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Kent, England, under financial pressure from lone children seeking asylum
This morning's key headlines from GenerationalDynamics.com
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An estimated 5,000 migrants are staying in temporary refugee camps near Calais, France. Most are from Syria, Somalia, Sudan and Eritrea. There are smaller groups from Ethiopia, Egypt, Afghanistan, Iraq, Iran and Afghanistan. There have been 110,000 migrants so far this year who have crossed the Mediterranean from North Africa to Italy and Greece.
Starting earlier this week, there have been what officials are calling an "invasion" by thousands of migrants trying to cross the Eurotunnel from Calais to Britain each night. According to Jacques Gounon, the chairman of Groupe Eurotunnel:
"This isn't a case of a passenger not paying for their ticket, we are facing systematic and massive invasions, maybe even organized ones. This is a problem of numbers, it's not a problem of quality, it's a problem of quantity.Regardless of the huge investment we have made and are continuing to make to protect the boarding paths, there's a problem of quantity (of policing) when you consider the size of the first trans-Channel operator which is the Channel Tunnel."
Groupe Eurotunnel says that it has invested more than $175 million in physical resources, including fences, cameras and infra-red detectors, as well as personnel. However, large numbers of migrants have been walking along railroad tracks to the Eurotunnel. Others wait until a truck (lorry) going to Britain stops for any reason, and then hides under the trailer. These maneuvers are extremely dangerous, and there have been several deaths this week.
Officials have been building fences to prevent migrants from reaching the Eurotunnel tracks, but migrants cut holes through the tunnels as soon as they're built or repaired. A chain saw can be purchased from a local hardware store for less than $50.
According to the UN Secretary-General's Special Representative for International Migration Peter Sutherland:
"Anybody who thinks that by erecting borders and fences in some way a particular state can be protected from alleged ‘floods’ – which are anything but floods of migrants – is living in cloud cuckoo land."
Irish Independent and Telegraph (London) and Express (London) and Guardian (London)
There is widespread outrage over remarks by Britain's prime minister David Cameron:
"We have to deal with the problem at source and that is stopping so many people from travelling across the Mediterranean in search of a better life. That means trying to stabilize the countries from which they come, it also means breaking the link between travelling and getting the right to stay in Europe.This is very testing, I accept that, because you have got a swarm of people coming across the Mediterranean seeking a better life, wanting to come to Britain because Britain has got jobs, it’s got a growing economy, it’s an incredible place to live. But we need to protect our borders by working hand in glove with our neighbors, the French, and that is exactly what we are doing."
The comments drew widespread criticism. The Refugee Council said it was "awful, dehumanizing language from a world leader."
Acting opposition Labor leader Harriet Harman said:
"He should remember he is talking about people, not insects.I think it's a very worrying turn that he appears to be wanting to be divisive and set people against, whip people up, against the migrants in Calais when what he should have been doing, and should have been doing months ago and was warned to be doing, is to get the situation sorted out with the French. ...
I don't think there should be any question of us sending in our army. The French themselves have got troops as well as a large police force."
Another Labor politician called it "nothing short of disgraceful." Guardian (London) and AFP and Daily Mail (London)
Kent, England, is facing financial problems for having to care for hundreds of lone children migrants seeking asylum. Kent is the British endpoint of the Eurotunnel opposite Calais, and so Kent ends up with the responsibility of taking care of the children.
The number of lone migrants under age 18 has doubled in the past three months has doubled to 605. The result is that Kent is struggling to find the additional £5.5 million ($8.6 million) needed to care for them. Kent's costs are reimbursed by London at £112 a day last year but that has fallen to £91 per child. In addition, each child receives £10 a week "pocket money." Kent Online and Belfast Telegraph
(Comments: For reader comments, questions and discussion, see the 31-Jul-15 World View -- 'Swarm' of migrants causing crisis at Eurotunnel from France to Britain thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(31-Jul-2015)
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Lashkar-e-Jhangvi leader Malik Ishaq killed in gunfight in Pakistan
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Malik Ishaq, the leader of Pakistan's most extreme terror group, Lashkar-e-Jhangvi (LeJ), responsible for thousands of civilian deaths, mostly Shia Muslims, was killed on Wednesday in a gunfight with police.
I've written many times about Pakistan's al-Qaeda linked terror group Lashkar-e-Jhangvi (LeJ), which is dedicated to the extermination of all Shias, and particularly the Hazara ethnic group, in the same way that the Nazis were dedicated to the extermination of all Jews.
According to an LeJ statement issued in 2013:
"Our mission [in Pakistan] is the abolition of this impure sect and people, the Shias and the Shia Hazaras, from every city, every village, every nook and corner of Pakistan. Like in the past, [our] successful Jihad against the Hazaras in Pakistan and, in particular, in Quetta is ongoing and will continue. We will make Pakistan their graveyard-- their houses will be destroyed by bombs and suicide bombers. ... Jihad against the Shia Hazaras has now become our duty. ... We will rest only after hoisting the flag of true Islam on the land of the pure -- Pakistan."
LeJ has conducted numerous horrific terrorist attacks against targets like Shia mosques during Friday prayers and Shia marketplaces, and I've reported on a number of them.
LeJ chief Malik Ishaq, was arrested a week ago, along with his two sons. The police interrogated him, and then took him in a convoy to aid the police in recovering weapons and explosives. Three water coolers filled with explosives, detonators, Kalashnikov assault rifles, 12 pistols and four hand grenades were seized during the raid, according to police.
As the convoy was returning, it was allegedly attacked by some 12-15 gunmen, and succeeded in freeing Ishaq. In the subsequent shootout, Ishaq, his two sons, and 11 other militants were killed. There's some controversy, because the police claim that Ishaq was killed by the attackers, rather than by the police. There are claims that the police staged the gunfight in order to kill Ishaq, who might have been freed by a court, as he has in the past.
Ishaq was also accused of masterminding, from behind bars, the 2009 attack on the Sri Lankan cricket team in Lahore, which wounded seven players and an assistant coach, and killed eight Pakistanis. (From 2009: "Cricketing world in shock after attack on Sri Lanka team in Pakistan")
This attack was extremely humiliating to Pakistan, not only because of the attack itself, but also because Pakistan was stripped of its right to co-host the 2011 cricket World Cup, and no international cricket was played in Pakistan for years. It was only in May and June of this year that international cricket returned to Pakistan, when the Zimbabwe team visited for a series of games. Pakistan Today and BBC and Express Tribune (Pakistan)
The death of Mullah Mohammed Omar, who has been the spiritual head of the Taliban and al-Qaeda since the late 1990s, was confirmed on Wednesday in a bizarre announcement that said he's been dead for years. Some reports said he died in 2012, others in 2013; one said he died of tuberculosis in Karachi, others that he died in Afghanistan near the Pakistan border.
With American coalition troops set to pull out of Afghanistan at some unspecified time in the near future, the hope has been that the Taliban will stop making terrorist attacks and will agree to peace talks with the Afghan government, so that the pullout won't turn into another major humiliation, like the pullout from Iraq.
The problem is that there are multiple tribal groups within the Taliban, including some that had pledged allegiance to the so-called Islamic State (IS or ISIS or ISIL or Daesh). The hope was that Omar would serve to unite all the Taliban groups to agree to a peace deal with the Afghan government in Kabul, but the (announcement of the) death of Omar now makes that even more impossible. In fact, with Omar's death kept a secret for 2-3 years, some analysts are saying word of his death was leaked by a tribal group wanting to torpedo any peace talks. GEO TV (Pakistan) and CNN and Reuters
In June 2013, Secretary of State John Kerry announced that "peace talks" with the Afghan Taliban would begin in Doha, Qatar. As Kerry was making the announcement, the Taliban themselves were giving a press conference in Doha, Qatar, announcing the return of the "Political Office of the Islamic Emirate of Afghanistan." This was the name of the country Afghanistan when the Taliban ruled it, prior to September 11, 2001. The so-called "peace talks" collapsed the next day. ( "20-Jun-13 World View -- Afghan peace talks collapse day after they're announced")
It's been the same story over and over for the Afghan-Taliban "peace talks" (and incidentally, also for the Pakistan-Taliban "peace talks"). The Taliban always express interest in "peace talks," setting all sorts of conditions, and continuing with full-scale war against the Afghan government, and making it clear to everyone that there will be no peace talks.
Mullah Omar has been the great hope for peace talks -- that he would bring about unity among all the Taliban tribal groups, and they would all sign on to a peace deal, so that the American-led military coalition could withdraw without being humiliated.
In fact, it was just two weeks ago that an Eid (end-of-Ramadan) message supposedly from Mullah Omar that contained a reference to "political endeavors" was interpreted by desperate politicians as approving the peace process.
According to Afghan President Ashraf Ghani:
"The whole nation wants peace. During the past 14 years we tried to hold face-to-face talks but could not succeed. But it has happened now and the second round of talks will be held within a few weeks."
We now know that the message could not have been from Omar.
The first meeting was held, and the Taliban presented their demands for further talks: The complete withdrawal of foreign troops from Afghanistan, removing the names of Taliban commanders from a US Department of State blacklist, and the exchange of prisoners. None of these conditions can be met by the West. Express Tribune (Pakistan) and Deutsche Welle and Bloomberg
(Comments: For reader comments, questions and discussion, see the 30-Jul-15 World View -- Bizarre Mullah Omar death announcement seals fate of Afghan peace talks thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(30-Jul-2015)
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Puerto Rico expected to default on Saturday
This morning's key headlines from GenerationalDynamics.com
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A bomb on Tuesday exploded outside a girls' school in the Shia village of Sitra, killing two policemen and wounding six. This was the first bombing in Bahrain in several months, and the worst since March 2014.
Bahrain is governed by Sunni tribal leaders, although the population is 2/3 Shia. In February 2011, during the chaotic start of the "Arab Awakening," peaceful Shia protesters in Bahrain were met by extreme violence, when police smashed into demonstrators with guns, clubs and teargas. (See "18-Feb-11 News -- Bahrain's government chooses the massacre scenario.")
Iran has long been accused of interfering in Bahraini affairs, and in particular of supporting the Shia opposition. According to Bahrain media, "Early information suggests that the explosives used in today’s terrorist attack are of the same type that were recently intercepted coming from Iran."
On Saturday, Bahrain had recalled its ambassador to Iran after Iran's supreme leader Ayatollah Seyed Ali Khamenei said that the nuclear deal Tehran agreed with the West would not alter its support for the governments of Syria and Iraq, nor its backing for "oppressed people" in Yemen and Bahrain, and the Palestinians. Khamenei's comments provoked widespread outrage in Bahrain. Reuters and Gulf News and The National (UAE, 7/25)
As expected, Puerto Rico is expected to be in default on Saturday, unable to make a $58 million payment due on Friday to bondholders.
Puerto Rico's governor Alejandro García Padilla announced last month that the island territory will be unable to pay off its $72 billion in debts, so Saturday's bankruptcy will not be a surprise.
Many people have invested in Puerto Rico bonds because they pay 10% interest (yields) and because under federal law they're "triple-tax free," meaning that you can earn 10% interest every year and not have to pay federal, state or municipal tax on the interest you collect. It's a sweet deal, provided that Puerto Rico doesn't go bankrupt, because if it does, then you lose most or all of your initial investment.
A default will hurt a huge number of ordinary investors. 52% of all U.S. municipal bond funds hold credit tied to Puerto Rico. Even if individual investors don't individually own PR bonds, they own them through their 401k's or other investment funds, which have been boosting returns by purchasing the PR bonds. These funds will all lose significant principal in a PR default.
The situation is expected to be chaotic and painful, since Puerto Rico cannot file for bankruptcy (as Detroit did) under U.S. law. CNBC and Prensa Latina
The Shanghai composite index on Tuesday fell 1.68%, after falling 8.48% on Monday, after massive intervention by the China Securities Regulatory Commission (CSRC). There were a variety of interventions, including massively buying shares, preventing some stocks from being traded, forbidding large companies from selling shares, and forbidding any Chinese media from using words like "plunge" that could cause people to panic. The plunge was a sign to many investors that the Chinese Communist Party is losing control of the stock market.
The CSRC announced that it will continue buying stock shares, in the hope of keeping the market from crashing.
Many ordinary Chinese investors are complaining that they're "trapped in the stock market." These means that they can't sell without losing a lot of money, so they have to hope that government will intervene sufficiently to push up the market again, to the point where the CAN sell. This situation highlights the danger: Every time the CSRC intervenes so massively that they push the market up, many investors immediately sell, pushing the market down again. Xinhua and Reuters and CNN
(Comments: For reader comments, questions and discussion, see the 29-Jul-15 World View -- Iran blamed for terrorist bombing in Bahrain thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(29-Jul-2015)
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Turkey-US 'ISIS-free zone' in Syria becomes increasingly controversial
This morning's key headlines from GenerationalDynamics.com
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Adm. Harry Harris, commander of U.S. Pacific Command, indicated that China has been consistently lying by denying the military purpose of the artificial islands they're building in the South China Sea:
"They are building ports that are deep enough to host warships and they’re building a 10,000-foot runway at Fiery Cross Reef. A 10,000-foot runaway is large enough to take a B-52, almost large enough for the Space Shuttle, and 3,000 feet longer than you need to take off a 747. So, there’s no small airplane that requires a runway of that length. They’re building revetted aircraft hangars at some of the facilities there that are clearly designed, in my view, to host tactical fighter aircraft. ...Most countries choose to pursue diplomatic means to address their disputes. China, on the other hand, is changing the status quo in the region through aggressive coercive island building without meaningful diplomatic efforts toward dispute resolution or arbitration. China is changing facts on the ground...essentially, creating false sovereignty ... by building man-made islands on top of coral reefs, rocks, and shoals. These activities are harming the environment and will not strengthen any country’s legal claims to disputed areas in the South China Sea."
One of the excuses that China has been giving is that other countries have also built artificial islands. But according to Harris:
"While Vietnam, Malaysia, the Philippines and Taiwan have also conducted land reclamation in the South China Sea, their total — approximately 100 acres over 45 years — is dwarfed by the size, scope and scale of China's massive buildup."
He added that China has reclaimed almost 3,000 acres in only 18 months, resulting in enormous harm to the fragile ecosystem. Defense One and Stars and Stripes
Earlier this month, Chinese state TV ran video of People's Liberation Army soldiers storming a mock-up of Taiwan's presidential palace during a major military exercise in northern China.
China has frequently made it clear that Taiwan is sovereign territory of mainland China, and there will be a military attack if Taiwan makes any kind political change to become more independent. As a result, Taiwan's pro-China and pro-Independence governments have for years been following a careful dance not to antagonize China too much, while also maintaining a sufficient arm's length from China. Nonetheless, China has made it clear that, at some point, Taiwan will have to return to the mainland.
It's hard to know what to make of the mock attack on Taiwan's presidential palace appearing on state TV. Was it an intentional signal that a military invasion is close? Or was it left in the video unintentionally? A YouTube link to the video is given below, and the mock attack segment runs from about 3:01 to 3:04 (that is, only three seconds).
A Chinese military attack on Taiwan will bring the U.S. into war China within hours. Even if the U.S. appeases China and doesn't require, something that I believe is almost vanishingly unlikely, then increased tensions in the region will spiral into war before long. Business Insider and YouTube
China's stock market appears to have been recovering since July 9, after falling 30% since June 12, due an imploding bubble. As I wrote in "25-Jul-15 World View -- Commodities and world trade volume plunge as China pumps stock market", China has all but destroyed the Shanghai stock market as a market, by massively intervening to keep the bubble from imploding further. A bubble never implodes only halfway, so there was never any chance that the intervention would work.
On Monday, the Shanghai composite index plunged 8.5%, the greatest one-day market plunge since 2007, and so now the Chinese Communist Party (CCP) faces a double humiliation. First, it's now clear to a lot of people that the stock market will crash, and that millions of people, especially elderly people, will lose their life savings.
And second, it's now clear that the great, powerful CCP is not powerful enough to control the stock market. This may be enough to cause a panic or even a rebellion.
Typically in these situations, there are wild gyrations. The index may fall 10% one day and rise 10% the next day. There might be a bounce back on Tuesday. On the other hand, more than 1,700 stocks fell by the daily 10% limit on Monday, indicating that they would have fallen even more if allowed. This would indicate a further plunge on Tuesday. Either way, the bubble must continue imploding at some point. (At this writing, on Monday evening ET = Tuesday morning in Shanghai, the market has already fallen 4%, and stocks are down across Asia. Commodities continue to fall.)
The CCP is now going to be considering what further desperate measures they can try. The government has already poured some $800 billion into the market within a few days. As a last resort, the CCP may have to "print" a lot of money and purchase stock shares from anyone who wants to sell them.
China's history is filled with huge, massive internal rebellions (civil wars). The last three were the White Lotus Rebellion (1796-1805) and the Taiping Rebellion (1852-1869), Mao's Communist Revolution (1934-49), killing millions or tens of millions of people each time. These occur at regular intervals, with each new one occurring at about the time that the survivors of the preceding one die off. From the point of view of Generational Dynamics, it's time for the next one and, in fact, it's a bit overdue. The CCP officials are aware of that even if they don't know anything about generational theory. Bloomberg and Asia Times
Turkey last week announced US warplanes could use Turkey's Incirlik and Diyarbakir air bases to launch attacks on the so-called Islamic State (IS or ISIS or ISIL or Daesh) in Syria. The terms of the US-Turkey agreement that led to that announcement are becoming clearer, and are generating controversy.
The heart of the agreement is that the US and Turkey will work together to create an "ISIS-free zone" in Syria along a portion of the border with Turkey. This was being called a "safe zone" last week, but that name has apparently been abandoned so as not to provoke Syria's president Bashar al-Assad. The term "no-fly zone" has been abandoned for the same reason.
As we wrote in "26-Jul-15 World View -- Turkey bombs ISIS targets in northern Syria to set up 'safe zone'", the Kurds in northern Syria are separated into two large enclaves, one in the east up the border with Iraq, and one in the west. If the Kurds can unite those two regions, then it can declare the entire region a Kurdish state, something that Turkey will not tolerate.
The proposed "ISIS-free zone" is the region separating the two Kurdish enclaves, and so the objective of the Turks seems to be to create it actually as an "ISIS-free and Kurdish-free zone." This severely complicates the US coalition's mission in Syria, since the Kurds are supposed to be our allies. Pro-Kurdish activists are accusing Turkey and the US as being in a joint plan to kill Kurds as well as ISIS.
It's worth pointing out that there are no good guys in Syria. Bashar al-Assad is a genocidal monster who's used "industrial strength" torture, barrel bombs and Sarin gas on innocent women and children. The Kurdish PKK is a far left revolutionary terrorist group that has been bombing and murdering innocent civilians for decades. And of course ISIS and al-Nusra are bloody jihadists who decapitate innocent civilians just for fun. There's really no one to root for here. However this "ISIS-free zone" gets sorted out, all we can really do is watch as the Syria continues to deteriorate, until we're finally drawn in and forced to fight someone, whoever we feel is our enemy at the time. Hurriyet (Ankara)
(Comments: For reader comments, questions and discussion, see the 28-Jul-15 World View -- China faces nightmare political scenario with stock market plunge thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(28-Jul-2015)
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Syria's Bashar al-Assad admits that regime army is in decline
This morning's key headlines from GenerationalDynamics.com
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As we've been reporting since April, the army of Syria's president Bashar al-Assad has been increasingly showing signs of collapse, losing one major city after another either to the so-called Islamic State (IS or ISIS or ISIL or Daesh) or to the al-Qaeda linked Jabhat al-Nusra (al-Nusra Front).
