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“Try to unlearn the obsessive fear of death (and the anxious quest for death avoidance) that pervades linear thinking in nearly every modern society. The ancients knew that, without periodic decay and death, nature cannot complete its full round of biological and social change. Without plant death, weeds would strangle the forest. Without human death, memories would never die, and unbroken habits and customs would strangle civilization. Social institutions require no less. Just as floods replenish soil and fires rejuvenate forests, a Fourth Turning clears out society’s exhausted elements and creates an opportunity.” – Strauss & Howe – The Fourth Turning

“Institutions will be increasingly bossy, limiting personal freedoms, chastising bad manners, and cleansing the culture. Powerful new civic organizations will make judgments about which individual rights deserve respect and which do not. Criminal justice will become swift and rough, trampling on some innocents to protect an endangered and desperate society from those feared to be guilty. Expect a loss of personal privacy. Fourth Turnings can be dark times for the free spirit: Just as one kind of official may have new authority to do something for you, another kind—some hastily deputized magistrate—may have new authority to do something to you.” – Strauss & Howe – The Fourth Turning

It’s been almost a year since my annual look ahead at the upcoming year. Last year’s article FOURTH TURNING DETONATION was a big picture overview of where we stood during the thirteenth year of this ongoing Fourth Turning Crisis. I had given up trying to make specific predictions because the twenty-year length of a Crisis period does not lend itself to specificity within a given year. My comment at the beginning of the article was:

…click on the above link to read the rest of the article…

It’s a Fourth Turning: What Did You Expect?

September 20, 2021

IT’S A FOURTH TURNING: WHAT DID YOU EXPECT?

“Reflect on what happens when a terrible winter blizzard strikes. You hear the weather warning but probably fail to act on it. The sky darkens. Then the storm hits with full fury, and the air is a howling whiteness. One by one, your links to the machine age break down. Electricity flickers out, cutting off the TV. Batteries fade, cutting off the radio. Phones go dead. Roads become impossible, and cars get stuck. Food supplies dwindle. Day to day vestiges of modern civilization – bank machines, mutual funds, mass retailers, computers, satellites, airplanes, governments – all recede into irrelevance. Picture yourself and your loved ones in the midst of a howling blizzard that lasts several years. Think about what you would need, who could help you, and why your fate might matter to anybody other than yourself. That is how to plan for a saecular winter. Don’t think you can escape the Fourth Turning. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted.” – The Fourth Turning – Strauss & Howe

“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…

…click on the above link to read the rest of the article…

A Look Back at Nixon’s Infamous Monetary Decision

August 12, 2021

A Look Back at Nixon’s Infamous Monetary Decision

A half century ago one of the most disastrous monetary decisions in U.S. history was committed by Richard Nixon. In a television address, the president declared that the nation would no longer redeem internationally dollars for gold. Since the dollar was the world’s reserve currency, Nixon’s closing of the “Gold Window” put the world on an irredeemable paper monetary standard.

The ramifications of the act continue to this very day. America’s current financial mess, budget deficits, the reoccurring booms and busts, the decline of living standards (particularly the middle class), all have their genesis with Nixon’s infamous decision in August, 1971.

Abandoning the last vestiges of the gold standard was the culmination of a long-term goal of the banksters, politicians, financial elites, and deceitful economists. The first step was the establishment of the Federal Reserve in 1913 whose primary purpose was to allow its member banks to inflate the money supply without fearing the consequences – bank failures/panics, bank runs, recessions/depressions. The Fed could, and still does, through the control of the money supply enrich itself, the government, and its aligned financial elites at the expense of the public at large.

The next step on the road to monetary debasement was Franklin Roosevelt’s draconian measure of outlawing the private ownership of gold. This was not only an unprecedented and outrageous attack on private property, but it also eliminated gold redemption of dollars domestically, which gave the Fed unlimited power to print money without fear of its notes being redeemed.

The specious justification for the law, enacted shortly after the start of FDR’s first tyrannical term in office, was to fight the Great Depression. Of course, the measure did nothing to mitigate the Depression which, in fact, was not caused by Americans’ ownership of gold, but rather the Fed itself and its wild inflationary policies throughout the “Roaring 20s.”

