Looking at Our Present Crisis Through the Lens of 'The Fourth Turning'

There's a great article by James Quinn over at Financial Sense Online (hat tip NA) that I've just gotten around to working my way through - Boomers: Your Crisis has Arrived. If you have some time to spare, it is well worth a look. [The article can also be found here.]

Mr. Quinn has managed to provide many contemporary guideposts to the framework that was developed by William Strauss and Neil Howe when they wrote The Fourth Turning back in 1997 and the results are chilling.

In what has many similarities to Kontratieff waves for the world of economics and finance and, unfortunately for us Americans, is sure to only be exacerbated by what Paul Kennedy wrote about so brilliantly in The Rise and Fall of Great Powers, the Fourth Turning describes four distinct phases that society goes through over an 80 to 100 year cycle along with the types of personalities these phases produce.

The bad news is we're not in a good phase at the moment.

The good news is that there's one coming.

The really bad news is that it might take a while to get to the next good phase and things are likely to get pretty ugly between now and then.

The four phases are as follows and the start dates for the current cycle have been inserted:

• 1946 - THE FIRST TURNING – THE HIGH (Spring)
• 1964 - THE SECOND TURNING – THE AWAKENING (Summer)
• 1984 - THE THIRD TURNING – THE UNRAVELING (Fall)
• 2001 - THE FOURTH TURNING – THE CRISIS (Winter)

Have a look at the article to fill in all the details, particularly the personality types that correspond to each of the above. An interview(.mp3) with Mr. Quinn is also available as part of the weekly radio broadcast at Financial Sense - skip to about the 34 minute mark to get there directly.

Here's one part that was particularly chilling to me, in reference to the crisis period that we are now well into, a period that typically ends with highly destructive wars:

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.

You can kind of see how this could materialize if all the money currently being created to cure the world's economies and financial markets actually succeeds in doing so and, all of a sudden, we have inflation-fueled economic growth and a big, bad global energy crisis.

Comments

[Steven Hansen:]

Listened to James Quinn interview - he handled himself with distinction.

Feb 16 05:27 AM

[phil from E...:]

So maybe this is the reason we went into Iraq?

Feb 16 09:21 AM

[NanO49:]

The boomer crisis article is well written and very interesting. I liken it to the Apocalypse 2012 phenomenon. If you haven't read it, do so -- it is chilling.

Feb 16 09:29 AM

[kelm:]

The current period ending with highly destructive wars is completely consistent with the experience following the Great Depression. As for where such a conflict would start...I keep looking at Israel and seeing that nations inability to elect a majority government as very reminiscent of the inter-war period politically in Austria and Germany, and indeed in some other European nations. Fractured coalitions can invite attack or mis-steps by others or can lead to that nation assuming the aggressor role as a means of galvanizing public support. So I agree the middle east is a likely flash point.

Feb 16 09:55 AM

[adan:]

two things:

1) re: "...Oil is the lifeblood of our society...." -

only because it's been allowed and forced upon us as so (in my opinion)

2) re: "...The problem with waging a major war is that you need troops to sacrifice." -

only because of the lack of will or desire to use nuclear or other non-troop weapons

- and please don't think i'm in favor of not wanting the oil industry to exist, or flourish; nor that i want or favor neutron or nuclear weapons used

my point is, there are and have been alternatives

it's not and hasn't been a "must be" situation

bottom line: there's choices

we, and our elected reps, should take responsibility for that fact

that's all....

yes, it might make us think and reconsider, but not necessarily change our minds

Feb 16 10:04 AM

[Teutonic Kn...:]

The investment literature since the '80 had widely predicted the forthcoming of that "Collapsing Phase" of our economy.

The current crisis differs with other previous U.S. only recessions and even the Great Depression taking on a global dimension certainly has that ominous "look and feel".

My take is that if by the end of 2009 we are still in this rut, that could be it.

Feb 16 10:31 AM

[ain't no fo...:]

Mr Quinn finishes his piece with:

"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."

Would that it would be that easy. He may find that place, but I guarantee that there will be twin signs on the front gate:

NO TRESPASSING

YANKEE GO HOME

We'll have worn out our welcome by that time, garronteed.

