The Crisis Has Hardly Begun, America’s Economic Crisis Is Beyond The Reach of Traditional Solutions – By Paul Craig Roberts

The Crisis Has Hardly Begun

By Paul Craig Roberts

“The prospects of a government rescue for the foundering American automakers dwindled Thursday as Democratic Congressional leaders conceded that they would face potentially insurmountable Republican opposition,” reported the NY Times last Friday. [Chances Dwindle On Bailout Plan For Automakers, By David M. Herszenhorn, November 13, 2008]

Wow! The entire country is steamed up over the Republicans bailing out a bunch of financial crooks who have paid themselves fortunes in bonuses for destroying America’s pensions. Why do Democrats want to protect Republicans from further ignominy by not giving them the opportunity to vote down a bailout for workers? Quick, someone enroll the Democratic Party in Politics 101.

GM’s divisions in Canada and Germany are asking those governments for help. It will be something if Canada and Germany come through for the American automaker and the American government doesn’t.

Conservative talking heads are saying GM is a “failed business model” unworthy of a $25 billion bailout. These are the same talking heads who favored pouring $700 billion into a failed financial model.

The head of the FDIC is trying to get $25 billion–a measly 3.5 percent of the $700 billion for the banksters–with which to refinance the mortgages of 2 million of the banksters’ victims, and Bush’s Secretary of the Treasury Paulson says no. Why aren’t the Democrats all over this, too?

Apparently, the Democrats still think they are the minority party—or else their aim is to supplant the Republicans as the party of the rich.

Any bailout has its downsides. But if America loses its auto industry, it will lose the suppliers as well and will cease to have a manufacturing sector. For years no-think economists have been writing off America’s manufacturing jobs, while deluding themselves and the public with propaganda about a New Economy based on finance.

A country that doesn’t make anything doesn’t need a financial sector as there is nothing to finance.

The financial crisis has had one good effect. It has cured Democratic economists like Robert Reich and Paul Krugman of their fear of budget deficits. During the Reagan years these two economists saw doom in the “Reagan deficits“ despite the fact that OECD data showed that the US at that time had one of the lowest ratios of general government debt to GDP in the industrialized world.

Today Reich and Krugman are unfazed by their recommendations of budget deficits that are many multiples of Reagan’s. Moreover, neither economist has given the slightest thought as to how the massive budget deficit that they recommend can be financed.

Both recommend large public spending programs. Krugman puts a price tag of $600 billion on his program. If it takes $700 billion to save the banks and only $600 billion to save the economy, it sounds like a good deal. But this $600 billion is on top of the $700 billion for the banks, the $200 billion for Fannie Mae and Freddie Mac, and the $85 billion for AIG. These figures add to one trillion five hundred eighty-five billion dollars, a sum that must be added to the budget deficit due to war and recession (or worse).

What we are talking about here is a minimum budget deficit of $2 trillion. The US has never had to finance a deficit of this magnitude. Where is the money coming from?

The US Treasury doesn’t have any money, and neither do Americans, who have lost up to half of their savings and retirement funds and are up to their eyeballs in mortgage and consumer debt. And unemployment is rising.

There are only two sources of financing: foreign creditors and the printing press.

I doubt that foreigners have $2 trillion to lend to the US. Thanks to the toxic US financial instruments, they have their own bailouts to finance and economies to stimulate. Moreover, I doubt that foreigners think the US can service a public debt that suddenly jumps by $2 trillion. At 5 percent interest, the additional debt would add $100 billion to the annual budget deficit. In order to pay interest to creditors, the US would have to borrow more money from them.

Economists and policy-makers are not thinking. This enormous financing need comes not to a well-managed economy that can take the additional debt in its stride. Instead, it comes to an economy so badly managed that there are no reserves.

Massive US trade deficits have been financed by giving up US assets to foreigners, who now own the income flows as well. Budget deficits from 6 years of pointless wars and from unsustainable levels of military spending have helped to flood the world with dollars and to drive down the dollar’s exchange value. Consumers themselves are drowning in debt and can provide no lift to the economy. Millions of the best jobs have been moved offshore, and research, design, and innovation have followed them. Considering America’s dependency on imports, part of any stimulus package that reaches the consumer will bleed off to foreign countries.

Generally, when countries acquire more debt than they can service, they inflate away the debt. If foreign creditors do not save the Obama administration, the Treasury will print bonds and give them to the Federal Reserve, which will issue money.

The inflation will be severe, particularly as Americans will not be able to pay for the imports of manufactured goods from abroad on which they have become dependent. The exchange value of the dollar will decline with the domestic inflation. Once inflation is off and running, the printing press dollars will only have goods made in America to chase after. The real crisis has not yet begun.

Paulson should rethink the automakers’ and FDIC’s proposals. A bank produces nothing but paper. Automakers produce real things that can be sold. Occupied homes are worth more than empty ones.

Paulson’s inability to see this is the logical outcome of Wall Street thinking that highly values deals made over pieces of paper at the expense of the real economy.

America’s Economic Crisis Is Beyond The Reach of Traditional Solutions

By Paul Craig Roberts

By most accounts the US economy is in serious trouble.  Robert Reich, an adviser to President-elect Obama, calls it a “mini-depression,” and that designation might be optimistic.  The Russian economist, Mikhail Khazin says that the “U.S. will soon face a second ‘Great Depression.’” It is possible that even Khazin is optimistic.

I cannot predict the future.  However, I can explain what the problems are, how they differ from past times of troubles, and why traditional remedies, such as the public works programs that Reich proposes, are unlikely to succeed in reviving the U.S. economy.

Khazin points out, as have others, such as University of Maryland economist Herman Daly and myself, that consumer debt expansion is the fuel that kept the U.S. economy alive.  The growth of debt has outstripped the growth of income to such an extent that an increase in consumer credit and bank lending is not possible.  Consumers are overburdened with debt.  This fact takes monetary policy out of the picture.  Americans can no longer afford to borrow more in order to consume more.

This leaves economists with fiscal policy, which, as Reich realizes, also has problems.  Reich is correct that neither a reduction in marginal tax rates nor a tax rebate is likely to be very effective.  Reich, a Keynesian, has an uncertain grasp of supply-side economics, but as one who has a firm grasp, I can attest that marginal tax rates today are not the stifling influence they were prior to John F. Kennedy and Ronald Reagan.  As Art Laffer said, there are two tax rates, high and low, that will produce the same tax revenues by expanding or contracting economic activity. Marginal tax rates are no longer in the higher ranges.  As for a tax rebate, Reich is correct that in the present situation a tax rebate would be dissipated in paying off creditors.

Reich sees the problem as a lack of aggregate demand sufficient to maintain full employment. His solution is for the government to spend “a lot” more on infrastructure projects on top of a trillion dollar budget deficit –“repairing roads and bridges, levees and ports; investing in light rail, electrical grids, new sources of energy.” This spending would boost employment, wages, and aggregate demand.

I have no opposition to infrastructure projects, but who will finance the baseline trillion dollar US budget deficit plus the additional red ink spending on infrastructure? Not Americans.  The US savings rate is zero or negative.  Home mortgage foreclosures are in the millions.  Officially, US unemployment is 10 million, but if measured by pre-Clinton era standards unemployment is much higher.  Statistician John Williams, who measures the unemployment rate by the pre-Clinton standards concludes that the rate of US unemployment is about 15 percent.  President Clinton “reformed” the unemployment statistics by ceasing to count discouraged workers as unemployed.

For years, the US government’s budget has been dependent on foreigners financing the red ink.  Countries such as Japan and China and OPEC suppliers of oil to the US have huge export surpluses with the US.  They recycle the dollars by buying US Treasury bonds, thus financing the US government’s red ink budgets.

The open question is: how much longer will they do so?

Foreign portfolios are overweighed in dollar assets.  Currently the dollar’s value is benefitting from the financial crisis, as investors flee to the reserve currency.  However, sooner or later the huge outpourings of dollar debts will cause foreign creditors to draw back.  Already China, America’s largest creditor, has sent a signal that that time might be drawing near.  Recently the Chinese government asked, as they do indirectly  through third parties, “Why should China help the US to issue debt without end in the belief that the national credit of the US can expand without limit?”

Is the rest of the world, which has demanded a financial summit to work toward a new financial order, going to  permanently allocate the world’s supply of capital to covering American mistakes?

If not, the bailout and the stimulus package will have to be financed by printing money.

And the bailout needs are growing.  Car loans and credit card debt were also securitized and sold.  As the economy worsens, credit card and car loan defaults are rising.  Moreover, AIG needs more money from the government. Fannie Mae’s loss has widened to $29 billion despite the $200 billion bailout. General Motors and Ford need taxpayer money to survive. General Motors says that its GMAÇ mortgage unit “may not survive.” Deutsche Bank sees General Motors shares “as likely worthless.“

Shades of the Weimar Republic.

What Reich and the American economic establishment do not understand is that the recession paradigm does not apply.  There are no jobs waiting at US manufacturers for a demand stimulus to pull Americans back into work.  The problem is not a liquidity problem.  To the contrary, there have been many years of too much liquidity.  Credit has grown far more than production.  Indeed, US production has been moved offshore.  Jobs that used to support the growth of American incomes and the tax bases of cities and states have moved, along with US GDP, to China and elsewhere.

The work is gone.  All that are left are credit card and mortgage debts.

Anyone who thinks that America still has a vibrant economy needs to log onto www.EconomyInCrisis.org and face the facts.

Economists associate economic depression with price deflation.  However, traditionally, debts that are beyond an economy’s ability to service are inflated away.  This suggests that the coming depression will be an inflationary depression.  Instead of falling prices mitigating the effects of falling employment, higher prices will go hand in hand with rising unemployment–a situation worse than the Great Depression.

The incompetent Clinton and Dubya administrations, unregulated banksters and Wall St criminals, greedy CEOs, and a no-think economics profession have destroyed America’s economy.

What is the remedy for simultaneous inflation and unemployment?

Three decades ago the solution was supply-side economics.  Easy monetary policy had pushed up consumer demand, but high tax rates had curtailed output.  It was more profitable for firms to allow prices to rise than for them to invest and increase output.

Supply-side economics changed the policy mix.  Monetary policy was tightened and marginal tax rates were reduced, thus stimulating output instead of inflation.

Today the problem is different.  The US has abused the reserve currency role, thus endangering its credit worthiness and the exchange value of the dollar.  Jobs have moved offshore.  The budget deficit is huge and growing.  If foreigners will not finance the widening gap, the printing presses will be employed or the government will not be able to pay its bills.

The bailout funds have been wasted. The expensive bailout does not address the problem of falling employment and rising mortgage defaults.  Treasury Secretary Hank Paulson could not see beyond saving Goldman Sachs and his bankster friends. The Paulson bailout does nothing except take troubled assets off banks’ books and put them on the overburdened taxpayers’ books, thus endangering the US Treasury’s credit rating.

What the Bush Regime has done is to stick the taxpayers with the banks’ mistakes.  An intelligent government would have used the money to refinance the troubled mortgages and stop the defaults.  By saving the mortgages from default, the banks’ balance sheets would have been made secure.  By failing to deal with the subprime crisis, Bush and  Congress have added a financial crisis to the exhaustion of consumer demand and the problems of financing huge trade and budget deficits.

Belatedly, Paulson has realized his mistake.  On November 12, Paulson announced, “We have continued to examine the relative benefits of purchasing illiquid mortgage-related assets.  Our assessment at this time is that this is not the most effective way to use [bailout] funds.”

The financial crisis has cost taxpayers far more than the amount of the bailout.  Americans’ savings and pension funds have been devastated.  Americans in investment partnerships, who have been required by IRS rules to pay income taxes on gains in the partnerships’ portfolios, have had the accumulated multi-year gains wiped out.  They have paid taxes on years of “capital gains” that have disappeared, thus doubling their losses.

America’s economic troubles will rapidly accumulate if the dollar loses its reserve currency role.  To protect the dollar and the Treasury’s credit standing, the US needs to curtail its foreign borrowing by reducing its budget deficit.  It can do this by halting its gratuitous wars and slashing its unnecessary military spending which exceeds that of the rest of the world combined.  The empire has run out of resources, and the 700 overseas bases must be closed.

Can Americans afford massive infrastructure spending when they cannot afford health care?  In Florida a Blue Cross Blue Shield group policy for a 60-year old woman costs $14,100 annually, and this is a policy with deductibles and co-payments.  Supplementary policies from AARP to fill some of the gaps in Medicare can cost retirees $3,300 annually. When one looks at the economic situation of the vast majority of Americans, it is astonishing that the Bush regime regards wars in the Middle East and taxpayer bailouts of Wall Street criminals as a good use of scarce resources.

US corporations, which have moved their production for US markets offshore in order to drive up their share prices and provide their CEOs with multi-million dollar bonuses, can be provided with a different set of incentives that encourage the corporations to bring employment back to the US.  For example, the corporate income tax can be restructured to tax corporations according to the value-added in the US.  The higher the value-added in the US, the lower the tax rate; the lower the value-added, the higher the tax rate.

Cutting the budget deficit by halting pointless wars and unnecessary military spending  and reducing the trade deficit by bringing jobs back to America are simple tasks compared to confronting inflationary depression.

The world has had enough of American irresponsibility and is taking away the reins. At the November 15 economic summit, the world will begin the process of imposing a new financial order on the US in exchange for continued lending to the bankrupt “superpower.”

With bailouts eating up the world’s supply of capital, continued foreign financing for Washington’s wars of aggression is out of the picture.

Mikhail Khazin: U.S. will soon face second “Great Depression”

Mikhail Khazin.

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Renowned economist Khazin predicted U.S. financial crisis in 2000

KP.RU, Yevgeniy Chernyx — 29.10.2008

Five years ago, I ran the cultural section at Komsomolskaya Pravda. Publishing houses used to send me their new releases now and again for review. One day, after digging through the latest shipment of such literature, I stumbled upon a book titled, “Sunset of the Dollar Empire and the End of the Pax Americana.”

I remember reading the title over to myself several times in disbelief. Way back when, Soviet Americanologists loved to debate the collapse of the U.S. financial empire. But this book was published in 2003.

I flipped through the pages, skimming over the text. The conclusions of the author — an economist named Mikhail Khazin — seemed convincing enough. So I gave the book to our economics columnist at KP Jenya Anisimov, who wrote a review and interviewed the author later at our editorial offices.

