Watching the pot come to a boil

Also note: H1N1 swine flu virus mutates in Australia.


“Watching the pot come to a boil”

28-Oct-10 News — Rare earth minerals controversy creates new alliances
France is braced for a new strike on Thursday 

Rare earth minerals controversy creates new alliances

As we reported yesterday, China’s export restrictions on rare earth minerals (REEs) are considered by many international officials to be China’s revenge for the arrest of the fishing boat captain last month, and even for the selection of a Chinese dissident as winner of the Nobel Peace Prize.

Global production of rare earth oxides (Market Oracle)
Global production of rare earth oxides (Market Oracle)

China produces over 90% of the world’s supply of rare earth minerals (REEs). REEs are not particularly rare, but they are expensive to mine because of labor costs and poisonous byproducts that pollute the environment, according to an analysis by Market Oracle.

Apparently, the current situation is due to the foresight of former Chinese leader Deng Xiaoping, according to Global Post. In the 1980s, he put the country on track to be the world leader in development of REEs, though some say it was by taking advantage of China’s cheap labor costs and weak environmental laws.

The REE controversy is a boon for Australian mining companies that still produce them, according to the Sydney Morning Herald. Prices are going so high, according to the article, that a new bubble has been created, and it’s likely to burst at some point.

Other countries, including the U.S., couldn’t compete with China on price, and they simply stopped developing REEs in the 1990s and the early 2000s.

One American supplier, Molycorp Inc., has a mine in Mountain Pass, Calif., that was closed almost ten years ago, and could reopen, but it would take four years. Other suppliers might require up to ten years.

On the other hand, India has now decided to restart production of REEs for the first time since 2004, according to Reuters, and expects to be in production in 2011. India hopes to meet Japan’s need for REEs as quickly as possible. This is part of a Comprehensive Economic Partnership Agreement (CEPA) signed by Prime Minister Manmohan Singh and his Japanese counterpart, Naoto Kan.

This agreement is significant for a number of reasons, according to an analysis by Asia Times. Japan is eager to develop a strong trading relationship with India these days, but that wasn’t the case a few years ago. Until recently, Japan complained of bureaucratic bottlenecks and corruption in India, but China’s actions on REE’s seem to have turned things around.

When we look back at this controversy five or ten years from now from the point of view of Generational Dynamics, it may turn out to have spiraled into something big, or it may have fizzled into nothing. What makes it interesting now is that it supports the overall expected trend. The prediction is that we’re headed for a new world war with China, as the mutual xenophobia between China and the West continues to grow. Thus, we expect Japan to be allied with India and the U.S., and China to be allied with Pakistan.

A part of the CEPA agreement mentioned above between Japan and India is that Japan may be investing in nuclear power plants in India. This would have been unthinkable a few years ago, because of Japan’s post WW II nonnuclear policy, having been the target of nuclear weapons in 1945. But the generations of survivors of that attack are now pretty much gone, and Japan may conclude a nuclear deal with Japan.

At the same time that’s going on, the United States has asked Pakistan to provide more information about a civilian nuclear agreement that they’ve concluded with China, according to the Times of India.

Additional links

France is braced for a major public union strike on Thursday, protesting raising the retirement age from 60 to 62. However, both houses of Parliament have passed the reform, and only procedural steps are required before the bill becomes law, probably next week. Unions have had to back down from their strike actions in recent days, and Thursday’s strike is the fifth, and possibly the last. Bloomberg

The European Union is headed for a major economic summit on Thursday, following up from last spring’s bailout of Greece. However, there are deep divisions on the way to proceed, and France and Germany are proposing major changes to governance of the EU that would require renegotiation of the Lisbon Treaty. AFP

(Comments: For reader comments, questions and discussion, see the 28-Oct-10 News — Rare earth minerals controversy creates new alliances thread of the Generational Dynamics forum. Comments may be posted anonymously.) (28-Oct-2010) Permanent Link

27-Oct-10 News — Rare earths controversy polarizes China’s relations
Obama administration is becoming more confrontational with China 

Rare earths controversy polarizes China’s relations with the world

From China’s point of view, ceasing exports of rare earth minerals makes a lot of sense outside of ideology. China needs these minerals for its own manufacturing as much as any other countries do, so the Chinese might well reason that they want to keep all of these resources available for themselves.

