I wrote this in April 2009 when the stock market was at 7,000, oil was less than $50 a barrel and the National Debt was $11.1 trillion. I warned that government solutions and stimulus would fail. I thought that more liberties would be taken away and that turmoil in the world would lead to higher oil prices and our government would look for an external threat to divert our attention away from our domestic issues. The Federal Reserve and captured politicians in DC have since been able to enrich their Wall Street constituents with a 120% gain in the stock market, while killing the middle class with $6 trillion of additional debt and a doubling of energy and food prices.

It was written at the outset of this Fourth Turning Crisis. We are now over four years further into this Fourth Turning. Back then politicians and bankers promised things would get better if we just trusted them and their solutions. Are things better? Has normalcy been returned? In my opinion, and it appears millions more, things are not better and getting worse by the day.

Do you know the enemy?
Do you know your enemy?
Well, gotta know the enemy

Violence is an enemy
Against the enemy
Violence is an energy

Bringing on the fury
The choir infantry
Revolt against the honor to obey

Know Your Enemy – Green Day

Do you know the enemy? Is it Iraqis, Iran, the Taliban, terrorists, Muslims, Russia, North Korea, China, or our government? General Douglas MacArthur had a distinct point of view on the more likely threat.

“I am concerned for the security of our great Nation; not so much because of any threat from without, but because of the insidious forces working from within.”

William Strauss and Neil Howe wrote the book The Fourth Turning in 1997. Their theory is that history is a series of repetitive 100 year cycles with four generations living through each cycle. Each cycle and generation has many similarities, only the particular events change. We are currently in the most hazardous part of the cycle with the most volatile generation in positions of power. Strauss & Howe foresaw perilous times ahead:

“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.”

We are currently in the midst of the Fourth Turning, an era of upheaval, a crisis in which our country will redefine its very nature and purpose. The sudden spark that catalyzed this crisis occurred on the beautiful sunny morning of September 11, 2001. The crisis reached an initial crescendo in late 2008. Many believe that the worst is behind us and the future has begun to brighten. This is highly unlikely. Previous crisis periods lasted fifteen to twenty years. The Civil War crisis was confined to five brutal years that resulted in 600,000 American deaths. The crisis in our past history that appears most analogous is the Great Depression/World War II crisis that lasted sixteen years. A financial depression caused by the Federal Reserve pumping too much credit into the financial system during the 1920’s had been considered the worst in U.S. history. The current financial crisis, caused by the Federal Reserve pumping too much credit into the financial system along with politicians turbo charging the effort by eliminating all regulation of the financial system, has led to the Greater Depression. We are likely only half way through this crisis, with tears and bloodshed yet to follow.

Are You a Terrorist?

Most people in America, comfortable in their manicured lawn suburban sprawl will discount the possibility of civil unrest, war, and dictatorship in this country. Could Nazi like sociopaths gain control of our government? It is inconceivable. Anyone who would bring up this possibility would be branded a lunatic. As Doug Casey recently pointed out in his article Street Fighting Man, the Germans thought the same thing.

“Who would have guessed that the Germans of the last century, who had much more than their share of writers, composers, philosophers, scientists, plain middle-class shopkeepers, and a well-educated, orderly population would have bred the Nazis? It would be easy to recount dozens of recent examples of perfectly ordinary countries that have gone bonkers. The fact is that your neighbor or your mailman, who pets his dog, hugs his kids, and plays softball on the weekends, might exhibit a much less appealing, indeed an appalling, side when social conditions change. The problem arises when a society becomes highly politicized. In normal times, a sociopath stays under the radar. Perhaps he’ll commit a common crime when he thinks he can get away with it, but social mores keep him reined in.

However, once the government changes its emphasis from protecting citizens from force to initiating it with laws and taxes, those social mores break down. Peer pressure and moral opprobrium, the forces that keep a healthy society orderly and together, are replaced by regulation enforced by cops funded by taxes. And sociopaths start coming out of the woodwork and are drawn to the State, where they can get licensed and paid to do what they’ve always wanted to do. It’s very simple, really. There are two ways people can relate to each other: voluntarily or coercively. The government is pure coercion, and sociopaths are drawn to its power and force.”

