Economy Entering '1930's-Style' Transformation; Historic Financial Reset | Neil Howe
What this covers
Neil Howe, author of "The Fourth Turning" and Director of Demography at Hedgeye Risk Management, discusses global tensions, the potential dissolution of NATO, and how Trump's nationalist policies align with the 80-year historical cycle of societal transformation currently underway.
*This video was recorded on April 25, 2025.
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0:00 – Intro 1:14 – A dangerous moment 4:16 – New world 9:30 – Trump and Countertrends 13:54 – Global conservatism? 15:44 - Ukraine and Russia 20:13 - NATO 23:00 – Tariffs and chaos 24:30 – Nuclear conflict 28:25 – Fourth Turning and the economy 34:23 – Investor advice 35:15 – Tariff resilience 36:44 - China 38:01 – Power of the dollar 42:55 – Buying opportunity 45:18 – Generational cycles 46:53 – Steering capital
#economy #politics #investing
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Howe argues we are in a fourth turning—a generational crisis period comparable to the 1930s-40s—characterized by the loss of community, rising authoritarianism globally, geopolitical fragmentation, trade war, and the breakdown of the post-WWII rules-based order, which will reshape the economy toward autarky, defense spending, and public-sector mobilization.
- The 80-year generational cycle means communities built after crisis are lost when no one who remembers their formation survives, requiring new conflict to rebuild collective identity
- Global leaders now pursue ethnocentric nationalism (Hungary, Turkey, Iran, China), rejecting the rules-based international order that has governed the post-WWII era
- Trade wars and tariffs mirror the 1930s Smoot-Hawley precedent, which coincided with the rise of fascism and dictatorship, suggesting economic closure and geopolitical conflict reinforce each other
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The loss of community in modernity, identified by 19th-century sociologists (Durkheim, Weber) as a central problem, is recreated through conflict, and the 80-90 year generational cycle reflects successive generations losing memory of earlier crisis moments until they must recreate community through new conflict.
“one one truth uh about social history and this goes back all the way back to the 19th century with Durkheim and Weber and you know, all of the the great sociologists who sort of founded the study of social science was one of the one of the things they all agreed upon was that the whole problem with modernity was the loss of community. Uh this was in the in in Germany, this was the movement from from you know, Gemeinschaft to Gesellschaft, you know, from community to society and you had all these huge urban areas where people were losing their sense of community. And what they all agreed upon is looking back historically is that what creates community is conflict, right?”
The 1930s provide a perfect analogy for current times: the Smoot-Hawley Tariff and global tariff escalation in the early 1930s coincided with the rise of dictators across Europe and East Asia, and the spread of fascism and Stalinism in the Soviet Union, showing that economic closure and authoritarianism are historically linked.
“Here's where the analogy of the 1930s works perfectly, right? Uh we had the the huge ramping up of tariffs in the early 1930s, you know, led by the Smoot Hawley Tariff. Yeah. And the total drying up of global tariff as people tried to do beggar thy neighbor at the same time as you had uh dictators take over country over country in Europe um as and and dictatorships spreading in in East Asia as well. I mean, that was the the the decade of the rise of of fascism uh and the kind of the the you know, the terror the terror of Stalinism in in in the Soviet Union at the same time.”
The Trump administration has not fully thought through the consequences of trade closure: by shutting windows on goods and services trade, it also shuts windows on capital imports and exports, and since the US imports more goods/services than it exports but exports more financial assets (IOUs) than it imports, trade closure will cause capital inflows to the US to cease, leading to capital shortages, higher real interest rates, and financial market disruption.
“I think the Trump administration hasn't thought through entirely is that by shutting the window on goods and service trade, he shuts the window on capital trade, capital imports and exports. And the problem is is it yeah, we import we, you know, we import a lot of uh uh goods and services more than we export, but we also export a lot of pieces of paper that are IOUs more than we import, right? And what that's going to mean is it's going to mean the shutting of the capital inflows into the United States, which is going to reverberate throughout capital markets.”
The dollar has historically been the perfect safe-haven asset because it had the unique property that when global conditions deteriorated, the dollar would appreciate, providing investors both interest income on US Treasuries and currency appreciation—a win-win that no other currency offers; but if the dollar now fails to strengthen during bad news, the US is 'losing the magic' of reserve currency status.
“for decades and decades uh what made the dollar such a perfect safe haven asset was that if anything went terribly wrong with the world, David the dollar would go up, which means that not only is a liquid market and you earn interest, you know, on T-bills wherever you are in the world, right? But, if things really went bad in the world, the value of the dollar went up relative to your currency. That's like a win-win. I mean, no other currency in the world has that property.”
Painless tariffs would require both that Americans be completely indifferent between foreign and domestic products AND that foreign markets desperately need US exports regardless of price—neither condition is met, making tariff pain inevitable.
“if if America were completely ambivalent about, you know, buying foreign products versus buying American products on the one hand, when it comes to imports, and if our exports were absolutely desperately needed by the rest of the world, no matter what the price, then we could have painless tariffs. Do you understand what I mean? Then, of course, uh we wouldn't have any of the price hikes, and we could export our products even with a higher dollar”
The United States practiced first-use nuclear doctrine during the Cold War (1970s-early 1980s) because it feared conventional defeat—if Soviet tanks breached the Fulda Gap and the US lacked conventional troops to block them, the US would use nuclear weapons to stop the invasion, showing that the losing side takes greatest nuclear risk.
“The United States did that. The United States said, you know, we often say that we're not a first use country, but back in the height of the Cold War, back in the 1970s, early 1980s, the US basically said, 'If Soviet tanks came through the Fulda Gap and started invading the West and we did not have the conventional troops on the ground necessarily to block that, we would use nukes to stop, right? We would engage in first use.'”
The side losing a nuclear conflict has more incentive to escalate to first use because people are loss-averse and feel more pain from losses than pleasure from gains, making the losing side most likely to use nuclear weapons out of desperation
“I think the general presumption is, David, it's the side that's being humiliated, that's taking the losses, that's going to take the most risk. People are loss averse. Much more pain from losses than, you know, pleasure from wins.”
The fundamental problem with modernity since the 19th century, as identified by sociologists like Durkheim and Weber, was the loss of community that accompanied urbanization and the transition from Gemeinschaft (community) to Gesellschaft (society).
“one one truth uh about social history and this goes back all the way back to the 19th century with Durkheim and Weber and you know, all of the the great sociologists who sort of founded the study of social science was one of the one of the things they all agreed upon was that the whole problem with modernity was the loss of community. Uh this was in the in in Germany, this was the movement from from you know, Gemeinschaft to Gesellschaft, you know, from community to society”
Authoritarian regimes worldwide are adopting ethnocentric nationalism focused on returning to past greatness (Hungary, Turkey, Iran, Russia), reflecting a global trend away from the rules-based international order and toward patrimonial leadership.
“I kind of I I what do you want to say? Authoritarian regimes which have this ethnocentric focus, right? On getting back to whatever greatness they once had. Um and you know, what could go wrong in a world where that's happening, right? Uh you know, Hungary wants to be greater Hungary. Turkey wants to be greater Turkey. You know, Iran wants to get back to what they once were. I mean, all around the world, right?”
The trend in the Trump administration is toward autarky (self-sufficiency and integrated communities with high walls), with barriers against trade, migration, and immigration, representing repudiation of globalization and return to integrated domestic communities.
“And this is what we're facing in terms of uh the economy, um we we see this trend toward autarky, right? Uh uh repudiation of globalization, getting back to this integrated, you know, community with much higher walls. I mean, everyone's building walls today. We we build walls against immigrants, we build walls against migration, we build walls now against trade.”