All these years, I kept Khazin in the back of my mind, and followed his career as he spoke at various conferences throughout Russia. He seemed certain the U.S. was teetering on the verge of an economic collapse, while other analysts were quick to refute his theory. Now, as his once unfathomable prognosis begins to come true, KP contacted Khazin for an interview.

Fired from the Kremlin!

KP: Mikhail Leonidovich, how did you end up predicting the current financial crisis?

Khazin: In the spring of 1997, the Kremlin established the Presidential Economic Department. I was made the deputy head of the unit. Our first task was to prepare a report for [former President Boris] Yeltsin about the economic situation. We realized an economic crisis was pending in Russia and would take place in the late summer or early fall of 1998 if the country’’s economic policies weren’t changed.

KP: What view did the higher echelons take of your report?

Khazin: They didn’t really take any view at all. No one read the text except for the deputy head of the administration and Yeltsin himself. In the summer of 1998, we were fired from the presidential administration for trying to stop a business project titled, “State Treasury Bills— Exchange Rate Corridor.” This was the biggest financial scheme of the post-Soviet era. Just as we had predicted, an economic crisis gave way that August. Together with my colleagues, I continued researching the reasons behind the crisis.

After becoming seriously consumed in our studies of the U.S. financial system, we found an unprecedented parallel. Just as our T-bill market had sucked all the juices out of the Russian economy, the U.S. financial market was sucking the resources out of the entire planet. We realized a similar fate awaited the U.S. financial system. Our article was published in the summer of 2000 in the “Ekspert” magazine, titled, “Is the U.S. Digging for an Apocalypse.” We concluded that it was just as impossible to avoid an economic crisis in the U.S. as the financial collapse in Russia.

Playing the idiot

KP: The U.S. obviously didn’t listen to the song written by [the renowned Russian rock group] LUBE during perestroika, “Don’t Play the Fool, America!” Seriously, though, what’s the real reason for the economic collapse? Let’s try to do this without any heavy duty financial terms…

Khazin: I’ll try! The economic model that led to the collapse was the result of a crisis in the 1970s. This was a terrible financial crisis that was the result of surplus capital. Even the 19th-Century classics in economics literature concluded that capital grows faster than labor provides compensation. As a  result, there is a lack of demand. In traditional capitalism, this problem is solved on account of crises in excess production. And in an imperialistic system, the problem is solved on account of capital outflow. But by the 1970s, these solutions had run their course. However, the internatinoal situation demanded the U.S. either make a great scientific and technological leap forward or lose the Cold War to the USSR. The administration of [President Jimmy] Carter and the head of the Financial Reserve System Paul Walker developed a very tricky concept. For the first time in the history of capitalism, capitalists began helping others, issuing new currency in an effort to stimulate aggregate demand .

KP: They decided to switch on the printing press?

Khazin: Exactly. In the early 1980s, they started to stimulate demand through state support. For example, they launched the “Star Wars” program. As of 1983, they placed an emphasis on the household economies.

KP: You mean, they relied on the average citizens?

Khazin: Yes. For an entire quarter century, households received funds as a result of issuing new currency in larger and larger quantities.

KP: In other words, credit?

Khazin: Yes. The U.S. was able to make the next step in technological progress as a result of this excess demand. They accomplished the collapse of the USSR and numerous other significant fears. But… The boom took place thanks to resources that were supposed to provide for future growth. The country ate its own resources two generations ahead of time. The U.S. built up tremendous debt. This is clearly seen if we compare the growth of debt in U.S. households with the entire U.S. debt and GDP. The economy is growing at an annual rate of 2-3, or at a maximum 4 percent. But debt is increasing at a rate of 8-10 percent.

Illustration by Valentin Druzhinin.

KP: Well, let the debt keep growing… The U.S. lived fine up until now without a problem… Better than we did!

Khazin: Yes, the U.S. did create a very high standard of living by stimulating consumer demand. Generations lived without having to experience poverty. But it’s impossible to live forever in debt. Household debt has now surpassed the national economy — more than $14 trillion. Now it’s time to pay up. Of course, Wall Street tried to postpone this collapse. I won’t go into detail about derivatives and other such financial assets, but this was just a gasp for air before an inevitable death.

Another problem in the U.S. is that powerful industries were built around this growing demand. Whatever decision Wall Street takes right now, the demand is going to fall. What will happen to these industries? In 2000, we estimated that 25 percent of the U.S. economy would disappear. Today, we think the number is closest to one-third — if not more.

KP: That’s a lot!

Khazin: That’s an incredible amount! But what exactly does this mean — the destruction of one-fourth of the U.S. economy? It means an uncontrollable increase in unemployment, a horrible depression, a sharp increase in the effect of social services on the budget… Now, the U.S. is jumping all over the place doing everything its can to rescue this fraction of the economy. The government is stimulating banks and manufacturing… But regardless, in 2-3 years, the U.S. will face a crisis similar to the Great Depression.

Who is Who

Mikhail Leonidovich Khazin was born in 1962. He studied mathematics at the Yaroslavl University and Moscow State University. In 1984-1991, he worked at the Soviet Academy of Sciences. In 1993-1994, he worked at the State Working Center of Economic Reforms. In 1995-1997, he was the head of the Credit Policy Department at the Economics Ministry. In 1997-1998, he was the deputy head of the Presidential Economics Department. In June 1998, he left state service. At the moment, he is president of the consulting firm, Neokon.

As GM Goes, So Goes the GOP – By Patrick J. Buchanan

As GM Goes, So Goes the GOP

By Patrick J. Buchanan

Understandably, Republicans are seething.

When Hank Paulson demanded $700 billion to haul away the trash in the dumpsters of JPMorgan Chase and Goldman Sachs—assuring us we could hold a garage sale of the junk—they rebelled. They acted as the nation, by 100 to one, demanded. They killed the Wall Street bailout.

The Dow quickly sank another 1,000 points, and, charged with criminal irresponsibility by the elites, the GOP buckled, reversed itself, rescued the bailout—and was wiped out on Nov. 4.

Now we hear from Paulson that the $700 billion Congress voted will not, after all, be used to buy up all that rotten paper on the books of the big banks. Some banks are using the cash to buy other banks.

So Republicans are right to be enraged. They are victims of the biggest bait-and-switch in political history.

But they are now about to do something terminally stupid. With GM, Ford and Chrysler teetering on the brink, they are turning a cold stone face to Detroit and are about to follow the counsel of that quintessential Bushite Dick Darman, who said of our computer chip industry, “If our guys can’t hack it, let ‘em go.”

America responded—by letting George H.W. Bush and Darman go.

Are Republicans aware of what they are about to do?

When workers, execs, engineers, dealers, salesmen and suppliers are all factored in, the Big Three employ 3 million people who contribute $21 billion a year to Social Security and Medicare, and $25 billion in federal income taxes. Add in all the businesses that depend on the auto industry, and we are talking about one-tenth of the U.S. labor force.

As columnist Tom Piatak of Chronicles and Takimag.com writes, 850,000 retirees, and their families, depend for pensions and health care on the Big Three. If they go under, the burden falls on us.

And to let the auto industry die is to write America o out of much of the economic future of the planet.

In a good year, like 2005, Americans buy more than 17 million new cars, and West Europeans as many. Tens of millions in Eastern Europe, Russia, China, India and Southeast Asia are now moving into the middle class each year. These folks will all need or want one or two family cars. If we let the U.S. auto industry die, that immense and burgeoning market will be lost forever to America, and ceded to Asia.

“Who cares?” comes the free-traders’ reply. Japanese and Koreans are setting up factories here. They can pick up the slack.

But that means Americans will work for and depend on foreign companies for a necessity of our national life as vital as the imported oil and gas on which our cars and trucks operate. All the profits of the mighty automobile industry in America will be sent abroad.

Before Republicans follow this free-trade fanaticism to their final interment, they might study the results of a poll by Peter Hart: [PDF]

• Seventy-eight percent of Americans believe the U.S. auto industry is highly or extremely important. Three percent think we can do without it.
• Ninety percent of Americans believe the death of the U.S. auto industry would do great damage to our economic future.
• By 55 percent to 30 percent, Americans favor federal loans to save it. And by 64 percent to 25 percent Americans back President-elect Obama’s resolve not to let the U.S. auto industry go under.

If the GOP blocks these loans, and the industry dies, the party can forget about Ohio, Michigan and the industrial Midwest. For the Reagan Democrats will never come home again. Nor should they.

By the choices we make, we define ourselves and reveal what we truly care about. Thus, consider:

We bail out the New York and D.C. governments of Abe Beame and Marion Barry. We bail out a corrupt Mexico. We bail out public schools that have failed us for 40 years.

We bail out with International Monetary Fund and World Bank loans and foreign aid worthless Third World regimes.

We bail out Wall Street plutocrats and big banks.

But the most magnificent industry, the auto industry that was the pride of America and envy of the world, we surrender to predator-traders from Asia and Europe, lest we violate the tenets of some 19th-century ideological scribblers that the old Republicans considered the apogee of British stupidity.

Nancy Pelosi is talking about tying loans to a restructuring of the industry. But Congress is not competent to do that.

What needs to be restructured is the U.S. tax-and-trade regime.

Dump globalism. Instruct Japan, Canada, Korea, Germany and China that if they wish to sell cars here, they will assemble them here and produce the parts here. And we shall have the same free access to and same share of their auto market as they have of ours.

To accomplish this, use the same import quotas and tariffs Ronald Reagan used to save the steel industry and Harley-Davidson.

Reciprocal trade. Even Democrats like FDR used to practice it.

What WN wants from Obama and what the SPLC wants are not the same

What WN wants from Obama and what the SPLC wants are not the same

So … I seriously over-estimated the white American electorate when, twenty-two months ago, I declared that Barrack Hussein’s boy had made his move for the VP.  Who’d have thought that a vacuus appeal to empty minds could rout the governing right?  Again.

But I did at least predict that Obama will:-

… divide America like no other, which I presume to be a good.  Should the nationalist American, then, hope that Hillary so scares the cattle he actually wins the nomination?  Should the hope even be that he strides to victory on November 4th next year over a prostrate John McCain (or Rudi Giuliani)?

The Giuliani thing wasn’t such a great call, that’s for sure.  But, anyway, now we’ve got this black – a probable empty suit – and his blacker, angry wife on their way to the White House we can ask ourselves what the result could be for WN.

For all of those twenty-two months the general assumption has certainly been that a black in the White House will create a tidal wave of new support for “the movement”.  It seems inevitable.  The Obamessiah is bound to experience a little difficulty in blessing his errant people with “change”.  Human nature does not change.  Radical leftist objectives are never gratefully seized upon by a subject people.  They are imposed by force.

But, it seems to me now that a great deal depends on how successfully Obama’s team and the “liberal” media can play on the violent redneck factor, while at the same time confounding white fears of KFC parties on the White House lawn and fresh Affirmative Action legislation before Congress.  That could keep the fence-sitters a-sitting and those who become disillussioned with the trope of “change” still convinced of the electoral claim that only white racism is holding America back from a golden new dawn.

Obviously, the media power exists to do this.  Indeed, the image of the redneck with a noose in one hand and a sniper’s rifle in the other is already getting the full SPLC treatment:-

From msnbc:-

More threats against Obama since election

WASHINGTON – Threats against a new president historically spike right after an election, but from Maine to Idaho law enforcement officials are seeing more against Barack Obama than ever before.

The Secret Service would not comment or provide the number of cases they are investigating. But since the Nov. 4 election, law enforcement officials have seen more potentially threatening writings, Internet postings and other activity directed at Obama than has been seen with any past president-elect, said officials aware of the situation who spoke on condition of anonymity because the issue of a president’s security is so sensitive.

… One of the most popular white supremacist Web sites got more than 2,000 new members the day after the election, compared with 91 new members on Election Day, according to an AP count. The site, stormfront.org, was temporarily off-line Nov. 5 because of the overwhelming amount of activity it received after Election Day. On Saturday, one Stormfront poster, identified as Dalderian Germanicus, of North Las Vegas, said, “I want the SOB laid out in a box to see how ‘messiahs’ come to rest. God has abandoned us, this country is doomed.”

It is not surprising that a black president would galvanize the white supremacist movement, said Mark Potok, director of the Southern Poverty Law Center, who studies the white supremacy movement.

“The overwhelming flavor of the white supremacist world is a mix of desperation, confusion and hoping that this will somehow turn into a good thing for them,” Potok said. He said hate groups have been on the rise in the past seven years because of a common concern about immigration.

From The Huffington Post:-

After the Election

Mark Potok

… Even before the campaign was over, racial rage, clearly driven by fear of a black man in the White House, began to break out around the country. Effigies of Obama appeared hanging from nooses on university campuses. Angry supporters of John McCain and Sarah Palin shouted “Kill him!” at a campaign rally and even screamed “nigger” at a black cameraman, telling him, “Sit down, boy!” The head of the Hillsborough County, Fla., Republican Party sent an E-mail warning members of “the threat” of “carloads of black Obama supporters coming from the inner city to cast their votes.” A reporter who has covered every presidential election since 1980 told me he had never seen such fury. Similar scenes were reported nationwide.

Naturally, the rage also engulfed the radical right. Thom Robb, an Arkansas Klan leader, described for a reporter the “race war” he sees developing “between our people, who I see as the rightful owners and leaders of this great country, and their people, the blacks.” In Tennessee, two neo-Nazi skinheads went further, allegedly planning to murder black schoolchildren, shoot and behead other African Americans, and assassinate Obama. They were arrested two weeks before the election.

A healthy majority of Americans did vote to send Obama to the Oval Office. But, clearly, there are people—perhaps millions of them—who are deeply upset over his victory for reasons that are fundamentally racial. And their anger is likely to intensify as the economy, especially unemployment, continues to worsen.

“Historically, when times get tough in our nation, that’s how movements like ours gain a foothold,” Jeff Schoep, the leader of the National Socialist Movement, a neo-Nazi group with 73 chapters in 34 states, told USA Today. “When the economy suffers, people are looking for answers. … We are the answer for white people.”

And even in England:-

White rage: The rednecks out to kill Obama

“There’s not any question he’s under more threat than most politicians,” said Mark Potok, one of America’s leading researchers into hate groups who edits a monthly Intelligence Report for the Alabama-based Southern Poverty Law Center. “I think we are seeing a kind of perfect storm of conditions that might well help white supremacist movements grow, and grow rapidly.

