Watching the pot come to a boil

“Watching the pot come to a boil”

11-Jan-11 News — Riots in Bangladesh as stock market appears to be crashing
Illinois may vote to increase income taxes by 75%

Riots in Bangladesh as stock market appears to be crashing

Almost the entire city of Dhaka, the capital of Bangladesh, came to a standstill on Monday, as thousands of angry investors poured into the streets and staged violent demonstrations, according to Bangladesh News 24.


Dhaka Stock Exchange - One year
Dhaka Stock Exchange – One year

The stock market had fallen 7.8% on Sunday, largest in the history of the Bangladesh stock market. It then fell an additional 9% on Monday during just the first hour of trading, after which trading was ended for the day. Rioting spread to other cities after trading was suspended.

There seems little doubt that the stock market was in a large bubble. The stock market index rose 80% in 2010, peaking on December 5 of last year. Then, on December 19, the market fell 6.73% fell, according to CNN. This trigger protests in Dhaka and around the country, though not as large as the new protests.

There are 3.5 million investors in the Bangladesh stock market, and this appears to be a full-scale panic. Regulators are trying to use every tool available to them stop the panic, but it has not yet been announced with trading will resume.

If you’re an investor in the stock market, then you should understand that the same thing could happen to you at any time. There were several “mini-panics” last year, especially around the time of the bailout of Greece. The euro zone is going through another crisis this week, so be prepared for anything.

Additional links

The state that’s worst off financially — even worse off than California — is Illinois, with a deficit of at least $13 billion, more than $6 billion in unpaid bills to social service agencies, schools and funeral homes, and the most underfinanced state pension system. The Illinois legislature is now on the verge of voting to increase the state income tax by 75%. NY Times

It’s been revealed that some time in September or October of last year, Chinese troops crossed the border to Indian-controlled Kashmir and forced construction workers to abandon their work. DNA India

Why Chinese mothers are superior. Wall Street Journal (Access)

(Comments: For reader comments, questions and discussion, see the 11-Jan-11 News — Riots in Bangladesh as stock market appears to be crashing thread of the Generational Dynamics forum. Comments may be posted anonymously.) (11-Jan-2011) Permanent Link

10-Jan-11 News — Defense Secretary Gates announces an arms race with China
Japan and South Korea unite against China and North Korea

Defense Secretary Gates announces an arms race with China

US Defense Secretary Robert M. Gates announced on Friday that the Pentagon is investing in a range of new weapons in response to China’s military buildup, according to the NY Times. China has been rapidly building up its military since the 1990s, but this is the first time that the Pentagon has responded to China’s buildup with more than words.

 

“The American weapons that Mr. Gates was referring to included investments in a new long-range nuclear-capable bomber aircraft, which the Pentagon had stopped developing in 2009, as well as a new generation of electronic jammers for the Navy that are designed to thwart a missile from finding and hitting a target. At a Pentagon briefing on Thursday, Mr. Gates said that the jammers would improve the Navy’s ability to “fight and survive” in waters where it is challenged.Mr. Gates was also referring to continued investment in the Joint Strike Fighter, the Pentagon’s newest radar-evading fighter jet.”

From the point of view of Generational Dynamics, China is arming and planning for a major war with the United States.

However, hope springs eternal. Secretary Gates arrived in Beijing on Sunday for discussions with China’s president and defense minister. According to VOA, Gates says that he wants to persuade China to engage in regular military talks with the United States to prevent misunderstandings that could lead to conflict.

In ten days, China’s president Hu Jintao will arrive in Washington for discussions with President Obama.

Japan and South Korea unite against China and North Korea

Japan and South Korea have had very bitter relations since the end of World War II, because Japan had colonized Korea during the first half of the 20th century, and because the Japanese army used Korean women as “comfort women” during WW II.

But now Japan and South Korea are faced with new realities. These include China’s military buildup, North Korea’s nuclear weapons buildup, and China’s close relationship with North Korea.

As a result, Japan and South Korea are being forced to choose sides, and they’re choosing each other, according to Bloomberg. Japan and South Korea are boosting military and economic ties in ways that would have been politically impossible just a few years ago.

Governments around the world struggle with increasing food prices

Riots continued in Algeria for a fifth day on Sunday over high food prices and unemployment. Since they began on Tuesday, three young people have been killed, and more than 1,000 have been arrested, according to the Interior Minister quoted by Magharebia.

Fourteen people were killed on Sunday in clashes with security forces in Tunisia, near the border with Algeria, according to VOA.

In both countries, policemen were killed as a result of the clashes.

This comes as the U.N. Food and Agriculture Organization (FAO) announces that its food price index has reached its highest level since it was begun in 1991. Prices have risen 32% in just the last half of 2010.

High prices sparked worldwide food prices in 2008. Everyone hoped that food prices would come down, and they did for a while in 2009, and again early in 2010, but they really surged in the last half of 2010. They’re now up to new highs, higher than in 2008, and governments around the world are looking for ways to head off problems.


World food situation (FAO)
World food situation (FAO)

In Bangladesh, the Prime Minister announced a rationing system on Sunday, according to the Daily Star. Rice will be distributed to “the destitute and ultra-poor” at subsidized prices through ration cards.

India, which still has in effect from the 2008 crisis an export ban on rice, is also considering a plan to distribute food grains at subsidized prices to the BPL (people Below Poverty Line), according to Business Standard (India).

