“Watching the pot come to a boil”

“Watching the pot come to a boil”

14-Jan-10 News – Senior bankers may be headed for prison
How the Jews were driven out of Iraq.

William Black: Many senior bankers should be in prison

Watching the bank CEOs testify before Congress on Wednesday, I was immediately struck by the remarks of Lloyd Blankfein, CEO of Goldman Sachs, the man who said that bankers are doing “God’s work.”

He agreed that Goldman Sachs could have done some things better, and indicated that he might have misled an investor or two, but he said of the things that Goldman Sachs did that “these are typical behaviors” and they are “standards of the times didn’t work out well.”

Phil Angelides, chairman of the Financial Crisis Inquiry Commission, responded to Blankfein by saying, “It sounds to me a little bit like selling a car with faulty brakes, and then buying an insurance policy on the buyer of those cars.”

He’s referring to the fact that Goldman created securities that are now known as near-worthless “toxic assets,” and at the same time made other investments that bet against those securities, expecting to make money when those securities became worthless.

William K. Black is a professor at the University of Missouri, and was the senior regulator investigating the savings and loan crisis of the 1980s. He compares today’s investigations to those he led in the early 1990s. I saw him being interviewed on Bloomberg TV on Wednesday afternoon.

He’s extremely criticial of regulators who, he said, have done almost nothing. In the savings and loan crisis, regulators were very aggressive in prosecuting the CEOs of the offending savings and loans banks, but nothing like that is happening today.

This shouldn’t be a surprise to anyone, especially after the revelations about how regulators treated Bernie Madoff, the the man who defrauded hundreds of investors of $65 billion. The SEC was warned several times that Madoff was likely conducting a Ponzi scheme, but the SEC never did anything about it. The SEC management was absolutely pathetic, and they proved it last September when they published a report of their own investigation that absolved themselves of all blame. (See “Laughable SEC report on Madoff absolves SEC management of blame.”)

What we see here is the generational pattern that I’ve been writing about for years. Blankfein referred to the “standards of the time” giving rise to this crisis. Well, the standards of the time are fraud and extortion being practiced by almost every financial and real estate organization in the country — or in the world.

Once the Silent Generation disappeared, the world was managed by a lethal combination of greedy, nihilistic Generation-Xers, managed by greedy, incompetent boob Boomers. A generational explanation is the only one that explains why fraud and extortion has become “the standards of the time,” and why fraud and extortion is still going on as bad as ever.

On his tv interview, William K. Black was asked why he thought bank CEOs and senior management should go to prison. Here’s what he said (my transcription):

“We haven’t learned anything, and it’s clear from the testimony of the four top executives, it’s clear that they haven’t learned the fundamental lessons.

William K. Black <font face=Arial size=-2>(Source: Bloomberg TV)</font>
William K. Black (Source: Bloomberg TV)

We still get this dribble [from them] about “it’s the 100 year flood” type of thing, “so there really ARE no lessons to learn. It’s just bad luck that happened on my watch.” …

Many, many of those CEOs and senior officers should be in prison.

The shocking thing about the current crisis is that the regulators, the treasury, the prosecutors, and at least to this point, Congress and the Angelinis Commission have not gotten that information. [He adds that the prosecutors have only begun to get information — emails, models, accounting books, etc.]

Here’s what we know empirically. The FBI warns in Sept 2004 of an epidemic of mortgage fraud. It finds that 80% of the losses occur when lender personnel are involved. So it’s not primarily borrowers — it’s coming from the lending institutions.

We know that when Fitch [Ratings agency] finally looks in Nov 2007 at the underlying mortgages on these CDOs, the collateralized debt obligations, it finds that the results are “disconcerting,” and that there’s the appearance of fraud in nearly every file. Now that means we have massive fraud at that level.

That inherently produces accounting and securities fraud all the way up the line, because of course these are not really assets – these are really net liabilities.

Every time, on average, a “liar’s loan” was made, the bank that made the loan lost money.

And so all of this paper is underlying this roughly $2 trillion in non-prime paper.

Now we know what happened next. because there are Standard & Poors memos. Where the professional rater asked to see the underlying files, and he’s told by his boss, “It is totally outrageous to ask to see the underlying files,” which is the only way to rate risk, and he’s ordered not to do that, and to produce a rating.

We know that those ratings are AAA for product that isn’t even C. These are not small errors. …

There are only two choices. Let’s take a Goldman Sachs, that under [Hank] Paulsen, when he was still running them, went deeply into this toxic paper.

Either they DID underwriting, which is what an investment banker is supposed to do, and they found that nearly every file was fraudulent, in which case, if they sold it, that’s a fraud; or they’re telling us they never did any underwriting, in which case they’re the most incompetent and unbelievable people in the world, and should be removed from office. And certainly shouldn’t get bonuses.”

This is an excellent statement why many of these bankers will be going to jail, just as bankers went to jail in the 1930s when they did similar things.

Here’s something that I wrote years ago: “If you’re an economics expert, journalist, investment broker, mortgage lender, analyst, regulator, pundit or politician whom the public decides is blameworthy for the major coming crisis, then I suggest that you’d better have your underground bunker picked out, because people are going to be coming after you, and the guillotine is going to seem mild compared to the punishment that they’re going to want to inflict on you.”

The fact that bankers are going to be paying themselves tens of billions of dollars in bonuses during the next few weeks means that they’re too dumb to take that advice.

