The Fourth Turning

My colleague showed me a book entitled the "The Fourth Turning", written by the Historian, William Strauss in 1997. Here was a book written more than a decade ago, by people who are experts on the rise and fall of civilizations and economies.

In Chapter 10 of this book, my friend pointed out that some of the prophecies now look chillingly probable. For example, in the first scenario, Strauss saw the country beset by a financial crisis that resulted in the states laying claim to the residents' federal tax monies. Declaring this as an act of secession, the Federal government intervenes. Soon "tax rebellion" emerges in other states. This frightening scenario is already at play, as bankrupt states like California is trying to raise taxes massively (Will they in the end try and repeal Federal taxes?) as it juggles its finances.

In the second scenario, Strauss postulated the possibility of an escalation of nuclear armament amongst rogue nations. To counter this threat from within, Congress declares war, and authorizes house-to-house search. Opponents charge that this was concocted for political reasons and the nation is torn by political bickering and foreign capital leaves the US. To me, this seemed to describe the Bush Administration, but fortunately, no capital flight during that period.

In scenario 3, Strauss talked about the impasse over the federal budget and the impact of this stalemate on state spending, the USD and asset prices. Judging by how difficult it was for the Obama-Administration to pass the first stimulus package in early 2009, this is a real risk, if a second package is required.

Next, Strauss warned of a new communicable virus striking and paralysing the country. For me, I only need to look at the current H1N1 flu to know that the risk is real.

In summary, the USA is closer to what historians warned about a decade ago. We have not hit a (US) confidence crisis yet, but there are growing signs of concerns over the US leadership. If unchecked, we could see the dawn of a new era in the next decade which could see the gradual death of the USD.