This is a follow-up to The Cold War Collapse: Why the Fourth Turning Ends With Capital, Not War.
The Cold War Collapse argued that the Fourth Turning would not end in war but in the destruction of capital. That argument did not emerge from thin air. It is the logical conclusion of a sequence that has been unfolding since 2016.
2016: The Constructive Thesis
As commodities and wages bottomed together for the first time since the financial crisis, there was a genuine possibility of healthy normalization. If wages and prices recovered in sequence the system could rebalance. Labor’s share of growth could be restored. The political fractures widening beneath the surface might have healed before they became irreparable.
Low Commodity and Wage Costs Will Drive a New Growth Cycle — SeeItMarket, February 2016
2018 to 2020: The Sequence Breaks
The path was interrupted. Trade wars distorted supply chains and capital flows before the normalization could take hold. Then the pandemic triggered collapse followed by the most extraordinary monetary and fiscal intervention in modern history.
Asset prices reflated long before wages recovered. The sequence that might have healed the system was broken. Inequality did not widen because inflation returned. It widened because the recovery was captured by capital before it reached labor. The Cantillon effect playing out in real time, exactly as it always has.
2023: The Capital Reflexivity Question
By 2023 the question had sharpened into something more structural. If U.S. growth slows and external capital no longer reflexively returns to U.S. assets after each global crisis, what actually anchors American valuations?
For decades every crisis sent capital to the US as the last safe haven. European stagnation. The Hang Seng bubble. The pandemic. All of it funneled into U.S. assets. That dynamic inflated valuations to levels only justifiable if American exceptionalism continues indefinitely.
But that dynamic was never permanent. It was a privilege extended by dollar reserve currency status and the absence of credible alternatives. And it is exhausting itself.
What Happens to Interest Rates When the Chinese Consumer Recovers? — SeeItMarket, July 2023
Now: The Japanification Threshold
The Japanification thesis is the endpoint of this sequence, not a pivot from one view to another. It is a coherent layering of observations across time.
Wage normalization interrupted. Recovery distorted by extraordinary intervention. Growth constraint emerging. Capital reflexivity weakening. The result is what The Cold War Collapse described: A long grinding revaluation of American exceptionalism. Not a crash. A reckoning.
The clearing that should have happened in 2008 was delayed. The clearing that should have happened in 2020 was delayed again. Each delay inflated the next bubble higher and pushed the reckoning further out.
We are now watching for whether the delay ends. The capital destruction The Cold War Collapse identified as the necessary reset mechanism is being tested in real time. The confirmation will come not from the selloff but from what follows it. Whether capital returns to the US as it always has. Or whether it doesn’t.
That question remains open. And it is the only one that matters.
#FourthTurning #Japanification #ColdWarCollapse #Capital #Cantillon #USExceptionalism #Reckoning #GlobalRotation #LongCycles #Kondratieff
The author may have positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
