	Generational Dynamics
	Forecasting America's Destiny ... and the World's

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Generational Dynamics Web Log for 10-Mar-2010
10-Mar-10 News - Biden in Jerusalem condemns Israeli settlements

Web Log - March, 2010

10-Mar-10 News - Biden in Jerusalem condemns Israeli settlements

Fitch Ratings issues stern warnings to Britain, France, Spain and Greece

Israel embarasses VP Biden by announcing new settlements

Pretty much everything that can go wrong in "peace talks" happened on Tuesday, as American VP Joseph Biden was visiting Prime Minister Benjamin Netanyahu in Jerusalem.

As we described last week, the Palestinians and the Israelis endorsed "indirect" peace talks. This means that the Palestinians and the Israelis won't actually be in the same room together when they're negotiating. Instead, U.S. Middle East envoy George Mitchell will be mediating the talks, ping-ponging back and forth between the two sides.

Biden was in Jerusalem on Tuesday to launch the talks. This has already pissed off the Israelis, who note that President Obama has visited Egypt and other Muslim states, but has never visited Israel as President.

While Biden was visiting Netanyahu, Israel's interior minister announced that approval had been granted to build 1,600 new settlements in East Jerusalem, in a region that the Palestinians claim is their territory.

So, there was a big political dance. Biden condemned the settlement announcement. And, having after having embarassed Biden, Netanyahu is quoted by Haaretz as saying, "No one was seeking to embarrass you or undermine your visit - on the contrary, you are a true friend to Israel."

And so the beat goes on.

I first wrote about this subject in 2003 in "Mideast Roadmap - Will it bring peace?" As I've been saying over and over since then, Generational Dynamics predicts that there will be a major new war between Israels and Palestinians, re-fighting the 1948-49 war between Jews and Arabs that followed the partitioning of Palestine and the creation of the state of Israel.

Therefore, a peace agreement in the Mideast is impossible.

Fitch Ratings issues stern warnings to Britain and Greece

Brian Coulton, Fitch's head of Europe, Middle East and Africa sovereign ratings, warned Britains credit profile is deteriorating rapidly.

Coulton was speaking at a conference in London. The Guardian quotes him as saying that the UK is still "within tolerance" of its AAA rating, but that the UK, France and Spain all had to act with greatest urgency to avoid being downgraded.

Fitch also expresses concern about Greece

Chris Pryce, Fitch's Greece expert, also expressed great skepticism about what's going on with Greece.

Greek debt maturing in 2010, by month <font size=-2>(Source: wsj.com)</font>

Greek debt maturing in 2010, by month (Source: wsj.com)

There's a game going on with Greece that's so completely insane that only the financial community could believe it. Greece is in deep trouble, and has massive debt payments in April and May, as you can see from the adjoining graphic that I first posted a few days ago.

So everybody is pretending that there's no problem, in order to fool investors into believing that there's no problem. Thus, Greek Prime Minister George Papandreou met with President Barack Obama in Washington today. Politico quotes him as saying:

"We haven't asked for financial help. We are not asking for a bailout. We are not asking for financial help from anyone. ...

We are taking measures to put our own economy on the right track. And that has been recognized and hailed by many leaders."

This is a very interesting statement, because the austerity measures taken so far by Greece are generating a lot of social unrest, but they're still not nearly enough to put the economy on track. And yet, he's right that they've been "hailed" by many leaders, especially German chancellor Angela Merkel, because nobody wants to spend any money bailing out Greece. So we have this neat game, where people say that no bailout is needed, in the hope that just saying it will mean that no bailout is needed.

Fitch's Pryce is not counting out the need for a Greek bailout, and agrees that this game of "constructive ambiguity" has succeeded in calming the markets, but noted that not a single "hard cent" has been put on the table for Greece so far. "The great question mark is whether the Papandreou government is going to conform [to the austerity requirements demanded by others]. There is already dissent in the cabinet," as quoted by The Telegraph.

Pryce added that "Greece has an appalling record. Underneath this fiscal crisis is a failing political system. Politicians regard the public sector as a something to exploit for their own enrichment, but also for votes."

Finally, Pryce points out that "Even if German politicians wanted to bail out Greece, they know it would probably be overturned by Germany's constitutional court."

The Asian crisis of 1998

According to Fitch, the Europeans are counting on on a "Korean" recovery, modelled on Korea's fast return to trend growth following the Asian crisis in 1998. Countries in Asia suffered a big financial crisis in the late 1990s, but they recovered quickly, and many politicians and financial analysts are expecting (or hoping) that the same thing will happen in the current financial crisis. Although Fitch only attributes this hope to the European, it's also one of the reasons why American investors are expecting a rebound.

There are two reasons why the 1998 Asian situation does not apply and cannot apply to today's situation.

First, there was a huge dot-com bubble going on in the United States at that time. Korea and other countries were able to recover quickly by manufacturing products and exporting into that bubble.

The second reason is generational. The world is a very different place today than it was in 1998. In 1998, the Boomers were in charge. They're incompetent, but they had enough sense to ask the few people left from the Silent generation what to do, and then to do it. But today, the world belongs to Generation-Xers, and Generation-Xers don't have the vaguest idea what to do, and have no one that they can ask for guidance, or even that they WANT to ask for guidance.

In the Financial Topics thread of the Generational Dynamics forum on Tuesday, we had a discussion on whether the year-long stock bull market is "tired." My response was: "I don't see the market as tired at all. What I see is a market that's manic. Sure, maybe it has bloodshot eyes, and it's lost the spring in its step. But it's drinking coffee and taking amphetamines, afraid that if it falls asleep then ... it'll spiral even further into insanity. So the question I keep asking myself every day is this: How long can it pump itself up with drugs to keep going, and what will happen when the drugs finally stop working?"

Additional Links

With Facebook and Twitter now taking the lead in social networking web sites, the one-time leader MySpace is facing tough times, resulting in a management shake-up and deep layoffs. Now, MySpace is planning a site overhaul, in order to regain market share. Reuters

As I've said many times, bankers are turning into the most hated group in America, because they're doing exactly the same kinds of things they were doing in the 1930s -- screwing their customers and using the money to pay themselves huge bonuses and salaries. Slowly but surely, the bankers are beginning to realize how much trouble they're in, especially as new federal rules box them in. Thus, Bank of America is going to stop charging $40 overdraft fees on debit cards this summer, and instead will simply decline purchases. NY Times

(Comments: For reader comments, questions and discussion, see the 10-Mar-10 News - Biden in Jerusalem condemns Israeli settlements thread of the Generational Dynamics forum. Comments may be posted anonymously.) (10-Mar-2010) Permanent Link
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