On Sunday, a clearly weakened Bashar al-Assad gave a nationally televised speech that was almost a speech of desperation. He said that there have been so many defections and desertions, that the army's fighting strength has been cut deeply. As a result, the regime has had to retreat from some regions of the country in order to hold on to other regions of the country.
According to al-Assad:
"If we thought we will be victorious in all the battles everywhere at the same time ... this is unrealistic and impossible. We are forced to give up areas to move those forces to the areas that we want to hold onto. ...Are the Syrian armed forces able ... to defend the homeland? Yes, it is certainly capable.
But the army in the first degree is a matter of manpower which would then utilize the weapons and ammunition. Everything is available but there is a lack of manpower."
The last sentence is presumably an allusion to the massive flows of heavy weapons that Russia is supplying to the genocidal dictator.
The question of what percentage of Syria the regime still controls was discussed by several analysts on the BBC. According to some reports, the regime controls only 25% of the country. That may be true, but much of the other 75% is most desert and far-flung rural areas where there are few people. Among the major cities and other strategic regions, the regime controls more than 25%, but less than 50%.
Right now, the regime controls Damascus, Homs and strongholds of Assad's minority Alawite sect in coastal areas. If there are any further losses to ISIS or al-Nusra, then those will be very significant. So the question is: Was al-Assad admitting past losses, or was he preparing the public for future, more significant losses? That question is unanswered. Telegraph (London) and Reuters and ARA News (Syria) and LA Times
Sunday's speech by Bashar al-Assad comes one day after state media announced, on Saturday, a decree for a general amnesty for military deserters who violated the country's compulsory military conscription law. Deserters have two months to turn themselves in to take advantage of the amnesty.
It's not believed that this decree will result in a flood of defectors and deserters returning the army, if that's what al-Assad is hoping for. Daily Star (Beirut) and BBC
Citizens of Turkey are bewildered by the breathless speed of events. In less than a week, Turkey has turned from a country determined to avoid war into a country fighting two enemies in two countries. Turkey's warplanes are bombing Kurdish PKK strongholds in northern Iraq and ISIS strongholds in northern Syria, with the threat of bombing Kurdish PYD strongholds in northern Syria, where they are fighting ISIS. In addition, security forces over the weekend arrested over 400 people in cities across the country, accusing them of been PKK militants, and a scheduled political rally in Istanbul in support of Kurdish rights was ordered cancelled in order to avoid violence.
On Sunday, Turkey invoked Nato's Article 4, which allows member states to request a meeting if they feel their territorial integrity or security is under threat.
Nato Secretary General Jens Stoltenberg called a Nato meeting for Tuesday, to be attended by all 28 member nations. According to a statement by Stoltenberg:
"Turkey requested the meeting in view of the seriousness of the situation after the heinous terrorist attacks in recent days, and also to inform Allies of the measures it is taking. NATO Allies follow developments very closely and stand in solidarity with Turkey."
Article 4 is less potent than Article 5, which recognizes an attack against one or more members as an attack against all. Today's Zaman (Istanbul) and AP and Nato
(Comments: For reader comments, questions and discussion, see the 27-Jul-15 World View -- Turkey invokes Nato article 4 with 'territorial integrity and security' threatened thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(27-Jul-2015)
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Turkey - PKK 'peace process' threatened by new Turkish war policy
This morning's key headlines from GenerationalDynamics.com
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More than 1,000 Kurds and leftist Turks have marched in Paris to protest airstrikes by Turkey on Kurdish militant camps in northern Iraq. One banner held high at Saturday's march read, "To hit the PKK is collaborating with ISIS." AP
Turkey's rapidly changing policy towards the war in Syria seems to have become more risky, complex and dangerous every day for the last six days, ever since Monday's terror attack on Suruç killing 32 mostly young pro-Kurdish activists who were discussing plans to help rebuild the town of Kobani, which the Kurds had captured from ISIS in January. No one has claimed responsibility for the Suruç attack, but Turkish officials believe that the so-called Islamic State (IS or ISIS or ISIL or Daesh) is responsible.
The Kurdistan Workers’ Party (PKK), a communist separatist terror group advocating a separate Kurdish state of Kurdistan to be formed out of regions from Syria, Turkey and Iraq, has been conducting terrorist attacks against Turkish government officials for decades, including kidnapping, bombings and assassinations. Turkey and the PKK agreed to a ceasefire and "peace process" in 2013.
But now, that peace process is in jeopardy, after Turkey's major U-turns and changes in foreign policy this week. Many people in Turkey fear a full-scale return to hostilities between the armed forces and PKK.
Early on Saturday, Turkish warplanes launched attacks on PKK strongholds in the Kandil mountains in northern Iraq, near the border with Turkey. These attacks were an almost daily occurrence before the ceasefire agreement.
Turkey's pro-Kurdish Peoples' Democratic Party (HDP) issued a statement criticizing Turkey's president Recep Tayyip Erdogan for "mixing the fight against the Kurdish people with the fight against ISIS," and added:
"The AKP [Erdogan's Justice and Development Party] government, state institutions and the army have unfortunately taken steps that aborted the solution and peace process, as well as the effective ceasefire.A plan to win back a single party majority again by creating a nationalist and militarist climate, making an impression of engaging in a comprehensive struggle against terrorism is a plan to burn the country."
According to a statement on the PKK web site: "The truce has no meaning anymore after these intense air strikes by the occupant Turkish army," alluding to the separatist claim that Turkey is striking the "independent state of Kurdistan." Hurriyet (Ankara) and AP and Hurriyet
In addition to the airstrikes in northern Iraq, Turkey's warplanes have been striking ISIS targets in northern Syria, with the stated objective of setting up a "safe zone" or a "no-fly zone."
This concept has a long history. Ever since the tsunami of Syrian refugees began flooding across the border into Turkey in 2011, Turkish officials have suggested that there may be a need to set up a "no-fly zone" in northern Syria to which the refugees could flee without having to cross into Turkey. However, this suggestion was never implemented, mainly because Turkey didn't want to enter the war in Syria, and Syria's president was loudly objecting to any talk of Turkey striking Syrian territory.
Like so many other things, this policy has been completely reversed since Monday's attack on Suruç. Turkey is now planning to strike at both ISIS and PKK targets in northern Syria.
Prime minister Ahmet Davutoglu on Saturday gave the following explanation for the need for "natural safe zones":
"Unfortunately Turkey is surrounded by a ring of fire.In such an atmosphere, Turkey tries to keep her democracy and development alive... these operations have carried a message to the countries in the region and to international circles: whatever happens in Syria and Iraq, in our border regions, we will not allow them to threaten Turkey's security and will not hesitate to take necessary measures."
This has generated accusations that Turkey is using the that attacks on ISIS are a thinly veiled cover for planned attacks on Kurdish (PYD) forces in Syria.
The Kurds in northern Syria are separated into two large enclaves, one in the east up the border with Iraq, and one in the west. A major objective for the Kurds fighting ISIS in Syria is to control the region between the two enclaves and declare the united region a Kurdish state, something that Turkey will not tolerate.
Turkish sources say that there are currently no plans for airstrikes to target the Kurdish Democratic Union Party (PYD) forces in Syria, which are thought to be linked to the PKK in Turkey. But those plans could change if the Kurds gain more control of the border with Turkey. This was the meaning of Davutoglu's statement that "whatever happens in Syria and Iraq, in our border regions, we will not allow them to threaten Turkey's security and will not hesitate to take necessary measures."
However, Turkmen in northern Syria claim that they're being driven out of their homes by Kurdish PYD forces, and they are requesting help from Turkey's government. Hurriyet (Ankara) and BBC and AP and Anadolu (Turkey)
An analysis in the Arab News says that the evidence points away from the claim that ISIS was responsible for the attack in Suruç, and points to the PKK as the perpetrator:
The columnist concludes darkly that the attack was a conspiracy involving Turkey, the PKK, and the United States, although no evidence of that was presented.
I believe that Turkey's new policies this week are potentially explosive. I've been saying for a long time that there is no war of Muslims versus the West, at least not yet. What there is is a massive and increasing war of Muslims versus Muslims, that's becoming significantly worse every week. Many analysts are pointing to the US nuclear deal with Iran as forcing Sunni Muslim governments to become more militarily aggressive (in Syria and Yemen). As we wrote last week in "19-Jul-15 World View -- Behind the scenes in the Iran nuclear deal", the Iran nuclear deal is forcing yet another realignment in the Arab world, as it deteriorates into war. Turkey's new policies advance that trend even further. Arab News
(Comments: For reader comments, questions and discussion, see the 26-Jul-15 World View -- Turkey bombs ISIS targets in northern Syria to set up 'safe zone' thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(26-Jul-2015)
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Turkey's warplanes bomb ISIS and PKK strongholds in Syria
This morning's key headlines from GenerationalDynamics.com
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Just a week ago, it was Turkey's clearly stated policy to stay out of the war in Syria. But as we wrote yesterday in Syria's war comes to Turkey after Monday's terror attack on Suruç, Turkey no longer has any choice but to respond.
In a major policy reversal earlier this week, Turkey will let the US use Incirlik Air Base to fight the so-called Islamic State (IS or ISIS or ISIL or Daesh) in Syria, something that had been refused all along.
But perhaps the biggest change is that now Turkey's warplanes will join the U.S.-led coalition airstrikes against ISIS targets in Syria. Turkey has already begun striking targets in Syria, but is doing so without violating Syria's air space. Turkish officials did not rule out doing so in the future.
However, Turkey has taken on an even more ambitious task of airstrikes against both ISIS targets and Kurdish PKK targets in Syria. If I understand this correctly, Turkish warplanes will be striking at Kurdish militias in Syria, perhaps the same militias that are fighting against ISIS in Syria. This comes as Kurds in Turkey are accusing president Recep Tayyip Erdogan of allegedly helping ISIS in the fight over the Syrian city of Kobani. If Turkish warplanes are going to be striking Kurdish militias that are fighting ISIS, then those accusations are going to become much louder.
As of this week, Turkey is now embarking on an extremely dangerous course of action. Generational Dynamics predicts that the entire Mideast is headed for a major regional war, and that war seems to come much closer every week. AP and Anadolu Agency (Turkey) and Washington Post
For the first time since the financial crisis of 2008, commodities and trade figures are signaling a warning for the global economy.
Gold has collapsed to five year lows. Copper just hit a six year low. Oil prices have had the worst price crash in 45 years. World trade volume has been declining sharply for five months.
Some analysts blame the plunge on the appreciating dollar and China's failing economy. Whatever the reason, forecasts are that the trends will continue for the rest of the year. Analysts are mixed about the consequences, but with so many declining signals, a decline in US stocks of 30-50% would not be a surprise to some.
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Generational Dynamics predicts that we're headed for a global financial panic and crisis. According to Friday's Wall Street Journal, the S&P 500 Price/Earnings index (stock valuations index) on Friday morning (July 24) was at an astronomically high 21.18. This is far above the historical average of 14, indicating that the stock market is in a huge bubble that could burst at any time. Generational Dynamics predicts that the P/E ratio will fall to the 5-6 range or lower, which is where it was as recently as 1982, resulting in a Dow Jones Industrial Average of 3000 or lower. Zero Hedge and Market Watch and Bloomberg
As we reported several times, China's Shanghai Composite stock market index peaked on June 12, and then plunged 30% in the next four weeks. It has now recovered about 1/4th of what it lost, because of extraordinary intervention by China's government:
The "China dream" is for China to replace the United States militarily, by taking control of the Pacific and Indian Oceans, and also to do so financially, by replacing the dollar with the Chinese yuan as the global reserve currency. In order to do that, China has to prove that it can provide a world-class stock market that can operate free of government intervention.
For that objective, the last month has been a disaster. China has effectively destroyed the Shanghai stock market as a market. China has absolutely no credibility left in its ability to provide a world-class stock market.
And that's not the worst of it. Where is China going to go next? China has intervened massively to prop up an imploding bubble. China may have bought a few weeks' time, but that bubble is going to implode, wrecking the savings of millions of ordinary people, often older people, who invested their life saving in the stock market when the bubble was growing. China has a history of massive "people's rebellions" against an oppressive government. The last one was Mao's Communist Revolution that ended in 1949. From the point of view of Generational Dynamics, China is now overdue for the next one. Quartz and Straits Times and Investors.com
(Comments: For reader comments, questions and discussion, see the 25-Jul-15 World View -- Commodities and world trade volume plunge as China pumps stock market thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(25-Jul-2015)
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Turkey's politics become vitriolic after Suruç massacre
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In the fallout of Monday's terrorist attack on Suruç by the so-called Islamic State (IS or ISIS or ISIL or Daesh), Turkey's politics are becoming increasingly vitriolic.
Kurds are blaming President Recep Tayyip Erdogan for either supporting ISIS, or at least for not doing anything to stop them. As we wrote yesterday in Syria's war comes to Turkey after Monday's terror attack on Suruç, there is no credible evidence that Erdogan has been supporting ISIS, but before ISIS came into existence, he may have been providing weapons to anti-Assad forces that later became part of ISIS.
Turkey's politics have never been pleasant, but the Suruç massacre appears to have created a split between the Kurds and pro-Erdogan activists that's even more vitriolic than before.
A mainstream Turkish newspaper fired well-known newspaper columnist Kadri Gürsel on Thursday, because he sent a tweet that criticized President Recep Tayyip Erdogan. The tweet said:
"It is shameful that foreign leaders call the person who is the number one culprit of ISIL terrorism in Turkey and convey their condolences over the Suruç bombing."
Gürsel is referring to Erdogan as the "number one culprit," and the foreign leaders are Barack Obama and other leaders who called Erdogan to convey their condolences over Monday's terrorist attack on Suruç by the so-called Islamic State (IS or ISIS or ISIL or Daesh).
It's believed by some that Gürsel was fired under orders from Erdogan, as the newspaper is headed by a close Erdogan associate. Erdogan has been infuriated by journalists who have criticized him, and he has allegedly ordered the firing of many of them.
A recently published report has claimed that Erdogan's daughter Sümeyye Erdogan has been linked to ISIS, and is currently running a 'covert' hospital exclusively to treat wounded ISIS terrorists. Erdogan issued a statement that did not directly address the specific charges, but said:
"Every day, a new one is being added to ‘perception management’ operations aimed at harming our country’s image by creating an impression of a relation between Turkey and the terrorist organization, Daesh.Groundless claims that try to show our President Mr. Recep Tayyip Erdogan, his son Bilal Erdogan and his daughter Sümeyye Erdogan in relation with Daesh, which have been immorally released in the recent days, are part of a smear campaign conducted against Turkey and are all lies."
With many Kurds, after the Suruç massacre, blaming Erdogan for the supporting ISIS terrorists, Erdogan struck back on Thursday. He accused leaders of the pro-Kurdish People's Democratic Party (HDP) of supporting the Kurdistan Workers’ Party (PKK) terrorists who killed two policemen in southeastern Turkey earlier in the week. In a statement, Erdogan said:
"It’s disgraceful for circles - who have openly expressed that they rely on the terror organization - to not be able to show courage to condemn and instead remain silent on the PKK’s brutal terror acts."
The HDP leadership expressed its regret over the shooting, but did not condemn the PKK. Today's Zaman (Istanbul) and Hurriyet (Ankara) and International Business Times
In the fallout of Monday's terrorist attack on Suruç by the so-called Islamic State (IS or ISIS or ISIL or Daesh), Turkey has made a major reversal, and will allow American warplanes to launch attacks against ISIS in Syria from Incirlik Air Base.
It's believed that ISIS was behind the suicide bombing in Suruç, targeting a large meeting of mostly young pro-Kurdish activists who were discussing plans to help rebuild the town of Kobani, which the Kurds had captured from ISIS in January. There were 32 dead and more than 100 others injured.
Turkey is a member of Nato, and Incirlik Air Base is a joint U.S.- Turkish installation that houses the U.S. Air Force's 39th Air Base Wing. However, Turkey's president Recep Tayyip Erdogan has in the past refused to permit American warplanes take off from Incirlik to fight ISIS for two reasons:
US warplanes fighting ISIS currently have to leave from Iraq or Jordan or other Arab nations. Using Incirlik would allow US warplanes to move more quickly and efficiently.
In a potentially major strategic change in the fight against ISIS in Syria, Turkey and the US will set up a 90 km no-fly zone, 40-50 km deep into Syria's territory. The no-fly zone will prevent ISIS or the al-Qaeda linked Jabhat al-Nusra (al-Nusra Front) from gaining territory in the region.
Warplanes from the Bashar al-Assad regime in Syria will not be permitted within the no-fly zone, and those which violate this will be targeted. AP and Washington Post and Hurriyet (Ankara)
For the first time, there was a gunfight between Turkish soldiers and ISIS militants across the border between Turkey and Syria. Five ISIS militants approached the border and fired on Turkish soldiers. Turkey returned fire, and also used artillery to fire at suspected ISIS positions. CNN
(Comments: For reader comments, questions and discussion, see the 24-Jul-15 World View -- In major reversal, Turkey will let US use Incirlik to fight ISIS in Syria thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(24-Jul-2015)
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Greece's parliament approves European lender reform demands
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Protesters rioted and clashed with police in Istanbul and other cities across Turkey in anti-government demonstrations protesting the policies of Turkey's president Recep Tayyip Erdogan, whose policies many people blame for Monday's massive terrorist attack in the town of Suruç, on Turkey's border with Syria. It's believed that the so-called Islamic State (IS or ISIS or ISIL or Daesh) was behind the suicide bombing in Suruç, targeting a large meeting of mostly young pro-Kurdish activists who were discussing plans to help rebuild the town of Kobani, which the Kurds had captured from ISIS in January. There were 32 dead and more than 100 others injured.
Turkish police have identified Seyh Abdurrahman Alagöz, a 20-year-old Turkish male Kurd as the person behind the suicide bombing. Another female suspect has yet to be identified. It's believed that Alagöz went to Syria six months ago to join ISIS.
Police detained 49 protesters in multiple locations in Istanbul, and seized three hand-made cluster bombs, 203 Molotov cocktails, a pump-action rifle, a blank-firing pistol, 125 pieces of ammunition, two firework-launching platforms and 40 boxes of fireworks. Today's Zaman (Istanbul) and Hurriyet (Ankara) and Telegraph (London)
The military wing of Turkey's outlawed Kurdistan Workers’ Party (PKK) said on Wednesday that it had killed two Turkish police officers in a town on the Syrian border as a reprisal for Monday's suicide bombing in Suruç. According to a web site statement: "A punitive action was carried out... in revenge for the massacre in Suruç."
The killings took place in Ceylanpinar, a Turkish district that has been severely affected by fighting between rival factions across the border in Syria.
Turkey has been for decades the target of terrorist attacks by the Kurdistan Workers’ Party (PKK), although in recent years the PKK has been talking about a peace agreement in return for greater freedoms for Kurds in Turkey. Hurriyet (Ankara) and Today's Zaman (Istanbul)
Monday's massive terrorist attack in the town of Suruç, on Turkey's border with Syria, has polarized the Turkish people, especially the Turkish Kurds, into believing that Erdogan has allowed Syria's civil war to come to Turkey.
Turkey's president Recep Tayyip Erdogan has said many times in the past that the Kurds are more dangerous than ISIS, but Erdogan may have to change his tune after Monday's attack. According to an MP from Turkey's pro-Kurdish People's Democratic Party (HDP), being interviewed on the BBC:
"People are incredibly angry. They are angry that Turkey is turning into Syria. They're shocked, they're angry, and they're particularly angry at Mr. Erdogan, who is the president of Turkey, for his support to all kinds of groups in Syria, and they blame him for also supporting ISIS."
