The Role of Finance in Our Structural-Demographic Crisis

Peter Turchin


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It is strange to actually live in a society experiencing a structural-demographic crisis, after studying many examples of such crises in the past. Unfortunately the crisis is developing largely according to the classical pattern. The degree of political polarization is at its highest levels since the (First) American Civil War. Intraelite infighting is tearing the Republic apart. There has already been at least one sacrificial victim (see my post Days of Rage). In general, things are falling apart faster than I expected. But this is the nature of political violence outbreaks: they are like earthquakes in that pressures for them build slowly and fairly predictably, but the actual timing of the quake is very difficult (probably impossible) to predict with any accuracy (see my explanation here).

My prediction for a violence spike peaking in the early 2020s, which I made a decade ago, was based on structural, slowly developing drivers. The most fundamental structural-demographic force is labor oversupply which drives popular immiseration and (after a lag) elite overproduction. Both of these trends are already at levels that they previously reached during our first Age of Discord (see graphs here). But these trends require decades to build and subside, so what helped me to pinpoint the time frame of the crisis to the early 2020s?

One of these faster moving drivers is demographic: the numbers of people aged between 20 and 29 years old. This is the age group that typically supply the shock troops to each of the warring sides in revolutions and civil wars. We are currently in the middle of this “youth bulge” (it will start subsiding after 2020).

Another important factor is economics. The dynamics of economic growth in capitalist societies is very complex. There are a suite of cycles or, rather, boom-bust sequences, as these “cycles” don’t have fixed periods. Instead, they tend to operate on “characteristic” time scales, ranging from years (the business cycle) to decades. One of the most important longer cycles is known as the Kondratiev Wave, because it was first described by the Russian economist Nikolay Kondratiev. Most economists don’t believe in the reality of these “K-waves” that recur every 40-60 years. However, Kondratiev recognized the cyclic pattern in the 1930s, and since then we’ve had two more K-waves, happening pretty much as he hypothesized. It’s actually one of rare economic predictions that have been supported by the subsequent history.

We are currently living during a negative phase of the current K-wave (sometimes known as “winter”), which is associated with stagnating economic growth, unwillingness of business to invest in production, high unemployment, and a general pessimistic mood. According to Russian researchers (like Korotayev, Akayev, and others) the current K-wave should turn around during the mid- or late 2020s. So “winter is here” for the next 5-10 years.

There is also a 50-year cycle of political violence, which I have termed “fathers-and-sons” cycle. Since the last spike was c.1970 (which was preceded, by other spikes in c.1920 and c.1870), the next one should come around 2020.

These and other drivers, which I considered 10 years ago, pointed to the early 2020s as the period when the American social system would be experiencing the greatest stresses (which historically usually end in revolutions and major civil wars). But what I haven’t explicitly considered is the role of finance economics in contributing to the crisis.

This is why I found the recent book by Steve Keen, Can We Avoid Another Financial Crisis?, so interesting and illuminating.

Steve is one of the “heterodox economists” (meaning that they are pretty much ignored by the mainstream). His starting point is the theory of Hyman Minsky (another economist who was largely ignored by the profession). Minsky’s theory makes a lot of sense to me, however. Let me try explain it in one paragraph.

The main dynamical driver is the magnitude of private debt (combining what’s owed by both corporations and households) in relation to GDP. Currently this indicator is at 150% of the US GDP. Why is it bad?

Actually, for a while, as private debt grows, things are just fine because expanding credit drives economic growth (think of new housing construction during building booms). But eventually the cost of servicing accumulated debt starts to depress consumption (the more you pay for your mortgage, the less money you have to buy things). Falling consumption results in overproduction of goods and declining profits for businesses, which makes investment a losing proposition. Credit collapses, businesses go bankrupt, or downsize their labor, less employment means even less consumption, and (absent large-scale increase in government spending) the economy enters a downward-trending “death spiral” of a prolonged depression.

The precise timing of the turn-around point is very difficult to predict (it’s another example of earthquake-like dynamics). Yet Steve Keen is one of very few economists who predicted the General Financial Crisis (GFC) of 2007–2008.

