MAY 2016: MONTHLY MARKET COMMENTARY (Subscription Plan II)
A FAILING SOCIAL CONTRACT - There is an Unwritten Contract between the Governing and the Governed
We believe that what the Economic Cycles are telling us is that there is a massive social change about to occur in the US. A change being brought on by lost faith in the system.
Our Annual Thesis this year was entitled “Crisis of Trust”. Last year it was entitled “Fiduciary Failure”. The titles are telling about an increasing degree of lost faith in the status quo.
Inequality has become so blatant that the current US Presidential Primaries have been “set on their ear” by massive turnout for candidates who are talking about the degree of corruption, incompetence and ineffectiveness of the US government. The electorate is frustrated and getting angry.
The citizenship now believes that the system is no longer working for them. They see that when they do all the right things (go to school, train, work hard) it no longer delivers on expectations. The American Dream is no longer a reality for the vast majority of Americans. It is a broken dream.
What has happened is the Social Contract has broken down.
The Social Contract is the unwritten agreement between the Citizenship and Government, that if a person does the right things, the government will create an environment such that they will be rewarded. Instead what they now see is; not only this not happening, but those closest to the government (such as Crony Capitalists, Government Employees, those living off the government) doing well but everyone else hurting.
Corruption is often tolerated by the citizenship until a person can no longer live the life they want. They then resent the government free loaders and demand change and or revolt. When they no longer can support their family - they revolt. It my opinion we are nearing that point in America.
Maybe more frightening is the possibility that this may not be unique to America. We are seeing similar patterns with fringe parties taking controlling positions around the world. The status quo and social contract is now under fire in all developed economies!
Promised entitlements are now being called into question as time has come for governments to deliver on their promises.