“We have changing demographics, and the Census Bureau projection that whites will lose their majority status in America by 2040. We have the tanking economy, and now… a black man in the White House. This makes some Americans feel they are losing their world – the sense that the country their forefathers built is slipping away from them.”

The number of racist hate groups tracked by the Southern Poverty Law Centre has grown by almost 50 per cent during the Bush administration years, from about 600 in 2000 to almost 900 now. In contrast to the 1990s, when the “angry white man” phenomenon fuelled the militia movement and led to the white-supremacist inspired Oklahoma City bombing, much of this new growth has been triggered by virulent hostility to immigrants pouring in from Mexico.

It is entirely possible, though, that the emphasis will change now that Obama is about to enter the White House. Certainly, the neo-Nazi movement senses an opportunity: to judge by the endless chatter on far-right websites, they see a President Obama as the best recruiting tool they’ve had in years. “Obama will be a signal, a clear signal for millions of our people,” the former Louisiana Ku Klux Klan leader and erstwhile candidate for governor, David Duke, wrote earlier this year in an essay he called A Black Flag for White America. “Obama is like that new big dark spot on your arm that finally sends you to the doctor for some real medicine. … Obama is the pain that let’s [sic] your body know that something is dreadfully wrong… Millions of European Americans will inevitably react with new awareness of their heritage and the need for them to defend and advance it.”

That logic suggests the far right is not, in fact, itching to pull the trigger on Obama. Except that we are hardly dealing with rational people. The neo-Nazi magazine National Socialist wrote a cover story in September purporting to debunk the “myth” that Obama might be assassinated. But the cover also showed a photograph of the candidate in the crosshairs of a rifle (altered to look like a swastika) under the headline: “Kill this NIGGER?” And the piece went on to suggest that Obama, backed by Communists and Jews, planned to commit genocide against working white people.

Likewise, the “imperial wizard” of the Ku Klux Klan, an Indiana railway worker who calls himself Ray Larsen, denied any intent to attack Obama when interviewed on television a few months ago. But he added: “If that man is elected president, he’ll be shot sure as hell.”

Easy for Potok to make WN the enemy of all mankind, isn’t it?  And profitable, too.  The SPLC has a symbiotic relationship with extreme entities, or nonentities, like the National Socialist Movement.  If WN was a responsible movement focussed on a national organisation of a racialist conservative character like Vlaams Belang, life would be immeasurably more difficult for Mo and Mark and Heidi.  Indeed, in Europe where nationalist parties are contesting elections it isn’t Jewish front organisations that lead the rhetorical opposition to them, it’s mainstream politicians.  That is the measure of political seriousness to which WN must aspire.

We should be looking for change from the Obama presidency, but in the area the political Establishment least expects.  If it is capable of reforming itself … of ceasing to be negative and self-destructive … ceasing to be a career opportunity for a few “big men”, then WN can meet any appointment with history that may come out of this extraordinary passage in American politics.

The problem, as ever, is how to get to the politically ordinary yet exalted and promising “there” from the desperately frustrating and static “here”.

A Few Thoughts On What The Census Bureau’s Projected White Minority Will Mean For America By Steve Sailer

Now They Tell Us! A Few Thoughts On What The Census Bureau’s Projected White Minority Will Mean For America

By Steve Sailer

Typically, the two most important factors influencing the long-term success of an organization are the quantity and quality of people involved.

This is particularly true for a country. Yet there has been barely any discussion in the U.S. prestige press on the implications of the demographic change imposed by immigration. We’re constantly lectured by the New York Times on the long-run impact of carbon emissions and by the Wall Street Journal on the difficulties posed for Social Security by the changing ratio of workers to retirees over the next several decades. But the basic factor driving these issues is almost off-limits.

That’s why there is a VDARE.com.

In forecasting the U.S. population, the wild card is always the Hispanic component.

For example, on January 13, 2000, the U.S. Census Bureau released population projections stating that the number of Hispanics resident in the country would grow massively, from 32 million in 2000 to 98 million in 2050.

When the Bureau conducted the decennial census on April 1, 2000, however, it found out that there were already over 35 million Hispanics within the borders—ten percent more than the government had previously imagined.

So in late 2001, the Census Bureau released “interim” projections incorporating the 2000 Census findings and projected that the number of Hispanics would hit 103 million in 2050.

Now, the Bureau has released its first full-blown set of projections in 8.5 years,. And they’re a doozy. The key figure: 133 million Hispanics by 2050, an increase of almost 100 million in half a century.

Is adding 100 million Latinos to the U.S. population a good idea? Will it “form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity“?

(That’s the first sentence of something called the “U.S. Constitution”—a once-celebrated document put together way back when by a bunch of long-dead white guys, some of whom were slave-owners.)

We the people are supposed to have a say in such things. But how can we have a say when we’re not supposed to talk about it?

The well-worn responses of Establishment figures to public unease about adding 100 million Hispanics usually start with the words “All we have to do is …”

All we have to do is fix education. Once we just figure out how to get Hispanics and blacks to stay in school and learn as much as whites, we’re all set!

All we have to do is create more good jobs.

All we have to do is solve the illegitimacy crisis and get the Hispanic out-of-wedlock birthrate back down below 50 percent.

All we have to do is solve the housing / health care finance / carbon emission, energy / infrastructure / and crime crises!

In reality, we don’t know how to solve any of these problems. And we are unlikely to discover and implement workable solutions any time soon. I’ve been following social science and public policy for 36 years now. I’ve learned that fixes for social problems are rare.

In recent decades, we did finally make some progress against crime. But we did it through the brute force method of throwing a couple of million people in prison.

And there has been little change in the racial disparities in crime rates. Racial and ethnic differences of all kinds have been strikingly stable since the 1970s. In particular, the word that best sums up Latino America is inertia. Things just sort of keep on keeping on in the general direction that they were already moving.

What we do know is that all of these troubles are exacerbated by the mass immigration of people with low human capital.

And alleviating some of that immigration-caused pressure is something we actually do have a rough idea of how to carry out.

But you won’t hear that from John McCain, Barack Obama, or the mainstream media. Why not?

One reason is that there are huge constituencies out there who make their livings out of social problems. They won’t make the problems go away, of course, because that would make their jobs go away too. Instead, more immigration by more people lacking in human capital is their full employment plan.

Yet the quantity and quality of the American population does matter in the long run. It’s not even that hard to do the calculations of the opportunity cost.

Consider high school dropout rates. In 2007, Nobel Prize-winning economist James Heckman calculated [PDF]that the high school dropout rate in the U.S. had bottomed out at around 20 percent in 1969, but rose to about 25 percent by 2000. Over that period, there was no change in the dropout rate’s racial ratio: blacks and Hispanics raised in the U.S. were twice as likely as whites to drop out (and Hispanic youths raised in Mexico were much more likely).

I estimated that the majority of that increase was directly due to simple demographic change—high dropout-rate ethnic groups just made up a larger fraction of all 18-year-olds in 2000 than in 1969.

The rest of the worsening may have been an indirect product of demographic change as well. More non-Asian minorities (NAMs) mean more stressed schools and more anti-education attitudes in the classroom swamping traditional American values even for the kids of traditional Americans.

Simple math suggests that, all else being equal, the ethnic change projected by the Census Bureau is likely to raise the dropout rate from 25 percent to close to 30 percent.

Why do we want that?

Similarly, the change in ethnic makeup of 15-44 year olds will, just by itself, raise the illegitimacy rate by 4 points.

You can do similar calculations for rates of crime, lack of health insurance, unaffordable housing, and other social distresses. Most problems are inevitably made worse by the immigration-driven shift in America’s demographic balance—they have what Peter Brimelow in Alien Nation back in 1995 called “an immigration dimension“.

Similarly, the burden imposed by affirmative action on individual whites will rapidly increase as the racial ratio of minority quota beneficiaries to majority benefactors shifts. And, note carefully, the Census Bureau forecasts that minorities are forecast to be a majority in the U.S. by 2042, only 34 years from now.

Overall, at the very least, we’ll have to get used to being a country of lower average levels of achievement. For whatever reasons, Mexican culture and human accomplishment don’t go together.

For example, Hispanics today make up 23.4 percent of all Americans between 15 and 44, yet they only account for four percent of the U.S. Olympic team in Beijing. (Heck, only two of the 23 players on the 2006 U.S. World Cup soccer team had Spanish surnames.)

The Latino Olympic shortfall is particularly notable because Californians are three times more likely to make the Olympic team than non-Californians. The Golden State has always been fitness and outdoors mad. And the California culture encourages obsessions with eccentric minor sports, which is why Los Angeles was such a successful host for the 1932 and 1984 Olympics. And yet, over the last century, the now-13 million Hispanics in California have not assimilated much of the state’s local culture.

Even Dara Torres, the swimmer from Southern California who won three silver medals at a Barry Bonds-like age 41, turns out not to be as Hispanic as her surname implies—her father is Sephardic and she grew up in Beverly Hills.

The same pattern is seen internationally. As of Saturday night, the U.S. Olympic team had won 62 medals, while the Mexican team had won just a single bronze.

Moreover, if current policy continues, we’ll be a poorer and more unequal citizenry than we would have to be without so much immigration from south of the border. The Pew Hispanic Center reported in 2004:

“According to the study, the median net worth of Hispanic households in 2002 was $7,932. This was only nine percent of $88,651, the median wealth of non-Hispanic White households at the same time. … Twenty-six percent of Hispanic, 32 percent of non-Hispanic Black and 13 percent of non-Hispanic White households had zero or negative net worth in 2002. These proportions are essentially unchanged since 1996. …

“The wealthiest 25 percent of Hispanic and non-Hispanic Black households own 93 percent of the total wealth of each group. Among non-Hispanic White households, the top 25 percent own 79 percent of total wealth.”

And, in 2050, the future will look even more depressing. The Census Bureau says:

“In 2050, the nation’s population of children is expected to be 62 percent minority, up from 44 percent today. Thirty-nine percent are projected to be Hispanic (up from 22 percent in 2008), and 38 percent are projected to be single-race, non-Hispanic white (down from 56 percent in 2008).”

And then there are the problems exacerbated just by absolute changes in the quantity of residents of the country. A completely obvious trap is the one that liberals these days claim to be most concerned about: America’s carbon footprint. Clearly, importing tens of millions of poor Mexicans boosts this country’s—and the world’s—output of greenhouse gases because they’ll burn more fossil fuels living in America than in Mexico. Indeed, the possibility of affording a personal car is often the motivation for immigrating.

But what’s relevant for global warming is not just the difference in fuel consumption per person caused by immigration. Illegal aliens also have more children living in America than they would have if they had to stay home in Mexico.

According to the Public Policy Institute of California, immigrant Latinas in California in 2005 were having babies at the rate of 3.7 per lifetime, compared to only 2.4 for Mexican women back home in Mexico.

Unmistakable conclusion: Mexicans are sneaking into America to have more children than could afford to have in their own country.

You are almost never told that.

When you look under the hood of the Census Bureau projections, it’s apparent that the Hispanic population could turn out to be quite a bit bigger than 133 million by 2050. The Bureau assumes that the Hispanic total fertility rate (TFR) will decline from 2.70 in 2010 to 2.29 by 2050. In the real world, however, the trend has been going in the opposite direction: 1996, Latino women were having babies at a rate equivalent to 2.77 per lifetime. By 2006, the last year for which we have data, Latinos were up to 2.96.

On the other hand, there is a bit of good news in these new projections. The old projections badly underestimated the current level of immigration. Thus, the 2000 forecasters presumed that net immigration from the whole world would top out at 1.1 million per year in 2050.

In contrast, the 2008 projections assume that net international migration will accelerate from 1.3 million in 2010 to over 2.0 million in 2050.

But of course, the level of immigration is not an act of God. It’s a political decision—one that United States citizens have the right to change.

And they certainly would—if they were allowed to talk about it.

Hispanic Boot Hasn’t Dropped – Yet

By Steve Sailer

To celebrate its 25 anniversary, American Demographics magazine asked various marketing research gurus to list both their accurate predictions (yawn) and their biggest mistakes (interesting).

Youth culture trend spotter Irma Zandl offered the most intriguing bad prediction – not because she alone messed up, but because she had the guts to admit a mistake that has been made repeatedly since.

“Things That Have Not Happened—1988: The Hispanic influence

”We felt that this country would become more Latinized. However, with the exception of food and beverages and an occasional musician (e.g. Ricky Martin or J-Lo), we have not seen the kind of widespread influence that we anticipated. For example, there are still no mass fashion trends, no mass entertainment trends, no mass social trends rooted in the Hispanic culture.”

I certainly don’t blame Zandl for her fallacious forecast. I assumed exactly the same thing in 1988. The signs were pointing toward middle class American culture becoming more Latin.

That year Time Magazine put an East L.A. mural of the formidable Mexican-American actor Edward James Olmos on the cover over the headline: “¡Magnifico! Hispanic culture breaks out of the barrio.” As the laconic Lt. Castillo, Olmos had provided the moral center of gravity for that ultimate 1980s TV series, Miami Vice. And Olmos earned an Oscar nomination in 1988 for his portrayal of the inspiring calculus teacher Jaime A. Escalante in Stand and Deliver.

Back then, Corona was the coolest beer and East L.A.’s Los Lobos was the most talented rock band.

The year before their sensational cover version of “La Bamba” supercharged the hit biopic about Mexican-American musical prodigy Ritchie Valens.

Southern California architects had finally returned to building in the white stucco and red tile roof Spanish Mission style that suited the climate so well.

With the constant influx of new Latino immigrants, I thought, how could this trend not snowball?

Fifteen years have gone by. Hispanics have (supposedly) surpassed African-Americans to become the largest minority. But their impact on American culture lags far behind blacks – and even behind the much less numerous East Asians.

This weekend’s Movie of the Century, The Matrix Reloaded, for example, is full of black actors and stunts inspired by Hong Kong action movies and Japanese anime cartoons, but there’s nothing Latin American about it.

Of the approximately 270 movies to make $100 million at the domestic box office, only “Spy Kids” had a primarily Latino cast.

In 1999, Time made Puerto Rican singer Ricky Martin its cover boy over the headline “Latin Music Goes Pop!” But Pop! turned out to be a better description of poor Ricky’s career.