If Steve is right in identifying the main cause of the GFC, then we should listen to what he says in the book about the likelihood of another crisis in the next few years. Unfortunately, the news is bad, because we are still at a very high level of private debt in relation to GDP.

I suspect that the Minsky model of Steve Keen would be a good fit with other models on which the structural-demographic theory rests (“suspect” because I haven’t yet looked into the actual equations). More generally, financial crises are a recurrent feature of structural-demographic crises, and I think I understand why (this, though will have to be deferred to a future post).

I think that Can We Avoid Another Financial Crisis is an important book. It is not an optimistic story. If Steve Keen is right, labor oversupply will not abate in any near future. This means popular immiseration will continue to increase, driving the rise of more politically entrepreneurial elite aspirants, ever greater polarization, and political violence. In other words, the current prognosis is a gloomy one.

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al loomis

there is no office of economic management in capitalist societies, their history is ‘natural.’ but i suspect it could be done in a socialist democracy. communication and computation power are in place, all that is lacking is democracy, to drive society towards the welfare of its members.

john samual

I think the GiNI coefficient and social anxiety play a large portion in the up coming crash. In 2014 the GINI was 0.48 and most of Trump policies will increase GINI quickly and his management increases social anxiety. I expect next summer will be a very interesting summer.

Steve H.

The Gini coefficient ranked Bloomington, Indiana as having the highest income inequality in the country. It completely failed to capture the cultural assets of a college town with a great music school, where you can see for free what would be high-cost tickets elsewhere. It’s skewed by a single company which produced a billionaire or so, countered by many people with low incomes who choose to stay based on quality of life at low price.

john samual

I agree with you. I am trying to find a measurement of wealth inequality that correlates to social unrest. Even looking at only the economic model does not capture the full meaning because there are social dynamics. I have tried to do research on the subject but most scholarly papers are pay for view. I want to write an article about wealth inequality and social dynamics in relationship today political issues. My background is system engineering, data mining and machine learning and I want to apply my skills to politics today. See about an idea add another feed back from the people to the US government.

J. Daniel

“I have tried to do research on the subject but most scholarly papers are pay for view.” Is there a university near you? Maybe you can use the library and/or the internet on campus may permit access to many electronic journals.


Regarding stature, did you control for ancestry?


Can we find those well being indicator by country on internet?

john samual

I have been trying to find some type of indicator. Opioid deaths rose over 500%, 47% of the population does not have $400 in savings. There has been a 6.1% increase in suicide for ages 45-64 since 2000. Mass shooting have risen. We all see the results, but have there been studies between wealth inequality and unrest. Given the raw data, I can manipulate, analyze and display it. I have been data mining the Census Bureau and Bureau Labor Statistics, so I can do projections but I am looking for historical data that I can compare with. I have studied early Chinese dynasties and found similarities, but no hard data.

Peter van den Engel

It can also be driven by expectations inverted to the outcome. You will probably not find them in statistics; apart from the fact people usually give the answers in questionairies they are supposed to give/ but can derive them logically from its history.
When fi incomes are stalling, the failure of integration of minorities, rising state debt projected on a failing future, percentual rise in elderly, so there seems to be less future, unrest provoking irritation, etc. The more factors align, the stronger the evolutionary difference becomes.

Tom Hite

Your missing spike of 1820s might be the result of new information technology, called the penny newspaper. Before the penny newspaper only the well to do read newspapers and were “informed”. After the penny newspaper became popular, anyone with a penny could become informed:

So, after about 1820, anyone could read, but only the rich (or connected) could write. This was the beginning of the MSM which peaked just as the Internet started to catch fire around the turn of the 21st century. Then when social media hit (2010?)… suddenly NOW anyone can speak. The other shoe has dropped. There is a massive disintermediation of the MSM starting as of about 2014(?). Could social media be important enough bump the timing or tragectory of these cycles around a bit?


Interesting point about the penny newspaper!

Also wonder whether the spike of the 1970s is the new ‘high’ we might expect under conditions of modern society – that is, well-funded police force, intelligence services, lots of bread and circuses.

