Crisis – Page 2 – The Burning Platform

FOURTH TURNING ECONOMICS (PART TWO)

In Part One of this article I laid out the unsustainable economic conditions which will drive the next phase of this Fourth Turnings and detailed the economic factors which drove the previous three American Fourth Turnings.

Strauss and Howe, when writing The Fourth Turning in 1997, did not know the exact circumstances and events which would propel the next Turning. But their study of economic and demographic trends along with the attitudes of generations and historical precedents in prior Fourth Turnings, led them to conclude the driving factors of this Crisis would be debt, global disorder and civic decay.

As I watch what is currently happening in this country and around the world, it is evident to me they nailed it. The volcanic eruption in 2008 unleashed a torrent of molten lava, which continues to flow along channels of distress, but is currently threatening to burst free of these channels and wreak worldwide financial and physical devastation. A multitude of possibilities described by Strauss and Howe below are already happening or will happen in the next few years.

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FOURTH TURNING ECONOMICS

“In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. If foreign societies are also entering a Fourth Turning, this could accelerate the chain reaction. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” – The Fourth Turning – Strauss & Howe

The quote above captures the current Fourth Turning perfectly, even though it was written more than a decade before the 2008 financial tsunami struck. With global debt now exceeding $250 trillion, up 60% since the Crisis began, and $13 trillion of sovereign debt with negative yields, it is clear to all rational thinking individuals the next financial crisis will make 2008 look like a walk in the park. We are approaching the eleventh anniversary of this crisis period, with possibly a decade to go before a resolution.

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2019 FROM A FOURTH TURNING PERSPECTIVE

“An impasse over the federal budget reaches a stalemate. The president and Congress both refuse to back down, triggering a near-total government shutdown. The president declares emergency powers. Congress rescinds his authority. Dollar and bond prices plummet. The president threatens to stop Social Security checks. Congress refuses to raise the debt ceiling. Default looms. Wall Street panics.” – The Fourth Turning – Strauss & Howe

Strauss and Howe wrote their book in 1996. They were not trying to be prophets of doom, but observers of history able to connect events through human life cycles of 80 or so years. Using critical thinking skills and identifying the most likely triggers for crisis: debt, civic decay, and global disorder, they were able to anticipate scenarios which could drive the next crisis, which they warned would arrive in the mid-2000 decade. The scenario described above is fairly close to the current situation, driven by the showdown between Trump and the Democrats regarding the border wall.

It has not reached the stage where all hell breaks loose, but if it extends until the end of January and food stamp money is not distributed to 40 million people (mostly in urban ghettos) all bets are off. The likelihood of this scenario is small, but there are numerous potential triggers which could still make 2019 go down in history as a year to remember.

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TICK TOCK

“This country, and with it most of the Western world, is presently going through a period of inflation and credit expansion. As the quantity of money in circulation and deposits subject to check increases, there prevails a general tendency for the prices of commodities and services to rise. Business is booming. Yet such a boom, artificially engineered by monetary and credit expansion, cannot last forever. It must come to an end sooner or later. For paper money and bank deposits are not a proper substitute for non-existing capital goods. Economic theory has demonstrated in an irrefutable way that a prosperity created by an expansionist monetary and credit policy is illusory and must end in a slump, an economic crisis. It has happened again and again in the past, and it will happen in the future, too.” – Ludwig von Mises – 1952

Image result for recession

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Seventh-Inning Debt Stretch

Guest Post by John Mauldin

Science tells us energy can neither be created nor destroyed within a closed system. Whatever amount is there will stay the same, though it might change form. If only the same were true for debt.

Within the closed system called Earth, we are much better at creating debt than eliminating it. But when we have too much, we eventually eliminate it in painful and unpleasant ways via some kind of debt crisis. This has happened over and over again throughout history.

Today we’ll look at a new book by Ray Dalio called Principles for Navigating Big Debt Crises in which he examines those debt cycles and what we can do about them. I read it on my recent trip to Frankfurt and I highly recommend you do the same. That link is for Amazon but you can also get a free PDF copy here. I read it on my Kindle so I could highlight and save notes in the cloud for later reference. Worth every penny of the $14.99 I spent.

At a minimum, you should read the first 60 pages, which explain his principles and thoughts. The rest of the book dives deep in the weeds of 48 modern debt crises, sorting them into different types and then analyzing each type. Data wonks will love that part. Ray gives us a brilliant tour de force examination of how debt crises arise and what you can do when one strikes.

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THE FOURTH TURNING & WAR OF THE WORLDS

The paragraph above captures everything that has happened, is happening, and will happen during this Fourth Turning. It was written over two decades ago, but no one can deny its accuracy regarding our present situation. The spark was a financial crash. The response to the financial crash by the financial and governmental entities, along with their Deep State co-conspirators who created the financial collapse due to their greed and malfeasance, led to the incomprehensible election of Donald Trump, as the deplorables in flyover country evoked revenge upon the corrupt establishment.

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10 YEARS LATER – NO LESSONS LEARNED

“A variety of investors provided capital to financial companies, with which they made irresponsible loans and took excessive risks. These activities resulted in real losses, which have largely wiped out the shareholder equity of the companies. But behind that shareholder equity is bondholder money, and so much of it that neither depositors of the institution nor the public ever need to take a penny of losses. Citigroup, for example, has $2 trillion in assets, but also has $600 billion owed to its own bondholders. From an ethical perspective, the lenders who took the risk to finance the activities of these companies are the ones that should directly bear the cost of the losses.” – John Hussman – May 2009

This month marks the 10^th anniversary of the Wall Street/Fed/Treasury created financial disaster of 2008/2009. What should have happened was an orderly liquidation of the criminal Wall Street banks who committed the greatest control fraud in world history and the disposition of their good assets to non-criminal banks who did not recklessly leverage their assets by 30 to 1, while fraudulently issuing worthless loans to deadbeats and criminals. But we know that did not happen.

You, the taxpayer, bailed the criminal bankers out and have been screwed for the last decade with negative real interest rates and stagnant real wages, while the Wall Street scum have raked in risk free billions in profits provided by their captured puppets at the Federal Reserve. The criminal CEOs and their executive teams of henchmen have rewarded themselves with billions in bonuses while risk averse grandmas “earn” .10% on their money market accounts while acquiring a taste for Fancy Feast savory salmon cat food.

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