Fed Reserve Chairman Bernanke grilled mercilessly by Congressman Grayson over why the Fed gave a half-trillion American dollars to foreign central banks. This should end any doubt about the global loyalties of U.S. banking elitists.
Friday, July 24, 2009
Monday, July 20, 2009
Bernanke: Why are we still listening to this guy?
Yeah...........he gets a lot of face time for an incompetent liar...
Tuesday, July 14, 2009
Government-insured mortgage loans skyrocket as taxpayers are forced to guarantee marginal loans.This is what created the melt-down in the first place!
Government-insured mortgages skyrocket
South Florida Business Journal
The number of mortgage loans insured by the U.S. government jumped to their highest share of total loan applications in nearly 20 years, according to a report by the Mortgage Bankers Association.
FHA and VA loan applications rose to 35.9 percent in June, up from 25.7 percent a month earlier and 27 percent a year earlier.
Since the MBA survey's inception in January 1990, the lowest recorded share was 5.8 percent in August 2005.
The government-insured share of applications to purchase homes last month was 38.6 percent, up from 27.8 percent one year ago. Those applications have averaged 36.6 percent to date, compared to an average of 21.8 percent during the same period last year. The low point was in August 2005 when it was 6.8 percent, the MBA reported.
"A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans," Orawin Velz, MBA's associate VP of economic forecasting, said in a news release. "In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance."
South Florida Business Journal
The number of mortgage loans insured by the U.S. government jumped to their highest share of total loan applications in nearly 20 years, according to a report by the Mortgage Bankers Association.
FHA and VA loan applications rose to 35.9 percent in June, up from 25.7 percent a month earlier and 27 percent a year earlier.
Since the MBA survey's inception in January 1990, the lowest recorded share was 5.8 percent in August 2005.
The government-insured share of applications to purchase homes last month was 38.6 percent, up from 27.8 percent one year ago. Those applications have averaged 36.6 percent to date, compared to an average of 21.8 percent during the same period last year. The low point was in August 2005 when it was 6.8 percent, the MBA reported.
"A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans," Orawin Velz, MBA's associate VP of economic forecasting, said in a news release. "In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance."
This May Be Longer Than Anyone Wants To Admit
A 20-Year Bear Market?
In November of 1997, my partner and co-editor of The Casey Report, Doug Casey, wrote an article titled “Foundations of Crisis,” which leaned heavily on the research of Neil Howe and the late William Strauss.
Howe and Strauss have written many books on how generations determine the course of history and how they will shape America’s future. Their forecasts on a wide variety of indicators have turned out to be amazingly accurate. They were among the first to predict (back in the late 1980s) the rise of Boomer-driven culture wars and the simultaneous rise of Gen-X-driven free agency and distrust of government. And they were completely alone back then in predicting, for the post-X “Millennial Generation” (a label they coined), a decline in youth crime and risk taking and an increase in youth civic engagement that would first become apparent around the year 2000. Guess what? For the last ten years, everyone has been noticing exactly these trends among teens and 20somethings.
Howe and Strauss also made extensive predictions, based on generational aging, on how America’s entire social mood would likely change, in dramatic fashion, during our current 2000-2010 decade. To quote Doug’s prescient 1997 article, which was reprinted in Outside the Box late last year…
“…an excellent case can be made the U.S. is approaching another time of secular crisis, a Fourth Turning, with an expected due date of 2005 – seven years from now – plus or minus a few years in either direction.
“The Stamp Acts catalyzed the American Revolution, the election of Lincoln catalyzed the Civil War, the Crash of ‘29 catalyzed the Depression/WW II era. What might precipitate the elements now floating in solution? The answer is practically any random event that’s sufficiently traumatic. Any of the theses of current disaster/action novels and movies will do nicely. Perhaps the accidental or intentional release of a super plague vector. The crashing of an airliner into the Capitol during a joint session. An all-out assault on the IRS computers by an armed group – or perhaps the computers just melting down due to the Year 2000 Problem. Perhaps a financial disaster that cascades into the Greater Depression. In any of these, or a hundred other scenarios, the federal government would almost certainly act precipitously and with a heavy hand, which would bring on a whole other set of consequences.
“There’s no way of telling where the Crisis will lead, or how it will end. That’s going to depend not only on exactly who’s in control, but what they do, who they’re up against, and a hundred other variables we can’t even anticipate.
“One thing that seems certain is that real crisis brings out strong leadership. Because of its age and size, it will come from the Boomer generation, and it will be in the mold of Roosevelt or Lincoln – both very dangerous precedents. The boomers in elderhood will be dogmatic, harsh, puritanical, and quite willing to burn down the barn in order to destroy whatever rats they see. Admix that attitude to a time resembling the Revolution, the Civil War, or WW II, overlain with today’s ethnic strife, urbanization, financial overextension, and powerful, compact new weaponry in the hands of foreign fanatics out to teach the Great Satan a lesson and it’s a real witch’s brew.”
As eye-opening as Doug’s predictions were, they brought us only to the onset of the current crisis. Consequently, we thought it both timely and important to check back with the source of much of the research he relied on. And so it was that I spent several hours talking with Neil Howe, co-author of the seminal work on generational cycles, The Fourth Turning, and, just recently, the subject of the DVD “The Winter of History.” Howe is not just an historian, but also a Washington DC-based economist and demographer. While our conversation covered a great many topics, the overriding focus was on how things are likely to unfold from here.
Many bullish readers won’t be thrilled to hear Howe’s latest findings about the future, but given his predictive track record, dismissing them out of hand could be a costly mistake.
The summary outlook, according to Howe, is that we are in the very early stages of a 20-year period of economic and institutional upheaval — an era denominated by a crisis during which we’ll likely witness the tearing down and reconstruction of many aspects of society as we know it.
As individuals, understanding Howe’s views and taking some reasonable precautions makes a lot of sense. As investors, those views also have the potential to make us a lot of money.
Following is my high-level recap of my long conversation with Neil Howe, along with some general thoughts on the investment implications of a 20-year bear market.
Remember the Sixties?
If you’re old enough — or possess even a rudimentary sense of history — think back to the 1950s, with roller-skating waitresses, crew cuts, and nuclear families of the sort represented by the iconic Leave it to Beaver. Fathers worked, while many mothers stayed home. Life had a certain predictable quality and, as far as anyone knew, would continue along the same lines for time immemorial.
But then something happened…the 1960s. Literally no one saw it coming. It was as if someone had flipped a switch that electrified America and, quickly, the world. Most everything changed, and a society accustomed to conformity was blown away with a fierce individualism expressed with long hair, sex, drugs, and rock and roll, topped off with civil disobedience and bloody riots in the streets.
What happened?
According to Neil Howe, in the mid-1960s, generational change pushed society around a dramatic corner as idealistic, individualistic young Baby Boomers (born 1943 to 1960) rebelled against the midlife leadership of their G.I. Generation parents (born 1901 to 1924).
These periods of transitions are part of a larger cyclical pattern made up of four distinct eras, or “Turnings,” each lasting approximately 20 years. It can be helpful to think of the four turnings as you might think of the four seasons, repeating predictably in their own natural rhythm. A full cycle of turnings takes place over a period of about 80 to 90 years — roughly the span of a long human life. A new turning begins as a new youth generation comes of age, bringing a new social ethic that compensates for the excesses of the midlife generation then in power.
