The classic scene where Harry Potter first meets Fawkes, the phoenix.
Recessions happen. Much like thunderstorms, they have a cleansing effect, along with their destructive side. Lightning supposedly cleans the air, at least that's what my dad told me, when I was a kid. The rain may flood for a time, but it waters the flowers and the vegetables and the trees and all the plants. The wind breaks off the weak and dying branches of the trees and bushes, a natural form of pruning. We all know that storms come, and storms go, and that they will pass. Storms of all kinds may be destructive, but we realize that they are part of the natural process. They come, they whoosh through our lives, drop the needed rain, the wind blows, the lightning sparks and the the thunder crashes, they cause some destruction. Some storms, like hurricanes, cause an incredible amount of destruction. But we, as humans, despite all our differences, recognize that storms are a part of life. We hunker down when necessary, weather the storms, and we rebuild if needed, and we go on.
Yet, when it comes to the "storms of the financial world," market corrections, recessions, depressions, and full scale economic collapses, most humans like to pretend that the last financial storm was the last one ever, and there will never, EVER, be another one. Every few years the majority of people delude themselves into thinking that the powers at be have finally "figured out" the economy, and now it will just keep going up forever. And then the next crash comes. The storm hits. And millions of people act like they had absolutely no idea such a thing could ever happen. And the process starts all over again. Honestly, it baffles me. Yes, recessions are not fun things to look forward to, for most people, but they are a regular occurrence.
That's where we are now. I'm starting to write this chapter on March 1st, 2020. This past week the stock markets collapsed, presumably due to the crazy virus from China. The Dow Jones Industrial Average dropped 3,600 points this past week. This may turn into a correction, but it seems more likely this is the visible start to the next "financial storm." It actually started with the Repo Market crisis, last September, but that's out of sight to average people. People are acting surprised, like they never expected this could happen. Many are unsure weather to "hunker down" financially, or to "buy the dip" like the business media tells people to do. The business media, by and large, tells retail investors to buy all the way to the bottom, and many people do just that, losing their savings and nest eggs along the way. CNBC show host Jim Cramer is famous for telling people to buy Bear Stearns stock in 2008 a few weeks before the company collapsed. I actually like Cramer, he's smart and entertaining, I just wouldn't blindly take his advice without a ton of other research on my own.
Whether this recent market slide heads us into the visible part of this economic crash, or whether that major crash comes in the coming days, weeks, or months, it will come. But this next economic downturn will be much more than just a standard 6 month to 2 year recession. As I've explained in the previous chapter, there are other large scale changes happening as well. This next financial downturn will accelerate many of those changes.
So why am I sounding alarmist by calling this next recession "The Phoenix Great Depression.?" First of all, let's start with the " great depression" part. There is now a crazy, convoluted definition of what a financial "recession" is. Then there's the older, traditional definition. A recession is an economic contraction for two consecutive quarters. So instead of growing, when the economy shrinks (a little or a lot) for six months straight, or more, that's a recession. A financial "depression" is when the economy shrinks for two or more years, or the GDP (Gross Domestic Product) shrinks by 10% or more. So a depression is either a really deep recession, or, more often, one that lasts two years or more. A "great depression," by the traditional definition, is a depression that lasts five years or more. So it's a time thing, mostly. When the economy shrinks for six to 18 months, it's a recession, 2 years or more, it's a depression, five years or more, it's a great depression. A "great depression" isn't necessarily worse, in intensity, than a recession or depression, it just lasts longer.
I think the next actual economic crash or downturn, will probably last 2 to 3 years. I also believe that the official numbers will be so manipulated, that it will be called a "recession," or maybe a "double dip recession," like the early 1990's downturn. But I also believe that it will be more intense than most recent recessions, and the overall economy will be largely stagnant for at least 5 to 7 years . So whatever the official definition turns out to be, it will feel like a 5 to 7 year (maybe longer) recession, to most people. So that's why I'm calling this next downturn "The Phoenix Great Depression."