However, the way events played out, it appears that the Chinese are motivated entirely by revenge and ideology. The result is increasing international polarization.

Rare earth elements have to be extracted from mines, in the way that copper and iron ore are extracted, but as the name implies, they’re much harder to find and extract. There are 17 metals in this category, according to Reuters, all with the names that end in “ium.” The ones in biggest demand are dysprosium, terbium, neodymium, praseodymium and europium.

Rare earth elements are used in electronic devices, everything from the iPhone to hybrid cars to to military weapons. There is some concern that the U.S. military is particularly dependent on China’s rare earth mineral exports.

The rare earth export began as an act of revenge by China following the incident last month where a Chinese fishing boat captain was arrested by the Japanese following a confrontation in waters disputed by both countries. The Japanese backed down in order to avoid antagonizing the Chinese further, but Beijing overreacted enormously. (See “26-Sep-10 News — China turns the screws on a humiliated Japan.”)

China demanded a formal apology and compensation, embargoed exports of rare earth minerals to Japan, and made additional threats. After a few days, it became clear that China had quietly embargoed rare earth mineral exports to other countries as well.

Germany is a country that depends on imports of most of its raw materials, and has been hit particularly hard by China’s embargo. Germany is calling for increased international regulation of the market for rare earth minerals, according to Associated Press, and is appealing to the World Trade Organization for help.

From the point of view of Generational Dynamics, this is just one small incident in what will be an increasing number of incidents, as the level of xenophobia between China and western countries continues to increase. With almost all of these countries in a generational Crisis era, at some point, one of the incidents will cross a line that can’t be ignored, and the result will be war.

Additional links

The Obama administration is no longer courting China, but has been taking an increasingly confrontational stance on such issues as exchange rates, and trade and security issues. The change in attitude reflects the current view that China has no intention of working with the United States. This is one more sign of the increasing xenophobia between China and the U.S. NY Times

Home prices in Hong Kong have almost doubled since the start of 2009, making it impossible for Hongkongers to afford a home. The price bubble is being caused by China’s mainland speculators who see Hong Kong real estate as a good investment opportunity. But officials are increasingly worried that the bubble will burst. Asia Times

Turkey’s role as a member of NATO is going to come under stress at the NATO summit meeting on November 16, particularly on the issue of the plans for a NATO missile shield to protect Europe from possible future nuclear missiles from Iran. Turkey has been developing closer relations with Iran, and has opposed sanctions against Iran, and will probably oppose the missile shield at the NATO summit. EurasiaNet

Osama bin Laden has been searching for someone to take over his own leadership role, and he’s found Ilyas Kashmiri, and 46 year old terrorist with the experience, the connections, and a determination to attack the West — including the United States, making him the most dangerous al-Qaeda operative to emerge in years. He’s hiding out in Pakistan’s tribal areas, and both Pakistanis and Americans are trying to find him. Pakistani officials fear that if Kashmiri carries out another major attack on India or in the West, their country could suffer massive retaliation. Newsweek

There’s another immigration issue in Europe. Immigrants have been pouring into Greece from Turkey and many are put into prisons and camps that a UN investigation charges are “inhuman, degrading and dysfunctional.” Greece has asked the EU for help, and the EU will deploy border patrols in Greece to try to stop the increasingly high numbers of immigrants crossing over. In addition, Greek premier George Papandreou and Turkish Prime Minister Recep Tayyip Erdogan have agreed to work together to solve the illegal immigration problem. At a joint press conference, Papandreou said that a “xenophobic climate” is being cultivated in Europe and hoped that bilateral co-operation with Turkey would help alleviate the trend by reducing the wave of migration. Greece and Turkey have been bitter enemies for millennia. EU Observer