India’s consumers have been particularly hit by a doubling of the price of onions in the last month, according to Sify (India). However, the General Secretary of the Vegetable Traders Association is quoted as saying that the rise in onion prices is only temporary, as a fresh crop is ready to be harvested.

From the point of view of Generational Dynamics, what we’re seeing is what I call the “Malthus effect,” a continuing increase in the price of food as the population grows faster than the supply of food. (See “Food: Green revolution v Malthus effect.”)

Food prices were steady or declining until 2002. Since 2002, food prices have been surging much faster than inflation.

The survivors of World War II (GI and Silent generations) were well aware of the horrors of famine and starvation that occurred during the war, and they developed the Green Revolution to make sure that everyone in the world would be fed.

The Green Revolution led to huge increases in food production in the 1960s and 1970s, but for some reason, many people believe that the Green Revolution is some magic potion that will last forever. In many ways it was a one shot deal — improve crop yields by using a lot more water, fertilizer and insecticides. Since then, water has gotten scarcer, and fertilizer and insecticides have been overused. New, modern equipment that was made available in the 1970s is now worn out and rusting.

It’s really not surprising that the surge in food prices occurred in the same time frame as the tech, real estate and credit bubbles that have developed into the current global financial crisis. The same generational greed and nihilism that led to the global financial crisis has also led to the collapse of the Green Revolution.

Additional links

After a relaxing holiday season, the euro zone financial crisis is coming to the fore again. Germany, France and other euro zone countries are pressuring Portugal to seek a bailout from the EU and IMF to prevent Portugals financial problems from spreading to other countries. This is the same kind of game that was played with Ireland last year, and if it plays out in a similar way, then Portugal will stall on asking for aid in order to gain leverage in having to pay lower interest rates on the bailout money. Reuters

Tensions are also rising again in Thailand. On Sunday, some 30,000 red-shirt anti-government protesters filled the streets of downtown Bangkok in a peaceful demonstration. Red Shirt organizers say that they plan to hold regular demonstrations twice a month. CNN

165 Israeli academics are refusing to participate in academic functions at the Ariel University Center of Samaria, because it’s across the “Green Line” in the West Bank, in territory claimed by the Palestinians. Jerusalem Post

(Comments: For reader comments, questions and discussion, see the 10-Jan-11 News — Defense Secretary Gates announces an arms race with China thread of the Generational Dynamics forum. Comments may be posted anonymously.) (10-Jan-2011) Permanent Link

9-Jan-11 News — Food riots kill two in Algeria
Algerians cut duties to reduce food prices

Food riots in Algeria kill two and injure hundreds

Two people were killed and hundreds injured in the fourth day of food riots in Algeria on Saturday, according to VOA. An additional body was found in a hotel burned down by rioters.

The riots come as the U.N. Food and Agriculture Organization (FAO) food price index reached historic highs, higher than when the worldwide food riots occurred in 2008. World food prices have increased by 32% in just the last half of 2010.

The rioting began this week after the sudden price hike of food staples such as flour, sugar and oil.

A panicked Algerian government reacted by saying it will cut taxes and import duties on some staple foods, according to Al-Jazeera. Officials claim that this will reduce the price of sugar and cooking oil by 41%. However, many people claim that the riots go beyond high food prices to general discontent with the Algerian government.

(Comments: For reader comments, questions and discussion, see the 9-Jan-11 News — Food riots kill two in Algeria thread of the Generational Dynamics forum. Comments may be posted anonymously.) (9-Jan-2011) Permanent Link

8-Jan-11 News — Bernanke emphatically rejects bailing out states and cities
First anniversary of the daily news summary

First anniversary of the daily news summary

Here’s what I wrote exactly one year ago:

 

“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.”

Much to my own amazement, I’ve only missed five days or so in the last year, even though I do this in addition to my full time job. (By that, I’m referring to my software engineering job that pays me a salary, as opposed to this full time job that pays nothing — except for the donations that I receive from those of you who are kind enough to provide them.) Each evening as I write an article, I ask myself why the hell I keep doing this, and think it’s about time to quit. But then I get the article written and posted, and it (hopefully) looks good, and then I decide that it was all worth it, for at least another day.

I should mention that even after all this time, I still respond to most e-mail and comment questions that I receive. However, I’m very often a few days or weeks behind, but in almost all cases I do respond (eventually). By the way, I give a higher priority to queries posted in the Generational Dynamics forum, since in that case the response is seen by more people.

I know that I’ve helped a lot of people, because many people have written to me thanking me for this service, which is entirely altruistic. The nation and the world are entering a truly terrible time, and I always say that you should treasure the time you have left, and use the time to prepare yourself, your family, your community and your nation. The purpose of this web site is to help you prepare, and I’m pleased to be able to provide that help.

Happy new year to everyone.

Bernanke emphatically rejects bailing out states and cities

Federal Reserve Chairman Ben Bernanke was appearing on Friday before the Senate Budget Committee, and was asked whether the Fed could provide money through quantitative easing to bail out state and municipal budgets.

It’s a serious problem. States are collectively forecasting a budget gap of an enormous $113 billion for the fiscal year starting in July, according to Reuters.

I’ve heard several financial analysts and pundits say that there will have to be many municipal bankruptcies this year, especially in California. There’s apparently a severe political compulsion that’s going to lead to these bankruptcies.

