FOR A FEW DOLLARS MORE – PART ONE

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Posted on 29th September 2012 by Administrator in Economy |Politics |Social Issues

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Where life had no value, death, sometimes, had its price. That is why the bounty killers appeared. - For a Few Dollars More

 

“Tell me, isn’t a sheriff supposed to be courageous, loyal and, above all, honest?” - Man with No Name – For a Few Dollars More

Whenever I get an idea for an article I plan to keep it short and sweet. But it never seems to work out that way. Once I start typing, the articles tend to grow exponentially. It happened again with my attempt to make sense of how the United States of America managed to screw our finances up so badly, that an epic collapse is within view to people with their eyes open to facts and the truth. You don’t end up in the predicament we find ourselves in today due to a couple minor mistakes over a short time frame. It took thousands of horrible choices, colossal doses of delusion, a heaping of stupidity, and a mountain of denial over decades to put us on the brink of economic collapse. An unholy amalgamation of demographics, fiat currency, debt, taxes, power and greed have led us to this point. Next we experience collapse, revolution and ultimately, retribution.

Since I’ve identified four major rationales for our impending doom, I’ve decided to write a four part series that can be read in small doses, rather than one enormous article. I don’t want anyone to miss tonight’s episode of Dancing With the Stars, get distracted from the Royal Wedding preparations, or skip the best reality TV show ever – Ben Bernanke’s press conference, while reading an 8,000 word article about the end of America. The four part series will have a Clint Eastwood theme. For a Few Dollars More will address the Baby Boomer impact on America’s decline. A Fistful of Dollars will examine how the creation of the Federal Reserve and the income tax in 1913 set us on a path to ruin. Outlaw Josey Wales will scrutinize the looting of America by a small group of powerful, connected, super rich men lurking in the shadows, but pulling the strings on our puppet politicians. Lastly, Unforgiven  will detail the impending collapse of our economic system and the retribution that will be handed out to the guilty.

Over the last few weeks there seems to be consensus among many financial bloggers, whose credibility is far more trustworthy than the corporate mainstream media, that the country is teetering on the verge of economic collapse due to the complete capture of the government, financial, regulatory, and media by a small group of oligarchs. They have also been described as the super rich, plutarchs, ruling elite, and scum sucking leeches. The bloggers that I have the utmost respect for, including Jesse, Charles Hugh Smith, Mike Shedlock, Yves Smith and Gonzalo Lira have all come to the logical conclusion the horrific economic situation of the country is a direct result of the greed, corruption, fraud, and plundering by a powerful connected group of rich financiers operating without fear of being brought to justice by the authorities.

While pondering the ruminations of these dedicated truth tellers, I was reminded of the Clint Eastwood Spaghetti Western For a Few Dollars More. The quotes above are representative of living in the USA today. There are supposed to be courageous, loyal and honest sheriffs that protect the citizens from crime, corruption and evil doers. But, just as we saw in the Old West of Clint Eastwood movies, the sheriffs are always corrupt and bought off by the evil cattle barons. In a world where life has no value and you can’t rely on law enforcement to protect your interests, the citizens eventually will need to turn to bounty hunters to take care of the bad guys. The bounty hunters of truth reside on the internet. They reside at Zero Hedge, Jesse’s Café Americain, Of Two Minds, Mish, Chris Martenson, and dozens of other anarchist websites. When you can’t trust your government, your bankers, your church, your media, or mega-corporate CEOs, you need to seek the truth where it can be found. The insightful bloggers who courageously print the truth on a daily basis have unanimously concluded that a small band of powerful elite have accumulated undue influence and control over this country, having brought it to the verge of economic collapse. How did this happen? Who is responsible? Why were they permitted to gain this power?

Boomers Come of Age

“If those in charge of our society – politicians, corporate executives, and owners of press and television – can dominate our ideas, they will be secure in their power. They will not need soldiers patrolling the streets. We will control ourselves.” – Howard Zinn

Whenever I direct any blame for our economic woes towards the Baby Boom generation they react as expected. They blame the GI Generation for creating the welfare state. They declare that Generation X and the Millenials are just as greedy and self centered as the Boomers. Boomers are great at blaming, ridiculing and acting pompously, while taking no responsibility for their actions and more importantly their inaction. This generation cannot avoid their responsibility for the state of affairs. They like to take credit for their stand against the Vietnam War and their protests against the man during the 1960s. They don’t like to take credit for turning into materialistic, greedy, selfish, short-term focused bastards. When a generation of 76 million people decides to go in a particular direction, the country will go in that direction. While blaming FDR and the GIs who stormed the beaches of Normandy for creating the unfunded Social Security and Medicare liabilities, the Boomers have been voting since the mid-1960s and have been in control of corporate America and the levers of government since the early 1980s.

The U.S. Congress is dominated by Baby Boomers today and has been dominated by this generation since the 1990s. The Senate has 60 Boomers out of 100, while the House of Representatives has 254 Boomers out of 435 members. Boomers occupied the White House from 1992 through 2008. They have had the political power and control of the agenda for two decades and have failed miserably. Rather than do what was best for the country for the long-term, they took the expedient, easy, vote getting route. Promise more than you could ever deliver and let future generations worry about the consequences. Not one true noble statesman has arisen from this generation of myopic, self centered “Me Generation” political hacks. Even as the country nears the precipice, they continue to address the great issues of the day with talking points supplied by other Baby Boomer PR maggots from Park Avenue. These weasels care not for the country, but worry only about poll numbers and the next election cycle. An apathetic public, dominated by the Baby Boom generation, has the attention span of a gnat. As long as they can make the lease payment on their Escalade, use one of their 15 credit cards at the Mall, be entertained by 600 cable TV stations, play with the latest iSomething, live in their McMansion for two years without making a mortgage payment and consume massive quantities of fast food, then any thoughts of future generations or civic duty are unnecessary. Live for today has been the rallying cry for the Boomer generation. Pot was their drug during the 1960s. Debt has been their drug since 1980.

The drug (debt) dealer for the Baby Boom generation has been the Wall Street mega-banks, coincidentally, run by Boomers. The entire corrupt financial industry is being run by Boomers. The CEOs, CFOs, and the thousands of Harvard MBA VPs that created the fraudulent derivative scheme to bilk billions from clueless municipalities, pension funds and American taxpayers are all Boomers. It is no coincidence that the great debt delusion began in the early 1980’s. Jim Kunstler captured the essence of Boomer transformation:

“The Baby Boomers came back from the land, clipped their pony tails, discovered venture capital, real estate investment trusts, securitization of “consumer” debt, and the Hamptons. Greed was good.”

The Boomer CEO hall of scam has been built on the brilliance and financial acumen of Lloyd (god’s work) Blankfein, Charlie (keep dancing) Prince, Jamie (friend of Obama) Dimon, and the king of the Boomers, Hank (the system is sound) Paulson. These mainstays of crony capitalism led the Boomer charge of greed, greed and more greed. The Baby Boomer generation has been the proverbial pig in a python working its way through the decades as presented below. By 1985, Boomers had entered the work force in full force with the entire generation between the ages of 25 and 42. It will be a great day when the python craps this pig of a generation out the other end.

It is not a coincidence the National Debt growth has far outstripped GDP growth since 1980. Boomers had been spoiled their whole lives and felt they deserved the goodies today while passing the bill to future generations. They voted for politicians who promised them more benefits, more programs, more subsidies, more tax breaks, more military adventures, and more pleasure. And this was “paid for” with more debt. Thirty five years of government debt declining as a percentage of GDP was reversed over the next thirty years starting in 1980, pushing it past the 90% tipping point in the last year. The country is over-indebted to the tune of $9 trillion on a current basis and $100 trillion on a long term accrual basis.

There is no better picture of Boomer decadence and myopia than an historical view of the national savings rate. The parents of the Boomers understood the meaning of sacrifice and investing in the future of the country. During World War II they bought US War Bonds to support the cause. From 1950 through 1985, the savings rate consistently ranged between 7% and 12%. Americans had this odd notion that if you saved more than you spent, you actually got ahead in life. Excess savings were used to invest in new plants and equipment that were used to produce goods and employ more Americans. By 1985, the Boomers considered these notions as quaint and old fashioned. The savings rate methodically declined until it went negative in 2006, just prior to the worldwide financial conflagration. Our inspirational Boomer president George (Mission Accomplished) Bush while waging two wars of choice, asked for the ultimate sacrifice from the Boomers. He solemnly urged them to buy a GM SUV with $0 down and 0% interest for 7 years, so we could defeat the terrorists. The Boomers who ran GMAC were more than happy to make loans to people with no income so they could “purchase” a $40,000 ostentatious gas guzzling hog. They were doing their patriotic duty for the good of the nation. It brings a tear to my eye just thinking about it.

The Boomers not only heeded George’s call, but they did him proud by buying 8,000 sq ft McMansions with $0 down and negative amortization ARMs. Luckily, the executives at the mortgage origination sweatshops were Boomers. They found no good reason to verify income or assets before loaning someone $600,000, because they knew their fellow Boomers at the rating agencies would rate the bundles of these toxic shit loans as AAA so the Boomers on Wall Street could sell them to greater fools. GMAC’s exemplary subprime mortgage arm – Ditech, did a bang up job getting migrant Mexican workers into $450,000 homes in California’s inland empire. As the tsunami of bad debt swept toward shore, delusional Boomers across the land borrowed $500 billion against the inflated value of their McMansions and installed granite counter tops, stainless steel appliances, home theatres, elegant patios, Olympic sized pools, and with the excess home equity, leased a BMW or two. The first devastating tsunami wave hit in 2008 and wiped out billions in faux Boomer wealth. Instead of learning a brutal lesson and reverting back to saving and frugality, the “never say sacrifice” Boomers ventured out to where the waves had subsided looking for more trinkets and treasures.

Tsunami Warning by Mobile Phone

The next tsunami wave is on its way. The delusional Boomers will be surprised again.

The Boomer persona has been formed over the last five decades and the country will deal with the consequences for decades to come. The clean cut Beaver Cleaver children of the 1950s turned into the pot smoking Dobie Gillis of the 1960’s, then into the slimy Gordon Gekkos of the 1980s and ultimately into the eternal wealth seeking Gollums of today.

 

  

This Boomer debt orgy over the last thirty years would have made Caligula blush. Of course, none of this could have happened without the Creature from Jekyll Island. I will address this aspect of our fate in Fistful of Dollars – Part Two.

Now for the righteous indignation from the Boomers that think I have unfairly lumped them all together as one. Their reactions are predictable. Even though they have had the means, the power and the time to reverse the course of USS Titanic, they plowed full steam ahead into the abyss. The GI Generation is dead. Generation X doesn’t hold the reins of power. The Boomer generation needs to look in the mirror to recognize who is to blame.  I’m sure there are a few good Boomers out there somewhere, but as a generation they have failed this country and our unborn generations miserably.

GENERATION SCREWED

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Posted on 22nd July 2012 by Administrator in Economy |Politics |Social Issues

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Neil Howe with another thought provoking post. He posted this on the same day that a Millenial named James Holmes committed one of the most horrific mass murders in history. Howe’s description of Millenial beliefs and hopes fits perfectly with my thesis about why Holmes snapped. Millenials have very traditional views on success and the American Dream. They believe education will lead to a good job, which will lead to a good income and a nice house in the burbs. Well reality sucks. Howe doesn’t address the current state of affairs, but shifts the discussion to the 2020s when Millenials may get the chance to succeed. That doesn’t cut it in my book. How do the Millenials get through the next ten or fifteen years with staggering student loan debt, lack of good jobs, miniscule income and no chance to buy a house? What does this do to their beliefs and minds? We’ve seen what it did to James Holmes. How many more Millenials will snap?

I was happy to find out that my Generation is actually the most screwed. But that’s alright, we expected it. Gen X relishes being crapped on. We don’t expect much and our expectations keep getting met.

Howe seems to have his own cognitive dissonance. His own books reveal clearly that Fourth Turnings are always violent and bloody, but he doesn’t seem to want to go there. Even when I met him, he didn’t want to talk about that aspect of the current Fourth Turning. I believe the levels of getting screwed that are happening in our society will lead to violence, social unrest and civil war in this country. But I’m Gen X and always expect the worst.

 

Generation Screwed and Unscrewed

Are Millennials the Screwed Generation?” asks Joel Kotkin in Newsweek.  A professor of urban studies and an astute observer of social trends, Kotkin answers his own question in the affirmative.

He describes a gauntlet of economic challenges facing today’s under-30 Americans that are, I think, pretty well known to readers of this blog.  Some of the adverse trends he cites are mostly of recent (post-2008) origin: High unemployment, falling real median personal and household income, falling median household net worth, a sharply rising share who are living with their parents, a falling share who own their own homes, and (symptomatically) a sharp decline in birthrates by younger moms.

Yet other trends prejudicial to youth, most of which he mentions, have been underway for much longer: a declining national saving rate; rising fiscal deficits; college tuitions rising faster than family incomes; a widening spread between the relative wealth and income of older versus young households; and the steady rise in the share of public spending that goes to the entitled old (pensions, health care)—versus a declining share that goes to future-oriented investment (infrastructure, research, education).

Sounds depressing, I know.  But the reason I emphasize how long many of these trends have been at work is to cast a bit of doubt on whether Millennials are really as screwed as all that.  Keep in mind that back in the early 1980s, many economists and policymakers commented on the “declining fortunes” of late-wave Boomers who came of age during the energy crises and stagflation.  At the time, experts thought that demographic size was the problem: Numbers-driven competition among young workers was depressing Boomer incomes.

Then came the early 1990s, when economists discovered that Gen-Xers–often, at that time, called “Busters”–were even more screwed than Boomers.  (Since there were relatively few of these Busters, the demographic explanation was quietly dropped.)  From the very beginning, a “reality bites” fatalism about diminished economic possibilities emerged as a cornerstone this generation’s very self-image.  Over the next twenty years, as first-wave Gen-Xers moved into their 30s and then their 40s, evidence of “living-standard decline” in their age brackets (despite two-income households and working around the clock) has steadily mounted.

So is there still a good case for calling Millennials yet more “screwed” than these two older generations?  I suppose one could argue that Millennials are uniquely penalized because the adverse trends cited above—savings decline, young-old divide, fiscal bias, etc.—are more advanced and pronounced today than when Xers or Boomers were young.  One could also point to the extreme severity of the recent recession’s impact on youth—for example, the highest unemployment rate over the most months for young adults than during any downturn since the Great Depression.  We know from abundant economic research, starting with Glen Elder’s great book (Children of the Great Depression) that extended unemployment early in life has an impact on future income that lasts long into a person’s career.

On the other hand, of course, one would have to note the even harsher impact of the Great Recession on Gen-Xers and late-wave Boomers (households today age 30 to 60), as I pointed out in my earlier blog post.  And who hurts most during a great famine—the guy who thinks he might someday have a home and kids, or they guy who actually has a home and kids?

One would also have to weigh in the balance certain collective advantages Millennials have enjoyed early in life that their elders did not.  These include arriving as newborns in an era when mothers were more likely to say their newborn was “wanted” and growing up in an era when parents and families (if not always government) spent more time with them, more money on them, spurred them to achieve, and protected them more from harm.  Today, as a result, Millennials have become a generation of youth who commit less crime, cooperate more with each other, take fewer personal risks, and get along much better with their parents.  They are also on track to have the highest educational attainment ever (following college completion rates that actually backtracked for late-wave Boomers and early-wave Gen-Xers).

What’s more, most Millennials already know that history favors them.  Interesting factoid: When asked if being a young person is harder today than it was when your parents were kids, a growing majority of young people since the late 1990s say no, it’s actually easier being a kid today—after decades of polls (in the ‘70s, ‘80s, and early ‘90s) that leaned the other way, with Boomers and Xers bemoaning, year after year, how much harder being a kid is for them.

Kotkin asserts that this generation still believes in a very conventional definition of life success—most aspiring to a stable career and to owning a home in the suburbs.  I agree.  The data I’ve seen point in the same direction.  My favorite recent survey on this topic is the 2011 MetLife Study of the American Dream, which shows that Millennials are significantly more likely than Xers or Boomers to say that a college degree, acquiring wealth, owning a home, and (yes!) even marriage is “essential” to realizing the American Dream.  Most Millennials have a fairly concrete idea of what they want in life, together with benchmarks for getting there, and thus far most surveys (admittedly, not the depressing Rutgers survey cited by Kotkin) indicate that they remain confident that they will someday get there.

But to me, the most persuasive argument for not regarding Millennials as America’s most “screwed” generation is simply this: They are still young.  Even if the economy continues to deteriorate, a steady recovery that gets underway by the early 2020s will still save the future for most of them.  At roughly age 20 to 40, in this case, most Millennials will still be able to launch successful careers in an expanding economy.  Moreover, they will be able to buy homes at record-low prices and buy stock portfolios at record-low P/E ratios.  Which means, by the time they fully occupy midlife in the late 2040s (at roughly age 45 to 65), they may be doing far better at that time, relative to other generations, than people that age are doing today.

So who really is the most screwed generation?  When it comes to aggregate economic security and upward mobility, I think the most screwed generation already know who they are: Generation X.  Consider the scenario described above.  More chaos followed by a steady recovery starting a decade from now would come too late for most Xers—who by then (their first-wavers hitting their early 60s and thinking about retirement) may be looking at senior benefits programs whose generosity has just been cut way back in the name of fiscal austerity and renewed economic growth.  Any Xer protest is likely to be weak and ineffectual.  Most Boomers will be grandfathered, and most of the public’s attention will be focused on saving America’s future for the Millennials.

As Bill and I forecast twenty years ago back in 13th-Gen (I’ve changed the “13ers” here to “Gen-Xers”):

Reaching midlife, the Gen-Xers’ economic fears will be confirmed: They will become the only generation born this century (the first since the Gilded) to suffer a one-generation backstep in living standards.  Compared to their own parents at the same age, the Xers’ poverty rate will be higher, their rate of homeownership lower, their pension and healthcare benefits skimpier.  They will not match the Boomers’ inflation-adjusted levels of disposable income or wealth, at the same age.  Gen-Xers will also experience a much wider distribution of income and wealth than today’s older generations, with startling proportions either falling into destitution or shooting from rags to riches…  Finding their youthful dreams broken on the shoals of market-place reality, Xers will internalize their disappointment.  Around the year 2020, accumulated “hard knocks” will give midlife Xers much of the same gritty determination about life that they gave the midlife Lost during the Great Depression or the Gilded during Reconstruction.

