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Generational Dynamics Web Log for 12-Mar-2010
12-Mar-10 News - Mideast peace talks collapse in humiliation

Web Log - March, 2010

12-Mar-10 News - Mideast peace talks collapse in humiliation

Obama Administration may be talking to Iran's Revolutionary Guards

Embarassing Mideast talks collapse over settlements

At a speech at Tel Aviv University on Thursday, Vice President Joe Biden once again condemned Israel's announcement earlier in the week about plans to build 1,600 additional settlements in East Jerusalem:

"Two days ago, the Israeli government announced it would advance planning for new housing units in east Jerusalem, I realize this is a very touchy subject in Israel as well as in my own country. But because that decision, in my view, undermined the trust required for productive negotiations, I, at the request of President Obama condemned it immediately and unequivocally."

Unexpectedly, Biden received applause for these words, according to the Jerusalem Post. (It would be interesting to know the age of the people applauding; at a university, we would assume that they were young students.)

Biden immediately added that he was "such a strong supporter of Israel," and that, "Quite frankly, folks, only a friend can deliver the hardest truth."

Nonetheless, Biden's trip to the region really can't be characterized as anything less than an embarassing disaster. He had hoped to launch a new round of peace talks, albeit "indirect" peace talks mediated by U.S. Middle East envoy George Mitchell. But after the settlement announcement, Palestinian President Mahmoud Abbas retracted his agreement to take part in the negotiations. These were the first negotiations of any kind since the end of the Gaza war early in 2009, and now they've been canceled after three days.

This is not President Obama's first major humiliation over the settlement issue. Last September, Obama had hoped to have a summit meeting with Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas, at which he hoped to announced that the Israelis would stop building West Bank settlements. But Netanyahu refused, so the whole thing was an just embarrasing. (See "After a week of foreign policy disasters, President Obama's entire program is adrift.")

I guess politicians have to keep playing their games and pretending that they're doing something besides wasting taxpayers' money. I've been saying the same thing since 2003, when President Bush launched his major peace plan. (See "Mideast Roadmap - Will it bring peace?") Generational Dynamics predicts that there will be a major new Mideast war re-fighting the 1948-49 war between Jews and Arabs that followed the partitioning of Palestine, and the creation of the state of Israel. There will be no peace agreement.

As if to prove this point further, the Guardian reports that Israeli authorities are actually considering plans for at least another 8,000 homes in settlements in East Jerusalem, although some of these are years away.

Debka: Obama administration is talking to Iran's Revolutionary Guards

According to Debka's weekly subscriber-only newsletter (forwarded to me by a subscriber), President Obama has given up trying to reach any accommodation with Iran's president Mahmoud Ahmadinejad, and since the last week of February has been courting Iran's Revolutionary Guard Corps (IRGC) leaders.

This idea is not nearly as insane as it first sounds. As I wrote last month in "Revolutionary Guards in Iran's government - military dictatorship?" the IRGC (also called the Pasdaran) is a huge organization, with tentacles into all of Iran's power centers.

As such, it's also representative of all of Iran's generational changes. In particular, the young "Green movement" protestors that have been filling Tehran's streets to protest Ahmadinejad's reelection are also going to be in the IRGC itself, though they may not be protesting. In my article, I concluded that the winner of Iran's Awakening era generational conflict may not be the young people in the "Green movement," but rather the young people in the Revolutionary Guards.

Thus, in fact, it makes a lot of sense for the Obama administration to be forging ties with the Revolutionary Guard.

According to the Debka newsletter:

"The Americans are also naturally au fait with the Revolutionary Guards' internal affairs and therefore aware of the fundamental change in emphasis it is undergoing, gradually evolving from an organization geared to military functions to one dominated by the financial interests of its huge business empire.

This dynamic was exhibited most prominently in the low profile its leaders maintained during the months of domestic upheaval besetting the government. Only rarely did a corps figure speak out in defense of the president or spiritual ruler. Indeed, note was taken in Washington that since January 2010, too, not a single commander has voiced support for Ahmadinejad.

The Obama administration deduced the Guards had come to regret engineering his re-election as president in June 2009. Washington hoped that this disenchantment stemmed from the same disappointment as the Obama administration felt in Ahmadinejad's continued pursuit of the most radical path in all circumstances, rather than opting for a more pragmatic nuclear policy vis-a-vis the US.

Inferring a common interest, White House strategists drew up a four-point plan for a joint US-IRGC effort to sideline the president."

This description appears to confirm the Generational Dynamics analysis of a youthful IRGC that is just as westward-looking as the general population of Iran is, especially its youth.

It's worth repeating here what I've said many times on this web site: When Iran is finally FORCED TO CHOOSE SIDES in the Clash of Civilizations world war, then my expectation is that Iran will choose the West, including the U.S. and Israel. This rapprochement between the Obama administration and Iran's Revolution Guards may turn out to be a big step in that direction.

Elizabeth Warren: Nothing has changed since near-disaster

I'm always looking for ways of describing the financial crisis in new ways. From the point of view of Generational Dynamics, nothing has changed since I started discussing this in 2002: The stock market has been in a bubble since 1995, and is still overpriced today by a factor of almost 200%, so by the Law of Mean Reversion, there will be a stock market crash to a range below Dow 3000. (See "How to compute the 'real value' of the stock market.")