…click on the above link to read the rest of the article…

Culmination of Fed Interventions Inflates Historic “Everything Bubble”

February 27, 2021

Culmination of Fed Interventions Inflates Historic “Everything Bubble”

Culmination of Fed Interventions Inflates Historic "Everything Bubble"

via HistoryDaily

We reported on last year’s partial deflation of the “everything bubble,” aided in part by the COVID-19 pandemic and erratic response to it.

But it could be a bit premature to consider that partial crash a singular event, followed by another period of economic recovery.

In fact things seem a lot worse economically, and this time in the worst way possible. At The Hill, Desmond Lachman describes how the U.S. may have reached the end of the economic road:

Herb Stein famously said that if something cannot go on forever it will stop. He might very well have been talking about today’s everything bubble in U.S. and world financial markets, which has largely been fueled by the Federal Reserve’s extraordinarily easy monetary policy.

The “everything bubble” Lachman refers to is easy to see in the current Shiller Price Earnings Ratio. It’s higher than the 1929 Depression, and on a trajectory towards “dot-com bust” levels from 2000. You can see for yourself on the latest Shiller PE chart below:

Everything Bubble: Shiller Price Earnings Ratio Chart

Schiller PE measures the price to average earnings from the past ten years. Today, on average, an investor pays $34.87 to secure $1 annual earnings.

Both of the past economic peaks, the Great Depression and the Dot-com crash, were “everything bubbles”. Today’s Shiller PE ratio has already surpassed Black Tuesday‘s…

You’ve seen charts before – why care about this one? A few reasons: its inventor, Robert J. Shiller, won the 2013 Nobel Prize for economics (and a bucket of other prizes). He’s been on the list of 100 most influential economists in the world since 2008. His book Irrational Exuberance came out in March 2000, warning that the stock market was in a bubble. (He was right.) Almost exactly one year before Lehman Brothers collapsed, Shiller authored a prescient warning – here’s the summary:

…click on the above link to read the rest of the article…

Recovery or Renewal? Time for an economic rethink

July 19, 2020

Recovery or Renewal? Time for an economic rethink

A recent study of long-term fluctuations in economic growth published in Nature Scientific Reports suggests both danger and opportunity in the emerging debate about post Covid-19 economic recovery. In this blog, Craig D. Rye and Tim Jackson outline their findings.

The International Monetary Fund (IMF) expects the global economy to contract by 5% this year alone, making it the largest downturn since the Great Depression in the 1930s. Advanced economies are likely to see a 10% decline in output and even the emerging economies of south-east Asia are unlikely to escape a recession.

Unprecedented though this is in the modern era, its real impact lies in the wider tapestry within which this uncomfortable economic portrait is drawn. Rates of economic growth across the OECD have been in decline since the 1970s, a phenomenon known as ‘secular stagnation’. The average growth in GDP per capita across the rich economies fell from over 4% in the mid-1960s to little more than 1% in the pre-pandemic years. The decline is related to an underlying stagnation in labour productivity growth.

In a recent study, published in Nature Scientific Reports, we’ve been exploring an even longer story about the ups and downs of economic growth and recession. Critical Slowing Down (CSD) theory is most commonly used to understand the oscillations (waves) in physical systems. In our study, we used the same techniques to analyse long-term trends in the gross domestic product (GDP) in datasets from as far back as the 1820s.

Imagine a pendulum or swing which is held in its equilibrium position by gravity. A push or a shove in one direction or another will shift the pendulum away from the central position or a random gust of wind might move the swing, but gravity pulls it back again.

…click on the above link to read the rest of the article…

Unstoppable: The Greatest Depression and the Reverse Wealth Effect

June 11, 2020

Unstoppable: The Greatest Depression and the Reverse Wealth Effect

We are entering The Greatest Depression because there is no exit.