Feb 16 10:50 AM

[the social ...:]

Anyone remember the Greening of America? Came out in the early 1970's I think. He argued that America for most of its years had been in a frontier mentality. I forget what other stages there were that we were going to proceed into, but it was an excellent book, except in 1980 we elected Reagan, and reverted to a frontier mentality.

Classification of the past into various sociological or psychological eras is a descriptive tool. It has no predictive value. I am a baby boomer. I do not recognize myself in the psychological attributes of the boomers. We are not a great uniformity. Besides, the psychological attributes are not predictive of future events, nor of our reactions to future events.

Cycles are also a description of the past. They are in no way predictive of cycles in the future, just as trends are not predictive of a trend continuing or discontinuing. This is an astrological mentality - that there are cyclical forces afoot, and these cycles have a regular periodicity.

We are faced with depleting oil and no cheaper alternative that can quickly be put in place to replace it (unlike oil replacing coal 75 years ago). We are faced with an aging population that would like to live a retirement at the same comfort level that they enjoyed in their working years. We are faced with a debt burden of historic proportions both at the individual and government level, and having government assume some of that private debt doesn't solve anything. For credit to flow again, for economic growth to occur again (and there are no guarantees that it must), that debt must be deleveraged.

Where are the cycles in these three headwinds? Two of them are completely new. When we deleveraged and came out of the Great Depression, resources were plentiful, and there was no immediate threat of an aging population. Quite the opposite. Things ARE different this time. Some things are always different. And things don't look good for some time to come based on historical relationships that are likely to continue. And then there are Black Swan events, some of which could have benefits to society.

The certainty of history is that no one knows the future. Thanks for wasting my time.

Feb 16 11:32 AM

[Jason Rines...:]

Also kudos to Mr. Quinn whom is a leader on a think tank I put together in August. We are working on a next generation of building the necessary but now not-yet-existant technology to build online collectives that can create rigourous debate and actionable plans. He devotes his time as a true servant of humanity. I will be meeting with him in March to create the financial plan for funding for this kind of important work to connect the emerging leadership.

Government could do this work and harnass the collective to solve problems as a B group option to current leadership and soothe a TON of frayed citizenship nerves. Consider the mention of this on the Geitner 'Mission Statement' of a debacle he and the Administration called a 'Plan'. Well, I have contacted this Administration and do have a few connections in Washington (not as many as I used to). I am hearing crickets, it's lip service!

So gentlemen like Mr. Quinn and myself are DOING IT. But we have concluded that what we are doing is building such technology mechanisms for the next era working with the global collective as this old model, leadership continue to implode then literally it explodes. I am an eternal optimist. Mankind's progress never moves in a straight line.

Feb 16 12:06 PM

[basehitz:]

Kudos to . . . the social scientist. . . (i.e., not Quinn) for his rational comments above. Initially Quinn's piece relating to historical events was informative. Then his assessment of the last couple decades proceeds more like the political hacks he criticizes. Then he seems to conclude our future demise is preordained.

Around 1990, there was a book getting widely circulated predicting then the inevitable failure of America. Someone I knew sold his house and most of his possessions waiting for the crash. Immense wealth was created in the decade he lived in a trailer. Then he couldn't afford the house anymore. Now he's retired and it's too late. Oops!

Similarly, Michael Panzer now has a book entitled "Financial Armageddon" which I just finished. It again assumes the worst decisions will be made by those in authority and human nature in response will degrade to it's most base elements. Like Quinn, the 1st half was informative, the 2nd half was wild speculation assuming a worse case outcome.

While the bleak scenario of Panzner may come to pass, it is not preordained.

Those who care should become informed and voice opinions with elected officials. The more that do, the more difficult for them to legislate based on self-interest.

Quinn should be filed under fiction.

Feb 16 12:25 PM

[jksisco:]

The ending that James Quinn is predicting does not have to come to pass, we have free will and live in the only country in the world where real change can take place. It will take many of us to implement this change and the place to start is by reining in our Federal Government and restoring it to it's constitutional position. This is no joke and will take courage and determination to succeed. We owe it to future generations to prevail and it is our duty. Please visit www.nhliberty.org/ as the first shot across the bow to initiate this vital patriotic duty has occurred. If you love liberty and the pursuit of happiness get involved.

Feb 16 12:57 PM

[silver-bullet:]

America may not be as white as you think. I may be an American, but I ain't no Yankee.