Twenty years later, I think this prediction still stands.  As I read back over it, the only adjustment I would make is to say “early-wave Boomers” where we wrote “Boomers.”  But now let me move on to something else about Xers—the fact that the economy will recover, in part, precisely because Generation X chooses not to insist on its rightful public entitlement in old age.  We wrote about that in 13th-Gen, as well:

Nor will Gen-Xers ever effectively organize or vote in their own self-interest.  Instead, they will take pride in what they don’t receive, in their lifelong talent for getting by on their own, and in their ability to divert government resources to help the young.  Policy experts who today worry about the cost of Social Security and Medicare past the year 2025 seldom reflect on the political self-image of those who will then be entering their late sixties.  Entitled “senior citizens”?  Hardly.  Like Lost Generation elders in 1964–who voted more for Goldwater than any younger generation even after he promised to slash their retirement benefits—old Xers will feel less deserving of public attention than richer and smarter young people who lack their fatalism about life.

Even back in 1993 we had the concepts of generational archetypes firmly in mind.  As readers of The Fourth Turning know, Gen-Xers belong to same (Nomad) archetype as the Lost Generation.  The location in history of both generations, which manifests so many obvious parallels early in life, will continue (I think) to track each other moving forward.  Who is getting hurt worst in the current age of stagnation and deleveraging?  Late-wave Boomers (born after 1950) to some extent, mostly by have their home and retirement assets values hit hard; Generation X most of all; and early-wave Millennials to some extent, mostly by delayed career starts.  Who got hit worst in the Great Depression?  Late-wave Missionaries (born after 1870) to some extent, mainly by losing their savings in failed banks in the early 1930s; the Lost Generation most of all; and early-wave G.I.s to some extent, mostly by having their careers put on hold until VE- and VJ-Day.  Same archetypes, same patterns.

Koktin points out that today’s hard times are pushing most Millennials in the developed world politically toward the left—that is, toward a greater commitment to national collective action by government.  We’ve witnessed this trend in every election globally since 2008—including of course the massive 2-to-1 margin by U.S. Millennials for Obama in 2008.  (In the fall of 2012, U.S. Millennials will almost certainly give another large margin for Obama, but it will be smaller than in 2008 and whether it will be enough to win the election is uncertain; this is an issue I will handle in a future post.)

These political trends also have interesting parallels in the last saeculum.  The Lost Generation, as we document in Generations and The Fourth Turning, leaned Republican and libertarian all its life.  The Lost hated President Wilson for the fiasco of World War I; voted heavily for Harding, Coolidge, and Hoover (though it turned against Hoover with the Bonus Army); comprised the most visible and colorful opponents of FDR; and voted GOP after WWII all the way to Goldwater.  The party valence turned sharply the other way, however, for cohorts born after 1900—those who missed WWI, who belonged (like John Steinbeck) to entirely different artistic circles than the likes of Hemingway and Fitzgerald, and who were disposed to mobilize around a new trust in community after the Crash of ‘29.

Although no one collected age-graded polling back in the 1930s, some historians estimate that a very large majority—perhaps 85 percent—of voters under age 35 voted for FDR and the Democratic Party in 1936.  It is widely agreed that this is the first election in which a clear majority of young African-Americans voted for the Democratic Party rather than the party of Abraham Lincoln.  Consulting our own American Leadership Database, we are able to confirm that 28 out of 32 (88 percent) of G.I. senators, representatives, and governors sent to Congress in 1936 were Democrats.  By 1940, 75 percent of incoming G.I.s were still Democrats.

Read the numbers, Republicans, and weep.  That is, unless your new Mormon, whiz-kid, C-suite candidate is able to project a stronger, more hands-on image of strong national leadership than Barack Obama—which may not be setting the bar too high.  Anything is possible.

One last point.  To most Millennials, the whole whiney victimization card (look at me, I’m screwed!) seems like such a stale trope of Boomers and Gen-Xers, that they instinctively recoil from it.  And right on cue, a bona fide Millennial offers a cocky and defiant reply to Kotkin in the Washington Post (“Generation Unscrewed”)—though in a sardonic (“It’s the End of the World as We Know It (and I Feel Fine)”) tone that may leave all generations mystified.

DID BABY BOOMERS DESTROY AMERICA?

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Posted on 15th March 2012 by Administrator in Economy |Politics |Social Issues

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Causation or coincidence? Facts can be very inconvenient to a generation in denial. I know. It was FDR and LBJ’s fault. That damn Greatest Generation made them do it. Gotta have it now generation – you got it.  



CAUSE, EFFECT & THE FALLACY OF A RETURN TO NORMALCY

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Posted on 6th March 2012 by Administrator in Economy |Politics |Social Issues

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 “Thousands upon thousands are yearly brought into a state of real poverty by their great anxiety not to be thought of as poor.”Robert Mallett

 

I hear the term de-leveraging relentlessly from the mainstream media. The storyline that the American consumer has been denying themselves and paying down debt is completely 100% false. The proliferation of this Big Lie has been spread by Wall Street and their mouthpieces in the corporate media. The purpose is to convince the ignorant masses they have deprived themselves long enough and deserve to start spending again. The propaganda being spouted by those who depend on Americans to go further into debt is relentless. The “fantastic” automaker recovery is being driven by 0% financing for seven years peddled to subprime (aka deadbeats) borrowers for mammoth SUVs and pickup trucks that get 15 mpg as gas prices surge past $4.00 a gallon. What could possibly go wrong in that scenario? Furniture merchants are offering no interest, no payment deals for four years on their product lines. Of course, the interest rate from your friends at GE Capital reverts retroactively to 29.99% at the end of four years after the average dolt forgot to save enough to pay off the balance. I’m again receiving two to three credit card offers per day in the mail. According to the Wall Street vampire squids that continue to suck the life blood from what’s left of the American economy, this is a return to normalcy.

The definition of normal is: “The usual, average, or typical state or condition”. The fallacy is calling what we’ve had for the last three decades of illusion – Normal. Nothing could be further from the truth. We’ve experienced abnormal psychotic behavior by the citizens of this country, aided and abetted by Wall Street and their sugar daddies at the Federal Reserve. You would have to be mad to believe the debt financed spending frenzy of the last few decades was not abnormal.

The Age of Illusion

“Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces.” - Sigmund Freud

In my last article Extend & Pretend Coming to an End, I addressed the commercial real estate debacle coming down the pike. I briefly touched upon the idiocy of retailers who have based their business and expansion plans upon the unsustainable dynamic of an ever expanding level of consumer debt doled out by Wall Street banks. One only has to examine the facts to understand the fallacy of a return to normalcy. We haven’t come close to experiencing normalcy. When retail sales, consumer spending and consumer debt return to a sustainable level of normalcy, the carcasses of thousands of retailers will litter the highways and malls of America. It will be a sight to see. The chart below details the two decade surge in retail sales, with the first ever decline in 2008. Retail sales grew from $2 trillion in 1992 to $4.5 trillion in 2007. The Wall Street created crisis in 2008/2009 resulted in a decline to $4.1 trillion in 2009, but the resilient and still delusional American consumer, with the support of their credit card drug pushers on Wall Street, set a new record in 2011 of $4.7 trillion.

A two decade increase in retail sales of 135% might seem reasonable and normal if wages and household income had grown at an equal or greater rate. But total wages only grew by 125% over this same time frame. Interestingly, the median household income only grew from $30,600 to $49,500, a 62% increase over twenty years. It seems the majority of the benefits accrued to the top 20%, with their aggregate share of the national income exceeding 50% today, versus 47% in 1992 and 43% in the early 1970s. The top 5% are taking home in excess of 21% of the national income versus less than 19% in 1992 and 16% in the early 1970s. It appears the financialization of America, after Nixon closed the gold window and allowed unlimited money printing by the Federal Reserve, has benefitted the few, at the expense of the many. The bottom 80% of households has seen their share of the national income steadily decrease since the early 1970s. There are 119 million households in the United States and 95 million of these households have seen their wages and income stagnate. One might wonder how the 80% were able to fuel a two decade surge in retail sales with such pathetic wage growth.

Your friendly Wall Street banker stepped into the breach and did their part to aid a vast swath of Americans to enslave themselves in debt. As the chart above reveals, the slave owners on Wall Street have been the chief beneficiary of the decades long debt deluge. It seems that charging 18% interest on hundreds of billions in credit card debt can be extremely profitable for the shyster charging the interest. Decades of mailing millions of credit card offers, inundating financially ignorant Americans with propaganda media messages convincing them they needed a bigger house, fancier car, or latest technological gadget and creating complex derivatives that permitted banks to market debt to people guaranteed not to pay them back but not care since they sold the packages of these toxic AAA rated loans to pension funds and little old ladies, has done wonders for earnings per share, stock option awards, executive salaries and bonus pools. It hasn’t done wonders for the net worth of the average American who has been entrapped in the chains of debt, forged link by link over decades of purposeful deception and willful delusion.

The 135% increase in retail sales over two decades may have been slightly enhanced by the 213% increase in consumer credit outstanding. Consumer revolving credit rose from $800 billion to the current level of $2.5 trillion over the last two decades. Those 15 credit cards in our possession were so easy to use that we financed our trips to Dollywood, Sandals, and Euro-Disney, in addition to financing our 72 inch 3D HDTVs, granite countertops, stainless steel appliances, decks, pools, recliners with a built in fridges, home theatre rooms, Coach pocketbooks, Jimmy Cho shoes, Rolex watches, yachts, bigger and better boobs, and of course our smokes and beer. Much has been made about the great de-leveraging by the American consumer. There’s just one inconvenient fact – it hasn’t happened – yet.

Total consumer credit outstanding peaked at $2.58 trillion in July 2008. Today it stands at $2.50 trillion. Revolving credit card debt peaked at $972 billion in September 2008 and subsequently declined to $790 billion by April 2011. It now stands at $801 billion, as living well beyond our means has resumed its appeal. Meanwhile, non-revolving credit for automobiles, boats, student loans, and mobile homes peaked at $1.61 trillion in July 2008 and “crashed” all the way down to $1.58 trillion in May 2010. Once Bennie fired up the printing presses, the government car companies decided to make subprime auto loans again and the Federal government started doling out student loans like a pez dispenser, all was well in the non-revolving consumer loan world. The debt outstanding has soared to $1.7 trillion, a full $90 billion above the pre-crash peak. So, after three and a half years of “austerity” and supposed deleveraging, consumer debt outstanding has fallen by 3%.

The Big Lie of austerity and consumer deleveraging is unquestioned by the talking heads in the mainstream media. They are incapable or unwilling to examine the actual data which substantiates the fact that Americans have NOT deleveraged and have NOT taken austerity to heart. The most basic facts fly in the face of consumers even having the wherewithal to pay down their debt. Median household income has declined from $50,300 in 2008 to $49,400 today. There are 5 million less people employed today than employed in 2008. Total wages in the country have only grown from $6.6 trillion in 2008 to $6.8 trillion today. This increase was concentrated among the .01%, who do not carry credit card debt. They profit from credit card debt. Real disposable personal income has fallen by 5% since the peak in 2008 as Bernanke’s Wall Street bailout zero interest rate policy has caused prices for everything except our houses to surge. The people carrying most of the credit card debt are the least able to pay it off. These are the same people who have swelled the food stamp rolls from 28 million in 2008 to 46.5 million today.

A CNBC bubble headed arrogant bimbo might sarcastically ask, “If the American consumer isn’t deleveraging, than how did revolving credit card debt drop by $182 billion over three years?” Rather than do the minimal research needed to find the answer, they would rather parrot the company/government line. The chart below, compiled from Federal Reserve data, provides the answer. The Wall Street banks have written off $193.3 billion of bad debt since 2008. Now for some basic math, that will probably be over the head of most Wall Street analysts and CNBC parrots. If you start with $972 billion of credit card debt and you write-off $200 billion (assuming another $7 billion in the 4th Quarter of 2011) and your ending balance is $801 billion, how much debt did the American consumer pay down? It’s a trick question. The American consumer ADDED $29 billion of credit card debt since 2008 to go along with the $90 billion of auto and student loan debt ADDED onto their aching backs. So much for the deleveraging storyline. It’s comforting to convince ourselves we’ve changed, but we haven’t. And the powers that be need you to keep believing, so they can continue to keep you enslaved and under their thumbs.

Consumer Credit Card Debt and Charge-off Data (in Billions):

Outstanding Revolving Consumer Debt Outstanding Credit Card Debt Quarterly Credit Card Charge-Off Rate Quarterly Credit Card Charge-Off in Dollars
Q3 2011 $793.4 $777.5 5.63% $10.9
Q2 2011 $787.4 $771.7 5.58% $10.8
Q1 2011 $779.6 $764.0 6.96% $13.3
2010 $826.7 $810.2 $75.1
Q4 2010 $825.7 $810.2 7.70% $15.6
Q3 2010 $806.9 $790.8 8.55% $16.9
Q2 2010 $817.4 $801.1 10.97% $22.0
Q1 2010 $828.5 $811.9 10.16% $20.6
2009 $894.0 $876.1 $83.2
Q4 2009 $894.0 $876.1 10.12% $22.2
Q3 2009 $893.5 $875.6 10.1% $22.1
Q2 2009 $905.2 $887.1 9.77% $21.6
Q1 2009 $923.3 $904.8 7.62% $17.2
Q4 2008 $989.1 $969.3

(Source: CardHub.com, Federal Reserve)

Loving Our Servitude

“There will be, in the next generation or so, a pharmacological method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing, or brainwashing enhanced by pharmacological methods. And this seems to be the final revolution.” Aldous Huxley

The American people have come to love their servitude through a combination of self- delusion, corporate mass media propaganda, and an irrational desire to appear successful without making the necessary sacrifices required to become successful. The drug of choice used to corral the masses into their painless concentration camp of debt has been Wall Street peddled financing. Can you think of a better business model than being a Wall Street bank? You hand out 500 million credit cards to 118 million households, even though 60 million of the households make less than $50,000. You then create derivatives where you package billions of subprime credit card debt and convince clueless dupes to buy this toxic debt as if it was AAA credit. When the entire Ponzi scheme implodes, you write-off $200 billion of bad debt and have the American taxpayer pick up the tab by having your Ben puppet at the Federal Reserve seize $450 billion of interest income from senior citizens and re-gift it to you through his zero interest rate policy. You then borrow from the Federal Reserve at 0% and charge an average interest rate of 15% on the $800 billion of credit card debt outstanding, generating $120 billion of interest and charging an additional $22 billion of late fees. Much was made of the closing of credit card accounts after the 2008 financial implosion, but most of the accounts closed were old unused credit lines. Now that the American taxpayer has picked up the tab for the 2008 debacle, the Wall Street banks are again adding new credit card accounts.

With 40% of all credit card users carrying a revolving balance averaging $16,000, they are incurring interest charges of $2,400 per year. Some of the best financial analysts in the blogosphere have been misled by the propaganda spewed by the Wall Street media shills at Bloomberg and CNBC. The following chart, which includes mortgage and home equity debt, gives the false impression households are sensibly deleveraging, as household debt as a percentage of disposable personal income has fallen from 115% in June 2009 to 101% today. As I’ve detailed ad nauseam, $200 billion of the $1.2 trillion of “household deleveraging” was credit card write-offs. The vast majority of the remaining $1 trillion of “deleveraging” could possibly be related to the 5 million completed foreclosures since 2009. Of course, this pales in comparison to the unbelievably foolhardy mortgage equity withdrawal of $3 trillion between 2003 and 2008 by the 1% wannabes.  Bloomberg might be a tad disingenuous by excluding the $1 trillion of student loan from their little chart. If student loan debt is included, household debt outstanding surges to $11.5 trillion.

Based on the Bloomberg chart you would assume wrongly that American consumers are using their rising incomes to pay down debt. Besides not actually reducing their debts, the disposable personal income figure provided by the government drones at the BEA includes government transfer payments for Social Security, Medicare, Medicaid, unemployment compensation, food stamps, veterans benefits, and the all- encompassing “other”. Disposable personal income in the 2nd quarter of 2008 reached $11.2 trillion. It has risen by $500 billion, to $11.7 trillion by the end of 2011. Coincidentally, government social transfers have risen by $400 billion over this same time frame, a 20% increase. Excluding government transfers, disposable personal income has risen by a dreadful 1.1%. For the benefit of the slow witted in the mainstream media, every penny of the social welfare transfers has been borrowed. Only a government bureaucrat could believe that borrowing money from the Chinese, handing it out to unemployed Americans and calling it personal income is proof of deleveraging and austerity.

Household debt as a percentage of wages in 2008 was 185%. Today, after the banks have written off $1.2 trillion of debt, this figure stands at 169%. Meanwhile, total credit market debt in our entire system now stands at an all-time high of $54 trillion, up $3 trillion from 2007. It stands at 360% of GDP. In 1992, total credit market debt of $15.2 trillion equaled 240% of GDP ($6.3 trillion). Was it a sign of a rational balanced economic system that total credit market debt grew by 355% in the last two decades while GDP grew by only 238%? I think it is pretty clear the last two decades have not been normal or built upon a sustainable foundation. In the three decades prior to 1990 household debt as a percentage of disposable personal income stayed in a steady range between 60% and 80%. The current level of 101% is abnormal. In order to achieve a sustainable normal level of 80% will require an additional $2 trillion of debt destruction. No one is prepared for this inevitable end result. The impact of this “real” deleveraging will devastate our consumer dependent society.

The colossal accumulation of debt in the last two decades was the cause and abnormally large retail sales were the effect. The return to normalcy will not be pleasant for consumers, retailers, mall owners, local governments or bankers.

Demographics are a Bitch

In addition to an unsustainable level of debt, the pig in the python (also known as the Baby Boomer generation) will relentlessly impact the future of consumer spending and the approaching mass retail closures. Baby Boomers range in age from 51 to 68 today. The chart below details the retail spending by age bracket. Almost 50% of all retail spending is done by those between 35 years old and 54 years old. This makes total sense as these are the peak earnings years for most people and the period in their lives when they are forming households, raising kids and accumulating stuff. As you enter your twilight years, income declines, medical expenses rise, the kids are gone, and you’ve bought all the stuff you’ll ever need. Spending drops precipitously as you enter your 60’s. The spending wave that began in 1990 and reached its apex in the mid-2000s has crested and is going to crash down on the heads of hubristic retail CEOs that extrapolated unsustainable debt financed spending to infinity into their store expansion plans. The added kicker for retailers is the fact Boomers haven’t saved enough for their retirements, have experienced a twelve year secular bear market with another five or ten years to go, are in debt up to their eyeballs, and have seen the equity in their homes evaporate into thin air in the last seven years. This is not a recipe for a spending up swell.

Demographics cannot be spun by the corporate media or manipulated by BLS government drones. They are factual and unable to be altered. They are also predictable. The four population by age charts below paint a four decade picture of reality that does not bode well for retailers over the coming decade. The population by age data correlates perfectly with the spending spree over the last two decades.

  • 26% of the population in the prime spending years between 35 and 54 years old.
  • Only 14% of the population over 65 years old indicating reduced spending.

  • 31% of the population in the prime spending years between 35 and 54 years old.
  • Only 13% of the population over 65 years old indicating reduced spending.

