Neil Howe On The Fourth Turning: How Bad Will It Get, How Long Will It Last & What Comes Next? (Part 1)

33:29
i mean actually a good example of that
33:31
would be
33:32
boomeranging back home
33:34
boomers did not boomerang okay
33:37
and i remember uh the the great
33:40
recession of of uh 8283 you know when
33:43
you went into the reagan administration
33:45
volcker was tightening rates and so on
33:47
it was a really pretty bad recession
33:49
boomers would do anything rather than
33:51
return they would like sleep under a
33:53
bridge or something right but they would
33:55
not go back home right
33:57
that boomerang stuff started with gen
34:00
xers in the 90s
34:02
and with millennials they don’t return
34:04
home they just never leave
34:06
they just keep their bedroom there and
34:08
you know they’re always
34:09
and you understand what i mean just a
34:11
very different kind of relationship
34:14
uh where i think there’s a little bit of
34:16
inversion is when it came to actually
34:19
major structural substantive reforms and
34:22
how the system worked and how it
34:23
actually you know allocated income and
34:25
rewards and how we actually built for
34:28
our future
34:29
pumas had no problem with the gis were
34:31
doing i mean they obviously ran things
34:33
really well in fact the whole problem
34:35
with the gi generation is they ran
34:36
things too well they invested too much
34:38
right it’s too much repression you know
34:40
we need to enjoy yourself more for today
34:43
the millennial problem with boomers is
34:46
just the opposite right
34:48
boomers can’t run anything
34:50
they can’t exercise authority they can’t
34:53
invest in anything they can’t do
34:55
anything for the long term right they
34:57
don’t know how to run the system at all
34:59
and this is why i say that the
35:01
fundamental problem in an awakening
35:03
is that the public senses that
35:05
institutions are supplying too much
35:07
order
35:08
but the fundamental problem of a crisis
35:10
the fourth journey
35:12
is that the public be particularly the
35:14
younger public begins to sense that
35:16
institutions aren’t supplying enough
35:18
order and that is always the context for
35:21
a crisis right
35:23
and by the way i mean just just
35:25
mentioning you know you said where might
35:26
this lead
35:27
every fourth turning in american history
35:30
has featured a total war
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um
35:34
and all total wars in american history
35:37
have come in a fourth turn right you
35:38
don’t want to think about that you know
35:40
this goes all the way back to the
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anglo-american
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circular you know going back in the
35:44
early modern era you know in the british
35:47
history
35:48
but this is a pattern now sometimes it’s
35:50
um
35:51
it’s so it is
35:53
we don’t say that war is necessary
35:56
for a fourth turning but that sense of
35:58
total public urgency and the need to
36:01
band together and create a new sense of
36:03
community
36:04
is always required at some point before
36:06
the fourth turning is over okay
36:09
so this is something that’s just simply
36:11
i just observe historically now
36:14
sometimes this struggle
36:16
this conflict
36:18
is we think of it mostly in terms of you
36:20
know america taking on enemies abroad
36:22
right and i think that’s the idea that
36:24
good war and we we all think of world
36:26
war ii you know we took on the axis
36:28
powers and we conquered half the world
36:30
right uh you know fascism and yeah
36:33
exactly yeah you know germany and italy
36:35
and japan
36:37
uh but we forget that that era started
36:39
out with the new deal which was
36:42
not exactly a civil war but it was a
36:44
highly contentious ideological conflict
36:47
in america right which deeply divided
36:49
americans about the new role of
36:51
government and you know it had its court
36:54
packing threats and you know everything
36:56
else that happened uh in the first new
36:58
deal and the second new deal and and fdr
37:01
finally getting this incredible victory
37:03
in 1936 right finally just becoming
37:06
absolutely dominant politically
37:08
and pushing through these new
37:11
this whole new role for government and
37:12
the economy right
37:15
um but ultimately we all remember how it
37:17
all came together in world war ii which
37:19
is more kind of you know america versus
37:20
the world but it’s useful to go back in
37:23
earlier conflicts and many of these
37:25
actually had a very major
37:27
