Are We In For A Long Winter?
Bruce Collins
December 20, 2007
To everything there is a season, and a time to every purpose under the heaven
Ecclesiastes
Professor Nickolai Kondratieff was an economist in Russia during the Stalin years. In 1926, he published “Long Waves in Economic Life” which was viewed as a Stalin directed ‘smackdown’ because it seemed to criticize certain policies. Eventually, Kondratieff was imprisoned and, later, executed.
One surviving piece of Kondratieff’s economic conclusions was that Capitalist societies go through booms lasting 50-60 years. These booms are followed by inevitable busts. Kondratieff’s work was documented in the 1920’s and was, seemingly, proven with the 1930’s depression less than 10 years later. The good news is that his research concluded that Capitalist societies tend to ultimately survive these natural economic occurrences.
There are four seasons, or phases, in the Kondratieff cycle. These are: Spring (inflation), Summer (stagflation), Autumn (deflationary growth), and Winter (depression).
Many economists argue that the validity of the K-Wave cycle is non-existent now due to the great manipulation that goes on today with Central Banks. However, the real question, in my mind, is: do Central Banks avert crashes or prolong them (and make them worse)?
So, the difficulty then becomes the understanding of where we are in the cycle. One of the ways to determine this is how bad the credit collapse is and how much worse it can get. The Kondratieff wave is, among other things, a study of debt collection.
We’ve seen inflation in the housing market and we continue to see prices rising in food and energy (The Economist recently dealt with the high price of food in their lead story). We see stagflation in the slowing GDP numbers and the flood of US dollars chasing too few commodities. Certainly, a case can be made that we are also feeling the effects of Autumn or deflationary growth. What about winter?
We have experienced many significant busts in recent years: NASDAQ, Dot Coms, Enron-style scandals and the housing market. Yet, instead of witnessing a natural economic cycle, we have also seen the Federal Reserve jump in to ‘correct’ the market’s failings. So, when we think a recession should be imminent, the international bankers use their powers of illusion to keep us confused about the season we are experiencing. This illusionary power steals from the wage earners through inflation while giving the false impression of wealth (i.e. incomes go up yet price inflation goes up much higher).
Could we experience the horrifying effects of a K-wave depressionary cycle soon? Ian Gordon, a long wave analyst and expert on the Kondratieff effect, believes we are already there.
He writes:
This is it. The Kondratieff winter is now underway in earnest and nothing can stop it. The huge credit expansion initiated by the Maestro, the past Federal Reserve Chairman, Alan Greenspan, has now reversed. The ensuing credit contraction will be devastating. It will take down creditor and debtor alike and will result in a destructive and frightening deflationary depression.”
One of the serious dangers is the predicament that the Federal Reserve now faces with its’ game of interest rate manipulation. If they lower rates too aggressively, hyperinflation is a surety. If they lower rates too slowly, credit collapse and deflationary fallout are guaranteed.
This is a tightrope act for the future of the United States. It’s too bad the acrobat created the problem.
Right now, we’re getting mixed messages: slowing retail sales and rising prices. Who knows how this will end?
Americans are not prepared. The government’s meddling has caused wealth disparity that is worse than ever. Likewise, credit has been fast and loose.
Today the top 5% of Americans have all the money, while the bottom 95% seem to have all the debt. Why so much (expletive deleted) debt on the part of the bottom 95%? Well, they’re to keep up their standard of living, and can’t do it on what they make. So how do they manage? This is how…today both the husband and wife work, and they also do a lot of borrowing.” Richard Russell, Dow Theory Letters.
We know that gold sustains purchasing power during periods of hyperinflation but how does it do in a depression-like implosion?
Again, we turn to the expert, Mr. Gordon.
Prices are likely to return to their starting point at the beginning of the Kondratieff autumn. That will be devastating.”
In the midst of all this darkness, gold shines. It takes on its traditional role as money, because the values of all other paper such as stocks, bonds, real estate (mortgages) and even money becomes suspect.”
The trust in paper, which has been so evident during the Kondratieff autumn, is lost, as winter unfolds. The scramble to own gold and the companies that produce it and explore for it will be as strong as was the scramble to own paper during the Kondratieff autumn.”
It’s cold in Northern California. Last night, I heard the rain pouring as the storm clouds hovered over the city. This morning, I put a jacket on, anticipating much of the same outside.
It’s winter.
It’d be wise to bundle up.
