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Mar 25 2023

Brenner & Kondratieff Waves v Economic Confidence Model


Armstrong Economics Blog/Understanding Cycles Re-Posted Mar 25, 2023 by Martin Armstrong

COMMENT: Marty, I began following you in 1985. That is when everyone was using the Kondratieff Wave and admitted it averaged 45 to 60 years. They were all predicting another Great Depression. You were the only one right back then as well. I remember your advertisement in the Economist saying a new Private Wave was beginning. The ECM has called every turn ever since and even to the very day.

Now the Brenner Chart is floating around all because it points to 2023.  The 1999 turning point which was supposed to be the high, was not just off from the stock market and the 2000 Dot-Com Bubble, but 1999 was low in gold. The 2019 target was also off for it was 2020 which was a low.

I think both the Kondratieff and the Brenner cycles have caused more harm than good in furthering cyclical analysis. You are right. They were commodity based not economic-based.

I just wanted to share my observations because people need to understand the difference.

Jeff

REPLY: Oh yes. I remember 1985. It was high in the dollar and the British pound hit nearly par dropping from $240. Yes, we took the back cover of the Economist for 3 weeks during July 1985 to announce the start of inflation and the Private Wave. I was shocked that people held on to those advertisements and we would get letters even 2 years later.

The Kondratieff and Benner cycles were constructed during the 19th century. You cannot create a model on Wheat and then try to use it to trade Copper. Sometimes it will line up, and other times it will not.

Both Kondratieff and Brenner waves were not just based on commodities/sunspots, but they were in turn influenced by war and climate, unbeknownst to either. Kondratieff and Brenner followed agriculture/commodity prices when agriculture accounted for 70% of the GDP pre-20th century. That only began to decline from 1850 forward, dropping to 40% by 1900 as the Industrial Revolution emerged with the invention of the steam engine. Then there was climate change. The Little Ice Age bottomed in the 1600s.

Then there was the volatility in weather that also impacted the commodity prices. This too has contributed to the inaccuracy of both waves.  During the late 18th to early 19th century, it was still very cold and the ground would freeze down a couple of feet preventing winter crops. The ground froze to a depth of 2 feet according to John Adams. When John Adams set out to travel to Philadelphia, it was bitterly cold and there was a foot or more of snow that covered the landscape that had blanketed Massachusetts from one end of the province to the other. Beneath the snow, after weeks of severe cold, the ground was frozen solid to a depth of two feet. I grew up near the Delaware River. NEVER in my lifetime did I ever see the river frozen as you see in paintings of Washington crossing the Delaware River. In a letter to his wife, John Adams wrote:

“Indeed I feel not a little out of Humour, from Indisposition of Body. You know, I cannot pass a Spring, or fall, without an ill Turn — and I have had one these four or five Weeks — a Cold, as usual. Warm Weather, and a little Exercise, with a little Medicine, I suppose will cure me as usual. … Posterity! You will never know, how much it cost the present Generation, to preserve your Freedom! I hope you will make a good Use of it. If you do not, I shall repent in Heaven, that I ever took half the Pains to preserve it.”

On September 8, 1816, Jefferson described the weather in a letter to Albert Gallatin:

“We have had the most extraordinary year of drought and cold ever known in the history of America. In June, instead of 3¾ inches, our average of rain for that month, we had only 1/3 of an inch; in August, instead of 9 1/6 inches our average, we had only 8/10 of an inch; and it still continues. The summer too has been as cold as a moderate winter. In every state North of this there has been frost in every month of the year; in this state we had none in June and July but those of August killed much corn over the mountains. The crop of corn through the Atlantic states will probably be less than 1/3 of an ordinary one, that of tobacco still less, and of mean quality.”

Obviously, the Kondratieff and Brenner Waves did not understand the external forces. The climate was impacting the food supply, there were also wars. This is why their waves have not been consistent. If we extend the K-Wave 54 years from the commodity high in 1919, that brings us to 1973 which missed the end of Bretton Woods in 1971 by 2 years, but it was near the OPEC Oil crisis, which was imposed in retaliation for helping Israel in war. The Dow Jones Industrials peaked in January 1973 and crashed into December 1974. The Brenner wave did not bottom until 1978.

