“Watching the pot come to a boil”

	Generational Dynamics
	Forecasting America’s Destiny … and the World’s

31-Jan-10 News – US-China relations deteriorating

Japan’s economy also deteriorating.

US-China relations continue to deteriorate since Copenhagen climate change summit

China’s defense ministry has announced measures to retaliate for the US administration’s announcement on Friday that it would sell $6.4 billion in arms to Taiwan, according to The Guardian. The measures include suspension of military exchanges with the US and sanctions on companies selling arms to Taiwan.

The arms sale will cause severe damage to overall China-US cooperation, according to Xinhua. The article points that the US is violating a joint communiqué issued on August 17, 1982. Indeed, the communiqué states:

“6. Having in mind the foregoing statements of both sides, the United States Government states that it does not seek to carry out a long-term policy of arms sales to Taiwan, that its arms sales to Taiwan will not exceed, either in qualitative or in quantitative terms, the level of those supplied in recent years since the establishment of diplomatic relations between the United States and China, and that it intends to reduce gradually its sales of arms to Taiwan, leading over a period of time to a final resolution. In so stating, the United States acknowledges China’s consistent position regarding the thorough settlement of this issue.7. In order to bring about, over a period of time, a final settlement of the question of United States arms sales to Taiwan, which is an issue rooted in history, the two governments will make every effort to adopt measures and create conditions conducive to the thorough settlement of this issue.”

A lot has happened in the 28 years since the joint communiqué was issued. The US policy is to do nothing to disturb the status quo. China has repeatedly threatened war with the US, and is militarily preparing to take control of Taiwan by force. The US justifies the arms sales to Taiwan as necessary to balance China’s military threat against Taiwan, so that the status quo can be maintained. Everyone recognizes that a China-US war over Taiwan could start at any time.

It’s thus worthy of note that US-China relations have deteriorated significantly in just the last seven weeks, when Chinese President Hu Jintao snubbed Barack Obama at December’s climate change conference in Copenhagen. Since then, the US State Department has sided with Google in their dispute with China, and has openly criticized China’s lack of internet freedom. Now the Taiwan arms sale and China’s announcement of retaliation have made relations even more tense.

You can see one of the reasons why I’ve been so critical of Barack Obama before and after the election. He gives these great oratorial speeches where he makes absolutely ridiculous promises and commitments that can’t be fulfilled. (See “After a week of foreign policy disasters, President Obama’s entire program is adrift.”) Now some of those promises are really biting him in the ass, and we’re all paying for it.

American analysts are ‘befuddled’ by China’s change

A Washington Post analysis of the deterioration says that China’s actions have “befuddled Western officials and analysts,” who wonder whether it’s a change in policies or just a change in tone. The article offers the following explanation:

“Analysts say a combination of hubris and insecurity appears to be driving China’s mood. On one hand, Beijing believes that the relative ease with which it skated over the global financial crisis underscores the superiority of its system and that China is not only rising but has arrived on the global stage — much faster than anyone could have predicted. On the other, recent uprisings in the western regions of Tibet and Xinjiang have fed Chinese leaders’ insecurity about their one-party state. As such, any perceived threat to their power is met with a backlash.”

From the point of view of Generational Dynamics, this explanation is bizarre in its naïveté. China is going through a major generational change, just like the US. The top level leaders are from the generation of survivors of the the last crisis war, Mao’s Communist Revolution, and they’re like our Silent Generation, looking for compromise and conciliation. But more and more, younger generations are making all the day to day decisions, just as Generation-X is doing in the US. And those younger generations are going to be more confrontational and less conciliatory.

That’s why we’re seeing a change in tone from BOTH the US and China. BOTH sides are being more confrontational. BOTH sides are moving closer and closer to “crossing the line.”

This is not a “yo-yo” kind of trend, where things get bad for a while and then get better for a few years. There are minor ups and downs, of course, but the major trend is toward greater and greater confrontation, shock and anger. Generational Dynamics predicts that China and the US has headed for a “Clash of Civilizations” world war, and that could happen at any time.

Japan’s plunging consumer prices risk a deflationary spiral

Japan’s consumer prices in December fell at the fastest rate since records began in 1971, leaving many analysts worrying that Japan is in the midst of a new deflationary spiral, according to the Financial Times. Furthermore, preliminary data from January shows that declines are accelerating.

I’m actually surprised by this. In 2007 I wrote “Japan’s real estate crash may finally end after 16 years.” Recall that Japan had an enormous real estate bubble in the 1980s, so large that at the time it ended, the nominal value of Tokyo’s real estate was greater than the nominal value of all the property in the United States.

By 2007, 16 years had passed since the bubble burst and Tokyo’s stock exchange had crashed. I felt that Japan’s deflationary spiral must finally be over, and prices would start increasing again. But this week’s news caps a period of increasing deflationary pressure in Japan.

My explanation for this is the same as I wrote last April in commenting on theories of Richard C. Koo, Chief Economist at Nomura Research Institute. (See “Fiscal stimulus programs in 1930s and today.”)

Even though Japan went through a major financial crisis, including stock market and real estate crashes, they were able to avoid a great deal of suffering simply by developing an export economy that took advantage of the economic bubbles in China and the United States.

Apparently their financial crisis hasn’t yet been painful enough, and there is a lot more to come.

Additional Links

Critical infrastructures worldwide, especially oil and gas, electrical, and telecommunications companies, are under constant cyber attack, according to Dark Reading, and the threat is growing. The cost of downtime incurred from an attack is $6-8 million per day.

France is very close to permanently banning women from wearing a veil or burqa, according to France24. This has spurred a national debate about discrimination against women and discrimination against Muslims.

Learning a foreign language is easier and cheaper than ever, thanks to courses offered over the internet, according to NY Times. Firms offering courses include Rosetta Stone TellMeMore, Livemocha, Babbel and the BBC.

(Comments: For reader comments, questions and discussion, see the 31-Jan-10 News – US-China relations deteriorating thread of the Generational Dynamics forum. Comments may be posted anonymously.) (31-Jan-2010) Permanent Link

30-Jan-10 News – Tony Blair faces questions about Iraq

US will sell $6 billion in arms to Taiwan, infuriating China.

Tony Blair faces the Iraq War inquiry

I watched a couple of hours of the questioning of Tony Blair on the BBC on Friday morning, and I noted that the Iraq War Inquiry commissioners asked Blair a lot of tough questions, but they never laid a glove him.

It was discouraging to me that this inquiry even has to be held, and even more discouraging because of the loons outside the meeting hall calling Blair a liar and war criminal. Blair was cleared of all those charges in 2004 in the the Hutton Inquiry, but the loons still persist.

The most important thing that I heard Blair say didn’t even appear in the BBC story, but does appear in the Reuters coverage:

“Sometimes what is important is not to ask the March 2003 question but to ask the 2010 question. Supposing we had backed off this military action, supposing we had left Saddam and his sons who were going to follow him in charge of Iraq, people who had used chemical weapons, caused the death of over a million people? What we now know is that he retained absolutely the intent and the intellectual know-how to restart a nuclear and a chemical weapons programme when the inspectors were out and the sanctions changed.”

This paragraph is a devastating response to the loons, but they’re apparently incapable of even the simplest coherent thought.

I’ve made the point in the past that the only reason we know that Saddam had no weapons of mass destruction (WMDs) is because of the invasion. Obviously, therefore, if there had been no invasion, then we still wouldn’t know to this day. This continuing uncertainty would have destabilized the entire region, and might well have triggered an attack on Iraq by either Israel or Iran.

But Blair carries this a lot farther. My assumption was that if there had been no invasion, then the status quo (uncertainty) would have continued. But Blair points out that it was not a choice between invasion and status quo. Without the invasion, it would have been politically impossible to continue the sanctions and inspections. And once the inspections ended, Saddam had every intention of reconstituting his WMD program.

So without the invasion, we would have had Iraq developing WMDs. Saddam had used WMDs during the Iran/Iraq war, and so Iran would have sped up its own program to develop its own WMDs. There might even have been similar nervous reactions in Saudi Arabia, Turkey and Syria.

So, without the invasion, we might have several countries in the region developing nuclear weapons and other WMDs.

This is so obvious, but even the simplest reasoning appears to be out of reach of the loons.

Meanwhile, the Obama administration is getting into a situation in Afghanistan that is possibly even more dangerous than the Iraq situation was. Like Blair, Obama will eventually have to face questioning about every word in every sentence he says about the subject.

