Guest Post by Martin Armstrong
Western culture is prejudiced for we think everything is a straight line. My introduction to cycles was actually in high school. The teacher brought in a movie we were to watch in class the Toast of New York. This was about the Jim Fisk manipulation of gold in 1869. In the movie they said gold reached $162. I thought that was just Hollywood. It bothered me so I was compelled to go to the library and look it up in the newspapers on film back then. Low and behold, there it was the quote of $162. I knew gold was $35. Suddenly the world was not a straight line (I highly recommend watching this movie).
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This was the movie that changed my life. I did not read about Kondratieff or Dewey or anyone else. They were never mentioned in school. So I came at this totally fresh and unbiased by anyone else. I began writing about cycles in the 1970s. As I did, after discovering the Economic Confidence Model, many people responded overwhelmingly positive. A professor from the military school, the Citadel, called me and said I was a modern-day Hegel. He asked me if they could teach the ECM at the Citadel. I said of course. Hegel had influenced Marx for Hegel saw two opposing forces, but argued that a third conclusion would emerge from a thesis and antithesis producing a synthesis.
While I agreed with Hegel in the existence of two opposing forces, I disagreed that a synthesis of the two will always emerge. My study of history revealed that the common denominator was human nature and that never changes over the centuries so there is no synthesis of a Utopian state as Marx believed based upon Hegel – only one side dominates the other for brief periods of time until the pendulum swings back to the opposing side. History repeats, indeed, but the actors change. If you simply study the cause and effect, you will see that this pattern repeats regardless of the century.
What I studied about cycles and the various people who were also attracted to the subject matter came after I had explored on my own. I could see we came to similar conclusions, but from different perspectives, which was good. I have put together a comprehensive review of everyone who has contributed to the field and from different perspectives.
In physics class, the professor would say nothing was random. Then you went to economics and the professor would say everything is random so don’t bother to try to figure out the business cycle because it’s just a random walk through the park of a drunk.
Cycles exist because there MUST always be two opposing forces in everything. We are awake by day sleep by night (most of us anyhow). Hold your hand straight up in the air. No problem for most. Now keep it there. You will suddenly see that you run out of energy. Your arm will feel so heavy you can no longer keep it in the air.
This is why markets cannot go up forever nor down forever. Markets will always reach that maximum point of energy being expended in each direction. This is true even in things like fashion. Women’s skirts go up and down and men’s ties and lapels get wide and then narrow. Human nature is fickle.
Anyone who only forecasts a given market will always rise like gold or the stock market must go down, do not understand cycles and how these two opposing forces propel everything in the universe. How gravity keeps the planets revolving, how our solar system is revolving within the milky way, and how it takes 25,800 years to return to the same point in time. Just look at the structure of an atom. You see the same structure in the universe. There is a fundamental design that everything in the universe complies with or else it would be random chaos. This is the blueprint to everything. Even you heart beats to a cycle. How do they tell you are dead? There is no more cyclical activity in your brain.
There must always be two opposing forces; good & evil, night & day, male & female, left & right, plus and minus, sun & moon … etc, etc. There is no absolute right and wrong that can be maintained. This is why you cannot write a law to change human nature. You can outlaw prostitution and drugs, but you cannot eradicate it. All you do is subsidize such activity making it tax free because it goes underground. You will never change human nature this is also why career politicians can never be honest – impossible.
As long as Western culture continues to see the world only in a linear fashion, then we will never understand the future. Politics relies upon linear thinking. They promise vote for them and they will change the future in some manner typically engaging in class warfare. Politicians cannot solve any problem, for they are the source of all problems. The West thinks linearly so we will NEVER solve a problem, merely repeat it. We do not teach how to think, we teach what to think. This is why A students work for C students and B students work for government.
Richard E. Nesbett wrote a good book entitled “The Geography of Thought, How Asians and Westerners Think Differently … and why.” He attributed his work to a Chinese student who said: “You know, the difference between you and me is that I think the world is a Circle, and you think it’s a line.” He goes on to quote him:
“The Chinese believe in constant change, but with things always moving back to some prior state. They pay attention to wide range of events; they search for relationships between things; and they think you can’t understand the part without understanding the whole. Westerners live in a simpler, more deterministic world; they focus on salient objects or people instead of the larger picture; and they think they can control events because they know the rules that govern the behavior of objects.”
What I am trying to do with this blog is open your mind to see the entire world around you. This is how to be a successful hedge fund manager. Stop being a horse with blinders. There is a big world around you. You have to see the world in its entirety or else you will fail.
This is what it takes (1) to be a real hedge fund manager, and (2) a successful trader.
Reminds me of Allan Watts, On the Taboo Against Knowing Who You Are. “Here is someone who has never seen a cat. He is looking through a narrow slit in a fence, and, on the other side, a cat walks by. He sees first the head, then the less distinctly shaped furry trunk, and then the tail. Extraordinary! The cat turns round and walks back, and again he sees the head, and a little later the tail. This sequence begins to look like something regular and reliable. Yet again, the cat turns round, and he witnesses the same regular sequence: first the head, and later the tail. Thereupon he reasons that the event head is the invariable and necessary cause of the event tail, which is the head’s effect. This absurd and confusing gobbledygook comes from his failure to see that head and tail go together: they are all one cat.”
He goes on to say, in Psycotherapy East and West, I think, that it is in the west we see the head causing the tail but in the east they simply see a cat viewed through a fence.
Great article and good advise.
I had to look up that gold thing.
https://en.wikipedia.org/wiki/Black_Friday_%281869%29
Something to figure in to discussions about the gold standard being a stable standard since we were on the gold standard then.
I suppose everything is subject to manipulation in one way or another, particularly if someone sees the opportunity to profit from it.
As for other cycles, they are obvious but sometimes hard to identify since they can easily appear to be something they are not instead of what they are.
“What the caterpillar sees as the end of the world, the power greater than you sees as a butterfly” Richard Bach – “Illusions”
Worth a read.
OR – The bible is not a bad read either
“There are at least two kinds of games. One could be called “finite”, the other “infinite”. A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play. If a finite game is to be won by someone, it must come to a definite end. It will come to an end when someone has won.
We know that someone has won the game when all the players have agreed who among them is the winner. No other condition than the agreement of the players is absolutely required in determing who has won the game.
It may appear that the approval of the spectators, or the referees, is also required in the determination of the winner. However it is simply the case that if the players do not agree on a winner, the game has not come to a decisive conclusion – AND the players have not satisfied the orginal purpose of playing. Even if they are carried from the field and forcibly blocked from further play, they will not consider the game ended……..”
A book worth reading: “Finite & Infinite Games (A vision of life as Play and Possibility) by: James P. Carse