There is very little patience around the world for the rules-based international order run by great powers (World Trade Organization, G7, NATO), and this order is being delegitimized in favor of powerful leaders running their own countries; authoritarian regimes with ethnocentric focus are everywhere (Hungary, Turkey, Iran, China all seeking to return to past greatness).
“Meanwhile, uh there seems to be very little patience uh around the world for the uh uh uh uh rules-based international order of the great powers that choose to you know, so-called run the system, right? Whether it's the you know, the the the the World Trade Organization or the the G7 or NATO or these powers coming together. All these are being somehow delegitimized in favor of just powerful people leading their own countries. Um it's a dangerous moment.”
A fourth turning economy is characterized by public-sector control of capital allocation and labor deployment; during WWII, the US government effectively nationalized investment (owning over half of the capital stock of manufacturing corporations by war's end) and productivity soared because production could focus on mass output of certain goods without concern for consumer welfare or customization.
“much of what you can describe in a fourth turning economy is a is an economy which sooner or later is taken over by the public sector. That's that's the element of of mobilization and conflict...we basically nationalized investment during World War II, right? By the end of World War II, the US government uh, owned well over half of of the uh, capital stock of US manufacturing corporations.”
The Fourth Turning psychology develops when young people experience epidemic loneliness, detachment from employment, political systems, and democracy, combined with distrust in democratic institutions, creating breeding ground for mass social psychology seeking community through conflict.
“looking at surveys of young people today. And the epidemic of loneliness and detachment, of feeling as though young people have no they're disconnected from their jobs, their their their political systems. They're distrustful of democracy, they feel they have no voice in it. It's not doing them any good anyway. Yeah. Just does nothing but talk about problems, never solves problems, never really acts on anything. Uh this is the breeding ground for what we call fourth turning psychology”
Closing off trade flows inevitably closes capital flows, and shutting windows on goods/service trade simultaneously shuts windows on capital imports/exports, preventing the US from continuing to finance its deficits through foreign capital inflows.
“by shutting the window on goods and service trade, he shuts the window on capital trade, capital imports and exports. And the problem is is it yeah, we import we, you know, we import a lot of uh uh goods and services more than we export, but we also export a lot of pieces of paper that are IOUs more than we import, right?”
The 80-90 year generational cycle operates because once a crisis creates tight community, that community sense is gradually lost with subsequent generations until no one who remembers the earlier community formation survives; then new populations must recreate community through conflict, restarting the cycle.
“one way of looking at this uh life, you know, this lifelong cycle that I talk about, this you know, 80-90 year cycle is that once you've created a world of tight community after one crisis uh that community is that sense of community is gradually lost with subsequent generations until finally you reach a state where absolutely no one who remembers the earlier formation of community is left alive, right? And then it's up for new nations, new populations, new societies to recreate that community, which moves us back into these periods of conflict, right?”
Young people today report epidemics of loneliness, detachment, and disconnection from jobs and political systems; they distrust democracy and feel they have no voice in it, with the result that democratic institutions do nothing but talk about problems without solving them—this psychological state is the breeding ground for fourth turning mass social psychology, which seeks to recreate community through conflict.
“if you if you we do this all the time uh is looking at surveys of young people today. And the epidemic of loneliness and detachment, of feeling as though young people have no they're disconnected from their jobs, their their their political systems. They're distrustful of democracy, they feel they have no voice in it. It's not doing them any good anyway. Yeah. It just does nothing but talk about problems, never solves problems, never really acts on anything. Uh this is the breeding ground for what we call fourth turning psychology, mass social psychology, which is movement back to a community and happens through conflict.”
Global shift toward cultural conservatism is visible not just in the US: UK PM Keir Starmer reversed his position on whether trans women are men (now says they are), Pew Research shows the share of Americans identifying as Christian has stopped declining and begun rebounding from pandemic lows to 2018-2019 levels, with growth led by young people, suggesting a genuine generational shift toward cultural conservatism.
“I just note that uh Prime Minister Keir Starmer came out and suddenly said he changed his opinion on whether uh uh uh trans women were really men. He changed his mind and he was saying they are really uh men after all, right? Now, this is in UK. This is the leader of the progressive party in the United Kingdom, right?”
Generational cycles produce four basic types of generations with a pattern of civic moments roughly one lifetime apart, and this pattern can be extended globally, not just to American history.
“it's it's as we alluded to earlier, it's the changing of generational experience um in the the model that I I lay out, there there are four basic types of generations um and we have a pattern in American history um and and I think increasingly global history of having these huge civic moments about the length of one lifetime apart when everyone who recalls the earlier moment passes away, right?”
Civic moments are typically moments of conflict where society reshapes politics, economy, infrastructure, and the public world, interspersed with great awakenings that reshape the inner world, creating yin-yang oscillation throughout history.
“It's a moment typically of conflict where we reshape politics, the economy, infrastructure, the public world, right? And roughly halfway in between those, we have the great awakenings of American history um and these are the um you know, we number them uh among historians, we call them the first great awakening, the second great awakening, and so on. The most recent period was the 1960s, early '70s when we reshaped the inner world. And this this uh yin and yang oscillation between moments of reshaping inner world and outer world has been a huge pattern in American history going back.”
India-Pakistan nuclear conflict risk is elevated not because of tariffs (since neither country trades heavily) but because both are nuclear powers and any military escalation between them carries catastrophic risk regardless of trade dynamics.
“I I don't think tariffs really play a role much in in Iran-Pakistan Iran Excuse me, India-Pakistan as a conflict. Uh India doesn't trade that much as a share of its GDP. And Pakistan's trade is managed. I think they they do for a minute. Uh you know, I Neither is a Neither country is a trading dynamo. Let's put it that way. Uh but the reason we should be worried is that these are nuclear powers. I think full stop.”
US net national savings rate is near zero and the country runs enormous deficits dependent on foreign borrowing, which Trump's new budget resolution proposes to expand rather than close, creating perfect conditions for capital shortage and price inflation from tariffs simultaneously.
“The United States is critically dependent on borrowing from abroad to uh to fund investment and fund its very high deficit levels. We are a nation that doesn't save very much. Our net national savings rate is close to zero, right? We run these enormous deficits. And and oddly enough, um rather than close the deficit uh in its new budget resolution with the reconciliation that's going to go with it, you know, through the Senate uh to to get around the filibuster rule, uh Trump wants to expand the deficit, right?”
Companies that import or export heavily will underperform under tariff regime, while import-substituting companies (producing domestically what the US previously imported) will outperform, particularly in materials and manufacturing where US runs large deficits.
“you get you get out of any firm that's uh that uh that uh that trades a lot, right? That exports or imports a lot. more on countries where companies that produce domestically. Yes, these are companies which are called uh import substitutors. Okay. So, in other words, any company that that produces something where the United States is running a big deficit, they gain, right?”
Most countries globally are price-takers in goods markets, with only rare exceptions (specialized chip manufacturers, Denmark's Novo Nordisk with Wegovy) possessing pricing power, meaning generalized tariffs harm most countries' export competitiveness similarly.
“I think if you're looking at the total economy around the world, uh it's it's very hard to find one country. Uh you know, maybe Denmark with Novo Nordisk, right? Making Wegovy. May- maybe they're a price maybe they're a whole country that's a price maker. Maybe that's a good example of that. But I'm just saying in general, in the market for goods, uh uh uh uh most goods from most countries are are price takers.”
