September 28, 2016; To Understand Election 2016 You Have to See 2020

The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

You and I, Kevin, look at debt and we say, “This is a big problem.” For the muckety-mucks, they would say, “This is not a big problem because we have something at our fingertips that you don’t have, and that’s the power to coerce. We can force the variables and if you don’t like it, we’ll force your face into the mud.” This is the nature of politics. It gets dirty at a certain point, and I think this is where we are in this timeframe.

– David McAlvany

Kevin: We live in a day, Dave, of shifting sand. Everything seems relative. We were watching two candidates a couple of nights ago campaigning against each other, that you can’t really put a finger on, at all, what either one truly believes. We’ve been told that those are the only two options that we have. But there are some consistent things that you can measure that I’d like to start with before we talk about the debates. I know the debates have been on everybody’s mind. Was there a winner, was there a loser? But when we were talking before this Commentary we actually were reminiscing a little bit about a 15-year-old’s birthday party, and how you can teach someone to measure, not relative to shifting sand, but actually, relative to something that has been solid for thousands of years?

David: We live in a post Bretton Woods world. That was the agreement that after World War II aligned currencies to being measured in dollar terms with the backing of the dollar being gold.

Kevin: There was a gold guarantee, originally.

David: Once we left the Bretton Woods system, we entered onto a floating currency system. And to be able to judge the value of one currency against the other becomes very difficult because they are both floating. So you see more exaggerated trends show up one versus the other, but they both could be going down at the same time, and it would be very difficult to tell the difference. And I feel like we’ve had a loss of value, just like we lost the plumb line for currencies, so we’ve lost a larger values plumb line.

I was reminded of that in this last week’s debate between the Republican and Democratic candidates, because essentially, we have a system of floating values, nothing that is tied or related to something real and constant, and so it is difficult to really say what is right or wrong with either one of them because they both seem to be shifting down, maybe to one degree or another at a faster pace, and at a different time and place at a faster pace.

Kevin: Monetarily, Dave, there was a standard. You talked about Bretton Woods and how the dollar was backed by gold at one time. In 1971, when Nixon closed the gold window, your dad saw that as a time to continue to reach for gold because the government had taken it off of currency. I was eight years old at the time when that occurred. I should have been taught to continue to measure things in gold, as well. I know that you try, Dave, with your own kids and with others, to teach them to reach for the discipline that would measure things in gold so that they actually understand what is the real value of something.

David: Part of it is trying to have them focus on what is real, and it is almost impossible in the context of a presidential debate because virtually nothing is real.

Kevin: Like Pilate said, “What is truth?”

David: Yes. In this case, “What is reality?” And we have two people who, quite frankly, don’t even care. They are willing to say whatever it takes to get elected. But what is real? Back to the friend’s birthday party, 15 years old, and reflecting on the changes in value over time, I gave him two things. I gave him a bank note and I gave him a silver coin. One is worthless. The other increases in value relative to the currency that it is priced in.

Kevin: The bank note that you gave him was the German mark from the 1920s, right?

David: That’s right. It was a 10 million German mark. Ten million marks, you would think, “Being a millionaire, is that significant?” Well, it is, if there is substance to that currency, and if that currency has lost substance, then what is the significance of being a millionaire? Keep in mind, we’ve moved from it being a big deal to be a millionaire, you were wealthy as a millionaire, to now there being a recalibration only if you are a multi-billionaire are you truly amongst the upper crust, so to say? So you look at the change in value, and we discussed more recently the move in the Mexican peso.

Kevin: That’s been dropping. You mentioned last week that it is hitting all-time lows against the dollar.

David: Right. If you go back to the 1992-1993 period, we had massive devaluations in the currency and they tried to stabilize it. We had rates that were catastrophic in that timeframe for the Mexican people. Once they stabilized the currency, I would say post 1992-1993, this is the worst we’ve seen the peso since then. How does that translate? Again, we’re looking at a piece of paper which has, through time, become worthless. And we’re looking at one ounce of silver, which actually was a Mexican once (pronounced own-say, Spanish for “ounce”). I gave him that to illustrate a point.