On Feb 16 10:50 AM wpdragon wrote:

> Mr Quinn finishes his piece with:
>
> "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."
>
> Would that it would be that easy. He may find that place, but I guarantee
> that there will be twin signs on the front gate:
>
> NO TRESPASSING
>
> YANKEE GO HOME
>
> We'll have worn out our welcome by that time, garronteed.

Feb 16 01:16 PM

[kentw007:]

It is not a stretch to say that the Kondratieff wave is also a private central bank wave - in which the for-profit credit expansion by the "Fed" monetary cartel expands until it reaches it limits of exploitation and debt levels - then the disastrous rollback occurs.

Feb 16 01:36 PM

[tallguy:]

Peak oil is a myth, based on the myth of peak demand. A hybrid diesel can easily with today's technology get 100 mpg, at very little or no additional cost over existing vehicles of like size and performance. Ford and Toyota both have the existing technology to produce this vehicle NOW.

Emerging technologies will displace the need for oil as it dwindles, extraction of diesel from coal can replace the lack of oil as supply from traditional sources goes down.

This can all happen with no advances in technology. However the advances are actually accelerating. The number of patents, the amount of $$$ being spent on alternatives is increasing, with predictable results, giving new options.

New technologies bring about great changes.

Automobiles, aircraft, nuclear fission, probably at some point nuclear fusion, solar, wind (another version of solar), geothermal, cold fusion, etc., have all changed or wil change the course of history and our future as we know it.

There is no shortage of energy, and in fact there is no shortage of technology to develop extremely efficient transportation alternatives and home energy alternatives.

There is an old saying, necessity is the mother of invention.

In fact there has been no necessity, and beyond that, financial incentives by the ones in power / control to maintain the status quo.

The status quo is changing with growing understanding that the United States can no longer outsource production and even service jobs to the rest of the world and survive as a powerful nation.

It can all be summed up by a few choice words. Greed, shortsightedness, fraud, stupidity, but mostly money, or greed.

We must legislate the end to our job losses in this great nation and refocus on innovation and a strong job infrastructure.

Feb 16 01:49 PM

[windswept:]

When it comes to Oil. I think one needs to bear in mind that the paradigm shift to fuel efficiency is upon us. The new "stimulus" package provides economic incentives (Billions $) to help accelerate the shift. Nuclear power will also become more palatable both to Govt. and to the people as necessity for economies dictate. The U.S could reduce its oil consumption by millions of barrels per day within 5-10 years with real implementation of fuel efficiency transportation and power. The automotive industry has no choice but to produce these vehicles or they die. We are in a painful transition. All the doom and gloom is for those whom have believed the world was going to end several times over before. Believe this; you will be driving an EV or some derivative thereof within 5 years. The paradigm first will occur in you mind via economies and then it will be accepted. I am still long on oil stocks but I think our nation can maneuver around an oil catastrophe. We consume appox. 20.6million barrels per day, we produce 8.5million bpd, we export 1.2 million bpd, we import 10.6million bpd. We currently operate 104 nuclear reactors, France has 59, and Japan has 53. Once we embrace that energy source and if need be build it out in the deserts and hinterlands. We will significantly reduce our oil dependence. Interesting times indeed. Time to surrender to the new theorized economics; didn’t we already do that during the dot com era?

Man must be resourceful and positive to survive. Theorizing about coming wars is an unproductive mental exercise. Flip the coin over and you will see the other side. IMO

Feb 16 01:53 PM

[the social ...:]

I think Basehitz is referring to the Coming Great Depression of 1990 by Ravi Batra. I read that one before 1990, and his arguments about income equality were good, and then he went into this long cycle thing about certain kinds of social classes displacing each other in power. So there was a recession in 1990, and I made good money in both 1990 and 1991, by being long.

Batra's error again was categorizing past societies based on social attributes of his choosing. That is, it was all interpretive. There was no measurement of these social groupings. I have engaged in categorization of phenomena using cluster analysis. It requires good data, and no mathematical technique can tell you whether an individual observation should be in this group or that group, and how diverse the group memberships should be, and which attributes you should choose to define the group. Your classification is only meaningful if it is predictive in some way - so you have to wait.

