Overprotective Parenting: My Baby Boomer peers and I love to recall the unsupervised play and relative independence of our childhood years. Growing up as a country boy on the edge of a small West Texas city, I roamed the woods and ranches of our neighbors. The barbed wire fences were built to keep the cattle in, but they didn’t keep the kids out. We knew which fields had the bulls we wanted to steer clear of. We explored quarries and lakes and rivers, clambered down into caves, and in general did things that would scare the pants off of today’s younger parents. It’s not that my mother didn’t love me; it’s just that in summer, your kid took off with all the other kids and came back in time for dinner. Maybe. We might all end up at someone’s house, eating dinner there. Mothers would call each other, and decisions would get made. I look back now and realize that it was an idyllic time, and I wonder if it will ever come again. Neil’s work suggests it will, but that’s hard to foresee today.
Today’s cautious parents won’t let children out of their sight – and often with good reason. As the Crisis unfolds we should see growing concern for protecting children from harm.
The Worst Yet to Come
So after Neil Howe explained all this at the conference, it was time for questions. Naturally I voiced the question that we all want to know the answer to: “Will the Crisis be over soon?” Neil’s answer was succinct, and not encouraging. He thinks we are only halfway through; and if the next few years play out like past Fourth Turnings, the worst is yet to come.
Why?
Right now we are in a period that roughly parallels the 1930s. Then, Franklin Roosevelt was battling the Great Depression with vast public works and relief programs. Could we do the same now?
We could, yes, but we have a problem. FDR had room for fiscal stimulus because government debt was minimal. That is clearly not the case now. The next recession, which would precipitate the next portion of the Fourth Turning Crisis, will see our national deficit balloon to $1.5 trillion; and with the off-balance-sheet requirements, the national debt will grow by $2 billion a year, quickly bringing us to a $30 billion total debt.
The government is in hock up to its eyeballs, and the Federal Reserve has used up most of its monetary policy tools. There is little room to add public spending in one sector unless we take it away from another.
And the developing Crisis is not just a US problem. Europe is coming to realize that it faces an existential crisis; in Japan Abenomics is losing credibility; and China is well into a period of severe financial and cultural struggle. The emerging markets will be tossed to and fro on the whims of financial flows. Yes, there will be great technological leaps forward, and over the next decade or two we will see three billion people move into the middle class around the world – which will create an even greater potential for cultural change worldwide.
But coming back to the US, who among us will give up the goodies we get from Washington so that someone else can have more? While I see a few hands here and there, my reading of the mood of the voters is that they’re not going to willingly hand back their Social Security or Medicare or anything else. I don’t talk to too many people who feel they are not being taxed enough. Dear gods, in some states you are already paying 60% of your income in taxes. Yes, that means you made a lot of money. It also means that many of you have already thought about moving to lower-tax states or changing the nature of your income.
That’s the problem we face now. The times are going to force major change upon us, and none of us are going to be very happy about it, because the challenges ahead are going to require a common sacrifice. Admittedly, it’s a different type of sacrifice than World War II required, but it will be just as wrenching to the people who are involved.
I really see no way around Crisis – which means we’ll have to plow straight through. The message is, make sure you’re ready. The good news is that we still have some time (even if we don’t know how much time). We can prepare our portfolios and lives to deal with the coming changes. Properly handled, meeting the challenges of a Crisis can be a very positive experience and one that can benefit us as individuals, as well as our families and communities. If you leave your future up to the vagaries of whatever forces are brought to bear upon you, without planning and preparation, you will probably not be happy with the outcome.
Some Final Thoughts on Brexit Before the Vote
If you have not read last week’s Outside the Box and the links I put in it, I urge you to do so. As of today, the Brexit vote is really too close to call. Even though the Leave contingent has a small lead in the polls, in other previous separatist votes, like Québec leaving Canada in the ’90s or Scotland leaving the United Kingdom two years ago, the Leave contingent was slightly ahead in the polls but ultimately lost. The Leave voters probably need to have a 3% cushion in the polls to actually pull off a win for Brexit, as it appears that when we actually go into the voting booth, the prospect of real change becomes daunting to some of us, and we reverse our votes.
