17 October 2007

I share this premise

if you go back two K cycles ago there are a lot of resonances to the present situation. At the time we had out of control fiat inflation in Europe (Russia expanded the money supply by x10 and France x4 between 1900-1915, the British and French were borrowing like crazy while the Americans were saving during the same period. The commodity cycle was on the rise globally during the same period while the Europoean stock market went into a 20 year bear 1900-1920 while the US market rose, the British even had their own concept of free trade while everyone else was putting up barriers.

Here is the hypothesis, modern market commentary relies exclusively on US data and virtually ignores all other economies, we ignore most other stock markets and economic data are refer almost obsessively to US data. How many times have you heard folks refer to the London bear market of 1900-20?

Kondratiev found his cycles in pricing data from Europe and only later confirmed it with American data at a later stage, much of Schumpeters analysis also relied on European data, this was only natural then as most economic activity happened outside the US.

To replicate the 1900 K wave growth period all we need is a bear stock market in the US, a bull in Asia and a commodity bull, the US looks much like France and England at the start of the 20th century , rising debt and poor savings , while Asia looks like the US , rising savings and lower debt.

Peak oil is a western problem in that the Asians are more robust people and use less, where as in the US the people have become fragile and less robust. I don't mean to say that Peak Oil wont impact everywhere , it will but it wont have the human impact it will have on the US lifestyle and pysche.

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