China may sanction US companies after arms sales to Taiwan

The government in China is furious over the Obama administration’s announcement, on Friday, of $6 billion dollars in weapons, including Patriot anti-missile systems, helicopters, mine-sweeping ships and communications equipment to Taiwan, according to a report in the Washington Post.

I would guess that the anti-missile systems are to be used to defend against the 1500 or so missiles that China is ready at any time to launch at Taiwan.

China was “strongly indignant” about the arms sales to Taiwan, according to the article, and warned that they would have a “serious negative impact” on U.S.-China cooperation. China may sanction US companies, and the planned visit of Chinese President Hu Jintao to Washington in April may be canceled.

Additional Links

A commentary in Financial Times Deutschland (translation) says that negotiations are going on for an EU bailout of Greece, despite the fact that such a bailout would violate the EU constitution. However, German Chancellor Angela Merkel opposes a bailout because of Greece’s history of lying about deficits.

But the talk of bailout encouraged investors, and pushed down credit default swap prices slightly from their historic highs, according to Bloomberg. (High credit default swap prices indicate an investor belief that Greece is going to default on its bond payments.)

Iran’s hardliners are about to purge Ali Akbar Hashemi Rafsanjani, the remaining high-level moderate among the Islamic Revolution survivors, from his government post, according to an analysis in the Asian Times. From the point of view of Generational Dynamics, however, this will only outrage the opposition further, as Iran is in a generational Awakening era. (See “Theological split in Iran widens as opposition protests continue.”)

(Comments: For reader comments, questions and discussion, see the 30-Jan-10 News – Tony Blair faces questions about Iraq thread of the Generational Dynamics forum. Comments may be posted anonymously.) (30-Jan-2010) Permanent Link

29-Jan-10 News – Greece financial crisis spreading

Ben Bernanke is confirmed

Greece’s financial crisis pushes down stocks on Wall Street

It’s an interesting chain reaction.

Yesterday we mentioned the rumor that Goldman Sacks was putting together a deal where China would buy Greece’s bonds, after Greece’s public sale had been at very high interest rates. (The Greek newspaper Kathimerini (translation) contemptuously calls them “usurious.”)

The rumor has been firmly denied by Goldman, by Greece, and by China.

That caused investors to become anxious over Greece’s and Portugal’s worsening budget deficit crises, with the prices of credit default swaps reaching fresh record highs on Thursday. The euro fell sharply against the dollar, reaching its lowest level since July 14, according to Bloomberg.

Now, let’s recall how many pundits explained the unexpected stock market rally last year. (See, for example, “Nouriel Roubini apparently is predicting a global market crash.”)

Last year’s new stock market bubble was driven by massive stimulus spending by the government. With Treasury interest rates effectively zero, investors borrow money at zero percent interest rates and invest the money in commodities and stocks, or in foreign currencies paying higher interest rates. This is a typical “carry trade” scenario, especially since the stimulus spending caused the dollar to weaken against other currencies.

Once the dollar begins to strengthen again, the above reasoning reverses. Investors who borrowed cheap dollars rush to pay back the loans before the dollars become even more expensive. In order to pay back the dollars, they have to sell the assets they purchased with the cheap dollars, including stocks.

So that’s the chain reaction:

• The Greek (and Portuguese) budget deficit crisis worsens.
• This causes the euro to weaken against the dollar.
• This causes the dollar to strengthen against the euro.
• Investors who borrowed cheap dollars to invest now have to sell their investments, pushing prices down.
• Insofar as those investments are stocks, stock prices go down.

The Greek deficit crisis is increasingly turning into a euro currency crisis. Whether it fizzles or gathers steam will affect a lot more people than the Greeks.

Ben Bernanke is confirmed as Fed Chairman for a second term

The opponents of Ben Bernanke’s nomination claimed that he caused the real estate bubble that caused the financial crisis, or at least that he was oblivious to the danger.

These are idiotic reasons. He couldn’t have caused the real estate bubble, because the world wide real estate bubble began in the mid-1990s. (See “The global housing bubble began in the mid-1990s.” and “The housing bubble began in 1995.”)

It’s true that Bernanke was oblivious to the bubble, and I’ve been bitterly critical of him for that, but all the people criticizing were even more oblivious than he was.

One thing that’s absolutely hilarious about this situation is that the analysts, journalists, politicians and economists who are now criticizing Bernanke were saying really stupid things at the time, like “There can’t be a housing bubble, since everyone has to live somewhere.” You didn’t have to a rocket scientist to know that there was a real estate bubble, since I was writing about it on this web site in 2004. (See “Real estate is in an overpriced bubble all over the world.”)

These people, who are now criticizing Bernanke, are simply hiding their own complicity in the bubble. Those who were able to got as much as they could out of the bubble — money or political power. Having acted without a shred of ethics, they’re now blaming Bernanke.

What’s past is past, and now we’re approaching a major new financial crisis. If Bernanke hadn’t been confirmed, then the choice might have gone to some political hack, like Larry Summers or Paul Krugman. Ben Bernanke is the best person I can see on the horizon to help us get through the coming catastrophe.

Additional Links

The Financial Times says that “An explosion in trading propelled by computers is raising fears that trading platforms could be knocked out by rogue trades triggered by systems running out of control.” I wrote about this last year. (See “The Bubble Algorithm – How computers and herd behavior are inflating the stock market bubble.”)

The climate scientists who were exposed by the hacked “climategate” e-mail messages last year were apparently breaking the law, according to The Telegraph. They were illegally hiding or destroying data that they were required to reveal under Freedom of Information laws.

When there’s nothing else to blame, then blame video games. Well, Dungeons and Dragons isn’t a video game, but prisoners in Wisconsin prison are being forbidden from playing it because it “could lead to gang behavior and fantasies about escape,” according to the NY Times. Hmmmm. I wonder if when bankers are in jail they’re forbidden from playing “Monopoly”?

(Comments: For reader comments, questions and discussion, see the 29-Jan-10 News – Greece financial crisis spreading thread of the Generational Dynamics forum. Comments may be posted anonymously.) (29-Jan-2010) Permanent Link

28-Jan-10 News – US military in Yemen, investors bet against Greece

Portugal, Italy and Spain aren’t far behind.

US military ‘deeply involved’ in Yemen, as leaders meet in London

U.S. military teams and intelligence agencies are deeply involved in secret joint operations with Yemeni troops, according to reporting by The Washington Post. The American advisors do not take part in raids, but provide intelligence and weapons, as well as missile strikes from drones. Dozens of people have been killed in the past six weeks, including six of the 15 top regional al-Qaeda leaders, according to the US.

Recent US military operations in Yemen (Source: Washington Post)

The American military intervention is supported by the Yemen government but is kept secret because it’s deeply disliked by the Yemeni people.

All of this is occurring in the context of a conference being held in London, attended by foreign ministers from the US, Britain, Saudi Arabia and 20 other countries. The purpose of the conference: What do we do about Yemen?

According to The Guardian, there is widespread alarm that al-Qaeda is finding safe havens in the country’s “ungoverned spaces” – tribal areas beyond the reach of the Yemen’s government. However, the ministers in London are pledging not to interfere in Yemen’s internal affairs.

LOL.

Investors increasingly expect EU country defaults, led by Greece

Credit default swaps on Greece’s debt jumped to record levels, according to Bloomberg. Rising credit default swaps on any form of debt means that investors believe that that form of debt is more likely to default.

As we mentioned yesterday, Greece’s bond sale earlier this week required Greece to pay exceptionally high interest rates. Investors presumably were reacting to the possibility that the country is in a spiral of increasing debt from which it can’t escape.

Rumors spread on Wednesday that China was going to help Greece out by buying $35 billion in Greek bonds, in a deal being put together by Goldman Sachs. However, Reuters reports that both Goldman and Greece denied the rumors.

(Source: Daily Mail)

The Bloomberg story says that Greece isn’t the only European country in trouble, as credit default swaps have also risen substantially on debt from Spain, Portugal and Italy.

Additional Links

Ohio is spending $1 million in stimulus money to put up signs that brag that Ohio is spending stimulus money, according to CNN. The signs cost as much as $3,000 apiece.

Employer told not to post advert for ‘reliable’ workers because it discriminates against ‘unreliable’ applicants, according to The Daily Mail.

(Comments: For reader comments, questions and discussion, see the 28-Jan-10 News – US military in Yemen, investors bet against Greece thread of the Generational Dynamics forum. Comments may be posted anonymously.) (28-Jan-2010) Permanent Link

27-Jan-10 News – Sri Lanka elections, and Turkey returns to its roots

Higher tensions between North and South Korea.