Tom Hite

Yes, that makes sense for the U.S. I will put Ages of Discord on my reading pile.

There was an enormous opening of new land in the American west in 1820s~1850s, that could vent large populations with a promise of a new start. I am reading Mark Twain’s book Roughing It which talks about this. This book is about Twain’s adventures in the west in the period 1850s to 1860s. Twain writes that many hopeful and violent men were drawn to the frontier. This could have bled off a lot of … potential conflict…?

Thinking about it again, it seems like new tech would make new elites and therefore should escalate inter-elite conflict. Perhaps the penny newspaper had that effect in Europe? Brought Marx to the forefront?

Nick Weech

I also have a huge respect for Steve Keen’s & have read his book ( and others) & hope he’s wrong- but fear he’s right.

The 1% just don’t care as they believe they’re sitting pretty and have enough money to buy total security: But look at #Harvey, there’s no escape from huge potential calamities that will affect us all, rich and poor. Things money alone can’t buy.
As Adam Curtis says, They, the High Achievers, are trying to manage basically unmanageable forces- and will fail

Al K. Annossow

I know a high achiever. He has bought gold that resides in a bank in Switzerland; he can borrow against it in any currency. He is investigating permanent residency in Austria or Switzerland. Others choose New Zealand. They assume the bankrupt government will come after all their money. They have contingency plans. A non-lethal hurricane only take one of their assets.

steven t johnson

It is not clear to me that a period of economic stagnation necessarily constitutes a fiscal crisis of the state. Unless I misunderstood, isn’t that also an essential factor in the structural-demographic theory?

When trying to think about how the theory might apply to the US, in relation to the fiscal crisis of the state, the boundaries of the US state are not clear. At this moment, the dollar is the reserve currency of the world economy. The military dominance of the US is nearly global. I am somewhat confused as to where one should look for data about the cycles: The official national territory of the US? Or a larger arena?

This kind of problem seems to be closely related to the problem of identifying the proper regions for a cyclical analysis in, for example, France. Should one examine data for the north, with its economy so closely linked to that of modern Belgium and the Rhineland? And should one separately analyze data for the south, where the economy is so Mediterranean? What should be the appropriate units of analysis for Italy? How does a demographic-structural analysis of Spain incorporate the New World empire?

On the one hand, it seems there might be a tendency to reserve analysis for units where it applies and tacitly omit other units, where its lack of applicability can be read as simply not being a unit at all. Might this be a kind of Texas sharp shooter scoring?

On the other hand, the apparent existence of the cycles, as provocative as the idea is, does leave one uncertain how to incorporate broad historical changes. How did the price revolution of the sixteenth century affect the progress of the cycles in Europe?

In a related point, I’m not sure how absolute changes in population size and density affect the theory. The demographics seem to refer to relative changes within the whole, the percent increase of elites, or the percent decrease in resources available to the masses.

On Minskyan economics, I’m not sure that the existence of Kondratiev waves is even acknowledged, much less incorporated into the analysis.

Steve H.

You can follow through on Minsky with Modern Monetary Theory. An explanation that’s true enough for a starting point is that a sovereign government which makes its own money cannot go bankrupt. It can always pay its debt. So the distinction of fiscal to monetary policy correlates to a worker v elite distinction. Fiscal policy, when the government takes on debt and spends it, is a driver for worker well-being, while monetary trends towards elites.

Steve H.

I believe those governments payments were precious metals based. Fiat currencies are able to avoid bankruptcy, but only if the currency continues to be accepted, or you get a Weimar situation. And the U.S. has been brutal in enforcing its status as the world’s reserve currency, both militarily in the world (Libya for example), and within it’s own borders. Yves Smith:

“To be the reserve currency issue, you need to be willing to run trade deficits on an ongoing basis so there is plenty of your currency in foreign hands. That is equivalent to having your domestic demand support foreign jobs, or exporting jobs.”

mart malakoff

While i disagree with Niall Ferguson (historian at harvard which i have heard is a good school) on many things, he made a similar point about sovereign governments—which suggests that Modern Monetary Theory is flawed. (Ferguson was Oxford trained , and the Ferguson, Missouri protests were named in his honor—-and he has a statue there, and one in DC–due to recent violent protests, they replaced the MLK monument statue with one of Niall Ferguson shaking hands with the heads of N Korea and ISIS–holy trinity). )

I read a review of N Ferguson ‘s his book about english economy in the NY review of books.