Another 54 years from there will bring us to 2027 while the Brenner Wave targeted 2019 and projects the low in 2023. Wheat peaked in March 0f 2022. So you can see if any of these targets were to actually work on time, it tends to be more of a coincidence rather than an accurate forecast. So I can see what you say that they have perhaps led some to think cyclical research is snake oil. It is so important to understand that you cannot create a model on potatoes and then use it to trade the Dow. We must understand the nature of markets to comprehend what we are really looking at in the first place.

There is a cycle of industrialization as well. Rome began as an agrarian society and moved toward trade, which brought them into conflict with Carthage. We see this cycle even in their coinage. The first silver coins of Rome were struck using the monetary system that was Greek in origin from the days of Athens and Alexander the Great. Only after the Second Punic War did Rome create its own monetary unit which was a debasement (reduction in weight) from 6.5 grams to 4 grams. That reflected both the inflation due to war, but also the rise of Rome whereby they no longer cared about complying with the Greek standard but set out to establish the Roman standard. To this day, many denominations still retain derivatives of the word “denarius” such as in the Iraqi Dinar or the French denier. The Germans called it the pfennig and the English adopted that as the penny.

Rome itself became more like New York and grain was imported from Egypt. As agriculture became more of an import, Rome blossomed like New York in the arts and culture. It built the massive port of Ostia which was celebrated on the coinage of Nero (54-68AD) securing the food supply.

The shift toward industrialization in the Roman Empire also resulted in a decline in birth rates for children as we see in modern times. Large families were needed in an agrarian society, but not so much in a developed society – hence the family laws of Augustus. We see the same patterns repeat throughout history.

The first known Clean Air Act occurred in 535 AD by Emperor Justinian in Constantinople. He proclaimed the importance of clean air as a birthright. “By the law of nature these things are common to mankind—the air, running water, the sea.” Even Cicero wrote about pollution in the ancient city of Rome. This went hand and hand with developed societies and urbanization.

Joseph Mois Schumpeter (1883-1950) was an Austrian economist, educated in Vienna. He taught at Czernowitz, Graz and Bonn. In 1932, he moved to Harvard where he taught until his death. Among Schumpeter’s writings is Theory of Economic Development (1912), Business Cycles (1939), Capitalism, Socialism and Democracy (1942), and History of Economic Analysis (1954).

Schumpeter developed a theory of trade cycles and growth; he argued that abnormal profit was the entrepreneur’s reward for innovation. He predicted, however, that the scope for innovation would be declining in the course of capitalist development as competitive market structures were replaced by monopolies. He believed that capitalism would gradually evolve into socialism. Like Malthus, he could not look into the future and see all the technological advancements that would constantly create waves of new innovation.

In 1939, it was actually Schumpeter who suggested naming the cycles “Kondratieff waves” in his honor. To explain the Kondratieff Wave, Schumpeter called them waves of innovation that result in waves of creative destruction. Each wave of some new innovation destroys the last. Cars wiped out horses & buggies. The internet is wiping out local stores, and the post office, as technology has introduced streaming that has wiped out VCRs and DVDs, and even movie theaters. The cryptocurrency advocates promote the end of central banks and paper currency.

There has always been a cycle of innovation. That was one of Joseph Schumpeter’s main theories to explain the business cycle. For example, first, there was the Canal Bubble that peaked during the Panic of 1825. There was the invention of the telegraph followed by the telephone. The ancient Romans had invented the first version of the Pony Express and could get a letter from Britain to Rome in about 7 days. That too was celebrated on the coinage of Emperor Nerva (96-98AD).

This age of communication with the Pony Express and stagecoach travel was followed by the invention of the steam engine. That gave birth to the railroad boom which lasted from the 1860s and peaked in 1907. It was on May 10th, 1869, when the Union Pacific and Central Pacific railroad lines joined 1776 miles of rail at Promontory Summit, Utah Territory connecting the East and West by rail. The Railroad Barrons became famous millionaires and that innovation boom peaked initially with the Panic of 1893, but the final rally in the railroads peaked in 1907. Thereafter, the combustion engine took over for the next wave of innovation giving birth to the automobile took over and peaked in 1929, tractors, and air travel.

