This morning’s key headlines from GenerationalDynamics.com.
- Hezbollah leader Nasrallah’s defiant threat to Syrian kidnappers backfires
- Significance of Spain’s bailout begins to sink in
- Egypt’s Hosni Mubarak may be close to death
- Burma (Myanmar) declares state of emergency over Buddhist/Muslim violence
Hezbollah leader Nasrallah’s defiant threat to Syrian kidnappers backfires
An important side show of the crisis in Syria is now entering its third week. A busload of Shia Lebanese citizens were kidnapped in Syria on May 22, as they traveled back to Lebanon from a religious pilgrimage to Iran. Hezbollah leader Sayyed Hassan Nasrallah, who is normally the one fomenting terrorist acts, is now reeling from the effects of this terrorist attack, which has him as a target. The kidnappers are demanding that Nasrallah apologize for his support of Bashar al-Assad, whose regime is exterminating village after village of Sunni Arabs. Nasrallah, who represents Shia Muslim terrorists, and has close ties with Iran, has threatened war against the kidnappers. There were signs that the hostages would be released this weekend, but Nasrallah’s recent speech, in which he defiantly said that the kidnapping would not sway his full support of al-Assad, has “complicated” the negotiations. The Syrian rebels who abducted the Lebanese said that they would release them were they ordered to do so by a new parliament of a “new civil state” in Syria. Daily Star (Beirut)
Significance of Spain’s bailout begins to sink in
On Sunday, Spain’s prime minister Mariano Rajoy said that Saturday’s bailout announcement was a “victory” for both Spain and Europe, and that, “It was the credibility of the euro that won.” So Spain is going to get a €100 billion bailout, apparently with no onerous austerity requirements. But nothing has changed in Spain, so Spain will need another bailout before long. And if Spain can get a bailout with no austerity strings attached, then why can’t Greece, Ireland and Portugal? First in line will be Greece, holding an election on June 17, where the leading candidate, Alex Tsipras, is promising to end the harsh austerity program, and who claims that the EU is bluffing when they say they won’t bail out Greece any more. It looks to me like Tsipras is right.
Several years ago, someone was mocking me, saying that I’ve set myself up so that I could never be wrong. “You’ve predicted a financial crisis, but you just keep saying that it hasn’t happened yet.” My response was this: The amount of public debt has been increasing exponentially for years, and if it ever starts leveling off and decreasing, then you can declare me wrong.
Since I made that remark, the level of public debt has increased many times over. Look what’s just happened in Spain. Spain’s debts were incurred by the individual banks, who have hundreds of billions of toxic foreclosure loans on their books that will never be repaid because Spain’s humongous real estate bubble is rapidly collapsing.
So Spain’s debts belong to the individual banks, but the bailout gives €100 billion to Spain, which it will use to bail out the banks, leaving the debt on the books of Spain, rather than the banks. What we’ve been seeing in country after country in euroland is that private debt is being taken on by the euro nations.
And now, everyone’s blaming the Germans for standing in the way of “euro bonds.” What euro bonds would do is move the debt from the books of the individual nations to the euro zone as a whole, so that all 17 euro nations would be jointly responsible for the individual debts of the individual nations, and those debts were previously held by private institutions (banks).
The same thing has happened in the United States, with a series of fiscal and monetary programs that bailed out states like California and Illinois, as well as huge banks on Wall Street. And now the lastest bailout program, known as “Operation Twist,” is scheduled to come to an end this month, leading analyst firms to demand an extension, or a new round of quantitative easing.
This continuing exponential growth of public debt is remarkable for three reasons. First, it’s remarkable that it’s happening at all.
And second, it’s remarkable that it has no limit. Prior to 2008, a government program costing more than $10 or $20 billion was considered very expensive. Now we think nothing of a few hundred billion, or a trillion or two. I hear nuts like Krugman say that it’s OK to go into debt by another $5-10 trillion. Well, what’s the limit? After that, will it be $20 trillion? Then $100 trillion? Then a quadrillion? Has anyone in Krugman’s camp set any limit whatsoever?
And the third remarkable thing is that it’s been useless. None of these programs has had the desired effect of causing “growth,” by which is meant recreating the housing and credit bubbles of the last decade. This is the generational insight. People today are not like people in the 1990s. They’re like people in the 1930s. They’re risk averse, and they don’t trust government or Wall Street because they’re very well aware that people like Krugman are liars.
So, the bailout of Spain buys a little more time, and moves more private debt onto the public’s books. Sooner or later, Germany will have to succumb to the pressure and agree to eurobonds, and than the debt will have moved from the 17 individual nations to the eurozone as a whole. Then the next step will be pressure on Britain (a non-euro country) to agree to an EU-wide bond, which means that all 27 EU countries will be responsible for the debts of Spain’s banks. Under those circumstances, why should anyone practice austerity? Guardian and Reuters
Egypt’s Hosni Mubarak may be close to death
Hosni Mubarak, who ruled Egypt for thirty years until he was deposed last year by the Arab Spring, may be close to death, though officials are saying that the 85 year old former leader is not dying. Mubarak has been in Tora Prison Hospital since June 2, after having been sentenced to life imprisonment for his role in the killing of peaceful demonstrators during the early days of the January 25 Revolution. According to one prison official, “He is an old and ailing man; he is certainly very depressed to have ended this way, but life and death are in the hands of God.” Al-Ahram (Cairo)
Burma (Myanmar) declares state of emergency over Buddhist/Muslim violence
Myanmar’s president on Sunday night declared a state of emergency in a western state where sectarian tensions between Buddhists and Muslims have unleashed deadly violence. He warned that if the situation spun out of control, it could jeopardise the democratic reforms he has been instituting since taking office last year. A state of emergency effectively allows the military to take over administrative functions for Rakhine State, a coastal region that borders Bangladesh.
From the point of view of Generational Dynamics, this is an ominous development. Burma gained independence in 1948, but then had a bloody civil war among different ethnic groups, reaching a climax in 1958. In October, 2007, Burma’s army overreacted to demonstrations by protesters, led by Buddhist monks. Hundreds of activists and citizens were shot dead or burned alive in government crematoriums. Thousands of monks were rounded up and detained. Some were found floating face down in rivers. ( “Burma: Growing demonstrations by the ’88 Generation’ raise fears of new slaughter” and “Burma (Myanmar) demonstrations fizzle after violent government response” )
The bloody 2007 violence was typical of a country in the decades following a crisis civil war. The survivors of such a war justify bloody suppression of protests as necessary to prevent a new civil war. This suppression leads to a new crisis civil war decades later, when the survivors of the previous civil war are gone.
Much to my surprise, a new government came to power last year, with a conciliatory approach, freeing the well-known political prisoner Aung San Suu Kyi and signing a peace agreement with the Karen ethnic group.
If this new violence between Buddhists and Muslims grows, it will be a problem by itself. But the broader problem is that it will stir new anxieties among the aging generation of survivors of the last crisis civil war, and justify a new round of violent political suppressions. AP and BBC