Gordon Long has an interesting graphic on what he describes as the New Economic Cycle.



Quite fascinating . . .


We’ll Need The Courage Of Our Forefathers
The New Economic Cycle
Gordon T. Long
The Automatic Earth, November 8 2010

Category: Cycles, Economy

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27 Responses to “The New Economic Cycle”

  1. bernandoo says:

    that graphic looks like a compelling reason to own metals.

  2. Cynic_FA says:

    Alfred Hitchcock movie – Bernanke – The Man Who Knew Too Much (Not).

    The script might follow the chart above, except in 2011 where it says Demographic Shift, it should say Democratic Shift…Republican President Elected

  3. vader says:

    Or it is a new way of recycling $s. As the rich take in more $ they have to invest the $s in more and more speculative investments, losing more and more requiring more and more government intervention.

    The poor are unaffected and the middle class is eliminated.

    The fact that the rich lose more in mal-investments than a reasonable redistribution scheme is unimportant and conforms to current political theory.

  4. Petey Wheatstraw says:

    Where’s the part in the cycle where things get out of hand socially and politically? The path the future takes will better resemble that of a staggering, retching drunk — not a predictable cycle leading to a do-over for Biff and Muffy.

  5. Super-Anon says:

    I think a USD crisis will essentially disable the Federal government and make it look completely powerless and incompetent. I don’t see how an Obama “New Deal” would be possible.

    Political leadership usually doesn’t survive a currency crisis.

    How does the Palin “New Deal” sound to everybody?

  6. Easyenough says:

    Unbelievable that people keep making the same cognitive error: rules will be changed to facilitate ugly muddling through. Decisive shifts al la this chart will not be permitted to occur by the major stakeholders. Things like reserve requirement drops, balance sheet assets allowed to be valued speculatively, new wars, huge state bailouts and the matching decline of other currencies like the Euro will just keep it ugly, incoherent and unpredictable.

  7. Ted Kavadas says:

    Interesting depiction – although I believe the timeline of these various problems (as well as others) will be far more accelerated, unfortunately.

    As well, my analysis indicates that a substantial U.S. Dollar decline (some would call it a “collapse”) is something to be very concerned about, as there is vulnerability for a variety of fundamental and technical reasons.

    This U.S. Dollar vulnerability is seen technically through various measures; one is a rather ominous “triangle” chart pattern which I showed in this post:


  8. partimer1 says:

    I felt we went through one cycle already. was Obama’s new deal at beginning of 2009?

  9. DeDude says:

    “How does the Palin “New Deal” sound to everybody?”

    Yeah baby – a gun and a moose to everybody.

  10. crunched says:

    How can Obama have a New Deal if he’s not President then?

  11. oldtimer says:

    Assumes QE2 and Stimulus measures will be completely ineffective.
    Its an ill wind that blows nobody any good. Since the majority of goods sold in stores are manufactured in the far east, frugality will help the balance of payments.
    Insurance distress? I’m sure Warren Buffett will figure something out.
    Obama new deal? If the Country is still in crisis on January 20th 2013 Obama’s stint at the dealing desk will be over.
    Franklin D Roosevelt had the strongest hand when BW I was formulated. If there is a next time, Hu Jintao will be calling the shots. Maybe Uncle Sam will have to place his highest chip. Taiwan.

  12. Gatsby says:

    Looking at this chart makes me think a certain book that has been oft referred to by BR as of late written by Ned Davis.

    This cycle represents what most of us see as a logical unfolding of events as the inevitable consequences of current circumstances.

    Unfortunately it suffers from the Achilles heel of economic thought: “Assuming all things being equal”.

    I cannot agree more with what Easyenough has said. Readers of Marc Faber would also find this concept familiar.

    If I told you five years ago that the banks were going to fail due to over-leverage and over speculation many of you would have agreed. But who could have predicted the reaction of the government. In addition the “Assuming all things being equal” line of thought would not have agreed that banks would be given a pass at the due process of law and be able to steal things at will.

    One of the rule of power if that the power class will shift the environment in any way it can in order to maintain its advantage.

    I would expect to get a lot angrier in the future.

  13. Ramstone says:

    Yes, we’re gonna be inundated with Corporate Bankruptcies.

    There are a lot of cowpies to step on, but that’s not one of them.

  14. Bill W says:

    If Obama can survive until then, the shape of his new deal needs to look like a resolution authority, not more bailouts and easy money. (I realize that I stole that idea from Chris Whalen.)

    I think Obama can survive if he turns himself into the reformer that he promised to be.

  15. Mannwich says:

    I totally concur with easyenough and gatsby. When the elites don’t like the outcome, they’ll just change the rules to continually allow themselves to make out just fine at everyone else’s expense. Anything to keep the status quo in place.

  16. Mannwich says:

    I believe crisis & government response arbitrage is the new economy and market cycle.

  17. xynz says:

    Wait, there’s something missing. Now that the Republicans control the House, they are in a position to finally “Starve the Beast” once and for all, by forcing a strategic default on US government debt. I don’t see that anywhere in the cycle.

    I say there is a very good chance that the Republicans will do this, because they WANT to permanently hobble the government’s ability to raise and spend money.

    Now you might say this would be an extraordinarily irresponsible and irrational course of action; I would agree with you. But when has that ever stopped the Republicans?