The MP responded to the statement that it's now believed that Monday's suicide bomber was a Kurd who had joined ISIS:
"Many Kurdish people join ISIS. Even in my home town, hundreds of youth went there are joined them, and definitely one needs to work on this kind of issue. It's going to get dangerous. There are so many nobodies who want to be somebody, and they [ISIS] are somehow able to recruit those people. Very openly they're doing all kinds of campaigns here, recruiting events, even in my home town, and they always even do military training in the hills around my home town. And they have all kinds of support."
The evidence given that Erdogan supports ISIS consists of his statements that the Kurds are more dangerous than ISIS, and also that Erdogan did nothing to support the Kurds in the fight in Kobani. Erdogan has furiously denied any support for ISIS, and no real evidence has been presented that he has.
The real story is probably much more nuanced.
I've been writing since 2011 that Syria's president Bashar al-Assad was a genocidal psychopath who was using torture and mass slaughter, killing innocent women and children who were peacefully protesting, to try to exterminate the Sunnis in Syria. A few months later, some occasional news stories began to appear about Sunni jihadists from other countries, from Asia to the Caucasus to North Africa, who were coming to Syria to fight al-Assad. ISIS didn't exist at that time, but I speculated that if these foreign jihadists kept arriving, then they would form a terrorist fighting force in Syria, and then return to their countries and use their terrorist skills at home.
At that time, according to analysts, Erdogan was willing to arm any group in Syria that was fighting against al-Assad. Erdogan did not believe that he was arming ISIS, since ISIS didn't exist; he believed that he was arming anti-Assad forces. As it turned out, he was arming anti-Assad forces some of which later turned into ISIS.
Erdogan's Syria policy has had the objective of regime change, removing al-Assad, with secondary objectives of defeating ISIS and of preventing the Kurds from forming any kind of Kurdistan state in Syria, because they would also demand part of Turkey for Kurdistan.
So those have the elements of Erdogan's foreign policy towards Syria, but now that policy is backfiring and falling apart. Now Turkey is threatened with terror attacks by both PKK Kurds and ISIS, the latter including ISIS Kurds. That is that Syria's war is now in Turkey, and many Kurds blame Erdogan for the rise of ISIS, while other disaffected Turkish Kurds are joining ISIS, possibly with the purpose of a war against Erdogan's government. AP and Lowy Institute (Australia)
Greece's parliament worked deep into the night, and early on Thursday morning approved resolutions demanded by lenders as prerequisites for opening negotiations for a third bailout, for 86 billion euros.
The approved reforms will affect the courts, the civil procedure code, and the banks, causing them to adopt a regulatory system used by other European Union countries.
Greece's prime minister Alexis Tsipras urged MPs to endorse the reforms:
"Conservative forces within Europe still insist on their plans to kick Greece out of the euro. We chose a compromise that forces us to implement a program we don’t believe in and we will implement it, because the choices we have are tough."
As a separate matter, Greece is planning for the reopening of the Athens Stock Exchange, after being closed for four weeks. However, severe restrictions on buying and selling will be in place to prevent a complete stock market crash.
Prolonged restrictive measures could lead to a downgrade by MSCI Inc. to “standalone market,” a designation that includes Jamaica, Botswana, Zimbabwe and mainland China, from emerging market. That might mean trading and prices would decline even further and Greek companies would be cut off from a crucial source of funding. Kathimerini and Bloomberg
(Comments: For reader comments, questions and discussion, see the 23-Jul-15 World View -- Syria's war comes to Turkey after Monday's terror attack on Suruç thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(23-Jul-2015)
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Burundi's president Nkurunziza continues to provoke Hutu-Tutsi tensions
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Burundi's Hutu president Pierre Nkurunziza took office in 2005 apparently won re-election on Tuesday in an election that the international community considered to be non-credible.
Burundi is in a generational Awakening era, one generation past the end of a bloody, genocidal civil war, the 1994 war between Hutus and Tutsis in Rwanda and Burundi. Now, all the old hatreds that gave rise to the war are being inflamed again, particularly in the younger generations. This is raising fears that the civil war will be revived in all its fury, something that can't happen in a generational Awakening era because the survivors won't permit it.
Nkurunziza is a Hutu who apparently is doing his best to stoke those old hatreds with Tutsis. He ran for a third term, in violation of the constitution, and he's responded to Tutsi protests with brutality and violence. More than 140,000 people, almost all Tutsis, have fled to neighboring countries, and are living in squalid refugee camps.
It may be that Nkurunziza is planning to copy the technique of Zimbabwe's Robert Mugabe. Mugabe is best known for his 1984 genocidal pacification campaign known as "Operation Gukurahundi" (The rain that washes away the chaff before the spring rain). During that campaign, accomplished with the help of Mugabe's 5th Brigade, trained by North Korea, tens of thousands of people, mostly from the Ndebele tribe, were tortured and slaughtered.
Nkurunziza is showing every sign of going down the same road as Mugabe, and planning an "Operation Gukurahundi" to torture and slaughter any from the Tutsi tribe who oppose his grab for power. Now that Nkurunziza has won an illegal third term, the new "Operation Gukurahundi" may not be far off. International Business Times and BBC and France 24
Greece got through last week's crisis by means of a parliamentary vote on Wednesday that approved increased taxes and pension changes, reforms that prime minister Alexis Tsipras supported only because European officials were "holding a knife at my neck." And Greece was rewarded with a bridge loan that kept Greece from defaulting two days ago, and also allowed Greece's banks to reopen on the same day.
That was last week's crisis. Time to move on to this week's crisis. The European creditors are demanding a second vote by parliament, on a mix of tax hikes, market reforms and spending cuts demanded by the lenders. The plan is that this package will pass Greece's parliament today (Wednesday), and then on Friday negotiations can begin with the lenders on an 86 billion euro bailout package. The negotiations are supposed to be completed by August 20.
Many people in Tsipras's far left Syriza party are furious about the direction the country is taking. Since about 40 of the Syriza MPs abandoned Tsipras in last Wednesday's vote, Tsipras has had to reorganize by firing some Syriza ministers and appointing a minister from the ANEL Independent party, thought by some on the left to be xenophobic, and another minister from the right of center New Democratic party.
On Tuesday evening, Tsipras lashed out at his critics in the Syriza party by taking a hard line:
"Up until today I've seen reactions, I've read heroic statements but I haven't heard any alternative proposal. Syriza as a party must reflect society, must welcome the worries and expectations of tens of thousands of ordinary people who have pinned their hopes on it. ...If some believe that an alternative leftist plan is Schäuble’s plan, or grabbing the stock of European Central Bank note, or giving IOUs to pensioners, let them explain to the Greek people."
The references are to a plan by Germany's finance minister Wolfgang Schäuble for Greece to leave the euro currency ("Grexit"), and other plans to transit to a drachma or IOU-based economy. Instead, Tsipras said that he supports "a compromise, but one which keeps us alive so we can keep on fighting." Kathimerini and BBC and Reuters
But OK, even if all goes well in today's vote, and even if the negotiations that begin on Friday, where is the money coming from for the 86 billion euro bailout?
As long-time readers know, I've been saying for years that no solution exists to the Greece crisis. It's not that no one has been clever enough to find a solution. It's that no solution exists to be found. More and more, the paradoxes and contradictions of five years of "kicking the can down the road" are becoming apparent.
The International Monetary Fund (IMF) contributed about a third of the funding of the two previous bailouts in 2010 and 2012, but threw Europe under the bus last week by saying that the IMF would not participate in the third bailout unless the Europeans agree to write off part of Greece's debt -- something that German Chancellor Angela Merkel, among others, has said will not happen.
And so, given that contradiction, there will have to be some imaginative fudging to find a way to provide the money for the next bailout.
I wrote a couple of times in the past that it was my personal belief (not a Generational Dynamics prediction) that, one way or another, Greece would remain in the eurozone. That was before the repeated convulsive crises of the last few weeks that brought Greece several times right to the edge of the Grexit cliff.
But now it's even less likely that Greece will leave the eurozone. After going through the past few horrendous weeks of pain, it's almost unthinkable to throw it all away. For that reason, there's little doubt that a way will be found to provide that next bailout. It's really not that hard. Just find somebody willing to pay for it. Kathimerini and Politico Europe
(Comments: For reader comments, questions and discussion, see the 22-Jul-15 World View -- Greece's Tsipras lashes out at his own party as new vote approaches thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(22-Jul-2015)
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Kurds blame Erdogan for ISIS terrorist attack in southeastern Turkey
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A massive terrorist explosion in southeastern Turkey on Monday killed 31 and wounded hundreds. It's believed that it was triggered by an 18-year-old female suicide bomber.
It occurred in the town of Suruç, which is on the border with Syria, just across the border to the Syrian town of Kobani.
In January, Kurdish militias scored a major victory over the Islamic State (IS or ISIS or ISIL or Daesh) by driving all ISIS forces out of Kobani.
Because of the importance of Kobani, ISIS has been trying to retake the town since then. A month ago, ISIS killed dozens of Kurds, mostly civilians, in a brutal attack on Kobani. The ISIS militants disguised themselves in Kurdish YPG uniforms, so they were undetected, until they opened fire. President Recep Tayyip Erdogan by some opposition politicians, especially from the opposition pro-Kurdish People's Democratic Party (HDP), of hating the Kurds and of helping ISIS launch the attack agains the Kurds in Kobani. Erdogan was outraged, and said that HDP politicians "are carrying out a slander and black propaganda campaign in the wake of this nefarious attack."
The bomb attack in Suruç targeted a large meeting of pro-Kurdish activists who were discussing plans to help rebuild the town of Kobani. They had been chanting slogans and were holding a large banner with the words "We defended it together, we are building it together," when the suicide bomber exploded her load.
HDP party politicians condemned Erdogan for not taking enough steps to prevent terrorism on Turkish soil. On Monday, there were demonstrations in Istanbul by protesters who blamed the government for the ISIS suicide bombing. Some activists chanted slogans against Erdogan and the ruling AK Party, including: "Murderer ISIS, collaborator Erdogan and AKP." Police in Istanbul fired teargas and water cannon when the demonstration turned violent. Hurriyet (Ankara) and Zaman (Istanbul) and Daily Mail (London)
With China building illegal artificial islands in the South China Sea, the Philippines government is retaliating by reinforcing a naval vessel, the BRP Sierra Madre, that was beached on Second Thomas Shoal in 1999. In order to challenge China's claims of sovereignty over the entire South China Sea, including regions that had belonged to other countries for centuries, the Philippines government has kept the beached ship staffed with a small group of marines.
This has gone on for years, and has infuriated the Chinese. There are at least China coast guard cutters nearby constantly, to interdict any resupply attempts to the ship. Any supplies or replacement personnel can arrive only by running past China's blockade.
For years, the beached ship has kept a low profile, but in view of China's increasingly aggressive and hostile moves, the Philippines government is beginning to provide more "maintenance" to the vessel, with cement, welding tools and other reinforcing materials brought past the Chinese blockade.
China's foreign ministry accused the Philippines of illegal activities, repeating that the entire South China Sea is China's sovereign territory:
"China strongly protests and firmly opposes such an act. ...The relevant activity fully exposed the Philippines’ hypocrisy and that it is a double dealer. It once again proved that the Philippines is truly a troublemaker and rule-breaker in the region."
The Philippines government is also restoring the former US naval facility in Subic Bay to be a full-fledged military base, for the first time since the US Navy was thrown out from the base. The Philippines will station new fighter jets and two frigates early next year. US Naval Institute and AFP and Reuters
(Comments: For reader comments, questions and discussion, see the 21-Jul-15 World View -- Philippines reinforces grounded ship to challenge China in South China Sea thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(21-Jul-2015)
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Greece's banks to reopen at start of another stormy week
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There were five explosions in Gaza on Sunday from bombs placed underneath five cars parked in front of their owners' homes. The explosions were evidently coordinated, as they occurred almost simultaneously. There were no reports of serious injuries. The cars belonged to members of the armed branches of two different militant groups in Gaza, Hamas and Islamic Jihad. The two groups issued a joint statement on Sunday saying:
"The culprits of the violence are in the camp of traitors. ...Guilty hands are attempting to attack the resistance by blowing up its fighters' vehicles, which only serves the occupier and its objectives."
The "occupier" is Israel. The "resistance" are Hamas and Islamic Jihad.
The statement is ironic because has reportedly been in peace talks with Israel for a five year truce while, on the other hand, Hamas has launched a crackdown on Salafist groups in Gaza, with as many as 100 members or supporters arrested and jailed.
It's believed that the bombs were placed by one of the smaller militant groups in Gaza that have declared allegiance to ISIS. AP and Daily Mail (London)
The increasing influence of Iran through last week's nuclear agreement with the West and of the Islamic State (IS or ISIS or ISIL or Daesh) are causing further shifts in Mideast relationships. Relations between Hamas and Saudi Arabia have been particularly strained because of Hamas's close relationship with Iran and because Saudi Arabia sided with the Palestinian Authority in its conflicts with Hamas.
However, a meeting of Friday between Hamas chief Khaled Meshaal and Saudi Arabia's new king Salman bin Abdulaziz al Saud is being viewed as a possible "game changer" in the relationship between the two. According to a Hamas official, Salah al-Bardawil, "We sensed that there is a readiness in Saudi Arabia to support the Palestinian cause."
It's thought that the rapprochement signals that Hamas has decided to distance itself from Iran, and that the Saudis will help rebuild Gaza, which is still devastated from last summer's 60 day war with Israel.
As we wrote yesterday in "19-Jul-15 World View -- Behind the scenes in the Iran nuclear deal", the Iran nuclear deal is forcing yet another realignment in the Arab world, as it deteriorates into war. Events seem to be moving more quickly in recent weeks. Jerusalem Post and Reuters
The European lenders have approved a bridge loan for Greece, to prevent bankruptcy for a few weeks, and are providing liquidity so that Greece's banks can reopen on Monday for the first time in three weeks. Greek citizens have been restricted to ATM withdrawals of only 60 euros per day, but now there'll be a small lightening of the rules: They will be permitted to take an entire week's withdrawals -- 420 euros -- in a single day, so they won't have to stand in line at the ATM every day.
It'll be anything but smooth sailing this week. Austerity measures are being imposed on Greece. But these are the same kinds of austerity measures that the Greek people voted down in a referendum, and they're the measures that prime minister Alexis Tsipras said that he doesn't believe in, but had to accept because the European lenders were "holding a knife at my neck."
In fact, nobody believes any more that the austerity measures will work. Germany's finance minister Wolfgang Schäuble is calling for a temporary "Grexit" -- for Greece to leave the eurozone and use a different currency for up to five years. But German Chancellor Angela Merkel has completely ruled out any Grexit, and she's apparently pushing for a new 86 billion euro bailout for Greece, which will kick the can down the road for a while. In the past she's been adamantly opposed to forgiving any part of Greece's debt, but she's indicated a willingness to consider restructuring the Greek debt in the fall, possibly by extending the payment schedule out for decades. Kathimerini and Bloomberg
(Comments: For reader comments, questions and discussion, see the 20-Jul-15 World View -- Possible rapprochement in the works between Hamas and Saudi Arabia thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(20-Jul-2015)
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The Arab world is disintegrating into war
This morning's key headlines from GenerationalDynamics.com
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I like to reference Debka's newsletter because it contains valuable insights into what's going on, but it's written from Israel's point of view, and sometimes gets things wrong. This week's subscriber-only newsletter (sent to me by a subscriber) contains an analysis of the behind the scenes activities that led to the Iran nuclear deal:
Generally, the Debka view is consistent with my article "15-Jul-15 World View -- Arab views of Iran nuclear deal", including the fact that Iran is becoming America's ally, and the Sunni Arabs will America's enemy. Debka
The same Debka newsletter points out that the number of conflicts in the Arab world is larger than the number of Arab nations involved in the conflicts:
On the other hand, the United Arab Emirates (UAE) and Oman have lined up behind the Iran nuclear deal and have maintained good relations with Iran. In particular, the UAE expects to gain from the Iran's post-sanctions import and export trade by having Dubai become the biggest free port in the Gulf.
Debka says that the Arab governments are, like Israel, in a state of disarray after being swept aside by the Iran deal, and in a state of gloom over all the wars going on. The Arab nations need to focus on creating a new Arab regional structure to replace the outdated Arab League.
As we've been saying for many years, the Mideast is headed for a major regional ethnic and sectarian war with 100% certainty, and events seem to bring that war closer every week. This is particularly true of last week's major event, the Iran nuclear deal.
It's impossible to predict the sequence of political events that will lead to this regional war, but the concept of "a new Arab regional structure" suggests one possibility. My expectation is that, sooner or later, the Arab states will unite with ISIS to fight Iran, Syria and Hezbollah, and this new Arab regional structure may be the political mechanism that brings all these Sunni and Arab elements together to fight Iran. Debka
In a major anti-terrorism sweep across the country, Saudi Arabia has arrested 431 people believed to belong to ISIS cells, "as part of a scheme managed from troubled areas abroad and aimed at inciting sectarian strife and chaos." According to the Saudi statement statement:
"The number of arrested to date was 431 ... detainees, most of them citizens, as well as participants holding other nationalities including Yemeni, Egyptian, Syrian, Jordanian, Algerian, Nigerian, Chadian, and unidentified others.What combines these cells (which were subjected to security restrictions by not making direct contacts among themselves) is the belonging to the terrorist ISIS organization in terms of the adoption of thought, takfir of society and bloodshed, and then exchanging roles to implement the plans and objectives dictated from abroad."
There have been several terrorist attacks on Shia mosques in eastern Saudi Arabia, and the purpose of the announcement in part was to make it clear to the Shia's in the east that the government is doing something. The Saudis claim that they've thwarted six additional planned attacks on Shia mosques.
The fact that over 400 people have been arrested gives an idea of the scale of threat that the Saudis face in ISIS. Saudi Press Agency and AP and Arab News
ISIS has claimed responsibility for a massive bomb attack in a crowded open-air market in Khan Bani Saad, a mostly Shia town 20 miles northeast of Baghdad. The death toll is 130 and climbing, making it the biggest ISIS civilian terror attack in the country.
A man in a truck pulled up to the marketplace in the extreme summer heat and said he was selling ice at a discount to celebrate the end of Ramadan. He lured over 100 people to the truck, and the detonated at least one ton of explosives.
Khan Bani Saad is in Diyala province, which borders Iran. It's the only province in Iraq where Iranian jets are known to have conducted airstrikes against ISIS earlier this year. CNN and AP
(Comments: For reader comments, questions and discussion, see the 19-Jul-15 World View -- Behind the scenes in the Iran nuclear deal thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(19-Jul-2015)
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European officials prepare to negotiate Greece's next bailout
This morning's key headlines from GenerationalDynamics.com
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As we reported two days ago, Japan's prime minister Shinzo Abe is pushing through the parliament a law that would reinterpret the clause in Japan's "pacifist" constitution that the military could be used only in Japan's self-defense to include "collective self-defense," which would allow Japan to use the military in defense of an ally anywhere in the world. For example, if an American warship were attacked by China near Japanese waters, then Japan would be prohibited from defending it, unless collective self-defense were allowed.
The reinterpretation is unpopular in Japan according to polls, and there have been large public demonstrations opposing it. Those who oppose it say that the self-defense clause was part of a constitution that was wonderful gift given by the United States to Japan at the end of World War II, and that it should not be changed. However, Abe has expressed the view that the constitution is a humiliation imposed on Japan by its American conquerors.
