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Generational Dynamics Web Log for 16-Jun-2010
16-Jun-10 News -- Obama gives Oval Office speech on oil spill

Web Log - June, 2010

16-Jun-10 News -- Obama gives Oval Office speech on oil spill

Europe's financial crisis deepens

President Obama's gives an Oval Office speech on the oil spill

As I've said before, there's an overwhelming sense that Karmic revenge is being played on a man who promised "change you can believe in" and that he would heal the world, and that the same Karmic revenge is being wreaked on the American people for credulously electing him.

There is absolutely nothing that President Obama can do to end the Gulf oil spill disaster, but I'm really having a hard time understanding his Oval Office speech that I just heard. Here are a couple of sentences that struck me:

"The sadness and the anger they [the fishermen of Louisiana] feel is not just about the money they've lost. It's about a wrenching anxiety that their way of life may be lost.

I refuse to let that happen. Tomorrow, I will meet with the chairman of BP and inform him that he is to set aside whatever resourcces are requied to compensate the workers and business owners who have been harmed as a result of this company's recklessness, and this fund will not be controlled by BP. In order to ensure that all legitimate claims are paid out in a fair and timely manner, the account must and will be administered by an independent third party."

He refuses to let that happen?? This is a man who still believes that he can heal the world or do anything else merely by giving a speech or issuing a directive.

Everybody, Republicans and Democrats, seem to believe that the solution to this problem is to eviscerate BP.

I hear this, and I have the same feeling of nausea that I've felt so many times in the last few years. I felt it when I listened to politicians and experts say that there was no housing bubble, and that housing prices can't fall because "everybody has to live somewhere." I felt it 2007 when the airheads on CNBC were saying that the stock market would go up forever. I feel it now when the airheads on CNBC say that the stock market is going to go up forever, except that maybe we might have a tiny little double-dip recession.

So now, I hear everyone saying that all we have to do eviscerate BP, and everything will be OK. Well, I guess it's possible, but what I look at are trends, and what I see is a political process going completely out of control. This political process works by having nobody take responsibilty for anything, simply by saying that BP will pay for it. It's "One, Two, Three ... Infinity" all over again.

There is nothing about this that makes any rational sense, but that makes it typical of the insanity of today's world.

Kyrgyzstan violence tamps down, leaving hundreds of thousands of refugees

Kyrgyzstan <font size=-2>(Source: CIA Fact Book)</font>

Kyrgyzstan (Source: CIA Fact Book)

The UN refugee agency says that more than 250,000 refugees have fled their homes to escape the violence in Osh and Jalalabad, according to the BBC. 75,000 Uzbek refugees were allowed into Uzbekistan before the border was closed on Thursday.

Now much of the focus is on the women and children who are camped at the border to Uzbekistan, as the men have stayed behind to defend their homes. The refugees hope that the border will be reopened, but now it's being called a "humanitarian disaster," and the U.N. is rushing to provide food and other supplies to the refugees.

The cities of Osh and Jalalabad are smoldering, but the gunfire and violence have slowed for the time being.

There are three versions of how the Kyrgyzstan violence started, according to Ria Novosti:

According to the Kyrgyz residents of Osh, the Uzbeks were to blame as they raped Kyrgyz women in a dormitory.
The Uzbeks say that they were attacked by the Kyrgyz, who came and took their houses and property.
The Kyrgyz government in Bishtek, who took power through a coup a couple of months ago, is blaming exiled former president Kurmanbek Bakiyev for instigating the violence.

The last explanation is apparently being adopted by the U.N., according to the Washington Times. U.N. High Commissioner for Human Rights Navi Pillay says that the fighting "appears to be orchestrated, targeted and well-planned."

The violence is taking place in the fertile Fergana Valley, one of the most important regions in Central Asia and the world. Josef Stalin is at the core of the carnage in Kyrgyzstan, according to a historical article in the UAE National. In the 1920s and 1930s, Kyrgyzstan, Uzbekistan and Tajikistan were established as Soviet republics, and divided by arbitrary borders in the Fergana Valley. These arbitrary boundaries, which ignored ethnic realities, have created the ethnic tensions and rivalries that are the basis of the current violence, according to the article.

