The Kondratieff Cycles

[kyleAF]

I've seen this tossed around a couple of places before: the long cycles of Kondratieff.

I had never heard of such a notion prior to coming onto these forums. I was familiar with the business cycle theory, and the Austrian refutation of it as being a consequence only of false senses of credit expansion without a corresponding real growth in productive base (wealth) and demand.

Translation: the business cycle is brought on by government interference in the economy: specifically through the fiat money and cheap credit expansion. It's not a natural cycle.

Well, Kondratieff claimed long ago that there was actually a much larger underlying cycle consisting of roughly 54 years. It's usually described in terms of seasons with Winter being the bad deal, or depression.

If anyone out there is familiar with the Fourier transform, or wave additions, you know that any complex wave can be created by summing an array of simple sinusoidal waves. Even digital, "square" waves can be approximated this way. Well, apparently people claim that these long cycles are just sums of the smaller ones, in a sense.

Now, for the same reasons that the business cycles aren't actually natural, so isn't the Kondratieff wave. It's just a longer term result of interference by the government. Besides, there have been all of 3 or 4 long cycles attributed to this, which does not a trend make.

Here's an article by Rothbard written in 1984:
http://www.lewrockwell.com/rothbard/rothbard44.html

The long cycles DO make sense when viewed in the context of history, as there is usually a prolonged period of credit expansion (without a corresponding REAL increase in wealth and product demand) which precedes the recession / depression, but let's not mistake the effect for the cause!

Let's also not throw out the baby with the bath water (I'm on a cliche roll today ), by recognizing that prolonged deferments of necessary market corrections in the face of governmental distortions of credit WILL eventually lead to a larger than normal correction. That's what we call PAINFUL, and a DARN good reason to get pissed at the manipulation of the money supply and economy... especially when you lose your job and your splendid way of U.S. life.

[jonahtrainer]

So, what is your point?

When you look at the earth as a whole it is a free market. Governments are just actors and are subject to the market just as any other actor. When the benefits of the government no longer justify the costs the subjects usually abolish government and institute or change policy. Governments are just brands like Coke or Pepsi. So, I'm not sure your 'governmental interference' argument works when discussing Long Valuation Waves.

But at the same time I doubt Kondratieff has a 100% correct theory either. But I figure he gets fairly close.

Several people have written on LVWs and here is one of several articles I'd recommend.

[kyleAF]

Governments are just actors and are subject to the market just as any other actor

Except that they have a distinct nature which is not the same as any other actor, by which I assume you mean any other entity in the system.

Governments control large scale aspects of the economy, and can set policies which are enforceable under penalty of death. "any other actor" cannot.

Case in point is the fiat monetary system itself. The only way to keep hold of a devalued currency is under penalty of force. It is only the government's use of force holding onto this system which allows for such massive credit expansion and asset bubbles, which must inevitably lead to future contractions, or recessions.

The "free" market would not support such reckless expansion at such a large scale... it can't.

[jonahtrainer]

Governments control large scale aspects of the economy, and can set policies which are enforceable under penalty of death. "any other actor" cannot.

So, what exactly is the difference between the US Federal Government and MS-13? Both are looters.

For example, there are entire areas in Los Angeles that MS-13 controls and police will not enter. MS-13 charges those who do business in the area a 50% tax on revenues. I suppose if the tax gets too onerous for the benefits derived then the business owners will relocate to a lower cost higher benefit jurisdiction.

So likewise when a government's cost outweigh its benefits then the productive members of society relocate to lower cost higher benefit jurisdictions thus leaving the moochers and looters to their own devices. Two prime examples right now is the Germany/Liechtenstein tiff and Denmark's huge shortage of young skilled labor.

One thing that made the US great was good and cheap government. However, costs seem to outweigh the benefits so therefore it may be time for many of the productive members to switch brands, I mean countries.

I do agree with your premise that governments are extremely strong actors and resulting actions can have larger effects than from other smaller actors. However, governments are subject to market forces as the market is stronger than government. Because governments have been supported it is because of an allocation of capital under a 'free market.' Governments exist within the free market of the world. There is no One World Order yet so therefore governments must compete.

Sure, the US$ may be forced currently but eventually it will fail to market forces. History is replete with examples of why all empires end because of economic reasons.

[kyleAF]

So, what exactly is the difference between the US Federal Government and MS-13? Both are looters.

For example, there are entire areas in Los Angeles that MS-13 controls and police will not enter. MS-13 charges those who do business in the area a 50% tax on revenues. I suppose if the tax gets too onerous for the benefits derived then the business owners will relocate to a lower cost higher benefit jurisdiction.

So likewise when a government's cost outweigh its benefits then the productive members of society relocate to lower cost higher benefit jurisdictions thus leaving the moochers and looters to their own devices. Two prime examples right now is the Germany/Liechtenstein tiff and Denmark's huge shortage of young skilled labor.

One thing that made the US great was good and cheap government. However, costs seem to outweigh the benefits so therefore it may be time for many of the productive members to switch brands, I mean countries.

I do agree with your premise that governments are extremely strong actors and resulting actions can have larger effects than from other smaller actors. However, governments are subject to market forces as the market is stronger than government. Because governments have been supported it is because of an allocation of capital under a 'free market.' Governments exist within the free market of the world. There is no One World Order yet so therefore governments must compete.

Sure, the US$ may be forced currently but eventually it will fail to market forces. History is replete with examples of why all empires end because of economic reasons.

This point cannot be argued in terms of snapshots...you've got to see the big picture.

