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Fourth Turning 2022 — Bad Moon Rising

FOURTH TURNING 2022 – BAD MOON RISING

“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

Coronavirus: Is Germany doing enough to slow the outbreak? | Germany | News and in-depth reporting from Berlin and beyond | DW | 14.03.2020

“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:

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John Law–300 Years On

Most people are aware that historically there have been speculative bubbles. Some of them can even name a few – the South Sea bubble, tulips, and more recently dot-coms. Some historians can go even further, quoting the famous account by Charles Mackay of the South Sea bubble, the tulip mania and the Mississippi bubble, published in the mid-nineteenth century.

The most valuable bubble empirically for the purpose of our elucidation has to be the Mississippi bubble, whose central figure was John Law. Law, a Scotsman whose father’s profession was as a goldsmith and banker in Edinburgh, set up an inflation scheme in 1716 to rescue France’s finances. He proposed to the Regent for the infant Louis XIV a scheme that would be based on a new paper currency.

Law was a somewhat louche character, who in his Continental travels had spent his mornings studying finance and the principles of trade, and the evenings in the gaming-houses of Europe. He was a successful gambler, because of his ability to calculate odds.

Some similarities with the personality of Keynes two hundred years later are striking. Keynes was a mathematician first, and an economist second. Their approach was also similar: see a problem and try to find a solution, instead of seeing a problem and trying to understand why it existed before solving it. Both Law and Keynes felt that sound money was too restrictive for the enhancement of an economy.

Consequently, much of what Law proposed and then enacted in France rhymes with our neo-Keynesian world today. The difference, perhaps, is that when given the opportunity Law seized it, and had ultimate financial and monetary power. He harnessed the roles of a central bank, monopolist in international trade, stock promoter and finance minister.

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It’s Bubble Time!

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It’s Bubble Time!

Wisdom & discipline will separate winners from victims

It’s impossible to predict with certainty how much more insane our financial markets will get before an inevitable correction. But my personal bet is: A lot!

For my reasons why, take a few minutes to watch the chapter on bubbles below from The Crash Course. For those who haven’t seen it before, the takeaway is this: bubbles pop only when greed in the market has been exhausted:

Bubbles make no sense economically. Or rationally. But they happen all the time as a part of the human condition.

Even while financial bubbles are enabled by dumb monetary and banking decisions, their actual genesis is rooted in primal human emotions. Greed on the way up, and fear on the way down.

The hardest part about these bubbles is not being swept up in them.  As the above video shows, history is chock full of asset bubbles. We humans just never seem to learn. Like Charlie Brown’s endless attempts to kick Lucy’s football, we get suckered in by the promise of easy riches, only to end up flat on our back when the market suddenly yanks that promise away.

Wash, rinse, repeat.

Most of you reading this might be thinking “Hey, I’m a reasonable intelligent person. I won’t fall victim to the next bubble.” Perhaps, but maybe not. The numbers say that the majority of you will. Unfortunately, being smart — even a genius — is no protection against being ruined by a bubble.

Remember from the video that even Sir Isaac Newton, easily one of the most brilliant humans ever to live, got his clock cleaned by the South Sea Bubble:

Newton Poor Chart

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Olduvai IV: Courage
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Olduvai II: Exodus
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