Kevin: So you gave this young man a bank note, basically, a currency from German in the 1920s, and a Mexican once, that is an ounce of silver, but it also had a peso designation so that you could compare it to the currency.

David: That’s right. So in U.S. dollar terms the price of silver, going back to October of 2008, the price of silver is up about 110%. The strength of the peso was there in 2008 at about a 10-to-1 exchange rate. Now we’re close to 20-to-1 on the U.S. dollar Mexican peso exchange rate, 19 and change. So you see the ounce of silver, in U.S. dollar terms, has gone up 110%.

Kevin: But in peso terms…

David: In peso terms it’s up over 300%. So both currencies have devalued, one more than the other. And this is the point, and what I hoped that this young man would remember. Is the metals price moving up, or are those currencies on the proverbial trail of tears? Are they going on a very long, arduous, difficult, and even deadly journey, from a monetary perspective? Yes, maybe it’s unfair to look at the presidential candidates and say we’re on a similar trail of tears, but the reality is, we’re not arguing about real things anymore. The point is we’ve lost a plumb line for value, both in the monetary, and in the political/cultural aspects of life.

Kevin: I was talking to my wife this morning after watching the debate, and I told her, “If there was a man or woman of integrity on the stage at the time that actually just told the truth, that would trump – pun intended, actually – both Trump and Hillary. We just don’t seem to have that integrity anymore. In fact, I look at this growing audience right now of people who just can’t stand politicians. Now, Trump played on that a little bit, but people are sick of lifer politicians. They’re sick of just seeing the two-party option, and people who say, “Look, you’re going to pay my bills, and you’re going to give me a pension for the rest of my life, and you’re going to listen to what I have to say.”

David: He has very effectively positioned himself as the Washington outsider, and that comes at a time when, as you say, there is a growing audience that doesn’t like the lifer politicians. They don’t like the culture which they have seen created in D.C., a culture of cronyism and of lobby priorities which have really set the tone for what may in the future become a political reshuffle. And you can already see the aversion to the status quo, and it goes from left to right in terms of the political spectrum. It doesn’t matter whether you are conservative or liberal.

You’ve probably seen bumper stickers that say, “Feel the Bern.” Feel the Bern. That’s an expression of Millennial discontent with the status quo. I think it will be very interesting as we move through this election cycle to count the third party votes in this election and see if it’s not the biggest in recent history, where a generation says, a growing audience of people say to themselves, “I don’t really like either option that I’m given, and I’m not feeling compelled on the lines of party loyalty, or a scare tactic because of the judiciary, which may be – whatever, it may become an absolute crisis in the next 30-40 years. That’s not compelling enough for me to sacrifice either my vote or my integrity. I must vote for someone or something I believe in.” That’s what you are seeing in terms of the Millennial expression of discontent.

Kevin: I want to talk about revolution at some point because we’ve seen revolutions in the past where the false dilemma, or the false dichotomy of just two choices, is thrown out. We saw that back with the American Revolution. You had the Whigs and the Tories and you had everybody arguing about those two parties. And then you had the colonists, who basically said, “No. We’re going to throw that off.” Only the old guard argues that a protest vote is thrown away, and that seems to be the argument at this point. People saying, “Gosh, if you vote third party, don’t you understand, the judiciary is going to be lost for the next 30 years?” They’re absolutely right, but the problem is, how long have we sold our souls to the devil by continuing to just bite at one bait or the other? There is a hook in both.

David: That’s right, and I think this is a message which has been told to the boomers, it has been believed by the boomers, and it is something they have continued to perpetuate, this threat of the loss of the judiciary. I guess the real question is, can you show me a substantive difference in the appointments under a Republican versus a Democrat? You’ve seen some catastrophic appointments under both, and it doesn’t lead me to think that there is very much at stake in the final analysis. It doesn’t hold, this idea that you should not “throw your vote away.”