With the never ending lessening of our civil liberties after 9/11, the government power over our daily lives grows day by day. Recent revelations that the Department of Homeland Security considers Ron Paul and his followers, potential terrorists are disturbing. A February 20 report states:

“Due to the current economical and political situation, a lush environment for militia activity has been created. Unemployment rates are high, as well as costs of living expenses. Militia members most commonly associate with 3rd party political groups. It is not uncommon for militia members to display Constitutional Party, Campaign for Liberty or Libertarian material.” 

A new Department of Homeland Security report highlights security risks posed by extremist groups and disgruntled veterans. The report stated that threats could come from “military veterans facing significant challenges reintegrating into their communities.” I’m sure the young men and women who risked their lives in Iraq and Afghanistan for George Bush are thrilled to find out that the organization he created to protect the homeland considers them a terrorist threat. The U.S. Army War College in Carlisle, PA recently put out a report titled Known Unknowns: Unconventional Strategic Shocks in Defense Strategy Development warning an economic crisis in the United States could lead to massive civil unrest that would require the military to restore order. The report states:

“Widespread civil violence inside the United States would force the defense establishment to reorient priorities to defend basic domestic order and human security, in case of unforeseen economic collapse.”

Why are the government organizations that are supposed to protect and defend our citizens making plans to protect the government from the citizens? President Obama’s top advisor David Axelrod had this to say about the tax day tea parties last week.

“I think any time you have severe economic conditions there is always an element of disaffection that can mutate into something that’s unhealthy.”

Since when did peaceful protest and free speech become unhealthy? What is unhealthy and dangerous is when the government and many in the mainstream media proclaim that what these people were doing was perilous to our country. Maybe Mr. Axelrod, Nancy Pelosi and the pundits on MSNBC should read the 1^st Amendment to the Constitution.

Crisis – Winter of our Discontent

Don’t want to be an American idiot.
One nation controlled by the media.
Information age of hysteria.
It’s calling out to idiot America.

  American Idiot – Green Day

Strauss and Howe described the similarities of most crisis phases:

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. 

On September 11, 2001 an attack by 19 Muslim terrorists using knives to hijack airliners and fly them into the Twin Towers and Pentagon plunged the United States into a state of crisis. This was an attack by a small terrorist organization of less than 10,000 members led by Osama bin Laden. It was not an attack by the Muslim world against the Christian world. The dogmatic, single minded, religiously driven George Bush, influenced by neo-con extremists, decided a worldwide war on terror was the solution. He even declared the war on terror as World War III. Using fear tactics and bullying weak Congressmen who feared losing their jobs if they showed courage, George Bush enhanced the power of the government over our lives by ramming through the USA Patriot Act (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001) and creating the Department of Homeland Security in the name of safeguarding the public from unknown phantom dangers. Section 2 of the act essentially allows the government to listen in on your private conversations or access your emails. Does this seem proportionate to the acts of 19 men with knives that could have been foiled by a $39.99 deadbolt lock from Wal-Mart?

The fact that there have been no terrorist attacks in the U.S. since 9/11 is touted as being due to this act and the Department of Homeland Security. Therefore, sacrificing civil liberties is seen as a small price to pay for safety and security. Osama bin Laden’s 1^st attempt at blowing up the World Trade Center occurred in 1993. He patiently waited eight years before his 2^nd attempt. Has spending over $1 trillion since 9/11, forfeiting 4,900 American lives and sacrificing of individual liberties led to our increased security, or are the terrorists just being patient?

The perceived success of these extreme measures has now convinced a majority of the population that government can solve all of their financial troubles better than the free market. America is a minimum monthly payment nation. As long as they can make the minimum monthly payment, they can lease a BMW, buy the best furniture today and worry about the bill in 2013, and buy electronic gadgets and bling on their Capital One credit card. The American sheeple are being led to slaughter by shepherds (Obama, Geithner, Bernanke) who have convinced them that borrowing and spending at malls will save the country. The Baby Boomers are desperately hoping to be saved from their own irresponsible behavior by even more reckless behavior by their government. Boomers will never be celebrated for their willingness to sacrifice and accept the bitter medicine that is required to rebalance their lives. Ask them to buy a Rolex with someone else’s tax dollars and they are all in. I’m personally hoping the crack in my windshield will eventually convert into the likeness of Jesus Christ. I’ll turn my car into a shrine and make millions. Just classify me as a Boomer optimist.