(It was interesting since i had never heard of england, being from little rock, arkansas and wash, dc in usa. Due to political correctness, all references to events before 1776 or places not in america have been removed from the public school curricula. SJW’s and PC types have these speech codes so the fact that according to accepted (christian) science , the world is less than 400 years old, and a christian country. Also its not a nation (partly) of immigrants, since there are no other countries—those who claim otherwise are deported (thrown off edge of the world). )

I got from that review that his theory basically could be written as a 3 species Lotka-Volterra type system . (ie 3 things which interact nonlinearily — predator, prey, and prey of prey—except his model was of sectors of the economy. Peter Turchin does some theories of that type–if I could get in a grad program, i’d maybe apply to that one (although i’m more into math than simulations).

(To an extent my view is that alot of history, and ecology, can be summarized with a few equations on one or a few pages. It leaves out detail but is just a summary and possibly useful as an organizing tool. I studied theoretical biology as a student—to many biologists and ecologists in my experience , this view was unpopular and unwelcome. They had a sort of Luddite or ‘the robots are coming’ attitude–you might make them obsolete. I dont think so–data and theory can coexist, and even ‘mutually aid’.

(This is a term from some book by some russian nobleman noone has ever heard of nor should –i think it was anti-science, anti-darwinian and anti-evolutionist, instead promoting ‘intelligent design’ in contrast to the pro-social darwinists like herbert spencer–famous economist, evolutionist (discovered ‘survival of the fittest’ which is often attributed to darwin, who likely plagiarzed Spencer’s theory), and feminist (supported equal rights for womyn until he realized they might want alinomy–pay for ‘womyn’s work’ (which should be free since its like slave work—free as air and water) –so rejected since it conflicted with economic theory. That may have been Spencer’s ‘biggest mistake’ like the one Einstein made on cosmological constant and nuclear weapons). (Spencer had 2 sons, both who may live in DC area, robert (‘islamophobe’) and richard (white supremacist).

–digression on MMT–
MMT seems to be the trend among some groups but i think its wrong (or else often so vague as to be able to prove anything). If you say that in these groups you are seen as a heretic , and excommunicated from these ‘progressive’ economic groups –which basically follow a Stalinist-type model of ‘progressivism’ (often called ‘green’ rather than communist or socialist, and so far they dont have any gulags to send people to—they just kick out of their groups which operate on principles of ‘democratic stalinism’ . Alot of people who promote MMT
seem to be analogous to fundamentalist christians who havent read much of the bible, or anarchists who havent read on that–they just are it—and actually from an anarchist view, that is fine since no one authority can definite it for anyone else, and also some ‘atheists’, ‘skeptics’ etc who don’t believe in god but believe in evolution and Richard Dawkins (which is the only thing they’ve read on the subject though sometimes they haven’t nor have to–you just believe in him because its rational. Some MMT people seem not to have read it. ) .
(Neill Ferguson i gather has said things like colonialism was the best thing that ever happened to africa, and Keynesian economics is flawed because Keynes was homosexual, couldnt have children (though some do –i assume they are like some plants and animals which can reproduce asexually, and without committing sin either–being gay is not a sin in itself to many, so long as you are celibate) and hence had no sense of time or ability to theorize about future generations–sometimes useful for economic theorizing (because its not like a ‘one shot game’ , but more like a ‘repeated game’ —which have at times complicated dynamics. I think childless people and gays actually may be able to theorize about the future, even plan and design policy for it, but I’m not at harvard so likely wrong.) .