Pan-Arab nationalism in the 1940s and 1950s

A MEMRI translation of a television interview with Dr. Rashid Al-Khayoun, an Iraqi scholar and author, tells how Jews were driven out of Iraq.

According to Al-Khayoun, Iraqi Jews of the 1940s were not much interested in going to Israel, because they had lived in Iraq for centuries, and considered it to be their home.

But Al-Khayoun says that Jews were coerced to move to Israel by a wave of pan-Arab nationalism within Iraq.

“[P]an-Arab nationalism grew stronger in Iraq, from the late 1940s to the early 1950s,” says Al-Khayoun. “The Jew began to be the target of deliberate affronts. Iraqi Jews are known for their patriotism. They have nothing to do with Israel.”

The rise of pan-Arab nationalism in the late 1940s is very interesting from the point of view of Generational Dynamics.

In North America and Europe, it’s common to refer to “Boomers” and “Generation-X” and their specific behaviors, but those behaviors don’t seem to apply to Russia, Turkey and Mideast countries such as Lebanon, Iraq and Iran.

There’s a good reason for that. For the West, the most cataclysmic event of the 20th century was World War II. But for Russia, Turkey and the Mideast, the most cataclysmic events surrounded World War I, including the Bolshevik Revolution and the destruction of the Ottoman Empire.

Thus, the people born in Russia and the Mideast in the 20 years following WW I would have attitudes and behaviors similar to the West’s Boomers, and the next generation would be similar to the West’s Generation-X.

Iraq’s crisis war at that time was the the Great Iraqi Revolution of 1920. According to Al-Khayoun, the movements to expel Jews from Iraq began in 1941. This was in Iraq’s generational Awakening era, about the same point in Iraq’s generational timeline as America’s 1967 Summer of Love or Iran’s political upheavals of 2009.

What happens in all of these cases is a great deal of political turmoil, followed by a sharp change in political direction. In the case of Iraq in the 1940s, this meant a change from the secularism imposed by the end of the Ottoman Empire, and a resurgence of Arab nationalism to the exclusion of other ethnic and religious groups. Hence, the expulsion of the Jews from Iraq.

There have been new crisis wars 60-70 years after the end of the Ottoman Empire, including the Lebanese civil war and the Iran/Iraq war of the 1980s. These countries are now, once again, in generational Awakening eras, going through the same kind of political turmoil as they did in the 1940s.

(Comments: For reader comments, questions and discussion, see the 14-Jan-10 News – Senior bankers may be headed for prison thread of the Generational Dynamics forum. Comments may be posted anonymously.) (14-Jan-2010) Permanent Link

13-Jan-10 News – Greece may be near financial collapse
The UK debates the Iraq war.

IMF visits Athens as EU accuses Greece of fiscal dishonesty

Question: What are the most terrifying ten words in the English language?

Answer: We’re from the Government, and we’re here to help you.

Well, perhaps Greece is hearing something even worse: “We’re from the IMF, and we’re here to help you.”

Bloomberg reports that a team from the International Monetary Fund (IMF) arrived in Athens to help the government with “pension reform, tax policy, tax administration and budget management.”

These are just some of the areas where Greece’s budget has been growing uncontrollably.

This comes at a time when the European Commission is essentially calling Greece a liar, with “severe irregularities” in the nation’s statistical data. Other accusations claim that Greece used dishonest financial data in order to join the euro currency.

It’s pretty clear that there’s widespread distaste for the idea of bailing Greece out, and preventing the government from defaulting on its debts. The reason is that Greece’s government is so out of control with spending, and apparently does not have the political will to cut back sufficiently.

Adding to Greece’s troubles, Reuters reports that the major Greek civil servants’ union has called a strike for February 10, to protest against the government’s austerity measures.

There’s apparently a big game of “chicken” going on. In American in the 1950s, the game of Chicken was quite popular among teen hot rodders. Two teenagers would drive their cars full speed straight towards each other from opposite ends of the field. The first driver to swerve to avoid an accident is the “chicken.” If neither driver swerves, then both drivers die.

That’s what may well happen in Greece. If the EU and the IMF refuse to bail Greece out, and if the Greek government and unions refuse to cut spending, then the repercussions of a Greek default will be worldwide. It’ll be interesting to see which side swerves, if any.

Paul Krugman says that the euro currency was a mistake

According to Krugman’s blog,

“Europe lacks both the centralized fiscal system and the high labor mobility. (Yes, some workers move, but not nearly on the US scale).To be sure, America has at least minor-league versions of the same problems: we are having fiscal crises in the states, and the housing slump has depressed mobility in the recession. But we’re still better able to cope with asymmetric shocks than the eurozone.

Was the euro a mistake? There were benefits — but the costs are proving much higher than the optimists claimed. On balance, I still consider it the wrong move, but in a way that’s irrelevant: it happened, it’s not reversible, so Europe now has to find a way to make it work.”

This guy has absolutely no sense of history. Since the end of World War II, there has been an increasing movement towards a European Union and a European currency. The momentum was unstoppable, because nobody wants to see a new European war.

From the point of view of Generational Dynamics, a new European war is inevitable. The European Union and the euro currency will not survive in anything like its current form, and both may collapse completely.

But that’s not the end of the story. Once the war is over, in the 2020 time frame, Europe will enter a new generational Recovery era, and this time the European Union and the euro currency will succeed.

Did Iraq war make it harder to talk to Iran?

The UK is currently conducting a highly contentious inquiry into the history of the UK’s involvement in the Iraq war, with the objective of assigning blame.