The risk taking by entrepreneurs that has been the basis for our economic success is abating as they step aside and let government dictate how auto companies, insurance companies, and banks should be run. Government is dictating the winners and losers. They will pick the winners that will benefit government and their social agenda. Government will use this crisis to enhance their power. The 50% of Americans who pay no Federal income taxes will support any idea or program that will get them something for nothing. Politicians will frame every issue as an either or option. You either support their new spending plan or catastrophe awaits. The young allow their dogmatic parents to dictate family values. The rhetoric in our society continues to get more polarizing.

Prophets in an Alien Nation

Welcome to a new kind of tension.
All across the alien nation.
Where everything isn’t meant to be okay.

American Idiot – Green Day

Strauss & Howe described the Prophet/Idealist generation as being born during a High, spending its rising adult years during an Awakening, spending midlife during an Unraveling, and spending 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. The three previous crisis periods in U.S. history were dominated by the prophetic leadership of George Washington, Abraham Lincoln, and Franklin Roosevelt. George Bush has led us through the 1^st half of this crisis. It is likely that Barack Obama will lead us through the 2^nd half of the crisis. I don’t think George Bush will be revered for being cerebral or making inspiring speeches. He did wage a righteous war against terrorism. Barack Obama is cerebral and principled. He is waging a righteous war in Afghanistan, though he has never seen combat. He is already known for his inspiring speeches. Will he rise to the level of Lincoln?

George Bush and Barack Obama are both Baby Boomers. The oldest boomer is 63, the youngest 45. Boomers occupy the leadership positions in government, corporations, military, and educational institutions. Boomer leaders are cocky, aggressive, and quoting Doug Casey, “quite willing to burn down the barn in order to destroy whatever rats they see.”

George Bush was sure there was WMD in Iraq. He was sure that cutting taxes, sending out rebate checks, and letting banks regulate themselves was the path to prosperity. Hank Paulson and Ben Bernanke were sure that TARP would save our financial system from collapse. Barack Obama was sure that if we didn’t pass his bloated stimulus bill, catastrophe awaited the country. Baby Boom leaders are always sure and often wrong. The masses are drawn to leaders who are sure of themselves. They want to believe that a wise man will lead them to the Promised Land. They won’t realize that he is leading them to hell, until it is too late.

Civil Unrest – The Great Unraveling

Overthrow the effigy
The vast majority
Burning down the foreman of control

Silence is the enemy
Against your urgency
So rally up the demons of your soul

Know Your Enemy – Green Day

Strauss & Howe explained their view of how America was feeling in 1997. They were dead on. We are a country that has been rotting from within for decades.

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.

Many Americans know we are on the wrong track but are so distracted by the circus like distractions of every day life, they choose not to think about it. It is likely that the 123 million eligible voters who chose not to vote in the 2008 Presidential election don’t even realize the country is on the wrong track. The sedated masses were easy to manipulate when unemployment was 4%. There are now 6 million more people unemployed today than just 16 months ago in November 2007. Another 2 to 3 million will lose their jobs in 2009. The government doesn’t count another 5 to 10 million people who are classified as out of the workforce, but would like to work. This means there will be 20 to 25 million people out of work by the end of this year. Unemployed people have a propensity to be angry. In the last few months there have been several mass murders committed by angry unemployed men. As the economic “solutions” rolled out by politicians and Federal Reserve bureaucrats lead to an inflationary depression similar to the Weimer Republic of the early 1930’s, civil unrest will rear its ugly head.

Doug Casey describes the likely scenario:

People believe they have little to lose, they’re eager to hang those they believe responsible for their problems, and they’ll listen to radical or violent proposals. We’re now just entering what will likely be the worst economic trough since the Industrial Revolution. A rioter is typically an angry person looking for vengeance because he blames someone else for his problem. So far, rioters seem to be directing their attention at governments. Correct target, of course, but they don’t have the rationale quite right. They’re not angry because governments inflated the currency, promoted fractional reserve banking, and nurtured all the cockamamie socialist programs that caused this crisis. Not at all; they rather liked all that. They’re angry only because their governments haven’t adequately protected them from the consequences of what they did. So as conditions worsen, we can expect governments worldwide to pull out absolutely all the stops to show they’re “doing something.” And round up scapegoats to satisfy the mob and divert anger from themselves. I fully expect civil unrest to spread everywhere, simply because the depression will spread everywhere. It will be worst in places that have been most overextended, most debt leveraged, most urban, and have the largest numbers of unemployed workers — the U.S., Europe, and China.

