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I want to compare the 1970's to now.  That is because most people who think in conventional terms economically and financially and are old enough to remember the 1970's use that decade as a reference point for what to look for to avoid. 

The problem is that things do not work that way - and that is a major theme of this website.  I will talk about both the Kondratieff wave and Elliott waves on this web page, both methods point the problem out. 

Especially in current times, most people, especially baby boomers, who were the young adults in the 1970's, regard that time as the reference point for everything that can go wrong now and should be avoided. 

The problem is that we are now in a very different time - back then, we were in the stagnation phase of the current Kondratieff wave, now we are leaving what amounts to an extremely extended version of the Kondratieff plateau phase and are about to enter (as a result) into a very pronounced depression phase of the Kondratieff wave, which is actually just about the exact opposite of what was happening transitioning from the growth phase back then, in the late 1960's, into the stagnation phase. 

This is intentional, in terms of how the system works from a philosophical point of view - if most people could correctly anticipate what is coming next in terms of Kondratieff wave phase, the phases would never be able to transition correctly. 

And that is actually exactly what is happening this time, in a way - the authorities are playing with fire, they managed to keep the plateau phase (the good times) going for far longer than the good times would have done on their own, in other words, when people continued to anticipate good times, the authorities provided more good times to them, which means that people in general are now that much more unprepared for the bad times that are coming, which is going to make the times that much worse, in general, as a result. 

The reality is that although the transitions in the Kondratieff wave happen for specific economic and financial reasons, the ones that are relevant to now of which I will describe below, the real reason why the transitions happen is because of how people react to those conditions (i.e., the psychology of the people at those times). 

The stagnation phase kicks in when the growth phase has progressed to a point where the economy is overheating and can't keep it up anymore - which also results in consumer prices starting to rise unacceptably as demand outstrips supply. 

The stagnation phase can be short or long - a few years or about double that, depending on whether the authorities decide to disconnect the currency from its reference point early in the process in order to try to combat the downturn.  If they do so - which is the expedient, but not smart, thing to do - then the longer version happens, greater short-term pain is avoided and the pain gets spread out over a longer period of time as a result, with a building even-more-substantial consumer price inflation episode at the end of that time as a result.  We went that second route - Nixon, being as clueless about economics as Obama is, listened to the economists around him (the only ones available to him), who were Keynesians and therefore took the conventional way out, recommending taking the currency off the gold standard so the country could inflate its way out of the crisis of the time (i.e., get more money into the system).  Nixon disconnected the dollar in August 1971.  The result was that the crisis was abated - but we were in the stagnation phase of the Kondratieff wave, so it was not going to go away.  (It would have only gone away if the country had been willing to stay on the gold standard, thus taking more short-term pain so the stagnation phase could do its job better - but this was not going to happen this time around for the reason explained at the link "Why the law against recessions was passed" on this website, a law which was passed, I might add, in 1978 in direct response to people's reaction to the hard times that I am describing here at this moment). 

So the authorities put more money in the system - but we were in the stagnation phase of the Kondratieff wave, so the problem did not go completely away (Keynesian economists have no concept of this, that is why they expected their solution to work).  So even more money was pumped - and then more money and then more money in an effort to get the problem to go away.  The result was an eventual increase in consumer price inflation to levels that were even more unacceptable than before (as predicted by Mr. Kondratieff himself in his theory if the currency is disconnected from the standard) and downright scary to people who were accustomed to much more stable prices (but it is not a hyperinflation, inflation has to get to much higher levels than it did back then to constitute that - 50-100%/year minimum, we did not reach that, not even close, even at the height of the inflation scare of the late 1970's/early 1980's; see my discussion of hyperinflation elsewhere on this website). 

So things played out exactly the way Kondratieff predicted they would if people try to take the easy way out. 

