Every Forty Years – Revisited

MidasMoments: Rob Slee’s Comments on the Nation

CLICK HERE to return to our website 

It took longer than expected, but Nixon’s Silent Majority finally showed up last week. I suspect Nixon knew at the time that mainly uneducated white men would comprise this majority, because back then, that was the main demographic of America.

I wonder if uneducated white men, like most Americans, have economic amnesia. For reasons I can’t understand and therefore can not explain, people can not remember that every forty years the economic system of America resets itself. Walk with me.

Let’s start with the 1810’s. The Panic of 1819 was the first major peacetime financial crisis in the United States followed by a general collapse of the American economy persisting through 1821. The Panic was characterized by the financial and industrial imperatives of central bank monetary policy, making it susceptible to boom and bust cycles. This sure sounds familiar.

Who can forget the Panic of 1857? This was a financial panic unlike any the US had seen to that point. It was caused by a declining international economy and over-expansion of the domestic economy. It was ended by the Civil War, or the Panic likely would have likely lasted a decade.

The War between the States (as we still call it in the South) bought the US several decades of economic prosperity. Then the Depression of 1893 hit; it was one of the worst in American history with the unemployment rate exceeding ten percent for half a decade. Everything went economically wrong in the 1890s. We’re talking strikes; massive business contraction; and assassinations. Admit it – you had no idea.

The 1930s need no introduction. But historians are still arguing about the causes and should-have-dones of the Great Depression (I suppose the 1890 depression was just Good). Bernanke spent an academic career trying to better understand and explain this decade of America’s economic history. Some days I wonder if he learned anything. In any event, we once again had to fight our way out of depression.

Many of us clearly remember the 1970s. During the 70s, the Vietnam War had just concluded so we got busy fighting each other. The golden age was over and the U.S. entered a recession. Pandora’s box opened wide – from a severe energy crisis, to high inflation to high unemployment. Unless you were a Pittsburgh Steelers fan, this was just a lousy decade.

When we add 40 years to the 70s, we get to the current economic catastrophe-in-making. I’ve been convinced for several years that we needed to let the system reset itself in 2008. But no, the government had to “save us,” thereby assuring that the people who caused the problems would be rewarded, and further guaranteeing that this decade would be lost. With no solutions at hand, the Fed and government are busy rearranging deck chairs on the Titanic, and now there’s a new Captain who seeks to be “unpredictable.” Wow.

Since I seem to be the only person on the planet who has noticed this forty year trend, I feel free to explain it. There is only one commonality since 1810 – and that’s humans. Humans are greedy, fearful animals. We’ll do stupid things if allowed. It is the government’s responsibility to keep us honest, or at least force us to pay the piper when we mess up. If we would just flush the toilet every decade – by crushing those who create the problems – we wouldn’t have major recessions/depressions every forty years.

But voluntarily resetting the system represents a collision between democracy and capitalism. You can’t get elected by saying that you’ll turn off the money spigot, so get ready for $1T+ annual budget deficits and probably a war, because that usually solves a major economic downturn.

If history holds true, we’ll soon experience an every forty year reset. It will last at least 4-5 years, maybe a decade. The big question is: will you be ready when it comes?

– Rob 

If you have questions,  click here to have our office call to set up a time to discuss this with you.

CLICK HERE to return to our website

Sorry, comments for this entry are closed at this time.