North and South Korea exchange artillery fire in the Yellow Sea

South Korea’s Yonhap news service reports that North and South Korea have exchanged artillery fire across a disputed sea border in the Yellow Sea. “No casualties or injuries were reported as both sides fired toward the air and no fishing boats were then on duty.”

This will probably fizzle out, as similar flare-ups have done in the past. But both countries are armed to the teeth, and are fully prepared for full-scale war with one another. The possibilities for panic, misunderstanding and miscalculation are large.

Sri Lanka holds peaceful elections after civil war ends

The Colombo Page newspaper, published in Sri Lanka’s capital city, reports that Tuesday’s historic presidential elections were peaceful, with little violence.

Many people had feared that the elections would trigger a renewed round of the civil war that lasted thirty years, between the majority Sinhalese ethnic group vs the minority Tamils. Voting was heavy in the southern Sinhalese regions, lighter in the northern Tamil region.

However, the The Independent is reporting that the vote will be close for the two candidates (both Sinhalese, both war heroes), and it may be the Tamil vote that decides the winner.

Following the Sri Lanka civil war has been exciting for me in the development of Generational Dynamics, since it’s the first generational crisis war that I’ve been able to follow to its climax.

In 2006, the final peace agreement unraveled, and the 30 year old war transitioned into a full-fledged crisis war. (See “While world watches Lebanon, Sri Lanka goes to war.”) It began its final phases early in 2008. (See “Sri Lanka government declares all out war against Tamil Tiger rebels.”)

At that time, the war became increasingly genocidal on both sides. The Sinhalese government forces were increasingly willing to kill civilians, and the Tamil rebel forces were increasingly willing to use civilians as human shields. This is typical as a generational crisis war approaches a climax.

By early 2009 it was clear that the end was near, and that the Tamil rebels were close to defeat. Analysts at Stratfor, BBC, and other organizations predicted that since the war had gone on for 30 years, it would continue on even after a rebel defeat. I said, based on generational theory, that this would be a crisis war climax, and that the war would end. Generational Dynamics turned out to be 100% right, and Stratfor, BBC and the others turned out to be dead wrong.

There is no other web site like this one in the world.

I renew my challenge to anyone to find an analyst, journalist, politician or web site, anywhere in the world, with anything even remotely close to the predictive success of this web site. Other analysts’ predictions are no better than chance; after seven years, Generational Dynamics predictions have proved to be almost 100% correct. The validity of generational theory has been proven by the consistently correct results posted on this web site.

Turkey moves back towards its Sunni Muslim roots

The fall of Constantinople in 1453 ended the (Orthodox Christian) Byzantine Empire, and launched the (Sunni Muslim) Ottoman Empire. The Turks changed Constantinople’s name to Istanbul, and made it the Caliphate for Islam (playing the same role as the Vatican in Rome for Catholicism).

When the Ottoman Empire collapsed after World War I, Turkey became a secular nation, and worldwide Islam lost its Caliphate. The 1940s was an Awakening era for the Arab/Muslim world, and it resulted in pan-Arab and Sunni Muslim nationalism. According to an intelligence report on Islam, published by the US military in 1946:

“The Moslems remember the power with which once they not only ruled their own domains but also overpowered half of Europe, yet they are painfully aware of their present economic, cultural, and military impoverishment. Thus a terrific internal pressure is building up in their collective thinking. The Moslems intend, by any means possible, to regain political independence and to reap the profits of their own resources, which in recent times and up to the present have been surrendered to the exploitation of foreigners who could provide capital investments. The area, in short, has an inferiority complex, and its activities are thus as unpredictable as those of any individual so motivated.”

Now, a new analysis in the Asian Times, Turkey in recent years has been moving back to its Muslim roots, along with an “irreversible shift in Turkish foreign policy towards Israel, the United States and the Middle East as a whole.”

The main signpost of this shift was the election of Prime Minister Recep Tayyip Erdogan from the Islamist AKP party. The article concludes:

“Turkey will find a very receptive audience among Arabs and Muslims all over the world who are desperate for a powerful and sensible leadership to defend and champion their causes. Needless to say, for the besieged Palestinians in Gaza, Erdogan is becoming a household name, a folk hero, a new Gamal Abdel Nasser, president of Egypt from 1954 to 1970. The same sentiment is shared throughout the region.”

Additional Links

The Washington Post says that Hugo Chavez’s revolution is crumbling, referring to the virulently anti-American president of Venezuela.

Greece has avoided (i.e., postponed) an immediate financial crisis by selling $11.3 billion of 5-year government bonds at a very high 6.2% interest rate, according to Bloomberg. It will have to sell tens of billions of dollars in additional bonds this year.

“Lower your voice when taking calls in public.” That’s the first rule of cell phone etiquette, according to Computerworld.

(Comments: For reader comments, questions and discussion, see the 27-Jan-10 News – Sri Lanka elections, Turkey returns to its roots thread of the Generational Dynamics forum. Comments may be posted anonymously.) (27-Jan-2010) Permanent Link

26-Jan-10 News – Elevated terror alerts around the world

China’s oil imports reach “alarming levels”

Terror alerts rise in countries around the world

In the last few days I’ve mentioned that higher terror alerts have been announced in the UK and India, but Debka points out that many more governments, some without fanfare, are implementing elevated terror security levels.

These include the following:

• India placed its airlines and airports and those of all of South East Asia -Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka – on alert for a possible airplane hijacking by al Qaeda or Lashkar-e-Taibem.
• The UK elevated its terror threat level from “substantial” to “severe” – one below top and suspended direct British airline flights to and from Yemen.
• Yemen itself stopped issuing entry visas at the airport in the capital city, Sanaa.
• Although the Obama administration has not formally raised the current terror alert level, vigilance at all American airports and border posts has been radically heightened.

In addition, The Telegraph reports that terror experts are warning that Al-Qaeda has trained female suicide bombers to attack West. The women, who may have a “non Arab” appearance and be travelling on Western passports, have been prepared for their missions by Al-Qaeda in the Arabian Peninsula (AQAP).

China deepens ties with Saudi Arabia over oil dependency

China’s crude oil imports (Source: Xinhua)

China’s oil imports reached “alarming levels” in 2009, and are poised to surge even higher in 2010, according to Xinhua.

China imported 52% of its oil in 2009, and “importing more than 50 percent is a globally recognized level for an energy security alert,” according to the article.

Most of China’s imported oil comes from Saudi Arabia, as you can see from the adjoining graphic.

So it’s not surprising that China and Saudi Arabia are deepening ties with one another. Xinhua reports that the two countries plan to cooperate on energy and infrastructure projects, and to foster cultural exchanges.

From the point of view of Generation Dynamics, this is consistent with the expected trend that the Clash of Civilizations world war will be fought by China and Sunni countries, including Saudi Arabia, versus the West.

By contrast, as we’ve mentioned a couple of times recently, Iran and China are not getting along well at all. Two years ago, we reported that China had ‘betrayed’ Iran. And recently, we’ve described a cyberwar between Iran and China. (Paragraph modified – 26-Jan-10)

At the same time, hostilities between Saudi Arabia have been growing. The two countries are supporting opposite sides in Yemen’s war against Houthi rebels, and it’s thought that Saudi Arabia may have provided support for last October’s Jundullah terrorist attack in southeast Iran.

Intelligence indicates Iran close to nuclear weapons

Thanks to intelligence gained from high-ranking defectors from Iran, officials in Washington and Europe are concerned about Iran’s plans to develop nuclear weapons, according to a report by Der Spiegel.

Officials who have read the report conclude that the government in Tehran is serious about developing a bomb, and that its plans are well advanced.

From the point of view of Generational Dynamics, the fear is that at some point the Israelis will panic and attempt to attack Iran’s nuclear research facilities. Whether this is even possible is in doubt, since Iran has hidden them deep inside mountains that may not even be reachable by bombing raids.

As we’ve been saying for years, Iran is a schizophrenic nation with a government that’s anti-American and anti-West, but a young population that’s pro-American and pro-West. Iran is in a generational Awakening era, and the continuing student protests can only end in a political victory for the young people. Thus, it’s expected that, when Iran is forced to pick sides in the Clash of Civilizations world war, they’ll side with the West, including America, Europe and Israel.

Additional Links

Teens are choosing to wait to get their driver’s licenses, according to the Washington Post. More differences between the young Millennial generation and their parents.

Facebook is increasingly becoming a security problem for computer users, providing a path for careless users to have their personal information stolen or a computer virus installed. The NY Times has “The 3 Facebook Settings Every User Should Check Now.”

