one. Not a single militia is seeking to wage war with any other militia. In Palestine, you have large numbers of people committed to the destruction of Israel.

Arabs and Palestinians are in a "generational crisis" period, and <#inc ww2010.weblog.ref e060218 "are headed for a major regional war,"#> as I've explained many times. That's why you're seeing the hatred between Palestinians and Jews continue to grow on almost a daily basis. In order for a civil war to occur, you have to a palpable hatred between the warring groups. You need some emotion such as was carried by the phrase "Cut down the tall trees" in Rwanda in 1994 -- when this phrase was used as a signal by Hutu leaders to kill the Tutsi ethnic minority. Or here's the description by Amy Chua, in her book, World on Fire, about the civil war in the Balkans in the early 1990s: "In the Serbian concentration camps of the early 1990s, the women prisoners were raped over and over, many times a day, often with broken bottles, often together with their daughters. The men, if they were lucky, were beaten to death as their Serbian guards sang national anthems; if they were not so fortunate, they were castrated or, at gunpoint, forced to castrate their fellow prisoners, sometimes with their own teeth. In all, thousands were tortured and executed." That's the kind of emotion we'd have to see to conclude that a civil war is coming. That's what's building in Palestine, but there's nothing like that going on at all in Iraq. What violence there is remaining in Iraq is mostly directed against buildings (mosques). Where people are being killed, it's appears to be by the same insurgency that's been operating for months. That's how I could be sure that there would be no civil war in Iraq. The press corps, the pundits, the analysts could all have seen the same thing. It's not rocket science. But they're all bound up in anti-Americanism, and lie awake at night having erotic dreams of the worst possible outcome for America. The people in the Baby Boomer generation are extremely arrogant and narcissistic, as I've said many times before. But within the Baby Boomer generation, the group that's most arrogant and narcissistic of all is the journalists. We've seen this recently with their attitude about <#inc ww2010.weblog.ref e060206 "the Danish cartoon controversy."#> This civil war hysteria was really the limit. These guys never once stopped to question their own assumptions and biases. They wanted to embarass America with an Iraqi civil war, and they overwhelmingly slanted the news in that direction. It's a truly shameful display, and it proves that journalists are also wrong when they say that they're professionally able to separate their political opinions from their reporting. There's no separation at all. From the point of view of Generational Dynamics, what's going on today in Iraq is almost <#hreftext ww2010.i.sixties040501 "a textbook case of an Awakening era, like America in the 1960s,"#> with the enfant terrible Shiite cleric Moqtada al-Sadr playing the role of the kids and America and the Iraqi government playing the role of the parents. Here's <#hreftext ww2010.i.sixties040501 "what I wrote two years ago:"#>

In any society, an awakening period is always a time of cultural growth and new ideas of all kinds. But it's always a tumultuous time because it features a major generational class between kids of college age and their parents. In 1960s America, we saw the assassination of President Kennedy, of Martin Luther King, and of Robert F. Kennedy. We saw massive racial demonstrations in Washington D.C., and we saw racial riots and demonstrations throughout the country. We saw bombings in Washington, Chicago and elsewhere. We saw calls for civil war and insurrection that were supported by the media and polls -- but which turned out to be no more than rhetoric. And we saw two presidents, President Johnson and President Nixon, forced from office because they became so unpopular as a result of those protests. Those same things are happening in Iraq today. Our policymakers should take the trouble to understand this equivalence, because if we understand what happened in our own country 40 years ago, then we have a much better chance at understanding what's happening in Iraq today, and what we should do about it. What I wrote two years ago is just as true today. We're going to go through hell in Iraq, until the world war starts and we're forced to refocus our troops elsewhere. But there will be no Iraqi civil war, even though the press corps will keep hoping for one. =eod =// &&2 e060227 Sudden collapse of Iceland krona portends bursting of 'carry trade' bubble =data ww2010.weblog.y2006.e060227.head Sudden collapse of Iceland krona portends bursting of "carry trade" bubble =data ww2010.weblog.y2006.e060227.keys Iceland, carry trade, Great Depression =data ww2010.weblog.y2006.e060227.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060227.date 27-Feb-06 =data ww2010.weblog.y2006.e060227.txt1 I don't normally write about international interest rates because =data ww2010.weblog.y2006.e060227.txt2 there's a lot to explain, and frankly it's a lot easier to talk about the stock market bubble and the housing bubble, and a lot easier for readers to understand. Relatively speaking, it's easier to understand how the Fed's near-zero interest policy has created the housing bubble and has perpetuated to the stock market bubble, to the point where today it's <#hreftext ww2010.i.050711eleven "overpriced by a factor of over 220%,"#> making it highly vulnerable to a panic. And besides, all these bubbles are heavily linked together, so that when one of them bursts and crashes, the other ones will too. But the events of the past week in Iceland and Japan, and their domino effects on other nations, make it time to discuss the bubble in international interest rate trading, known as the "carry trade," and why the expected bursting of this bubble in the next few months is going to be particularly gruesome. =inc ww2010.h2 how "How the carry trade works" You're probably aware that the Federal Reserve Bank sets the "Fed funds rate" or the "overnight interest rate" for the dollar. This is the interest rate at which banks loan money to each other Every country has its own central bank (with a single central bank for the European Union) that decides the bank lending rate for that nation's currency. Here's a list of the current interest rates for different countries:

    Country         Interest rate
    --------------  -------------
    Japan            0 %
    Switzerland      1 %
    Sweden           2 %
    Eurozone         2.25 %
    United States    4.5 %
    New Zealand      7.25 %
    Iceland         10.75 %

If you look at this table for a moment, you might get an idea of what a "carry trade" is. The interest rates are different. That means that you can do the following (if you're a bank or major investor):

Borrow a ton of money -- Japanese Yen -- from Japan at 0% interest. That means you'll have to pay the money back, but you won't have to pay any interest.
Convert the money into US dollars.
Lend the money to a bank at 4.5% interest. If it's a million dollars, then you'll earn $45,000 per year in interest.
At some point, convert the money back into Japanese Yen, return the money you borrowed, and pay no interest.

So that's what a carry trade is -- it uses the differential between two different countries' interest rates to make money. All you have to do is borrow money at a low or zero interest, then lend it to someone at a high interest rate, and you make money. In the above example, you've made $45,000 without risking any of your own money. It's easy, right? =inc ww2010.h2 exchange "Big complication: Exchange rates" Well, there's a big complication, having to do with exchange rates. In the above example, you have to convert yen to dollars, and later convert dollars to yen. Those conversion rates can change, and that makes things even trickier. In this case, the exchange rate has favored the speculator. A year or two ago, the exchange rate was 105 yen per dollar. Today, the exchange rate is 116 yen per dollar. This has been great for the speculator. He borrowed a ton of Japanese yen, converted them to dollars at 105 yen per dollar, and then lent the dollars to someone at 3.5-4.5% interest. During that period, the dollar became more valuable, and the yen became less valuable, so he needed about 10% fewer dollars to get the same amount of yen as he previously had. So he made money on interest, and also made money on currency exchange. =inc ww2010.h2 iceland "Iceland króna bloodbath" Take a look at the table above, and you'll see that Iceland has the highest interest rate shown -- 10.75%. This makes Iceland a very attractive place to lend money. A speculator can borrow money in euros from a European bank at 2.25%, convert it to Iceland krónas, and lend it at 10.75%, making 8.75% per year. Many speculators have done exactly that, though here's an interesting side note: Nobody knows how much money is out there in carry trades, in Iceland banks or anywhere else. Anyway, on Wednesday, the <#stdurl http://www.fitchratings.com/ "Fitch Ratings agency"#> (along with S&P and Moody's, one of the three major international investment ratings agencies) issued a new rating on Iceland's banks, revising the country outlook for Iceland from "stable" to "negative," citing macroeconomic imbalances. (Paragraph corrected - 1-Feb-2009) According the <#stdurl http://www.icelandreview.com/icelandreview/daily_news/?cat_id=16567&ew_0_a_id=186790 "analysis released by Fitch:"#>

"[The ratings] take into account Iceland's macro-prudential risks, including rising inflation, rapid credit growth, buoyant asset prices, a steep current account deficit and escalating external indebtedness. For [KB-bank, Landsbanki and Islandsbanki] these risks are offset to some extent by the banks' large capital bases, with Tier 1 ratios of 9.4%, 11.9% and 9.9% respectively at end-2005, and by the significant geographic diversification of their loan portfolios, with foreign lending representing between around 35% and 70% of the banks' loan books at end-2005."

(By the way, does the stuff about "rapid credit growth, buoyant asset prices, a steep current account deficit and escalating external indebtedness" remind you of some other country you may have heard of -- like the United States?) The publication of Fitch's rating caused an immediate collapse in the value -- the exchange rate -- of the Iceland króna, which fell 9.3% against the dollar in just two days. This means that speculators making an 8.25% interest rate differential suddenly lost all their profit in a currency exchange rate revaluation. =inc ww2010.h2 chain "A chain reaction" The Iceland collapse <#stdurl http://news.ft.com/cms/s/70f34440-a5a4-11da-bf34-0000779e2340.html "created a chain reaction that threatened numerous emerging markets from Brazil to Indonesia."#> The reason is that many hedge funds and currency speculators suddenly lost a lot of money, forcing them to issue sell orders in other places in order to meet their payment commitments. The Brazilian real fell 3%, the South African rand more than 2%, the Indonesian rupiah and Polish zloty 1.5%, and the Mexican peso and Turkish lira 1%. "These countries may be unrelated geographically but they are not unrelated in portfolios," said Tony Norfield, global head of Foreign Exchange (FX) strategy at ABN Amro. "What starts as a trimming back of a position can turn into an avalanche." However, the panic was short-lived, and seems to have been resolved by the end of the week. Iceland, Brazil, Mexico and other countries immediately announced that they would defend their currencies either by raising interest rates further or by buying back their currency with dollars. =inc ww2010.h2 yen "Yen revaluation" Like the stock market and housing, there's a "carry trade bubble," and it's going to have to unwind in the next few months. The major source of the carry trade bubble has been Japan's 0% interest rate. This one interest rate has created huge positions in currencies around the world, possibly as much as billions of billions of dollars. All of these positions are based on the assumption of 0% interest rates to be paid back to the Bank of Japan. What happens if the Bank of Japan suddenly decides to raise its interest rates -- just as the Fed has been doing? Well, that's exactly what the Bank of Japan has indicated that it plans to start doing. This will have infinitely more impact than the little dust-up last week of the collapse of the króna. Few investors were deeply into the króna, but astronomically many more are depending on the yen interest rate. "There are several hundred billion dollars of positions in the carry trade that will be unwound as soon as they become unprofitable," said Stephen Lewis, an economist at Monument Securities, <#stdurl http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/02/24/cccredit24.xml&menuId=242&sSheet=/money/2006/02/24/ixcoms.html "quoted by The Telegraph."#> "When the Bank of Japan starts tightening we may see some spectacular effects. The world has never been through this before, so there is a high risk of mistakes." Stephen Roach, chief economist at Morgan Stanley, warns that the carry trade is itself, in all its forms, a major cause of dangerous speculative excess. "The lure of the carry trade is so compelling, it creates artificial demand for 'carryable' assets that has the potential to turn normal asset price appreciation into bubble-like proportions," he said. "History tells us that carry trades end when central bank tightening cycles begin," he said, <#stdurl http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/02/24/cccredit24.xml&menuId=242&sSheet=/money/2006/02/24/ixcoms.html "quoted by The Telegraph."#> =inc ww2010.h2 generational "Generational financial crisis cycles" From the point of view of Generational Dynamics, what we're headed for is a new 1930s style Great Depression, as we've said many times before. But this "carry trade" issue adds a new dimension to it. Generational financial crises affect the entire world economy. They occur roughly every 80 years, the length of maximum human lifespan, when the generation of people who remember the previous crisis all disappear (retire or die), all at once. The past few are Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash. What all of these financial crises have in common is that they were based on an exponentially increasing credit bubble that eventually bursts. A person who survives the horror, homelessness and starvation of a major financial crisis invariably becomes a very risk-averse adult, and makes only the most cautious financial investments. As the generation of people who lived through the last financial crisis disappear, they leave behind younger generations of people with no personal memory of the previous financial crisis. They are much more risk-seeking, and they make more and more risky investments, creating a new credit bubble, leading to a new financial crisis. For example, the Tulipomania bubble occurred in the early 1600s. Tulips were the "high tech" items of the day. By means of breeding experiments, Dutch botanists were able to produce tulips with spectacular colors. These tulips were sought by wealthy people, and by 1624, one particularly spectacular bulb sold for the cost of a small house. Prices kept going up until the market for tulip futures crashed in 1637. International financial crises are often based on whatever "high tech" means for the day. The 1857 bubble was based on railroad expansion, the 1929 crash was based on the automobile, and the 1990s bubble was based on internet technology. Each successive international financial crisis affected more and more of the world. The Tulipomania bubble affect mostly Western Europe. By 1857, all of Europe and North America were affected. The 1929 crash affected Japan and some other Asian countries. Today, the carry trade bubble means that every country in the world is going to be affected. This will be the biggest and most far-reaching financial crash the world has ever seen. =eod =// &&2 e060224 Fear of Iraqi civil war nears hysteria =data ww2010.weblog.y2006.e060224.head Fear of Iraqi civil war nears hysteria =data ww2010.weblog.y2006.e060224.keys Iraq =data ww2010.weblog.y2006.e060224.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060224.date 24-Feb-06 =data ww2010.weblog.y2006.e060224.txt1 But there is NO CHANCE WHATSOEVER of a civil war. =data ww2010.weblog.y2006.e060224.txt2 Here are typical front page headlines on newspapers around the world:

Iraq slides toward civil war
Specter of civil war in Iraq grows
Iraq starts to spin out of control in day of vengeance
Revenge squads stalk streets as war of the mosques tears country ...
Iraq on brink of religious war
Shrine bombing: Sunnis give a lesson in how to start a civil war
Mosque Attack Pushes Iraq Toward Civil War

The BBC World Service talked about civil war all day Thursday in the darkest tones. And I just heard someone on CNN International say, "In the next few days the gates of hell may open to a new civil war." As I <#inc ww2010.weblog.ref e060223 "said yesterday (see previous item, below),"#> a civil war in Iraq today is absolutely impossible. It will not happen, because Iraq is in a "generational awakening" era, just one generation past the end of the genocidal Iran/Iraq war of the 1980s. The pictures coming out of Iraq on Thursday were not of Shiites yelling "Kill the Sunnis." They were not of Sunnis yelling, "Kill the Shiites." What we've been seeing is huge masses of people -- tens of thousands of them -- demonstrating and demanding political changes. They're blaming the government and they're blaming the Americans. But they aren't looking for blood. There aren't even any signs of civil war. These huge demonstrations are typical of awakening eras. Two years ago, I wrote <#hreftext ww2010.i.sixties040501 "a lengthy article comparing Iraq today to America in the 1960s,"#> when America had its last awakening era, just one generation past the end of World War II. Let me try to explain this a different way. Suppose Ahmed, an angry young Iraqi man, tells his mom, "Mom, I'm going to fight the bad guys (Sunnis or Shiites). Allah be blessed!" Now, Mom is in her 30s or 40s. She survived the bloody Iran/Iraq war, and she still has nightmares about it. She says, "Ahmed, you're not going anywhere. I lost my father and husband in war, and you lost your father and your uncle. Your friend Mahmoud? His mother was raped repeatedly. Most of the people in our neighborhood were beaten, poisoned, killed, raped or tortured, or all of those. I need you right here, and you're going to stay here." So Ahmed stays there and there's no civil war. There's another thing that these moms know. It's terrible that the al-Askariya shrine was bombed, and that dozens of Sunni mosques were bombed, but these moms know that they're just buildings, and that they can be repaired or rebuilt. There have also been several dozen deaths, but those were at the hands of the insurgents, whom everyone increasingly dislikes. There isn't enough anger and hatred between Sunnis and Shiites because all of them are well aware that it's the insurgents -- led by Jordanian terrorist Abu Musab al-Zarqawi -- that's causing the deaths. A civil war doesn't even make sense. There's a lot of wishful thinking going on in the press these days. <#inc ww2010.weblog.ref e050331 "The BBC World Service, which seethes with anti-Americanism,"#> is only too happy to bias its reporting toward the outcome that's most unfavorable for Americans -- and for British too, by the way. And many other international news organizations are exactly the same. If they could get past their bias, even they could begin to understand why a civil war is impossible, and they wouldn't let their biases influence their reporting so much. Incidentally, let me add (in case it isn't clear) that none of this is an endorsement of Bush or any political party. In fact, as I point out on my web site all the time, all politicians compete with each other to say the dumbest things, because they're all totally oblivious to even the most obvious generational considerations. In Iraq, Iran, Palestine, China, and Europe, even the simplest generational analysis provides enormous insights that no politician of any party appears capable of understanding, with the result that mistakes in judgment and tactics keep being made, and that includes the current administration. =inc ww2010.cf.cf060209 p right On this web site, the analyses are based on Generational Dynamics. And from the point of view of Generational Dynamics, the Mideast is headed for a major regional war between Arabs and Jews, and between Pakistanis and Indians over Kashmir. All of these people are in "generational crisis" eras and the young men don't have moms telling them to stay home, so these wars will occur with certainty. Iraq may be drawn into these wars, but in a "generational awakening" era, they'll fight with little enthusiasm. =eod =// &&2 e060223 Bombing of 1200 year old Shi'ite mosque inflames Iraq =data ww2010.weblog.y2006.e060223.head Bombing of 1200 year old Shi'ite mosque inflames Iraq to the verge of massive civil war rhetoric =data ww2010.weblog.y2006.e060223.keys =data ww2010.weblog.y2006.e060223.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060223.date 23-Feb-06 =data ww2010.weblog.y2006.e060223.txt1 Shi'ites conducted over 90 revenge attacks on Sunni shrines on Wednesday, =data ww2010.weblog.y2006.e060223.txt2 after <#stdurl http://abcnews.go.com/International/wireStory?id=1650570 "insurgents detonated bombs inside the al-Askariya shrine"#> in Samarra, near Baghdad. <#inc ww2010.pic askariya.jpg right "" "Golden dome of al-Askariya shrine in Samarra, near Baghdad"#> The shrine, built in the 800s AD, contains <#stdurl http://www.almerjantour.com/islamic.php "sacred tombs and is capped by Golden Dome 68 meters wide, containing more than 72,000 gold pieces."#> The insurgent bombing left the golden dome destroyed, and the revenge attacks on Sunni mosques began almost immediately. By the end of the day more than 90 mosques lay damaged or wrecked, and at least eighteen Sunnis including three clerics, were reported murdered. There have been riots and demands for revenge. There's been talk of civil war all day long, especially by journalists and pundits. The BBC World Service has been talking about a possible civil war all day, and CNN's Wolf Blitzer used his most anxious tone of voice to talk about Iraq "on the verge of civil war." On CNN International, they called the new violence a "tipping point." As I've been saying on this web site repeatedly for three years now, there will be no civil war in Iraq because a crisis civil war is impossible. Only one generation has passed since the genocidal Iran/Iraq war of the 1980s, meaning that Iraq is in a "generational awakening" era, and any crisis war is impossible during an awakening era, similar to <#hreftext ww2010.i.sixties040501 "America's "generational awakening" period in the 1960s-70s."#> A civil war could only come 25-30 years from now, when Iraq is approaching a new "generational crisis" period. Yes, there will be some riots and demonstrations. Yes, there may be additional revenge bombings and yes, there may be some low-level violence. But the rioting and bombings and the violence will fizzle out soon, and will not spiral up into a civil war. I've made many predictions on this web site in the last three years, based on Generational Dynamics analysis, and I've bragged that I've never gotten any of these predictions wrong. I've also bragged that if you want to know what's going on in the world and what's going to happen, this is the only place in the world that actually tells you. But maybe this will be the one the proves my undoing -- maybe tomorrow we'll see that the Sunnis and Shi'ites are engaged in a new massive civil war. This would make the pundits and journalists right and me wrong, for the first time. Well, let's wait and see. Generational Dynamics predicts that there will be no Iraqi civil war, so you can be pretty certain that there won't be a civil war. =eod =// &&2 e060221 Former President Jimmy Carter says that Hamas will seek peace with Israel. =data ww2010.weblog.y2006.e060221.head Former President Jimmy Carter says that Hamas will seek peace with Israel. =data ww2010.weblog.y2006.e060221.keys Jimmy Carter =data ww2010.weblog.y2006.e060221.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060221.date 21-Feb-06 =data ww2010.weblog.y2006.e060221.txt1 In an interview on Monday on CNN, =data ww2010.weblog.y2006.e060221.txt2 Carter said that he's spoken to Palestinian Authority president Mahmoud Abbas, and he believes that Abbas wants peace and can bring peace. Carter conceded that many Hamas leaders are committed to destroying Israel, but said he's certain that the Palestinian people want real peace with Israel. Carter became nostalgiac about the peace agreement that he helped engineer between Egypt and Israel in 1978. He said that Egypt had wanted to destroy Israel, but once they saw that peace was the best solution, they signed a peace agreement that's been honored to this day. He said that the Palestinians will do the same thing. The 1978 agreement is a fresh memory to Jimmy Carter, as it is to Wolf Blitzer, the interviewer, as it is to me, in fact. I remember it well. But neither the interviewer nor interviewee thought to make the obvious point: that the 1978 peace agreement isas relevant to most Palestinians as the fall of Constantinople in 1453. Do the math. The <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html "median age"#> in the Gaza Strip is 15.6. The Palestinians are a society of children -- literally -- when you consider their ages. Do you think that they care what Jimmy Carter thinks, or what peace agreement was signed before they were born? 15.6 years ago was a couple of years into the Intifada that began in 1989. Palestinians and Israelis have been fighting ever since then, and that all that most of these kids have known for their whole lives. They just want to win. What always puzzles me is how even the simplest generational concept is never even considered by these people. For example, I discussed this with respect to the <#hreftext ww2010.i.eu050601 "rejection of the European Constitution by French and Dutch voters,"#> where it is clear that the population is split between the generation born before WW II and the generations born after. Getting back to the Mideast, you can see what's happening and why Jimmy Carter is wrong just by looking at the numbers. The older generations, who grew up during the genocidal Arab-Jewish wars of the 1940s after the state of Israel was created, do not want to have another war. But those generations are disappearing fast. The younger generations have no such hesitation. To these kids, Jimmy Carter, senior Hamas leaders, and Mahmoud Abbas are just ancient babbling dinosaurs. That's what all these news interviews overlook. Generational Dynamics predicts that the genocidal wars between the Arabs and Jews will be re-fought, and sooner rather than later. The war will engulf all the countries in the region, and will draw in the U.S. and Europe as well. =eod =// &&2 e060220 International Muslim identity group formation accelerates =data ww2010.weblog.y2006.e060220.head International "identity group" formation accelerates among Muslims worldwide since cartoon controversy =data ww2010.weblog.y2006.e060220.keys Nigeria, Indonesia, Pakistan, identity groups, cartoons =data ww2010.weblog.y2006.e060220.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060220.date 20-Feb-06 =data ww2010.weblog.y2006.e060220.txt1 From Nigeria to Indonesia, regional conflicts are turning into anti-American riots, =data ww2010.weblog.y2006.e060220.txt2 thanks to the <#inc ww2010.weblog.ref e060206 "Danish cartoon controversy that has inflamed the entire Muslim world."#>

In Nigeria, low-level violence between Muslims and Christians has been going on for decades. But on Saturday, <#stdurl http://www.allheadlinenews.com/articles/7002479491 "Nigerian Muslims protested the Danish cartoons by attacking Christians and burning churches, killing at least 15 people."#>
At least <#stdurl http://news.ft.com/cms/s/762b82d2-a17c-11da-9ca4-0000779e2340.html "10 people were killed in the Libyan city of Benghazi"#> last Friday in riots triggered when an Italian minister was deliberately provocative by wearing a T-shirt with the Danish cartoons on it.
Pakistan has long had continuing terrorist violence between Sunni and Shi'a Muslims. I wrote <#inc ww2010.weblog.ref e041008 "an article in 2004 about this terrorism."#> But on Sunday, Pakistani police had to break up a <#stdurl http://news.ft.com/cms/s/02d76a6a-a1b5-11da-9ca4-0000779e2340.html "riot by thousands protesting the Danish cartoons,"#> and arrest several hundred protesters.
Indonesia is the world's most populous Muslim nation. It's been hit by <#inc ww2010.weblog.ref e051005 "a series of terrorist bombings since 2002,"#> the most recent one on the resort island of Bali in October, 2005. Now, for the last couple of weeks, militant Muslims have protesting the Danish cartoons. On Sunday, <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2006-02-19T192645Z_01_L19108349_RTRUKOC_0_UK-RELIGION-CARTOONS.xml "more than 200 members of the militant Islamic Defenders Front pelted the U.S. embassy in Jakarta with eggs and stones."#>
In the United Kingdom, a new poll shows that <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/02/19/nsharia19.xml "40% of UK Muslims want Sharia or Muslim law introduced"#> in the country. 50% say that interracial relations are worsening, and 20% have sympathy for the "feelings and motives" of the July 7, 2005, London subway suicide bombers.

From the point of view of Generational Dynamics, this is called "identity group" formation, meaning that disparate groups in places around the world are now identifying with one another for the purpose of conflict. A year ago, an ordinary person, a "man on the street" in each of these countries might have identified himself, if asked, as "a Nigerian" or "a Pakistani" or "an Indonesian." Today, such a "man on the street" may have become inflamed by the Danish cartoon controversy and, in that case, will identify himself first as "a Muslim," part of the worldwide struggle against Christians and Jews. There's absolutely no rational reason why this kind of reaction should take place at exactly this time in history because of some cartoons published in a Danish newspaper last September. It's crazy. It's ridiculous. It makes no sense at all. But it happens. It's part of the human DNA. It's like sex. It's purely emotional. Tell my why people have sex with the wrong people, and I'll tell you why the Danish cartoons have created this controversy. On Sunday evening, before writing this article, I watched the 2004 movie Hotel Rwanda on Showtime. This movie is about the 1994 genocidal crisis war in Rwanda, where the Hutus killed almost a million Tutsis. The movie was graphic, but left unexplained how it was possible for someone to pick up a machete, murder his neighbor, dismember his body, rape his wife, and murder and dismember her. But that's what happens in "generational crisis" periods. It happened in Darfur last year and may still be happening; it happened in the Balkans in the 1990s, in Cambodia in the 1970s, and throughout Europe and Asia during World War II. And it's what we're headed for today, starting next month, next year, or shortly thereafter. =inc ww2010.cf.cf060209 p right The only thing that we don't year have a clear picture of is the scenario -- the sequence of events, shocks and surprises that will lead to the various declarations of war. The adjoining graphic shows the most dangerous regions of the world, in the sense that a regional crisis is almost certain to lead to a world war. The toppling of a country's leader or a small conflict spiraling out of control are examples of unexpected events that can lead, step by step, to a new world war. Here's one particular thing to watch for: President Bush will be paying a state visit to President Pervez Musharraf of Pakistan, ten days from now. Radical Islamists, which have been stirring up pubic fury in Pakistan for months, are planning to use the visit <#stdurl http://news.independent.co.uk/world/asia/article346493.ece "to stir up massive street protests throughout the country, in the hope of unseating Musharraf."#> If successful, the détente that Pakistan's President Musharraf and India's Prime Minister Manmohan Singh have engineered over the disputed Kashmir region will probably become quickly undone. Another place to watch closely is the Palestinian region. With Hamas now in control, the Americans and the Europeans are refusing to provide aid, and Israel is refusing to pay the Palestinians the taxes it's collected on their behalf. Since the Palestinian Authority has little money to pay salaries, the region could become very unstable very quickly. As usual, Generational Dynamics tells you what your destination is, but doesn't tell you how you'll get there. We know that we're headed for a "clash of civilizations" world war, but we have no way of knowing which regional conflict will explode first. We may know soon. =eod =// &&2 e060218 Chaos grips Israel, Palestine =data ww2010.weblog.y2006.e060218.head International political chaos grips Israel, Palestine, and everyone else, as Hamas takes over on Saturday =data ww2010.weblog.y2006.e060218.keys Hamas =data ww2010.weblog.y2006.e060218.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060218.date 18-Feb-06 =data ww2010.weblog.y2006.e060218.txt1 No one, not even Hamas itself, has any idea what to do next, except to let events play out as they will. =data ww2010.weblog.y2006.e060218.txt2 Hamas takes control of the Palestinian government today, after <#inc ww2010.weblog.ref e060127 "winning a parliamentary majority in the elections"#> three weeks ago. But just how much control should they take? Should they take as much power as possible from current Palestinian president Mahmous Abbas, or should they leave Abbas in charge, to keep the West happy? It's a big deal, because it's all about money. America, which has <#stdurl http://www.alertnet.org/thenews/newsdesk/N17386031.htm "given $1.5 billion in aid to Palestinians"#> in the last decade, has announced that it will not give aid to a Hamas government, since Hamas is a terrorist group. In fact, $50 million in aid already given to the Palestinians will be returned to the US for this reason. The European Union, which has given even more money than America, has a similar policy. And Israel, which collects customs duties and sales taxes as a service for the Palestinian Authority, and repays the Palestinians about $16 million per month, has said it will stop passing that money through. Indeed, Israel is <#stdurl http://www.timesonline.co.uk/article/0,,251-2046459,00.html "threatening economic war against the Palestinians,"#> by refusing to pay money and by closing borders. In the past, Hamas has claimed credit for numerous suicide bombings directed against Israelis. “Is anyone prepared to give us a guarantee that such money won’t be used in suicide bombings?” says an Israeli spokesman. With an election coming in a few weeks, Israeli polticians have no idea what to do. No Israeli politician can be seen to give into Hamas, so the three candidates are all taking a tough line. But they can't take too tough a line, because they have to leave room for compromise. The Americans and Europeans have the same dilemma. There's no way that anyone can provide aid to a Hamas that might use the money for weapons to be used against Israel, but there has to be room for compromise. In order to break this logjam, Hamas has to rescind its harsh positions. Hamas has never agreed to peace with Israel, and hasn't even agreed to recognize Israel as a nation. Yasser Arafat has recognized Israel in the past, but Hamas is threatening to reverse that recognition. But if Hamas tries to change its positions, then it will piss off their base. Remember that the Palestinians are a society of children -- with <#stdurl http://www.cia.gov/cia/publications/factbook/fields/2177.html "a median age"#> in the Gaza Strip is 15.6. These kids will not be happy if Hamas decides to sign a peace deal with Israel. But the Palestinian Authority is broke. They have thousands of employees to pay, as well as numerous other projects, and no money to pay them with. If Israels fee repayment and America's aid and Europe's aid are all cut off, the Palestinians will completely destablize and fall into civil war. When the "Mideast Peace Roadmap" was announced in May, 2003, the world thought that we were getting close. Do you remember what the "Roadmap" said? It said that there would be side-by-side Palestinian and Israeli states by 2005. That was last year, in case you've lost track. It was on May 1, 2003, that I first wrote about the Mideast situation on this web site, and <#hreftext ww2010.i.may01 "explained what was really going to happen."#> I explained that Yasser Arafat and Ariel Sharon may hate each other, but they're both committed to avoiding a new crisis war in the Mideast. I explained that Generational Dynamics predicts that the region was headed for a new crisis war, with absolute certainty, like the massive bloodshed that occurred in 1948 and 1949 when the state of Israel was created out of a partitioned Palestine. I explained that when Arafat and Sharon were gone, then an important generational change will have occurred, and the Mideast will descend quickly info further chaos, with total war not far off. Everybody I told those predicts to disagreed with me. Some called me an idiot, and others just wished me luck. But since that time, almost three years ago, things have gone exactly as I predicted. Every other pundit and analyst, as far as I know, has gotten everything wrong on the Mideast. This is the only web site that's gotten everything right, and that's because it's based on Generational Dynamics. It's now 57 years since the end of the genocidal war between Arabs and Jews of the late 1940s. That war was so horrible that anyone who lived through it vowed that they would never let it happen again -- that's the basis for the Generational Dynamics prediction that it's only now that a new genocidal war will occur, since the people who lived through that war are now all disappearing (retiring or dying), all at once. In the meantime, the Israelis, the Palestinians, the Americans and the Europeans are all frozen in place, with no idea what to do next. Hamas needs the money, but can't make the necessary concessions. Undoubtedly there'll be something worked out -- perhaps the money will go to non-government organizations according to some formula. But in the meantime the world has no idea what to do next, for fear that some path will lead to know. What Generational Dynamics tells us is that all paths lead to war. =eod =// &&2 e060217 Bernanke's testimony to Congress =data ww2010.weblog.y2006.e060217.head New Fed Chairman Ben Bernanke gives predictable upbeat testimony to Congress =data ww2010.weblog.y2006.e060217.keys Ben Bernanke =data ww2010.weblog.y2006.e060217.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060217.date 17-Feb-06 =data ww2010.weblog.y2006.e060217.txt1 Pundits are smiling today, happy that they can understand "plain-speaking" Bernanke. =data ww2010.weblog.y2006.e060217.txt2 One pundit, a chief economist interviewed by the BBC on Wednesday, said that "Bernanke has exploded the 'Greenspan myth.'" According to the pundit, Greenspan defined the myth himself by saying, "If I speak plainly then I run the risk of inciting a financial panic. So it's in everyone's interest that no one understand a word that I say." The pundit added that Bernanke gave exactly the same message that Greenspan used to give, but in clear English, and the markets didn't panic. The problem is that Bernanke gave quite a different message than Greenspan used to give. Bernanke gave his standard "What? Me worry?" speech, and Greenspan, in the last year or two, was giving speeches quite a bit of alarm, as I've described frequently on this web site, and summarized in my essay, <#hreftext ww2010.i.051029bernanke ""Ben S. Bernanke: The man without agony.""#> In <#stdurl http://www.federalreserve.gov/boarddocs/hh/2006/february/testimony.htm "his testimony to Congress on Wednesday,"#> Bernanke said that the economy was performing "impressively," adding that the "economy achieved these gains despite some significant obstacles. Energy prices rose substantially yet again, in response to increasing global demand, hurricane-related disruptions to production, and concerns about the adequacy and reliability of supply." =inc ww2010.h2 inflation "Inflationary worries" Bernanke's major focus were his worries about inflation, and that's a generational issue. Bernanke was born in 1952 and hasn't seen any serious national economic problems except inflation in the 1970s. Since that's the only problem he's ever seen, that's all he thinks he has to worry about. In his testimony, he expressed a fear of increased inflation, thanks to two problems. One problem is "higher energy prices." The other problem is that, "with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path, leading ultimately ... to further upward pressure on inflation." I really have to laugh. This second reason is totally meaningless fluff, but he couldn't think of any other reasons besides high energy problems. <#inc ww2010.pic cpi.gif right "" "Consumer price index (CPI) from 1870 to present, with an exponential growth trend line. The CPI is 185 in 2003, and 2010 has a trend value of 129."#> From the point of view of Generational Dynamics, we've been saying for three years that we're in a long term deflationary period, and that prices will be falling by 30% in the next few years. This assessment is based on the adjoining graph of CPI from 1870 to the present, along with an exponential growth trend. What most people don't seem to understand is that almost all growth trend values must maintain the long term trend; this is <#inc ww2010.weblog.ref e060122 "the law of "Mean Reversion,""#> that we've discussed before. Since the CPI is well above the trend line today, it has to start falling soon, and stay below the trend line long enough to balance things out. So the kind of inflationary pressures that Bernanke is talking about simply don't exist. Remember that we've had near-zero interest rates for most of the last five years, and that oil prices have doubled. Those are huge stimuli, and they should have pushed inflation up above 10%, where it was in the 1970s with far less stimulus. Instead, inflation has remained very close to zero. In Wednesday's testimony, Bernanke himself predicted that inflation should be 2% for all of 2006, basing his prediction on the fact that he implies that the Fed is going to continue raising interest rates. Unfortunately Bernanke, who was an Economics Professor at Princeton, apparently can't grasp something as simple as the cyclical nature of inflation, based on generational changes, and that the Fed really has very little influence over the inflation rate, except temporarily. Bernanke's testimony does give a hint of why inflation has stayed so low:

"The relatively benign performance of core inflation despite the steep increases in energy prices can be attributed to several factors. Over the past few decades, the U.S. economy has become significantly less energy intensive. Also, rapid advances in productivity as well as increases in nominal wages and salaries that, on balance, have been moderate have restrained unit labor costs in recent years."

Whether the U.S. is significantly less energy intensive is arguable, but his point about labor costs is an interesting one. Why have labor costs remained low? Labor costs are influenced not by the Fed but by the law of supply and demand. Inflation was high in the 1970s because labor costs were high, because labor was in high demand. Labor was in high demand because the Great Depression of the 1930s had forced almost all businesses into bankruptcy, forcing the creation of news businesses that reached their peak growth in the 1960s and 1970s, causing a high rate of labor demand, causing a high rate of inflation. The Fed had nothing to do with it. Today, those same businesses are encrusted with bureaucracy. This ties together with the <#inc ww2010.weblog.ref e060214b "the Katrina report that I discussed a couple of days ago."#> The sloth that the government showed during Katrina is the same sloth that businesses are exhibiting as well. Millions of jobs have been outsourced to China and India, leaving behind an American work force that places job security above everything else. So businesses "make do" with the people that they have. This increases productivity, as Bernanke mentions, but it also reduces the demand for labor, which keeps labor costs down, which keeps inflation low. Once again the Fed has absolutely nothing to do with all this, although this concept appears to be complete foreign to Professor Bernanke, as well as most analysts, journalists and pundits. =inc ww2010.h2 confusion "Other confusions" Professor Bernanke repeated some of the silly things in speeches that I've previously commented on on this web site. He repeated "a hypothesis I offered last year":

"that, in recent years, an excess of desired global saving over the quantity of global investment opportunities that pay historically normal returns has forced down the real interest rate prevailing in global capital markets."

This refers to his claim that America's astronomically high public debt can be blamed on a <#inc ww2010.weblog.ref e050314 ""global savings glut" in other countries."#> This is so silly that he should be embarrassed to say it. <#inc ww2010.pic cashlia.gif left "" "Household cash and liabilities, 1945 to present (Source: Contrary Investor)"#> The adjoining graph shows how public debt has been increasing exponentially since 1945, and really took off in the 1990s, at exactly the same time that the stock market bubble occurred. They both happened at that time, and had the same cause: The risk=averse generation of senior managers that had grown up during the Great Depression all disappeared (retired or died) all at once in the 1990s, and were replaced by the risk-seeking Boomer generation, with no personal memory of the Depression. Once again, this has nothing to do with anything the Fed does, and blaming it on a "global savings glut" in other countries is just a silly conceit. =inc ww2010.h2 agony "The man without agony" This brings us back to how plain-spoken he is. He's plain spoken because everything is simple for him. In Bernanke's "What? Me worry?" world, there are no bubbles, and panics are no problem at all, as I described in <#hreftext ww2010.i.051029bernanke ""Ben S. Bernanke: The man without agony.""#> It's the same for everyone in the Boomer generation -- every problem is always someone else's fault and responsibility. Alan Greenspan, born in 1926, lived through the Depression and knows how complicated the world really is. He knows that there are more dangers besides inflation, which is why <#inc ww2010.weblog.ref e050830 "Greenspan's "swan song" Fed speech"#> warned about the stock market and housing bubbles, that "history has not dealt kindly with the aftermath of protracted periods of low risk premiums.” There's nothing like that kind of stern warning in any of Bernanke's speeches. The reason that these expert economists, analysts and pundits that always get quoted on tv didn't understand what Greenspan was saying was because either they don't understand macroeconomics or didn't want to listen to what Greenspan was saying. "Plain-spoken" Bernanke will please these experts and pundits because it takes place in his academic world where the only danger is a little inflation. It's a shame the real world isn't like that. As I've been saying since 2002, Generational Dynamics predicts that America is entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range by the 2007 time frame. I certainly have no reason to change this prediction now, especially with public debt and the trade deficit continuing to grow uncontrollably and exponentially, so it may happen a lot sooner than expected. =eod =// &&2 e060214b Katrina report finds massive incompetence at all levels =data ww2010.weblog.y2006.e060214b.head Katrina report finds massive incompetence at all levels =data ww2010.weblog.y2006.e060214b.keys Hurricane Katrina =data ww2010.weblog.y2006.e060214b.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060214b.date 14-Feb-06 =data ww2010.weblog.y2006.e060214b.txt1 This report is really depressing because it shows how far and fast we're sinking. =data ww2010.weblog.y2006.e060214b.txt2 "It was like the entire government was mired in mud and couldn't move," commented one television pundit today. That's in reference to a leaked Congressional report on the government's response to Hurricane Katrina. The actual report will be released on Wednesday. The reported <#stdurl http://www.iht.com/articles/2006/02/13/news/katrina.php "criticized the Bush administration and the Dept. of Homeland Security,"#> but also laid plenty of blame on Governor Kathleen Babineaux Blanco of Louisiana and Mayor C. Ray Nagin of New Orleans. Since it's a Congressional report, you can bet it won't criticize any Congressmen, but in fact a Senator or Representative from Louisiana or Mississippi might also have taken a leadership position, but didn't. <#inc ww2010.pic g060213.jpg right "" "Over 10,000 FEMA mobile homes sit unused in Hope, Arkansas (Source: KTHV)"#> One of most amazing sights today are the <#stdurl http://www.firstcoastnews.com/news/usworld/news-article.aspx?storyid=51378 "over 10,000 mobile homes, ordered by FEMA,"#> sitting in a cow pasture at the airport near Hope, Arkansas. However, Federal regulations <#stdurl http://www.cnn.com/CNN/Programs/anderson.cooper.360/blog/2006/02/katrina-mobile-homes-immobile-in.html "forbid the use of these mobile homes on a flood plain,"#> which makes them useless in southern Louisiana. Why did FEMA order trailers it can't use? What happened was this: All these government officials were standing around, waiting for someone else to do something. They took no initiative themselves, because they were waiting for someone else to take the initiative. From the point of view of Generational Dynamics, here's what's happening: As a man gets older, he's supposed to acquire more and more wisdom, so that he can guide younger generations away from danger. But that means that the younger generations don't get the dangerous experiences that let them gather experience, so that they when they become older they remain stupid, not wise. And that's what's happened. The generations of people that fought or grew up during World War II learned that things don't take care of themselves, that someone has to take the lead and do something, or else follow the lead of someone else who's doing something. Those generations guided the country away from danger all through the decades since WW II, until the late 1990s, when they all disappeared (retired or died), all at once. Today, the country is led by the Baby Boomer generation, who have never accomplished anything but argue politics, and by Generation X, who have never accomplished anything except to hate the Boomers. So, the bad news is that the country is increasingly incompetent, increasingly sliding into the mud of paralysis. The good news is that our major enemies, like China, are going through exactly the same process, and are becoming as incompetent as we are. This is what always happens when a nation enters a crisis war. Recall that when Japan bombed Pearl Harbor in 1941, they wiped out America's entire Pacific fleet. Our ENTIRE Pacific Fleet -- in a single day. How could that have happened? Because the same kinds of incompetent generations (they were known as the "Missionary Generation" and the "Lost Generation", instead of "Boomer" and "Generation X," respectively) were running things, and they were just too stupid to protect Pearl Harbor, even though many people in government were expecting an attack by Japan. But instead of protecting the harbor, they simply sat around arguing about politics and hating each other. We won WW II against Japan because we were a much larger country. It took us a good six months to get off our asses and start fighting back, but because of our enormous size, we were able to use that time. Things may not go so well with the coming war with China. China will have (or already has) nuclear missiles that can be launched from their submarines to strike almost any American city. In fact, it was last year in July that General Zhu Chenghu, a top-level officer in China's People's Liberation Army (PLA) <#inc ww2010.weblog.ref e050716 "threatened America with nuclear war if America interfered with Taiwan."#> Speaking to a group of foreign journalists, General Zhu said,

This is the kind of war scenario that America is unprepared to handle, but the Katrina disaster is giving Americans a small taste of what to expect. And unfortunately, as more and more Boomers and Gen-Xers come to power, the country will be getting less and less prepared, less and less incompetent. What all this means for you, dear Reader, is that you will be entirely on your own. It will be up to you to protect, feed and shelter yourself and your family. Do not expect any government aid, because you'll get none. Do not expect welfare checks, or Social Security checks, or pension checks, because you'll receive none. Do not expect neighbors or politicians to help you, because they won't. You'll only have what you've stashed away. And be prepared for looters and maurading gangs, including gangs of former paramilitaries. If you're into guns, then be prepared to use one to defend yourself and your family. That's where we're headed. But, as I said, there is good news. China is not only becoming as incompetent as we are, it's becoming increasingly unstable and is <#hreftext ww2010.i.china050116 "approaching a massive civil war as its bubble economy unravels."#> That won't stop them from getting off a few nuclear missiles to American cities, but at least they'll be preoccupied with their own troubles. That's the good news. =eod =// &&2 e060214 UN: Bird flu virus "only two mutations away" from pandemic =data ww2010.weblog.y2006.e060214.head UN: Bird flu virus "only two mutations away" from global pandemic =data ww2010.weblog.y2006.e060214.keys Bird flu =data ww2010.weblog.y2006.e060214.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060214.date 14-Feb-06 =data ww2010.weblog.y2006.e060214.txt1 "I wake up every morning thinking that today could be the day =data ww2010.weblog.y2006.e060214.txt2 that I will see a report about a strange case of bird flu among humans," <#stdurl http://www.abc.net.au/news/newsitems/200602/s1567776.htm "said Dr David Nabarro, who heads the UN drive to contain the virus,"#> to a radio audience. Dr. Nabarro said that everyone should prepare for a worldwide pandemic "as if this will happen tomorrow." In <#stdurl http://www.chron.com/disp/story.mpl/ap/world/3652271.html "a separate interview,"#> Dr. Nabarro explained in detail how the recent spread of bird flu into Turkey, the Mideast, Europe and Africa greatly increases the chance of an immediate human pandemic. "Unfortunately, we cannot tell when the mutation might happen, or where it might happen, or how unpleasant the mutant virus will turn out to be," he said in an interview. "Nevertheless, we must remain on high alert for the possibility of sustained human-to-human virus transmission and of a pandemic starting at any time." =eod =// &&2 e060213 US trade deficit continued exponential increase in 2005 =data ww2010.weblog.y2006.e060213.head US trade deficit continued exponential increase in 2005 =data ww2010.weblog.y2006.e060213.keys Trade deficit =data ww2010.weblog.y2006.e060213.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060213.date 13-Feb-06 =data ww2010.weblog.y2006.e060213.txt1 The trade deficit reached the fourth record high in four consecutive years. =data ww2010.weblog.y2006.e060213.txt2 The <#stdurl http://www.nytimes.com/2006/02/11/business/11trade.html?hp&ex=1139634000&en=6780bada7ffd5320&ei=5094&partner=homepage "article in the New York Times"#> has a headline that reads, "U.S. Trade Deficit Sets Record, With China and Oil the Causes." Well, those are interesting causes. Oil can't really be the cause, because it doesn't explain why the trade deficit has been going up for years, including years when oil was much cheaper. Blaming China is interesting, because that makes it China's fault that we're spending so much money on Chinese goods. I guess the Times has completely bought into Fed Chairman Ben Bernanke's <#inc ww2010.weblog.ref e050314 "claim that America's debt is caused by a "global savings glut.""#> If only those darn other countries would stop their profligate habits of saving so much money, America wouldn't be so much in debt. <#inc ww2010.pic g060212.gif right "" "Imports and exports (Source: Dept. of Commerce)"#> The adjoining diagram from the <#stdurl http://www.bea.gov/bea/newsrelarchive/2006/trad1205.htm "Bureau of Economic Research press release"#> shows what's been going on. America's imports have been increasing at about 12% per year, while exports have been growing at a smaller 10% per year. So the trade deficit, which equals the exports minus the imports, continues to grow exponentially. From the point of view of Generational Dynamics, it doesn't make sense to blame the trade deficit on "oil" or "China." Generational Dynamics is the study of changes in behaviors and attitudes of large masses of people as generations change. The trade deficit has been growing exponentially because it's been growing exponentially for decades. <#inc ww2010.pic cashlia.gif left "" "Household cash and liabilities, 1945 to present (Source: Contrary Investor)"#> The adjoining graph shows what's happening quite vividly. People who lived through or grew up during the Great Depression of the 1930s spent their entire lives in fear of it happening again. They spent their lives as careful, risk-averse people who were determined never to risk bankruptcy, homelessness and starvation again, as happened so widely during the 1930s. For that reason, they carefully saved money, and they made sure that they were never seriously in debt. That's why "Household cash" (blue line in the above graph) was always greater than "Household liabilities" (red line). By the 1990s, the people in the last generation that had grown up during the Great Depression all disappeared (retired or died) all at once. The Baby Boomer generation that took charge had no fear of bankruptcy, homelessness and starvation, because they'd never seen it with their own eyes, and so the large masses of people became, on the average, much more risk-seeking than risk-averse. Thus, household liabilities began to exceed household cash in the late 1990s. That was exactly the time that the stock market bubble occurred, and for the same reason. The generational change that caused households to go into debt also caused investors to make much riskier investments. The stock market today is still <#hreftext ww2010.i.050711eleven "overpriced by a factor of over 220%,"#> making it highly vulnerable to a panic. Today, household debt is increasing exponentially, just like the national trade deficit. These trends cannot now be stopped, until a major worldwide financial crisis forces them to stop. As I've been saying since 2002, Generational Dynamics predicts that America is entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range by the 2007 time frame. I certainly have no reason to change this prediction now, especially with public debt and the trade deficit continuing to grow uncontrollably and exponentially, so it may happen a lot sooner than expected. =eod =// &&2 e060210 Hamas victory and cartoon controversy significantly affect chances of Mideast war =data ww2010.weblog.y2006.e060210.head Hamas victory and cartoon controversy significantly affect chances of Mideast war =data ww2010.weblog.y2006.e060210.keys Hamas, Mideast, cartoon =data ww2010.weblog.y2006.e060210.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060210.date 10-Feb-06 =data ww2010.weblog.y2006.e060210.txt1 It's time to change to the world conflict risk graphic. =data ww2010.weblog.y2006.e060210.txt2 The world has been changing rapidly in the last few months -- much more quickly than before. =inc ww2010.cf.cf050530 p right The graphic on the right, which I first posted in May, 2005, represents my view of where the greatest dangers are in the world. I once wrote an article on <#hreftext ww2010.i.danger041120 "The Six Most Dangerous Regions of the World,"#> so chosen because a regional war in any one of these regions will trigger a world war. The graphic lists those reasons, and I've added a financial crisis and a bird flu pandemic as two additional crises that could trigger a world war. Generational Dynamics predicts that all of these crises (with the possible exception of a bird flu pandemic, about which Generational Dynamics has nothing to say) will occur in the context of a new world war with near mathematical certainty. However, Generational Dynamics only tells you for sure what your destination is - not how you'll get there. The conflict risk graphic is not a firm prediction; it highlights my opinion about which crises are more likely to occur first. Here's the new modified graphic: =inc ww2010.cf.cf060209 p center We've made three changes:

"Arab Israeli" has changed from <#inc ww2010.cf.cflgif 2#> (2=Medium risk) to <#inc ww2010.cf.cflgif 3#> (3=High). In the past, Palestinian Authority president Yasser Arafat and Israeli prime minister Ariel Sharon <#hreftext ww2010.i.may01 "worked together to prevent another major war,"#> both having lived though the genocidal Arab-Israeli wars of the 1940s that occurred when Palestine was partitioned and the state of Israel was created. However, a lot has happened since then:
- Yasser Arafat died, leaving behind Mahmoud Abbas, a well-meaning but weak leader of the Palestinians.
- An important generational change has occurred. Both Arafat and Sharon are gone, and the Palestinians is literally a society of children - the average age in Gaza is 15.6.
- Terrorist group Hamas has been elected as the leading party. They have repudiated Arafat's recognition of Israel, and have not renounced suicide bombings. The children are, effectively in charge.
- $1.7 billion of Western aid to the Palestinians is now in doubt. That aid is all that's prevented a Palestinian civil war, so far.
- Iran's President Mahmoud Ahmadinejad has evidently <#inc ww2010.weblog.ref e060116b "adopted a policy of intentional Israeli/Palestinian provocation,"#> in order to provoke a war and gain hegemony over the entire region.
- The <#inc ww2010.weblog.ref e060206 "Danish cartoon controversy has inflamed the Palestinians,"#> along with the rest of the Muslim world.
Generational Dynamics predicts, with near mathematical certainty, that the Arabs and Jews are headed for a new genocidal war that will encompass all the countries in the entire region. The region has been continually sliding in the that direction, and now the possibility of war within six months has to be considered a significant possibility.
"Kashmir" has changed from <#inc ww2010.cf.cflgif 1#> (1=Low risk) to <#inc ww2010.cf.cflgif 2#> (2=Med). Pakistan's President Pervez Musharraf and India's Prime Minister Manmohan Singh have engineered a remarkable Détente that significantly eased tensions over the Kashmir dispute. However, the Danish cartoon controversy has raised tensions in Kashmir as it has throughout the rest of the Muslim world, including the Muslims in India itself.
"North Korea" has changed from <#inc ww2010.cf.cflgif 3#> (3=High risk) to <#inc ww2010.cf.cflgif 2#> (2=Med). North Korea has been openly planning for war for at least a couple of years, and is developing nuclear weapons. However, I've gradually come to believe that North Korea will not do anything without coordinating it with China. As for China itself, there's no question that it's planning a major war with America, and that it's actively preparing for years with huge annual expenditures for its war machine. Initial objectives will be reunification of Taiwan with the mainland, the destruction of Japan, and control of the Pacific and Indian Ocean sea lanes. However, there's not yet any overt signs that this will happen within the next six months. In addition, from a generational point of view, Chinese President Hu Jintao was born in 1942, and so is in the risk-averse, conciliatory generation that grew up during the last crisis war, the genocidal civil war between forces led by Mao Zedong and Chiang Kai-shek that ended in 1949 with Chiang's flight to Taiwan. For those reasons, I'm leaving china at the <#inc ww2010.cf.cflgif 2#> (2=Med) risk level, subject to the observation that any major worldwide crisis, including a bird flu or financial crisis, could prompt an immediate move to <#inc ww2010.cf.cflgif 3#> (3=High).

Here's the long form graphic: =inc ww2010.cf.cf060209 f center =eod =// &&2 e060209 Bird flu spreading through western Africa =data ww2010.weblog.y2006.e060209.head Bird flu spreading through western Africa =data ww2010.weblog.y2006.e060209.keys Nigeria, bird flu =data ww2010.weblog.y2006.e060209.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060209.date 9-Feb-06 =data ww2010.weblog.y2006.e060209.txt1 This week's Nigeria announcement clears up a mystery. =data ww2010.weblog.y2006.e060209.txt2 Last week, in <#inc ww2010.weblog.ref e060203 "an article I wrote on bird flu in Northern Iraq,"#> I quoted a <#stdurl http://www.fao.org/newsroom/en/news/2006/1000215/index.html "a UN FAO press release"#> that warned that bird flu "could be further spread by migratory birds particularly coming from Africa in the spring." This was somewhat mysterious, since no one had announced a bird flu finding in Africa, and seemed to imply that FAO knew of bird flu but wasn't admitting it. Well, now we know. This week's <#stdurl http://allafrica.com/stories/200602090074.html "announcement that bird flu has been confirmed in Nigeria,"#> based on samples taken on January 10, shows that FAO officials did, in fact, know that this announcement was coming. Furthermore, since the confirmation is based on samples taken a month ago, there has already been several weeks -- plenty of time -- for the virus to spread much farther. Indeed there are already <#stdurl http://www.alertnet.org/thenews/newsdesk/L09218784.htm "unexplained deaths of large numbers of birds in northern Nigeria,"#> and in other regions of western Africa. As far as Europe is concerned, it's been found in Greece, Cyprus, Bulgaria, and Roumania, and <#inc ww2010.weblog.ref e060112 "it's endemic and firmly established in Turkey."#> Long-time readers of this web site will recall <#inc ww2010.weblog.ref e050707 "a report from July of last year"#> that bird flu had infected birds at Lake Qinghaihu, a huge lake in mid-China that served as an international meeting point and breeding ground for migratory birds, and that from there, bird flu was poised to spread around the world. That appears to have happened for much of Asia, Europe, and now Africa. There has been no H5H1 in North America so far, but that may happen in the the spring as birds migrate from Asia, across the Bering Straits, into Alaska. American and Canandian officials are continually conducting tests. An <#stdurl http://www.recombinomics.com/News/02080604/H5N1_Nigeria_Qinghai.html "analysis on Henry Niman's Recombinomics web site"#> shows that the H5N1 strain that's reached the Mideast and Africa originated in Lake Qinghaihu. Furthermore, while spreading around Turkey, the virus mutated slightly, picking up the "S227N polymorphism." This gives it the ability to infect humans a little more easily than before, through physical contact with an already infected bird or human. So far as is known, no mutation has yet occurred anywhere that would permit easy human to human transmission, such as happens with the regular human flu. However, since it takes several weeks to find, test, and report results of new H5N1 infections, especially in remote areas of the world, we many not even know of such a mutation until it's already begun to spread rapidly around the world. =eod =// &&2 e060206 Cartoon controversy explodes into worldwide confrontations between Muslims and Westerners =data ww2010.weblog.y2006.e060206.head Cartoon controversy explodes into worldwide confrontations between Muslims and Westerners =data ww2010.weblog.y2006.e060206.keys Denmark, cartoons =data ww2010.weblog.y2006.e060206.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060206.date 6-Feb-06 =data ww2010.weblog.y2006.e060206.txt1 Muslims around the world are electrified and outraged by the publication =data ww2010.weblog.y2006.e060206.txt2 of 12 cartoons depicting the prophet Mohammed. In one of them, Mohammed is wearing a turban shaped like a bomb with its fuse lit. In another, Mohammed is telling suicide bombers to slow down, saying, "Stop, stop, we're running out of virgins." The 12 cartoons first appeared in Denmark’s <#stdurl http://epaper.jp.dk/30-09-2005/demo/JP_04-03.html "Morgenavisen Jyllands-Posten daily"#> in September, but the outrage only began to take hold in the last couple of weeks. Muslim anger especially increased last week when a number of European newspapers in France, Germany, Italy, and Spain reprinted the cartoons, to express solidarity with Jyllands-Posten. On Saturday, a <#stdurl http://www.stuff.co.nz/stuff/0,2106,3561502a12,00.html "New Zealand newspaper reprinted the cartoons."#> Muslims <#stdurl http://news.bbc.co.uk/2/hi/south_asia/4684652.stm "around the world have retaliated, with demonstrations, with boycotts, and sometimes with violence."#> Uncontrolled mobs in Syria and Lebanon attacked the Danish and Norwegian embassies. Five people were killed in Afghanistan, as was a 14-year-old boy in Somalia. Rallies have also taken place in India, Thailand, Indonesia, Iran and Gaza and other countries. Even <#stdurl http://www.alertnet.org/thenews/newsdesk/L06490153.htm "far-away Chechnya has banned Danish humanitarian groups."#> There's now little doubt that the cartoon controversy is going to be a continuing source of Muslim anger for a long time to come. It's hard to understand why this "trivial" incident seems to be getting blown out of proportion, and so to explain what's going on, I'll need to put the incident in the context of a more complete theoretical description from Generational Dynamics. The following paragraphs summarize the process that's occurring:

Suppose an island has two species of animals, A and B, which compete with each other for food on an island. Suppose that species A has some advantage -- it's stronger or taller, for example -- so that A gets more food than B. As populations of both species grow, members of B will find less and less food to eat, and they'll quietly starve to death. In time, B will become extinct.
Now suppose that A and B are two tribes of humans. Human beings have intelligence -- something that animals don't have. Intelligent human beings do not die quietly, and tribes do not go extinct quietly. Instead, they figure out what's going on and they go to war. There's no choice about this, because there's not enough food for everyone, as population grows. There must be a genocidal war to reduce the population.
Even if A and B are pretty much identical, speak the same language, have friendly relations, intermarry, and so forth, eventually food will become scarce as population grows, and there will be more and more poverty. They'll form "identity groups" in anticipation of the coming confrontation. They must do this, because you can't have a war unless you have an enemy. They might form identity groups based on where they live, or based on some slight differences in skin color, for example. If there are no other differences then they'll make something up: they'll develop competing religions, and form identity groups based on religious differences. But they will always form hostile identity groups.
A and B will look for reasons to dislike each other. A will blame B for hunting in A's forests, and B will blame A for being offensive or for raping B's women. There will be a series of shocks, surprises and confrontations. Diplomacy and politics can hold war off for a while, but both sides feel instinctively that their existence and their way of life are at stake. Positions will harden, and patience will decrease.
Eventually a small confrontation between the two tribes will spiral out of control into full scale war. What Generational Dynamics has found is that these genocidal crisis wars tend to be cyclic, occurring every 70-90 years or so, the length of a human lifetime.

In order to understand the remarkable reaction to the Mohammed cartoons, note the sentence above, "There will be a series of shocks, surprises and confrontations." That's what's going on now. The cartoon controversy might have come to nothing at another point in time, but it appears to have come at exactly the right time, a time when anxiety about poverty and powerlessness in the Muslim world is at just the right level, perhaps at a kind of "tipping point." The cartoon controversy is a kind of catalyst that was needed at this time in history, and if it hadn't happened then something else would have served as a catalyst. Let's compare this to an event from another era, the Boston Tea Party, that preceded the American Revolutionary War. A financial crisis in the English banking system in 1772 was disastrous to colonial businesses, especially in the Northeast, and many were forced into bankruptcy against their will. So when the English Parliament passed a new tea tax in May, 1773, the colonists were infuriated and radicalized, and in December 1773, a group of Boston activists dumped 342 casks of English tea into Boston Harbor. At any other time in history, this might have been considered an expensive prank. The tea was ruined, but it could be easily replaced, and no one was hurt. But at that moment in history, it filled a need. This trivial, childish prank, the Boston Tea Party, became world famous. It was so electrifying at the time that it surprised and shocked both the colonies and England. After that, one provocation after another on both sides finally led to war within two years. There's no way to predict when such things will happen - when a trivial incident or a silly squabble will cause a major reaction way out of proportion to the original incident. But that's what happened with the Boston Tea Party, and that seems to be what's happening with the Mohammed cartoons. Even if the worldwide demonstrations calm down in the next few days, these cartoons will be used by radical Muslims to continue to inflame Muslims for months to come. Of course, not all the shocks and surprises leading to war are trivial. We've already seen several -- the 9/11 attacks, the retaliatory wars in Afghanistan and Iraq, and the terrorist attacks in Bali, London and Madrid are shocks that have occurred before now, and were much more than trivial. As I've been saying on this web site since 2002, the world is headed for a new "clash of civilizations" world war, with almost mathematical certainty. The chances are that 2 billion people or more will be killed in this war, based on my computations of population versus food supply. The world will approach this war through a series of shocks, surprises and confrontations that can't be predicted in advance. However, we can be fairly certain now that the Mohammed cartoon controvery will turn out to be an important milestone in the development of this world war, and will be considered an important historical event. =eod =// &&2 e060205 Worker productivity plummets as corporations hire =data ww2010.weblog.y2006.e060205.head Worker productivity plummets as corporations do more hiring =data ww2010.weblog.y2006.e060205.keys Unemployment rate, worker productivity =data ww2010.weblog.y2006.e060205.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060205.date 5-Feb-06 =data ww2010.weblog.y2006.e060205.txt1 After four years of boosting earnings by not hiring, =data ww2010.weblog.y2006.e060205.txt2 companies did enough hiring in December to <#stdurl http://www.boston.com/business/articles/2006/02/04/jobless_rate_lowest_since_01/ "unexpectedly lower the unemployment rate to 4.7% from 4.9%,"#> the lowest it's been since 2001. This explains another surprise this week: <#stdurl http://quote.bloomberg.com/apps/news?pid=10000103&sid=aryI0lfkbe.I&refer=news_index "Worker productivity plummeted and labor costs jumped"#> in the last quarter of 2005. These results also exceeded analysts' expectations. There's a great deal of irony in this situation for departing Fed Chairman Alan Greenspan based his <#inc ww2010.weblog.ref e041124 "entire strategy for handling the 1990s stock market bubble on worker productivity,"#> according to a November, 2004, article in the Wall Street Journal. Greenspan noticed in 1996 that a stock market bubble was beginning, but decided to ignore it, because he believed that it was occurring because of increased worker productivity stemming from information technology (IT - the use of computers). As <#inc ww2010.weblog.ref e041124 "I wrote,"#> anyone familiar with the computer industry at that time would have known that Greenspan was simply wrong. Companies were spending astronomical sums of money on software development costs to bring up web sites, and any tiny amount of money saved would have been swamped by these huge development costs. So Greenspan was wrong about worker productivity in 1996, and made a historic decision at the time not to try to stop the bubble, but instead to "deal with its aftereffects." What that meant was seen after the Nasdaq crash in 2000: The Fed lowered interest rates to near zero. But something else happened at exactly the same time: During mid-2000, employment of IT professionals dropped to almost zero. Uniformly, businesses decided to do little or no more computer software development or web site development, and make do with what they already had. (As an IT consultant, I was personally affected by this, and was mostly unemployed for a couple of years. The "good" news is that this period of unemployment gave me plenty of time to develop Generational Dynamics and this web site.) When businesses stopped hiring IT professionals, the thing that Greenspan thought was happening in 1996 actually started happening in 2002. Businesses did little software or web development, and the little that they did was performed by seasoned employees that had been hired years earlier. As a result, worker productivity really did increase, and has been very high since 2002. With worker productivity high, corporate earnings were also high. High earnings meant that price/earnings ratios would be lower for a given price. So worker productivity combined with low interest rates to continue the stock market bubble that began in the late 1990s. The low interest rates made plenty of money available for purchases of stock on credit, and the extremely high earnings growth justified high prices, under the assumption that earnings would continue to grow at those historically high rates. Note the last clause of the previous paragraph: Investors have been assuming that earnings would continue grow at the same historically high rate. As <#inc ww2010.weblog.ref e060122 "we explained in detail last month,"#> this cannot happen. In fact, by the principle of "mean reversion," earnings are going to fall substantially, to historically low levels, for several years, in order to compensate for the years of historically high earnings. This will trigger a stock market crash similar to the one that began in 1929. It's impossible to predict when a stock market panic will occur -- it might be next week, next month or next year -- but mathematically speaking it has to happen, and sooner rather than later. All we can do in these articles is point out that stocks are currently overpriced by a factor of some 220%, and that the time is increasingly right for a panic to occur. Ironically, the increase in hiring and the lowering of the unemployment rate during a bubble is one of the signs. It means that corporations are risking earnings by betting that the bubble will continue indefinitely. As I've been saying since 2002, Generational Dynamics predicts that America is entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range, probably by the 2007 time frame. I have no reason to change this prediction now, especially with public debt and the trade deficit continuing to grow uncontrollably and exponentially. =eod =// &&2 e060203 Bird flu spreads through Northern Iraq =data ww2010.weblog.y2006.e060203.head Bird flu spreads through Northern Iraq, with 162 suspected human cases =data ww2010.weblog.y2006.e060203.keys Turkey, bird flu, Iraq, Africa =data ww2010.weblog.y2006.e060203.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060203.date 3-Feb-06 =data ww2010.weblog.y2006.e060203.txt1 After first denying that bird flu was involved, WHO now says that a teen girl died of bird flu last month. =data ww2010.weblog.y2006.e060203.txt2 When 15 year old Shangen Abdul Qader of Northern Iraq died last month, the U.N. World Health Organization (WHO) performed the necessary steps and announced that <#stdurl http://english.aljazeera.net/NR/exeres/52079A8F-B3B9-4E4B-9A9F-84A82C3E84D5.htm "the girl had not been suffering from bird flu."#> Kurdish officials in Northern Iraq were still suspicious, since the region is near Turkey, <#inc ww2010.weblog.ref e060112 "where bird flu is becoming widespread and firmly established,"#> and because the family kept chickens in the house, and some of them had died. Instead, WHO diagnosed the cause of death as cardiovascular disease. However, WHO on Thursday <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2006-02-02T184630Z_01_L02235542_RTRUKOC_0_UK-BIRDFLU-IRAQ-WHO.xml&archived=False "finally confirmed that she did indeed die of the deadly H5N1 virus."#> And now, WHO officials are overseeing the <#stdurl http://www.boston.com/news/world/articles/2006/02/01/500000_birds_slaughtered_to_stop_flu_spread/ "slaughter of 500,000 birds,"#> to prevent the spread of the disease. Furthermore, the pan-Arab daily al-Hayat announced that <#stdurl http://www.novinite.com/view_news.php?id=58646 "162 more people are under suspicion of having contracted the virus."#> What this all shows is how confusing the situation is. It's been very strange, and entirely unrealistic, to believe that bird flu has affected Turkey from the the east to west, but somehow the infections have stopped at the Turkish border, with few or no reports of infections in neighboring countries. The explosion in Northern Iraq illustrates the problem - that many countries are simply not testing for H5N1, and so the world doesn't know what's happening until human beings start dying. Bird flu may spread far into Africa and Europe by spring, according to <#stdurl http://www.fao.org/newsroom/en/news/2006/1000215/index.html "a press release by the U.N. Food and Agriculture Organization (FAO)."#> I have to chuckle at what an FAO spokesman is quoted as saying:

"Fighting the avian influenza virus in animals is the most effective and cost-effective way to reduce the likelihood of H5N1 mutating or reassorting to cause a human flu pandemic. ... Governments will fail in combating avian influenza if they don’t give their veterinary services the political support as well as the technical and financial means to fight the virus. Early warning systems, swift interventions and preventive measures will remain weak and inadequate without strong, centrally organized veterinary services."

This probably makes sense, but I'm imagining President Bush addressing the nation and saying, "And tonight, my fellow Americans, I ask the Congress to provide $10 billion to veterinarians around the country to prepare to combat bird flu." Somehow, I don't think it's going to happen. On a more serious note, the press release contains the following text:

The avian influenza virus could become entrenched in the Black Sea, Caucasus and Near East regions through trade and movement of people and animals and it could be further spread by migratory birds particularly coming from Africa in the spring. ... "FAO is concerned that with trade, the movement of people and animals and migratory birds, new countries could become infected," [said a spokesman.] “Countries in Africa deserve special attention. In Turkey, the virus has already reached the crossroads of Asia, Europe and Africa, and there is a real risk of further spread. If it were to become rooted in the African countryside, the consequences for a continent already devastated by hunger and poverty could be truly catastrophic."

The problem with this text is that it says that birds coming from Africa this spring could spread the disease through migration to Europe and Asia. Thus, in this text, the FAO appears to be admitting that it believes that H5N1 is already established in Africa, even though no such announcements have been made. With the <#inc ww2010.weblog.ref e060130 "Chinese and Vietnamese Lunar New Year celebrations"#> just finishing up, and with all the additional opportunities for gene recombination in the Mideast and Africa, it's possible that a dangerous human to human mutation could occur, or could even have already occurred, and we might not know until a pandemic starts spreading around the world uncontrollably. At that point, panic will set in worldwide. For that reason, I once again strongly urge my readers to prepare for an H5N1 pandemic or for any kind of emergency (think of hurricane Katrina) by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e060201 State of the Union speech displays continuing misreading of Iran =data ww2010.weblog.y2006.e060201.head State of the Union speech displays continuing misreading of Iran =data ww2010.weblog.y2006.e060201.keys Iran =data ww2010.weblog.y2006.e060201.loc ww2010.weblog.log0602 =data ww2010.weblog.y2006.e060201.date 1-Feb-06 =data ww2010.weblog.y2006.e060201.txt1 It's wishful thinking to believe that an overthrow of the Mullahs is coming. =data ww2010.weblog.y2006.e060201.txt2 In Tuesday's <#stdurl http://www.whitehouse.gov/news/releases/2006/01/20060131-10.html "State of the Union speech,"#> President Bush said the following about Iran:

The same is true of Iran, a nation now held hostage by a small clerical elite that is isolating and repressing its people. The regime in that country sponsors terrorists in the Palestinian territories and in Lebanon -- and that must come to an end. The Iranian government is defying the world with its nuclear ambitions, and the nations of the world must not permit the Iranian regime to gain nuclear weapons. America will continue to rally the world to confront these threats. Tonight, let me speak directly to the citizens of Iran: America respects you, and we respect your country. We respect your right to choose your own future and win your own freedom. And our nation hopes one day to be the closest of friends with a free and democratic Iran. This is an echo of an argument that pundits and politicians, mostly on the Republican side, have been making for several years: We've been seeing Iranian college students protesting against the hardline Muslim clerics that run the country, and lately against the new President Mahmoud Ahmadinejad. Their complaints have largely to do with "women's issues," like <#hreftext ww2010.i.sixties040501 "the women's lib movement in 1960s America."#> The reasoning goes that Iran is ripe for a revolutionarly overthrow of the hardline government. This is total nonsense, and even the most elementary generational analysis of the situation shows why. Let's take this very slowly, step by step, so that it will be understandable to any politician, pundit or journalist who might happen to stumble across this web page:

Iran entered its generational crisis period in the late 1970s, with the overthrow of the Shah, and the establishment of the hardline Islamic regime led at that time by Ayatollah Khomeini. This was widely supported by the Iranian population who were very dissatisfied with the corruption in the Shah's regime, and who supported the overthrow through a very bloody civil war.
That same population that had fought a bloody civil war to overthrow the Shah next had to fight a bloodly war with Iraq, when the latter country invaded Iran with at least tacit American support. Iraq even used mustard gas against Iraq in that war. Hundreds of thousands of Iranians lost their lives in the devastating Iran/Iraq war, but in the end they got the government they had fought for.
Now it's 2006 and a generation has passed. The college students, with no personal memory of the civil war or the war with Iraq, are rioting and demonstrating, demanding more freedom for women.
But their parents, or any Iranian aged 25 or older, lived through that bloody period. They lost their sons, brothers, husbands and fathers as soldiers in the bloody fighting, and they also lost women and children in the Iraqi attacks on civilians. But they were fighting for a cause, and they won, and they're not going to give up that cause now.
And now they hear the Americans, who supported Iraq during the Iran/Iraq war, telling them they should overthrow the leaders that they'd given their sons and daughters for in the 1980s. That's a "You gotta be kidding me!" moment.
Finally, these people were the victims of chemical weapons of mass destruction used by the Iraqis, and now they're facing a world where their enemy, Israel, has nuclear weapons. The Iranian people see nuclear weapons as their guarantee that they won't be victimized by weapons of mass destruction for a second time.

I tried to make that so simple that even a politician or a journalist might be able to understand it, but I won't get my hopes up. The point is that even if college students are demonstrating against Ahmadinejad and the hardline clerics, the adults in Iran have no interest or desire to go through another period of bloody war, as they just did not long ago. They fought for the clerics, and they'll keep the clerics. What we're seeing is the increasing hardening of America's position against Iran, when President Bush said, "The Iranian government is defying the world with its nuclear ambitions, and the nations of the world must not permit the Iranian regime to gain nuclear weapons." These words have a sense of a threat behind them, and that will create a reaction in Iraq. America is not alone in this. The European Union has also been hardening its position against Iran. There's no way to tell where that will lead, but the sense of war against Iran's nuclear facilities is in the air. There's something else in the air. When <#inc ww2010.weblog.ref e060127 "Hamas won a major election victory in Palestine last week,"#> it was pretty clear that the major issue would be money -- continued aid from America and the EU, even though a terrorist group was now running the Palestinian government. The Palestinians are now <#stdurl http://www.guardian.co.uk/worldlatest/story/0,,-5584543,00.html "threatening to obtain aid from elsewhere,"#> and Iran is a potential source of such aid. A close relationship between Hamas and Iran would throw the Mideast into further chaos. From the point of view of Generational Dynamics, the Arabs and Jews are heading for a new genocidal crisis war, and it's appearing more and more that Iran will play a major part in that war. The last crisis war between Jews and Arabs was the extremely violent, genocidal war of the late 1940s, when the United Nations partitioned Palestine and created the state of Israel. Generational Dynamics predicts that we're heading for a major new Mideast war, replaying that war, and engulfing the entire region. =eod =// &&2 e060131b Muslim world boycotts Danish goods over offensive cartoons =data ww2010.weblog.y2006.e060131b.head Muslim world boycotts Danish goods over offensive cartoons =data ww2010.weblog.y2006.e060131b.keys Denmark, cartoons, Saudi Arabia, Libya, Norway =data ww2010.weblog.y2006.e060131b.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060131b.date 31-Jan-06 =data ww2010.weblog.y2006.e060131b.txt1 This is a bizarre tale about how a small thing can lead to a major, real crisis. =data ww2010.weblog.y2006.e060131b.txt2 Saudi Arabia has recalled its ambassador from Denmark, Libya closed its embassy in Copenhagen, and many clerics are calling for a worldwide Muslim boycott of Danish products, after <#stdurl http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/theworld/2006/January/theworld_January655.xml§ion=theworld&col= "Denmark's Prime Minister refused to apologize"#> for cartoons depicting the Prophet Mohammed in a manner considered offensive to Muslims. <#stdurl http://www.iranmania.com/News/ArticleView/Default.asp?NewsCode=40028&NewsKind=Current%20Affairs "Iran may join the boycott as well."#> The 12 cartoons first appeared in Denmark’s <#stdurl http://epaper.jp.dk/30-09-2005/demo/JP_04-03.html "Morgenavisen Jyllands-Posten daily"#> in September. The scandal has continued to grow ever since. Muslims consider any images of Mohammed to be considered blasphemous, but the published cartoons depicted Mohammed in a manner that Muslims consider to be extremely offensive. In one of them, Mohammed is wearing a turban shaped like a bomb with its fuse lit. In another, Mohammed is telling suicide bombers to slow down, saying, "Stop, stop, we're running out of virgins." Morgenavisen Jyllands-Posten has refused to apologize, claiming freedom of speech. The Denmark government claims that it can't discipline the paper for the same reason -- freedom of speech. The Norwegian paper <#stdurl http://www.magazinet.no/ "Magazinet"#> reprinted the cartoons, but <#stdurl http://www.arabnews.com/?page=1§ion=0&article=77013&d=29&m=1&y=2006&pix=kingdom.jpg&category=Kingdom "Norway hopes to escape the same retribution,"#> because the Royal Norwegian Embassy in Riyadh issued an expression of regret: “All people have the right to respect for their religion and the right to expect that neither their religion nor their religious affiliation will be subject to contempt. I understand that the caricatures of the Prophet Muhammad in the Norwegian magazine Magazinet are perceived as offensive and that they have caused a stir in Muslim communities. This incident is unfortunate and deplorable.” It's possible to understand both sides of this disagreement. The Danes are perplexed about what they should do; it's as if the Muslim world was outraged at all of America because the Boston Globe had published something that Muslims consider blasphemous. However, Muslims claim that the Danes have pushed freedom of speech too far -- like crying "Fire!" in a crowded movie theatre -- by publishing cartoons that are so extremely offensive to Muslims. They point out that Western Christians would be similarly offended by cartoons of Jesus. The disagreement may escalate still further. The EU Trade Commissioner Peter Mandelson has warned Saudi Arabia that <#stdurl http://www.jpost.com/servlet/Satellite?cid=1138622507049&pagename=JPost%2FJPArticle%2FShowFull "would take legal action in the World Trade Organization (WTO),"#> if the Saudi government supported a boycott of Danish goods. Perhaps this disagreement will simply settle down. The only way I can see that happen is if the Danish government decides to issue some kind of apology, although an opinion poll showed that <#stdurl http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/theworld/2006/January/theworld_January655.xml§ion=theworld&col= "79 percent of Danes think that the government should not issue an apology,"#> and 62% say the newspaper should not apologize. However, Morgenavisen Jyllands-Posten <#stdurl http://www.jp.dk/meninger/ncartikel:aid=3527646 "issued an apology on January 28,"#> but it doesn't seem to be doing much good. What this disagreement shows is how easily a war can start during a generational crisis period. This is a really silly squabble, and yet positions are very hard on both sides. If the same sort of thing happened between Japan and China (which it could), then a diplomatic squabble could rise to a boycott, then rise to a minor confrontation with weapons, to a larger confrontation with weapons, to a full-scale war. Stranger things have happened, and may happen again. =eod =// &&2 e060131 Personal savings plummet to Great Depression levels =data ww2010.weblog.y2006.e060131.head Personal savings rate plummets to Great Depression levels =data ww2010.weblog.y2006.e060131.keys Personal savings, Great Depression, China =data ww2010.weblog.y2006.e060131.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060131.date 31-Jan-06 =data ww2010.weblog.y2006.e060131.txt1 Ben Bernanke becomes Fed Chairman tomorrow, and faces exponentially growing debt levels =data ww2010.weblog.y2006.e060131.txt2 The Commerce Department <#stdurl http://www.bea.gov/bea/newsrelarchive/2006/pi1205.htm "reported Monday that Americans' personal savings fell to -0.5 percent last year,"#> a negative value, meaning that Americans as a whole spent more than they earned last year. This has happened <#stdurl http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&Date=20060130&ID=5458922 "only twice before in the last century -- 1932 and 1933"#> -- as the Great Depression was beginning. <#inc ww2010.pic bgross1g.gif right "" "Total credit market debt (Source: PIMCO)"#> This is consistent with the adjoining graphic, which I've posted before (in 2004). It shows the astronomically high level of public debt, exceeding even the level of the Great Depression, when people went into debt to avoid starvation and homelessness. As I've been writing since 2002, America is entering a new 1930s-style Great Depression and, as I've said many times, <#hreftext ww2010.i.050711eleven "both I and other analysts have computed,"#> the "true value" or book value of the stock market today to be around Dow 4500, which means that the market is overvalued by more than a factor of 2, at about the level as just before the 1929 stock market crash. The savings rate has been declining for decades. In 1984, it was 10.8% of after-tax income; it decreased steadily, reaching +1.8% in 2004, and then fell to its negative value, -0.5%, in 2005. A similar pattern has been occurring with <#inc ww2010.weblog.ref e051215b "trade deficits, which have also been increasing exponentially."#> Those pundits who have been saying that the economy is "self-correcting" are simply wrong. The theory was that the dollar would weaken sufficiently that consumers would be forced to spend less. What you're seeing is something that undermines the entire theory of demand economics. When people run out of money, they're supposed to spend less. But that's now what's been happening; thanks to the Fed's near-zero interest rate policy in the early 2000s, people have gone deeper and deeper into debt rather than spend less. They obtained credit through credit cards and by refinancing their homes in a real estate bubble. That reasoning would have worked from the end of WW II through the 1970s, but then a major generational changed started happening, as the thrifty, risk-averse people who lived through and grew up during the Great Depression all disappeared (retired or died), and new generations of risk-seeking and irresponsible Baby Boomers and Generation-Xers took their place. When I was growing up in the 1950s, my school teachers talked about the Great Depression all the time, because they had suffered through it. Those teachers must be spinning in their graves over the appalling things that are happening now, as a matter of course. In the 1980s, the Republicans and the Democrats cooperated with each other to change the Social Security system to make it a sounder system. After that, they cooperated again to specify new rules to control the budget deficit. And in 1996, Democratic President Bill Clinton cooperated with the Republican congress to eliminate the welfare entitlement. Such governmental cooperation causes political pain, but today that kind of political pain is impossible. Even at the personal level, it's easier to go into debt than to cut back on spending. This is not just an American phenomenon; it's a worldwide phenomenon. Furthermore, these financial crises are generational, and occur in a regular pattern. They've occurred every 70-80 years since the 1600s: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash. These bubbles and crashes always occur at exactly the time when the generation of people who grew up and lived through the previous bubble all disappear (retire or die), all at once. And it happens to every country in the worldwide economic system -- mostly Europe and North America. However, this particular cycle has a twist, as revealed by another economic announcement that just came out: <#stdurl http://news.xinhuanet.com/english/2006-01/18/content_4065938.htm "China's savings rate hit an all-time record high in 2004,"#> just as America's has been plumetting. Of course, China's savings rate has to be high. The Chinese people have to save a lot of money so that the government can afford to purchase American treasury bonds, so that America will have more money to purchase Chinese goods. In other words, China sends us money, we send the money back to China, and China sends us manufactured goods that people purchase with credit. And don't expect Europe to save us -- they're as bad off as we are. Stephen S. Roach, the chief economist for Morgan Stanley, has called this <#inc ww2010.weblog.ref e051111 "the ambush waiting for Ben Bernanke,"#> referring to Bush's appointee to replace Alan Greenspan at the Fed on February 1. Bernanke will have his academic skills tested in practice very quickly. With debt growing exponentially, and with the stock market overpriced by a factor of more than two, the climate for a financial crisis is right. The crisis could occur tomorrow, next week, next month or next year, but economic indicators show that it has to come relatively soon. =eod =// &&2 e060130 Bird flu: China and Vietnam Lunar New Year =data ww2010.weblog.y2006.e060130.head Bird flu: World holds breath for China and Vietnam Lunar New Year celebrations =data ww2010.weblog.y2006.e060130.keys Bird flu, China, Vietnam, Lunar new year =data ww2010.weblog.y2006.e060130.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060130.date 30-Jan-06 =data ww2010.weblog.y2006.e060130.txt1 If we get through the next month without a pandemic, we may be OK till next season. =data ww2010.weblog.y2006.e060130.txt2 It's the Year of the Dog, as the Chinese Lunar New Year launches four days of celebrations. And next week, Vietnam will begin its Lunar New Year festival of Tet. <#inc ww2010.pic vietnam_seasonal.gif right "" "Avian Influenza (AI) outbreaks in Vietnam in 2004 and 2005 (Source: iflu.org)"#> Both of these celebrations involve massive increases in handling, transporting and slaughtering poultry. As the adjoining graphic shows, the number of bird flu cases in Vietnam spiked greatly during Tet celebrations in 2004 and 2005. The United Nations and Vietnam have <#stdurl http://www.vnagency.com.vn/newsA.asp?LANGUAGE_ID=2&CATEGORY_ID=29&NEWS_ID=184451 "jointly launched a bird flu media campaign,"#> hoping to reduce the prevalence of bird flu this year. Media campaigns have begun in other countries as well, in Asia and Europe. The great fear is that the pathenogenic H5N1 bird flu virus will mutate in a form that passes easily from human to human, causing a bird flu pandemic which could kill many millions of people. As <#inc ww2010.weblog.ref e050121b "we wrote about in January, 2005,"#> the World Health Organization (WHO) feared that a human-to-human bird flu pandemic might start with last season's lunar new year (Tet) celebrations, when many people would be travelling, and more poultry would be transported, slaughtered and consumed. Bird flu virus mutation is basically a numbers game. A human to human transmissible virus will be formed when somebody simultaneously gets the ordinary human flu and the pathogenic H5N1 bird flu at the same time. At that time, the genes from the two forms of the virus can recombine to form an H5N1 virus that can move easily from human to human. It's the far greater numbers of recombination opportunities that make a pandemic increasingly likely. Since last year, pathenogenic H5N1 has spread throughout China, west through Asia, into Europe, and has <#inc ww2010.weblog.ref e060112 "become firmly established among birds in Turkey."#> It's not known how far bird flu has spread in many parts of Europe, Africa and Asia. The reason is that there simply are no testing programs in many countries, and the presence of bird flu would not be detected. Beyond that, there's reason to believe that many countries are refraining from reporting suspected cases, for fear of hurting the country's tourist trade. This is particular evident in the countries surrounding Turkey, which have mysteriously not detected any H5N1, even though it's spread across Turkey from east to west. There's also reason to believe that China is not reporting the full extent of the problem there. Another debate concerns the question of whether a limited form of human-to-human transmission has already begun. This appears to be the case in Turkey, where the sequencing of the cases within families <#stdurl http://www.recombinomics.com/News/01230601/H5N1_Kocyigit_Ozcan_Grows.html "appears to indicate that some family members have gotten it from each other."#> However, such limited human to human transmission requires physical contact, and so cannot spread very widely. The really dangerous mutation would occur with an additional mutation that would permit human-to-human transmission through the air, through coughing and sneezing. A reader who is an expert on genome science has written to me to say that he believes that a mutation that permits this kind of rapid human to human transmission will require a second mutation that reduces the virulence of the virus. I have no expertise to evaluate such statements, but if true it would indicate that a full-fledged pandemic would not be a deadly as feared. At any rate, we are now entering the most dangerous time of the year, the time most likely for a human pandemic. The good news is that if we pass through the next few weeks without a pandemic, then we have a good shot of being safe until next season. =eod =// &&2 e060127 Hamas victory throws Mideast 'peace process' into disarray =data ww2010.weblog.y2006.e060127.head Hamas victory throws Mideast 'peace process' into disarray and turmoil =data ww2010.weblog.y2006.e060127.keys Hamas, Palestinians =data ww2010.weblog.y2006.e060127.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060127.date 27-Jan-06 =data ww2010.weblog.y2006.e060127.txt1 What struck me most, seeing the cheering Hamas supporters on TV yesterday, =data ww2010.weblog.y2006.e060127.txt2 was how young they are. I swear they looked like high school students, or maybe late teens. The <#stdurl https://www.cia.gov/cia/publications/factbook/fields/2177.html "median age"#> in the Gaza Strip is 15.6!!! Compare that to 29 for Israel, 36 for the U.S., and 42 for Germany. When we talk about the Palestinians, we're talking about a society of children. That's not meant to be an insult -- it's a demographic fact. And where do children get their news from? Well, here in America we know that it's almost all from MTV and from Comedy Channel's Daily Show with Jon Stewart. Try watching the Daily Show a few times, and then try to imagine how much you'd know about the world if that's all the news you ever heard. Well, I don't know what the Arabic version of the Daily Show is, but I'm pretty sure it paints a picture of a world run by irrelevant dinosaurs and also, I'd guess, a world in which Israelis and Americans and British are the idiots who are making life miserable for everyone else. I heard on the BBC that not a single pundit or politician predicted this kind of result. Most predicted a narrow Fatah victory, but none foresaw the huge Hamas margin, <#stdurl http://www.csmonitor.com/2006/0127/p01s03-wome.html "gaining some 74 seats of a total of 132 in the Palestinian Parliament."#> This means that the "terrorist" organization Hamas is now in charge of the Palestinian government, and the "moderate" Fatah, led by Mahmoud Abbas, is pretty much wiped out. So what happens now? President Bush dodged that question in a <#stdurl http://www.whitehouse.gov/news/releases/2006/01/20060126.html "Thursday morning press conference."#> He was asked whether "Mideast peacemaking [is] dead with Hamas' big election victory." His answer: "Peace is never dead, because people want peace [and] democracy yields peace. And the best hope for peace in the Middle East is two democracies living side-by-side." That's the silliest damn thing. The two-state plan is dead, and democracies have wars just as often as dictatorships do. Hitler was elected by a democracy. Or, if you dislike that example because the election might have been crooked, how about our own American Civil War? That war was triggered by the democratic election of Abraham Lincoln, and it was unbelievably bloody and violent war, spawned by our own (imperfect) democracy. In fact, the dinosaurs are full of silly remarks. My favorite yesterday was by <#stdurl http://www.jpost.com/servlet/Satellite?cid=1137605924104&pagename=JPost%2FJPArticle%2FShowFull "69-year-old Palestinian Christian Hanna Siniora:"#> "The Hamas victory in the Palestinian elections may be a blessing in disguise. Now that they are in power, Hamas will have to take responsibility for the future. They will have to become more moderate. Now they are part of the democratic game and they will have to play by the democratic rules." That's like saying that an earthquake is a blessing in disguise because it prepares the survivors for the next earthquake. This statement is also quite ironic, because it brings the wishful thinking crowd full circle. That's what they used to say about former Palestinian leader Yasser Arafat. After he signed the Oslo peace agreement with Israel in 1995 (and won a Nobel Peace Prize along the way), he was felt to have become a newly "moderate" leader of the Palestinians. By the early 2002, he was back to being a terrorist, and Israel refused to negotiate with him -- because he was a terrorist, a crook and a liar. The Israeli and American view was that peace would come to the Mideast as soon as Arafat was out of the way. It was right along this time that I made the prediction that has drawn the most "You're crazy, Xenakis!" remarks of all my predictions: I said that Arafat may be a terrorist, crook and liar, but he's the person holding the Palestinians back from war. I said that the disappearance of Arafat would be part of a generational change that would bring a major conflagration to the Mideast, probably within a couple of years. And now, on Thursday, we have an election that puts a terrorist organization in charge of the Palestinians. Former Israeli Prime Minister Benjamin Netanyahu describes the situation thus: "It's like having another Tehran, Iran, but this time on our doorstep." So here we are, <#inc ww2010.weblog.ref e041114 "14 months after Arafat's death,"#> and everyone else's predictions keep getting proven wrong, and mine keep getting proven right. All those people who said "You're crazy, Xenakis!" are wrong, and I turn out to be right. And not just on this issue. Whether it's about Darfur or about the economy or about Iraq or about China, I keep getting it right where others keep getting it wrong. This is obviously something that bothers me a lot, since I do write about it from time to time, especially on a day like this, the day after the Hamas victory. Why am I so special? I'm certainly not the least bit psychic, and I certainly can't read people's minds as, for example, my bad luck with women repeatedly demonstrates. The fact that everyone else's predictions are as often wrong as right has been well documented. <#stdurl http://online.wsj.com/public/article/SB113810608408354680.html?mod=todays_free_feature "An article in Tuesday's Wall Street Journal"#> finds that economists predictions are dismally wrong, including predictions by government agencies and the Federal Reserve. (Regular readers will know that this doesn't surprise me, given how critical I am of the Fed.) And a new book by Prof. Philip Tetlock, Expert Political Judgment: How Good Is It? How Can We Know? shows, based on 20 years of research, shows that, without exception, <#stdurl http://www.newyorker.com/printables/critics/051205crbo_books1 "media analysts and pundits are wrong more often than they're right."#> This is true even for experts and specialists, talking in their areas of expertise. The worst offenders are those who are trying to make political cases, whether Republic or Democrat, liberal or conservative. Obviously Prof. Tetlock hasn't seen my web site. What's so different about me? For one thing, I've developed the Generational Dynamics forecasting methodology, which tells you what your final destination is, but not how you get there, or when. In early 2003, when I was developing the theory behind the Generational Dynamics forecasting technique, I began to be very careful with words to distinguish between "long-term forecasts," which are 100% certain, and "short-term forecasts," which are probabilistic. By using long-term predictions to "advise" short-term predictions, I can even get short-term predictions to be very accurate. I've posted many, many predictions since Spring 2003 on my web site, and not a single one has been wrong. Some have come true, and others are still pending, but not one has been proven wrong. If you want to know what's going on in the world, and where the world is going, the only place that you can find out is on my web site. Furthermore, I try to be as transparent as possible. Every time I make a prediction, I give my reasoning in detail, rather than depending on my "gut." And I've written two books that explain the forecasting methodology in detail. I estimate, based on web logs, that I have several hundred regular readers, possibly more than a thousand, since I've done some limited advertising. Of course, I have no idea who you are, except for a few dozen who have written to me over the years. So, for example, how come my predictions about the Mideast are always right, and everyone else's are usually wrong? That's easy. I know something that they don't know: That the region is headed for a massive genocidal crisis war between Arabs and Jews, with 100% certainty. That's because, as I've explained may times, Arabs and Jews are re-fighting the genocidal war of the 1940s, especially what occurred after Palestine was partitioned and the state of Israel was created. So, since I KNOW that for a fact, I can predict with certainty, as I did in 2003, that the <#hreftext ww2010.i.may01 "Mideast Roadmap for Peace would fail, with almost 100% certainty."#> Every step of the way in the last three years, I've been able to make the right prediction since I know, with certainty, that the region is headed for war. That's why everyone else gets it wrong. If they're aware of my writings at all, they usually think, "Xenakis, you're crazy." They don't know that the region is headed for war, with absolute certainty. They think there's a chance to avoid war. If they love George Bush, they advocate something like Bush's "democracy brings peace" principle. If they hate George Bush, they advocate the opposite of whatever George Bush advocates. Both sides are wrong, because both of them believe that war can be avoided. (As I mentioned above, Tetlock's research found that the worst of the pundits were the ones with political points of view.) =inc ww2010.h2 outlook "The Outlook" But you, dear reader, can figure out what's going to happen next in the Mideast as well as I can. Before you read any farther, take a minute or two and see if you can figure out the outlook in the Mideast. Remember that there's something that you KNOW: that the region is headed for a massive war, with absolute certainty. So, with that knowledge, what's coming next? Thought about it? Here's my answer for a fairly likely scenario: Hamas has a big problem right now: Money. The European Union and the U.S. contribute about $1 billion a year to the Palestinians; that money is the only glue holding the Palestinians together, if "holding together" can be used to describe the increasing chaos enveloping the Gaza Strip. But the EU and US are not going to keep giving money to the Palestinians if Hamas is going to get it, since Hamas is committed to the destruction of Israel. Hamas can't very well give up its charter to destroy Israel. Remember that Palestine is society of mostly children -- because the median age is 15. We're dealing with children here, and these children have elected a government of terrorists. These children will not be happy if they think that Hamas is going back on its election promises. So how to get the money? That's the problem. In the end, it's always about money, isn't it? How is Hamas going to get that money? Well really, I can only guess. Hamas will have to split itself into two parts in some way. It will put forth some kind of "kinder, gentler" Hamas as the Palestinians' government at the very top; these officials may even be puppets, but the important thing is that they'll say that they want peace with Israel. Beneath that shell government, Hamas will continue to operate in the way that the children expect, with terrorist acts, and so forth. That's one possible scenario. Another possible scenario is that Hamas will agree with the EU and US that money should go through non-governmental organizations, to make sure that Hamas won't get it. Of course, Hamas will be in control of these NGOs, but everyone can just keep quiet about this. The point is that, no matter what the scenario, Hamas, Israel, the EU and the US will have to find some political formula to keep giving $1 billion to the Palestinians in such a way that the politicians can claim it's not going to terrorists. But if a political accommodation is not found, and the $1 billion is cut off, then that war between Arabs and Jews will happen quite quickly. So, in summary, the outlook is as follows: Find a political way to keep the money flowing in, and have war in the long run; or don't find a way, and have war in the short run. It's impossible to predict which of these two major paths will be taken, since they're chaotic events. There is only one thing that's absolutely certain: The Mideast is headed for a major genocidal war between Arabs and Jews, and probably sooner rather than later. =eod =// &&2 e060126 China reports 2005 economy still overheated at 9.9% growth =data ww2010.weblog.y2006.e060126.head China reports 2005 economy still overheated at 9.9% growth =data ww2010.weblog.y2006.e060126.keys China =data ww2010.weblog.y2006.e060126.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060126.date 26-Jan-06 =data ww2010.weblog.y2006.e060126.txt1 Like a railroad train careening down the track out of control, =data ww2010.weblog.y2006.e060126.txt2 China's economy grew at an unexpectedly high 9.9% last year. Analysts <#stdurl http://www.chinapost.com.tw/business/detail.asp?ID=76001&GRP=E "expressed suspicion that the 9.9% is actually an understatement."#> "One could say that 9.9 percent is a very convenient number," he said. "It's not 10 percent. Ten percent might scare people, and might create more trade friction with the U.S." You might think that such a high growth rate is a good thing, but the problem is that China's economy has had this kind of growth rate for over 20 years, and has become highly dependent on it. China has 100-150 million migrant workers, mostly peasants who can't make much money on the farm. They go to cities like Shangai to get whatever work they can, and send money back to their families. This works because of the overheated 10% growth rate, but whenever a recession occurs, these millions of migrant workers in the cities will be unable to find work, causing even more social instability. The Chinese themselves are aware of this danger, and for several years they've been <#hreftext ww2010.i.stocks040517 "trying to slow the economy down to a "soft landing.""#> It was just a couple of days ago that China's Prime Minister <#inc ww2010.weblog.ref e060124 "warned that the country was already becoming unstable,"#> thanks to a "historic error" caused by corruption in local governments. A recession which caused massive unemployment might well be the trigger leading to a massive rebellion -- growing out of the tens of thousands of regional rebellions already occurring each year. From the point of view of Generational Dynamics, China is experiencing a bubble economy similar in many ways to America's bubble economy in its "generational unraveling" era in the late 1990s. There is a debate today whether Alan Greenspan did enough to try to prevent the 1990s bubble, but I've argued that the bubble was caused by a generational change and could not have been stopped, no matter what Greenspan and Fed did. Similarly, China's attempt at a "soft landing" for its economy has been failing dramatically for several years, as it transitions from a "generational unraveling" to "generational crisis" era. There are already a number of signs that China's bubble is bursting. The <#inc ww2010.weblog.ref e060118 "Shanghai real estate bubble has been bursting since March,"#> with some properties falling in value by 50% since then. And China is <#inc ww2010.weblog.ref e051201b "suffering overcapacity in cement, aluminum, textiles and other goods,"#> and is also constructing too many factories, buildings and resorts. This <#stdurl http://www.chinapost.com.tw/business/detail.asp?ID=76001&GRP=E "has led to very low inflation in China,"#> because the oversupply of these goods is pushing prices down. As I've described before, China is becoming increasingly unstable and is <#hreftext ww2010.i.china050116 "approaching a massive civil war as its bubble economy unravels."#> America's economy is also in a precarious situation, because of the astronomically high and exponentially increasing public debt, and because of the <#inc ww2010.weblog.ref e060122 "vastly overpriced stock market."#> =inc ww2010.cf.cf050530 p right A financial crisis in either China or America or, for that matter, in Europe or Japan will cause a "domino effect" that will precipitate financial crises around the world, and trigger a civil war in China, which will lead to war crises around the world. Generational Dynamics predicts that we're at a unique time in history, 60 years after the end of World War II, and that we'll soon have a new "clash of civilizations" world war. =eod =// &&2 e060124 China Prime Minister warns country becoming unstable =data ww2010.weblog.y2006.e060124.head China Prime Minister warns that country is becoming unstable =data ww2010.weblog.y2006.e060124.keys Wen Jiabao, China, mass riots, Taiping Rebellion =data ww2010.weblog.y2006.e060124.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060124.date 24-Jan-06 =data ww2010.weblog.y2006.e060124.txt1 Blaming local governments for making a "historic error," =data ww2010.weblog.y2006.e060124.txt2 Chinese prime minister Wen Jiabao said that <#stdurl http://www.guardian.co.uk/china/story/0,,1691804,00.html "corrupt land grabs by local officials"#> are "threatening social stability" and causing violent "mass incidents." According to China's Ministry of Public Security, <#stdurl http://www.chinapost.com.tw/asiapacific/detail.asp?GRP=C&id=75667 "there were 87,000 mass incidents in China in 2005,"#> up from 74,000 in 2004 and 58,000 in 2003. "Mass incidents" are "public order disturbances, obstructions of justice, gathering of mobs and stirring up of trouble." If even one of these disturbances occurred in the U.S. or Europe it would be international news, so having tens of thousands of these in a year in China is mind-blowing. I've described some of these mass uprisings on this web site -- the <#inc ww2010.weblog.ref e051211 "massacre in Dongzhou,"#>, the <#inc ww2010.weblog.ref e051011 "violent beating of Chinese democracy activist,"#> and a riot where <#inc ww2010.weblog.ref e041226 "50,000 workers clashed with police."#> These are only the tip of the iceberg. As I've described before, China is becoming increasingly unstable and is <#hreftext ww2010.i.china050116 "approaching a massive civil war as its bubble economy unravels,"#> along with the rigid social structure originally set up by Mao Zedong in the 1950s and 60s. Today, there are close to 150 million migrant workers (20% of the workforce), mostly peasants who have lost their farms to corrupt land deals by CCP (Chinese Communist Party) officials, who take any jobs they can find in the cities and send money back to their families in vast poverty-stricken rural areas. What's different this time is that China is actually admitting that the society is becoming unstable. "Some locales are unlawfully occupying farmers' land and not offering reasonable economic compensation and arrangements for livelihoods, and this is sparking mass incidents in the countryside," said Wen. "We absolutely can't commit a historic error over land problems." The "historic error" refers to the similar corruption that preceded China's previous huge rebellions -- the Taiping Rebellion (1852-64) and Communist Revolution (1934-49) -- each of which consumed the entire country and killed tens of millions of people. Wen is saying that the corrupt land grabs are creating the conditions will inevitably lead to a new nationwide rebellion, perhaps killing millions of people. Generational Dynamics predicts that China is very close to chaos, and that there are three possible triggers of this chaos:

A massive new rebellion, possibly triggered by the Falun Gong movement;
A collapse of the Chinese economic bubble, such as happened in Japan in 1990 and in America with the 2000 Nasdaq crash; or
<#inc ww2010.weblog.ref e060103 "Moves by Taiwan leaders toward independence,"#> which would force China to declare war.

The rapid spread of bird flu among birds in China has created an even more dangerous situation, as China has <#inc ww2010.weblog.ref e051105 "mobilized its 2.3 million man army to "fight bird flu.""#> Any one of these triggers could occur at any time -- next week, next month, or two or three years from now. Generational Dynamics predicts that all three of these will occur in the next few years, probably sooner rather than later. =eod =// &&2 e060122 Wall Street bloodbath on Friday =data ww2010.weblog.y2006.e060122.head Wall Street awaits Monday trading after Friday's "blood bath" on earnings =data ww2010.weblog.y2006.e060122.keys Great Depression, price/earnings ratios =data ww2010.weblog.y2006.e060122.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060122.date 22-Jan-06 =data ww2010.weblog.y2006.e060122.txt1 Investors have been getting measureably more risk-averse since October, =data ww2010.weblog.y2006.e060122.txt2 with the result that nervousness is exceptionally high as Monday approaches. Traders are <#stdurl http://today.reuters.com/investing/financeArticle.aspx?type=fundsNews2&storyID=URI:urn:newsml:reuters.com:20060120:MTFH21162_2006-01-20_23-01-30_N20347606:1 "calling Friday, the worst trading day in 3 years, a "blood bath,""#> after the DJIA fell three out of last week's four trading days:

        Date            DJIA      (Change)
        --------------  ------    ---------
	Tue 2006-01-17  10896.32  ( -0.58%)
	Wed 2006-01-18  10854.86  ( -0.38%)
	Thu 2006-01-19  10880.71  ( +0.24%)
	Fri 2006-01-20  10667.39  ( -1.96%)

For the week, the DJIA fell 2.7%, the S&P lost 2%, and the Nasdaq ended 3% lower. All the gains of 2006 were wiped out this week. =inc ww2010.h2 giddiness "Giggling giddiness at Dow 11,000 last week" Things were quite different last week, when giddy, giggling investors and analysts were popping champagne corks and celebrating the two days that the DJIA exceeded 11,000 for the first time since June, 2001. According to <#stdurl http://news.moneycentral.msn.com/category/topicarticle.asp?feed=AP&Date=20060109&ID=5402985&topic=TOPIC_MARKET_REPORT&iSub=2 "one analyst commenting last week,"#> it's about time. Hitting 11,000 merely meant the Dow was "catching up with the other averages," said Alexander Paris, economist and market analyst for Chicago-based Barrington Research. "It's just a matter of the market evening itself out," he said. "The Dow was the only average in 2005 that didn't go up." A search on Google news revealed no quotes or opinions from Alexander Paris on this week's market activity. Last week's giddiness also came through in <#stdurl http://www.time.com/time/business/article/0,8599,1147820,00.html "an article that appeared in Time Magazine online:"#>

"Quibble all you want about things like the deficit and inverted yield curve. In general, the fundamentals look pretty good. Arguably, the only thing missing from this market has been a healthier psychology. Which is understandable, given how long stocks have suffered. But just maybe a round number like Dow 11,000 will finally get investors to think about the upside of stocks again. If so, there are trillions of dollars in money market accounts, trillions more possibly looking to get out of real estate, and another trillion-plus of buying power collecting dust at private equity firms—much of which could move into the stock market and help topple the old record sooner rather than later.

The article says that "GDP growth is on track, inflation is tame, corporate earnings are good, dividends are up and values have become attractive," and quotes hedge fund mogul Leon Cooperman as saying that valuations [price/earnings ratios] "are reasonable." However, a search on Google news revealed no quotes or opinions from Leon Cooperman on this week's earnings reports. The psychological framework for investors and analysts was set early in the week when <#inc ww2010.weblog.ref e060118 "the Tokyo Stock Exchange's Nikkei index fell 6.22% in three days,"#> resulting in worldwide shock waves. One analyst <#stdurl http://www.nytimes.com/2006/01/19/business/worldbusiness/19livedoor.html?hp&ex=1137646800&en=8fca8e809e91215f&ei=5094&partner=homepage "told the New York Times that,"#> "This thing has taken on greed, panic and fear." =inc ww2010.h2 earnings "Earnings disappointments" Actually, it's more than psychology, and Time Magazine's claim that "the fundamentals are good" is simply not true. An <#stdurl http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=AP&Date=20060122&ID=4116718 "AP analysis this weekend"#> shows that we've been seeing "a recent streak of earnings disappointments." It adds, "That's created intense concern that other companies' fourth-quarter results will likewise fall short. The expectation of those disappointments fueled the selloff, with investors dumping stocks ahead of earnings reports in hopes of softening the blow." This was fully to be expected, and there's worse to come. Earnings have been exceptionally high for ten years by historical standards. Analysis shows that <#hreftext ww2010.i.050711eleven "corporate earnings grow at an average of 11% per year,"#> and that this has been true for close to a century. In fact, you can pick any 20-year period, and earnings have averaged 11% in that 20 year period. That means that earnings will average 11% during the 20-year period from 1995 to 2014. =inc ww2010.h2 reversion "Mean Reversion" But since 1995, corporate earnings have averaged 18% per year. Now apparently a wide variety of investors, analysts and financial managers -- people who are really supposed to know better because it's their job to know better -- have become so giddy that they believe that the laws of nature have been revoked, just for them. Apparently many airheads in the Wall Street and investment community believe that if earnings have been growing at 18% for the last ten years, then they'll continue to grow at 18% a year. But that's not what's going to happen. The applicable principle is a mathematical term called "mean reversion": When the value of a variable stays above average for a long time, then it has to fall below average for just as long at time in order to maintain the historical average. In other words, the variable falls low enough so that the variable reverts to its historical "mean" or average. Applying mean reversion to corporate earnings: The historical average growth is 11%; but growth since 1995 has been 18%; therefore, the average for the next ten years will be 4%, in order to revert the average to 11% for the entire period. This reversion of earnings growth must happen, and might have begun at any time, and in fact I thought it might start happening in 2005. But earnings growth remained high in 2005. Now, the first earnings forecasts for 2006 appear to indicate that mean reversion of earnings growth is finally starting to be felt. If next week's earnings reports show that to be the case, then the effect on the stock market and the economy is likely to be dramatic. =inc ww2010.h2 october "Something happened last October" Long-time readers of this web site will recall that I wrote <#inc ww2010.weblog.ref e050811 "an article that appeared on August 11 of last year,"#> I wrote about a "new mystery" involving the following graph: <#inc ww2010.pic per0805.gif center "" "S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 5-Aug-2005. (Source: MarketGauge ® by DataView, LLC)"#> This graph showed the S&P 500 P/E ratio index for the period ending August 5, and it showed something very strange: The P/E ratio had remained constant at around 20 for almost a year. In that article, I speculated that the airhead investors, analysts and financial managers on Wall Street were all making decisions based on exactly the same formula that they shared with one another over water coolers and on barstools. I speculated that the formula was based on something called the "Fed Model," a fallacious but widely used investment formula derived from a single paragraph buried deep in a 1997 Federal Reserve report. Since investors all used the same formula, the P/E ratios were remaining constant. But something happened last September and October to cause investors to become more cautious. As <#inc ww2010.weblog.ref e051006 "I wrote in October,"#> investors had suddenly pushed the P/E ratio from 20 down to the 18-19 range, indicating that they were unwilling to pay as much for the stock of companies with the same earnings as before. Thus, they were unwilling to take as much risk as before. Now, several months later, let's see how the graph as changed: <#inc ww2010.pic pe060120.gif center "" "S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 20-Jan-2006. (Source: MarketGauge ® by DataView, LLC)"#> As you can see, the P/E ratio index has been steady since October, but at the lower 18-19 value. This indicates that the great mass of airhead investors and analysts had changed their formulas to reflect a desire to demand higher earnings for a given stock price. This is one way of measuring investors' "risk averseness"; if they're demanding greater earnings for a given stock price, then they're willing to take less risk, and they're becoming increasingly risk-averse. Actually, if you look at the above graph, you'll see that there was a sharp fall in the P/E ratio index early in 2004, and that it's been falling steadily ever since. =inc ww2010.h2 greenspan "Greenspan's warning" What we're seeing is actually something that Fed Chairman Alan Greenspan <#inc ww2010.weblog.ref e050830 "warned us about last August."#> In <#stdurl http://www.federalreserve.gov/boarddocs/speeches/2005/20050826/default.htm "a speech to central bankers,"#>

We've been going through a "protracted period of low risk premiums," based on "abundant liquidity" resulting from low interest rates and a bubble investor mentality. But now we have "increase investor caution," or increased risk aversion. The result? "[H]istory has not dealt kindly with the aftermath of protracted periods of low risk premiums." =inc ww2010.h2 outlook "The Outlook" So, we're now in a climate of increasing risk-aversion. What happens in that climate if earnings start to fall? The answer is that we'll begin to see "mean reversion" in its most vicious form, since mean reversion also applies to the P/E index itself. The long term average for the P/E index in the above graphs is around 14. It's been well above 14 for over ten years now, and in fact it's reached as high as the 60s for a while. In order to return to the average of 14, it will have to compensate by falling well below 10. In fact, it's been down as low as 5 many times in the last century, so that wouldn't be so unusual. But at a time when earnings are falling, a P/E ratio index of 5 means a DJIA even below the 3,000-4,000 range that I've been predicting on this web site since 2002. If you'd like to see what happened in the Great Depression, take a look at the analysis of the <#hreftext ww2010.i.djia ""Great Depression and the Dow Jones Industrial Average,""#> that I just posted. What you'll see there is how "mean reversion" works at its most vicious: The DJIA actually fell 90% between 1929 and 1932. If the same thing happens this time, and it might, then the market will fall to Dow 1100 by 2009. The only remaining question is when this precipitous fall will begin. While it's impossible to predict when a panic will occur, we've described a number of current factors that indicate that the time is right, right now, for a panic. The things to watch for are continued bad earnings news and increased volatility. Both of these occurred last week. If they continue to occur, they'll indicate that a panic may occur very soon. =eod =// &&2 e060118 Tokyo stock exchange suspends after 3-day Nikkei fall =data ww2010.weblog.y2006.e060118.head Tokyo stock exchange suspends trading to stem heavy selling of shares =data ww2010.weblog.y2006.e060118.keys Tokyo Stock Exchange, Nikkei, Great Depression =data ww2010.weblog.y2006.e060118.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060118.date 18-Jan-06 =data ww2010.weblog.y2006.e060118.txt1 The Nikkei index fell 3.94% on Wednesday, not enough to be called a "panic," =data ww2010.weblog.y2006.e060118.txt2 but enough to raise concerns about a broader selloff. Stocks fell for the third straight day, triggered by <#stdurl http://www.iht.com/articles/2006/01/17/business/bxasia.php "an investigation of a high-flying Japanese internet portal, Livedoor Co."#> The Nikkei index fell 3.94% on Wednesday, and 6.22% for the week. Usually the term "panic" is reserved for selloffs of 10% or more in a short period. Because of the high selling volume, the Tokyo Stock Exchange (TSE) was forced to suspend trading and shut down early, for the first time in its history. The concern is that the selloff will continue when the New York Stock Exchange opens this morning at 9:30 am. As I've discussed many times, <#hreftext ww2010.i.050711eleven "both I and other analysts have computed"#> that the "true value" or book value of the stock market today to be around Dow 4500, which means that the market is overvalued by a factor of more than two -- at about the same level as just before the 1929 stock market crash. The situation is complicated by two additional factors:

Housing prices have been leveling off since August, and the housing bubble finally appears to be bursting. As a point of comparison, <#stdurl http://www.latimes.com/business/la-fi-chinabubble8jan08,0,7585034.story?coll=la-story-footer&track=morenews "housing prices began leveling off in Shanghai in March"#> of last year, and prices in some categories have fallen 50% since then. That big a fall is not expected here, but even a leveling off could have important consequences, since the housing bubble has been fueling the credit bubble and stock market bubble for several years.
Corporate earnings are beginning to show weakness, for the first time in several years. Earnings have been exceptionally high for ten years by historical standards. Average annual long term earnings growth <#hreftext ww2010.i.050711eleven "has been tediously consistent at 11% per year"#> for close to a century, but has been at 18% since 1995. History shows that this exceptionally high earning growth will be compensated in the next few years by average earnings growth of 4% per year. If those lowered earnings rates continue to show up this year, then stock prices will have to fall to keep price/earnings ratios steady.

Investors are very nervous these days, because the stock market is so far overpriced. However, there hasn't been any real sign of panic until the TSE selloff today, and even that sign was muted. If anything serious is going to happen, it will probably happen in the next couple of weeks; otherwise, if things settle down again, then we may have to wait until the next crisis raises concerns again. Since 2002, Generational Dynamics has been predicting that we're entering a new 1930s style Great Depression with the stock market falling to the Dow 3000 to 4000 range, probably by the 2006-2007 time frame. At this point I see no reason to change that prediction. =eod =// &&2 e060116b Europe resigns itself to a nuclear Iran =data ww2010.weblog.y2006.e060116b.head Europe resigns itself to a nuclear Iran =data ww2010.weblog.y2006.e060116b.keys Iran =data ww2010.weblog.y2006.e060116b.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060116b.date 16-Jan-06 =data ww2010.weblog.y2006.e060116b.txt1 Defiant Iran President Mahmoud Ahmadinejad continues to lead Iran to be the regional superpower, =data ww2010.weblog.y2006.e060116b.txt2 as he incites regional antagonism to Israel and insists on developing nuclear material. Early this week, Iran <#inc ww2010.weblog.ref e060111 "broke the seals on its once-secret nuclear facility at Natanz,"#> after a two-year voluntary moratorium on developing nuclear material, and restarted its nuclear fuel enrichment program. This situation represents a significant political failure for Europe and the UN, and an equally significant vindication of American policy. Following the extremely bitter split between Europe and America over the Iraq war, there was a unanimous desire to handle the Iran problem in unified manner. Thus, America left it to the EU3 -- Britain, France and Germany -- to negotiate with Iran to resolve the nuclear issue. The complete failure of the EU3 in those negotiations has sent shock waves through Europe, which now faces the possibility of a hostile nuclear superpower on its doorstep. Thus, Europe now has to consider a <#stdurl http://www.lefigaro.fr/english/20060113.FIG0262.html?200406 "series of disaster scenarios for international crisis."#> The gist of these scenarios is that the Iran situation is referred to the UN security council. The various ministers at the Security Council then bloviate for a few days and either do nothing because Russia and/or China wil block any economic sanctions against Iran, or else some economic sanctions are imposed, but they really do nothing to resolve the situation, especially because Iran is rolling in money from oil. On Sunday, <#stdurl http://news.ft.com/cms/s/8373600e-85ed-11da-bee0-0000779e2340.html "Iran said that the resumption of nuclear research was "irreversible,""#> so only the giddiest politician could possibly believe that anything short of military action will stop Iran from developing nuclear weapons. Iran says that it wants nuclear development only for peaceful purposes -- to build nuclear power plants -- but many in the international community doubt this since Iran's huge reserves of oil mean that Iran doesn't particularly need nuclear power. Furthermore, Iran kept it's nuclear development project secret for almost 20 years, before exiled dissidents exposed it in 2002. In fact, Mohamed ElBaradei, head of the U.N. International Atomic Energy Agency (IAEA), doesn't believe Iran either. On Sunday he said that <#stdurl http://www.alertnet.org/thenews/newsdesk/N15197815.htm "he cannot confirm the peaceful nature of Iran's nuclear program."#> He added: "And if they have the nuclear material and they have a parallel weaponization program along the way, they are really not very far -- a few months -- from a weapon." Thus, we see yet another unstoppable confrontation occurring on the world stage, to add to the <#inc ww2010.weblog.ref e060103 "mounting confrontation between China and Taiwan,"#> and <#inc ww2010.weblog.ref e051230 "North Korea's own inexorable nuclear weapons program."#> President Mahmoud Ahmadinejad added fuel to the fire this week by <#stdurl http://news.bbc.co.uk/2/hi/middle_east/4615172.stm "announcing a plan to host a "holocaust conference":"#> A conference to look at "scientific evidence" and determine whether or not the holocaust was "a myth." On the Sunday morning talk shows, American lawmakers took time off from calling each other names to appear to unite on a policy for Iran. Moderate Republican Senator John McCain said, <#stdurl http://edition.cnn.com/2006/US/01/15/iran.congress/ ""There's only one thing worse than the United States exercising the military option;"#> that is a nuclear-armed Iran. The military option is the last option but cannot be taken off of the table." Democratic Senator Dianne Feinstein agreed with McCain that the military option must remain on the table. "Iran has much more opportunity to create devastation in the Middle East than Iraq at this time," she said. "I think it's a very serious threat." One after another, Republicans and Democrats said the same thing -- Iran is an enormously dangerous international threat, and must be stopped by diplomatic means or, failing that, military action cannot be foreclosed. It's great to see this love-in between Republicans and Democrats. We haven't seen anything as heartwarming as this since Republicans and Democrats all agreed that we should go ahead with the invasion of Iraq. It's well to think of this when we see someone like Congressmen John Murtha make an outlandish claim (see <#inc ww2010.weblog.ref e060116 "previous item, below"#>) that "mounting pressure from constituents in this election year will force Congress" to withdraw from Iraq this year. No such pressure will occur, even in this election year. America is now in a "generational crisis" period, a time of increasing willingness to use confrontation and retribution for problems, rather than compromise and containment. The same is true for Europe and Israel. There seems to be no turning back now. Iran will not back down from nuclear development. Period. America and Israel will not back down from a willingness to use the military option. What France and Germany will do is anyone's guess. So it seems that a military strike on Iran will occur. This appears to be President Mahmoud Ahmadinejad's plan, as I've <#inc ww2010.weblog.ref e060111 "previously discussed."#> Ahmadinejad seems to me to be following this plan:

Inflame the Mideast Muslims by a continuing series of inflammatory statements about Israel;
Inflame the West by continuing nuclear development;
Goad Israel or America to make a nuclear strike on Iran's nuclear development facilities.
Retaliate in some way unknown to us -- for example, he may provide nuclear weapons to Hizbollah to use to strike Israel.
If possible, trigger a major Arab-Israeli war that would engulf the region. Iran would stay out of this war except to supply weapons, and would come out of the war as the "last nation standing."
Let Iran take its place as the major regional superpower in the entire Mideast region.

This vision of a future great Iran is exactly the kind of plan that makes sense for a youthful, vibrant leader of Iran during its own generational awakening period. From the point of view of Generational Dynamics, there will be a major new genocidal Arab - Israeli war, refighting the genocidal wars of the late 1940s. Generational Dynamics also predicts that we're headed for a new "clash of civilizations" world war. As I've said many times, Generational Dynamics tells us what our destination is, but now how we'll get there. We can only look at day-to-day news stories to help us guess exactly what that route will be. Since the election of Ahmadinejad, we see a new possible scenario emerging. In this scenario, Iran plays a key catalyst role in bringing about the inevitable regional war in the Mideast. Furthermore, we can easily imagine a alliance between Iran and China, linking them together in a new plan to emerge with China the major superpower in the Pacific and Iran the major superpower in the Mideast. It's a frightening plan, and right now it's hard to see what can be done to stop it. =eod =// &&2 e060116 John Murtha predicts quick American withdrawal from Iraq =data ww2010.weblog.y2006.e060116.head Congressman John Murtha predicts quick American withdrawal from Iraq =data ww2010.weblog.y2006.e060116.keys John Murtha, Cindy Sheehan, antiwar movement =data ww2010.weblog.y2006.e060116.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060116.date 16-Jan-06 =data ww2010.weblog.y2006.e060116.txt1 Speaking in a "60 Minutes" interview on Sunday, =data ww2010.weblog.y2006.e060116.txt2 the 73-year-old Pennsylvania Democrat, a decorated Vietnam war veteran, <#stdurl http://www.cbsnews.com/stories/2006/01/13/60minutes/main1208423.shtml "said that troops will be withdrawn from Iraq sooner than we think."#> He said: "Our troops have become the primary target of the insurgency. They are united against U.S. forces, and we have become a catalyst for violence. My plan calls for an immediate redeployment of U.S. troops consistent with the safety of U.S. forces." In the interview, he said that mounting pressure from constituents in this election year will force Congress to pass his withdrawal plan, or something similar to bring troops home. This interview is worth reading because it's a perfect example of living in the 60s and 70s. Regular readers of this web site know that since 2002 we've been predicting that there would be no significant antiwar movement. Every time something spurts up, it dies quickly. For example, in August pundits were predicting a <#inc ww2010.weblog.ref e050819 "massive resurgence of the antiwar movement, thanks to Cindy Sheehan."#> Today, Cindy Sheehan is almost gone from public view. Now Murtha is poking his head up again, claiming that "mounting pressure from constituents in this election year will force Congress" to pass a withdrawal plan. Why don't these people ever learn? Every claim of this sort for years has turned out to be completely wrong. And the clearest indication is that there are no college students demonstrating for a withdrawal. Although Murtha has not previously been an antiwar activist, he's now joining other aging antiwar activists who may recall that in the 1960s and 1970s, the antiwar movement was led by college students, not by old men and women. That's because <#hreftext ww2010.i.sixties040501 "America was in a "generational awakening" period in the 1960s-70s."#> The "baby boomer" generation attending college at that time pursued the antiwar movement, the women's lib movement, the anti-racism movement, the environmental movement, and so forth. Today, it's that same "baby boomer" generation that's trying to stir up an antiwar movement, but now they're old men and women, and as far as college students are concerned, they're like dinosaurs fighting each other, and they really don't care which dinosaur wins. Thus, as we've said repeatedly, Generational Dynamics predicts that there will be no significant antiwar movement, even in this election year. =eod =// &&2 e060112 Human bird flu becomes widespread in Turkey =data ww2010.weblog.y2006.e060112.head Human bird flu becomes widespread and firmly established in Turkey =data ww2010.weblog.y2006.e060112.keys Turkey, bird flu =data ww2010.weblog.y2006.e060112.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060112.date 12-Jan-06 =data ww2010.weblog.y2006.e060112.txt1 With 100+ suspected and confirmed human cases, and thousands of dead birds across the country, =data ww2010.weblog.y2006.e060112.txt2 the United Nations <#stdurl www.fao.org "Food and Agriculture Organization (FAO)"#> has issued a <#stdurl http://www.fao.org/newsroom/en/news/2006/1000208/index.html "press release"#> warning that bird flu "could become endemic" to Turkey, and could threaten neighboring countries. FAO is warning these countries, including Armenia, Azerbaijan, Georgia, Iraq, Iran and Syria, to be on high alert. <#inc ww2010.pic turkbf.jpg right "" "Human H5N1 in Turkey. For each province, the number above the line is confirmed cases of H5N1 in humans, and below the line is the number of suspected cases awaiting tests. (Source: sabah.com.tr)"#> As the adjoining map shows, human bird flu has become widespread across Turkey. It is believed that all the cases came from contact with infected birds, especially in the case of children who play with these birds. It is not believed that any of the cases involve human to human transmission of the virus. The rapid spread in Turkey of bird flu in birds and now humans has been a surprise to many officials. It now appears to be most likely that <#stdurl http://www.recombinomics.com/News/01070602/H5N1_Turkey_October.html "bird flu has been spreading among birds in Turkey since October,"#> but hasn't been reported. Discovering bird flu in birds requires a nationwide testing program, something that few countries are doing yet. Thus, when the virus spreads to humans, it's an unexpected surprise. Many experts suspect that bird flu has spread to birds in countries in Africa, without being reported yet. The situation in Turkey has alarmed <#stdurl http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1136978165910&call_pageid=968332188492&col=968793972154&t=TS_Home "officials in countries from Greece to Russia,"#> who are taking additional precautions to prevent the disease from spreading beyond Turkey's borders. One Russian legislator, known for his flamboyance, told a parliament session that Russia should become a no-fly zone for migratory birds from Turkey. “We must force the government to stop the bird migration,” he said. “We must shoot all birds, field all our men and troops ... and force migratory birds to stay where they are.” All joking aside, we're now entering the most dangerous period of the year for the potential mutation of the highly pathenogenic H5N1 virus to a human to human transmissible form, for <#inc ww2010.weblog.ref e051113 "reasons that I've previously discussed."#> This would cause a worldwide pandemic. Experts are encouraging people to prepare for an H5N1 pandemic by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e060111 Iran appears to be positioning itself as a post-war superpower =data ww2010.weblog.y2006.e060111.head Iran appears to be positioning itself as a post-war superpower =data ww2010.weblog.y2006.e060111.keys Iran, Israel, nuclear enrichment =data ww2010.weblog.y2006.e060111.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060111.date 11-Jan-06 =data ww2010.weblog.y2006.e060111.txt1 Iran restarts its nuclear enrichment program while calling for Israel's removal. =data ww2010.weblog.y2006.e060111.txt2 <#inc ww2010.pic ahmad3.jpg right "" "Mahmoud Ahmadinejad (Source: irna.ir)"#> Last October, when Iran's new President, Mahmoud Ahmadinejad, <#stdurl http://www.iht.com/articles/2005/10/26/news/mideast.php "spoke to students at a conference, "The World Without Zionism,""#> he called for Israel to be "wiped off the map," and called for a new wave of Palestinian attacks to "wipe off this stigma from the face of the Islamic world." Ahmadinejad's words shocked the world, including France and Russia. Journalists scrambled to try to explain it. "I think that it's due to Ahmadinejad's naïveté," <#stdurl http://www.csmonitor.com/2005/1101/p01s02-wome.html "said one analyst, referring to the short time he'd been President."#> Others explained that similar attacks on Israel are common throughout the Muslim world, and the only difference with Ahmadinejad is that he forgot that he was a head of state, and so people actually cared what he said. It was easy to excuse Ahmadinejad in that way, since it seemed a reasonable explanation. But since then Ahmadinejad has made <#stdurl http://www.voanews.com/uspolicy/2005-12-13-voa5.cfm "a series of statements about Israel that have continued to outrage"#> almost everyone outside the Muslim world. In these statements, Ahmadinejad said that Israel should be pushed into the sea, that the Holocaust never happened, and that the entire state of Israel should be moved to Europe or Alaska. It's no longer possible to assume that these are just naïve statements of a new President. =inc ww2010.h2 nuclear "Nuclear brinkmanship" However, this was all just words until Tuesday, when Iran restarted its nuclear enrichment program. Iran claims that the program is for peaceful energy development, and <#stdurl http://news.bbc.co.uk/go/pr/fr/-/2/hi/middle_east/4600404.stm "peaceful nuclear energy development is very popular with the Iranian people."#> But the nuclear fuel is dual-purpose, usable for both electric power generation and nuclear weapons. It's hard to overestimate the effect this has had. Incredibly, Iran has actually united countries as ideologically different as America, France, Germany, Russia, the UN and the EU -- all opposed to Iran's nuclear plans, and threatening a "serious response" if Iran took the steps it finally took yesterday. By "serious response," these governments mean referring the situation to the UN Security Council, where sanctions will be imposed on Iran, provided that China doesn't veto the sanctions, which it will. And what would the sanctions be, anyway? Iran supplies a great deal of oil to the world, and if the "sanction" were to forbid Iran to sell oil, then the price of oil would go up even higher. So the threat to the refer the situation appears to be an empty threat. There's a very great deal at stake. If Iran continues with its nuclear program and builds nuclear weapons, then the entire region -- the Mideast, Europe and Western Asia -- will be threatened. This brings us to the other possible "serious response": There have been numerous rumors and leaks about plans to bomb Iran's nuclear facilities. Israel has been openly hinting at <#stdurl http://www.timesonline.co.uk/article/0,,2089-1920074,00.html "bombing Iran's nuclear facilities by March, 2006,"#> for several months. Israel previously bombed Iraq's nuclear facilities -- in 1981, when Iraq was developing nuclear weapons at Osirak. Even more, one <#stdurl http://www.globalresearch.ca/index.php?context=viewArticle&code=%20CH20060103&articleId=1714 "lengthy analysis by the Canadian thinktank Global Research,"#> predicts a massive "shock and awe" bombing campaign, conducted by the US, Israel and Turkey, which they say is being planned for Iran's nuclear facilities. According to the analysis, which no one has confirmed, the Europeans and even some Muslim countries are in accord with the plan. Iran is certainly aware of all these threats, but is going ahead with the nuclear program anyway. "The policy of Iran is completely defensive, but if we are attacked, the answer of the armed forces will be swift, firm and destructive," <#stdurl http://english.aljazeera.net/NR/exeres/B1DD4722-C5D2-4320-BFB1-B1749223E52E.htm "says Mostafa Mohammad Najjar, Iranian defence minister."#> =inc ww2010.h2 upto "What is Iran up to?" The fact is that Iran, and especially President Ahmadinejad, have been acting as provocatively and even offensively as possible. The threat to "wipe Israel off the map" may or may not have been a faux pax, but there's no doubt at all the subsequent statements in a similar vein were no accident, and were done on purpose. But for what purpose? And are those statements related to the nuclear development plans? The following possible explanation is speculative. It certainly is not a prediction, but is consistent with Iran's recent behavior. From the point of view of Generational Dynamics, Iran is in a "different place" then the Western nations that it's currently confronting. <#inc ww2010.pic ahmad2.jpg left "" "President Mahmoud Ahmadinejad of Iran(Source: Mardomyar.ir )"#> Iran is entering a "generational awakening" period, just as <#hreftext ww2010.i.sixties040501 "America was in the 1960s."#> Iran today is one generation past the genocidal Iran/Iraq war of the 1980s, just as America in the 1960s was one generation after World War II. Like President John F. Kennedy, elected in 1960, we can see the young, charismatic Mahmoud Ahmadinejad in a position to change Iran's direction, as the country enters its generational awakening. By contrast, America, Europe, and the West are all in a "generational crisis" period, increasing confrontation and willing to fight, rather than compromise to solve problems. There are many differences between countries in awakening versus crisis eras, as has been shown throughout history in many countries. When a country goes to war during a generational crisis period (like World War II and the Civil War for America), the war is likely to be extremely violent, bloody and genocidal, resulting in massive historical changes. When a country goes to war during an awakening era, it's much more careful and canny, willing to win by deception rather than by genocidal fighting. That's where Iran is today. So the speculative scenario is this:

Ahmadinejad and Iran are trying to be as provocative and threatening as possible, with the intention of goading or provoking the West into the bombing of Iran's nuclear facilities.
Iran seems to have some specific retaliation in mind when it says that "the answer of the armed forces will be swift, firm and destructive." I have no idea what this would be, but, for example, perhaps Iran has already smuggled a nuclear weapon into Israel. The bombing of Iran's nuclear facilities would give Iran the excuse to detonate such a weapon, or to do pretty much anything it pleased.
If there's a major regional war between Arabs and Jews, the adjoining map shows that it's very likely that Ahmadinejad will get his wish, and Israel will be wiped off the map, since Israel is just a teeny, tiny red dot in the midst of an ocean of Muslim countries. Ahmadinejad may hope to trigger such a war, but keep Iran out of the major fighting (which would be natural during its generational awakening era).
This would leave Iran as the "last country standing" in the region, making Iran the leading superpower for the entire Mideast.

This scenario may seem farfetched, but when you think about it, it's not much more farfetched than what's actually going on. Ahmadinejad seems to be doing everything he can to provoke a bombing campaign against Iran, and such a bombing campaign will surely come. Ahmadinejad will certainly not just still and allow Iran to be bombed without some kind of retaliation, and the scenario described above is one of the few that appears to be consistent with everything that's going on. =eod =// &&2 e060109 Young July 7 London subway bomber was a wealthy man =data ww2010.weblog.y2006.e060109.head Young July 7 London subway bomber was a wealthy man =data ww2010.weblog.y2006.e060109.keys Shehzad Tanweer, London subway bombings =data ww2010.weblog.y2006.e060109.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060109.date 9-Jan-06 =data ww2010.weblog.y2006.e060109.txt1 Scotland Yard was shocked to find suicide bomber Shehzad Tanweer left behind a bank account =data ww2010.weblog.y2006.e060109.txt2 <#stdurl http://www.thesun.co.uk/article/0,,2-2006000715,00.html "containing £121,000 (US $214,315)."#> <#inc ww2010.pic tanweer.jpg right "" "Suicide bomber Shehzad Tanweer (Source: The Sun)"#> On July 7 of last year, <#inc ww2010.weblog.ref e050715 "Tanweer was one of the four London subway bombers,"#> killing 56 people and wounding over 700. They were all native-born young men whose parents had emigrated from Pakistan. Even their own parents and neighbors were shocked by what they did. Tanweer was a 22-year-old cricket lover who worked in a fast-food fish and chip shop owned by his parents. Tanweer's father, Mohammed Mumtaz Tanweer, <#stdurl http://www.telegraph.co.uk/news/main.jhtml;jsessionid=53Z1HUXN32LVBQFIQMGSFFWAVCBQWIV0?xml=/news/2005/10/30/nbomb30.xml "spoke out for the first time last year at his son's funeral."#> "All the bombings and killings were awful. Only the group of four [bombers] or God alone knows why they carried out this terrible act." He added: "As far as I can understand, my son was more British in his orientation than anything else. He has planned his career in sport. Even on the night before he died, he was playing cricket." It's not known how Tanweer obtained this money. One possibility is that <#stdurl http://news.scotsman.com/uk.cfm?id=26402006 Tanweer may have been holding funding intended to be used for acts of terrorism."#> Tanweer's fortune is a mystery to Scotland Yard, but only one of <#stdurl http://news.independent.co.uk/uk/crime/article337244.ece "several mysteries about the 7/7 subway bombings that remain unsolved,"#> including the question of who masterminded the attack. From the point of view of Generational Dynamics, the July 7 London subway bombings have exposed new generational patterns that explain why suicide bombers do what they do. Generational Dynamics cannot predict the attitudes and behaviors of any individual, since each individual is free to do what he or she wants. But we're seeing that suicide bombers only come from societies that have entered generational crisis periods, and not before. This indicates that the generational crisis period changes society so that it makes the creation of suicide bombers possible. Further findings, obtained by combining Generational Dynamics research with <#hreftext ww2010.i.050718pape "Robert Pape's study of suicide bombers, published in the new book Dying to Win,"#> we find that suicide bombers justify their terrorist acts as "altruistic suicide." Pape found that suicide bombers most likely come from countries occupied by another country, and his research shows that they come overwhelming from countries that have passed through a generational crisis era without having a crisis war. In these countries, the parents have accepted the occupation, albeit bitterly and reluctantly. But their impatient children take it upon themselves to free their parents' generation from this occupation by this unique form of altruistic suicide. =eod =// &&2 e060105 Ariel Sharon nears death as his political career ends =data ww2010.weblog.y2006.e060105.head Ariel Sharon nears death as his political career ends =data ww2010.weblog.y2006.e060105.keys Ariel Sharon, Yasser Arafat, Israel =data ww2010.weblog.y2006.e060105.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060105.date 5-Jan-06 =data ww2010.weblog.y2006.e060105.txt1 Now both Ariel Sharon and Yasser Arafat are gone, and the Mideast descends into chaos. =data ww2010.weblog.y2006.e060105.txt2 Several years ago, I wrote that Generational Analysis predicts that <#hreftext ww2010.i.may01 "the Mideast peace plan of side-by-side Jewish and Palestinian states"#> would fail, with almost mathematical certainty. I added the following about Israeli Prime Minister Ariel Sharon and Palestinian Authority President Yassir Arafat:

"These two men hate each other, but they're the ones cooperating with each other (consciously or not) to prevent a major Mideast conflagration. Both of them remember the [genocidal Arab - Jewish] wars of the 1940s, and neither of them wants to see anything like that happen again. And it won't happen again, as long as both of these men are in charge. The disappearance of these two men will be part of an overall generational change in the Mideast that will lead to a major conflagration within a few years. It's possible that the disappearance of Arafat alone will trigger a war, just as the election of Lincoln ignited the American Civil War. (It's currently American policy to get rid of Arafat. My response is this: Be careful what you wish for.)"

It's now been <#inc ww2010.weblog.ref e041114 "a little more than a year since Arafat died,"#> and hardly a day goes by that the violence and chaos doesn't get worse. Indeed, things are going from bad to worse:

The Lebanese militia group Hizbullah will be stepping up its terrorist attacks on Israel this year, according to <#stdurl http://www.ynetnews.com/articles/0,7340,L-3193462,00.html "analysis by Israeli Military Intelligence."#> More about this below.
Gaza is <#stdurl http://news.bbc.co.uk/go/pr/fr/-/2/hi/middle_east/4581334.stm "descending into total anarchy,"#> as the Palestinian Authority government under Mahmoud Abbas, Arafat's successor, continues to disintegrate from within. <#inc ww2010.weblog.ref e050914 "Weapons have been pouring in from Egypt,"#> and the region is effectively under control of Hamas and other militia groups. Yesterday, <#stdurl http://msnbc.msn.com/id/10688786/ "militia groups engaged Egyptian troops on the border,"#> killing two. This is significant because Egypt has carefully avoided going anywhere near Gaza for 30 years, for fear of triggering a war with either Israel or the Palestinians, and now Egypt is becoming significantly more involved on a day to day basis.
Iranian President Mahmoud Ahmadinejad has made <#stdurl http://www.voanews.com/uspolicy/2005-12-13-voa5.cfm "a series of statements about Israel that have outraged even the Europeans."#> In these statements, Ahmadinejad said that Israel should be pushed into the sea, that the Holocaust never happened, and that the entire state of Israel should be moved to Europe or Alaska. Iran has also indicated that it plans to go ahead developing the technology to build nuclear weapons, despite outrage from America, Europe, and even Russia. Ahmadinejad appears to be trying to goad Israel or America into making an air strike on Iran, since <#stdurl http://english.aljazeera.net/NR/exeres/B1DD4722-C5D2-4320-BFB1-B1749223E52E.htm "he seems to believe that he has a devastating counterattack in his arsenal."#>
Abu Musab al-Zarqawi, the terrorist leader of "al-Qaeda Mesopotamia" or "al-Qaeda in Iraq" is <#stdurl http://www.ynetnews.com/articles/0,7340,L-3194487,00.html "is redirecting his operations increasingly toward Israel."#> Recent operations include <#inc ww2010.weblog.ref e051115 "the bombing of an Amman, Jordan, hotel on November 9,"#> and the <#inc ww2010.weblog.ref e050723 "the massive bombing at the Egyptian Red Sea resort of Sharm el-Sheikh."#>

These specific incidents could not have been predicted by Generational Dynamics, but the failure of the Mideast peace plan and the inevitable drift to a major regional war is an easy prediction that can be made by applying the principles of Generational Dynamics. I'm not a psychic and don't have any special power, and yet I got this prediction right, and in fact anyone could have applied the same principles and reached the same conclusions. It was a year ago at this time that I had discussions, in person and through e-mail, with several people who essentially told me I was nuts. With Arafat gone, they told me, the Palestinians would get increasingly peaceful. My explanations of the generational changes that brought the increasingly militant "young guard" into power had no effect on these people, who evidently thought they were hearing the words of a raving maniac. And yet, here we are, and my predictions have come true. In fact, every prediction made on this web site in the last three years has either come true or is coming true; not a single one has been proven wrong. It's not magic. It's all done by straightforward application of simple principles of Generational Dynamics that are clearly explained on this web site. So yesterday the news was that <#stdurl http://www.haaretz.com/hasen/spages/666364.html "Ariel Sharon may be near death after suffering a massive stroke."#> We can expect the disappearance of Sharon from Israeli politics to have the same kind of effect that the disappearance of Arafat had on Palestine. Not that Israel will descend into anarchy controlled by lawless militias, but that the Israeli government will descend into dysfunctional political anarchy, like Palestine, Europe and America. This is a theme that <#inc ww2010.weblog.ref e051218 "I've discussing frequently lately."#> In country after country that fought in World War II, as the generation of leaders who grew up during that war are all disappearing (retiring or dying) all at once, each country is becoming politically paralyzed. Israel has been one of the few countries left that could actually accomplish something (withdraw from Gaza, build the barrier around Israel), as long as Ariel Sharon, born in 1928, was in charge. There is <#stdurl http://news.bbc.co.uk/2/hi/middle_east/4582842.stm "no one in Israel who can replace Sharon."#> Whether you consider him a hero or a terrorist, from the point of view of Generational Dynamics there is no doubt at all that he was pursuing an aggressive policy to make Israel safe, with or without a Palestinian state. Without Sharon, all of those policies will be frozen in place, or will continue on "cruise control" until they collapse. Let's take one example of how they might collapse, by returning to one of the items listed above, that the militia group Hizbullah will be stepping up its terrorist attacks on Israel this year. According to the <#stdurl http://www.ynetnews.com/articles/0,7340,L-3193462,00.html "analysis by Israeli Military Intelligence,"#> Hizbullah Chief Hasan Nasrallah plans a 'controlled escalation' in 2006, and he sees the northern front as a controlled front in which Israel will not 'go mad.' This kind of "controlled escalation" is something that Sharon could handle in a controlled way himself. He lived through the genocidal Arab-Jewish wars of the late 1940s, and developed the wisdom and skill to respond to an escalation without triggering a new war like the one in the 1940s. But the people who will replace him won't have those skills, and will make heavy-handed responses that cause much greater escalations than Nasrallah had contemplated. Once the right kind of miscalculation occurs on either side, a small escalation can quickly escalate into all out war. From the point of view of Generational Dynamics, nothing has changed. The Mideast is headed for a new, genocidal war between Arabs and Jews, probably sooner rather than later. This war will draw in countries from the entire region, as well as Europe and America, leading to a "clash of civilizations" world war. The incapacitation of Ariel Sharon gives us some information about how the Generational Dynamics prediction will come about. =eod =// &&2 e060104 Kyoto protocol dead as European countries fail to comply =data ww2010.weblog.y2006.e060104.head Kyoto protocol is evidently dead as European countries fail to comply =data ww2010.weblog.y2006.e060104.keys Kyoto protocol, England, Sweden, Darfur =data ww2010.weblog.y2006.e060104.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060104.date 4-Jan-06 =data ww2010.weblog.y2006.e060104.txt1 Among the EU countries, only UK and Sweden are on target to meet requirements, =data ww2010.weblog.y2006.e060104.txt2 according to <#stdurl http://www.forbes.com/markets/feeds/afx/2005/12/27/afx2415140.html "a study by a UK-based environmental think-tank."#> According to the <#stdurl http://www.ippr.org "Institute for Public Policy Research (IPPR),"#> all of the 13 other EU countries are either coming no closer to their targets, or are actually slipping farther behind by increasing, rather than reducing, their carbon dioxide emissions. In fact, <#stdurl http://news.independent.co.uk/environment/article335198.ece "Britain itself has recently been increasing its carbon dioxide emissions,"#> but is still on target because of a quirk in the way the treaty was set up, according to the BBC World Service: It's based on 1990 carbon dioxide emission levels, and Britain decreased its emissions in the early 1990s when it made a major switch from using coal to using gas in producing energy. However, since that switch, emissions have been increasing. The irony about this is that <#stdurl http://www.japantimes.co.jp/cgi-bin/geted.pl5?ed20051226a1.htm "United States has been repeatedly condemned by countries around the world,"#> including the EU countries, for refusing to sign the Kyoto treaty. (Among the major developed countries, <#stdurl http://www.news.com.au/story/0,10117,17727129-2,00.html?from=newsquote1 "only America and Australia have failed to sign."#>) The drama was really great at an international meeting early in December, when America refused to even participate in meetings about signing the treaty, and was skewered by country after country, including most EU countries. Adoption of the Kyoto protocol has been fraught with problems. In mid-December, <#stdurl http://www.alertnet.org/thenews/newsdesk/KLR107460.htm "New Zealand scrapped the protocol"#> as unworkable. Interestingly, about half of its greenhouse gases come from the methane and carbon-dioxide emissions generated by more than 50 million sheep and cattle. The Kyoto protocol treaty has been a cynical political joke. Russia signed the protocol in 2004, but only because <#stdurl http://www.iht.com/articles/2005/12/27/business/kyoto.php "Russia stands to make billions of dollars from the treaty."#> Once again, this is because of the same quirk in the treaty, because Russian industries have been converting from coal to oil. China and India also signed the treaty. They produce enormous amounts of pollution, but they're excused from the treaty requirements because they're "developing countries." And so it goes. Another ridiculous display by politicians around the world. Indeed, the Kyoto protocol requirements could never have been met. Generational Dynamics shows that energy usage grows exponentially over time, and it's impossible to stop with a tax. Only new technologies will solve the problem. Politics will have no effect whatsoever. It reminds me of the G-8 meeting last June, where the "richest" countries of the world vowed to cure poverty in Africa during the next decade. But the sheer size of Africa makes that impossible, <#inc ww2010.weblog.ref e050612 "as I explained at length at the time,"#> and the politicians know it. But they all patted themselves on the back for making promises that they knew could not be fulfilled. Or, how about the genocidal war in Darfur, Sudan? From the point of view of Generational Dynamics, it was clearly a genocidal crisis war, based on fault lines defined by race, skin color, religion and ethnicity. When the news broke last year in June, 2004, <#inc ww2010.weblog.ref e040628 "I predicted"#> that the UN would fail to stop the war before it runs its course. This kind of genocidal crisis war is a force of nature, and that the UN can no more stop it than they can stop a typhoon. As I predicted, the United Nations did absolutely nothing to stop the genocide. but the U.N. solved its political problem a year ago by <#inc ww2010.weblog.ref e050201 "declaring that the Darfur was was "not genocide,""#> despite the mass murders and rapes and forced relocation of millions of people. It was a sickeningly cynical political act by the United Nations, an organization that's evidently incapable of doing anything that isn't sickeningly cynical. As I've said before, Generational Dynamics and this web site do not take political sides. I think that pretty much all politicians -- Republican or Democrat, left or right, liberal or conservative -- act like idiots most of the time. This political paralysis is occurring around the world, especially in the countries that fought in WW II. The effect of this political paralysis is to allow political decisions to be made by younger generations of terrorists and extremists. If anything good comes out of this morass is that the ridiculous Kyoto treaty may finally be shown to be dead, but the demise of the Kyoto treaty shows how world paralysis is leading to a new world war. =eod =// &&2 e060103 China and Taiwan step closer to military confrontation =data ww2010.weblog.y2006.e060103.head China and Taiwan step closer to military confrontation =data ww2010.weblog.y2006.e060103.keys Taiwan, China, Chen Shui-bian =data ww2010.weblog.y2006.e060103.loc ww2010.weblog.log0601 =data ww2010.weblog.y2006.e060103.date 3-Jan-06 =data ww2010.weblog.y2006.e060103.txt1 Taiwan President Chen Shui-bian took the offensive on Sunday, =data ww2010.weblog.y2006.e060103.txt2 New Year's Day, in a live television address to the nation. Chen <#stdurl http://www.thestandard.com.hk/news_detail.asp?pp_cat=5&art_id=8953&sid=6097277&con_type=1 "called for parliamentary passage of a multibillion dollar arms package,"#> pointing to increased Chinese militarism:

"At present, the Chinese People's Liberation Army has deployed 784 ballistic missiles targeting Taiwan along the coast across the Taiwan Strait. "Recent reports on the military power of the People's Republic of China, published by the United States and Japan respectively, have made it very clear that China's military development evidently exceeds the reasonable scope of its defense needs. "In the face of such imminent and obvious threat, Taiwan must not rest its faith on chance or harbor any illusions. We shall seriously contemplate how our self-defense capabilities can be strengthened and how to effectively respond to the gradual tipping of military power across the strait in favor of China."

More significant, though, was Chen's pledge to go ahead with his plan for Constitutional reform immediately -- an indirect promise to move toward full independence from China. <#stdurl http://www.voanews.com/english/2006-01-01-voa4.cfm "He made repeated references to "Taiwan consciousness,""#> and said he will stick with his four principles of sovereignty, democracy, peace and parity. He said this is the wish of Taiwan's people. <#inc ww2010.pic taigraph.gif right "" "Taiwan poll results to question: "Do you feel Taiwanese, Chinese or both?" (Source: WSJ)"#> Indeed it is the wish of Taiwan's people, because of generational changes in Taiwan. The adjoining graph, which shows the number of Taiwanese who call themselves "Chinese" versus "Taiwanese" shows how the generational change is playing out. As the older generation dies out, the number of people calling them "Chinese" has been decreasing; as younger generations grow older, the number of people calling themselves "Taiwanese" is increasing. This change was noticed 1½ years ago by Singapore Prime Minister Lee Hsien Loong, <#hreftext ww2010.i.taiwan040823 "in a televised speech,"#> after a visit to Taiwan:

I came back from Taiwan more troubled than before I went. The ruling party, ... is preoccupied with domestic politics. .... The [opposition party] is preoccupied with challenging the results of the presidential election.... Neither side has had time to think about Taiwan's longer-term future, how to manage relations with China, how best to reconcile the aspirations of the Taiwanese people with the realities of their international position. There is a stronger Taiwanese identity emerging. More people are speaking in the Taiwanese dialect, or hollow whey. Before Lee Teng-hui and Chen Shui-bian became presidents, most Taiwanese people considered themselves Chinese. Now many think of themselves as Taiwanese, not Chinese. Some [ruling party] leaders told me that they believe a majority of people now support an independent Taiwan and that this has become a mainstream view. From the point of view of Generational Dynamics, this is the type of generational change that always occurs during a "generational crisis" period. The violent, genocidal civil war that led to the government on Taiwan ended in 1949. The people who lived through that war are willing to do anything to keep another such war from occurring, so they tend to identify with the Chinese mainland; those born after the war, with no personal memory of it, have no fear of another war, and are more willing to identify themselves as being "Taiwanese." A similar generational change is taking place in China. The most noticeable sign of this is the dramatic increase in regional mass riots. These riots are increasingly common in China, <#inc ww2010.weblog.ref e051211 "with 74,000 riots occurring in 2004, according to Chinese officials."#> In a widely reported recent incident in Dongzhou, about 80 miles from Hong Kong, a protest by 10,000 villagers was put down by Chinese security police, who killed several dozen villagers. As I wrote last January, <#hreftext ww2010.i.china050116 "China's society is unraveling and headed for civil war,"#> and this trend will only accelerate as the generation of mainland people who lived through the same civil war disappear. China's position on Taiwan is also becoming increasingly hardline. The most dramatic example was <#inc ww2010.weblog.ref e050308 "China's Anti-Secession law,"#> which guaranteed Chinese military action in case of any Taiwanese moves towards independence -- such as moving forward on Constitutional reform. This law, passed in March, caused <#inc ww2010.weblog.ref e050327 "massive public demonstrations in Taiwan,"#> the largest in history. On January 3, China made <#stdurl http://news.xinhuanet.com/english/2006-01/03/content_4002596.htm "an initial response to Chen's speech"#> through an analysis in the state-controlled media:

However, the "Taiwan independence" camp has not stopped its activities. Neither has the cause of tension across the Straits been uprooted. There is no room for blind optimism about cross-Straits relations in 2006. The opposition and containment of the "Taiwan independence" movement and its activities will remain the most pressing challenge for compatriots on both sides of the Taiwan Straits. The Chen Shui-bian administration still clings to its "Taiwan independence" stand and remains active in pushing the task forward. The most dangerous of such manoeuvres is, of course, the efforts to "legitimize Taiwan independence" through the so-called "constitutional change." There is still a force in the world offering military as well as political support to the Taiwan regime in its rivalry against the mainland and, by doing so, sending the wrong signal to the "Taiwan independence" camp. For instance, the United States has been selling advanced weapons to and conducting military co-operation with Taiwan. A confrontation between Taiwan and Beijing in 2006 has been building for several years because of Chen's stated constitutional reform plans for this year. For all that time, there's been a debate among academics whether an actual confrontation would take place. For example, one <#stdurl http://www.tp.org.tw/eletter/story.htm?id=20004363 "2004 study by a Taiwanese professor"#> said that a Chinese invasion of Taiwan would not take place in 2006. He gives several reasons, the most important of which is that China believes that it's becoming militarily stronger and America is becoming militarily weaker. The most intriguing argument is that China can't invade in 2006 because it doesn't want to do anything to derail the prestige it will receive from hosting the Olympics in 2008. However, these arguments are naïve because they overlook the generational situation. The argument about the Chinese Olympics is particularly naïve; if it were true, then anyone could blackmail Beijing in 2006 and 2007 with no fear of retribution from a China more concerned about the Olympics. That's silly. People think that "cooler heads will prevail" on both sides, rather than risk a war that could be devastating for Taiwan, and trigger war with America. The implication is that people will think things over, and compromise rather than risk war. But that isn't what happens during a generational crisis period. All sides become more and more hardline during a crisis period, since the generational changes cannot be reversed. Instead of cooler heads prevailing, it happens more and more that confrontational heads prevail. A war could happen anytime, by miscalculation. If China believes that it has the ability to launch a lightning fast military takeover of Taiwan before the U.S. could respond, it would do so, miscalculating the U.S. response. An American response would be swift but overconfident, and a miscalculation might underestimate the strength of China's capabilities. =eod =// &&2 e051230 North Korea exporting women into slavery =data ww2010.weblog.y2005.e051230.head North Korea exporting women into slavery =data ww2010.weblog.y2005.e051230.keys North Korea, slavery =data ww2010.weblog.y2005.e051230.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051230.date 30-Dec-05 =data ww2010.weblog.y2005.e051230.txt1 10,000 to 15,000 North Koreans, mostly women, are working as slaves =data ww2010.weblog.y2005.e051230.txt2 <#stdurl http://seattletimes.nwsource.com/html/nationworld/2002707584_koreans28.html "in Russia, Libya, Bulgaria, Saudi Arabia, Angola, and Czech Republic."#> They perform a variety of jobs, from nursing to textile manufacturing to construction work, under the strict 24-hour a day supervison of North Korean security guards. After each day's work, they're herded back into dormitories. Their earnings, around $260 per month, are automatically deposited directly into an account controlled by the North Korean government. North Korea, a dictatorial Communist state, is one of the poorest nations in the world. The government gains hard currency from a variety of criminal enterprises including counterfeiting, drug trading, weapons sales, and now commerce in slavery. President Kim has been getting increasingly erratic in recent years. Starting in 2003, Pyongyang has claimed that the U.S. was about to attack North Korea preemptively, and Kim has taken a number of hostile steps, including mobilizing for war, and developing nuclear weapons and long-range missiles. Early in 2005, North Korea began <#inc ww2010.weblog.ref e050610 "blocking all international communications,"#> confiscating 20,000 cell phones and shutting down the internet for most citizens. Even more bizarre, in September <#inc ww2010.weblog.ref e050926b "North Korea demanded an end to U.N. food aid."#> Evidently, Kim objected to U.N. inspectors doing hundreds of spot checks to make sure that the food is being distributed honestly. All of these steps further isolate the North Korean people from the rest of the world. North Korea's statements and actions indicate that a preemptive attack by North Korea could occur at any time. The constant claims that the U.S. is planning a nuclear attack on North Korea prepares the population for a preemptive attack on South Korea or Japan; and the increasing isolation, which Kim is implementing in every way possible, permits military mobilization, including nuclear weapons development, to continue in secret. A starving population is the most dangerous force in the world, especially during a generational crisis period, which is where North Korea is now on the generational timeline, since it can lead to a violent uprising and civil war. (During a generational awakening or unraveling period, it might lead only to rioting or low-level violence; but during a generational crisis period, a full-scale civil war is likely.) This makes North Korea, along with China, the two most dangerous nations in the world. From the point of view of Generational Dynamics, North and South Korea are headed for a violent war of reunification, and the most likely scenario is that it will be launched preemptively by North Korea, led by North Korean President Kim Jong-il. This might happen next month, next year, or soon thereafter. =eod =// &&2 e051227 Tom Brokaw stocking food etc for bird flu =data ww2010.weblog.y2005.e051227.head Tom Brokaw says that he's stocking food, water and medicines for a possible bird flu pandemic =data ww2010.weblog.y2005.e051227.keys Tom Brokaw, Ted Koppel, bird flu =data ww2010.weblog.y2005.e051227.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051227.date 27-Dec-05 =data ww2010.weblog.y2005.e051227.txt1 Emphasizing the seriousness of the threat, Sunday's Meet the Press =data ww2010.weblog.y2005.e051227.txt2 presented one of the clearest messages in the mainstream media for individuals to make some serious preparations. (<#stdurl http://www.msnbc.msn.com/id/10531436/ Transcript#>) "This virus has crossed the species barrier. It has infected humans," said Dr. Michael Ryan of the World Health Organization in the lead-in. "It's killing a high proportion of those human beings and we need to prepare for the possibility of a pandemic." Ted Koppel, who anchored the "Nightline" show at ABC News for 21 years until his recent retirement, said that, when it comes to something like bird flu, "You have to alarm people because until people are sufficiently alarmed they're not going to listen to what has to happen." Koppel added,

"Among the things we need to do, and it sounds horrific, to say it, is to put in a decent supply of food and water and whatever medicine is needed by a family in each American home now, before it's too late, so that if, and when, a flu hits an area, like, let's say, our area here in Washington, the people, especially older people, or people who have breathing problems, lung problems, people who have heart problems, can afford to stay home for two or three weeks, or longer."

Then there was the following conversation:

MR. BROKAW: Have you done that at your house? MR. KOPPEL: No, in truth. Have you? MR. BROKAW: We have. MR. KOPPEL: Have you? MR. BROKAW: Yeah. MR. KOPPEL: Good for you. MR. BROKAW: Well, we did it for a couple of reasons. Meredith -- we live in New York and we have a house outside of New York and Meredith said, "This is going to be our sanctuary. We have to be prepared in case something happens." And we did put in a small supply of food and water and ... other things to have on the ready. As far as I know, Tom Brokaw, who anchored NBC's "Nightly News" for 39 years, is the first major media person to announce that he's made preparations so that he and his wife and family can spend an extended time at home, in case of a bird flu quarantine. Now that the regular flu season has begun, and regular human flu is spreading in America, Asia and Europe, the chances of a mutation that will allow the highly pathenogenic H5N1 to spread from human to human are increasing. That's because the way it will most likely happen is for a human being (or a pig) to get both the regular flu and H5N1 at the same time. At that time, the genes from the two forms of the virus can recombine to form an H5N1 virus that can move easily from human to human. This might happen next week, next month, next year or after that. If it happens this season, the most likely time would be <#inc ww2010.weblog.ref e051113 "during the Chinese and Vietnamese new year celebrations in January and February,"#> when many people will be travelling, and more poultry would be transported, slaughtered and consumed. Experts are encouraging people to prepare for an H5N1 pandemic by stocking up on food and water and currency and batteries for the entire household to live on for 2-3 months. This may cost a thousand dollars per person, but it's not wasted money since you can always eat the food later if no emergency occurs. Get canned or dried food that can last a long time in storage, and get a large container for storing water. Keep in mind that stored water becomes impure with time, so you'll also need some purifying tablets or bleach to kill bacteria in the water when the time comes. Finally, get whatever medicines you'll need to take care of yourself and your family for a long period of time. =eod =// &&2 e051225b A year after tsunami, children still traumatized =data ww2010.weblog.y2005.e051225b.head A year after tsunami, children survivors still feel traumatized =data ww2010.weblog.y2005.e051225b.keys tsunami =data ww2010.weblog.y2005.e051225b.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051225b.date 25-Dec-05 =data ww2010.weblog.y2005.e051225b.txt1 And yet, on this Christmas day, the tsunami aftermath tells a story of hopefulness and renewal. =data ww2010.weblog.y2005.e051225b.txt2 <#inc ww2010.pic xmastree.gif right "" "Merry Christmas!"#> "Imagine you're sitting with your father on a bicycle getting groceries in the market," <#stdurl http://www.csmonitor.com/2005/1219/p01s03-woap.html "says John Prewitt Diaz of the American Red Cross in New Delhi."#> "You see the wave, you try to go back to your house, but the wave is already covering the house. You'll never see your mother and brother again. These are the experiences that children had during the tsunami." A year after the huge tsunami struck Southeast Asia, <#stdurl http://www.unicef.org/media/media_30540.html "a UNICEF survey of 1633 children in four countries"#> shows that most children who survived the tsunami still exhibit some signs of trauma. They lived in fear of another earthquake or tsunami, or they fear losing another loved one. One in five are not eating regularly. The majority feel lonely, but they're still able to describe themselves as happy and confident and are able to remain hopeful that the future holds promise for themselves and their families. Adults are lonely too, and they have a special method for expressing their hopefulness about the future: There's a baby boom going on. One young girl <#stdurl http://www.cbsnews.com/stories/2005/12/21/world/main1155704.shtml "lost both her parents and al three siblings,"#> when they were all washed away by the tsunami. Scared and alone, she married a man she hardly knew in a mass wedding in February and immediately became pregnant. "I'm the only person to survive, so I'm all alone," she says. "If I have a baby, I will have a friend." Some older women are going to extremes. Some in their 40s are risking complications trying to get pregnant again, and some are trying to reverse sterilization procedures. One says, "I will wait for some time. If I am not pregnant again, I will kill myself." =inc ww2010.h2 renewal "Renewal" For these people as individuals, the loss, loneliness and desperation are traumatic. But for the people as a society, it's a time of renewal. We can begin to see how a society renews itself after an enormous disaster, whether the disaster is a tsunami or a crisis war. (In Generational Dynamics, a crisis war is the worst, most genocidal kind of war.) The tsunami was like a crisis war in terms of the amount of devastation it caused, particularly the loss of lives. But a tsunami lasts only one day, and a crisis war can last for months or years, and so a crisis war is much worse than a tsunami. Children growing up during a crisis war are surrounded by death, disease, poverty, starvation and homelessness for months or years at a time. They suffer a kind of "generational child abuse" and, like most abused children, they grow up into an entire generation of indecisive, nonconfrontational adults. But even though the tsunami was much briefer than a crisis war, we're still seeing the same kinds of aftereffects, and we're seeing how a society renews itself after a disaster. The children who survived will be affected by that experience every day for the rest of their lives, and will do everything in their power to protect themselves, their families and their communities from another tsunami. When these children become adults, they'll insist on raising their own families safely far from the seaside. Those who become teachers will tell their students to do the same. Those who grow up to be architects or homebuilders will create buildings that can withstand tsunamis and will have "panic rooms" on the top, where people can run to escape a tsunami. Those that grow up to become political leaders will support laws that require "tsunami-safe buildings," as well as early warning systems. If a new tsunami occurs, there'll be few deaths since everyone will be prepared. And that's not all. Just as America had a "Baby Boomer" generation after World War II, the tsunami-struck regions are also having a baby boom, led by mothers who feel lonely. These mothers will want to stay close to their children -- just as American mothers in the 1950s wanted to stay and home with their children. The children of this new baby boom will form a new generation in a time of hope and optimism about the future. They'll quickly get sick and tired of hearing their parents talk about the "Great Tsunami of 2004." Their mothers will tell them to stay away from the sea shore, and they'll obey at first, but soon they'll see that the beaches are great, especially in the summer. As the population grows and real estate becomes more expensive, the children in this new generation will ignore the "tsunami-safe building" laws. If a new tsunami occurs at that time, these people will not be prepared, and the new tsunami will be as devastating as the tsunami of 2004. This is cycle of life for a society. Individuals suffer, but their individual suffering renews and preserves the society as a whole, and makes it stronger. We can see the same thing today in New Orleans. Under the slogan, "ReNew Orleans," the city is renewing and rebuilding itself. After the pain and loss and trauma inflicted by Hurricane Katrina, a whole "NewNew Orleans" is rising. This cycle of destruction and renewal brings back a memory. When I was growing up in New Jersey in the 1950s, my mother commuted to New York City, where she worked. She had a love-hate relationship with New York, and she would often joke, "They ought to drop an atom bomb on New York and start all over." Since she was joking I never really asked her what she meant, and I'll never know. But both my parents lost many family members in Europe in World War II, and she was probably thinking about something that happened in the war. Maybe she was thinking of Japanese cities that we had targeted with atom bombs, or maybe she was thinking of some city in Greece that had been devastated by the war, and now was rebuilding and renewing itself. She had the wisdom to know there are many disasters, but disasters always lead to rebirth and renewals. People acquire wisdom through experiencing disasters. As a man gets older, and experiences more and more disasters, he gets wiser and wiser until he becomes a wise elder. At that point, he's wise enough to guide his children and other young people, so that they won't make the same mistakes he made, and suffer the same disasters. The same is true of an entire generation of people: As it becomes a generation of wise elders, it can guide the people in younger generations not to make the same mistakes. The elders can make sure that their children don't suffer the same disasters that they did. The above paragraph sounds great, but it really contains an inherent contradiction: If the "generation of wise elders" guides the younger generation not to make the same mistakes, then the younger generations won't experience the same disasters, and so they won't become wise. That's the way it works. It's like a dirty trick that our collective memories play on us. George Santayana's famous saying, "Those who cannot remember the past are condemned to repeat it" is usually quoted by someone who's about to brag that he remembers something that other people have forgotten. But the hard truth is that Santayana's saying is a joke, because when you're talking about generations of people then it's impossible to remember the past, with the result that new generations are always condemned to repeat the past. So this brings us to the final conclusions of our little Christmas message. First, remember that death is part of life. Second, remember that disasters are disastrous for individuals, but lead to an aftermath of hope and rebirth for the survivors and for society as a whole. And third, in moments of quiet contemplation on Christmas day, as you think of parents and other loved ones who are no longer with you, try to remember the things they used to say, and try to understand anew the wisdom behind those sayings. You might gain some wisdom for yourself that will be invaluable to you during the next few difficult years. =eod =// &&2 e051225 Threat of Christmas terror attacks in Indonesia =data ww2010.weblog.y2005.e051225.head U.S. says threat of Christmas terror attacks in Indonesia is high =data ww2010.weblog.y2005.e051225.keys Bali, Indonesia, Jemaah Islamiyah =data ww2010.weblog.y2005.e051225.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051225.date 25-Dec-05 =data ww2010.weblog.y2005.e051225.txt1 Maps and explosives obtained in a police raid on a terrorist's hideout last month =data ww2010.weblog.y2005.e051225.txt2 show that <#stdurl http://mdn.mainichi-msn.co.jp/international/asia/news/20051222p2g00m0in024000c.html "Jemaah Islamiah is in the advanced stages of planning a new attack."#> The threatened terrorist attacks, including kidnappings, shootings or suicide bombings, may target Westerners over the Christmas and New Year holidays. Indonesia is the world's most populous Muslim nation. It's been hit by <#inc ww2010.weblog.ref e051005 "a series of terrorist bombings since 2002,"#> the most recent one on the resort island of Bali in October, 2005. All of the them have been credited to Jemaah Islamiah, a terrorist group linked to al-Qaeda. Jemaah Islamiah also played a part in the planning for the 9/11 terrorist attacks. =eod =// &&2 e051222 Japan calls China a considerable military threat =data ww2010.weblog.y2005.e051222.head Japanese minister calls Chinese a considerable military threat =data ww2010.weblog.y2005.e051222.keys Japan, China =data ww2010.weblog.y2005.e051222.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051222.date 22-Dec-05 =data ww2010.weblog.y2005.e051222.txt1 Relations between China and Japan continue to increase in anger and hostility, =data ww2010.weblog.y2005.e051222.txt2 as Japanese Foreign Minister Taro Aso said today that <#stdurl http://www.crisscross.com/jp/news/359339 "China's military build-up was an increasing threat."#> China is "a neighbor with 1 billion people equipped with nuclear bombs and has expanded its military outlays by double digits for 17 years in a row, and it is unclear as to what this is being used for," Aso said. "We would not be saying that China is a threat if the content of its military expenses are clearly known...the lack of transparency fans distrust." Relations between Japan and China have deteriorated rapidly in recent years, as <#inc ww2010.weblog.ref e050628 "both countries are bringing forth a younger generation of younger, more confrontative leaders."#> Japanese Prime Minister Junichiro Koizumi's visit to the Yasukuni shrine <#hreftext ww2010.i.051023japan "has seriously inflamed Japan's relations with China and South Korea,"#> at a time when a serious conflict is brewing over billions of dollars worth of oil and gas rights in the East China sea. As I wrote last January, <#hreftext ww2010.i.china050116 "China's society is unraveling and headed for civil war,"#> and China could choose to deflect this unrest into a conflict with Japan or even America. The rapid spread of bird flu among birds in China has created an even more dangerous situation, as China has <#inc ww2010.weblog.ref e051105 "mobilized its 2.3 million man army to "fight bird flu.""#> The mobilization of China's army cannot help but increase the tension with Japan. Generational Dynamics predicts that we're headed for a new "clash of civilizations" world war, and you can see it happening in China and Japan. We're at a unique time in history, 60 years after the end of WW II, when all the countries that fought in that war are in generational crisis periods, because all the leaders and senior managers in these countries are from the generations born after WW II, and none of them have any personal memory of the horrors of that war. That war is going to begin next week, next month, next year, or soon after that, but it's coming. =eod =// &&2 e051218 Ariel Sharon in hospital apparently with minor stroke =data ww2010.weblog.y2005.e051218.head Ariel Sharon in hospital apparently with minor stroke =data ww2010.weblog.y2005.e051218.keys Ariel Sharon =data ww2010.weblog.y2005.e051218.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051218.date 18-Dec-05 =data ww2010.weblog.y2005.e051218.txt1 In a single moment, the fragility of the entire Mideast peace process is exposed. =data ww2010.weblog.y2005.e051218.txt2 It's not yet known how serious the problem is, or whether Israeli Prime Minister Ariel Sharon will return to full strength and power after <#stdurl http://news.bbc.co.uk/1/hi/world/middle_east/4540550.stm "being taken to hospital with a minor stroke."#> However, it's suddenly apparent to everyone that there's no one in Israeli politics that's even close to Sharon's stature. Insofar as there's been any "Mideast peace process" in the last few years, it's been propelled mainly by Sharon's willingness to make unilateral decisions -- the decision to build the barrier surrounding Israel, the decision to evacuate the Gaza Strip, and his decision to <#hreftext ww2010.i.051129ariel "abandon the Likud party"#> that he co-founded in 1974, creating a "political earthquake" in Israel. These decisions have been highly controversial and, as I've said before, I'm not passing judgment on whether they were good or bad decisions; but I am making the point that Sharon is one of the few world leaders left who is actually capable of making major decisions. Just contrast Sharon with Palestinian President Mahmoud Abbas and his dysfunctional Palestinian government, or contrast it with the equally dysfunctional European Union or the American government, running on "cruise control." This is what happens in a "generational crisis" period, which has engulfed most of the countries that fought in World War II, since 60 years have passed since that war. For decades, the generations of people who lived through the horrors of WW II have guided the world through international crises, avoiding land mines that could cause a new world war. But the "Baby Boomer" generation, born after the war with no personal memory, does not have the skills to avoid those land mines. For the past few years, this Boomer generation has been taking leadership positions in government, business, education and other organizations around the world, leading the world into increasing confrontation that will lead to a new "clash of civilizations" world war. Ariel Sharon, born in 1928, and Yasser Arafat, born in 1929, hated each other but still cooperated with each other to prevent a new genocidal Mideast war like the one in the late 1940s. But now <#inc ww2010.weblog.ref e041114 "Arafat is gone,"#> leaving Gaza and the West Bank to continue their descent into chaos, and Sharon's vulnerability is exposed. If Sharon recovers, and if Sharon can demonstrate the energy to continue leading Israel, then things will return to where they were; but if Sharon is incapacitated, then Israel's government will degenerate into the same dysfunction as the Palestinian government. Either way, this incident shows how fragile the entire Mideast peace process is, and how quickly a generational change can occur. =eod =// &&2 e051217 Tony Blair caves, and the EU reaches a budget agreement =data ww2010.weblog.y2005.e051217.head Tony Blair caves, and the EU reaches a budget agreement =data ww2010.weblog.y2005.e051217.keys Tony Blair, Jacques Chirac, EU Budget =data ww2010.weblog.y2005.e051217.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051217.date 17-Dec-05 =data ww2010.weblog.y2005.e051217.txt1 "A big cloud has been lifted from Europe," says Germany Chancellor Angela Merkel, =data ww2010.weblog.y2005.e051217.txt2 after British Prime Minister Tony Blair <#stdurl http://news.scotsman.com/latest.cfm?id=2422432005 "sacrificed more of the British rebate to gain an agreement"#> on a budget for 2007-2013. <#inc ww2010.pic g051216.jpg right "" "Tony Blair and Jacques Chirac meet at the EU summit in Brussels. (Source: Reuters)"#> The pressure on Blair was enormous. Essentially the discussion had been positioned so that Blair would bear almost the entire blame for a failure to break the deadlock, and for the resulting major crisis to the European Union project. He didn't give up the entire rebate, as France, Poland and other EU members were demanding, but he also got little in return. French President Jacques Chirac conceded nothing in reducing the agricultural subsidy to France, but only agreed to a vague budget review by 2008. However, some of the newer states will have to give up some of the money they had expected to receive. From the point of view of Generational Dynamics, this agreement is like a heat wave in New York in November -- it's a welcome relief, but it doesn't change the overall trend, and doesn't mean that winter isn't coming. Still, the compromise means that the "European Project" can continue, even though generational changes have made <#hreftext ww2010.i.eu050601 "rejection of the proposed European constitution a foregone conclusion."#> What now remains to be seen is the reaction of the British public, which is generally very suspicious of the European Project. Generational Dynamics predicts that there'll be a new west European war, just as there have been west European wars at regular intervals for a millennium or more. Generational Dynamics doesn't predict who the belligerents will be, but trends for the last few years indicate that England and France will, once again, be at war. =eod =// &&2 e051216 Palestinian 'Old Guard' giving way to 'Young Guard' =data ww2010.weblog.y2005.e051216.head Sudden generational shift puts Palestinian "Young Guard" threatening "Old Guard" =data ww2010.weblog.y2005.e051216.keys Palestine, Israel, Mahmoud Abbas, Ariel Sharon, Hamas, Fatah =data ww2010.weblog.y2005.e051216.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051216.date 16-Dec-05 =data ww2010.weblog.y2005.e051216.txt1 Younger generations in control in Palestine and Israel bring war closer. =data ww2010.weblog.y2005.e051216.txt2 Right on schedule, a significant generational change is taking place in the Palestinian Authority and its ruling political party, Fatah. On the same day that the Palestinian militia group <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2005-12-15T185125Z_01_MCC565940_RTRUKOC_0_UK-MIDEAST-PALESTINIANS-POLL.xml "Hamas won two crucial municipal elections,"#> far ahead of Fatah, the Fatah party itself <#stdurl http://www.voanews.com/english/2005-12-15-voa45.cfm "has split in two, with a younger splinter group"#> challenging the leadership, headed by Mahmoud Abbas, also known as Abu Mazen. <#inc ww2010.pic arafat.jpg left "" "Yasser Arafat in 2000"#> Abbas was part of the "Old Guard," the group of Palestinian leaders surrounding Yasser Arafat, who founded Fatah and the Palestinian Authority in 1959, and was idolized by many Palestinians, until his <#inc ww2010.weblog.ref e041114 "death on November 14, 2004."#> For many years, leaders in America and around the Western world were absolutely certain that peace would finally come to the Mideast if only Arafat weren't preventing it. When he died, these leaders heralded the new era of Mideast peace and tranquility, especially after <#inc ww2010.weblog.ref e050124 "Abbas took "bold steps" to bring peace,"#> after being elected Palestinian Authority president. From the point of view of Generational Dynamics, this was all the usual political nonsense. Ironically, as I <#inc ww2010.weblog.ref e041114 "explained several times,"#> Arafat was perhaps a brutal, vicious terrorist, but he was a terrorist because it was the lesser of two evils, the other evil being a major regional war between Arabs and Jews. It's one of the great ironies of history, though few people understand it, that Arafat and Israeli Prime Minister Ariel Sharon, two men who truly hated each other, actually worked together to prevent a major new war. The reason was that Arafat (born in 1929) and Sharon (born in 1928) had a very important shared experience: They both lived through the Arab-Jewish war of the 1940s, especially the extremely violent, genocidal war of 1948-49, that exploded after the United Nations partitioned Palestine, creating the state of Israel. Like any "generational crisis" war, that war was such a horror that both Arafat and Sharon were always willing to do anything to prevent another one. Thus, Arafat promoted terrorism, and Sharon has taken several controversial steps, including building the barrier surrounding Israel. Based on this trend information from Generational Dynamics, I predicted two and one-half years ago that <#hreftext ww2010.i.may01 "the Mideast Peace Roadmap would fail,"#> and that the most likely time frame for a Mideast war would be within two years after the disappearance of Yasser Arafat. As of today, I have absolutely no reason to modify either of these predictions, even though I've been called "crazy" by people who simply have no real understanding of the power of generational changes. Now the younger generations are taking over in both Palestine and Israel. In the Gaza Strip, Abbas's Fatah has almost lost control completely to Hamas. When Arafat died, Western leaders were happily chirping that Abbas would bring Hamas under control, and would even disarm the militia group. Instead Hamas, which is lead by a younger generation of Palestinians who have no personal memory of the 1940s genocidal wars, have little respect for Abbas and Fatah, is poised to win the Parliamentary elections to be held in January. It's Hamas that's going to bring Abbas under control. (Incidentally, I've heard some pundits gleefully predict that when Hamas takes charge, they'll become domesticated and more responsible, and they'll negotiate peace with Israel. There's no limit to the nonsense that politicians believe.) A similar <#hreftext ww2010.i.051129ariel ""generational earthquake" has been taking place in Israel,"#> as Ariel Sharon abandoned the Likud party, that he co-founded in 1974. He had to abandon it because it was being taken over by hard-liners from a younger generation. Similarly, Israel's Labor party has also been shaken to the core, thanks to the victory of a young man as party leader. These changes are occurring right on schedule, as the generation of people who grew up during the genocidal 1940s wars are all disappearing (retiring or dying), all at once, leaving behind generations of people born after the war, with no personal memory of the war, and with contempt for the compromises and "sellouts" of the older generations. If you're a regular reader of this web site, I hope that you're beginning to understand how deeply this generational change goes. If you don't believe it, just talk to somebody under age 25. Or go to a college, and talk to some college students. See how many youngsters you run into who have any grasp of how close the Mideast is to a major war, or how devastating a war with China would be. Actually, you may find it difficult to find very many who can even pick out China on a map. It's the same everywhere in the world, including the Mideast. New generations are taking over, consisting of young people who have no fear of war, and are leading the world into new wars. Generational Dynamics predicts, with 100% certainty, that there will be a new genocidal war between Arabs and Israelis, and that it will encompass the entire Mideast. My own (slightly less certain) prediction is that American forces will still be in Iraq when this war begins, and that America will become fully engaged in this new Mideast war. =eod =// &&2 e051215b October trade deficit hits fresh monthly record high =data ww2010.weblog.y2005.e051215b.head Once again, October trade deficit hits fresh monthly record high =data ww2010.weblog.y2005.e051215b.keys Trade deficit =data ww2010.weblog.y2005.e051215b.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051215b.date 15-Dec-05 =data ww2010.weblog.y2005.e051215b.txt1 Economists were surprised again =data ww2010.weblog.y2005.e051215b.txt2 by the <#stdurl http://www.nytimes.com/2005/12/15/business/worldbusiness/15trade.html "unexpectedly high trade deficit."#> <#inc ww2010.pic g051214.gif right "" "Trade deficit, 2002-present. (Source: WSJ)"#> For two or more years, I've been hearing economists and pundits talk about a "self-correcting economy," which would cause the trade deficit to level off by itself. But that hasn't happened, and the adjoining graph, <#inc ww2010.weblog.ref e051111 "which is similar to graphs I've posted in the past,"#> makes it clear that the imports continue to grow at a much faster rate than exports, and that the two rates show no signs at all of becoming equal. If anything, the distance between them is accelerating slightly. The unexpected deterioration in the trade deficit was caused by <#stdurl http://today.reuters.com/business/newsarticle.aspx?type=ousiv&storyID=2005-12-14T192347Z_01_KWA450949_RTRIDST_0_BUSINESSPRO-ECONOMY-DC.XML "sharply increased imports from China, Canada, the EU and Mexico,"#> as well as oil purchases, while exports increased, but less than expected or hoped for. The droll Treasury secretary, John W. Snow, <#stdurl http://www.nytimes.com/2005/12/15/business/worldbusiness/15trade.html "blamed the trade deficit on slow growth in other countries."#> "If our major industrialized trading partners were growing faster, the U.S. wouldn't have such a large trade gap." (Of course, this reminds us that newly appointed Fed Chairman Ben Bernanke has blamed the astronomically high American public debt on a <#hreftext ww2010.i.051029bernanke ""global savings glut" in other countries."#>) As I've been saying since 2002, America is entering a new 1930s style Great Depression, with a stock market crash to the Dow 3000-4000 range by the 2007 time frame. I certainly have no reason to change this prediction now, especially with public debt and the trade deficit continuing to grow uncontrollably and exponentially, so it may happen a lot sooner than expected. =eod =// &&2 e051215 European Union "make or break" summit begins today =data ww2010.weblog.y2005.e051215.head European Union "make or break" summit begins today =data ww2010.weblog.y2005.e051215.keys Tony Blair, Jacques Chirac, EU Budget =data ww2010.weblog.y2005.e051215.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051215.date 15-Dec-05 =data ww2010.weblog.y2005.e051215.txt1 It ought to be a great show in Brussels as anti-Blair acrimony continues unabated. =data ww2010.weblog.y2005.e051215.txt2 It seems to have <#stdurl http://www.dw-world.de/dw/article/0,2144,1811701,00.html "settled down to this:"#>

British Prime Minister Tony Blair, who is just about to finish his six-month turn in the rotating EU Presidency, has agreed to a small reduction in the "rebate" that the EU pays to Britain every year in lieu of agricultural subsidies.
France, Poland and other EU members are demanding that he agree to give up the rebate completely. <#stdurl http://www.dw-world.de/dw/article/0,2144,1813442,00.html "He won't because he can't - it's domestically impossible."#>
Blair will only give up more rebate if France and other countries give up some of their much larger agricultural subsidy. They won't.
French President Jacques Chirac can't even think about agreeing to reduced agricultural subsidies after the recent <#inc ww2010.weblog.ref e051103 "violent mass riots in Paris."#>
Blair and Chirac <#stdurl http://www.news24.com/News24/World/News/0,,2-10-1462_1849009,00.html "really hate each other."#>
In fact, a lot of <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/12/15/weu15.xml&sSheet=/portal/2005/12/15/ixportal.html "people in Europe seem to hate Blair these days"#> - even more than they hate George Bush.