The problem in many municipalities is that they’re bound by enormous union contracts that demand cadillac salaries and cadillac benefits far in excess of corresponding salaries and benefits in the private sector. Most unions have been playing hardball and refusing to agree to any cuts whatsoever, under the assumption that either the state or the federal government will be forced to provide a bailout.

That’s why so many municipalities are considering bankruptcies. The money to pay these salaries and benefits simply does not exist, and cannot be raised. By going into bankruptcy court, a municipality can ask the judge modify or eliminate the union contracts to affordable levels.

Naturally, this becomes a big issue for the Democrats in Congress, who are politically pressured to provide bailouts to the cities and states. The Reuters article referenced above points out that last year’s $814 stimulus plan included the largest transfer of federal funds to states in U.S. history. There is little appetite to repeat this.

So Democratic Senators on Friday asked Bernanke if the Fed could bail out the states and municipalities. His response:

 

“They should not expect loans from the Fed. It’s going to be difficult, but on the other hand there is some improvement in the economy and tax revenues have actually picked up. …”I don’t think the Federal Reserve has the authority. And I don’t think it would be appropriate for us to do that. This is something that would take place over a period of time … And there’d be plenty of time, I think, for Congress and for the state legislature to look at alternative solutions.”

Almost all Republicans and many Democrats are coming out against any fiscal bailout of the states as well, according to Wall Street Journal (Access).

Republican House Budget Committee chairman said, “If we bail out one state, then all of the debt of all of the states is almost explicitly put on the books of the federal government.”

Thousands of foreclosures on hold after Massachusetts court ruling

The Massachusetts Supreme Judicial Court on Friday ruled that two foreclosures were invalid because the paper trail for the too tangled, and the foreclosing banks could not establish clear ownership, according to the Boston Globe.

Although only two mortgages are involved, this court ruling could affect thousands of foreclosures, and may have national implications. As I described in “22-Oct-10 News — Foreclosure mess turns into a major crisis,” this problem may be good news for homeowners, who now will be able to stay in their homes a while longer, but it’s bad news for the real estate market as a whole, since it puts many purchases of foreclosed homes into question.

The Washington Post quotes one analyst as saying that this case is “enough to put serious cloud on title through the whole system and that’s a problem.”

Goldman Sachs investment plan for Facebook shows that little has changed

There’s an SEC rule that says that once a privately held company has 500 investors, then the company is required to open its books and divulge financial information. This makes sense because you don’t want a company to mislead or defraud thousands of investors.

However, as we’re well aware, the people on Wall Street consider rules to be an annoyance to be avoided, and they’ve now found a way to get around this rule.

Well, Facebook is generating so much profit that a lot of investors want to invest in the company, but they don’t want to have to divulge their financials, according to Reuters.

“No problem!” says Goldman Sachs, one of the leaders among the many banks that five years ago sold defective mortgage-backed collateralized debt obligations to millions of investors, causing the global financial crisis.

Goldman has created a special investment vehicle in which investors can buy shares. The special investment vehicle will then use the money to invest in Facebook. Voilà! You can have thousands of investors, but there’s only one investor in Facebook itself, so there’s no problem.

As I keep saying on this web site, the global financial crisis was caused by massive fraud in almost every major financial institution in the world, perpetrated by nihilistic, greedy Gen-Xers, enabled by their incompetent, greedy Boomer bosses.

And the point is that the same people are still in the same jobs, looking for news ways to screw investors for their own personal gain. That’s one way that you know that there’s still a worse major financial crisis yet to come.

Even apart from this deal, Facebook looks to me like a disaster in the making. I don’t have anything against the company — as far as I know, they’re a fine company run by a fine management team.

But Facebook appears to me to be a one-company bubble. It’s a social networking web site with more than 500 million users, and it has rock star popularity. The problem is that there may be a different rock star next year, and the next generation of teenagers may decide to leave Facebook just as fast as they joined. The situation is even worse because the Goldman deal shows that they’re willing to cut corners to make money unethically.

It wouldn’t take much for that bubble to burst, causing investors to lose a lot of money.

Investment firm predicts repeat of 2005-2007 stock market bubble

As I’ve pointed out a number of times, financial pundits and analysts seem to believe that “prosperity is just around the corner,” because they believe that the real estate and credit bubbles of the mid 2000s decade can be reflated. From the point of view of Generational Dynamics, this is impossible, but that doesn’t stop the analysts from predicting it.

Here’s a Bloomberg article that says it explicitly:

 

“The Standard & Poor’s 500 Index will rally back up to “mid-2008 levels,” in part because conditions resemble those at the end of 2004, when shares gained almost three more years, said MKM Partners.The S&P 500 broke to new highs at the end of 2010, just as in 2004. In both years, the index’s Moving Average Convergence/Divergence line, calculated by subtracting the index’s average level during the past 26 months from the average over the past 12 months, rose above zero and its stochastics chart shows usually strong momentum. The similar pattern suggests the current bull market may have more room to rally, said Katie Stockton, MKM’s chief market technician.

“The uptrend is equally mature” as it was at the end of 2004, Stockton, who is based in Stamford, Connecticut, wrote in a note dated Jan. 2. “We are thus encouraged by the ability of the market to extend its uptrend from 2005 through 2007 and would not be scared away from the market simply because it has already seen two years of impressive gains.””

Believe me, Dear Reader, this is a pile of crap. Katie Stockton, who is quoted in the article, doesn’t have the vaguest idea what’s coming, but she’s developed this mathematical model that justifies her six or seven-digit salary, since it tells people what they want to hear.