On January 1, 1914, the world’s inaugural scheduled flight with a paying passenger hopped across the bay separating Tampa and St. Petersburg, Florida. Planes were used during World War I, but after the war, there were thousands of unemployed pilots and a surplus of aircraft along with an appreciation for the future significance of this new technology.

It was after World War I that civilian airliners began to emerge. The Fokker Trimotor built in Europe by the Dutch with an 8-12 passenger capacity was the most popular airliner in the 1920s. It had a range of about 600 miles. World War II was coming into play when the USA built Douglas DC-3 with a capacity of 28 passengers. It had a range of nearly 1500 miles. The DC-3 made its maiden commercial flight in 1936 between New York and Chicago and thus the airline stocks were the big innovation for the rally into 1937.

It was 1938 when televisions first began to be commercially available. It would be after World War II when this became the next real innovation boom. It was 1954 when color RCA TV C-100 systems were sold across America. By 1960, there were four debates between John F. Kennedy and Richard Nixon that were broadcast and changed the manner in which presidents would campaign. By 1969, Neil Armstrong walked on the moon for the first time as millions of American viewers watched live on network TV.

Of course, we have the internet boom in 2000, etc., and there is a clear cycle of innovation that Kondratieff and Brenner could not see before even the invention of the combustion engine that led to tractors changing agriculture forever. There is a difference between when something is invented and when it becomes commercially viable.

For example,  the FAX machine was actually invented by the Scottish inventor Alexander Bain (1811–1877) who was famous for being the first to patent the electric clock and was also involved in installing the telegraph lines between Edinburgh and Glasgow in Scotland. He could see in his mind’s eye that the Morse Code of dots and dashes invented several years earlier by Samuel Morse, could take an image and transmit it by reducing it to a binary image. He envisioned the first fax machine. In 1846, he was able to reproduce graphic signs in laboratory experiments. He applied and received a British patent #9745 on May 27, 1843, for his “Electric Printing Telegraph”, but it took more than 100 years to actually become usable. We have embarked on the next wave of innovation that includes quantum computers and Artificial Intelligence.

Consequently, when you are looking at long-term cycles, a few hundred years is not enough data. If Kondratieff were alive today and based his study on just the current system, he would be focusing on services rather than commodity-based economies. Agriculture has fallen to just 1.41% of the civil workforce.

It is simply vital to grasp the very nature of the data that you are intending to use to create models, which is itself in its own cycle of innovation. This is why the Economic Confidence Model is totally different. It is NOT panic on any single sector. It is based on the boom and bust movement irrespective of the sector and it embraces the entire world, not a single economy. Back-testing revealed that not only did the Roman Monetary System collapse in just 8.6 years, but this cyclical frequency appears throughout the ancient monetary systems globally.

There is a lot more hidden behind the cloak of what people think is just chaos.

Mar 25 2023

Credit Suisse Banking Crisis


Armstrong Economics Blog/Banking Crisis Re-Posted Mar 24, 2023 by Martin Armstrong

It is refreshing when you actually find a journalist who is honest and is not being included by the Neocons to put out their propaganda. Her review of Credit Suisse is a worthwhile read. Especially when this is not over yet and the winds of finance are now turning toward questioning Deutsche Bank.

Izabella Kaminska is senior finance editor at POLITICO Europe.

Over the span of 10 days, the global financial system was once again shaken.

The time frame between the collapse of Californian lender Silicon Valley Bank, America’s 16th largest bank, and that of the 167-year-old lender Credit Suisse was approximately just that — 10 days.

And as we witness the fallout, so far it appears contained. Stock markets are up, bank stocks seem stabilized and government bonds are in high demand. Officials reassure ad nauseam that the financial system remains strong and stable.

But the truth is, even if so, what happened in this period of time has changed the financial system forever — and worryingly, most people haven’t even noticed.

Governments and central banks would have you believe that in both cases, private sector solutions were found to resolve the failures. No taxpayer funds were used.