While we don’t have the space here to go into the full details of Howe’s research, it’s important to the topic at hand that we quickly recap the Four Turnings.
The First Turning is referred to by Howe as a High. As this follows a period of crisis, one of the hallmarks of a First Turning is a heightened sense of community and collective optimism, driven in part by the fact that the society has just come through a difficult and challenging time. Consequently, during First Turnings, societal institutions tend to be strong while individualism is weak. The post-World War II “High” of the mid-1940s through early ‘60s is the most recent example of a First Turning.
The Second Turning, called an Awakening, typically starts out feeling like the high tide of a High, with signs of progress and prosperity everywhere. But just as everything seems to be going along swimmingly, large swaths of society begin to chaff under the social conformity of the High, beginning to gravitate to more individualistic pursuits and demanding that their personal interests come first. You may recognize the “Consciousness Revolution” of the mid-1960s through early 1980s, correctly, as the Second Turning.
Next up, the Third Turning, which Howe calls an Unraveling, is much the opposite of a High. To wit, individualism dominates, while institutions are increasingly weak and discredited. Quoting Howe on the Unraveling…
“This is a time when social authority feels inconsequential, the culture feels exhausted, and people feel bewildered by the number of options available to them. It is a time of celebrity circuses and a tremendous amount of freedom and creativity in our personal lives, but very little sense of public purpose.
“The most recent Third Turning began in the mid-‘80s with Morning in America, and continued through the ‘90s. Previous periods of Unraveling in American history were also decades of cynicism and bad manners. Think of the 1920s, the 1850s, the 1760s. And history teaches us that the Third Turnings inevitably end in Fourth Turnings.”
Finally, there is the Fourth Turning, called a Crisis. The recent Third Turning appears to be winding down, and we are currently on the cusp of a Fourth Turning. This is a time of great turmoil, when society’s basic institutions are torn down and rebuilt, and seemingly insurmountable problems are addressed. During Fourth Turnings, America engages in a struggle for its very survival and redefines its identity as a nation. Large wars are often a part of this process. The American Revolution, Civil War, Great Depression, and World War II were all features of past Fourth Turnings.
In sum, Howe’s research has shown that, with remarkable predictability, history is not a straight line extending toward a better and brighter (or increasingly awful) future, but rather a repeating cycle of the four distinct social eras. These four turnings have recurred with remarkable consistency throughout Anglo-American history, as Neil Howe outlines at length in Generations and The Fourth Turning. It is therefore no accident that America has experienced great cataclysms or “Crises” about every 80 years. Travel back eighty years from Pearl Harbor Day, and you land in the middle of the Civil War. Eighty years before that takes you to the Revolutionary War. If the rhythms of history hold, America is now poised to enter another Fourth Turning.
Bad News, Potentially Good News
You don’t need me to tell you that the United States and in fact the world are now facing a plethora of intractable problems. The world’s former powerhouse economy, the U.S., is now the world’s largest debtor nation — and by a wide margin. The nation has trillions in unpayable liabilities coming due on Social Security and Medicare, to name just two of many broken government programs weighing on the country. And our much vaunted democracy is increasingly dysfunctional — rotten to the core, truth be known — thanks largely to entrenched special interests and a voting public clamoring for their own piece of the pie, while trying to hand the bill off to somebody else.
Meanwhile, the economy — despite rigorous jawboning by the government and its many friends in the large banking institutions — is in serious trouble, with the housing market buffeted by tsunami-like waves of defaults, foreclosures, overvaluations, historic levels of personal debt, and tight credit that has left the U.S. government as the sole lender in many markets.
Bernanke and his ilk may see green shoots, but what they’re really seeing is the deep, green sea rising up once again to bury the economy. That’s the bad news.
The potentially good news, if you credit Howe’s research, is that the Crisis we’re now entering will change pretty much everything. While this change will entail a great deal of pain and a reduced standard of living for a large number of people, by the time the Crisis subsides, society will have pretty much remade itself in ways that no one can predict at this point.
Put another way, today’s intractable problems will be solved...one way or another.
What's Next
When discussing what’s likely to follow next, Neil Howe turns to his generational profiles and points out that the rising societal power today belongs to the generation he calls the Millennials, individuals born between 1982 and 2004. They are a “Hero” generation, just like the G.I. Generation that coped so well with the turmoil of the Great Depression and World War II — the last Fourth Turning. Coddled as children, the G.I.s were ultimately called upon to help society through a dark and dangerous period and rose to the occasion. Again, quoting Howe on the Millennials…
“These are today’s young people, who are just beginning to be well known to most Americans. They fill K-12 schools, colleges, graduate schools, and have recently begun entering the workplace. We associate them with dramatic improvements in youth behaviors, which are often underreported by the media. Since Millennials have come along, we’ve seen huge declines in violent crime, teen pregnancy, and the most damaging forms of drug abuse, as well as higher rates of community service and volunteering. This is a generation that reminds us in many respects of the young G.I.s nearly a century ago, back when they were the first boy scouts and girl scouts between 1910 and 1920.
Unlike the Baby Boomers, who are largely individualistic and anti-establishment, the Millennials are good team players. We hear a lot these days about working together for a common cause, volunteerism, and the need for stronger government institutions, largely because these are the new priorities of the Millennial Generation.
As you may recall, out of the devastation of World War II, a spate of transnational political and economic institutions were born, including the United Nations, the World Bank, the World Health Organization, and the International Monetary Fund. By the time the current Fourth Turning is over, expect more of the same — but probably even bigger and more ambitious.
What Does This Mean to You?
Most importantly, if Howe is right, this crisis is far from over. In fact, when I asked him where we are today on a scale from 1 to 10 — with 10 representing as bad as the crisis will get — he replied that we are at either 2 or 3. In other words, the worst is very much yet to come. And, per above, he expects this period of turmoil to take 20 years to play out. Thus, if nothing else, you may want to continue approaching matters of personal finance cautiously.
Secondly, if you’re the type of individual that tends to get steamed up by larger and more intrusive government programs, you may want to take a few deep breaths and resolve yourself to the fact that this phenomenon is likely to get far worse before we see a return to celebration of individual rights. (And the cycle shows that we will see such a return — about 40 to 50 years from now, when the next Second Turning comes around.)
If it is any consolation, the Millennial Generation places a great deal of weight on teamwork and the notion of doing things “smart.” That doesn’t mean, of course, that the various programs that are kicked off in an attempt to fix the many problems now confronting society will in fact turn out to be technically smart. But they will almost certainly be better thought out than some of the numbskull initiatives we’ve seen over the last 20 years.
You can also take some comfort in the fact that Millennials are builders, not destroyers. By contrast, the individualistic Boomers that dominate today’s aging political class are world-class dissenters, radio talk show aficionados always ready to scrap it out for their beliefs. Millennials want to skip the philosophical debate and get straight to fixing things.
In November of 1997, my partner and co-editor of The Casey Report, Doug Casey, wrote an article titled “Foundations of Crisis,” which leaned heavily on the research of Neil Howe and the late William Strauss.
Howe and Strauss have written many books on how generations determine the course of history and how they will shape America’s future. Their forecasts on a wide variety of indicators have turned out to be amazingly accurate. They were among the first to predict (back in the late 1980s) the rise of Boomer-driven culture wars and the simultaneous rise of Gen-X-driven free agency and distrust of government. And they were completely alone back then in predicting, for the post-X “Millennial Generation” (a label they coined), a decline in youth crime and risk taking and an increase in youth civic engagement that would first become apparent around the year 2000. Guess what? For the last ten years, everyone has been noticing exactly these trends among teens and 20somethings.