US net investment position relative to the world is negative 100% of GDP, meaning the rest of the world is net creditor to the US, creating long-term fear that absent future US surpluses, foreign creditors will never recover the value they've lent.
“America has, I think, its net investment position to the rest of the world is something like negative 100% of GDP, something like that, right? In other words, uh the the rest of the world owes us rather relative to what we owe the rest of the world.”
China is furious about US installation of mobile land-based missiles on Philippine islands near Taiwan because mobile sites that can move around are China's worst nightmare compared to hardened fixed sites in Guam whose locations are known.
“This is the US which is installing these mobile launchers, which China is furious about, right? This is China's worst nightmare, right? That you're going to have these mobile missiles. It's not It's not like these hardened sites in Guam where they know where they are. Yeah. will be mobile sites that can move around.”
The American High (post-WWII period) was a good time for both markets and standard of living growth; the late 1980s-1990s-early 2000s were good times for standard of living growth, though not for inequality reduction.
“You know, the the American high was a pretty good news for both markets and the economy economic growth, particularly standard of living growth. And the late 1980s, 1990s, early '00s was a pretty good time uh, for standard of living growth, although not not so good for inequality. Uh, there there is a shape to the economy that corresponds with these four seasons, David.”
Ukraine once possessed nuclear weapons at the breakup of the Soviet Union but gave them up in exchange for an international agreement that no one would violate its borders, but this agreement was violated by Russia, meaning Ukraine would be in a fundamentally different strategic position today had it retained nuclear weapons.
“Where would Ukraine be today, David, if Ukraine had nuclear weapons? As it once did, by the way, at the breakup of the Soviet Union. Ukraine gave them up for an agreement that no one would ever, you know, in no one would ever violate its borders. Russia, United States, Europe, um, didn't do it any good.”
Defense stocks have been bullish for the past 3 years and will continue to benefit from fourth turning mobilization and increased defense spending as the US rearmsfor conflict and cannot borrow from abroad to fund deficits.
“How do you feel about defense stocks? because we can't borrow. We can't borrow from the rest of the world anymore and because we have all these public needs which we'll have to pay for. Speaking of uh rearming, how do you feel about defense stocks? Um I've been pretty bullish on them and they've done very well uh over the past 3 years.”
The US net national savings rate is close to zero, meaning the US does not save domestically and therefore is critically dependent on borrowing from abroad to fund both investment and its enormous deficits.
“Our net national savings rate is close to zero, right? We run these enormous deficits.”
Nuclear weapons provide deterrence and protection for nations: Kim Jong-un in North Korea is secure because he has nuclear weapons and no one dares bother him, whereas Muammar Gaddafi agreed to disarm his nuclear weapons and was killed, and Ukraine, which once had nuclear weapons after Soviet dissolution but gave them up in exchange for a border guarantee, is now being invaded by Russia because it lacks that deterrent.
“Kim Jong-un in North Korea is doing very well and no one dare to bother him versus someone like Muammar Gaddafi, right? Who agreed to get rid of his nuclear weapons and he ended up shot dead in a ditch, right?”
Few companies can absorb tariff costs without raising prices or losing margin because painless tariffs would require that: (1) Americans are completely indifferent between foreign and domestic products, and (2) US exports are desperately needed by the rest of the world regardless of price, neither of which is true; most US exports are price-sensitive commodities or commodity-like goods where the US is a price taker, not a price maker.
“look, if if America were completely ambivalent about, you know, buying foreign products versus buying American products on the one hand, when it comes to imports, and if our exports were absolutely desperately needed by the rest of the world, no matter what the price, then we could have painless tariffs. Do you understand what I mean? Then, of course, uh we wouldn't have any of the price hikes, and we could export our products even with a higher dollar, right?”
Ukraine would be in a fundamentally different position today if it had retained the nuclear weapons it possessed at the breakup of the Soviet Union rather than giving them up in exchange for a security agreement that was subsequently violated by Russia, the United States, and Europe.
“Where would Ukraine be today, David, if Ukraine had nuclear weapons? As it once did, by the way, at the breakup of the Soviet Union. Ukraine gave them up for an agreement that no one would ever, you know, in no one would ever violate its borders. Russia, United States, Europe, um, didn't do it any good.”
Even Trump supporters who agree with his policy goals (immigration restrictions, trade protections, tough stance on Europe) are concerned whether constitutional rule of law will survive his presidency, creating a regime question about whether patrimonial one-person rule will displace the Constitution.
“And I think the the big problem that people see even people who voted for Trump is will the rules-based Republican order as enshrined by the Constitution survive? And these are people, by the way, who completely agree with Trump when it comes to, you know, kicking out immigrants or uh reducing the level of global trade uh or, you know, getting tough with Europe.”
The dollar's historic advantage as a reserve currency was that during global crises, the dollar strengthened while other currencies fell, providing a double benefit to dollar-holders (liquidity plus appreciation); if the dollar fails to strengthen during crises, it is 'losing the magic' that made it the world's preferred reserve asset.
“what made the dollar such a perfect safe haven asset was that if anything went terribly wrong with the world, David the dollar would go up, which means that not only is a liquid market and you earn interest, you know, on T-bills wherever you are in the world, right? But, if things really went bad in the world, the value of the dollar went up relative to your currency. That's like a win-win. I mean, no other currency in the world has that property...when the dollar doesn't go up on bad news, what does that imply? Uh that implies that we're losing the magic.”
The host (David) challenges the claim that Ukraine with nuclear weapons would have prevented Russian invasion, arguing that mutually assured destruction (MAD) logic doesn't prevent invasion if both sides possess nukes—the side losing conventionally has the most incentive to use them first, creating a stalemate rather than prevention.
“Even if Ukraine possessed nuclear weapons today, how would that change the calculus of Russia invading? I mean, it's not like Ukraine would nuke Russia, nuke Russia would just nuke them back. The threat of mutually assured destruction goes both ways. It's generally agreed upon that in a nuclear standoff the country that's getting beaten, that is to say the country that is that is negatively being affected by a change in the status quo, is at the most risk of launching its nukes simply out of desperation, right?”
The side that is losing a nuclear standoff—the country being humiliated and taking losses—is most likely to use nuclear weapons out of desperation, making the losing side the greatest nuclear risk, not the winning side.
“I think the general presumption is, David, it's the side that's being humiliated, that's taking the losses, that's going to take the most risk. People are loss averse. Much more pain from losses than, you know, pleasure from wins.”
The American High (post-WWII era) was good for both markets and economy, particularly for standard of living growth; the late 1980s, 1990s, and early 2000s were good for standard of living growth though not for inequality; there is a clear correspondence between generational cycles and economic/standard of living outcomes.
“the American high was a pretty good news for both markets and the economy economic growth, particularly standard of living growth. And the late 1980s, 1990s, early '00s was a pretty good time uh, for standard of living growth, although not not so good for inequality.”
Franklin Delano Roosevelt disagreed with isolationism and sought to pull America out of it, with the critical turning point in American opinion being June 1940 with the fall of France
“Now, as you know, Franklin Delano Roosevelt disagreed, right? He He always wanted to urge America out of its isolationism. America at that time was strongly isolationist. And I think that the the policy of leave the the world alone was something that most Americans wanted. But then there arose a moment, David, and that's when suddenly American opinion shifted. And I believe that moment was June of 1940 with the fall of France.”