That said, the underlying cultural phenomenon we see is a rejection of the establishment. I’m told by friends who live in Britain that you can’t turn the TV on without hearing some authoritative economist or business leader or politician arguing that it would be an disaster to leave the European Union. The cultural and elite cognoscenti, the establishment, is arguing strenuously, not to say desperately, for staying. And yet there is a huge pushback from people who are more concerned about their day-to-day lives than they are about the fate of their European overlords, and who don’t see that the current leadership has improved things for them. They are seemingly willing to take a chance on the unknown.
This cultural angst is not going away, no matter which side wins the vote in Britain on Thursday. It is a phenomenon that is playing out all over the world, but especially in the developed world.
Finally, if in fact the vote is to leave the EU, it is not clear what the immediate economic consequences will be. It would be at least two and maybe three years before the final agreements are confirmed and documents are signed. The most important consequence may be the potential for “contagion” to the rest of the European Union. The sense that the EU is a sinking ship will be heightened. The concerns about immigration and lost national sovereignty will come intensely to the forefront. The Deutsche Bank chief economist whom I quoted last week excoriating the European Central Bank for its destruction of the economic prowess of the EU will be joined by many other powerful voices.
Where are the strong leaders that Europe needs today? Merkel is increasingly looking beleaguered, and she is going to have to pull back from some of her immigration and economic policies if she is going to survive the vote next year. Hollande is a lame duck who won’t even make it onto the final ballot, where the conservatives and the National Front will likely meet in the runoff. Spain’s next vote is right around the corner, and it is likely to end up with the same decision as last time, which is no decision, with no government able to be formed because of all the splinter parties that won’t work with each other. Italy? It’s having its own crisis and can’t stomach the leadership of Northern Europe. Ninety percent of the Dutch citizens polled this month wanted their own exit referendum. Greece lurches from one crisis to the next. Belgium? You’ve got to be kidding, right?
I could add a number of other factors, not just in Europe but globally. And it’s not just economics. Technological change is going to force dramatically different lifestyles in terms of work and social interaction on cultures that are not really prepared for them. And unlike the 1870s through the 1930s in the US, when we went from being a largely agrarian country to one that was largely urban and manufacturing-based, these changes won’t happen over the course of 60 years. The transition will seem more like the twinkling of an eye.
And that is precisely what Neil Howe was telling us, back in 1997, that the climactic phase of the Fourth Turning would be like. Were Howe and Strauss looking forward and seeing the Iraq war? Brexit? The rise and then the potential upheaval in China? No, they weren’t making any specific calls. They were simply telling us that at this moment in time this is what happens in a generational turning.
It is important that we understand the times we are in. Is our fate sealed? No, not in the sense that we are all doomed and there is nothing we can do about it. We are going to live through a period of stress and crisis. Coincidence? Some will argue so, and maybe they are right. Some argue that seeing history through a generational lens is shaping the facts to meet your story. Okay, you can have whatever narrative you want, but the fact remains that there are forces in the world today that are aligned to bring about a pretty damned serious global crisis and recession.
And the recovery from the next recession will be even slower and more frustrating than it has been from the last one, given the response of our central bankers. If you think the mood of the country (pick a country, almost any country in the developed world) is going to be brighter and happier in four years when we are enduring yet another slow-growth recovery (or are still in recession, with high unemployment and all of the stress that creates), then you have a greater faith than I do in our current leadership’s being able to navigate the challenges that loom.
Do I think it’s possible that we could avoid or largely mitigate the next recession? Absolutely. I think I can see a path that would lead to an improving economic situation, at least for the US. I don’t see much hope for Europe. But do I think it’s likely that we’ll be so fortunate? Sadly, no. The choices that would have to be made are so radical and so out of the mainstream that the current political, economic, and monetary policy establishment will just not be able to get their heads around them. They would have to reject what are, for them, are core beliefs. I just don’t see it happening.
Finally, I suggest that you remember that we will get through this Crisis, whatever it demands of us. Life will go on, and before you know it we’ll be on the other side of the crisis, breathing a sigh of relief and enjoying a “Happy Days” growth era comparable to the 1950s. Our goal is to make sure that we get to the other side of the Crisis as well-prepared as possible, in order to benefit from what will be not just a powerful new bull market but a glorious expansion of human capacity and ability.