MS-13 holds most of its power because of the government.

Just like the mafia... Prohibition allows for havens and societal power increases, as they can work within the black market for insane profits.

The only proper role of government is to guard against the use of force by its citizens against other citizens. This MS-13 example doesn't address what I said, as they:
1. are still a relatively minuscule area of influence in the economy
2. are only there because of government policies in the first place

And government competition makes no sense. It also is irrelevant to any single one of us, as the timescales you're speaking of far exceed our lifespans.

My original point was this:
It is only the manipulation of the money supply that allows for the cycles within an economy. Real money does not lend itself to inflation and massive-scale leveraging, which must then unwind and deflate.

[jonahtrainer]

This point cannot be argued in terms of snapshots...you've got to see the big picture.


And government competition makes no sense. It also is irrelevant to any single one of us, as the timescales you're speaking of far exceed our lifespans.

Well, zooming in or out is where the issue lies. The free market has been around thousands of years. How long have any given governments lasted? Maybe 200 years at the most.

As far as thinking that government competition makes no sense I think that statement is very incorrect. It is extremely relevant. Don't like the US and its policies? Take your capital and yourself and leave.

I know a lot of people who find the US is no longer a good deal so they have taken their capital and themselves and left. Since Bush took office it is estimated around 300,000 millionaires have gone. I think this drain of human capital is one of the reasons for the rapid decline of the US. The faster it declines the more human capital leaves and so the faster it declines. Just look how quickly Germany descended.

Governments compete for human and economic capital. The US is rapidly running off their producers and soon the looters and moochers will be left by themselves.

[expatriot]

I've seen this tossed around a couple of places before: the long cycles of Kondratieff.
...

...

Let's also not throw out the baby with the bath water (I'm on a cliche roll today ), by recognizing that prolonged deferments of necessary market corrections in the face of governmental distortions of credit WILL eventually lead to a larger than normal correction. That's what we call PAINFUL, and a DARN good reason to get pissed at the manipulation of the money supply and economy... especially when you lose your job and your splendid way of U.S. life.

Was this a question - an answer - or were you just typing out loud?

(I like the Kondratieff concept, but the evolution of human life expectancy
along with the temporal distortions created by modern communications
mean that the functions are not what we term 'stationary' signals.
They are more obviously wavelets, but that's a different thread.

[kyleAF]

Was this a question - an answer - or were you just typing out loud?

(I like the Kondratieff concept, but the evolution of human life expectancy
along with the temporal distortions created by modern communications
mean that the functions are not what we term 'stationary' signals.
They are more obviously wavelets, but that's a different thread.

I was stating that the cycles make sense given the contexts of our economies, but trying to also state that I don't believe they are a natural thing... The business cycle is brought on artificially, and so is this longer cycle.

[WilliamC]

Well, zooming in or out is where the issue lies. The free market has been around thousands of years. How long have any given governments lasted? Maybe 200 years at the most.

Not to revive a conspiracy theory but there are non-governmental players that have been around for longer than that. Royal families, the Catholic Church, ect.

As far as thinking that government competition makes no sense I think that statement is very incorrect. It is extremely relevant. Don't like the US and its policies? Take your capital and yourself and leave.

I know a lot of people who find the US is no longer a good deal so they have taken their capital and themselves and left. Since Bush took office it is estimated around 300,000 millionaires have gone.

I was not aware of this. 300,000 millionaires is a minimum of 300 billion dollars, and more likely over trillion if many of them were multi's.

Any sources to validate this?

I think this drain of human capital is one of the reasons for the rapid decline of the US. The faster it declines the more human capital leaves and so the faster it declines. Just look how quickly Germany descended.

Governments compete for human and economic capital. The US is rapidly running off their producers and soon the looters and moochers will be left by themselves.

Sounds like a bad situation is going to get worse.

[jonahtrainer]

I was not aware of this. 300,000 millionaires is a minimum of 300 billion dollars, and more likely over trillion if many of them were multi's.

Any sources to validate this?



Sounds like a bad situation is going to get worse.

Here is an ancient article from 1994. Congress has since tried to make it more difficult to leave by imposing 'exit taxes.' As a result most are doing it 'under the radar' and so collecting statistics is fairly difficult. But it is easy to purchase citizenship, have new passports in 6-8 weeks and be on your way. A good plan usually takes at least 4-6 years to carry out. If you are interested in doing such a thing then I recommend you find qualified and competent professionals to assist as there are plenty of scams.

Hitler also imposed exit taxes on the Jews who left Germany early therefore I would tend to agree that yes the bad situation is going to get worse as the 'smart Jews have left the country.'

[WilliamC]

Here is an ancient article from 1994. Congress has since tried to make it more difficult to leave by imposing 'exit taxes.' As a result most are doing it 'under the radar' and so collecting statistics is fairly difficult. But it is easy to purchase citizenship, have new passports in 6-8 weeks and be on your way. A good plan usually takes at least 4-6 years to carry out. If you are interested in doing such a thing then I recommend you find qualified and competent professionals to assist as there are plenty of scams.

Well there's just one little problem.

I'm not a millionaire.

Heck, I'm not even a $100,000aire.

I'm just a working middle-class schumck trying to to support a family in a two-income household.

Fortunately we live in a fairly low-expense part of the Country and have been a bit wise and frugal so we don't have any debt except the mortgage, and that's only ~17% of our take-home pay.

So my big get-rich-slow scheme is to pay off the mortgage in 10-12 years instead of 30, then hopefully use the income to help pay for some education for the kids and build a little wealth to leave them before I die.