Economic Long Waves

Kondratieff's work

Many have studied economic cycles and tried to fit them into a single secular wave, with Kondratieff's work below the best known.

A more Natural and Complex system

My studies below suggest there are many cycles involved depending on the series and even within the same series. For example the Princeton Economic Confidence Model achieves greater accuracy using a number of cycles based on the value of PI, with increasing octaves similar to harmonic principles of resonance.

Commodities and the 30 year cycle

The Commodities series shows the secular trends between price inflation and deflation have accelerated in the last century. It also shows that the inflation periods are powerful while the deflation periods are now weak and range bound. The increasing population, and our growing global economy and communications keeps resources in high demand. This inflation cycle has now broken out as expected and will likely continue into the projected cycle high. There is evidence of a 150 year cycle, a likely cycle since it would be an harmonic resonance of the 309.6 year Princeton model. Assuming we have a 309.6 / 2 or 154.8 year cycle, then the last cycle low in 1932 points to a 2000 high, and the last high in 1865 points to a 2020 high, in line with the 2010 shorter cycle high.

Charts courtesy of StockCharts.com

Charts courtesy of StockCharts.com

Interest Rates and the 60 year cycle

The Interest Rates series also shows acceleration into the now regular 60 years but the volatility is increasing. The high levels in 1980 are likely a swing reaction to the lows in 1945, and we can expect decreasing swings ahead. If this behavior holds we can expect rates to be somewhere in the 3.5-4.5% range, probably nearer the 3.5% level by 2010. Supporting this low rates forecast is the Federal Debt now over 8.8 trillion, and Household Debt Service at 20 year highs. We can then look for Interest Rates to head back up towards the levels seen during most of the 1970's or the 6-8% range for the 2040 cycle high.

Note: In his Investment Outlook Bill Gross agreed and said: "My/our most certain idea, as expressed in previous Outlooks, is that real interest rates in the United States will have to be kept low, that the old Taylor rule [*] is out. Too much debt in a finance-based economy precludes raising interest rates like we have in the past and while that keeps the patient/economy breathing it leads to asset bubbles, potential inflation, and a declining currency over time."

Charts courtesy of BullandBearWise.com


Charts courtesy of BullandBearWise.com

Rates show a 6 year harmonic resonance cycle

Rates make lows and highs just about every 6 years and the next low is due in 2010-11 confirming the 60 year cycle.

Charts courtesy of StockCharts.com


Charts courtesy of StockCharts.com

Equities and the Princeton Economic Model

The cycles in Equities are not as clear due to their strong uptrend this century but the Princeton Economic Model did find significant cycles of 8.6 and 51.6 year as shown above and below as the PI - 8.6 and PI 51.6 year cycles. You can learn more about Martin Armstrong Princeton Economic model and his constitutional fight with the US government here.

Other Harmonic Resonance cycles

One 51.6 year cycle is made up of 4 idealized seasons of 12.9 years and we should expect markets to turn significantly near these 12.9 year boundaries. We can see that empirical data matches this very well with the market making turns in 1929, 42, 55, 68, 81, 94 and 2007, but also the middle series as well in 1935, 48, 61, 74, 87, 2000 and 2013. The well known 4 year Election cycle happens to be very close to the theoretical 8.6 / 2 = 4.3 year Princeton cycle.

Charts courtesy of StockCharts.com


Charts courtesy of StockCharts.com