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Depression every 70-80: Is this a cycle?

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rosstaylor posted on Thu, Jan 6 2011 4:48 PM

Has anyone noticed how something major occurs every 70-80 years in the US? The last Great Depression occurred roughly 70-80 years ago, and the Civil war occurred 70-80 years before that. In addition, 70-80 before that we had the american revolution. Has anyone noticed this? Does anyone think this is a cycle, more or less?

- Ross

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There is a book out,  can't remember the title off hand and I just have a moment, but it says that there is a cycle, and it is a realignment/split cycle, but every 40 or so.  And each realign (right now) produces the "Greatest Gen" and the split is the baby boomers.

 

Has "some" merit, if any- interesting idea, but still...

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You may be talking about the Kondratiev wave theory.

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Has anyone noticed how something major occurs every 70-80 years in the US? The last Great Depression occurred roughly 70-80 years ago, and the Civil war occurred 70-80 years before that. In addition, 70-80 before that we had the american revolution. Has anyone noticed this? Does anyone think this is a cycle, more or less?

- Ross

Joseph Schumpeter's trade cycle analysis focuses on what he calls "long waves," where there is a major catastrophe every 5-6 decades or so, and where smaller economic contractions occur periodically between the peak and the trough of the long wave. Hyman Minsky, a post-Keynesian economist, also incorporates Schumpeterian "long waves" in his analysis. Early business cycle theorists also focused on long waves, but they attributed them to solar cycles and other mystical phenomena, as opposed to Schumpeter and Minsky, who attribute them to either real structural changes and the accumulation of private debt respectively. Austrians reject the "long wave" analysis (if anything, they attribute it to interventions which aim at preventing and/or delaying the inevitable correction).

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that is an amazing theory. Any other comments?

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1775-American Revolution Begins

1861-Civil War Begins (~86 years later)

1929-Great Depression Begins (~68 years later)

2008-Great Recession/Global Economic Collapse Begins (~79 years later)

 

It's a little wider than 70-80 years.  Plus, the American Revolution wasn't really a depression and neither was the Civil War (although it was bad economically.)  This mostly seems to cover internal "regeneration" time periods.

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If such cycles existed then shouldn't market participants be mitigating their effects through temporal arbitrage?

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To compensate for something, you have to be able to predict it. While people might be prepping for individual events, knowledge of these cycles is fairly new and still very obscure.
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around 1775 is when we first experience hyperinflation (not worth the continental), during the civil, the south also suffered from hyperinflation (greenbacks), in the Great Depression, the country suffered a deflationary crisis, and now (2008+) it looks like we are all heading towards hyperinflation once again. Just seems a bit strange these events occur in relatively a 70-80 period time frame.

Does anyone also notice that when a currency collapses, usually a dictator (or dictatorship) arise?

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Anyone....?

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mwalsh replied on Mon, Jan 10 2011 6:17 AM

Sorry for the lag from my first post to now, I was camping with the Order of the Arrow (Part of the Boy Scouts of America, and was honored w/ the Vigil Honor)

 

But, this is the book I was talking about:  http://www.amazon.com/Millennial-Makeover-MySpace-American-Politics/dp/0813543010/ref=sr_1_10?s=books&ie=UTF8&qid=1294661695&sr=1-10

 

Doesn't address the economics, but it does look at the political views (to me to much stress is placed on cyclical theory, that it will be repeating ~x many years without fail, but...)

 

This may help in that it looks and shows of how in the cycles it addresses, the people are unified, and tend to be pro-big gov't.

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Zlatko replied on Mon, Jan 10 2011 7:03 AM

Maybe I'm biased but I tend to reject mechanical explanations of complex human phenomena without looking much into the explanations.

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Kaz replied on Mon, Jan 10 2011 3:31 PM

Has anyone noticed how something major occurs every 70-80 years in the US? The last Great Depression occurred roughly 70-80 years ago, and the Civil war occurred 70-80 years before that. In addition, 70-80 before that we had the american revolution. Has anyone noticed this? Does anyone think this is a cycle, more or less?

I suppose it's a failing of our socialized education system, that people don't realize how common depressions were until the 1950s.

In fact, we had a depression in 1920, a panic in 1916, another one in 1907 that was kept from becoming a depression only by private enterprise setting up a system of Lenders of Last Resort, another in 1900, a depression from 1893-1896, a long period of weak economic growth before that going all the way back to the depression of 1873, so that the entire 23 year period is sometimes known as The Long Depression, et cetera.

http://butnowyouknow.wordpress.com/those-who-fail-to-learn-from-history/history- of-economic-downturns-in-the-us/

Check out the history of economic downturns in the US.

Note, by the way, that all economic downturns have specific and general reasons, individually. There is no "cycle" in the sense that you seem to mean, which smacks of "magic thinking", as if the cycle existed on its own, not as a symptom of natural factors.

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Kaz replied on Mon, Jan 10 2011 3:41 PM

around 1775 is when we first experience hyperinflation (not worth the continental), during the civil, the south also suffered from hyperinflation (greenbacks), in the Great Depression, the country suffered a deflationary crisis, and now (2008+) it looks like we are all heading towards hyperinflation once again. Just seems a bit strange these events occur in relatively a 70-80 period time frame.

You missed the depression Jefferson caused in 1806 or so, because of his embargo, the inflationary period that occurred between the First Bank of the US ending in 1808 and the Second Bank of the US being chartered in 1816, and of course the two depressions that occurred around the dissolution of the Second Bank of the US, thanks to Andrew Jackson. Oh, and the series of panics and depressions caused by the gold and silver rushes causing wild inflation/deflation in our bimetalic system, in the 1840s-1860s, which are what caused conditions to be bad enough to precipitate the "Civil War" in the first place.

And there's zero danger of hyperinflation, today, even aside from the ridiculously hyperbolic attitude that is necessary to expect HYPER inflation from an increase in money supply merely in double digits:

Hyperinflation always entailed the issuing of money that then remained in the economy, snowballing. The Fed's trillions added via its short-term loans and quantitative easing are all temporary money, that is destroyed when its function ends. When the Fed sells back the securities it bought with QE2, for example, it will simply destroy the money it is paid. The overnight, 30, and 90 day loans of the other trillions of dollars are likewise automatically destroyed when they're paid back.

This leaves the only risk as that of having high inflation, probably the low double digits, when the economy finally recovers. When inflation starts registering at all, the Fed will raise rates and sell its securities. Sadly, it takes a year or two for the impact of this to become visible, so we'll probably end up with two years of inflation AFTER it starts to react, then in a backlash recession caused by its belated contraction, just like every other cycle in the 60 year inflationary period from the 1940s through 2006 or so.

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agreed with Kaz here. Except if I recall correctly, the so-called "Long Depression" turned out to be pretty good. Prices were falling but there was economic growth. This was addressed by Tom Woods in one of his presentations(unfortunately, i forgot the title of it), and i think i've seen addresssed somewhere else as well. Does anyone know which presentation it was where Tom Woods talked about this?

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