  • 28% of the population in the prime spending years between 35 and 54 years old.
  • A rising 14% of the population over 65 years old indicating reduced spending.

  • 24% of the population in the prime spending years between 35 and 54 years old.
  • A rising 17% of the population over 65 years old indicating reduced spending.

The irreversible descent in the percentage of our population in the 35 to 54 year old prime spending age bracket will have and is already having a devastating impact on retail sales. In addition, the young people moving into the 25 to 34 year old bracket are now saddled with $1 trillion of student loan debt and worthless degrees from the University of Phoenix and the other for-profit diploma mills, luring millions with their Federal government easy loan programs. The fact that 40% of all 20 to 24 year olds in the country are not employed and 26% of all 25 to 34 year olds in the country are not working may also play a role in holding back spending, as jobs are somewhat helpful in generating money to buy stuff. Even with Obama as President they will have a tough time getting onto the unemployment rolls without ever having a job. The 55 and over crowd, who have lived above their means for three decades, will be lucky if they have the resources to put Alpo on the table in the coming years. The unholy alliance of debt, demographics and delusion will result in a retail debacle of epic proportions, unseen by retail head honchoes and the linear thinkers in the media and government.

We’re Not in Kansas Anymore Toto

“We tell ourselves we’re in an economic recovery, meaning we expect to return to a prior economic state, namely, a turbo-charged “consumer” economy fueled by easy credit and cheap energy. Fuggeddabowdit. That part of our history is over. We’ve entered a contraction that will seem permanent until we reach an economic re-set point that comports with what the planet can actually provide for us. That re-set point is lower than we would like to imagine. Our reality-based assignment is the intelligent management of contraction. We don’t want this assignment. We’d prefer to think that things are still going in the other direction, the direction of more, more, more. But they’re not. Whether we like it or not, they’re going in the direction of less, less, less. Granted, this is not an easy thing to contend with, but it is the hand that circumstance has dealt us. Nobody else is to blame for it.” – Jim Kunstler

 

The brilliant retail CEOs who doubled and tripled their store counts in the last twenty years and assumed they were geniuses as sales soared are getting a cold hard dose of reality today. What they don’t see is an abrupt end to their dreams of ever expanding profits and the million dollar bonuses they have gotten used to. I’m pretty sure their little financial models are not telling them they will need to close 20% of their stores over the next five years. They will be clubbed over the head like a baby seal by reality as consumers are compelled to stop consuming. As we’ve seen, just a moderation in spending has resulted in a collapse in store profitability. Retail CEOs have failed to grasp that it wasn’t their brilliance that led to the sales growth, but it was the men behind the curtain at the Federal Reserve. The historic spending spree of the last two decades was simply the result of easy to access debt peddled by Wall Street and propagated by the easy money policies of Alan Greenspan and Ben Bernanke. The chickens came home to roost in 2008, but the Wizard of Debt – Bernanke – has attempted to keep the flying monkeys at bay with his QE1, QE2, Operation Twist, and ZIRP. As the economy goes down for the count again in 2012, he will be revealed as a doddering old fool behind the curtain.

There are 1.1 million retail establishments in the United States, but the top 25 mega-store national chains account for 25% of all the retail sales in the country. The top 100 retailers operate 243,000 stores and account for approximately $1.6 trillion in sales, or 36% of all the retail sales in the country. They are led by the retail behemoth Wal-Mart and they dot the suburban landscape from Maine to Florida and New York to California. These super stores anchor every major mall in America. There are power centers with only these household names jammed in one place (example near my home: Best Buy, Target, Petsmart, Dicks, Barnes & Noble, Staples). These national chains had already wiped out the small town local retailers by the early 2000s as they sourced their goods from China and dramatically underpriced the small guys. The remaining local retailers have been closing up shop in record numbers in the last few years as the ability to obtain financing evaporated and customers disappeared. The national chains have more staying power, but their blind hubris and inability to comprehend the future landscape will be their downfall.

Having worked for one of the top 100 retailers for 14 years, I understand every aspect of how these mega-chains operate. They all approach retailing from a very scientific manner. They have regression models to project sales based upon demographics, drive times, education, average income, and the size of the market. They will build any store that achieves a certain ROI, based on their models. The scientific method works well when you don’t make ridiculous growth assumptions and properly take into account what your competitors are doing and how the economy will realistically perform in the future years. This is where it goes wrong as these retail chains get bigger, start believing their press clippings and begin ignoring the warnings of sober realists within their organizations. When the models show that cannibalization of sales from putting stores too close together will result in a decline in profits, the CEO will tweak the model to show greater same store growth and a larger increase in the available market due to higher economic growth. They assume margins will increase based upon nothing. At the same time, they will ignore the fact their competitor is building a store 2 miles away. Eventually, using foolhardy assumptions and ignoring facts leads to declining sales and profitability.

There is no better example of this than Best Buy. They increased their U.S. store count from 500 in 2002 to 1,300 today. That is a 160% increase in store count. For some perspective, national retail sales grew by 42% over this same time frame. Their strategy wiped out thousands of mom and pop stores and drove their chief competitor – Circuit City – into liquidation. But their hubris caught up to them. There sales per store has plummeted from $36 million per store in 2007 to less than $28 million per store today, a 24% decline in just five years. They have cannibalized themselves and have seen a $6 billion increase in revenue lead to $100 million LESS in profits. It appears the 444 stores they have built since 2007 have a net negative ROI. Top management is now in full scramble mode as they refuse to admit their strategic errors. Instead they cut staff and use upselling gimmicks like service plans, technical support and deferred financing to try and regain profitability. They will not admit they have far too many stores until it is too late. They will follow the advice of an earnings per share driven Wall Street crowd and waste their cash buying back stock. We’ve seen this story before and it ends in tears. I was in a Best Buy last week at 6:00 pm and there were at least 50 employees servicing about 10 customers. Tick Tock.

Best Buy - Annual Store Count Growth

Best Buy - Annual Sales per Store

You would have to be blind to not have noticed the decade long battles between the two biggest drug store chains and the two biggest office supply chains. Walgreens and CVS have been in a death struggle as they have each increased their store counts by 80% to 90% in the last 10 years. Both chains have been able to mask poor existing store growth by opening new stores. They are about to hit the wall. I now have six drug stores within five miles of my house all selling the exact same products. Every Wal-Mart and Target has their own pharmacy. At 2:00 pm on a Sunday afternoon I walked into the Walgreens near my house and there were six employees, a pharmacist and myself in the store. This is a common occurrence in this one year old store. It will not reach its 3rd birthday.

Walgreens - Annual Store Count Growth

CVS - Annual Retail Store Growth

Further along on the downward death spiral are Staples and Office Depot. They both increased their store counts by 50% to 60% in the last decade. Despite adding almost 200 stores since 2007, Staples has managed to reduce their profits. Sales per store have declined by 20% since 2006. Office Depot has succeeded in losing almost $2 billion in the last five years. These fools are actually opening new stores again despite overseeing a 36% decrease in sales per store over the last decade. These stores sell paper clips, paper, pens, and generic crap you can purchase at 100,000 other stores across the land or with a click of you mouse. Their business concept is dying and they don’t know it or refuse to acknowledge it.

Staples - Annual Store Count Growth

Office Depot - Annual Store Count Growth

Even well run retailers such as Kohl’s and Bed Bath & Beyond have hit the proverbial wall. Remember that total retail sales have only grown by 42% in the last ten years while Kohl’s has increased their store count by 180% and Bed Bath & Beyond has increased their store count by 175%. Despite opening 200 new stores since 2007, Kohl’s profits are virtually flat. Sales per store have deflated by 26% over the last decade as over-cannibalization has worked its magic. Bed Bath & Beyond has managed to keep profits growing as they drove Linens & Things into bankruptcy, but they risk falling into the Best Buy trap as they continue to open new stores. Their sales per store are well below the levels of 2002. Again, there is very little differentiation between these retailers as they all sell cheap crap from Asia, sold at thousands of other stores across the country. With home formation stagnant, where will the growth come from? Answer: It won’t come at all.

Kohl's - Annual Store Count Growth

Bed Bath & Beyond - Annual Store Count Growth

The stories above can be repeated over and over when analyzing the other mega-retailers that dominate our consumer crazed society. Same store sales growth is stagnant. The major chains have over cannibalized themselves. Their growth plans were based upon a foundation of ever increasing consumer debt and ever more delusional Americans spending money they don’t have. None of these retailers has factored a contraction in consumer spending into their little models. But that is what is headed their way. They saw the tide go out in 2009 but they’ve ventured back out into the surf looking for some trinkets, not realizing a tsunami is on the way. The great contraction began in 2008 and has been proceeding in fits and starts for the last four years. The increase in retail sales over the last two years has been driven by inflation, not increased demand. The efforts of the Federal Reserve and Wall Street to reignite our consumer society by pushing subprime debt once more will ultimately fail – again. The mega-retailers will be forced to come to the realization they have far too many stores to meet a diminishing demand.

The top 100 mega-retailers operate 243,000 stores. Will our contracting civilization really need or be able to sustain 14,000 McDonalds, 17,000 Taco Bells & KFCs, 24,000 Subways, 9,000 Wendys, 7,000 7-11s, 8,000 Walgreens, 7,000 CVS’, 4,000 Sears & Kmarts, 11,000 Starbucks, 4,000 Wal-Marts, 1,700 Lowes and 1,800 Targets in five years?  As our economy contracts and more of our dwindling disposable income is directed towards rising energy and food costs, retailers across the land will shut their doors. Try to picture the impact on this country as these retailers are forced to close 50,000 stores. Where will recent college graduates and broke Baby Boomers work? The most profitable business of the future will be producing Space Available and For Lease signs. Betting on the intelligence of the American consumer has been a losing bet for decades. They will continue to swipe that credit card at the local 7-11 to buy those Funions, jalapeno cheese stuffed pretzels with a side of cheese dipping sauce, cartons of smokes, and 32 ounce Big Gulps of Mountain Dew until the message on the credit card machine comes back DENIED.

There will be crescendo of consequences as these stores are closed down. The rotting hulks of thousands of Sears and Kmarts will slowly decay; blighting the suburban landscape and beckoning criminals and the homeless. Retailers will be forced to lay-off hundreds of thousands of workers. Property taxes paid to local governments will dry up, resulting in worsening budget deficits. Sales taxes paid to state governments will plummet, forcing more government cutbacks and higher taxes. Mall owners and real estate developers will see their rental income dissipate. They will then proceed to default on their loans. Bankers will be stuck with billions in loan losses, at least until they are able to shift them to the American taxpayer – again. No politician, media pundit, Federal Reserve banker, retail CEO, or willfully ignorant mindless consumer wants to admit the truth that the last three decades of debt delusion are coming to a tragic bitter end. The smarmy acolytes of Edward Bernays on Wall Street and in corporate America have successfully used propaganda and misinformation to lure generations of weak minded people into debt servitude. But, at the end of the day, you need cash to service the debt. Mind control doesn’t pay the bills.  We will eventually return to normal, just not the normal many had in mind.

“If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it.” – Edward Bernays



 

RON PAUL – THE OBI-WAN KENOBI & GREY CHAMPION OF THIS FOURTH TURNING

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Posted on 9th February 2012 by Administrator in Economy |Politics |Social Issues

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Great article on the Lew Rockwell site. This guy would fit in real well on TBP. It seems his definition of Generation X is spot on.

The X and Y Generations and Ron Paul: An Alliance for Our Age

by Donald W. Miller, Jr., MD

Members of Generation X, born 1962 to 1981, and Generation Y, 1982-2004, are rallying behind Ron Paul in his run for president. Media commentators find it odd that people under the age of 40 in the X Generation and especially voters under age 30 in the Y Generation are so taken with this unassuming, soft-spoken 76-year-old candidate. Ron Paul is in the Silent Generation, whose members are now 70 to 87 years of age (born 1925-1942).

Exit polls show that Ron Paul won the majority of voters under age 40 in the Iowa caucus and in the New Hampshire primary. He received 21.4 percent of the votes in Iowa (first-place Rick Santorum got 24.6 percent) and came in second in New Hampshire with 22.9 percent of the votes (first-place Mitt Romney got 39.3 percent). More voters under age 30 chose Ron Paul over the other candidates in the South Carolina primary and Nevada caucus. He garnered 41 percent of the under 30 vote in Nevada – Mitt Romney got 36 percent; Newt Gingrich, 16 percent; and Rick Santorum, 7 percent. But only a small minority of older people has voted for him, as was especially evident in the Florida Republican primary.

In Generations: The History of America’s Future, 1584-2069 (1991) and The Fourth Turning: An American Prophecy (1997), William Strauss and Neil Howe examine the four main generations alive today, including the Boom (“Baby Boomer”) Generation, born 1943-1961. They show how these generations mirror ones in the past. They note that a “Young Hero and Elder Prophet” pairing occurs repeatedly in history, myth, and art, as with Joshua and Moses in the Old Testament, the Gray Champion in Colonial America, King Arthur and Merlin in Celtic myth, Tolkien’s Frodo and Gandalf, and Luke Skywalker and Obi-Wan Kenobi in Star Wars. In Star Wars, Episode IV, Obi-Wan Kenobi instructs Luke in the ways of the Force and in Episode VI tells him that killing Darth Vader (his father) is the only way to destroy the evil Galactic Empire. And as Joseph Campbell, the American mythologist, notes, the young hero’s close bond with a wise elder is essential to his ultimate success.

The “Gray Champion” precipitated the Boston Revolt of April 1689, mounted to protest King James II’s increasingly autocratic rule of the British-American colonies. As Nathaniel Hawthorne describes it in his Twice-Told Tales, the King-appointed governor of New England marched British troops through Boston to intimidate the public and quell any thoughts of colonial self-rule. Hawthorne writes:

“Suddenly, there was seen the figure of an ancient man, who seemed to have emerged from among the people, and was walking by himself along the center of the street, to confront the armed band. He wore the old Puritan dress, a dark cloak and a steeple-crowned hat, in the fashion of at least fifty years before…” 

This elderly champion with a manner “combining the leader and saint” commanded the soldiers to stop; and “at the old man’s word and outstretched arm, the roll of the drum was hushed at once, and the advancing line stood still.” Then, “inspired by this single act of defiance, the people of Boston roused their courage and acted. Within the day, Andros [the governor] was deposed and jailed, the liberty of Boston saved, and the corner turned on the colonial Glorious Revolution.” This revolt led to the American Revolution 85 years later.

Ron Paul is the Obi-Wan Kenobi and Gray Champion of our time, and the Darth Vader of our U.S. Empire is the Federal Reserve.

The Federal Reserve System, with its network of twelve regional private banks, was established in 1913. The Fed is the country’s third central bank (the first two, established in 1791 and 1816, each lasted for 20 years). The Fed issues token coins and paper dollars, and creates and transfers unlimited amounts of computer-generated digital money. Manufacturing money this way, during its 99-year existence the Fed has destroyed 98.8 percent of the value of the dollar, as calculated by the Shadow Government Statistics (SGS)-Alternate-Consumer Price Index (CPI). Using this measure of inflation, a basket of goods and services that cost $100 in 1913 now costs $8,204! (Even the Bureau of Labor Statistics admits that the dollar has lost 96 percent of its value since 1913, with that $100 basket of goods and services now said to cost $2303.) Using the more accurate SGS-Alternate-CPI, the greatest drop in the dollar’s value, 95.1 percent, has occurred since 1971, when president Nixon severed the dollar’s last remaining link with gold, turning it into an effortlessly issued fiat currency. (A fiat currency is one that has no hard asset backing it such as gold and derives its value from government edict.) Like a virulent virus, the Fed has infected the U.S. dollar and made it grow like a cancer.

The Spanish Flu pandemic of 1918-1921 killed somewhere between 20 to 40 million people (including my 22-year-old grandmother and my wife’s 23-year-old grandmother). What the Fed is could result in an equally dire hyperinflationary economic collapse, similar to what happened in the Weimar Republic, Austria, and Hungary in the 1920s, Argentina in 1989, and Zimbabwe. (A practical definition for hyperinflation is that the country’s largest pre-inflation bank note – for the U.S., the $100 bill. – becomes worth more as toilet paper, or for stoking a fire, than as a currency. The currency remains “current” but no longer serves as a medium of exchange.)

Dr. Paul prescribes an Austrian cure for our country’s economic problems (see below). A professor at the University of Vienna, Carl Menger (1840-1921), founded the Austrian School of Economics, which is named for its country of origin. (Government officials and economists in Austria do not follow or endorse “Austrian Economics.”) This branch of economics studies the action of individuals in the marketplace and puts forward a subjective theory of value. It explores important subjects like marginal utility (the amount of benefit derived from consuming one additional unit of a product or service, a concept that debunks the labor theory of value), moral hazard (where being covered against loss increases risk taking – executives at the leading investment banking and securities firm, Goldman Sachs, make a bad, multibillion dollar investment in AIG, and the government, i.e., U.S. taxpayers, bails them out), and malinvestments (making the wrong kind of investments, like building too many shopping malls, encouraged by Fed-set artificially low interest rates). Austrian economists don’t spin their wheels constructing mathematical models of the economy on a large, “macroeconomic” scale, something that Keynesian economists like to do and which have little bearing on the real world of human action. In contrast to pump-priming, big government Keynesianism, Austrian economics stresses the importance of free markets and a stable currency for economic calculation and setting prices.

Starting at a young age, Americans need to learn the basics of Austrian Economics and appreciate how it restores economic health. But government schools do not teach Austrian economics or the concomitant Jeffersonian vision of individual liberty. These subjects make a compelling case for limited government and are thus politically incorrect.

The primary role of government schools, where 90 percent of U.S. children are educated, is to inculcate, in the words of John Calvin, “the duty of obedience to rulers.” Government-employed bureaucratic officials determine what political and economic ideas children are to be taught. Compulsory government schooling has become a zero-tolerance, one-size-fits-all, dumbed-down operation that focuses on social engineering rather than on learning and individual achievement. James Ostrowski, in Government Schools Are Bad for Your Kids, puts it this way: “[The government school] produces barely literate, historically ignorant, uncultured lovers of big government.” Sadly, public schools have evolved into prison-like indoctrination centers that children and adolescents in the Y Generation currently endure – six and seven hours a day for thirteen years. For a sobering assessment of what our nation’s public schools have turned into, watch the online documentary on tagtele.com titled “War on Kids,” available HERE.

Nevertheless, there is reason for hope.

The outpouring of support by young people for Ron Paul is truly heartening. In Texas, for example, students at the Hudson Middle School in Hudson overwhelmingly cast ballots for Ron Paul in the school’s mock GOP primary, “after spending weeks studying the candidates’ views on the issues and watching debates among the hopefuls” according to a newspaper account, which reported: “They liked Paul’s anti-war stance, as well as his willingness to talk straight and not attack his opponents to make a point. ‘He’s just like this down-to-earth dude who just seems like he knows what he’s doing,’ seventh-grader Danielle Heidkamp said.”