Tensions are increasing again between North and South Korea, according to a report by the Korea Times. The South threatened to strike the North “right away” if the North shows a clear sign of attacking with nuclear weapons. A North Korea military official called this remark “an open declaration of war.”

(Comments: For reader comments, questions and discussion, see the 26-Jan-10 News – Elevated terror alerts around the world thread of the Generational Dynamics forum. Comments may be posted anonymously.) (26-Jan-2010) Permanent Link

Political left appear willing to drive off a cliff to prove they’re right.

The same may be true of some investors.

My favorite metaphor these days is to be “willing to drive off a cliff to prove you’re right.”

The Republicans, who polls show are as unpopular as the Democrats, have no power, no strategy and no leader. This is turning out to be to their benefit, since it means that they keep their mouths shut most of the time.

But the Democrats appear to be so consumed with hatred that they’re determined to commit suicide. Probably the poster boy for this suicidal hatred is MSNBC’s ardent Obama supporter, Keith Olbermann. On the day before Tuesday’s election of Republican Scott Brown as Massachusetts Senator, Olbermann said:

“You may not have heard Scott Brown support a constitutional amendment banning same-sex marriage, or describing two women having a child as being, quote, ‘just not normal.’ … In Scott Brown we have an irresponsible, homophobic, racist, reactionary, ex-nude model, teabagging supporter of violence against woman and against politicians with whom he disagrees. … The Commonwealth of Massachusetts is close to sending this bad joke to the Senate of the United States.”

What does one make of such a hate-filled, self-destructive statement? Is Olbermann too stupid to know how much damage he’s doing to the causes he claims to support? Or is Olbermann, born in 1959 on the cusp of Gen-Xerdom, just following basal nihilistic Gen-Xer instincts and destroying everything in his path just to improve his ratings?

Not that he’s improving his ratings. Ratings of MSNBC and other mainstream news media are plunging like necklines in summer against the Fox News Channel (FNC).

In fact, Fox News is cleaning up against everyone, according to TV By the Numbers. On Election night, for example,

• FNC averaged its highest primetime average viewerships since election Day 2008.
• Last Tuesday, FNC beat all three cable news channels COMBINED, in ALL categories. That includes CNN, MSNBC and Headline News Network; it includes both demographics age 25-42, and all viewers; and it includes both time periods prime time alone, and the entire day.
• Particular personalities, including Bill O’Reilly, Sean Hannity, Greta Van Sustern, Bret Baier, and Glenn Beck, did exceptionally well, even beating NBC and ABC evening lineups at some points.

Now, FNC does indeed lean to the right, but not as far to the right (in my opinion) as CNN and MSNBC lean to the left.

And this is nothing new. I started watching CNN in 1980, when it first came on the air. Its coverage of the Gulf War in 1990 was spectacular. By the mid 1990s, it had the best international news coverage in the world, except perhaps for the BBC.

The turning point came in 1998, with the Tailwind Scandal, where CNN erroneously accused the U.S. military of using nerve gas in a mission to kill American defectors in Laos during the Vietnam War.

By the 2006 elections, CNN was turning the entire network over to the Democratic party. By spring of 2009, it had really hit bottom, as I wrote in “Vile ‘teabagging’ jokes signal the deterioration of CNN and NBC news.” The practice of using unbelievably offensive “teabag” references to “tea party” supporters — and this practice continues to this day — continues to show how deep in the sewer mainstream media has gone, and how willing these so-called journalists are to drive off a cliff to prove that they’re right.

Moving toward the center

President Obama the pragmatist would like to move toward the political center, but it’s obvious that the loony left is not going to allow him to do so.

A good example is Paul Krugman, who used to be an economist decades ago, but now only plays one on tv. Here’s what he wrote earlier this week:

“He Wasn’t The One We’ve Been Waiting ForHealth care reform — which is crucial for millions of Americans — hangs in the balance. Progressives are desperately in need of leadership; more specifically, House Democrats need to be told to pass the Senate bill, which isn’t what they wanted but is vastly better than nothing. And what we get from the great progressive hope, the man who was offering hope and change, is this:

“I would advise that we try to move quickly to coalesce around those elements of the package that people agree on. We know that we need insurance reform, that the health insurance companies are taking advantage of people. We know that we have to have some form of cost containment because if we don’t, then our budgets are going to blow up and we know that small businesses are going to need help so that they can provide health insurance to their families. Those are the core, some of the core elements of, to this bill. Now I think there’s some things in there that people don’t like and legitimately don’t like.”

In short, “Run away, run away”!

Maybe House Democrats can pull this out, even with a gaping hole in White House leadership. Barney Frank seems to have thought better of his initial defeatism. But I have to say, I’m pretty close to giving up on Mr. Obama, who seems determined to confirm every doubt I and others ever had about whether he was ready to fight for what his supporters believed in.”

This is quite a remarkable statement. Obama tries to move toward the center, and Krugman calls it “running away.” And then Krugman says that he’s going to give up on Obama. With friends like these, Obama doesn’t need enemies. In particular, the Republicans can just sit back and enjoy the show.

Krugman won the Nobel Prize last year because he had the major qualification that the Nobel committee was looking for: He hated George Bush. If Krugman turns his back on Obama, do you think he’ll win another Nobel prize?

Barack Obama vs Lyndon Johnson

The loony ideology of people like Krugman and Olbermann isn’t President Obama’s only problem. He also has to deal with journalists and pundits who adore him but are incredibly naïve. That was pretty clear listening to the Sunday news talk shows.

A good example today was Fareed Zakaria, appearing on his Sunday news show GPS on CNN. Zakaria is something of a contradiction these days. He’s way over on the left politically, but he’s not imbued with the sheer hatred of people like Olbermann and Krugman.

Zakaria is also a contradiction because he’s well-read, well-studied, he knows a lot about what’s going on in the world, and yet he seems totally unable to grasp what it all means. I first wrote about Zakaria in 2006 in “Learning-disabled journalists and politicians continue to predict Iraq civil war,” quoting him as saying, “If you look at the last 3-4 months, it’s absolutely clear that a civil war dynamic has set in. This is happening. … The trend is moving in the wrong direction on every issue that relates to a building civil war.”

Now of course Zakaria was 100% wrong about this. (See, for example, “Brookings Institution does a full reversal on Iraq war.”) And Zakaria, who sports a broad teethy smile, turns out to be wrong about most things. But he still produces a good show on CNN on Sunday that’s worth watching.

Today’s show (transcript here) is a good example because it shows how a complete lack of understanding of generational theory leads you to dramatically wrong conclusions (as was the case with his Iraqi civil war theory).

Fareed and his guests looked to the experiences of past Democratic presidents to help them conclude what President Obama should do next. Here’s how he introduced his show:

“So, let’s start with some historical perspective. Obama’s approval ratings one year into his tenure are roughly the same as Ronald Reagan, Bill Clinton and Jimmy Carter’s were. The two Bushes had higher ratings — 41 because of the collapse of the Soviet Union, and 44 because of 9/11 and the rallying effect that had on the presidency.So, Obama’s situation is not dramatically worse than many of his predecessors, which means it can be corrected.

But what should he do? I would put it very simply. Obama needs to start acting like a president, and particularly the president he campaigned to become.

For the last six months, Barack Obama has seemed to be not a president, but a prime minister. He has not outlined a broad vision for the country and put forward grand plans to solve the nation’s problems.”

I cannot imagine a more dramatic misreading of what’s going on. he says that Obama “has not outlined a broad vision for the country and put forward grand plans to solve the nation’s problems.”

Huh?

Obama was nothing BUT broad visions. He was going to heal the world with his mere presence — cure global warming, provide universal health care, close Guantanamo, leave Iraq in peace, bring a two-state solution to Palestinians and Israelis, beat the Taliban in Afghanistan, restore the stock market bubble, and dismantle President Bush’s war against terror. Nothing was beyond his reach. Unfortunately it now turns out that he was “all hat, but no cattle,” (as the midwesterners like to say), but no one can credibly claim he had no broad visions. He was just in over his head.

But the most interesting part of Zakaria’s theory are his comparisons to past Presidents. If he knew even the simplest facts about generational theory, he wouldn’t compare President Obama, governing during a generational Crisis era, with Presidents who governed in generational Awakening and Unraveling eras. There simply is no basis for comparison.

In particular, let’s move forward in the tv show to some statements by one of his guests, Robert Caro, a biographer of President Lyndon Baines Johnson (LBJ).