What eventually happens in that case is that consumer price inflation gets so high, and interest rates do, too (irrespective of what a central bank might do - see my comments about Paul Volcker on this website), that people cut back on their spending, or at least they don't buy as many things as they used to because of the in-the-meantime-higher prices, and a recession develops.  This is the secondary recession, after the one that brings on the stagnation phase in the first place - both of which Kondratieff talks about in his theory. 

That recession goes deep enough to cause enough of a cutback in spending that producers are forced to cease raising prices at the high rate that they had been doing, and so inflation starts to come back down again - and that results in interest rates starting to come back down again, too (note that Kondratieff talked about all of this directly in his theory - long before Volcker was doing his thing back then). 

Once the interest rates come down enough, the economy starts reviving - which is the beginning of the plateau phase.  (The law against recessions could not have been enforced before then - doing so simply would not have worked.) 

The plateau phase is characterized by the following things.  Economic growth gradually declines, in real terms, after the initial burst up coming out of the stagnation phase, people feel better and better as time goes on now that the stagnation phase is over with, and the stock market goes higher in percentage terms than it did during the growth phase (which is one reason why the people end up feeling even better than they did during the growth phase).  This continues until the stock market just can't go any higher and the economic growth has finally also gone low enough to not be viable anymore (which is not noticed by the people because they feel so good by then). 

The economy then transitions to the depression phase when the stock market comes back down and the economic growth goes below zero, usually very quickly well below zero at that point - and the people are caught totally by surprise because they were feeling so good just before the transition hit! 

The whole process of the plateau phase was put on steroids this time.  One of the other characteristics of the plateau phase is that new money going into the system during that time tends to go into the stock market, not into consumer prices.  That is why the plateau phase remains disinflationary (above-zero inflation that is coming down, after the inflation of the stagnation phase), no matter what.  The psychology of the people is such that they feel so good that they tend to put the money into investments, rather than mostly into consumer goods.  And in fact, even if new money is not put into the system during the plateau phase - as far as I can tell, this is the first Kondratieff wave in which that has happened, we have been in the current one since the late 1940's (at the latest) - the plateau phase is characterized by an increasingly financial economy, rather than a goods-productive one, especially near the end. 

So, as I noted, the whole process was put on steroids this time.  I think the plateau phase should have ended with the stock market crash of 1987 - that would have been more-or-less typical timing (would have come a year or two short, as far as I can tell) - but as far as I can tell for the first time in history, the authorities made an active effort to prevent the transition to the depression phase in the first place (in the past, authorities have tried to prevent the depression once the transition was already underway, as in under way for at least several days or a few weeks when they realized what was going on, but by then, it is virtually always too late, the psychology of the people has changed too much by then). 

So when the stock market crashed in 1987 and everyone was worried that we were about to head into a major economic downturn, the new Fed chairman, Greenspan - who had only taken over quite recently - announced that "We will provide all the necessary liquidity" and the stock market shot right back up starting the next morning. 

That extended the plateau phase - because the stock market kept right on going, eventually going way up, even into an exponential by the end of the 1990's.  It is, in fact, my claim that there is no way the stock market could have reached the heights that it did by the end of the 1990's without the money that was pumped into the system in the 1990's - there was simply (nowhere near) enough money in the system at the beginning of the 1990's to even make that happen. 

It is rare for a stock market to go exponential - and such a potential is not even discussed in the Kondratieff wave theory.  I think the main reason why I caught on (bearing in mind that I have been watching things financial closely since the 1970's) is that I have been trained in exponentials, one can't get a degree in electronics engineering without being trained in exponentials (inductors and capacitors have exponentials as part of the mathematical equations that define them for modeling purposes). 

But exponential this stock market did go - in a big way by early 2000.  Here is the problem - exponential is as high as it can go, in the big picture (in other words, it won't go a lot higher), on the scale that the exponential is on, and this one was huge.  So the stock market was driven literally as high as it could possibly go in the late 1990's and into 2000 - before it came back down again, as discussed above.  And, interestingly enough, the law against recessions was set to expire in mid-2000 in the original bill, and it did. 