I’ve endeavored to explain why The Greatest Depression is unstoppable in recent posts:

The Covid-19 Dominoes Fall: The World Is Insolvent March 16, 2020

Pandemic Pandemonium: The Tides of Globalization and Financialization Reverse March 31, 2020

Here’s Why the Economy Won’t Recover–and No, It’s Not Covid-19 or the Lockdown April 23, 2020

What’s Collapsing Can’t Be Saved: Our Fraudulent Economy April 22, 2020

Why Assets Will Crash May 4, 2020

Our Inevitable Collapse: We Can’t Save a Fragile Economy With Bailouts That Increase Fragility May 1, 2020

Globalization and Financialization Are Dead, and so Is Everything That Depended on Them May 15, 2020

Our Fate Is Sealed, Vaccines Won’t Matter: Four Long Cycles Align May 19, 2020

Consumer Spending Will Not Rebound–Here’s Why May 18, 2020

This Is How Systems Collapse May 30, 2020

I’ll try to summarize all this as simply as possible:

1. The global economy’s cost structure has been fatally distorted by central bank policies of inflating asset bubbles and reducing interest rates to near-zero.

2. Earnings from labor have stagnated or eroded since the era of globalization / financialization took off around 2000.

3. Everything costs too much, i.e. is no longer affordable from earnings alone, so the only way to maintain the current costly lifestyle is to borrow money and use it to pay current expenses. This is true for every sector: household, corporate and government.

4. As a result, everyone now needs every dollar of income just to pay their expenses, including interest and principal on their rising debts. There is no slack (buffers) in the system at all.

5. This can be visualized as a row of dominoes. Once the first domino falls, every domino will be toppled.

…click on the above link to read the rest of the article…

Great Depression to our Depression: Debt Deflation Doom Loop Lessons

May 24, 2020

Great Depression to our Depression: Debt Deflation Doom Loop Lessons

We are now in the crosshairs of a mega debt deflationary bankruptcy phase.

Some of our sharpest forefathers left us illustrations to better understand how this cycle operates. It helps that many both actually lived through and studied the last one fresh off it happening. No not this fiat currency bifurcated ivory tower era thinking either ( not you bailout Bernanke).

☠️DEBT DEFLATION BANKRUPTCY LESSONS ☠️

Described as the last honest Federal Reserve governor, John Exter (1910 – 2006) believed by the early 1960s that the Federal Reserve was locking itself into currency expansionism it could not stop without disastrous outcomes and blowback.

He reportedly would say that the Fed was becoming a prisoner of its own currency stock and debt-based growth (effectively painting itself into a corner). Then a trend that risked a credit expansion reaching total US debt levels far in excess of the country’s GDP (quaint times).

His was an envisionment of a major debt crisis ahead of his life, and he believed the crisis would then turn the economy down, to levels not seen since the Great Depression.

Exter warned the Fed would one day find itself unable to prevent a wide-scale deflationary depression.

Perhaps the man could never envision our current viral scapegoat or how this global economic shutdown would quicken into existence some of his worst economic predictions.

But by the late 1950s and early 1960s, our financial system was effectively already devolving into a debt-based, debt-driven economy. To illuminate its growing unstable structure, Exter devised an upside-down debt pyramid as this original illustration shows.

Within it, the former central banker presented the US debt pyramid and drew attention to the fact that all foreign economies also had debt pyramids too. The structures are always perched in an unstable manner which Exter believed was also true for the financial system generally.

…click on the above link to read the rest of the article…

Rickards: This Time IS Different

May 13, 2020

Rickards: This Time IS Different

Stocks stumbled out of the gate today, at least partially on fears about a resurgence in coronavirus cases.

South Korea, which did an excellent job containing the virus, has reported a new batch of cases. Japan and Singapore also reported new cases. Infections are increasing in Germany as well, where lockdown restrictions are being lifted.

We can also expect a rise in U.S. cases as several states lift their own restrictions.

From both epidemiological and market perspectives, the pandemic has a long way to go. Its economic effects are already without precedent…

In the midst of this economic collapse, many investors and analysts return reflexively to the 2008 financial panic.

That crisis was severe, and of course trillions of dollars of wealth were lost in the stock market. That comparison is understandable, but it does not begin to scratch the surface.

This collapse is worse than 2008, worse than the 2000 dot-com meltdown, worse than the 1998 Russia-LTCM panic, worse than the 1994 Mexican crisis and many more panics.