So the stage is set for a replay of the <#inc ww2010.weblog.ref e050618 "vitriolic confrontation of June 17."#> The <#hreftext ww2010.i.eu050601 ""European project" is dead,"#> especially thanks to the rejection of the European constitution by French and Dutch voters. And now it's looking more and more like the budget process for 2007 is almost dead. Generational Dynamics predicts that there'll be a new European war, probably between France and England, just as there have been wars between France and England for centuries. We can see the anger and hatred building as the weeks and months go by. So it ought to be a great show in Brussels for the next two days. =eod =// &&2 e051212 Over 5,000 whites riot against Muslims on Sydney beach =data ww2010.weblog.y2005.e051212.head Over 5,000 whites riot against Muslims on Sydney beach =data ww2010.weblog.y2005.e051212.keys Australia =data ww2010.weblog.y2005.e051212.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051212.date 12-Dec-05 =data ww2010.weblog.y2005.e051212.txt1 Australia joins many other countries that fought in WW II in becoming xenophobic. =data ww2010.weblog.y2005.e051212.txt2 Thousands of young white men, yelling racist chants, <#stdurl http://www.alertnet.org/thenews/newsdesk/SYD267856.htm "chased and attacked Australians of Middle Eastern appearance on Sydney beaches on Sunday."#> Among the racist chants were "kill the Lebs", "kill the wogs," "go home Lebby scum". and "we grew up here - you flew here." The violence was triggered by a brawl last week when volunteer lifeguards were attacked by a Lebanese gang of youths. Once this incident occurred, <#stdurl http://www.news.com.au/story/0,10117,17538291-29277,00.html "people stirred up an anti-Lebanese campaign all week,"#> using text messaging and talkback radio, calling for a revenge attack this weekend. This call for revenge appears to have worked. Following the beach violence, <#stdurl http://www.theaustralian.news.com.au/common/story_page/0,5744,17536279%255E601,00.html "gangs of youths of Middle Eastern descent conducted a series of revenge attacks,"#> smashing and burning dozens of cars. Aussie politicians unanimously condemned the violence, <#stdurl http://www.smh.com.au/articles/2005/12/11/1134235951340.html "but didn't always agree on the causes."#> One politician expressed the sentiment of many when he said he was "disgusted by the offensive behaviour shown by hundreds of my fellow Australians." But others pointed out that people on those beaches had frequently been harassed and intimidated by gangs with Middle Eastern backgrounds, and that the problem had been getting worse with no response from the police. What immediately struck me about this situation was its apparent similarity to what happened in the Netherlands in November of last year. <#inc ww2010.weblog.ref e041115b "The country appeared to melting down completely,"#> following the murder of filmmaker Theo van Gogh by a Muslim extremist. After that, arson attacks burned over a dozen mosques and Muslim schools, and the Dutch people have become increasingly anti-Muslim since then. But this kind of xenophobia is hardly unique to Australia and the Netherlands. We've had non-Muslim versus Muslim race riots in France, Germany, England, Russia, India and Malaysia, just to name a few. And we've seen xenophobia between Japan on the one hand and Korea and China on the other hand send relations among these countries become the worst in decades. We're a unique time in history, 60 years after the end of World War II, when all the countries that fought in the war are now being led by people born after the war, people who don't have personal memory of its horrors, and are unwilling to compromise to prevent another such war, making a new war certain. Generational Dynamics cannot predict the attitudes and behaviors of any individual, since each individual is free to do what he or she wants. But Generational Dynamics does predict changes in the attitudes and behaviors or large masses of people, based on generational changes. Throughout history, whenever a genocidal crisis war is fought, the people who fight in that war consider it to be so horrible that they pledge never to let anything like it happen again; but when the people who were alive during that war all disappear (retire or die), all at once, about 55-60 years after the end of the war, then the nation enters a "crisis period." A crisis period is characterized by an increasing desire for confrontation and retribution, and sooner or later a miscalculation leads to a new crisis war. The last crisis war for America and many other countries was World War II. All of these countries are now in, or are entering, a generational crisis period. That's why xenophobia is increasing, as is a desire for confrontation and retribution. Generational Dynamics predicts that xenophobia will continue to increase, and this will lead to a new "clash of civilizations" world war, and that this will happen sooner rather than later. =eod =// &&2 e051211 China killing Dongzhou protesters - Tiananmen =data ww2010.weblog.y2005.e051211.head Chinese killing of Dongzhou protesters revives memories of Tiananmen Square massacre =data ww2010.weblog.y2005.e051211.keys Dongzhou, China, Tiananmen Square =data ww2010.weblog.y2005.e051211.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051211.date 11-Dec-05 =data ww2010.weblog.y2005.e051211.txt1 Chinese armed security forces fired on villagers protesting land confiscation, killing many peasants =data ww2010.weblog.y2005.e051211.txt2 The protest <#stdurl http://english.epochtimes.com/news/5-12-7/35458.html "occurred in Dongzhou, about 80 miles from Hong Kong."#> It began on Monday with 100-200 villagers, growing to over 10,000 protesters on Tuesday, after which 3,000 armed security forces responded with guns, killing some villagers. The incident might have been successfully covered up, except for the village's proximity to Hong Kong, where some press freedom still exists. The severity of the incident is still in question. China was officially silent on the incident until Saturday, and then blamed "violent agitators" with "pipe bombs," forcing action by the security forces that killed only three people. However, <#stdurl http://www.iht.com/articles/2005/12/11/news/china.php "interviews with numerous villagers tell a far more violent story."#> Villagers deny use of pipe bombs and other violent weapons, and say that about 20 dead bodies of villagers have been found, and that another 40 villagers are missing. Regional mass riots in are increasingly common in China, <#inc ww2010.weblog.ref e051011 "with 74,000 riots occurring in 2004, according to Chinese officials."#> The specially trained Chinese security forces have become extremely skilled at using tear gas and truncheons to disperse these riots, but they've avoided using lethal weapons so far. Thus, the current incident represents a significant increase in violence against protesters, especially because it revives memories of <#hreftext ww2010.i.china050116 "the 1989 Tiananmen Square massacre."#> That event, which was the climax of China's "generational awakening" period, shocked China and the entire world, and led to the rise of the Falun Gong protest movement and to the independence movement in Taiwan. Both of those movements will be newly electrified by the Dongzhou killings. China is becoming increasingly unstable because Mao Zedong's social structure, set up in the 1950s and 1960s, is completely unraveling. Peasants were the backbone of Mao's Communist revolution, but afterwards he controlled them with harsh measures that led to the deaths of tens of millions of peasants in 1959 through Mao's "Great Leap Forward." Mao set up strict rules separating rural peasants from urban factory workers, and guaranteed rough parity in incomes. Today, however, <#stdurl http://www.bloomberg.com/apps/news?pid=10000087&sid=a.CfKv5uwcDU&refer=top_world_news "peasants have fallen far behind city workers,"#> with rural income about 1/3 of urban incomes. Today China has over 120 million itinerant workers, mostly poor peasants who get what work they can in the cities and send money back to their families. This instability comes at a time of increasing problems for the Communist regime:

Bird flu has been spreading rapidly among birds throughout China, with new regional outbreaks announced almost every day. China has <#inc ww2010.weblog.ref e051105 "mobilized its 2.3 million man army to "fight bird flu.""#> Bird flu is <#stdurl https://www.clsa.com/public/media/index.cfm?id=29&content=1&press_id=37&lang=en "substantially affecting rural households who raise most of the country’s poultry."#>
China is <#inc ww2010.weblog.ref e051201b "suffering overcapacity in cement, aluminum, textiles and other goods,"#> and is also constructing too many factories, buildings and resorts. China's bubble economy, which has been growing at 9-10% a year for two decades, seems finally ready to burst. This will result in deflation and recession, and severe unemployment among itinerant workers.

As a separate issue. China's relations with Japan have <#hreftext ww2010.i.051023japan "have been deteriorating sharply,"#> leading to the possibility of a miscalculation on either side leading to war. As I wrote last January, <#hreftext ww2010.i.china050116 "China's society is unraveling and headed for civil war."#> With the continually increasing social unrest, fed by bird flu problems, overcapacity and deflation, there are now signs that the unraveling of China's economy and society is gathering steam. Into that mix, add the Dongzhou massacre and newly stirred memories of the Tiananmen Square massacre, and you have a situation that could boil over at any time. =eod =// &&2 e051208 WSJ article Bernanke - errors and omissions =data ww2010.weblog.y2005.e051208.head Wall Street Journal's page one article on Bernanke contains the usual errors and omissions =data ww2010.weblog.y2005.e051208.keys Ben Bernanke, Alan Greenspan, Great Depression =data ww2010.weblog.y2005.e051208.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051208.date 8-Dec-05 =data ww2010.weblog.y2005.e051208.txt1 Let me try and explain this a different way. =data ww2010.weblog.y2005.e051208.txt2 Yesterday's <#stdurl http://online.wsj.com/article/SB113392265577715881.html?mod=home_page_one_us "lengthy article on Ben S. Bernanke's research on the Great Depression"#> explains why the man expected to replace Alan Greenspan as Fed Chairman believes that he has complete control of the economy. We've recently called the youthful Bernanke <#hreftext ww2010.i.051029bernanke "the "man without agony,""#> and that comes through loud and clear. He has his hand on the levers of control. He knows exactly why the 1930s Great Depression occurred (he's begun writing a book about it, called "Age of Delusion: How politicians and central bankers created the Great Depression"), and he knows exactly how to prevent any new Great Depression. Only someone from the Baby Boomer generation could be so arrogant. As usual, his attitude conflicts with that of Greenspan who, born in 1926, grew up amid the horrors of the Depression, and is still VERY concerned about the fragility of the economy, as he <#inc ww2010.weblog.ref e051204 "indicated in a harsh doom and gloom speech on Friday."#> The WSJ article points out that Bernanke believes he's also much smarter than John Kenneth Galbraith, who was born in 1908 and wrote a seminal book on the Great Depression in 1955; Bernanke hopes to replace Galbraith's book with his own wisdom. I'll write a detailed critique of Bernanke's research when I have more time, but today I'd just like to hit a couple of points, and try a different way to explain why Bernanke must be wrong, almost as a matter of mathematical necessity. =inc ww2010.h2 obvious "Some obvious errors" One of Bernanke's biggest and most often repeated errors is his naïve comparison of the 1987 stock market crash with the 1929 crash. Here's a quote from a 2001 article:

"One often-heard hypothesis is that the Great Depression was caused by wild speculation on Wall Street, which provoked the stock market crash. But though stock prices may have been unrealistically high in 1929, there is little evidence to suggest that the fall in stock prices was a major cause of the Depression. A similar crash in October 1987, when stock prices fell a record 23 percent in 1 day -- an event comparable in severity to the crash of October 1929 -- did not slow the economy significantly."

He mentions that "stock prices may have been unrealistically high in 1929" as if it were a minor thing, but in 1929 stock prices were more than double book value of the underlying companies -- something we'll explain more below -- but in 1987, stocks were AT book value. So the stock market rebounded quickly from the 1987 crash, because the stock market was solid. Thus, the 1987 crash was not a "similar crash" to 1929, since the market was completely different. Today, the market is again priced at more than twice book value. And that's the problem -- that Bernanke doesn't even acknowledge any of the problems today. The nation's public debt is at 1930s levels and is still increasing rapidly. This concerns Greenspan, but why not Bernanke? There's an even more subtle issue: Bernanke has no explanation for why the 1990s stock market bubble occurred, but he doesn't believe that the Fed had any way of controlling it. He doesn't even mention today's real estate bubble, but believes that no bubble can be controlled; attempting to "prick market bubbles" causes stock market crashes, he "would argue." Also, like Greenspan, Bernanke has no explanation for why the 1990s stock market bubble started in 1995. Why not 1990 or 2000? What was important about 1995? That's a question that no one and no theory has the answer to, except for just one: Generational Dynamics. The stock market bubble began in 1995 because that was EXACTLY the time that all the top financial managers, who had been very risk-averse from having grown up during the Great Depression, all disappeared (retired or died) all at once, and were replaced by a new generation of risk-seeking top financial managers with NO personal memory of the Great Depression. The new risk-seeking managers created the bubble, and today still continue to be oblivious to the danger. The point is that Bernanke could not stop or even explain the most recent bubbles. But he's so arrogant, he believes that he'll have no trouble containing the aftermath when the bubble finally bursts. If he can't explain or stop a bubble, how can he possibly believe that he can stop a Depression? It's absolutely bizarre. One more conundrum: Bernanke certainly doesn't believe he understands the psychology that caused such a large bubbles in the 1920s and 1990s. (Once again, Generational Dynamics is the only theory with an explanation.) Then he can't possibly believe that he understands the psychology that caused the crash and depression of the 1930s. Then how can he possibly know that whatever prescription he uses will defeat that psychology? If anything, it's obvious that nothing will work. If a bubble is caused by psychological exuberance, then a depression is caused by psychological hopelessness. After a guy loses a big chunk of his overpriced assets, it'll take more than a drop in the Fed funding rate to get him interested again. =inc ww2010.h2 value "The value of stock" Let me try a different approach to showing why people like Bernanke are not just wrong, but mathematically wrong. Here's a question: Suppose I wanted to sell you 100 shares of stock in Worldwide Widget Corp. You're not allowed to know the prices of any other stocks, but you can ask me any questions you want about the company. How would you arrive at the value of the 100 shares of stock? If you're just in love with Worldwide Widget Corp., then you might value your stock based on that love. That's how you might buy a work of art. There's no way to value a work of art, except to go by your guts and feelings. That's the way you might arrive at a value of this stock. The value you pick is just a number in the air, with no solid reasoning behind it. But suppose you don't want to treat it like a work of art; you don't particularly love or hate Worldwide Widget, and you just want to make money. The stock purchase is an investment, so you want to do an actual analysis that provides the actual investment value of the 100 shares of stock. What methodology do you use? It turns out that there's another kind of investment where exactly this kind of analysis is done all the time: Investment real estate. Suppose you want to purchase an apartment building with 100 apartments, with the intention of making money. How do you decide what price you're willing to pay for the apartment building? This is called real estate appraisal. Real estate investors will tell you that there are two common ways to appraise investment property, with the following GREATLY simplified explanations:

You compute how much money the apartment building will earn each year from rent collection, assuming a reasonable vacancy rate; you compute how money you'll have to pay each year for expenses and upkeep for the apartment building. You subtract the two to get annual cash flow. You divide that by the annual interest rate you expect to earn, say 7%. The result is the appraised value of the building.
You find out the replacement value of the building, the cost of building an equivalent new apartment building. The replacement value can, in certain circumstances, be the appraised value of the building.

A good investor doesn't allow himself to be swayed by emotion in computing these figures. You're not buying a work of art or having a love affair with the building; you just want to make money, nothing else. So you use real numbers, not wishful thinking numbers. <#inc ww2010.pic peratio.jpg right "" "Wall Street Historical Price/earnings ratio for S&P 500"#> But that's nothing like how stocks are bought today. The prices of stock today are just numbers in mid air; they have no solid underpinning. No one even pays attention to whether they're overpriced. Investors buy when the price of oil goes down, and sell when the Fed Open Market Committee minutes come out. But in fact the two methods for real estate appraisal work just as well for stock purchases:

You determine the annual cash flow to be earned from the stock. You can do this in several ways, usually from earnings or dividends or revenue. Once you determine the annual cash flow, you divide by the annual interest rate you expect to earn, say 7%, which corresponds to a Price/Earning ratio of about 14 (since 100/7 = 14.3). But stock market P/E ratios have been historically high for over ten years, as the above graph shows. Note that they were extremely high in 1929, but they were about average in 1987, something which, for reasons that are totally beyond me, Bernanke and others don't grasp.
You determine the book value of the underlying company, Worldwide Widget Corp., and you use that as the value of the outstanding stock shares. As I've discussed many times, <#hreftext ww2010.i.050711eleven "both I and other analysts have computed,"#> the "true value" or book value of the stock market today to be around Dow 4500, which means that the market is overvalued by a factor of more than two -- at about the level as just before the 1929 stock market crash. In 1987, by the way, the stock market price was just about exactly at book value, again something that Bernanke and others don't grasp, for reasons that escape me.

If you're under 40 years old, you may be shocked and surprised to learn that investors were using exactly these methods for decades, until the early 1990s. That's why the 1987 crash did so little harm to the stock market -- the stock market's position was solid, because senior investors had grown up during the depression and knew how to make solid investment decisions. When that generation retired, a new generation of senior investors took over. These were people with who bought stocks like works of art, based on feeling good. These investors made one crazy investment decision after another, and created a huge market bubble. <#inc ww2010.pic djia40.jpg right "" "Dow Jones Industrial Average -- 1896 to 1940 -- with book value shown as thin curve"#> Bernanke believes that the Fed can just wiggle the interest rate a little, and thereby defy the mathematically certain historical patterns that say that stock market prices will fall. He will not because he cannot. All he can hope to do is extend the bubble a little longer, as the Fed has been doing since 2002. Stocks will fall. And not only will they fall to the solid market levels -- with an average P/E ratio and a book value price -- but they'll overshoot those values and fall by much more. In 1929-1933, the stock market fell by 90%. Something like that is going to happen again, and it's laughable to think that it can be stopped. =eod =// &&2 e051206 Blair's EU 2007 budget proposal =data ww2010.weblog.y2005.e051206.head Blair's EU 2007 budget proposal leaves Europe is poised for new bruising battle in Brussels on Dec 16-17 =data ww2010.weblog.y2005.e051206.keys Tony Blair, Jacques Chirac, EU Budget, european union =data ww2010.weblog.y2005.e051206.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051206.date 6-Dec-05 =data ww2010.weblog.y2005.e051206.txt1 Will the European Union survive into 2007? That's the question that may be answered =data ww2010.weblog.y2005.e051206.txt2 as ministers prepare for a new attempt to settle on an EU budget for the years 2007-2013. The current budget agreement expires at the end of 2006. <#inc ww2010.pic junck.jpg right "" "Furious EU President, Luxembourg Prime Minister Jean-Claude Juncker on June 18 (Source: BBC)"#> The last attempt at a budget agreement, on June 17, failed in an <#inc ww2010.weblog.ref e050618 "acrimonious confrontation between UK Prime Minister Tony Blair and French President Jacques Chirac,"#> with the furious EU President Jean-Claude Juncker siding with Chirac. (Sorry to keep posting that same picture of Juncker, but I just love it.) Blair is refusing to give up its annual €5 billion rebate (€ = euros), negotiated by Margaret Thatcher in the 1980s, unless the agricultural subsidy that gives France an annual €12 billion is also reduced. Chirac and other countries are refusing. Last week there were <#inc ww2010.weblog.ref e051130 "press reports that Tony Blair was caving on the rebate,"#> getting nothing in return, as a result of extreme pressure from several EU countries. If the press reports had been right, it could have been politically disastrous for Blair, since many Brits feel that they're paying way too much to the EU as it is. The press reports were only tangentially true. In a <#stdurl http://news.bbc.co.uk/1/hi/world/europe/4492714.stm "complex proposal put forward to the EU ministers on Monday,"#> Blair has offered to reduce the rebate by 12-15% and allow France to retain its full agricultural subsidy in 2007 -- provided that the agricultural subsidy for 2008 and beyond is open for debate, and provided that development aid to new member states, especially Poland, Bulgaria and Romania, is also reduced. Tony Blair is in a very unusual political position: He's scheduled to hold office for several years more, but he's already announced that he will not run again. This gives him some political freedom within his own country to make this kind of offer. But the repercussions were swift nonetheless. A <#stdurl http://www.timesonline.co.uk/article/0,,13509-1905742,00.html "spokesman for the opposition Conservative party said,"#> “Mr Blair has spent the last few days rushing around Eastern Europe trying to find a friend. Now, at the last minute, he has come up with these ill-considered and damaging proposals to surrender part of Britain’s rebate whilst getting nothing in return.” But that's nothing compared to the heat he's getting from the Europeans. The budget proposal was immediately labeled "unacceptable" by the EU and by several member countries. <#stdurl http://www.guardian.co.uk/france/story/0,11882,1658930,00.html "France and Poland led the assault."#> The French foreign minister said, "These proposals do not seem to be of a nature to lead to the agreement for which we all wish." The Polish prime minister said, "The proposal is not based on solidarity. In this form it is unacceptable." And the European commission president said, "This proposal amounts to a budget for a 'mini-Europe', not the strong Europe we need." As <#inc ww2010.weblog.ref e051130 "we've previously said,"#> we're at a unique time in history, 60 years after the end of World War II, when all the countries that fought in the war are now being led by people born after the war, don't have personal memory of its horrors, and are unwilling to compromise to prevent another such war, making <#hreftext ww2010.i.eu050601 "failure of the "European project" a foregone conclusion."#> So there's a great deal at stake in the next two weeks or so. Positions are very hard, and it's difficult to see how much each side can back down. Germany has expressed interest in mediating the negotiating, so perhaps some compromise will be worked -- perhaps for just the year 2007, with the hope that tempers will cool, so that an agreement can be worked out a year from now for 2008 and beyond. However, what few people understand is that tempers are not going to cool, because the generational changes that are in place are an irreversible trend. A year from now, the French, the British, the Poles and all the others will be even more adamantly locked into their positions, so a long term agreement at that time will be impossible. Generational Dynamics predicts that there'll be a new west European war, just as there have been west European wars at regular intervals for a millennium or more. Generational Dynamics doesn't predict who the belligerents will be, but trends for the last few years indicate that England and France will, once again, be at war. =eod =// &&2 e051204 Alan Greenspan gives harsh doom and gloom speech =data ww2010.weblog.y2005.e051204.head Alan Greenspan gives another harsh doom and gloom speech =data ww2010.weblog.y2005.e051204.keys budget deficit, Ben Bernanke, Alan Greenspan =data ww2010.weblog.y2005.e051204.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051204.date 4-Dec-05 =data ww2010.weblog.y2005.e051204.txt1 Saying that "the consequences for the U.S. economy of doing nothing could be severe," =data ww2010.weblog.y2005.e051204.txt2 Fed Chairman Alan Greenspan <#stdurl http://federalreserve.gov/boarddocs/speeches/2005/20051202/default.htm "spoke to the Federal Reserve Bank of Philadelphia Policy Forum"#> on Friday. He expressed the fear that "we may have already committed more physical resources to the baby-boom generation in its retirement years than our economy has the capacity to deliver. If existing promises need to be changed, those changes should be made sooner rather than later." Greenspan specified a first step to changing things:

"[The] necessary choices will be especially difficult to implement without the restoration of procedural restraints on the budget-making process. For about a decade, the rules laid out in the Budget Enforcement Act of 1990 and in the later modifications and extensions of the act helped the Congress establish a better fiscal balance. However, the brief emergence of surpluses in the late 1990s eroded the will to adhere to these rules of restraint. ... By the end of the decade, many of the rules that helped constrain budgetary decisionmaking earlier in the 1990s--in particular, the limits on discretionary spending and the PAYGO requirements--were being violated with increasing frequency; finally, in 2002, they were allowed to expire. Reinstating a structure like the one formerly provided by the Budget Enforcement Act of 1990 would signal a renewed commitment to fiscal restraint and help restore discipline to the annual budgeting process."

What Greenspan is describing here is a typical "generational unraveling." Congress passed the Budget Enforcement Act when it was being led by people from the generation that had grown up during the Great Depression, who understood its horrors, and who were willing to put politics aside to accomplish something important. But as the people in that generation disappeared (retired or died) during the 1990s, the Budget Enforcement Act "unraveled" -- its provisions were increasingly violated and it was allowed to expire. That's the kind of thing that ALWAYS happens during generational unraveling periods. To put this in context, I've written about this Budget Enforcement Act a couple of times without naming it. Here's what I wrote in conjunction with the plan for the Federal Government to pay <#inc ww2010.weblog.ref e050916 "two million dollars per family in aid for hurricane Katrina victims:"#>

"When I was growing up in the 1950s, my school teachers talked about the Great Depression all the time, because they had suffered through it. Those teachers must be spinning in their graves over the appalling things that are happening now, as a matter of course. In the 1980s, the Republicans and the Democrats cooperated with each other to change the Social Security system to make it a sounder system. After that, they cooperated again to specify new rules to control the budget deficit. And in 1996, Democratic President Bill Clinton cooperated with the Republican congress to eliminate the welfare entitlement. Today, cooperation is impossible, except to spend money and more money and more money. Controlling anything is impossible."

The point I was making then, and am making again now, is that budget control is IMPOSSIBLE. Reinstatement of the Budget Enforcement Act is IMPOSSIBLE. People sometimes write to me to complain when I use words like "IMPOSSIBLE." One person wrote, "Politics is the art of the possible. How could passing a law be impossible?" The answer is that you need the right people to do anything. You can't build a bridge unless you have people with the skills to build a bridge. You can't pass a budget enforcement act unless you have the people with the skills to put politics aside to make difficult budget decisions. And the people with those skills are gone; the Baby Boomer generation born after WW II is in charge now, and they don't have the skills to put politics aside for anything, as anyone can see by watching any newscast. So when Greenspan tells us to reinstate the Budget Enforcement Act, he's asking for what is literally impossible. The Budget Enforcement Act will NOT be reinstated. Greenspan adds:

"I do not mean to suggest that the nation's budget problems will be solved simply by adopting a new set of budgeting rules. The fundamental fiscal issue is the need to make difficult choices among budget priorities, and this need is becoming ever more pressing in light of the unprecedented number of individuals approaching retirement age. For example, future Congresses and Presidents will have to weigh the benefits of continued access, on current terms, to advances in medical technology against other fiscal initiatives."

Once again, Greenspan is asking the impossible. Today's leaders are unable to "make difficult choices among budget priorities." History tells us that once a generational unraveling has occurred, difficult choices will not be made -- until a new huge financial and war crisis occurs. Greenspan also spoke of the danger to the Social Security system from the retiring Baby Boomer generation. As we mentioned above, Republicans and Democrats put politics aside in the 1980s to make the Social Security system sounder, but look what happened, according to Greenspan:

"Unfortunately, the current Social Security system has not proven a reliable vehicle for such saving. Indeed, although the trust funds have been running annual surpluses since the mid-1980s, one can credibly argue that they have served primarily to facilitate larger deficits in the rest of the budget and therefore have added little or nothing to national saving."

In other words, by making Social Security sounder, the 1980s leaders only permitted 2000s leaders to raid the Social Security system for more money to spend. So the Social Security changes of the 1980s have also unraveled. Greenspan's speech makes for very gloomy reading. Ben S. Bernanke, Greenspan's youthful replacement as Fed Chairman, <#hreftext ww2010.i.051029bernanke "is a man without agony,"#> as we've written before. But Greenspan, born in 1926, is more and more able to see what's coming, and he feels a great deal of agony. Greenspan concludes:

"Crafting a budget strategy that meets the nation's longer-run needs will become more difficult the more we delay. The one certainty is that the resolution of the nation's unprecedented demographic challenge will require hard choices that will determine the future performance of the economy. No changes will be easy, as they all will involve setting priorities and, in the main, lowering claims on resources. "It falls to our elected representatives to determine how best to address the competing claims on our limited resources. In doing so, they will need to consider not only the distributional effects of policy changes but also the broader economic effects on labor supply, retirement behavior, and private saving. In the end, the consequences for the U.S. economy of doing nothing could be severe. But the benefits of taking sound, timely action could extend many decades into the future."

Once again, Greenspan makes IMPOSSIBLE demands: making "hard choies," "setting priorities," and "lowering claims on resources." It's a good time to recall the wisdom of Sherlock Holmes:

"When you have eliminated all which is impossible, then whatever remains, however improbable, must be the truth."

The Adventure of The Blanched Soldier

So now that we've eliminated the impossible, things like "setting priorities," what's left? Greenspan says that "the consequences for the U.S. economy of doing nothing could be severe," and there's only one thing that Greenspan can mean: A replay of the 1930s Great Depression that Greenspan himself spent his childhood enduring. =eod =// &&2 e051203 Indian MP says that bird flu is a 'scam' - 'Tamil-flu' =data ww2010.weblog.y2005.e051203.head Indian MP says that bird flu is a 'scam' to sell 'Tamil-flu' =data ww2010.weblog.y2005.e051203.keys India, bird flu, Maneka Gandhi =data ww2010.weblog.y2005.e051203.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051203.date 3-Dec-05 =data ww2010.weblog.y2005.e051203.txt1 This sounds like a joke, but unfortunately it isn't. =data ww2010.weblog.y2005.e051203.txt2 Speaking to an environmental group, Maneka Gandhi, a member of India's Parliament, said that <#stdurl http://news.webindia123.com/news/showdetails.asp?id=179489&n_date=20051202&cat=Health ""bird flu does not exist.""#> She called it a "scam" to sell the medicine she called "Tamil-flu." <#inc ww2010.pic maneka.gif right "" "Maneka Gandhi"#> She was probably thinking of the <#stdurl http://www.tamiflu.com/ "the flu treatment drug Tamiflu,"#> manufactured by Swiss pharmaceutical firm Roche Holding AG. There has been a worldwide frenzy to obtain doses of Tamiflu for bird flu, even though it's doubtful that Tamiflu will provide much help for a bird flu victim. She may also have been thinking of the <#stdurl http://news.bbc.co.uk/1/hi/world/south_asia/526407.stm "Tamil Tigers,"#> a violent terrorist group operating in Sri Lanka near the border with India. So Ms. Gandhi, who is a good enough looking chick to have <#stdurl http://www.fortunecity.com/lavendar/sidjames/126/maneka.html "a fan web site,"#> evidently thinks that the bird flu "scam" was created by Tamil Tiger terrorists in order to sell the medicine Tamil-flu. Ms. Gandhi is <#stdurl http://www.petaindia.com/newsnew/NewsItem.asp?id=2962 "an animal activist,"#> and may also believe that bird flu is a hoax because it gives animal-haters an excuse to kill birds. =eod =// &&2 e051202 Belgians shocked that suicide bomber is Belgian woman =data ww2010.weblog.y2005.e051202.head Belgians shocked to learn that suicide bomber is Belgian woman =data ww2010.weblog.y2005.e051202.keys Belgium, Muriel Degauque, Robert Pape, suicide bombers, fifth turning =data ww2010.weblog.y2005.e051202.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051202.date 2-Dec-05 =data ww2010.weblog.y2005.e051202.txt1 Her parents try to make sense of the life of their daughter, =data ww2010.weblog.y2005.e051202.txt2 38 year old Muriel Degauque. Working class couple Jean and Liliane Degauque <#stdurl http://news.independent.co.uk/europe/article330688.ece "hadn't been able to make contact with their daughter for a month,"#> but immediately feared the worst when they heard the Tuesday evening news about a native Belgian female suicide bomber in Iraq, they immediately suspected the worst. <#inc ww2010.pic degauque.jpg right "" "Muriel Degauque - "Here's the Kamikaze Belgian woman killed in Iraq" (Source: La Dernière Heure)"#> The details are available in a <#stdurl http://www.dhnet.be/dhinfos/article.phtml?id=135292 "an article in the Thursday's La Dernière Heure."#> Muriel Degauque grew up in southern Belgian as a normal Christian girl, though she was a disaffected Generation X teenager occasionally on drugs, and was somewhat estranged from her parents. A boyfriend, Belgian-born Moroccan Issam Goris, converted her to Islam in 2001, and they married in 2002. They spent time in Morocco, and she started wearing burkas, covering her body entirely, except for the eyes. She became "more Muslim than a Muslim," according to her parents. Both Muriel and her husband died on the same day, November 9, in separate suicide bomber attacks. He was shot before he had a chance to detonate his bomb. She detonated her bomb, and killed either just herself or six people, <#stdurl http://www.timesonline.co.uk/article/0,,7374-1900483,00.html "according to conflicting reports."#> From the point of view of Generational Dynamics, this situation is very interesting and instructive, because it can be combined with information about the London subway bombers of July 7 to obtain interesting new theoretical results in generational theory. One thing we've known for a long time is that societies and nations change during "generational crisis" periods. A generational crisis period occurs about 50-60 years after the end of the previous crisis war, when the people who grew up during the previous crisis war and have personal memories of its horrors all disappear (retire or die), all at once, leaving behind a new generation of leaders with no personal memory of the last crisis war. At that time, the national mood changes dramatically, so that problems are dealt with by confrontation and retribution, rather than by confrontation and containment as they were prior to the crisis period. America's last crisis war was World War II. We're at a unique time in history today because 60 years have passed since the end of WW II, and almost all the nations that fought in WW II have entered a generational crisis period. Generational Dynamics makes predictions about the attitudes and behaviors of large masses of people, and currently predicts that the world will be fighting a new "clash of civilizations" world war, sooner rather than later. Generational Dynamics cannot predict the attitudes and behaviors of any individual, since each individual is free to do what he or she wants. But we're seeing that suicide bombers only come from societies that have entered generational crisis periods, and not before. This indicates that the generational crisis period changes society so that it makes the creation of suicide bombers possible. I've also begun exploring the correlation between crisis wars and suicide bombers in <#hreftext ww2010.i.050718pape "my article on Robert Pape's study of suicide bombers, published in the new book Dying to Win."#> Putting his research together with Generational Dynamics, we find that suicide bombers are most likely to come from countries in generational crisis periods where the land is occupied by another country. They justify their terrorist acts as "altruistic suicide," believing that they're helping the people of their country. So what we saw <#inc ww2010.weblog.ref e050715 "with the July 7 London subway bombers"#> is that were the children of immigrants from a Muslim portion of Kashmir, a region in dispute between Muslim Pakistan and Hindu and Sikh India. The bombers attacked England because it's an ally of India. However, Pape's research also found, among the Mideast countries he examined, most suicide bombers come from Saudi Arabia and Morocco. These two countries that have had exceptionally long times pass since their last crisis wars. Saudi Arabia's last crisis war was the Ibn Saud conquest, ending in 1925, and Morocco's was the Rif War, ending in 1927. The new Belgian situation is exciting because it further confirms these newly discovered correlations. The husband, Issam Goris, was a second generation Moroccan, born in Belgium. The suicide bombing occurred in Iraq, which radical Islamists consider as occuppied by Americans. Muriel Degauque, of course, was raised as a Christian in Belgian, but became a Muslim suicide bomber under the influence of her radical husband. So we can see that this kind of "altruistic suicide" can be adopted not only by the children of immigrants but also by their wives. The foundational work on generational theory was done by historians William Strauss and Neil Howe, who studied what's happened in previous Anglo-American crisis periods, and published their findings in two books, Generations and The Fourth Turning. Their generational theory forms the basis of Generational Dynamics. In their theory, a nation cycles through four periods, or "turnings," each roughly 20 years long. The "fourth turning" is what we've been calling the generational crisis period. Thanks to the new research that we've developed, based on Pape's work, we're able to paint a much better picture of what happens to a nation when it enters a generational crisis period; in particular, we're getting an answer to the following question: What happens when te fourth turning (generational crisis period) goes by without any crisis period? We developed some of this new theoretical material in the article a few days ago on <#hreftext ww2010.i.051129ariel "Ariel Sharon's political "earthquake" in Israel."#> As we discussed, a country that goes into a generational crisis period goes into a kind of "cruise control" before the crisis war begins. During this "cruise control" period, little gets actually accomplished, except a lot of political bickering. Of course, once the crisis war begins, the country unites and pursues the war for its own survival. But what happens if there IS no crisis war? Then what we're finding is that the country appears to enter a "supplementary crisis era" or "fifth turning," a period which is as distinctly different from a fourth turning as a fourth turning is from previous eras. In brief, the picture that appears to be forming is as follows: During the fourth turning, the middle-aged and older generations (Generation X and Boomers in America today) get nothing done except bicker and argue. The young adult generation, which would normally be the new Hero generation fighting in the crisis war, matures into middle age as placid and content people who are, shall we say, "not looking for trouble." However their children, who normally would have grown up during the crisis war, reach adulthood having incorporating their parents' frustrations and smoothed-over hatreds. They turn into a distinctly new type of generation that I call "Super-Nomads." They feel a great deal of anger and little appreciation for the value of life. Thus, during this new "fifth turning," they adopt strategies like suicide bombings, but they also keep their intentions hidden from their parents, who would oppose them. This is a new theoretical development in Generational Dynamics, and more research needs to be done on it. However, it provides the answer to one more question that people sometimes ask me: Suppose a country just gets through the generational crisis period without a war, something that, according to my research, happens about 10% of the time. Can they go on without a crisis war forever? The answer appears to be no. Once a generational crisis period begins, the younger generations become increasingly angry and vengeful, and hold human life to have less and less value. With that kind of anger and hatred becoming increasingly pervasive, a new crisis war cannot be prevented. Another question still to be answered is: Why is it possible for a society or nation to get through a crisis period without a crisis war? For now we can only guess by looking at some examples: Saudi Arabia avoided a crisis civil war in the 1970-80s because of its massive oil revenue; Morocco avoided a crisis war in the 1970-80s because a guerilla war with the Polisario in Western Sahara didn't spiral out of control (though we don't know why it didn't); and the American colonies should have had a Revolutionary War in the 1750s, but it was postponed to 1776 because of the French and Indian Wars. =eod =// &&2 e051201c New Spielberg movie Memoirs of a Geisha =data ww2010.weblog.y2005.e051201c.head New Spielberg movie Memoirs of a Geisha infuriates both China and Japan =data ww2010.weblog.y2005.e051201c.keys China, Japan, Memoirs of a Geisha =data ww2010.weblog.y2005.e051201c.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051201c.date 1-Dec-05 =data ww2010.weblog.y2005.e051201c.txt1 As if Japan-China relations aren't bad enough (see previous item below), =data ww2010.weblog.y2005.e051201c.txt2 Steven Spielberg's "Memoirs of a Geisha," which had its world premiere in Tokyo on Tuesday, is infuriating Japanese because <#stdurl http://www.mercurynews.com/mld/mercurynews/news/world/13294142.htm "none of the three lead actresses are Japanese;"#> two of them are Chinese and another is an ethnic Chinese from Malaysia. This is despite the fact most of the characters are Japanese. <#stdurl http://www.sonypictures.com/movies/memoirsofageisha/ "The movie"#> is scheduled to open in America on December 9. <#inc ww2010.pic geisha2.jpg right "" "Ziyi Zhang in Memoirs of a Geisha (Source: IMDB)"#> The word Geisha means "artist" in Japanese. <#stdurl http://marian.creighton.edu/~marian-w/academics/english/japan/geisha/whatgeisha.html "Geisha are professional hostesses who entertain guests through various performing arts in tea houses called O-chaya."#> They are trained in a number of traditional skills such as Japanese ancient dance, singing, playing instruments such as the Shamisen, flower arrangement, wearing kimo no, tea ceremony, calligraphy, conversation, alcohol serving manners and more. Geisha continue to study and perfect these skills throughout their careers as geisha. According to <#stdurl http://www.imdb.com/title/tt0397535/plotsummary "imdb.com,"#> the plot for the movie is as follows: In 1929 an impoverished nine-year-old named Chiyo from a fishing village is sold to a geisha house in Kyoto's Gion district and subjected to cruel treatment from the owners and the head geisha Hatsumomo. Her stunning beauty attracts the vindictive jealousy of Hatsumomo, until she is rescued by and taken under the wing of Hatsumomo's bitter rival, Mameha. Under Mameha's mentorship, Chiyo becomes the geisha named Sayuri, trained in all the artistic and social skills a geisha must master in order to survive in her society. As a renowned geisha she enters a society of wealth, privilege, and political intrigue. As World War II looms Japan and the geisha's world are forever changed by the onslaught of history. Chinese are outraged over the film for a different reason: The film's star, Zhang Ziyi, China's best-known actress, is depicted in the movie as having sexual relations with a Japanese man. With relations between Japan and China deteriorating, and the Chinese people becoming increasing infuriated at the Japanese, it's hard to say what effect this kind of movie will have. =eod =// &&2 e051201b Slowing China economy may become deflationary =data ww2010.weblog.y2005.e051201b.head Slowing China economy may become deflationary due to overcapacity =data ww2010.weblog.y2005.e051201b.keys China, Japan =data ww2010.weblog.y2005.e051201b.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051201b.date 1-Dec-05 =data ww2010.weblog.y2005.e051201b.txt1 Economic problems are growing against the backdrop of continually deteriorating relations with Japan =data ww2010.weblog.y2005.e051201b.txt2 China's bubble economy, which has been growing at 9-10% a year for two decades, may finally be ready to deflate - both literally and figuratively. According Morgan Stanley economist Andy Xie, <#stdurl http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_pesek&sid=afuxSS8Sl0Xc "China is suffering overcapacity in cement, aluminum, textiles"#> and other goods, and is also constructing too many factories, buildings and resorts. Overcapacity means an oversupply of goods to sell, which would mean a fall in prices, resulting in deflation. Deflation would "cut economic growth, cut off foreign direct investment and would destabilize Asia," according to Columbina University economics professor Robert Mundell. Generational Dynamics predicts that this is exactly the kind of result to be expected from China's bubble economy. Adding to China's woes is the rapid spread of bird flu in China, with reports of <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=globalNews&storyID=2005-12-01T014948Z_01_FOR024362_RTRUKOC_0_US-BIRDFLU-CHINA.xml "a new outbreak of bird flu"#> around the country almost every day. China has recently mobilized its 2.3 million man army to fight bird flu. All of this is occurring at the same time that China's relations with Japan continue to deteriorate rapidly. South Korea and China will cancel planned meetings of their leaders with Japan's Prime Minister Junichiro Koizumi. Koizumi, Chinese President Hu Jintao, and South Korean President Roh Moo Hyun will <#stdurl http://www.iht.com/articles/2005/11/30/news/summit.php "all be attending a major summit of Asean nations in mid-December."#> Koizumi was to have met with each of the other two. Those meetings will be canceled, though a three-way meeting is still considered possible. Japan's relations with both countries have <#hreftext ww2010.i.051023japan "have been deteriorating sharply"#> ever since Koizumi visited the Yasukuni shrine in October. The Tokyo shrine honors 2.3 million war dead, including some who have been declared World War II war criminals. These visits infuriate the Chinese and Japanese, who claim that the shrine ignores Japanese atrocities including mass murder and the use of Korean and Chinese women as "comfort women" for Japanese soldiers. Things have been boiling over all year, with anti-Japanese riots in China last Spring and a dispute over oil and gas rights in the East China sea. Koizumi says that he doesn't understand the criticism of his visits to the shrine. "I visit the shrine as an individual who is against the occurrence of another war and to pay respect to the sacrifices of those who died in war," he says. "So I do not understand why I am criticized for this." It seems to me that he has a point. Why should South Korea and China stay so infuriated for months over what is essentially a religious service. This is something that China and South Korea could get past, if they wanted to. So I guess they don't want to. As I wrote last January, <#hreftext ww2010.i.china050116 "China's society is unraveling and headed for civil war."#> With the country's overcapacity and deflation, there are now signs that the unraveling of China's economy and society is gathering steam. Every country must have a recession sooner or later, but that would be especially harsh on China, with its 150 million migrant workers dependent on the bubble economy for survival. There are already tens of thousands of regional rebellions in the country every year, and a significant rise in unemployment could lead to rapid destabilization. I'm a suspicious kind of guy, and my thoughts keep getting drawn back to the mobilization of China's 2.3 million man army. It would surprise me if those 2.3 million soldiers weren't training to do more than kill chickens. =eod =// &&2 e051201 President Bush's speech plan for Iraq disengagement =data ww2010.weblog.y2005.e051201.head President Bush's speech lays out plan for disengagement from Iraq war =data ww2010.weblog.y2005.e051201.keys George Bush, Iraq war, Joe Biden =data ww2010.weblog.y2005.e051201.loc ww2010.weblog.log0512 =data ww2010.weblog.y2005.e051201.date 1-Dec-05 =data ww2010.weblog.y2005.e051201.txt1 Both sides showed little understanding of what's going on in Iraq =data ww2010.weblog.y2005.e051201.txt2 yesterday, as President Bush gave <#stdurl http://www.whitehouse.gov/news/releases/2005/11/20051130-2.html "gave a major speech outlining his Iraq war strategy."#> President Bush made it clear that he would not approve of withdrawing from Iraq until the insurgency was defeated:

"Some are calling for a deadline for withdrawal. Many advocating an artificial timetable for withdrawing our troops are sincere -- but I believe they're sincerely wrong. ... Pulling our troops out before they've achieved their purpose is not a plan for victory. ... Setting an artificial deadline to withdraw would send a message across the world that America is a weak and an unreliable ally. Setting an artificial deadline to withdraw would send a signal to our enemies -- that if they wait long enough, America will cut and run and abandon its friends. And setting an artificial deadline to withdraw would vindicate the terrorists' tactics of beheadings and suicide bombings and mass murder -- and invite new attacks on America. To all who wear the uniform, I make you this pledge: America will not run in the face of car bombers and assassins so long as I am your Commander-in-Chief."

Senator Joe Biden (Democrat, Delaware), interviewed on CNN, said that we "stirred up a hornet's nest," since it was the war that created the insurgency, and that the insurgency would start to disappear as the American troops withdrew. From the point of view of Generational Dynamics, both views are flawed for the same reason. Generational Dynamics predicts a major regional war between Jews and Arabs in Israel/Palestine, and another major regional war over the Kashmir region. It's the long-standing conflicts over the Palestine and Kashmir regions that are driving the insurgency, not just in Iraq but also in countries throughout the region. American interests have been targeted by an ever-increasing level of Islamist terrorism since the 1980s, with 9/11 being the peak attack so far. In fact, Islamist terrorist insurgency groups are active in Indonesia, Malaysia, Thailand, Bangladesh, Kashmir, Afghanistan, Chechnya, Dagestan, Ingushetia, Iraq, Saudi Arabia, Lebanon, West Bank, Gaza, Egypt, Morocco, and other countries. Almost none of these have anything to do with Iraq, and they wouldn't go away if we pulled out of Iraq tomorrow. Was the 2003 invasion of Iraq a mistake? I've said before that I don't believe we'll know for ten years or so. Generational Dynamics predicts that we're heading for a "clash of civilizations" world war, it will be years before we know whether the invasion of Iraq helps us or hurts us in that war. (Incidentally, French Prime Minister Dominique de Villepin, one of the world's most anti-American political leaders, <#stdurl http://www.alertnet.org/thenews/newsdesk/L29754471.htm "told CNN yesterday that"#> a badly planned withdrawal could cause chaos in Iraq, "which of course would be disastrous for the whole region." He wants America to coordinate the withdrawal wth France and the international community.) At any rate, it seems clear that American forces will remain in Iraq until the larger war begins. Like everything else these days in American policies, the Iraq war will be running on "cruise control," and will serve useful purpose for political game-playing for both political parties, until some major terrorist attack or other shock forces us off cruise control into war. =eod =// &&2 e051130 Press reports say that Tony Blair caving on EU budget =data ww2010.weblog.y2005.e051130.head Press reports say that Tony Blair ready to cave on EU budget =data ww2010.weblog.y2005.e051130.keys Tony Blair, Jacques Chirac, EU Budget, european union =data ww2010.weblog.y2005.e051130.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051130.date 30-Nov-05 =data ww2010.weblog.y2005.e051130.txt1 Under intense pressure from the European Union and other member states, =data ww2010.weblog.y2005.e051130.txt2 the UK Telegraph is reporting that British Prime Minister Tony Blair is <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/11/30/neu30.xml&sSheet=/news/2005/11/30/ixnewstop.html ""ready to surrender EU rebate with no payback.""#> The rebate is related the EU's Common Agricultural Policy (CAP or PAC), which provides agricultural subsidies to member states. The CAP was actually set up in the 1980s, when "iron lady" Margaret Thatcher was British Prime Minister, and she negotiated a "rebate" for the UK, since the UK didn't have enough agriculture to justify much of a subsidy. <#inc ww2010.pic junck.jpg right "" "Furious EU President, Luxembourg Prime Minister Jean-Claude Juncker (Source: BBC)"#> The issue came to a head in at an EU summit in Brussels in June, in which <#inc ww2010.weblog.ref e050618 "Blair and French President Jacques Chirac disputed the terms of the EU budget for 2007-2013."#> Blair offered to agree to end the EU rebate, currently about $3.5 billion per year, provided that France agreed to reduce the CAP subsidies, currently about $10 billion. Chirac demanded that Blair give up the rebate with nothing in return. The dispute between the two men turned into an extremely vitriolic confrontation. The furious EU President Jean-Claude Juncker sided with Chirac and condemned Blair and the UK, saying he felt ashamed that "certain people did not have the will to reach agreement when some poorer other countries were willing to do so." From the point of view of Generational Dynamics, this is the kind of result one would expect. Ten years ago, when the EU was in a "generational unraveling" period, a compromise would have been expected, and indeed similar disagreements always did end in compromise. But today, 60 years after the end of World War II, Europe is in a "generational crisis" period, a time when leaders increasingly seek confrontation and retribution rather than compromise and containment of problems. Thus, a compromise on the EU budget seemed unlikely. On the French side, there was never any doubt that Chirac would never back down, and if there WERE any doubt, the doubt would have been eliminated by the <#inc ww2010.weblog.ref e051110 "the Paris riots from early November."#> These riots revealed that France was much deeper financial trouble than even the 12% unemployment rate would indicate. On the UK side, there seemed to be an equally steely determination not to back down, and as late as last week, Gordon Brown, Britain's chancellor of the exchequer, <#stdurl http://msnbc.msn.com/id/10144386/ "made it clear that the rebate would be retained"#> unless France yielded on the agricultural subsidies. So it comes as quite a shock that if press reports are true then Blair is about to cave completely. The pressure on Blair and UK has been enormous. On Tuesday, <#stdurl http://www.iht.com/articles/2005/11/29/news/poland.php "Poland's president sharply criticized Blair,"#> assigning him the sole blame for deepening the crisis in the EU. Hungary's Prime Minister <#stdurl http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-11-29T164627Z_01_L29762854_RTRIDST_0_EU-BUDGET-WRAPUP-2.XML "told Hungarian television"#> that "What ... Blair is now proposing is unacceptable ... It is so far from Hungary's interests that let's put it simply: no." And an <#stdurl http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-11-29T164627Z_01_L29762854_RTRIDST_0_EU-BUDGET-WRAPUP-2.XML "open letter by the prime ministers of Poland, Hungary, the Czech Republic and Slovakia"#> pressed Blair for a compromise, saying that "for us the stakes are high." And the executive European Commission warned the failure to agree on the budget would plunge the EU deeper into crisis. This is a very interesting situation, and it will be fascinating to see how it's going to play out. From the point of view of Generational Dynamics, the EU is going in any direction besides compromise. When the French voters rejected the proposed EU constitution in a referendum, <#hreftext ww2010.i.eu050601 "my analysis of the exit polls"#> showed that the split was generational: Older voters born before the end of World War II favored adopting the Constitution, while those born after the war favored a rejection. Since the first group of voters is constantly getting smaller while the latter group is constantly getting larger, it's pretty clear that the EU Constitution will never be adopted for the foreseeable future. This indicates that the "European Union project" is, for all practical purposes, dead. The budget impasse seemed to confirm that. =inc ww2010.cf.cf050530 p left Thus, a budget compromise would be quite a surprise, given the European trend, and it would have harsh repercussions for Blair in Britain. It would be a surprise for a different reason. As we discussed earlier this week in the article on <#hreftext ww2010.i.051129ariel "Ariel Sharon's political "earthquake" in Israel,"#> the countries that fought in WW II are all on a kind of "cruise control," led by people born after WW II with no skills to actually DO anything except express outrage when something goes wrong. Thus, if the EU actually manages to get a budget agreement for 2007, it would be quite an achievement. However if, surprisingly, Blair caves and the EU reaches a budget compromise, then it does not change the eventual trend, just as a heat wave in November doesn't mean that winter isn't coming to New York City. Generational Dynamics predicts that there'll be a new west European war, just as there have been west European wars at regular intervals for a millennium or more. Generational Dynamics doesn't predict who the belligerents will be, but trends for the last few years indicate that England and France will, once again, be at war. I see no reason at this time to make any changes to that prediction. =eod =// &&2 e051129 Canada announces bird flu findings not pathenogenic =data ww2010.weblog.y2005.e051129.head Canada announces that bird flu findings are not pathenogenic =data ww2010.weblog.y2005.e051129.keys Canada, China, bird flu =data ww2010.weblog.y2005.e051129.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051129.date 29-Nov-05 =data ww2010.weblog.y2005.e051129.txt1 After many weeks of delay, Canada has finally responded to conspiracy buffs. =data ww2010.weblog.y2005.e051129.txt2 As we reported on October 31, <#inc ww2010.weblog.ref e051031b "Canada's Public Health Agency issued a press release"#> saying that bird flu had been found in Canada, and that tests were ongoing to determine whether it was the H5N1 strain. According to <#stdurl http://www.inspection.gc.ca/english/corpaffr/newcom/2005/20051031e.shtml "the press release,"#> these tests would "take up to a week." But the results of the tests were not forthcoming, leading conspiracy buffs to wonder <#stdurl http://www.canadafreepress.com/2005/cover112205h.htm "why Canada wasn't releasing its test results."#> Finally, after three weeks, the agency issued <#stdurl http://www.inspection.gc.ca/english/corpaffr/newcom/2005/20051120e.shtml "a new press release"#> saying that tests confirm that the type of bird flu was a "low pathogenic North American strain" that's been around for years. This form of avian flu produces only mild disease in birds, and is not transmitted to humans. This doesn't mean that North America has escaped for all time, unfortunately. Highly pathenogenic H5N1 bird flu has spread via wild bird migrations from Vietnam throughout Asia to Russia, Europe and the Mideast, and we're just beginning to hear reports from Africa. Migratory birds, some of which carry bird flu but do not become ill, spread the virus by dropping feces that make contact with birds on the ground, which then contract the virus. <#inc ww2010.pic chicken.jpg right "" "Inquisitive chicken inspects vaccination needle"#> The situation in China is especially severe with new outbreaks reported almost every day. China has announced plans to vaccinate 14 billion (billion with a "b") birds with bird flu vaccine, though many question the feasibility of this project. China has just <#inc ww2010.weblog.ref e051105 "mobilized its 2.3 million man army to "fight bird flu.""#> There are also migratory bird paths that run from Asia across the Bering Straits into Alaska and then down into Canada and the United States. It's only a matter of time before the pathenogenic virus spreads to North America in the same way that's spread to other continents. This does not change the outlook for a pandemic involving human to human transmission of the pathenogenic H5N1 virus. A human to human transmissible virus will be formed when somebody simultaneously gets the ordinary human flu and the pathogenic H5N1 bird flu at the same time. At that time, the genes from the two forms of the virus can recombine to form an H5N1 virus that can move easily from human to human. Experts fear that a propitious time for such a result will be during the Chinese and Vietnamese new year celebrations in January and February, when many people will be travelling, and more poultry would be transported, slaughtered and consumed. If this happens, it would lead to <#inc ww2010.weblog.ref e051113 "a bird flu pandemic in the spring,"#> and a renewed pandemic the following winter. =eod =// &&2 e051121 Vitriolic Iraq war politics erupts in Washington =data ww2010.weblog.y2005.e051121.head Vitriolic Iraq war politics erupts in Washington =data ww2010.weblog.y2005.e051121.keys Iraq war, John Murtha =data ww2010.weblog.y2005.e051121.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051121.date 21-Nov-05 =data ww2010.weblog.y2005.e051121.txt1 But the basics of the Iraq war haven't changed a bit. =data ww2010.weblog.y2005.e051121.txt2 I turned on CNN on Friday morning and heard news anchor Miles O'Brien say that the civil war had already begun. I saw Pat Buchanan on MSNBC predict "a real disaster" in Iraq a Vietnam-like defeat. Pat Buchanan was in the Nixon administration when they lost Vietnam. Now he thinks that there'll be a debate on "who lost Iraq?" The vitriol reached a peak on Thursday when Democratic Congressman John Murtha made <#stdurl http://www.house.gov/apps/list/press/pa12_murtha/pr051117iraq.html "an anti-war speech with rhetoric straight out the Vietnam era,"#> calling for immediate withdrawal from Iraq, followed up by a really nasty remark about people who sat behind during the Vietnam war shouldn't be sending soldiers to Iraq now. This drew <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2005/11/18/AR2005111802896.html "an equally nasty remark from Ohio Congresswoman Jean Schmidt,"#> quoting a Marine colonel sending "Congressman Murtha a message: that cowards cut and run, Marines never do." This is the nature of the times, as happens during "generational crisis" periods. The nation's leaders are from the arrogant, narcissistic Boomer generation, born after WW II. They spent their youth as hippies in anti-war demonstrations in the 1960s, and now they're in trying the same thing as aging hippies in 2005. But they have no skills at accomplishing anything except political arguments, so nothing really ever gets done. So we see arguments over Karl Rove, the Iraq war, Scooter Libby, Supreme Court nominee Samuel Alito, and the Iraq war again. The country is on cruise control. Pundits are calling this a pivotal moment of change, but in fact nothing has changed. Let's list some things that haven't changed:

The anti-war movement is toothless and virtually non-existent. It's really an anti-Bush movement. Everyone knows that a pullout from Iraq would be an international catastrophe, so it won't happen despite the silly rhetoric. In particular, college students aren't protesting; to them, two Boomers arguing is about as interesting as two dinosaurs fighting.
There will be no civil war in Iraq. I've explained this a million times on this web site: <#hreftext ww2010.i.sixties040501 "Iraq is in a generational awakening period,"#> only one generation past the genocidal Iran/Iraq war, and history tells us that a civil war at this time is impossible.
The Iraq war won't spread democracy through the Mideast. The original "neo-conservative" master plan was that by restoring democracy in Iraq, democracy would then spread around the Mideast. Generational Dynamics tells us that this master plan is impossible.
The Iraq war has nothing to do with the increase in terrorism around the Mideast. Those opposing the war claim that the Iraqi war is energizing the terrorist insurgency led by Abu Musab al-Zarqawi. This view overlooks what would have happened if we hadn't invaded Iraq: Saddam would still be in power, still funding suicide terrorists in Palestine, and we would still be wondering whether he would planning to sell weapons of mass destruction (WMDs) to terrorists. The situation would be even worse than it is now.
The Mideast is still headed for a war between Arabs and Jews, spreading to a major regional war that will draw in many other identity groups.
This is not the 1960s.

As I've said many times before, the Iraqi people are not in any mood for war, having lost hundreds of thousands of young men in the Iran/Iraq war of the 1980s. The Iraqi people will not participate in a war unless they're forced to, although Abu Musab al-Zarqawi is doing his best to trigger one. As the world heads for a "clash of civilizations" world war, al-Zarqawi may yet bring full scale war to Iraq, but it will be from the outside, not from civil war. =eod =// &&2 e051117 George Bush lectures China on being more like Taiwan =data ww2010.weblog.y2005.e051117.head George Bush lectures China on being more like Taiwan =data ww2010.weblog.y2005.e051117.keys China, Taiwan, Taiping Rebellion, Falun Gong =data ww2010.weblog.y2005.e051117.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051117.date 17-Nov-05 =data ww2010.weblog.y2005.e051117.txt1 It's incredible that President Bush told China to be more open and democratic, =data ww2010.weblog.y2005.e051117.txt2 and should permit freedom of speech and religion, in <#stdurl http://www.whitehouse.gov/news/releases/2005/11/20051116-6.html "a speech given in Japan, prior to his visit to China."#> He said that China should follow the example of Taiwan:

"Taiwan ... has moved from repression to democracy as it liberalized its economy. ... [E]conomic liberalization in Taiwan helped fuel its desire for individual political freedom -- because men and women who are allowed to control their own wealth will eventually insist on controlling their own lives and their own future. Like South Korea, modern Taiwan is free and democratic and prosperous. By embracing freedom at all levels, Taiwan has delivered prosperity to its people and created a free and democratic Chinese society."

If you're a regular reader of this web site, then you know that I'm not a very big fan of politicians (this has nothing to do with party affiliation), and this ridiculous statement shows why. The Chinese must be looking at one another, shaking their heads and saying, "What planet is this guy from?" Surely Bush must know that China can't permit freedom of speech or freedom of religion because it would send the country into total chaos. As we discussed last January, <#hreftext ww2010.i.china050116 "China's society is unraveling and headed for civil war,"#> a certain war with Japan, and a certain war with America over Taiwan. The main dynamic began in 1989 with the Tienanmen Square massacre of college students protesting against the government. This caused major social changes in both China and Taiwan. In Taiwan, students watching the massacre were horrified by what they saw. The started the Wild Lily student rebellion, whose purpose was to advocate Taiwan's nationhood and independence from China. One of the leaders of the Wild Lily rebellion, Chen Shui-bian, has been Taiwan's president since 2000, and has announced plans to move towards independence, although he's backed off to avoid provoking China. However, attitudes in Taiwan continue to harden, thanks to generational changes. <#inc ww2010.weblog.ref e050327 "Young people in Taiwan are increasingly confrontational with China,"#> which is to be expected from the Generational Dynamics model. In China, many people became followers of a spiritual movement called the Falun Gong. Older people would get together to meditate and do exercises. By 1999, millions of people had joined the movement, and many were <#stdurl http://www.globaled.org/chinaproject/teachingmaterials/lesson_59_china.php "comparing themselves to the founders of the Taiping rebellion"#> of the 1850s and 1860s, which resulted in the deaths of tens of millions of people. Alarmed Chinese leaders are well aware of the comparison, and they reacted by brutally crushing the Falun Gong movement, putting tens of thousands and perhaps hundreds of thousands of practitioners in jail. Falun Gong has become an international movement, but within China any association is illegal and punishable by years in jail. It hasn't solved the problem, however. <#inc ww2010.weblog.ref e051011 "Regional mass riots in are increasingly common, with 74,000 occurring last year."#> The number of regional rebellions keeps growing, and it's only a matter of time before Chinese lose control. So what you should imagine is terrified Chinese leaders, fearful of a regional rebellion that spirals out of control, and looking across the Straits of Taiwan to a territory whose citizens are increasingly desirous of independence, with both trends increasing because of generational changes. Into that atmosphere comes President Bush's call for freedom of speech and religion in China. This would free the millions of followers of Falun Gong to begin demonstrating against the Beijing government, and instantly create a nationwide rebel group. So why did Bush make this statement? Maybe it was a mistake, or maybe it was a planned provocation. Who knows? He's a politician. As I've said before, I see one and only one person of either party in Washington who knows what's going on in the world, and that's Secretary of Defense Donald Rumsfeld. <#inc ww2010.weblog.ref e051024 "Rumsfeld was born in 1932, and is a member of the "Silent Generation""#> that grew up during the Great Depression and World War II. Rumsfeld was old enough to understand that the militarization of Hitler's Germany in the mid 1930s led to the most violent war the world has known, and Rumsfeld can see the same thing happening in China's aggressive militarization today. Thus, he's been modernizing the armed forces and refocusing it on the Pacific, in preparation of a preemptive war by China. Ominously, China has just <#inc ww2010.weblog.ref e051105 "mobilized its 2.3 million man army to "fight bird flu.""#> In the meantime, Bush's visit to Asia should be seen as a political dance, not having much to do with what's really going on in the world. =eod =// &&2 e051115 The bizarre November 9 bombings in Amman, Jordan =data ww2010.weblog.y2005.e051115.head The bizarre November 9 bombings in Amman, Jordan =data ww2010.weblog.y2005.e051115.keys Abu Musab al-Zarqawi, Jordan =data ww2010.weblog.y2005.e051115.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051115.date 15-Nov-05 =data ww2010.weblog.y2005.e051115.txt1 After four days, what happened is still unclear. =data ww2010.weblog.y2005.e051115.txt2 The bare facts are clear: Three suicide bombers walked into popular tourist hotels in Amman on Wednesday and exploded their bombs, killing 57 people, including a large wedding party with many women and children. "Al-Qaeda in Iraq" terrorist leader Abu Musab al-Zarqawi was immediately suspected. Beyond that, confusion abounds: Jordanians identified the remains of the three male suicide bombers, but al-Zarqawi bragged on his web site that there four Iraqis, two of whom were a married couple. <#inc ww2010.pic sajida.jpg right "" "Saijida Mubarak Atrous"#> This was a surprise to the Jordanians, who immediately expanded their investigation to search for the woman who, it turned out, had not exploded her bomb. Jordan aired part of her confession on television:

"My name is Saijida Mubarak Atrous, born in the 70s. I am an Iraqi national. I reside in Ramadi. On November 5, I accompanied my husband to Jordan carrying a fake Iraqi passport. His was under the name of Ali Hussein Ali, and mine was Saijida Abdel Kader Latif. We waited in Iraq, and a white car picked us up. There was a driver and a passenger. We entered Jordan together. My husband is the one who organized everything. I don't know anything else. We rented an apartment. My husband wore an explosive belt and put one on me. He taught me how to use it. The targets were hotels in Jordan. We took a car, and we went on November 9 to a hotel. There was a wedding ceremony in the hotel. There were women, men and children. My husband took a corner and I took another one. My husband detonated his bomb, and I tried to detonate mine but failed. People fled running, and I left running with them."

They're still questioning the woman to find out as much as she's willing to tell about Zarqawi's operation. Now, there are a whole bunch of problems with this whole story.

This has been painted as a successful al-Zarqawi operation. It was in many ways, but obviously he made many mistakes.
- Bombing a wedding has <#stdurl http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20051112/ZARQAWI12/TPInternational/Africa "turned most of the Jordanian population against him,"#> where they previously supported his insurgency because it was against the Americans.
- al-Zarqawi used a female suicide bomber to increase the level of horror, but the effect was lost because the female walked away without detonating her bomb.
- Bragging about the married suicide bomber only revealed that she had escaped without detonating her bomb. This must have made al-Zarqawi look like an idiot.
Al-Zarqawi is Sunni Muslim, and it's a surprise that he would target Jordanian Sunni Muslims, especially since, just two months ago, he <#inc ww2010.weblog.ref e050922 "declared war against all Shi'ites in Iraq,"#> and then looked pathetic as he had to back off his threat "for some Shi'ites."
Some <#stdurl http://www.dailystar.com.lb/article.asp?edition_id=10&categ_id=5&article_ID=19960 "commentators are calling this"#> "a qualitatively significant and troubling step in the global dynamics of terror," because al-Zarqawi has expanded his Iraq insurgency into Jordan. Actually, al-Zarqawi is a Jordanian, and has long history of <#stdurl http://www.time.com/time/magazine/article/0,9171,1129575,00.html "attempted terrorist acts against Jordan,"#> because of Jordan's peace agreement with Israel and tacit support for America's war in Iraq.
Some commentators are calling the attack a major terror expansion because <#stdurl http://abcnews.go.com/WNT/Investigation/story?id=1312273 "a female suicide bomber was involved."#> Once again, this is a confusing interpretation because there have been female suicide bombers used on Israeli targets. From the point of view of Generational Dynamics the use of a female suicide bomber is a sign of the intensity of the hatred that al-Zarqawi holds for Jordan, because using a woman to kill women and children shows a willingness to use genocidal methods that are standard in a crisis war. Those who hope that for an end to the terrorist insurgency should understand this.
The woman's confession story <#stdurl http://www.cbsnews.com/stories/2005/11/14/world/main1041548.shtml "contains some apparent contradictions:"#> She wasn't wounded by the explosion of her husband's bomb. She didn't get rid of her explosive belt after escaping. This makes it seem more likely that she never planned to detonate her bomb, and may even not have gone to the hotel.
The suicide bombers have been identified as Iraqis. This is a surprise because <#hreftext ww2010.i.050718pape "suicide bombers in Iraq have been overwhelmingly Saudi."#> From the point of view of Generational Dynamics, this makes sense because Iraq is in a "generational awakening" period, meaning that the value of individual life is at a high value, and Saudi Arabia is deep into a generational crisis period, meaning that individual lives have little value. It seems reasonably likely, again, that the husband and wife decided that the woman should walk away without detonating her bomb, rather than losing her life too.

There are several things that we can tentatively conclude from this incident. First, al-Zarqawi has been acting increasing desperate recently, even <#inc ww2010.weblog.ref e050908b "claiming credit for Hurricane Katrina."#> In this case, al-Zarqawi managed to kill a lot of incident Jordanians, including many women and children, but accomplished little else. It's hard to see this as much more than a maniac striking out. Second, this incident illustrates the complexity of the Mideast situation. Generational Dynamics predicts that there will be a new genocidal war between Arabs and Jews, replaying the genocidal crisis war of the 1940s after the partitioning of Palestine and the creation of the state of Israel. Al-Zarqawi's acts show that there may also be genocidal splits among different Muslim groups, such as between Sunnis and Shi'ites, or between Arabs and other Muslim groups. =eod =// &&2 e051113 Hong Kong fears bird flu cases may explode in spring =data ww2010.weblog.y2005.e051113.head Hong Kong fears bird flu cases may "explode" in spring =data ww2010.weblog.y2005.e051113.keys Hong Kong, bird flu, Canada =data ww2010.weblog.y2005.e051113.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051113.date 13-Nov-05 =data ww2010.weblog.y2005.e051113.txt1 Meanwhile, people are wondering whether Canada is stonewalling. =data ww2010.weblog.y2005.e051113.txt2 High-level officials that manage all of Hong Kong's hospitals are planning for "an explosion of bird flu cases in the city early next year," according to <#stdurl http://www.alertnet.org/thenews/newsdesk/HKG135604.htm "a Reuters story that quotes a Chinese-language newspaper."#> "Spring is the peak season for human influenza," according to the officials. "Once the human influenza virus mixes with bird flu, it will pose a big threat." <#inc ww2010.pic vietnam_seasonal.gif right "" "Avian Influenza (AI) outbreaks in Vietnam in 2004 and 2005 (Source: iflu.org)"#> The adjoining graph, which depicts bird flu outbreaks in Vietnam for the last two years, shows that major bird flu outbreaks occur with the Tet holiday. As <#inc ww2010.weblog.ref e050121b "we wrote about in January, 2005,"#> the World Health Organization (WHO) feared that a human-to-human bird flu pandemic might start with last season's lunar new year (Tet) celebrations, when many people would be travelling, and more poultry would be transported, slaughtered and consumed. A pandemic didn't occur at that time, but the concern is renewed as the new Tet holiday approaches in 2006. The Chinese New Year celebrations raise similar concerns, and that will occur around the same time, on January 29, 2006. Bird flu virus mutation is basically a numbers game. A human to human transmissible virus will be formed when somebody simultaneously gets the ordinary human flu and the pathogenic H5N1 bird flu at the same time. At that time, the genes from the two forms of the virus can recombine to form an H5N1 virus that can move easily from human to human. It's the far greater numbers of recombination opportunities that make a pandemic much more likely this year than last year. Bird flu has been spreading so rapidly (among birds) in China, that <#inc ww2010.weblog.ref e051105 "China has mobilized its 2.3 million man army to fight bird flu."#> In fact, H5N1 bird flu has been <#stdurl http://www.recombinomics.com/News/11120501/H5N1_Geographic_Genetic.html "dramatically changing, expanding its reach both geographically and genetically."#> Thus, the opportunities for recombination to form a human to human virus are exponentially greater this year than last. Further research out of Hong Kong shows why H5N1 bird flu is more dangerous to young people than it is to older people. Influenza is generally far more dangerous to older people, because they have weakened immune systems to fight off the disease than younger people. But the stronger immune systems of younger people actually make H5N1 more dangerous to young people than to older people. The new research, appearing in <#stdurl http://respiratory-research.com/content/6/1/135/abstract "an article in Respiratory Research magazine,"#> shows that when a human contracts H5N1 virus, the person's lungs overreact by generating a "storm" of cytokines, chemicals that are produced by the immune system. The stronger the immune system, the greater the overreaction, and the more cytokines that are produced. The result is that <#stdurl http://www.alertnet.org/thenews/newsdesk/N10196768.htm "young and healthy victims are more likely to die,"#> because the cytokines flood the lungs and make breathing impossible. Finally, there's an ongoing mystery about whether H5N1 has been detected in Canada. As we reported on October 31, <#inc ww2010.weblog.ref e051031b "Canada's Public Health Agency issued a press release"#> saying that bird flu had been found in Canada, and that tests were ongoing to determine whether it was the H5N1 strain. According to <#stdurl http://www.inspection.gc.ca/english/corpaffr/newcom/2005/20051031e.shtml "the press release,"#> these tests would "take up to a week." It's now been two weeks, and Canada has not announced the final results. Conspiracy buffs wonder if Canada is stonewalling; after all, a finding of H5N1 in Canada would be major international news, and would be bad for business in both Canada and America. Others say that it's simply taking longer than expected to complete the very complex tests. Canada should release its results as quickly as possible to dispel confusion. I'd like to end this article with a word about credibility. If I were writing for the New York Times or the Wall Street Journal, I would have automatic built-in credibility, but writing for web site means that I have to work twice as hard if I want to be credible. That's why I quote only the most reliable sources, and make it clear whether something is an established fact, a prediction from Generational Dynamics, or my own opinion. Readers of this web site can be certain that they're getting an honest, credible story. I first started writing about bird flu <#inc ww2010.weblog.ref e041003 "over a year ago, in October, 2004,"#> when my study of multiple sources led me to believe that a bird flu pandemic sometime soon was very likely. Nothing can be certain, of course, but the possibility of a bird flu this winter is significantly high, and the possibility that I and/or a number of my readers will not survive is also significantly high. I say that because it's my best estimate of the situation. I make no money from this web site, except to sell an occasional book, and I make no money from any of the subjects discussed, so I have nothing to gain or lose by making these statements. But that's not all. I keep thinking about the spread of bird flu in China, and <#inc ww2010.weblog.ref e051105 "the mobilization of its 2.3 million man army to "fight bird flu.""#> China as a country is becoming increasing convulsive and unstable. Its bubble economy was close to bursting anyway, but now with the spread of bird flu, everything is speeding up. The mobilization of the army is extremely significant. Bird flu has provided a convenient excuse for the mobilization, but you can be absolutely certain that the army will be performing other kinds of exercises besides practicing how to kill chickens. They'll be performing "attack Taiwan" exercises and "attack Tokyo" exercises and maybe even "attack Seoul" exercises. Furthermore, that army will never be demobilized again -- at least not without a major war. The situation is extremely serious and dangerous, and getting more dangerous every day. The risk of a serious international crisis this winter is significantly high. If I'm wrong about these things, no one will be happier than I am. But I've said this a couple of times before, and I'll say it again: If you've planning to make some advance preparations for a possible crisis or emergency, such as by stocking up on 2-3 months of food (such as canned goods), then now is the time to do it. =eod =// &&2 e051111 US trade deficit hits new monthly record high =data ww2010.weblog.y2005.e051111.head US trade deficit hits new monthly record high =data ww2010.weblog.y2005.e051111.keys trade deficit, Ben Bernanke, Alan Greenspan =data ww2010.weblog.y2005.e051111.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051111.date 11-Nov-05 =data ww2010.weblog.y2005.e051111.txt1 Once again, economists' hopeful predictions of a fall in the trade deficit continue to be thwarted. =data ww2010.weblog.y2005.e051111.txt2 <#inc ww2010.pic g051110b.gif right "" "Trade deficit, 2002-present. (Source: WSJ)"#> Among the analysts who claim that the economy is in good shape and poised to continued growing, there are two classes: (1) The analysts who have no idea at all what's going on, and just says things are great to keep their clients happy; and (2) the ones who claim that the economy is "self-adjusting," and that things like the trade deficit will take care of themselves. Most analysts are in the first category; those in the second category were disappointed today when the Dept. of Commerce announced that <#stdurl www.bea.gov/bea/newsrel/tradnewsrelease.htm "the trade deficit had a fresh monthly high"#> in September, $66.1 billion. The analysts who believe that the economy is "self-adjusting" <#stdurl http://msnbc.msn.com/id/9994029/ "predicted a significantly lower deficit."#> It's pretty clear from the unexpectedly high deficit that the trade deficit is not leveling off. As the graph above shows, it's not showing any sign of leveling off. It keeps fooling the experts, since every time it appears to be going lower, it takes another jump up to an even higher level, and continues its persistent growth. Some expert analysts are saying the increase is only temporary, because it was caused by high oil prices and by hurricane Katrina. The say that these problems are only temporary, and that they'll go away soon. In fact, that's what they said last April, <#inc ww2010.weblog.ref e050413 "which was the last time I wrote about this subject."#> Obviously, little has changed. Actually, the article I'm writing today is little changed from the article I wrote in April except, of course, that seven more months have passed and the problem continues to get steadily worse. <#inc ww2010.pic g051110.gif left "" "Imports and exports (Source: Dept. of Commerce)"#> A more detailed picture is shown by examining the components in the adjacent graph, taken from <#stdurl www.bea.gov/bea/newsrelarchive/2005/trad0905.pdf "the full US Dept. of Commerce report (PDF file)."#> The trade deficit is computed by subtracting the amount of our exports to other countries from the amount of our imports from other countries. As this graph shows, the amount of imports keeps rising, while the amount of exports has leveled off. In fact, imports are now 63% higher than exports. That's a very big percentage. If that difference were narrowing it might still take years until exports equalled imports, but in fact the difference keeps increasing, not decreasing. In a <#stdurl http://www.latimes.com/news/opinion/commentary/la-oe-roach26oct26,0,2699976.story "recent column appearing in the L.A. Times,"#> Stephen S. Roach, the chief economist for Morgan Stanley, wrote that this trip is nearing the end of the road. "Running at an annual rate of close to $800 billion in the first half of 2005, [the trade deficit] requires foreign funding to the tune of $3 billion per business day. To accomplish that without a sharp drop in the dollar and/or a related backup in interest rates requires extraordinary confidence on the part of foreign investors in U.S. assets." Roach points out that the today's account deficit equals 6.4% of gross domestic product, while 1.5% was a common level in times past. This corresponds to the astronomically high level of public debt -- higher than it's been since the 1930s Great Depression. And, as I've said many times, <#hreftext ww2010.i.050711eleven "both I and other analysts have computed,"#> the "true value" or book value of the stock market today to be around Dow 4500, which means that the market is overvalued by more than 110% -- at about the level as just before the 1929 stock market crash. Roach's article is entitled, "The ambush waiting for Bernanke," referring to the <#hreftext ww2010.i.051029bernanke "Ben S. Bernanke, Bush's appointee to replace Alan Greenspan at the Fed."#> According to Roach, the transition at the Fed could trigger a loss of foreign confidence in the dollar, while the account deficit continues to increase. "In short, the U.S. is going to be asking a lot more of the foreign investor at precisely the moment the Fed is transitioning from Greenspan to Bernanke. As the maestro leaves the building, the hard-won aura of foreign confidence that surrounds him could be quick to follow. Bernanke could be faced with a dollar crisis and the related need on the part of foreign investors to seek compensation for taking currency risk. That compensation invariably spells higher interest rates — the last thing the nation's housing bubble and overly indebted consumers need." Roach concludes, "History warns us to expect the unexpected when the nation's second-toughest job changes hands." =eod =// &&2 e051110 The Paris riots and Hurricane Katrina =data ww2010.weblog.y2005.e051110.head The Paris riots and Hurricane Katrina =data ww2010.weblog.y2005.e051110.keys =data ww2010.weblog.y2005.e051110.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051110.date 10-Nov-05 =data ww2010.weblog.y2005.e051110.txt1 After 13 days, the Paris riots are subsiding, but not after enormously embarassing France. =data ww2010.weblog.y2005.e051110.txt2 Prime Minister Dominique de Villepin <#stdurl http://www.guardian.co.uk/worldlatest/story/0,1280,-5401587,00.html "announced strict curfew laws and a strong law and order program,"#> along with the promise of new social programs for immigrant ghettoes. The social programs are needed because of decades of pervasive unemployment, poverty, discrimination and racism, endured by the residents of the ghettos where the rioting has been taking place. The rioters were young men, native Frenchmen, and almost all Muslims, sons of parents who immigrated to France in the 1950s and 1960s from Algeria, Morocco, Tunisia and black Africa. The embarassment to France is that it has long been demonstrating a kind of "holier than thou" attitude, criticizing England and America and the "Anglo-Saxon model" which, according to the French, allows unemployment, poverty, discrimination and racism in the free market capitalist system. When hurricane Katrina struck, France was one of the main critics of the American system, claiming that it exposed the racial divide in America, with the implication that no such divide exists in France. It's now pretty clear that it does exist, and there's a lot of gloating going on. For example, <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2005/11/08/AR2005110801109.html "an analysis in Wednesday's Washington Post"#> says,

"[The] refusal of French politicians to lift restrictions on employers, to promote entrepreneurship or to deregulate make it impossible for young people to integrate through the economy, as immigrants do in this country, despite discrimination. The only real long-term solution -- that France should join the dreaded "Anglo-Saxon" world market and open up its economy -- is precisely the one that no French politician dare speak aloud."

Remarkably, the press in other nations is also comparing America favorably to France. According to a <#stdurl http://www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1131145799838&call_pageid=968256290204&col=968350116795 "column in the Toronto Star,"#>

"The Paris riots have done to France what Katrina did to America: rip open its Third World underbelly and expose its deep divisions of race and class. But unlike America — which, with its reservoir of guilt and goodwill toward its black citizens, is making a huge effort to compensate and rehabilitate the displaced of New Orleans — one suspects that France, with its anti-immigrant pathology, will continue to muddle along."

And a Muslim columnist says that <#stdurl http://www.dailytimes.com.pk/default.asp?page=2005%5C11%5C09%5Cstory_9-11-2005_pg4_14 "Arabs and Muslims have better lives in America than in France:"#>

"While Arab Americans and Muslims suffered a spike in hate crimes after the September 11 attacks, they do not face the same level of disenfranchisement as their French counterparts, experts say. “They’re discriminated against but they have jobs - this is the major difference from Europe,” Yvonne Haddad, a professor of Islamic history at Georgetown University in Washington told AFP."

The message from these sources is that the French social model has failed. From the point of view of Generational Dynamics, the choice of social model doesn't make any difference. America does have racial problems, but we've also had a civil war fought over them in the 1860s. Enough time has passed since then that the fault line has softened. But the situation is much more recent in Europe, and so much more serious, and we've discussed this problem before on this web site. The July 7 London subway suicide bombers were <#hreftext ww2010.i.050718pape "the children of immigrants from Kashmir,"#> and the Muslim population that convulsed Holland following the murder of filmmaker Theo van Gogh by a Muslim extremist <#inc ww2010.weblog.ref e041214 "consists mostly of children of Muslim immigrants who arrived from Turkey and Morocco"#> in the 1960s and 1970s as "guest workers." The European country with the largest Muslim minority is France, with 5 million Muslims, as a result of immigration Africa during the 1950s and 1960s. It was very generous of so many European countries to offer immigration opportunities to so many Muslims -- from Africa, the Mideast and Turkey -- in the 1950s and 1960s, but no good deed goes unpunished and it's now time to pay the price. The French riots appear to be subsiding, but their principal effect has been to further polarize the fault line between Christians and Muslims throughout Europe. Generational Dynamics predicts that there will be a new European war, as there has been so any times in the past. As we've said in the past, a new war between England and France is all but certain, but the size of the Muslim minorities guarantees that another component will be a civil war based on this fault line. =eod =// &&2 e051105 China mobilizes its army to fight bird flu =data ww2010.weblog.y2005.e051105.head China mobilizes its army to fight bird flu =data ww2010.weblog.y2005.e051105.keys China, bird flu =data ww2010.weblog.y2005.e051105.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051105.date 5-Nov-05 =data ww2010.weblog.y2005.e051105.txt1 Does this move have greater significance? =data ww2010.weblog.y2005.e051105.txt2 China is <#stdurl http://www.bloomberg.com/apps/news?pid=10000080&sid=amjkOqz7DtF4&refer=asia "mobilizing its 2.3 million person army to fight bird flu."#> At the very least, this move indicates the depth of China's concern over the spread of bird flu. China has officially been <#stdurl http://en.chinabroadcast.cn/2238/2005-11-5/118@280234.htm "downplaying the extent of bird flu in that country,"#> and has specifically denied that humans are getting infected. However, China has officially made four separate reports of bird flu outbreaks in birds in three weeks, resulting in the culling (killing) of over 300,000 birds. Furthermore, there have been several human deaths from pneumonia that have gone unexplained, leading to <#stdurl http://www.recombinomics.com/News/11040501/H5N1_Liaoning_Six_Villages.html "the suspicion that China is hiding a much worse situation than they've reported."#> The new report that China is mobilizing its huge army, the largest army in the world, to fight bird flu is significant in more ways than one. The obvious significance is that bird flu must be increasingly widespread if the army is required. But the second reason is the possibility that China itself is becoming increasingly unstable. As <#hreftext ww2010.i.china050116 "described at length before,"#> Generational Dynamics predicts that China is approaching a massive civil war as its bubble economy unravels, along with the rigid social structure originally set up by Mao Zedong in the 1950s and 60s. Today, there are close to 150 million migrant workers (20% of the workforce), mostly peasants who have lost their farms to corrupt land deals by CCP (Chinese Communist Party) officials, who take any jobs they can find in the cities and send money back to their families in vast poverty-stricken rural areas. Any recession or economic setback to China would provoke nationwide fury, and a bird flu epidemic would certainly be a trigger. =inc ww2010.cf.cf050530 p right It's possible that the mobilization of the army is related only to the bird flu, and that's bad enough. But <#inc ww2010.weblog.ref e051011 "China had 70,000 regional rebellions in 2004,"#> and the number has been increasing in 2005, even without the bird flu. It's possible that the army is being mobilized to contain the danger of more regional rebellions, and a serious instability in China could lead to a world war. During the next few weeks and months, we'll see what effects the deployment of China's huge army has. =eod =// &&2 e051104 Some bird flu notes from all over =data ww2010.weblog.y2005.e051104.head Some bird flu notes from all over =data ww2010.weblog.y2005.e051104.keys Bird flu =data ww2010.weblog.y2005.e051104.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051104.date 4-Nov-05 =data ww2010.weblog.y2005.e051104.txt1 A Dutch politician was asked what advice he'd give to people traveling to Turkey, =data ww2010.weblog.y2005.e051104.txt2 where H5N1 bird flu had been discovered. His response to the BBC interviewer: "We ask people traveling to Turkey to wipe their feet before they leave Turkey, so that they won't track bird flu back to Holland." Speaking of politicians, here's an important bird flu announcement from President George Bush:

"Bush Orders Mass Bald Eagle Slaughter To Stop Spread Of Bird Flu November 2, 2005 | Issue 41•44 WASHINGTON, DC—As experts issue increasingly dire warnings of an avian flu epidemic, President Bush signed an executive order Tuesday authorizing the mass slaughter of "all bald eagles found anywhere within our borders." "As president, my first duty is to protect the American people, whether the threat is terrorists or deadly, fast-mutating bird viruses," said Bush, standing on the lawn of the National Mall before a specially built pyre stacked with recently killed bald eagles. "This proactive initiative will rid our nation of this potentially disease-ridden winged animal." Bush added: "I want these birds rounded up, tied down, and their throats slit." Executive Order 1342A, which calls for the annihilation of the bald eagle, specifies that each carcass shall be wrapped in a single American flag, doused with gasoline, and burned. ... Administration critics have suggested that the president's plan is too narrow in scope, and leaves Americans susceptible to contact with a wide variety of other dangerous birds. "What about less prominent but far more abundant fowl common to residential areas, such as bluebirds, cardinals, or geese—shouldn't they die, too?" said Democratic Party strategist Elaine Quigley, appearing on MSNBC's Hardball. "Benjamin Franklin once said that the wild turkey, not the bald eagle, should be the emblematic bird of America. Why aren't we executing those, too?" <#stdurl http://www.theonion.com/content/node/42166 #>

On a more serious note, I've been told that the following passage from the Bible may be an early case of bird flu:

NUMBERS 31-34: 31 Now a wind went out from the LORD and drove quail in from the sea. The wind brought the quail down all around the camp to a depth of about three feet above the ground, as far as a day's walk in any direction. 32 All that day and night and all the next day the people went out and gathered quail. No one gathered less than ten homers [600 bushels]. Then they spread the quail out all around the camp. 33 But while the meat was still between their teeth and before it could be consumed, the anger of the LORD burned against the people, and he struck them with a severe plague. 34 Therefore the place was named Kibroth Hattaavah, because there they buried the people who had craved other food. Of course, everyone's being hit with the bird flu these days. Did you hear the news? Bird flu has reached Disneyland. I'm sorry to have to inform you that Donald Duck is dead. Daisy requests no flowers. Then there's this: <#inc ww2010.pic vogelgrippe.jpg center "" ""BIRD FLU - The panic is spreading! -- Better safe than sorry!""#> =eod =// &&2 e051103 Paris riots continue for seventh night =data ww2010.weblog.y2005.e051103.head Paris riots continue for seventh night =data ww2010.weblog.y2005.e051103.keys France, Nicolas Sarkozy, Dominque de Villepin =data ww2010.weblog.y2005.e051103.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051103.date 3-Nov-05 =data ww2010.weblog.y2005.e051103.txt1 Historically, Paris is well known for its riots and rebellions. =data ww2010.weblog.y2005.e051103.txt2 The French Revolution occurred in 1789. It launched the Reign of Terror, in which 200,000 ordinary people were killed using the guillotine. The word "terror" was invented at the time of the French Revolution, and at that time is was thought to be a good thing, because it meant the death by guillotine of the aristocrats, their families, their servants, their friends, friends of their friends, their children, children of their friends, and so forth. (According to one story, the French Revolution was launched when the Queen, Marie Antoinette, was told that there was no bread for the people, and she responded, "Let them eat cake," infuriating the populace. As it turns out though, there's no proof that Marie Antoinette actually made that remark.) The next rebellion followed about 80 years later. In 1870, Prussian (German) Chancellor Otto von Bismarck tricked France into attacking Prussia. This war was a disaster for France. German forces overran and occupied France for months -- something that was repeated 70 years later in World War II. The Franco-Prussian War was followed a few months later in 1871 by a huge genocidal civil war in Paris known as the French Commune. After tens of thousands of French had already been killed by the Germans, 30,000 more French killed each other in the French Commune. So civil wars and rebellions aren't new for Paris. That's why the current riots in Paris suburbs carry a historical significance, as well as a significance in the battle between political rivals Nicolas Sarkozy and Dominique de Villepin <#inc ww2010.weblog.ref e051102 "that we described yesterday."#> The riots appear <#stdurl http://abcnews.go.com/International/wireStory?id=1275560 "to be spreading and gaining in intensity."#> This indicates that feelings in the Muslim communities run very deep, and that the fault lines are growing increasingly pronounced. Each day that the riots continue, respective positions harden more and fault lines become more and more dangerous. An <#stdurl http://www.arabnews.com/?page=7§ion=0&article=72684&d=3&m=11&y=2005 "editorial in the Arab News"#> says that the initial incident "unleashed wider grievances among immigrants who feel themselves disadvantaged and ignored by the French state. Poor schooling, bad housing and a lack of jobs create alienated youths and gang cultures where violence is never far from the surface." Positions are also hardening on the government side, where both Sarkozy and de Villepin are taking increasingly tough positions on the violence. All this doesn't mean that the current riots are about to spiral out of control into full-scale civil war. But it does mean that the longer it takes for Sarkozy and de Villepin to bring the situation under control, the more likely it is that a major Paris civil war will be a major component of the <#hreftext ww2010.i.eu050601 "upcoming West European war that we've been talking about."#> And it certainly means that there's no chance whatsoever of a settlement of the <#inc ww2010.weblog.ref e050624 "vitriolic budget dispute between England and France,"#> since any reduction in subsidies to French farmers could lead to increased violence. Thus, if there was ever any doubt that the "European project" was dead, the riots guarantee it. Generational Dynamics predicts that, after a millennium of West European crisis wars, England and France are going to be fighting a new crisis war. The current riots in French suburbs indicate that a French civil war is likely to be a component of that West European war. =eod =// &&2 e051102 France's Nicolas Sarkozy says 'Let them eat cake!' =data ww2010.weblog.y2005.e051102.head France's Nicolas Sarkozy says "Let them eat cake!" =data ww2010.weblog.y2005.e051102.keys France, Nicolas Sarkozy, Dominque de Villepin =data ww2010.weblog.y2005.e051102.loc ww2010.weblog.log0511 =data ww2010.weblog.y2005.e051102.date 2-Nov-05 =data ww2010.weblog.y2005.e051102.txt1 There's been violent racial rioting in Paris's Muslim ghetto suburbs every night since Thursday, =data ww2010.weblog.y2005.e051102.txt2 and Interior Minister Nicolas Sarkozy is being blamed. Angry youths have been rioting, torching cars and buildings, and confronting police for the last six consecutive nights. The situation is the same as in England, Holland, and other European countries that have experienced Muslim violence -- the youths are second and third generation Moroccans, Turks and Arabs whose parents and grandparents came to France in the 1960s and 1970s, seeking a better life. However, unemployment and poverty have been particularly harsh to Muslim minorities, and Muslims have suffered from bias and discrimination. As always happens, generational changes bring social changes. Youths with no memory of their native countries come of age and become infuriated by the discrimination. The violence in France began on Thursday by an accident that electrocuted two Muslim teenagers at an electricity sub-station while they were apparently fleeing the police. This triggered violence by youth gangs in several suburbs. <#inc ww2010.pic sarkozy.jpg right "" "Interior Minister Nicolas Sarkozy is being blamed. (Source: BBC)"#> Interior Minister Sarkozy <#stdurl http://edition.cnn.com/2005/WORLD/europe/11/01/france.riots.ap/ "responded by saying he had a "zero tolerance policy" for violence."#> He referred to the troublemakers as "scum" and "riffraff," and vowed to "clean out" the suburbs. Born in 1955, Sarkozy is in the arrogant, narcissistic Boomer generation, and lacks the finesse and ability to compromise of the French President Jacques Chirac, born in 1932 and in the Silent Generation. Sarkozy has been considered a rising star in French politics, and even wants to align France's policies more closely with America's. However, this incident is certain to polarize public opinion, and Sarkozy is being blamed for inflaming the situation. Sarkozy's main political opponent is French Prime Minister Dominque de Villepin, born in 1953, also in the Boomer generation. You may recall that de Villepin is the sleazebag <#inc ww2010.weblog.ref e041116 "who screwed and double-crossed American Secretary of State Colin Powell"#> in 2003, during the preliminaries to the Iraq war. From the point of view of Generational Dynamics, the growing fault lines between the French and Muslim immigrants and their children are being repeated throughout Europe, just as there was a fault line between Christians and Jews in Germany during World War II. And just as England and France have had repeated wars for at least a millennium, Generational Dynamics predicts a new West European war, and the growing fault line between the French and the English indicates that there'll be a new war between those two countries. As we indicated in our <#hreftext ww2010.i.eu050601 "analysis of the French rejection of the EU constitution,"#> exit polls show clearly that the differences are generational, with younger generations increasingly opposed to an EU. As in other cases, Generational Dynamics tells you your final destination, but now how you'll get there, so there's no way to predict the sequence of events that will lead to the next West European crisis war. On this web site, I've stated that one likely scenario is that in a Mideast war, the French will side with the Palestinians and the British and Americans will side with Israel. Other countries around the world would be forced into a war on one side or the other. One barometer of that sequence of events is the relative success of the political opponents Nicolas Sarkozy and Dominque de Villepin. The fact that de Villepin is so anti-American would appear to make him the more likely to lead France in a war against an Anglo-American alliance, especially if he's able to serve as a peacemaker with the French Muslims. However, Sarkozy's "law and order" stance may be very popular with the French people, and Sarkozy could undoubted flip to anti-Americanism in a minute, if it suited his purpose. So Sarkozy and de Villepin are the two men to be watching to get an idea of how things will unfold in Western Europe in the next year or two. =eod =// &&2 e051031b Canada announces discovery of bird flu =data ww2010.weblog.y2005.e051031b.head Canada announces discovery of bird flu in migratory ducks in Quebec and Manitoba =data ww2010.weblog.y2005.e051031b.keys bird flu, Canada =data ww2010.weblog.y2005.e051031b.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051031b.date 31-Oct-05 =data ww2010.weblog.y2005.e051031b.txt1 Officials emphasize that there's no danger yet to human health, =data ww2010.weblog.y2005.e051031b.txt2 in a <#stdurl http://www.inspection.gc.ca/english/corpaffr/newcom/2005/20051031e.shtml "press release issued on Monday by the Public Health Agency of Canada."#> The discovery was made in the course of regular testing of migratory birds. Scientists have determined that the migratory ducks had Avian flu type H5, but further subtyping may require up to a week. In particular, it will take that long to determine whether the subtype is the highly pathenogenic H5N1. However, <#stdurl http://www.recombinomics.com/News/10310503/H5N1_WBF_Canada_Concerns.html "H5 Avian flu is extremely rare in Canada,"#> and H5N1 is the only subtype that's been appearing recently in migratory birds. For that reason, a positive finding of H5N1 will not be a surprise. The press release emphasizes that transmission of the virus to humans is rare, but says that special precautions should be taken: "Persons handling wild birds should follow routine hand washing and safe food preparation practices. These include disinfecting surfaces, being careful to avoid cross contamination with other food products, keeping raw meat away from other food utensils, and thoroughly cooking all wild birds prior to eating. Following these steps is good practice to minimize risks associated with the handling and preparation of wild fowl." =eod =// &&2 e051031 Coordinated terrorist bomb blasts across New Delhi =data ww2010.weblog.y2005.e051031.head Coordinated terrorist bomb blasts across New Delhi kill 60+ =data ww2010.weblog.y2005.e051031.keys New Delhi, India, Bangladesh =data ww2010.weblog.y2005.e051031.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051031.date 31-Oct-05 =data ww2010.weblog.y2005.e051031.txt1 An Islamist Kashmiri separatist group has claimed credit. =data ww2010.weblog.y2005.e051031.txt2 Prime Minister Manmohan Singh called for calm in the wake of <#stdurl http://www.telegraphindia.com/1051030/asp/frontpage/story_5416953.asp "a major terrorist attack at 6 pm on Saturday"#> in India's capital, New Delhi. New Delhi now joins New York, London, Madrid, Moscow and Bali as sites of major terrorist attacks. There were three different but nearly simultaneous blasts at three widely separated marketplaces crowded with shoppers. Over 60 people were killed, but the toll is likely to rise. Many more were wounded. The markets were mobbed because of shopping for the <#stdurl http://en.wikipedia.org/wiki/Diwali "Festival of Lights, or Diwali,"#> the most popular festival in India. It's celebrated throughout India by Hindus, Jains and Sikhs alike to celebrate life and strengthen relationships. The date varies from year to year, but it always falls on a dark night, when there's a new moon. This year it falls on Tuesday, November 1. <#inc ww2010.pic india3.gif right "" "India, Pakistan, Bangladesh and Kashmir. (Source: Peter N. Stearns)"#> A group called Islamic Inquilabi Mahaz, or Islamic Revolutionary Group has claimed credit for the bombings. That group is little known, but is believed to be <#stdurl http://en.wikipedia.org/wiki/Lashkar-e-Toiba "linked with Lashkar-e-Taiba or Lashkar-e-Toiba (LeT),"#> a known Kashmiri separatist group with an agenda to convert all of India to Islam. If the link to Kashmiri separatists is confirmed, that would link the bombing to the July 7 London suicide bombers <#hreftext ww2010.i.050718pape "whose ancestral home was Kashmir and who were trained in Kashmir."#> In a related story, <#stdurl http://www.dailytimes.com.pk/default.asp?page=2005\10\31\story_31-10-2005_pg4_16 "Bangladesh has also stepped up security,"#> especially around the capital, Dhaka, where a regional summit meeting is to be held later this week. It was just two months ago that <#inc ww2010.weblog.ref e050820 "Islamist terrorist conducted a spectacular Islamist terrorist attack across Bangladesh."#> From the point of view of Generational Dynamics, the significance of this terrorist attack is that it's another step in the linking up of Islamist terrorist groups throughout Africa, the Mideast, through Asia and Southeast Asia. As we described a month ago <#inc ww2010.weblog.ref e051005 "after the terrorist bombing in Bali, Indonesia,"#> the third in three years, Islamist terrorist groups are using similar methods in Indonesia, Thailand, Bangladesh, India, Pakistan, Iraq, Saudi Arabia, and Palestine/Israel. The intent is to trigger a new "clash of civilizations" world war, and Generational Dynamics predicts that such a war will occur, most likely beginning within 2-3 years. =eod =// &&2 e051028 Storks fall out of the sky in Lebanon =data ww2010.weblog.y2005.e051028.head Storks fall out of the sky in Lebanon =data ww2010.weblog.y2005.e051028.keys Lebanon, Bird flu, Israel, Europe, Africa =data ww2010.weblog.y2005.e051028.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051028.date 28-Oct-05 =data ww2010.weblog.y2005.e051028.txt1 500 million birds are migrating from Asia to Africa this week and next, =data ww2010.weblog.y2005.e051028.txt2 flying over the Mideast. <#stdurl http://www.dailystar.com.lb/article.asp?edition_id=1&categ_id=2&article_id=19659 "Farmers have spotted dozens of storks and other birds"#> falling from the sky near Tyre in Lebanon. Meanwhile, health experts are investigating <#stdurl http://www.israelnationalnews.com/news.php3?id=91873 "the mysterious deaths of 'many birds'"#> in Negev, Israel. These are only two incidents out of many more that may occur as <#stdurl http://www.cjp.org/content_display.html?ArticleID=165867 "officials in Israel and in other Mideast countries"#> are nervously watching the massive annual winter migration of 500 million birds from Asia to Africa. The hope is to catch early cases of the disease, and avoid the need to cull (kill) very many domestic birds, as this would affect the farming industry. However, according to one researcher, the Mideast migration presents a special opportunity for the bird flu virus to adapt to human to human transmission. According to <#stdurl http://www.recombinomics.com/News/10220501/H5N1_H9N2_Recombination.html "research by Dr. Henry Niman,"#> a non-lethal form of bird flu endemic to Israel could provide the missing genes to the lethal virus to make it human to human transmissible. There are three types of influenza virus (A, B and C). Influenza type A viruses cause avian flu (bird flu) and also are a major cause of human influenza. There are <#stdurl http://www.who.int/csr/don/2004_01_15/en/ "15 avian influenza virus subtypes,"#> but we're interested in only two of them: Subtype H5N1 is the deadly pathenogenic form that's been killing so many birds recently. It mutates frequently, with the result that it's also spread recently to pigs and tigers. It is not yet transmissible from human to human, as far as is known. Subtype H9N2 is a far less deadly form of avian flu. It's also a non-deadly form of human flu, and it can spread from human to human. According to <#stdurl http://www.recombinomics.com/News/10220501/H5N1_H9N2_Recombination.html "Dr. Niman,"#> H9N2 has become endemic in Israel, meaning that it appears commonly in Mideast chickens, turkeys and geese. With hundreds of millions of birds flying over Israel this week and next, and with many of those birds releasing droppings containing H5N1, there are many opportunities for H5N1 and H9N2 to infect the same birds in the Mideast. Once a bird is infected with both of these subtypes simultaneously, the genes can recombine to create a new virus with the lethality of H5N1 and the human to human transmissibility of H9N2. It's thus possible (though, of course, by no means certain) that a bird flu pandemic could begin in Israel in the next few days or weeks. If it's avoided now, then it may happen in March, when the same birds fly north again over Israel, following the same route in reverse. Thus, many researchers are concerned that there is a non-negligible possibility that a bird flu pandemic could begin in the next few days or weeks, rather than next year as most people hope. Meanwhile, bird flu has been spreading in other regions as well. <#inc ww2010.pic bird1027.gif right "" "Bird flu outbreaks as of 27-Oct-2005(Source: Recombinomics.com)"#> Bird flu has already touched most countries in Europe, as the adjoining map shows. So far, rapid action by health officials in the different countries of Europe has contained the spread to isolated regions of the continent. Europeans will breathe a big sigh of relief if they can extinguish all H5N1 outbreaks in the next few weeks, since that will probably leave them safe for the winter. However, the greatest danger will only be postponed to the spring, when <#stdurl http://online.wsj.com/article/SB112990421875275693.html?mod=todays_us_page_one "hundreds of millions of migrating wild birds returning from the Black Sea and eastern Mediterranean"#> will be harder to contain. Europe, Asia and the Mideast are not the only regions in danger, of course: Africa is next. <#inc ww2010.pic g051028.jpg left "" "Open air market in Kenya has chickens for sale. (Source: Reuters)"#> The wild birds migrating over the Mideast this week are heading into east Africa, <#stdurl http://news.bbc.co.uk/1/hi/health/4378784.stm "where it will have a devastating effect."#> Open air bird markets are common in the crowded cities of Africa, especially near the bodies of water that migrating birds will be headed for. While European and Mideast countries have the veterinary infrastructure necessary to respond quickly to H5N1 outbreaks, <#stdurl http://www.alertnet.org/thenews/newsdesk/L25359231.htm "most African countries do not."#> Even worse, disease is common in the backyard chicken farms that are common throughout Africa, and bird mortality is already fairly high. Even if 80% of a backyard flock is killed by bird flu, the outbreak may not be reported. As a result, H5N1 may spread rapidly throughout Africa this winter. This will present further opportunities for recombinations of H5N1 with H9N2 and other human-transmissible type A viruses, making a human-transible H5N1 even more likely. The development of a human-transmissible form of deadly H5N1 is basically a numbers game, a roll of the dice. If you roll a pair of dice just once, the probability of getting "snake-eyes" (1-1) is just 1 chance out of 36; but if you roll the pair of dice 100 times, then the chances of getting snake-eyes at least once are almost certain. Similarly, if you put a duck infected with H5N1 in contact with a duck infected with H9N2, then that one pair of ducks has a small probability of being the "mixing host" for the creation of a human-transmissible virus; but if you have hundreds of millions of migrating ducks available, then the chances of a "mixing host" are far from negligible. =eod =// &&2 e051024 Donald Rumsfeld visits China, raises concerns =data ww2010.weblog.y2005.e051024.head Donald Rumsfeld visits China and cordially raises concerns =data ww2010.weblog.y2005.e051024.keys Donald Rumsfeld, China, Japan =data ww2010.weblog.y2005.e051024.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051024.date 24-Oct-05 =data ww2010.weblog.y2005.e051024.txt1 Laying the groundwork for a November visit to China by President Bush, =data ww2010.weblog.y2005.e051024.txt2 Secretary of Defense Donald Rumsfeld was cordial to Chinese officials in Beijing, but he questioned the purpose of China's rapid military expansion. In essence, Rumsfeld conveyed the same message to Chinese leaders that he did in <#inc ww2010.weblog.ref e050604 "a speech in June in Singapore."#> His <#stdurl http://www.defenselink.mil/news/Oct2005/20051019_3085.html "message to Chinese leaders on Wednesday"#> was that the country's rapid and mostly secret military advances are raising concerns around the world. The "rapid and, from our perspective at least, non-transparent nature" of the country's military expansion, plus its efforts to exclude the United States from regional institutions and activities" are leading nations around the world to wonder about China's intentions, the secretary said. More importantly, Rumsfeld said, "it raises questions about whether China will make the right choices -- choices that will serve the world's real interests in regional peace and stability." As I wrote yesterday (Sunday) in an analysis of <#hreftext ww2010.i.051023japan "the sharply deteriorating relations between China and Japan,"#> these concerns are running deep in the region and around the world. A conflict over gas and oil rights in the East China between Japan and China could escalate out of control at any time. Although Rumsfeld said that China is sending out "mixed signals" about its intentions, on this web site I've made no secret of what I see happening in China: China is rapidly militarizing in preparation for war with America. A war with America over re-unification of Taiwan with China is 100% certain, but it won't stop there. China will attack Japan to get revenge for Japan's atrocities in World War II, and China will go to war to gain hegemony over the entire North and South Pacific region, extending through the Indian Ocean to Africa. This comes at a time when China itself is becoming increasingly unstable, <#hreftext ww2010.i.china050116 "and is approaching civil war,"#> which only makes China even more dangerous to the rest of the world. You don't have to be a Generational Dynamics scholar to see that coming. Donald Rumsfeld sees this clearly as well. Rumsfeld is a member of the "Silent Generation" that grew up during the Great Depression and World War II, and knows well what can happen. Born in 1932, Rumsfeld was old enough to understand that the militarization of Hitler's Germany in the mid 1930s led to the most violent war the world has known, and Rumsfeld can see the same thing happening in China's aggressive militarization today. Regular readers of this web site know that I don't get political, and that I have little use for the political prevarications of politicians of any party. But I'll say this without hesitation: There is only one person in Washington, Democrat or Republican, who knows what's going on in the world and is actually doing something about it, and that's Donald Rumsfeld. Since he took office, he's been modernizing our military and re-focusing it on the Pacific, in preparation for a preemptive war by the Chinese. I dread the day that Rumsfeld leaves office and is replaced by a Gen-Xer (of either party), because anyone that young won't have a clue what's going on. If America survives the next world war in decent shape then, in my opinion, the person we'll owe the most to is Donald Rumsfeld. =eod =// &&2 e051023 Will there be a stock market crash in October? =data ww2010.weblog.y2005.e051023.head Will there be a stock market crash before the end of October? =data ww2010.weblog.y2005.e051023.keys Great Depression, Principle of Maximum Ruin, Refco =data ww2010.weblog.y2005.e051023.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051023.date 23-Oct-05 =data ww2010.weblog.y2005.e051023.txt1 The "Principle of Maximum Ruin" says that it won't happen. =data ww2010.weblog.y2005.e051023.txt2 There's an enormous amount of anxiety out there, because a lot of people realize that we could be on the verge of a panic and because several previous huge panics have all occurred in October -- the 1929 crash, the 1987 panic, and the Asian market crash in 1997. So a crash is on a lot of people's mind, and if you talk to people and read some of the blogs, you realize that a lot of people are very concerned. The <#inc ww2010.weblog.ref e051020 "Refco scandal, meltdown and bankruptcy"#> that I've been writing about, might have caused a crash, but the regulators moved very fast to prevent further market damage and to maintain investor confidence. Right now, it looks like a market collapse has been prevented. Almost everyone will be breathing a sigh of relief when October ends, because panics haven't occurred during the holiday season or in the springtime. However, one web site reader recently sent me an e-mail message saying that a crash might, in fact, come later after all:

"As far as time frames, I've recently made an observation that may have merit or it may not. It appears that long term stock cycles may be starting to invert, meaning that highs are appearing where lows would be expected. This fits in with what I have been thinking for some time and have expressed indirectly to you ... and that is that since this is the third in a series of 75 year or so complete generational cycles (and the pattern is now well known) that the pattern will change due to our (or the regulators') recognition of it. This might mean that once the September/October "danger period" has passed that the crash could start. There are fundamental reasons to think that is possible such as the runup in home heating fuel prices and recent sudden drop in consumer and CFO (Duke University survey pre-Katrina) confidence. Just a thought."

The writer was referring to the previous two generational crashes -- the crash of 1929 and the Panic of 1857, both of which led to major international financial crises that lasted many ears. His thought ties in with an essay I've been working on for this web site that's been taking way, way longer than I had expected. It's called "The Principle of Maximum Ruin": If you want to figure out what the market will do during a generational crash, then assume it will take the path that will ruin the most people, and that's the path it will follow. The purpose of this long-delayed essay is to show why the upcoming crsis will much more devastating than you or anyone expect. I got the idea for it from the following paragraph from John Kenneth Galbraith's 1955 book, "The Great Crash - 1929":

Galbraith's point was that there were previous market panics, such as those occurring in 1903, 1907 and 1921, but that the market had recovered from them in a year or two. But that didn't happened after the 1929 panic. Instead, the market kept falling. Not only that, the market's up and downs following the 1929 crash occurred in such a way that more and more people were drawn in by false hopes to invest all their savings in the market. It was almost as if Adam Smith's "invisible hand" had turned into a perverse hand of doom. The same thing is happening today, so far. The market recovered quickly from the panics of 1987 and 1997. The Nasdaq crash in 2000 was bad, and was made worse by 9/11, but now the market has recovered enough so that almost every investor today is back in the market, expecting it to go up. If I buy a share of stock for $100, and I sell it to you for $200, and you sell it back to me for $300, then we've both made $100, even though the underlying stock certificate is still worth only $100. A very simple computation, <#hreftext ww2010.i.050711eleven "made by me and by other analysts,"#> shows that the fundamental value of the stock market today is around Dow 4500, and yet stock prices are at Dow 12600, making the market far overpriced. This is also shown by current price/earnings ratios, as I've described many times. And yet investors today are in the same state of giddy denial as they were in 1929. As I've been saying since 2002, Generational Dynamics tells us that we're entering a new 1930s style Great Depression, and that stock prices will fall to Dow 3000-4000 with certainty. As I've said many times, Generational Dynamics tells us where we're going, but not how we'll get there. So how will we get there? Well, it's impossible to predict for sure, but we can look for guidance from the Principle of Maximum Ruin. So what's the most likely thing for the market to do to ruin the greatest number of people? Obviously a crash in October would not be it, since everyone is prepared for it and expecting it. The thing that would ruin the most people is for the market to do OK in October and into November, and then crash. Or maybe even get through the holiday season and then crash in January. Nothing like this has ever happened before, so almost everyone will be fooled. So if you believe the Principle of Maximum Ruin, then expect a panic and crash sometime after October. This isn't exactly a farfetched concept. One thing that most analysts agree on these days is that there's going to be a recession early next year, thanks to high oil prices and the effects of the hurricane damage. Such a recession would certainly spread to China, and a recession in China could trigger a market meltdown there, which would cause a market meltdown here. Incredibly, China just announced another quarter of 9.4% growth. China has been growing at 9-10% for twenty years. Each year since 2002, China has been trying to maneuver the economy into a "soft landing," reducing the growth rate to around 7%, but they've failed every year and every quarter, and every quarter they promise to do better next quarter. Obviously, they've failed again. They're in a huge market bubble themselves, and it's very close to bursting, which would cause the same market meltdown here, even if we don't have a recession first. And, of course, there's always bird flu, which will be devastating to the global economy. In fact, <#inc ww2010.weblog.ref e050825b "the BBC recently predicted that a bird flu pandemic would cause a new Great Depression."#> So keep the Principle of Maximum Ruin in mind as you make your investment plans in the next few months. =eod =// &&2 e051020 Refco declares bankruptcy as regulators work to contain more widespread damage =data ww2010.weblog.y2005.e051020.head Refco declares bankruptcy as regulators work to contain more widespread damage =data ww2010.weblog.y2005.e051020.keys Refco, Great Depression =data ww2010.weblog.y2005.e051020.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051020.date 20-Oct-05 =data ww2010.weblog.y2005.e051020.txt1 Fast intervention by regulators has prevented a panic or a chain reaction, =data ww2010.weblog.y2005.e051020.txt2 but the danger is far from over. Last week, <#inc ww2010.weblog.ref e051015 "it took only four days"#> for Refco to go from the world's largest commodities and futures dealer to complete meltdown, with the CEO charged with securities fraud. The SEC shut down trading operations on Friday evening, and on Tuesday, <#stdurl http://quote.bloomberg.com/apps/news?pid=10000006&sid=aLQ.R1MOE7Ok&refer=home "Refco filed the fourth largest bankruptcy in U.S. history."#> The collapse occurred just ten weeks after Refco went public with a spectacular IPO. Refco consists of several different companies, and some are in more trouble than others. As is the case in any bankruptcy situation, various investors are looking to purchase different pieces of Refco at the cheapest possible prices. The leading bids are from little known hedge fund firm J. C. Flowers (which evidently has no web site), from the government of Dubai, and from over two dozen additional bidders. The complex negotiations over who will get which pieces will be overseen by the bankruptcy court, but <#stdurl http://www.bloomberg.com/apps/news?pid=10000087&sid=aFqAGeiDOmws&refer=top_world_news "Refco would like to sell its assets as quickly as possible,"#> according to its lawyers in court on Wednesday. The situation is greatly complicated by the danger to the rest of the rest of the market. Very quick work by regulators last week appears to have controlled the damage, but there are still many unknowns. As happens in all bankruptcies, creditors often lose a great deal of money. Refco's biggest creditor is Austrian bank Bawag International Finance, which is owed $451.2 million by Refco. Wells Fargo Corporate Trust Services is owed $390 million, and VR Global Partners LP has $380.1 million in claims. Those are the three largest creditors, but Refco had 200,000 clients, and possible losses may be far more widespread. Since many of Refco's trading operations have been frozen by the SEC, the full impact may not appear until the freeze is lifted. There are two major dangers that concern regulators as they try to steer the Refco settlement into safe waters:

The danger that the Refco bankruptcy will cause a chain reaction: A Refco creditor loses hundreds of millions of dollars and also goes bankrupt, then a creditor to the second firm loses money and goes bankrupt, and so forth. This chain reaction will continue since most of the hedge fund firms are highly interlocked with each other, and with other kinds of businesses. Once this chain reaction gets started, there won't be enough money in the world to stop it from engulfing most of the major businesses in the world.
An emotional "panic" among investors, such as happened in 1987 and previously in 1929. At the time of the 1987 panic, the market was priced at about 102% of book value; the panic caused an immediate lost of 22% in market pricing, and so the market recovered quickly. But in 1929, the market was priced at well over 200% of book value, so the panic lasted many years. The market today is priced at about 215% of book value, so a panic would have the same effect as in 1929.

There's actually a third danger: A chain reaction of discoveries of securities fraud and embezzlement in other firms. How would that work? It would happen as follows:

The accounting firm Grant Thornton is receiving a lot of blame right now. It was Refco's auditing firm for the IPO, and it didn't catch the securities fraud that finally led to Refco's demise. As a result, <#stdurl http://news.independent.co.uk/business/news/article320585.ece "Grant Thorton is facing potentially huge claims"#> by people who lost money in the debacle and are looking for someone else to blame.
This will cause other auditing firms to become increasingly about their own potential exposure. (Recall that when the Enron scandal broke, its auditing firm, the venerable Arthur Andersen, was forced out of business.)
The increased scrutiny from auditing firms will uncover other crimes at other financial firms, crimes that wouldn't otherwise have been discovered, at least for a while.

This is not a far-fetched concept, because this is exactly what happened after the 1929 crash. All sorts of financial irregularities and crimes that had slid by unnoticed before the crash suddenly came to light after the crash. John Kenneth Galbraith described this phenomenon in his 1954 book, The Great Crash - 1929, as follows:

In 1929, these crimes were rampant before the crash, but were not discovered until after the crash, as Galbraith describes. What I'm suggesting is that these crimes are just as rampant today, but instead of waiting for a crash to be uncovered, Grant Thorton's problem may cause some of them to be exposed soon, and it's those very discoveries that might trigger the crash. In fact, the Panic of 1857, which was the major generational crash that preceded the crash of 1929, was triggered by the embezzlement of a cashier at a bank in New York. From the point of view of Generational Dynamics, we're entering a new 1930s style Great Depression, as I've been predicting since 2002. At that time, I indicated that Generational Dynamics predicts a stock market crash to the Dow 3000-4000 range, most likely by the 2006-2007 time frame. The current troubles at Refco may or may not be the trigger that leads to this financial crisis, but one way or another, a financial crisis of this type is going to occur, with absolute certainty. =eod =// &&2 e051019 Shamil Basayev gains in stature and power =data ww2010.weblog.y2005.e051019.head Shamil Basayev gains in stature and power as pan-Caucasus terror leader =data ww2010.weblog.y2005.e051019.keys Caucusus, Shamil Basayev, Nalchik, Chechnya =data ww2010.weblog.y2005.e051019.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051019.date 19-Oct-05 =data ww2010.weblog.y2005.e051019.txt1 He claims credit for leading Nalchik attack, but blames a traitor for leaking advance information. =data ww2010.weblog.y2005.e051019.txt2 Chechen warlord Shamil Basayev's web site (<#stdurl http://www.kavkazcenter.com/#>) presents a stark view of the terrorist leader's intentions in provoking a wider war between Muslims in Chechnya and other North Caucausus provinces and Russia itself (mostly Orthodox Christians). =inc ww2010.xr.related1 right basayev 3 In <#stdurl http://www.kavkazcenter.com/eng/content/2005/10/17/4156.shtml "one article, quoting Basayev himself,"#> he took credit for <#inc ww2010.weblog.ref e051014 "last week's massive assault on Nalchik,"#> saying that "Nalchik was attacked by 217 Mujahideen." He described it as follows: "217 Mujahideen participated in the assault operation, who at 9:14 a.m. simultaneously stormed 15 military objects of all power structures of KB [Kabardino-Balkarian province] in territory of city." By objective standards, the attack has to be considered a failure. Dozens of Basayev's militants were killed or captured, while there were only a few Russian FSB (former KGB) casualties. Furthermore, several of the assault targets were defended with no losses whatsoever. According to Basayev, any failure can be attributed to an information leak:

"Our casualties – 41 Shaheeds [martyrs], insha Allah [if Allah wills]. These all are our wounded Mujahideen [Muslim fighters] who could not move and consequently conducted combat up to the end, by remaining in city. For us it is greater casualties. These casualties were caused because five days before the operation there was a serious information leakage and kafirs [infidels] have dispatched additionally 1000 Special Forces units to Nalchik by planes, trains and motor vehicles."

Basayev adds, "Despite of greater losses, this is a big success for us, as our dead ones in Paradise, insha Allah and their dead ones in the Hell!" <#inc ww2010.pic caucas2.gif right "" "The Caucasus Mountains run from the Black Sea to the Caspian Sea"#> Anyway, Basayev's attack is widely considered to be significant because it signals a substantial increase in his power and influence. =inc ww2010.h2 Putin1018 "A problem for Putin" According to <#stdurl http://news.ft.com/cms/s/e91cf702-3e7c-11da-a2cb-00000e2511c8.html "an analysis in the Financial Times:"#> "On the surface, the attack in Nalchik, in which authorities said 92 Islamist militants and 24 police and civilians died, was reminiscent of an incursion last year by rebels from Chechnya into the neighbouring Caucasus republic of Ingushetia. But there was an important evolution: the attack in Nalchik appeared to reflect a recent change of leadership and tactics among Chechen rebels, and their ability to rely upon local discontent in the republics of the north Caucasus." Much of the world press have framed the Nalchik attack as a policy failure by Russian President Vladimir Putin. One <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2005/10/16/AR2005101600801.html "Washington Post commentary entitled " Putin's Spreading War","#> by Masha Lipman, blames the war on "the irresponsibility and inefficiency of Putin's bureaucracy." Whatever the reason, few people doubt that the problems in Russia's Caucasus provinces are getting worse. The "nightmare scenario," where all Russia's Muslim provinces in the Caucasus join together with Chechnya in a secessionist cause appears increasingly likely, especially since unemployment in the region exceeds 50%, and government corruption is high. =inc ww2010.h2 corpses1018 "Keeping corpses" A new Kremlin policy that's infuriating the Nalchik families since the terrorist attacks has the FSB <#stdurl http://www.themoscowtimes.com/stories/2005/10/18/002.html "refusing to return the dead bodies of innocent bystanders to their families for burial."#> The policy is based on a law passed in 2002, following a terrorist attack in Moscow. The purpose of the policy is to prevent the return of the bodies of terrorists to their leaders, who can then honor them as fallen martyrs. The result is that innocent bystanders cannot be buried according to Muslim law, causing a great deal of anger and distress. The problem for the authorities is that there's no way to distinguish innocent bystanders from the terrorists themselves, who were local citizens. <#stdurl http://www.kavkazcenter.com/eng/content/2005/10/16/4155.shtml "An article on Basayev's web site"#> accuses the "FSB scumbags" of planting weapons on innocent bystanders in order to accuse them of being militants. An analyst critical of Putin, speaking to the BBC, accused the authorities of returning to the days of genocidal dictator Josef Stalin:

"The situation is becoming increasingly unpredictable and unstable. For anyone with intelligence, the situation is understandable. Things have gotten much worse in the last five years. The Mujahideens are not real Mujahideens -- they're just young people who wish to protest, but they can't express their point of view because opposition newspapers have been destroyed in the last five years. These 'Stalin methods' will not work at the present time. It's very wrong not to return the corpses of the people killed to their relatives The relatives are protesting. This is a very small republic and the people know each other. These actions make the authorities very unpopular. They can't just arrest 100 or 200 young people, say that they're militants, and expect to get a solution to the problem. There's only one solution - an open society."

In fact, Putin is likely to adopt even more confrontational policies, since all of this puts increasing pressure on Russian president Vladimir Putin to "solve" the problem. According to <#stdurl http://kavkazcenter.com/eng/content/2005/08/18/4062.shtml "another article on Basayev's web site,"#> Moscow is getting ready for a "great war" in the Caucasus. "The Kremlin is getting ready for it," it says. "By the beginning of 2005 Moscow has concentrated 300 000 soldiers in Caucasus . Part of them, more than 100 000 (according to some data up to 200 000), are directly in the Chechen Republic. ... The militarization of all Northern Caucasus goes at full speed." =inc ww2010.cf.cf050530 p left Whether this is true or not, there's no doubt that a confrontation between Russia and its Caucasus provinces is gathering steam. From the point of view of Generational Dynamics, such a confrontation, leading to a major regional civil war, is certain. The Bolshevik Revolution, ending in 1928 with the civil war between Trotsky and Stalin, killed millions of Russians, and that war is going to be refought. Furthermore, the Caucasus is one of the three regions that have historically have hosted massive crisis wars between the Orthodox and Muslim civilizations. (The others are the Crimea and the Balkans.) =eod =// &&2 e051018 Condoleezza Rice says goodbye after visiting Moscow =data ww2010.weblog.y2005.e051018.head Condoleezza Rice says goodbye after visiting Moscow =data ww2010.weblog.y2005.e051018.keys =data ww2010.weblog.y2005.e051018.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051018.date 18-Oct-05 =data ww2010.weblog.y2005.e051018.txt1 =data ww2010.weblog.y2005.e051018.txt2 <#inc ww2010.pic leezza1.jpg center "" "Condoleezza Rice says goodbye after visiting Moscow (Source: Reuters)"#> Russian Foreign Minister Sergei Lavrov and U.S. Secretary of State Condoleezza Rice say goodbye after their meeting in Moscow October 15, 2005. (Source: Reuters, <#stdurl http://www.kommersant.com/page.asp?idr=527&id=618242 "by way of Kommersant."#>) =eod =// &&2 e051015 Refco collapse =data ww2010.weblog.y2005.e051015.head Friday evening collapse of brokerage firm Refco sends regulators scrambling to prevent market meltdown =data ww2010.weblog.y2005.e051015.keys Refco, SEC =data ww2010.weblog.y2005.e051015.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051015.date 15-Oct-05 =data ww2010.weblog.y2005.e051015.txt1 It took only four days for the world's largest commodities and futures dealer =data ww2010.weblog.y2005.e051015.txt2 to go from a high-flying success to almost certain bankruptcy, with the potential of creating a chain reaction with widespread effects. <#inc ww2010.pic refco.jpg right "" "Ebullient Refco execs at Stock Exchange a month after the August IPO (Source: Bloomberg)"#> Regulators, well aware of these potential dangers, have moved rapidly to contain the damage. On Thursday, regulators at the Chicago Mercantile Exchange and Commodity Futures Trading Commission asked several financial firms, including Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. <#stdurl http://online.wsj.com/article/SB112930138544668844.html?mod=home_whats_news_us "to buy or assume financial responsibility for Refco's trading operations,"#> to stabilize the situation. However, <#stdurl http://quote.bloomberg.com/apps/news?pid=10000006&sid=avbW._B37wOc&refer=home "Goldman, at least, has decided against being part of a potential bailout."#> On Friday evening, the Securities and Exchange Commission (SEC) stepped in and shut down most trading operations. Just Monday, <#stdurl http://www.nytimes.com/2005/10/15/business/15refco.html "Refco was thought to be in great financial shape."#> But then it was revealed that CEO Phillip Bennett had been hiding $430 million in bad debts, and that the company's financial statements since 2002 could not be relied upon. Bennett was arrested on Tuesday for securities fraud, and he's now free on bail, but is no longer Refco's CEO. Refco's lightning fast collapse has caught investors and financial institutions by surprise. <#stdurl http://www.marketwatch.com/news/story.asp?guid=%7B0B92DA83-6451-47DD-B86E-0637914AC8DA%7D&siteid=google "Some investors say that the collapse should have little impact on the rest of the market,"#> pointing out that, unlike Enron, Refco was merely a broker, not a principal in its major transactions. Other analysts, however, point out that <#stdurl http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2005/10/15/cnrefco15.xml&menuId=242&sSheet=/money/2005/10/15/ixcitytop.html "the collapse has already weakened some commodities futures prices,"#> and that some weaker hedge funds may be battered. Any chain reaction from the Refco collapse would probably occur as the result of concerned and panicking investors pulling their money out of hedge funds, causing further collapses in the highly interlocked hedge fund industry. Refco has more than 200,000 customers, including corporations, government agencies, hedge funds, pension funds, financial institutions and retail and professional traders. All of these customers are mulling over their strategies over the weekend, and we'll see the results when business opens on Monday. =eod =// &&2 e051014 Chechnya terrorists attack Russian town Nalchik =data ww2010.weblog.y2005.e051014.head Chechnya terrorists attack Russian town (Nalchik) massively =data ww2010.weblog.y2005.e051014.keys Chechnya, Beslan, Nalchik, Shamil Basayev, russia =data ww2010.weblog.y2005.e051014.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051014.date 14-Oct-05 =data ww2010.weblog.y2005.e051014.txt1 Coordinated attack by 300 Chechen gunmen raises Caucusus violence to new level. =data ww2010.weblog.y2005.e051014.txt2 When I first heard a story about "a gunfight in the Caucasus" teased on the news yesterday morning, I wondered, "Why is this even a news story? There are gunfights in the Caucasus every day." <#inc ww2010.pic caucas2.gif center "" "The Caucasus Mountains run from the Black Sea to the Caspian Sea"#> As I wrote last July, <#inc ww2010.weblog.ref e050725 "when a passenger train was bombed in Dagestan,"#> violence in Dagestan occurs almost daily because of 60% unemployment, poverty, and rampant government corruption. =inc ww2010.xr.related1 right basayev 3 Dagestan has not disappointed this week. On Tuesday, <#stdurl http://www.rferl.org/featuresarticle/2005/10/3824c557-7a44-4a1c-886a-c53cde333827.html "police in Dagestan defused a powerful bomb,"#> and on Wednesday, <#stdurl http://newsfromrussia.com/main/2005/10/11/64990.html "gunmen shot and killed two policemen."#> This kind of stuff happens all the time. So what's so special about yesterday's gunfight? First, its size and execution. There were <#stdurl http://www.csmonitor.com/2005/1014/p04s01-woeu.html "150-300 gunmen simultaneously attacking three police stations, the airport, and other government buildings."#> The assault took place in Nalchik, capital of Kabardino-Balkaria, a province near Chechnya, and adjacent to South Ossetia, the site of the Beslan school massacre that killed hundreds of school children a year ago. Yesterday's assault left the streets of Nalchik littered with some 60 corpses, most of them part of the terrorist group that launched the attack. Second, and most important, the fact that the attack was sufficiently complex to have required coordination between different Muslim terrorist groups, including one local to Nalchik. In this case, it means that a local Muslim terrorist group coordinated the attack with a Chechen terrorist group. This theme of coordination and organization is similar to the one we discussed recently as regards the <#inc ww2010.weblog.ref e051011 "violent beating of Chinese democracy activist Lu Banglie."#> As long as demonstrations and rebellions are local, the government can handle them. But when local groups start to link together into larger, better organized terrorist armies, then the government can lose control. That is, in fact, what's happening. Credit for yesterday's attack was <#stdurl http://www.mosnews.com/news/2005/10/13/basayevnalchik.shtml "claimed by Chechen warlord Shamil Basayev."#> Basayev is responsible all the terrorist attacks described in the preceding paragraphs, including the Beslan massacre and the downing of two passenger planes while in flight. Basayev's group linked up with Yarmuk, a militant Islamic group based in Kabardino-Balkaria. This major new terrorist attack is <#stdurl http://www.guardian.co.uk/russia/article/0,2763,1591858,00.html "a major setback for Russian President Vladimir Putin's hardline policy"#> in trying to control terrorism in the Caucasus. President Putin has <#stdurl http://www.mosnews.com/news/2005/10/13/nalchikputin.shtml "ordered a complete blockade of Nalchik"#> to keep the remaining terrorists from escaping. In fact, there's no possibility that any policy by Putin will end the terrorism in Caucasus. From the point of Generational Dynamics, the Caucasus region is well into a "generational crisis" period, following the Russian civil war of the 1920s, Stalin's genocide of Ukrainians in the 1930s, and exiled Chechens to other regions in the mid 1940s. The Caucasus region is a major front line in the centuries old war between Orthodox Christians and Muslims, and Generational Dynamics predicts that the war between those two civilizations will be fought again, resulting a war that consumes Russia and the entire Caucasus region. =eod =// &&2 e051011 China - Lu Banglie beating =data ww2010.weblog.y2005.e051011.head Violent beating of democratic activist in China illustrates country's increasing instablity =data ww2010.weblog.y2005.e051011.keys Lu Banglie, China, Taiping Rebellion, Mao Zedong, Taiwan =data ww2010.weblog.y2005.e051011.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051011.date 11-Oct-05 =data ww2010.weblog.y2005.e051011.txt1 Government authorities are thought to be responsible for the attack on Lu Banglie, =data ww2010.weblog.y2005.e051011.txt2 who was <#stdurl http://www.guardian.co.uk/china/story/0,7369,1589186,00.html "kidnapped on Saturday evening as he was traveling with a UK Guardian reporter to Taishi."#> He disappeared until Monday, when authorities drove him to the hospital to be treated for the savage beating he had received. "Five to six of them pulled my hair and punched me in the head," said Lu. "They kicked my legs and body for a couple of minutes. Then I passed out. Some people splashed water on me which brought me round, then I passed out again." The local Chinese Communist Party (CCP) propaganda office said there had been "no violence" and that Mr Lu had "pretended to be dead." This kind of incident epitomizes the increasing instability of China, as it transitions from a "generational unraveling" period to a "generational crisis" period. As <#hreftext ww2010.i.china050116 "described at length before,"#> Generational Dynamics predicts that China is approaching a massive civil war as its bubble economy unravels, along with the rigid social structure originally set up by Mao Zedong in the 1950s and 60s. Today, there are close to 150 million migrant workers (20% of the workforce), mostly peasants who have lost their farms to corrupt land deals by CCP officials, who take any jobs they can find in the cities and send money back to their families in vast poverty-stricken rural areas. Any recession or economic setback to China would provoke nationwide fury. China has a long history massive slaughter during periods of rebellions and civil war, most recently the Taiping Rebellion (1852-64) and the civil war between Mao and Chiang Kai-shek (1934-49). The last civil war led to a split in China, with Mao's forces taking control of the mainland as Chiang's forces fled to Taiwan. Generational Dynamics predicts that a new civil war will soon force the violent reunification of Taiwan with China, pulling America and the world into a new world war. Today, we see instability increasing even without a recession. It's hard to understand this in America, but regional riots occur on an almost daily basis, throughout China. <#stdurl http://www.guardian.co.uk/china/story/0,7369,1589296,00.html "According to CCP figures, 3.6 million people took part in 74,000 "mass incidents" last year,"#> an increase of more than 20% on 2003. Ten years ago, there were only a few hundred such mass riots in the country, but the number has been increasing exponentially as <#stdurl http://www.guardian.co.uk/china/story/0,7369,1589416,00.html "the country's society and economy continue to unravel."#> In many ways, Lu Banglie is a perfect example of the generational archetype to lead this kind of rebellion. Born in 1971, he's an example of the "Nomad archetype" in China, known as Generation X in America. From the point of view of Generational Dynamics, Nomads are born and raised during generational awakening eras, periods of enormous political turmoil (like <#hreftext ww2010.i.sixties040501 "the 60s in America"#>, and they typically grow up to be the angry and disaffected, but the generation that gets things done. Most of the world's greatest war leaders, like FDR, are from the Nomad generation, but so are many of the world's most evil dictators, including Hitler and Mao himself. Lu, described as <#stdurl http://www.guardian.co.uk/china/story/0,7369,1589156,00.html "a pioneer who studied Gandhi,"#> began in 2001, at age 30, to initiate a class struggle against the CCP by petitioning the Beijing government to relieve taxes on poor farmers. In 2004, he achieved personal success by getting his local village chief ousted, and getting himself elected, campaigning against land seizures, corruption and rising healthcare costs. That much was tolerated by the CCP, but Lu really started getting into trouble this year when the villagers of Taishi, far from Lu's home, asked him to help them get rid of their own village chief. He willingly got involved, much as Mao himself might have, 70-80 years earlier. This was intolerable to the CCP because of something that it fears more than anything else: organized dissent. It's one thing when a group of villagers protest or rebel against their local village chief, but when organizers from different regions begin cooperating with one another, then the threat to the CCP becomes overwhelming. Organized threats to the CCP have always been dealt with very harshly. The seminal event was the 1989 Tiananmen Square massacre. This was the explosive climax to China's generational awakening era, as several million college students from all over the country crowded into Tiananmen Square in Beijing to protest CCP policies. The CCP responded by jailing and slaughtering thousands of students. But that event also triggered two movements that will eventually be the CCP's undoing. The 1989 massacre launched the Falun Gong movement in 1992, led by Li Hongzhi. Li was born in 1951 or 1952, and is a member of China's "generational prophet generation" (like America's baby boomer generation. From the point of view of Generational Dynamics, the prophet generation typically provides spiritual guidance, while Lu Banglie's nomad generation does the actual implementation work.) Falun Gong (or Falun Dafa) is a spiritual movement, containing concepts from Buddhism and Taoism. The CCP was shocked to learn that by 1999 the movement had some 100 million practitioners across China. Older people would get together to meditate and do exercises. Once again, Beijing became alarmed at the possibility of organized resistance, and declared in 1999 that practicing the Falun Gong was illegal. Rumors have it that millions of Chinese have been jailed simply for doing the equivalent of Richard Simmons exercises. Nonetheless, the Falun Gong movement continues to grow and gain practitioners. Their leaders believe it to be the modern version of the God-Worshipper's Society, a spiritual movement which launched the Taiping Rebellion in 1852, and was a form of Christianity combined with Buddhism. China has the most sophisticated technology in the world for controlling internet content, and has the most advanced techniques in the world for crushing regional rebellions. Nonetheless, the Lu Banglie incident is an example of how ordinary Chinese peasants are forming inter-regional organized resistance movements, using whatever slang or obscure language they need to get their ideas across the country through the internet. The other movement launched by the 1989 Tiananmen Square massacre was the Wild Lily movement in 1990 among Taiwanese college students, who watched the CCP's Tiananmen Square actions in horror, and vowed to remain independent of China. Today, the president of Taiwan is Chen Shui-bian, one of the early supporters of the Wild Lily rebellion, and an advocate of Taiwanese independence. From the point of view of Generational Dynamics, new religions and ideologies are usually created by the Prophet generation during an awakening era, and are implemented by the Nomad generation during a crisis era. This is a pattern that has been occurred repeatedly throughout history, and we see it happening now, right before our eyes, in China. =eod =// &&2 e051009 Bird flu spreads to Europe: Romania and Turkey =data ww2010.weblog.y2005.e051009.head Bird flu spreads to Europe: Romania and Turkey =data ww2010.weblog.y2005.e051009.keys bird flu, Indonesia, Turkey, Romania =data ww2010.weblog.y2005.e051009.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051009.date 09-Oct-05 =data ww2010.weblog.y2005.e051009.txt1 Suddenly bird flu is a very hot media topic, as President Bush raises the possibility =data ww2010.weblog.y2005.e051009.txt2 of <#stdurl http://msnbc.msn.com/id/9630262/site/newsweek/ "using the military to contain a flu outbreak."#> The sudden confirmation of bird flu in Europe <#inc ww2010.weblog.ref e050824 "has been expected for several months,"#> ever since the virus was found in birds in the Qinghai Lake region of China. Qinghai Lake is a major central point for waterfowl migrations, and there was rarely any doubt that migrating birds would spread the virus further, once the winter migration began in September. In Turkey, <#stdurl http://www.alertnet.org/thenews/newsdesk/L09382878.htm "nearly 2,000 turkeys died last week of the flu"#> at a farm near the Aegean Sea. There is enormous fear that the flu will spread not only to other birds, but also to humans, as it already has in Asia. "I cried when I witnessed the death of my turkeys," says one farmer. "I cannot forget those moments ... But now I think of myself and what will happen to my health. I cannot go near my wife and children." Authorities are taking precautions to contain the virus, including setting up quarantines around affected areas, and culling (killing) thousands of birds who might be susceptible. Since many other European countries are on the migration paths, it's likely that other countries will be affected. Already, <#stdurl http://www.recombinomics.com/News/10080506/H5_Turkey_Confirmed.html "there are rumors of infections in Iran, Germany, and Hungary,"#> but they haven't been confirmed. In fact, the Romanian outbreak occurred in <#stdurl http://www.alertnet.org/thenews/newsdesk/L09382878.htm "the Danube delta, which contains Europe's largest wetlands and is a major migratory area for wild birds coming from Russia, Scandinavia, Poland and Germany."#> This indicates that the virus will continue to spread worldwide. In Jakarta, Indonesia, <#stdurl http://www.alertnet.org/thenews/newsdesk/SP265335.htm "a 4-year-old boy has been diagnosed with bird flu,"#> which would be sixth confirmed human case in the country. On the other hand, <#stdurl http://www.thejakartapost.com/detaillatestnews.asp?fileid=20051009190917&irec=0 "six of fifteen patients being treated for bird flu"#> have been found to have other illnesses instead (ordinary flu or typhoid), and they are being discharged. Media attention to bird flu has increased, thanks to last week's announcement of the <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2005/10/05/AR2005100501565.html "reconstruction of the lethal Spanish Flu virus,"#> that spread around the world in 1918-19. World War I had just ended, killing many more people than any previous war in history, but the Spanish Flu killed more people than the war. In fact, of American soldiers who died in Europe, <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/10/06/nflu106.xml&sSheet=/news/2005/10/06/ixhome.html "half of them fell to the virus and not to the enemy."#> The reconstruction was done by obtaining samples from two different sources. One source was small samples of lung tissue that had been saved by the Army in 1918 in the hope that some future generation could learn something from them. The other source was the frozen body of woman who had died from the flu in Alaska in 1918. The reconstruction was led by Jeffery K. Taubenberger of the Armed Forces Institute of Pathology, <#stdurl http://www.businessweek.com/bwdaily/dnflash/oct2005/nf2005106_6320_db008.htm "said in an interview,"#>

"Our concern is that the H5 type [such as the new avian flu strains] might be going down a similar path [of adapting to humans] as the 1918 virus did. What we've found is kind of eerie. Practically any of the bird viruses that we can find with some of these changes tend to be the highly pathogenic avian viruses, like those in Asia. This suggests to us that these viruses are acquiring mutations that make them more human-adapted. So far it's a lucky thing. These viruses can get into a person, and they can kill. But they can't yet spread from person to person. The race is on now to figure out what changes are crucial to allowing the virus to be transmissible from one person to another."

Bird flu was first discovered in 1997, and was localized to chickens in Hong Kong, and later Vietnam. Despite repeated attempts by the U.N. World Health Organization to stamp it out, it has continued to survive, and adapt to additional species. Originally it infected only chickens, but since then it's adapted to infect ducks, geese, and other birds, and has gone on to kill pigs, tigers and other cats. =inc ww2010.cf.cf050530 p left Most epidemiologists today believe that a worldwide bird flu pandemic is inevitable. Once begun, it will kill tens of millions of people worldwide, and perhaps hundreds of millions. A bird flu pandemic would cause a worldwide financial crisis, and would spark riots among people seeking food or scarce vaccine. Within a year or two, all of the regions in my little "Conflict risk" graphic would be at full scale war, since they're all in "generational crisis" periods. Right now, the best that officials can hope for is that the pandemic won't start this year. If it doesn't occur till next year, then the time might be used to develop additional vaccines, or find other solutions. However, we're overdue for a stock market panic as well as a bird flu pandemic, and so the world may be a very different place a year from now. =eod =// &&2 e051006 Sharp losses in stock market =data ww2010.weblog.y2005.e051006.head After 3 days of sharp losses on the stock market, the "Octoberphobia" mood is increasingly gloomy. =data ww2010.weblog.y2005.e051006.keys Alan Greenspan, Katrina, panic, Great Depression =data ww2010.weblog.y2005.e051006.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051006.date 06-Oct-05 =data ww2010.weblog.y2005.e051006.txt1 Is this a panic? Just what IS a panic, anyway? =data ww2010.weblog.y2005.e051006.txt2 The market took a steep fall on Wednesday, for the third day in a row, falling 2.4% in three days. As I'm writing this, the noontime reading of Japan's Nikkei index shows it's fallen almost 3% today alone. The economic bad news just doesn't seem to stop. =inc ww2010.blocking.start <#inc ww2010.pic wsj0927.gif left "" "Consumer spending in August had its sharpest decline in four years (Source: WSJ)"#> <#inc ww2010.pic wsj0928.gif right "" "Consumer confidence fell sharply in September, to nearly a two-year low (Source: WSJ)"#> =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic per0930.gif center "" "Investors have gotten more cautious in the last month. After keeping the P/E ratio at 20 for a year, last month they pushed it down to the 18-19 range. (Source: MarketGauge ® by DataView, LLC)"#> =inc ww2010.blocking.end On Wednesday, the <#stdurl http://www.businessweek.com/ap/financialnews/D8D202LO4.htm?campaign_id=apn_home_down&chan=db "Institute of Supply Management released its non-manufacturing business activity index,"#> showing that it fell sharply because commodities prices, led by oil and gas, have spiked up. Earlier this week, on Monday, the ISM released its manufacturing index, <#stdurl http://moneycentral.msn.com/redir/gredir.asp?pageid=INV_BILLBOARD&target=/content/CNBCTV/Articles/Dispatches/P131428.asp&Namespace=0MCUSENINTERPRESS&HL=Market+resigned+to+two+more+rate+hikes "which showed unexpected strength."#> That should have made investors happy, right? Just the opposite. The "prices paid" component was up sharply, once again led by oil and gas prices, and the market immediately took a dive. The logic is this: When businesses pay more for commodities, it means that they'll have to increase prices, leading to inflation, which means that Alan Greenspan's Fed will continue to raise interest rates, which means that credit will be tighter, which means that business will be bad. This is all on top of exponentially increasing public and private debt, with little fiscal control following the destruction wrought by hurricanes Katrina and Rita. And sky-high oil and gas prices are keeping consumers out of shopping centers and eating into discretionary income. In fact, Alan Greenspan warned that the market may be in danger, <#stdurl http://www.federalreserve.gov/boarddocs/speeches/2005/20050927/default.htm "a speech he gave on September 27."#> This would be really hilarious if it weren't so serious. Greenspan said that the market was in danger because his clever rate-setting policy has stabilized the economy, which has reduced "risk premiums", which has made investors less willing to invest. It reminds me of the statement last year by Greenspan's colleague, <#inc ww2010.weblog.ref e050314 "Fed Governor Ben Bernanke,"#> blaming America's astronomic credit imbalance on other countries for spending so little that they've created a "global savings glut." These guys just can't stop patting themselves on the back. There's a great deal of anxiety in the marketplace now, because of "Octoberphobia," the fear of a stock market panic, such as those that occurred in 1987 and 1929. Are we in a panic situation already? No we aren't. Not even close. A 2% or 3% loss could easily be made up in a single day. (Though as I'm writing this I'm watching the Nikkei index continue to fall, more and more.) In 1987, the stock market fell 22% in ONE DAY (Oct. 19), and in 1929 the stock market fell 24% in two days. When a real panic comes, you'll know it when you see it. A "panic" means what it says -- an unreasoned frenzy to sell faster than anyone else does. Today, the mood is right for a panic. Investors are highly anxious today, and race to the bottom could easily result in a lose of 20% or more in one or two days. That would bring the DJIA down to around 8200, which is where it was in July, 2002, anyway. But what would happen after that? Would the market keep on falling, as it did in 1929, or would it begin to recover, as it did in 1987? Most journalists, pundits and high-priced analysts are saying the same thing: There won't be a panic, but if there is, the market will recover soon, as it did after the 1987 panic by 1989. But those analysts would be wrong, and here's why: As we've said many times, <#hreftext ww2010.i.050711eleven "both I and other analysts have computed,"#> the "true value" or book value of the market today is around Dow 4500, which means that the market is overvalued by more than 100%. In fact, the market today is priced at 216% of book value. In 1929, the market was at 173% of book value when the panic occurred, following the 1920s bubble. The market continued to fall for three more years, ending up at 24% of book value by July, 1932. This shows how a bubble can cause an "anti-bubble", caused by strong risk-averseness among investors; instead of stopping at 100% of book value, the market fall overshot the book value, and fell substantially further. By contrast, in 1987 the market was just at 105% of book value when the panic occurred. The panic caused a 22% fall, which brought the market price well below book value, so that an early recovery was to be expected at that time. [22-Jan-2006 correction: in 1987, the market was at 127% of book value, still within the normal variation.] That's why we're entering a new 1930s style Great Depression, as I predicted in 2002, and that the market will fall to the Dow 3000 level, or lower. (If the market again falls to 25% of book value, then it will fall to the Dow 1000-1500 range.) There's no way to predict when a panic will occur, and if it doesn't occur before Thanksgiving, then it probably won't occur until we're well past the Christmas/holiday shopping season. But October is the cruelest month, and it's a good idea to be prepared for the worst. If you do it right, then you'll be OK whether the worst occurs or not. =eod =// &&2 e051005 Terror grips Southeast Asia from Thailand to Australia =data ww2010.weblog.y2005.e051005.head Terror grips Southeast Asia from Thailand to Australia =data ww2010.weblog.y2005.e051005.keys Bali, Australia, Indonesia, Thailand, Jemaah Islamiyah, Malaysia, Pan-Malaysian Islamic Party (PAS) =data ww2010.weblog.y2005.e051005.loc ww2010.weblog.log0510 =data ww2010.weblog.y2005.e051005.date 05-Oct-05 =data ww2010.weblog.y2005.e051005.txt1 Weekend Bali bombing targeted Australians, who are warned of further attacks. =data ww2010.weblog.y2005.e051005.txt2 "The timing didn't surprise me because, if I'm not mistaken, this is the start of the Australian holiday season, just as it was three years ago," <#stdurl http://www.theage.com.au/news/World/Bombs-timed-to-maximise-Aussie-deaths/2005/10/05/1128191752180.html "an American DoD consultant told an Australian newspaper."#> "It's a calculated time when foreigners, particularly Australians, are in Bali." <#inc ww2010.pic husin.jpg left "" "Azahari Husin - Asia's most-wanted man"#> Last Saturday's near-simultaneous blasts struck two seafood cafes in the tourist center in Bali, Indonesia, killing 22 people and injuring more than 100 others. Last weekend's bombing attack was actually the fourth in as many years. <#inc ww2010.weblog.ref e040909b "Last year, a bomb blast targeted the Australian embassy in Jakarta,"#> killing 8 people, injuring 168 others. In 2003, A car bomb in front of the JW Marriott Hotel in Jakarta killed 12 people. The most deadly blast occurred on October 12, 2002, when the bombing of a Bali nightclub killed 202 people, including 88 Australians. All four attacks are thought to be the work of Islamist terror group Jemaah Islamiyah, led by Malaysians Azahari Husin and Noordin Mohamed Top, the two most wanted men in Asia. <#inc ww2010.pic seasia1.jpg right "" "Southeast Asia"#> The two men <#stdurl http://www.philstar.com/philstar/News200510040401.htm "were trained in bombmaking in the Philippines in 1999,"#> and advanced training in Afghanistan in 2000. The group's avowed intention is to establish an Islamic state from Indonesia to southern Thailand. Thailand's Prime Minister Thaksin Shinawatra <#stdurl http://news.xinhuanet.com/english/2005-10/04/content_3581297.htm "has warned that the Bali violence could spread to Thailand."#> "Geographically it may seem that the locations are far apart, but Indonesia, Malaysia and Thailand are actually connected along sea routes," said Thaksin. "These people (the terrorists) have been traveling between and circulating around the region via the sea for generations." In fact, Thailand has already has had its own problem with Islamic terrorists in its southern provinces. Prime Minister Thaksin's government was granted <#stdurl http://news.bbc.co.uk/1/hi/world/asia-pacific/4684883.stm "sweeping new powers to detain suspects and censor newspapers."#> The powers were granted following an increasingly serious series of attacks. Thailand is primarily Buddhist, but there is a predominantly Muslim area in the south, on the border with Malaysia. An Islamist insurgency began there in January 2004, and since then more than 1,000 people have been killed in repeated terrorist attacks. <#stdurl http://jamestown.org/terrorism/news/article.php?articleid=2369795 "Some 34,000 Buddhists have been forced to flee the region,"#> the most violent arena for Muslim violence outside of Iraq and Southern Russia (Caucasus). There is a danger that the Thai Muslim terrorists will link up with the Pan-Malaysian Islamic Party (PAS), an Islamist radical party that has control over the northern province of Kelantan bordering Thailand. The PAS in turn may be linking up with Jemaah Islamiyah, the group responsible for the Bali bombings, and with al-Qaeda itself. From the point of view of Generational Dynamics, this kind of linking up is expected, as we approach a "clash of civilizations" world war. However, some readers of this web site have misunderstood this to mean that the war will be with Islamist terrorist groups. (The politicians in Washington seem to believe the same thing.) The expected reality is quite different. The war will be between countries: Muslim countries like Pakistan and Malaysia will be at war with non-Muslim countries like India, Thailand and America. Generally speaking, the intentions of terrorist groups are not so much to win a war themselves, but to trigger a major war which, they believe, their "side" will win. Osama bin Laden has, in fact, stated this as his intention, since he believes that a major world war would be won by the more than one billion Muslims in the world. This linking up of identity groups, to form ever larger identity groups, leading to entire countries being forced to choose sides, is a major feature of crisis wars throughout history. =eod =// &&2 e050930 Bird flu situation clouded =data ww2010.weblog.y2005.e050930.head Bird flu situation in Indonesia remains clouded, as virus spreads =data ww2010.weblog.y2005.e050930.keys bird flu, Indonesia =data ww2010.weblog.y2005.e050930.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050930.date 30-Sep-05 =data ww2010.weblog.y2005.e050930.txt1 Meanwhile, the Dutch breathe sigh of relief as spread towards Europe appears to stall. =data ww2010.weblog.y2005.e050930.txt2 As many as <#stdurl http://www.voanews.com/english/2005-09-29-voa21.cfm "48 people may be infected with bird flu"#> in Jakarta and nearby municipalities, raising the possibility of rapid spread to other regions. The U.N. World Health Organization (WHO) says that these fears are exaggerated, that only four cases have been confirmed so far, and that the others "might be just old-fashioned flu." The Recombinomics web site, on the other hand, says that <#stdurl http://www.recombinomics.com/News/09290504/H5N1_False_Negatives_Indonesia.html "it's "obvious to the most casual observer""#> that WHO is not treating the situation seriously enough, and that the rapid spread of bird flu clusters throughout the region means that the <#stdurl http://www.recombinomics.com/News/09290506/H5N1_Cluster_Sulawesi.html ""resulting major pandemic appears to be accelerating in Indonesia at this time.""#> Certainly WHO wants to be as conservative as possible, for fear of prematurely causing a panic and then not be believed when a real pandemic finally occurs. However, even WHO's <#stdurl http://www.who.int/mediacentre/news/releases/2005/pr45/en/index.html "latest press release"#> says that "the world is fast recognizing the risk of an imminent human influenza pandemic." So the situation is confused, but the potential for an imminent human bird flu pandemic is certainly present. Separately, the Netherlands <#stdurl http://news.scotsman.com/latest.cfm?id=2013162005 "has eased an order which had required that all commercial poultry be confined indoors."#> The order was causing a row because the products were labeled as "free range," and some people say that an indoor chicken just can't be called a "free range" chicken. The revised order, which permits "low risk" birds to be allowed outside as long as they're protected by netting, was motivated by the fact that the spread of bird flu in western Asia seems to have slowed. It was moving quite rapidly through central Asia and Russia towards Europe last month, but there have been fewer cases this month. The spread could begin again any day as the winter bird migration continues. =inc ww2010.cf.cf050530 p right Once again, I must recommend to my readers that if you've been planning to take reasonable precautions before any crisis occurs, then now is the time to do take them. A worldwide bird flu pandemic could well occur this fall, but that's not all. Economic news this week indicates that credit card and public debt continues to increase exponentially, to the point where a number of analysts, including many who are habitually much less gloomy than I am, are starting to talk about a serious recession this fall. With public debt and credit card debt continuing to increases exponentially, the country may be at an economic tipping point, just as Jakarta may be near a health tipping point. =eod =// &&2 e050926b North Korea demands an end to U.N. food aid =data ww2010.weblog.y2005.e050926b.head In a new bizarre move, North Korea demands an end to U.N. food aid =data ww2010.weblog.y2005.e050926b.keys North Korea =data ww2010.weblog.y2005.e050926b.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050926b.date 26-Sep-05 =data ww2010.weblog.y2005.e050926b.txt1 The famine-stricken country officially told the UN World Food Program =data ww2010.weblog.y2005.e050926b.txt2 (WFP) to <#stdurl http://www.bloomberg.com/apps/news?pid=10000080&sid=aEh1WNBMrkz4&refer=asia "stop food aid within the next few months."#> They said that they expect good harvests of their own this year, and that private donations of food will make up any difference. They also accused the U.S. of politicizing food aid by linking it to human rights violations, a charge with the State Department denies. North Korea is asking that food aid be replaced with "development work" aid. Food aid is actually <#stdurl http://www.alertnet.org/thefacts/reliefresources/112686556137.htm "a controversial issue in general."#> Food aid to a country lowers the price of food in that country, making it harder to encourage local farmers to do more. But there are other issues as well. North Korea receives private donations of food from both South Korea and China. <#stdurl http://english.chosun.com/w21data/html/news/200509/200509090030.html "But there are big differences in implementation between them and the UN WFP."#> When the WFP distributes food aid, it has dozens of inspectors that do hundreds of spot checks to make sure that the food is being distributed honestly. But South Korea and China simply give the food aid with almost no spot checks at all. They feel that they have to, because otherwise their neighbor will destabilize and affect them. So I hope you get this. North Korea doesn't like the WFP's meddling, so they cut off food aid, "knowing" that this will force China and South Korea to increase food aid without meddling, since they presumably have no choice. This has generated political turmoil in South Korea. An opposition legislator in Seoul said the WFP now faces expulsion from Pyongyang because of what she called Seoul's "indiscreet" provision of food. If South Korea is pressured to substantially increase its food aid, then the political repercussions will increase. From the point of view of Generational Dynamics, North and South Korea are headed for a violent war of reunification, and the most likely scenario is that it will be launched preemptively by North Korea, led by North Korean President Kim Jong-il. This might happen next month, next year, or soon thereafter. In attempting to discern Kim's plans, all we can do is look at what Pyongyang says and does. The problem is that Kim has been getting increasingly erratic for the last couple of years. Starting in 2003, Pyongyang has claimed that the U.S. was about to attack North Korea preemptively, and Kim has taken a number of hostile steps, including mobilizing for war. Starting a few months go, North Korea began <#inc ww2010.weblog.ref e050610 "blocking all international communications,"#> confiscating 20,000 cell phones and shutting down the internet for most citizens. In the last couple of months, Pyongyang seemed to be getting less confrontational, and even agreed, last weekend,to discontinue its nuclear weapons program. However, they repudiated that agreement the next day, and once again <#stdurl http://www.allheadlinenews.com/articles/7000236586 "accused the U.S. of plotting a nuclear attack."#> This new announcement, canceling UN food aid, adds to the country's isolation and instability. According to the UN, the cancelation could cause the death by starvation of hundreds of thousands of people this winter, <#stdurl http://www.bloomberg.com/apps/news?pid=10000080&sid=aEh1WNBMrkz4&refer=asia "including 125,000 children."#> As regular readers know, I've felt for some time that a preemptive attack by North Korea could occur at any time. This view is based simply on North Korea's statements and actions. The constant claims that the U.S. is planning a nuclear attack on North Korea prepares the population for a preemptive attack on South Korea or Japan; and the increasing isolation, which Kim is implementing in every way possible, permits military mobilization, including nuclear weapons development, to continue in secret. A starving population is the most dangerous force in the world, especially during a generational crisis period, since it can lead to a violent uprising and civil war. South Korea and China know that, of course, and that's the reason why they've been providing unregulated food aid to North Korea; any problem in North Korea would create a massive refugee problem. But food aid unregulated by the UN is going to mean increased politicization -- i.e., politically favored groups will get more food than others -- and once winter sets in, violent unrest among starving masses could increase. Kim can't prevent the unrest, but does have the power to deflect it somewhat by declaring war on Seoul and Tokyo -- and Washington. That's why I continue to believe that a preemptive war by North Korea could happen at any time. =eod =// &&2 e050926 Gaza - Israel launches "crushing response" =data ww2010.weblog.y2005.e050926.head Gaza violence spiking up as Israel launches "crushing response" to rocket attacks =data ww2010.weblog.y2005.e050926.keys Gaza, Israel, Hamas =data ww2010.weblog.y2005.e050926.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050926.date 26-Sep-05 =data ww2010.weblog.y2005.e050926.txt1 Hamas promised to stop attacking Israel from Gaza, to prevent spiraling out of control. =data ww2010.weblog.y2005.e050926.txt2 On Sunday, Israel killed a senior member of the Islamic Jihad militia group on the <#stdurl http://www.voanews.com/english/2005-09-25-voa5.cfm "second day of Israeli helicopter missile strikes at Gaza buildings"#> used by Palestinian militants. The attacks followed a barrage of militant rocket attacks from Gaza on Israel on Friday. Those rocket attacks were supposedly in retaliation for a massive explosion on Friday during a Hamas military parade, evidently caused by militants who mishandled explosives. Hamas blamed Israel anyway. In the face of the escalating violence, <#stdurl http://www.alertnet.org/thenews/newsdesk/L25192740.htm "Hamas promised to stop attacking Israel from Gaza."#> The statement, by a senior Hamas leader, said "The movement declares an end to its operations from the Gaza Strip against the Israeli occupation, which came ... in response to the assaults by the enemy." However, it remains to be seen whether that promise will be honored. From the point of view of Generational Dynamics, the Arabs and Jews are heading for a new genocidal crisis war. The last crisis war between Jews and Arabs was the extremely violent, genocidal war of the late 1940s, when the United Nations partitioned Palestine and created the state of Israel. Generational Dynamics predicts that we're heading for a major new Mideast war, replaying that war, and engulfing the entire region. =eod =// &&2 e050925 Greenspan says that the deficit is out of control =data ww2010.weblog.y2005.e050925.head Fed Chairman Alan Greenspan says that the deficit is out of control =data ww2010.weblog.y2005.e050925.keys Alan Greenspan, Katrina =data ww2010.weblog.y2005.e050925.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050925.date 25-Sep-05 =data ww2010.weblog.y2005.e050925.txt1 France's Finance Minister Thierry Breton quoted Greenspan =data ww2010.weblog.y2005.e050925.txt2 as saying on Saturday that the U.S. had "lost control" of the budget deficit. "'We have lost control,' that was his expression," <#stdurl http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2005-09-25T005906Z_01_N24701644_RTRIDST_0_GROUP-FRANCE-GREENSPAN-UPDATE-1.XML "said Breton, after meeting with the outgoing chairman of the U.S. Federal Reserve."#> "The United States has lost control of their budget at a time when racking up deficits has been authorized without any control (from Congress)," Breton said. "We were both disappointed that the management of debt is not a political priority today," he added. Greenspan was probably reacting to the plan for the Federal Government to pay <#inc ww2010.weblog.ref e050916b "two million dollars per family in aid for hurricane Katrina victims."#> Maybe that amount will increase, now that hurricane Rita has struck. A senior US official suggested the French minister <#stdurl http://business.timesonline.co.uk/article/0,,16849-1797751,00.html "must have misunderstood Mr Greenspan’s remarks."#> “Things can get lost in translation,” the official said. =eod =// &&2 e050923 Indonesia nearing panic as bird flu spreads =data ww2010.weblog.y2005.e050923.head Indonesia nearing panic as bird flu spreads =data ww2010.weblog.y2005.e050923.keys bird flu, Indonesia =data ww2010.weblog.y2005.e050923.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050923.date 23-Sep-05 =data ww2010.weblog.y2005.e050923.txt1 There's mass confusion in Jakarta over possible human to human contamination. =data ww2010.weblog.y2005.e050923.txt2 According to <#stdurl http://www.who.int/entity/csr/don/archive/disease/influenza/2005_09_22a/en/index.html "yesterday's surveillance report"#> by the United Nations World Health Organization (WHO), an 8 year old hospitalized boy has been confirmed positive for the bird flu. The WHO report downplays the likelihood of of human to human transmission, but leaves the question open. <#stdurl http://www.canada.com/health/story.html?id=e05b34c6-68d9-49a1-9d6e-5837d364c155 "News reports"#> have not been nearly as sanguine. The boy is the nephew of a woman who died of bird flu on Sept. 16. He had contact with his aunt after she became ill, and developed symptoms shortly thereafter. It seems pretty likely that the boy caught it from his aunt, indicating human to human transmission. Jakarta, one of the most densely populated cities in the world, is beginning to panic. Five people in Jakarta have died recently of the bird flu. On Wednesday, <#stdurl http://www.adnki.com/index_2Level.php?cat=Security&loid=8.0.210620726&par=0 "a five year old girl died,"#> having bird flu symptoms; a DNA analysis will reveal next week whether it was the actual bird flu. Malaysia, Indonesia's neighbor, <#stdurl http://www.thejakartapost.com/detaillatestnews.asp?fileid=20050922135412&irec=7 "is beginning to close down the border between the two countries,"#> in order to try to stop the spread. So the question of whether there's human to human transmission in Jakarta is confusing, but that isn't the half of it. A major Jakarta zoo was closed on Monday, after 19 birds tested positive for bird flu. A number of people who visited the zoo prior to its closing <#stdurl http://www.thejakartapost.com/detailheadlines.asp?fileid=20050923.B06&irec=5 "have been admitted to the hospital showing symptoms of bird flu."#> Test results will be available next week. Even more serious, <#stdurl http://www.recombinomics.com/News/09220502/H5N1_Zoo_Treatment_115.html "over 115 patients have developed mild bird flu symptions"#> in the last couple of days, but were refused treatment because of lack of beds and because the symptoms were mild. The <#stdurl http://www.recombinomics.com/whats_new.html "Recombinomics web site,"#> which posts analyses of current events in the progression of bird flu, has been wondering <#stdurl http://www.recombinomics.com/News/09220503/H5N1_Jakarta_9.html "whether Jakarta and WHO have been hiding the seriousness of the situation."#> According to Recombinomics, the bird flu has become a Phase 5 pandemic and appears to be close to Phase 6. WHO classifies it as Phase 4. The phases have been <#stdurl http://www.cdc.gov/flu/avian/gen-info/pandemics.htm "defined to show how close a new virus is to a general pandemic."#> Here are the last few phases:

Phase 3

Phase 4

Phase 5

Phase 6

Until more testing is done, there's no way to tell whether something has changed in the last few days. It's possible that the current storm will pass, when all the tests are in, or it's possible that the tests will reveal the first stages of a real bird flu panemic. As with most things in life, there's no way to tell what's going to happen now. That there'll be a pandemic is certain, but whether it will occur next week is far from certain. A lot will depend on what happens with those 115 patients who weren't treated. If it turns out that they all have bird flu, then we have an pandemic; if all they have is the sniffles, then the pandemic will be postponed for a while. In my opinion, if you've been planning to make some sort of preparations in advance of a bird flu pandemic, such as purchasing face masks or something, now is the time to do it. =eod =// &&2 e050922 Abu Musab al-Zarqawi looking pathetic =data ww2010.weblog.y2005.e050922.head Abu Musab al-Zarqawi is very dangerous, but he's looking increasingly pathetic =data ww2010.weblog.y2005.e050922.keys al-Zarqawi, Iraq, al-Sadr =data ww2010.weblog.y2005.e050922.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050922.date 22-Sep-05 =data ww2010.weblog.y2005.e050922.txt1 It was just two weeks ago when he claimed credit for the weather, =data ww2010.weblog.y2005.e050922.txt2 <#inc ww2010.weblog.ref e050908b "when he took credit for Hurricane Katrina,"#> by saying, “If Muslims are powerless to defend their religion, God is on the lookout (to punish) the oppressors.” That statement appeared rather desperate, because he had to admit that his attempts to trigger a civil war in Iraq, and al-Qaeda's failure to perpetrate another terrorist act on American soil, had all been failures. Abu Musab al-Zarqawi, the well-funded leader of the group "al-Qaeda in Iraq," has been very successful in using suicide bombers to blow up some Americans and a huge number of Iraqis. And it's the fact that he's blowing up devout Muslims that's causing enormous anger within the Muslim community itself. This has led al-Zarqawi to issue a series of increasingly pathetic statements, starting <#stdurl http://www.alertnet.org/thenews/newsdesk/L14261821.htm "last Wednesday, when he issued this statement:"#>

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

Now, al-Zarqawi is Sunni Muslim, and his declaration of war against the Shi'ites was not welcomed by the Shi'ites. Apparently the pressure has gotten to al-Zarqawi, because <#stdurl http://www.adnki.com/index_2Level.php?cat=Terrorism&loid=8.0.210065428&par=0 "he issued this statement earlier this week:"#>

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

Well, that should make the Shi'ites happy, shouldn't it? Well, one of the best known Shi'ite clerics in Iraq is imam Moqtada al-Sadr. You may recall that one year ago, he was <#inc ww2010.weblog.ref e040812 "trying foment an Iraqi uprising against the Americans."#> He failed utterly, as I had predicted he would, because Iraq is in a "generational awakening" period, just one generation past the genocidal Iran/Iraq war of the 1980s. Since then, al-Sadr has given up fomenting violence against Americans, and he's taken to denouncing al-Zarqawi. In a <#stdurl http://www.adnki.com/index_2Level.php?cat=Terrorism&loid=8.0.210442682 "statement issued on Wednesday by al-Sadr,"#> he said,

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

The statement went on to call on Zarqawi and his followers to immediately leave Iraq and stressed that "for our movement, al-Zarqawi is nothing but an enemy, and if he falls into the hands of our militia he will be torn apart." There's good news and there's bad news here. The good news is that al-Zarqawi is embarassing and harming the cause of Islamic Jihadists and terrorists. It's possible that al-Zarqawi will be forced to end the Iraqi insurgency, simply because it's accomplishing little more than killing innocent Iraqis, without doing too much damage to the Americans. The bad news is that al-Qaeda's worldwide war against Western civilization is going to continue, and gather momentum. Generational Dynamics predicts that we're headed for a "clash of civilizations" world war. However, it's worth pointing out that this doesn't mean that all Muslim countries will be on one side, and all Western countries will be on the other side; there will undoubtedly be splits on both sides. But my expectation is that this world war will begin in earnest within the next 1-3 years, and that the American troops will still be stationed in Iraq when it begins. =eod =// &&2 e050921 North Korea plays a little joke on the world =data ww2010.weblog.y2005.e050921.head North Korea plays a little joke on the world =data ww2010.weblog.y2005.e050921.keys =data ww2010.weblog.y2005.e050921.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050921.date 21-Sep-05 =data ww2010.weblog.y2005.e050921.txt1 North Korea's "no more nuclear" pledge startled the world, but now they say, "Ha, ha, fooled ya." =data ww2010.weblog.y2005.e050921.txt2 Much to everyone's surprise, North Korea appeared on Sunday to have backed down on its plans to continue development of nuclear weapons. The news reports were ebullient. <#stdurl http://news.bbc.co.uk/2/hi/asia-pacific/4261866.stm "President Bush said,"#> "Five nations have spoken and said it is not in the world's interests that North Korea have a nuclear weapon. And now there's a way forward. And part of the way forward is for the North Koreans to understand that we're serious about this and that we expect there to be a verifiable process. In other words they have said, in principle, that they will abandon their weapons programs." North Korea didn't actual say they'd abandon their nuclear weapons program. <#stdurl http://www.csmonitor.com/2005/0920/p01s01-woap.html "What they said is that they'd talk about it."#> The next meeting to talk about it will be in November. Well, it took only one day for North Korea to reverse itself. On Tuesday, <#stdurl http://www.iht.com/articles/2005/09/20/news/talks.php "North Korea's Foreign Ministry issued a statement:"#> "The U.S. should not even dream of the issue of North Korea's dismantlement of its nuclear deterrent before providing light-water reactors. This is our just and consistent stand as solid as a deeply rooted rock." What's going on with North Korea? Why are they up and down like a yoyo? I have no way of knowing for sure, of course, but here's a possible explanation, better than some of the giddy explanations I've seen in the press: The first factor is that North Korea is facing a major famine this winter. Furthermore, the country is in a generational crisis period, meaning that a "people's rebellion" against President Kim Jong-il's government is a good possibility if the famine is bad enough. There is no more powerful motivator for a crisis war than when men can't feed their families. Incidentally, North Korea had a bad famine in the mid-1990s without any people's rebellion. But the country was in a generational unraveling era at that time, an era of compromise, not rebellion. It's different today. Kim knows that, and knows that he has to be perceived to be cooperative if he's to get aid from the international community. The second factor is that North Korea has absolutely no intention on earth of discontinuing its nuclear weapons development program. Each of these factors has its own constituency in Pyongyang politics, and they're in conflict, and this conflict is showing up in the nuclear non-proliferation negotiations. There is one thing that's changed in the last few weeks: Pyongyang has become less openly militaristic. =inc ww2010.cf.cf050530 p right Throughout the last two years, it seems that Kim was making an ever-increasing series of threats, and making a series of justifications for a pre-emptive war against South Korea and Japan. That's why North Korea is at the highest conflict risk level in my conflict list graph. But for the last 2-3 months, Kim has been less aggressively confrontative. This doesn't mean that Kim's plans have changed -- he's still planning pre-emptive war against South Korea and Japan. But it no longer seems that this will happen in the next few months. If this trend continues for the next couple of weeks, then I will adjust the conflict graph and reduce North Korea's risk level from 3 to 2. Some things haven't changed, though. A major stock market crash could certainly happen this fall, and a worldwide bird flu pandemic could also happen this fall. =eod =// &&2 e050919 Tony Blair and Bill Clinton blast BBC's anti-Americanism =data ww2010.weblog.y2005.e050919.head Tony Blair and Bill Clinton blast BBC's anti-American coverage of Katrina =data ww2010.weblog.y2005.e050919.keys Katrina, BBC, Tony Blair, Bill Clinton, anti-Americanism =data ww2010.weblog.y2005.e050919.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050919.date 19-Sep-05 =data ww2010.weblog.y2005.e050919.txt1 Blair described the BBC coverage as "gloating" and "full of hatred for America," =data ww2010.weblog.y2005.e050919.txt2 in a conversation <#stdurl http://scotlandonsunday.scotsman.com/politics.cfm?id=1956002005 "revealed last week by media baron Rupert Murdoch."#> Speaking at a seminar in New York City on Friday, Murdoch said, "Tony Blair - perhaps I shouldn't repeat this conversation - told me yesterday [Thursday] that he was in Delhi last week, and he turned on the BBC World service to see what was happening in New Orleans; and he said it was just full of hate of America and gloating about our troubles." I can vouch for this. I love the BBC World Service, but as I've previously said, <#inc ww2010.weblog.ref e050331 "the BBC coverage reeks of anti-Americanism."#> This is nothing new. Just last year, in January, 2004, the BBC was reprimanded after a long investigation resulting in <#stdurl news.bbc.co.uk/1/hi/in_depth/uk/2003/david_kelly_inquiry/default.stm "the Hutton Report."#> The investigation found that the BBC had purposely lied in news stories in order to make Tony Blair's administration look bad in pursuing the Iraq War. The coverage of Katrina frequently was written to make the U.S. appear as bad as possible. <#inc ww2010.pic ec91005.jpg right "The Economist - Sep 10th, 2005"#> And they're not the only one. The European press has used Katrina as an opportunity to attack America for incompetence and racism in any angle it can. The adjoining cover of The Economist for September 10, 2005, illustrates the point. Blair's criticisms were backed up by former President Bill Clinton, who said there was nothing factually inaccurate but reports were "stacked up" against the government. He said: "It was designed to be almost exclusively a hit on the federal response without showing what anybody at any level was doing." Lord Tebbit, former chairman of the Britain's Conservative party, "They certainly seemed in their coverage to blame President Bush for just about everything short of the hurricane itself." =eod =// &&2 e050918 Bill Gross / Stephen Roach =data ww2010.weblog.y2005.e050918.head Pimco's Bill Gross recommends selling all, buying only short-term Treasuries =data ww2010.weblog.y2005.e050918.keys Katrina, Great Depression =data ww2010.weblog.y2005.e050918.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050918.date 18-Sep-05 =data ww2010.weblog.y2005.e050918.txt1 Meanwhile, Morgan Stanley's Stephen Roach says, "The world as we know it must come to an end." =data ww2010.weblog.y2005.e050918.txt2 In <#stdurl http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2005/IO+September+2005.htm "his September, 2005, investment newsletter,"#> PIMCO's Bill Gross, head of the world's largest bond fund, advises investors to sell everything else off and move into short-term Treasury bonds. Gross refers to <#inc ww2010.weblog.ref e050830 "Alan Greenspan's swan song speech,"#> wherein he said: "Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums." He indicates that the housing bubble will soon at level off, and possible burst completely. Either way, investors will become more cautious, and they will sell off any assets that carry the "low risk premiums" that Greenspan mentioned. "Those assets include real estate, equities, high yield, corporate, and some areas of emerging market debt," according to Gross. He includes long-term Treasury notes in this list. This is the prescription for preparing for a major market correction, and Gross evidently believes that it's coming, and coming soon. Stephen Roach, chief economist of Morgan Stanley, appearently feels the same. In <#stdurl http://www.morganstanley.com/GEFdata/digests/20050909-fri.html ""The Shoestring Economy," his September 9 commentary,"#> he says that "the world's leading economic power is trying to do [too] much with [too] little." America has too little money because of the historically low savings rate, and the historically enormous level of public debt. "But now Washington is upping the ante as it opens the fiscal spigot to cope with post-Katrina reconstruction at the same time it is funding the ongoing war in Iraq," he says. "Could this be a tipping point for America’s shoestring economy?" If you've been reading this Web Log this week, then you know that I'm practically in a state of shock over what's happened. Led by President Bush, Washington is committing to spend $200 billion on aid for Katrina victims. That's $1-2 million for each family of five. All three of us are saying the same thing: That the economy is close to a meltdown. If there's any disagreement among the three of us, it's about how bad the meltdown will be, with me being the gloomiest of the three. As <#hreftext ww2010.i.050711eleven "both I and other analysts have computed,"#> the true value of the market today is around Dow 4500, which means that the market is overvalued by more than 100%. What about dates? In 2002, when I first realized that Generational Dynamics predicts that we're entering a 1930s style Great Depression, I predicted a stock market crash by the 2006-2007 time frame. Today, all three of us are saying something like 12-24 months. But I think that what we're all saying is that things are getting sooooooooo bad, even before Katrina. And now and $200 billion for Katrina is an almost unbelievable impetus. The 76th anniversary of the crash of 1929 is coming soon, on October 24. It's time to be very, very cautious. =eod =// &&2 e050916b Is TWO MILLION DOLLARS per family enough Katrina aid? =data ww2010.weblog.y2005.e050916b.head Is TWO MILLION DOLLARS per family enough Katrina aid? =data ww2010.weblog.y2005.e050916b.keys George Bush, Katrina, Great Depression =data ww2010.weblog.y2005.e050916b.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050916b.date 16-Sep-05 =data ww2010.weblog.y2005.e050916b.txt1 That's how much the federal government plans to spend. =data ww2010.weblog.y2005.e050916b.txt2 When I wrote <#inc ww2010.weblog.ref e050916 "my previous article,"#> I hadn't thought of this, but someone has pointed out that New Orleans has a population of 500,000, and so $200 billion in aid comes to $400,000 per person. That's $2 million for a family of 5. Now, it's true that the $200 billion is also for people in other Gulf coast regions, so maybe it's only a paltry $1 million per family of 5. But that doesn't count the huge volume of private donations, so it'll be a bit more than that. As I've said before, historians have often expressed perplexity at the giddy world of 1929, wondering how so many investors, politicians, journalists and analysts could have been so wrong and could have done one really dumb thing after another, leading to the huge stock market crash of 1929. Well, now we know. During generational transition periods into full generational crisis, everyone becomes incredibly stupid. There's no one left in the generations that remember what happened the last time, so they just do anything that feels good. So we're going to spend $2 million in aid per family, and there's barely a peep being heard in protest. Please note that I'm not singling any one person out, nor am I singling out either the Republicans or the Democrats. And I'm not singling out just politicians, since I'm including journalists, pundits, investors, financiers, and high-priced analysts. I'm saying that they've all turned into morons - the whole bunch of them. There's nothing so stupid that they won't support, as long as it involves spending money. It's very hard to see that this can go on too much longer. =eod =// &&2 e050916 President Bush promises gargantuan aid program to Katrina victims =data ww2010.weblog.y2005.e050916.head President Bush promises gargantuan aid program to Katrina victims =data ww2010.weblog.y2005.e050916.keys George Bush, Katrina, Great Depression =data ww2010.weblog.y2005.e050916.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050916.date 16-Sep-05 =data ww2010.weblog.y2005.e050916.txt1 Those who hoped that the economy would "self-correct" are now demonstrably wrong. =data ww2010.weblog.y2005.e050916.txt2 As I've been talking about for a couple of years, the level of public debt has been increasing exponentially. The federal government's deficit continues to increase, the monthly trade deficit (indebtedness to other nations) continues to increase, individual credit card debt continues to increase, the amount of investor debt for hedge fund investments continues to increase, and the size of risky interest-only loans fueling the housing bubbles continues to increase. Not only have all these debts been increasing, but they've been increasing exponentially. And yesterday they took an enormous new leap - a $200 billion leap. President Bush's <#stdurl http://www.whitehouse.gov/news/releases/2005/09/20050915-8.html "Thursday evening speech from New Orleans"#> promised huge amounts of aid to the victims of Hurricane Katrina. There will be direct aid to allow victims to rent apartments; there'll be medical aid; there'll be job training; and repairs will be made to bridges, schools, and water systems. And everything will be done in a grand way. No expense will be spared. It turns out that <#stdurl http://www.guardian.co.uk/worldlatest/story/0,1280,-5281974,00.html "government spending on Katrina has already dwarfed"#> previous spending on disasters -- $14 billion spent on last year's Florida hurricanes, $15.5 billion on the 1994 Los Angeles earthquake, and $10.8 billion spent on Hurricane Andrew in 1992. Now, I'm certainly in favor of helping disaster victims, but do we really have to spend TEN TIMES AS MUCH as past disasters? This is what Generational Dynamics is all about. When I was growing up in the 1950s, my school teachers talked about the Great Depression all the time, because they had suffered through it. Those teachers must be spinning in their graves over the appalling things that are happening now, as a matter of course. In the 1980s, the Republicans and the Democrats cooperated with each other to change the Social Security system to make it a sounder system. After that, they cooperated again to specify new rules to control the budget deficit. And in 1996, Democratic President Bill Clinton cooperated with the Republican congress to eliminate the welfare entitlement. Today, cooperation is impossible, except to spend money and more money and more money. Controlling anything is impossible. Which brings us back to the "self-correcting" economy. The economy has been self-correcting for fifty years because people who lived through the Great Depression made sure it did. These people imposed disciplines and agreed to compromises to make sure that the economy had the flexibility to correct itself. It wasn't by chance that the economy was "self-correcting"; it was self-correcting because people who remembered what happened the last time made sure it wouldn't happen again. That's not true today. Nobody in a leadership position today remembers the Great Depression. And that's true in government, in education, in journalism, in finance, and in other professions. These bubbleheads have been taken care of by their parents for decades, and now that their parents are gone and they're in charge, they think that things will still take care of themselves. These halfwits are so busy screaming at one another over their culture wars, that they never stop to think that they have to work with their political enemies to fix things by making sacrifices. Generational Dynamics predicts that we're entering a new 1930s style Great Depression, with massive homelessnes, bankruptcies and starvation in America. The stock market, which is currently more than 100% overpriced, will fall to the Dow 3000 range. This might start to happen next week, next month or next year, but it will happen sooner rather than later. =eod =// &&2 e050914 Gaza strip descending into further chaos and lawlessness =data ww2010.weblog.y2005.e050914.head Gaza strip descending into further chaos and lawlessness following Israeli withdrawal =data ww2010.weblog.y2005.e050914.keys Gaza, Egypt, Mahmoud Abbas =data ww2010.weblog.y2005.e050914.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050914.date 14-Sep-05 =data ww2010.weblog.y2005.e050914.txt1 Black market prices for weapons have been falling sharply in Gaza, =data ww2010.weblog.y2005.e050914.txt2 in the clearest sign that weapons are pouring into Gaza, now that the Israelis have completely withdrawn. According to <#stdurl http://www.cjp.org/content_display.html?ArticleID=163062 "an article by the Associated Press,"#> the price of an AK-47 assault rifle has dropped from around £1,000 (€1,484) to around £650 (€965), and Egyptian-made pistols that were recently sold in Gaza for £700 (€1,039)can now be bought for as little as £90 (€133). The weapons are evidently pouring into Gaza from Egypt. Egypt had promised to keep the border between Gaza and Egypt closed, once the Israeli border guards had withdrawn, but Egyptian border guards have been unable to secure the border. Thousands of Palestinians immediately crossed the border into Egypt for shopping and recreation as soon as the Israelis withdrew. Egypt has promised to close the border again, but Palestinian militant group <#stdurl http://news.bbc.co.uk/2/hi/middle_east/4244730.stm "Hamas has thwarted such efforts by blowing a hole in the concrete barrier"#> separating the two regions. Looting and gunfights have become commonplace throughout the Gaza strip in the last few days. On Tuesday, Palestinian president <#stdurl http://news.bbc.co.uk/2/hi/middle_east/4242886.stm "Mahmoud Abbas promised to restore order,"#> saying "We have one law for everyone and no one is above the law. We are not going to tolerate chaos after today." However, <#inc ww2010.weblog.ref e050908 "Gaza has been getting increasingly violent and unstable"#> for a while now, and it appears less and less likely that Abbas will be able to restore any semblance of order. It's particularly ironic that Palestinian police have been <#stdurl http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/middleeast/2005/September/middleeast_September382.xml§ion=middleeast "unable to stop the looting of 4,000 greenhouses"#> left behind by the Israelis. These greenhouses had been central to the plan to provide jobs and income to Gazans. =inc ww2010.cf.cf050530 p right There are now multitudes of ways that miscalculations can lead to a regional war. Egypt has obligated itself to close the border with Gaza. It cannot do so without taking military action against Palestinians in general and Hamas in particular, but such military action against Arabs could trigger violence in both Gaza and Egypt. If Egypt does not or cannot close the border, then Israel may feel it necessary to intervene. This would bring Egyptian and Israeli forces into contact with one another for the first time since the 1972 war. From the point of view of Generational Dynamics, there would be a big difference between 1972 and today, if Egyptian and Israeli forces engage one another. In 1972, both countries were in a generational awakening period, and awakening wars have little energy. Thus, the 1972 war ended in just 7 days. Today, both countries are entering (or are in) a generational crisis period, where young people with no personal memories of the 1940s genocidal war between Jews and Arabs do not fear a new war. Generational Dynamics predicts that the Mideast is headed for a new genocidal crisis war that will engulf the entire region. This war may begin next week, next month, next year or soon thereafter. =eod =// &&2 e050913b Pentagon proposes permitting preemptive use of nuclear weapons =data ww2010.weblog.y2005.e050913b.head Pentagon proposes permitting preemptive use of nuclear weapons =data ww2010.weblog.y2005.e050913b.keys nuclear weapons, clash of civilizations =data ww2010.weblog.y2005.e050913b.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050913b.date 13-Sep-05 =data ww2010.weblog.y2005.e050913b.txt1 The plan specifies several scenarios =data ww2010.weblog.y2005.e050913b.txt2 that would permit America to be the first to use nuclear weapons. According to <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2005/09/10/AR2005091001053.html "an article in Sunday's Washington Post,"#> the proposal is under consideration, but hasn't yet received final approval. Nuclear weapons could be used first against an using or stockpiling weapons of mass destruction, including nuclear, biological or chemical weapons. From the point of view of Generational Dynamics, this is the next step in a pattern that's being repeated worldwide -- a willingness for countries that fought in World War II to be increasing combative and less compromising, to spend more resources preparing for war. China is rapidly militarizing, and so are the Koreas; Japanese Prime Minister Junichiro Koizumi, who sides with Taiwan against China, was reelected on Sunday in landslide; Pakistan's President Pervez Musharraf is serving as both civilian and military leader. The political situation around the world has changed dramatically in the last few years as well. Here in America, our entire foreign policy has changed direction since 9/11, with relatively little public debate. Previously, our foreign policy was entire defensive; in 2002, the nation accepted, with little objection, a change to a "preemptive" policy, permitting attacks on foreign countries in pursuit of terrorists. Prior to 9/11, any talk of a preemptive nuclear policy would have lead to a huge political fight; today it's not receiving even a murmur, as far as I can tell. Two months ago, there was a scandal involving Presidential aide Karl Rove, and pundits were predicting an enormous political fight that would get Rove fired; today, it's forgotten. Last month, pundits were predicting a <#inc ww2010.weblog.ref e050819 "massive resurgence of the antiwar movement, thanks to Cindy Sheehan."#> Today, I doubt that most people would even remember who Sheehan was, if you mentioned her name. Today, the great political fight is over Administration incompetence in handling Hurricane Katrina. That fight will pass as well, though hopefully it will lead to real changes. Today there's only one issue of importance: anxiety from fear of terror and war. 60 years have passed since World War II, and in all the countries that fought in that war, all the people who have any personal memories of that war's horrors are in their 70s or late 60s, and have little remaining influence. People today have no personal memory of those horrors, and are leading the world, in one country after another, into a new war, a "clash of civilizations" world war. =eod =// &&2 e050913 World shocked re Hurricane Katrina =data ww2010.weblog.y2005.e050913.head The world is shocked at America's bureaucratic fumbling over Hurricane Katrina =data ww2010.weblog.y2005.e050913.keys katrina, bureaucracy =data ww2010.weblog.y2005.e050913.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050913.date 13-Sep-05 =data ww2010.weblog.y2005.e050913.txt1 It's hard to get past the feeling that this disaster will turn out to be a blessing in disguise =data ww2010.weblog.y2005.e050913.txt2 for the country as a whole, despite the terrible losses that people in the Gulf Coast suffered. There was <#stdurl http://www.boston.com/news/weather/articles/2005/09/11/chronology_of_errors_how_a_disaster_spread "bureaucratic incompetence at all levels:"#> The New Orleans Mayor didn't deploy hundreds of buses available to him; the Louisiana Governor blocked deployment of National Guard troops and Red Cross aid rather than give up political control; and, at the Federal level, <#stdurl http://news.bbc.co.uk/1/hi/world/americas/4222272.stm "FEMA stumbled over itself,"#> led by an inexperienced leader whose previous tenure was as head of the International Arabian Horse Association. There was no one in charge. Local, state and federal governments each waited for someone else to do something. There was no coordination. This was not a failure of one level of government or one political group. This was a total failure of the United States. Even today, two weeks into the disaster, there's still infighting over the question of whether the remaining residents should be forced to evacuate. The rest of the world has been fascinated by all this. During the week of the hurricane, through most of the Labor Day weekend, the hurricane was the lead story around the world. I would estimate that the BBC World Service, which is beamed to countries around the world, spent some 75% of its time on Katrina coverage during the weekend. People in countries around the fascinated by such questions as: Why is the richest country in the world having such a problem dealing with this hurricane? How can a First World country turn into a Third World country so quickly? Not surprisingly, a lot of the coverage focused on America's failure. A typical "man on the street" remark was, "Hurricane Katrina has destroyed part of U.S. arrogance." Anti-American journalists and politicians have been having a field day of wishful thinking . According to <#stdurl http://www.marxist.com/new-orleans-disaster-capitalism020905.htm "an article on an international Marxist web site:"#>

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

As amusing as all this wishful thinking is, there's no doubt that massive bureaucrative failures at all levels of government have occurred. As one television talking head pointed out, a lot of the management systems were paper systems set up in the 1950s, right after World War II. Today, they're sadly out of ate. From the point of view of Generational Dynamics, this bureaucratic ossification is typical of the country as a whole. The 1930s Great Depression put most businesses into bankruptcy, and forced other businesses to lay off people to survive. The same was true of government agencies, educational institutions, labor unions, and other organizations. The new organizations that sprang up were "lean and mean," but over the years they've become increasingly inefficient, encrusted with a bureaucracy of people set in their ways, protective of their turf, and only interested in preserving their pensions. It will take a new Great Depression and a massive new war to renew all of America's organizations again, and Generational Dynamics predicts that all that will happen. That's why the Hurricane Katrina might possibly be a blessing in disguise for the country as a whole. If this catastrophe forces changes at all levels of government, and guarantees that one person will be in charge of the entire effort the next time a disaster happens, then many lives will be saved. =eod =// &&2 e050908c DoD increasingly sees China as a military foe =data ww2010.weblog.y2005.e050908c.head Department of Defense increasingly sees China as a military foe =data ww2010.weblog.y2005.e050908c.keys China =data ww2010.weblog.y2005.e050908c.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050908c.date 8-Sep-05 =data ww2010.weblog.y2005.e050908c.txt1 A front page article in today's Wall Street Journal =data ww2010.weblog.y2005.e050908c.txt2 says that, "most Americans have China all wrong. They think of the place as an inherently gentle country intent on economic prosperity." =inc ww2010.cf.cf050530 p right According to <#stdurl http://online.wsj.com/article/0,,SB112613947626134749,00.html "the front page article,"#> Pentagon advisor Michael Pillsbury says that, "Beijing sees the U.S. as an inevitable foe, and is planning accordingly." This echoes what I've said on this web site repeatedly for over two years. In fact, from the point of view of Generational Dynamics, China's economy and society are rapidly unraveling into chaos, as <#hreftext ww2010.i.china050116 "the country heads for a certain civil war,"#> a certain war with Japan, and a certain war with America over Taiwan. =eod =// &&2 e050908b Al-Qaeda claims credit for hurricane Katrina =data ww2010.weblog.y2005.e050908b.head Al-Qaeda claims credit for hurricane Katrina =data ww2010.weblog.y2005.e050908b.keys Al-Qaeda, Katrina, Osama bin Laden, Abu Musab Al Zarqawi =data ww2010.weblog.y2005.e050908b.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050908b.date 8-Sep-05 =data ww2010.weblog.y2005.e050908b.txt1 "Congratulations to the Islamic nation ... for the destruction of America, which is at the forefront of evil," =data ww2010.weblog.y2005.e050908b.txt2 brags an internet statement from terrorist mastermind Abu Musab Al Zarqawi published on Sunday. <#stdurl http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/theworld/2005/September/theworld_September120.xml§ion=theworld&col= "The statement particularly congratulates Osama bin Ladin."#> Both Zarqawi and bin Laden have been embarassed by repeated failures to accomplish their objectives, especially in two areas:

There hasn't been another major terrorist attack on American soil since September 11, 2001.
Zarqawi has spent millions of dollars in Iraq, killed thousands of Iraqis and hundreds of Americans, but could not meet his objective of triggering a civil war. Even worse, Zarqawi could not prevent the Iraqi elections and creation of the Iraqi constitution.

