One
of the biggest mistakes economists are making in their analysis of the recovery
is in ignoring the impact of the long-wave deflationary cycle. Known as the Kress Cycle, this cyclical force
will largely determine the future course of the global economy in the coming
one year.
Many,
if not most, economists insist that the financial market and economic recovery
that has been underway these last 3-4 years will continue into 2014 and
beyond. The reasoning behind this
forecast is nothing more than linear extrapolation – the classic recipe behind
most economic predictions. Conventional
economists excel at simply observing a trend that has been in place for the
last 3-4 years or more – psychologists tell us it takes at least three years
for the average person to recognize a trend – and then projecting that trend
well into the future. This extrapolative
outlook is based on a number of dangerous assumptions, one of which happens to
be that the economy is cyclical, not linear.
Not surprisingly, most economic forecasts are proven wrong by future
events.
If
there is any truth to the Kress cycles, and my 13 years experience with them
tells me there is, then next year will most likely upset the rosy forecasts of
most mainstream economists. Indeed, with
storm clouds already gathering on the horizon we can see trouble spots beginning
to manifest in key areas of the economy, most notably in the real estate
market. Real estate alone could upend
the consensus optimistic outlook for next year.
It’s
a tough road ahead for the U.S. economy as it will be forced to slog through
the combined forces of the constituents of the 120-year cycle: the 60-year,
40-year, 30-year, et al, cycles. Each of
these cycles is scheduled to bottom around the beginning of the fourth quarter
in 2014.
