Posts Tagged ‘depression’

Many Reasons to Believe that the Economy will not Recover in a Short Time

Wednesday, June 24th, 2009

The Unemployement and the Stock Market are rising for some time now. A new Stock Market Bubble is building up and will explode in the near future. The biggest Bubble is certainly the US Deficit Bubble.

The Stock Market Bubble and the Deficit Bubble will explode as soon as the major creditors (China, India, …) of the US will move out of the Dollar. This is happening already.

The Customers are the backbone of the Economy and the Leaders understand very well that the Economy is governed by Psychology. So Bad News is hidden en Good News is exaggerated. The Expectations of Analysts are always beaten and the downfall is falling slower than before.

The Economy is still in a terrible state and this state is getting worse every day. The unemployement is still rising and will rise for a very long time because companies are getting broke or are rationalizing everything that is possible.

They replace their employees by IT-Technology and Cheap Labor. The customers are not buying, they are saving more and more money for a rainy day or are paying back their debts.

Saving money will not stimulate the economy. It stimulates unemployment. The rising unemployement results in more foreclosures and problems with credit card debts. The Economic Downturn is just at its beginning.

Economist John Williams says that– if the unemployment rate was calculated as it was during the Great Depression the unemployment figures for July 2009 rose to 20.6%. According to an article summarizing the projections of former International Monetary Fund Chief Economist and Harvard University Economics Professor Kenneth Rogoff and University of Maryland Economics Professor Carmen Reinhart,… unemployment could rise to 22% within the next 4 years or so.”

The Scenario of the Current Downturn is highly comparable with the Scenario of the Great Depression with one exception. The current Downturn is much deeper than the other. We are approaching the Biggest Global Economic Crisis in Human History.

The current investors base their policy on positive news and ignore the bad news. They believe the economy will rise when the customer-confidence is rising or when the downfall of the economy is “slowing down” or “bottoming”. They don’t see that a slowing down of a downfall is still a downfall.

The investors, the Doves, act just like the behavioral economists predict they will act. They read the headlines, believe the Hawks and are not aware of the (Money) Illusion the Government, the Media and the Banks are creating. The Hawks know better. They buy Silver, Gold and certainly the best investment, Oil.

Nouriel Roubini has a more realistic view on the economy. In his article Ten Risks to Global Growth he analyses the risks that could block the recovery of the economy and his conclusion is highly pessimistic.

According to Roubini the major cause of the crisis is overspending. Overspending is a normal activity when the Kondratiev-Cycle is in the state of Autumn. The debts are always repayed in the next phase, Winter. In the Kondratiev Winter the economy is purged and cleansed. This phase started around 2000 and will be finished around 2013. In the Winter-State you have to stay in cash or invest is Gold and Silver.

At this moment the investors don’t know what currency they have to chose for their cash-reserves. Usually the Dollar was a Save Heaven but the current policy of the FED to expand the amount of Dollars to an almost unbelievable amount is seen as a huge risk.

The Creditors (China, India, ..) of the US are already creating an alternative currency and are secretly and slowly moving out of the Dollar. If the Trust in the Dollar has gone the US Economy will go bankrupt.

The big problem with the current Cycle is that we have moved to the Level of Earth. In the last downfall of the Kondratiev Cycle other parts of the world were decoupled. They moved in a complementary mode. The Down of one part of the Earth was compensated by an Up somewhere else.

At this moment the complementary parts are synchronized and act and react according to the same rhythm. This rhythm is related to a longer term cycle that almost nobody is aware of. This cycle with a periodicity of 250 years is called the Secular Cycle.

The current level of integration of the World Economy is very dangerous. The production-processes of the Earth are highly rationalized and integrated. When one process stops the rest of the processes also has to stop.

The very high level of rationalization causes cascades or avalanches. The fast and slow avalanches generate sudden bursts of unemployment and financial disasters. The Car Industry and the Financial Industry are good examples. At this moment the avalanches start new avalanches in completely different branches of the tree of the World Economy.