I saw a review of one book by NF which made the point you do here (though in more detail—sovereign governments could go bankrupt if they mismanaged things. )

another digression, on ‘rational expectations’ theory—————–

Technically or theoretically one could say they don”t go bankrupt because they cant (MMT) –instead they have a revolution, which means their banks and money are no longer valued (or at same level).
So MMT proves government can’t go bankrupt. (But it doesn’t explain why governments get overthrown—though it can be that doesn’t happen either—the only thing that happens is it changes its name (eg from Russia to USSR, or ‘english colony’ to USA. Easy to do as printing money—maybe even print new kinds—eg instead a 1$ bill, you print a $1,000,000 bill (like I heard Zimbabwe did) which buys same amount of milk as $1 used to. . (In physics, one can call this a relativistic , gauge, or coordinate transformation).

This to me is the Robert Lucas (noble in econ) ‘rational expectations’ view of economics and history—basically by definition there is no involuntary unemployment or unemployment at all—people ‘without jobs’ actually have a job called ‘unemployed’. In this theory, markets are always at equilibrium,and prices are stable. The only reason people think there are economic crisis is r changes of beliefs , perceptions, etc (and those also may actually not change—the only things that change are words—people say ‘market is up’ rather than ‘down’. There’s even a theorem on this. This is also like changing moral codes—one day something is bad, and next its good, and reverse (eg smoking)) .

However like energy of the universe (some positive and some negative) sum of ‘bad and good’ remains constant. (usually one has something like ‘positive E’= ‘negative E’, so ‘good plus bad’ = 0 or G = -B.

Pieter V.

Not to be pedantic, but there’s an important nuance: a sovereign government which issues it’s own currency can pay any debt *denominated in that currency*, not in others (and money printing can influence exchange rates). It also does not mean that there cannot be repercussions to profligate money creation by the state (inflation, distrust, inefficiencies, etc). Keen has done some writing on concepts of Endogenous Money, Monetary Circuit Theory and Modern Money Theory, they all offer some key insights about the money system you don’t find in mainstream economics.

Princes of the Yen by Richard Werner shows how central bank money creation can be used to transform societies. There’s a free documentary version of the book (same name) on Youtube, well worth a watch in my opinion.


The USA sovereign forfeited the Constitutional right to literally print money to the semi-private Fed, which creates fiat debt money reserved by Government debt primarily, at least formerly; now the reserves of the Fed are largely toxic waste carried at fictitious values swept under the carpet by the private banks (i.e., the Fed is insolvent).

The Congress would have to clip the Fed’s and the private bankers’ wings and take back the ability to mint its own money. Kennedy was allegedly assassinated for suggesting something like this. A trillion “sovereign dollars” distributed to American households on the basis of need would jump start the economy with little inflationary impact given current labor market conditions.

Wouldn’t it be nice if Congress took back the Constitutional right to mint money? Of course, in order to control for the structural foibles of free-spending politicians, the entire political system would also have to be cleaned up, with term limits, nullification of the Citizens United decision, campaign finance reform, etc.

America is strangling itself on its own contradictions.

Loren Petrich

The term “finance capitalism” was invented by Marxist economist Rudolf Hilferding in 1910, as part of his study of German financial institutions back then and how prominent they were getting, even to the point of dominating the non-financial parts of the economy. Some early-20th-cy. Marxists were optimistic enough to consider finance capitalism the final stage of capitalism, before capitalism destroys itself because of its “inner contradictions”. Marxists often use “contradiction” as a synonym for “conflict”, though Bertrand Russell considered it a usage that no self-respecting logician can approve of.

But one does not have to be a Marxist or a socialist to dislike finance capitalism, and plenty of believers in more ordinary sorts of capitalism have disliked the financial world. Consider the popularity of banker conspiracy theories among some parts of the far right. Also consider the stereotype of Jews as rapacious capitalists, like bankers who demand their “pound of flesh”.

A more mainstream term is “financialization”: It has a graph that shows the US financial sector’s fraction of that nation’s GDP. From 1.6% in 1860 to 1.1 in 1880, it then rises rather bumpily, reaching a peak of 5.8% in 1931. It then declines to 2.0% in 1943, and starts rising again. By 2006, it reached 8.3% (my measuring of a graph).

