In anticipation of the outcome of this week’s Federal Reserve Board meeting, the media reads like a excerpt from George Orwell’s 1984(more so than usual, anyway):

”Durable goods orders increased 2.9 percent…”

“…Consumer Confidence Index rose to a better-than-expected 117.9 in June, up from 116.1 in May.”

“…orders for automobiles and car parts jumped 7.4 percent…”

“Semiconductor orders skyrocketed 35.3 percent…”

What few people realize is that Karl Marx in Das Capital (as opposed to Marxism in Communist Manifesto) was right about laws of economy. Economic motion is as regular as the Cosmos, the oceans and plate tectonics. There are predictive motions in a market economy. These motions travel in cycles and waves. They are well documented. Denying their existence is ignoring the facts. Attempting to alter them is akin to declaring war on the sky.

Seventy years ago, a Russian economist named Nikolai Kondratiev found regular cycles of growth and decline among industrialized nations since 1750. A complete cycle experiences growth, prosperity, recession then depression over 50 to 55 years. Since Kondratiev’s groundbreaking discovery, four complete “Kondratiev Waves” have been documented from the dawn of the Industrial Revolution.

Kondratiev Waves have two phases. Price acceleration/inflation and price deceleration/deflation. The wave is marked by four familiar stages which are cycles themselves within the larger Kondratiev Wave. The cycles are called “Kuznets Cycles”, after economist Simon Kuznets, and they take the following form: growth, prosperity, recession, depression.

This is not to be confused with the weak and faulty “business cycle.” The business cycle is designed to sedate ailing and failing businesses and individuals. In contrast, Kuznets Cycles—like Kondratiev Waves–are fundamental motions of economic activity.

“Growth” is a positive euphemism for “recovery” because the last point of depression meets the first point of recovery. Growth is accompanied by inflation for 10 to 12 years. After the growth/inflationary period, the wave begins its approach to its apex in the prosperity stage. Prosperity is marked by extremely stable currency valuation indicated by the near absence of inflation. This period also lasts approximately 10 to 12 years.

At the peak of the Kondratiev Wave is the trough of the Kuznets Cycle. Kondratiev marks the highest prices in the 50 year cycle while currency stability marks the lowest inflation of the currency. The result is stagflation—stable money/nothing affordable.

The Kondratiev Wave begins its descent and the Kuznets Cycle marks rising inflation/recession over the third set of 10 to 12 years. When the two waves touch again for the fourth stage, depression, there is another peak in the Kuznets Cycle. Rapid deflation is accompanied by rapid price declines meaning that everyone’s money is essentially worthless but prices keep dropping so companies can attempt to pay the bills.

Then the whole process begins again: price increase/inflation, price peak/inflation halted, price decrease/deflation. Nothing in the world can stop it short of a command market but even a command market will break under the stress of successive economic waves and smaller cycles.

The Soviet Union did not survive one complete Kondratiev wave and made aggressive actions of futility against Kuznets cycles within the one wave they barreled through history on.

Politicians like to take credit for anything. Clinton arrived in 1993. That year just happened to be the tail end of the fourth known Kondratiev Wave. 1995 marked the beginning of the fifth Kondratiev Wave. Rapid growth with inflation accompanied the 1996 election. The whole industrialized world was experiencing the same thing. As Clinton left office in 2000, inflation is slowing. He takes credit where credit isn’t due.

Bush—and this hurts me to say this—was more accurate in campaigning that the government “has nothing to do with American prosperity.” True. Absolutely true though his motives were somewhere else and his ideas had only a vague foundation in economics despite his MBA. Most MBAs know exactly squat about economics.

Under Bush, if the Kondratiev Waves and Kuznets cycles hold their historical pattern, the first term of his presidency will be blessed by a growing economy with stable currency though there will be escalating prices. In fact, because the recovery period that Clinton rode in on will become serious prosperity around 2008. In other words, “you ain’t seen nothing yet.”

The world should not experience Nixon-style stagflation again until 2030.

That amounts to seven presidential terms. Assuming that ignorance(pocket voting/not voting) remains constant and political spin doctors know how to play economic law better than Elder Bush’s administration(they told the truth when they shouldn’t have), then Republicans can realistically extend their presidential winning streak to at least 6 of the next seven presidential elections.

The Republican presidential election record already stands at 6 of the last 9 elections, or five of the last six regimes(Nixon, Ford, Reagan, Bush, Dubya)—interrupted only by Carter and Clinton.

Things will be so smooth economically for the next 20 years that the Democrats must essentially become free-market Republicans to win in the executive branch. The Democrats must convince people that Republicans have nothing to do with the motions of economic actions and the Republicans must convince people that they actually contributed to the natural economic rise displayed by Kondratiev Waves. The more difficult task is to survive the Kondratiev Crest/Kuznets Trough (stagflation).

The real way to prevent either party from manipulating economic fact for electoral gain is for people to understand how economics flows through society and why it flows as it does. Nothing that the Federal Reserve does today, tomorrow or a month from now will stop inflation until 2010. To increase or decrease basis points on interest rates is microeconomic manipulation for the benefit of very few people with no impact on the larger motions. Much in the same way that nuclear bombs won’t affect earth’s orbit, Fed action won’t be felt through 99% of the economy.

The only new “X” factor that may have a legitimate affect on Kondratievs and Kuznets is the speed of information. Since capital and knowledge move so quickly in the fifth Kondratiev Wave, the effect may compress the frequency of the wave and its cycles by years. Possibly as much as 50%, depending on how inflation affects investment.

The fifth Kondratiev could be 25 years but even that is an extreme estimate. 40 is much more realistic. These cycles are forces of nature that won’t change easily, if ever—no matter what politicians want you to believe.

If the market is erratic now, that’s because of inflation combined with growth. When growth combines with deflation again, the Fed won’t be nearly as popular and Alan Greenspan will have long gone to the place in the sky (or the ground) where all Federal Reserve Chairman eventually go. If history looks on his governance kindly, it should be because he is always willing to try to calm the market psyche even if he knows there’s nothing he can really do about it.

Chris Uzal is a political science graduate of the University of Florida. He currently is the systems manager of a Lantana distribution company. He thanks Dr. Timothy Fik for introducing him to the field of economic geography and ending his undergraduate career on a very high note.

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