Category: EU Members

European Council decided to open accession negotiations with Turkey on 17 Dec. 2004

  • Poor Richard’s Report

    Poor Richard’s Report

    Poor Richard’s Report
    Over 300,000 readers
    My Mission: God has uniquely designed me to seek, write, and speak the truth as I see it. Preservation of one’s wealth while continuing to provide needed income is my primary goal for these unsettled times. I have been given the desire to study and observe global money progressions and trends for the last 50 years. I evaluate possible future trends in order to provide positive concepts for you to form your own conclusions. The main purpose of this letter is to warn you of possible financial sinkholes.
    Good Bye Stocks – Hello Bonds

    We are leaving the golden era of free enterprise due to unmitigated greed and chicanery. We can easily adjust if we accept the true meaning of what awaits us. If we fight to retain our old dreams and fantasies we will see ourselves being spoon fed by fat socialist bureaucrats for the “common good”.
    In this letter I will present some facts for your perusal and then you can make up your own mind in regards to your financial decisions. Those willing to change their offensive strategy can become winners in life’s never ending battles.
    The result of these recent price disturbances (all the bubbles bursting) is the falling value of the property that has been borrowed against. The value of the property’s income also falls. We have come from extreme over indebtedness and now find ourselves in a hole – we should stop digging.
    This is a hard lesson that our grandparents learned in the 1930’s, but sadly has been forgotten as satanic greed took over our souls. We now find ourselves caught between a recession and a depression. I call it a MESSYSESSION.
    All the corporations whose bubbles have burst must work down their inventories; since many are in the financial sector this will take time. Individuals must use their earnings to pay down debts to save their homes instead of spending money on frivolous purchases. The Rule of 72 has the deck stacked against them, unless the Usury Law is resumed. The lack of the Usury Law is quicksand for our economic recovery.
    The working down of inventories alone can be deflationary, however, the Federal Reserve has been pumping money into our supply pipeline at super speed. When an entity goes bankrupt, those debts do not go back into circulation, they go to money heaven. This is why the Fed has to keep the supply pool full and why this action should keep us out of a depression.
    Having to pay down all this debt slows down our economy and hurts our suppliers worldwide. This is why we have a world wide Messysession.
    Corporations that have borrowed from the Government will have a hard time maintaining their common stock dividends because their first priority is bond interest. Their second priority is preferred dividends. What is left over will then be distributed to common stock holders or used for debt reduction. Debt reduction means job security.
    Sooner or later the US Government will have to go on a massive borrowing campaign. This could weaken the dollar and send interest rates soaring along with the price of Gold – for a while.
    Some recessions are “V” shaped, which means stocks fall down hard and come back up quickly. Stocks tumble, but recover because there are people looking across the valley. If the recovery is like an elongated “U” or “L” one needs binoculars to see across the valley to a recovery. This could cause price to earnings ratios to shrivel, since analyst’s earnings estimates will be suspect at best. The economy can take a year or two to recover based upon how responsible Congress is. It will be years before our economy fully recovers from all the bubble bursting. What we need is a cheap new energy invention.
    The only period, since 1872, where stocks substantially outperformed bonds on a prolonged basis was the 1950s to 1960s. This was a golden era for stocks and it has taken many abuses to wind down.
    These are some of the many issues that President Obama faces on the home front. Now we shall look at some of his international problems.
    Europe is changing. It used to be that France and Germany were the major players, with Great Britain looking on. The United States has encouraged the expansion of the European Community to diminish the power of the two largest countries. Poland is emerging as an economic power and if Turkey is admitted, as they should be, they will bring new found political clout for the first time since the demise of the Ottoman Empire 90 years ago. Their inclusion could bring stabilization to the chaotic Middle East situation. Turkey has freedom of religion, a vigorous economy (17th largest), and a solid government. Their influence is growing. They also have a strategic location to insure peace long term.
    Then, there is Russia, who can throw all kinds of money around, but when it comes to signing on the dotted line – they cannot be trusted. Turning off gas supplies in mid-winter and canceling major contracts with world-renowned companies are actions that are hard to forget. Obama has pledged to focus US military power on the war in Afghanistan. The bulk of supplies must come from the north. Russia does not want a ballistic missile defense system in central Europe. It wants a halt to NATO expansion and reduced American influence in the Caucus and central Asia. They also want a broad renegotiation on non-trivial treaties that are terrible for Russia in 2009. (Anyone want to be President?)
    We must come up with a way to renew confidence for the consumer. First and foremost is the renewal of our Usury laws that were dropped because disintermediation was wrecking the banking system in the 1970s. Creating lasting jobs will not happen by just building roads. These programs must be done so that they promote or improve future growth. It is difficult to do this on a national level because there are too many fingers in the pie. Programs done on a state level are easier to control. It is more realistic to meet regional needs.
    Lowering corporate taxes when a corporation moves into intercity areas would mean better roads, and businesses to support them. Raising taxes invites tax avoidance schemes that only benefit the issuer. It also removes money from the private sector. Today, pricing power has evaporated.
    There must be global reorganization of the securities laws, most importantly the Uptick rule. Countries that do not participate should be banned from trading within the member countries. Today hedge funds and institutions have spent millions of dollars on sophisticated trading programs. This makes for an uneven playing field and has driven the small investor to the sidelines, as witnessed by declining volume on the exchanges. The large institutional investor becomes the ultimate bag-holder at the bottom of markets when they have no one to sell to.
    If a country’s Gross Domestic Product (GDP) is declining that means the average on corporate earnings will be declining also. This means fewer companies will be showing an increase in earnings and therefore there will be fewer securities that have an investment grade value. Since there are already too many mutual funds and they all cannot buy the same stocks, that game is over. I would sell your mutual funds while you can if you are over 55 years old. If they get too many orders for liquidation they have the option of delivering stock of the same value to you. That is an easy way to get rid of their losers. If you are under 55 and own a balanced fund where the income can be reinvested on a periodic basis you are in the catbird seat. Lower prices will mean more shares and 10 to 15 years from now when the market recovers you could be a wealthy person. Other low income on non paying funds should be sold. It could be 20 to 25 years just to breakeven and that is only if it is a survivor.
    First quarter earnings are going to be a disaster. I suspect this is when many will throw in the towel and give up.
    Gold should be considered a hedge – possible short term.
    Here are some moneymaking ideas. A successful portfolio can be 20% equities 50% fixed income and 30% cash.
    By equities I mean income-producing securities yielding over 5%. There are a few out there that are “stupid” cheap versus dirt-cheap. Then there are preferred stocks, many of which are 85% tax-free. Many are selling below their call price. This means if a company wants to improve its balance sheet, they can do that by calling your preferred from you by paying the call price. If they fail to pay a preferred dividend it becomes cumulative. To resume payments they must make up the back dividends first. One that falls into this category is: AMERCO Pfd A (NYSE) 20 (2-6-09) pays $2.125 which yields 9.41%. gives you a tax free yield of 8%. If they call the stock at $25 you will have a $5 gain which amounts to a 25% gain. You won’t be able to have this return with common stocks over the next several years.
    Tax free bonds were good when income tax rates were 55%-92%. The low tax rates today are beaten by preferred stock’s rates, such as the one I mentioned above. You have a ready market and real value. What you see is what you get. There was an issue on Long Island that defaulted in the depression. A default like that today would wreck havoc in the entire sector. For safety reasons, please avoid tax-free bonds.
    Since the US has to borrow around a trillion dollars or more, Government bonds could be an instant loss. For now, I would avoid these also. That leaves us with corporate bonds. Many corporate bonds have a better balance sheet than the United States. Buying bonds in the five year range is the safest place to be. As the bond gets closer to maturity the price fluctuations are at a minimum and easily salable. You are better off buying an individual bond than a fund. The fund will charge a yearly management fee as well as anything else they can get away with. Also, some funds simply dump bonds into a portfolio and walk away. There was a case where a fund dumped their holdings of an issue right at the very bottom, only to have the bonds called a few months later. Please remember that corporate bond holders have first lien on a corporation’s asset.
    I suspect that in a few months you will see a stampede out of many mutual funds and a proliferation of all types of bond funds trying to cash in on the new trend. Keep it simple- buy your own.
    I know I have thrown many ideas your way in this letter and I apologize, but I feel the times warrant such thinking. I will be available, free of charge, to anyone who would want to discuss any of these ideas at the addresses below.
    CHEERIO!!!!
    Richard C De Graff 2/10/2009
    256 Ashford Road
    RER Eastford Ct 06242
    860-522-7171 Main Office
    800-821-6665 Watts
    860-315-7413 Home/Office
    [email protected]