Caro’s comparison of LBJ to Obama is so out of touch with reality, it’s bizarre. Caro wants Obama to push health care reform through Congress with the same kind of “legislative genius” that LBJ used to get the Civil Rights act through Congress. In particular, he describes how he got cooperation from some Southern Democrats, who normally sided with the Republicans. He describes how LBJ did it:

“You say, what is legislative genius? He wants to get the first civil rights bill through. He needs a — there are Southerners who will let it go to the next level, if they can get a guarantee that they can filibuster and hold it up on a future level.Johnson needs 10 or 12 votes that he can deliver to the South. He says, what can I find? He finds the Western Democrats. What do they want? He says, I have to find something that 12 senators want enough to go along with the South on this.

And he finds Hells Canyon Dam on the Snake River, which divides Idaho or Oregon. He says, they’ve been fighting for this for 20 years for federal power. The South, if I can get Richard Russell, the head of the Southern Democrats, to agree to give them Hells Canyon, the South will let the bill move forward to the next level.

And he gets 12 votes.

If we had seen a stroke of genius like — what else is legislative genius? Johnson is on the floor during this…

There’s a moment where he’s going to lose. There’s about to be a vote called. He’s going to lose. He’s standing next to the senator from New Mexico, Clinton Anderson, and he sees that Anderson, a liberal, has been doodling on a paragraph, and changing it around.

And he says, “That’ll work.” He says, “Introduce it, introduce it now.”

And Anderson says, “I can’t introduce it. I’m too liberal. They won’t trust me.”

He says, “Get a good Republican.”

He looks around and he says, “Get Aiken.” George Aiken of Vermont … who was working on it. He says — Aiken introduces it, and the bill passes.

We don’t see legislative genius like that anymore, I’m sorry.

It’s an interesting story, about “horse trading” to get legislation passed, and Caro wants Obama to do the same kind of thing that LBJ did.

Why is this historian so dense? Why doesn’t it occur to him that this comparison makes no sense, because the country was so different in 1965?

In 1965, the country was still on a “high.” We had beaten the Great Depression, and we knew we could do it again if we had to. We had beaten the Nazis, and we knew we could do it again if we had to. The country was very confident about itself.

The leaders in Congress at that time were people whose fathers had fought in the Civil War. Abraham Lincoln and the Republicans had fought the South, and had freed the slaves. The Democrats had opposed fighting the war, and were feeling “liberal guilt” for having done so. The Southern Democrats were a special case. They were philosophically close to the Republicans, but couldn’t be in the political party that had beaten the South.

The country was well into a general Awakening era. It had been launched two years earlier, in the great civil rights march on Washington in 1963, led by Martin Luther King. Then, in 1964, the beloved President John Kennedy had been assassinated.

This was also a time America transitioned from a “Protestant nation,” with prejudice against Catholics and Jews, into a country of “religious equality.” (See my 2006 article, “President George Bush talks about a ‘Third Awakening,’ but he has his history wrong.”)

So this is the world that LBJ operated in.

Everything’s upside down today. There’s enormous anxiety over the economy and over terrorism. There’s no “guilt” over health care. There’s no sense of unity from having beaten a common enemy.

LBJ’s “legislative genius” was more a product of generational era than of anything else. His “horse trading” worked because the climate was right.

Obama has been trying “horse trading” as well, to get the health care bill passed. LBJ’s “Hells Canyon Dam” may have been a stroke of genius, but the numerous corrupt deals (known as the “Louisiana purchase” and the “Cornhusker’s kickback”) are only provoking anger today.

Caro, Zakaria, Krugman and the others are all living in the past. They’re dreaming of the 60s, 70s, or 80s, when the GI and Silent Generations were still in charge, and compromise was still possible, because there was a sense of common purpose. There’s no such sense of common purpose today, so LBJ’s “horse trading” cannot possibly work.

Waiting for the regeneracy

What we’re seeing here is generational theory and Generational Dynamics in action. This kind of political bickering is standard fare at the beginning of a generational Crisis era. For example, you can can google “FDR scandals,” and you’ll see that the political bickering for Franklin Roosevelt was equally bad. But once the Pearl Harbor attack occurred in 1941, the nation began to unify behind the President.

An event like the Pearl Harbor attack is called a “regeneracy event” in generational theory. It’s an event that regenerates civic unity for the first time since the end of the preceding crisis war, World War II, in this case.

(For information about the term “regeneracy” and about generational eras, see “Basics of Generational Dynamics.”)

Today, the country is almost just waiting for a “regeneracy event.” It might be a terrorist attack on American soil, or it might be an overseas military disaster. But whatever it is, it will end the bickering, and regenerate civic unity again.

Universal health care may be dead for now, but it’s not dead forever. This is the wrong time for this kind of legislation. In September I called Obama’s bill a proposal of economic insanity, because it’s basically a rehash of President Richard Nixon’s wage and price controls, applied to health care. That was a disaster, and Obama’s proposal is sure to be as well.

If you want to reduce health care costs, then the only way to do it is to increase the supply of health care services — more doctors, nurses, hospitals and equipment. Obama’s health care proposal does the opposite. But once the Clash of Civilizations world war is over, in 5-10 years, then universal health care will revived, and it will pass. And President Obama may still get some of the credit.

Investors driving off a cliff

What I’ve been describing in politics and media also appears to be happening in the investor community. Here’s how “xakzen” described it in the Generational Dynamics forum:

“My anecdotal experience is that our society is becoming stratified into those who know something is wrong and have changed their behavior and those who continue to believe that everything is okay and the worst of the crisis has past. This became apparent to me when I asked my Sunday school kids what they got for Christmas. The answers ranged from 1 kid getting an ipod, DSi, pellet gun & $100 iTunes card to another kid who along with his 3 siblings got a kitten. I know the families of both and the difference is the latter kid’s dad was recently laid off and is now delivering pizza and of course the former kid’s dad has a government job.”

I’ve noticed this stratification as well. The stratification seems to be similar to the political split between Republicans and Democrats. Each side is absolutely convinced the other side is wrong, and is willing to drive off a cliff to prove it. I can’t prove it, but I believe that the stratification among investors is related to the divisions among politicians.

If you listen to CNBC or read the Wall Street Journal, you could easily believe that all mainstream financial pundits are agreed that the only direction is up with the stock market, or that the worst that will happen is a minor new recession.

That actually isn’t true. There are quite a few mainstream financial experts who believe that the situation is far more serious.

A web site reader pointed me to an article entitled “12 ‘Dr. Dooms’ warn Wall Street’s optimism misleads, will trigger new crash.”

For example, according to the article, Money manager Jeremy Grantham warns that our irrational nightmare will repeat. A year ago we came dangerously close to the “Great Depression 2.” Unfortunately, we’ve “learned nothing … condemning ourselves to another serious financial crisis in the not too-distant future.” We had our bear-market rally. Next, historical cycles plus our irrational behavior guarantees another, bigger global meltdown. We “learned nothing.” There are 11 more like that in the article.

Why don’t we hear from these people more often on CNBC and in the Wall Street Journal?

We actually have an analogy for that if we look at climate change scandal that was triggered by the release of thousands of hacked e-mail messages from climate change scientists. The hacked e-mail messages showed a pattern of deception and fraud by these “scientists.” The scientists urge one another to smooth over data and hide unfavorable data; to enforce a unified view; and to blackball scientists with opposing views.

The same kind of massive corruption happened in Washington in the negotiations for the health care bill that passed the Senate. And when last Tuesday’s Massachusetts election blew things apart, the mainstream media has been filled with oozing contempt for Scott Brown. The most extreme example, of course, is MSNBC’s Keith Olbermann, calling him an “irresponsible, homophobic, racist, reactionary, ex-nude model, teabagging supporter of violence against woman.”

Thus, Tuesday’s election has performed the same role for the health care bill that the hacked e-mail messages did for climate change. In both cases, the mainstream politicians and the mainstream media had overwhelmingly adopted the “politically correct” position — supporting climate change legislation and supporting the health care bill. And in both cases, the mainstream politicians and media simply showed contempt when the corruption was exposed.

But what about investors? Is it really even possible that Democratic supporters are more invested in the current stock market than Republicans?

There are certainly some obvious examples of that. Warren Buffett seems almost erotically in love with Barack Obama, and he’s been saying loudly and often that the worst is over.

But that’s just one example. Is there a trend? I actually suspect that there is, but I have no way of proving it or disproving it.

One thing’s for sure. Just as the hacked e-mail messages caused the climate change support to collapse, just as the election of Scott Brown signaled the end of health care legislation, the coming financial crisis will be a devastating blow to investors who believe that it’s ok to invest in a stock market with a P/E ratio over 80, just because Barack Obama is President.