Bruce Collins
www.BruceDCollins.com
Ecclesiastes
Professor Nickolai Kondratieff was an economist in Russia during the Stalin years. In 1926, he published “Long Waves in Economic Life” which was viewed as a Stalin directed ‘smackdown’ because it seemed to criticize certain policies. Eventually, Kondratieff was imprisoned and, later, executed.
One surviving piece of Kondratieff’s economic conclusions was that Capitalist societies go through booms lasting 50-60 years. These booms are followed by inevitable busts. Kondratieff’s work was documented in the 1920’s and was, seemingly, proven with the 1930’s depression less than 10 years later. The good news is that his research concluded that Capitalist societies tend to ultimately survive these natural economic occurrences.
There are four seasons, or phases, in the Kondratieff cycle. These are: Spring (inflation), Summer (stagflation), Autumn (deflationary growth), and Winter (depression).
Many economists argue that the validity of the K-Wave cycle is non-existent now due to the great manipulation that goes on today with Central Banks. However, the real question, in my mind, is: do Central Banks avert crashes or prolong them (and make them worse)?
So, the difficulty then becomes the understanding of where we are in the cycle. One of the ways to determine this is how bad the credit collapse is and how much worse it can get. The Kondratieff wave is, among other things, a study of debt collection.
We’ve seen inflation in the housing market and we continue to see prices rising in food and energy (The Economist recently dealt with the high price of food in their lead story). We see stagflation in the slowing GDP numbers and the flood of US dollars chasing too few commodities. Certainly, a case can be made that we are also feeling the effects of Autumn or deflationary growth. What about winter?
We have experienced many significant busts in recent years: NASDAQ, Dot Coms, Enron-style scandals and the housing market. Yet, instead of witnessing a natural economic cycle, we have also seen the Federal Reserve jump in to ‘correct’ the market’s failings. So, when we think a recession should be imminent, the international bankers use their powers of illusion to keep us confused about the season we are experiencing. This illusionary power steals from the wage earners through inflation while giving the false impression of wealth (i.e. incomes go up yet price inflation goes up much higher).
Could we experience the horrifying effects of a K-wave depressionary cycle soon? Ian Gordon, a long wave analyst and expert on the Kondratieff effect, believes we are already there.
He writes:
This is it. The Kondratieff winter is now underway in earnest and nothing can stop it. The huge credit expansion initiated by the Maestro, the past Federal Reserve Chairman, Alan Greenspan, has now reversed. The ensuing credit contraction will be devastating. It will take down creditor and debtor alike and will result in a destructive and frightening deflationary depression.”
One of the serious dangers is the predicament that the Federal Reserve now faces with its’ game of interest rate manipulation. If they lower rates too aggressively, hyperinflation is a surety. If they lower rates too slowly, credit collapse and deflationary fallout are guaranteed.
This is a tightrope act for the future of the United States. It’s too bad the acrobat created the problem.
Right now, we’re getting mixed messages: slowing retail sales and rising prices. Who knows how this will end?
Americans are not prepared. The government’s meddling has caused wealth disparity that is worse than ever. Likewise, credit has been fast and loose.
Today the top 5% of Americans have all the money, while the bottom 95% seem to have all the debt. Why so much (expletive deleted) debt on the part of the bottom 95%? Well, they’re to keep up their standard of living, and can’t do it on what they make. So how do they manage? This is how…today both the husband and wife work, and they also do a lot of borrowing.” Richard Russell, Dow Theory Letters.
We know that gold sustains purchasing power during periods of hyperinflation but how does it do in a depression-like implosion?
Again, we turn to the expert, Mr. Gordon.
Prices are likely to return to their starting point at the beginning of the Kondratieff autumn. That will be devastating.”
In the midst of all this darkness, gold shines. It takes on its traditional role as money, because the values of all other paper such as stocks, bonds, real estate (mortgages) and even money becomes suspect.”
The trust in paper, which has been so evident during the Kondratieff autumn, is lost, as winter unfolds. The scramble to own gold and the companies that produce it and explore for it will be as strong as was the scramble to own paper during the Kondratieff autumn.”
It’s cold in Northern California. Last night, I heard the rain pouring as the storm clouds hovered over the city. This morning, I put a jacket on, anticipating much of the same outside.
It’s winter.
It’d be wise to bundle up.
Bruce Collins
www.BruceDCollins.com
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