But when we got to that point in time, the authorities in the system at that time decided they liked the results of the enforcement of the law up to that time, through the end of the 1990's, so much that they decided to continue to enforce it as if it had never expired, and that is what they have done (I found out about this when I found out about the law against recessions in the summer of 2001). 

The stock market came back down hard in 2000 (as it should do coming out of an exponential), and that should have been the end of it even in the context of the original law against recessions, that should have been the transition to the depression phase (interestingly enough, right on the year 2000 boundary in the big picture). 

Interestingly enough, when the stock market came back down in 2000, the central bank did not do anything about it right away - there was still so much economic momentum from the bubble-boom of the late 1990's that the economy did not come down with the stock market right away.  And when people complained that their investment accounts were being affected - even average citizens had jumped in in the late 1990's, just like in the late 1920's (but to an even greater extent than in the late 1920's) - Greenspan said that "It is the job of the central bank to keep the economy going, not to provide automatic profits to speculators - as long as the economy is holding up, I will let the stock market do whatever it wants to."  The people complained - and it was an interesting statement from Greenspan because what really happened was that the people had gotten so used to expecting the stock market to go up that they had come to regard it as an automatic savings account in the meantime!  They certainly did not regard themselves as speculators!  (And, normally, only people who are going short stocks are truly regarded as speculators anyway - maybe in part because most people can't stomach the implication of a stock going down.) 

The stock market went down throughout 2000 - and a picture-perfect Elliott initial three waves down on a very large scale formed in the process. 

Then, by the end of 2000, the economic statistics started showing cracks in the economy - and because the authorities had decided to continue to enforce the law against recessions, Greenspan decided to act.  He waited until after the first of the year, when everyone was back from the holidays, to have more effect.  But it was not nearly as effective as the single 1/4 point cut in interest rates that he did in the fall of 1998, which aborted that stock market downturn then just as the stock market was about to go below the previous low of that fall to confirm a major market downturn and caused the market to soar instead, which is what resulted in the exponential.  The new interest rate cut was not nearly as effective as the one before because that one, in 1998, had been done when the economy was still in the plateau phase, whereas the new one, at the beginning of 2001, was being done when the economy was in the beginning of the depression phase in the meantime.  So Greenspan managed to arrest the decline - but that was it, that was all he managed to accomplish.  When it became clear to him a few weeks later that that was all he had accomplished, he hit the system with another interest rate cut. 

That went on for half a year - the interest rate cuts clearly being less effective than they had been before (I think for the reason that I just stated above).  It was in the summer of 2001, when I was investigating why the interest rate cuts had been happening for so long, which was unprecedented - in other words, why the Fed was being so very, very forceful - that I found out about the law against recessions and the decision to continue to enforce the law. 

The result of all the interest rate cuts for half a year - one about every month - was a sideways stock market and economy.  It was either basing for a rise or it was a picture-perfect Elliott 4th wave on the way down, relative to what happened in the stock market in 2000. 

Then came 9/11.  The World Trade Center was destroyed.  The stock market did not even open that morning because the attacks started before its normal opening time - and the attack was just blocks from the New York Stock Exchange, the people who run the stock exchange could see the smoke from there.  They knew something had gone seriously wrong somehow, and they decided to keep the stock market closed (to prevent a panic plunge) until they could figure out what was going on. 

They never got the chance - as I found out later, at least some back offices for the stock exchange were in the World Trade Center, and it came down later that morning.  So those back offices were gone.  The decision was made to rewire the back offices to elsewhere, but the stock exchange could not open again until that was done.  Telephone technicians worked frantically all day and night for the next several days, right through the following weekend, to finish the rewiring and test it, successfully so - and the stock exchange opened again the following Monday morning. 