It reminds me of the super-sophisticated mathematical models that were used to justify the sales of collateralized debt obligations five years ago. Those models, it turned out, were based on mathematically impossible assumptions. (See “Financial Crisis Inquiry hearings provide ‘smoking gun’ evidence of widespread criminal fraud.”)

As I keep saying, over and over, the same people who caused the financial crisis in the first place are still in the same jobs, doing the same kinds of things, looking for new ways to skirt the rules and defraud investors. That’s how we know for sure that the worst of the financial crisis is far from over.

Additional links

Yields (interest rates) on the bonds of several European countries rose sharply this week, indicating that investors are betting that there will be defaults. The euro currency fell sharply against the dollar. The reason is that the euro is facing a major test next week: Germany, the Netherlands, Italy, Spain and Portugal are all going into the bond market next week, seeking to borrow 20-22 billion euros. Reuters

Despite the fall in the unemployment rate to 9.4%, analysts are deeply disappointed by the Friday’s jobs report, because employers added only 103,000 jobs in December, when analysts had predicted a figure closer to 200,000. The fall in the employment rate is apparently caused by a shrinkage in the nation’s workforce by 260,000 persons from November, as more Americans retired, went back to school or simply gave up looking for jobs. LA Times

Financial superstar nation Brazil may be facing a financial crisis. Consumer credit has shot up fivefold since 2002, and the credit bubble is showing signs of being about to burst. Bloomberg

As we’ve reported, Greece has generated a great deal of controversy by proposing to build a fence (similar to the one on the US border with Mexico) along the border with Turkey, to prevent illegal migration. This has triggered a meeting between Greek Prime Minister George Papandreou and Turkish Prime Minister Tayyip Erdogan, at which they showed unity over the problem of illegal migrants. Reuters

Pakistan’s government had been close to collapse this week, because a key party, the MQM, had pulled out of the PPP’s governing coalition. The split had been triggered when Prime Minister Yousuf Raza Gilani had imposed a fuel surcharge as an austerity measure, so that Pakistan can avoid bankruptcy. Gilani has caved in and rescinded the fuel surcharge, and the MQM will rejoin the coalition. I guess the MQM is hoping for a bailout from either China or the U.S. What this shows, as much as anything, is that unpopular austerity programs will not survive long, until there’s a crisis that forces austerity. Nation (Pakistan)

Older generations in Pakistan are mourning the loss of a once tolerant, relaxed nation. Associated Press

Food riots in Algeria spread into Tunisia on Friday, as protests and strikes driven by unemployment and high food prices swept across the country. Videos of demonstrations are appearing on the internet, despite attempts by Tunisia’s government to control internet postings. LA Times

Tunisia’s government is conducting a vigorous attack on internet users to prevent information unfavorable to the government from reaching the internet. The Tunisian authorities have allegedly carried out targeted “phishing” operations: stealing users passwords to spy on them and eradicate online criticism. Al-Jazeera

Muslim girls are often forced to lead double lives in Europe. They have sex in public restrooms and stuff mobile phones in their bras to hide their secret existences from their strict Muslim families. They are often forbidden from visiting gynecologists or receiving sex ed. In the worst cases, they undergo hymen reconstruction surgery, have late-term abortions or even commit suicide. Says one mother to her daughter, “An unmarried woman who has lost her virginity might as well be a whore.” Spiegel

(Comments: For reader comments, questions and discussion, see the 8-Jan-11 News — Bernanke emphatically rejects bailing out states and cities thread of the Generational Dynamics forum. Comments may be posted anonymously.) (8-Jan-2011) Permanent Link

7-Jan-11 News — Food riots begin again as food prices reach historic highs
China’s military developments catch Americans by surprise

Food riots begin again as food prices reach historic highs

Riots over rising food prices and chronic unemployment spread across Algeria on Thursday, with youths torching government buildings and shouting “Bring us Sugar!” according to Associated Press.

The food price index of the U.N. Food and Agriculture Organization (FAO) has risen 32% in just the last half of 2010, according to Bloomberg.

Here’s a graph that I posted in November, showing food prices through October:


FAO Food Price Index versus CPI, 1990 to October 2010
FAO Food Price Index versus CPI, 1990 to October 2010

It had been hoped at that time that food prices would start to fall again, but they didn’t. Instead, the price index continued to climb, reaching new highs in December.


Food prices rose rapidly in India during December (Calcutta Telegraph)
Food prices rose rapidly in India during December (Calcutta Telegraph)

In India, food inflation increased to 18.32% for the week ending December 23, primarily due to a steep rise in onion prices, according to the Business Standard (Delhi). This was about twice the rate in November. Chief Economic Adviser Kaushik Basu said: “It is an utter mistake to think that it is fully within the control of the government to move prices of food up and down.”

It had been hoped that food inflation would moderate in 2010, after a significant rise in 2009. During the summer it did moderate, but in recent weeks it’s surged.

Pakistan’s government, which is in near total paralysis after the assassination of Salman Taseer that we’ve been reporting on, banned onion exports to India over land routes on Thursday, in order to lower onion prices in Pakistan. This move, which was completely unexpected, is being criticized in both India and Pakistan, according to the Calcutta Telegraph.

Food prices are now higher than they were in 2008, when surging prices caused food riots around the world. Officials are claiming that the situation is not as bad today, since there are larger stocks of wheat and other commodities available. (However, I’m not sure why food prices are increasing, if there are these huge stocks available.)