The Crisis in the Banking Industry puts a large part of the Corporate Sector under severe financial stress. Firms that in the past would have been able to roll over their loans, bonds and debts now face a liquidity crisis that may lead them into costly debt restructuring.

This will affect the Banking Industry and will also put a high strain on the Bailout capacity of the Governments who are not able to leant money or inflate money until eternity.

The only solution that is left is to Rationalize even more than the Companies were planning to do. Their only solution is to speed up the use of IT (Use the Internet) and fire the employees. It is very clear that the use of IT in Companies is still in its infancy. Many manual activities can be replaced by software. The total effect will be a worsening of the current crisis.

To stop the cascades governments are starting to Protect and Regulate their Economies. The Worldwide Cooperative Institutions are losing their grip and the Free Market Economy is on its return.

Big Companies are splitted according to the old Boundaries of Power. The expansion and integration of the EG is blocked because the member states suddenly have conflicting objectives. The Rich Countries don’t want to help the Poor Countries because the Rich Countries are getting poorer with the minute.

Not only the poor member states of the EG are getting into big trouble. The same applies to the Underdeveloped Countries. The poor Countries of the World are on their own. Everybody is in the Survival mode and The Fittest, The Rich, will as always Survive.

The world is not only hit by a Economic and a Cultural crisis. The world is also hit by a Climate Crisis. Although human activity plays an important (negative) role the Cycle of the Climate related to the activities of our Sun and the Movement of Earth in our System (the Precession Cycle) is much more important.

The current change in Climate is irreversible and will have a major effect on the world economy. Climate change and ecological misuse are the major factor why Societies collapse.

The last factor and perhaps most important factor is the Energy Consumption of the World. This consumption is not only affecting the Climate but it also facilitates a huge highly integrated Transport-System.

This System is the Backbone of the Integrated Value-Chains of the Western World. The Western World is completely dependent on the transport system for its Industrial Production and the Supply of Food.

The Transport System has a devastating effect on the poor countries in the World. To make enough money to survive they have to export their products to the Western Markets ignoring their own needs.

It is certain that the supply of oil and gas is lower than the increasing demand. The resources all over the world are going down. The total effect of this all will be a dramatic rise in price. This will affect the rich countries and in particular the US. They are already the major importer of energy in the World and when you import something you have to export something else to keep the financial balance in order.

As you already know the deficit of the US is spectacular and the only reason the US is not broke is the special role of the Dollar. If the economy recovers the demand and the prices will rise and the US Economy will slow down immediately.

What is Going to Happen?

Every scenario leads to a long term decline of the Economy, our Culture and our Civilization. The theory of the short term and long term cycles is right and it is very stupid to ignore these theories.

According to the Panarchy Model the world is too connected and this leads to an increasing rigidity in its goal to retain its state. The rigidity reduces resilience and the capacity of the system to absorb change, thus increasing the threat of abrupt change. The world is unable to cope with the changes of climate and culture that are happening now. Therefore we will see the collapse of the accumulated connections and the destruction of bound up knowledge and capital.

The highly integrated structures of the Earth (the Cooperative Institutions, the Big Companies, Governments AND the Transport System) are bound to desintegrate. The impact on the local structures is immens. Communities will have to grow their own food, manufacture and repair their own tools, create their own currency etc etc on a local level again.

Most of these structures have outsourced these functions to places far away and don’t have the skills nor the resources to do this. The fittest, the Haws, will survive but it is unclear if the Doves will accept this situation forever. A Rise of the Masses just like the French Revolution in 1789 (almost 250 years ago!) is possible.

The world is moving to a very fast transformation. The only thing that can be said when we use the Panarchy Model is that it will move back to a stable state before the expansion started and start all over again. The Wisdom of the Old Civilizations that survived earlier Collapses is very valuable. These lessons are very easy to comprehend.

Civilizations die because the humans don’t want to Move with the Cycles, don’t Cooperate and don’t Respect Mother Nature. When Civilizations Collaps even the Hawks lose Everything!