Generation Y members like Danielle will carry the Ron Paul banner forward. The Y Generation is also named the “Millennial Generation,” coming of age as it is at the beginning of a new millennium. This generation must cope as young adults with the unfolding global financial crisis. When the Baby Boomer generation was growing up in the 1950s and 60s U.S. government debt increased $2.5 Billion a year. Life was good. Today, with the Millennial Generation coming of age, U.S. government debt increases by $2.5 Billion every 16 hours.

After the housing boom peaked in 2006 and foreclosures began to mount, the so-named “Millennial Crisis” began in February, 2007 when the Federal Home Loan Mortgage Corporation (Freddie Mac) announced that it would no longer buy subprime mortgages or mortgage-related securities (collateralized debt obligations). The Y Generation facing this crisis today bears some likeness to the GI Generation, born at the beginning of the last century (1901-1924), who became young adults during the last big crisis in U.S. history, the Great Depression and World War II. Strauss and Howe see the GI and Y generations as both manifesting a “Hero” archetype – can-do heroes and competent pragmatic managers who possess confidence and optimism.

Strauss and Howe name Generation X the “13th Generation” because it is the thirteenth one to call itself “American,” beginning with the Awakening Generation born 1701-1723. The Glorious Revolution (Revolution of 1688) brought this about, which dethroned King James II and led Parliament to pass the 1869 English Bill of Rights, called “An Act declareing the Rights and Liberties of the Subject and Setleing the Succession of the Crowne.” This Act enabled people in the American colonies, emboldened by the Boston Revolt and this Bill of Rights, to see themselves as distinctly American and not servile British subjects.

Progressives view human history as a linear process. Beginning with Theodore Roosevelt and Woodrow Wilson early in the last century, progressives have sought to expand government power and use it to effect what they consider to be beneficial social, political, and economic change. They are notable for launching the FED, an income tax, World War I, Prohibition, and the New Deal. Linear thinkers, which include politicians, the mainstream media, and CEOs of big corporations, work to maintain the status quo and their power and wealth. Rather than progress in a linear fashion, however, human history has a more seasonal, cyclical nature. As Mark Twain observed, “It is not worthwhile to try to keep history from repeating itself, for man’s character will always make the preventing of the repetitions impossible.” Twain is also alleged to have said something like, “Although history doesn’t repeat itself, it often rhymes” (source unknown). Whatever “rhyme” or “repetition” that might have helped bring about the Millennial Crisis, having a linear-thinking progressive president will only serve to make things worse. That includes President Obama and all the Republican presidential candidates except Ron Paul. He alone knows what is really going on, understands it, predicted it, and knows how best to deal with it.

Not counting the earlier crisis that caused the colonial Glorious Revolution and its Boston Revolt (1675-1704), there have been four crises in American history: the American Revolution (1773-1704), followed 66 years later by the Civil War (1860-1865), 64 years later by the Great Depression and World War II (1929-1946), and 61 years later by the current Millennial Crisis (2007-?). Each crisis has been worse than the previous one. There were 25,000 deaths in the American Revolution. Some 600,000 to 800,000 people died in the Civil War. And in World War II 50 to 70 million people died (civilian and military). In the American Revolution hyperinflation of the Continental Dollar rendered it worthless, and in the Civil War the Confederate Dollar suffered the same fate.

In The Fourth Turning, William Strauss and Neil Howe predicted, in 1997 when the book was published, that the next period of crisis in our country’s history, the “Fourth Turning” (following the first three crises) which they named the Millennial Crisis, would begin in 8 to 10 years. They were spot-on predicting when it would begin, 10 years later (in 2007), and this is what they say about its course:

“The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. Thus might the next Fourth Turning end in apocalypse – or glory. The nation could be ruined, its democracy destroyed, and millions of people scattered or killed. Or America could enter a new golden age, triumphantly applying shared values to improve the human condition. The rhythms of history do not reveal the outcome of the coming Crisis [the one we are experiencing now]; all they suggest is the timing and dimension.”

One thing is certain. This crisis, now in its 6th year, will not be over anytime soon. How bad it becomes will depend on whether or not our country heeds the teachings of Ron Paul and his advocates.

Unfortunately, the establishment media tries to ignore Ron Paul and pretend he doesn’t exist. Jon Stewart, on The Daily Show, skewers the media’s talking heads on this score, asking “How did Ron Paul become the 13th floor in a hotel?” in “John Stewart Shows How Ron Paul Is Feared By The NWO Mafia Controlled Mainstream Media,” which can be seen on YouTube HERE. But other wiser heads can see and appreciate his true worth.

Bill Buckler, Captain of the financial newsletter The Privateer, published in Australia, has this to say about Ron Paul:

“Dr. Paul’s great and merited attractiveness to a growing number of admirers has a very simple source. He is that rarest of creatures – a FREE man. He is beholden to nobody. He has developed his ideas and his convictions over a long and fruitful life of independent thinking. He does not compromise. He homes in on the fundamental issue and principle of any political issue and serves it up without salt or other ‘seasoning.’ He says what he means and he means what he says. He is the living embodiment of the ‘dream’ that most Americans have long since given up on as they saw it slip further and further beyond their grasp. He is the only prominent person who is doing everything he can to turn the non-debate which masquerades as the ‘mainstream’ in the US and global political economy into something of substance. That, far more than presidency, is his goal.”

Ron Paul wants to legalize freedom and have the government stop punishing people for using the freedom that is rightfully theirs (as long as you, of course, do not encroach on other persons and their property). All the other leading candidates who want to be elected president are pro-big government and seek power. Mitt Romney is Wall Street’s Republican candidate, with the investment banking and securities firm Goldman Sachs being his biggest contributor. There is little difference between Mitt Romney and Barack Obama, except perhaps that Romney is even more pro-war than is Obama. I highly recommend Andrew Napolitano’s YouTube video “Judge Napolitano What if the Government Has Been Lying to You” where he portrays Republicans (excluding Ron Paul) and Democrats as “two wings of the same bird of prey.”

Ron Paul is different. As the YouTube video What Is It About Ron Paul? affirms,

“Once you get hooked on Ron Paul you can no longer bear listen to a man who wants power. You become instantly disgusted whenever they begin to speak. Before they were just boring, but now they’re revolting. Listening to a Romney, or a Gingrich, or a Bush, or Obama makes you sick; and you just don’t understand how Ron Paul can get through those debates without getting nauseous. You see a political veneer in these politicians that is so transparent, like a ghost flapping its ethereal tongue at you.”

A poster shown in the video states, “Once you get hooked on Ron Paul you can no longer bear to listen to a man who wants power.”

People all over the world are getting hooked on Ron Paul. A Canadian citizen, Terry Neudorf, for example, writes this in a blog titled “Ron Paul Shakes the World”:

“When the name Ron Paul is mentioned to my grandchildren, a smile will creep across their faces, and they will recall, and speak with excited tones about a time where an idea was born, a message was spread, and a revolution took hold that shook the world. That’s the time I’m living in right now. I will treasure every moment. Thanks for all you do.”

Young Americans are joining The Ron Paul Movement, like those manning phone banks to promote and raise funds for his campaign. (Don’t expect Goldman Sachs to contribute any money to Ron Paul’s campaign.) Leaders of the X and Y Generations allied with Ron Paul are our best hope for the future – and for coming through the Millennial Crisis without war. A third world war, with nuclear weapons in play, could well prove to be even more devastating than was World War II. But even if he is not elected president, all is not lost. Like Obi-Wan Kenobi, Ron Paul’s spirit and teachings will live on and guide a new generation of Luke Skywalkers, including his son, X-Generation Rand Paul, to lead our country safely through this time of economic and social peril.

The Austrian Cure for Economic Illness

Dr. Paul’s Austrian treatment for the Millennial Crisis comprises six parts:

1) End the Fed – close down the central bank. “Unplug the machinery of the Fed,” as Ron Paul puts it in his book End the Fed (see also the other three books he has written on government and liberty in “Suggested Reading” below). The market must be free to set interest rates without a central bank artificially lowering them and inflating the money supply. Banks should once again exist as free-enterprise institutions without privileges or bailouts from the state. ATMs, Web-based systems of funds transfer like PayPal, and online trading can function perfectly well without a Fed. 2) Restore sound money to the economy – privatize the country’s monetary system, abolish legal tender laws, and allow the free market to determine the forms of money it prefers.3) Lower taxes and cut government spending – close military bases that the U.S. maintains in more than 130 countries around the world and bring the troops home; defund unconstitutional departments like Education, Housing and Urban Development, Agriculture, etc.; abolish the personal income tax. 4) No bailouts – the economy needs to liquidate all the malinvestments and mistakes made during the boom in order to be able to move on and recover from the bust.5) Allow prices and wages to fall to levels the market sets – propping up prices stifles recovery, as the Great Depression proved. 6) Regulate the government, not private property and markets – entrepreneurs and investors will only make long-term investments that spur recovery and boost employment if they feel that their property is secure. (Fifteen cabinet-level departments control different parts of the economy, along with 100 federal regulatory agencies that have produced more than 81,000 pages of regulations, not including those set by state and local governments.)

Disclosure:

Like Ron Paul, I am a member of the Silent Generation.

Suggested Reading:

Articles

Books

By Ron Paul

Others

February 9, 2012

Donald Miller (send him mail) is a cardiac surgeon and Professor of Surgery at the University of Washington School of Medicine in Seattle. He is a member of Doctors for Disaster Preparedness and writes articles on a variety of subjects for LewRockwell.com. His web site is www.donaldmiller.com



 

THE SHALLOWEST GENERATION (Oldie but Goodie)

134 comments

Posted on 9th February 2012 by Administrator in Economy |Politics |Social Issues

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WHAT AN AWESOME THREAD. RE, SMOKEY & LLPOH (ALL BOOMERS) HAVE SINCE THROWN IN THE TOWEL AFTER BEING PULVERIZED BY ADMIN. BOOMERS DO TEND TO BE QUITTERS.

Originally posted on Seeking Alpha in October 2008. It received 278 comments, most of which were crying Boomers making excuses and screaming that it wasn’t their fault. Accept responsibility for your actions Boomers. Grow a pair and man up.

 

The Baby Boom Generation will never be mistaken for the Greatest Generation that survived the Great Depression and defeated evil in a World War that killed 72 million people. I hate to tell you Boomers, but putting a yellow ribbon on the back of your $50,000 SUV is not sacrifice.

Our claim to fame is living way beyond our means for the last three decades, to the point where we have virtually bankrupted our capitalist system. Baby Boomers have been occupying the White House for the last sixteen years. The majority of Congress is Baby Boomers. The CEOs and top executives of Wall Street firms are Baby Boomers. The media is dominated by Baby Boom executives and on-air stars. We have no one to blame but ourselves for the current predicament. Blaming Franklin Roosevelt or Lyndon Johnson for our dire situation is a cop out. Baby Boomers had the time, power, and ability to change our course. We have chosen to leave the heavy lifting to future generations in order to live the good life today.

Of course, not all Baby Boomers are shallow, greedy, and corrupt. Mostly Boomers with power and wealth fall into this category. There were 76 million Baby Boomers born between 1946 and 1963. They now make up 28% of the U.S. population. Their impact on America is undeniable. The defining events of their generation have been the Kennedy assassination, Vietnam, Kent State, Woodstock, the 1st man on the moon, and now the collapse of our Ponzi scheme financial system. They rebelled against their parents, protested the Vietnam War, and settled down in 2,300 square foot cookie cutter McMansions with perfectly manicured lawns, in mall infested suburbia. They have raised overscheduled spoiled children, moved up the corporate ladder by pushing paper rather than making things, lived above their means in order to keep up with their neighbors, bought whatever they wanted using debt, and never worried about the future. Over optimism, unrealistic assumptions, selfishness and conspicuous consumption have been their defining characteristics.

click to enlarge images

Boomers are currently in their prime earning and spending years. A Baby Boomer turns 50 years old every 7 seconds. The older Boomers had a fantastic run from 1989 through 2004. Median net worth for those between the ages of 55 and 59 rose 97% over 15 years to $249,700 in 2004. Median income rose 52%. The younger generation between the ages of 35 and 39 saw their median net worth fall 28% to $48,940. Their median income dropped 10% over the same 15 year period. It is clear that all Baby Boomers are not created equal. Based on calculations made by the Federal Reserve, at least 50% of Boomers will not have a happy retirement. The bottom 30% will reach the age of 65 with net worth of less than $100,000. They will try to subsist in poverty, dependent upon social security and part time Wal-Mart jobs until they die penniless. The top 30% will retire to lives of luxury and leisure. The middle 40% will muddle through with social security payments the only thing keeping them from an old age in poverty.

We have become a have and have not society. Our economy favors education, entrepreneurship, and creativity. Those benefitting from a good education will make dramatically more money than the uneducated laborers. The top 20% of households make 12.5 times the lowest 20% of households. This ratio was 7 to 1 in 1982. The top 1% of households make 20% of all the income in the U.S., the highest rate since 1928. Does this statistic portend a decade long depression? The difference between now and 1928 is the huge household debt burden of Americans. This usage of debt by the poor has masked the gap between haves and have nots for the last 20 years.

As I drive to work every day in my fully paid for 2002 CRV with 110,000 miles, I have plenty of time to observe my surroundings. Sitting in traffic on the Schuylkill Expressway, I have noticed that the number of luxury Mercedes, BMW, Cadillac and Lexus vehicles seems out of proportion to the number of wealthy people in the Philadelphia population.

When I see an older gentleman, wearing a suit, driving one of these automobiles, I assume that he is a wealthy executive who has put in his time and rewarded himself with a luxury vehicle. But, most of these vehicles are being driven by Joe the Plumber types. As I take a shortcut through some of the more depressed areas of West Philadelphia, I see people talking on their Apple (AAPL) iPhones, Direct TV satellite dishes attached to dilapidated row homes, and Cadillac Escalades & Mercedes parked on the mean streets. This is not exactly the world that Henry Fonda’s character, Tom Joad, described in The Grapes of Wrath:

I’ll be all around in the dark – I’ll be everywhere. Wherever you can look – wherever there’s a fight, so hungry people can eat, I’ll be there. Wherever there’s a cop beatin’ up a guy, I’ll be there. I’ll be in the way guys yell when they’re mad. I’ll be in the way kids laugh when they’re hungry and they know supper’s ready, and when the people are eatin’ the stuff they raise and livin’ in the houses they build – I’ll be there, too.

When I see “poor” people appearing to live a more luxurious life than myself, I don’t feel jealous. The thought that goes through my head is: Which banks or finance companies were foolish enough to loan these people the money to live this lifestyle? These foolish financial institutions will never get their loans repaid. What does bother me is that the Bush-Paulson-Pelosi Bailout of Stupid Banks will use my taxes to buy these bad loans from the foolish banks.

So, who is the fool in this scenario? The “poor” person got to drive a Cadillac Escalade for a period of time, the foolish banks got bailed out, the bank CEOs took home $30 million, and I lived within my means and footed the bill for the reckless actions of others. It appears that the fools are the Americans who lived their lives according to the rules. The anger is building. I don’t think the politicians running this country realize what true anger looks like. They are used to Americans being herded along like passive sheep.

I’ve heard many Republican ideologues blame the current crisis on the people who took the subprime loans for home purchases. I’ve also heard many Democratic ideologues blame the crisis on the regulators. The ideologues are wrong, as usual. If a poor person has no home, no vehicle, and no prospects; then a bank tells them that they can buy a $300,000 home, drive a $55,000 Mercedes SUV, and live like people on TV; why wouldn’t they say yes? What is their downside? If you have nothing and “The Man” offers you the American Dream, you’d actually be foolish to say no. Now that they have lost the home in foreclosure and the repo man has taken the Mercedes, they are exactly where they were a few years ago with no home, no vehicle and no prospects.

The regulators were certainly asleep at the wheel. They did not enforce existing rules, foolishly waived leverage rules for the biggest investment banks, and believed that the banks would regulate themselves. They were wrong, but they never made a single loan. The commercial banks, investment banks, auto finance companies, and credit card companies made the ridiculous loans to people who could never pay them back in the search for short term profits. Greedy Wall Street executives created an artificial market for the loans in order to generate billions in fees so they could enrich themselves through stock options and obscene bonuses. They spent their false riches on $2 million NYC penthouses, $100,000 Porsche 911s, and $5 million beachfront estates in the Hamptons. Based on the estimated $2 trillion of losses that our banks have generated, the CEOs certainly deserved annual pay 500 times as high as the average worker. There is no way an “average” worker could possibly be talented enough to lose $2 trillion. You would need to be truly extraordinary to lose that much.

CEOs’ average pay, production workers’ average pay, the S&P 500 Index, corporate profits, and the Federal minimum wage, 1990-2005 (adjusted for inflation):

Source: Executive Excess 2006, 13th annual CEO Compensation Survey

The brutal necessary lesson that should have been learned is that if you loan money to people who can’t pay you back, your bank will go bankrupt. The “poor” people who made a bad decision in buying homes and cars they couldn’t afford have lost those homes and cars. The banks made a bad business decision in making those loans. The taxpayer was not involved in these business transactions. This is where Hank Paulson, Ben Bernanke and George Bush, formerly free market capitalists, decided to commit our grandchildren’s money to bailing out the horribly run financial institutions.

Our government has chosen to allow these banks off the hook for their bad business decisions at the expense of taxpayers. Rewarding bad decisions and bad behavior will lead to more bad decisions and more bad behavior. The government has made a dreadful decision that will haunt our country for generations. Now the Federal Reserve has lowered interest rates to 1% again. This is where this horrible nightmare started. The massive printing of currency throughout the world will ultimately lead to a hyperinflationary bust. The law of unintended consequences can be devastating.

Early in the 1st Reagan administration, Americans saved 12% of their income and household debt as a percentage of GDP was 63%. In 1980, the oldest Baby Boomers turned 34. They entered their prime earnings and spending years. This is when something went haywire with our great country. Deficit spending became fashionable for government, corporations and individuals. Dick “deficits don’t matter” Cheney was probably in his glory as the country ran up deficits of money, morals, and brains. The Boomers and our government chose to try and borrow and spend their way to prosperity. As we now know, Mr. Cheney’s advice about deficits not mattering was about as good as his belief that you can fire a shotgun in any direction without implications. The Boomer generation has freely made choices over the last quarter century that has brought us to the brink of a second Great Depression.