Howe and Strauss also made extensive predictions, based on generational aging, on how America’s entire social mood would likely change, in dramatic fashion, during our current 2000-2010 decade. To quote Doug’s prescient 1997 article, which was reprinted in Outside the Box late last year…
“…an excellent case can be made the U.S. is approaching another time of secular crisis, a Fourth Turning, with an expected due date of 2005 – seven years from now – plus or minus a few years in either direction.
“The Stamp Acts catalyzed the American Revolution, the election of Lincoln catalyzed the Civil War, the Crash of ‘29 catalyzed the Depression/WW II era. What might precipitate the elements now floating in solution? The answer is practically any random event that’s sufficiently traumatic. Any of the theses of current disaster/action novels and movies will do nicely. Perhaps the accidental or intentional release of a super plague vector. The crashing of an airliner into the Capitol during a joint session. An all-out assault on the IRS computers by an armed group – or perhaps the computers just melting down due to the Year 2000 Problem. Perhaps a financial disaster that cascades into the Greater Depression. In any of these, or a hundred other scenarios, the federal government would almost certainly act precipitously and with a heavy hand, which would bring on a whole other set of consequences.
“There’s no way of telling where the Crisis will lead, or how it will end. That’s going to depend not only on exactly who’s in control, but what they do, who they’re up against, and a hundred other variables we can’t even anticipate.
“One thing that seems certain is that real crisis brings out strong leadership. Because of its age and size, it will come from the Boomer generation, and it will be in the mold of Roosevelt or Lincoln – both very dangerous precedents. The boomers in elderhood will be dogmatic, harsh, puritanical, and quite willing to burn down the barn in order to destroy whatever rats they see. Admix that attitude to a time resembling the Revolution, the Civil War, or WW II, overlain with today’s ethnic strife, urbanization, financial overextension, and powerful, compact new weaponry in the hands of foreign fanatics out to teach the Great Satan a lesson and it’s a real witch’s brew.”
As eye-opening as Doug’s predictions were, they brought us only to the onset of the current crisis. Consequently, we thought it both timely and important to check back with the source of much of the research he relied on. And so it was that I spent several hours talking with Neil Howe, co-author of the seminal work on generational cycles, The Fourth Turning, and, just recently, the subject of the DVD “The Winter of History.” Howe is not just an historian, but also a Washington DC-based economist and demographer. While our conversation covered a great many topics, the overriding focus was on how things are likely to unfold from here.
Many bullish readers won’t be thrilled to hear Howe’s latest findings about the future, but given his predictive track record, dismissing them out of hand could be a costly mistake.
The summary outlook, according to Howe, is that we are in the very early stages of a 20-year period of economic and institutional upheaval — an era denominated by a crisis during which we’ll likely witness the tearing down and reconstruction of many aspects of society as we know it.
As individuals, understanding Howe’s views and taking some reasonable precautions makes a lot of sense. As investors, those views also have the potential to make us a lot of money.
Following is my high-level recap of my long conversation with Neil Howe, along with some general thoughts on the investment implications of a 20-year bear market.
Remember the Sixties?
If you’re old enough — or possess even a rudimentary sense of history — think back to the 1950s, with roller-skating waitresses, crew cuts, and nuclear families of the sort represented by the iconic Leave it to Beaver. Fathers worked, while many mothers stayed home. Life had a certain predictable quality and, as far as anyone knew, would continue along the same lines for time immemorial.
But then something happened…the 1960s. Literally no one saw it coming. It was as if someone had flipped a switch that electrified America and, quickly, the world. Most everything changed, and a society accustomed to conformity was blown away with a fierce individualism expressed with long hair, sex, drugs, and rock and roll, topped off with civil disobedience and bloody riots in the streets.
What happened?
According to Neil Howe, in the mid-1960s, generational change pushed society around a dramatic corner as idealistic, individualistic young Baby Boomers (born 1943 to 1960) rebelled against the midlife leadership of their G.I. Generation parents (born 1901 to 1924).
These periods of transitions are part of a larger cyclical pattern made up of four distinct eras, or “Turnings,” each lasting approximately 20 years. It can be helpful to think of the four turnings as you might think of the four seasons, repeating predictably in their own natural rhythm. A full cycle of turnings takes place over a period of about 80 to 90 years — roughly the span of a long human life. A new turning begins as a new youth generation comes of age, bringing a new social ethic that compensates for the excesses of the midlife generation then in power.
While we don’t have the space here to go into the full details of Howe’s research, it’s important to the topic at hand that we quickly recap the Four Turnings.
The First Turning is referred to by Howe as a High. As this follows a period of crisis, one of the hallmarks of a First Turning is a heightened sense of community and collective optimism, driven in part by the fact that the society has just come through a difficult and challenging time. Consequently, during First Turnings, societal institutions tend to be strong while individualism is weak. The post-World War II “High” of the mid-1940s through early ‘60s is the most recent example of a First Turning.
The Second Turning, called an Awakening, typically starts out feeling like the high tide of a High, with signs of progress and prosperity everywhere. But just as everything seems to be going along swimmingly, large swaths of society begin to chaff under the social conformity of the High, beginning to gravitate to more individualistic pursuits and demanding that their personal interests come first. You may recognize the “Consciousness Revolution” of the mid-1960s through early 1980s, correctly, as the Second Turning.
Next up, the Third Turning, which Howe calls an Unraveling, is much the opposite of a High. To wit, individualism dominates, while institutions are increasingly weak and discredited. Quoting Howe on the Unraveling…
“This is a time when social authority feels inconsequential, the culture feels exhausted, and people feel bewildered by the number of options available to them. It is a time of celebrity circuses and a tremendous amount of freedom and creativity in our personal lives, but very little sense of public purpose.
“The most recent Third Turning began in the mid-‘80s with Morning in America, and continued through the ‘90s. Previous periods of Unraveling in American history were also decades of cynicism and bad manners. Think of the 1920s, the 1850s, the 1760s. And history teaches us that the Third Turnings inevitably end in Fourth Turnings.”
Finally, there is the Fourth Turning, called a Crisis. The recent Third Turning appears to be winding down, and we are currently on the cusp of a Fourth Turning. This is a time of great turmoil, when society’s basic institutions are torn down and rebuilt, and seemingly insurmountable problems are addressed. During Fourth Turnings, America engages in a struggle for its very survival and redefines its identity as a nation. Large wars are often a part of this process. The American Revolution, Civil War, Great Depression, and World War II were all features of past Fourth Turnings.
In sum, Howe’s research has shown that, with remarkable predictability, history is not a straight line extending toward a better and brighter (or increasingly awful) future, but rather a repeating cycle of the four distinct social eras. These four turnings have recurred with remarkable consistency throughout Anglo-American history, as Neil Howe outlines at length in Generations and The Fourth Turning. It is therefore no accident that America has experienced great cataclysms or “Crises” about every 80 years. Travel back eighty years from Pearl Harbor Day, and you land in the middle of the Civil War. Eighty years before that takes you to the Revolutionary War. If the rhythms of history hold, America is now poised to enter another Fourth Turning.
