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Generational Dynamics Web Log for 21-Oct-2013
21-Oct-13 World View -- Saudi Arabia under pressure to reverse its U.N. Security Council decision

Web Log - October, 2013

21-Oct-13 World View -- Saudi Arabia under pressure to reverse its U.N. Security Council decision

U.S. and the world approach the point of 'peak debt'

This morning's key headlines from GenerationalDynamics.com

U.S. and the world approach the point of 'peak debt'
Saudi Arabia under pressure to reverse its U.N. Security Council decision

U.S. and the world approach the point of 'peak debt'

U.S. Private and Public Debt as % of GDP since 1870

U.S. Private and Public Debt as % of GDP since 1870

As I've written many times, Generational Dynamics predicts that the global financial crisis is far from over, and a global panic and stock market crash could happen at any time. As I've said, this is inevitable because of the exponential growth of public debt. The above graph is interesting, because it shows the ratio of private and public debt as a % of GDP going back as far as 1870. I've written in the past about how this has been growing exponentially since 1950, but this graph shows the secular nature of the growth a lot more clearly than I've been able to do in the past.

The U.S. ratio is currently at about 350%, but there are other economies that are far worse off: the Eurozone is at 450%, the U.K. is at 550%, and Japan's debt is close to 700% of GDP.

These figures show how precarious the world economy is, and how any factor that creates some kind of disequilibrium could result in a global financial crisis. Just to take one of many possible examples, interest rates might rise from their current artificially low near-zero percent levels. This could affect hedge funds that are holding hundreds of trillions of dollars in interest rate swaps, who would suddenly have to sell to cover their own debts, resulting in a worldwide chain reaction and spiral downward. Other possibilities include a war or a start of Federal Reserve tapering.

It's worthwhile pointing out that there's nothing that the U.S. government can do to cause this or to prevent this. Continue the sequester or end the sequester, reduce food stamp payments or increase them, and so forth -- it doesn't even matter. "Eat, drink and be merry, for tomorrow we die." [Ecclesiastes 8:15, Isaiah 22:13]

The world economy is so fragile and out of kilter that this massive deleveraging is baked into the cake, and the financial crisis will begin when the right event triggers. It doesn't matter too much what anyone does in the meantime. Future Tense blog

Saudi Arabia under pressure to reverse its U.N. Security Council decision

After Saudi Arabia's surprise announcement that it would reject a non-permanent seat on the United Nations Security Council, a group of Arab nations at the United Nations called an emergency meeting and appealed to Saudi Arabia to reverse its decision. According to the Arab Group's statement:

"We hope that they (Saudi Arabia), which are amongst the blessed who represent the Arab and Islamic world at this important and historical stage, specifically for the Middle East region ... maintain their membership in the Security Council.
[they should] continue their brave role in defending our issues specifically at the rostrum of the Security Council."

Reports indicate that Saudi Arabia's rejection was due to its anger at United States policy. King Abdullah was furious at the Obama administration for throwing Egypt's leader Hosni Mubarak under the bus when the Arab Revolution began in 2011. Recently, the Saudis are disillusioned by the unwillingness of the U.S. and the U.N. to do anything about the genocidal slaughter, by Syria's president Bashar al-Assad, of hundreds of thousands of innocent civilians, even after crossing clearly stated "red lines" by using chemical weapons, after president Obama's flip-flop.

The latest concern is that president Obama appears to be close to another flip-flop, by reaching some kind of détente with Iran that would lift sanctions and permit Iran to continue developing nuclear weapons.

The Saudis believe that they have played by all the rules, not pursuing any nuclear development of their own, and following all of America's wishes for decades. Since president Obama has taken office, America has turned its back on Saudi Arabia in one policy after another. The rejection of the U.N. seat is a signal that the Saudis don't intend to play by the rules any more.

Saudi Arabia is not scheduled to take the seat until January 1, and so there's still time for its leaders to change their minds. The National (UAE) and Reuters

(Comments: For reader comments, questions and discussion, see the 21-Oct-13 World View -- Saudi Arabia under pressure to reverse its U.N. Security Council decision thread of the Generational Dynamics forum. Comments may be posted anonymously.) (21-Oct-2013) Permanent Link
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Generational Dynamics Web Log for 21-Oct-2013 21-Oct-13 World View -- Saudi Arabia under pressure to reverse its U.N. Security Council decision

U.S. and the world approach the point of 'peak debt'

Saudi Arabia under pressure to reverse its U.N. Security Council decision

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Generational Dynamics Web Log for 21-Oct-2013
21-Oct-13 World View -- Saudi Arabia under pressure to reverse its U.N. Security Council decision