During the current Bush administration, Americans’ savings rate actually went below zero, while household debt as a percentage of GDP soared above 130%, a doubling in 25 years. These figures prove that the apparent prosperity of the last 25 years was an illusion. Beginning in 1982, Baby Boomers chose to take the easy road. Saving, investing and living within your means were cast aside as “Old School”. Boomers were handed a better future through the blood, sweat and tears of the “Greatest Generation”. Through their hubris, they’ve squandered that better future, the future of their children and imperiled our entire capitalist system. Between 1989 and 2007, credit-card debt soared from $238 billion to $937 billion, a 300% increase. Household liabilities that are in delinquency or default totaled $775 billion at the end of June, according to CreditForecast.com data. This is equal to 7.5% of all U.S. household debt, up from 3% just two years ago.

In the last five years, our live-for-today Boomers sucked over $3 trillion of equity out of their homes to fund their selfish lifestyles. At the end of June, there were 2.72 million mortgage loans in default at an annualized rate. For all of 2008, defaults will hit 3 million, up from approximately 1.5 million in 2007, and 1 million in 2006.

What “essentials” do the Boomers invest all this borrowed money in every year? The U.S. Census bureau provides the answers:

  • $200 billion on furniture, appliances ($1,900 per household annually)
  • $400 billion on vehicle purchases ($3,800 per household annually)
  • $425 billion at restaurants ($4,000 per household annually)
  • $9 billion at Starbucks (SBUX) ($85 per household annually)
  • $250 billion on clothing ($2,400 per household annually)
  • $100 billion on electronics ($950 per household annually)
  • $60 billion on lottery tickets ($600 per household annually)
  • $100 billion at gambling casinos ($950 per household annually)
  • $60 billion on alcohol ($600 per household annually)
  • $40 billion on smoking ($400 per household annually)
  • $32 billion on spectator sports ($300 per household annually)
  • $150 billion on entertainment ($1,400 per household annually)
  • $100 billion on education ($950 per household annually)
  • $300 billion to charity ($2,900 per household annually)

The priorities of our Boomer led society are clearly born out in the above figures. We spend more eating out than we give to charity. We spend as much on big screen TVs and stereos as we do on education. This may explain why 37 million (12.5%) of all Americans live in poverty and our high school students trail the students of 25 other countries (including Latvia) in science and math knowledge. Our school system processes many more clueless morons who don’t know the candidates for President, versus intelligent, thoughtful, hard working, driven young people. The $160 billion spent on gambling is indicative of the get rich quick without hard work attitude of the Boomer generation. Even worse, households with income under $13,000 spend, on average, $645 a year on lottery tickets, about 9 percent of all their income. Our government feeds this addiction by siphoning off billions in taxes from these gambling revenues to redistribute as they see fit.

What the data proves is that Boomers love to shop and eat, whether they have the money or not. The top 100 retailers in the U.S. have 250,000 stores that generated $1.7 trillion of sales last year. How could America function without 31,000 McDonalds, 35,000 KFCs, Taco Bells, & Pizza Huts, 15,000 Starbucks, 7,000 Wal-Marts, 2,000 Home Depots, 4,000 K-Marts/Sears, and 8,000 Blockbusters? There are 91,000 shopping centers in the United States. The Advertising industry spends $275 billion per year to convince you to spend money you don’t have for things you don’t need. This generation lacks self control, morals, a work ethic, and savings ethic. Based on the recent actions of our government and corporate leaders, we seem to lack any ethics at all. It is immoral for the Boomer generation to run up $53 trillion in unfunded future liabilities in Social Security, Medicare and Medicaid to leave as our gift to future generations, while we live it up today. Optimists like to point out that Europe and Japan have much worse unfunded liability problems than the U.S. That is like taking pride in being the best looking horse at the glue factory. In the end, we’ll all still be glue.

The 25 year Boomer borrowing and spending binge is coming to an end. The hangover will be really bad. The Federal Reserve and Treasury are trying to keep the frat party going, but everyone is passed out on the floor. The Case Shiller housing data shows that the 20 largest cities have experienced an average 20% decline in price from their peaks. The futures index predicts a further 10% to 15% loss in value. There are 75 million owned homes in the U.S. One in six, or 12 million homeowners, owe more than the house is worth. With further expected losses, 20 million homeowners will eventually be underwater on their mortgage. In California, where home price declines will be 40% to 50%, half the homeowners in the State will owe more than the house is worth.

If you are one of these homeowners and can afford the mortgage payment, time will eventually bail you out. If you can’t afford the mortgage payment, you should lose the house to someone who can make the payment. This is the failure side of the creative destruction that is true capitalism. If the government steps in to subsidize and eliminate failure, the system will ultimately collapse.

Part two of the great Boomer credit contraction will be the collapse of credit card companies who have mailed out 27 billion credit card offers in the last five years. They are now reaping what they have sown. As Boomers could no longer borrow from their homes, they switched to credit cards to make mortgage payments and car payments. That well is running dry. The losses to card companies will make the losses in 2000 to 2002 seem like good times. Losses in the 1st half of 2008 soared to $21 billion. Losses are expected to total $55 billion in the next year and a half. This brings me to the latest outrage perpetrated upon the U.S. citizens by Hank Paulson and his Treasury cronies.

The credit card industry, which collects 23% interest and $12 billion in late fees from consumers, is lining up to get their piece of the $700 billion bank handout. Capital One (COF) has just received a $3.6 billion injection from the American taxpayer, one week after projecting that their write-offs will be $7.2 billion in the next twelve months. This will allow them to send another million offers to more people who shouldn’t have a credit card. Why not? The taxpayer will pay, if the losses are too high. Why aren’t the pundits on CNBC outraged at this misuse of taxpayer money? Would the bankruptcy of Capital One hurt our country in any way?

The Great American Empire has begun its long slow decline. It may take a few generations to reach its nadir, but the poor decisions already made and crucial decisions postponed in the last 25 years by our Boomer dominated leadership has put our country on a path to a declining standard of living. The U.S. is like a punch drunk ex-champion boxer who still thinks he has what it takes, but is living off his old press clippings. He lived the good life, got fat and didn’t do the hard work required of a champion. A slew of young brash fighters are itching to take him down. It is just a matter of time.

In our heyday during the 1950s, manufacturing accounted for 25% of GDP. In 1980 it was still 22% of GDP. Today it is 12% of GDP. By 2010 it will be under 10% of GDP. Our Government bureaucracy, which contributes nothing to the advancement of our society, now is a larger portion of GDP than manufacturing. Services such as banking, retail sales, transportation, and health care now account for two-thirds of the value of U.S. GDP. We have become a nation of bureaucratic paper pushers. Past U.S. generations invented the airplane; invented the automobile; discovered penicillin; and built the Interstate highway system. The Baby Boom generation has invented credit default swaps; mortgage backed securities; the fast food drive thru window; discovered the cure for erectile dysfunction; and built bridges to nowhere. No wonder we’re in so much trouble.

Now that I have laid out our bleak future, I can tell you that, like Dickens’ Christmas Carol, this is only a vision of what might be. There is time to change our course before our ship wrecks on a jagged reef. David M. Walker, former Comptroller of the United States, at a recent Fiscal Wake Up Tour at the University of Pennsylvania, described what has been happening in this country for the last 25 years in one word – laggardship. The last six months have been a perfect example of laggardship. Our leaders have floundered from crisis to crisis, overreacting and blustering rather than leading. True leaders are proactive, not reactive. After not addressing our energy policy for decades, as soon as oil reached $140 a barrel, Congress lurched into action so their constituents would think they were leading. As our financial system has imploded, government “leaders” have flailed about with one rescue package after another and Congress looks for scapegoats. Meddling, tinkering, and non-enforcement of rules by Congress and other government bureaucracies caused the crisis that they are reacting to. Government creates the problems and then assumes even more power over our lives with their ridiculous “solutions”.

No one in Washington has shown an ounce of leadership in decades. True leadership requires strength of character, clear vision to see the future as it is, the bravery to make unpopular decisions, and the honesty to tell the public the unvarnished truth based on the facts.

The facts are: we have a $10.5 trillion national debt; $53 trillion of unfunded liabilities; a military empire that has U.S. troops in 117 countries and has spent $700 billion on a pre-emptive war that has killed over 4,000 Americans; a $60 billion trade deficit; an annual budget deficit that will exceed $1 trillion in the next year; a crumbling infrastructure with 156,000 structurally deficient bridges; almost total dependence on foreign oil; and an educational system that is failing miserably. We can not fund guns, butter, banks and now car companies without collapsing our system.

I truly hope that President Obama can rise to the occasion and become a true statesman and leader. David Walker lays out our dilemma:

The regular order in Washington is broken. We must move beyond crisis management approaches and start to address some of the key fiscal and other challenges facing this country if we want our future to be better than our past. Our fiscal time bomb is ticking, and the time for action is now!

Ultimately, it is up to the Baby Boom generation to change our country’s course. The oldest Boomer is 62 years old and the youngest 45 years old. It is time for Boomers to take a hard look in the mirror and rethink their priorities. It is time to cast aside the $88,000 Range Rovers, $1,200 Jimmy Choo boots, $5,000 Rolex watches and daily double lattes at Starbucks. It is time to live within your means, distinguish between needs and wants, reduce debt, save 10% of your income, make sure your kids get a good education, not try and keep up with the Joneses, show compassion for your fellow man, and possibly pay more taxes and get less benefits, for the good of the country. We must support true leaders like [former Comptroller General] David Walker and get rid of the old time corrupted politicians who want to keep the status quo. Texas Congressman Ron Paul gives the blunt truth that a true leader is willing to give:

Our government has lived beyond its means for decades. We now face a crucial juncture, at which we determine whether to continue down the path of debt, inflation, and government intervention or choose to return to the economics of the free market, which have been ignored for almost a century. Increased debt leads to higher taxes on future generations, while increased inflation diminishes the purchasing power of American families and destroys the dollar. No society has ever been achieved prosperity through indebtedness or inflation, and the United States is no exception. We cannot afford to continue our current policies of monetary expansion and unending bailouts. Unless we return to sound monetary policy, sharply reduce government expenditures, and realize that the government cannot act as a lender of last resort, we will drive our economy to ruin.

The Baby Boom generation has one last chance to change the course of U.S. history, keep us from wrecking in a storm of debt on the approaching jagged reef and shed the title of “Shallowest Generation”.



 

BAD MOON RISING

169 comments

Posted on 2nd November 2011 by Administrator in Economy |Politics |Social Issues

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I see the bad moon arising.
I see trouble on the way.
I see earthquakes and lightnin’.
I see bad times today.

Creedence Clearwater Revival – Bad Moon Rising

 

“Human history seems logical in afterthought but a mystery in forethought.” – The Fourth Turning – Strauss & Howe

The above statement by historians William Strauss and Neil Howe is very significant as we try to make sense of the events unfolding before our very eyes in today’s world. On September 17, a mere six weeks ago, a few hundred young people showed up in Zucatti Park in Lower Manhattan to protest our corrupt, broken and Wall Street manipulated economic and political system. That first night, approximately 100 protestors occupied the park and were outnumbered by the NYPD in full riot gear. The idea to Occupy Wall Street began circulating on the internet in late August. The Millennial Generation used their social networks and put their tech savvy talents to work. Before long, thousands of protestors showed up in cities across the U.S. The model for this movement was the successful demonstrations in Egypt and Tunisia, earlier in the year.

 

The initial reaction among mainstream media and politicians across the land was bemusement. A bunch of young hippy throwbacks were going to make a meaningless statement and then fade away. The attention span of Americans is as long as the commercial break between contestants on Dancing With the Stars. Everyone knows the Millennials aren’t to be taken seriously. They are a bunch of spoiled, coddled, lazy college kids who need to get a job. But a funny thing happened during the commercial break. The kids held their ground. They didn’t leave. More young people arrived. More young people began protesting in cities across the country. Middle aged people began to get involved. Even some older people joined the cause. Before long there were thousands of people getting involved. It spread to Europe, with young people occupying London and Rome. Donations and supplies began to pour in from around the world. There’s something happening here, but what it is ain’t exactly clear.

The six weeks since September 17 have been chaotic, venomous, confusing, and verging on deadly. Wall Street gyrated wildly with stocks falling 8% by October 3 and rebounding by 15% by October 28 and plunging again this week. The Economic Cycle Research Institute (ECRI) declared the country was headed back into recession on September 30:

“It’s important to understand that recession doesn’t mean a bad economy – we’ve had that for years now. It means an economy that keeps worsening, because it’s locked into a vicious cycle. It means that the jobless rate, already above 9%, will go much higher, and the federal budget deficit, already above a trillion dollars, will soar. Here’s what ECRI’s recession call really says: if you think this is a bad economy, you haven’t seen anything yet. And that has profound implications for both Main Street and Wall Street.”

The ECRI has called the last three recessions with no instances of false alarms. Last week, the Conference Board announced the Consumer Confidence Index plummeted to two and a half year low of 39.8, last seen in March of 2009. The Dow Jones was trading at 6,500 in March 2009, some 47% below today’s level. It is an interesting dichotomy between how the average American feels about the world and how the Wall Street elite feel about their Ben Bernanke sheltered world. The Consumer Confidence Index was 110 in 2007 and 140 in early 2001. We’ve come a long way baby.

During these past six weeks the European Union has teetered on the verge of disintegration. Non-stop negotiations, agreements, plans, declarations, special purpose vehicles, bailout funds, and lies have poured forth on a daily basis. Greece still lives – on a ventilator – as it has been brain dead for months. The sole purpose of all the public relations efforts, press conferences, summit meetings and lies has been to keep European banks, their stockholders and bondholders from accepting the consequences of their irresponsible lending to the PIIGS. Essentially, the German people have been put on the hook for losses that should have been born by the stockholders and bondholders of the biggest French, German, Belgian and English banks. The EU has put a tourniquet over a cancerous tumor. The entire world is awash in bad debt and until this debt is liquidated, we will stagger from crisis to crisis like a drunken sailor. John Hussman describes the master plan:

In effect, European leaders have announced “We have agreed to solve our debt problem, leveraging money we do not have, to create a fund, which will then borrow several times that amount, in order to buy enormous amounts of new debt that we will need to issue.”

As politicians and central bankers around the world desperately try to keep their debt drenched ponzi scheme going for awhile longer, the mood darkens among the populations of developed countries around the world. I came across a quote from, of all people, Vladimir Lenin that describes how the last six weeks seemed to me: 

“There are decades where nothing happens; and there are weeks where decades happen.”

It seems like history is accelerating. Momentous events have been occurring regularly since 2007. Our political and financial leaders are blindsided on a daily basis by each new crisis. The majority of the American public continues to be apathetic, willfully ignorant, and constantly absorbed by their array of electronic gadgets and mindless drivel spewed at them by media conglomerates. Rather than think critically, most Americans allow left wing and right wing mainstream media to formulate their opinions for them through their propaganda and misinformation operations. Linear thinkers, who make up the majority of the political, social, media and financial elite in this country, believe the world progresses and moves ever forward. In reality, the world operates in a cyclical fashion, with generations throughout history reacting to events in a predictable manner based upon their stage in life. The reason the world has turned so chaotic, angry and fraught with danger since 2007 is because we have entered another Fourth Turning. Strauss & Howe have been able to document a fourfold cycle of generational types and recurring mood eras in American history back 500 years. They have also documented the same phenomenon in other countries.

The housing collapse, near meltdown of our financial system, revolutions in the Middle East, economic turmoil in Europe, poisoned political atmosphere in Washington DC, and most recently the Occupy Wall Street movement are part of a larger cycle. The four living generations have each entered the phases of their lives that will lead to a convulsive upheaval and destruction of the existing social order. We’ve entered a twenty year period of Crisis as described by Strauss & Howe:

“A CRISIS arises in response to sudden threats that previously would have been ignored or deferred, but which are now perceived as dire. Great worldly perils boil off the clutter and complexity of life, leaving behind one simple imperative: The society must prevail. This requires a solid public consensus, aggressive institutions, and personal sacrifice. People support new efforts to wield public authority, whose perceived successes soon justify more of the same. Government governs, community obstacles are removed, and laws and customs that resisted change for decades are swiftly shunted aside. A grim preoccupation with civic peril causes spiritual curiosity to decline. Public order tightens, private risk-taking abates, and crime and substance abuse decline. Families strengthen, gender distinctions widen, and child-rearing reaches a smothering degree of protection and structure. The young focus their energy on worldly achievements, leaving values in the hands of the old. Wars are fought with fury and for maximum result.” – Strauss & Howe

History is Cyclical, not Linear

“There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny.” Franklin Delano Roosevelt  

  

I’ve been trying to decipher which direction this Fourth Turning will lead, and the last six weeks has started to crystallize my thinking. I’ve been fascinated by the intense reactions, opinions and arguments that have taken place across the airwaves and internet regarding the true nature of the Occupy movement. Some of the reaction is based upon pure ideological grounds, with media outlets like Fox News, the Wall Street Journal, NY Post and CNBC, disparaging, ridiculing and demeaning the movement. The anti-rich tone of the protests may not sit well with the multi-billionaire owners (Rupert Murdoch, Mort Zuckerman, Roberts Family) of these mega-media corporations. The liberal media such as MSNBC, Huffington Post, and CNN have sometimes been fawning over the movement in an effort to co-opt it into liberal Tea Party for the benefit of Obama and the Democratic Party. The propaganda and misinformation coming from both these ideological camps is easy to discern for a critical thinking person. Sadly, the nation is filled with people that don’t want to think. Therefore, they let their opinions be formed by talking heads on a TV screen.

These reactions were predictable. What caught my attention was the generational reaction to Occupy Wall Street. I know all the rugged individualists out there chafe at being lumped into a generational cohort, but the fact remains that groups of people born during the same time frame encounter key historical events and social trends while occupying the same phase of life. Because members of a generation are molded in lasting ways by the eras they encounter as children and young adults, they also tend to share certain common beliefs and behaviors. Aware of the experiences and traits that they share with their peers, members of a generation also tend to share a sense of common perceived membership in that generation. To deny the reality that large clusters of human beings tend to act with a herd mentality is contrary to all visible evidence. The herd mentality can be observed in the Dot-com bubble, Americans unquestioningly allowing passage of the Patriot Act, the housing bubble, the mass hysteria over the latest iSomething, Black Friday riots at retail stores to obtain the “hottest” toy or gadget, and the slaves to the latest fashions and trends as directed by the corporate media machine. The masses don’t realize they are being manipulated by the few who understand the power of propaganda:

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.” – Edward Bernays – Propaganda – 1928

The Occupy movement is being driven by the Millennial Generation. They have used their superior technological and social networking skills to organize, educate, and inspire people to their cause while befuddling and confusing the authorities. They continue to rally more young people to their fight against Wall Street and K Street tyranny. The generational lines of battle are being drawn. The Baby Boom Generation, who is at the point of maximum power in society, fears this movement. They control Wall Street, corporate America, Congress, the courts, academia and the media. They have reached their peak of influence and power, which will rapidly wane over the next fifteen years. They see the Occupy movement as a threat to their supremacy and control of the system. The cynical, alienated, pragmatic Generation X is caught between the Boomers and the Millennials in this escalating conflict. It is likely the majority of this generation will side with the Millennials, realizing the future of the country depends on them and not the elderly Boomers. To clarify, not every Boomer, Gen Xer, or Millennial will act in concert with their generational cohort. But it doesn’t matter if a few cattle stray from the herd, when the herd is stampeding in one direction. 

