The continuing foreclosure crisis has proven that the financial industry's sole purpose in creating subprime loans, liar loans, Alt-A loans and packaging them into tranches with fake AAA ratings to be sold off to whatever sucker they could find, was to enrich themselves with no care about the future consequences. The owners of the debt can't prove they own the debt. Lawsuits clog up the court system. Deadbeats occupy houses for longer than two years without making mortgage payments. Wall Street has created so many complex confusing financial products in their greedy thirst for fees that Harvard MBAs can't even figure out the mess they have created. The $1.4-quadrillion of outstanding derivatives is truly a weapon of mass worldwide destruction waiting to be triggered. The fraudulent actions of Wall Street, the lies told to the American people by government bureaucrats about the solutions needed, the overstep and obfuscation committed by Ben Bernanke, and the propaganda fed to the masses by the corporate mainstream have destroyed the remaining trust in our institutions. Distrust grows by the day, as Strauss and Howe foresaw in 1997:
"As the Crisis catalyzes, these fears will rush to the surface, jagged and exposed. Distrustful of some things, individuals will feel that their survival requires them to distrust more things. This behavior could cascade into a sudden downward spiral, an implosion of societal trust."
The growing distrust of financial and governmental institutions was reflected in the angry and sometimes violent town hall meetings with Congressmen during the healthcare debate. An angry on-air rant by financial reporter Rick Santelli ignited the Tea Party movement that eventually swept dozens of candidates into office in a Republican landslide in the 2010 mid-term elections. Societal trust in promises made by politicians is ripping apart. The entitlement benefit promises can't be kept. Senior citizen and government union beneficiaries are angry. Younger generations don't want to be left with debt so older generations can have comfortable 25-year retirements. Taxpayers don't want to pay higher taxes to support gold-plated healthcare and pension plans for government union workers. The decades of compromise, denial, apathy and lethargy are over. The mood of the country has changed dramatically. Survival of the country is at stake.
According to Strauss and Howe, it is akin to a Volcanic Eruption...
"America's short-term Crisis psychology will catch up to the long-term post-Unraveling fundamentals. This might result in a Great Devaluation, a severe drop in the market price of most financial and real assets. This devaluation could be a short but horrific panic, a free-falling price in a market with no buyers. Or it could be a series of downward ratchets linked to political events that sequentially knock the supports out from under the residual popular trust in the system. As assets devalue, trust will further disintegrate, which will cause assets to devalue further, and so on. Every slide in asset prices, employment, and production will give every generation cause to grow more alarmed. With savings worth less, the new elders will become more dependent on government, just as government becomes less able to pay benefits to them."
The country has withstood the initial onslaught of this latest Fourth Turning. The Great Devaluation resulted in a 50% stock market crash and a 30% decline in home values. Rather than allowing home values to fall to their fair value, the government used tax credits and loan modification programs to prop up home prices. Rather than liquidating insolvent Wall Street banks in an orderly bankruptcy, the government and Federal Reserve chose to use accounting gimmicks and borrowed taxpayer funds to save those who had taken excessive risks and reaped hundreds of billions in profits. The government has systematically "adjusted" every economic statistic in order to paint the most optimistic view possible. Unemployment, inflation, government debt, and GDP are all manipulated in the most positive light.
Many people understand that you cannot solve a debt problem by issuing more debt. They understand that politicians have over-promised Social Security and Medicare benefits to the tune of $100 trillion. They understand that if you cover 30 million more people in your healthcare system, it will cost hundreds of billions more. They understand that mega-corporations have shipped their manufacturing jobs overseas, and they aren't coming back. They understand spending $800 billion per year, policing the world, fighting two wars of choice, with hundreds of military bases across the globe is unsustainable. They understand that running $1.5 trillion deficits will eventually result in a collapse of the U.S. dollar. They understand that an individual or a country cannot borrow their way to prosperity. The U.S. government is essentially bankrupt and dependent upon Ben Bernanke's printing press to keep up the appearance of solvency.
Fingers of tension and instability run through every aspect of American society. Pressure is building beneath the surface. The last year and a half have proven to be a liquidity driven lull. The appearance of stability does not mean our situation has stabilized. The actions of those in power have created a vastly more dangerous scenario for the next decade. The volcano is erupting and the lava is flowing along the channels of distress, as described by Strauss and Howe:
Imagine some national (and probably global) volcanic eruption, initially flowing along channels of distress that were created during the Unraveling era and further widened by the catalyst. Trying to foresee where the eruption will go once it bursts free of the channels is like trying to predict the exact fault line of an earthquake. All you know in advance is something about the molten ingredients of the climax, which could include the following:
- Economic distress, with public debt in default, entitlement trust funds in bankruptcy, mounting poverty and unemployment, trade wars, collapsing financial markets, and hyperinflation (or deflation)
- Social distress, with violence fueled by class, race, nativism, or religion and abetted by armed gangs, underground militias, and mercenaries hired by walled communities
- Political distress, with institutional collapse, open tax revolts, one-party hegemony, major constitutional change, secessionism, authoritarianism, and altered national borders
- Military distress, with war against terrorists or foreign regimes equipped with weapons of mass destruction
Strauss and Howe did not predict specific events that would occur during the next Fourth Turning. As trained historians and economists, they simply analyzed the environment created by our leaders over the last few decades. If the thought leaders in the country had not been blinded by their ideological biases, they would have seen that the next Fourth Turning Crisis would be channeled by un-payable debt obligations, reckless financial schemes, religious ideology, political corruption, class warfare, foreign conflicts, and terrorism. The molten ingredients are travelling along the channels outlined above. What happens next is anybody's guess.
The economic distress worsens for the average American every day. The recovery propaganda circulated by the power elite through the mass media is a fraud. Only those with wealth and power have recovered. The middle class sinks further into poverty and despair. Unemployment remains at Depression levels and the entire economic faux recovery rests with Ben Bernanke's printing press. The only question that remains is whether the United States experiences a deflationary collapse or a hyper-inflationary collapse. The country is currently experiencing stagflation as the things we need (energy, food, clothing) inflate, while wages stagnate and our home values deflate. Bernanke and his minions at the Federal Reserve will choose inflation as their poison because it will allow their banker masters to pilage the remaining wealth of the middle class before the final collapse of the U.S. dollar.