In fact, anti-Muslim and xenophobic feelings are growing in Europe, and are propelling right wing policy. Washington Post

(Comments: For reader comments, questions and discussion, see the 27-Oct-10 News — Rare earths controversy polarizes China’s relations thread of the Generational Dynamics forum. Comments may be posted anonymously.) (27-Oct-2010) Permanent Link

26-Oct-10 News — Xenophobia in Framingham, Massachusetts
U.S. Treasury sells bonds with negative yield for first time in history 

Xenophobia in Framingham, Massachusetts

On Monday evening, I was moderator for a debate between three candidates running for the office of town representative from Framingham, Massachusetts, to the legislature on Beacon Hill.

I used to live in Framingham until last year, when I moved to Cambridge. It’s an interesting town for several reasons, one of which is that it’s still a town, and still has town meetings instead of a mayor. In fact, Framingham is the largest town in the United States.

Framingham is located about 25 miles west of Boston. It’s the target of unending snobbery by the reporters at the major newspapers of the area, the Boston Globe and the Middlesex News, who consider the wealthier municipalities such as Wellesley and Wayland to have superior people. Still, Framingham is a great place to live, with great schools and great shopping.

You would think that the economy was the most important topic in the debate, but actually it wasn’t. The questions that came in from Framingham residents were only tangentially related to the economy. People seem to have resigned themselves to a bad economy, and that there’s nothing that any candidate can do about.

The issue that dominated the debate was immigration or, as I describe it frequently on this web site, xenophobia.

However, the target of the xenophobia was not Muslims or Roma Gypsies or Mexicans. The target is Brazilians, because Framingham has a large community of Brazilian immigrants, including a significant number of illegal immigrants.

As I was sitting there moderating, presenting the questions and listening to the answers, I was struck by how the debate going on in that little room between those three candidates was a microcosm for the debates going on in the entire world.

On a global basis, the first point to be made is that the xenophobia story is not just about Muslims. The issue everywhere is about immigrants of any kind.

The second point is that the issues are always the same — immigrants take jobs, immigrants go on welfare, immigrants cause crime.

And of course, both sides have valid points. Immigrants complain of incessant discrimination, but many immigrants are also very contemptuous of the societies that they live in. In many cases, immigrants are so contemptuous of their hosts that they consider crime against their hosts to be completely acceptable. The local populations return the favor by increasingly being contemptuous of all the people in the immigrant community.

Some people may argue that Muslims ARE a special case because they attacked America on 9/11/2001. That’s certainly true, but as far as I can tell, that attitude is much less true in Europe than it is in America. There’s a lot of xenophobia in Europe directed at Muslims, but what people say is very similar to what they say about the Roma Gypsies, and sometimes even the Jews.

On the other hand, Europeans have a different view of terrorist acts. Europeans are well aware that home-grown groups, including the Irish Republic Army and Basque separatists, have also perpetrated terrorist acts.

For example, from the point of view of someone in Great Britain, at around the time that Muslims were committing the 9/11 attacks, the Irish Republican Army was the real danger. Here’s a list of terrorist attacks in Great Britain since 2000, that I’ve taken from Wikipedia:

  • 2000 1 June: Real IRA bomb explodes on Hammersmith Bridge, London
  • 2000 20 September: Real IRA fired a RPG at the MI6 HQ in London SIS Building
  • 2001 4 March: The Real IRA detonate a car bomb outside the BBC’s main news centre in London. One London Underground worker suffered deep cuts to his eye from flying glass and some damage was caused to the front of the building.[14] (See 4 March 2001 BBC bombing)
  • 2001 16 April: Hendon post office bombed by the Real IRA.
  • 2001 6 May: The Real IRA detonate a bomb in a London postal sorting office. One person was injured.[15]
  • 2001 3 August: A Real IRA Bomb in Britain explodes in Ealing, West London, injuring seven people.[16] (See 3 August 2001 Ealing bombing)
  • 2001 4 November: Real IRA car bomb explodes in Birmingham[17]
  • 2005 7 July: The 7 July 2005 London bombings conducted by four separate Islamist extremist suicide bombers, killing 56 people and injuring 700.
  • 2007 January – February: The 2007 United Kingdom letter bombs
  • 2007 30 June: 2007 Glasgow International Airport attack perpetrated by Islamist extremists.
  • 2008 22 May: 22 May 2008 Exeter bombing by an Islamist extremist, injuring only the perpetrator.

Thus, someone in Great Britain might credibly argue that Islamist terrorists are less dangerous than IRA terrorists.

As I’ve said many times, from the point of view of Generational Dynamics, xenophobia of all kinds is increasing around the world, as the survivors of World War II disappear.

The generations of survivors of WW II remembered how xenophobia in the 1930s led to the greatest world war in history, and they vowed to spend their lives preventing anything like that happening again. But now those people are gone. Xenophobia in all forms is increasing around the world, and it’s going to lead to another world war.

U.S. Treasury sells bonds with negative yield for first time in history

For the first time in history, bonds issued by the U.S. Treasury were in such heavy demand that purchasers push the bond price up high enough so that the yield (interest rate) was negative, at -0.55%, according to Bloomberg.

Imagine that you have a few million dollars sitting around, that you’d like to put somewhere safe. You could invest in stocks, but stocks are too risky. You could deposit it in the bank, but the FDIC only insures $200,000 or so. You could put the money into your mattress, but you’d be afraid of being robbed.

The best solution would be to purchase Treasury bonds. Normally, you would expect to receive interest payments, but not the bonds that were sold on Monday. In that case, you have to pay the Treasury interest for taking your money.

Admittedly, it’s more complicated than that. These are TIPS bonds — Treasury Inflation-Protected Securities — which means that the bonds will pay more in case of inflation in the years to come. Thus, investors are willing to accept negative interest rates in the hope that inflation rates will be high.

However, as I’ve been saying for eight years now, that’s a false hope. The economy is in a deflationary spiral, and the hyperinflation that investors are hoping for will not occur.

Interest rates have been close to zero for most of those eight years, and pundits have been predicting (hyper)inflation for most of those eight years. For these pundits, hyperinflation is like prosperity: They’re both right around the corner.

Negative yields are a sign of a continuing deflationary spiral. A negative interest rate means that investors are willing to pay to keep their assets in cash, which means that they expect cash to become more valuable, which is what deflation means.

Additional links

Both houses of France’s parliament are expected this week to pass the final form of pension reform legislation that will raise the retirement age from 60 to 62. Public sector union workers who have virtually shut down France’s refineries for the last few weeks are now returning to work, and three of the twelve refineries are now reopening. In addition, the port of Marseille has been blocked for weeks, and leaving dozens of oil tankers anchored in the harbor waiting to dock. The blockade has now been lifted, and the oil tankers are beginning to unload their cargoes. France 24

A new dispute has broken out between the Israelis and the Palestinians. Over the weekend, Israeli Prime Minister Benjamin Netanyahu warned the Palestinians not to take unilateral states to achieve statehood by going directly to the United Nations to request an international mandate. Netanyahu’s warning has pissed off the Palestinians, who say that Israelis should not lecture the Palestinians, in view of their record. Meanwhile, the peace talks are still on hold, since September 26 when the moratorium on West Bank settlements expired. It’s believed that the Obama administration is operating behind the scenes in an attempt to bring about a compromise, and get the big peace deal in the sky. VOA

Another Sufi shrine has been attacked by Sunni Islamist terrorists in Pakistan, this time in central Pakistan in the province of Punjab. Al-Qaeda linked terrorists have been attacking Shia and Sufi shrines for months. Daily Times (Pakistan)