A related term is “casino capitalism”, describing a tendency to chase speculative investments, complete with producing speculative bubbles that tend to burst.

Loren Petrich

As to why financialization and finance capitalism, I think that it’s from the dynamics of lending at interest. This causes the lenders to get money from the borrowers, and if the lenders are careful not to spend all their earnings, they get more and more money. So they may end up sucking more and more money from the rest of the economy, reducing it to poverty and indebtedness. This also has the result that there is not much to put one’s money into except financial speculation. Thus producing financial bubbles that grow and grow and grow until they burst.

As to political violence, the Charlottesville rally is rather obvious. Neo-Nazis, Ku Klux Klansmen, and other white supremacists marched there and got into fights with protesters of them. One of them even attacked some of their opponents with his car, killing one of them and injuring several. Antifa was there, and it got involved with some of the violence. The police were not much involved, claiming that they were outgunned by the white supremacists. This is in contrast with other police forces’ military-occupation-style confrontation of Black Lives Matter protesters.

The “Black Bloc” or Antifa has been a fixture of US left-wing demonstrations for some time, smashing windows, setting fires, and the like. Most of the left dislikes them, and some on the left consider them a false-flag operation: police provocateurs for making the demonstrators look bad.

I’ve found this incident, where some Antifa people tangle with some BLM people at an anti-white-supremacy rally:

But no politicians are willing to express sympathy for the BB/Antifa. That is unlike President Trump, who has expressed sympathy for the Charlottesville white supremacists, trying to imply that both sides are equally bad.

Tom Hite

False flag? You’ve been reading MSM (Plutocrat owned and operated). If you want to know Antifa, talk to one yourself. They are just people that can share a particular profile (fatherless, drugs, white, intelligent, angry, age 17-30, raised by single mom on welfare) Here is a video of someone who has left the Antifa:

ishi crew

I’ve known alot of people who might vaguely be associated with antifa, though (see salon magazine) that group varies from people primarily concerned with supporting antiracism (ARA), some communists and socialists, and then some ‘insurrectionist anarchists’ (typical black blocers), some ‘anarcho-primitivists-derreck jensenites/zerzanites, and then more ‘liberal’ anarchists –murray bookchinites and noam chomskyites, and also christian anarchists in tradition of dorothy day (catholic worker), and some people inspired by people like MLK and CLR James. .

they range from people from broken families, to -people with broken marriages and durg/alochol etc problems, to mid and upscale college students and some professors, and writers and musicians on small book and record labels, and small organic farmers and software developers–trying to make a. living outside of major corporations.

By one view Antifa is anybody who goes to these protests; possibly the more correct view is Antifa is that subset of people who go to these protests who are sort of the militant, black clad, club welding types—who tend to be the most ignorant and sometimes arrogant—basically the flip side of the coin of people they are fighting against. (alot of them dont care about going to jail because they dont have anything better to do–and also advocate others do the same thing—like that nazi who killed a protestor in va (no imagination, no education really…) , and also if they do go to jail they can become a ‘hero’ and ‘prisoner of war’–and if they get out maybe get a police settlement or make money describing their heroism in talks and books.)
you may make more money and get more acclaim by throwing one brick than you will from passing 15 college math classes. (se Brandon Darby, famous from Katrina–‘anarchist’ now paid shill for breitbart and co.)

Just like that vile interviewer on that youtube. People like that flip from being ‘far left’ to being nazi, or from being atheists, to fundaemtnalist christian, or from christian to muslim, from totally high drug pushers to totally sober sobriety counselors in one day—whoever pays. i’ve seen it in this area–far left anarchists turn into nazis overnite.

Even the more moderate people usually have a very limited understanding of what they are doing and talking about even if they have PhD or are in grad school. They protest because they feel its the right thing to do. A few know various tehnical things from programming to quantum computing, but politically they are naive. Money (and stupidity) make the world go round. Sortuh like early chomsky—anarchist, but funded by Dept of Defense at MIT.