The chart below details the Strauss & Howe configuration of generations and turnings for the last two Saeculums in American history. They describe their generational theory in the following terms:

“Turnings last about 20 years and always arrive in the same order. Four of them make up the cycle of history, which is about the length of a long human life. The first turning is a High, a period of confident expansion as a new order becomes established after the old has been dismantled. Next comes an Awakening, a time of rebellion against the now-established order, when spiritual exploration becomes the norm. Then comes an Unraveling, an increasingly troubled era of strong individualism that surmounts increasingly fragmented institutions. Last comes the Fourth Turning, an era of upheaval, a Crisis in which society redefines its very nature and purpose.” Strauss & Howe

Each new generation is born approximately three years prior to the next turning. This results in Strauss & Howe having a slightly different generational grouping than government demographers.

Great Power Saeculum (82)
Missionary Generation Prophet (Idealist) 1860–1882 (22) High: Reconstruction/Gilded Age
Lost Generation Nomad (Reactive) 1883–1900 (17) Awakening: Missionary Awakening
G.I. Generation Hero (Civic) 1901–1924 (23) Unraveling: World War I/Prohibition
Silent Generation Artist (Adaptive) 1925–1942 (17) Crisis: Great Depression/World War II
Millennial Saeculum (67+)
(Baby) Boom Generation Prophet (Idealist) 1943–1960 (17) High: Superpower America
13th Generation Nomad (Reactive) 1961–1981 (20) Awakening: Consciousness Revolution
(a.k.a Generation X)
Millennial Generation(Generation Y) Hero (Civic) 1982–2004 (22) Unraveling: Culture Wars, Postmodernism, Digital Technology
New Silent Generation (Generation Z) Artist (Adaptive) 2004–present (6+) Crisis: Great Recession, War on Terror, Declining Superpower, and Globalization

 

There is nothing mystical about their theory. Strauss & Howe are historians who have created a framework for understanding why people act a certain way to events differently, depending on which stage of life they occupy. The theory is so logical because it is based upon the average 80 year life cycle of a human being. A human being goes through four stages during their life: childhood, young adulthood, midlife, and elderhood. During each of these stages, you will react to the same event in a very different manner. During an 80 year cycle, there will be four generations at different stages of their life. The interaction between the generations at each 20 year turning determines how history is steered through the events of that cycle. The life cycle stages can be seen in this chart:

         
  Prophet Nomad Hero Artist
High Childhood Elderhood Midlife Young Adult
Awakening Young Adult Childhood Elderhood Midlife
Unraveling Midlife Young Adult Childhood Elderhood
Crisis Elderhood Midlife Young Adult Childhood
         

 

Strauss and Howe compare the saecular rhythm to the seasons of the year, which inevitably occur in the same order, but with slightly varying timing. Just as winter may come sooner or later, and be more or less severe in any given year, the same is true of a Fourth Turning in any given Saeculum. The theory does not predict the events which drive history, but it does predict the generational reaction to events depending upon their age. We entered the Fourth Turning Crisis in 2007 with the housing collapse and the implosion of our financial system. The configuration of elder self righteous Boomers at 60 years old, midlife pessimistic Gen Xers at 40 years old, and coming of age Millennials at 20 years old is an explosive mixture that will provide the impetus and fury to this period of catharsis and pain. Winter has arrived. There is no way to avoid it. The bitter winds have begun to blow. The first harsh front arrived in 2008 with the near meltdown of the worldwide economic system. There has been a lull in the biting gale force winds of this Crisis through the shoveling of massive amounts of newly created debt into a system already drowning in debt. The Occupy movement and the impending collapse of the European Union charade will usher in the next blizzard of pain and suffering. We hurdle towards are rendezvous with destiny.   

“The ‘spirit of America’ comes once a saeculum, only through what the ancients called ekpyrosis, nature’s fiery moment of death and discontinuity.  History’s periodic eras of Crisis combust the old social order and give birth to a new. A Fourth Turning is a solstice era of maximum darkness, in which the supply of social order is still falling—but the demand for order is now rising.  It is the saeculum’s hibernal, its time of trial. Nature exacts its fatal payment and pitilessly sorts out the survivors and the doomed.  Pleasures recede, tempests hurt, pretense is exposed, and toughness rewarded—all in a season.” Strauss & Howe

Millennials Rising

Over the last six weeks I’ve watched as the young protestors around the country have been called: filthy hippies, losers, lazy, coddled, socialists, communists, spoiled college kids, parasites, useful idiots, and tools of the left. Most of the wrath being heaped upon these young people for exercising their Constitutional right to free speech and freedom of assembly has been from the Baby Boom Generation, who are at the peak of their power in our society. Sixty percent of the Senate is made up of Baby Boomers, with the next closest generation being the Silent Generation with twenty five percent. Over 58% of the House of Representatives is made up of Baby Boomers, with the next closest generation being Gen Xers at 27%. They occupy the executive suites of the Wall Street banks (Blankfein, Dimon, Pandit, Monihan) and the Federal Reserve (Bernanke). They make up the majority of judges, local politicians and school boards. They run the Federal government agencies. And they dominate the airwaves as the high priced mouthpieces for their corporate bosses. This Prophet generation will lead the country through the trials and tribulations of this Fourth Turning.

The disdain and contempt for these Millennial protestors flies in the face of the facts about this generation. They use drugs at a lower rate than their parents did at the same age. Teen crime rates and teen pregnancies have declined. They will have the highest level of college education in U.S. history. They were protected during their youth as organized sports taught them teamwork. They are the most technologically savvy generation in history. They volunteer at a higher level than previous generations. They have been more upbeat and engaged than their predecessors (Gen X). And they are much closer to their parents than Boomers were at the same age. They reject the negativism and cynicism of their parents and believe positive change is possible in our society. They have shown respect for authority up until the last six weeks. They were primed to be led by Boomers that could articulate a positive vision of the future based on reality and a better tomorrow. They were ready to make sacrifices in order to create a brighter future. But a funny thing happened. The Boomer generation failed to deliver on their part of the bargain.

Prior Hero Generation Americans had braved the winter at Valley Forge and stormed the beaches of Normandy as Prophet leaders like Ben Franklin and Franklin Roosevelt provided inspirational guidance and the vision of a better tomorrow. Strauss & Howe accurately assessed the Millennial Generation in their book Millennials Rising: The Next Great Generation, published in 2000 when the 1st Millennials were graduating high school:

“As a group, Millennials are unlike any other youth generation in living memory. They are more numerous, more affluent, better educated, and more ethnically diverse. More important, they are beginning to manifest a wide array of positive social habits that older Americans no longer associate with youth, including a new focus on teamwork, achievement, modesty and good conduct. Only a few years from now, this can-do youth revolution will overwhelm the cynics and pessimists … will entirely recast the image of youth from downbeat and alienated to upbeat and engaged — with potentially seismic consequences for America.” - Strauss & Howe

The youth of America listened to their parents and stayed in school. They’ve racked up over $1 trillion in student loan debt getting college educations. Meanwhile, our Baby Boomer leadership had an opportunity to address the country’s unsustainable fiscal path by accepting the consequences of a thirty year debt binge and liquidating the banks that took extreme risks with extreme leverage. An orderly liquidation (aka Washington Mutual) would have punished the stockholders, bondholders and management of the Wall Street banks, while leaving the depositors whole and purging the system of debt that can never be paid off. Our politicians could have ended our wars of choice in the Middle East and cut our war spending by hundreds of billions without sacrificing one iota of safety for the American people. The political leadership could have put the country on a deficit reduction path that would have insured the long-term viability of our republic.

Instead of doing the right thing, our Baby Boomer leaders did the exact opposite of the right thing. They held the American taxpayer hostage and absconded with trillions of their tax dollars and handed it over to the same Wall Street banks that had run the largest fraud scheme in world history and blew up the worldwide financial system. The Boomer Chairman of the Federal Reserve decided to not only save the Wall Street banks but to purposefully try to pump up the stock market, while destroying the lives of savers and senior citizens with his zero interest rate policy. His policies have led to a surge in energy and food prices and contributed to revolutions in the Middle East. The Wall Street banks have used the accounting gimmick of relieving loan loss reserves to create fake profits over the last two years. Wall Street celebrated by paying themselves $60 billion in bonuses between 2008 and 2010. The poster boys for the .1% Jamie Dimon and Lloyd Blankfein “earned” $23 million and $19 million respectively in 2010.

The politicians borrowed trillions from future unborn generations to inflict a Keynesian nightmare of solutions on the American economy that included: an $800 billion porkulus program, $22 billion pissed down the toilet on a homebuyer tax credit as home prices are now lower, $3 billion for Cash for Clunkers that cost $24,000 per car sold, loan modification schemes, tax credits for windows, doors and appliances, and payroll tax cuts. The result of all the Federal Reserve and politician “solutions” has been to increase the National Debt by $5.3 trillion in three years, a 55% increase. It took the country over 200 years to accumulate the first $5.3 trillion in debt. Everything done thus far has benefitted only the top 1%. The real unemployment rate is 23%. The real inflation rate is between 5% and 10%. The economy is headed back into recession. But at least the top 1% are doing well, as the stock market has risen 84% from its 2009 lows. Somehow, the oligarchy that runs this country is taken aback by the protests growing increasingly contentious across the country. It is not a surprise to those who understand the cyclical nature of history and the darkening mood in this country, which has been deepening since the Tea Party protests of 2009.

Hope You Are Quite Prepared To Die

Hope you got your things together.
Hope you are quite prepared to die.
Looks like we’re in for nasty weather.
One eye is taken for an eye.

Creedence Clearwater Revival – Bad Moon Rising

  

It seems the young people in this country have realized they have no future when the system is run for the benefit of an oligarchy consisting of Wall Street banks, mega-corporations, media conglomerates, and puppet politicians in Washington D.C. These people will stop at nothing to retain their wealth and power. Not only do they want to retain it, they are actively trying to increase it. They have achieved their goal beyond all expectations, and are still able to convince a large portion of the population through their propaganda machine they deserve every penny. The chasm between the “Haves” and “Have Nots” has never been greater in U.S. history. The truth is that Americans have always admired entrepreneurs like Steve Jobs and Bill Gates who created businesses, created jobs, and ended up with vast wealth. But, that is not the wealth protestors on Wall Street and across the country are angry about. They are angry at the hyper-concentration of wealth in the hands of men that have rigged the system in their favor through bribery (lobbying & contributions), fraud (no-doc loans & AAA rated toxic derivatives), accounting schemes (special purpose vehicles & suspending mark to market) and holding the American middle class hostage (TARP & zero interest rates). When the 400 wealthiest Americans own more than the “lower” 150 million Americans put together, you have a system that is badly broken.

Do the Millennials have a right to be angry? The table below shows how the economic solutions of the oligarchy have worked out for the youth of our country. There are 19 million young people between the ages of 18 and 29 that are not working. Some are still in college, but most are not. That is a lot of potential Occupiers.  

   
Age Group %  not employed
18 to 19 65%
20 to 24 40%
25 to 29 27%
   

After observing the reactions to the OWS movement over the last few weeks, I’m more convinced than ever that different generations view the same event through the prism of their own life experiences, beliefs, prejudices, and biases. I’ve found the Baby Boomers have generally been doubtful of the protestors’ motives, condescending towards their intelligence, scornful about their appearance, and derogatory regarding their flaunting of authority. This is fascinating considering that Boomers love to reminisce about their glory days protesting the Vietnam War. The Boomer generation was at this same age configuration in 1970. Their GI Generation parents probably had the same opinions about the long haired, drug using, sex crazed youthful Boomers in 1970. Now the Boomers are the establishment and they don’t like seeing their authority challenged by these naïve troublemakers. Strauss & Howe saw the likelihood of this conflict back in 1997 when the oldest Millennials were only 15 years old:

“When young adults encounter leaders who cling to the old regime (and who keep propping up senior benefit programs that will by then be busting the budget), they will not tune out, 13er-style. Instead they will get busy working to defeat or overcome their adversaries. Their success will lead some older critics to perceive real danger in a rising generation perceived as capable but naïve.” –  Strauss & Howe

The Millennials spearheading these protests are most certainly capable. In a matter of six weeks they have created a worldwide movement occupying every major city in the world. The biggest complaints coming from the Boomers is they are naïve, misguided, immature, and don’t understand the real problem. The bitter condemnation of the protestors for breaking a myriad of minor administrative laws, regulations, ordinances, and curfews is beyond laughable. Fox News, CNBC, the Wall Street Journal, NY Post and the other mouthpieces of the ruling oligarchy are apoplectic about the young protestors camping out in public parks, but they were not too concerned by the Wall Street banks systematically defrauding millions of people by creating mortgage products designed to deceive.

They weren’t irate when Wall Street held Congress hostage for a $700 billion ransom. They weren’t enraged when Ben Bernanke bought a trillion dollars of toxic mortgage debt from the Wall Street banks at 100 cents on the dollar. They weren’t furious when the government officials forced the FASB to abandon mark to market rules, allowing the Wall Street banks to falsely report their financial statements. But, they are outraged by young people exercising their right to free speech and right to assembly. When their paid armies of thugs attack the protestors with tear gas and billy clubs, they declare the protestors had it coming. It seems the 150 year old American tradition of civil disobedience to protest unjust laws, defined by Henry David Thoreau, is not too popular among Boomers or the corporate mainstream media.

“Unjust laws exist: shall we be content to obey them, or shall we endeavor to amend them, and obey them until we have succeeded, or shall we transgress them at once?” –  Henry David Thoreau 

Many of the protestors are naïve, misinformed about the true causes of the financial crisis, impulsive, and seeking solutions that would result in more government control. Their critics say they should be in Washington DC, not on Wall Street. The Boomers don’t like their flaunting of rules and regulations imposed by local authorities. Again, the older generations have conveniently forgotten how naïve, impulsive and rebellious they were at the age of 20. The amazing thing to me is this generation never showed this side during their younger years. Their slogans like “Tax the Rich” are misguided. They need assistance from older generations, but instead they are getting beaten and arrested by the older generation. Some Boomers, like William Black, have opened a dialogue with the protestors, but the majority of Boomers are resistant to the movement. In prior Fourth Turnings, the Hero archetype followed the orders of the Prophet archetype. I fear the Boomer Generation, through their intransigence and refusal to proactively address our structural problems, have set in motion a revolutionary chain of events that will lead to class warfare and possibly civil war in this country. The real danger, as experienced in other countries (France, Russia, China), is that a demagogue could gain control. Strauss & Howe envisioned that possibility in 1997:

“This youthful hunger for social discipline and centralized authority could lead Millenial youth brigades to lend mass to dangerous demagogues. The risk of class warfare will be especially grave if the 20% of Millenials who were poor as children (50% in the inner cities) come of age seeing their peer-bonded paths to generational progress blocked by elder inertia. Unraveling era adults who are today chilled by school uniforms will be truly frightened by the Millennials’ Crisis-era collectivism.” –  Strauss & Howe

The most outrageous accusation made against the protestors is they are somehow responsible for their current plight. The Boomers declare they are spoiled kids who need to get a job. A critical thinking analysis of the Millennial Generation demographics reveals how ridiculous it is for Boomers to blame Millennials in any way for our current economic debacle. There are 97 million Millennials and 54 million of them are under the age of 20. Another 21 million are between the ages of 20 and 24, barely getting started in the real world. Only 39 million of them were eligible to even vote in the last Presidential election. It should be clear to even the most dense CNBC anchor that the young people protesting in the streets are not to blame for the raping and pillaging of the U.S. economic system by the barbarians on Wall Street over the last thirty years, with the consent and encouragement of the bought off politicians in Washington D.C.

Generation Age Total Pop.(mil)
G.I. 86–109 6
Silent 69–85 22
Boomer 51–68 73
Gen-X 30–50 83
Millennial 7–29 97
Homeland – 6 29

 

After placing the living generations in their assigned age buckets, I was shocked to see the Millennials being, by far, the largest generation. I had assumed it was the Baby Boom Generation. At their peak in 1970 they totaled 76 million and made up 37% of the U.S. population. But, time has not treated them well. Approximately 3 million have left this earth and they only make up 24% of the population. Both Gen X and the Millennials now outnumber the Baby Boomers. They will continue to see their power wane as the years roll by. The Millennial power will grow as the Fourth Turning progresses, since they make up 31% of the population today and will see that ratio grow as the G.I. and Silent generations die off. There are very few people remaining that lived through the last Fourth Turning. The initial phase of this Crisis has revolved around the Wall Street induced housing collapse with the consequences of not enforcing the rule of law by liquidating insolvent banks and prosecuting the white collar criminals that reaped ungodly profits by committing fraud on an epic scale. This has left the country with an unsustainable level of debt, a hollowed out economy, and unemployment at Great Depression era levels, while Wall Street bankers, media titans, and career politicians reap compensation packages fit for kings. Jesse from Jesse’s Café Americain describes our political system perfectly: 

Kleptocracy:“rule by thieves” is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population, often without pretense of honest service.No outside oversight is possible, due to the ability of the kleptocrats to personally control both the supply of public funds and the means of determining their disbursal. 

The Millennials were raised by parents who believed government could solve all our problems. The welfare-warfare state became monolithic during the Boomer reign of error. Therefore, it is understandable these young naïve revolutionaries still cling to the belief the government can solve our problems through more taxes or new programs. The point being missed by all the doubters and detractors of the OWS movement is these young people have zeroed in on the right culprits. They are not stupid. They understand these basic facts:

  • The $15 trillion National Debt, headed to $20 trillion by 2015, is the gift we are leaving to the Millennials.
  • The $100 trillion of unfunded entitlement liabilities will never be honored by the time the Millennials retire.
  • The Millennials know the $1 trillion per year spent maintaining our military empire is more than the next 18 countries’ spending combined, and it benefits only the corporations peddling armaments, while making us less safe.
  • The soldiers getting killed and wounded in our wars of choice in the Middle East are predominantly Millennials.
  • There are 14,000 professional lobbyists in Washington D.C. representing mega-corporations, unions, trade groups and other special interests, which have doled out $30 billion over the last decade influencing (bribing) politicians to write the laws in their favor, and not one lobbyist was working for the Millennials.
  • Millennials know Wall Street has spent $154 million on political contributions and $383 million on lobbying in the last decade. The buying of political influence by our bastions of crony capitalism was as follows: Goldman Sachs – $46 million; Merrill Lynch – $68 million; Citigroup – $108 million; J.P. Morgan Chase – $65 million; Bank of America – $39 million.
  • The Millennials know the 71,000 page Federal tax code and 140,000 pages of Federal regulations are written to protect the interests of the few, not the many.
  • Millennials know the financial industry consciously created products designed to induce mortgage fraud, knowingly packaged toxic mortgages into derivatives, bribed the rating agencies to rate them AAA, sold these worthless instruments to their customers, shorted these same derivatives, and pocketed billions in fees and ill gotten gains. After blowing up the financial system and costing taxpayers trillions, not one person has gone to jail.
  • Millennials know how to read a chart:

 

  • Millennials know that Barack Obama and Mitt Romney are the same face of a never changing oligarchy. Change brought about through opposing political parties and elections has been rendered obsolete as the oligarchy chooses the candidates, uses their wealth to create policies and programs, and is able to control the masses with their propaganda message machines.