Joint military operations between the U.S. and South Korea, with exercises planned for the Yellow Sea this month, have been postponed. According to the South Koreans, the exercises were delayed in order not to antagonize the Chinese and North Koreans, prior to the G20 summit in Seoul on November 11-12. But the Pentagon denies this, and says the delay is caused by scheduling snags. Reuters

China’s recent decision to suspend export of rare earth minerals has spurred Japan and India to expand their bilateral ties in research, development and recycling of rare earth minerals and metals. This is an interesting development, because it supports the view that in the coming Clash of Civilizations world war, India and Japan will be allied against China. The Hindu

(Comments: For reader comments, questions and discussion, see the 26-Oct-10 News — Xenophobia in Framingham, Massachusetts thread of the Generational Dynamics forum. Comments may be posted anonymously.) (26-Oct-2010) Permanent Link

25-Oct-10 News — Observers breathe sigh of relief at Bahrain election
H1N1 swine flu virus mutates in Australia 

Observers breathe sigh of relief at Bahrain election

Observers are breathing a sigh of relief that Bahrain’s parliamentary election on Saturday went smoothly, and that there are no threats of violence in the aftermath, so far.

Persian Gulf region. Bahrain's 33 small islands are a tiny dot in this map
Persian Gulf region. Bahrain’s 33 small islands are a tiny dot in this map

Bahrain is an important American ally because it houses America’s Fifth Fleet, and because it’s a major financial center in the Mideast.

However, the country is governed by Sunni Muslim officials, while 2/3rds of the population are Shia Muslim. Iran has been stirring up trouble recently, and claims Bahrain is part of Iran, as I described last month in “20-Sep-10 News — Unrest grows in Bahrain over Shia ‘terror network’ arrests.”

The election has been closely watched in the Arab community, and the verdict seems to be that it was a great success, according to the Arab News.

According to the article, “The international media had access to all election booths on Saturday and the journalists were free to speak to anyone they wanted. The whole exercise was quite transparent and beamed live on state television. All key ministers were at hand and more than willing to answer difficult questions from the media, indicating the government’s confidence in carrying out this important democratic exercise.”

The opposition party Al-Wefaq, which represents the Shia majority, gained an additional seat in the National Assembly, though they’re still in the minority.

Although the election was successful, severe sectarian divisions remain, according to Geopolitical Monitor and Global Research, and Iran is certain to continue to exploit them.

Additional links

Since it broke out in March, 2009, and spread around the world, the H1N1 swine flu virus has been very stable, with almost no mutations. However, it may now be starting to mutate, as a new form has begun to predominate in Australia, New Zealand and Singapore, where the winter flu season is just ending. Fox News

However, as the flu season begins in the northern hemisphere, the number of deaths from pneumonia and flu has spiked much higher than usual in the U.S. The H1N1 swine flu virus normally targets younger people, since older people are protected by antibodies made during the H1N1 flu outbreaks in the 1950s. Thus, a peculiar thing happened in 2009: The H1N1 flu virus “crowded out” the normal seasonal flu, and the result is that fewer old people died from flu in 2009. This means that old people are at higher risk in the new flu season, and this might explain the spike in deaths. Recombinomics

Anti-Japan protests in China continued on Sunday. The police broke up demonstrations by hundreds of protestors unfurling banners and demanding a boycott of Japanese products. There was no violence. Reuters

For 17 days after the Chile miners were trapped, nobody knew whether they were dead or alive. Then one of the miners attached a note to a probe. The note read, “Estamos bien en el refugio los 33” (“We are okay in the refuge, the 33 of us”). This note is being declared a work of art, and the phrase has been copyrighted in the name of its author, Jose Ojeda. BBC

(Comments: For reader comments, questions and discussion, see the 26-Oct-10 News — Observers breath sigh of relief at Bahrain election thread of the Generational Dynamics forum. Comments may be posted anonymously.) (25-Oct-2010) Permanent Link

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