I agree that there is plenty of energy out there, but we are near peak oil, and replacing it or substituting for it is more expensive than oil at $100 a barrel given current technologies. It's not the dollar cost of energy that is a problem, it's the energy efficiency of energy production. Ethanol produces very little net energy, if any, because of industrial agriculture that uses great amounts of energy to fertilize, plant, manage pests, and harvest corn. Then there is the energy used in conversion of the corn to alcohol.

It takes oil to build nuclear reactors. It takes oil to build synthetic fuel plants that make oil out of coal. We're talking about huge capital and energy investments to get alternative energy production started up, at a time that both cheap capital and energy are scarce.

Necessity is NOT the mother of invention. Most inventions come out of the blue and then spur a demand for them. I'm not waiting for nuclear fusion. Viagra was a side effect of testing the stuff as a cardiac drug.

Feb 16 02:34 PM

[tallguy:]

Agreed, necessity is not always the mother of invention, but often it is.

Inventions are frequently accidental by products of R&D, but often it is directed research and resource.

The United States Gov has had lots of innovations as by products of Space technologies, but also directed necessities like spending billions on chip development early on in the silicon chip race that helped develop and fund that technology for U.S. companies.

There is a current program / joint venture with the U.S. Gov and several private U.S. companies to develop advanced batteries for hybrid and other energy storage uses to recapture that portion of the technological race and market.

Coal to oil technology is here now by the way, is working in Australia.

So it goes both ways.

Feb 16 03:00 PM

[hemibarracuda:]

Had my kids read it in 1999. To late for me--Where there is adversity there is opportunity. Plant a garden--live beneath your mens-- deal in cash-- have gold in the form of wire--have friends with skills. Thankyou and goodnight

Feb 16 03:12 PM

[basehitz:]

The oil supply question justifiably gets into many discussions. For anyone inclined to spend time and effort, a detailed argument is presented in a book entitled "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy" by Matthew R. Simmons. If Mr. Simmons is even directionally correct, very few commentators are even close to reality as much of it accepts OPEC statements at face value. Mr. Simmons gives convincing arguments why that is a false hope and the importance of bridging to alternatives, not as reactionary measure during price spikes, but with resolve to a real solution. Brazil did.

Back to the Quinn's article: My current book is "Panic" by Michael Lewis. It is a compilation of articles written after major market upheaval in the past. The early sections contain articles published after the '87 crash. As I was reading it, I was struct by the similarity with much of today's commentary. Alarmists come out of the woodwork everytime the market dives.

However, I am not bullish on the market. But it's not because I expect all politicians to screw up and people to resort to their worst instincts. They might, but that's not my basis. The reason is the amount of debt this nation carries as a % of GDP. And that was before all the recent govt intervention. Oct 9, 2005, Marc Faber wrote a paper "Why the Fed has no other Alternative but to print Money!" This was written in 2005! Page 1 has a graph that left an indelible mark. Back in 2005, Total US debt was 300% of GDP. The ONLY time in history it was even close (250%) was . . . 1929. And since 2005, it has expanded to 356% per the article "FT Alphaville: Welcome to debt central" written by Izabella Kaminska on 12/12/08 . Our debt load is ridiculous!

After the 1929 crash, the debt unwound for 20 years to 130% of GDP. Then we were in a position for sustained growth. That I believe is the process we are going through the next decade. Hopefully, the politicians won't prolong the pain with all their "help".

For you market traders, recall that in the '30s there were many tradable rallies. Some were huge! I expect the same now and for years to come.

Feb 16 03:57 PM

[hemibarracuda:]

Read the creature from Jekyll Island by Ed Griffin. Historically the way back rich (Rockafellers, Rothchilds, Morgans, and a few others conspired with the politicians and Presidents to create money and have us pay for it. It does not matter as their connections are worldwide and they profit from every transaction. What would serve thei needs is a world government with them and us. We can only change by gold backed dollar, retire debt on the same basis, curtail spending, get rid of the federal reserve, allow banks to back deposits dollar for dollar and make money the old fashioned way (on srevices) GET RID OF THE FDIC. They encourage bad banking on our tax dollars. Privatise it. WE NEED TERM LIMITS to discourage political control over our lives by manipulating fiscal policy to serve their whims. We are in major trouble.

Feb 16 06:25 PM