That doesn’t hold with a generation that has questioned whether or not it’s worth their time to vote at all, or if their vote matters in the grand scheme of things. You’re dealing with a younger generation who may not have a huge bearing on this election, but they will define the course of the body politic in future elections. What are they after? They are after an authentic, truthful expression of values, and that is a greater priority for them than the choice of the lesser of two evils.

This is a generation that is watching how people vote and will serve as those who indict the current generation who would say, “Don’t ‘throw your vote away.’ You must not let it get in the hands of so-and-so.” Republicans do the same thing as Democrats, Democrats the same thing as Republicans. “Be aware of how you’re going to throw the election into the hands of the ‘enemy.’” This is a generation who is going to judge that advice, and judge it very harshly, as something that lacks ethics.”

Kevin: Speaking of that generation, we’ve seen generations in the past that, really, turned away from the vote completely and went to pitchforks and torches and guillotines. I wonder, with the outcome of however this vote comes up, Dave, whether a person is for Trump, or Hilary, or a third party, or what have you, I wonder, with the social expression that is coming up right now, the anger, this angst against everything. We talked about Brexit. All the polls said that Brexit was not going to pass, and so the establishment was very comfortable that Brexit would not pass. And then, sure enough, Brexit passed. They didn’t know what to do with it.

David: I don’t think Trump did very well in the debate. That doesn’t mean that his numbers are going to change at all, because the man in the street, frankly, doesn’t care about a debate, he cares about the status quo and he feels angry about not being well represented or taken care of.

Kevin: Do you think this is the last hurrah of the old guard at this point?

David: I do. I think you’re looking at a generation of selfish and power-hungry leaders on both sides of the aisle, and what they’re setting the stage for is a youth-driven revolution of interests. People that are, today, counting on social security, are going to face a generation that is supposed to fund their social security payments, who are asking a different set of questions, things like this. “Haven’t you taken enough? Haven’t you damaged the environment enough? Haven’t you set yourself up comfortably enough on the backs of the world’s needy and attempted to corner the market on luxury and excess, using your contacts and connections to protect against positive change? Haven’t you tried to tell us that we need to vote just like you?”

The next administration is going to define the kind of war on inequality that we have, and it’s going to define it by setting in motion the biases of a younger generation and defining what they believe about the people back in Washington. It’s fascinating to me, from a sociological perspective, far more than from a political perspective. Frankly, it’s probably because I’m jaded by ideas from my dad. He would say that there is not a dime’s worth between the Republicans and Democrats. And I think this is where, again, the farce of, you must choose A or you must choose B, there will never be a change to consider C, D, E, or F as options until you have a generation who is willing to throw it all away, and not feel that there is something at risk.

Kevin: When you read about false dilemma on Wikipedia, one of the things they say is that a false dilemma can arise intentionally when a fallacy is used in an attempt to force a choice or an outcome. I want to talk today, Dave, about some of the dangers that whoever wins this election may face. Actually, it may not be the best thing that the best candidate wins, just for future reference. But let’s go ahead and look at what has changed. You’re talking about this Millennial generation. When I talk to my son about things related to the Internet, just my using the word Internet makes me sound already old-fashioned. There are words that I don’t even know. There is a different way of thinking.

This is a generation that has learned that information is free. Our generation still gets on Amazon.com and pays full retail for our books. They don’t think that way. They leap-frog, with their technology, the old way of thinking. Do you think maybe this politically connected side, let’s say the Democrats, facing the moneyed interests, let’s say on the Republican side, this third option might be something we’ve never thought of before, Dave?

David: When I think about the Millennials, the reality is, I don’t understand them, and I think it’s why for the longest time I have underestimated them. What we’re looking at in terms of the disruptions in business today where tech undoes the old models and leap-frogs them – I think that’s going to hit the political arena over the next ten years, and it’s going to welcome in, it’s going to introduce to Washington, a whole new group of outsiders. I think this election is today, obviously, between the politically connected and the moneyed interests, but what is coming is going to be very different.