We may be entering a multipolar currency world where the dollar is no longer the default currency for global trade, with alternative currencies like the renminbi, euro, or yen becoming viable alternatives
“Do you think we're entering a multipolar world for um for currency reserves, meaning the dollar will no longer be the de facto currency of of trade, and we're going to see others pop up like the renminbi or euro or yen. I'm just naming things off the top of my head. Is that what's happening?”
If the US chooses to abandon NATO in response to Baltic state attacks, this would represent a fundamental dissolution of the postwar alliance system, triggering European rearmament and a shift toward a multipolar European defense architecture independent of US protection.
“So, so there is a chance now that the US could abandon NATO. If put to the test like that, they may just say, 'You know, why should we get into a war like that?' And look, this would be this would be a sequela. Look, this would be after the Ukraine thing were over”
Bill Strauss and Neil Howe laid out the Fourth Turning framework in 1997, predicting that the 2020s would be the decade of crisis, a forecast they have watched materialize.
“keep in mind that Bill and I uh Bill Strauss and I laid this out in 1997, long before we were here. We said night the 2020s would be the decade, right? We were kind of counting forward. Um and now we're here.”
The America First Committee in 1938-1939 advocated for allowing autocrats their sphere of influence rather than US intervention, but FDR disagreed and American opinion shifted sharply after the fall of France in June 1940, suggesting Trump might similarly shift if confronted with major geopolitical crisis.
“what the leaders of the America First Committee back in 1938, 1939 saw as maybe what America's policy would should be, right? Which is to let autocrats have their sphere of influence. Why should we get involved? Now, as you know, Franklin Delano Roosevelt disagreed, right? He He always wanted to urge America out of its isolationism. And I think that the the policy of leave the the world alone was something that most Americans wanted. But then there arose a moment, David, and that's when suddenly American opinion shifted. And I believe that moment was June of 1940 with the fall of France.”
The Fourth Turning era is characterized by internecine conflict within the United States (red zone vs blue zone), with Trump treating political opponents as enemies and prioritizing tribal victory over constitutional rule of law, creating a slow-motion constitutional crisis.
“In the United States it's happening partly through internecine conflict within the United States, red zone versus blue zone, right? Uh Trump is dealing with his political enemies in the United States as enemies. You know what I mean? Yeah. Uh you can break any rules uh as long as you uh as long as you make sure that your tribe wins, right?”
High-level members of the Iranian Revolutionary Guard have indicated that if Iran had nuclear weapons, the United States would not be making demands on Iran—demonstrating that the world has learned that nuclear weapons provide protection.
“Uh, I think a lot of people are wondering whether there's going to be some sort of surprise. As some of the high-level members of the Revolutionary Guard have basically said comments to the effect that if if Iran had a nuclear weapon as we all know, uh, the United States wouldn't be making these demands, right? I mean, I think that's that's one lesson that the world has learned”
UK Prime Minister Keir Starmer reversed his position on whether trans women are men, now publicly stating they are men, suggesting a global trend of conservative cultural positions displacing progressive policies.
“Prime Minister Keir Starmer came out and suddenly said he changed his opinion on whether uh uh uh trans women were really men. He changed his mind and he was saying they are really uh men after all, right? Now, this is in UK. This is the leader of the progressive party in the United Kingdom, right?”
Dollar decline from overvaluation is technically a correction, but danger exists if it overshoots and dollar continues falling beyond fundamental fair value, potentially creating sustained currency weakness.
“the dollar is much higher than it used to be. Terms of trade have improved, the real value of the dollar has improved. So, to some extent, it's just correcting for the for the overvaluation it was. But, there is a danger of it if it keeps going down.”
During WWII mobilization, productivity soared because the government focused on mass-producing certain things without needing to worry about consumer welfare or customization, showing that when you don't have to optimize for consumer preference, productivity goes through the roof.
“What happened to productivity during this time? What happened to earnings? Oh, productivity soared because of course we we had these certain mass produced things we wanted to build and we produced a zillion of them, right? Uh, when you don't have to worry about consumer welfare or consumer customization, our productivity goes through the roof.”
For the first time, Japan is joining in the Philippines-US military exercises, indicating expanded regional military coordination against China in response to escalating Western Pacific tensions.
“Um uh and for the first time Japan is joining in these exercises. Um uh so again, David, I think your estimate is is correct. We see around the world these new um uh uh uh I kind of I I what do you want to say? Authoritarian regimes which have this ethnocentric focus, right?”
Pew Research shows that the share of Americans declaring themselves Christian, which had been declining for 3-4 decades to a nadir in early pandemic, is now rebounding to 2018-2019 levels, with the rebound led by young people, potentially signaling a generational conservative cultural shift.
“there's also news that came out from the Pew Research recently. I don't know if you saw this, but apparently the share of Americans who who declare themselves as Christian, which reached its nadir, you know, it's been falling now for about three or four decades, it reached its nadir back early in the pandemic, is actually rebounding now. It's about as it was back in 2019, 2018. This is the first time that's happened in several decades. Uh a lot of it is led by young people.”
Global capital is flowing out of US equities into domestic companies in other countries (Japan, South Korea, etc.) rather than into other currency reserve assets, indicating a selective withdrawal from US markets rather than a shift to alternative reserve currencies; this is consistent with the dollar's overvaluation correcting toward equilibrium.
“I would say, you know, the the decline we've seen so far is just basically people getting out of uh you know, uh private sector people not not necessarily government people just getting out of uh uh US equities. I think there was a huge movement into US equities in around the world. We're we're seeing We're seeing uh laying off that or some withdrawal from that. Where is that capital going? Uh into domestic companies. You know, if you're Jap- Japan's going into Jap- Japanese companies, South Korea, South South Korean companies. Uh maybe into each other's companies, but it's just not no longer in American guy.”
The Swiss franc has appreciated by ~15% and is now a safe haven alternative alongside US Treasuries, as investors from other countries seek Swiss assets in anticipation of US decline; this is evidence of diversification away from dollar-only reserves.
“if you're in another country, looking for other countries, do you look at the uh Swiss franc? It's up like 15%. I don't know you can call it up on your screen. It's it's amazing. So, we see these other opportunistic currencies going up.”
The Dollar Index (DXY) is at a 3-year low (same level as 2022), suggesting the dollar is weakening despite normal expectations that weakening economics would strengthen dollar inflows
“You mentioned the dollar floating downwards and the interest rate the 10-year yield going up. Here's a chart of the DXY. It's at a 3-year low. Last time we saw this level was at was in 2022.”
Prepping and survival preparation is increasingly mainstream, with survival buckets sold at Costco and people stashing cash and preparing homes
“We do see this um the sort of spread of prepping, you know, down to the level you can go into Costco and buy these survival buckets. I mean, you know, it's it's it's it's everywhere, right? People stashing cash, people thinking about what to do with you know, when their own homes.”
Recent anomalous market behavior—dollar falling and interest rates rising simultaneously during anticipated recession—is alarming because historically recession causes dollar appreciation and long-term treasury yields to fall, indicating capital is flowing away from the US rather than flowing in.
“Typically, when that happens and you have a the VIX is much higher, you have a lot more volatility in capital markets, particularly in the downside. Typically, when that happens, David, the dollar goes up and long-term treasuries go down, right? That's what happens. All the money in around the world flows into the US. It's going the opposite way this time.”
The constitutional crisis in the US is beginning to emerge through contempt proceedings in district courts, and in a few months it will become obvious in major Supreme Court cases involving Trump administration violations of constitutional guidelines, including the Enemy Aliens Act, impoundment of funds, and violation of the Administrative Procedure Act.