You have to go back to 1929 and the start of the Great Depression for the right frame of reference.

But even that does not explain how bad things are today. After October 1929, the stock market fell 90% and unemployment hit 24%. But that took three years to fully play out, until 1932.

In this collapse the stock market fell 30% in a few weeks and unemployment is over 20%, also in a matter of a few weeks.

Since the stock market has further to fall and unemployment will rise further, we will get to Great Depression levels of collapse in months, not years. How much worse can the economy get?

Well, “Dr. Doom,” Nouriel Roubini, can give you some idea.

…click on the above link to read the rest of the article…

Investing Legend Sees A Second Great Depression For Stocks By 2023

May 4, 2020

Investing Legend Sees A Second Great Depression For Stocks By 2023

The name of Kiril Sokoloff, author of the weekly WILTW (What I Learned This Week) newsletter through his advisory firm 13D Global Strategy & Research, needs no introduction on this website for the simple reason that over the past few years we have often published his highly insightful excerpts (most recently one month ago with “A Corporate-Debt Reckoning Is Coming“).

Which is why the latest “Lunch with the FT” feature by the FT’s Rana Foroohar may be of interest to readers curious about Sokoloff’s background and how over the past four decades he became one of the most closely sought after independent thinkers and strategists on Wall Street (he works out of St. Thomas in the US Virgin Islands, unaffiliated with any bank), and why his clients – which include Mukesh Ambani, Sam Zell and Raymond Kwok – are quite happy to pay thousands of dollars for a subscription.

We find 13D fascinating, and one of the world’s best newsletters for many reasons by the main one is that Sokoloff’s overarching philosophy – fiscally conservative, rational, measured – is congruent with ours: as the FT notes, Sokoloff “has been trying to make the financial elite see the dangers of seeking to solve the problems of debt with more debt“, something we too have been doing since 2009 but obviously to absolutely no success.

As the FT continues, “the topic is timelier than ever, given that central-bank balance sheets — already huge before Covid-19 — are headed into the stratosphere, as policymakers struggle to cope with the crisis, not to mention the popping of a debt bubble that grew for years before it.”

Sokoloff is, of course, referring to this.

…click on the above link to read the rest of the article…

Mr. President: Open the Economy Now – Martin Armstrong

April 23, 2020

Mr. President: Open the Economy Now – Martin Armstrong

Legendary financial and geopolitical cycle analyst Martin Armstrong says shutting down the economy is far worse that the effects of the Wuhan China virus. Armstrong says, “This is just scare mongering, and there is another agenda going on. The WHO is part of the UN, and the UN is for this climate change, and this is what their objective has been: Shut down the world economy, bankrupt everything you possibly can, and then rebuild from scratch. . . . The devastation in the economy is unbelievable. Our computer is very well known. Just about all the intelligence agencies look at it because it’s the only fully functioning artificial intelligence system in the world. It was saying unemployment was going to rise dramatically and retest the Great Depression highs. . . .That’s never happened like that. Even in the Great Depression, it took three years to get to 25%. We passed 13% in the first month. . . . From the very beginning, I said something is not right. Something is wrong. . . . This is really going to push the debt bubble over the cliff. . . . The number that has died is minimal. More than twice that die from the flu. There is no logical explanation to have done this. The study they used was not even peer reviewed.”

So, if Armstrong were face to face with President Trump, what would he tell him? Armstrong says, “What he needs to do is open up the economy instantaneously. I think he needs to appoint a special prosecutor to investigate who started this. All the information I have is pointing to a deliberate and intentional movement to harm the economy. These people are elitists. Bill Gates was in Germany saying everybody should remain in lockdown until he comes up with a vaccine. . . .