You may not be of the money crowd, you may not be stacked with a political Rolodex that allows you to make a few calls and get lots of things done, including raising funds. But again, this notion of disruption in business, given a tech work-around, I think we’re going to see that in the political sphere as well, and it’s one of the things that will empower a Millennial generation to reshape the world. That may be for the good; that may not be for the good. That remains to be seen, the kinds of values that they are willing to promote.

Kevin: Did you get the impression watching the debate, Dave, with 20 trillion dollars in debt, with some of the international political struggles that we have, both in the Middle East and in Asia, that either candidate should be in office at this point, and could handle that? Or do you think they’re going to be the guys who are left holding a really heavy bag?

David: I think that’s the conclusion I’m coming to. The biggest loser in this election is the one that wins. The party, and what the person represents, will not show well over the next four to eight years. There are so many imbalances baked into the economic and political cake that what we will witness over the next one, and/or two terms, is revulsion to whomever and whatever is in office. I’d like to take the opposite view of my dad, here. He argues that a Trump win is a victory against the establishment. 2016 sets the stage for bigger issues to be defined and prioritized by the electorate in the ensuing four years.

I think Trump wins, and it’s actually an establishment victory. This is just my opinion, but here’s why I say it. What does that presuppose? Number one, that we’re at an economic tipping point. That’s a key in my thinking. We’ve been able to postpone a severe economic correction, a deleveraging event, for eight years, by re-leveraging the financial system with an extra 60 trillion dollars in debt. That’s globally. And if you look at 12 trillion dollars which is just central bank balance sheet expansion, I don’t think that we can postpone that deleveraging any longer, leading me to my second point, which is, if the central bank is not helping you, they may inadvertently be hurting you.

This is what I would call the central bank-aided crucible. This is where if Trump wins, and the political and the personality bias that is against Trump at the Fed, and I say that because the majority of the folks that work at the Fed are Democrats (laughs), I think that political and personality bias will become obvious. The Fed can shrink his empire by 80%, I’m talking about his personal balance sheet, by raising interest rates. They can also trigger a recession that will define the tone of his administration. D.C. is a jungle. D.C. is absolutely a jungle. And this is what it brings to mind for me. If the Fed wants to make life difficult for you – do you remember the movie, The Predator, with Arnold Schwarzenegger?

Kevin: Oh sure.

David: Well, if the Fed wants to, they could drop you in the middle of a jungle – that’s D.C., right? – without arms, facing the predator (laughs), and leave you to get skinned alive by the marketplace, right? So this brings me to the third point, which is a framed failure. Whoever is in office over the next four years is going to get caught holding the bag.

Kevin: Speaking of holding the bag, let’s just go back and look at this. If this is intentional, like I was talking before about this dilemma that we have, you may have a designated bag-holder for this financial correction. Bag-holder comes from shareholders caught up in corporate bankruptcies who are left holding the bag. It’s a statement that actually goes back to the 1700s in Britain. If there was a thief who wanted to get away and had to hand the bag to somebody, they handed it to the guy left holding the bag. Do you think, possibly, either a Hillary or a Trump would be the ones left holding the bag, and whatever occurs after that will be the reaction opposite what they represent?

David: That’s right. So let’s go neutral and say it just doesn’t matter who wins. The global economic imbalances and the massive quantities of debt are in the process of coming undone – now. Not tomorrow, not six months from now – now.

Kevin: They’re barely making it to the election, Dave. They’ve kept the Dow at 18 thousand-and-something for three months.

David: Have you noticed sort of the suspended, the gravitational pulls? We’ve been 18, 18, 18, three months in a row. And yes, I think the biggest loser is the one that wins. And I, for one, would prefer that capitalists, that business owners, that conservatives, not be blamed for what has been a bipartisan catastrophe developed over the last 20-30 years. We all take risks, I appreciate that, and the calculation in my risk-taking in this analysis includes some cause and effect. And I hope that the show we are about to see demonstrates to a generation that socialist redistribution, and quite frankly, the more extreme expression of that is in the DNC platform. A softer version is in the RNC platform.