But that is likely not true.

In the United States, growing calls from the country’s top billionaires and hedge fund bosses to guarantee the full extent of customer deposits would, if acted on, deliver a backstop that must be underwritten by public funds. That’s the case even if costs are distributed among whatever healthy banks remain later. The sums involved are eye-watering — by some measures up to $17 trillion of unfunded liabilities.

If the rule is passed — and all indications are that it will be — this would finally make the implicit explicit: that the financial system was never really rescued following the 2008 financial crisis but merely put on life-support. And that has now failed, which means socialization of the losses beckons.

Over in Europe, things are potentially worse. This time, it wasn’t the storming of the Winter Palace Hotel in Gstadt that seized the means of financing but something far more mundane: an untidy bank resolution for Credit Suisse, which relies far too heavily for comfort on Swiss National Bank (SNB) guarantees.

As one former top British central banker told POLITICO, “They could have used bail-in; it would have worked; and banking would become part of a capitalist market economy” — a reference to the loss-absorbing processes regulators came up with after 2008 to ensure bank failures didn’t have to draw on public resources ever again. “The only stable equilibrium is one where bank resolution works, or socialism,” he added.

But the resolution didn’t work. And investors are belatedly realizing this.

Key to this reality is that Credit Suisse was a bank considered to be in good condition and solvent by all regulatory measures. As one bank analyst told POLITICO, going by the assets, you would never have seen the problem coming. Even the SNB and financial markets regulator FINMA said so as recently as last week.

The SVB Private logo is displayed on an ATM outside of a Silicon Valley Bank branch in Santa Monica, California | Patrick Fallon/AFP via Getty images

So were the regulators lying? Or is the accounting somehow fundamentally broken?

What we know for sure is that markets questioned the numbers, and this was evidenced by a run on the bank’s deposits, equity and bonds. And the discrepancy poses a big problem going forward, as it knocks trust in the accounting of all similarly assessed banks, which, thanks to international accounting standards, means pretty much all of them.

Credit Suisse’s sale to domestic rival UBS at cents on the dollar of what regulators claim the underlying assets are worth presents another problem too. If similar assets are lurking in UBS’ own balance sheet — and chances are that is the case, as the assets in question are probably government bonds — they might have to be written down to a similar degree. This is probably why UBS needed the guarantee from the SNB to be doubled to 100 billion Swiss francs to do the deal.

In light of this, Switzerland now faces an even larger issue: If UBS were to become stressed — and it very well could due to this discrepancy — there’s no private sector pathway for resolution left. The country now only has one major bank and, thus, only two possible pathways to deal with a failure — nationalization or acquisition by a foreign buyer with enough cash to keep the valuation of all the consolidated assets at a price that brings everything back to par. And there are few of those in the Western hemisphere.

With a full foreign acquisition off the table due to global discord, this leaves only an unthinkable solution for the home of Swiss private banking — the dawn of a type of finance more commonly seen in communist countries, where banks are directed by the state to allocate funds to activities they prioritize. Combined with a central bank digital currency, this would reduce banks to mere proxies of the state, with uncertain consequences for efficient capital allocation and inflation.

How things would unfold from then on is unclear. The only thing we can be sure of is that nothing in banking, or capitalism, may ever be the same again.

Mar 25 2023

Deutsche Bank Loses 10% Value After EU Leaders Say “Banking System Is Stable in Europe”


Posted originally on the CTH on March 24, 2023 | Sundance

Almost as soon as German Chancellor Olaf Schulz said, “The banking system is stable in Europe – Generally, I think we are in good shape,” shares of German-based Deutsche Bank began dropping.

After a Friday loss of 14%, the bank came back to close -9.8%, and on the heels of the Credit Suisse collapse and subsequent purchase, concerns are still reverberating.

BRUSSELS (AP) — European Union leaders Friday played down the risk of a banking crisis developing from recent global financial turbulence and hitting the economy even harder than the energy crunch tied to Russia’s war in Ukraine.

After a meeting in Brussels, the EU government heads said lenders in Europe are generally in sound health and in a position to weather a combination of rising interest rates and slowing economic growth.