Bad News, Potentially Good News
You don’t need me to tell you that the United States and in fact the world are now facing a plethora of intractable problems. The world’s former powerhouse economy, the U.S., is now the world’s largest debtor nation — and by a wide margin. The nation has trillions in unpayable liabilities coming due on Social Security and Medicare, to name just two of many broken government programs weighing on the country. And our much vaunted democracy is increasingly dysfunctional — rotten to the core, truth be known — thanks largely to entrenched special interests and a voting public clamoring for their own piece of the pie, while trying to hand the bill off to somebody else.
Meanwhile, the economy — despite rigorous jawboning by the government and its many friends in the large banking institutions — is in serious trouble, with the housing market buffeted by tsunami-like waves of defaults, foreclosures, overvaluations, historic levels of personal debt, and tight credit that has left the U.S. government as the sole lender in many markets.
Bernanke and his ilk may see green shoots, but what they’re really seeing is the deep, green sea rising up once again to bury the economy. That’s the bad news.
The potentially good news, if you credit Howe’s research, is that the Crisis we’re now entering will change pretty much everything. While this change will entail a great deal of pain and a reduced standard of living for a large number of people, by the time the Crisis subsides, society will have pretty much remade itself in ways that no one can predict at this point.
Put another way, today’s intractable problems will be solved...one way or another.
What's Next
When discussing what’s likely to follow next, Neil Howe turns to his generational profiles and points out that the rising societal power today belongs to the generation he calls the Millennials, individuals born between 1982 and 2004. They are a “Hero” generation, just like the G.I. Generation that coped so well with the turmoil of the Great Depression and World War II — the last Fourth Turning. Coddled as children, the G.I.s were ultimately called upon to help society through a dark and dangerous period and rose to the occasion. Again, quoting Howe on the Millennials…
“These are today’s young people, who are just beginning to be well known to most Americans. They fill K-12 schools, colleges, graduate schools, and have recently begun entering the workplace. We associate them with dramatic improvements in youth behaviors, which are often underreported by the media. Since Millennials have come along, we’ve seen huge declines in violent crime, teen pregnancy, and the most damaging forms of drug abuse, as well as higher rates of community service and volunteering. This is a generation that reminds us in many respects of the young G.I.s nearly a century ago, back when they were the first boy scouts and girl scouts between 1910 and 1920.
Unlike the Baby Boomers, who are largely individualistic and anti-establishment, the Millennials are good team players. We hear a lot these days about working together for a common cause, volunteerism, and the need for stronger government institutions, largely because these are the new priorities of the Millennial Generation.
As you may recall, out of the devastation of World War II, a spate of transnational political and economic institutions were born, including the United Nations, the World Bank, the World Health Organization, and the International Monetary Fund. By the time the current Fourth Turning is over, expect more of the same — but probably even bigger and more ambitious.
What Does This Mean to You?
Most importantly, if Howe is right, this crisis is far from over. In fact, when I asked him where we are today on a scale from 1 to 10 — with 10 representing as bad as the crisis will get — he replied that we are at either 2 or 3. In other words, the worst is very much yet to come. And, per above, he expects this period of turmoil to take 20 years to play out. Thus, if nothing else, you may want to continue approaching matters of personal finance cautiously.
Secondly, if you’re the type of individual that tends to get steamed up by larger and more intrusive government programs, you may want to take a few deep breaths and resolve yourself to the fact that this phenomenon is likely to get far worse before we see a return to celebration of individual rights. (And the cycle shows that we will see such a return — about 40 to 50 years from now, when the next Second Turning comes around.)
If it is any consolation, the Millennial Generation places a great deal of weight on teamwork and the notion of doing things “smart.” That doesn’t mean, of course, that the various programs that are kicked off in an attempt to fix the many problems now confronting society will in fact turn out to be technically smart. But they will almost certainly be better thought out than some of the numbskull initiatives we’ve seen over the last 20 years.
You can also take some comfort in the fact that Millennials are builders, not destroyers. By contrast, the individualistic Boomers that dominate today’s aging political class are world-class dissenters, radio talk show aficionados always ready to scrap it out for their beliefs. Millennials want to skip the philosophical debate and get straight to fixing things.
Other insights about Fourth Turning periods gained from my conversation with Neil Howe…
~Government grows powerful, and sweeping new legislation is enacted. The old 1990s rule was: just compete and stay off the state’s radar screen. The new 2010s rule will be: better have a presence in Washington so you’re not dealt out of the “new” new deal. One political party tends to dominate. The Democrats under FDR during the last Fourth Turning offer a good example. While Neil Howe doesn’t think it will necessarily be the Democrats this time around, they are certainly in the pole position at this point.
~While public history speeds up, personal life slows down. Families will spend more time together, like in the old Frank Capra movies. Ever more households will be multi-generational, a trend now spurred by Boomers with large, empty McMansions and Millennials without jobs. There will be a blanding of the pop culture, with the entertainment of the young (put Miley Cyrus or “High School Musical” on fast forward) increasingly regarded as tamer than the entertainment of the old.
~Innovation tends to stagnate, while a few new technologies will be chosen to be adopted on a large scale. We will see the equivalent of canals or railroads or interstates being built across America. To borrow from Carlotta Perez’ four-stage description of technological revolutions, we are moving from the “innovation” to the “implementation” stage.
~New laws and regulations will do less to referee a free market and more to pursue one or another national priority. They will increasingly favor the large producer over the retail buyer, investment over consumption, planning over risk, debt over equity. Businesses will hustle to reposition themselves. Anti-trust will weaken.
~The authority and obligations of community will strengthen at all levels, from local to national and possibly beyond (if our alliances prove durable). Personal reputation and membership will matter more. A “new localism” will reshape town and urban planning. A global slide toward national or regional protectionism will loom as a real danger.
It is too early to tell whether the crisis will ultimately be inflationary or deflationary, though we at Casey Research come down on the side of inflation for the simple reason that the government possesses the means to inflate. Due to the gold standard, that was not the case early in the Great Depression.
~In the past, Fourth Turning periods have always resulted in the nation redefining who we are in some essential way. That was certainly the case during the American Revolution, when we transitioned from a British colony into a collection of independent states — and the Civil War, when those states were hammered into a single nation. And, again, after World War II, when the U.S. went from being a relatively isolated nation to a global empire. A wild card, for instance a terrorist nuke going off in a city anywhere on the planet, could similarly take the country, and the world, into unforeseeable new directions.
~Baby Boomers will continue to be respected for their cultural achievements (it’s not a fluke of history that Boomer music and other entertainments are still wildly popular among the young), but will be increasingly ignored in the political debate. The term “senior citizen,” already in decline, will disappear entirely. And if push comes to shove, Boomer’s financial interests – including Social Security – will be subjugated “for the greater good.”
~There will be a growing push to rebuild the middle class. The wealthy and the impoverished alike will both come under pressure thanks to new pro-middle class initiatives. If you are a high-income earner, it’s a certainty your taxes are going up, and likely by a lot. If you want to make a fortune, don’t pursue the niche or the “long tail.” Invent the next big brand that will appeal to Everyman.
Don’t Worry, Be Happy
That is, at best, a sketch of my long conversation with Neil Howe and doesn’t do justice to his research. If nothing else, however, I hope I’ve succeeded in giving you at least some sense of the man and his unique research and encouraged you to think outside the box about the nature of today’s crisis.
A couple of final observations.