These failures and humiliations must be at least part of the justification for Zarqawi's taking the credit for a hurricane. In fact, Zarqawi himself comes close to admitting his own failures, as he writes:

“If Muslims are powerless to defend their religion, God is on the lookout (to punish) the oppressors.” His statement claims that Katrina is "the beginning of the end" for the United States, and adds:

“Just yesterday, America attacked, killed and starved whomever it liked. Today, it is begging for oil and food. America has been hit by a divine strike. The curses of the oppressed have been fulfilled. ... There are signs of victory on the horizon. The anger of the Almighty has descended on the tyrants. Their deaths can be measured in the thousands, their material damage in the billions.” To me, Zarqawi's statements come across as being close to pathetic and desperate. That's not to say that al-Qaeda isn't dangerous -- they're responsible for the Madrid subway bombings on March 11, 2003, and the London subway bombings on July 7 of this year. And they're undoubtedly planning new terrorist attacks on American soil. But when somebody starts taking credit for the weather, you know that something has to be wrong. =eod =// &&2 e050908 Israelis almost gone, Gaza violent and unstable =data ww2010.weblog.y2005.e050908.head With Israelis almost gone, Gaza is becoming increasingly violent and unstable =data ww2010.weblog.y2005.e050908.keys Israel, Egypt, Palestine, Hamas, Mahmoud Abbas =data ww2010.weblog.y2005.e050908.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050908.date 8-Sep-05 =data ww2010.weblog.y2005.e050908.txt1 Especially ominous is the planned intervention by Egypt as border guards. =data ww2010.weblog.y2005.e050908.txt2 There's almost constant violence now. Over the weekend, <#stdurl http://news.bbc.co.uk/2/hi/middle_east/4216376.stm "hundreds of unemployed Palestinian protesters threw missiles and fire bombs."#> In the subsequent confrontation with the police, at least ten people were injured. Then on Monday, <#stdurl http://msnbc.msn.com/id/9217827/ "a mysterious explosion destroyed a house and killed four Hamas supporters,"#> injuring 30 others. Apparently it was an accidental explosion occurring as Hamas was building a bomb. The explosion came three days after <#stdurl http://news.bbc.co.uk/1/hi/world/middle_east/4211698.stm "Hamas publicly announced its leadership, in a kind of press release."#> Palestinian militia group Hamas has never agreed to seek peace with Israel, and <#stdurl http://www.yale.edu/lawweb/avalon/mideast/hamas.htm "their charter calls for the destruction of Israel."#> Actually, Hamas appears poised to take full control of Gaza, as they're expected to do well in <#stdurl http://www.alertnet.org/thenews/newsdesk/L0650148.htm "Parliamentary elections to be held on January 6,"#> thus pushing aside Palestinian president Mahmoud Abbas's Palestinian Authority in Gaza. Even within the Palestinian Authority, things are not well. <#stdurl http://www.timesonline.co.uk/article/0,,251-1770073,00.html "Moussa Arafat, a cousin of the late PA President Yassir Arafat, was brutally murdered on Wednesday"#> and his son was kidnapped. A PA splinter group took credit for the crime. This increasing chaos is happening in the context of Israel's unilateral withdrawal from Gaza. All <#inc ww2010.weblog.ref e050816 "Jewish settlements in Gaza have been emptied,"#> leaving behind only the IDF (the Israeli Defense Forces - the army). The IDF will start leaving on Saturday, and should be gone completely by Monday. That leaves two problems. The first problem is that someone has to police the violent militia groups left behind in Gaza. In the original plan, the Palestinian Authority was supposed to do that, but the events of the last few days show that the PA is part of the problem, not part of the solution. The other problem is this: Who's going to guard the boundary between Gaza and Egypt? The IDF has been controlling the border up until now, controlling the flow of weapons and terrorists from Egypt into Gaza. With the IDF leaving, who will take their place? The answer is that, by previous agreement, <#stdurl http://english.aljazeera.net/NR/exeres/2A03A572-C6EC-49F1-85F9-70236CE1CDD8.htm "Egyptian forces will be deployed along the Egypt - Gaza border,"#> and this is extremely significant. After the 1967 non-crisis war involving the Palestinians, Egypt and Israel, Egypt pulled out of the Palestine region completely. The reason was simple: With Egypt out of the region, there's less chance of a new war between Egypt and Israel. True, there was another non-crisis war in 1972 (the "seven day war"), but there's been no war since then. For the same reason, America has resisted putting any of its troops into the Palestine region, despite numerous requests from various international factions to do so over the decades. This is typical of what happens during "generational awakening" and "generational unraveling" periods. People and nations try to avoid problems by compromise and containment. There's no desire for another crisis war, and any simple step that can be taken to prevent one is often adopted. But now Israel and the Palestinians are into a new generational crisis period, and Egypt is entering one as well. There is much less interest in compromise and containment, and much less fear of confrontation. I explained all this in a different way, in terms of "chaotic attractors," when I discussed the <#inc ww2010.weblog.ref e050816 "Jewish withdrawals from Gaza."#> These concepts explain why Gaza is headed for war, while a civil war in Iraq is impossible at this time, despite what the pundits say. As an aside, there isn't a single other web site on the internet that's been getting it right, in both Palestine and Iraq. I've made hundreds of predictions on this web site in the past three years, and so far not a single one has been wrong. Other pundits, politicians, journalists, web sites, and high-priced analysts repeatedly predicted civil war in Iraq and also predicted peace in Palestine once Yassir Arafat died, but this web site's predictions are the only ones that are coming true, based on the Generational Dynamics forecasting methodology. If you want to know what's really going on in the world, then forget the various "forecasting" and "early warning" web sites -- they're based on guesswork -- and come to this web site. So anyway, Egyptian forces are now being ejected into the mix, and now there are only a few short miles separating the IDF from the Egyptian forces, leaving the possibility of miscalculation that can bring the two sides to a small military confrontation that can quickly spiral into a major military confrontation. The last crisis war between Jews and Arabs was the extremely violent, genocidal war of the late 1940s, when the United Nations partitioned Palestine and created the state of Israel. Generational Dynamics predicts that we're heading for a major new Mideast war, replaying the genocidal war between Jews and Arabs in the 1940s, and engulfing the entire region. =eod =// &&2 e050907 Stock market spikes upward in huge rally as oil prices ease =data ww2010.weblog.y2005.e050907.head Stock market spikes upward in huge rally as oil prices ease =data ww2010.weblog.y2005.e050907.keys stock market, volatility =data ww2010.weblog.y2005.e050907.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050907.date 7-Sep-05 =data ww2010.weblog.y2005.e050907.txt1 Volatility appears to be increasing as investors return from summer vacations. =data ww2010.weblog.y2005.e050907.txt2 The market's upward spike of 1.3% -- the Dow increased 141.87 points to 10,589 -- <#stdurl http://quote.bloomberg.com/apps/news?pid=10000006&sid=aPPO.mcRrgBc&refer=home "was caused, the pundits say, because the price of oil fell $65.96 a barrel."#> It was just a couple of weeks ago that the stock market fell because, the pundits said, the price of oil had reached a modern high of around $60 per barrel. Now, how is that $65.96 a barrel is a "good" thing, while $60 a barrel is a "bad" thing? It's because investors think they're playing <#stdurl http://www.lasvegasandhotels.com/gaming/table-games/las-vegas-craps.html "a game of Las Vegas craps."#> What makes Las Vegas craps so special is that each time you lay your money down and "roll dem bones," the dice have no memory. No matter how much money you've already won or lost, your chances of winning on the next roll are the same, time after time after time. But that's not true of the stock market. Stocks have a true, intrisic value, determined by things like assets, revenue and expenses, and when the value of any stock goes way above or way below its true value, then it must soon return to its intrinsic value. As <#hreftext ww2010.i.050711eleven "both I and other analysts have computed,"#> the true value of the market today is around Dow 4500. The market has not yet shaken out the stock market bubble of the late 1990s, and at 10,589, the market is overvalued by more than 100%. A stock market panic and major correction will occur with near certainty, next week, next month, next year, or shortly thereafter. There's no way to predict exactly whan a panic will occur, but one of the signs that it's coming closer is increased volatility. These days, it's not unusual to see the Dow increase or increase by 100 points or more. And there's no reason for it, except that investors are playing Las Vegas craps. The state of the market appears to be very ominous these days. There are wild swings, but <#inc ww2010.weblog.ref e050811 "price/earnings ratios are remaining mysteriously constant,"#> indicating that investors and brokers are all following one another like sheep. And that's why there's so much volatility. When investors take individual paths, betting on individual stocks, then one investor's gains are canceled out by another investor's losses, so the market as a whole remains steady; but when all investors are doing the same thing, essentially betting on the whole market rather than individual stocks, then the whole market becomes as volatile as an individual stock normally is, and it's just a matter of time before the right kind of trigger causes all investors to panic at once. There's very little chance of making money in the stock market today, even in the short range, and there's a possibility of losing big, especially for those who have purchased stocks on credit. Any investor who owns stocks today might as well bet his entire bankroll on a roll of the dice. =eod =// &&2 e050904 Britons shocked by London subway suicide bomber video =data ww2010.weblog.y2005.e050904.head Britons shocked by London subway suicide bomber video =data ww2010.weblog.y2005.e050904.keys London bombings =data ww2010.weblog.y2005.e050904.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050904.date 4-Sep-05 =data ww2010.weblog.y2005.e050904.txt1 "We are at war and I am a soldier," says Mohammad Sidique Khan in a clear Yorkshire accent. =data ww2010.weblog.y2005.e050904.txt2 Khan is the man who blew himself and dozens of other up in the July 7 London subway bombings, in a video played on al-Jazeera on Friday. He is believed to be the leader <#inc ww2010.pic khan.jpg right "" "Mohammad Sidique Khan video"#> The slickly produced al-Qaeda video is still being analyzed, but it's causing shock waves in the British public. There had always been a hope that while the London subway bombers were British citizens, they might have been somehow tricked or duped into doing what they did. But hearing Khan defend his murderous act, and promise more of the same, in his clear Yorkshire accent completely dashes those hopes. Britain's Muslim community <#stdurl http://news.bbc.co.uk/2/hi/uk_news/england/west_yorkshire/4208000.stm "is especially disgusted by the video."#> Prior to July 7, Khan had been just a "quiet, pleasant young man" living with his wife and young daughter in West Yorkshire. Khan's former neighbors expressed anger and disbelief. One was quoted as saying, "We are all gutted here. It's devastating to see a young man like that talking about what he is going to do. It is a frightening thing for anybody to see." Here is <#stdurl http://news.bbc.co.uk/1/hi/uk/4206800.stm "the complete text (transcript) of Khan's video statement:"#>

"I'm going to keep this short and to the point because it's all been said before by far more eloquent people than me. And our words have no impact upon you, therefore I'm going to talk to you in a language that you understand. Our words are dead until we give them life with our blood. I'm sure by now the media's painted a suitable picture of me, this predictable propaganda machine will naturally try to put a spin on things to suit the government and to scare the masses into conforming to their power and wealth-obsessed agendas. I and thousands like me are forsaking everything for what we believe. Our driving motivation doesn't come from tangible commodities that this world has to offer. Our religion is Islam - obedience to the one true God, Allah, and following the footsteps of the final prophet and messenger Muhammad... This is how our ethical stances are dictated. Your democratically elected governments continuously perpetuate atrocities against my people all over the world. And your support of them makes you directly responsible, just as I am directly responsible for protecting and avenging my Muslim brothers and sisters. Until we feel security, you will be our targets. And until you stop the bombing, gassing, imprisonment and torture of my people we will not stop this fight. We are at war and I am a soldier. Now you too will taste the reality of this situation."

=eod =// &&2 e050902 Katrina / New Orleans disaster - Homeland Security =data ww2010.weblog.y2005.e050902.head Katrina / New Orleans disaster is first real test for new Department of Homeland Security =data ww2010.weblog.y2005.e050902.keys Homeland Security, New Orleans =data ww2010.weblog.y2005.e050902.loc ww2010.weblog.log0509 =data ww2010.weblog.y2005.e050902.date 2-Sep-05 =data ww2010.weblog.y2005.e050902.txt1 Resembling a theatre of war, a million desperate refugees have been evacuating New Orleans =data ww2010.weblog.y2005.e050902.txt2 first to escape the hurricane, and then to escape starvation, disease and ravaging looters in what President Bush has called <#stdurl http://www.alertnet.org/thenews/newsdesk/N01420725.htm ""one of the worst natural disasters in our nation's history.""#> If the disaster can be said to have any bright side at all, it's that it provides the first major test of the ability of the Department of Homeland Security to organize and coordinate the response to a national disaster. This isn't an idle consideration. It just six weeks ago that General Zhu Chenghu, a top-level officer in China's People's Liberation Army (PLA) <#inc ww2010.weblog.ref e050716 "threatened America with nuclear war if America interfered with Taiwan."#> Speaking to a group of foreign journalists, General Zhu said,

"If the Americans are determined to interfere [then] we will be determined to respond. We . . . will prepare ourselves for the destruction of all of the cities east of Xian. Of course the Americans will have to be prepared that hundreds . . . of cities will be destroyed by the Chinese."

This is the kind of war scenario that America is unprepared to handle, but the Katrina disaster is giving Americans a small taste of what to expect. In response, President Bush and Secretary of Homeland Security Michael Chertoff announced <#stdurl http://www.whitehouse.gov/news/releases/2005/08/20050831-4.html "a massive response, involving almost every agency of the federal government."#> The <#stdurl www.fema.gov "Federal Emergency Management Agency"#> is focusing on emergency aid to victims. The Energy Department is working to restore electricity. The EPA is issuing waivers to make more gasoline available. The Department of Defense is moving 8 Navy ships into the area, with water, food, medicine, hospital facilities and berthing. The Department of Health and Human Services has declared a public health emergency, and is providing medical supplies. But the massive effort has already run into a number of glitches:

It took the better part of three days to mobilize the effort, thanks to rules that require the city and state to be the first responders, leaving the federal government's role reduced at first, with little planning for local and federal coordination.
Despite decades of repeated warnings about the levees that protect the city from flooding, officials were unprepared for the levees' collapse and the subsequent flooding that ended up doing more damage than the hurricane itself.
Evacuation was incomplete, and those remaining were left with no food, drinkable water, electricity or communications.

The size of this disaster has awakened a lot of people, especially those in younger generations who are complacent about everything. Just Thursday afternoon, for example, the city of Boston has announced that it will do a thorough review and update of its disaster plan. As the "clash of civilizations" world war approaches, steps taken now in response to the Katrina disaster will serve America well later. =eod =// &&2 e050831c Iran will set up a "love fund" =data ww2010.weblog.y2005.e050831c.head Iran will set up a "love fund" =data ww2010.weblog.y2005.e050831c.keys Iran, Mahmoud Ahmadinejad =data ww2010.weblog.y2005.e050831c.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050831c.date 31-Aug-05 =data ww2010.weblog.y2005.e050831c.txt1 Iran's new president, Mahmoud Ahmadinejad, plans a billion dollar fund =data ww2010.weblog.y2005.e050831c.txt2 <#stdurl http://news.bbc.co.uk/2/hi/middle_east/4198906.stm "to help young couples from poor families get married."#> <#inc ww2010.pic ahmad2.jpg right "" "President Mahmoud Ahmadinejad of Iran(Source: Mardomyar.ir )"#> It's called the "Love Fund," and it's the first piece of legislation sponsored by the charismatic new president of Iran. The money will come from oil revenues. It will require passage by the parliament, but that should be easy because the newly elected Ahmadinejad is in a "honeymoon" period. =eod =// &&2 e050831b Lech Walesa claims credit: EU, German unification =data ww2010.weblog.y2005.e050831b.head Lech Walesa claims credit for European Union and unification of Germany =data ww2010.weblog.y2005.e050831b.keys Poland =data ww2010.weblog.y2005.e050831b.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050831b.date 31-Aug-05 =data ww2010.weblog.y2005.e050831b.txt1 Saying that he had been "well prepared and decisive" 25 years ago, =data ww2010.weblog.y2005.e050831b.txt2 Lech Walesa <#stdurl http://news.bbc.co.uk/2/hi/europe/4194204.stm "told a BBC interviewer"#> that, without him and his actions, the "European Union couldn't have expanded, the unification of Germany would not have been possible. And other countries wouldn't have got their freedom if the Poles had not broken the Soviet bear's teeth." Lech Walesa was an electrician and union organizer in Poland who became an anti-communist organizer in the 1970s, when Poland was still under Soviet control. In August 1980 he led the Gdansk shipyard strike which, much to his surprise, gave rise to a wave of strikes over much of the country. Walesa called for a national strike, which he led, and forced the government to stand down. <#stdurl http://nobelprize.org/peace/laureates/1983/walesa-bio.html "Walesa won the Nobel Peace Prize in 1983,"#> and became the President of Poland from 1990 to 1995. He's viewed around the world as a hero, and many people do believe that it was his actions what led to the fall of the Berlin Wall, and then to the collapse of the Soviet empire. However, it's a stretch to say that Walesa caused all these things to happen. Walesa is a good example of what I refer to as an "agent of change." When a change is due to come because of generational or technological trends, then very often there's an individual that triggers the change. For example, if Thomas Edison had never been born, then the light bulb would have been invented by someone else at almost exactly the same time. If Martin Luther King had never been born, then someone else would have led the civil rights movement at the same time. Thus, Thomas Edison and Martin Luther King were "agents of change," but were not the "causes of change." The same is true of Lech Walesa. Poland's last crisis war was World War II, and Poland's awakening period occurred beginning in the 60s and 70s, same as in America. An awakening period is characterized by a "generation gap" which pits the coming-of-age younger generation against their war hero parents' generation. The period is characterized by little violence, or at most sporadic violence, but also by huge political battles, in the form of riots and demonstrations by the younger generation. The awakening period usually climaxes with an "internal revolution," which results in some change, and which establishes which generation "wins" the awakening period. In America, the awakening period climaxed with President Richard Nixon's resignation in 1974, which established the younger generation as the winner; in China, the awakening period climaxed with the brutal massacre of the students at the 1989 Tiananmen Square demonstrations, establishing the older generation as a "winner." In Poland, the awakening period climaxed with the August 1980 labor strike which forced the government to back down. Things always happen in their time. Lech Walesa was the agent of change, but the confrontation occurred because large masses of people across Poland were ready to force a change, and were looking for a way to do it. If Walesa hadn't been there, then the change would have happened anyway. =eod =// &&2 e050831 U.S. building quarantine stations in airports =data ww2010.weblog.y2005.e050831.head U.S. building quarantine stations in airports around the country =data ww2010.weblog.y2005.e050831.keys bird flu, Indonesia, polio, tuberculosis =data ww2010.weblog.y2005.e050831.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050831.date 31-Aug-05 =data ww2010.weblog.y2005.e050831.txt1 With the threatened spread of bird flu, polio and tuberculosis, =data ww2010.weblog.y2005.e050831.txt2 the Centers for Disease Control and Prevention <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2005/08/27/AR2005082700958.html "plans to build quarantine stations in international airports around the country."#> If an epidemic or pandemic is looming, then the quarantine stations will be used as a "firebreak" to keep the disease out of the United States. These will come none too soon, as a number of exotic diseases are gaining ground:

<#inc ww2010.weblog.ref e050824 "Bird flu is rapidly spreading across Asia and approaching Europe,"#> and it's feared that a new mutation of the virus might change it to a form that can easily spread from human to human.
<#stdurl http://www.voanews.com/english/2005-08-26-voa26.cfm "With tuberculosis killing 500,000 people per year in Africa"#> the World Health Organization's (WHO) Regional Committee for Africa has declared a state of emergency on the continent. Tuberculosis is second only to HIV/AIDS as an infectious killer of adults around the globe, causing nearly nine million cases of active disease and two million deaths every year.
<#stdurl http://www.voanews.com/english/2005-08-30-voa12.cfm "Indonesia is vaccinating 24 million children against polio,"#> after hundreds of children across the country have suddenly started contracting the disease.

It was only a couple of decades ago that it was thought that polio and tuberculosis could be completely eliminated, but now these diseases are experience a resurgence, at the same time that HIV/AIDS is spreading across Asia, and a global bird flu pandemic might occur at any time. =eod =// &&2 e050830 Alan Greenspan sings schizophrenic swan song =data ww2010.weblog.y2005.e050830.head Departing Fed Chairman Alan Greenspan sings schizophrenic swan song =data ww2010.weblog.y2005.e050830.keys Alan Greenspan =data ww2010.weblog.y2005.e050830.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050830.date 30-Aug-05 =data ww2010.weblog.y2005.e050830.txt1 Is the economy strong or is it in danger? Greenspan played both sides =data ww2010.weblog.y2005.e050830.txt2 in <#stdurl http://www.federalreserve.gov/boarddocs/speeches/2005/20050826/default.htm "a speech on Friday"#> and <#stdurl http://www.federalreserve.gov/boarddocs/speeches/2005/200508272/default.htm "another speech on Saturday."#> The two speeches were given to central bankers, and are likely to be Greenspan's last before he steps down as Fed Chairman in January. Ever since February of this year, when <#hreftext ww2010.i.greenspan050206 "repudiated and reversed his thinking of ten years,"#> and later said that <#inc ww2010.weblog.ref e050217 "global interest rates are a "conundrum,""#> Greenspan's speeches have been, at best, ambiguous, and the two swan song speeches he gave this weekend are the same. Actually, Greenspan's analysis was very interesting in the way he tied together his view that the economy is doing well with his warnings about the future. His argument about the strength of the economy is based in its flexibility. He's made this argument in previous statements, when he particularly praised hedge funds for acting as a kind of safety valve. In Friday's speech, he said:

"The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated, disturbances. That process of correction limits the size and the consequences of cyclical imbalances. Enhanced flexibility provides the advantage of allowing the economy to adjust automatically, reducing the reliance on the actions of monetary and other policymakers, which have often come too late or been misguided. In fact, the performance of the U.S. economy in recent years, despite shocks that in the past would have surely produced marked economic contraction, offers the clearest evidence that we have benefited from an enhanced resilience and flexibility."

Now, here's how he turned his positive message into a warning. He said that stock values (asset values) and real estate home values have increased beyond their historic values. He blamed these increases on the very same flexibility in the economy that he just said was valuable:

In other words, investors have been taking advantage of the economy's flexibility by investing too much, and creating a bubble in both stocks and real estate. This paragraph ends with an extremely harsh warning: he says that the bubble will burst, and when it does, it will be painful. Regular readers of this web site know that I've blown hot and cold on whether I believe that Greenspan knows what's going to happen, especially since his dramatic reversal last February. Logically he should: He was born in 1926, he grew up during the Great Depression of the 1930s, and he can't help but recognize that disaster is in the air because he's seen it before -- unlike younger investors and analysts who are too young to have any idea what's happening. This speech seems to do what he has to do. He can't explicitly say the stock bubble will burst without being blamed for causing a panic, but he can give a warning that will be ignored, so that he can say "I told you so" later. I would feel more confident of his views if it weren't for the following paragraph from his speech:

"We weathered a decline on October 19, 1987 of a fifth of the market value of U.S. equities with little evidence of subsequent macroeconomic stress--an episode that provided an early hint that adjustment dynamics might be changing. The credit crunch of the early 1990s and the bursting of the stock market bubble in 2000 were absorbed with the shallowest recessions in the post-World War II period. And the economic fallout from the tragic events of September 11, 2001, was limited by market forces, with severe economic weakness evident for only a few weeks. Most recently, the flexibility of our market-driven economy has allowed us, thus far, to weather reasonably well the steep rise in spot and futures prices for crude oil and natural gas that we have experienced over the past two years."

These are his examples of how the flexibility of the American economy but unfortunately they don't make sense. <#inc ww2010.pic peratio.gif right "" "Wall Street Historical Price/earnings ratio for S&P 500"#> He says that the flexibility of the US economy allowed all these good things to happen. There was a mild stock market panic in 1987, and the economy recovered without too much pain, but as the adjacent graph shows, the S&P 500 average price/earnings ratio was rising but was at a historic average, around 14-15. Stocks were already priced low enough, relative to earnings, so that they could recover quickly. That's not true today. Price/earning ratios are much higher, and stocks are way overpriced, as Greenspan himself pointed out in the paragraphs above. A panic today would have much farther to fall than in 1987. =eod =// &&2 e050825b BBC: bird flu pandemic can cause a new Depression =data ww2010.weblog.y2005.e050825b.head BBC warns that bird flu pandemic can cause 1930s style Great Depression =data ww2010.weblog.y2005.e050825b.keys bird flu =data ww2010.weblog.y2005.e050825b.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050825b.date 25-Aug-05 =data ww2010.weblog.y2005.e050825b.txt1 Developed countries will suffer the most, =data ww2010.weblog.y2005.e050825b.txt2 according to <#stdurl http://www.bbc.co.uk/worldservice/programmes/analysis.shtml "the BBC World Service "analysis" segment for August 25, 2005."#> A global human pandemic would cause "worldwide economic mayhem," which would result in economic hardships similar to the 1930s Great Depression, according to the report. People in developed countries will suffer the most because these people do not have the ordinary day-to-day survival skills, such as using backyard gardens to feed their families, that people in less developed countries have had to learn for survival. The bird flu has not yet mutated to a form that can easily spread from human to human, but that mutation appears to be all but certain, and may occur next week, next month or next year. Such a mutation would trigger a worldwide pandemic that would kill hundreds of millions of people, similar to the Spanish Flu pandemic of 1918. =inc ww2010.cf.cf050530 p right From the point of view of Generational Dynamics, this is the kind of linkage we've discussed frequently. A regional war in any of <#hreftext ww2010.i.danger041120 "The Six Most Dangerous Regions of the World"#> would trigger a world war because America and other countries would immediately be forced by existing treaties and identity group relationships to enter such a war. A major financial crisis is coming anyway, because <#hreftext ww2010.i.050711eleven "the true value of the stock market is at Dow 4500,"#> meaning that stocks are overpriced by over 100%. This can easily be seen by looking at standard price/earnings ratios. A war would certainly trigger a financial crisis, but a financial crisis would almost certainly trigger a war. One of many possible scenarios is this: China's economy and society are unraveling, as <#hreftext ww2010.i.china050116 "the country heads for a certain civil war,"#> and an international financial crisis would certainly trigger it. China would react by attacking Taiwan or Japan, leading to the world war we've discussed. Now we can throw bird flu into the mix. A bird flu pandemic would trigger the financial crisis that would trigger the world war. (For those who accuse me of being too gloomy, here's an "optimistic" scenario: The bird flu may kill one or two billion people, reducing the population available for a world war.) A world war could not directly trigger a bird flu pandemic, but it might do so indirectly as follows: A world war would result in a breakdown in the enforcement of worldwide health protocols that are designed to prevent the spread of contagious diseases, and in particular, infected birds will no longer be culled (killed) as they have been in the past. This will create an environment in which the bird flu can mutate more quickly and easily, and so a bird flu pandemic is more likely to spread quickly. So we have 8 different risk factors in my "conflict risk level" graphic (shown above). These risk factors are roughly independent as long as none of risks has been realized; but they're interdependent in the sense that the realization of any one of the risk factors could trigger all the others within one or two years. =eod =// &&2 e050825 Mexico: Violence increases throughout Mexico =data ww2010.weblog.y2005.e050825.head Violence increases throughout Mexico as illegals pour across U.S. border =data ww2010.weblog.y2005.e050825.keys Mexico =data ww2010.weblog.y2005.e050825.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050825.date 25-Aug-05 =data ww2010.weblog.y2005.e050825.txt1 It's been 85 years since the end of the Mexican Revolution, =data ww2010.weblog.y2005.e050825.txt2 and from the point of view of Generational Dynamics, a new Mexican Revolution is overdue. There are signs that it's building now:

The <#stdurl http://www.nytimes.com/2005/08/24/politics/24border.html "rate of illegal immigrants being caught"#> is almost five times as great as it was in 2000. (This increase is partially explained by an increase in the number of Border Patrol agents.)
Some <#stdurl http://www.cia.gov/cia/publications/factbook/geos/mx.html "40% of the population is below the poverty line."#>
One in eight adults born in Mexico now lives in the US, and they remit $16 billion back to their relatives in Mexico. According to <#stdurl http://pewhispanic.org/reports/report.php?ReportID=52 "surveys conducted by the Pew Hispanic Center"#>
"Meanwhile, separate PHC surveys conducted in Mexico show that about four of every ten adults in the Mexican population say they would migrate to the United States if they had the means and opportunity and that two of every ten are inclined to live and work here without legal authorization. The willingness to migrate, even illegally, is evident in all sectors of Mexican society including the middle class and the well-educated as well as those who are poor and who only completed low-levels of schooling."
Drug lords are taking greater and greater control of Mexico, <#stdurl http://www.usatoday.com/news/world/2005-08-17-mexican-cartels_x.htm "running a $142 billion a year business in cocaine, heroin, marijuana, and other drugs."#> Drug war violence along the US border can no longer be controlled by the Mexican police or armed forces. 228 killings, including 21 police officers and 2 police chiefs, have occurred so far this year around the city of Nuevo Laredo, across the Rio Grande from Laredo, Texas.
Violence is also increasing in the southern state of Chiapas, thanks to paramilitaries of a rebel group <#stdurl http://www.zapatistarevolution.com/alarm.html "claiming to represent the indigenous peasants of Chiapas."#> The group is the Zapatista Army of National Liberation, named after Emiliano Zapata, who, along with Pancho Villa, led the rebel insurgent army in the Mexican Revolution civil war of the 1910s.

All of these are trends that point to a problem that is getting worse with time, with every expectation that those trends will continue. From the point of view of Generational Dynamics, Mexico is well into a generational crisis period. Mexico's last crisis war was the Mexican Revolution of 1910-20. Historically, 87% of all crisis wars begin less than 85 years after the previous crisis war, and so Mexico is more than ready for a new crisis war, quite possibly led by the Zapatistas. Whatever happens, the US is certain to be involved, because of the number of Mexican immigrants in America, especially in California. Some 10 million of California's 35 million people -- almost 1/3 -- are Mexican immigrants, 70% of them illegal. Mexicans in California make far less than native Californians, and use far more in public services, including welfare programs. This is precisely the kind of racial division that precipitates a civil war, and it seems likely that the new Mexican civil war will extend into America's southwest. =eod =// &&2 e050824 Europe scrambles for cover as bird flu approaches =data ww2010.weblog.y2005.e050824.head Europe scrambles for cover as bird flu speeds past Asia =data ww2010.weblog.y2005.e050824.keys bird flu, European Union =data ww2010.weblog.y2005.e050824.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050824.date 24-Aug-05 =data ww2010.weblog.y2005.e050824.txt1 Holland and Germany order farmers to keep all birds indoors, =data ww2010.weblog.y2005.e050824.txt2 in order to protect their meat industry. An infestation of bird flu would might require the culling (killing) of millions of chickens, ducks, turkeys, geese and other birds, and could <#stdurl http://news.ft.com/cms/s/a0c8d0ba-1371-11da-beee-00000e2511c8.html "cost Holland alone hundreds of millions or billions of euros."#> The reason for the concern is clear from this <#stdurl http://www.recombinomics.com/H5N1_Map_2005_QinghaiL.html "map from the Recombinomics web site:"#> <#inc ww2010.pic bird0823.jpg right "" "Bird flu outbreaks as of 23-Aug-2005(Source: Recombinomics.com)"#> The <#stdurl http://www.recombinomics.com/H5N1_Map_2005_QinghaiLMay.html "May version of this map"#> was practically bare, appearing <#inc ww2010.weblog.ref e050808 "mainly in the the Qinghai Lake region of China"#> (on the far right of the above map). The <#stdurl http://www.recombinomics.com/H5N1_Map_2005_QinghaiLJuly.html "July map"#> (see the yellow circles in the map above) showed the first major signs of the virus spreading toward Europe. The August 23 map, shown above, makes it clear that Europe is not far off, especially when the massive bird migrations begin in the next couple of weeks. However, <#stdurl http://www.iht.com/articles/2005/08/23/news/flu.php "the European Union and other European countries are not following Holland's example."#> According to the EU Directorate for Consumer Health and Protection, the probability of bird flu reaching Europe is "relatively low." I guess they haven't seen the map above. =inc ww2010.cf.cf050530 p left Meanwhile, the <#stdurl http://news.bbc.co.uk/1/hi/world/asia-pacific/4289637.stm "World Health Organization has issued the strongest warning yet"#> of the danger of bird flu mutating to a form that allows one human to pass it to another. The virus has been mutating anyway, and is becoming increasingly efficient in spreading from region to region among birds, and has spread to other animals. It's already spread to several new species, including cats and tigers. A mutation allowing human to human transmission could happen next week, next month or next year, and now seems all but certain. =eod =// &&2 e050820 Spectacular Islamist terrorist attack in Bangladesh =data ww2010.weblog.y2005.e050820.head Spectacular Islamist terrorist attack in Bangladesh throws country into panic =data ww2010.weblog.y2005.e050820.keys Bangladesh, Kashmir, India, Pakistan =data ww2010.weblog.y2005.e050820.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050820.date 20-Aug-05 =data ww2010.weblog.y2005.e050820.txt1 On Wednesday at 11-11:30 am, hundreds of bombs exploded almost simultaneously in major cities across the country. =data ww2010.weblog.y2005.e050820.txt2 A banned Islamist group, Jamaat-ul-Mujahideen, took credit for the bombings, <#stdurl http://www.telegraphindia.com/1050818/asp/frontpage/story_5126593.asp "according to leaflets left at the bomb sites."#> “It is time to implement Islamic law… there is no future with man-made law,” the leaflets said. “We are warning Bush and Blair to abandon occupation of Muslim countries. NGOs are warned to stop anti-Islamic activities… else they will be completely uprooted.” Bangladesh is the third-largest Muslim-majority nation in the world. <#inc ww2010.pic india3.gif right "" "India, Pakistan, Bangladesh and Kashmir. (Source: Peter N. Stearns)"#> Two people were killed, and 140 were injured. But the meticulous preparation that was required and the involvement of so many people, while still catching the government by surprise, has raised concerns about the stability of the country, and has spread fear among the population. A <#stdurl http://news.bbc.co.uk/2/hi/south_asia/4168226.stm "one-day general strike has been called across Bangladesh,"#> and there are fears of additional violence. A tumultuous history has gotten the country to this point. One of the most brutal, genocidal wars of World War II was the war between Muslims and Hindus on the Indian subcontinent. Hoping to prevent such a war from ever occurring again, the United Nations partitioned the Indian sub-continent following World War II into separate countries for Hindus and Muslims, India and Pakistan, respectively. What we now call Bangladesh was the eastern region of Pakistan. However, East Pakistan's mostly Bengal population (language: Bengali) was in constant friction with West Pakistan's more multiethnic population (language: Urdu). As a result, East Pakistan broke off as the People's Republic of Bangladesh ("Bengal nation") in 1971. The partitioning of the Indian subcontinent did not resolve all the border issues. One of the most dangerous regions in the world is Kashmir, which was the <#hreftext ww2010.i.050718pape "ancestral home of the July 7 suicide bombers on the London subways."#> The bombings across Bangladesh this week have highlighted disagreements over another border area, the one separating India from Bangladesh. The bombing has <#stdurl http://news.bbc.co.uk/2/hi/south_asia/4166928.stm "reopened mutual rifle firing along this border."#> =inc ww2010.cf.cf050530 p left Bangladesh and America have had excellent relations with one another, thanks especially to the $100+ million annual economic aid from America. However, the country is 90% Muslim, and it's in a generational crisis period, like most other countries that fought in World War II. Thus, it's possible that the current skirmish could spiral out of control into a larger war, including a nuclear war between Pakistan and India over Kashmir. =eod =// &&2 e050819 Antiwar movement - Cindy Sheehan =data ww2010.weblog.y2005.e050819.head Pundits claim that antiwar movement is gaining steam with Cindy Sheehan =data ww2010.weblog.y2005.e050819.keys Iraq war, Iran, awakening, Cindy Sheehan =data ww2010.weblog.y2005.e050819.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050819.date 19-Aug-05 =data ww2010.weblog.y2005.e050819.txt1 Oh really? That's news to me. Ummmmm, where are the college students? =data ww2010.weblog.y2005.e050819.txt2 It was just a month ago when there was a "Karl Rove" scandal that was going to cause a lot of problems in Washington. Today it's barely even remembered. Today, the scandal du jour is the new antiwar movement. <#stdurl http://news.bbc.co.uk/2/hi/americas/4161898.stm "Cindy Sheehan, who lost her son in Iraq,"#> is demanding a visit with George Bush during his Crawford, Texas, vacation. (Sheehan has briefly left Crawford to care for her ill mother.) I've been hearing about a resurgent antiwar movement ever since the Afghan war was declared a "quagmire" within a week after we landed there, shortly after 9/11. On Thursday I was listening to Pat Buchanan on MSNBC. He foresees a powerful resurgence of the antiwar movement, thanks to Sheehan and others. Buchanan ought to know. He was President Richard Nixon's speechwriter when college students were hanging Nixon in effigy, demanding that we pull out of Vietnam. Yes sir, Buchanan ought to know. Except, duh!!! Where are the college students hanging George Bush in effigy????? Answer: There aren't any. If you want to see college students demonstrating, take a look at Iran. One week we see <#inc ww2010.weblog.ref e050815 "demonstrating college students demanding more rights for women,"#> and this week we see <#stdurl http://www.expatica.com/source/site_article.asp?subchannel_id=52&story_id=22844&name=Iranian+students+vow+to+fight+for+nuclear+right "demonstrating college students demanding development of nuclear technology."#> Why am I the only one who notices things like this? You don't have to understand the entire theory of Generational Dynamics to realize that there's a big difference between the American antiwar movement today versus in the 1960s, and the demonstrations today versus those in Iran today. (À propos to this, I recently commented on the <#hreftext ww2010.i.eu050601 "obvious generational explanation for the French rejection of the EU constitution,"#> but not one pundit I've seen has yet picked up on it. These people are totally blind to even the simplest and most obvious generational interpretation of events.) As I've said, America is in a "generational crisis" era today, and so you aren't going to see any college students demonstrating. There's no generation gap today. As <#hreftext ww2010.i.sixties040501 "I've explained many times,"#> America in the 1960s was in a "generational awakening" period, where there is massive political conflict between war heroes from the previous crisis war and their children, born after the last crisis war. That's why you saw college students rioting and demonstrating in the 1960s. Iran is in a generational awakening period today (one generation past the 1980s Iran/Iraq war), and that's why you see college students demonstrating there today. But you won't see American college students today demonstrating against the war. There's no "generation gap" today, as there was in the 1960s. The people demonstrating against the war today are exactly the same people who were demonstrating in the 1960s -- except that now they're 40 years older! It wouldn't surprise me if I learned that Cindy Sheehan was carrying placards in the 1960s, or even burning her bra. Those tactics work in a generational awakening period, but not in a crisis period. With regard to the question of what's going on in Iraq, both the Republicans and the Democrats are completely misreading what's going on in Iraq. The Iraqis themselves do not want a civil war or any other kind of war, as I've said on my web site a million times. But Iraq is heading towards becoming a battlefield in the imminent clash of civilizations world war. Republicans like Pat Buchanan have been talking about pulling out of Iraq, but they're wrong to think that the Iraq war is going to end anytime soon. Actually, my expectations are that when the "clash of civilizations" world war breaks out, our forces will still be there. I believe that historians will look at the Iraq war as one of the early battles of the world war, which will have already begun on 9/11. And the Democrats are wrong to think that the "antiwar" movement is going to be revived. This is silly 60s stuff which is completely impossible today. That's not to say that there won't be bitter political battles over the war in Iraq. But these battles are not generational, and they don't represent an antiwar movement. They represent party against party, red states against blue states. And that means that they will never be anywhere near as virulent as they were in the 60s. =eod =// &&2 e050817 Australia seeking hairdressers and doctors =data ww2010.weblog.y2005.e050817.head Australia seeking hairdressers and doctors =data ww2010.weblog.y2005.e050817.keys Australia =data ww2010.weblog.y2005.e050817.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050817.date 17-Aug-05 =data ww2010.weblog.y2005.e050817.txt1 Australia is seeking 20,000 skilled immigrants to fill job vacancies =data ww2010.weblog.y2005.e050817.txt2 in its biggest global recruitment drive since the 1950s, according to the <#stdurl http://www.immi.gov.au/ "Australia Department of Immigration."#> However, <#stdurl http://www.finance24.com/articles/default/display_article.asp?Nav=ns&ArticleID=1518-1785_1754720 "only those with special skills need apply."#> The particular skills most in demand are doctors, hairdressers, mechanics, boilermakers, pharmacists and accountants. =eod =// &&2 e050816 Israel withdraws from Gaza =data ww2010.weblog.y2005.e050816.head Israel withdraws from Gaza amid hopes for peace and fears of instability =data ww2010.weblog.y2005.e050816.keys Israel, Gaza, Iraq =data ww2010.weblog.y2005.e050816.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050816.date 16-Aug-05 =data ww2010.weblog.y2005.e050816.txt1 Here's what you should watch for in the weeks ahead. =data ww2010.weblog.y2005.e050816.txt2 As of Monday, Israel has declared that all Jewish settlements in the Gaza strip are illegal. <#stdurl http://www.voanews.com/english/2005-08-15-voa24.cfm "All Jewish settlers must withdraw by Wednesday or be removed by force."#> Resistance by Jewish settlers so far has been peaceful, and Palestinian militia groups have remained peaceful as well. The optimistic view of the future is that the Palestinians and Israelis will now begin to settle down into a pattern for peace, leading to side-by-side Palestinian and Jewish states. However, Generational Dynamics predicts that that won't happen. The easiest way to understand this is via the concept of "attractor" that I introduced in Chapter 4 of my new book, Generational Dynamics for Historians, and to contrast the situation in Palestine with the situation in Iraq. Palestine and Israel are in a "generational crisis" period. This means that the millions of random, chaotic political acts that occur every day are "attracted" increasingly to war. This happens because of generational changes that have been occurring, based on the fact that the last crisis war was the genocidal crisis war between Jews and Arabs in the late 1940s. Iraq is in a "generational awakening" period, since only one generation has passed since the genocidal Iran/Iraq crisis war of the 1980s ended, and the random political acts are "attracted" to peaceful but tumultuous political conflict. That's why there's been no civil war in Iraq, even though journalists, pundits, and high-priced analysts have been predicting a civil war in Iraq for two years. As I've explained a million times in the last two years on this web site, a civil war has never, throughout history, occurred within one generation from the end of a crisis war. Despite the repeated attempts by well-funded terrorist leader Abu Musab al-Zarqawi to instigate a civil war -- mainly by importing suicide bombers from Saudi Arabia and Jordan -- he's failed completely to do so. There are no Shi'a, Sunni and Kurdish armies fighting with each other. Instead, their leaders are all locked in a room arguing over the form of the new Constitution. That's how the "attractor" concept works. No matter what the provocation, the millions of political acts are "attracted" to peaceful political confrontation, not war. But in the Gaza Strip and the West Bank, the millions of political acts are "attracted" to increasing violence. A new major genocidal crisis war between Jews and Arabs will occur with almost 100% certainty within a few years, and it's more likely to occur sooner, rather than later. That's why the region will not settle down into a pattern of peace. The region is not "attracted" to a pattern of peace. The cockeyed optimists who are hoping for that are deluding themselves. There may be brief periods when peace seems to be taking hold. One of these occurred in January, when Mahmoud Abbas was elected Palestinian Authority president, and promised to negotiate with Israel and bring peace. But the events that occur in a generational crisis period, the "attraction" to a new genocidal crisis war, are completely out of control of any politicians. The new war will come from the great masses of people, driven by the younger generations, impatient for change. Politicians can no more stop such a war than they can stop a tsunami. The same "attractor" principles are true if some minor armed conflict begins. In Iraq, a minor armed conflict between Sunnis and Shi'as would extinguish itself fairly soon; but a minor armed conflict between Palestinians and Jews might well spiral into full scale war. A brief period when peace appears to be taking hold is like a heat wave in New York in November. The fact that a heat wave occurs at that time doesn't mean that winter isn't coming. With all that in mind, here are some things to watch out for in the next few weeks and months:

Will the Jewish settlers' protests remain peaceful, as they've promised?
The Palestinian militant group Hamas has been holding its fire, pending the Israeli withdrawal. Will they continue to hold fire after the withdrawal is completed?
Will Mahmoud Abbas be able to keep his promise of <#stdurl http://www.palestinereport.org/article.php?article=874 "stopping Hamas violence after Israel withdraws?"#>
Or will Hamas take complete control of the Gaza Strip, either by force now, or in the parliamentary elections scheduled for January?
Will the Lebanese militant group Hizbollah also continue to hold fire after the withdrawl?
Will Israeli Prime Minister Ariel Sharon be able to grant further concessions to the Palestinians, in view of the Jewish opposition to the Gaza withdrawal?
If not, will <#stdurl http://news.bbc.co.uk/1/hi/world/middle_east/4148732.stm "Hamas and Hizbollah resume full-scale violence against Israel,"#> on the grounds that Israel has not retreated to its 1967 (or 1948) borders?
In fact, will Israel really withdraw completely from Gaza, in view of the need for the IDF (Israeli Defense Forces) to strike back at Hamas for its violence? Or will <#stdurl http://www.arabnews.com/?page=7§ion=0&article=68149&d=9&m=8&y=2005 "the Palestinians say that the whole withdrawal process was a sham?"#>

Each of these questions has a "peaceful" alternative and a "violent" alternative. Generational Dynamics predicts that events will be more "attracted" to the violent alternative, and that eventually the violent acts will spin out of control into a new genocidal crisis war that will engulf the entire region. =eod =// &&2 e050815 Iran: Feminism flourishes / nuclear weapons =data ww2010.weblog.y2005.e050815.head Feminism flourishes in Iran, as the international crisis on nuclear weapons intensifies =data ww2010.weblog.y2005.e050815.keys Iran, Mahmoud Ahmadinejad, feminism, nuclear weapons =data ww2010.weblog.y2005.e050815.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050815.date 15-Aug-05 =data ww2010.weblog.y2005.e050815.txt1 Iran's new president, Mahmoud Ahmadinejad, named a hardline Islamist cabinet on Sunday, =data ww2010.weblog.y2005.e050815.txt2 signalling a strongly Islamic direction, both domestically and internationally. <#inc ww2010.pic ahmad2.jpg right "" "President Mahmoud Ahmadinejad of Iran(Source: Mardomyar.ir )"#> The political turmoil in Iran is coming to a boil as President Ahmadinejad moves the country in an increasingly ultra-Islamist direction, courting conflicts with the international community over the development of nuclear fuel and with its own youth over the issue of women's rights. Iran is exhibiting some of the classic signs of a "generational awakening" period, with a growing level of political conflict that resembles the level of conflict in <#hreftext ww2010.i.sixties040501 "America's last generational awakening period in the 1960's."#> John F. Kennedy became U.S. President in 1961, and was recognized as a young, charismatic leader who would change the country's direction. He was a World War II hero, and remembered well the horrors and genocidal atrocities of that war. Thus, he saw his primary job as protecting the country from a new world war with the Communists in Russia and China. However, he immediately ran into political turmoil. Shortly after taking office, he and the country suffered a major international embarassment in a confrontation with Russia known as <#stdurl http://en.wikipedia.org/wiki/Bay_of_Pigs_Invasion "the Bay of Pigs invasion of Cuba."#> Later, Kennedy launched policies that led to the Vietnam War. Had he not been assassinated in 1964, he would have faced the same "generation gap" inspired student-led riots and demonstrations against the war. As it was, the antiwar movement, along with the "racial equality movement and the "environmental movement" and the "women's lib movement" caused Kennedy's two successors, President Lyndon Johnson and President Richard Nixon, to end their presidencies in disgrace. The reason that this kind of generational political conflict always occurs during a generational awakening period is because it's the time, 15-20 years after the last crisis war, that the kids born after the war, and with no personal memory of the war, begin to make their political views felt. They rebel against the severe rules and compromises imposed by their parents, the generation of war heroes who want only to make sure that their own children never have to suffer another war like the last crisis war. The heart of the conflict is that the war heroes want the people to continue to sacrifice their individual rights for the benefit of the country as a whole, while their children fight for individual rights, including minority rights and women's rights, and the right not to have to make any sacrifices at all for one's country. It is a major principle of Generational Dynamics that this kind of political conflict occurs one generation past the end of any crisis war. Now we see the young, charismatic Mahmoud Ahmadinejad in a position to change Iran's direction, as the country enters its own generational awakening, one generation following the genocidal Iran/Iraq war. Ahmadinejad sees his duty as protecting Iran from the danger of another war. Iran had no effective defense to Saddam Hussein's use of poison gas during the Iran/Iraq war, and so Ahmadinejad sees the development of nuclear weapons as a necessary defense when the next war comes. He currently has the support of the young people in Iran for this, but he could lose it quickly if something goes wrong. Similarly, his announcement yesterday to <#stdurl http://www.guardian.co.uk/iran/story/0,12858,1549304,00.html "appoint a staunchly hardline ultra-Islamist cabinet"#> reflects his belief that his country will be best protected if the entire population unites behind conservative Islam. This is sure to cause conflict, because just as 1960s America spawned a "women's lib" movement, Iran is developing a very strong feminist movement. Increasingly, college-age women have been demonstrating publicly in favor of women's rights, <#stdurl http://www.boston.com/news/world/articles/2005/08/14/with_quiet_effect_iranian_women_advance "according to the Boston Globe."#> Such demonstrations occurred in June at Tehran University, during the election campaign, and are continuing. Indeed, 60% of the students entering Iranian universities are now female, and the number of working women is growing steadily. Ahmadinejad has indicated that he doesn't plan to curtail women's rights. But let's face it, it doesn't take a lot to get women angry, and with a bunch of old war hero geezers in the cabinet making all the rules, it's only a matter of time before a confrontation develops. More serious is the growing confrontation with the international community over the development of nuclear fuel. Iran insists that this fuel is being developed only to run electric power plans, but Iran's promises are not well trusted, by the United States or, increasingly, by the European Union. On Sunday, Iran <#stdurl http://www.iranmania.com/News/ArticleView/Default.asp?NewsCode=34314&NewsKind=Current%20Affairs "warned the United States that any use of force over its nuclear program"#> would be a "mistake," "Bush should know that our capabilities are much greater than those of the United States. We don't think that the United States will make such a mistake." The International Atomic Energy Commission (IAEA), whose mission is to prevent the proliferation of nuclear weapons, is considering turning the matter over to the United Nations Security Council, where the possibility of sanctions against Iran will be discussed. The women's movement is expected to become increasingly confrontational on the domestic front, and the nuclear weapon issue is shaping up to be as major an international confrontation as the Bay of Pigs invasion was for America. This indicates an increasingly tumultuous political future is at hand for Ahmadinejad and Iran. =eod =// &&2 e050814 New address =data ww2010.weblog.y2005.e050814.head I have moved to a new address. =data ww2010.weblog.y2005.e050814.keys change of address =data ww2010.weblog.y2005.e050814.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050814.date 14-Aug-05 =data ww2010.weblog.y2005.e050814.txt1 Please click on the "About" link at the top of this web page for the new address. =data ww2010.weblog.y2005.e050814.txt2 =eod =// &&2 e050811 A new mystery: Why is the P/E ratio remaining constant? =data ww2010.weblog.y2005.e050811.head A new mystery: Why is the P/E ratio remaining constant? =data ww2010.weblog.y2005.e050811.keys price/earnings ratios, volatility =data ww2010.weblog.y2005.e050811.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050811.date 11-Aug-05 =data ww2010.weblog.y2005.e050811.txt1 If you look at the bottom of this web site's home page, =data ww2010.weblog.y2005.e050811.txt2 you'll see a graph, automatically updated every week, of the S&P 500-stock index, and the S&P 500 stock price/earning ratio index. Here's the graph as of today: <#inc ww2010.pic per0805.gif center "" "S&P 500 Price/Earnings ratio and S&P 500-stock Index as of 5-Aug-2005. (Source: MarketGauge ® by DataView, LLC)"#> See anything strange? For the last several months, the P/E ratio has been constant -- around 20. As far as I can tell, going back to the 1800s, the P/E ratio has never before remained constant for several months like that. In fact, it's been almost constant for a full year, especially when you realize that the Presidential election probably pushed the stock market up slightly, as happens in any election year. What's the explanation? It could be a coincidence, but I don't believe a coincidence like this could go on for so long. What it must mean is that most investors are making investment decisions based on a formula, and they're all using the same formula. And the formula is equivalent to investing in a stock portfolio with an average p/e ratio of about 20. Does that seem strange to you? Why should it? Do you really think that all those stock analysts think for themselves all the time? They're like everyone else -- they talk to each other, and they all do the same thing. Actually, I think I know what formula all the stock analysts are using. Several months ago, I read a commentary somewhere that mentioned that most investors were using the "Fed Model" for investments. I did some investigation, and it turns out that the "Fed Model" is based on one single paragraph and a graphic buried deep in the middle of <#stdurl http://www.federalreserve.gov/boarddocs/hh/1997/july/ReportSection2.htm "a 1997 Federal Reserve report."#> The graphic and the paragraph are as follows: <#inc ww2010.pic epr797.gif right "" "Graphic on which the "Fed Model" is based"#>

"The run-up in stock prices in the spring was bolstered by unexpectedly strong corporate profits for the first quarter. Still, the ratio of prices in the S&P 500 to consensus estimates of earnings over the coming twelve months has risen further from levels that were already unusually high. Changes in this ratio have often been inversely related to changes in long-term Treasury yields, but this year's stock price gains were not matched by a significant net decline in interest rates. As a result, the yield on ten-year Treasury notes now exceeds the ratio of twelve-month-ahead earnings to prices by the largest amount since 1991, when earnings were depressed by the economic slowdown. One important factor behind the increase in stock prices this year appears to be a further rise in analysts' reported expectations of earnings growth over the next three to five years. The average of these expectations has risen fairly steadily since early 1995 and currently stands at a level not seen since the steep recession of the early 1980s, when earnings were expected to bounce back from levels that were quite low."

So, from what I can gather, a sizable majority of investors today are basing their investment decisions on the "Fed Model," which is based on a single paragraph in a 1997 Fed report. It's laughable, but it's true. Incidentally, in case you were wondering, the correlation shown in the graphic did not work prior to 1982. However, most financial analysts today are kids in their 20s and 30s, so anything before 1982 is ancient history to them anyway. This observation that most investors and financial analysts are following the same formula ties in with something else. In May, I wrote <#inc ww2010.weblog.ref e050504 "an article about stock market volatility."#> I pointed out that the stock market was getting increasingly volatile, meaning that the marketing was fluctuating wildly. In that article, I explained that "the volatility means that individual investors are not making decisions based on individual stocks, which they do in normal times; instead, they're nervously making buy/sell decisions based on their "feeling" about where the entire stock market in going. With investors moving in unison, that means that the entire market is subject to volatility that only a single stock would have in normal times, and it means that a scare can cause a panic and a stock market crash." When I wrote that paragraph, I didn't know what "feeling" the individual investors were getting. But now with the observation that the P/E ratios are remaining constant, we can infer that this "feeling" is based on a formula that they're all using like sheep, so they're all acting roughly in unison. And that formula is probably something close to the "Fed Model." For some reason, some people think that stock market panics have been banished. I can't imagine why. But as we discussed in <#hreftext ww2010.i.050711eleven "an article last month,"#> the true value of the stock market is at Dow 4500, and so the market today is well over 100% overvalued. When a panic occurs, then the market is liable to fall to the Dow 3000-4000 range. =eod =// &&2 e050810b U.N. predicts severe North Korea famine this fall =data ww2010.weblog.y2005.e050810b.head U.N. predicts severe North Korea famine this fall =data ww2010.weblog.y2005.e050810b.keys food, food prices, North Korea =data ww2010.weblog.y2005.e050810b.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050810b.date 10-Aug-05 =data ww2010.weblog.y2005.e050810b.txt1 This could be a reason why North Korea is close to preemptive war. =data ww2010.weblog.y2005.e050810b.txt2 A million people are already forced to forage for grasses and acorns, and that number will increase to over 3 million by the end of the year, according to <#stdurl http://www.un.org/apps/news/story.asp?NewsID=15340&Cr=DPR&Cr1=Korea "a statement by James Morris, executive director of the UN's World Food Program."#> A shortfall of donations this year to the WFP has made the problem critical. “This year’s food crisis in the North has been exceptionally severe owing to an acute lack of affordable local staples, not least because of record-high cereal prices in private markets,” says Morris. Indeed, world food prices have been skyrocketing in the last five years. While inflation has risen just 9% since 2000, wheat has increased 20-50% in prices, oats 30%, and rye 50%. Other food prices have risen comparably. (See previous weblog item, below.) These food price increases are creating poverty, starvation and malnutrition among huge numbers of additional people around the world. =inc ww2010.cf.cf050530 p right From the point of view of Generational Dynamics, the massive increasing starvation in North Korea is a signal that war may be approaching. The reason is simple: When millions of men are unable to feed themselves or their families, then they have nothing to lose by going to war. In many cases, joining the army is the best way to get regular meals, as well as a salary to send home. This is especially true during generational crisis periods, which North Korea and most other nations of the world have entered, 60 years after the end of WW II. During a generational crisis period, a war can become forced on the government. The starving people of North Korea are not going to tolerate starvation for long, and they'll turn against the government. The government, faced with the possibilty of civil war, will deflect the war against other enemies -- Japan, South Korea, America, etc., in this case. The nuclear non-proliferation talks with North Korea are not getting anywhere, and there never was any chance that they would. <#stdurl http://www.time.com/time/asia/magazine/article/0,13673,501050815-1090972,00.html "One commentator describes the talks as a "charade masquerading as diplomacy,""#> and as an "international diplomatic game in which North Korea pretends to consider denuclearizing, while five other countries at the table pretend to believe Pyongyang is serious." It's likely that the only reason that North Korea rejoined the talks in the first place was in the hope of getting further financial and food aid from China, South Korea and America. North Korea has been mobilizing for war for over a year now, and <#inc ww2010.weblog.ref e050610 "recently began blocking international communications."#> If WFP director Morris is correct that three million will be starving by winter, then it's hard to see how the country can remain stable for long. =eod =// &&2 e050810 Food prices continue to increase around the world. =data ww2010.weblog.y2005.e050810.head Food prices continue to increase dramatically around the world =data ww2010.weblog.y2005.e050810.keys food, population, Malthus Effect, food prices. Green Revolution =data ww2010.weblog.y2005.e050810.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050810.date 10-Aug-05 =data ww2010.weblog.y2005.e050810.txt1 Hunger, poverty and starvation are spreading to increasing masses of people around the world, =data ww2010.weblog.y2005.e050810.txt2 as the growing world population makes food scarcer and scarcer. From the point of view of Generational Dynamics, this is called "the Malthus Effect," as I described in <#hreftext ww2010.i.food040628 "an article I wrote last year."#> I estimated that food production grows at 0.96% worldwide, while population grows at 1.72% per year. The Malthus Effect refers to the fact that while food production grows exponentially, the population of the world also grows exponentially, but at a faster rate. The result is that food becomes more and more scarce and, by the law of supply and demand, it also becomes more expensive. According to <#stdurl http://www.ext.nodak.edu/extpubs/agecon/market/ec1090.pdf "a study (PDF) by North Dakota State University,"#> food prices have been increasing dramatically since the year 2000. Here are some sample prices:


                     ------ Prices -------    -- Increases --
                     1999-   2000-   2004-    Since    Since
          Commodity   2000    2001    2005     1999     2000
--------------------  ------  ------  ------   ------  -------
        Spring wheat    2.85    2.79    3.35   17.54%   20.07%
        Winter wheat    2.49    2.25    2.87   15.26%   27.56%
         Durum wheat    2.58    2.48    3.83   48.45%   54.44%
                Oats    0.90    0.86    1.11   23.33%   29.07%
         Feed barley    1.39    1.37    1.50    7.91%    9.49%
            Soybeans    4.19    4.23    6.02   43.68%   42.32%
         Alfalfa hay   43.00   46.00   63.89   48.58%   38.89%
           Other hay   29.00   31.00   46.35   59.83%   49.52%
       Oil sunflower    6.56    6.06   11.96   82.32%   97.36%
   Non-oil sunflower   13.50   11.30   17.74   31.41%   56.99%
              Canola    7.50    6.55   11.40   52.00%   74.05%
            Flaxseed    3.79    3.31    7.35   93.93%  122.05%
                 Rye    1.44    1.31    1.96   36.11%   49.62%
            Potatoes    5.60    5.45    5.03  -10.18%   -7.71%
Beef 400-500# Steers   97.68  106.07  128.86   31.92%   21.49%
Beef 800-900# Steers   80.87   85.79   99.59   23.15%   16.09%
           Cull cows   36.50   39.80   50.40   38.08%   26.63%
       Hogs - 250 lb   32.50   43.10   51.12   57.29%   18.61%
      Slaughter ewes   25.00   31.00   36.00   44.00%   16.13%
     Slaughter lambs   69.57   72.74   94.59   35.96%   30.04%
        Feeder lambs   76.64   83.78  115.34   50.50%   37.67%
                Milk   13.20   11.30   15.22   15.30%   34.69%
Consumer Price Index  168.80  175.10  190.70   12.97%    8.91%

The bottom line of this chart shows that the inflation rate (CPI) has been just under 9% since 2000. But food prices have generally been increasing at several times the inflation rate. In this list, only potatoes have fallen in price. When Thomas Roberts Malthus wrote his famous Essay on Population in 1798, he made some mistakes, but his basic point that population grows faster than the food supply was correct. Malthus' conclusion was that famines would result. This was the wrong conclusion: the result is poverty and malnutrition. That's what's happening today. From the point of view of Generational Dynamics, this is what happens in most generational cycles. When food becomes too scarce and the price of food becomes too great, then a genocidal crisis war occurs. This reduces the population and restores the balance between food and population. For those who don't like this conclusion, let me assure you that it's been happening for millennia, and it's happening again now. Since the end of World War II in 1945, it appears that the following has happened: In order to prevent another world war, countries of the world, led by the Rockefeller Foundation, launched a "green revolution" which brought modern agricultural techniques and technology to countries around the world. The Green Revolution evidently greatly increased the supply of food in the world throughout the 1960s. Since then, addition application of new agricultural technology have produced smaller and smaller benefits, as would be predicted by the economic Law of Diminishing Returns. It appears that the effects of the Green Revolution petered out in the mid-1990s, as world malnutrition has been increasing since then. Furthermore, worldwide food prices have been increasing dramatically since 2000. These increases have been primarily driven by the demands of China's exploding bubble economy, but it would have happened anyway. As more and more people in the world are forced into poverty and starvation because of the Malthus Effect, the political state of the world is becoming increasingly unstable. Generational Dynamics predicts that we're headed for a new "clash of civilizations" world war, and it will happen sooner rather than later. =eod =// &&2 e050808 Bird flu spreads throughout Asia, heads for Europe =data ww2010.weblog.y2005.e050808.head Bird flu spreads throughout Asia, heads for Europe =data ww2010.weblog.y2005.e050808.keys bird flu =data ww2010.weblog.y2005.e050808.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050808.date 8-Aug-05 =data ww2010.weblog.y2005.e050808.txt1 A new vaccine is announced, but its effectiveness is questioned. =data ww2010.weblog.y2005.e050808.txt2 The bird flu which, just two years ago, was restricted just to Vietnam, has been mutating and has now spread to some ten nations throughout all of Asia, far to the west and north. <#inc ww2010.pic wsjbird.gif right "" "Bird flu - infected breeding grounds of migratory birds (Source: WSJ)"#> As <#inc ww2010.weblog.ref e050707 "I wrote in an article a month ago,"#> Chinese scientists confirmed that bird flu had spread to migratory waterfowl in one of the world's major breeding grounds, Qinghai Lake, and that it was poised to continue spreading. Since then, the <#stdurl http://www.bloomberg.com/apps/news?pid=10000080&sid=apjzA51ZJYTQ&refer=asia "bird flu has spread to Russia, Mongolia and Kazakhstan."#> Previously, it had already spread from Vietnam to Thailand, Cambodia and Indonesia. It's expected to continue spreading, and should reach Europe within a couple of months, especially inasmuch as millions of birds will begin migrating at the end of August. =inc ww2010.bugcomment left Although several dozen people have died of bird flu in the last two years, all human bird flu cases have been caught by close contacts with birds, as far as is known. No human-to-human contamination has yet manifested itself, although experts are saying that conditions are now exactly right for such a mutation to occur. Once a mutation allowing human to human transmission occurs, possibly this fall or winter, a worldwide bird flu pandemic is expected, killing hundreds of millions of people worldwide. A new bird flu vaccine has been developed and tested with promising results, according to <#stdurl http://msnbc.msn.com/id/8869732/ "an announcement by Dr. Anthony S. Fauci,"#> director of the National Institute of Allergy and Infectious Diseases. =inc ww2010.cf.cf050530 p right Because of the urgency of the situation, America plans to purchase millions of doses of the new vaccine, according to Fauci, though the exact number was not announced. However, <#stdurl http://news.scotsman.com/latest.cfm?id=1747352005 "the new vaccine is not a "silver bullet,""#> according to the World Health Organization (WHO). From the point of view of WHO, the most obvious reason is that a vaccine might protect the Americans who get it, but will do nothing for the vast majority of the people in the world. But in fact the new vaccine may not ever be very helpful to anyone, according to <#stdurl http://www.recombinomics.com/News/08080501/H5N1_Vaccine_Third_Dose.html "a commentary on the vaccine announcement in Recombinomics,"#> which points out the following:

Two or three large doses of the vaccine will be needed to immunize someone effectively. This is 12-18 times as much vaccine as is needed against an ordinary human virus, and so will increase the severity of manufacturing problems. Furthermore, the multiple shots will take a long time to administer under pandemic conditions, making success far less likely.
The vaccine is based on the original Vietnam bird flu virus. But the version currently spreading throughout Asia is a mutated version, and the new vaccine may offer little or no protection from this mutation.
Now, here's an ironic problem. The way that a vaccine is manufactured involves injecting the virus into an egg containing a living chicken embryo. The embryo manufactures the vaccine as it grows inside the egg. However, in this case, the virus tends to kill the chicken embryo. It is, after all, the bird flu.

=eod =// &&2 e050803 Iran's nuclear plan is "irreversible" =data ww2010.weblog.y2005.e050803.head Iran's plan to develop nuclear fuel is "irreversible" =data ww2010.weblog.y2005.e050803.keys Iran, nuclear weapons =data ww2010.weblog.y2005.e050803.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050803.date 3-Aug-05 =data ww2010.weblog.y2005.e050803.txt1 France calls it a "major international crisis" =data ww2010.weblog.y2005.e050803.txt2 On Tuesday, Iran sent <#stdurl http://news.bbc.co.uk/2/hi/middle_east/4736421.stm "the following statement"#> to the International Atomic Energy Commission:

"Extraneous pressures prevented timely and serious consideration by E3 [Germany, France and Britain]/EU of this proposal which has the potential of providing a framework in which concerns of all sides are reasonably allayed. ... Iran made it clear in Geneva that any proposal by the E3/EU must incorporate E3/EU's perception of objective guarantees for the gradual resumption of the Iranian enrichment programme, and that any attempt to turn objective guarantees into cessation or long-term suspension were incompatible with the letter and spirit of the Paris Agreement and therefore unacceptable to Iran. ... Against all its sincere efforts and maximum flexibility, Iran has not received a proposal as of today, and all public and diplomatic information, particularly the letter of 29 July 2005 of the E3 Ministers, indicate that the content of the eventual proposal will be totally unacceptable. We have been informed that the proposal not only fails to address Iran's rights for peaceful development of nuclear technology, but even falls far short of correcting the illegal and unjustified restrictions placed on Iran's economic and technological development, let alone providing firm guarantees for economic, technological and nuclear co-operation and firm commitments on security issues. ... It is now self-evident that negotiations are not proceeding as called for in the Paris Agreement, due to E3/EU policy to protract the negotiations without the slightest attempt to move forward in fulfilling their commitments under the Tehran or Paris Agreements. ... In light of the above, Iran has decided to resume the uranium conversion activities at the UCF in Isfahan on 1 August 2005."

The response from EU members has been sharp. "The Iranian affair is very serious," <#stdurl http://washingtontimes.com/upi/20050802-113157-3522r.htm "said French Foreign Minister Philippe Douste-Blazy."#> "It could be the start of a major international crisis." "Were Iran to resume currently suspended activities, our negotiations would be brought to an end and we would have no option but to pursue other courses of action," <#stdurl http://today.reuters.com/News/newsArticle.aspx?type=topNews&storyID=2005-08-02T165304Z_01_N02624016_RTRIDST_0_NEWS-NUCLEAR-IRAN-DC.XML "said a letter from the EU to Iran."#> "We therefore call upon Iran not to resume suspended activities or take other unilateral steps." Although not specifically mentioned, the "other unilateral steps" will be to refer the matter to the United Nations Security Council. The UN may vote to impose some sort of sanctions on Iran, which should leave Iran quaking in their collective boots, assuming that the sanctions aren't vetoed by Russia or China. The EU's concern is that Iran will be enriching plutonium for use in nuclear weapons. Iran says it's only interested in nuclear electric power plants. As I've previously explained, Iran is in a "generational awakening" period, which means that the nation will be in <#inc ww2010.weblog.ref e050625 "a period of severe political conflict caused by a "generation gap""#> between the liberal college students and hard-line mullahs. Although there is much inter-generational political conflict, news stories in recent months have made it clear that there's one thing that all the generations agree on: They all want Iran to have nuclear weapons. They want them for national prestige, and they want them for security purposes. It's interesting to compare Iran's situation, from the point of view of Generational Dynamics, to that of North Korea. The North Korea nuclear non-proliferation talks have been going on now for 8 days, and <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2005-08-03T025835Z_01_SCH246160_RTRUKOC_0_KOREA-NORTH.xml "are now pretty much deadlocked."#> Like Iran, there never was any chance at all that North Korea was going to give up it's nuclear weapon development plans. The only reason that North Korea is participating at all is that they hope to get food and financial aid, without having to give up their nuclear weapons. But North Korea, in a generational crisis period, is planning to use the weapons in a war. The purpose of the war would be to reunite with South Korea, under North Korean control, and also to gain revenge against Japan for its humiliation of Korea before and during WW II. (My own unsubstantiated speculation is that China and North Korea are already planning a joint campaign against Japan.) But Iran, in a generational awakening period, is not planning to go to war, even against Israel. Iran will do everything it can to keep its armed forces out of war. If Iran gets nuclear weapons, the issues will be quite different. Iran will not want to go to war with Israel, but would be willing to provide nuclear weapons to anti-Israeli militia groups like Hizbullah. Israel is quite well aware of this, so nuclear weapons in Iran would cause Israel to take some sort of action to protect itself. I cannot guess what this action will be, but it could involve bombing some facilities in Iran. Recall that in 1982 Israel bombed and destroyed a factory in Iran which they believed could manufacture nuclear weapons. =inc ww2010.cf.cf050530 p right A recurrence of such a bombing could well trigger a major Mideast war. So the problem with Iranian nuclear weapons is that they'll destabilize the balance of power in the Mideast, and cause a chain reaction leading to a major war. And that doesn't even count the other problem - that the nuclear weapons might be used on Israel or on Europe or American bases. From the point of view of Generational Dynamics, the Mideast is replaying the prelude to the genocidal war between Arabs and Jews of the late 1940s, when Palestine was partitioned and the state of Israel was created, and a new genocidal war between Arabs and Jews is not far off. Since there's no guarantee that Israel would survive, this would trigger the "clash of civilizations" world war. =eod =// &&2 e050802c Russia barring ABC News reporters from Russia =data ww2010.weblog.y2005.e050802c.head Russia is barring ABC News reporters from working in Russia =data ww2010.weblog.y2005.e050802c.keys Russia, ABC news, Shamil Bsayev =data ww2010.weblog.y2005.e050802c.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050802c.date 2-Aug-05 =data ww2010.weblog.y2005.e050802c.txt1 Still infuriated over ABC Nightline's airing of interview with Chechen terrorist warlord Shamil Basayev, =data ww2010.weblog.y2005.e050802c.txt2 Russia's Foreign Ministry says that <#stdurl http://news.bbc.co.uk/2/hi/europe/4739619.stm "it will not renew the accreditation of ABC News journalists when they expire."#> =inc ww2010.xr.related1 right basayev 3 As we <#inc ww2010.weblog.ref e050729 "wrote last week when the interview appeared,"#> Russians are overwhelmingly outraged that ABC News gave air time to the terrorist. In the interview, Basayev took credit for the Beslan school massacre and other terrorist acts, and promised Russia more of the same. Russia's outrage should not be a surprise. We would have been similarly infuriated if a news organization had given air time to Osama bin Laden a few months after 9/11. In fact, we did express outrage when al-Jazeera aired taped messages from bin Laden. Why ABC News is not able to understand that comparison is beyond me. According to <#stdurl http://en.rian.ru/russia/20050802/41078223.html "the statement by the Russian Foreign Ministry,"#>

"Considering all the circumstances of the interview with Shamil Basayev, who has been generally acknowledged as a terrorist, such as the obvious fact of contributing to terrorist propaganda and calling for violence against Russian nationals, Russia has decided to deny the company further accreditation."

The Ministry said that any contact between ABC and Russian state departments and organizations was undesirable. The particular ABC News correspondent who conducted the interview, Andrei Babitsky, and who is employed by a Russian radio station, will have his employment status reviewed, according to the Ministry. According to the BBC, <#stdurl http://news.bbc.co.uk/2/hi/europe/4739619.stm "Babitsky is seen by Russian officials as a terrorist sympathizer,"#> and note his apparent ease of access to Mr Basayev's hideout in Chechnya - at a time when Russia is offering $10 million for his capture. =eod =// &&2 e050802b China deflation, manufacturing index shows weakness =data ww2010.weblog.y2005.e050802b.head China heading for deflation as manufacturing index shows weakness =data ww2010.weblog.y2005.e050802b.keys China economy, Baltic Dry Index =data ww2010.weblog.y2005.e050802b.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050802b.date 2-Aug-05 =data ww2010.weblog.y2005.e050802b.txt1 There are signs that China's bubble economy may be bursting =data ww2010.weblog.y2005.e050802b.txt2 For over twenty years, China's economy has been growing at a red-hot 9-10% per year. For 2-3 years, China's been trying to slow down its economy, but have failed to do so. The idea was to slow it down just a little -- enough to stablize it for a "soft landing," but not too much, which might cause a "hard landing." For example, <#inc ww2010.weblog.ref e040715b "China's economy grew by 9.7% in the first half of 2004,"#> much more than the 7% that Beijing's planners had been aiming for. Well, you know the old saying: Be careful what you wish for. There's much one can't be sure of when dealing with a government as secretive as China's, but there are some initial signs that China's economy may be unraveling faster than Beijing would like. According to <#stdurl http://news.xinhuanet.com/english/2005-07/31/content_3291201.htm "an article by the Chinese Xinhua news service:"#>

"At the second China economic observation forum, some economists predict that China's economy may fall into a deflation characterized by persistent consumer price decrease. Lin Yifu, Director of China Center for Economic Research (CCER) of Beijing University, said at the forum held quarterly by CCER that owing to the overproduction in most manufacturing sectors since 1998 and the to-be-overcapacity from over-investment in some sectors in 2003 and 2004, China is expected to see deflation caused by overcapacity in the latter half of 2005. Wang Jian, Deputy Secretary General for the Economic Research Institute under State Development and Reform Commission, said that decreasing growth of Consumer Price Index (CPI), dropping enterprise profits, as well as losses in downstream industries are all signals that China's economy has taken a cooling trend."

China is not usually forthcoming when its economy is in trouble, so for a significant Chinese official to admit even the possibility of deflation indicates a great deal of concern. The first announcement of deflation appeared in recent weeks, as it became clear that <#stdurl http://news.ft.com/cms/s/624dcf10-d3d0-11d9-ad4b-00000e2511c8.html "Chinese manufacturers are continuing to cut prices."#> Chinese manufacturers have been increasing production and cutting prices in the hope of catching up. What's happening in China is the same as has been happening in America, although the details are different. Since 2002, I've been predicting that America is entering a new 1930s style Great Depression, and that there would be a stock market collapse, with the Dow falling to the 3000-4000 range probably by the 2007 time frame. This is a consequence of the huge 1995-2000 stock market bubble, which has not yet fully unraveled. Even now, as that time approaches, I see no reason to revise that prediction. The same Generational Dynamics methodology which arrives at that conclusion also predicts that <#hreftext ww2010.i.fed050324 "America is in a deflationary period,"#> with prices expected to fall by 30% by 2010. The reason this happens is because of the <#inc ww2010.weblog.ref e050727 "crusty old bureaucracy"#> phenomenon, where the new businesses that were created in the 1930s have now become sluggish and crippled from bureaucracy, as employees become stale in their jobs. In America, this has caused jobs to flee massively to China, where low-paid workers turn out products at less than half the price that America's factories can. What's a little harder to understand is that China is now also succumbing to the "crusty old bureaucracy" phenomenon. Although China's red-hot economy has been expanding at 9-10% a year for over 20 years, this has been accomplished by Chinese businesses with the same kind of entrenched bureaucracy. For a business to survive it must constantly change, but China's success at making standard products like T-shirts has worked for many years, but left China's businesses as stale as America's are. Thus, China is passing through the same kind of unraveling generation cycle that America, Japan and Europe are. These regions' economies are all closely linked together so when one goes down, all of them will go down. The signs of a weakening Chinese economy include <#stdurl http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nPEK8285&imageid=&cap= "a weakening in Chinese manufacturing in recent months."#> <#inc ww2010.pic bdi0801.gif right "" "Baltic Dry Index, 1996-present (Source: FinData)"#> Another dramatic sign is the continuing precipitous fall in the <#stdurl http://www.balticexchange.com "Baltic Dry Index (BDI),"#> which measures the shipments of "dry-bulk cargos," commodities like iron ore, grain, cement and coal, shipped in bulk on huge freighters traveling the seas around the world. When I wrote <#inc ww2010.weblog.ref e050705 "a lengthy article on this subject last month,"#> I explained how the BDI reflects China's imports of manufacturing commodities, especially iron ore, and that even at that time it had fallen so far since December that a recession in China seemed likely by fall. Since that time, the BDI has continued to fall, by an incredible 2-3% almost every single business day. This kind of fall in worldwide dry goods shipping prices indicates that something very dramatic is going on. Yes, it's true that the enormous rise in the BDI in 2003-4 brought additional shippers into the business, with the result that carriers now have some 8% more capacity than they did a year ago, but that alone can't account for a collapse in the BDI from over 6,000 to below 1,800 in a few months. From the point of view of Generational Dynamics, China, America, Europe, Japan and other countries are all going to suffer the same collapse in stock market value, as stocks are overvalued by 100% or more around the world. The only question is when the cascading fall will begin, and what will trigger the panic that causes it. A failure in China's economy might possibly be such a trigger. Meanwhile, a new story about a regional mass riot in a Chinese province has surfaced. According to <#stdurl http://msnbc.msn.com/id/8780005/ "the story in the Washington Post,"#> a student on vacation was riding down the street when his bicycle accidentally collided with a wealthy official's very expensive four-door sedan. Before long, the student had been beaten up, and a riot ensued. What typically happens in these cases is that word spreads quickly, thanks to mobile phones and text messages, and soon there are thousands of people rioting. According to the article,

But the riot here, like a growing number of flare-ups in other Chinese cities, was in fact directed against the flourishing alliance of Communist Party officials and well-connected businessmen that runs Chizhou. Before calm returned to the streets, the disturbance had become a political rebellion against the increasingly intimate connection in modern China between big money and Communist government. "When anger boils up in your heart so long, it has to burst," said a Chizhou man who was part of the crowd that night.... Recently, the resentment has exploded into violent protests, despite draconian laws against attempts to challenge the party's rule. Although press censorship prevents an independent count, the government-funded Ta Kung Pao newspaper said Public Security Minister Zhou Yongkang estimated that 3.76 million Chinese were involved in 74,000 "mass incidents" during 2004. So we're not talking about something small here, not with 3.76 million Chinese involved in 74,000 mass riots in one year. This riot involved 10,000 people, but others have brought in 50-60,000 rioters. The Chinese security police are very skilled at bringing such riots under control, and they obviously were successful 74,000 times in 2004. But it's only a matter of time before one of these mass riots spirals out of control. As we wrote about in detail in <#hreftext ww2010.i.china050116 "a lengthy analysis that was posted in January,"#> China's social structure is unraveling rapidly, as can be seen from from the tens of thousands of regional rebellions each year, over 100 million migrant workers, high food prices, high rust belt unemployment, addiction to a bubble economy, unraveling of Mao's social structure and secessionist provinces. Things are coming to a head in China, in both its economy and its social structure. =eod =// &&2 e050802 Should America have dropped the A-Bomb at Hiroshima and Nagasaki? =data ww2010.weblog.y2005.e050802.head Should America have dropped the A-Bomb at Hiroshima and Nagasaki? =data ww2010.weblog.y2005.e050802.keys nuclear weapons, Japan, World War II =data ww2010.weblog.y2005.e050802.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050802.date 2-Aug-05 =data ww2010.weblog.y2005.e050802.txt1 On the 60th anniversary, the debate still continues. =data ww2010.weblog.y2005.e050802.txt2 On April 12, 1945, Vice-President Harry S. Truman became President of the United States, upon the death of Franklin D. Roosevelt, with World War II still ravaging on. Truman had never been in Roosevelt's inner circle, and suddenly had to make decisions that would affect the lives of hundreds of thousands of American soldiers: Should we invade Japan, and risk the death of thousands of Americans? The choice was simple: We should not have - according to William M. Burke, who served in WW II, in <#stdurl http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/07/31/INGAKDUJG11.DTL "an article appearing two days ago:"#>

"If American policy-makers had been more rational, in late 1944 they would have tailored their policies to Japan's true situation as a defeated and isolated island nation. After the small fleet of American submarines had gained its stranglehold over Japan's lifeline, policy-makers should have suspended all other operations and waited patiently for Japan to negotiate a withdrawal from its overseas conquests. But considerations of this kind were ignored during the invasion-planning sessions in the Washington of 1945, and in the Smithsonian controversy in the Washington of 1995."

I have to chuckle at statements like this, because nobody is "rational" during a crisis war. America had already seen tens of thousands of its soldiers slaughtered like fish in a barrel on D-Day, 1944. Japan had tortured, beaten and killed American prisoners of war. The level of hatred that the Japanese and the Americans had toward one another was palpable. Like other countries, America has fought many wars. From the point of view of Generational Dynamics, there are two kinds of wars. Briefly, crisis wars are the most genocidal kinds of wars, the wars where huge masses of people are killed, raped, starved or relocated. America has had only two such wars since its founding. One was World War II, in which America firebombed and destroyed entire cities like Dresden and Tokyo, and dropped two nuclear weapons on Japanese cities. The other was the Civil War, in which northern General Sherman marched through Georgia not only killing everyone in sight, but also destroying all homes and crops so that any survivors starved to death. None of America's other wars -- World War I, Vietnam, the Spanish-American war, etc. -- had this kind of genocidal explosion, and that's why the distinction is important. An easy way to understand the difference is to ask yourself: Why didn't we drop nuclear weapons on Hanoi to win the Vietnam war? Because there was no public support for any such move. America was defeated politically, and then on the battlefield. Crisis wars come from the people and non-crisis wars come from the politicians. It was the politicians who led the Vietnam war, and the war was lost because of enormous political opposition from the people. There was no such political concern over Truman's decision to use nuclear weapons in WW II. Although there were some dissenters, there was no serious political opposition at the time. In fact, there was little political criticism for years. It was the 1960s when the political criticism became serious. In a sense, Harry Truman was doing what the people wanted him to do. David McCullough, in his biography of Truman, wrote the following: "How could a president, or the others charged with responsibility for the decision, answer to the American people if... after the bloodbath of an invasion of Japan, it became known that a weapon sufficient to end the war had been available by midsummer and was not used?" The fact is, you can't understand the feelings behind a decision like the use of nuclear weapons after the fact. You can only understand it by studying the attitudes at the time. Let's take a look at what happened in 1945, and what President Truman said at the time (thanks to <#stdurl http://www.doug-long.com/hst.htm "a web site by Doug Long"#>): The atom bomb was dropped onto Hiroshima on August 6, 1945. That same day, Truman made the following statement:

"The Japanese began the war from the air at Pearl Harbor. They have been repaid many fold. If they do not now accept our terms they may expect a rain of ruin from the air, the like of which has never been seen on this earth."

On August 9, an atomic bomb was dropped on Nagasaki. That same day, President Harry Truman made the following statement:

"The world will note that the first atomic bomb was dropped on Hiroshima, a military base. That was because we wished in this first attack to avoid, insofar as possible, the killing of civilians. But that attack is only a warning of things to come. If Japan does not surrender, bombs will have to be dropped on her war industries and, unfortunately, thousands of civilian lives will be lost. "Having found the bomb we have used it. We have used it against those who attacked us without warning at Pearl Harbor, against those who have starved and beaten and executed American prisoners of war, against those who have abandoned all pretense of obeying international laws of warfare. We have used it in order to shorten the agony of war, in order to save the lives of thousands and thousands of young Americans. "We shall continue to use it until we completely destroy Japan's power to make war. Only a Japanese surrender will stop us."

Truman's words are filled with revenge. The later debates do not take these feelings into account. Truman was even more explicit in a letter he wrote the same day to a Senator who wanted more bombing:

"I know that Japan is a terribly cruel and uncivilized nation in warfare but I can't bring myself to believe that, because they are beasts, we should ourselves act in the same manner. "For myself, I certainly regret the necessity of wiping out whole populations because of the 'pigheadedness' of the leaders of a nation and, for your information, I am not going to do it until it is absolutely necessary... "My object is to save as many American lives as possible but I also have a humane feeling for the women and children in Japan."

On August 10, Japan offered to surrender under certain conditions. However, Truman had demanded an 'unconditional' surrender, so the offer was rejected. Truman wrote the following letter:

"Nobody is more disturbed over the use of Atomic bombs than I am but I was greatly disturbed over the unwarranted attack by the Japanese on Pearl Harbor and their murder of our prisoners of war. The only language they seem to understand is the one we have been using to bombard them. "When you have to deal with a beast you have to treat him as a beast. It is most regrettable but nevertheless true."

These are the emotions of the time. Those words are not "politically correct" today, but it's the way that most Americans felt at the time. (And incidentally, the Japanese felt the same about us.) That's what happens during crisis wars, when wars come "from the people." A crisis war is like a raging typhoon or a tsunami. It has no morality, no matter how destructive it is. It destroys and buries almost everything it touches. It's only in retrospect that morality can be assigned to the actions in a war, but while a crisis war is going on, there's little morality. These crisis wars happen at regular intervals. Generational Dynamics predicts that we're close to a new such war, the "clash of civilizations" world war, and sooner rather than later. =eod =// &&2 e050801 The Somalia connection -- The 7/21 London subway bombers =data ww2010.weblog.y2005.e050801.head The Somalia connection -- The 7/21 London subway bombers were from east Africa =data ww2010.weblog.y2005.e050801.keys Somalia, London bombers, suicide bombers, Robert Pape =data ww2010.weblog.y2005.e050801.loc ww2010.weblog.log0508 =data ww2010.weblog.y2005.e050801.date 1-Aug-05 =data ww2010.weblog.y2005.e050801.txt1 All four suspects are now in custody after an international manhunt =data ww2010.weblog.y2005.e050801.txt2 captured <#stdurl http://www.guardian.co.uk/worldlatest/story/0,1280,-5176880,00.html "three suspects in London and one in Rome."#> <#inc ww2010.pic bombxray.jpg right "" "Xray of bomb packed with nails. This picture is related to the July 7 attacks. (Source: ABC News)"#> Incidentally, we're not talking about <#inc ww2010.weblog.ref e050715 "the four perpetrators of the original 7/7 subway bombings."#> Those were massive blasts caused by four suicide bombers who were killed in the blasts, along with dozens of other innocent people, and so, of course, they will never be in custody. These suspects are <#inc ww2010.weblog.ref e050722 "the four perpetrators of the 7/21 subway bombings."#> Those were not attempted suicide bombings. The four perpetrators left the bombs behind in bags to explode. All four bombs failed to explode, although the bombs' detonators did explode, hurting one person non-fatally. Thanks to brilliant police work, <#stdurl http://www.guardian.co.uk/worldlatest/story/0,1280,-5176880,00.html "all suspects were arrested without firing a shot."#> Yasin Hassan Omar was captured on Wednesday in the city of Birmingham Two of the suspects were arrested Friday in west London, following raids by heavily armed police wearing gas masks and lobbing stun grenades. Tracing cell phone calls across Europe, police in Rome on Friday arrested Osman Hussain, a naturalized British citizen from Somalia. Osman was the fourth attacker in the botched bombings. What made such quick work possible was the fact that there are cameras on the subway and on most street corners in London. Investigators were able to go back through the tapes from 7/27 and find pictures of the four suspects and make them public. Civil libertarians object to the use of these cameras, and they're little used in America; but this will increasingly become an issue as the rate of terrorism increases. =inc ww2010.h2 somalia "Somalia - Crucible for al-Qaeda" <#inc ww2010.pic mideast2.gif left "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries. Somalia and Eritrea are in east Africa."#> It turns out that all four suspects are from east Africa, three of them from Somalia. Somalia was in the international news in 1993, when Somali gunmen killed US soldiers and shot down a Black Hawk helicopter in Mogadishu. The incident caused a humiliating retreat of American forces out of Somalia, and was given as one of the reasons that Osama bin Laden believed that he could defeat America with terrorist attacks like 9/11. The Somalia incident was retold in the 2001 movie Black Hawk Down. Since that time, Somalia has become known as a "Crucible for al-Qaeda," because it has a long, unpoliced coastline that's permitted smugglers and terrorists unfettered travel between Africa and the Arabian peninsula. <#inc ww2010.pic somalia2.jpg right "" "Somalia"#> According to <#stdurl http://www.crisisgroup.org/home/index.cfm?id=3555&l=1 "a recent report by the International Crisis Group"#>:

"Nearly four years after 9/11, hardly a day passes without the "war on terrorism" making headlines, with Iraq, Afghanistan, Indonesia and now London holding centre stage. But away from the spotlight, a quiet, dirty conflict is being waged in Somalia: in the rubble-strewn streets of the ruined capital of this state without a government, Mogadishu, al-Qaeda operatives, jihadi extremists, Ethiopian security services and Western-backed counter-terrorism networks are engaged in a shadowy and complex contest waged by intimidation, abduction and assassination.... During the 1990s, jihadism in Somalia was synonymous with al-Itihaad al-Islaami, a band of Wahhabi militants determined to establish an Islamic emirate in the country. Al-Qaeda also developed a toehold, contributing to attacks on U.S. and UN peacekeepers in the early part of the decade and using the country as a transit zone for terrorism in neighbouring Kenya; some leading members of al-Qaeda's East African network continue to hide in Somalia. Since 2003, Somalia has witnessed the rise of a new, ruthless, independent jihadi network with links to al- Qaeda. Based in lawless Mogadishu and led by a young militia leader trained in Afghanistan, the group announced its existence by murdering four foreign aid workers in the relatively secure territory of Somaliland between October 2003 and April 2004."

The 7/21 bombers were part of <#stdurl http://news.ft.com/cms/s/7824c88e-ff04-11d9-94b4-00000e2511c8.html "the "Invisible Community" of tens of thousands of Somalians"#> who came to Britain in the 1990s, seeking asylum from the war and famine. Somalia remains a significant source of refugees, providing the third biggest number of asylum seekers in the first quarter of this year. =inc ww2010.h2 whynot "Why weren't they suicide bombers?" As I was listening to the news coverage on 7/21 of the second round of London subway bombers, I heard something which struck me as very strange: A witness said, "The man put down a bag on the seat and started running away as fast as he could." It was immediately clear how different the 7/21 bombing was from the 7/7 bombing. The 7/7 bombers were happy to die for their cause, and the 7/21 bombers were not. The 7/7 bombers caused enormous carnage, and the 7/21 bombers botched the job. Here's the difference: The first group of bombers were born in Britain, but their families were from Kashmir. As <#inc ww2010.weblog.ref e050715 "I explained in detail after the 7/7 bombings,"#> Kashmir's last crisis war was the bloody mid-1940s crisis war between India and Pakistan, resulting in the partitioning of Kashmir, and enormous and continuous bitterness in Kashmir's Muslim community. By contrast, Somalia's last crisis war began in 1988 and ended in the early 1990s. Thus, it's been less than 15 years since the end of Somalia's last crisis war. Somalia today is thus in a "generational austerity" period, the era that immediately follows any crisis war. The second group of bombers grew up during Somali crisis war. Any generation growing up during a crisis war suffers a kind of generational child abuse. People in that generation grow up to be risk averse and indecisive. So the explanation for the differences between the first and second London bombings was that the first group of bombers was from a community (Kashmir) well into a generational crisis period, while the second group was from a community (Somalia) nowhere near a generational crisis period. The second group of bombers, having recently experienced a crisis, refused to become suicide bombers, and didn't even have the drive and purposefulness to guarantee that even one of the four bombings would succeed. This finding is very significant, not only for Generational Dynamics but also for public policy. =inc ww2010.h2 crisis "Crisis Wars and Suicide Bombers" I've already begun exploring the correlation between crisis wars and suicide bombers in <#hreftext ww2010.i.050718pape "my article on Robert Pape's study of suicide bombers, published in the new book Dying to Win."#> For Generational Dynamics, this correlation is a powerful piece of support for the theory of crisis wars and generational flow. For public policy, this correlation can be used in profiling to relate different kinds of criminal behavior with country of origin of the perpetrator. Is this correlation merely a coincidence? Some people will certainly argue that it is. This discovery of the depth of this correlation is actually something of a surprise to me. I've been aware for some time that there's some correlation, based on our experience with the insurgency in Iraq. News stories have consistently confirmed that the Iraqi suicide bombers were not Iraqis, but were mostly Saudis. This is consistent with Generational Dynamics because the last Saudi crisis war ended in 1925, while the last Iraqi crisis war was the Iran/Iraq war of the 1980s. Still I hesitated to be certain that the correlation existed because of a theoretical objection in Generational Dynamics: We can predict the actions and behaviors of large masses of people, based on generational changes, but we can't predict the actions and behaviors of individuals or small groups of people. This issue comes up most often in the case of politicians. People are forever asking me why I don't comment one way or the other on the policies of George Bush or groups of Senators, for example. My response is that we're headed for various financial and war crises that are already "in the cards," and there's nothing important going on in the world today that George Bush or any other politician can affect one way or the other. What's happening today depends on the attitudes of large masses of people in America, Europe, China, Muslim countries, and other countries around the world. Politics has nothing to do with it. Well, if Generational Dynamics only predicts the attitudes and behaviors of large masses of people, how could there possibly be that it appears to predict the behaviors of individual terrorists? =inc ww2010.h2 theory "Theoretical explanation" The answer to that puzzle is provided by examining Robert A. Pape's research on suicide bombers. His research is published in his recent book, Dying to Win : The Strategic Logic of Suicide Terrorism. I reviewed his research in <#hreftext ww2010.i.050718pape "an analysis that I posted a couple of weeks ago."#> The idea is that every generation always contains a small percentage of angry, disaffected people. The difference is that such people have different choices available to them, depending on the generational era. Some choices are always available: Sublimating that anger into a socially acceptable activity, such as art, writing, counseling, or a religious conversion. In an awakening era, like <#hreftext ww2010.i.sixties040501 "1960s America or Iraq today,"#> when there's a "generation gap" and a great deal of inter-generational political conflict, a young, angry person has the obvious choice of rioting in the streets against his parents' generation. Solitary suicide is also always available as a choice. But in a generational crisis era, there's a special choice available that's not available in any other era: altruistic suicide. From the point of view of Generational Dynamics, crisis eras are unique in that a society values a human life much less than it values the security and survival of the society as a whole. During non-crisis eras, individual human lives are considered important. An altruistic suicide is impossible during non-crisis eras because the great mass of people could never consider such a suicide to be selfless; in fact, the tendency would be to consider a person who commits suicide to have done it for selfish reasons, an unwillingness to face one's personal problems. But during a crisis period, an altruistic suicide is indeed possible. The great mass of people consider are more willing to sacrifice one life for the good of the society, and even to consider such a person to be a hero. And the deeper the society is into the crisis period, the more possible an altruistic suicide becomes. For Americans, an excellent example is D-Day in 1944, when tens of thousands of American forces poured onto the beaches of Normandy, where they were massively slaughtered by the enemy. Those men essentially committed altruistic suicide, and they're considered to be heroes, members of "the greatest generation," to this very day. This ties into Robert Pape's work in Dying to Win. Pape found that, of the hundreds of suicide bombers he studied, they were all altruistic suicides. Since altruistic suicides can only occur during generational crisis periods, we have a solid theoretical explanation for why suicide bombers are overwhelming from societies in generational crisis periods. This theoretical analysis has been confirmed by Pape's findings, and by the Somalia connection of the 7/21 bombers. If further research continues to confirm this analysis, it will be quite significant for both Generational Dynamics and public policy. =eod =// &&2 e050730 Vatican and Israel exchange angry words on terrorism =data ww2010.weblog.y2005.e050730.head Vatican and Israel exchange angry words on terrorism =data ww2010.weblog.y2005.e050730.keys Israel, Vatican, terrorism =data ww2010.weblog.y2005.e050730.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050730.date 30-Jul-05 =data ww2010.weblog.y2005.e050730.txt1 Some Jews are pointedly recalling that the new Pope used to be in the Hitler youth. =data ww2010.weblog.y2005.e050730.txt2 On Sunday, the day after <#inc ww2010.weblog.ref e050723 "the massive bombing at the Egyptian Red Sea resort of Sharm el-Sheikh,"#> Pope Benedict XVI issued <#stdurl http://212.77.1.245/news_services/bulletin/news/16804.php?index=16804&po_date=24.07.2005&lang=en "the following statement:"#>

"The days of serenity and rest have been upset by the news of the abominable terrorist attacks, the death, destruction and widespread suffering in Egypt, Turkey, Iraq and Great Britain. While we entrust to God the victims and their families, and offer heartfelt condolences, we ask God to stay the murderous hand of those who are driven by fanaticism and hatred, and may He convert their hearts to thoughts of reconciliation and peace."

So what's the problem? The problem was that <#stdurl http://www.catholic.org/cathcom/international_story.php?id=15810 "Israel wasn't mentioned in the list of countries targeted by terrorism,"#> especially in view of of a July 12 suicide bombing against Israelis in the coastal city of Netanya. When the Israeli <#stdurl http://www.haaretzdaily.com/hasen/spages/606391.html "Foreign Ministry complained that Benedict "deliberately" omitted the Netanya bombing,"#> a Vatican press statement said,

"It's not always possible to immediately follow every attack against Israel with a public statement of condemnation, and for various reasons, among them the fact that the attacks against Israel sometimes were followed by immediate Israeli reactions not always compatible with the rules of international law. It would thus be impossible to condemn the first (the terror strikes) and let the second (Israeli retaliation) pass in silence."

Let's face it: The Jews and the Catholics have never really gotten along, and it was only in 1994 that the Vatican recognized the state of Israel. Still, diplomats on both sides have been trying to calm the waters, and it's not known at this time whether this spat will settle down or spiral into a major confrontation. From the point of view of Generational Dynamics, a major confrontation would be highly significant. As we've <#inc ww2010.weblog.ref e050616 "indicated several times on this web site,"#> Europe is descending into chaos and heading for a new major war, just as it has time after time for centuries. What we've been seeing in the step-by-step collapse of European Union on the road to war, as part of the major "clash of civilizations" world war. A possible scenario for such a European war may be as follows: When there's a new Mideast war, it seems pretty clear that Britain will side with Israel, and France will side with the Arabs. With France supplying arms to Arabs, it won't be long before British and American bombers are bombing French factories and supply lines, and the French are making strategic strikes on England. A split between the Vatican and Israel will be quite consistent with the above scenario, as a Catholic France sides with Arabs, and a Protestant England sides with Israel. The split does not shed light on which side Germany will choose, however; Benedict is German, of course, but Germany is mostly Protestant. This situation at least marks a change in tone in the Vatican, since the ascension of Pope Benedict XVI. The Inquisition was created in 1233 by Pope Gregory IX as a means to curb heresy, and especially targeted Jews and Muslims. It was just a little over a year ago, on June 15, 2004, that <#stdurl http://thescotsman.scotsman.com/international.cfm?id=683442004 "Pope John Paul II, before his death, asked forgiveness"#> "for errors committed in the service of truth." He added that the request for forgiveness was for "both the dramas connected to the Inquisition as well as for the wounds to the [collective] memory that followed." =eod =// &&2 e050729 Russia infuriated over ABC 'Nightline' interview of Shamil Basayev =data ww2010.weblog.y2005.e050729.head Russia infuriated over ABC "Nightline" interview of Shamil Basayev =data ww2010.weblog.y2005.e050729.keys Russia, ABC news, Shamil Bsayev, Chechnya =data ww2010.weblog.y2005.e050729.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050729.date 29-Jul-05 =data ww2010.weblog.y2005.e050729.txt1 "How many more bombs must hit New York before the American media learns =data ww2010.weblog.y2005.e050729.txt2 to differentiate terrorists from normal people?" asks <#stdurl http://en.rian.ru/analysis/20050729/41054759.html "political commentator Pyotr Romanov."#> It's a good question. Americans have been very critical of al-Jazeera for airing tapes by Osama bin Laden, but obviously ABC considers an interview with notorious Chechen terrorist Shamil Basayev to be just a news story. <#inc ww2010.pic basayev.jpg right "" "Chechen warlord / terrorist Shamil Basayev (Source: Itar-Tass)"#> The Russian embassy in Washington <#stdurl http://www.tass.ru/eng/level2.html?NewsID=2272558&PageNum=0 "issued this statement:"#>

"The fact that the television company ABC News has decided to ignore the arguments of the Russian embassy against the broadcasting of the interview with international terrorist Shamil Basayev causes indignation,” the embassy said in its statement to ABC. “By doing so ABC News has shown apparent disregard of all standards of responsibility of journalism, as well as of human values. At issue is providing a forum to one of Al Qaeda’s zealots responsible for slaughtering innocent victims during many major terrorist attacks that he masterminded and personally perpetrated.” “The most shocking and deadliest of them was the cold-blooded killing of hundreds of children a year ago in the southern Russian city of Beslan."

=inc ww2010.xr.related1 right basayev 3 During the interview of ABC's Nightline on Thursday evening, The interview can currently be seen online by launching it from the <#stdurl http://abcnews.go.com/Video/ "ABC News video page,"#> where a fee is required. As of noon ET today, the <#stdurl http://abcnews.go.com/Nightline/ "ABC News Nightline site"#> publicizes the interview and acknowledges the controversy, but gives neither an explanation or an apology. In the interview, Basayev admits that he's a terrorist, and <#stdurl http://www.rferl.org/featuresarticle/2005/07/4422a342-ee02-4d52-9125-5b36176e6fd8.html "takes credit for numerous terrorist acts, including the September, 2004, Beslan school massacre,"#> in which 330 hostages, half of them children, died. In the interview, <#stdurl http://www.mosnews.com/news/2005/07/29/kosachevbasayev.shtml "Basayev promised many more similar attacks."#> “It’s not the children [of Beslan] who are responsible,” Basayev said. “Responsibility is with the whole Russian nation... If the war doesn’t come to each of them individually, it will never stop in Chechnya.” Asked if a Beslan-type attack could occur again, Basayev said: “Of course ... As long as the genocide of the Chechen nation continues, as long as this mess continues, anything can happen.” It was just last month that Russia <#stdurl http://www.mosnews.com/news/2005/06/14/budyonnovskanniv.shtml "commemorated the tenth anniversary of Basayev's first major terrorist attack."#> In June 1995, Basayev-led terrorists entered Budyonnovsk, a small town in southern Russia, where they captured a large hospital and took over 1,800 people hostage. In the end, more than 100 hostages were killed, and Basayev and his men were allowed to retreat safely back to Chechnya, using hostages as human shields. Ironically, <#stdurl http://www.mosnews.com/news/2005/06/15/flyintokreml.shtml "a recent report reveals"#> that Basayev's original plan, which they had been forced to revise, had been to hijack a plane and fly it into the Kremlin. This would have been six years before exactly that kind of incident took place in New York and Washington on 9/11/2001. News of the ABC interview has caused outrage throughout Russia. "Do ABC journalists dislike Russians and the Russian government? asked <#stdurl http://en.rian.ru/analysis/20050729/41054759.html "political commentator Pyotr Romanov."#> "That is their problem. But do they like their fellow Americans who were killed in the horrendous terrorist attacks of September 11, 2001? Do they like the British citizens who died as a result of the bombing of the London Underground? And what about those killed in Spain and Egypt? Or do my colleagues still naïvely think that Chechens alone are fighting in Chechnya? I would like to tell them that foreign mercenaries have already outnumbered Chechen terrorists in the Caucasus." An envoy of Russian president Vladimir Putin <#stdurl http://www.interfax.ru/e/B/0/28.html?id_issue=11356073 "said that America is encouraging terrorism by employing "dual standards.""#> "It is not the signal we need today, not a signal toward cooperation, toward improving understanding or making it more effective," said Anatoly Safonov. "On the contrary, it signals that dual standards and dual approaches remain. No doubt such instances cast a shadow on cooperation and encourage terrorist operations." Chechen President <#stdurl http://www.interfax.ru/e/B/0/28.html?id_issue=11355988 "Alu Alkhanov said,"#> "I was startled by how they allowed this person, who openly claimed responsibility for dozens of terrorist attacks in Russia, which claimed hundreds of human lives, to voice new threats against Russia and the Russian people. My opinion is that those who gave the floor to Basayev, have not fully realized what threat this person and other terrorists like him pose to the whole world. We will never succeed in the fight against terrorism if such an approach is adopted toward terrorists. Virtually no peaceful place remains on the planet. The world should present a united front against terrorism and refrain from dividing terrorists into good ones and bad ones." =eod =// &&2 e050727 AFL-CIO split =data ww2010.weblog.y2005.e050727.head Historic labor split will mean near-extinction of AFL-CIO and rise of service unions =data ww2010.weblog.y2005.e050727.keys economy, General Motors, Ford, bureaucracy =data ww2010.weblog.y2005.e050727.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050727.date 27-Jul-05 =data ww2010.weblog.y2005.e050727.txt1 As General Motors and Ford themselves approach near-extinction, =data ww2010.weblog.y2005.e050727.txt2 their historic "enemy/collaborators" in the labor union are going the same way. At the 50th anniversary celebration of the <#stdurl http://www.aflcio.org/ "AFL-CIO"#> at its convention that opened in Chicago on Monday, two major labor unions, the 3.2 million members of <#stdurl http://today.reuters.com/business/newsarticle.aspx?type=ousiv&storyID=2005-07-25T200707Z_01_N255964_RTRIDST_0_BUSINESSPRO-ECONOMY-LABOR-DC.XML "the International Brotherhood of Teamsters and the Service Employees International Union left the AFL-CIO's"#> 13 million former members, and joined a dissident group, <#stdurl http://www.changetowin.org/ "the Change to Win Coalition."#> Four other unions are expected to defect as well. Just two months ago, <#inc ww2010.weblog.ref e050511 "S&P changed its ratings of General Motors and Ford bonds to "junk" status,"#> briefly threatening an international financial crisis <#inc ww2010.weblog.ref e050519 "as international hedge fund positions started to unravel."#> Things appear to have settled down now in the hedge fund world, but the long-term decline of both American manufacturing, including GM and Ford, and American labor unions. These are both examples of what I've been calling the "Crusty Old Bureaucracy" pheonomenon. During the 1930s Great Depression, the vast majority of the old businesses went bankrupt, and were eventually replaced by new businesses. When a new business starts out, especially when it's trying to survive after the Depression, it has a "lean and mean" corporate culture, where every employee scrambles to work hard to make the business succeed. As time goes on, many employees become stale in their jobs, and the business develops an entrenched "crusty old bureaucracy." This has been happening to the country as a whole since the 1930s. All the "lean and mean" new 1930s and 1940s new businesses are today, for the most part, sluggish and crippled from bureaucracy. And not just businesses. The same thing has happened to government agencies, educational institutions, non-profit institutions, and, of course labor unions. The symptoms of this are the massive outsourcing of manufacturing jobs to China and service jobs to India that's occurred in the last few years. The collapse of the AFL-CIO also signals continued change for the national political parties, since the AFL-CIO has been among the party's largest fund-raisers. Both political parties will be blown apart just as much as businesses and other institutions will. That's why Generational Dynamics predicts that we're entering a new 1930s style Great Depression that will force a similar massive round of business closings. The AFL-CIO has been losing membership steadily for decades. In 1955, at its peak membership, one out of three workers belong to a labor union. As recently as 1983, 20% of American workers belonged to labor unions. Today, that figure is 12.5%. Money always talks, and the loss of membership has meant loss of dues, and then the loss of political power for the AFL-CIO. Howevr, not all labor unions have been losing members. The leader of the defection is Andrew L. Stern, president of the Service Employees International Union, one of the two unions that walked out on Monday. "We're not trying to divide the labor movement - we're trying to rebuild it," he says. "We have to do everything in our power to help workers. But when you're going down a road and it's headed in the wrong direction, and you know where the road ends, you got to get off the road and walk in a new direction where there is hope." Stern can afford to take a different road because, more and more, he's the man with the money. The SEIU is also one of the few labor unions that's been growing in size. Thus, not only did the AFL-CIO lose 25% of its membership on Monday, it lost the portion of its membership that's growing in size. That's why the AFL-CIO may not be long for this world, at least in its current form. It's been well-publicized that the cost of building a General Motors car today includes $1,500 just to pay the pensions for retired GM workers. That $1,500 per car has frozen everyone in place. GM promised to pay those pensions when times were better, and can't afford to do the research and development necessary to develop new car models to replace the increasingly unpopular SUVs. The AFL-CIO also depends on the $1,500 per car for its own credibility and income. (I need to fact-check this, but I believe that the AFL-CIO manages its members' pension funds and depends heavily on the derived income.) The point is that innovations are out of the question, thanks to the heavy bureaucracy created around that $1,500 per car. But Stern's SEIU is not nearly so bound up. Service industries are, for the most part, much younger than heavy manufacturing industries, and so the pension burden is much smaller. Furthermore, Stern has vowed to make "fundamental changes," including integration with global industries and a positive approach to outsourcing. It's impossible to predict what the new "lean and mean" businesses will be formed during this coming crisis period, and it's impossible to predict what kinds of "lean and mean" labor unions will arise. But Stern's appears to be willing to adapt the SEIU to the rapidly changing world, while the AFL-CIO does not. =eod =// &&2 e050725 Passenger train bombed in Dagestan, following Putin's visit =data ww2010.weblog.y2005.e050725.head Passenger train bombed in Dagestan, following Putin's visit =data ww2010.weblog.y2005.e050725.keys Dagestan, Chechnya, terrorism, Vladimir Putin, russia =data ww2010.weblog.y2005.e050725.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050725.date 25-Jul-05 =data ww2010.weblog.y2005.e050725.txt1 This is the 70'th terrorist attach this year in Dagestan, =data ww2010.weblog.y2005.e050725.txt2 After a week of bombings in Chechnya, Turkey, London, Spain, Iraq, Lebanon, a passenger train was bombed on Sunday morning at 5:30 am near Makhachkala, the capital of Dagestan. <#stdurl http://www.moscowtimes.ru/stories/2005/07/25/013.html "The train car derailed, and a crater was left in the track bed."#> The bomb had been set off by remote control. Russian President Vladimir <#stdurl http://www.csmonitor.com/2005/0725/p07s01-woeu.html "Putin made an emergency visit to Dagestan"#> in secret last week, indicating the seriousness of the situation. Dagestan has over 2 million inhabitants from <#stdurl http://news.ft.com/cms/s/6afcc4c0-fa4c-11d9-b092-00000e2511c8.html "37 different ethnic groups."#> The increasing rate of terrorist attacks is being ascribed to some 2000 insurgents, masterminded by <#inc ww2010.weblog.ref e040919 "Chechen warlord Shamil Basayev,"#> the same person who masterminded <#inc ww2010.weblog.ref e040904 "a series of spectacular terrorist acts last August and September,"#> including the bombing of two airplanes in flight, a subway bombing in Moscow, and the Beslan, North Ossetia, school massacre that killed 340 people, more than half of them children. Commentators are blaming the situation in Dagestan on the increasing level of corruption, fed by the 60% unemployment rate. According to <#stdurl http://www.moscowtimes.ru/stories/2005/07/21/007.html "columnist Yulia Latynina:"#>

"Terrorism in Dagestan is the result of total corruption. The only business in Dagestan is the sale of government jobs, not the production of goods. Residents of the republic can therefore be divided into four categories: those who were given a job based on family ties; those who bought a job; the armed guards who protect people in the first two categories; and the unemployed young people with no money or prospects who are recruited by the Wahhabis and paid to kill cops."

This should not be surprising, because Russia has something in common with its huge neighbor China: Both countries' economies are unraveling rapidly, and both countries are headed for civil war. In the case of <#hreftext ww2010.i.china050116 "the coming major civil war in China,"#> you can see it developing from the tens of thousands of regional rebellions each year, migrant workers, high food prices, high rust belt unemployment, addiction to a bubble economy, unraveling of Mao's social structure and secessionist provinces. In the case of Russia it can be seen by the exponentially growing level of corruption, as reported last week by <#stdurl http://www.indem.ru/indemfond/indfp2_e.html "last week's widely publicized research report"#> by the thinktank <#stdurl www.indem.ru "The Indem Foundation."#> Indem surveyed 1,000 business people and 3,000 private systems and found that <#stdurl http://news.ft.com/cms/s/6afcc4c0-fa4c-11d9-b092-00000e2511c8.html "the size of an average bribe paid by companies has gone up 13-fold"#> from $10,000 to $136,000 in four years, mostly to health, fire and safety inspectors, tax police and law enforcement agencies. Indem calculated that the volume of bribes extracted by various Russian fiscal inspections, police and licensing authorities had reached $316bn (€260bn, £180bn), or 10 times the figure four years ago. The report highlighted the failure of the government to tackle corruption despite Mr Putin's promise to make it a priority. <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus region - including Dagestan, North Ossetia and Chechnya"#> Last year, after <#inc ww2010.weblog.ref e040904 "the Beslan school massacre,"#> I considered the Caucasus region to be the most dangerous region of the world, because it was farthest into a generational crisis period, and because the Beslan massacre seemed likely to make things spin out of control. Since then, Putin has been bending over backwards to reduce tension, and the region has simmered more quietly. But the quiet simmering cannot last forever. What's happening in Dagestan is what's been happening in London, Egypt, Pakistan, and elsewhere: Older generation Muslims do not wish to risk a major war, and so are willing to compromise on many issues, and suffer poverty, bigotry and humiliation. But the younger Muslim generations have no such fear of war, and are increasingly impatient their parents' hesitation. The radical younger Muslims have discovered that suicide bombings get huge amounts of publicity, and it's the best way for the perpetrators to become heroes to their friends. As the younger generations swell in size, while the older generations retired and die, the use of suicide bombings is expected to continue to grow. =eod =// &&2 e050723 Massive bomb blasts in Egypt vacation resort =data ww2010.weblog.y2005.e050723.head Massive bomb blasts in Egypt vacation resort =data ww2010.weblog.y2005.e050723.keys Egypt, terrorism, Shamil Basayev, Beslan, London bombings =data ww2010.weblog.y2005.e050723.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050723.date 23-Jul-05 =data ww2010.weblog.y2005.e050723.txt1 This follows new blasts in London and Chechnya. =data ww2010.weblog.y2005.e050723.txt2 There was a state of panic in the Egyptian Red Sea resort of Sharm el-Sheikh when <#stdurl http://news.bbc.co.uk/1/hi/world/middle_east/4709607.stm "a series of huge explosions early Saturday morning"#> killed at least 49 vacationers. Details are still being released. In the village of Znamenskaya in Chechnya, <#stdurl http://www.mosnews.com/news/2005/07/20/chechnyamourn.shtml "a car bomb killed 14 on Tuesday."#> This bombing was masterminded by <#inc ww2010.weblog.ref e040919 "Chechen warlord Shamil Basayev,"#> the same person who masterminded <#inc ww2010.weblog.ref e040904 "a series of spectacular terrorist acts last August and September,"#> including the bombing of two airplanes in flight, a subway bombing in Moscow, and the Beslan, North Ossetia, school massacre that killed 340 people, more than half of them children. On Thursday there were <#inc ww2010.weblog.ref e050722 "four new subway/bus bombings in London,"#> on the two-week anniversary of the July 7 London bombings. Londoners were stunned on Friday, when <#stdurl http://news.bbc.co.uk/1/hi/uk/4706787.stm "police shot dead a fleeing man."#> They pushed him down onto the ground, and although he did not appear to be a threat, they fired five bullets into his head and shot him. Police have not released any details, but such a killing would only be justified if the victim was suspected of being a suicide bomber who might detonate his bomb at any time. A statement from the police should come over the weekend. From the point of view of Generational Dynamics, the rate of terrorist acts and suicide bombings is expected to increase, as we head for the "clash of civilizations" world war. =eod =// &&2 e050722 Tony Blair calls for calm after new subway bombings. =data ww2010.weblog.y2005.e050722.head Tony Blair calls for calm after another round of subway bombings. =data ww2010.weblog.y2005.e050722.keys =data ww2010.weblog.y2005.e050722.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050722.date 22-Jul-05 =data ww2010.weblog.y2005.e050722.txt1 New York City will inspect bags and backpacks, starting today. =data ww2010.weblog.y2005.e050722.txt2 Today's bombings appeared to be a bungled follow-up on the day of the two-week anniversary of the July 7 bombings. According to <#stdurl http://www.iht.com/articles/2005/07/22/news/london.php "London's police chief,"#> "Clearly the intention must have been to kill. The intention of the terrorists has not been fulfilled." Although details haven't been fully released, it appears that all four bombs failed to detonate. The bombs' detonators themselves exploded, causing only one non-fatal casualty. British Prime Minister <#stdurl http://www.alertnet.org/thenews/newsdesk/L2131582.htm "Tony Blair said at a press conference,"#> "We know why these things are done. They are done to scare people. Fortunately in this instance there appear to have been no casualties...We've got to react calmly." Indeed, Londoners have been reacting calmly since the July 7 bombings, keeping the famous British "stiff upper lip," developed during the daily bombings of the 1940s Nazi "blitz." But everyone realizes that you can't run a subway system if it's vulnerable to regular bombings. One idea is to use the same kind of apparatus for subway passengers as are currently used in airports, but with 3 million passengers a day in London, that idea is simply impossible. However, New York Mayor Bloomberg announced that, starting today, <#stdurl http://www.nytimes.com/2005/07/21/nyregion/21cnd-security.html?hp&ex=1122004800&en=f7657fe1f1bc5beb&ei=5094&partner=homepage "New York City will begin making random checks of bags and backpacks"#> at subway stations, commuter railways and on buses. Boston transit authorities conducted random baggage checks at major rail stations during the Democratic National Convention in July 2004, following the terrorist bombings of 10 commuter trains in Madrid four months earlier. The city, which has about one million daily subway riders, was the first in the nation to enact such a policy. As <#inc ww2010.weblog.ref e050330 "we've said many times on this web site,"#> countries around the world are cutting back on individual civil rights in favor of giving new laws and powers to government. This will continue through the "clash of civilizations" world war, after which individual rights will again slowly be restored. =eod =// &&2 e050721 Pakistan cracks down on extremists =data ww2010.weblog.y2005.e050721.head Tensions build as Pakistan cracks down on extremists after London bombings =data ww2010.weblog.y2005.e050721.keys =data ww2010.weblog.y2005.e050721.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050721.date 21-Jul-05 =data ww2010.weblog.y2005.e050721.txt1 In Kashmir, a car bomb that kills and wounds dozens, including children, =data ww2010.weblog.y2005.e050721.txt2 highlights a week of increasing tension and violence. The London bombings are ironic for those Muslims who have lived in Kashmir, Pakistan, the homeland of the London bombers' parents, since they've seen much similar violence, which they blame on the Indian Hindus. <#stdurl http://www.satribune.com/archives/200507/P1_ms.htm "Murtaza Shibli, a Kashmiri Muslim wrote the following"#>:

"I am no stranger to killing and chaos in my surroundings, for I have lived most of my life witnessing, dodging and reporting such events. As a journalist in Kashmir, I have filled columns of newspapers counting the dead in dozens, collecting the pain and suffering in lifeless words, and watching, the ‘paradise on earth’ – that old designation of Kashmir – burned to a wasteland of sadness by the violence kindled by Indian rule.... By the time I went to college in Kashmir, everyone was talking about holding a gun to fight for freedom. In no time, I saw friends, teachers, neighbors, relatives exalting freedom and the gun. The first blast I witnessed occurred in 1998, and I was standing just yards away from where an old man died. After six months in London, I returned to Kashmir. I felt I had been thrown out of life. I felt like an evictee form my own country. I came back to London and settled here. But all the time I was hiding from myself. I could no longer write. For a time, I even stopped reading about Kashmir and its killing fields. I denied everything that had formed me – my life, my background, my feelings, even my friends. For a long time, my family thought I had gone missing. My mother had become resigned to the possibility that I had been just one more name added to the thousands missing in Kashmir."

The picture is much different from the Indian side, though just as violent. What Murtaza Shibli called "the violence kindled by Indian rule," is seen <#stdurl http://indiamonitor.com/news/readNews.jsp?ni=8037 "by General J J Singh, head of India's army,"#> as necessary to control violence from thousands of Pakistan Muslim militants in Kashmir:

"Previously, there were 2,000 militants in Kashmir. The number has fallen to 1,600 because in January, we eliminated 400 terrorists. ... We are likely to face the situation for some time because terrorism infrastructure is yet to be dismantled across the borders. In light of the situation, we have to continue efforts at achieving our objectives in Kashmir, which is to 'bring down the level of violence to such a degree that the other organs of the state and central governments can deliver on governance'."

The seething "Line of Control" in Kashmir, separating the Indian-held territory from the Pakistan-held terrority is the site of continuing violence. The LoC was established by the United Nations in 1947, following an extremely bloody genocidal crisis war between Pakistan and India that "settled" the Kashmir problem by partitioning the region and giving part of it to each. The U.N. mandated that an election be held in Kashmir within five years to decide which country they wanted to belong to, but India has always blocked any such election, knowing that it would lose in the majority Muslim population. So, radical Muslim forces <#stdurl http://www.jihadunspun.com/intheatre_internal.php?article=103607&list=/home.php "vow to continue the "sacred struggle""#> involving martyrdom and strikes against the "Indian occupational forces." This is the environment that the families of the London bombers came from. Young men often look for ways to make something of their lives, to become heroes if they can. And if the young men are disaffected and bitter, they may look for extreme ways. What better way is there to become a hero than an "altruistic suicide," killing as many civilians as possible in England, the supporter and long-time ally of India. Pakistan has become almost as electrified by the London bombings as England has. One Pakistani journalist, <#stdurl www.MumtazRao.net "Mumtaz Hamid Rao,"#> says <#stdurl http://www.pakistantimes.net/2005/07/18/editorial.htm "in an editorial"#> that Pakistan is becoming hostage to the extremists:

"With a vow that enough is enough, we would like to point-out that the nation can and would, in no way tolerate extremists in any mode or manner—may they be locals or the ones who have their ancestral abodes, somewhere else—perceptibly onto the land of the antagonistic neighbour(s)—and have penetrated into the dazzling soils of Pakistan to create discomfiture for us."

Pakistan the country has been changing rapidly since July 7. Under <#stdurl http://indiamonitor.com/news/readNews.jsp?ni=8009 "orders of President Pervez Musharraf,"#> hundreds of suspected militants have been rounded up and jailed, and new laws will be passed to give the police even greater power. The new laws are being called <#stdurl http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/07/18/nbomb218.xml&sSheet=/news/2005/07/18/ixnewstop.html ""Taliban-style public morality laws,""#> since they will force all citizens to observe the call to prayer, singing and dancing will be banned and unrelated men and women will be forbidden from walking together in public. Politicians around the world are calling on Musharraf to do more to keep Pakistan from exporting more terrorism, and he does seem to be trying. =inc ww2010.cf.cf050530 p right But Generational Dynamics tells us that it's a losing battle. It's the older generation, the generation that lived through the genocidal crisis war of the 1940s, that's willing to do anything, endure any compromise, to avoid another such war. It's the younger generations that know only the violence they see, the hopelessness they feel, who can't believe that a war would make their lives any worse than it already is. Kashmir has appeared on my conflict risk graphic at a "low risk" level because it seems that the even with the violence at the Line of Control, a war was unlikely at this time. This rating is currently under review. An increase to "medium risk" seems to be in order. An increase to "high risk" would not be warranted unless an attempt on Musharraf's life, of which there have been many, finally succeeds. Generational Dynamics predicts there will indeed be a new genocidal crisis war between India and Pakistan, and since both countries possess nuclear weapons, there's little doubt that they will be used. The war may begin next month, next year, or soon after, but it will happen with near 100% certainty. =eod =// &&2 e050716 China and Japan head for military confrontation over disputed islands. =data ww2010.weblog.y2005.e050716.head China and Japan head for military confrontation over disputed islands. =data ww2010.weblog.y2005.e050716.keys =data ww2010.weblog.y2005.e050716.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050716.date 16-Jul-05 =data ww2010.weblog.y2005.e050716.txt1 Meanwhile, a Chinese general threatens America with nuclear war over Taiwan. =data ww2010.weblog.y2005.e050716.txt2 In a move which could not have done anything besides infuriate the Chinese, <#stdurl http://news.bbc.co.uk/2/hi/asia-pacific/4681823.stm "Japan's government has awarded test drilling rights"#> to a private Japanese company in an area of the East China Sea claimed by both Japan and China. For centuries Japan and China have disputed the ownership of a small island chain called the Senkaku Islands by the Japanese and the Diaoyu Islands by the Chinese. The islands are little more than rocks in the middle of the sea, but they are valuable because of a potential oil field there. In the past few months, <#inc ww2010.weblog.ref e050416 "Chinese rage at Japan has been growing"#> over a variety of issues, leading to a series of anti-Japan riots and demonstrations in China in April. The United Nations had planned to arbitrate the dispute by 2009, but Japanese is going ahead with test drilling anyway, in order to gain leverage in the discussions. As a separate issue, General Zhu Chenghu, a top-level officer in China's People's Liberation Army (PLA) <#stdurl http://news.ft.com/cms/s/28cfe55a-f4a7-11d9-9dd1-00000e2511c8.html "threatened America with nuclear war"#> if America interfered with Taiwan. Speaking to a group of foreign journalists, General Zhu said,

"If the Americans are determined to interfere [then] we will be determined to respond. We ... will prepare ourselves for the destruction of all of the cities east of Xian. Of course the Americans will have to be prepared that hundreds ... of cities will be destroyed by the Chinese."

China has long promised never to be the first to use nuclear weapons, but General Zhu's remarks, if confirmed by Beijing, would represent a reversal of that policy. (Xian is an ancient city in central China.) As I've said many times before on this web site, China has the largest army in the world, and is quickly militarizing <#inc ww2010.weblog.ref e050604 "and arming itself to the teeth with high technology weapons."#> China has repeatedly vowed to capture Taiwan by force, if necessary, and the conflict over the East China Sea islands will provide them with an excuse to attack Japan as well. Meanwhile, China is internally coming apart at the seams, and any external conflict could be the trigger that launches <#hreftext ww2010.i.china050116 "a major civil war in China."#> Generational Dynamics predicts that these wars will occur with 100% certainly. These wars will occur sooner or later, and with the level of verbal conflict rising constantly, it's sure to be sooner. =eod =// &&2 e050715b Israel strikes at Hamas =data ww2010.weblog.y2005.e050715b.head Israel strikes at Hamas in Gaza, after Hamas launches massive rocket attack against Israel =data ww2010.weblog.y2005.e050715b.keys =data ww2010.weblog.y2005.e050715b.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050715b.date 15-Jul-05 =data ww2010.weblog.y2005.e050715b.txt1 The Palestinian Authority declared a state of emergency in Gaza on Friday, =data ww2010.weblog.y2005.e050715b.txt2 after a series of violent escalations. Israel and the United States have <#stdurl http://www.guardian.co.uk/worldlatest/story/0,1280,-5143572,00.html "called on Palestinian leader Mahmoud Abbas to crack down on the Palestinian militants,"#> who killed six Israelis this week - five in a suicide bombing in Netanya and one in a rocket attack near Gaza. The suicide bombing occurred in Tuesday, when an 18-year-old Palestinian approached a West Bank shopping mall and blew himself up. On the Gaza side, Hamas-led militias launched at least 53 missiles against Israeli targets on Thursday and Friday afternoons. according to Israeli sources. The <#stdurl http://news.bbc.co.uk/2/hi/middle_east/4686739.stm "Palestinian Authority tried to use force to restrain Hamas,"#> but they were outnumbered by the Hamas forces. After that, Israel took matters into its own hands, and launched air strikes that killed militans from the Hamas organization. Israel is fulfilling it's promise, made in mid-June, <#inc ww2010.weblog.ref e050622 "to resume targeting Hamas militants, if the Palestinian Authority can't control them."#> The last crisis war to occur in this region was the genocidal Jewish-Arab war of the late 1940s. From the point of view of Generational Dynamics, the Palestine region has been replaying the events of the 1930s and 1940s that led to a massive regional war. The earlier conflict began in 1936 with rock throwing. The level of violence increased over the years until the partitioning of Palestine and the creation of Israel in 1948 triggered a full-scale crisis war. Today's conflict could be said to have started with the first Intifada in 1989. The level of violence increased significantly with the second Intifada that began in 2000, and has been increasing ever since. Since 2002, I've been predicting that the genocidal 1940s Arab-Jewish war will be refought, and will engulf the entire region. Generational Dynamics predicts that such a war will occur again, with near 100% certainty. What will trigger the renewed war is not yet known, but it could happen tomorrow, next month, next year, or in two or three years. Since 2002 I've been saying that I consider the most likely time to be within two years following the disappearance (through death or retirement) of Yasser Arafat. Following <#inc ww2010.weblog.ref e041114 "Arafat's death on Nov 14, 2004,"#> the entire world, in a "state of denial" as usual, heralded the new era of Mideast peace and tranquility, especially after <#inc ww2010.weblog.ref e050124 "Mahmoud Abbas, also known as Abu Mazen, took "bold steps" to bring peace,"#> after being elected Palestinian Authority president. As I said at the time, nothing has changed: Generational Dynamics still predicts a new Mideast crisis war, with 100% uncertainty. =inc ww2010.cf.cf050530 p right For me, only one question remains: Has the situation in the Mideast now gotten so bad that it's time to raise the risk level in my risk level graphic from <#inc ww2010.cf.cflgif 2#> to <#inc ww2010.cf.cflgif 3#>? Right now I'm leaving it where it is, because Mahmoud Abbas is still making a grand effort to bring peace to the region. But when the violence worsens, or if Abbas is "eliminated," then the graphic will be changed. =eod =// &&2 e050715 Defiant Britons in two minutes of silence =data ww2010.weblog.y2005.e050715.head Defiant Britons join people around the world in two minutes of silence =data ww2010.weblog.y2005.e050715.keys =data ww2010.weblog.y2005.e050715.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050715.date 15-Jul-05 =data ww2010.weblog.y2005.e050715.txt1 The revelation that the subway suicide bombers were young native-born Britons has thrown Western Europe into alarm =data ww2010.weblog.y2005.e050715.txt2 <#inc ww2010.pic vigil.jpg right "" "Crowds at the vigil in London's Trafalgar Square (Source: BBC)"#> At 12 noon on Thursday in London, <#stdurl http://news.bbc.co.uk/2/hi/uk_news/4682005.stm "cars and busses pulled to the side of the road,"#> people poured out of buildings onto the sidewalk to bow their heads, the government shut down, sporting events paused, stores closed, and radio and television statements went silent, to pay two minutes of respect to the victims of last week's subway bombing. One Muslim man told CNN that he was worried about the attitudes of his own children. "The bombers were just like us. And if they're just us, then more of them could be anywhere, couldn't they?" They were all native-born young men whose parents had emigrated from Pakistan. One was a 22-year-old cricket lover whose parents ran a fish and chip shop; another was a 30-year-old married primary school teacher with an eight-month-old daughter; another was an 18 year old boy. Last Thursday, they traveled together on a train from Luton, arriving at King's Cross subway station a little before 8:30. They left separately in four different directions (north, south, east and west) and exploded their bombs, killing themselves and dozens of others. Since then, <#stdurl http://www.iht.com/articles/2005/07/11/news/bias.php "at least four mosques have been fire-bombed,"#> and others have seen their windows smashed and their doors damaged. Some have had racist graffiti scrawled on their walls and, in one case, a mosque was hit by bloody pig parts, a particular offense in a religion that eschews eating pork. A Muslim man in London was beaten by passers-by, and some women have had their hijabs pulled from their heads. Prime Minister Tony Blair, trying to reduce people's anxieties and at the same time head off further public backlash against Muslims, is planning to meet with Muslim leaders around Britain, and at the same time <#stdurl http://news.bbc.co.uk/1/hi/uk/4679001.stm "he's recommending the passage of new laws:"#> It's already illegal to commit a terror attack, of course, but one new law will make it illegal to "prepare for" such an attack; and the other new law will permit the deportation of anyone who "incites hatred." These laws don't mention Muslims, of course, but no one doubts that they're targeted specifically at Muslims. French Premiere Jacques Chirac observed the two-minute period of silence, and said that <#stdurl http://www.dailytimes.com.pk/default.asp?page=story_15-7-2005_pg4_8 ""no country in the world is safe from attacks""#> like the ones in London last week. And yet, Chirac, who last week expressed his contempt for British food, did not hesitate at the same time to express his contempt for England in other ways, saying that <#stdurl http://www.iht.com/articles/2005/07/14/news/france.php "the French are better than the British in many ways:"#> They have more children, they spend more on research and they live longer. Those who had hoped that the London bombings would re-unify Britain and France after <#inc ww2010.weblog.ref e050618 "last month's acrimonious European Union summit that has put EU into crisis"#> were disappointed by Chirac's additional comments: "I am not disposed to making the least concession on agriculture," he said. From the point of view of Generational Dynamics, we're seeing a continuing hardening of many attitudes that are unique to "generational crisis" periods. Most of the world is in a generational crisis period because it's 60 years past the end of World War II, and today's leaders have no personal memory of the horrors of that war, and lack the personal experience necessary to govern. On this web site I've often said that what's important in generation trends are the behaviors and attitudes of large masses of people. Each individual, each politician is an individual who can do what he wants, and his actions cannot be predicted. But it is possible to predict certain attitudes and behaviors of large masses of people as generations change, and we're seeing that now. The British people are in a state of shock over the bombings, because the same thing could happen again at any time. If something like this had happened ten years ago, it wouldn't have had nearly the same impact. Ten years ago, the country's leaders were people who had lived through the daily "blitz" bombing of London by German bombers. A single subway bombing is nothing compared to what those living through the blitz had to go through every day, and they could have shrugged it off. But everyone in active life today in Britain -- and in Western Europe and in America and in Pakistan -- have never experienced anything like the subway bombing, and are scared to death of it. What made these four young men decide to bomb the subway? Generational Dynamics provides some partial answers. Children who are born right after a crisis war (the "baby boomer" generation after World War II) grow up in a very structured environment with parents who are determined to protect them from ever having to go through such a war again. When these kids come of age, the kids rebel against their parents' world view and harsh rules, in a "generation gap" like the generational awakening period that America experienced in the 1960s. Kids born during an awakening period ("Generation X" in the 1960s case) have a very different childhood from the preceding generation. Kids born during an awakening become disaffected, unhappy, cynical, and they consider the earlier generation (the Boomers) to be extremely arrogant and narcissistic. The kids who turned into suicide bombers were from the tail end of the disaffected Generation X. This might have taken them in any direction, but these kids decided to bomb the London subways. There are <#stdurl http://www.dailytimes.com.pk/default.asp?page=story_14-7-2005_pg3_1 "700,000 Britons who came from Pakistan."#> Because of their high birth rate, their mean age is around 16. They have a high crime rate, and a very high unemployment rate. Why target England? That's easy to explain. Their parents had immigrated from Pakistan, but not just anywhere in Pakistan: They had come from the Kashmir region. India and Pakistan had fought a very bloody crisis war in the mid-1940s, Kashmir became the major, most bitter geogrphical fault line. Kashmir is an overwhelmingly Muslim area, and when the United Nations partitioned Kashmir in 1947, into Indian and Pakistani regions, it was supposed to be temporary, since the UN Security Council mandated an election in 1951 to permit Kashmiri self-determination. That election has never been held because India has blocked it, since Pakistan would probably win. India is allied with England, and used to be part of the British empire. So, to a disaffected young man whose parents came from Kashmir, who is suffering bias and unemployment and poverty, and who is looking for a way to make his life meaningful, might well see the suicide bombing of a subway as the way to make himself a hero (not to mention getting 72 virgins). Once you've established the patterns of history, and once you understand that what's happening today has happened many times before, for exactly the same sorts of reasons that it's happened before, you can't be surprised. The result is inevitable: Muslims are already becoming increasingly isolated and radicalized throughout Europe, and non-Muslims are becoming increasingly suspicious and anxious. Desperate politicians will pass new laws that restrict civil rights, hoping that these new laws will prevent a new terrorist attack. And related issues, such as the contemptuous attitude of the French toward the English, are not affected at all. =eod =// &&2 e050712b Kofi Annan tells UN General Assembly to "calm down" =data ww2010.weblog.y2005.e050712b.head Kofi Annan tells UN General Assembly to "calm down" =data ww2010.weblog.y2005.e050712b.keys =data ww2010.weblog.y2005.e050712b.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050712b.date 12-Jul-05 =data ww2010.weblog.y2005.e050712b.txt1 In a very heated debate over expanding the UN Security Council, =data ww2010.weblog.y2005.e050712b.txt2 opposing factions adopted some harsh language about each other. <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2005-07-12T175914Z_01_YUE264731_RTRUKOC_0_UN-COUNCIL-REFORM.xml "Pakistan called the four countries which submitted one resolution"#> "seekers of special privileges and power," while Brazil called arguments to delay "beguiling." The African Union has one proposal, Brazil has put forth a second proposal, and there's even a third proposal floating around. As things got heated, Kofi Annan said, "We are at a very early stage, and I think we should calm down and better not get all excited about it. ... These are mature men and women who are dealing with a very serious issue. And I hope no one is going to want to play a "spoiler,' to be blamed for lack of progress." In Kofi Annan's dream world, <#inc ww2010.weblog.ref e050712 "where he decides whether a war is a "good war" or a "bad war,""#> anything is possible as long as Kofi Annan wants it. <#inc ww2010.pic unlogo.jpg right "" "United Nations"#> Over two years ago, in March 2003, <#hreftext ww2010.i.un "I wrote that the UN is self-destructing."#> That was because the United Nations was debating the war in Iraq, and the debate was extremely bitter and divisive. That was a major crisis for the UN, and nothing like it has happened since then, but that doesn't change the conclusion. The UN today is practically incapable of accomplishing anything but empty words. It's a forum for world leaders to talk absolute and utter nonsense. The UN will survive as long as there isn't a real issue that they have to deal with. But there are many such issues coming up, and the UN will not reach any satisfying conclusion on any of them. Generational Dynamics predicts that we're headed for a new "clash of civilizations" world war, and you can see it happening. It was just a couple of weeks ago that an <#inc ww2010.weblog.ref e050618 "acrimonious European Union summit ends in total crisis and chaos,"#> putting the entire "European project" on hold. We're at a unique time in history, 60 years after the end of WW II, when all the countries that fought in that war are in generational crisis periods, because all the leaders and senior managers in these countries are from the generations born after WW II, and none of them have any personal memory of the horrors of that war. =eod =// &&2 e050712 Srebrenica massacre: Survivors commemorate =data ww2010.weblog.y2005.e050712.head Survivors commemorate the genocidal 1995 Srebrenica massacre =data ww2010.weblog.y2005.e050712.keys =data ww2010.weblog.y2005.e050712.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050712.date 12-Jul-05 =data ww2010.weblog.y2005.e050712.txt1 After Rwanda, Srebrenica and Darfur, United Nations says "Never again" - again. =data ww2010.weblog.y2005.e050712.txt2 When I was growing up in the 1950s, I used to hear the words "never again" in reference to the Jewish holocaust in 1930-40s Germany. Since then, we've had several genocides which were just as bad as the Jewish holocaust, and we seem to hear the words "never again" again and again and again. On Monday, world leaders gather with tens of thousands of survivors and neighbors to say "never again" again and to commemorate the tenth anniversary of the Srebrenica massacre, where thousands of boys and men, who had been separated out from the women, were massively slaughtered and buried in mass graves -- all right under the nose of a United Nations "peacekeeping force." The Balkan states (formerly Yugoslavia) is the meeting place of three great civilizations: the Western (Judeo-Christian) civilization, the Orthodox Christian civilization, and the Muslim civilization. Great genocidal inter-civilization wars have occurred in this region with regularity for centuries. One of the greatest of these wars was World War I, the Great War, that began in 1912. When it was settled, the Balkans were united as the Kingdom of Yugoslavia. Regular readers of this web site know that genocidal crisis wars occur in every tribe, society, nation and region, and that they occur roughly every 70-90 years, the maximum length of a human lifetime. And so it's no surprise that Yugoslavia survived only 74 years from the time it was formed, and then dissolved into a new genocidal crisis war. When Yugoslavia collapsed in the 1980s, it split into largely Catholic Croatia, largely Orthodox Christian Serbia, and largely Muslim Bosnia and Albania. Remarkably, these three groups lived together peacefully for decades in the Balkans. In many cases, they were friends and neighbors, living near each other, babysitting for each other's children, often intermarrying - just like any suburban neighborhood in America. That's why it was so remarkable to see how brutal and violent the Balkans war of the 1990s was. It was as strange and unexpected as if the citizens of Stamford, Connecticut, decided one day to rise up and start killing each other. The war was extremely brutal, with atrocities committed on both sides. However, the better-armed Serbs gained the upper hand, and developed a policy of mass-murdering all the men and mass-raping all the women. With the Serbs achieving victories, the United Nations tried to stop the war. In 1993, the UN Security Council passed Resolution 819, declaring that the town of Srebrenica and a 30 square mile area around the town is now the first "United Nations Safe Area." There's always a big problem with "safe areas," in that they're usually protected from attack by some political prohibition, but nothing stops them from being used as bases for counterattacks. (For example, the Muslims in Iraq often used mosques as "safe areas," feeling free to store weapons there and launch missiles from there.) Thus, the Muslims were "safe" in Srebrenica, but could store weapons and launch counterattacks from Srebrenica, thus further infuriating the Serbs. By December, 1994, the war had resulted in some 200,000 or more deaths, millions of refugees, and tens of thousands of rapes. In <#stdurl http://www.pbs.org/wnet/cryfromthegrave/massacre/time_line.html "January, 1995, a battalion of Dutch Peacekeepers arrived on the scene"#> to Keep the Peace in Srebrenica. Unfortunately, the Serbs didn't comply, and took 350 of the Dutch Peacekeepers as hostages. An angry United Nations decided to bomb the Serb positions, but there were some mixups, and the request for bombers was filled out on the wrong form (I'm not joking!!!), then it was too late because the bombers were running out of fuel, so the whole thing got delayed. Finally, two Dutch F-16 Fighters drop two bombs on Serb positions. The Serbs threatened to kill Dutch hostages and shell refugees, so the bombing campaign was called off. Later the same day, July 11, 1995, the Serbs entered Srebrenica and issued an ultimatum: The Muslims must hand over their weapons to guarantee their lives. Some men fled into the mountains; they were shelled, captured and killed. But most Muslims complied. Thus did the Serbs acquire most of the Muslim weapons in Srebrenica. On July 12, the Serbs demanded that the men and boys be separated from the women; the Serbs insisted that men must be questioned to identify Muslim War Criminals. The women were sent away on busses, and the men and boys were slaughtered. Between July 12 and July 16, 1995, the Bosnian Serb Army killed over 7,000 Muslim men. It was the greatest European atrocity since World War II. So yesterday, <#stdurl http://msnbc.msn.com/id/8540736/ "50,000 people rallied in Srebernica to commemorate the massacre."#> Officials from all over the world spoke utter nonsense. <#stdurl http://www.iht.com/articles/2005/07/11/news/bosnia.php "British foreign secretary, Jack Straw, said"#> it was "a shame on the international community that this evil took place under our noses. I particularly regret this. And I am deeply sorry for it." Similar sentiments came from <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2005/07/11/AR2005071101439.html "Richard Holbrooke, who eventually engineered a peace treaty."#> He said, "Srebrenica was the failure of NATO, of the West, of peacekeeping and of the United Nations It was the tragedy that should never be allowed to happen again." How was it a failure of Nato, the west, peacekeeping and the UN? What else could have been done? We didn't do anything about the Rwanda genocide, and the Darfur genocide. And we've gotten nothing but grief from intervening in Iraq. Straw and Holbrooke don't say what could have been done, and indeed, nothing could have been done. UN Secretary General Kofi Annan <#stdurl http://www.un.org/apps/news/story.asp?NewsID=14886&Cr=Srebrenica&Cr1= "put out a press release"#> and sent an envoy, Shashi Tharoor, to the rally. Tharoor said, "Ten years after those tragic events, they continue to haunt us and serve as a reminder that such atrocities must be met with all necessary means and that there must be the political will to carry the policy through." Annan must be getting exhausted from all the haunting he's suffering, with all the genocide going on. And there's never any political will. Annan forgot to mention that after the massacre, when American-led forces intervened and forced an end to the war, we did so without UN approval. But nine years later, when American-led forces intervened in Iraq, Annan called the war illegal. One thing I've discovered is that everyone has their favorite wars. Last year, I was startled to hear <#inc ww2010.weblog.ref e040727 "the great peacenik Jesse Jackson call for sending American troops to Darfur."#> Kofi Annan has also called for intervention in Darfur. So an intervention in Iraq is a "bad intervention" to these guys, but an intervention in Darfur and Sudan is a "good intervention." Do you get the feeling that we're dealing with political twits? The problem, as I've said many times on this web site, is that these massacres and genocides all take place in the context of crisis wars, and are "acts of nature," which cannot be stopped any more than a tsunami can be stopped. A year ago, when <#inc ww2010.weblog.ref e040628 "I first wrote about the crisis war in Darfur,"#> I predicted that the UN would be helpless to stop the crisis war until it had run its course. And I was absolutely right. Crisis wars happen regularly, and they can't be stopped. There are many reasons why they can't be stopped, but one of the main reasons is that there are many people around who don't want to stop whatever war you're talking about. The UN couldn't intervene further to prevent the Srebrenica massacre because Russia and China opposed intervention. One columnist, <#stdurl http://www.iht.com/articles/2005/07/11/opinion/edmont.php "William Montgomery, wrote a column"#> entitled, "There's plenty of blame for us all," which contained these paragraphs:

"The fault for this lies equally with the United Nations and the powerful countries like the United States and others in the Contact Group that provided much of its policy direction. Instead of demanding a cease-fire and backing it up with sufficient force, Unprofor had to beg, cajole and offer a variety of carrots or empty threats with totally predictable results.... If we are going to move this region away from the idea of collective guilt, the first and necessary step is to acknowledge individual guilt and to indicate remorse that war crimes were committed. At the same time, though, where are the leaders of the international community who also helped to bring events in the Balkans about? Have we ever heard one word of apology or acknowledgement of failure or responsibility from anyone in leadership positions of Unprofor, the United Nations or the major governments that they got it wrong?"

Well, of course it's all America's fault, but I'm particularly struck by his claim that the massacre was "totally predictable." Really? There was nobody predicting a Srebrenica massacre at the time, to my knowledge. But OK, why don't we turn away from the past, and look at some things that I've discussed on this web site, things that are "totally predictable" today:

We're headed for a <#hreftext ww2010.i.050711eleven "major stock market crash"#> with 100% certainty, but no one's talking about it or preparing for it. I never understood how people didn't see the crash of 1929 coming, but I sure see it now.
China has the largest army in the world, and is quickly militarizing <#inc ww2010.weblog.ref e050604 "and arming itself to the teeth with high technology weapons."#> Their plan is to capture Taiwan, go to war with Japan and get revenge for WW II atrocities, and gain hegemony over all of the Pacific region, including all of southeast Asia, taking the place of America as the world's largest superpower. What are we doing about that, inasmuch as it will cause a new world war? I never understood how Neville Chamberlain could have been so completely fooled by Hitler (and why Winston Churchill was mocked and scorned at the time), but I sure do now.

=eod =// &&2 e050711 S&P 500 stock index nears four-year high =data ww2010.weblog.y2005.e050711.head S&P 500 stock index nears four-year high =data ww2010.weblog.y2005.e050711.keys =data ww2010.weblog.y2005.e050711.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050711.date 11-Jul-05 =data ww2010.weblog.y2005.e050711.txt1 Unfortunately, that's not good news. =data ww2010.weblog.y2005.e050711.txt2 A couple of years ago, oil sold for $25-30 a barrel. Today the price exceeds $60 a barrel. It seems that the worse the economic news is, the higher the stock market goes, and today the S&P 500 index neared a four-year high. "On balance, things are going well, but the mood is still very, very guarded," <#stdurl http://www.usatoday.com/money/markets/us/2005-07-12-wall-street_x.htm "Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors, said of stocks."#> "Confidence in the market is improving, but it's improving in very small steps because there's still risks out there, like oil prices." As I've been writing on this web site since 2002, we're entering a new 1930s style Great Depression, as payment for the 1990s stock market bubble. This view was supported last weekend by an article in Barron's, as <#hreftext ww2010.i.050711eleven "I wrote about yesterday."#> That article confirms that the stock market is overvalued by 100%, from which one can only conclude that a major stock market crash is in the offing. In 2002, when the stock market was around Dow 8000, I had hoped that stocks would keep falling gradually to the Dow 4000 level, since that would do the least damage to the US and world economy. However, that hasn't happened, and stocks have returned to extremely high bubble levels. The crash is coming with 100% certainty, and when it does, it will do enormous damage. =eod =// &&2 e050709 North Korea resuming nuclear non-proliferation talks =data ww2010.weblog.y2005.e050709.head North Korea agrees to resume nuclear non-proliferation talks =data ww2010.weblog.y2005.e050709.keys =data ww2010.weblog.y2005.e050709.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050709.date 9-Jul-05 =data ww2010.weblog.y2005.e050709.txt1 The six-party talks will start the week of July 25, thirteen months after the last round, =data ww2010.weblog.y2005.e050709.txt2 after which North Korea canceled all further talks. The <#stdurl http://www.bloomberg.com/apps/news?pid=10000087&sid=aYVrco0g_srU&refer=top_world_news "six parties include South Korea, China, Japan and Russia, as well as North Korea and the U.S."#> North Korea has used the 13 month hiatus to make substantial progress in its nuclear weapon development program, and is now believed to have several nuclear weapons in its inventory. As I wrote in <#hreftext ww2010.i.korea050210 "my Feb. 10 analysis,"#> North Korea has been mobilizing for war since last April, and appeared to be manipulating the nuclear non-proliferation talks to gain time for its nuclear weapons program. North Korea's behavior since 2002, when it first announced its intention to develop nuclear technology, follows a typical historical pattern of countries that are about launch a pre-emptive crisis war. The only thing we don't know is President Kim Jong-il's timing. The possibility that North Korea may be close to conducting a nuclear test has <#inc ww2010.weblog.ref e050510 "caused a high level of nervousness and panic around the world."#> However, this all comes at a time when North Korea <#stdurl http://news.bbc.co.uk/2/hi/asia-pacific/4072280.stm "has been facing a severe food shortages in years."#> According to news reports, North Korea wants the U.S. to provide fuel and food, sign a non-aggression pact, build a nuclear reactor and open diplomatic relations. North Korea may thus see a return to the talks at this time as a way to gain substantial financial benefit. The U.S. is going to ask North Korea to destroy it's nuclear arsenal, but pigs will fly before that happens. It may be that North Korea plans to use the talks to get food, fuel and money in return for not conducting a nuclear test in the near future. =eod =// &&2 e050707c British political parties uniting =data ww2010.weblog.y2005.e050707c.head British political parties uniting around Prime Minister as death toll mounts =data ww2010.weblog.y2005.e050707c.keys =data ww2010.weblog.y2005.e050707c.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050707c.date 7-Jul-05 =data ww2010.weblog.y2005.e050707c.txt1 Proposed laws to require identity cards and allow detention without trial are given new impetus, =data ww2010.weblog.y2005.e050707c.txt2 as death toll mounts into the dozens following the subway bombings in London earlier today. The Conservative and Labor parties united with Tony Blair's Labor party to insist that terrorists would not succeed. Conservative leader Michael Howard said, "What is important is to make it absolutely clear that this country is united as one in our determination to defeat terrorism and to deal with those who are responsible for the dreadful acts that have taken place in London". Analysts <#stdurl http://news.bbc.co.uk/1/hi/uk_politics/4660185.stm "are now recalling Blair's words on February 23, 2005:"#>

"Were there to be a serious terrorist act in this country and afterwards it was thought that we had not taken the measures necessary, believe me, no one would be talking about civil liberties; they would be talking about why we had not done more to protect the security of this country"

Those words now appear to have been prophetic. British citizens today, almost all in the generations born after WW II, are undoubtedly thinking about their parents' horror stories of the "blitz" - the daily bombing of London during WW II. It was 9/11 every day for Londoners during WW II, and now it's happening again. As always happens during a "generational crisis" era like today, the generations born after the previous crisis war will not tolerate acts of terrorism and similar surprises and, as Tony Blair indicated, will not hesitate to curtail civil liberties if they perceive that to be required. =eod =// &&2 e050707b G-8 leaders react to "particularly barbaric" London subway bombings =data ww2010.weblog.y2005.e050707b.head G-8 leaders react to "particularly barbaric" London subway bomb blasts =data ww2010.weblog.y2005.e050707b.keys =data ww2010.weblog.y2005.e050707b.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050707b.date 7-Jul-05 =data ww2010.weblog.y2005.e050707b.txt1 England and France are unified once more -- against terrorism. =data ww2010.weblog.y2005.e050707b.txt2 An Islamist website has posted a statement - purportedly from al-Qaeda - claiming that it was behind <#stdurl http://news.bbc.co.uk/1/hi/england/london/4659093.stm "the simultaneous bombing attacks on London's subways and busses"#> this morning. The terrorist bombings all went off simultaneously at about 8:50 am local time -- the same time of day that the Madrid subway bombing occurred on March 11, 2004, and the time of day that the first plane flew into the World Trade Center on 9/11/2001. British Prime Minister Tony Blair spoke as follows:

"It's important, however, that those engaged in terrorism realize that our determination to defend our values and our way of life is greater than their determination to cause death and destruction to innocent people in a desire to impose extremism on the world. Whatever they do, it is our determination that they will never succeed in destroying what we hold dear in this country and in other civilized nations throughout the world."

French President Jacques Chirac, also present at the G-8 meeting, announced his solidarity with Blair, as did George Bush and all the other leaders present. Back in France, <#stdurl http://www.alertnet.org/thenews/newsdesk/L07706181.htm "Prime Minister Dominique de Villepin said,"#>

"Faced with these odious acts, I must express my most profound solidarity, my friendship and my support for the British people, and in particular for the people of London. ... More than ever, democracies must rally together and show unity in the face of the terrorist threat. More than ever, we must show vigilance and determination."

We must now wait to see what the reaction will be to these terrorist acts. During a "generational crisis" period, like the current one, a terrorist act like this one can trigger retaliation and further crises in the months to come. Here are some things to watch for:

Will the British retaliate, and if so, then how? After 9/11, we immediately invaded Afghanistan. Will the British do something similar (probably with American help)? Or will they refuse to take reprisals, and lay the government open to accusations of being afraid to respond forcefully?
Will there be new laws restricting civil rights in Britain, giving more police power to the central government? This is what almost always happens. After 9/11, America locked up close to 1,000 Muslims without charges and without being able to see lawyers, and there was no more than trivial public criticism. Today, France raised its internal security level from orange to red.
Will there be a big backlash in Britain against the Muslims?
Will today's bombings trigger a financial crisis? So far, it looks like it won't. Wall Street fell sharply on the news, but stocks are remaining relatively stable in New York and Europe.

During the last year, talk of war has become increasingly political, especially over the war with Iraq. I've corresponded with several people in the last few weeks who appear to claim the world's troubles are all George Bush's fault. One said that people in so-called "red states" want to "write off" New York and Washington. Those statements seem ironic today, unless red state people also want to write off London. If you want to understand what's going on today, you have to realize that no politician has anything to do with it. The roots of these terrorist acts were laid decades ago, especially in decisions that were made after WW I and WW II. It could even be said that these events were caused by events that occurred centuries ago -- the Crusades, the Norman conquest of England, the fall of Constantinople, the French Revolution, and so forth. All we can really do today is watch what happens, and look for ways to protect ourselves, our families, our communities and our nation, as we head for the inevitable "clash of civilizations" world war. =eod =// &&2 e050707 Bird flu poised to spread to birds world wide =data ww2010.weblog.y2005.e050707.head Bird flu poised to spread to birds world wide =data ww2010.weblog.y2005.e050707.keys =data ww2010.weblog.y2005.e050707.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050707.date 7-Jul-05 =data ww2010.weblog.y2005.e050707.txt1 Migratory geese are now infected and spreading bird flu, and thousands have died. =data ww2010.weblog.y2005.e050707.txt2 Thousands of dead bird have been found at Lake Qinghaihu, a protected nature reserve in western China, <#stdurl http://www.alertnet.org/thenews/newsdesk/N06168339.htm "according to Chinese scientists."#> =inc ww2010.bugcomment left "The occurrence of highly pathogenic H5N1 avian influenza virus infection in migrant waterfowl indicates that this virus has the potential to be a global threat," Jinhua Liu of China Agricultural University, George Gao of the Chinese Academy of Sciences and colleagues wrote in their report in Science. "Lake Qinghaihu is a breeding center for migrant birds that congregate from Southeast Asia, Siberia, Australia and New Zealand." DNA analysis reveals that virus is a slight mutation of the virus that killed a few dozen people in Vietnam, and that all of the birds were infected by a single bird that flew in, presumably from Vietnam. This means that the virus is now poised to spread to birds in other countries, and then worldwide. The original virus killed only chickens. A later mutation also infected ducks, though with little harm to the ducks, who showed no symptoms but were carriers of the disease. This is the first time that the virus has infected and killed wild migratory birds, indicating that the lethal virus is jumping to new species. =inc ww2010.cf.cf050530 p right Although the virus has infected and killed humans, humans have only been infected by birds, as far as scientists know. This will change when the virus mutates again so that humans be infected by other humans. At that point, it will quickly spread worldwide, and probably kill hundreds of millions of people worldwide over the next two or three years. This is the worst case mutation, and will occur when one human being gets the bird flu and the ordinary human flu at the same time. The two flu viruses could recombine within a single human body into a new, mutated variant that could have almost the virulence of the bird flu, but with the easy human to human transmission of ordinary human flu. =eod =// &&2 e050705 The mysterious Baltic Dry Index and China =data ww2010.weblog.y2005.e050705.head The mysterious Baltic Dry Index reveals a great deal about the Chinese economy =data ww2010.weblog.y2005.e050705.keys =data ww2010.weblog.y2005.e050705.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050705.date 5-Jul-05 =data ww2010.weblog.y2005.e050705.txt1 China is causing wild volatility and turmoil in shipping, iron ore and steel prices, =data ww2010.weblog.y2005.e050705.txt2 and it's anybody's guess how long this can last. Last month I wrote <#inc ww2010.weblog.ref e050614 "an article on the Baltic Dry Index (BDI)"#> and its sharp, rapid fall in the last six months. I said that it indicated a possible global economic slowdown in the fall. I've now been able to put together a more complete picture. The <#stdurl http://www.balticexchange.com "Baltic Dry Index (BDI)"#> measures the shipments of "dry-bulk cargos," commodities like iron ore, grain, cement and coal, shipped in bulk on huge freighters traveling the seas around the world. <#inc ww2010.pic bdi0704.gif right "" "Baltic Dry Index, 1996-present (Source: FinData)"#> The adjoining graph (from <#stdurl http://www.findata.co.uk/markets/Quote.aspx?e=INDEX&s=BDI "the FinData web site"#>) shows the BDI for the last ten years, The BDI has a colorful <#stdurl http://www.balticexchange.com/default.asp?action=article&ID=21 history#> since it was established in 1744 by merchants and ships' captains chitchatting at the Virginia and Baltick Coffee House in Threadneedle Street in London. The BDI is considered to be a reliable leading economic indicator for manufacturing, since it measures commodities that will eventually be used in the manufacture of finished goods. As you can see, the BDI followed a fairly steady pattern for many years, until mid-2003. Since then, it's become extremely volatile, and is currently plummeting very rapidly, with sharp decreases almost every day. This means that the cost of shipping dry goods is falling sharply, which means that demand for shipping services is falling. Such a sharp decrease in worldwide shipping demand is a harbinger of a fall in manufacturing in the fall. The suddenly volatility has been caused by variability in Chinese imports of iron ore. China's economy has been growing at the rate of 9-10% per year for 20 years, and any such exponential growth pattern cannot last long without causing severe market distortions. By the early 2000s, China's steel production was beginning to be felt around the world. China was importing iron ore and coal for its steel production, but the world price of iron ore was still around a stable $200 per ton. However, China has needed more and more steel to maintain its explosive growth, to build more and more new factories, to feed its quickly expanding shipyards, and to manufacture goods including cars, household appliances and buildings, many for export shipment to America, Japan and Europe. Starting in 2003, China's steel output really began to take off, and iron ore prices were rising, so numerous factories began importing iron ore in order to lock in prices. These imports reached a peak early in 2004, which explains the first tall peak in the BDI graph shown above. The panicky purchase of iron ore created <#stdurl http://www.fool.com/news/commentary/2005/commentary05062203.htm "an iron ore glut"#> within the country, and imports fell. This explains the sharp fall in shipping rates in mid-2004, as shown in the above graph. Soon the glut became a shortage, triggering a boom in the worldwide price of steel, and a revived increased demand for iron ore. By early 2005, the worldwide price of both iron ore and steel had tripled, with steel selling for $750-800 per ton - a three to fourfold increase since 2001. That explains the second peak on the graph above, occurring at the end of 2004. (Paragraph corrected on 4-Nov-2008) =// tripled, with iron ore selling for $750-800 per ton - a three to Once again, there was another glut, and shipments fell. To add to it, China announced a <#stdurl http://news.xinhuanet.com/english/2005-06/30/content_3155308.htm "17% tax on high-end steel products"#> made for processing and sale overseas — such as metal for containers and ships. This has substantially reduced China's demand for iron ore, and that's why worldwide shipping costs began to fall sharply in May, as the above BDI graph shows. At the present time, there's no way to describe the current situation as anything else but massive turmoil. This volatility has caused huge swings in prices of shipping, iron ore, steel, and related commodities, services and products. Nobody knows for sure whether the BDI is going to keep falling or is going to level off. <#inc ww2010.pic bdi0704b.gif right "" "Baltic Dry Index, Feb-July, 2005 (Source: FinData)"#> For a few days last month, the BDI began to increase, and some people were predicting that the index would continue to rise again. But at the end of last week, the BDI fell once more, as shown by the adjoining graph. The turmoil is extending a number of other countries. India has been building up its steel-making capacity, but now has <#stdurl http://www.dailytimes.com.pk/default.asp?page=story_3-7-2005_pg5_31 "more capacity that it can use."#> Instead, India has been shipping huge amounts of iron ore to China, but now analysts are trying to discourage that, because they've discovered that India is going to run out of iron ore in 10-20 years at current rates. Other countries have been rapidly expanding their steelmaking capacity as well. <#stdurl http://www.zwire.com/site/news.cfm?newsid=14785696&BRD=2185&PAG=461&dept_id=415891&rfi=6 "Brazil's capacity has also been growing rapidly,"#> making it clear that the world can produce more steel that it can use. The three largest miners of iron ore are <#stdurl http://www.cvrd.com.br/ "Cia. Vale do Rio Doce in Brazil,"#> <#stdurl http://www.riotinto.com/ "London-based Rio Tinto,"#> and Melbourne-based <#stdurl http://www.bhpbilliton.com/ "BHP Billiton."#> (Paragraph corrected on 4-Nov-2008) China's rise as a global steel power has been led by <#stdurl http://www.baosteel.com/english_n/indexe_n.html "Shanghai Baosteel Group,"#> a state-owned steel manufacturer. China's government has been pushing Baosteel since 1978 to be the world's leading steel producer, so a further dramatic fall in both steel prices and the BDI would not be a surprise. Indeed, one analyst is predicting that <#stdurl http://www.abc.net.au/pm/content/2005/s1406785.htm "steel prices have already peaked, and are falling."#> From the point of view of Generational Dynamics, this kind of volatility and turmoil is typical of an "unraveling" situation that precedes a crisis. China's economy is in a price bubble; America's economy is overwhelmed with debt, and is in a stock market and real estate bubble; Japan's economy is still in a monetary deflationary state, 13 years after its stock market collapse; and Europe is strapped with very high unemployment and decreasing GDP. Generational Dynamics predicts that we're entering a new 1930s style Great Depression that will cause a stock market correction of 50% or more, and a deflation of American currency by 30% or more. All that's required is some kind of "shock," and that could happen next week, next month or next year. But it's going to happen with 100% certainty, and sooner rather than later. =eod =// &&2 e050702b Paul McCartney and a Pink Floyd reunion at Live 8! London's the place to be today. =data ww2010.weblog.y2005.e050702b.head Paul McCartney and a Pink Floyd reunion at Live 8! London's the place to be today. =data ww2010.weblog.y2005.e050702b.keys =data ww2010.weblog.y2005.e050702b.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050702b.date 2-Jul-05 =data ww2010.weblog.y2005.e050702b.txt1 Meanwhile, tens of thousands march in Scotland, to end poverty in Africa. =data ww2010.weblog.y2005.e050702b.txt2 Why not march to end cancer and traffic accidents at the same time? Oh, I shouldn't be such a curmudgeon, since this is big news. <#inc ww2010.pic pfloyd.jpg right "" "Pink Floyd"#> Ex-Beatle <#stdurl http://uk.news.launch.yahoo.com/dyna/article.html?a=/050702/325/fminq.html&e=l_news_dm "Paul McCartney and U2's Bono were the warm-up acts"#> for the must-see Live 8 <#stdurl http://jam.canoe.ca/Music/2005/06/30/1111314.html "reunion of all four members of 70s rock bank Pink Floyd,"#> for the first time in 24 years. And that's just the London concert. <#stdurl http://news.bbc.co.uk/1/hi/entertainment/music/4596885.stm "The complete lineup for all Live 8 concerts"#> taking place today in London, Cornwall, Versailles, Ontario, Berlin, Rome, Moscow, Tokyo, Johannesburg, and Philadelphia, and in Edinburgh on 6 July reveals some of the greatest musical artists of our time. The purpose of the concerts is to call attention to the G-8 meeting to be held in Edinburgh, Scotland, next weekend. G-8 stands for the "Group of eight" major industrialised states, whose members are US, UK, Canada, France, Germany, Italy, Japan, Russia. The major agenda item for that meeting will to end poverty in Africa. To that end, tens of thousands of protesters are marching today in Edinburgh to demand action. According to the UN, <#stdurl http://www.bloomberg.com/apps/news?pid=10000087&sid=aVguNLuUMN0o&refer=top_world_news "more than 300 million Africans live on less than $1 a day,"#> and less than half of children on the continent complete primary school. In the last 50 years, there have been 186 coups and 26 wars in Africa, with more than 7 million people killed, the United Nations says. Africa is the only continent to have become poorer in the last 25 years, according to the UN. <#inc ww2010.pic afribig.gif left "" "Africa is larger than Europe, America, Alaska, China, and New Zealand (not shown) combined. (Source: Boston Univ)"#> As <#inc ww2010.weblog.ref e050612 "I wrote in an article last month,"#> just the sheer size of Africa makes any attempt to cure African poverty impossible. Africa is huge -- bigger than China, America, Alaska, Europe and New Zealand combined. If all the so-called "rich nations" of the world gave every penny they had to Africa, it still wouldn't be enough. But at the meeting next week they won't give every penny they have to Africa, and so the crowds attending Live 8 concerts and marching on Edinburgh this week are going to be very disappointed next week. It'll be interesting to see how it all falls out. Africa is no different from the rest of the world. It's true that they've had a lot of wars recently, but that's just because they're on a different timeline. The other countries of the world had their major wars in World Wars I and II, and are now headed for a "clash of civilizations" world war with 100% certainty. And it's true that HIV/AIDS is widespread in Africa, but <#stdurl http://news.bbc.co.uk/2/hi/asia-pacific/4640807.stm "Asia is facing an AIDS explosion,"#> with India leading the way. And a UCLA study reveals that <#stdurl http://news.bbc.co.uk/1/hi/health/4295141.stm "US teens with AIDS are taking greater risks,"#> indicating that AIDS will be increasing in America as well. And this week, reports of two new research studies by the <#stdurl http://news.ft.com/cms/s/68c254e8-e8d3-11d9-87ea-00000e2511c8,ft_acl=,s01=1.html "International Monetary Fund (IMF) reveal that increased aid will not solve Africa's problems."#> One of the working papers, <#stdurl http://www.imf.org/external/pubs/cat/longres.cfm?sk=18380.0 "What Undermines Aid’s Impact on Growth?"#> by IMF researchers Raghuram G. Rajan and Arvind Subramanian, does the following:

"We examine one of the most important and intriguing puzzles in economics: why it is so hard to find a robust effect of aid on the long-term growth of poor countries, even those with good policies. We look for a possible offset to the beneficial effects of aid, using a methodology that exploits both cross-country and within-country variation. We find that aid inflows have systematic adverse effects on a country’s competitiveness, as reflected in a decline in the share of labor intensive and tradable industries in the manufacturing sector. We find evidence suggesting that these effects stem from the real exchange rate overvaluation caused by aid inflows. By contrast, private-to-private flows like remittances do not seem to create these adverse effects. We offer an explanation why and conclude with a discussion of the policy implications of these findings."

The paper concludes that foreign aid pours money into a poor country and has many adverse effects, usually involving a great deal of corruption. But even if corruption is avoided, foreign aid usually makes the country worse off that it was because the influx of money inflates the country's currency, and increases wages in the industries favored by the aid, making the country less competitive on the world market and more and more dependent on continued aid. An interesting finding is that the negative effects of foreign aid don't occur with an equal amount of money provided as remittances. <#stdurl http://www.fairus.org/Research/ResearchList.cfm?c=10#Remittances "The word 'remittances'"#> refers to "Money earned or acquired by immigrants that is sent back to their country of origin. For some developing countries, remittances can form a sizeable chunk of their economy." The IMF has found that money from <#stdurl http://www.imf.org/external/np/tr/2005/tr050407.htm "remittances amounted to $100 billion of capital inflows"#> of 90 developing countries, about 50% of total capital inflows.

"For a number of developing countries, remittances are the single largest source of foreign exchange, exceeding export revenues, official aid, FBI and other private capital inflows. As an example, Mexico receives about $15 million in remittances per year, and this is probably an underestimate because we don't measure remittances that well. The United States still remains the main source of remittances, over $30 billion in 2003, and the outflows from the U.S. have almost quadrupled in the last 15 years. So this is a big and growing source of external financing for a number of countries. What is most important about remittances which the essay highlights is their stability. They're sent in good times as well as bad times and so they play a role in cushioning adverse shocks such as wars and natural disasters. In fact, they lower the volatility of GDP growth which I just told you from the other essay was so harmful. They also are very well targeted at the poorest people, so in that sense they contribute significantly to reducing poverty which again the essay demonstrates. So given these benefits, we need to find ways to encourage remittances. For example, by reducing the cost of sending them as well as to impediments to their flow, and the essay makes clear what kinds of policies might make sense."

In <#stdurl http://www.imf.org/external/pubs/cat/longres.cfm?sk=18380.0 "the working paper,"#> the IMF researchers contrast the results of remittances with an equal amount of foreign aid:

"We now turn to the question of whether the effects of aid are unique or are shared by other unrequited transfers such as remittances.... [A] large body of micro-evidence suggests that remittances can have a positive effect on entrepreneurship, supply of labor, and increased investment.... Even so, it is somewhat puzzling that remittances do not give rise to the kinds of adverse competitiveness effects resulting from aid inflows. One possible explanation is that remittances are spent on items like adding a room to a house, which in turn increases the demand for plentiful unskilled labor or for imported cement, and thus does not lead to real exchange rate appreciation.... However, a more compelling explanation comes from examining the pattern of remittance inflows and exchange rate overvaluation.... [C]ountries that had overvalued exchange rates in the 1990s received significantly lower remittances. The same pattern is seen when we plot remittances in the 1990s against exchange rate overvaluation in the 1980s..., suggesting that causality runs from exchange rates to remittances. It is plausible that emigrants stop sending funds as they see an overvalued exchange rate, and as they find it cheaper to send goods directly. It is also likely that overvalued exchange rates in many of these countries were accompanied by exchange controls and dual exchange rates, which IMF 2005 finds are deterrents to remittances. Whatever the reason, we may have an explanation of the apparent puzzle. The reason that remittances do not lead to a significant loss of competitiveness is that they tend to dry up if an exchange rate starts getting overvalued. Thus, it is only countries that through astute macroeconomic policies manage to keep the real exchange rate competitive in the face of remittances that continue to attract them. The endogeneity of remittances offers one explanation of why we do not see remittances adversely affecting the growth of tradable industries. Aid, by contrast, might even increase if exchange rate overvaluation leads to poor economic performance, thus further exacerbating the problem."

So the thrust of the IMF report is that foreign aid is counter-productive, while remittances not only improve the lives of the people in the countries that receive them, they even encourage "astute macroeconomic policies," which in turn encourages good government and discourages corruption. This means, according to the IMF report, that we ought to be looking for ways to make remittances easier -- programs that encourage people to help people. For example, instead of giving $1 billion to a country's government ages, which will harm the country and make life worse, we should spend that same $1 billion in a program that somehow matches up Americans with ordinary people in another country, and then pays the aid to the foreign individuals, based on recommendations by the matching Americans. I'll bet that a way could be found to make that work, but anything is better than destroying a country by pouring money into it so that all the politicians can pat themselves on the back for being such deeply caring people. Such a matching program might do some actual good, but it won't happen because politicians really don't care much about doing good, except for themselves. Incidentally, Generational Dynamics explains why there's so much poverty in the world, and why it continues to increase. The reason is that the population grows much faster than the food supply. According to <#hreftext ww2010.i.food040628 "my own computations,"#> food production increases by at most 0.96% per year, while population grows at 1.72%. Therefore, the amount of food per person keeps decreasing, and so food becomes scarcer and, by the law of supply and demand, the price of food keeps going up. In fact, the worldwide price of food has been skyrocketing in the last couple of years, thanks to massive feeding programs in China. As the price of food goes up, poverty increases in large marginal populations around the world. There is no solution to this problem except the ones provided by nature. Nature has three ways of reducing the population in order to match the food supply: famine, disease and war. Famines are actually quite rare, so throughout history the major method for reducing population to match the food supply has been genocidal crisis wars (such as World War I and World War II). The problem has been exacerbated in the last 150 years by advances in medicine which have significantly reduced the rate of infant mortality -- from almost 50% to about 2%. This has created a huge pool of young men ready to kill and be killed in new genocidal crisis wars, such as the impending "clash of civilizations" world war, which is expected to kill some 2-3 billion people out of the current world population of 6.5 billion. However, today we can also expect disease to reduce the world's population. A bird flu pandemic will kill hundreds of millions of people, and will bring international commerce to a standstill. There is some good news, however: After the pandemic and world war end, there'll be plenty of food for the survivors. =eod =// &&2 e050702 Sandra Day O'Connor steps down from Supreme Court =data ww2010.weblog.y2005.e050702.head Sandra Day O'Connor steps down from Supreme Court =data ww2010.weblog.y2005.e050702.keys =data ww2010.weblog.y2005.e050702.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050702.date 2-Jul-05 =data ww2010.weblog.y2005.e050702.txt1 It's a crisis moment that could ignite a "political civil war" =data ww2010.weblog.y2005.e050702.txt2 In <#stdurl http://www.iht.com/articles/2005/07/02/news/scotus.php "announcing on Friday O'Connor's decision to step down,"#> President Bush said: "The nation deserves and I will select a supreme court justice that Americans can be proud of. The nation also deserves a dignified process of confirmation in the United States Senate, characterised by fair treatment, a fair hearing and a fair vote." This statement by the President was a political warning to the Senate Democrats not to use the weapon of filibusters to prevent his nomination to receive a vote. <#stdurl http://msnbc.msn.com/id/8375356/ "Democrats responded immediately."#> Massachusetts Sen. Edward Kennedy and Connecticut Sen. Chris Dodd, held a joint news conference minutes later saying they reserve the right to use the filibuster to block a nominee from ever getting a confirmation vote. “If the president abuses his power and nominates someone who threatens to roll back the rights and freedoms of the American people, then the American people will insist that we oppose that nominee and we intend to do so,” Kennedy said. As I've said many times on this website, when a country enters a "generational crisis" period, the great mass of people become increasingly confrontational and less willing to compromise. This unwillingness to compromise occurs in international politics, as we've seen in the European Union, and in national politics. Generational Dynamics predicts that American politics will become increasingly bilious and conflicted, reaching what might be called a "political civil war." This is what happens during crisis periods. In the case of the Civil War, the political civil war became a real civil war. During the 1930s crisis period, the political bitterness created a major Constitutional crisis, and it occurred when the President tried to "pack" the Supreme Court. President Franklin D. Roosevelt was furious at the Supreme Court for finding many of his New Deal laws unconstitutional, mostly on 5-4 votes. Most of the Justices had been appointed by Republicans, and FDR was furious at them. He <#stdurl http://www.enterstageright.com/archive/articles/0799fdrcourt.htm "came up with a complex scheme to increase the size of the Court,"#> allowing him to appoint additional justices who would support his policies. The attempt failed, and in fact turned out to be a political fiasco, but it illustrates how vitriolic the politics can get during generational crisis periods. Today, many Democrats are furious at the Supreme Court for its decisions in the 2000 Presidential election which led to George Bush becoming President instead of Al Gore. The vitriol over replacing Justice O'Connor will <#stdurl http://msnbc.msn.com/id/8375356/ "center on four big issues:"#> abortion, the death penalty, religious expression, and legal protections for gays and lesbians. Now, take a look at that list of four issues, and think of how irrelevant they are. We have China mobilizing for war with the goals of reuniting with Taiwan and to challenge American military capabilities throughout the Pacific, leading to an inevitable world war. We have a mutating bird flu virus which could turn into a worldwide pandemic with a day or two, killing tens or hundreds of millions of people worldwide. So instead of uniting the country and preparing people for what's coming. the important Washington politicians are going to spend their time arguing whether it's ok to post the Ten Commandments in a government building. When I was a kid in the 50s, we used to think of Washington politicians as buffoons. More and more, I'm beginning to remember why. =eod =// &&2 e050701 After President Bush's speech: What next for Iraq? =data ww2010.weblog.y2005.e050701.head After President Bush's speech: What next for Iraq? =data ww2010.weblog.y2005.e050701.keys =data ww2010.weblog.y2005.e050701.loc ww2010.weblog.log0507 =data ww2010.weblog.y2005.e050701.date 1-Jul-05 =data ww2010.weblog.y2005.e050701.txt1 With growing insurgency violence and flagging public support, what's America's "end strategy" in Iraq? =data ww2010.weblog.y2005.e050701.txt2 The relentless stream of car bombings and suiciding bombings is having its impact on American public opinion. Recent polls show that Americans are slightly in favor of setting a withdrawal deadling. I heard some college professor discussing the situation in Iraq on WBUR, a PBS station in Boston. He was saying that the anti-war movement is finally growing. He said that we know from the Vietnam and Korean wars that once the anti-war movement picks up, it keeps getting bigger. I had to laugh at this wishful thinking. The political conflict during the 1960s was caused by a "generation gap," with anti-war students rebelling against their pro-war parents. Today there's absolutely no "generation gap" whatsoever; any political disagreement is red-state versus blue state (vertical) rather than generational (horizontal). So there's no growing antiwar movement. Still, there's a lot of political pressure these days for a strategy to withdraw our troops from Iraq within one or two years. However, this isn't the first time we're heard this. Last year, syndicated columnist Robert Novak, <#stdurl http://www.townhall.com/columnists/robertnovak/rn20040920.shtml "wrote a column (September 20),"#> which said that the Bush administration is planning a quick exit from Iraq in 2005. At that time, just prior to the Presidential election, there was much discussion of this option. According to Novak, his Bush administration sources had told him confidentially that President Bush plans to begin withdrawing from Iraq after the January, 2005, elections in Iraq. He explained this view further on Meet the Press by saying that the Bush administration has concluded that the American public cannot stand the continued terrorist beheadings and armed forces casualties. Novak claimed that his contacts in the John Kerry election team had reached the same conclusion, if Kerry wins the election. The result, according to Novak, was that American troops would withdraw from Iraq in 2005 no matter who wins. Well, here it is June, 2005, the January elections are over, and there's no withdrawal, no withdrawal in the works, no public demand for a withdrawal, and no outrage over President Bush's clear refusal to set a withdrawal deadline. There are no riots on college campuses, as there were in the 60s, no "Summer of love," and no "days of rage." Last year, I <#hreftext ww2010.i.iraq041016 "wrote an analysis of the option of withdrawing from Iraq,"#> and that analysis has held up pretty well - I'd barely change a word. Bringing that analysis up to date, here are the major points:

There will be no civil war in Iraq, as I've been saying on this web site repeatedly for the last 2 1/2 years. Pundits, journalists and college professors have been predicting a civil war almost daily, and still predict it even now, but a civil war in Iraq is impossible, because Iraq is in a "generational awakening" period, just one generation past the end of the genocidal Iran/Iraq crisis war, and no civil war ever happens at such a time.
If you want to understand what's happening in Iraq today, the "gold standard" historical comparison is to Iraq's last generational awakening period: the mid-1940s. At that time, Britain had control of two air bases in Iraq, but massive student demonstrations forced Britain to withdraw in 1948. There was no civil war, and civil order was maintained for the most part, but there was a great deal of political instability. Iraq today is exactly the same.

