What Will This Crisis Lead to?

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 4 generations living through each cycle. We’re currently in the most hazardous part of the cycle: The Fourth Turning, an era of upheaval in which our country will redefine its very nature and purpose. The most volatile generation -- Baby Boomers -- now holds positions of power.

The sudden spark that catalyzed this crisis occurred on the beautiful morning of September 11, 2001; the crisis reached a crescendo in late 2008. Many believe that the worst is behind us, but this is highly unlikely. Previous crises lasted 15 to 20 years. The crisis which appears most analogous to this one is the Great Depression, which lasted 16 years. In both cases, the Federal Reserve pumped too much credit into the financial system. The only contemporary innovation: Politicians now hastened the fall by eliminating all financial regulation. What we have is the Greater Depression - which we’re likely only halfway through.

The perceived success of the War on Terror has convinced a majority of the population that government can solve all of their financial troubles better than the free market. America has thus become 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 (COF) 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 reckless behavior by even more reckless behavior by the government. Boomers will never be known 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 entrepreneurial risk-taking that’s been the basis for our economic success is dying out; now, the government dictates how auto companies, insurance companies, and banks should be run. Government names the winners, and the losers. Politicians will frame every issue as an either/or option. You either support their new spending plan - or catastrophe awaits. 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.

Strauss & Howe described the Prophet/Idealist generation as one born during a High; coming of age during an Awakening; spending its midlife in an Unraveling; and passing old age in a Crisis. Prophetic leaders have been cerebral and principled, proponents of sacrifice, wagers of righteous wars. Early in life, few saw combat. Late in life, most prophets come to be revered as much for their words as for their deeds.

The three previous crisis periods in US history were dominated by the prophetic leadership of George Washington, Abraham Lincoln, and Franklin Roosevelt. George Bush led us through the first half of this crisis; Barack Obama will lead us through the second. I don’t think George Bush will ever be revered for being cerebral or inspiring - though he did wage his own righteous war. Barack Obama is cerebral and principled. He’s waging a righteous war in Afghanistan, though he has never seen combat. He’s already known for his inspiring speeches. But will he rise to the level of Lincoln?

Boomer leaders are cocky, aggressive, and quoting Doug Casey, “quite willing to burn down the barn in order to destroy whatever rats they see.” 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 of milk and honey.

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. The sedated masses were easy to manipulate when unemployment was at 4%. There are now 6 million more people unemployed than there were in November 2007. Another 2 to 3 million will lose their jobs in 2009; another 5 to 10 million people 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. With so many out of work, civil unrest could begin to rear its ugly head.

The recent Tax Day Tea Parties revealed another 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 take a double hit. Worldwide economic turmoil will result in protests and anger in many countries.

Difficult economic periods often lead to war. The economic period ahead will be extremely 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. 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?

But the current crisis doesn’t 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 this great American republic. If we permit the country to re-balance to a sustainable level of spending, address our future liabilities, and develop an energy plan, there is hope.

The choice is ours.

Comments

[Tom E.:]

Obama is generation Jones, not a boomer.

Apr 22 10:30 AM

[nym:]

My parents came of age in the Depression, and they taught me not to try to keep up with the Joneses.

Apr 22 11:57 AM

[FromLori:]

If the media had done their job and actually exposed obama the electorate would have known that he is nothing more than a fascist controlled by the bankers but then we no longer have a media with journalistic integrity that too is a bought and paid for profession that reports what they want you to hear.

Big Boys
www.businessinsider.co...
www.bloomberg.com/apps...
Catherine Austin Fitts
www.opednews.com/artic...


$1.14 quadrillion get a load of this!

No, that's not a made up word. A quadrillion is one thousand trillion dollars. Not $4 trillion, but $1000 trillion – and change.

Here's the breakdown, according to the International Bank of Settlements, which acts as banker for the world's central banks:

1) Listed credit derivatives stood at USD 548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:
a. Interest Rate Derivatives at about USD 393 + Trillion;
b. Credit Default Swaps at about USD 58 + trillion
c. Foreign exchange derivatives at about USD 56 + trillion;
d. Commodity Derivatives at about USD 9 trillion;
e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.
World derivative debt is $1.14 Quadrillion USD. For the US banks share of that see Table 1, page 22 of 33 at

bluelori.blogspot.com/...