But in the meantime, sell orders had piled up - and they were all executed when the stock exchange opened again.  The result was an absolutely massive and immediate plunge in the stock market, despite the fact that the central bank had also announced another interest rate cut that morning before the market opened in an effort to boost the trader psychology (it did not matter - there were just too many sell orders piled up, and the exchange and the brokers did not simply refuse to execute them under the circumstances because they might have been accused in that case of not actually running a capitalist system, and I think those accusations might have been correct if the sell orders had, in fact, not been executed). 

At any rate, the massive plunge after 9/11 locked the bear market in - we were now in a long-term bear market, guaranteed, which was assured anyway once the stock market exponential had come back down, but now the proof was in.  The 9/11 attacks happened at at least almost exactly the right time to create a picture-perfect 5 Elliott waves down at a very large degree of scale from the top in early 2000. 

Elliott waves.  They are fractal, meaning self-similar at different degrees of scale.  So much so that I have seen Elliott waves unfold intra-day that look just like the one I just described that took a year and a half to run its course. 

Corrective Elliott waves consist of 3 waves.  Impulsive Elliott waves consist of 5 waves.  Impulsive waves are in the direction of the main trend, up or down (with some exceptions within corrections that I won't go into here, does not apply in this case and too complicated for the discussion here). 

So when we had 3 Elliott waves down at the end of 2000, I knew there was the possibility that it was just a correction in an uptrend - but I figured that was unlikely because we were coming out of a major exponential, it was more likely we had transitioned to down and a 5th wave down was still to come (which would make the flat market in the first half of 2001 an absolutely classic 4th wave on the way down). 

That is what happened.  The big drop after 9/11 locked it in - and it happened right when it needed to to make the overall Elliott wave down from early 2000 be very-well-proportioned as a 5-wave sequence. 

But there was still a law against recessions being enforced - and so even after the hit to the economy after 9/11, the authorities continued to support the economy and continued to pump more money in.  The result was that the transition to the depression phase did not really happen among the people - but we were still already in the depression phase according to the way Kondratieff measured it, so the additional money-pumping was not nearly as effective as it would have been before the stock market exponential completed - so the stock market came way back up, which it would not have otherwise done, but for years it did not even make it to a new high, and when it finally did, it did not do so for long before it came back down again.  That was a false breakout on a huge scale, I realized that at the time when it was done, and sure enough, even just a year later, the stock market came crashing down and went to new lows, thus cementing the bear market even more (that was probably the biggest Elliott wave flat ever in history - an Elliott wave flat is a corrective move, going against the main trend, that goes to a new extreme in the non-main direction at the end, fooling just about everyone, before it crashes in the other direction and goes to new levels in the direction of the main trend, thus truly fooling just about everyone in the process - this process was put on steroids this time because of how long the flat took to play itself out, people lost all track of what was going on, the move was so big that it took a few years, with the final fooling move itself taking a full year, from October 2007 to October 2008!). 

When a market goes down, it goes down in three waves overall (all down-waves are nominally corrections at the top scale of the downturn) - but as noted above, Elliott waves are fractal.  That means that in a 5-wave sequence, which is an impulse wave, the waves 1, 3, and 5, which are the moves in the wave that go in the same direction as the overall wave, are themselves impulse waves, and waves 2 and 4 are corrective waves, going in the direction opposite to the main trend.  In a corrective wave, which is labeled A, B, C to clearly distinguish it from an impulse wave, the A wave and C wave are impulse waves (going in the direction of the main direction of the correction) and the B wave is a corrective wave (i.e., correcting the correction itself).  The easiest way to differentiate an impulse wave from a corrective wave - if the waves are not too sloppy (which they sometimes are, especially if the authorities are trying to enforce a law against recessions at the time, i.e., trying to prevent the stock market from going down when it wants to) is to note that if the middle wave looks very impulsive, the overall wave will probably be seen to be impulsive, as well, whereas if the middle wave has a very corrective look to it, the overall wave will probably also be seen to be corrective (one will then be able to easily see the stand-alone impulse waves on either side of it).  Once one has learned the various kinds of corrective waves (there are several, unlike in the case of the impulse wave), it becomes pretty easy to see the large waves on a semi-logarithmic chart (which is how a chart has to be plotted to see the larger waves, small waves can be seen using linear charting) and to see small waves even in real-time on a computer screen (I am so well-practiced at that in the meantime that I have no difficulty spotting them at all, I spot them shortly after they form, and sometimes spot them even while they are forming, but it still never ceases to amaze me that humans can be so predictable that the Elliott waves show up time and time again, for years, even in real-time on a very small scale!) 