“The banking system is stable in Europe,” German Chancellor Olaf Scholz told reporters after the summit. Dutch Prime Minister Mark Rutte said: “Generally, I think we are in good shape.”

The EU deliberations came in the wake of U.S. regulators’ shutdown of two U.S. banks, including Silicon Valley Bank, and a Swiss-orchestrated takeover of troubled lender Credit Suisse by rival UBS.

The emergency actions on both sides of the Atlantic revived memories of the 2008 global financial meltdown and the ensuing EU sovereign debt crisis, which almost broke apart the euro currency now shared by 20 European countries.

In a sign of market jitters in Europe, shares of Deutsche Bank, Germany’s largest lender, fell as much as 14% in Frankfurt on Friday. The drop, which dragged down the stocks of other European lenders, followed a steep rise in the cost of financial derivatives known as credit default swaps that insure bondholders against the bank defaulting on its debts.

Scholz dismissed the idea of basic weaknesses at Deutsche Bank, saying it has become “very profitable” after modernizing its business.  “There is no reason to have any concerns,” he said. (read more)

The German bank has lost about a fifth of its market value this month. Other European banks were also down at closing, including Deutsche Bank German rival Commerzbank, which was down 9%. Credit Suisse and its new parent company, Barclays and Societe Generale were all down over 6% on Friday.

Mar 25 2023

King Charles Cancels Trip to France as Revolution Breaks Out on the Streets of Paris


Posted originally on the CTH on March 24, 2023 | Sundance

No, despite the historic rhyming, we have been assured it remains 2023 not 1629.  However, King Charles has cancelled his trip to France amid an angry revolution that has broken out in several regions of the country, including Paris.

(International News) – United Kingdom King Charles III’s state visit to Paris has been postponed amid the mass protest against the unpopular pension reforms.

The King had been scheduled to arrive in France on Sunday on his first state visit as monarch, before heading to Germany on Wednesday.

This decision was taken by the French and British governments, after a telephone exchange between the President of the Republic and the King. According to the French president’s office, this State visit will be rescheduled as soon as possible. (link)

..”Listen, you stupid little dwarf, I don’t care about your Donbas…. He’s having dinner with Justin right now and we need the codes to the bunker. Just give me the codes or I will cancel your wife’s credit line at Lanvin and La Perla boutiques!”…

Mar 24 2023

CNN is Dying – Thank God!


Armstrong Economics Blog/Press Re-Posted Mar 24, 2023 by Martin Armstrong

COMMENT: Marty, You have a bigger readership than CNN. They dropped to 80,000 primetime. I think you are well beyond 600,000 these days. Maybe put in an offer to buy CNN for $1.49 and hire all new staff and Socrates should get his own show.

WL

REPLY: That is just amazing. I think the price is too high. It should be negative. You fire all the leftist pretend journalists and they will be in court the next day. So there would be a huge amount of liquidation costs. They would have to pay me to take over CNN and even then I think the lights should just be turned out and start fresh with something new. This is just another example of WOKENESS and how it is destroying everything it touches. Quantification, competence, and experience are no longer required for jobs in any company that is WOKE. They are all at the end of the day destined for bankruptcy. In the media, the truth has been sacrificed for fake news to manipulate people’s opinions and steer the country to its doom.

In Germany, being pro-COVID and pro-war, the press is being viewed as part of the whole agenda against the people. There are people now attacking the journalists for hiding the deaths from the vaccines. Many see the press as just evil. Some are still caught up in the vaccines and refuse to admit that there are even side effects. They have lost all sense of honor and independence. It is no longer bout truth, it is just pushing an agenda.

The German mainstream media will also cheer on sending German boys to their death in Ukraine all because that is their directive. They seem to care nothing for society whatsoever and cannot see past the end of their nose. I do not understand how they can look at themselves in the mirror every morning.

If you have any children, tell them to stay away from joining any mainstream media. It will ruin their lives forever for when the dust settles, the people will remember who they were that sent the world to its destruction.

