Celsus

Ruy Lopez,

I'm not sure I follow your rationale. You are speaking of Kondratieff waves right? Have they ever established proper causation behind the correlation? Where do you feel it applies to best: the global economy, or just to America, or perhaps the West? I wouldn't back the predictive power of the Kondratieff cycles. (Zar: very nicely done, btw)

Joel

Hugo Holbling

Another nice post, Koy.

I can't see how the response to these actions can be anything other than a strengthening of the case for an EU-wide Defence and Foreign Policy. Is that what these lunatics want?

Ruy Lopez

From Celsus:
I'm not sure I follow your rationale. You are speaking of Kondratieff waves right?

I'm glad you asked as it gives me opportunity to clarify. In this thread I mention three(3) distinct long duration waves or trends as examples of trends that are virtuallyirreversible . Something like 95-98% certainty. These three are:

1)Kondratieff Long Wave--in its original form, applies to factors in the physical economy only i.e. wholesale prices, raw commodity prices, real wages and a few others. Phenomenon was recorded by Kondratieff only in Western economies like Europe and US. Later on, other interest groups started claiming their favorite indicators like gold and the stock market are related to the K-wave. These latter coat-tail hangers on take a lot of words to explain. They have a point but can easily be misunderstood. Average past duration is 56 years.

2)Episodal Rise and Fall of Empires-- In this thread which I started
http://www.iidb.org/vbb/showthread.p...threadid=45852
"Why war policy in Middle East is dysfunctional", It is demonstrated that there are four distinct periods of rise and fall averaging 150 years each WITHIN the entire history of the Roman Empire of approximately 600 years. Again when they fall, they are irreversible until the problems are liquidated.

3)The third example comes from a paper on peak oil production by Mr. Duncan which Oneofshibumi provided. It simply says that the oil industrial civilization era seems to have a duration of 130 years; again irreversible.

Have they ever established proper causation behind the correlation?

. Let's limit the question to the K-wave. Literature that I saw has little of "proper causation". Even Kondratieff did not categorically state he was confident of the causes. Schumpeter suggested the useful life cycle of structural capital equipment. Personally, I AM NOT TOO INTERESTED (and I'm not making fun of you). Causation theories are far too many and inconclusive. The past three repetitions of the wave in the last 200 years is good enough for me. I prefer more to use results, when I am convinced, than to explain them.

Where do you feel it applies to best: the global economy, or just to America, or perhaps the West? I wouldn't back the predictive power of the Kondratieff cycles

To the West accoding to Kondratieff but since almost everyone is connected now, to all industrialized societies. For me, it is what explains the three-year economic malaise of the US, 12 years in Japan, 5 years for most of Asia, and 5 years in south america as well as the depression in Argentina. Europe too.

I feel better when most people do NOT believe what the K-wave says because that is what makes it profitable for those who see it. In this particular topic, once a critical mass of investors are convinced, the wave will stop to work. In speculative activity, the majority cannot win!!!

I will try to reproduce an idealized diagram of the K-wave for our friends on the board (I do not mind sharing with) to appreciate.

[img]http://www.gmsresearch.com/98charts....dratieff_Chart[/img]

If it does not work, please click the URL.

Edit: It did not work and I followed the vb instructions. Anyway, please note the "split top" or the attempted double top that failed to exceed the previous. This is similar to the Photoshop figure Zar kindly provided earlier.

Celsus

Hi again,

I'm going to have to post a fuller reply to that in the near future. For the time being, I believe that the study of Kondratieff cycles have suffered from a poor methodological framework and weakened their applicability. I'd go so far as to say they've been discredited, except that I haven't actually seen the original arguments for them. The short waves have been coopted into the "business cycle" and are useful in some ways (but still not predictive, despite the nature of self-fulfilling tendencies in financial markets), but as I recall, even this is under attack. As for the long wave, the failure to establish causation is a strong critique, and shows that even with selective evidence (which is very telling), the theory is weak at best.