    This report has been prepared from original sources and data which we believe reliable but we make no representation to its accuracy or completeness. Coburn & Meredith Inc. its subsidiaries and or officers may from time to time acquire, hold, sell a position discussed in this publications, and we may act as principal for our own account or as agent for both the buyer and seller.

  • Ankara Monitors French Plans

    Ankara Monitors French Plans

    Ankara Carefully Monitors French Plans to Rejoin NATO’s Military Command

    Publication: Eurasia Daily Monitor Volume: 6 Issue: 26
    February 9, 2009
    By: Saban Kardas

    Determined to bring Paris into NATO’s military command after four decades of opting out, French President Nicholas Sarkozy is expected to announce France’s return to NATO’s military structures by April, when a NATO summit will mark the 60th anniversary of the Western alliance. Recent reports indicate that Paris secured U.S. support for the transfer of two senior command positions to the French. Nonetheless, discussions on the timing and modalities of France’s rejoining the alliance’s military structures will increase in the following weeks. Speaking at the annual Munich Security Conference, Sarkozy said that while pursuing this goal, he would not do anything that might jeopardize his country’s independence (www.euobserver.com, February 5; Reuters, February 6).

    Recent discussions on France’s return to NATO’s military structures have highlighted the intricate links between Turkish-French relations on the one hand and their implications for Turkey’s relationships with NATO and the European Union, on the other. Turkey is a full member of NATO and is negotiating accession terms for EU membership. Turkey’s EU membership process has been stalled recently, and Ankara puts a large portion of the blame on obstacles created by EU-members France and Greek Cyprus. In particular, Ankara is irked by the French and Cypriot objections to the EU’s efforts to open new negotiation chapters with Turkey (EDM, January 20).

    Turkey’s problematic relations with the EU may have negative repercussions for NATO-EU security cooperation. Paris has been pushing for strengthening the EU’s military capabilities without undermining NATO’s role in European security. For France, a greater European role in security and defense affairs would complement NATO’s collective security responsibilities. Despite the EU’s progress toward acquiring autonomous military capabilities, however, it still depends on NATO assets to carry out military missions.

    Turkey supports greater European autonomy in principle, but Ankara is troubled by its exclusion from the decision-making mechanisms of the European Security and Defense Policy (ESDP), the EU’s security arm. Being the largest non-EU contributor to the ESDP, Turkey demands greater participation of non-EU NATO allies in the European defense initiatives. Ankara supports NATO’s primacy in managing European security and objects to the development of EU-only capabilities that might undermine NATO.

    In an effort to retaliate for the Greek Cypriots’ objections to Turkish-EU cooperation, Turkey uses its position in NATO to prevent Greek Cypriot participation in EU operations utilizing NATO assets. Ankara maintains that since Cyprus does not have a security agreement with the alliance, it cannot have access to sensitive information. Sources argue that this situation “makes it difficult to work out detailed tactical arrangements between NATO and the EU. It is a potential burden on operation settings” (Hurriyet Daily News, February 2).