From the point of view of Generational Dynamics, what we’re seeing is what I call the “Malthus effect,” a continuing increase in the price of food as the population grows faster than the supply of food. (See “Food: Green revolution v Malthus effect.”)

As you can see from the above graph, food prices were steady or declining until 2002. Since 2002, food prices have been surging much faster than inflation.

The survivors of World War II (GI and Silent generations) were well aware of the horrors of famine and starvation that occurred during the war, and they developed the Green Revolution to make sure that everyone in the world would be fed.

It’s really not surprising that the surge in food prices occurred in the same time frame as the tech, real estate and credit bubbles that have developed into the current global financial crisis. The same generational greed and nihilism that led to the debauched use of credit has also led to the collapse of the Green Revolution.

Additional links

American officials have been caught by surprise by China’s development of a stealth fighter, along with news of advances in anti-ship missiles. The fighter is only a prototype that won’t see service for years, but the missile is nearly operational. As we’ve said many times, China is preparing to lead a new world war against the United States and the West. LA Times

The assassination of Pakistani Punjab’s governor Salman Taseer by his “Elite Force” bodyguard is raising concerns in Washington and around the world that a similar assassination attack may give al-Qaeda linked terrorists access to Pakistan’s nuclear arsenal. Times of India

Thousands of Coptic Christians packed churches across Europe and the Middle East to celebrate Christmas Eve mass on Wednesday evening. Tensions were high after last week’s bombing of a Coptic church in Alexandria, and continued internet threats by al-Qaeda linked groups that more churches would be bombed. Muslims had offered to visit churches in Egypt to act as “human shields” against further attacks, but church officials said that the presence of Muslims would be harmful to “the feelings and the sensitivities of the relatives of the victims.” Al-Jazeera

Floods in Australia, the worst in 50 years, have affected about 200,000 people and caused $5 billion. The coal industry has been particularly hard hit, and coal exports have been brought to a standstill. Reuters

Homeowners who would like to reduce mortgage payments, but don’t qualify for refinancing, can use a little-known strategy called “recasting” or “re-amortization.” NY Times

New research says that when a woman cries, a man’s sexual desire for her decreases. Australian

(Comments: For reader comments, questions and discussion, see the 7-Jan-11 News — Food riots begin again as food prices reach historic highs thread of the Generational Dynamics forum. Comments may be posted anonymously.) (7-Jan-2011) Permanent Link

6-Jan-11 News — Pakistan melts down as US/Nato forces struggle in Afghanistan
Muslims will attend Coptic Christmas mass in Egypt

Pakistan melts down as US/Nato forces struggle in Afghanistan

Islamist lawyers showered Mumtaz Qadri with roses when he arrived in court on Wednesday to face charges of having assassinated Salman Taseer, the governor of the province of Punjab in Pakistan, according to Dawn (Pakistan). And MEMRI has translated a statement by 500 Pakistani religious scholars, mostly belonging to the terrorist organization Jamaat Ahle Sunnat Pakistan, praising Qadri for keeping alive a “tradition of 1,400 years in Islam” which requires the killing of anyone committing an act of blasphemy against Prophet Mohammed.


Protesting female students at Red Mosque seminary wearing burkas and carrying bamboo sticks in 2007
Protesting female students at Red Mosque seminary wearing burkas and carrying bamboo sticks in 2007

The assassination is only the latest in an almost weekly stream of terrorist attacks by al-Qaeda linked groups in Pakistan. Many of them have been particularly targeted shrines and worshippers of Sufi and Shia Muslim sects, considered by Islamists to be apostasies.

Pakistan has been a troubled nation since its birth, where there have been militias particularly targeting Indians in Kashmir.

Pakistan really began turning against itself in 2007, with the bloody confrontation between police and students in Lal Masjid or the Red Mosque in Islamabad. (See my 2007 article, “Pakistanis are increasingly joining forces with al-Qaeda.”)

Trouble began when female students began wearing head-to-toe black burkas and, in a move heavy with sexual symbolism, began carrying bamboo sticks. They demanded that all the Islamabad prostitutes be arrested for violating Islamic law, but they weren’t taken seriously until they began abducting prostitutes and locking them in the seminary. This led to a 36-hour siege and gunfight with police — the male students were carrying guns, not bamboo sticks — that ended up killing more than 100 people.

A seminary student interviewed before the gunfight said that she was prepared to die for God. After the six hour gun battle she said, “We are never afraid. One day all lives will end, and if this is the case, then why not give our life to Islam?”

Since then, there have been numerous news stories about boys and girls, having been trained in Islamist madrassas, saying that they were ready to become martyrs to Allah. Sunni Islamist groups in Pakistan seem to have an endless supply of young people willing to become suicide bombers.

Now let’s contrast all this to what’s happening next door in Afghanistan.


Helmand's Sangin district in Afghanistan (McClatchy)
Helmand’s Sangin district in Afghanistan (McClatchy)

On Monday, an influential Afghan tribe leader agreed to put a stop to Taliban attacks in the Sangin district of Helmand, according to McClatchy. The deal is being compared to the “Anbar Awakening” in Iraq, where Sunni Iraqis turned against al-Qaeda in Iraq. This is raising hopes that there’ll be a similar “Awakening” in Afghanistan, bringing the war to an end.

There’s another major similarity to Iraq that, to my knowledge, has never been reported except on my web site.