So when will we withdraw from Iraq? As time goes on it becomes more and more likely that we'll remain in Iraq until the "clash of civilizations" world war begins, probably in the next 2-4 years. At that point, 9/11, Afghanistan and Iraq will turn out in retrospect to have been the opening rounds of the new world war. =eod =// &&2 e050628 How generational changes affect Japan and China =data ww2010.weblog.y2005.e050628.head How generational changes affect Japan and China =data ww2010.weblog.y2005.e050628.keys =data ww2010.weblog.y2005.e050628.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050628.date 28-Jun-05 =data ww2010.weblog.y2005.e050628.txt1 A page one article in today's Wall Street Journal =data ww2010.weblog.y2005.e050628.txt2 explains how Japan's attitudes towards China have changed as generations change. <#stdurl http://online.wsj.com/article/0,,SB111990572454670770,00.html "The article explains"#> that "Relations between Japan and China are at their tensest level in decades," and gives a generational reason for this:

"Ten years ago, when Chinese navy ships were spotted in waters between Japan and China, a newly elected lawmaker named Keizo Takemi warned that the Chinese were surveying energy resources also claimed by Japan. He was ignored by senior colleagues, who said they wanted to keep smooth ties with Beijing. This year, as China prepares to drill for natural gas below that same part of the East China Sea, Japan is reacting very differently. Mr. Takemi, now a leader on foreign affairs in parliament, put together a response that was surprisingly robust by Japanese standards: In March, Tokyo announced it will launch a rival drilling effort, to be protected by Japan's high-tech military if necessary. "Our nation's sovereign rights are at stake," says Mr. Takemi, 53 years old."

=inc ww2010.xr.related1 right japan 3 The article describes "the emergence of a new generation of leaders with new notions about Japan's role in the world," and adds:

"These younger lawmakers, most in their 40s and 50s, want their nation to be more assertive. They are also willing to break old taboos about shows of military force, something Japan long avoided for fear of conjuring memories of World War II aggression. That's a big change from their predecessors, who avoided confrontation with China, instead showering it with billions of dollars in development aid out of guilt over Japan's brutal 1930s invasion. Memories are still raw in China of the Japanese attack, which historians say caused fighting and famine that killed millions of Chinese civilians."

Journalists have to rediscover this every time, but this article is describing one of the most important concepts underlying Generational Dynamics: That as long as a nation's leaders have personal memory of the last crisis war (World War II in this case), they're willing to compromise and contain problems, but they're willing to do anything to prevent another crisis war. That was true ten years ago, when the Chinese navy ships were first spotted. But once the generational of leaders who grew up during the last crisis war all disappear (retire or die) all at once, the nation's attitudes change decisively and dramatically. The new leaders have no fear of a new crisis war and have a completely different world view than their departed elders. This is what began happening very rapidly in the late 1990s in countries around the world that fought in World War II. Incidentally, we're not talking only about political leaders. We're talking about senior managers in government, labor unions, businesses, educational institutions, non-profit instituations, financial institutions, and so forth. That's why this generational change deeply affects every organization and institution throughout the nation. I'm mentioning this article because it's so rare to see any mainstream publication discuss the effects of generational changes on society, finance and politics. This is quite striking because the changes in the European Union are caused by exactly the same kinds of generational changes that the article describes in Japan. As we pointed out in our <#hreftext ww2010.i.eu050601 "analysis of the French rejection of the EU Constitution,"#> the exit polls indicate that the people who were alive during World War II favor the Constitution because they believe that it's the best way to prevent a new European war, while those born after WW II are opposed to the Constitution because they believe it will cost them jobs. As time goes on, the generational balance will tilt further and further toward people who reject the European Union. This analysis of exit polls isn't exactly rocket science, but to this day I haven't read a single article or heard a single analyst make this obvious point. Journalists, pundits and analysts are generally completely blind to even the simplest generational issues. In all of these cases, the generational change continues, and the population of each country becomes more confrontational, and more willing to risk conflict. Once this mood change takes place, it's very easy for a country to miscalculate. For example, referring to the WSJ story, there might be a small military confrontation between Japanese and Chinese ships trying to drill for natural gas. Each side may expect the other to back down, but as both sides become increasingly confrontational, neither side backs down, and a small battle spirals out of control into a major war. =inc ww2010.cf.cf050530 p left Generational Dynamics predicts that exactly that will happen with 100% certainty -- not just in China versus Japan, but around the world, leading to a new "clash of civilizations" World War. This might happen next week, next month, next year, or shortly thereafter, but it's going to happen with absolutely certainty. The adjoining graphic, which also appears on the home page of this web site, gauges the risk level in several different regions around the world. Generational Dynamics predicts that once a war breaks out in any of these regions (or there's a major financial crisis or bird flu epidemic), then wars in all the remaining regions will follow within two years or so, leading to a world war. =eod =// &&2 e050625 Ultraconservative Mahmoud Ahmadinejad wins in Iran =data ww2010.weblog.y2005.e050625.head Ultraconservative Mahmoud Ahmadinejad wins Iran Presidential election =data ww2010.weblog.y2005.e050625.keys =data ww2010.weblog.y2005.e050625.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050625.date 25-Jun-05 =data ww2010.weblog.y2005.e050625.txt1 I try to find humor wherever I can for this serious web site, and with this guy it's easy. =data ww2010.weblog.y2005.e050625.txt2 <#inc ww2010.pic ahmad2.jpg right "" "President-elect Mahmoud Ahmadinejad of Iran(Source: Mardomyar.ir )"#> Start by checking out <#stdurl http://mardomyar.ir/ "his personal web site, Mardomyar.ir,"#> where you'll find the adjoining picture. Lovely, isn't he? Next, click on <#stdurl http://mardomyar.ir/default1.htm "the word 'Flash',"#> and watch the flash presentation. Enjoy the music, and watch him:

His thoughtful pose
His friendly pose
His working pose
Talking to the ladies

So, this is the man who <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=worldNews&storyID=2005-06-25T014722Z_01_SCH419611_RTRUKOC_0_IRAN-ELECTION.xml "swept to a landslide victory in Friday's presidential elections."#> Yes, he may be 49 years old, but he clearly fancies himself to be of movie star caliber. As <#inc ww2010.weblog.ref e050623 "I discussed a couple of days ago,"#> Iran is in the early stages of a "generational awakening" period, which means a "generation gap," enormous political conflict between older and younger generations. America's last awakening period was the 1960s, one generation past WW II, and last year <#hreftext ww2010.i.sixties040501 "I wrote an article"#> comparing Iraq today to America in the 1960s. So Iran's society is changing rapidly, and the ultraconservative Mahmoud Ahmadinejad doesn't have a clue what's going to happen. Ahmadinejad wants to return to what he views as fundamental Islamic values. He wants to return to "pure" Iran culture, and not permit Western culture "pollute" Iran. He wants men to grow beards. He wants women to dress modestly. He doesn't want men and women to speak to one another in public. Now, he got away with a lot of that stuff as Mayor of Tehran because the country was in a "generational austerity" era, just following the genocidal Iran/Iraq war. During the austerity era, the people who survived the war are traumatized by the war and glad just to be alive, and they adopt strict rules to normalize society and make sure no such war happens again. (To understand this, think of the "Leave it to Beaver" world of 1950s America.) But 15-20 years after the war ends, the kids who were born after the end of the war begin to make themselves felt politically. They rebel against the austere rules adopted by their elders, leading to the "generational gap," and political turmoil. Ahmadinejad won't be expecting the ferociousness of the rebellions. =inc ww2010.pic braburn.jpg left "" "Bra-burning in 1960s" A particular feature of most awakening eras is the rise of gender issues. Remember how American college girls burned their bras in the 1960s? Well, maybe Iranian girls won't do the same (or maybe they will!), but they'll make their opinions felt in other ways. And since Ahmadinejad obviously considers himself a ladies man, they're going to target him specifically. Don't get me wrong: Ahmadinejad is a very, very bad guy. <#stdurl http://www.iranfocus.com/modules/news/article.php?storyid=2394 "He sponsors terrorism and he violently suppresses dissidents."#> He was one of the masterminds of the Iranian hostage crisis which took Americans hostage for many years in the 1980s. He was involved in a plan to assassinate the Indian-born British author Salman Rushdie. His most famous one-liner is, "We did not have a revolution in order to have democracy." But at least we can take some pleasure in his discomfort, and he's about to suffer a lot of it. =eod =// &&2 e050624 Tony Blair: We need jobs, not subsidies for cows =data ww2010.weblog.y2005.e050624.head Tony Blair: "We need jobs, not subsidies for cows" =data ww2010.weblog.y2005.e050624.keys european union, france, united kingdom =data ww2010.weblog.y2005.e050624.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050624.date 24-Jun-05 =data ww2010.weblog.y2005.e050624.txt1 Lots of vitriol led up to Blair's speech on Thursday =data ww2010.weblog.y2005.e050624.txt2 Responding to Blair's <#stdurl http://news.scotsman.com/latest.cfm?id=4727460 "remark about cows,"#> French President <#stdurl http://www.nytimes.com/2005/06/23/international/europe/23europe.html "Jacques Chirac said,"#> "France did everything, with its partners, to arrive at an agreement. Unfortunately, British intransigence did not allow one to be reached." The outgoing EU President, Jean-Claude Juncker, <#stdurl http://www.euobserver.com/?sid=9&aid=19401 "got a standing ovation at the European Parliament"#> by accusing Blair of having used false arguments and lying. <#inc ww2010.pic blairx.jpg right "" "Der Spiegel's photo of Tony Blair speaking to EU Parliament"#> British Prime Minister Tony Blair will be taking over the rotating EU presidency on July 1. His <#stdurl http://www.number-10.gov.uk/output/Page7714.asp "speech to the European Parliament on Thursday"#> was the start of campaign to convince the Europeans to revise the entire EU budget, starting with the agricultural subsidies and the British rebate. Many people on the Continent didn't exactly sympathize, as can be seen by the adjoining picture in a <#stdurl http://service.spiegel.de/cache/international/0,1518,361912,00.html "critical article in the German magazine Der Speigel."#> What Blair is pointing out is Europe is in a very great deal of trouble. <#stdurl http://www.bloomberg.com/apps/news?pid=10000100&sid=aQTBbcACwws4&refer=germany "Germany's economy, for example, is near desperation and getting worse."#> German exports keep falling, factory orders keep falling, and German unemployment rose to 12% in March, the highest since World War II. America today is almost as bad off as Europe. America's public debt is astronomically high by historical standards, and one analysis shows that <#inc ww2010.weblog.ref e050429 "American consumers will have to cut spending by 1/3 for ten full years, just to cut the deficit in half."#> But any attempt to do anything about the problem is only met with political vitriol in Washington. For those of you who remember waaaaay, way back into the 1980s, you'll recall that Republicans and Democrats got together and agreed on difficult changes to Social Security, and then got together again and agreed on difficult budget rules to reduce the deficit. Today, a generation later, Republicans and Democrats can't agree on anything beyond blaming the other side for not being able to agree on anything. So the problems will only get worse until a meltdown imposes a solution. The point is that the same things are happening in America and Europe. The politicians are frozen in place, and unable to solve the serious and growing problems. From the point of Generational Dynamics, the world is entering a new 1930s style Great Depression. This will "solve" the problems for both Europe and America. =eod =// &&2 e050623 Iran holding chaotic runoff election on Friday =data ww2010.weblog.y2005.e050623.head Iran holding chaotic runoff election on Friday =data ww2010.weblog.y2005.e050623.keys =data ww2010.weblog.y2005.e050623.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050623.date 23-Jun-05 =data ww2010.weblog.y2005.e050623.txt1 Iran and Iraq are generational twins, and their elections show it. =data ww2010.weblog.y2005.e050623.txt2 To understand Iran's elections, you have to realize that Iran is in a "generational awakening" era, since just one generation has passed since the genocidal Iran/Iraq war of the 1980s. America's last awakening period was the 1960s, one generation past WW II, and last year <#hreftext ww2010.i.sixties040501 "I wrote an article"#> comparing Iraq today to America in the 1960s. Generational awakening periods are characterized by political hostility between older and younger generations, but there is no civil war or violent revolutions, as there may be during generational crisis periods. America's last awakening period caused two Presidents, Lyndon Johnson and Richard Nixon, to leave office in disgrace. =inc ww2010.h2 generational "Generational conflict" That kind of generational conflict is going on today. <#inc ww2010.pic ahmad.jpg left "" "Mahmoud Ahmadinejad"#> The old hard-line geezer mullahs are supporting the ultra-conservative Mahmoud Ahmadinejad, the 49 year old appointed mayor of Tehran. Most of Iran's population is under age 25, thanks to the number of deaths in the Iran/Iraq war. And the kids, also known as the "pro-reformist group," are <#stdurl http://news.independent.co.uk/world/middle_east/story.jsp?story=648977 "trying to block "Iranian Taliban,""#> often by using text messaging to spread cutting humor:

<#stdurl http://www.reuters.com/newsArticle.jhtml?type=reutersEdge&storyID=8852091 ""Ahmadinejad announces his ministries:"#> ministry of the evil, ministry of censorship, ministry of the Revolutionary Guard, ministry of religious paramilitaries."

The hard-line Iran leadership had shut down two pro-reformist newspapers just to prevent this kind of regressive, counter-revolutionary humor, but the kids are thwarting the hard-liners by using text messaging. =inc ww2010.h2 message "The text messaging revolution" Another text message refers to a Tehran traffic directive that allows cars with license plates ending in odd numbers into the city center on one day and those with even numbers the next day, and mocks a conservative preference for segregation of the sexes in public:

"The odd/even directive is being expanded to have one day when women can go out on the street, while men are allowed out the next day."

Text messaging is infuriating the mullahs, so much that Iran's ultra-conservative judiciary has now <#stdurl http://www.iranmania.com/News/ArticleView/Default.asp?NewsCode=32814&NewsKind=Current%20Affairs "threatened to prosecute people who send text messages"#> with the aim of "denigrating" candidates. The country's supreme leader, Ayatollah Ali Khamenei, has been <#stdurl http://www.nytimes.com/2005/06/21/international/middleeast/21iran.html "sharply critical of this kind of stuff."#> "Are you aware of what you are doing?," he said in a statement. "Are you aware that what you are doing is aimed at creating a crisis and pessimism among people, and is in line with what our enemies want to do to the revolution and the Islamic republic, and it will catch up with you, too? ... Others may have similar protests. Do you think they should have the right to question everything as well? I was not expecting this from you. And I will not allow anyone to create crisis in the country." I can easily imagine similar words coming out of the mouths of Lyndon Johnson or Richard Nixon in the 1960s. Khamenei's fellow hard-liners came to power in 1979, following a series of very violent student revolts that overthrew the existing government in a civil war. Khamenei is seeing students acting the same way, and is concerned that history is going to repeat itself, and his government will be violently overthrown in a similar civil war. What he doesn't understand is that such a civil war is impossible during a generational awakening period, just as a civil war has been impossible in Iraq (which I've pointed out on this web site dozens of times in the last two years). <#inc ww2010.pic rafsan.jpg right "" "Ayatollah Ali Akbar Hashemi Rafsanjani"#> The kids are supporting the 70-year-old ex-President Ayatollah Ali Akbar Hashemi Rafsanjani, since 1979 one of the two most powerful men within Iran’s ruling hierarchy. =inc ww2010.h2 turmoil "Political turmoil" It is indeed an irony, isn't it, that the kids are supporting the "moderate" 70 year old, while the mullahs are supporting the 49 year old Mahmoud Ahmadinejad. However, that's a tribute to Rafsanjani as a very skillful politician, re-defining himself as just that -- a moderate and a pragmatist -- in contrast to his hard-line opponent. Some commentators are claiming that a victory by either candidate is bad news for America because Iran's hard line policies will continue or worsen. Such commentators don't understand generational awakening eras. No matter who wins, the political conflict across the "generation gap" is going to grow, until some climax is reached. There are two kinds of climaxes. One kind is an "internal revolution" within the government that gives the kids a political victory. The resignation of Richard Nixon is an example of this kind of internal revolution. The other kind of climax is a hard government crackdown on the kids. The best recent example of this is the Tiananmen Square massacre in 1989 in China, when three million college students demonstrated in Beijing and thousands were killed by government forces. This massacre gave rise to the Falun Gong movement, which is the philosophical underpinning to <#hreftext ww2010.i.china050116 "a coming major civil war in China."#> It's not possible to predict how or when Iran's awakening period will climax, but we can be certain that the level of political turmoil will be enormous. =inc ww2010.h2 nuclear "Nuclear weapons development" This brings us to the final topic: What about Iran's nuclear weapon development program? Will the kids force the mullahs to give up nuclear weapons development? Quite the contrary. This is something that the kids and mullahs agree on. They both want Iran to have nuclear weapons for "defensive" purposes, and little can be done to prevent Iran from developing those weapons. What about using Iranian nuclear weapons on Israel? Surely the kids won't approve of that. That's true, but this is a political decision that Generational Dynamics can't predict. The behaviors and attitudes of large masses of people are quite predictable, and Generational Dynamics does that. But a decision to use nuclear weapons on Israel will be made by a few mullahs, and no one can predict the actions of one person or a small group of politicians. Iran's future is enormously complicated by the fact that Israel and the Palestinians are headed for war. At that time, Iran will be forced to support the Palestinians with troops and with weapons. Iranian moms will be very reluctant to send their young men into another war, after all the losses in the Iran/Iraq war; but there's little doubt that Iranian nuclear weapons will be used on Israel, once they're available. =eod =// &&2 e050622 Ariel Sharon and Mahmoud Abbas meet / peace unravels =data ww2010.weblog.y2005.e050622.head Ariel Sharon and Mahmoud Abbas meet as Mideast cease-fire unravels =data ww2010.weblog.y2005.e050622.keys =data ww2010.weblog.y2005.e050622.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050622.date 22-Jun-05 =data ww2010.weblog.y2005.e050622.txt1 Like Britain vs France, Israel vs Palestinian Authority meetings are becoming increasingly confrontational. =data ww2010.weblog.y2005.e050622.txt2 Palestinian Authority president Mahmoud Abbas met with Israeli prime minister Ariel Sharon at Sharon's Jerusalem residence on Tuesday in a highly confrontational meeting that was intended to coordinate Israel's pullout from the Gaza strip, scheduled for July. However, the long-scheduled meeting took place in an environment where the cease-fire and high expectations of January, when Abbas was elected, are almost completely destroyed. On Monday night, just hours before the meeting, Israeli security forces arrested 50 Islamic Jihad militants. The Islamic Jihad militia group has never formally agreed to the cease-fire, but has been observing a voluntary ceasefire until recently. Now the <#stdurl http://www.haaretz.com/hasen/spages/590669.html "Israel Defense Forces (IDF) has decided to resume targeted killings of senior leaders of the group."#> "Islamic Jihad has taken itself absolutely out of the [cease-fire] agreement with its attacks, and so from our view, we are operating fully against them, as we did before," said Lt. Col. Erez Winner, a senior Israeli commander to Haaretz. "Anyone we know who is affiliated with this organization is a legitimate target." And, the <#stdurl http://news.ft.com/cms/s/4cdf4e20-e26b-11d9-84c5-00000e2511c8.html "Hamas militia group is also threatening to end its ceasefire."#> This brings us back to the meeting between Abbas and Sharon. Abbas was looking for certain concessions from Israel: <#stdurl http://www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=8853449 "reopening Gaza's airport, further releases of Palestinian prisoners in Israeli jails and evacuation of some Jewish settlements in the West Bank."#> Instead, Sharon said, "we're still taking casualties," in reference to Palestinian terrorist attacks. He offered some partial concessions, but only on the condition that Abbas use force to deprive Palestinian militias of weapons. That's obviously not going to happen. Here's the crux of the matter: According to the BBC, Abbas wants to use persuasion and negotiation to get the Palestinian militia groups to disarm, because he believes that if he uses force the it will lead to civil war. Now, I agree with Abbas that using force will cause a civil war, but persuasion won't work either. Look at other crisis wars: Would persuasion have stopped Hitler? Stopped the American Civil War or Revolutionary War? Would it have stopped the Hutus from slaughtering a million Tutsis in three months in the 1994 Rwanda war? Crisis wars are like forces of nature; persuasion will no more stop a crisis war than it will stop a tsunami. So the meeting was a failure. Sharon refused to back down until Abbas ends the violence, and Abbas refused to use force to try to end the violence, for fear it would start a civil war. Neither side was willing to compromise. The same kind of thing happened last week at the European Union summit in Brussels, <#inc ww2010.weblog.ref e050618 "in the confrontation between Blair and Chirac."#> The confrontation over the $5 billion rebate to England versus the $9 billion agricultural subsidies to France. Ten years ago, this kind of issue would have been resolved in a compromise. That's because it was a "generational unraveling" period, and Europe was being led by people in the generation that grew up during WW II, and considered the European Union essential to prevent a new European war. Today, Europe is in a "generational crisis" period, led by people in the generation born after WW II. It's that simple, as we showed as we pointed out in our <#hreftext ww2010.i.eu050601 "analysis of the French rejection of the EU Constitution."#> The exit polls indicated that the people who were alive during World War II favor the Constitution because they believe that it's the best way to prevent a new European war, while those born after WW II are opposed to the Constitution because they believe it will cost them jobs. That's why there's little willingness to compromise today. The same is true in the Mideast, which is also entering a generational crisis period. Recent news stories indicate that when British Prime Minister Tony Blair takes over as EU President on July 1, <#stdurl http://news.scotsman.com/politics.cfm?id=682922005 "he and Chirac may reach a compromise."#> Some sort of temporary compromise is possible, just as it's possible to have a heat wave near the beginning of winter, but it doesn't stop the inevitable freeze. Imagine these two geezers, Blair and Chirac, going around Europe trying to convince kids that they want a European Union even if it means losing their jobs, and you can predict what's going to happen. So we have Blair and Chirac in Europe, Abbas and Sharon in the Mideast. These are two pairs of people who distrust and dislike each other, unwilling to compromise very much, trying to convince their constituents that values that were important in the 1940s are still important today. You know, Dear Reader, that I sometimes joke around in this web log, and I'm occasionally irreverent, but I have to tell you that I was genuinely upset by what happened last week in Brussels. Yes it's true that it's exactly the kind of thing that I've been predicting, but it's still very upsetting to see England and France go step by step toward a new war, with almost mathematical certainty. I've often said that Generational Dynamics is the saddest project that I've ever worked on in my life, and it seems that every day's news only seems to make it sadder. =eod =// &&2 e050618 Acrimonious European Union summit ends in crisis =data ww2010.weblog.y2005.e050618.head Acrimonious European Union summit ends in crisis =data ww2010.weblog.y2005.e050618.keys european union =data ww2010.weblog.y2005.e050618.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050618.date 18-Jun-05 =data ww2010.weblog.y2005.e050618.txt1 Chirac and Blair exchanged bitter recriminations, with most of Europe blaming Blair =data ww2010.weblog.y2005.e050618.txt2 for refusing to give up the $5 billion annual "rebate" that Margaret Thatcher negotiated in 1984. At the end of a marathon session of the EU summit that lasted late into Friday evening, Blair refused to consider reducing the rebate unless France agreed to reduce the PAC (agricultural subsidies) that provides substantial subsidies to French farmers. <#inc ww2010.pic chir.jpg left "" "Defiant French President Jacques Chirac (Source: LeMonde)"#> Chirac really poured on the heat. He refused to link the rebate reduction in any way with any other part of the budget, let alone reduce the PAC amount, which provides $9 billion in farm subsidies to France. The current EU President, Luxembourg Prime Minister Jean-Claude Juncker, <#stdurl http://politics.guardian.co.uk/eu/story/0,9061,1509292,00.html "led the failing effort at reaching a compromise."#> <#inc ww2010.pic junck.jpg right "" "Furious EU President, Luxembourg Prime Minister Jean-Claude Juncker (Source: BBC)"#> At a post-midnight press conference, a furious Jean-Claude Juncker clearly condemned Blair and the UK, saying he felt ashamed that "certain people did not have the will to reach agreement when some poorer other countries were willing to do so." <#inc ww2010.pic blair.jpg left "" "Grim-faced British Prime Minister Tony Blair (Source: BBC)"#> At a competing press conference, a grim-faced Blair accused Chirac of intentionally trying to isolate him, and pointed out that England was not isolated, since four other countries, Holland, Sweden, Finland and Spain, with Denmark and Italy abstaining, <#stdurl http://www.lemonde.fr/web/article/0,1-0@2-3214,36-663595@51-662200,0.html "had joined the UK in rejecting the compromise budget."#> From the point of view of Generational Dynamics, this is exactly the kind of political result that should be expected. Europe is headed for a major new war, as part of the "clash of civilizations" world war, and it's increasingly clear that France and Britain will be the two major belligerents. This prediction is based on generational changes that have already taken place and are continuing to take place. As we pointed out in our <#hreftext ww2010.i.eu050601 "analysis of the French rejection of the EU Constitution,"#> the exit polls indicate that the people who were alive during World War II favor the Constitution because they believe that it's the best way to prevent a new European war, while those born after WW II are opposed to the Constitution because they believe it will cost them jobs. As time goes on, the generational balance will tilt further and further toward people who reject the European Union. The summit may have ended, but the acrimonious battle is far from over. It is incredibly ironic that on July 1, Tony Blair will follow a pre-established rotating schedule and take over from Jean-Claude Juncker as the new EU President. Asked about this at the press conference, Juncker said, "I have no comment on that. And I won't give Mr. Blair any advice, since he doesn't seem to want my advice." Thus, Blair will serve for six months as President of a European Union that will refuse to cooperate with him until he relents on the rebate issue. However, that would infuriate his own constituency back home, and so Blair is unlikely to back down. As of today, the EU Constitution is dead, thanks to the French and Dutch referenda; the EU budget is dead after 2006, thanks to yesterday's fiasco; and the EU's euro currency is close to death, thanks to the differing needs of the 25 member countries. Around 2015 or so, after the war is over, the survivors will try to form a new European Union, and they'll probably succeed at that time. =eod =// &&2 e050617 The worldwide household bubble is still expanding =data ww2010.weblog.y2005.e050617.head The worldwide household bubble is still expanding =data ww2010.weblog.y2005.e050617.keys =data ww2010.weblog.y2005.e050617.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050617.date 17-Jun-05 =data ww2010.weblog.y2005.e050617.txt1 Thanks to a worldwide collapse in mortgage interest rates, =data ww2010.weblog.y2005.e050617.txt2 housing prices are booming around the world, growing 11% in the last year in the United States, and up to 20% or more in other countries. The housing boom is related to the fact that 10-year Treasury bond interest rates have been falling, as have been similar bond rates around the world. Mortgage interest rates are set based on the 10-year Treasury bond rates, low interest rates allow home purchasers to buy more expensive houses for the same monthly payment, pushing housing prices up. =inc ww2010.pic monop.gif right "" "Cartoon from Monopoly board game" A humorous side note is that real estate prices have gone up so much in London that <#stdurl www.monopoly.com "the Parker game company"#> has issued a <#stdurl http://today.reuters.co.uk/news/newsArticle.aspx?type=topNews&storyID=2005-06-16T161956Z_01_MCC658781_RTRUKOC_0_LEISURE-MONOPOLY.xml "new 70th anniversary edition of the game"#> with prices some 10,000 times as high as they were in the original game. As <#inc ww2010.weblog.ref e050608 "we discussed a couple of weeks ago,"#> Alan Greenspan and other analysts don't claim to have a clue that explains the conundrum of why long-term interest rates are falling. The only credible explanation is the Generational Dynamics explanation, related to the prediction that we're headed for a major stock market correction and a 1930s style Great Depression. According to a <#stdurl http://online.wsj.com/article/0,,SB111887057779860749,00.html "front page article in yesterday's Wall Street Journal,"#> home prices have been increasing in countries around the world, as shown in the following table:

Rank	Country	One-Year Change	Three-Year Change
1	SOUTH AFRICA	28%	95%
2	CHINA (Shanghai)*	27%	68%
3	SPAIN	17%	63%
4	AUSTRALIA	-3%	56%
5	NEW ZEALAND	16%	55%
6	UNITED KINGDOM	11%	50%
7	FRANCE	15%	48%
7	IRELAND	13%	42%
9	CANADA	10%	31%
10	UNITED STATES	11%	29%
11	THAILAND	13%	29%
12	SWEDEN	10%	27%
13	HONG KONG	19%	27%
14	HUNGARY(Budapest)*	5%	27%
15	FINLAND	6%	23%
16	EURO AREA	7%	22%
17	GREECE (Ex-Athens)	4%	22%
18	KOREA	-2%	20%
19	NORWAY	10%	17%
20	DENMARK	9%	17%
21	TAIWAN	10%	15%
22	NETHERLANDS	5%	11%
23	SWITZERLAND	1%	8%
24	PORTUGAL	0%	3%
25	GERMANY	-3%	-5%
25	JAPAN	-5%	-16%
26	BULGARIA	48%	NA
27	INDONESIA	5%	NA
Source: WSJ

At some point the bubble is going to burst, and real estate prices are going to fall substantially. So-called "analysts" like Suze Orman are going on television telling people not to worry about that. The reasoning is that you can still continue to live in a home even its value goes down substantially, although she does advise converting interest-only and adjustable rate mortgages to fixed rate mortgages. But the problem is much more serious than these analysts are indicating. If property values go down in a community, then the money available to the local government will go down, causing the people living in overpriced homes to bear a much large real estate tax burden. Numerous other dislocations will occur as well. Those having a choice should rent for now, and put off purchasing for a couple of years. Those considering selling should do so soon. =eod =// &&2 e050616 European "Union" descends further into chaos =data ww2010.weblog.y2005.e050616.head European "Union" descends further and further into chaos =data ww2010.weblog.y2005.e050616.keys =data ww2010.weblog.y2005.e050616.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050616.date 16-Jun-05 =data ww2010.weblog.y2005.e050616.txt1 At EU summit today, there may be blood on the floor, =data ww2010.weblog.y2005.e050616.txt2 as Tony Blair and Jacques Chirac butt heads over the "UK rebate." Former British Prime Minister Margaret Thatcher negotiated this in 1984 with regard to the budget of the European Economic Community (EEC). All member states contributed to the budget, and the EEC then distributed the money back to the members, mostly in the form of agricultural subsidies, most of which went to France, which had designed the system. So Thatcher pointed out that Britain was paying a lot of the budget, and getting almost no subsidies, and said Britain wouldn't play under those terms, so Britain got a hefty budget "rebate." <#inc ww2010.pic g050615.jpg right "" "Tony Blair scowls angrily at grinning Jacques Chirac at Élysée Palace in Paris on Tuesday. (Source: AP)"#> Now the EEC has become the EU. The EU budget is being renegotiated at today's EU summit, and the UK has been under pressure for a while to give up the rebate. French President Jacques Chirac, who had expected France to be the leader of the EU, was enormously humiliated by the vote 2 1/2 weeks ago, where <#hreftext ww2010.i.eu050601 "France rejected new EU Constitution."#> Blair and Chirac have never liked each other very much anyway, so it was easy for Chirac to blame France's rejection on Blair's inflexibility on the rebate. (Actually, it was a generational thing, as <#hreftext ww2010.i.eu050601 "I explained.)"#> So Blair said (paraphrasing), hey, we'll talk about cutting back the rebate, if you wanna talk about cutting back the agricultural subsidies. (The agricultural subsidies are called the "PAC," standing for "la politique agricole commune.") So Chirac said (paraphrasing), Screw you. What we're witnessing is the EU, crumbling before our very eyes. The EU was already in a crisis, after France and then Holland refused to ratify the new EU Constitution. And suddenly there's a lot of talk around Europe about abandoning the new euro currency, and going to back to individual country currencies. <#inc ww2010.pic g050613.gif left "" "Divergent economic growth in different EU countries. (Source: WSJ)"#> Last year, the international investment firm <#inc ww2010.weblog.ref e040815b "Morgan Stanley warned that the euro could collapse"#> entirely in 2005, because some EU countries have a "more virtuous budgetary policy" than others. The adjoining graphic shows how different countries' economies have been growing (or not growing) at different rates, causing difficulties of the type Morgan Stanley predicted. And now, the budget crisis and the discord between Blair and Chirac are spiraling Europe further and further into chaos. From the point of view of Generational Dynamics, Europe is heading for a new major war, just as it has time after time for centuries. What we're seeing in the step-by-step collapse of European Union is the step-by-step trip on the road to war. This European War will be part of the major "clash of civilizations" world war. Generational Dynamics doesn't predict who the belligerents will be, but it's increasingly clear that Britain and France will be fighting a new crisis war. A reader wrote to me after reading <#hreftext ww2010.i.eu050601 "my coverage of the French vote,"#> as follows:

"You mention the French and England war concept but give no details for what seems like such a radical statement. I would have never guessed a war between those two nations now. Could you please elaborate?"

It's really not so radical, considering the fact that England and France have had literally dozens of wars in the last millennium, as they've done over and over since 1066, when the Normans conquered Saxon England. In fact, the Hundred Years War (which lasted 117 years) was mainly between France and England. Why should this cycle be any different? Or at least, why should it be considered radical? It shouldn't, especially to anyone who's studied anything about Napoleon. Generational Dynamics predicts that there'll be a new W. European war, but doesn't predict who'll be fighting whom. For that, we need to look at the current trend lines. In the leadup to the Iraq war, Germany and Russia opposed the war and didn't want to participate, but France actively tried to cause the English and Americans to be defeated. The leading architect of the French strategy was sleazebag Dominique de Villepin, whom Chirac recently elevated to the position of French Prime Minister. Incidentally, de Villepin is known to be an admirer of Napoleon. What would be the scenario for such a war? In my opinion, one or the more likely scenarios is as follows: When there's a new Mideast war, it seems pretty clear that Britain will side with Israel, and France will side with the Arabs. With France supplying arms to Arabs, it won't be long before British and American bombers are bombing French factories and supply lines, and the French are making strategic strikes on England. NATO's weapons will then be in play, and anything can happen, including a nuclear strike on British or American soil. What about the other European countries? When they are forced to choose between Britain and France, which side will they choose? We can't be sure, of course, but <#stdurl http://www.timesonline.co.uk/article/0,,13509-1652076,00.html "a very intriguing analysis"#> recently appeared in the Times of London. The analysis listed which countries are supporting France, and which are supporting the UK in the EU battles. Here's their list:

Supports France: Austria, Belgium, Germany, Greece, Luxembourg, Portugal, Spain.
Supports UK: Cyprus, Czech Republic, Denmark, Estonia, Finland, Hungary, Ireland, Italy, Latvia, Lithuania, Malta, Netherlands, Poland, Slovakia, Slovenia, Sweden.

Supporting one side or the other in the current political battle doesn't guarantee what will happen in the case of war, but it provides some indication. =eod =// &&2 e050614 Baltic dry index =data ww2010.weblog.y2005.e050614.head Worldwide shipping is slowing down, indicating a softening of world economic growth =data ww2010.weblog.y2005.e050614.keys =data ww2010.weblog.y2005.e050614.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050614.date 14-Jun-05 =data ww2010.weblog.y2005.e050614.txt1 Have you ever heard of the 'Baltic Dry Index'? It's been falling sharply. =data ww2010.weblog.y2005.e050614.txt2 The <#stdurl http://www.balticexchange.com "Baltic Dry Index (BDI)"#> measures the shipments of "dry-bulk cargos," commodities like iron ore, grain, cement and coal, shipped in bulk on huge freighters traveling the seas around the world. The BDI has a colorful <#stdurl http://www.balticexchange.com/default.asp?action=article&ID=21 history#> since it was established in 1744 by merchants and ships' captains chitchatting at the Virginia and Baltick Coffee House in Threadneedle Street in London. The BDI is considered to be a reliable leading economic indicator for manufacturing, since it measures commodities that will eventually be used in the manufacture of finished goods. Thus, the fact that it's down 50% since December, with the fall accelerating in recent weeks, signals a probable fall in manufacturing in the months to come and an economic downturn. This is consistent with measures of worldwide manufacturing activity. As we <#inc ww2010.weblog.ref e050602 "reported two weeks ago,"#> manufacturing activity was the slowest in two years worldwide, according to <#stdurl http://www.napm.org/ISMReport/JPMorgan/JPMorganMfg060105.pdf "the JP Morgan global report on manufacturing."#> According to the report, "The latest fall in the PMI was the result of slower growth in output and new orders, which led to a decline in employment." The worldwide slowdown in manufacturing and shipping almost gives one the visceral feeling that the earth's rotation is slowing down. According to <#stdurl http://online.wsj.com/article/0,,SB111861000054757291,00.html "an article in the Wall Street Journal,"#> worldwide shipping is decreasing because worldwide economic growth is slowing. In particular, China has cut back substantially in imports of iron ore used in steel production. <#inc ww2010.pic bdi0613.gif right "" "Baltic Dry Index, 1996-present (Source: FinData)"#> The Baltic Dry Index is not widely reported, but you can find current and historical BDI data on <#stdurl http://www.findata.co.uk/markets/Quote.aspx?e=INDEX&s=BDI "the FinData web site."#> As the adjoining 10-year graph shows, the BDI is normally fairly steady, but skyrocketed in 2003-4 as Chinese commodity imports went up. After reaching a peak in December, the Chinese imports have been falling. From the point of view of Generational Dynamics, China is transitioning from a "generational unraveling" period to a "generational crisis" period, and <#hreftext ww2010.i.china050116 "appears to be unraveling into a civil war."#> China is on a kind of "crack cocaine" addiction -- it's been growing at 9-10% for 20 years, and is addicted to continuing that rate of growth. A recession is inevitable, and when it occurs, it could destabilize the entire country. Whether the sharp fall in the BDI indicates that a Chinese recession is coming remains to be seen. The worldwide fall in shipping and manufacturing growth is also consistent with the Generational Dynamics prediction that we're entering a 1930s style depression. America's hollowed out economy has closed factories and shipped jobs to China. China imports commodities and exports finished goods, especially textiles and electronics, to America, that we pay for on credit. China then repurchases our credit in the form of Treasury bonds. Other countries play a part to a lesser extent, and many of their economies are worse off than ours. Some unplanned event, like a recession, that interrupts this symbiotic relationship could be the trigger that causes the major economic readjustment that Generational Dynamics predicts. =eod =// &&2 e050612 Wealthy nations cancel Africa's debts at G-8 =data ww2010.weblog.y2005.e050612.head "Wealthy nations" agree to cancel Africa's debts at G-8 meeting =data ww2010.weblog.y2005.e050612.keys =data ww2010.weblog.y2005.e050612.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050612.date 12-Jun-05 =data ww2010.weblog.y2005.e050612.txt1 Can Africa be saved? Will more money do it? =data ww2010.weblog.y2005.e050612.txt2 Some people think of Africa as the land of genocide, famine and AIDS, an unstable breeding ground for war and terrorism. Some believe that these are caused by racial or tribal issues, and some even blame it on slavery. These explanations are silly, of course. Africa is no different than any other continent. AIDS is spreading throughout Asia, and famine and hunger strike all heavily populated nations, and is currently occurring in North Korea. As for the two recent genocidal African wars (Darfur last year and Rwanda in 1994), genocide happens everywhere -- like the Balkans wars last decade, Cambodia in the 1970s, and Europe in the 1940s. Nonetheless, the agreement on Saturday by the "rich nations" to <#stdurl http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=8762441 "forgive $40 billion of African debt"#> is being called "historic." Actually, there was never a snowflake's chance in hell that those debts would ever be repaid anyway, so the agreement is really nothing more than accepting the inevitable. Trying to save a country by pouring money into it is nothing new. We're doing it today with the West Bank, for example, where an all-out Arab-Jewish war is being postponed only with ever-increasing billions of dollars of aid. It's happening in Haiti today as well. And the leaders of China, a country with 150 million itinerant workers and frequent local riots, are known to believe that plenty of food will prevent civil war. <#inc ww2010.pic afribig.gif right "" "Africa is larger than Europe, America, Alaska, China, and New Zealand (not shown) combined. (Source: Boston Univ)"#> But Africa?? Pouring money into the West Bank is one thing, because it's tiny. In contrast, many people don't realize how big Africa is -- bigger than China, America, Alaska, Europe and New Zealand combined. If all the so-called "rich nations" of the world gave every penny they had to Africa, it still wouldn't be enough. And what good does it do? Decades of providing aid to Africa through the World Bank and other organizations has evidently only made things worse -- if we're to believe all the people who are asking for more money now. In fact, Ugandan investigative reporter and political commentator <#stdurl http://www.iht.com/articles/2005/03/07/opinion/edmwenda.html "Andrew M. Mwenda explains how foreign aid has sabotaged reform"#> in Uganda:

Uganda collects only a fraction of the taxes owed it; the rich and powerful usually pay no taxes: "The Uganda Revenue Authority collects only about 57 percent of taxes due. This is because of institutional weaknesses in tax administration and also because, as Aslund Annebrit, a former commissioner general of the agency, has said, 'the rich and politically powerful don't pay taxes.'"
Uganda has used the money to build a bloated government bureaucracy: "Uganda spends $200 million on the military, including $40 million on an inflated army payroll. There is evidence to show that $70 million is enough for Uganda's security needs. The government also spends $200 million on public administration, mostly political patronage - 68 cabinet ministers, 73 presidential advisers, a stadium-sized Parliament and local governments that keep multiplying by the year. A Ministry of Finance study shows public administration expenditure could be cut by 50 percent."

Mwenda's argument is that foreign aid makes governments unaccountable to the people, stifles government reform, subsidizes government corruption and incompetence, and saves the rich and well-connected from having to pay taxes. This is what's happening in Africa, but it's also clear that the same things have been happening in Haiti and the West Bank. It's in the nature of this kind of aid. But what's the choice? The alternative is to give that aid, but also impose controls, even place outside managers in the country to oversee how the money is spent. That alternative has a name. It's call "colonialism." The 1850s discovery of quinine as a treatment for malaria opened the floodgates to colonialism of Africa. In what was known as the "Scramble for Africa," England, Belgium, France, Portugal, Italy, Spain and Germany all competed to colonize parts of Africa in the late 1800s. By 1914, all of black Africa except Ethiopia and Liberia were European colonies. Since 1914, these former colonies have become independent nations. Today, colonialism is not exactly a politically popular concept. For example, I have a friend named Mike who tends a little toward paranoia, and sees almost anything anyone does as driven by greed. Take any current news event anywhere in the world, no matter what it is, and he sees it as being motivated by one country trying to get another country's oil. He sees colonialism as an unalloyed evil: a desire of one country to enslave the people of another in order to gain possession of their resources. Does that apply to all of those countries -- England, Belgium, France, Portugal, Italy, Spain and Germany? To him, yes it does. What about the colonists bringing modern agriculture, modern medicine, modern communications, modern transportation, modern financial structures, factories, jobs, and so forth. To him, that doesn't matter. It's just greed and slavery. A lot of people think that way, because colonialism never works out. At the beginning it's win-win, and great for everyone. As time goes on, the population increases, the food supply can't keep up with the population, poverty increases, and hunger increases. The colonists can no longer provide for the public welfare, and they develop a bunker mentality, and protect themselves to keep order. This leads to massive government corruption. In time a crisis war develops (like the Rwanda war), and enough people are killed so that the survivors have enough food. A year ago, when <#inc ww2010.weblog.ref e040628 "I first wrote about the crisis war in Darfur,"#> I predicted that the UN would be helpless to stop the crisis war until it had run its course. And I was absolutely right. Crisis wars are forces of nature, like typhoons, like tsunamis. They happen regularly, and they can't be stopped. That's what happens in the case of colonialism, but that's also what happens in the case of direct aid (or loans), as we've been seeing. And that's the point of this little essay. It doesn't matter whether you provide direct aid or you provide aid with controls, or you provide investments, or you provide full colonial control. It's always the same. World War II was a huge genocidal war involving many countries of the world, no different from Rwanda or Darfur. Each country, each region takes its turn. The whole concept of "rich nations" giving aid is a joke. America is the "richest" country, but we're in hock up to our necks to China. Europe is supposed to be rich, but they're worse off than we are. China is currently a "rich" country, but they're a third world country so they don't count as rich. However, that's not what's important today. What's important today is that the politicians have signed "an historic agreement on the way to eliminating poverty in the world." They did this by forgiving loans that never would have been paid, promising more aid that will make no difference, and patting themselves on the back for being so caring and clever. But that's what politicians are for, isn't it. =eod =// &&2 e050610 North Korea blocking all international communications =data ww2010.weblog.y2005.e050610.head North Korea is blocking all international communications =data ww2010.weblog.y2005.e050610.keys =data ww2010.weblog.y2005.e050610.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050610.date 10-Jun-05 =data ww2010.weblog.y2005.e050610.txt1 Continuing its war mobilization that began early last year, =data ww2010.weblog.y2005.e050610.txt2 North Korea is <#stdurl http://joongangdaily.joins.com/200506/07/200506070003592109900090209021.html "moving aggressively to prevent its citizens from making international calls."#> It has cut 90% of its 970 international phone lines, and has confiscated 20,000 cell phones. The Internet has been all but shut down. Ironically, the use of cell phones and the internet was considered by by many observers to be <#stdurl http://www.politinfo.com/articles/article_2005_05_18_1212.html "an important sign that personal and economic freedom was finally increasing"#> in the Stalinist country. In particular, the cell phones permitted family members in the North and South to talk to one another for the first time in fifty years. The Kim Jong-il government had been permitting a great deal of freedom in phone use since cell phones were introduced in 2002. But on April 24 of last year, there was a huge train explosion in Ryongchon province near the Chinese border, and Pyongyang was shocked by how quickly the details of the explosion became known around the world -- thanks to Korean citizens using their cell phones to call across the Chinese border! Officials investigating the train explosion became convinced that the train explosion <#stdurl "http://www.telegraph.co.uk/news/main.jhtml;sessionid=G5I0J1EUPHGHNQFIQMGSM54AVCBQWJVC?xml=/news/2004/06/13/wkor13.xml&secureRefresh=true&_requestid=85436" "was an attempted plot to assassinate Kim,"#> and that a cell phone was used to detonate the explosives. The cell phone confiscation began at that time, but now Pyongyang has cut almost all international phone lines, with the result that North Koreans have almost no contact with the outside world. Analysts believe that the phone cutoff is related to the Pyongyang claim that the U.S. will attack North Korea preemptively, and then North Korean citizens would be able to pass confidential information to the Americans. "Since a preemptive strike scenario surfaced in 2003, North Korea has been in a semi-state of war, and it is likely to continue until the six-party talks resume," <#stdurl http://joongangdaily.joins.com/200506/07/200506070003592109900090209021.html "said Jung Chang-hyun, a professor of North Korean studies"#> at Kookmin University. However, this all comes at a time when North Korea <#stdurl http://news.bbc.co.uk/2/hi/asia-pacific/4072280.stm "is facing the worst food shortages in years,"#> and is facing a possible famine. =inc ww2010.cf.cf050530 p right From the point of view of Generational Dynamics, North Korea is in a "generational crisis" period, and a war to reunite Korea is a near 100% certainty. A severe food shortage is exactly the kind of event that could trigger such a war during a generational crisis period. A famine would cause enormous unrest by citizens infuriated at the Kim government, and the government would redirect the citizens' passions against their hated enemies, America and Japan, who would be blamed for the fact that the North and South are still separated. If Kim were going to invade South Korea soon, then cutting off international phone service would be the right thing to do in preparation. That doesn't mean that an early invasion is planned, but it's a possibility. Generational Dynamics predicts that North Korea will preemptively launch a war to reunify South and North Korea under Kim's control. This war will engulf the region, including Japan, China and America. It could start next week, next month or next year, but it's certain. =eod =// &&2 e050608 Alan Greenspan predicts major losses by hedge funds =data ww2010.weblog.y2005.e050608.head Alan Greenspan predicts major losses by hedge funds =data ww2010.weblog.y2005.e050608.keys =data ww2010.weblog.y2005.e050608.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050608.date 8-Jun-05 =data ww2010.weblog.y2005.e050608.txt1 But still says he doesn't have a clue why 10-year Treasury bond interest rates are falling. =data ww2010.weblog.y2005.e050608.txt2 In a <#stdurl http://federalreserve.gov/boarddocs/speeches/2005/20050606/default.htm "speech on Monday to an International Monetary Conference in Beijing,"#> that hedge funds had picked "most of the low-hanging fruit of readily available profits," and that very soon, "many wealthy fund managers and investors could become less wealthy." Hedge funds are based on small inefficiencies in the marketplace. If, for some reason, copper is selling for slightly more in Moscow than Chicago, then hedge fund managers use a technique called "arbitrage": they purchase Moscow copper and hedge (or collateralize) the purchase by selling Chicago copper, and make money when the prices converge again. According to Greenspan,

These entities have been able to raise significant resources from investors who are apparently seeking above-average risk-adjusted rates of return, which, of course, can be achieved by only a minority of investors. To meet this demand, hedge fund managers are devising increasingly more complex trading strategies to exploit perceived arbitrage opportunities, which are judged--in many cases erroneously--to offer excess rates of return. This effort is particularly evident in the pronounced growth and increasing complexity of collateralized debt obligations. Although collateralized debt obligations are a powerful tool for enhancing risk management by separating idiosyncratic risks from systematic risks, the models used to price and hedge these instruments are just beginning to be tested. I have no doubt that many of the new hedge fund entrepreneurs are embracing a strategy of pinpointing temporary market inefficiencies, the exploitation of which is expected to yield above-average rates of return. For the time being, most of the low-hanging fruit of readily available profits has already been picked by the managers of the massive influx of hedge fund capital, leaving as a byproduct much-more-efficient markets and normal returns. But continuing efforts to seek above-average returns could create risks for which compensation is inadequate. Significant numbers of trading strategies are already destined to prove disappointing, a point that recent data on the distribution of hedge fund returns seem to be confirming. Consequently, after its recent very rapid advance, the hedge fund industry could temporarily shrink, and many wealthy fund managers and investors could become less wealthy. Note that Greenspan likes hedge funds. He says above that they leave "as a byproduct much-more-efficient markets," and later he tells us not "to lose sight of the very important contributions hedge funds and new financial products have made to financial stability by increasing market liquidity and spreading financial risk, and thereby enhancing economic flexibility and resilience." The question is whether a collapse in hedge funds will bring down the whole market. Greenspan says it won't, but <#inc ww2010.weblog.ref e050519 "other analysts fear a market meltdown,"#> as I wrote last month. =inc ww2010.h2 treasury "Why is the yield curve flattening?" Early in 2004, <#hreftext ww2010.i.greenspan040108 "Greenspan was bragging that he'd saved the economy"#> from repeating the 1930s Great Depression. However, many things started going wrong during 2004, and Greenspan's language became increasingly uncertain, and by February, 2005, <#inc ww2010.weblog.ref e050217 "Greenspan completely repudiated his earlier reasoning"#> about the 1990s stock market bubble and its aftereffects. Greenspan pointed to a special "conundrum": The flattening of the yield curve in bonds, <#hreftext ww2010.i.fed040921 "which I wrote about last year."#> The issue is that interest rates for long-term investments keep falling, while the interest rates for short term investments have been rising. Here's an update of the chart that I posted last year, showing the interest rates for short and long-term bonds for some recent dates:


Treasury Bond Yields

Date	3-month maturity	10-year maturity	Difference

May 11 '04	0.94%	4.74%	3.80%
June 11 '04	1.17%	4.79%	3.62%
Aug 21 '04	1.38%	4.23%	2.85%
Sept 21 '04	1.60%	4.03%	2.43%
Feb 17 '05	2.44%	4.17%	1.17%
Jun 7 '05	2.86%	3.90%	1.04%

As you can see, the short-term rates continue to increase significantly, and the long-term rates have been decreasing or remaining steady. Many analysts believe that the bond rates are trending towards an "inverted yield curve," where long term bonds have a lower interest rates than short-term bonds. Whenever this has happened in the past, it was followed by a recession or a major stock market correction. (There's a great web page that discusses all this, and has a "living graphic" that shows how the yield curve has changed, month by month, since 1978, at <#stdurl http://www.smartmoney.com/onebond/index.cfm?story=yieldcurve "The Living Yield Curve."#>) Greenspan says that won't happen this time. OK. In his speech, Greenspan says, "[By summer, 2004,] pressures emerged in the marketplace that drove long-term rates back down. In March of this year, market participants once again bid up long-term rates, but as occurred last year, forces came into play to make those increases short lived." He added that this is happening around the world: "But what are those forces? Clearly, they are not operating solely in the United States. Long-term rates have moved lower virtually everywhere. Except in Japan, rates among the other foreign Group of Seven countries have declined notably more than have rates in the United States. Even in emerging economies, whose history has been too often marked by inflationary imbalances and unstable exchange rates, access to longer-term finance has improved." Greenspan considers "a number of hypotheses" to explain "this remarkable worldwide environment of low long-term interest rates," but he rejects them, and finally concludes, "The economic and financial world is changing in ways that we still do not fully comprehend." =inc ww2010.h2 gdview "Generational Dynamics view" Generational Dynamics, in its current stage of development, does not predict the yields on Treasury bonds. However, Generational Dynamics does make financial predictions that provide an indirect explanation for why long-term interest rates are falling worldwide. First, you have to understand how long-term bonds are priced. Suppose you purchase a bond that will pay $1,000 in ten years. The more you pay for it, the less interest you'll be earning over ten years. So, as the price of bonds goes up, the interest rate (or yield) goes down. That's what's been happening with 10-year Treasury Bonds: the prices have been going up, meaning that the yields have been coming down. If the prices are going up, it means that there must be a greater demand for these bonds. So the real question is: Why are investors around the world purchasing more and more long-term bonds, pushing their prices up and their yields down? We know that many Asian companies have been buying up US Treasury bonds, <#inc ww2010.weblog.ref e050517 "as have hedge fund managers in the Carribean."#> But this is a worldwide phenomenon, as Greenspan pointed out. It's not just US Treasury bonds, but also long-term bonds in many other nations. What possible explanation is there for this worldwide demand for long-term bonds for countries around the world? Alan Greenspan has no explanation, and neither does anyone else. But Generational Dynamics does have an explanation: It predicts that the world is going through a generational financial crisis. These have occurred every 70-80 years since the 1600s: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash. These bubbles and crashes always occur at exactly the time when the generation of people who grew up and lived through the previous bubble all disappear (retire or die), all at once. The 1990s bubble occurred at exactly the time that senior financial managers who grew up during the 1930s Great Depression all disappeared (retired or died) all at once. The effects of the 1990s bubble have not fully unraveled, and we're still in a bubble. Price/earnings ratios have been at 20 or above for ten years now, as I've written about many times, meaning that stocks are overpriced. So what's an investor to do? Stocks are risky because they're overpriced. Hedge funds are risky because even Greenspan says they're going to lose money. Investing directly in companies is risky because most companies have become heavy with bureaucracy and pension fund obligations. Because of all those risks, investors around the world are investing in long-term bonds. They pay about 4% per year in interest, and they're much safer than any of these other investments. This view, which Greenspan other high-priced analysts refuse to utter, is quite consistent with other data. An <#stdurl http://online.wsj.com/article/0,,SB111817921624553309,00.html "article in today's (June 8) Wall Street Journal"#> says that manufacturing growth is slowing around the world. According to the article,

"Virtually across the world, the rate of growth is decelerating in manufacturing," says Daniel Meckstroth, chief economist with Manufacturers Alliance/MAPI, a public-policy group in Arlington, Va. ... This year, U.S. industrial production is expected to rise 3.7%, slower than the 4.1% growth of last year. Germany is expected to slow to growth of 1.9% from 2.4%, while Italy is forecast to record a decline of 0.5%, compared with a fall of 0.7% in 2004. The drop-off is even more pronounced in parts of Asia, with industrial-production growth slipping to 1.4% in Japan from 5.2%, to 7.5% in Malaysia from 12.6%, and to 6.3% in Singapore from 13.9%. Export-oriented Asian economies such as Malaysia depend heavily on Japan to soak up their goods and are getting hammered by its slowdown. China is expected to decelerate modestly, to 14% from 16.7%, although past predictions about Chinese slowdowns haven't materialized."

So, the worldwide fall in long-term interest rates coincides quite naturally with the worldwide slowdown in manufacturing growth. Manufacturing isn't doing well, so investors put their money into long-term bonds rather than manufacturing plants, raising the price of bonds, and lowering yields (interest rates). A recent article entitled, <#hreftext ww2010.i.greenspan050206 ""Alan Greenspan warns that global economic dangers are without historical precedent,""#> describes how Alan Greenspan reversed his long-held position on the health of the world economy. Generational Dynamics predicts that things are going to get much worse. =eod =// &&2 e050606b Abbas losing control of Gaza / West Bank =data ww2010.weblog.y2005.e050606b.head Abbas is increasingly losing control of Gaza and the West Bank =data ww2010.weblog.y2005.e050606b.keys =data ww2010.weblog.y2005.e050606b.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050606b.date 6-Jun-05 =data ww2010.weblog.y2005.e050606b.txt1 Palestinian militants are infuriated by Abbas' unilateral cancellation of parliamentary elections. =data ww2010.weblog.y2005.e050606b.txt2 Palestinian Authority President Mahmoud Abbas on Saturday <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2005/06/04/AR2005060401224.html "postponed the July 17 parliamentary elections indefinitely,"#> in light of polls that have shown increasing popular support for the militant group Hamas. Palestinians are showing increasing discontent with the corruption in Abbas' Fatah party. When Abbas took over Fatah following <#inc ww2010.weblog.ref e041114 "Yasser Arafat's death in November,"#> Abbas promised to reduce corruption and disarm the militias. Abbas repeated those promises in the euphoria following <#inc ww2010.weblog.ref e050124 "Abbas' election as Palestinian Authority president"#> in January. However, there's no sign of any decrease in corruption, the militias are not being disarmed, and the armed violence appears to be only increasing. Armed gangs in the Al-Aqsa Martyrs Brigades and other militias <#stdurl http://www.dailystar.com.lb/article.asp?edition_id=10&categ_id=2&article_id=15681 "have become increasingly powerful"#> in the last few months. Yesterday, armed militias temporarily three government buildings to protest their opposition to Abbas' decision to cancel the elections. <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> The situation has become even more perilous as <#stdurl http://www.guardian.co.uk/syria/story/0,13031,1499909,00.html "Lebanese Shi'ite Hezbollah militia group"#> appears to have won south Lebanon's parliamentary elections on Sunday. Like the Palestinian militia groups, Hezbollah has never agreed to the peace plan with Israel, but is allied with Syria and Iran, and <#stdurl http://www.guardian.co.uk/worldlatest/story/0,1280,-5031370,00.html "claims to have 12,000 rockets and misslies capable of burying northern Israel."#> Sunday's election victory gives this group increased power. Abbas' cancellation of the July 17 elections was a desperate move to try to buy time, but time is passing, and youthful generations of militants with no fear of war are growing in size. From the point of view of Generational Dynamics, the Mideast is headed for a major new crisis war between Jews and Arabs that will engulf the entire region, refighting the war in the late 1940s that was triggered by the partitioning of Palestine and the creation of the state of Israel. There's no guarantee that Israel will survive this war. =eod =// &&2 e050606 Howard Dean says Republicans 'never made honest living' =data ww2010.weblog.y2005.e050606.head Howard Dean says Republicans "never made honest living" =data ww2010.weblog.y2005.e050606.keys =data ww2010.weblog.y2005.e050606.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050606.date 6-Jun-05 =data ww2010.weblog.y2005.e050606.txt1 History tells us that both Republicans and Democrats will be using more and more of this bilious language. =data ww2010.weblog.y2005.e050606.txt2 On Thursday, Democratic National Committee Chairman <#stdurl http://washingtontimes.com/national/20050603-123932-6657r.htm "Howard Dean said the following"#> about why working parents find it difficult to make it to the polls on time to vote:

"Well, Republicans, I guess, can do that, because a lot of them have never made an honest living in their lives. But for ordinary working people, who have to work eight hours a day, they have kids, they got to get home to those kids, the idea of making them stand for eight hours to cast their ballot for democracy is wrong."

I hate this kind of putrid rhetoric from either Democrats or Republicans, but history tells us that now, in a "generational crisis" period, this is precisely the kind of rhetoric we're going to be hearing more and more, from both Democrats AND Republicans, between the "blue staters" and the "red staters." The level of conflict will not reach the level of armed conflict, as it did during the Civil War, but the political conflict will be much worse than it is now, or than it even was during last year's election. =eod =// &&2 e050604 Rumsfeld alarm: militarization of China and N. Korea =data ww2010.weblog.y2005.e050604.head Rumsfeld expresses alarm over militarization of China and North Korea =data ww2010.weblog.y2005.e050604.keys =data ww2010.weblog.y2005.e050604.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050604.date 4-Jun-05 =data ww2010.weblog.y2005.e050604.txt1 Defense Secretary Donald Rumsfeld spoke in Singapore on Saturday =data ww2010.weblog.y2005.e050604.txt2 to an international conference on Asian security issues, hosted by the <#stdurl http://www.iiss.org/shangri-la.php "International Institute of Strategic Studies."#> In <#stdurl http://www.iiss.org/shangri-la-speeches.php?itemID=46 "his speech to the conference,"#> Rumsfeld described North Korea as follows:

"[C]onsider North Korea’s Stalinist regime, where: The children and grandchildren of dissidents are pressed into labor; Refugees who escape are kidnapped from foreign countries; and Where starving citizens search barren fields for individual grains. A European doctor who spent many months treating children in North Korea said: “There are two worlds in North Korea: one for the senior military and the elite; and a living hell for the rest.” Pyongyang’s nuclear ambitions threaten the security and stability of the region, and because of their record of proliferation, it threatens the world."

Here is what Rumsfeld said about China:

Rumsfeld is saying what has been getting increasingly obvious for a year: Both China and North Korea are mobilizing for war. They both have large armies, and both are improving their missile technology and nuclear technology quickly. China's anti-secession law has laid what Beijing considers the legal groundwork for a pre-emptive strike to reunite Taiwan with China, and N. Korea's desperately poor people are jealously eyeing the great wealth in S. Korea and Japan. A more sanguine point of view was expressed by Lee Hsien Loong, Prime Minister of Singapore, in <#stdurl http://www.iiss.org/shangri-la-speeches.php?itemID=44 "his keynote address to the conference:"#>

[Last year,] the danger that Taiwan might make a move towards independence and so provoke a cross-strait conflict dragging in the US and Japan seemed very real. Today, the tension has eased. China has passed the Anti-Secession Law. Japan has formally stated that peace in the Taiwan Strait is one of its joint security concerns with the US. The US and particularly President Bush has stated clearly that it supports One China and does not support Taiwanese independence. Clear lines have been drawn. Both the Taiwanese population and government now know that independence is now out of the question, as any unilateral move towards independence will not get US support. This has stabilised the position. This kind of statement exhibits the kind of generational naïveté in leaders that we saw this past week, as voters in France and Holland surprised the élite leaders of Europe by <#hreftext ww2010.i.eu050601 "rejecting the EU Constitution in a major generational split."#> Lee may be Asian, but he fits the same élite profile as the European leaders: Born in 1952, attended University of Cambridge, and got a Master's degree in public administration at the Kennedy School of Government in Harvard University. As we <#hreftext ww2010.i.taiwan040823 "noted last year,"#> Singapore sides with China in the Taiwan dispute. Singapore is 80% Chinese and is very wealthy, the wealthiest country, per capita, in the region. <#inc ww2010.pic taigraph.gif left "" "Taiwan poll results to question: "Do you feel Taiwanese, Chinese or both?" (Source: WSJ)"#> Lee's statement that "Taiwanese population and government now know that independence is now out of the question" is simply false, as is completely evident to anyone who looks at the generational issues. The adjoining graph, which shows the number of Taiwanese who call themselves "Chinese" versus "Taiwanese" shows how the generational change is playing out. As the older generation dies out, the number of people calling them "Chinese" has been decreasing; as younger generations grow older, the number of people calling themselves "Taiwanese" is increasing. Lee is generationally naïve, but the people of Taiwan are naïve as well. Lee is naïve because he thinks that the Taiwanese younger generations don't mean it when they say they want independence, and the Taiwanese younger generations are naïve because they don't believe that Beijing means it when they say they'll start a war over Taiwan. This is how these major crisis wars start, as they've started through millennia of history, as I've described in my books. I always enjoy speaking to people from the "Silent Generation," as the generation that grew up during the Great Depression and World War II is called. Younger people who read this web site often think that the whole thing is crazy. But "Silents" who read this web site may disagree with some of the details, but they know that everything on this web site is perfectly possible. That's because Silents have seen it all before, and younger people haven't. It's always a pleasant surprise to see any major leader speak frankly about the state of the world, but Donald Rumsfeld, a Silent born in 1932, grew up during World War II, and is very well aware that a war could be triggered at any time. All that either China or N. Korea need is an actual trigger - a new pro-independence law in Taiwan, or an offensive anti-Kim remark by someone in Japan or U.S., for example, for either country to initiate a pre-emptive war. The war might begin next week, next month or next year, but it's coming with 100% certainty, and it will affect the entire world. =eod =// &&2 e050603 Fourth Turning forums web site will be up again soon =data ww2010.weblog.y2005.e050603.head Fourth Turning forums web site will be up again soon =data ww2010.weblog.y2005.e050603.keys =data ww2010.weblog.y2005.e050603.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050603.date 3-Jun-05 =data ww2010.weblog.y2005.e050603.txt1 The Fourth Turning forums are often used to discuss generational issues, =data ww2010.weblog.y2005.e050603.txt2 since the generational paradigm was developed by William Strauss and Neil Howe, and published in their 1995 book, <#redir "http://www.amazon.com/exec/obidos/ASIN/0767900464"#> The Fourth Turning: An American prophecy; What the cycles of history tell us about America's next rendezvous with destiny. Strauss and Howe's historical analysis of contemporary diaries and histories for the last 600 years in England and America showed that six war cycles followed a common generational cycle. Generational Dynamics is built on their findings. (The differences can be found in my new book, <#hreftext ww2010.book2 "Generational Dynamics for Historians."#>) The Fourth Turning forums web site has been unavailable for the last ten days thanks to a hacker, and a number of people, including many who read this web site regularly, have been suffering severe withdrawal symptoms, including severe nervous reactions from being forced to spend more time with their families. =inc ww2010.bugcomment right Craig, the Webmaster, is waiting to hear from the web host firm when the security hole has been fixed and the system is up and running again. Hopefully, this will happen soon. You may contact him directly at <#stdurl mailto:webmaster@lifecourse.com#>. When the Fourth Turning forum is running again, you'll be able to find it at <#stdurl http://fourthturning.com/forums"#> . I personally contribute to many of the dicussions, but the two that are most relevant to this web site are:

<#stdurl http://www.fourthturning.com/forum/showthread.php?goto=newpost&t=1236 "Objections to Generational Dynamics"#> - for a discussion of Generational Dynamics theory.
<#stdurl http://fourthturning.com/forums/viewtopic.php?t=909 "The Singularity"#> - for a discussion of super-intelligent computers and the Singularity.

If you try these web pages today, you'll be redirected to an error page, since these system is still down. But they should be available soon. =eod =// &&2 e050602 Manufacturing index falls =data ww2010.weblog.y2005.e050602.head Manufacturing index falls more than expected after falling for 24 months =data ww2010.weblog.y2005.e050602.keys =data ww2010.weblog.y2005.e050602.loc ww2010.weblog.log0506 =data ww2010.weblog.y2005.e050602.date 2-Jun-05 =data ww2010.weblog.y2005.e050602.txt1 In another sign that the economy is slowing down, =data ww2010.weblog.y2005.e050602.txt2 the growth in manufacturing has been declining for two years. <#inc ww2010.pic g050601.gif right "" "Purchasing Managers Index, 2003-present (Source: WSJ)"#> The <#stdurl http://www.napm.org/ISMReport/ROB062005.cfm "Purchasing Manager's Index"#> is composed of several components, including New Orders, Employment, and Prices. Combined, the overal. index indicates whether the manufacturing sector is growing or declining. The data "indicates that the sector is losing momentum, as this month's PMI is at the lowest level since June 2003 when it registered 50.4 percent," according to the report. "The rate of growth in New Orders continues to decline.... The Employment Index failed to grow, ending 18 months of employment growth. The manufacturing sector is definitely slowing, and the question is whether a somewhat stronger dollar and the burden of high energy costs are slowly bringing this manufacturing growth cycle to end." <#inc ww2010.pic g050601b.gif left "" "Global Purchasing Managers Index, 1998-present"#> The same thing is happening globally, and manufacturing activity was the slowest in two years worldwide, according to <#stdurl http://www.napm.org/ISMReport/JPMorgan/JPMorganMfg060105.pdf "the JP Morgan global report on manufacturing."#> as shown by the adjoining graph. According to the report, "The latest fall in the PMI was the result of slower growth in output and new orders, which led to a decline in employment." And probably nothing is more dramatic than the fall of ten-year treasury bond yields worldwide. The US bonds fell sharply to about 3.9%, when it was 4.5% just a few months ago. The same things are happening to government bonds in many other countries. This decline indicates that investors are becoming increasingly risk-averse, fleeing from risky investments in hedge funds and, for that matter, in new manufacturing plants, and investing in safe government bonds. That's one of the reasons why manufacturing activity is losing momentum. These facts are all consistent with the predictions that I've been making since 2002, when I said that we're entering a new 1930s style Great Depression, and that the stock market would fall to the DJIA 3000-4000 range by the 2006-2007 time frame. The reports also show that manufacturer's prices are showing little sign of inflation, and that they're cutting back on employment. This should be very surprising to conventional economists because short-term interest rates have been close to zero for three years, and are still historically low today. By conventional standards, these rates should be causing massive inflation. But as we've been saying since 2002, we're in a long-term deflationary trend, and I expect prices to actually fall by 30% or so by 2010. <#inc ww2010.pic peratio.jpg right "" "Wall Street Historical Price/earnings ratio for S&P 500"#> Price/earnings ratios for stocks have been above 20 for ten years now, and as the adjacent graph shows, the P/E ratios fall below 10 within 5-15 years whenever that happens. The fall could happen tomorrow, next week, or next year. There's no way to give an exact time prediction. But the worldwide economic situation continues to deteriorate, as yesterday's manufacturing data shows. =eod =// &&2 e050530b French reject European constitution =data ww2010.weblog.y2005.e050530b.head Political earthquake continues, as French decisively reject European Constitution =data ww2010.weblog.y2005.e050530b.keys =data ww2010.weblog.y2005.e050530b.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050530b.date 30-May-05 =data ww2010.weblog.y2005.e050530b.txt1 European nationalism continues to grow as "Preserving national identity" trumps "Europe built around peace" =data ww2010.weblog.y2005.e050530b.txt2 Stunned politicians throughout Europe are scrambling to cope with <#stdurl http://www.lemonde.fr/web/articleinteractif/0,41-0@2-631760,49-655529@51-655472,0.html "the rejection, by an overwhelming 55%-45% vote"#> of <#stdurl http://european-convention.eu.int/bienvenue.asp?lang=EN "the proposed EU Constitution."#> The rejection was especially convincing in view of the unusually high turnout of 70%, and appears to be part of a mounting European political crisis. France, the most important founding member of the EU, thus became the first country to reject the European Constitution, which throws the entire Union's future in doubt. The EU can go on as it has before, but this vote will encourage nationalistic feelings in other EU countries. In particular, another founding country, Holland, will hold a similar referendum on Wednesday, and is also expected to vote NO. <#inc ww2010.weblog.ref e041214 "Holland has been getting increasingly nationalistic since November 2,"#> when filmmaker Theo van Gogh was murdered by a Muslim extremist. Countries in Eastern Europe will be especially appalled by the vote. Those who campaigned against ratification in the French referendum used the phrase "Preserving national identity," which are code words for the desire to avoid being in the same Union as 24 other countries. During the campaigning, the low-paid Polish plumber who steals a job away from a well-paid Frenchman became the symbol of the opponents. That's not surprising. With an unemployment rate above 10 per cent, concern about job security is widespread, and the Constitution, as well as the élite who are promoting it, are easy targets. Those who campaigned for ratification used the phrase, "Europe built around peace." The clearest statement was a voter was interviewed on the BBC: "My grandfather fought in World War I. My father fought in World Wars I and II. I fought in World War II. And now, for 60 years, my children and grandchildren have lived in peace. That's a good enough reason to me to vote 'yes' on the Constitution." From this statement, you might have guessed what the BBC reported about pre-election polls: They showed that the only age group that was polling in favor of the Constitution was the elderly. These were people who grew up during WW II and lived through the horror and terror of the war with Germany. For these people, another war must be avoided at all costs. The Generational Dynamics theory is based on the observation that generations born after a crisis war have a completely different world view from those who grew up during a crisis war. We're seeing that generational difference manifest itself in this referendum. Some analysts are predicting that the French will come to their senses, and the Constitution will be ratified in a new referendum to be held next year. But that's nonsense. There's a generational change going on, as the generations that still have a personal memory of WW II are quickly dying off, replaced by new generations that are more worried about their jobs than about war. From the point of view of Generational Dynamics, Europe is headed for a new crisis war. This should be no surprise to anyone who's read European history of the last 1000 years. We do not yet know how countries will choose sides in this war, but right now it looks pretty certain that England and France will have yet another war with one another. =eod =// &&2 e050530 The Conflict Risk Index =data ww2010.weblog.y2005.e050530.head The Conflict Risk Index: Depicting the current State of the World =data ww2010.weblog.y2005.e050530.keys =data ww2010.weblog.y2005.e050530.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050530.date 30-May-05 =data ww2010.weblog.y2005.e050530.txt1 I've been looking for a simple graphic that where we (the world) stand =data ww2010.weblog.y2005.e050530.txt2 at any given time. The problem is this: Generational Dynamics tells us that we're headed for a "clash of civilizations" world war with near 100% certainty, but doesn't tell us what will trigger this war. As usual, the Generational Dynamics Forecasting Methodology tells us our final destination, but not how we'll get there. To address this problem last year, I wrote an article on <#hreftext ww2010.i.danger041120 "The Six Most Dangerous Regions of the World,"#> to identify the regions that might trigger such a war. In that article, I was able to compute the probability of a world war beginning in each year, and I found it to be 22-24% each year for the next five years. That computation was based on the following assumption: That a regional war in any of the six dangerous regions would be enough to trigger a world war, often because America has defense agreements that commit us to enter many wars. These include agreements with Taiwan, South Korea, Japan, Europe (NATO), Israel, and Australia and New Zealand (ANZUS). So, for example, if China attacks Taiwan, or if Syria attacks Israel, then America will be required to enter the war, and the war will spread within a few months to a world war. In addition, there are two other crises that would almost certainly trigger a world war: A major international financial crisis, and a bird flu epidemic. Each of these regions and potential crises changes on a regular basis. I wanted to develop a graphic that I could easily update regularly to show the current "State of the World." I came up with the following graphic: =inc ww2010.cf.cf050530 p center The idea is that this graphic should not change more often than a few times a year. A second form of the graphic contains textual comments. The comments might change more often, even if the individual risk assessments don't: =inc ww2010.cf.cf050530 f center As time goes on, I'll update these graphics. My analysis leads me to conclude that all of these wars and crises will be triggered in time. History tells us that once one of these crises begins (a crisis war in one of the six regions, a major financial crisis, or a bird flu pandemic), then the others will follow in a cascade during the next two to three years. Finally, I wanted to prepare a retrospective version of this graphic for comparison. This turns out to be hard to do, since you have to adjust your frame of mind to remember how things were at a specific date in the past. =inc ww2010.cf.cf041001 f center By comparing the two, you can see that the Russia situation has cooled since October, but tensions have increased considerably among China, Korea, Taiwan and Japan. =eod =// &&2 e050529 Pope Benedict XIV pledges to end rift with Orthodox Christians =data ww2010.weblog.y2005.e050529.head Pope Benedict XIV pledges to end rift with Orthodox Christians =data ww2010.weblog.y2005.e050529.keys =data ww2010.weblog.y2005.e050529.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050529.date 29-May-05 =data ww2010.weblog.y2005.e050529.txt1 The whole concept is misguided, and besides, my grandmother would never have stood for it. =data ww2010.weblog.y2005.e050529.txt2 In a Sunday visit to Bari, Italy, a city which is symbolic in the relationship between Catholics and Orthodox Christians, the new Pope Benedict XIV <#stdurl http://edition.cnn.com/2005/WORLD/europe/05/29/papal.visit.ap/ "pledged to make healing the 1,000-year-old rift with the Orthodox church"#> a "fundamental" commitment of his papacy. My mother always enjoyed retelling this story of her own mother in the 1930s Chicago: Since there was no nearby Greek Orthodox Church, she would frequently attend Sunday services at a neighborhood Catholic Church. She contributed to the Catholic Church, and became friendly with the Priest. One day, the Priest said to her, "You've been so good to us, and you're so devoted to God. Why don't you consider converting and becoming a Catholic?" My grandmother was infuriated, and replied, "If I converted, then I would be no good to either you or myself." And she never returned to that Church or spoke to that Priest again. I'll bet that a lot of Greek Orthodox are having similar thoughts today, hearing that the Pope wants to reconcile. They aren't at war, so what's to reconcile? Does the Pope think that some Greek Orthodox will convert to Catholicism? My grandmother would be laughing in her grave. =inc ww2010.h2 incompatible "Incompatible religions" History has made Catholic and Orthodox Christianity basically incompatible religions. The difference can be illustrated forcefully by the following: There are Catholic missionaries in China whose purpose is to convert people to the Catholic religion, but there are no Greek Orthodox missionaries in China to convert people to the Greek Orthodox religion. In fact, anyone can become Catholic by agreeing to be baptized. But to become Greek Orthodox you pretty much have to, well, become Greek, or at least marry a Greek. After the Romans destroyed Jerusalem and massacred thousands of Jews in a crisis war that climaxed in 66 AD, Christianity began to spread throughout the Roman Empire, centered in the West in Rome and in the East in Byzantium (later Constantinople) in what is now Turkey. Later, when the Roman Empire collapsed, Constantinople became the "second Rome," and the center of the "orthodox" or "true" version of Christianity, presumably the direct descendant of Jesus' original teachings. But the Catholic religion was born with a remarkable difference: It became a "stateless religion." Although centered at the Vatican in Rome, it was independent of Italy. When the Germans sacked Rome, they adopted Christianity, combining it with some of their former pagan beliefs, creating the Catholic religion. In order to survive, the Catholics had to declare themselves independent of any state, so that the religion could survive any invasions and conquests. The Orthodox religions have always been closely related to the state. Constantinople was the center of both an empire and a religion. The Catholics competed with the Byzantines to gain the favor of Prince Vladimir of Kiev, and in 988 he adopted the Orthodox religion for himself and his people, the Slavs. When the Slav culture moved east to Moscow, the Russian Empire adopted it, and it became the Russian Orthodox religion. For the Greek Orthodox, the seminal moment in their relationship with the Catholics came with the Crusades, the same Crusades that the Muslims complain about. In 1204, along the way to fighting the Muslims, the Crusades sacked Constantinople, starving and murdering its citizens, and plundering the Church's treasures accumulated over the centuries. The deed was capped by placing a prostitute on the Emperor's throne at the church of St. Sophia, at that time the most beautiful church in Christendom. Though 1204 was a long time ago, this moment is burned into Greeks' minds. When Pope John Paul II visited Athens in May, 2001, he was met with anti-Catholic demonstrations and violence. Finally, the Pope said, "For occasions past and present, when the sons and daughters of the Catholic Church have sinned by actions and omission against their Orthodox brothers and sisters, may the Lord grant us the forgiveness we beg of him." So now what? So, Pope Benedict XIV pledges to end the rift with Orthodox Christians. Exactly what is Benedict going to do that John Paul didn't do? Is he going to apologize harder? Is he going to return some of the treasures that were plundered in 1204? I assume not. But there's still more to the story. =inc ww2010.h2 paul "Pope tries to end rift with Orthodox Church" One of the most significant events in world history in the last millennium was the fall of Constantinople to the Ottomans (Muslims) in 1453, renaming the city Istanbul. This ended the Byzantine Empire once and for all. In 1472, Pope Paul II saw this as an opportunity unify the Churches. He arranged for Russian Grand Prince Ivan the Great to marry Sophia, a Byzantine princess, hoping to draw them both into the Catholic Church, along with all of Russia. The move backfired, as Sophia convinced Ivan to declare Moscow as the "third Rome," and himself the first Czar (a word derived from the name "Caesar") of the entire Orthodox ("true") Church. So Benedict XIV is not the first Pope to try to "reach out" to the Orthodox Church. Actually, the Orthodox and Western civilizations are about as different from one another as the Western and Muslim civilizations, and have fought as many wars, most recently in World Wars I and II. All three civilizations fought a crisis war together in the Balkans in the 1990s. As we approach the "clash of civilizations" world war, it's worthwhile remembering that there are these three civilizations, and that the fault lines between them did not develop in either the Clinton administration or the Bush administration; they developed centuries ago, and no mere pledges to reconcile are going to make much difference today, as my grandmother could have told you. =eod =// &&2 e050527 PlayStation 5 will be as powerful as the human brain =data ww2010.weblog.y2005.e050527.head PlayStation 5 will be as powerful as the human brain =data ww2010.weblog.y2005.e050527.keys =data ww2010.weblog.y2005.e050527.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050527.date 27-May-05 =data ww2010.weblog.y2005.e050527.txt1 British Telecom Futurologist Ian Pearson looks ahead ten years. =data ww2010.weblog.y2005.e050527.txt2 Every five years, a new generation of game consoles comes out, and the time is now. Microsoft showed off <#stdurl www.xbox.com "the new XBOX 360"#> at the annual Electronic Entertainment Expo (E3), at the Los Angeles Convention Centre. <#inc ww2010.pic sp3.jpg right "" "Screen shot for EA Sports Fight Night Round 3 for the PS3"#> And Sony announced the Sony PlayStation 3 (PS3), scheduled for delivery early next year. Pointing to <#stdurl http://ps3.ign.com/articles/614/614682p1.html "the specifications of PlayStation 3,"#> futurologist Ian Pearson noted that <#stdurl http://gamesradar.msn.co.uk/news/default.asp?pagetypeid=2&articleid=36038&subsectionid=1585 ""[The SP3] is into supercomputer status"#> compared to 10 years ago." Pearson is head of the futurology unit at British Telecom's and Britain's leading thinker on the future. Pearson highlighted the fact that the SP3 is 35 times more powerful than previous consoles, and did a little math: "The new PlayStation is one per cent as powerful as a human brain. [Therefore,] PlayStation 5 will probably be as powerful as the human brain." =inc ww2010.bugcomment left I personally think it's more likely to be PlayStation 6 rather than PS5, but let's not quibble over 5 more years. He added, "We're already looking at how you might structure a computer that could possibly become conscious. There are quite a lot of us now who believe it's entirely feasible." That's certainly true. As <#hreftext ww2010.i.robot040709 "we discussed in conjunction with the release of the movie I, Robot."#> Supercomputers will be as intelligent as human beings by 2010 or so, and autonomous super-intelligent desktop or mobile computers will be surging in the 2020s, and will take over a variety of jobs: a computer plumber, a computer nursemaid, a computer soldier. Even more striking is that the Army is planning to deploy its <#inc ww2010.weblog.ref e050228 ""Future Combat System""#> which calls for autonomous robot soldiers by 2014. In fact, the development of super-intelligent computers is proceeding rapidly in countries around the work. <#inc ww2010.pic singul1.gif right "" "The Singularity"#> By the 2020s, intelligent robots will also be doing scientific research to develop improved versions of themselves, so that intelligent robots will eventually be far more intelligent than human beings. The point in time where intelligent robots are essentially in control of their own destiny is called "The Singularity," because there will be a bend in the exponential growth technology curve, as shown in the adjoining graphic. There is no way to have any idea what's going to happen to the world after that point. My own estimate is that the Singularity will occur between 2025 and 2030, though other analysts' estimates put it as late as 2040 or 2050. =eod =// &&2 e050525 German election signals major European political realignment =data ww2010.weblog.y2005.e050525.head German election signals major European political realignment =data ww2010.weblog.y2005.e050525.keys =data ww2010.weblog.y2005.e050525.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050525.date 25-May-05 =data ww2010.weblog.y2005.e050525.txt1 The unexpected landslide victory of a woman known as Germany's Margaret Thatcher =data ww2010.weblog.y2005.e050525.txt2 is being called "an earthquake" in German politics. =inc ww2010.blocking.start <#inc ww2010.pic merkel.jpg left "" "Angela Merkel, CDU leader (Source: BBC)"#> Analysts <#stdurl http://news.scotsman.com/international.cfm?id=565472005 "are describing it as shocking"#> as if Republicans had taken over the state of Massachusetts in America. For four decades, the liberal Social Democratic Party (SDP) had been firmly in control of Germany's largest province, North Rhine-Westphalia. But on Sunday, the conservative Christian Democratic Union (CDU) party took control of the district, winning a landslide victory in the regional elections. =inc ww2010.blocking.end This has turned into a confrontation between the two parties' leaders: <#inc ww2010.pic schroed.jpg right "" "Chancellor Gerhard Schröder, SDU leader (Source: BBC)"#>

Chancellor Gerhard Schröder is the head of the SDP and is also head of the country. Following the CDU victory, Schröder shocked the nation by calling for new national elections in September, a year earlier than they were required.
Angela Merkel has been head of the CDU, since 2000, and is expected to be Schröder's opponent in the new national elections.

A Schröder/Merkel contest in the fall would draw a lot of international attention. Merkel will be the first major European woman leader since Margaret Thatcher was Prime Minister of Great Britain in the 1980s. And like Thatcher, Merkel is a conservative, which is why Merkel is being called <#stdurl http://news.bbc.co.uk/1/hi/world/europe/4572387.stm "the "new Margaret Thatcher.""#> An interesting comparison of this election with the recent re-election of Tony Blair in Britain and last year's re-election of George Bush in U.S. is that in all cases there's no difference in policy between the principle candidates except posturing. George Bush and John Kerry had identical policies in Iraq, and the same was true of Tony Blair and Michael Howard in Britain. Merkel is much more pro-American than Schröder, but Merkel has already said that she won't have Germany join the American-led coalition in Iraq. The main issue in Germany is the economy. Germany has been going through a long period of double-digit unemployment, and economic growth has been almost non-existent. From the point of view of Generational Dynamics, this is not surprising. Generational Dynamics predicts that Europe is entering the same 1930s style Great Depression that America is entering. And, like America, Germany increasingly has a hollowed-out economy unable to produce products that people actually want to buy. The difference between America and European countries including Germany is that America's increasing debt is being financed by countries around the world, mainly in Asia, purchasing US Treasury notes in high volume. No Asian countries are doing the same favor for Europe. Schröder has been addressing the economic problems by implementing a series of very painful, very unpopular economic reforms, such cuts to welfare and benefits. Merkel has promised to continue implementation of reforms, but to do them better. Her position is reminiscent of John Kerry's promise during the 1994 campaign to follow the same Iraq policy, but to do it better. The net of all this is that, for all the bitterness between Schröder and Merkel, there's simply no substantive difference between their policies, even though one is "liberal" and the other is "conservative." This is exactly what happened in Britain and America, and it's what happens to any country during a "generational crisis" period, since the people of the country start to unite around common policies to guarantee that the nation and its way of life will continue as before. For Generational Dynamics, the importance of any event is how it demonstrates shifts of opinion among masses of people, because these shifts indicate likely directions (allies and enemies) as the nation heads towards its next crisis war. In 2002, Schröder survived near defeat by adopting an anti-American stance on the war in Iraq. Prior to the current election, <#stdurl http://www.washtimes.com/upi-breaking/20050523-050056-6645r.htm "Schröder used bitterly anti-American, anti-British and anti-Jewish rhetoric,"#> in the hope of repeating his 2002 success. The victory of pro-American Merkel makes it clear that German public opinion is not nearly as anti-American and anti-British as the French are. This corresponds to my own experience doing business in Europe in the 1970s. At that time, it was pretty apparent to me that the Germans liked Americans, and the French hated Americans. The German public attitudes towards Britain and America tell us some information about how Germany will choose side in a future war between France and England. People are often surprised at the thought of a new war between France and England, but they've had regular wars since before 1066, and it should be no surprise that they're expected to have a new one. In the imminent "clash of civilizations" world war in the Mideast, my expectation is that Britain and America will be on the Israeli side, and France will be on the Palestinian side. The current election tells us that the German are more likely to be on the English side than on the French side. We'll get a little more information next week. France is voting on ratifying the new EU constitution on Sunday, and Holland is voting three days later. France had been expected to vote YES, but polling in recent weeks indicates that the NO side is now a majority. A French vote against ratifying the EU constitution will be considered a major setback to the EU as a whole. The outcome of the French and Dutch referenda will provide more information about the cohesiveness of the EU. From the point of view of Generational Dynamics, the European Union is not heading toward becoming a viable united nations. After the war, the EU will make another attempt and will almost certainly succeed at that time. In the ruins of the post-war "austerity period," issues will be resolved in a way that benefits the entire continuent, which is not the case today. These issues will include the economy, and one more difficult issue that we haven't mention: Whether Turkey should be a member of the EU. =eod =// &&2 e050523 Iraq - clerics call for restraint - re civil war =data ww2010.weblog.y2005.e050523.head Iraqi Sunni and Shi'ite clerics call for restraint =data ww2010.weblog.y2005.e050523.keys =data ww2010.weblog.y2005.e050523.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050523.date 23-May-05 =data ww2010.weblog.y2005.e050523.txt1 Analysts, pundits and journalists are still predicting civil war, and they're still getting it wrong. =data ww2010.weblog.y2005.e050523.txt2 For two years, journalists, pundits and high-priced analysts have been predicting a civil war in Iraq. Last August, the Boston Globe reported on the front page that <#inc ww2010.weblog.ref e040812 "the civil war appeared to have begun."#> The predictions of civil war in Iraq have gotten louder in the last few weeks, thanks to the rise in car bombings by insurgents. There were special concerns because the insurgents, who are believed to support the Sunnis, have been targetting Shi'ite clerics. But nothing of the sort is happening. On Sunday, <#stdurl http://www.csmonitor.com/2005/0523/p01s04-woiq.html "Iraq's religious factions called for restraint."#> The calls were lead by Moqtada al-Sadr. Remember him? He's the Shi'ite cleric who many pundits predicted last year would lead the civil war. But it seems, as I predicted over and over, that he would not lead a civil war because a civil war was impossible. This is a good example of how the simplest understanding of Generational Dynamics in our newsrooms, our government and other institutions would make a substantial improvement in these people understanding what's going on in the world, and would even prevent some mistakes. The reason that a civil war is still impossible in Iraq is because Iraq is in a "generational awakening" period. Only one generation has passed since the genocidal Iran/Iraq war of the 1980s, and no civil war ever occurs just one generational after a crisis war. The reason is that the people who lived through the war and were traumatized by the war consider the war so horrible that it should never happen again, and they'll do anything to avoid fighting such a war. As <#hreftext ww2010.i.sixties040501 "I wrote last year,"#> Iran's awakening period is similar to America's last generational awakening period, which occurred in the 1960s, just one generation past World War II. Generational awakening periods are characterized by political hostility between older and younger generations, but there is no civil war. Unfortunately, most of the rest of the world is in a "generational crisis period." We're at a unique time in history, 60 years after the end of WW II, and all countries that fought in that war are in crisis periods. From the point of view of Generational Dynamics, we're headed for a "clash of civilizations" world war that will pit Western nations and allies against Muslim nations and allies. Last year, when I wrote about <#hreftext ww2010.i.danger041120 "the six most dangerous regions of the world,"#> to identify the regions that might trigger such a war. However, Iraq is not one of those regions. =eod =// &&2 e050519 S. Korea - Treasury bonds / market meltdown? =data ww2010.weblog.y2005.e050519.head South Korea signals that it might stop purchasing US Treasury bonds =data ww2010.weblog.y2005.e050519.keys =data ww2010.weblog.y2005.e050519.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050519.date 19-May-05 =data ww2010.weblog.y2005.e050519.txt1 Meanwhile, Financial Times speculates about "a larger market meltdown." =data ww2010.weblog.y2005.e050519.txt2 In <#stdurl http://news.ft.com/cms/s/e0b2974c-c7c7-11d9-9765-00000e2511c8.html "an interview with the Financial Times yesterday,"#> Park Seung, the governor of the Bank of [South] Korea said, “I believe that we now have sufficient reserves to secure our sovereign credibility, so I do not anticipate increasing the amount of foreign reserves further." This follows by one day <#inc ww2010.weblog.ref e050517 "the report that Norway is selling off half of its US Treasury Bond holdings."#> By using the phrase "foreign reserves," Park did not mention the US Treasury bond specifically, but that is evidently what he meant, as South Korea has been one of the largest purchasers of these bonds in the past. He added, “We now need to take more consideration of profitability, and I think we're at a stage where we need to manage our reserves in a more useful way.” When South Korea made a similar remark in February, it caused a sharp reaction in the bond market, as the price of 10-year Treasury bonds fell sharply. However, yesterday's announcement produced no such result. In fact, bond prices actually rose yesterday. Why is that? Because hedge fund investors have been moving away from risky corporate bonds to safer US Treasuries, ever since S&P changed its rating last week on GM and Ford, giving their debt "junk bond" status, <#inc ww2010.weblog.ref e050511 "as we discussed a week ago."#> Thus, hedge funds investors are taking the place of central banks in purchasing Treasury bonds, and keeping their prices up. (Incidentally, when bond prices go up, the interest rates they pay go down. 10-year Treasury bonds closed yesterday at 4.098%, the lowest it's been in a while, which means that home mortgage rates will be down again.) Things are changing rapidly on the world economic scene, as the use of hedge funds has been increasing exponentially in the last few months and the last year. These funds are largely unregulated, and permit highly leveraged investments with varying amounts of risk. During the 1930s Great Depression, officials blamed the stock market crash on the common 1920s practice of purchasing stocks on "margin" or credit. So 1930s politicians passed regulations and created the Securities and Exchange Commission (SEC) and other agencies to guarantee that credit would be strictly regulated, and that no 1920s-type stock market bubble would every occur again. Well the SEC and the FED obviously completely failed to prevent the 1990s stock market bubble, and they've also failed to regulate credit, given that America's level of public debt is the highest in history. But now we see that hedge funds are the vehicle that have replaced "margin" sales as a form of unregulated credit purchases. The increasingly rapid rise in the use of these unregulated credit vehicles indicates that they're creating exactly the same kind of instability and risk that margin credit did in the 1920s. I'm not the only one that this has occurred to. <#stdurl http://business.timesonline.co.uk/article/0,,8209-1618433,00.html "In a speech yesterday,"#> Sir Andrew Large, the Deputy Governor of the Bank of England warned that the rapidly expanding market of credit derivatives is "tricky and opaque," and that they threaten the stability of financial markets. “Credit risk transfer has introduced new holders of credit risk, such as hedge funds and insurance companies, at a time when market depth is untested,” he said. “The growth of derivative instruments ... (has) added to the risk of instability arising through leverage, volatility and opacity.” He called for increased regulation. All of this extreme volatility is causing analysts more and more to consider the possibility of a complete market meltdown, according to <#stdurl http://news.ft.com/cms/s/15d88c5a-c7d3-11d9-9765-00000e2511c8.html "an article in yesterday's Financial Times."#> “Two weeks ago, we might have said that the chances of a market meltdown were 1 per cent, but now we might put it nearer 10 per cent,” said an analyst at a large American bank. “The issue is being talked about.” The article lists two scenarios that might lead to such a meltdown:

Another corporate shock, like the one that hit GM and Ford last week, that might trigger broader investor panic about bonds.
Evidence that investors are pulling their money out of hedge funds.

“If we were to see significant hedge fund redemptions and further unwinding of credit exposure as a result, it would ... turn a weak market that is suffering from poor liquidity into a meltdown,” the article quotes a major investment banker as saying. Meanwhile, investors are gorging themselves on stocks on a massive buying spree. The Wall Street stock markets rose by 1% yesterday, and at midday today (Thursday), Asian stock markets in Japan and South Korea are incredibly more than 2% higher. Many people consider this to be good news, but unfortunately it's not. It doesn't mean that the stock market is going to continue to rise, any more than a November heat wave in New York City means that winter isn't coming. As we're predicted since 2002, the stock market is going to fall to the Dow 3000-4000 range with 100% certainty, and a stock market rise now simply means that the stock market has just that much farther to fall, whether the fall occurs next week, next month, or next year. =eod =// &&2 e050518b Bird flu virus evolving into form more likely to cause human pandemic =data ww2010.weblog.y2005.e050518b.head Bird flu virus evolving into form more likely to cause human pandemic =data ww2010.weblog.y2005.e050518b.keys =data ww2010.weblog.y2005.e050518b.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050518b.date 18-May-05 =data ww2010.weblog.y2005.e050518b.txt1 New mutations of the virus appear to permit human to human infection, =data ww2010.weblog.y2005.e050518b.txt2 according to <#stdurl http://news.bbc.co.uk/2/hi/health/4559309.stm "a new report by the World Health Organization (WHO)"#> to be issued soon. The new mutated strains are being found in northern Vietnam, where the worst outbreaks have occurred this year. Until recently, researchers believed that all infections came about from handling poultry, and millions of birds have been culled (killed), as directed by authorities. However, new strains of the bird flu have characteristics that indicate that "it's possible" that human to human transmission is already occurring, according to WHO research. The most important of these changes is that the virus is becoming less virulent. Early versions of the virus have killed 75% of those infected, but the new strains are killing fewer people. This is a sign of human to human transmission because a less virulent strain is more likely to be transmitted among humans to large groups of people. Mutations <#stdurl http://www.bloomberg.com/apps/news?pid=10000080&sid=aaNUsm2n8Iks&refer=asia "have caused other changes as well."#> Asymptomatic infections have been detected, meaning that some people are "carriers" of the disease, but have not developed symptoms. In addition, a wider range of people are being infected than before. These changes are consistent with a virus which is mutating to adapt to human to human transmission, and human pandemic transmission. Apparently the worst case mutation has not yet occurred. The worst case mutation will occur when one human being gets the bird flu and the ordinary human flu at the same time. The two flu viruses could recombine within a single human body into a new, mutated variant that could have almost the virulence of the bird flu, but with the easy human to human transmission of ordinary human flu. WHO officials are warning that a major flu pandemic could occur at any time, including this year. We're overdue for a major flu epidemic, and it's possible that a bird flu pandemic would have the same mortality rate as the Spanish Flu of 1918. The major flu epidemics since then are as follows:

    1918 Spanish flu killed 50m
    1957 Asian flu killed about 1m
    1968 Hong Kong flu killed 1m
    2003 Sars killed 774
    2004-5 Bird / Avian flu (H5N1) has killed 50 to date
    Source: BBC

WHO is encouraging government health organizations around the world to prepare for a pandemic, although the time of a pandemic cannot be predicted. A potential bird flu is relevant to this web site because a bird flu pandemic might trigger a major worldwide financial crisis, and might trigger <#hreftext ww2010.i.china050116 "a major civil war in China."#> =eod =// &&2 e050518 Stock market frenzy follows Washington yuan-bashing =data ww2010.weblog.y2005.e050518.head Stock market frenzy follows Washington yuan-bashing =data ww2010.weblog.y2005.e050518.keys =data ww2010.weblog.y2005.e050518.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050518.date 18-May-05 =data ww2010.weblog.y2005.e050518.txt1 In an almost meaningless gesture, the Bush administration harshly warned China =data ww2010.weblog.y2005.e050518.txt2 to revalue its currency within a year, <#stdurl http://www.iht.com/articles/2005/05/18/business/dollar.php "with an implied threat of financial sanctions."#> (For actual Treasury Dept. statement, <#stdurl http://www.treas.gov/press/releases/js2449.htm "click here."#>) This move has absolutely no chance whatsoever to improve America's financial picture, <#inc ww2010.pic g050517.png right "" "Dow Jones index, minute by minute, on 17-May-2005 (Source: Yahoo)"#> Nonetheless, giddy investors used the gesture as an excuse to spike stocks up. As the adjacent diagram shows, the DJIA was relatively flat all day, until about 2 pm, when Treasury made its announcement about the yuan. After that, the index suddenly took off, rising over 100 points in the two hours remaining of the trading day. Thus ended another wild, volatile trading today, a kind that we're seeing more and more. As <#inc ww2010.weblog.ref e050504 "we've written lately,"#> this is an ominous sign because it means that investors are making buy/sell decisions based on their view about where the entire stock market is going, rather than on their evaluations of the individual stocks. This kind of volativity occurs before a stock market crash, though it doesn't mean that a crash must occur at this time. The <#stdurl http://www.treas.gov/press/releases/js2449.htm "Treasury Department Statement"#> was issued because Washington politicians have been increasingly vocal in criticizing China for harming America by supplying products at such low prices that factories and jobs have been leaving America and moving to China. China maintains the low prices by fixing the exchange rate for the yuan to the dollar, and not allowing the exchange rate to float. The statement does not accuse China of manipulating currency exchange rates, but it's so harsh that it has the smell of desperation:

"The report finds that no major trading partner of the United States met the technical requirements of the statute for designation [as being guilty of manipulating currency exchange rates] during the period covered, which is the second half of 2004. However, it would be a mistake to interpret this conclusion as acquiescence with the foreign exchange policies of many of America's trading partners. In fact Treasury is actively engaged with several economies to promote the adoption of flexible, market-based exchange policies and to help facilitate broader adjustment. Most notable among these is China. China's rigid currency regime has become highly distortionary. It poses risks to the health of the Chinese economy, such as sowing the seeds for excess liquidity creation, asset price inflation, large speculative capital flows, and over-investment. It also poses risks to its neighbors, since their ability to follow more independent and anti-inflationary monetary policies is constrained by competitiveness considerations relative to China. Sustained, non-inflationary growth in China is important for maintaining strong global growth and a more flexible and market-based renminbi exchange rate would help the Chinese achieve this goal. A more flexible system will also support economic stability, which we understand is of paramount concern to Chinese leadership. China's ten-year-long pegged currency regime may have contributed to stability in the past, but that is no longer the case today, as China has grown to be a more significant participant in global trade and financial flows. Currently, China relies largely on administrative controls to manage its economy – controls that are cumbersome and increasingly ineffective. An independent monetary policy will allow China to more easily and effectively pursue price stability, stabilize growth, and respond to economic shocks. China has a history of significant swings in credit-fueled investment and inflationary pressures and these have often ended in "hard landings." Such swings are disruptive to the Chinese economy and may prove more disruptive in the future – not only to China but also to the global economy. A more flexible system will allow for a more efficient allocation of resources and higher productivity. The current system is fueling over-investment and excessive reliance on export-led growth while under-emphasizing domestic consumption. Moreover, much of the investment and capital flows into these favored sectors and projects may not prove profitable under market-determined prices, which could lead to another investment hard landing, more non-performing loans and a weakened banking sector. And a more flexible system would also quell speculative capital inflows that are costly to China's government and increasingly likely to prove disruptive. China's ability to sterilize capital inflows is increasingly limited and harmful to its banking sector. Finally, recent history has taught us that it's better to move from a fixed to a flexible currency system during from a position of strength, and not when economic weakness compels reform."

This statement promises economic stability for China if it allows the exchange rate to be more flexible, but almost no one actually believes that. In fact, <#stdurl http://www.forbes.com/business/feeds/afx/2005/05/17/afx2033124.html "analysts at Goldman Sachs and Morgan Stanley"#> called the statement "political" and "counterproductive." Nor will yuan flexibility help the American economy at all. China will not adjust the exchange rate by more then 3-4%, and since Chinese textile products are 40% cheaper than similar American products, nothing much will change. And even if China stopped exporting textiles altogether, the slack will be picked up by other third world countries with similarly low prices. Finally, America couldn't pick up the slack itself anyway, since some two-thirds of its textile factories have been bulldozed or converted to other purposes. So the Treasury statement will have no effect whatsoever. There is a precedent for this kind of thing. After the stock market crash of 1929, the public demanded that American jobs be protected from foreigners, and so Congress passed the Smoot-Hawley Tariff Act in 1930 to prevent imports of foreign products, even though economists were overwhelmingly opposed to it. The act did enormous damage, especially to Japan, whose silk industry was completely shut down, resulting in enormous suffering. Japan considered the Smoot-Hawley law to be an act of war, and it was one of the sequence of events leading to Japan's bombing of Pearl Harbor in 1941. The Treasury statement is just a statement and not a law, so it probably won't do as much damage as the Smoot-Hawley act did. But it's just as irrational. In fact, nothing about what happened on Tuesday makes sense. IN a world where standard price/earnings ratios tell us that stocks are overpriced by 100%, investors are no longer making rational decisions; instead they're taking increasing risks in order to make some gains, and they're hoping that irrelevant signals like the Treasury Dept. statement will make a difference. My original prediction, made in 2002, based on generational analysis and standard growth analysis, was that we would have a major stock market crash (DOW down to 3000-4000 range, S&P 500 index down to 400) by 2006 or 2007. This MUST happen sooner or later because stocks are so far overpriced. The rapidly increasing volatility of the market indicates that that day is coming sooner rather than later. =eod =// &&2 e050517 Norway sells half its U.S. Treasury bond holdings =data ww2010.weblog.y2005.e050517.head Norway sells half its U.S. Treasury bond holdings =data ww2010.weblog.y2005.e050517.keys =data ww2010.weblog.y2005.e050517.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050517.date 17-May-05 =data ww2010.weblog.y2005.e050517.txt1 Foreign central banks were net sellers of US securities in March =data ww2010.weblog.y2005.e050517.txt2 for the first time since August, 2003. This sharp fall in foreign bond purchases is mostly the result of <#stdurl www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=8506837 "a mysterious decision by oil-rich Norway"#> to dump half its holdings of US Treasury bonds on the market. The slack was taken up by non-central bank purchasers: Carribean-based financial institutions dealing in hedge funds made purchases that offset Norway's central bank selling, according to <#stdurl online.wsj.com/article/0,,SB111625830625134659,00.html "a report in the Wall Street Journal."#> Hedge funds are financial instruments that spread the risk in purchasing corporate bonds. As <#inc ww2010.weblog.ref e050511 "we wrote about last week,"#> one form of hedge funds so-called "collateralized-debt obligations," or CDOs, have fallen sharply in price, thanks to S&P's rating change of Ford and GM bonds to "junk status." This was only one of several signs of a general weakening in the corporate bond market. This weakening has led financial institutions to favor U.S. Treasury bonds over corporate bonds. Thus, when Norway's central bank dumped its US Treasury bonds on the market, an opportunity was available to private financial firms to switch from corporate bonds to Treasury bonds, and that appears to be what's happening. Norway's move might be an isolated incident, or it might be part of a larger trend. Foreign central banks, especially in Asia, have been supporting America's massive public debt by making equally massive purchases of Treasury bonds. If foreign central bankers become disenchanted with their huge holdings of Treasury bonds, then private hedge fund dealers might take up the slack, but this would make the global financial markets less stable. None of this would really matter much if it weren't for the fact that, as I've discussed many, many times, we're in a stock market bubble with stocks overpriced by about 100%, according to standard price/earning ratio measures, and the American balance of payments deficit (current accounts deficit) continues to grow exponentially, as it has since 1945. It's only a matter of time before the bubble bursts, launching us into a new 1930s style Great Depression. =eod =// &&2 e050515 "Koran in toilet" rumor uniting Muslims around the world =data ww2010.weblog.y2005.e050515.head "Koran in toilet" rumor is uniting Muslims around the world =data ww2010.weblog.y2005.e050515.keys =data ww2010.weblog.y2005.e050515.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050515.date 15-May-05 =data ww2010.weblog.y2005.e050515.txt1 From Gaza to Indonesia, Muslims are shouting "Death to America." =data ww2010.weblog.y2005.e050515.txt2 Muslim protestors are calling on America to apologize for desecrating the Koran. Muslim leaders are demanding that the Guantanamo perpetrators be found and punished for tearing up a Koran and stuffing it down a toilet. The problem is that the incident apparently never happened. The rumors began with <#stdurl www.msnbc.msn.com/id/7693014/site/newsweek/ "a story in last week's Newsweek magazine,"#> which began, "Investigators probing interrogation abuses at the U.S. detention center at Guantanamo Bay have confirmed some infractions alleged in internal FBI e-mails that surfaced late last year. Among the previously unreported cases, sources tell NEWSWEEK: interrogators, in an attempt to rattle suspects, flushed a Qur'an down a toilet and led a detainee around with a collar and dog leash." No one's getting upset about the dog leash part, but the unconfirmed toilet story is roiling the Muslim world, according to <#stdurl aolsvc.news.aol.com/news/article.adp?id=20050513150009990003&ncid=NWS00010000000001 "news stories:"#>

Pakistanis hold an anti-U.S. protest Friday in Karachi.

There are several interesting and important things to be said about all this.

Though this is no major revolution, this shows how major popular revolutions can start. All it takes is an unsubstantiated rumor at a time when people are in the right mood to ignite the fury of a lot of people.
It's not surprising that this kind of thing is happening. Last year, we <#hreftext ww2010.i.zogby040726 "described a survey of Arabs in six countries"#> that showed that Arab attitudes towards America, which were 80% unfavorable two years early, were now 90% unfavorable. That was last July. Today, they're probably even more unfavorable, and so these kinds of expressions of anti-American fury are not surprising.
To emphasize this point: <#stdurl www.palestinechronicle.com/story.php?sid=20050515134216544 "Palestinians today are marking Al Naqba - Catastrophe Day"#> - commemorating the 67th anniversary of the creation of the state of Israel on May 15, 1948. The desecration rumor is perfect symbol for anti-American and anti-Israeli demonstrations on Catastrophe Day.

<#inc ww2010.pic g050514.jpg right "" "(11-May-05) Afghan university students march in the steets in Jalalabad, Afghanistan, carrying copies of the Quran and sticks and tree branches (Source: AP)"#>

<#inc ww2010.pic g050514b.jpg right "" "(11-May-05) A car burns in the street as university students protest in the steets in Jalalabad, Afghanistan (Source: AP)"#>

<#inc ww2010.pic falluj1.jpg center "" "Car burning in Fallujah riot in Iraq in April, 2004"#>

In fact, we've seen these kinds of demonstrations before. The top two adjacent photos are from last week's demonstrations in Afghanistan, the bottom photo is from last year's demonstrations in Fallujah in Iraq. These demonstrations are similar to those that occurred in the political turmoil of the 1960s and 1970s in <#hreftext ww2010.i.sixties040501 "America's "generational awakening" period."#> Iran and Iraq are going through a generational awakening period, a generation after the Iran/Iraq war of the 1980s, and Afghanistan is going through a generational awakening period, following its war with Russia in the 1980s. (That war was not a crisis war for Russia.)
Contrast those demonstrations to what happened in Uzbekistan on Friday and Saturday, which <#hreftext ww2010.i.uzbek050514 "as I wrote about yesterday,"#> has the potential of spreading and destabilizing Asia. According to <#stdurl www.csmonitor.com/2005/0516/p01s02-wosc.html "more recent news stories,"#> government forces that fired into the crowd killed 500 people, and thousands of refugees have fled Andizhan and poured across the Kyrgyzstan border. It's this involvement of huge masses of people that signals a crisis-era war, as opposed to a non-crisis or awakening type demonstration. Screaming "Death to America" and burning a car for a TV camera is great political theatre, since the demonstrators just return home each evening to their homes and families. But when thousands of people flee their homes in terror, you have something quite different, the first signs of a major genocidal crisis war. Perhaps things will settle down right now (or perhaps they won't), but sooner or later one of these conflicts will "spiral out of control" into full-scale revolution.
Returning now to Iraq, we see that nothing of this sort has happened in Iraq. Well-funded terrorist leader Abu Musab al-Zarqawi has been trying for two years to ignite a civil war in Iraq, and has been very successful in using his money to convince disaffected youngsters to become suicide bombers to kill Iraqi civilians. But we don't see thousands of Iraqi citizens fleeing their homes to avoid the bombings, we don't see sectarian violence between Sunnis and Shi'ites, and we don't see a rebel army threatening to overthrow the new government. All we see are war-weary Iraqis struggling to get their lives back together, even in the face of the violence. For the last two years on this web site I've been mocking journalists, analysts and politicians who wishfully predicted a civil war in Iraq. I've always said that such a civil war is impossible, because only one generation has passed since the 1980s Iran/Iraq crisis war. Time has proven that I was repeatedly correct, and the journalists and high-priced analysts were wrong.
On the other hand, Gaza, Pakistan and Indonesia are all in or near "generational crisis" periods, and this kind of demonstration could eventually lead to crisis wars in those countries.
In a final ironic twist, the <#stdurl www.msnbc.msn.com/id/7857407/site/newsweek/ "lead story in the new issue of Newsweek"#> admits that the story was wrong, and explains what happened.

From the point of view of Generational Dynamics, we're headed for a "clash of civilizations" world war that will pit Western nations and allies against Muslim nations and allies. Last year, when I wrote about <#hreftext ww2010.i.danger041120 "the six most dangerous regions of the world,"#> to identify the regions that might trigger such a war. But the massive demonstrations over over a descration incident that isn't even true shows that Muslims around the world war identifying and uniting with one another, building up to that war. =eod =// &&2 e050511 Credit market derivatives fall sharply =data ww2010.weblog.y2005.e050511.head Credit market derivatives fall sharply, sparking big stock market losses =data ww2010.weblog.y2005.e050511.keys =data ww2010.weblog.y2005.e050511.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050511.date 11-May-05 =data ww2010.weblog.y2005.e050511.txt1 A Wall Street Journal web site article appearing on Tuesday afternoon =data ww2010.weblog.y2005.e050511.txt2 caused nervousness on Wall Street, leading to 1% losses in stock market indexes. According to <#stdurl online.wsj.com/article/0,,SB111573626385329264,00.html "the article in today's paper,"#> recent troubles at auto makers General Motors and Ford has caused a domino effect that's causing concern among investors. The turmoil is occuring with so-called "collateralized-debt obligations," or CDOs. Conceptually, these work as follows: Corporations incur debt by selling corporate bonds that pay interest -- unless the corporation goes bankrupt. You can purchase corporate bonds directly, but there are additional choices. Wall Street dealers will package together packages of bond debts from numerous corproations, and you can buy shares of those packages, allowing you to spread your risk over many corporations and many kinds of bonds. You can purchase high-risk CDOs, hoping to make a lot of money, or you can purchase safer low-risk CDOs that pay less. While you may never have heard of, let alone owned, a CDO share, many large financial institutions are heavily invested in these CDOs. Last week, S&P changed its rating on GM and Ford, giving their debt "junk bond" status. This caused the value of certain CDO holdings to fall sharply. The rumors are that Deutsche Bank is heavily invested in CDOs related to GM and Ford, resulting in substantial losses. The resulting investor nervousness has pushed down the values of all CDOs except those with the lowest risk, and has raised concerns about a domino effect causing big losses for many financial institutions holding CDOs. This resulted in the panic that caused the Dow to fall 103 points on Tuesday. This is a fairly obscure situation that most people wouldn't even care about much, at least as long as the Jackson trial is going on. But it's one more sign of extreme nervousness and volatility in the stock market. It's exactly this kind of volatility that precedes a stock market crash, although the appearance of such volatility doesn't mean that a crash must happen right away. From the point of view of Generational Dynamics, a stock market crash to the Dow 3000-4000 range is 100% certain, but whether it will happen next week, next month, next year, or a year or two later cannot be predicted. But the increasing volatility indicates that it's more likely to occur sooner rather than later. =eod =// &&2 e050510 World panicky over North Korean nuclear test threat =data ww2010.weblog.y2005.e050510.head World becoming panicky over North Korean nuclear test threat =data ww2010.weblog.y2005.e050510.keys =data ww2010.weblog.y2005.e050510.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050510.date 10-May-05 =data ww2010.weblog.y2005.e050510.txt1 UN nuclear chief calls it "disastrous"; US lawmaker calls it a "cataclysmic" event. =data ww2010.weblog.y2005.e050510.txt2 North Korea's threat to test a nuclear weapon next month seems to be causing a level of panic and nervousness around the world. Arthur Brown, who retired in December as chief of the East Asia division of the CIA's clandestine service, has painted the following scenario:

Within a year, North Korea is likely to test a nuclear weapon, probably in a cave or mine shaft somewhere in the barren northeast of the country. A small amount of radioactive fallout will leak from the test site and drift toward Japan. Financial markets in Tokyo and Seoul will be rocked by the news. Foreign companies in South Korea will weigh whether to pull out dependents or reduce their operations. And Washington will debate whether to impose a blockade or other tough measures to contain the North Korean nuclear breakout. According to <#stdurl http://www.washingtonpost.com/wp-dyn/content/article/2005/05/05/AR2005050501681.html "the Washington Post article by David Ignatius,"#> Brown believes that North Korean President Kim Jong-il is being completely rational, and is not the "reckless madman" and some analysts and pundits claim. He's playing the "nuclear card" in order to guarantee his regime's survival and, in Brown's view, "the chance that Kim Jong Il will negotiate away his nuclear option is close to zero." I agree completely. There's never been any doubt in my mind that Kim knows exactly what he's doing. He's mobilizing for war, and he's playing games with the non-nuclear proliferation talks to gain time. But I've noticed something different these last few days. I've written numerous articles about the North Korea nuclear threat on this web site during the last two years, always pointing out the same thing - that Kim is preparing for a preemptive attack on South Korea to reunite Korea under his control. But this time, I can feel a rising sense of panic going on in the world. David Brown's scenario is a sign of this. It's very unusual to read or hear such dire warnings in standard news stories in newspapers and television. But not only is this scenario making the rounds, but many people are taking it seriously. Mohamed ElBaradei, director-general of the United Nations' International Atomic Energy Agency (IAEA) <#stdurl edition.cnn.com/2005/WORLD/asiapcf/05/08/north.korea/ "said about the scenario when asked,"#> "I'm not sure it is very far-fetched... I think that test could open a Pandora's box, frankly. I do not know what will happen afterwards." ElBaradei believes that North Korea already has five or six nuclear weapons, and that "It would have disastrous political repercussions. I am not sure how much environmental impact it could have, in terms of radiological fallout. So, I do hope that the North Koreans would absolutely reconsider such a reckless, reckless step." He's not the only one to use such alarming language. On Sunday, <#stdurl www.voanews.com/english/2005-05-08-voa26.cfm "Republican Senator Richard Lugar said he is concerned"#> about reports North Korea appears to be preparing for some kind of nuclear test, adding, "This would be cataclysmic. This really is over the top." This kind of nervousness and alarming language is a surprise to me. Some people may chuckle and talk about "the pot calling the kettle black," referring to the alarming language that I often use on this web site. But there are big differences. My analyses, based on the Generational Dynamics Forecasting Methodology which is now in its third successful year on this web site, may be alarming, but I'm just a little guy that no one listens to. Arthur Brown, Mohamed ElBaradei and Richard Lugar are "very important people" that most people actually listen to, and when they start using alarming language it's a big deal. It reminds me of the nervousness in the stock market. <#inc ww2010.weblog.ref e050504 "As we've described,"#> the stock market has been extremely volatile, reflecting a great deal of nervousness on the part of investors. Stock market volatility is something that we can measure, and we know from history that stock market crashes are preceded by high volatility. But nervousness of North Korean nuclear tests is not so easy to measure objectively. But speaking subjectively, something feels very different. At the very least, if people are getting nervous and panicky, it means that it's easy to make miscalculations that could lead to war. From the point of view of Generational Dynamics, a war is coming with 100% certainty. That war might being next week, next month or next year, but it's coming, and probably sooner rather than later. Incidentally, I'd like to apologize to my regular readers for missing a few days. I'm working day and night on another project, and it should be completed later this week, after which I'll go back to contributing more frequently. =eod =// &&2 e050504 Stock market swings wildly following a quirky Fed error =data ww2010.weblog.y2005.e050504.head Stock market swings wildly following a quirky Fed error =data ww2010.weblog.y2005.e050504.keys =data ww2010.weblog.y2005.e050504.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050504.date 04-May-05 =data ww2010.weblog.y2005.e050504.txt1 The Fed raised interest rates a quarter point yesterday, triggering an investor buy/sell frenzy =data ww2010.weblog.y2005.e050504.txt2 as the overnight funds rate increased to 3.0%. Early last year, the rate was 1.0%. <#inc ww2010.pic g050503.gif right "" "Dow ups and downs on May 3, 2005 (Source: WSJ)"#> The increase, announced at 2:15 pm, was expected, but it triggered first a 10 point increase and then a 40 point fall, all within a couple of minutes, as investors noticed that the wording of the Fed statement appeared to indicate that the Fed was getting increasingly concerned about inflation. Then investors reversed themselves, and pushed the Dow up 90 points, and then back down 100 points, where it appeared to settle for the rest of the day. But then at 3:50 pm, just 10 minutes before the end of the trading day, the Fed announced an error: They had accidentally omitted the line "longer-term inflation expectations remain well contained" from their statement. In the those last ten minutes, the Dow jumped up 40 points, to end the day relatively unchanged. <#inc ww2010.pic g050501.gif left "" "Stock market volatility in April, 2005 (Source: WSJ)"#> Today's wild ride continues an extreme level of volatility that occurred throughout April. As the adjoining graph shows, the Dow had a 100 point change (up or down) seven times in April, an extremely rare event. As <#inc ww2010.weblog.ref e050429 "I explained last week"#> and <#inc ww2010.weblog.ref e050422 "the week before,"#> this kind of volatility occurs before a major stock market correction or a major crash, although that doesn't mean that a stock market crash must occur in the next few weeks. The reason is that the volatility means that individual investors are not making decisions based on individual stocks, which they do in normal times; instead, they're nervously making buy/sell decisions based on their "feeling" about where the entire stock market in going. With investors moving in unison, that means that the entire market is subject to volatility that only a single stock would have in normal times, and it means that a scare can cause a panic and a stock market crash. <#inc ww2010.pic g050502d.gif right "" "VIX volatility index, 1997 to present (Source: Barrons)"#> The VIX is the "Volatility Index," computed by the <#stdurl http://www.cboe.com/micro/vix "Chicago Board Options Exchange (CBOE)."#> The adjoining graph shows that the VIX is the highest it's been in years, and that previous highs have always accompanied financial crises. From the point of view of Generational Dynamics, we're headed into a major 1930s style Great Depression, and in 2002 I predicted the Dow would crash to the 3000-4000 range by the 2007 time frame. Today, with the American economy continually deteriorating, I have no reason to revise that forecast. The current volatility might mean that the slide will begin in the next few weeks; or it could signal only a minor correction for now, leaving the major correction for a later date. =eod =// &&2 e050502 UK election - Blair - pattern - American and Australian elections =data ww2010.weblog.y2005.e050502.head UK election follows same pattern as American and Australian elections =data ww2010.weblog.y2005.e050502.keys =data ww2010.weblog.y2005.e050502.loc ww2010.weblog.log0505 =data ww2010.weblog.y2005.e050502.date 02-May-05 =data ww2010.weblog.y2005.e050502.txt1 The Iraq issue is causing bitter divisiveness, but not enough to affect Blair's lead. =data ww2010.weblog.y2005.e050502.txt2 All the major players of the 2004 American Presidential election are present in UK election scheduled for Thursday, May 5:

<#inc ww2010.pic g050502c.jpg center "" "Charles Kennedy, Liberal Democrat party (Source: BBC)"#>

<#inc ww2010.pic g050502a.jpg center "" "Michael Howard, Conservative Party (Source: BBC)"#>

<#inc ww2010.pic g050502b.jpg center "" "Tony Blair, Labour Party (Source: BBC)"#>

The Liberal Democrats were opposed to the Iraq war from day one, and are opposed to the Iraq war today. Party leader Charles Kennedy says that <#stdurl news.bbc.co.uk/1/hi/uk_politics/vote_2005/frontpage/4500953.stm "Tony Blair's authority has been "seriously undermined""#> by his errors in judgment. The Liberal Democrats are in third place, <#stdurl www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=8355137 "polling at 24%."#> The corresponding American candidate was Howard Dean, who was opposed to the Iraq war from the beginning, but burned out quickly.
The Conservatives supported the war from the beginning, and support it today. There is absolutely no policy difference between the Conservatives and Labour over Iraq. However, party leader <#stdurl news.bbc.co.uk/1/hi/uk_politics/vote_2005/frontpage/4503061.stm "Michael Howard has bitterly attacked Tony Blair,"#> accusing him of lying to the British people about the reasons for going to war, and even lying to his own Cabinet. The Conservatives are in second place, <#stdurl www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=8355137 "polling at 33%."#> The corresponding American candidate was John Kerry, who supported the war from the beginning, and who had absolutely no policy difference with George Bush over Iraq.
The Labour Party is a bit split over the war, but is still strongly supporting their party leader. They're polling at 36%, though <#stdurl abcnews.go.com/International/wireStory?id=719800 "other polls"#> have shown an even greater lead.

There are a couple of important differences between the UK and American elections. First, the Brits vote for a party, and the party chooses a leader. Thus, a Brit who wanted the Labour Party to win in the House of Commons would have to, in effect, vote for Tony Blair. In America, of course, someone could have voted for John Kerry for President, and still vote for any party for Congress. Second, in America Bush was the conservative candidate, and Kerry was the liberal candidate, so the political philosophies of the respective candidates are opposed. So, in the War against Terror, the liberal Tony Blair is allied with the conservative George Bush. This is another reversal - in World War II, the conservative Winston Churchill was allied with the liberal Franklin Roosevelt. From the point of view of Generational Dynamics, this reversal isn't surprising. Last year, <#hreftext ww2010.i.bush040824 "we explained that the Republicans were historically favored in the 2004 election,"#> because favored parties tend to alternate from crisis period to crisis period, and the Democrats were favored by the last crisis period, in World War II. For the same reason, the Labour Party is historically favored in this election, since the Conservatives were favored during the World War II crisis period. A similar kind of transition has occurred in Australia, where Liberal Party Prime Minister John Howard <#inc ww2010.weblog.ref e041009b "won a reelection battle decisively last October,"#> after a bitter election fought over Howard's support of the Iraqi war. The Liberal Party was formed at the end of World War II from dissidents of the Labor Party, which had been the winning party during that war. Thus, the Liberal Party was historically favored during this crisis period for the same reasons we've been discussing. George Bush, Britain's Tony Blair, and Australia's John Howard were the three major leaders in the world in launching the Iraq war in 2003. Unless there's a big surprise in the UK, all three will have won their respective elections, after bitter election battles in all three countries. From the point of view of Generational Dynamics, this is the expected result. America, Britain and Australian are all in a "generational crisis" period. During such a period, a nation's citizens tend to reject bitter political battles and unite around a leader that they trust, rather than risk someone new. The kind of political reversal we're seeing in all three countries is not a historical certainty, of course, but the fact that it's happening in all three countries is an interesting confirmation of one of the major principles of Generational Dynamics: That during a generation crisis periods, all political parties undergo massive transformations and a new majority political consensus emerges, with one party representing that consensus; but when the next generational crisis period comes around, the old consensus collapses, to the disadvantage of the party that represented that consensus, and a new consensus, represented by a different political party, takes hold. This transformation is extremely brutal and divisive, however, and the political divisiveness we've seen so far is almost nothing compared to what we're going to see in the next few years. =eod =// &&2 e050429 -- Another ominous day for the American economy =data ww2010.weblog.y2005.e050429.head Another ominous day for the American economy =data ww2010.weblog.y2005.e050429.keys =data ww2010.weblog.y2005.e050429.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050429.date 29-Apr-05 =data ww2010.weblog.y2005.e050429.txt1 Stocks fell 1.3% on Thursday as volatility continues, growth slows, and other indicators are lower. =data ww2010.weblog.y2005.e050429.txt2 The business news:

<#inc ww2010.pic yh050428.gif center "" "DJIA, April 28 2004-2005"#>

<#inc ww2010.pic g050428.gif center "" "Quarterly GDP (Gross Domestic Product) increases, 2004-present"#>

Nervous investors pushed the Dow down 128 points to 10070, as Wall Street stocks fell 1.3-1.4%, continuing a volatile up/down pattern. The Dow is down 6.6% since January 1.
A <#stdurl www.bea.gov/bea/newsrelarchive/2005/gdp105a.htm "new Commerce Dept. report"#> showed that GDP increased only 3.1% in the first quarter, down from 3.8% in the preceding quarter. Analysts had been expecting a 3.5% increase.
<#stdurl quote.bloomberg.com/apps/news?pid=10000006&sid=aqGe.r0J1eVw&refer=home "Inventory levels spiked up,"#> indicating that consumers aren't purchasing the goods being manufacturing. Manufacturing output has been showing weakness recently, and an increase in inventory levels often means more factory layoffs or closings.
Imports soared 14.7%, while exports increased only 7%, indicating that our balance of payments situation continues to worsen.

I've been forecasting since 2002 that we're entering a new 1930s style Great Depression, and that the market would fall to the Dow 3000 by the 2006-2007 time frame. With the balance of payments and public debt continuing to grow exponentially, and with stocks overpriced by 100%, using standard price/earnings measurements, there's certainly no reason to revise that forecast now. As <#inc ww2010.weblog.ref e050422 "I discussed last week,"#> the continuing market volatility is very ominous, because it creates the kind of environment that precedes a market crash, provided the right kind of trigger occurs. These negative GDP and related figures could provide that kind of trigger in the next few weeks. This is not a certainty, of course; perhaps the stock market will fall only slightly, or will recover and go up again. But Generational Dynamics predicts that such a crash must occur in the next few years, and with greater than 50% probability before the end of 2007. Normally optimistic financial analysts yesterday expressed far more concern than usual. "Business capital spending growth slowed markedly and, with the slump in capital goods orders late in the quarter, may portend an earlier and more abrupt slowdown than we had reckoned on," said David H. Resler and Gerald Zukowski, Nomura Securities International, <#stdurl online.wsj.com/article/0,,SB111469678298719525,00.html "as quoted by the Wall Street Journal."#> <#stdurl www.economist.com/finance/displayStory.cfm?story_id=3915038 "The Economist reports"#> that a recent analysis shows American consumers will have to cut spending by 1/3 for ten full years, just to cut the deficit in half. "For America's consumers, that will be an unpleasant shock. Prudent central bankers should be preparing them for it." But central bankers are doing nothing of the sort, and that's the problem. A reader recently asked me whether my prediction of a stock market crash could ever be proved wrong, or would I always just say "Wait till next year." My response is that I'll begin to have my doubts about my prediction as soon as something is done to show a change in direction. I watch these figures every day, and they constantly get worse. The balance of payments keeps growing exponentially. Public debt keeps growing exponentially. The Medicare / Medicaid / Social Security packages are growing out of control, and Washington is doing nothing about it. And nobody really shows any signs of giving a damn. Even the Fed is living in a fantasy world, if we're to judge from <#inc ww2010.weblog.ref e050314 "the bizarre February speech by Fed Governor Ben Bernanke,"#> where he blamed America's public debt on other saying that it was caused by a "global saving glut" in other countries of the world. In the meantime, I'm warning my readers again that the economy is exhibiting extremely ominous signs right now, and a great deal of caution is in order. =eod =// &&2 e050427 Taiwan opposition leader's trip to Beijing is high theatre =data ww2010.weblog.y2005.e050427.head Taiwan opposition leader's trip to Beijing is high theatre =data ww2010.weblog.y2005.e050427.keys =data ww2010.weblog.y2005.e050427.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050427.date 27-Apr-05 =data ww2010.weblog.y2005.e050427.txt1 Taiwan's generational split is on display today, amid cheers and cries of "traitor." =data ww2010.weblog.y2005.e050427.txt2 <#inc ww2010.pic lienchan.jpg right "" "Lien Chan, leader of KMT, Taiwan's opposition Nationalist Party (Source: BBC)"#> Lien Chan was just a youth when he and his family fled mainland China for Taiwan to escape execution by Mao Zedong's army, after the Communist Party defeated the Nationalist Party in a 15-year civil war that ended in 1949. Lien is returning to the mainland today for the first time in 56 years. He'll be leading a delegation of senior officials of the same Nationalist Party that fled from the Communists in 1949. It'll be the first meeting of Communist and Nationalist Party officials since then. Mr Lien, who was born in China, has called his trip to the mainland a journey of peace - saying he hopes it will help the two sides work towards reconciliation after more than half a century of conflict. Lien <#stdurl news.bbc.co.uk/2/hi/asia-pacific/4482617.stm "says his trip is a journey of peace."#> "I hope the journey will contribute in whatever small way towards mutual assistance, mutual concern, and the creation of a win-win situation," he said. This is rich in irony of course, as any good political ploy is. The trip has infuriated supporters of the ruling Democratic Progressive Party, although President Chen Shui-bian has given the trip cautious approval. The trip dramatizes the sharp differences in views between people of different generations. Lien was born in 1936. He grew up during the genocidal civil war, and saw dozens or hundreds of his friends and family slaughtered during the war. Like most people in the generation that grows up during a crisis war, he suffered a kind of "generational child abuse," and grew up to be an indecisive adult who seeks compromise and containment of problems rather than confrontation. President Chen was born in 1950, part of the risk-seeking generation that grows up after a crisis war (like America's Baby Boomer generation). He has no personal memory of the civil war, and has no fear of confrontation. The younger generations were greatly influenced by China's bloody 1989 Tiananmen Square massacre, which convinced them that they didn't want to be part of China. Taiwan's college students began the "Wild Lily Rebellion" several months later, and in 2000, one of their leaders became President of Taiwan: Chen Shui-Bian. <#inc ww2010.pic taigraph.gif left "" "Taiwan poll results to question: "Do you feel Taiwanese, Chinese or both?" (Source: WSJ)"#> The adjoining graph, which shows the number of Taiwanese who call themselves "Chinese" versus "Taiwanese" shows how the generational change is playing out. As the older generation dies out, the number of people calling them "Chinese" has been decreasing; as younger generations grow older, the number of people calling themselves "Taiwanese" is increasing. From the point of view of Generational Dynamics, a reunification war between China and Taiwan is inevitable, and will occur with 100% certainty. <#inc ww2010.weblog.ref e050327 "As we've previously described,"#> China has announced double-digit war budgets for each the past several years, and appears to be preparing for a preemptive strike. China is believed to be <#inc ww2010.weblog.ref e050308 "building a navy of amphibious vehicles capable"#> of transporting an invading army to Taiwan. Such a war would bring military retaliation from America. =eod =// &&2 e050426 Russian President Vladimir Putin bares his teeth as unrest spreads in Russia =data ww2010.weblog.y2005.e050426.head Russian President Vladimir Putin bares his teeth as unrest spreads in Russia =data ww2010.weblog.y2005.e050426.keys russia, putin =data ww2010.weblog.y2005.e050426.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050426.date 26-Apr-05 =data ww2010.weblog.y2005.e050426.txt1 Putin threatened to crack down heavily on any attempts to instigate a popular revolution =data ww2010.weblog.y2005.e050426.txt2 in Russia, in <#stdurl www.guardian.co.uk/russia/article/0,2763,1470121,00.html "Sunday's State of the Nation speech."#> <#inc ww2010.pic putin1.jpg right "" "Vladimir Putin"#> The speech comes as <#stdurl www.iht.com/articles/2005/04/26/news/russia.php "social unrest has been spreading throughout Russia."#> The social unrest is increasing because of <#inc ww2010.weblog.ref e050119 "a recent law that removed numerous benefits,"#> and replaced them with cash payments worth much less for many pensioners. In past years, the public would be demonstrating against their local government leaders, but that no longer makes sense, since Putin abolished direct election of regional leaders last year. "It is evident now that instead of making its life easier with this proposal, the Kremlin created huge problems for itself," <#stdurl www.iht.com/articles/2005/04/26/news/russia.php "said Nikolai Petrov,"#> an analyst at the Moscow Carnegie Center who studies regional politics. "There are now no legal means for the opposition in this or that region to beat the incumbent governor." <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus region - including North Ossetia and Chechnya"#> Ethnic protests have been also occurring in Karacheyevo-Cherkassia, Ingushetia and North Ossetia, Russia's Muslim southern provinces in the Caucasus. A neighboring province, Chechnya, has been the site of a regional war with Russia that's now over ten years old. The social unrest throughout Russia is being encouraged by the success of protests in three former Soviet Republics: Georgia, Kyrgyzstan and Ukraine. During the last 18 months, widespread protests and demonstrations have resulted in the downfall of Kremlin-supported leaders in each of these three now independent nations. These three losses have been extremely humiliating to Putin, as he indirectly indicated in his State of the Nation speech, when he referred to the 1991 breakup of the Soviet Union as "the biggest geopolitical catastrophe of the last century. Specifically for the Russian people it became a real drama. Dozens of millions of our citizens and compatriots found themselves outside of the borders of Russian territory". Many Muslims considered this statement to be quite ominous, as indicated by <#stdurl www.arabnews.com/?page=7§ion=0&article=62765&d=26&m=4&y=2005 "an editorial in the Arab News:"#>

One of the more disturbing parts of his speech was his reference to the millions of Russians who found themselves outside the country’s borders when the Soviet Union broke up and thirteen independent republics were created. His audience, not just in the Duma but on nationwide TV, might just have taken the view that the president felt that this was a wrong that in due time needed to be righted. For the independent Ukraine with its new independent-minded government and a large Russian minority, Putin’s comments will not have played well. Indeed for all former Soviet republics with significant ethnic Russian populations, the statement could be taken as downright sinister. As <#hreftext ww2010.i.ukraine041128 "I've written on several occasions,"#> Putin is a man of steely determination. He made some missteps by overreaching in Ukraine, where he humiliated himself, but he stepped back and covered his tracks very adroitly, all the while accumulating more power for himself in the Kremlin. From the point of view of Generational Dynamics, Russia and the Caucasus is one of the <#hreftext ww2010.i.danger041120 "the six most dangerous regions of the world,"#> in that a regional war is almost certain to expand quickly into a world war. Generational Dynamics predicts that the violent Russian civil war, ending in 1928 following the Bolshevik Revolution and killing tens of millions of Russians, is going to be refought, with near absolutely certainty. An eerie sign of this is <#stdurl "www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/04/20/wstal20.xml" "the revival in veneration for Josef Stalin,"#> one of the greatest monsters of the 20th century, who committed genocidal atrocities against Muslims, Chechens, Ukrainians, and several other ethnic groups in the 1930s and 1940s. These fault lines are all reopening. =eod =// &&2 e050425 China makes five demands of Japan =data ww2010.weblog.y2005.e050425.head China makes five demands of Japan =data ww2010.weblog.y2005.e050425.keys =data ww2010.weblog.y2005.e050425.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050425.date 25-Apr-05 =data ww2010.weblog.y2005.e050425.txt1 After Japanese leader apologized at length for Japan's history, =data ww2010.weblog.y2005.e050425.txt2 a private Saturday <#stdurl "abcnews.go.com/International/wireStory?id=698001" "meeting between Chinese President Hu Jintao and Japanese Prime Minister Junichiro Koizumi"#> at the Asian-African summit in Jakarta failed to resolve differences between the two countries. The day before the meeting <#stdurl www.iht.com/getina/files/241663.html "Mr. Koizumi said that Japan humbly accepted the facts of history"#> that "through its colonial rule and aggression, [it had] caused tremendous damage and suffering to the people of many countries, particularly to those of Asian nations." He added, "With feelings of deep remorse and heartfelt apology always engraved in mind. Japan has resolutely maintained, consistently since the end of World War II, never turning into a military power but an economic power, its principle of resolving all matters by peaceful means, without recourse through the use of force." However, in an accident of bad timing, just hours before Koizumi's speech, Japanese lawmakers paid a <#inc ww2010.weblog.ref e050420 "long-scheduled visit to Yasukuni Shrine,"#> which honors Japan's 2.5 million war dead from World War II, including a number of war criminals. This led a frosty Hu to snap, "Remorse expressed for (Japan's invasion of China and World War II) should be translated into action and no move should be made to offend the people of China and the people from other Asian countries." The Saturday meeting between Hu and Koizumi was cordial, but <#stdurl english.eastday.com/eastday/englishedition/node20676/userobject1ai1042382.html "Hu used the meeting to make five "proposals""#> to Japan to improve relations between the two countries:

The Japanese government should strictly abide the existing "Peace and Friendship Treaty" between the two countries, and take specific actions to forge a friendly and cooperative relationship.
The Japanese government should reflect on the aggression by the Japanese militarists against China in the 1930s and 40s, and deal with historic problems in a serious and sincere manner. (This refers to the Chinese complaints that <#inc ww2010.weblog.ref e050416 "Japanese textbooks don't deal with Japan's history sincerely."#>)
Japan should support the "one China" policy, and oppose Taiwan independence. (In recent months, Japan and Taiwan have been supporting each other's positions against the Chinese.)
Differences between the two nations need to be resolved through dialogues and peaceful negotiations.
The two countries should further strengthen communication and cooperation.

Needless to say, not all Japanese are willing to simply accept these Chinese "proposals." Japanese Foreign Minister Nobutaka Machimura is playing "bad cop" to Prime Minister Koizumi's "good cop." He <#stdurl www.swissinfo.org/sen/swissinfo.html?siteSect=143&sid=5709503&cKey=1114302016000 "warned Beijing against more anti-Japan demonstrations,"#> and then he <#stdurl www.guardian.co.uk/worldlatest/story/0,1280,-4960057,00.html "criticized China's textbooks,"#> saying that, "There is a tendency toward this in any country, but the Chinese textbooks are extreme in the way they uniformly convey the 'our country is correct' perspective." From the point of view of Generational Dynamics, Japan and China are heading for war with 100% certainty. As the generation of people who grew up during and have personal memory of the horrors of World War II all retire, the younger generations will increasingly reject compromise and containment of problems, and adopt solutions involving confrontation. It's important to remember that all of this is really irrespective of what the politicians do. If it were up to Koizumu and Hu, the two countries would probably work out some sort of compromise. But both countries are entering a "generational crisis" period, and during these periods it's the masses of people that lead the country into war, not the politicians. If the politicians tried to compromise, the people would throw them out of office. As Leo Tolstoy wrote about Napoleon's invasion of Russia in War and Peace, "Had Napoleon then forbidden [his army] to fight the Russians, they would have killed him and have proceeded to fight the Russians anyway, because it was inevitable." We're seeing the same sort of thing today between China and Japan, as well as in other regions of the world, at this unique time in history, 60 years after the end of World War II. =eod =// &&2 e050422 Giddy, ebullient investors push stocks to highest gain in years =data ww2010.weblog.y2005.e050422.head Giddy, ebullient investors push stocks to highest gain in years =data ww2010.weblog.y2005.e050422.keys =data ww2010.weblog.y2005.e050422.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050422.date 22-Apr-05 =data ww2010.weblog.y2005.e050422.txt1 Wild turbulence continues as stocks close 2% higher after week's 7% fall. =data ww2010.weblog.y2005.e050422.txt2 All three major Wall Street indexes -- the Dow, the S&P 500 and the Nasdaq -- rose 2% to 2.5% Thursday, in the largest gain since October 2003. And as of midday Friday, Japan's Nikkei index is following suit with a 2% jump. (Update: By end of day Friday, the Nikkei is making only a 0.55% jump.) Commentators are expressing ebullience. On <#stdurl marketplace.publicradio.org/shows/2005/04/21/pm.html "Thursday's NPR Marketplace business program,"#> host David Brown referred to the "broad smiles" on the faces of investors. Anyone who's been reading this web site for a while knows that I'm a curmudgeon who's critical of most of what passes for financial commentary today, but this giddiness is almost beyond belief. <#inc ww2010.pic yh050421.gif right "" "DJIA, April 21 2004-2005"#> The market has been going up and down for the last year or more, as the adjoining graph shows. But in the last few weeks, these oscillations have been getting more rapid, making the market increasingly volatile. As we wrote about yesterday (see next item, below), this doesn't necessarily mean that a crash is imminent, but this is the behavior that always precedes a crash. Let's take a look at the psychology of what's going on. Why would investors sell so much for a few days, and then buy so much on the next day? <#inc ww2010.pic djialog.jpg left "" "Dow Jones Industrial Average - the trend value in 2006 is 4900; in 2010 it's 5800"#> First of all, the stock market is a bubble floating in mid-air. Stock prices today have no relationship to the actual values of the companies they represent, as the adjoining graph shows. <#hreftext ww2010.i.greenspan040706 "As we've previous described,"#> the actual value of the companies being represented is shown the the long-term trend line, which has a value of 4900 in 2006 and 5800 in 2010. These values are far below todays stock market prices, above Dow 10000, indicating that today's stock market is some 100% overpriced. Under normal circumstances, the stock market will oscillate around that line, with stock prices sometimes a little overpriced, and sometimes a little underpriced. But something went wrong in the 1920s and the 1990s bubbles, when stock prices went high above their underlying values, and price/earnings ratios went into the 20s or 30s or higher. Today, stock prices are still in bubble territory. So if today's stock prices have no real relationship to the companies they represent, then why does the market go up and down on a daily basis? This is "behaviorial economics" gone amok. Investors use faulty data based on faulty theoretical models. In fact, <#inc ww2010.weblog.ref e050325 "I've written several times"#> about the nutty misinterpretations of price/earnings ratios used by financial analysts who try to hide the fact that almost all stocks are overpriced. When you look at investors' decision making process, you see that there's been a dramatic change in the last few months. In "normal times," investors make decisions about buying or selling individual stocks. But today, investors are making decisions based on whether the market as a whole will go up or down on a daily basis. This means that investors are following a "herd mentality," all tending to move in the same direction, dictated by the market as a whole, rather than in different directions, dictated by individual stocks. It's the volatility of the market that indicates that the herd mentality is going on, and the greater the volatility, the greater the herd mentality. In "normal times," an individual stock can be highly volatile, as investors as a group sell off the stock or buy the stock heavily, based on rumors or emotions or real data. Today, with investors moving in unison, the whole stock market is becoming more and more volatile, and the stock market as a whole moves up or down, based on rumors or emotions or real data. And that means that, one of these days, there will be a sharp selloff. My original prediction, made in 2002, based on generational analysis and standard growth analysis, was that we would have a major stock market crash (DOW down to 3000-4000 range, S&P 500 index down to 400) by 2006 or 2007. This MUST happen sooner or later because stocks are so far overpriced. The rapidly increasing volatility of the market indicates that that day is coming sooner rather than later. =eod =// &&2 e050421 Increasingly volatile stock market falls to six-month lows =data ww2010.weblog.y2005.e050421.head Increasingly volatile stock market falls to six-month lows =data ww2010.weblog.y2005.e050421.keys =data ww2010.weblog.y2005.e050421.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050421.date 21-Apr-05 =data ww2010.weblog.y2005.e050421.txt1 Investors are becoming increasingly risk-averse, indicating a major correction may be in store. =data ww2010.weblog.y2005.e050421.txt2 Stocks have fallen 1-2% per day in four out of the last six sessions, for roughly a 7% fall. Japan's Nikkei index has taken a similar fall, and as of midday Thursday, the Nikkei is down an additional 2%. If there's going to be a major stock market crash, then this is exactly the type of situation that would be a prelude. From the point of view of Generational Dynamics, a stock market crash to about Dow 3000-4000 is near 100% certain. As usual, Generational Dynamics tells you what the final destination will be, but doesn't tell you the path or how long it will take to arrive there. <#inc ww2010.pic sp5010.gif left "" "S&P 500 index, 1950 to present"#> In 2002, we predicted that America entering was entering a new 1930s Great Depression, with a fall to the Dow 3000 range by 2007. This was based on <#hreftext ww2010.i.fed050324 "straightforward analysis"#> using price/earnings ratios and growth trends, as illustrated by the adjoining graph. When a stock market crash occurs, it happens after the kind of volatility we've been seeing. Thus, there's a possibility that we'll see a major stock market crash within the next few weeks. This is not a certainty in this time frame, of course. A stock market crash is a certainty, but the precise time frame is not. There are several reasons factors that indicate that it's coming sooner, rather than later:

The level of <#inc ww2010.weblog.ref e041215 "public debt has been increasing at an exponential rate,"#> and is now at historically high levels with no sign of leveling off. It is literally impossible for this situation to continue much longer.
The <#inc ww2010.weblog.ref e050413 "US Trade deficit has been increasing exponentially."#> In fact, the level of imports (mostly from China) has been increasing exponentially, and the level of exports has been leveling off, indicating that our hollowed out economy is losing the ability to provide products that people want. It is literally impossible for this situation to continue much longer.
The Price/Earnings ratio index has been above 20 since 1995, a very long time by historical standards, and must fall to the 5-10 range before too much longer.
Analysts are in a state of denial about what's going on. The most bizarre claim was by Fed Governor Ben Bernanke, the man expected to become Fed Chairman when Alan Greenspan resigns next year. In a speech last month, <#inc ww2010.weblog.ref e050314 "Bernanke blamed America's public debt on other nations,"#> saying that it was caused by a "global saving glut" in other countries of the world. This is a typical attitude of people in the Baby Boomer generation.
Investors are evidently becoming increasing risk-averse, indicating that the current credit bubble must burst soon.

I've computed the probability of a stock market crash before the end of 2007 as being above 50%. For reasons that <#hreftext ww2010.i.big041024 "I described last year,"#> there's good reason why major disasters (Civil War, 1929 crash, Pearl Harbor, 9/11) are likely to occur in the fall of the year following a Presidential election, and so if a stock market crash is going to occur this year, I would expect it in the fall. So it's possible that the stock market will temporarily recover from the past week's downturn. But this past week has been especially ominous, and I'm posting this notice to readers of my web site to be prepared for the worst in the next few weeks. =eod =// &&2 e050420 Neither China nor Japan backing off from increasing confrontation =data ww2010.weblog.y2005.e050420.head Neither China nor Japan backing off from increasing confrontation =data ww2010.weblog.y2005.e050420.keys =data ww2010.weblog.y2005.e050420.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050420.date 20-Apr-05 =data ww2010.weblog.y2005.e050420.txt1 As conflict increases, America's Pacific strategy is coming apart at the seams. =data ww2010.weblog.y2005.e050420.txt2 Japanese lawmakers said Tuesday that they <#stdurl "abcnews.go.com/International/wireStory?id=682821" "plan to visit Yasukuni Shrine,"#> which honors Japan's 2.5 million war dead from World War II. But the infuriated Chinese say some of the dead being honored were war criminals who committed atrocities against the Chinese. This follows three weekends in which <#inc ww2010.weblog.ref e050416 "tens of thousands of Chinese students violently rioted"#> against the Japanese embassy and Japanese businesses in several large cities in Eastern China. Japan has demanded that China apologize for the violence, and China has refused. China blames the violence on Japan for refusing to face up to its history and show proper contrition for its actions in WW II. The level of mutual acrimony between Japan and China has been increasing steadily and openly for weeks, so much so that an alarmed United Nations Secretary-General Kofi Annan asked the leaders of the two countries to meet and resolve the dispute. Such a meeting could take place later this week at the Asia-Africa summit, which opens in the Indonesian capital, Jakarta, on Thursday. However, Japanese Prime Minister Junichiro Koizumi put such a meeting in doubt by saying, “A meeting that becomes an exchange of criticism is not constructive." The Wall Street Journal <#stdurl online.wsj.com/article/0,,SB111394204651811062,00.html "reports that American foreign policy is being affected"#> by the dispute:

The turn in Japan-China relations threatens to draw in the U.S. Stretched militarily in the Middle East, the U.S. is strengthening its longstanding security alliance with Tokyo, hoping Japan will help contain East Asian trouble-spots such as North Korea and Taiwan. But promoting Japan as a power in the region has stoked fears in the Chinese leadership that the reinvigorated security ties will be refocused to stifle China's ambitions. Those concerns may slow down Washington's plans. "[Beijing's] opposition to the alliance is making China a problem," says Denny Roy of the Asia-Pacific Center for Security Studies, a think tank for the U.S. military's Pacific Command. China already failed to meet Washington's fond hopes and expectations when it didn't convince North Korea to abandon its plans to acquire nuclear weapons. But North Korea <#inc ww2010.weblog.ref e050409b "has increasingly adopted a hard line against negotiations"#> after walking out of the nuclear non-proliferation talks. It's now believed that North Korea already has 6-8 nuclear weapons, as well as the missiles to deliver them as far as Japan or even California. And now, North Korea has suddenly <#stdurl www.voanews.com/english/2005-04-18-voa10.cfm "shut down its main nuclear reactor,"#> evidently in order to remove spent plutonium and reprocess into weapons fuel into six to eight additional nuclear weapons. "We don't know the state of readiness of their reprocessing facility," says an official of the International Atomic Energy Agency, but "if it's fully operational, then they have a reprocessing capability that can separate the spent plutonium in a matter of months." Generational Dynamics predicts that North Korea will start a war to reunite South and North Korea under North Korean control, that China will start a war to return Taiwan to Chinese control, and that China and Korea will get revenge against Japan for the latter's actions prior to and during World War II. These wars could begin next week or next year, but they're coming with 100% certainty. =eod =// &&2 e050416 Chinese rage at Japan grows - fear of uncontrolled rioting =data ww2010.weblog.y2005.e050416.head Chinese rage at Japan grows, as does fear of uncontrolled rioting =data ww2010.weblog.y2005.e050416.keys =data ww2010.weblog.y2005.e050416.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050416.date 16-Apr-05 =data ww2010.weblog.y2005.e050416.txt1 Chinese Internet boards are calling for renewed anti-Japanese riots this weekend. =data ww2010.weblog.y2005.e050416.txt2 The new riots would follow <#inc ww2010.weblog.ref e050409b "last weekend's massive riots,"#> where 20,000 Chinese threw rocks and bottles at the Japanese embassy and at Japanese businesses in other cities. <#inc ww2010.pic g050413.gif right "" "Map of East China Sea and disputed region (Source: BBC)"#> The Chinese were further enraged this week when <#stdurl news.bbc.co.uk/1/hi/world/asia-pacific/4439171.stm "Japan began allocating gas exploration rights"#> in an area of the East China Sea also claimed by China. But this is only the latest in what the Chinese see as provocations fueled by Japanese nationalism and an unwillingness to face up to its historical crimes. (However, one commentator recently made the point that the Chinese also refuse to face up to their history, especially the genocidal Great Leap Forward in the late 1950s, which killed tens of millions of people.) In return, Japan <#stdurl dailytelegraph.news.com.au/story.jsp?sectionid=1274&storyid=2963920 "accused China of ignoring anti-Japanese violence in China,"#> by "implying that the responsibility lies with the Japanese side and not with the Chinese side. ... Such violent acts, however, cannot be justified for any reason whatsoever in the international community today." This dispute may have torpedoed Japan's bid to convince the world to gain a permanent seat on the UN Security Council. Chinese Premier Wen Jiabao <#stdurl http://www.iht.com/getina/files/239147.html "made extremely strong anti-Japanese remarks"#> during a visit to India, referring to the Security Council issue: "The core issue in China-Japan relations is that Japan needs to face up to history squarely. ... Only a country that respects history, takes responsibility for past history and wins over the trust of people in Asia and the world at large can take greater responsibility in the international community." Asian nations are lining up on both sides of this issue. North Korea <#stdurl "www.bloomberg.com/apps/news?pid=10000101&sid=aLbYe0R3OdqA&refer=japan" "called Japan "a vulgar and shameless political dwarf,""#> protesting new Japanese school textbooks that appear to gloss over Japan's actions in World War II. They added, "This is a grave insult to the people of Korea and the rest of Asia who suffered all sorts of misfortune and pain due to Japanese imperialists." South Koreans have also expressed outrage over the textbook. On the other hand, Japan and Taiwan appear to be forming an anti-China alliance. This will only provoke China further. =inc ww2010.h2 risk "Chinese protests carry a risk - to China" However, starting a couple of days ago, the Chinese government has <#stdurl www.iht.com/articles/2005/04/14/news/china.html "started to discourage the rioting,"#> and has ordered leaders of last weekend's protests to stay at home. China is also clamping down on Internet message traffic that encourages further rioting. (China is the most sophisticated country in the world in controlling the Internet, according to <#stdurl "www.opennetinitiative.net/modules.php?op=modload&name=News&file=article&sid=49" "a study and report from the OpenNet Initiative."#>) The reason is that China is afraid that the rioting will spiral out of control and turn against the Chinese government itself. Large mass riots have been occurring throughout the country in recent months, and as <#hreftext ww2010.i.china050116 "I wrote in January,"#> China appears to be close to civil war. Such a civil war might be triggered by any sort of financial crisis that throws many of its 150 million itinerant workers out of employment. =inc ww2010.bugcomment left "The basic policy of our government has been to be conciliatory to Japan and the rest of the world," <#stdurl www.iht.com/articles/2005/04/14/news/china.html "says Pan Wei,"#> a political theorist at Beijing University. "But that policy has become less viable today, when people are demanding a harder line." We'll have to see whether China's "conciliatory" attempts bear fruit this weekend. What is happening is that the level of conflict in the region -- Japan, China, Korea, Taiwan -- is increasing every day. There may well be war in the region in the next 12 months. =inc ww2010.h2 dire "Why such a dire forecast?" A couple of readers have asked me why my forecasts for the North Pacific region seem more dire than forecasts for other regions. Last year, when I wrote about <#hreftext ww2010.i.danger041120 "the six most dangerous regions of the world,"#> I felt that the Caucasus (southern Russia) region was the most dangerous, because of the 10-year-old Chechen war and a long series of bloody terrorist events, culminating in the Beslan school massacre. I also felt that the Caucasus was the most dangerous because it's farthest into a "generational crisis" period, with Russia itself on the World War I timeline (while other regions are on the World War II timeline). However, Putin has been increasingly conciliatory for the last few months, backing off from putting pressure on Ukraine and Georgia, for example. The Mideast entered a conciliatory period, with the election of Mahmoud Abbas in Palestine, although the good will is quickly fraying at the edges. But nothing like that has happened in the North Pacific. The one major conciliatory act in the last few months was <#inc ww2010.weblog.ref e050308 "the "five noes" speech by Taiwan President Chen Shui-bian,"#> in which he pledged no declaration of Taiwan independence, no incorporation of "two states" into its constitution, no change of the so-called country's name and no referendum on Taiwan independence. However, that one act of conciliation turned to fury and <#inc ww2010.weblog.ref e050327 "massive anti-Chinese Taiwan public demonstrations,"#> the largest in history, after China responded by passing its Anti-Secession law, making it legal for China to invade Taiwan. The point is that other regions bounce back and forth between confrontation and conciliation, but the North Pacific doesn't. North Korea and China are clearly mobilizing for war, and almost every day brings a fresh spiking of the level of confrontation. It's quite possible that North Korea or China will pursue a preemptive war over reunification with South Korea and Taiwan, respectively. But even if there is no preemptive war, there's still the possibility of overreaction or miscalculation. For example, this dispute of gas rights in the East China Sea could lead to a small armed skirmish between Chinese and Japanese patrols in the islands themselves, and that could quickly escalate to a much larger conflict. Most of the time, Japan and China would back down from such a confrontation; but in a generational crisis period, they'll look for reasons to confront and escalate rather than to compromise and contain problems. That's why anything from a financial setback to a mild skirmish can lead to war. And in the mood these countries are in, that could happen at any time. =eod =// &&2 e050413 US trade deficit hits new monthly record high =data ww2010.weblog.y2005.e050413.head US trade deficit hits new monthly record high =data ww2010.weblog.y2005.e050413.keys =data ww2010.weblog.y2005.e050413.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050413.date 13-Apr-05 =data ww2010.weblog.y2005.e050413.txt1 Meanwhile, former Fed Chairman Paul Volcker is predicting a financial crisis =data ww2010.weblog.y2005.e050413.txt2 =inc ww2010.blocking.start <#inc ww2010.pic g050412.gif right "" "Trade deficit, 2002-present. (Source: WSJ)"#> For a long time now, analysts have been hopefully predicting that the trade deficit would fall. Instead of falling, <#stdurl www.bea.gov/bea/newsrel/tradnewsrelease.htm "the trade deficit had a fresh monthly high"#> in February, $61.0 billion. Indeed, it continues to grow exponentially, as shown by the adjoining graph. The new high was achieved because of the increased volume of clothing imports from China, and because of the increase in the price of oil. =inc ww2010.blocking.end <#inc ww2010.pic g050412b.gif left "" "Imports and exports (Source: Dept. of Commerce)"#> A more detailed picture is shown by examining the components in the adjacent graph, taken from <#stdurl www.bea.gov/bea/newsrelarchive/2005/trad0205.pdf "the full US Dept. of Commerce report (PDF file)."#> The trade deficit is computed by subtracting the amount of our exports to other countries from the amount of our imports from other countries. As this graph shows, the amount of imports keeps rising, while the amount of exports has leveled off. Is there any reason to believe that either of two trends will change? I sure don't know of any reason. In fact, a <#stdurl "quote.bloomberg.com/apps/news?pid=10000006&sid=a94WnTdoVEY4&refer=home" "report from the Bloomberg service"#> today says that several analysts are reducing their forecasts for the American economy. The leveling off of exports is especially ominous, because it shows that the American economy is not making goods that people want to buy. This reinforces the analysis from Generational Dynamics that the American economy as a whole is becoming increasing inefficient, as the new businesses created during the 1930s Great Depression have been getting increasing bureaucratic and inflexible in the intervening decades. I've been pointing out frequently that <#hreftext ww2010.i.greenspan050206 "Fed Chairman Alan Greenspan has sounded increasingly alarmed"#> in the past year. As Fed Chairman, Greenspan has to be very careful about what he says, so his statements of concern have to be taken seriously. However, now we have an opinion from Paul Volcker, the man who was Fed Chairman from 1979 to 1987, and whom Alan Greenspan replaced. In an <#stdurl www.washingtonpost.com/wp-dyn/articles/A38725-2005Apr8.html "April 8 editorial in the Washington Post,"#> Volcker says that "[current] circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot." Having been born in 1927, Volcker remembers the Great Depression of the 1930s, so Volcker must have been referring to that period. Volcker points out a number of imbalances -- the housing bubble, high personal debt and disappearance of savings are examples. He indicates that these imbalances could be resolved if there were a national will to do so. But, "[what] really concerns me is that there seems to be so little willingness or capacity to do much about it." That's exactly the kind of public attitude that Generational Dynamics predicts. During the 1950s-1980s, when all our nation's leaders had lived through the starvation, homelessness, unemployment and devastation of the Great Depression, there was a strong national determination to be fiscally sound, so that the Depression would not repeat itself. Paul Volcker himself was part of such an effort. During the 1970s, inflation grew rapidly and appeared to be spiraling completely out of control. Paul Volcker was appointed Fed Chairman and he immediately raised interest rates and cooperated with Congress to control inflation. The program was successful. But today there's no similar willingness to resolve our current economic crisis, according to Volcker. He suggests several policies, and says:

"But can we, with any degree of confidence today, look forward to any one of these policies being put in place any time soon, much less a combination of all? The answer is no. So I think we are skating on increasingly thin ice. On the present trajectory, the deficits and imbalances will increase."

and he concludes:

"I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change."

There can be little doubt of this. American consumers are buying more and more clothing manufactured in China. Even though gasoline prices have almost doubled in the last year, gasoline demand in US is 2% higher than it was a year ago, and jet fuel demand is 11% higher. There are no signs that the American consumer is cutting back on using credit cards and home equity to purchase everything under the sun. So there is no national will to bring about a change, and the current trend lines seem to be reaching a crisis point fairly quickly. Things have been getting steadily worse for many months now, and there's nothing on the horizon suggesting a change. =eod =// &&2 e050411 Jane Fonda's half-hearted selective apology =data ww2010.weblog.y2005.e050411.head Jane Fonda's half-hearted selective apology =data ww2010.weblog.y2005.e050411.keys =data ww2010.weblog.y2005.e050411.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050411.date 11-Apr-05 =data ww2010.weblog.y2005.e050411.txt1 This puts John Kerry in the spotlight. =data ww2010.weblog.y2005.e050411.txt2 I was sufficiently confused about the Vietnam War in the 70s that I didn't know what to make of Fonda's trip to Hanoi. But I did clearly understand the difference between criticizing the President (first President Johnson and then President Nixon) versus criticizing the soldiers who were bravely doing the jobs that their nation asked them to do. =inc ww2010.blocking.start <#inc ww2010.pic fonda1.jpg right "" "Jane Fonda mirthfully posing with enemy North Vietnamese soldiers"#> So when Fonda now apologizes and says she didn't hate our soldiers, I know she's lying. That was a big part of the antiwar campaign. Antiwar protestors, led by the likes of Jane Fonda, would spit on soldiers, call them war criminals and baby killers, and even become violent with them. The adjoining picture is that one the Fonda now disavows. She says that as soon as the picture was taken, she immediately regretted it, because she knew it would look that she was demonstrating against the soldiers rather than against President Nixon. =inc ww2010.blocking.end <#inc ww2010.pic fonda2.jpg center "" "Jane Fonda, back from Hanoi, wearing a necklace gift from the North Vietnamese. The necklace was made from the melted parts of a U.S. B-52 shot down by Hanoi."#> Well, her "regret" didn't last long. In the above picture, she's shown wearing a necklace made from the melted parts of a U.S B-52 shot down by Hanoi. So her regret didn't last long enough to avoid celebrating the death or capture of the American soldiers shot down with it. And Fonda's real feelings came out in 1976, when it became clear that the Chinese and North Vietnamese were supporting a holocaust and genocide of historical proportions going on in Cambodia. Millions of people were being tortured and killed, but Fonda, allied with her communist leaning friend William Kunstler, refused to condemn or criticize the Vietnamese or Chinese in any way. Finally Kunstler, speaking for himself and Fonda, said, "I would never criticize the actions of any Socialist government." So Fonda actively supported and helped our enemies, and then refused to condemn the same people when she perpetrated a massive genocidal holocaust. From the point of view of Generational Dynamics, there's an important context to this story. The political turmoil of the 1960s and 1970s occurred in a <#hreftext ww2010.i.sixties040501 ""generational awakening" period."#> A generational awakening period is characterized by massive political struggle based on a "generation gap," a conflict between the aging (World War II) war heroes and their children. Basically, the younger generation is opposed to whatever their fathers are for. In the 1970s, Fonda's hatred of her father, Henry Fonda, was well known. The father had starred in a number of WW II moves that Jane Fonda now despised, along with her father. They only finally made up in 1981, when they starred in the movie On Golden Pond together. Still, let's let bygones be bygones. I'm glad that Jane Fonda has finally figured out the distinction between hating Nixon and hating our soldiers, and that's she's apologizing for the latter. Of course, she's lying about it, and she's only doing it because she's promoting her new book and her new movie that's coming out next month, but I'm glad that she apologized anyway. That brings us to Senator John Kerry of Massachusetts. In 1971, Kerry said that American soldiers in Vietnam were committing war crimes "on a day-to-day basis with the full awareness of officers at all levels of command." He said that these atrocities included rape, torture, and cutting off ears, heads and limbs. Now, when <#inc ww2010.weblog.ref e040827b "I wrote about this during last year's Presidential campaign,"#> I said that I didn't care what Kerry said decades ago, but I wanted to know what he believes today. I believed that Kerry must repudiate his 1971 remarks, because if he were elected President without repudiating those remarks, then he'd have to do it anyway as President, because the War on Terror cannot be led by a President who believes that America committed the same kinds of atrocities in Vietnam that Islamic terrorists are committing today. I discussed this issue with some friends of mine who were strong Kerry supporters. Their response was to say that Kerry's 1971 statement was correct since, in essence, American soldiers in Vietnam were the equivalent of Nazi Storm Troopers of World War II who committed atrocities against the Jews. Well! Anyway, Kerry didn't win, so it's no longer absolutely necessary for him to repudiate his 1971 statement. But it would be nice if he took Jane Fonda's leave and apologized for them. But still, I live in Massachusetts, so Kerry is my Senator. And I would still like to know what Kerry believes today. Does Kerry believe today that American soldiers in Vietnam were no different than Nazi Storm Troopers? Enquiring minds want to know, but I have a feeling we aren't going to find out. =eod =// &&2 e050409b Thousands of Chinese protesters hurl bottles at Japan Embassy =data ww2010.weblog.y2005.e050409b.head Thousands of Chinese protesters hurl bottles at Japan Embassy in Beijing =data ww2010.weblog.y2005.e050409b.keys =data ww2010.weblog.y2005.e050409b.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050409b.date 09-Apr-05 =data ww2010.weblog.y2005.e050409b.txt1 Anti-Japanese feelings in China and Korea have been erupting for weeks. =data ww2010.weblog.y2005.e050409b.txt2 On Saturday, <#stdurl "news.bbc.co.uk/2/hi/asia-pacific/4427379.stm" "10,000 stone-throwing protesters smashed windows at the Japanese embassy"#> and Japanese-owned businesses in Beijing. It's not known who organized what is called a "patriotric rally" protesting Japan's actions prior to and during World War II, but notices appeared on Chinese internet bulletin boards, and the rally appears to have been sanctioned by the Chinese government. This is only the latest in the series of expressions of anti-Japanese sentiments that have been building in intensity since last month, when <#inc ww2010.weblog.ref e050318 "Korea protested Japan's claim to the the tiny Dokdo/Takeshima islands."#> Before last month, relations with Japan had seemed to be ever-improving, and 2005 was named as "Korea-Japan Friendship Year." However, the protests over the islands seem to have aroused strong feelings among the Chinese and Japanese people. Before that time, public anti-Japanese sentiments were expressed on bulletin boards, but rarely in any overtly public way. The islands controversy seems to have "made it OK" for the Chinese and Koreans to express their fury overtly. Other protests that have occurred are the following:

A number of major Japanese and Korean cultural exchanges have been canceled.
In China, there have been several weeks of nationwide street protests, online petitions and boycotts of Japanese goods.
The Koreans and Chinese have been condemning the Japanese for <#stdurl news.xinhuanet.com/english/2005-04/06/content_2796214.htm "whitewashing history in its new textbooks,"#> and ignoring Japanese atrocities in the 1930s and 1940s.
The Koreans and Chinese are vehemently protesting Japan's campaign to gain a permanent seat on the United Nations Security Council.

From the point of view of Generational Dynamics, this provides a classic example of how genocidal crisis wars begin. Older generations of people suppress their hatred and fury in order to avoid a repeat of the horrors of the previous crisis war. Younger generations, with no personal memory of those horrors, lead the way in letting these feelings bubble to the surface. A <#stdurl "news.scotsman.com/international.cfm?id=374442005" "new generation of young Chinese professions"#> have been actively campaigning against Japan. One of them, Lu Yunfei, webmaster for the web site <#stdurl www.1931-9-18.org#>, organized an online petition that received 830,000 signatures in the last two weeks protesting Japan's campaign to gain a UN Security Council seat. "It is Japan that has stimulated our national pride," says Lu. "They have never taken seriously their actions during the war and they continue to teach their children lies." [1931-9-18 is the day that Japan invaded China.] If you use the <#stdurl http://www.google.com/language_tools "Google language translator"#> on <#stdurl "http://translate.google.com/translate?u=http%3A%2F%2Fwww.1931-9-18.org&langpair=zh-CN%7Cen&hl=en&ie=UTF-8&oe=UTF-8&prev=%2Flanguage_tools" "Lu's web site home page,"#> the rough translation gives some additional protest information: protest Japanese control of the Diaoyu Island lighthouse; protest the Nanjing massacre of 1937, where hundreds of thousands of civilians were murdered; protest Japanese encroachment on East China Sea; protest the issuance of the song, "Taiwan, my brothers," which promotes a Japan-Taiwan alliance against China. As we've been reporting for months, the tension in the North Pacific is growing on a daily basis. <#inc ww2010.weblog.ref e050327 "China has passed an "Anti-Secession Law,""#> that legalizes a Chinese invasion of Taiwan. <#hreftext ww2010.i.korea050210 "North Korea is mobilizing for war,"#> and is refusing to attend nuclear non-proliferation talks. North Korea in particular <#stdurl "www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=8132506" "is adopting an increasingly hardline stance on talks."#> According to Selig Harrison, an analyst at Washington-based Center for International Policy, "There has been a major policy shift in Pyongyang in recent weeks. The hardline elements there are riding high, the army has increasingly asserted its control over nuclear policy. Now North Korea is not prepared to discuss dismantling its nuclear weapons until complete normalization of all economic and diplomatic relations with the United States." Generational Dynamics predicts that North Korea will start a war to reunite South and North Korea under North Korean control, that China will start a war to return Taiwan to Chinese control, and that China and Korea will get revenge against Japan for the latter's actions prior to and during World War II. These wars could begin next week or next year, but they're coming with 100% certainty. =eod =// &&2 e050409 Jewish extremists at Temple Mount =data ww2010.weblog.y2005.e050409.head Jewish extremists attempt to provoke Palestinian extremists to violence =data ww2010.weblog.y2005.e050409.keys =data ww2010.weblog.y2005.e050409.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050409.date 09-Apr-05 =data ww2010.weblog.y2005.e050409.txt1 Israeli and Palestinian security forces are out in force this weekend =data ww2010.weblog.y2005.e050409.txt2 protecting the Al Aqsa Mosque, Islam's third-holiest site, on a hilltop in Jerusalem's Old City. The same hilltop is also sacred to the Jews, and is known as Temple Mount. However, to reduce tensions, Jewish access has been strictly limited since Israel captured east Jerusalem in the 1967 Mideast war. Indeed, when opposition leader Ariel Sharon, now Prime Minister, visited Temple Mount in September 2000, the visit touched off Palestinian riots that triggered the 4 1/2 year Intifida. Sooooooooo, Jewish extremists, who are opposing Israel's pullout from the Gaza strip, and the abandonment of the Jewish settlements there, have announced a huge rally at Temple Mount on Sunday. The purpose of such a rally would be to provoke the Palestinians to violence, which would, presumably, cause Sharon to reverse the Gaza pullout plan. Devious, huh? Well, it's working so far. <#stdurl "www.iht.com/articles/2005/04/08/news/mideast.html" "Palestinian extremist militia group Hamas"#> has promised a massive counter-rally if the Jewish extremist rally takes place. "They will not be able to storm Al Aqsa Mosque, God willing, but if they do, all that has happened during the so-called quietness will disappear in the wind," said Nizar Rayan, a Hamas official. "We will move with our rockets and our mujahadeen in order to defend Al Aqsa and to protect it. Not only Hamas but all the Palestinians and Muslims." The "quietness" that Rayan is referring to is the honeymoon period following the election in January of Abu Mazen Mahmoud Abbas as the new president of the Palestinian Organization formerly headed by the late Yasser Arafat. Hamas and other militia groups have refused to sign on to any peace agreement between Abbas and Sharon, but they have agreed to honor a temporary ceasefire. The Sunday rallies would end the ceasefire. The Israeli security forces are planning a major show of force to prevent the Jewish extremists from reaching their goal. But keep in mind that the Gaza pullout isn't scheduled until July, so there is still plenty of time for Jewish extremists to provoke violence, even if violence is avoided this weekend. These aren't the only signs that Abbas' honeymoon is over. Last week, <#stdurl "www.aljazeera.com/cgi-bin/news_service/middle_east_full_story.asp?service_id=7712" "Abbas was forced to dismiss two senior security men"#> and to announce plans to retire hundreds more, in response to a shooting rampage by a group of Palestinian militants in Abbas' West Bank compound last week. On the Israeli side, Sharon has announced plans to plans to build more settlements in a portion of the West Bank with the "Mideast Roadmap" peace plan designates as Palestinian land. The <#stdurl "www.aljazeera.com/me.asp?service_ID=7820" "European Union is expressing "deep concern""#> over the plan, saying that it violates international humanitarian laws, as well as UN revolutions. President Bush will be meeting with Ariel Sharon in Texas on Monday, and he's indicated that <#stdurl www.nytimes.com/2005/04/09/national/09bush.html "he will also chastise Sharon for the settlment expansion plans."#> For the Palestinians themselves, the high expectations of change and permanent peace with Israel are not being met. <#stdurl www.csmonitor.com/2005/0407/p07s02-wome.html "There has been little relief from the regime of Israeli checkpoints"#> that give Israel a veto over ordinary Palestinians' ability to work, study, and visit relatives, and there is little or no chance that Israel will remove the checkpoints any time soon. This concept of unrealistic expectations not being met is a theme that <#hreftext ww2010.i.big041024 "I've discussed frequently on this web site,"#> in various contexts. The concept is that terrorist groups and warmaking groups put plans on hold pending an election, thanks to unrealistic expectations that the election will change things. When the unrealistic expectations are not met, then the terrorist groups vigorously resume their previous plans. This appears to be what's happening with Hamas today. Generational Dynamics predicts that we're heading for a major new Mideast war, replaying the genocidal war between Jews and Arabs in the 1940s. =eod =// &&2 e050407 World Bank warns that global economy recovery has "peaked" =data ww2010.weblog.y2005.e050407.head World Bank warns that global economy recovery has "peaked" =data ww2010.weblog.y2005.e050407.keys =data ww2010.weblog.y2005.e050407.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050407.date 07-Apr-05 =data ww2010.weblog.y2005.e050407.txt1 Saying that global economic growth is at a "turning point," =data ww2010.weblog.y2005.e050407.txt2 the World Bank's <#stdurl www.worldbank.org/prospects/gdf2005 "annual Global Development Finance report,"#> predicted a slowdown in global growth, and that the slowdown could be quite severe. "The global economy is at a turning point," says the report. "Growth has peaked, and pressures to address global imbalances are growing, exposing important risks facing both developed and developing countries as the needed adjustments occur." In some scenarios the adjustment could be mild, but a new global recession is also a possibility. "A reduction in the pace at which central banks are accumulating dollars, a weakening in investors' appetite for risk, or a greater-than-anticipated pickup in inflationary pressures could cause interest rates to rise farther than projected, providing a deeper-than-expected slowdown or even a global recession." Actually, this is not a new prediction. Many analysts last year predicted that there would be a recession this year, and they gave exactly the reasons that are now being given in the World Bank report:

Last year, analysts predicted that if the price of oil stayed above $40 a barrel, then it would put the world into a recesion. The World Bank repeats this reason, and of course it's a lot worse than expected, since the price of oil is now close to $60 a barrel.
There were big refunds to taxpayers a year ago, thanks to the legislated tax cuts, but those refunds have long since run out. The report points out that many countries around the world used fiscal stimulus to help recovery from the 2000/2001 recession, and that without that stimulus, a recession is more likely.
America has been raising interest rates. This is going to cause a fiscal crunch in many developing countries, and is the most important potential factor in causing a major global recession. As we pointed out in yesterday's article (see next item, below), this is going to force China into a financial crisis as early as this year, causing a potential chain reaction.

The following are some graphs from the report: =inc ww2010.blocking.start <#inc ww2010.pic wb40636.gif right "" "Industrial production has been slowing around the world (page 36)"#> Industrial production slowed around the world (excluding China) dramatically in 2004, and is expected to continue falling in the developing countries, and remain flat at a low level in high-income countries. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic wb40638.gif right "" "Foreign countries are financing the US account deficit (balance of payments) (page 38)"#> This graph shows who is financing the US current account deficit:

Foreign official assets and government securities is the category that's been growing exponentially. This is the purchase of US treasury bonds by foreign central banks.
Foreign direct investment (FDI) plus equity investment used to be the biggest category, representing foreign investors sending money to America in the form of private investments. By 2004, this category had a large negative value, meaning that American investors are investing overseas.
Other private securities and banking has remained relatively unchanged.

=inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic wb40658.gif right "" "Foreign exchange reserves in developing countries (page 58)"#> Because developing countries have been purchasing America's debt, the foreign exchange reserves held by these countries has been skyrocketing. The major countries include: China, India, Thailand, Malaysia, Venezuela, the Czech Republic and Pakistan. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic wb40640.gif right "" "Short / Long term interest rates in U.S. (page 40)"#> This graph shows "real interest rates." The Fed lowered interest rates to 1% by 2002, but since this was lower than the inflation rate, short-term interest rates were actually effectively negative. In fact, they're still negative today. Long-term interest rates are positive, but still effectively close to zero. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic wb40643a.gif right "" "Worldwide commodity prices have been rising since 2002 (page 43)"#> Commodity prices have been skyrocketing since late 2003, thanks to huge demands from China. The rise in agricultural product prices is especially disturbing because it pushes huge masses of people around the world into poverty and starvation. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic wb40643b.gif right "" "Most of the new demand for commodities is coming from China (page 43)"#> In just the last year, China's share of commodity demands has skyrocketed, to almost equal the rest of the world combined. (The OECD is the <#stdurl www.oecd.org "Organization for Economic Co-operation and Development,"#> a group of 30 countries, including the United States that furnish international aid to developing countries.) =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic wb406104.gif right "" "Global military spending, 1992-2003 (page 104)"#> Global military spending decreased in the 1990s, but has been increasing steadily since 2000. =inc ww2010.blocking.end I've been reading enough of these analyses now to get the impression that many analysts expect something serious to happen this year, some time in the summer or the fall. From the point of view of Generational Dynamics, America is entering a 1930s style Great Depression. =eod =// &&2 e050406 Analysts: Worldwide economy is getting weaker =data ww2010.weblog.y2005.e050406.head Analysts: Worldwide economy is getting weaker =data ww2010.weblog.y2005.e050406.keys =data ww2010.weblog.y2005.e050406.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050406.date 06-Apr-05 =data ww2010.weblog.y2005.e050406.txt1 After Greenspan's January warning that the global economic dangers are "without historical precedent," =data ww2010.weblog.y2005.e050406.txt2 other pundits are beginning to take up the theme. <#hreftext ww2010.i.greenspan050206 "In Fed Chairman Alan Greenspan's January speech,"#> he indicated that Fed actions since the beginning of the 1990s bubble have been based on the erroneous assumptions that the American economy is sufficiently self-contained so that the Fed's near-zero interest rate policy would prevent a new 1930s style Great Depression. Because of the global nature of the economy today, Greenspan is no longer certain. Now other analysts are beginning to fill in some of the blanks. Now that the Fed is being forced by concerns about the falling value of the dollar to raise interest rates again, ntelligence service Stratfor.com points out that these interest rate hikes are going to hit China especially hard. Chinese "debt is extremely vulnerable to interest rate hikes," says says the intelligence service, as quoted by <#stdurl "cbs.marketwatch.com/news/story.asp?guid=%7B24EED6D8-E169-476D-90BC-36A4F4F75513%7D" "financial analyst Joe Duarte in a column."#> "As rates rise, that debt will become impossible to maintain, and China will face the beginnings of a financial crisis. Given the makeup of the Chinese financial system, such a development is unavoidable. The only questions regarding the crisis to come are time frame and severity." Duarte adds that the Chinese economy has to hit a "bump in the road" sooner or later, and that could happen later this year, perhaps in July or August, the "traditional time for markets to start stumbling." With the Fed raising interest rates, American debt-ridden households will be in a cash flow crunch, and "the Chinese economy is suddenly drained of foreign cash," with unspecified geopolitical instability. Morgan Stanley chief economist Steven Roach in <#stdurl "www.morganstanley.com/GEFdata/digests/20050404-mon.html" "his weekly commentary"#> says that "A US-centric global economy continues to run on fumes." He points out that "lagging employment and real wage growth has been a hallmark of the first half of the 2000s in the developed world. Unemployment in Europe and Japan is hovering near-post-World War II highs. The US is in the midst of the weakest period of job creation in modern history -- its unemployment rate has been depressed by those fleeing the work force. Jobless recoveries have become the norms in most major segments of the developed world. And they persist to this very day." The picture that Roach and Stratfor are painting is of a hollow American economy, but also equally hollow Japanese and European economies. The only country that's actually producing real manufactured goods is China, which depends on America as a market, and also on Japan and Europe to a lesser extent. From the point of view of Generational Dynamics, America, Europe and Japan are all in generational crisis periods, facing the following problem: The Great Depression of the 1930s forced most organizations out of businesses, and their replacements were super-efficient, "lean and mean," with every employee doing a much needed job. Today, over 70 years later, all those businesses have themselves become increasingly bureaucratic and inefficient, bogged down by stale, mindless, uninspired executives managing a sluggish, rule-bound work force more concerned about work breaks than working. This is true for all countries that fought in WW II, but it's perhaps most apparent in parts of Europe where it's actually against the law for anyone to work more than 40 hours per week. The only way way to fix this problem, unfortunately, is a new "cleansing" Great Depression, which is what we've been predicting since 2002. This is based on a historical analysis of secular adjustments that come every 70 years or so (Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash). China is filling this gap, because it's a little bit behind America, Japan and Europe on the generational timeline. China is in a frenetic "generational unraveling" period, suffering from a heroin-like addiction to 20 years of 9% annual growth. When China has a recession, as everyone agrees it must, then China will move to a "generational crisis" period, as its economy starts collapse in the same way that has happened in America, Japan and Europe. Interestingly enough, Stephen Roach gives an incorrect explanation of the global economic problems. He blames on the Internet, and its ability to create a "global labor arbitrage" which, for the first time, makes it possible to outsource all kinds of activities, including "software programming, engineering, design, accounting, medical technology, legal and actuarial expertise, and financial analysis at the upper end of the value chain." However, this analysis doesn't stand up. Transportation and communications technology has been improving exponentially for centuries. The worldwide installation of international phone services in the 1950s-70s was just as significant then as the internet is today, but didn't cause the hollowed out economies we see today. If you want to see the real problem, look at <#stdurl "www.csmonitor.com/2005/0406/p01s02-usec.htm" "the article by Patrik Jonsson"#> in csmonitor.com today, entitled "As China sews, few US mills left." It points out that only 677,000 textile and apparel jobs remain in America, down from 1.6 million in 1994. These jobs disappeared because of inefficient American textile mills, most of which have now been converted or bulldozed into the ground. What do closing textile mills have to do with the Internet? Both Duarte and Roach point out that current conditions cannot continue much longer, and that a major correction is coming. From the point of view of Generational Dynamics, this correction will come in the form of a new Great Depression, with the same kind of bankruptcy, unemployment and homelessness as in the 30s. As Roach and Duarte point on, it's no longer a matter of "if." The only thing we don't know is "when," and that can't be too much longer. =eod =// &&2 e050405 Tony Blair schedules a new election for May 5 =data ww2010.weblog.y2005.e050405.head UK Prime Minister Tony Blair schedules a new election for May 5 =data ww2010.weblog.y2005.e050405.keys =data ww2010.weblog.y2005.e050405.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050405.date 05-Apr-05 =data ww2010.weblog.y2005.e050405.txt1 But pundits are saying that Iraq is not an issue. Could that be true? =data ww2010.weblog.y2005.e050405.txt2 Tony Blair could have selected any date before June 12, 2006 - five years after the last election, but he selected May 5. On Tuesday, he made a visit on Tuesday to Westminister Palace, to ask the Queen to dissolve Parliament, and the Queen graciously agreed. Next month's election will select all 646 Members of Parliament (MPs) in the House of Commons. The majority party (or coalition) will form a new government and select the Prime Minister, either Tony Blair or his replacement. What's interesting is that the pundits do not expect the Iraq war to be the major issue. The major issues are expected to be related to the National Health Service, immigration, crime, taxes, and whether to adopt the proposed European Union constitution and the euro currency. According to <#stdurl "news.bbc.co.uk/1/shared/vote2005/issues/html/grid.stm?s1=CON_UK&s2=LAB_UK&s3=LD_UK&x=9&y=11" "the BBC's election issues guide,"#> here are the top priorities of each of the three major parties:

Tony Blair's Labor Party: Strong economy, higher living standards; faster NHS treatment; better results at schools; tougher border protection; safer communities; more family leave, childcare.
Michael Howard's Conservative Party: Lower taxes through savings on bureaucracy; tougher school discipline and more school choice; cleaner hospitals and shorter waiting lists; immigration controls; more police.
Charles Kennedy's Liberal Democratic Party: Put patients not targets first; free personal care for elderly; scrap student tuition fees; smaller class sizes; 10,000 more police; higher pensions for over 75s; local income tax; 50% top tax rate.

Here are the three parties' positions on the Iraq war:

Labor: Stand by Iraq war - even if weapons intelligence was wrong, Saddam flouted UN resolutions; new powers for government to detain terror suspects at home; £3.7bn more on defence.
Conservative: Still back Iraq war but say Tony Blair lied over the intelligence; oppose house arrest and want wiretap evidence admitted; spend £2.7bn more on defence than Labour.
Liberal Democrats: Opposed Iraq war and demand Blair reveal when he promised to commit UK forces; would start phased withdrawal of troops with year-end deadline; want only judges to detain terror suspects.

According to <#stdurl news.bbc.co.uk/1/hi/uk_politics/vote_2005/frontpage/4413659.stm "early polls,"#> Labor and the Conservatives are tied at about 35%, and the Liberal Democrats are a distant third at 21%. Thus, if Labor or Conservatives win, as is overwhelmingly expected, the UK will continue to support the war in Iraq. In this sense, the UK election parallels our own November Presidential election. The John Kerry and George Bush had almost completely identical platform positions on Iraq, but Iraq was a major election issue nonetheless. Australia, America, UK President George Bush, Prime Minister Tony Blair and Australian Prime Minister John Howard were the three major leaders in launching the Iraq war in 2003. <#inc ww2010.weblog.ref e041009b "John Howard was decisively reelected"#> last year, This victory was a surprise because opposition leader Mark Latham has been highly critical of Australia's participation in the Iraq war, and indicated that if he won he would pull Australian troops out of Iraq. Thus, Blair's is the third reelection bid of the three leaders. If we can predict anything based on these last elections, it's probably this: That Iraq is going to be in important issue, and will have an important effect on the election, though we don't yet know what it will be. =eod =// &&2 e050401 French scandal over teaching 'La Marseillaise' in school. =data ww2010.weblog.y2005.e050401.head French scandal over teaching "La Marseillaise" in school. =data ww2010.weblog.y2005.e050401.keys =data ww2010.weblog.y2005.e050401.loc ww2010.weblog.log0504 =data ww2010.weblog.y2005.e050401.date 01-Apr-05 =data ww2010.weblog.y2005.e050401.txt1 Why is the French national anthem so much bloodier than the Star Spangled Banner? =data ww2010.weblog.y2005.e050401.txt2 It's one of the most familiar songs in the world: "Allons enfants de la patrie..." -- "Arise, patriotic children of France! The day of glory has arrived!" In case you don't remember the song, check out <#stdurl www.marseillaise.org/english/berlioz.html "this page from the site marseillaise.org"#> that gives you some MP3 files. Really, if you have an MP3 collection, don't miss out on this. And check out the rest of this web site as well. It's a song that dates back to 1792, and the ideals of liberty, brotherhood, and equality. And now, <#stdurl www.mg.co.za/articlePage.aspx?articleid=198497 "a new law"#> requires the French public schools to teach the song to students. And you may ask, What's wrong with that? Well, it's quite a bloody song. "The ferocious soldiers are coming to cut the throats of your sons and wives. March! And make their impure blood soak into the land!" Now, there's <#stdurl "www.lexpress.fr/info/france/dossier/educationnation/dossier.asp?ida=431886" "a huge debate"#> going on in France about the appropriateness of teaching words like this to small children. "I find it a little horrifying to hear toddlers howl La Marseillaise at the top of their lungs," says one opponent. "I don't see how we can teach them that we all have to live together, at the same time we talk about 'impure blood.'" But France is in a "generational crisis" period, just like America and every other country that fought in WW II, and countries are becoming more nationalistic, and their people are becoming more patriotic. In fact, France recently passed another law making it a crime to say something offensive about La Marseillaise. The song is as inspirational to Frenchmen as The Star Spangled Banner is to Americans, and in a generational crisis period, that's what's important. Indeed, if you play the MP3 file above, even YOU may be inspired by the stirring passage that ends it. The following is a fairly liberal translation that I feel captures the intensity of the French lyrics:

Arise you children of France
The day of glory has arrived!
The bloody flag of tyranny
Is being raised against us.
Their bloody flag is raised!
Listen to these ferocious soldiers
Howling in our fields.
They come to our homes
And cut the throats of our sons and wives.

To arms, citizens!
Form your battalions!
March! March!
Spill their impure blood
All over our soil!

And yet, the Star-Spangled Banner is much more "laid back." Here's the first stanza:

O say can you see, By the dawn's early light,
What so proudly we hail'd At the twilight's last gleaming,
Whose broad stripes and bright stars, Thro' the perilous fight,
O'er the ramparts we watch'd, Were so gallantly gleaming?
And the rocket's red glare, The bombs bursting in air
Gave proof thro' the night That our flag was still there. 

O say, does that star-spangled Banner yet wave
O'er the land of the free And the home of the brave.

Nothing about blood in there. Both of these national anthems were written at wartime -- La Marseillaise in 1792 during the French Revolution, and the Star-Spangled Banner in 1814 during the War of 1812. Why is the former song so much more warlike than the latter? Any popular song, especially a national anthem, is going to reflect the mood of the times, and the mood of the times is going to be affected by where the nation is on the generational timeline. In 1792, France was in a full-fledged crisis mood, filled with rage and a desire for retribution. They were just about to begin the genocidal Reign of Terror, which would execute more than 200,000 Frenchmen in the guillotine for crimes no more serious than being the acquaintance of an aristocrat. At that time, France had no national direction outside of survival. But in 1814, 30 years had passed since the end of America's last crisis war, the Revolutionary War. That was a generational awakening period, when Americans had no desire for blood or war, but were anxious that their young Republic might not survive. America did have a direction at that time. Perhaps the hopes and dreams of America in 1814 are best expressed by the fourth stanza of the Star-Spangled Banner:

O thus be it ever, When free men shall stand
Between their loved homes And the war's desolation;
Blest with vict'ry and peace, May the heav'n rescued land
Praise the Power that hath made And preserved us a nation!
Then conquer we must, When our cause it is just,
And this be our motto, "In God is our trust!" 

And the star-spangled banner In triumph shall wave
O'er the land of the free And the home of the brave.

Today, of course, France and America have something in common: We have no national direction any more except to survive. And Generational Dynamics predicts that this will result in a "clash of civilizations" world war. It will not be until around 2015 or 2020 that the world will start once again to have hopes and dreams and new direction. =eod =// &&2 e050331 Why is BBC so blantantly anti-American? - joke of the day =data ww2010.weblog.y2005.e050331.head Why is BBC so blantantly anti-American? =data ww2010.weblog.y2005.e050331.keys =data ww2010.weblog.y2005.e050331.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050331.date 31-Mar-05 =data ww2010.weblog.y2005.e050331.txt1 Did you know that there's a BBC News joke of the day? =data ww2010.weblog.y2005.e050331.txt2 Here's the joke from Tuesday:

A small aircraft is in trouble over North America. On board are five people: the pilot, the actor Robert De Niro, President George W Bush, a schoolboy and a very old man. Unfortunately, there are only four parachutes. The pilot selfishly grabs one and jumps out yelling that the plane is going to crash. Robert De Niro grabs the second parachute and yells that he has to star in a new movie so he needs to be saved. George Bush makes his move and leaps from the plane yelling that he has to run the country and save America from terrorists. The small boy and the old man look at each other. "You take the last parachute, son," the old man says. "You're young. I have lived a long life. Go on, jump." The schoolboy looks at him. "It's okay, pops," he says, "there's one parachute left for each of us. Looks like President Bush grabbed my schoolbag."

This joke appeared in <#stdurl www.bbc.co.uk/email "the daily e-mail message"#> from Gavin Esler on Newsnight. Now, this is a very funny joke, and if I saw this joke on an internet blog, or if I heard it from late night comedians Jay Leno or David Letterman, I would laugh and not think much about it. But this kind of Bush-bashing doesn't belong in an official BBC News publication. It's just as inappropriate as if it were a sexually explicit joke, or if the joke had racial overtones. <#inc ww2010.pic mirror.jpg right "" "Daily Mirror front page, November 4, 2004"#> I read a lot of news sources, and I learn to tune out the screeds on the right and left. I expect some sources to be anti-Bush or anti-American, and I expect others to be pro-Bush and pro-American. When I read the adjoining front page published by the Daily Mirror after the November election, I just chuckled. But the BBC is supposed to be a real news organization. It's funded by British taxpayers, and it's world-renowned as the greatest news organization in the world. I listen to the <#stdurl www.bbc.co.uk/worldservice/ "BBC World Service"#> a lot over the internet, and it amazes how anti-American they are. Yesterday, for example, their news bulletin identified Paul Wolfowitz as the "American right-wing nominee to the World Bank." Later in the same hour, they changed it to the "controversial nominee to the World Bank," which is a little better. Ironically, it's hard to see how they're hurting Bush or America. Maybe Gavin Esler's joke was supposed to make Bush look dumb, but Bush is known to have a strategy of letting his opponents think he's dumb so they'll underestimate him. In the end, all this stuff does is make the BBC look like a bunch of clowns. Instead of looking like the preeminent world news organization that it is, they look like squeaky, hysterical neophytes. This petulance by BBC reporters is extremely stupid. You'd think they'd have the sense to be a tiny bit more circumspect about their biases, but they seem to want to parade them for all to see. Just last year, in January, 2004, the BBC was reprimanded after a long investigation resulting in <#stdurl news.bbc.co.uk/1/hi/in_depth/uk/2003/david_kelly_inquiry/default.stm "the Hutton Report."#> The investigation found that the BBC had purposely lied in news stories in order to make Tony Blair's administration look bad in pursuing the Iraq War. The investigation was instigated because the false BBC reports caused a weapons expert, Dr. David Kelly, to commit suicide, rather than continue to be humiliated by the BBC news stories. The Hutton findings were extremely detrimental to the BBC, causing large budget reductions. Just last week, the BBC <#stdurl news.bbc.co.uk/1/hi/entertainment/tv_and_radio/4369221.stm "announced thousands of job layoffs"#> caused by the budget cutbacks. That's how stupid the BBC reporters are being in their display of blantant anti-American bias. It's very similar to the "forged document" incident at CBS News, that led to the disgraced resignation of Dan Rather. When <#inc ww2010.weblog.ref e040913b "I wrote about this last September,"#> I pointed out that anyone who's old enough to have used typewriters, especially IBM Selectric typewriters, in the 1970s would know without doubt that the documents had been forged. I said that the person who forged the documents has to be a 20-25 year old idiot. That's why I'm so amazed that, after all these months, CBS News has still not simply said that the documents were forged. It's stupid, and it makes CBS News look like a bunch of biased clowns. There is a generational lesson to be drawn from all this. In case you don't know it, the average viewer of the NBC, CBS and ABC network news shows is in his late 50s. In other words, the main viewers of network news shows are the people in the arrogant Baby Boomer generation. It's obvious that the network news shows will soon lose their audiences entirely. I would hate to see the same thing happen to the BBC. Incidentally, for those who are interested, I watch all the news networks, and I find that CNN leans to the left, and FOX News Channel leans to the right. MSNBC is closest to the center, though the quality of their news coverage suffered last year when Jerry Nachman died. As for the broadcast news network newscasts, they all lean to the left, and they're pretty hopelessly shallow =eod =// &&2 e050330 "Moral values" in Russia =data ww2010.weblog.y2005.e050330.head Now it's "moral values" in Russia =data ww2010.weblog.y2005.e050330.keys russia =data ww2010.weblog.y2005.e050330.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050330.date 30-Mar-05 =data ww2010.weblog.y2005.e050330.txt1 Anti-religious art is now banned in Russia, as exhibitor is convicted of "religious hatred" against Orthodox church. =data ww2010.weblog.y2005.e050330.txt2 <#stdurl www.rferl.org/featuresarticle/2005/3/B5246D28-59C0-4D99-9043-9832168181FA.html "The art exhibition, titled "Caution, Religion,""#> featured 42 works, including a painting of Jesus' face imposed on a Coca-Cola logo next to the words "This is My Blood." The exhibit was supposed to provoke discussion about the role of religion in modern society. Well, it certainly did that. <#inc ww2010.pic g050329.jpg right "" "Vandals sprayed the word 'blasphemy' behind this exhibit (Source: BBC)"#> The exhibit was quickly vandalized by a group calling it "blasphemous," but the vandals were cleared after intervention by the Russian Orthodox Church. And now, a Moscow court has tried Yuri Samodurov, the director of the Museum holding the exhibit, and found him guilty of "instigating religious and ethnic hatred." The Church welcomed the verdict, saying it would discourage future attempts to insult believers. This result has infuriated the art community and human rights activists, but it's the same thing that's been happening in America:

<#hreftext ww2010.i.election041103 ""Moral values" surged as an important issue"#> in the November presidential election.
Women are abandoning "women's lib" and feminism, returning to gender-specific roles, including staying home with the kids, <#inc ww2010.weblog.ref e041011 "as they did in the 1950s."#>
People are becoming more intolerant of open sexuality, as shown by the public reaction when <#inc ww2010.weblog.ref e040924 "Janet Jackson bared her breast in the 1994 Superbowl half-time show."#>
The political "gender gap" has reversed. Ten years ago, far more men than women ranked national defense as a top priority; after 9/11, more women than men did so.

It's not surprising that Russia and America are following parallel paths with regard to gender and family issues, and to "moral values." This is what always happens during a "generational crisis" period, such as is occurring now in both countries, as well as in all countries around the world that fought in WW II. Between crisis wars, nations move in the direction of individual rights; during crisis periods, nations move in the direction of supporting the nation at the expense of individual rights, and men and women assume traditional gender roles during those periods. Today, all the countries that fought in WW II are in a generational crisis period. Generational Dynamics predicts that we're quickly heading for a new "clash of civilizations" world war that will be worse than WW II. =eod =// &&2 e050327 Anti-secession law provokes massive Taiwan riots =data ww2010.weblog.y2005.e050327.head Massive Taiwan public demonstrations, the largest in history, protest China's Anti-Secession Law =data ww2010.weblog.y2005.e050327.keys =data ww2010.weblog.y2005.e050327.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050327.date 27-Mar-05 =data ww2010.weblog.y2005.e050327.txt1 Tensions between Taiwan and China skyrocketed on Saturday =data ww2010.weblog.y2005.e050327.txt2 as Taiwan President Chen Shui-bian led <#stdurl "money.cnn.com/cnn/2005/WORLD/asiapcf/03/26/taiwan.march/" "close to a million Taiwanese"#> (out of a total population of 23 million) chanting slogans like "Oppose War, Love Taiwan" and "Shame on China." Chen himself didn't speak at the rally, but sang a song -- "Taiwan is our baby." Just last month, <#inc ww2010.weblog.ref e050308 "Chen was acting increasingly conciliatory"#> towards China, with his "five noes" pledges speech, which include no declaration of Taiwan independence, no incorporation of "two states" into its constitution, no change of the so-called country's name and no referendum on Taiwan independence. However, that attempt at conciliation came to an end quickly. First, many of Chen's own political allies furiously called him a traitor, and several resignations resulted in a governmental crisis. And next, Beijing passed the Anti-Secession Law that made a mainland invasion of Taiwan legal in case Taiwan moved toward independence, infuriating even moderate Taiwanese. The most outspoken critics of China's policies were, not surprisingly, people in the younger generation who have no memory of the genocidal Chinese civil war that ended in 1949 with the establishment of the Taiwan government. Here are some of the remarks:

"In the past, I didn’t understand the emerging situation across the Taiwan Strait - it seems that war across the Taiwan Strait will happen at any time," said Sue Rong-yin, a 24-year-old pharmacology student who described herself as a staunch Nationalist Party supporter who had never joined a political demonstration until Saturday. <#stdurl "www.nytimes.com/2005/03/26/international/asia/26cnd-taiwan.html?hp" "(NY Times)"#> Another student in the crowd, Mickey Shi, a 23-year-old Nationalist Party supporter who also had never been to a political demonstration before, said that he thought his party’s leaders should have joined the march. "If you think you are a party of the Taiwan people, you should stand up for them," he said. (NY Times) "Taiwan is in such a sad position. It's like an international orphan. If we don't stand up and fight, no-one will fight for us," said 23-year-old student Jonathan Lin. "We should not be afraid of China. If they invade, I am willing to fight to the last moment." <#stdurl "www.swissinfo.org/sen/swissinfo.html?siteSect=143&sid=5632113" (Swissinfo)#> "China has never ruled Taiwan, not even for one day, yet they treat us as part of their territory," Huang Ming-yu, who took his wife and 2-year-old daughter to join the rally after a nearly 10 hour bus ride from the southern county of Pingtung. (Swissinfo)

These are the voices of a young generation with no fear of war. They're just like America's own new generation of soldiers going to fight wars in Iraq and Afghanistan, with no fear for themselves. (<#hreftext ww2010.i.taiwan040411 "Read this"#> for a description of Taiwan's political scene.) So many times since 9/11 I've heard pundits and analysts and television try to compare today's society to the "Vietnam era" of the 1960s, with the expectation that "students will start demonstrating against the war once the body bags start coming back." These pundits and analysts could not have been more out of touch. <#hreftext ww2010.i.sixties040501 "In the 1960s, America was in a "generational awakening" period,"#> characterized by a "generation gap" between the students and their WW II war hero parents. Those students now are the elder generation, many of whose members just can't understand why today's students aren't holding rebellions like the 60s. They don't understand that America today is in a "generational crisis" period, now that the generation of WW II war heroes is long gone. <#inc ww2010.pic taigraph.gif right "" "Taiwan poll results to question: "Do you feel Taiwanese, Chinese or both?" (Source: WSJ)"#> The same is true in Taiwan, as is shown dramatically by the poll results depicted in the adjoining graph, which shows the following:

A little less than half the population calls itself "both Taiwanese and Chinese" at all times.
Since 1996, the number of people calling themselves "Chinese" has been falling dramatically. This undoubtedly corresponds to the older generation of people who fought in the civil war. These people have been dying off steadily.
Since 1996, the number of people calling themselves "Taiwanese" has been rising dramatically. These are presumably from the younger generation, such as those quoted above. As students, these people were shocked and repulsed by the violence of Chinese officials in the 1989 Tiananmen Square massacre.

This kind of generational change is not just occurring in America and Taiwan; it's occurring in every country that fought in WW II. As these generational changes take place, the world heads towards a new war, a "clash of civilizations" world war that will be worse than WW II. In China, the younger generation is becoming just as intolerant as Taiwan's younger generation. But in China, the younger generation is less and less tolerant of Taiwan's separation from the mainland. Like their Taiwanese counterparts, they have no fear of war if that's what's necessary to settle the issue of Taiwan independence once and for all. "Facts have shown again that 'Taiwan independence' secessionist forces are the biggest threat to peace and stability in the Taiwan Straits," says one <#stdurl "news.xinhuanet.com/english/2005-03/27/content_2748106.htm" "Beijing commentary."#> "The [Anti-Secession Law] reflects the consistent stand of the motherland of exerting the utmost sincerity and efforts to achieve peaceful reunification. It also reflects the common will and firm determination of the 1.3 billion Chinese people, including people in Taiwan, to safeguard national sovereignty and territorial integrity and never tolerate 'Taiwan independence' secessionist activities." From the point of view of Generational Dynamics, everything is proceeding as predicted. There will be a renewal of the 1940s civil war with 100% certainty, and the time is approaching quickly. China itself has announced double-digit war budgets for each the past several years, and is believed to be <#inc ww2010.weblog.ref e050308 "building a navy of amphibious vehicles capable"#> of transporting an invading army to Taiwan. China is giving all the signs of preparing for a preemptive attack to reunite Taiwan with China, a war that will involve America. Generational Dynamics predicts that there will be major regional wars to reunite North and South Korea, to reunite Taiwan with China, and to give China and Korea revenge for Japan's actions in World War II. The statements we've seen recently have been getting increasingly ominous. China and North Korea are becoming increasingly militaristic, and are mobilizing for war. We can't predict when those wars will occur, but the kinds of statements we're hearing are typical of the things we would be hearing if these countries are planning a pre-emptive attack soon. =eod =// &&2 e050325 Motley Fool provides a bizarre analysis of price/earnings ratios =data ww2010.weblog.y2005.e050325.head Motley Fool provides a bizarre analysis of price/earnings ratios =data ww2010.weblog.y2005.e050325.keys =data ww2010.weblog.y2005.e050325.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050325.date 25-Mar-05 =data ww2010.weblog.y2005.e050325.txt1 I've been relentlessly critical of analysts, journalists and pundits who are brain-dead about price/earnings ratios. =data ww2010.weblog.y2005.e050325.txt2 The P/E ratio of a stock is the price of a share of stock divided by the company's earnings per share. Historically, P/E ratios average about 14. For the last ten years, the S&P 500 P/E index has consistently been in the 20-40 range, indicating that we're in a long-term bubble. This bubble will burst at some point when the right kind of triggering event occurs. This might happen next month, next year, or the year after, and it will result in a substantial stock market adjustment. (See <#hreftext ww2010.i.fed050324 "my new article on the Fed"#> for more information.) Analysts, journalists and pundits have been in a total state of denial about this, and do almost anything to mislead readers. In December, <#inc ww2010.weblog.ref e041206 "I wrote about a Wall Street Journal article,"#> where the reporter had computed the P/E ratio by dividing today's stock price with next year's inflated assumed earnings. This is almost a complete hoax, and shows how even Wall Street Journal reporters are pretty clueless about P/E ratios. Well, now I've seen a new bizarre twist. It appeared in an e-mail message that investment advisors <#stdurl fool.com "Motley Fool"#> sent to their mailing list. Here's the item:

Q. HOW CAN NOVICE INVESTORS TELL WHEN A STOCK IS OVERVALUED (AND THEREFORE SHOULD BE AVOIDED)? A. Experienced investors often crunch a lot of numbers, taking many factors into consideration. Novices can learn these skills, but understand that even complex discounted cash flow analysis calculations are still based on assumptions and estimates. Moreover, expert investors often disagree on the fair value of specific stocks. For beginners, one way to get an initial handle on a stock price's attractiveness is to compare its current price-to-earnings (P/E) ratio with its historical P/E range over the past five to 10 years. General Dynamics (NYSE: GD), for example, was recently trading with a P/E around 18. But a glance at its P/E's history shows that in the past decade, its average P/E has rarely topped 18 and is often in the mid-teens. This suggests that the stock may not be a bargain right now. Well first, I'm surprised when any investment advisor mentions P/E ratios, because using them means that you shouldn't buy any stocks at the present time. Investment advisors stand to lose their income if their clients don't buy stocks, so they tend to avoid telling their clients anything that might have any hint of bad news, especially P/E ratios. Well, the above little piece of advice is Motley Fool's bizarre way of avoiding giving bad advice. If they were telling the truth, they would have said this: General Dynamics was recently trading with a P/E around 18, which means it's overpriced like almost every other stock, so don't buy any of them. (Full disclosure: I work as a subcontractor to General Dynamics, which has no relationship whatsoever to Generational Dynamics.) Instead, they ask you to compare today's overpriced P/E to the stock's average P/E for the last ten years. Look, I don't know how else to put this, but this is about the dumbest thing I've ever heard. If this represents the quality of Motley Fool's advice, I'd recommend that you stay away from Motley Fool. They're true to their name; their advice is motley, and very foolish. Average P/E ratios skyrocketed in the late 1990s, to values close to 40. Tech stocks in particular often had P/E ratios in the 60s. These were the most overpriced stocks in an overpriced market, and these are the stocks that fell the hardest in the Nasdaq crash of 2000. So Motley Fool's advice is essentially to favor the stocks that were the most outrageously overpriced during the bubble, the companies that were even more poorly managed than average during the bubble. Motley Fool advises you to stay away from stocks from good solid companies like General Dynamics that steered a fairly reasonable course during the bubble. Obviously, this is just plain moronic, and it shows the quality of advice that we're seeing today. The correct advice is this: Stay away from all stocks, because almost all of them have been way overpriced for ten years now, and the stock market is due for a 50-75% correction. =eod =// &&2 e050324 The ghoulish news coverage of Terri Schiavo =data ww2010.weblog.y2005.e050324.head The ghoulish news coverage of Terri Schiavo =data ww2010.weblog.y2005.e050324.keys =data ww2010.weblog.y2005.e050324.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050324.date 24-Mar-05 =data ww2010.weblog.y2005.e050324.txt1 It reminds me of another ghoulish story -- Chandra Levy and Gary Condit. =data ww2010.weblog.y2005.e050324.txt2 <#inc ww2010.pic chandra.jpg right "" "Chandra Levy"#> On May 1, 2001, Washington DC intern Chandra Levy disappeared, and soon it was revealed that she was linked to married California congressman Gary Condit, who was immediately assumed by many to have murdered her. That summer it was almost impossible to get away from Condit. They had cameras following him to work, cameras following him home, cameras following him to the bathroom, waiting for him to "lose it" and admit that he had murdered Levy. There were hours and hours of Condit coverage every day on CNN, and on other channels as well. And it wasn't just Condit. We saw photos of Chandra Levy, stories about her life, her wishes, her hopes, her desires, her dreams. The ghoulish coverage went on and on. It would be a year later when her body was finally found, and Condit was completely exonerated, but we didn't know that at the time. Now, it's happening again with a different cast of characters. This time the poor girl is alive, but in a vegetative state in 1991, and the news shows bombard us with videos of her in bed, including an incredibly gross video of her wearing huge black ears, which I guess are supposed to be Mickey Mouse ears. And we're hearing all the side stories. There's the husband who still loves her, but has been living with someone else for ten years. There are the parents who love her, but who keep telling and showing us creepy things about her. The news is "All Schiavo all the time." When is the coverage all going to end? I suppose it'll end when Terri dies, but that could take a long time. When the Condit coverage was on, everyone was expecting Chandra's body to be found at any time, the mystery would be solved, and television news could turn to something else. That's not how it ended, of course. It was "All Condit, all the time," and it went on nonstop day after day, week after week, and month after month. It was kind of a lazy summer anyway, and there wasn't much news, so it seemed only natural to fill the hours of news with the summer ghost story of the lost girl, Chandra Levy. The minute by minute Condit coverage finally ended at 8:50 am ET on Tuesday, Sept. 11, with breaking news. =eod =// &&2 e050322 Condi Rice hints at sanctioning North Korea =data ww2010.weblog.y2005.e050322.head Condi Rice hints at sanctioning North Korea =data ww2010.weblog.y2005.e050322.keys =data ww2010.weblog.y2005.e050322.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050322.date 22-Mar-05 =data ww2010.weblog.y2005.e050322.txt1 She demands that North Korea return to the nuclear non-proliferation talks. =data ww2010.weblog.y2005.e050322.txt2 It isn't clear what Secretary of State Condoleezza Rice was threatening when she raised <#stdurl www.washingtonpost.com/wp-dyn/articles/A53646-2005Mar21.html "the prospect of using "other options in the international system""#> against North Korea if it refuses to rejoin the talks, but presumably the other options would include the horror of having the case turned over to the United Nations Security Council. (As usual, sorry for the sarcasm.) It's hard to see what the point of this threat is, for several reasons:

North Korea has been saying for three years now that any economic sanctions would be considered an act of war.
The U.N. Security Council is useless, and anything it wanted to do would be vetoed by China.
South Korea has actually been giving substantial aid to North Korea, in hopes of preventing a North Korean invasion.
North Korea has already said firmly it would not return to the talks, so returning to them would be an enormous humiliation. Rice's statement just adds to that.

The level of tension in the North Pacific has been increasing on an almost daily basis for the last few months, and Rice's statement continues that trend. Actually, everyone knows by this time that there's nothing to be done about North Korea's nuclear buildup, so Rice's statement is just plain desperate. North Korea's response was to announce that <#stdurl "www9.sbs.com.au/theworldnews/region.php?id=107728®ion=2" "it has increased its nuclear arsenal."#> "We have taken a serious measure by increasing nuclear arms in preparation for any invasions by enemies," said the North Koreans. "We've taken serious steps of boosting our nuclear arsenal and we are also prepared to mobilise all of our military force against any provocative moves by the enemy." Rice has been hoping that China would use its leverage with North Korea to pressure it to return to the talks, but <#stdurl "www.nytimes.com/2005/03/22/international/asia/22rice.html" "China has refused to do any such thing."#> And why would they? China itself is preparing for an inevitable war with America over Taiwan. Meanwhile, <#inc ww2010.weblog.ref e050318 "South Korea is becoming increasingly angry with Japan,"#> because of the dispute over those tiny islands, a dispute that brings back memories of Japan's invasion and colonization of Korea. Generational Dynamics predicts that North Korea will start a war to reunite South and North Korea under North Korean control, that China will start a war to return Taiwan to Chinese control, and that China and Korea will get revenge against Japan for the latter's actions prior to and during World War II. These wars could begin next week or next year, but they're coming with 100% certainty. =eod =// &&2 e050318b Stephen Roach says we've past economic "tipping point" =data ww2010.weblog.y2005.e050318b.head Stephen Roach says we've past the economic "tipping point" =data ww2010.weblog.y2005.e050318b.keys =data ww2010.weblog.y2005.e050318b.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050318b.date 18-Mar-05 =data ww2010.weblog.y2005.e050318b.txt1 Early in 1929, even the most astute analyst could not have predicted the precise day of the big crash, =data ww2010.weblog.y2005.e050318b.txt2 and frequent readers will note that I have never named the date of the start of the financial crisis we're rapidly approaching. But Morgan Stanley's chief economist, <#stdurl "www.morganstanley.com/GEFdata/digests/20050318-fri.html" "Stephen Roach says in his weekly commentary"#> today that,

"March 16, 2005, could end up in the running as a possible tipping point for America. Suddenly, the US has taken on a very different aura in an increasingly unbalanced world: The confluence of a record current account deficit, a disaster from General Motors, and yet another new high for oil prices all speak of an increasingly precarious role for the global hegemon. World financial markets have barely begun to sniff that out."

Read <#stdurl "www.morganstanley.com/GEFdata/digests/20050318-fri.html" "his column"#> for yourself if you want the details, but I agree with Roach that we're past the time when anything can be done. <#inc ww2010.pic bgross1g.gif right "" "Total credit market debt (Source: PIMCO)"#> American public debt has been growing exponentially since 1950, as the adjoining graph shows, and has recently accelerated so much that it can't be stopped. It's like a ball rolling downhill. At first it rolls slowly, and someone could easily stop it and even push it back up the hill. But after a while the ball gains so much energy, speed and momentum that it can no longer be stopped, and we've reached that point. I had to laugh earlier this week when the Senate defeated a proposal to reduce the Medicare budget by 1% in order to reduce the deficit. The proposal was defeated because some Senators said that poor people wouldn't get medical care. So if America doesn't have the will to cut 1% out of one spending program, then you can be sure that America doesn't have the will to make the 20%, 40% or 60% cuts in various programs that have to be made -- and will be made once the financial crisis begins, because at that time there will be no choice. This is all happening in the shadow of an increasingly stormy situation in the Northern Pacific, as China, North Korea and even South Korea are talking more and more in terms of war, with a new escalation in the rhetoric almost every day. I've always said that China and North Korea are planning preemptive wars of reunification (with Taiwan and South Korea, respectively), but I've always been vague about the date -- it might happen tomorrow, next month or next year. I've said the same thing about the financial crisis. That's why Stephen Roach is extraordinarily gutsy to name an actual date. On some date soon, there will be a financial tsunami and a war explosion, and there is no way now to stop either of those from happening, and in that sense we're past the tipping point already for both events. Stephen Roach makes one more point in his column that's worth repeating:

"[H]istory is replete with examples of leadership tests that pit a nation’s military prowess against its economic base.... Yale historian Paul Kennedy has long argued that great powers typically fail when military reach outstrips a nation’s economic strength. In that vein, there’s little doubt that America is extending its reach in this post-9/11 world. Wars in Afghanistan and Iraq were the opening salvos. The Bush Administration ... is upping the ante on its “transformational” projection of global power. In Paul Kennedy’s historical framework, America is extending its reach at precisely the moment when its economic power base is weakening -- a classic warning sign of the fall of a Great Power."

As usual, I completely disagree with the political interpretations of these things. America has been the "policemen of the world" since 1945, and has been taking on more and more responsibility since then. Just as it's too late now to reverse the economic overreaching, it's also too late now to reverse our military overreaching. These disasters have been in the cards for decades, and there's nothing that Bush administration could do to stop them even if it wanted to. Just as we can't pass a 1% reduction in Medicare, we can't also can't reduce our national arrogance about our military power. I gave a startling example of American arrogance earlier this week, referring to <#inc ww2010.weblog.ref e050314 "Fed Governor Ben Bernanke's statement"#> blaming America's astronomic credit imbalance on other countries for spending so little that they've created a "global savings glut." A lot of eyes should be rolling over that one. I see so many people on television who talk blithely about America's massive power and massive wealth. And this has nothing to do with politics - it's the same for both Republicans and Democrats. Like a teenager who believes that he's invulnerable and invincible, even when he drinks and drives and takes drugs, so the American public, led by the arrogant generation of Baby Boomers born after World War II, are convinced that we're invincible and invulnerable. But there are 6.5 billion people in the world, and only 280 million of them are Americans. The coming "clash of civilizations" world war is going to inflict the wrath of several billions of those people on America, and those who believe that we'll have an easy victory, including most of our journalists, politicians and pundits, are living totally in a fantasy. I must caution all my readers that Stephen Roach may well be right, and that you should be taking steps to protect yourself, your family and your nation. As I've said before, the world today is much worse than it was a year ago, and things are getting worse every day. The public debt situation and the level of world conflict grow, and more and more commentators are noticing it. We must come together as a nation to protect one another, because we are going to have no choice. =eod =// &&2 e050318 Korea - Japan relations nosedive over long-disputed islands =data ww2010.weblog.y2005.e050318.head Korea - Japan relations nosedive over long-disputed islands =data ww2010.weblog.y2005.e050318.keys =data ww2010.weblog.y2005.e050318.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050318.date 18-Mar-05 =data ww2010.weblog.y2005.e050318.txt1 2005 is supposed to be "Korea-Japan Friendship Year," =data ww2010.weblog.y2005.e050318.txt2 to mark the 40th anniversary of the normalization of diplomatic ties. However, 2005 is also the 100th anniversary of an event that's overshadowing everything else today: It was in 1905 that Japan invaded and colonized Korea. Japan retained control of Korea through WW II, and used Korean women as "comfort women" for Japanese soldiers during World War II. Bitter feelings are exploding to the surface in South Korea this week, after Japan moved to claim ownership of two small islands between the countries. Korea calls them the Dokdo islands, and Japan calls them the Takeshima islands. Japan took control of the islands in 1905, at the same time it invaded Korea. =inc ww2010.pic dokdo.gif right "" "Dokdo or Takeshima Islands" The South Korean government <#stdurl news.bbc.co.uk/2/hi/asia-pacific/4357183.stm "has warned Japan"#> not to pursue their claim to the islands. However, feelings expressed "on the street" are much stronger. Japanese living in Korea are feeling Korean anger and hostility, and are taking care not to aggravate their friends. At one Japanese school in Seoul, <#stdurl "www.koreaherald.co.kr/SITE/data/html_dir/2005/03/18/200503180027.asp" "children are being warned not to speak Japanese aloud in public."#> One <#stdurl www.hani.co.kr/section-001100000/2005/03/001100000200503180258001.html "Korean newspaper editorial"#> refers to "Korea's moral superiority" and says that

"Japan has been taking a rapid turn to the right in the meantime, and now there are clear signs of a trend towards ultranationalism and militarism. The various provocations and [reckless comments] have become more frequent."

This is just one more situation in the North Asian region that appears to become increasingly unstable almost every day. Earlier this week, China <#inc ww2010.weblog.ref e050309b "officially passed the anti-secession law,"#> approving a military invasion of Taiwan if Taiwan moves toward independence. This law has infuriated even the moderate Taiwanese, who see it as offensive. North Korea is still becoming increasingly bellicose, having said they have nuclear weapons and have no intention of returning to nuclear non-proliferation talks. North Korea mobilized for war against America last April, and on Thursday, North Korea said that <#stdurl "www.themoscowtimes.com/stories/2005/03/18/254.html" "the U.S. has already entered a "real war""#> phase by sending an aircraft carrier into the region. The United States "has always dispatched carrier flotilla to waters off a certain country before launching a war of aggression," according to the country's news agency. All of this is increasingly ominous. Every country always lays the groundwork for war by providing legal justifications. China has done that by passing the anti-secession law, and North Korea is doing that by accusing America of already having begun a war. Both countries are clearly preparing for preemptive war, with North Korea's preparations far more immediate. Generational Dynamics predicts that North Korea will start a war to reunite South and North Korea under North Korean control, that China will start a war to return Taiwan to Chinese control, and that China and Korea will get revenge against Japan for the latter's actions prior to and during World War II. These wars could begin next week or next year, but they're coming with 100% certainty. =eod =// &&2 e050316 Mideast political turmoil becomes increasingly volatile =data ww2010.weblog.y2005.e050316.head Mideast political turmoil becomes increasingly volatile =data ww2010.weblog.y2005.e050316.keys =data ww2010.weblog.y2005.e050316.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050316.date 16-Mar-05 =data ww2010.weblog.y2005.e050316.txt1 Think back six weeks to the euphoria following the Palestinian elections =data ww2010.weblog.y2005.e050316.txt2 that selected Abu Mazen Mahmoud Abbas as the new president of the Palestinian Organization formerly headed by the late Yasser Arafat. At that time, the path to peace seemed clear: Abbas would negotiate with Israel's Ariel Sharon on terms for peace, and for a Palestinian nation living side by side with Israel. =inc ww2010.bugcomment right In some ways, things are going well. The "temporary ceasefire" between Israelis and Palestinians has been holding reasonably well, if you don't count <#inc ww2010.weblog.ref e050226 "last month's suicide bombing"#> at a popular Tel Aviv karaoke nightclub. And the negotiations have been going pretty well, if you don't count the Sharon government's <#stdurl http://www.voanews.com/english/2005-03-14-voa33.cfm "decision to extend the barrier around Jerusalem"#> to include a large West Bank settlement. <#inc ww2010.pic mideast2.gif left "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> And a <#stdurl www.pcpsr.org/survey/polls/2005/p15epr.html "new poll by the respected Khalil Shikaki"#> says that something has changed: The Palestinian people are overwhelmingly rejecting suicide bombing as a strategy against Israel. And yet, the chaos in Mideast politics is growing, pushing the region in unpredictable directions. In Lebanon, hundreds of thousands of anti-government protestors in one day insist that Syria must leave; on another day, <#inc ww2010.weblog.ref e050309 "the Hezbollah militia sponsors a huge pro-Syrian rally"#> fueled by more by anti-Israeli sentiment than anything else. And what about Abbas and the Palestinian Authority? The future of both is coming increasingly into question as the increasingly popular Palestinian militia group <#stdurl "www.islamonline.org/English/News/2005-03/14/article04.shtml" "Hamas militia group will run"#> in the upcoming Palestinian legislative elections. So the Lebanese anti-Israeli militia group Hezbollah and the Palestinian anti-Israeli militia group Hamas are both poised to gain a great deal more political power than they had before. And when I say, "anti-Israeli," I mean that both groups have announced that they have no intention to honor the ceasefire any more than temporarily. So, we see a rising maelstrom of chaotic political events being drawn to a long-range trend, and Generational Dynamics predicts that the long-range trend is a major new Mideast war, replaying the genocidal war between Jews and Arabs in the 1940s. =eod =// &&2 e050314 Bernanke blames debt on "global savings glut" =data ww2010.weblog.y2005.e050314.head Fed Governor Ben Bernanke blames America's sky-high public debt on other nations =data ww2010.weblog.y2005.e050314.keys =data ww2010.weblog.y2005.e050314.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050314.date 14-Mar-05 =data ww2010.weblog.y2005.e050314.txt1 I'm normally wary of applying specific generational archetypes to individuals, but Bernanke is acting like a Baby Boomer. =data ww2010.weblog.y2005.e050314.txt2 As I've <#hreftext ww2010.i.greenspan050206 "frequently reported,"#> speeches by Fed Chairman Alan Greenspan have been getting increasingly alarming in the past year. At the beginning of 2004, he was congratulating himself that he'd saved America's economy from danger by his policy of near-zero interest rates. By mid-year, he was expressing concern about debt levels. And then in January of this year, he repudiated his own statements of the last eight years, and indicated that the economy was facing a global danger "without historical precedent." <#inc ww2010.pic bernanke.jpg right "" "Ben Bernanke"#> Ben Bernanke is Greenspan's colleague at the Fed, and is considered the most likely candidate to replace Greenspan as Chairman when he retires next year. Bernanke's statements in the last year have been getting, if anything increasingly sanguine. Last October, <#inc ww2010.weblog.ref e041010b "we were highly critical of Bernanke's statements"#> to the effect that the economy was being saved by Fed policy statements -- the mere publication of the Fed's view of the economy is keeping the economy under control. I considered, and still consider, this claim by Bernanke to be extremely bizarre because it completely ignores fundamentals. The economy is controlled by economic fundamentals, not by words published by the Fed, no matter how enlightened and sagacious those words might be. On Friday, March 11, Bernanke gave <#stdurl www.federalreserve.gov/boarddocs/speeches/2005/200503102/default.htm "a speech to the Virginia Association of Economics, Richmond, Virginia,"#> with the most bizarre claim of all: he's blaming America's huge public debt on a "global saving glut" in other countries:

What then accounts for the rapid increase in the U.S. current account deficit? My own preferred explanation focuses on what I see as the emergence of a global saving glut in the past eight to ten years. This saving glut is the result of a number of developments. [One] well-understood source of the saving glut is the strong saving motive of rich countries with aging populations, which must make provision for an impending sharp increase in the number of retirees relative to the number of workers. With slowly growing or declining workforces, as well as high capital-labor ratios, many advanced economies outside the United States also face an apparent dearth of domestic investment opportunities. As a consequence of high desired saving and the low prospective returns to domestic investment, the mature industrial economies as a group seek to run current account surpluses and thus to lend abroad. Now I won't, in fact, claim that Bernanke isn't technically incorrect. After all, if someone borrows money through a credit card, then you can say it's the "fault" of the credit card company for issuing the card. And if someone gets mugged while walking through New York's Central Park at 3 am, then the mugger can blame the guy who got mugged for doing something so stupid as walking through Central Park at 3 am. <#inc ww2010.pic bgross1g.gif right "" "Total credit market debt (Source: PIMCO)"#> But America's total public debt is astronomical, as the adjoining graph shows, and blaming it on nations issuing the credits is just a little too convenient. Let's face it: It's just plain bizarre, and it appears that Bernanke is in denial about what's really going on. I normally avoid applying specific generational archetype attributes to specific people, because the archetypes are generalizations that don't hold for every individual of a generation, but it seems compelling in this case, so I'm going to go out on a limb. Alan Greenspan, born in 1926, was in the generation that grew up during the Great Depression, and saw around all the horrors of bankruptcy, homelessless and starvation that the Depression caused. And this doesn't even mention the horrors of World War II. Ben Bernanke, born in 1953, is the Baby Boomer generation that grew up after WW II, and knew absolutely nothing of those horrors. To people in this generation, America had beaten the Depression and beaten the Nazis, and it had been easy, and there had never been any doubt about the result. The two generations represented by Greenspan and Bernanke, respectively, clashed in the massive riots and demonstrations caused by the "generation gap" of <#hreftext ww2010.i.sixties040501 "America in the 1960s."#> Greenspan's generation wanted to impose austere savings rules and fight Communism, to prevent any horrors like the Depression or WW II from every happening again. The kids in Bernanke's generation saw no need for austerity or for fighting Communism, and fought against it, forcing two Presidents (Lyndon Johnson and Richard Nixon) to leave office in disgrace. Today, the Boomer generational is viewed by many, especially the people in Generation X that followed the Boomers, as extremely arrogant. (Incidentally, I'm in the Boomer generation.) As I look at Bernanke's picture, shown above, from <#stdurl "www.princeton.edu/~bernanke/" "his Princeton University web site,"#> he gives me the appearance of nothing so much as a 1960's radical student, still rebelling against his parents. His words give the same impression. While the elder Greenspan is expressing caution and alarm, the younger Bernanke is making one bizarre, wild statement after another. The 1960's "generation gap" is alive and well at the Fed. Meanwhile, Morgan Stanley's chief economist Stephen Roach <#stdurl "www.smh.com.au/news/Business/Wall-Street-loses-its-nerve-shy-of-11000-mark/2005/03/13/1110649056103.html" "was quoted this weekend as saying"#> that the Fed's near-zero interest policy has simply shifted the stock market bubble into other assets:

"Unlike the excesses in equities five years ago, today's bubble is more of an interest-rate and currency phenomenon - complete with extraordinary compressions of interest-rate spreads in notoriously risky asset classes such as emerging-market debt, high-yield securities and a broad array of credit instruments. In my view, these bubbles are joined at the hip, with today's excesses very much an outgrowth of the post-equity-bubble defence tactics of America's Federal Reserve."

This precisely coincides with my view, as I've been expressing it on this web site. It's quite possible that Roach reached this view in the same way that I did, and it's possible that Greenspan has done the same. In 2002, when I first began to predict that we're in a 1930s style Great Depression, I believed that stock prices would continue to fall fairly steadily, from Dow 8000 to Dow 7000 and so forth, down to Dow 3000 or so. This would be generally similar to how stocks performed after the 1929 crash. Obviously that hasn't happened, but the underlying fundamentals haven't changed: Stocks are still overpriced by a factor of 2 or more, according to standard price/earnings ratio index values, and stocks have come nowhere near correcting the 1990s bubble. Thus, the final destination (Dow 3000) hasn't changed at all, but now it appears that we'll be taking a different route getting there. As <#inc ww2010.weblog.ref e050125 "I wrote a couple of months ago,"#> the scenario I now expect is the "tsunami scenario," where the market is overwhelmed by a full-fledged panic that crashes stocks in a day or two, too quickly for most investors to get out in time. The recent rise in stock prices to Dow 11000 is extremely ominous, because it means stocks are getting increasingly overpriced, while the underlying fundamentals remain unchanged. In other words, the higher stocks go, the farther the fall will be. That's what Stephen Roach is saying, and that may even be what Alan Greenspan is trying to say, but without saying too much. But there's still one person over at the Fed who believes that the old folks are crazy, that there's nothing to worry about, that words trump fundamentals, and that everyone else is to blame for any problems: That's the person who is currently most likely to replace Alan Greenspan as Fed Chairman, Fed Governor Ben Bernanke. =eod =// &&2 e050312 Tony Blair wins passage Prevention of Terrorism law =data ww2010.weblog.y2005.e050312.head Tony Blair wins passage of Britain's Prevention of Terrorism Law =data ww2010.weblog.y2005.e050312.keys =data ww2010.weblog.y2005.e050312.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050312.date 12-Mar-05 =data ww2010.weblog.y2005.e050312.txt1 Despite opponents' criticisms that the new law would be like America's Patriot Act, =data ww2010.weblog.y2005.e050312.txt2 the British Parliament passed a <#stdurl www.guardian.co.uk/worldlatest/story/0,1280,-4858707,00.html "new law targeted at Muslim extremists in Britain"#> The new law approves new government powers to order house arrest, impose curfews and electronic tagging of terror suspects without trial. The law also provides for new "control orders" that allow the government to ban terror suspects from meeting certain people or traveling and to restrict their access to the Internet or telephone. The bill was <#stdurl www.washingtonpost.com/wp-dyn/articles/A25146-2005Mar10.html "mired in bitter debate"#> for several days. Prime Minister Tony Blair said that national security must come before civil liberties considerations, and that the threat from Islamic extremists is unprecedented in its potential for harm. "There is one basic civil liberty, which is the right to life," he said. Opponents decried the threatened loss of civil liberties. "We insist that the decision to impose a control order be a judicial decision made in accordance with due process and with necessary safeguards against injustices," said a leading opponent. "It is the perception of injustice . . . which may inflame communities and increase the danger of creating more terrorists than we can control either by imprisonment or by these orders." The arguments mirrored the American debate over the Patriot Act, under which hundreds of Muslims were incarcerated after 9/11 for minor infractions of the law. We've seen similar debates around the world. <#inc ww2010.weblog.ref e040904 "Russian President Vladimir Putin"#> and <#inc ww2010.weblog.ref e050102 "Pakistan's President Pervez Musharraf"#> have both assumed extraordinary powers following terrorist attacks, with little opposition from the frightened members of the general public. In <#inc ww2010.weblog.ref e041214 "the Netherlands, the plan is to deport Muslims"#> who can't pass a citizenship exam, and other European countries are also considering laws restricting Muslims. This is typical of countries in a generational crisis period. A generational crisis period occurs roughly 60 years after the end of the previous crisis war (World War II in this case), when the generation of people who grew up during the crisis war all disappear (retire or die), all at the same time. During a generational awakening period, <#hreftext ww2010.i.sixties040501 "like America in the 1960s and 1970s,"#> the country moves in the direction of increased individual rights. During a crisis period, countries sacrifice individual rights in favor of national unity. We're at a unique time in history, when all the countries that fought in WW II are all entering generational crisis periods all at once, and all are increasingly passing laws emphasizing national unity over individual rights. Other countries have gone even farther. <#inc ww2010.weblog.ref e050304 "North Korea has been mobilizing for war since last April"#> to reunite North and South Korea under North Korean control, and has announced its intention to build nuclear missiles. <#inc ww2010.weblog.ref e050309b "China is rapidly building up its military capability"#> for a war to reunite Taiwan with mainland China. Generational Dynamics predicts that we're headed soon for a new "clash of civilizations" world war. In country after country, we're seeing generational changes that are triggering ancient historical forces to swell toward increased nationalism and national survival. As people's positions harden and the level of political conflict rises, war is the inevitable result. =eod =// &&2 e050311 Russian killing of Chechen rebel leader =data ww2010.weblog.y2005.e050311.head Chechnya: Russian killing of rebel leader returns world's focus back to Caucasus =data ww2010.weblog.y2005.e050311.keys russia, chechnya =data ww2010.weblog.y2005.e050311.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050311.date 11-Mar-05 =data ww2010.weblog.y2005.e050311.txt1 Terrorist Shamil Basayev may gain, as rebels select an obscure Islamic cleric =data ww2010.weblog.y2005.e050311.txt2 to be their new leader, after their former leader, <#stdurl www.iht.com/articles/2005/03/10/news/chech.html "Aslan Maskhadov,"#> was killed on Tuesday. <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus region - including North Ossetia and Chechnya"#> For several months, the world's attention has been elsewhere -- Lebanon, Korea, the tsunami, Darfur, and Michael Jackson. This killing has refocused the world's attention on the Caucasus region, with several troubled areas. Maskhadov was considered by many to be a moderate rebel leader in the ten-year-old Chechen war with Russia. Whenever American or European governments criticized Russian president Vladimir Putin for not negotiating with the Chechens, they meant negotiating with Maskhadov. Now, with Maskhadov gone, many commentators are saying that <#stdurl "www.zaman.com/?bl=international&alt=&trh=20050310&hn=17328" "any hopes for peace in Chechnya are gone with him."#> The Russians themselves are calling the killing a victory that will demoralize the terrorists. Very little is known about <#stdurl "www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/03/11/wchech11.xml&sSheet=/news/2005/03/11/ixworld.html" "Islamic cleric Abdul-Khalim Saidullayev,"#> who was selected as the new rebel leader. It's not even certain that he's a native Chechen, as some have claimed that he's from Saudi Arabia and a proponent of the radical Islamist Wahabbi sect. =inc ww2010.bugcomment left The main concern is that the change in leadership will give new power to terrorist Shamil Basayev, the Chechen terrorist who masterminded the September, 2004, massacre of 300 people, including 156 children, in the Beslan, North Ossetia, school massacre. The latter was only of three major terrorist acts in ten days, including the bombing of two airplanes in flight and a subway bombing in Moscow, all masterminded by Basayev. From the point of view of Generational Dynamics, the analysis of this situation is as follows: Generational Dynamics predicts that there'll be a new major regional war in the Caucasus region, replaying the genocidal wars that occurred in the 1920s-40s in that region. The killing of Maskhadov and the selection of Saidullayev are chaotic (in the sense of Chaos Theory) political events, two of millions that occur every day. Although the these millions of events have seeming random effects, there is a "attractor trend" that "attracts" random chaotic events to be more likely to follow the trend. The attractor trend, in this case, is the major war that we described in the last paragraph. Thus Generational Dynamics tells us that these events are move likely to move the region toward war rather than away from war. That result isn't a certainty, just as you might have a heat wave in November in New York City, where the "attractor trend" in that case is the cold temperaturs of winter. But the chances are that these events will be one new step toward the war. For people who are interested in more information about how this kind of forecasting works, read Chapter 4, "Chaos Theory and Generational Forecasting" in the <#hreftext ww2010.book2 "online text of my new book, Generational Dynamics for Historians."#> =eod =// &&2 e050309b US urges China to rethink passage of 'anti-secession' law =data ww2010.weblog.y2005.e050309b.head US urges China to rethink passage of "anti-secession" law =data ww2010.weblog.y2005.e050309b.keys =data ww2010.weblog.y2005.e050309b.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050309b.date 09-Mar-05 =data ww2010.weblog.y2005.e050309b.txt1 Taiwan threatens mass counter-demonstrations as China reveals more of the anti-secession law, =data ww2010.weblog.y2005.e050309b.txt2 scheduled for passage next week, targeted at preventing Taiwan from moving to independence. "If possibilities for a peaceful reunification should be completely exhausted, the state shall employ nonpeaceful means and other necessary measures to protect China's sovereignty and territorial integrity," <#stdurl www.guardian.co.uk/worldlatest/story/0,1280,-4849570,00.html "said one Beijing official."#> China's proposed anti-secession law authorizes China to attack if Taiwan moves toward formal independence, though the law doesn't specify what actions might invite an attack. The White House <#stdurl news.ft.com/cms/s/a64bbede-9041-11d9-9a51-00000e2511c8.html "condemned the law"#> and said it "[opposes] any attempts to determine the future of Taiwan by anything other than peaceful means." Taiwan's Mainland Affairs Council issued a written statement: "This law exposes China's plot to impose armed force to swallow up Taiwan. In essence, it has handed its military a blank check to unleash force against Taiwan." China has still not revealed all the details of the law, and the leaders of Taiwan's ruling party have vowed to <#stdurl "english.www.gov.tw/index.jsp?action=cna&cnaid=7494" "stage a mass demonstration"#> in any of three cases: if the anti-secession law imposes penalties on Taiwan people, or leads to changes to the status quo across the strait, or damages Taiwan's basic national interests. What strikes me about the situation is that there's something new every day that raises the level of confrontation in the region, because of something said or done by Taiwan, China, North Korea, South Korea or Japan. The phrase that I'm using more and more in these situations is that all of these countries are "looking for reasons to confront," while even a year or two ago, they were "looking for reasons to compromise." The reason that the anti-secession law is so significant is that it provides a legal framework for a Chinese attack on Taiwan. It's rare for a country, even with the most venal intentions, to go to war without providing a legal justification. Even Hitler did so. It's very unlikely that Beijing would consider such a law without planning to use it. Taiwan's separation from mainland China in the civil war that ended in 1949 has always been a major thorn in China's side, but the country has always been too weak to do anything about it, since Taiwan and American have a mutual security agreement. Now, China and Taiwan are entering a "generational crisis" period, thanks to the fact that the kids who grew up during the genocidal civil war of the 1940s are all disappearing (retiring or dying), all at once. With younger generations now in charge, there is little desire on either side (or on America's side, for that matter) to compromise. That's why these countries are "looking for reasons to confront," rather than compromise, and why the level of conflict is increasing. From the point of view of Generational Dynamics, both China and North Korea are mobilizing for war. Taiwan is not yet doing so, but the anti-secession law may provoke Taiwan into mobilizing for war as well. Generational Dynamics predicts that there will be major regional wars to reunite North and South Korea, to reunite Taiwan with China, and to give China and Korea revenge for Japan's actions in World War II. The statements we've seen recently have been getting increasingly ominous. China and North Korea are becoming increasingly militaristic, and are mobilizing for war. We can't predict when those wars will occur, but the kinds of statements we're hearing are typical of the things we would be hearing if these countries are planning a pre-emptive attack soon. =eod =// &&2 e050309 Hundreds of thousands rally in Lebanon, morphing freedom movement to anti-Israeli protest =data ww2010.weblog.y2005.e050309.head Hundreds of thousands rally in Lebanon, morphing freedom movement to anti-Israeli protest =data ww2010.weblog.y2005.e050309.keys =data ww2010.weblog.y2005.e050309.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050309.date 09-Mar-05 =data ww2010.weblog.y2005.e050309.txt1 Hezbollah militia sponsors pro-Syrian rally dwarfing the previous opposition protests =data ww2010.weblog.y2005.e050309.txt2 <#stdurl news.bbc.co.uk/2/hi/middle_east/4329201.stm "asking Syria to leave."#> Last week, thousands or tens of thousands of Lebanese demonstrated peacefully to demand Syria's withdrawal from Lebanon after 30 years. These demonstrations have united America, France, and even several Arab governments in calling for Syria's withdrawal by May. However, hundreds of thousands demonstrated in yesterday's pro-Syria rally. This significantly changes the picture. Generational Dynamics focuses on the beliefs and actions of large masses of people, not on the words or deeds of any politician or group of politicians. That's why the two demonstrations, taken together, represent a major turning point in Middle Eastern politics. <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> To sort out what's going on, we have to understand the adjoining map. Lebanon, Syria, Iraq and Turkey were formed after WW I from the remains of the (Muslim) Ottoman empire. Generational Dynamics predicts that countries fight new crisis wars in 70-90 year cycles, and these four countries have all had new crisis wars, including the Lebanon-Syrian war that began in 1976. That means that all four of these countries are in generational "awakening" periods, which are times of political conflict. But as I've been saying for two years, a new civil war in Iraq is impossible, and now I'm saying that a new Lebanon-Syria war is almost impossible. What is likely is large, mostly non-violent public demonstrations, such as happened <#hreftext ww2010.i.sixties040501 "in America in the sixties."#> So people who are talking about an "explosion of democracy" in these countries don't understand that the reason that countries are really seeing fairly standard awakening-type events. I just wish some of our politicians understood some of this. The situation is complicated because adjoining countries are on different timelines. Israel, Gaza, the West Bank, Jordan and Saudia Arabia are all in generational crisis periods, in most cases because of the genocidal Arab-Jewish war of the late 1940s. Generational Dynamics predicts that the 1940s genocidal war will be refought within the next few years, in a new Mideast war that will engulf the entire region. As with most Generational Dynamics predictions, we know the final destination, but we don't know what path we'll take to get there. It's possible that the situation in Lebanon will simply simmer down. But if the political situation keeps escalating, then it will have consequences. As <#inc ww2010.weblog.ref e050303 "we said last week,"#> the withdrawal of Syria from Lebanon is going to leave a political vacuum that may well suck in some of the crisis-level conflict from next door. This is not exactly a stretch. A lot of the car bombing and other insurgency in Iraq is directly related to the war-ready Palestinian terrorists in Jordan. Today's overwhelming public response to Hezbollah's call for support for Syria shows that the vacuum we discussed is going to be filled by Hezbollah, resulting in significant changes for the region. Hezbollah is a Shi'ite militia organization funded by Syria and Iran. Hezbollah Secretary-General Sayid Hassan Nasrallah has openly stated his belief in <#hreftext ww2010.i.oct10 "using suicide bombings against Israel."#> Nasrallah and Hezbollah became greatly respected in 2000 in the Arab world when their use of suicide attacks forced Israel to withdraw its forces unilaterally from southern Lebanon in May 2000. Nasrallah himself claims that this was a major victory against "the Zionists," has also said that he can use suicide attacks to force Israel to leave the entire region. Hezbollah's power and influence may expand considerably now, if Syria withdraws from Lebanon. The unexpectedly massive turnout yesterday can only be addictive Nasrallah, and lead him to believe that he can succeed in his program against Israel. Thus, we don't know the scenario that's going to lead us to a new Mideast war, but it may well be Hezbollah is going to play a much larger part than it has before. =eod =// &&2 e050308 China's 'Anti-Secession' law infuriates Taiwan =data ww2010.weblog.y2005.e050308.head China's new "anti-secession" law infuriates Taiwan =data ww2010.weblog.y2005.e050308.keys =data ww2010.weblog.y2005.e050308.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050308.date 08-Mar-05 =data ww2010.weblog.y2005.e050308.txt1 15,000 protest new law which provides legal justification for Chinese invasion of Taiwan =data ww2010.weblog.y2005.e050308.txt2 in case of any Taiwanese moves towards independence from China. The exact text of the new proposed law won't be revealed for a few days, but it "reflects the strong determination of the Chinese people to never allow secessionist forces working for Taiwan to separate Taiwan from China", according to <#stdurl "www.theaustralian.news.com.au/common/story_page/0,5744,12461789%255E2703,00.html" "a Saturday speech by Chinese Premier Wen Jiabao."#> At the same conference, Beijing denounced a Japan-US security agreement, say, "Any part of putting Taiwan directly or indirectly into the scope of Japan-US security co-operation constitutes an encroachment on China's sovereignty and an interference in China's internal affairs." This repeated a denunciation that <#inc ww2010.weblog.ref e050221 "we discussed several weeks ago,"#> of a joint statement by Japan and America that security in the Taiwan Strait is a "common strategic objective." And, as if that weren't enough, on Monday <#stdurl "www.theage.com.au/news/Breaking-News/China-warns-Australia-on-Taiwan-stance/2005/03/08/1110160778362.html" "China warned Australia not to honor"#> its 50-year old security agreement with America. These new warnings came just after China announced a <#stdurl "edition.cnn.com/2005/WORLD/asiapcf/03/03/china.defense.update.reut/" "12.6% military budget increase."#> China already has the world's largest standing army, the People's Liberation Army, with 2.3 million people. American intelligence agencies have revealed that China has been <#stdurl www.theage.com.au/articles/2005/03/06/1110044254427.html "rapidly building up its military assault forces,"#> including amphibious ships capable of ferrying troops and tanks from mainland China to Taiwan. Ironically, China's series of combative steps comes just after Taiwan President President Chen Shui-bian has been increasingly conciliatory. Just last week he <#stdurl "english.www.gov.tw/index.jsp?action=cna&cnaid=7343" "reaffirmed the "five noes":"#>

no declaration of independence,
no change of the nation's official name,
no inclusion of the "state-to-state" theory on cross-strait relations in the nation's Constitution,
no national referendum on changing the status of the island regarding unification or independence, and
no abolition of the National Unification Guidelines or National Unification Council.

However, many Taiwanese feel that Chen, who has long favored Taiwan independence, is exhibiting weakness in making such remarks. From the point of view of Generational Dynamics, China's moves constitute a continuing mobilization for war. Generational Dynamics predicts that the genocidal civil war that began in 1934 with Mao Zedong's "Long March," and ended when Mao's enemy, Chiang Kai-shek, fled with his troops to Taiwan, will be refought in the next few years, with a full-scale regional war that will involve America. Like North Korea, China has been making a series of provocative moves that are historically typical of countries that are planning preemptive wars. China's rapid military buildup is clearly in preparation for a war to reunite Taiwan with the mainland, and the anti-secession law is China's method for justifiying a preemptive attack legally. As in the case of North Korea, we know with near 100% certainty that a war is coming, but we don't know whether Beijing has a "date certain" for a preemptive attack, or is waiting for some other event to trigger an attack. =eod =// &&2 e050307 Generational Dynamics for Historians -- Chapter 7 has been rewritten =data ww2010.weblog.y2005.e050307.head Generational Dynamics for Historians -- Chapter 7 has been rewritten =data ww2010.weblog.y2005.e050307.keys =data ww2010.weblog.y2005.e050307.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050307.date 07-Mar-05 =data ww2010.weblog.y2005.e050307.txt1 The entire text of the current draft of the new book can be found online =data ww2010.weblog.y2005.e050307.txt2 at <#hreftext ww2010.book2 "http://www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.book2"#> The new chapter contains some brand new analysis for people interested in evolution. Darwin's theory of evolution describes how individuals use natural selection (survival of the fittest), but provides no clue whatsoever how intelligence evolved in human beings. The new chapter is an addition to the theory of evolution, and shows how Generational Dynamics provides an explanation for the evolution of intelligent species, and makes some speculation about intelligent beings elsewhere in the universe. =eod =// &&2 e050306 A little humor =data ww2010.weblog.y2005.e050306.head A little humor =data ww2010.weblog.y2005.e050306.keys =data ww2010.weblog.y2005.e050306.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050306.date 06-Mar-05 =data ww2010.weblog.y2005.e050306.txt1 Why is there a picture of a pretty girl in Taiwanese men's rooms? =data ww2010.weblog.y2005.e050306.txt2 Public toilets in Hsiulin Township, Taiwan, use <#stdurl www.taipeitimes.com/News/feat/photo/2005/03/04/2003156127 "this photo of Lin Chi-ling"#> over the urinals to get men to lean closer. <#inc ww2010.pic urinal.jpg center "" "Lin Chi-ling (Source: Taipei Times)"#> =eod =// &&2 e050304 North Korea announces that it will resume testing missiles =data ww2010.weblog.y2005.e050304.head North Korea announces that it will resume testing missiles =data ww2010.weblog.y2005.e050304.keys =data ww2010.weblog.y2005.e050304.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050304.date 04-Mar-05 =data ww2010.weblog.y2005.e050304.txt1 North Korea continues its war mobilization begun a year ago, =data ww2010.weblog.y2005.e050304.txt2 when <#inc ww2010.weblog.ref e050106 "President Kim Jong-il ordered the military,"#> the Workers' Party and all officials to assume wartime readiness. On Thursday, North Korea <#stdurl "www.reuters.com/newsArticle.jhtml?type=topNews&storyID=7797339" "that it was no longer bound by a 1999 moratorium"#> on missile testing, and that it would resume testing. This follows a February 10 announcement that it already had nuclear weapons and would pull out of the nuclear non-proliferation talks. For reasons I <#hreftext ww2010.i.korea050210 "explained at length"#> at the time, Kim appears to be preparing a pre-emptive war to reunite Korea by force under his control, and also avenge Japan's treatment of Korea prior to and during World War II. The announcement that it will resume missile testing further ratchets up the tension and brings Kim's war mobilization one step further. The only thing we don't know at this time is whether Kim has already chosen a "date certain" for the preemptive strike, or whether he's waiting for a triggering event or further preparation. We really have no way of knowing exactly what's going on in North Korea on a day to day basis, but yesterday we learned that next week's March 9 meeting of the the Supreme People's Assembly, the country's legislature, has been indefinitely postponed. What does that mean? It could mean that Kim has a cold. It could mean that the meeting hall is being repainted. Or it could be related to plans for a preemptive strike. We have no way of knowing what's going on in Kim's life. Generational Dynamics predicts that there will be major regional wars to reunite North and South Korea, to reunite Taiwan with China, and to give China and Korea revenge for Japan's actions in World War II. The statements we've seen recently have been getting increasingly ominous. China and North Korea are becoming increasingly militaristic, and are mobilizing for war. We can't predict when those wars will occur, but the kinds of statements we're hearing are typical of the things we would be hearing if these countries are planning a pre-emptive attack soon, with North Korea's statements considerably more ominous than China's. =eod =// &&2 e050303 Syria is suddenly the least popular country in the world =data ww2010.weblog.y2005.e050303.head Syria is suddenly the least popular country in the world =data ww2010.weblog.y2005.e050303.keys =data ww2010.weblog.y2005.e050303.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050303.date 03-Mar-05 =data ww2010.weblog.y2005.e050303.txt1 Even France and America are united in demanding Syria's pullout from Lebanon. =data ww2010.weblog.y2005.e050303.txt2 As tens of thousands of Lebanese demonstrate for free elections and force <#stdurl "www.guardian.co.uk/syria/story/0,13031,1428336,00.html" "the collapse of the Syrian-puppet government,"#> people around the world are asking themsleves, "Gee. What if George Bush was right, and invading Iraq does bring democracy to all the countries in the Mideast?" This speculation only increased when Egypt also moved in the direction of free elections. I wish it were so, but as readers of this web site know, Generational Dynamics predicts a major regional war between Arabs and Jews within the next few years, so the hoped-for string of Mideast democracies is not in the cards. Still, the rapidly swelling worldwide political pressure on Syria to withdraw from Lebanon is remarkable to behold, and it's useful to speculate on what will happen next. There are many things that Generational Dynamics can predict with a great deal of certainty, but whether or not Syria will withdraw from Lebanon is not one of them. This is a purely political and chaotic (in the sense of Chaos Theory) event, and day-to-day events could move the withdrawal decision in either direction. If you want to try to "read" Syria by comparing their situation to something in America, you might compare it to the 1962 Cuban missile crisis, when President Kennedy used political pressure to force Russia to remove missles from Cuba. The two events are comparable not because their details are the same, but because the two events occur at similar times in the generational cycle. They're both big international political crises occurring about one generation after the end of the previous crisis war: World War II for America, and the Syria-Lebanon war for Syria. Syrian President Bashar al-Assad will be like President Kennedy in the following sense: He will have vivid memories of the horrors of the crisis war, and will be seeking a political solution which will guarantee that no such war will ever happen again. Assad will be firm and resolute in his political decisions. He will avoid a war if possible, and if a war becomes necessary then the people will generally not support it -- at least not for long. Syria's increasing political isolation comes from a perfect storm of events. America has been accusing Syria of funding suicide bomber insurgents in Iraq, and funding anti-Israeli terrorism by the Hizbollah militia in Lebanon. But then <#inc ww2010.weblog.ref e050216 "beloved former prime minister Rafiq Hariri was killed"#> by a suicide bomber in Beirut two weeks ago, and the Lebanese people en masse blamed the bombing on Syria. Then there was the massive <#inc ww2010.weblog.ref e050226 "Tel Aviv nightclub bombing"#> last week, and Israel and a lot of other people are blaming Syria for that too. Assad undoubtedly blames the presence of Israel for the Lebanon/Syria crisis war. Syria's occupation of Lebanon thus fulfills several strategic goals: It keeps the conflict level between the two countries under control, and also puts pressure on Israel. Assad will thus go to the brink to avoid having to withdraw from Lebanon. This is going to infuriate the Lebanese people, and bring hostile international criticism on Syria. The real danger is that all this political turmoil will ignite violence in neighboring Palestine. The situation in Lebanon is very, very far from resolution. =eod =// &&2 e050301 Japan blocks most North Korean ships from its ports =data ww2010.weblog.y2005.e050301.head Japan blocks most North Korean ships from its ports =data ww2010.weblog.y2005.e050301.keys =data ww2010.weblog.y2005.e050301.loc ww2010.weblog.log0503 =data ww2010.weblog.y2005.e050301.date 01-Mar-05 =data ww2010.weblog.y2005.e050301.txt1 The Japanese, infuriated by North Korean abductions in the 1970s, =data ww2010.weblog.y2005.e050301.txt2 is <#stdurl "www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=7765182" "imposing a "pollution insurance,""#> effective today on large ships entering Japanese harbors. Although North Korea is not mentioned in the law, its clear intention is to impose economic sanctions on North Korea in retaliation for the of ten or twenty Japanese citizens in the 1970s. <#inc ww2010.pic yokota.jpg right "" " Megumi Yokota pictured before her abduction in 1977 (Source: BBC)"#> The Japanese are particularly infuriated over Megumi Yokota who was just 12 years old when the Koreans abducted her on a Japanese beach. Japan has demanded return of the abductees' remains, and tensions skyrocketed in December when <#inc ww2010.weblog.ref e041216 "DNA tests on the bones returned by Korea turned out to be two people,"#> neither of the Yokota. Two weeks ago, when North Korea pulled out of nuclear non-proliferation talks and announced that it already had nuclear weapons, tensions in the region began to increase on an almost daily basis, and it appeared that North Korean President Kim Jong-il was headed for pre-emptive war. Last week, it was revealed that Kim's reason for pulling out of the talks was <#inc ww2010.weblog.ref e050223 "Japan's insistence on discussing the abductions."#> North Korea relieved tensions a bit, by expressing a willingness to return to the talks on the condition that the abductions be excluded. North Korea has repeatedly said that any economic sanctions directed at them would be considered an "act of war," echoing Japanese actions in the 1930s, when <#inc ww2010.weblog.ref e041216 "economic sanctions against Japan eventually led to Japan's bombing of Pearl Harbor."#> But Japan has been applying sanctions without calling them sanctions. It has already shut down the practice of allowing Koreans living in Japan from <#stdurl "news.bbc.co.uk/2/hi/asia-pacific/4305551.stm" "sending cash back to their relatives in Korea."#> Generational Dynamics predicts that there will be major regional wars to reunite North and South Korea, to reunite Taiwan with China, and to give China and Korea revenge for Japan's actions in World War II. The statements we've seen recently have been getting increasingly ominous. China and North Korea are becoming increasingly militaristic, and are mobilizing for war. We can't predict when those wars will occur, but the kinds of statements we're hearing are typical of the things we would be hearing if these countries are planning a pre-emptive attack soon, with North Korea's statements considerably more ominous than China's. =eod =// &&2 e050228 Army's 'Future Combat System' calls for autonomous robot soldiers by 2014 =data ww2010.weblog.y2005.e050228.head Army's "Future Combat System" calls for autonomous robot soldiers by 2014 =data ww2010.weblog.y2005.e050228.keys =data ww2010.weblog.y2005.e050228.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050228.date 28-Feb-05 =data ww2010.weblog.y2005.e050228.txt1 What surprises me is that the technology is proceeding faster than I expected. =data ww2010.weblog.y2005.e050228.txt2 On Friday, the Army cut the ribbon on the huge <#stdurl "www4.army.mil/ocpa/read.php?story_id_key=6787" ""System of Systems integration laboratory""#> in Huntingdon Beach, Calif. This will be the simulation, testing and integration lab for the Future Combat Systems project, which will deploy, by 2014, <#stdurl www.iht.com/articles/2005/02/16/business/robot.html "a network of intelligent battlefield robots"#> which will replace the duties of ordinary soldiers, and will have the ability to kill. =inc ww2010.bugcomment left The robots will be in a variety of forms, including aircraft, ground vehicles, and special-purpose units that look like toy trucks. When I heard the BBC interview Pentagon spokesman Gordon Johnson about the project, I was struck by how careful Johnson was to be reassuring. These robots will NOT be making autonomous decisions to kill, he assured us. Human soldiers will be monitoring everything they do, and human soldiers will have to approve any killing. I was also struck by the fact that Johnson was talking about the initial deployment in 2014, and the interviewer failed to ask the obvious question: "What about 2020 or 2025?" By that time, these autonomous robots will be much more numerous and much more advanced, and it will not be desirable or even possible for a human being to approve each action. By that time, intelligent computer robots will be making decisions on their own. So what does this mean for the timeframe for the Singularity? Just as intelligent robots will be used as soldiers, they'll also have a wide variety of commercial uses, everything from robot plumbers to robot nursemaids, all making autonomous decisions. And those robots will soon be making all their decisions on their own as well. <#inc ww2010.pic singul1.gif right "" "The Singularity"#> Intelligent robots will also be doing scientific research to develop improved versions of themselves, so that intelligent robots will eventually be far more intelligent than human beings. The point in time where intelligent robots are essentially in control of their own destiny is called "The Singularity," because there will be a bend in the exponential growth technology curve, as shown in the adjoining graphic. There is no way to have any idea what's going to happen to the world after that point. Various analysts have estimated the date of the Singularity as occurring anywhere between 2015 and 2045. Early in 2004, <#hreftext ww2010.i.robot040709 "I estimated that the Singularity would occur in 2030."#> However, the aggressive schedule for the deployment of Future Combat Systems leads me to believe that technology is farther ahead than I had estimated. Furthermore, it now appears that <#stdurl http://www.research.ibm.com/bluegene/ "a supercomputer"#> will have the power of the human brain in the 2008 time frame, where I had estimated 2010-2012. These schedules lead me to wonder whether the Singularity will come a little earlier, perhaps around 2025. On the other hand, some of these schedules may turn out to be too optimistic, so I'm going to stick with the 2030 estimate for the time being. =eod =// &&2 e050227b Draft of new book, Generational Dynamics for Historians, can now be read online. =data ww2010.weblog.y2005.e050227b.head Draft of new book, "Generational Dynamics for Historians," can now be read online. =data ww2010.weblog.y2005.e050227b.keys =data ww2010.weblog.y2005.e050227b.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050227b.date 27-Feb-05 =data ww2010.weblog.y2005.e050227b.txt1 This book resolves the question of identifying patterns in history and extrapolating them forward. =data ww2010.weblog.y2005.e050227b.txt2 For the time being, a draft of the book can be read online at the following location: <#hreftext ww2010.book2 "http://www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.book2"#> The following text is from the preface:

To begin, I am among those who believe that the world is headed for a major "clash of civilizations" world war that will be worse than World War II. The probability of this occurring in the next few years is close to 100%, and if you count the wars in Afghanistan and Iraq, then it already began on 9/11. This conclusion comes from analyzing patterns of generational changes and "world wars" throughout millennia of history, and extrapolating those patterns forward. I believe that it's especially important for young people to understand this conclusion and the reasoning behind it. After all, they're the ones who will be most affected. There are many books that attempt to predict the future based on historical cycles in finance, war or politics. Every book we've seen, including the most modern and scholarly, makes substantial methodological errors that we've identified. The two biggest and most common mistakes are (1) failure to distinguish between chaotic (in the sense of Chaos Theory) events and ordered (cyclic or growth) trends; and (2) failure to distinguish between generational and non-generational trends. For example, many cyclic trends were identified in the 1920s, in the aftermath of the Great War (World War I). The best known of these are the 40-50 year cycles identified by Russian researcher Nikolai Kondratiev. It was a great theory until its predictions were contradicted by World War II. The theory of Kondratiev Cycles (K-cycles) is actually valid, but only if you understand that WW I was a generational war in Eastern Europe, and WW II was a generational war in Western Europe. Probably the most useful accomplishment of Generational Dynamics is to identify and sort out the different components and data series that go into establishing historical cycles and trends and technology growth cycles and trends, and then applying them to the current times. We believe that this work, which unifies numerous analytical and forecasting methodologies, almost completely solves the heretofore unresolved questions about finding patterns in history. =eod =// &&2 e050227 Israeli police are on maximum terror alert, as West Bank handover is suspended =data ww2010.weblog.y2005.e050227.head Israeli police are on maximum terror alert, as West Bank handover is suspended =data ww2010.weblog.y2005.e050227.keys =data ww2010.weblog.y2005.e050227.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050227.date 27-Feb-05 =data ww2010.weblog.y2005.e050227.txt1 Following the shock of Friday's unexpected suicide bombing at a Tel Aviv nightclub, =data ww2010.weblog.y2005.e050227.txt2 <#stdurl "www.jpost.com/servlet/Satellite?pagename=JPost/JPArticle/ShowFull&cid=1109301662303" "Israel's defense minister blamed Syria"#> for the bombings. On Sunday, Israeli police <#stdurl www.debka.com "went on maximum terror alert,"#> and is roadblocking town entries and patrolling crowded centers. There is a great deal of confusion over which of the Palestinian militia groups is responsible for the bombing. The Palestinian Authority has blamed the Lebanese militia group Hezbollah, which has repeatedly denied involvement. Israel is accusing Syria and Islamic Jihad, but Islamic Jihad itself is putting out mixed messages, with some leaders claiming credit and others denying involvement. This could indicate a split within Islamic Jihad itself, between those supporting Mahmoud Abbas and the peace plan versus those urging continued violence against Israel. Israel is suspending further handover of West Bank towns to the Palestinian Authority, until Abbas's response becomes clearer. Israel is demanding that Abbas dismantle the militia groups and confiscate their weapons. Generational Dynamics predicts that there will be a new regional war between Israelis and Palestinians. The exact path that this conflict will take is not known, but it's quite possible that it could begin with a violent conflict within the Palestinian community itself, and that the current split within Islamic Jihad is the first sign. Here's something else to watch for: There's going to be a big international conference in London this week, starting on Tuesday, with the purpose of advancing the Mideast peace process. Watch to see if there's any talk about forming an international force to help peacekeeping in Palestine. Any such peacekeeping force would even further inflame the region, and lead directly to the involvement of participating countries in the new Mideast war. =eod =// &&2 e050226 Tel Aviv nightclub shows where the Mideast peace plan is going =data ww2010.weblog.y2005.e050226.head Tel Aviv nightclub shows where the Mideast peace plan is going =data ww2010.weblog.y2005.e050226.keys =data ww2010.weblog.y2005.e050226.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050226.date 26-Feb-05 =data ww2010.weblog.y2005.e050226.txt1 Islamic Jihad never agreed to the Palestinian/Israeli ceasefire in the first place, =data ww2010.weblog.y2005.e050226.txt2 and yesterday they took credit for a suicide bombing at a popular Tel Aviv karaoke nightclub, killing four people and wounding dozens. One of Islamic Jihad's leaders denied involvement with the attack, and another group took credit. The second group, al-Aqsa Martyrs' Brigades, has also refused to participate in the ceasefire. This was the <#stdurl news.bbc.co.uk/1/hi/world/middle_east/4299609.stm "first terrorist suicide bombing in Israel"#> in several months, and it caught the country by surprise. The Mideast peace plan is now at a critical turning point. Israel and most Palestinian terrorist groups have been honoring the ceasefire. In particular, Israel has refrained from attacking militia leaders recently. Many Israelis are now openly saying the following: There haven't been any suicide bombings for several months because the Israeli army was going after the militia groups in their camps. As soon as the the army stopped attacking the militia, there's a new suicide attack. Palestinian Authority president Mahmoud Abbas is under enormous pressure today to bring the perpetrators to justice, and find a way to guarantee that there will be no more suicide bombings. Abbas has vowed to track down and punish the perpetrators, but let's face it: If they're not afraid to die, then they won't be afraid of Abbas' punishment. When Yasser Arafat was in charge, Israel would already have retaliated by now. Israeli is undoubtedly delaying a response to see what Abbas does. Militant groups like Islamic Jihad and al-Aqsa Martyrs' Brigades and Hizbollah have not agreed to the ceasefire or peace process, and are trying to trigger a war. They believe that a major war would result in Israel's extermination. Generational Dynamics predicts that the genocidal Jewish-Arab war of the 1940s will be re-fought in the next few years, as the people in the generation that grew up during the 1940s war all disappear (retired or died), all at the same time. As usual, Generational Dynamics tells us what the final destination is, but doesn't tell us how we'll get there, or how long it will take. Based on this trend information from Generational Dynamics, I predicted that <#hreftext ww2010.i.may01 "the Mideast Peace Roadmap would fail,"#> and that the most likely time frame for a Mideast war would be within two years after the disappearance of Yasser Arafat. As of today, I have absolutely no reason to modify either of these predictions. =eod =// &&2 e050225 United Nations revises population growth projections upward =data ww2010.weblog.y2005.e050225.head United Nations revises population growth projections upward =data ww2010.weblog.y2005.e050225.keys =data ww2010.weblog.y2005.e050225.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050225.date 25-Feb-05 =data ww2010.weblog.y2005.e050225.txt1 The world population will be 9.1 billion in 2050, not 8.9 billion, =data ww2010.weblog.y2005.e050225.txt2 which is what the U.N. predicted in 2002, according to a <#stdurl "www.unfpa.org/news/news.cfm?ID=568" "a press release from the United Nations Population Fund (UNFPA)."#> Almost all growth will take place in developing regions, where population is expected ro rise from today's 5.3 billion to 7.8 billion, according to the press release. By contrast, developed countries’ population will remain mostly unchanged, at 1.2 billion. =// A * (1+x)^N = B =// 1+x = (B/A)^(1/N) =// x = (B/A)^(1/N) = (7.8/5.3)^(1/45)-1 = 0.862401692 % =// x = (B/A)^(1/N) = (6453/6070)^(1/5)-1 = 1.23% (2000-2005) =// x = (B/A)^(1/N) = (9100/6453)^(1/45)-1 = 1.23% (2000-2005) Hmmmmmmm. That comes out to 0.76% per year increase in the world population for the next 45 years. That's 0.86% per year in the fastest growing regions, the developing regions. That's interesting. And that's 0.00% per year in the developed countries. Well, stop having sex folks -- the United Nations says that the population won't increase. Let's look at the population for the past 55 years, according to the <#stdurl "esa.un.org/unpp/index.asp" "United Nations database of population information:"#>

    Year  Population
    ----  ----------
    1950  2 518 629
    1955  2 755 823
    1960  3 021 475
    1965  3 334 874
    1970  3 692 492
    1975  4 068 109
    1980  4 434 682
    1985  4 830 979
    1990  5 263 593
    1995  5 674 380
    2000  6 070 581
    2005  6 453 628

For the past 55 years, population has been growing at the rate of 1.72% per year worldwide. In the Muslim countries, population has been growing at 2-4% per year. =inc ww2010.bugcomment right And some United Nations committee says that all of a sudden, people are going to have a lot fewer kids. Why? The slower growth rate projections are “contingent on ensuring that couples have access to family planning and that efforts to arrest the current spread of HIV/AIDS epidemic are successful in reducing its growth momentum”. So get this: If we go in and educate the Bangladeshi Muslims about birth control and family planning, then they'll all say, "Gosh, now we see what we're doing wrong, and we're gonna stop having so many kids," and their population growth rate will reduce from 2.07% a year to only 0.76% per year. And we'll send a few lecturers into the West Bank, and explain to the Palestinians how the birds and bees works, and they'll reduce their population growth from 3.3% per year to just 0.76% per year. And all these Muslim groups will just be thrilled at having someone come in and explain all this stuff about sex and family planning to them. Who knows? Maybe even I'll get a job going over there and explaining family planning to Palestinians, because otherwise how would they ever understand what's causing all those kids? Sorry for the sarcasm, but you really have to laugh at all this. What are these people at the United Nations thinking? Where do they get this stuff? I'm told that some people don't believe the solid analysis on this web site, but they do believe the stuff that the United Nations tells them. Well, whatever floats your boat. The United Nations projections are just plain silly. Maybe the world would be a better place if people who should know better, like the dum-dum politicians at the United Nations, would actually talk about the future more realistically. Maybe the way to reduce the number of wars is to stop making so many stupid airhead projections with no basis in reality. From the point of view of Generational Analysis, here's what's more likely to happen: We're headed for a major new <#hreftext ww2010.i.danger041120 ""clash of civilizations" world war"#> that will reduce the world population to around 3 billion. By 2030, the population will grow back to around 4 billion. That's around the time when <#hreftext ww2010.i.robot040709 "the Singularity"#> takes place, and super-intelligent computers will be running things. Nobody has any idea what's going to happen after that. In particular, no United Nations committee has the vaguest clue what the population of the world will be in 2050. =eod =// &&2 e050224 WHO makes strongest bird flu alert so far, warning of 'gravest possible danger' =data ww2010.weblog.y2005.e050224.head WHO makes strongest bird flu alert so far, warning of "gravest possible danger" =data ww2010.weblog.y2005.e050224.keys =data ww2010.weblog.y2005.e050224.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050224.date 24-Feb-05 =data ww2010.weblog.y2005.e050224.txt1 America and countries around the world are preparing for the worst-case scenario, =data ww2010.weblog.y2005.e050224.txt2 which would be a virulent avian flu (bird flu) epidemic spreading around the world. However, officials at the Atlanta-based <#stdurl www.cdc.gov "Centers for Disease Control"#> played down the immediate danger. "It [the virus] is still inefficient. It's not something we need to panic about. But it's giving us a big wake-up call," In the worst-case scenario, the virus would repeat the behavior of the 1918-19 Spanish Flu epidemic, which killed tens of millions of people. <#stdurl www.iht.com/articles/2005/02/23/news/flu.html "Speaking an an Avian Flu conference in Vietnam"#> yesterday, of the <#stdurl www.who.int "World Health Organization"#> emphasized that the avian flu is becoming increasingly widespread throughout a dozen countries in Asia and is mutating to infect additional species of animals, though it hasn't yet mutated to a form which permits one infected human to easily infect another human. "Avian influenza in Asia poses a very significant public health threat. The disease is prevalent in several countries. It has never been so widespread at any time during the last century." Other WHO officials urged preparation as quickly as possible. "The World is now in the gravest possible danger of a pandemic. We need to onsider urgent and decisive action in radical new ways." Researchers are <#stdurl "today.reuters.co.uk/News/newsArticle.aspx?type=healthNews&storyID=2005-02-23T131011Z_01_BKK209885_RTRIDST_0_HEALTH-BIRDFLU-DUCKS-DC.XML" "studying the role of ducks"#> in the continuing spread of avian flu. Ducks are carriers of the virus, but do not exhibit any symptoms, yet spread the virus through feces. Millions of ducks in Thailand and Vietnam are being slaughtered in the hope of preventing the further spread of the virus, but everyone knows that it's a hopeless battle, since it's impossible to exterminate all ducks carrying the virus. So far, 55 people, mostly in Vietnam, have become infected, and 42 of those have died, yielding a 76% death rate. A flu pandemic with that death rate would have a devastating effect on the world's population. What would make the virus mutate so that it could spread from one human to another? All that's required is for one human being to catch the avian flu from a duck or chicken, and then also get the ordinary human flu. The two strains of flu would exchange genes, making a mutation to a transmissible strain very likely. However, there is some good news: If such a gene exchange occurs, the resulting mutation may (or may not) have a much lower death rate than 76%. However, even a 10% death rate would be devastating. The common flu virus has a death rate of only about 2%. Of course, a flu epidemic has no relationship to Generational Dynamics, but it's relevant to this web site because it might trigger either a financial crisis or <#hreftext ww2010.i.china050116 "a civil war in China."#> =eod =// &&2 e050223 North Korea agrees to talk about talking =data ww2010.weblog.y2005.e050223.head North Korea agrees to talk about talking =data ww2010.weblog.y2005.e050223.keys =data ww2010.weblog.y2005.e050223.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050223.date 23-Feb-05 =data ww2010.weblog.y2005.e050223.txt1 After two weeks of increasing tensions, there was a little relief yesterday =data ww2010.weblog.y2005.e050223.txt2 as North Korean President Kim Jong-il said he'd resume the six-party nuclear non-proliferation talks "under certain conditions." What are those conditions? Well, according to a story a French news agency, the issue is <#stdurl "www.bakutoday.net/view.php?d=12531" "Japan's continued insistence on discussing the Korean abductions"#> of one or two dozen Japanese in the 1970s. As it turns out, this is an issue that <#inc ww2010.weblog.ref e041216 "I discussed in December."#> The Japanese are furious that North Korea hasn't resolved this issue, and have threatened to impose economic sanctions. North Korea has said that would be an act of war. It's hard to know what to make of this, but if it represents a true backdown in North Korea's position on the nuclear non-proliferation talks, then it means that the tension level in the Pacific is down, at least for the time being. =eod =// &&2 e050221 Increasingly militaristic China denounces US-Japan statement on Taiwan =data ww2010.weblog.y2005.e050221.head Increasingly militaristic China denounces US-Japan statement on Taiwan =data ww2010.weblog.y2005.e050221.keys =data ww2010.weblog.y2005.e050221.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050221.date 21-Feb-05 =data ww2010.weblog.y2005.e050221.txt1 China is militarily surpassing America in the Taiwan Straits, =data ww2010.weblog.y2005.e050221.txt2 according to CIA Director Porter Goss in Senate testimony earlier this week. This statement was just one of several by different countries that are raising tensions in the region. On Thursday, Feb 17, <#stdurl "cia.gov/cia/public_affairs/speeches/2004/Goss_testimony_02162005.html" "Porter Goss made the following statement"#> about China to the Senate:

In 2004, China increased its ballistic missile forces deployed across from Taiwan and rolled out several new submarines.
China continues to develop more robust, survivable nuclear-armed missiles as well as conventional capabilities for use in a regional conflict.

Goss' statement matches the increasingly held view that China is growing militarily stronger, and its military is becoming increasingly modern. Many analysts believe that China will become the world's greatest economic and military power within one or two decades. (This reminds me of a joke that we used to tell each other in college in the 1960s, when we were discussing what foreign languages to study: "The optimists learn Russian, and the pessimists learn Chinese.") Goss's statement drew an <#stdurl english.people.com.cn/200502/19/eng20050219_174010.html "immediate angry response from Beijing"#>:

"The U.S. warning has severely violated the conventions of international relations. The United States has severely interfered with Chinese internal affairs and sent a false signal to the advocates of Taiwan independence."

This statement angered the Taiwanese. According to <#stdurl "www.taipeitimes.com/News/edit/archives/2005/02/19/2003223697" "one editorial in the Taipai Times"#>:

China's pressing for `legal warfare'

Because of the escalating threat to Taiwan, Japan and America issued <#stdurl www.taipeitimes.com/News/front/archives/2005/02/19/2003223648 "a joint statement"#> saying that the two countries see security in the Taiwan Strait as a "common strategic objective." This statement, issued on Sunday morning, was a seeming minor change from previous military cooperation statements which called for Japan and America to work together in the "area surrounding Japan." Although this was just a minor change in wording, Beijing <#stdurl http://www.chinadaily.com.cn/english/doc/2005-02/21/content_417843.htm "strongly denounced"#> the statement, saying that it interfered with China's sovereignty, territorial integrity and state security. All of this is taking place just after North Korea has pulled out of the nuclear non-proliferation talks, declaring that it already had nuclear weapons. South Korea, America and Japan have been meeting with Chinese diplomats, hoping to get China to pressure North Korea to rejoin the talks. <#stdurl www.koreaherald.co.kr/SITE/data/html_dir/2005/02/19/200502190011.asp "China either can't or won't apply such pressure"#> to North Korea, On Saturday, China reported that <#stdurl www.guardian.co.uk/worldlatest/story/0,1280,-4812330,00.html "North Korea will not return to the talks"#> under any conditions. From the point of view of Generational Dynamics, these statements are all moving in the same direction -- toward a mobilization for war in the Pacific. Generational Dynamics predicts that there will be a war to reunite North and South Korea; it predicts that there will be a war to reunite Taiwan with China; and it predicts that China and Korea will engage in a war with Japan to obtain revenge for Japan's actions in World War II. However, Generational Dynamics does not tell us when these wars will occur, except that they'll occur in the next few years. The statements we've seen in the last week have been getting increasingly ominous. China and North Korea are becoming increasingly militaristic, and are mobilizing for war. Positions in all countries involved, including America, are increasingly hardening. We can't predict when those wars will occur, but the kinds of statements we're hearing are typical of the things we would be hearing if these countries are planning a pre-emptive attack soon, with North Korea's statements considerably more ominous than China's. The one thing that would defuse the situation right now is for North Korea to back down and agree to rejoin the nuclear non-proliferation talks. This would cost the country nothing, and would do a lot to calm many people's concerns about North Korea's intentions. If North Korea continues to firmly refuse to even talk, then we have to assume that the Koreans hold America and Japan in such contempt that they don't even feel the need to appease them by talking to them. If North Korea's President Kim Jong-il can't make even that small compromise, then we can only assume that Kim has already firmly decided on a definite course, and may even have set a "date certain" for preemptive attack. =eod =// &&2 e050220 'Mr. Bush, please don't bomb Apatzingan' =data ww2010.weblog.y2005.e050220.head "Mr. Bush, please don't bomb Apatzingan" =data ww2010.weblog.y2005.e050220.keys =data ww2010.weblog.y2005.e050220.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050220.date 20-Feb-05 =data ww2010.weblog.y2005.e050220.txt1 This story appeared just 11 days after the 9/11 attacks, =data ww2010.weblog.y2005.e050220.txt2 and I just came across the file where I'd saved it. I'm posting it to provide a little black humor. At that time, a somber President Bush had announced that we were mobilizing for war against the Taliban in Afghanistan. The following story appeared:

Bush, 'please don't bomb Apatzingan'

In a follow-up news story several days later, Mayor Castaneda said that he had sent the letter as a joke. =eod =// &&2 e050218 Ambassador to Japan calls North Korean threat 'deadly' =data ww2010.weblog.y2005.e050218.head Ambassador to Japan calls North Korean threat "deadly" =data ww2010.weblog.y2005.e050218.keys =data ww2010.weblog.y2005.e050218.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050218.date 18-Feb-05 =data ww2010.weblog.y2005.e050218.txt1 While the Bush administration has been trying to give a muted, non-alarming response to the North Korean threat, =data ww2010.weblog.y2005.e050218.txt2 James A. Baker Jr., the departing U.S. ambassador to Japan, says that <#stdurl www.iht.com/articles/2005/02/17/news/baker.html "North Korean's nuclear arsenal is a "deadly threat"."#> "The thing I worry most about with the North Koreans, to tell you the truth, is not that they're going to bomb Tokyo, but rather that they have a demonstrated record of selling any military device they own," Baker said. "A regime such as the North Koreans', with that record, selling nuclear material to all comers, is a very serious issue." Baker may not be worried about a North Korean threat to bomb Tokyo, but other people are worried about Pyongyang's potential threats. The South Koreans are pretty worried, for example. A South Korean newspaper reports that <#stdurl english.chosun.com/w21data/html/news/200502/200502150015.html "North Korea has developed an upgraded Scud missile"#> that is capable of hitting any target in Japan or South Korea with greater accuracy than was previously possible. South Korea has also been <#stdurl english.chosun.com/w21data/html/news/200502/200502170044.html "urging China to use economic sanctions"#> to pressure North Korea to return to the nuclear non-proliferation talks. North Korea pulled out of those talks recently, blaming "hostile" U.S. policies, and revealed that it already had nuclear weapons. Last year in April, the North Korean government ordered its military to mobilize for war with the U.S. In fact, there's been quite <#stdurl www.voanews.com/english/2005-02-17-voa10.cfm "flurry of diplomatic activity,"#> as alarmed U.S. and South Korean negotiators have been looking for any way possible to get North Korea to give up its nuclear program. From the point of view of Generational Dynamics, there will soon be a crisis war of Korean unification with near 100% certainty, and that Japan will be pulled into this war. My expectation is that China will be North Korea's ally in this war, especially because China is already expecting a war with America over Taiwan. The only difference between the two countries is timing. If China wants to hold back North Korea, it would not be a matter of principle, but only because China wants Korea to wait until China is ready. <#hreftext ww2010.i.korea050210 "As we've recently discussed,"#> North Korea's behavior since 2002, when it first announced its intention to develop nuclear technology, follows a typical historical pattern of countries that are about launch a pre-emptive crisis war. The only thing we don't know is President Kim Jong-il's timing. Meanwhile, if you're one of the people who love crazy dictators, consider applying for <#stdurl www.korea-dpr.com/ssi/kfa-form.htm "membership in the (North) Korean Friendship Association."#> You too can be recognized as an admirer of <#stdurl www.korea-dpr.com/pmenu.htm ""The Dear Leader," Kim Jong-Il."#> =eod =// &&2 e050217 Greenspan further repudiates earlier bubble reasoning =data ww2010.weblog.y2005.e050217.head Greenspan's testimony further repudiates his earlier stock bubble reasoning =data ww2010.weblog.y2005.e050217.keys =data ww2010.weblog.y2005.e050217.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050217.date 17-Feb-05 =data ww2010.weblog.y2005.e050217.txt1 The Fed Chairman has now completely reversed his previous position on the stock market bubble =data ww2010.weblog.y2005.e050217.txt2 of the 1990s. <#hreftext ww2010.i.greenspan050206 "As I've previously discussed,"#> Federal Reserve Chairman Alan Greenspan expressed a great deal of alarm about the world economy in a February 5 speech to the Advancing Enterprise 2005 Conference in London. At that time he said,

International trade has been expanding as a share of world gross domestic product since the end of World War II. Yet through 1995, the expansion was essentially a balanced grossing up of cross-border flows. Only in the past decade has expanding trade been associated with the emergence of ever-larger U.S. current account deficits, lesser deficits elsewhere, matched by a corresponding widening of external surpluses in a majority of trading nations. ... The dramatic advances over the past decade in virtually all measures of globalisation have resulted in an international economic environment with little relevant historical precedent.

This represented a very significant change in position by Greenspan, who has always treated the 1990s economy as self-contained and in control of its own future. In particular, his policy in the late 1990s of not treating the bubble but treating its aftermath was based on the belief that the Fed could have headed off the 1930s Great Depression by rapid interest rate cuts. This belief, whether correct or not, takes advantage of the fact that the 1930s economy was almost entirely self-contained within America. =inc ww2010.bugcomment right Greenspan's <#stdurl federalreserve.gov/boarddocs/hh/2005/february/testimony.htm "testimony to Congress on February 16"#> did not use the same alarming language, but continued his repudiation of his past position by emphasizing the international nature of the economy. Greenspan pointed to a special "conundrum": The flattening of the yield curve in bonds, <#hreftext ww2010.i.fed040921 "which I wrote about last year."#> The issue is that interest rates for long-term investments keep falling, while the interest rates for short term investments have been rising. Here's an update of the chart that I posted last year, showing the interest rates for short and long-term bonds for some recent dates:


Treasury Bond Yields

Date	3-month maturity	10-year maturity	Difference

May 11 '04	0.94%	4.74%	3.80%
June 11 '04	1.17%	4.79%	3.62%
Aug 21 '04	1.38%	4.23%	2.85%
Sept 21 '04	1.60%	4.03%	2.43%
Feb 17 '05	2.44%	4.17%	1.17%

As you can see, the short-term rates continue to increase significantly, and the long-term rates have been decreasing or remaining steady. Greenspan recounted several reasons that analysts have been giving for this phenomenon, including the business community's fear of recession and the heavy purchases of long-term bonds by foreign banks. Then he said:

But we should be careful in endeavoring to account for the decline in long-term interest rates by adverting to technical factors in the United States alone because yields and risk spreads have narrowed globally. The German ten-year Bund rate, for example, has declined from 4-1/4 percent last June to current levels of 3-1/2 percent. And spreads of yields on bonds issued by emerging-market nations over U.S. Treasury yields have declined to very low levels. There is little doubt that, with the breakup of the Soviet Union and the integration of China and India into the global trading market, more of the world's productive capacity is being tapped to satisfy global demands for goods and services. Concurrently, greater integration of financial markets has meant that a larger share of the world's pool of savings is being deployed in cross-border financing of investment. The favorable inflation performance across a broad range of countries resulting from enlarged global goods, services and financial capacity has doubtless contributed to expectations of lower inflation in the years ahead and lower inflation risk premiums. But none of this is new and hence it is difficult to attribute the long-term interest rate declines of the last nine months to glacially increasing globalization. For the moment, the broadly unanticipated behavior of world bond markets remains a conundrum. Bond price movements may be a short-term aberration, but it will be some time before we are able to better judge the forces underlying recent experience. There are two major points to get out of this:

Greenspan is thinking internationally much more than he used to.
He says he has no idea why long-term interest rates are falling.

In affirming his confusion, he's essentially repeating what he said last time: "The dramatic advances over the past decade in virtually all measures of globalisation have resulted in an international economic environment with little relevant historical precedent." As I've been saying since 2002, Generational Dynamics predicts that we're entering a new 1930s style Great Depression. Even to people without an understanding of Generational Dynamics, including Alan Greenspan, this prediction must be getting increasingly plausible. =eod =// &&2 e050216 Massive Beirut explosion killing Rafiq Hariri puts Lebanon into state of shock =data ww2010.weblog.y2005.e050216.head Massive Beirut explosion killing Rafiq Hariri puts Lebanon into state of shock =data ww2010.weblog.y2005.e050216.keys =data ww2010.weblog.y2005.e050216.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050216.date 16-Feb-05 =data ww2010.weblog.y2005.e050216.txt1 Washington recalls its ambassador to Syria, as both Lebanon and America blame Damascus =data ww2010.weblog.y2005.e050216.txt2 for the terrorist assassination of former Prime Minister Rafik Hariri. In following this story, I've been struck by the fact that everyone seems to have liked Hariri. He was charismatic, a successful businessmen, and one of the richest people in the world. Following the Syrian-Lebanese war that ended in 1989, Hariri brought in investors from around the world to rebuild the country, and especially its capital, Beirut. He was a moderate Sunni Muslim, committed to the peace plan between Israel and the Palestinians. He was welcome in the capitals of countries throughout the Mideast, and he was a good friend of French President Jacques Chirac. Hariri's fatal flaw may have been his firm opposition to Syria's continued political and military influence in Lebanon. Syrian forces continued to occupy Lebanon after the war, bringing a period of relative peace, but Hariri resigned as prime minister in October in order to join to the opposition to the Syrian-supported Lebanese government and to continued Syrian occupation. Shocked and infuriated Lebanese people are blaming Syria for the assassination of Hariri. Without directly blaming Syria, Washington <#stdurl www.state.gov/secretary/rm/2005/42325.htm "withdrew our Ambassador to Syria"#> today, indicating that Syria bares "some responsibility" for the assassination. Lebanese newspapers are expressing concern of a return to war with Syria, and some analysts are expressing concern that such a war could destabilize the entire region. =inc ww2010.h2 gd "The Generational Dynamics view" <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> As so often happens, Generational Dynamics provides important policy-related information that cannot be obtained any other way. Iraq, Syria and Lebanon are all on the World War I timeline, having all been part of the (Muslim) Ottoman Empire centered in Turkey. The Ottoman Empire was destroyed in the aftermath of WW I. As regular readers of this web site know, genocidal crisis wars tend to come in 70-90 year cycles, and all of these countries have had their next crisis wars. I've discussed the Iran/Iraq war of the 1980s many times on this web site. [Corrected 21-Nov-06] A crisis civil war began in Lebanon in 1975, and it became a war with Syria in 1976. Israel was an off-and-on participant, and the war reached an explosive climax in 1982 when Christian Arab forces, allied with Israel, <#stdurl en.wikipedia.org/wiki/Sabra_and_Shatila_massacre "massacred and butchered hundreds or perhaps thousands of Palestinian refugees in camps in Sabra and Shatila."#> When a crisis war ends, every society and nation goes through predictable phases. Immediately following the war, the nation goes through an austere period where the highest priority is to impose any rules or compromises necessary to prevent anything so horrible from happening again. Thus, Syria's decision after the war to maintain a military occupation of Lebanon as peacekeepers makes perfect sense. However, now that a generation has passed since the war, Lebanon is entering a "generational awakening" period. This is always an intensely political period, when college-age students who grew up after the war rebel against the austere rules and compromises imposed by their parents. For two years I've been saying that there can't be a crisis civil war in Iraq, despite frequent warnings by pundits that there may be one, and despite repeated attempts by terrorist leader Abu Musab al-Zarqawi to ignite one. For the same reason, there will not be a major new crisis war between Lebanon and Syria, just one generation after the end of the last one. However, if the people of Lebanon are so outraged by Syria's alleged complicity in the death of Hariri that a war becomes a matter of national honor, then a non-crisis war is possible. Crisis wars come "from the people," while non-crisis wars come from the politicians, and it's possible for Lebanese politicians to lead the country to a new war against Syria. Such a war would receive little support from the people, and would not last long. One thing seems certain: The political pressure on Syria to withdraw from Lebanon will now become overwhelming. France, America and the United Nations have demanded a withdrawal before the current crisis, and the Lebanese opposition to Syrian occupation has been growing as the generational awakening period has progressed, and now the political pressure may well be irrestible. =inc ww2010.h2 what "What happens next?" If Lebanon and Syria were on an island by themselves, there would really no major cause for concern, beyond the concern we all feel when people are killed in brief wars or low-level violence. But Syria and Lebanon are adjacent to Jordan, Palestine and Israel, regions on the World War II timeline, regions which have not yet had a new crisis war, and which are currently in a "generational crisis" period. There seems to be little doubt that death of Hariri is a major historical turning point in Lebanon, and will cause major changes of some kind. But whether there's a non-crisis war with Syria, or if the Syrian forces are made to withdraw, then a power vacuum will be created, providing a climate for Israelis, Palestinians and Jordanians to join in the violence. This could indeed be the trigger for a major regional Arab-Jewish crisis war. =inc ww2010.h2 who "Who's responsible?" Finally, who's responsible for the assassination of Hariri? Syria is suspected, but Syria strongly denies it, and so far there's no "smoking gun" evidence. If I had to take a guess, my vote would go to the same insurgents who have been setting off car bombs in Iraq. Abu Musab al-Zarqawi may be the mastermind, though he's issued a statement denying it. But there's a strong Baathist minority in Lebanon, and so the assassination may be linked to the same Baathist insurgents operating in Iraq. What would be the motive? What many people don't understand is that a significant minority of Islamists want a war. In the map of the Mideast shown above, there's a tiny red dot, representing Israel, in the middle of a vast sea of green, representing Islam. These Islamists have failed to trigger a major war in Iraq, and so Lebanon would be another logical place to take a shot. These Islamists believe that if they can trigger a major war, then that tiny red dot will be eliminated forever, and the old Ottoman Empire will be revived as a new Muslim empire centered in Jerusalem. =eod =// &&2 e050214 Neo-Nazis rally at Dresden firebombing commemoration =data ww2010.weblog.y2005.e050214.head Neo-Nazis rally at Dresden firebombing commemoration =data ww2010.weblog.y2005.e050214.keys =data ww2010.weblog.y2005.e050214.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050214.date 14-Feb-05 =data ww2010.weblog.y2005.e050214.txt1 A wrenchingly emotional ceremony brings back battles of WW II, Vietnam and today's war on terror. =data ww2010.weblog.y2005.e050214.txt2 In 1969, at the height of <#hreftext ww2010.i.sixties040501 "America's "days of rage" violent protests,"#> antiwar science fiction writer <#stdurl www.amazon.com/exec/obidos/ASIN/0440180295 "Kurt Vonnegut's book Slaughterhouse-Five"#> inflamed the protestors college students with this description of what he had seen when he was in Dresden, Germany, on February 13 and 14, 1945:

"You guys burnt the place down, turned it into a single column of flame. More people died there in the firestorm, in that one big flame, than died in Hiroshima and Nagasaki combined."

The two names mentioned by Vonnegut, Hiroshima and Nagasaki, are the two Japanese cities that were bombed a few weeks later with the first nuclear weapons. Many old emotions came back on Sunday, when American, British, French and Russian dignitaries attended a <#stdurl www.iht.com/articles/2005/02/13/news/dresden.html "60th anniversary commemoration of the Dresden bombing."#> The special bombs created fires that sucked the oxygen out of the city and used to create a fire explosion, while leaving behind carbon monoxide to suffocate the people. The city was flattened, and 200,000 people were killed. The purpose of the commemoration was to promote peace and reconciliation, but the peace was disturbed by 5,000 neo-Nazi protesters who compared the bombing of Baghdad last year to the bombing of Dresden in 1944. The two situations are totally incomparable, of course, but it shows the kind of polemics that accompanied the commemoration. The neo-Nazis, who frequently say that Germany should be for Germans (as opposed to Jews or Muslims), demanded an apology from Britain for the war crime in Dresden. <#inc ww2010.pic derbrand.jpg right "" "The Fire: Germany Under Bombardment, 1940-45"#> In fact, the whole Dresden issue came to life suddenly in 2002 when a new book hit the best seller lists in Germany: <#stdurl "http://www.amazon.de/exec/obidos/ASIN/3549071655" "Der Brand. Deutschland im Bombenkrieg 1940-1945"#> (The Fire: Germany Under Bombardment, 1940-45), by Jörg Friedrich. Since that time, the view that the Allied bombing of Dresden was an unnecessary act of revenge has been expressed more and more frequently. However, German Chancellor Gerhard Schroeder was having none of this. "Today we grieve for the victims of war and the Nazi reign of terror in Dresden, in Germany and in Europe. We will oppose in every way these attempts to reinterpret history. We will not allow cause and effect to be reversed." Outside of the hate groups that used the commemoration for polemics, everyone had regrets that the ceremony had to be held. The Germans regret their Nazi past, and the British regretted having killed so many civilians in an undefended German city that was one of the greatest cultural centers of northern Europe. Speakers defending the attack say that it wasn't revenge at all; Dresden had some munitions factories, and anyway, the way had to be cleared for the advancing Russian army. From the point of view of Generational Dynamics, the Dresden bombing was indeed revenge, and quite justified. That it was revenge can be seen from President Harry S. Truman's speech on August 9, 1945, just after we had dropped the first nuclear weapon on Japan: "Having found the bomb we have used it. We have used it against those who attacked us without warning at Pearl Harbor, against those who have starved and beaten American prisoners of war, against those who have abandoned all pretense of obeying international laws of warfare. We have used it in order to shorten the agony of war, in order to save the lives of thousands and thousands of young Americans. We shall continue to use it until we completely destroy Japan's power to make war. Only a Japanese surrender will stop us." The firebombing of Dresden was revenge just as much as the nuclear destruction of Hiroshima was. It was revenge for Hitler's attempt to exterminate the Jews, for Hitler's bombing of London and Coventry in England, killing thousands of civilians, and for slaughter of our soldiers on D-Day. That's what happens in crisis wars, and that's what makes crisis wars different from non-crisis wars. In non-crisis wars, like the Vietnam War, we worry about "collateral damage" and killing civilians, because non-crisis wars are political wars. But every nation has genocidal crisis wars and always has. Then what about Baghdad? If this is a new crisis period, then why didn't we firebomb Baghdad or Fallujah and simply destroy it. Isn't that what people do in a crisis war? No, not at the beginning. At the beginning of even a crisis war, it's often the case that the genocidal aspects are muted. But a crisis war is like a ball rolling down a hill. When the ball first starts rolling, it may go very slowly, and even stop and bounce around when it hits rocks and trees in its way. That's the time when everyone hopes that the war really isn't necessary, that if we don't any serious lines, then the other side will back down and say, "Heh heh, just kidding," and the war will end. But in a crisis period, the other side doesn't back down. In Vietnam we pulled out; we wouldn't have done that in a crisis period. In the 1990 Gulf War, we stopped short of getting Saddam; we would go after Saddam in a crisis war and, guess what? We did just that in 2003. So every time that the other side doesn't back down, that ball starts to roll down the hill a little bit faster. Once it's going fast enough, it can't be stopped. It rolls faster and faster until it reaches the bottom of the hill in an explosion of vengeance and genocide. That's our future, as we approach the "clash of civilizations" world war. Despite the neo-Nazi polemics, we were quite nice in Iraq. But we won't be so nice the next time. And by the time it's all over, when we've had tens of millions of American deaths and the total destruction of someo of allies, we'll see a desire for vengeance that no one will mistake. =eod =// &&2 e050211 Unlike North Korea, Iran's nuclear intentions are unclear =data ww2010.weblog.y2005.e050211.head Unlike North Korea, Iran's nuclear intentions are unclear =data ww2010.weblog.y2005.e050211.keys =data ww2010.weblog.y2005.e050211.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050211.date 11-Feb-05 =data ww2010.weblog.y2005.e050211.txt1 There are big differences in the reasons why Iran and North Korea want nuclear technology. =data ww2010.weblog.y2005.e050211.txt2 There's little doubt why North Korea is developing nuclear weapons. North Korea is mobilizing for war to force reunification of Korea under its control. Korea is in a generational crisis period, and is also likely to ally with China to attack Japan, <#hreftext ww2010.i.korea050210 "as we wrote yesterday."#> But even though Iran is in the same "Axis of Evil" as North Korea, Iran is actually like Iraq - in a generational awakening period, since only a single generation has passed since the genocidal Iran/Iraq war of the 1980s. Never in history has any country every initiated a new crisis war less than 40 years after the previous one ended. Thus, Iran's goals are more political than belligerent, at least for the time being. Iran knows that with American forces right next door in Iraq, American would not hesitate a second to use force to prevent Iran from developing a nuclear weapon. But Iran also knows that it can gain a great deal of political leverage if it can add nuclear weapons to its arsenal, even if, unlike in North Korea, there's no immediate plan to use them. That's not to say that Iran never would use them. If, as expected, the Palestine region erupts into a major regional war between Jews and Arabs, then Iran will readily use any weapons it has on Israel. But without that kind of provocation, Iran will use its weapons to gain political hegemony only, and leave the preemptive nuclear wars to North Korea. =eod =// &&2 e050209 Comments and questions from readers =data ww2010.weblog.y2005.e050209.head Comments and questions from readers =data ww2010.weblog.y2005.e050209.keys =data ww2010.weblog.y2005.e050209.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050209.date 09-Feb-05 =data ww2010.weblog.y2005.e050209.txt1 Palestinian peace, war in Iceland, are among the topics that readers have asked me about in the last few weeks. =data ww2010.weblog.y2005.e050209.txt2 =inc ww2010.h2 palpeace "Palestinean Peace?"

Many people predicted that Yasser Arafat's death could lead to peace between Israel and Palestine, while you've consistently predicted a major Mideast war, Now that Abu Mazen Mahmoud Abbas is Palestinian President, the two sides are moving towards peace.

I agree that Abbas is doing what he promised to do, and that things seem so hopeful in Palestine that it's hard to imagine trouble ahead. It almost looks like I'm mistaken, doesn't it? But it's like being in the middle of a heat wave in November, where you're tempted to believe that you'll be skipping winter this year. But winter comes anyway. Let's watch what happens in the next few months. By the fall, we'll know if the "right of return" issue is being resolved, for example, and whether the Jewish settlers in Gaza are willing leave their homes. Militia groups Hamas and Hizbollah have not agreed to more than a temporary ceasefire. The prediction of a major Mideast war is near 100% certain, and the only reason it isn't 100% is because the sun might explode in the meantime. While I'm answering this, let me give one dark scenario that some will consider the most cynical possible. One of the common characteristics of a crisis war is that it's frequently preceded by a secret mobilization (like Hitler's promise of "peace in our time" while he was secretly mobilizing for WW II). The dark scenario is that Hamas or Hizbollah are going along with the cease fire to gain time and to gain concessions from Israel, especially the release of former terrorists from prison, and that they're secretly mobilizing for future attacks on Israel.

=inc ww2010.h2 iceland "War in Iceland and Canada?"

I really enjoy your site and methodology. I have one question though, how do you account for countries that never seem to go to war. Like Iceland for example, or maybe even Canada. How does your theory apply to these types of countries?

Both Iceland and Canada are on the World War II timeline, and both fought in WW II. Iceland was essentially part of Denmark in 1940, when German forces overran Denmark, meeting no more than token resistance. First British and then American forces occupied Iceland, to prevent German occupation. Thus, Iceland did participate in WW II. Canada was certainly heavily involved in WW II, so they certainly have been to war. One thing to watch in Canada in the next few months and years is that if England and France become increasingly hostile to one another, then that should be reflected within Canada itself, in the relation between Quebec and the rest of Canada.

=inc ww2010.h2 social "Social Security"

Q:	What's your position on the current Social Security battle being fought in Congress?
A:	It's irrelevant. The upcoming "clash of civilizations" world war will cause enough deaths that the demographics of Social Security will be completely changed.

=inc ww2010.h2 rss "RSS News Feeds"

Q:	Do you have any plans for an RSS feed of your articles/blogs? Yours is the one site that I still can't get with my aggregator.
A:	There's now an RSS/XML News Feed for the Web Log at: www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.weblog.rss A news feed for the articles will be coming soon.

=eod =// &&2 e050205 Fewer people are working, but the unemployment rate went down anyway in January. =data ww2010.weblog.y2005.e050205.head Fewer people are working, but the unemployment rate went down anyway in January. =data ww2010.weblog.y2005.e050205.keys =data ww2010.weblog.y2005.e050205.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050205.date 05-Feb-05 =data ww2010.weblog.y2005.e050205.txt1 Unemployment fell to 5.2% from 5.4% in January, =data ww2010.weblog.y2005.e050205.txt2 even though <#stdurl "www.reuters.com/financeNewsArticle.jhtml?type=businessNews&storyID=7545622" "far fewer jobs were created last month"#> than analysts had predicted. The reason is that the number of discouraged unemployed people no longer looking for work has been rising substantially. Such people are not counted by unemployment surveys, resulting in the fall in the unemployment rate. Analysts' comments put the best possible face on it. The jobs report <#stdurl "quote.bloomberg.com/apps/news?pid=10000006&sid=a7HckywwElJg&refer=home" ""is not a sign of weakness,"#> the economy continues to create jobs," according to Richard Yamarone, chief economist for Argus Research Corp. in New York. But those of us with memories will recall that this situation has recurred frequently for two years now. Analysts predict explosive job growth month after month, and they're disappointed almost every time. If the economy were really growing as vibrantly as analysts say, then job growth would be much greater. We've made a similar point frequently about the rate of inflation. <#inc ww2010.weblog.ref e050202 "as we've pointed out,"#> analysts talk about nothing else but the dangers of inflation, and they would be right if these were ordinary times. But we're in a generational crisis period, entering a 1930s style Great Depression, and so the consumer and producer prices have been extremely low when they should be skyrocketing. A recent article entitled, <#hreftext ww2010.i.greenspan050206 ""Alan Greenspan warns that global economic dangers are without historical precedent,""#> describes how Alan Greenspan reversed himself in a speech he made in London on Friday. A year ago, Greenspan was congratulating himself for avoiding a stock market crash after the 1990s bubble. But in the speech on Friday, he essentially reversed himself and admitted that he's been mistaken for the past ten years. He came very close to saying that a crash is inevitable. Something could trigger it next month or next year, but it's definitely coming. =eod =// &&2 e050203 Europe is stunned by dramatic rise in German unemployment =data ww2010.weblog.y2005.e050203.head Europe is stunned by dramatic rise in German unemployment =data ww2010.weblog.y2005.e050203.keys =data ww2010.weblog.y2005.e050203.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050203.date 03-Feb-05 =data ww2010.weblog.y2005.e050203.txt1 With high employment throughout euroland, the EU is making a major change in economic direction. =data ww2010.weblog.y2005.e050203.txt2 Germany received a harsh reminder of its Nazi past with the announcement that <#stdurl news.bbc.co.uk/2/hi/business/4228849.stm "the January jobless rate was 12.1%,"#> the highest since 1933. That's when severe financial hardship caused the German people to blame their troubles on France, England, America and the Jews. leading to the rise of Hitler. I've frequently written on this web site about how American businesses have become increasingly bureaucratic and inefficient since the 1930s Great Depression, and how this situation will only be corrected by a new Great Depression. What I haven't frequently mentioned is that Europe is on the same generational timeline as America, and is facing exactly the same reality. In fact, European businesses are even more inefficient than America's, thanks to onerous business regulations throughout Europe that mandate large benefits and long vacations. In some cases, they even make it illegal for a citizen to choose to work beyond the normal work day. But now with the unemployment rate at 8.9% for all of euroland, and excpected to increase still further, alarm bells are going off in the Brussels headquarters of the European Union. The shocked EU politicians <#stdurl www.guardian.co.uk/eu/story/0,7369,1404270,00.html "have now announced the abandonment of the "Lisbon strategy""#> of 2000, which set the goal of the making the EU the "most dynamic economy in the world," ahead of America's. They will immediately work to pass new laws to cut back on regulations and other red tape that affects business. Unfortunately, no such legislative program can affect the results of the generational changes taking place. As aging businesses in America and Europe become increasingly bureaucratic and inefficient, they're making products that don't interest younger generations at high prices, or sometimes at any price. This change will continue to force prices down, and turn inflation into deflation. The reason that America and Europe are both moving in this direction at the same time is because we're at a unique time in history, about 60 years after the end of World War II, when every country is experiencing the same generational change at the same time: The people in the generation that lived through the Great Depression and then fought in WW II are all disappearing (retiring or dying) all at once, and are being replaced by the people in the generation born after WW II. Although German authorities today downplayed the connection between today's unemployment rate increase and the discontents of the Nazi era, the fact is that severe economic problems are historically one of the main generators of public attitudes leading to war. Just as Germans blamed the Jews in WW II, Europeans today are increasingly blaming Muslim immigrants for today's economic problems. Generational Dynamics predicts that there will be a new major European war, just as there have been European wars for a millennium or more at regular intervals. =eod =// &&2 e050202 Fed expected to raise interest rates today =data ww2010.weblog.y2005.e050202.head Fed expected to raise interest rates today =data ww2010.weblog.y2005.e050202.keys =data ww2010.weblog.y2005.e050202.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050202.date 02-Feb-05 =data ww2010.weblog.y2005.e050202.txt1 The Fed is saying that inflation "can be contained," but the danger is in the other direction. =data ww2010.weblog.y2005.e050202.txt2 On January 20, the Wall Street Journal headline said, <#stdurl "http://online.wsj.com/article/0,,SB110614127875630044,00.html" " CPI Rose at Fast Clip, Erasing Many Pay Gains."#> The next day, Jeffrey Lacker, one of Alan Greenspan's colleagues at the Federal Reserve, said that <#stdurl "www.reuters.com/newsArticle.jhtml?type=domesticNews&storyID=7396759" "inflation was still a danger,"#> but that the Fed could contain it with continued interest rate increases. Thus, it's all but a sure thing that the Fed will <#stdurl "www.bloomberg.com/apps/news?pid=10000101&sid=a0fe1uPhBbwM&refer=japan" "announce an increase in the overnight bank interest rate"#> from 2.25% to 2.5%, and that these increases will continue in the months ahead. =inc ww2010.h2 deflation "A deflationary period" <#inc ww2010.pic cpi.gif right "" "Consumer price index (CPI) from 1870 to present, with an exponential growth trend line. The CPI is 185 in 2003, and 2010 has a trend value of 129."#> We've been saying for two years that we're in a long term deflationary period, and that prices will be falling by 30% in the next few years. This assessment is based on the adjoining graph of CPI from 1870 to the present, along with an exponential growth trend. What most people don't seem to understand is that almost all growth trend values must maintain the long term trend; it's a law of nature, something like the law of gravity. Since the CPI is well above the trend line today, it has to start falling soon. Now, we've been following the CPI (consumer price index - retail prices) and the PPI (producer price index - wholesale prices) in the web log for a long time. You can't always tell much from individual monthly figures, but the point is this: With interest rates close to zero for most of 2004, and with oil prices skyrocketing from to more than $50 a barrel for much of the year, inflation should be exploding. The fact that it hasn't been exploding is a sign that something's wrong, or at least that something strange is going on. Here are the PPI and CPI values for 2004:


                        Changes from preceding month
                                    2004
                 Jan. Feb Mar. Apr. May June July Aug Sept  Oct Nov  Dec
---------------- ---- --- ---- ---- --- ---- ---- --- ---- ---- --- ----
PPI               .6   .1   .6   .7  .6  -.2    0   0   .1  1.7  .5  -.7
---------------- ---- --- ---- ---- --- ---- ---- --- ---- ---- --- ----
PPI "Core index"  .3  -.1   .3   .1  .2   .3  -.2  .3   .3   .3  .2   .1
---------------- ---- --- ---- ---- --- ---- ---- --- ---- ---- --- ----
---------------- ---- --- ---- ---- --- ---- ---- --- ---- ---- --- ----
CPI               .5   .3   .5   .2  .6   .3  -.1  .1   .2   .6  .2  -.1
---------------- ---- --- ---- ---- --- ---- ---- --- ---- ---- --- ----
CPI "Core index"  .2   .2   .4   .3  .2   .1   .1  .1   .3   .2  .2   .2
---------------- ---- --- ---- ---- --- ---- ---- --- ---- ---- --- ----

Notice how the values have been changing from month to month. Many months, including December, saw deflationary values. And notice that the "core index" values - which exclude volatile oil and food prices -- were much lower than the combined index. What this means is that the spike in oil prices did indeed temporarily affect the CPI and PPI, but for all other products, the so-called "finished products" that people actually purchase, inflation was still extremely low. =inc ww2010.h2 inefficient "Inefficient businesses" From the point of view of Generational Dynamics, this has been happening because America's organizations -- business, government, educational, and so forth -- have become increasingly bureaucratic and inefficient. When the 1930s Great Depression ocurred, almost all existing businesses went bankrupt, and the country started with almost a "clean slate," with all new businesses, where every employee had to perform and produce results. =inc ww2010.bugcomment right Over the years, these businesses have become increasingly inefficient, often with whole departments and divisions producing products and services that could be done much more efficiently and cheaply using computer technology. Indeed, businesses in both China and India are doing that today. So the products produced by America's inefficient businesses are overpriced, and that's why deflation must occur. (It's theoretically possible for the Fed to flood the economy with money and deflate the money supply so much that the dollar will become increasingly worthless, and thus increase prices, but that's not expected to happen.) The stock market today is 100% overpriced, using standard price/earnings ratio measures, and the situation cannot continue for long. Public debt is astronomically high. The Fed is raising interest rates in order to strengthen the dollar, in the hope of avoiding a panic collapse of the dollar on world markets. But in raising interest rates, it's becoming more difficult for people to borrow more money to make loan payments, it's more difficult for businesses to borrow money to stave off bankruptcy, and it's more difficult for investors to justify purchasing stocks, when they can buy short-term Treasury bonds at higher interest rates. Since the end of WW II, the economy has always been "self-correcting," meaning that any serious economic problem solved itself through market forces. With public debt continuing to increase, it remains to be seen how long that can continue. =eod =// &&2 e050201 UN declares Darfur war was not genocide =data ww2010.weblog.y2005.e050201.head UN declares that Darfur war was "not genocide," in the most sickeningly cynical story of the year =data ww2010.weblog.y2005.e050201.keys =data ww2010.weblog.y2005.e050201.loc ww2010.weblog.log0502 =data ww2010.weblog.y2005.e050201.date 01-Feb-05 =data ww2010.weblog.y2005.e050201.txt1 If mass murders and rapes and forced relocation of millions of people isn't genocide, then what is? =data ww2010.weblog.y2005.e050201.txt2 Evidently few people deny the facts on the ground: For almost two years, white Arab government forces, along with government-sponsored militias, <#stdurl news.bbc.co.uk/1/hi/world/africa/3496731.stm "have been systematically mass-murdering, mass-raping, torturing, robbing, and generally "cleansing""#> large numbers of black Africans living in Darfur, the Western region of Sudan. 1.8 million people have been forced to flee for their lives to large camps near or over Sudan's western border with Chad. 70,000 are known to have been executed, but hundreds of thousands are suspected of having died from the horrific atrocities. From the point of view of Generational Dynamics, it's clearly been a genocidal crisis war, based on fault lines defined by race, skin color, religion and ethnicity. When the news broke last year in June, <#inc ww2010.weblog.ref e040628 "we predicted"#> that the UN would fail to stop the war before it runs its course. This kind of genocidal crisis war "is a force of nature, and that the UN can no more stop it than they can stop a typhoon." Not only did the UN fail to stop the war, the war actually got progressively worse throughout the fall. By December, the <#inc ww2010.weblog.ref e041210 "African Union was openly mocking"#> the UN's fecklessness. Although there are many wars going on in the world today, the Darfur war was the only crisis war. However, this crisis war finally appears to have ended in the last few weeks. UN officials are congratulating themselves for getting a "peace treaty," but what it really means is that the war has finally run its course. =inc ww2010.h2 blame "Who's to blame?" Now it's time to assign blame, and wouldn't ya know it, they've found a way to blame it on good ol' Uncle Sam. When former Secretary of State Colin Powell visited the Darfur region a few months ago, America took the official position that the Darfur war was a "genocide." Other nations refused to agree, and this was the big joke. China couldn't agree, because the Chinese are exploiting Sudan's oil. Russia couldn't agree either - they were selling arms to the Sudanese in exchange for oil. And various Muslim states couldn't agree, of course, because that would mean Arabs would be guilty of genocide, and we can't have that. It's all very embarassing for the UN, of course. It was just last spring that Kofi Annan led a huge international conference in Africa, commemorating the tenth anniversary of the Rwanda genocide in 1994. The UN did nothing to stop that genocide, and Kofi Annan promised, "Never again." Little did he know at the time that "never" would come very quickly. So now it's time to punish Sudan with sanctions for committing this genocide, but China, Russia and the Muslims won't support that. So that's a dilemma - let Sudan off the hook and look even more foolish. So an answer has been found:

Refuse to find Sudan guilty of genocide. That's the gist of <#stdurl edition.cnn.com/2005/WORLD/africa/01/31/sudan.report/ "a new report, published today by the UN."#>
Find Sudan guilty of "human rights violations," and recommend a trial.
Propose trying Sudanese government officials in the International Criminal Court (ICC), knowing that this would require Security Council approval and that the United States would refuse to support the use of the ICC for any such purpose. The U.S. would support a court set up specially for the Darfur situation.
Blame America and the Bush administration for causing more deaths in Sudan. Indeed, the ideological organization <#stdurl hrw.org "Human Rights Watch"#> has already <#stdurl "www.alertnet.org/thenews/newsdesk/HRW/61251ff06a0203e672a4740341ed1143.htm" "issued a press release"#> accusing America of "the loss of more innocent lives in Darfur."

The International Criminal Court is a recent creation of the UN designed to bring human rights criminals to justice. It's perfectly obvious that the intent of many UN officials is to use it to bring such charges against American government officials, and possibly even arrest such officials as they're traveling in foreign countries. For that reason, America has refused to submit itself to the jurisdiction of the ICC, or even acknowledge its legitimacy in any way. So it's the perfect out for the UN. It isn't the UN's fault that things went badly in Darfur; it's those mean old Americans. =inc ww2010.h2 genocide "What is genocide?" In developing Generational Dynamics, I had to come up with a solid working definition of genocide. This isn't the standard legal or dictionary definition, but my research indicates that it's closest to what genocide really is. I needed this definition because I needed a method for identifying crisis wars. A basic principle of Generational Dynamics is that every nation has a genocidal crisis war every 70-90 years, and this has been shown to be true in over 100 cases in dozens of countries throughout history. This requires a solid definition of "genocidal" that can be applied to any war at any place and time in history to determine whether or not it's genocidal. Here are some of the factors that indicate that a war exhibits this kind of genocidal violence:

Highly secretive mobilization, with the intent to hide from other countries the war intention
A massive surprise attack on the enemy
A pursued desire for "ethnic cleansing"
A sustained program of mass murders, mass rapes, massacres, torture, destruction of entire towns (with inhabitants), forced relocation of huge populations of people - sustained over a period of months (a single battle doesn't count)
"Scorched earth policy" that kills as many civilians as possible, leaving the survivors to starve or die from exposure. This involves burning of villages, and destruction of wells and crops.
Nation at end is "devastated" or perpetrates devastation
A "D-Day" type mass assault, a willingness to sacrifice one's own forces for victory
"Spiraling out of control"
A refusal to capitulate, a willingness to fight to the death, even when defeat is almost certain

In World War II, genocidal acts by the Germans included: The Holocaust (execution of millions of Jews), and Hitler's refusal to capitulate when it was clear that Germany would lose. Genocidal acts by Japan included: Murder and torture of prisoners of war at Bataan; refusal to capitulate when it was clear that Japan would lose; Genocidal acts by America included: Massive D-day assault (willingness to risk everything for victory); firebombing Dresden and Tokyo; use of nuclear weapons on Japanese cities. In the American Civil War, General Sherman's march through Georgia in 1864 was a genocidal act, since it involved a "scorched earth policy" that killed as many civilians as possible. From the point of view of Generational Dynamics, genocide is a force of nature, and is neither good nor evil, any more than an earthquake or tsunami is good or evil. This may seem a heartless way of looking at it, but everything about crisis wars is heartless. =inc ww2010.h2 next "What's next in Darfur" The end of a crisis war is a major generational transition for every country, and that's the same with Darfur. A crisis war is a traumatic experience for everyone involved, even the perpetrators of war crimes, because they have to live with the massive slaughters, rapes, and other atrocities that were perpetrated. The country's top priority is to make sure that such a war is never necessary again. Sudan has committed <#stdurl news.bbc.co.uk/2/hi/africa/4217405.stm "new violations of the ceasefire,"#> but they seem to be sporadic and do not appear to indicate that the crisis war is still going on after all. The following is my guess as to what's going on: Because of the UN's humanitarian program, many lives were saved by people fleeing to camps. Thus, the UN was at least partially successful in preventing as much mass murder as might otherwise have occurred. But now, Sudanese officials want to make sure that the people who fled the region have no opportunity to return to their former homes. The way to do that is to continue some low-level violence in the Darfur region, so that the people will be afraid to return, for fear of being attacked again. =eod =// &&2 e050131 US dollar weakness and China's growing economic strength dominate World Economic Forum =data ww2010.weblog.y2005.e050131.head US dollar weakness and China's growing economic strength dominate World Economic Forum =data ww2010.weblog.y2005.e050131.keys =data ww2010.weblog.y2005.e050131.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050131.date 31-Jan-05 =data ww2010.weblog.y2005.e050131.txt1 There's always craziness when world political leaders talk about economics =data ww2010.weblog.y2005.e050131.txt2 (the same is true of any politicians), and the crazy ideas were flowing like wine last week, as <#stdurl "news.xinhuanet.com/english/2005-01/30/content_2528052.htm" "2,250 representatives of the world's leading economies"#> spent 5 days in a ski resort in Davos, Switzerland, discussed "Taking Responsibility for Tough Choices." Many "tough choices" were discussed -- combatting poverty and disease, especially in Africa, reducing oil and commodity prices, and fixing global warming. But there was no taking of responsibility, however, except that most of the participants meant that someone else -- usually either America or China -- should be taking responsibility. However, the weakness of the dollar, and China's growing political and economic strength were the two related issues overshadowing all of the meetings. The continuing dollar weakness is caused by the American public debt, which is astromically high by historical standards, and continues to grow rapidly, with no end in sight. Many politicians, including some in the Bush administration, have been blaming the problem on China's "fixed rate" policy, which fixes the yuan at 8.2 to the dollar. The argument is that this has given Chinese exports an unfair advantage on global markets, and Washington's position has been that the Chinese should allow the yuan's value to float against the dollar. Banking officials in Europe, which is a major trading partner with China, <#stdurl msnbc.msn.com/id/6876823/ "have also blamed Europe's troubles on the fixed peg,"#> and are asking China to float the yuan. The Chinese agreed this week that something had to change, but signaled that a different kind of change was in the works. "The U.S. dollar in our opinion is no longer a stable currency, and is devaluing all the time, causing [continuing troubles]," <#stdurl "news.xinhuanet.com/english/2005-01/27/content_2514016.htm" "said Fan Gang, director of the National Economic Research Institute"#> at the China Reform Foundation. His talk attracted a large standing-room only crowd, and his remarks attracted a great deal of attention, as well as questions about whether it represented official Chinese policy. "The real issue," he continued, "is how to change the regime from a U.S. dollar pegging to a more manageable reference, say, [a combination of] euros, yen and dollars -- a more diversified system. [In the beginning, this would cause] some kind of initial shock. You'd have to deal with some devaluation pressures." Thus, the Chinese are signaling that they won't freely float the yuan, but they're consider revaluing the yuan upward to a new fixed value pegged to a combination of the euro, yen and dollar. As Fan Gang indicated, any revaluation of the yuan is liable to cause a shock in the U.S. A substantial number of consumer goods in American stores were manufactured in China, and a revaluation of the yuan would increase their prices substantially. Last year, a number of analysts predicted that there would be a recession in America this year, thanks to oil prices above $40 a barrel, so there are many factors that will be pressuring the American economy in the next few months. These factors include: oil prices that remain close to $50 a barrel; an aggressive policy by Alan Greenspan and the Fed to raise interest rates; and a potential devaluation shock for the dollar. With the stock market overvalued by 50% or more according to traditional price/earnings ratio measures, these factors could cause a substantial fall in stock prices. Generational Dynamics predicts that America is in a generational crisis period and that we're entering a new 1930s style Great Depression. When I first predicted this in 2002, I was expecting a gradual collapse in stock prices between then and 2007, as happened in 1929. But <#inc ww2010.weblog.ref e050125 "as I wrote a few days ago,"#> I've changed my view. The change is based on the fact many investors are expecting some kind of stock market correction, but believe that they can get out in time. Because only a few can get out in time, the logic of the situation implies that some unexpected event will a stock market collapse very quickly, with a huge fall in a day or two, too fast for almost anyone to get out in time. Last week at Davos, <#stdurl "www.timesonline.co.uk/article/0,,2095-1461901,00.html" "Fred Bergsten of the Washington-based Institute of International Economics said that,"#> “The US deficits are unsustainable in domestic-political and trade-policy terms, as well as in international financial terms.” Bergsten sees the possibility of a dollar crisis "within weeks". The <#stdurl www.ecb.int/ "European Central Bank,"#> the <#stdurl www.boj.or.jp/en/ "Bank of Japan,"#> and the <#stdurl www.pbc.gov.cn/english/ "People's Bank of China"#> have all been purchasing huge volumes of American dollars and American debt. Bergsten sees this changing soon. Smaller Asian banks, including those <#stdurl "www.iht.com/articles/2005/01/30/bloomberg/sxpesek.html" "in Malaysia, Thailand and Indonesia,"#> have evidently already begun selling dollars and buying euros. Bergsten sees the larger central banks starting to do the same thing, resulting in a sudden collapse of the dollar by 20-40%. That might (or might not) be the trigger that causes the stock market collapse predicted by Generational Dynamics. =eod =// &&2 e050128b The chaotic Iraq election is only two days away =data ww2010.weblog.y2005.e050128b.head The chaotic Iraq election is only two days away =data ww2010.weblog.y2005.e050128b.keys =data ww2010.weblog.y2005.e050128b.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050128b.date 28-Jan-05 =data ww2010.weblog.y2005.e050128b.txt1 The election is on Sunday, January 30, and no one has a clue what's going to happen. =data ww2010.weblog.y2005.e050128b.txt2 Journalists, pundits, and high-priced analysts are strangely silent in their predictions about what's going to happen on Sunday, and thereafter. The reason that's very strange is that they've had no trouble predicting things up till now. On January 9, <#inc ww2010.weblog.ref e050109b "as I wrote at the time,"#> pundits were making all kinds of predictions. One pundit said the Sunnis won't come out to vote because they're a minority. Another said the Shi'ites won't come out to vote because they're anti-American. Another says that everyone will be too terrorized to vote. Etc., etc., etc. These predictions by pundits were completely hot air, based on nothing but wishful thinking and demented logic. We used the word "chaotic" in the title of this article for a reason. We mean "chaotic" in the sense of Chaos Theory. Most readers have probably heard of the "Butterfly Effect" in weather forecasting: if a butterfly in China flaps its wings, then it can start a chain reaction that leads to a hurricane in America a week or two later. What this means is that we'll never be able to forecast the weather any better than we can today. No matter how good the science is, no matter how fast the computers are, it's mathematically impossible to predict the weather accurately for more than a few days in advance. Exactly the same principle is true in political forecasting. Your political forecasts will never be accurate for more than a few days, no matter how good your reporting is. That doesn't stop the journalists, pundits and high-priced analysts from making predictions anyway. After all, it's easy to get a million predictions right. Just make two million predictions. That's what the pundits do. The Generational Dynamics methodology very carefully avoids making predictions about chaotic events. On this web site, I'm very careful never to make such predictions. Yes, it's true that I sometimes can't resist the urge to state an opinion on an upcoming chaotic event, but I always (try to remember to) use words to indicate that it isn't a prediction; so I might say that it's "likely" or "possible," or "probable." In one article, on <#hreftext ww2010.i.danger041120 "the six most dangerous regions of the world,"#> I even went to the trouble of computing a specific probability (that, under certain assumptions, the probability of the "clash of civilizations" world war beginning in 2005 was about 21%, and would be slightly higher in 2006 and every year thereafter until it happened). A little while ago, I was having an e-mail discussion with someone who runs a news web site that specifically claims to be making predictions. I finally got to the point where I pointed out to him that "what you're trying to do is impossible -- not just difficult, but mathematically impossible." He didn't bother to write back after that, so I have to assume that he just didn't want to hear that. I gave him a couple of examples. In September, they had predicted that an American invasion of Iran to stop nuclear weapons development was "not an option." That prediction is, of course, completely ill-founded. Any of a number of "butterfly" events could turn that around. Israel might receive some specific intelligence, leading to a pinpoint bombing or an invasion with a small force. Or there might be an Iranian defector, or something suspicious in a spy satellite photo, or a drunken admission by a mullah, or a sex scandal involving an Iranian nuclear scientist. That's what we mean by predicting chaotic political events. It's not just difficult - it's actually mathematically impossible. That's one of the things that Chaos Theory proves. Now, contrast that prediction with a prediction that I've made repeatedly for over two years: That there wouldn't be a civil war in Iraq. What's the difference between their prediction of no invasion of Iran, and my prediction of no civil war in Iraq? The difference is that an invasion of Iran would be a decision made by politicians, and decisions made by politicians are chaotic events. But a civil war in Iraq is a "decision" that would come from the people, not from politicians. This distinction between decisions coming from politicians versus the people is a fundamental distinction used throughout Generational Dynamics. When you're talking about large masses of people, behaviors and attitudes change over the generations in predictable ways that have been identified by Generational Dynamics. This means that only certain things can be predicted, but those predictions can be made with near certainty. For over two years, this web site has been a "real-time laboratory experiment" to see if this kind of prediction works. Every prediction I've made is still on this web site, accessible from either the front page or the archives. It's been extremely successful - far more successful than any journalist, pundit or high-priced analyst that I'm aware of. (On the other hand, I don't seem to be able to make any money doing this, and they make lots of money, so compared to them, my very real victory is quite Pyrrhic.) Incidentally, I had promised that my new book, Generational Dynamics for Historians, would be finished by now, but it's taking a little longer than expected. If you're interested in this stuff about Chaos Theory, the new book will explain how it works in detail. I've made a lot of progress in the last few weeks, and I'm hoping to have the first draft completed and posted on this web site in just one or two more weekends' work. Incidentally, if you're wondering why I've been posting in this web log a little less frequently, that's the reason - I spend every spare minute I have finishing up the book. It's taken me a little bit longer to sort out all the details and get them all written down, but with luck it shouldn't be more than a couple more weeks. (I can't predict the exact date, because it's a chaotic event, in almost every sense of the word.) =eod =// &&2 e050128 Auschwitz politicians overemphasize Hitler's uniqueness =data ww2010.weblog.y2005.e050128.head World figures marking Auschwitz liberation overemphasize Hitler's uniqueness =data ww2010.weblog.y2005.e050128.keys =data ww2010.weblog.y2005.e050128.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050128.date 28-Jan-05 =data ww2010.weblog.y2005.e050128.txt1 The atrocities in the Holocaust were horrific almost beyond belief, =data ww2010.weblog.y2005.e050128.txt2 but they were hardly unique. Jewish leaders, Holocaust survivors and world political figures commemorated the liberation of the Auschwitz-Birkenau death camp on January 27, 1945. Heads of state, Jewish leaders, Nazi death camp survivors and a handful of their liberators gathered here on Thursday to <#stdurl "www.iht.com/articles/2005/01/27/news/auschwitz.html" "commemorate the freeing of thousands of people from the Auschwitz-Birkenau"#> site 60 years ago. Most of the speakers described the Holocaust as uniquely evil, and Hitler as a unique monster, but there have been a number of genocides in the twentieth century -- the Turks of the Armenians in the 1910s, Stalin's Russia of the Ukrainians in the 1930s, Mao of his own people in the 1950s, the Cambodians in the 1970s, the former Yugoslavia in the 1990s, Rwanda in 1994. In this century, we've already had the Darfur genocide. I think that Jewish leaders do themselves a disservice by insisting that the Holocaust was uniquely horrific or evil. By essentially denying the credibility of other genocide victims' stories, they only encourage and give indirect credibility to the Holocaust deniers. One Jewish Holocaust survivor said how important it is to educate young people about the Holocaust, so that the world will never forget. "It's difficult for young people to distinguish between an Auschwitz and Rwanda," he said. It's difficult for me, too. In the Holocaust, the Germans tried to exterminate the Jews by sending 1.5 million to their deaths in Auschwitz and other concentration camps over a four-year period. In Rwanda, one race mass-murdered, raped, and dismembered one million members of another race, all in at three-month period. From the point of view of Generational Dynamics, no genocide is unique, genocide is commonplace, and genocide is neither good nor evil. It's as much a part of being human as sex is -- both are needed for "survival of the fittest" among different human societies, nations, ethnic groups and religions. The world today is vastly over-populated. Poverty, homelessness and starvation are increasing around the world, because population grows significantly faster than the food supply. History has shown, over and over and over and over, that there is only one way to "correct" this problem, and it will be corrected in the next decade in the "clash of civilizations" world war. =eod =// &&2 e050125 A change in thinking about the economy =data ww2010.weblog.y2005.e050125.head A change in thinking about the economy =data ww2010.weblog.y2005.e050125.keys =data ww2010.weblog.y2005.e050125.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050125.date 25-Jan-05 =data ww2010.weblog.y2005.e050125.txt1 Stocks fell again yesterday, as they have steadily since December 31. =data ww2010.weblog.y2005.e050125.txt2 Stocks fell despite generally good earnings reports in the last few days, but as one commentator described the situation, "Investors are looking for reasons to sell, not for reasons to buy." If you're looking for reasons to sell, you won't have any trouble finding some. Oil prices are back up, reaching $50 a barrel today. Alan Greenspan and the Fed are on a tear, planning to raise interest rates steadily throughout the year. Stocks are still overpriced by a factor of two, according to perfectly standard price/earning ratios. American public debt is so high, and growing exponentially, that Japan and China are in a trap: They buying huge amounts of America's debt, for fear that if they don't, all three economies could collapse. And the collapse is coming, according to more and more analysts. <#stdurl "www.pimco.com/LeftNav/Latest+Publications/2004/Dialynas+Paper.html" "A lengthy 10-year analysis"#> of the economy by Chris P. Dialynas, Managing Director of PIMCO, begins, "Today, the global economy is on the threshold of upheaval." Peter Schiff, CEO and chief global strategist of Euro Pacific Capital, says <#stdurl "www.forbes.com/economy/2005/01/10/cx_da_0110doomdollar.html" "in an interview with Forbes,"#> "We are going to go through one of the most trying financial times in U.S. history, including the Great Depression." He says that, "We are a society that has lived beyond its means for a long time," adding that while the trend has been evident for two or three decades, "in the last five years, it has gone off the deep end." Americans are relying on foreigners more and more to produce goods, rather than producing them themselves. And Stephen Roach, the Chief Economist at Morgan Stanley was privately telling clients that America has no better than a 10 percent chance of avoiding "economic Armageddon," according to <#stdurl "business.bostonherald.com/businessNews/view.bg?articleid=55356" "a Boston Herald news report."#> I personally have had a change of thinking in the last year in the nature of the coming financial crisis. I alluded to this change of thinking a few weeks ago when I wrote that the stock market might lose 50-75% of its value, possibly in a single day. This change has been bubbling in my mind for many months, but what really firmed it up was the tsunami disaster in the Indian Ocean, for reasons that will soon be clear. <#inc ww2010.pic djia40.jpg right "" "Dow Jones Industrial Average -- 1896 to 1940"#> Early in 2002, when I was first developing Generational Dynamics, I concluded that it implied that we would have to be entering a new 1930s style depression. At that time, I speculated that the path of the depression would be similar to the 1930s, as shown in the adjoining graph. Notice that stock prices fell gradually from 1929 to 1933. I've been assuming that something similar would happen now, following the 2000 Nasdaq crash. However, the path since the 1990s bubble has been quite different: <#inc ww2010.pic sp5010.gif left "" "S&P 500 index, 1950 to present"#> This graph shows the explosive bubble that began in 1995 followed roughly the same upward path as the 1920s bubble. But the downward paths have different. A lot of the reason for this is the near-zero interest rate policy that the Fed has followed; this prevented massive bankruptcies and homelessness in 2000 and 2001, but it transformed the stock market bubble into a more unstable credit bubble. So what's going to happen when the bubble bursts? Now, here's an important change. I speak to a lot of people, and I've learned something remarkable: Evidently many, many investors are aware that "something is wrong" with the stock market, and they plan to sell "soon," but they think that they can get out in time. Even those who've already lost money in the 2000 Nasdaq crash seem to have no fear. They're certain that they'll be "smarter" this time around, and get out fast when they see the warning signs. I just spoke to an investor today who said, "I can't sell now with the market down. I'll sell in a couple of months when the market is up again." Gulp. What if the market doesn't come up again? <#inc ww2010.pic yh050124.gif right "" "DJIA, Jan 24 2004-2005"#> Look at the graph on the right of the DJIA for the last year. It's as addicting as a roller coaster ride. It even looks like a roller coaster ride. This leads to an obvious apparent logical contradiction. We know that "getting out in time" is a zero-sum game, and that only a few people will actually succeed at doing that. Therefore we know that most of the people who believe they can get out in time will not be able to do so. It therefore follows that the next collapse won't take four years, as it did in 1929-1933, but will occur so quickly that almost all investors will be unable to react in time. Thus, I see two possible scenarios:

A fast one-day crash in which the stock market loses 50-75% of its value in one day; or
A two-stage crash. The first stage will be a one-day fall into the Dow 7000 range. The market will stabilize there briefly, because the stock market fell to that range in 2002, and people are familiar with that level. The second stage will be a continuing fall into the Dow 3000 range. The second stage might take some time, depending on how many investors bring themselves to believe that the stock market can't possibly continue falling.

Either way, we're going to return to the bankruptcies and the homelessness of the 1930s. Things have gotten so bad in the world economy, that it's only a matter of time before something triggers a collapse. The trigger could be almost anything -- a word from Japan or China that they won't purchase as much American debt, an unexpected bankruptcy, a terrorist act, or any of a million other possible random, chaotic events that can cause a panic. There's no way to predict this with any certainty. Maybe the stock market will continue its wild roller coaster ride for another year, and will go up and down five times before then. But with price/earnings rations so high, and with public debt so astronomically high and growing quickly, there is no possibility that the current situation can continue. The depressed economy will be with us for a long time, since we'll be seeing a "reverse bubble" effect. That is, people in the 1990s were irrationally exuberant in making unwise investment decisions, while people after the next crisis will be irrationally subdued, and will be overly cautious in making new investment decisions. Expect a severely depressed economy until the 2015-2020, when the new biotechnology revolution will begin to take hold. A lot of people ask me about investing in gold. My view is this: The economy is in a long-term deflationary period right now, which means that gold is more likely to fall than rise. But if it falls, it won't fall much, and there's a good chance that gold will spike upward for a while. So gold is a good bet, since the worst that will happen is that you'll lose very little. Another choice is Treasury bonds. Ten-year bonds are paying a little over 4% a year, which is pretty good these days, especially since you might lost 50-75% in the stock market. You could put your money into banks, because your money will be insured -- but if you have a large bank account, make sure that you don't exceed the bank's insured amount. Or stuff your money into the mattress. It'll be safer there than in the stock market. =eod =// &&2 e050124 Notes on Darfur, Palestine and Ukraine =data ww2010.weblog.y2005.e050124.head Some notes on current news in Darfur, Palestine and Ukraine =data ww2010.weblog.y2005.e050124.keys =data ww2010.weblog.y2005.e050124.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050124.date 24-Jan-05 =data ww2010.weblog.y2005.e050124.txt1 It appears that the genocidal crisis war in Darfur, Sudan, may be ending. =data ww2010.weblog.y2005.e050124.txt2 There are many wars going on in the world today, but the only crisis war has been the Darfur war in Sudan. Now, a peace treaty signed last week appears to be holding, although some fighting and atrocities are continuing, <#stdurl "www.sudantribune.com/article.php3?id_article=7671" "according to some news stories."#> Crisis wars are genocidal, meaning that the extermination becomes an objection, usually for the purpose of gaining access to land, wealth and even women. All of these elements were seen in this war, as pro-government Arab milities conducted ethnic cleansing against the regions black African population. Crisis wars cannot be stopped until they reach their explosive conclusion, which, in this case, resulting killing 70,000 people and forcing some two million people to flee their homes for camps. However, the fact that some fighting is continuing may mean that a resurgence is still possible. =inc ww2010.h2 palestine "Palestine" After winning last week's election for leader of the Palestinian Authority (PA), Mahmoud Abbas, also known as Abu Mazen, is taking bold steps to advance the peace process. He's deployed PA forces throughout Gaza to stop further attacks on Israel, thus meeting a major demand of the Israelis. Now the spotlight is on Israel. Israel has promised a cease-fire for at least a month, meaning that it will not attack Palestinian militias for that period. After that, pressure will be on Israel to commit to a date to tear down the security wall. Generational Dynamics predicts that the peace will not hold, and that there will be a new genocidal crisis war between Jews and Palestinians within the next few years. As I've described, Palestine/Israel is one of <#hreftext ww2010.i.danger041120 "the six most dangerous regions of the world,"#> in that a regional war is almost certain to explan quickly into a world war. =inc ww2010.h2 ukraine "Ukraine" Viktor Yushchenko took the oath of office as President on Sunday. Russia sent only a low-level aide to represent Russian president Vladimir Putin at the inauguration. That's not too surprising, since Putin openly opposed Yushchenko during the campaign, and said many, many offensive things about him and his followers. But not to worry -- on Monday, Yushchenko takes a trip to Moscow to meet with Putin personally. Yushchenko has already said that he plans to establish close relations with the EU, which Putin would hate, and now Yushchenko is going to Moscow to make friends with Russia again. The steely Putin will skillfully force himself to smile, all the while hoping for a legitimate opportunity to slip a shiv into his ribs. Although everyone's playing nice right now, there's a lot of unfinished business to be played out as well. This is a huge humiliation for Putin, and he will get revenge. Generational Dynamics predicts that the 1932 Russian genocide of Ukraine is a battle that will be re-fought. The entire Caucasus region is close to being aflame, thanks to the ten-year-old Chechen war, and the terrorist acts like the Beslan school massacre. It's very unlikely that things will settle down soon. =eod =// &&2 e050121b Thailand bird flu emergence - tet holiday =data ww2010.weblog.y2005.e050121b.head After 38 deaths from bird flu, Thailand declares state of emergency =data ww2010.weblog.y2005.e050121b.keys =data ww2010.weblog.y2005.e050121b.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050121b.date 21-Jan-05 =data ww2010.weblog.y2005.e050121b.txt1 A World Health Organization (WHO) alert says that a worldwide pandemic of the bird flu "may be imminent." =data ww2010.weblog.y2005.e050121b.txt2 As <#inc ww2010.weblog.ref e050118 "we wrote"#> earlier this week, officials at WHO are increasingly concerned that the deadly virus, so far confined almost exclusively to chickens and ducks, may mutate into a form that can be passed from human to human. With <#stdurl news.xinhuanet.com/english/2005-01/21/content_2489088.htm "new bird flu deaths occurring in Vietnam and Thailand,"#> Thailand has declared a state of emergency. So far, people infected with the bird flu stand a 75% chance of dying, but those infections were contracted from direct contact with chickens and ducks. If some human being contracts both bird flu and ordinary human flu at the same time, that would probably be enough to create a bird flu virus that could be transmitted from human to human. Such a virus would probably have a lower death rate, but even if the death rate lowers to 10%, a worldwide pandemic would still kill hundreds of millions of people. The 1918 worldwide Spanish flu epidemic killed 40 million people. The bird flu virus is clearly mutating, <#stdurl "www.reuters.com/newsArticle.jhtml?type=healthNews&storyID=7380685" "according to WHO officials."#> It now appears capable of infecting additional animals (tigers and cats), and it's become "hardier," able to survive longer in the environment. Another issue is that infected ducks don't show any symptoms, but during migrations they can spread the virus through their droppings. Because there are so many different ways now that the virus can mutate, WHO officials believe that a worldwide pandemic is increasingly likely. A particularly plausible time is next month, during Vietnam's lunar new year (Tet) celebrations, when many people will be travelling, and more poultry is transported, slaughtered and consumed. Incidentally, in response to a reader question, a potential bird flu pandemic has no major connection with Generational Dynamics, but I'm covering it on this web site because most people are ignorant of what's going on, and the media is doing little to publicize it. However, there is one indirect connection: A bird flu pandemic might trigger a major worldwide financial crisis, and might trigger <#hreftext ww2010.i.china050116 "a major civil war in China."#> =eod =// &&2 e050121 Bush's inaugural address speaks to America's destiny =data ww2010.weblog.y2005.e050121.head Bush's inaugural address speaks to America's destiny =data ww2010.weblog.y2005.e050121.keys =data ww2010.weblog.y2005.e050121.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050121.date 21-Jan-05 =data ww2010.weblog.y2005.e050121.txt1 In a stirring speech, President Bush said that "The great objective of ending tyranny is the concentrated work of generations. =data ww2010.weblog.y2005.e050121.txt2 The difficulty of the task is no excuse for avoiding it." And indeed, "We go forward with complete confidence in the eventual triumph of freedom." In <#stdurl "www.whitehouse.gov/news/releases/2005/01/20050120-1.html" "a speech"#> that used the words "liberty" and "freedom" in almost every sentence, he said that if liberty and freedom are goals, then America must play an important part. "We are led, by events and common sense, to one conclusion: The survival of liberty in our land increasingly depends on the success of liberty in other lands. The best hope for peace in our world is the expansion of freedom in all the world. America's vital interests and our deepest beliefs are now one." He issued a warning to dictatorships by saying, "We will persistently clarify the choice before every ruler and every nation: The moral choice between oppression, which is always wrong, and freedom, which is eternally right. America will not pretend that jailed dissidents prefer their chains, or that women welcome humiliation and servitude, or that any human being aspires to live at the mercy of bullies." And he said that America will not stand passively by: "All who live in tyranny and hopelessness can know: the United States will not ignore your oppression, or excuse your oppressors. When you stand for your liberty, we will stand with you." I thought it was a great speech, but it's going raise a lot of hackles in some countries. North Korea and Iran will feel especially targeted. We're at a time in history where positions harden. Everybody likes freedom and liberty, but Islamic terrorists will say, "See? He's going to treat all Muslim countries like Iraq." For me personally, there's a very eerie connection. Here's what appears on <#hreftext ww2010.book "the back cover of my book"#>:

America's Manifest Destiny

It's not just a coincidence that Bush's inaugural address echoes the theme of America's manifest destiny. The past 60 years have been America's Golden Age. At the end of World War II, America took on the idealistic role of "Policeman of the World," defending freedom and democracy wherever it could. We really are seeing the climax of America's Golden Age. Since WW II, America became the world's only remaining superpower and now, since 9/11, America's policeman role has gone from being defensive to being preemptive. Bush's speech captured the sentiment of the moment. But as we head toward the "clash of civilizations" world war, which will be much worse than WW II, the greatest danger facing America is stronger than ever: The danger of hubris, the belief that America can easily win against any opponent. This hubris is all around us, and it will cause us to overextend ourselves, to the point where the entire nation is in danger. A millennium of Anglo-American history have been leading inevitably to this decisive crisis. Every American will be tested, and we won't know until it's over whether America will even survive, or whether America will enter a another, brand new Golden Age. =eod =// &&2 e050120 A look at President Kennedy's 1961 inaugural address =data ww2010.weblog.y2005.e050120.head A look at President Kennedy's 1961 inaugural address =data ww2010.weblog.y2005.e050120.keys =data ww2010.weblog.y2005.e050120.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050120.date 20-Jan-05 =data ww2010.weblog.y2005.e050120.txt1 On President Bush's inauguration day, it's well to remember that life is what happens while you're making other plans. =data ww2010.weblog.y2005.e050120.txt2 President George W. Bush will be making his second inaugural address later today. One of the <#stdurl www.bartleby.com/124/pres56.html "best remembered inaugural addresses"#> is that given by President John F. Kennedy on Friday, January 20, 1961. It began as follows:

Fellow citizens, we observe today not a victory of party, but a celebration of freedom—symbolizing an end, as well as a beginning—signifying renewal, as well as change. For I have sworn before you and Almighty God the same solemn oath our forebears prescribed nearly a century and three quarters ago. The world is very different now. For man holds in his mortal hands the power to abolish all forms of human poverty and all forms of human life. And yet the same revolutionary beliefs for which our forebears fought are still at issue around the globe—the belief that the rights of man come not from the generosity of the state, but from the hand of God. We dare not forget today that we are the heirs of that first revolution. Let the word go forth from this time and place, to friend and foe alike, that the torch has been passed to a new generation of Americans—born in this century, tempered by war, disciplined by a hard and bitter peace, proud of our ancient heritage—and unwilling to witness or permit the slow undoing of those human rights to which this Nation has always been committed, and to which we are committed today at home and around the world. Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of liberty. ... And here's how it ended:

In the long history of the world, only a few generations have been granted the role of defending freedom in its hour of maximum danger. I do not shrink from this responsibility—I welcome it. I do not believe that any of us would exchange places with any other people or any other generation. The energy, the faith, the devotion which we bring to this endeavor will light our country and all who serve it—and the glow from that fire can truly light the world. And so, my fellow Americans: ask not what your country can do for you—ask what you can do for your country. My fellow citizens of the world: ask not what America will do for you, but what together we can do for the freedom of man. Finally, whether you are citizens of America or citizens of the world, ask of us the same high standards of strength and sacrifice which we ask of you. With a good conscience our only sure reward, with history the final judge of our deeds, let us go forth to lead the land we love, asking His blessing and His help, but knowing that here on earth God's work must truly be our own. When reading President Kennedy's address, in which he describes how much the world had changed, it's well to remember how much the world has changed since then. Kennedy was leading a nation that had beaten the Great Depression and had beaten the Nazis in World War II, a world which had tested both America's existence and America's way of life. For Kennedy, the world was a very dangerous place, and the hard-won peace following WW II could be destroyed at any time the Soviet Union and Communism, which he considered to be as evil and dangerous and Naziism. Kennedy himself was a WW II hero, and like all heroes, his goal was to prevent anything like that from ever happening again, and that meant not appeasing the Communists the way that those in the West had initially appeased the Nazis. That led to the Vietnam War, which confounded Kennedy's words:

Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of liberty. ... In fact, the 1960s were <#hreftext ww2010.i.sixties040501 "in a "generational awakening" period."#> During generational awakening periods, there's always a "generation gap," a major political clash between the hero generation from the previous crisis war, and the new generation born after the war, having no personal memories of the horrors of that war, and unwilling to support the austere compromises and rules that the hero generation has devised to prevent any such war from ever happening again. The result is that America was not willing to "pay any price, bear any burden, meet any hardship," and America lost that war. Today, the generational awakening period is long behind us, and we're in a new generational crisis period, approaching a new "clash of civilizations" world war that will be far worse than WW II. Ironically, Kennedy's words are much more relevant today than they were in 1961. As we wait to hear what President Bush will say in his inaugural address, it's well to remember that things may not go according to Bush's plans, just as they didn't go according to Kennedy's plans. It's also worthwhile to remember <#hreftext ww2010.i.bush040824 "what I predicted last year."#> When polled on who the greatest Presidents have been, historians' top choices are from America's previous generational crisis periods: Abraham Lincoln from the Civil War, inaugurated in 1861, and Franklin Delano Roosevelt from WW II, inaugurated in 1933, 72 years later. Great events make great Presidents, not vice-versa. Today, in 2005, 72 years have passed again, and we're on the verge of many new great events. Last year I said that whoever won the election (Bush or Kerry) would be America's next great President, and I have no reason today to doubt that prediction. =eod =// &&2 e050119 Public backlash forces Putin to increase pension benefit payments =data ww2010.weblog.y2005.e050119.head Public backlash forces Putin to increase pension benefit payments =data ww2010.weblog.y2005.e050119.keys russia =data ww2010.weblog.y2005.e050119.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050119.date 19-Jan-05 =data ww2010.weblog.y2005.e050119.txt1 Former Putin allies are calling for a vote of no-confidence, =data ww2010.weblog.y2005.e050119.txt2 thanks to <#stdurl "www.csmonitor.com/2005/0119/p01s03-woeu.html?s=hns" "thousands publicly protesting a new law"#> that removes "in kind benefits," such as free medicine, transportation and housing for pensioners and disadvantaged groups, and replaces them with an increase in cash benefit payments. With the protests spreading across the country in their second week, Russian President Vladimir Putin announced that the amount of the cash benefit increase will be more than doubled. As <#=inc ww2010.weblog.ref e050117 "we wrote on Monday,"#> the protests so far seem far from being a serious threat to Putin's political strength, though the payment increase has the smell of desperation. His former allies in the Communist Party are agitating for a vote of no confidence in the Duma, and the worst of the protests should come at the beginning of February, when pensioners will receive substantially higher housing bills, and we should know by then what impact the protests will have. The interesting question is this: How will Putin react if the protests grow and the no-confidence vote shows signs of succeeding. As I've said in the case of the nationalization of Yukos assets, Putin appears to be following in the steps of Nicolai Lenin prior to the 1917 Bolshevik Revolution. Putin does not appear to me to be the kind of guy who'd step down easily if threatened with a vote of no confidence. Putin is not heavy handed. His nationalization of Yukos was very crafty, and he's trod carefully in problems with Ukraine and Georgia. If the pension reform protests blossom into a major crisis next month, we'll see how deep Putin's steely determination goes. =eod =// &&2 e050118 Bird flu is causing panic in Asia -- as well as in Geneva and Atlanta =data ww2010.weblog.y2005.e050118.head Bird flu is causing panic in Asia -- as well as in Geneva and Atlanta =data ww2010.weblog.y2005.e050118.keys =data ww2010.weblog.y2005.e050118.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050118.date 18-Jan-05 =data ww2010.weblog.y2005.e050118.txt1 Bird flu is spreading across Vietnam, forcing the culling (killing) of thousands of birds, =data ww2010.weblog.y2005.e050118.txt2 severely harming the Vietnamese economy, and raising widespread fears of a possible human bird flu epidemic. Under the direction of the World Health Organization (WHO), <#stdurl "www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=7339906" "hundreds of thousands of birds have been culled in the last year."#> Last March, when Vietnam announced that the bird flu had been completely eradicated, it had been hoped that further culling wouldn't be necessary. But it turns out that the virus is capable of living dormant in ducks through the summer, and then start spreading again when it turns cold in the fall. So the virus has reappeared in Vietnam, Thailand and China, and culling began again last month. This is having a devastating effect on the Vietnamese economy. Chicken production is big business in Southeast Asia, and culling chickens has cost a lot of money. Small peasant farmers, who have only a few birds as their main source of income, have had to cull them all. These huge sacrifices are all being motivated by a very real fear. The World Health Organization in Geneva and the National Institutes of Health in Atlanta are expressing concerns greater than for SARS or any other recent world health issue. The bird flu is spreading wildly among chickens and ducks. It's also spread to a few humans -- almost 40 people have died from it in the last year. However, the people who have gotten the flu have caught it by rubbing against an infected bird. If the flu mutates so that it can be spread from human to human, then there'll be a major worldwide pandemic. How many people will die? The following figures tell the story. The last major flu pandemic was the Spanish flu in 1918-19. Most people in the world became infected, and about 3-5% of those infected died, for a total of about 40 million deaths. So far, among those who have been infected by bird flu, the death rate has been around 75%. If the flu mutates, then that percentage may drop, but even a death rate of 10% could mean hundreds of millions of deaths. What does it take to cause a mutation? No one is sure, and no one is even sure that the bird flu is capable of mutating into a form that can be transmitted from human to human. However, some scientists believe that it could happen very easily if the some person become simultaneously infected with the bird flu and an ordinary human flu at the same time; the two flu viruses could recombine within a single human body into a new, mutated variant. When will it happen? It could happen any year, and it could even being next month. That's because it's already spreading quickly, and next month's Lunar New Year celebration will vastly increase the marketing, transportation and consumption of poultry for a brief period. According to one official from WHO, speaking to the BBC World Service, the disease is spreading so fast among birds that there's a good chance that we'll know the answer in 2005. "It could turn to the left, and create a pandemic; or it could turn to the right, and prove to us that it can't mutate." Either way, we should know the answer soon. =eod =// &&2 e050117 Tens of thousands protesting benefit reductions in cities across Russia =data ww2010.weblog.y2005.e050117.head Tens of thousands protesting benefit reductions in cities across Russia =data ww2010.weblog.y2005.e050117.keys russia =data ww2010.weblog.y2005.e050117.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050117.date 17-Jan-05 =data ww2010.weblog.y2005.e050117.txt1 Putin may be facing a serious political crisis, =data ww2010.weblog.y2005.e050117.txt2 thanks to a restructuring of federal benefits that affect the vast majority of families in the country. The benefit structure was set up during the Soviet area, following the Communist maxim: From each according to his ability, to each according to his need. There were many, many people with a need: the elderly pensioners, war veterans, the handicapped, low-income families, and other groups considered socially vulnerable. In fact, <#stdurl "www.reuters.co.uk/newsArticle.jhtml?type=worldNews&storyID=653704" "about half of Russia's 145 million people were receiving a variety of benefits,"#> including free public transportation, free medicines, free treatment a health resorts, free local telephone service, and discounts on housing and residential utilities. Almost all these benefits were canceled on December 31, and replaced with payments of $15 to $100 per month, way too little to replaced the lost benefits, according to the protesters. And the protests may be only just beginning. On February 1, the pensioners will receive their first communal housing services bills -- bills for such things as heat, electricity, gas and water. These bills alone may exceed the monthly payments, and will certainly lead to even more mass protests. It's ironic that Russian President Vladimir Putin will be held directly responsible for these changes, thanks to a law that Putin signed last month scrapping direct regional elections, giving himself the right to nominate governors with the approval of regional parliaments, along with the right to dismiss them. Prior to this law, people might have held the regional governors responsible for the pension reductions, but since Putin now controls the governors, Putin is the man to blame. In fact, Putin is being blamed for several things these days. While still popular, his leadership is being questioned more and more, thanks to last September's Beslan school hostage massacre and his humliating failure in openly supporting the losing candidate in the recent Ukraine election. Ever since the Kremlin began legal moves to take over the oil giant Yukos, I've been saying that Putin is following in Lenin's footsteps, by appearing to be nationalizing businesses and appropriating their assets for the Kremlin. Lenin led the 1917 Bolshevik Revolution which was followed by a decade of massive civil war that killed tens of millions of Russians, a civil war that Generational Dynamics predicts will be refought. Yesterday I posted an analysis indicating that <#hreftext ww2010.i.china050116 "China appears to be approaching a major civil war."#> This conclusion was based on a variety of factors, including the increasing number of mass riots, a huge migrant worker population, big income disparities, and an unraveling of the social structure. My reading is that Russia's social unrest from these pensioner protests is not anywhere nearly as bad as the social unrest from the Chinese riots. China is much closer to a civil war, in my opinion, than Russia is, though of course that could change rapidly if the protests greatly expand next month. That's not to say that Russia is free from conflict - far from it. In the Caucasus, the war with Chechnya is in its tenth year, and the level of tension with the Republic of Georgia has been increasing, especially since <#inc ww2010.weblog.ref e050112 "Putin vetoed continuation of the international peacekeeping force"#> along the border. Generational Dynamics predicts that there will be a new major war in the Caucasus, and that the Russian civil war of the 1920s will be refought. One possible scenario is that a larger Caucasus war will spiral out of control into a full-scale Russian civil war. One way or another, the Caucasus is still <#hreftext ww2010.i.danger041120 "possibly the most dangerous region in the world today."#> =eod =// &&2 e050113 Sharp increase in trade deficit surprises economists =data ww2010.weblog.y2005.e050113.head Sharp increase in trade deficit surprises economists =data ww2010.weblog.y2005.e050113.keys =data ww2010.weblog.y2005.e050113.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050113.date 13-Jan-05 =data ww2010.weblog.y2005.e050113.txt1 Mainstream economists had expected the trade deficit to level off, =data ww2010.weblog.y2005.e050113.txt2 and <#stdurl "news.bbc.co.uk/go/pr/fr/-/1/hi/business/4169039.stm" "were surprised by the sharp 7.7% increase in November to $60.3 billion,"#> announced yesterday. <#inc ww2010.pic g050112.gif right "" "Monthly trade deficit, 2002-present (Source: WSJ)"#> As you can see from the adjoining graph, the monthly trade deficit rose substantially in 2002 through early 2004, but then appeared to be leveling off for several months, until the November up-spike. On this web site, we've emphasized long term structural fundamentals in the economy, such as astronomically high public debt, and astronomically high stock valuations. Mainstream economists downplay the importance of these problems because they consider the economy to be "self-correcting." In the case of the trade deficit, this should work as follows:

The high trade deficit causes the dollar to weaken, and other currencies to become stronger. This in fact has happened, as the value of the dollar against the euro has gone from 92 cents per euro just a few years ago to $1.32 per euro today.
If the dollar weakens, then European goods sold in America become more expensive, and American goods sold in Europe become cheaper.
Therefore, Europeans import and purchase more American goods, because they're cheaper, and Americans import and purchase fewer European goods, because they're more expensive.
Therefore, the trade deficit decreases, and the problem has corrected itself.

But this hasn't been working in today's economy. With the dollar falling so precipitously in the last few years, the trade deficit should be falling as well; instead, the above graph makes it clear that it's increasing. The only we can't tell for sure is whether the increase is linear or exponential, but either way it means the economy is not correcting himself. From the point of view of Generational Dynamics, here's what's going on: During the 1930s Great Depression, most old businesses went bankrupt, and every new business was "lean and mean," with every employee required to pull his full weight. In the intervening 70 years, these businesses have all been getting calcified with bureaucracies, older employees who are waiting around for retirement, middle aged employees whose job skills are obsolete, or whole departments or divisions producing products and services that people no longer want. Therefore, the average American business today is producing too many overpriced products that nobody really wants. The same calcification process has also happened with government agencies, universities, and all other organizations. So the economy will "correct itself," but will do so by a major adjustment like the crash of 1929. This will force all the existing businesses into bankruptcy, and the cycle will repeat with the creation of new "lean and mean" businesses. Unfortunately, the side effects of massive homelessness and even starvation will also occur. As I say all the time, Generational Dynamics tells us what our final destination is, but doesn't tell us how we'll get there, so we can only guess at the scenario. We know that we're headed for a major stock market collapse that will cause the stock market to lose 50-75% of its value, possibly in a single day. We don't know what will trigger that event, and we don't know whether the trigger will come tomorrow, next month, next year, or in a couple of years. We just know it's coming. Since we don't know when it's coming, we have to be on guard every day. It's possible that this trade deficit surprise will cause the rapid adjustment, as international investors and foreign banks frantically race with each other to pull out of the stock market. I just want my readers to know that both the economy and the world security situation is much worse today than it was a year ago, and that unless things start to settle down again, you should be very wary. =eod =// &&2 e050112 Russia ejects international patrols from Russia-Georgia border =data ww2010.weblog.y2005.e050112.head Russia ejects international patrols from Russia-Georgia border =data ww2010.weblog.y2005.e050112.keys russia, georgia =data ww2010.weblog.y2005.e050112.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050112.date 12-Jan-05 =data ww2010.weblog.y2005.e050112.txt1 As an act of defiance, Russia has vetoed continuation of an international peacekeeping force =data ww2010.weblog.y2005.e050112.txt2 that's been <#stdurl news.bbc.co.uk/2/hi/europe/4070835.stm "stationed since 1999"#> on the mountainous border between the Russian province of Chechnya and the Republic of Georgia. The <#stdurl www.osce.org "Organization for Security and Cooperation in Europe (OSCE)"#> had performed the monitoring. <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus region - including North Ossetia, Ingushetia and Chechnya. Ukraine is above the Black Sea just to the left of the map's left edge"#> European and Georgian officials have condemned ending the mission, saying that doing so reduces the region's stability. This is a move of defiance by Russian President Vladimir Putin, who has <#stdurl "www.sptimes.ru/archive/times/1032/top/t_14530.htm" "vigorously condemned the West"#> ignoring the danger of terrorism to Russia in favor of politically correct human rights. Putin has also condemned the OSCE as ineffectual Russia has been the victims of terrorist attacks by Shamil Basayev, a Muslim warlord from Chechnya, who has taken credit for the series of terrorist acts which brought down two passenger planes, and killed hundreds of children and adults in a massacre in Beslan. Following this series of attacks, Putin has promised preemptive revenge against international terrorists. Russia's threats have alarmed the entire Eastern Asian region, including Georgia, Turkey, and Roumania. Many Western countries have called on Putin to negotiate with the Chechen terrorists; Putin angrily rejected these suggestions, and suggested sarcastically that America should start negotiating with Osama bin Laden. Ejecting the OSCE is seen as a follow-on to Putin's promise of pre-emptive revenge against international terrorists in other countries, especially Georgia. Putin has accused Georgia of harboring Chechen terrorists fleeing across the border from Chechnya into Georgia. Georgia has denied this, and the OSCE has said that it hasn't detected any such fleeing terrorists, which is why Putin has called the OSCE ineffectual. By removing the OSCE monitors, Putin will now feel free to make preemptive strikes on alleged Chechen targets on Georgian soil. This could inflame the Chechen war even further, to the point where it might engulf the entire region. The Caucasus region is one of <#hreftext ww2010.i.danger041120 "the six most dangerous regions of the world"#> right now. From the point of view of Generational Dynamics, it's even more dangerous than the Palestine region, since it's farther into a generational crisis period. It's a major front line in the centuries old war between Orthodox Christians and Muslims, and it's a breeding ground for major Russian rebellions and civil wars that have occurred in the past. =eod =// &&2 e050109b Brent Scowcroft predicts Iraq "incipient civil war" =data ww2010.weblog.y2005.e050109b.head Brent Scowcroft predicts an "incipient civil war" for Iraq =data ww2010.weblog.y2005.e050109b.keys =data ww2010.weblog.y2005.e050109b.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050109b.date 09-Jan-05 =data ww2010.weblog.y2005.e050109b.txt1 Pundits are returning to wishful thinking as the January 30 election approaches =data ww2010.weblog.y2005.e050109b.txt2 Listening to the journalists, pundits and high-priced analysts on today's Sunday morning news shows can make your head spin, as one pundit after another predicts disaster in Iraq in a different way. One pundit says the Sunnis won't come out to vote because they're a minority. Another says the Shi'ites won't come out to vote because they're anti-American. Another says that everyone will be too terrorized to vote. Another says that even if everyone votes, the election will still be defective, because Iraq is an "occupied land." And finally, the election will be a disaster because the insurgents will stage a series of huge, "spectacular" terrorist attacks on election day. Every one of these predictions is complete hot air. The pundits don't have any idea what they're talking about, but they'll say any dumb thing that pops into their minds to get on television. There isn't a single one of the above predictions that's based on any sustainable evidence. If any one of these predictions comes true, it'll be by chance. Most of the discussions centered around Thursday speech by former national security adviser Brent Scowcroft, who served under the former President Bush, and a friend of the Bush family. In the speech, delivered at a luncheon hosted by the <#stdurl www.newamerica.net "New America Foundation"#>. According to <#stdurl "www.washingtonpost.com/wp-dyn/articles/A54680-2005Jan6.html" "the Washington Post article,"#>

"The Iraqi elections, rather than turning out to be a promising turning point, have the great potential for deepening the conflict," Scowcroft said. He said he expects increased divisions between Shiite and Sunni Muslims after the Jan. 30 elections, when experts believe the government will be dominated by the majority Shiites. Scowcroft predicted "an incipient civil war" would grip Iraq and said the best hope for pulling the country from chaos would be to turn the U.S. operation over to NATO or the United Nations -- which, he said, would not be so hostilely viewed by Iraqis.