(Comments: For reader comments, questions and discussion, see the President Barack Obama thread and the Financial Topics thread of the Generational Dynamics forum. Read the entire latter thread for discussions on how to protect your money.) (25-Jan-2010) Permanent Link

24-Jan-10 News – Arms sales to India and Pakistan, UK threat level

Theologians ask: Why did God punish the Haitians with an earthquake?

Gates explains strategy of arms sales to India and Pakistan

American Secretary of Defense Robert Gates is confronting a nominal contradiction in American foreign policy, according to an analysis in the Los Angeles Times: How could the US be selling military weapons to both Pakistan and India, especially when the US is concerned about a possible war between the two countries?

According to the article, the strategy is as follows:

• They’re going to buy weapons from somewhere, so it might as well be from America.
• Military cooperation will build trust in the American administration.
• The Pentagon is careful not to alter the military balance between the two countries. Thus, a Pentagon official says: “Another squadron of F-16s means they [Pakistan] will lose the next war with India a little slower. They are not going to defeat India because we gave them a squadron of F-16s. The military overmatch India enjoys is just too great.”

However, Generational Dynamics predicts that India and Pakistan are headed for a new war re-fighting the massive war that began after Partition, the 1947 partitioning of the Indian subcontinent into India and Pakistan.

Why did UK raise its terror threat level to ‘Severe’?

We mentioned this briefly yesterday, but few details were known beyond the fact that it means that chance of a terrorist attack is now “highly likely,” instead of merely being “substantial.”

It turns out to be a consequence of the attempted jetliner bombing over Detroit on Christmas day, according to an analysis by The Telegraph.

Recall that the attempt was perpetrated by an “underwear bomber,” someone who hid bomb incredients in his underwear, but failed to explode them at his intended time.

The attempted Detroit attack demonstrated a “new methodology,” according to the article, leading to fears that al-Qaeda is planning “a wave of attacks.”

Why did God punish the Haitians with an earthquake?

Francis X. Clooney, A Jesuit scholar, writing for The National Catholic Weekly analyzes Pat Robertson’s recent remarks that God punished the Haitians because they made a deal with the Devil. He dislikes Robertson’s statements, but he wonders what the correct answer is, if Robertson is wrong.

Michael Johnson, writing in The NY Times, quotes Voltaire as asking the same question about a devastating earthquake in Lisbon in 1755:

    Would you say, seeing this heap of victims,
    That God is avenged, that their death is payment for their crimes?
    What crimes, what bad things have been committed by these children,
    Lying on the breasts of their mothers, flattened and bloody?
    Lisbon is a city no longer. Did it have more vices
    Than London, than Paris, given to doubtful delights? 

I’m not a religious person, but I like religion, and it plays an important part in Generational Dynamics theory. (See “Book review review: Christopher Hitchens: ‘God Is Not Great: How Religion Poisons Everything’.”)

The question that I ask of religious theorists is this: For millennia, the population rate has grown faster than man’s ability to grow food, and this has been the root cause of thousands of genocidal wars. How, according to religious theory, could God allow this to happen?

I’ve asked may religious people this question, and have never gotten a credible answer. I should also mention that neither Clooney nor Johnson provide answers to why God might have punished Haitians with such devastation.

Additional Links

At the Global Economic Trend Analysis blog, Michael “Mish” Shedlock explains in detail why California is headed for bankruptcy. The short answer: California has some of the highest tax rates, but is being strangled by public service unions.

Gu Yan’s China News blog quotes Chinese news sources as saying that Pakistan is buying 36 Chinese J-16 fighters, in addition to America’s F-16 fighters described above.

(Comments: For reader comments, questions and discussion, see the 24-Jan-10 News – Arms sales to India and Pakistan, UK threat level thread of the Generational Dynamics forum. Comments may be posted anonymously.) (24-Jan-2010) Permanent Link

23-Jan-10 News – US vs China cyberwar, and Bernanke in trouble

News summary is New! Improved! with ‘Additional Links.’

Google vs China is turning into US vs China

Detailed technical information about the announcement by Google last week that China had hacked its servers is coming out slowly but surely, but very slowly. The Dark Reading newsletter reports that the attack took advantage of a flaw in Internet Explorer that permits an attacker to install malware that takes control of the user’s computer if the user visits an infected web site. Reverse engineering of the attack malware reveals that it contains code that can be traced back to Chinese programmers, although China’s government claims that it had nothing to do with the attack.

The flaw in Internet Explorer is a serious one. Microsoft issued a “critical” patch to fix the flaw a couple of days ago. You should make sure that your version of the Internet Explorer is updated to include that patch. The Microsoft support site has further information.

However, the Google attack is metamorphosing from a tech story to a geopolitical story. The Obama administration has taken up Google’s case, and demanded that China investigate the attack and provide some answers.

In a speech on Thursday, US Secretary of State Hilary Clinton said:

“In the last year, we’ve seen a spike in threats to the free flow of information. China, Tunisia, and Uzbekistan have stepped up their censorship of the internet. In Vietnam, access to popular social networking sites has suddenly disappeared. …States, terrorists, and those who would act as their proxies must know that the United States will protect our networks. Those who disrupt the free flow of information in our society or any other pose a threat to our economy, our government, and our civil society. Countries or individuals that engage in cyber attacks should face consequences and international condemnation. In an internet-connected world, an attack on one nation’s networks can be an attack on all. And by reinforcing that message, we can create norms of behavior among states and encourage respect for the global networked commons. …

The most recent situation involving Google has attracted a great deal of interest. And we look to the Chinese authorities to conduct a thorough review of the cyber intrusions that led Google to make its announcement. And we also look for that investigation and its results to be transparent.”

Clinton’s remarks were pretty threatening, and the Chinese are apparently infuriated by these remarks.

Here’s the response from China’s Foreign Ministry:

“The US attacks China’s internet policy, indicating that China has been restricting internet freedom. We resolutely oppose such remarks and practices that contravene facts and undermine China-US relations. …Hacking in whatever form and offence of others’ privacy is prohibited by law in China. As a major victim of hacking in the world, China believes that the international community should intensify the cooperaion in jointly combating internet hacking so as to safeguard internet security and protect the privacy of citizens in accordance with law.

We urge the US to respect facts and stop attacking China under the excuse of the so-called freedom of internet. We hope that the US side can work with China to earnestly implement the consensus between leaders of both countries on developing bilateral relationship in the new era by strengthening dialogue, exchanges and cooperation, respecting each other’s core interest and major concerns and properly handling differences and sensitive issues so as to ensure the healthy and stable development of China-US relationship.”

The Foreign Ministry spokesman does make one very good point: Chinese web sites are as much victims of hacking as American web sites. As we described last week, there is a particularly vicious cyberwar between Iran and China.

Beyond that, the Chinese statement is about as weaselly as you can get. Note that:

• It doesn’t deny that the China was behind the attack on Google; and
• It doesn’t offer to investigate the hacking incident.

From the point of view of Generational Dynamics, we’re headed for a Clash of Civilizations world war with China and the US on opposite sides. It’s becoming increasingly clear that a “cyber war” is going to be an important component of this real war.

Ben Bernanke’s reconfirmation as Fed Chairman goes to the wire

The White House is still predicting that Ben Bernanke will be confirmed for a second term as Chairman of the Federal Reserve, according to the Baltimore Sun.

This is true even though four Senate Democrats have indicated that they will vote against confirmation. “It is time for a change,” said California Democratic Senator Barbara Boxer.

However, a WSJ Blog says that the vote tally as of Friday evening is close:

    Voting “Yes”: 26 (18 Democrats, 8 Republicans)
    Voting “No”: 15 (4 Democrats, 10 Republicans, 1 Independent)
    Officially Undecided: 21 (13 Democrats, 7 Republicans, 1 Independent)
    The remainder of the senators haven’t officially commented.

60 “Yes” votes are required for confirmation.

Both supporters and opponents of confirmation are pointing to the aggressive actions that Bernanke took in implementing various monetary programs like quantitative easing, and advocating fiscal stimulus programs. Supporters say that he prevented a worse financial crisis, and opponents claim that he made things worse.

Actually, none of these politicians really has any idea whether Bernanke has made things better or worse. After this past Tuesday’s election, these guys are just trying to decide which vote will make them more likely to get reelected next time.

I personally like Bernanke, even though I’ve been bitingly critical of his thinking. I think he’s a decent honest guy. (See “The ‘culture of complicity’ continues with Tim Geithner’s new toxic asset plan.”)