The civil unrest is most likely to erupt among Hispanics and African Americans. The unemployment rate of Hispanics is 11.4% versus 5.0% in November 2007. It is doubtless far worse, as many Hispanics worked “under the table” in the housing industry. The unemployment rate of African Americans is 13.3%, the highest since 1993, and up from an all-time low of 7.0% in 2000. The urban areas of the United States are a powder keg, with automatic weapons available to anyone. Policemen are being slaughtered at a record pace. Mexico is on the verge of becoming a failed state. Drug lords are running the country. Its oil fields are in rapid decline and it will no longer be an exporter of oil within 5 years. The Mexican government depends on oil for 40% of its tax revenues. The collapse of Mexico’s government, extreme power of murderous drug lords, and worldwide depression will drive millions of poor towards the U.S. border. The anti-immigrant feelings in the U.S. continue to grow as more white Americans lose their jobs. This is an explosive combination that will eventually require military and National Guard intervention.

There are two other hot button issues which will increase the anxiety in this country. Guns and ammo are selling like hotcakes. The combination of apprehension that Obama and his Democratic majority will put restrictions on gun ownership and the severe economic downturn has led to an exorbitant increase in gun sales. Ruger has a $48 million backlog of guns on order. Many citizens in the Western states live by the motto: You can have my gun when you pry it from my cold, dead fingers. Any effort by the Obama administration to restrict gun ownership will be met with major resistance. The Tax Day Tea Parties revealed the other hot button issue for many Americans. When the Bush tax cuts expire in 2010 and Obama institutes his Cap & Trade energy tax, the economy will receive a double whammy. At that point the failed economic policies and higher taxes will lead to consternation and resentment throughout the land. The unending economic turmoil throughout the world will result in protests and anger in many countries. The more disturbing issue is how politicians will try to divert the attention of the masses through the use of an external threat.

War – Fingers of Instability

The insurgency will rise
When the bloods been sacrificed
Don’t be blinded by the lies
In your eyes

Violence is an energy
From here to eternity
Violence is an energy
Silence is the enemy
So gimme gimme revolution

Know Your Enemy – Green Day

Back in 2006 John Mauldin wrote an article titled Fingers of Instability. It was based on a book written by Mark Buchanan called Ubiquity, Why Catastrophes Happen. It examines chaos theory, complexity theory, and critical states. Physicists, using a computer model examined what takes place when sand is continuously piled up grain by grain. They were endeavoring to understand what makes the pile ultimately collapse. Buchanan described the experiment:

“Imagine peering down on the pile from above, and coloring it in according to its steepness. Where it is relatively flat and stable, color it green; where steep and, in avalanche terms, ‘ready to go,’ color it red. What do you see? They found that at the outset the pile looked mostly green, but that, as the pile grew, the green became infiltrated with ever more red. With more grains, the scattering of red danger spots grew until a dense skeleton of instability ran through the pile. Here then was a clue to its peculiar behavior: a grain falling on a red spot can, by domino-like action, cause sliding at other nearby red spots. If the red network was sparse, and all trouble spots were well isolated one from the other, then a single grain could have only limited repercussions. But when the red spots come to riddle the pile, the consequences of the next grain become fiendishly unpredictable. It might trigger only a few tumblings, or it might instead set off a cataclysmic chain reaction involving millions. The sand pile seemed to have configured itself into a hypersensitive and peculiarly unstable condition in which the next falling grain could trigger a response of any size whatsoever.”

“In this simplified setting of the sand pile, the power law also points to something else: the surprising conclusion that even the greatest of events have no special or exceptional causes. After all, every avalanche large or small starts out the same way, when a single grain falls and makes the pile just slightly too steep at one point. What makes one avalanche much larger than another has nothing to do with its original cause, and nothing to do with some special situation in the pile just before it starts. Rather, it has to do with the perpetually unstable organization of the critical state, which makes it always possible for the next grain to trigger an avalanche of any size.”