I want a generation to see that socialist redistribution is not an answer, but is the worst expression of a systemic problem. If Trump wins, anything remotely market-related gets tarred and feathered. Hillary wins, guess what? It’s the status quo politics that gets re-engineered as a reaction to the failure of not only her term, but the eight years that precede it. Democrat, Democrat, Democrat – I want to know who gets caught holding the bag, and frankly, anyone who has a market orientation, even if I don’t like him, I’m not inclined to see him get caught holding the bag because of the social and long-term political implications.

Kevin: Dave, we’ve been talking about chess grand masters here over the last couple of weeks. In a chess game sometimes you’ll see a sacrifice of a very valuable piece – a queen, a rook – and you’ll look at the board you’ll think, “What in the world were they thinking? They sacrificed the queen, they’ve given up the game.” And then you find out later that it was a beautiful sacrifice, and it wins the game, ultimately, for the person who sacrificed their queen.

Now, I’m wondering, let’s say you’re the establishment. You and I both know, it’s not the president who runs the country. There is an establishment that is above that, that may be playing the long game. And if you’re playing the long game, and you say, “We have a financial crisis that has to come apart. We’ve bought eight years with the Federal Reserve being on our side.” Do you think maybe the establishment says, “Fine then. Let’s go ahead and let Trump have it. Let him hold the bag because we have so much more after that that we can incorporate.”

David: I don’t know what the establishment is feeling, other than they don’t like him. And he makes them sick. But on the other hand, do they reach a point where they say, “Fine then. Let him have it.” Trump wins, and as a greater depression unfolds, in the absence of a monetary policy prop for assets, and as trade competitiveness increases, as wars begin to start, budget deficits being to re-blossom and bloom, who is going to be the man who is dealing with debt rollover issues as rates are rising? And who, then, is going to come swooping back in as the knight on the white horse? And people don’t realize that right now the establishment is, in fact, losing its grip. They are. That’s a current reality. But they may be able to get a better grip post-Trump. In that way, in my opinion, I think Trump is an establishment victory.

Kevin: You made a comment. Being a McAlvany you read a lot of things that I didn’t read when I was a teenager. When you were a teenager you read Taylor Caldwell’s The Devil’s Advocate. You were explaining to me how that may have some play in this particular instance.

David: It had me reflecting on good and evil, and what appears good, and what appears evil. I was, maybe, a little young to read it, reflecting on sort of a dystopian culture where in every aspect of life there was command and control dynamics. It was sort of an extreme version of communism, if you will, written in 1952 or 1953 when there was a real awareness of “red threat.” What it makes me think of is, you have the villain in the story who in some respects ends up being the hero. And it turns around your preconceived notion of what is good and what is evil. You don’t necessarily know the motives of people in office, so judging good and evil, frankly, if you took the 40,000 foot view and said, “We don’t know, ultimately, what is good or evil for our culture, for our nation, on a longer frame.”

I’ve seen evil done in the name of good under a Republican administration. I’ve seen evil done in the name of good under a Democratic administration, and I don’t think either one of them has a corner on evil, or on what can be done in the name of good. So to me, that’s where Caldwell’s The Devil’s Advocate, I begin to say, “Look, I’m not sure what actually is going to be best for this country long-term, but I think even the scare of losing the judiciary – Republicans have done a really bad job of that, as have Democrats, in my opinion. So I don’t know that there is much to lose there. That may be a bit of a canard.”

Kevin: I want to go back to the thinking that there may be backlash on whoever takes office this particular time, because what we’re actually saying is, to play the long game, or to watch the long game, we really need to be thinking about the 2020 election.

David: That’s right.

Kevin: Because whoever wins in 2016 is probably going to be backlashed against in 2020.

David: Yes, think about that. To understand 2016 you have to see 2020. Take on 2020 vision and you’ll better understand what’s happening in this election. What occurs over the next four years will set the tone in social and political discourse for a generation. That’s what is at stake, in my opinion. Pain shapes social consciousness far more than the slow grip of Gramscian socialism. Pain, in the form of job loss. Pain, in the form of losing your home, in the form of wealth evaporation, and the other consequences of deleveraging which I think are going to define a perspective for a generation. And it’s the youth of today that will define the America of tomorrow, so what is their experience of life over the next four to eight years?