  18. willid3 says:

    looks like we have gone back to the old style economy. thats where every falls apart every few years. and no we can’t fix it, even though we did back in the 30s.
    you get the feeling that the moneyed elite have found a way to convince the rest of us that this is good for us. sort of makes one wonder about us. seems like there is a name for people who think like that

  19. Mannwich says:

    Exactly willid3. I think the plan is to slowly rob the non-elites of all of our remaining scraps of wealth to freeze the status quo in place, and even improve things for the elites, so that we don’t realize it until it’s too late. We might be past that point already though (of being “too late”).

  20. [...] – The new economic cycle. [...]

  21. QOTD:

    “All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” -Arthur Schopenhauer (1788 – 1860)

    with that, and given the Post, “”First they came for the socialists, and I did not speak out because I was not a socialist. Then they came for the trade unionists, and I did not speak out because I was not a trade unionist. Then they came for the Jews, and I did not speak out because I was not a Jew. Then they came for me, and there was no one left to speak out for me.”– Martin Niemoller, German anti–Nazi pastor during World War II

  22. Long term says:

    americans demand bubbles and political leadership is happy to accomodate. i mean who thought we’d have monetary policy to create a bubble on the heels of the great recession?? only insiders know how to take bubble profits but even that is sketchy. with bubble leaderhip, this is rough and tumble capitalism at its finest.

  23. victor says:

    The graph resembles the proverbial serpent swallowing its own tail…bad omen. I do have a (naive) solution for our ills here in the US: privatize Federal and State assets starting with the vast land holdings in the West, then the coastal and outer continental shelf waters. That could pay down part of the outstanding debts. Also switch to domestically abundant natural gas for power generation and for some of the transportation sector (Pickens’ plan). Timing? not yet as 1) the pain level is still low (just look at California’s newly elect retread Governor) and 2) the system is too corrupt, most assets would wind up in the hands of the members of our ruling class, much like what happened in Russia. That’s why ex President of Mexico, Lazaro Cardenas modified the constitution down there so that Pemex could not be sold, unlike for example Telemex that ended up in Carlos Slim Helu’s hands. Until then: be like the jackrabbit in a hailstorm: hunker down and TAKE IT. BR any comments to my little rant?

  24. mock turtle says:

    i support the concept and the policy of shared pain as we dig our way out of this crisis

    medicare and medicaid are major cost liabilities in the future especially since part D was unfunded and unlike tri-care for our military people, drug benefits in medicare are disallowed, by law, from negotiations over price

    but shared pain or not, the idea that the social security funded by a regressive tax, which has generated more than a 1 trillion dollar surplus, a surplus “taken” by the general fund, …that social security should be on the chopping block, while the marginal tax rates for the wealthiest americans is reduced to 20%…a 75 year low… on the heels of the bush tax cuts..well this is nothing less than fraud

    i applaud entrepreneurial success and believe that hard work and enterprise should be richly rewarded

    the people who gain the most from our system and our society are the top 1% who own all by themselves about half of everything in this country (stocks bonds real estate etc) and most of whom earn in the 10s of millions, hundreds of millions and even in a few cases billions of $ each year

    these americans have not only a responsibility, but self interest, as the ‘owners” of our country to maintain a viable level of infrastructure, transportation, education, nutrition and health

    why? because the roads carry the trained and educated workers and customers to the work places and stores so that the wealth can be generated and the products sold for profit

    no entrepreneur if dropped in the middle of the jungle, absent society and technology, could generate great wealth we see acquired by the rich today

    the rich have the farthest to fall

    we are told over and over and over that taxes must be cut to produce jobs and prosperity. but what does history teach us? the marginal tax rates went from 90% in the 1950s to 70% in the 60s…to 60, 50, 40, and in the 30s percent from reagan to clinton

    where are the jobs all these tax reductions were supposed to generate, where is the income gains for the middle class from 2000 to 2009 there was over that time period net zero growth in private sector employment

    during the same period (from the 50s till today) the corporate contribution to federal revenue went from about half of all federal tax receipts (as compared to individual income tax) to less than 15%

    i for one am sick of the lies and the hype

    yes… because of the gross mis management of the tax and international trade system we will all have to suffer

    so far , primarily, the middle class is in the cross hairs

  25. Uchicagoman says:

    Whhaaa, whaaa , whaaa, poor us, poor US.

    Look at the picture of the poor chap on the linked site.
    Probably didn’t live past 40. Most folks didn’t back in the day.
    Poor us.
    If we get sh*t on, I guarantee the rest of the world (especially the have-nots) will get 10x sh*t on. Just look at Iraq or Afghanistan.
    People slave away 14 hours a day to build our iPads. What happens to those people? Political crisis? how about human crisis?

    I love how the big Financial Crisis arrow just pops in there from no where. Out of the blue like a big blue phallus, penetrating the economy, injecting it’s cyclical vitality and renewal. Tectonic shift up the a**.

    That is a great clip, loius. Sums it up.

  26. Marc P says:

    “Wait, there’s something missing. Now that the Republicans control
    the House, they are in a position to finally “Starve the Beast” once
    and for all, by forcing a strategic default on US government debt. I
    don’t see that anywhere in the cycle.”

    Yeah, like when the GOP starved the beast over 2000-2008, in which they increased federal spending by 50% and federal tax receipts increased every year?

    @Victor: Sell off federal lands and coastal waters to solve the budget problem? Selling assets to pay for recurring expenditures? That usually is the last step before compete bankruptcy, either for a personal household, a business, or government. Except the gov’t can’t sleep in a 1992 Suburban in a WalMart parking lot.