On BBC’s Europe Today program, former Labour Party minister Frank Dobson made the following comments (my transcription):

“It must be obvious to anyone with a grain of sense that the invasion and occupation of Iraq has been disastrous, quite substantially for large numbers of people in Iraq who’ve died or been injured, and certainly for peace and security in the middle east. …It’s also made it more difficult to deal with problems arising from Iran attempting, if they do, to get nuclear weapons.

All that has been made more difficult as a direct result of the stupid decision to invade and occupy Iraq.”

If Dobson can call his political opponents “stupid,” then that gives me leave to call Dobson a total moron, almost incapable of coherent thought.

Let’s assume the counterfactual that there was no ground invasion of Iraq in 2003. Then we’d have to assume that Saddam Hussein was still in power today, and we STILL WOULDN’T KNOW whether he was deploying weapons of mass destruction.

In that scenario, Iran would be saying to us, “Saddam Hussein has already attacked Iraq with weapons of mass destruction (WMDs), during the Iran/Iraq war of the 1980s, and he may do it again any day. We need nuclear weapons to protect ourselves from Saddam’s WMDs. If you want to stop the spread of WMDs, then you’d better start with Saddam!”

And so, contrary to Dobson’s argument, without the Iraq war it would have been MUCH MORE DIFFICULT to talk to Iran about nuclear weapons.

Of course, Iran would be developing nuclear weapons capabilities under any scenario. The Iraq war made no difference, except that they might have gone faster without the Iraq war.

This is a good time for me to remind readers that I’ve never taken a position on whether the Iraq war was “right” or “wrong” or “good” or “bad.” (See “The Iraq war may be related to the bombing of Hiroshima and Nagasaki.”)

Dobson’s statements illustrates the incredibly ignorant quality of most political discussions about the Iraq war.

Congress to skewer bank execs over bonuses on Wednesday

First the bankers who created trillions of dollars in near worthless “toxic assets,” and used them to defraud investors while paying themselves hundreds of billions in commissions and fees. Now that they’ve been bailed out by the government, they’re forcing their own customers 30% interest, and they’re using the money to pay themselves more billions in bonuses. This is criminal extortion, but it’s the norm for the financial community these days.

I’ve been expecting something like this for years, since the same thing happened in the 1930s, but I’ve been sickened by the extent of the corruption being exhibited by these bankers.

On Wednesday, bank executive will be testifying on Capitol Hill before the Financial Crisis Inquiry Commission.

It is grossly loathsome and disgusting that these people are paying themselves million dollar bonuses after all the damage they’ve done. As I’ve said before, I truly believe that many of them are going to go to jail before this is all over.

Google threatens to pull out of China

The NY Times reports that Google has discovered that the e-mail accounts of human rights activists had been hacked.

According to the report, Google said that it had found a “highly sophisticated and targeted attack on our corporate infrastructure originating from China. … These attacks and the surveillance they have uncovered — combined with the attempts over the past year to further limit free speech on the web — have led us to conclude that we should review the feasibility of our business operations in China.”

Google has been criticized for years for agreeing to censor its search results to exclude anything that the Chinese Communist Party objects to. The company now says that it is no longer willingo to continue this censoring.

(Comments: For reader comments, questions and discussion, see the 13-Jan-10 News – Greece may be near financial collapse thread of the Generational Dynamics forum. Comments may be posted anonymously.) (13-Jan-2010) Permanent Link

12-Jan-10 News – Afghan people hope for the best
While American ‘Preppers’ prepare for the worst.

‘Preppers’ prepare for the worst

In the past, I’ve frequently said on this web site that you can’t prevent what’s coming, but you can prepare for it. You should treasure the time that you have left, and you should use the time to prepare yourself, your family, your community and your nation.

Web site reader Joel has referred me to a Newsweek article about a growing group of people, called “preppers,” who are doing exactly that.

These people hope for the best, but want to be prepared for the next hurricane Katrina, the next pandemic, the next financial meltdown, the next terrorist attack or, presumably, the next war.

Referring to one of the preppers, the article concludes, “But she believes that in times of uncertainty, what she’s doing is simply common sense. As for the rest of us, isn’t it a little bit crazy not to prepare?”

That’s damn good advice.

Poll shows Afghanistan people are more optimistic about future

Afghanistan poll <font size=-2>(Source: BBC)</font>
Afghanistan poll (Source: BBC)

The BBC reports that a major poll conducted in December finds the Afghanistan people much more optimistic about the future than in previous years. (PDF here for full poll results.)

Compared to a year ago, many more Afghans believe that the country is going in the right direction, and more of them back the presence of US troops. 71% were optimistic about the future, compared to 51% a year ago.

This is good news for the armed forces “surge” fighting in Afghanistan, and it raises hopes that the war can be won. However, as I wrote last year, comparing the Afghanistan and Iraq wars, the Iraq “surge” strategy will not work in Afghanistan.

Afghanistan’s last generational crisis war as the hugely genocidal civil war that ended in 1996, almost 15 years ago. Thus, Afghanistan is in a generational Recovery era, still recovering from that ghastly war.

Thus, the optimistic results of the Afghan poll make a lot of sense. The people are on a “high,” looking forward to a bright future in a country that already settled its differences.

In fact, if it were up to the Afghan people, the war would be over. Even if it were up to the Pashtuns, who make up the Taliban terrorists, the war would be over.

But there are two reasons why the war can’t be won.