First, Neil Howe is not a negative person, nor a professional doomsayer. Rather, he is a social scientist and historian with decades of experience in the social sciences. As you speak to him, you get the sense that he doesn’t view the world through any particular philosophical bias, but rather is simply reporting what his research is telling him about the current players on the global stage, and which act we are currently in.
Secondly, speaking as a Baby Boomer and someone with a lifelong distrust of government and its meddling institutions, talking to Neil left me feeling oddly relaxed — letting go, if you will, of some of the frustration that has been building within me as I watch the nanny state grow more and more bloated.
That is not to say we won’t continue to speak out against government waste and prolificacy. We will. But it seems increasingly clear that we’re now caught up in a powerful trend toward bigger, not smaller, societal institutions — and that these institutions will, over the period ahead, change the world as we know it.
Of course, being active investors, at the same time we raise our voices in protest, we’ll deal with the reality of the situation by strategically positioning our portfolios to profit from the coming changes.
And so, like the Rockefellers and J.P. Morgan during the Great Depression, we’ll make the trend — to matter how negative — our friend. You may want to consider doing so yourself.
Fix This!
Some People Have a Strange Definition of 'Stimulus'
Posted By Bobby Eberle On July 13, 2009 at 7:07 am
When someone's heart rhythm is out of whack, what do medical personnel do to get it back on the beat? Do they massage it for twenty to thirty minutes? Do they talk to it, trying to coax it back to beat normally? No. They zap it. In other words, they provide it with a "stimulus" that is designed for one purpose: get the heart beating properly... now!
This concept seems to be foreign to Barack Obama and the Democrats. During the last recession when the country was gripped with not only an economic downturn but a massive terrorist attack, President Bush moved to cut taxes and inject money back into the system... money spent by the taxpayers in the manner they saw fit. It worked. Now, we have nearly a trillion dollars in big-government spending, and it's not doing the job. What do Obama and the Democrats think about it? They think another "stimulus" might be in order. Are they crazy???
In an op-ed in the Washington Post, Obama wrote about the need for patience as he and the Democrats work to "fix" the economy.
Of course, he starts the column by noting, "Nearly six months ago, my administration took office amid the most severe economic downturn since the Great Depression." It seems to be that this is the worst economic situation since the last time we had a Democrat in office who didn't know what he was doing (Jimmy Carter).
The swift and aggressive action we took in those first few months has helped pull our financial system and our economy back from the brink. We took steps to restart lending to families and businesses, stabilize our major financial institutions, and help homeowners stay in their homes and pay their mortgages. We also passed the most sweeping economic recovery plan in our nation's history.
Where to begin? First, Obama said that because of his nearly trillion dollar spending plan, unemployment would not top 8 percent. Now, it is nearly 10 percent. People keep losing jobs. In addition, a true stimulus is made to get things going NOW. The vast majority of the funds approved by Congress have not even been spent, and when they are, it will be toward a laundry list of liberal programs designed to take money from productive Americans and give it to others.
The American Recovery and Reinvestment Act was not expected to restore the economy to full health on its own but to provide the boost necessary to stop the free fall. So far, it has done that. It was, from the start, a two-year program, and it will steadily save and create jobs as it ramps up over this summer and fall. We must let it work the way it's supposed to, with the understanding that in any recession, unemployment tends to recover more slowly than other measures of economic activity.
Question... Had the federal government done nothing, where would the country be now? Next question... What if the federal government passed a bill the size of the stimulus but directed toward cutting taxes? What do you think that would do to hiring and to spending by the American people? Isn't that what a stimulus is all about?
I am confident that the United States of America will weather this economic storm. But once we clear away the wreckage, the real question is what we will build in its place. Even as we rescue this economy from a full-blown crisis, I have insisted that we must rebuild it better than before. For if we do not seize this moment to confront the weaknesses that have plagued our economy for decades, we will consign ourselves and our children to future crises, sluggish growth, or both.
Rebuild it better than before? Let's see... right now, in order to pay for the government-run health care plan that Obama is proposing, the Democrats want to raise taxes even higher. First, they will let the Bush tax cuts expire. This will not only push the top rate from 35% to nearly 40%, but it will push other rates higher as well. Then, the Democrats want to put a surtax on top of the tax rate. This will effectively put the top rate somewhere around 43-45%. Thus, the people that America counts on to expand business and hire people will be paying almost half of their income in taxes to the federal government. How is that supposed to help in hiring?
Obama talks about the "jobs of the future." Clearly those must all be government jobs, because the private sector will be taxed into oblivion in order to pay the increasing costs of government. Americans deserve to keep what they make and spend it how they see fit. The more that is spent by the private sector means that more goods will need to be produced and more services will be rendered. This means manufacturing. This means jobs.
Posted By Bobby Eberle On July 13, 2009 at 7:07 am
When someone's heart rhythm is out of whack, what do medical personnel do to get it back on the beat? Do they massage it for twenty to thirty minutes? Do they talk to it, trying to coax it back to beat normally? No. They zap it. In other words, they provide it with a "stimulus" that is designed for one purpose: get the heart beating properly... now!
This concept seems to be foreign to Barack Obama and the Democrats. During the last recession when the country was gripped with not only an economic downturn but a massive terrorist attack, President Bush moved to cut taxes and inject money back into the system... money spent by the taxpayers in the manner they saw fit. It worked. Now, we have nearly a trillion dollars in big-government spending, and it's not doing the job. What do Obama and the Democrats think about it? They think another "stimulus" might be in order. Are they crazy???
In an op-ed in the Washington Post, Obama wrote about the need for patience as he and the Democrats work to "fix" the economy.
Of course, he starts the column by noting, "Nearly six months ago, my administration took office amid the most severe economic downturn since the Great Depression." It seems to be that this is the worst economic situation since the last time we had a Democrat in office who didn't know what he was doing (Jimmy Carter).
The swift and aggressive action we took in those first few months has helped pull our financial system and our economy back from the brink. We took steps to restart lending to families and businesses, stabilize our major financial institutions, and help homeowners stay in their homes and pay their mortgages. We also passed the most sweeping economic recovery plan in our nation's history.
Where to begin? First, Obama said that because of his nearly trillion dollar spending plan, unemployment would not top 8 percent. Now, it is nearly 10 percent. People keep losing jobs. In addition, a true stimulus is made to get things going NOW. The vast majority of the funds approved by Congress have not even been spent, and when they are, it will be toward a laundry list of liberal programs designed to take money from productive Americans and give it to others.
The American Recovery and Reinvestment Act was not expected to restore the economy to full health on its own but to provide the boost necessary to stop the free fall. So far, it has done that. It was, from the start, a two-year program, and it will steadily save and create jobs as it ramps up over this summer and fall. We must let it work the way it's supposed to, with the understanding that in any recession, unemployment tends to recover more slowly than other measures of economic activity.
Question... Had the federal government done nothing, where would the country be now? Next question... What if the federal government passed a bill the size of the stimulus but directed toward cutting taxes? What do you think that would do to hiring and to spending by the American people? Isn't that what a stimulus is all about?
I am confident that the United States of America will weather this economic storm. But once we clear away the wreckage, the real question is what we will build in its place. Even as we rescue this economy from a full-blown crisis, I have insisted that we must rebuild it better than before. For if we do not seize this moment to confront the weaknesses that have plagued our economy for decades, we will consign ourselves and our children to future crises, sluggish growth, or both.