The problem I see with all these metatheories is their selective use of evidence. Huntingdon, for example, tries to establish that the West peaked c.1910 and has been in steady decline since (though he never mentions Kondratieff cycles). He does mention the American rise as an ameliorating (but not significant) trend to Western decline (or should it be the rise of other civilisations?). Your attempt tries to argue for an American peak demarcated by the Vietnam War. Obviously in tying the two (Huntingdon's or yours) together, you get conflicting evidence. I'm curious as to how the K-wave analysts make decisions on which evidence is significant and which is not? Also, limiting the scope is near impossible due to the entangled nature of economic relations. How do they separate one economy from the next?

Joel

Richard1366

Koyaanisqatsi...

I notice that you throw about phrases such as...
...ruling elite
...financial allegiance to oil
...unjust war
...imperial desires
...imperialist dictation of war
...justify murdering civilians
and observe that you have the uncanny ability to know for a fact the true and evil motives of our government. In addition, you apparently assume and accept that the motives of France, Germany, and Russia are only altruistic.

With this in mind, I will not try to confuse you with facts because obviously your mind is made up.

Ruy Lopez

I'm back so soon Celsus (Joel). Was dozing off and suddenly realized a logical flaw in my last post. I'm glad to read your more scholarly approach and am eager to see more because that was not the route I took in arriving at what I know. Actually you didn't say much yet.

Below would hopefully be a succint restatement of what I believe and know about the topic--US empire and long-term trends impinging on it.

1)There exists the phenomenon of rise and fall of empires as well as the K-wave which are distinct from each other.

2)US foreign adventures seems to have started in the 1890s. Its political, moral and economic ascendancy peaked in the 1970s; attempted a recovery between 1980 to 2000; and decline would continue and even accelerate between now and the next 30-40years.

3)Based on 4 separate rise and fall episodes during ancient Roman times, 150 years seems a reasonable rise and fall duration. Thus US world influence had been on the rise for about 85 yrs; had been declining for 27 yrs and would only stop deteriorating after 30-40 years.

4)The K-wave, mainly economic in nature, which had an average duration of some 56 years in the past is coinciding with the 150-yr Imperial wave in a manner more unfavorable to the US. Both waves peaked AT THE SAME TIME, the 70s.

5)The present K-wave bottomed and started rising in 1945; peaked around 1968-70; wreaked damage to world economies between 1970-1983 (the primary recessionary period per diagram); attempted a rebound between 1983-1997 for most of the world (US on 2000); and is now headed for the sharper and longer very bothersome deflationary phase. According to the method I use, 2006 would be the worst year.

6)We have another problem, oil depletion, which could start anytime between the next 5 to 15 years. The effect would be to dampen any recovery from the K-wave. No economic booms during the transition from oil to its main substitues. Lethargy.

That's about what I want to say for now. Please feel free to tear it apart. Anybody. But I would appreciate solid reasoning. I can explain the detailed process I went through to arrive at the above observations. These things have been bubbling in my head for the last 15 years since I stopped working and they come from reading and actual repetitive market experience and analysis.

Celsus

Hi Ruy Lopez,

There's a lot to sift through here. At the moment, the only causation you've established is the depletion of oil, which I don't think is a problem for "the next 5 to 15 years." In 1992, OPEC estimates of oil production for the MENA (Middle East and North Africa) countries were as follows:

Kuwait: 250 years
Iraq: 129 years
S. Arabia: 118 years
Iran: 86 years
Algeria: 74 years
Egypt: 33 years
UAE: 19 years

US: 10 years (notice that this means the US should technically be run out by now, but it has not!)

My figures of course, exclude other significant sources, such as Brunei, Nigeria, Venezuela and newly found sources, such as Sudan.

The second major weakness is your failure (and unwillingness) to illustrate causation. As long as you have not done so, then local factors take precedence. Are these local factors also associated with the K-wave? Impossible to establish, hence your thesis is mostly just speculation. You may recognise a pattern, but that proves nothing. The Soviet Union for example, became an economic giant from the 1930s till the 1970s, then began a long slow decline: there is no previous K-wave to seek patterns from there. As for the US, prior to the previous K-wave; what else was there? Again, nothing of significance. You are tying K-waves of different powers together, so if you are correct, it will be from luck rather than prediction. Without causation, you can't predict.

