In 1926, three years before the Great Depression, a Russian economist wrote a paper titled "Long Waves in Economic Life." He was one of the first to observe that capitalistic economies undergo decades-long cycles of inflation, followed by deflation. The economist's name was Nickolai Kondratieff, and his observations are today known as the Kondratieff Wave:
Kondratieff also noticed distinct phases within each cycle that related to people's mood and sentiment. Today, these moods are often described as "seasons," or economic trends. Wikipedia describes these seasons as Spring (Inflationary Growth), Summer (Stagflation), Fall (Deflationary Growth), and Winter (Depression):
the "Winter" stage, that of severe depression, includes the integration of previous social shifts and changes into the social fabric of society, supported by the shifts in innovation and technology.
While many may discount or ignore these patterns as coincidence, there is no question that there have been previous episodes of manias/bubbles, followed by depressions and collapse. Here is a partial list of historical events:
Whether you believe that these events are part of a recurring series or random events, the important point is that these events have happened in history, and that we can learn about our current situation by exploring these historical events in detail.
In the next post, we'll explore the anatomy of a panic, and how it changes the world in an instant. For a head start, you can review the events leading up to the current collapse, that culminated in the panics of October, 2008.
Until next time ...