Mar 24 2023

Medvedev warns The ICC Has Instigated an Act of Arbitrary War


Armstrong Economics Blog/Corruption Re-Posted Mar 24, 2023 by Martin Armstrong

Former Russian President Dmitry Medvedev has warned the West and rightly so that the decision of the International Criminal Court (ICC) to issue an arrest warrant against his successor, Vladimir Putin, will have dire consequences for international law. But it would also justify immediate World War III. The ICC has been usurped by the Neocons and has lost all its integrity and authority whatsoever.

The Neocons who have seized control of USW Foreign policy are the aggressors and unless we overthrow them, we are headed into a dark period. They have divided the world economy and the loyalty of nations. Just as many who were in league with ancient Athens turned against them for their arrogance, history is repeating. Their usurpation of the ICC crossed the Rubicon.

Medvedev made it clear that the change in International law and the institutions themselves, such as the ICC, that were once to govern the world have been corrupted just like everything else the Neocons get their hands on. The No. 1 goal of Russia and China now in the context of this new divided world order is to reestablish international law.

Medvedev explained this on his Telegram platform.

“They decided to try the president (…) of a nuclear power, which is not a member state of the ICC
for the same reasons as the USA and other countries, … “There is a definitive breakdown of the international law system.”

As I have explained, the rule of the ICC is that they have no jurisdiction over nonmembers, and that includes Russia, China, and the USA. Even the former prosecutor at Nuremberg has come out in protest against the ICC. The Neocons have usurped the ICC and it is now just a corrupt court no longer worthy of any respect.

https://player.vimeo.com/video/793785656?h=08ef0d3c53&dnt=1&app_id=122963
Mar 24 2023

US National Debt – A Different Perspective


Armstrong Economics Blog/Uncategorized Re-Posted Mar 24, 2023 by Martin Armstrong

In 2010, Barron’s wrote a piece on me effectively laughing at my forecast that the share market would rally to new highs. What seems to inevitably unfold is this notion that whatever the event might be in motion, the mere thought of a reversal in trend appears impossible. When the press disagrees with Socrates, I know it will be the press who is wrong. And because they end up being wrong, of course, they cannot print a retraction so they will just pretend you do not exist rather than admit – Sorry, we were wrong. The Dow made that new high above 2007 by February 2013. That was 64 months from the October 2007 high.

I have been in the game for many years. With each event, it appears to be like Groundhog Day. They pop their heads out and declare they do not see their shadow, so the entire world will disintegrate and that is always based upon opinion. It is never backed by real analysis. Just the standard human trait of assuming whatever trend is in motion, will remain in motion.

Being an institutional adviser, I have never had that luxury. We have had to deal with some of the biggest portfolios in the world. They want accurate forecasting, and it has to be long-term – not day trading. They are not interested in the typical headlines of doom and gloom that the press love to print with every financial event simply to get readership. That is all they care about. It has been the financial version of the fake news.

When we step back and look at this favorite fundamental that people beat to death to predict the end of the world, the national debt, and the collapse of the dollar. Little did they know that the increase in National Debt during the 2007-2009 Financial Crisis was supposed to bring down the sky and end the existence of the dollar. We can see the sharp rise in debt simply made a double top with the Financial Crisis of 1985.

It was that previous 1985 Financial Crisis that set in motion the Plaza Accord which brought together the central banks creating what was then the G5 – now G20. Of course, like every government intervention, the side effect was the 1987 Crash and their attempt to reverse their directive at the Plaza Accord became the Louve Accord. When the traders saw that failed, the collapse in confidence led to the 1987 Crash.

It has always been a CONFIDENCE game as I pointed out with the 1933 Banking Holiday previously. In this case, the failure of the Louvre Accord which came out and said the dollar had fallen enough, once new lows in the dollar unfolded and the central banks could not stop the decline, led to financial panic by 1987 which manifested in the 1987 Crash.

This chart shows the quarterly change in the National Debt since 1966, Here you can see the 1985 and 2008 Financial Crises were on par. Neither one ended the dollar no less the world economy. So when I warned the share market would rally and make new highs and Barron’s laughed in 2010, I said the same thing after the 1987 Crash and people laughed.