I am truly the most optimistic person in the room about the long term. It’s just that I see a little stress and upheaval over the short term. And that’s what we’ll be addressing over the coming year in this letter. Stay tuned…
Las Vegas, Maine, and Writing Time
Speaking of Brexit, I’m going to use it as an excuse to have a party. It turns out the British polls generally report later than we are used to in the US, so that 6:30 PM here in Dallas is a good time to tune in for the results. Surely somebody will be covering the vote live from London. Drop me a note if you’re in the area and want to come by. My special chili, fabulous ham and beans (never cooked together!), and guacamole and chips are on the menu. Summer, friends, and great conversation – it doesn’t get much better.
I was in Cleveland for what was one of the most enjoyable NBA experiences I’ve ever had, watching the Cleveland Cavaliers manhandle the Golden State Warriors. Now, Cleveland came out hot, and Golden State never really got it together. They made some runs but never could get within seven points.
Normally, that does not make for a memorable game. What was fascinating was that the normally cool and nonconfrontational LeBron James and the league MVP, Stephen Curry, were increasingly in each other’s faces. We ended up having to switch seats at the last minute, so I didn’t get my “rockstar” seats, but I still sat with my friend Dr. Mike Roizen in good seats that allowed us to watch the Jumbotron easily. It was a little different from being at a Dallas Mavericks game, because the camera focused on the faces of the players more than I was used to.
You could easily read their lips and grok their emotions. LeBron and Steph were openly taunting each other, giving each other the “look,” and from time to time accompanying it with a few emotionally charged words and name-calling – not exactly the language I’d want my kids using, but it did punctuate the intensity of the moment. Then Curry got thrown out of the game on fouls, and the crowd went nuts. You could feel the intensity of the players on both sides at that moment.
I’ve been watching NBA for 34 years, and that was one of the most entertaining games I’ve ever seen. I will confess that I don’t watch the NBA very often on TV, and I certainly don’t sit and watch a whole game. I hate feeling like I’m wasting time sitting through commercials. It’s not like the Super Bowl where you watch the game in order to see the commercials. But Sunday night I’m going to record the game, and about an hour in I will retreat to my man cave and fast-forward through the commercials to watch this one. I don’t know whether it will be the game of the decade or a blowout, but this is one I don’t want to miss if game six was anything like a hint of the great B-ball to come. Hearing about it after is not the same thing.
I know, I said I’m not planning to leave Dallas until I finish my book; but Mark Skousen talked me into coming to his big libertarian blowout in Vegas, called Freedom Fest. Since I’m not really doing a vacation this summer, I thought I could go and moderate a few panels with old friends like Steve Forbes and Rob Arnott. I have tons of friends coming to the conference, and I’ll also do a breakout speech that I’ve have been wanting to do for quite some time but that I know nobody will pay me to do, entitled “The Invisible Hand, Evolution, and Why I Am an Economic Atheist.” It will be a short 20 minutes on a topic I have thought about a great deal and am passionate about. Again, not a commercial speech.
Shane and I will catch a few shows (I will once again see the Cirque du Soleil show called “Love,” featuring the music of the Beatles) and spend time with friends. I will even catch some of the other conference speeches and panels. You can see the lengthy list of speakers and topics by going to freedomfest.com. It happens July 13–16 at the Planet Hollywood casino. I think there will be something like 2,000 attendees, representing all wings of the libertarian world. Trump spoke there last year, and I think Gary Johnson is speaking this year.
Then I’ll be back home until the first week of August, when I will head to our annual Maine fishing trip with a bunch of unruly economists. Afterward, I’ll show up in New York for a few days. Then my calendar is travel-free until the middle of September.
Okay, this letter has run long, so I will hit the send button and wish you a great week.
Your wondering what the Brexit vote will be and who will win Game 7 analyst,
John Mauldin
John Mauldin is editor of Mauldin Economics' Outside The Box.
This article was originally published at Mauldin Economics.