Apr 22 01:03 PM

[JohnAl:]

"Obama is better than the other guy, and by extension Obama's choice of Bernanke and Geithner is almost certainly better than the team the other guy would have installed. Let me change that: NOT ALMOST CERTAINLY BETTER, BUT DEFINITELY BETTER! "

F.E.B., you seem to see the world, as so many amazingly still do, as strictly D vs R. Anyone critical of D must be a proponent of R and vise versa, when in fact, many of us critical of Obama recognize that both McCain and Obama were terrible choices because both are big government proponents neither of whom has ever seen a problem that he didn't think the federal government should attempt to solve.

I may be way wrong, but I sense that there is a true political realignment taking place. The D v R alignment is being replaced by Big v Small federal government political sides. The big banker bailout last fall was the shock that many of us on both the right and left needed in order to clearly see the US federal government for what it truly has become - an oligarchy controlled by large, favored corporations.

The tea parties and future like protests are in large part reactions to this 21st century fascism.

Apr 22 01:43 PM

[John Lounsbury:]

Jim - - -

This is one of your best essays. I started to write a comment an hour ago and it ended up so long that I copied into an Instablog piece.
seekingalpha.com/insta...

Apr 22 02:00 PM

[Ricard:]

You bring up a very good point about the tech bubble.

The collapse of the Soviet Union brought about an unparalleled amount of prosperity to the US in the form of mental euphoria. We could do no wrong, as our righteous standard burned our enemies with words, not swords.

Perhaps this is what caused our collapse - the hubris we acquired when we won over our mortal enemy.


On Apr 22 09:31 AM a fat panda wrote:

> While I agree with your conclusions, Sept 11, 2001 is just another
> floor in the house of cards. The asset bubble started in tech during
> the mid 90s, and has finally worked its way through the entire system.
>
>
> The distinction is important because you see that GWB has led us
> through the first half of this crisis where as I sense that he inherited
> a problem which he in turn made worse. Obama seems content to do
> the same. The problem is that no one is looking for a good solution
> because Americans want a fast solution, whether it is good or not.
>
>
> Probably the biggest challenge we as a nation face is that for 20
> years we lived in very good times. The promotion culture in good
> times leads to your "leaders are always sure and often wrong" because
> during the good times the cycle covered up mistakes. Now the cycle
> is revealing mistakes. The solution to our problems is innovation
> and creativity, and we have to figure out how to get leaders in place
> that will listen to outsiders. That doesn't happen very fast.<br/>

Apr 22 02:04 PM

[Whippet:]

Couldn't agree more, JohnAI- just about every senatorial, gubernatorial, and presidential election in this country has become "Satan vs. Beelzebub- The Cage Match." When Nimrod Axelrod and Princess Pelosi come out and slander and criticize the teaparty gatherings, it shows just how out of touch the liberal elites are in this country. Equally out of touch are the neocons, who are neither new nor conservative. They're more like Woodrow Wilson than Ronald Reagan. The last three presidents, from GHW Bush through GW Bush, have been Pontiac, Buick, and Chevy. All manufactured at the same factory but with different hood ornaments.
As a paleoconservative, I find I have more in common with some members of Code Pink than the Republican party anymore.

The real question and turning point is whether a majority of Americans will wake up and stop drinking the welfare state Kool Aid. I'm skeptical, but my children's future depends upon it.

Here's an apropos quote from Thomas Jefferson:
"When all government, domestic and foreign, in little as in great things, shall be drawn to Washington as the center of power, it will render powerless the checks provided of one government on another, and will become as venal and oppressive as the government from which we were separated."

I'd take George III over George the 2nd, or Obama the First.

Apr 22 02:13 PM

[kruser53:]

James Quinn - - -

Great article.

John Lounsbury - - -

Thanks for taking a long comment out of this comment stream to an Instablog. It makes reading the other comments much easier.

Apr 22 02:57 PM

[DavyJ:]

Um, methinks that Bernanke preceded Obama.


On Apr 22 09:43 AM Ferdinand E. Banks wrote:

> and by extension Obama's choice of Bernanke and
> Geithner is almost certainly better than the team the other guy would have installed.

Apr 22 02:58 PM

[Gedankonomist:]

1913 was the crisis point approximately 100 years ago. That's when we got the FED, the 16th and 17th amendments and unless I'm mistaken, liquor prohibition. And shortly after this, Woodrow Wilson, Col. House and Winston Churchill manipulated the US into the "Great War" by arranging for the sinking of the Lusitania. This of course, paved the way for Hitler's rise to Power, as well as our own little dictator who caused a recession to turn into a depression.

