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Generational Dynamics Web Log for 23-Apr-2014
23-Apr-14 World View -- Arab countries recruit more soldiers from Pakistan

Web Log - April, 2014

23-Apr-14 World View -- Arab countries recruit more soldiers from Pakistan

China's commodity and real estate bubbles are bursting

This morning's key headlines from GenerationalDynamics.com

Arab countries recruit more soldiers from Pakistan
U.S. threatens to cut off all aid to the Palestinians
ZeroHedge: China's commodity and real estate bubbles are bursting
45 people in Chicago shot over the weekend

Arab countries recruit more soldiers from Pakistan

Pakistani soldiers (pakarmedforces.com)

Pakistani soldiers (pakarmedforces.com)

Saudi Arabia has begun recruiting soldiers the Pakistan's tribal areas, which are the stronghold of Taliban and al-Qaeda militants. According to a report on the recruitment:

"Youths skilled in firearms are given preferences.
Monthly salary 75,000 rupees [$750]. Medical and other facilities will also be given.
Will be deployed on borders with Yemen and oil installations."

Preference is being given to youths skilled in using an AK-47. According to the Saudis, up to $20 billion in foreign exchange could come annually to Pakistan.

Kuwait, Bahrain, Qatar, UAE and Oman are also recruiting in Pakistan. Kuwait is opening a military office in Pakistan's capital, Islamabad, to recruit retired Pakistani military officers and trainers to train 11,000 Kuwaiti soldiers.

Ten years ago, based on a generational analysis, I said that the coming Clash of Civilizations world war would pit the West, India, Russia and Iran versus China, Pakistan and the Sunni Muslim countries. Ten years ago, that seemed far-fetched, but as each year goes by, the trend continues to move in that direction. Memri (4/15) and Memri

U.S. threatens to cut off all aid to the Palestinians

As we reported two days ago, 79 year old Palestinian president Mahmoud Abbas is threatening to personally retire, and also "retire" the Palestinian Authority (PA) that's responsible for governing the West Bank, leaving it to Israel and the United Nations to take responsibility. ( "21-Apr-14 World View -- Palestinian president Abbas, 79, faces life after 'peace talks' collapse")

The U.S. State Department is responding with a threat to cut off all aid to the Palestinians, according to spokesman Jen Psaki at Monday's press conference:

QUESTION: "Are you telling Abbas not to keep issuing statements and proclamations that they are going to sort of just close shop with the PA and turn over the occupation responsibility to the Israelis?"
MS. PSAKI: "Well, let me speak to that, because it’s an important question. That – we’re aware, of course, of these reports and comments. That type of extreme step would obviously have grave implications. A great deal of effort has gone into building Palestinian institutions by Palestinians as well as the international community, and it would certainly not be in the interests of the Palestinian people for all of that to be lost. We – the United States has put millions of dollars into this effort. It would obviously have very serious implications for our relationship, including our assistance going forward."

The Palestinian Authority gets about $400 million in aid each year from the U.S. Members of Congress have already threatened cut aid earlier this month, after Mahmoud Abbas applied for membership in 15 United Nations organizations as the State of Palestine. U.S. State Dept. and Israel National News (3-Apr)

ZeroHedge: China's commodity and real estate bubbles are bursting

For the last two months, the ZeroHedge blog has been publishing a series of articles analyzing China's collapsing credit and real estate bubbles, and responding to pundits who say that the collapse isn't happening or that it's purely a Chinese domestic matter.

The latest offering shows how China has been creating huge amounts of debt by using soybean contracts in the same way that American banks used subprime mortgages. You'll recall that investors were "flipping" properties in 2004-2007, meaning that someone would buy a property, wait a few months for properties to rise, and then sell it at a profit. This pushed up the prices of all real estate. When the bubble burst, millions of people lost their homes.

China has been "flipping" soybean contracts in the same way. One Chinese business sells a contract to someone else at a higher price, and everyone makes money, as long as the price of soybeans keeps going up. And international soybean prices have been skyrocketing into bubble levels in the last two months. The problem is that international soybean contract prices have been getting ahead of China's local soybean market, which has been getting depressed. Soybean contracts are different from actual soybeans, and a price rise in one doesn't necessarily mean a price rise in the other. So when it's time for the soybean contract to be fulfilled, and the soybeans are shipped for delivery to the contract holder, the holder has to come up with the money he's committed to pay on the contract. But if he's going to be stuck with a $10 million contract in soybeans for which he can only get $3 million in his local market, then he'll go bankrupt.

This has been happening more and more frequently in the last few weeks, and it portends a bursting of the soybean bubble, along with China's credit bubble in general. Since the soybeans are being shipped from the United States and South America, a lot of soybean farmers are not going to get paid.

It's estimated that Chinese buyers are going to default on a total of about $900 million dollars in soybean contracts. That's a huge domino effect, and it's going on right now.

I recall vividly how in 2006, all the expert economists were saying that a real estate bubble is impossible because "everyone has to live somewhere," and "these building contractors know what they're doing, and wouldn't keep building in a bubble." Then in 2008, Ben Bernanke and other expert economists were saying that there was a problem, but the problem was "contained." What all this means is that the China bubble may or may not be bursting, but that the "expert" economists who say that a China bubble is impossible, or that it's "contained" domestically, don't have a clue what's going on, and are probably full of crap. ZeroHedge and Reuters

45 people in Chicago shot over the weekend

In Chicago over the weekend, 9 people were killed and 36 were wounded from gunshots. 6 children were shot on Sunday night. Almost all of it was gang violence, scattered around the city. Unfortunately, this is a typical Chicago weekend. Chicago is beginning to read like Karachi, Pakistan, or Baghdad, Iraq. Chicago Tribune

(Comments: For reader comments, questions and discussion, see the 23-Apr-14 World View -- Arab countries recruit more soldiers from Pakistan thread of the Generational Dynamics forum. Comments may be posted anonymously.) (23-Apr-2014) Permanent Link
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