“That is, I think, a slow-motion crisis we're beginning to see a little bit in these uh uh contempt proceedings in a couple of uh district courts that are starting, but I think a few months from now it's going to become obvious in all the huge cases that are going to come before the Supreme Court on all the ways that the Trump administration is breaking uh uh constitutional guidelines, right? Whether it's the Enemy Aliens Act or when it's come to the impoundment of funds or whether, you know, violating the administration's procedure act.”
The 1970s were a terrible time for capital markets, exemplifying how Fourth Turning/Second Turning periods are bad for financial returns.
“the times that are hardest for for for capital markets are the fourth turnings and the second turnings, the awakenings. I mean, the 1970s was a terrible time for markets, as you know.”
India and Pakistan are both nuclear powers, and India-Pakistan escalation should be a concern specifically because nuclear weapons are involved, regardless of tariffs; this is the primary reason to worry about the conflict.
“Uh I don't think tariffs really play a role much in in Iran-Pakistan Iran Excuse me, India-Pakistan as a conflict. Uh India doesn't trade that much as a share of its GDP. And Pakistan's trade is managed. I think they they do for a minute. Uh you know, I Neither is a Neither country is a trading dynamo. Let's put it that way. Uh but the reason we should be worried is that these are nuclear powers. I think full stop.”
Putin's ultimate strategic objectives extend beyond Ukraine to include the Baltic republics and NATO withdrawal from Eastern Europe, with Putin fundamentally reshaping his regime's identity around anti-Western, anti-NATO ideology and likely harboring further territorial ambitions.
“I think Putin has reshaped i- the very identity of his regime now as being an anti-Western, anti-NATO regime determined to rid uh the the the taking of Ukraine as he sees it. He's going to push uh the West out of Ukraine and and and he probably has further ambitions, too. I think starting with the Nordic uh the the Baltic the Baltic Republics.”
Trump was prescient in recognizing 8-9 years ago (circa 2016-2017) where the world was heading in terms of repudiation of globalization, rise of nationalism, and cultural conservatism, which the mainstream political class failed to anticipate.
“I think Trump was very prescient, I think of all American leaders, um you know, 8 9 years ago. Yeah. He's the only one who really saw where the world was going. Um in terms of uh you know, not for everything from globalization, the repudiation of globalization to this increased nationalism focus.”
New Trump economy will increase national savings rates as Americans consume less and save more, with capital redirected to defense, hardening critical infrastructure, and rearmament rather than personal consumption.
“I do think that one aspect of this new Trump economy is going to be um higher national savings rate. I think Americans will be saving more, they'll be consuming less. Um and they'll be uh the I think ultimately will be we'll be rearming. Uh we'll be doing more in in things like hardening installations, doing more infrastructure, all of the rest of it. We'll certainly be spending less on personal consumption.”
Fourth turning and second turning (awakenings) are both bad news for capital markets, while first turning and third turning are good news, reflecting the K-wave economic cycle correspondence with generational cycles.
“the times that are hardest for for for capital markets are the fourth turnings and the second turnings, the awakenings. I mean, the 1970s was a terrible time for markets, as you know. Yes. Uh but basically uh, the rule is basically second turnings and fourth turnings are are bad news. Uh, first turnings and third turnings are really good news.”
The question of whether NATO will respond to Russian aggression against Baltic states hinges on whether the US will help; the famous historical question 'Who will die for Gdansk?' illustrates that alliance commitments are only binding if the hegemon will enforce them.
“Some of them are part of NATO though. I think that's the Yes, they are, but the question is is NATO going to respond, right? Uh who's going to die for Gdansk? You remember that famous uh Is NATO going to go that famous headline in in 1939? I mean, who's going to die for some little town in Poland, right? So, that's that's really the question.”
Trade wars and tariff escalation in the 2020s parallel the 1930s pattern of Smoot-Hawley tariffs leading to global trade collapse, simultaneous authoritarian regime consolidation, and fascist/Stalinist expansion, creating conditions for major conflict.
“I think I think it always does uh Here's where the analogy of the 1930s works perfectly, right? Uh we had the the huge ramping up of tariffs in the early 1930s, you know, led by the Smoot Hawley Tariff. Yeah. And the total drying up of global tariff as people tried to do beggar thy neighbor at the same time as you had uh dictators take over country over country in Europe um as and and dictatorships spreading in in East Asia as well.”
Fourth turning economy is fundamentally characterized by public sector dominance, where capital and labor are steered toward public priorities rather than private market allocation, with example being WWII where US government owned over half of manufacturing capital stock by war's end.
“much of what you can describe in a fourth turning economy is a is an economy which sooner or later is taken over by the public sector. That's that's the element of of mobilization and conflict. are you talking about nationalization of companies? No, you don't have to nationalize them, you just have to steer capital and and steer workers and so on labor where it should go.”
Fourth turnings are typically moments of conflict where politics, the economy, infrastructure, and the public world are reshaped; roughly halfway between these civic moments occur Great Awakenings that reshape the inner world; this yin-yang oscillation between outer-world and inner-world reshaping has been the pattern of American history.
“we have a pattern in American history um and and I think increasingly global history of having these huge civic moments about the length of one lifetime apart when everyone who recalls the earlier moment passes away, right? Uh that we have another one of these great civic reshaping moments, constitutional moments. It's a moment typically of conflict where we reshape politics, the economy, infrastructure, the public world, right? And roughly halfway in between those, we have the great awakenings of American history um and these are the um you know, we number them uh among historians, we call them the first great awakening, the second great awakening, and so on.”
The post-WWII nuclear peace was generally deemed to favor the status quo because it created incentives for the losing side to use nuclear weapons, making the system inherently unstable for powers seeking to change the existing order.
“the nuclear peace after World War II was generally deemed to be a peace that favored the status quo, right? Because it meant that whoever's losing would be most likely to use them.”
Trump has threatened to bomb Iran in two months (the 2-month deadline he gave) if a nuclear deal is not met, though it's unclear how serious this threat is.
“you mentioned the 2-month deadline that Trump has given Iran. So, Yes. Yeah, that was a big one. He he threatened to bomb Iran a couple weeks ago if a nuclear deal weren't uh met, but I I don't know how serious that threat is.”
Trump demonstrates unparalleled focus and energy in pursuing his stated goals through relentless executive action, far exceeding the political energy of Democratic opposition, showing determination to fundamentally transform America and reshape geopolitics.
“and he's also shown unparalleled focus and energy at pursuing his goals, right? And this is something where I think that the Democrats are left panting, you know, uh way behind him. It's like he's he's at it, you know what I mean? Every day he's Mhm. he's throwing out more executive orders.”
Investors are increasingly buying precious metals, particularly gold, as alternative to dollar reserves, indicating loss of confidence in dollar as universal reserve asset.
“I think also people are investing increasingly in other precious metals, particularly gold, rather than the dollar.”
Prepping culture is now mainstream, visible in Costco selling survival buckets and widespread stashing of cash, reflecting public recognition of Fourth Turning risk, though Howe criticizes much prepper culture as impractical and disconnected from how normal people live.
“We do see this um the sort of spread of prepping, you know, down to the level you can go into Costco and buy these survival buckets. I mean, you know, it's it's it's it's everywhere, right? People stashing cash, people thinking about what to do with you know, when their own homes.”
The S&P 500 was overvalued before the recent decline due to passive indexing and other forces pushing it up to extreme valuation ratios (S&P market cap to GDP, Shiller PE), so much of the recent drop is just correction from overvaluation rather than new fundamental deterioration.
