Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
What to Expect at a Critical Stock Market Point: End of a Wave 2 Rally - 26th Apr 18
A New Lithium War Is About To Begin, Modern Gold Rush! - 26th Apr 18
Silver, silver, and silver! There’s More Than Silver, People! - 26th Apr 18
How to be Financially Prepared When Purchasing Your First Home - 26th Apr 18
Is a Stock Market Crash Imminent or Does this Stock Market Bull Still Have Legs - 25th Apr 18
Gold Price Focusing on May Cycle Bottom - 25th Apr 18
Cash “Vanishes” From Bank Accounts In Ireland - 25th Apr 18
Is the Malaysian Economy a Potemkin Village - 25th Apr 18
Land Rover Discovery Sport Rattling / Knocking Sounds From Car Pillars - 25th Apr 18
China Takes the Long View on Gold-Silver... and So Should You - 25th Apr 18
Russia Buys 300,000 Ounces Of Gold In March – Nears 2,000 Tons In Gold Reserves - 24th Apr 18
Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - 24th Apr 18
CRYPTOCURRENCY MASTERCLASS #CRY90 - 24th Apr 18
UK Gambling Statistics - What the Numbers Say - 24th Apr 18
Chaos Capitalists Short Countries - How Chanos Got China Wrong - 24th Apr
Artificial Intelligence Defines the Political News Narrative - 24th Apr 18
Stock Market "Oops, They Did It Again" - 24th Apr 18
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Stock Market Kondratieff Waves and the Greater Depression 2013- 2020 update

Stock-Markets / Stock Markets 2015 May 01, 2015 - 12:06 PM GMT

By: Christopher_Quigley

Stock-Markets

In February 2012 I wrote an essay on Kondratieff waves (K waves). At that time based on the teaching of Nikolai Kondratieff it appeared that the world economy was in the middle of a Kondratiev winter or “greater recession”. (See chart below).
The K wave is a 60 year cycle ( a year or so) with internal phases that are sometimes characterized as seasons: spring, summer, autumn and winter:


  • Spring phase: a new factor of production, good economic times, rising inflation
  • Summer: hubristic 'peak' war followed by societal doubts and double digit inflation
  • Autumn: the financial fix of inflation leads to a credit boom which creates a false plateau of prosperity that ends in a speculative bubble
  • Winter: excess capacity worked off by massive debt repudiation, commodity deflation & economic depression. A 'trough' war breaks psychology of doom. 


However, since 2012 the American stock market has not collapsed but moved to new highs. So what is the explanation?
My contention is that we are in a financial “greater-recession” (depression) but it does not “seem” so because it has not yet become a true economic depression. Let me explain.

The worst of the consequences of the “greater-recession” which began in 2000 have been mitigated by the Fed’s and the bank of Japan’s Quantitative Easing policies. For example with regard to the US Fed between 2008 and 2013 reserves held increased to nearly 2.5 trillion dollars.

Reserve Balances Held at the Federal Reserve: St. Louis FED.



When we look to Japan we see from the chart below that the level of assets it holds as a percentage of GDP was a whopping 45% in 2013.

Size of International Central Bank Balance Sheets: St. Louis FED.

This level of central bank intervention worldwide has completely skewed the operation of the free markets. The consequential low interest rates and the availability of easy money to large banks and institutions have resulted in a “corrupted” price formulation for commodities, real estate, stocks and bonds. Thus when we should be experiencing deep price contraction we have market booms across most asset classes.

 As every follower of Ludwig Von Mises knows when you manipulate the pricing mechanism of the free market nobody knows the true value of anything anymore and accordingly resources become mis-allocated. Most K wave theorists observe this development with grave concern. They know that there have been nearly 18 K wave cycles in world economic growth since 930 AD and the current manipulation of “natural” prices is only going to make the current Kondratieff winter more catastrophic when it really takes hold.  In other words the K winter cycle has been pushed out but it has not been neutralized.

Anyone who does not realize that the USA is actually in a near depression should look at the chart below. The level of central bank “ownership” of the US economy was near 1929 “great depression” levels in 2012 and things have deteriorated since then.

Historical View of Federal Reserve Balance Sheet: St. Louis FED.


How long financial engineering, interest rate swaps, economic statistic modification and stock buy-backs can be used to fudge the economic  “greater recession” we are living through is anyone’s guess.

When, due to the potential bankruptcy of the central banks of Japan, the EU, England and the US  the current musical chairs of floating currency wars, negative interest rates and quantitative easing stops, my intuition tells me the true nature of our economic vulnerability will become visible for all to see.

It is my contention, as mentioned in the last essay, that the current “recessionary” reality should be accepted for what it is i.e. a depression and dealt with through honest policies rather than through “smoke and mirror” QE delusion. World leaders must accept the reality of Kondratieff’s credit cycle discovery and let the current “natural” international credit contraction take its course.

The essential cause of the current K wave winter is a natural by-product of collapsing growth, high debt, labour obsolescence, falling incomes and contracting employment. The type of enlightened policies needed to deal with the crisis are:

1.         Ordered debt liquidation and restructure
2.         Promotion of creative development.
3.         Limitation of government regulation, taxation and control.
4.         Efficient market pricing and asset allocation.
5.         Availability of new non debt money to finance real growth, efficiency and productivity.
6.         Distribution of purchasing power through fair wages and conditions.
7.         Promotion of a new banking system based on sustainable economic growth rather than      negative money.

The current policies being endorsed by the likes of the European Union are the antithesis of the above. Instead of debt liquidation we have debt sustained by additional debt. Rather than have wage growth we have zero hour contracts with no minimum wage protection. Instead of the promotion of new industries with cutting edge research and development we have existing conglomerates stifling innovation through pork barrel regulation and repressive  government control.

The longer the inevitable K winter is ignored, the more violent will be the eventual political, social and economic collapse. As the famous character Chancy Gardner said in the classic movie “Being There”: “after the winter, economically there will be growth in the spring”. However, we must be courageous enough to allow the current K winter to become fully manifest for this re-growth to occur anytime soon.

Crushing legacy bank debt is the problem. Debt liquidation through deep economic contraction is the solution. As long as this Kondratieff truth is denied the longer will be the delay in the commencement of world reinvention, renewal, rebirth and expansion.

Sources:
St. Louis Fed:             “The Rise and Fall of the Fed’s Balance Sheet”.
                                    Lowell Ricketts & Christopher J. Weller, Jan. 2014.
Financial Sense:         “Kondratieff Waves and the Greater Depression 2013 -2020”
                                    Christopher M. Quigley February Feb. 24 2012.

K Wave Chart:            Courtesy of Longwaveanalysis.ca

By Christopher M. Quigley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2015 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules