FOURTH TURNING ELECTION YEAR CRISIS

“The next Fourth Turning is due to begin shortly after the new millennium, midway through the Oh-Oh decade. Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation and empire. The very survival of the nation will feel at stake. Sometime before the year 2025, America will pass through a great gate in history, commensurate with the American Revolution, Civil War, and twin emergencies of the Great Depression and World War II.” – Strauss & Howe The Fourth Turning 

How a contested election could send the U.S. into a constitutional crisis - MarketWatch It's not the chairman of the Joint Chiefs' job to remove Trump from office if he won't leave.

“There is no darkness but ignorance. The devil can cite Scripture for his purpose.” William Shakespeare

I read The Fourth Turning in 2006, after seeing it described in John Mauldin and Doug Casey’s newsletters as an uncannily accurate assessment of American history based upon generational configurations which recur on eighty-year cycles, a long human life. Strauss and Howe wrote the book in 1997 and used their generational theory to predict the Crisis that would begin in the mid-2000’s and come to an indeterminate climax in the mid-2020’s.

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THE ROAD TO PERDITION IS PAVED WITH EVIL INTENTIONS

“Suckers think that you cure greed with money, addiction with substances, expert problems with experts, banking with bankers, economics with economists, and debt crises with debt spending”Nassim Nicholas Taleb, The Bed of Procrustes: Philosophical and Practical Aphorisms

The Logic of globalism | The Vineyard of the Saker

“Globalization has created this interlocking fragility. At no time in the history of the universe has the cancellation of a Christmas order in New York meant layoffs in China.”Nassim Nicholas Taleb

As we continue our national lockdown suicide cult to hell, I find myself getting angrier and angrier at the pathetic leadership displayed by politicians, government bureaucrats, so called medical “experts”, and intellectual yet idiot academics displaying their ignorance of facts, reality, history, and humanity. My nature is to be skeptical of everything I read or am told.

I most certainly disregard everything communicated to me by politicians, world leaders, central bankers, corporate CEOs, CNBC talking heads, the mainstream corporate fake news media, and lately – self-proclaimed medical experts who have distinguished themselves by not seeing the danger coming, downplaying the danger, not being prepared for the danger, incompetently handling the danger and righteously proclaiming the nation had to be brought to a full stop because their terribly flawed models said so.

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Capitalism Without Competition

Guest Post by John Mauldin

The Soviet Union’s collapse and spread of semi-free markets through Eastern Europe seemingly ended the socialism vs. capitalism argument. Capitalism had won. Collectivist economies everywhere began turning free. Even communist China adopted a form of free market capitalism although, as they say, with “Chinese characteristics.”

The fruits of capitalism: millions of people freed from abject poverty and a few who got rich indeed. Nor is this a recent phenomenon. Capitalism in the last three centuries, with all its faults and problems, with all its contradictions, generated the greatest accumulation of wealth in human history. From a few hundred years ago when the vast majority of the people of the world lived below the poverty line, barely above subsistence levels, today we have less than 10% doing so and that number is shrinking every year.

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Double Debt Problem

Guest Post by John Mauldin

The selloff in GE is not an isolated event. More investment grade credits to follow. The slide and collapse in investment grade debt has begun… (and later) Don’t be fooled by bond prices holding up, because trading volumes are down. There are fewer bids in the market, and the dispersion of bids is wider. It is time to jog—not walk—to the exits of credit and liquidity risk.

– Scott Minerd, Guggenheim Partners Chief Investment Officer

From a 50,000-feet viewpoint, we’re probably in a global debt bubble…Global debt to GDP is at an all-time high…This is going to be a very challenging time for policymakers moving forward.

– Paul Tudor Jones at the Greenwich Economic Forum in Connecticut, November 15, 2018

Last week, I talked about Ray Dalio’s new book on debt cycles. He describes how debt is inherently cyclical, because it enables more spending now that must be offset by less spending later.

Ray’s book helped me refine my description of The Great Reset. It’s a critical refinement, too. After reading the book, I realized it is entirely possible we will have another debt crisis before what I think of as The Great Reset. I firmly believe the latter is still coming, but there may be another “mere” credit crisis beforehand.

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Economic Brake Lights

Guest Post by John Mauldin

But, like Cinderella at the ball, you must heed one warning or everything will turn into pumpkins and mice: Mr. Market is there to serve you, not to guide you. It is his pocketbook, not his wisdom, that you will find useful. If he shows up some day in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren’t certain that you understand and can value your business far better than Mr. Market, you don’t belong in the game. As they say in poker, “If you’ve been in the game 30 minutes and you don’t know who the patsy is, you’re the patsy.”

Warren Buffett (b. 1930), 1987 Berkshire Hathaway Annual Report

Those who do not learn from history are doomed to repeat its mistakes.

—George Santayana (1863–1952), Spanish-American philosopher

Those who don’t study history are doomed to repeat it. Yet those who do study history are doomed to stand by helplessly while everyone else repeats it.

—Tom Toro (b. 1982), American cartoonist for The New Yorker

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The Growing Economic Sandpile

Guest Post by John Mauldin

“How did you go bankrupt?” 
“Two ways. Gradually, then suddenly.”

Ernest Hemingway, The Sun Also Rises

As you may have noticed, I’ve been in a pensive mood lately. I’m re-thinking a lot of things as I process economic developments, personal issues, and the clock ticking as I reach birthday number 69 in a few weeks. Many good things are happening but with them comes change.

Change will be today’s topic. Below I’m reproducing part of a letter I originally wrote in December 2007 and have referred to several times. It is the single most-read letter I have written and the most commented-on, too. I consider it, in some ways, my most important letter. If you’ve read it before, you should read it again. I have updated it a little bit, but the principles are just as timeless as ever. And for the time conscious, we have shortened it a bit and at the end, I try to apply those principles to present economic times.

Change happens quickly and often, unpredictably. And as we will see, the unpredictable part is actually a mathematical principle. As in the Hemingway quote above, not just bankruptcy but change also happens slowly and then seemingly all at once. It’s time passing without change that causes the worst problems, including some historic economic catastrophes. It turns out we shouldn’t just accept change; we actually require it.

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A NATION BUILT ON LIES

“The greatest want of the world is the want of men — men who will not be bought or sold; men who in their inmost souls are true and honest; men who do not fear to call sin by its right name; men whose conscience is as true to duty as the needle to the pole; men who will stand for the right though the heavens fall.”Ellen G. White

The world becomes more chaotic by the day. Good luck finding a politician, business icon, or religious leader who is not bought and sold by corporate or special interests. Finding truth telling honest leaders in today’s world is virtually impossible. Charles Foster Kane, a quasi-biographical portrayal of William Randolph Hearst, is a fine representation of the billionaire clique that pull the strings in our warped, deceitful, greed driven, materialistic world.

Citizen Kane’s thematic portrayal of the American Dream is far more germane to our society today than it was when made in 1941. Financial affluence, material luxury, wielding power over others, and controlling the opinions of the masses through propaganda media, did not guarantee happiness or fulfillment for Kane or todays oligarchs. Kane was happiest as a poor child, living with his parents, playing in the snow on his sled – Rosebud.

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The Clock Is Ticking: “Modern Slaves Are Not In Chains, They’re In Debt”

Authored by John Mauldin via MauldinEconomics.com,

Rather go to bed without dinner than to rise in debt.

– Benjamin Franklin

What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?

– Adam Smith

There are no shortcuts when it comes to getting out of debt.

– Dave Ramsey

Modern slaves are not in chains, they are in debt.

– Anonymous

Debt isn’t always a form of slavery, but those old sayings didn’t come from nowhere. You can find hundreds of quotes on the Internet discussing the problems of debt. Debt traps borrowers, lenders, and innocent bystanders, too. If debt were a drug, we would demand it be outlawed.

The advantage of debt is it lets you bring the future into the present, buying things you couldn’t afford if you had to pay full price now. This can be good or bad, depending on what you buy. Going into debt for education that will raise your income, or for factory equipment that will increase your output, can be positive. Debt for a tropical vacation, probably not.

And that’s our core economic problem. The entire world went into debt for the equivalent of tropical vacations and, having now enjoyed them, realizes it must pay the bill. The resources to do so do not yet exist. So, in the time-honored tradition of lenders everywhere, we extend and pretend. But with our ability to pretend almost gone, we’re heading to the Great Reset.

https://www.zerohedge.com/sites/default/files/inline-images/COMM-gold-and-the-global-ticking-debt-bomb-02232018.jpg?itok=jIJyvkuh

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The 2020s Might Be The Worst Decade In U.S. History

Authored by John Mauldin via Forbes.com,

I recently wrote about a looming credit crisis that’s stemming from high-yield junk bonds. The crisis itself will have massive consequences for investors. But that’s not the worst part.

The crisis will create a domino effect and trigger global financial contagion, which I usually refer to as “The Great Reset.”

The collapse of high-yield bonds will hit stocks and bonds. Rising defaults will force banks to reduce their lending exposure, drying up capital for previously creditworthy businesses.

This will put pressure on earnings and reduce economic activity. A recession will follow.

https://www.zerohedge.com/sites/default/files/inline-images/2018-05-25_10-20-53.jpg?itok=M3xRLDJ3

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A Liquidity Crisis of Biblical Proportions Is Upon Us

GUEST POST BY JOHN MAULDIN

Last week, I mentioned an insightful comment my friend Peter Boockvar—CIO of Bleakley Advisory Group—made at dinner in New York: “We now have credit cycles instead of economic cycles.”

That one sentence provoked numerous phone calls and emails, all seeking elaboration. What did Peter mean by that statement?

In an old-style economic cycle, recessions triggered bear markets. Economic contraction slowed consumer spending, corporate earnings fell, and stock prices dropped. That’s not how it works when the credit cycle is in control.

Lower asset prices aren’t the result of a recession. They cause the recession. That’s because access to credit drives consumer spending and business investment.

Take it away and they decline. Recession follows.

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A $210 Trillion Problem: “You May Be Hopping Mad When You Finish Reading This”

Submitted by John Mauldin of Mauldin Economics

Uncle Sam’s Unfunded Promises

Here’s a surprisingly profound question: What is a promise? Dictionaries offer various definitions. I like this one: “An express assurance on which expectation is to be based.”

That definition captures the two-sided nature of a promise. One party offers an assurance, which the other converts into an expectation. You deposit money in your checking account, and the bank assures you that you can have it back on demand. You expect that the bank will fulfill its promise when you visit an ATM.

Governments likewise make promises, but those are different. Government is the ultimate enforcer of promises, but we have no recourse if it chooses to break them – except at the ballot box. As we’ve seen in recent weeks regarding public pensions, that’s ineffective when the promises were made long ago by officials who are no longer in office.

The federal government’s keeping its promises is important for everyone in the US, because almost all of us are part of the largest public pension system: Social Security. We pay taxes our whole working lives and expect the government to give us retirement benefits. But what happens if it can’t?

Three weeks ago we visited the problems with local and state pensions. Last week we looked at European pensions. This week we are going to take a hard look at the unfunded liabilities and debt of the US government. And even though the federal unfunded pension liabilities dwarf those of state and local pensions, I want to make it clear that I believe the state and local problems will be far more intractable.

I have to warn you: You may be hopping mad when you finish reading this.

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Prepare for Turbulence

Guest Post by John Mauldin

“The job of the central bank is to worry.”

– Alice Rivlin

“The central bank needs to be able to make policy without short-term political concerns.”

– Ben Bernanke

“… from the standpoint of the overall economy, my bottom line is we’re watching it closely but it appears to be contained.

– Ben Bernanke, repeatedly, in 2007

“Would I say there will never, ever be another financial crisis? You know, probably that would be going too far, but I do think we’re much safer, and I hope that it will not be in our lifetimes, and I don’t believe it will be.”

– Janet Yellen, June 27, 2017

“My good friends, for the second time in our history, a British Prime Minister has returned from Germany bringing peace with honor. I believe it is ‘peace for our time.’ Go home and get a nice quiet sleep.”

– Neville Chamberlain, September 30, 1938


Photo: Monica Muller via Flickr

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The Economic Costs of Terrorism Hit an All-Time Peak

The Economic Costs of Terrorism Hit an All-Time Peak

BY JOHN MAULDIN

The world can change quickly, and last week it did. The most immediate and heartbreaking impacts of the Paris attacks were suffered by the victims themselves and their families, but from there the ripples of terror spread outward around the world.

The Paris events didn’t happen in isolation. Recent bombings in Lebanon, Iraq, Mali, and Nigeria, plus the Russian airline disaster, showed us how far evil can reach.

It isn’t just ISIS: al-Qaeda is getting stronger in some places; Boko Haram continues to strengthen in West Africa; the Taliban is resurgent in Afghanistan; and the list goes on…

In addition to the catastrophic human cost, terrorism has economic impacts. It misallocates resources, distorts prices, and prompts adverse government policies. We all feel these effects, even if we live far from the terror zones.

Terrorism is global. So is the economy. We can’t separate them.