Again, I mention Huntingdon because he sees a similar trend (decline of the West, and now the US*), but argues that it is reversible, but that certain actions must be taken. His dates demarcating peaks and troughs are quite different from yours. That's why I'd like to see the reasons behind your estimates.

Joel

*And please note, I disagree with him on this too, but your methodology is what I'm trying to uncover. Many economists like Robert Solow fully expect the West to retain their dominance, given contemporary economic relations.

Zar

Celsus,

Peak Oil is not the same thing as "running out of oil to the last drop." The key figure is the rate of extraction/processing which is an absolute limitation that controls the availability/price/rate of consumption. This is what is going to be on the decline within the next decade, and it is crucial to understand its importance when talking about this. In addition, some of the warnings about peak oil are adamant about saying that OPEC estimates and the like are flawed and probably inflated for prolonging a favorable market and investment climate.

Some say oil shale or oil sands are the answer, with estimates as high as 2.9 trillion barrels of potential oil to be had. This ignores the higher cost of processing, the massive environmental costs (huge areas being strip mined, even beneath population centers), the relative amounts of recoverable oil shale/ oil sands, the quality of what is recoverable, and whether, in the end, it will reverse the slowing rate of extraction, which is the ultimate concern. Oil shale and oil sands production has been spotty, with some success in parts of the world, but has not reached "prime time" for the above reasons. When it comes time to do this in earnest, I expect many techincal, economic and political obstacles.

On the plus side, of course, there is increased efficiency to be had in consuming less with better engines, not to mention promising alternative fuel technologies, although those technologies have languished and will probably only be fully developed when we get into real price trouble with oil -- hence probably too late to avoid a potentially prolonged depression. But none of this means civilization will end, it just means there are some more or less serious bumps ahead that can be worsened or abated depending on how forward-thinking we are.

Ruy Lopez

Zar and Celsus:

Your last post, Zar, reads like it was written by an expert in energy and oil production as well as in energy demand management. It's virtually perfect and I do not have to explain the matter to Joel. Care to tell us where or how you got the skill? Just curious.

US: 10 years (notice that this means the US should technically be run out by now, but it has not!)

Japan has zero years just like my country, but these two will continue burning oil. Countries with hundred years are EXPORTERS.

The second major weakness is your failure (and unwillingness) to illustrate causation. As long as you have not done so, then local factors take precedence. Are these local factors also associated with the K-wave? Impossible to establish, hence your thesis is mostly just speculation. You may recognise a pattern, but that proves nothing.

It was mentioned earlier that neither Kondratieff nor Joseph Schumpeter could offer definite causative principles for the trend observed. Neither would I offer one. It is like hurricanes or typhoons hundreds of years ago. People can feel one is coming and are familiar with its effects but they could not explain the drastic change in the weather. The body of mainstream economists, like natural scientists, have strict norms for accepting entries into the general body of knowledge.

I found a very good K-wave reference site that had been updated up to 2002 where the ominous "turn to the south" can be seen.

http://www.financialsense.com/transc...raWithCRB4.pdf

The chart is cluttered and packed with information. I'll help go through it. Magnify to read smaller print.

1)Chart illustrates the period 1789 to Sept. 2002 or 212 years, enough for 3 completed repetitions of the K-wave plus a 4th that should be nearing completion in possibly 10 years.

2)The original K-wave data used by Kondratieff is the plot (near bottom) labeled PPI (wholesale price index) which is now called the CRB index (commodity research bureau). Notice its rise and fall every 55 years or so. The 4th or current wave is unlike the previous three. Its magnitude is immense representing unprecedented economic prosperity during our oil-based era. It is also an era that is not shackled by the gold standard discipline but by Central Bank fiat and printing presses. The corrective or deflationary phase of this bubble is too horrible to contemplate.

3)Long-term T-Bill yields also faithfully reflect the rise and fall trend for every 55 year cycle. It is the earliest warning signal, as early as 1980 in the present case, that can be used.

4)Just above the CRB/PPI plot is a heavier smoother line representing the "idealized" K-wave. It illustrates the primary recession period at the top ,1970s in our time, and the traditional characterization of the four seasons corresponding to four phases of the Wave.

5)The inclusion of Homestead mining in the plots is intended to show that gold protects asset values during the downswing or deflationary or "winter" phase.