Think carefully about these causal connections. They may be specious. There may be zero connection, in reality, between what happens in the next four years in the marketplace, and people’s experience of life being harder and harder, and the people in office. But that causal connection will be made, and it will be made over the next four to eight years. And again, I think it’s in a way that has a generation defining a political objective. That’s what has me concerned.

Kevin: I think at this point we need to revisit the talk that you had with one of our past guests, Neil Howe. One of the great books that was written in the late 20th century was The Fourth Turning, because it went back 600 years and looked at the seasons of social change. You have about a 20-25 year period called the first turning. That’s when there is usually a spiritual awakening and things are changing. Then you have sort of young maturity in a society. And then it goes to older maturity. And then age, this fourth turning. So you have the one, two, three, and four turning. Are we in a fourth turning? Howe, the author of the book, thought that we had begun the fourth turning in 2008.

David: Neil Howe’s first book was written in the 1980s, and he wrote it with Pete Peterson, who now runs the Peterson Institute, was head of the CFR for years, and has done some interesting things as a part of Blackstone, a major private equity firm. What I think is interesting is that they were looking at massive fiscal imbalances in the late 1980s and saying by the time we get to 2020-2040, this timeframe, we’re going to be dealing with numbers that will crush the system. That led him to his early 1990s work on generations, and looking at a study of how different generations deal with problems, and what generations tend to look like. Is there any similarity between generations, or any patterns that we can divine from looking at a longer swath of history? And out of that, he came up with The Fourth Turning. The fourth turning is this notion that, in fact, history has a cyclical character to it, and about every four generations, 80-100 years, you have this secular cycle.

Kevin: And it usually ends with depression and war.

David: That’s right. The fourth turning. This is the question. The fourth turning is like this. If there are four, the fourth is like winter.

Kevin: So, you have spring, summer, fall. The winter is the death of that particular system.

David: That’s right. And the winter precedes a period of regeneracy or growth. He would argue that we’re in a fourth turning now. Are we in one? This is the question I’m asking. Who would you want as president if this is the final stage of a fourth turning? Really, it’s question of how we want the pendulum to swing. The Millennials will be the generation charged with putting Humpty-Dumpty back together again. And if the first turning represents a reaction to the ideas and leadership of the further turning, what do you want the social and political animal to be that is being rejected? Do you see what I’m getting at?

Kevin: Sure.

David: So Neil Howe, who is one of the authors of The Fourth Turning, suggested that in 2008 we kicked off the fourth turning. And these shifts take about 20 years to complete, about a full generation. So we’re roughly halfway through that. This is the phase where institutional incompetence is most on display. This is the period when boomers are, in fact, going to be retiring, moving on to a different phase in life with different sets of priorities, where generation X are the new adults. They’re the new parents. They’re making a set of decisions different than they would have before because of the responsibilities that are on their plate right now. And who is defining young adulthood today, and redefining, to some degree? It is the Millennials.

Kevin: Dave, I was just reading this morning about how, of the Fortune 100 companies, there is not one single CEO that is publicly supporting Trump. So I’m wondering if, down deep inside, they want to not be seen holding the bag, either. There seems to be a disconnect between Trump and the Fortune 100 CEOs. I seriously doubt that they are all Democrats, but maybe they sense something coming, too. If you’re there working with a company, you actually can see the economy for what it is.

David: If you continue with the music, if you let the music continue to play, you never introduce that stress of, “Do I have a chair?” And if the music stops – I think they’re making a calculated bet that the music does not stop if a Democrat is elected. And if that is the case, then why would we have to reorient ourselves, our decision-making, toward finding a chair? Just let the party continue.

Kevin: That’s like what Richard Duncan said a few weeks ago. He said, “This is going to be so bad when it stops, let’s just go ahead and keep paying into the party.”

