World View: Generational Dynamics 2019 Forecast: The Camel Versus the Can

The Associated Press
The Associated Press
John J. Xenakis

This morning’s key headlines from GenerationalDynamics.com

  • Generational Dynamics 2019 Forecast: The Camel versus the Can
  • Separatist violence in India’s Kashmir and Jammu
  • The Mideast – increasing ethnic and secular tensions
  • Russia’s existential threats to Ukraine
  • North Korea continues nuclear weapons development
  • China continues to prepare for war
  • Preparations for a global pandemic
  • Stock market bubble continues
  • U.S. debt continues to become increasingly unsustainable
  • The future of Generational Dynamics

Generational Dynamics 2019 Forecast: The Camel versus the Can

The straw that broke the camel's back
The straw that broke the camel’s back

In forecasting the events of 2019, we are going to use two metaphors.

One is “the straw that breaks the camel’s back.” This commonly used metaphor suggests a scenario where someone is piling one straw after another onto a camel’s back. You know with 100 percent certainty that the weight will eventually break the camel’s back, but it is impossible to predict when. You will not know which straw breaks the camel’s back until after it happens.

Putting that into analytical terms, if you have a long-term trend that gets worse and worse, then there is a new saying that applies: “If something can’t go on forever, then it won’t.” At some point, the long-term trend ends with a growing or full-scale panic, resulting in a financial crash or a war.

The other metaphor is “kicking the can down the road,” which means taking some action that postpones a problem, but makes the problem worse in the long run. If we stretch the camel metaphor a little farther, we can imagine adding protein to the hay we feed the camel, in order to strengthen the camel’s back while we’re piling on straw. It will take longer for the camel’s back to break, but when it does, the poor camel will be almost destroyed. In analytical terms, this means that some action is taken to permit the long-term trend to continue for a while longer, albeit with even worse consequences when the panic finally occurs.

In each of the forecasts in the following sections, there is a trend for something that is getting worse or more dangerous because this is a generational Crisis era, because the survivors of World War II are almost completely gone. The trend may continue to worsen in 2019 with no major consequence, or there may be a full-scale panic leading to a financial crash or a war, or the international community may take steps to kick the can down the road.

If any one of these leads to a panic, then a panic may be triggered in the others, leading to a world war.

Separatist violence in India’s Kashmir and Jammu

Kashmir and Jammu are the two provinces of colonial India that were the epicenter of the massive 1947 Partition War between Muslims and Hindus that followed the partitioning of the Indian subcontinent into India and Pakistan. Starting in the 1980s, Pakistan-supported separatist groups have been conducting terrorist attacks in the Indian-government portion of Kashmir.

The situation on the ground has worsened substantially in the last two years as the terrorist attacks have become much more “organic,” meaning that they are being perpetrated by young Muslims growing up in Kashmir, rather than by jihadists imported from Pakistan.

This is an archetypical example of how the generational cycle works. The 1947 Partition War was one of the bloodiest and most horrific wars of the entire century and anyone who survived that war, whether Muslim or Hindu, would have vowed to spend their entire lives making sure that nothing like that happened again. And the survivors succeed but, eventually, the survivors die off, and younger generations without such inhibitions come to power and start a new horrific war, repeating the cycle.

In Kashmir, the trend line is that there is a growing number of young Muslims coming of age without the influence of survivors of the 1947 Partition war and are attracted to the separatist movement. At the same time, there is a growing number of Hindu members of the Indian army and police coming of age. The young Muslims are willing to commit increasingly serious terrorist acts in their separatist cause, while the young Hindus are willing to be increasingly violent with the separatists, in the vain hope of ending the separatist movement completely.

So there are two trend lines here, with both the young Muslims and the young Hindus becoming increasingly xenophobic and violent. Indian security forces try to kick the can down the road with a variety of techniques, such as spending money on social outreach to Muslims or implementing curfews. But these two trend lines cannot increase forever and, at some point, the situation will spiral out of control into a larger war. That might happen in 2019.