a civil dimension of conflict obviously
37:29
the civil war was literally
37:32
a civil war right no need to explain
37:34
there the american revolution however is
37:37
interesting for people to know that the
37:39
american revolution at the time was
37:42
referred to by most more americans as a
37:45
civil conflict as a civil war rather
37:47
than as a revolution it had a very
37:50
strong element of patriot-on-tory
37:52
conflict within the united states
37:54
particularly within the southern states
37:56
the backwoods regulators actually
37:58
supported the british because they hated
38:00
these big plantation owners near the
38:02
coast who were always lording it over
38:04
them right in other words it exploited
38:07
and the british at one point did what
38:08
abraham lincoln did he promised freedom
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to the blacks
38:12
and one of the things the british
38:14
couldn’t understand as well these
38:15
planters were you know constantly
38:17
talking about liberty
38:19
you know and and yet they had all these
38:21
things so the british said well we’re
38:22
gonna use that as a weapon we’re gonna
38:24
we’re gonna promise freedom to anyone
38:26
who wants to help that’s exactly what
38:28
abraham lincoln did right with his
38:30
emancipation proclamation about 80 90
38:32
years later
38:34
um
38:36
in dittos you go back in earlier crisis
38:38
in other words very often there’s a very
38:40
strong internal component
38:42
to the crisis even while it also has an
38:44
ex i mean obviously there’s an external
38:46
component the american revolution we had
38:48
to fight
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you know fight the british and uh you
38:51
know defeat them finally at yorktown and
38:54
and you know they all evacuated by uh
38:56
1783 they were gone
38:59
but then again we were in chaos after
39:01
that right and then we had to actually
39:03
forge a new constitution and in some
39:05
ways that was the real climax of the era
39:08
as being able to actually then agree on
39:10
a powerful central government
39:13
and to some extent i would say that
39:14
there was the miracle of of 1788 which
39:17
is even more amazing than the miracle of
39:20
you know 1781 which is the the defeating
39:24
of uh
39:25
of uh you know clinton and cornwallis so
39:29
so anyway that’s i i think that but it
39:31
probably illustrates your point that
39:32
there is an important
39:34
internal dimension i think it’s no
39:36
be no surprise today
39:39
looking in america that people are going
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to say yeah i get the internal component
39:44
right now right red zone versus blue
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zone i mean my god the two sides don’t
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even talk to each other you know i live
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in dc i mean i’ve been sort of a dc guy
39:54
uh they don’t even talk to each other
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now i mean there’s literally practically
39:57
no communication there’s nothing to say
39:59
at this point adam
40:01
you know
40:02
right so when you have mutually
40:04
exclusive ideas
40:06
of what the country’s future is
40:09
how does democracy work right are you
40:12
going to completely forfeit your future
40:14
just because the other guy gets i don’t
40:16
know half a percent more votes
40:18
no it doesn’t work that way does it and
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here’s the irony and this has been
40:22
pointed out by some you know brilliant
40:25
uh carl becker pointed that out in 1940
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just as we were going into world war two
40:29
he said one of the problems with
40:31
democracy
40:33
this democracy only works
40:35
really well
40:36
when the problems you’re trying to solve
40:38
are pretty trivial
40:42
i mean think about it if it’s a
40:44
fundamental problem how does democracy
40:46
work
40:48
right and and i think
40:50
kovid may have even sort of reinforced
40:51
that argument where you looked at some
40:53
of the more totalitarian governments and
40:55
you can say whether it’s right or wrong
40:57
uh but they certainly took measures to
40:59
clamp down uh
41:01
and and really stop the virus spreading
41:03
its tracks in a way that a democracy
41:05
just couldn’t i agree and there’s a
41:07
there’s a great uh a wonderful
41:10
compendium of worldwide polls done run
41:12
by the cambridge institute for for a
41:15
democracy
41:16