Even here in L.A., I’m repeatedly struck by how little impact Hispanic culture has on the tastemakers. Consider architecture. The lovely and time-honored Mission style has gone out of fashion again. What’s hot now, as embodied in the Walt Disney Concert Hall downtown, is Frank Gehry’s Mangled UFO Wreckage Look. The abrasive new Roman Catholic Cathedral, of all buildings, rejects populist Latin American styles for an intellectualized European deconstructionist look.

What happened? Why have all the pundits been wrong- going back to Zandl and me in 1988?

• First, the sheer mass of Spanish-speaking immigrants had an unexpected effect. Paradoxically, instead of increasing the cultural impact of Hispanics, it diminished the interpenetration of Latinos and non-Latinos by making possible the formation of gigantic Hispanic super-enclaves like northern Orange County The hundreds of thousands of Latinos there simply don’t need to have much interaction with the rest of America.As Ed Rubenstein documented in VDARE.com on recently, the number of residents of America who admitted to the Census that they speak English less than “very well” shot up from 14.0 million in 1990 to 21.3 million in 2000. Even among the native-born, those who don’t speak English very well grew from 4.0 million to 5.6 million.In turn, these demographic trends fertilized the Spanish language media, such as the Univision and Telemundo TV networks. These allow immigrants and their children to cocoon themselves in a Spanish alternate universe. (Not surprisingly, Univision and its Italian-American owner Jerrold Perenchio were the biggest financial backers of the campaign against Ron Unz’s 1998 anti-bilingual education Proposition 227.)

• Second, Hispanic immigrants, particularly the illegals, tend to lag in education and cultural sophistication. According to the Census Bureau, 65% of Mexican-born newcomers did not finish high school. Amazingly, while California is home to two million people with graduate degrees, it also hosts 2.2 million adults who have never even seen the inside of a high school. They are heavily Spanish-speaking.

Exacerbating the problem, Spanish-language television panders to the lowest tastes of its viewers. In L.A., the tawdriness of the Spanish channels contrasts sharply with the seriousness of the channel for Korean immigrants, who come to America with much better educations.

The Spanish networks’ fundamental rule seems to be: “There must be at least one bimbo on screen at all times.”

As opposed to the Bush Administration, whose motto is: “There must always be Hispanic Republicans on the horizon.”

Latin American Immigration Unlikely to Spark A New Renaissance

By Steve Sailer

The recent movie A Day Without A Mexican asks the interesting question: What would happen if California’s twelve million Hispanics suddenly disappeared?

Some slapstick satire ensues as the state’s remaining whites, blacks, and Asians try (and fail) to pick their own oranges, wash their own cars, and care for their own children.

Yet the plot makes the unintended point that Hispanics have contributed far more drudgery than creativity to California. Although the media regularly blither about the “vibrant contributions of Latin-American culture,” the plain truth is that California’s main creative industries—Hollywood and Silicon Valley—employ few Latinos above the technician level.

But, then, has creativity ever been the strong suit of the Hispanic world? Can we really expect to find much scientific or artistic talent among immigrants from Latin America?

To investigate these questions, I crunched some numbers from Charles Murray’s recent gift to data nerds everywhere, his book Human Accomplishment: The Pursuit of Excellence in the Arts and Sciences, 800 B.C. to 1950.

(Here’s my interview with Murray about his book and my review of it in The American Conservative.)

Murray ranked objectively history’s most important creators and discoverers based on their representation in leading histories and encyclopedias.

For example, to determine the most significant Western visual artists, Murray assembled 14 leading comprehensive works by art historians such as Gombrich and Janson. For each name in each book’s index, he typed into his computer basic measures of importance such as the number of pages mentioning the artist. (No surprise: Michelangelo came out on top.) It’s important to note that Murray’s own opinions played no role in his process.

This sounds simple, perhaps even simple-minded. But these kinds of metrics of eminence have been repeatedly validated over a century of use, beginning with Francis Galton.

The hundreds of scholars upon whom Murray relies have their personal and professional biases. But, ultimately, their need to create coherent narratives explaining who influenced whom means that their books aren’t primarily based on their own tastes, but instead on those of their subjects.

For example, the best single confirmation of the greatness of Beethoven (who ties with Mozart as the most eminent composer in Murray’s tables) might be Brahms’s explanation of why he spent decades fussing before finally unveiling his own First Symphony: “You have no idea how it feels for someone like me to hear behind him the tramp of a giant like Beethoven.” Thus, no musical scholar could leave out Beethoven without also leaving out Brahms, Schumann, Berlioz, Wagner, Mahler, and other composers influenced by Beethoven.

Murray found 4,002 “significant figures” who qualified for inclusion in his database because they were mentioned in at least half the top reference books in their field. He reserved eight of his twenty categories for Asian subjects such as Japanese Painting and Indian Philosophy. That leaves 3,404 significant figures in the twelve fields open to Westerners.

So how did Latin Americans do?

Not terribly well at all: just half of one percent of the most famous scientists and Western artists came from Latin America.

Significant Scientists and Artists: 800 BC to 1950 AD
	Total		Latin Americans			Spaniards
Total	3404		18	0.5%		69	2.0%
Astronomy	124		-	-		1	0.8%
Biology	193		-	-		1	0.5%
Chemistry	204		-	-		1	0.5%
Earth Sciences	85		-	-		-	-
Physics	218		-	-		-	-
Mathematics	191		-	-		-	-
Medicine	160		-	-		-	-
Technology	239		-	-		1	0.4%
Western Art	479		3	0.6%		15	3.1%
Western Literature	835		13	1.6%		33	4.0%
Western Music	522		2	0.4%		13	2.5%
Western Philosophy	154		-	-		4	2.6%

None of the 1,414 scientists who made the cut was a Latin American. That’s not too surprising because the mother country, Spain, contributed only four scientists … and even one of those four was the medieval Muslim astronomer Al-Zarqali!

Latin America did a little better in the sphere of high culture, accounting for 18 (or 0.9%) of the 1,990 top artists, composers, writers, and philosophers in the history of Western Civilization. (I’m including among the Latin Americans the only Brazilian in the database, composer Villa-Lobos.)

Spain has given the world a fair-to-middling 65 cultural creators—3.3% of all significant figures in the history of Western arts and philosophy. But Spain has been in a bit of a creative slump since its brilliant Golden Age of roughly 1550 to about 1660. There have been only 25 Spanish key creators since 1700. In contrast, the small country of the Netherlands developed 46 significant figures just during the 17th Century.

The Hispanic world’s strong suit has been literature, with 13 significant Latin American writers (or 1.6% of the 835 most eminent Western writers). Top Latin American authors include Borges and Neruda. Among the 33 significant Spanish writers (4.0%) are Cervantes, Lope de Vega, and Garcia Lorca.

Presumably individual genius is more likely to reach fruition in the field of literature because in the sciences or some of the other, more expensive arts, a high degree of social support for achievement is a precondition.

The three great Mexican muralists of the 20th Century, Rivera, Siqueiros, and Orozco, are the only Latin Americans (0.6%) among the 479 most famous painters and sculptors.

In contrast, fifteen Spaniards (3.1%) made the list, most coming from either Spain’s Golden Age (for instance, Velasquez, Zubaran, de Ribera, and the Crete-born El Greco) or from the 20th Century (such as Picasso, Miro, and Dali). The titanic Goya was the only significant Spanish painter to flourish between the middle of the 17th Century and the beginning of the 20th Century.

Of the 522 best-known classical composers, only two (0.4%) were Latin Americans (Villa-Lobos and the Mexican Carlos Chavez y Ramirez) and thirteen (2.5%) were Spaniards, but most of them were late medieval figures. De Falla is probably the best-known (and perhaps only well-known) Spanish composer. (However, there have been many great Spanish performers, such as Casals and Segovia.)

Among the 154 significant Western philosophers, there are no Latin Americans and four Spaniards. Of these four, however, two were Muslim Moors (Averroes and Avicebron), one the famous Jewish philosopher of the Muslim world, Maimonides, and the fourth was Santayana, who emigrated to the U.S. as a child. On the other hand, two well-known Spanish philosophers arguably should have qualified: Ortega y Gasset and Unamuno (who showed up on the table of top writers instead).

In summary, Spain was a leading European nation up until the middle of the 17th Century, after which it fell into the third rank.

Latin America has always been a backwater of Western Civilization, except in literature.

Murray didn’t cover the last half of the 20th Century, but the long-term trends seem to be continuing. Latin Americans have won a grand total of only three Nobel Prizes in the sciences and Spain only one. In contrast, Denmark has won eight, and the U.S. 206.

Latin America remains more productive in literature than in other fields, with dazzling novelists such as Garcia Marquez and Vargas Llosa. Over the last half century, classical composition, art, and philosophy appear to have been in general decline across the Western world, so Latin America’s lack of innovation in those fields no longer stands out as embarrassingly.

In the realm of popular culture, the last half of the 20th Century witnessed the overwhelming triumph of the U.S.A. Latin American pop music was vastly outgunned by American rock and roll. But even little English-speaking Jamaica wound up having more influence on music than did Cuba, which had been the most musically dynamic Spanish-speaking country. Perhaps Castro’s (hopefully imminent) demise should free up Cuba’s tremendous musical talent.

The more insidious Mexican ruling party bribed its artists into comfortable submission, which may account for the lack of Mexican creativity over the last 50 years. As the PRI fell apart over the last decade, several exciting Mexican movie directors have emerged.

Nonetheless, the bottom line: Latin America has been the least creative outpost of the West. And that probably won’t change much.

America is unlikely to find many creative geniuses among Hispanic immigrants—especially among illegal ones.

Mexicans Get The Message, Even If GOP Doesn’t—Race Is Destiny In American Politics

Mexicans Get The Message, Even If GOP Doesn’t—Race Is Destiny In American Politics

You can’t tell from the MSM, but the best way to look at the recent election is from a demographic point of view. McCain won the white vote, but not by a big margin. At 96%, Obama carried the black vote. In both the Asian-American vote and the Hispanic vote, Obama beat McCain 2 to 1.

Furthermore, among Latin American immigrants who voted, McCain was shellacked. While Hispanics in general went 67-31 for Obama, among foreign-born Latinos the margin was 78 to 22.

Yes, the future looks great for the GOP, doesn’t it? Today’s mass immigration is, in essence, a Democratic Voter Importation System. It’s completely understandable that the Democrats support it. But why do Republicans?

Nevertheless, we’re already being lectured that the problem is that Republicans didn’t pander enough to Hispanics. Which is amazing when you consider how much McCain has pandered to Hispanics throughout his political career. And this is the thanks he received!

The demographic aspect of election ‘08 did not go unnoticed south of the border. El Universal, Mexico’s paper of record, ran articles entitled Emerge Coalición de Minorías en EU [Coalition of Minorities Emerges in the U.S.] and Cambio Demográfico Impulsó a Obama, [Demographic Change Propelled Obama] both by Wilbert TorreEnviado, November 6, 2008.

Yeah, they get it—even if many of our people don’t.

The Mexican government, ever attentive, is gearing up for a new round of meddling. On November 7^th, Foreign minister Patricia Espinosa announced that, upon Obama’s assumption of the presidency, “Mexico will again take up the agenda that includes the migratory accord as a priority”.

As reported by El Universal:

“In a press conference, she said that President Felipe Calderon is confident that with the arrival of Obama to the presidency of the United States, a migratory accord that permits both nations a legal, safe and orderly migratory flow, will finally be achieved. She also said that ‘the government of Mexico hopes that the president-elect of the United States will change his position on the construction of the border wall‘.”

“According to the Foreign Minister, ‘the government of Felipe Calderon will continue proposing in a respectful but firm manner, that the border wall is not compatible with the relation of friendship and the character of partnership that exists between Mexico and the United States ‘.” [Replanteará México ante Obama Acuerdo Migratorio, El Universal, Nov. 7^th 2008]

Well, that’s not exactly surprising, now is it?

El Universal also ran stories highlighting people who are pinning their hopes on Barack Obama. One was a celebrity illegal alien, Flor Crisóstomo, a Mexican Zapotec Indian “in resistance”, to whom the recent elections “meant so much”:

“Barack Obama is her hope, and [the hope] she says, of at least 12 million ‘indocumentados’ in that country.” [EU: Migrantes en Resistencia (U.S.: Migrants in Resistance), Carolina Rocha, El Universal, November 9, 2008]

The article explains how Flor, arrested in 2006 as an illegal alien, has become an activist in the U.S. fighting for the rights “of the undocumented People”.

If Flor was arrested, why wasn’t she deported? On the recommendation of the Mexican consulate in Chicago, she refused to sign her deportation order.

Neat trick that. Somebody ought to try it in Mexico!

Eventually, after being given a deportation date, Flor found her way to the same Methodist church that sheltered the famous Elvira. There Flor continues her high-profile activism while making jewelry to sell, and sending money to her kids (whose dad is never mentioned) in Mexico.

Another article related the hopes of Mexican-Americans in Arizona, John McCain’s state, who voted for Obama. It quotes a lady who believes that the Virgin of Guadalupe won it for Obama:

“The Virgin of Guadalupe performed a miracle for Bernadina Chavez, a Mexican-American of Mesa, Arizona. Yesterday, with an enormous smile on her face, she said she asked [it of] the image that she brought from Mexico. She had never felt such happiness , of knowing that her candidate Barack Obama won the presidency of the United States. “

As I reported this past summer, John “The Panderer” McCain visited the Basilica of the Virgin of Guadalupe , apparently hoping it would win him Mexican-American votes. Guess what?—it didn’t.

Anyway, back to Bernadina Chavez in Arizona:

“She and her family voted for Obama, seeking change for all the Hispanics in the United States, because she has seen how in the last year her neighbors that had work lost it, entire families have been separated due to the raids that they carry out in Arizona, that parents are deported and their children stay because they are Americans [that is, anchor babies], that businesses are disappearing and that they are offended on the street just for being of Mexican origin. ‘All that is going to change now. It has already changed today because the people went out happy to the street because they have hope, because now we can be more secure here and those who don’t have papers can get them and they don’t have to think about returning where they came from ‘.” [La Guadalupana nos hizo el milagro, By Doris Gomora, El Universal, November 6, 2008]

So despite all of John McCain’s eager betrayal of American sovereignty in order to please Latinos, the candidate 1) lost the Hispanic vote by a wide margin; 2) is not popular in Mexico; and 3) still lost the election.