The problem that we currently have is that, as I noted above, corrections happen in three waves.  This is true no matter what scale one is talking about (Elliott waves are fractal) and in both directions.  I have seen them unfold many times in both directions in real-time even on an intra-day basis, completing even intra-day, i.e., in just a few minutes or hours at most (the hours ones are on a larger Elliott wave time scale than the minutes ones), during the last more than ten years that I have been watching the markets full-time.  (In some cases, remembering the trading from the day before or even the day before that, I have noticed ones that were unfolding over a few days, which are on a larger Elliott wave time scale than the hours ones.) 

So, once I knew about the law against recessions - the enforcement of which had been preventing large downward corrections to complete the entire 3 waves down for years already, witness Greenspan blasting the market up when the market was about to go below the previous low in the fall of 1998, which if it had done so, would have confirmed wave C down, which would have continued down, but because it was not allowed to continue, an exponential to the upside formed instead - I knew that it was inevitable that once the authorities would fail to enforce the law against recessions sometime in 2007-2010, we would start to get a true 3 waves down for the first time in a long time, many, many years, but starting from such a high market level as a result of the enforcement of the law against recessions that the third wave down would be truly destructive.  As it turns out, the authorities were able to drive the market way up again even during the partial recovery, which itself turned into a perfect large B wave (from March 2009 to May 2011, with an initial push up, followed by sideways trading for about a year, followed by another push up that lasted several months).  So the next downturn is going to be particularly destructive. 

Nominally, the 5-wave move down from early 2000 is wave A of the big bear market coming out of the exponential, the gigantic flat from early 2003 into the crash in the fall of 2008 is wave B, and we are currently in wave C as of when I write this, which started with the big down move from October 2007 to March 2009, which was 5 waves down, followed by the sharp upward correction that started in March 2009 - sharp corrections make people believe the uptrend is coming back again and happen in part because they are hoping for that so much and are even counting on it - which will then be followed by another 5 waves down to new lows, which is wave 3, which I think we are now in the beginning of, which will be followed by a sideways wave 4 because people will by then realize that the economy will have no hope of recovering any time soon, so it will not get off the mat at all from then on (no sharp recovery this time), followed by a 5th wave to even lower lows that will make most people give up all hope of any economic recovery and send them into total despondency. 

Will the economy come back up then, as it normally does, at this point in the Elliott wave sequence, thus proving the people wrong again? 

I think something much bigger is going on this time.  Because of the enforcement of the law against recessions and the pumping up of people's optimism to super-high heights as a result, when we get to the point of recognition in the middle of wave 3 of 3 down this time, the people are going to panic so much after all those years of prosperity when they realize that the downturn of the fall of 2008 was truly real after all that they are going to stop dead in their tracks, stopping spending on all but essentials.  The economy is going to stop dead in its tracks as a result - which is going to entrench that sideways wave 4 all the more - and then when the wave 5 down comes, the people are going to lose all hope.  That is going to entrench the downturn for a very long time to come, people are just going to be afraid to spend.  Most people are not going to have any money to spend anymore anyway (most people don't have much money now and the unemployment rate will be sky-high) - but even probably most people who still have money will not be willing to spend because they will be too scared because they don't understand what is going on because the paradigm that the English-speaking world works with (and has largely imposed on the rest of the world during the British/American era) is all wrong. 