In fact, on the very day of the low, I said this was it and that we would rally back to new highs by 1989. That was perfect and the market responded to the Economic Confidence Model (ECM) which has been published back in 1979. This was more than simply forecasting the 1987 Crash and the very day of the low. It clearly established that the ECM had revealed that there was a secret cycle behind the appearance of chaos even in economics.

Larry Edelson was actually a competitor at the time. But Larry respected that the forecast from the model was far beyond what people would ever expect. If we are ever going to advance as a society, we have to stop the bullshit and understand HOW markets trade and WHY. Larry did that. He understood that the model was something larger than just personal opinion.

Even those claiming to be using the K-Wave cannot make real forecasts. The basis of Kondratieff’s argument came from his empirical study of the economic performance of the USA, England, France, and Germany between 1790 and 1920. Kondratieff took the wholesale price levels, interest rates, and production and consumption of coal, pig iron, and lead for each economy. He then sought to smooth the data using an averaging mathematical approach of nine years to eliminate the trend as well as shorter waves. Kondratieff thus arrived at his long-wave theory suggesting that the economic process was a process of continuous waves of boom and bust.

Kondratieff’s work was compelling and contributed greatly to the Austrian School of Economics that first began to develop the concept of a Business Cycle. The general central principle of the Austrian Business Cycle Theory is concerned with a period of sustained low-interest rates and excessive credit creation resulting in a volatile and unstable imbalance between saving and investment. Within this context, the theory supposes that the Business Cycle unfolds whereby low rates of interest tend to stimulate borrowing from the banking sector and thus then result in the expansion of the money supply that causes an unsustainable credit ­source boom which leads to a diminished opportunity for investment by competition.

Benner

Here is a chart of the business cycle that was created by a farmer named Samuel Benner. Benner based his work on Sunspots, which actually incorporated solar maximum and minimum that today’s Climate Change zealots refuse to consider. Nevertheless, someone manipulated Brenner’s work and created a chart to try to influence society handing it in with a wild story to the Wall Street Journal published this cycle on February 2nd, 1932, when the market bottomed in July 1932. Still, nobody knew who had investigated this phenomenon in 1932.

WSJ1933

When I was doing my own research reading all the newspapers to understand how events unfolded, I came across this chart. I found it interesting that during the Great Depression people were reaching out and some began to embrace cyclical ideas. The problem with both Kondratiff and Brenner was that the period they used to develop their cycles was the 19th century because the real Industrial Revolution was unfolding and in the 1850s, 70% of the civil workforce were all in agriculture. Consequently, if you constructed a model based entirely upon one sector, it would work only as long as that sector was the top dog.

Being a historian buff, it quickly hit me that NOTHING remains constant and that the economy will ALWAYS evolve, mature, and then crash and burn. Where agriculture was 70% of the workforce in 18590, it fell to 40% by 1900, and then down to 3% by 1980.

Just look at energy. The earliest lamps, dating to the Upper Paleolithic, were stones with depressions in which animal fats were burned as a source of light. In cultures closer to the sea, they began to use shells as lamps which they would burn at first animal fat. Clay lamps began to appear during the Bronze Age around the 16th century BC and the invention quickly spread throughout the Roman Empire. Initially, they took the form of a saucer with a floating wick.

We even find Roman oil lamps as luxury items crafted out of bronze. There are collectors of terracotta oil lamps for there is a vast variety of motifs. There is everything from dolphins, and various entities, to erotic oil lamps, which may have been used in brothels. The point is, if you constructed a model on oil, you would have surely accomplished similar results to Kondratief and Brenner.

Then of course, just as the energy moved from animal fats to vegetable oils, by the 19th century it returned to whale oil which was extracted from the blubber. Emerging industrial societies used whale oil in oil lamps and to make soap. However, during the 20th century, whale oil was even made into margarine.

Then the discovery of petroleum and the use of whale oils declined considerably from their peak in the 19th century into the 20th century. Ironically, it was fossil fuels that probably saved whales from extinction. Hence, now we are entering a period where they deliberately want to end fossil fuels and move to solar and wind power. Obviously, just a cursory review of energy reveals the problem of basing a model on the current energy source or major economic industry. Things change with time.