Looking at this text, you have to wonder at the level of total nonsense spoken by supposedly intelligent people. His "solution," turning the operation over to NATO or the U.N., is impossible because neither organization would ever accept it, and even if one did, why would that stop the insurgencies? You'd have to be a high-priced analyst to say anything as dumb as that. But the heart of Scowcroft's argument is that of an "incipient civil war" in Iraq. I have to laugh at the word "incipient," which the dictionary <#stdurl "www.m-w.com/cgi-bin/dictionary?book=Dictionary&va=incipient&x=0&y=0" defines#> as "beginning to come into being or to become apparent." Pundits have been predicting an Iraqi civil war for two years, so I guess you'd have to say that a civil war has been "incipient" for at least that long. I keep wondering what they're talking about. There has been a car bombing every day or so for the last few months. Now these car bombings are horrible. But a car bombing is not a war. We know what a civil war would be. It would be masses of Sunnis picking up guns, going into Shi'ite strongholds, and killing the people there. Or it would mean the opposite - Shi'ites going out and killing Sunnis. Or it would mean a Kurdish army marching south to capture Baghdad. You'd think that the journalists, pundits and high-priced analysts would understand the difference between that and a car bombing, but those morons don't seem to have a clue. As <#hreftext ww2010.i.sixties040501 "we've been saying"#> repeatedly for two years, a civil war in Iraq is literally IMPOSSIBLE. It can't happen, because only one generation has passed since the end of the genocidal Iran/Iraq war of the 1980s, and it has never happened in history that a civil war has begun so soon after a crisis war. That's not to say that there won't be a great deal of trouble in Iraq. Iraq is currently at the beginning of a generational awakening period. Awakening periods are characterized by enormous political turmoil, and we should expect a lot of political conflict between Sunnis, Shi'ites and Kurds after the election. <#hreftext ww2010.i.iraq041016 "Hopes for an American withdrawal in 2005 won't happen,"#> but there won't be any civil war. =eod =// &&2 e050109 Morgan Stanley's chief economist Stephen Roach predicts a 'sharp adjustment' ahead =data ww2010.weblog.y2005.e050109.head Morgan Stanley's chief economist Stephen Roach predicts a "sharp adjustment" ahead =data ww2010.weblog.y2005.e050109.keys =data ww2010.weblog.y2005.e050109.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050109.date 09-Jan-05 =data ww2010.weblog.y2005.e050109.txt1 In an article that's sharply critical of Fed Chairman Alan Greenspan, =data ww2010.weblog.y2005.e050109.txt2 Roach blames Greenspan for today's historically astronomical levels of public debt and foreign deficit, and concludes: "Asia and Europe are increasingly dependent on overly indebted U.S. consumers, while those consumers are increasingly dependent on Asia's interest-rate subsidy. The longer these imbalances persist, the greater the likelihood of a sharp adjustment. A safer world? Not on your life." The article will appear soon in Foreign Policy Magazine, according to <#stdurl "www.forbes.com/personalfinance/strategies/2005/01/07/cx_da_0107topnews.html" "an item in Forbes Magazine online"#> entitled, "World On Brink Of Ruin." Roach blames Greenspan for today's historically astronomical levels of public debt and foreign deficit, and concludes: "Asia and Europe are increasingly dependent on overly indebted U.S. consumers, while those consumers are increasingly dependent on Asia's interest-rate subsidy. The longer these imbalances persist, the greater the likelihood of a sharp adjustment. A safer world? Not on your life." As I've previously written here, I've been highly critical of Greenspan myself, especially his disastrous conclusion in 1996 that the stock market bubble was being caused by productivity improvements in the computer industry. And I've been highly critical of speeches and papers by Greenspan's colleague, Fed Governor Ben Bernanke, that claim that the Fed has stabilized the economy for the next ten years simply by publishing the FOMC minutes! No one can blame the Fed for having too little hubris. But Roach's article raises the question: Once the "sharp adjustment" occurs, what will the general public think of Greenspan's legacy after that? Roach makes it pretty clear that Greenspan will be blamed for it. But the fact is that an argument can easily be made that Greenspan and the Fed are not at fault. The stock market bubble was caused by a massive generational change in the early 1990s, when the generation of risk-averse "depression babies" disappeared (retired or died) all at once, and were replaced as senior financial managers by risk-seeking Baby Boomers, who made one dumb investment after another. Greenspan's "irrational exuberance" remark didn't stop the bubble, and nothing else would have done so either. Once the bubble burst in 2000, the Fed had no choice but to lower interest rates to near-zero, in order to prevent massive bankruptcies, unemployment and homelessness, and allow people to survive by incurring low-cost debts. Those debts created the foreign imbalance that Roach is rightly concerned about, but Greenspan can't be blamed for it. Stephen Roach, whom journalists regularly tag with the "bearish" putdown, is one of the few high-profile analysts who is serving as an "early warning" system for the upcoming economic "sharp adjustment" tsunami. His negative treatment by the press shows that an early warning system wouldn't have done any good in Asia either. I believe that a majority of investors today believe that "something" is coming, but they don't know when, and they believe that they'll be smarter than they were in 2000: This time they'll see the early warning signs, and they'll get out early before they're hurt. Unfortunately, everyone is thinking that way, and "getting out early" is a zero-sum game. So what form will the "sharp adjustment" take? My expectation is that the adjustment is likely to be a very rapid fall in stock prices, perhaps 50-75% in a single day, as international investors and foreign banks frantically race each other to pull out. It might be triggered by anything from a Palestinian war to a recession in China or Japan. This is based on a historical analysis of secular adjustments that come every 70 years or so (Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash). Today, Greenspan, Bernanke, and the other Fed Governors are basking in the hubris of believing that they're responsible for the DJIA being close to 11,000 today, just as Icarus' hubris let him fly too close to the sun. But hubris exacts a big price. Icarus drowned when the crash came, and Greenspan's legacy is liable to drown as well. =eod =// &&2 e050108 How do unrealistically high expectations affect the world? =data ww2010.weblog.y2005.e050108.head How do unrealistically high expectations affect the world? =data ww2010.weblog.y2005.e050108.keys =data ww2010.weblog.y2005.e050108.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050108.date 08-Jan-05 =data ww2010.weblog.y2005.e050108.txt1 Hopes are sky-high as Palestinians go to the polls on Sunday =data ww2010.weblog.y2005.e050108.txt2 to choose a new leader to replace the late Yasser Arafat as leader of the Palestinian Authority. If the pre-election polls are correct, the winner will be Arafat's former aide, Mahmoud Abbas, also known as Abu Mazen. Abbas has been doing what politicians do -- flip-flopping from day to day, depending on his audience. One day, he's referring to Israel as the "Zionist enemy," and promising the Palestinians the "right of return" -- that Palestinians will be able to return to the land that they lost in 1949 and 1967 wars. And he's promising a Palestinian nation next to Israel, with Jerusalem as its capital. The next day, he's more moderate (in Western eyes). He's promising to rid Palestine of terrorists, and even punish Palestinians who are caught carrying an unlicensed handgun. He's also promising the withdrawal of Israeli forces from Palestinian lands. He can't carry out any of these promises of course. If he seriously tries to stop the terrorists, then he'll be killed. And Israel will never agree to a "right of return" for many reasons -- including the fact that Israel is already turning into a country with a majority of Arabs and a minority of Jews. So hopes are astronomically high - among the Palestinians and Israelis, and in London and Washington. What will happen in the months to come, when it turns out that expectations won't be met -- when Hamas, the militia group which refuses to endorse the election or any ceasefire with Israel -- continues its terrorist attacks and is not stopped by Abbas, or when Israel fails to eject all the Jewish settlers from Gaza as promised? What will happen then? We're in the midst of a number of significant elections, and people's expectations are an important issue surrounding all of them. Prior to the American Presidential election, <#hreftext ww2010.i.big041024 "I described"#> how unrealistic expectations were worldwide that things would change under a Kerry administration, and would even change under a second Bush administration, because of changes in the cabinet. It turns out that all major crisis-era catastrophes (Panic of 1857, 1861 Civil War, crash of 1929, 1941 Pearl Harbor, and 9/11/2001) have occurred in the year following a Presidential election. The hypothesis is these events were reactions to widespread disappointment from high expectations that were built up during the election campaign, and that "something big" may happen in 2005. The same sort of speculation applies to other elections:

Russia, Europe and America were cautiously hopeful that the December 26 Ukraine election would heal <#inc ww2010.weblog.ref e041211 "the extremely bitter split between East and West."#> The "rebel" candidate, Viktor Yushchenko, won the election, much to the alarm of Eastern Ukrainians and Russia. Ukraine has been mostly "on hold" since the election, mostly because of preparations for the Russian Orthodox Christmas, which was celebrated two days ago on January 6. Now that Christmas is over, the political session will be in full swing.
Today's Palestinian election has generated enormously high expectations worldwide, as we've described. The next few weeks and months will reveal the result.
The Iraqi elections are scheduled for January 30, although there's a lot of pressure to postpone them. Many people are still hoping that the American forces can withdraw after these elections, or at least that the insurgency terrorist attacks will decrease. <#hreftext ww2010.i.iraq041016 "as we discussed last year,"#> withdrawal from Iraq will remain impossible, and there's no reason to believe that the level of insurgency will do anything but increase (but there will be no civil war).

Let's give an example. We now know that <#inc ww2010.weblog.ref e050106 "North Korea has been mobilizing for war since April."#> There have been <#stdurl "news.independent.co.uk/world/asia/story.jsp?story=596607" "some news reports"#> that indicate that George Bush's re-election has been a big disappointment to President Kim Jong-il. He had been hoping for a John Kerry victory in November, and then a lot more more monetary support from America. Such support obviously will not be provided by a second Bush administration (and, incidentally, would not have been provided under a Kerry administration), and the result may be a decision to continue the mobilization. =eod =// &&2 e050106 North Korea is mobilizing for a long, drawn-out war =data ww2010.weblog.y2005.e050106.head North Korea is mobilizing for a long, drawn-out war =data ww2010.weblog.y2005.e050106.keys =data ww2010.weblog.y2005.e050106.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050106.date 06-Jan-05 =data ww2010.weblog.y2005.e050106.txt1 On a day when the United Nations said that the nuclear weapons problem is getting worse =data ww2010.weblog.y2005.e050106.txt2 in North Korea, it was revealed that North Korea has been mobilized for war since April. <#inc ww2010.pic korea.gif right "" "North and South Korea"#> North Korea, which is believed to posess several nuclear weapons, <#stdurl "www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=7245015" "poses the greatest nuclear threat to the world,"#> according to Mohamed ElBaradei, the head of the United Nations International Atomic Energy Agency (IAEA). "I hope we can start to move on the Korean issue, which is the number one proliferation threat we are facing," he said. In that context, a South Korean newspaper has published <#stdurl "times.hankooki.com/lpage/200501/kt2005010515502210440.htm" "a leaked 31-page law, published on April 7,"#> signed by President Kim Jong-il, ordering the Workers' Party, the military, and all officials to assume wartime readiness. The document is entitled, "Central Military Committee of the Workers' Party Order 002." The police and intelligence authorities were ordered to install command centers in underground tunnels around the nation. North Korea is konwn to have an extended network of underground tunnels dating back to the Korean War of the 1950s, and they're believed to have around 8,200 underground facilities, including 180 munitions factories. The new command centers would be hidden from American spy satellites and reconnaisance planes. In addition, the directive also calls for the recruitment of spies living in South Korea from "revolutionary organizations" that sympathize with Stalinist North Korea and believe that South Korea should be "liberated." This part of the directive is <#stdurl "english.chosun.com/w21data/html/news/200501/200501050025.html" "causing some debate among South Koreans,"#> as to whether the document was leaked on purpose for propaganda purposes. However, South Korea's National Intelligence Service <#stdurl "www.boston.com/dailynews/005/world/North_Korea_issues_wartime_gui:.shtml" "said in a one-sentence statement:"#> "We believe the document reflects North Korea's wartime preparations." From the point of view of Generational Dynamics, North Korea's actions are consistent with what's going on in the rest of the world. There is a worldwide mobilization for war going on, in preparation for the coming "Clash of Civilizations" world war. In Japan, China, Russia, Pakistan, America, and other countries, laws are being passed and directives are being issued that give additional powers to the country's leaders to defend against threats of terrorism or invasion. These countries are all moving in the direction of asserting national rights over individual rights. The reason that all of these countries are moving in this direction at the same time is because we're at a unique time in history, about 60 years after the end of World War II, when every country is experiencing the same generational change at the same time: The people in the generation that fought in WW II are all disappearing (retiring or dying) all at once, and are being replaced by the people in the generation born after WW II. As I've described in the discussion of <#hreftext ww2010.i.danger041120 "the six most dangerous regions of the world,"#> the time may not be too far off when a regional war in one of these regions will trigger a much wider war that will engulf America and the world. =eod =// &&2 e050105 Jewish extremists clash violently with Israeli soldiers over settlements =data ww2010.weblog.y2005.e050105.head Jewish extremists clash violently with Israeli soldiers over settlements =data ww2010.weblog.y2005.e050105.keys =data ww2010.weblog.y2005.e050105.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050105.date 05-Jan-05 =data ww2010.weblog.y2005.e050105.txt1 Jewish settlers protested violently on Tuesday against soldiers =data ww2010.weblog.y2005.e050105.txt2 <#stdurl "news.scotsman.com/latest.cfm?id=3957162" "who had been ordered to tear down structures"#> that were part of Jewish settlements in the Gaza strip. Israeli Prime Minister Ariel Sharon is going ahead with plans for "unilateral disengagement," pulling the Israeli army and Jewish settlers from the Gaza strip, leaving security in the hands of the Palestinians and the Egyptians. This plan requires 8,000 settlers to be removed from Gaza in the next few months. Although they will be compensated, and many are expected to go peacefully, a small group of extremists are threatening both legal and armed resistance, Ariel Sharon has for several months been expressing <#inc ww2010.weblog.ref e041027 "concerns about an Israeli civil war,"#> and he's <#stdurl "www.debka.com/article.php?aid=960" "still expressing those concerns."#> As we've repeatedly said, Generational Dynamics predicts that we're headed for a major crisis war in the Mideast, re-fighting the genocidal 1940s war between Arabs and Jews. However, it's worth remembering that there's no way to predict the chain of events that will lead to that war, and an internal Israeli conflict, however unlikely, is on one possible path. =eod =// &&2 e050104 Israeli forces kill 8 Palestinians, and Abbas calls Israel the 'Zionist enemy' =data ww2010.weblog.y2005.e050104.head Israeli forces kill 8 Palestinians, and Abbas calls Israel the "Zionist enemy" =data ww2010.weblog.y2005.e050104.keys =data ww2010.weblog.y2005.e050104.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050104.date 04-Jan-05 =data ww2010.weblog.y2005.e050104.txt1 Things appear quickly to be returning to "normal" in post-Arafat Palestine, =data ww2010.weblog.y2005.e050104.txt2 as the level of violence, both verbal and missile, has escalated in the last few days. <#stdurl "www.telegraph.co.uk/news/main.jhtml?xml=/news/2005/01/05/wmid05.xml&sSheet=/news/2005/01/05/ixworld.html" "Israeli tanks on Tuesday fired missiles"#> at Palestinians suspected of being the militants who had fired mortars at Israelis. The Israeli missiles ended up killing 7 Palestine children. Mahmoud Abbas, who is campaigning for Palestinian President and is expected to win the election on Sunday, said, "We are praying for the souls of the martyrs who were killed today by the shells of the Zionist enemy." The killing of Palestinian children is extremely infuriating to the Palestinians, and the "Zionist enemy" rhetoric is extremely offensive to the Israelis. This kind of violence was common before the November 11 death of Yasser Arafat, but had been less common since then. They hadn't ended entirely, of course. Just 3 weeks ago, <#inc ww2010.weblog.ref e041213 "I called"#> a major Hamas terrorist attack on Israelis a "turning point" for the peace process, but it was up to the Palestinians, not the Israelis, to stop such violence. I predicted that the violence would not be stopped, and I'm not surprised that it hasn't been. Israeli Prime Minister Ariel Sharon complained about the same thing in <#stdurl "www.number-10.gov.uk/output/Page6836.asp" "a press conference with Tony Blair on December 22."#> In response to a question about peace process, Sharon said, "[It] depends very much on the Palestinians. By now we don't see even the slightest step taken by the Palestinians. ... [T]hey are not doing even the slightest effort, because it is not a problem of forces, they have in the Gaza district 30,000 armed security people, under the control of the Palestinian Authority. We would have expected that it is not to start now, it is a dismantling of those terrorist organisations, at least they will make an effort to prevent deploying of those mortars and rockets that attack our towns and settlements on both sides of the border, I would have expected they will do that. But after the elections I believe that they have to start to take all the necessary steps ... that they committed themselves in the past to, and then we will be able to move forward. It depends upon them." When Sharon says that "we don't see even the slightest step" and "it depends on them," he's saying that we shouldn't expect any further concessions from Israel. When Abbas uses the emotionally laded words "Zionist enemy," the strongest language he's used since Arafat's death, he's saying, "Don't expect me to do anything about the Palestinian militias." Recent American policy in the Mideast has always been based on the assumption that it was Yasser Arafat who was the terrorist-in-chief who refused to accept peace. Politicians in Washington, London, and elsewhere have the conceit that it's politicians like them that determine policy. Generational Dynamics says that such policies come from the people, not from the politician. If the Palestinian people had wanted peace under the terms that have been offered, then they would have forced Arafat to accept those terms. Instead, we're seeing the opposite right before our eyes: The Palestinian people are forcing Abbas to move to the positions that Arafat took. Generational Dynamics predicts that there will be a major new genocidal crisis war in the next few years between Israelis and Palestinians, and that it will engulf the whole region. I've speculated, since 2002, that it would be the death of Arafat that would trigger the chain of events that would lead to such a war, within one to two years following Arafat's death. We're now watching those steps take place. Indeed, once Sunday's election is over, things might very well become worse very quickly, within a few weeks or months. The reason is that hopes and expectations are unreasonably high right now, among the Israelis and Palestinians, and also in Washington. After Sunday, it will become clear very quickly that things are not going to change. There is one thing that might postpone such a war: A lot of money. Well, it seems that the Bush administration is <#stdurl "www.reuters.com/newsArticle.jhtml?type=politicsNews&storyID=7234768" "considering a plan to double American aid to Palestinians,"#> from $200 million per year to $400 million. I'm not sure how much time $200 million can buy you in a situation like this, but it should buy a little. =eod =// &&2 e050102 Pakistan "Black Day" protests fail =data ww2010.weblog.y2005.e050102.head Pakistan "Black Day" protests fail =data ww2010.weblog.y2005.e050102.keys =data ww2010.weblog.y2005.e050102.loc ww2010.weblog.log0501 =data ww2010.weblog.y2005.e050102.date 02-Jan-05 =data ww2010.weblog.y2005.e050102.txt1 Continuing a worldwide trend of increased militarization and police power, President Pervez Musharraf =data ww2010.weblog.y2005.e050102.txt2 of Pakistan <#stdurl "english.aljazeera.net/NR/exeres/4D9F2465-F2BC-458D-AE21-82D5F9DD92A2.htm" "reneged yesterday on a promise"#> that he made in 2003 to relinguish some of the power he obtained by force in 1999. <#inc ww2010.mappic pakistan.gif right "" "Pakistan"#> Musharraf seized power in 1999 in Pakistan through a bloodless coup, and was highly criticized by America and the West for doing so. But everything changed on 9/11/2001, when his cooperation became an essential part of America's war to remove the Taliban in Afghanistan. Musharraf provided that cooperation, but in doing so, he angered hard-core Islamic extremists in Pakistan. Musharraf was both the civilian head of government, and was also head of the military. Things came to a head in November, 2003, when political opposition forced Musharraf to promise to give up one role or the other in January, 2005. Now Musharraf has reneged on that promised. In a televised speech to the nation on Thursday, he accused his opponents of "threatening democracy," and said, "I have decided to retain both offices... any change in internal or external policies can be extremely dangerous for Pakistan." In other words, Musharraf is keeping his extraordinary powers, and he's giving national security as the reason. This is what's going on in a number of other countries. It's happened in America (Patriot Act and Homeland Security), and it's happened in Russia (Putin has seized control of local governments). There are calls for additional police powers in countries around the world, including the Netherlands, Germany, France, Spain, China and Japan. This is typical of the approach to a major war during a generational crisis period. These moves toward centralized power are not being opposed by the people of the countries in which it's occurring. The "antiwar" movement in America has failed to materialize, although many pundits predicted it would, and Russia's Putin still has the support of most Russians as he assumes greater power. The same is happening in Pakistan, as was shown on Saturday. Musharraf's opponents, An alliance of Islamic parties and other groups, called for massive anti-Musharraf rallies on New Year's Day. It's not surprising that most Pakistanis continue to support Musharraf through his continuing aggregation of power. Musharraf has survived three recent assassination attempts, and the Pakistan government ordered a ban on all public gatherings in October, following a series of bombings in a conflict between Pakistan's majority Sunni Muslim population versus its minority Shi'a population. That's why <#stdurl "www.gulf-daily-news.com/Story.asp?Article=100347&Sn=WORL&IssueID=27288" "the rallies were a failure,"#> drawing only hundreds of protestors, instead of the thousands that organizers had hoped for. The rallies were held to mark the anniversary of "black day," 57 years ago (October 27, 1947), when India invaded Kashmir, giving as a reason need to prevent an invasion by Kashmir. The Kashmir region has been the subject of continuing conflict between Muslim Pakistan and Hindu India. Generational Dynamics predicts that there will be a new major war between India and Pakistan over the Kashmir region. We'll be watching in 2005 to see how the situation develops. =eod =// &&2 e041229 Yukos nationalization may set the pattern for Russia in 2005 =data ww2010.weblog.y2004.e041229.head Yukos nationalization may set the pattern for Russia in 2005 =data ww2010.weblog.y2004.e041229.keys russia, yukos, baikal finance group =data ww2010.weblog.y2004.e041229.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041229.date 29-Dec-04 =data ww2010.weblog.y2004.e041229.txt1 There was more high comedy last week, as the Kremlin completed the nationalization =data ww2010.weblog.y2004.e041229.txt2 of the major assets of oil giant Yukos. Forced into bankruptcy by the Kremlin, Yukos auctioned off its major asset, a subsidiary called Yuganskneftegas, two weeks ago. The financial world was shocked to learn that the auction was won by the previously unknown Baikal Finance Group, which <#inc ww2010.weblog.ref e041220 "was evidently a neighborhood liquor store,"#> in a village 100 miles from Moscow. Well, surprise, surprise! <#stdurl "www.themoscowtimes.com/stories/2004/12/28/044.html" "Baikal turns out to be a front"#> for a Kremlin-owned oil company Rosneft. And Rosneft had already been scheduled to merge with Gazprom -- the company that outside observers had expected to win the Yukos auction! So now we're going to have new oil giant, consisting of Yukos' former subsidiary Yuganskneftegas, combined with Rosneft and Gazprom. It's pretty obvious that Russian President Vladimir Putin had been planning something like this all along, as soon as he jailed former Yukos CEO Mikhail Khodorkovsky last year for political reasons. But there's more, oh so much more. Who's going to be in charge of the newly merged oil collossus? None other than Putin's number two man, <#stdurl www.themoscowtimes.com/stories/2004/12/28/048.html "hard-core security advisor Igor Sechin."#> Now get this: Sechin's daughter recently married the son of Prosecutor General Vladimir Ustinov, who is in charge of the case that drove Yukos to bankruptcy!! So Putin not only managed to nationalize Yukos, but he even kept it all in the family! This is all really vile stuff, of course, but it shows how skillful Putin is, and how ruthless he is in taking any assets he pleases. <#hreftext ww2010.i.ukraine041128 "As I've previously said,"#> there's little doubt in my mind that he's going to bring the same steely determination to making sure that Ukraine's resources don't slip out of his hands. <#inc ww2010.weblog.ref e040706b "When I first wrote about Yukos"#> last July, I said that it appeared that Putin planned to nationalize Yukos, because it looked like he was following the example of Nicolai Lenin (Vladimir Ilyich Ulyanov) when he confiscated the immense wealth of the Russian Orthodox Church in 1917, prior to the Bolshevik Revolution. The reason that I was right about Putin and Yukos, when other commentators were wrong, is that I used the correct type of historical analogy. From the point of view of Generational Dynamics, when you're making any sort of historical comparison, you must compare only to previous periods at the same point in the generational cycle. Thus, Russia is in a crisis period today, and I made a historical comparison to Russia's previous crisis period. Every day you can see a lot of nonsense on television and in newspapers because journalists, pundits, and high-priced analysts keep comparing America and Iraq today to America and Vietnam in the 1960s. That's why they make one dumb mistake after another in their predictions. America is in a crisis period today, and was in an awakening period in the 1960s; Iraq is in an awakening period today, and Vietnam was in a crisis period in the 1960s. There is absolutely nothing comparable about America today and America in the 1960s. I've successfully compared America today to America's last crisis period, World War II. For example, that's why I've been predicting with certainty for over two years that there would be no anti-war movement, and there hasn't been one. You can easily see how comparable the two periods are when you realize that America locked up innocent Muslims after 9/11 in exactly the same way that America locked up innocent Japanese during World War II. This is no mere coincidence; it's how nations and societies act during crisis periods. I've also <#hreftext ww2010.i.sixties040501 "successfully compared Iraq today to 1960s America"#> -- something that works because those were both awakening periods. And if you want to know what's going to happen in Iraq, then please, stop comparing it to El Salvador in the 1980s, as I heard several politicians do on this past Sunday morning's news shows. Instead, compare Iraq today to <#hreftext ww2010.i.iraq041016 "Iraq's last awakening period, the mid to late 1940s."#> That's a valid historical comparison to make. Returning now to Russia and Putin, if you want to do historical comparisons, then the best place is to continue to compare Putin to Lenin in 1917. Lenin's brutal policies are in Russia's blood, and are certainly in Putin's blood. I'm told there's an old Russian saying, "If they don't know what to do - then they do what they know," and that certainly applies here. =eod =// &&2 e041228 China's 'sacred responsibility' is to stop Taiwan independence by force =data ww2010.weblog.y2004.e041228.head China's "sacred responsibility" is to stop Taiwan independence by force =data ww2010.weblog.y2004.e041228.keys =data ww2010.weblog.y2004.e041228.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041228.date 28-Dec-04 =data ww2010.weblog.y2004.e041228.txt1 A national defense white paper issued Monday by China threatens =data ww2010.weblog.y2004.e041228.txt2 to use Chinese armed forces "to stop the Taiwan independence forces from splitting the country," <#stdurl news.xinhuanet.com/english/2004-12/27/content_2385162.htm "The white paper"#> accuses Taiwan of using the independence issue to incite the Taiwanese people's hostility toward the mainland. It condemns Taiwan's purchase of military weapons and equipment from the U.S., and adds, "Should the Taiwan authorities go so far as to make a reckless attempt that constitutes a major incident of 'Taiwan independence', the Chinese people and armed forces will resolutely and thoroughly crush it at any cost." China has substantially increased its defense budget in the last two years, and the new white paper says that the nation will maintain current troop levels at the current 2.3 million soldiers and will promote technological warfare to thwart any independence attempt by Taiwan. The white paper comes just after a news leak Sunday that China's National People's Congress <#stdurl www.taipeitimes.com/News/taiwan/archives/2004/12/27/2003216903 "is finalizing a new "anti-secession" law."#> The new law calls for "peaceful unification" of China and says that China would resort to "non-peaceful approaches" to deal with Taiwan under "necessary situations." Taken together, these two new policy positions represent an increase in the level of confrontation with both Taiwan and America. <#hreftext ww2010.i.taiwan040706 "Beijing has previously threatened war"#> in case Taiwan President Chen Shui-bian went ahead with announced plans to amend the Constitution in 2008 to move towards independence. But the new statements not only extend the forbidden actions to any "reckless attempt that constitutes a major incident of 'Taiwan independence," whatever that means, but also wires the warning into firm Beijing policy and law, rather than just talk. From the point of view of Generational Dynamics, this escalation goes to the nuts and bolts of the theory. Every nation goes through genocidal crisis wars every 70-90 years or so, and China's last one was the civil war between Mao Zedong and Chiang Kai-shek from 1934 to 1949. Between crisis wars, a country goes through specific generational changes, referred to as an "austerity" period, an "awakening" period, an "unraveling" period, and then back to a "crisis" period. The transition from unraveling period to crisis period represents a major change in public opinion, caused by the fact that risk-averse people in the generation that grew up during the last crisis war all disappear (retire or die) all at once, and are replaced by risk-seeking people in the generation born after the war. This major generational change is characterized by going from an unraveling period, in which problems are solved with compromise and containment, to a crisis period, when problems are solved with confrontation and risk taking. That's what the new China policy seems to be doing. It's much more confrontative than previous policies have been, and indicates that the people of China are moving from risk-avoiding unraveling policies to risk-seeking crisis policies. A key to understanding the new Chinese policies is the phrase, "to stop the Taiwan independence forces from splitting the country," This indicates that Beijing sees China in danger of coming apart, and blames Taiwan. One part of this is <#inc ww2010.weblog.ref e041226 "the recent increase in regional rebellions,"#> as we're recently discussed. But note that the anti-secession law is directed not only at Taiwan, but also to China's western provinces, Tibet and Xinjiang, which are also threatening secession. Beijing cannot afford to let Taiwan move toward independence, since doing so would encourage Tibet and Xinjiang to do so as well. America has already entered a crisis period, having done so after the Nasdaq crash in 2000, and especially after the 9/11 attacks in 2001. America's policy was extremely confrontative: invasion of Afghanistan and then Iraq, locking up Muslims, and restricting individual rights through such mechanisms of the Patriot Act. In fact, these kinds of crisis-era changes are taking place around the world. Russia's President Vladimir Putin has aggregated enormous new powers in the last year, including the abolishment of local elections, in favor of political appointments by Putin. Putin's nationalization of oil giant Yukos is evidently a part of an emerging pattern. In Pakistan this week, President Pervez Musharraf has officially reneged on his promise to give up his control of the armed forces, Since he held dual roles as civilian leader and head of the armed forces, he had promised to give up his armed forces role by the end of 2004, but has now said he will not do so. And we've recently seen the re this kind of dynamic in <#inc ww2010.weblog.ref e041214 "the Netherlands, where they're talking about deporting Muslims"#> who can't pass a citizenship exam. These countries are all moving in the direction of asserting national rights over individual rights. The reason that all of these countries are moving in this direction at the same time is because we're at a unique time in history, about 60 years after the end of World War II, when every country is experiencing the same generational change at the same time: The people in the generation that fought in WW II are all disappearing (retiring or dying) all at once, and are being replaced by the people in the generation born after WW II. Slowly but surely (or maybe not so slowly), the world is moving, step by step, toward a new world war, a "clash of civilizations" world war. As described in the discussion of <#hreftext ww2010.i.danger041120 "the six most dangerous regions of the world,"#> that time might not be too far off. =eod =// &&2 e041226 Up to 50,000 workers riot and clash with police in southeast China =data ww2010.weblog.y2004.e041226.head Up to 50,000 workers riot and clash with police in southeast China =data ww2010.weblog.y2004.e041226.keys =data ww2010.weblog.y2004.e041226.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041226.date 26-Dec-04 =data ww2010.weblog.y2004.e041226.txt1 As income disparities and food problems continue to grow in China, =data ww2010.weblog.y2004.e041226.txt2 incidents of social unrest have been increasing throughout China. <#inc ww2010.pic chinagdp.gif center "" "China and its provinces (Source: The Economist)"#> Yesterday's incident occurred in Guangdong province, near the border of Hunan province. <#stdurl www.alertnet.org/thenews/newsdesk/PEK202037.htm "It was triggered by a traffic accident,"#> which led to a confrontation, which led to major riots, as workers clashed with local security forces. The same kind of thing happened <#inc ww2010.weblog.ref e041101 "last month in central China,"#> when a traffic accident triggered violent clashes between Muslim and non-Muslim Chinese. Guangdong is a historically significant region for riots. China's last two crisis civil wars both began in this region. The Taiping Rebellion began here in 1852, and Mao Zedong's Long March began here in 1934. In each case, the results were devastating for China. The rebellion spread north to Beijing and out into the midlands, killing tens of millions of people each time. If the current rebellion grows and spreads, deaths will once again reach the hundreds of millions. Generational Dynamics predicts that there will a new country-wide rebellion within the next few years, with near 100% certainty. China is currently in a "generational unraveling" period, with the overheated economy in a bubble that may burst at any time. Mao's entire social structure, which required peasants to remain on the farm and factory workers to live in the cities, is unraveling. Individual peasant farms are being taken over by large farming businesses, and tens of millions of peasants have been forced into the cities as migrant workers for their livelihood, where they're ill-prepared to cope with financial problems that may arise. Guangdong province has been a major beneficiary of the new economy, as it's one of the wealthiest provinces, earning about $2,000 per year per person, but is adjacent to Jiangxi and Guangxi provinces that earn only $100-200 per person per year. These enormous income disparities form a major engine of the social unrest. =// The 2nd URL below may change to =// http://publish.gio.gov.tw/FCJ/past/04122471.html However, an analysis in the new issue of <#stdurl publish.gio.gov.tw/FCJ/ "Taiwan Journal"#> indicates that food is an increasingly critical issue. According to <#stdurl publish.gio.gov.tw/FCJ/past/04122471.html "the article,"#> industrial construction and erosion are eating up 0.5% of China's farmland each year. China has lost 2/3 of its farmland in 40 years, but has 2.3 times as many people. (Using my standard benchmark measure of 0.96% annual increase in food production per acre of farmland, the above figures mean that the amount of food per capita is ((2 / 3) / 2.3) * (1.0096^40) = 42% of what it was 40 years ago.) China's food problems are consistent with what's happening in the rest of the world. A <#stdurl "www.washingtonpost.com/wp-dyn/articles/A57945-2004Apr30.html" "Washington Post analysis"#> earlier this year indicated that food prices are skyrocketing around the world. This is happening because of <#hreftext ww2010.i.food040628 "the "Malthus Effect,""#> which causes the population to grow faster than the food supply, except during major genocidal wars. This causes food to become relatively scarce, causing food prices to rise. China has particularly added to this problem in the couple of years, as it's been importing food to feed people in its overheated economy. This makes China's food problems are especially critical, when combined with the other problems. If there's a recession in China in 2005, and some analysts are predicting there will be, then China won't be able to import enough food to meet its shortfall, and migrant workers will be unable to get jobs and make money to send back to their families in rural areas. This is certain to foment further social unrest. =eod =// &&2 e041224 This is Christmas eve. =data ww2010.weblog.y2004.e041224 =data ww2010.weblog.y2004.e041224.head This is Christmas eve. =data ww2010.weblog.y2004.e041224.keys =data ww2010.weblog.y2004.e041224.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041224.date 24-Dec-04 =data ww2010.weblog.y2004.e041224.txt1 Let's have no more doom and gloom for a day or two. =data ww2010.weblog.y2004.e041224.txt2 For one day, no talk about high P/E ratios, or dangerously high expectations. For one day, I'll forget that this is the saddest project I've ever worked on in my life. For now, I'll be like the journalists, pundits and analysts you see in the news:

The December 26 Ukraine elections will finally settle the differences between east and west.
The January 9 Palestinian elections will select a moderate Palestinian leader who will work with Israel to create a Palestinian state, living in peace side by side with Israel.
The January 30 Iraq elections will legitimize the government and give the insurgents no further reason to commit terrorist acts.
The recent incredibly rapid run-up of the stock market means that the economy is surging and self-sustaining.
The precipitous drop in the international value of the dollar is good news, because it's the self-correcting economy in action.
Iran and North Korea will abandon all plans for nuclear weapons

Merry Christmas, everyone! =eod =// &&2 e041223 Tomorrow is the 90th Anniversary of the 1914 Christmas Truce =data ww2010.weblog.y2004.e041223 =data ww2010.weblog.y2004.e041223.head Tomorrow is the 90th Anniversary of the 1914 Christmas Truce =data ww2010.weblog.y2004.e041223.keys =data ww2010.weblog.y2004.e041223.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041223.date 23-Dec-04 =data ww2010.weblog.y2004.e041223.txt1 One of the most remarkable occurrences in modern warfare occurred =data ww2010.weblog.y2004.e041223.txt2 just a few months after World War I had begun. On December 24, 1914, the German and British soldiers laid down their arms, crossed into the "No Man's Land" separating their trenches. They sang Christmas carols, played games, and shared jokes and beer with one another. The war resumed shortly after Christmas. <#inc ww2010.pic truce.jpg right "" "Christmas truce drawing from the London News of January 9, 1915. The drawing's caption reads, in part, "British and German soldiers arm-in-arm and exchanging headgear: a Christmas truce between opposing trenches. Drawn by A. C. Michael.""#> Although there are <#stdurl www.firstworldwar.com/features/christmastruce.htm "varying stories of how the truce happened,"#> there is little doubt that it did occur, as <#stdurl "www.lib.byu.edu/~english/WWI/historical/slide6.html" "the adjoining drawing shows."#> This story illustrates how different World War I was from World War II. From the point of view of Generational Dynamics, World War II was a generational crisis war, but World War I was not. Can you imagine Hitler's German troops and Churchill's English troops singing Christmas carols and playing games at the beginning of World War II? That would have been impossible. World War I is now an almost completely forgotten war in America, except for its name. Because of the similarity of names between World Wars I and II, and because Americans fought Germans in both wars, most Americans between that WW I and WW II were similar to one another. In fact, World War I was much more similar to our Vietnam war than it was to World War II. World War I was very politically divisive for both America and Germany. America actually remained neutral between England and Germany for several years, and only entered the war in 1917, to much political dissent. To this day, many historians still consider America's entry in WW I to have been unwise. In a <#stdurl "www.opinionjournal.com/pl/?id=110005196" "recent survey of historians's views"#> on the "greatest" and "least great" presidents, the two presidents voted the "most controversial" were Bill Clinton and Woodrow Wilson. Wilson was considered controversial because he was the President who entered America into World War I, despite enormous political opposition. World War I was just as politically divisive for Germany. Germany did not start WW I, as many people naïvely believe. WW I started in the Balkans and spread to Russia. Germany was "accidentally" forced into the war because of a long-standing treaty with Austria which obligated Germany to invade France because France was an ally of Russia. England was pulled into the war because of a previous agreement with France. Germany's incredible capitulation at the end of 1917, long before it was necessary, occurred because the German people were so politically angered by the war. Essentially, Germany capitulated in WW I for exactly the same reason that America capitulated in the Vietnam War -- because of enormous political opposition back home during a "generational awakening" period. (Incidentally, WW I was a crisis period war for Russia, just as the Vietnam war was a crisis period war for Vietnam.) By contrast, WW II was a crisis war for Germany (as well as England and America). That war was no "accident." Hitler planned his attack on France and England for years in advance, in secret, and Hitler kept on fighting long after it was clear that Germany would lose. So, the Christmas truce of 1914 is a unique, sentimental story to think about in this holiday season, as we realize with sadness that there'll be no Christmas truces in the "clash of civilizations" world war that's just around the corner. =eod =// &&2 e041221 Americans support additional restrictions on Muslim-Americans =data ww2010.weblog.y2004.e041221 =data ww2010.weblog.y2004.e041221.head Americans support additional restrictions on Muslim-Americans =data ww2010.weblog.y2004.e041221.keys =data ww2010.weblog.y2004.e041221.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041221.date 21-Dec-04 =data ww2010.weblog.y2004.e041221.txt1 48% of Americans want restrictions on the civil liberties of Muslims, =data ww2010.weblog.y2004.e041221.txt2 according to <#stdurl www.news.cornell.edu/releases/Dec04/Muslim.Poll.bpf.html "a poll conducted by Cornell University."#> Over 700 people were interviewed for the survey, which gauged their support for different kinds of restrictions on the civil liberties of Muslim Americans. The results show that Americans are increasingly willing to restrict Muslim Americans, even those who are ordinary citizens with jobs and families and no suspicion of crime. And the feelings are mutual. As <#hreftext ww2010.i.zogby040726 "we discussed in July,"#> Arab views around the world are becoming increasingly hostile to America. This is the kind of thing that happens in every nation and society during generational crisis periods. America's last generational crisis period was World War II, and at that time we locked up innocent Japanese-American citizens in camps. The feeling was mutual then too, as Japanese and Americans increasingly hated each other in the 1930s, leading up to WW II. Furthermore, this is the kind of dynamic we've been seeing in <#inc ww2010.weblog.ref e041214 "the Netherlands, where they're talking about deporting Muslims"#> who can't pass a citizenship exam. We've also described some other major changes in American public attitudes on this web site, including:

<#hreftext ww2010.i.election041103 ""Moral values" surged as an important issue"#> in the recent presidential election.
Women are abandoning "women's lib" and feminism, returning to gender-specific roles, including staying home with the kids, <#inc ww2010.weblog.ref e041011 "as they did in the 1950s."#>
People are becoming more intolerant of open sexuality, as shown by the public reaction when <#inc ww2010.weblog.ref e040924 "Janet Jackson bared her breast at the last Superbowl half-time show."#>
<#hreftext ww2010.i.antiwar "There has been no antiwar movement,"#> despite the fact that we've been in two wars since 9/11. There were brief antiwar demonstrations tied to the election, but they were anti-Bush demonstrations, not anti-war demonstrations.

All of these trends point in the same direction: The American public is increasingly concerned about terrorism, the future of America, and the future of the American way of life. They're increasingly willing to give up individual rights for the safety and unity of the nation. This is what always happens during a generational crisis period, and these trends will continue to increase as we approach the "clash of civilizations" world war. In the Cornell University poll, each of the respondents was asked to agree or disagree with each of the following statements:

Statement	% Agree
All Muslim Americans should be required to register their whereabouts with the federal government.	27
Mosques should be closely monitored and surveilled by U.S. law enforcement agencies.	26
U.S. government agencies should profile citizens as potential threats based on being Muslim or having Middle Eastern heritage.	22
Muslim civic and volunteer organizations should be infiltrated by undercover law enforcement agents to keep watch on their actiities and fundraising.	29

Approximately one-quarter of respondents agreed with each statement, with the infiltration of Muslim civic and volunteer organizations garnering the most support (29%). Overall, nearly half of all respondents (48%) supported one of the possible restrictions on Muslim American civil liberties, with 29% of all respondents supporting two or more type of restrictions. The Cornell poll also asked the respondents some related questions about civil liberties, and compared them to the responses given in their pool in 2002:

#	Statement	% Agree 2004	% Agree 2002

1	Government should have greater power in monitoring Internet activities such as email and online transactions,	47	41
2	Law enforcement officials should be able to indefinitely detain suspected terrorists,	63	57
3	We need to outlaw some un-American actions, even if they're Constitutionally protected,	47	41
4	Government officials sometimes need to lie to the press about military operations,	48	57
5	In a time of crisis or war, the media should NOT cover anti-war protests,	33	30
6	In a time of crisis or war, the media should NOT report comments of individuals who criticize the government,	31	31
7	In a time of war or crisis, individuals should be allowed to stage public protests against the government or its policies, and lastly	60	62
8	In a time of war or crisis, individuals should be allowed to criticize publicly the government, or its policies.	63	65

From the point of view of Generational Dynamics, these results are as expected. Americans are increasingly less concerned about civil liberties, and increasingly more concerned about national survival. This trend will continue. This is all part of a historical realignment of both political parties that will occur in the next ten years. =eod =// &&2 e041220 Now we know - Baikal is a neighborhood liquor store / Yukos =data ww2010.weblog.y2004.e041220 =data ww2010.weblog.y2004.e041220.head Now we know - Baikal is a neighborhood liquor store =data ww2010.weblog.y2004.e041220.keys russia, yukos =data ww2010.weblog.y2004.e041220.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041220.date 20-Dec-04 =data ww2010.weblog.y2004.e041220.txt1 High comedy continued on Monday, as Russian officials stonewalled =data ww2010.weblog.y2004.e041220.txt2 on the new owner of Russian oil giant Yukos' assets. The previously unknown Baikal Finance Group won the assets at an auction on Sunday when their principal rival, Gazprom, made a phone bid and was evidently ordered not to make a higher bid. Baikal's winning bid was about half analysts' estimates of the assets' actual worth. So who's Baikal? Well, the company is registered in Tver, a city 100 miles northwest of Moscow, at 12 B Novotorzhskaya Street. Reporters going to that address discovered a 3-story building constructed before the (1917) Russian revolution. <#stdurl "www.kommersant.com/page.asp?id=-3781" "The only things located on the first floor"#> were London café, Dionis liquor store and Volga grocery store. An employee at the bar, Valentina Vasilieva, said in an interview there wasn't even a sign for Baikal in the building and she never counted any oil tycoons among her clientele. "We would immediately have noticed them," she said, <#stdurl "online.wsj.com/article/0,,SB110356007831704836,00.html?mod=home_whats_news_us" "according to the Wall Street Journal"#> According to the BBC World Service, there's another angle that almost guarantees that Yukos' assets will soon be completely owned by the Kremlin. Yukos' major creditor is the Kremlin, thanks to huge tax assessments levied against the company. Baikal has 14 days to come up with the $9.4 billion that it bid, and if it fails, then Russian law says that its assets will go to the largest creditor - the Kremlin. So it's possible that Baikal is simply an empty shell company with no money, set up as a ruse to nationalize Yukos. =eod =// &&2 e041219 After a week of high comedy, who the heck is Baikal? / Yukos =data ww2010.weblog.y2004.e041219 =data ww2010.weblog.y2004.e041219.head After a week of high comedy, who the heck is Baikal? =data ww2010.weblog.y2004.e041219.keys russia, yukos =data ww2010.weblog.y2004.e041219.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041219.date 19-Dec-04 =data ww2010.weblog.y2004.e041219.txt1 Baikal Finance Group, an unknown company with unknown backers, is the new owner of Yukos' =data ww2010.weblog.y2004.e041219.txt2 principal asset, its Yuganskneftegaz subsidiary. after <#stdurl "www.reuters.co.uk/newsArticle.jhtml?type=worldNews&storyID=641041" "their $9.4 billion bid won at auction on Sunday."#> Yukos is the Russian oil giant that President Vladimir Putin's government <#inc ww2010.weblog.ref e040706b "has been determined to nationalize"#> for over a year. The game began when Yukos' CEO Mikhail Khodorkovsky announced that he was going to challenge Putin politically. Khodorkovsky was almost immediately jailed in October, 2003, and Sunday's auction completes the destruction of the company that Khodorkovsky once headed. It's not really a game for Khodorkovsky, however, since he's still in jail, and may never get out. The bidding at the auction lasted just 10 minutes. The representatives of the company that expected to win, Gazprom, appeared shocked at being outbid by Baikal, but did not have the funding to top Baikal's bid. Gazprom is controlled by the Kremlin, so ownership by Gazprom would mean that the Kremlin had succeeded in nationalizing Yukos. The auction was the climax of several days of high comedy. In an attempt to prevent the bankrupt Yukos from being auctioned off, <#stdurl "olympics.reuters.com/newsArticle.jhtml?type=topNews&storyID=7120255" "Yukos' lawyers went to an American bankruptcy court in Houston,"#> Texas (!!!!), to get the auction stopped. And the Houston court obliged, ordering the Russian government not to hold the auction on Sunday. The bankruptcy court's ruling was upheld on Saturday evening by an American federal appeals court. Well, guess what? Russia held the auction anyway. But Gazprom didn't win, as expected. Baikal did, and no one knows who or what Baikal is. The Houston court ruling did have one major impact: It meant that Deutsche Bank and other European banks that had been planning to finance Gazprom's bid announced that they were backing out since, even though a Russian court couldn't be bound by a Houston court, a European bank doing business in the U.S. could indeed suffer serious consequences. So here's one possible explanation of what happened: The Houston court ruling may have forced the Kremlin to abandon acquisition plans by Gazprom, and move in a different direction. It's possible that Baikal is simply a front for the Kremlin, or perhaps for Gazprom. Either way, it's pretty certain that Putin has finally succeeded in getting his hands on Yukos. From the point of view of Generational Dynamics, this is all part of a pattern where Putin is repeating the kinds of actions pursued by Nicolai Lenin, leading to the Bolshevik Revolution of 1917, and the ensuing decade-long civil war that killed tens of millions of people. I find myself very impressed by Putin's ingenuity in nationalizing Yukos this past year. He could have simply ordered the company taken by force, but that would have infuriated the international community. Instead, he wove a complex web of tax assessements, regulatory rulings, and court suits. It took him a year to nationalize Yukos, but he did it with a veneer of legality that gave him plausible deniability. Analysts in international community have not really been fooled, but there's really nothing that they can point to as a "smoking gun" proof that the nationalization was illegal. I get exactly the same feeling when I see what's happening in Ukraine. <#hreftext ww2010.i.ukraine041128 "As we've previously said,"#> there is no way that Putin is going to lose control of Ukraine's valuable resources, and allow Ukraine to become more closely allied with the European Union. Putin has lately been keeping quiet about Ukraine, and the country <#inc ww2010.weblog.ref e041211 "appears to be in a state of suspended animation,"#> awaiting the December 26 runoff election. We'll be waiting to see what Putin will do if the election doesn't go his way. =eod =// &&2 e041217 Explosive conflict seems imminent in Darfur, Sudan =data ww2010.weblog.y2004.e041217 =data ww2010.weblog.y2004.e041217.head Explosive conflict seems imminent in Darfur, Sudan =data ww2010.weblog.y2004.e041217.keys =data ww2010.weblog.y2004.e041217.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041217.date 17-Dec-04 =data ww2010.weblog.y2004.e041217.txt1 Large quantities of arms and ammunition have poured into Darfur in the last two weeks =data ww2010.weblog.y2004.e041217.txt2 and the Sudan government appears ready for a major military offensive, <#stdurl "www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=7125695" "the African Union (AU) said on Friday,"#> which added that the region was now a "time bomb that could explode at any moment." <#inc ww2010.pic sudan1.gif right "" "Darfur - southwest region of Sudan (Source: BBC)"#> Thiis AU report came out on Friday, just as <#stdurl "www.amnesty.org.uk/news/press/15823.shtml" "Amnesty International blamed the AU and the United Nations"#> for failing to stop the mass murder and rape of civilians by government-supported militias, which are also bulldozing and burning entire regions ("scorched earth policy") to prevent people from returning to their homes. When I <#inc ww2010.weblog.ref e040628 "first discussed the Darfur issue"#> six months ago, in a piece entitled, "Darfur genocide: The UN is completely irrelevant," I concluded, "One thing that Generational Dynamics tells us is that this kind of genocide is a force of nature, and that the UN can no more stop it than they can stop a typhoon." If the AU report is correct, then we're just about the see the full fury of that typhoon. A principal finding of Generational Dynamics is that there are two kinds of wars: Non-crisis wars are fraught with political dissent and often end inconclusively; the Vietnam War and World War I are two non-crisis wars for America in the 20th century. Crisis wars are fought with little political dissension and with much ferocity, almost always ending in an explosion of genocidal fury. There have been two American crisis wars since the founding of the nation: World War II, which ended with the use of nuclear weapons on two cities of Japan, and the Civil War, which ended after General Sherman conducted a "scorched earth" march through Georgia, killing everyone possible and destroying all possible property. This kind of war, once begun, cannot be stopped any more than an earthquake can be stopped, until it's run its course. If the African Union report is right, then we may be seeing the explosion of genocidal fury in the Darfur war very soon. =eod =// &&2 e041216 North Korea: Japanese sanctions will trigger war =data ww2010.weblog.y2004.e041216 =data ww2010.weblog.y2004.e041216.head North Korea says Japanese sanctions will trigger "war" and an "effective physical" response =data ww2010.weblog.y2004.e041216.keys =data ww2010.weblog.y2004.e041216.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041216.date 16-Dec-04 =data ww2010.weblog.y2004.e041216.txt1 Japan has threatened to freeze food aid to North Korea and impose other sanctions =data ww2010.weblog.y2004.e041216.txt2 after <#stdurl www.taipeitimes.com/News/world/archives/2004/12/16/2003215326 "catching North Korea in a lie over a matter or Japanese national honor."#> <#inc ww2010.pic yokota.jpg right "" " Megumi Yokota pictured before her abduction in 1977 (Source: BBC)"#> Megumi Yokota was just 12 years old when the Koreans abducted her on a Japanese beach. She was one of a dozen or so 1970s Korean abductions of Japanese for the purpose of teaching spies Japanese language and culture. In recent years, Japan has demanded return of the abductees, or their remains if they're dead, as claimed by North Korea. Korea returned some ashes and bones to Japan in November, saying that they were Yokota's remains. However, the Japanese public was infuriated when <#stdurl "www.japantoday.com/e/?content=news&cat=&id=321399" "DNA tests revealed that the remains contained the bones of two persons,"#> neither of them Yokota. Japan said it will suspend food aid to North Korea and consider other possible economic sanctions. North Korea responded yesterday by saying that any sanctions would be viewed as a declaration of war and would hit back with an "effective physical" response. Now, this exchange has a deep reverberation in history, something that newspaper accounts are missing. In 1931, Japan invaded Manchuria. and that triggered the worldwide oil embargo and economic sanctions against Japan, led by American and Britain and enforced by the League of Nations. In 1933, Japan walked out of the League of Nations and invaded China. One thing led to another, in Europe and Asia, and Japan finally bombed Pearl Harbor in 1941. Americans have forgotten all this, of course, but you can be sure that the Koreans haven't. Imperial Japan colonized Korea during the first half of the 20th century, and later, during WW II, used tens of thousands of <#stdurl "online.sfsu.edu/~soh/comfortwomen.html" "Korean women as "comfort women,""#> for the Japanese armed forces. If we follow the Generational Dynamics principle that no one ever remembers the atrocities they commit on other people, but no one every forgets the atrocities that others commit on them, then you can be certain that North Korean president Kim Jong-il, and the North Korean people themselves, are still infuriated by Japanese actions at that time. And after being victimized for "comfort women," you can be sure that the North Koreans really don't give a damn about Japanese anger over the abducted 12-year-old girl, Megumi Yokota. And when Japan threatened last week to impose economic sanctions, Korea's response yesterday was essentially this: "We'll consider that an act of war, just as Japan considered economic sanctions against it an act of war in 1933." The implied threat is that while Japan waited 8 years (1933 to 1941) to build up its military and launch the attack on Pearl Harbor, Korea is ready to launch an attack on Japan today, and won't wait 8 years. Indeed, North Korea is known to have developed missile technology that can easily reach Japan, and might even reach California, and North Korea is thought to have an arsenal of six to eight nuclear weapons that could deployed with those missiles. Furthermore, North Korea, which is in a generational crisis period, has a million man army ready to flood across the demilitarized zone (DMZ) to overrun Seoul, South Korea. Generational Dynamics shows that this are exactly the kinds of things that happen in crisis periods, whether they are rational or not. During crisis periods throughout history, war becomes like sex, and the drive to commit genocidal war becomes an overwhelming drive related to the human "survival of the fittest" instinct. Why didn't Japan's invasion of Manchuria in 1931 trigger an immediate larger war involving America? Well, one reason is that we had no major national interest in defending Manchuria and China in a regional war with Japan. Things are quite different today. We're obligated by treaties to defend Japan, South Korea and Taiwan (as well as Israel). That means that a regional war in any of these areas will pull in America, and probably trigger a worldwide war. As <#hreftext ww2010.i.danger041120 "I've recently described,"#> these are among the six most dangerous regions of the world, in that a regional war in any one of them would almost certain spiral out of control into a world war. =eod =// &&2 e041215 Fed raises interest rates and makes a 2005 recession almost certain =data ww2010.weblog.y2004.e041215 =data ww2010.weblog.y2004.e041215.head Fed raises interest rates and makes a 2005 recession almost certain =data ww2010.weblog.y2004.e041215.keys =data ww2010.weblog.y2004.e041215.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041215.date 15-Dec-04 =data ww2010.weblog.y2004.e041215.txt1 Signalling aggressive plans to fight the weakening dollar, =data ww2010.weblog.y2004.e041215.txt2 the Fed on Wednesday <#stdurl www.iht.com/articles/2004/12/14/business/usecon.html "raised the overnight funds rate"#> a quarter percent, to 2.25%. The Fed undoubtedly felt it had no choice, in view of the ever-widening trade deficit with other countries, which has caused a substantial fall in the value of the dollar overseas. If they had any doubt on Monday evening, I'm sure they lost that doubt on Tuesday morning when released figures showed an unexpectedly sharp increase of 9% in the October trade deficit, showing that the loss of value in the dollar may be accelerating. According to Hans Redeker of BNP Paribas, speaking on CNN International this morning, this means an almost certain recession in 2005. Redeker's remarks are not surprising, in view of the fact that analysts have been predicting for several months that there would be recessions in Europe and America in 2005 if oil prices stayed above $40 per barrel. Oil prices have been falling recently, after shooting up to $55 per barrel last month, but they're still above $40. Still, the situation highlights the Fed's dilemma. If the Fed leaves interest rates unchanged, then the dollar's value will continue to fall. If the Fed raises interest rates, which it is signaling that it will continue to do, then investors will pull money out of stocks. <#inc ww2010.pic peratio.jpg right "" "Wall Street Historical Price/earnings ratio for S&P 500"#> The reason for this is related to the historically high price/earnings ratios of stocks today, running between 20 and 25. When the price/earnings ratio is 25, it means that a company is earning $1.00 per year for each $25.00 in the price of its stock. This roughly means that an investor buying that stock can hope to earn only $1.00/$25.00 or 4% per year. At a P/E ratio of 20, the rate is $1.00/$20.00, or 5% per year. Yesterday's increase in the overnight funds rate to 2.25% has had the immediate effect of causing banks to raise their prime interest rates from 5% to 5.25%. These are the rates that banks charge in loans to its most reliable borrowers. So an investor with money has a choice of investing in stocks, and hoping to earn roughly 4% to 5% on the investment, or by lending at the prime rate, and earning 5.25%. As the Fed continues to increase interest rates to prevent further weakening of the dollar, stock investments become less worthwhile. <#inc ww2010.pic bgross1g.gif left "" "Total credit market debt (Source: PIMCO)"#> Increasing interest rates has another effect: The Fed lowered interest rates to near-zero in order to prevent massive bankruptcies and homelessness following the 2000 Nasdaq crash. Many people and businesses that would have gone bankrupt have, instead, borrowed large sums of money at near-zero interest rates, and are living off this credit. The result is the highest rate of public debt since the 1930s. As the Fed raises interest rates, the ability of individuals to continue borrowing to cover existing debt is reduced, and we can expect to see the level of bankruptcies increase. From the point of view of Generational Dynamics, a 1930s-style depression is already in the cards, no matter what the Fed does. =eod =// &&2 e041214 Netherlands will deport Muslims who can't pass integration exam =data ww2010.weblog.y2004.e041214 =data ww2010.weblog.y2004.e041214.head Netherlands will deport Muslims who can't pass an integration exam =data ww2010.weblog.y2004.e041214.keys =data ww2010.weblog.y2004.e041214.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041214.date 14-Dec-04 =data ww2010.weblog.y2004.e041214.txt1 The startling changes in Holland are continuing, as the Dutch government announced =data ww2010.weblog.y2004.e041214.txt2 a plan to <#stdurl "www.expatica.com/source/site_article.asp?subchannel_id=19&story_id=14798&name=Verdonk+plans+'restricted'integration+of+750%2C000" "require 750,000 non-citizens to pass a citizenship exam,"#> or risk a fine or deportation. This is the latest in a number of rapid changes to Holland that have been occurring since the November 2 murder of filmmaker Theo van Gogh by a Muslim extremist. Since then, arson attacks have burned over a dozen mosques and Muslim schools, and <#inc ww2010.weblog.ref e041117b "Pim Fortuyn, the harshly anti-immigrant politician"#> who was assassinated two years ago, was voted the "Greatest Dutchman of all time." Although the planned law is framed as an educational measure, it's mainly targeted at Muslim immigrants who arrived from Turkey and Morocco in the 1960s and 1970s as "guest workers." These guest workers formed communities of their own and were educated in their own languages and their own culture. This was done on purpose, following the Dutch model of a multicultural society in which any group could express their own opinions and ideas, and practice their own religion. The Dutch always avoided talking about these guest workers, and politicians turned a blind eye to serious problems, according to a <#stdurl "www.bbc.co.uk/worldservice/programmes/analysis.shtml" "BBC World Service analysis yesterday,"#> and tacitly assumed that the guest workers would eventually return to their own countries. Of course, this has always been an unrealistic assumption, especially for second and third generation workers, even when they grew up in Holland without learning to speak Dutch! Attitudes began to change after 9/11, and anti-immigration attitudes were galvanized by Fortuyn. The changes were put on hold after Foruyn's assassination by an animal rights activist, but were revived with great vigor after the recent Van Gogh assassination by a Muslim extremist. The new planned law is intended to reverse Holland's multicultural approach, and adopt an approach that France has been trying for years - integration instead of multiculturalism. The purpose of the integration exam is force guest worker families to learn the Dutch language and culture, and become integrated within Dutch communities. Needless to say, that's just another form of denial; this has as much chance of succeeding as pigs have of flying. From the point of view of Generational Dynamics, this is interesting because it's beginning to show what path Europe is taking. Generational Dynamics tells us what the final destination is, but doesn't tell us what path will be taken to reach the destination. In this case, it tells us that there will be a new West European war, just as there have been wars as regular as clockwork throughout the last millennium or more. But how is it going to unfold? As we approach "clash of civilizations" world war, Europe itself is becoming increasingly divided along the fault line between Muslims on the one hand and Christians and Jews on the other. This division has become apparent in Germany with the success of <#inc ww2010.weblog.ref e040920 "Neo-Nazis and Communists in regional elections,"#> and in France <#inc ww2010.weblog.ref e041004b "with the headscarf ban."#> The rapidity with which the Netherlands is changing gives us a glimpse of how fault lines are being exposed, as we approach the next European war. =eod =// &&2 e041213 Sunday's Gaza bombing a turning point for Palestine peace plan =data ww2010.weblog.y2004.e041213.head Sunday's Gaza bombing a turning point for Palestine peace plan =data ww2010.weblog.y2004.e041213.keys =data ww2010.weblog.y2004.e041213.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041213.date 13-Dec-04 =data ww2010.weblog.y2004.e041213.txt1 Palestinian militia group Hamas claimed credit for major terrorist attack, =data ww2010.weblog.y2004.e041213.txt2 <#stdurl "www.bloomberg.com/apps/news?pid=10000087&sid=aUBjwfaZ3QdI&refer=top_world_news" "that killed four Israeli soldiers."#> Hamas promised that the attacks will continue. Prior to Yasser Arafat's death, the international belief was that only Arafat was standing in the way of a peace agreement, and that once he was gone, a moderate Palestinian leader could bring peace. The complaint about Arafat is that he refused to bring Palestinian terrorists to justice. That's why today's terrorist act is such a major turning point. Mahmoud Abbas, also known as Abu Mazen, was Arafat's aide, and is now the de facto Palestinian leader. He's expected to win the election for Palestinian president on January 9. So what's Abbas going to do now? Will he crack down on the Hamas leaders who perpetrated today's bombing, and are claiming credit for it? If he doesn't, then he'll reveal himself as no different from Arafat. If he does, he'll infuriate Hamas, and a lot of other Palestinians as well. There's also a great deal of Palestinian politics going on. Abbas is head of Fatah, the militia group that Arafat founded. Hamas, which perpetrated today's attack, is essentially a competitor to Fatah. Today's attack reveals that Hamas is willing to use violence as a weapon against Fatah as well as Israel, since Fatah will be shown impotent when it fails to bring Hamas under control. Incidentally, Sunday's attack is a major embarassment to Israel's IDF (security forces). The bombing came from 1500 kg (3300 pounds) of explosives inside a tunnel 600 meters (0.37 miles) that the Hamas operatives have been digging for four months. This represents a <#stdurl "www.jpost.com/servlet/Satellite?pagename=JPost/JPArticle/ShowFull&cid=1102821630714" "massive intelligence failure for the IDF,"#> whose leaders will be subject to the same type of political criticism as America's CIA leaders are. Ironically, Abbas received a gift on Sunday, when <#stdurl "www.iht.com/articles/2004/12/12/news/mideast.html" "Marwan Barghouti withdrew from the election race,"#> virtually guaranteeing that Abbas will win on January 9. Journalists are speculating that Barghouti, who is also a member of Fatah, made the move out of kindness to Abbas, so as not to split the Fatah movement. That sounds like wishful thinking to me. Abbas is a member of Palestine's "old guard" generation, who grew up during the 1940s genocidal war between Jews and Arabs, and willing to compromise to prevent a similar war. Barghouti is a member of the "new guard" younger generation, born after that war, with no personal memory of it, and no fear of repeating it. <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> There has been a clear generational split among Palestinians for a long time, with Arafat's "old guard" becoming increasingly less popular. A more likely explanation is that the 49 year old Barghouti didn't want to run for President because he was likely to win, and then he'd have to face problems like Sunday's Hamas blast; better to wait until Abbas fails and then take over. Many Palestinians in Barghouti's generation and younger generations feel like radical Muslims in other countries, who deeply resent having Israel in their midst, and will not rest until the small red dot hear the middle of the adjoining map is wiped out. Whatever the reason for Barghouti's withdrawl, <#hreftext ww2010.i.may01 "we've been predicting for a long time"#> that no Mideast peace plan will succeed, and that the Palestinians and Israelis will re-fight the genocidal 1940s war, with almost mathematical certainty. =eod =// &&2 e041212 Taiwan dodges a bullet for now by repudiating President Chen =data ww2010.weblog.y2004.e041212 =data ww2010.weblog.y2004.e041212.head Taiwan dodges a bullet for now by repudiating President Chen =data ww2010.weblog.y2004.e041212.keys =data ww2010.weblog.y2004.e041212.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041212.date 12-Dec-04 =data ww2010.weblog.y2004.e041212.txt1 Rather than further antagonize Beijing and risk an early war, =data ww2010.weblog.y2004.e041212.txt2 the people of Taiwan <#stdurl "www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=7063045" "gave President Chen Shui-bian an unexpected defeat"#> in a Saturday election by voting to give the opposing party a majority in the legislature. President Chen had been moving in the direction of independence of Taiwan from China. Chen has announced <#hreftext ww2010.i.taiwan040706 "he will amend the Constitution by 2008"#> to move towards independence, and China has announced that such a move would amount to a declaration of war. Several weeks ago, on Taiwan's National Day, Chen roiled the waters still further with the "the Republic of China is Taiwan, and Taiwan is the Republic of China," hinting at a plan to change the name of the island officially to Taiwan, which would be a further move toward independence. That statement prompted a poll that found that indicate that 71% of Taiwanese citizens <#inc ww2010.weblog.ref e041109 "already consider Taiwan to be "sovereign and independent,""#> leading many to believe that Chen would win the Parliamentary election. However, both Beijing and Washington have been rebuking Chen's moves toward independence, and Saturday's election indicated that the people were going to be more cautious. From the point of view of Generational Dynamics, China and Taiwan are in a late "generational unraveling" period turning into a "generational crisis" period. During an unraveling period, a society is risk-averse, and seeks compromise and containment of problems. In a crisis period, a society becomes risk-seeking, and is much more willing to use confrontation in its policies. So it's not surprising that during the transition period from unraveling to crisis, there is flipping back and forth between risk-aversion and risk-seeking. That's why the Taiwanese can say that Taiwan is already "sovereign and independent" one day, and then repudiate plans to become more sovereign and independent a few weeks later. In fact, the phrase "unraveling period" comes from the observation that during the period leading up to a new crisis war, all the old painful rules and compromises that ended the previous crisis war become increasingly unraveled as time goes on. Washington and Beijing are both breathing a sigh of relief over these election results, since Chen's plans are clearly going to be slowed down. But they'll be delayed, not stopped. China's last crisis war was the civil war between armies led by Mao Zedong and Chiang Kai-shek that ended in 1949. The war concluded with Chiang's flight to Taiwan. People with a personal memory of that war would be 60 years old or older today. These risk-averse people will slow down the move toward independence, rather than risk another war with China. However, these people are increasingly disappearing (retiring or dying), all at once, and they're being replaced by the risk-seeking younger generation of people born after the war and with no personal memory of it. Generational Dynamics predicts that China will refight the civil war of the 1940s. There are three possible triggers for this renewed civil war:

A massive new rebellion, possibly triggered by the Falun Gong movement;
A collapse of the Chinese economic bubble, such as happened in Japan in 1990 and in America with the 2000 Nasdaq crash; or
<#hreftext ww2010.i.taiwan040706 "Moves by Taiwan leaders toward independence,"#> which would force China to declare war.

Any one of these triggers could occur at any time -- next week, next month, or two or three years from now. Generational Dynamics predicts that all three of these will occur in the next decade or so. =eod =// &&2 e041211 Who poisoned Ukraine opposition leader Viktor Yushchenko? / Putin =data ww2010.weblog.y2004.e041211 =data ww2010.weblog.y2004.e041211.head Who poisoned Ukraine opposition leader Viktor Yushchenko? =data ww2010.weblog.y2004.e041211.keys russia, putin, ukraine =data ww2010.weblog.y2004.e041211.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041211.date 11-Dec-04 =data ww2010.weblog.y2004.e041211.txt1 That's what people are asking today, after doctors confirmed that he was poisoned =data ww2010.weblog.y2004.e041211.txt2 with dioxin. <#inc ww2010.pic g041211.jpg left "" "Viktor Yushchenko - August 2004 versus October 2004 (Source: AFP)"#> Suspicions have been brewing for months, thanks to the dramatic change in the 50-year-old politician's appearance since September, which turned him from a young-looking stud into a pock-marked old man. He has frequently complained that he was poisoned, <#stdurl "www.bloomberg.com/apps/news?pid=10000087&sid=aB5w6hJAKync&refer=top_world_news" "and today, doctors confirmed his suspicion."#> So, who poisoned Yushchenko? If it were America, my first suspicion would be an old lover, since no one would be so stupid as to poison a political enemy. But this is Ukraine, not America. In this case Yushchenko's major political enemy is Russian President Vladimir Putin, formerly of the KGB, and there's little doubt that the KGB is quite capable of poisoning someone to gain a political objective. Yushchenko was the loser of a November 21 Presidential election which is now almost universally recognized worldwide as a fraudulent election. A variety of <#stdurl http://slate.msn.com/id/2110858/ "fraudulent election-rigging techniques"#> were used, including media manipulation, padding ballot boxes with millions of invalid ballots, threats of physical violence, and rigged ballot counting after the election. Facing public demonstrations by hundreds of thousands of Yushchenko supporters, the Supreme Court called for a rerun election on December 26. Polls currently give Yushchenko a 10 point lead, and the finding confirming that he was poisoned will presumably increase that lead. The finding will reopen a criminal investigation in Ukraine to determine responsibility for the poisoning. An angry Yushchenko himself has promised that, when elected, he will investigate all the people involved in the mass fraud of the last election, including the poisoning. Supporters of Yushchenko's opponent, Viktor Yanukovych, have denied having anything to do with the poisoning. <#inc ww2010.pic ukraine3.gif left "" "East/West Ukraine split in Presidential vote. (Source: AFP)"#> Ukraine has been sharply split along geographical lines by the November 21 election: Russian-speakingEastern provinces support the current government and closer relations with Moscow and victory by Viktor Yanukovych. Ukrainian-speaking Western provinces support the "Orange Revolution" led by Viktor Yushchenko, and closer relations with Europe. <#inc ww2010.pic putin1.jpg right "" "Vladimir Putin"#> For the many reasons <#hreftext ww2010.i.ukraine041128 "that we've previously described,"#> the steely Russian President Vladimir Putin will not tolerate an entirely independent Ukraine, since Russia needs the resource-rich nation. Putin showed great skill in nationalizing the oil giant Yukos during the last year, and confiscating all its assets for his own purposes, and he'll be looking for ways to do the same in Ukraine. Any such moves will receive the support of the people of East Ukraine, but will be bitterly opposed by West Ukrainians, not to mention governments in Washington and Europe. Incidentally, most of the people of Ukraine and Russia are undoubtedly aware that today is the tenth anniversary of the day, 11-Dec-1994, when Russia sent troops into Chechnya, marking the official beginning of the Chechen war that is going on until this day. If Yushchenko wins on December 26, as polls currently indicate, then the world will be watching for threats of a similar action. Today, Ukraine appears to be in a state of suspended animation. The massive demonstrations have been reduced small groups, and everyone is "playing nice," under the watchful eyes of the international community. Undoubtedly, this is also influenced by preparations for Christmas, which will be celebrated on January 6. The question is: Is there any outcome of the December 26 election that will be acceptable to everyone -- East Ukraine, West Ukraine, and Vladimir Putin? =eod =// &&2 e041210 Tough talk, little action on Darfur =data ww2010.weblog.y2004.e041210 =data ww2010.weblog.y2004.e041210.head Tough talk, little action on Darfur =data ww2010.weblog.y2004.e041210.keys =data ww2010.weblog.y2004.e041210.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041210.date 10-Dec-04 =data ww2010.weblog.y2004.e041210.txt1 A spate of news stories are decrying fact that nobody's doing anything about the Darfur genocide. =data ww2010.weblog.y2004.e041210.txt2 A <#stdurl allafrica.com/stories/200412090515.html "story on allAfrica.com"#> begins by mocking the United Nations:

THE first two United Nations resolutions on Darfur were so threatening it was reasonable to expect decisive action from the special UN Security Council meeting in Nairobi, Kenya, on November 18 and 19. But, as is habitual for the UN, little came of the tough talk. An <#stdurl "www.csmonitor.com/2004/1210/p06s01-woaf.html?s=hns" "article on csmonitor.com"#> points out that things have been getting much worse in the last few months:

What's clear is that Janjaweed attacks haven't stopped. And 2.3 million people in Darfur need aid, according to a new UN report. That's roughly twice the number just six months ago, when the world began paying attention to the conflict. "Attacks against civilians are increasing, humanitarian space is decreasing, and the Sudanese government's strategy ... has succeeded in muddying the waters as the conflict gets more complex," says John Prendergast with the nonprofit International Crisis Group. When I <#inc ww2010.weblog.ref e040628 "first discussed the Darfur issue"#> six months ago, in a piece entitled, "Darfur genocide: The UN is completely irrelevant," I concluded, "One thing that Generational Dynamics tells us is that this kind of genocide is a force of nature, and that the UN can no more stop it than they can stop a typhoon." This is in contrast to my repeated predictions that Iraq would NOT spiral into a major uprising or major civil war. The difference, as I've explained many, many times, is that Darfur is in a generational crisis period, and Iraq is in a generational awakening period. That's why I could make both predictions with such assurance, and why both predictions came true. I was musing about this fact yesterday, when I was speaking with a couple of co-workers on my "real job" as an IT consultant, where both of them were telling me that I don't know what I'm talking about. I don't know what it takes to prove to people that I have a track record. I've been posting very specific predictions on this web site for almost two years. Many of them have come true. Some of them are still "pending," and we'll have to see if they come true. (They will.) And none of them have turned out to be wrong. I'm sorry, dear reader, but I feel like whining today. My record in forecasting the future on this web site has been nothing short of sensational -- much more successful than I would have believed possible three years ago, before I started researching and developing the Generational Dynamics methodology, and discovered to my own amazement that it actually works. And yet I can't get any support or traction for Generational Dynamics or this web site, though I do greatly appreciate the several hundred of you who read this web site on a daily or regular basis. Well, I guess it must be the fault of my sunny personality. I do have some news. I've almost completed a first draft of my next book, tentatively titled, Generational Dynamics for Historians. Within the next few weeks I'll be making the text of the new book available online. (Actually, it's already online at a secret URL, hee hee.) The new book explains the historical analysis and forecasting methodologies in detail, and shows how they're applied to dozens of societies, regions and nations throughout thousands of years of history. It will describe the previous work on generations on which Generational Dynamics is based, and show how the theory has changed, expanded and advanced. It will even address other methods that historians have used to attempt to find patterns in history, and why these methods, like Kondratiev Cycles, have all failed, and how Generational Dynamics fully explains and subsumes them in a very elegant way. So if you're interested in history, then watch for that, coming soon to a computer screen in your neighboohood. =eod =// &&2 e041209 United Nations report says skyrocketing hunger problem is solvable with money =data ww2010.weblog.y2004.e041209 =data ww2010.weblog.y2004.e041209.head United Nations report says skyrocketing hunger problem is solvable with money =data ww2010.weblog.y2004.e041209.keys =data ww2010.weblog.y2004.e041209.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041209.date 9-Dec-04 =data ww2010.weblog.y2004.e041209.txt1 Unfortunately, the UN's Food and Agricultural Organization (FAO) is wrong. =data ww2010.weblog.y2004.e041209.txt2 According to <#stdurl "/www.fao.org/newsroom/en/news/2004/51809/index.html" "FAO's Annual Hunger Report for 2004"#>:

With the number of hungry people in the world rising to 852 million in the 2000-2002 period, up by 18 million from the mid-1990s, the human and economic costs of hunger will only increase if the trend is not reversed. The total includes 815 million hungry people in the developing countries, 28 million in the countries in transition and 9 million in the industrialized countries. The increase from 18 million to 852 million in just 5 to 7 years indicates that hunger and poverty are skyrocketing, and may be approaching some sort of tipping point. Another UN web site shows the countries where hunger and malnutrition are the greatest: <#inc ww2010.pic g041208s.gif center "" "Hot Spots in Worldwide Hunger (Source: UN)"#> On the <#stdurl www.wfp.org "World Food Programme web site,"#> it's <#stdurl "www.wfp.org/country_brief/hunger_map/map/hungermap_popup/map_popup.html" "an interactive map"#> that lets you zoom in on any country of interest. It shows where hunger is the greatest. According to the UN World Food Programme, "There is enough food in the world to feed everyone. Yet malnutrition and hunger still afflict one out of every seven people on earth," and the following are the reasons:

Many poor people do not have the money to buy food.
Some people live in such remote places that the food market is too far away or there is no road or means of getting there.
Other poor people do not have the land, seeds or the proper tools to cultivate crops.
For those who can grow food, insects, drought, floods and war often destroy crops.
Many people don't understand the importance of a balanced diet of cereals, vegetables, meats, dairy products and other items.

Unfortunately, the UN analysis isn't true. Yes, technically there may be enough food in the world to feed everyone, but as a practical matter there isn't, since a surplus of wheat in France would not be much help for the poor people of Mongolia, where 40% of the population are undernourished. As we discussed in our <#hreftext ww2010.i.food040628 "analysis of the "Green Revolution vs Malthus Effect,""#> the population of the world is growing faster, possibly much faster, than the amount of food. We've estimated that the food supply grows at the rate of 0.96% per year, while worldwide population growth exceeds 1.25% per year, and is 2-4% in some countries -- usually the poorest countries. [Correction: UN figures show that population growth has been 1.72% since 1950, not 1.25%.] This is an iron fact of the human condition. It's been true throughout history, and it will continue to be so for as long as humans are on the earth: Women will continue to have children faster than available food, and women in the poorest countries will have more children than women in wealthier countries. We've made the following estimate: We start by assuming that in 1950, after all the deaths in WW II, the population of the earth is "just right" for the amount of food available per capita. Since the food supply grows at 0.96% per year, we can compute what the population should be today. According to the UN, the world population in 1950 was 2.5 billion. Multiplying this by (1.0096^55), we get 4.2 billion, which should be the population of the earth in 2005, 55 years later. But in fact, the world population in 2005 is 6.5 billion. That means that we have roughly 2/3 as much food per person today as we did in 1950. And it gets worse every hour, every day, every week, every month, every year. As I said, this is an iron fact of the human condition, and we call it the "Malthus Effect," because it was first described by Thomas Roberts Malthus in 1798. If a man can't feed his family, then he has every reason to go to war. In fact, in many societies the best way to get fed is to be in the army, and often you can send your salary back to your family so they can eat. Even worse, if a man can't feed his family, then he'll blame someone wealthier, and hate that person. If that person is an American or an Israeli, then he'll be motivated to go to war against America or Israel. For those who don't believe the conclusions of this web site, then you should understand that the figures are given are just about as close to a mathematical proof as you can get that we're headed for a world war. It's been that way throughout history. In this case, the 6.5 billion people on earth will be reduced to 3 or 4 billion. Once the war is over, there'll be prosperity everywhere, since there'll be plenty of food again, just like there was in 1950. Then the cycle will begin again. =eod =// &&2 e041208 Iran: Tehran University student unrest is building against the government =data ww2010.weblog.y2004.e041208.head Iran: Tehran University student unrest is building against the government =data ww2010.weblog.y2004.e041208.keys =data ww2010.weblog.y2004.e041208.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041208.date 8-Dec-04 =data ww2010.weblog.y2004.e041208.txt1 "Moderate" President Mohammad Khatami blamed the hard-line Muslim clerics =data ww2010.weblog.y2004.e041208.txt2 for his <#stdurl "www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=7003249" "failure to keep his promises to implement democratic reforms"#> when he was elected in 1997 and re-elected in 2001. Instead, his term of office, which ends in 2005, has been marked with harsh intolerance. Newspapers have been closed, dissident students have been jailed, and electoral reforms have been blocked. From the point of view of Generational Dynamics, what's interesting about all this is that Iran is in a generational awakening period, just like Iraq (see next item below). So we're seeing exactly the same kind of political turmoil in Iran that we see in Iraq, and that we saw in America in the 1960s. This is always a generational conflict, pitting the younger generation of college against their parents, the survivors of the last crisis war (in this case, the Iran/Iraq war). The hard-line imams seem unreasonable to us, but from their point of view, their hard-line actions have no purpose other than to prevent another destructive, genocidal war like the Iran/Iraq war. Political conflict in awakening periods often leads to a politically explosive climax which decides which side is the winner. In the American awakening, the kids "won" when Richard Nixon resigned. In China awakening period of the 1980s, the older generation "won" with the Tiananmen Square massacre in 1989. The political crisis, however it ends, does not substantially change the country's direction. This is a relevant issue, because I've heard a number of pundits suggest that we fund the students to overthrow the imams and install a pro-American government. Not going to happen. There will be a political climax at one point, but at this point we can only guess how it will turn out. =eod =// &&2 e041207 Iraq: Jan 30 elections and civil war =data ww2010.weblog.y2004.e041207 =data ww2010.weblog.y2004.e041207.head Iraq: As the January 30 election date approaches, pundits are talking about civil war again =data ww2010.weblog.y2004.e041207.keys =data ww2010.weblog.y2004.e041207.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041207.date 7-Dec-04 =data ww2010.weblog.y2004.e041207.txt1 Journalists and analysts are pumping up their warnings of civil war, as well-funded insurgents step up their car-bombings and other terror attacks. =data ww2010.weblog.y2004.e041207.txt2 For example, according to <#stdurl www.iht.com/articles/2004/12/05/news/policy.html "one analysis in the International Herald Tribune,"#> the civil war has already begun. We're being told that it's because the Sunnis are rising up against the Shi'ites. We're also being told that it's like the violent Lebanese civil war that begin in the late 1970s. It was just a few months ago that these same journalists were telling us that a civil war was breaking out because the Shi'ites were rising up, in sympathy with Shi'ite cleric Moqtada al-Sadr. What? You've forgotten that civil war? You have a short memory, don't you? Well, it's not surprising - Moqtada al-Sadr hasn't been in the news for several months now. As we <#inc ww2010.weblog.ref e040812 "explained at the time,"#> as we mocked the journalists and high-priced analysts who were making these pronouncements, a civil war is IMPOSSIBLE at this time in Iraq, because only a single generation has passed since the violent crisis war, the Iran/Iraq war of the 1980s. We've studied over 100 wars throughout all places and times throughout history, and there's NEVER been a new crisis war less than two generations after the end of the last crisis war. So a crisis war in Iraq today is impossible. But what about that Lebanese civil war? Well, that was indeed a crisis civil war, but Lebanon's previous crisis war was in the 1920s, with the breakup of the Ottoman Empire. That's the same timeline as the Iran/Iraq war of the 1980s, and the Turkey-Kurd war that ran from 1984 to 2000. Those crisis wars all ran pretty much right on schedule, on the World War I timeline. A crisis war in Iraq today is impossible. That's not to say that things are going to be easy in Iraq. Far from it. Abu Musab al-Zarqawi's well-funded terrorist program, designed to derail the January 30 election and destability the entire region, is going to kill a lot more people, most Iraqis, before it's over. As <#hreftext ww2010.i.sixties040501 "we've described in detail,"#> Iraq is currently at the beginning of a generational awakening period. Awakening periods are characterized by enormous political turmoil, and we should expect a lot of conflict between Sunnis, Shi'ites and Kurds next year. <#hreftext ww2010.i.iraq041016 "Hopes for an American withdrawal in 2005 won't happen,"#> but there won't be any civil war. =eod =// &&2 e041206 India Sensex P/E ratio goes from 11 to 15 =data ww2010.weblog.y2004.e041206.xxx =data ww2010.weblog.y2004.e041206.head A Wall Street Journal article with an ironic twist warns that stocks are overpriced in India. =data ww2010.weblog.y2004.e041206.keys =data ww2010.weblog.y2004.e041206.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041206.date 6-Dec-04 =data ww2010.weblog.y2004.e041206.txt1 India's stock prices have increased 29% during the past six months. =data ww2010.weblog.y2004.e041206.txt2 <#inc ww2010.pic g041203.gif right "" "India's BSE 30 stock market index, Jan-December 2004 (Source: WSJ)"#> According to <#stdurl online.wsj.com/article/0,,SB110200879990589339,00.html "the article on p. C16 of Friday's (12/3) WSJ by Eric Bellman,"#> "The robust Indian stock market may be due for a breather, as investors wait for earnings to catch up with soaring share prices." There's a very ironic twist to this article, because it gives as an explanation the fact that price/earnings ratio are getting too high. How high have they gone? To an average of 15!! According to the article, analysts are warning that the recent rally in India's stock market "might have taken prices higher than their potential earnings warrant." It says, "The 29% increase in the benchmark index during the past six months has pushed up the average price/earnings ratio for companies that make up the Sensex to more than 15, based on projected earnings for the year ending March 31 -- well above the average of 11 for the previous three-year period. The average P/E ratio based on earnings projections for fiscal 2006 is about 13, analysts say." <#inc ww2010.pic peratio.jpg left "" "Wall Street Historical Price/earnings ratio for S&P 500"#> So the Indian stock market is in danger because P/E ratios have reached 15, but journalists, pundits and high-priced analysts are blithely sanguine about American P/E ratios in the 20s, as the adjacent graph shows. Regular readers of this web site know how cynical I am about journalists, politicians and analysts, most of whom say any dumb thing that pops into their heads, but this whole issue of P/E ratios really takes the cake. Go back and and reread that paragraph above where I quoted the WSJ article, where it says that the value 15 is "based on projected earnings for the year ending March 31." This computation is almost a complete hoax. Let me explain. How do you compute P/E ratios? You take the price of the stock and divide by the earnings of the company per share of stock. So if the stock sells for $100 per share, and the company earned $5 per share, then the P/E ratio is $100/$5, or 20. It's easy to determine the price of the stock, but what value do you use for earnings? It turns out that there are several ways of doing this, and they're all equally good, provided that you don't switch methods in midstream. Since I'm interested in analyzing long-term trends, I use Yale Professor Robert J. Shiller's figures on his web site at <#stdurl www.econ.yale.edu/~shiller/data.htm#>, where he's collected annual stock market data since 1871, and very generously makes them available to the public. Shiller computes the P/E ratios using today's stock prices and dividing by the average earnings per share value over the preceding ten years. This is the most solid method method, in my opinion, and is the best to use when you're doing long-term analyses and forecasting future values. However, almost as good a method is using the previous one year's earnings in the P/E computation. This gives a slightly different value for the P/E index, but as long as you use that value consistently, then you get valid results. In fact, the P/E ratio chart that appears at the bottom of this web site's home page is based on the previous year's earnings. But that's not what the article above did:

It computed the current P/E index of 15 by dividing stock prices by NEXT YEAR's projected earnings. They fudged the figures by projecting higher earnings next year, so that the P/E ratio is as low as possible.
It even says that the "average P/E ratio based on earnings projections for fiscal 2006 is about 13." Why not use earnings projections for 2010 and get a P/E ratio of 5 or 10?
But when they compare it to the average of 11 for the preceding three years, that value of 11 is based on real earnings for each of those years, not on projected earnings.

This is incredibly flaky, sloppy analysis. You cannot compare P/E ratios when you compute them in completely different ways, but that's exactly what's happening in that article. Beware the same thing happening when pundits and analysts talk about P/E ratios for Wall Street stocks. If you hear them say, as I have heard on occasion, that current P/E ratios are around 15 or 16, then they're pulling this methodological hoax. They're using current stock prices and dividing by whatever they want to claim are next year's projected earnings. You can use any method you want to compute earnings -- 10 year average, one year, or next year's projected earnings -- but if you want to compare today's P/E ratios to historical values, then you MUST use the same method to compute earnings in all cases you're comparing. From the point of view of Generational Dynamics, America has entered a 1930s style Great Depression era, with stocks overpriced by 100% or more, and poised to fall by 50% within the next few years. =eod =// &&2 e041203b Ukraine Supreme Court rules that election must be rerun on Dec 26. =data ww2010.weblog.y2004.e041203b.head Ukraine Supreme Court rules that election must be rerun on Dec 26. =data ww2010.weblog.y2004.e041203b.meta =meta dox ww2010 Ukraine Supreme Court rule;/s for election rerun =meta topics ww2010 Ukraine =data ww2010.weblog.y2004.e041203b.keys =data ww2010.weblog.y2004.e041203b.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041203b.date 3-Dec-04 =data ww2010.weblog.y2004.e041203b.txt1 In a huge victory for opposition leader Yushchenko, and a defeat for Putin and the Ukraine government, =data ww2010.weblog.y2004.e041203b.txt2 <#stdurl www.washingtonpost.com/wp-dyn/articles/A31541-2004Dec3.html "the Ukraine Supreme Court"#> has found that the last election was so flawed through rigging, vote abuse, government interference, government-run media bias, that the election has to be rerun. The ruling was greeted by massive shouts and cheers by the thousands of Viktor Yushchenko supporters who had been camping out around the Supreme Court and other government buildings in Kiev. The court ruling was a crushing defeat for the government and for the Russian-supported candidate, Victor Yanukovych. They had hoped for a more moderated decision, but in fact the decision indicated a huge litany of election abuses. The Supreme Court rejected a government-supported proposal for an entirely new election. This would have resulted in a new vote, but under legal terms that would prevent either Yanukovych or Yushchenko from running. If two entirely new candidates were to run in a new election, then the possibility of Russian influence might turn things back in their direction. As things stand, the opposition candidate Viktor Yushchenko is heavily favored to win the re-run election. This hardly settles the matter, however. <#hreftext ww2010.i.ukraine041128 "As we've previously written,"#> Russian President Vladimir Putin will not tolerate an entirely independent Ukraine, something that Yushchenko would certainly seek. Indeed, Yushchenko would pursue policies to link the country closer to Europe than to Russia, and would be expected to consider adopting policies that might bring Ukraine to join the European Union. This is not something that Putin is going to tolerate. <#inc ww2010.pic g041128.gif right "" "East/West Ukraine split in Presidential vote. (Source: BBC)"#> This Supreme Court decision will cause a great deal of discord within Ukraine itself. East Ukraine, which voted for Yanukovych and still supports him, <#inc ww2010.weblog.ref e041129 "is threatening to secede from Ukraine,"#> splitting the country in two. We can expect this threat to gain further momentum. =eod =// &&2 e041203 November jobs report much softer than expected =data ww2010.weblog.y2004.e041203.head November jobs report much softer than expected =data ww2010.weblog.y2004.e041203.meta =meta dox ww2010 Weak job;/s report |~ high price earning;/s ratio =meta topics ww2010 jobs price/earnings#ratio =data ww2010.weblog.y2004.e041203.keys =data ww2010.weblog.y2004.e041203.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041203.date 3-Dec-04 =data ww2010.weblog.y2004.e041203.txt1 In a story we've heard repeatedly for three years, companies are not hiring =data ww2010.weblog.y2004.e041203.txt2 at anywhere near the rate predicted by politicians, journalists and high-priced analysts. The U.S. economy created 112,000 new jobs in November, <#stdurl www.bls.gov/news.release/empsit.nr0.htm "according to the Bureau of Labor Statistics."#> Analysts had <#stdurl "www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=6989283" "forecast an increase of 180,000 to 200,000"#> new jobs. By now, according to analysts in 2003, the economy should be creating some 300,000 new jobs per month or more. As late as this past February, just ten months ago, the White House projected that the economy would create 2.6 million jobs in 2004. They made this estimate by assuming that the recent recession is just like other recent recessions, such as the 1991 recession, or other recessions since 1945. What Generational Dynamics says is that today's economy is like the 1930s-40s depression economy. The reason is that, within the last ten years, the generation of people who lived through the great depression have all disappeared (retired or died), all at the same time, and so our society has been making the same mistakes that gave rise to the 1930s depression, especially the massive 1990s stock market bubble, which still hasn't fully played out. We haven't suffered the massive bankruptcies and homelessness of the 1930s because Alan Greenspan's Fed has kept interest rates close to zero for the last three years, allowing people and businesses that would otherwise have gone bankrupt to borrow huge amounts of money at low interest to stay afloat. However, lowering interest rates hasn't eliminated the danger, but only postponed it. That's why we've been saying, since 2002, that we're entering a new 1930s style Great Depression. <#inc ww2010.pic peratio.jpg right "" "Historical Price/earnings ratio for S&P 500"#> The fact that stocks are due for a big fall has been evident for years to anyone looking at the extremely high price/earnings ratios, well into the 20s. If history is any guide, and it is, then the price/earnings ratios are going to fall below 10, which means that the Dow Jones average will fall to the 4000 range and the S&P 500 index will fall to the 400 range. Alan Greenspan and the Fed have an immediate problem to deal with: Will they increase interest rates again and risk hurting the employment situation still further? Or will they leave interest rates steady, and risk letting the already plummeting dollar to fall still further on international markets? We'll all be breathlessly waiting to see which it will be. =eod =// &&2 e041202 Marwan Barghouti shocks Palestinians and the West by running for President =data ww2010.weblog.y2004.e041202.head Marwan Barghouti shocks Palestinians and the West by running for President =data ww2010.weblog.y2004.e041202.meta =meta dox ww2010 Marwan Barghouti run;/s for Palestine President =meta topics ww2010 Israel-Palestine =data ww2010.weblog.y2004.e041202.keys =data ww2010.weblog.y2004.e041202.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041202.date 2-Dec-04 =data ww2010.weblog.y2004.e041202.txt1 What if the jailed Palestinian terrorist wins the election on January 9? =data ww2010.weblog.y2004.e041202.txt2 Marwan Barghouti was a leader of the Palestinian uprising that began in September 2000. <#stdurl "news.bbc.co.uk/2/hi/in_depth/middle_east/2001/israel_and_the_palestinians/profiles/1473585.stm" "The Israelis arrested him in April 2002"#> and charged with the killing of 26 people and belonging to a terrorist organisation. If he wins the election, he'll have to govern from jail. Western politicians, pundits and high-priced analysts, including the Israelis, Americans and Europeans, have been saying for years that the only reason that the Israelis and Palestinians could have peace is because of Yasser Arafat, and that peace would break out once he was gone. The reason they believed this is because they believed that Arafat's policies came from Arafat rather than from the people he was representing. In other words, even though Arafat has been a survivor and has led the politicians for decades, these Westerners assumed that the Palestinians were so dumb that they let him lead him in a direction they didn't want to go. The Presidential candidate most favored by the West (though not be many Palestinians) is Mahmoud Abbas, 69, part of the same "old guard" generation that Arafat was in. But Arafat had the people's respect as being Father of the Palestinians. Abbas has no such respect. <#inc ww2010.weblog.ref e041114 "as I wrote when Arafat died,"#> Arafat lived through the vicious genocidal wars between Jews and Palestinians in the 1940s, and considers an occasional terrorist act to be a small price to pay to avoid having any war like that again. Abbas is in the same generation. But 49 year old Barghouti is in the "young guard" generation that has no memory of that war, and has no fear of brinksmanship that might lead to a similar war. <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> Many Palestinians in Barghouti's generation and younger generations feel exactly the same way. Like radical Muslims in other countries, younger generation Palestinians deeply resent having Israel in their midst, and will not rest until the small red dot hear the middle of the adjoining map is wiped out. Politicians in Israel, Europe and Washington breathed a sigh of relief last week, when Barghouti announced that he would not run for President against Abbas. And that's why those same politicians, <#stdurl www.haaretz.com/hasen/spages/508666.html "and even the Palestinian politicians,"#> are suddenly so alarmed, now that Barghouti has evidently changed his mind. They've had this dream of instant peace when Arafat was gone, and suddenly they realize that their dream might well be a fantasy. Guess what? Arafat was just doing what the Palestinian people wanted him to do. There's a possibility that Barghouti's candidacy is still a ploy of some kind to gain leverage against the Palestinian Authority. But in the end, Barghouti isn't the point. The point is that the "young guard" generation of Palestinian leaders are impatient that their hated Israeli enemy still lives in their midst, and are will to cross lines that Arafat would not crossed. As I've been saying since 2002, Generational Dynamics predicts that there's going to be a major regional Mideast war between Arabs and Jews in the next few years with near 100% probability. The war will engulf the entire region, and draw in America. The Jews and Palestinians will try again, as they did in the 1940s, to exterminate each other, and the continued existence of Israel is not guaranteed. =eod =// &&2 e041201b Ukraine drifts further from Moscow as Parliament rejects Yanukovych =data ww2010.weblog.y2004.e041201b.meta =meta dox ww2010 Ukraine election Viktor Yushchenko =meta topics ww2010 Ukraine Putin Russia =data ww2010.weblog.y2004.e041201b.head Ukraine drifts further from Moscow as Parliament rejects Yanukovych =data ww2010.weblog.y2004.e041201b.keys =data ww2010.weblog.y2004.e041201b.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041201b.date 1-Dec-04 =data ww2010.weblog.y2004.e041201b.txt1 Everything depends on Putin's reaction now, =data ww2010.weblog.y2004.e041201b.txt2 as momentum appears to be gathering for a political victory by opposition candidate Viktor Yushchenko, <#inc ww2010.pic g041201.jpg right "" "Ukrainian opposition leader Viktor Yushchenko (left) sings the national song during a rally held in Kiev. (Source:Xinhua/AFP Photo)"#> With large crowds in Kiev continuing to support Yushchenko, <#stdurl "www.bloomberg.com/apps/news?pid=10000100&sid=a.LT6pXX4WZk&refer=germany" "the Ukraine Parliament has passed a no-confidence vote"#> in the Russian-supported Yanukovych government, in a close vote supported by 229 of the 450 members of Parliament. There are still numerous legal options to be played out: the Supreme Court has yet to rule; there are calls for an immediate rerun of the election, which the rebel Yushchenko would almost certainly win; there are calls for a brand new election in three months, which would give Yushchenko's supporters a chance to cool down. Yushchenko and his supporters will oppose a brand new election or any other form of delay, and will continue to insist that he immediately be declared the winner of the recent allegedly fraudulent Presidential election or, at worst, an immediate rerun of that election. <#inc ww2010.pic g041201b.jpg left "" "Supporters of Ukrainian Prime Minister Viktor Yanukovich at a rally. (Source:Xinhua)"#> Prime Minister Viktor Yanukovych, who was declared the narrow winner of the Presidential election, appears to be playing the part of a pawn of Russian President Vladimir Putin. <#hreftext ww2010.i.ukraine041128 "As we wrote last weekend,"#> Putin's history suggests that he will "do whatever is necessary" to make sure that Ukraine does not slip from his grasp, and that would almost certainly happen if Yushchenko is declared the winner. So far, there's no sign of violence in Ukraine. Even on the streets, the supporters on both sides have been cordial with each other. But more and more, this is looking like a confrontation between Yushchenko and Putin. We will have to see if either of them backs down, or what will happen if neither does. =eod =// &&2 e041201 U.S. and Japanese economies show unexpected warning signs =data ww2010.weblog.y2004.e041201.head U.S. and Japanese economies show unexpected warning signs =data ww2010.weblog.y2004.e041201.keys =data ww2010.weblog.y2004.e041201.loc ww2010.weblog.log0412 =data ww2010.weblog.y2004.e041201.date 1-Dec-04 =data ww2010.weblog.y2004.e041201.txt1 With the jobs report due out on Friday, America's consumer confidence index fell =data ww2010.weblog.y2004.e041201.txt2 for the fourth month in a row, according to <#stdurl "www.conference-board.org/utilities/pressDetail.cfm?press_ID=2527" "a report from The Conference Board."#> <#inc ww2010.pic g041130.gif right "" "Consumer Confidence Index, March-November, 2004. (Source: Conference Board)"#> The Consumer Confidence index is computed from several different components that measure the economy in several different ways. For November, the most ominous components were expectations of future job growth, which were the lowest in more than a year, and measures of future buying plans, which also fell dramatically. These measures indicate that employment and retail sales are likely to be weak in coming months. The fall was unexpected, as analysts had expected it to increase Analysts had also been forecasting improvements in Japan's economy, but <#stdurl "www.bloomberg.com/apps/news?pid=10000101&sid=atUw2.zGArLs&refer=japan" "Japan's industrial production, employment and household spending"#> all fell in October, an unexpected result. As usual, you can't determine long term trends from one month's figures, but analysts have been predicting for over two years that both the Japanese and US economies would be growing robustly by now, since the recession ended in 2001. At least, that's what's happened "historically," with recessions in the 1960s through 1990s. And Japan's econony has been in the doldrums since Nikkei (Tokyo Stock Exchange) index fell 80% in 1990. No analyst has provided any explanation for why three major world economies -- America, Japan and Europe -- are all foundering, and can't seem to break out as they always have "historically." <#inc ww2010.pic sp5010.gif right "" "S&P 500 Index, 1950-present, with long-term trend line"#> This is the only web site that gives the complete reason. As we've said before,

The stock market spiked sharply upward in 1995, at exactly the time when the risk-averse generation of senior financial who had grown up during the Great Depression (as "depression babies") all disappeared (retired or died), all at the same time, and were all replaced by the generation of risk-seeking baby boomers.
As a result, stocks rose far above their long-term adjoining trend line (as the adjoining graph illustrates), creating a stock market bubble. The Fed's near-zero interest rate policy since 2001 has maintained the bubble, with the result that stocks are still overpriced by 100%, as measured by standard price/earnings ratio index values.
Looked at another way, the 1930s Great Depression forced most businesses into bankruptcy, and they all had to begin again from scratch, as "lean and mean" startups. But now, after over 70 years, the vast majority of American businesses, government agencies, colleges, labor unions, and non-profit organizations have all become so bureaucratic that they've become too slow and ineffecient to survive. Most would have gone bankrupt since the Nasdaq crash of 2000, but they've held on by borrowing money at near-zero interest rates to keep their bureaucratic oranizations in business. However, they're not selling products, because they're not producing the products that people want.
When <#hreftext ww2010.i.japan "we wrote about Japan 1 1/2 years ago,"#> we quoted a report that said, "The glue holding stock prices together in Japan has been copious lending by banks at ultralow rates, allowing even nearly insolvent companies to survive for years." In other words, America is following the same path that Japan did starting in 1990. However, Japan has done well by exporting to the American economy. As the American economy slows down, Japan's string runs out at the same time America's does.
That leaves China's ultra-hot economy to be the engine of growth for the entire world. But China's economy itself is so overheated that it's being cooled down by force.

Generational Dynamics predicts that we're in a new 1930s style depression. My expectation is that stock prices will fall by more than 50% in the next 3-4 years. To people who disagree with the analysis that I've been giving on this web site since 2002, my question is this: What's your explanation for why the economy has been doing so poorly? The November jobs report is due out on Friday. It will be closely watched. =eod =// &&2 e041129 East Ukraine threatens secession, splitting the country in two =data ww2010.weblog.y2004.e041129.head East Ukraine threatens secession, splitting the country in two =data ww2010.weblog.y2004.e041129.keys =data ww2010.weblog.y2004.e041129.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041129.date 29-Nov-04 =data ww2010.weblog.y2004.e041129.txt1 Government forces threatened "disaster," but it may have been just a political ploy =data ww2010.weblog.y2004.e041129.txt2 as the Ukrainian officials supporting pro-Russian Viktor Yanukovich called for <#stdurl "www.telegraph.co.uk/news/main.jhtml?xml=/news/2004/11/29/wukra29.xml&sSheet=/news/2004/11/29/ixnewstop.html" "a referendum to split East Ukraine off"#> as a separate country. <#inc ww2010.pic g041128.gif right "" "East/West Ukraine split in Presidential vote. (Source: BBC)"#> Presumably, the proposal would be to split the country along the line that separates the mostly pro-Yanukovich provinces (see adjoining map) from the mostly pro-Yushchenko provinces. However, even Viktor Yanukovich appears to oppose such a solution. He said: "Today we are on the brink of catastrophe. There is one step to the edge. Do not take any radical steps. When the first drop of blood is spilled, we will not be able to stop it." Yanukovich supporters have been extremely frustrated by the crowds supporting the opposition candidate Viktor Yushchenko, and indeed there were still hundreds of thousands of pro-Yushchenko supporters out in Kiev on Sunday. The call for East Ukrainian autonomy may simply be a political ploy by the other side to gain some traction. But the East Ukrainians are becoming just as passionate and infuriated as the West Ukrainians are, and so the autonomy proposal may gather momentum. If it does, then it may lead to violence and the civil war that everyone fears. The Ukrainian Supreme Court will be meeting later today. It will be their job to thread the needle through the conflicting desires and claims of the opposing sides, in an effort to find a solution that everyone will live with. In that sense, their job won't be dissimilar to the job of the U.S. Supreme Court in 2000, when America was faced with a potential political battle that might have deprived the country of a President for months. In the end, the Supreme Court sees itself as the last resort in keeping the country together. But <#hreftext ww2010.i.ukraine041128 "as we described yesterday,"#> Ukraine itself may not be the master of its own fate. Russian President Vladimir Putin cannot afford a hostile Ukrainian neighbor, rich in resources and providing an overland route to the Black Sea. Putin will not accept any solution that doesn't give him what he needs. From the point of view of Generational Dynamics, the violent atrocities of the 1920s and 1930s occurred across a fault line between ethnic Ukrainians, mostly in Western Ukraine, and ethnic Russians, mostly in Eastern Ukraine. That fault line that is now being reopened. Generational Dynamics predicts that a new war will be fought across that fault line in the next few years, no matter who is finally selected to be President. =eod =// &&2 e041127 How much farther is the dollar going to fall? =data ww2010.weblog.y2004.e041127.head How much farther is the dollar going to fall? =data ww2010.weblog.y2004.e041127.keys =data ww2010.weblog.y2004.e041127.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041127.date 27-Nov-04 =data ww2010.weblog.y2004.e041127.txt1 With a euro selling for over $1.33 yesterday, the dollar is the weakest it's been in years. =data ww2010.weblog.y2004.e041127.txt2 <#inc ww2010.pic g041126.gif right "" "Euro vs Dollar - 11/26/2002 - 11/26-2004"#> The adjoining graph shows the price of the euro in dollars. The higher the price of the euro, the weaker the dollar is. As you can see, from this graph, the dollar has been falling (euro has been rising) fairly steadily for over two years, and the fall has become rapid since the presidential election, and has fallen further almost every day. Most analysts hd been predicting that the dollar might fall to $1.40 or $1.50 per euro, but one analyst, Julian Jessop of Capital Economics, said on television Thursday that he's revised his opinion because of the rapid momentum of the fall, and that now he expects a price of $1.60 to $1.70 per euro, possibly by the end of the year. The fall has been caused by the Fed's near-zero interest rate policy for the last few years. At near-zero interest rates, many more people borrow money, so the supply of money increases, and by the law of supply and demand, the value of the dollar goes down. If Greenspan and the Fed had not lowered interest rate, then the Nasdaq crash in 2000 would have resulted in massive bankruptcies and homelessness, like the 1930s Great Depression, but now we see that the low interest has had a different cost. You would think that a weak dollar and a strong euro would be good news for Europe, but if you think that then you would be wrong. Euroland's economy has been very weak anyway, especially in market leaders France and Germany, but its one strength has been marketing products to America. But with the rapid rise of the euro, Europe's exports are becoming much more expensive in America, and that will reduce exports. That's wy European Central Bank chief Jean-Claude Trichet said that <#stdurl "www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=6931563" "the fall of the dollar has been "brutal.""#> Generational Dynamics predicts that we're entering a new 1930s style Great Depression, and that stock prices will fall by at least 50% in the next few years. There's no way to predict an exact time frame, but history shows that these things always begin with an unexpected downward cascade that catches even the experts by surprise. =eod =// &&2 e041125 Ukraine: Police in Kiev holding fire as opposition candidate tells hundreds =data ww2010.weblog.y2004.e041125.head Ukraine: Police in Kiev holding fire as opposition candidate tells hundreds of thousands of demonstrators to hold nationwide strike =data ww2010.weblog.y2004.e041125.keys =data ww2010.weblog.y2004.e041125.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041125.date 25-Nov-04 =data ww2010.weblog.y2004.e041125.txt1 The 1919 civil war could be repeated today, =data ww2010.weblog.y2004.e041125.txt2 <#stdurl "www.reuters.co.uk/newsPackageArticle.jhtml?type=worldNews&storyID=627205§ion=news" "according to outgoing President Leonid Kuchma."#> "The civil war at the beginning of the last century which we know about, thank goodness only from films, could well become a reality at the present time," he said. Kuchma is referring to the atrocities and mass executions that Russia used to force Ukraine into the Soviet Union in 1921. Tens of millions died at the time. These are the atrocities that <#inc ww2010.weblog.ref e041123 "I described a few days ago."#> Generational Dynamics predicts that they will indeed become a reality again, if not right away then at some time in the near future. The supporters of opposition leader Viktor Yushchenko were enraged yesterday, when Ukraine's election commission declared the establishment candidate Viktor Yanukovich as the winner of Sunday's election. Russian President Vladimir Putin immediately congratulated Yanukovich, but he's about the only one who did. Secretary of State Colin Powell bluntly called the election a "fraud" <#stdurl http://www.state.gov/secretary/rm/38738.htm "at a State Department briefing yesterday."#> "We cannot accept this result as legitimate because it does not meet international standards and because there has not been an investigation of the numerous and credible reports of fraud and abuse," he said. "We have been following developments very closely and are deeply disturbed by the extensive and credible reports of fraud in the election." Powell indicated that some unnamed action will be taken if the election fraud isn't investigated and corrected. (He's an interesting aside: It turns out that it's American taxpayers who are paying for dismantling old Soviet nuclear weapons located in Ukraine. Isn't that special?) It's unlikely that America will reduce aid to Ukraine, so the exact nature of the threatened consequences is unknown. <#stdurl "www.ctv.ca/servlet/ArticleNews/story/CTVNews/1101300221955_8/?hub=TopStories" "Similar declarations were made by Canada and Europe."#> Speaking to a crowd of hundreds of thousands of demonstrators, opposition leader Viktor Yushchenko is calling for an "all-Ukrainian political strike" to protest the election. Kiev's riot police are wary, but are holding fire against the massive crowd of demonstrators. If violence spirals out of control, then it may well spread into southern Russia dn the Caucausus region, which <#hreftext ww2010.i.danger041120 "I've previously described"#> as one of the six most dangerous regions of the world. =eod =// &&2 e041124b Stephen Roach predicts an "economic Armegeddon" =data ww2010.weblog.y2004.e041124b.head Stephen Roach predicts an "economic Armegeddon" =data ww2010.weblog.y2004.e041124b.keys =data ww2010.weblog.y2004.e041124b.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041124b.date 24-Nov-04 =data ww2010.weblog.y2004.e041124b.txt1 The Chief Economist at Morgan Stanley is privately telling clients =data ww2010.weblog.y2004.e041124b.txt2 that America has no better than a 10 percent chance of avoiding "economic Armageddon," according to <#stdurl "business.bostonherald.com/businessNews/view.bg?articleid=55356" "a Boston Herald news report,"#> based on leaks from attendees.

"In a nutshell, Roach's argument is that America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants. ... To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day. That is an amazing 80 percent of the entire world's net savings. Sustainable? Hardly. Meanwhile, he notes that household debt is at record levels. Twenty years ago the total debt of U.S. households was equal to half the size of the economy. Today the figure is 85 percent. Nearly half of new mortgage borrowing is at flexible interest rates, leaving borrowers much more vulnerable to rate hikes. Americans are already spending a record share of disposable income paying their interest bills. And interest rates haven't even risen much yet."

Readers of my book or my web site already know that the only thing I would disagree with is that the probability of avoiding a severe financial crisis as high as 10%. Generational Dynamics predicts that we're entering a new 1930s style depression with almost 100% certainty. What strikes me is that there seems to be some sort of verbal cascade going on. Last week, Alan Greenspan <#inc ww2010.weblog.ref e041122 "made a blunt warning"#> that there would be harsh "adjustments" in store for America unless spending were cut back, just after Treasury Secretary John Snow indicated that the weak dollar would not be supported. This was at the top of the business news around the world. Today we have Roach's statement, followed by the news that <#stdurl "www.bloomberg.com/apps/news?pid=10000085&sid=a5dxfu9U2rfc&refer=europe" "Russia's central bank says that it plans to shift its dollar holdings"#> to euros. Obviously the Russians believe that the dollar will be getting weaker against the euro. Meanwhile, Asian central banks are hoarding $2.3 trillion in American currency reserves. If the dollar keeps weakening, then those reserves will be worth less and less. But if Japan and China try to do what Russia is doing, then Roach's economic Armageddon may well occur in the short run. =eod =// &&2 e041124 Greenspan-WSJ: Why did stock prices suddenly turn sharply upward in 1995? =data ww2010.weblog.y2004.e041124.head Why did stock prices suddenly turn sharply upward in 1995? =data ww2010.weblog.y2004.e041124.keys alan greenspan, information technology =data ww2010.weblog.y2004.e041124.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041124.date 24-Nov-04 =data ww2010.weblog.y2004.e041124.txt1 A Wall Street Journal series on Alan Greenspan's legacy =data ww2010.weblog.y2004.e041124.txt2 not only doesn't answer that question, but shows that Greenspan made some fundamental errors at the time. The front-page two-part article (<#stdurl "online.wsj.com/article/0,,SB110072933456177155,00.html" "Part I"#> and <#stdurl "online.wsj.com/article/0,,SB110081981338978661,00.html" "Part II"#>) examines Greenspan's record in detail since he took over the Federal Reserve 17 years ago. One of the most remarkable aspects of the article, something I've never heard before, is that Greenspan's reasoning in 1996 was based on his belief that the bubble was caused by increased productivity from hi-tech investments. I've been in the computer industry my whole life, and I can tell you that is about the dumbest thing I've ever heard. Only someone who knew little about computer technology could possibly believe hi-tech investments were increasing productivity. In the 1980s and 1990s, IT (information technology) was a monetary black hole. A typical development project was one or two years late -- if it didn't fail completely. It's true that productivity was improved in some ways; for example, managers used PCs to type their own memos with word processors and their own budgets with spreadsheets. But those savings were no more spectacular than the productivity improvements from electric typewriters and Xerox machines in earlier decades. So it turns out that Greenspan's reasoning about the 1990s bubble was partially caused by this crazy belief. In the article it says that Greenspan asked two economists to do a study, and they came back with what the boss wanted to hear. Incredible! Here are the relevant paragraphs from the WSJ article:

Mr. Greenspan listened without tipping his hand. He had noted the same developments but reached a different conclusion based on his analysis of worker-productivity numbers. Like many economists, Mr. Greenspan had long wondered why the spread of computers in the 1970s and 1980s hadn't boosted productivity, or output per hour of work. He was taken with the argument of economic historian Paul David, who noted that electricity didn't boost productivity for decades until working patterns adjusted. Mr. David suggested the same lag applied to computers. Mr. Greenspan now saw surging orders for high-tech equipment since 1993 -- coupled with higher profits at the companies that bought the equipment -- as evidence the productivity payoff had arrived. If this effect was real, it meant economists were underestimating how fast the economy could grow before inflation reared its head. Companies could produce more without incurring the cost of hiring fresh labor. Mr. Greenspan disagreed and told the committee he wanted to hold rates firm. An important reason, he argued, was that the government's productivity data were wrong. According to an analysis he commissioned from two Fed economists, productivity since 1990 in many services industries such as health care must have declined if the government's numbers were accurate. This "makes no sense," Mr. Greenspan told the meeting. "The tremendous contraction in productivity, which all of our data show, is partially phony." Instead, he pointed to other government reports showing that companies were recording ever-wider profit margins without raising prices, a sure sign of productivity gains. "Productivity is indeed rising a lot faster than our statistics indicate." Many committee members remained skeptical.... The remainder of this article is the contents of <#stdurl "discussions.wsj.com/wsjvoices/messages?msg=3344.42" "the message that I posted"#> on the WSJ user message board: Greenspan's analysis of the 1990s bubble simply doesn't make sense. <#inc ww2010.pic sp5010.gif right "" "S&P 500 Index with long-term trend line"#> Why did the S&P index turn sharply upward in 1995? Why not 1990 or 2000? What was different about 1995? Greenspan provides an explanation having to do with increased productivity from computer technology, but that doesn't make sense. For every little island of increased business productivity in the 1980s and 1990s, there were enormous training and development costs that wiped the productivity savings out. Greenspan ignored the data that said that productivity was decreasing, but in fact those data values were correct, and Greenspan was wrong. Productivity has only increased in the 2000s, when IT budgets were frozen. There's only one plausible explanation for the 1995 upturn: Prior to 1995, all the senior financial managers throughout the country were from the generation of "depression babies." These risk-averse people didn't part with a cent unless they were sure they would get it back, with interest. During the 1990s, those people all disappeared (retired or died), all at once. The new senior financial managers were from the risk-seeking Baby Boomer generation who believed that the world owed them a living. The result was an explosion of unsafe investments, causing the bubble, which was nothing more than a pyramid scheme that the widespread use of derivatives has simply prolonged You can trace this generational pattern throughout history. There have been many stock market falls, but the ones with major international impact were: Tulipomania bubble (1637), South Sea Bubble (1721), French Monarchy bankruptcy (1789), Hamburg Crisis of 1857, and 1929 Wall Street crash. Throughout history, these follow the pattern that when the generation of senior financiers who lived through the previous crash all disappear (retire or die), all at the same time, then the next bubble occurs. Greenspan's fundamental error was that he didn't understand that technology patterns and generational bubbles are TOTALLY SEPARATE SERIES that have to be analyzed separately, as this graph shows: <#inc ww2010.pic spsmoo.gif center "" "S&P 500 Index with long-term trend line and technology curve"#> The green technology curve matches the S&P index almost precisely, provided that you ignore the generational bubbles. Once you understand that separation, then you understand what really happened in 1995, and you also see that the full impact of the 1990s bubble has not yet been felt, but only postponed. John J. Xenakis
GenerationalDynamics.com =eod =// &&2 e041123 Ukraine: Hundreds of thousands of people in Kiev street protest =data ww2010.weblog.y2004.e041123.head Hundreds of thousands of people in Kiev street protest against rigged Ukraine presidential election =data ww2010.weblog.y2004.e041123.keys =data ww2010.weblog.y2004.e041123.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041123.date 23-Nov-04 =data ww2010.weblog.y2004.e041123.txt1 A growing international confrontation is pitting America and Europe against Russia, =data ww2010.weblog.y2004.e041123.txt2 over charges of <#stdurl "www.reuters.com/newsArticle.jhtml?type=topNews&storyID=6890719" "massive electoral fraud"#> in a close election that appears to have been won by the candidate favored by Russian President Vladimir Putin. <#inc ww2010.pic g041122b.jpg right "" "Ukraine's opposition presidential candidate Viktor Yushchenko addresses supporters during a rally in Kiev (Source: Reuters)"#> At first, exit polls showed that the "rebel" candidate, Viktor Yushchenko, would win, but actual vote counts gave the win to the Russian-backed "establishment" candidate Viktor Yanukovych. (Yes, both candidates' first names are Viktor, and their last names begin with 'Y'. Sorry.) After the results were announced, Yushchenko asked his supporters to hold street protests to pressure the government, and as many as half a million complied on Monday. Both America and the EU are <#stdurl "www.bloomberg.com/apps/news?pid=10000085&sid=a6AxD5WkKrmg&refer=europe" "refusing to recognize the results"#> until an investigation has been completed. =// <#inc ww2010.pic eeur.gif left "" "Eastern Europe / Western =// Asia"#> =// More important, the Crimea in the south is one of the three major =// regions (along with the Balkans to the West and the Caucasus to =// the East) on the fault line between Orthodox Christian and Muslim =// civilizations. <#inc ww2010.mappic ukraine.gif center "" "Ukraine"#> Ukraine is located just above the Black Sea, and has been a theatre for wars between Europe and Russia. Ukraine became an independent nation in 1918, just after the Russian Revolution. The independence was brief, as Ukraine was forcibly incorporated into Soviet Russia by 1921. The country was subject to repeated atrocities, mass executions and deportations, throughout the 1920s and 1930s, the worst being Stalin's man-made genocidal famine that killed millions of peasants in 1932. One of the principles of Generational Dynamics is that nobody ever remembers the atrocities they commit on others, but no one ever forgets the atrocities that others commit on them. So one can be certain that Stalin's atrocities are playing a part today. The "rebel" Viktor Yushchenko represents the Ukranian-speaking 75% majority ethnic Ukranians living mostly in rural areas, especially in the west. Yushchenko would like to move Ukraine closer to Europe. The "establishment" Viktor Yanukovych represents the Russian-speaking 25% minority ethnic Russians living mostly in large cities, especially in the east. Yanukovych has been heavily and openly supported by Putin, and would like to move Ukraine closer to Russia. Now, you don't have to be a rocket scientist to see the problem here. Ukraine regained its indpendence with the Soviet breakup in 1991, and a lot of Ukrainians must feel in their gut that Putin would like to take over Ukraine again, the way Stalin did in 1921. Generational Dynamics predicts that the atrocities committed by Stalin will be revisited in the form of a major new conflict, possibly a major civil war. When this will happen cannot be predicted, of course, but the current scandal is opening up this fault line wound today. =eod =// &&2 e041122 Alan Greenspan's blunt warning raising international concern =data ww2010.weblog.y2004.e041122.head Alan Greenspan's blunt warning raising international concern =data ww2010.weblog.y2004.e041122.keys =data ww2010.weblog.y2004.e041122.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041122.date 22-Nov-04 =data ww2010.weblog.y2004.e041122.txt1 Newspapers around the world are headlining their business sections with the news =data ww2010.weblog.y2004.e041122.txt2 that Greenspan has come closer than ever before to predicting that the American economy is possibly close to suffering a painful "adjustment." This followed on the heels of <#stdurl "www.bloomberg.com/apps/news?pid=10000100&sid=ajG6t4iZO_2w&refer=germany" "November 17 statements by Treasury Secretary John Snow in London"#> that America would not attempt to strength the dollar in international markets, at a time when the dollar is already at historically weak levels. In <#stdurl federalreserve.gov/boarddocs/speeches/2004/20041119/default.htm "his speech Friday to the European Banking Congress in Frankfurt,"#> that the "current accounts deficit" (American debt level to other countries) has "risen to more than 5 percent of GDP," and "cannot continue to increase forever in international portfolios at their recent pace." The current accounts deficit continues to widen because the American economy imports far more goods than it exports, forcing the U.S. to borrow heavily from other countries, especially Asian economies. This has weakened the dollar relative to other currencies, and encouraged <#stdurl "english.donga.com/srv/service.php3?bicode=060000&biid=2004112274388" "widespread currency speculation, especially in China."#> Greenspan's warning is that these countries will not continue to loan money forever, and that an adjustment may come sooner than expected. The French news agency Agence France-Presse (AFP) says, <#stdurl "www.turkishpress.com/news.asp?ID=34158" ""Snow, Greenspan dash hopes for relief from weak dollar.""#> The UK Guardian headline reads, <#stdurl "www.guardian.co.uk/business/story/0,3604,1356683,00.html" ""US risks a downhill dollar disaster.""#> The BBC says much the same thing, though adds, <#stdurl news.bbc.co.uk/2/hi/business/4027587.stm ""[Greenspan] is not predicting certain catastrophe now"#> or indeed at any stage in the future. But the implication is clear, that the inevitable adjustment might come in a disruptive form." What's new is this level of negative comment. <#hreftext ww2010.i.big041024 "As I wrote before the Presidential election,"#> many negative comments were being muted until after the election. For example, Greenspan's and Snow's statements would both have been impossible before the election, since either would have become a campaign issue. Now that the election is over, it's possible to report a drop in the value of the dollar as if it were a weather report. However, it's not just comments but also actions that are changing following the election. China's President Hu Jintao <#stdurl "www.bloomberg.com/apps/news?pid=10000087&sid=aEg2lOshFUqU&refer=top_world_news" "has promised to revaluate the Yuan,"#> albeit slowly, a move which would accelerate the fall of the dollar. However, Monday's Wall Street Journal <#stdurl online.wsj.com/article/0,,SB110106445465680132,00.html "reports that a wave of revaluation is spreading around Asia."#> According to the article,

"Asia appears to be in the early stages of a regionwide currency revaluation, partly in anticipation that China will let its own currency float higher over the next year. From Tokyo to Seoul to Singapore, some investors are buying up large volumes of Asian currencies, a strategy that assumes Asian countries will tolerate somewhat stronger currencies in the year ahead. The won is trading near its highest level against the dollar in seven years, while the yen is up nearly 7% since the beginning of October. Investors also are pouring capital into Asia's equity and bond markets -- a bet that appreciating currencies will boost the value of their assets over time. Meanwhile, a number of Asia's largest companies are drafting strategies to deal with current and anticipated adjustments in Asian currencies, including cutting costs and changing the amount of business they do in dollars."

A large revaluation of Asian currencies would have a big impact in America, since imported products would become much more expensive, forcing Americans to cut back. Since many analysts are predicting a recession next year anyway, thanks to high oil prices, this kind of revaluation would make a recession even worse, and force a harsh "adjustment" of the kind that Greenspan is raising warnings about. From the point of view of Generational Dynamics, an "adjustment" could be quite severe. Stocks are overpriced by a factor of 100%, according to standard price/earning ratio measures that were commonly used by financial managers two decades ago. Investors stopped using price/earnings ratios when these measures stopped giving answers that the investors wanted to hear. The purpose of Greenspan's warning was to shock the Administration and the Congress into reducing spending. In earlier warnings, <#inc ww2010.weblog.ref e040830 "Greenspan warned about "abrupt and painful adjustments""#> unless changes were made to reduce Social Security and Medicare benefits quickly. All of this is politically impossible of course. The Republicans will never agree to roll back the tax cuts, and the Democrats will never agree to reducing Social Security or Medicare benefits. Any attempt to bring about these changes will trigger a bitter political battle, <#hreftext ww2010.i.election041103 "as the nation undergoes a major cultural and political restructuring."#> Generational Dynamics predicts that America has entered a 1930s style Great Depression, and that stock prices will fall by 50% or more, when something happens to trigger a loss of confidence. Based on the current accounts deficit, and <#hreftext ww2010.i.danger041120 "high level of dangerous international conflict,"#> Greenspan's warning about a serious "adjustment" may be well on its way to coming to pass. =eod =// &&2 e041119 Inflation is back, according to analysts. =data ww2010.weblog.y2004.e041119.head Inflation is back, according to analysts. =data ww2010.weblog.y2004.e041119.keys =data ww2010.weblog.y2004.e041119.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041119.date 19-Nov-04 =data ww2010.weblog.y2004.e041119.txt1 Both wholesale and consumer prices are sharply up - but not if you don't count oil and food. =data ww2010.weblog.y2004.e041119.txt2 The Producer Price Index (PPI - for wholesale prices) jumped 1.7%, and the Consumer Price Index (CPI - for retail prices) jumped 0.6% in October. Both increases were much higher than they've been for a while. As a result, <#stdurl www.iht.com/articles/2004/11/17/business/usecon.html "analysts are talking about the return of inflation."#> That's not all. The value of a dollar has been falling internationally, with the euro going over $1.30 for the first time. The return of serious inflation would have a significant impact on policy at Alan Greenspan's Fed, forcing him to be more aggressive in raising interest rates. That could cause other problems, however, with a number of analysts predicting a recession next year. So what's going on? The following table shows the values of the PPI and CPI for each month so far in 2004:


                        Changes from preceding month    
                                    2004                
                     Jan. Feb. Mar. Apr.  May June July  Aug Sept  Oct
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI                .6    .1   .6   .7   .7  -.3   .1  -.1   .1  1.7
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI "Core index"   .3   -.1   .3   .1   .4   .2   .1  -.1   .3   .3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI                .5    .3   .5   .2   .6   .3  -.1   .1   .2   .6
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI "Core index"   .2    .2   .4   .3   .2   .1   .1   .1   .3   .2
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----

In each case, the "core index" is the index without food and energy prices factored in. Now, the price of oil has increased over 40% this year, and it topped $50 per barrel in October. That's why the PPI jumped so high. When you look at it that way, the question isn't "Why did the PPI go up?" The relevant question is, "Why did it take so long to go up?" And there's a second relevant question: "Why are the two core index values still so low?" These figures indicate that both businesses and consumers are being forced to pay very high prices for energy and food items, but that businesses are unable to pass high energy prices through to finished goods. From the point of view of Generational Dynamics, what's happening is this: The Great Depression of the 1930s forced many inefficient businesses to close, and forced others to completely change course to survive. By the time it was over, almost every business, university, government agency, labor union and non-profit organization was "lean and mean," getting everything done with a few highly motivated employees. Over the years, all of these organizations have become increasingly inefficient, until today they're so inefficient that they're producing products and services that people don't really want at prices much higher than people are willing to pay. When you combine that with the great bubble of the late 1990s, that's why we're entering a new 1930s style great depression again. We would already have had massive bankruptcies and homelessness, except that Alan Greenspan's Fed poured money into the economy by pushing interest rates down to near-zero, allowing people to borrow enormous amounts of money at lower interest rates to avoid bankruptcy. The result is that inefficient businesses have continued to survive on credit, pushing public debt to astronomically high levels. Thus, the Fed policy has not prevented the financial crisis, but only postponed it. Furthermore, as <#inc ww2010.weblog.ref e040717 "we've previously said,"#> if you look at long-term trends instead of just a few months, we're actually in a long-term deflationary period, and we actually expect prices to fall by 30% in the next few years. That's why huge spurts in oil prices are causing temporary spikes in the PPI, but aren't having much effect on the the core values, and won't have any long-term effect. =eod =// &&2 e041117b Dutch vote murdered anti-Islamic polemicist as 'Greatest Dutchman of all time' =data ww2010.weblog.y2004.e041117b.head Dutch vote murdered anti-Islamic polemicist as "Greatest Dutchman of all time." =data ww2010.weblog.y2004.e041117b.keys =data ww2010.weblog.y2004.e041117b.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041117b.date 17-Nov-04 =data ww2010.weblog.y2004.e041117b.txt1 Alarmed politicians, led by Queen Beatrix, are considering repeal of freedom of speech =data ww2010.weblog.y2004.e041117b.txt2 by <#stdurl www.iht.com/articles/2004/11/16/news/dutch.html "reviving a 1932 law that forbids dangerous speech."#> <#inc ww2010.weblog.ref e041115b "As we described recently,"#> Holland almost seems to be melting down, following the November 2 murder of filmmaker Theo van Gogh by a Muslim extremist. Since then, arson attacks have burned over a dozen mosques and Muslim schools, and the new law is meant to curb incitement of such attacks.

GREATEST DUTCHMEN 1 - Pim Fortuyn - politician
2 - William of Orange - royalty
3 - William Drees - politician
4 - Antony van Leeuwenhoek - scientist
5 - Erasmus - humanist
6 - Johan Cruyff - footballer
7 - Michael de Ruyter - admiral
8 - Anne Frank - diarist
9 - Rembrandt van Rijn - artist
10 - Vincent van Gogh - artist
Source: <#stdurl news.bbc.co.uk/2/hi/europe/4015173.stm BBC#>

The man voted the "Greatest Dutchman of all time" is Pim Fortuyn, the harshly anti-immigrant politician who was becoming increasingly popular two years ago, until <#stdurl "news.bbc.co.uk/hi/english/world/europe/newsid_1971000/1971884.stm" "his murder shocked the nation just before the elections."#> Fortuyn's murderer was an animal rights activist. Fortuyn's political organization split up after his murder, but since the assassination of van Gogh, one of Fortuyn's political heirs, Geert Wilders, has been gaining political power with anti-Islamic and anti-immigration rhetoric. The new dangerous speech law, if passed, would be used against Wilders' rhetoric, and also against inflammatory rhetoric of Islamic clerics in mosques. From the point of view of Generational Dynamics, what's amazing about the Netherlands situation is the evident rapidity with which the country seems to be melting down. First, notice that these rapid changes in Dutch attitudes are coming from the people, not from the the politicians. This is an important principle of Generational Dynamics, and I've emphasized many times on this web site with respect to American politics -- American adoption of the Patriot Act, American's naming "moral values" as the most important issue of the recent election -- George Bush had nothing to do with these things, and these would have been the same if Al Gore had been President these last four years. Second, notice the complete irrationality of the Dutch public naming Fortuyn as the greatest Dutchman of all time, since he was clearly just a minor politician whose greatest claim to fame was being assassinated. I commented frequently during the American election campaign, and especially after the debates, how completely irrational the campaign was, especially since there was almost no discernable difference between the policies of the two candidates, except in the fantasies of partisans. Third, this is the kind of rapid movement of opinion that can lead to revolution. I'm not saying that will happen in Holland, but I'm making the point that some event just like this can in fact trigger a revolution. There was nothing particularly rational about the mobs' storming the Bastille in 1789 to launch the French Revolution, and there was certainly nothing rational about the Reign of Terror that followed, but it can happen, does happen, and has happened in every nation throughout history. Another example is the Rwanda genocide of 1994: A plane crash triggered a massive attack by Hutus on Tutsis, killing them, raping them, and hacking their bodies apart, with almost a million casualties. These events are like sex acts that have to be consummated every 80 years or so. We're in a unique time in history, when all the nations who fought in World War II are now rapidly making generational changes, all at the same time. In each nation, all the people who have personal memories of the genocidal horrors of WW II are all disappearing (retiring or dying), all at once, and history tells us that that's when the next world war is likely to begin. There are several "pressure cooker" regions of the world, all of them entering or well into a "generational crisis" period. These include Western Europe, Israel/Palestine, India / Pakistan / Kashmir, Russia / the Caucasus, China/Taiwan, and North/South Korea. We'll see periods of rapidly changing public opinions in each of these regions, just as we've seen them in America, and now Holland. Sooner or later, one of them will trigger a revolution or a genocide, and then the "clash of civilizations" world war will not be far off. =eod =// &&2 e041117 World Bank calls world economic growth "strongest in three decades" =data ww2010.weblog.y2004.e041117.head World Bank calls world economic growth "strongest in three decades" =data ww2010.weblog.y2004.e041117.keys =data ww2010.weblog.y2004.e041117.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041117.date 17-Nov-04 =data ww2010.weblog.y2004.e041117.txt1 In a "bubble-headed" analysis, the World Bank called 2004 a "fabulous year" =data ww2010.weblog.y2004.e041117.txt2 for developing countries. Richard Newfarmer, lead author of the World Bank report, says, <#stdurl "www.voanews.com/english/Africa/2004-11-16-voa35.cfm" ""This year we expect growth rates to be on the order of 6.1 percent"#> with growth having increased in virtually every region, every one of the six major regions around the world." According to the World Bank report (<#stdurl www.worldbank.org/prospects/gep2005#>):

"World growth accelerated sharply in 2004, with GDP advancing an estimated 4 percent.... All developing regions are now growing faster than their average growth rates of the 1980s and 1990s. The ongoing economic boom in China was a major factor, as were the surges in activity registered in Japan and the United States. The economic recovery was slower to take hold among European high-income countries, which contributed to the less marked increase in growth rates there. Meanwhile, very strong import demand -- because of the torrid expansion in China and the continued tendency for domestic demand in the United States to substantially exceed production -- contributed to an exceptional 10.2 percent increase in world trade volumes."

The problem with statements like this is that they don't examine the real underlying fundamentals of the economies involved. When the report refers to "the torrid expansion in China," it's referring not to strong economic growth but to an economic bubble that's going to burst sooner or later. And since it's the primary engine for the "world growth" that report mentions, when the bubble bursts, as it must, it's going to have a severe domino through several countries. Japan's economic bubble occurred in the 1980s, and burst in 1990. The country still hasn't recovered; in fact, <#inc ww2010.weblog.ref e041115 "the Japanese economy suffered a sharp, unexpected slowdown"#> in the third quarter. And when the report refers to "the continued tendency for domestic demand in the United States to substantially exceed production," it's alluding to the fact that American public debt is historically astronomical. =eod =data xx.xx You know, I read so many of these weasel-worded reports, that I've stopped commenting on them as much as before, but I decided it was time again. The Fed is going to be meeting later today, and they're going to be in qui-i-i-i-i-te a pickle. On the one hand, the dollar is getting weaker and wholesale prices are increasing (though consumer prices aren't), meaning that the Fed should increase interest rates again. On the other hand, manufacturing is continuing to slow, and many economists are predicting a recession next year, meaning that the Fed should not increase interest rates. For several months, <#inc ww2010.weblog.ref e041020 "I've been harshly critical of Greenspan"#> and his colleague, Fed Governor Ben Bernanke, and it's gotten to the point that <#inc ww2010.weblog.ref e041021 "economists are increasingly skeptical of Greenspan's statements."#> My complaint has been the same as for this World Bank report: weasel words with no mention of fundamentals. Today's Fed meeting may or may not increase interest rates, but whichever way it goes, you can be sure that the accompanying statement will be as weasely as ever. =eod =// &&2 e041116 How France screwed Secretary of State Colin Powell =data ww2010.weblog.y2004.e041116.head How France screwed Secretary of State Colin Powell =data ww2010.weblog.y2004.e041116.keys =data ww2010.weblog.y2004.e041116.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041116.date 16-Nov-04 =data ww2010.weblog.y2004.e041116.txt1 Powell's worst day as Secretary of State was undoubtedly January 20, 2003, =data ww2010.weblog.y2004.e041116.txt2 at a joint press conference with French foreign minister Dominique de Villepin. Powell and de Villepin had had a close working relationship at the UN, developing a final resolution to use force in Iraq. They spoke a a minute or two before the press conference, and agreed on what they would say. At the press conference, Powell was shocked to hear de Villepin announce that France would veto any any resolution that explicitly authorized the use of force against Saddam Hussein. After that, the whole effort with the United Nations fell apart, and the UN itself was almost torn apart. <#stdurl "www.humaneventsonline.com/article.php?id=3289" "It later turned out"#> that the whole thing had been planned for weeks by French President Jacques Chirac and de Villepin. They purposely led Powell on, strung him along, with the intention of ambushing him and humiliating both him and America. We now know the reason as well -- that <#stdurl www.guardian.co.uk/Iraq/Story/0,2763,1352150,00.html "France was making billions of dollars in kickbacks from Saddam's oil-for-food fraud,"#> which was enriching France, Russia and Saddam, but leaving millions of Iraqi citizens to starve. From the point of view of Generational Dynamics the importance of this episode is with regard to France itself. By planning in secret to humliate Powell and America, France is establishing a pattern typical of pre-war activities throughout history. Another pattern that France is establishing is a closer and closer relationship with the Muslim "side" in conflicts between the West and Muslim nations. These include

Evidently taking the Muslim side in war between the Catholic government and Muslim rebels in Côte d'Ivoire (Ivory Coast)
Supporting the Palestinian side in political disagreements with Israel, and providing a haven for Yasser Arafat prior to his death.
Receiving positive support from Muslims worldwide when <#inc ww2010.weblog.ref e040830c "two French journalists were kidnapped in Iraq."#>
Continued open hostility to England and America.

No one of these items is determinative by itself, but the group taken together indicates an increasing trend. There have been crisis wars in Western Europe for centuries, the last one being World War II, and Generational Dynamics tells us that there'll be another one in the next few years with near 100% certainty. However, Generational Dynamics doesn't tell us which countries will be on each side. Indeed, France was allied with England in World War II, but was defeated by England in the Napoleonic Wars. In fact, England is considered to have been founded when the French conquered the native Saxons in London in 1066. The growing entente between France and the Muslim world, combined with the growing hostility between France and England indicates that there will be a major new war between France and England, and that France will be on the side of the Muslim civilization in the "clash of civilizations" world War. When I tell people that there's going to be a new war between England and France they often express emotions varying from simple disbelief to total contempt, but it's appearing more and more certain. Here's a scenario that shows how it can occur: As unrest increases in the Mideast, international forces, including French and English forces, are called in to keep the peace. As the war escalates, both the French and England are forced to choose sides. When Jordan and Egypt declare war against Israel, France sides with Jordan and Egypt, and England sides with Israel. England bombs French facilities in France, leading to a new West European war. This is speculation of course, but one way or another, expect a new war between England and France in the next few years. Colin Powell himself may understand some of this, and it might even be one of the reasons why he felt it necessary to resign yesterday as Secretary of State. =eod =// &&2 e041115b Dutch Mosques and Churches burning after terrorist murder of author =data ww2010.weblog.y2004.e041115b.head Dutch Mosques and Churches burning after terrorist murder of author =data ww2010.weblog.y2004.e041115b.keys =data ww2010.weblog.y2004.e041115b.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041115b.date 15-Nov-04 =data ww2010.weblog.y2004.e041115b.txt1 The November 2 murder of Dutch author Theo Van Gogh is stirring religious violence and political repercussions =data ww2010.weblog.y2004.e041115b.txt2 throughout the Netherlands, and is raising concerns throughout Western Europe. It all started on November 2 with the murder of Dutch filmmaker Theo van Gogh last Tuesday by a suspected Islamist militant. Van Gogh, the great-grandnephew of famous Dutch artist Vincent van Gogh, had made a short film, called Submission, that portrays and criticizes Muslim treatment of women. You can view the 11-minute film <#stdurl "www.ifilm.com/ifilmdetail/2655656?htv=12" "online on the ifilm.com web site."#> I saw this news story the day it happened, but didn't think much of it. It was a horrible crime, but I figured that they'd catch the guy who did it, and that would be the end of it. We're pretty used to murder here in America. People will give you different reasons for the murder rate - liberals will tell you it's because of poverty and lack of gun control, and conservatives will tell you it's because criminals are coddled and schools aren't teaching kids to read. And we're used to dealing with racial or ethnic crimes as well, even though we hate them. But not so the Netherlands. The capital city, <#stdurl "www.thehague.nl/info/document.php?id=56&s=312" "the Hague, calls itself "the international city of peace,""#> and points to various peace conferences and international courts of justice to back up its claim. The entire country considers itself <#stdurl "www.arabnews.com/?page=7§ion=0&article=54214&d=9&m=11&y=2004" "to be the most tolerant in Europe"#> of other religions and races. People with such a smug attitude are bound to be humiliated sooner or later, and the first major blow came in February, 2002, when an "intolerant, right wing" politician, <#stdurl "news.bbc.co.uk/hi/english/world/europe/newsid_1857000/1857918.stm" "Pim Fortuyn, suddenly became very popular after expressing harshly anti-Muslim views."#> This was a matter of debate throughout Holland and Europe, as Fortuyn gained popularity, and formed a new political party that was poised to score well in the May, 2002, national elections. But shortly before the elections, the country was shocked to hear that <#stdurl "news.bbc.co.uk/hi/english/world/europe/newsid_1971000/1971884.stm" "Pim Fortuyn was murdered,"#> in a country where politicians are never murdered. Now, the murder of Van Gogh appears to have set off a wave of religious violence throughout Holland, including the firebombing of a Muslim school and attacks on a dozen Mosques. Reprisals have included molotov cocktail attacks on several churches. So far, no further injuries have been reported. However, the same can't be said of the arrest of two terror suspects in the Hague last week. <#stdurl "www.turkishpress.com/turkishpress/news.asp?ID=33381" "Dutch police arrested two suspected terrorists"#> after a 14-hour siege of their apartment that required the evacuation of five city streets after the terrorists exploded a grenade that injured three policemen, two seriously. The murder of one man, Theo Van Gogh, has exposed deep fissures in the Dutch, and has caused reactions that appear to exceed those of Americans after 9/11. The Dutch, normally considered to be docile, tolerant people, were treated very harshly by Nazi occupation during World War II, and there is still a feeling of betrayal by Nazi collaborators. So with a population of 16 million containing 1 million Muslims, it's not surprising that some Dutch are calling Muslims the "new Nazi occupiers." The fallout isn't limited to Holland. With 3.4 million Muslims comprising 4 percent of Germany's population, centuries-old fault lines between the Christian Habsburg Empire and the Muslim Ottoman Empire has been re-opening in recent years, even before the current crisis. Germany's interior minister, Otto Schily, <#stdurl "www.expatica.com/source/site_article.asp?subchannel_id=52&story_id=13950&name=Dutch+religious+violence+alarms+Germany" "said earlier this year,"#> said to Islamic fundamentalists: "If you love death so much, then it can be yours." Just a few weeks ago, <#inc ww2010.weblog.ref e040920 "Neo-Nazis and Communists made significant gains in regional elections,"#> on a platform blaming foreigners, including Jews and Muslims, for the country's high unemployment. "It's a great day for Germans who still want to be German," said Holger Apfel, a spokesman for the neo-Nazi National Democratic Party. Now the remarks are getting even more pointed. "The feelings of hatred against the majority Christian society are growing," said <#stdurl "www.expatica.com/source/site_article.asp?subchannel_id=52&story_id=13950&name=Dutch+religious+violence+alarms+Germany" "the left-leaning Berliner Zeitung."#> These feelings between Germans and Muslims may well be mutual. A TV station secretly filmed the following speech by a cleric at the Mevlana Mosque in Berlin: "These Germans, these atheists, these Europeans don't shave under their arms and their sweat collects under their hair with a revolting smell and they stink. ...Hell lives for the infidels! Down with all democracies and all democrats!" Both Dutch and German legislators are now considering legislation which will be even harsher than America's Patriot Act, even including banning speeches in Arabic in mosques. From the point of view of Generational Dynamics, this is developing into a hardening of attitudes that was predicted. West Europe has had numerous wars for centuries, and a new one is "scheduled" in the next few years. The startling and suddent transformation of normally placid Netherlands into a zone of conflict between Christians and Muslims is a step along that path. =eod =// &&2 e041115 Sharp slowdowns: Europe, Japan, US factory orders =data ww2010.weblog.y2004.e041115.head European and Japanese economy show sharp, unexpected slowdowns, as do American factory orders =data ww2010.weblog.y2004.e041115.keys =data ww2010.weblog.y2004.e041115.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041115.date 15-Nov-04 =data ww2010.weblog.y2004.e041115.txt1 High oil prices, weakness of the dollar, and slowdown in exports are blamed for third quarter slowdowns =data ww2010.weblog.y2004.e041115.txt2 in both the European and Japanese economies. Growth in euroland <#stdurl "www.forbes.com/home/feeds/ap/2004/11/12/ap1651695.html" "was only 0.3% in the third quarter,"#> below economists' expectations of 0.4%, and well below second quarter growth of 0.5%. Growth was <#stdurl "quote.bloomberg.com/apps/news?pid=10000006&sid=aCqzGklA_2XI&refer=home" "likewise only 0.3% in Japan's third quarter."#> In America, the economy has had mixed results recently. Retail sales have risen slightly, but in September <#stdurl "www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=6702476" "factory orders fell unexpectedly."#> Orders fell 0.4%, which was the biggest decline since April, while analysts had been expected a 0.3% rise. From the point of view of Generational Dynamics, America is entering a 1930s style depression. I've written this many times before on this web site, but one thing I haven't emphasized too much in the past is that Europe is on the same generational timeline. The huge 1990s stock market bubble occurred at exactly the time that the senior financial advisors from the generation of people who grew up during the Great Depression all disappeared (retired or died), all at the same time, in the early 1990s, and the same is true of Europe. <#inc ww2010.pic nikkei.jpg right "" "Japan's Nikkei Stock Market Index, 1973 to 2003"#> Japan is on an earlier timeline, having had its major bubble in the 1980s. As you can see from the adjoining graph, the Nikkei stock market index was at around 40,000 in 1989, following a large bubble that began in 1985. Recently, the Nikkei has recovered to the 11,000 range. But even so, the economy is still slowing, and inflation has actually been negative (deflation) now for six years. As had been the case repeatedly for 2-3 years, economists have no plausible explanation for any of these unexpected results. =eod =// &&2 e041114b Iran agrees to suspend uranium enrichment =data ww2010.weblog.y2004.e041114b.head Iran agrees to suspend uranium enrichment =data ww2010.weblog.y2004.e041114b.keys =data ww2010.weblog.y2004.e041114b.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041114b.date 14-Nov-04 =data ww2010.weblog.y2004.e041114b.txt1 Today, Iran sent a letter to the International Atomic Energy Agency =data ww2010.weblog.y2004.e041114b.txt2 of the UN, <#stdurl "www.reuters.com/newsArticle.jhtml?type=topNews&storyID=6806506" "agreeing to a full nuclear enrichment freeze."#> This evidently defuses <#inc ww2010.weblog.ref e041007 "a potential crisis with the Israeli government,"#> which had claimed that Iran would reach the "point of no return" in its nuclear weapons program by November. It also heads off threatened UN sanctions, and, in addition, it enables incentives promised by the European Union, including providing free nuclear technology. The White House reacted cautiously to Iran's announcement, saying: "We look forward to a briefing by our European friends." =eod =// &&2 e041114 Yasser Arafat dies =data ww2010.weblog.y2004.e041114.head NY Post: "Arafat Dead - And he won't be missed." =data ww2010.weblog.y2004.e041114.keys =data ww2010.weblog.y2004.e041114.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041114.date 14-Nov-04 =data ww2010.weblog.y2004.e041114.txt1 I look at Arafat's life very, very differently. =data ww2010.weblog.y2004.e041114.txt2 Was he a terrorist? Yes. Was he a hero to the Palestinian people? Yes - just ask them. <#inc ww2010.pic g041111.gif right "" "New York Post front page, 11-Nov-2004"#> The <#stdurl www.nypost.com/seven/11112004/index.shtml "front page of the 11-Nov Post"#> captures a sentiment that has been repeatedly stated by Western analysts and politicians. One pundit even called Arafat "a truly evil man." These people believe that Arafat, and only Arafat, stood in the way of Mideast peace. That's obviously what President Bush believes. In a joint press conference with British Prime Minister Tony Blair, the President said that with Arafat out of the way, <#stdurl www.washingtonpost.com/wp-dyn/articles/A46469-2004Nov12.html "his goal is to establish a peaceful, democratic Palestinian state"#> alongside Israel before he leaves office in 2009. All this is based on the silly assumption that the Palestinian demand that Jerusalem return to Palestinian control and that the Palestinian people have a "right of return" to lands lost in the 1948 Arab/Jewish war came from Arafat, rather than from the people he led. Both Generational Dynamics and history tell us that those kinds of demands are buried deep in the DNA of the people. The pattern is always the same after a genocidal crisis war like the Arab/Jewish war of the late 1940s: There are numerous atrocities and genocidal rage on both sides, along with a desire on each side to exterminate the other side. Such a war is resolved only with painful compromises, in order to end the atrocities. When the generation of people who lived through the atrocities disappear (retire or die), all at once, then the younger generations left behind retain the old demands, and the painful compromises unravel. In fact, many commentators are expressing a kind of perverse appreciation of Arafat, <#stdurl washingtontimes.com/commentary/20041112-081509-2561r.htm "worrying that Arafat's departure will cause a civil war"#> among the Palestinians. As well they might. Arafat was hardly a high-flying playboy. He lived in a filthy uncomfortable bunker in Ramallah when he could have had a luxury suite in Paris. He was a driven desperate man, obsessed with doing anything, willing to sacrifice his own comfort and livelihood, if it meant finding a way to prevent a new genocidal war between the Arabs and Jews. Only a "terrorist" who had actually survived the atrocities of the 1940s Arab/Jewish war would be obsessed enough to make these sacrifices, because he considers his own life less important than the lives of his fellow Palestinians, and yes, even the Jews in Israel. <#inc ww2010.pic arafat.jpg left "" "Yasser Arafat in 2000"#> Yes, he was a brutal, vicious terrorist. Yes he was a liar and maybe even a crook. Yes, he approved suicide bombings that killed Jewish children. But for a man in his position, approving suicide bombings was the lesser of two evils. The greater evil was unleashing a new genocidal war, one that would kill many more Jewish and Arab children than suicide bombings do. Arafat surely saw what's coming, and that's why he lived his tortured life in his Ramallah bunker. He leaves behind Israeli Prime Minister Ariel Sharon, who was about the same age (born in 1928) as Arafat (1929). Sharon is also a deeply desperate man, since he's also a survivor of the 1940s Arab/Jewish war. He orders the killing of Hamas leaders, and he builds a 12 foot high barrier around Israel, infuriating the Palestinians and the Europeans, once again because it's the lesser of two evils. <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> Generational Dynamics predicts that there'll be a new Arab/Israeli crisis war, with almost 100% probability, in the next few years. When it occurs, Jews and Palestinians will once again try to exterminate each other completely, but since there are so many more Muslims in the region, the continued existence of Israel is in question. No one who looks at the adjoining map can realistically doubt that conclusion. The Palestinians will mourn Yasser Arafat and miss him. But despite what the New York Post says, a lot of other people are going to miss Yasser Arafat as well, and I suspect that the man who will miss him most of all will be Ariel Sharon. =eod =// &&2 e041111 Hizbollah sends unmanned Iranian drone over Israel =data ww2010.weblog.y2004.e041111.head Hizbollah sends unmanned Iranian drone over Israel =data ww2010.weblog.y2004.e041111.keys =data ww2010.weblog.y2004.e041111.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041111.date 11-Nov-04 =data ww2010.weblog.y2004.e041111.txt1 In an escalation of the hostility between Iran and Israel, Iran has humiliated Israel =data ww2010.weblog.y2004.e041111.txt2 by overflying Israel with a drone that was not detected by the Israeli air force. The drone was launched from Lebanon last Sunday jointly by experts from the Iranian Revolutionary Guards and the Lebanese militia group Hizbollah. It took pictures with a built-in camera and transmitted them back to Hizbollah, and then crashed into the sea, where fishermen recovered it and returned to Hizbollah operatives. The drone was one of eight that Iran has supplied to Hizbollah. This comes after a month when Iran has made it clear to the UN and the international community that it plans to go ahead with its nuclear enrichment program. Enriched petroleum is the first step in developing nuclear weapons, although Iran insists it plans only peaceful uses. We're now near mid-November, a period of time which has previously been <#inc ww2010.weblog.ref e041007 "identified as critical by the Israeli government,"#> who have said that Iran will reach the "point of no return in its nuclear weapons program by November. At the same time, Israeli Prime Minister Ariel Sharon said that Israel is "taking measures to defend itself" in the Iran situation. Whenever a politician makes a threat and sets a deadline, it always makes me nervous. Is Israel going to take military action against Iran's nuclear development facilities before December 1? If so, Iran has said it is ready, and will retaliate. If not, then what happens on December 1, when the "point of no return" will have passed? It's hard to escape the feeling that Iran's drone flight over Israel was meant to stick a thumb into Israel's eye. Iran seems to be saying, "Not only are we ready for you if you take military action, but we're getting ready to take military action against you some day no matter what you do." =eod =// &&2 e041110 Iraq: Fallujah resistance light so far =data ww2010.weblog.y2004.e041110.head Iraq: Fallujah resistance light so far =data ww2010.weblog.y2004.e041110.keys =data ww2010.weblog.y2004.e041110.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041110.date 10-Nov-04 =data ww2010.weblog.y2004.e041110.txt1 As has happened repeatedly - in the war itself, and in Moqtada al-Sadr's insurgency - resistance is quickly collapsing in Fallujah, =data ww2010.weblog.y2004.e041110.txt2 at least so far. <#stdurl "www.washingtonpost.com/wp-dyn/articles/A38834-2004Nov10.html" "American-led coalition forces have had a "stunningly swift" advance,"#> and have taken control of 70% of Fallujah. The reason was revealed in a BBC World Service interview on Tuesday of an Iraqi journalist from Fallujah, someone who was evidently sympathetic to the insurgents. When the journalist was asked what the insurgents hoped to accomplish, he said (paraphrasing), "There's a difference between the Iraqi insurgents and the insurgents from other countries. The Iraqis just want to end the American occupation. Those from other countries are Jihadists wanting to defeat the Americans and are willing to die fighting the Americans." This contrast is consistent with what we've been saying for many months on this web site. <#hreftext ww2010.i.sixties040501 "Iraq itself is in a "generational awakening" period,"#> since just one generation has passed since the genocidal Iran/Iraq war of the 1980s. That means that the Iraqis themselves simply do not want a war, and are experiencing a political battle between older and younger generations. We've repeatedly had fun pointing out that a civil war or anti-American uprising from the Iraqis was IMPOSSIBLE, even though journalists, pundits and high-priced analysts have repeatedly warned of that possibility. We've even <#inc ww2010.weblog.ref e040812 "taking the liberty of mocking journalists"#> who make such repeated warnings, evidently out of wishful thinking. This was particularly appearent during the brief insurgency of young Shi'ite cleric Moqtada al-Sadr, which collapsed shortly after it started, as we predicted. We've also noted that <#inc ww2010.weblog.ref e041013b "Fallujans are getting angry with insurgents."#> and that foreign-born Abu Musab al-Zarqawi's most formidable enemy may be the 40-50 year old mothers of Fallujah, who have already lost husbands, fathers and brothers in war, and see no point in losing their sons as well. By contrast, the foreign-born insurgents, including al-Zarqawi himself, are from Lebanon and Palestine, which is in a "generational crisis" period. That's why they're "willing to die" fighting the Americans, and why the Palestine region is so much more dangerous than Iraq itself ever could be. That's not to say that the recapture of Fallujah is a cakewalk. Abu Musab al-Zarqawi is very dedicated and resourceful and has enormous sums of money at his disposal. But he's trying to stir up a population that simply doesn't want to be stirred up. =eod =// &&2 e041109b Palestinian rage and dissension grows as Arafat nears death =data ww2010.weblog.y2004.e041109b.head Palestinian rage and dissension grows as Arafat nears death =data ww2010.weblog.y2004.e041109b.keys =data ww2010.weblog.y2004.e041109b.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041109b.date 9-Nov-04 =data ww2010.weblog.y2004.e041109b.txt1 Plans for peaceful transition of Palestinian power are progressing within the Palestinian Authority, =data ww2010.weblog.y2004.e041109b.txt2 as wary observers look for signs of possible violence following the death of Yasser Arafat, which now appears to be only hours away. "Hell hath no fury like a woman scorned" was the watchphrase yesterday, when <#stdurl "www.arabnews.com/?page=4§ion=0&article=54212&d=9&m=11&y=2004" "Arafat's wife, Suha, called the Arabic cable network al-Jazeera"#> and screamed that Arafat's aides in the Palestinian Authority (PA) were trying to usurp her husband's role in traveling to Paris to see him. "Let it be known to the honest Palestinian people that a bunch of those who want to inherit are coming to Paris," she shouted. "I tell you they are trying to bury Abu Ammar [Yasser Arafat] alive. He is all right and he is going home." Suha is 41 years old, 34 years younger than Yasser. When they got married in 1991, Palestinians reacted with as much disdain and hostility as any society does when an older man marries a much younger woman. Suha was repeatedly rebuffed and humiliated by Arafat's PA aides, the same men who have now traveled to Paris to gain a vengeful Suha's permission to visit Arafat's bedside. By 1995, when their daughter was born, Suha was spending most of her time in Paris, and now lives in a $5 million penthouse apartment in Paris, where she has control of a great deal more money. She has not seen her husband since 2000. As Arafat's death approaches, the situation has been further inflamed by the question of where Arafat will be buried. He's expressed the wish to be buried in Jerusalem, but Israeli Prime Minister Ariel Sharon has forbidden a Jerusalem burial. Now a new inflammatory medical statement is complicating the situation even further, as French doctors are implying that Arafat's poor health was caused by the Israelis' confining him by force to the West Bank town of Ramallah since 2000. Palestinians will honor Arafat as a martyr who stood up against Israel and America and died for his people. Americans and Israelis criticize Yasser Arafat because he didn't accept a deal in 1999 which would have created a Palestinian state side by side with Israel. Palestinians honor and revere Arafat because he didn't give in to Israel by accepting that deal, which would have required Palestinians to give up the "right of return" to the lands they lost in 1947. This feeling has become only stronger, as Ariel Sharon directs the building of a barrier around Israel that takes even more land that the Palestinians believe belongs to them. Americans and Israelis have a dream that with Arafat gone, another leader will step into his place and accept the peace deal that Arafat rejected. It's nice to have dreams. I once had a dream that I got to spend the night with Julia Roberts. Their dream has less chance of coming true than mine did. =eod =// &&2 e041109 Poll: Taiwanese see themselves as a sovereign nation =data ww2010.weblog.y2004.e041109.head Poll: Taiwanese see themselves as a sovereign nation =data ww2010.weblog.y2004.e041109.keys =data ww2010.weblog.y2004.e041109.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041109.date 9-Nov-04 =data ww2010.weblog.y2004.e041109.txt1 The survey results, which are highly significant for China - U.S. relations, =data ww2010.weblog.y2004.e041109.txt2 <#stdurl www.etaiwannews.com/Taiwan/2004/11/09/1099965133.htm "indicate that 71% of Taiwanese citizens already consider Taiwan to be "sovereign and independent.""#> The survey was prompted by a speech last month by President Chen Shui-bian on Taiwan's National Day, with the statement, "the Republic of China is Taiwan, and Taiwan is the Republic of China," a statement with which 63% of the survey respondents agreed. Chen's remarks prompted a late October rebuke by US Secretary of State Colin Powell, who said that "Taiwan is not independent. It does not enjoy sovereignty as a nation," and that Taiwan and China will eventually reach a "peaceful unification" under the US "one China" policy. The poll results show what a fantasy Powell's rebuke is. What the survey clearly shows is that it's the people of Taiwan who are demanding that the country move toward independence. Most people believe that politicians determine the overall direction of a country, but it's a basic principle of Generational Dynamics that it's large masses of people who determine a country's directions, and that those directions are driven by generational changes. So Chen couldn't stop the country from moving in the direction of independence if he wanted to; if he tried, he'd be thrown out of office. But of course Chen doesn't want to stop, as I described in my discussion of <#hreftext ww2010.i.taiwan040706 "Operation Summer Pulse 04,"#> and <#hreftext ww2010.i.taiwan040411 "Taiwan's Wild Election Battle."#> Chen was actually one of the leaders of Taiwan's 1990 Wild Lily student rebellion that demanded Taiwan independence, following Beijing's Tiananmen Square massacre in 1989. Chen has announced he will amend the Constitution in 2008 to move towards independence, and China has announced that such a move would amount to a declaration of war. However, Taiwan is only one of China's problems. <#inc ww2010.weblog.ref e041101 "China is already facing increased violence"#> between its majority Han population and its wealthier Muslim Hui minority, and violence may be spreading. From the point of view of Generational Dynamics, China is going through a frantic "unraveling" period. Financially, the country is in an economic bubble, similar to Japan in the 1980s and America in the 1990s, and the bubble will burst at some point, creating a recession and loss of jobs. On top of that, the structured economy balancing farms and factories that Mao Zedong set up in the 1950s is unraveling, as small farms are merging into giant agricultural units, leaving peasants in poverty. In response, young rural peasants are flocking to the factories in the cities, where they receive the relatively high wages of the bubble economy. In fact, <#stdurl "online.wsj.com/article_print/0,,SB109986795263067023,00.html" "China has 114 million migrant workers, the largest migration in human history."#> China is teetering on the brink in many ways. An internal rebellion, possibly led by Muslim/non-Muslim violence or by followers of the Falun Gong, or a move by Taiwan for independence, could tip China over. Indeed, if an American recession occurs next year, that could burst the Chinese economic bubble, and create chaos. The new Taiwanese survey shows that generational changes are causing China and Taiwan to hurtle towards a confrontation; other generational changes are making an internal rebellion and an economic failure increasingly likely as well. All we ordinary people here in America can do is watch it happen and hope that there won't be too much fallout. =eod =// &&2 e041108 Ivory Coast close to civil war? / Muslims v Catholics =data ww2010.weblog.y2004.e041108.head Ivory Coast appears close to major civil war between Muslim and Catholic ethnic groups =data ww2010.weblog.y2004.e041108.keys =data ww2010.weblog.y2004.e041108.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041108.date 8-Nov-04 =data ww2010.weblog.y2004.e041108.txt1 France's Ivory Coast intervention is far more dangerous than America's Iraq intervention, =data ww2010.weblog.y2004.e041108.txt2 since Ivory Coast is in a generational crisis period, and Iraq is not. American-led coalition forces today are <#stdurl "http://www.boston.com/dailynews/312/world/Developments_in_Iraq_:.shtml" "launching an attack to recapture Fallujah"#> from the Iraqi insurgents. Although this is expected to be a violent battle, it will not spiral out of control into a larger war or a civil war. This is true because <#hreftext ww2010.i.sixties040501 "Iraq is in a generational awakening period,"#> and as I've discussed on the web site a couple of dozen times, a massive civil war or uprising during an awakening period is impossible, since only a single generation has passed since the country's last crisis war, the Iran/Iraq war of the 1980s. =inc ww2010.blocking.start =inc ww2010.pic ivory.gif right "" "Ivory Coast" France does indeed appear to be getting drawn into <#stdurl "www.csmonitor.com/2004/1108/p06s01-woaf.html" "a war which is spiraling out of control,"#> after the French destroyed the Ivory Coast government's entire air force in retaliation for killing of nine French peacekeepers. This generated a backlash of anti-French violence by thousands of machete-waving rioters around Abidjan, the nation's capital. French President Jacques Chirac is now sending several hundred more troops to bolster the 4600 French peacekeepers already there. =inc ww2010.blocking.end =inc ww2010.blocking.start <#inc ww2010.pic afrn1.gif right "" "Africa, with Ivory Coast and Darfur highlighted"#> France colonized portions of Western Africa in the late 1800s. When France was defeated by the Nazis in World War II, the region was thrown into turmoil, but remained largely loyal to France, despite Nazi provocations. This was a crisis war for France's colonies, as well as for France. Côte d'Ivoire (Ivory Coast) became independent of France in 1960, although France continued to retain influence. Today, the World War II fault lines are being revived in a new civil war between the largely Muslim rebel population in the north and the largely Catholic population in the south. The civil war began in 2002, but it was brought under control by French and United Nations peacekeepers, and both sides were scheduled begin an extensive disarmament program three weeks ago. But the rebels withdrew from the transitional government ten days ago, leading to low-level violence that's currently escalating. This is following a familiar pattern of crisis wars throughout history. When World War II ended, all sides were forced to accept painful compromises in order to keep the peace. No war broke out in 1960 because civil wars don't happen in generational awakening periods, one generation after the end of the last crisis war. Instead there was a "bloodless coup," a "velvet revolution," an internal revolution that brings about a peaceful change in government, but doesn't really resolve the underlying problems. Today, the last generation of people who lived through World War II are disappearing (retiring or dying), and all the compromises are unravelling. Powerful "survival of the fittest" emotions are taking over, and there is little fear of another major genocidal crisis war. Like many crisis wars throughout history, this one is starting off slowly. The 2002 flare up was brought under control by outside forces, the peacekeepers. But when the peacekeepers tried to impose a "peace plan," requiring disarmament by a scheduled date, both the peace and the peace plan fell apart. (This is similar to what's happening in the Palestine region.) It's possible that the French will be able to bring the government and rebel forces under control once more, but if it does so, then it will be only temporary. Côte d'Ivoire is headed for a crisis war and, if it comes, it will probably engulf the entire west African region. (I've always assumed that the "clash of civilizations" world war would be triggered in Palestine or in the Caucasus, but there's no reason why it couldn't be triggered here.) According to <#stdurl http://www.sundayherald.com/45855 "one newspaper story yesterday,"#> the "clash was in the classic West African mould, with all the potential for madness and disorder that peacemakers fear." The phrase "madness and disorder" alludes to the Darfur genocide going on today, as well as the Rwanda genocide of 1994. Because of this view, it's worthwhile pointing out that this kind of "madness and disorder" is hardly unique to Africa, and occurs throughout the world at all times in history, <#hreftext ww2010.i.africa040822 "for reasons that I've previously described."#> Nonetheless, it's true that there are many wars going on in the world today, but there's only one crisis war, the Darfur genocide. =inc ww2010.blocking.end If the Côte d'Ivoire situation continues to spiral out of control, it will be the second one, for the time being. =eod =// &&2 e041105b German papers criticize British hatred of Germany and demand an =data ww2010.weblog.y2004.e041105b.head German papers criticize British hatred of Germany and demand an apology from Queen Elizabeth. =data ww2010.weblog.y2004.e041105b.keys =data ww2010.weblog.y2004.e041105b.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041105b.date 5-Nov-04 =data ww2010.weblog.y2004.e041105b.txt1 On the occasion of a state visit by Queen Elizabeth to Germany, =data ww2010.weblog.y2004.e041105b.txt2 <#stdurl "www.telegraph.co.uk/news/main.jhtml;sessionid=GRYQYACFWSKJNQFIQMGCNAGAVCBQUJVC?xml=/news/2004/11/02/wger02.xml" "German tabloids are demanding that she apologize"#> for British hatred of Germans and for the massive bombing of Dresden and other German cities during World War II. <#inc ww2010.pic queenel2.jpg right "" "Queen Elizabeth (Source: Telegraph)"#> In the end, the Queen chose not to apologize, but <#stdurl "www.telegraph.co.uk/news/main.jhtml?xml=/news/2004/11/03/wger03.xml&sSheet=/news/2004/11/03/ixworld.html" "she acknowledged that both sides had suffered."#> "And in remembering the appalling suffering of war on both sides," she said, "we recognise how precious is the peace we have built in Europe since 1945." And she added, "It is difficult for someone of my generation to over-emphasise this." This remark is at the heart of Generational Dynamics. Having lived through the "appalling suffering" of World War II, people in her generation are willing to make any possible compromises to prevent anything like that from happening again. <#inc ww2010.pic queenel.jpg left "" "The Queen pays her respects at the Stahnsdorf cemetery (Source: Telegraph)"#> Queen Elizabeth also <#stdurl "www.telegraph.co.uk/news/main.jhtml?xml=/news/2004/11/03/wger03.xml&sSheet=/news/2004/11/03/ixworld.html" "paid tribute to British war dead buried in Germany."#> We're now at a unique time in history where all the countries that fought in World War II are now going into a new generational crisis period, as Queen Elizabeth and other people of her generation that remember the horror of World War II all disappear (retire or die). As that generation continues to disappear, the desire for compromise and containment of problems disappears, leading to a new crisis war. =eod =// &&2 e041105 Palestinian violence looms as Arafat seems close to death =data ww2010.weblog.y2004.e041105.head Palestinian violence looms as Arafat seems close to death =data ww2010.weblog.y2004.e041105.keys =data ww2010.weblog.y2004.e041105.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041105.date 5-Nov-04 =data ww2010.weblog.y2004.e041105.txt1 The Israeli military has gone on high alert, and the Palestinian Authority is scrambling =data ww2010.weblog.y2004.e041105.txt2 to establish new leadership, <#stdurl "www.nytimes.com/2004/11/05/international/europe/05arafat.html" "as both governments scrambled to prepare to control expected rioting and violence"#> that will occur if Arafat's death is announced. Yasser Arafat is a revered figure among the Palestinians. He's considered the father of the Palestinians, and he's the one leader who's been able to hold all the competing factions together. As one Palestinian woman said today to explain why Palestinians respect him: "He's made mistakes, but you could always count on him to be there for the Palestinians. He did not ever give in to the Israelis." Arafat, born in 1929, and his Jewish counterpart, Israeli Prime Minister Ariel Sharon, are part of their respective "hero generations" from the genocidal crisis war fought between the Arabs and the Jews in the 1940s, after the UN partitioned Palestine and created the state of Israel. Both men, having lived through war, are willing to take any reasonable steps to create a new genocidal crisis war. From the point of view of Generational Dynamics the disappearance of either of these men could destabilize the Mideast, but the death of Arafat will be especially significant. His death will be met with open mourning, demonstrations and rioting, and his funeral will attract worldwide attention. Do you remember this past summer how the nation and even the world mourned at the death of Ronald Reagan? That level of emotion will be repeated and exceeded. However, the greater problem is that the power vacuum left by Arafat's disappearance attract many younger men who will want to fill it. These men will have no personal memory of the 1940s wars, and will be far less inclined to compromise and avoid war. As I've been saying for two years, the Mideast is entering a generational crisis period, and there will be a major Mideast crisis war in the next few years, with 100% certainty. It will engulf the entire region, and the survival of Israel is not guaranteed. The war might begin tomorrow, next week, next year, or in a few years, but it must occur. In my book, I speculated that it was likely to begin in the months following the disappearance of Yasser Arafat. And yet, we're hearing from journalists, pundits and high-priced analysts who actually believe that the disappearance of Arafat is what's needed to make peace possible. For example, <#stdurl "www.reuters.com/newsArticle.jhtml?type=topNews&storyID=6719097" "an official in the Bush administration said"#> that Arafat's death "will encourage resolution of the political uncertainty on the Palestinian side and it will make the prime minister and his government emerge as the only capable institutions," This kind of naïve, wishful thinking statement always amazes me. Ever since the second Intifada began in 2000, it's been official Israeli and American policy to isolate Arafat, and to plan for his disappearance so that a peace plan can take hold. Now we're going to see if those policies make sense after all. =eod =// &&2 e041104b United Nations: Darfur falling into anarchy =data ww2010.weblog.y2004.e041104b.head United Nations: Darfur falling into anarchy =data ww2010.weblog.y2004.e041104b.keys =data ww2010.weblog.y2004.e041104b.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041104b.date 4-Nov-04 =data ww2010.weblog.y2004.e041104b.txt1 The Sudan government is losing control of areas of Darfur, =data ww2010.weblog.y2004.e041104b.txt2 <#stdurl "www.reuters.com/newsArticle.jhtml?type=worldNews&storyID=6721061" "according to Jan Pronk, the U.N. envoy for Darfur."#> <#inc ww2010.pic sudan1.gif right "" "Darfur - southwest region of Sudan (Source: BBC)"#> "Darfur may easily enter a state of anarchy -- a total collapse of law and order," he said. "The progress is slow and the regression is alarming." When the Darfur story first broke, back in June, <#inc ww2010.weblog.ref e040628 "I predicted"#> that the United Nations would be unable to prevent the genocide from occurring. Since then, weeks and months have gone by, and nothing's happened but meetings, speeches, condemnations, resolutions and hand-wringing. There are many wars going on in the world right now, but only one of them is a generational crisis war: The war in Darfur and Sudan. A major finding of Generational Dynamics is that there are two kinds of wars: crisis and non-crisis wars. Non-crisis wars can start any time for political reasons, and can stop at any time for political reasons. Crisis wars happen at roughly 80 year cycles in any society, and they can't be stopped, any more than an earthquake or a raging typhoon can be stopped. That's why I was able to predict last June that the Darfur genocide would not be stopped until it had run its course. =eod =// &&2 e041104 European press expresses fury at Bush victory =data ww2010.weblog.y2004.e041104.head European press expresses fury at Bush victory, while leaders promise to mend fences =data ww2010.weblog.y2004.e041104.keys =data ww2010.weblog.y2004.e041104.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041104.date 4-Nov-04 =data ww2010.weblog.y2004.e041104.txt1 The left-wing British Daily Mirror tabloid's front page headline was: "How can 59,017,382 people be so DUMB?" =data ww2010.weblog.y2004.e041104.txt2 On the other hand, another British daily, The Sun, hailed Bush's victory as "bad news for terrorists everywhere." <#inc ww2010.pic mirror.jpg right "" "Daily Mirror front page, November 4, 2004"#> =// Daily Mirror =// http://images.icnetwork.co.uk/upl/mirror/nov2004/1/0/000ADF94-E181-1189-B6E080BFB6FA0000.jpg =// http://images.icnetwork.co.uk/upl/mirror/nov2004/0/0/000B09C4-E14E-1189-B6E080BFB6FA0000.jpg =// mirror.jpg Similar differences were displayed in newspapers throughout western Europe. These views illustrate that the American Presidential election has exposed deep cultural differences in the European population. Yesterday, <#hreftext ww2010.i.election041103 "we described how such differences in America"#> will lead to a major political and social restructuring in America in the next few years. The European newspaper headlines show how those countries are also heading for the same kinds of political and social restructuring. We're at a unique time in history, when all the countries that fought in World War II are now entering a new generational crisis period, all at roughly the same time. That's certainly true of America, Britain, and Western Europe, as well as many other countries. During generational crisis periods, there is less and less motivation for compromise. Old fault lines that people thought had disappeared resurface again, and positions harden, until eventually a new crisis war begins. The American Presidential election gives us an opportunity to see how far these social and political divisions have advanced. However, foreign positions have not become so hardened that leaders are also expressing extreme views. Most national leaders around the world congratulated Bush on his reelection victory, although some of these messages were guarded. French President Jacques Chirac, for example, expressed the hope that the second Bush term would "reinforce Franco-American friendship." =eod =// &&2 e041102 Mixed emotions in Europe as Kerry may be victorious. =data ww2010.weblog.y2004.e041102.head Mixed emotions in Europe as Kerry may be victorious. =data ww2010.weblog.y2004.e041102.keys =data ww2010.weblog.y2004.e041102.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041102.date 2-Nov-04 =data ww2010.weblog.y2004.e041102.txt1 Most Europeans favor Kerry, but a Kerry victory will cause new strains with America, =data ww2010.weblog.y2004.e041102.txt2 according to pundits and journalists discussing the American election on the BBC World Service today. With exit polls this evening showing that John Kerry will be the next President, Europeans are saying that a John Kerry presidency would have a better relationship with Europe than with a second term George Bush presidency. [Late evening update: The vote count and exit polls now appear to show that Bush is leading.] But they also warn that a Kerry presidency would raise issues that would cause new frictions between America and Europe:

As a candidate, Kerry promised support from other countries in Iraq. President Kerry would be expected to pressure France and Germany to provide troops to "share the load" in Iraq, but any such requests would be flatly rejected.
As a candidate, Kerry promised to promote measures to keep American jobs in America, which translates into higher tariffs and tax penalties for outsourcing jobs. Europeans prefer free trade, and would be hurt by restrictive trade policies.

From the point of view of Generational Dynamics, in the long run it will make no difference whether Bush or Kerry is elected, since we're headed for conflicts that have been in the cards for decades. Indeed, Kerry's policies on Iraq, Israel and other foreign policy areas are identical to Bush's, and there really isn't any opportunity for flexibility anyway. As <#hreftext ww2010.i.bush041023 "we've previously written,"#> much of the non-American world favors Kerry, but many of these opinions are based on unrealistic expectations of a Kerry presidency. This view is supported by <#stdurl "www.nytimes.com/2004/11/02/international/middleeast/02voices.html?pagewanted=all" "an article in today's New York Times"#> which describes how the residents of Falluja view a possible Kerry presidency:

Sheik Khalid al-Jumaili, the chief negotiator representing the people of Falluja in talks aimed at averting an imminent American-led invasion, at first said the elections would change nothing for the town either way. But then he warmed to the topic. "If there is the slightest possibility of a change in the policy in Iraq," he said, "then we pray to God that Kerry wins. We have suffered enough and we need a change in policies." He is far from the only resident of Falluja to feel that way. Of eight men at a recent gathering of former soldiers, tribal leaders and intellectuals at a home in Falluja, six said they hoped Mr. Kerry would win. "The policy of Bush was one of violence and war, and we don't think Bush will change that," said a former officer in the Iraqi Army. "Maybe Kerry will be wiser. Even if he doesn't withdraw the American forces, maybe he'll reduce the violence. Even people in America now think that because of Bush's policy, others in the world have taken an aggressive view against America."

Now, there is absolutely no difference in policy on Falluja between Bush and Kerry. Bush has received moderate criticism from conservatives because last spring's offensive against Falluja was postponed for peace talks. Kerry cannot be less aggressive in Iraq, or in Falluja in particular, or the moderate criticism will become a roar. Whether Kerry wins or Bush wins, lots of people are going to be furious, and that's going to have an important effect on the world next year. =eod =// &&2 e041101 Muslim / non-Muslim violence emerges in central China =data ww2010.weblog.y2004.e041101.head Muslim / non-Muslim violence emerges in central China =data ww2010.weblog.y2004.e041101.keys =data ww2010.weblog.y2004.e041101.loc ww2010.weblog.log0411 =data ww2010.weblog.y2004.e041101.date 1-Nov-04 =data ww2010.weblog.y2004.e041101.txt1 A traffic accident spurred rioting and violence, killing possibly dozens of people =data ww2010.weblog.y2004.e041101.txt2 in Henan, a province in central China, although reports of the exact number are conflicting. The violence <#stdurl www.guardian.co.uk/worldlatest/story/0,1280,-4588329,00.html "cannot be called "inter-ethnic,""#> since both groups, the minority Hui and the majority Han, are ethnic Chinese. The Han Chinese make up more than 90% of the the country's 1.3 billion people. The Hui minority consists of ethnic Chinese whose ancestors converted to Islam. Although the Hui and the Han live in the same region, the Hui live in separate communities, attend mosques in those communities, and have separate customs, especially as regards eating pork, which is a common Chinese food, but is forbidden by Islam. According to the BBC World Service, the Hui minority have been successful in trucking and restaurants, and are wealthier than the Hans, most of whom are poor farmers. This is a typical description of a "market-dominant minority," a structure that appears frequently around the world and generates enormous fury. (I like to remind people of the Enron scandal in America in 2001; after it occurred, the infuriated American public was calling for all corporate CEOs to be jailed, even those who had nothing to do with scandal.) So far, this appears to be a classic local rebellion, of a kind that is very common in Chinese history. Prior to the 1800s, all such local rebellions were handled by armed forces troops. <#inc ww2010.pic china1.jpg right "" "China and adjoining countries (modern names and boundaries), showing the origins of the White Lotus Rebellion and the Taiping Rebellion."#> The first rebellion for which this approach failed was the White Lotus Rebellion, which occurred in the same central China region from 1796 to 1805, and proved too large for the regular army to handle. That was a precursor to the massive Taiping Rebellion of 1851-64, which killed tens of millions of people. It started in southeastern China and killed tens of millions of people - 15% of the entire Chinese population. The next round of massive bloodletting began in 1934 with Mao Zedong's Long March from the same region where the Taiping rebellion began. The resulting civil war between the Communist Mao and the Nationalist Chiang Kai-shek continued until 1949, with only a brief pause during World War II when the two leaders joined forces to defeat the Japanese invaders. From the point of view of Generational Dynamics, these rebellions and civil wars have occurred with clocklike regularity in Chinese history, and we're now approaching the "scheduled" time for the next one. The fact that a mere traffic accident could trigger such massive violence in central China is a sure sign that the necessary generational changes have already occurred. China has imposed martial law on the region, and has <#stdurl "english.donga.com/srv/service.php3?bicode=060000&biid=2004110241978" "sent thousands of security forces personnel"#> to the region to bring it under control. It's possible that the Chinese security forces will succeed in restoring control, but Generational Dynamics predicts that there'll be a new massive rebellion (civil war) in China within the next decade. One possible agent of this rebellion may be the followers of the Falun Gong, a form of meditation that grew out of reaction to the 1989 Tiananmen Square massacre. Indeed, the leaders of the Falun Gong movement have said that they consider themselves to be the spiritual descendants of those who started the Taiping Rebellion. China has outlawed practice of the Falun Gong, using massacres and jailing of practitioners (which is like jailing someone for exercising to Richard Simmons tapes), but has been unsuccessful in doing so. Today, China is in a "generational unraveling" period, where all the strict societal rules imposed by Mao during the 1950s are unraveling, and there is little social structure to replace them. In particular, China is experiencing an economic bubble similar to Japan in the 1980s and America in the 1990s. Generational Dynamics predicts that China is very close to chaos, and that there are three possible triggers of this chaos:

A massive new rebellion, possibly triggered by the Falun Gong movement;
A collapse of the Chinese economic bubble, such as happened in Japan in 1990 and in America with the 2000 Nasdaq crash; or
<#hreftext ww2010.i.taiwan040706 "Moves by Taiwan leaders toward independence,"#> which would force China to declare war.