    Since decisions in NATO are taken unanimously, it has been suggested from time to time that Ankara could also use its position in NATO as leverage to remove obstacles in Turkish-EU negotiations, but Turkey has refrained from resorting to that option. Although Turkish diplomats carefully avoid giving the impression that Turkey might veto France’s reintegration when this issue comes on the agenda, some Turkish experts and academics call on the government to consider this option to counteract French policies against Turkish interests. Following the 2008 NATO summit, where Sarkozy announced his plans for reintegrating France into NATO’s military structures, a Turkish academic labeled a veto as a “low-risk” card and argued that “Ankara must ensure that Paris understands that rejoining France to the military wing of NATO will be possible only if France meets some of the Turkish demands. Negotiations on this issue must begin” (www.asam.org.tr, May 2).

    Given Turkey’s recent frustration with French policies, it has been speculated that Turkey might threaten a veto in NATO to bargain for a lifting of French obstacles in Turkish-EU negotiations. Some see this occasion as a new litmus test for Turkish diplomacy, because, following the Davos incident, the government is under pressure to play hard ball to protect its national interests. Opposition parties expect the government to use the veto trump effectively (Milliyet, February 7).

    Noting the eagerness of Paris to rejoin NATO, analysts argue that Prime Minister Recep Tayyip Erdogan will be caught in a dilemma as the April summit approaches. If Erdogan lets France have its way after having presented so many obstacles to Turkey, he might lose popularity at home. If Turkey uses its veto power as a bargaining chip, it might well backfire, because at a time when there is consensus on bringing France back into the organization, this move might isolate Turkey from its allies (Milliyet, February 6; www.cnnturk.com, February 6).

    The feasibility of a veto hinges, however, on whether a formal vote is needed for a French return. French diplomats and alliance officials believe that a unanimous decision is not required (Turkish Daily News, July 24; Reuters, February 6). Indeed, France is already active within NATO, and French troops serve in continuing NATO operations. A French return would largely concern French representation in the command structure.

    Before departing for the Munich Conference, Turkish Foreign Minister Ali Babacan told reporters that Turkey was still evaluating a French return to NATO. Babacan noted that Turkey would await clarification of whether a unanimous vote was necessary. Describing the situation of France as a unique case, Babacan added “the matter is more political than legal… The key concern here is for NATO to continue operating as a strong international organization. But, we will see how the French decision will be implemented… Here, the modalities of French participation are important, and we expect the French to present their modalities in the coming days” (ANKA, February 6).

    Though maintaining Turkey’s policy of ambiguity, Babacan avoided confrontational language. He gave indications that Turkey would prioritize alliance interests and go along with its NATO allies.

    Nonetheless, even if a unanimous decision might not be required, political bargaining would be needed for the distribution of command posts. Given the high premium NATO attaches to political consensus among its members, France and the United States will have to work hard to bring Turkey on board.

    https://jamestown.org/program/ankara-carefully-monitors-french-plans-to-rejoin-natos-military-command/

  • France’s white knight tarnished

    France’s white knight tarnished

    Lizzy Davies in Paris
    February 6, 2009

    ACCUSED of using his power to secure lucrative contracts with African dictators, France’s most popular politician and charismatic humanitarian activist has been forced to defend his reputation as a moral crusader.

    Bernard Kouchner, the foreign minister, is portrayed as a money-loving hypocrite whose business dealings between 2002 and 2007, while out of ministerial office, tarnish his reputation for ethical practice.

    The thrust of the allegations made in a new book, The World According To K by the investigative journalist Pierre Pean, is that Mr Kouchner profited from an uncomfortable combination of public and private sector work, billing huge sums to the regimes of Gabon and Congo.

    Capitalising on his political clout as the government-appointed head of a public health body operating in Africa, Mr Kouchner also worked as a policy consultant for two French firms that charged €4.6 million for his reports into national health insurance schemes.

    Pean does not describe the activities as illegal but claims there was a clear conflict of interests. “[There is] a distortion between the general way in which he behaves and the image that the French people have of him,” he said. “That image is of a knight in shining armour fighting for morality …”

    Mr Kouchner, the founder of Medecins Sans Frontieres and a prized recruit of President Nicolas Sarkozy, has rejected the book as a “grotesque and sickening” attack motivated by jealousy from those who resent his success, and revenge from former Socialist allies who view him as a traitor.

    In the weekly Nouvel Observateur, he denied having had direct financial dealings with President Omar Bongo of Gabon or President Sassou Nguesso of the Republic of Congo. Defending his right to work in the private sector, he insisted it stopped as soon as he took up his new job.

    Despite his characteristically vigorous denials, the allegations threaten his “whiter than white” reputation.

    Some opposition politicians urged him to set out his defence publicly. “It seems to me problematic that a minister has received money from African heads of state with debatable human rights records,” said a Socialist deputy, Arnaud Montebourg. Bernard-Henri Levy, the philosopher, criticised the “little men” who attacked Mr Kouchner.

    Source: The Sydney Morning Herald, February 6, 2009

  • Christofias: “Turkey cannot join EU until troops out – Cyprus”

    Christofias: “Turkey cannot join EU until troops out – Cyprus”

    Thu Feb 5, 2009 2:15pm GMT

    NICOSIA, Feb 5 (Reuters) – Cypriot President Demetris Christofias said on Thursday that Turkey would not be able to join the European Union as long as it kept troops stationed in northern Cyprus.