Mar 24 2023

Things Are Getting Spicy in France as Mass Protests Turn Violent in Some Areas – Macron Declares This Is France’s January 6th Insurrection Moment


Posted originally on the CTH on March 23, 2023 | Sundance

History tells us the French ‘do revolution’ quite well, the current status of the protests against President Macron’s unilateral pension reform cuts are no exception.

Worker strikes have hampered France for over a week in protest to: (1) the pension reform; and (2) the undemocratic way it was enacted via unilateral fiat by the French President, Emmanuel Macron.

Today the worker strike turned to massive protests in the streets throughout several regions.

As the day wound down, those protests then turned violent as the ultra-left-wing “Black Bloc” anarchists began attacking police.

(Reuters) – PARIS, March 23 – Police fired tear gas and fought with violent black-clad anarchists in Paris and across France on Thursday as hundreds of thousands of protesters marched against President Emmanuel Macron’s plan to raise the pension age.

The ninth day of nationwide protests, mostly peaceful, disrupted train and air travel. Teachers were among many professions to walk off the job, days after the government pushed through legislation to raise the retirement age by two years to 64.

Demonstrations in central Paris were generally peaceful, but groups of “Black Bloc” anarchists smashed shop windows, demolished street furniture and ransacked a McDonald’s restaurant. Clashes ensued as riot police drove back the anarchists with tear gas and stun grenades.

Interior Minister Gerald Darmanin said 149 police officers were injured and 172 people were arrested across the country. Dozens of protesters were also injured, including a woman who lost a thumb in the Normandy town of Rouen.

[…] Police had also fired tear gas at some protesters in several other cities, including Nantes, and Lorient in the west, Lille in the north, and used water cannon against others in Rennes in the northwest. Labour unions fear protests could turn more violent if the government does not heed mounting popular anger over pension curbs.

Unions called for regional action over the weekend and new nationwide strikes and protests on March 28, the day Britain’s King Charles is due to travel to Bordeaux from Paris by train.

The main entrance of the Bordeaux town hall was set ablaze on Thursday, days before the monarch was due to walk through on his visit to the southwestern city.

On Wednesday, Macron broke weeks of silence on the new policy, insisting the law would come into force by year end. He compared protests to the Jan. 6, 2021, storming of the U.S. Capitol.

[…] The French Interior Ministry said 1.089 million protested across the country, including 119,000 in the capital which was a record since protests started in January. The CGT union said 3.5 million people marched in the country, equalling a previous high on March 7.

“I came here because I oppose this reform and I really oppose the fact that democracy no longer means anything,” Sophie Mendy, an administrative medical worker, told Reuters at the Paris rally. “We’re not being represented, and so we’re fed up.” (read more)

World War III may break out against Russia in/around Moldova.  However, another more widespread war may break out even sooner that has nothing to do with nation states.

Mar 23 2023

Lord, what fools these Ukrainians Be!


Armstrong Economics Blog/Ukraine Re-Posted Mar 23, 2023 by Martin Armstrong

I get hate mail from Ukrainian Nazis routinely now. They of course deny there are any Nazis ever. Yesterday it was “You are definitely on the wrong side of history” and of course calling all Russians “scum” while Ukraine walks on water and is so honorable it makes me sick. Here we have Zelensky bragging about how Ukraine will be the biggest bonanza in European history. As for the American “titans” lobbying for more destruction and death so they can make money, I can only warn them – what goes around comes around. They have no problem advocating drafting your children to die on Ukrainian territory for their lucrative construction projects.

Sorry – I only wish them what they wish to put others through for their profits and bottom line, When this is done, they will probably also flee to Dubai like Halliburton for the Iraq War to avoid American subpoenas. So jump up and down cheering war for dollars. I for one will not invest 1 cent in any company joining Ukraine. I lost most of my high school friends for Vietnam and their profits back then. Screw you and your manipulation of human lives for profit.

And as for Ukrainians, how blind do you have to be not to see the real enemy in home-grown?