That is what this website is trying to combat. 

I think that in terms of the rich people, what will happen will be a repeat of what happened in 2008, on steroids.  Then, the biggest single drop in sales in percentage terms was for luxury goods, which is something that I predicted years earlier because I knew that the typical rich person, who tends to be inherently optimistically-oriented to begin with, would not only be horrified by what was happening, they would be totally confused because in the context of the paradigm that they are used to working with, such a downturn is not supposed to be able to happen.  So when it did, they were totally confused and scared and they panicked, worrying that the rest of their money might go, too (after the big drop in the stock market that they were also hit hard by), and so they tried to hang onto everything that they had left.  I think that reaction will occur in a much bigger way this time, since 2008 will still be fresh on their minds. 

I think that if people, especially rich people, don't figure out somewhere along the way what is really going on so that they can develop a more confident perspective, the coming downturn is going to be a really, really long one and a very, very bad one, indeed, because only a minority of people is still going to have any money anyway and those who do are going to be very reluctant to part with it because they are going to be very scared, far more scared than they were in the fall of 2008 until the spring of 2009. 

One other note - one of the principles of Elliott wave analysis, which also applies at a more general level to the Kondratieff wave, is the guideline of alternation.  In the case of Elliott waves, this applies to corrective waves - and basically says that wave 2 will be different in its kind of form from wave 4, thus fooling the maximum number of people.  If wave 2 is a sharp correction, wave 4 will probably be sideways correction - and vice-versa.  Usually, wave 2 is a sharp correction and wave 4 is a sideways correction (the up move from March 2009, which was a wave 2, was, on a very large degree of scale, a sharp upward correction, which is why most people are calling it a new bull market). 

The principle of alternation, or in the case of the Kondratieff wave simply expecting what happened before to happen again, is why most people historically are wrong at all the major turning points.  They are always expecting what happened last time to repeat.  That does not happen.  This time, however, people were expecting the good times to continue once they came back, and the authorities indulged them by making that happen.  But the underlying problem did not go away - and that is why I was able to predict in 2001 that there would be a big stock market AND economic downturn sometime between 2007-2010, followed by a major partial upturn that would be the slowest economic recovery in living memory (because the economy keeps getting slower as the second half of the Kondratieff wave progresses), in fact so slow that there would be no way the economy could fully recover, and so the economy would go into a major new downturn afterward that would, because of the nature of things, take the stock market and the economy to new lows again (I think major new lows - see above).  Thus, after the government supporting the system for years convinced the people for years that they were right after all, they are now going to find that they are more wrong than ever. 

The government has been supporting the system with ever-greater record deficit spending pretty much continuously for a decade now - and including the effect of the spending in the nominal GDP numbers to make them look better in the hope that real growth would kick in more sooner or later again.  Even with that, the GDP number for the 2000's was quite a bit lower than that for the decades before - and I am quite sure that the GDP number for the 2010's will be much lower yet and will be quite a ways below zero. 

Simply-put, the government is spending America bankrupt - trying to buttress the economy ever-more through government means in the hope that real growth will pick up sooner or later, which it won't.  The reason why they don't see that is because they are working with a paradigm from the English-speaking world that does not take how things really work into account.  So they are pushing the economy ever-more toward the brink - and once it goes over, only what people do for themselves will make any difference anymore, the government will be powerless to help at that point.  Trying to encourage and enable people to help themselves is what this website is all about, both in terms of the information I provide myself and the related links I provide which are designed to provide resources that will enable people to follow through on some of the things that they need to do to keep their money, and themselves, safe.  Those related links are for resources that are provided already and have been for years, and I don't see the point in duplicating them myself, and in most cases I can't even do so.  Others do them - so I just refer people to them.  But those others, at least the ones who analyze markets, basically all have been wrong in a big way at some point in their predictions because they don't have the full picture of the economy.  I have been more right, ultimately, than any of them.