The first reason is that there is no war. The war was won in 2002, when the American coalition forces, in conjunction with the Afghan Northern Alliance, decisively defeated the Taliban armies. Since then, the war has collapsed into a series of terrorist attacks and a counterinsurgency strategy.

The second reason that the war can’t be won is that it’s not up to the Afghan people. The terrorist insurgency is being fought by Pashtun, al-Qaeda and Uzbek terrorists hiding out in the tribal areas on Pakistan’s borders. The war can’t be won in Afghanistan any more than it can be won in Pakistan.

As if the prove the point, the London Independent reports that Taliban terrorists have developed a new generation of roadside bombs that are made out of wood, and have no metal or electronic parts, so they can’t be detected by existing methods.

(Comments: For reader comments, questions and discussion, see the 12-Jan-10 News – Afghan people hope for the best thread of the Generational Dynamics forum. Comments may be posted anonymously.) (12-Jan-2010) Permanent Link

“The Diplomat” Magazine: Top events and flashpoints for Asia-Pacific region
Understanding where the world is going in the 2010s.

As regular readers know, Generational Dynamics predicts that we’re headed for a new “Clash of Civilizations” world war, pitting China and Sunni Islam forces against the West. As usual, Generational Dynamics tells you the final destination, but doesn’t tell you the scenario that will get you there. (See “Generational Dynamics forecasting methodology.”)

The new issue of The Diplomat Magazine presents an “end of decade” series of articles on the major events of the last decade and the major flash points of the next decade. The magazine doesn’t mention anything about a world war, of course, but it does provide an overview of the major trends and major points of conflict, at least for the Asia-Pacific region.

Top 10 Asia-Pacific Stories of Decade

The following are The Diplomat’s Top 10 stories of the decade:

  1. “The Rise of China, January 1, 2000 – present.” The article focuses on the economic rise of China. That’s very important, of course, but I would more strongly emphasize the military rise of China, its constant threats of war with the US over Taiwan, and its massive spending on weapons as it plans for that war.
  2. “War in Afghanistan, October 7, 2001 – present.” This is the article’s placeholder for the 9/11 attacks, with the Afghanistan war beginning less than a month after those attacks.The article makes an interesting observation: “As if to prove the maxim that generals always fight the last war, the approaches that worked (sort of) in Iraq have been imported almost wholesale — think ‘COIN’ [counterinsurgency] and ‘surge’ — and supported by Obama in an unconvincing plan announced after much cogitation late in 2009.”This is certainly true, and one of the most remarkable aspects of our Afghanistan strategy. However, as I wrote in September the Iraq “surge” strategy will not work in Afghanistan.
  3. “Sonia Gandhi Steps Aside, May 18, 2004.” Of the top ten, this is the only one that’s never previously been mentioned on this web site, since it’s a purely political event. The article credits this event with allowing Manmohan Singh to become Prime Minister, resulting in an economic transformation. From the point of view of Generational Dynamics, it would have made no difference whether Gandhi or Singh was Prime Minister.
  4. “Indian Ocean Earthquake and Tsunami, December 26, 2004.” This was a truly devastating disaster, considering the immense loss of life. Putting aside the human toll, this event was a geopolitical plus for America since it allowed us to demonstrate quick humanitarian aid and generosity in helping the victims.
  5. “Assassination of Benazir Bhutto, December 27, 2007.” This event went beyond politics because it was one of the first major Sunni extremist terrorist attacks in Pakistan, made even more significant by the fact that Bhutto was from a leading Shia Muslim family.If I had to choose, however, I would say that the spectacular Red Mosque attack in Islamabad, earlier in the same year, was more significant, since it was the first major terrorist attack, and it led to other attacks, including the Bhutto assassination.
  6. “Bali Bombing, October 12, 2002.” This attack brought the terrorist group Jemaah Islamiyah to international prominence. As the article points out, this was the first attack to show that Sunni extremist terrorist attacks are not limited just to the Mideast and Pakistan, but are quite widespread in the southeast Asia Pacific region.
  7. “SARS, November 2002 – July 2003.” It’s hard to see why this is a major event of the decade, since the SARS, bird flu and swine flu threats never turned into major pandemics. The H1N1 swine flu threat seems to have fizzled, but medical experts warn that it still might mutate and turn into a major pandemic in 2010. Only then will it become a “major event,” in my opinion.
  8. “North Korea Tests Nukes, October 9, 2006 and May 25, 2009.” These tests have frightened the hell out of people in Japan and South Korea, and have substantially raised the level of danger for major conflict in the region.
  9. “The LDP Falls in Japan, August 30, 2009.” This was a historic political change in Japan, but the larger picture is that Japan has had a new government every year or so for the last five years. The victory of the Democratic Party of Japan (DPJ) over the Liberal Democratic Party (LDP), which had ruled for decades, does not now guarantee that Japan’s government is finally stable. We’ll see what happens in 2010.
  10. “Sinking Islands, January 1, 2000 – present.” This refers to the Carteret Atoll, a group of low-lying islands located in the South Pacific, apparently a victim of climate change. That’s not really an event, however. Probably the most important climate change event of the decade was the corrupt nonsense emanating from the recent Copenhagen climate change conference.

In the Asia-Pacific region covered by the article, it’s hard not to include China’s crackdown on Tibet in March, 2008. This event electrified the world, and led to a big rise in hostility between the Chinese people and much of the rest of the world.

Outside of the Asia-Pacific region, we might add a couple of important events from the last decade.

First, the disappearances of Yasser Arafat and Ariel Sharon (through death and coma, respectively) have sent the Mideast spiraling into a worsening situation, resulting in three wars (so far): Israelis vs Hizbollah in Lebanon in 2006, Palestinian Fatah vs Hamas in Gaza in 2008, and Israelis vs Hamas in Gaza in 2009.

And second, the the 2004 Beslan school massacre in southern Russia unified the Russian people behind Vladimir Putin, who is still viewed by the Russian people as almost a god.

Flashpoints in Asia-Pacific region

The Diplomat Magazine now describes the major flashpoints, any of which could trigger a major war in the Asia-Pacific region.

  • Taiwan. As the article points out, relations between China and Taiwan have been improving lately, largely because the pro-China Nationalist Party (KMT) came to power in 2008. However, the political winds could change quickly, and there are still many Taiwanese who want complete independence from China.There are 1500 missiles on China’s soil pointing directly at Taiwan, and that number continues to increase. Few people doubt that China intends, sooner or later, to forcibly make Taiwan part of China again. Any political move in Taiwan that even smells of “independence” might trigger such a move by the paranoid Chinese Communist Party (CCP) leaders, and the US would immediately counterattack, leading to war.
  • The Spratly Islands.

    The Spratly Islands <font size=-2>(Source: The Diplomat)</font>
    The Spratly Islands (Source: The Diplomat)

    The Beijing government claims sovereignty over all islands in the South China sea, including the Spratly Islands, but those claims are disputed by Brunei, the Philippines, Malaysia, Taiwan, and Vietnam. (See “China continues massive military expansion as it announces 18% budget increases.”)

    This is part of a much larger naval strategy — a plan to gain hegemony over the entire Pacific and Indian ocean regions. China is developing a “String of Pearls” — a collection of ports that link China with the Mideast and Africa.

  • North Korea. In 2009, the North Koreans launched a multi-stage satellite launch vehicle and detonated a second nuclear device. The level of hatred between the North Koreans and the Japanese is enormous, and the amount of tension between North and South Korea is also enormous.
  • Kashmir. Kashmir has been a continuing source of military conflict between Pakistan and India since the two countries were formed in 1947 by Partition.
  • China-India-Burma . This is the magazine’s placeholder for China’s increasing military and economic investment throughout central Asia. The countries in China’s “String of Pearls” include Myanmar (Burma), Bangladesh, Nepal, Sri Lanka, Maldives, Mauritius, Seychelles and Pakistan.Completion of this “String of Pearls” strategy will bring China into direct confrontation with both India and the US.
  • Arunachal Pradesh. Arunachal Pradesh is a region in northeast India on the border with Tibet in China. The Chinese claim that the region is historically part of China, and they even took military action in 1959 to reclaim it, though they retreated in 1961. Just as China plans, sooner or later, to forcibly make Taiwan part of China, it’s quite likely that the China has similar plans for Arunachal Pradesh, creating a new trigger point for war between China and India.

This list of flashpoints will be very useful for sorting out which news events are significant and which are not. One of these flashpoints could well be the trigger that leads to war.

Outside of the Asia-Pacific region, other flashpoints include the Mideast and the Caucasus regions, as can be seen on the conflict risk graphic on the home page of this web site.

(Comments: For reader comments, questions and discussion, see the 11-Jan-10 News – US threatens Israeli / Top Asian Events and Flashpoints thread of the Generational Dynamics forum. Comments may be posted anonymously.) (11-Jan-2010) Permanent Link

11-Jan-10 News – US Threatens Israeli Loan Guarantees
And a US political realignment is proceeding.

Responding to many requests, I’m now going to set up a separate forum thread for comments and discussion for each day’s article(s). The thread for today’s articles is called 11-Jan-10 News – US threatens Israeli / Top Asian Events and Flashpoints.

Furthermore, you’ll be able to post in these threads (only) without having to register. To limit spamming, each thread will be locked after 24-72 hours.

US backs off after threatening Israeli loan guarantees

The Jerusalem Post reports that Israel “can manage without US guarantees,” after US Middle East envoy George Mitchell hinted on Thursday that the US might end US loan guarantees.

However, Ynet news reports that an unnamed American official has backed off, saying, “It was not a threat and not an implied threat.”

As part of its numerous campaign promises to save the world on January 21, 2009, the Obama administration said it would focus on the Mideast, and would bring about peace treaty between the Israelis and Palestinians. Now the administration is discovering what the Bush administration discovered: That neither side is willing make almost any real concessions at all. (See “After a week of foreign policy disasters, President Obama’s entire program is adrift.”)

Now the Obama administration is taking its turn at being blamed for lack of progress. An al-Jazeera editorial blames the administration’s “soft-handed approach” toward Israel.

When the Bush administration released its “Mideast Roadmap to Peace” in 2003, one of the first major prediction I wrote for this web site was that it would fail. (See “Mideast Roadmap – Will it bring peace?”) From the point of view of Generational Dynamics, the Mideast is headed for a major war, re-fighting the genocidal war between Jews and Palestinians that followed the 1948 partitioning of Palestine and the creation of the state of Israel.

Democrats are increasingly furious at President Obama

The Boston Globe reports on a letter from a local Democratic party activist and “lifetime Democrat” who is switching his voter registration from Democratic to Unenrolled.

As reasons, he says that the “state of Perpetual War is continuing and even expanding,” and the bailouts are helping banks rather than people. “The final straw was the travesty of the Health Care Insurance Reform bill,” he adds.