The Direct Cost of Terrorism Reached $52.9 billion in 2014

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It Will Take Trillions of Euros to Save the European Union

It Will Take Trillions of Euros to Save the European Union

By John Mauldin

BY JOHN MAULDIN

The EU’s political leaders and other elites are committed to holding the European Union together. To them, united Europe is an article of faith. They hold the idea with as much ferocity and fervor as any religious belief. But while the European Union is a wonderful political idea, it’s economically terrible. And the EU nations will have to face up to bearing enormous costs to save the Europe we wished for.

Why the Euro Doesn’t Work

Many of us take our national currencies for granted and we assume there have always been dollars, pounds, or yen. In fact, for a long time, individual banks issued notes promising the holder to exchange the notes for gold upon demand. The concept of a national currency is actually one that came about very late in history.

Before the euro was created, the economist Robert Mundell wrote about what made for an optimal currency area. His work was so important that he won a Nobel Prize for it. He wrote that a currency area is “optimal” when it has:

  • Mobility of capital and labor,
  • Flexibility of wages and prices,
  • Similar business cycles, and
  • Fiscal transfers to cushion the blows of recession to any region.

Europe has almost none of these. Very bluntly, that means it is not a good currency area.

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Thoughts from the Frontline: Thanksgiving amid the Threats

Thoughts from the Frontline: Thanksgiving amid the Threats

By John Mauldin

 

“Nobody in Europe will be abandoned. Nobody in Europe will be excluded. Europe only succeeds if we work together.”
– Angela Merkel, December 15, 2010

“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. Believe me, it will be enough.”
– Mario Draghi, July 25, 2012

“We have to safeguard the spirit behind Schengen,” Mr Juncker told the European Parliament on Wednesday. “Yes, the Schengen system is partly comatose. But . . . a single currency does not exist if Schengen fails. It is one of the pillars of the construction of Europe.”
London Telegraph, November 25, 2015

We all have great cause for gratitude this Thanksgiving weekend, whether or not you celebrated that holiday in your home country. In the last month we have seen how violence can touch people far from the battlefields. If your only connection to the recent terrorist events came through watching the news, count yourself lucky. Others can only wish they had such distance.

Many have made comparisons with 9/11 these past two weeks. History never repeats itself quite so neatly, of course, but I too sense that we are poised at an inflection point. Significant events at different places around the globe seem to be converging. I suppose we will look back someday and be able to see clearly the connections among them. For now, we can only try to understand.

I think the entire situation in the Middle East, the refugee crisis, and the present state of the European Union have to be placed in a greater context if we are to understand what the confluence of these vastly different sociopolitical rivers will mean for the future of our economy and investments. I think we are coming to a period of time when geopolitical concerns, always on my radar, are going to require more attention. This has been apparent to me for some time, and I’ve been working to position Mauldin Economics to help you stay abreast of global developments. We will be making what I think you will find to be immensely helpful announcements in the immediate future.

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RIP RICHARD RUSSELL

It’s weird sometimes how curiosity leads to understanding. I started reading John Mauldin’s weekly newsletter in 2002. He referenced the writings of Richard Russell in one of his letters. He wrote a daily subscription newsletter, but I found a number of his articles for free and was immediately impressed by his reasoning and logic. I subscribed to his Dow Theory Letter and read his thoughts every day. His sound arguments for owning gold convinced me to invest in gold stocks, gold mutual funds, physical gold, and upon its issuance GLD. This was 2004, so I enjoyed excellent returns over the next seven or eight years.

I stopped paying for his newsletter in the late summer of 2008. It was clear to me we were about to experience an economic meltdown and he came out with a huge BUY recommendation just before the September 2008 collapse. I lost faith in his advice. Nobody’s perfect, but I don’t need to pay for bad advice.

I still think he was a brilliant analyst and I owe him a huge debt of gratitude. I had never heard the name Ron Paul until Richard mentioned him as the one decent politician in Congress. I started reading the writings of Ron Paul and became convinced he was the only person in Washington DC who had the right solutions for the country. I became a huge supporter of his 2008 bid for the GOP nomination. My outrage at how he was scorned and ridiculed by the neo-con GOP establishment and their media mouthpieces at Fox News, led to me to write the first article of my life – Why We Need Ron Paul – which was kindly published by Lew Rockwell.

So, in a way, Richard Russell is responsible for this website. Thank you Richard, and rest in peace. You left at the right time. 

From Richard Russell’s Family

It is with great sadness that we report the passing of Richard Lion Russell on Saturday, November 21. Richard had gone to the hospital a week earlier with abdominal pain. He was diagnosed with blood clots in the leg and lungs and other untreatable ailments, but was able to return home under hospice care. He spent his last days surrounded by family and visited by close friends.

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