So here we stand, about five years into this Fourth Turning, with protests in the U.S. growing increasingly violent and intense. The calls for civility after the Gabrielle Giffords assassination attempt in January of this year went unheeded as the political vitriol has grown increasingly nasty. January seems like a lifetime ago. Revolutions have overthrown rulers in Tunisia, Egypt, and Libya. Unrest and bloodshed continues in Syria, Gaza, Yemen, Bahrain and Saudi Arabia. The European Union is disintegrating before our very eyes and violent protests against austerity measures flare up on a daily basis in Greece, Italy and Spain. There is no doubt we have entered the 2nd stage of this Crisis – the more violent and dangerous stage. I can sense fear and uneasiness among the more connected members of society. The drones, which constitute a large portion of America, are highly focused on Kim Kardashian’s divorce after 72 days and a $10 million wedding. The Millennials leading the protest movement are connected. They understand what is at stake. Strauss and Howe had it figured out 14 years ago:

“Of all today’s generations, the Millenials probably have the most at stake in the coming Crisis. If it ends badly, they would bear the full burden of its consequences throughout their adult lives. Yet if the Crisis ends well, Millenials will gain a triumphant reputation for virtue, valor and competence.” – Strauss & Howe

So what happens next? The truth is that no one knows what will happen next. We can only try to connect the dots and peer into a foggy future. We know that our leaders have not solved any of the financial imbalances that existed in 2007. They have made them worse, as have leaders across the world from China to Japan to Europe. We await the next Lehman moment, except this time it will be a sovereign nation and the contagion will be ten times greater than the 2008 meltdown. Our already fragile economy will be brought to its knees in a replay of the 1930s. As nations plunge into economic chaos, civil strife will likely lead to authoritarian figures rising from the ashes of the turmoil. Could Russia and China take advantage of this turmoil to acquire new resources through military means? Possibly. When the American middle class sees their remaining wealth dwindle to nothing, will they take to the streets? Revolution seems too remote to fathom, but it seemed remote in 1764 and 1855 too. When people have nothing left to lose, anything is possible. The collapse of our economic system is baked in the cake. Our current fiscal path is destined to end in fatality. Strauss & Howe knew the outcome of this Fourth Turning would depend upon the wisdom, strength and fortitude of the American people:    

 “The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. Thus might the next Fourth Turning end in apocalypse – or glory. The nation could be ruined, its democracy destroyed, and millions of people scattered or killed. Or America could enter a new golden age, triumphantly applying shared values to improve the human condition. The rhythms of history do not reveal the outcome of the coming Crisis; all they suggest is the timing and dimension.” – Strauss & Howe

Winter has arrived. There will be difficult hurdles with many trials and tribulations in front of us. You may have to choose sides in a generational war. No one wants to face bitter choices. No one wants bloodshed and war. But it really doesn’t matter what we want. There is no real justice in a country that attacks and incarcerates young people for exercising their right to free speech and dissent, while allowing a psychopathic Wall Street banking cartel to wreak havoc upon our nation. The generational alignment is such that the existing social order will be swept away in a violent manner. What replaces the existing order will be up to the American people. You may lose your wealth, security, freedom, or life during the coming struggle. The years ahead will require steely determination and courage like our forefathers exhibited on the frigid barren fields at Valley Forge, the undulating wheat fields at Gettysburg, and the bloody beaches of Normandy. I have three teenage sons at home. My choices will be dictated by what I feel will be best for their futures. I will do WHATEVER it takes to secure a better tomorrow for my boys. If that means standing beside them in battle, so be it. Lines are being drawn. You will not be able to avoid choosing sides, just as you cannot avoid Winter if you ever want to see the dawn of another Spring.

 

“History offers no guarantees. We should not assume that Providence will always exempt our nation from the irreversible tragedies that have overtaken so many others: not just temporary hardship, but debasement and total ruin. Since Vietnam, many Americans suppose they know what it means to lose a war. Losing in the next Fourth Turning, however, could mean something incomparably worse. It could mean a lasting defeat from which our national innocence – perhaps even our nation – might never recover.” – Strauss & Howe

 

BOOMERS – YOUR CRISIS HAS ARRIVED (Oldie but Goodie)

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Posted on 30th April 2011 by Administrator in Economy |Politics |Social Issues

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I wrote this article at the depths of the economic downturn in February 2009. The stock market was in freefall and bottomed in March 2009, down 50% from its high. Obama had just assumed power. Oil was selling at $40 per barrel. I made a number of predictions. You can judge how well I did. I took a few shots at Boomers, but I was pretty easy on them. Anyone left on the site who doesn’t understand the Fourth Turning theory, will get a good education at the beginning of the article.

“There is a mysterious cycle in human events. To some generations, much is given. Of other generations, much is expected. This Generation has a rendezvous with destiny.”  Franklin Roosevelt – 1936

President Roosevelt was correct. The generation he was speaking to was already dealing with the worst financial crisis in the history of the United States, the Great Depression. By 1945, over 400,000 of this generation had lost their lives. Another 600,000 men were wounded. Much was expected and much was sacrificed. Every generation has a rendezvous with destiny. The generation that won World War II passed the ultimate test and proceeded to produce the next generation, the Baby Boom Generation. Their rendezvous with destiny is underway. Will it be a rendezvous with history that results in World War III, the collapse of the Great American Republic, dictatorship, or a return to the original Constitutional principles upon which this country was founded? Many of you are probably thinking the idea of WW III, collapse or dictatorship is crazy. I’d respond with the wisdom of Kramer from the classic Seinfeld show.

Jerry:             “Oh you’re crazy”

Kramer:         “Am I? Or am I so sane that you just blew your mind?”

Jerry:             “It’s impossible”

Kramer:         “Is it? Or is it so possible your head is spinning like a top?”

Jerry:             “It can’t be”

Kramer:         “Can’t it? Or is your entire world just crashing down all around you?”

As a student of history I’m drawn to the concept of cycles. It is comforting to think that history has recurring patterns and a natural rhythm. Trying to figure out why the major events in history occurred is complex, challenging and fascinating. When I read an updated 1997 article by Doug Casey in December on John Mauldin’s site called Foundations of Crisis, I was blown away. Mr. Casey had read the book The Fourth Turning by William Strauss and Neil Howe and made some forecasts of what would happen in the next few years. They were eerily accurate, including an airliner being purposefully crashed into a government building to trigger a crisis. After reading this article I’ve been trying to wrap my arms around the implications of their theory and the possible consequences for the United States. I know that an individual can learn from the past. I’ve always thought that poet George Santayana’s quote, “Those who cannot remember the past are condemned to repeat it”, is profound and worth studying.

The crucial issue is whether societies as a whole are capable of learning from the past or are they condemned to the inevitable cycle of history. Can an individual change the course of history? Was World War II inevitable, even if Adolph Hitler had been killed during World War I? Is there anything that can be done to avert the cyclical crisis that seems to arrive on a consistent basis throughout history? Is our destiny already preordained? Mr. Strauss and Mr. Howe wrote the following words in 1997:

Based on historical patterns, America will hit a once-in-a-century national crisis within the decade…’like winter,’ the crisis or ‘fourth turning’ cannot be averted. It will last 20 years or so and bring hardship and upheavals similar to previous fourth turnings, such as the American Revolution, the Civil War, the Great Depression and World War II. The fourth turning is a perilous time because the result could be a new ‘golden age’ for America or the beginning of the end. It all will begin with a ‘sudden spark’ that catalyzes a crisis mood around the year 2005.

I don’t have a preconceived notion of our country’s destiny, but I’m getting a bad feeling about the track we are on. The last thing in the world I want to see is my three boys being forced into a war caused by a bunch of clueless 60 year old political hack morons in Washington DC fulfilling their destiny to cause the once in a century national crisis. Based on the foolish actions of most politicians in Washington over the last thirty years, I fear for the future of our country. I don’t think the politicians in Washington comprehend the state of affairs. I sense the mood of the country turning. Fear, anger and disillusionment are the prevalent themes. Change is coming, but it is not the change that Barack Obama campaigned for. It will be forced upon us by circumstances beyond any one person’s control. While we are hurtling towards our summit with destiny, Congress continues its path of pork barrel spending, short term solutions, party politics, and condemning our children and grandchildren to a lower standard of living. The “leaders” of this country are using the tried and true method of using fear to ram through their $900 billion tax on future generations. President Bush used the same fear tactics to launch his invasion of Iraq. I see a similar success story with the coming stimulus package. Maybe the coming crisis will ultimately lead to Great Leaders rising to the occasion.

THE FOURTH TURNING

Strauss and Howe believe that history is marked by 80 to 100 year cycles which match the lifespan of most human beings. These cycles are discernible by four generations of 20 to 25 years that show remarkable consistency over history. I’m sure this theory will anger the individualists out there. They are not saying that everyone within a generation acts alike, but are shaped by joint experiences and time period in history. According to Strauss and Howe:

 Turnings last about 20 years and always arrive in the same order. Four of them make up the cycle of history, which is about the length of a long human life. The first turning is a High, a period of confident expansion as a new order becomes established after the old has been dismantled. Next comes an Awakening, a time of rebellion against the now-established order, when spiritual exploration becomes the norm. Then comes an Unraveling, an increasingly troubled era of strong individualism that surmounts increasingly fragmented institutions. Last comes the Fourth Turning, an era of upheaval, a Crisis in which society redefines its very nature and purpose.

They are able to trace these turnings back to 1500 with remarkable consistency. They have broken U.S. history into the following cycles of history: Revolutionary Cycle (1701-1791), Civil War Cycle (1792-1859), Great Power Cycle (1860-1942), and the Millennial Cycle (1943-2???). Within these cycles are four distinct generations, that have a consistent persona because their parents had similar views, they listened to the same music, read the same books, were taught the same curriculum, were bombarded with the same marketing messages, and experienced the same set of unique experiences. Even though every Baby Boomer is not alike, the sheer size of this generation of 76 million people has left a dramatic imprint on history. The shared experiences of this cohort are clearly visible as they have marched through the cycle of history. The four typical generations within a cycle as described by Strauss and Howe are:

Prophet/Idealist

A Prophet (or Idealist) generation is born during a High, spends its rising adult years during an Awakening, spends midlife during an Unraveling, and spends old age in a Crisis. Prophetic leaders have been cerebral and principled, summoners of human sacrifice, wagers of righteous wars. Early in life, few saw combat in uniform. Late in life, most prophets come to be revered as much for their words as for their deeds.

Nomad/Reactive

A Nomad (or Reactive) generation is born during an Awakening, spends its rising adult years during an Unraveling, spends midlife during a Crisis, and spends old age in a new High. Nomadic leaders have been cunning, hard-to-fool realists, taciturn warriors who prefer to meet problems and adversaries one-on-one.

Hero/Civic

A Hero (or Civic) generation is born during an Unraveling, spends its rising adult years during a Crisis, spends midlife during a High, and spends old age in an Awakening. Heroic leaders are considered to have been vigorous and rational institution-builders, busy and competent in old age. All of them entering midlife were aggressive advocates of technological progress, economic prosperity, social harmony, and public optimism.

Artist/Adaptive

An Artist (or Adaptive) generation is born during a Crisis, spends its rising adult years in a new High, spends midlife in an Awakening, and spends old age in an Unraveling. Artistic leaders have been advocates of fairness and the politics of inclusion, irrepressible in the wake of failure.

This concept of 100 year cycles consisting of four generations is very logical to me. It all seems so theoretical and quaint until you realize that if they are right, we have just entered The Fourth Turning, a period of upheaval, crisis and enormous societal and possibly worldwide change. This is not a normal cyclical recession and bear market. There are much larger forces at work. Washington politicians are so consumed with their short-term election politics, power plays, enrichment of supporters, and letting lobbyists write our laws, they are incapable of seeing the real gathering storm that is about to engulf them. They go about their day to day horse trading and fooling the public with rhetoric, while a crisis of epic proportions is looming just over the horizon.

100 YEARS TO LIVE

The recent song by the group Five for Fighting called 100 Years reflects the 100 year cycle that all humans live through.

15 there’s still time for you
Time to buy and time to lose
15, there’s never a wish better than this
When you only got 100 years to live
I’m 33 for a moment
Still the man, but you see I’m a they
A kid on the way
A family on my mind
I’m 45 for a moment
The sea is high
And I’m heading into a crisis
Chasing the years of my life

The lyrics heading into a crisis couldn’t be truer today. We are only on this earth for 100 years. Why shouldn’t every person want to leave the earth a better place than they were born into? Instead, the world has periods of advancement and periods of regression, periods of peace and periods of war, periods of awakening and periods of crisis.

The last 150 years in American history as segmented by Strauss and Howe is charted below. Each generation experiences the four turnings at a different time in their lives. An appreciation of past turnings may give us clues to what will befall our country in the next 20 years.

Great Power Saeculum
Missionary Generation Prophet (Idealist) 1860–1882 The indulged home-and-hearth children of the post-Civil War era. They came of age as labor anarchists, and campus rioters. In the 1930s and ‘40s, their elder elite became the “Wise Old Men” who enacted a “New Deal” (and Social Security) for the benefit of youth, led the global war against fascism, and reaffirmed America’s highest ideals during a transformative era in world history.
Lost Generation Nomad (Reactive) 1883–1900 The Third Great Awakening was a period of religious activism in American history from the late 1850s to the 1900s. It affected pietistic Protestant denominations and had a strong sense of social activism. It gathered strength from the postmillennial theology that the Second Coming of Christ would come after mankind had reformed the entire earth.
G.I. Generation (aka Greatest Generation) Hero (Civic) 1901–1924 As young adults, their uniformed corps patiently endured depression and heroically conquered foreign enemies. In a midlife subsidized by the G.I. Bill, they built gleaming suburbs, invented miracle vaccines, plugged “missile gaps,” and launched moon rockets.
Silent Generation Artist (Adaptive) 1925–1942 Grew up as the suffocated children of war and depression. They came of age just too late to be war heroes and just too early to be youthful free spirits. Instead, this early-marrying Lonely Crowd became the risk-averse technicians and professionals—as well as the sensitive rock ‘n rollers and civil-rights advocates—of a post-crisis era in which conformity seemed to be a sure ticket to success. 
Millennial Saeculum
Baby Boom Generation Prophet (Idealist) 1943–1960 Basked as children in Dr. Spock permissiveness, suburban conformism, Sputnik-era schooling, Beaver Cleaver friendliness, and Father Knows Best family order. They came of age rebelling against the worldly blueprints of their parents. Youth pathologies worsened—and SAT scores began a 17-year slide. In the early 1980s, many young adults became self-absorbed “yuppies” with mainstream careers but perfectionist lifestyles. Entering midlife (and national power), they are trumpeting values, touting a “politics of meaning,” and waging scorched-earth Culture Wars. 
13th Generation (aka Generation X) Nomad (Reactive) 1961–1981 Survived a “hurried” childhood of divorce, latchkeys, open classrooms, devil-child movies, and a shift from G to R ratings. They came of age curtailing the earlier rise in youth crime and fall in test scores—yet heard themselves denounced as so wild and stupid as to put The Nation At Risk. In jobs, they embrace risk and prefer free agency over loyal corporatism. Politically, they lean toward pragmatism and non-affiliation, and would rather volunteer than vote.
Millennial Generation Hero (Civic) 1982–200? As abortion and divorce rates ebbed, the popular culture began stigmatizing hands-off parental styles and recasting babies as special. Child abuse and child safety became hot topics, while books teaching virtues and values became best-sellers. Today, politicians define adult issues (from tax cuts to deficits) in terms of their effects on children.
New Silent Generation Artist (Adaptive) 200?– This generation is the first to be born in a digital world and is currently in grade school. This new generation is being molded from the outset to be unique, with a focus on advanced second-hand interactive learning techniques. The result being Gen Z children are exposed to an environment that is heavy on stimuli, and weaker in interpersonal relationships.

Sources: Wikipedia & The Fourth Turning

THE FIRST TURNING – THE HIGH (Spring)

The American High in the 20th century began in1946 with unconditional victory in World War II. According to Strauss and Howe:

A HIGH brings a renaissance to community life. With the new civic order in place, people want to put the Crisis behind them and feel content about what they have collectively achieved. Any social issues left unresolved by the Crisis must now remain so. The need for dutiful sacrifice has ebbed, yet the society continues to demand order and consensus. The recent fear for group survival transmutes into a desire for investment, growth, and strength–which in turn produces an era of commercial prosperity, institutional solidarity, and political stability. The big public arguments are over means, not ends.

The mood of the country after World War II was joyous. America was left as the sole global power. Its industrial power was unsurpassed. Europe, Japan and the Soviet Union lay in shambles. The country settled into a period of prosperity and conformity. America was brimming with confidence.

We were confident that our democratic principles could be spread throughout the world. The American High lasted from the Truman presidency through the Kennedy presidency. As the youthful President Kennedy took office in 1961, anything was possible. We could put a man on the moon, defeat communism, and eradicate poverty. The symbol of this period would be the Disney World ride Carousel of Progress, a sterile world inhabited by animatronic people. This time period also gave life to the Baby Boom Generation. Their mouseketeers ears and Leave it to Beaver lives of the 1950’s were brought to an abrupt confidence shattering end with the assassination of John F. Kennedy in 1963.

THE SECOND TURNING – THE AWAKENING (Summer)

The Fourth Awakening of the great American Republic began in 1964. This episode is known as the Conscious Revolution. Strauss and Howe describe these phases in history:

An AWAKENING arrives with a dramatic challenge against the High’s assumptions about benevolent reason and congenial institutions. The outer world now feels trivial compared to the inner world. New spiritual agendas and social ideals burst forth, along with utopian experiments seeking to reconcile total fellowship with total autonomy. The prosperity and security of a High are overtly disdained though covertly taken for granted. A society searches for soul over science, meanings over things. Youth-fired attacks break out against the established institutional order. As these attacks take their toll, society has difficulty coalescing around common goals. People stop believing that social progress requires social discipline. Public order deteriorates, and crime and substance abuse rise. 

