Seeking Alpha
Brick & mortar retail
Profile| Send Message|
( followers)  

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 (NYSE: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.

Source: What Will This Crisis Lead to?