uh by a guy named roberto fowa and he
41:18
and
41:19
have written a lot on this issue of
41:20
growing inequality but particularly
41:23
in the turning away of younger
41:25
generations in america
41:27
particularly millennials
41:29
not just in america but around the world
41:31
from the whole idea of liberal democracy
41:34
it’s it’s becoming less popular less
41:36
interesting and important
41:38
amazingly enough there are a lot more
41:40
younger people today
41:41
who are willing to say yeah let a
41:43
dictator you know handle things for a
41:45
while right
41:47
meaning that
41:48
this liberal democracy that all these
41:51
boomers and silent talk about
41:53
has done nothing for us
41:56
it just feathers the bed of all these
41:59
older people and all these in you know
42:01
uh dysfunctional institutions which
42:04
aren’t doing anything for our future
42:06
right
42:07
and that sense of that sense of being
42:09
turned off
42:11
uh and being much more willing and open
42:14
to a more autocratic it doesn’t really
42:17
matter too much whether it’s on the left
42:18
or the right you understand what i mean
42:20
or it could be some crossbreed between
42:22
them
42:23
well in in you know in some ways um
42:27
you know
42:28
can you blame the younger generation um
42:30
in the sense that it’s seeing all the
42:32
spoils go to the older generations as
42:34
we’ve talked about
42:35
um and you know you get
42:38
somebody that’s promising them for
42:40
education free health care whatever you
42:42
know the the platforms of those more
42:45
progressive uh you know political
42:47
parties sound pretty appealing right hey
42:49
look if i’m if i’m going to struggle i
42:50
may as well you know struggle and get
42:52
something so you said you know part of
42:53
the fourth turning is
42:55
is basically seeing the rise of a
42:57
recentralization of power
42:59
and i think that that’s probably one of
43:01
the drivers that will will drive you
43:04
know the um
43:05
resumption of central state power and
43:07
here in the states i mean we’re we’re
43:09
seeing this state get involved in ways
43:11
that it hasn’t been a long time
43:13
right no you’re right well i mean think
43:15
about it for for uh most of the year in
43:17
2020
43:19
uh the state took over everything i mean
43:21
we all became words of the state right
43:24
businesses households everyone i mean
43:26
nothing
43:27
remotely close to that has happened in
43:29
american history
43:31
now that example won’t go away quickly
43:34
you know what i mean people will
43:35
remember that yeah that you can do that
43:38
right
43:39
every window is dependent on the state
43:41
even major corporations you know to
43:44
renew their turnover their loans i mean
43:46
everything right the combination of
43:48
huge fiscal largesse plus the fed policy
43:52
right yeah the stimulus has been i mean
43:54
unprecedented yeah and and it and it by
43:57
the way it rewrites the rules of the
43:59
regime
44:01
um and you know i’ve pointed that out i
44:03
mean if you look at the six quarters of
44:06
the pandemic
44:08
and compare them to the quarter before
44:10
the pandemic you know the last quarter
44:12
of 2019
44:14
we’ve had something like a
44:16
seven percent growth in real disposable
44:19
personal income
44:20
at the same time we’ve had a two percent
44:22
decline or nearly three percent decline
44:25
actually in real gdp
44:28
that is unprecedented right a 10
44:31
percentage point gap between what we’re
44:34
earning to be able to spend
44:36
and what our economy is producing i’ve
44:38
gone back and look at all the earlier
44:40
recessions that gap is never more than
44:42
like one and a half percent
44:44
so where did all that free money come
44:46
from
44:47
it came from
44:48
borrowing it came from borrowing and it
44:52
came from
44:53
first of all borrowing by the federal
44:55
government
44:56
which we’ve seen it ramped up we went
44:58
into the recession by the way already
45:00
under trump at a
45:02
federal deficit of nearly five percent
45:04
of gdp that was already a record for a
45:07
non-recession year before the panda we
45:10
were 4.8 percent of gdp
45:13
um and you know everyone was fine with
45:15
that
45:16
uh
45:18
uh jerome powell is fine with that you
45:19
know donald trump is obviously fine with
45:21
that
45:23
and then
45:24
the next two years are at 12.5 percent
45:27
of gdp right so that was an extra five
45:30
and a half percent of gdp kicker in two
45:32
years well that translates into about 10
45:35
of dpi right disposable personal income
45:37
so that’s how you get there right
45:40