Rebuild it better than before? Let's see... right now, in order to pay for the government-run health care plan that Obama is proposing, the Democrats want to raise taxes even higher. First, they will let the Bush tax cuts expire. This will not only push the top rate from 35% to nearly 40%, but it will push other rates higher as well. Then, the Democrats want to put a surtax on top of the tax rate. This will effectively put the top rate somewhere around 43-45%. Thus, the people that America counts on to expand business and hire people will be paying almost half of their income in taxes to the federal government. How is that supposed to help in hiring?
Obama talks about the "jobs of the future." Clearly those must all be government jobs, because the private sector will be taxed into oblivion in order to pay the increasing costs of government. Americans deserve to keep what they make and spend it how they see fit. The more that is spent by the private sector means that more goods will need to be produced and more services will be rendered. This means manufacturing. This means jobs.
Getting Closer To A 1-World Currency
Would have been cooler if he pulled it from behind Barack Obama's ear...But check this out: Russian President Dmitry Medvedev is so serious about a new global reserve currency, he brought a demo to the G-8 meeting.
“This is a symbol of our unity and our desire to settle such issues jointly,” Medvedev said as he called for a “united future world currency.” The Russian didn’t really go into detail about how the money would be balanced or what nations would contribute, but we take note of two items:
Medvedev is the first to suggest that a new world reserve currency would actually be used by everyday people. The previously proposed Special Drawing Rights currency was supposed to be one of those shadow monies that doesn’t really exist… just this invisible running tab swapped back and forth between nations. Yet Medvedev suggested on Friday that his money be used by people around the world.
Second, we haven’t heard if there is physical gold in that coin… but we doubt the Russians picked that color just by chance.
“This is a symbol of our unity and our desire to settle such issues jointly,” Medvedev said as he called for a “united future world currency.” The Russian didn’t really go into detail about how the money would be balanced or what nations would contribute, but we take note of two items:
Medvedev is the first to suggest that a new world reserve currency would actually be used by everyday people. The previously proposed Special Drawing Rights currency was supposed to be one of those shadow monies that doesn’t really exist… just this invisible running tab swapped back and forth between nations. Yet Medvedev suggested on Friday that his money be used by people around the world.
Second, we haven’t heard if there is physical gold in that coin… but we doubt the Russians picked that color just by chance.
Canada's Coming Trouble
“If you think Canada escaped the downward trend in U.S. banking, think again,” Dan Amoss begins. “While the country may not have plunged headfirst into subprime mortgages, it did dip heavily into risky derivatives. The leverage it took on generated impressive returns on equity in good times, but that same leverage is set to wipe out equity today.
“Canada has just entered what will ultimately be an enormous credit loss cycle, and by the time it's over, the Canadian banks could easily lose their pristine reputations. Until the middle of 2008, Canada's economy was booming. Its mining, energy and manufacturing sectors are world-class, and every other sector was pulled along for the ride.
“But the wheels fell off last fall. According to Statistics Canada, the unemployment rate rose to 8.4% in May -- the highest in 11 years. Ontario, with its heavy manufacturing base and ties to the ‘Detroit Three’ auto companies, is especially hard hit; Ontario lost 234,000 jobs, or 14% of its entire manufacturing work force, since last October. Ontario will lose even more jobs this summer as GM and Chrysler dramatically cut auto production. Alberta has slowed dramatically too. Just a year ago in Alberta, every skilled construction worker was working overtime on oil sands projects. Now many projects are postponed and workers are getting laid off. The unemployment rate in Alberta nearly doubled from May 2008 to May 2009, to 6.6%, and is heading higher.
“For Canada, this credit cycle will probably be worse than the one in the late 1980s. According to RBC Capital Markets, annualized loan loss provisions for the entire Canadian banking system peaked at 2.88% of all loans in 1988. As of April 2009, this figure was just 0.77%. Over the next year or two, loan loss provisions should easily triple or quadruple, which would cut deeply into profits and capital.”
“Canada has just entered what will ultimately be an enormous credit loss cycle, and by the time it's over, the Canadian banks could easily lose their pristine reputations. Until the middle of 2008, Canada's economy was booming. Its mining, energy and manufacturing sectors are world-class, and every other sector was pulled along for the ride.
“But the wheels fell off last fall. According to Statistics Canada, the unemployment rate rose to 8.4% in May -- the highest in 11 years. Ontario, with its heavy manufacturing base and ties to the ‘Detroit Three’ auto companies, is especially hard hit; Ontario lost 234,000 jobs, or 14% of its entire manufacturing work force, since last October. Ontario will lose even more jobs this summer as GM and Chrysler dramatically cut auto production. Alberta has slowed dramatically too. Just a year ago in Alberta, every skilled construction worker was working overtime on oil sands projects. Now many projects are postponed and workers are getting laid off. The unemployment rate in Alberta nearly doubled from May 2008 to May 2009, to 6.6%, and is heading higher.
“For Canada, this credit cycle will probably be worse than the one in the late 1980s. According to RBC Capital Markets, annualized loan loss provisions for the entire Canadian banking system peaked at 2.88% of all loans in 1988. As of April 2009, this figure was just 0.77%. Over the next year or two, loan loss provisions should easily triple or quadruple, which would cut deeply into profits and capital.”
Gold Hasn't Been Kind To Us...But That May Change......
Gold…If Not Now, When
By Chris Mayer
Gold stocks are taking a drubbing, as are most of the other classic inflation hedges. Why? Because inflation fears have abated. The deflationist view of the world is the one that now prevails. That’s why 10-year Treasury yields have dropped all the way down to 3.35% from a high of 3.95% one month ago.The deflationist view, which makes some compelling and elegant arguments, maintains that the credit losses in the U.S. financial system far surpass the size of the government’s monetary and fiscal stimulus. All those trillions in bad loans – plus the yanking of credit from consumers and businesses – overwhelm new money creation. The Fed, in other words, is trying to fill a swimming pool with a Dixie cup. This might take a while.Therefore, this reasoning goes, the greater risk is that asset prices continue to fall. This is the classic debt-deflation point of view. I don’t dismiss these arguments lightly. I’ve spent some time going over the arguments of some of deflation’s most persuasive and sophisticated advocates – like the successful Treasury bond investor, Van Hoisington and the insightful economist, David Rosenberg.Still, I think the endgame is for inflation -- which is when paper currencies buy less. Given the choice of holding U.S. dollars or real assets (such as gold or iron ore or land), I’ll take real assets.Over the weekend, Thomas Donlan at Barron’s presented a good analogy for it all. He asked what you would rather own as store of value, bananas or corn? The obvious answer is corn, because you can store it for months. Corn lasts longer than bananas. Fruit rots. You can also use corn for a lot of different things -- corn flour, animal feed, etc. You can also arrange to sell corn into the future, say, by arranging to deliver corn so many days from today.Corn can lose value, obviously, as can any real asset. But it is a better choice than holding the bananas.Donlan likens paper money to bananas and natural resources to corn. “In the modern economy,” he writes, “a barrel of oil is much like a bag of corn… Paper money and bank balances are more like the bag of bananas.” When currency rots, we call that inflation.The problem with the deflation arguments long term, it seems to me, is that you are betting against a government’s ability to destroy its own currency. Governments are seldom good at anything, but one thing they are undeniably good at is destroying their own currencies. The dollar has lost 95% or so of its value since 1913, the year the United States established the Federal Reserve. Enough said.Long-term, betting that a government will safeguard its currency seems like a very bad bet. Deflation – or at least symptoms of deflation – may prevail today, but the real question is for how long. My own crystal ball is frustratingly cloudy on the issue. But the great rewards in investing are always with the out-of-consensus view. The upside from holding Treasuries seems hardly worth the risk of being wrong, for instance. On the other hand, if we are right about currency rot, then we’ll make multiples of our money on natural resource stocks. The downside on many commodities seems low, because the prices have already corrected. In several instances, as with oil and natural gas and iron ore, we are already below the marginal cost of production for much of the industry. So unless we don’t need these things at all anymore, the simple economics of the businesses involved help support a certain price structure. And anyway, as far as the case for gold is concerned, I’ve been arguing that it is less about inflation or deflation than it is about creditworthiness in general. Gold does well during times of credit troubles. It did well in the 1930s, for instance, even though that was largely a deflationary era. Banking troubles made investors turn to gold. On that front, we’ve got plenty of banking troubles on the way. Yesterday’s Wall Street Journal headline, buried in the middle of the paper, hints at what’s to come: “Pick-a-Pay Loans: Worse Than Subprime.” The piece begins: “For the third straight month, option adjustable-rate mortgages are generating proportionately more delinquencies and foreclosures than subprime mortgages, the scourge of the U.S.”These loans require only partial-interest payments each month. So the loan balances on many of these loans have actually gone up while housing prices have tumbled. Bad combination. As of April, 36% of these loans were at least 60 days past due. These troubled loans will mean more large losses for banks -- in particular for Wells Fargo, J.P. Morgan Chase and others who were active in these markets. Wells Fargo, the WSJ points out, has a mountain of this stuff -- $115 billion of it. So as long as we have banking troubles, we have the potential for fear to return in a big way. And that is when gold does well…with or without inflation. But I’m not counting inflation out just yet.I’d use the market weakness in the gold price and in gold shares to pick up your favorite gold miners.
