In these pages you will learn about a Russian man named Nikolai Dmyitriyevich Kondratiev (aka Kondratieff) 1892 – 1938, who came up with a theory about the 50 to 80 year-long wave cycle that capitalistic economies go through: a spring (inflation), a summer (stagflation), a fall (deflation) and a winter (depression). According to the Kondratiev (aka Kondratieff) long wave theory, just like nature the economy is born again and rises up from a higher plateau than where the economy had started.
That very valid and positive outlook of a theory did not sit well with the communist leader Joseph Stalin. Nikolai Kondratiev (aka Kondratieff) was arrested in 1930 and sent to the Gulag (prison in Siberia). Then in 1938, Stalin had poor Kondratiev (aka Kondratieff) shot by firing squad on trumped-up charges.
Nowdays few people believe that inflation will ease and go away.Most economists are in denial that we have been in a deflation economy leading into the GREATER DEPRESSION since the 2000 stock market top. Kondratieff theory points to previous long term tops that were all evidenced by a major war and economic tops in the markets
- The War of 1812, "to save the American way of life," led to the "Era Of Good Feelings."
- The Civil War, "to make all men free" led to the "Reconstruction."
- World War I and II, "to make the world safe for democracy," with the Roaring 20's between them. (World War II, the Korean War and the Vietnam War have not had their depression yet. To me wars are all enormous wastes of men, money and material. The government with the help of the Federal Reserve just kept papering over the problem with bigger and bigger spending and stimulus (keynesian monetary scientists). Credit inflation never works out and always end in a bust.
- The Vietnam War, "to stop the spread of communism" with it's "Great Society."
The longest depression was 10 years after the Civil War ended at the end of the Reconstruction.
The most severe depression, so far, was the 1930's. The long wave peak, like 2000, is an emotional top and a time pent-up feelings become a national or (as in this millennium case) a worldwide catharsis. Deflation after the top then looks like prosperity because things calm down and the economy is somewhat stable.
There is actually a downward deflationary self-reinforcing spiral, which will last until the end of the depression. With interest rates declining in the post top period, each new business joining the competition gets the advantage over his predecessors of lower cost of money and new technology. So, he can lower prices. Overhead is fixed. Profits are under pressure. Business has to lower wages by laying off and by having those left on the payroll be more productive. This is where we are now. Those left at the job are doing extra work.
Next comes the "multiplier effect" in economics in reverse. Those laid off can't afford to buy much – businesses not selling as much have to layoff more – and so on – in a snowballing vicious circle. This is the worlds future until things stabilize in year 2016 or so.
My college professor in Economics 101 was explaining the "multiplier effect." Each year, he said, 3 per cent more children are born and then when they graduate they get jobs in the work force. The total economy grows at that multiple each consecutive year afterward. I raised my hand and asked, "What if that goes in reverse." He told me not to worry. The government would not let that happen. That was in 1968. I have been wondering every since when he would be proven wrong. A big 13 year head and shoulders top has formed in the Dow Jones Industrial and S & P 500 averages. Unfortunately, the "multiplier effect" goes downhill a lot faster that it rose. The Crash is Dead Ahead! It will be called the Greater Depression.
Unfortunately, the new technologies and discoveries from the top of the cycle are not followed up by investment and use for the benefit of man. During the bad times, people and business become afraid and pull back naturally. Then, at the bottom, there is no money or will to take a chance on new ideas and processes. That is why market bottoms languish and take a long time to come back.
Remarkably, only 10% of the people in Obama's administration have any business experience. None have any economy savvy. Obama Sr. (deceased) and Obama Jr. (Marxist) are on course to make the "winter of our discontent" phase of the Kondratiev (aka Kondratieff) Wave longer and worse.
The last Kondratiev (aka Kondratieff) wave should have ended about 1935. It got extended because of hair-brained stupid ideas of the socialist president Franklin Delano Roosevelt. His socialist programs not only actually delayed the recovery from the 1930's depression, but led to the big parasitic monster government we have today. So, take year 1940 add 70 years and that puts us right in the winter / depression part of the long wave that is due to end around circa 2016-2020. You can expect stocks, real estate, most corporate bonds, commodities, collectables, art and antiques to lose some 90+% of peak value in the coming Greater Depression. In depressions cash is king because prices just keep dropping.
I call it the Greater Depression because there has been three times as much waste and three times as much government messing with the economy since the depression of the 1930's. In addition, there is a three times factor in relation to the Elliott Wave Principle. Robert Prechter says this is a Grand Supercyle Degree wave (ever larger waves build on each other in the Elliott Wave Principle theory). Hence, three times longer and deeper that the 1930's depression.
The Kondratiev (aka Kondratieff) long super cycles will keep getting bigger and last longer according to Robert Prechter's understanding of the Elliott Wave Theory.
PS Robert Prechter's book, CONQUER THE CRASH 2002, mentions the Kondratiev (aka Kondratieff) long wave cycle. He is a firm believer in the Kondratiev (aka Kondratieff) theory. Nicolai Kondratiev (aka Nicolai Kondratieff) was a hero and a martyr.
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