Peter van den Engel

Yes, I see. But there are different types of cycles, as you eknowledge. Usually economy is leading and economic crises foretell social, like riots, which are more general than lynchins and terrorism. Anarchist terrorism fi of the 19th century and beyond is very different from islam terrorism today and therefore cannot be compared. It does not belong to the same culture. As parameters themselves they are evolving with cultural evolution, so as parameters not completely trustworthy. They contain a relative.

The spike in the seventies however was no economic crisis/ but a social youth revolution against an older elite generation, a fathers and sons cycle.
So the 50 year period in between is non related, a projection of a supposed identifier, which is not present in the cycle. It was not an economic crisis and the previous economic crisis was not a fathers sons cycle. As far as strict evenly spread timecycles have to be relevant for their own reason.

Another indicator, which does have a lot to do with financial economic cycles is that of technological invention. Which also indirectly correlates with fathers sons cycles, because younger people tend to be more entrepreneurial. The seventies spyke correlates with the invention of the transistor, which led to new music and radio, hence a new cultural consciousness/ but not a financial boom and bust cycle, because it did not attract a lot of money, apart from the fact it helped Japan in its technological revolution economicly.

The Minsky theory applies to financial crises, as in stock market crashes, because related money invests; speculates; in new industry, which is fast growing/ but still very inefficient. As a result, as soon as it does become efficient the stock market crashes with a lot of money evaporating into thin air, with a debt crises as result. So debt building itself was not the cause for the crisis and the paradox is that a more efficient economy leads to financial crisis. That is one of the big faults in the financial system in general, which has more to it than just describing or profetizing its types of crises.

The current cycle has again been involved in technological invention: the chip and internet; as projection of the transistor; leading to the stock market crash of 2000. This crisis however was quickly mitigated by the central bank: Greenspan, who inmediately lowered interest rates to levels not seen since the second worldwar… This eventually lead to the housing boom and the spike in state debt, that became the Great Recession of 2008 – 2014. This however was not a Minsky effect, because the ‘investments’ were not labor market related and certainly not new technilogical invention related.
It was money running away from that since the 2000 dotcom crash. It is not a normal economic crisis.
It is a financial crisis on its own.

The correlated trend, because new technology and globalisation have not stopped, is a los of jobs and ongoing state debt, so also a fiscal crisis. Private debt is still lagging as well, but not a primary reason for crisis.

Current social unrest is again economy related/ but not in terms of a speculative crisis; athough state debt has a relation with that, it is an economic effect which is parallel to the equation; and is job related, inmissiration, apart from being psychological for probably 50%, so it is not part of a boom and bust cycle, nor of a fathers sons.

In this case half of the younger generation and half of the older generation; or lets say equal parts; are in trouble and the other half is doing fine. Culture is in confusion. So in this case it is hard to tell which part will evolve faster in what equation than the other.

It does resemble the Great Depression which led to two worldwars.
I suppose a trade war is perhaps more likely/ although you cannot foretell where that might lead to, once the wagon starts roling. The proces does foretell a period of a decade or less to lead to an outcome. I agree.

But in fact the economy is getting more efficient again/ but again this is not understood by the financial system. With the only difference this is not a Minsky effect in this cycle, so governments do not know what to do.


My piano teacher said: “Do not give me problems, give me solutions.”
What solutions does the theory offer? From what I interpret from your books:
To close the frontier to workers, to limit the number of graduates, to reduce the number of bureaucrats, to eliminate subsidies to large corporations, to limit the great wealth through taxes … What is missing from this list?

Tom Hite

I would agree with all five of the solutions posited. Plus add the prohibition of foreign ownership of media companies, term limits on all political offices to no more than 10 years, with a life time limit of 20 years per person.


Prohibition foreing ownership of media companies? I do not understand what the function of this idea is. What consequences would have to implement something like this? In my country the owners of the national media are as corrupt as foreigners. Maybe watching this in my country bias my reasoning.

On the other hand, I think like you about limiting time in bureaucratic positions.