Apr 22 03:58 PM

[User 353732:]

A distressingly large fraction of our fellow citizens belong to the DKDC class(Dont Know, Dont Care)
Consider:
1.A substantial fraction of Americans pay no income taxes(or capital gains or wealth taxes) at all and another large fraction pay very little: They are completly decoupled from the incentive/disincentive impacts of income/capital gains/wealth taxes. They could not possibly care about an issue of fundamental importance to the organization of the economy. They do not understand where the Government gets its money, so they care not for gigantic deficits, share of Govt. in total spending, crowding out of private capital . Maybe if sales taxes accounted for a majority of Govt revenues they would care or if there were a no exceptions universal flat tax or something equivalent, they would notice but there isn't and they dont. Sadly, they do not even know that up to 25% of their utility bills can consist of taxes, fees, cost of govt. mandates. If they did, they might become agitated.
2. In state and local elections voter turnout is below to well below 50%; this means that a large fraction of our fellow citizens are disengaged/decoupled from the very fabric of democracy and representative government. They have no stake in the system. Many millions of Americans in April 2009 have very little notion of what is actually in our Constitution or the Bill of Rights or any real sense of natonal history: they are even decoupled from our unique heritage.
3. An astonishingly small fraction of Americans have worn the uniform of the country in the past 20 years: they are decoupled from what it takes to keep freedom alive: this does NOT mean they are unpatriotic or brave; it does mean that they are disconnected..
4. Millions of our fellow citizens prefer Reality TV to reality itself: they are decoupled rom the difference between truth and a manufactured reality or between facts and propaganda: how easy then to beguile and lead astray and how hard for them to even acquire the basic knowledge to make informed decisions. In April 2009 one can certainly fool more of the people, most of the time than in the past. This, I think, is a tragic national weakness.

Before we discuss waking up the populace, we ought to discuss: >how the DKDC class came to be( not by accident in my view),
> whose interests(Washington DC, Wall Street, Hollywood come to mind) are well served by the existence and perpetuation of of this class and
>how the DKDC class can be made even to realize that they are asleep and dreaming. Their very state of consciousness is remarkably and maybe unfathomly different from the state of consciouness of people who visit SA, pay taxes, vote, participate in National defence, invest and create jobs.Bridge this chasm and all other issues may be addressed. Ignore it and eventually it will swallow up the very idea of America.

Apr 22 04:01 PM

[Mistrofan:]

Hear! Hear! Confirms my theory. Except few little details:
1. The crisis started way back in Oct 1997, as response to a BIG change in the world economy: the Asian crisis and the emergence of China
2. Continued in 1998 with the failure of LTCM and the first bailout (Greenspan & Clinton)
3. Continued even more in 1999 when Clinton decided to de-regulate de financial system issuins an Act in this matter.
4. 1999-2000 The greed of baby boomers surpasses the most imaginative SF writters imagination.
5.. 2000 - Greenspan props-up the hipotetical Y2K with waves of liquidity
5. 2000-2003 Greenspan pushes the financial system to take more risk by low interest rates and QE policies.
6. 2004-2007 Baby Boomers again show their greed by super-speculating the Real-Estate bubble .
7. 2008-2010 another wave of low interest rates and QE will fuel another or the same bubble. Doesn' really matter which one.
8. 2015-2017 (my estimate) - End of Story - Worldwide Financial Colapse. I don't even want to say what I am foreseeing happening in the US of 2015-2017. God help us all.

Apr 22 06:01 PM

[Sober Realist:]

It's not a nuclear war amongst Russia/America/China you should fear. Do a little research on Pakistan and you will see that it has been deteriorating for several years now. The financial crisis was the cue de grace for the Pakistani government. A nuclear-armed state with the extremist Taliban knocking at the door of this country's seat of power is the scary scenario we face today. Another major attack in India would seem more likely.
As far as the crisis in America, I think it will be prolonged just like in the 1st Great Depression. 10 years from now after the American tax revolt that will occur sometime in the next decade, America will arise with a hard lesson learned from the failures of Big Government and the freedoms that had been lost through widespread apathy.

Apr 23 12:52 AM

[Ferdinand E...:]

Yes, Bernanke was appointed by President Bush, which is one reason that I was initially against him, but unfortunately I was wrong. I have now decided to pronounce the professor suitable for the Obama team - the man Obama might have appointed if given the opportunity - although I might have to change my opinion next week or month. Of course I might also have to change my opinion of the Chief Executive if he does not give us a winning season, but in general I'm an optimist. Somewhere out there is the right formula, and I think that the present Obama team has what it takes to find it.

As for 'the other guy'. I certainly could have voted for him...until he made his choice of a running mate; and you know something, I still haven't seen an explanation of why he failed to select Mr Romney.