Time for a change of strategy. The GOP has no choice but to adopt the Sailer Strategy instead.

GOP Can Play By “McCain Rules” And Lose, Or “Sailer Rules” And Win

By Steve Sailer

Well, that election sure was exciting, wasn’t it?

First, let’s start with John McCain.

Before the general election campaign started, the MainStream Media presented McCain as an ideal candidate: the kind of straight-shooting Scots-Irish war hero that Americans have voted for over and over since Andy Jackson’s time. (Indeed, just about the only region in which the pugnacious McCain performed well last Tuesday was the Scots-Irish heartland from West Virginia to Oklahoma.)

Not surprisingly, McCain actually turned out to be a pretty awful candidate. That he still got 46 percent of the vote attests more to the value of the brand than to his performance.

McCain’s was essentially a vanity candidacy, driven by little more than his assumption that his own personal awesomeness entitled him to be President.

As a candidate, he was fairly similar to Bob Dole in 1996: a partly-crippled war veteran 72-year-old Senator who was a regular guest on the Sunday morning talk shows. Not surprisingly, he ended up losing by about the same margin.

Until they deserted him for Obama, the press had liked McCain because he reacts emotionally to issues, and thus often disagrees with other Republicans. But, McCain’s idiosyncratic positions don’t point to some higher wisdom, just to McCain’s inability to think systematically.

Thus, given almost nothing pressing to do from the Super Tuesday primaries on February 5 until the convention on Labor Day weekend, he could barely come up with any issues to run on in this election.

In contrast, Obama promised everything to everybody. Granted, Obama’s enormous platform was a fraud (I sure hope you haven’t already gone out and spent the tax cut Obama promised you), but, you have to admit, at least it was a methodical fraud.

Senator McCain has neither executive experience not inclination, and it showed in 2008. He outsourced the management of his campaign to a bunch of empty suits, who had him lurching about trying to one-up his opponent over each 24-hour news cycle on some trivial distraction. His handlers seemed more intent on furthering their own careers by impressing other Washington insiders than to get a coherent message out to the electorate.

Most disastrously, as the MainStream Media’s favorite Republican, McCain played by the rules of political correctness and, inevitably, lost by them. As I document from Obama’s own writings in my new book America’s Half-Blood Prince: Barack Obama’s “Story of Race and Inheritance,” Obama was long devoted to the far left fringe of American politics. But McCain couldn’t persuasively explain that to the public. Why not? Because Obama’s leftism is inextricably intertangled with his “race and inheritance,” his need to prove his “racial credentials” by being far enough left. Yet, McCain had ruled out of bounds any mention of the abundant evidence for this. For example, Senator Obama’s donations of $53,770 to Reverend Jeremiah “White Folks’ Greed Runs a World in Need” Wright in the years 2005-2007 was off limits. This left McCain with only the few and random-sounding examples of Obama’s leftism that didn’t have any apparent connection to race, such as Obama’s vague connection with the white terrorist Bill Ayers.

The Republicans played by the rules of diversity sensitivity and forfeited the election. Are they going to do the same?

Second, let’s look at who voted and for whom.

I’ve been covering elections since 2000. After every election, hundreds of autopilot articles are published attributing whatever happened to the tsunami of new Hispanic voters, which then is presumed to prove that the GOP’s only salvation is to embrace Open Borders.

This conventional wisdom is unfalsifiable: If the GOP win, as in 2004, it’s because its Presidential candidate is so enthusiastic about illegal aliens. If the GOP loses, it’s because Republicans other than its Presidential candidate aren’t enthusiastic enough about illegal aliens.

After each election, I then patiently debunk both the premise and the conclusion. No, while Hispanics voters are increasing in number, their growth isn’t as fast as is widely assumed. And, Hispanic voters, who are, after all, citizens, don’t care as much about illegal immigrants as their self-proclaimed leaders trumpet they do.

Moreover, by not taking a strong stand against illegal immigration, the GOP leaves more non-Hispanic votes on the table than it would lose from Hispanics. Think about it. What else other than immigration did the Republicans have to run on in 2008? The economy? Foreign policy?

Unfortunately, exit polling is becoming less reliable each election. Its history in this decade has been ignominious.

In the 2002 midterm elections, the exit polls weren’t published because of a software foul-up. (In 2003, I purchased the raw data and crunched the 2002 numbers so they wouldn’t be lost to history.)

In 2004, the exit polls predicted a narrow Kerry victory. In addition, they initially reported that Bush had garnered 44 percent of the Hispanic vote. After I pointed out how unlikely that was, the polling company announced later the number should have been about 40 percent. (And keep in mind that Bush only got to 40 percent via his Housing Bubble, which poured hundreds of billions of dollars into the pockets of Hispanic homebuyers and construction workers.)

In 2008, the lone exit poll predicted an Obama landslide. Karl Rove complained right after this election:

“We can’t be precise, because for the third election in a row the exit polls were trash. The raw numbers forecast an 18-point Obama win, news organizations who underwrote the poll arbitrarily dialed it down to a 10-point Obama edge, and the actual margin was six. [Actually, closer to seven than to six, it looks now.]“[How the President-Elect Did It , by Karl Rove, WSJ, November 6, 2008]

Why are exit polls so bad in this decade?

One problem is that there is more early voting and mail-in voting each election. In 2008, there was also likely to be a large Bradley Effect in which Republican voters offer politically correct answers to the young, Democratic-looking pollsters who accost them after voting.

Nevertheless, the most fundamental problem is one that’s common in the marketing research industry, where I worked for many years: it has become a monopoly.

There’s an old saying in the marketing research business that in any viable industry segment, there’s only room for 1.5 firms. You’ll notice, for example, that Nielsen doesn’t have any competition for TV ratings and Arbitron doesn’t have any competition for radio ratings. They could enter each other’s field, but then they’d both lose money in both fields. Why ruin nice little monopolies? In contrast, in the supermarket sales data field, there have long been two competitors, with rapid technological advancements resulting. That little industry has been notorious among investors for generating terrible profit margins.

Back in 2000, there were three national exit polls, one sponsored by a group of media outlets (which I’ll call the CNN poll for the convenience of its website), one by the New York Times, and one by the Los Angeles Times. They came up with different figures for the GOP share of the Hispanic vote: 31 percent according to the NYT, 35 percent according to CNN and its colleagues, and 38 percent according to the LAT.

This fuzzy math had the dual benefits of keeping you from being too stridently confident about the results (“Well, all we can say is the real number was likely somewhere in the 30s”) while letting you triple-check your numbers (“Yes, although we can’t be sure, 35 percent sounds like a reasonable estimate.”)

Over the course of the decade, unfortunately, the individual newspapers dropped out of the business. The cartel’s poll has wound up as a monopoly, with the usual results in terms of quality and reliability. Without competition to spur them on, they usually do a bad job.

It’s particularly important to understand that exit polls are not a very good way to determine an ethnic group’s share of the vote. There are all sorts of articles exulting over the huge turnout of Hispanics last Tuesday, but they all seem to reference the exit poll rather than real world results. A huge chunk of Hispanic voters are in California and Texas, both states in which there was little campaigning, advertising, or canvassing because they were all wrapped up.

The CNN exit poll has a long history of exaggerating the Hispanic share of the vote in contrast to the gold standard Census Bureau phone survey of 50,000 households that is conducted immediately after each election but not released until the following year:

Year	CNN Exit Poll	Census Phone Survey
2000	7%	5.4%
2004	8%	6.0%
2008	9%	NA until 2009

I’m guessing, based on trends going back to the 1970s, that the Census Bureau will eventually report the 2008 Hispanic fraction as a little under 7.0 percent. For your edification, here are Census Bureau figures for midterm elections. Both minority groups’ shares of the vote have been growing, but not exceptionally fast.

It’s worth noting that this year’s much-publicized 9 percent figure for Hispanic’s share of the vote is from the exit poll’s smaller “national sample.” The blogger Audacious Epigone toted up the figures from the exit poll’s much larger “state sample” and came up with 7.54 percent, which sounds more plausible.

In general, exit polls aren’t very good at figuring out turnout shares. If you stop and think about what’s involved in running a national exit poll, you can grasp why.

Only a tiny fraction of all the polling places in the country are covered, so the polling company has to decide ahead of time where to send their pollsters. That isn’t a big problem for calculating, say, the female share of the vote, because males and females generally live in the same neighborhoods. However, racial groups frequently don’t live in the same neighborhoods. The polling firm has to choose carefully which neighborhoods to survey.

Therefore, first, long before the election, the polling company must come up with an estimate of each group’s expected share in order to decide which polling stations to cover. This prediction tends to become a self-fulfilling prophecy. The firm’s thinking may go something like this: “Okay, we said the Hispanic share last time was 8 percent, and everybody knows they are growing, so we’d better report Hispanics as 9 percent this time, or we’ll look bad. So, let’s figure out which neighborhoods to send pollsters to in order that 9 percent of the voters they interview are Hispanic.”

The monopoly exit poll is asserting that the black share in 2008 (goosed upward by Obama’s presence on the ballot) was 13 percent, the Hispanic share was 9 percent, and the white share 74 percent. My guesstimate is that the definitive Census Bureau numbers will be more like 12 percent black, 7 percent Hispanic, and 77 percent white. But the white share could be as low as 75 percent white because McCain did so little to motivate whites to turn out.

Overall, the white share seems to be falling a couple of points per four-year election cycle, which means, among other things, that white voters are hardly powerless in the near-term.

Demographic change is combining with political change, however.

I’m not sure how trustworthy the exit polls are, but here are the GOP Presidential candidate’s share of the vote in the last two elections:

	2004	2008	GOP Decline
Whites	58%	55%	-3%
Blacks	11%	4%	-7%
Hispanics	40%	31%	-9%
Asians	44%	35%	-9%
Others	40%	31%	-9%

The interesting thing is how consistently large the non-white defections to the Democrats were in 2008. Amusingly, the GOP lost fewer percentage points among blacks than among the other three minorities listed. (Of course, that’s mostly just an example of diminishing marginal returns in action.)

To win the popular vote, McCain needed either 59 to 60 percent of the white vote, or to expand the number of white voters by raising issues of interest to the unmotivated, such as, say, immigration.

So, what’s the future going to look like?

A crucial question is which party will recruit the best political talent.

Consider the Los Angeles shopping mall developer Rick Caruso, age 49, whose superbly detailed mega-malls, The Grove (a faux-Italian hilltop city) and The Americana (a loving tribute to the prosperous small American cities of the early 20th Century), have been wildly successful with the public, making him the most popular Republican in Los Angeles.

When I heard that Caruso might run for mayor of Los Angeles against Antonio Villaraigosa, I immediately thought to myself, “I have no idea what his politics are, but I’d vote for him because he gets big things done, and with a level of quality that’s rare in Southern California these days.”

But, two days after McCain’s loss, Caruso announced he wasn’t going to challenge Mayor Villaraigosa.

To understand the prospects for the two parties in recruiting younger talent, think about the question of which party to join from the point of view of a next-generation Rick Caruso:

Say, you’re a 32-year-old white guy who has made a bundle putting up shopping malls. You’re good looking, a charismatic speaker, you like shaking hands and remembering people’s names, and, as the popularity of your malls attests, you’ve got a knack for understanding what the average person likes. In other words, you’re a natural political talent. And, unlike a lot of politicians (such as, say, John McCain), you’re a proven manager.

You figure the real estate business is going to be slow for awhile, so maybe it’s time to go into politics like you always said you would. You’ve donated to and schmoozed with most of the politicians in your state, Republican and Democrat, in your battles for land use permits. You know you’re better than most of them. They know it, too. Both parties have been recruiting you to run for office.

You’ve got a little timetable in your head: county supervisor, state senator, state treasurer, governor, and finally President in the 2032 election, when you’ll be 56. Maybe it’s crazy, but maybe it’s not.

You just don’t know which party to commit to. You’ve kept your politics vague while you’ve made your fortune.

Maybe you should run as a Democrat. They’ve got the demographic trends on their side.

The state Democratic chairman keeps telling you that you’re the next Bill Clinton. But, you watched Obama deftly play the race card on the Clintons. Soon, half the Democrats in the country were denouncing Bill Clinton as a racist.

Who needs that?

Is there all that much of a longrange future in the Democratic Party for a white guy like you? Are you going to just end up losing primary after primary to minority candidates who get a free pass on their backgrounds the way Obama did? Mrs. Clinton couldn’t publicly make an issue out of Obama’s Rev. Wright because her party has so many blacks and so many politically correct whites. Therefore, she lost.

Why risk a lifetime of frustration in the Democratic Party?

The Republicans definitely need some young blood. The road to winning primaries looks more open to a white guy in the Republican Party. So, precisely because the GOP is down now, it’s more attractive to new talent like you looking to move up in a hurry.

But, are you just going to lose general elections to minority Democrats because they’ll be untouchable due to their race the way Obama was? Will you be expected to take a dive like McCain did?

Who needs that?

That’s the key question: Are you going to have to play by the McCain Rules because the GOP will disown you if you go to the mat against the Democrats and do what it takes to win, the way George H.W. Bush did in 1988? Will the Republicans have your back if you play to win? Or are you going to be expected to be good loser like John McCain in 2008—and still get smeared as a racist by the media in the bargain?

If the GOP doesn’t want candidates who play to win, well, then, you’ve already got a career, a family, and charitable interests, a rich life without politics.

The GOP needs you more than you need them. So, forget going into politics.

The MainStream Media are telling the GOP that even though they ran a candidate of obsessive political correctness and he still got killed among minorities, the Republicans’ only hope are to become even more politically correct. And the only way they can prove their devotion to diversity, to remove the suspicion of racism, is by opening the borders even wider to invite in more nonwhites.

Maybe that will work. Maybe not.

The logical alternative for Republicans is to stop playing by the rules of political correctness, the McCain Rule, which, after all, were constructed by your political opponents for their own advantage.

Instead, play by the Sailer Rule: tell the truth.

As the Democrats become ever more the party of minorities, the Republicans would naturally become the party that welcomes the chance to defend the interests of what will remain the majority of the electorate well into the second half of the century.

F.E. Smith, Winston Churchill’s best friend, once remarked, “The world continues to offer glittering prizes to those who have stout hearts and sharp swords.”