According to a July, 2007, study by the Jamestown Foundation entitled “The Taliban Fedayeen: The World’s Worst Suicide Bombers?”:

 

“An analysis of the attacks carried out in the last two years reveals a curious fact. In 43% of the bombings conducted last year and in 26 of the 57 bombings traced in this study up to June 15, the only death caused by the bombing was that of the bomber himself. Astoundingly, approximately 90 suicide bombers in this two year period succeeded in killing only themselves. This number exceeds 100 when you factor in those who succeeded in killing only one person in addition to themselves. There was one period in the spring of 2006 (February 20 to June 21) when a stunning 26 of the 36 suicide bombers in Afghanistan (72%) only killed themselves. … These statistics also represent a uniquely Afghan phenomenon that warrants investigation.”

What almost nobody has noticed is that a very similar phenomenon occurred in Iraq.

In April, 2007, I wrote “Iraqi Sunnis are turning against al-Qaeda in Iraq.” I was able to show by quoting documents from a variety of sources that the Iraqis themselves had little interest in fighting against each other, though al-Qaeda did everything possible to provoke them.

One of the most interesting examples was a letter of complaint from al-Qaeda in Iraq leader Abu Musab al-Zarqawi to Osama bin Laden, including the following:

 

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

It was shown that Iraqis were refusing to allow their children to become suicide bombers, and so al-Zarqawi had to import suicide bombers from Saudi Arabia and Jordan.

The experiences of Afghanistan and Iraq are dramatically different from what’s happening in Pakistan, which is increasing turning against itself with its never-ending supply of young suicide bombers.

This dramatic difference has been possibly the most fascinating aspect of my development of Generational Dynamics over these last nine years. When a country has had a recent generational crisis war — as in the case of Iraq, Afghanistan, Iran, Lebanon and Thailand — then the population is strongly attracted away from violence. In particular, a civil war is impossible or, if one occurs, then it fizzles quickly.

But Pakistan’s last generational crisis war was the genocidal war between Hindus and Muslims that followed Partition, the 1947 partitioning of the Indian subcontinent into India and Pakistan.

In many current and historical examples that I’ve studied, the pattern is overwhelmingly consistent. Even when a generational crisis civil war ends, there is little or no internal violence for about 25-30 years. We’ve seen this quite dramatically in Sri Lanka, whose civil war ended last year. Pundits and analysts predicted that fighting would continue, but there has been no fighting whatsoever.

After about 25-30 years after a crisis civil war, low level violence can begin. This violence gradually increases, often punctuated by short-lived peace agreements, until a new war begins decades later.

So what does this mean for the war in Afghanistan? Can that war wind down the same as the war in Iraq seems to be doing?

As I’ve said many times, the answer is no, because of two very important differences between the two countries.

The first difference is that Afghanistan’s last crisis war was an extremely bloody civil war (1992-96), while Iraq’s last crisis war as an external war (the Iran/Iraq war, 1980-88). This means that Iraq’s Sunni and Shia population can comfortably form a shared government, at least for the time being.

With Afghanistan still in a generational Recovery era, there is almost no taste for war of any kind, even between people who, just 15 years ago, were literally slitting each others throats.

This is where the second difference becomes important. The Iraqi Sunnis were Iraqis first and Sunnis second, and had little identity with external Arab Sunni groups.

But the Sunni group in Afghanistan is the Pashtuns, and there is a strong identity group connection with the Pashtuns in Pakistan. The Taliban terrorist group is drawn from the Pashtun ethnic group. From the point of view of Generational Dynamics, this is a fascinating research subject, since the Afghan Pashtuns are in a generational Recovery era, while the Pakistan Pashtuns are in a generational Crisis era.

But the Afghan Pashtuns will not be able to eject the Pakistani Pashtuns in the way that the Iraqis ejected al-Qaeda in Iraq.

This means that Pakistan’s never-ending supply of suicide bombers becomes Afghanistan’s never-ending supply of suicide bombers.

My expectation is that there will be more deals with Afghan tribal leaders like the one that was announced on Monday, especially in the western regions far from the Pakistani border.

But I expect no such deals near the Pakistani border, or if there are any, they will be quickly sabotaged by the Pakistani Pashtuns. If only the border between Pakistan and Afghanistan could somehow be closed, then the Afghan war would end quickly. But that’s not possible.

The larger picture is that Afghanistan is to play a secondary role to the major war, the one between Pakistan and India. This will refight the 1947 war between Hindus and Muslims, with Pakistan itself torn between Sunni and Shia Muslims.

Pakistan has not yet recovered from last year’s devastating floods that covered 20% of the country. That lawyers, supposedly committed to upholding the law, would be throwing rose petals at the man who killed the governor of Punjab is almost too much to believe. And this comes as the government is close to collapse because a political party has pulled out of the governing coalition. Pakistan is truly staring into the abyss.

Additional links

Christmas is January 6 for Coptic Christians. After the bombing of the Coptic Christian church in Egypt last week, many Egypt Muslims are planning to attend the Christmas mass in sympathy with the Christians. Ahram

(Comments: For reader comments, questions and discussion, see the 6-Jan-11 News — Pakistan melts down as US/Nato forces struggle in Afghanistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (6-Jan-2011) Permanent Link

5-Jan-11 News — Pakistan’s crisis worsens as senior politician is assassinated
Egypt Christian church bombing blamed on Salafi terrorists

Pakistan’s crisis worsens as senior politician is assassinated

Salman Taseer, the governor of Punjab province and a senior politician in the governing Pakistan People’s Party (PPP),was assassinated on Tuesday by one of his own bodyguards, significantly worsening Pakistan’s financial and political crises.

