By Steinbeck ……do you know this classic? Click here for a brief synopsis.
As the story evolves you see how seemingly little decision,with seemingly little compromising of his integrity eventually leads to near fatal consequences. There is no better analogy for what is happening is this country. I will stay with economics is this posting.
Are you familiar with the Kondratieff Wave? To save time I cut and posted this explanation.
Nikolai Kondratieff, a Russian economist was the first to suggest that industrial economies followed a cycle of change in prices and production. Actually, this cycle is a cycle of liquidity and not price. But rising and declining trends for money, labor and products are an effect of the cycle.
Kondratiev waves also called Supercycles, surges, long waves or K-waves are described as regular, sinusoidal-like cycles in the modern (capitalist) world economy. Averaging fifty and ranging from approximately forty to sixty years in length, the cycles consist of alternating periods between high sectoral growth and periods of relatively slow growth.
Kondratieff Cycle averaged 54 years in duration, however cyclic periods can expand and contract and are therefore inherently unreliable for precise timing. But the sequence of events in the Kondratieff Wave may be an immutable social process regardless of how many decades it takes it to play out. The presence of a CREDIT INFLATING MECHANISM (my emphases) causes extreme booms and busts during the cycle.
As liquidity expands in the initial phase of the cycle, commodity prices rise reflecting the increasing business activity and inflation. As business activity and inflation accelerate, speculators bid up commodity prices due to their fear that inflation will continue to accelerate. After the rate of inflation peaks and starts to fall, the acceleration premium is removed from prices. Thus, commodity prices start to fall despite continued but slowing inflation, a trend called disinflation. At the same time, a change in psychology away from fear and toward feelings of relief and hope induces people to channel the excess purchasing media created during disinflation into bidding up the prices of investment assets such as stocks. Because inflation continues, the wholesale prices that manufacturers charge for finished products, the retail prices that stores charge for goods and the levels of wages that employers pay for labor all continue to rise but at a continuously lesser rate, following the rising but slowing trend of business activity and inflation. Near the end of the cycle, the rates of change in business activity and inflation flip to zero. When they fall below zero, deflation is in force. As liquidity contracts, commodity prices fall more rapidly, and prices for stocks, wages and wholesale and retail goods join in the decline. When deflation ends and prices reach bottom, the cycle begins again.
The cycles that were just described are cycles within what is called the “super cycles”. The smaller cycles or business cycles are the cycles created by the “central issuer of monetary inflation”. The super cycle by my definition is the “medium of exchange” that is created to facilitate the business cycle. A way to grasp these concept is to think back when the Federal Reserve was created. The United States Treasury deposited all the gold that it had at the Federal Reserve and a new currency was created, The Federal Reserve Note. (please this is not where we debate the intention for these action, this is an explanation of inflation super cycles or structural cycles). The expansion or contraction after the creation is the business cycles inside the structural cycle. The initial injection is the economy first taste of the inflation drug, those receive the new money first at the expense of those that receive it last, those that were debtors at the inception benefit at the expense of creditors. Those that are on fixed incomes pay for those that have yet to earn a living.
Kondratieff described his waves in four distinct stages, Spring, Summer Fall & Winter. The Spring when the next drug fix was injected, followed by a Summer of partying and the Fall of realization that you weren’t feeling so well only to need to recoup in the Winter. But each business cycle was doing further value in the confidence in the structure of the body. Sooner or later that body cannot take enough drug to get high…..or it will kill the body. We have had many business cycle failures in the past and a couple structural failures. The Structural failures of the recent past the 30’s….1970’s have been restructured by further deprecation of the medium of exchange…..the failure of this structural cycles has been the final destruction of the medium of exchange.
We are entering into the “WINTER” of discontent of the dollar, the death of a “medium of exchange”.
If you would like further analysis of the macroeconomics numbers I will be happy to provide the analysis.
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