RI... The likelihood of serious geopolitical conflict is increasing, current levels of debt across the developed world are unsustainable, and the real probability of currency wars to retain perceived global share may well and truly pop several chains of imploding bubbles. Buckle up
The more the central banks meddle and attempt to control natural market forces, the more forceful is the markets blowback.
Russia has been home to many prophets, seers, healers and mystics such as Helen Blavatsky, George Gurdjieff, Matrona of Moscow, and Wolf Messing among others. Some have lasted through the tests of time, some not. Among the mosaic of Russian people who have delved into the future, one man in particular rose from obscurity like a meteor, barely made his mark among the economists of the world, and then was killed.
His works were lost in the dust of time, only to re-emerge stronger more than 30 years after his death. He was no mystic, yet his work with time, markets, waves and conclusions rank with the best.
Nikolai Dmitriyevich Kondratieff, (4 March 1892 – 17 September 1938) was a Russian economist, who was a fan of the New Economic Policy (NEP), which promoted small private, free market enterprises in the Soviet Union. He is best known for proposing the theory that economies have long-term (50 - 60 year) cycles of boom followed by depression. These business cycles are today called "Kondratieff waves" and are part of any commodity or equity trader’s base education.
Sadly, his career came to an untimely end when shot during the Stalin purges in 1938 and his works largely lost to the world until the 1970s. Who knows how we would be seeing and judging the economic landscape these past 50 years if he were around to argue cycles with John Maynard Keynes and the now dominant Keynesian world view.
Kondratieff's economic cycle theory maintained that there occurred long cycles of about fifty years in the markets. Starting each cycle, economies produce high cost capital goods and infrastructure investments creating new jobs, income and ability to acquire consumer goods.
After a few decades, the expected return on investment falls below the interest rate and people refuse to invest, even as overcapacity in capital goods gives rise to job layoffs that reduce consumer activity. Unemployment and a long economic crisis follow as economies contract. People and companies husband resources until renewed confidence returns and there is an upswing into a new capital formation time, usually characterized by significant investment in new technologies.
Today’s stock market rise is given energy through the easy monetary policies of the global central banks. Barring a small period of optimism between 2005 and 2007, the market has witnessed an undercurrent of anxiety, impending gloom, and heightened geopolitical tension. It may be safe to say that the current historically high equity numbers are accompanied by significant unease and fear – the anxiety quotient.
The mood of investors has been underlined with disbelief that despite all the many ongoing efforts of the central banks, QE, and capped rates they have not been successful in preventing the onset of Kondratieff’s “winter” waves.
We are entering the final phase of Kondratieff’s projected winter cycle (2016 – 2021) which will more likely than not be a significantly stressful period. Global economic activity and work demographics have passed their peak, geopolitical conflict risks are increasing, current levels of debt across the developed world are unsustainable, and the real probability of currency wars to retain perceived global share may well and truly pop several chains of imploding bubbles.
While not a popular theme among go-to economists, it may very well be that gold will again re-emerge as the safest place to park ones assets until the “winter wave” passes over us and crashes on the shore.
Cycles tend to repeat giving us some broad insight into general trends of the future so that planning can be profitably acted on. The more the central banks meddle and attempt to control natural market forces, the more forceful is the markets blowback.
Correction, possibly severe, will ultimately happen as surely as the sunrises in the east. Nothing mystical about it, just hard numbers crunched with the help of Mr. Kondratieff.
Paul Goncharoff is Chairman, Disciplinary Committee, National Association of Corporate Directors, Russia.
Poster Comment:
Tatarewicz • An economy based on money or gold is no longer viable in an age of automation. Each new robot is replacing a half dozen workers.
In a cyber age the best option is an economy based on an individual's merit in producing wealth (needed goods and services), inventions, research success, attaining training and skills for needed tasks as well as readiness to undertake them; tasks determined by citizen input and assigned by teams of geeks.
There are already more than enough resources and trades/professionals to meet everyone's basic needs of food, shelter, clothing, medical care and internet or other communication service and can be readily organized/provided by geek teams. Perks beyond basics can be awarded on the basis of merit points earned in wealth production or other achievements.
Time to adopt meritocracy as a replacement for democracy with its political intrigues, labor strife, financial manipulation and wars that have characterized it for centuries.
John Tosh • 9 hours ago The world's economy is now run by a few people sitting in intelligence offices of the CIA. When China dumped US Treasuries, the CIA created a fake account out of Europe buying up those treasuries! How can you buy your own debt? Its now a house of cards.
The sale of Gold and Petroleum in other currencies other than the US Dollar has doomed the US dollar to a "regional" currency only used within the G7 Western countries. A few of the countries will break away and join the Gold-trading world.
The military machine keeping the Dollar backed global economy which runs on ponzi schemes called stock markets (inflated with paper money) is not the sole military power on the planet anymore. This means military might is not going to enable the intelligence community of the G7 countries to force their way into the new gold controlled market.
The only viable option they have is to try to bring back Russia and China into their fold. This is now impossible with the murders of Russian Ambassadors, and the bombing of Chinese port cities which occurred a while back.
The intelligence community wants to offer China a deal to break with Russia and end the destruction of the fraudulent ponzi stock market. Unfortunately China now sees its own future clearly and this future does not involve sharing anything with the USA except perhaps having a market for its products. China is the new economic giant willing to create and set the rules, there is nothing the US can offer China not even the South China sea or Taiwan.
When the Chinese leader visits the USA, they will offer him everything. He will smile and say "let me take it to my people" and that would be the end of that. A similar deal would be offered to Russia in the near future..... same result..... nothing will change.
China and Russia are the future, the G7 Western countries are the past. Nothing the Western countries can do about that except lay down and die!
John Tosh Isabella Jones • Its simple really; when an economy grows all the way to the top, there is no space left to grow into, so it reverses direction. Watch the fast collapse in the Western economies.... by 2030 most Americans would be fighting for Chinese and Russian visas just like Mexicans do for US Visas today. +2
Bruno Bardorosso • Spare yourselves from all these fairytales (Ko dratieff, Keynes, et al) and study the ABCT (Austrian Business Cycle Theory). The only one that actually makes sense. and yes, the CBs are guilty.
Kjell Hasthi • - The more the central banks meddle and attempt to control natural market forces, the more forceful is the markets blowback.
Kjell Hasthi •
- The more the central banks meddle and attempt to control natural market forces, the more forceful is the markets blowback.
No. There is no functional market, just a controlled market. The Kondratieff's economic cycle theory has already been negated by the missing collaps 1990 ... No collaps in reality. FED increased money supply and stopped it. All the cycles are created by CB themselves. The insiders are enriching themselves by creating collapses [to trade there must first be movement, and to be profitable the movements have to be predictable. What can be more predictable than what they create themselves?], and no one understand what is going on - except one or two, like Edwin Lefevre (in his time, the 20-ties) - No traders are making money. They are just as often wrong as right, except some few who were always right
(The statistics is 10-20% ROI for master traders, with 10+ as leverage. I.e. 1-2% as ROI unleveraged = inflation rate. The funds [they are using own money and no leverage] do not make money. Stock brokers make money on the fee ) http://russia-insider.com/en/politics/buckle-global-economic-war/ri19407