…click on the above link to read the rest of the article…

The Lesson of a Crash that Cured Itself

April 4, 2020

The Lesson of a Crash that Cured Itself

If a government wishes to alleviate, rather than aggravate, a depression, its only valid course is laissez-faire—to leave the economy alone. Only if there is no interference, direct or threatened, with prices, wage rates and business liquidation, will the necessary adjustment proceed with smooth dispatch. — Murray Rothbard

The economic disruption caused by the government’s coronavirus clamp-down may lead to a deep recession or depression; arguably, it already has. President Trump’s $2.2 trillion relief package indicates what his answer to such an economic disaster will be: mega-spending on hand-outs and social projects. Trump is setting himself up as a modern version of Franklin D. Roosevelt (FDR) whose New Deal programs defined 20th century America by diverting it from a largely free-market path down a largely statist one. Trump wants to be an activist president — the type that history books applaud. Congress’s near-unanimous support of the relief bill means that no real brake will be applied on the speed or depth of federal spending. Few voices even question the need for government to lift up the economy by its bootstraps.

The Great Depression of the 1930s is often viewed as the gold standard for a federal response to an economic crisis. And, yet, FDR’s strong-man policies ushered in a decade of economic misery that did not end until the jolt of a world war in which over 400,000 Americans were killed. Happily, a less bloody “success” story exists.

The financial analyst and historian James Grant offers the do-nothing alternative in his path-breaking book The Forgotten Depression. 1921: The Crash That Cured Itself. The crash of 1920-21 is called “the forgotten depression” because it has almost vanished from history books.

…click on the above link to read the rest of the article…

Pandemic-Related Unemployment and Shutdowns Are a Recipe for Social Unrest

March 31, 2020

Pandemic-Related Unemployment and Shutdowns Are a Recipe for Social Unrest

That’s a huge concern as forecasters expect the U.S. unemployment rate in the months to come to surpass that seen during the depths of the Great Depression.

krtphotoslive884669 — (Elizabeth Robertson/TNS/Newscom)

Could the stalled economy we’ve inflicted on ourselves in our frantic efforts to battle the COVID-19 pandemic lead to civil disorder? History suggests that’s a real danger.

Around the world, high unemployment and stagnant economic activity tend to lead to social unrest, including demonstrations, strikes, and other forms of potentially violent disruptions. That’s a huge concern as forecasters expect the U.S. unemployment rate in the months to come to surpass that seen during the depths of the Great Depression.

“We’re putting this initial number at 30 percent; that’s a 30 percent unemployment rate” in the second quarter of this year as a result of the planned economic shutdowns, Federal Reserve Bank of St. Louis President James Bullard told Bloomberg News on March 22. Gross Domestic Product, he adds, is expected to drop by 50 percent.

Unlike most bouts of economic malaise, this is a self-inflicted wound meant to counter a serious public health crisis. But, whatever the reasons, it means businesses shuttered and people without jobs and incomes. That’s risky.

“Results from the empirical analysis indicate that economic growth and the unemployment rate are the two most important determinants of social unrest,” notesthe International Labour Organisation (ILO), a United Nations agency that maintains a Social Unrest Index in an attempt to predict civil disorder based, in part, on economic trends. “For example, a one standard deviation increase in unemployment raises social unrest by 0.39 standard deviations, while a one standard deviation increase in GDP growth reduces social unrest by 0.19 standard deviations.”

…click on the above link to read the rest of the article…

The Crash Of 2020 Is Now Worse Than The Great Depression

March 20, 2020

The Crash Of 2020 Is Now Worse Than The Great Depression

Back in December, someone in China made bat soup (at least according to the officially accepted narrative that doesn’t get you banned on Facebook, Twitter, etc), and the rest is history: in the next three months, the global equity market has lost $24 trillion in value, more than the $22 trillion in US GDP. And here is a staggering chart from BofA putting the crash of 2020 in its historic context: in the past month, the US stock market has crashed faster than both the Great Depression and Black Monday, and in terms of the total drawdown, the crash of 2020 is now worse than 1929 and is fast approaching 1987.