Now, for the "phoenix" part. In the previous chapters here in "Dystopia," I have laid out my thoughts on why I think the Toffler's Third Wave concept is still playing out. I believe that we will continue to see old, Industrial Age organizations, systems, industries, and businesses continue to break down, and be replaced by new, Information Age versions, where needed. Systems that don't have a needed role in the Information Age, may simply disappear altogether.
I also believe that, at the same time, we are seeing Sarkar's Law of Social Cycle transition play out. The Acquisitor Age, the "rule by businessmen," is hitting peak corruption, and the Laborers, the average working people, are rising up, in a widespread populist movement. It's Super Tuesday as I write this part, with primary voting in several states. President Trump is the only serious Republican candidate at this time. Democratic socialist, Senator Bernie Sanders remains a top contender for the Democratic nomination. They are not the only candidates in the race, but 8 months before the presidential election, the populists are leading the parade at the moment. That's the Acquisitor cum Laborer transition in action. (Writer's note, as I proofread this a day later, Democratic moderate, former vice-president Joe Biden, was the big winner on Super Tuesday, but Senator Bernie Sanders won several states, as well.)
So we have a financial crisis, the Repo market seize up, that started over five months ago (September 2019), and has required massive daily injections of money into the financial system, to keep the system operating. In addition, interest rates have also been lowered to try an stimulate the economy, including an emergency 50 basis point drop this morning. So we are over five months into a financial crisis, as of today, March 3, 2020. If this slides us into the next recession, we also have stock and real estate bubbles to deal with, and multiple debt bubbles, with levels of debt never seen in human history. In addition to all that, we are 11 years into a business cycles, where recessions usually happen every 4 to 7 years. Things are just built up for a much larger downturn than normal, for all of these reasons. AND we have the huge societal shifts from the Industrial Age into the Information Age, and the Acquisitor to Laborer mentality(eventually to Warrior mentality) shift in societal mindset, as well. There's just a ton of stuff that's happening all at once. We are not simply going to have these issues shake out and work through them in a year and a half. It's going to take a while. My educated guess is five to seven years, more or less. Tough years, for most average people. It's a big storm, a financial and social hurricane, and it's going to be a big one to hunker down and watch go by.
Now, the "phoenix" part of this is that a lot of traditional ideas, organizations, systems, industries, and businesses will break down in this next downturn. That's the bad part, for people tied to those systems and organizations. The good part is that we, as a society, will have to figure out new ideas, new systems, new organizational models, new business models, and we'll see many whole new industries and systems emerge from this decade. For example, pretty much everybody complains about our crappy education system. It will break down, likely sparked by a breakdown in the college system, fueled by too much student loan debt. As a society, we'll need to figure a better education model out. It won't be easy, but it will be necessary. Hopefully the new education system functions a lot better in 5 to 10 years, as we work out of this mess. The same is true of all kinds of other societal institutions, the ones that haven't been fully disrupted yet. So this is the "phoenix" part of this economic downturn/"great depression." The longer term trends I've written about will lead to breakdowns of businesses and systems, and the need to create and build new systems and business models.
I know hardly anyone wants to hear "bad" news. I also know that damn near everyone complains daily about this thing in society, or that thing. OK, here's your chance! Find some little part of society the bugs you, think up a better way to do something, and do your best to bring your new idea into existence. That's what this next decade, the 2020's, is all about. The time has come to build something new, out of the ashes of the old. The phoenix transition, for society itself. The remaining parts of the Industrial Age will collapse. So let's all take a deep breath, find a piece of the world we think needs fixing, and get to work building a better version.
Blogger's note- 9/12/2023- I haven't changed anything since I wrote these posts back in 2019-2020, except these notes at the bottom. I even left in the typos I missed initially. As of late summer 2023, I'm doing most of my writing on Substack. Check it out.
No comments:
Post a Comment