But the glittering prizes are only available to those with more courage than the old jet pilot showed in 2008.

GOP Wins With Sailer Strategy!

By Steve Sailer

Right after the GOP’s tepid showing in the 2000 election, I wrote an article “GOP Future Depends on White Vote” that got VDARE.COM in general and me in particular banned from FreeRepublic.com, the self-proclaimed “Premier Conservative News Forum.”

JimBob and his enforcers apparently thought it was “racist” of me to point out the indisputable fact that whites cast 81% of the 2000 vote. I heinously added:

“Here at VDARE, we’ve discussed repeatedly how dire will be the long-term impact of immigration on the Republican Party. It’s crucial to understand, however, that the long-term has not quite arrived. The GOP [can] save itself by changing the immigration laws. This can be seen by examining the 2000 election results closely. The reason George W. Bush struggled so much to eke out a 271-267 win in the Electoral College…is not that he got crushed in the minority vote 77% to 21%. No, it’s that he commanded only a measly 54% of the white vote.”

In 2002, I estimate that voters chose Republican over Democrats last Tuesday by a 53%-47% margin in the two-party vote.  But the meltdown of the Voter News Service exit polling monopoly left us without national demographic breakdowns. So there’s a lot of 99% fact-free spinning aimed at establishing the conventional wisdom.

Here’s what really happened: the Republicans, perhaps in spite of themselves and no doubt benefiting from 9/11, followed the Sailer Strategy. They raked in the white votes.

All the official talk about the necessity of GOP minority outreach was in effect a smokescreen for the Strategy that Dare Not Speak Its Name.

Now start banning Dubya, JimBob.

Here’s what I’ve pieced together.

Fortunately, the Los Angeles Times conducted a full scale exit poll in California. It explains, as I reported at length for UPI, why, after Democrat Gray Davis crushed popular Republican Dan Lungren by 20 percentage points in the 1998 gubernatorial race, the hapless Bill Simon lost by only five in 2002.

The key to this surprising near-miss, in the LA Times’ words:

“Extrapolating from the exit polls, the number of votes cast by minority voters in California plummeted almost to half of their 1998 level, from 3 million down to what should turn out to be 1.7 million or 1.8 million when all the absentee and provisional ballots are counted. Meanwhile, the total number of white votes probably will roughly equal the 5.4 million cast in 1998. The minority share of the California electorate dropped from 36 percent in the 1998 to 24 percent this year. In turn, the white share rose from 64 percent to 76 percent.”

The Hispanic share reportedly fell from 13% to 10%.

Further, Lungren lost to Davis in the 2000 election by 6 percentage points among whites. But Simon beat Davis among whites by 3 points.

The Republicans picked up no ground among Hispanics, despite George W. Bush’s much-vaunted popularity with them. Lungren won 23% of Hispanic voters. Simon won 24%.

In the rest of the country, there’s only anecdotal data. But it provides clear evidence that whites turned out in large numbers and voted enthusiastically for the GOP, while minority turnout was down.

Thus the New York Times (November 7) reported that in Georgia,

“the rural white voting base was mobilized this year as never before….

“While 13,000 fewer voters turned out in the county with the most black voters, suggesting problems with the Democratic base, Republicans in Georgia piled up insurmountable leads in predominantly white rural and suburban counties. Mr. [Ralph] Reed said Republicans had to overcome an enormous spending advantage by [Democratic Governor Roy] Barnes, who spent more than $19 million, and turned to a huge grass roots effort. He said the party had enlisted 3,000 volunteers and 500 paid workers who knocked on 150,000 doors in 600 target areas around the state.”

(Significantly, this turnout was largely because of a National Question issue – the Confederate battleflag.)

In the rest of the South, the New York Times recounted

“In [Alabama and South Carolina], Democrats had counted on reprising the heavy black voter turnout that carried [Governor] Siegelman and Gov. Jim Hodges of South Carolina to victory in 1998. But…while blacks voted at about the same rate this time in South Carolina, Democrats said, white voters came out in greater numbers than expected in suburban and rural areas for Representative Mark Sanford, the victor in South Carolina’s gubernatorial contest. “We got 4 out of 10 white votes in 1998,” said Dick Harpootlian, the South Carolina Democratic chairman. “Yesterday, we got 3 of 10 white votes….

“[In Texas] Democrats had predicted that minority voters would turn out in droves for their diverse ticket. Minority turnout was up, but turnout in largely white, Republican suburbs were even higher…

“[Republican Governor Perry] also aired two controversial advertisements about a 1980’s scandal in which a savings and loan controlled by Mr. Sanchez was used by men later identified as Mexican drug dealers to launder money. Another commercial, released in the final days of the campaign, linked those drug dealers, and implicitly Mr. Sanchez, to the murder of a federal drug agent. Hispanic political leaders and Democrats assailed the advertisements as racially motivated and too extreme, but the Perry campaign defended them as factual. And today, Ms. Weddington, the party chairwoman, said Mr. Perry’s willingness to be so “aggressive” late in the campaign helped energize core Republican voters.”

Similarly, the Associated Press said:

“Tony Sanchez and Ron Kirk carried heavily Hispanic regions of South Texas in Tuesday’s elections, but unfortunately for the Democrats’ so-called Dream Team, they were routed by Republicans everywhere else. Some analysts said minority turnout fell below Democrats’ expectations but that the party’s strategy of appealing to minority voters is still valid because of the fast-growing Hispanic population in Texas. Others, however, warned that Democrats are having an increasingly difficult job winning white voters. … The Democratic candidates “were attractive to black and brown voters, there just weren’t enough of them,” [Professor Stein of Rice University] said.”

In Florida, according to the New York Times -

“Voter turnout…was remarkably high for a midterm election: 42.9 percent, up from 36.5 percent in 1998 and 41.5 percent in 1994, according to the Committee for the Study of the American Electorate, a research group based in Washington. ‘Turnout was higher among Republicans and much lower among Democrats,’ [Jim] Kane, [director of the Florida Voter Poll] said.”

This triumph for the Sailer Strategy makes it even more important for Republican mouthpieces to exude flapdoodle about how huge a help Hispanics were.

Thus Ellen Sorokin, writing in the Beltway-oriented Washington Times reported credulously that

“…Hispanic voters were a driving force behind the Republicans’ historic win of both chambers of Congress, party officials and political analysts said yesterday. … Republicans won their seats, with a lot of help from the Hispanic community.”

["Disillusioned blacks hurt Democrats" By Ellen Sorokin, Washington Times, November 7, 2002]

Sorokin’s article goes on to feature some of the most egregious attempts to deceive I’ve seen recently. Republican officials must be desperate if this is the best they can come up with:

(1) “Republican Sen. Wayne Allard, of Colorado, won El Paso County, which has about 58,400 Hispanics, by 53,445 votes.”

This is silly. Of course Allard won by a mile in El Paso County. It’s home to Colorado Springs, one of the most Conservative Christian cities in the country. El Paso County is in Colorado’s 5th Congressional district, in which Republican Representative Joel Hefley was re-elected with 83% of the vote in 2000. Only 11.3% of the population is Hispanic, according to the Census, and maybe they cast 5% or 6 % of the votes in El Paso. You can’t possibly draw the conclusion that because a Republican won big there, that Hispanics had much to do with it.

(2) “In Georgia, Rep. Saxby Chambliss won Gwinnett County, which has the largest Hispanic population, by 39,346 votes.”

Look, Gwinnett County, in suburban Atlanta, is one of most famously white Republican counties in America, the home of Newt Gingrich. Its Republican Congressman John Linder ran unopposed for reelection in 2000. It was only 10.9% Hispanic by population in the 2000 Census. Most of the Hispanics in the South are new immigrants — few are citizens. I’d be surprised if 3% of the votes in Gwinnett were cast by Hispanics.

(3) “In North Carolina, Elizabeth H. Dole won Wake County, the county with the state’s second-largest Hispanic population by 22,405 voters, the RNC numbers show.”

C’mon! Wake is only 5.4% Hispanic. Almost all of them are newcomers. I doubt if Hispanics cast 2% of the votes in Wake.

Then the Washington Times’ Sorokin listed three more substantive possibilities – but they’re still wrong:

(4) “In Florida, Gov. Jeb Bush was re-elected with more than 60 percent of the Latino vote.”

My comments: (a) Who knows? We are being asked to take this on faith. (b) Florida has many middle class, anti-Communist, Republican Cuban Hispanics. There’s nothing unusual about Republicans doing well there. (c) If that 60 percent figure is true, Jeb did about eleven points over George W.’s share of Florida Hispanics in 2000. But he did over 13 points better than Dubya among Florida voters overall. So his Hispanic performance was still weaker.

(5) “In New York, Gov. George E. Pataki was re-elected with nearly 50 percent of the Hispanic vote.”

“Nearly”? Subsequent estimates put it closer to a third. (NYT Nov 9)

And remember this: Pataki ran so far to the left that he was endorsed by the New York Times!

Is that what Beltway “conservatives” (and JimBob) want?

(6) “In Texas, Gov. Rick Perry was re-elected with more than one-third of the Latino vote, according to figures compiled by the Republican National Committee [RNC].”

Oh yeah?  The William Velasquez Institute’s exit poll of 800 Hispanic voters in Texas found Perry getting only 13%.

Obviously, both sides are biased. I wouldn’t trust either. That said, Perry must have garnered close to 70% of the white vote. So the gap between whites and Hispanics in Texas is still huge.

So the Sailer Strategy worked. All it took was an imminent war – to which whites responded more patriotically. (Interestingly.)

In the longer term, I am uncomfortable with the idea of the two major parties splitting into racial blocs.

But there’s a simple solution. If you don’t want whites to act like a minority group – e.g. racially-conscious, bloc-voting, biased, prickly, led by racial racketeers constantly proclaiming their group’s victimization – then the government should stop making whites a minority through mass immigration.

Barack Obama: Radical or Windbag?

Barack Obama: Radical or Windbag?

By Ian Jobling • 11/17/08

More of a windbag than a radical.

Barack Obama has filled racial right writers, as well as many commenters on this website, with dire foreboding. Steve Sailer has called Obama a “man of the radical left, driven by racial animosity against the American majority,” and has written a whole book to prove his point. Pat Buchanan predicts the passage of amnesty within Obama’s first 100 days, as well as universal health insurance that would cover illegal aliens. Michael Hart thinks Obama “hates whites” and is favorable to communism.

I agree that Obama’s election is a disturbing and possibly disastrous event, and I will no doubt find many occasions to rail against him in the future. However, what we need now is a sober assessment of what the man actually believes and how he will try to change America. I have not found evidence to support the claim that Obama is a radical leftist driven by a lust for racial vengeance. Certainly, Obama’s association with the appalling Jeremiah Wright, his past work as a community organizer and civil rights lawyer, and the college radicalism described in Dreams of My Father prove that he possesses a profound sense of racial identity and was steeped in academic leftism in his youth. However, these aspects of Obama’s history should not be exaggerated. The Obama of The Audacity of Hope, the campaign, and the transition is a moderate center-left politician, not a firebrand leftist, on issues of race and welfare. Moreover, the circumstances of Obama’s presidency will make it difficult for him to pass even a moderate leftist agenda into law.

The memory of the Republican landslide in the congressional elections of 1994 haunts the Democrats. They will be wary of provoking a conservative backlash by pressing for unpopular liberal policies, as the Clinton administration did after it came in 1992. There is, after all, no evidence that American public opinion is shifting to the left. Rather, Americans appear to have voted Democrat out of discontent with an unpopular president rather than eagerness for radical change. Voters in 2008 were much more likely to call themselves conservatives than liberals, and the percentages were almost exactly the same as in 2004. Voters chose the conservative option on most ballot initiatives dealing with issues of race, immigration, and culture.

Obama undoubtedly favors amnesty and other forms immigration liberalization, although not as passionately as John McCain does. However, Mark Krikorian, the foremost expert on American immigration issues, has convincingly argued that the new administration recognizes the unpopularity of amnesty and will not push for it in the foreseeable future. The incoming White House Chief of Staff Rahm Emanuel has said that amnesty has “emerged as the third rail of American politics” and once told a Hispanic activist that “there is no way this legislation [comprehensive immigration reform] is happening in the Democratic House, in the Democratic Senate, in the Democratic presidency, in the first term.” Many of the incoming Democrats ran on an anti-amnesty platform; in fact, the next Congress will not move substantially to the left on immigration.

Besides, the rationale for any kind of immigration liberalization will be even weaker for the foreseeable future than it was during the Bush years, when all such initiatives failed. America is entering a recession that will probably last for years. It would be suicidal for any politician to back legislation friendly to foreign workers in a time of high unemployment.

When it comes to affirmative action, Obama is hardly a radical. Rather his position is vague and cautious to the point of incoherence. In The Audacity of Hope, he makes it clear that he thinks blacks still suffer from widespread discrimination and endorses racial preferences as a correction. He even calls for “goals and timetables for minority hiring” for corporations, trade unions, and government agencies that are insufficiently diverse.¹

On the other hand, Obama says that he thinks policies designed to help the poor in general will do more for minorities than racial preferences. For example, he writes, “a plan for universal health-care coverage would do more to eliminate health disparities between whites and minorities than any race-specific programs we might design.”² When Obama addressed the NAACP in July, he didn’t mention affirmative action at all, but spoke of the need to help out all of the poor, “whether they live in Anacostia or Appalachia.” Finally, Obama thinks poor white applicants to college deserve preferences more than his own daughters, which would be an odd position for anyone who hated white people to take.

Obama will face considerable resistance if he tries to implement affirmative action policies or stock the courts with judges who are racial preference radicals. Affirmative action has never been popular among Americans, and Obama’s very success has convinced even more people that it is obsolete. An October poll found that 68 percent of whites and even 43 percent of blacks believed blacks and whites have an equal chance of getting ahead today, which was up considerably from 1997 and even from earlier this year. Moreover, suspicions that Obama is a race-baiting demagogue, stoked by his association with Jeremiah Wright, almost sunk his campaign. Since Obama will be eager to avoid reviving these suspicions, he may actually be less aggressive in promoting racial preferences than a white liberal president would be.