The reinterpretation is being triggered by the rise and increasing belligerence of China's military. The United States has pressured Abe to make the reinterpretation, saying that it's important for the security of Japan itself.
Not surprisingly, Chinese officials are outraged. China was invaded by Japan prior to World War II, and China uses that invasion to justify its own massive military buildup, while at the same time using it to condemn any military actions by Japan. China is blasting the reinterpretation as a "nightmare scenario," and the Foreign Ministry issued a statement saying:
"[The reinterpretation is] an unprecedented move since the Second World War ... [which] may lead to significant changes in Japan’s military and security policies. It is fully justified to ask if Japan is going to give up its exclusively defense-oriented policy or change the path of peaceful development that has been long pursued after the Second World War."
The Chinese News Service was considerably more dramatic and blunt:
"By fatally slashing Japan's seven decades of pacifism, like a Shogun's shoulder to waist "kesagiri" finishing move, in the very year marking the 70th anniversary of the end of World War II, Prime Minister Shinzo Abe on Thursday realized his dream of abandoning postwar order and switching his country back into war mode.Despite majority of population's opposition, the country's ruling coalition led by the historical revisionist rammed through a series of controversial security bills in Japan's all-powerful lower house Thursday, marking a backward move meaning the historically bloodied "samurai sword of Japan" could once again be wielded by its troops in every corner of the world."
I checked out the meaning of "kesagiri," and it's described as follows: The swordsman cuts his opponent diagonally from the opponents' right armpit to his left shoulder, then reverses the blade and cuts downward from opponents left shoulder to his right hip. After that, the swordsman shakes the blood off the blade and sheaths his sword.
This sounds like something that Sun Tzu, the author of the ancient Chinese classic The Art of War, might approve of. The Diplomat and Chinese News Service and Akban School of Martial Arts
On Friday, Germany's parliament overwhelmingly approved the 7 billion euro bridge loan so that Greece won't go bankrupt in the next two or three weeks.
Germany's finance minister Wolfgang Schäuble is being widely identified as the bad guy in the negotiations, the hardliner who's making everyone suffer, particularly the Greeks. According to a dramatic but scathing article in the left wing periodical Der Spiegel:
"He then inhaled, flashing a pugnacious smile and turned his wheelchair around. He then prepared for battle of a kind he had never before fought in his long political career -- a battle against the Greek government, against American economists, against large swathes of European public opinion and also, to some extent, against the chancellor herself.Had it been up to Schäuble, Germany would have shown the Greeks the euro-zone door long ago. His problem, however, is that the chancellor doesn't share this sentiment. Merkel rejects his insistence because she doesn't want to go down in history as the government leader responsible for the disintegration of Europe.
If it were any other minister that had so persistently refused to endorse her line, she would likely have got rid of him long ago. But she can't do that with Schäuble. His hard line is precisely what makes him so popular among the Germans."
So apparently it's not just Schäuble who's the bad guy. It's all those Germans who like Schäuble's hard line.
At any rate, the bridge loan has been OK'ed, and the Emergency Liquidity Assistance (ELA) for the banks has been OK'ed, and so Greece won't go bankrupt next week, and Greece's banks may or may not reopen next week.
You thought that the hard part was over, but that was all the easy part. Now the hard part really starts.
This crisis has been going on for five years. There have been two previous bailouts, in 2010 and 2012, totaling 240 billion euros. Now negotiations are supposed to begin on a third bailout, for 80 billion euros. The bailout money has been supplied by three institutions -- -- the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF), formerly known as the "Troika".
The problem now is that the IMF will not participate in the third bailout, because the debt is unsustainable. The Europeans must be willing to write off a substantial portion of Greece's debt before the IMF will participate in a new bailout. But German Chancellor Angela Merkel has said that writing off any portion of the debt is a red line that will not be crossed.
To add to the fun, there's even another deadline that's been set: European officials are saying that a new Memorandum of Understanding (MoU) must be signed by August 10 between Greece and the Troika.
So, here we go! Prepare yourself for another few weeks of daily crises. Der Spiegel and AFP and Irish Times
(Comments: For reader comments, questions and discussion, see the 18-Jul-15 World View -- China reacts harshly to Japan's plans for 'collective self-defense' thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(18-Jul-2015)
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Both Greece and Germany in political disarray after IMF bailout statement
This morning's key headlines from GenerationalDynamics.com
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The ISIS-linked "Sinai Province" terrorist group sank an Egyptian navy ship in the Mediterranean Sea near Gaza and Sinai. They claim to have fired a rocket at the ship, setting it on fire and sinking. Some news reports confirm this, but the Egyptian military says that there was only an exchange of gunfire that caused the ship to catch on fire.
The attack comes just two weeks after Egypt said it was in a 'state of war' in northern Sinai, following July 1 when the same group conducted simultaneous coordinated terror attacks at 15 different locations in Sinai. According to Egyptian officials, at least 300 militants launched that offensive, of whom 100 were killed. The military said that 17 soldiers had been killed, but other reports put the death toll much higher.
The new attack appears to be a significant escalation by terrorists linked to the Islamic State (IS or ISIS or ISIL or Daesh). Daily Star (Beirut) and Al Ahram (Cairo)
What Egyptian officials most fear is a terrorist attack on a commercial vessel in the Suez Canal that forces the canal to close for a period of time. Last month, Egyptian authorities arrested 13 Muslim Brotherhood suspected of planting bombs around the canal. Last year there was a failed RPG (rocket-propelled grenade attack) on a vessel. If the attack had succeeded in hitting the bunker of a tanker, the canal would have been closed for a week for environmental cleanup.
Early in August, Egypt will announce the completion of a Suez Canal expansion project. The expansion will be second channel along a portion of the canal, making two-way traffic possible in that portion. This will reduce the average transit time of vessels from 18 hours to 11 hours, and it will increase the number of vessels transiting the canal each day from 49 to 97.
There's another reason for the Suez Canal expansion project, a somewhat ironic one. The Muslim Brotherhood was involved in the original construction of the canal in 1936 giving them a rare understanding of the waterway and one they exploited to make the RPG attack. So the expansion project is altering the infrastructure, including tunnels, so the Brotherhood can’t use its knowledge of its inner workings to attack the canal. [Correction: This paragraph was sourced from the Journal of Commerce article linked below, but it's not correct as the Suez Canal was constructed between 1859 and 1869.](Paragraph modified. 17-Jul)
Helenic Shipping News and Journal of Commerce
As I wrote yesterday, the International Monetary Fund (IMF) has essentially thrown Europe under the bus, by declaring that Greece's debt is "unsustainable," and that the IMF therefore could not participate in a third bailout, unless the Europeans forgive and write off a large part of Greece's existing debt. That IMF statement thrown European negotiations over a new 80 billion euro bailout for Greece into disarray.
It focused the mind of Greece's prime minister Alexis Tsipras. Greece's economy is in desperate straits, with conditions as bad as the 1930s Great Depression. The average Greek is 40% poorer than five years ago. The unemployment rate is 25%, with youth unemployment at 50%. Tsipras realized that his and Greece's situation was so desperate that he had to capitulate and accept whatever deal the Eurogroup offered it. But that also triggered the resignation of several of Tsipras's ministers, especially after a third of the MPs Tsipras's own far left Syriza party deserted him in the final vote. The result is that Tsipras will have to make widespread changes to his government, assuming his government can survive.
The IMF statement also gave more ammunition to Germany's finance minister Wolfgang Schäuble, who has taken a hard line against simply bailing Greece out again. His position, which he repeated on Thursday, is that voters in Germany and some other eurozone countries will not accept reducing Greece's outstanding debt, either by forgiving part of it or by extending the payments out for decades, since the voters will see that as rewarding Greece's profligacy. The concern is that other countries, such as Italy, Spain, Portugal or even France, will get into trouble some day, and also demand that their debt be written off.
Schäuble claims that the only way to save the euro is to give Greece a "time out" for up to five years, meaning that Greece will return to the drachma or an IOU-based currency until the economy stabilizes, and then can return to the euro.
German Chancellor Angela Merkel is opposing any "time out" for Greece, and this has resulted in a split between Merkel and Schäuble, and also a split in Merkel's conservative party, the Christian Democratic Union (CDU).
Just as Tsipras needed MPs from opposition parties to get the parliament to accept the Eurogroup deal on Wednesday, Merkel on Friday is expected to depend on votes from opposition parties to pass the approval of a bridge loan to prevent Greece from defaulting next week. The bridge loan of 7 billion euros is needed by Monday to allow Greece to make debt repayments to the IMF and the European Central Bank (ECB). The German parliament is expected to approve the bridge loan on Friday.
Greece got some additional good news on Thursday, when the ECB announced that it will again provide a limited amount of Emergency Liquidity Assistance (ELA), to last for a week. Greece's banks have been closed for two weeks now, and this will permit them to reopen next week. However, there apparently will still be a limit of 60 euros per day in ATM withdrawals.
Once Monday arrives, the crisis will continue with chaotic negotiations over the new 80 billion euro bailout for Greece. But after the IMF has thrown Europe under the bus, and after Schäuble has said Greece has to have a "time out," you should expect the shouting to continue. It's not clear to me personally how it makes sense to negotiate a new bailout when the IMF is like the child who yelled that "the Emperor is naked," leaving everyone else no choice but to face reality. Kathimerini and Reuters
(Comments: For reader comments, questions and discussion, see the 17-Jul-15 World View -- ISIS-linked terrorists sink Egyptian navy ship amid Suez Canal expansion thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(17-Jul-2015)
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Japan's Shinzo Abe pushes 'collective defense' bill for vote
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After a day of violence in the streets outside Greece's parliament, and bitter screaming and shouting inside the parliament, Greece's parliament passed a set of harsh reforms that prime minister Alexis Tsipras said that he's supporting only because European officials were "holding a knife at my neck."
The reforms included increased taxes and pension reforms that were harsher than the reforms that voters rejected ten days ago in a national referendum. A total of 229 MPs voted for the reforms, while 64 voted against. The vote was overwhelmingly in favor of the reforms only because Tsipras formed a coalition with opposition parties. Of the MPs in Tsipras's far left Syriza party, 32 voted against the reforms, and 6 abstained. Some of Tsipra's ministers have been forced to resign with the result that the Syriza party may no longer exist, and Tsipras may have to scramble to stay in power. However, Tsipras has been quoted as saying that he will not resign.
Greece's communist party led labor union street riots in Syntagma (Constitution) Square outside the parliament building. Protesters were throwing rocks and Molotov cocktails at police, who were firing tear gas at the protesters.
With Greece having fulfilled the demands of the Eurogroup, the Eurogroup can now go ahead and approve by Monday a 6 billion euro bridge loan that will allow Greece to avoid bankruptcy for a few weeks. After that, negotiations can begin on the terms of an entirely new bailout loan, for 86 billion euros.
However, this all comes as the International Monetary Fund (IMF) has essentially thrown Europe under the bus, by saying that it will not participate in the new bailout loan, which would mean that the eurozone would have to provide the loan entirely by itself.
The reason for the IMF decision was that the IMF had done the math and determined that Greece's debt was "not sustainable." This will be no surprise to regular readers, as I've been saying for years that no solution exists to Greece's debt crisis. However, it is a surprise that someone official is finally saying so.
The IMF is saying that the Europeans must make the debt sustainable, and so they must write off a significant portion of the debt, or else stretch out the repayments for several decades, meaning in effect that it will never be paid off. Germany, Finland and the Baltic states oppose writing off any portion of the debt.
In a related note, CNBC economist Steve Liesman has just returned from a trip to Germany. He said that when you speak to Germans about the situation, you begin to sympathize with them not wanting to keep bailing Greece out over and over. He said that many Germans believe that Greeks developed a culture of not paying taxes because they were governed by the Turkish Ottomans for four centuries, and didn't want to pay taxes to the Ottomans. With a culture of not paying taxes, there's no point in continuing to bail them out. Independent (London) and Kathimerini and AFP
Japan's prime minister Shinzo Abe is promising to better his explain the terms of his security bills, amid large demonstrations shouted opposition to the bills outside the parliament building, while opposition lawmakers yelled and waved signs in frustration.
Since the end of World War II, Japan has had a "pacifist" constitution, prohibiting any military action except in response to a direct attack on Japan itself. Shinzo Abe has stated that he wants to remove this restriction from the constitution, but opposition would prevent him from doing so.
So he's made a decision to "reinterpret" the self-defense clause of the constitution to allow for what is called "collective self-defense." I discussed this issue in detail in "5-May-14 World View -- Japan debates 'collective self-defense' to protect America and Japan".
Under international law, if a nation's ally is attacked by another country, then the nation may use its armed forces in defense of its ally. This is known as "collective self-defense," and it particularly can be invoked by either of two countries that have a mutual defense agreement, such as the mutual defense agreement signed by Japan and the United States. However, many people in Japan interpret the constitution's self-defense restriction to mean that collective self-defense is prohibited in Japan's constitution. Abe's reinterpretation makes collective self-defense possible, but has generated heated opposition.
On Wednesday, Abe's Liberal Democratic Party (LDP) members were able to cut off debate in a key committee. The security bill would then be debated in the lower and upper house before it becomes law. AFP and Shingetsu News Agency (Japan)
Mexico on Wednesday attempted to auction off the rights to drill for oil in 14 different locations ("exploration blocks") in the Gulf of Mexico. However, oil companies were definitely unenthusiastic, as the 14 were "shallow water" blocks that had previously been drilled for decades by Mexico's government-run oil monopoly, Pemex. As a result, major oil companies, such as Exxon Mobil Corp., Chevron Corp. and Total SA, refused to participate, and only two of the 14 blocks were actually auctioned off, to a consortium of smaller companies.
Mexico nationalized its entire oil industry in 1938, following a series of labor disputes and crippling national strikes by labor unions demanding greater pay, amid political claims that the foreign oil companies were stripping Mexico of its national resources, with almost no financial benefit to Mexicans. The oil companies retaliated by organizing an international boycott of Mexican goods, including Mexican oil. With the start of World War II, the boycotts were resolved. But the nationalization became a symbol of great national pride and liberation from American imperialism. The calendar date of March 18th, 1938, is remembered throughout the country as the day of "Expropiación Petrolera" (Oil Expropriation). All oil assets were turned over to a state-owned monopoly called Petróleos Mexicanos, today called Pemex. The nationalizing also served as a model for other countries to subsequently nationalize their own oil industries.
As always happens with state monopolies, Pemex has been plagued with corruption. In recent years, oil production has plummeted, and it's been increasingly clear that Pemex was top-heavy with bureaucracy, and lacked the expertise to improve production. Mexico had been the world world's fifth bigger oil produced, but dropped to tenth.
Despite opposition from most Mexicans, Mexico's president Enrique Peña Nieto fought for a change in the constitution and laws to re-privatize the energy industry. In 2013, 75 years after the nationalization, Nieto announced the auctions, now being referred to as "historic."
Unfortunately, Nieto may have waited too long. Since 2013, oil prices have fallen over 50%, making much oil exploration uneconomic. Even Pemex decided not to bid in Wednesday's auction.
There will be more auctions later this year, but it's becoming clear that Nieto has to offer much more favorable financial terms to the oil companies if he wants the auctions to succeed, and any such changes will bring stiff domestic opposition. Bloomberg and MexOnline and Forbes and Dallas News
(Comments: For reader comments, questions and discussion, see the 16-Jul-15 World View -- Mexico's first 'historic' attempt to re-privatize oil industry flops thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(16-Jul-2015)
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Generational Dynamics view of Iran nuclear deal
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Media from Saudi Arabia and other Arab countries were completely silent on Tuesday, following the announcement of the Iran nuclear deal. According to one Israeli analyst: "There’s an [Arab] sense of disappointment mixed with shock. These countries, and especially Saudi Arabia, are trying to come to terms with the materialization of their worst fears."
There was a brief statement from the Saudi Press Agency:
"The Kingdom of Saudi Arabia has always believed in the importance of reaching a deal regarding Iran's nuclear program that ensures preventing Iran from obtaining nuclear weapons and at the same time includes a specific, strict and permanent mechanism for inspecting all sites - including military ones - along with a mechanism for rapidly and effectively re-imposing sanctions in case Iran violates the deal, an official source said in a statement following the nuclear deal between Iran and the P5+1 group. ...Under the nuclear deal, Iran has to use its resources in serving its internal development and improving the conditions of the Iranian people, rather than using these resources in destabilizing the region which is an act that will be strictly faced by the region's countries."
The statement emphasizes two major areas of Arab concern: That Iran may develop a nuclear weapon for use on the Arabs, and that Iran will use the money from lifting sanctions to further destabilize the region.
Frank Gardner, the BBC security correspondent, listed three major area of concerns for Arabs:
The Saudis recall that under the Shah of Iran, prior to the 1979 Great Islamic Revolution, Iran was the big US ally in the Middle East. After 1979, the Saudis became the big ally, and now Iran is returning to its prior role.
According to Gardner: "What I fear is that Sunni hardliners will say, right, OK, we need to now support Sunni extremists in the Middle East, as a bulwark against Shia extremists and Shia militias, which will extend and prolong the wars and conflicts in Iraq and Syria." Saudi Press Agency and Times of Israel
Marwan Bishara is the senior political analyst for the Qatar-based al-Jazeera, and he appears on both the English and Arabic channels. He's a good analyst, though he's consistent with Qatar's policies in that he's stridently anti-American, anti-Israeli, and anti-Palestinian Authority, while he's pro-Hamas. Thus, he provides a good overview of Arab opinion (my transcription):
"It's important for everyone, and I'll add that it will affect everything in the Middle East, and everything in terms of western relations to the Middle East, in so many ways.Everything from the energy markets to the arms race - the economic well-being of citizens in Iran to the elections in the United States, from security in Saudi Arabia and the Gulf region, to the war in Yemen. from ISIS, and the developments in Iraq and Syria, to what's going on in Israel, Lebanon, Palestine, Egypt, North Africa, and so forth.
So I think probably every aspect of the political strategic life of the Middle East region will change, and the world's approach to the Middle East region will change with it."
BBC correspondent Frank Gardner, quoted above, said that a Saudi concern is that Iran will replace Saudi Arabia as America's big strategic partner. Bishara expressed the same concern in a more colorful way:
"My idea is that we're going to be seeing slowly the phasing out of Iran as the bogeyman and the phasing in of ISIS.For our viewers around the world, it's good to remind everyone that for the last 5 or 6 decades, every 10 years, Washington and the West in general have had a bogeyman in the region. So in '58 it was Nasser of Egypt, in '68 it was Yasser Arafat of Palestine, '78 it was Ayatollah Khomeini, in '88 it was Saddam Hussein, in '98 it was Osama Bin Laden, back in 2009 it was again Iran's Ahmadinejad, and now we're going to al-Baghdadi and ISIS.
The Saudis and the rest of the Arab world in general are probably happy that Iran's nuclear program has been verifiably limited to civilian development. But everyone is worried about what the rest of the deal means in terms of a strategic opening for Iran."
Bishara's colorful description doesn't have all the dates right, but it expresses the view that the "bogeyman" target will move from Iran to ISIS, and implies that, at the same time, Iran will be the US partner, while the Saudis may be blamed for ISIS.
What's most interesting about Bishara statements is that he foresees major changes throughout the Mideast because of the Iran nuclear deal. He doesn't detail what those changes are, but it's easy to guess what he means: Iran will use the billions of dollars that Iran will now receive, to worsen the wars in Yemen, as well as the conflicts in Syria and Iraq; Iran will support terrorist organizations throughout the region, from North Africa to Bahrain. Bishara sees these and other changes as having major effects in the Mideast, far broader than anyone is saying. Politico and DPA
As long-time readers know, I've been saying for almost ten years that Iran would be our ally in the coming Clash of Civilizations world war. This has actually been pretty obvious since the early 2000s, when Iranian college students were holding pro-West and pro-American demonstrations. Those college students are today increasingly in positions of power.