That’s just one activist, but reading a Democratic Underground web site page, you can read many activists agreeing with the letter and expressing their own anger, with almost no dissenting voices.

From the point of view of Generational Dynamics, what we’re seeing is a major political realignment. Pew Research describes by saying “the public has moved in a conservative direction on a range of issues,” and implies that the Republicans will gain.

But that misses the point. The Republican party isn’t very popular either. For example, people across the political spectrum want health care reform, but not the loathsome, corrupt bill passed by Democrats in December. And according to a Rasmussen poll, 45% say that a random group of people from phone book would be better than current Congress.

The biggest recent manifestation of this political realignment is the “Tea Party” movement. A December Rasmussen poll found that a new “Tea Party” is more popular than the Republican party. Other polls have found high interest among Democrats for a new “Tea Party.”

In 2010, expect to see an increasing realignment that will synthesize views of both parties and create a new movement of some kind.

Obama and the Democratics under fire on Sunday morning

The main topic of discussion in Sunday mornings news talk shows was the failure of President Obama to respond quickly after the nearly-successful Christmas day jetliner bombing attempt over Detroit.

There was plenty of related discussion about the growing threat of al-Qaeda in Yemen, and whether it’s possible to protect airliners against future “underwear bombers.”

The major political drama of the morning was over the revelation that Senate Majority Leader Harry Reid (D-NV) said privately, during the 2008 Presidential campaign, that the US would be “ready to embrace a black presidential candidate, especially one such as Obama – a ‘light-skinned’ African American ‘with no Negro dialect, unless he wanted to have one.'”

That remark is so bizarre, I barely know what to make of it.

Democrats rushed to defend Reid, but Republican National Committee Chairman Michael Steele, who is black, pointed out that if a Republican had ever said anything like that, he would be skewered by the Democrats. That’s undoubtedly true, but Steele is in trouble with his own party for making money on the side by giving speeches and writing books. His response: “Either fire me or shut up!”

Great drama!

(Comments: For reader comments, questions and discussion, see the 11-Jan-10 News – US threatens Israeli / Top Asian Events and Flashpoints Flashpoints”#> thread of the Generational Dynamics forum. Comments may be posted anonymously.) (11-Jan-2010) Permanent Link

10-Jan-10 News – Worldwide soccer is in shock after Togo’s team is attacked by terrorists
It seems like déjà vu — it was less than a year ago that that terrorists attacked the Sri Lanka cricket team in Lahore. (See “Cricketing world in shock after attack on Sri Lanka team in Pakistan.”)

Now it’s the soccer world’s turn. The the BBC reports that the Togo team’s assistant coach are among the three killed and nine wounded by attackers with machine guns.

The bus was taking the taking the Togo team to the Africa Cup of Nations, a major African soccer tournament being held in Angola. The bus had just entered the Angola’s Cabinda region, and terrorists demanding independence for Cabinda have claimed responsibility for the attack.

The world’s biggest soccer tournament, the World’s Cup, is scheduled to be held in Johannesburg, South Africa this summer. The attack has raised questions about whether proper security can be guaranteed this summer, but it’s thought that the Togolese attack was a one-of-a-kind incident.

In fact, the Africa Cup of Nations tournament will go on as scheduled, and the BBC is reporting that, after changing their minds several times, the Togo team will participate.

(Comments: For reader comments, questions and discussion, see the Geopolitical Topics thread of the Generational Dynamics forum.) (10-Jan-2010) Permanent Link

9-Jan-10 News – Corruption is increasing in China
As financial imbalances grow around the world, say goodbye to Saab.

Simon Johnson predicts financial “catastrophe”

Simon Johnson, MIT School of Management professor, and Peterson Institute Senior fellow, predicts financial catastrophe on CNBC:

Johnson talks about a financial “catastrophe” in the offing. He makes the following very interesting argument: The last crisis (beginning in 2007) was caused by banks that were “too big to fail” taking huge risks with other people’s money.

Today, the biggest banks are even bigger, and are even more reckless than ever in taking risks. They can do this because they know that they’re “too big to fail,” and so they know that they can take any gamble they want: if they succeed, they’ll make a lot of money, and if they fail, the government will bail them out.

Therefore, if the last crisis was caused by banks “too big to fail,” then there must be an even worse crisis coming soon.

From the point of view of Generational Dynamics, this argument makes sense. The Great Depression of the 1930s made the survivors extremely risk-averse. When those survivors disappeared (retired or died) in the 1990s, they were replaced by Boomers and Gen-Xers who abused credit, causing the dot-com bubble and the credit/real estate bubble. The current crisis will not end until the new generations of Boomers, Gen-Xers and Millennials learn their lessons, and become extremely risk-averse again. The fact that they haven’t yet learned that lesson is proof that the worst is yet to come. It’s like an alcoholic who doesn’t stop drinking until he really hits bottom.

Johnson points out the enormous hubris of these bankers. Goldman Sachs, for example, was bailed out by the government, but is just about to pay $20 billion (with a “b”) in bonuses. It’s amazing.

Another interesting thing about the above video is that the CNBC anchors don’t believe a word that Johnson is saying. They haven’t learned their lessons either.

Corruption grows in China

Johnson predicts a financial crisis in China, similar to Japan’s massive crash in 1990.

However, as we’ve written many times, a financial crash will be much worse for China, as even the Beijing government fears it will trigger a huge civil war.

The NY Times reports that wealth hedge-fund investor James S. Chanos is saying that China is in a huge real estate bubble, “Dubai times 1,000 — or worse,” headed for a major crash.