Moreover, we don’t need to worry that Obama is a socialist or a Marxist or any such thing. Yes, Obama believes in greater government investment in and regulation of business; yes, he supports an increase in welfare spending, particularly for health care; yes, he wants to raise taxes on the wealthy. However, Obama believes in government as a supplement and partner to the free-market system, not as a replacement for it. In The Audacity of Hope, Obama speaks of the “bankruptcy of socialism and communism” and praises America’s “business culture,” which has resulted in “a prosperity that’s unmatched in human history.”³

There is good reason to believe, moreover, that Obama’s plans to increase welfare spending will founder. The government has already spent trillions on the bailout of the American financial sector, and now the Democrats want to bail out the automakers too. It will be difficult for the Democrats to justify increasing the size of the welfare state after this orgy of spending. Democrats will also find it hard to convince Americans that businesses should spend more on employee health insurance during a recession when business will be struggling. Finally, fiscal conservatives will be able to make a strong case that tax increases of any kind will retard economic recovery by lowering investment.

All predictions about the course of a presidency are unreliable, of course. A single event can push a president in an unexpected direction, as 9/11 did Bush. All bets about the Obama presidency are off if the worst forecasts for the economy—those that call for an outright depression—come true. If unemployment reaches 20 percent, America may enter strange and turbulent times, when radical changes, whether for good or evil, become possible. Moreover, only a rapid Republican recovery can contain the left. The Democrats will grow more frightening the longer they retain the presidency and their congressional majority.

The interpretation of Obama as a radical racialist and leftist mistakes the man’s basic motivations. As he made clear in his March speech on race, Obama thinks of himself not as an avenger, but a healer. As Obama sees it, blacks, whites, Hispanics, all of us are angry. We all need to come together and learn to understand each other’s anger so that we can forgive it and be healed, and Obama himself is the miraculous being who will make this transcendence possible.

Obama’s image of himself is not just pompous and hackneyed, but downright insulting. After all, whites are suicidally indulgent to minorities already—how much more understanding and forgiving do we have to be? However, Obama’s vanity is less likely to result in hate-whitey legislation than in windy speechifying about a “the fierce urgency of now” and “unyielding hope” and such. So stay strong, keep the faith, and make sure your remote has a functioning mute button!

Markets fall as investors are increasingly unsettled by bad economic news – Web Log – November, 2007

Markets fall as investors are increasingly unsettled by bad economic news

Web Log – November, 2007

Markets fall as investors are increasingly unsettled by bad economic news

Hopes for quick return to “normal” bubble growth are fading.

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, 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 “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, 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 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 mind-boggling “M-LEC” announcement, which was supposed to calm jitters, only increased them. The October 31 Fed interest rate cut only caused investors to become more sober, instead of returning to drunken euphoria.

On October 24, I 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 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 “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 four years, until 1933, when it had fallen 90% of its peak value.

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:

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 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 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 four years, until mid-1933:

• “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-1933 that the stock market began to gain again, having fallen 90% from its 1929 peak. (21-Nov-07)

Rumors abound in Russia of a palace coup by Vladimir Putin

Rumors abound in Russia of a palace coup by Vladimir Putin

A new constitutional amendment leaves people wondering what he’s planning.

The amendment to Russia’s constitution, the first since the constitution was adopted in 1993, is being rushed through the Parliament at top speed.

The new law will extend the President’s term of office from four years to six years, and the term of office of a member of parliament from four years to five years.

The amendment was put forth by Russia current President, Dmitry Medvedev, with the backing of former President and current Prime Minister Vladimir Putin. The amendment easily passed its first vote in the State Duma (the lower house of Russia’s parliament), since Putin’s political party, the United Russia party, is in control of the Duma. The Federation Council (the upper house) will approve it next week.

The vote in the Duma was 388-58. The only major objecting group was, ironically, the Communist Party.

Vladimir Putin (Source: Telegraph)

Putin served two terms as President, from 2000-2008, but was forced to step down because of a constitutional limitation to no more than two consecutive terms. Putin’s hand-picked successor, Medvedev, won the Presidency for a term running from 2008 to 2012. Putin became Prime Minister, and the constitution will allow him to run for President again in 2012, since the three terms won’t be consecutive.

Both Medvedev and Putin claim that the amendment doesn’t apply to them. If that’s true, then why are they pushing it, and why are they pushing it at top speed to get it passed within just a few days?

The speed certainly is related to the scheduled November 20 national meeting of Putin’s United Russia party. Rumors are buzzing that Medvedev will step down, leaving the way open from Putin to become President again within a few weeks, after another election. Then Putin could be President for two six-year terms, until the 2020s.

This is all speculation right now, but if it happens, it will be completely consistent with all the game-playing that’s been going on this year.

The United Russia party was formed last year to support Putin, who had not previously been in any political party, and on December 2, 2007, United Russia won the Russian Parliamentary election by a landslide.

Then Putin arranged a deal so that his ally Dmitry Medvedev. Medvedev would win the March 2 elections and become President, allowing Medvedev to appoint Putin as Prime Minister.

The assumption has always been that Putin would run again in 2012, but the worldwide economic crisis is forcing Putin to consolidate power very quickly. It was only ten days ago, on November 5, that Medvedev announced that he would be proposing the new amendment. Now, the entire Russian political landscape is apparently changing in the blink of an eye.

I’ve written about Putin many times, and about his rock-star cult status in Russia. Did Putin arrange to have Alexander Litvinenko poisoned with polonium? That’s fine with the Russians. Did Putin arrange to nationalize Yukos and other Russian companies by the vilest means possible? The Russians love it. Did Putin have journalists killed? Did Putin arrange for a cyber attack on Estonia? That’s great, according to the Russians. And it was just a few months ago that Putin shut down an entire newspaper, throwing all the employees out on the street, for committing the crime of reporting rumors that Putin was having an affair with a glamorous Olympic gymnast.

From the point of view of Generational Dynamics, it’s impossible to predict Putin’s future. Any prediction about a single person could be proven wrong by a simple traffic accident, for example. Generational Dynamics predicts the attitudes and behaviors of large masses of people, entire generations of people, as a group.

But what is clear is that the Russian people are looking for someone to lead the country through its worsening crisis, and Putin is the obvious choice. Russia is going through a major stock market crash, triggered by the collapse in price of its main export, oil, from a peak of $147 per barrel to a new low this week of $55 per barrel. Russia has been coming apart at the seams for two decades now, with increased xenophobia around the country, and terrorist activity in the Caucasus provinces of Chechnya, Dagestan and Ingushetia.

Putin was able to keep things under control by using the vast wealth generated by oil sales, but now that control is collapsing as the oil wealth collapses. According to some analyses, Putin’s domestic situation is so bad that he’ll be forced to manufacture an international crisis to unite the Russian people behind him.

There is a parallel that we can draw here with Iran. President Mahmoud Ahmadinejad’s desperate domestic situation causes him to manufacture crises with Israel, with the US and with Europe. (For an extensive analysis of Iran’s strategy, see “China ‘betrays’ Iran, as internal problems in both countries mount.”)

However, although Putin’s and Ahmadinejad’s strategies may be similar, a Generational Dynamics analysis explains why they’re having and will continue to have very different results.

Iran is in a generational Awakening era, which means that the Iranian people are “attracted away from” war. Ahmadinejad’s attempts at unifying the Iranian people behind him only backfire, because the Iranian people, who are largely pro-American, blame him for making Iran look foolish in the world.

But Russia is in a generational Crisis era, which means that the Russian people are “attracted toward” war. That doesn’t mean that they want war, but it means that they’ll choose confrontation over conciliation and compromise, and that they’ll support Putin in any international crisis.

In particular, it’s very likely that the Russian people will support Putin in this palace coup, if it occurs. And those who believe that a new Obama administration will mean the end of international crises with Russia can expect those hopes to be dashed.

(Comments: For reader comments, questions and discussion, see the Russia thread of the Generational Dynamics forum.) (15-Nov-2008)

A generational view of China’s growing melamine food disaster

A generational view of China’s growing melamine food disaster

On Thursday, the FDA issued a nationwide alert, banning Chinese dairy products and food and feed products manufactured in China that contain dairy ingredients.

This alert by the US Food and Drug Administration is an extremely broad ban because it covers goods from an entire country, rather than from a single rogue manufacturer.

Even though this situation has barely made the news in America, the size of this growing disaster in China is almost beyond comprehension. Over the last few years, Chinese manufacturers of milk products have been adding a chemical called melamine to their products. Melamine is an industrial chemical used to make plastics and fertilizer.

The advantage of adding melamine to food products is that it boosts nitrogen levels in the food, and the higher nitrogen levels give the appearance of higher protein levels, when standard tests are used.

The disadvantage of adding melamine to food products is that not only is it not real protein, but it’s actually poison. Melamine can cause kidney stones and renal problems, and eventually death.

And that’s what’s happened — to babies on baby formula. According to Beijing’s figures, some 54,000 babies have fallen ill and been hospitalized with kidney stones and related problems. Beijing has also claimed that only four babies have died from melamine poisoning, but there is plenty of anecdotal evidence that far more babies have died.

The spreading disaster

There was an early warning of this disaster in 2007. Early in 2007, it was found that dogs and cats were dying in America because pet food imported from China had been contaminated with melamine. The result was one of the largest pet food recalls in American history.

At first, China denied that any such thing had happened, and even claimed that melamine could not harm pets. Finally, in May, 2007, China said that it had found two Chinese companies guilty of intentionally exporting contaminated pet food ingredients to the United States.

Well, the problem was “contained,” and it had been resolved by finding the two guilty parties.

But it exploded into the news in China two months ago, on September 10, when China revealed that 14 babies had fallen ill from drinking the same brand of milk powder, marketed by the Sanlu Group. It soon turned out that the milk powder had been contaminated with melamine.

Once again, the problem was thought to be “contained,” with only one guilty company. Still, it was shocking that the same contaminant that had been used with pet food was now found to be used with human food.

In the last two months, the tentacles of this scandal have spread throughout China and around the world. Here are some examples:

• Melamine was found in ordinary milk products from several large firms.
• Cadbury chocolates and White Rabbit candies, sold around the world, have been recalled because they contain traces of melamine from milk powder manufactured in China.
• Hong Kong authorities found melamine in eggs, because of tainted feed given to chickens. There have been subsequent reports of melamine found in feed for pigs, cows and fish, prompting fears that meat and meat products could be contaminated.
• Vietnam and other countries have found that products imported from Australia are contaminated with melamine, because they were manufactured from products imported from China.
• Even zoos are concerned. Two infant gorillas from Hangzhou Wildlife Park were suffering from the early stages of kidney stones, after being nursed with milk powder made by the Sanlu Group.

There seems to be no end to these revelations. Here’s how one Chinese analysis describes it:

“The lessons to be learned are painful, but the problems are systemic. The dairy farmers added melamine in order to make more money. Many manufacturers turned a blind eye during quality control, only caring about cutting costs. Local officials covered up the scandal, keeping up appearances in order to protect their own careers. Very little attention was paid to business ethics, or to the harm they could be doing to consumers.To avoid similar tragedies in the future, the Chinese authorities have vowed to overhaul the chaotic industry and provide the necessary help to affected farmers and some enterprises. However, the most important thing should be to emphasize the importance of business ethics, and to strictly punish those evil-doers. Only then will public trust in China’s dairy sector begin to be restored.”

What’s becoming increasingly clear is that the melamine problem is becoming widespread and ubiquitous.

To realize how incredible this is, just imagine an American food producer purposely contaminating food, resulting in the hospitalization of even a few dozen babies. Think of how shocked everyone would be, and what an enormous scandal there would be.

Now realize that in China it wasn’t just one food producer, but many, many food producers, supported by a wide variety of officials in other organizations — government agencies, testing agencies, other manufacturers, and so forth.

China’s subprime crisis

Astute long-term readers of this web site will have guessed by now where this is going.

I’ve written frequently about the ubiquity of the deception and fraud that occurred in the subprime crisis: Homeowners who lied on their mortgage applications, and accepted mortgage loans they had no hope of repaying; collusion of homebuilders and lenders to inflate the market value of homes; lenders who praced “predatory lending” practices; financial advisers who misled investors to get commissions; investment banks that created fraudulent mortgage-backed securities; ratings agencies that gave these securities AAA ratings; “monoline” bond insurers that provided near-worthless insurance; hedge fund, mutual fund, money market fund managers who sold these worthless securities to investors; journalists, analysts, pundits and politicians, supposed experts in finance, who lied and said everything was ok; government regulators who banks to commit fraud by lying about the values of their assets.

The same ubiquity applies to China’s melamine scandal. The depth and breadth of the criminal activities can only be explained generationally.

On this web site, I’ve written in extensive detail how it happened. In the 1990s, the risk-averse generation of Great Depression survivors all retired. The arrogant, incompetent Boomers took the senior management positions, and created the dot-com bubble, which burst in 2000. After that, the nihilistic, destructive Generation-Xers reached middle management positions, and created the CDOs and other complex financial instruments that have destroyed the world financial system.

China’s melamine poisoning has reached into food products around the world, just as the CDOs have reached into financial portfolios around the world. The financial scandal is farther along than the melamine scandal, and in the end, both may end up being equally destructive.

There’s also a parallel with academic support for the activities, according to an Asia Times analysis:

“It’s not just a few bad eggs. The trail of greed and negligence that allowed melamine – a toxic industrial chemical – to slip from modified animal fodder into the human food chain has now led to some of China’s top scientists – many of whom are widely regarded to have put personal profit over the public safety of billions.Recent reports have found that China’s top scientific research body – the Chinese Academy of Sciences (CAS) – “discovered” as early as 1999 that adding melamine to food could boost its protein levels. In turn, the reports allege that rogue biologists cashed in on their chemical invention by promoting the sale of products containing melamine – even charging for training in how to use them – for years. …

The prestigious, government-funded CAS was among the first to be linked to the chemical.

Last month, Chinese bloggers exposed that as early as in 1999, a CAS institution placed advertisements for an additive to cattle feed called “DH Composite High-protein Fodder Supplement”. The advertisement claimed that the technology could be used to manufacture “high protein fodder using organic nitrogen and special catalysts”.

The technology was sold by the Appliance Technology Institute of CAS for 10,000 yuan (US$1,466) plus an extra 5,000 yuan ($700) for training, according to the advertisement. The online ad was soon posted on major websites and forums. Many believed that “DH Composite High-protein Fodder Supplement” was based on melamine.