If Bernanke’s not confirmed for a second term at the Fed, then someone else will be chosen. And that someone else will be someone like Larry Summers or Hank Paulsen or Robert Rubin. These people are far less capable than Bernanke, and they’re all sleazy, having made millions of dollars participating in the fraudulent creation and sale of toxic assets.

On the other hand, long time readers of this web site are well aware that we’re headed for a major financial panic and crash. I believe that by this time Bernanke is aware of it as well. It’s quite possible that Bernanke is HOPING that he won’t be confirmed. That way, someone else will be blamed for what’s coming.

Additional Links

The Times of India reports that India has gone on high alert based on intelligence that the Pakistan-based terror group Lashkar-e-Taiba (LeT) has acquired more than 50 para-gliders. These can be loaded with explosives and launched from unused airstrips to attack jetliners.

On Friday evening, the UK raised its terror threat level to “Severe,” according to The Guardian. This means that the probability of a terror attack has gone from “substantial” to “highly likely.”

European investors are beginning to talk about openly about a Greek default, according to Euro Intelligence, quoting FT Deutschland.

Another scandal involving global warming scientists: UN climate report riddled with errors on glaciers.

From web site reader Eric, a fascinating account by historian Sir John Glubb relating generations to empires. Glubb finds that an empire generally lasts for about ten generations.

News you can use: Too Much Sex Can Cause Wrist Pain.

(Comments: For reader comments, questions and discussion, see the 23-Jan-10 News – US vs China cyberwar, and Bernanke in trouble thread of the Generational Dynamics forum. Comments may be posted anonymously.) (23-Jan-2010) Permanent Link

22-Jan-10 News – President Obama declares war on banks

And he calls the Mideast situation ‘intractable.’

President Obama declares war on banks

President Obama gave a very interesting speech on Thursday. Extracts:

“For while the financial system is far stronger today than it was one year ago, it’s still operating under the same rules that led to its near collapse. These are rules that allowed firms to act contrary to the interests of customers; to conceal their exposure to debt through complex financial dealings; to benefit from taxpayer-insured deposits while making speculative investments; and to take on risks so vast that they posed threats to the entire system.That’s why we are seeking reforms to protect consumers; we intend to close loopholes that allowed big financial firms to trade risky financial products like credit defaults swaps and other derivatives without oversight; to identify system-wide risks that could cause a meltdown; to strengthen capital and liquidity requirements to make the system more stable; and to ensure that the failure of any large firm does not take the entire economy down with it. Never again will the American taxpayer be held hostage by a bank that is “too big to fail.” …

My message to members of Congress of both parties is that we have to get this done. And my message to leaders of the financial industry is to work with us, and not against us, on needed reforms. I welcome constructive input from folks in the financial sector. But what we’ve seen so far, in recent weeks, is an army of industry lobbyists from Wall Street descending on Capitol Hill to try and block basic and common-sense rules of the road that would protect our economy and the American people.

So if these folks want a fight, it’s a fight I’m ready to have. And my resolve is only strengthened when I see a return to old practices at some of the very firms fighting reform; and when I see soaring profits and obscene bonuses at some of the very firms claiming that they can’t lend more to small business, they can’t keep credit card rates low, they can’t pay a fee to refund taxpayers for the bailout without passing on the cost to shareholders or customers — that’s the claims they’re making. It’s exactly this kind of irresponsibility that makes clear reform is necessary.”

So President Obama is declaring war on the banks.

If you look at the history of the last century, this is almost hilarious. During the 1930s Great Depression, all sorts of laws were passed to regulate banks.

As the generations of Great Depression survivors disappeared (retired or died), all these 1930s regulations were ignored or repealed by the Gen-Xers and Boomers, who thought of them as vestigial remnants of an age dominated by doddering old fools. (See “Markets fall as investors are increasingly unsettled by bad economic news.”

Since 2007, the Gen-Xers are learning the same rules that the doddering old fools of the 1930s learned, and we see the result today: President Obama is saying we have to regulate the banks again.

Pundits are pointing out that Obama is pivoting to a new issue, having suffered a major political defeat on Tuesday with the election of Republican Scott Brown as Senator from Massachusetts, in the seat formerly occupied by ultra-liberal Ted Kennedy. The vote is considered a repudiation of Obama himself, and particularly a repudiation of his health care plan, which I’ve called a proposal of economic insanity.

History tells us that this new issue is sure to be a winner for President Obama. Whereas his health plan was wildly unpopular, the public hatred being directed at banks is growing palpably each day.

History is repeating itself. As I’ve pointed out several times, when I was growing up in the 1950s, my parents and my teachers all hated bankers. I didn’t understand it then, but I understand it today. Bankers in the 1930s perpetrated the same kind of fraud and extortion that they’re practicing today, as standard operating procedure.

The fury directed at banks is going to grow, and will be around for decades. President Obama will do much better politically with this issue than he did with health care.

Finally, it’s worth saying again that from the point of view of Generational Dynamics, the attitudes and behaviors of politicians are irrelevant; what’s important are the attitudes and behaviors of the great masses of people, entire generations of people. These attitudes and behaviors follow generational trends that are completely independent of the wishes of the politicians. We’re seeing this happen now, as Obama abandons his health care agenda and takes up his war against bankers.

Obama calls the Mideast situation ‘really hard’ and ‘intractable’

President Obama didn’t only talk about banks on Thursday. He also gave an interview to Time Magazine discussing a number of issues. Probably the most interesting part came near the end when he discussed his Mideast policy. In his statement, he refers to George Mitchell, the special envoy that he sent to the Mideast early in 2009 to negotiate a peace deal.

“I’ll be honest with you. A) This is just really hard. Even for a guy like George Mitchell, who helped bring about the peace in Northern Ireland. This is as intractable a problem as you get. B) Both sides — the Israelis and the Palestinians — have found that the political environment, the nature of their coalitions or the divisions within their societies, were such that it was very hard for them to start engaging in a meaningful conversation. And I think that we overestimated our ability to persuade them to do so when their politics ran contrary to that. From [Palestinian Authority President Mahmoud] Abbas’ perspective, he’s got Hamas looking over his shoulder and, I think, an environment generally within the Arab world that feels impatient with any process.And on the Israeli front — although the Israelis, I think, after a lot of time showed a willingness to make some modifications in their policies, they still found it very hard to move with any bold gestures. And so what we’re going to have to do — I think it is absolutely true that what we did this year didn’t produce the kind of breakthrough that we wanted, and if we had anticipated some of these political problems on both sides earlier, we might not have raised expectations as high. Moving forward, though, we are going to continue to work with both parties to recognize what I think is ultimately their deep-seated interest in a two-state solution in which Israel is secure and the Palestinians have sovereignty and can start focusing on developing their economy and improving the lives of their children and grandchildren.”

To begin with, let’s remember that Obama was going to heal the world on January 21, 2009, when he took office a year ago today. And that wasn’t just an empty campaign promise; it was clear from his statements that he actually believed it. It was clear that the believed that the problems of the world were caused because President Bush was evil.

But now, after a year in office, his foreign policies have failed in pretty much every area. (See “After a week of foreign policy disasters, President Obama’s entire program is adrift.”)

So now, President Obama is apparently learning from his lessons, and becoming more realistic. He’s changing his major domestic issue from health care to banking, and he’s beginning to understand that the Mideast problem is “intractable.”

This is what Generational Dynamics has been predicting for years. The Mideast is dominated by younger generations that have no desire to compromise with the other side. They’re prepared to re-fight the genocidal 1948-49 war between Jews and Palestinians that followed the partitioning of Palestine and the creation of the state of Israel, and nothing’s going to stop that.

President Obama mentioned the efforts of his envoy, George Mitchell, “who helped bring about the peace in Northern Ireland.”

What Obama and Mitchell don’t understand is that the Northern Ireland peace was negotiated during a generational Unraveling era, a time when peace treaties are relatively easy to agree on.

Things are quite different different today, when the Israelis and Palestinians are in a generational Crisis era, when a negotiated peace is almost impossible. It’s a shame the Obama and Mitchell don’t understand that.

(Comments: For reader comments, questions and discussion, see the 22-Jan-10 News – President Obama declares war on banks thread of the Generational Dynamics forum. Comments may be posted anonymously.) (22-Jan-2010) Permanent Link

21-Jan-10 News – Gates: Danger of India-Pakistan war

Stimulus spending on lending slows in China.

