by Charles Hugh Smith, Of Two Minds:

Any domino-like expanding crisis will unfold in a status quo lacking any coherent response.

Longtime readers know I’ve often referenced The Fourth Turning, the book that makes the case for an 80-year cycle of existential crisis in U.S. history.

The first crisis was the constitutional process (1781) following the end of the Revolutionary War, whether the states could agree on a federal structure; the 2nd crisis was the Civil War (1861) and the 3rd crisis was global war– World War II (1941).

According to this proposition, we’re fast approaching an existential crisis that could upend the status quo in a fundamental fashion.

While there is a great deal of historical evidence for cycles, predicting a major transition based on previous cycles is obviously a guess rather than a certainty.

So will everything change in 2020-25, or will the present simply extend another five years? We have to start by defining what qualifies as fundamental change. In my view, if the current distribution of income, power and ownership of capital remains unchanged, nothing of import has changed.

There might be dramas playing out in the political theater, but if the asymmetrical distribution of income, power and wealth doesn’t change, then the dramas are merely another form of distraction / entertainment.

The other type of change that qualifies as fundamental is the breakdown of the structures of everyday life: the distribution, cost and availability of food, fresh water, energy, healthcare, income and basic security.

One way to measure the vulnerability of any society to breakdown or a fundamental reshuffling of income, wealth and power is to examine its buffers–the resiliency and reserves of the core systems.

I often reference buffers, as these are largely invisible to everyone who isn’t intimately familiar with the workings of each system: the reserves that can be drawn upon in crisis, the redundancies, the staff and management training to handle crises, and so on.

Two examples that are often referenced are the supplies of gasoline in service stations and the food in supermarket shelves and coolers. Each commodity–food and fuel–are largely “just in time,” meaning that the supply and distribution system is a long, complex chain with minimal buffers, as the systems have been optimized for efficiency not resilience.

Any disruption in any link of the supply chain will break the entire chain.

The ultimate buffer for any nation-state is its currency, a.k.a. “money.” If its currency still acts as a store of value globally, the nation in crisis can issue more money to buy whatever is needed to alleviate the crisis.

If trust in the value of the money has been lost by over-issuing new currency, this buffer has been depleted.

Social and cultural buffers are more difficult to assess. Deeply corrupt societies may find that the public’s patience with the abuses of power that manifest as endemic corruption has thinned to the point that mustering the police and army no longer protects the status quo.

Natural systems also have buffers, and the industrial civilization we inhabit takes a variety of natural resources–fuels, fresh water and fertile soils–for granted, assuming that brute force (more chemical fertilizers, more wells, more fracking, etc.) will guarantee ample supplies of these essentials.

Financial systems have multiple points of resilience or fragility. If we take the 2008 Global Financial Meltdown as an example, the Federal Reserve created or backstopped / guaranteed an astonishing $27 trillion out of thin air to restore trust. (The first tranches totaled $16 trillion.)

It worked a decade ago, but saving the banks does not necessarily restore the “animal spirits” of borrowing more money to chase assets higher, and it certainly doesn’t boost investments in productivity, the ultimate source of broad-based prosperity.

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