The CAS, however, was quick to deny the charge. Jiang Xiezhu, spokesman of the CAS, told the media that an investigation launched by the academy showed that the supplement “had nothing to do with melamine”. His explanation was that the advertised technology could not produce the high temperature needed for the production of melamine.

Few are convinced by the explanation, however, because the investigation was done unilaterally by the CAS. Without an independent observer, people began to doubt the objectivity of the results. And while denying that “DH Composite High-protein Fodder Supplement” is based on melamine, the spokesman also failed to publicize its formula or ingredients.

The CAS also failed to mention who invented the technology. It only said that the contact person named in the advertisement, Gao Yinxiang, was not a scientist, implying that Gao was not the inventor.

This is not true. In an interview with the Beijing Evening News, Gao acknowledged taking part in the development of the product. The Beijing Evening News later exposed Gao as a former director of the Appliance Technology Institute of CAS, and a biologist.”

I won’t quote any more – read the original article if you want more details. The point is that there were a cadre of academics and scientists like Gao Yinxiang who developed these poisonous products, and they’re now using sleazy lies and excuses to keep from being identified.

Robert Engle and Joseph Stiglitz, Nobel Prize winners in Economics (Source: CNBC)

The American equivalents of Gao include Robert Engle, 2003 Nobel Prize Winner in Economics, and Joseph Stiglitz, 2001 Nobel Prize Winner in Economics. I wrote about these two when they appeared on CNBC in an article, “Brilliant Nobel Prize winners in Economics blame credit bubble on ‘the news.’”

These two Nobel prize winners actually developed the theoretical support for the CDOs and other financial instruments, but according to Stiglitz, forgot to account for things like recessions and rising interest rates.

I’ve seen Stiglitz in particular on numerous shows, pointing the finger at everyone but himself. A couple of times I heard him blame the whole subprime crisis on Bush’s war in Iraq, which is exactly the kind of stuff that the mainstream financial media loves to hear, even though it makes as much sense as blaming it on the weather.

The melamine crimes have poisoned tens or hundreds of thousands of people, including many babies, perpetrated by people who knew what they were doing, but wanted to make money.

By the beginning of 2007, it was clear that the computer models that supported the subprime securities were wrong, and that the models were falling apart. This did not stop the deception and fraud, as I’ve discussed many times. Instead, the deception and fraud actually INCREASED, because the greedy Gen-Xers and compliant Boomers wanted to continue to collect their fat commissions and bonuses.

The same kind of thing is also true of the melamine crimes. When the pet food scandal broke in 2007, it was clear that there was a problem, but the melamine contamination didn’t stop. Instead, it apparently increased and spread to more and more human food, including milk for baby’s formulas.

An article with another analysis describes the situation as follows:

“According to a recent report in the Nanfang Daily, the addition of melamine into animal feed started about five years ago in the aquatic farming industry and has since spread into other agricultural products including poultry, milk, biscuits and candies despite a ban imposed in June of 2007 after large numbers of dogs and cats in the United States died after it was added to pet foods imported from China. Some of China’s top dairies have been embroiled in the scandal.“The scale of the problem proved that it was clearly not an isolated accident but a large-scale intentional activity to deceive consumers for simple, basic, short-term profits,” commented a spokesman of the World Health Organisation. He said that this was one of the largest food safety events it has had to deal with in recent years.”

The people who perpetrated these crimes exhibited the same kinds of behaviors as America’s Gen-Xers and Boomers.

China’s generations and eras

In order to make a better comparison, it’s necessary to identify China’s generations. In generational theory, generations follow well-defined archetypes: Heroes (like our World War II GI generation, and the young Millennial generation), Artists (like our Silent generation), Prophets (like our Boomers), and Nomads (like our Generation-X).

(For information about American generations and eras, see “Basics of Generational Dynamics.”)

In 2006, I developed a list of China’s generations and eras, but I’ve never posted it on this web site. Now seems like a good time to do so. I believe that the time intervals for these eras are accurate, but the names for the eras and generations are my own, and might be improved upon by scholars.

1852-73: Taiping era (Crisis)

This is the crisis period that triggered the unification of China into a single country, rather than a group of independent provinces. The major war was the Taiping Rebellion, but there were other revolts in other parts of China. (This is an example of what’s called “merging timelines,” when different regions with separate timelines merge together into a single timeline.) The principal revolts were the following:

• 1850-64 Taiping Rebellion (Eastern China)
• 1851-68 Nian Rebellion (Central China)
• 1855-73 Muslim (Panthay) rebellion in Yunnan (Southern China)
• 1862-73 Muslim revolt in Shaanxi and Gansu (Northwest China)

Humiliated Generation (Artists) – Growing up during this enormous and bloody civil war, they missed their chance for the fight. As adults, they and all of China were humiliated in 1895 in the Sino-Japanese war.

1874-94: Self-strengthening era (Recovery/High)

The Recovery era began with the “Self-Strengthening Movement,” the study of Western skills, government, technology and industry. China had been humiliated in the Opium Wars of the 1840s, and it was argued that China could become stronger by learning Western ways and adapting them to Chinese culture. It was successful, and the next few decades saw China advance far towards catching up with the rest of the world in technology, finance and trade.

Revolutionary Generation (Prophets) – Remarkably, Taiping era crisis did not dislodge the government of the Qing dynasty of the Manchus, although the Manchus (from Manchuria), had governed China for centuries. This generation first brought down the Manchus, in 1912, and then led the Communist Revolution in the 1930s and 1940s.

1894-1918: Revolutionary Awakening (Awakening era)

The Awakening era began with the first of many attempts to overthrow the Qing dynasty by means of secret revolutionary societies. The first was formed by Sun Yat-sen (1866-1925), who failed and was forced to flee to Hawaii and the United States, but later returned after the success of the 1911 revolution to become President of China.

As soon as the 1894 revolution failed, China was defeated and humiliated by the 1895 Sino-Japanese War. China was forced to sign a treaty which ceded Korea, Taiwan and other territories to Japan, a small neighbor on whom China had formerly looked on condescendingly.

The 1911 Chinese Revolution replaced the Qing Dynasty with a Republic that lasted only two years, and was replaced in turn by a military dictatorship.

The Awakening era ended with the Bolshevik Revolution in Russia and the formation of the Communist International (Comintern) and its plan to conquer the world.

??? Generation (Nomads) -

1918-1934 Warlord Period (Unraveling era)

There were massive student demonstrations in Tiananmen Square and elsewhere in 1919, resulting in a student union of the Republic of China.

The central government disintegrated, leaving power in the the hands of small groups of militarists and their armies in constant battles for power. This led to the formation of two power groups:

• In 1921, the Communist Party was formed in Shanghai. Mao Zedong (1893-1976) rose to prominence in the Party after a clash in 1925 with the KMT.
• In 1922, Sun Yat-sen and Chiang Kai-shek (1887-1975) formed what was to become the Nationalist party or KMT (Kuomintang Party).

The two factions fought through an unraveling war until Mao and his army were surrounded and faced with defeat in 1934.

Communist Generation (Heroes)

All the separate revolts and rebellions of the Taiping era were now merged into a single civil war between the Mao and Chiang, resulting in the victory of the Communist Revolution.

1934-49 Communist Revolution (Crisis era)

Mao escaped the encirclement through the Long March, the longest retreat in history, lasting a year. This began the civil war.

The two sides were forced to unify because of Japan’s invasion, especially after the “Rape of Nanjing” in December 1937.

The civil war resumed after WW II, forcing the nationalists onto Formosa (Taiwan).

Preparatory Generation (Artists)

(Like our Silent generation). Led by the current president, Hu Jintao, this generation has been preparing China for its greatest challenge, all-out war with the U.S., Japan and India.

1949-1965 The People’s Republic (Recovery/High era)

Mao consolidated his power by executing millions of people in the 1950s. Mao said “Let a hundred flowers bloom,” meaning that free expression should be encouraged, but intellectuals who expressed grievances were executed or sent off the work camps.

The worst was Mao’s Great Leap Forward, 1958-60, during which some 20 to 30 million people died of starvation in a man-made famine. This was a disaster of almost unimaginable proportions and created many enemies for Mao.

Miserable Generation (Prophets)

(Like our Boomer generation) I call them the “Miserable Generation,” a name that I picked up several years ago in an article by a Chinese author. They were starved by Mao’s Great Leap Forward, and they got no education, thanks to Mao’s Great Cultural Revolution. They turned into a political force after he 1989 Tiananmen Square massacre, and now their Falun Gong movement is being violently suppressed.

1965-89 Cultural Revolution (Awakening era)

To retaliate against his enemies, Mao launched the Great Cultural Revolution (1965-68) and formed the Red Guards, mostly young students, to implement the assault on dissidents. They brought the country to the verge of chaos, carrying out summary execution, forcing tens of thousands from their homes or into labor camps. Schools and universities were shut down for several years.

During this period, China developed a rapprochement with the United States, joined the United Nations, instituted many educational and government reforms, and launched the “Democracy Wall” movement. In 1980, China launched the “one-child” policy. By the end of the era, Mao was openly criticized.

Tiananmen Generation (Nomads)

(Like our Generation-X.) Growing up in the aftermath of the chaos of the cultural revolution, this generation formed the bulk of the millions of students that crowded into Tiananmen Square in 1989.

1989-present Falun Gong era (Unraveling era)

The era was launched by the Tiananmen Square massacre, triggering the huge movement, followers of the Falun Gong. Their leaders believe it to be the modern version of the God-Worshipper’s Society, a spiritual movement which launched the Taiping Rebellion, and was a form of Christianity combined with Buddhism. By 1999 the movement was so widespread that Beijing clamped down on it. It’s rumored that millions of adherents have been jailed.

Today, 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.

Today, China has either already entered, or is about to enter, a Crisis era.

One-child Generation (Heroes) – This generation bore the brunt of the one-child policy which has created an enormous surplus of young males, meaning that a large segment of this generation will never get married. This generation almost has nothing to lose by going to war — against Beijing, against Japan, or against the U.S. And they will be guided by the last Prophets – the Miserable generation — and supported by the last Nomads — the Tiananmen generation.

The melamine crimes

Since the 1930s, the US has been the world leader in finance. The US developed most of the laws and regulations for finance that are followed around the world. Thus, the subprime crisis is a rejection by younger generations of a major achievement of America’s WW II survivors, and expresses contempt for their values.

For China, a principal achievement of the last 70 years has been the conquest of famine. With 2.4 billion people, the spectre of famine is always close in China, but since the 1960s, China has been successful in feeding its population. Thus, the melamine scandal is a rejection by younger generations of a major achievement of China’s Communist Revolution survivors, and expresses contempt for their values.

A lot more research into the melamine scandal is needed in order to fully identify completely how it unfolded generationally. But this article provides a first pass at showing how the melamine scandal is very similar to America’s subprime scandal, with the same kinds of generational overtones.

(Comments: For reader comments, questions and discussion, see the Geopolitical topics thread of the Generational Dynamics forum.) (17-Nov-2008)

Bailout fever seems to be petering out as Paulson reiterates his claims of victory

Bailout fever seems to be petering out as Paulson reiterates his claims of victory

With no immediate crises going on, politicians just settle for rhetoric.

What’s interesting about what happened in Congress on Tuesday is that almost nothing happened.

Treasury Secretary Hank Paulson lauded his achievements, but lawmakers bickered with him over the question of why he hasn’t used the $700 billion bailout fund to end foreclosures.

Recall that the original proposal for the Troubled Asset Recovery Program (TARP), the official name for the bailout, was to purchase near-worthless mortgage-backed securities from financial institutions. Then last week, Paulson reversed direction, saying that he would use the money to bail out banks directly.

Committee members who angry about not ending foreclosures had apparently thought that purchasing worthless mortgage-backed securities would mean the end of the foreclosure problem.

Anyway they argued about that for an hour or two.

They also argued about whether some of the $700 billion TARP money should be used to bail out auto manufacturing firms.

In the afternoon, CEOs of GM, Chrysler and Ford came to Congress to beg and plead for a bailout. The car people were almost in tears, but the heartless lawmakers (both Republicans and some Democrats) were looking for some sort of guarantee that the bailout money wouldn’t just go down the drain.

So they argued about that for an hour or two.

In fact, Paulson has spent $250 billion of TARP money, and plans to leave the remaining $350 billion unspent, to be used by the incoming Obama administration.

In the play “Finian’s Rainbow,” the pot of gold at the end of the rainbow finally turns into a pot of worthless dross. One gets the feeling that the same thing has happened to the $700 billion bailout pot.

Meanwhile, Gen-X President-elect Barack Obama gave a talk on Tuesday to a bunch of environmentalists. He promised to spend lots of money to reduce emissions to combat global warming.

He promised to implement the “cap and trade” scheme that’s been a total, absolutely failure in Europe.

As I wrote last year in “UN Climate Change conference appears to be ending in farce,” I explained that the “cap and trade” plan is scam. The idea is to create a new class of near-worthless securities, backed by “carbon credits,” in the same way that near-worthless securities were created from subprime mortgages.

The only good thing I can say about this buffoonery is that there isn’t a snowflake’s chance in hell that anything will ever come of sham; even a Democratic Congress will find it almost impossible to endorse this scam in the midst of an ever-worsening financial crisis.

Meanwhile, the stock market has been continuing its general downward trend that began in October 2007. It’s now down 41% from its peak on October 7, 2009.

On any day when the market goes higher, you hear shrieks of “Hooray! We’ve reached a bottom.”

Last week on Thursday, the market spiked up 6.7%, and Art Cashin, the UBS floor manager at the stock exchange and devoted believer in the “capitulation” theory, announced on Friday morning that capitulation had arrived, and the market was going up again. Unfortunately, it fell sharply on Friday and Monday, so he’s had to back off. Tsk, tsk. Well, it rose 1.8% on Tuesday, so let’s see what he says on Wednesday morning.

I used to write a web log entry on the economy and the stock market almost every day, but there hasn’t been much new lately. It’s just the same old bickering and arguing, one idiotic remark by analysts and journalists and politicians after another, the long faces when the market is down, the euphoric cries of “we’ve reached bottom” on days when it goes up.

We haven’t had a major financial crisis for a few weeks now, so it shouldn’t be too long now.

(Comments: For reader comments, as well as more frequent updates on this subject, see the Financial Topics thread of the Generational Dynamics forum. Read the entire thread for discussions on how to protect your money.) (19-Nov-2008)