“I think it was overvalued anyway, so I think it was it was due to come down, you know, regardless. I think we've seen, you know, passive indexing and a lot of other forces just push it way up. And I think I think actually it was getting so extreme that that's why the rest of the world was basically joining in on it. I think it was it to some extent a bubble, right? Very high valuation ratios. For instance, you know, S&P market cap as a share of GDP, you know, some of those measures uh uh Shiller's PE, um a variety of these indexes just show that that the the S&P was very much overvalued.”
Trump is unlikely to successfully broker a peace deal between Russia and Ukraine within his term because Putin has fundamentally reshaped his regime identity around anti-Western expansion, making settlement inconsistent with his domestic political legitimacy.
“I think it may come to an end in the next four years. I just don't think Trump's deal is going to do it, right? That's all I'm saying. I'm just saying, 'Look, I think Putin has reshaped i- the very identity of his regime now as being an anti-Western, anti-NATO regime determined to rid uh the the the taking of Ukraine”
The decline in dollar valuation seen so far is primarily driven by private sector capital withdrawal from US equities into domestic equities globally, not government-level currency moves, indicating rational investor reallocation from overvalued US markets.
“I would say, you know, the the decline we've seen so far is just basically people getting out of uh you know, uh private sector people not not necessarily government people just getting out of uh uh US equities. I think there was a huge movement into US equities in around the world. We're we're seeing We're seeing uh laying off that or some withdrawal from that.”
The 1960s-early 1970s great awakening reshaped the inner world (consciousness, values, identity), representing the most recent period of inner-world reshaping before the current fourth turning's outer-world reshaping.
“The most recent period was the 1960s, early '70s when we reshaped the inner world.”
Investors should exit firms that trade heavily (export or import heavily) and instead invest in companies that produce domestically—called 'import substitutors'—which gain from tariff regimes because they face less foreign competition for goods in which the US runs large trade deficits.
“you get out of any firm that's uh that uh that uh that trades a lot, right? That exports or imports a lot. more on countries where companies that produce domestically. Yes, these are companies which are called uh import substitutors. Okay. So, in other words, any company that that produces something where the United States is running a big deficit, they gain, right?”
NATO dissolution (or de facto non-response to Russian invasion of members) would mean European military buildup, defense spending increases, and a post-US defense environment where European countries realize they must prepare for their own security without American backing.
“Well, I think we're already beginning to see it. You have several leaders of of Western European countries basically announced that we're on our own now. A huge ramping up of defense spending in Europe. And obviously led by Germany now under the the new Chancellor. I think it's a new game. All around in Europe people are beginning to say we have to prepare for a post US defense environment.”
The central question of the fourth turning is whether conflict will be within a nation or between nations, and this determines whether internal civil conflict or international war dominates the crisis period.
“So, you have this possibility of conflict within the United States, but meanwhile we have the possibility of conflict around the world, right? Between great powers or between great powers and somewhat lesser powers. I don't know, Pakistan and India is an interesting case, I guess. Neither one is we call a great power, but that would be they're both nuclear powers, right? So, that's reason for us to be worried. Um so, this is this is, as I described in the fore turning, a very interesting moment that time and time and again we meet, and that is is the conflict going to be within a nation or is it going to be between nations?”
During crises like COVID, families experienced separation pressures (seniors in nursing homes needing to be picked up), illustrating why family proximity planning is critical in Fourth Turning for ensuring family protection during rapid-onset crises.
“This happened even during COVID, right? You had seniors who were in nursing homes and they had to be picked up and so on. Things happen fast in a fourth turning and things can happen unexpectedly.”
The S&P 500 was overvalued before the recent selloff based on multiple metrics (market cap as share of GDP, Shiller PE ratios), so much of the current decline is simply correcting from overvaluation rather than fundamental deterioration, and the question is whether it will fall further beyond this correction to become undervalued.
“I think it was overvalued anyway, so I think it was it was due to come down, you know, regardless. I think we've seen, you know, passive indexing and a lot of other forces just push it way up. And I think I think actually it was getting so extreme that that's why the rest of the world was basically joining in on it. I think it was it to some extent a bubble, right? Very high valuation ratios. For instance, you know, S&P market cap as a share of GDP, you know, some of those measures uh uh Shiller's PE, um a variety of these indexes just show that that the the S&P was very much overvalued.”
Global tensions are intensifying with escalations in multiple regions: Kashmir (India-Pakistan), Gaza, Ukraine-Russia conflicts, and Philippines-US war exercises near Taiwan testing mobile land-based missiles.
“Global tensions continue to intensify. Just this week, the rivalry between India and Pakistan has escalated to new levels uh on the region of Kashmir. Elsewhere, the uh region of Gaza continues to see conflict. Ukraine-Russia, nowhere near a peace deal yet. In fact, missiles were just sent to Kiev uh just this week.”
Trump posted on Truth Social criticizing Russian strikes on Kyiv and calling for a peace deal, stating '5,000 soldiers a week are dying. Let's get the peace deal done.'
“This is what Trump posted on Truth Social uh just yesterday. I am not happy with the Russian strikes on Kyiv. So like I mentioned earlier uh Russia sent missiles to uh or fired missiles to Kyiv. Not necessary and very bad timing. Vladimir, stop. 5,000 soldiers a week are dying. Let's get the peace deal done.”
Putin has publicly stated willingness to accept current battle lines as a peace settlement and agreed not to advance westward beyond currently held territory.
“And then now we have this. What's going on? I think it's bait and switch. Uh I think Putin is brilliant at the diplomacy end of this. I think he you know, frankly, I think Putin sort of has Trump around his finger a little bit because he gave up something without saying anything about what he would agree with to go along with that, right? He said, 'Yes, I'll let these current battle lines just stand, right, as part of a settlement.'”
Foreign creditors face the question: if the US closes trade and never runs surpluses, how will they ever recover their invested value?—analogous to investors in Amazon who would abandon it if it announced never paying dividends or doing buybacks, implying the value is forever trapped.
“So, the rest of the world is thinking, 'If they're closing off all their goods and trade exports, how will we ever going to get that value back, right?' Meaning that the only way that America can ever pay this back is someday America's going to have to run a surplus with the rest of the world. Do you know what I mean? But if America never again runs a surplus, how is it ever going to get the value back? It's a little bit like if Amazon, you remember all those years it wasn't paying any dividends? Right. And and people invested in anyway cuz I thought, 'Oh, it's retained earnings. There'll be a There'll be dividends someday, right?'”
The post-WWII nuclear peace favored the status quo because it made the losing side most likely to use nuclear weapons, creating a deterrent against major power wars that would alter territorial distributions.
“I think that's that's one of the reasons, by the way, why the nuclear peace after World War II was generally deemed to be a peace that favored the status quo, right? Because it meant that whoever's losing would be most likely to use them.”
In the fourth turning, things happen fast and unexpectedly, making family proximity critical for protection and care, as occurred during COVID with seniors in nursing homes
“What if you're scattered around and what if there's a real crisis, right? Where is your family going to get to where you are? How are you going to take care of them? How are you going to protect them? This happened even during COVID, right? You had seniors who were in nursing homes and they had to be picked up and so on. Things happen fast in a fourth turning and things can happen unexpectedly.”
Trump achieves what Americans have long wanted by forcing Europe to spend more on defense through threat of withdrawal, which is paradoxically brilliant because he accomplishes a goal everyone agreed on (European rearmament) by using fear of abandonment as leverage; systems don't create change, but incentives (threats) do.