Defense Sec’y Gates: Al-Qaeda ‘syndicate’ trying to provoke India-Pakistan war

Speaking at a press conference in India, America’s Secretary of Defense Robert Gates says that there is a “syndicate of terrorist operators,” operating under the al-Qaeda umbrella, attempting to destabilize the entire region.

These include the Taliban in Afghanistan, Tehrik-e-Taliban Pakistan, which is focused on Pakistan, and Lashkar-e-Taiba, which is focused on both Pakistan and India, and which is responsible for the 2008 terrorist attack in Mumbai. (See “After Mumbai’s ’26/11′ nightmare finally ends, India – Pakistan relations face crisis.”)

Their objective is to cause a collapse of the Pakistan government through terrorist acts, or to provoke an India-Pakistan conflict through provocative or terrorist acts.

“And what we see is that the success of any one of these groups leads to new capabilities and new reputation for all,” according to Gates. “A victory for one is a victory for all.”

Gates’ remarks reflect the increasing danger presented by Sunni Muslim terrorist groups in Afghanistan, Pakistan and India.

As I’ve said many times, these groups have been trying for years to repeat the success of the 1979 (Shia) Islamic Revolution in Iran, to create a Sunni Islamic nation. They’ve tried it in Iraq, Somalia, Yemen, Afghanistan, Uzbekistan, and Pakistan. They haven’t succeeded yet, but they’re committed to continuing, until they succeed.

India and Pakistan almost went to war in 2008, when India threatened to invade Pakistan to go after Lashkar-e-Toiba, following the Mumbai terrorist attack. This was nipped in the bud by hard intervention from Condoleezza Rice, but if a war does break out between the two nuclear powers India and Pakistan, then China will side with Pakistan and Russia and the US will side with India, spreading within a few months to world war.

China puts the brakes on business lending

Prices for oil and other commodities are likely to fall sharply if China keeps its word that it will slow lending to businesses, according to CNN Money. Oil prices could return to $40 per barrel, close to their lows in 2008.

As we’ve said in the past, China is experiencing a huge real estate and investment bubble, fueled by China’s huge stimulus program, to the extent that even the Beijing government is concerned. (See “Skyrocketing real estate prices in China alarm officials.”)

From the point of view of Generational Dynamics, a cutback in China’s stimulus program could do more than just cause commodity prices to call. There is still a major worldwide panic and crisis predicted, and it’s possible that Chinese cutbacks could serve as the trigger causing a chain reaction.

Financial crisis continues in Greece

Greece’s debt problems are causing the euro currency to fall sharply against the yen and the dollar, according to Bloomberg. The possibility of a bailout for Greece is putting pressure on other countries in euroland, and on the other hand, there is fear that if there’s no bailout, and Greece defaults, then the defaults will spread to other countries.

Greece’s government is proposing to put Greece on a three-year austerity program, but the program is facing facing substantial opposition, according to the WSJ’s Athens Bureau Chief. Already, Greek farmers are blockading roads, and next month the civil servants union is planning a strike.

If there’s any way out of this for Greece, I sure don’t see it.

More on blondes getting their own way

A couple of days ago I posted an item about a University of California study that says that blondes get their own way with men, and that their sense of entitlement makes them “more warlike they are than their peers on campus.”

Professor Aaron Sell, the author of the study, has written to tell me that the news reports I quoted are in error. Here’s his message:

“I’m afraid you, and thousands of others for that matter, have been badly misinformed. I have never done any research that shows blondes are more aggressive, entitled, angry or “warlike” than brunette or redheads. This error was the result of a piece in the London Sunday Times.If you’d like to see my actual research, which shows that attractive women are more prone to anger, feel more entitled, and believe they win more conflicts of interest then you can see the actual article and the press release here: http://www.psych.ucsb.edu/research/cep/topics/anger.htm

Note that the words “blonde” or even “hair” never appear there.

The writer Ryan Sager has reported accurately on the story here: http://trueslant.com/ryansager/2010/01/18/science-reporting-gone-wild/

I apologize to Professor Sell for propagating the error.

(Comments: For reader comments, questions and discussion, see the 21-Jan-10 News – Gates: Danger of India-Pakistan war thread of the Generational Dynamics forum. Comments may be posted anonymously.) (21-Jan-2010) Permanent Link

20-Jan-10 News – Republican victory in Massachusetts signals political realignment.

Hundreds die in Muslim-Christian riots in Nigeria.

Republican Scott Brown appears to have won in Massachusetts

Republican Scott Brown has won, by a substantial margin, the special election to replace the late Ted Kennedy in the Senate. That this is happening in Massachusetts, an overwhelmingly liberal Democratic state, illustrates how thoroughly the country is realigning politically.

To see what’s going on, you have to understand what I’ve been saying for years: The great trends of any society or nation are generational, and are not determined at all by politicians. All the politicians can do is follow the generational trends.

President Bush represented the Silent and Boomer generations. The Generation-Xers, who generally speaking despise Boomers and Silents, turned to Gen-Xer Barack Obama because he was the un-Bush — and by that I mean the un-Boomer and the un-Silent.

But now President Obama’s presidency is turning out to be indistinguishable from President Bush’s third term. President Obama is considered by many of his supporters to be just as much a “warmonger” as Bush was, and “change we can believe in” has been buried by loathsome corruption of the health care bill. The only difference between Bush and Obama is oratorial skill. The policies turn out to be the same.

A year ago, mainstream pundits were saying that the Republican party was close to death, and wouldn’t recover for decades.

This evening, I’m hearing Republican pundits talk about this as a major political revolution, a huge victory for the Republicans that will be felt for decades. Yawn.

Other pundits are saying that Obama and the Democrats are going to move to the center. Yawn.

Actually, there is a revolution going on, but nothing that’s going to make anyone happy. The Gen-Xers, who are pretty much running things now, are not going to turn back to the Republicans, nor are they going to move to the center. They’re going to synthesize something new.

Who will be the new candidate who will lead the nation through this realignment? Who will be the new Abraham Lincoln or the new Franklin Roosevelt? It might be a Boomer or a Gen-Xer, but it will probably be a surprise to a lot of people.

Hundreds die in Muslim-Christian riots in Nigeria

Nigeria

In three days of clashes between Christians and Muslims in the city of Jos in central Nigeria, nearly 200 people have been killed, according to a report in the Times Online. The Army has been called in to restore order.

The northern part of Nigeria is mostly Muslim, because of centuries of migration from the Maghreb, the region in northern Africa that was conquered by Arab Muslims in the centuries following the death of Mohammed.

The southern part of Nigeria, especially around the Port Harcourt area, is predominantly Christian, following centuries of colonization by the Europeans, taking advantage of opportunities for mining and the slave trade.

In the middle of Nigeria is the city of Jos, heavily populated by both Muslims and Christians. There have been a number of secular confrontations in Jos over time, so the current clashes are nothing new.

However, it comes at a bad time for the Nigerian psyche. President Yar’Adua has been out of the country since November, in a hospital in Saudi Arabia receiving treatment for a heart condition.

Even worse, the perpetrator of the attempted Christmas day jetliner bombing over Detroit has been identified as a Nigerian citizen, and Nigerians have been demoralized because the US has placed Nigeria on a list of “terror-linked” countries that include Afghanistan, Cuba, Iran, Libya, Pakistan, Somalia, Sudan, Syria and Yemen.

Politicians in Nigeria are calling this violence evidence of declining Nigerian state, according to the Nigerian newspaper The Punch.

“With the ongoing crisis, we have one more piece of evidence of decline,” says one presidential candidate. “Something that repeats itself like that should by now be containable. There is a committee still working on the last riot and this one is taking place. Yet, we think the world has no right to talk about the character of the Nigerian nation, it is a shame and it is regrettable. … In a way, the Jos crisis is an indictment. Being included on the United States‘ security risk list is a matter of perception of the character of the Nigerian state. This crisis reinforces that perception; it is acting negatively against us.”

Nigeria is a country of dozens of separate tribes and ethnic groups, and I have not yet done the many hours of research necessary to completely sort out the generational timelines. But it appears that for most of the country the last generational Crisis war was the Nigerian-Biafran war of 1967-70. At that time, the southeast portion of Nigeria attemted to secede, creating a new country called the Republic of Biafra.

Based on that tentative assessment, there is no chance that the current violence will spiral into full-scale war, despite the fears of many.

(Comments: For reader comments, questions and discussion, see the 20-Jan-10 News – Republican victory in Massachusetts thread of the Generational Dynamics forum. Comments may be posted anonymously.) (20-Jan-2010) Permanent Link