    “It’s not possible for Turkey to be accepted as a member of the union while continuing the occupation of Cyprus,” he told reporters. (Reporting by Michele Kambas; editing by Elizabeth Piper)

    Source:  Reuters, Feb 5, 2009

  • Temper tantrums

    Temper tantrums

    Temper tantrums

    Feb 5th 2009 | ANKARA
    From The Economist print edition

    A dramatic Davos walkout raises new questions about Recep Tayyip Erdogan

    WAS it premeditated? Or did Turkey’s prime minister, Recep Tayyip Erdogan, lose control? Mr Erdogan’s walkout from a debate with Israel’s president, Shimon Peres, in Davos has made him the most talked about Turkish leader since Kemal Ataturk. His audience of financiers and policy wonks was stunned. But Muslims worldwide cheered as Mr Erdogan scolded Mr Peres over Israel’s war in Gaza. “When it comes to killing, you know very well how to kill. I know well how you hit and kill children on beaches,” thundered a crimson-faced Mr Erdogan.

    The incident has led to new debate over Turkey’s strategic alliance with Israel, whether an increasingly erratic Mr Erdogan is fit to lead Turkey at all and, if so, in what direction: east or west? There is no question of Turkey walking away from NATO or the European Union, or scrapping military ties with Israel and America. Mr Erdogan’s critics say his outburst was a ploy to please voters. If so, it worked: his approval ratings have shot up. Polls suggest that 80% of Turks support Mr Erdogan’s actions. His mildly Islamist Justice and Development party will reap dividends in municipal elections on March 29th.

    Mr Erdogan’s defiance has also helped to assuage his people’s long-running feelings of humiliation and inferiority, which date back as far as the Ottoman defeat in the first world war. Many insist that Mr Erdogan’s reaction was spontaneous and utterly sincere. Turkey has assumed “moral leadership” based on Western values, opined Cengiz Candar, a liberal commentator. Mindful of the public mood, Turkey’s secular opposition leader, Deniz Baykal, grudgingly declared that his rival had done the right thing.

    Not everybody agrees, however. Mr Erdogan’s behaviour makes it less likely that Turkey can successfully mediate between Israel and Syria. His call to Barack Obama to “redefine” what terrorist means has been seen as an appeal to remove the label from Hamas. Although European and American reaction has been muted, in private officials are unhappy. “What [the Davos spat] does leave in Europe is the feeling that Mr Erdogan is unpredictable,” says a European diplomat. Mr Obama is highly unlikely now to pay Turkey an early visit.

    Mr Erdogan’s temper tantrums are not new. But they used to be reserved for his critics at home. The Davos affair, says another foreign diplomat, is further evidence of “Mr Erdogan’s conviction that the West needs Turkey more than Turkey needs it.” It is of a piece with Mr Erdogan’s threat to back out of the much-touted Nabucco pipeline to carry gas from the Caspian Sea to Europe via Turkey. In Brussels recently Mr Erdogan said that, if there were no progress on the energy chapter of Turkey’s EU accession talks then “we would of course review our position”. Meanwhile, Turkey sided with Saudi Arabia and the Vatican in opposing a UN statement suggested by the EU to call for the global decriminalisation of homosexuality.

    Mr Erdogan’s supporters argue that EU foot-dragging on Turkey’s membership bid explains why Turkey is now seeking new friends in the Middle East and beyond. Its growing regional clout is another reason why the EU should embrace Turkey. But the reverse is also true. It is because it is the sole Muslim country that is at once secular, democratic and allied with the West that Turkey commands such respect in the rest of the world. Growing numbers of Arab investors have flocked to Turkey, “because we see it as part of Europe, not the Middle East,” says an Arab banker in Istanbul.

    To retain its allure, Turkey will need to swallow its pride and make further concessions on Cyprus. The EU may suspend membership talks altogether unless Turkey meets a December 2009 deadline to open its ports to Greek-Cypriots. The hope is that Egemen Bagis, who was chosen as Turkey’s official EU negotiator in January, will remind Mr Erdogan that, at least in these talks, it is Turkey that is the supplicant not the other way round.

    Source:  Economist, Feb 5th 2009

  • Poor Richard’s Report

    Poor Richard’s Report

    Contact John Mauldin
    Print Version

    Volume 5 – Special Edition
    January 22, 2009

    The Next 100 Years
    By George Friedman

    Much of the world is focused on the next 100 days—what Obama is going to do. That’s important. But today in a special Outside the Box from my good friend George Freidman of Stratfor We will look out a bit further George is just about to release his latest book, The Next 100 Years: A Forecast for the 21st Century. (Even pre-release it’s already at #11 on Amazon’s non-fiction bestseller list!) Here’s my quick summary; and to cut to the chase, it’s just fascinating.

    What reads like a geopolitical thriller gives a thought-provoking glimpse into what the world will look like in the coming century. George’s strength is his ability to take geopolitical patterns and use them to forecast future events, sometimes with startling and counterintuitive results.

    For example, he forecasts:

    By the middle of this century, Poland and Turkey will be major international players
    Russia will be a regional power – after emerging from a second cold war
    Space-based solar power will completely change the global energy dynamic
    The border areas between the US and Mexico are going to be in play again, like 150 years ago
    Shrinking labor pools will cause countries to compete for immigrants rather than fighting to keep them out
    I confess when George first told me about these ideas, I raised an eyebrow. But after reading the book, and going through the analysis, I find myself sometimes nodding in agreement and other times not being sure what I was reading. But like all the analysis reviews I do, I pay as much attention to the methods, the logic, and the arguments as the conclusions. Do that, and what seems hard to believe all of a sudden makes sense.

    Don’t let short-term fears blind you to long term opportunities. George’s company, Stratfor, is my source for this kind of geopolitical analysis on an on-going basis. I’ve included the full introduction to the book below; and I heartily recommend that you click here for a special offer on a Stratfor Membership that includes a copy of George’s upcoming book.