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The Mideast – increasing ethnic and secular tensions

There are so many trend lines of increasing tension and violence in the Mideast that it is almost impossible to count them: in Syria, between Iran and Saudi Arabia, and between Israelis and Palestinians. These trend lines were particularly exposed by the 67-day war in 2014 between Israel and Hamas. The increasing hostility behind these trend lines was further exposed on June 5, 2017, when Saudi Arabia, United Arab Emirates (UAE), Bahrain, and Egypt imposed a land, sea, and air blockade on Qatar.

President Trump’s recent announcement of a quick American troop withdrawal from Syria – recently modified to a “slow withdrawal” – has further hardened these fault lines as different factions compete to fill the vacuum in eastern Syria that the U.S. withdrawal will leave behind. There are three major sets of alliances among the Mideast countries:

  • Iran, Syria, Lebanon’s Hezbollah, Iraq Shia militias, Yemen Houthis
  • Turkey, Qatar, some Syria opposition factions, Hamas, Muslim Brotherhood
  • Saudi Arabia, UAE, Bahrain, Egypt, some Syria opposition factions, Jordan, Oman, Kuwait, Palestinian Authority. To some extent, Israel is a part of this alliance.

From the point of view of Generation Dynamics, the Mideast is particularly difficult to analyze because of multiple generational timelines. The last crisis war climax for Saudi Arabia occurred in the 1920s, for Israel and the Palestinians in the late 1940s, for Syria and Lebanon in the early 1980s, and for Iraq and Iran in the late 1980s. Each of these timelines and their interactions has to be analyzed separately to get precise forecasts for the future of the Mideast.

The general Generational Dynamics forecast is that there will be a larger regional Mideast war that is coming with 100 percent certainty, pitting Arabs vs Jews, Sunnis vs Shias, and various ethnic groups against each other. This will be part of the Clash of Civilizations world war and nothing can be done to prevent it. It might begin in 2019. Jerusalem Post

Russia’s existential threats to Ukraine

Russia is not an existential threat to America, but it is an existential threat to Ukraine.

Ever since Russia invaded Ukraine in 2014, Russia has conducted one act of war after another against Ukraine, including invading Crimea, annexing Crimea, building the Kerch Strait bridge and blockading the Sea of Azov and, most recently, seizing three Ukrainian ships in international waters and abducting and torturing the 24 crew members. Ukraine has retaliated by implementing martial law and prohibiting Russian men aged 16-60 from entering Ukraine.

A dramatic development occurred late in 2018 when there was a historic split between the Ukrainian and Russian Orthodox Churches with the blessing of the Patriarch Bartholomew of Constantinople. This is a huge loss of prestige to Moscow and the Russians are furious.

The trend lines are that Russia is perpetrating increasingly belligerent military actions targeting Ukraine and Ukraine is desperately looking for ways to retaliate. Fears are growing that Russia is planning a new invasion of Ukraine in 2019.

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North Korea continues nuclear weapons development

2018 was a remarkable year of kicking the can down the road by means of a charm offensive, starting with North Korean participation in the Seoul Olympics.

But the “North Korea problem” has become objectively much worse than it was a year ago. The North Koreans have been continuing development of nuclear weapon and ballistic missile technology, with the one exception that they have not been able to publicly test their new developments.

The charm offensive has also changed the border between North and South Korea. The DMZ is being demilitarized, with military posts and land mines being removed along the border. Those were put there to prevent or slow an invasion by North Korea of Seoul in South Korea. North Korea has never repudiated its stated intention of unifying North and South Korea under military control by the North.

So the North Korean charm offensive has kicked the can down the road for a whole year, in that there have been no public tests of nuclear weapons or ballistic missiles. But that could change in 2019 and North Korea has become considerably more dangerous in the last year.

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China continues to prepare for war

As I recently wrote in “30-Dec-18 World View — Xi Jinping’s speech on ‘the humiliation of the Chinese nation for centuries'”, China’s government blames the world for 200 years of “humiliation of the Chinese nation.” China is becoming increasingly nationalistic, xenophobic, and militaristic. Whether it is militarizing the South China Sea or developing and deploying new nuclear missile systems, China is preparing to launch an attack on the United States at a time of its choosing. It may choose 2019.

Preparations for a global pandemic

The rapidly spreading Ebola pandemic in eastern Democratic Republic of Congo (DRC) caught a lot of people by surprise and it will be continuing well into 2019.