6)The S&P plot has also turned south. It does not look too bad here because the plot is logarithmic; it would look terrible in a linear chart.

For those who have seen this for the first time, I do not yet expect thorough understanding not to mention concurrence. For the next two years, as you watch events unfold, the chart would probably become easier and easier to appreciate. It took me a much longer time to understand this because no one helped me. But once I saw it, I could even analyze the undulations of the Roman Empire which historians do not look at because they are not looking for them. Like the case of a coroner, it helps to know what one is looking for.

I disagree with him on this too, but your methodology is what I'm trying to uncover

My methodology sprang from a need to explain painful as well as exhilarating experiences. Why was I wrong that time and correct this time? I found out that brokers, tipsters, TV business commentators and security analysts have their own interests to promote and they are not the same as mine. Also the vast majority of traders and investors are eventually, eventually going to be victims. It is bound to happen if one hangs around long enough.

Economic and market cycles or waves can be as long as the K-wave in duration or as short as an 8-hr trading day. And there are numerous waves in between. I have plotted 4 and 8 days, 3 months which when together form 12 months waves. Four 12-month waves combine to make the 4-yr Kitchin or US presidential wave. Two Kitchins result into an 8-yr Juglar wave. Juglar waves form the structural Kutznet and the Kutznets form the Kondratieff Long Wave. Beyond the K-wave there are undoubtedly longer duration trends but I have not detected them as I am not too interested to find them.

This is my methodology, Joel. It is acquired over long periods of time, with undivided attention span and complemented by reading valid literature, not those that try to sell something. It is based on the greed, fears, hopes and aspirations of people which I learned to read from charts. I make mistakes of course and when that happens I do not blame the market or charts. I read wrong.

With this one can see that I do not need the approval of a college of mainstream economists. That would be ridiculous of me to convince them I am right. Once they accept my method to be valid and announce it to the world, my method would become ineffective as many people would be doing the same thing. What would one win if everybody won? Nil. $100 divided by 100 people equals $1, the initial bet. While $100 divided by 5 people is $20 or a 2000% return.

Edit and P.S.

I just remembered that last Aug. 24 2002, I posted a prediction of the Dow. Here it is:

If I were the investor, this is what I would do:

1)Right now, sell everything into the rally of July24-August 2002. Short the market if you do not have long positions.

2)Wait for Oct. 2002 to buy for a medium-term trade until summer 2003. This is the short upswing phase of the next 4 yr. Kitchin cycle. Then stay out completely until second half of 2006.

3)The first two are not for strictly long-term investors. You wait for 2006 and buy gradually.

[ August 24, 2002: Message edited by: demon-sword ]</p>

Demon-sword was my former monicker.

On no. 1, two days later the Dow topped at 9025 and fell without looking back. On no.2, the Dow did careen to a bottom on Oct. 11 at 7300. The index has since bounced up and down between 7950 and 9000. The third prediction is for summer 2003 which has not happened yet. The fourth is for 2006, which I see as a terrible year.

What were the odds of getting the first two items right? Probably astronomical. The first, second and fourth calls were relatively easy to make. It is the third that is very difficult because it is counter to the main bearish trend. If the US economic turns out weaker than originally supposed, the Dow won't wait for the summer, July, to loiter around bear market rally territory. It could punch through the 7300 present major support. That would be another indicator the K-wave is correct.

Zar

Ruy Lopez,

If you remember that thread I started a while back, "The Primacy of Material Reality", I lead with what was my best try at an understanding of the world energy situation, flawed as it may or may not have been. Many thoughtful responses and counter-arguments later, I found myself devouring all kinds of articles and opinion on the subject. There are still untold numbers of opinions I have not seen, but I feel like I have a better grasp on the energy questions, at least, if not the answers.

What I wrote above was my attempt at a simple and concise summary of what I think I know now from my readings. I am not, of course, an energy expert -- just an interested and concerned layman. But I felt confident enough to say that quoting how much oil OPEC says it has in terms of "years left" probably isn't going to be enough of a basis for getting a full picture of the situation. So, I leave my comments as a series of challenges that anyone interested should find answers to.