The “Fourth Turning” is a thesis formulated by historians Neil Howe and William Strauss in 1997, suggesting that society moves in 80-year macrocycles, made up of 4 sub-cycles called “turnings” - with each turning lasting about 20 years - and having its own generational archetype, specific role to play, and predictable result. During the fourth tuning, society is expected to address a range of major crises, head-on - and create a new system by the end of it - leading into the first turning of the next 80-year cycle.
Howe and Strauss suggested in 1997 that the Fourth Turning of the current 80-year cycle could start around 2005 - however the 2008 Global Financial Crisis was likely a key catalyst marking its beginning - and with social unrest, combative elections, wars and pandemics - our positioning in the fourth turning becomes increasingly evident each passing year.
The 4 turnings are
First turning - Spring.
The first phase after the period of crisis - this involves the rise of powerful institutions and mass consensus on the direction for society to move in. There is less of a focus on individualism and a major focus on society. Those who disagree with the societal consensus will feel jaded and helpless during this time.
The last Spring was after World War II, from the mid-40s to the mid-60s.
Second turning - Summer
During this phase, we see a rise of individuality and the institutions established in the Spring start facing opposition in the name of individual identity. Focus starts to shift more from society to self, and a larger feeling of cultural and spiritual lack, results in increased activism.
The most recent Summer was from the mid-60s to the early 80s - which was characterized by the “Freedom” movement and an increased push for civil liberties, equal rights and freedom of expression.
Third turning - Autumn
By this season, individualism is well and truly alive, and institutions are perceived with increasing distrust. The focus here is on the self and on having fun.
Our most recent autumn started in the 1980s and continued through the 90s - peaking around the year 2000
This phase involved tax cuts, low interest rates, and financial overconfidence leading to increasing inflation and government deficits which moved us into the current phase.
Fourth turning - Winter
This phase is defined by war and revolution. Institutions are torn down and rebuilt for the sake of a nation's survival. Once the prevailing crises are overcome - society finds a sense of communal direction, unity, and common purpose. While the winter is fraught with major challenges, it is essential for the progress of society and to define the values, institutions and cultures that will shape the next 4 turnings.
The previous winter started with the Wall Street crash of 1929 and ended with World War II. Children born between 1901 and 1924 were shaped by this era and ended their lives with confidence, optimism and a collective outlook of unity.
The fourth turning is a significant one, as it transitions society into a new era.
Based on the theory of the fourth turning - one could expect chaos across finance and culture to continue into the end of this decade - with a major societal transition, by 2030 - involving a major global transformation followed by a time of optimism confidence and overarching cultural unity - leading into the next 80-year cycle commencing.
So, what is the impact of the fourth turning on investing specifically?
With the previous winter starting with the Great Depression of the 1930s - and the current winter with the 2008 Global Financial crisis - the fourth turning is typically characterized by massive disruptions in financial markets and broad-based financial collapses - leading to significant systemic changes.
During these times of instability, safe haven assets provide shelter from the storm. An asset that is decentralised, not tied to any specific government or institution, allows investors to sidestep the current system, and re-enter the new system while preserving their wealth and not getting caught up in the chaos of the transition, from one system to another.
Empires have risen and fallen, and entire civilizations have come and gone - but gold and silver have held their value, through the millennia and are hence referred to as “God’s money”. As social and financial institutions are reset - we seek an asset that is consistent, reliable and eternal. Investor patience, humility and risk aversion - are rewarded in the long run, during the fourth turnings – with precious metals offering an ideal vehicle to navigate through this phase - into the next. Within chaos, there is always opportunity, and this phase is no exception. Trading the gold-to-silver ratio during major financial collapses is one such opportunity.
Let’s dig into the interplay between Gold and Silver
The gold-to-silver ratio tells us how many ounces of silver give us one ounce of gold. When this ratio is high, silver is objectively undervalued when priced in gold. Once this ratio falls off, this provides an opportunity to buy silver with the view of trading it in for gold. There is widespread debate on the appropriate level for the gold-to-silver ratio, which has ranged from 1:1 to 1:125—where it should sit would depend on who you ask.
When Sir Isaac Newton, who was Master of the Royal Mint, introduced a fixed ratio between silver and gold, the ratio he applied was 15.5:1. Regardless of what one believes the ratio should be at - if silver is bought when the ratio is high and traded for gold when the ratio is lower, investors have done well to capture capital growth while securing a hedge against inflation and systemic collapses.
To understand silver’s position during times of turbulence - let’s analyse how the gold-to-silver ratio performed during the Global Financial Crisis.
We recorded major volatility in the gold-to-silver ratio in the previous financial crisis. For four months, between August and December 2008, during the height of the GFC, when everyone was seeking shelter from the storm, the GSR shot up to 82, creating a generational buy opportunity for silver. Following this it fell to 35 as investors noticed precious metals outperforming almost every market, causing a generational bull run in silver markets.
With its smaller market capitalisation and sudden increased demand, silver's price skyrocketed, closing the gap between gold and silver and causing the gold-to-silver ratio to fall off a cliff.
The GSR (currently at 84) is a ratio that silver investors can use to track their swaps between gold and silver and one that will become increasingly relevant in this current phase of the fourth turning.
The Gold and Silver Standard Tokens – facilitate quick and easy swaps between Gold and Silver. While being back 1:1 with physical metal, the transaction, using immutable blockchain technology, allows for change of ownership via instant, transparent and hassle-free methods – while simultaneously providing the security of ownership that comes with the ownership of precious metals.
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