Wednesday Wisdom

"The Fourth Turning" by William Strauss and Neil Howe is a book that explores the cyclical nature of history and how societies go through recurring cycles every 80 to 100 years. Saeculums, a Latin term for a "long life", are divided into turnings that last 20-25 years. The authors argue that the United States is in the midst of its fourth turning, which is characterized by a crisis period that will reshape American society fundamentally. Silicon Valley Banks' quick demise and the recent bank runs, coupled with the financial crisis of 2009, can certainly make one ponder the future of banking and money and also wonder if the authors predictions are coming true.

The authors outline how these changes come about in course of a saeculum. They identify 4 cycles within this century-long saeculum.

1. The First Turning, or "The High": A time of optimism and social order, where institutions are strong and individualism is weak. Examples of a First Turning include the post-World War II era of the 1940s and 1950s.

2. The Second Turning, or "The Awakening": This is when there is spiritual and cultural upheaval, where institutions are attacked in the name of personal and spiritual autonomy. Examples of a Second Turning include the counterculture of the 1960s and 1970s.

3. The Third Turning, or "The Unraveling": Here we find social decay and declining trust in institutions, where individualism is strong and the sense of national purpose is weak. Examples cited f a Third Turning include the period of political polarization and cultural wars of the 1980s and 1990s.

4. The Fourth Turning, or "The Crisis": Brings resolution to a time of great turmoil and conflict, where institutions are destroyed and rebuilt in response to a major threat or challenge. Examples of a Fourth Turning include the American Revolution and Civil War. Are we heading into a 4th turning? or is this circumspect or coincidental evidence?

One significant impact of a fourth turning in the United States could be on its currency. The U.S. dollar has been the global reserve currency for decades, and any changes in its value would have far-reaching global implications. The authors predict that the fourth turning will be a period of economic upheaval and inflation, which could result in the dollar's devaluation. This devaluation could significantly impact international trade, the global economy, and the United States' position in the world. Another potential impact of the fourth turning on the United States is on the banking industry. The authors argue that the fourth turning will be characterized by a period of distrust in institutions, including banks. This distrust could lead to a significant loss of confidence in the banking system, which could lead to a run on banks and a potential collapse of the industry.

Ironically, Silicon Valley Bank is an example of how innovative technologies are already disrupting the banking industry. The Silicon Valley Bank served the needs of high-growth companies as well as banking for crypto companies. Unfortunately, Silicon Valley Bank's demise mirrored traditional banking as mismanagement, crony capitalism, and poor regulatory oversight led to a bank run. In the music and words of the Talking Heads; "Same as it ever was". One possible solution to the currency and banking crises during a fourth turning could be Bitcoin and cryptocurrencies. The book was written in 1997, well before there was available technology like cloud storage or a fast internet that could accommodate digital currencies, although the concept of digital currency has been discussed by the likes of Milton Friedman since the 70s. Bitcoin is a decentralized digital currency that operates outside the traditional banking system. It has the potential to provide a secure, stable, and programmed monetary system alternative to fiat currencies. Bitcoin's decentralized nature and encryption technology also make it more secure than traditional banking methods with improvements in self-custody. Could an alternative monetary network sit beside traditional finance and help restore public confidence in the banking industry.? If "The fourth turning" is playing out now, it's likely to have a significant impact on the United States currency, banking, and institutions. The potential devaluation of the dollar and loss of confidence in the banking and financial industry. Bitcoin and other decentralized digital currencies could provide a possible solution to these problems. The fourth turning could be a period of transformation for the United States, and innovative technologies like Artificial Intelligence and cryptocurrencies could be the key to navigating these challenging times.

The book is quite long and can be interpreted as being very dark at times. While it's uncertain whether the book predictions are playing out in real-time, it's worth noting the book makes logical arguments using pattern recognition. The conclusions of correlation might be coincidental, or one could argue they fit their facts to align with the narrative. The book resembles the philosophy of Georg Wilhelm Friedrich Hegel (1770–1831) who was a German thinker and one of the central figures of German Idealism. Hegel’s philosophy sought to explain all of reality of nature, history, and reason as part of a single, unfolding rational process he called the dialectic.

Since 2000, we have experienced the internet bubble, the financial crisis resulting in bank bailouts in 2009, and a pandemic. On top of that, we have seen a highly accommodative Federal reserve policy with huge deficits from tax and government initiatives. All of this seemingly leads to an erosion of confidence in institutions as the authors opine. Whether there is a seismic shift or a gradual movement into the digital age of finance were all securities are tokenized, the process has begun.

It's important to note that the book is well-read by macro traders and money managers and the market is a collective of sentiment. Given the book's attention, its premise deserves attention. The 4thTurning and Hegel both recognized history comes in cycles, and Strauss and Howe offer a provocative theory that history moves in predictable generational cycles.

And now you know...

Thank you, Dad, for the gift of curiosity

Philosophy is the art of thinking, the building block of progress that shapes critical thinking across economics, ethics, religion, and science.

METAPHYSICS: Literally, the term metaphysics means ‘beyond the physical.’ Typically, this is the branch that most people think of when they picture philosophy. In metaphysics, the goal is to answer the what and how questions in life. Who are we, and what are time and space?

LOGIC: The study of reasoning. Much like metaphysics, understanding logic helps to understand and appreciate how we perceive the rest of our world. More than that, it provides a foundation for which to build and interpret arguments and analyses.

ETHICS: The study of morality, right and wrong, good and evil. Ethics tackles difficult conversations by adding weight to actions and decisions. Politics takes ethics to a larger scale, applying it to a group (or groups) of people. Political philosophers study political governments, laws, justice, authority, rights, liberty, ethics, and much more.

AESTHETICS: What is beautiful? Philosophers try to understand, qualify, and quantify what makes art what it is. Aesthetics also takes a deeper look at the artwork itself, trying to understand the meaning behind it, both art as a whole and art on an individual level. A question an aesthetics philosopher would seek to address is whether or not beauty truly is in the eye of the beholder.

EPISTEMOLOGY: This is the study and understanding of knowledge. The main question is how do we know? We can question the limitations of logic, how comprehension works, and the ability (or perception) to be certain.