Freedom Ain't Free
The High Cost of Liberty
Recently we here in the U.S. celebrated the 233rd Anniversary of our Independence Day. It is, as I hope you remember from your history lessons, the day upon which Congress approved the Declaration of Independence. The legal separation from England, however, actually occurred on July 2, two days earlier. This is when the Second Continental Congress voted to approve a resolution offered by Richard Henry Lee of Virginia, which had been tendered to the Congress on June 7.
From it we draw the historic words, “That these United Colonies are, and of right ought to be free and independent States...” The resolution was tabled for the day and taken up on June 8. But because some of the colonies, including Maryland, New York, New Jersey, Pennsylvania and Delaware, had not authorized their delegates to vote for independence (imagine that: politicians who are faithful to their constituents) the congress recessed for three weeks for the men to return home to find their colonies’ will.
Before recessing however, the Congress appointed the famous Committee of Five, John Adams (MA), Benjamin Franklin (PA), Thomas Jefferson (VA), Robert Livingston (NY), and Roger Sherman (CT), to produce a document that laid out the case for independence. The committee tasked Jefferson with the writing of the document, and the bulk of the work was his. After his initial draft, he presented it to the committee, who made only minor revisions. Then it was off to the Congress, where the debate really commenced.
The Congress re-convened on June 28, 1776.
It had been a hot spell in Philadelphia. Jefferson records that on his way to what is now known as Independence Hall, he stopped to look at a thermometer. Even in the early morning, it was already 80 degrees and rising. Inside the hall, which was all closed up to avoid the heated debate being heard in the streets outside, some have estimated the temperatures at 100 degrees. In the humid, bug-infested convention (there was a livery stable next door), the temperature was not the only thing rising.
Jefferson’s own design was to create a document that by its plainness and simplicity would be instructive and convincing, with arguments so plain and straightforward that none could contest them as they set forth the case for independence. Hoping to create a document that would convince those who read it, not the least of which were many fence-sitting colonists, he listed a long section of the crimes of the King against the colonies, many of which were eventually omitted. He also had written a substantial portion on the illegitimacy of the slave trade in MEN (capitalization was Jefferson’s). That too was eventually stricken from the finished edit.
There were those who refused to vote. There was even an abstention from New York in the final tally. The young nation was being stressed at every seam in that hot, humid hall.
But on July 2, 1776, the cornerstone of the new nation had been formed. A day later, July 3, future president John Adams wrote to his wife Abigail the following words.
“The second day of July, 1776, will be the most memorable epoch in the history of America. I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival. It ought to be commemorated as the day of deliverance, by solemn acts of devotion to God Almighty. It ought to be solemnized with pomp, and parade, with shows, games, sports, guns, bells, bonfires, and illumination, from one end of this continent to the other, from this time forward forever more.”
His spirit was right, even if his timing was off by a couple days.
What was once memorized by grade school children as a world-shaping piece of literature is now known by very few modern students.
However, it’s final lines bear repeating...
“And for the support of this Declaration, with a firm reliance on the protection of the Divine Providence, we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.”
Of the 56 men who signed the Declaration, some names are still common among us: Franklin, Jefferson and Hancock. But the remaining 53 have been largely forgotten. What kind of men were they? What did they stand to gain from this Revolution?
They ranged in age from 23 (Edward Rutledge of South Carolina) to age 80 (Ben Franklin of Pennsylvania). 24 of them were lawyers or judges, 11 of them were merchants of various kinds, nine were farmers, and the remaining members were ministers, doctors, and statesmen.
With just a handful of exceptions, these were all men of substantial education, property and public standing. As compared with the rest of the populace of the 1700s, they had blessings, eases, and pleasures in life enjoyed by very few. All of them had more to lose, than they had to gain.
John Hancock, who already had a bounty of 500 pounds on his head, was one of the wealthiest of the signers. From a family of considerable wealth, he inherited his mercantile fortune from his Uncle, Thomas Hancock. He was educated at Harvard, and had all that life could give him at the time. Yet he signed his signature with such size and flourish, that “it might be read without spectacles.”
He was not alone. The fever of liberty was running at a high pitch. Yet each of them knew the risks. Treason was punished by hanging. And the consequences did not end with themselves, but extended to their families as well. And there was already a massive English fleet docked in the harbor at New York.
And Hancock’s actions did not go unnoticed by the British. Nor did the those of the other suspected signers. All of them became ferociously hunted. Delegates from New York, William Floyd, Philips Livingston, Louis Morris, and Francis Lewis, each had their homes destroyed. Mrs. Lewis was captured and brutalized. Though later exchanged for teo British prisoners, she never recovered. The Floyds were able to flee from New York into Connecticut, where they lived as refugees for the next seven years. Upon their return, they found nothing left of their estate. Livingston, whose large possessions were confiscated, died two years later still working in Congress. Morris was deprived of his family for the next seven years.
Delegate John Hart of New Jersey, attempted to come home to see his dying wife, but was turned back by soldiers. As she lay dying, soldiers destroyed his livestock and burned his farm. He was hunted from pillar to post. When the manhunt finally relented, he returned to find his wife dead and buried. His 13 children had been taken away. He died three years later absolutely broken, never seeing his family again.
Judge Richard Stockton rushed home from Philadelphia to evacuate his wife and children. Betrayed by a sympathizer to the Crown, he was torn from his bed where they were hiding in the middle of the night and subjected to a brutal beating. He was jailed, starved, and finally released after becoming an invalid. He did not see the end of the war or its victory, and his family was required to live off of the charitable help of friends and strangers.