    John Mauldin, Editor
    Outside the Box

    The Next 100 Years

    OVERTURE
    An Introduction to the American Age
    Imagine that you were alive in the summer of 1900, living in London, then the capital of the world. Europe ruled the Eastern Hemisphere. There was hardly a place that, if not ruled directly, was not indirectly controlled from a European capital. Europe was at peace and enjoying unprecedented prosperity. Indeed, European interdependence due to trade and investment was so great that serious people were claiming that war had become impossible—and if not impossible, would end within weeks of beginning—because global financial markets couldn’t withstand the strain. The future seemed fixed: a peaceful, prosperous Europe would rule the world.

    Imagine yourself now in the summer of 1920. Europe had been torn apart by an agonizing war. The continent was in tatters. The Austro-Hungarian, Russian, German, and Ottoman empires were gone and millions had died in a war that lasted for years. The war ended when an American army of a million men intervened—an army that came and then just as quickly left. Communism dominated Russia, but it was not clear that it could survive. Countries that had been on the periphery of European power, like the United States and Japan, suddenly emerged as great powers. But one thing was certain—the peace treaty that had been imposed on Germany guaranteed that it would not soon reemerge.

    Imagine the summer of 1940. Germany had not only reemerged but conquered France and dominated Europe. Communism had survived and the Soviet Union now was allied with Nazi Germany. Great Britain alone stood against Germany, and from the point of view of most reasonable people, the war was over. If there was not to be a thousand-year Reich, then certainly Europe’s fate had been decided for a century. Germany would dominate Europe and inherit its empire.

    Imagine now the summer of 1960. Germany had been crushed in the war, defeated less than five years later. Europe was occupied, split down the middle by the United States and the Soviet Union. The European empires were collapsing, and the United States and Soviet Union were competing over who would be their heir. The United States had the Soviet Union surrounded and, with an overwhelming arsenal of nuclear weapons, could annihilate it in hours. The United States had emerged as the global superpower. It dominated all of the world’s oceans, and with its nuclear force could dictate terms to anyone in the world. Stalemate was the best the Soviets could hope for—unless the Soviets invaded Germany and conquered Europe. That was the war everyone was preparing for. And in the back of everyone’s mind, the Maoist Chinese, seen as fanatical, were the other danger.

    Now imagine the summer of 1980. The United States had been defeated in a seven-year war—not by the Soviet Union, but by communist North Vietnam. The nation was seen, and saw itself, as being in retreat. Expelled from Vietnam, it was then expelled from Iran as well, where the oil fields, which it no longer controlled, seemed about to fall into the hands of the Soviet Union. To contain the Soviet Union, the United States had formed an alliance with Maoist China—the American president and the Chinese chairman holding an amiable meeting in Beijing. Only this alliance seemed able to contain the powerful Soviet Union, which appeared to be surging.

    Imagine now the summer of 2000. The Soviet Union had completely collapsed. China was still communist in name but had become capitalist in practice. NATO had advanced into Eastern Europe and even into the former Soviet Union. The world was prosperous and peaceful. Everyone knew that geopolitical considerations had become secondary to economic considerations, and the only problems were regional ones in basket cases like Haiti or Kosovo.

    Then came September 11, 2001, and the world turned on its head again. At a certain level, when it comes to the future, the only thing one can be sure of is that common sense will be wrong. There is no magic twenty-year cycle; there is no simplistic force governing this pattern. It is simply that the things that appear to be so permanent and dominant at any given moment in history can change with stunning rapidity. Eras come and go. In international relations, the way the world looks right now is not at all how it will look in twenty years . . . or even less. The fall of the Soviet Union was hard to imagine, and that is exactly the point. Conventional political analysis suffers from a profound failure of imagination. It imagines passing clouds to be permanent and is blind to powerful, long- term shifts taking place in full view of the world.

    If we were at the beginning of the twentieth century, it would be impossible to forecast the particular events I’ve just listed. But there are some things that could have been—and, in fact, were—forecast. For example, it was obvious that Germany, having united in 1871, was a major power in an insecure position (trapped between Russia and France) and wanted to redefine the European and global systems. Most of the conflicts in the first half of the twentieth century were about Germany’s status in Europe. While the times and places of wars couldn’t be forecast, the probability that there would be a war could be and was forecast by many Europeans.

    The harder part of this equation would be forecasting that the wars would be so devastating and that after the first and second world wars were over, Europe would lose its empire. But there were those, particularly after the invention of dynamite, who predicted that war would now be catastrophic. If the forecasting on technology had been combined with the forecasting on geopolitics, the shattering of Europe might well have been predicted. Certainly the rise of the United States and Russia was predicted in the nineteenth century. Both Alexis de Tocqueville and Friedrich Nietzsche forecast the preeminence of these two countries. So, standing at the beginning of the twentieth century, it would have been possible to forecast its general outlines, with discipline and some luck.

    The Twenty-First Century
    Standing at the beginning of the twenty-first century, we need to identify the single pivotal event for this century, the equivalent of German unification for the twentieth century. After the debris of the European empire is cleared away, as well as what’s left of the Soviet Union, one power remains standing and overwhelmingly powerful. That power is the United States. Certainly, as is usually the case, the United States currently appears to be making a mess of things around the world. But it’s important not to be confused by the passing chaos. The United States is economically, militarily, and politically the most powerful country in the world, and there is no real challenger to that power. Like the Spanish-American War, a hundred years from now the war between the United States and the radical Islamists will be little remembered regardless of the prevailing sentiment of this time.