You may be wondering what sand has to do with war. The relevance is that a small seemingly minor incident could lead to a large world war. At the moment Austrian Archduke Franz Ferdinand was assassinated by Serb anarchists in 1914, no one expected a World War to result. When the war began most expected it to last a few weeks. Instead, over 15 million people died in one of the deadliest conflicts in human history. There are many known flashpoints that could lead to a broader worldwide conflict. The use of nuclear weapons seems unlikely, but the deaths of 15 million people in World War I and 70 million in World War II also seemed unlikely at the outset of each conflict. Among the possible flashpoints are:

• Israel attacks Iran nuclear facilities.
• Pakistan government collapses and conflict with India and/or Afghanistan erupts.
• Russia attempts to reacquire its former territory the Ukraine.
• China attempts to reign in its former province Taiwan.
• North Korea attacks South Korea.
• While the U.S. gets bogged down in Afghanistan, civil war breaks out again in Iraq supported by Iran and Syria.

Difficult economic periods often lead to war. The economic period ahead will be intensely difficult. Leaders of the U.S., China, and Russia will see their economic theories and solutions discredited. The natives will become restless as they are kicked out into the streets, homeless and hungry. The U.S. has completely ignored the energy crisis that is bearing down on them. The 12% of our daily oil supply from Mexico will be gone in less than five years. Our economy is still in freefall. If oil were to rocket back up into the mid-$100’s in the next year, the consequences would be dire. A conflict between Israel and Iran would immediately lead to a spike in oil prices. If Iran is attacked they would surely launch missiles at the Iraqi oil fields and attempt to block or mine the Strait of Hormuz.

The United States views China and Russia as our chief adversaries in the world. The United States is attempting to get Georgia and the Ukraine admitted into NATO. If Russia were to attack either country, the U.S. would be obligated to go to war against Russia. How would we do this with an all volunteer military that is already stretched too thin? Russia knows we are stretched thin and will push right to the edge of conflict. China knows they can not win a traditional war with the United States. Therefore, they are not preparing for a traditional war. As the U.S. spends $765 billion per year on F-22s, aircraft carriers, and tanks, the Chinese use our dollars to buy up commodities and natural resources in Africa, South America, Australia, and the Middle East. The next war will be a resource war and a cyber war. China is already winning the resource war. Russia has vast reserves of oil and natural gas. Worldwide turmoil is beneficial to the price of their major assets. The United States is dependent on foreign nations to the tune of 5.1 billion barrels of oil per year. Who will be more desperate when the oil tap is shut off?

As the U.S. is bogged down in Iraq, Afghanistan and our Mexican border, further world conflict would stretch U.S. military capacity to the breaking point. As the U.S. economy falls further and the price of oil skyrockets, American leaders will grow increasingly desperate. They will be looking for an opportunity to flex their muscles and prove to the American people that they aren’t really failures. This will be the dangerous time where the fingers of instability could be triggered by one grain of sand. Suppose China decided to take advantage of our weakness and attacked Taiwan. We would steam our aircraft carrier fleets towards the conflict. Suppose China launched a nuclear missile 100 miles from our fleet at sea as a warning. Would we launch a nuclear missile at China? If cyber war broke out and the Chinese or Russians were able to disable our electric grid and or satellites, we would be unable to detect a nuclear strike. Would we launch our nuclear missiles in response? Who knows? If Russia and China can disable our satellites, we can surely do the same. Uncertainty, pressure and panic never lead to a positive result. Could the end of earth as we know it be over in a matter of moments due to the miscalculations of inept politicians? You know the enemy.

“Never, never, never believe any war will be smooth and easy, or that anyone who embarks on the strange voyage can measure the tides and hurricanes he will encounter. The statesman who yields to war fever must realize that once the signal is given, he is no longer the master of policy but the slave of unforeseeable and uncontrollable events.”       Winston Churchill

The current crisis does not have to end this way. If the American people can wake up from their materialistic stupor in time, this crisis could lead to a new beginning for the Great American Republic. This crisis will inflict enormous pain on many Americans. If we continue on the current path, violence is in our future. If we permit the country to rebalance to a sustainable level of spending, address our future liabilities, and develop an energy plan there is hope. The choice is ours.