Ten years ago, the prediction seemed preposterous to most people, but we've all watched it coming true in the last couple of years, as those college students are now in their 30s. The Iran nuclear deal is a big step forward in that prediction, for the reasons outlined above by Frank Gardner and Marwan Bishara.
In recent weeks, as it's becoming more and more apparent that the Generational Dynamics analyses are coming to pass, I've been getting a lot more questions. I've been discussing these issues at length for years, but here's a summary:
Putting all this together, America will be allied with India, Iran, and Russia against China, Pakistan, and the Sunni Arab states.
So I agree with Marwan Bishara when he says that there will be massive changes throughout the Mideast following the Iran nuclear deal, from regime change in Iran to bigger sectarian Sunni-Shia conflicts throughout the region, finally ending up in all-out war.
Every once in a while I receive a very nice e-mail message, and would like to share it with everyone:
"Every few months I feel compelled to write you. First and foremost I thank you for your HARD WORK. I see what you do collecting, sorting, packaging and sending out a concise snapshot of what's really going on in the world. I don't waste my time watching news on television since they are always chasing the cheap and easy stories that come in the form of press releases from the White House. Because of your e-mails, I knew about Syria two years before ABC, NBC, or CBS talked about what was going on. Just now, people are taking notice of China's financial problems."
The writer is one of the almost 500 people who receive the daily Generational Dynamics World View article by subscribing to the daily e-mail message. Others subscribe to the RSS Feed. Some tens of thousands read it on the Generational Dynamics web site or the Breitbart National Security web site.
I'd also like to congratulate you, Dear Reader, for sticking with this. It's not easy going to read these articles, since the news isn't good. I can tell you that there are many people who couldn't find Iran on a map if their lives depended on it, and who go to their happy places when someone gives them bad news. You, Dear Reader, are definitely not in that category.
The American mainstream media just slavishly prints whatever the White House tells them to print, and so it's almost always good news, even if it almost always turns out to be wrong. But I issued a challenge in 2005 to anyone to find any web site, any politician, any analyst, or any journalist that has a more successful predictive record than my web site. Several people have taken up that challenge, but none has succeeded because no such web site or politician or journalist exists. The Generational Dynamics methodology is a major breakthrough in analyzing and relating historical events to current events, and its predictions have been almost 100% correct over 12 years.
So I hope that you will continue reading the daily World View articles, and that you will use the information to take whatever actions you can to protect yourself, your family, your community and your nation. That's the only thing that can make this effort worthwhile.
(Comments: For reader comments, questions and discussion, see the 15-Jul-15 World View -- Arab views of Iran nuclear deal thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(15-Jul-2015)
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Emotions running high over Eurogroup ultimatum to Greece
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Boko Haram violence in Nigeria has left over 600 dead in the last six weeks. Since Boko Haram began operating in 2002 they have caused over 13,000 deaths.
And yet, Boko Haram is not the only source of violence in Nigeria. What has been going on for years is sectarian violence between Muslims and Christians. Much of the sectarian violence occurs in Jos, in the Plateau region in central Nigeria.
Jos is in the middle of Nigeria, right on the fault line between Muslims who live in the north and Christians who live in the south.
The northern part of Nigeria is mostly Muslim, because of centuries of migration from the Maghreb, the region in northern Africa that was conquered by Arab Muslims in the centuries following the death of Mohammed.
The southern part of Nigeria, especially around the Port Harcourt area, is predominantly Christian, following centuries of colonization by the Europeans, taking advantage of opportunities for mining and the slave trade. Over time, many of the southern tribes were converted to Christianity.
In the middle of Nigeria is the city of Jos, heavily populated by both Muslims and Christians. There are frequent really horrific attacks by Muslim gangs against Christians, and by Christian gangs against Muslims.
Although these are nominally secular attacks, religion is not the core reason for the attacks. The Christians are almost all farming tribes that settled long ago. In the last few decades, Muslim nomadic Fulani cattle herders from the north have been moving south looking for new pastures and water for their herds.
Battles between farmers and herders occur in country after country, as I've described many times in Central African Republic, Rwanda, Sudan, and even America in the 1800s. The farmers accuse the herders of letting the cattle either their crops, while the herders accuse the farmers of planting on land that's meant for grazing. If the farmers put up fences, then the herders knock them down.
In one refugee camp in Wende, south of Jos, there are thousands of people who have lost their homes and become "Internally Displaced People" (IDPs) because of clashes between herders and farmers. Strategy Page and All Africa and All Africa (2-Jul)
Many citizens of Greece are accepting the demands that the Eurogroup is making of Greece in return for bailout money, while others are furious, feeling that they've been betrayed and sold out by prime minister Alexis Tsipras, who agreed to demands that were harsher than the ones that had been rejected just a week earlier in a nationwide referendum.
There are big disagreements by analysts about the demands that the Eurogroup has put on Greece before any new bailout money can be provided. If Greece's parliament passes the first round of laws Wednesday, then they will receive a bridge loan that will allow the banks to re-open and keep Greece from defaulting. Most analysts are expecting parliamentary approval on Wednesday, as Tsipras's far left Syriza party is being joined by the right of center New Democracy party in voting to accept the deal. After that, Greece's parliament will have pass additional laws to receive an additional 86 billion euros in bailout money. This will kick the can down the road, but there may be an additional crisis at any time if the committed reforms are not implemented.
According to far left NY Times political commentator Paul Krugman:
"The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for."
The first terms of the deal have to be enacted by Greece's parliament by Wednesday. Well-known investor Wilbur Ross, whose consortium last year invested 1.7 billion euros in Greek banks, said that this deal is the best thing for Greece and Europe, in an interview with CNBC (my transcription):
"I believe it will go through [in the parliament], and I think maybe in some ways it's more important that there will be a change in the political situation in Greece. So I think it will not only be enacted, I think it will be implemented. ...I think that Greece needed societal reform, and that's what's coming as part of this package. They're not calling it that, but that's really what it is. There was a lot of dysfunctionality in the way that both the economy and society were structured. Those are now being addressed. In terms of moral hazard, if there's one thing that a politician wants, it's to be re-elected, and if I'm right, there'll be sufficient changes in the political scene - that will be a deterrent from other countries from playing games with the EU. So I totally disagree with the notion that there's anything here that will encourage bad behavior on the part of the other euro countries. ...
As for the amount of the debt itself, what Greece really needs is to get to a primary budget surplus, because right now they're going cash negative every month, without reference to any interest or principal. A lot of these reforms will cure that."
The last sentence refers to the fact that even if the entire debt were written off, and Greece was debt free, then Greece would immediately go back into debt, and would have to borrow more money.
Those who favor the deal point to privatizations of the seaports and airports as favoring growth in Greece, since they would remove a huge source of fiscal losses, and turn them into profit-making entities that would benefit the entire country and Europe. Reuters
China's stock market bubble that caused stock prices to rise by a factor of 250% before the bubble began to burst on June 12 is being blamed on "peizi" or "fund-matching" businesses that allow individual citizens to lend money to stock market investors in an unregulated manner. As of June 17, the outstanding margin loans in Chinese stock markets reached 2.26 trillion yuan (US$364 billion), which is equivalent to 4.1% of the total market value.
Ordinary people deposit money into the peizi funds, which do business online. All this money is pooled, and investors can then borrow money from the pool to invest in stocks, using the purchased stocks as collateral. The depositors earn a fixed rate of about 1%-1.2% per month, and the financing firms earn a fee. The rest of the money from increases in the value of the stock shares goes to the investors.
You don't have to be a rocket scientist to see what could go wrong with this. The peizi business are allowing leveraged margin loans of something like ten times the amount of margin that's permitted by regulated brokers. This allows stocks to be traded quickly between investors, bidding up the prices and creating a stock market bubble, which is what happened.
If stock prices start falling, as they have since June 12, then investors who pledged stocks as collateral have to sell the stocks in order to maintain the margin requirements. This creates a vicious cycle, where falling stock prices cause margin calls, margin calls cause stock sales, and stock sales cause falling stock prices. This was the major characteristic of American's 1929 stock market crash, and in fact it's a characteristic of the bursting of most asset bubbles.
The China Securities Regulatory Commission (CSRC) has been promising for months to crack down on peizi companies, and has finally begun to do so in the past week. Three such companies (Miniu98.com, Xunqianwang and Quchaoguwang) shut down their peizi services on Monday because of the CSRC crackdown.
The Shanghai Composite stock market index plunged 30% in the days following June 12, but then recovered almost 10% in the last three trading days (Thursday, Friday, Monday). There is widespread fear in China, sometimes approaching a state of panic, that the index will start to fall rapidly once more. This is a well-founded fear. The stock market bubble has burst but has only partially fallen. When stock market bubbles burst, they never stop collapsing until they overshoot the index value at the time the bubble started to expand, so it's likely that the cumulative fall will be 60-75% before it's over. The Australian and Want China Times (17-Dec-2014) and Want China Times (22-Jun-2015)
(Comments: For reader comments, questions and discussion, see the 14-Jul-15 World View -- China cracks down on 'peizi' or 'fund-matching' stock market businesses thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(14-Jul-2015)
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China police crack down ahead of another volatile week in stocks
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With Greece almost out of cash, Eurogroup members are split into two sharply divided factions, the hardline group led by Germany, and the anti-German group led by France.
Saturday's Eurogroup meeting of eurozone finance ministers ended abruptly late at night after Germany's finance minister Wolfgang Schäuble got into a loud shouting match with Mario Draghi, the head of the European Central Bank (ECB). The nature of the fight was not reported, except that it ended with Schäuble shouting "I'm not stupid!"
However, Greece's credibility is so low, after months of lying and evasion, that even its supporters have to demand some kind of proof that Greece will meet its commitments. Germany is demanding that Greece meet certain conditions by Wednesday, or else the solution will be a "temporary Grexit," meaning that Greece leaves the eurozone for a period of time up to five years. However, France is opposed to any "Grexit" plan.
A political commentator on the BBC said that France and Italy, along with the European Commission, are against the hardline position that the Germans are taking. However (my transcription):
"But the number of people who fall into what you might call the German camp is large and is growing. It includes in particular all of the central and eastern European countries that are in the euro, Finland, the Slovaks, the Slovenes, the Baltic states. The Spanish and the Portuguese have been quite tough on the Greeks. So my guess is that whatever emerges is probably going to be a little bit closer to the German line than to the French line, but I think we're probably NOT going to see this idea of a temporary Grexit, because there are alternatives."
The popularity of France's president François Hollande has been plummeting in the last year. He hopes to improve his approval ratings by taking the anti-German side in the Greece debate, but that's causing political controversy within France itself. According to former president Nicolas Sarkozy: "We need Hollande to get his act together and restore unity with German Chancellor (Angela) Merkel."
There's one thing that seems increasingly clear: That the move two weeks ago by Greece's prime minister Alexis Tsipras to call a referendum has backfired in the sense that it made it much harder to reach an agreement. In particular, Greece's economy has deteriorated significantly in the last two weeks.
The Greek people are very resilient, and they will do well whatever happens. But there's a great deal of sadness internationally over the suffering that will occur in Greece no matter how the next few days unfold,
The European Union leaders summit that had been originally scheduled for Sunday was canceled because of the bitter Eurogroup split. AFP and Reuters and Kathimerini
A document containing the the Eurogroup conditions to keep Greece in the eurozone has been leaked. The demands of Greece are harsh, but there are many sections of the documents that are in square brackets, indicate that the Eurogroup ministers could not agree on that section.
The document requires that the proposals be implemented by passing legislation in Greece's parliament by Wednesday, a feat that Greece's prime minister Alexis Tsipras may not be able to accomplish in a short time frame.
Some of the demands are as follows:
The Eurogroup ministers are referring to these demands, including the three-day ultimatum, as a "trust building exercise."
But the Greek people, already torn between fear and fatalism, are furious at the new demands, calling them Germany's plan to humiliate Greeks and Greece. Many Greeks are pointing out that Germany had half of its debt forgiven after World War II, and one of the countries that forgave Germany's debt was Greece.
The next three days will be very stormy. Kathimerini and AFP and Reuters
China's regulators took extraordinary measures last week to slow the fall of the plummeting stock market, and apparently succeeded on Thursday and Friday, when stocks rebounded 10%, after falling 30% since June 12.
As of Friday, trading in about 1,400 firms - nearly half of the total traded on the Shanghai and Shenzhen exchanges - was suspended in order to prevent further bloodletting. By Sunday evening, about 260 had announced they would resume trading on Monday, raising fears of a new slide.
Meanwhile, in an effort to pin the blame on someone for the stock market slide, China's Ministry of Public Security has launched a task force to investigate "malicious short-selling." This refers to illegal practices such as spreading rumors to induce panic selling, taking advantage of inside information to dump shares before others, colluding with other institutions in bulk share sell-offs to send down prices, and churning - selling and buying the same shares at affiliated accounts to rig prices. Market manipulators could face up to 10 years in prison and heavy fines.
Beijing police said on Sunday that they had detained a 29-year-old man for spreading rumors that a person had jumped off a highrise in Beijing's Financial Street after incurring heavy losses in the stock market. Police claimed that the picture and video posted online were actually of a man falling off a building in east China's Jiangsu Province, and the cause is still unknown. China News Service and South China Morning Post
(Comments: For reader comments, questions and discussion, see the 13-Jul-15 World View -- France-Germany split over 3-day ultimatum to Greece leads to flared tempers thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(13-Jul-2015)
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Distrust of Greece dominates indecisive Eurogroup meeting on Saturday
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Pope Francis met with Paraguay's President Horacio Cartes as part of his Latin American tour in the capital city of Asunción.
During his speech Pope Francis praised the women who rebuilt Paraguay after the War of the Triple Alliance devastated the entire country, killing almost all of the men. According to the Pope:
"On their shoulders, mothers, wives, widows have been able to pull forward their country. God bless the Paraguayan woman."
The War of the Triple Alliance is an interesting war from the point of view of generational theory. The war was launched against the triple alliance of Uruguay, Brazil and Venezuela by Paraguay's president Francisco Solano López, who is considered a hero by some, and an insane dictator by others.
López felt insulted, in common with Uruguay, in September 1864 when Brazil intervened in Uruguay without objection from Argentina.
López turned his hurt feelings into a decision to come to Uruguay's aid militarily, but he vastly overrated Paraguay's potential as a military power. He had expected Uruguay and Argentina to side with him in fighting Paraguay, but they weren't interested, instead signing the Treaty of the Triple Alliance, vowing to destroy López's government.
This was a generational crisis war for Paraguay, but a non-crisis war for the three allies, and all four countries fought the war in typical fashion for their generational eras. The allies would have ended the war quickly with little damage, but López didn't know when to quit. Paraguay's soldiers exhibited suicidal bravery, especially considering that Solano López shot or tortured so many of them for the most trivial offenses. By 1867 Paraguay had lost 60,000 men to casualties, disease, or capture, and another 60,000 soldiers were called to duty. Solano López conscripted slaves, and infantry units formed entirely of children appeared. The war was a complete disaster for López. He apparently went completely insane and suffered hallucinations of a vast conspiracy against him.
Allied troops entered Asunción in January 1869, but Solano López held out in the northern jungles for another fourteen months until he finally died in battle. The year 1870 marked the lowest point in Paraguayan history. Hundreds of thousands of Paraguayans had died. Destitute and practically destroyed, Paraguay had to endure a lengthy occupation by foreign troops and cede large patches of territory to Brazil and Argentina.
As regular readers know, Generational Dynamics predicts that China is preparing to launch a preemptive attack on the United States, and is manufacturing thousands of missiles and submarines with no other purpose than to attack American cities, military bases, and aircraft carriers.
The Chinese are very sure of themselves at this time in history. They believe that the US is weak, and unwilling to fight. They see America's weakness in the South China Sea and in the Mideast, and they conclude that either we won't fight back or that they'll knock us out quickly. Like Francisco Solano López and the 1864 Paraguayans, the Chinese vastly underestimate their enemies and vastly overestimate their own military capabilities.
Yes, they will launch hundreds or thousands of missiles, including many nuclear weapons, but that won't be the end of the war. The Chinese will be wracked by their own internal civil war. They will have Pakistan and the Sunni Arabs as allies, but they'll have India, Iran, Russia, Japan, Vietnam and the Philippines as enemies. China's army has never fought an external war, and they will make many mistakes that the United States will not. It's not possible to predict whether the US will survive, but it's quite possible that a devastated United States will end up winning the war, and China will end up being as destitute and destroyed as Paraguay was in 1870. And it will be what they deserve for launching the war in the first place, just as it was for Paraguay. Telesur TV and Library of Congress Country Study: Paraguay
A meeting on Saturday of the Eurogroup of eurozone finance ministers ended with no agreement on providing any further bailout money to Greece. It's clear that in the last few months there has been a complete loss of goodwill and trust between Greece and the eurozone.
According to Eurogroup chairman and Dutch finance minister Jeroen Dijsselbloem, referring to the proposal submitted by Greece:
"We are still far away. It looks quite complicated. On both content and the more complicated question of trust, even if it's all good on paper the question is whether it will get off the ground and will it happen. So I think we are facing a difficult negotiation. ...There is still a lot of criticism on the proposal, reform side, fiscal side, and there is of course a major issue of trust. Can the Greek government be trusted to do what they are promising, to actually implement in coming weeks, months and years. I think those are the key issues that will be addressed today."
It's widely believed that whatever reforms Greece agrees to will never be implemented. There are reports that Finland's parliament has already rejected Greece's proposal.
Germany is taking a very hard line, and could make it's proposal by amending it as follows, with agreement from Greece's parliament:
In my personal opinion, these three items, particularly the second one, look more like a pathway to war than to a bailout. Can you imagine the reaction to having a German official order Greece's parliament around?
In the alternative, Germany's finance minister Wolfgang Schäuble has been floating the idea of a five-year eurozone "time out" for Greece, after which it could return to the eurozone.
Greece has requested enough bailout money to last three years. Others are saying that Greece would only get enough money to get through the summer months, and the whole thing would start again. But this would "kick the can down the road," which has been what's happened every time for years. Bloomberg and AFP and Reuters
Not everybody is against Greece. France and Italy have welcomed the Greek proposals and suggest that they would be acceptable.
France's economy minister Emmanuel Macron and Italy's Prime Minister Matteo Renzi both said that they are reasonably optimistic that an "aid for reforms" deal can be worked out. However, France's finance minister Michel Sapin was cautious on Saturday:
"Confidence has been ruined by every Greek government over many years which have sometimes made promises without making good on them at all. Today we need to have confidence again, to have certainty that decisions which are spoken of are decisions which are actually taken by the Greek government."
The Eurogroup of finance ministers met long into Sunday morning without reaching a conclusion. They'll try again to reach agreement on Sunday afternoon. If they fail, then there will be a summit of European Union leaders who will decide what to do next. Bloomberg and Reuters
(Comments: For reader comments, questions and discussion, see the 12-Jul-15 World View -- Pope Francis in Paraguay alludes to 1860s War of the Triple Alliance thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(12-Jul-2015)
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Worldwide concerns are growing about China's stock market crash
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The world has been focused this week on the financial crisis in Greece, but the financial crisis in China has the potential to be much more significant for the world. The Greek crisis is arguably just political, but a stock market crash is something that's almost completely out of control of any government.
