The Kondratieff Wave: Tracking the Past or Predicting the Future?
In 1926, Nikolai Kondratieff (also spelled Kondratiev or Kondratyev) published a study called Long Waves in Economic Life for the Agricultural Academy and Business Research Institute in Russia.
Kondratieff noted that capitalist economies have long waves of boom and bust, that he described similar to the seasons in a year. However, for presenting his work to Stalin showing that capitalism will always return, he was imprisoned and then eventually executed.
The four seasons in The Kondratieff Wave are:
- Spring (25 years) – Inflationary phase with rising stock prices and increased employment and wages.
- Summer (3-5 years) – Stagflation phase with rising interest rates, rising debt and stock corrections. Imbalances lead to war.
- Autumn (7-10 years) – Deflation phase where falling interest rates lead to a plateau and stock prices increase sharply.
- Winter (3 year collapse and 15 year readjustment) – Depression phase with stock and debt markets collapsing and commodity prices increasing.
So what does all this mean? I found this chart very interesting, especially in today’s economy. I’d like to thank a reader, Dave in Calgary, for emailing this to me. Of course, it’s debateable whether winter is behind us and we’re back into spring… or are we currently in autumn, with winter still to come?