Economic Best Guess

Ok, I'm an old woman so what do I know about economics? Well I remember when the The Kondratieff cycle was ground breaking theory, The sum of the 4 generations is called a saeculum, it is from 70 to 80 years in length, or the length of time it takes the grandfathers to pass away from the scene....

There is a new world order forming, and as the Harvard Business article points out it is not going to be what one would expect. There is an emerging mass movement arising from the ashes or a generation of people who knew nothing but cheap oil.

There are no guarantees in a Fourth Turning--for the nation as a whole, or for any of the generations that will live through it. The Fourth Turning will lend each generation its own script, allowing each to offer its own unique contributions. A Fourth Turning can harness all the archetypal strengths of our extant generations to maximum advantage, enabling society to work through problems that might otherwise destroy it. Or it can fail to do so.

When one stops to consider why leadership or government is so utterly incompetent to anticipate challenges, or at the least unwilling to change, one must reflect what group that that leadership is in.

Cycle Theories in History and Social Science

FIELD	CYCLE AND BEST-KNOWN SCHOLAR(S)
GEOPOLITICS	rise and fall of great powers: William R. Thompson, George Modelski
WAR	great conflict cycle: Arnold J. Toynbee, Quincy Wright
POLITICS	ideological cycle: Arthur Schlesinger, Jr., Paul Allen Beck realigning election cycle: Walter Dean Burnham
FOREIGN AFFAIRS	introversion-extroversion cycle: Frank L. Klingberg
ECONOMY	long wave: Nikolai Kondratieff and "K-wave" successors technology & investment: Joseph Schumpeter and others
DEMOGRAPHICS	fertility cycle: Richard Easterlin immigration cycle: Jeffrey Williamson
SOCIAL DISORDER	substance abuse cycle: David Musto crime cycle: Ted Robert Gurr
CULTURE	individual vs. collective values cycle: Zvi Namenworth utopian cycle: Michael Barkun "clean living" cycle: Ruth Engs

Characteristics of the Four Turnings

TURNING:	FIRST (High)	SECOND (Awakening)	THIRD (Unraveling)	FOURTH (Crisis)
GENERATION ENTERING
Elderhood	Nomad	Hero	Artist	Prophet
Midlife	Hero	Artist	Prophet	Nomad
Young adulthood	Artist	Prophet	Nomad	Hero
Childhood	Prophet	Nomad	Hero	Artist
Families:	strong	weakening	weak	strengthening
Child nurture:	loosening	underprotective	tightening	overprotective
Gap between gender roles:	maximum	narrowing	minimum	widening
Ideals:	settled	discovered	debated	championed
Institutions:	reinforced	attacked	eroded	founded
Culture:	innocent	passionate	cynical	practical
Social structure:	unified	splintering	diversified	gravitating
World view:	simple	complicating	complex	simplifying
Social priority:	maximum community	rising individualism	maximum individualism	rising community
Social motivator:	shame	conscience	guilt	honor
Sense of greatest need:	do what works	fix inner world	do what feels right	fix outer world
Vision of future:	brightening	euphoric	darkening	urgent
Wars:	restorative	controversial	inconclusive	total

I think that the current situation is similar to the BOJ woes and the NPL's (non performing loans) that were as a result of the Japanese moral hazard.



There is one difference, the current circumstances of NPL's dwarf the BOJ debacle and the availability of cheap oil is more severe now.

When you look at the generational characteristics it is easy to see why most of the analysis is incappable of accepting that things have changed.

I think that the initial reaction will be to stave off systemic default, to inject monetary stimulus, but that will not erase the debt and demand. Consequently to a demand that energy supplies cannot meet for continual global growth at 5%, or said inversely, that monetary expansion cannot increase at 5% with current demands on available energy, that a slow contraction of the economy will create eventual deflation, which will drop all commodities in comparison to their dependence on oil.

As an example, I see a retracement on Gold. There was an article, OIL and Gold compete for the basis of money, well let me tell you that it is food and heat instead. Gold is not money, but was a superior measure of wealth before the automobile.

Said another way, the average schmoe will fill his tank with oil, but skip the gold chain to hang around his neck. In effect when the economy and deflation (to many debts chasing to few dollars occur, then gold should be at a high?) Well that is not the case, you have to find a buyer and bartering gold for an empty tank of gas makes oil money.

I see flat growth and artificial low rates, similar to the BOJ with one key difference, that a slow and flat refelection of growth will be seen in markets.

In all the advanced markets, G8 markets, more people are thinking of retiring at the same time, making withdrawals prevelant over investment, further eroding the ability to expand an economy.

I see the costs of homes remaining static, and the churn traditional in the economy slowing, where the expansion halts until Malthusian influences can create redistribution of wealth that approximates growth at the individual perspective, but reflects smaller gross production globally.

In effect what has happened is that we are at Peak Oil and few realize it, or would admit it.

But unless as a society we can get more energy, our fate is reflected best by the lessons learned in Japan another resource poor nation, that experienced a debt bubble with a population demographic similar to all G8 nations.

The outlook is clear, the DOW will not march to a new high, but instead travel sideways and down as consumption comes into line with available resources. Inflation and Deflation (NPL's) will be in conflict as energy asserts it's rightful role as cash.

What is being witnessed is a world that can no longer refinance tomorrow under the certainty of an abundance of cheap sweet crude. The consumer of last resort cannot afford it, and the developing nations cannot afford the infrastructre to attain it.

I see flat growth, low interest rates, declining or static home prices, and monetary supplies that reflect a malthusian economy for at least 20 years, and probably in the G8 nations 30.

The world will look different by then, there will be a New World Order, and it will look nothing like the current unraveling. I can speculate easily that for the next 5 to 10 yeatrs at best, that growth will be flat. I can speculate that those whom bought precious metals will wish that they stocked up on white Rhino cannisters of Gas instead.

But the events are not about lending and instruments of growth, but instead that the catalyst for growth is limited.