Below, courtesy of BofA CIO Michael Hartnett, are several other stunning observations on the Crash of 2020:

Calls for Fed corporate bond buying, New Deal fiscal policies, new Plaza Accord to stabilize US$, closure of stock exchange coincide with week of Wall St devastation.
Peak-to-trough crash in global equity market cap = $24tn (c/o US GDP = $22tn).
Monday’s 12.0% drop Dow Jones = 3rd largest crash all-time (c/o -20.5% Oct 19th 1987, -12.9% Oct 28th 1929 – Chart 2).
Liquidation of “safe havens” e.g. gold & US Treasuries (TLT ETF sank 20% after oil shock); epic US$ surge reflects funding pressure of excess US$-denominated debt & zero liquidity.
Leverage in bond & stocks savaged (see REM, PFF, EMB, homebuilders like TOL – Chart 3); bond yields rise + bank stocks fall = classic sign of deflationary bear market.
Feral Wall St means vicious bear market rallies…WTI oil surged 24% today.
Stock exchange has closed just 4 occasions: 1914 & WW1, 1933 bank holiday, 1963 Kennedy assassination, 2001 9/11.
Global “lockdown” on movement people, goods, services unprecedented but note June 1930 passage of protectionist Smoot-Hawley bill saw US stocks -16.5% in one month.

And some additional views:

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Nothing to Fear But Fear Itself

March 16, 2020

NOTHING TO FEAR BUT FEAR ITSELF

Customers waited in line at a Costco in Burbank last week to buy water and other supplies for fear that COVID-19 would spread and force people to stay indoors.

“So, first of all, let me assert my firm belief that the only thing we have to fear is…fear itself — nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and of vigor has met with that understanding and support of the people themselves which is essential to victory. And I am convinced that you will again give that support to leadership in these critical days.”- Franklin D. Roosevelt – March 4, 1933

Franklin D. Roosevelt spoke these words during his first inauguration at the depths of the Great Depression in 1933. The narrative taught in government schools is how FDR’s words invigorated the nation and inspired the people to show courage in the face of adversity. His terminology was that of a general leading his troops into battle.

What is not taught in government schools or proclaimed by the propaganda spewing fake news media were the dictatorial type actions taken by FDR over the next month after his “inspirational” speech. He was the first Democrat president to not let a crisis go to waste. The day after his inauguration, Roosevelt assembled a special session of Congress to declare a four-day bank holiday, and on March 9 signed the Emergency Banking Act.

What the American people should have feared was the government taking control of every aspect of their lives and threatening them with imprisonment if their dictums were not followed. On March 6, taking advantage of a wartime statute that had not been repealed, he issued Presidential Proclamation 2039 that forbade the hoarding ‘of gold or silver coin or bullion or currency’, under penalty of $10,000 and/or up to five to ten years imprisonment.”

…click on the above link to read the rest of the article…

Spirits in the Material World

February 27, 2020

SPIRITS IN THE MATERIAL WORLD

There is no political solution
To our troubled evolution
Have no faith in constitution
There is no bloody revolution

The Police – Spirits in the Material World

As I was driving home from work last week, an almost forty-year-old song began emanating from my radio. I’ve always appreciated the music of The Police, but was never a huge fan. Spirits in the Material World was a relatively minor hit from their 1981 Ghost in the Machine multi-platinum album. I’ve probably heard it hundreds of times over the last four decades, but the lyrics struck me as particularly apropos at the end of a week where lunatic left-wing politicians staged a battle royale of ineptitude, invective, and idiotic solutions, in front of a perplexed public in a Vegas casino. Sting wrote the lyrics to this song in 1981 at the outset of the Reagan presidency. It is less than 3 minutes in length, but says much about humanity and the world we inhabit.

The interpretation of Sting’s (Gordon Sumner) lyrics depends upon your position in the generational kaleidoscope of history. As a boomer, Sting came of age during the 1960s and 70s. He was thirty years old in 1981 as the Second Turning (Awakening) was winding down and Reagan’s Morning in America was about to launch the Third Turning (Unraveling) in 1984.

His passionate idealism and search for spiritual solutions to the problems of the day had not been extinguished. The raging inflation of the 1970s had led to the worst recession since the Great Depression. The Cold War was at its coldest. Politicians had been discredited as criminal (Nixon) or incompetent (Carter). Sting and many others of his generation had lost faith in the political system. His viewpoint fit perfectly into the Strauss and Howe assessment of our last Awakening period (1964 – 1984).

Image result for awakening strauss and howe

…click on the above link to read the rest of the article…

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