The upheaval of the 1960’s took the country by surprise. The Vietnam War, assassination of Bobby Kennedy and Martin Luther King, campus riots, Kent State massacre, drug use, and promiscuous sex marked a vivid departure from the High. The older establishment was outraged by the personal liberation youth culture. Baby Boomers rebelled against everything their parents stood for. The Cultural Revolution was shocking to the older generation. Previous Awakenings in U.S. History were religiously based. The 1960’s and 1970’s were a tumultuous period that tore the fabric of American life apart. Instead of being led by mainstream religions, this Awakening was led by a Baby Boom generation that had been coddled and spoiled by their parents. Instead of turning to religion, they turned to self actualization. They became the self absorbed “Me Generation”.

The New Age teenage hippies of the 1960’s grew into selfish adults, more concerned by their professional careers, obtaining a Harvard MBA, acquiring the biggest McMansion, and graduating from a 200 Series BMW to a 300 Series BMW. As the country moved out of the 1970’s into a new era, individualism and ego enrichment became the dominant themes. The end of this Awakening period in 1984 was marked by the classification of the then 25 to 35 year old Baby Boom Generation as Yuppies. Young upwardly mobile professionals were characterized accurately in the movie The Big Chill, the novel Bonfire of the Vanities by Tom Wolfe and the TV show Thirtysomething. These were not flattering portrayals.

THE THIRD TURNING – THE UNRAVELING (Fall)

The latest Unraveling period in U.S. history began during the presidency of Ronald Reagan. His theme of “Morning in America” convinced most of the country that a new era of prosperity would lead to all boats rising. Strauss and Howe describe the traits during these periods:

An UNRAVELING begins as a society-wide embrace of the liberating cultural forces set loose by the Awakening. People have had their fill of spiritual rebirth, moral protest, and lifestyle experimentation. Content with what they have become individually, they vigorously assert an ethos of pragmatism, self-reliance, laissez faire, and national (or sectional or ethnic) chauvinism. While personal satisfaction is high, public trust ebbs amid a fragmenting culture, harsh debates over values, and weakening civic habits. The sense of guilt (which rewards principle and individuality) reaches its zenith. As moral debates brew, the big public arguments are over ends, not means. Decisive public action becomes very difficult, as community problems are deferred. Eventually, cynical alienation hardens into a brooding pessimism. The approaching specter of public disaster ultimately elicits a mix of paralysis and apathy.

The period between 1984 and 2001 was a period of peace and prosperity. President Reagan cut taxes, Paul Volcker defeated inflation, the Soviet Union collapsed, the stock market went up 1,000%, and MBA yuppies elevated to senior management positions on Wall Street. This interlude echoed the High of 1946 to 1964. The self involved Baby Boom Generation kept busy accumulating stuff. Their personal satisfaction is what mattered most. Gordon Gekko, the John Thain of his generation, uttered the words in the movie Wall Street that reflect the mood of the 1980’s. “Greed, for lack of a better word, is good.”

The 1990’s were dominated by cultural wars. The Republican Party and Democratic Party debate become extremely partisan. Public deliberations became harsh. Moral certitude was exuded by all sides of every issue. Hard driving overachieving narcissistic yuppies wearing Brooks Brothers suits and Rolex watches dominated corporate America. As twenty-eight-year-old Rob Lewis, a yuppie profiled in Newsweek, noted, yuppies were often willing to sacrifice “marriage, families, free time, relaxation.” He added, “Our marriages seem like mergers, our divorces like divestitures.”

The internet was going to change the world. Fraudulent IPOs were rolled out to the unsuspecting public. Day traders could get rich without working. Government did what it does best, spend money and defer all tough decisions to the distant future. A tough unpopular decision deferred is the path to reelection for a professional politician. The unwillingness to work together towards solutions that would insure that future generations weren’t left with the debts of the Baby Boom Generation, led to the current crisis being worse than it needed to be. As yuppies dashed down the streets of New York City, beating away on their crack-berries, on a sunny cool Fall morning, little did they know that their materialistic egotistical frenzied lives were about to change forever. With the tragic murder of 3,000 Americans in the Saudi led terrorist attacks of September 11, 2001, the Fourth Turning had arrived.

THE FOURTH TURNING – THE CRISIS (Winter)

We know how this Crisis period in our history began. We don’t know how it will end. Previous crisis periods in American history included The American Revolution (1773-1794), The Civil War (1860-1865), and the twin crisis of The Great Depression and World War II (1929-1945). All three period included wrenching highly destructive total wars. Will our current crisis period result in World War III?

Strauss and Howe describe the commonalities of most crisis periods:

A CRISIS arises in response to sudden threats that previously would have been ignored or deferred, but which are now perceived as dire. Great worldly perils boil off the clutter and complexity of life, leaving behind one simple imperative: The society must prevail. This requires a solid public consensus, aggressive institutions, and personal sacrifice. People support new efforts to wield public authority, whose perceived successes soon justify more of the same. Government governs, community obstacles are removed, and laws and customs that resisted change for decades are swiftly shunted aside. A grim preoccupation with civic peril causes spiritual curiosity to decline. Public order tightens, private risk-taking abates, and crime and substance abuse decline. Families strengthen, gender distinctions widen, and child-rearing reaches a smothering degree of protection and structure. The young focus their energy on worldly achievements, leaving values in the hands of the old. Wars are fought with fury and for maximum result. 

Every crisis period has been initiated by a catalyst. The passage of the Stamp Acts started the American Revolution, the election of Abraham Lincoln sparked the Civil War and the Stock Market Crash of 1929 initiated the Depression/WW II crisis. If history is our guide, the Iraq and Afghan Wars will not be the only wars during this crisis epoch. Many challenges lie ahead. I don’t think the majority of Americans are ready to meet these challenges.

Winter Has Arrived

Strauss & Howe wrote the following words in 1997:

America feels like it’s unraveling. Though we live in an era of relative peace and comfort, we have settled into a mood of pessimism about the long-term future, fearful that our superpower nation is somehow rotting from within. The America of today feels worse, in its fundamentals, than the one many of us remember from youth, a society presided over by those of supposedly lesser consciousness. We yearn for civic character but satisfy ourselves with symbolic gestures and celebrity circuses. We perceive no greatness in our leaders, a new meanness in ourselves. Each new election brings a new jolt, its aftermath a new disappointment.

The Prophet Generation is the elder statesmen as we begin this secular crisis. George W. Bush was born in 1946. He is the eldest of the Prophet/Baby Boom Generation. Barack Obama was born in 1961 at the very end of the Baby Boom Generation. These two men have or will lead the United States through most of this crisis stage. George Bush and his cohort of neo-conservatives and their drastic overreaction to the terrorist attacks of 9/11, have set the stage for the most dangerous crisis in U.S. history. A Crisis always results in the appearance of strong leaders. George Washington, Abraham Lincoln, and Franklin Roosevelt rose to the occasion during our previous Crisis episodes. Strong does not always mean wise, thoughtful or right. George Bush exhibited strong leadership during his tenure. Wisdom and thoughtfulness were not two of his better traits. Barack Obama is a smart man and has exhibited some strong leadership skills in his initial weeks in office. He has also exhibited an ability to exaggerate threats to get what he wants. Will he rise to the level of Washington, Lincoln or Roosevelt?

On the day George Bush took office, he inherited an annual budget surplus that was the result of gridlock in Washington and PAYGO restrictions on Congressional spending. The National Debt stood at $5.7 trillion and our unfunded future liabilities for Social Security, Medicare and Medicaid stood at $20 trillion. We had not been at war for nine years. Today, our National Debt is $10.7 trillion, poised to rocket above $13 trillion in the next year. Our unfunded liabilities now total $53 trillion as President Bush signed a prescription benefit plan expansion that added $8 trillion to our grandchildren’s burden. Since 9/11 almost 5,000 Americans have died in battle, with 50,000 Americans wounded. We’ve spent $800 billion, so far, on a war that didn’t need to be fought. Untold thousands of Iraqi and Afghan civilians have been killed or wounded, despite the fact that none of the 9/11 terrorists were from Iraq or Afghanistan. Fifteen of the nineteen hijackers were from our “staunch ally”, Saudi Arabia. The acts of a terrorist organization consisting of less than 2,000 members resulted in actions by an American President that resulted in declining American moral influence throughout the world, increased terrorism around the world, budget deficits that threaten the very existence of our capitalistic system, and an American public that is angry, disillusioned and confused. Doug Casey in 1997 described the future actions of George Bush to a tee. “The Boomers in Elderhood will be dogmatic, harsh, puritanical, and quite willing to burn down the barn in order to destroy whatever rats they see.”

Domestically, the period from 2001 to 2008 could be described as “Boomers Gone Wild”. Boomers in their 40’s and 50’s now dominate society, as they have assumed the positions of power in government and business. Based on what they have accomplished so far, I truly fear for what comes next. After 9/11, President Bush urged Americans to spend to defeat terrorism, while Alan Greenspan lowered interest rates to historically low levels. This was like waving a red cape in front of a bull. The materialistic, self actualizing, individualistic Boomers went on the grandest borrowing and spending spree in the history of the world. Their mission: Save the world from terrorism by buying a 6,000 sq ft McMansion, the largest HDTV, the biggest Hummer, and most expensive Rolex. Boomers running Wall Street were happy to oblige with loans and complex derivatives to finance the Mardi Gras like celebration of capitalism.

The aftermath of the eight years of partying is, not surprisingly to some, the greatest hangover in the history of the world. There are 19 million vacant homes, 10% of all homes in the U.S. are in foreclosure, 20 million homeowners are underwater with their mortgage, $30 trillion of consumer wealth has be obliterated, the savings rate dropped below zero, consumer debt levels are at historic levels, and the banking system is insolvent. The Boomer economists, like Paul Krugman, are sure they have the answers (they don’t) and the current bank bailout tab has already reached $9.7 trillion. You have to hand it to Americans, we truly believe bigger is better. If this is the easy part of the twenty year crisis, I’m not looking forward to the hard part.

 Winter of Our Discontent

We enter 2009 and the Presidency of Barack Obama with citizens pessimistic about the future of our country. The public has lost faith in government, financial institutions, and religious institutions. Distrust of politicians, bankers, CEO’s, financial advisors, and moral leadership is well founded. The popular culture of over hyping public figures and then tearing them down has led to everyone and everything being discredited. The personal and public choices that will be required in the next few years will be harsh. Moral courage and leadership is what is needed. As I watch the likes of Barney Frank, Nancy Pelosi, Rush Limbaugh, and Sean Hannity work their rhetorical magic, it is clear that we have a major deficit in wisdom, courage and leadership. Instead of analyzing how we got here and how we want the country to be in ten years, when this crisis has past, we are focused only on specific right wing or left wing agendas and how to position ourselves for the next election cycle. The short sightedness of our current leadership will lead to the next more dangerous phase of this crisis.

Congress will pass a stimulus bill with wave pools, Frisbee golf courses, digital TV coupons, tax incentives to borrow money and buy houses and cars, and billions more of pork in the next week. The bill is being sold as an infrastructure bill despite the fact that only 5% of the bill is for infrastructure. President Obama will sign it. The second helping of TARP will be dished out to banks, insurance companies, automakers, and people who bought more house than they could afford. It is tough to predict what will happen in the next week, let alone the next decade. Here is my best guess:

  1. The stimulus bill will grow to $900 billion (this is how Senators & Representatives compromise) and be passed on party lines, with virtual Democratic Senators Specter and Collins showing their true colors and providing the deciding votes. President Obama will use fear tactics, convincing the non-thinkers that inhabit most of America that not passing this bloated pig of a bill will result in a permanent Depression. I’d love to find out which economists told him this would happen. Every dime of this stimulus package will be borrowed from foreign countries and be paid for by increased taxes on future generations. An unfunded tax decrease or spending increase is a tax increase for our children and grandchildren.
  2. Timothy Geithner, our TurboTax expert Treasury Secretary, will introduce the sixth variation of the TARP program since we were told it had to be done to save the world from collapse. It will not do what needs to be done. Smoke and mirrors will not pay off debt. The bankrupt financial institutions and corporations (Citigroup, Bank of America, General Motors, Chrysler) must be put into receivership and their shareholders wiped out. Good banks should take over from bad banks. Corporations with sound management and viable business plans should prosper. Corporations that sell every product at a loss, financed by its subsidiary at a further loss, must go out of business.
  3. We are in the midst of a Global recession. Every country in the world is decreasing their interest rates, trying to devalue their currency, protecting domestic businesses, and subsidizing domestic employment. Every politician on the planet is playing to their constituents with protectionist rhetoric and actions. There are Buy American clauses in the stimulus package. French President Sarkozy has been ratcheting up protectionist ideas. Calling your biggest lender a currency manipulator months before you will need to borrow an additional $2 trillion is probably not a bright idea. Our new Treasury Secretary did just that last week. Protectionist measures will lead to retaliation and a worsening global economy.
  4. The Federal Reserve has doubled their balance sheet in the last year. They’ve done this by printing $1 trillion. They will double their balance sheet again if that is what it takes to generate inflation. They have bought toxic assets from banks but will not reveal the banks or assets they’ve bought, to the public. They work for taxpayers, not vice versa. Pundits on CNBC casually say that the Fed can just print money and everything will be OK. Their words prove that the Federal Reserve System is just the BIGGEST PONZI SCHEME ever perpetrated on the U.S. public by bankers in conspiracy with government. The Federal Reserve chairman Bernanke did not see this crisis coming. He thought we had a strong housing market, when any impartial observer, such as Robert Shiller, proved that we were three standard deviations too high. Mr. Bernanke will succeed in igniting inflation. He will not see it coming and as a political animal, will not pull the punch bowl away before the party gets going. Inflation will get out of control within three years.
  5. The annual deficit for 2009 will exceed $2 trillion. The government bean counters haven’t realized that people without jobs don’t pay taxes and companies with no profits don’t pay taxes. When you bring in less tax income, increase spending, and send out tax rebates to all Americans, deficits tend to rise. In the next two years the National Debt will exceed $15 trillion. GDP is headed in the opposite direction and will drop below $14 trillion in 2009. At this rate of increase, we’ll be approaching the debt to GDP ratio of 120% reached during WW II by the end of the Obama Presidency. This increase in debt combined with the enormous printing of dollars by the Federal Reserve will drive the value of the dollar down. The only question is whether it will go down slowly or violently.
  6. The U.S. has been dependent on Japan, China, and the Oil exporting countries to purchase our debt in the last ten years. Japan has entered recession and will need to stimulate their economy. Social unrest is growing as factories shut down in China. The government has begun domestic stimulus programs and will need more. Oil revenues have dropped 70% in the last year for the oil exporting countries. With their own domestic issues and U.S. Treasuries yielding 3% to 3.5% and U.S. annual funding needs of $2 trillion, demand is likely to wane. The only possibility is dramatically higher rates. High interest rates devastate a heavily indebted country.
  7. Oil prices below $40 a barrel will lead to a deepening of this crisis in the not too distant future. At these prices it is no longer profitable to develop alternative fuels and search for new supply. Rigs are being shutdown, deepwater projects cancelled, shale and oil sands projects being delayed, and natural gas exploration dramatically scaled back. The fact remains that the world has reached peak oil supply. The Saudi wells are 50 years old and are depleting rapidly. Mexico’s Cantarall oil field is in rapid decline and Mexico, the supplier of 12% of U.S. supply, will become a net importer in five years. The drastic decline in oil revenue will further exacerbate social unrest in a country on our border. The complete lack of a comprehensive energy plan will result in oil prices exceeding $200 a barrel in the next five years. Politicians will blame oil companies and the Arab countries, further alienating us from the world.
  8. The Military Industrial Complex will grow stronger. We have no intentions of leaving Iraq and we will double our presence in Afghanistan. The Defense (should be called Offense) budget will increase. We will be told that the Russian threat is growing. We will be told that China has aggressive intentions and that Iran threatens the Middle East. The public will go along because they don’t think for themselves. We will be told that the Defense industry generates American jobs. As the government identifies false threats, they will take away more rights and liberties in the name of protecting us. It will be gradual and almost unnoticeable to the Average American, but it is happening. A stronger more powerful Military will want to prove itself. They will be itching for action. When you are a hammer, everything looks like a nail.
  9. Boomer leaders are always sure, and often wrong. They are dogmatic and cocky. They utter the words catastrophe, without specifying what will happen if you don’t follow their plan. They say that we will enter a permanent decline if we don’t spend our way out of a situation that was caused by spending too much. Boomer followers are so shallow and self involved that they will put reason aside and believe that we can spend our way out of this. The easy sound bite solution is what they are looking for. The word sacrifice does not exist in their vocabulary. The well being of future generations is of no interest to them. The day trading, house flipping, BMW driving Boomers are looking for the next big thing. The danger is that the next big thing could be a major war. They are too old to fight, but they are not too old to send others to their death.
  10. The stimulus package and TARP 6 plan will be implemented. The economy will not improve. By the Fall, Obama and the Democratic led Congress will push through trillions more in spending. The dollar will continue to fall versus gold. As the deficits grow and foreigners buy less and less of our debt, interest rates will rise. Oil will gradually rise as long as no external event causes it to spike. Protectionism will increase, leading to declining world trade. When we have not pulled out of this downturn in 2010, people will realize we are in a Depression and politicians have lied to them again. Social unrest will grow. Riots are likely to break out in poor urban areas. Governments always react to internal strife by seeking an external threat.
  11. The external threat could be anything. Russia could invade Ukraine. Israel could attack Iran. When oil reaches $200 a barrel, disputes over drilling rights in the Arctic with Russia or China could cause a confrontation. Oil is the lifeblood of our society. If major shortages occur in the U.S. it would bring the country to a grinding halt. The panic would be so drastic that our Leaders will use every means at their disposal to get more oil. With the most powerful military on the planet at their disposal, and itching for a fight, our Leaders will manufacture a reason to go to war in order to secure oil supplies. The problem with waging a major war is that you need troops to sacrifice. The volunteer army will not do. When the government tries to reinstitute the draft, the fabric of this country will be torn to shreds. This will be where I get off this merry-go-round ride.
  12. In ten years my sons will be 25, 22, and 20. They will not be sacrificing their lives for oil, bankers, corrupt politicians, and Defense industry CEOs. If I see the future developing as I fear, I will move my family out of this country to a place where individual liberties are respected, sound fiscal policy is practiced, and people can live in peace. I don’t know if that place exists, but I’ll be looking.

The good news is that every modern Crisis has been followed by a new High. Of course, in every modern U.S. Crisis we had a strong leader. Will Barack Obama be that strong leader? If no strong wise leader emerges, could we follow the path of the Roman Empire? Can we as individuals change the course of history? I don’t know the answers to these questions. It is up to each of us to analyze the facts and act accordingly. A recent song by The Fray, You Found Me, asks the question we will all need to answer.

Where were you?

When everything was falling apart