a few observations nine lives re K waves I have all of Kondratievs, Schumpeter , Kuznets and Minkys original work and data some of which is included here
comparisons with 1907 or 1929-32 ignore the fact that prices actually crashed in 1920
priced in gold the clear end of commodity cycle can be seen to happen in 1920 both Kondratiev and Schumpeter used this as their timing for the downwave
The British economy the command economy at the time crashed 10 years earlier than the US
German stock prices followed the British
we are looking at a much larger government sector this time around in ratio to the private sector
The declines globally happened 10 years earlier, these combined commodity and equity declines are what kicked of the Weimer Hyperinflation and the Russian revolution
Here we see global equity declines our obsession with US economic history tricks us into believing that 1929 was the turning point it actually happened much earlier
Then when the global reflation took hold after 1920 equities boomed for another 10 years (note the +1000% increase of german equities) and the 73% increase of British economy.
then when we do get to 1929 all the ships sink together (note the British economy took to 1954 to recover from 1921 crash +30 years
I think where people are missing the point is they substitute US economic history for global economic history and make the comparisons with 1929-31
Where as if you look at the actual numbers the US is in a mirror of Britain and France in the 1920's (which is just as bad)
An interesting observation was while asset markets expanding in some European countries the underlying economy stagnated , the consumption of commodities in England, France, Russia and German stayed flat for most of the 1920's, it was in the US that commodity consumption had strong growth while commodity prices throughout the 1920s remained slowly rose
This suggests that if the US mimic Britain in the 1920s equity prices may fall another 30% or more and may not recover till 2044 and China will possibly triple by 2020
the trick price deflation actually started in 1920 not 1930 (as per the chart on prices measured in gold)
Schumpeter re checked Kondratievs figure and confirmed them both in 1932-40-52 with slight variations between them
Here we have Schumpeter in a letter to Kuznets dating the start of the global depression as 1926
I have masses and masses of old data in my library that has almost every sector of the economy turning down starting in the 1920's I will post it over the next few days , be assured that the number show a massive downturn in incomes , prices and trade starting in 1920, postulating that the world has been tricked into thinking fiat based asset inflation was actually economic health, similar to the way folks have been since 2000.
remember Schumpeter wasn't talking about markets , nor fiat based inflation he factored all of this out , his basis for cycles was the underlying economy.
Note Schumpeter dates the start of the global recession as 1912, which has interesting parrells to the commodity bull that peaked in 1920..........this gives us another echo of 2000-2008 to reflect on, did the start of the recession actually start in 2000 and did we see a similar echo with the commodity blow off from 2000-2008?
this is further confirmed with the fall in income in Europe here we have French incomes falling off a cliff
The crash is the symptom of the underlying economic cancer, the cancer has existed from 1998-2000 as it had done since 1912, but folks only started coughing up blood in 2007 and had the cancer diagnosed in 2008, unfortunately for some countries is terminal in others its bed rest.
When I say terminal I mean in the sense of this generation, by the time some countries recover it will be another another generation.
The Fed is pumping money into a black hole , the economies are so leveraged that for every dollar pumped in about 95c reaches the economy.
In monetary theory terms they refer to this is as the monetary transmission channel, the reason credit is so important is that without credit all the money dropped by the helicopter gets blown away by debt retirement before it reaches the ground. The banks are so capital impaired they that they keep it on the way through and so it doesnt reach consumers who wouldnt borrow it anyway because they are scared to death of taking on more debt because the debt to income levels are so high.
The Fed calls this measure the money multiplier and when this measure turns it will signal the return of normal credit conditions and depending on the steepness of the curve whether we lurch into hyperinflation
All of Bernankes work at Princeton suggested that the Fed could step in at this stage and basically forgive all the bank private sector debt and move it onto the governments balance sheet. This is what they mean by suggesting the establishment of a "bad bank", this is a bank thats owned by the government that basically takes all the bad debt onto the governemnt.
The problem that exists though is there isnt enough money in the world to do this because the derivatives market has created more bad debt than any government (even combined) can absorb
If the money multiplier turns up then they have succeeded and gold will go ballistic
If that happens asset controls will have to implemented in order to control the hyper inflation
Here is an good explanation of the money multiplier
(20min delay)