Chinese officials are breathing a sigh of relief today, because China's stock markets rebounded 10% on Thursday and Friday, after falling 30% since June 12. It's not an exaggeration to say that government officials have been panicking as much as investors have.
Chinese officials have taken desperate measures to stop the stock market crash. They've reduced interest rates, so that it's easier to borrow money to invest in stocks. They've forbidden large investors from selling any stocks for six months. Half the companies on the stock market have suspended trading, for fear that if they're allowed to trade, then their prices will fall. Margin rules have changed in the last couple of days to let people borrow a lot more money, and use it to buy stocks.
So now the Chinese are praying that the market won't start falling again. China's stock market increased by 250% in the year preceding June 12, and was in a huge bubble. So far, the bubble has only partially popped, and bubbles never only pop partially. In fact, what they always do is overshoot their old indexes on the way down (applying the Law of Mean Reversion).
It's been a traumatic month for small investors, two-thirds of whom have not even finished high school. Some are retired, some are migrants. All of them have lost confidence.
As long-time readers know, Generational Dynamics predicts that China is headed for two wars -- an internal civil war, the first major civil war since the Communist revolution, and an external war, leading a world war with the United States, their first world war since World War II. These two wars are not inconsistent with each other, any more than the Communist Revolution and World War II were not inconsistent with each other.
A stock market crash triggering a Chinese economic depression would be enough to trigger an internal rebellion. One way that Chinese officials might try to externalize the internal rebellion would be to attack Japan or Vietnam or India or the United States.
So a major stock market crash in China could have far-reaching effects on the rest of the world. And China does appear to be in the middle of a major stock market crash. Reuters and Guardian (London)
China's stock market looks more and more like America's in the 1920s, leading up the crash in 1929, according to Andy Xie, former Morgan Stanley Chief Asia-Pacific Economist, and former World Bank Economist, when he was interviewed on Bloomberg TV.
According to Xie, the current stock market rebound might last for a while, but then it could fall again sharply, so that it goes down "in waves."
Xie compares what's happening in China today to "pump and dump schemes" of the 1920s. The perpetrators would buy shares of a stock at a low price, and then pump up the price of the stock by means of a media hype campaign of some type, encouraging people to buy the stock. The perpetrators would then dump their stock shares at the high price, which would collapse the price for the people who had fallen for the hype campaign. Pump and dump schemes were made illegal after the 1929 crash, but they're still practiced regularly on CNBC today.
According to Xie, China's stock market bubble was backed almost exclusively in this way, with no real economic fundamentals in play (my transcription):
"In the 1920s the US market was manipulated by all these pump and dump guys, before the government started to regulate the market. And they organized trusts to pump certain stocks.In China it's become ubiquitous. The extent is far greater that what had happened in the United States in the 1920s.
It's been going on for 20 years. More and more people keep joining the dark side, and the people are losing money quicker -- every cycle you lose money quicker than the previous one.
So this time around, people with the real cash, didn't really join in. You see [in the media] all the pictures of the people going in there. These are really like a lot of young people, who just got their first job, not much money, and so that's why this market has been so dependent on margin loans. ... Even at the top of the market, only about 20% of the market capitalization are liquid shares.
So this market has not been pumped by real money. It's been pumped up by the loans. And the loans are borrowed by those guys who have been pumping. So at the end of the day, they look around, all they see are people are like them. So what are you gonna do? You keep doing that, and you borrow more, and hope one day the real money will come in."
According to Xie, the real market crash is not in stocks, but in the real estate market, which is 30-40 times as large as the stock market.
"The property market really burst a couple of years ago, but it's been covered up by the financial system -- not foreclosing on developers who go into default.The stock market ride has raised the hope of these developers that they could somehow get money from the stock market.
So everything would be fine. But the stock market is small compared to the property market. China's debt is like 200 trillion renminbi. The stock market at the peak was 6 trillion. So the big game is not the stock market. The stock market offers the hope that if it keeps going up, then it will bail out everybody. ...
It's fair to say that most developers are technically bankrupt. ... Even when you look at Shanghai and Beijing, where markets are supposed to be very good - that's what people really think - but the sales are down 70-80%.
The property market has been the driving force in [the economy].
Electricity production is flat. ... You look at the consumption of whatever commodity - it's down. China's imports are down at a double digit rate, and exports are flat. You look at freight traffic - real freight traffic is down. It's difficult to see what's going on.
What the stock market did was to raise hope. Something was going up. And if it kept going up, eventually it would pull everything up.
That hope was dashed a few days ago."
(Comments: For reader comments, questions and discussion, see the 11-Jul-15 World View -- China's stock market looks increasingly like America in 1929 thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(11-Jul-2015)
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UK advises all Britons to leave Tunisia
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It's not certain yet, but the Game of Chicken that Greece and the Europeans have been playing with each may finally be coming to an end, with both sides screeching to a halt before the collision.
Greek officials, led by prime minister Alexis Tsipras, submitted written reform proposals just minutes before the midnight (22:00 GMT) Thursday deadline demanded by the European leaders.
The proposals include tax increases on shipping companies, increases in VAT taxes, some privatizations, phasing out solidarity grant for pensioners by 2019, and defense spending cuts. The proposals are thought to contain around 12 billion euros worth of reform measures.
The package that Tsipras rejected before calling last week's referendum, which is also the package that the referendum vote rejected, called for a smaller amount, 8 billion euros, of reform measures.
However, Tsipras isn't being as generous as might first appear, and he is definitely not capitulating. As part of his proposal package, he's seeking 53.5 billion euros in a new bailout package, and a restructuring of Greece's large debt burden. The restructuring would involve stretching out the payment timeline for decades, meaning that the current repayment amounts will be smaller.
The proposal will be reviewed over the weekend first by the Eurogroup of finance ministers, and then by an EU summit on Sunday. If it's not considered adequate, it will be rejected.
Even if the EU summit accepts it, it's still not a done deal. The package has to be approved by Greece's parliament, and by several European parliaments.
It had previously been thought that Tsipras would never win approval for any such package because the communists and far left segments of his own Syriza party would block it. However, Tsipras is now allying with opposition parties, and he evidently has enough votes to get it passed.
As for the European parliaments, including Germany's Bundestag, a lot will depend on what German Chancellor Angela Merkel and Germany's Finance Minister Wolfgang Schäuble. If they support the package, then it's thought that the parliaments will fall in line.
Merkel has said in the past that the "red line" for her was that there can be no "haircut," meaning that no portion of Greece's debt can be entirely forgiven. That problem is evaded in Tsipras's proposal by keeping the nominal debt the same, but stretching out the payments so far that the debt, in actuality, will almost certainly never be repaid.
So it's believed that if Merkel and Tsipras can both personally endorse this proposal, then the national parliaments will fall in line.
You may recall, Dear Reader, that I said a couple of times in the past that my personal prediction (not a Generational Dynamics prediction) was that, one way or another, Greece would remain the in the eurozone. That prediction was really just based on a personal feeling. Since that time, I've been thinking about why I had that feeling.
I've been following news stories closely and writing about them for years, and one thing that's characterized the last 10-15 years, as opposed to the years following WW II, is that almost no one wants to make a hard decision, because they don't want to bear the responsibility of possible failure.
In this case, Tsipras and Merkel are being forced to choose. Neither of them wants to go down in history as the person responsible for the breakup of the euro currency union. Neither does anyone else. From that, the conclusion must be that, one way or another, Greece will remain in the eurozone.
Meanwhile, there'll a lot of hard bargaining over the weekend, and it's still possible that the negotiations will collapse. Kathimerini and BBC and Kathimerini
It looks like the terrorists have won, at least in Tunisia.
Just four days after Tunisia declared a 'state of war,' following a terror attack in Sousse on June 26, and an attack on the Bardo Museum in Tunis on March 18, Britain is advising all of its citizens to leave Tunisia because "a further terrorist attack is highly likely."
According to the statement by the UK Foreign Office:
"Since the attack in Sousse, we have been working closely with the Tunisian authorities to investigate the attack and the wider threat from terrorist groups in Tunisia. Although we have had good co-operation from the Tunisian government, including putting in place additional security measures, the intelligence and threat picture has developed considerably, reinforcing our view that a further terrorist attack is highly likely. On balance, we do not believe the mitigation measures in place provide adequate protection for British tourists in Tunisia at the present time and we have therefore changed our travel advice accordingly."
According to Tunisia's Tourism Ministry, travel and tourism was 15% of Tunisia's GDP in 2014. 473,000 jobs are supported by travel and tourism, 13.8% of total employment. It's believed that the objective of the terrorist attacks was to cripple Tunisia's tourist industry, and the terrorists appear to have met their objective, at least for the time being. UK Foreign Office and BBC
(Comments: For reader comments, questions and discussion, see the 10-Jul-15 World View -- Both Greece and European leaders seem poised to compromise thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(10-Jul-2015)
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Tunisia to build a wall and a moat along the border with Libya
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According to reports, many officials in Brussels are worried that Greece's prime minister Alexis Tsipras is "sleepwalking to disaster."
A speech that Tsipras gave to the European Parliament in Strasbourg on Wednesday has raised those concerns. Tsipras said:
"We want an agreement that will bring a final end to the crisis and show there is light at the end of the tunnel. The money that was given to Greece [went to the Greek and European banks and] never went to the people. ...In ‘Antigone,’ Sophocles taught us that there are times when justice for men is above the laws of men. This is such a moment."
It's really weird that Tsipras is referencing the tragic Antigone character. Antigone was famously the daughter of the incestuous relationship between Oedipus and his mother, Jocasta. Antigone's situation does resemble Tsipras's in some ways, but the story does not end well. This is from the Cliff Notes summary of Antigone:
"As the heroine of Antigone, Oedipus' daughter grapples with Fate on her own, not just as a child or a dutiful daughter. Her decisiveness and courage appear in stark contrast to Ismene's passive timidity, and, in this tragedy at least, overshadow even her brother Polynices' bold attempt to take Thebes. In championing the laws of the gods above the laws of the state, Antigone occupies the ultimate high moral ground, but she is not impervious to doubt. Just before she is led off to her death, Antigone mourns the life she is leaving by her own choice and even seems to regret her decision. The moment passes, however, and may represent simply a small proof of human weakness that makes Antigone's strength all the more dramatic."
So what should we make of Tsipras's reference to Antigone? She championed the laws of the gods above the laws of the state, and occupied the high moral ground, which I'm sure Tsipras feels is true of himself as well. But at the end:
"Antigone has hanged herself and Haemon, in desperate agony, kills himself as well. On hearing the news of her son's death, Eurydice, the queen, also kills herself, cursing Creon. Alone, in despair, Creon accepts responsibility for all the tragedy and prays for a quick death. The play ends with a somber warning from the chorus that pride will be punished by the blows of fate."
Is that where Tsipras sees himself and Greece going? Kathimerini and Cliff Notes and Trung Cao
Greece's prime minister Alexis Tsipras received applause from the left-wing members of the parliament, and boos from the right-wing members. However, it's clear even those members of the European parliament (MEPs) who would like to help Greece are exasperated by his behavior, and this was reflected in some of their responses.
The liberal Jean-Claude Jüncker, the president of the European commission, was deeply offended by Tsipras's campaign rhetoric last week, and was extremely angry at Wednesday's meeting:
"I'm strongly rejecting all these accusations which were thrown to the public during the campaign that we are not respecting the dignity of the Greek people, that we are terrorists. I don't like this word. Who are they, and who do they think I am?
European Council President Donald Tusk spoke calmly, but firmly:
Until today I have avoided talking about deadlines. But tonight I have to say it loud and clear: that the final deadline ends this week."
Guy Verhofstadt, former prime minister of Belgium, and now leader of the Alliance of Liberals And Democrats for Europe (ALDE) in the European Parliament was shouting as he spoke:
"Greek political class didn't do enough themselves in the case of Greece. That is the problem today.And I'm angry I have to tell you, I'm angry, because you are talking about reforms [[waving his hands for emphasis]] and WE NEVER SEE concrete proposals of reforms."
At this point, Tsipras has almost no credibility left, even with this supporters, because he's repeatedly lied.
He has now been told that he must have specific written proposals submitted by midnight Thursday, to give European Union leaders time to review them. There will be a meeting of EU (EU, not eurozone) leaders on Sunday to decide whether to approve the plan. The mood seems to be that nothing short of a major capitulation by Tsipras will be accepted.
If not, then all economic aid to Greece will end. Since this will mean the collapse of Greece's banks, the EU on Sunday will discuss humanitarian aid to Greece -- emergency handouts of food, water and other essential supplies -- something normally reserved for war zones and third world countries. AP and Business Insider
Last weekend, Tunisia's President Beji Caid Essebsi said the country was in a 'state of war' against terrorists, and imposed a 30-day state of emergency, after the terror attack that struck Sousse, Tunisia, on June 26. A terrorist with a Kalashnikov assault rifle strolled through the hotel grounds, opening fire at the pool and beach, reloading his weapon several times and tossing an explosive. He killed 37 people.
The investigation has revealed that the terrorist had been trained in Libya, and so Essebsi announced on Wednesday on state TV that the Tunisian army will build a 160 kilometer-long wall along the length of the country's border with Libya, with a moat next to it. The prime minister indicated that the wall would be made of sand and would be finished by the end of the year. He said security cameras and surveillance posts would be placed at regular intervals.
My personal belief is that a determined terrorist will find a way around a wall and a moat, but the government of Tunisia is desperate, and willing to try almost anything.
Tunisia would join Kenya which is planning a wall along its porous border with Somalia, following frequent infiltration by Somali militant group Al-Shabaab, which has carried out deadly attacks that has harmed the tourism-dependent economy.
Walls and fences are becoming very fashionable these days. As we reported last month, Hungary is setting aside $23.5 million to build a temporary security fence along Hungary's entire border with Serbia. The fence will be 4 meters high and 175 km long. VOA and Mail and Guardian Africa
(Comments: For reader comments, questions and discussion, see the 9-Jul-15 World View -- Greece's Alexis Tsipras compares himself to the tragic Antigone thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(9-Jul-2015)
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Report on Obama's plans for the Mideast strategy into total fantasy
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Everyone is getting sick of this story, but it's so awful and so horrible every day that it's impossible to take your eyes off of it.
Tuesday's news is that Greece's prime minister Alexis Tsipras was to come to a meeting of eurozone leaders in Brussels with new proposals, but showed up empty-handed. Last week, during his referendum political campaign, he referred to eurozone leaders as "terrorists," and now he continues to be as offensive and contemptuous as possible to the people that he wants to provide his government with many billions of dollars.
Exasperated eurozone leaders gave Tsipras until Thursday to provide a written plan, and scheduled a full summit of all 28 European Union nations for Sunday.
According to France's president François Hollande: "It's not just the problem of Greece - it's the future of the European Union" that is at stake.
Thursday and Sunday are supposed to be the final, final deadlines, but we've heard that before, haven't we? BBC
An amusing sideshow to Tuesday's meeting in Brussels is related to the arrival of Greece's new finance minister Euclid Tsakalotos at the meeting. He held his papers with his personal notes on top, where they could be photographed and examined.
Tsakalotos is being especially mocked because of the notes reads "No triumphalism." This is being interpreted to mean that Tsakalotos wants to keep himself from openly gloating over the size of his government's referendum victory on Sunday. Perhaps he's unaware that his country staring into the abyss. Guardian (London)
As I've said in the past, I didn't care much about President Obama's ridiculous promises during the 2008 campaign, such as saying that with his election the earth would heal and the tides would recede. I assumed he'd become more serious after the election. But then, after the election, I heard him say similar stuff, like his promise that the world would be a different place on January 21, the day after he took office. My reaction was that if Obama believed something so delusional, then we would be in a great deal of trouble. Now, six years later, Obama has had one foreign policy disaster after another, after evidently having no clue what's going on in the world, and now it's widely believed that he's so desperate to have a foreign policy achievement that he'll concede anything to Iran to get a nuclear agreement.
But now an article in Tuesday's WSJ describes Obama's Middle East strategy for the next 18 month, and it's so out of touch with reality that it's clear that he's learned absolutely nothing in six years.
According to the article, he's seen an Iran deal as a kind of "gateway" to bring about massive changes in the Mideast:
"The White House is crafting a Middle East strategy for the remaining 18 months of President Barack Obama’s term that would more forcefully address conflicts in Iraq, Yemen and Syria amid tensions over the conclusion of talks with Iran. ...[S]enior administration officials said the president is intent on cleaning up leftover messes in the region before leaving office in 2017, including relations with key allies that have been strained by the Iran talks."
How is anyone supposed to react to this? This is completely delusional. As I've been writing since May 2003 in "Mideast Roadmap - Will it bring peace?", no peace plan can work because Generational Dynamics predicts that Arabs and Jews would be refighting the 1948 war that followed the partitioning of Palestine and the creation of the state of Israel. Since that times there have been four wars among various combinations of Israel, Hezbollah, and the Palestinians. And in recent years, there's been the war in and disintegration of Libya, the war in and disintegration of Yemen, and the rise of the Islamic State (IS or ISIS or ISIL or Daesh) in both Syria and Iraq, threatening neighboring states.
The idea that Obama wants to "[clean] up leftover messes in the region" in the next two years is utter fantasy, but it's exactly the kind of thing that Obama believes.
According to the article:
"White House officials see the conclusion of Iran talks as a gateway for Mr. Obama to press for a political resolution in Syria that would facilitate the exit of President Bashar al-Assad, a close Iranian ally.“It’s something I’d expect to see more pickup on as the Iran talks conclude,” a senior administration official said. “There’s a growing sense that momentum has turned against Assad and that is feeding a belief that there could be more opening on the political track.”
The conclusion of talks would thrust the U.S. into unfamiliar territory in a volatile region where years of diplomacy with Tehran has left relations with America’s allies, including Israel and Saudi Arabia, deeply strained.
Those alliances could be further frayed if the U.S. takes steps toward a broader rapprochement with Iran, and U.S. officials face a significant task in smoothing regional strains."
Obama is a Generation-Xer who, like many Generation-Xers, believes that he's the smartest person in the room, no matter who else is in the room. He's particularly contemptuous of Boomers and older people in general. This includes the Saudi Arabia's new King Salman bin Abdulaziz al Saud who has been so often offended by Obama, that he snubbed Obama by not attending a Gulf Cooperation Council (GCC) meeting hosted by Obama. Salman and other Gulf leaders are in their 70s, and consider Obama to be a kid who has no clue what's going on in the Mideast. ( "15-May-15 World View -- Obama repudiates the Carter doctrine at bizarre GCC meeting")
So as Obama goes about "cleaning up the mess" in the Mideast, you can be certain that he's only going to insult and offend Salman and the others even more.
And the Iran nuclear deal is extremely alarming to the Saudis and other Arabs, because Iran is a mortal enemy. Obama's oratorical skills will be worthless to change that.
As for convincing Iran to help bring about the exit of Syria's president Bashar al-Assad, it's far more likely that the opposite will happen. The lifting of sanctions on Iran will increase Iran's income by tens or even billions of dollars, and much of that money will be redirected to Bashar al-Assad, as well as to the terrorist group Hezbollah.
Finally, the article says:
"In Yemen, where Saudi Arabia is fighting Iran-backed Houthi militants, White House officials are also considering ways to work with Tehran toward a diplomatic resolution. Iranian leaders view the conflict in Yemen as a low-cost opportunity to challenge Saudi Arabia, but less critical to Tehran’s future, one senior administration official said."