Any one of these triggers could occur at any time -- next week, next month, or two or three years from now. Generational Dynamics predicts that all three of these will occur in the next decade or so. The Henan rioting and violence going on today is a precursor of much more to come. =eod =// &&2 e041030b Arafat will not return to Ramallah =data ww2010.weblog.y2004.e041030b.head Arafat will not return to Ramallah =data ww2010.weblog.y2004.e041030b.keys =data ww2010.weblog.y2004.e041030b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041030b.date 30-Oct-04 =data ww2010.weblog.y2004.e041030b.txt1 For years, America and Israel have been trying to get rid of Arafat; now they've gotten their wish. =data ww2010.weblog.y2004.e041030b.txt2 <#inc ww2010.pic arafat.jpg right "" "Yasser Arafat in 2000"#> =// arafat.jpg from =// http://members.ozemail.com.au/~adamgosp/popecove.htm Yasser Arafat is <#stdurl money.cnn.com/cnn/2004/WORLD/meast/10/30/arafat.health/ ""not in control of his mental faculties" because of leukemia,"#> and the "Arafat political era is now over," according to the news this morning. Since the beginning of the "second Intifada" in 2000, both Israel and America have refused to speak to Arafat officially. Both countries have taken the position that Israel and Palestine could reach agreement on a peace treaty if only Arafat would be willing to abide by his commitments, and stop perpetrating terrorist acts against Israelis. According to this view, it's Arafat's fault that the "Roadmap to Peace" has failed, and that without Arafat we'd be creating a new Palestinian state living in peace side by side with Israel. That whole view is fundamentally flawed, because it assumes that Arafat was in control of all these decisions. From the point of view of Generational Dynamics, it's large masses of people who usually direct the policy of a nation, not the political leaders. From that point of view, the rejection of the "Roadmap" comes from the Palestinian people, not from the Palestinian leaders. I've always felt that the terrorist acts against Israelis, as horrific as they are, have been quietly supported by Arafat because they represent a compromise position which is short of total war. This concept is speculative, but it makes sense because Arafat, born in 1929, is old enough to have lived through the genocidal wars between the Jews and Arabs in the 1940s, and considers any compromise to be small compared to the horror of a repeat of those wars. There will now be a power struggle among a younger generation of Palestinian leaders, but these youthful new leaders have no personal memory of the 1940s genocidal wars, and so have no fear of seeing them return. That means that they'll be much more willing to take risks in rhetoric and actions, and much more willing to risk total war. The thing to watch for in the next few month is how this power struggle evolves. Politically, Arafat's Palestinian Authority will claim control of the Palestinian people. But "on the streets," terrorist groups like Hamas and Hizbullah will attempt to fill the power vacuum left by Arafat's departure. Generational Dynamics predicts that no political solution is possible for more than the short run. The Palestinian dynamics are coming from the Palestinian people, and are not controlled by any political leader. Arafat's disappearance does mean one big thing however: Many of the Palestinian people have been willing to exercise restraint, simply out of respect for the elder Arafat, who is considered to be a Palestinian hero. With Arafat gone, that restraint is gone as well. =eod =// &&2 e041030 Yesterday was the 75'th anniversary of Black Tuesday, October 29, =data ww2010.weblog.y2004.e041030.head Yesterday was the 75'th anniversary of Black Tuesday, October 29, 1929, the stock market crash =data ww2010.weblog.y2004.e041030.keys =data ww2010.weblog.y2004.e041030.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041030.date 30-Oct-04 =data ww2010.weblog.y2004.e041030.txt1 Analysts and historians yesterday completely missed the point. =data ww2010.weblog.y2004.e041030.txt2 There were lots of retrospectives yesterday, talking about what happened when the stock market crashed 75 years ago, and why it couldn't happen again. <#stdurl business.mainetoday.com/news/041029crash.shtml "The AP story by Michael Martinez"#> is a great historical summary. The reason that most people give that it can't happen again is because the Federal Reserve has changed policy since 1929. Unlike 1929, today the Fed policy is to make a great deal of money available during times of financial crisis -- that's why interest rates have been near-zero for the past few years. That didn't happen in 1929. <#inc ww2010.pic wsj1029.gif right "" "Major stock market declines (Source: WSJ)"#> Those who say it can't happen again point to the day in 1987 when the stock market fell by the greatest amount (on a percentage basis) in history. The Wall Street Journal used the adjacent graphic. According to one analyst I saw on tv, "The Fed made plenty of money available in 1987. If it weren't for that, a new Great Depression would have begun in 1987." This represents a complete misunderstanding of what's going on, but before we get to that, here's a table of <#stdurl www.forbes.com/2004/10/26/cx_dn_dowslide.html "then ten worst days in the history of the stock market,"#> as measured by falls in the Dow Jones Industrial Average (DJIA): =html =set .x0 ww2010.weblog.e041030.x0 =set .x1 ww2010.weblog.e041030.x1 =set .x2 ww2010.weblog.e041030.x2 =set .xx ww2010.weblog.e041030.xx =inc .x0 "Top Ten Worst Days in Dow History" =inc .x1 "#" "Date" "Percent
Decline" "Dollar
Decline" "Final" =inc .x2 1 19-Oct-1987 -22.61% -508.00 1738.74 =inc .x2 2 28-Oct-1928 -12.82% -38.33 260.64 =inc .x2 3 29-Oct-1929 -11.73% -30.57 230.07 =inc .x2 4 6-Nov-1929 -9.92% -25.55 232.13 =inc .x2 5 18-Dec-1899 -8.72% -5.57 58.27 =inc .x2 6 12-Aug-1932 -8.40% -5.79 63.11 =inc .x2 7 14-Mar-1907 -8.29% -6.89 76.23 =inc .x2 8 26-Oct-1987 -8.04% -156.83 1793.93 =inc .x2 9 21-Jul-1933 -7.84% -7.55 88.71 =inc .x2 10 18-Oct-1937 -7.75% -10.57 125.73 =inc .xx =text So if you see this table, you might be inclined to agree. After all, if we recovered so quickly in 1987, then we can recover any time, can't we? <#inc ww2010.pic peratio.jpg right "" "Historical Price/earnings ratio for S&P 500"#> The reason that these analyses are wrong is because stocks were generally not overpriced in 1987. In fact, price/earnings ratios had been below 10 in 1980, and were rising slowly. In 1929, stocks were way overpriced, with price/earnings ratios into the 30s. No Fed action in 1929 could have prevented the stock price fall that brought price/earnings ratios below 10 again. So I completely disagree that the Fed saved us from a new "great depression" in 1987. The Fed's actions kept a lot of things running smoothly of course, but even without them, stocks would have returned to the growth path they exhibited through the 1990s. <#inc ww2010.pic bgross1g.gif left "" "Total credit market debt (Source: PIMCO)"#> Today, things are much more like the 1930s, in that stocks are still way overpriced. The Fed's zero-interest policy has kept stock prices up, but that can only work so long. The price/earning ratio is not some obscure measure that I made up to make some sort of point; P/E ratios were commonly used by analysts until the last decade or so to decide the relative values of stocks. Back in those days, prior to the early 1990s, all the senior financial managers in the country were people who had lived through the 1930s Great Depression, and so were very risk-averse investors. They considered P/E ratios to be one of the best measures of stock value. In the last ten years, senior financial managers have all been in the generations born after the Great Depression, and these risk-seeking people have thrown out P/E ratios as a valuable indicator. Nonetheless, it simply doesn't make sense for investors to purchase stocks from companies whose annual earnings per share of stock are less than 5% of the value of that share of stock. We're now into some three years of consistently wrong forecasts of jobs, inflation rates and output by a wide variety of analysts of all kinds - forecasts that have been proven overly optimistic to the point of wishful thinking. I've recently been <#inc ww2010.weblog.ref e041021 "highly critical of statements by Alan Greenspan and Fed Governor Ben Bernanke"#> that are increasingly self-serving and questionable, so much so that economists are becoming increasingly skeptical of the Fed's credibility. On the 75'th anniversary of the 1929 stock market crash, the risk-averse generation of people who lived through the Depression are gone. Today's financial leaders are from subsequent risk-seeking generations, and are getting increasingly restive and confused about what's going on in today's economy. =eod =data ww2010.weblog.y2004.e041030.x0 =parameters $(Title) =set T1width 400 =data ww2010.weblog.y2004.e041030.x1 =parameters $(N),$(Date),$(Pc),$(Decl),$(Close) =data ww2010.weblog.y2004.e041030.x2 =parameters $(N),$(Date),$(Pc),$(Decl),$(Close) =data ww2010.weblog.y2004.e041030.xx

$(Title)
$(N)	$(Date)	$(Pc)	$(Decl)	$(Close)
$(N)	$(Date)	$(Pc)	$(Decl)	$(Close)

=eod =// &&2 e041029 An eerie parallel between Pakistan and Israel =data ww2010.weblog.y2004.e041029.head An eerie parallel between Pakistan and Israel =data ww2010.weblog.y2004.e041029.keys =data ww2010.weblog.y2004.e041029.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041029.date 29-Oct-04 =data ww2010.weblog.y2004.e041029.txt1 Pakistani President Pervez Musharraf has proposed a Kashmir peace plan which, like the Mideast "Roadmap to Peace," has no chance of succeeding. =data ww2010.weblog.y2004.e041029.txt2 Musharraf's plan offered to negotiate over three possible options:

The whole area could be demilitarised and made autonomous
It could be put under the joint control of the two countries
Some parts could be divided between the two countries and the Kashmir Valley would either become autonomous or be put under UN supervision.

However, leaders in both Pakistan and India <#stdurl www.csmonitor.com/2004/1029/p07s02-wosc.html "are rejecting Musharraf's plan."#> <#inc ww2010.pic india3.gif right "" "India, Pakistan and Kashmir. (Source: Peter N. Stearns)"#> Both Palestine and Kashmir were partitioned by UN fiat following the end of World War II. The partitioning of Palestine resulted in the creation of the state of Israel. The partitioning of Kashmir was part of an overall UN solution which created the state of Pakistan, separate from India, and provided for referendums within the disputed Kashmir and Jammu regions to decide whether the would be part of either Pakistan or India. Both Palestine and Kashmir have been the sites of non-crisis wars - Kashmir in 1965, and Palestine in 1967 and 1972. Both have experienced low-level violence for several years now. Both have been the subject of major international attempts at peace plans -- the "roadmap to peace" for Palestine and the new Musharraf plan for Kashmir. From the point of view of Generational Dynamics, both regions are in generational crisis periods, with a new regional war coming with near 100% certainty in the next few years. Thus, there is no possibility that either peace plan will work. The new "Mideast Peace Roadmap" was announced in May, 2003, and called for a Palestinian state side by side with Israel by 2005. There are few people in the world who believe that that goal will be met, in view of the continuing violence in the Mideast. Indeed, Israel has all but abandoned the "roadmap," in favor of Ariel Sharon's unilateral disengagement plan from Gaza in 2005. However, <#inc ww2010.weblog.ref e041027 "Yasser Arafat's health problems have threatened new conflicts,"#> and recent news stories hint that Arafat may be near death. Pakistan has also been suffering from continuing violence. Indeed, <#inc ww2010.weblog.ref e041008 "both the Mideast and Pakistan were subject to massive terrorist bombings"#> on the same day, earlier this month. There is a difference: The Mideast violence is between Arabs and Jews, while the Pakistan terrorist violence is mostly between Sunni Muslims and Shi'a Muslims. But from the point of view of Generational Dynamics, that difference is no difference at all, since both are part of the trend lines of increasing violence, that will eventually lead to major new regional wars in the next few years. =eod =// &&2 e041028 My son Jason was wrong =data ww2010.weblog.y2004.e041028.head My son Jason was wrong =data ww2010.weblog.y2004.e041028.keys =data ww2010.weblog.y2004.e041028.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041028.date 28-Oct-04 =data ww2010.weblog.y2004.e041028.txt1 Last week, out of frustration, he said, "The Red Sox will NEVER win another World Series." =data ww2010.weblog.y2004.e041028.txt2 This statement led to <#inc ww2010.weblog.ref e041019b "a discussion of the fact that professional baseball will not exist 10-20 years from now."#> The reason is that advances in biotechnology research, in which Jason is an expert, will create "augmented human beings" in the next few years who will have above-human skills in strength, running, pitching, and everything else. With these kinds of players available, many professional sports will no longer make sense. Well, that part is still true, but my son's first statement is wrong. Within the last half hour, the Boston Red Sox won the World Series, for the first time since 1918. =eod =// &&2 e041027 Ariel Sharon's Gaza victory and Yasser Arafat's illness are roiling the Mideast =data ww2010.weblog.y2004.e041027.head Ariel Sharon's Gaza victory and Yasser Arafat's illness are roiling the Mideast =data ww2010.weblog.y2004.e041027.keys =data ww2010.weblog.y2004.e041027.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041027.date 27-Oct-04 =data ww2010.weblog.y2004.e041027.txt1 The two ancient lions holding back chaos are facing new troubles. =data ww2010.weblog.y2004.e041027.txt2 Ariel Sharon's spectacular <#stdurl "news.independent.co.uk/world/americas/story.jsp?story=576433" "U.S.-backed victory in the Knesset"#> Tuesday moves Israel along the path of a Gaza pullout in 2005. Under this plan, 8,000 Jewish settlers will evacuate their Gaza settlements and move back into Israel. Sharon's unilateral Gaza disengagement plan has caused massive protests in both the Jewish and Palestinian communities, for completely different reasons. The radical proposal is <#stdurl www.haaretz.com/hasen/spages/493864.html "splitting Israel's party lines"#> and may threaten Sharon's coalition, as <#stdurl www.iht.com/articles/2004/10/26/news/gaza.html "thousands of Jewish settlers have been demonstrating in Jerusalem"#> to protest against being forced to give up the Gaza settlements. Even Sharon himself has voiced fears of an Israeli civil war, and is rejecting a national referendum on the Gaza pullout apparently for this very reason: "My position on the referendum is unchanged - I am opposed because it will lead to terrible tensions and a rupture in the public." This comes at a time when Palestinian Authority Chairman Yasser Arafat has been experiencing severe health problems. The official party line is that Arafat has the stomach flu, but the secrecy surrounding Arafat has lead some to speculate that his illness may be much worse, even life-threatening. A loss of power and control by Arafat would lead to a violent generational power struggle among the Palestinians. This <#hreftext ww2010.i.mideast040719 "became evident last summer"#> when the Palestinians appeared to be close to civil war over Arafat's attempt to shake up his security forces. For several years there has always been a strange irony in America's view of both Ariel Sharon and Yasser Arafat. American politicians support Sharon, but many express a view that he's harsh and uncooperative, and that Israel would be better served by a younger leader. Arafat is being officially shunned by Washington these days, and it's been official American policy for several years that the Palestinians would be better off if Arafat would leave and be replaced by a younger leader. For some reason that baffles me, people seem to believe that young leaders are more likely to be flexible and peaceful, even though history has shown that massive civil wars and uprisings are always led by younger leaders. From the point of view of Generational Dynamics, the Palestine region has been replaying the events of the 1930s and 1940s that led to a massive regional war. The earlier conflict began in 1936 with rock throwing. The level of violence increased over the years until the partitioning of Palestine and the creation of Israel in 1948 triggered a full-scale crisis war. Today's conflict could be said to have started with the first Intifada in 1989. The level of violence increased significantly with the second Intifada that began in 2000, and has been increasing ever since. Ariel Sharon and Yasser Arafat hate each other, but they're the only two major leaders left who lived through the massive genocidal war of the 1940s, and who would rather do anything than see such a war occur again. Generational Dynamics predicts that such a war will occur again, with near 100% certainty. What will trigger the renewed war is not yet known, but it could happen tomorrow, next month, next year, or in two or three years. Since 2002 I've been saying that I consider the most likely time to be in the months following the disappearance (through death or retirement) of Yasser Arafat, since he's the only leader sufficiently respected to keep the Palestinian factions under control. Historians of the future will look back and see what steps led to the new Mideast war, but we can see the trend lines coming together now. Arafat's health is weakening, and therefore his power is weakening, leading to open splits among the Palestinians. Sharon's plan is succeeding, but it's infuriating the traditional Jews, leading to open splits among the Israelis. So we have Palestinian against Palestinian, Jew against Jew, and Palestinian against Jew, and those conflicts have only been getting worse. =eod =// &&2 e041026b Violent crime dropped, continuing a trend =data ww2010.weblog.y2004.e041026b.head Violent crime dropped, continuing a trend =data ww2010.weblog.y2004.e041026b.keys =data ww2010.weblog.y2004.e041026b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041026b.date 26-Oct-04 =data ww2010.weblog.y2004.e041026b.txt1 Violent crime has been declining since 1994, and reached the lowest level ever recorded in 2003, =data ww2010.weblog.y2004.e041026b.txt2 according to the <#stdurl www.ojp.usdoj.gov/bjs/glance/viort.htm "Department of Justice, Bureau of Justice Statistics."#> <#inc ww2010.pic g041025c.gif right "" "Violent crime rate per 1,000 persons, 1973-2003"#> The adjoining graphic is a line chart of overall violent crime rate per 1,000 persons 1973-2003. According to the Department of Justice:

Violent crime encompasses rape, sexual assault, robbery, aggravated assault, and simple assault. A period of stability existed between 1973 and 1977. Then, the violent crime rate increased to a peak in 1981 interrupted only by a 1-year decline in 1980. For the following 5 years until 1986, the rate decreased. From 1986 to 1993 the rate of violent crime increased to a level slightly below the 1981 peak. A decline in the violent crime rate began in 1994 and has continued through 2003 to the lowest level ever recorded. Between 1994 and 2003 violent crime rates declined about 55%. From the point of view of Generational Dynamics, this reduction in crime rate confirms an important finding of the generational paradigm. William Strauss and Neil Howe, the historians who studied generational changes in the 1980s and published the results in their book, <#stdurl www.amazon.com/exec/obidos/ASIN/0688119123 "Generations"#>, found that children who are born during a "generational awakening" period, such as America in the 1960s, have the highest crime rates. The "generational awakening" period occurs one generation past the end of a crisis war (World War II in this case), and Strauss and Howe verified this result for six cycles, all the way back to the 1500s, by studying hundreds of histories and diaries throughout American history. The kids born in the 1960s have been named "Generation X" by the media, but Strauss and Howe use the term "Nomads" to refer to any generation born during an awakening period like the 1960s. These kids have to grow up during a period of enormous political struggle caused by a "generation gap." (See my discussion of <#hreftext ww2010.i.sixties040501 "Iraq Today vs 1960s America"#> for more information.) The kids in this generation have very difficult childhoods and grow up statistically more likely to become violent young adults. By contrast, the kids born in the next generation are called generational "Heroes," because then end up being the soldiers who fight in the next crisis war. Research shows that this generation has a lower crime rate than other generations. =eod =// &&2 e041026 Two online polling web sites show overwhelming worldwide support for Kerry for President. =data ww2010.weblog.y2004.e041026.head Two online polling web sites show overwhelming worldwide support for Kerry for President. =data ww2010.weblog.y2004.e041026.keys =data ww2010.weblog.y2004.e041026.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041026.date 26-Oct-04 =data ww2010.weblog.y2004.e041026.txt1 But a third site, where you have to pay to cast your vote, favors Bush. =data ww2010.weblog.y2004.e041026.txt2 =inc ww2010.blocking.start <#inc ww2010.pic g041025a.gif right "" "Results of global poll by BBC World Service"#> A global poll conducted by the <#stdurl www.bbc.co.uk/worldservice/ "BBC World Service"#> found that John Kerry was favored by 72% of respondents worldwide, George Bush by 19%, and Ralph Nader by 9%. The adjoining graph shows <#stdurl "globalnin.com/branchedsurvey/results.aspx?surveyid=20&languageid=2&partnerid=0&branchid=0&filter=region" "the results of the BBC poll, broken down by region."#> A similar poll, from <#stdurl www.betavote.com#>, found an even bigger margin: 88% for Kerry, and 11% for Bush. The web page breaks the results down by country. Those two polls aren't particularly accurate. Anybody in the world can access either of those poll web sites and vote, and so the votes are subject to cheating. But <#hreftext ww2010.i.bush041023 "the global poll of ten nations"#> that we described last week is a valid poll, and has similarly lopsided results. =inc ww2010.blocking.end <#inc ww2010.pic g041025b.gif left "" "Expectation that George Bush will win - at 9:00 PM ET - according to Intrade.com"#> On the other hand, Bush is the favorite in another kind of online poll, conducted by <#stdurl www.intrade.com/jsp/intrade/contractSearch/ Intrade.com#>. On that web site, a "vote" is actually a monetary bet, and when the election is over, you can win real money if you're right. Thus, this poll measures something quite difference from the preceding polls. In the preceding polls, you vote for whom you want to be elected; in the Intrade.com poll, you vote for whom you expect to be elected. As the adjoining graph shows, respondents expected Bush to win by 57% to 43% at the moment when I captured the graph. However, the results are fairly volatile, even during a single day, so check the web site frequently. If you look at the web site after the election is over, it should show a value of either 0% (if Bush loses) or 100% (if Bush wins). =eod =// &&2 e041025 Britons advise Americans on whom to elect for President =data ww2010.weblog.y2004.e041025.head Britons advise Americans on whom to elect for President =data ww2010.weblog.y2004.e041025.keys =data ww2010.weblog.y2004.e041025.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041025.date 25-Oct-04 =data ww2010.weblog.y2004.e041025.txt1 Saying that "the US election will affect the lives of millions around the world [who] have had no say in it," =data ww2010.weblog.y2004.e041025.txt2 the left-leaning UK newspaper The Guardian initiated a project for <#stdurl "www.guardian.co.uk/uselections2004/story/0,13918,1326033,00.html" "Britons to write letters to Americans, providing election advice."#> As <#hreftext ww2010.i.bush041023 "we wrote yesterday,"#> a ten-nation survey shows that non-Americans around the world overwhelmingly favor Kerry, but it's also clear that most of these people have very unrealistic expectations of what a Kerry or a Bush presidency means. The Guardian project allows Britons, at least, to express their opinions directly to Americans. It worked like this: Any reader could request the name and address of a voter in Clark County, Ohio, to write to, <#stdurl "www.guardian.co.uk/uselections2004/story/0,13918,1331403,00.html" "and over 14,000 did so."#> Some Americans wrote back to the Guardian with <#stdurl "www.guardian.co.uk/uselections2004/story/0,13918,1329858,00.html" "their opinions of the whole idea."#> Here are some brief excerpts

"I am a student and life-long resident of Clark County, Ohio. I just wanted you to know that this is a wonderful idea you've initiated."
"Stay out of American electoral politics. Unless you would like a company of US Navy Seals ... to descend upon the offices of the Guardian, bag the lot of you, and transport you to Guantanamo Bay."
"Thank you, thank you, thank you! What a wonderful idea! I am a US citizen who is scared to death that Bush and Klan will get back in. We need all the help we can get to ditch this bunch of maniacs."
"Keep your noses out of our business. As I recall we kicked your asses out of our country back in 1776. We do not require input from losers and idiots on who we vote for in our own country. Fuck off and die asshole!!!!!"

<#stdurl "www.guardian.co.uk/uselections2004/story/0,13918,1329858,00.html" "Go here for lengthier excerpts."#> =eod =// &&2 e041022b UN report points to a surge in use of robots for work and home =data ww2010.weblog.y2004.e041022b.head UN report points to a surge in use of robots for work and home =data ww2010.weblog.y2004.e041022b.keys =data ww2010.weblog.y2004.e041022b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041022b.date 22-Oct-04 =data ww2010.weblog.y2004.e041022b.txt1 In Japan's auto manufacturing plants, there is already one robot for each ten human employees. =data ww2010.weblog.y2004.e041022b.txt2 That's just one of the findings of <#stdurl www.unece.org/press/pr2004/04robots_index.htm "the report World Robotics 2004,"#> by the United Nations Economic Commission for Europe (UNECE). Japan's auto industry has been leading the way in the use of robots, but today robots are being used in numerous industries throughout the world. In 2003, robot use increased by 28% in North America and 25% in Japan. The European Union's use is growing far less quickly, increasing by only 4% in 2003. (Although political aspects are not addressed by the report, this appears to me to be an ominous sign that Europe's industrial capabilities will be falling behind North America and Asia for years to come.) Altogether, there are over a million industrial robots hard at work worldwide. Robots are rapidly improving in performance and coming down in price, just as desktop computers have been doing for over twenty years. And just as desktop computers have eliminated large categories of desk jobs, starting in the 1980s, we can expect to see automated robots eliminate large categories of labor-based jobs, especially manufacturing jobs. The report does not discuss the issue of increasing intelligence of computers, that <#hreftext ww2010.i.robot040709 "we discussed in conjunction with the release of the movie I, Robot."#> Supercomputers will be as intelligent as human beings by 2010 or so, and autonomous super-intelligent desktop or mobile computers will be surging in the 2020s, and will take over a variety of jobs: a computer plumber, a computer nursemaid, a computer soldier. However, the report highlights a point that I hadn't considered: That even without super-intelligence, autonomous robots will be taking over many human tasks by 2007, far earlier than the 2020s dates that I estimated. In the home, robots are just getting started with tasks like automated vacuum cleaning and lawn mowing. Before 2010, we can expect to see robots that aid the handicapped, clean hazardous waste sites, and, of course, prosecute war. The following table, abstracted from the report, lists the major categories of professional and domestic robots that installed in each category, today and in 2007. If a field is blank, it means that the UN report didn't provide data. 2007 isn't very far off. If these projections hold, then we can expect a real explosion of these devices into the 2010s, for many more categories of work. =html =set .x1 ww2010.weblog.e041022b.x1 =set .x2 ww2010.weblog.e041022b.x2 =set .x3 ww2010.weblog.e041022b.x3 =set .x4 ww2010.weblog.e041022b.x4 =inc ww2010.blocking.start =inc ww2010.weblog.e041022b.x0 =inc .x1 "SERVICE ROBOTS FOR PROFESSIONAL USE" =inc .x2 "Field robotics" 885 1,345 110 177 271 =inc .x3 "Agriculture" =inc .x3 "Milking robots" 830 1,300 100 =inc .x3 "Forestry" =inc .x3 "Mining systems" =inc .x3 "Space robots" =inc .x3 "Others" 55 45 10 =inc .x2 "Professional cleaning" 3,370 2,310 212 68 54 =inc .x3 "Floor cleaning" 340 340 2 =inc .x3 "Window and wall cleaning (including wall climbing robots)" =inc .x3 "Tank, tube and pipe cleaning" =inc .x3 "Pool cleaning" 3,000 1,000 200 =inc .x3 "Other cleaning tasks" 30 970 10 =inc .x2 "Inspection systems" 185 290 18 21 17 =inc .x3 "Sewer robots" 85 160 7 =inc .x3 "Tank, tubes and pipes" =inc .x3 "Other inspection systems" 100 130 11 =inc .x2 "Construction and demolition" 3,030 1,250 225 195 96 =inc .x3 "Demolition systems:" =inc .x4 "nuclear demolition & dismantling" 70 45 7 =inc .x4 "other demolition systems" 2,900 1,110 202 =inc .x3 "Construction support robots:" =inc .x4 "maintenance or construction" 60 95 16 =inc .x4 "other types of construction" =inc .x2 "Logistic systems" 225 1,375 28 12 68 =inc .x3 "Courier systems" =inc .x3 "Mail delivery" "" =inc .x3 "Factory logistics" =inc .x3 "Other logistics" =inc .x2 "Medical robotics" 2,440 1,910 218 352 413 =inc .x3 "Diagnostic systems*" =inc .x3 "Robot assisted surgery of therapy" 2,440 1,910 218 352 413 =inc .x3 "Rehabilitation systems" =inc .x3 "Other medical robots" "" =inc .x2 "Defence, rescue & security applications" 1,010 2,740 319 76 360 =inc .x3 "Demining robots" =inc .x3 "Fire and bomb fighting robots" 410 430 61 =inc .x3 "Surveillance/security robots (incl. UAV-surveillance systems)" 600 2,310 258 =inc .x3 "Unmanned aerial vehicles:" =inc .x3 "surveillance systems" =inc .x3 "armed systems" "" =inc .x3 "Others" =inc .x2 "Underwater systems" 4,785 2,960 496 1,467 937 =inc .x2 "Mobile platforms in general use" 1,990 1,900 262 33 57 =inc .x2 "Laboratory robots" 3,060 3,150 400 37 68 =inc .x3 "General material handling" =inc .x3 "Clean room robots" =inc .x3 "Others" =inc .x2 "Public relation robots" 15 10,000 6 50 =inc .x3 "Hotel & restaurant robots" "" =inc .x3 "Guide robots" =inc .x3 "Robots in marketing" =inc .x3 "Others (i.e. library robots)" =inc .x2 "Special Purpose" 55 50 5 4 5 =inc .x3 "Refuelling robots" 55 50 5 4 5 =inc .x3 "Others" =inc .x2 "Humanoid robots" "" 24,000 426 =inc .x2 "Customized robots" =inc .x2 "Other professional service robots not specified above" 10 1,000 3 1 32 =inc ww2010.weblog.e041022b.hr =inc .x2 "Total number of units of professional service robots" 21,060 54,280 2,302 2,443 2,854 =inc ww2010.weblog.e041022b.hr =inc .x1 "SERVICE ROBOTS FOR PERSONAL/DOMESTIC USE" =inc .x2 "Robots for domestic tasks" 607,000 4,145,000 397,500 217 2,670 =inc .x3 "Vacuuming cleaners" 570,000 3,445,000 390,000 =inc .x3 "Lawn mowing" 37,000 200,000 7,500 =inc .x3 "Pool cleaning" "" 100,000 =inc .x3 "Window cleaning" "" 300,000 =inc .x3 "Others" "" 100,000 =inc .x2 "Entertainment and leisure robots" 691,490 2,497,320 136,968 1,125 4,070 =inc .x3 "Toy robots" 587,000 2,470,000 132,000 =inc .x3 "Entertainment" 30 70 14 =inc .x3 "Hobby systems" 1,600 7,000 1,000 =inc .x3 "Education and training" 12,760 19,700 3,931 =inc .x3 "Others" 90,100 550 23 =inc .x2 "Handicap assistance" 260 1,640 65 2 27 =inc .x3 "Robotized wheelchairs" "" 100 =inc .x3 "Other assistance functions" 260 1,540 65 =inc .x3 "Personal rehabilitation" =inc .x3 "Others" =inc .x2 "Personal transportation" 205 740 184 7 26 =inc .x2 "Home security & surveillance" "" 5,000 25 =inc .x2 "Other Personal/domestic robots" =inc ww2010.weblog.e041022b.hr =inc .x2 "Total number of units of personal/domestic service robots" 1,298,955 6,649,700 534,717 1,351 6,818 =inc ww2010.weblog.e041022b.hr =inc .x2 "Total number of units of all types of service robots" 1,320,015 6,703,980 537,019 3,794 9,672 =// =inc .x3 "of which robotics R&D" * * * 90 130 =inc ww2010.weblog.e041022b.xx =inc ww2010.blocking.end =text =eod =data ww2010.weblog.y2004.e041022b.x0 =set T1width 400 =data ww2010.weblog.y2004.e041022b.hr =data ww2010.weblog.y2004.e041022b.x1 =parameters $(Title) =data ww2010.weblog.y2004.e041022b.x2 =parameters $(Title),$(N1),$(N2) =data ww2010.weblog.y2004.e041022b.x3 =parameters $(Title),$(N1),$(N2) =data ww2010.weblog.y2004.e041022b.x4 =parameters $(Title),$(N1),$(N2) =data ww2010.weblog.y2004.e041022b.xx

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$(Title)

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=eod =// &&2 e041022 Iran moves forward with developing nuclear weapons technology =data ww2010.weblog.y2004.e041022.head Iran moves forward with developing nuclear weapons technology =data ww2010.weblog.y2004.e041022.keys =data ww2010.weblog.y2004.e041022.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041022.date 22-Oct-04 =data ww2010.weblog.y2004.e041022.txt1 Iran has indicated that it won't budge on its plans to develop nuclear enrichment technology, =data ww2010.weblog.y2004.e041022.txt2 which can be used for nuclear weapons development. However, Iran insists that it's only for peaceful power generation, a claim that many find dubious. Early this month, <#inc ww2010.weblog.ref e041007 "Iran announced a new missile capability"#> which, together with the nuclear capability it's developing, will allow it to deliver a nuclear weapon to the soil of its arch enemy, Israel. For the last year, the Europeans have been trying to use multilateral negotiations and incentives to convince Iran to abandon its nuclear enrichment program. The political subtext is that the Europeans would show how things should be done, in contrast America's handling of Iraq through invasion. Europe has offered a last chance incentive: <#stdurl www.iht.com/articles/2004/10/21/news/iran.html "the Europeans have offered Iran free nuclear technology"#> for power generation, if only Iran agrees not to go ahead with nuclear enrichment. Iran has said it's studying the proposal, but has also said it won't give up nuclear enrichment development. If Iran rejects the European proposal, as expected, then a confrontation will develop in the United Nations, and the Security Council will subject Iran to the horror of threatened economic sanctions. (Sorry for the sarcasm.) Iran is an interesting dichotomy. The ruling mullahs are fundamentalist Islamists, while most of the people are secular Muslims. Iran, like Iraq, is in a "generational awakening" period, and opposes many of the mullahs' policies. A couple of years ago there were even large pro-American rallies in the streets of Tehran, though the Iraq war pretty much ended those. And despite the peoples' distrust of the mullahs, there is still <#stdurl news.bbc.co.uk/2/hi/middle_east/3758762.stm "very strong popular support of Iran's right to have nuclear weapons."#> "Why should the US, Britain and Israel all have nuclear weapons and not us?" asks one student? So a potent confrontation appears to be in the works, and we're not referring to the UN's economic sanctions. For the last few weeks, Israel has been very quiet about Iran. When we last heard, <#inc ww2010.weblog.ref e041007 "Israel was insisting it would defend itself,"#> and Israeli Prime Minister was saying that Iran will reach the "point of no return" in its nuclear weapons program by November. This might possibly mean that Israel will take some unilateral action next month, presumably after the American election. We'll be keeping our eyes on the situation. =eod =// &&2 e041021 Economists increasingly skeptical about Fed Chairman Alan Greenspan =data ww2010.weblog.y2004.e041021.head Economists increasingly skeptical about Fed Chairman Alan Greenspan =data ww2010.weblog.y2004.e041021.keys =data ww2010.weblog.y2004.e041021.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041021.date 21-Oct-04 =data ww2010.weblog.y2004.e041021.txt1 "Greenspan's modus operandi now is always to play down problems," =data ww2010.weblog.y2004.e041021.txt2 <#stdurl "www.reuters.com/newsArticle.jhtml?type=reutersEdge&storyID=6558223" "said Stephen Roach at Morgan Stanley."#> "Greenspan's trying to soften fears," says Josh Stiles, a bond strategist with IDEA Global in New York, adding, "There just doesn't seem to be that much that worries him." <#inc ww2010.weblog.ref e041020 "As we wrote yesterday,"#> Greenspan's colleague, Fed Governor Ben Bernanke has been saying repeatedly these last few months that the Fed will say anything it wants, even misleading things, to influence the economy, We can feel pretty certain that's what was happening on Tuesday, and that Greenspan doesn't believe what he was saying. The question is this: Given the bizarre, crazy things that Greenspan and Bernanke have been saying, just how much of a state of denial are they in? Are they completely oblivious to what's going on? I wouldn't be asking this question if it weren't for the fact that I've studied what happened in 1929. The bright economists, financiers and bankers of that day were totally duped. They had no idea what was coming, and even after the crash occurred, they thought it was temporary. It took them three months just to figure out what was happening. And then there was a second crash in 1937. The economy didn't fully recover until around 1950. From the point of view of Generational Dynamics, I've been predicting since 2002 that we're entering a new 1930s style Great Depression, and that stocks will fall 50% by the 2006-07 timeframe. I see no reason to change that prediction. =inc ww2010.h2 cpi "Consumer Price Index (CPI) shows modest growth" Meanwhile, inflation has continued to be modest, though higher than in the past. <#stdurl "www.boston.com/business/articles/2004/10/20/consumer_prices_pick_up_pace/" "The Consumer Price Index for September grew only .2%,"#> and the "core index," which excludes food and energy items, increased 0.3%. These increases are larger than those of the preceding three months, but still far lower than the much higher rates that would be expected from the near-zero interest rates of the last couple of years, and the over-$50 per barrel oil prices. The following table shows the values of the PPI (Producer Price Index) and CPI for each month so far in 2004:


                        Changes from preceding month    
                                    2004                
                     Jan. Feb. Mar. Apr.  May June July  Aug Sept
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI                .6    .1   .6   .7   .7  -.3   .1  -.1   .1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI "Core index"   .3   -.1   .3   .1   .4   .2   .1  -.1   .3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI                .5    .3   .5   .2   .6   .3  -.1   .1   .2
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI "Core index"   .2    .2   .4   .3   .2   .1   .1   .1   .3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----

<#inc ww2010.weblog.ref e040717 "As we've said before,"#> Generational Dynamics predicts that we're in a deflationary period, and that prices will fall by about 30% by 2010. =inc ww2010.h2 invest "Private foreign investments drop sharply"# In a surprise, <#stdurl www.iht.com/articles/2004/10/19/business/invest.html "private investments in America fell sharply in August."#> The fall was dramatic -- - to $37.4 billion in August from $72.9 billion in July. Asian central banks made up the difference, saving the dollar currency from disaster. Maybe this was a one-month blip, but if it continues then it could be the trigger for a serious problem. America's level of public debt is astronomically high, and it's being supported by foreign investors. If those investments fall off, then the American economy will fall sharply, generating a domino effect that will be felt throughout Asia and Europe. =eod =// &&2 e041020 Greenspan uses circular reasoning on housing bubble =data ww2010.weblog.y2004.e041020.head Fed Chairman Greenspan uses circular reasoning to defend economy =data ww2010.weblog.y2004.e041020.keys =data ww2010.weblog.y2004.e041020.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041020.date 20-Oct-04 =data ww2010.weblog.y2004.e041020.txt1 In an extremely bizarre statement to a bankers' association on Tuesday, =data ww2010.weblog.y2004.e041020.txt2 <#stdurl "www.federalreserve.gov/boarddocs/speeches/2004/20041019/default.htm" "Federal Research Chairman Alan Greenspan said that"#> yes, household debt (especially credit card debt) is at historically high levels compared to disposable income, and yes, housing prices have experienced "an exceptional run-up." But hey, folks, it doesn't matter. It's OK. It's fine. Here's why:

The reason that high household debt doesn't matter is because even though it's high compared to disposable income, it's not high compared to household assets, and that's because housing prices have been skyrocketing.
The reason that high housing prices are not a housing bubble is because the high prices are due to mortgage refinancings rather than speculative trading, and "the surge in cash-out mortgage refinancings likely improved rather than worsened the financial condition of the average homeowner. Some of the equity extracted through mortgage refinancing was used to pay down more-expensive, non-tax-deductible consumer debt or to make purchases that would otherwise have been financed by more-expensive and less tax-favored credit."

In other words, high household debt is OK because of high home prices; and high home prices are OK because they provide people with cash to pay household debt -- although not enough cash to reduce household debt below historic levels. It's a remarkably bizarre form of circular reasoning. Greenspan did concede that there are "concerns":

"To be sure, some households are stretched to their limits. The persistently elevated bankruptcy rate remains a concern, as it indicates pockets of distress in the household sector. But the vast majority appear able to calibrate their borrowing and spending to minimize financial difficulties. Thus, short of a significant fall in overall household income or in home prices, debt servicing is unlikely to become destabilizing."

In other words, high household debt and high housing prices are both OK as long as they both remain high, and neither one of them falls. But that's what a bubble is. In a stock market bubble, like the 1920s bubble or the 1990s bubble, you could say that stock A isn't overpriced, because stock B is also overpriced; and stock B isn't overpriced, because stock A is also overpriced. And both stocks are OK as long as neither one of them falls. And that's what Greenspan is saying now. High household debt is OK because of home prices are high, and high home prices are OK, because of household debt is high. You know, dear reader, if you're like me then you used to listen carefully to everything that Alan Greenspan said because he was highly credible, presumably without any partisan political motivations to affect his pronouncements. At least, that's what I used to think until a few months ago. But in recent months, I've been harshly criticizing statements by a Greenspan colleague, Fed Governer Ben Bernanke, for saying, in effect, that it's Fed jawboning rather than fundamentals that have the greatest effect on the stock market. A couple of weeks ago, <#inc ww2010.weblog.ref e041010b "I criticized Fed Governor Ben Bernanke"#> for saying that he believes that stock and bond prices are determined almost exclusively by Fed policy and Fed verbal statements. The Fed is ignoring fundamentals, such as astronomically high public debt, astronomically high stock valuations, and falling inflation rates. Last month, I harshly criticized Bernanke for saying, in effect, <#inc ww2010.weblog.ref e040917 "that Fed jawboning, even misleading statements,"#> are the major drivers for the economy rather than fundamentals. Now, when Bernanke says things like this over and over, we have to get the message: That Greenspan's statement may or may not reflect the Fed view of the state of the economy. Bernanke has clearly and unambiguously said that Greenspan's statements are designed to influence the economy, not to credibly describe the state of the economy. This is a big difference. Bernanke has been quite unequivocal that, within limits, the Fed is permitted to issue misleading statements to the public in order to influence the public. This is not what we normally mean by "partisan political" statements, but there's not much difference. So, based on Bernanke's repeated statement, we must conclude that Greenspan's speech yesterday may well have been purposely misleading. So when we're talking about historically high household debt and surging real estate prices, we're left to our own devices to determine whether the situation is serious or not. So, we can only go back to fundamentals. If you want to find out whether you're in a stock market bubble, you can't compare one stock price to another; you have to compare stock prices to historical stock prices using standard historical measures -- price/earnings ratios. And <#hreftext ww2010.i.fed040921 "price/earnings ratios show that stock prices today are overpriced by 100%."#> Similarly, you have to compare housing prices today to historical housing prices, and you find that <#inc ww2010.weblog.ref e040730b "real estate is in an overpriced bubble all over the world"#>, and that <#inc ww2010.weblog.ref e040909 "housing prices are beginning to cool down"#> after a year of record increases. With household debut, you find that <#inc ww2010.weblog.ref e040617 "public debt is at historic highs."#> I'm well aware that many readers of this web site don't fully agree with all the economic concerns I've raised. But whether you do or not, you should be aware that there is something very weird going on over at the Fed. As the weeks go by, and we read more bizarre statements by Bernanke, Greenspan and other Fed governors, we should all be getting a lot more concerned about what's happening. =eod =// &&2 e041019b 'The Red Sox will NEVER win another World Series' =data ww2010.weblog.y2004.e041019b.head "The Red Sox will NEVER win another World Series" =data ww2010.weblog.y2004.e041019b.keys =data ww2010.weblog.y2004.e041019b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041019b.date 19-Oct-04 =data ww2010.weblog.y2004.e041019b.txt1 My son Jason said that last night out of frustration, as the Yankees pulled ahead by a score of 4-2. =data ww2010.weblog.y2004.e041019b.txt2 This led to a discussion of the following question: Just how long will the sport of baseball continue to exist? The Red Sox haven't won the World Series since 1918, 86 years ago. If professional baseball is going to exist only another 10 or 20 years, then yes, it's quite literally possible that the Red Sox will NEVER win another World Series. With the huge amounts of biotechnology research going on today, it won't be long before it will be possible to "augment" an individual human being to make him stronger, faster, and sharper. That means that we'll be "augmenting" professional athletes within 10-15 years. This will throw a question mark around the viability of baseball as a professional sport, and also around all other professional sports, including the Olympics. Think of how many headaches we have today dealing with athletes who may or may not be on steroids, and multiply those headaches by a million. At some point, the professional sports become more trouble than their worth. My son Jason is quite familiar with this kind of discussion. He's majoring and doing research in biotechnology as a student at Georgia Tech. He's been working on a biotechnology research project to provide new heart tissue to fix damaged hearts, and we're well within sight of the kinds of "athlete augmentation" technology that I've been describing. Incidentally, the Red Sox finally did beat the Yankees last night. =eod =// &&2 e041019 Five African nations oppose intervention in Darfur =data ww2010.weblog.y2004.e041019.head Five African nations oppose intervention in Darfur =data ww2010.weblog.y2004.e041019.keys =data ww2010.weblog.y2004.e041019.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041019.date 19-Oct-04 =data ww2010.weblog.y2004.e041019.txt1 Many months ago, I said that the United Nations would never stop the Darfur genocide, which is a force of nature. =data ww2010.weblog.y2004.e041019.txt2 The Darfur genocide began receiving worldwide attention just three months after a big ceremony on the tenth anniversary of the Rwanda genocide, during which <#inc ww2010.weblog.ref e040628 "Kofi Annan said "never again""#> would the world permit something like that again. Now, after months of name-calling, meetings, visits, discussions, criticisms, condemnations, and so forth, by the United States, United Nations, European Union and African Union, little has been done. There are well over a million people who have been forced from their homes, and many of them will die from cold or starvation this winter. A crisis war is a force of nature, and can no more be stopped by the United Nations than a raging typhoon can be stopped. This fact was emphasized yesterday when a meeting of five African nations -- Sudan, Libya, Sudan, Egypt, Nigeria and Chad -- <#stdurl www.nytimes.com/2004/10/18/international/africa/18sudan.html "ended with a statement rejecting "foreign intervention""#> to stop the genocide. There are 20-some wars going on in the world today, but there's only one crisis war in progress right now: The Darfur genocide. There's no reason to believe that anything is going to stop it. =eod =// &&2 e041018b Outsourcing of US jobs to India is accelerating =data ww2010.weblog.y2004.e041018b.head Outsourcing of US jobs to India is accelerating =data ww2010.weblog.y2004.e041018b.keys =data ww2010.weblog.y2004.e041018b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041018b.date 18-Oct-04 =data ww2010.weblog.y2004.e041018b.txt1 Outsourcing should accelerate even more after the November 2 Presidential election, =data ww2010.weblog.y2004.e041018b.txt2 <#stdurl "www.reuters.com/newsArticle.jhtml?type=reutersEdge&storyID=6512391" "according to India's top outsourcing firms,"#> who have already been showing record profits. Many American firms have been outsourcing numerous categories of jobs to India, where salaries are just 20% of American salaries. Even companies that would prefer to continue hiring Americans have been forced to hire Indians instead, in order to remain competitive. However, outsourcing has been made an election issue by John Kerry, and this has inhibited some outsourcing of jobs, but that's expected to end when the election is over, according to analysts. These developments portend an even more difficult American labor market next year, and they also shed light on a mystery. From the point of view of Generational Dynamics, the American economy is entering a new 1930s style Great Depression. In fact, with current stocks overpriced by a factor of 2 (as measured by standard price/earnings ratios), why hasn't there been a sharp fall in stock prices? It's beginning to look more and more that a wide variety of plans and expectations around the world are awaiting the election. For example, <#hreftext ww2010.i.iraq041016 "as we've recently written,"#> there is a widespread expectation that American forces will be withdrawn from Iraq in 2005, even though both Bush and Kerry have expressly denied planning this, and even though such a withdrawal would be extremely dangerous to Israel. Now we see by example that many financial decisions are also being postponed. In today's campaigning hothouse, it's almost impossible to give a weather report without someone making a political accusation. Any company that announces good news or bad news, especially about things like layoffs or outsourcing, risks political accusations and possible retribution. For that reason, many decisions are simply being postponed until after the election. If there are many negative decisions that have been postponed until 2005, this might mean that the major stock market fall predicted by Generational Dynamics may also wait until sometime in 2005. =eod =// &&2 e041018 The Producer Price Index continued its near-deflationary path in September =data ww2010.weblog.y2004.e041018.head The Producer Price Index continued its near-deflationary path in September =data ww2010.weblog.y2004.e041018.keys =data ww2010.weblog.y2004.e041018.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041018.date 18-Oct-04 =data ww2010.weblog.y2004.e041018.txt1 The PPI, which measures wholesale prices, increased by 0.1% in September. =data ww2010.weblog.y2004.e041018.txt2 The "core index," which excludes food and energy items, <#stdurl "www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=6513463" "increased by 0.3%."#> Both figures had fallen in August. For months, analysts have been predicting increasing inflation, based on economic models that were developed since the 1970s. However, longer term models are required to understand why inflation has been falling recently, despite very low interest rates and very high oil prices. The following table shows the values of the PPI and CPI for each month so far in 2004:


                        Changes from preceding month    
                                    2004                
                     Jan. Feb. Mar. Apr.  May June July  Aug Sept
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI                .6    .1   .6   .7   .7  -.3   .1  -.1   .1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   PPI "Core index"   .3   -.1   .3   .1   .4   .2   .1  -.1   .3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI                .5    .3   .5   .2   .6   .3  -.1   .1  n/a
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
   CPI "Core index"   .2    .2   .4   .3   .2   .1   .1   .1  n/a
   ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----

The September Consumer Price Index (retail prices) will be available later this month. As <#inc ww2010.weblog.ref e040717 "we've previously said,"#> if you look at long-term trends instead of just a few months, we're actually in a long-term deflationary period. We actually expect prices to fall by 30% in the next few years. =eod =// &&2 e041014b Violence is escalating in Haiti =data ww2010.weblog.y2004.e041014b.head Violence is escalating in Haiti =data ww2010.weblog.y2004.e041014b.keys =data ww2010.weblog.y2004.e041014b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041014b.date 14-Oct-04 =data ww2010.weblog.y2004.e041014b.txt1 An activist Roman Catholic priest has been jailed for inciting violence in Haiti, =data ww2010.weblog.y2004.e041014b.txt2 where <#stdurl news.bbc.co.uk/2/hi/americas/3743376.stm "everyone seems to agree that the level of violence is continually increasing."#> The priest, Rev. Gerard Jean-Juste, <#stdurl "www.haiti-info.com/article.php3?id_article=2776" "is supporting the return of Jean-Bertrand Aristide from the exile"#> he was forced into last February. The two sides in the intensifying violence are nominally "pro-Aristide" and "anti-Aristide." =inc ww2010.pic haitipid.jpg left "" "Poor neighborhood in Haiti" As we pointed out in our <#hreftext ww2010.i.haiti040304 "analysis of the Haiti situation"#> several months ago, Haiti is suffering from extreme poverty, because of the "Malthus effect" that strikes every nation: The population grows faster than the food supply, forcing more and more people into poverty each day. There is now only one region of the world which is in a full-scale genocidal crisis war -- the Darfur region of Sudan in Africa. <#hreftext ww2010.i.africa040822 "As we predicted,"#> the United Nations has been unable to do anything to stem the genocide, which is expected to get worse as winter approaches. A genocidal crisis is like a force of nature, and once it gathers enough energy it can't be stopped any more than a raging typhoon can be stopped. From the point of view of Generational Dynamics, Haiti is also deep into a generational crisis period. If the level of violence continues to increase, then it will spiral out of control into a full scale genocidal crisis war. This could happen tomorrow, next week, next year, or in a couple of years, but it's going to happen before long. The interesting and every-present contrast is with Iraq, which is not spiraling out of control, despite numerous wishful predictions from journalists, pundits and high-priced analysts for almost two years. <#inc ww2010.weblog.ref e041013b "As we've repeatedly said,"#> Iraq is in a "generational awakening" period, during which a spiral out of control into a massive civil war or anti-American uprising is impossible. So we have three different regions:

The Darfur region, which is in a generational crisis war,
Haiti, which is in a generational crisis period, with low-level violence that has not yet spiraled out of control into a full-scaled genocidal crisis war.
Iraq, which is in a generational awakening period, and therefore cannot into a crisis war, despite predictions of journalists, pundits and high-priced analysts.

=eod =// &&2 e041014 40 days after the massacre, it's a time of decision for Beslan =data ww2010.weblog.y2004.e041014.head 40 days after the massacre, it's a time of decision for Beslan =data ww2010.weblog.y2004.e041014.keys =data ww2010.weblog.y2004.e041014.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041014.date 14-Oct-04 =data ww2010.weblog.y2004.e041014.txt1 The residents of Beslan, North Ossetia, are choosing between revenge and getting on with their lives today. =data ww2010.weblog.y2004.e041014.txt2 On September 1-3, a terrorist massacre occurred at a school in Beslan, North Ossetia, killed more than 340 people, almost half of them children. The Russian Orthodox religion calls for 40 days of mourning and prayer for the souls of the dead. The 40 days have ended. The people of Beslan are taking off their shawls and shaving their beards. <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus region - including North Ossetia, Ingushetia and Chechnya"#> So what happens now? <#stdurl www.csmonitor.com/2004/1014/p06s01-woeu.html "Interviews with Beslan residents yesterday"#> indicate that feelings are mixed. Some want to try to just get on with their lives -- though that's not particularly easy after such a traumatic event -- and others are talking about revenge against the neighboring Muslim provinces of Ingushetia and Chechnya. I've <#inc ww2010.weblog.ref e040907 "said repeatedly the past few months"#> that the Caucusus is the most danger region on earth, mainly because it's deeper into a "generational crisis" period than other regions. Furthermore the Caucusis has been the site of numerous major ethnic and religious wars for centuries. Generational Dynamics predicts another major war is to come, and we can see how the that war seems to approach closer every day. Generational Dynamics predicts that the Caucusus region will have a major crisis war in the next few years with almost 100% certainty. The fact that this region is deeper into a crisis period means that the people are more ready, willing and able to wage war. That's why Russian President Vladimir Putin is calling for calm. This situation is not going to go away. There is no way that the massacre of so many children and their parents is going to be forgotten. Even if revenge does not occur right away, this is one more issue that will inflame the region for years to come. =eod =// &&2 e041013b Fallujans are getting angry with insurgents =data ww2010.weblog.y2004.e041013b.head Fallujans are getting angry with insurgents =data ww2010.weblog.y2004.e041013b.keys =data ww2010.weblog.y2004.e041013b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041013b.date 13-Oct-04 =data ww2010.weblog.y2004.e041013b.txt1 Just a few hours after my posting that al-Zarqawi's most formidable enemy may be the 40-50 year old mothers of Fallujah, =data ww2010.weblog.y2004.e041013b.txt2 the Washington Post has published <#stdurl www.washingtonpost.com/wp-dyn/articles/A28105-2004Oct12.html "a story that the citizens of Fallujah are turning against the foreign-born Arabs"#> led by Abu Musab al-Zarqawi. In <#inc ww2010.weblog.ref e041013 "my posting earlier today,"#> I said that the al-Sadr's agreement to disarm may trigger the people of Fallujah to turn against al-Zarqawi, and that's exactly what appears to be happening. In fact, we're finally seeing what I predicted over a year ago, when <#hreftext ww2010.i.aug19 "I wrote that terrorist suicide bombings in Iraq may backfire against terrorists."#> What's happening in Iraq is completely predictable from Generational Dynamics. The people of Iraq are in a "generational awakening" period, which means they are not in the mood for war. Generational Dynamics cannot predict the actions of any individual or any small group of individuals, but it can predict the behaviors and actions of large masses of people. Thus, there's no way to predict what Abu Musab al-Zarqawi or his small group of foreign-born Arab jihadists may do, but we can predict with almost 100% certainty that the Iraqi people do not want to be in the middle of this. The Arabs and the Iraqis are at different times within the generational cycle. Palestine and Jordan are in a "generational crisis" period which means, to put it bluntly, that they're ready, willing and able to go to war, and that they'll pursue any such war with genocidal fury. But Iraq is in a "generational awakening" period. They had their genocidal fury in the 1980s Iran/Iraq war, and they won't be ready for it again until several decades and three more generations pass. In the meantime, the war isn't over. Abu Musab al-Zarqawi is extremely wealthy, and extremely resourceful, and he'll pursue the war in any way he can, just like Osama bin Laden. He'll have millions of Arabs cheering him on, but the people of Iraq will not have their heart in it. =eod =// &&2 e041013 Al-Sadr's Shi'ite militia turn in weapons =data ww2010.weblog.y2004.e041013.head Al-Sadr's Shi'ite militia fighters turn in their weapons =data ww2010.weblog.y2004.e041013.keys =data ww2010.weblog.y2004.e041013.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041013.date 13-Oct-04 =data ww2010.weblog.y2004.e041013.txt1 The war in Iraq took a significant turn this week when the Shi'ite militias agreed to disarm, =data ww2010.weblog.y2004.e041013.txt2 as <#stdurl washingtontimes.com/world/20041011-105525-1079r.htm "Moqtada al-Sadr decided to enter the political field"#> in anticipation of January's Iraqi elections. It was just two months ago that most of the media was talking about an imminent mass anti-American Shi'ite uprising in Iraq, perhaps spiraling out of control to a full-scale civil war. <#inc ww2010.weblog.ref e040812 "I wrote at the time"#> that it was a mop-up operation, not a civil war, and Surprise! The mop-up operation seems to be coming to an end. Indeed, I've been saying for almost two years that a civil war or uprising in Iraq was impossible, even though journalists, pundits and high-priced analysts have been emitting hysterical warnings for almost that long. And the way I knew that a massive civil war or uprising was impossible is because I've studied history. Only one generation has passed since the genocidal Iran/Iraq crisis war of the 1980s. In my study of Generational Dynamics, I've examined well over 100 events throughout history, and there has never been a new crisis war less than 40 years after the end of the preceding crisis war, and rarely in under 50 years. Based on those figures, I knew and know that a new crisis civil war or uprising in Iraq now is impossible. Iraq is in a "generational awakening" period, and al-Sadr's move into politics is very typical of awakening periods. During awakening periods, there is always a turbulent political battle between the people in the hero generation that fought during the crisis war and their children, who have no personal memory of the war. The battle between the young Moqueta al-Sadr and the elder Shi'ite Ayatollah Ali al-Sistani is what this political move is all about. And although the military battle may be over, the political opposition to the American forces will continue or grow stronger. The greater significance of the disarmament is that there's a good chance that it will convince the Sunni insurgents in Fallujah to do the same, since otherwise the Shi'ites will gain a political advantage in the January elections. This will not sit well with Jordanian terrorist leader Abu Musab al-Zarqawi, whose goal is to destabilize Iraq and trigger a "clash of civilizations" war. Al-Zarqawi is well funded and has plenty of money to throw around in Fallujah, and he undoubtedly has a cadre of loyal followers from Jordan, Palestine and Saudi Arabia who are willing to die for his cause. But Generational Dynamics tells us he has a problem motivating the local Iraqi population to follow his leadership. The fact that only one generation has passed since the genocidal Iran/Iraq war of the 1980s has real significance on the ground. Every 40-60 year old mother living in Fallujah today lost a father, a brother, a husband or a son in the Iran/Iraq war, These mothers are telling their Iraqi sons, "Don't listen to al-Zarqawi, just because he has money. He'll just get you killed." So America has its problems in Iraq, but al-Zarqawi may have worse problems, as shown by the disarmament of al-Sadr's militias. And if we think that al-Zarqawi's worst enemy is the American-led coalition forces, we have to remember that he has an even greater, more formidable enemy: Those 40-50 year old Fallujah mothers who see through al-Zarqawi and who are telling their sons not to have anything to do with him. =eod =// &&2 e041012 Kerry's "Terrorists as mere nuisances" remark =data ww2010.weblog.y2004.e041012.head Kerry's "Terrorists as mere nuisances" remark =data ww2010.weblog.y2004.e041012.keys =data ww2010.weblog.y2004.e041012.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041012.date 12-Oct-04 =data ww2010.weblog.y2004.e041012.txt1 Let's assume that Kerry's remarks were merely a slip of the tongue, which they may well have been. =data ww2010.weblog.y2004.e041012.txt2 What I want to consider here is the question of what impression they make on foreign populations, including foreign terrorists. Let's begin by quoting in full the two relevant paragraphs from <#stdurl www.nytimes.com/2004/10/10/magazine/10KERRY.html "the article " Kerry's Undeclared War" by Matt Bai"#> in Sunday's New York Times Magazine:

When I asked Kerry what it would take for Americans to feel safe again, he displayed a much less apocalyptic worldview. "We have to get back to the place we were, where terrorists are not the focus of our lives, but they're a nuisance," Kerry said. "As a former law-enforcement person, I know we're never going to end prostitution. We're never going to end illegal gambling. But we're going to reduce it, organized crime, to a level where it isn't on the rise. It isn't threatening people's lives every day, and fundamentally, it's something that you continue to fight, but it's not threatening the fabric of your life." This analogy struck me as remarkable, if only because it seemed to throw down a big orange marker between Kerry's philosophy and the president's. Kerry, a former prosecutor, was suggesting that the war, if one could call it that, was, if not winnable, then at least controllable. If mobsters could be chased into the back rooms of seedy clubs, then so, too, could terrorists be sent scurrying for their lives into remote caves where they wouldn't harm us. Bush had continually cast himself as the optimist in the race, asserting that he alone saw the liberating potential of American might, and yet his dark vision of unending war suddenly seemed far less hopeful than Kerry's notion that all of this horror -- planes flying into buildings, anxiety about suicide bombers and chemicals in the subway -- could somehow be made to recede until it was barely in our thoughts. For our purposes, the second paragraph is even more important than the first, because it focuses not on what Kerry said, but on what Kerry is perceived to have said. From the point of view of Generational Dynamics, whatever happens in Iraq or in the coming "clash of civilizations" world war is already decided, based on events and trends that have been occurring for decades. Nothing that happens in the short term now, including the choice of American president, is going to affect what's going on in the Caucasus, in Taiwan, in Pakistan, or in Palestine. But there appears to be a powerful worldwide dynamic going on, based on the belief or perception, encouraged by both Bush and Kerry, that Bush and Kerry have entirely different world views. The difference between reality and perception here is truly astonishing. Kerry has never put forth any plan that differs in any way that differs from anything that Bush is doing or planning. From the point of view of reality, there is literally no difference between the two candidates. But the difference in perception is enormous. There is a "feeling," not only among Kerry's supporters in America, but in those who favor Kerry around the world, that a Kerry presidency would bring enormous change. What kind of change? As I research events and opinions around the world, I see it appear in various ways. For example, <#stdurl "www.japantoday.com/e/?content=comment&id=653" "one Japanese commentator"#> says that the Iraqi "Coalition of the willing" is going to dissolve under a Kerry presidency, and even under a continuing Bush presidency, and that therefore a quick withdrawal from Iraq is going to happen early in 2005. Another example is <#stdurl "www.thejewishpress.com/news_article.asp?article=4242" "an Israeli opinion piece"#> that says that Palestinians expect Kerry to be harsher with the Israelis than Bush is, because of statements made by Kerry to that effect in the past. These examples, including the "nuisance" example, illustrate a larger pattern that seems clear: That many people in the world expect a Kerry victory to mark a major change, and even a Bush victory would result in some changes. Like a person whose giddy belief is that his personal problems would be solved if he quit his job, and then finds that his personal problems are the same when he quits his job, many people in the world seem to have a giddy belief that terrorism will somehow get "better" in 2005. There's no real reason to believe that much of substance will change. Kerry's policy toward Israel and Palestine is certain to be a continuation of Bush's, as is his policy toward Taiwan and Iraq. These are decades old American policies. Now, what happens in 2005 when the realization sets in that the giddy dreams of change will not be realized? That's a question we want to explore some more in the next few days. =eod =// &&2 e041011 'It's going to be the 1950s all over again' =data ww2010.weblog.y2004.e041011.head "It's going to be the 1950s all over again" =data ww2010.weblog.y2004.e041011.keys =data ww2010.weblog.y2004.e041011.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041011.date 11-Oct-04 =data ww2010.weblog.y2004.e041011.txt1 Young women in droves are staying home to take care of the kids, =data ww2010.weblog.y2004.e041011.txt2 according to <#stdurl "www.cbsnews.com/stories/2004/10/08/60minutes/main648240.shtml" "a 60 Minutes report Sunday evening."#> =inc ww2010.xr.related1 right gender 2 "Could it really be that this generation of women, the first to achieve success without having to fight for it, is now walking away, willingly, and without regrets?" asks narrator Leslie Stahl. Indeed it is. This is exactly what Generational Dynamics has been predicting. Women's behavior goes in generational cycles, varying between strong gender roles and weak gender roles. Leslie Stahl interviewed a feminist professor, Linda Hirshman, who's been studying the issue. She surveyed high-powered couples who announced their weddings in the New York Times in 1996. 85% of those women were staying at home to take care of the kids, either full-time or part-time. This is a remarkable swing of the pendulum, and is one of the most dramatic examples of how Generational Dynamics works. America in the 1960s was in a "generational awakening" period, when individual rights are emphasized. These include "gender rights," and traditional gender roles are politically suppressed. The same thing happened in the 1830s and continued through the 1850s until the Civil War, and then happened again in the 1890s and continued through the 1920s, until the Great Depression. In between those periods, and traditional male and female roles are emphasized. Today, America is in a "generational crisis" period, when individual rights are sacrificed for the unity of the nation, and traditional gender roles are emphasized. As I've previously written <#inc ww2010.weblog.ref e040924 "about the negative public reaction to Janet Jackson baring her breast"#> at the Superbowl half-time show, the American public is expecting women to act more like women, and men to act more like men. And if 85% of high-powered women graduates are really staying at home to take care of the kids, then the 1950s really are back. =eod =// &&2 e041010c Do both Bush and Kerry lie on purpose in the debates? =data ww2010.weblog.y2004.e041010c.head Do both Bush and Kerry lie on purpose in the debates? =data ww2010.weblog.y2004.e041010c.keys =data ww2010.weblog.y2004.e041010c.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041010c.date 10-Oct-04 =data ww2010.weblog.y2004.e041010c.txt1 That's the charge of Gloria Borger on CNN's Reliable Sources this morning. =data ww2010.weblog.y2004.e041010c.txt2 Here are some examples:

When Dick Cheney mistakenly said that he'd never met John Edwards before, it wasn't necessarily a mistake. He may have said it on purpose, knowing that it was a lie, because he wanted to use it as a put-down for Edwards.
When John Kerry mistakenly said that the Iraq war had cost $200 billion, it wasn't necessarily a mistake. He may have said it on purpose, knowing that it was a lie, because he wanted post-debate commentary to focus on how much the war was costing.

In other words, telling a lie during a debate has a positive value, because it calls attention to the subject being lied about, and forces the post-debate commentators to talk about the "mistake," thereby calling attention to the subject of the "mistake." If you've been reading my commentary about the debates these last few days, you know that I don't think much of them. The debates are simply a repackaging of stump speeches, and cover only the past, never the future, They're completely vacuous. Borger's comments provide additional support for this view, and add an even darker dimension to it. Why is this important to this web site? From the point of view of Generational Dynamics, the public is completely shocked and surprised when unexpected surprises occur, leading to crisis wars. Thus, the public was completely naïve in the 1930s about the danger form Adolf Hitler, although after the war there was public fury that we "should have stopped Hitler in 1935 when we could." Prior to the Civil War, the North and the South both completely underestimated the fury that was to come. According to one anecdote, the wealthy residents of Washington, DC, went out in carriages to view the early battles of the war as a kind of entertainment. By the time the war was over, it was by far the bloodiest war in American history. Today we're seeing similar naïveté on the part of the public. Earlier today, <#inc ww2010.weblog.ref e041010b "I criticized Fed Governor Ben Bernanke"#> for believing that stock and bond prices are determined almost exclusively by Fed policy and Fed verbal statements. The Fed is ignoring fundamentals, such as astronomically high public debt, astronomically high stock valuations, and falling inflation rates. The same criticism applies to the public as a whole as regards the dangers around the world. In the 1960 Presidential election, the question of war between China and Taiwan was a major election issue, while today, when war over Taiwan is becoming increasingly likely, I doubt that nine out of ten people in the public have even heard of Taiwan. Similarly, the Caucasus region is the most dangerous region in the world today, but the public is blind to it. Secular violence is occurring daily in Pakistan and other locations, but it's barely reported. That's why analyzing the debates is so instructive. The naïveté and shallowness of the debate arguments is a reflection of the naïveté and shallowness of Americans' understanding of the world as a whole, and even of politician's understanding of the world. (And there's no excuse for the politicians, since we actually pay them to keep track of this stuff.) So, if there's another terrorist act on American soil, or if China attacks Taiwan, forcing America into the same war, or if Pakistan or the Caucasus spiral out of control, triggering a regional war that we're forced into, then the politicians will be as surprised as anyone else is. As famous American satirist Ambrose Bierce once said, "War is God's way of teaching Americans geography." =eod =// &&2 e041010b Bernanke / The Fed congratulates itself - again - on its jawboning policy =data ww2010.weblog.y2004.e041010b.head The Fed congratulates itself - again - on its jawboning policy =data ww2010.weblog.y2004.e041010b.keys =data ww2010.weblog.y2004.e041010b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041010b.date 10-Oct-04 =data ww2010.weblog.y2004.e041010b.txt1 The Fed appears to be indicating a slowdown on interest rate increases =data ww2010.weblog.y2004.e041010b.txt2 in a lengthy self-congratulatory analysis of the Fed's jawboning policy. Federal Reserve Governor Ben S. Bernanke emphasized that the Fed has been following a gradualist approach in raising interest rates. His emphasis has led some analysts to read between the lines and conclude that the Fed plans to slow down its program to increase interest rates. This speculation <#stdurl "quote.bloomberg.com/apps/news?pid=10000006&sid=aoVYtLzriaNk&refer=home" "increased on Friday,"#> after the September jobs report <#inc ww2010.weblog.ref e041008b "was much poorer than had been expected."#> However, today we want to focus on the main thrust of <#stdurl www.federalreserve.gov/boarddocs/speeches/2004/200410072/default.htm "Bernanke's luncheon speech on Thursday to the Japan Society."#> Bernanke talked at length about the Fed's jawboning policy -- providing guidance on the Fed's view of the economy, so that investors will be able to make longer range plans, based on a reasonable expectation of what the Fed will do in the future. So when the Fed said earlier this year that it would proceed with interest rate increases "at a pace that is likely to be measured," investors could reasonably conclude that interest rate increases will be gradual. Now, I have no objection to more information from the Fed. I think it's great. What bothers me is <#inc ww2010.weblog.ref e040917 "what bothered me last month when I criticized Bernanke"#> because he seemed to be saying that verbal statements from the Fed can affect stock prices in the long run. In Thursday's speech, Bernanke didn't talk about stock prices, but he did talk about falling interest rates on 10 year notes that are occurring at the same time that interest rates are rising on short term notes. According to Bernanke, the reason that interest rates are falling on ten year notes is as follows:

The Fed repeatedly made verbal statements that short-term interest rates would be increased at "a measured pace," and particularly would keep inflation under control.
Therefore, the market decided that the Fed would keep inflation at moderate levels in the long run.
Therefore, the market concluded that long term interest rates should fall.

Bernanke has a good point here when he relates inflation to long-term interest rates, and it's a point I should have discussed when <#hreftext ww2010.i.fed040921 "I wrote last month that yield curves are flattening, indicating a problem."#> It's true that interest rates in general are related to inflation, and that if inflation is under control, then interest rates are likely to be lower. But the problem I have with all this is that it completely ignores fundamentals. When <#inc ww2010.weblog.ref e040917 "I last criticized Bernanke,"#> I pointed this same thing out. Bernanke apparently believes that the Fed can use verbal statements, even misleading verbal statements, to affect the economy -- stock prices, interest rates (bond prices), and so forth -- in the long run! If you want a simple demonstration that verbal statements by the Fed don't work, take a look at Alan Greenspan's 1996 statement complaining that the high stock prices were a sign of "irrational exuberance." This statement got a great deal of media play, but it didn't stop naïve investors from bidding up the prices stock to astronomically high levels, which only fell after the Nasdaq crash in 2000. What Bernanke doesn't even discuss is the kinds of fundamentals that I described in my <#hreftext ww2010.i.fed040921 "piece on flattening yield curves:"#> that public debt is at astronomically high levels, higher than even in the 1930s, that stock valuations (as measured by price/earnings ratios) are at historic highs, worse than even in the 1930s, and that the common measures of inflation (the Producer Price Index (PPI) and Consumer Price Index (CPI)) are showing that the economy is in a long-term deflationary period, not an inflationary period. In Bernanke's strange world, fundamentals like these are completely irrelevant. Nothing matters except what the Fed says and does. When Bernanke gives historical examples (in this speech, and in <#stdurl www.federalreserve.gov/boarddocs/speeches/2004/20041008/default.htm "a speech that he gave on Friday on another subject,"#>) his historical examples never go back more than a few decades. Once again, we see why Generational Dynamics can provide the accurate forecasts that it does. Generational Dynamics says that today we're in another period like the 1930s, but even professionals like Bernanke can't go to the trouble to make historical comparisons to the 1930s, because they have no personal memory of anything that happened before they were born, and tend to discount it all. I'm glad that the Fed is providing more information, but I object to the vanity, conceit and self-deception that Bernanke and the other Fed Governors exhibit when they claim that verbal messages can affect long-term interest rates. More information from the Fed means less volatility in short-term rates, resulting in less volatility in derivative values, including stock prices and the value of the dollar, in the short term. But the Fed's verbal statements provide at most six months of guidance beyond what the market would know if the Fed provided no verbal guidance whatsoever. In the end, it's necessary to look at the fundamentals, and that's what the Fed and most other analysts are avoiding. Finally, here's an aside: On Friday, <#stdurl online.wsj.com/article/0,,SB109718972544939839,00.html "a Wall Street Journal editorial"#> criticizes Bernanke's speech, and the Fed in general, for not raising interest rates more quickly. The editorial blames the Fed for high oil prices and says that "the Fed may lose its focus on its core mission, which is supposed to be maintaining price stability." Apparently the people who write WSJ's editorials don't bother to read the paper's own news pages. Oil prices are at a historic high, but that's because of China's increasing demand for oil, not because of anything the Fed is doing. And anyway, we're in a deflationary, not an inflationary, period, as the news about the PPI and CPI for the last few months has shown. =eod =// &&2 e041010 I just saw Saturday Night Live's debate parody =data ww2010.weblog.y2004.e041010.head I just saw Saturday Night Live's parody of Friday's Presidential debate. =data ww2010.weblog.y2004.e041010.keys =data ww2010.weblog.y2004.e041010.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041010.date 10-Oct-04 =data ww2010.weblog.y2004.e041010.txt1 In the televised parody, Bush and Kerry said some really stupid, moronic things, =data ww2010.weblog.y2004.e041010.txt2 so stupid and moronic that any American would be embarassed to hear their Presidential candidates say them out loud. The only trouble is: They're exactly the same kinds of things that the real Bush and Kerry said on Friday. (See <#inc ww2010.weblog.ref e041009 "my comments following the actual debate."#>) =eod =// &&2 e041009b Australian Prime Minister John Howard wins reelection =data ww2010.weblog.y2004.e041009b.head Australian Prime Minister John Howard wins reelection battle decisively =data ww2010.weblog.y2004.e041009b.keys =data ww2010.weblog.y2004.e041009b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041009b.date 9-Oct-04 =data ww2010.weblog.y2004.e041009b.txt1 This election has been closely watched because of Howard's strong support of George Bush's Iraq war policy. =data ww2010.weblog.y2004.e041009b.txt2 As of Thursday, <#stdurl www.theage.com.au/articles/2004/10/08/1097089557215.html "polls shows Howard with a small margin,"#> but with a large number of undecided voters. <#stdurl "www.reuters.com/newsArticle.jhtml?type=topNews&storyID=6458471" "Saturday's decisive election results"#> appear to indicate that the undecided voters tended to favor Howard. The Australian election has been watched as an early indicator of the American election in November, and a possible English election next year. In fact, George Bush, England's Tony Blair, and Australia's John Howard were the three major leaders in launching the Iraq war last year, and Opposition Labor Party leader Mark Latham has been highly critical of Australia's participation in the Iraq war, and indicated that if he won he would pull Australian troops out of Iraq. From the point of view of Generational Dynamics, this is the expected result. America, England and Australian are all in a "generational crisis" period. During such a period, a nation's citizens tend to reject bitter political battles and unite around a leader that they trust, rather than risk someone new. We saw this during America's last generational crisis period, when Franklin Roosevelt was elected President for a historic four terms. Because we're in a generational crisis period, <#hreftext ww2010.i.bush040824 "history favors the incumbent."#> The same reasoning applies to England and Australia, for similar reasons. However, there is one big difference between Australia and America: Australia is doing better economically at the current time. <#inc ww2010.weblog.ref e041008b "The September jobs report in America was much poorer than expected,"#> George Bush could still be defeated because of the economy. =eod =// &&2 e041009 In second debate, Bush and Kerry simply repeated what they said in the first debate =data ww2010.weblog.y2004.e041009.head In second debate, Bush and Kerry simply repeated what they said in the first debate =data ww2010.weblog.y2004.e041009.keys =data ww2010.weblog.y2004.e041009.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041009.date 9-Oct-04 =data ww2010.weblog.y2004.e041009.txt1 You know how you have an argument, and then the next day think of the zinger that you should have used? =data ww2010.weblog.y2004.e041009.txt2 That's what happened last night. Both George Bush and John Kerry have had a week to think over what they should have said in the last debate, and they used those lines last night. But there was absolutely no new content. In the past couple of days we've had massive terrorist actions in Pakistan and Egypt, but those weren't mentioned last night, even though the Egypt action opens up a new front between the terrorists and Israel. There was only one moment when my ears perked up, because John Kerry said he was going to describe what he would do differently in Iraq. But all he said was that he'd get support from other countries, which he's said before, and it's a silly statement anyway because he won't have any more success with other countries than Bush has had. So nothing, absolutely nothing, was said last night. All that mattered is how the two candidates looked, which is somewhat the way we choose Miss America. Generational Dynamics predicts that whatever is going to happen in Iraq and the Mideast will happen the same way, no matter who's elected this November. Both candidates have put forth policies that are virtually identical, which supports the Generational Dynamics prediction. =eod =// &&2 e041008c Kenyan woman environmental activist wins Nobel Peace Prize =data ww2010.weblog.y2004.e041008c.head Kenyan woman environmental activist wins Nobel Peace Prize =data ww2010.weblog.y2004.e041008c.keys =data ww2010.weblog.y2004.e041008c.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041008c.date 8-Oct-04 =data ww2010.weblog.y2004.e041008c.txt1 What does planting 30 million trees have to do with world peace? =data ww2010.weblog.y2004.e041008c.txt2 <#inc ww2010.pic maathai.jpg right"" "Nobel Peace Prize winner Wangari Maathai in Nairobi, Oct. 8, 2004. (Source: Reuters)"#> That's the question a lot of people are asking, now that <#stdurl "www.npr.org/templates/story/story.php?storyId=4077230" "the winner of the prestigious Nobel Peace Prize"#> is a woman from Kenya, an environmental activist. Maathi's principal achievement was that she founded The Green Belt Movement, which has since been credited with planting 30 million trees across Africa. Now that's a wonderful accomplishment, but how is it related to promoting world peace? The problem is that if you think about it, almost every political figure in the world would have been controversial. Thus, if George Bush were selected, the committee would be called pro-America, and if French President Jacques Chirac were selected, then the committee would be called anti-American. One puzzled Norwegian researcher, Espen Barth Eide, <#stdurl news.xinhuanet.com/english/2004-10/09/content_2065723.htm "is quoted"#> as saying, "There was no lack of traditional candidates, like the International Atomic Energy Agency." But in fact, the International Atomic Energy Agency wouldn't do at all. After all, <#inc ww2010.weblog.ref e041007 "has recently condemned Iran"#> for continuing to develop a nuclear weapon capability. To the pro-Iranian community wouldn't be happy with the IAEA as a Nobel Peace Prize winner. So, Wangari Maathai: A politically correct black African woman, and a tree planter. Who could object to that? =eod =// &&2 e041008b September jobs report much poorer than expected =data ww2010.weblog.y2004.e041008b.head September jobs report much poorer than expected =data ww2010.weblog.y2004.e041008b.keys =data ww2010.weblog.y2004.e041008b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041008b.date 8-Oct-04 =data ww2010.weblog.y2004.e041008b.txt1 George Bush will face harsh attacks on the employment issue at this evening's debate =data ww2010.weblog.y2004.e041008b.txt2 as a result of <#stdurl bls.gov/news.release/empsit.nr0.htm "a Bureau of Labor Statistics (BLS) report"#> that the American economy created only 96,000 jobs in September. The figure <#stdurl "www.forbes.com/business/businesstech/feeds/ap/2004/10/08/ap1582937.html" "is substantially below the amount that economists had predicted."#> Economists had been forecasting an increase of 128,000 to 144,000. At the beginning of 2004, economists had been predicting that the economy would be creating several hundred thousand jobs each month by now. Last month, <#inc ww2010.weblog.ref e040903 "I wrote"#> that the August jobs report, at 144,000 new jobs, was much more positive than expected, helping Bush as the Republican convention ended. Today's report contains even more bad news, however: The BLS has revised the August figures down to 128,000. This increases the danger <#hreftext ww2010.i.bush040824 "that Bush will be "Hooverized,""#> by being compared to Herbert Hoover, who lost his fight for reelection to Franklin Roosevelt in 1932, mainly because of the jobs issue. As I've been saying since 2002, Generational Dynamics predicts that the economy is entering a new 1930s style "great depression," and that stocks will fall by 50% or more in the next two or three years. The reason is the following: The stock market bubble of the 1990s occurred at exactly the time that the generation of people who lived through the stock market bubble of the 1920s and the following Great Depression all disappear (retired or died), all at about the same time. Today, we haven't yet "paid the price" of the 1990s stock market bubble, as can easily be seen by the fact that stocks today are overvalued by 100% by ordinary price/earnings evaluations. <#inc ww2010.pic wsj1008.gif center "" "Unemployment since 2001 (Source: WSJ)"#> After the Nasdaq crash in 2000, the economy didn't follow the path of the economy after 1929 because the Fed has flooded the economy with money by keeping short-term interest rates close to zero. This allowed people and businesses to avoid bankruptcy by borrowing low-cost money, but the result is that public debt has now increased to the highest levels since the 1930s. Generational Dynamics predicts that the economists who are predicting a surge in job growth will continue to be as wrong as they've been in the last two years, and that unemployment will reach historically high levels within the next two or three years. =eod =// &&2 e041008 Massive terrorist bombings yesterday in Pakistan, Iraq and Egypt =data ww2010.weblog.y2004.e041008.head Massive terrorist bombings yesterday in Pakistan, Iraq and Egypt cause hundreds of casualties across the Mideast in a single day =data ww2010.weblog.y2004.e041008.keys =data ww2010.weblog.y2004.e041008.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041008.date 8-Oct-04 =data ww2010.weblog.y2004.e041008.txt1 The Pakistan government has ordered a ban on all public gatherings, =data ww2010.weblog.y2004.e041008.txt2 following a car bombing in Multan, Pakistan, that killed 40 people and injured hundreds. <#stdurl "www.arabnews.com/?page=4§ion=0&article=52560&d=8&m=10&y=2004" "The bomb went off near a crowd of 3,000 Sunni Muslims"#> who had congregated for a memorial service. The bombing of the Sunni congregation was evidently in retaliation for <#stdurl news.bbc.co.uk/2/hi/south_asia/3709736.stm "a bombing last week of a Shi'ite temple in Sialkot"#> that killed 31, and caused massive riots and looting. The ban on all public gatherings was ordered evidently to prevent further rounds in the cycle of violence. No indication was given for how long the ban would last. From the point of view of Generational Dynamics, this follows a familiar pattern which we've seen recently in Russia, France, Israel, and America -- the willingness of a nation to sacrifice individual rights in favor of unifying the nation for its own survival. Pakistani officials on Thursday were saying things like, "Terrorists want to damage the integrity of Pakistan through such acts." These kinds of words -- saying that terrorist acts are attacks on the nation rather than attacks on individuals -- are the same sorts of things we've heard from Russian President Putin and American President Bush. It's this kind of language -- a call for national unity against a common enemy -- that is one of the signals that a nation has entered a generational crisis period. This was also a day when <#stdurl www.nytimes.com/2004/10/07/international/middleeast/07CND-IRAQ.html "insurgents fired two rockets into a Baghdad hotel"#> occupied by journalists and foreign contractors. No deaths were reported. But the day couldn't end without more bombings. <#stdurl "www.reuters.com/newsArticle.jhtml?type=topNews&storyID=6447034" "A massive truck bomb explosion at an Egyptian Red Sea resort"#> was quickly followed by coordinated bombings at two more resorts. Egypt has long been a target of Islamic extremists. In 1981, Egyptian President Anwar Sadat was murdered by Islamic extremists in retaliation for having signed a peace agreement with Israel in 1979. Today, Islamic extremists remain very critical of Egypt for having relative cordial relations with Israel and America. However, the Egyptian bombings appear to be directed against Israel, rather than Egypt. The targets were hotels on Egyptian soil, but it was clear that the bombs were directed against the hundreds of Israelis who were guests of the hotels. There were dozens of deaths and over 120 injuries. Thus, we don't hear Egyptian officials saying anything like, "These are attacks against the nation of Egypt." Indeed, Egypt is apparently not yet in a generational crisis period, since its last crisis war was the Egyptian Revolution, 1948-1954, which ended only 50 years in the past. As <#hreftext ww2010.i.world040911 "we wrote on September 11,"#> terrorism is increasing significantly around the world. With multiple terrorist bombings all across the Mideast, October 7, 2004, has to be considered one of the worst days. =eod =// &&2 e041007b Top Israeli aide: Israel has abandoned the 'Road Map to Peace' =data ww2010.weblog.y2004.e041007b.head Top Israeli aide says that Israel has abandoned the American-sponsored 'Road Map to Peace' =data ww2010.weblog.y2004.e041007b.keys =data ww2010.weblog.y2004.e041007b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041007b.date 7-Oct-04 =data ww2010.weblog.y2004.e041007b.txt1 The plan to create a Palestinian state has effectively been scuttled =data ww2010.weblog.y2004.e041007b.txt2 by Israeli President Ariel Sharon, according to <#stdurl www.haaretz.com/hasen/spages/485491.html "senior adviser Dov Weisglass in an interview."#> In the interview, which will appear in full on Friday, Weisglass says the following: "The significance of the disengagement plan is the freezing of the peace process. ... And when you freeze that process, you prevent the establishment of a Palestinian state, and you prevent a discussion on the refugees, the borders and Jerusalem. Effectively, this whole package called the Palestinian state, with all that it entails, has been removed indefinitely from our agenda. And all this with authority and permission. All with a presidential blessing and the ratification of both houses of Congress." This statement has caused furious repercussions in Israel, where <#stdurl www.haaretzdaily.com/hasen/spages/485862.html "opposition Labor Party chairman Shimon Peres said,"#> "He who seeks half-peace will bring half-war." More significantly, it's also caused great consternation in Washington, which is now demanding an explanation. As the election approaches, the Bush administration is not desirous of seeing any Israeli rejection of its key Mideast plan, the "Roadmap to Peace." We can expect Sharon to fully disavow Weisglass' remarks. From the point of view of Generational Dynamics, Weisglass is obviously telling the truth. <#hreftext ww2010.i.may01 "I predicted on the day the 'Roadmap' was announced"#> that it could not possibly succeed, and that there wouldn't be a Palestinian state, at least not without first having a major, genocidal war between the Jews and the Arabs, like the one that occurred in the late 1940s. By this time, 1 1/2 years later, it's hard to believe that there's anyone left who's in such a state of denial that he believes that the Roadmap is working. Weisglass reminds us how much fun it is to see a politician tell the truth, and then to see how much trouble it causes. =eod =// &&2 e041007 Iran's plans to build nuclear capability likely to destabilize Mideast =data ww2010.weblog.y2004.e041007.head Iran's plans to build nuclear capability likely to destabilize Mideast =data ww2010.weblog.y2004.e041007.keys =data ww2010.weblog.y2004.e041007.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041007.date 7-Oct-04 =data ww2010.weblog.y2004.e041007.txt1 The question everyone's asking: Will Israel preemptively attack Iran? =data ww2010.weblog.y2004.e041007.txt2 <#inc ww2010.pic ph1006.gif right "" "Iran's new missle can reach past Israel into Egypt, and past Turkey into southeastern Europe (Source: BBC)"#> For months, Iran has been openly moving ahead with a nuclear enrichment program. At the same time, Iran just announced that it's <#stdurl news.bbc.co.uk/2/hi/middle_east/3716490.stm "improved its missile capability"#> so that it's missiles can reach Israel. Putting these two capabilities together means that Iran will soon be able to deliver a nuclear weapon to the soil of its arch enemy, Israel. Iran has <#stdurl "www.voanews.com/article.cfm?objectID=3600A64C-ACF9-4279-90C3F3F30E0C82B7&title=Iran%20Says%20it%20has%20Converted%20Some%20'Yellowcake'%20Uranium&catOID=45C9C78D-88AD-11D4-A57200A0CC5EE46C&categoryname=Mideast" "openly flouted"#> the United Nations International Atomic Energy Agency (IAEA), which passed a resolution last month demanding that Iran freeze all enrichment activities. Iran has also defied demands by the United States and the European community to cease such activities. Iran has even <#stdurl "www.reuters.co.uk/newsPackageArticle.jhtml?type=worldNews&storyID=595619§ion=news" "rebuffed a proposal by Presidential candidate John Kerry"#> to supply them with nuclear fuel if they agreed to give up their own fuel-making capacity. Iran foreign ministry spokesman Hamid Reza Asefi said on Sunday it would be "irrational" to accept the proposal. "We have the technology (to make nuclear fuel) and there is no need for us to beg from others," he said. Iran itself <#stdurl "www.tehrantimes.com/Description.asp?Da=10/7/2004&Cat=2&Num=008" "claims that it's all for purely peaceful, legal purposes,"#> but most of the rest of the world is very skeptical. So what is Israel going to do about this? Prime Minister Ariel Sharon doesn't have a reputation for sitting by and letting threats of this sort develop unchallenged. People with long memories will recall that in 1981, Israel preemptively bombed Saddam Hussein's nuclear plant near Baghdad. Israel received almost universal international condemnation for having done so, but since that time many critics have acknowledged that Israel was right to have done so. And who was Israel's minister of defense in 1981? Yes, Ariel Sharon. If Israel is now going to take preemptive action against Iran's nuclear plants, then it may do so very quickly. Giora Eiland, Israel's national security adviser, <#stdurl "www.jpost.com/servlet/Satellite?pagename=JPost/JPArticle/ShowFull&cid=1096344041767&p=1006688055060" "said last week"#> that Iran will reach the "point of no return" in its nuclear weapons program by November. Presumably that means that if Israel waits until December, then it will be too late to stop Iran. This happened shortly after Sharon himself said that Israel is "taking measures to defend itself" in the Iran situation. However, many people doubt that Israel would be successful with a preemptive strike. Iran has built its nuclear capability with Israel's 1981 strike in mind, and has spread the capability throughout the country in places that Israel would be unlikely to know about. But to conclude that therefore Israel dares not strike assumes that the Israelis don't have good intelligence in Iran. Maybe they do, maybe they don't, but if they do then we can read Sharon's message that Israel is "taking measures to defend itself" to mean that a preemptive strike will occur before December, probably after the November 2 American election. Finally, let me finish up by discussing a technical point in Generational Dynamics. This issue was raised by a reader several months ago in response to another comment about Iran's nuclear intentions. He said, "Correct me if I'm wrong, but aren't you yourself claiming that they don't want a major war? Are you wrong about that?" He was referring to my frequent statements that only one generation has passed since the genocidal Iran-Iraq war of the 1980s, and so the people of neither Iran or Iraq want another war. The fact is that the Iranian people do not want another war. In fact, the Iraqis and Iranians are less desirous of war than many others in the Mideast. As a forecasting methodology, Generational Dynamics applies to the beliefs and behaviors of large masses of people, not to the actions of individuals or small groups of politicians. You can predict how large masses of people are going to think and act, but you can never predict what any particular individual is going to do. The actions that we're talking about -- building nuclear missiles and threatening Israel -- are decisions of a small group of Islamic mullahs. I doubt very much that the Iranian people are happy today that their rulers are destabilizing the region and raising the threat of a nuclear war. =eod =// &&2 e041006 Last night, another vacuous, backward-looking debate. =data ww2010.weblog.y2004.e041006.head Last night, another vacuous, backward-looking debate. =data ww2010.weblog.y2004.e041006.keys =data ww2010.weblog.y2004.e041006.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041006.date 6-Oct-04 =data ww2010.weblog.y2004.e041006.txt1 The VP candidates talked about the past for 90 minutes, and about the future for zero minutes. =data ww2010.weblog.y2004.e041006.txt2 John Edwards said that George Bush said that there was a connection between 9/11 and Iraq, even though he never did. Dick Cheney said that John Kerry said he voted for the $87 billion before he voted against it, even though that was an inconsequential legislative tactic. I watched the entire debate, and even managed to avoid falling asleep, but I can't think of a single forward-looking statement that either candidate made. Every single statement was some inconsequential statement about the past. Here are some questions that were never discussed:

What's the exit strategy for Iraq? (Answer: There isn't any.)
The war between Palestinians and Israelis has been getting increasingly violent since the 1999 Intifada. How can all out war be prevented? (Answer: It can't.)
On domestic policy, Alan Greenspan has warned that Medicare will collapse unless benefits are reduced immediately. What should be done? (Answer: Nothing will be done.)

It's fine to spend time talking about the past, but can't we spend just a little bit of time talking about the future? From the point of view of Generational Dynamics, this explains why major crisis wars happen in 70-90 year cycles. Once the generation of people who remember the last crisis war disappear (retire or die), the people in the new generations lack the ability to even to discuss the real issues. =eod =// &&2 e041005b Kofi Annan criticizes Sudan re Darfar genocide =data ww2010.weblog.y2004.e041005b.head UN Secretary General Kofi Annan criticizes Sudan for no progress stopping Darfur genocide =data ww2010.weblog.y2004.e041005b.keys =data ww2010.weblog.y2004.e041005b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041005b.date 5-Oct-04 =data ww2010.weblog.y2004.e041005b.txt1 I haven't been writing about Darfur on a regular basis because there's no point. =data ww2010.weblog.y2004.e041005b.txt2 Several months ago, <#inc ww2010.weblog.ref e040628 "I wrote that the UN is completely irrelevant"#> to the ongoing Darfur genocide. I said that this kind of genocide is a force of nature, and the UN can no more stop it than they can stop a typhoon. <#inc ww2010.pic sudan1.gif right "" "Darfur - southwest region of Sudan (Source: BBC)"#> Time has proven this prediction to be correct. The past few months have seen almost a comedy of buck-passing and name-calling in the UN and the European Union to do something to stop the genocide. And with almost two million displaced people, the worst is yet to come. The latest <#stdurl "www.voanews.com/article.cfm?objectID=FF0688F0-64CF-4F32-A52E2087141FD8F2&title=UN%20Faults%20Sudan%20for%20Failing%20to%20Halt%20Attacks%20on%20Darfur%20Civilians&catOID=45C9C786-88AD-11D4-A57200A0CC5EE46C&categoryname=Health%20%26%20Medicine" "remarks by Kofi Annan on Darfur"#> came at the end of UN Security Council session today, during which several ministers condemned Sudan for appearing to support the genocide, and promised that they might, maybe, perchance, impose some sort sanctions some day if Sudan doesn't stop it. None of this makes any difference to the actual genocide because <#stdurl news.bbc.co.uk/1/hi/world/africa/3702242.stm "there are deep-seated ethnic differences between the warring groups,"#> just as there were in Rwanda in 1994 when the Hutus massacred close to a million Tutsis. It's one of the principal discoveries of Generational Dynamics that these kinds of genocidal wars cannot be stopped by the United Nation any more than an earthquake can be stopped by the United Nations. And <#hreftext ww2010.i.africa040822 "these genocidal wars are not unique to Africa,"#> but occur at regular intervals in every society at every time in history. You may find this hard to believe, dear reader, but some people actually tell me that they find this web site too gloomy and negative. That's why I like to point to the Darfur example. I could predict with almost 100% certainty that the genocide could not be stopped, despite enormous worldwide attention, and that prediction is, of course, coming true, despite the wishes of those who believe that with a positive attitude and a lot of hard work, such a genocide can be prevented or stopped. It can't. There are fundamental patterns that the world has followed throughout history, whether in wars, in finance, and in technology. It boggles the mind to think that we've entered another 1930s style depression, and that stocks will fall by more than 50% within the next few years, and yet <#hreftext ww2010.i.greenspan040706 "the historical patterns show that it will happen, with almost 100% certainty."#> thanks to generational changes. It boggles the mind to think that a <#inc ww2010.weblog.ref e041003b "massive genocidal war between Palestinians and Israelis that will engulf the entire region"#> will occur and can't be stopped, but historical parallels throughout history prove that such a war will occur with almost 100% certainty, and will engulf the entire region, thanks to generational changes. The same can be said of <#inc ww2010.weblog.ref e040929d "the Caucasus region, which is the most dangerous region on earth,"#> thanks to generational changes. And the same can be said about <#hreftext ww2010.i.taiwan040823 "an inevitable war between China and America in the Pacific,"#> thanks to generational changes. A regular reader recently sent me an e-mail message asking me, "I am having quite a difficult time getting others to understand the principles of Generational Dynamics. Most of the people I talk to about this seem to have a difficult time grasping the idea that a society (or region I should say) goes into a crisis period because the generations alive during the last crisis disappear, so there is no guidance from those generations to keep the younger ones from getting into the same trouble all over again. "I was wondering if you are having the same level of difficulty I am in disseminating the information? "Thanks again for the book. It really is interesting to know that I am ahead of the curve simply by reading this book and I know now where the country is heading in the upcoming years. Information like this is priceless." I wrote back to him joking that being able to predict the future may be as much a curse as a blessing, and that information like this may be "priceless," but I haven't figured out a way to make money from it. More seriously, I fundamentally believe that if at least American politicians could understand Darfur and why these fundamental generational forces, then we could make the world a better place. Unfortunately, the current political campaign proves that even this hope is completely in vain. =eod =// &&2 e041005 George Bush and John Kerry are both 'delusional optimists' over Iraq =data ww2010.weblog.y2004.e041005.head George Bush and John Kerry are both "delusional optimists" over Iraq =data ww2010.weblog.y2004.e041005.keys =data ww2010.weblog.y2004.e041005.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041005.date 5-Oct-04 =data ww2010.weblog.y2004.e041005.txt1 I just became aware of a column by George Will written prior to the last debate. =data ww2010.weblog.y2004.e041005.txt2 Although Will favors Bush, the first two paragraphs of <#stdurl www.washingtonpost.com/wp-dyn/articles/A60974-2004Sep29.html "his 9/29 column"#> contain a good analysis of what's wrong with both candidates' views of the Iraq situation.

Tonight's debate will be a duel between two delusional optimists. It pits a man who regards recent events in Iraq as "steady progress" against a man who, while accusing the president of unrealism, says that when he becomes president, "the world" -- a geographical expression, not a political entity -- will help heal Iraq. If ever an administration, in a reelection season properly dominated by a single issue of the administration's choosing, has earned an electoral rebuke, it is this one. And if ever there has been a challenger who, together with his party, seemed perfectly designed to dissuade the electorate from administering such a rebuke, it is this one. In other words, neither candidate knows what's going on, a claim that anyone would have difficulty finding a suitable refutation for. The debate is over now, and we now know that neither candidate said anything sensible about Iraq. But it's also worthwhile pointing out that neither of them said anything at all (let alone anything sensible) about the fact that <#inc ww2010.weblog.ref e041003b "the Israeli/Palestinian war has gotten considerably more violent."#> Hamas rocket attacks are continuing to kill Israelis, and the Israeli army is continuing to kill dozens of Palestinians. Israel has always been an important issue in American politics. So why has it utterly, totally, completely disappeared from the issues map? The answer is that <#inc ww2010.weblog.ref e041003c "the situation is so hopeless"#> that it's not worth even mentioning. Tonight there'll be a debate between vice presidential candidates. Let's see if the subject comes up there. =eod =// &&2 e041004b After a month, the French hostage crisis is becoming a major humiliation. =data ww2010.weblog.y2004.e041004b.head After a month, the French hostage crisis is becoming a major humiliation. =data ww2010.weblog.y2004.e041004b.keys =data ww2010.weblog.y2004.e041004b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041004b.date 4-Oct-04 =data ww2010.weblog.y2004.e041004b.txt1 If you enjoy schadenfreude, then you'll like this French farce, where French mediators tried to blame American forces for hostages' captivity. =data ww2010.weblog.y2004.e041004b.txt2 The French, who have never missed an occasion to gloat over American difficulties in Iraq, are now learning a little more about the real world. When the <#inc ww2010.weblog.ref e040902 "two French journalists were taken hostage in Iraq"#> in early September, it appeared that France would turn this painful incident into an international diplomatic coup.

French Muslims immediately united overwhelmingly behind a new law restricting obvious religious symbols, including Muslim headscarves, in public schools. The terrorists had initially demanded repeal of the law as a condition for release of the hostages.
International Muslim leaders condemned the terrorist act and demanded the release of the French hostages.

Today, the incident is even more painful, since the hostages' lives are still at stake, and because a month of failed diplomacy has been capped by a farcical scandal. Last week, <#stdurl "www.reuters.co.uk/newsPackageArticle.jhtml?type=worldNews&storyID=596066§ion=news" "a private negotiating team led by a French MP went to Iraq to free the hostages."#> (It sounds like something that Jesse Jackson or Jimmy Carter would do here in America.) On Friday, they called and said that they were "with the hostages," that they were negotiating, and that release was imminent. Then Europe was stunned when the MP called a press conference in Damascus and said that the negotiations had collapsed because a convoy carrying the hostages to freedom in Syria had come under attack from American armed forces. The only problem was that both French and US authorities said that there was no evidence to support the MP's claims. It was evidently a lie. This is big news in France because it smells of a cover-up. President Jacques Chirac is distancing himself from the entire affair, claiming he didn't even know it was going on, even though the MP is in Chirac's own party. However, <#stdurl www.lemonde.fr/web/article/0,1-0@2-3218,36-381594,0.html "the lead story in Monday's Le Monde"#> provides a detailed timeline of the entire effort, and purports to show that Chirac knew about the whole effort all along. As is well-known, France has been the leading opponent to America's involvement in Iraq, and has opposed every American initiative to gain help and cooperation from the United Nations or the European Union to provide security and help rebuilding in Iraq. The French evidently believed that by opposing America they would be immune to attacks by Islamic terrorists. Thus, this weekend's fiasco is a humiliation to the French not only because it highlights France's own exposure to Islamic terrorism, but also because of the heavy-handed attempt to blame America with the phony story. But it's even worse than that for the French. Last week, <#stdurl "www.voanews.com/article.cfm?objectID=47E996BA-BAB8-45CA-A2E6BF748023B8BD&title=Italian%20Aid%20Workers%20Arrive%20Home%20from%20Iraq" "two Italian aid workers were freed"#> after they had been captured in Iraq and held as hostages for three weeks. Italy, of course, is cooperating with America in Iraq, and so the freeing of the Italian hostages while the French hostages are still in captivity is a direct slap in the face to the French. What the French don't understand -- and indeed, what Americans and most other people don't understand -- is that hostage-taking has nothing to do with support for Iraq in most cases. Islamic terrorist groups are determined to use hostage-taking and other terrorist acts to spark a new "clash of civilizations" world war, and those attempts will continue until they succeed. =eod =// &&2 e041004 Janet Leigh dies. =data ww2010.weblog.y2004.e041004.head Janet Leigh dies. =data ww2010.weblog.y2004.e041004.keys =data ww2010.weblog.y2004.e041004.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041004.date 4-Oct-04 =data ww2010.weblog.y2004.e041004.txt1 Not really relevant to this web site, but I love this photo of her in Psycho. =data ww2010.weblog.y2004.e041004.txt2 <#inc ww2010.pic leigh.jpg center "" "Janet Leigh in Psycho"#> =eod =// &&2 e041003c After debate, there's still no end in sight in the Iraqi war =data ww2010.weblog.y2004.e041003c.head After debate, there's still no end in sight in the Iraqi war =data ww2010.weblog.y2004.e041003c.keys =data ww2010.weblog.y2004.e041003c.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041003c.date 3-Oct-04 =data ww2010.weblog.y2004.e041003c.txt1 The Sunday morning news shows have focused on the candidates' demeanors =data ww2010.weblog.y2004.e041003c.txt2 -- John Kerry looked confident, George Bush looked annoyed -- but also made it clear that there's no substantial difference between the candidates on Iraq. John Kerry followed the outline of his four-point plan that he described it in <#stdurl www.johnkerry.com/pressroom/speeches/spc_2004_0920.html "a September 20 speech:"#>

Obtain greater international support
"Get serious" about training Iraqi security forces, so that fewer American forces will be required.
Carry out a reconstruction plan that brings tangible benefits to the Iraqi people.
Guarantee that the promised Iraqi elections can be held next year, with U.N. participation.

If you read through the above list, you'll see that it doesn't differ with anything that Bush is doing or planning, and doesn't provide any path for exiting from Iraq. As <#hreftext ww2010.i.world040911 "we've said before,"#> terrorism around the world is increasing significantly. We can be absolutely certain that even if Bush or Kerry had a plan for exiting from Iraq, the terrorists would make absolutely certain that any such plan would not succeed. =eod =// &&2 e041003b Palestinians and Israelis becoming more violent =data ww2010.weblog.y2004.e041003b.head Palestinians and Israelis becoming more violent =data ww2010.weblog.y2004.e041003b.keys =data ww2010.weblog.y2004.e041003b.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041003b.date 3-Oct-04 =data ww2010.weblog.y2004.e041003b.txt1 Dozens of Palestinians were killed in a new Israeli offensive, as a new poll of Palestinians shows that they approve of increasing violence against Israel. =data ww2010.weblog.y2004.e041003b.txt2 According to <#stdurl www.pcpsr.org/survey/polls/2004/p13epressrelease.html "the poll,"#> conducted by Dr. Khalil Shikaki's <#stdurl www.pcpsr.org "Palestinian Center for Policy and Survey Research,"#> found that Palestinians overwhelmingly support the following actions by Palestinians:

Firing of rockets into Israeli settlements and into Israel itself
"Liquidation" of collaborators - Palestinians who spy for Israel.

On the Israeli side, Prime Minister Ariel Sharon said <#stdurl "www.reuters.com/newsArticle.jhtml?type=topNews&storyID=6396299" "Israel should expand its military offensive"#> in the Gaza strip, in order to eliminate the launching of missles into Israel. The current offensive, which has killed over 60 Palestinians in the last five days, is expected to continue for weeks. According to an <#stdurl www.haaretz.com/hasen/spages/484032.html "Israeli analysis,"#> the Palestinians are becoming increasingly audacious, and the Palestinian government refuses to address the problem. <#inc ww2010.pic mideast2.gif right "" "Mideast, showing Israel/Palestine, Muslim countries, and Orthodox Christian countries"#> If you start with those facts, and with the adjoining map which shows the Palestine region as a tiny red dot in a huge sea of Muslim countries, then you don't have to be an expert in Generational Dynamics to see that the Palestine region is heading toward all-out war, but the question is: What is the "tipping point"? When does this continuing form of low-level violence spiral out of control into all-out genocidal war, where Israelis and Palestinians try to destroy each other completely? In <#hreftext ww2010.book "my book,"#> I compared the situation in the Palestine region to what happened leading up the extremely violent war in the late 1940s. Fighting between Jews and Arabs began with rock throwing in 1936, became more violent after World War II ended, and turned into a genocidal crisis war in 1948, when the UN partitioned Palestine, creating the state of Israel. We've seen the same pattern in the last few years. Fighting began in 1989 with the first Intifada, and became more violent in 1999 when the second Intifada began. Shikaki has been polling ever since the Intifada began in 1999, and each poll sows that the Palestinians are more and more supportive of violence, not only against the Israeli military, but also against Israeli families and children. Similarly, Israel has been willing to tolerate more violence against Palestinians, first against Hamas leaders, and later against residential neighborhoods where missiles and other weapons might be stored. What will be the trigger for all-out war this time? <#hreftext ww2010.i.mideast040719 "I've speculated that it will be the departure of Yasser Arafat"#> and what Shikaki has called the Palestinian Authority "old guard." As long as Yasser Arafat's generation is in control, and prevents the "young guard" from taking power, all-out genocidal war is unlikely. =eod =// &&2 e041003 World preparing for deadly bird flu pandemic =data ww2010.weblog.y2004.e041003.head US and world preparing for a deadly "bird flu" pandemic, including forced quarantines and isolation =data ww2010.weblog.y2004.e041003.keys =data ww2010.weblog.y2004.e041003.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041003.date 3-Oct-04 =data ww2010.weblog.y2004.e041003.txt1 The UN World Health Organization (WHO) is downplaying the fear =data ww2010.weblog.y2004.e041003.txt2 of a widespread "bird flu" pandemic, after the flu was apparently transmitted from one person to another in several cases in Thailand. <#stdurl "www.canada.com/health/story.html?id=1e7fe866-6c17-4175-acff-3a392344aa9e" "As far as is known,"#> all such human to human transmissions so far have been contained. The bird flu is a new, deadlier form of influenza. If there is a widespread global pandemic of the new flu strain, then tens or hundreds of millions of deaths are expected. This is not farfetched. 20 million people died in the Spanish flu epidemic of 1918-1920. Such a worldwide flu epidemic has never occurred since then, but there is absolutely no reason to believe it couldn't, and many medical experts believe that it's overdue. The number of deaths might be much higher, since the earth's population is much greater. If you want to know how serious the problem is being treated, consider this: 100 million (100,000,000) birds have been culled (killed) this year in Asia as a precaution, as 20 people have died from the bird flu, apparently after they caught it directly from birds. These figures appeared in <#stdurl "www.un.org/apps/news/story.asp?NewsID=11741&Cr=&Cr1=" "a WHO press release issued a month ago"#> calling for studies on bird flu to assess its potential for becoming a global pandemic. The American government is taking the situation very seriously. The Dept. of Health and Human Services (HHS) has issued a <#stdurl www.hhs.gov/nvpo/pandemicplan "draft Pandemic Influenza Response and Preparedness Plan."#> According to the <#stdurl www.hhs.gov/nvpo/pandemicplan/exec_summ.html "Executive Summary:"#>

Implementing infection control strategies to decrease the global and community spread of infection, while not changing the overall magnitude of a pandemic, may reduce the number of people infected early in the course of the outbreak, before vaccines are available for prevention. Travel advisories and precautions, screening persons arriving from affected areas, closing schools and restricting public gatherings, and quarantine of exposed persons may be important strategies for reducing transmission. The application of these interventions will be guided by the evolving epidemiologic pattern of the pandemic. So far it's only a draft plan, so if these things interest you, consider commenting on it at <#stdurl www.hhs.gov/nvpo/pandemicplan#>. =eod =// &&2 e041001 New Chinese military chief ratchets up talk of war. =data ww2010.weblog.y2004.e041001.head New Chinese military chief ratchets up talk of war. =data ww2010.weblog.y2004.e041001.keys =data ww2010.weblog.y2004.e041001.loc ww2010.weblog.log0410 =data ww2010.weblog.y2004.e041001.date 1-Oct-04 =data ww2010.weblog.y2004.e041001.txt1 When Hu Jintao (age 61) replaced Jiang Zemin (age 78) as Chairman of China's Central Military Commission on Sept. 19, =data ww2010.weblog.y2004.e041001.txt2 many observers hoped that that relations with Taiwan would thaw. <#stdurl news.bbc.co.uk/2/hi/asia-pacific/3671106.stm ""[T]here will be a more flexible approach to Taiwan,""#> according to one Taiwanese military analyst, adding that "Hu Jintao is a much more pragmatic person." However, just the opposite is happening. Hu <#stdurl www.guardian.co.uk/china/story/0,7369,1317196,00.html "has now told the People's Liberation Army to prepare for war."#> He did this in response to recent remarks by Taiwanese officials. First, Taiwan's president, Chen Sui-bian, warned that China is building up an arsenal of missiles pointed at the island, and that 800 of them would be in place by 2006. Then the Taiwanese prime minister, Yu Shyi-kun, amplified Chen's remarks by calling for the development of an offensive missile system. "You fire 100 missiles at me, I fire 50 at you. You hit Taipei and Kaohsiung. I at least hit Shanghai. If we have such counter-strike capability today, Taiwan is safe." Why would he ever think that would make Taiwan safe? Anyway, that infuriated the Chinese, leading to Hu's remarks about preparing for war. Why would anyone have expected Hu Jintao to be a much more pragmatic person? For some reason, people seem to automatically believe that younger people are more pragmatic and flexible than younger people, despite the fact that it's the angry young men who start most of the wars. From the point of view of Generational Dynamics, the difference between Hu and his predecessor is very clear. Jiam Zemin, at age 78, grew up during the genocidal civil war between armies led by Mao Zedong and Chiang Kai-shek that ended in 1949. People who grow up during crisis wars suffer a kind of generational child abuse, and the people in the entire generation grow up to be indecisive, risk-averse leaders -- more flexible and pragmatic in the sense that they're much more willing to compromise to avoid another war. Hu Jintao, at age 61, grew up after the civil war. People in these post-war generations (like America's Baby Boomers) grow up to be arrogant and risk-seeking, much more likely to risk war. Thus it's not surprising to see that Hu is preparing for war, while Jiang might have been more circumspect. On the Taiwanese side of of the straits, <#hreftext ww2010.i.taiwan040706 "President Chen is in the rebellious younger generation"#> in Taiwan's 1990 Wild Lily Rebellion, a student separatist movement that began as a reaction to the 1989 Tiananmen Square crackdown in China. Chen has promised to amend the Taiwanese constitution by 2008 to make Taiwan more independent. Jiang has already said that this would lead to war, and Hu is obviously following the same policy with even more vigor. =eod =// =data ww2010.weblog.e040930b.head =// Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz =// =data ww2010.weblog.e040930b.loc =// ww2010.weblog.log0409 =// =data ww2010.weblog.e040930b.date =// 30-Sep-04 =// =data ww2010.weblog.e040930b.txt1 =// The Presidential debate was very boring. Both sides stuck to =// their scripts. =// =data ww2010.weblog.e040930b.txt2 =// They even complimented each others' daughters. =// On balance, I think Kerry did a tiny bit better. =// Let's see what the polls say over the weekend. =// =eod =// &&2 e040930 Oil prices fall, since inventories are up after all =data ww2010.weblog.y2004.e040930.head Oil prices fall, since inventories are up after all =data ww2010.weblog.y2004.e040930.keys =data ww2010.weblog.y2004.e040930.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040930.date 30-Sep-04 =data ww2010.weblog.y2004.e040930.txt1 After reading analyst reports that claimed that US oil inventories are at rock bottom, =data ww2010.weblog.y2004.e040930.txt2 which <#inc ww2010.weblog.ref e040929b "I wrote about yesterday,"#> quoting <#stdurl "quote.bloomberg.com/apps/news?pid=10000006&sid=aFZ3vVhpUtSI&refer=home" "a Bloomberg news report,"#> one of several places I'd seen the claim, that said that US inventories are at historic lows. However, a report published on Wednesday by the US Department of Energy says that crude oil inventories are unexpectedly high. According to the <#stdurl "quote.bloomberg.com/apps/news?pid=10000103&sid=a9JnQ1coRIK4&refer=news_index" "new Bloomberg news report,"#> "Supplies gained last week for the first time in nine weeks. Twelve of 13 analysts surveyed by Bloomberg expected a decline." In addition, the threat of a new Nigerian civil war seems to have passed, and so oil prices fell on Wednesday. More to come. Update: The US Department of Energy report referenced above can be found at <#stdurl tonto.eia.doe.gov/oog/info/twip/twiparch/040929/twipprint.html"#> =eod =// &&2 e040929e IBM claims supercomputer title from NEC =data ww2010.weblog.y2004.e040929e.head IBM claims supercomputer title from NEC =data ww2010.weblog.y2004.e040929e.keys =data ww2010.weblog.y2004.e040929e.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040929e.date 29-Sep-04 =data ww2010.weblog.y2004.e040929e.txt1 In the worldwide race to build the next generation of the world's faster computers, the Japanese have been leading =data ww2010.weblog.y2004.e040929e.txt2 the world since 2002, when NEC announced the novel <#stdurl http://www.es.jamstec.go.jp/ "Earth Simulator supercomputer"#>, running at 35.8 megaflops (35.8 trillion calculations per second), more than twice as powerful as anything that any American firm had to offer. Today <#stdurl http://www.iht.com/articles/541094.html "IBM announced"#> that <#stdurl http://www.research.ibm.com/bluegene/ "Blue Gene/L supercomputer"#> can achieve a sustained rate of 36.01 megaflops. IBM's supercomputer is not yet officially number one, however, since the performance results have to be confirmed by independent researchers. The official list of top supercomputers can be found on the web site <#stdurl www.top500.org#>. The list will next be updated in November. <#inc ww2010.pic irobot1.jpg right "" "Robot from I, Robot"#> Although the development of a new supercomputer doesn't seem particularly relevant to most people, it actually affects everyone on earth in a very fundamental way. As <#hreftext ww2010.i.robot040709 "we discussed in conjunction with the release of the movie I, Robot,"#> it will be only a few years from now that supercomputers will be more intelligent than human beings. By the 2020s, autonomous super-intelligent computers will be performing varied tasks, everything from repairing the plumbing to being a 24-hour nursemaid, to being an intelligent soldier. By 2030 or so, the "Singularity" will have occurred, and super-intelligent computers will be able to research and manufacture new versions of themselves, raising doubts about the continuing role of the human race. As today's announcement by IBM shows, there is a worldwide race to produce this new technology. Today, America and Japan are the leaders, but the UK, China and India are also in the race. By the 2010s, there will be additional competitors. =eod =// &&2 e040929d Kremlin negotiator says he has evidence of planned 'revenge attacks' in Caucasus =data ww2010.weblog.y2004.e040929d.head Kremlin negotiator says he has evidence of planned "revenge attacks" in Caucasus =data ww2010.weblog.y2004.e040929d.keys =data ww2010.weblog.y2004.e040929d.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040929d.date 29-Sep-04 =data ww2010.weblog.y2004.e040929d.txt1 "The situation is balanced between war and peace," =data ww2010.weblog.y2004.e040929d.txt2 says Rusian Aushev, former President of Ingushetia. <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus region - including North Ossetia and Chechnya"#> "If Ingushetia gets drawn into a conflict with Ossetia, it will be a mess," he said, <#stdurl www.iht.com/articles/541022.html "according to news stories."#> "Look at the map of the region. There is Georgia, there is South Ossetia, there are Abkhazia, Kabardino-Balkaria and Dagestan. It's a big pot where everyone will seek to solve his own problems. So, this is a very dangerous scenario. Those who are doing this either do not understand what they are doing or are doing this on purpose to set the south of Russia, and maybe the North Caucasus and the entire Caucasus, on fire." One of the observations of Generational Dynamics is that war is like sex in that it's a basic human need. Today, Islamic terrorists throughout Asia and the Mideast are actively working to spark a war between the Muslim and Western civilizations. As <#inc ww2010.weblog.ref e040907 "we've said,"#> the Caucusus is the most dangerous region in the world. This region has been the site of numerous major ethnic and religious wars for centuries. Generational Dynamics predicts another major war is to come, and we can see how the that war seems to approach closer every day. =eod =// &&2 e040929c The debate dialectic =data ww2010.weblog.y2004.e040929c.head The debate dialectic =data ww2010.weblog.y2004.e040929c.keys =data ww2010.weblog.y2004.e040929c.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040929c.date 29-Sep-04 =data ww2010.weblog.y2004.e040929c.txt1 Both Bush and Kerry will be lying on Thursday evening, but so what? They're politicians. =data ww2010.weblog.y2004.e040929c.txt2 Iraq will be a big subject on the Thursday evening debates. We invaded Iraq because we were convinced that there were weapons of mass destruction in Iraq. Most of the rest of the world was convinced of the same thing. Generational Dynamics is based on the very real observation that nobody knows much of anything that happened before they were born, with the result that societies and nations repeat the same mistakes cyclically. But if we're to judge from the Iraq situation, people's memories are even worse than that. Because no one remembers that two years ago we were all convinced, beyond a shadow of a doubt, that Saddam had chemical and biological weapons in his possession. Now that it turns out that there aren't any -- and we still don't know where they all went to -- the politicians have to scramble. Bush will say that weapons of mass destruction weren't the main reason, which of course is a lie. Kerry will say that he would have pursued the war on Iraq more cleverly than Bush, which is a lie. Bush will say that bringing democracy to Iraq will bring democracy to the entire Mideast, which is a lie. Kerry will say he'll do things differently in Iraq, which is a lie. Hopefully all the bickering over the Vietnam era is over, but there is one outstanding issue: John Kerry must repudiate his 1971 remarks that American soldiers committed atrocities and war crimes on a day to day basis in Vietnam, with the full awareness of officers at all levels of command. If he's elected President without repudiating those remarks, he's going to have a big problem being President. As for what's going to happen in Iraq, it makes no difference who's elected in November. The future of Iraq and the entire Mideast has been "baked into the cake" for decades. It only remains for us to play out our moves and see how it turns out. =eod =// &&2 e040929b Oil drops just barely below $50 - closing at $49.75 yesterday. =data ww2010.weblog.y2004.e040929b.head Oil drops just barely below $50 - closing at $49.75 yesterday. =data ww2010.weblog.y2004.e040929b.keys =data ww2010.weblog.y2004.e040929b.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040929b.date 29-Sep-04 =data ww2010.weblog.y2004.e040929b.txt1 But surprise! US oil inventories are low after all. =data ww2010.weblog.y2004.e040929b.txt2 For several months, oil industry analysts have been blaming the increasing price of oil <#inc ww2010.weblog.ref e040820 "on speculators who were building up large inventories."#> Well, now <#stdurl "quote.bloomberg.com/apps/news?pid=10000006&sid=aFZ3vVhpUtSI&refer=home" "the news reports are"#> that inventories, in the US at least, are at historic lows. One analyst is quoted as saying: "Prices will only drop to the levels of the 1990s if there's a total collapse of demand or if the market is flooded with supplies. I'm sure demand will go down with the high prices, but I don't see the market being flooded." Meanwhile, Saudi Arabia is promising to increase its output of oil, to try to bring the price down. This creates a very interesting situation, because <#hreftext ww2010.i.oilpeak040803 "some experts are claiming that oil production has reached a peak."#> <#inc ww2010.pic wsj0921b.gif right "" "Global oil production, as predicted by the peak-oil movement. (Source: WSJ)"#> Just last week, the Wall Street Journal ran <#stdurl online.wsj.com/article/0,,SB109571753759322877,00.html "a front page story on the peak-oil movement,"#> and Colin Campbell, one of its gurus. The adjoining graph shows that Campbell and others are predicting that oil production is leveling off, and can no longer rise to reach further increasing demands. Saudi Arabia's promise to increase output puts the peak-oil movement into greater focus. Everyone's walking on eggshells right now, because no one wants to be blamed for trying to affect the US Presidential election. After November, we may begin to get some firm answers. =eod =// &&2 e040929 Rioting and looting in Haiti following hurricanes may destabilize =data ww2010.weblog.y2004.e040929.head Rioting and looting in Haiti following hurricanes may destabilize country =data ww2010.weblog.y2004.e040929.keys =data ww2010.weblog.y2004.e040929.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040929.date 29-Sep-04 =data ww2010.weblog.y2004.e040929.txt1 Haiti is almost a textbook case of impending civil war caused by poverty amidst a "market-dominant minority." =data ww2010.weblog.y2004.e040929.txt2 The French-speaking light-skinned minority controls most of the economy, while the vastly greater number of Creole-speaking blacks live in poverty. It all started with the best of intentions in the 1700s, when Haiti was an extremely wealthy French colony, thanks to crops sugar, rum, coffee and cotton -- and thanks to the efforts of 500,000 slaves that the French had imported from Africa. As time went on, Haiti became independent, international markets changed, and population grew. Since <#hreftext ww2010.i.food040628 "population always grows faster than the food supply,"#> Haiti has become increasingly poor. Today, Haiti is literally the poorest country in the Western hemisphere. The average Haitian makes $1.00 a day. As we described <#hreftext ww2010.i.haiti040304 "when we wrote about Haiti last Spring,"#> Haiti's last generational crisis civil war followed the American occupation that began in 1915. It didn't end until 1934. So it's been long enough. Why isn't Haiti breaking out into another into total anarchy? It's being headed off by a large United Nations led peacekeeping force, and a great deal of foreign aid. I was startled <#stdurl "abcnews.go.com/wire/World/ap20040927_1757.html" "to read a news story"#> that says that even China is contributing. Why is China helping out in Haiti? Doesn't China have enough poverty in its own country? Isn't this the country that massacres and jails people for meditating and exercising to Richard Simmons tapes -- wait -- I mean, meditating and exercising as spiritual followers of the Falun Gong? Well, maybe China is sucking up to the UN because <#inc ww2010.weblog.ref e040823 "Taiwan is trying to get its own seat in the UN,"#> something that China bitterly opposes. Meanwhile, there are similar pockets of poverty in Asia and around the world. When studying Generational Dynamics and the resulting patterns of genocidal wars, one learns to put one's feelings aside, and treat human history as a kind of scientific experiment, and in that sense Haiti is an interesting test. Haiti's <#stdurl www.cia.gov/cia/publications/factbook/geos/ha.html "population is growing at the rate of 1.71%,"#> almost twice as fast as the food supply grows. That means that things are getting worse every year, every month, every day, and even international help can't help forever. Last Spring, when President Aristide was forced out, Haiti was close to anarchy, and was saved by international aid. Today, <#stdurl "www.thestar.com/NASApp/cs/ContentServer?pagename=thestar/Layout/Article_Type1&c=Article&cid=1096409410676&call_pageid=968332188492&col=968705899037" "armed gangs are shooting at UN aid workers"#> (which is what caused the UN to leave Iraq). The hurricanes have brough Haiti close to anarchy again. We'll put our feelings aside and watch to see whether the UN peacekeeping forces can continue to work their magic. =eod =// &&2 e040928b Nigeria civil war threat pushes oil prices past $50 per barrel =data ww2010.weblog.y2004.e040928b.head Nigeria civil war threat pushes oil prices past $50 per barrel =data ww2010.weblog.y2004.e040928b.keys =data ww2010.weblog.y2004.e040928b.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040928b.date 28-Sep-04 =data ww2010.weblog.y2004.e040928b.txt1 For months, analysts have been predicting that oil prices would start falling after Labor Day, =data ww2010.weblog.y2004.e040928b.txt2 but late yesterday evening <#stdurl "edition.cnn.com/2004/BUSINESS/09/27/oil.price.50/" "oil prices passed $50 per barrel in after hours trading."#> The details of the threatened Nigerian civil war are not yet entirely clear, but Nigeria has a long history of wars between the Muslims in the North and the Christians in the South. We've previous discussed the question of <#hreftext ww2010.i.africa040822 "why these things always seem to happen in Africa (its geography)"#> in connection with the Darfur genocide, which is still in progress. Analysts have been predicting that oil prices would fall into the $30-40 range, and <#inc ww2010.weblog.ref e040820 "Bear Stearns even predicted a fall to $25 per barrel."#> Events have continued to conspire to keep international oil prices up. Demand from India and China stays high; the Yukos crisis in Russia continues; Iraq continues to have difficulty exporting oil; and even the Florida hurricane's have had a local effect, at least on American gas prices. Why can't oil prices fall again into the $30-40 per barrel range? Frankly, I'm surprised as well, but here's my speculation: I believe that the Chinese is more out of control than people are saying, and that China is importing even more oil than the Chinese themselves know. This is an educated guess, of course, but from the point of view of Generational Dynamics, China is in a "generational unraveling" period, and the Beijing government really no longer has any real control over most of the economy. We'll see how this plays out. We'll have more analysis on the civil war in Nigeria, the price of oil, and the Chinese economy as further facts become known. =eod =// &&2 e040928 Gender gap replaced by a marriage gap or mother gap =data ww2010.weblog.y2004.e040928.head Gender gap replaced by a marriage gap or mother gap =data ww2010.weblog.y2004.e040928.keys =data ww2010.weblog.y2004.e040928.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040928.date 28-Sep-04 =data ww2010.weblog.y2004.e040928.txt1 The new phrase replacing "soccer moms" is "security moms," worried about their family's safety from terrorism. =data ww2010.weblog.y2004.e040928.txt2 A few days ago, I <#inc ww2010.weblog.ref e040924 "used the Janet Jackson fine"#> to show how public attitudes are changing on gender issues, that the public is demanding that women become more modest again, and that women are depending on men more than they did ten years ago. In particular, the gender gap is narrowing, and women are expected to vote more like men in the next election, a change that appears to favor Bush over Kerry. Recent polling has shown that the issue is more complicated. It turns out that it's young mothers, in particular, who are more likely to vote for Bush than they used to. Older women and single women are voting pretty much as before. This is being called <#stdurl "www.usatoday.com/news/politicselections/nation/president/2004-09-24-female-voters_x.htm" "the marriage gap,"#> because the new results are rather startling:

Percentage of voters favoring each candidate
	Bush	Kerry
Men Voters	54%	41%
Women Voters	45%	49%
Single Voters	30%	65%
Married Voters	57%	38%

As you can see, there's still a gender gap, but the marriage gap is much larger. The marriage gap is being attributed mainly to "soccer moms," who formerly favored the Democrats on issues such as health care, are now turning into "security moms," who are favoring Bush because of his fight in the war on terror. This is an interesting development from the point of view of Generational Dynamics. As far as I know, the historians who have studied American generational cycles (mainly William Strauss and Neil Howe in their book, <#stdurl www.amazon.com/exec/obidos/ASIN/0688119123 Generations)#> have identified gender-based cycles, but not cycles based on marital status. The "marriage gap" adds some depth to the gender cycle issue. It's worth pointing out again that it's very hard to beat an incumbent President during a generational crisis period because people don't like to change leaders during a crisis. That's why Franklin Roosevelt was elected to four consecutive terms during the last crisis period - the 1930s and 1940s. =eod =// &&2 e040927 Israel joins America and Russia in striking at terrorists wherever they are =data ww2010.weblog.y2004.e040927.head Israel joins America and Russia in striking at terrorists wherever they are =data ww2010.weblog.y2004.e040927.keys russia, israel, syria =data ww2010.weblog.y2004.e040927.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040927.date 27-Sep-04 =data ww2010.weblog.y2004.e040927.txt1 Israeli agents are believed to be behind the assassination of a Hamas leader in Damascus, Syria. =data ww2010.weblog.y2004.e040927.txt2 Israel has not claimed responsibility for the car booby-trap bombing of Iz a-Din al Sheikh Khalil, but <#stdurl www.haaretz.com/hasen/spages/482037.html "Israeli is widely believed to be behind the killing."#> If true, this marks a major change in Israeli policy -- a willingness to strike terrorists on Syrian soil. From the point of view of Syria, this is a major provocation, and Syria is sure to be considering revenge in some form. Israel has <#hreftext ww2010.i.hamas040321 "assassinated two other top Hamas leaders"#> in Gaza this year, and has promised to assassinate others, in retaliation for terrorist attacks against Israel. But until now, Israel has not crossed the line to perform assassinations in other countries. Israel is thus expressing its willingness to strike at terrorists wherever they are. This is what Russia's Vladimir Putin announced as Russia's new policy, following the Beslan hostage taking that resulted in the deaths of hundreds of children. Israel and Russia, who are <#inc ww2010.weblog.ref e040922 "cooperating with each other against terrorism,"#> have thus also joined with one another in the policy of striking at terrorists anywhere. This, of course, is also America's policy, and Britain's, ever since 9/11. So now we have four countries - America, Britain, Israel and Russia - who are following a policy of striking terrorists in foreign countries. This is another example of countries picking sides, as we approach the "clash of civilizations" world war. =eod =// e040926 Debate over long-term interest rates =// &&2 e040926 Debate over long-term interest rates =data ww2010.weblog.y2004.e040926.head Debate over long-term interest rates =data ww2010.weblog.y2004.e040926.keys =data ww2010.weblog.y2004.e040926.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040926.date 26-Sep-04 =data ww2010.weblog.y2004.e040926.txt1 Analysts are clearly puzzled over why long-term interest rates have been falling, while the Fed is pushing up short-term interest rates. =data ww2010.weblog.y2004.e040926.txt2 This phenomenon, known as "flattening of the yield curve," is a sign of trouble if it continues for long, <#hreftext ww2010.i.fed040921 "as we've discussed."#> Australia is having a national election on October 9, and Prime Minister John Howard, who is seeking a fourth term, <#stdurl "quote.bloomberg.com/apps/news?pid=10000081&sid=aGReQ7VI3vLA&refer=australia" "is making interest rates an election issue,"#> by pointing out that short-term interest rates are 5.25% now, and were 7.5% when the Labor government, his opponents, lost power in 1996. "Interest rates will always be higher under a Labor government than a coalition government," Howard said. (I just love it when politicians brag about things they have no control over and probably don't even understand; but if they didn't talk about things like that, they probably wouldn't have anything to talk about.) However, what analysts in Australia <#stdurl "www.theaustralian.news.com.au/common/story_page/0,5744,10889315%255E462,00.html" "are puzzled about"#> is the same thing that's puzzling American analysts: How can long-term rates be falling, while short term rates are rising? The Australian central bank has been more aggressive than the American Fed in raising short-term interest rates, which is why the Australian short-term rate is 5.25% (compared to 1.75% in America). But the 10-year bond rate is down to 5.33% in Australia (compared to 4% in America). What these extremely low long-term rates indicate is that the market expects the economy to grow very slowly - around 2% - in the next decade, both here and in Australia. It's a matter of some debate whether the market is right or wrong. Here in America, the question was debated in <#stdurl online.wsj.com/article/0,,SB109598124180526723,00.html "an op-ed in Friday's Wall Street Journal,"#> in which financial analyst Brian S. Wesbury considers several different theories to explain the phenomenon. He considers several different theories: the economy is growing without inflation; oil prices are slowing the economy; dollars held by Japan, China and other countries are finding their way back into the American economy. In the end, he finally concludes that nothing is wrong: "Many of the theories used to explain the recent decline in long-term bond yields break down under close scrutiny. The best explanation continues to be excessively accommodative Fed policy. ... It is this policy stance, not some imminent economic collapse that is holding down long-rates. As we saw in 2003 and again earlier this year, no matter how many different theories are bandied about, once bond yields shake loose of the Fed, they rise sharply. There is no reason to suspect that this time will be any different." This is the standard view. He compares today's situation to recent history (2003 and 2004), but overlooks the fact that public debt has become astronomically high in the last year, and he overlooks the fact that stocks are selling at extremely high valuations (measured by price/earnings ratios). To say that "There is no reason to suspect that this time will be any different" is silly. There are plenty of reasons to suspect that this time will be different, and analysts have a responsibility to analyze those reasons, not just dismiss them out of hand. Wesbury's column illustrates the problem with mainstream analysts. Wesbury considers only a few unsound reasons to explain the current situation, and ignore the really huge issues (public debt and stock valuations). These are the issues that explain the current situation: Stocks are overvalued by about 100%, but near-zero Fed financial rates are encouraging people to borrow money to purchase them, keeping their prices up. Many companies, burdened by huge corporate bureaucracies, are preserving cash by cutting expenses, and employees. Unemployed people and near bankrupt businesses have mortgaged or sold long-term assets and borrowed short-term money to pay debts. Now that all the homes and other long-term assets have been mortgaged, the demand for long-term debt has decreased, lowering long-term yields, even while short-term yields are increasing (thanks to the Fed). This string is close to running out. =eod =// &&2 e040924 CBS fined $550,000 because Janet Jackson bared her breast on MTV show =data ww2010.weblog.y2004.e040924.head CBS fined $550,000 because Janet Jackson bared her breast on MTV show =data ww2010.weblog.y2004.e040924.keys =data ww2010.weblog.y2004.e040924.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040924.date 24-Sep-04 =data ww2010.weblog.y2004.e040924.txt1 Women love "manly men"; the gender gap is narrowing. The sex revolution is over. =data ww2010.weblog.y2004.e040924.txt2 <#inc ww2010.pic ph0922.jpg right "" "Janet Jackson's hand covers her bare breast as Justin Timberlake looks on during the Superbowl halftime show on CBS"#> The <#stdurl "www.reuters.com/newsArticle.jhtml?type=industryNews&storyID=6309372" "FCC's $550,000 fine"#> was historically high, reflecting the public's massive change in attitudes in recent years in matters of public sexuality. The country is becoming increasingly conservative on sexual matters. While the women's lib and feminist movements of the 70s, 80s and 90s have emphasized the similarity of men and women, today we're seeing men and women emphasize their gender-specific roles. The sexual revolution has ended. The change began to show shortly after 9/11 -- <#stdurl www.foxnews.com/story/0,2933,38109,00.html "several news stories"#> indicated that, all of a sudden, "women love manly men." Stories during the 1980s and 1990s tended to indicate women's attraction to "sensitive" men. I noticed it myself when firemen and policemen were being praised as heroes for their willingness to run back into burning buildings to save people. It was the first time I could remember since the 1950s when men as a group were being called "heroes." A related sign is that the "gender gap" is narrowing, indicating that the gender wars of the 1990s are ending. <#stdurl "www.nytimes.com/2004/09/22/politics/campaign/22women.html?ei=5090&en=38857fd7e8c3f604&ex=1253592000&partner=rssuserland&pagewanted=all" "Recent polls"#> have shown that the women and men are voting more and more similarly. Generational Dynamics predicts that this trend will continue for the next two or three decades. I've written about the end of the sexual revolution on <#hreftext ww2010.i.sexrev040227 one#> or <#inc ww2010.weblog.ref e040801 two#> occasions on the past. One reader criticized my statement, and wrote this to me:

In your posting on <#inc ww2010.weblog.ref e040801 "the Vatican's document on feminism"#> you state that "the "sexual revolution" was being reversed" and that this trend" would continue for several decades". Can you give me an example of what you see happening? Do you mean it will be totally reversed to say, 1964? Will there be no (or very few) women in politics? the media? the board room? academia? the military? road crews? construction? I see a generation of astute, ambitious young women before me, who are, in many cases, far superior to their male counterparts (which is a good thing in my opinion - I also don't feel that "respect for their womenly contributions" alone will satisfy them) I'm interested in some speculation of the possibilities you see. The answer is yes, women will again become very much like they were in the 1950s -- staying closer to home, reluctant to take jobs outside the home, dependent on their husbands to support this. This is a cyclic thing that all societies go through at all times in history. The "Roaring 1920s" was a time of great sexual freedom, just like the 1990s, for example. An interesting read is Naomi Wolf's 1993 book, Fire with Fire, The New Female Power and How It Will Change the 21st Century. (You may recall that in 2000, Wolf was appointed as an advisor to Al Gore. Her job was to help Gore learn to act and dress as more of an "alpha male.") She details how the poorer women filled factory jobs in the earlier 1800s, while the wealthier women moved "into lives of enforced domesticity, sexual repression, economic dependency, and unpaid `good works.'" It's the first group that continually expanded women's rights through war and peace. And the reader is right -- these changes will not backtrack during the next decades. But there's another aspect. People don't understand the 1950s. It's true that women stayed at home and depended on their husbands, but that wasn't caused by the feminists' evil patriarchy. The mothers of the 1950s were not the same as the mothers of today. The mothers of the 1950s had lived through the 1940s, and seen their brothers, fathers and friends killed overseas. Even people who've seen the movie Saving Private Ryan see the D-Day invasion as something like a live cartoon, but these 1950s mothers had seen the men they love storm the Normandy beach and get shot down like fish in a barrel. If we were traumatized by 9/11, imagine how they must have felt when all those men, the men they loved, were massacred, almost by their own choice. So in the 1950s, these mothers wanted to stay home and be close to their children. Thus, women in the 1950s focused much more on home life than women today. It's what 1950s women wanted for themselves and their daughters. Today, after forty years of women's lib and feminism, women are becoming increasingly anxious and concerned about terrorism, and this is causing them once again to assume feminine roles more and more, and to depend on men more and more. It's not a massive overnight change; instead, it's a gradual change that will take place over a period of years. People in older generations today are confused by this, but the point of the generational paradigm is that what's important to a boy (or a girl) varies in a cyclic manner. During an awakening period like the 1960s, society stresses individual rights, and equality of men and women becomes the political goal. In a crisis period like today, individual rights are sacrificed to the needs of the nation as a whole. Today's young men and women in the Millennial generation have noticed how anxious and frightened their parents are about terrorism, and they're concerned about their parents' welfare. Not only that, they've noticed that young men who serve as policemen, firemen and soldiers -- who are on the front lines of the war against terror -- are being called heroes. This is a vast change from the 1990s when, boys were expected to act like girls. Today's boys want to be those heroes, and today's girls want to be those heroes' girlfriends - they want to love "manly men." That's a major reason why there's no antiwar movement in today's colleges. If you want to understand young people today, you have to reverse everything you concluded during the 1960s. The public got angry at Janet Jackson's breast bearing because women are expected to be increasingly modest today. Women are voting more like men because women trust men more than they used to, and because they have the same concerns that men have. As we approach the "war of civilizations" world war, we'll see more and more examples of how the sexual revolution is over -- at least for a decade or two. =eod =// &&2 e040923 The 'Index of Leading Indicators' falls for third month in a row =data ww2010.weblog.y2004.e040923.head The "Index of Leading Indicators" falls for third month in a row. =data ww2010.weblog.y2004.e040923.keys =data ww2010.weblog.y2004.e040923.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040923.date 23-Sep-04 =data ww2010.weblog.y2004.e040923.txt1 One economic indicator after another is surprising analysts: =data ww2010.weblog.y2004.e040923.txt2

When the recession ended early in 2003, analysts predicted that job creation would increase rapidly. Instead, the economy kept losing jobs throughout 2003. Jobs only began increasing anemically this year, still well below analysts' projections.
The Fed has been raising short-term interest rates in the expectation of surging inflation, but inflation has been almost nonexistent. Significantly, <#hreftext ww2010.i.fed040921 "long-term rates have been falling"#> at the same time.

Now we see that the <#stdurl www.conference-board.org "Conference Board's"#> index of leading indicators <#stdurl "www.reuters.com/financeNewsArticle.jhtml?type=businessNews&storyID=6319934" "fell in August for the third month in a row."#> This contrasts to the statement made by the Fed (specifically, the Federal Open Market Committee) on Tuesday when <#stdurl "federalreserve.gov/boarddocs/press/monetary/2004/20040921/default.htm" "it raised interest rates by 0.25% to 1.75%."#> According to the statement, "output growth appears to have regained some traction," which contradicts the actual results we've been seeing. If we look at the leading indicators since the beginning of the year, we get the following table:


                 Index of Leading Indicators for each month
                                    2004                
                     Jan. Feb. Mar. Apr.  May June July  Aug
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
    Leading Index    +0.5 +0.3 +0.3 +0.1 +0.5 -0.2 -0.3 -0.3
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----

As you can see, the leading indicators have been falling significantly in the last three months. This is the same three month period when the Fed has been raising interest rates, and it's also the same three month period when inflation rates have been so unexpectedly low as to indicate a deflationary trend. And of course the job creation rate is still far below expectations. Now, you can make what you want of these figures, but at the very least you should conclude that the pundits and high-priced analysts have absolutely no idea what's going on with the economy. As for the Fed, I was giving them the benefit of the doubt until last week, when the Fed <#inc ww2010.weblog.ref e040917 "published an incredible report bragging that they'd saved the economy by misleading the public."#> As I've been saying since 2002, Generational Dynamics predicts that the economy is entering a new 1930s style "great depression," and that stocks will fall by 50% or more in the next two or three years. =eod =// &&2 e040922 Russia and Israel cooperating against terrorism =data ww2010.weblog.y2004.e040922.head Russia and Israel cooperating against terrorism =data ww2010.weblog.y2004.e040922.keys russia, israel =data ww2010.weblog.y2004.e040922.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040922.date 22-Sep-04 =data ww2010.weblog.y2004.e040922.txt1 The most unpopular politician in the world is George Bush, but Vladimir Putin and Ariel Sharon are close behind. =data ww2010.weblog.y2004.e040922.txt2 The reasons are similar in all cases. All three politicians have been very aggressive in response to major terrorist attacks. President Bush initiated wars in Afghanistan and Iraq after the 9/11 attacks. Ariel Sharon has announced a "disengagement" policy, and is implementing it by building a barrier separating Israel from the Palestinian lands around it. And Putin has promised preemptive revenge against international terrorists, following the recent series of terrorist attacks in Russian, including the incident in Beslan, North Ossetia, that killed hundreds of people, almost half of them children. These threats have alarmed the entire Eastern Asian region, including Georgia, Turkey, and Roumania. Many Western countries have called on Putin to negotiate with the Chechen terrorists; Putin has angrily rejected these suggestions, and suggested sarcastically that America should start negotiating with Osama bin Laden. As a practical matter, only America has the power, the technology, the forces and the bases to strike at international terrorists around the world. Russia simply does not have that kind of reach. But now, it appears more and more that America, Russia and Israel are coming together on the subject of terrorism. Israel has <#stdurl "thestar.com.my/news/story.asp?file=/2004/9/14/latest/18875Israelsen&sec=latest" "sent anti-terrorism experts to Russia,"#> and the two countries are dicussing even closer cooperation. America has been critical of Putin's power grab in the past, but in <#stdurl "www.nytimes.com/2004/09/21/international/21WEB-PTEX.html" "his speech to the United Nations yesterday,"#> President Bush appeared to side with Putin. From the point of view of Generational Dynamics, these changes are significant because they show how the countries of the world are choosing sides in the coming "clash of civilizations" world war. As a separate issue, James Wolfensohn, president of the World Bank, <#stdurl "www.themoscowtimes.com/stories/2004/09/22/003.html" "is going against the grain and supporting Putin."#> He questions the attacks on Putin's motives, saying, "I think Russia is a pretty difficult place to run, and so I wouldn't come to that conclusion too quickly." The head of the World Bank is more motivated by economic concerns than by political concerns, so Wolfensohn's support of Putin is not surprising. This comes at a time when the Fed has increased short term interest rates. However, as discussed in <#hreftext ww2010.i.fed040921 "yesterday's analysis of the flattening yield curve,"#> long-term interest rates are falling significantly as short-term rates are rising, indicating an increastingly troubling level of public debt. =eod =// &&2 e040921 Things that the Class of 2008 knows nothing about =data ww2010.weblog.y2004.e040921.head Things that the Class of 2008 knows nothing about =data ww2010.weblog.y2004.e040921.keys =data ww2010.weblog.y2004.e040921.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040921.date 21-Sep-04 =data ww2010.weblog.y2004.e040921.txt1 If you want to understand today's college freshmen, just remember that they know nothing about Crystal Pepsi, =data ww2010.weblog.y2004.e040921.txt2 or about almost anything that happened before the early 1990s. The reason that Generational Dynamics works is because almost no knows anything that happened before they were five years old. The Class of 2008 sees the world quite differently than older folks do. Beloit College annually releases a list of things that you have to know to understand the freshman class. Here's this year's list, for the class of 2008.

Most students entering college this fall were born in 1986.
Desi Arnaz, Orson Welles, Roy Orbison, Ted Bundy, Ayatollah Khomeini, and Cary Grant have always been dead.
"Heeeere's Johnny!" is a scary greeting from Jack Nicholson, not a warm welcome from Ed McMahon.
The Energizer bunny has always been going, and going, and going.
Large fine-print ads for prescription drugs have always appeared in magazines.
Photographs have always been processed in an hour or less.
They never got a chance to drink 7-Up Gold, Crystal Pepsi, or Apple Slice.
Baby Jessica could be a classmate.
Parents may have been reading The Bourne Supremacy or It as they rocked them in their cradles.
Alan Greenspan has always been setting the nation's financial direction.
The U.S. has always been a Prozac nation.
They have always enjoyed the comfort of pleather.
Harry has always known Sally.
They never saw Roseanne Roseannadanna live on Saturday Night Live.
There has always been a Rock and Roll Hall of Fame.
They never ate a McSub at McD's.
There has always been a Comedy Channel.
Bill and Ted have always been on an excellent adventure.
They were never tempted by smokeless cigarettes.
Robert Downey, Jr. has always been in trouble.
Martha Stewart has always been cooking up something with someone.
They have always been comfortable with gay characters on television.
Mike Tyson has always been a contender.
The government has always been proposing we go to Mars, and it has always been deemed too expensive.
There have never been any Playboy Clubs.
There have always been night games at Wrigley Field.
Rogaine has always been available for the follicularly challenged.
They never saw USA Today or the Christian Science Monitor as a TV news program.
Computers have always suffered from viruses.
We have always been mapping the human genome.
Politicians have always used rock music for theme songs.
Network television has always struggled to keep up with cable.
O'Hare has always been the most delay-plagued airport in the U.S.
Ivan Boesky has never sold stock.
Toll-free 800 phone numbers have always spelled out catchy phrases.
Bethlehem has never been a place of peace at Christmas.
Episcopal women bishops have always threatened the foundation of the Anglican Church.
Svelte Oprah has always dominated afternoon television; who was Phil Donahue anyway?
They never flew on People Express.
AZT has always been used to treat AIDS.
The international community has always been installing or removing the leader of Haiti.
Oliver North has always been a talk show host and news commentator.
They have suffered through airport security systems since they were in strollers.
They have done most of their search for the right college online.
Aspirin has always been used to reduce the risk of a heart attack.
They were spared the TV ads for Zamfir and his panpipes.
Castro has always been an aging politician in a suit.
There have always been non-stop flights around the world without refueling.
Cher hasn't aged a day.
M.A.S.H. was a game: Mansion, Apartment, Shelter, House.

<#stdurl "www.beloit.edu/~pubaff/mindset/"#> © 2004 Beloit College, Beloit, Wisconsin =eod =// &&2 e040920 Neo-Nazis and Communists gain in regional German elections =data ww2010.weblog.y2004.e040920.head Neo-Nazis and Communists gain in regional German elections =data ww2010.weblog.y2004.e040920.keys =data ww2010.weblog.y2004.e040920.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040920.date 20-Sep-04 =data ww2010.weblog.y2004.e040920.txt1 German Chancellor Gerhard Schröder and the country's mainstream political parties suffered a major setback Sunday =data ww2010.weblog.y2004.e040920.txt2 <#stdurl "www.nytimes.com/2004/09/20/international/europe/20german.html" "in regional elections"#> that gave the Nazi and Communist parties substantial gains. "It's a great day for Germans who still want to be German," said Holger Apfel, a spokesman for the neo-Nazi National Democratic Party. These are regional elections, so the results won't give the fringe parties a significant share of the power in the country, but they send a message of extreme discontent to the two major parties. The popular anger is greatest in East Germany, where unemployment is near 20% and Schröder's government has been cutting long-term unemployment benefits. The fringe parties have been blaming Jews and foreigners for these problems, by complaining that they're taking all the good-paying jobs. For Generational Dynamics, the significance of these election results is that Germany, like America, has been entering a generational crisis period, where the generational of people who lived through the last crisis war all disappear (retire or die) all at about the same time. The most recent crisis war for Germany (and America) was World War II. Naziism has been a mark of shame for Germany ever since World War II, especially as long as the actual participants (or their immediate families) were still alive. But now, there's almost no one left who remembers Naziism, and the kids who were born after the war think of Naziism as a great way "for Germans who still want to be German." Major West European "world wars" have been occurring through the centuries like clockwork: the Franco-Prussian war (1869-70), the French Revolution and Napoleonic Wars (1789-1814), the War of the Spanish Succession (1701-14), the Thirty Years War (1618-48). Generational Dynamics predicts that we're going to see a new West European in the next few years. It's impossible to predict exactly when, but these elections show how the fault lines are forming. =eod =// &&2 e040919 Shamil Basayev = Osama bin Laden =data ww2010.weblog.y2004.e040919.head Chechen terrorist Shamil Basayev now has the same stature as Osama bin Laden =data ww2010.weblog.y2004.e040919.keys =data ww2010.weblog.y2004.e040919.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040919.date 19-Sep-04 =data ww2010.weblog.y2004.e040919.txt1 Putin's ploy of blaming "international terrorists" for the Beslan terrorism was demolished =data ww2010.weblog.y2004.e040919.txt2 on Friday when Shamil Basayev, a warlord from Chechnya, <#stdurl www.themoscowtimes.com/stories/2004/09/20/001.html "posted a statement on the internet"#> taking full credit for the series of terrorist acts which brought down two passenger planes, killed hundreds of children and adults, and caused the Russian people to demand justice and revenge. =inc ww2010.xr.related1 right basayev 3 Russian President Vladimir Putin had blamed "international terrorists" for the acts, since blaming Chechen terrorists would have further inflamed Russia's southern provinces, possibly to a major regional war. However, Basayev is determined to inflame the situation as much as possible. For reasons <#hreftext "ww2010.i.world040911#children" "we've described"#>, Basayev's goal actually is to start a war. Basayev was born in Chechnya in 1965, and <#stdurl www.alertnet.org/thenews/newsdesk/L1772000.htm "was raised by a generation"#> that had just returned to the region after being exiled by Stalin to Kazakhstan and Siberia. In terms of Generational Dynamics, Basayev is in the powerful and alienated "Nomad" generation, the second generation following a crisis war. Osama bin Laden, born 1957 in Saudi Arabia, is in that country's "Nomad" generation. In today's America, the "Nomad" generation is Generation X, born during the turmoil of the 1960s and 70s. Their alienation turns to fury and their power turns them to taking revenge for whatever wrongs their parents reluctantly accepted. As <#inc ww2010.weblog.ref e040907 "we've said,"#> the Caucusus is the most dangerous region in the world. The Beslan terror incident has caused Putin to threaten to <#stdurl www.themoscowtimes.com/stories/2004/09/20/012.html "make preemptive strikes on terrorists,"#> even in other nations, and this has most frightened Georgia, Turkey and other nations in the Caucasus region. This region has been the site of numerous major ethnic and religious wars for centuries. Generational Dynamics predicts another major war is to come, and we can see how the that war seems to approach closer every day. =eod =// &&2 e040917 Bernanke / Federal Reserve congratulates itself on jawboning policy =data ww2010.weblog.y2004.e040917.head Federal Reserve congratulates itself on jawboning policy =data ww2010.weblog.y2004.e040917.keys =data ww2010.weblog.y2004.e040917.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040917.date 17-Sep-04 =data ww2010.weblog.y2004.e040917.txt1 Fed says it propelled the economy upward merely by promising to keep interest rates low. =data ww2010.weblog.y2004.e040917.txt2 The claims are based on <#stdurl "www.forbes.com/business/feeds/ap/2004/09/16/ap1548100.html" "a study led by Fed Governor Ben Bernanke."#> The study found that merely by making statements that interest rates would be kept low for a "considerable period," the Fed changed public expectations so much that the values of stocks increased from 2003 to 2004. The conclusion is that the Fed can continue to use verbal statements to affect the economy positively. I cannot say how strongly I disagree with this conclusion. It presumes that stock prices are based totally on emotions, and not on fundamentals. Maybe that does work once, for a few months, but could Bernanke and the others possibly believe this strategy could ever work again? The only reason it worked this time is because it's never been used before. If it's ever tried again, people will remember, and won't be fooled a second time. Which brings me to the Generational Dynamics point. Yes, this strategy might work again -- after 60 or 70 years when the last generation of people who remember the recent events all disappear (retire or die). That, after all, is what the generational paradigm is all about. What really bothers me about all this is that Fed governors actually seem to believe this stuff. I listen to high-priced analysts on TV all the time, and for them there's never any bad news. When stocks go up it's good news because stocks are going up; when stocks go down, it's good news because prices are low and people can buy more stocks cheaply. If these analysts were more balanced in their appraisals I might find them more credible, but when it's good news all the time, my conclusion is that they're in a serious state of denial. Bernanke's report leads me to conclude that the Fed governors are in denial too, if they really believe that they can continue to get away with using a jawboning policy. As <#inc ww2010.weblog.ref e040717 "we've previously said,"#> the fundamentals are clear that we're in a period of long-term deflation, and can expect prices to fall by 30% in the next few years. Jawboning might postpone (and indeed has postponed) that result, but the fundamentals will win out sooner or later. In fact, it will probably be sooner, since the Fed has indicated that it will continue increasing interest rates, with the next increase evidently planned for September 21. Meanwhile, if you're interested in this kind of stuff, then read the Fed's full report (<#stdurl "www.federalreserve.gov/pubs/feds/2004/200448/200448pap.pdf" "Click here for PDF."#>) The problem it addresses is the following: The Fed reduced short-term interest rates to near-zero in 2001, and cannot lower them to below zero, and so the Fed has effectively lost its most valuable tool for stimulating the economy. The report considers three "non-standard" tools that the Fed could use, once the short-term interest rate string has run out:

The jawboning policy that we've been discussing.
A policy called "quantitative easing," where the Fed in fact does let short term interest rates fall below zero for short periods of time to extend use of this tool
A policy of lowering long-term interest rates by repurchasing long-term 10-year bonds, in order to keep 10-year interest rates low. (This is contrasted to the standard policy of lowering short-term interest rates.)

The report discusses examples of each of these policies at length, in both America and Japan, and concludes that the first of them is very successful. =eod =// &&2 e040916b The Consumer Price Index grew slower than expected in August, further indicating a period of deflation. =data ww2010.weblog.y2004.e040916b.head The Consumer Price Index grew slower than expected in August, further indicating a period of deflation. =data ww2010.weblog.y2004.e040916b.keys =data ww2010.weblog.y2004.e040916b.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040916b.date 16-Sept-04 =data ww2010.weblog.y2004.e040916b.txt1 The CPI, which measures consumer prices, increased by a tiny 0.1% in August. Economists had expected a 0.2% increase. =data ww2010.weblog.y2004.e040916b.txt2 The "core index," which excludes food and energy items, increased 0.1%. Earlier this month, the Producer Price Index, which measures wholesale prices, actually fell. Economists had expected an increase. Both the PPI and the CPI have been lower than economists' expectations for several months, even the Fed seems to worry only about inflation. The following table shows the values of the PPI and CPI for each month so far in 2004:


                        Changes from preceding month    
                                    2004                
                     Jan. Feb. Mar. Apr.  May June July  Aug
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   PPI                .6    .1   .6   .7   .7  -.3   .1  -.1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   PPI "Core index"   .3   -.1   .3   .1   .4   .2   .1  -.1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   CPI                .5    .3   .5   .2   .6   .3  -.1   .1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   CPI "Core index"   .2    .2   .4   .3   .2   .1   .1   .1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----

A further increase in interest rates will exacerbate the inflationary trend, and yet the Fed is expected to do exactly that on September 21. As <#inc ww2010.weblog.ref e040717 "we've previously said,"#> if you look at long-term trends instead of just a few months, we're actually in a long-term deflationary period. We actually expect prices to fall by 30% in the next few years. =eod =// &&2 e040916 Israel makes it official: The American-backed 'road map to peace' is dead. =data ww2010.weblog.y2004.e040916.head Israel makes it official: The American-backed "road map to peace" is dead. =data ww2010.weblog.y2004.e040916.keys =data ww2010.weblog.y2004.e040916.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040916.date 16-Sep-04 =data ww2010.weblog.y2004.e040916.txt1 In fact, Israel itself is in enormous turmoil today because of Ariel Sharon's disengagement plan. =data ww2010.weblog.y2004.e040916.txt2 The "road plan to peace" <#hreftext ww2010.i.may01 "never had a chance anyway,"#> but it's always fascinating when a politician actually tells the truth about something like that. <#inc ww2010.mappic israel.gif right "" "Israel: Ariel Sharon is proposing to "disengage" from the Gaza Strip and the West Bank"#> The road plan required Israel and the Palestinians to negotiate the details of Palestinian state side by side with Israel by 2005. However, this plan could never have worked because it would be violently opposed by extremists in both sides. Palestinian leader Yasser Arafat and Israeli Prime Minister both understand this, of course. Palestinian militia factions have almost <#hreftext ww2010.i.mideast040719 "gone to war with each other on several occasions,"#> only to be pulled back from the brink by Arafat himself. History tells us that it will be almost impossible for the Palestinians to avoid civil war after Arafat is gone. However, the past few months have similarly seen the level of bitterness and conflict in Israel itself increase significantly. The conflict revolves around Sharon's disengagement plan: Build a ten-foot high barrier around Israel, and then remove Israeli settlements outside the barrier from Gaza and the West Bank. In fact, the Israeli cabinet <#stdurl "www.telegraph.co.uk/news/main.jhtml?xml=/news/2004/09/15/wisr15.xml&sSheet=/news/2004/09/15/ixworld.html" "has approved payment of substantial compensation funds"#> for 8,500 settlers to withdraw from Gaza by September of next year. The problem is that the settlers and their supporters have no intention of withdrawing under any circumstances. One opposition leader <#stdurl "www.telegraph.co.uk/news/main.jhtml;sessionid=Y00550O1BSHEDQFIQMFCM54AVCBQYJVC?xml=/news/2004/09/13/wmid13.xml" "described the removal of settlements as "a crime against humanity,""#> essentially equating it to the Nazi genocide of Jews during World War II. He promised an armed confrontation if the withdrawal plan goes ahead. An infuriated Sharon responded: "We have witnessed in the past few days a fierce campaign of incitement, including references to civil war. I find these threats on defence force officers and members of the security establishment to be a severe offence." So we have three separate confrontations going on: Israeli versus Palestinian, Palestinian versus Palestinian, and Israeli versus Israeli. Meanwhile, the population in the Gaza strip <#stdurl "www.cia.gov/cia/publications/factbook/geos/gz.html" "continues to grow at the rate of almost 4% per year,"#>. If a war has been avoided so far, it's only <#hreftext ww2010.i.world040911 "because of massive American foreign aid."#> That will only work for so long. Each day more babies are born and the pressure cooker atmosphere gets worse and worse. It's only a matter of time before someone declares war on someone. =eod =// &&2 e040914 Putin moving to restore Soviet-style dictatorship in Russia =data ww2010.weblog.y2004.e040914.head Putin moving to restore Soviet-style dictatorship in Russia =data ww2010.weblog.y2004.e040914.keys russia, putin =data ww2010.weblog.y2004.e040914.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040914.date 14-Sep-04 =data ww2010.weblog.y2004.e040914.txt1 Reacting to the recent horrific terrorist acts in Russia, Russian President Vladimir Putin announced substantially more centralized control of Russia. =data ww2010.weblog.y2004.e040914.txt2 Last week, <#inc ww2010.weblog.ref e040904 "a furious Putin announced"#> that he would take drastic measures to curtail terrorist acts, such as the horrific slaughter of children in Beslan, and the downing of two planes in flight from Moscow by "black widows," women carrying bombs. Putin appeared to be promising revenge. The terrorist acts are widely believed to have been perpetrated with Islamic terrorists in Chechnya. However, in order to avoid inflaming the highly volatile region further, Putin blamed the acts on "international terrorists." Nonetheless, there have been specific threats as tensions have been Russia's Colonel General Yuri Baluyevsky announced last week that <#stdurl "www.guardian.co.uk/russia/article/0,2763,1299663,00.html" that Russia has the right to use "preventive strikes" against terrorists abroad."#> He added, "We will take all measures to liquidate terrorist bases in any region of the world." These threats have unsettling throughout Russia's southern Muslim provinces, including Chechnya and Ingushetia, but <#stdurl "www.civil.ge/eng/detail.php?id=7788" "they've also further inflamed Georgia,"#> the nation on Russia's southern border which is already <#inc ww2010.weblog.ref e040824b "threatening war with Russia"#> to expel Russian troops from South Ossetia. On Monday, <#stdurl "www.themoscowtimes.com/stories/2004/09/14/001.html" "Putin announced a drastic restructuring of all levels of Russian government."#> Many legislators who were formerly elected will now be appointed by the Kremlin, and will be required to follow Kremlin policies. This is absolutely no surprise, as <#inc ww2010.weblog.ref e040706b "we've been saying for several months"#> with respect to Yukos, Russia's oil giant. Putin has effectively nationalized Yukos. He began last October by jailing former Yukow CEO Mikhail Khodorkovsky, right after he announced he would be challenging Putin politically. Since then, the Kremlin has been taking one legal step after another to harvest all of Yukos' wealth. If there's any principle that this web site supports, it's the principle that history repeats itself, and we see this happening now. The Kremlin practice of taking any assets it wants is part of the Soviet policy. This practice was used by Nicolai Lenin from the beginning of the Bolshevik (Communist) Revolution in 1917 when he destroyed the Russian Orthodox Church in order to harvest its wealth. In one of his early letters to the Politburo he writes:

We must pursue the removal of church property by any means necessary in order to secure for ourselves a fund of several hundred million gold rubles (do not forget the immense wealth of some monasteries and lauras). Without this fund any government work in general, any economic build-up in particular, and any upholding of soviet principles ... is completely unthinkable. In order to get our hands on this fund of several hundred million gold rubles (and perhaps even several hundred billion), we must do whatever is necessary.

Following the Bolshevik Revolution, there was a massive civil war throughout Russia that killed tens of millions of people before it ended in the late 1920s. If history is any guide, and it is, then we can expect to see Putin move more and more to nationalize private assets, take more and more control of the government, take harsher and harsher measures against terrorists, and eventually live through a repeat of the civil war of the 1920s. =eod =// &&2 e040913b Whoever forged the CBS documents is an idiot, about 20-25 years old =data ww2010.weblog.y2004.e040913b.head Whoever forged the CBS documents is an idiot, about 20-25 years old =data ww2010.weblog.y2004.e040913b.keys =data ww2010.weblog.y2004.e040913b.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040913b.date 13-Sep-04 =data ww2010.weblog.y2004.e040913b.txt1 I worked for IBM in the early 1970s, and we had Selectric typewriters all over the place. =data ww2010.weblog.y2004.e040913b.txt2 Even the computer terminal I used to write mainframe software on was a specially modified Selectric typewriter. <#inc ww2010.pic cbsth.gif right "" "How was the superscript "th" produced?"#> Selectric typewriters are in the news today, because they're providing the explanation for how someone could have produced a superscript "th" as shown on the adjoining graphic in a 1973 memo. The memo is one of four documents exhibited by CBS News in a news story indicating George W. Bush failed to meet Texas Air National Guard standards. (For PDF copies of the documents, <#stdurl "msnbcmedia.msn.com/i/msnbc/Sections/News/Politics/BushGuardDocs.PDF" "click here."#>) Now, I typed many memos myself on Selectric typewriters, so I know that the superscript effect is indeed possible. What you would have had to do is this: You go along typing your memo, until you've typed the "187." Then you remove the type ball from the Selectric, and replace it with a type ball in a font having a smaller point size. Then you physically rotate the platen so that paper slides down. Then you type the "th." Then you rotate the platen back. Then you remove the typeball with the smaller font size and replace it with the original type ball. Then you go on typing. So it's possible, but nobody in the world would ever go to that much trouble. You just type "187th" and be done with it. Who cares? That's why I'll be very amazed if it turns out that these memos are real. So why do I say that the forger is an idiot, about 20-25 years old? Well, first off, he's never used a real typewriter, or he'd know that no one would ever bother with all that. That's why he's 20-25 years old. In fact, it's pretty obvious he's used word processors his whole life, and it never even occurred to him that a memo produced by a typewriter would look different from a memo produced by a word processor. That's why he's an idiot. This incident is relevant to the subject matter of this web site, because it shows how little people know about life and history before they were born. It's a rare college kid today who can even tell you what the 1991 Gulf War was about, since today's college kids were too young to know what's going on. That's why the generational paradigm works. That's why countries walk into violent, genocidal crisis wars on a regular 70-90 year cycle: Because it happens when the generation of people who remember the last crisis war all disappear (retire or die), all at the same time. That's what's happening around the world today to the generation of people who lived through World War II, and that's why we're headed for a "clash of civilizations" world war. It's always surprising to compare something like a Selectric typewriter to a world war, but the principle is the same. Let's see how the CBS document scandal pans out. =eod =// &&2 e040913 Nobel Prize Winner SV Naipaul calls for destruction of countries that 'foment religious war' =data ww2010.weblog.y2004.e040913.head Nobel Prize Winner SV Naipaul calls for destruction of countries that "foment religious war" =data ww2010.weblog.y2004.e040913.keys =data ww2010.weblog.y2004.e040913.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040913.date 13-Sept-04 =data ww2010.weblog.y2004.e040913.txt1 The well-known and prolific Hindu author wants to see Saudi Arabia and Iran dealt with, =data ww2010.weblog.y2004.e040913.txt2 according to <#stdurl "books.guardian.co.uk/departments/generalfiction/story/0,6000,1302366,00.html" "an interview appearing in The Guardian."#> Sir Vidia Naipaul <#stdurl "www.weeklystandard.com/Content/Public/Articles/000/000/000/351arlzg.asp" "won the Nobel prize for Literature in October, 2001,"#> shortly after the 9/11 attacks, for his analysis of civilizations, as expressed in sweeping novels such as <#stdurl "www.amazon.com/exec/obidos/ASIN/0679722025" "A Bend in the River."#> Much of his work highlights the conflict between the Western and Islamic civilizations. When we think of the "clash of civilizations," we're usually talking about a clash between Islam and Western Christianity and Judaism. Naipaul reminds us that the clash is also with Orthodox Christianity and the Hindu civilization, based in India. It's in the Hindu context that he calls for the destruction of Saudi Arabia, Iran, and other countries that foment religious war. Naipaul has recently been expressing many controversial opinions that some regard has extreme. He has reacted to a population explosion in India by demanding that immigrants be required to become more thoroughly assimilated into society. He argues that society is "not a melting pot but a salad bowl," and that this causes problems and conflicts. His call for destruction of countries that foment religious wars is significant to Generational Dynamics because it's one more example of <#hreftext ww2010.i.world040911 "the fury and hatred that more and more people and nations are feeling today."#> Thanks to terrorist attacks around the world, such as the ones in Jakarta, Indonesia, and Beslan, Russia, last week, more and more people are expressing the kinds of views that we're hearing from Nobel Prize winner VS Naipaul. =eod =// &&2 e040910c This is fun - 'Fahrenheit 9/11' versus 'Michael Moore Hates America' =data ww2010.weblog.y2004.e040910c.head This is fun - "Fahrenheit 9/11" versus "Michael Moore Hates America" =data ww2010.weblog.y2004.e040910c.keys =data ww2010.weblog.y2004.e040910c.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040910c.date 10-Sept-04 =data ww2010.weblog.y2004.e040910c.txt1 Dallas has something for everyone this weekend, as the city hosts two film festivals, one conservative and one liberal. =data ww2010.weblog.y2004.e040910c.txt2 The liberal <#stdurl "http://democrats.com/elandslide/index.cfm?campaign=film" "Take Back Democracy Film Festival"#> will show Michael Moore's Fahrenheit 9/11, which is harshly critical of President Bush, anti-war and especially anti-Iraq-war documentaries, and a movie critical of the Fox News channel. Across town, the conservative <#stdurl www.afrfilmfestival.com/ "American Film Renaissance Festival"#> will be showing Michael Moore Hates America, which is harshly critical of Michael Moore, documentaries that praise the US military and explain why wars are ncessary, and a movie describing the impact of and praising Mel Gibson's movie, The Passion of the Christ. The festivals are being held several miles apart and <#stdurl "www.reuters.com/newsArticle.jhtml?type=politicsNews&storyID=6208498" "organizers said"#> they do not expect customers to go to both. =eod =// &&2 e040910b Producer Price Index falls, indicating period of deflation =data ww2010.weblog.y2004.e040910b.head The Producer Price Index unexpectedly fell in August, further indicating period of deflation =data ww2010.weblog.y2004.e040910b.keys =data ww2010.weblog.y2004.e040910b.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040910b.date 10-Sept-04 =data ww2010.weblog.y2004.e040910b.txt1 The PPI, which measures wholesale prices, fell 0.1% in August. Economists had expected a 0.2% increase. =data ww2010.weblog.y2004.e040910b.txt2 The PPI, which measures wholesale prices, fell 0.1% in August. Economists had expected a 0.2% increase. The "core index," which excludes food and energy items, also fell 0.1%, while economists had expected an increase of 0.1%. The Consumer Price Index (CPI), which measures retail prices, fell 0.1% in July. August CPI figures are not yet available. Even though pundits and high-priced analysts have been talking about nothing else besides inflation, the fact is that the rate of inflation has been falling dramatically since May, indicating a period of increasing deflation. The following table shows the values of the PPI and CPI for each month so far in 2004:


                        Changes from preceding month    
                                    2004                
                     Jan. Feb. Mar. Apr.  May June July  Aug
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   PPI                .6    .1   .6   .7   .7  -.3   .1  -.1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   PPI "Core index"   .3   -.1   .3   .1   .4   .2   .1  -.1
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   CPI                .5    .3   .5   .2   .6   .3  -.1  n/a
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----
   CPI "Core index"   .2    .2   .4   .3   .2   .1   .1  n/a
   ----------------- ---- ---- ---- ---- ---- ---- ---- ----

It was the May figures, which appeared to indicate an inflationary trend, that convinced the Fed and Alan Greenspan to increase interest rates for the last two months. The next interest rate decision day for the Fed will be on September 21. Opinion seems to be split on whether the Fed will further increase interest rates then. As <#inc ww2010.weblog.ref e040717 "we've previously said,"#> if you look at long-term trends instead of just a few months, we're actually in a long-term deflationary period. We actually expect prices to fall by 30% in the next few years. =eod =// &&2 e040910 My apologies - the Web Log was unavailable yesterday. =data ww2010.weblog.y2004.e040910.head My apologies - the Web Log was unavailable yesterday. =data ww2010.weblog.y2004.e040910.keys =data ww2010.weblog.y2004.e040910.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040910.date 10-Sept-04 =data ww2010.weblog.y2004.e040910.txt1 It was caused by a technical glitch which, hopefully, will not recur. =data ww2010.weblog.y2004.e040910.txt2 =eod =// &&2 e040909b Third terrorist bomb blast in Indonesia in three years =data ww2010.weblog.y2004.e040909b.head Third terrorist bomb blast in Indonesia in three years targets Australian embassy =data ww2010.weblog.y2004.e040909b.keys =data ww2010.weblog.y2004.e040909b.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040909b.date 9-Sept-04 =data ww2010.weblog.y2004.e040909b.txt1 If there's any "good news," it's that the bombing failed to achieve the effect of the 2002 bombing of a Bali nightclub =data ww2010.weblog.y2004.e040909b.txt2 that killed 202 people. The second bombing occurred in 2003. A car bomb in front of the JW Marriott Hotel in Jakarta killed 12 people. =inc ww2010.blocking.start <#inc ww2010.pic husin.jpg right "" "Azahari Husin - Asia's most-wanted man"#> Today's bombing in central Jakarta cost the lives of 8 people, injuring 168 others. Most of the casualties were Indonesians, although the Australian embassy was targeted. The 2002 Bali nightclub bombing killed many Australian citizens on vacation, and that was thought to be the reason that the nightclub was targeted. =inc ww2010.blocking.end =inc ww2010.blocking.start All three attacks are thought to be the work of Azahari Husin, a British-trained Malaysian engineer, working with <#stdurl "www9.sbs.com.au/theworldnews/region.php?id=93817®ion=2" "Jemaah Islamiah,"#> a branch of al-Qaeda. <#inc ww2010.pic seasia1.jpg left "" "Southeast Asia"#> Jemaah Islamiah's <#stdurl "www.alertnet.org/thenews/newsdesk/L09543433.htm" "avowed aim"#> is to establish a conservative Islamic state across the Malay archipelago encompassing Indonesia, the southern Philippines, Brunei, Singapore, peninsular Malaysia and southern Thailand. =inc ww2010.blocking.end =eod =// &&2 e040909 Housing prices beginning to fall =data ww2010.weblog.y2004.e040909.head Housing prices are beginning to cool down after a year of record increases =data ww2010.weblog.y2004.e040909.keys =data ww2010.weblog.y2004.e040909.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040909.date 9-Sept-04 =data ww2010.weblog.y2004.e040909.txt1 The era of huge annual home price increases appear to be ending, =data ww2010.weblog.y2004.e040909.txt2 as prices in some regions are beginning to cool. Home prices grew at a record 9.36% during the last year, the highest four-quarter increase since the 1970s. <#stdurl "www.ofheo.gov/media/pdf/2q04hpir.pdf" "The report (PDF)"#> from the <#stdurl www.ofheo.gov "Office of Federal Housing Enterprise Oversight (OFHEO)"#>. <#inc ww2010.pic ofheo.gif center "" "House price index, 1990-2004 (Source: OFHEO)"#> The report details housing price increases in regions throughout the nation. It shows that the highest increase, 23%, in Nevada, with Hawaii and California close behind; and the lowest increase (2.58%) is Utah, with Texas and Indiana close behind. The huge spurt in the last year has been caused by exceptionally low interest prices. After the Nasdaq crash of 2000, falling stock prices might have caused numerous bankruptcies and foreclosures. The Fed reduced interest rates to near-zero, allowing people and businesses that might have gone bankrupt continue by means of low-interest credit. Because of the low interest rates, mortgage payments became substantially cheaper, so that people could afford more expensive houses, thus increasing home prices. Now that the Fed is increasing interest rates, housing prices are beginning to cool. However, <#stdurl www.bankrate.com/brm/news/mortgages/20040902a1.asp "according to a new estimate,"#> prices of homes in California, Nevada and Florida have begun to fall abruptly in the last couple of months. One expert indicates that a one percent change in interest rates, which is approximately the amount that the Fed has promised for the next few months, will result in a 20% fall in home prices. Prices in surburban Boston are falling as well, according to <#stdurl "online.wsj.com/article/0,,SB109459625088011696,00.html" "The Wall Street Journal."#> And existing-home sales declined 2.9% in July, according to <#stdurl "www.realtor.org/PublicAffairsWeb.nsf/Pages/JulyEHS04?OpenDocument" "a report"#> from the National Association of Realtors. America is not the only country with overpriced real estate. According to <#inc ww2010.weblog.ref e040730b "investment firm Morgan Stanley,"#> residential properties in countries around the world, including America, Australia, the United Kingdom, China, South Korea, Spain, the Netherlands, and South Africa, are overpriced by 50% or more. Some of those prices are beginning to fall as well; <#stdurl "www.channelnewsasia.com/stories/afp_asiapacific_business/view/104497/1/.html" "Australian housing prices have begun falling substantially,"#> for example. The moral of this story is that if you own, or you're thinking of buying, residential property, then you should not assume that prices will continue to go up any longer. =eod =// &&2 e040908 Voters: Terrorism more important than Iraq =data ww2010.weblog.y2004.e040908.head Terrorism becoming a more issue important for voters, as Iraq becomes less important =data ww2010.weblog.y2004.e040908.keys =data ww2010.weblog.y2004.e040908.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040908.date 8-Sept-04 =data ww2010.weblog.y2004.e040908.txt1 According to a poll of likely voters conducted last weekend, =data ww2010.weblog.y2004.e040908.txt2 terrorism has become a substantially more important issue in the last six weeks, and Iraq has become substantially less important. According to <#stdurl "gallup.com/content/default.aspx?ci=12922&pg=4" "the Gallup poll"#>, the most important issues now and in mid-July are as follows:

	Economy	Terror- ism	Iraq	Health Care	No opinion
2004-Sep 3-5	31%	31%	20%	15%	3%
2004-Jul 19-21	31%	26%	27%	15%	1%

As this table shows, terrorism has become a significantly more important issue (31% versus 26%), while Iraq has become a significantly less important issue (20% versus 27%) to voters in the last six weeks. The economy and health care remain unchanged in importance to likely voters. The importance of this change relates to the fact that <#inc ww2010.weblog.ref e040906 "American deaths in Iraq have become a non-story,"#> even though the number of deaths passed the 1,000 milestone on Tuesday. As we've been saying, America entered a "generational crisis" period around the year 2000. Since that time, as in all crisis periods, Americans have become increasingly anxious and fearful about the American way of life and the increasing militancy of Islamic terrorists around the world. The last time America was in a generational crisis period was during World War II, and the previous time was during the Civil War. Most of the countries of the world that fought in World War II have recently also entered a generational crisis period. These include countries in Western Europe, the Mideast (except Iraq and Iran), China, Japan and Korea. Other regions, including Russia and the Caucasus countries, had their last generational crisis period prior to World War II, and so are even deeper into a new crisis period today. =eod =// &&2 e040907 An angry Putin refuses to negotiate with Chechnya =data ww2010.weblog.y2004.e040907.head An angry Putin refuses to negotiate with Chechnya =data ww2010.weblog.y2004.e040907.keys russia, putin, chechnya, european union, france, lithuania, latvia, north ossetia, georgia =data ww2010.weblog.y2004.e040907.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040907.date 7-Sept-04 =data ww2010.weblog.y2004.e040907.txt1 Facing mounting citizen anger and EU criticism for not stopping the barbaric terrorist slaughter in Beslan, =data ww2010.weblog.y2004.e040907.txt2 Russian President Vladimir Putin refused to negotiate with Chechen rebels in a <#stdurl www.guardian.co.uk/russia/article/0,2763,1298905,00.html "special press conference for foreign journalists"#> on Monday. "Why don't you meet Osama bin Laden, invite him to Brussels or to the White House and engage in talks, ask him what he wants and give it to him so he leaves you in peace? Why don't you do that?" he said. "You find it possible to set some limitations in your dealings with these bastards, so why should we talk to people who are childkillers? No one has a moral right to tell us to talk to childkillers." Putin was referring to a row that began on Friday, when Dutch Foreign Minister Bernard Bot, who has just assumed the rotating role of European Union (EU) President, <#stdurl "www.reuters.co.uk/newsPackageArticle.jhtml?type=topNews&storyID=577121§ion=news" ""requested" an explanation for the bloodshed"#> in Beslan, North Ossetia, where a terrorist hostage-taking resulted in the deaths of 350 people, almost half of them children. The outraged Russian Foreign Ministry responded with a statement that said, "Inappropriate statements by the Dutch minister look odious ... and blasphemous. We expect explanations from the Dutch side." The EU backed down, saying that Bot's statement had created a "misunderstanding," but there's little doubt that many Europeans are blaming Putin's longstanding refusal to negotiate with Chechnya for the terrorist action. While European governments have been reacting very cautiously since the Bot row, editorial writers have not always been so circumspect. An <#stdurl "www.lemonde.fr/web/article/0,1-0@2-3208,36-377892,0.html" "editorial in French newspaper Le Monde"#> complains about "schizophrenic" French policy that is willing to oppose America in Iraq, but "closes its eyes to similar Russian threats that result in blood and slaughter." Indeed, France is somewhat cornered today by forces beyond its control. On the one hand, France has received <#inc ww2010.weblog.ref e040902 "enormous sympathy from moderate Muslims"#> over the kidnapping of French journalists in Iraq, and cannot afford to criticize the Islamic terrorists in Russia. On the other hand, Russia was France's ally in opposing UN support for America in Iraq, so France can't afford to criticize Russia too much either. As a result, French President Jacques Chirac is reduced to simply sympathizing with Russia over the slaughter. Criticism of Russia goes even deeper from former Communist controlled states of Eastern Europe, however, especially those which have recently joined the EU. In fact, Bot's statement was apparently urged on him by <#stdurl www.eubusiness.com/afp/040906143713.60axjmz6 "foreign ministers from Lithuania and Latvia."#> America used to be very critical of Russia's policies in Chechnya, but became much more sympathetic after 9/11. <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus region - including North Ossetia and Chechnya"#> However, Putin himself is under conflicting pressures in assigning blame for these exceptionally brutal and horrific terrorist acts. He <#inc ww2010.weblog.ref e040904 "called for revenge"#> in his nationwide television address on Monday, but he blamed "international terrorism" from unnamed countries. His reluctance to blame Chechnya directly comes from what he sees as the real danger: An all-out war in the Caucasus, which has, for centuries, been a historic battleground between Orthodox Christian and Muslim civilizations. That danger is quite real. Infuriated Ossetians, mostly Christian, are <#stdurl news.bbc.co.uk/2/hi/europe/3634674.stm "directing their anger at the neighboring province of Ingushetia,"#> mostly Muslim. In addition, Georgian President Mikheil Saakashvili appears <#inc ww2010.weblog.ref e040824 "to be ready to ready to declare war"#> to expel Russian troops from South Ossetia, because of the perception that Russia is supporting the South Ossetians' moves towards secession from Georgia. Saakashvili appears to believe that Russia would be unable to defend against such a war, because doing so would risk inflaming the Chechen region still further. Saakashvili appears to believe that he would win such a war with relatively little bloodshed. Thus, the Caucasus region is becoming increasingly inflamed. This is consistent with the Generational Dynamics prediction that a major war will occur in this region during the next few years with almost 100% certainty. In fact, the Caucasus region is the most dangerous region on earth today, even more dangerous than Palestine, because it's farther into a "generational crisis" period. =eod =// &&2 e040906 American deaths in Iraq has become a non-story =data ww2010.weblog.y2004.e040906.head American deaths in Iraq has become a non-story =data ww2010.weblog.y2004.e040906.keys =data ww2010.weblog.y2004.e040906.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040906.date 6-Sept-04 =data ww2010.weblog.y2004.e040906.txt1 A suicide bombing in Iraq today killed seven Marines, bringing to 990 the number of American military deaths =data ww2010.weblog.y2004.e040906.txt2 since the beginning of military operations in Iraq in March, 2003. It was the deadliest day for Americans in Iraq in four months. Even though there have been American deaths almost daily, the number of war deaths is rarely reported in major newscasts today, or is reported only in passing. That's because the American people as a whole have changed in the last few years, more concerned about the danger to the American way of life than even battle deaths. The number of deaths will probably cross the 1,000 mark later this week. That milestone will undoubtedly generate some news coverage, but to judge from recent reporting, the amount of coverage will simmer down again fairly quickly. This is remarkable when you consider the fact that just a few combat deaths in Somalia in 1993 caused such a public outcry that the entire military engagement had to be scrapped. For those who want to understand Generational Dynamics, then this is what happens when a country enters a "generational crisis" period. America began entering this period around the year 2000, as the generation of people who lived through World War II were quickly disappearing (retiring or dying), all at once. In 1993, America was in a "generational unraveling" period, when individual rights have the highest public priority. Today, individual rights are no longer as important to the great masses of American people as preserving our way of life from Islamic terrorists. All the countries who fought in World War II are entering generational crisis periods about now. <#inc ww2010.weblog.ref e040902 "France has clearly done so,"#> as shown by the near-unanimous support for the new headscarf law when the French journalists were kidnapped. And <#inc ww2010.weblog.ref e040904 "Russia and the Caucasus"#> are the most dangerous region on earth, because they've been in generational crisis period even longer. It's amazing how the public mood can change so drastically within just a few years, but that's the kind of effect a major generational change can have. That's why, for example, we've been able to predict since 2002 that <#hreftext ww2010.i.antiwar "there would not be any significant antiwar movement in America,"#> and there hasn't been. The world is a much, much more somber place than it was just a few years ago. =eod =// &&2 e040904 Russian President Putin asks revenge for Beslan =data ww2010.weblog.y2004.e040904.head Russian President Vladimir Putin appears to be calling for revenge =data ww2010.weblog.y2004.e040904.keys russia, putin =data ww2010.weblog.y2004.e040904.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040904.date 4-Sept-04 =data ww2010.weblog.y2004.e040904.txt1 Putin said that Russian "weakness in the face of danger" has caused Russia to be "beaten up" in the face of "a total and full-blown war." =data ww2010.weblog.y2004.e040904.txt2 A shaken Putin <#stdurl "www.itar-tass.com/eng/level2.html?NewsID=1214686&PageNum=0" "made his somber and angry remarks"#> to a nationwide radio and television audience, after more than 340 people, including 156 children, were killed in a terrorist hostage-taking incident in Northern Ossetia. This was only the most recent of three major terrorist acts in ten days, including the bombing of two airplanes in flight and a subway bombing in Moscow. According to Putin, Russia has two choices: To "rebuff" the terrorists or to "begin obeying their orders." He added that "[our] actions [must] become proportionate to the size of the new threats." In Putin's own words:

[We have] encountered crises, revolts, and terrorist acts on many occasions, but what happened this time is a terrorist crime, the cruelty of which stands beyond precedence. This is not a challenge to the President, Parliament, or cabinet of ministers; this is a challenge to the entire Russian state and its people. This is aggression against us. The terrorists believe they are stronger than ourselves, that their cruelty will intimidate us, paralyze our will and degenerate our society. Here we have a seeming alternative -- to rebuff them or to begin obeying their orders. The second means to give in and to let them partition Russia in a hope that they will somehow let us alone. As President of the Russian state, a person who gave an oath to defend the nation and its territorial integrity, and last but not least, as a Russian citizen, I am confident that we have no such alternative. The moment we give in to their blackmail and succumb to panic, we will plunge millions of people into an endless chain of bloodletting conflicts.... What we have on our hands is not the scattered acts of intimidation or odd terrorist sorties. This is direct intervention on the part of international terrorism in Russia. It is a total and full-blown war that keeps claiming the lives of our compatriots. But world experience proves that such wars do not end quickly. Given this situation, we cannot afford complacent treatment of it anymore. We must set up a much more efficient system of security and make demands to our law enforcement system that its actions become proportionate to the size of new threats. The main thing, however, is to mobilize the consciousness of the nation in the face of a common threat. Events in other countries show that terrorists get the most adequate responses in the places where they run into the power of the state, on the one hand, and organized and united civic society, on the other. From a Generational Dynamics point of view, the call for national unity is significant. A nation in a generational crisis period experiences a series of shocks and surprises that unify the country against a common enemy and elicit a desire for revenge. In other (non-crisis) periods, the country is rent by political differences, and seeks to respond to challenges by means of compromise and containment. But in a crisis period, when the generation of people who lived through the last crisis war disappear (retire or die), the visceral reaction is revenge, not compromise. This eventually leads to a new crisis war. <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus region - including North Ossetia and Chechnya"#> According to President Putin, "The people who sent the terrorists to commit that utterly heinous crime harbored a hope to set on our peoples to fight with one another and unleash a bloody feud in Northern Caucasus." Thus, Putin is going to try to walk a difficult line. On the one hand, he plans to invoke whatever measures are required to "rebuff" the terrorists. On the other hand, he wants to prevent war in the Caucasus. Unfortunately, these are conflicting objectives. His enemies, the Chechen terrorists, are also in a crisis period; they're also becoming more and more unified, and they are also looking for revenge. So any action that Putin takes in Chechnya will have to be fairly harsh, and any harsh actions will only lead to a harsh response. That's what happens during generational crisis periods, until a new crisis war occurs. The Caucasus region is one of the most dangerous regions of the world right now. From the point of view of Generational Dynamics, it's even more dangerous than the Palestine region, since it's farther into a generational crisis period. It's a major front line in the centuries old war between Orthodox Christians and Muslims. =eod =// &&2 e040903 George Bush appears to have done well at the Republican Convention =data ww2010.weblog.y2004.e040903.head George Bush appears to have done well at the Republican Convention thanks to a strong message and a major piece of good luck =data ww2010.weblog.y2004.e040903.keys =data ww2010.weblog.y2004.e040903.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040903.date 3-Sept-04 =data ww2010.weblog.y2004.e040903.txt1 This morning's unemployment and jobs report was much more positive than expected, =data ww2010.weblog.y2004.e040903.txt2 in view of recent weaknesses in manufacturing, retail, and consumer confidence figures. The unemployment rate fell to a three-year low of 5.4%, and the payroll estimates were higher than they have been. This is a stroke of luck for the Republicans, who had a very weak economic message at the Republican National Convention this week. The economy was barely mentioned all week. When Bush finally gave his acceptance speech he did have an economy message, but it was just the usually silly laundry list of promises for every one. (John Kerry <#inc ww2010.weblog.ref e040730 "had a similar list in his acceptance speech"#> at the Democratic National Committee meeting.) Bush had been <#inc ww2010.weblog.ref e040901 "in danger of being "Hooverized,""#> in the sense that the Democrats might have painted him as a new President Herbert Hoover, who lost the 1932 election for failing to recognize that the economy was having serious problems and was failing. But now, the Republicans have had a very strong message on the War on Terror this week, and thanks to the jobs report, their weak message on the economy will not matter. =inc ww2010.h2 antiwar "'Fighting the Last Antiwar'" During the 1960s and 1970s, the World War II heroes suffered one humiliating defeat after another because they didn't realize how much the nation had changed in the 20 years since the war ended. The young college student generation, including John Kerry, challenged the aging hero generation, and won one political victory after another. One criticism of the aging heroes that was frequently repeated throughout the 1960s and 70s was that "they're always fighting the last war." The implication was the the older generation was out of date, and didn't realize that the new world was different, and different tactics were required for both wars and politics. The fact that societies flip back and forth between "generational crisis" periods, during which the people feel that their entire way of life is in danger and individual rights are sacrificed, and "awakening periods," during which new political and spiritual ideas blossom and individual rights are emphasized, is part of Generational Dynamics, and has been verified for dozens of times and places throughout history. So when I say, slightly facetiously, that John Kerry is "fighting the last antiwar," I'm making the point that he's conducting a campaign <#hreftext ww2010.i.sixties040501 "that would be quite appropriate for the 1960s and 70s,"#> and even the 80s and 90s, but is inappropriate today. Last night, following President Bush's speech, Kerry held a midnight campaign rally that appeared so desperate that it's hard to fathom what he might have been thinking. Following Bush's strong defense of his decisiveness in the War on Terror, and the laundry list of economic programs, all Kerry could do was make tasteless personal attacks on Bush and Cheney, framed by once more bragging about his Vietnam War record. It's quite possible that it's too late for Kerry to straighten out his campaign enough to do any good, but here's what he has to do:

He must immediately repudiate his 1971 remarks that American soldiers committed atrocities and war crimes on a day to day basis in Vietnam, with the full awareness of officers at all levels of command. It's not enough just to apologize for them; he has to state dramatically that his remarks were untrue. If Kerry were elected President without repudiating those remarks, then he'd have to do it anyway as President, because the War on Terror cannot be led by a President who believes that America committed the same kinds of atrocities in Vietnam that Islamic terrorists are committing today. It may be too late now, but the sooner he repudiates his remarks, the better it will be for him. Unfortunately he won't repudiate them, because he literally can't, because his mind is still wrapped around the 1960s and 70s. In those days, describing "Amerika" as a capitalist monster was appropriate because America was in a generational awakening period. Today, in a generational crisis period, it's totally inappropriate. Kerry can't seem to understand that.
He must stop making vitriolic attacks against the President. Once again, Kerry is living in the 60s, when demonizing President Nixon, or any authority figure, was well within the spirit of the times. (Those who remember the 60s will remember the catchphrase, "Don't trust anyone over 30.") Kerry can't seem to understand that we're no longer in the 60s, and that the vitriolic attacks on the president and other authority figures that worked so well in his childhood no longer work today.
He must stop counting on antiwar riots and demonstrations to save him. Antiwar riots were <#hreftext ww2010.i.sixties040501 "great stuff in the 1960s,"#> but he's an adult now, and we're no longer in the 60s.
He must come up with a positive message on the War on Terror and the economy that will distinguish him from Bush and convince Americans that he's a better leader. It will be very difficult to do that at this late date.