The list goes on and on. One heartbreaking, gutwrenching story after another. Each of sacred honor, fortunes sacrificed and lives lost or forever altered. Yet not one recanted. Not one relented. Not one failed to deliver on his pledge to the others.
And most remarkably, there was one man...a man who had the chance to see his family spared. A man who could have saved his two sons if only he had rejected the colonial revolution and supported the King. He was Abraham Clark of New Jersey. Clark had two sons who fought for the new nation. They were eventually captured and taken to the notorious British prison ship Jersey, where more than 11,000 American soldiers died. The two suffered most severely for the “crimes” of their father, brutally beaten and starved.
Clark was offered his two son’s lives if he would just come out in support of the King. To those of us who live so soft and comfortably 200 hundred years in their wake, it must seem astounding that with a broken heart, he said, “No.”
Recently we here in the U.S. celebrated the 233rd Anniversary of our Independence Day. It is, as I hope you remember from your history lessons, the day upon which Congress approved the Declaration of Independence. The legal separation from England, however, actually occurred on July 2, two days earlier. This is when the Second Continental Congress voted to approve a resolution offered by Richard Henry Lee of Virginia, which had been tendered to the Congress on June 7.
From it we draw the historic words, “That these United Colonies are, and of right ought to be free and independent States...” The resolution was tabled for the day and taken up on June 8. But because some of the colonies, including Maryland, New York, New Jersey, Pennsylvania and Delaware, had not authorized their delegates to vote for independence (imagine that: politicians who are faithful to their constituents) the congress recessed for three weeks for the men to return home to find their colonies’ will.
Before recessing however, the Congress appointed the famous Committee of Five, John Adams (MA), Benjamin Franklin (PA), Thomas Jefferson (VA), Robert Livingston (NY), and Roger Sherman (CT), to produce a document that laid out the case for independence. The committee tasked Jefferson with the writing of the document, and the bulk of the work was his. After his initial draft, he presented it to the committee, who made only minor revisions. Then it was off to the Congress, where the debate really commenced.
The Congress re-convened on June 28, 1776.
It had been a hot spell in Philadelphia. Jefferson records that on his way to what is now known as Independence Hall, he stopped to look at a thermometer. Even in the early morning, it was already 80 degrees and rising. Inside the hall, which was all closed up to avoid the heated debate being heard in the streets outside, some have estimated the temperatures at 100 degrees. In the humid, bug-infested convention (there was a livery stable next door), the temperature was not the only thing rising.
Jefferson’s own design was to create a document that by its plainness and simplicity would be instructive and convincing, with arguments so plain and straightforward that none could contest them as they set forth the case for independence. Hoping to create a document that would convince those who read it, not the least of which were many fence-sitting colonists, he listed a long section of the crimes of the King against the colonies, many of which were eventually omitted. He also had written a substantial portion on the illegitimacy of the slave trade in MEN (capitalization was Jefferson’s). That too was eventually stricken from the finished edit.
There were those who refused to vote. There was even an abstention from New York in the final tally. The young nation was being stressed at every seam in that hot, humid hall.
But on July 2, 1776, the cornerstone of the new nation had been formed. A day later, July 3, future president John Adams wrote to his wife Abigail the following words.
“The second day of July, 1776, will be the most memorable epoch in the history of America. I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival. It ought to be commemorated as the day of deliverance, by solemn acts of devotion to God Almighty. It ought to be solemnized with pomp, and parade, with shows, games, sports, guns, bells, bonfires, and illumination, from one end of this continent to the other, from this time forward forever more.”
His spirit was right, even if his timing was off by a couple days.
What was once memorized by grade school children as a world-shaping piece of literature is now known by very few modern students.
However, it’s final lines bear repeating...
“And for the support of this Declaration, with a firm reliance on the protection of the Divine Providence, we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.”
Of the 56 men who signed the Declaration, some names are still common among us: Franklin, Jefferson and Hancock. But the remaining 53 have been largely forgotten. What kind of men were they? What did they stand to gain from this Revolution?
They ranged in age from 23 (Edward Rutledge of South Carolina) to age 80 (Ben Franklin of Pennsylvania). 24 of them were lawyers or judges, 11 of them were merchants of various kinds, nine were farmers, and the remaining members were ministers, doctors, and statesmen.
With just a handful of exceptions, these were all men of substantial education, property and public standing. As compared with the rest of the populace of the 1700s, they had blessings, eases, and pleasures in life enjoyed by very few. All of them had more to lose, than they had to gain.
John Hancock, who already had a bounty of 500 pounds on his head, was one of the wealthiest of the signers. From a family of considerable wealth, he inherited his mercantile fortune from his Uncle, Thomas Hancock. He was educated at Harvard, and had all that life could give him at the time. Yet he signed his signature with such size and flourish, that “it might be read without spectacles.”
He was not alone. The fever of liberty was running at a high pitch. Yet each of them knew the risks. Treason was punished by hanging. And the consequences did not end with themselves, but extended to their families as well. And there was already a massive English fleet docked in the harbor at New York.
And Hancock’s actions did not go unnoticed by the British. Nor did the those of the other suspected signers. All of them became ferociously hunted. Delegates from New York, William Floyd, Philips Livingston, Louis Morris, and Francis Lewis, each had their homes destroyed. Mrs. Lewis was captured and brutalized. Though later exchanged for teo British prisoners, she never recovered. The Floyds were able to flee from New York into Connecticut, where they lived as refugees for the next seven years. Upon their return, they found nothing left of their estate. Livingston, whose large possessions were confiscated, died two years later still working in Congress. Morris was deprived of his family for the next seven years.
Delegate John Hart of New Jersey, attempted to come home to see his dying wife, but was turned back by soldiers. As she lay dying, soldiers destroyed his livestock and burned his farm. He was hunted from pillar to post. When the manhunt finally relented, he returned to find his wife dead and buried. His 13 children had been taken away. He died three years later absolutely broken, never seeing his family again.
Judge Richard Stockton rushed home from Philadelphia to evacuate his wife and children. Betrayed by a sympathizer to the Crown, he was torn from his bed where they were hiding in the middle of the night and subjected to a brutal beating. He was jailed, starved, and finally released after becoming an invalid. He did not see the end of the war or its victory, and his family was required to live off of the charitable help of friends and strangers.
The list goes on and on. One heartbreaking, gutwrenching story after another. Each of sacred honor, fortunes sacrificed and lives lost or forever altered. Yet not one recanted. Not one relented. Not one failed to deliver on his pledge to the others.
And most remarkably, there was one man...a man who had the chance to see his family spared. A man who could have saved his two sons if only he had rejected the colonial revolution and supported the King. He was Abraham Clark of New Jersey. Clark had two sons who fought for the new nation. They were eventually captured and taken to the notorious British prison ship Jersey, where more than 11,000 American soldiers died. The two suffered most severely for the “crimes” of their father, brutally beaten and starved.
Clark was offered his two son’s lives if he would just come out in support of the King. To those of us who live so soft and comfortably 200 hundred years in their wake, it must seem astounding that with a broken heart, he said, “No.”
Wednesday, July 1, 2009
30 Little Known Facts about America
Don't know how deep all this goes; but these are good conversational points.
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