Violence could begin again at any time, especially with hundreds of thousands of vulnerable women and children camped out with little food and water. If a humanitarian disaster can be averted, then the region may simmer down without a war.

Europe's financial crisis continues to deepen

Spain may be the next European country, following Greece, to face a financial crisis, largely stemming from its huge recent real estate bubble.

Spain is close to falling into a "debt trap," according to the NY Times. According to the article, Spain is being forced to borrow at higher and higher interest rates, a fate that befell Greece before it was bailed out. The high interest rates mean that many investors are simply staying away from Spanish bonds, forcing Spain to rely on its own banks for funding. But Spanish banks themselves are finding it difficult to borrow from other banks in other countries, so they have to turn to the European Central Bank (ECB) which, like the Fed, is a lender of last resorce. This creates a "vicious circle" of high interest rates leading to more borrowing, resulting in higher interest rates.

Ambrose Evans-Pritchard, writing in the Telegraph, says that Spain is being "pummeled." Interest rates on Spanish bonds are rising, and the prices of credit default swaps (CDSs) -- insurance policies that pay off if Spanish bonds default -- have been surging, as the did for Greece. This indicates that investors are betting that Spain WILL default, despite its protestations that it won't.

In fact, things are so bad that the article quotes the chairman of Spain's largest bank as admitting that "the majority of the Spanish companies and financial groups are shut out of the international capital markets," because investors no longer trust Spanish debt.

Another financial expert says that Madrid is powerless at this stage. "There is absolutely nothing the Spanish government can do to get their message through. They have lost all market credibility and nobody is listening to them any longer."

Meanwhile, as we reported yesterday, the bailout has not saved Greece, as Moody's has changed the rating on Greek bonds to junk status.

[[Correction: An article that I quoted as being from last week was actually from a year ago, so I've deleted the quotes from it.]] (Corrected on 16-Jun-2010)

I wrote a few days ago about world trends in "7-Jun-10 News -- Globally, May was a month of ominous events." I've heard a couple of financial pundits today say that the signs are that retail sales have started to fall sharply in the last couple of months, as the effects of the stimulus and bailout packages wear off.

As I've said many times, from the point of view of Generational Dynamics, the situation hasn't changed. The stock market has been historically overpriced by substantial amounts since 1995, and by the Law of Mean Reversion, will have to fall sharply to well below the Dow 4000 level and stay down there for a comparable length of time (15 years). This is a mathematical certainty. (See "How to compute the 'real value' of the stock market.")

Additional links

If North Korean president Kim Jong-il's successor turns out to be his son Kim Jong-un, it will be fine with the octogenarian politicians who run the government, since Kim Jong-un is only 27 years old, and will be easy for them to control. Asia Times

Jordan wants to become the next to develop a peaceful nuclear program, and has support from the United States, but King Abdullah blames Israel for taking "underhanded" actions to block the program. BBC

Hundreds of people have been killed in Mexico during the last five days due to drug cartel violence. Mexican President Felipe Calderón blames the United States, calling it "the biggest drug addict in the world." Washington Post

Germans are enjoying a round of Schadenfreude at the expense of Robert Green, the UK soccer team goalkeeper whose blunder permitted the U.S. team to achieve a tie in their World Cup game. Spiegel

A Russian rocket in Kazakhstan lifted off successfully early Wednesday, carrying two American astronauts and one Russian cosmonaut to the international space station. Associated Press

Humor: The 7 habits of highly ineffective people. Dan Ariely

(Comments: For reader comments, questions and discussion, see the 16-Jun-10 News -- Obama gives Oval Office speech on oil spill thread of the Generational Dynamics forum. Comments may be posted anonymously.) (16-Jun-2010) Permanent Link
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