A year ago, <#hreftext ww2010.i.sep26 "I strongly criticized Howard Dean"#> for his vitriolic attacks against President Bush. Senator Kerry avoided such attacks for a while, especially <#inc ww2010.weblog.ref e040730 "in his passionate DNC acceptance speech,"#> but the 1960s is too much a part of both him and Howard Dean, and right now it doesn't look like he has the sense to break free of his own demons. =eod =// &&2 e040902 France scores major diplomatic coup over hostage crisis =data ww2010.weblog.y2004.e040902.head France scores major diplomatic coup over hostage crisis =data ww2010.weblog.y2004.e040902.keys =data ww2010.weblog.y2004.e040902.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040902.date 2-Sept-04 =data ww2010.weblog.y2004.e040902.txt1 French Muslims have overwhelmingly put nationality above religion, =data ww2010.weblog.y2004.e040902.txt2 showing the Muslims and Christians in France are far more united than might previously have been expected. The terrorist kidnapping of two French journalists in Iraq <#inc ww2010.weblog.ref e040830c "initially stunned the French people"#> because they had strongly opposed the war in Iraq. However, the French people have now reacted to the crisis by <#stdurl "www.boston.com/news/world/articles/2004/08/31/hostage_crisis_unites_france_behind_headscarf_ban?mode=PF" "overwhelmingly supporting the new law"#> restricting obvious religious symbols, including Muslim headscarves, in public schools. The terrorists have demanded repeal of the law as a condition for release of the hostages. Even Muslim opponents of the law are now strongly opposing repeal, because the hostage crisis amounts to foreign interference in French society. According to one Muslim leader, "Some (Muslim) women say that if the headscarf is to be tainted with the blood of hostage victims, then they don't want the headscarf." The diplomatic coup is international, as Muslims throughout the world have been condemning the terrorist act and demanding the release of the French hostages. Unfortunately, this international unity of France and the Muslim community does not guarantee that the hostages will be freed. The terrorists, whose goal is to increase the level of international conflict, may well decide that their goal is still best served by beheading their prisoners. For those who are trying to understand what Generational Dynamics is about, this incident gives us an opportunity to explain why something like this is important. Generational Dynamics predicts that <#hreftext ww2010.i.frangerm "there'll be a new West European crisis war"#> in the next few years. This is based on the observation that West European crisis wars have occurred repeatedly for centuries, at fairly regular intervals dictated by generational changes. Like the last ones, the new war will involve at least France, Germany and England. A crisis war unifies a society, and the people become more willing to sacrifice individual rights for the greater good of working together for national survival. This has been happening in America, as shown by the little political resistance to the Patriot Act. The sudden show of unity by the French, and the willingness to give up individual rights in the form of displaying religious symbols, shows that the French have entered a generational crisis period, and that they'll be united as a people as the crisis proceeds. The show of unity tells us that France will not split along a religious fault line, and end up in a civil war. The diplomatic closeness of France with the international Muslim community tells us that as the crisis progresses, France will side with the Muslims. This should not come as a surprise, given the enmity that France has shown to England's and America's participation in the Iraq war. Specifically, this situation makes it clear that in a Mideast war between Palestinians and Israelis, the French will side with the Palestinians and the England and America will side with the Israelis. Nothing is certain until it actually happens, of course, but the hostage incident is clearly pointing France in that direction. Incidentally, Germany and Russia also opposed the Iraqi war, but they're not exhibiting the same kinds of international unity with Muslims that France has. In particular, <#inc ww2010.weblog.ref e040901b "Russia has been the target of numerous terrorist acts"#> by Islamic terrorists, and may be close to a major war in the Caucasus region. As we head for the "Clash of Civilizations" world war, which Generational Dynamics predicts is coming with almost 100% certainty, we can watch events like the French hostage crisis to help us understand how events are most likely to unfold. =eod =// &&2 e040901b Russians in shock over three major terrorist attacks within a week =data ww2010.weblog.y2004.e040901b.head Russians in shock over three major terrorist attacks within a week =data ww2010.weblog.y2004.e040901b.keys russia =data ww2010.weblog.y2004.e040901b.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040901b.date 1-Sept-04 =data ww2010.weblog.y2004.e040901b.txt1 The world's most dangerous region, the Caucusus, is quickly becoming even more dangerous, =data ww2010.weblog.y2004.e040901b.txt2 as repeated major terrorist actions attributed to the Chechen "black widows" are creating the impression that Russian President Vladimir Putin is losing control of his country. Russians themselves are furious that terrorists have taken hundreds of hostages, including 200 children and their parents, in an ongoing drama in North Ossetia. This follows a car bombing yesterday that killed ten people outside a subway stop in Moscow. And that follows last week's double airline bombing, attributed to two Chechen women in the two simultaneous incidents that killed 90 people. <#stdurl seattletimes.nwsource.com/html/nationworld/2002020818_russcrash31.html "The perpetrators were two women,"#> 30 and 37, who had been roommates. One of them had lost her brother when, according to reports, he was abducted, tortured and killed by Russian forces in 2001. Other terrorist acts this year include a Moscow subway bombing in February that killed 41 people and the May 9 bombing in a stadium in the Chechen capital, Grozny, during a Victory Day ceremony, that killed 24 people, including Chechen President Akhmad Kadyrov. <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus region - including North Ossetia and Chechnya"#> Some analysts are blaming the wave of terror attacks on Russia in general and on Putin in particular, because of the policy that permits Russian security forces to abduct, torture and kill young Chechen men suspected of rebel ties. It's this policy that spawned the "black widow" movement, consisting of female Chechen suicide terrorists. The group is also known by the name "Islambouli Brigades of al-Qaeda." While it's certainly true Putin has mishandled the situation, and it's certainly true that Russian policies have exacerbated the terrorist problem in the Caucasus, the terrorism precedes the Russian policies, going back to Chechnya's 1994 attempt to secede from Russia. The Caucasus region is one of the most dangerous regions of the world right now. From the point of view of Generational Dynamics, it's even more dangerous than the Palestine region, since it's farther into a generational crisis period. It's a major front line in the centuries old war between Orthodox Christians and Muslims. Today's terrorist hostage-takers are demanding the release of Chechen fighters seized by Russian forces during another terrorist attack, a June 22 attack by heavily armed rebels against the Russian Interior Ministry in the next-door province of Ingushetia. The fact that this incident is taking place in North Ossetia relates it to another ongoing drama, the threatened secession of South Ossetia from Georgia, in order to merge with North Ossetia in Russia. Mikheil Saakashvili appears <#inc ww2010.weblog.ref e040824 "to be ready to ready to declare war"#> on Russia, because of the perception that Russia is supporting the South Ossetians' moves towards secession. Saakashvili appears to believe that Russia would be unable to defend against such a war, because doing so would risk inflaming the Chechen region. Saakashvili appears to believe that he would win such a war with relatively little bloodshed. Generational Dynamics predicts that the "Clash of Civilizations" world war is going to occur within the next few years with almost 100% certainty. I think that we can now begin to see more clearly how events in the war on terror are likely to unfold. Islamic terrorists throughout Europe and Asia are using more and more terrorist attacks to inflame and infuriate people, even moderates. Sooner or later, one of these countries is going to declare war on somebody, in order to "solve the problem once and for all" - just as an infuriated America immediately declared war on Afghanistan after 9/11. We can't predict exactly where it will happen -- an infuriated Israeli population against the Palestinians, an infuriated Russian population against Chechnya, or a similar situation in Pakistan, Bangladesh, Philippines or other places. Once such a war begins, it's liable to lead, within a few months, to the spread of war to other regions, leading to the "Clash of Civilizations." None of this is certain, of course, but this appears to be an increasingly likely scenario. A side note: The television commentators on the cable news stations seem to know very little about what's going on in this region. Several are attributing the hostage-taking to last Sunday's election; this ignores the fact that the Chechen issues are much deeper, and it also ignores the fact that the school takeover obviously required months of planning. One CNN analyst this morning spoke at length about the situation, and kept referring to the school takeover as taking place in "South Ossetia." Anyone who knows anything at all about this region could not possibly confuse South Ossetia, which is a northern province of Georgia, with North Ossetia, which is a southern province of Russia. =eod =// &&2 e040901 Republicans have strong message on terror, weak message on economy =data ww2010.weblog.y2004.e040901.head Republicans have strong message on terror, weak message on economy =data ww2010.weblog.y2004.e040901.keys =data ww2010.weblog.y2004.e040901.loc ww2010.weblog.log0409 =data ww2010.weblog.y2004.e040901.date 1-Sept-04 =data ww2010.weblog.y2004.e040901.txt1 Taking place only a few blocks away from the site of the World Trade Center destroyed on 9/11, =data ww2010.weblog.y2004.e040901.txt2 Rudolph Giuliani, John McCain and Arnold Schwarzenegger gave a powerful justification for the War on Terror and the invasion of Iraq. The Republicans are clearly hitting the right note on the terror issue, as Democratic candidate John Kerry continues to flounder from attacks on his 1971 remarks that American soldiers committed atrocities and war crimes on a day to day basis in Vietnam, with the full awareness of officers at all levels of command. As <#inc ww2010.weblog.ref e040827b "we've previously said,"#> Kerry must repudiate his 1971 remarks or lose the election, because the War on Terror cannot be led by a President who believes that America committed the same kinds of atrocities in Vietnam that Islamic terrorists are committing today. However, the Republicans are still in very dangerous territory on issues related to the economy. In Schwarzenegger's phrase, the message was that pessimists about the economy are economic girlie men. As <#hreftext ww2010.i.bush040824 "we've said,"#> Bush's reelection is in danger because the Democrats can accuse him of being another Herbert Hoover, a President who refused to acknowledge that the economy was in trouble by saying, "Prosperity is just around the corner." Recent economic indicators have not been encouraging. In <#stdurl "quote.bloomberg.com/apps/news?pid=10000006&sid=apFB1iw8Dt_Q&refer=home" "figures released separately yesterday,"#> consumer confidence in the U.S. economy fell sharply for the first time since February, and a closely watched report by the National Association of Purchasing Management in Chicago indicates that manufacturing is slowing. If the Republican message remains nothing more than "Prosperity is just around the corner," then they could be in trouble as early as Friday morning, when the next jobs report comes out. The jobs report has been negative for several months, after being positive in the spring. With regard to the other major speakers at the Republican Convention, the Bush daughters, Barbara and Jenna, were waaaaaaaaaaay too cute, and Laura Bush was waaaaaaaaaaaaay too sweet. These speeches were completely out of place at the Convention. I hope that women viewers got something out of them, because they did nothing for me. =eod =// &&2 e040831 Two buses in Israel blown up today, apparently by suicide bombers =data ww2010.weblog.y2004.e040831.head Two buses in Israel blown up today, apparently by suicide bombers =data ww2010.weblog.y2004.e040831.keys =data ww2010.weblog.y2004.e040831.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040831.date 31-Aug-04 =data ww2010.weblog.y2004.e040831.txt1 The thing to watch for - and it won't be widely reported - is changing attitudes of Israelis themselves. =data ww2010.weblog.y2004.e040831.txt2 The Israelis have undoubtedly been feeling very relieved in recent weeks, because there haven't been any suicide bombings in Israel for a relatively long time - since March. The disappearance of suicide bombings has been attributed to Ariel Sharon's disengagement plans: Building the barrier separating Israel from the West Bank, and pulling out of the Gaza strip. =inc ww2010.mappic israel.gif right "" Israel Both of these plans have been very controversial. A United Nations court has said, in essence, that Israel has no right to build such a barrier on Palestinian land, even if it prevents suicide bombings, although Israel could build a barrier on Israeli land if it wished. And the plan to pull out of the Gaza strip in 2005 <#hreftext ww2010.i.mideast040719 "has roiled Palestinian politics,"#> as different factions have competed with one another to fill the power vacuum that Israeli will be leaving. This is all in the framework of a threat (or promise), by Palestinian militia group Hamas, of <#hreftext ww2010.i.hamas040321 "a major terrorist attack"#> against Israel by the end of 2004, in retaliation for Israel's killings of major Hamas leaders. So today we apparently have two new coordinated suicide bombings in Beersheba. How will this affect the attitudes of the Israeli people? From the point of view of Generational Dynamics, the Palestine region appears to have entered a "generational crisis" period in 1999, starting with the new Intifada that resulted in a series of suicide bombings that forced the Israeli withdrawal from southern Lebanon, something that the Palestinian militia group Hizbollah considers to be a major victory over the Israelis. However, the last generational crisis period ended in 1949, and so not enough time has passed for the region to be very deep into a crisis period. That's why both the Palestinians and the Israelis are still willing to look for ways to compromise and contain problems, rather than threaten all out war. (By contrast, the <#inc ww2010.weblog.ref e040824 "Caucasus region is deep into a crisis period"#> and is far more dangerous.) So, what we'll be watching for in the next few days is to see how Israeli public opinion changes, now that they face the realization that they're still exposed to suicide bombers. Will they continue to seek ways to compromise and contain problems? Or will they start to become so infuriated that they'll seek revenge or a war to "fix the problem once and for all," as Americans did after 9/11 when we went to war in Afghanistan? =eod =// &&2 e040830c France stunned, Arabs embarassed by terrorist kidnapping of French journalists in Iraq =data ww2010.weblog.y2004.e040830c.head France stunned, Arabs embarassed by terrorist kidnapping of French journalists in Iraq =data ww2010.weblog.y2004.e040830c.keys =data ww2010.weblog.y2004.e040830c.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040830c.date 30-Aug-04 =data ww2010.weblog.y2004.e040830c.txt1 The "nice guys" aren't immune to terrorism either, =data ww2010.weblog.y2004.e040830c.txt2 as <#stdurl www.itv.com/news/world_436156.html "the French found out on Friday"#> when two French journalists were kidnapped and held hostage. The kidnappers appear to be the same group, "the Islamic Army in Iraq," that murdered a kidnapped Italian journalist on Friday. This is apparently the same terrorist group that scored an impressive victory in July by threatening to behead a Filipino hostage. The hostage was released <#inc ww2010.weblog.ref e040714 "after the Philippines capitulated to its demands"#> and withdrew 50 troops from Iraq a few weeks earlier than had been scheduled. The group had threatened to murder the Italian hostage unless Italy agreed to withdraw all troops from Iraq. Italy refused to comply, leading to journalist's gruesome murder on Friday. The terrorists are now threatening to murder the French journalists unless France rescinds a new law that bans Muslim head scarves in schools. The law takes effect on Thursday, when school resumes following the summer vacation. The controversial law is not directed only at Muslims. It forbids public school students from wearing "conspicuous" signs showing their religious affiliation, including Jewish skullcaps and large Christian crosses. However, the law appears to be mainly aimed at removing Muslim headscarves from schoolgirls. The French, who have used every diplomatic means possible to oppose and embarass America over the war in Iraq, felt that they were more or less immune to the kinds of terrorist acts directed against America, Italy, and other countries. Arab leaders, even those who have opposed the headscarf ban, <#stdurl "www.turkishpress.com/turkishpress/news.asp?ID=25892" "are calling for the release of French journalists."#> French diplomats have announced that the headscarf ban will not be rescinded, but have been working channels all weekend to get the hostages freed. The terrorists have boxed themselves into a corner.

If they release the hostages without getting the headscarf ban rescinded in return, then they'll lose credibility among their bloodthirsty pals in the international Islamic terrorist world.
If they murder the hostages, which the logic of terrorism almost forces them to do unless they get something in return, then they'll further embarass the "nice guys" in France, and their Arab supporters.

Which group do the terrorists care about more? We'll see. The terrorists have set a deadline of later today. =eod =// &&2 e040830b Income growing more slowly than expected, but Americans keep on spending =data ww2010.weblog.y2004.e040830b.head Income growing more slowly than expected, but Americans keep on spending =data ww2010.weblog.y2004.e040830b.keys =data ww2010.weblog.y2004.e040830b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040830b.date 30-Aug-04 =data ww2010.weblog.y2004.e040830b.txt1 Personal income rose 0.1% in July, but personal spending rose 0.8%, indicating that Americans are still buying more on credit, =data ww2010.weblog.y2004.e040830b.txt2 according to <#stdurl "quote.bloomberg.com/apps/news?pid=10000103&sid=abeXmIeKMj3Q&refer=news_index" "figures released this morning."#> Personal income had been expected to rise 0.4%. =eod =// &&2 e040830 Greenspan warns Baby Boomers not to count on Social Security and Medicare =data ww2010.weblog.y2004.e040830.head Alan Greenspan warns Baby Boomers not to count on Social Security and Medicare =data ww2010.weblog.y2004.e040830.keys =data ww2010.weblog.y2004.e040830.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040830.date 30-Aug-04 =data ww2010.weblog.y2004.e040830.txt1 Greenspan warned policy-makers to act soon to head off looming insolvencies in Medicare and Social Security =data ww2010.weblog.y2004.e040830.txt2 that guarantee that Baby Boomers will not receive all the benefits that have been promised. Medicare is in worse shape than Social Security because the cost of medical care has been increasing per patient, and there's no way to predict how much more expensive medical care for aging Boomers will be required. In <#stdurl www.federalreserve.gov/boarddocs/speeches/2004/20040827/default.htm "a speech Friday to the Federal Reserve Bank of Kansas City"#>, Greenspan warned that the policy changes should be made quickly, in order to give Boomers a chance to change their habits and increase their savings rate. In his words,

"As a nation, we owe it to our retirees to promise only the benefits that can be delivered. If we have promised more than our economy has the ability to deliver to retirees without unduly diminishing real income gains of workers, as I fear we may have, we must recalibrate our public programs so that pending retirees have time to adjust through other channels. If we delay, the adjustments could be abrupt and painful."

The reason that "the adjustments could be abrupt and painful" is shown by <#stdurl www.agingstats.gov/chartbook2000/population.html "the following graph."#> <#inc ww2010.pic aging.gif center "" "Total number of person age 65 or older, and age 85 or older"#> The number of people age 65 or older is increasing rapidly. When the Baby Boomers reach age 65 in 2010, the rate of increase will become much more rapid. This is a problem which has been building for decades but, as Greenspan points out, neither George Bush nor John Kerry has been talking about it. They're too busy worrying about stuff that happened in the 1960s. The problem is complicated by the number of people living alone. <#inc ww2010.pic aging2.gif center "" "Percentage of population age 65 and older living along, male and female"#> As the above graph shows, the number of older people living alone has been high, which complicates the problem of providing medical care. This whole issue has an interesting relation to Generational Dynamics. The Baby Boomers are the generation born after World War II. Generation X, the people born during the American "awakening" of the 1960s and 70s, followed. Following the generational paradigm, the people in the Boomer generation (the one born right after a crisis war) tend to be narcissistic, moralistic and arrogant. This is the elder generation today. The people in Generation X (born during an awakening) follow right behind them. They are the pragmatic middle managers doing most of the work today. As children, they were heavily criticized, and they grew up to be alienated. Following the generational pattern, the arrogant Boomers have always treated the GenXers with contempt, and the alienated GenXers have returned the favor by despising the Boomers. These are all generalities of course, and not true of all people in each of those generations. But these are overall characteristics of the people in these two generational archetypes throughout history. This is going to be part of the crunch that America is already facing. The aging Boomers are going to have very heavy voting power, and they're going to force politicians to impose more taxes to pay for income and medical services for themselves. The GenXers are going to be forced to pay those taxes for people in a generation that they don't particularly like, and they're going to be very unhappy about it. Many people may find this kind of analysis surprising, but there's nothing remarkable about all this. These generational relationships repeat throughout history. The last time it happened was in the 1930s, with the generations that grew up following the Civil War. At that time the situation was resolved because the nation had to unite to fight the Great Depression and then World War II. Journalists and pundits have remarked that the 2004 Presidential election campaign is the nastiest in a long time. It's these generational issues that are causing the increasing nastiness. Things are going to get a lot nastier in the next few years. =eod =// &&2 e040827b Polls show that Kerry has been hurt by 'Swift Boat' controversy =data ww2010.weblog.y2004.e040827b.head Polls show that Kerry has been hurt by "Swift Boat" controversy =data ww2010.weblog.y2004.e040827b.keys =data ww2010.weblog.y2004.e040827b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040827b.date 27-Aug-04 =data ww2010.weblog.y2004.e040827b.txt1 John Kerry might have done better if he'd followed his own rule. =data ww2010.weblog.y2004.e040827b.txt2 A year ago, when Howard Dean was the Democratic front-runner, <#hreftext ww2010.i.sep26 "I wrote"#> that "the Democrats [are] making a potentially fatal error by being too stridently anti-Bush." I said the Democrat's hatred of George Bush could seriously backfire. That's what's happened in the last few weeks. Instead of just letting the Swift Boat controversy die of its own accord, Kerry kept it alive for three weeks by personally making vitriolic attacks, accusing Bush of being involved in the Swift Boat campaign. Kerry won the nomination in part by setting a rule for his campaign that it would not repeat Dean's mistake of appearing to hate Bush. The Swift Boat controversy has hurt Kerry because he violated his own rule. By contrast, Bush did not make any such error when the far more damaging Fahrenheit 9/11 movie came out. He didn't make vitriolic accusations at Kerry over the movie, and let the storm pass. Kerry should immediately drop the Swift Boat controversy and let it play itself out, while he concentrates on other issues, such as the economy, which are his strength. It seems absurd that we're spending so much in this campaign on things that happened almost 40 years ago, but there is one remaining Vietnam War issue that's really concerning a lot of people (including me). In 1971, Kerry said that American soldiers were committing war crimes "on a day-to-day basis with the full awareness of officers at all levels of command." These atrocities included rape, torture, and cutting off ears, heads and limbs. Statements like these really infuriate many people who were alive at that time. The most visible person who made similar statements in the 70s was actress Jane Fonda, who visited the enemy capital (Hanoi) and made similar statements. Later, Fonda refused to condemn Vietnamese actions that led to the genocide of millions of Cambodians, leading many people to conclude that Fonda, Kerry, and others like them were motivated only by hatred of America, rather than by some abstract anti-war view. (In fact, Jane Fonda was clearly motivated by hatred of her own father, Henry Fonda. Jane and Henry finally "made up" in 1982 when they co-starred in the movie, On Golden Pond.) A lot of young people who don't understand what all the fuss is about should know that it's Kerry's statements about atrocities that are fueling the anger against him. The issue about what ribbons he won while serving is only a proxy for the real issue. Even so, it might not even matter what Kerry said in the 1970s if he repudiated those statements. Jane Fonda has apologized for her actions, but Kerry has never done anything to repudiate his statements and actions from the 1970s. Does Kerry still believe that American soldiers committed atrocities and war crimes on a day to day basis, with the full awareness of officers at all levels of command? As far as I can tell, he still does believe that. Does America want the War on Terror to be led by a man who believes that America itself committed regular atrocities in Vietnam? Probably not, and that's a big problem for Kerry. From the point of view of Generational Dynamics, Kerry has made the same mistake that so many other journalists, pundits and high-priced analysts have been making since the war in Afghanistan began after 9/11. They've all said that when the body bags start coming back, Americans will turn against the War on Terror. They've said that because they don't understand that America today is in a "generational crisis" period, where such an attitude cannot prevail. In the 1970s, <#hreftext ww2010.i.sixties040501 "America was in a "generational awakening" period,"#> which is completely different. Kerry's problems with this issue are self-inflicted -- he has failed to understand the real intensity of feeling about this issue. Kerry should have apologized months ago for his 1970s actions. He could easily have done so, with no harm to himself, by saying that he made mistakes because he was young. (Remember that Bush has apologized for drinking and womanizing when he was young.) At this late date, apologizing for his 1970s actions will not be as credible as it might have been months ago. Still, it's the best chance he has to defuse the Swift Boat campaign and get back to the real issues. =eod =// &&2 e040827 Grand Ayatollah Ali al-Sistani appears to be trumping Moqtada al-Sadr =data ww2010.weblog.y2004.e040827.head Grand Ayatollah Ali al-Sistani appears to be trumping Moqtada al-Sadr in Najaf =data ww2010.weblog.y2004.e040827.keys =data ww2010.weblog.y2004.e040827.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040827.date 27-Aug-04 =data ww2010.weblog.y2004.e040827.txt1 Things could still go wrong, but it appears that the adults are finally disciplining the kids. =data ww2010.weblog.y2004.e040827.txt2 And the use of the words "adults" and "kids" is not just an attempt at humor. It's crucial to understanding what's going on. =inc ww2010.pic sistani.jpg right "" "Ayatollah Ali al-Sistani" As <#hreftext ww2010.i.sixties040501 "I've said many times,"#> Iraq today is in a "generational awakening" period, one generation following the 1980s Iran/Iraq war. America's last awakening period was the 1960s, one generation following World War II. Awakening periods occur in any nation at any time throughout history, one generation past the end of a genocidal crisis war. It's always a generational conflict -- between, on the one hand, the heroes who fought in the war and who have created new institutions and rules to prevent any such war from happening again, and, on the other hand, their children, who always rebel against those institutions and rules. The conflict is between the children and their parents, but it becomes a conflict between the children and any authority figure. Thus, journalists and high-priced analysts who have been warning about a new Iraqi civil war between Sunnis and Shiites for the last year and a half have been completely wrong: No such civil war has ever occurred, throughout history, during an awakening period. It's literally impossible, as I've been saying on this web site for a long, long time. We can expect to see riots, demonstrations and low-level violence, but not the kind of uprising that journalists and high-priced analysts have been warning about. In the Najaf conflict, the "kids" have been Moqtada al-Sadr and his followers, and the "adults" have been the provisional government and, of course, the Americans. Grand Ayatollah al-Sistani holds special power in this situation, because he's a generation older than the leaders of the provisional government. It's his age that gives him the respect of both sides. So what should we expect now (assuming that the current deal in Najaf continues to hold)? One place to look is Iraq's previous awakening period -- in the mid-1940s. By 1948, the riots and demonstrations were so large and widespread that the British were forced to remove their troops from Iraq and had to give up sovereignty over their two air bases in Iraq. Ayatollah al-Sistani certainly remembers that 1948 victory, and so do a lot of other older Iraqis. We can feel pretty certain that the unrest will continue as long as there are American troops and bases in Iraq. =eod =// &&2 e040826 Russian airplane catastrophe, 5 days before Chechen election =data ww2010.weblog.y2004.e040826.head Russian airplane catastrophe, 5 days before Chechen election, heightens Putin's woes in the Caucasus =data ww2010.weblog.y2004.e040826.keys russia =data ww2010.weblog.y2004.e040826.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040826.date 26-Aug-04 =data ww2010.weblog.y2004.e040826.txt1 Al-Qaeda has promised America a terrorist attack prior to our election, =data ww2010.weblog.y2004.e040826.txt2 after their successful attack in Madrid on March 11 just prior to Spain's election. It looks like the terrorists were spectacularly successful in Russia on Tuesday, just a few days prior to Chechnya's presidential election, scheduled for Sunday. Russia has not yet confirmed that yesterday's two simultaneous plane crashes were caused by terrorism, but it's hard to believe that it's anything else. Can anyone forget on 9/11, when a plane hit the first World Trade Center tower, most people thought it was an accident, but quickly changed their minds when another plane hit the second tower? <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus regions - including Chechnya"#> Russia has had dozens of Chechen terrorist attacks in the last couple of years, resulting in hundreds of casualties. Until this week, the most complex and spectacular occurred in October, 2002, when terrorists held hundreds of playgoers hostage in a Moscow theatre. The most brazen was the assassination of Russian President Vladimir Putin's hand-picked Chechen President Akhmad Kadyrov on May 9 of this year. The attack was a major victory for the terrorists, since Kadyrov was killed by a bomb that tore through a heavily guarded section of stadium seats in Grozny, where Kadyrov and other officials were watching a "Victory Day" parade. The terrorists had cleverly planted the bomb, with a remote control device, underneath the stadium seats months earlier. It's easy to see why Putin is loath to admit that his government is victim of yet one more spectacular Chechen terrorist attack. The pace of successful Chechen terrorist attacks is increasing. The troubles are piling up in the Caucasus region, where the Chechen war has been going on for ten years and is spreading into Ingushetia and Dagestan, and <#inc ww2010.weblog.ref e040824b "he's close to war with Georgia"#> over the separatist province of South Ossetia. From the point of view of Generational Dynamics, the Caucasus region is the most dangerous in the world right now, since it's farther into a generational crisis period than even Palestine. The Caucasus region is a major front line in the centuries old war between Orthodox Christians and Muslims. =eod =// &&2 e040825 - New Islamic terrorist group - Bangladesh bombing =data ww2010.weblog.y2004.e040825.head New Islamic terrorist group claims credit for Bangladesh bombing leading to massive unrest and further violence =data ww2010.weblog.y2004.e040825.keys bangladesh, pakistan =data ww2010.weblog.y2004.e040825.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040825.date 25-Aug-04 =data ww2010.weblog.y2004.e040825.txt1 Like Pakistan, Bangladesh is overwhelmingly Muslim but still has excellent relations with the U.S. =data ww2010.weblog.y2004.e040825.txt2 <#inc ww2010.pic india2.gif right "" "India and surrounding countries, including Pakistan and Bangladesh (Source: CNN)"#> One of the reasons for the excellent relations is that the country receives plenty of economic aid from America, totalling $100 million in 2001. Bangladesh is a low-lying country with plenty of rivers. jungles and rain, giving the country a fertile soil that provides bountious crops that feed the burgeoning population. However, almost every year the country is hit with natural calamities -- floods, cyclones, tornadoes, tidal floods -- and requires U.S. assistance to protect human health and encourage economic growth. When the United Nations partitioned India following World War II in order to create a separate country for India's Muslims, apart from its Hindu population, Bangladesh was made part of Pakistan. However, East Pakistan's mostly Bengal population (language: Bengali) was in constant friction with West Pakistan's more multiethnic population (language: Urdu). As a result, East Pakistan broke off as the People's Republic of Bangladesh ("Bengal nation") in 1971. Bangladesh has had a troubled political history since then, marred by several coups. However, the level of violence took a sharp upwards turn last week when an assassination attempt on opposition political leader Sheikh Hasina of the <#stdurl www.albd.org "Awami League party,"#> involving grenades and gun fire, killed 19 persons and injured 200 others at a political rally in Dhaka. This has sparked riots and demonstrations involving tens of thousands of people in cities throughout the nation. There's also been further violence, the worst of which was a mob attack on a passenger train, dousing it in gasoline and setting it on fire. The country has been <#stdurl "www.financialexpress-bd.com/index3.asp?cnd=8/26/2004§ion_id=1&newsid=20190&spcl=no" "practically shut down by a two-day strike"#> (also called a <#stdurl "www.harthal.com/php/showNews.php?newsid=19&linkid=5" hartal#>), and a new hartal and more riots and demonstrations are expected this weekend. On this web site, I try to focus only on things with worldwide strategic significance, and so ordinarily I might not have written about a local disturbance of this type. However, there are two aspects of this situation that are worthy of attention. First, a previously unknown Islamic group, Hikmatul Zihad, has claimed responsibility for the bombings. New Islamic terrorist groups have been springing up around the world, from Egypt, across the southern Asia sub-continent, and then down into the Pacific Islands (where tensions are also growing because of <#hreftext ww2010.i.taiwan040823 "an increasing threat level between China and Taiwan"#>). These Islamic groups are becoming more and more violent, and are linking together in a loosely formed league related to al Qaeda. Second, the level of public response to this act of violence has been much larger than anyone expected. This indicates a level of public fury that can have international effects. Now put these two facts together. The objective of the international Islamic terrorist movement is to use terrorist attacks to spark a civil war that could spiral out of control and spark an Asian and Middle Eastern uprising against the Crusader and Zionist (Christian and Jewish) infidels. They've tried that in Iraq, but it's failed there because <#hreftext ww2010.i.sixties040501 "Iraq is in a generational awakening period"#>, since only one generation has passed since the last crisis war, the Iran/Iraq war of the 1980s. For that reason, a major civil war in Iraq is almost impossible. But other regions are well into generational crisis periods, since three or more generations have passed since the last crisis war. These include <#hreftext ww2010.i.mideast040623 Palestine#>, <#inc ww2010.weblog.ref e040703 Kashmir#>, <#inc ww2010.weblog.ref e040812b "the Caucasus"#>, and now Bangladesh. In the long run, the odds are with the Islamic terrorists. If history is any guide, and it is, then sooner or later, one of these regions will provide the spark that they're looking for. =eod =// &&2 e040824b Georgia President says that war with Russia is 'very close' =data ww2010.weblog.y2004.e040824b.head Georgia President says that war with Russia is 'very close' =data ww2010.weblog.y2004.e040824b.keys russia, georgia =data ww2010.weblog.y2004.e040824b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040824b.date 24-Aug-04 =data ww2010.weblog.y2004.e040824b.txt1 When a head of state becomes as provocative as Saakashvili, it's not a good sign, =data ww2010.weblog.y2004.e040824b.txt2 since it's easy to make a miscalculation. In an <#stdurl "www.liberation.fr/page.php?Article=233085" interview#> with a French newspaper, Georgian President Mikheil Saakashvili raised the level of confrontation with Russia even higher than in his op-ed piece (see <#inc ww2010.weblog.ref e040824 "item"#> below.) According to Saakashvili, Russia has distributed "vast quantities of weapons" to Ossetia, and that "the forces that attacked our positions last week were Russian forces, without any doubt." He added that the pro-Russian Chechen government is ready to send 5,000 Chechen soldiers of Ossetian ethnicity to South Ossetia to support the Russians. He made an additional accusation: That Russia is hiding the number of people being killed in both Chechnya and Ossetia. "The tactics are the same as the Russians use in Chechnya: When there are battlefield deaths, they risk their lives to go and recover the bodies, and then they make the bodies disappear." In response to a question on whether he was threatening war, he replied: "If a war is begun, it will be between Georgia and Russia, not between Georgians and Ossetians. It's absolutely necessary to avoid ethnic confrontations. We're very close to a war. The population must be prepared [for it]. But of course, that's the worst of the things that can happen; I have no intention of provoking a war - I'm not insane!" He proposed an international conference on the issue, something that Russia currently opposes. =eod =// &&2 e040824 Georgian President lays out South Ossetia battle lines =data ww2010.weblog.y2004.e040824.head Georgian President lays out South Ossetia battle lines to American audience =data ww2010.weblog.y2004.e040824.keys =data ww2010.weblog.y2004.e040824.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040824.date 24-Aug-04 =data ww2010.weblog.y2004.e040824.txt1 Mikheil Saakashvili is asking the West to side with Georgia against Russia =data ww2010.weblog.y2004.e040824.txt2 in <#stdurl http://online.wsj.com/article/0,,SB109321559762798022,00.html "an op-ed piece"#> in Monday's Wall Street Journal. <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus regions"#> Buried in 1000 words of politician-ese, Georgian President Mikheil Saakashvili laid down the battle lines. Here's what he said explicitly and what it really means for the future of the region: He said: South Ossetia is "a small but integral area of our country." He means: South Ossetia will not be allowed to secede from Georgia and join North Ossetia as part of Russia. He said: Not long ago, the people of Georgia launched a bold and uncertain experiment. After years of decline and chronic lawlessness, they stood up last fall to defend their democracy in what has since been called the Rose Revolution. He means: He's President now, after massive public demonstrations forced Eduard Shevardnadze out of office a year ago. Shevardnadze, born in Georgia in 1928, lived through the massive Stalinist purges of the 1930s and the Nazi invasion of World War II. He later rose high in the Soviet KGB ranks, and became founding President of Georgia when the Soviet Union dissolved. From the point of view of Generational Dynamics, the children in the generation raised during a crisis war grow up to become highly risk-averse, and try to avoid a new major war at any cost. Shevardnadze carefully led the country through a nascent civil war throughout the 1990s by careful compromise. The younger generation officials that run the government now, including Mikheil Saakashvili, born 1968, are much more willing to take risks and risk confrontations. So when Saakashvili talks about the Rose Revolution in which he replaced Shevardnadze last year, he's also saying that times have changed, that policies have changed, and that Georgia is no longer willing to go as far as before to compromise with Russia and avoid a serious confrontation. He said: "The first step in Georgia's peaceful reunification came this May. Courageous activists in the Black Sea region of Ajara forced out a local dictator who for years outlawed political pluralism and free media, undermined efforts to hold democratic elections and threatened to secede from Georgia. Afraid to face the people he once terrorized, Ajara's former dictator fled to Moscow, where hardliners generously offered him safe haven." As we described at length in <#inc ww2010.weblog.ref e040819 "in a piece I wrote several days ago,"#> the situation in South Ossetia is very different from the situation in Ajara. The fact that Saakashvili is using Ajara as a model for South Ossetia is an ominous sign (caused by his relative youth) that he doesn't understand the situation. He said: "For millennia, Georgia has prided itself on being a multi-ethnic, open-minded society. Ethnic and religious tolerance has always been a central component of our identity." This is true and it would be interesting if Georgia had not also been, for millennia, a central battlefield for major genocidal Asian wars. For centuries, the Caucasus region has been the scene of major wars between the Orthodox Christian and Muslim civilizations. He said: "Unfortunately, the attitude of South Ossetian authorities and certain elements within the Russian government have brought the situation to the brink of a major armed conflict. While Georgia has gone to great lengths not to respond to dangerous provocations, I have also made it clear that the security of our people is my highest priority and we will defend our citizens from aggression." He means: It's Russia that's at fault for ongoing violence, not Georgia. This is an interesting statement in view of the fact that <#stdurl "www.itar-tass.com/eng/level2.html?NewsID=1149771&PageNum=0" "a recent poll of Russian men and women"#> indicates that most Russians blame Saakashvili for the current troubles. Russian public opinion of Saakashvili has been worsening dramatically, as only 11% still have confidence in him, down from 27% just two months ago. He said: "Paramilitary groups and arms deliveries from Russia have played a major role in the escalation of tensions. ... That's where almost all of the arms, drugs and other contraband enters South Ossetia from Russia through the only road link into the region -- the Roki tunnel." He means: Once again, the problem is that Russians are using the Roki tunnel, which penetrates the Caucasus mountains and connects North and South Ossetia, and so Russians are at fault. He said: "I want to continue to have a productive working relationship with Moscow, but when it comes to defending our citizens, there is a distinct line representing protection of democratic values and territorial integrity that needs to be respected." This is an explicit warning to Russia that he's willing to risk a larger confrontation. He said: "A good start would be an active role for the international community -- specifically the United States, European Union and the Organization for Security and Cooperation in Europe (OSCE) -- in high-level negotiations among the parties directly involved. ... Therefore, an international peacekeeping operation that is balanced and takes into consideration Georgia's Euro-Atlantic partners should be mandated in South Ossetia to provide security for the population and ensure the conditions for political negotiations towards a lasting settlement. ... So, third, it is imperative to establish a joint Georgian-Russian customs and border checkpoint at the Roki tunnel. Russia has continued to balk at the establishment of such a checkpoint, even though it acknowledges that South Ossetia is indeed part of Georgia's territory." This is a major policy disagreement between Georgia and Russia. If South Ossetia is part of Georgia, then why are Russian troops stationed there, and why can't Georgian troops move in to prevent smuggling through the Roki tunnel? Saakashvili would like to replace Russian troops as peacekeepers with troops from America and Europe. Russia is firmly opposed to allowing Western troops into the Caucasus region at all. The Caucasus region is one of the most dangerous regions of the world right now. From the point of view of Generational Dynamics, it's even more dangerous than the Palestine region, since it's farther into a crisis period. With low-level violence continuing in South Ossetia, and with a ten-year old war going on in the nearby Russian province of Chechnya, this is a major front line in the centuries old war between Orthodox Christians and Muslims. =eod =// &&2 e040823 Taiwan to launch advertising blitz in US and Europe for UN membership =data ww2010.weblog.y2004.e040823.head Taiwan to launch advertising blitz in US and Europe for UN membership =data ww2010.weblog.y2004.e040823.keys =data ww2010.weblog.y2004.e040823.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040823.date 23-Aug-04 =data ww2010.weblog.y2004.e040823.txt1 The advertising campaign, beginning today, will target billboards, newspapers, radio and TV in New York, Washington, and some European cities, =data ww2010.weblog.y2004.e040823.txt2 according to <#stdurl "www.dailytimes.com.pk/default.asp?page=story_22-8-2004_pg4_6" "a news report."#> China is opposed to UN membership for Taiwan since that would add to the perceived independence of Taiwan. China considers Taiwan to be part of China, and will go to war rather than permit Taiwanese independence. The adjoining analysis on how <#hreftext ww2010.i.taiwan040823 "Southeast Asian nations are being forced to pick sides"#> between China and Taiwan describes how tensions are rising in the Pacific region. Singapore Prime Minister Lee Hsien Loong says that the Taiwanese are ignorant and naïve with respect to Beijing's intentions, and that Taiwan will be destroyed no matter who wins a war. This is also true of almost all Americans on the Taiwan issue except, of course, those who read this web site. This naïveté seems to be quite apparent with this proposed advertising blitz. I hope I get a chance to see one of these ads, because it sounds like waiving a red flag in front of a bull. =eod =// &&2 e040820 Bear Stearns predicts oil prices will fall by almost half =data ww2010.weblog.y2004.e040820.head Bear Stearns predicts oil prices will fall by almost half =data ww2010.weblog.y2004.e040820.keys =data ww2010.weblog.y2004.e040820.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040820.date 20-Aug-04 =data ww2010.weblog.y2004.e040820.txt1 As oil reaches $49.06 per barrel this morning, Stearns predicts that prices will collapse to $25 per barrel next year. =data ww2010.weblog.y2004.e040820.txt2 The prediction by Bear Stearns analyst Frederick Leuffer came in private note to clients earlier this week, according to <#stdurl money.cnn.com/2004/08/19/markets/bubble_crude/ "a CNN news report."#> The reasoning is as follows: During the last year, concerns about oil supplies have caused companies to increase their own private inventories of oil. Indeed, U.S. commercial inventories of crude oil are 5% above last year's level, according to <#stdurl "online.wsj.com/article/0,,SB109294862157996439,00.html?mod=home_whats_news_us" "the Wall Street Journal."#> Therefore, the Stearns reasoning continues, this almost panic-like stocking up of oil inventories has created an "oil bubble." Once the inventory build-up ends, according to Stearns' research, the actual market fundamentals support only a $25 per barrel price. Prices close to $25 would be maintained even if a terrorist act caused a temporary supply shock, because of the large inventories of oil on hand. This is definitely a minority position. Most analysts believe that there's an inventory build-up bubble that has added $10 to the price of oil, but has not doubled the price. This would indicate that oil prices will fall to the $30s. However, other analysts believe that high oil prices are here to stay. The main reason is the ever-increasing demand from China and India. China's crude imports increased by 40% over last year, and India's are increasing at the rate of 11% over last year. Just a few years ago, there was only one massive oil consumer - the U.S. Today, there are three, all competing for a limited oil supply. It's hard to see how oil prices are going to fall dramatically unless at least one of these three economies has a deep recession. =eod =// &&2 e040819b China's demand for oil up 40% over last year =data ww2010.weblog.y2004.e040819b.head China's demand for oil up 40% over last year =data ww2010.weblog.y2004.e040819b.keys =data ww2010.weblog.y2004.e040819b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040819b.date 19-Aug-04 =data ww2010.weblog.y2004.e040819b.txt1 Oil prices surged up again to $47.80 this morning, a new modern record, =data ww2010.weblog.y2004.e040819b.txt2 on news that Russian oil giant Yukos is continuing its descent into bankruptcy, and violence continues in Iraq. Prices are up more than $10 per barrel since the end of June, as a new record has been reached almost every day. The Wednesday announcement by OPEC (Organization of the Petroleum Exporting Countries) that it would increase oil production next month does not appear to have stemmed the price rise. For the last nine days, threats by terrorist insurgents in Iraq have forced export cutbacks in oil exports from that country by 50%. On top of that, there are also concerns that Saudi Arabia's old oil fields have reached their peak. These concerns are magnified by a <#stdurl "www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=6017004" "new report"#> from China's State Statistical Bureau that China has imported 40% more crude so far this year than in 2003, and that China's refiners have processed 17.2 percent more crude. These two figures together indicate that China is increasingly dependent on foreign sources of oil. In fact, one of China's principal international suppliers is Yukos. From the point of view of Generational Dynamics, China is in a generational "unraveling" period, similar to America in the 1990s or Japan in the 1980s, where societal and cultural norms of all kinds, including financial norms, appear to break down. Japan and America both experienced large stock market bubbles during these periods, with the bubbles ending in 1990 and 2000, respectively. China is now in a similar stock market bubble. When it bursts, it will reduce China's demand for imported oil, but it will also have significant negative effects on the global economy in other ways. =eod =// &&2 e040819 Putin calls Georgia's Ossetia policy a 'stupid decision' =data ww2010.weblog.y2004.e040819.head Putin calls Georgia's Ossetia policy a 'stupid decision' =data ww2010.weblog.y2004.e040819.keys russia, georgia =data ww2010.weblog.y2004.e040819.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040819.date 19-Aug-04 =data ww2010.weblog.y2004.e040819.txt1 Last week's cease-fire agreement between Tbilisi, Georgia's capital, and its secessionist South Ossetia province broke down =data ww2010.weblog.y2004.e040819.txt2 within hours after the agreement was reached. Low-level violence between Ossetians and Georgian troops has continued unabated since then, resulting in about a dozen casualties in the last few days. <#inc ww2010.pic osset.gif right "" "North and South Ossetia (Source: BBC)"#> Russian President Vladimir Putin <#stdurl "www.civil.ge/eng/article.php?id=7651" "cancelled his scheduled trip"#> to Tbilisi today, saying that it would be "inappropriate" amid the tension. "I want to remind people that this conflict [in South Ossetia] erupted after the collapse of the Soviet Union. After becoming independent Georgia announced that it is revoking autonomous status of South Ossetia. Ethnic conflict had erupted after this very stupid decision." In ordinary times, a remark like this might simply be ignored. But the entire Caucasus region is in a "generational crisis period," and even little remarks can inflame passions. Although Putin's language has been ambiguous as to which side he favors in the dispute between Georgia and South Ossetia, most South Ossetians have Russian passports, and the Georgians believe that Russia favors the separatist side. Georgian President Mikhail Saakashvili has stated that Georgia will not tolerate loss of its "territorial integrity." <#inc ww2010.pic caucas3s.gif right "" "Troubled areas in Caucasus regions"#> Since the breakup of the Soviet Union, Georgia has been threatened by demands for greater autonomony from three of its provinces, Ajara, Abkhazia and South Ossetia. While Georgia is mostly Orthodox Christian, Ajara has been historically Muslim; but thanks to many conversions to Christianity since the breakup of the Ottoman empire in the 1920s, Ajara's large cities are now mostly Christian. Although Islam still predominates in rural areas, Ajara is is ethnically similar to Georgia. As a result, after ten years of confrontation, Ajara agreed to submit to Tbilisi's control a couple of months ago. The Ajara success story is not expected to be repeated in Abkhazia and South Ossetia, according to <#stdurl "www.icg.org/home/index.cfm?l=1&id=2907" "a report"#> by the <#stdurl www.icg.org "International Crisis Group."#> While Ajara has never tried to secede from Georgia, the other two provinces have done so. And while Russia has no interest in Ajara, the Russians have offered the Ossetians and Abkhazians Russian citizenship. Complicating the matter further is the fact that Russia has military bases in both Abkhazia and South Ossetia. Saakashvili has indicated his intention for Georgia to join Nato, which would bring Western troops into Georgia. Thus, Abkhazia and South Ossetia are not going to agree to Tbilisi control as easily as Ajara did. =eod =// &&2 e040818b Yukos still very close to bankruptcy as oil tops $47 per barrel =data ww2010.weblog.y2004.e040818b.head Yukos still very close to bankruptcy as oil tops $47 per barrel =data ww2010.weblog.y2004.e040818b.keys russia, yukos =data ww2010.weblog.y2004.e040818b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040818b.date 18-Aug-04 =data ww2010.weblog.y2004.e040818b.txt1 The U.S. State Department is expressing concern about the fate of Yukos. =data ww2010.weblog.y2004.e040818b.txt2 State Dept. deputy spokesman Adam Ereli <#stdurl "www.voanews.com/Editorials/article.cfm?objectID=143F58C9-17BB-46BB-9C2356E0A3B9F28A" "says that"#> the Yukos case should be resolved "in accordance with the rule of law and due process" and "without influence from political considerations." That's going to be a good trick now, as the trial former Chief Executive Mikhail Khodorkovsky, whose trial on tax evasion and fraud, is just beginning. Khodorkovsky was jailed in October 2003 just after he announced plans to challenge Russian President Vladimir Putin politically. I must have been dreaming when <#inc ww2010.weblog.ref e040813c "I wrote last Friday"#> that the Kremlin had backed down on nationalizing Yukos without paying investors. Yukos' assets are still frozen, and the Kremlin is still making it clear that it will tear Yukos apart and sell the pieces to pay back taxes. It's pretty clear that the pieces will be sold to Kremlin-backed businesses at very low prices, effectively nationalizing Yukos at little cost to the Kremlin. With its assets and bank accounts frozen, Yukos is now saying that the company is just a few days from bankruptcy. If that happens, then the first in line to get paid will be the major shareholder Group Menatep, which is controlled by Mikhail Khodorkovsky. This will be very displeasing to the Kremlin, which will, we can be sure, find a way to prevent Khodorkovsky from benefiting in any way from bankruptcy. Analysts had been hoping that oil prices would come down, once the uncertainty surrounding last weekend's Presidential recall referendum in oil producer Argentina had been resolved. That uncertainty now seems to be removed, and prices did fall slightly for a few hours on Monday, but the concern over a Yukos bankruptcy pushed them back up again. Today they reached yet another modern record, at over $47 per barrel. At this writing (12:15 pm ET), the price is $47.16. The State Department statement says, "The appearance of a lack of due process and a threat to private property rights have resulted in both the Russian and the international business communities being on their guard. The way the case has been handled also raises questions about respect for investment rights in Russia and has led to increased capital flight and a decline in new investment that is certainly having an impact on the Russian economy." =eod =// &&2 e040818 The al-Sadr standoff in Najaf is reaching a climax =data ww2010.weblog.y2004.e040818.head The al-Sadr standoff in Najaf is reaching a climax =data ww2010.weblog.y2004.e040818.keys =data ww2010.weblog.y2004.e040818.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040818.date 18-Aug-04 =data ww2010.weblog.y2004.e040818.txt1 Are you old enough to remember when Mark Rudd took over Columbia University in April, 1968? =data ww2010.weblog.y2004.e040818.txt2 <#inc ww2010.pic alsadr.jpg right "" "Moqtada al-Sadr"#> Fighting is continuing in the southern Iraqi city of Janaf as Shiite rebels battle US-led Coalition troops. The rebels are mostly angry unemployed young men, led by the young Shiite cleric Moqtada al-Sadr, who is holed up in Imam Ali Mosque, the holiest Shiite Muslim site in Iraq. He's threatened to blow up the Mosque and everyone in it if America tries to forcibly remove him. A confrontation is near. If you want to better understand the psychology of what's going on with al-Sadr takeover of Najaf today, there is no better way than by comparing it to the takeover of Columbia University by Mark Rudd in April, 1968. <#inc ww2010.pic markrudd.jpg right "" "Mark Rudd in 1968"#> I've <#hreftext ww2010.i.sixties040501 "written in the past"#> about how Iraq today, one generation after the Iraq/Iraq war, is very much like America in the 1960s, one generation past World War II. Nowhere is the similarity more striking than in what's happening today. Mark Rudd was part of the violent Students for a Democratic Society and Weather Underground. He led a large group of protesting students from New York's Columbia University to take over several administration buildings on the campus, and refuse to leave. As conditions for ending the "sit-in," he demanded that the University stop supporting the Vietnam War and end Columbia's "racist" attitudes. The rhetoric of the time is very interesting to read today. Columbia president Grayson Kirk said,

Our young people, in disturbing numbers, appear to reject all forms of authority, from whatever source derived, and they have taken refuge in a turbulent and inchoate nihilism whose sole objectives are destruction. I know of no time in our history when the gap between the generations has been wider or more potentially dangerous. As <#hreftext ww2010.i.sixties040501 "we've written"#>, America in the 1960s was in a generational "awakening" period, and such periods are characterized by hostility between older and younger generations. The phrase "generation gap" was commonly used in the media throughout the 1960s to describe the vast difference in world view between the older generation of heroes who had fought in World War II and the younger generation of college kids with no personal memory of World War II. Grayson Kirk was wrong, incidentally: Similar generation gaps had also occurred during previous awakening periods in the 1820s and 1890s. On April 22, Mark Rudd wrote an open letter to Grayson Kirk, responding to the above quote. Here is the letter in its entirety:

Dear Grayson, Your charge of nihilism is indeed ominous, for it it were true, our nihilism would bring the whole civilized world, from Columbia to Rockefeller Center, crashing down upon all our heads. Though it is not true, your charge does represent something: you call it the generation gap. I see it as a real conflict between those who run things now--you, Grayson Kirk--and those who feel oppressed by, and disgusted with, the society you rule-we, the young people. You might want to know what is wrong with this society, since, after all, you live in a very tight self-created dream world. We can point to the war in Vietnam as an example of the unimaginable wars of aggression you are prepared to fight to maintain your control over your empire (by now you've been beaten by the Vietnamese, so you call for a tactical retreat). We can point to your using us as cannon fodder to fight your war. We can point to your mansion window to the ghetto below you've helped to create through your racist University expansion policies, through your unfair labor practices, through your city government and your police. We can point to this University, your University which trains us to be lawyers and engineers, and managers for your IBM, your Socony Mobil, your IDA, your Con Edison (or else to be scholars and teachers in more universities like this one). We can point, in short, to our own meaningless studies, our identity crises, cogs in your corporate machines as a product of and reaction to a basically sick society. Your cry of "nihilism" represents your inability to understand our positive values. If you were ever to go into a freshman CC [Contemporary Civilization] class you would see that we are seeking a rational basis for society. We do have a vision of the way things could be: how the tremendous resources of our economy could be used to eliminate want, how people in other countries could be free from your domination, how a university could produce knowledge for progress, not waste consumption and destruction (IDA), how men could be free to keep what they produce, to enjoy peaceful lives, to create. These are positive values, but since they mean the destruction of your order, you call them "nihilism." In the movement we are beginning to call this vision "socialism." It is a fine and honorable name, one which implies absolute opposition to your corporate capitalism and your government; it will soon be caught up by other young people who want to exert control over their own lives and their society. You are quite right in feeling that the situation is "potentially dangerous." For if we win, we will take control of your world, corporation, your University and attempt to mold a world in which we and other people can live as human beings. Your power is directly threatened, since we will have to destroy that power before we take over. We begin by fighting you about your support war in Vietnam and American imperialism - IDA and the School of International Affairs. We will fight you about your control of black people in Morningside Heights, Harlem, and the campus itself. And we will fight you about the type of mis-education you are trying to channel us through. We will have to destroy at times, even violently, in order to end your power and your system - but that is a far cry from nihilism. Grayson, I doubt if you will understand any of this, since your fantasies have shut out the world as it really is from your thinking. Vice President Truman says the society is basically sound; you say the war in Vietnam was a well-intentioned accident. We, the young people, whom you so rightly fear, say that the society is sick and you and your capitalism are the sickness. You call for order and respect for authority; we call for justice, freedom, and socialism. There is only one thing left to say. It may sound nihilistic to you, since it is the opening shot in a war of liberation. I'll use the words of LeRoi Jones, whom I'm sure you don't like a whole lot: "Up against the wall, motherfucker, this is a stick-up." Yours for freedom, Mark The 1968 media was extremely supportive of Mark Rudd and extremely hostile to President Johnson. That led Mark Rudd to believe that he would receive enormous popular support for his actions. In fact, most Americans, even most college students who opposed the war, considered Mark Rudd to be a criminal. The worldwide media have been extremely supportive of Moqtada al-Sadr and its constant talk of "Shiite uprisings" throughout the country. Such uprisings have, of course, never occurred, and in fact most Iraqis, even those who dislike American occupation, dislike al-Sadr even more. There is one enormous difference between Mark Rudd in 1968 and Moqtada al-Sadr today: Mark Rudd did not have a large arsenal of guns, missiles and explosives, and al-Sadr does. That makes the al-Sadr situation much more explosive, both literally and figuratively. Mark Rudd's sit-in ended a few days later on April 30, when 1,000 police raided the campus, evicting students from the occupied buildings. The Iraqi provisional government is planning something similar. We can only wait and how it will unfold. =eod =// &&2 e040817 The Consumer Price Index falls in July =data ww2010.weblog.y2004.e040817.head The Consumer Price Index falls in July =data ww2010.weblog.y2004.e040817.keys =data ww2010.weblog.y2004.e040817.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040817.date 17-Aug-04 =data ww2010.weblog.y2004.e040817.txt1 For the second month in a row, the CPI was lower than analysts expected, and indicates a deflationary trend. =data ww2010.weblog.y2004.e040817.txt2 The CPI fell by 0.1%, indicating that overall prices were slightly lower in July than they were in June. The "Core index," which is like the CPI except that it doesn't include highly volatile food and energy prices, increased 0.1%. Both of these figures were lower than expected, for the second month in a row. The following table shows the values of these figures for each month so far in 2004:


                        Changes from preceding month    
                                    2004                
                     Jan. Feb. Mar. Apr.  May June July  
   ----------------- ---- ---- ---- ---- ---- ---- ---- 
   CPI                .5    .3   .5   .2   .6   .3  -.1 
   ----------------- ---- ---- ---- ---- ---- ---- ---- 
   "Core index"       .2    .2   .4   .3   .2   .1   .1 
   ----------------- ---- ---- ---- ---- ---- ---- ----

It was after seeing the May figures that the analysts were saying that inflation was beginning to rise out of control. That was because the CPI seemed to be spiking up rapidly, although the core index remained steady. It was precisely the May figure that convinced the Fed to increase interest rates earlier this month. They were not dissuaded by the low June figures, perceiving them as a one-time aberration. In fact, it's clear from the above table that the aberration goes in the other direction. The core index, which is the value that the Fed is most interested in, has been very low all year, with a one-time high-side aberration in March. Since then, it's been decreasing steadily. As <#inc ww2010.weblog.ref e040717 "we've previously said,"#> if you look at long-term trends instead of just a few months, we're actually in a long-term deflationary period. We actually expect prices to fall by 30% in the next few years. The Fed made a mistake by increasing the funds rate earlier this month. We hope that the Fed will not compound the error by keeping its promise to raise interest rates further throughout the fall. =eod =// &&2 e040815b Will the Euro currency collapse? =data ww2010.weblog.y2004.e040815b.head Will the Euro currency collapse? =data ww2010.weblog.y2004.e040815b.keys =data ww2010.weblog.y2004.e040815b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040815b.date 15-Aug-04 =data ww2010.weblog.y2004.e040815b.txt1 International investment firm Morgan Stanley is warning that it's a real possibility, =data ww2010.weblog.y2004.e040815b.txt2 which shouldn't be surprising in view of the weakness of the European economy (see <#inc ww2010.weblog.ref e040815 "next item"#>). <#inc ww2010.pic euro.gif right "" "Euro currency"#> The <#stdurl www.morganstanley.com/ourviews/articles/euro_wreckage_report.pdf "Morgan Stanley report (PDF)"#> originally came out in January, but the company publicized it this week in a highly visible full page ad in the Wall Street Journal. When a company is willing to pay tens of thousands of dollars to publicize such a controversial finding, it captures one's attention. Here is a summary of the the report's reasoning:

Many of the small countries (plus Spain) that have pursued a more virtuous budgetary policy in the past several years are seriously angered by the slippage in budget deficits in large countries such as Germany and France. This is because rising budget deficits in the large countries, due to their sheer size, are seen as raising the borrowing costs for all governments within EMU, irrespective of the consolidation efforts that the smaller countries have made.
The new EU Constitution is unlikely to be agreed upon in 2004, and therefore unlikely to be agreed upon at all.
Bond yields are liable to differ significantly between the "more and less [fiscally] virtuous countries." In fact, thanks to the provisions of the Maastricht treaty that formed the EU, "the credit quality of a fiscally profligate country could deteriorate quite significantly." Thus, instead of converging to a single market, the EU may diverge further into separate markets for bonds and even for equities.
There is nothing really to prevent a country from seceding from the EU and issuing its own currency again, in order to depreciate it. There would be costs, since existing contracts would have to be honored in more expensive Euros, but devaluation might save more money in the long run.
On the other hand, if political pressures force the ECB (European Central Bank) to weaken the Euro currency, then a country could secede and issue its own less deflationary currency. In this case, it would save money on existing cross-border contracts, since they would have to be honored in cheaper Euros.
Individual central banks are still fully operational, making secession relatively easy for any country that wants to do it. Ironically, even the Euro coins and notes are still issued on a country by country basis, and can easily be distinguished by country of origin, so a country could use its local Euros as a national currency until the new national currency is available.

Based on this analysis, the Morgan Stanley report forecasts that the euro will weaken considerably in the next 6-12 months, and long-term investors "should allow for the possibility of the euro falling apart" at some time in the future. From the point of view of Generational Dynamics, a serious split in the European Union is very likely. There have been numerous wars between France, Germany and England for a millennium, and Generational Dynamics predicts that we have not seen the last of them. A splitup of the euro zone is something that we should be expecting. =eod =// &&2 e040815 Economists raising concerns about jobs =data ww2010.weblog.y2004.e040815.head More economists are raising concerns about job issue in Europe and America =data ww2010.weblog.y2004.e040815.keys =data ww2010.weblog.y2004.e040815.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040815.date 15-Aug-04 =data ww2010.weblog.y2004.e040815.txt1 Economists have been consistently dead wrong for two years on jobs, =data ww2010.weblog.y2004.e040815.txt2 as they predicted that hiring was just about to surge. This has been going on at least since early 2003. Each month they would say, "Employment is a lagging indicator - now that the recession is over, we'll see lots of hiring soon." Early in 2004 they were saying, "We just don't understand it. Employment has to take off soon." And yet it hasn't happened. But now we're seeing more economists express the view that "something is going on that we don't understand." According to <#stdurl "www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/08/14/MNG51886891.DTL" "today's San Francisco Chronicle"#>, the fact that California lost 17,300 jobs in July, when we're supposed to be in a recovery, has "left regional economists disappointed and puzzled." And, "There is a growing camp of economists who believe today's brutally tough labor market is not a temporary American oddity," according to an article in <#stdurl msnbc.msn.com/id/5709444/site/newsweek/ "the current international edition of Newsweek magazine."#>. There's no scarcity of possible villains. The price of oil, getting close to $50 per barrel, is receiving a great deal of the blame. Alan Greenspan <#stdurl "www.ctnow.com/business/hc-greenspancolumn.artaug15,1,3034632.story?coll=hc-headlines-business" "is receiving some criticism for increasing interest rates"#> this week. <#inc ww2010.weblog.ref e040809 "I agree with this criticism"#>, since we're in a long-term deflationary period. The reason that we're in a deflationary period, <#inc ww2010.weblog.ref e040717 "as we've said"#>, is that the country as a whole -- federal, state and local governments, businesses, labor unions, public schools, colleges, financial institutions, military, and so forth -- has become increasingly bureaucratic and resistant to change, and is producing products and services that are increasingly obsolete. We've been pointing out this obvious concept out for two years, but economists seem completely oblivious to it. They expect the economy to act the way it did in the 1991 or 1962 recessions, but they don't understand that the structure of today's economy is completely different from anything we've seen since 1945. You have to go back to the late 1920s to find an economy which is so bureaucratic and inflexible, and it was only cured by the mass bankruptcies of the 1930s depression. From the point of view of Generational Dynamics, Europe is in roughly the same situation as America. Our major financial cycles are mostly synchronized, and it's to be expected that both would become increasingly bureaucratic at the same time. In fact, it's a little noticed fact that America and Europe have gone through parallel generational financial cycles for centuries. The major historical financial credit bubbles have been as follows:

These are the major international bubbles of the last few centuries. The reason that they're approximately evenly spaced at roughly 70-80 years (the approximate maximum length of a human lifespan) is that a new major credit bubble only occurs when the people in the generation who remember the wild, undisciplined nature of the previous credit bubble all disappear (retire or die), all at the same time. In each of the historical bubbles, the crash was a complete surprise to all the intelligent people of the day. There was no lack of experts in 1929, but if do as I did and you go back and look at what happened then, you discover that the experts of the the time (with the except of a few unpopular Cassandras) had no idea what was going on, even as late as a month or two after the crash had begun. =eod =// &&2 e040813c Kremlin backs down and hires Dresdner to evaluate Yukos subsidiary =data ww2010.weblog.y2004.e040813c.head Kremlin backs down and hires Dresdner to evaluate Yukos subsidiary =data ww2010.weblog.y2004.e040813c.keys russia, yukos =data ww2010.weblog.y2004.e040813c.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040813c.date 13-Aug-04 =data ww2010.weblog.y2004.e040813c.txt1 Russia's ping-pong nationalization of Yukos appears to have ponged back in the direction of sanity, =data ww2010.weblog.y2004.e040813c.txt2 as <#stdurl mosnews.com/money/2004/08/13/yukosappraisal.shtml "the government hired a Western investment banking firm"#>, <#stdurl www.drkw.com "Dresdner Kleinworth Wassertein"#> to value Yukos' <#stdurl www.yukos.com/EP/Yuganskneftegaz.asp "Yuganskneftegaz subsidiary"#>. To recap: The Kremlin has assessed Yukos with an enormously high back bill for past taxes, far exceeding the company's available cash. That might be OK if it had been done the right way: Give the company a chance to sell off its own assets at market value, to pay the tax bill. Instead, the Kremlin has been persuing one smelly maneuver after another, in what appears to be nothing more than a scheme to nationalize Yukos and gain all its assets for its own purposes. The planned mechanism was for the Kremlin to sell off Yukos' assets itself; in particular, the Yuganskneftegaz subsidiary would be sold to a Kremlin-controlled oil firm for a fraction of Yuganskneftegaz' true market value. This appeared to be a reversion to the old Soviet ways, where the Kremlin could simply take any company's assets it wished, at any time, for any reason or for no reason. But it's a new world for Russia. If it wants international investments, it has to convince the world that it plays by international rules, not its own Soviet rules. That's why the Kremlin has finally backed down on its plan. =eod =// &&2 e040813b US trade deficit surged dramatically in July =data ww2010.weblog.y2004.e040813b.head US trade deficit surged dramatically in July, thanks to high oil prices and a global economic slowdown =data ww2010.weblog.y2004.e040813b.keys =data ww2010.weblog.y2004.e040813b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040813b.date 13-Aug-04 =data ww2010.weblog.y2004.e040813b.txt1 Alan Greenspan's June 30 committee meeting expressed concern about a "wrenching" adjustment =data ww2010.weblog.y2004.e040813b.txt2 to rising deficits, but I think even he's surprised at how quickly it's risen since then. <#inc ww2010.pic wsj0813.gif right "" "Trade deficit, 2001-Present. (Source: WSJ)"#> The dramatic increase in July was caused by a "perfect storm" of several factors: high oil prices are costing us more; <#stdurl "quote.bloomberg.com/apps/news?pid=10000006&sid=a5TBNhRKyD8E&refer=home" "a slowing European economy"#> is reducing our ability to export goods; and we're importing goods from China. Even before July's surge, the June 30 meeting of Alan Greenspan's Federal Open Market Committee, the meeting that sets short-term interest rates, expressed concern about the increases in deficit spending. According to <#stdurl federalreserve.gov/fomc/minutes/20040630.htm "the minutes of the meeting"#>:

The sizable current account deficit could be viewed as reflecting very low levels of national saving, in both its government and private components, in relation to investment opportunities in the United States that were very attractive. The staff noted that outsized external deficits could not be sustained indefinitely. However, the historical evidence indicated that such deficits could be quite persistent, and the adjustment of imbalances was not necessarily imminent. The adjustment, once under way, might well proceed in a relatively benign fashion, particularly if fiscal, monetary, and trade policies were appropriate, but the possibility that the adjustment could involve more wrenching changes could not be ruled out. The minutes go on to indicate that the Fed can do little to affect external imbalances, but seemed surprisingly pessimistic that even fiscal policy could have an effect:

[The] adjustment would involve shifts in demand and output both domestically and abroad, and changes to U.S. fiscal policy alone probably would not be sufficient to foster the adjustment. Meanwhile, this week's increase in short-term interest rates to 1.50% from 1.25%, set by Tuesday's Federal Open Market Committee meeting, appears to be having harsh effects, since stocks have fallen sharply in America, Asia and Europe since then. This should not be surprising. An interest rate increase has immediate effects. Corporate borrowing immediately becomes more expensive, leaving less money for labor and other activities. Monthly job reports have been increasingly grim for three months, and the interest rate increase should negatively affect the next report, due on September 3, the morning after President Bush's acceptance speech at the Republican National Convention. The FOMC minutes quoted above do not describe what a "wrenching" adjustment means, but one possibility is what Generational Dynamics has been predicting since 2002: A sharp fall in stock prices to less than one-half their current value. =eod =// &&2 e040813 Russia plans to increase its defense budget by 40% next year =data ww2010.weblog.y2004.e040813.head Russia plans to increase its defense budget by 40% next year =data ww2010.weblog.y2004.e040813.keys russia =data ww2010.weblog.y2004.e040813.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040813.date 13-Aug-04 =data ww2010.weblog.y2004.e040813.txt1 The plan is announced as rising tensions indicate Georgia may be close to war in South Ossetia. =data ww2010.weblog.y2004.e040813.txt2 The substantial defense budget increase <#stdurl news.bbc.co.uk/2/hi/europe/3561542.stm "will be used to increase the number of full-time regiments"#>, as opposed to conscript units. The money will also be used to improve pay and conditions of service for troops. The funding announcement comes at <#inc ww2010.weblog.ref e040812b "a time of continuing problems in Russia's southern provinces"#>, including the continuing ten-year-old Chechen war. Meanwhile, envoys from Russia, Georgia and South Ossetia are now in Tbilisi, Georgia's capital, trying to work out a compromise to end violence in the region. This is amid rising concerns that <#stdurl news.bbc.co.uk/2/hi/europe/3560816.stm "that Georgia's South Ossetia situation is worsening"#>. "The concentration of arms and armed men in the conflict zone seems to have reached the dangerous level beyond which the process of beginning full-scale military action could unfortunately become unmanageable," says Izvestiya in an editorial. South Ossetian leaders have declared their intention to unite with neighboring North Ossetia, which is in Russia. Tblisi has announced its intention to keep South Ossetia in Georgia, and Russia is thought to be encouraging the South Ossetians. A particular issue is that Tbilisi has demanded that its forces control the South Ossetian entrance to the tunnel beneath the Caucasus Mountains linking North Ossetia, in Russia, to South Ossetia in Georgia, supposedly to clamp down on the trade in contraband. Both <#stdurl "www.zaman.org/?bl=international&alt=&trh=20040813&hn=11404" Turkey#> and America are encouraging Russia to allow Georgia to maintain territorial integrity. The American State Department is urging an emergency meeting of the so-called Joint Control Commission to resolve the situation. =eod =// &&2 e040812b Russia's southern Caucasus region becoming increasingly dangerous =data ww2010.weblog.y2004.e040812b.head Russia's southern Caucasus region becoming increasingly dangerous =data ww2010.weblog.y2004.e040812b.keys russia =data ww2010.weblog.y2004.e040812b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040812b.date 12-Aug-04 =data ww2010.weblog.y2004.e040812b.txt1 It's more dangerous than Iraq, and possibly even more dangerous than Palestine, at least in the short term. =data ww2010.weblog.y2004.e040812b.txt2 Georgia's South Ossetia province began a war in 1992 to separate from Georgia, and join up with Russia's North Ossetia province. A peace agreement reached at that time was broken several months ago, and hostilities have been increasing since then. <#inc ww2010.pic caucas3.gif center "" "The Caucasus Mountains run from the Black Sea to the Caspian Sea"#> The last two weeks have seen increases in the shooting, the violence, the retribution, and the rhetoric. A new war appears likely to break out soon. This region has enormous strategic importance for many reasons, not the least of which is that oil pipelines run through it from Russia to the Black Sea. Other trouble spots in this region include the following: Russia's ten year old war with Chechnya, which has spilled over into Ingushetia and Dagestan; Georgia's conflicts with two other separatist provinces, Abkhazia and Ajaria; and Armenia's claim to the Nagorno-Karabakh region of Azerbaijan. The Caucasus region has been one of the three major historic sites for major "world wars" between Orthodox Christians and Muslims. (The other two are the Crimea and the Balkans.) From the point of view of Generational Dynamics, the Caucasus region is deeper into a crisis period than even Palestine. The reason is that the last crisis war involving Palestine was in the aftermath of World War II, when the state of Israel was created, but the last crisis war of the Caucasus region was in the aftermath of World War I, some 20 years earlier. So a Caucasus war is more likely to "spiral out of control" than a Palestine war, although a war in either region would end up triggering a much larger "clash of civilizations." =eod =// &&2 e040812 Re al-Sadr: Najaf mop-up operation in progress =data ww2010.weblog.y2004.e040812.head Najaf mop-up operation is currently in progress =data ww2010.weblog.y2004.e040812.keys =data ww2010.weblog.y2004.e040812.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040812.date 12-Aug-04 =data ww2010.weblog.y2004.e040812.txt1 As we predicted, there's no widespread "uprising" in Baghdad =data ww2010.weblog.y2004.e040812.txt2 or elsewhere, although there have been large anti-American demonstrations. The battle going on right now in Najaf is very large and complex, but it's a typical kind of "mop-up" battle that often follows a war. It would be surprising if the main battle lasted more than a few days, though cleaning up may well take few more months. The only thing that's atypical is the need to avoid damaging the Imam Ali Mosque, the holiest Shiite Muslim site in Iraq. The insurgents have holed up there, and loaded up with massive amounts of munitions, in the hope that an errant Coalition bomb will damage the Mosque and encourage other Shi'ites to join the battle. This insurgent strategy has greatly increased the complexity of the battle. The Coalition soldiers have to put the relatively inexperienced Iraqi soldiers between themselves and the Mosque. Exactly how the Coalition plans to do this has not yet been revealed, but you can be sure that it's very well planned out. As expected, there are large Shi'ite anti-American demonstrations in Baghdad and Basra, and lesser demonstrations elsewhere. However, such demonstrations <#hreftext ww2010.i.sixties040501 "are quite standard during a "generational awakening" period"#>, and will not lead to an uncontrolled "uprising." Meanwhile, it's fun to watch how the mindless Boston Globe reporters cover all this. Tuesday's lead multi-column page one headline was "Shi'ites' uprising grows." That was wishful thinking, and by Wednesday the page one Iraq headline was, "Qaeda arrests called 'lucky' break." Today's headline is "Young marines frustrated by lack of progress." Each day's headline seems so moronic that it could never be topped, but the next day's is even more moronic. I don't know how they manage to do it. When I first came to Boston in the 1960s as an MIT student, I was told that the Boston newspapers were mostly garbage, and that the best Boston newspaper was an international newspaper headquartered in Boston, <#stdurl www.csmonitor.com "The Christian Science Monitor"#>. I don't think that things have changed much in the last 40 years. =eod =// &&2 e040810b Are al-Sadr's militias in Iraq on their last legs? =data ww2010.weblog.y2004.e040810b.head Are al-Sadr's militias in Iraq on their last legs? =data ww2010.weblog.y2004.e040810b.keys =data ww2010.weblog.y2004.e040810b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040810b.date 10-Aug-04 =data ww2010.weblog.y2004.e040810b.txt1 Mindless journalists are proclaiming a massive Shi'ite revolt. Ummmm, I don't think so. =data ww2010.weblog.y2004.e040810b.txt2 For example, today's Boston Globe lead page one headline is: <#stdurl www.boston.com/news/world/articles/2004/08/10/shiites_uprising_grows "Shi'ites' uprising grows"#>, and quotes Moqtada al-Sadr as promising to fight to "the last drop of my blood." The story, which also <#stdurl http://www.washingtonpost.com/wp-dyn/articles/A52881-2004Aug9.html "appeared on page one of the Washington Post"#>, gushed with what can only be called wishful thinking. These stories have popping up regularly since the war began, and I've been saying for over a year and a half now that such an uprising is impossible. Only a single generation has passed since the Iran/Iraq war of the 1980s, and so Iraq is in a "generational awakening" period. Such massive civil wars and uprisings NEVER happen during generational awakenings. What has finally happened is what <#hreftext ww2010.i.aug19 "I predicted last year:"#> The incessant terrorism is backfiring. The Iraqi people, still war-weary from the 1980s, are sick and tired of the terrorism, and getting really pissed off at al-Sadr. That's why several Iraqi government officials, including Iraq's interim Prime Minister Ayad Allawi and Adnan al-Zarfi, the Governor of Najaf, have condemned al-Sadr's actions and have given the U.S. led American and Iraqi forces the go-ahead. The fight is against a fairly small militia loyal to al-Sadr. It's not known how large the militia is, but it's thought to be a few hundred members. They are not receiving widespread support from Iraqi Shi'ites. The only way that could possibly happen is if the American forces did something so heinous that they completely offended believers to their core. That's why news reports indicate that it will be the Iraqi fighters, rather than American forces, who will actually enter the holy Shi'ite shrines. From what I can tell, al-Sadr seems to be on his last legs. He's using bravado and braggadocio to compensate for the weakness and desperation of his position. And let's not forget that when he says he'll fight to "the last drop of my blood," he's staying safely out of sight and letting his followers fight to the last drop of their blood. The only time he comes out of hiding is to hold a press conference to give the eager, mindless reporters a few more quotes. =eod =// &&2 e040810 Yukos is now fit only for vultures, as rumors of insider trading fly =data ww2010.weblog.y2004.e040810.head Yukos is now fit only for vultures, as rumors of insider trading fly =data ww2010.weblog.y2004.e040810.keys russia, yukos =data ww2010.weblog.y2004.e040810.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040810.date 10-Aug-04 =data ww2010.weblog.y2004.e040810.txt1 Concerns about Russian and Iraqi oil output are spiking international oil prices to new highs, =data ww2010.weblog.y2004.e040810.txt2 with the price temporarily reaching $45.04 today. In Iraq, threats from Shia militants led to the closure of a key production facility in the southern city of Basra, halting the country's oil output. Other factors concerning the markets include a volatile election in Venezuela and a recent OPEC disclosure that <#hreftext ww2010.i.oilpeak040803 "it has no remaining capacity"#>. In Russia, Yukos won what looked like a major court victory a couple of days ago, when a Moscow Arbitration Court ruled that the Kremlin's fire sale of Yukos' assets was illegal. The Arbitration Court reversed itself a few hours later, I assume because the judges on that court didn't want Putin reassigning them to the court in northern Siberia. So now the Kremlin vultures are ripping pieces of Yukos off for resale to Kremlin-controlled oil firms at ten cents on the dollar, starting with its main oil-producing subsidiary, Yuganskneftegaz. It's hard to imagine things getting worse for Yukos, but they have. According to <#stdurl http://www.channelnewsasia.com/stories/afp_world_business/view/100092/1/.html "a report by Agence France Presse"#>, rumors are flying in Moscow that Kremlin officials are using inside information for personal benefit in trading Yukos stock. In other words, someone knowing that the court's first ruling was coming could buy up Yukos stock, knowing that the price would go up as soon as the court ruling was announced. Then, someone knowing that the second ruling was coming could sell the stock, knowing that the price would fall again. This kind of insider trading is not illegal in Russia, and so there's no reason to believe that it isn't being practiced. The Yukos situation <#inc ww2010.weblog.ref e040706b "has had a stench about it since the beginning"#>. It'll be a relief when it's over. =eod =// &&2 e040809 The world awaits Fed's interest decision on Tuesday =data ww2010.weblog.y2004.e040809.head The world awaits Fed's interest decision on Tuesday =data ww2010.weblog.y2004.e040809.keys =data ww2010.weblog.y2004.e040809.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040809.date 9-Aug-04 =data ww2010.weblog.y2004.e040809.txt1 The Fed should leave interest rates unchanged, since we're in a long term deflationary period. =data ww2010.weblog.y2004.e040809.txt2 If you forget the political passions of the moment, <#inc ww2010.weblog.ref e040717 "and look at the historic long-term trends"#>, then the economy has plenty of built-in pressure to move in a deflationary direction. That means that the Fed has a lot less to worry about with respect to inflation than many analysts believe. On the other hand, <#inc ww2010.weblog.ref e040806 "Friday's bad jobs report"#> shows that the economy's labor market is in much worse shape than high-priced analysts have been saying for months. The fact is that analysts are stumped - they did not see this coming and they have no explanation for it except, "well, it's just a bump in the road." But it's now a three-month bump, and no one that I've heard is really certain that things will be better next month. In fact, let's face it: It's been years since the high-priced analysts have gotten their labor and output forecasts right. What's going on in the economy has been <#hreftext ww2010.i.stocks2004 "fully explained on this web site"#>. And this brings us back to the question: What is the Fed's best policy now? Should the Fed increase the overnight funds rate to 1.50% from 1.25% tomorrow, as many people expect? No matter what we think of the Fed's zero-interest rate policy since 2000, it's saved the country from an economic disaster, or at least postponed it. If the Fed had kept interest rates up, there's little doubt that we would have already had a cascading stock market crash like the early 1930s, with massive bankruptcies and homelessness. If the Fed increases interest rates too much today, the effects will actually be much worse than they would have been in 2000. That's because many more people are in debt today than in 2000, so there would be many more bankruptcies and foreclosures. The Fed should keep interest rates steady for now, and permit a little more inflation if necessary. An additional weakening of the dollar on international markets will not be that harmful either. The Fed can't continue this policy forever, of course, but there are so many uncertainties in the world today that it won't be long before something happens (a war, or collapse of the Chinese bubble, for example) to force a change of policy. If a major economic upheaval has to occur, then let it happen because of some major international event, not because the Fed precipitated it. =eod =// &&2 e040807 The press is talking about another "uprising" in Iraq. Yawn. =data ww2010.weblog.y2004.e040807.head The press is talking about another "uprising" in Iraq. Yawn. =data ww2010.weblog.y2004.e040807.keys =data ww2010.weblog.y2004.e040807.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040807.date 7-Aug-04 =data ww2010.weblog.y2004.e040807.txt1 Nothing shows more how clueless the press is about what's going on in Iraq than this constant talk about civil war and uprisings. =data ww2010.weblog.y2004.e040807.txt2 And nothing shows better why journalists, analysts and others should learn a little about how generations work than the situation in Iraq. For a year and a half, the press, politicians, and analysts have been talking about things in Iraq "spiraling out of control" into a huge civil war between the Sunnis and Shi'as, or into a major uprising against the Americans. Let's face it, a lot of these concerns have been wishful thinking as much as anything else. But here's "Generational Dynamics 1.01": That kind of civil war or uprising is impossible in Iraq at this time. Why? Because it's been only one generation since they've been in a major crisis war, the Iran/Iraq war of the 1980s. Iraq is in a generational "awakening" period, characterized by riots and demonstrations, but no major civil wars - just like America in the 1960s. If you'd like to understand what's really going on in Iraq, then <#hreftext ww2010.i.sixties040501 "read about America in the sixties"#>. What makes this talk about things "spiraling out of control" in Iraq so mindless is that that's exactly what might happen in a couple of other places -- in Palestine or in Russia's southern provinces (Chechnya) near the Caucasus. Either one of those regions really could break out into full scale war at any time, and either would would draw America into a major war. These possibilities are crucially important to America's future, but the press would rather talk about the impossible in Iraq. There are things to worry about in Iraq. There are clearly insurgents in Fallujah and Najaf, well-funded by Abu Musab al-Zarqawi and Iranian mullahs, respectively, and there are terrorist bombings and kidnappings through the country. It's a dangerous place. But the perpetrators are small groups. Most important, they do not have the support of the mass of Iraqi people, most of whom are still war weary from the 1980s, and want no more of it. =eod =// &&2 e040806 Job growth figures worst in 8 months, far below analysts' estimates =data ww2010.weblog.y2004.e040806.head Job growth figures worst in 8 months, far below analysts' estimates =data ww2010.weblog.y2004.e040806.keys =data ww2010.weblog.y2004.e040806.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040806.date 6-Aug-04 =data ww2010.weblog.y2004.e040806.txt1 The economy is not producing new jobs at anywhere near the rate that pundits, high-priced analysts and politicians have been promising. =data ww2010.weblog.y2004.e040806.txt2 I've been listening to analysts all week talk about an expected "job surge" to be reported today. Analysts were predicting 215,000 to 300,000 net new jobs to be created in July, and some said that anything as low as 100,000 would be a tremendous shock. The figure came in at only 32,000. Furthermore, the May and June figures were adjusted substantially downward as well. Word of this morning's jobs report is causing bond prices to jump immediately, indicating that investors are likely to be moving money from stocks into bonds this morning. The White House projected in February, just six months ago, that the economy would create 2.6 million jobs this year. They made this estimate by assuming that the recent recession is just like other recent recessions, such as the 1991 recession, or other recessions since 1945. What Generational Dynamics says is that today's economy is like the 1930s-40s depression economy. The reason is that, within the last ten years, the generation of people who lived through the great depression have all disappeared (retired or died), all at the same time, and so our society has been making the same mistakes that gave rise to the 1930s depression. The major "mistake" was the stock market bubble of the late 1990s which was, in essence, no different than the stock market bubble of the 1920s. The Federal Reserve has postponed, but not prevented, the aftereffects of the 1990s bubble by keeping interest rates at near zero. That's why we've been saying, since 2002, that we're entering a new 1930s style Great Depression. <#inc ww2010.pic peratio.jpg right "" "Historical Price/earnings ratio for S&P 500"#> The fact that stocks are due for a big fall has been evident for years to anyone looking at the extremely high price/earnings ratios, well into the 20s. If history is any guide, and it is, then the price/earnings ratios are going to fall below 10, which means that the Dow Jones average will fall to the 4000 range and the S&P 500 index will fall to the 400 range. There is one thing about the current job report that's very intriguing: The number of people calling themselves "self-employed" grew by 641,000, causing the unemployment rate to tick down to 5.5% from 5.6%. Are these "self-employed" people just saying they're self-employed because they've given up seeking work? Or are these people actually creating new businesses that will eventually grow large enough to replace our aging business infrastructure? Only time will tell. =eod =// &&2 e040805b Incredible! The Kremlin has frozen Yukos' assets again =data ww2010.weblog.y2004.e040805b.head Incredible! The Kremlin has frozen Yukos' assets again, sending international oil prices to yet another record high =data ww2010.weblog.y2004.e040805b.keys russia, yukos =data ww2010.weblog.y2004.e040805b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040805b.date 5-Aug-04 =data ww2010.weblog.y2004.e040805b.txt1 Putin's herky-jerky policy may signal a serious split in Kremlin leadership. =data ww2010.weblog.y2004.e040805b.txt2 It was just a couple of days ago that <#inc ww2010.weblog.ref e040802 "the Kremlin appeared to be backing down"#> on Yukos, after the previous harsh handling had shocked the international oil markets and also shocked investors in Russian businesses into rethinking any further investments. The obvious intent was to nationalize Yukos, and use its income and assets to enrich the Russian treasury. On Tuesday, Russia's Justice Ministry reversed itself and gave Yukos access to its own bank accounts again, so that Yukos wouldn't go bankrupt. The international oil markets reacted positively, and oil prices fell slightly. Today, the Justice Ministry <#stdurl "quote.bloomberg.com/apps/news?pid=10000103&refer=news_index&sid=awTZ85iaVsQ4" "reversed itself again"#>, claiming that Tuesday's decision was a mistake because it "contradicts legal norms." Oil prices spiked to brand new highs, and Russian investors will certainly feel that their worst doubts about Russia are being confirmed. One Yukos employee <#stdurl "www.economist.com/business/displayStory.cfm?story_id=3070487" "is quoted"#> as saying, "It feels like we're being toyed with---like a baby seal being batted back and forth by killer whales." These wildly mercurial policy changes raise serious questions about a possible split within the Kremlin itself. On the one hand, you see the official policy since 1992 of being an open free-market economy, willing to play by all the rules, encouraging and rewarding international investment. But the Yukos incident reflects and older, darker policy of confiscating any assets the Kremlin pleases. The prototype of this policy was <#inc ww2010.weblog.ref e040706b "the seizure of the Russian Orthodox Church's assets"#>, including gold treasuries accumulated over centuries, to finance the Bolshevik Revolution in 1917. Since then, until Communism ended in 1991, the Kremlin has felt free to take any assets it wanted, for any purposes it desires. Russia is in a very troubled period, close to war in the Caucasus, and dealing with a chaotic economic infrastructure. The daily Yukos flip-flop circus is a sign of increasing problems. =eod =// &&2 e040805 Sharp fall in consumer spending portends soft economy, as oil prices continue to spike up =data ww2010.weblog.y2004.e040805.head Sharp fall in consumer spending portends soft economy, as oil prices continue to spike up =data ww2010.weblog.y2004.e040805.keys =data ww2010.weblog.y2004.e040805.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040805.date 5-Aug-04 =data ww2010.weblog.y2004.e040805.txt1 If there's another recession, is it fair to blame it on oil prices? =data ww2010.weblog.y2004.e040805.txt2 Indeed, financial analysts are getting increasingly pessimistic about the possibility of another recession in the fall of 2004, after they were surprised by <#stdurl www.bea.gov/bea/newsrelarchive/2004/pi0604.htm "a Commerce Department report showing that consumer spending decreased 0.7%"#>, after rising 1% in May. June's decrease was the first drop in a year, and the largest decline in three years. Earlier this year, financial analysts were predicting very strong economic growth by this time. However, numerous economic figures have been disappointing, and indicated little if any growth. Most disappointing have been job reports, which have indicated that businesses are simply not hiring in anything like the magnitude that analysts have been predicting by now. The highly anticipated July unemployment report will be available tomorrow (5-Aug). <#hreftext ww2010.i.oilpeak040803 "Historically high oil prices"#> have added to the pessimism. In Germany, where the unemployment rate is 11%, <#stdurl "quote.bloomberg.com/apps/news?pid=10000100&sid=atmS1kKTAneo&refer=germany" "the word from German Finance Minister Hans Eichel"#> is that high oil prices are going to affect global economic growth. But that argument carries very limited weight. It's true that high oil prices translate into high gasoline prices, and so consumers have to spend more on gas and have less money to spend on other things, and that depresses global economic growth. But high oil prices also mean more money to oil producers -- Saudi Arabia, Russia, Venezuela, and so forth. That money is fed back into the global economy and should help global economic growth. Of course it's true that any economic dislocation, including high oil prices, is going to affect global economic growth, if only because businesses take time to adjust to new conditions. Still, it's not clear that oil price changes should have a major change on the global economy. Generational Dynamics predicts that the global economy is in a time of generational crisis, and that we're entering a new 1930s style Great Depression. =eod =// &&2 e040803 Why didn't Kerry get a post-convention poll 'bounce'? =data ww2010.weblog.y2004.e040803.head Why didn't Kerry get a post-convention poll "bounce"? =data ww2010.weblog.y2004.e040803.keys =data ww2010.weblog.y2004.e040803.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040803.date 3-Aug-04 =data ww2010.weblog.y2004.e040803.txt1 We know the answer. You guessed it - it's generational! =data ww2010.weblog.y2004.e040803.txt2 We thought Kerry did pretty well in his speech last week, and we thought Kerry would do better in the post-convention polling. As it turns out, <#stdurl www.usatoday.com/news/politicselections/nation/president/2004-08-02-poll-cover_x.htm "the Gallup poll results"#> show him actually losing ground, and other polls show him at best level. There's a good reason for this, and it's not a reason that any of the pundits are mentioning. I know it the same way that I knew in 2002 that there wouldn't be any American anti-war movement in the War on Terror -- and there hasn't been, except for an occasional weekend blip here and there. A major generational change has taken place in the last few years. During the 1990s, America's business and government leaders were all people generation that grew up during the Depression and World War II. Now, that's no longer true: Today's business and government leaders are from the Baby Boomer generation born after the war. That's exactly the kind of generational change that puts a nation into a "generational crisis period," where people become anxious and concerned about the future of their nation. The last time this kind of change happened was in the 1930s, when the generation of people who were born after the Civil War came to power. In retrospect, the Democrats did make some mistakes at last week's convention. John Kerry's own speech was not great but OK, indicating that he understood the seriousness of the situation that the nation is in. But that was the only one. John Edwards' "two nations" speech was so cheerful and optimistic that it appeared naïve. Teresa Heinz Kerry's speech made her appear more self-involved than involved in the nation's problems. The only other speech that's gotten any attention is Al Sharpton's, but the attention has been all negative. So when you come right down to it, the only portion of the entire week's conference that addressed the subject most on Americans' minds was the first 20 minutes of Kerry's speech. And even then, he didn't say how he'd handle Iraq or prevent terrorism, but he did let us know, irrelevantly, that he's a Vietnam war hero. There's been only one President in American history who served more than two terms: Franklin Delano Roosevelt, who served four (up to his death in 1945). That's because people don't want to change leaders during a crisis. A recent poll of historians on the country's greatest Presidents listed FDR, Abraham Lincoln, and George Washington at the top. Those are the Presidents who lead the country through its three great generational wars, the Revolutionary War, the Civil War and World War II. It's great events that make great Presidents. A lot of people are going to gag when I say this, but whoever wins the election this fall is probably going to be the next great President. There's still plenty of time for things to change, but right now it looks like that'll be George Bush. =eod =// &&2 e040802 Kremlin appears to be backing down on nationalizing Yukos =data ww2010.weblog.y2004.e040802.head Kremlin appears to be backing down on nationalizing Yukos =data ww2010.weblog.y2004.e040802.keys russia, yukos =data ww2010.weblog.y2004.e040802.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040802.date 2-Aug-04 =data ww2010.weblog.y2004.e040802.txt1 Russia's Justice Ministry gave Yukos more time to pay its back taxes, =data ww2010.weblog.y2004.e040802.txt2 according to <#stdurl "quote.bloomberg.com/apps/news?pid=10000085&sid=ajC9u9miLdvQ&refer=europe" "an announcement today"#>. This evidently puts on hold the Kremlin's plans to effectively nationalize Yukos by selling off its subsidiaries to Kremlin-controlled oil firms at extremely low prices. It's most likely that Russian President Vladimir Putin backed down from the quick nationalization of Yukos because of the furious international reaction to his clumsy moves so far. Freezing Yukos' assets last week caused oil prices to spike to historic highs, and the threat to sell off its subsidiaries at fire sale prices has frightened investors. The Yukos story broke last year with the arrest of the company's CEO Mikhail Khodorkovsky, and <#stdurl "cbs.marketwatch.com/news/story.asp?guid=%7B9A497E5C-35E4-4FB2-89BA-F54BD7F92752%7D" "Russian stocks have fallen some 30% so far this year"#>. In the old Soviet days, the Kremlin could take any company's assets it pleased, with little fear of retribution. Today, Putin is feeling more and more hemmed in by a world that Russia's history has not prepared it for. The Yukos case reminds him that Russia today depends on international investors, and he has to play by their rules or lose their money. Even more serious is the ten-year-old war in Chechnya, a clash between Orthodox Christian and Muslim factions that has recently been spreading throughout the Caucasus region to Russia's other southern provinces, including Ingushetia, Dagestan, and North Ossetia, and to other countries to the south, including Georgia, Armenia, and Azerbaijan. History tells us that this region could ignite major civil war within Russia itself, as happened in the 1920s, and Putin is surely concerned about that. =eod =// &&2 e040801b A dramatic shift in Palestinian opinion, as Arafat retains control =data ww2010.weblog.y2004.e040801b.head A dramatic shift in Palestinian opinion, as Arafat retains control =data ww2010.weblog.y2004.e040801b.keys =data ww2010.weblog.y2004.e040801b.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040801b.date 1-Aug-04 =data ww2010.weblog.y2004.e040801b.txt1 Major violence has not yet spread from Gaza to West Bank, but the question of whether things will "spiral out of control" =data ww2010.weblog.y2004.e040801b.txt2 is still open. The level of violence hasn't gotten much worse in the last couple of weeks, but it hasn't gotten any better either. In Jenin, <#stdurl "www.tehrantimes.com/Description.asp?Da=8/2/2004&Cat=4&Num=002" "the offices of the pro-Arafat district governor were torched"#>, leading to a protest by thousands of Palestinians in support of the Al-Aqsa Martyrs Brigades. In Nablus, <#stdurl "www.voanews.com/article.cfm?objectID=3F2737ED-70FE-4C38-A6B714E085960B1A" "Arafat supporters used gunfire to break up a meeting"#> of the anti-Arafat Al Awda Brigades. There were no injuries. These two West Bank incidents are relatively minor violence by Mideast standards, but they show that the confrontation between the pro-Arafat "old guard" generation and the pro-reform "young guard" generation is far from resolution, and could get worse. Arafat is 74, and the "young guard" leaders are in their 20s, 30s and 40s. The most dramatic change is a recent change in Palestinian attitudes towards Israel's planned pullout from Gaza in 2005. Palestinian support of the pullout was at 73% in March, but dropped to 34% by the end June, according to <#stdurl www.pcpsr.org/survey/polls/2004/p12a.html "a new poll"#> by the respected <#stdurl www.pcpsr.org "Palestinian Center for Policy and Survey Research"#>. This change occurs as anxious Palestinians have viewed the increasing levels of violence, by Israelis and from Palestinian infighting, that have occurred ever since Israel first announced the withdrawal plan. According to the new poll, 59% of the Palestinians believe that the Israeli withdrawal will not end Palestinian infighting, as different Palestinian militias compete to fill the power vacuum left by the Israeli withdrawal. From the point of view of Generational Dynamics, the Palestinian region is in a very critical "generational crisis" period, and that the older generation led by Arafat, the "old guard," is the factor keeping the most extreme forms of violence under control. Generational Dynamics predicts that, with near 100% certainty, the region will spiral into a major war in the next few years, led by the self-appointed "prophets" or leaders of the young guard. The exact time cannot be forecast, but it's expected that it would begin in the months following the disappearance of Arafat through death or retirement. =eod =// &&2 e040801 Vatican criticizes the "lethal effects" of feminism =data ww2010.weblog.y2004.e040801.head Vatican criticizes the "lethal effects" of feminism =data ww2010.weblog.y2004.e040801.keys =data ww2010.weblog.y2004.e040801.loc ww2010.weblog.log0408 =data ww2010.weblog.y2004.e040801.date 1-Aug-04 =data ww2010.weblog.y2004.e040801.txt1 This is one more indication, following the backlash against Janet Jackson's bared breast at the Super Bowl, that the sexual revolution is over. =data ww2010.weblog.y2004.e040801.txt2 In a <#stdurl www.vis.pcn.net/doc/040731x_en.htm "37-page document "On the Collaboration of Men and Women in the Church and in the World""#>, the Vatican attempts to address "distortions" generated by radical feminism. The document says that feminism has "inspired ideologies" which view men as "enemies to be overcome" and which question family and marriage as a commitment between a man and a woman. From the point of view of Generational Dynamics, this is one more sign that the "sexual revolution" of the 1960s is being reversed. Men and women assume their traditional gender-specific roles during generational "crisis periods," such as World War II (1940s) or the Civil War (1860s), and gender differences increase. Gender differences are muted, and equality of the sexes becomes an important political principle during generational "awakening periods," such as the 1890s and 1960s. The Vatican's criticism of the "lethal effects" of feminism would have been politically impossible just ten years ago, but it's acceptable today because we're once again entering a generational crisis period. We should expect to see more signs of this cultural move toward traditional gender roles during the next few years. The pendulum is swinging back, and will continue to do so for a couple of decades. This does not mean that women are not respected. Quite the contrary, women will be respected more and more for their unique values and contributions as women, rather than for their similarity to men. =eod =// &&2 e040730b Real estate is in an overpriced bubble all over the world =data ww2010.weblog.y2004.e040730b.head Real estate is in an overpriced bubble all over the world =data ww2010.weblog.y2004.e040730b.keys =data ww2010.weblog.y2004.e040730b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040730b.date 30-Jul-04 =data ww2010.weblog.y2004.e040730b.txt1 A study by investment bankers Morgan Stanley warns that the bubble will burst with devastating results. =data ww2010.weblog.y2004.e040730b.txt2 Residential properties in countries around the world, including America, Australia, the United Kingdom, China, South Korea, Spain, the Netherlands, and South Africa, are overpriced by 50% or more. The cause is clear, <#stdurl rismedia.com/index.php/article/articleview/7243/1/1/ "according to Stephen Roach, chief economist of Morgan Stanley"#>. The stock market bubble of the late 1990s caused the Fed to lower interest rates to historic lows, and the same happened in central banks around the world. With interest rates low, excess liquidity flowed into the housing market. "Courtesy of property-induced wealth effects, the global economy was neatly able to sidestep the potentially devastating aftershocks of the [late 1990s] burst equity bubble," says Roach. He adds that as interest rates continue to rise and the global property bubble finally bursts, there will be no secret weapon for the global economy to turn to this time. What this means for you personally is this: If you own, or you're thinking of buying, residential property, then you should be aware that the market value of that property may fall by 30-50% in the next few years. Since 2002, we've been pointing out that Generational Dynamics predicts that we're entering a new 1930s style Great Depression, and that stock prices will fall by 50% in the next few years. The Fed's low interest policy has postponed the effects of the Nasdaq crash of 2000, but has not eliminated them. =eod =// &&2 e040730 John Kerry vows to strengthen the US military =data ww2010.weblog.y2004.e040730.head John Kerry vows to strengthen the US military =data ww2010.weblog.y2004.e040730.keys =data ww2010.weblog.y2004.e040730.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040730.date 30-Jul-04 =data ww2010.weblog.y2004.e040730.txt1 In his acceptance speech at DNC, Kerry showed the passion =data ww2010.weblog.y2004.e040730.txt2 that was necessary, proving wrong those who doubted he was capable of it. Saying that we're a nation at war, he said that he'd increase the size of the military by 40,000, but wouldn't send them to Iraq. "In these dangerous days there is a right way and a wrong way to be strong," he said. "We need a strong military and we need to lead strong alliances. And then, with confidence and determination, we will be able to tell the terrorists: You will lose and we will win." This portion of the speech lasted about 20 minutes. The rest of the speech was the usual silly laundry list of promises for everyone of high-paying jobs, high-cost medicare, day care, and everything else he could think of. This is the stuff that politicians like to promise, knowing that it would cost zillions of tax dollars to provide even a fraction of it. The first part of Kerry's speech was very good, in my opinion, so much so that I actually gave my full attention to it. I believe that his major issue, that George Bush's policies since 9/11 have squandered the respect of the world, is a very powerful one, and it gives him an opportunity to make the vacuous promise that he'll cooperate with other nations and get back respect. He hit exactly the right note, in my opinion, to reassure people that he understands the dangers we're facing and is ready to face them, and he's attacking President Bush's major strength. What I found missing is any details about how Kerry would handle the Iraq situation, or how he'd handle the Israeli/Palestine situation. This doesn't surprise me because there isn't the slightest difference between Kerry and Bush on these subjects, and if Kerry wins, he'll pursue those problems no differently than Bush would. That illustrates the problem that Kerry will face in the next few weeks. Other than promising more international cooperation, a promise which most people correctly suspect cannot be fulfilled, he has nothing to say that distinguishes him from Bush. He's rejected the demands from his left wing to name a final date for leaving Iraq, but they haven't let their distress turn to anger because Kerry winning is their highest priority. There are now two major factors left to decide the election:

The debates will pit the two candidates, and one or the other may make a mistake.
Some major surprise, like a terrorist attack, may turn the election in one direction or another.

=eod =// &&2 e040729b Yukos freeze order rescinded after worldwide oil prices soar to all time high. =data ww2010.weblog.y2004.e040729b.head Yukos freeze order rescinded after worldwide oil prices soar to all time high. =data ww2010.weblog.y2004.e040729b.keys russia, yukos =data ww2010.weblog.y2004.e040729b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040729b.date 29-Jul-04 =data ww2010.weblog.y2004.e040729b.txt1 The Kremlin's ham-handed treatment of Yukos brings memories of its Communist days, =data ww2010.weblog.y2004.e040729b.txt2 when the Soviet mismanaged its "controlled economy" so poorly that the entire nation fell decades behind America. Now Russia's <#stdurl "http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5812640" "Ministry of Justice has lifted the order"#>, issued just yesterday, that ordered <#stdurl www.yukos.com "Yukos"#> to stop selling oil. The order had caused a harsh worldwide reaction that pushed oil prices to over $43 per barrel, an all-time high. It appears that the Ministry of Justice rescinded the order when it became clear how much damage they were doing, something that any international financier could have told them in first place. This crisis du jour handling of Yukos makes it look like full-scale mismanagement is back. In the Soviet days, the Kremlin just seized anything they wanted, no matter who was hurt. Today, Russian President Vladimir Putin wants to get his hands on Yukos, and its enormously rich assets, but now there are rules imposed by international investors. So Putin has to use any legal trick possible. But he's trying too hard, is moving too quickly, and is making mistakes. He's coming across as desperate. Remember, this whole saga only began last fall, when former CEO Mikhail Khodorkovsky, one of Russia's wealthy Jewish oligarths, announced his intention to challenge Putin politically. Since then, the whole Yukos affair has had an ever-increasing stench of political retaliation. =eod =// &&2 e040729 Senator John Edwards says 'Hope is on the way' to DNC =data ww2010.weblog.y2004.e040729.head Senator John Edwards says "Hope is on the way" to DNC =data ww2010.weblog.y2004.e040729.keys =data ww2010.weblog.y2004.e040729.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040729.date 29-Jul-04 =data ww2010.weblog.y2004.e040729.txt1 VP candidate's masterful speech was cheerful and optimistic, =data ww2010.weblog.y2004.e040729.txt2 and received almost continuous cheers from the wildly enthusiastic audience at the Democratic National Convention in Boston. He criticized the "negative politics of the past," and called for "the politics of hope." Anyone who reads through this web site may guess that I'm not a wildly optimistic kind of person, and anyone who knows me personally can tell you I'm a bit of a curmudgeon. So I hope I can be forgiven for saying that this speech didn't turn me on at all. This kind of wild ebullience is a bit irksome to me in any circumstances, and here as well. Maybe that's one reason why I'm not really crazy about any politicians. But I think this speech was a mistake. This is a very anxious time for our country, and the speech should have reflected that. As <#hreftext ww2010.i.kerry040725 "I've previously said"#>, the people need to be reassured that they're safe with Kerry. Edwards himself has a youthful, cheerful appearance, and this speech may have come across to the American people as naive rather than hopeful. I hope that John Kerry finds a way to give a much more somber speech on Thursday evening. I believe that the American people will respond to this much more readily. =eod =// &&2 e040728 Kremlin orders Yukos to stop selling oil. =data ww2010.weblog.y2004.e040728.head Kremlin orders Yukos to stop selling oil. =data ww2010.weblog.y2004.e040728.keys russia, yukos =data ww2010.weblog.y2004.e040728.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040728.date 28-Jul-04 =data ww2010.weblog.y2004.e040728.txt1 Oil prices spiking today to $42 per barrel as the worst possible scenario unfolds in Russia. =data ww2010.weblog.y2004.e040728.txt2 <#stdurl "http://edition.cnn.com/2004/BUSINESS/07/28/russia.yukos.ap/" "Today's order from the Russian Justice Ministry"#> to stop selling oil pushes <#stdurl www.yukos.com "the company"#> toward bankruptcy, and guarantees that it will be unable to use its income to arrange payment of a disputed tax bill. Meanwhile, bailiffs are proceeding with plans to sell Yuganskneftegaz, Yukos' largest subsidiary, for as little as 10% of its market value, to pay the tax bill. Two other subsidiaries, Tomskneft and Samaraneftegaz, are also being readied for sale. No buyers have been named, but it's expected that the buyers will be Kremlin-controlled oil firms, effectively nationalizing the the company. In <#stdurl "http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20040728/IBYUKOS28/TPBusiness/International" "a separate development"#>, a close aide of President Vladimir Putin has been voted chairman of the board of Rosneft oil company, which is owned 100% by the Kremlin. This has raised speculation that Rosneft will be the buyer of the Yukos' subsidiaries. It's becoming clearer that Russian President Putin's intention from day one has been to nationalize Yukos, one of Russia's largest companies, and the supplier of 11.4% of the world's oil, and that the motives are political. The Kremlin has stonewalled or rebuffed several proposals to pay the back tax bill, and save the company to preserve investors' savings. Only one scenario seems acceptable to the Kremlin: Bankrupt the company, and nationalize its assets. The Kremlin's move will strongly discourage foreigners from investing in Russia, and is certain to roil the international oil markets for months to come. There are still too many unanswered questions to feel certain that we know what Putin's full motivation is. Is this a desperate sign that the Russian economy is a lot worse than we know about? Is this related to the conflict between Orthodox Christian and Muslim populations in its southern provinces (Chechnya, Ingushetia, Dagestan, North Ossetia), increasingly involving countries Caucusus region (Georgia, Armenia, Azerbaijan)? We have to wait and see. =eod =// &&2 e040727b Here's how to sign up to be a suicide bomber =data ww2010.weblog.y2004.e040727b.head Here's how to sign up to be a suicide bomber =data ww2010.weblog.y2004.e040727b.keys =data ww2010.weblog.y2004.e040727b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040727b.date 27-Jul-04 =data ww2010.weblog.y2004.e040727b.txt1 Check one: "I want to murder (a) Salman Rushdie (b) Israelis or (c) Americans." =data ww2010.weblog.y2004.e040727b.txt2 Last month, a recruiting event was held in Tehran, Iran, to provide opportunities for people to sign up to be suicide bombers. Some 2,000 people signed up, according to <#stdurl "memri.org/bin/articles.cgi?Page=archives&Area=ia&ID=IA18104#_ednref18" "a report translated by memri.org"#>. Of these, 25% are under 18; 55% are 18-40, and 20% are 40-80. Volunteers are asked to fill out a form with name, age and contact information. Occupation and education are not important. "There are three options on the form for registration for martyrdom operations. The volunteers can choose one: murdering Salman Rushdie, [martyrdom] operations in the holy [Shi'ite] cities [in Iraq] against the Americans, or attacking the Israeli forces in Palestine," says the report. The first option refers to author Salman Rushdie, who was condemned to death by a fatwa issued by the former Iranian spiritual leader Ayatollah Ruhollah Khomeini on February 14, 1989. Rushdie had just published <#stdurl www.amazon.com/exec/obidos/tg/detail/-/0312270828 "Satanic Verses"#>, a book which Khomeini claimed was blasphemous to Islam. The Nobel writer V.S. Naipaul described Khomeini's fatwa as "an extreme form of literary criticism." Rushdie has been in hiding most of the time since 1989, and even today Iran is still offering a reward of over $2 million for his murder. It's a wonder he's still alive. =eod =// &&2 e040727 Jesse Jackson calls for sending American troops to Darfur =data ww2010.weblog.y2004.e040727.head Jesse Jackson calls for sending American troops to Darfur =data ww2010.weblog.y2004.e040727.keys =data ww2010.weblog.y2004.e040727.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040727.date 27-Jul-04 =data ww2010.weblog.y2004.e040727.txt1 You see how it works? Everyone has a war they like. =data ww2010.weblog.y2004.e040727.txt2 Live on CNN International this morning, peace activist Jesse Jackson had just finished condemning Bush for sending troops to Iraq, when he called on Bush to lead a worldwide effort to send troops to prevent further deaths in Darfur. He said, "If we can have troops in Korea, in Nato, there should be nothing shameful about defending life in Africa." This is interesting to me because it provides a little more insight into how wars start. Jackson opposes America's involvement in the Iraq war, but calls for America's involvement in the Darfur war. In her speech to the Democratic National Convention last night, NY Senator Hillary Clinton criticized Bush for doing too much in Iraq, but not enough to prevent development of nuclear weapons in North Korea. Evidently she thinks we should have invaded North Korea instead of Iraq. Actually, I've heard a number of pundits, on both the left and the right, say that in the last few weeks. That's how wars get started. =eod =// &&2 e040723 Stocks are apparently poised for a fall =data ww2010.weblog.y2004.e040723.head Stocks are apparently poised for a fall =data ww2010.weblog.y2004.e040723.keys =data ww2010.weblog.y2004.e040723.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040723.date 23-Jul-04 =data ww2010.weblog.y2004.e040723.txt1 More and more pundits say that uncertainty in Iraq and fall in leading indicators portend a bear market this summer. =data ww2010.weblog.y2004.e040723.txt2 The <#stdurl "www.conference-board.org/economics/press.cfm?press_ID=2441" "Conference Board announced"#> that the U.S. index of leading economic indicators fell slightly, the first decrease since March 2003. I wish someone would someone would create a "financial pundit index," which keeps track of various pundits' statements predicting whether stocks will go up or down. The reason I suggest this is because I've noticed in the last month or so that more and more pundits are expecting a downward trend. When all these pundits, who are normally inclined to be more optimistic than usual, suddenly become pessimistic, there must be a good reason. Since 2002, Generational Dynamics has been predicting that stocks would fall 50% by 2006 or 2007. We see no reason to change that forecast. =eod =// &&2 e040722c Saudi amnesty expires - What now? =data ww2010.weblog.y2004.e040722c.head Saudi amnesty expires - What now? =data ww2010.weblog.y2004.e040722c.keys =data ww2010.weblog.y2004.e040722c.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040722c.date 22-Jul-04 =data ww2010.weblog.y2004.e040722c.txt1 Only four al-Qaeda militants have turned themselves in under the one month amnesty / ultimatum, =data ww2010.weblog.y2004.e040722c.txt2 amid <#stdurl "http://news.bbc.co.uk/2/hi/middle_east/3918215.stm" "news reports"#> that three more are negotiating surrender as the amnesty period expires today. Saudi officials had said that they expected many more militants to surrender. Crown Prince Abdullah announced the amnesty a month ago, along with an ultimatum promising a crackdown on anyone not surrendering by the deadline. Saudi Arabia is a Kingdom in crisis, thanks to a series of terrorist bombings targeted at vulnerable targets within the Royal family and the oil industry. So what happens now? The Kingdom has made an ultimatum and is committed to it, and must follow through or lose credibility. Will the Kingdom declare war on al-Qaeda? Or will it make a few symbolic arrests, and give al-Qaeda another victory? Either of these choices will lead to increasing violence, and that's why ultimatums make me nervous. This is a situation to watch for the next few days. =eod =// &&2 e040722b Yukos: Bankruptcy is near =data ww2010.weblog.y2004.e040722b.head Yukos: Bankruptcy is near =data ww2010.weblog.y2004.e040722b.keys russia, yukos =data ww2010.weblog.y2004.e040722b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040722b.date 22-Jul-04 =data ww2010.weblog.y2004.e040722b.txt1 The Kremlin is stonewalling Yukos and preparing to nationalize its major asset =data ww2010.weblog.y2004.e040722b.txt2 according to CEO Steven Theede at <#stdurl "edition.cnn.com/2004/WORLD/europe/07/22/russia.yukos/" "at a press briefing today"#>. Theede said he had sent 11 letters to various Russian government officials to discuss a way out, and has not received a single formal response. In the meantime, the process to sell Yukos' major asset, it's Yuganskneftegas subsidiary, to a Kremlin-controlled firm at 10% of market value is proceeding. Nationalization of Yukos is clearly not far off. =eod =// e040722 Russian President Putin appears maneuvering to nationalize Yukos =// &&2 e040722 Russian President Putin appears maneuvering to nationalize Yukos =data ww2010.weblog.y2004.e040722.head Russian President Putin appears maneuvering to nationalize Yukos =data ww2010.weblog.y2004.e040722.keys russia, yukos =data ww2010.weblog.y2004.e040722.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040722.date 22-Jul-04 =data ww2010.weblog.y2004.e040722.txt1 This situation smells worse for investors every day, =data ww2010.weblog.y2004.e040722.txt2 as it appears that Putin is harvesting Yukos' wealth for whatever purpose, as I <#inc ww2010.weblog.ref e040706b "described two weeks ago"#>. For several days, <#stdurl "www.forbes.com/home/feeds/ap/2004/07/20/ap1461289.html" "investors have been suspicious of a planned forced sale"#> of Yukos' "crown jewel," it's largest subsidiary, Yuganskneftegaz, to pay off back taxes. That may seem OK, but it's not the right way to do it. In order to protect the investors, Yukos should be given an opportunity, for example, to auction off Yuganskneftegaz, in order to get as much money for the subsidiary as possible. But that's not what happening. Instead, Putin evidently plans the forced sale of Yuganskneftegaz to a Kremlin-controlled oil firm, at a fraction of its market value. This means that investors lose a great deal of money, and Yuganskneftegaz is effectively nationalized. Yukos is <#stdurl "quote.bloomberg.com/apps/news?pid=10000087&sid=a6FXtBoluCrY&refer=top_world_news" "planning to hold a press briefing later today"#>, at which it's expected to say it will file for bankruptcy. This appears to be a counter-maneuver to take advantage of Russian laws and prevent the sale of Yuganskneftegaz. Yukos might then be able to sell off Yuganskneftegaz itself, and gain more money for the investors. The stench is growing. We'll see if Putin permits this counter-maneuver. =eod =// &&2 e040721 Greenspan very upbeat about the economy =data ww2010.weblog.y2004.e040721.head Greenspan very upbeat about the economy =data ww2010.weblog.y2004.e040721.keys =data ww2010.weblog.y2004.e040721.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040721.date 21-Jul-04 =data ww2010.weblog.y2004.e040721.txt1 but he seems to be too optimistic. =data ww2010.weblog.y2004.e040721.txt2 Federal Reserve Chairman Alan Greenspan's <#stdurl "www.federalreserve.gov/BoardDocs/HH/2004/July/testimony.htm" "testimony to Congress"#> (full Monetary Policy Report <#stdurl "http://www.federalreserve.gov/BoardDocs/HH/2004/July/fullreport.htm" here#>) was positively bubbly. He said that the economic recovery has become "self-sustaining," thanks to rising employment and increases in disposable income and consumer spending, and that the Fed could return to a "neutral stance" with respect to the Fed funds rate. He added that the economy's recent "soft patch" was caused by a spike in oil prices and would be "short-lived." Generational Dynamics predicts that the economy will return to a deflationary trend (see <#inc ww2010.weblog.ref e040717 below#>). The reason is that businesses are producing products and services that younger generations find increasingly obsolete, and the businesses have, on average, become too bureaucratic to change quickly enough to satisfy younger generations. The next few months will tell us which of these views is correct. =eod =// &&2 e040720 On the 60th anniversary of the failed assassination attempt on Adolf Hitler =data ww2010.weblog.y2004.e040720.head On the 60th anniversary of the failed assassination attempt on Adolf Hitler =data ww2010.weblog.y2004.e040720.keys =data ww2010.weblog.y2004.e040720.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040720.date 20-Jul-04 =data ww2010.weblog.y2004.e040720.txt1 it's well to remember that World War II would have occurred even without Hitler. =data ww2010.weblog.y2004.e040720.txt2 Major European "world wars" have been occurring through the centuries like clockwork: the Franco-Prussian war (1869-70), the French Revolution and Napoleonic Wars (1789-1814), the War of the Spanish Succession (1701-14), the Thirty Years War (1618-48). The list could be extended back into medieval times as well, and Hitler had nothing to do with any of those wars. There's a kind of "humanity clock" that determines major wars and puts them on a timeline, determined by the flow of generations. It's well to remember that, as we enter a new generational crisis period in Europe and America, that a new European war is not impossible. How could it happen? Of course when it happens, we'll all be shocked and surprised, but here's one scenario: A Mideast war brings in England on the side of Israel and France on the side of the Palestinians. =eod =// &&2 e040719 Darfur saga like depraved game of musical chairs =data ww2010.weblog.y2004.e040719.head Darfur saga like depraved game of musical chairs =data ww2010.weblog.y2004.e040719.keys =data ww2010.weblog.y2004.e040719.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040719.date 19-Jul-04 =data ww2010.weblog.y2004.e040719.txt1 As I've said before, I've gotten good at turning off my own feelings of horror =data ww2010.weblog.y2004.e040719.txt2 whenever something like this happens. <#inc ww2010.pic sudan1.gif right "" "Darfur - southwest region of Sudan (Source: BBC)"#> Hundreds of thousands of people in the Darfur region of Sudan will die in the next few months. This is a genocide by the northern white Muslim against the southern black Muslims. The men are mass murdered and the women are mass raped. These genocides are forces of nature, like typhoons, and can't be stopped by mere humans. But there's a certain fascination at turning off your feelings and watching events transpire, as the genocidal horror progresses. It's a depraved game of musical chairs, played by Kofi Annan of the United Nations, along with politicians from America, England, Europe and Africa. The politicians point to each other and say, "Do something! Do something!" Meanwhile the negotiations between various groups in the Sudan are reduced to squabbling over details, and have finally broken down. As long as agreements can't be reached, Darfur moves closer to the edge of the cliff of mass starvation and disease. It's a contradiction that pervades all of the findings of Generational Dynamics. People read the stories on this site, and can't believe that these kinds of things could ever happen. And yet, they've happened as regular as clockwork throughout human history, and they will again. Follow the news if you have the stomach for it, and watch the depraved game of musical chairs play out. My prediction is that nothing will be done to stop the progression of the genocide. And my prediction will turn out to come true. And next year, there'll be another speech by politicians who'll say, "We must never let this happen again." But it will, because it always does. =eod =// &&2 e040717 CPI data points to deflation trend =data ww2010.weblog.y2004.e040717.head This week's financial data points to trend back toward deflation. =data ww2010.weblog.y2004.e040717.keys =data ww2010.weblog.y2004.e040717.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040717.date 17-Jul-04 =data ww2010.weblog.y2004.e040717.txt1 Several inflationary indicators are down for June =data ww2010.weblog.y2004.e040717.txt2 -- import and export prices, producer prices and consumer prices were all lower than expected. In a world where the Fed funds rate is 1.25%, we should be seeing signs of inflation everywhere. The fact that the inflation rate continues to be tepid is seen as very good news by many analysts, but there's more to the story. The CPI (consumer price index), which measures prices paid by consumers, rose only 0.3% last month, half the rate recorded in May. The core index, which excludes volatile food and energy prices, rose a tiny 0.1%, the smallest increase this year. The PPI (producer price index), which measures prices by manufacturers and other producers for raw materials, actually fell 0.3%, while the core rate rose only 0.2% in June, Import and export prices were also lower than expected, indicating that the moderating inflation trend is international. Inflation had been increasing more than expected during the first half of the 2004. This was attributed to the low Fed rate (1.00%), and to the demands of China's superheated economy. Now, with the Fed rate 0.25% higher, and with the Chinese government cracking down on bad debt in its own banking system, inflation seems to be moderating again. <#inc ww2010.pic cpi.gif right "" "Consumer price index (CPI) from 1870 to present, with an exponential growth trend line. The CPI is 185 in 2003, and 2010 has a trend value of 129."#> Although you can't tell much from a single month's figures, the moderating inflationary trend is consistent with the Generational Dynamics prediction that we're entering a deflationary period. This prediction is largely based on the adjacent graph, which shows the long term CPI values with an exponential growth trend line. This graph indicates that consumer prices should decline 30% or more in the next few years. Why would prices decline so much? The proposed explanation that I gave in my book is called the "crusty old bureaucracy" theory. According to this, there's a generational cycle in businesses, where bureaucracy sets in, and the products become gradually obsolete, and that this happens on a national basis. In the extreme, once enough businesses are producing obsolete products, inflation can't increase because no one will want the products at any price. The only way to fix the problem is through massive business bankruptcies and a new set of businesses. In the current economy, one of the most visible examples is music CDs (compact disks). There's a huge chunk of business associated with manufacturing, distributing and selling CDs. However, CDs are becoming increasingly obsolete, because people want their music on their computer, and don't want CDs around cluttering up their homes. In other words, people don't want CDs at any price. CDs is one example, but you can easily think of many more examples in other domains where computerization are making products obsolete, or at least way overpriced. The inflation rate is very mysterious. It's supposed to be controlled by the Fed funds rate, but it's not clear how much control the Fed actually has. The Fed can't make people want to buy products at high prices if the products are obsolete or unwanted, and that's what could be going on right now. If the Fed floods the economy with money, then it can push up the inflation rate, but only at the cost of making money more and more worthless. =eod =// &&2 e040716b The Singularity is discussed on a news show =data ww2010.weblog.y2004.e040716b.head The Singularity is discussed on a news show =data ww2010.weblog.y2004.e040716b.keys =data ww2010.weblog.y2004.e040716b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040716b.date 16-Jul-04 =data ww2010.weblog.y2004.e040716b.txt1 I just saw the subject of super-intelligent computers discussed on Neil Cavuto's business show, in conjunction with the movie "I, Robot", =data ww2010.weblog.y2004.e040716b.txt2 this afternoon on Fox News Channel. The guest, Peter Rojas of <#stdurl engadget.com#>, discussed the Singularity as the time when computers will become self-aware and improve their own technology astronomically quickly. Cavuto was totally clueless, and kept worrying about computers taking his job. Even Rojas was afraid to go too far and utter the 2030 date, saying only that it won't happen for "a long long time." <#hreftext ww2010.i.robot040709 "As I've previously discussed,"#> This is a problem that the general public should become more aware of, for the sake of humanity, and maybe the "I, Robot" phenomenon will be the thing that makes that happen. =eod =// &&2 e040716 Chess: Bobby Fischer is arrested in Japan. =data ww2010.weblog.y2004.e040716.head Bobby Fischer is arrested in Japan. =data ww2010.weblog.y2004.e040716.keys =data ww2010.weblog.y2004.e040716.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040716.date 16-Jul-04 =data ww2010.weblog.y2004.e040716.txt1 Bobby Fischer used to be an idol to this nerd, =data ww2010.weblog.y2004.e040716.txt2 and I once got his autograph when I visited the Manhattan Chess Club as a high school student in 1960. I also played in a speed chess tournament in which he also participated, though of course I never got close to him. <#inc ww2010.pic pht0716.jpg right "" "Bobby Fischer in his heyday"#> This has nothing to do with Generational Dynamics, of course, but I'm posting this as a matter of personal privilege. I was transfixed by the live (sort of) public television coverage, hosted by Shelby Lyman, of Fischer's capture of the world chess championship against Boris Spassky in 1972, and was saddened to see him withdraw from the world and refuse to defend his title. Now he hates America, hates Jews, hates democracy, applauds 9/11, and seems to be falling into total insanity. Having been arrested in Japan, Fischer will probably be extradited to the United States to face charges of violating international sanctions when he traveled to Yugoslavia in 1992 to play a new match with Spassky. So this sad story is not over. =eod =// &&2 e040715b China's economy grew by 9.7% in the first half =data ww2010.weblog.y2004.e040715b.head Speaking of China, the economy grew by 9.7% in the first half =data ww2010.weblog.y2004.e040715b.keys =data ww2010.weblog.y2004.e040715b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040715b.date 15-Jul-04 =data ww2010.weblog.y2004.e040715b.txt1 This compares with a 9.1% growth last year, =data ww2010.weblog.y2004.e040715b.txt2 and is a lot faster than the 7% target that China is supposed to be aiming for. =eod =// &&2 e040715 China is getting more girls =data ww2010.weblog.y2004.e040715.head China is getting more girls =data ww2010.weblog.y2004.e040715.keys =data ww2010.weblog.y2004.e040715.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040715.date 15-Jul-04 =data ww2010.weblog.y2004.e040715.txt1 With a huge surplus of boys, ultrasound exams are illegal in China, =data ww2010.weblog.y2004.e040715.txt2 so that parents can't find out whether their unborn children are boys or girls. Parents are likely to abort unborn girls or to kill baby girls after they're born. Here's proof that a government program can produce unexpected result. China's gender balance used to be normal. Then, in 1980, in order to control population, China introduced a "one-child" policy that forbade any couple from having more than one child. The Chinese claim that the policy has prevented some 380 million births since it was introduced. Trouble is, parents want to be taken care of when they're old, and they need boys for that, since girls go off and take care of their husbands' families. So many parents decided that if they were going to have only one child, it had better be a boy, and that's why they started killing girl fetuses and babies. That's why there are 117 boys born for every 100 girls, and why demographers predict a surplus of 40 million bachelors by 2020. That's the bad news. The very bad news is that this causes further instablity in the Chinese culture. There are very many young men who are unable to find wives, and young girls are being driven into prostitution, in order for a small number of women to provide for a large number of men. That why the Chinese are cracking down on using ultrasounds and aborting girls. As <#hreftext ww2010.i.sep10 "we've written previously"#>, China is going through a generational unraveling period, with an overheated economy and a stock bubble that's going to burst one day soon. China is expected to experience a new secular civil war within the next ten years, following on the White Lotus Rebellion (1795-1805), the Taiping Rebellion (1852-62), and Mao's Long March and Civil War (1934-49). The last two secular civil wars killed tens of millions of people, and the next one is expected to continue the pattern. =eod =// &&2 e040714 Two events affect al-Qaeda psychology. =data ww2010.weblog.y2004.e040714.head Two events affect al-Qaeda psychology. =data ww2010.weblog.y2004.e040714.keys =data ww2010.weblog.y2004.e040714.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040714.date 14-Jul-04 =data ww2010.weblog.y2004.e040714.txt1 Saudi cleric Khaled al-Harby turns himself in, and the Filipinos capitulate to al-Qaeda. =data ww2010.weblog.y2004.e040714.txt2 Terrorism works with psychology. Everyone knows that setting off a car bomb in the middle of a crowd of Iraqis or blowing up a train station in Madrid are acts with little pure military value, but they do have a psychological value of, well, terrorizing people. On June 23, the Saudis issued a one-month amnesty and ultimatum to terrorists to turn themselves in. Well, a couple have already, but there has just been a big catch, Khaled al-Harby, who is Osama bin Laden's close associate. That's going to make al-Qaeda very angry. Yesterday, the Philippines capitulated to al-Qaeda by agreeing to withdraw its 50 troops from Iraq a few weeks earlier than had been scheduled. The terrorists had threaten to behead a Filipino hostage unless Manila complied. That's making al-Qaeda very happy. No other country has capitulated to terrorists in this way. The Philippines' capitulation has been widely criticized around the world -- by America, Poland, Australia, Bulgaria and South Korea have all deplored the move. Because of al-Qaeda's success, we can expect to see more kidnappings in Iraq. The Saudi ultimatum period ends in nine days. What will happen when it expires? Will the Saudis go after the other terrorists in a more aggressive manner, or will the ultimate just be dropped? Stay tuned. =eod =// &&2 e040713b Pope John Paul apologizes for 1204 sacking of Constantinople =data ww2010.weblog.y2004.e040713b.head Pope John Paul apologizes for 1204 sacking of Constantinople =data ww2010.weblog.y2004.e040713b.keys =data ww2010.weblog.y2004.e040713b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040713b.date 13-Jul-04 =data ww2010.weblog.y2004.e040713b.txt1 People laugh at stuff like this, but it's a really big deal. =data ww2010.weblog.y2004.e040713b.txt2 <#inc ww2010.pic pht0713.jpg right "" "The Patriarch of Constantinople visits Vatican"#> My mother, a devout Greek Orthodox, always loved the Catholics, but she always made it clear that we were better, and she expressed particular anger at this event. In 1204, a new Catholic Crusade was heading out to recapture Jerusalem back again from the Muslim Turks. Along the way, the Catholic army sacked Constantinople, starving and murdering its citizens, and plundered the Orthodox Church's treasures accumulated over the centuries. The deed was capped by placing a prostitute on the Emperor's throne at the church of St. Sophia, at that time the most beautiful church in Christendom. In studying Generational Dynamics, I've learned what might be called "the biggest lesson of history": That people never remember the atrocities that they commit against other people, but they never forget the atrocities that other people commit against them. Every tribe, society and nation commits atrocities during crisis wars and forgets about them later. The Pope has broken the mold in recent years by actually remembering Catholic atrocities and apologizing for them. This apology took place in Constantinople (Istanbul). In 2001, in a visit to Athens where he encounted large anti-Catholic protests, the Pope apologized to the Greeks for the same incident. And in a visit to France in 1997, he made a plea for forgiveness and reconciliation for the slaughter of Protestant Huguenots in the St. Bartholomew's Night Massacre in 1572. The fact that people remember these things for centuries is one of the reasons why wars repeat themselves, time after time. Desire for revenge is as much a part of being human as a desire for sex. The Pope's apologies, which are almost unique in history, are a reflection of his desire that he's not going to allow a war to occur on his watch for lack of saying, "I'm sorry." =eod =// &&2 e040713 Wall Street Journal: Today's soaring deficits don't inspire fears =data ww2010.weblog.y2004.e040713.head Wall Street Journal: Today's soaring deficits don't inspire fears =data ww2010.weblog.y2004.e040713.keys =data ww2010.weblog.y2004.e040713.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040713.date 13-Jul-04 =data ww2010.weblog.y2004.e040713.txt1 Back in the 1980s, Ronald Reagan's advisers worried that his federal budget deficits risked causing an economic calamity. =data ww2010.weblog.y2004.e040713.txt2 But the calamity never came, and that's why politicians of today are far more complacent, even though a "deficit-induced crisis" is far likelier, according to <#stdurl "http://online.wsj.com/article/0,,SB108958360900760766,00.html?mod=todays_us_page_one" "a front-page article"#> in yesterday's WSJ. Many economists are very concerned about the situation: Within four years, surging Social Security and Medicare expenditures will begin to overwhelm the economy, and worse, an enormous 40% of U.S. debt is held by foreigners. "Oddly, the lesson many Americans seem to have drawn from the experience of the past two decades is that nothing need be done," says Harvard University economist Benjamin Friedman. There's also a pretty simple generational explanation. In the 1980s, most government, business and education senior management positions were filled from a generation that lived through the Great Depression; today's leaders know nothing of that hardship, and at worst experienced only mild recessions. =eod =// &&2 e040710 Forbes Russia editor shot dead =data ww2010.weblog.y2004.e040710.head Forbes Russia editor shot dead =data ww2010.weblog.y2004.e040710.keys russia =data ww2010.weblog.y2004.e040710.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040710.date 10-Jul-04 =data ww2010.weblog.y2004.e040710.txt1 This is a grizzly new sidelight to the story about Yukos and Khodorkovsky =data ww2010.weblog.y2004.e040710.txt2 (see below). Paul Klebnikov, the editor in chief of Forbes Russia magazine has written a book on Boris Berezovsky, one of the Jewish oligarths that I've previously mentioned, and another book on organized crime in Russia's continuing war with Chechnya. In addition, Forbes Russia in May published a list of Russia's 100 wealthiest business people, including 36 billionaires. The new openness of the Kremlin was welcomed worldwide when it began in the late 1980s and continued through the 1990s. But starting in the late 1990s, Russia starting cracking down on freedom of religion and freedom of the press, and today media independence has been almost completely eliminated. Generational dynamics predicts that Russia is "scheduled" to repeat the secular civil wars it's had for centuries. =eod =// &&2 e040708b Darfur: "We want to create a light-skinned baby" =data ww2010.weblog.y2004.e040708b.head "We want to create a light-skinned baby." =data ww2010.weblog.y2004.e040708b.keys =data ww2010.weblog.y2004.e040708b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040708b.date 8-Jul-04 =data ww2010.weblog.y2004.e040708b.txt1 That's what a raped black woman told Congressman Frank Wolf when he visited Darfur. =data ww2010.weblog.y2004.e040708b.txt2 The white Muslims in northern Sudan are in a crisis war with the black Muslims in Darfur, western Sudan. The whites are killing the black men and raping the black women. <#inc ww2010.pic sudan1.gif right "" "Darfur - southwest region of Sudan (Source: BBC)"#> UN President Kofi Annan and US Secretary of State Colin Powell have both been visiting Darfur, and have tried to shame the world into doing something about Darfur. If you really want to know how the world works, watch this situation develop. There is no stopping this genocide. Close to a million people will die in the next few months, and nothing will stop it. It's nobody's fault, because nothing can be done about it, except that politicians can run around and say "Tsk! Tsk!" This kind of genocide is built into the human DNA, and is as basic a human force as sex is. It happens to people of all races, all religions, and all places. It happens because nature requires that population grows faster than food production, and genocide is the way of thinning the population so that the survivors can eat. Some people object to Generational Dynamics simply because they can't believe that its conclusions are humanly possible. Well, you can watch for yourself now. =eod =// &&2 e040708 Hussein al-Houthi and Yemen's "Believing Youth" =data ww2010.weblog.y2004.e040708.head Hussein al-Houthi and Yemen's "Believing Youth" =data ww2010.weblog.y2004.e040708.keys =data ww2010.weblog.y2004.e040708.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040708.date 8-Jul-04 =data ww2010.weblog.y2004.e040708.txt1 There's a new militant Islamic group to worry about. =data ww2010.weblog.y2004.e040708.txt2 <#inc ww2010.pic yemen1.gif right "" "Yemen (Source: BBC)"#> Almost 200 Yemenis have died in rebel clashes in northern Yemen, near the Saudi border. The attacks were launched by the group "Believing Youth," a Shia Muslim militant group with ties to terrorist groups in Iran and Lebanon. The group is opposed to Israeli and American presence in the Mideast. <#inc ww2010.pic houthi1.jpg left "" "Hussein al-Houthi (Source: al-Jazeera)"#> "Believing Youth" was formed in 1997 by Hussein al-Houthi, a (now) 50 year old rebel cleric who used the group to form religious schools in northern Yemen. (His name is also spelled al-Hawthi and Husain al-Huthi and Hussein Badr al-Deen al-Hothy in news stories.) From a generational dynamics point of view, fault line wars are often launched by youthful soldiers under the guidance of elder "prophets." This is a fluid situation. North and South Yemen have had cultural clashes including civil wars frequently, so this situation bears close watching. =eod =// &&2 e040706b I wish we knew more about Putin's plans for Yukos =data ww2010.weblog.y2004.e040706b.head I wish we knew more about Putin's plans for Yukos =data ww2010.weblog.y2004.e040706b.keys russia, yukos =data ww2010.weblog.y2004.e040706b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040706b.date 6-Jul-04 =data ww2010.weblog.y2004.e040706b.txt1 The gathering crisis for Russia's oil giant Yukos threatens both Russia's economic stability and world oil prices. =data ww2010.weblog.y2004.e040706b.txt2 <#stdurl www.yukos.com Yukos#> is Russia's second largest oil group. It supplied 11.4% of all the oil for the whole world last year, and alone accounts for 4% of Russia's economy. If Yukos stops pumping, which could possibly happen by the end of the month, then oil prices would spike upward and Russia's economy would take a big hit. If Yukos is nationalized, which could also happen, then Russia's entire economy could suffer, as panicked investors take their money out of other Russian companies that might get nationalized. I just have the feeling that we aren't being told everything about what's going on. There are just too many surprises. <#inc ww2010.pic khod.jpg right "" "Mikhail Khodorkovsky in happier times (Source: BBC)"#> There was the surprise stealthy arrest of the then CEO Mikhail Khodorkovsky in October 2003, with strong political overtones. There was the sudden appearance of massive tax bills for Yukos from 2000 and 2001 - along with requirements to pay them immediately, which would force the company into bankruptcy. And there was the surprise raid on the company's headquarter's this past Saturday for reasons not yet fully explained. All these moves were evidently ordered by Russian President Vladimir Putin. And it's possible that there were good valid reasons for all of them, based on genuine concerns over tax fraud and other illegal activities. The problem is that, given Russia's history, there's a more ominous explanation. It's only since 1991 that Russia eschewed Communism, a political system that gave the government the right to take any company's or any individual's profits at any time for any reason or no reason. This has been the Russian culture for decades. This practice was used by Nicolai Lenin from the beginning of the Bolshevik (Communist) Revolution in 1917 when he destroyed the Russian Orthodox Church in order to harvest its wealth. In one of his early letters to the Politburo he writes:

Now is history repeating itself, with Putin harvesting Yukos' wealth for whatever his purposes are? I don't know, of course, but it was a common Russian practice through 75 years of Communism. And there's more. Mikhail Khodorkovsky is one of the new Russian "oligarths," the six or seven people who took advantage of the new Russian capitalism of the 1990s to build up huge businesses and huge wealth for themselves. Khodorkovsky is actually the wealthiest man in Russia. And yet more: Khodorkovsky is Jewish, as are all but one of the new oligarths. Why is this important? Because Russia has a history of anti-Jewish pogroms, that may be at least a visceral factor here. It should not be a major historical surprise to anyone to learn that many people who are still in poverty after Russia's adoption of capitalism might blame their lot on the oligarths and or on the Jews in general. Now, I'm not saying those are Putin's motives for sure, but I'm saying that the more I read, the more I get a queasy feeling in my stomach. Otherwise, I'm still waiting to hear why Khodorkovsky just happened to be arrested last October just after he had announced a political campaign against Putin, and why Putin seems to be anxious to put Yukos out of business. =eod =// &&2 e040706 Kashmir violence heating up even more =data ww2010.weblog.y2004.e040706.head Kashmir violence heating up even more =data ww2010.weblog.y2004.e040706.keys =data ww2010.weblog.y2004.e040706.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040706.date 6-Jul-04 =data ww2010.weblog.y2004.e040706.txt1 A 115-year-old Islamic school in Srinagar was burned down on Monday. =data ww2010.weblog.y2004.e040706.txt2 The fire destroyed one of the world's oldest copies of the Quran as well as thousands of other ancient Islamic texts. The fire appears to be an arson attack by radical Islamist terrorists, targeting a moderate Muslim leader. It breaks my heart to read of the destruction of such hallowed, irreplaceable historical treasures such as these, and I'm not even Muslim. You can imagine how much a crime like this can ignite the fury of a Muslim to whom these documents are sacred. This is the kind of thing that happens in a generational crisis period. Each side practices brinkmanship, increasing the level of conflict and surprise, until finally the situation spirals out of control. =eod =// &&2 e040703 Kashmir violence is making news again. =data ww2010.weblog.y2004.e040703.head Kashmir violence is making news again. =data ww2010.weblog.y2004.e040703.keys =data ww2010.weblog.y2004.e040703.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040703.date 3-Jul-04 =data ww2010.weblog.y2004.e040703.txt1 Earlier today, bomb blasts exploded in two cities Kashmir in India-administered Kashmir, =data ww2010.weblog.y2004.e040703.txt2 Srinagar and Anantnag. <#inc ww2010.pic pht0703.gif right "" "Bomb blasts in Kashmir cities (Source: BBC)"#> Kashmir is an overwhelmingly Muslim area, but has been disputed by both Pakistan and India since the UN partitioned it in 1947 into Pakistani and Indian regions, to settle a violent regional war in the region. Pakistan claims the entire region, and points out the partition was supposed to be temporary, and that the UN Security Council mandated an election in 1951 to permit Kashmiri self-determination. That election has never been held. Today, India is building a fence along the line separating the two regions of Kashmir. This fence is much like the one the Israelis are building to separate themselves from the Palestinians. When crisis wars are settled by artificial means, such as partitioning (as also happened in the Palestinian region when Israel was created), belligerents often stop fighting out of sheer exhaustion, but the underlying issues are not settled. Generational Dynamics predicts that the crisis war will recur when the generation of people who grew up during the last crisis war are gone (retired or dead). This could happen any time in the next ten years. However, the Kashmir dispute has become linked, by Islamist militants, with other disputes in the Caucasus (Chechnya) and in the Palestine region. Furthermore, any major Kashmir war would expand into a regional war involving Pakistan and India, and both of these countries are prepared to use nuclear weapons. =eod =// &&2 e040702c Kerry approves security fence separating Israel from Palestinians. =data ww2010.weblog.y2004.e040702c.head Kerry approves security fence separating Israel from Palestinians. =data ww2010.weblog.y2004.e040702c.keys =data ww2010.weblog.y2004.e040702c.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040702c.date 2-Jul-04 =data ww2010.weblog.y2004.e040702c.txt1 This marks a significant change in Kerry's position to be much more pro-Israeli, =data ww2010.weblog.y2004.e040702c.txt2 according to <#stdurl "http://www.boston.com/news/politics/president/articles/2004/07/02/kerry_takes_a_stronger_pro_israel_line" "an article in today's Boston Globe"#>. <#inc ww2010.pic pht0702.jpg center "" "A Palestinian walks by the security fence. (Source: AFP)"#> The fence, which is part of Israel's disengagement plan, designed to insulate Israel from suicide bombings and other terrorist attacks, infuriates the Palestinians, who see it as an encroachment on their lands. The significance is that Kerry's position is, once again, much more closely aligned with Bush's, further indicating that whatever happens in the Mideast next year will happen irrespective of who's elected President. Generational Dynamics predicts that during crisis periods like this one, there are always major political realignments, as there were during the Depression-World War II period and the Civil War period. The alignment of the Christian right with the Jewish left is one of the more startling changes that are happening in the current realignment. These two groups were formerly political polar opposites, but now they've put their differences aside for the most part and joined in their commitment to the defense of Israel. Thus, Kerry's position change is being forced on him to prevent further Jewish defections. But it may cut into his big lead with Arab-American voters, who may now be tempted to vote for Ralph Nader, who claims that Bush is a puppet of the Israeli government. =eod =// &&2 e040702b Civil Rights Act signed 40 years ago today. =data ww2010.weblog.y2004.e040702b.head Civil Rights Act signed 40 years ago today. =data ww2010.weblog.y2004.e040702b.keys =data ww2010.weblog.y2004.e040702b.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040702b.date 2-Jul-04 =data ww2010.weblog.y2004.e040702b.txt1 Americans today are not as interested in invidual rights as they were in 1964. =data ww2010.weblog.y2004.e040702b.txt2 In fact, today they're most focused on threats from Islamist terrorist, and consider the civil rights battle to be mostly settled. See <#hreftext ww2010.i.sixties040501 "1960s America"#> for more information. =eod =// &&2 e040702 Low payroll data shows economy's fragility =data ww2010.weblog.y2004.e040702.head Low payroll data shows economy's fragility =data ww2010.weblog.y2004.e040702.keys =data ww2010.weblog.y2004.e040702.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040702.date 2-Jul-04 =data ww2010.weblog.y2004.e040702.txt1 Today's unemployment report for June showed employers added only 112,000 jobs to their payrolls last month, less than half the 250,000 economists had been expecting, =data ww2010.weblog.y2004.e040702.txt2 showing how fragile the economy is. There's little doubt about this: If the economy were in the robust economy that many pundits were claiming, then the job growth would be in the 300,000-400,000 range by now. You can't tell much from a single month's report, except that volatility is a way of life, but Generational Dynamics predicts that we're entering a new secular 1930s-style depression. At the very least, we can say that the job reports for the last year have done nothing to refute that prediction, especially with the vast amounts of very low interest credit that have been available for the last three years. The "good" news is that the weak employment number means that the Fed will not be any rush to increase interest rates further, thus guaranteeing continue low interest credit for the foreseeable future. =eod =// &&2 e040701 Kerry slams Bush Army reserve call-ups =data ww2010.weblog.y2004.e040701.head Kerry slams Bush Army reserve call-ups =data ww2010.weblog.y2004.e040701.keys =data ww2010.weblog.y2004.e040701.loc ww2010.weblog.log0407 =data ww2010.weblog.y2004.e040701.date 1-Jul-04 =data ww2010.weblog.y2004.e040701.txt1 Those who believe that a John Kerry victory in November will extract America from Iraq are in for a nasty surprise, =data ww2010.weblog.y2004.e040701.txt2 if we're to believe what Kerry said yesterday in criticizing the Bush administration's callup of retired and discharged soldiers, according to a <#stdurl "http://www.boston.com/news/nation/articles/2004/07/01/kerry_blasts_bush_for_military_call_ups" "7/1 Boston Globe article."#> The gist of Kerry's criticism of Bush is that there are too few troops in Iraq to do the job. Kerry and other members of Congress have previously called for increasing the size of the Army to meet Mideast commitments. Kerry has been repeatedly challenging Bush's management of national security in general and the war in Iraq in particular. The point is that whatever happens in Iraq and the Mideast is already "baked into the cake," and whatever happens will happen irrespective of who is elected President in November. In fact, if there's any difference at all in how Bush and Kerry might act, Kerry will act at least or more aggressively militarily than Bush. Why? Because Bush's natural enemies, the Democrats, will slow him down, while Kerry's natural enemies, the Republicans, will pressure him not to be weak militarily. One of the things that people ought to understand better, that Generational Dynamics teaches us, is that great events happen irrespective of who the politicians are. World War II would have happened even if Hitler had never been born. These events are caused by generational changes. I predicted in 2002 that there would be no important anti-war movement in America, and except for a small group of Naderites, there is none. I predicted late in 2002 that there would be no civil war in Iraq and no uprising against America in Iraq, and that's come true for very good reasons I've repeatedly said (<#hreftext ww2010.i.sixties040501 here#> and <#hreftext ww2010.i.iraq040409 here#> and <#hreftext ww2010.i.bombings040302 here#>, for example) on this web site, despite hysterical pundits who have been wrong every time. So now we have Bush furtively increasing the size of the armed forces, and Kerry calling for even more forces. Generational Dynamics tells us that we're heading for a much larger war, and both Bush and Kerry are heading in exactly that direction. =eod =// &&2 e040630 The race and gender wars are abating =data ww2010.weblog.y2004.e040630.head The race and gender wars are abating =data ww2010.weblog.y2004.e040630.keys =data ww2010.weblog.y2004.e040630.loc ww2010.weblog.log0406 =data ww2010.weblog.y2004.e040630.date 30-Jun-04 =data ww2010.weblog.y2004.e040630.txt1 The amount of public polarization along issues of race, gender and crime has plummeted in recent years, =data ww2010.weblog.y2004.e040630.txt2 according to <#stdurl "http://www.washingtonpost.com/wp-dyn/articles/A16180-2004Jun29.html" "a column by Robert Samuelson"#> in today's Washington Post. This isn't surprising, for reasons we gave in an earlier column, <#hreftext ww2010.i.sexrev040227 "The New Sexual Revolution"#>. The reason that the pendulum is swinging back on culture war issues is because such swings are generational, and because today's public is much more concerned about a potential Islamist terrorist attack than about whether Kobe Bryant's rape accuser is lying or not. However, the article also points out that there is one small demographic group that still cares about the culture wars: Politicians. They keep talking up race and gender issues, even though the public is largely uninterested. "The result is a growing disconnect between politics -- and political commentary -- and ordinary life. Politics is increasingly a world unto itself, inhabited by people convinced of their own moral superiority: conspicuously, the religious right among Republicans; and upscale liberal elites among Democrats," according to Samuelson. =eod =// &&2 e040629 Furtive armed forces buildup continues =data ww2010.weblog.y2004.e040629.head Furtive armed forces buildup continues =data ww2010.weblog.y2004.e040629.keys =data ww2010.weblog.y2004.e040629.loc ww2010.weblog.log0406 =data ww2010.weblog.y2004.e040629.date 29-Jun-04 =data ww2010.weblog.y2004.e040629.txt1 The Army's plan to call up some 6,000 retired and discharged soldiers continues the three-year trend line of a larger war effort. =data ww2010.weblog.y2004.e040629.txt2 The Pentagon had announced plans to reduce troop levels in Iraq, but instead is increasing them by a variety of techniques -- mainly by "stop-loss orders" that extend the involuntary active duty time for keeping National Guard and Reserve troops. Now the Army is calling up Individual Ready Reserve category of reservists for service. The problem that's worried me for two years is American overconfidence and hubris. It's amazing to me that I can't remember even a single television pundit or newspaper pundit express any doubt that America can win any war any time. (Senator Kerry, and those who think we're failing in Iraq, blame Bush for sending in too few troops.) This is caused by the generational change in leadership that took place around the year 2000. Ten years ago, all the major senior business, government and education leaders were risk-averse people from the generation that grew up during the Great Depression and World War II. Today, all the major leaders are from the risk-seeking, arrogant, hubristic, narcissistic, self-assured "baby boomer generation." So, as conflict levels continue to increase <#hreftext ww2010.i.mideast040623 "throughout the Mideast"#>, and tension grows in <#hreftext ww2010.i.taiwan040411 Taiwan#> and <#hreftext ww2010.i.korea Korea#>, America is so over-confident that we're not willing to take the necessary steps to prepare for the future (i.e., a draft). Instead, the use of reservists is an almost furtive way of increasing the size of the armed forces without anybody noticing. What will happen if a major new conflict situation arises somewhere, requiring American forces? We'll be almost totally unprepared for it. =eod =// &&2 e040628 Darfur genocide: The UN is completely irrelevant =data ww2010.weblog.y2004.e040628.head Darfur genocide: The UN is completely irrelevant =data ww2010.weblog.y2004.e040628.keys =data ww2010.weblog.y2004.e040628.loc ww2010.weblog.log0406 =data ww2010.weblog.y2004.e040628.date 28-Jun-04 =data ww2010.weblog.y2004.e040628.txt1 It was just three months ago that Kofi Annan said "never again," referring to the 1994 Rwanda genocide. =data ww2010.weblog.y2004.e040628.txt2 =inc ww2010.xr.related1 right darfur 2 I doubt that anyone <#stdurl "http://www.hipakistan.com/en/detail.php?newsId=en58949&F_catID=&f_type=source" "really believed "never again,""#> but I also doubt that many believed that it would take only a few weeks to prove the United Nations Secretary General wrong. <#inc ww2010.pic sudan1.gif left "" "Darfur - southwest region of Sudan (Source: BBC)"#> By the end of winter, some one million <#stdurl "http://news.bbc.co.uk/2/hi/africa/3843323.stm" "black Africans from Darfur will die"#> of either starvation or execution by Sudanese government-backed Jingaweit (Janjaweed) militias. Many of them will die in Chad, where they fled when the militias showed up to raze the towns, mass-murder the men <#stdurl "http://news.bbc.co.uk/1/hi/world/africa/3791713.stm" "and rape the women"#>. In other words, a typical, everyday secular genocide is in progress. One thing that Generational Dynamics tells us is that this kind of genocide is a force of nature, and that the UN can no more stop it than they can stop a typhoon. =eod =// &&2 e040623 Ultimatums make me very nervous =data ww2010.weblog.y2004.e040623.head Ultimatums make me very nervous =data ww2010.weblog.y2004.e040623.keys =data ww2010.weblog.y2004.e040623.loc ww2010.weblog.log0406 =data ww2010.weblog.y2004.e040623.date 23-Jun-04 =data ww2010.weblog.y2004.e040623.txt1 Saudi Arabia's King Fahd has evidently issued an ultimatum to the terrorists =data ww2010.weblog.y2004.e040623.txt2 to turn themselves. What happens if they don't do it? The beheadings have really raised the level of Mideast conflict, especially in Saudi Arabia. Countries that issue ultimatums always make me nervous, and King Fahd evidently issued an amnesty and ultimatum to the terrorists today to turn themselves in within a month. The problem with such an ultimatum is that if no terrorists turn themselves in, the King Fahd will be humiliated, and will be politically forced to resort to an armed response, and that could spiral out of control into war. Separately, the violence in southern Russia in the Caucasus region appears to be escalating. Georgia's South Osettia province is becoming increasingly tense, while just north over the mountains the ten-year-old war between Russia and the republic of Chechnya has spread to the neighboring Ingushetia. Soon we may hear some ultimatums issued there as well. =eod =// &&2 e040621 'I, Robot' movie trailer with Will Smith is fun to watch =data ww2010.weblog.y2004.e040621.head "I, Robot" movie trailer with Will Smith is fun to watch =data ww2010.weblog.y2004.e040621.keys =data ww2010.weblog.y2004.e040621.loc ww2010.weblog.log0406 =data ww2010.weblog.y2004.e040621.date 21-Jun-04 =data ww2010.weblog.y2004.e040621.txt1 This movie portrays a future world where super-intelligent humanoid robots are our servants. =data ww2010.weblog.y2004.e040621.txt2 The movie is scheduled for release on 16-July. If you'd like to have some fun, take a look at <#stdurl "http://www.irobotmovie.com/english/trailer3/index.html" "the trailer for the movie."#> The movie takes place in 2035. The trailer shows scenes of robots walking dogs, hugging children, and performing other chores. The plot thesis is that the robots have been developed with strict adherence to <#stdurl "http://www.asimovonline.com/asimov_FAQ.html#series13" "Isaac Asimov's Three Laws of Robotics"#>, which require robots to protect, and never harm, human beings. The laws appeared in a series of 1940s short stories that are <#stdurl "http://www.amazon.com/exec/obidos/ASIN/0553294385" "now available in book form"#> In the movie, it suddenly turns out the guy who designed the robots has been murdered, and the perpetrator is apparently a robot. Is there a bug in the robot implementation? Did the robots evolve on their own? These are the "big questions" that the movie poses. The trailer doesn't tell how the movie ends, of course, but we can assume that Will Smith will conquer the malevolent robots and get the girl, and the robots will be happily restored to the state of strictly obeying Asimov's laws, and that everyone will live happily ever after. It's all poppycock, of course. The 2035 time frame for intelligent robots performing chores for humans is OK, though I'd estimate the mid-2020s. But Asimov's laws will never be implemented. Quite the opposite: The first wide-scale application of super-intelligent computers will be for warfare. How do I know this? I know it because every new technology is used first for war. The fascinating question is: When will the issue of super-intelligent computers reach the public's radar? By 2030 or so, super-intelligent computers will be more intelligent than humans, and able to improve themselves. By 2050, they'll be as much more intelligent than human beings as humans are more intelligent than dogs and cats. Scientists have been writing about this (called "the Singularity") since the 1980s, but the public has been blissfully unaware. What event will finally trigger public interest? Perhaps this movie? =eod =// &&2 e040617 PIMCO bond fund manager Bill Gross expresses concern =data ww2010.weblog.y2004.e040617.head PIMCO bond fund manager Bill Gross expresses concern =data ww2010.weblog.y2004.e040617.keys =data ww2010.weblog.y2004.e040617.loc ww2010.weblog.log0406 =data ww2010.weblog.y2004.e040617.date 17-Jun-04 =data ww2010.weblog.y2004.e040617.txt1 The pace of foreboding analyst opinions seems to be increasing. =data ww2010.weblog.y2004.e040617.txt2 <#inc ww2010.pic bgross1b.gif right "" "Total credit market debt (Source: PIMCO)"#> One more major analyst is saying that the economy is becoming increasingly unstable. Bill Gross is no flake, as he heads the world's biggest bond fund. In his <#stdurl "http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2004/IO_5_04.htm" "May/June Investment Outlook"#>, he lists major changes that have occurred in the last 12 months that indicate that the instability is increasing. Most startling is the continuing rapid increase in debt, higher even than the 1930s Great Depression peak. But it's not just America: debt is increasing astronomonically in China and Japan as well. Gross's ominous conclusion is: "[C]heap money is primarily responsible for today's economic recovery and accelerating inflation, not just in the U.S. but worldwide. When it goes away, however, we may tip the other way.... Inflation and deflation in this levered world coexist nearly side-by-side. Is it any wonder that in the space of the last six months we have had headline speeches promoting the dangers of deflation only to be followed by fears of accelerating inflation? "One side's ice and one is fire." What has changed this year in our 3-5 year forward economic forecast is that the conditions for instability have accelerated -- more U.S. consumer leverage dependent on cheap financing; more Treasuries in foreigners' hands; more geopolitical instability; and more risk of a slowdown/shock in Asia." My original prediction, made in 2002, based on generational analysis and standard growth analysis, was that we would have a major stock market crash (DOW down to 4000 range, S&P 500 index down to 400) by 2006 or 2007. Nothing that's happened in the last two years has done anything to dissuade me of the validity of this forecast, and with today's astronomical price/earnings ratios, it's hard for me to see how anyone can doubt it. Bill Gross's remarks that "the conditions for instability have accelerated" mean that we're in an increasingly rapid slide downhill, and the crash may come well before 2007. =eod =// &&2 e040612 How should global execs prepare for World War III? =data ww2010.weblog.y2004.e040612.head How should global execs prepare for World War III? =data ww2010.weblog.y2004.e040612.keys =data ww2010.weblog.y2004.e040612.loc ww2010.weblog.log0406 =data ww2010.weblog.y2004.e040612.date 12-Jun-04 =data ww2010.weblog.y2004.e040612.txt1 That's the question that the "Manager's Journal" of today's Wall Street Journal =data ww2010.weblog.y2004.e040612.txt2 is asking. "The U.S. is fighting the early battles of World War III -- against global terrorism -- yet few in business seem to comprehend the far-reaching repercussions of this war," begins the article by Denis Bovin, Michael Sonnenfeldt, Larry Smith and Linda Flanagan. The article points out that industry leaders have to help take responsibility for protecting national security, and that they have to work together to tackle national security problems collectively. They say it's good business, too! =eod =data xxxxxxxxxx.xxxxxxxxx ********** June 11 Posted: Fri Jun 11, 2004 3:50 pm Post subject: How many bankruptcies will the Fed rate cause? Reply with quote How many bankruptcies will the Fed rate cause? It's unusual to see such a negative article so prominently displayed as this one was, on the first page of the Investment section of today's Wall Street Journal. Although ostensibly about Reagan's economic policy, it very quickly turns to the question of the effects of the expected June 30 increase in the Fed funds overnight rate. The quote, "I see no statistical evidence you should jump out a window here," refers to the concern that many analysts have that we're about to repeat the effects of 1929. This article is particularly interesting because it points out something to watch out for: Quote: > More troublesome than rising short-term rates, by his reckoning, > would be if long-term interest rates dipped to meet them as they > rose, thereby flattening the yield curve. But the yield curve > usually flattens only when the Fed goes overboard in its efforts > to cool the economy. This paragraph refers to the "normal" situation where long-term interest should be higher than short-term interest rates, since a long-term loan is riskier than a short-term loan. For example, today the rate for an overnight loan is 1.00%, the Fed funds rate. The rate is 2.79% for a 2-year Treasury bond, 4.79% for a 10-year bond, and 5.46% for a 30-year bond. Mortgage rates for fixed-rate mortgages are usually based on the 10-year Treasury bond figure, while mortgage rates for ARMs (adjustable rate mortgages) are based on the 2-year bond rate. These interest rates (= "yields") are shown in the following "U.S. Treasury Yield Curve" for today: The quoted paragraph above tells us to watch to see whether the 10-year rate begins to fall close to the 2-year rate when the Fed raises its rates. This would "flatten the yield curve" shown above. Why is this important? Because it means that more and more people and businesses are selling their long-term assets (like their homes or their long-term bonds) in order to pay short-term debt (like credit cards). A person or business doing this is likely to be trying to stave off bankruptcy, but it also means that a lot of other people and businesses with no long-term assets to fall back on are going to be unable to pay short-term debt, and will indeed go bankrupt. But now look what's already happening: Code: U.S. Treasury Bonds - June 11, 2004 -------------------------------------------------- Maturity Yield Yesterday Last Week Last Month -------------------------------------------------- 3 Month 1.17 1.15 1.06 0.94 6 Month 1.55 1.51 1.36 1.26 2 Year 2.79 2.75 2.60 2.55 3 Year 3.28 3.25 3.13 3.02 5 Year 4.00 3.96 3.86 3.89 10 Year 4.79 4.80 4.70 4.74 30 Year 5.46 5.47 5.41 5.45 -------------------------------------------------- Source: http://bonds.yahoo.com/rates.html In going from "Last Month" to "Last Week," the short-term rates increased, while the long-term rates fell. This week, the long-term rates recovered, but this is one more example of volatility in the financial markets. In 1994, when the Fed tightened interest rates in a strong economy, Orange County, California, went bankrupt, and a financial crisis in Mexico required a $50 billion bailout from the IMF. So there's little doubt that the rate increase will create hardship for some people. The question is: Will it create hardship for a great number of people and businesses, and even too much for heavily debt-ridden governments in Japan and China and in Euroland? That's what analysts will be watching for. Sincerely, John ******** June 11 Posted: Fri Jun 11, 2004 3:45 am Post subject: Japanese Suicide Rate Reply with quote Here's a different angle on the economic problems in Japan. John Record 32,082 Japanese committed suicide last year; sagging economy cited Canadian Press Friday, June 11, 2004 TOKYO (AP) - More Japanese committed suicide last year than ever before as poor economic conditions drove greater numbers to end their own lives, the government said Friday. Suicides rose 7.1 per cent to 32,082 in 2003 from 29,949 the year before, the Health Ministry said. It was the sixth leading cause of death after cancer, heart disease and other illnesses. Japan's economy has started to rebound in recent years amid rising exports to Asia, but years of sluggish growth have lifted unemployment and forced large numbers into personal bankruptcy. Suicide was the leading cause of death among men in their 50s, a population segment disproportionately affected by corporate restructuring. "Men in their 50s are probably the hardest hit by unemployment and economic slump," said Tsutomu Ishiyama, a ministry official in charge of the statistics. Suicide also was the No. 1 cause of death among those in their 20s and 30s, the age groups that are less likely to die from illnesses, he said. Overall, men accounted for nearly three-quarters of suicides. © Copyright 2004 The Canadian Press http://www.canada.com/health/story.html?id=7F6B53DF-D3FC-4092-975A-E4EB3447F8D2 ****** June 10 Posted: Thu Jun 10, 2004 3:06 pm Post subject: The Japanese Finance Dilemma Reply with quote The Japanese Finance Dilemma In my previous message (on May 17), I predicted that the Fed would not raise interest rates on June 30. If I turn out to be right, it will be a shock to everyone else in the world, since even Alan Greenspan himself has hinted that a rise is in the offing. So it looks like a raise 25 point increase in the overnight fed funds rate (from 1.00% to 1.25%) is in the offing. A couple of analysts (who, ironically, must therefore have very poor analytical skills) are saying that the economy is in such exceptionally good shape that they predict a 50 point increase (to 1.50%), but most real analysts realize how potentially disastrous such a big jump would be. The following article, about how Japan is having a similar problem, explains the dilemma the Bank of Japan is facing, and this is the same dilemma that the Fed is facing. Just one point of technical explanation: When "bond prices plunge," it means that the reason they're cheaper is because they're paying high interest rates. Thus, the interest rate (yield) of a bond is inverse to the price of the bond. When one goes up, the other goes down, and vice versa. *********** March 29 Posted: Mon Mar 29, 2004 8:09 am Post subject: Analysts are changing their outlook Reply with quote To all: Ever since 2002, when I discovered that the generational paradigm implies / proves that we're entering a new 1930s-style Great Depression and I started telling that to people, I've been informally keeping track of analysts' opinions on where the economy and the stock market are going. What I discovered was that the world seemed to be in almost total denial, especially with regard to the Price/Earnings ratios, which predict an almost certain major fall in the stock market. Instead, analysts were always very optimistic, and on the rare occasion when some analyst expressed concern, he was ridiculed and almost shut out. Good economic news always meant that the stock market would go up, and bad economic news always meant that the stock market would go up. What's moving me to write today is that I've noticed a very dramatic change in the last few weeks. Suddenly, the "bullish" analysts are almost always very reserved, and most of the analysts are either bearish or are expressing great concern about the stock market. Believe me, this is not a subtle change. What I'm hearing analysts say is ENORMOUSLY different from what I heard a month ago, or in any month in the last year. The sense is MUCH more negative than it was. As of today (29-Mar-04), the analysts seem to be on tenterhooks, awaiting Friday's unemployment report. The figure that people will be looking at is the job creation figure for March. If 100,000 to 150,000 new jobs were created, then everyone will breathe a sigh of relief. However, the job creation figure has been unexpectly low in recent months. One month (January?) it came in at 1,000 -- meaning that the entire country created only 1,000 new jobs that month! According to one TV analyst this morning, if Friday's figure comes in at under 50,000 then he expects a big selloff. Another indicator is first quarter corporate earnings, which will start coming in next week. In the last few quarters, earnings have been unexpectedly high, and this has driven up the stock market. (Remember: The Price/Earnings ratio is based on earnings, and investors can justify paying very high prices if earnings keep growing.) Investors' expectations for first quarter earnings are now very high -- some 16% growth over first quarter of last year. If the earnings reports meet or exceed 16%, then once again there will be a sigh of relief, but a failure to meet expectations, especially in combination with a bad jobs figure, will probably lead to a selloff. The entire employment issue has been one of endless fascination to me. My generational research shows / proves that America's businesses today are cyclically inefficient and steeped in bureaucracy, and that only massive layoffs and bankruptcies (as in the 1930s) can right the situation, by forcing businesses to start all over. So I've informally tracked what analysts and politicians have been saying about the unemployment rate. About a year ago, they were saying, "Unemployment is a lagging indicator." I must have heard that a million times in the last year. What it means is that when a recession ends, it takes a few months for unemployment to start going down. "Unemployment is a lagging indicator." "Unemployment is a lagging indicator." That's all I ever heard. Around January it started changing. Then the message became, "I can't believe that the economy is good and that employment hasn't taken off. Nothing like that has ever happened before. Employment WILL start to take off very soon." Around February, the message was, "We don't understand this. We're getting concerned that something is wrong, but we don't know what." [Sigh. If only I could figure out a way to turn this into book sales.] Today there's a great deal of apprehension, because no one can understand why the economy can't create jobs if it's doing so well in other ways. That's why Friday's unemployment report has taken on a major significance. Another thing I've been hearing lately is that suddenly there's recognition that the reason for the high stock market prices is because the Fed's low interest rate policy: People have been borrowing huge amounts of money, creating a great deal of debt, and using the money to buy stocks and bid up stock prices. I've heard several analysts express that concern, and according to the Wall Street Journal on March 19, 2004, the Fed itself shares that view: Wall Street Journal, 19-Mar-2004 wrote: > Fed Internal Debates May Heat Up > By GREG IP > Staff Reporter of THE WALL STREET JOURNAL > March 19, 2004; Page A2 > WASHINGTON -- Critics of the Federal Reserve warn that its low > interest rates are boosting prices for stocks, bonds and houses > to unsustainable levels. Some Fed officials, it turns out, may > share those concerns, minutes of the Fed's January meeting show. > ... > At its meeting Jan. 27-28, the 19-member Federal Open Market > Committee decided to replace its five-month-old commitment to keep > interest rates low for a "considerable period" with a commitment > to be "patient in removing its policy accommodation," that is, in > raising interest rates. That wasn't to signal that it would raise > rates soon, but to get the flexibility for an increase when the > U.S. economy called for it, the minutes say. > The Fed repeated its commitment to patience at its meeting this > past Tuesday, and left the target on the federal-funds rate, > charged on overnight loans between banks, at 1%. > The Fed's "considerable period" commitment held down long-term > interest rates last year and early this year while the economic > expansion gained traction. But some FOMC members worried that the > commitment had "contributed to valuations in financial markets > that left little room for downside risks," the minutes say, > indicating worries that an eventual rate rise could trigger a > violent reaction in the markets. Some private analysts long have > argued the Fed's easy monetary policy is encouraging excessive > speculation in stocks, corporate bonds and houses. > http://online.wsj.com/article_print/0,,SB107963420584959294,00.html The phrase "contributed to valuations" in the last paragraph referred to bidding up stock prices. Several months ago, a newsletter with a daily "Morning Briefing" from http://www.21stcenturyalert.com/ started appearing in my e-mail inbox each day, even though I never subscribed to it. Anyway, the newsletter usually contains stuff about obscure market indicators computed in strange ways - not things that are very interesting to me. But this morning's "briefing" was quite different in tone: 21st Century Alert Morning Briefing 29-Mar-04 wrote: > Trends and Retracements > By David Nichols > It's been a tumultuous string of years if you look at the big, > big picture on U.S. stocks. What these big up and down swings > show is nobody -- but nobody -- really knows what's going on with > the economy in the post-bubble world, or how it's all going to > eventually play out. > Alhough the fate of the economy and the grand monetary experiment > at the Fed will remain an unpredictable mystery in the > short-term, we can look at the big trend in stock price movement > to see how people are gauging the action. The following is a > monthly chart of the S&P 500 over the last few years, along with > the important Fibonacci retracment levels of the bear market. > [Image 1: Go to Web site to see image] > Any armchair technician will tell you that it's typical for a > trend to retrace 50% before continuing on its original path. > Well....it's certainly interesting that the market has retraced > exactly 50% of the bear market decline. You don't often hear > talk about this basic and observable phenomenon about the monthly > trend, for the simple reason that the monthly trend is taking > place in a time-frame that is hard for our limited attention > spans to grasp. It's happening on too large a scale. > Nevertheless, there is a distinct possibility that this entire > year-long uptrend in the market has been one of the cruelest > hoaxes in market history. It's stoked the desire to speculate > back to bubblicious levels, and perhaps set up the once-burned > majority to be scorched yet again. It is all-but-certain that > the majority will get burned yet again at some point, with > sentiment so outrageously and lopsidedly bullish for so long. And > it's a stretch to say that a 50% retracement is the beginning of a > grand bull market that will last years and years. Indeed, if > this is merely a typical retracement, then the ensuing ride south > could even make dramatic new lows. I've quoted this extremely pessimistic statement for the reasons previously stated: That it's in line with what I hear more and more analysts saying. As they like to say on Wall Street, the bulls have disappeared and the bears are going wild. Sincerely, John =eod =data ww2010.weblog.temp.pollock Alan Greenspan's mixed emotions of weak employment stats - Generational Dynamics

Alan Greenspan's Mixed Emotions

by John J. Xenakis, john@GenerationalDynamics.com

Friday's unemployment report was a shock to many analysts, because they had been so wrong. They had almost uniformly predicted that 250,000 net jobs would be created in June, but in fact only 112,000 net were created. Even worse, the figures were appeared to be establishing a downward trend, already two months old, supported by other negative trends, including weak retail sales. Analysts are saying that the chances of slipping back into recession are real.

Fed Chairman Alan Greenspan must have had mixed emotions about the figures, since he's been bragging for several months that, in essence, the economy has been following the path that he set for it in 1997. But even he may be wondering if things are in as good a shape as he'd like, especially after the sharp disagreement that the 78-year-old chairman has been having with younger members of the Fed committee, as revealed by the newly released May meeting minutes.

The disagreement concerns whether or not inflation is back in force. Greenspan says it isn't, and so the Fed can raise interest rates very slowly, slowly enough so as not to disrupt the stock market. The younger Fed governors don't see it that way. Inflation has been a major concern their entire professional lives, and they don't have the same worries about a stock market collapse that Greenspan might.

Reliving a nightmare?

And little wonder: Born in 1926, and concerned about his legacy as Fed chairman, Greenspan is very worried that he's reliving a childhood nightmare, the devastation of the Great Depression. Greenspan must remember growing up in the 1930s, with massive starvation and homelessness all around him, and learning that the cause was a stock market bubble that ran in the 1920s, and finally burst with the 1929 stock market crash. He remembers learning in school that the devastation that such a stock market bubble could never happen again, because President Franklin D. Roosevelt's administration had created the SEC and instigated new regulations that would prevent any such bubble from happening again.

But it did happen again -- and under Greenspan's watch in the late 1990s. And Greenspan knew all along we were in a bubble, according to a January, 2004, speech where he bragged, "There appears to be enough evidence, at least tentatively, to conclude that our strategy of addressing the bubble's consequences, rather than the bubble itself, has been successful. Despite the stock market plunge, terrorist attacks, corporate scandals and wars in Afghanistan and Iraq, we experienced an exceptionally mild recession, even milder than that of a decade earlier." So the Fed knew we were in a bubble, and decided not to stop it, but instead to deal with the crash, whenever it occurred. As we now know, his solution, starting in early 2000, was to lower interest rates to near-zero, thus making huge amounts of low-cost credit available to prevent bankruptcies and homelessness.

Did he prevent these consequences, or merely postpone them? Unfortunately, Generational Dynamics, a historical methodology that analyzes historical events based on the flow of generational changes, says that those bankruptcies are still coming, and they're unavoidable. And Greenspan should have realized this.

The 1990s bubble occurred at precisely the time that the generation of people who grew up during the 1930s Great Depression disappeared -- retired or died -- all at the same time.

Those growing up during the Depression were originally called "depression babies," but in the 1950s Time Magazine gave them the nickname "the Silent generation," because they valued conformity and loyalty above all else, and didn't complain about much.

It was this highly risk-averse Silent generation that grew into middle management positions in the 50s and 60s, and took senior management positions in the 70s and 80s. By 1990, probably every financial institution in the country was being led by, or at least heavily influenced by, the experience of Silents.

A big generational change

But a big change happened in the early 1990s: Most of the Silents disappeared, through either death or retirement, and the senior management positions were taken up by the Baby Boom generation of kids, born during or after World War II. These kids grew up in a world where America had beaten the Depression and beaten the Nazis, and thus had nothing to fear from anyone or anything. Since the early 90s, senior management positions all over are being filled by people from the risk-seeking, arrogant, hubristic, narcissistic, self-assured "baby boomers." This is a huge change for every institution in the entire country.

Historical price/earnings ratio for S&P 500, 1881 to 2002.

For the financial industry, it meant forgetting the lessons of the 1920s, and going into a state of denial about the new bubble that the stock market entered in the late 1990s. The level of denial has to be truly huge to ignore what the adjacent graph is saying. It tells you that, since 1880, whenever the Price/Earnings ratios go above 20, then they soon drop below 10. That means that we can soon expect the Dow to fall to around 4000, and the S&P index to fall to 400.

The level of denial is astonishing. Consider "Stock Prices and Fundamentals in a Production Economy", a Fed policy paper published in January, 2000, the absolute height of the bubble, when P/E ratios were around 40. It says, "In the late 1990s, the US stock market has taken off, leaving conventional valuation benchmarks such as dividend yields or P/E ratios very far from historical averages. Several recent analyses have suggested that the old benchmarks no longer apply because the US economy has entered a period of faster growth and lower required returns--two changes that imply a large runup in equity markets in the familiar ... growth model."

What the above means is that the "internet bubble" wasn't a bubble. How could anyone possibly believe that? Computer industry analysts were pointing out that there weren't enough potential customers in the world to recover even a small fraction of the venture capital being expended for software development or to use even a fraction of all the fiber optic cable that was being laid, or to pay off a tiny fraction of the money promised in conjunction with all the stock options being granted. There was literally no chance at all that the high stock valuations could be maintained. And yet we have this Fed policy paper.

What it says, in essence, is that we've counted on price/earnings ratios to guide us for decades, but we won't use them any more, because they're not giving us the answers we want.

That's the kind of thing that separates the Silents from the Boomers. The younger managers think they know only that inflation is the big danger, because that's all they've ever seen. The "know" that another Great Depression is impossible, because FDR's administration abolished it forever. Greenspan, who lived through the Great Depression, saw it, heard it, smelled it, tasted it, knows that he can see some of the same things today, smell some of the same smells, taste some of the same tastes.

The 'insanity of valuations'

Total credit market debt (Source: PIMCO)

Greenspan isn't the only one who's worried. The problems have been evident for a while. In March, 2003, when the Dow was around 8,000, master investor Warren Buffett, born 1930 into the Silent generation, declared, in Berkshire Hathaway Inc.'s annual report, that stocks were still significantly overpriced (at 8,000!!!), despite three years of falling prices, and that "the insanity of valuations reached during The Great Bubble" had yet to work themselves out.

And things have only gotten worse in the year since Buffett made those remarks according to Bill Gross, head of the PIMCO bond fund, the world's largest. He says in his May/June 2004 Investment Outlook that his 3-5 year economic forecast is much more negative than last year's because there's "more U.S. consumer leverage dependent on cheap financing; more Treasuries in foreigners' hands; more geopolitical instability; and more risk of a slowdown/shock in Asia." In short, "the conditions for instability have accelerated" in the last year.

Stephen Roach, chief economist at Morgan Stanley, agrees with Gross that accelerating debt, especially consumer debt, has already reached the tipping point. "This has all the ingredients for disaster," he says. "It will take nothing short of a miracle to extricate the self-indulgent American consumer from this mess."

Dow Jones Industrial Average - the trend value in 2010 is 5800

But there's no miracle in sight. My own original prediction, made in Spring, 2002, was that we were entering a new 1930s-style Great Depression. This prediction was based on the adjacent graph which shows that the DJIA is currently way above the exponential growth trend line. (You get a similar result for the S&P index.) Call it a law of nature if you want, but the real underlying value of the businesses represented by the stock market must grow at an exponential rate, no faster or slower. If the capitalized value is above the trend line, then it must soon thereafter fall below the trend line. There's no choice. This is about as close as you can get to a mathematical proof that the DJIA must fall to the 4000 range and the S&P index to the 400 range, before 2010. Nothing has happened since I made this prediction to cause me to think it's in error.

So that explains why Greenspan has been having mixed emotions over the unexpectedly negative employment report last week. On the one hand, it shows that the economy may be quickly heading for the the 1929-like downward spiral that he fears the most; but on the other hand, he can use the weak data to convince the younger Fed committee members to keep interest rates low. If he's very, very lucky, that will postpone that downward spiral until after he retires in 2006, when one of the Boomers will have to deal with it.

John J. Xenakis, john@GenerationalDynamics.com

Sources and acknowledgments

Greenspan's January 2004 speech was to the annual meeting of the American Economic Association in San Diego, and can be found at www.federalreserve.gov/boarddocs/speeches/2004/20040103/default.htm

Generational Dynamics can be found at www.GenerationalDynamics.com;

I'd like to thank Dr. Warren Jacobs, founder of Conservative Investment Strategies, for pointing out to me the paper "Stock Prices and Fundamentals in a Production Economy," written by Michael T. Kiley of the Federal Reserve Board at www.federalreserve.gov/Pubs/Feds/2000/200005/200005pap.pdf.

Warren Buffett's comments were in Berkshire Hathaway Inc.'s annual report at www.berkshirehathaway.com/2002ar/impnote02.html

Bill Gross's comments were in the PIMCO "May/June 2004 Investment Outlook" at www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2004/IO_5_04.htm

[End of article]

=eod =eof