Of Generational Cycles, Kondratieff Waves, And Credit Expansion

Tyler Durden's picture

While cycle or wave analysis is often dismissed for its tough-to-utilize-going-forward nature, Charles Hugh-Smith and Gordon T. Long expertly and thoroughly discuss a myriad of critical processes that the world (and endogenously or exogenously human beings and markets) transitions through in this clip. The intersection of Hugh-Smith's four critical trends (generational (or Fourth Turning), wage-inflation/stagnation, credit expansion/contraction, and energy extraction/depletion) is where we find ourselves as he notes directly that the generational cycle (of four twenty-year cycles culminating in massive geopolitical upheaval) is due to climax in the not-too-distant future. This presentation, which builds on the idea of behavioral changes and the generational knowledge transfer that for instance is now missing from the last great depression (do we need to learn the lesson of "excess credit is bad" once again?), is akin to 'everything you wanted to know about long-waves in social, political, and economic cycles but were afraid to ask'.

Again and again throughout human history, we fall victim to excesses of credit creation as we lose the experiential wisdom to just-say-no. Other topics in this extensive but brief discussion include S-Curve tipping points in the life-cycle of financialization, the wedge of uncertainty in US stocks and how it ties into the coordinated easing of global central banks, the USD as last to fail (least worst) of the major currencies (and the criticality of EURJPY as a carry-trade cross unwind), how BoJ intervention trickles down into buying US Treasuries, and why interest rates will never be allowed to rise again due to the leverage and collateral contagion.

  • Introduction to around 5:00
  • Around 5:55 (to around 10:20) Charles Hugh-Smith discusses the intersection of four long-term cycles.
  • Energy dependency is briefly discussed from 10:20 and transitions into Martin Armstrong's economic confidence model - where critically the idea of the third generation (i.e. you learning from your grand-parents) as the tipping point in human experience.
  • At around 12:15 Charles and Gordon discuss the S-curve - in this case applied to the life-cycle of financialization and how debt has flipped from a positive to a negative now as we have crossed the saturation or tipping point.
  • Around 14:00 the two chaps discuss Coppock Curves and go on to the wedge of uncertainty that exists in the US equity markets.
  • At 16:20 Long ties in the coordinated easing from global central banks to this rising wedge formation in stocks and goes on at around 18:10 to note how he sees the USD as the last of the major currencies to fail
  • At 20:30 they begin to discuss the collateral contagion effects should interest rates ever be allowed to rise in the US (or Japan)
  • From 22:00 Long discusses his Gann analysis of the S&P 500 and the long-term dramatic downside he expects in nominal values for this index.