Belmont Club

The Year of Transition

The year 2010 may be remembered in retrospect as the year of “if only”. Michael Totten describes “the perfect Iranian storm on the horizon”. The key line of his report is from Jonathan Spyer. “If the U.S. leaves a void here, the secondary powers in the region—Israel, Turkey, and Iran—will begin tussling with one another for dominance.” That void will in the first instance be filled by an Iran backed by a nuclear weapons, which will redouble its subversion behind that shield. The IAEA, famous for blaming America for crying wolf, now says Iran has material for one or two nuclear weapons.

If that were all.

Providing the backdrop to a crisis which even in normal times would be challenging is the second and possibly more dangerous round of the global economic crisis. Societe Generale’s Albert Edwards predicts the collapse of the equities market. In a newsletter distributed to subscribers. To the structural deficit afflicting the bond markets (discussed in the previous post) may now be added the “structural bear”. And it will show its head fairly soon. “The equity market … will crumble like the house of cards it is, when the nationwide manufacturing ISM slides below 50 into recession territory in the coming months.”

Even the Huffington Post can’t completely buy into the Summer of Recovery. It reports that David Rosenberg, the former chief economist for Merill Lynch is describing the current economy as being in a “depression”. One of the reasons Rosenberg gives for the structural downturn is demographics.

The 45- to 54-year-old demographic expanded as a group every year from 1984 to 2010, writes Rosenberg, citing demographic data from Harry Dent, whom he cites as “one of the world’s most widely read demographers.”

Over that 26 years, the stock market advanced 240%.

Starting next year, the age group will contract, according to various statistics, says Rosenberg, and will keep shrinking through 2021.

With regional enemies challenging the new Iraqi government by sending car bombs against the police it is interesting to note that in many ways the upheavals are worse even closer to home. Seventy two persons, perhaps illegal immigrants drawn by a border which politicians refuse to close, were found dead in a Mexican ranch close to the US border.

Things are much, much worse than Mexico in that socialist paradise Venezuela, which the NYT says is far more dangerous than Iraq. So bad in fact that the government has ordered the newspapers not to report any more killings.

In Iraq, a country with about the same population as Venezuela, there were 4,644 civilian deaths from violence in 2009, according to Iraq Body Count; in Venezuela that year, the number of murders climbed above 16,000.

Even Mexico’s infamous drug war has claimed fewer lives.

The NYT seems optimistic that police advisers from Cuba, that other socialist paradise where all problems are solved, will come to turn the tide. Of Chavez one NYT source said, “We elected him to crack down on the problems we face, but there’s no control of criminals on the street, no control of anything.” Only the illusion of control and the illusion of solutions.

In the end the NYT may discover that the Cuba, Iran and China have only appeared to solve their problems by controlling the narrative, a process the Old Gray Lady will be tolerably familiar with. Like the Summer of Recovery, like Hope and Change and probably like universal healthcare, those fictions have for too long been confused with fact. The year 2010 may be the last one in which the old order will have the chance to realize that there really is a problem. As for the solutions, those have not yet come to hand.

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