In fact, a new report in China daily says that corruption is spreading throughout the grass-roots levels of China’s government and state-owned enterprises (SOEs).

An interesting take on all this is to compare the generational timelines of the U.S. and China. America’s Recovery era began in 1945, when WW II ended, while China’s Recovery era began in 1949 when the Communist Revolution civil war ended. You can’t be very precise when it comes to mapping these generational changes forward, but roughly speaking we can assume that China is a couple or a few years behind America in its generational changes. Since America’s crisis began in 2007, we can assume that China is very close to a similar crisis.

A BBC report ties everything together by describing the resentment that ordinary Chinese people feel over the massive corruption. “There is widespread anger at the ostentatious lifestyle enjoyed by some Communist Party officials, police chiefs and bosses of state-owned companies,” it says.

Even without Generational Dynamics, one can see that China is headed for a very substantial crisis. (See also: “Skyrocketing real estate prices in China alarm officials.”)

Europeans are in denial over worsening economy.

Things are bad in America and China. Europe doesn’t escape.

Eurozone unemployment is at 10%, headed for 11%. The level is at 20% for young people. Latvia is the worst off, at 22.3%. Spain is in second place, at 19.4%

European commentators call them the “P.I.I.G.S”. Those are the Eurozone countries — Portugal, Ireland, Italy, Greece and Spain — so much in debt that they may default on their sovereign debt.

According to Lobito, a member of the Generational Dynamics forum visiting us from Portugal: “[A]lmost every one [in Portugal] is blind. I try to talk and people call me a pessimist or they say I´m too young to know anything about anything.” So it seems that the Portuguese are as deeply in denial as the Americans and the Chinese are.

Euro Intelligence tells us that the EU may not bail out Greece if it’s about to default. Jürgen Stark of the European Central Bank (ECB) is quoted as saying, “The markets are deluding themselves when they think at a certain point the other member states will put their hands on their wallets to save Greece.”

The EU is conducting a grand experiment right now, by appearing willing to allow countries to default. If Greece or Spain or Portugal defaults on its sovereign debt bonds, then will the damage be contained? Will it spread to other countries in the EU? Will it spread to other countries around the world? Nobody knows.

Getting back to America, California and Illinois are also close to defaulting on their bonds. No one knows what effect that will have either.

It looks like the end of the road for Saab cars

I’ve known several people who REALLY love Saab cars, and I imagine many of them are crying in their beer tonight. But while Saab owners are merely sad, European politicians and labor unions are absolutely furious, according to a report in The Guardian. General Motors has appointed liquidators to shut down the Swedish car firm, despite the fact that two or three other firms have expressed an interest in acquiring Saab, but apparently GM didn’t consider them to be serious offers.

The good news for Saab lovers is that there may be a fire sale of existing stocks of Saab cars.

(Comments: For reader comments, questions and discussion, see the Financial Topics thread, the China thread, the Portugal thread, and the Europe thread of the Generational Dynamics forum. Read the entire Financial Topics thread for discussions on how to protect your money.) (9-Jan-2010) Permanent Link

8-Jan-10 News – Obama: “We are at war with al-Qaeda.”
Al-Qaeda is jubilant, while Jordan is embarassed.

Today we focus on the repercussions of al-Qaeda’s recent terrorist acts, as we come closer to world war.

Barack Obama: “We are at war with al-Qaeda.”

Announcing the results of an investigation of the intelligence community’s failure to stop the “underwear bomber” from taking a plane to Detroit on Christmas day, President Barack Obama said:

“We are at war. We are at war against al Qaeda, a far-reaching network of violence and hatred that attacked us on 9/11, that killed nearly 3,000 innocent people, and that is plotting to strike us again. And we will do whatever it takes to defeat them.”

Germany's left-wing Die Tageszeitung newspaper asks 'How much Bush is there in Obama?' <font size=-2>(Source: Spiegel)</font>
Germany’s left-wing Die Tageszeitung newspaper asks ‘How much Bush is there in Obama?’ (Source: Spiegel)

As we’ve said several times last year, Obama is increasingly adopting President Bush’s foreign affairs policies, abandoning his own blundering, dithering, befuddled, unfocused approach to terrorism. This reflects the increasing fear and anxiety of the American people.

Der Spiegel says that the European left is getting worried. They’re asking, “How much Bush is there in Obama?”

It took President Bush only one day after 9/11 to say we’re at war. Obama has taken quite a bit longer. Just imagine what Obama would be saying today if the Christmas day attack HADN’T failed.

From the point of view of Generational Dynamics, such an event would be a “regeneracy” event, the kind of event that, during a Crisis era, regenerates civic unity for the first time since the end of the last crisis war (WW II), and often leads to full-scale war.

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

Al-Qaeda claims double victory — in Afghanistan and Yemen

You’d think that the failed Christmas day attack would be considered an al-Qaeda failure, but leaders of Al-Qaeda on the Arabian Peninsula (AQAP), headquartered in Yemen, are apparently very proud that they got a bomb into a jetliner over Detroit.

“With Allah’s grace, the hero mujahid martyrdom-seeker, brother Omar Al-Farooq, carried out a quality operation on an American plane that took off from the Dutch city of Amsterdam to the American city of Detroit, while they were celebrating the Christmas holiday on Friday December 25, 2009, [an operation] which broke through all modern advanced technological equipment and security barriers in world airports, … rubbing their noses in the dust [in humiliation], and making all they have spent upon security technologies a waste for them,” according to a MEMRI translation of AQAP statements posted on web sites.