On average, in one corner of the world or another, a new infectious disease has emerged every year for the past 30 years: Mers, Nipah, Hendra, swine flu, bird flu, and many more. Researchers estimate that birds and mammals harbor anywhere from 631,000 to 827,000 unknown viruses that could potentially leap into humans.

The international community, led by the World Health Organization (WHO) or the American Centers for Disease Control (CDC), have defined protocols and procedures to prevent outbreaks of new diseases from becoming pandemics. However, wars and mass migrations can defeat these protocols.

It was exactly a century ago, in 1918, that the Spanish flu pandemic began (though probably not in Spain). In two years, it killed as many as 100 million people, 5 percent of the world’s population and far more than the number who died in World War I. There could be a new pandemic in 2019. The Atlantic

Stock market bubble continues

S&P 500 Price/Earnings ratio at 19.60 on December 28, indicating a huge stock market bubble (WSJ)
S&P 500 Price/Earnings ratio at 19.60 on December 28, indicating a huge stock market bubble (WSJ)

According to Friday’s Wall Street Journal, the S&P 500 Price/Earnings index (stock valuations index) on Friday morning (December 28) was at an astronomically high 19.60. This is far above the historical average of 14, indicating that the stock market bubble is still growing, and could burst at any time.

The P/E ratio fell to the range of 5-6 three times in the last century, in 1919, 1949 and 1982, and it is overdue to do so again. When that happens, the DJIA will fall to around the 3000 range.

If we use 1929 as an example, there was an initial panic, then a partial recovery. John Kenneth Galbraith’s 1954 book The Great Crash – 1929 described what happened next:

A common feature of all these earlier troubles [previous panics] was that having happened they were over. The worst was reasonably recognizable as such. The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune.

The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost. The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains. … The bargains then suffered a ruinous fall. Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or fourth of the purchase price in the next twenty-four months. … The ruthlessness of [the stock market was] remarkable.” (p. 108-109)

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.

I hear more and more analysts express concern about a “20-30% correction,” with the expectation that once the correction reaches bottom the stock market will recover to new highs. These analysts always advise people to “buy into the dips,” which is what Galbraith was describing above.

With the P/E ratio so high, at some point, there will be a full-scale panic, and the process described by Galbraith will happen again. It might happen in 2019.

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U.S. debt continues to become increasingly unsustainable

I used to worry about U.S. debt but, on this issue, I have turned into Alfred E. Neuman. Does it really matter whether U.S. debt is at $20 trillion, $30 trillion or $50 trillion? It is unsustainable either way.

The Trump administration is issuing $1.3 trillion in U.S. government debt this year, more than twice the 2017 amount. This cannot go on forever and, if something cannot go on forever, then it will not. When the bond panic occurs, it will be a massive global financial disaster, and $20 trillion or $30 trillion won’t make much difference. It will be a disaster either way.

Issuing more and more U.S. debt depends on foreign buyers and investors willing to buy U.S. debts. But in the last couple of months, demand for U.S. debt, particularly 30-year Treasury bonds, has fallen to the lowest level in almost ten years. Will foreigners start buying U.S. debt again, or could this be the start of a bond panic? What, me worry? Fiscal Times

The future of Generational Dynamics

The trend line for me is that because of my age I’m unable to get a job, and since my only income is social security, I’m going to run out of money in 2019, which will be the end of both me and Generational Dynamics. Job descriptions in the computer industry often mention pizza parties and exercise rooms as a way of telling people over 30 not to apply. What I need is for someone to hire me and pay me a regular salary as a journalist, or as an analyst, or as a Senior Software Engineer. Help would be appreciated. Dice.com and Resume

KEYS: Generational Dynamics, India, Kashmir, Jammu, Pakistan, Syria, Saudi Arabia, Iran, Israel, Palestine, Hamas, Iraq, Egypt, Yemen, Lebanon, Hezbollah, Muslim Brotherhood, Russia, Ukraine, Kerch Strait, Sea of Azov, North Korea, South Korea, China, South China Sea, Xi Jinping, John Kenneth Galbraith, Price/earnings ratio
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