“In in in Europe there's a sense of remobilization. Um Now it's interesting because of course Americans, not just Trump, Americans on all sides have been saying for a long time that Europe ought to be spending more. So in some weird way, David, you can say well Trump is brilliant, right? He actually did what all the Americans, you know, the rest of the world have been saying for a long time. Why doesn't Europe spend more on their own defense?”
The rebound in Christian identification may be partly political rather than reflecting actual religious practice, with many young people identifying as non-denominational Christian
“A lot of it is led by young people. Uh and it may be partly political, you know, part of the poli- politics of the conservative brand is saying you're Christian. So, Yeah. I don't know if this is associated with Christian practice. A lot of these people seem to be non-denominational. Uh but it's very interesting because we see the change in direction in the youngest cohort, right?”
Practical Fourth Turning preparation focuses on family proximity, employment stability, wealth management, and home security rather than Sylvester Stallone-style wilderness survival fantasy, emphasizing actionable steps normal people can take.
“Unfortunately, too much of the prepper stuff is sort of Sylvester Stallone in the jungle for 3 weeks, you know what I mean? Uh it's it's not practical. It doesn't speak to us where we are and how we actually live. And so that's Maybe some people maybe some people want to live like that. Who am I to judge? Well, yeah, but this is for everyone else.”
The Trump administration's trend toward autarky (self-sufficiency, trade closure) represents a shift away from globalization with 'much higher walls' on immigrants, migration, and trade; this is consistent with the pattern observed historically where the third-to-fourth turning transition involves repudiation of globalization and movement toward integrated communities.
“we we see this trend toward autarky, right? Uh uh repudiation of globalization, getting back to this integrated, you know, community with much higher walls. I mean, everyone's building walls today. We we build walls against immigrants, we build walls against migration, we build walls now against trade.”
The Philippines and the US are conducting war exercises with mobile land-based missile launchers near the Luzon Strait between Philippines and Taiwan, which is the first time Japan has joined these exercises, and which China views as a direct threat because mobile missiles (unlike hardened Guam sites) cannot be targeted preemptively.
“the Philippines and the US are currently having their big um uh war exercises uh right there uh right up at the Luzon Strait between the Philippines and Taiwan. Uh and they're actually testing out their mobile land-based uh missiles uh on those islands. Uh this is the US which is installing these mobile launchers, which China is furious about, right? This is China's worst nightmare, right? That you're going to have these mobile missiles. It's not It's not like these hardened sites in Guam where they know where they are. Yeah. will be mobile sites that can move around. Um uh and for the first time Japan is joining in these exercises.”
Trump's apparent threat to withdraw from NATO is actually strategically brilliant because it incentivizes Europe to increase defense spending, which Americans have long urged but Europe only achieves when facing the threat of abandonment.
“It just shows you that that you often don't act until you get the fear of God. You know, you you start staring into the abyss, right? And that's what Europe is doing and that's why they're spending more. I think Trump very well understands that that systems don't get things done. Um uh incentives get things done”
Putin made a bait-and-switch move by publicly offering to freeze battle lines in Ukraine without specifying his demands in return, deliberately putting Zelenskyy in a weak negotiating position while leaving room for Putin to demand major concessions like NATO withdrawal from Eastern Europe.
“I think it's bait and switch. Uh I think Putin is brilliant at the diplomacy end of this. I think he you know, frankly, I think Putin sort of has Trump around his finger a little bit because he gave up something without saying anything about what he would agree with to go along with that, right?”
Zelenskyy made a diplomatic error by refusing to accept Putin's offer to maintain current battle lines; instead, Zelenskyy should have counter-proposed that he would accept territorial concessions only if Putin simultaneously made a similar ceremonial concession, knowing Putin would refuse due to the loss of face, thereby strengthening Zelenskyy's position.
“He basically said, 'We we would never agree to to abandon Ukraine.' Which is probably his weakest position. I think what Zelenskyy should have said is, 'Yeah, sure, we'll do that. We'll have a big uh constitutional ceremony and and and get rid of our, you know, possession of Ukraine and and these portions of these uh the these these four uh um you know, oblasts, you know, the the these these eastern oblasts. When Putin actually has a similar ceremony in Moscow giving up, right, his ownership. Of course, Putin would never do that. I mean, the loss of face would be crushing for him, right? But, in other words, Zelenskyy could have been smarter.”
NATO has some possibility of not responding to Russian invasion of Baltic states even though they are NATO members, because the question 'Who is going to die for Gdansk?' raises whether NATO will actually fight for small Eastern European territories, particularly if the US does not commit to defense; this is a critical open question for NATO credibility.
“Some of them are part of NATO though. I think that's the Yes, they are, but the question is is NATO going to respond, right? Uh who's going to die for Gdansk? You remember that famous uh Is NATO going to go that famous headline in in 1939? I mean, who's going to die for some little town in Poland, right? So, that's that's really the question.”
Putin uses a 'bait and switch' negotiation strategy: he offers concessions (like accepting current battle lines in Ukraine) without specifying what he demands in return, allowing him to later demand much larger prizes (like NATO withdrawal from Russian borders, Ukrainian demilitarization, and no NATO troops in Ukraine) while keeping Trump off-balance.
“I think it's bait and switch. Uh I think Putin is brilliant at the diplomacy end of this. I think he you know, frankly, I think Putin sort of has Trump around his finger a little bit because he gave up something without saying anything about what he would agree with to go along with that, right?”
Iran is attempting to stall Trump's nuclear demands by hiding uranium in caves and may have a covert program to rapidly speed up weapons production for demonstration purposes; this is an Iranian strategy to buy time and develop deterrence.
“Iran is an interesting case because of course Iran is very close to Iran probably has uh, the the uh, you know, the uranium somewhere uh, hidden away in caves that it probably create weapons. Uh, I think a lot of people are wondering whether there's going to be some sort of surprise. As some of the high-level members of the Revolutionary Guard have basically said comments to the effect that if if Iran had a nuclear weapon as we all know, uh, the United States wouldn't be making these demands, right?”
Trump is dealing with his political enemies in the United States as enemies rather than political opponents, endorsing the principle that any rules can be broken as long as your tribe wins; the big problem is whether the rules-based constitutional Republican order will survive this approach, as Trump breaks constitutional guidelines on issues like the Enemy Aliens Act, impoundment of funds, and the Administrative Procedure Act.
“Trump is dealing with his political enemies in the United States as enemies. You know what I mean? Yeah. Uh you can break any rules uh as long as you uh as long as you make sure that your tribe wins, right? The vision of your tribe prevails. Um and I think the the big problem that people see even people who voted for Trump is will the rules-based Republican order as enshrined by the Constitution survive?”
There is an indeterminacy about Trump's foreign policy: he may have the patrimonial vision where autocrats rule their own spheres without US interference (analogous to the America First Committee position of 1938-39), OR he may be willing to engage in military conflicts (Iran) if circumstances change; the key question is whether Trump will shift if a moment of public opinion realignment occurs, as happened with FDR after the fall of France in June 1940.
“Here's the problem though, David. And I think this is where you see an indeterminacy about Trump. You could say that on the one hand, all he wants is this patrimonial idea of a leader where what he says goes. And and um um no interest in foreign policy, right? In other words, would Trump be completely satisfied to have these these these these um autocrats elsewhere in the world just rule their own little areas, right?”
Kim Jong-un in North Korea is thriving and untouchable because he possesses nuclear weapons, whereas Muammar Gaddafi agreed to dismantle his nuclear arsenal and was subsequently killed, demonstrating that nuclear weapons provide regime protection against foreign intervention.