David: I think that’s what you have, Fortune 100 CEOs all in support of Clinton. This is one of her challenges. There are enough people who know that she is very connected, that she is tied into the bowels of Wall Street and of corporate America, and that she is not a Bernie Sanders. She can’t really ever pose, or convince anyone, that she is an outsider in any way (laughs). And oh, by the way, she is a part of the 1/10th of 1%, both in net worth and in current income. She represents the minority, which is now invoked to hate. So how does she end up winning over the Millennials? She doesn’t. But she can, on a self-interested basis, perhaps maintain the audience with the old guard.

Kevin: Let’s go ahead and go through the generations, then. Generations are a particular focus of the Strauss and Howe book, so go ahead and go through a little bit of the background of the various generations and how they see things.

David: I mentioned that was the title of their book in 1991, Generations. That led them to write The Fourth Turning. They point out that generations are defined, to an extent, by what they know and by what they don’t know. What is a part of their collective memory? Boomers, for instance, are the first generation to have no direct experience or memory of World War II.

Kevin: Right. They followed the Greatest Generation, we call them.

David: That’s right. Or the Silent Generation. Generation X was born after the assassination of John F. Kennedy. If you were born before, you know exactly where you were on that day. If you were born after, you may know it as a historical footnote. If you remember from your civics class, there was a president, and he was assassinated, and he was in Dallas, that’s about as granular as it gets, but you have no personal investment in it.

So Gen X was born after the assassination of John F. Kennedy. Howe points out that Woodstock is the sort of generational defining event that is not a part of the collective consciousness of Millennials. In fact, the complete redefining of marriage and family which began in the 1960s, 1970s and 1980s preceded the Millennials altogether. So the things that they assume to be the case about society were reshaped just before they were born.

Why am I bringing this up? Look over the next eight to ten years, and you’re either looking at the president that presides over the greatest crisis this country has seen since the Depression, World Wars, or at least, a one-termer that gets caught in the crossfire of too much debt, too many budgetary promises, and a breakdown in globalization, again, on a scale that we haven’t seen in 70-80 years.

Kevin: So the question that you’re asking is, not who is going to be in office, but who better to blame?

David: (laughs) In essence, you’re right. The man or woman at the helm is going to be dealing with economic collapse, with social chaos domestically, with a decline in international relations which typically accompanies major geopolitical conflict. Howe would say this is where all of your bloodletting occurs on an international basis. So you’re right, I’m not asking the question who makes better decisions under duress, I’m asking what the impressions are, right or wrong, of the leaders who are making decisions in the context of crisis? I’m asking a market question. I’m asking what Keynes asked, not what is of greater value, but how is the beauty contest going to go? How will the judges judge this as the next eight to ten years play out?

Kevin: When you were talking to Carmen Reinhart a couple of weeks ago, it was interesting, and shocking, but it should have been obvious to me that the Fed’s mandate wasn’t necessarily to pay off the debt. So, it hit me at that point. Wait a second. They’re going to just continue this as long as they can because the debt is not their problem. The mandates that they have they are actually playing out right now, and they’re doing it with debt. They’re doing it with completely unpayable debt. But it hit me, exactly what Howe said recently in an interview with Martensen. No one simply solves a terrible problem on a sunny day when they can afford, at least for the time being, to look the other way. The Federal Reserve is doing it, the politicians are doing it, and like you said, the Fortune 100 CEOs are doing the same thing.

David: That’s right. No real problem-solving occurs on a sunny day. That’s what Howe is saying. Problems like that are faced when people have no other choice, and it is a really grim day, that’s what he said in that interview. It’s a white knuckle time, it’s where horrible things are happening, at least historically, we’ve seen that geopolitically, around the world, and that’s when people are forced to act.

You and I, Kevin, look at debt and we say, “This is a big problem. This is a very big problem.” And for the muckety-mucks, they would say, “It’s not a big problem, because we have something at our fingertips that you don’t have, and that’s the power to coerce. And when you introduce coercion into the equation, guess what? Basic 2+2 doesn’t have to equal 4. It can be whatever we want it to be because we can force the equation. We can force the variables. And if you don’t like it, we’ll force your face into the mud.” This is the nature of politics. It gets dirty at a certain point, and I think this is where we are in this timeframe.