J. Daniel

“Intraelite infighting is tearing the Republic apart.”
What are the elite fragments that are at odds? Surely it is an oversimplification to identify them with the political parties? It is easier to see what the factions are among the masses, but as Ages of Discord says, subgroups of angry masses become a more important threat when they are used by elite fragment(s) against other fragment(s).
If the result of the current intraelite competition is ultimately to eliminate fragment(s) and thus end elite oversupply, what fragment(s) get eliminated and what get entrenched will mold the character of the nation for a long time to come. I suspect many elite do not (yet) realize that the current competition is a fight to the finish and downward mobility awaits them. When they do come to realize it, things will get a lot worse than they are now.

Peter van den Engel

It’s not that simple. The classic political division between economic liberals and more social driven, both have three fragmented representations among the masses; six in total; which also more then half contradict themselves regarding their classic political origination, so they belong to the other party without knowing it.
It has become impossible for elites to identify their most potential sub group in masses. So, they cannot use that.

As I mentioned, elites will look for answers outside, they might be able to controle, like a trade war, supposibly helping both parties.
This however will make economy less efficient, involving time which could have been used more efficient otherwise and creates a vulnaribiltiy that in the end shoots itself in the foot.
Yes, when they come to realize it, things ARE a lot worse than they are now.

L. Randall WRAY

Dear Peter: thank you for your interesting post and I am glad you find Minsky useful. There was a question about Minsky and long wave cycles–yes he did indeed include these, both in his early work (1964 article) and in his work from the early 1990s as he developed his theory of Money Manager Capitalism. He started his dissertation with Schumpeter, so this is not surprising. You might find my book, “Why Minsky Matters”, 2015 with Princeton Univ Press useful as an introduction to his body of work. L. Randall Wray, Levy Economics Institute.


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Prof. Turchin has written illuminatingly about how mass and workplace shootings are often a kind of submerged political violence, aimed at institutions, and how the current upswing in anger and instability is economically rooted.
But one of the things notable is the complete absence of Labor Unrest in the current mix of violence, which is a marked contrast from say the 60s or the 20s-30s. Most of the anger and rhetoric, at least, has only a muted economic component, instead tribal identity issues are at the forefront: BLM/race riots, confederate statues, Islamic terror, antifa/anti-Trump ‘resistance’, white nationalists, immigration ..etc. Of course , it doesn’t take long to scratch below the surface and see the economic populism that created simultaneous schisms in both parties during the election, but its interesting to note its indirect , subdued character.
I guess this is because the neoliberal order has really put labor in its place, as in just ‘be thankful your jobs aren’t outsourced or automated away, plebes.’ Mobility, distraction, and atomization has probably caused people to lose their self-organizing ability, another feature of the neoliberal order. Still, I can’t help but suspect you may end up seeing crude, disorganized attempts at labor resistance, somewhere in between strikes and workplace violence, all the more ugly because it will be naive and disorganized …
But again, most of the organized left violence is identity-related..

J. Daniel

In Ages of Discord Turchin asserts that the turnaround from the trough of social disharmony in the early 20th century was due in part to the elite’s fear that anarchists and socialists (I think it was?) were threatening the underpinnings of the economic system that the elite depended on. So they in essence made a bargain: we’ll transfer more wealth to the masses and the masses will leave the basics of the economic system alone. Now, however, it is a little different. The elite will have no motivation to spread the wealth now if, as is currently the case, the unrest is directed toward out groups who generally have even less (and complain less) than the agitated segment of the masses, the white male working class. Do I have that right?
Without the motivation to change, the elite will continue to be incentivized to continue the trend of increasing wealth disparity. Thus, more disparity, more elite overproduction, an elite incentive to continue the process of blaming out groups, hence more racism, and ultimately a deeper trough. Leading who knows where.
How are things in Canada? Might be time to consider the great white north in one’s retirement plans.

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Look at Turchin’s pro-gnosis from 2023, I would think the 2020 prognosis was delayed 2 years by Covid-19 lock-down … Events are unfolding as Dr Turchin’s pro-gnosis …


Looking at Turchin’s pro-gnosis from 2023, I would think the 2020 prognosis was delayed 2 years by Covid-19 lock-down … Events are unfolding as Dr Turchin’s pro-gnosis …

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