“Kim Jong-un in North Korea is doing very well and no one dare to bother him versus someone like Muammar Gaddafi, right? Who agreed to get rid of his nuclear weapons and he ended up shot dead in a ditch”
Howe and Bill Strauss laid out in 1997 that the 2020s would be the decade of fourth turning crisis; they predicted this long in advance by counting forward through generational cycles, and now in the current moment we are at that predicted turning point.
“keep in mind that Bill and I uh Bill Strauss and I laid this out in 1997, long before we were here. We said night the 2020s would be the decade, right? We were kind of counting forward. Um and now we're here.”
A higher national savings rate will emerge under the Trump economy as Americans consume less and save more, coupled with increased defense spending and infrastructure hardening, shifting resources from personal consumption to public/military spending.
“But But you can imagine it's a crazy world, right? We're seeing much higher volatility uh than we did before. Um I do think that one aspect of this new Trump economy is going to be um higher national savings rate. I think Americans will be saving more, they'll be consuming less. Um and they'll be uh the I think ultimately will be we'll be rearming. Uh we'll be doing more in in things like hardening installations, doing more infrastructure, all of the rest of it. We'll certainly be spending less on personal consumption.”
Most of the prepper movement is unrealistic and Stallone-like (fantasies of surviving in jungle for 3 weeks), not practical guidance for normal people in normal living situations; a forthcoming book by Howe will provide practical fourth-turning preparation advice on where to live, what careers to choose, family arrangements, and wealth management.
“Unfortunately, too much of the prepper stuff is sort of Sylvester Stallone in the jungle for 3 weeks, you know what I mean? Uh it's it's not practical. It doesn't speak to us where we are and how we actually live.”
The generational turning model predicts exactly these changes in cultural direction: the youngest cohort shows the first reversal in a long-term trend, which is the expected pattern for the beginning of a generational shift.
“it's very interesting because we see the change in direction in the youngest cohort, right? That's what you would expect. Um a generational change to start.”
Second turnings (great awakenings) and fourth turnings (crises) are bad times for capital markets and the economy, while first turnings and third turnings are good times; the 1970s exemplified a bad market period during a second turning.
“the times that are hardest for for for capital markets are the fourth turnings and the second turnings, the awakenings. I mean, the 1970s was a terrible time for markets, as you know. Yes. Uh but basically uh, the rule is basically second turnings and fourth turnings are are bad news. Uh, first turnings and third turnings are really good news.”
The central Fourth Turning question is whether conflict will primarily occur within nations or between nations, with the possibility of conflict escalating from regional (Baltic states) to international scope.
“this is this is, as I described in the fore turning, a very interesting moment that time and time and again we meet, and that is is the conflict going to be within a nation or is it going to be between nations? Um uh this isn't the first time we've been here.”
Trump's peace deal with Ukraine-Russia will not succeed in ending the war within the next four years; rather, Trump's deal will not work because Putin has reshaped his regime identity around anti-Western, anti-NATO posture and intends to push the West out of Ukraine and pursue further ambitions.
“Well, it it may come to an end in the next four years. I just don't think Trump's deal is going to do it, right? That's all I'm saying. I'm just saying, 'Look, I think Putin has reshaped i- the very identity of his regime now as being an anti-Western, anti-NATO regime determined to rid uh the the the taking of Ukraine as he sees it.”
Trump's recent demand for Iran to give up all nuclear weapons and willingness to threaten bombing represents a 2-month ultimatum that is unlikely to be met because inspection agreements are difficult to implement with Iran's leadership, and the lesson learned by Iran from Gaddafi's fate (gave up weapons, was killed) makes disarmament strategically irrational.
“He threatened to bomb Iran a couple weeks ago if a nuclear deal weren't uh met, but I I don't know how serious that threat is. Well, you don't know, but he he's constantly reiterated again and again that that any deal uh Iran must get rid of all nuclear weapons. and of course, that would have I People are trying to figure that out, but it probably would involve or require some sort of inspection in Iran. It's hard to see how that's going to go down, right? Uh with the with the Iran leadership.”
Trump was prescient 8-9 years ago in seeing the direction the world was heading (away from globalization, toward nationalism and cultural conservatism), and he has shown unparalleled focus and energy in pursuing his policy goals compared to other American political leaders, constantly issuing executive orders and pursuing transformation with determination.
“Trump was very prescient, I think of all American leaders, um you know, 8 9 years ago. Yeah. He's the only one who really saw where the world was going. Um in terms of uh you know, not for everything from globalization, the repudiation of globalization to this increased nationalism focus. You could even say toward this uh you know, trend toward cultural conservatism, which he could say we may be partly in, right? So, he anticipated that and he's also uh shown unparalleled focus and energy at pursuing his goals, right?”
The rebound in Christian identification may be partly political (conservative branding), with many self-identifying as Christian but non-denominational, and these numbers may not reflect increased Christian practice.
“A lot of it is led by young people. Uh and it may be partly political, you know, part of the poli- politics of the conservative brand is saying you're Christian. So, Yeah. I don't know if this is associated with Christian practice. A lot of these people seem to be non-denominational.”
Each generation believes it has better ideas about how to make society better, which drives an oscillation in generational leadership as generations take over nations and societies with new ideas about institutional reform.
“the deeper reasons for that are are kind of laid out in the book. It's the fact that uh we we we generally believe that we can make societies better over time and each generation thinks it has better ideas about how to do that. So, there is this trend of oscillation with generational leadership as generations take over nations and societies.”
Howe's forthcoming book will answer the practical question most readers ask after finishing The Fourth Turning: 'If this crisis is real, what should I do?' focusing on where to live, career choices, family dynamics, and wealth management.
“I have a new book coming out probably early next year and it really be the answer to the question most people ask after reading The Fourth Turning is here, David, and that is okay uh let's say I believe you, Neil. What the hell should I do? It's a practical book. It's basically where do you where do you live, what careers do you choose, how do you deal with your family and above all what do you do with your wealth?”
Defense stocks are attractive investments in the Trump economy due to increased defense spending and military buildup; Howe has been 'pretty bullish' on defense stocks and they have 'done very well' over the past 3 years.
“How do you feel about defense stocks? because we can't borrow. We can't borrow from the rest of the world anymore and because we have all these public needs which we'll have to pay for. Speaking of uh rearming, how do you feel about defense stocks? Um I've been pretty bullish on them and they've done very well uh over the past 3 years.”
Huge appropriations for armaments and America becoming an 'arsenal of democracy' happened almost overnight after the fall of France in June 1940
“suddenly we had huge appropriations for armaments. We became an arsenal of democracy over almost overnight.”
Howe is a director of demography at Hedgeye Risk Management and maintains a Substack called Demography Unplugged with regular podcast episodes discussing demographic and Fourth Turning themes.
“Neil Howe. He is a director of demography at Hedgeye Risk Management. Also the author of Demography Unplugged, interesting Substack with his podcast also in it. So, check out his work there.”
Denmark's Novo Nordisk producing Wegovy is a rare example of a country that can be a price-maker for exports because it has near-monopoly on a desperately needed product
“you know, maybe Denmark with Novo Nordisk, right? Making Wegovy. May- maybe they're a price maybe they're a whole country that's a price maker. Maybe that's a good example of that.”
Evidence of cultural conservatism shift includes growing popularity of country western music, where people are looking for evidence of cultural change at various markers including music, entertainment, and media choices.
“I I look I don't know. What do you want to look at, David? The popularity of country western? I mean, where where are you going to Where are you going to look at the change in culture? But I I do think it's fair to say that I think there's been a shift in the past 4 or 5 years.”