Once again, this is sheer delusion. Even without support from Iran, the Houthis will continue to fight the pro-Saudi Sunnis in Yemen, as well as the militias that form Al-Qaeda in the Arabian Peninsula (AQAP), which is headquartered in Yemen.
Some people may say that, as the saying goes, it's better to see the world as it should be, rather than as it is. History provides no support for this view, and Generational Dynamics says that it can only lead to disaster. WSJ and CNN and Politico
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As we've been reporting, China appears to be in a state of panic over the 30% loss in stock share value since June 12, and analysts are comparing it to America's 1929 crash. Last week, China announced a 'Market Stabilization Fund' that was similar to an 'Organized Support' support fund that America announced just before the 1929 crash.
China's stock markets fell only slightly on Tuesday, and did not continue the kind of huge plunge that we've seen. However, there's a good reason for that, and it's not because investors are suddenly confident about Chinese stocks.
About 1,000 Chinese mainland-listed companies, or over a third of firms on the Shanghai and Shenzhen stock exchanges, suspended trading on Tuesday precipitated mainly by the continuous drop in share prices. So when the Shanghai Composite Index lost only 1.29% on Tuesday, it was because the prices of stocks for 1,000 companies were frozen, and owners of these shares were stuck with them, unable to sell them.
Many of the remaining companies were those able to benefit from the 'Market Stabilization Fund', where fund managers and brokers are investing $19 billion of their own money in stocks, in order to push up prices.
According to analysts, no reason was given for suspending trading on the losing stocks, but analysts say that "they wanted to sit out the market turbulence" that caused the decline. If they believe that, then they're in for a long wait.
Halting trading on stocks is extremely dangerous because it exacerbates the pressures that caused the losses in the first place, meaning that the fall will be far more precipitous when trading begins again. If trading remains halted for more than a few days, then a secondary market will be created, where investors trade the losing stocks outside the stock market, and that can cause additional harm.
As of this writing on Tuesday evening ET, Wednesday morning in China, the Shanghai Stock Exchange opened 4-7% down. Since trading is still halted on over 1,300 stocks, it appears that the desperate policies to halt the bloodbath have failed. China News Service and Breitbart and USA Today
(Comments: For reader comments, questions and discussion, see the 8-Jul-15 World View -- China halts trading on 1,000 companies as stock bloodbath continues thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(8-Jul-2015)
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Greece's crisis deepens as German position hardens
This morning's key headlines from GenerationalDynamics.com
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Greece's prime minister Alexis Tsipras made several promises to the Greek people to secure their "NO" vote on the referendum. He promised that the eurozone leaders would immediately come to him with a new, more favorable proposal, and that the new deal would be signed within two days. He promised that the European Central Bank (ECB) would keep Greece's banks open with plenty of liquidity, and that the banks would re-open the day after the referendum. And he promised that the Greek people would keep their dignity.
Now the Greek people face the harsh light of reality. Even if everyone agreed to a new deal, it would take weeks to implement, because the German parliament would have to approve it. But Tsipras can't make any concessions after his overwhelming referendum victory, and the Germans, the Dutch and Finns are opposed to making any concessions at all. The ECB on Monday rejected any further liquidity infusions into Greek banks, and they'll have to remain closed for at least a few more days, and possibly many days. The 60 euro per day cap on ATM withdrawals will probably have to be reduced further, possibly to 10-20 euros per day.
Compounding the problem is that Greece is a different country than it was two weeks ago, a much poorer country. A country's economy is like a huge engine that can take weeks or months to come up to speed. Greece's economy has been almost completely shut down, so even if Tsipras's fantasy of a quick deal came true, it would still take months for Greece's economy to fully recover.
The eurozone leaders are meeting in Brussels on Tuesday, and Tsipras is supposed to make some proposals.
There's a great deal of irony about this. Tsipras made some commitments to the Eurogroup when he took power in January, and promised within a couple of weeks to submit proposals for meeting those commitments. He stalled and stalled, and never made those proposals.
Now he's back where he was -- he has to make proposals to the Eurogroup to meet his commitments. The referendum gained nothing, but it further impoverished the Greeks.
According to reports, he will "propose a deal based on the most recent set of proposals published by the European Commission." Well, he could have proposed that deal two weeks ago, and Greece will be a lot better off today.
If there is no deal, then the country will run out of money within a few days. At that point, the government will have to issue IOUs in lieu of salary and pension payments. These IOUs will serve as a "parallel currency" that can be used until the country returns to stability and can return to the euro. Kathimerini and BBC and CNBC and Kathimerini
Like national leaders in other countries, Nigeria's new President Muhammadu Buhari made promises during his campaign that he is now finding himself unable to fulfill. During the campaign, his billboards read, "We will defeat Boko Haram."
But in a surge in violence, Boko Haram in the last week slaughtered more than 145 people in villages in the northeast, and bombed churches and mosques across Nigeria's north.
Buhari promised to crush Boko Haram, and he made some initial gains, with the Nigerian army recapturing most of the territories from the militants this year. But the recent attacks show that Nigeria is nowhere near defeating the jihadists. According to one Nigerian analyst:
"Most Nigerians expected something drastic, something dramatic, something concrete on the ground. They did not expect this spate of bombings across the country. They feel that OK, by now, Boko Haram should truly be a thing of the past. They do not seem to be impressed by the handling of the situation so far."
However a Buhari spokesman says that the president is working on a plan. Leadership News (Nigeria) and VOA and The Hindu (India)
(Comments: For reader comments, questions and discussion, see the 7-Jul-15 World View -- Surge in Boko Haram attacks raises questions about new president of Nigeria thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(7-Jul-2015)
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Europe enters a dangerous period after Greece's Tsipras wins overwhelming victory
This morning's key headlines from GenerationalDynamics.com
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Greece's far left prime minister Alexis Tsipras won an overwhelming referendum victory on Sunday, with 61% of the voters favoring his position. No one knows what this means, except that it represents a major political victory for Tsipras, and a major humiliation for Merkel and the Eurogroup.
Tsipras's Syriza party won the victory in a campaign where he called the Germans "terrorists," and where promised that his victory would make the Eurogroup of eurozone finance ministers bend to his will and immediately give him a new bailout deal. He also promised that the banks would open on Tuesday.
The relations between Tsipras and other European leaders is now vitriolic, and it will be necessary for German Chancellor Angela Merkel and the others to swallow hard to force themselves not to shut out Tsipras completely. On the other hand, it may be politically impossible for Tsipras to compromise, after the overwhelming referendum victory. At the very least, the communists in his own governing coalition will not tolerate compromise.
Jeroen Dijsselbloem, head of the Eurogroup, said: "I take note of the outcome of the Greek referendum. This result is very regrettable for the future of Greece."
Germany's Economy Minister Sigmar Gabriel said:
"With the rejection of the rules of the euro zone ... negotiations about a program worth billions are barely conceivable. ...Tsipras and his government are leading the Greek people on a path of bitter abandonment and hopelessness. ... [Tsipras has] torn down the last bridges on which Greece and Europe could have moved towards a compromise."
Germany's Finance Minister Wolfgang Schäuble said:
"Greece is a member of the eurozone. There's no doubt about that.Whether with the euro or temporarily without it: only the Greeks can answer this question. And it is clear that we will not leave the people in the lurch."
As this suggests, EU leaders have drawn up emergency plans in cases Greece becomes insolvent, and the country is forced to leave the euro currency.
One part of this would be "humanitarian assistance," to help the Greek people survive.
The most important part of this would be a parallel currency, such as government IOUs. Unlike the euro, a parallel currency could be depreciated by Greece. According to Dr Jörg Krämer, Chief Economist at Commerzbank:
"If the Greek state were to become insolvent, it could pay its employees, pensioners and suppliers by means of promissory notes (IOUs) --- as the US state of California did in 2009. Banks would credit the recipients of these promissory notes with the equivalent value on separate accounts.This parallel currency would allow the Greeks to pay their taxes. Moreover, the value of this parallel currency would depreciate significantly versus the euro, which would improve the price competiveness of goods produced in Greece.
A parallel currency would be legally possible if the Greek state avoided giving it the status of legal tender, prohibited by Article 128 of the Treaty on the Functioning of the European Union. But even without this status, a parallel currency could circulate if the state offered the possibility of using it to pay taxes."
Once the currency had become stable, Greece could return to the euro.
As I've said several times in the past, my expectation is that, one way or another, Greece is going to remain in the euro currency. But whether Greece stays in the euro or not, it's only going to be after multiple crises. Daily Mail and FxStreet and Reuters
China appears to be in or close to a state of panic over the accelerating collapse of the stock market bubble since June 12, resulting in a 30% fall in the Shanghai Composite Index.
The "market stabilization fund" is tiny compared to the more than $3 trillion worth of market capitalization that the Chinese markets have lost in the past two weeks. Reuters and Business Times (Singapore) and Reuters
A close reading of the classic book "The Great Crash - 1929" by John Kenneth Galbraith reveals that China is following the same path as America's 1929 panic.
During the year prior to June 12, China's stock market shares increased by 250%. Here's what happened in 1928, according to Galbraith:
"Brokers' loans reached four billion on the first of June 1928, five billion on the first of November, and by the end of the year they were well along to six billion. Never had there been anything like it before. ... People were swarming to buy stocks on margin -- in other words, to have the increase in price without the costs of ownership. This cost was being assumed, in the first instance, by the New York banks, but they, in turn, were rapidly becoming the agents for lenders the country over the and even the world around. ...Never had there been a better time to get rich, and people knew it. 1928, indeed, was the last year in which Americans were buoyant, uninhibited, and utterly happy. It wasn't that 1928 was too good to last; it was only that it didn't last. ... As Walter Begehot once observed: 'all people are most credulous when they are most happy.'"
As in recent months in China, people were getting worried about a bubble and a recession by mid-1929, but everyone was optimistic:
"The official optimists were many and articulate. Thus in June, Bernard Baruch told Bruce Barton, in a famous interview published in The American Magazine [[June 1929]] that "the economic condition of the world seems on the verge of a great forward movement." He pointed out that no bears had houses on Fifth Avenue. Numerous college professors also exuded scientific confidence. In light of later developments, the record of the Ivy League was especially unfortunate. In a statement which achieved minor notoriety, Lawrence of Princeton said that "the consensus of Judgment of the millions whose valuations function on that admirable market, the Stock Exchange, is that stocks are not at present over-valued." He added: "Where is that group of men with the all-embracing wisdom which will entitle them to veto the judgment of this intelligent multitude?" [[WSJ, mid-1929]]That autumn [1929] Professor Irving Fisher of Yale made his immortal estimate: 'Stock prices have reached what looks like a permanently high plateau.' [Fisher added: 'I expect to see the stock market a good deal higher than it is today within a few months']"
Until September or October of 1929, the decline in economic activity was very modest. But on Friday, October 18, the market fell 2.5%, and on Sunday, the NY Times headline read, "Stocks driven down as wave of selling engulfs the market."
That was the day of the announcement of "organized support" or, as the Chinese are calling it, a "market stabilization fund." According to Galbraith:
"Never was there a phrase with more magic than “organized support.” Almost immediately it was on every tongue and in every news story about the market. Organized support meant that powerful people would organize to keep prices of stocks at a reasonable level.Opinions differed as to who would organize this support. Some had in mind the big operators like Cutten, Durant and Raskob. They, of all people, couldn’t afford a collapse. Some thought of the bankers — Charles Mitchell had acted once before, and certainly if things got bad, he would act again. Some had in mind the investment trusts.
They held huge portfolios of common stocks, and obviously they could not afford to have them become cheap. Also, they had cash. So if stocks did become cheap, the investment trusts would be in the market picking up bargains. This would mean that the bargains wouldn’t last. With so many people wanting to avoid a further fall, a further fall would clearly be avoided."
So that brings us to where China is today. Four days following the announcement of "organized support," the market began a full-scale panic.
So officials in China are going to be very nervously watching the market in the days to come, following the creation of the "market stabilization fund."
The newly minted 56-year-old King Tupou VI of Tonga, Polynesia's only constitutional monarchy, was crowned on Saturday in a lavish ceremony costing $1.9 million. Tens of thousands of Tongans were in the streets chanting, "Long live his majesty, long live the queen."
What I found interesting about this story is that the crown was placed on his head by an Australian, not by a Tongan. By tradition, Tongans are forbidden to touch the head of the king. So a retired Methodist minister D'Arcy Wood, of Gisborne, Victoria, in Australia, placed the crown on his head.
News stories don't indicate whether or not Queen Nanasipau'u is allowed to touch her husband's head. Beyond that, I guess they're going to have to import a barber from Australia as well, whenever the King needs a haircut. Sydney Morning Herald
(Comments: For reader comments, questions and discussion, see the 6-Jul-15 World View -- China announces 'Market Stabilization Fund' to stem stock market panic thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(6-Jul-2015)
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Tunisia declares a 'state of war' as Mideast meltdown continues
This morning's key headlines from GenerationalDynamics.com
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Greeks are deeply divided as they prepare to vote on Sunday on the referendum nominally whether to agree to the lenders' austerity plan in return for a new infusion of bailout cash.
News reports indicate that Alexis Tsipras's government has taken over all communications channels, plastering "OXI" (NO) posters all over Athens, and broadcasting Tsipras's speeches constantly. The polls indicate that Greeks are split, 44% for each side, with about 12% undecided. However, some analysts have pointed out that there's so much pressure to vote NO that people may be afraid to say YES to a pollster, which might suggest that many of the undecided voters will actually vote YES in the polling booth. This in fact happened in the case of case of the UK's May poll on Scotland's independence, where polls completely failed to predict the overwhelming vote to reject independence. ( "9-May-15 World View -- Britain's surprise election and Chaos Theory")
Some Greeks are using Bitcoins to circumvent the capital controls that have been imposed this week. BTCGreece is the only Greece-based Bitcoin exchange, and thousands of people have been depositing their euros. Then can then transfer the money out of Greece as Bitcoins, which is otherwise illegal.
Thousands of people will be unable to vote because they can't afford to travel to their home regions, usually where they were born. According to one woman who works in the tourism industry and would have to travel 220 miles from Athens to vote:
I don’t want to spend the money and I don’t want to vote. To travel all that way and to spend the money, for what? It’s not going to change anything. There is no good option for Greece."
Indeed, things may get worse very quickly after the referendum. The chairman of the National Bank of Greece, Louka Katseli, said that Greece's banks will completely run out of money on Monday evening. "Liquidity is adequate through the end of the bank holiday," according to Katseli. After that, it will depend on whether the European Central Bank (ECB) will extend more emergency liquidity assistance (ELA), and that may depend on the result of the referendum vote.
Exit polls should start coming out until 7 pm in Athens, or 1 pm ET on Sunday. Final results will probably be available on Monday. Kathimerini and Reuters and Bloomberg
Sunday's referendum is stirring several historical memories. The country hasn’t held a referendum since 1974, when 69 percent voted against the return of the former king after the fall of a military dictatorship.
However, for many older Greeks, the strongest memory is of Greece's bloody civil war following the expulsion of the Nazis after World War II. Al-Jazeera's Athens correspondent John Psaropoulos told how the referendum is stirring memories of the civil for his mother (my transcription):
"I came home very late the other night, and had a conversation with my mother, who remembers the civil war, 1946-49, fought in this country between the resistance to German occupation which had been predominately communist, and then after the departure of the German occupation, attempted to seize power by force.And I said to her what do you think of the NO vote, which would strengthen the ruling left wing Syriza government. She says, I don't know, I greatly fear another civil war. I remember they did terrible things last time around.
She remembers when her local police station was besieged by the communist forces. The young policemen inside were convinced that if they walked out and surrendered the property, their lives would be spared.
Instead, they were taken to a mountain top which is just to my left here on the outskirts of Athens, and their throats were cut using cans -- food cans -- opened tins.
This is the sort of brutality that Greece remembers from the civil war. It's been a taboo subject for many decades, because it split families apart, it split the entire country.
This is the first time that the left wing has been in power, and that was the last time it made a serious bid for power. So people have been connecting the divisive events of 1946-49 with the present. It's not that Syriza now threatens to take up arms against half the nation, but people are wondering whether people who have made such a violent and ultimately unsuccessful bid for power, and now have come to it with such a great thirst, with a sense of historic vengeance - are capable of wielding it in a way that unites the country, rather than divides it."
From the point of view of Generational Dynamics, this is a very real concern. There have been huge rallies in Athens, with tens of thousands of extremely passionate demonstrators on each side. These rallies have been overwhelmingly peaceful, and no one really expects any violence next week, no matter which side wins the referendum.
But Greece's economy is a disaster, with no hope of improving for years. Those same opposing rallies, with tens of thousands on each side, could reappear in the weeks to come, and with a lot more venom.
Psaropoulos was asked what he thought would happen after the referendum. He gave a very pessimistic answer:
"Well, anything can happen this week. The entire country has been in hiatus for the last 7 days. Because banks have been closed, businesses have been semi-operational, a lot of them have actually sent people home for several days.Now we're in a political hiatus as well. We don't know if the same government will be in office Monday night. We don't know whether Greece's creditors will continue to extend any kind of offer of financial assistance, a cash-for-reforms sort of program such as those that Greece has been dependent upon since 2010. Everything for the moment is up in the air. The degree of uncertainty is such that a lot of people are going out and stocking up on food.
An account I spoke to earlier today said, I'm afraid of the NO vote, but then again I know that if we vote yes to this package of austerity measures, none of my clients can possibly do them. 23% VAT on electricity and other utilities, impossible, she said. 100% of next year's tax income paid in advance this year, in addition to the current tax income - that's one of the measures on the austerity package going on the referendum tomorrow. .
Also impossible, she said. Nobody can possibly do these things.
So I think the best case scenario here is that the Greeks can ultimately come to some sort of deal that they can't fully honor, and only partially honor. I think those are the terms in which many people are thinking the day following this referendum here in Athens."
These last two sentences are interesting. This is exactly what I described yesterday has been happening all along, since 2010. Greece would promise to implement many reforms in order to get another bailout loan, but then Greece would implement as few of the reforms as possible. This would "kick the can down the road" a few more months, and then the whole cycle would start all over again.
It's interesting that Psaropoulos is putting this out as the best scenario to continue. That would mean that it's being talked about in Athens, and probably in Brussels as well, as the best way to continue, and to "kick the can down the road" once more.
Two days ago, I reported that leaders of Egypt and Kuwait were declaring that their countries were in a "state of war," thanks to terrorist activities. This followed terror attacks in Kuwait, France, Somalia and Tunisia on June 26.
Now Tunisia's President Beji Caid Essebsi on Saturday said that the country was in a "state of war." He declared a 30-day state of emergency powers. The declaration is linked to the terror attack that struck Sousse, Tunisia, on June 26. A terrorist with a Kalashnikov assault rifle strolled through the hotel grounds, opening fire at the pool and beach, reloading his weapon several times and tossing an explosive. He killed 37 people. There had also been an equally horrific terror attack at a museum in Tunis on March 18, killing 21 tourists and a policeman.
Essebsi gave a nationwide televised speech on Saturday:
"Tunisia faces a very serious danger and it should take any possible measures to maintain security and safety.Terrorism is spreading. I believe, and I say this plainly and clearly. If this were to happen, which happened in Sousse. If this were to happen again, the country would collapse.
Now, we are on a state of war. We have to confront this with what is necessary to fight a war. Undoubtedly, in a way, the armed forces have a role, and they have to be on a state of alert. The national guard, the police. But this war is special."
When Essebsi said that "the country would collapse" if there were another similar attack, he may not have been exaggerating.