    Ever since the Civil War, the United States has been on an extraordinary economic surge. It has turned from a marginal developing nation into an economy bigger than the next four countries combined. Militarily, it has gone from being an insignificant force to dominating the globe. Politically, the United States touches virtually everything, sometimes intentionally and sometimes simply because of its presence. As you read this book, it will seem that it is America- centric, written from an American point of view. That may be true, but the argument I’m making is that the world does, in fact, pivot around the United States.

    This is not only due to American power. It also has to do with a fundamental shift in the way the world works. For the past five hundred years, Europe was the center of the international system, its empires creating a single global system for the first time in human history. The main highway to Europe was the North Atlantic. Whoever controlled the North Atlantic controlled access to Europe—and Europe’s access to the world. The basic geography of global politics was locked into place.

    Then, in the early 1980s, something remarkable happened. For the first time in history, transpacific trade equaled transatlantic trade. With Europe reduced to a collection of secondary powers after World War II, and the shift in trade patterns, the North Atlantic was no longer the single key to anything. Now whatever country controlled both the North Atlantic and the Pacific could control, if it wished, the world’s trading system, and therefore the global economy. In the twenty-first century, any nation located on both oceans has a tremendous advantage.

    Given the cost of building naval power and the huge cost of deploying it around the world, the power native to both oceans became the preeminent actor in the international system for the same reason that Britain dominated the nineteenth century: it lived on the sea it had to control. In this way, North America has replaced Europe as the center of gravity in the world, and whoever dominates North America is virtually assured of being the dominant global power. For the twenty-first century at least, that will be the United States.

    The inherent power of the United States coupled with its geographic position makes the United States the pivotal actor of the twenty-first century. That certainly doesn’t make it loved. On the contrary, its power makes it feared. The history of the twenty-first century, therefore, particularly the first half, will revolve around two opposing struggles. One will be secondary powers forming coalitions to try to contain and control the United States. The second will be the United States acting preemptively to prevent an effective coalition from forming.

    If we view the beginning of the twenty-first century as the dawn of the American Age (superseding the European Age), we see that it began with a group of Muslims seeking to re- create the Caliphate—the great Islamic empire that once ran from the Atlantic to the Pacific. Inevitably, they had to strike at the United States in an attempt to draw the world’s primary power into war, trying to demonstrate its weakness in order to trigger an Islamic uprising. The United States responded by invading the Islamic world. But its goal wasn’t victory. It wasn’t even clear what victory would mean. Its goal was simply to disrupt the Islamic world and set it against itself, so that an Islamic empire could not emerge.

    The United States doesn’t need to win wars. It needs to simply disrupt things so the other side can’t build up sufficient strength to challenge it. On one level, the twenty-first century will see a series of confrontations involving lesser powers trying to build coalitions to control American behavior and the United States’ mounting military operations to disrupt them. The twenty-first century will see even more war than the twentieth century, but the wars will be much less catastrophic, because of both technological changes and the nature of the geopolitical challenge.

    As we’ve seen, the changes that lead to the next era are always shockingly unexpected, and the first twenty years of this new century will be no exception. The U.S.–Islamist war is already ending and the next conflict is in sight. Russia is re-creating its old sphere of influence, and that sphere of influence will inevitably challenge the United States. The Russians will be moving westward on the great northern European plain. As Russia reconstructs its power, it will encounter the U.S.-dominated NATO in the three Baltic countries—Estonia, Latvia, and Lithuania—as well as in Poland. There will be other points of friction in the early twenty-first century, but this new cold war will supply the flash points after the U.S.–Islamist war dies down.

    The Russians can’t avoid trying to reassert power, and the United States can’t avoid trying to resist. But in the end Russia can’t win. Its deep internal problems, massively declining population, and poor infrastructure ultimately make Russia’s long- term survival prospects bleak. And the second cold war, less frightening and much less global than the first, will end as the first did, with the collapse of Russia.

    There are many who predict that China is the next challenger to the United States, not Russia. I don’t agree with that view for three reasons. First, when you look at a map of China closely, you see that it is really a very isolated country physically. With Siberia in the north, the Himalayas and jungles to the south, and most of China’s population in the eastern part of the country, the Chinese aren’t going to easily expand. Second, China has not been a major naval power for centuries, and building a navy requires a long time not only to build ships but to create well-trained and experienced sailors.

    Third, there is a deeper reason for not worrying about China. China is inherently unstable. Whenever it opens its borders to the outside world, the coastal region becomes prosperous, but the vast majority of Chinese in the interior remain impoverished. This leads to tension, conflict, and instability. It also leads to economic decisions made for political reasons, resulting in inefficiency and corruption. This is not the first time that China has opened itself to foreign trade, and it will not be the last time that it becomes unstable as a result. Nor will it be the last time that a figure like Mao emerges to close the country off from the outside, equalize the wealth—or poverty—and begin the cycle anew. There are some who believe that the trends of the last thirty years will continue indefinitely. I believe the Chinese cycle will move to its next and inevitable phase in the coming decade. Far from being a challenger, China is a country the United States will be trying to bolster and hold together as a counterweight to the Russians. Current Chinese economic dynamism does not translate into long-term success.

    In the middle of the century, other powers will emerge, countries that aren’t thought of as great powers today, but that I expect will become more powerful and assertive over the next few decades. Three stand out in particular. The first is Japan. It’s the second- largest economy in the world and the most vulnerable, being highly dependent on the importation of raw materials, since it has almost none of its own. With a history of militarism, Japan will not remain the marginal pacifistic power it has been. It cannot. Its own deep population problems and abhorrence of large- scale immigration will force it to look for new workers in other countries. Japan’s vulnerabilities, which I’ve written about in the past and which the Japanese have managed better than I’ve expected up until this point, in the end will force a shift in policy.