According to the statements, the attack was revenge for “the savage bombing using cluster bombs and cruise missiles that was launched from American ships that occupy the Gulf of Aden.”

The leader of Al-Qaeda in Afghanistan is taking pride in the suicide bomber who killed seven CIA operatives in Kabul last week. The NY Times quotes him as saying, “He detonated his fine, astonishing and well-designed explosive device, which was unseen by the eyes of those who do not believe in the hereafter.”

Just as Obama’s rhetoric is increasingly talking about war, al-Qaeda is becoming energized by these two events.

Jordan expresses embarassment over the CIA killings

The suicide bomber that killed the CIA operatives was a Jordanian al-Qaeda terrorist whom Jordan had “turned” to be opposed to al-Qaeda. He was sent to Afghanistan to serve as a double agent — working for al-Qaeda, but reporting what he learned to the CIA. But what the CIA didn’t know was that he was a triple agent — working for al-Qaeda, spying on the CIA. He was so well trusted that he wasn’t searched when he came to the CIA compound, allowing him to explode his bomb.

Jordan is greatly embarassed by the CIA link, according to a detailed analysis in The Guardian. Jordan is America’s strongest Muslim ally in the Mideast, but has kept the alliance as quiet as possible. Now that the CIA link has been exposed in the worst possible way, it could have political implications for Jordan’s government.

(8-Jan-2010) Permanent Link

7-Jan-10 News – Increased violence in the Caucasus
Also: Panic buying of kitty litter in Britain

Dear Reader, I’m going to try this for a while and see if it works for me. Ideally I’ll produce a news summary every day, but that’s probably unrealistic. I’ll try to do it as often as possible.

Every day I come across one or more stories that I believe are very important (or just amusing). Often web site readers refer such articles to me. But my work schedule keeps me from writing a full article on them. The news summary will briefly cover stories that I believe are of international geopolitical or financial significance, and will provide a link to one or more articles.

Major suicide bombing in Russian province of Dagestan

The Caucasus is one of the most dangerous places in the world, since it’s the nexus of centuries of wars between Muslims and Orthodox Christians. Ria Novosti reports that violence is increasing throughout the Caucasus, especially in Chechnya, Dagestan and Ingushetia.

This follows after a suicide bomber car drove into a major police station compound in Dagestan, killing 5 police officers and wounding 14 others. The carnage would have been much worse, but a quick-witted police car driver prevented the bomber from getting into the crowded areas of the compound. The CNN story has a map showing the location.

Panic buying of kitty litter and thermal underwear surges in Britain

According to the Telegraph, the bitterly cold weather is causing people to stock up. Kinda makes you wish for more global warming, doesn’t it.

History ends in 1990 in Bosnia and Herzegovina

One of the two bloodiest wars of the 1990s was the ethnic war in Bosnia and Herzegovina where an estimated 100,000 people were killed and another 2 million displaced. (The other one was the Rwanda genocide.)

A World Focus video says that kids in this region are learning history from textbooks that contain no events at all after 1990, just before the war broke out. “All possible content that could be insulting to any of the people of Bosnia was taken out of the textbooks. Most of the last 20 years of the history of our country is not in primary school textbooks,” according to one Bosnian official.

“My personal opinion is that until all sides in Bosnia agree on facts about what happened in the last 20 years, I think it is good. But I hope that we will reach a time when some things could be described in the way they actually happened.”

This kind of thing really fascinates me, and we’ve discussed it in Lebanon and Sri Lanka.

When a country enters a Recovery era following a bloody civil war, everyone walks on egg shells for fear that the war will break out again. But it can’t, and won’t until the next Crisis era, decades later. In the meantime, they take drastic steps like this one — deleting 20 years of history from textbooks — to keep anything from happening.

Ironically, this only pisses off the younger generation of kids who wonder why information is being kept from them.

Clash of Civilizations – Muslims vs Christians in Nigeria

Nigeria - Muslims in the north, and Christians in the south <font size=-2>(Source: Spiegel)</font>
Nigeria – Muslims in the north, and Christians in the south (Source: Spiegel)

A great Der Spiegel article describes the split in Nigeria between Muslims in the north and Christians in the south. This came about because the Arabs colonized the north, and the Europeans colonized the south. Both sides are becoming more radical, and Nigeria is in the news now because the Christmas day attempted jetliner bomber comes from Nigeria.

U.S. and China race to the bottom in trade protectionism

The U.S. is imposing high duties on wire decking products imported from China, Reuters reports. This follows duties on steel pipes, that the U.S. claims the Chinese are “dumping” at unfairly low subsidized prices. The Chinese say the U.S. ignores the facts that U.S. manufacturers can’t compete in today’s recession world economy, and is making China a scapegoat.

On the other hand, China is threatening duties on U.S. chicken parts — chicken feet and wings — because they’re delicacies in the China.

Everybody is thinking about the Smoot-Hawley act of 1931, where the U.S. imposed high duties on imported goods, supposedly to save jobs. The tariffs made the Great Depression worse. They destroyed the Japanese economy, and is one of the factors that led Japan, ten years later, to bomb Pearl Harbor.

Ten Sci-Fi Weapons That Actually Exist

A Wired article about some neat stuff (assuming that there are neat ways to kill people). Plenty of great photos.

(Comments: For reader comments, questions and discussion, see the Financial Topics and the Geopolitical Topics threads of the Generational Dynamics forum.) (7-Jan-2010) Permanent Link

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