Tunisia depends heavily on its tourist industry. According to Tunisia's Tourism Ministry, travel and tourism was 15% of Tunisia's GDP in 2014. 473,000 jobs are supported by travel and tourism, 13.8% of total employment.
The two terrorist attacks specifically targeted foreign tourists, with the result that Tunisia's tourist industry has already been pretty much wiped out for the year. In this sense, the terrorists have already won. AFP and Reuters and Daily Mirror (London)
(Comments: For reader comments, questions and discussion, see the 5-Jul-15 World View -- Greece's referendum revives memories of a bloody civil war thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(5-Jul-2015)
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China hunts for 'stock manipulators' as market crashes
This morning's key headlines from GenerationalDynamics.com
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On Sunday, Greece will vote in a referendum to choose whether to accept Europe's last bailout deal, which has already expired on Tuesday and no longer exists. No one has any clue what a YES or NO vote will mean, except that it's essentially a referendum on Greece's prime minister Alexis Tsipras and his far left Syriza party.
Alexis has been campaigning non-stop, telling people nonsense -- that he guarantees that their pensions and salaries and bank accounts are safe, and that a NO vote will mean that the European creditors will have to back down, and give the Greeks back their dignity, with no more austerity. Others say that a NO vote will mean that Greece will leave the euro currency, and possibly even the European Union.
There have been huge rallies by YES and NO proponents in Athens. Polls show about 44% each for the YES and NO voters, with about 12% undecided.
Another bizarre twist occurred on Thursday, when the International Monetary Fund (IMF) issued a report saying that Greece's debt situation was far worse than previously reported, and is not sustainable. What's bizarre about it is that it was good news to Tsipras. According to Tsipras:
"Yesterday an event of major political importance happened. The IMF published a report on Greece's economy which is a great vindication for the Greek government as it confirms the obvious - that Greek debt is not sustainable."
So Tsipras's message is: "Hooray! The country is totally screwed, which is good for me! Yayyyyyyyy!"
Europeans are worried that if the far left wins in Greece because of this "bad news is good news for me" message from Tsipras, then far left and communist parties in Spain, Portugal and Italy will try the same thing.
If we can put aside Tsipras's glee for a moment, then to the rest of us it looks like a disaster either way, NAI or OXI. Kathimerini and BBC and Reuters
Thursday's report by the International Monetary Fund (IMF), described above, is raising questions about the credibility of the IMF, and its leader Christine Lagarde.
First, we have to look how we got here. Long-time readers know that I've been saying from the beginning that there is no solution to Greece's crisis -- not that no solution has been found, but that no solution exists. Other people have said similar things. And I've had lots of fun mocking European leaders who spoke nonsense, especially Jean-Claude Jüncker, who said, When it becomes serious, you have to lie. I've certainly had a lot of fun with that.
But the institutional lenders to Greece -- the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF), formerly known as the "Troika" -- have been engaged in a kind of game with Greece. The Troika would demand austerity reforms, Greece would promise to implement the reforms so that another partial bailout payment would be paid to Greece, but then Greece would implement as few of the reforms as possible. The "can would be kicked down the road" for a few months, at which time the process would start again.
When Alexis Tsipras came to power in January, he decided to call the Troika's bluff, and say: Your method won't work (because nothing can work), so I'm going to force you to do what I want (which is my far left agenda).
However, the Troika kept up the pretense that there exists a solution to the Greek crisis, and blamed Tsipras for being so unreasonable. But now the IMF report on Greece has undermined the Troika's pretenses, saying that Greece's growth is unsustainable. And Tsipras is jumping up and down with glee because, he says, they agree with him.
And that's causing problems for the IMF and Christine Lagarde. If I and other people have known since the beginning that Greece's debt is unsustainable, and there's no solution to the debt problem, then why didn't Lagarde speak up sooner? Was she lying? And why did she waste so much IMF money going to a lost cause?
Inquiring people want to know, and this is just one more element in the unending crisis in the Greece debt story. Australian Financial Review and Reuters
The Shanghai stock exchange index fell 6% on Friday, 10% for the week, and nearly 30% since June 12. The China Securities Regulatory Commission (CSRC) has been desperately trying different measures, such as cutting interest rates and allowing more stocks to be purchased on credit (margin), but the measures have been ineffective.
According to one Chinese analyst, "The government must rescue the market, not with empty words, but with real silver and gold. It's a disaster. If it's not, what is it?" What it is -- is a huge stock market bubble bursting.
Over 100 million Chinese investors, including many older people who have invested their life savings, have been spending 6 hours a day staring glumly at their mobile phones, watching the stock market index fall, and watching their own savings be destroyed. This feeds into the Chinese Communist Party's greatest paranoia - a people's rebellion.
Now the CSRC has set up a team to look at "clues of illegal manipulation across markets." This should be a laugh. Some poor slob who sold some stocks last week is going to be blamed and sent to jail.
When I wrote last week that, "It's well to remember that we don't know to this day what triggered the 1929 panic and crash," a web site reader wrote to say that Milton Friedman had written extensively about it. Actually, Milton Friedman has written extensively about the 1930s Great Depression, but nobody knows why the stock market panic occurred on the particular day, October 28, 1929, rather than a few months earlier or later.
Wall Street stocks are also in a large bubble, as I've described many times, with the S&P 500 Price/Earnings ratio at a historically high 21.3. What can happen in Shanghai can happen on Wall Street. If you have your life savings in stocks, it's not impossible that you too could lose 30% of your savings in three weeks. Reuters
(Comments: For reader comments, questions and discussion, see the 4-Jul-15 World View -- Greece heads for further chaos with referendum on Sunday thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(4-Jul-2015)
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Possible panic in China's stock markets
This morning's key headlines from GenerationalDynamics.com
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The fighting in Sinai continued into a second day. Air strikes from Egypt's warplanes killed 22 militants in dawn raids on Thursday The situation in Sinai is now "100% under control," according to Egyptian officials. However, in the town of Sheikh Zuweid, where the militants attacked a string of army checkpoints on Wednesday, the army is still going from house to house, searching for extremists, and removing explosive booby traps and mines.
According to Egyptian officials, at least 300 militants launched the offensive on Wednesday, of whom 100 were killed, while 17 soldiers and security officers were killed.
The militants were from the terror group Ansar Bayt al-Maqdis (ABM - Ansar Jerusalem - Champions of Jerusalem), which has conducted numerous attacks in Egypt's Sinai, along the border with Israel and Gaza, and last year changed its name to "Walayat Sinai" (Sinai Province), meaning "Sinai Province of Islamic State," when it repudiated its allegiance to al-Qaeda and declared its allegiance to the Islamic State (IS or ISIS or ISIL or Daesh).
There's been a surge in violence across the Mideast since ISIS called for increased violence during the holy month of Ramadan. Egyptian officials are going beyond blaming ISIS, and placing the blame on the Muslim Brotherhood, which is a banned organization in Egypt. Al Ahram (Cairo) and BBC and AP
An Israeli Defense Forces (IDF) general says that Hamas is actively assisting the ISIS-linked Sinai Province terror group that conducted the huge terror attack in Sinai on Wednesday. According to Major General Yoav Mordechai:
"We have clear information that Hamas supports the Walayat Sinai organization, which belongs to ISIS.In the latest attacks, Hamas gave assistance in the form of weapons and organization to the group that supports ISIS. We have examples of commanders in Hamas who took an active part in this aid. Wael Faraj, a battalion commander in Hamas's armed wing, smuggled wounded casualties from Sinai to Gaza."
However, other reports indicate that Egypt may not agree with this assessment. Jerusalem Post
ISIS has released a video targeting Palestinians that calls Hamas heretical and accuses its officials of apostasy. The main charges appear to be too much interest in democracy, too close relations with the Shia Muslim Hezbollah and Iran, and refusal to govern by Sharia law.
According to the video:
"The Islamic State has its eyes set on Jerusalem and is getting closer day after day to Al-Aqsa Mosque along the path paved by Abu Musab Al-Zarqawi [the head of al-Qaeda in Iraq] and Sheikh Osama Bin Laden [the head of al-Qaeda].A message to the tyrants of Hamas, you are nothing in our reckoning. You, Fatah and all the secularists, we count you as nothing. God willing, we shall uproot the state of the Jews. You are nothing but froth that will be gone as we move in. God willing, Gaza will be governed by Sharia despite you. ...
By Allah, we shall make your young and old weep just as we did very recently to your dogs, the apostates, the hypocrites and the liars, those who grew rotten beards in Yarmouk camp, those who fought against the law of God. By God, we shall do it again and Gaza will see the blood and the dismembered bodies."
Egypt's policy remains that many of the terrorist cells in Sinai are receiving people and supplies from Gaza, through illegal tunnels dug underneath the wall separating Gaza from Egypt.
However, with Hamas and Egypt having common interests in fighting ISIS, the possibility exists that Hamas can be convinced to support Sinai terrorism less. Egypt's media have sharply reduced the anti-Hamas rhetoric and incitement, and there have been reports in Arab media outlets of a "honeymoon" in relations between Hamas and Egypt. It's fair to assume that comes from Egypt's president Abdel al-Fattah al-Sisi.
Regional politics also play a part. Egypt used to be the main mediator between Israel and Gaza, but since last summer's Gaza war, when Egypt clearly sided with Israel, Hamas has turned to Qatar as a mediator, with reports of talks about a long-term ceasefire between Israel and Hamas. Egypt would like to return to its former central role as a mediator, and a cooling of hostilities would serve that purpose. Middle East Monitor and YNet (Israel)
As of this writing on Thursday evening ET, Friday morning in China, the Shanghai stock market has fallen over 6%, and it's only been open for a little over an hour. Whether this is a full-scale panic remains to be seen.
The Shanghai index has fallen 30% since June 12.
(Comments: For reader comments, questions and discussion, see the 3-Jul-15 World View -- Egypt's military brings the Sinai '100 pct under control' in 2nd day of fighting thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(3-Jul-2015)
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Kuwait in 'state of war' with ISIS, will require nationwide DNA testing
This morning's key headlines from GenerationalDynamics.com
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Egypt's Prime Minister Ibrahim Mahlab said, "We’re in a real state of war," at a cabinet meeting on Wednesday, as Egypt's army was fighting a protracted battle in northern Sinai with jihadist militants.
Egyptian F-16 warplanes and Apache helicopters attacked the militants' positions for several hours Wednesday afternoon and killed more than 90 jihadists, according to Egyptian sources. The militant assault targeted military and police personnel in two towns, El Arish and Sheikh Zuweid, located in northern Sinai near the border with Gaza and Israel. More than 70 Egyptian soldiers and policemen were also killed.
This was different from the "usual" terror attack that Egypt has been experiencing, in that it was a sustained militia attack on Egypt's security forces.
The militants were from the terror group Ansar Bayt al-Maqdis (ABM - Ansar Jerusalem - Champions of Jerusalem), which has conducted numerous attacks in Egypt's Sinai, along the border with Israel and Gaza, and last year changed its name to "Sinai Province," meaning "Sinai Province of Islamic State," when it repudiated its allegiance to al-Qaeda and declared its allegiance to the Islamic State (IS or ISIS or ISIL or Daesh).
Sinai Province has issued a statement claiming that they conducted simultaneous coordinated terror attacks at 15 different locations. They also claimed to have downed an Egyptian warplane with an anti-aircraft missile, but that claim was unconfirmed.
Wednesday's attack followed by two days the assassination of Egypt's top public prosecutor when a car bomb struck his convoy in Cairo. Egypt's president Abdel al-Fattah al-Sisi had already promised a crackdown in response to the bombing. It's now expected that he's going to be pressured to seek revenge for Wednesday's attack, the worst in Egypt's recent history. El Ahram (Cairo) and Bloomberg and El Ahram
The 1979 Camp David peace treaty between Egypt and Israel requires the approval of each country for the other to deploy additional military forces near their common border.
Following Wednesday's terror attack in North Sinai, Israel has reportedly decided to grant all Egyptian requests to reinforce troops in the Sinai Peninsula. Jerusalem Post
Kuwait's interior minister Sheikh Mohammad Al-Khaled Al-Sabah said on Wednesday:
"We are in a state of war. It's a war that had been decided with this cell. But there are other cells, and we will not wait for them to try their luck with us."
Al-Sabah was alluding to the Kuwait terror attack of last week, one of the four terror attacks that occurred in four countries on a single day. ( "27-Jun-15 World View -- Terror attacks in Kuwait, France, Somalia and Tunisia highlight growing sectarian war") All four attacks targeted Friday prayers at mosques during the holy month of Ramadan.
The terror group "Najd Province" claimed responsibility for a suicide bombing attack on the Imam Sadiq Mosque in Kuwait's capital city, Kuwait City, during Friday prayers, killing 27 people and wounding over 200. The terrorist wore a white robe that concealed the bomb, and was not prevented from entering the crowded mosque.
The name "Najd Province" refers to the central region of Saudi Arabia where the ultraconservative Sunni ideology of Wahhabism originated. Like "Sinai Province" in Egypt, the name was adopted when the militants pledged allegiance to ISIS. Al-Sabah was referring to "Najd Province" as the cell that triggered this war.
The first step in Kuwait's war against ISIS is a new law that requires mandatory DNA testing on all of the country's citizens and foreign residents. The interior ministry will establish a DNA database of all 1.3 million citizens and 2.9 million foreign residents. The database will be used to make quick identification and arrests during terror attacks, according to the law's sponsors.
Anyone who refuses to give a DNA sample will be jailed for one year, and anyone who gives a fake sample can be jailed for seven years.
As we reported last week, Tunisia is responding to the terror attack it suffered by closing 80 mosques that are "spreading venom."
What we're seeing is a broad trend where leaders of countries where terror attacks have occurred are being forced by public opinion to take repressive measures, in the hopes of preventing future terror attacks. Today we've described such repressive measures in Egypt, Kuwait and Tunisia. It's not thought that any of the repressive measures will prevent "lone wolf" terror attacks, which are becoming increasingly common.
Generational Dynamics predicts that the Mideast is headed for a major generational crisis war, refighting the bloody, genocidal 1948 war that followed the partitioning of Palestine and the creation of the state of Israel, and expanding to a full-scale sectarian war between Sunnis and Shias. International Business Times (London) and AFP
(Comments: For reader comments, questions and discussion, see the 2-Jul-15 World View -- Egypt in a 'state of war' in northern Sinai thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(2-Jul-2015)
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What were you doing last night at 23:59:60?
This morning's key headlines from GenerationalDynamics.com
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Ever since Russia invaded Georgia in 2008, annexing two Georgia provinces, Abkhazia and South Ossetia, it's been an unwritten European Union policy not to sell advanced weapons to Georgia, for fear of angering Russia and increasing tensions.
However, there's little support for such a policy anymore, after Russia invaded Ukraine, and annexed Ukraine's Crimea peninsula. As a result, France has agreed to sell Georgia "advanced air defense systems." The exact weapons systems to be supplied are top secret, but it's known that the supplier will be ThalesRaytheonSystems (TRS), which is a joint venture of the French defense electronics group Thales and US arms maker Raytheon. The company produces a range of ground-based surveillance radars, air defense command-and-control systems, as well as cyber capabilities.
Supplying just radars to Georgia would not be a big deal, as France supplied radars to Georgia after the end of the 2008 war with Russia. The unknown is whether the weapons will include either anti-aircraft systems or advanced anti-missile systems.
First discussions with France last year about the air defense deal triggered a major political crisis in Georgia. Former Defense Minister Irakli Alasania, who initiated the process of purchasing French air defense units, was unexpectedly fired last year, and made the sensational accusation that the deal was sabotaged by the prime minister, presumably at Russia's request.
Alasania claimed last year that the air defense systems to be purchased from France would be able to shoot down not only any type of Russian aircraft, but also even Russian ballistic missiles of the "Iskander" type. This claim was significant because Russia fired an Iskander missile into Georgia on August 12, 2008, killing dozens of civilians and a Dutch cameraman.
However, the current Georgia government is making no mention of Alasania's statement, causing the political opposition to be suspicious that the new deal with France was watered down to meet demands by Russia. EurasiaNet and Georgian Journal and Jamestown
At midnight on Tuesday, June 30, Greece became the first "developed" nation to miss a payment to the International Monetary Fund (IMF), joining the ranks of "undeveloped" nations, including Zimbabwe and Cuba, that have also missed IMF payments.
Greece is now "in arrears" in payments to the IMF, but is not "in default." The three major credit-rating companies have said failure to pay the IMF doesn't constitute a default because that term is reserved for private-sector creditors. Greece has requested an extension for payment to the IMF, but it's thought to be unlikely that the IMF will grant the request.
Earlier in the day, a panicky prime minister Alexis Tsipras made a desperate last gasp proposal to the Eurogroup to request a new 2-year bailout program. The Eurogroup rejected it immediately.
It now appears that there will be several days of arguing and posturing on the part of both the Greek government and the European leaders. Right now, it seems the most significant next event will be the referendum on Sunday.
Since the referendum refers to a bailout plan that no longer exists, no one knows what YES means or what NO means. So it's now being widely assumed that YES will mean that Greece will remain in the eurozone, and NO means that Greece should leave the eurozone. As I wrote yesterday, my personal opinion, not a Generational Dynamics prediction, is that one way or another Greece will remain in the eurozone, even if the referendum vote is NO. Bloomberg and Kathimerini
With $72 billion in debts and an extremely weak economy, Puerto Rico is in an economic death spiral, and may run out of cash within a few weeks, and be unable to pay salaries, pensions and other government expenses.
The White House has stated that there are no plans to bail out Puerto Rico.
Puerto Rico currently is barred by U.S. law from using Chapter 9 of the federal bankruptcy code, a last-resort tool that enables municipalities to resolve their debt in court. Detroit and other municipalities have used the bankruptcy courts to resolve their own debt issues, but Puerto Rico is barred from doing that.
Congressional leaders, led by New York Senator Charles Schumer, are considering a bill that would give Puerto Rico access to the bankruptcy courts.
A Puerto Rico bankruptcy, whether handled by a bankruptcy court of not, would have major consequences for Americans. Two-thirds of pension and retirement funds are holding Puerto Rico bonds, and these funds stand to lose billions of dollars. Bloomberg and NY Daily News
The above headline may look like it contains a typo, since the last second of every day is supposed to be 23:59:59. But on Tuesday, June 30, the last minute of the day was 61 seconds long, rather than 60. Most days are 86400 seconds long, but Tuesday was 86401 seconds long. The extra second was added as 23:59:60 GMT, or 7:59:60 ET.
Historically, an earth day has for centuries been defined as 84600 seconds long. But as it turns out, the rotation of the earth is a variable fraction of a second longer than that. Furthermore, the amount of variation can depend on things like earthquakes. The leap second is added at irregular intervals, by international agreement, to make up for that variation.
The fact that the dates of the leap seconds cannot be predicted in advance causes severe problems for some computer software developers.
Even in 1972, the time of the first leap second, system programmers for IBM mainframe operating systems had to deal with problems associated with leap seconds.
But today, the problems are much more severe. The guidance system for a rocket or missile may fail because of an added second at an unexpected time.
Real time financial systems have to deal with potentially thousands of transactions per second, and if a leap second is thrown into the mix, any financial system might make an incorrect computation or even crash.
For that reason, many stock exchanges decided to shut down their trading systems for a few minutes before and after Tuesday evening's leap second. Better to be safe than sorry. Bloomberg and Time Service Dept., U.S. Naval Observatory
(Comments: For reader comments, questions and discussion, see the 1-Jul-15 World View -- France reverses policy, will sell advanced defense weapons to Georgia thread of the Generational Dynamics forum. Comments may be
posted anonymously.)
(1-Jul-2015)
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