Kevin: Dave, as a businessman, you understand that to solve a problem you have to compartmentalize the problem. If you have a problem with advertising, you sit down and you solve the problem with advertising. If you have a problem with payables, you sit down and work on the payables problem. But Howe goes on to say that in a fourth turning, the issues get muddled. Everything sort of culminates. All the problems, at once, turn into one gigantic problem. Like World War I. World War I was a really interesting time, Dave, because nobody really knew why they were in the trenches. They just knew they were solving a bigger problem than themselves.

David: I think that may be what’s lacking, real executive insight because the problem of the department head is one of payables. The problem of the man who is trying to solve a marketing issue, again, that’s within a certain department. The executive is supposed to see everything from a bigger picture perspective, and I don’t know that either one of these candidates represents an executive from that standpoint.

This is what Howe says. “In our last fourth turning, all the problems of the world, the Depression, the trade wars, fascism – everything became one big problem and that was World War II. Total victory, and then that had a climax, which was probably sometime in the fall of 1942 and the beginning of 1943,” this is what Howe says, “where we suddenly realized we were probably going to win the thing.” And that typically happens in a fourth turning.

Kevin: So there is a peak that it hits, or a trough.

David: That’s right. All the different problems, all the different struggles, all coalesce into one big struggle, there’s a climax, and then the final moment of the fourth turning is the resolution. And that’s when all the treaties are signed. That’s when all the new institutions are created. That’s when the cement is wet, so that things are free to be shaped any way you want them.

Kevin: Think about the Marshall plan, think about Bretton Woods. All those things came right at that moment.

David: That’s right. That’s why Howe says, “People are going to become masterminds of a whole new global system,” which, as you can imagine, at the end of a fourth turning, it is all going to be aided and abetted by Millennials. Designing these enormous information technology systems to make sure that we are all looked after, like in a game of Sims, or something like a giant Sim city. That’s his perspective, where we are in the context of a fourth turning. It is the Millennials which are the generation with the opportunity to reshape the world. Whether that is a new Bretton Woods system, whether that is a new IMF, whether that is a new World Bank, or a variety of IT-driven solutions to solve problems in health care, elder care, a more sustainable welfare system, my question is, what are the values that they promote, and are those values refined and defined over the next four to eight years in the context of crisis?

Kevin: Unless we sound like we’re just talking about cold, hard facts, about these fourth turnings, fourth turnings are seasoned with horrible amounts of blood, and I know that it can hit us personally because we all have families, we have cares. I’m thinking about families that are young right now, Dave.

David: What concerns me is the period of conflict preceding regeneracy, which happens to encompass the timeframe in which my boys are recruitable. So in this election, I’m interested in who is likely to take us to war? It’s a late-stage concern for me, if you’re assuming a two-term president that is re-elected on the basis of concerns and crisis which compel the electorate to stick with the horse they know. But in that future scenario, we have Millennials that are directly impacted by the crisis. That includes my kids.

And we’re talking about lives that are marked by conflict. We’re talking about a predisposition of hopefulness which is characteristic of this generation, absolutely prerequisite to being the ones that make significant changes culturally, socially, politically. This is probably the most civic-minded group of people we’ve had in 50-60 years. They are a very collectively aware generation, the most so since the Great Depression.

But I want to know what values they are going to champion. And I want to know, if the consequences of major economic decline doesn’t have them spitting mad about things that are market-related, spitting mad about things that are truly a part of the solution that lies ahead – not the problem – which are entrepreneurialism and creativity and innovation. They have, at their fingertips, technologically advantaged solutions which I can’t even wrap my mind around, but to the next generation are the no-brainer things that, to an older generation, we couldn’t see it, we can’t see it, we can’t solve the problems the way they can.

Again, what is at the heart of the next generation? That’s my concern. If I’m thinking about legacy, I’m not just thinking about who is president. I’m interested in who, and what, experiences define the next generation.