LINKS

Peter Schiff, Why the US Economy will Collaps this Year

How the Fed is cheating the citizins. About Deflation.

Why the Labormarket is Much Worse than we Think

Why the Current Crisis is comparable with the Great Depression

About Behavioral Economics, Why Hawks always Win and Doves always Lose

Nouriel Roubini, Ten Risks to Global Growth

About The Kondratiev Winter and the Generations Theory

About the End of the US Dollar

Why the US Defense Budget will Destroy the US Economy

Peter Turchin, About Secular Cycles

The Complete Text of the Book of Turchin

About the Problems the Real Estate Market is Facing

Why Rationalization is the cause of the current Crisis

About Cascades and Avalanches

Jared Diamond, Why Societies Collapse

About the World Food Crisis

Jeff Rubin, Why Your World Is About to Get a Whole Lot Smaller

About Peak Oil, The Model that Predicts the End of Oil and Gas

How to get Very Rich during a Depression

Thursday, November 27th, 2008

The Kondratiev Wave predicts the long term behavior of the Economy. If you look at the Kondratiev Wave, the next stage after the Depression (Winter) is called Spring. Spring is the Time of the Seeds (new Ideas). They where harvested in Autumn. During the time of the Winter the seeds are dormant.

When the Harvest was rich, Winter is a time of Contemplation and Rest. Nature hibernates. Plants, Trees and many Animals sleep and are in the state of the Unconsciousness. When the Harvest was poor, Winter is a time of big trouble.

There will be shortages of Food and Fuel. When the Harvest was poor Winter is a time of Social Unrest and even Social Conflict. During the Kondratiev Winter Big Wars are fought and the Dark Side of the Unconscioussness shows itself in the extreme rise of Psychological Problems (Stress, Addictions, Paranoid) and Dark Religious Movements.

During Winter Shares, Paper money and other Imaginary forms of Wealth are worthless. When you want to buy something you have to deliver real value (Cash, Gold, Silver).

It is very clear that You can Make Big Money during a cold winter when you have gathered a huge pile of primary commodities (“raw materials”). During Winter raw materials are exchanged for other raw materials. When you don’t have access to these materials the only thing that is left for you is Charity.

When you are the owner of raw materials and you are making a lot of money you are Making Use of the Situation. During a cold winter you have to give to the poor and the sick. To make it very clear Making Big Money during a Depression is a Crime.

When you are Rich you can accumulate Social Value by giving away your Material Wealth to Others. During a Depression Material Wealth has to be transformed into Social Wealth to prevent a Social Conflict. This investment will pay back with a lot of social interest during Spring and Summer.

Unconditional Giving, Charity,  is a very old fashioned concept. At this moment we “give” a loan and we “ask”  interest but “giving and asking” are really “demanding”. We want to make sure that what we give will be returned in the same state. More Money for Money, an Two Eyes for an One Eye.

When we don’t want to deepen the down path of the Depression we have to leave behind the Behavior of the Expansion phase of the Cycle, Summer. When the Economy expands it is “easy” to accumulate Wealth. Loans and interest are helpful to bridge a temporary dip in the flow of cash. Summer is a time of fast moving Ups and Downs in the Economy (Recessions).

It is not strange that we are copying the behavior of the Summer. Long Term Cycles just like very fast moving Cycles are not noticed by the Human. They are generational. The pattern repeats every 50 to 60 year so the people that must be Aware of the current situation are Old. They are the grandmothers and the grandfathers, the older people (>75).

Moving through a Depression needs Wisdom and a Long Term View. A Depression is the time to Listen to the Older Generation. Hopefully they have Learned from their Mistakes at that time.

LINK

About the Kondratiev

Why a Depression Takes Thirteen Years

Wednesday, November 26th, 2008

The start and the end of the current depression was predicted a very long time (1922) ago by Nikolai Kondratiev. The Kondratiev Cycle is an economic cycle which lasts between 50 to 60 years.