    Then there is Turkey, currently the seventeenth-largest economy in the world. Historically, when a major Islamic empire has emerged, it has been dominated by the Turks. The Ottomans collapsed at the end of World War I, leaving modern Turkey in its wake. But Turkey is a stable platform in the midst of chaos. The Balkans, the Caucasus, and the Arab world to the south are all unstable. As Turkey’s power grows—and its economy and military are already the most powerful in the region—so will Turkish influence.

    Finally there is Poland. Poland hasn’t been a great power since the sixteenth century. But it once was—and, I think, will be again. Two factors make this possible. First will be the decline of Germany. Its economy is large and still growing, but it has lost the dynamism it has had for two centuries. In addition, its population is going to fall dramatically in the next fifty years, further undermining its economic power. Second, as the Russians press on the Poles from the east, the Germans won’t have an appetite for a third war with Russia. The United States, however, will back Poland, providing it with massive economic and technical support. Wars—when your country isn’t destroyed—stimulate economic growth, and Poland will become the leading power in a coalition of states facing the Russians.

    Japan, Turkey, and Poland will each be facing a United States even more confident than it was after the second fall of the Soviet Union. That will be an explosive situation. As we will see during the course of this book, the relationships among these four countries will greatly affect the twenty-first century, leading, ultimately, to the next global war. This war will be fought differently from any in history—with weapons that are today in the realm of science fiction. But as I will try to outline, this mid-twenty-first century conflict will grow out of the dynamic forces born in the early part of the new century.

    Tremendous technical advances will come out of this war, as they did out of World War II, and one of them will be especially critical. All sides will be looking for new forms of energy to substitute for hydrocarbons, for many obvious reasons. Solar power is theoretically the most efficient energy source on earth, but solar power requires massive arrays of receivers. Those receivers take up a lot of space on the earth’s surface and have many negative environmental impacts—not to mention being subject to the disruptive cycles of night and day. During the coming global war, however, concepts developed prior to the war for space- based electrical generation, beamed to earth in the form of microwave radiation, will be rapidly translated from prototype to reality. Getting a free ride on the back of military space launch capability, the new energy source will be underwritten in much the same way as the Internet or the railroads were, by government support. And that will kick off a massive economic boom.

    But underlying all of this will be the single most important fact of the twenty-first century: the end of the population explosion. By 2050, advanced industrial countries will be losing population at a dramatic rate. By 2100, even the most underdeveloped countries will have reached birthrates that will stabilize their populations. The entire global system has been built since 1750 on the expectation of continually expanding populations. More workers, more consumers, more soldiers—this was always the expectation. In the twenty-first century, however, that will cease to be true. The entire system of production will shift. The shift will force the world into a greater dependence on technology—particularly robots that will substitute for human labor, and intensified genetic research (not so much for the purpose of extending life but to make people productive longer).

    What will be the more immediate result of a shrinking world population? Quite simply, in the first half of the century, the population bust will create a major labor shortage in advanced industrial countries. Today, developed countries see the problem as keeping immigrants out. Later in the first half of the twenty-first century, the problem will be persuading them to come. Countries will go so far as to pay people to move there. This will include the United States, which will be competing for increasingly scarce immigrants and will be doing everything it can to induce Mexicans to come to the United States—an ironic but inevitable shift.

    These changes will lead to the final crisis of the twenty-first century. Mexico currently is the fifteenth-largest economy in the world. As the Europeans slip out, the Mexicans, like the Turks, will rise in the rankings until by the late twenty-first century they will be one of the major economic powers in the world. During the great migration north encouraged by the United States, the population balance in the old Mexican Cession (that is, the areas of the United States taken from Mexico in the nineteenth century) will shift dramatically until much of the region is predominantly Mexican.

    The social reality will be viewed by the Mexican government simply as rectification of historical defeats. By 2080 I expect there to be a serious confrontation between the United States and an increasingly powerful and assertive Mexico. That confrontation may well have unforeseen consequences for the United States, and will likely not end by 2100.

    Much of what I’ve said here may seem pretty hard to fathom. The idea that the twenty-first century will culminate in a confrontation between Mexico and the United States is certainly hard to imagine in 2009, as is a powerful Turkey or Poland. But go back to the beginning of this chapter, when I described how the world looked at twenty-year intervals during the twentieth century, and you can see what I’m driving at: common sense is the one thing that will certainly be wrong. Obviously, the more granular the description, the less reliable it gets. It is impossible to forecast precise details of a coming century—apart from the fact that I’ll be long dead by then and won’t know what mistakes I made.

    But it’s my contention that it is indeed possible to see the broad outlines of what is going to happen, and to try to give it some definition, however speculative that definition might be. That’s what this book is about.

    Forecasting a Hundred Years Ahead
    Before I delve into any details of global wars, population trends, or technological shifts, it is important that I address my method—that is, precisely how I can forecast what I do. I don’t intend to be taken seriously on the details of the war in 2050 that I forecast. But I do want to be taken seriously in terms of how wars will be fought then, about the centrality of American power, about the likelihood of other countries challenging that power, and about some of the countries I think will—and won’t—challenge that power.

    And doing that takes some justification. The idea of a U.S.–Mexican confrontation and even war will leave most reasonable people dubious, but I would like to demonstrate why and how these assertions can be made. One point I’ve already made is that reasonable people are incapable of anticipating the future. The old New Left slogan “Be Practical, Demand the Impossible” needs to be changed: “Be Practical, Expect the Impossible.” This idea is at the heart of my method. From another, more substantial perspective, this is called geopolitics.

    Geopolitics is not simply a pretentious way of saying “international relations.” It is a method for thinking about the world and forecasting what will happen down the road. Economists talk about an invisible hand, in which the self-interested, short-term activities of people lead to what Adam Smith called “the wealth of nations.” Geopolitics applies the concept of the invisible hand to the behavior of nations and other international actors. The pursuit of short-term self-interest by nations and by their leaders leads, if not to the wealth of nations, then at least to predictable behavior and, therefore, the ability to forecast the shape of the future international system.

    Geopolitics and economics both assume that the players are rational, at least in the sense of knowing their own short-term self-interest. As rational actors, reality provides them with limited choices. It is assumed that, on the whole, people and nations will pursue their self-interest, if not flawlessly, then at least not randomly. Think of a chess game. On the surface, it appears that each player has twenty potential opening moves. In fact, there are many fewer because most of these moves are so bad that they quickly lead to defeat. The better you are at chess, the more clearly you see your options, and the fewer moves there actually are available. The better the player, the more predictable the moves. The grandmaster plays with absolute predictable precision—until that one brilliant, unexpected stroke.

    Nations behave the same way. The millions or hundreds of millions of people who make up a nation are constrained by reality. They generate leaders who would not become leaders if they were irrational. Climbing to the top of millions of people is not something fools often do. Leaders understand their menu of next moves and execute them, if not flawlessly, then at least pretty well. An occasional master will come along with a stunningly unexpected and successful move, but for the most part, the act of governance is simply executing the necessary and logical next step. When politicians run a country’s foreign policy, they operate the same way. If a leader dies and is replaced, another emerges and more likely than not continues what the first one was doing.

    I am not arguing that political leaders are geniuses, scholars, or even gentlemen and ladies. Simply, political leaders know how to be leaders or they wouldn’t have emerged as such. It is the delight of all societies to belittle their political leaders, and leaders surely do make mistakes. But the mistakes they make, when carefully examined, are rarely stupid. More likely, mistakes are forced on them by circumstance. We would all like to believe that we— or our favorite candidate—would never have acted so stupidly. It is rarely true. Geopolitics therefore does not take the individual leader very seriously, any more than economics takes the individual businessman too seriously. Both are players who know how to manage a process but are not free to break the very rigid rules of their professions.

    Politicians are therefore rarely free actors. Their actions are determined by circumstances, and public policy is a response to reality. Within narrow margins, political decisions can matter. But the most brilliant leader of Iceland will never turn it into a world power, while the stupidest leader of Rome at its height could not undermine Rome’s fundamental power. Geopolitics is not about the right and wrong of things, it is not about the virtues or vices of politicians, and it is not about foreign policy debates. Geopolitics is about broad impersonal forces that constrain nations and human beings and compel them to act in certain ways.

    The key to understanding economics is accepting that there are always unintended consequences. Actions people take for their own good reasons have results they don’t envision or intend. The same is true with geopolitics. It is doubtful that the village of Rome, when it started its expansion in the seventh century BC, had a master plan for conquering the Mediterranean world five hundred years later. But the first action its inhabitants took against neighboring villages set in motion a process that was both constrained by reality and filled with unintended consequences. Rome wasn’t planned, and neither did it just happen.

    Geopolitical forecasting, therefore, doesn’t assume that everything is predetermined. It does mean that what people think they are doing, what they hope to achieve, and what the final outcome is are not the same things. Nations and politicians pursue their immediate ends, as constrained by reality as a grandmaster is constrained by the chessboard, the pieces, and the rules. Sometimes they increase the power of the nation. Sometimes they lead the nation to catastrophe. It is rare that the final outcome will be what they initially intended to achieve.

    Geopolitics assumes two things. First, it assumes that humans organize themselves into units larger than families, and that by doing this, they must engage in politics. It also assumes that humans have a natural loyalty to the things they were born into, the people and the places. Loyalty to a tribe, a city, or a nation is natural to people. In our time, national identity matters a great deal. Geopolitics teaches that the relationship between these nations is a vital dimension of human life, and that means that war is ubiquitous. Second, geopolitics assumes that the character of a nation is determined to a great extent by geography, as is the relationship between nations. We use the term geography broadly. It includes the physical characteristics of a location, but it goes beyond that to look at the effects of a place on individuals and communities. In antiquity, the difference between Sparta and Athens was the difference between a landlocked city and a maritime empire. Athens was wealthy and cosmopolitan, while Sparta was poor, provincial, and very tough. A Spartan was very different from an Athenian in both culture and politics.

    If you understand those assumptions, then it is possible to think about large numbers of human beings, linked together through natural human bonds, constrained by geography, acting in certain ways. The United States is the United States and therefore must behave in a certain way. The same goes for Japan or Turkey or Mexico. When you drill down and see the forces that are shaping nations, you can see that the menu from which they choose is limited.

    The twenty-first century will be like all other centuries. There will be wars, there will be poverty, there will be triumphs and defeats. There will be tragedy and good luck. People will go to work, make money, have children, fall in love, and come to hate. That is the one thing that is not cyclical. It is the permanent human condition. But the twenty-first century will be extraordinary in two senses: it will be the beginning of a new age, and it will see a new global power astride the world. That doesn’t happen very often. We are now in an America-centric age. To understand this age, we must understand the United States, not only because it is so powerful but because its culture will permeate the world and define it. Just as French culture and British culture were definitive during their times of power, so American culture, as young and barbaric as it is, will define the way the world thinks and lives. So studying the twenty-first century means studying the United States.

    If there were only one argument I could make about the twenty-first century, it would be that the European Age has ended and that the North American Age has begun, and that North America will be dominated by the United States for the next hundred years. The events of the twenty-first century will pivot around the United States. That doesn’t guarantee that the United States is necessarily a just or moral regime. It certainly does not mean that America has yet developed a mature civilization. It does mean that in many ways the history of the United States will be the history of the twenty-first century.

    John F. Mauldin
    [email protected]

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