A couple of weeks ago, I quoted an article by Niall Ferguson. (See "1-Mar-10 News - Harvard professor Niall Ferguson: 'America, the fragile empire.'") Most mainstream pundits and economists (like Nouriel Roubini) are arguing over nonsense like "U" or "V" shaped recessions, showing that they don't have the vaguest idea what's coming. But Ferguson is the only mainstream commentator who actually understands what's going on.

On Thursday, the BBC interviewed Elizabeth Warren, Chairman of the TARP Congressional oversight panel. (TARP is the Troubled Asset Recovery Program that was used to bail out banks.) I transcribed the interview because she made her points in a very forceful way. Warren's major point is that nothing has changed since the near-implosion of the world financial system at the time of the Lehman Brothers collapse.

The interview began when she was asked if the phrase "Too big to fail" had become a get out of jail free pass for any number of companies that should be allowed to fail.

"That's the real problem here. After TARP is gone, after we've recovered every dollar from the industry, if we ultimately do for the taxpayers, that promise will continue to hang in the air. That promise is not ephemeral. Citi [=CitiGroup = CitiBank], for example, is rated A by the rating agencies, but with a little asterisk that says, in effect, well if we rated only on their financials, and they didn't have the "too big to fail" implicit guarantee from the government, it would actually be a BB rating."

To me, this is really remarkable, something that I hadn't realized. Citibank's debt rating should be low, but it's high because there's a implied guarantee that Citibank is "too big to fail," and so if they get into trouble, then the government will bail them out again. That means that, essentially, they can bet on any crap shoot they want. If they win the crap shoot, then they split the money up among themselves in the form of million dollar bonuses. If they lose the crap shoot, then they get bailed out, and they can use the bailout money for their million dollar bonuses. It's really sickening, isn't it.

"So we have now constructed a market around the notion that there are a handful of very special companies that no matter what happens, they will be bailed out.

It ultimately cannot work because we distort the entire economic system. Think about it this way - here's Citi with this implicit guarantee from the government competing for investment dollars against a medium-sized bank that's not too big to fail or against some manufacturing outfit or service industry that has no implicit government guarantee. where are you going to invest your monley? The notion of "too big to fail" distorts markets.

If you ask me, here's the single most shocking thing: It's to be sitting here, 16-17 months after this enormous financial crisis, after we literally stared over the abyss and thought that markets might completely implode, and we're still operating under the same set of rules. We haven't changed the rules for the big guys, we haven't changed the rules for mortgages, we haven't changed any part of the rules in the system that led us to collapse."

In the next part of her interview, she gets into a historical perspective that's relevant to generational theory:

"This is a moment in history, and the consequence is the [JPMorgan Chase CEO] Jamie Dimon vision of the world.. He said in a hearing, I think it's been a little over a month now -- "well, ya know, booms and busts happen, every 5-7 years -- it's just the way the world works."

Actually no, Mr. Dimon. That was the way the world worked in the US from 1794 until the Great Depression. In the 1930s we said we can write a set of rules and do better than that. That allowed us of 50 years of economic prosperity and stability, simultaneously."

This is a very interesting way of putting it. Since the Great Depression, central bankers have developed techniques that have smoothed over the "little panics" that used to occur, so that they only appear as recessions.

The interviewer asked Warren, "So what you're saying is that if we don't go back to these sort of stringent rules, many of which were dismantled during the boom years, we'll go back to the boom/bust cycles that plagued this country in the 19th century." Warren responded:

"That's right, and Jamie Dimon has figured out how to make a profit off that. The problem is that the rest of us don't.

The rest of us get wiped out and we end up bailing out Jamie Dimon. He's too big to fail, just not the rest of us."

Warren's point is that we're doing exactly what we did that led to near-implosion of the markets, and that therefore we're headed in the same place again, and this time it might be an ACTUAL implosion. Generational Dynamics predicts that, in fact, that's exactly what's going to happen.

Additional Links

A report investigating the causes of the Lehman Brothers bankruptcy finds that the bank used "materially misleading" accounting gimmicks to hide the perilous state of its finances from regulators and investors. NY Times. As I always point out, exactly the same practices are being followed today, and exactly the same people are following them. That means that there could be a major bankruptcy of a bank or a country tomorrow, and you would never have seen it coming.

A violent general strike in Greece brought the country to a near standstill on Thursday. The strikers are protesting the austerity measures that have been announced to stave off national bankruptcy. Deutsche Welle

California's unemployment rate in January was 12.5%, its worst on record, and fifth highest in the nation. But in 8 counties of California, the unemployment rate actually exceeds 20%. These are Great Depression level unemployment rates. LA Times

Tests for prostate cancer are a mistake for most men, according to Richard A. Albin, the man who invented the test. NY Times

(Comments: For reader comments, questions and discussion, see the 12-Mar-10 News - Mideast peace talks collapse in disaster thread of the Generational Dynamics forum. Comments may be posted anonymously.) (12-Mar-2010) Permanent Link
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