This is the highest profile assassination since the the December, 2008, assassination of Benazir Bhutto, a leading Shia Muslim figure and daughter of the founder of the PPP. She was assassinated just two weeks prior to an election in which she was expected to win the office of Prime Minister.

After her death, her widowed husband, Asif Ali Zardari, became president of Pakistan. Syed Yousuf Raza Gillani, another PPP associate of Bhutto, later became Prime Minister. And Tasser became governor of Punjab, Pakistan’s largest and most important province.

Taseer was shot in broad daylight on an Islamabad street by Malik Mumtaz Qadri, a member of the “Elite Force” that were supposed to protect him, according to Pakistan’s Daily Times. Taseer was shot 27 times in the back. Qadri was arrested along with nine other members of the Elite Force, who had allegedly conspired with Qadri.

Qadri confessed to the killed, and blamed it on Taseer’s opposition to Pakistan’s blasphemy law, which forbids blaspheming Mohammed or Islam.

Taseer had been in the center of a major national controversy on this law. According to Dawn:

 

“Mr Taseer had few friends left in his last days. His outspoken defence of the Christian woman, Aasia Bibi, who was accused of blasphemy under questionable charges leveled against her by fellow Muslim villagers and who has been on the death row in a Punjab prison for over a year awaiting appeal in a higher court, made him a hate figure for extremist and Islamist outfits and parties. Major religious parties called out nationwide strikes on Christmas Eve and New Year’s Eve to demand Aasia Bibi’s execution under the controversial blasphemy law, and to condemn her sympathisers, Mr Taseer being one of the foremost public figures amongst the latter group and thus the object of hate.”

In the past few weeks, the validity of Pakistan’s blasphemy law in Islam has been debated by Pakistani scholars. Two articles have been translated by MEMRI, and summarized as follows:

 

“In the following two articles, Pakistani writers Abbas Zaidi and Dr. Mohammad Taqi debate the implications and rationale of the controversial blasphemy law in Pakistan. In the first article, titled “The Blasphemer Must Not Be Pardoned,” Abbas Zaidi, a sociolinguist, argues that the clerics should not be allowed to have their way, as it will embolden the clerics, causing further such threats to the nearly five billion people who are not Muslim.In the second article, titled “Blasphemy Laws: What Does the Koran Say?” prominent writer Dr. Mohammad Taqi argues that the Holy Koran and Sunnah, i.e. the deeds and sayings of the Prophet Muhammad, do not prescribe any punishment for a blasphemer. He reasons that the clerics are misusing a Koranic verse dealing with war and sedition to call for the death penalty for blasphemy.”

What’s always significant about these issues is that Islamist extremists are always justifying their mass murders, even of civilians, by claiming the most extreme interpretations of Islamic history and beliefs, and these interpretations are almost never supported by other Muslim scholars.

Pakistan has been the target of a steady stream of al-Qaeda and Taliban linked terrorist attacks, often targeting Sufi and Shia Muslim shrines and worshippers.

Pakistan is already in the middle of major financial and political crises. The government is close to collapse anyway, as two political parties pulled out of the PPP’s governing coalition. Pakistan has a huge budget deficit, and the economy is also collapsing as well, according to Financial Times (Access). The International Monetary Fund (IMF) has stopped a payment of $3.5 billion of its $11.3 billion loan to Pakistan, because has not raised taxes as demanded by the IMF.

As if that weren’t enough, major floods last year affected 20% of Pakistan’s land mass, making 7.5 million people homeless. In Sindh province, the heart of the PPP, hundreds of thousands of refugees fled into the port city of Karachi, making the city almost ungovernable. Hundreds were killed in the ensuing violence.

So it’s not surprising that the assassination of Taseer has caused panic in Karachi, according to Dawn. Many stores were closed and people stayed at home, fearing a violent backlash against the assassination. However, no signficant violence has occurred so far.

Troubles just seem to just pile upon troubles in Pakistan. From the point of view of Generational Dynamics, Pakistan and India are headed for a genocidal ethnic and religious war, refighting the war between Muslims and Hindus that followed Partition, the 1947 partitioning of the Indian subcontinent into Pakistan and India.

It’s impossible to predict exactly what scenario will lead to that war, but the continuing deterioration of Pakistan is certainly part of it.

Additional links

Saturday’s bombing of a Coptic Christian church in Alexandria, Egypt, is being blamed on an al-Qaeda linked Egyptian terrorist group known as Salafis. They had been calling for violence against Christians, and they are thought to be behind online instructional videos explaining how to build a bomb, and providing the locations of churches to target, including the one that was bombed. Associated Press

Internal divisions within the Palestinian Authority are growing, as Former security strongman Muhammad Dahlan was interrogated on Tuesday on charges of planning a military coup against president Mahmoud Abbas. Jerusalem Post

One of the most peculiar facets of the recent collapse in Mideast peace talks was the story that the Obama administration offered Israel a squadron of jet fighters in return for a 90-day extension to the West Bank settlement freeze. The story at the time was that Israel refused the offer, but on Monday, prime minister Benjamin Netanyahu said that he was willing to agree to the 90-day extension, but that U.S. officials withdrew the offer. “The Americans were right in saying that the settlement freeze will lead to a dead end, in which we would have entered an endless path of settlement freezes, but despite it all I agreed to go through with it,” he said. Haaretz

A campaign to reverse the excommunication 110 years ago of the great Russian writer Leo Tolstoy has been refused by the Russian Orthodox Church, who blame him for aiding the Bolshevik Revolution. As the centennial anniversary of his November 20, 1910, death approached, the church issued a statement acknowledging Tolstoy’s “unforgettable, beautiful works,” and said that Russian Orthodox readers were allowed to say solitary prayers for him on the anniversary of his death. NY Times

On the heels of a record-cold December, long-range forecasts indicate that January could be the coldest across the United States since the 1980s. AccuWeather

(Comments: For reader comments, questions and discussion, see the 5-Jan-11 News — Pakistan’s crisis worsens as senior politician is assassinated thread of the Generational Dynamics forum. Comments may be posted anonymously.) (5-Jan-2011) Permanent Link

4-Jan-11 News — Republicans say they’ll cut government spending
Palestinians to submit anti-settlement resolution to U.N. Security Council

Republicans say they’ll cut government spending

Now that the Republicans are in the substantial majority in the House of Representatives, they’re planning to cut spending, in order to reduce the budget deficit.

Here’s what the Republicans plan to do, according to an analysis in the Wall Street Journal (Access):

 

“House Republicans are pledging to cut spending, and one early sign they’re serious is the rules package they are bringing to the House floor tomorrow. More than the last time it held power, the GOP is changing the rules to make it harder to tax and spend. …In their new rules, Republicans are giving paygo the heave-ho and substituting a rule called “cut as you go.” From now on, increases in mandatory spending—for new or existing entitlements—will require that spending be cut by an equal or greater amount elsewhere in the budget. …

These new rules are … a welcome sign that Republicans understand their November mandate and are thinking strategically about how to fulfill it.”

The article lists a few more rules changes that I’ve omitted, in order to avoid tedium.

So the Republicans are “pledging to cut spending,” but nowhere in this sympathetic analysis is anything that points to any places where actual spending will be cut. The most that can be said is that in a few trivial cases, some small spending increases will be avoided.

In 2008, I wrote the article, “One, Two, Three … Infinity,” in which I compared to the ever-increasing government spending plans to a book by George Gamow that I read in school in the 1950s.

My use of that particular phrase was to convey the idea that American debt was on an exponential growth path that would not be stopped except by a major financial collapse and crisis.

A few rules changes will not stop the deficit’s exponential growth path. The whole idea is a big joke, typical of the jokes that we always see in Washington.

It’s easy now, at the beginning of 2011, to fantasize reducing the deficit. But it’s politically impossible to cut any government spending program or to increase taxes. Therefore, the deficit will only increase.

Furthermore, there’s no way of knowing what crises will occur during 2011. The global economy is far more fragile today than it was a year ago.

In the US, the shadow inventory of foreclosed and distressed real estate has grown to something like 7-8 million homes. Those foreclosed homes are being held off the market by bankers who are waiting for home prices to increase. Once it sinks in that home prices are only going to decrease, there’s a possibility of a full scale panic, with a million or two homes suddenly dumped on the market.

China has a massive real estate bubble that could burst at any time. China’s quantitative easing program has pushed up the prices of real estate and commodities, and I understand that food prices have increased 30% in the last year.

Europe’s financial crisis has been out of the news for the holidays, but few people believe that there won’t be major crises coming, like the ones that Greece and Ireland experienced last year, requiring bailouts. Pundits have also been pointing out that US states like California and Illinois may also go bankrupt in 2011.

As far as I can tell, the assumption that almost everyone is making is that the economy is going to take off in 2011. The next assumption is that this will cause all financial problems to simply melt away. But as we’ve said many times, what they’re hoping for is a reflating of the real estate and credit bubbles of five years ago, and that cannot happen.

One way that we know that a major financial crisis is yet to come is because no serious effort is really being made to reduce the budget deficit. However, the deficit budget must come down, one way or another, and therefore a major financial crisis of some kind, probably forcing a US Treasury default, must occur.

Additional links

The Palestinians are drafting a carefully worded resolution, to be presented to the U.N. Security Council, declaring that Jewish settlements in the West Bank are a major obstacle to ending the Palestinian-Israeli conflict. The wording of the resolution will mirror criticisms of Israel by the Obama administration in recent months, so that the U.S. will be politically unable to veto the resolution in the Security Council. “It’s a very moderate resolution by design because we don’t want the U.S. to veto it,” Palestinian chief negotiator Saeb Erekat said Sunday. “We want the international community to tell Israel that the settlements are against international law.” LA Times

Following Saturday’s bombing of a Coptic Christian church in Egypt, killing 21, Germany’s Coptic Christian community has also reported receiving threats from radical Muslims. Spiegel

The government of Greece plans to build a 206 km (128 mile) wall along the land border between Greece and Turkey, in order to keep out unwanted migrants. Each month, thousands of migrants, many from Africa and Asia, have been crossing from Turkey into Greece, using it as an entry point into the European Union. Many of them have been put into detention camps that have been called “degrading.” The fence will be modeled along the 1,050 km fence along the U.S. border with Mexico. EU Observer

(Comments: For reader comments, questions and discussion, see the 4-Jan-11 News — Republicans say they’ll cut government spending thread of the Generational Dynamics forum. Comments may be posted anonymously.) (4-Jan-2011) Permanent Link

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