this changes the rules of the regime and
45:44
the reason why so many people have been
45:46
faked out in the market
45:48
and i mean if you had told if you had
45:50
told people back in the worst days of
45:52
march
45:53
back in 2020
45:55
that we were going to
45:57
you know the s p 500 was gonna double
45:59
again
46:01
in three well i think if you told them
46:02
first the global economy is you know
46:04
gonna shrink in in the next one yeah but
46:06
eight months what do you think’s gonna
46:07
happen the s p nobody would guess it
46:09
would double
46:10
well exactly that it was gonna double
46:12
and oh by the way and they would have
46:14
already disbelieved you but if you told
46:16
them that in addition to doubling
46:19
uh the
46:20
employment level in america would still
46:22
be would still be lingering about five
46:24
percent below where it was at the
46:27
beginning and that we’d be having close
46:29
to 2 000 deaths per day
46:31
after 18 months and yet we’d see this
46:34
and picked up they would have thrown you
46:35
out of the room right
46:37
and and meanwhile we’ve had the the 40th
46:39
anniversary of the of the you know bond
46:42
uh bull market right we we we saw
46:45
september 30 1980 we had bonds 10-year
46:49
yield at 15.8 something i think 15.84
46:54
what’s going on with that at a time now
46:56
when the economy is recovering the
46:58
the s p 500 doubled
47:01
i mean how do you see bonds so low well
47:03
turns out now they’re they’re not quite
47:04
so low
47:06
maybe they’re
47:07
maybe they’re shifting in a slightly
47:08
different direction now
47:10
but here’s the point why do the old
47:12
rules don’t work why do the all those
47:15
all those valuation rules you know that
47:17
we talked about like like you know
47:19
schiller’s pe
47:21
you know
47:23
you know earnings to sales ratios or or
47:25
uh right they just haven’t mattered for
47:28
the past half decade yeah
47:30
so they’ve all you know they’re they’re
47:32
off the charts they’ve all been
47:33
screaming
47:34
sell but if you had sold recently you
47:37
would have been killed right
47:39
so i this is a really important question
47:41
for investors
47:42
why are all these rules not working and
47:44
i would submit that we’re changing
47:46
regimes now
47:48
we’re going from an old regime which we
47:50
we call you know sort of the neoliberal
47:52
regime the fed just you know buys and
47:55
sells the short end influence interest
47:57
rates over the business cycle and they
47:59
and the federal government keeps the
48:01
budget reasonably balanced because they
48:02
can’t expect the fed to bail it out
48:04
right and then you know a little bit
48:06
maybe uh in a crisis the fed will
48:10
offer credit at penalty rates kind of
48:12
the old budget rule
48:14
in the new regime which you could call
48:16
the mmt regime right
48:20
well what what what what is it now the
48:22
fed can buy any asset
48:24
at any maturity it can flatten the
48:26
entire year curve down it can also go
48:29
after high risk credit it can do
48:30
anything it wants and the federal
48:32
government can basically cut taxes or
48:36
expand benefits any way it wants to and
48:38
the fed will just monetize right
48:40
monetize the difference right yeah so
48:43
sorry interrupt but this is such an
48:44
important um question that so many of
48:47
the viewers have been asking themselves
48:48
of late which is um
48:51
are we going to see in this fourth
48:53
turning kind of will reality re-express
48:55
itself and it certainly may amongst
48:58
things like you know physical resource
48:59
limitations and stuff like that because
49:01
you can’t necessarily print those up
49:03
overnight
49:04
um
49:05
but well sort of economically here will
49:07
will reality re-express itself and all
49:10
those old fundamentals of investing and
49:12
whatnot begin to matter again
49:14
or have we crossed a rubicon where the
49:18
fed is just going to be intervening in
49:19
any and all cases going forward and it’s
49:21
not we’re not going to return to that
49:23
because they require very different
49:25
investing strategies we hope you’ve been
49:27
enjoying this discussion with researcher
49:29
neil howe
49:30
the interview continues in part two
49:32
where neil details the economic and
49:34
market dynamics that he foresees will
49:36
play out during this current fourth
49:38
turning to watch part two just click on
49:41
the link provided in the description of
49:43
this video below
49:44
or go to youtube.com
49:47
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50:27
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