Kondratiev predicted that the current Depression will start in 2000 and end around 13 years later. Kondratiev used the Seasons to name the phases of his Cycle. We are now in the phase of the Kondratiev Winter.

Spring is marked by economic expansion. Savings are at fairly high levels, and interest rates are low. Stocks and real estate are the most successful investments.

Summer is marked by high inflation, high interest rates and by volatility. Commodities, gold, and real estate do well during the summer.

Autumn is the happiest phase of the Cycle. This phase started about 1982 and ended around 2000. During Autumn paper financial investments like stocks and bonds always do best. It is characterized by speculative bubbles or manias in stocks, bonds, real estate, and collectibles. On the other hand, gold, silver, and commodities collapse. Unfortunately, the Autumn is also marked by a serious decrease in savings, and a dangerous and reckless increase in debt. The imbalances build up to the point where they cannot continue. That’s where we are now.

When Winter arrives the insane excesses of the Autumn are purged and cleansed. The ultimate result is a deflationary recession or depression. Debt is repudiated. There is usually a banking crisis. Bankruptcies and foreclosures increase, as does social discontent. During the Kondratiev Winter, gold and cash are the best investments.

It is very strange that almost nobody believes the Kondratiev Cycle is a tool to predict the Economy. If people would have believed the Cycle it would be very simple to move through the Depression. In the UP-state you have to save money to sustain the DOWN-state. When you don’t do this the DOWN-state will bring you in to big trouble. At this moment the World has used almost all his resources. We have saved almost nothing to move through the deep recession.

In 1931 the US Department of Commerce assigned Edward Dewey the task of discovering the cause and underlying dynamics of the Great Depression. The US Government created a special institute the Foundation for the Study of Economic Cycles. The US Government never took the research of the Institute for granted or used it for another purpose (Financial Warfare?).

The most interesting observation of Dewey is that Cycles restore themselves all the time and Cycles are influenced by other Cycles. They are entrained. We are not talking about a single isolated Economic cycle. The Universe is an Integrated Harmonic System. The Universe is a Wave that generates Waves that generates Waves. At this moment Physicists believe this is the case (String Theory, Plasma Theory).

To me it is unbelievable that Economists like Milton Friedman called the ongoing statistical research of Dewey and many related Cycle theorists “not scientific“. To me it is also unbelievable that almost nobody takes even a look at the enormous amount of data that is gathered. I believe ignoring the scientific facts of the Cycles is not only stupid but also a crime. It is a crime because by constantly ignoring and pushing the cycles the whole harmonic system (including your Body, the Weather, Society, Earth) gets out of balance.

The Cycle of Kondratiev is a “long-term” cycle but there are cycles with a much longer periodicity (The Precession). The “short-term” cycles of the Kondratiev Ride The Wave of the Very long term cycles. If a very long term cycle moves down the Kondratiev also moves down much deeper and much faster.

This is happening and we are totally not prepared to cope with the new phases of the “dominant” long term cycles. The Harmonic System is preparing to Jump to a new State of Balance. This State has been given many names like Time Wave Zero (Terrence McKenna) and Point Omega (Teilhard de Chardin).

In the old age the Scientists who studied the cycles were called Astrologers. They have gathered a lot of data about the Cycles. Just like Milton Friedman we think Astrology is not scientific but many people just ignore that we are now equipped with much better tools and theories to explain what is happening. The old Astrologers did a spectacular job without computers, telescopes and a highly developed mathematics.

If you read the Predictions of the Old Astrologers like The Maya and The Magi you have to understand that they wrote in the language and the metaphors of their time but their message is the same message McKenna and other Cycle-Theorist want to tell.

LINKS

About the Kondratiev Wave

The Case for Cycles, R.Dewey

About the Cycle of the Climate

About the Cycle of History

About  the Cycle of the Seasons

About the Very Long Cycle Theory of Terrence McKenna

About the Transformation Phase of the Cycle