Apr 23 01:55 AM

[Erick Tippett:]

Very interesting your observations are. What I feel most people in
this country fail to realize (as the result of the purposeful brainwashing and intentioned ignorance and lack of self awareness of the public executed by the educational institutions here) or don't care to exam beneath the surface, is a lie started many years ago. You see, the so called founding fathers of this "Republic" had already experienced a "whiskey tax revolt" and commissioned Mr. Washington to crush it and crush it he did, as only a true aristocrat would! So horrified were these men that a 'democracy' without a "chief of state" could lead to "mob rule" (as it actually did during the French revolution as opposed to the American aristocratic rebellion against the British Crown!) that the word 'democracy' appears nowhere in any of those documents they signed, not one! A republic allows for an elected chief of state who can assume presidential powers, go to war (as Mr. Bush has done) and let congress know afterwards. (Even Roosevelt sought an official
act of war after the attack at Pearl Harbor.)

Will the American public rise up in righteous indignation against
these governmental gangsters running this country? Probably, but in a way that will no doubt repeat history and create a vacuum for a charismatic dictator to appear on the scene to save us from dispair
and civil chaos!

The simple act of having the common sense to listen to and consider the many fine third party candidates as alternatives to
the 'republicrat' syndicate running this country possibly could
have sent an effective message to Washington. However,
unfortunately the mass defection to a third party that Newt Gingrich
predicted if the Republicans did not live up to their "contract with
America" did not occur! And so perhaps it should be thus. A public that fawns charismatic crooks like our fomer governor here in Illinois and seeks always psychologically to have their fantacies indulged and their desires cattered to will never fashion a true democracy because, as Adloph Hitler is quoted as saying,
"it is so wonderful for governments that the people don't think!"

Unfortunately, history seems to bear that statement out over and
over again!

EDT
Chicago, Illinois

Apr 23 02:04 AM

[Ferdinand E...:]

EDT, I wonder what would have happened the day after Pearl Harbor if Franklin Roosevelt had asked Congress not to declare war. It's possible that his term of office might have ended right then and there.

Apr 23 09:37 AM

[Libertyhope:]

The American boomers lived through Vietnam, the constant threat of nuclear attack, the 60's revolution, riots and the murders of the Kennedys and Martin Luther King. We lived crisis.


On Apr 22 09:16 AM Fabien Hug wrote:

> That we are in a mess; OK. That boomers have never seen a real crisis
> or combat; OK. That China and/or Russia is going to launch a cyber
> attack on the electric grid, prelude to a rainfall of nuclear missiles;
> NOK.

Apr 23 01:05 PM

[Libertyhope:]

How can you say that boomers have never seen a real crisis or combat? Boomers spent all of their early years with Vietnam, the threat of nuclear war, race riots, Kennedy and Martin Luther King murders and the sexual revolution!

Apr 23 01:08 PM

[rosey99:]

Ah. . .The Boom generation. First it was pot, protests, and communes (though a bunch of poorer boomers did go off to Vietnam).

Then disco, cocaine, greed, (greed is good?) and conservative politics.

Then religion, war, a lot more greed, and extreme conservative politics.

I wonder what phase is next? A truly gifted generation, if only in the senses that they were given much, and love to argue about just how great they are. Definitely legends in their own minds. The individual Boomers I have known and worked with have been, mostly, pretty good people. Taken as a group though I am constantly confounded by what seems to be an almost monolithic fascination with themselves, their self-interest, self-image, self-awareness, self, self, self. I guess they are the "Me" generation after all.

Sorry to vent like this. It's an interesting article, if a bit deterministic. I'm genuinely worried that Boomers will be in power for a while longer, given the bang-up job they have done so far as leaders. I hope the current guy (Barack) proves me wrong, but only time will tell.

I agree that we have an enormous amount of work to do in this country, and numerous large problems to solve. Please forgive me if I am skeptical that the current crop of people is cut out for the job. I hope they are, I just don't see any reason to be optimistic, yet. As for social unrest, and war, I see the risks rising somewhat, but see no clear evidence yet that we are in imminent danger. And a cyber attack blinding our strategic early warning system? I would be interested in any evidence you have that this is a credible threat.

I think Sober Realist is more or less right, the place to keep your eye on is Asia (Pakistan to Western China), at least for the time being. If China somehow destabilizes, even a little bit, it could get really ugly fast. But at this point it is all basically speculation.

I would really, really like to know on what basis you claim that a cyber attack is capable of disabling American strategic defences. Really.

Thanks again for the piece. It is, in your typical fashion, well written and convincing.

Apr 23 05:57 PM

[beenburnedt...:]

"The choice is ours/"

We have no choice.

Apr 24 10:25 PM