Ages of Discord, and Political and Financial Instability
Monthly Market Commentary: February 1, 2018
Charles Hugh Smith (www.oftwominds.com) recently penned an essay entitled Social Change Will Upend the Status Quo: The nation is fragmenting because the Status Quo is failing the majority of the citizenry.
According to Hugh Smith, "The core narrative of the Status Quo is that nothing fundamental needs to be changed: all the problems can be solved with more ‘free money’ (borrowed from the future at low rates of interest) and a few policy tweaks such as Universal Basic Income.
This core narrative is false: everything needs to change, from the bottom up. And that of course terrifies those gorging at the trough of status quo wealth and power."
Hugh Smith then discusses the theories of Peter Turchin. Peter Turchin is a Russian-American scientist, specializing in cultural evolution and the statistical analysis of the dynamics of historical societies.
His 2016 book Ages of Discord explains why we should be worried about the current course taken by American society and how we can use history to plan a better future. According to Turchin, "something happened to American society during the 1970s. Several previously positive social, economic, and political trends suddenly reversed their direction."
Turchin further explains that, "there were two periods in American history that were remarkably free of political violence: the Era of Good Feelings (the 1820s) and the post-war prosperity of the 1950s, which I termed the Era of Good Feelings II. After the quiet 1950s, however, incidents of political violence again became more frequent and now we may be in the middle of another wave of sociopolitical instability.
Waves of sociopolitical instability are characterized by
1. An over-supply of labor that suppresses real (inflation-adjusted) wages
2. An overproduction of essentially parasitic Elites
3. A deterioration in central state finances (over-indebtedness, decline in tax revenues, increase in state dependents, fiscal burdens of war, etc.)"
I love the expression of "overproduction of essentially parasitic elites," which includes an oversupply of bureaucrats.
Fortunately, The pace of new regulation has visibly slowed in the Trump administration. A search of OMB’s database reveals that, between January and December 2017, the Office of Information and Regulatory Affairs concluded review of 21 ‘economically significant’ regulations - those with impacts (costs or benefits) expected to be $100 million or more in a year. There are indeed far fewer rules than previous presidents have issued in their first years.
The most impressive part is that some of these "significant" rules are actually designed to reduce red tape.
The S&P 500 has made history on a seemingly weekly basis with its record highs, but this unprecedented feat is about longevity. The index has gone for over 400 days without a 5% pullback, putting it at the longest streak on record, dating back to 1929, an infamous year no doubt.
But as Valerius observed in the first century A.D.
"The divine wrath is slow indeed in vengeance, but it makes up for its tardiness by the severity of the punishment."