Nikolai Kondratieff, a Russian Economist, after years of
study, in 1931, released his findings in Russia which stated that capitalistic
economies across the world were about to enter an age of prosperity and growth.
Communist Russia, promptly jailed him, sent him to Siberia, where he eventually
died.
What in essence did Kondratieff postulate?
·
Economic cycles repeated themselves with an
approximate time periodicity of 54 years. 54 years between the peaks and 54
years between the troughs of the cycle. In essence the cycles could oscillate
between 45-63 years (54 plus one sixth or nine years).
·
The cycle is made up of 4 stages or phases-
Spring, Summer, Autumn and Winter. Spring and Summer represented growth phases
and Autumn and Winter represented contraction phases. Phases of the cycle were
not even. During periods of growth, prosperity years were more than contraction
years and vice versa.
·
During Contraction years, Agricultural output
suffers the most, as compared to other economic activity. Drought and famine
are common.
·
Many new inventions and technologies are
invented or discovered during the contraction phase.
·
These new technology or products will only be
applied in a mass scale once the contraction phase ends and a new cycle begins.
·
At the beginning of the growth phase, gold
production increases. Markets for goods and services will expand. Credit
expansion begins in a small way and later gathers momentum.
·
Closer to the end of growth phase of the cycle,
emotive wars break out. Closer to the end of the contraction phase, economic
wars break out.
Two critical observations need to be recorded.
1.
This cycle must not be confused with Stock Market
Cycles. Stock market cycles are a reflection of the perception regarding the
future of the Economy and hence will always lead the Economic cycles, sometimes
by as much as one year. Typically between 6 to 12 months.
2.
Economic cycles are no more Agriculture oriented.
First Industrialization and then Technology advances have changed the nature of
the ingredients which affect the Economic cycle. The extent and the timing of
these two changes vary from Nation to Nation.
Based on these postulates, we shall attempt to see the
Kondratieff cycles which affect us, in India, shall we? Let us also look at
some long term planetary cycles and their correlation to Kondratieff cycles.
We begin with the 1971 Indo-Pak war. It began on December 03,
1971 at about 17.40 hrs and ended on December 16, 1971, at 16.31 hrs. In the
same year on October 17, 1971, Saturn from Gemini opposed Jupiter in Sagittarius.
Thereafter Jupiter was moving towards forming a conjunction with Saturn. This
conjunction eventually took place on January 01, 1981, in Libra.
So from 1971 to 1981, Jupiter was moving through what is
called as a waning or declining phase. Saturn is the slower planet and Jupiter
faster. When Jupiter pulls away from Saturn after a conjunction, we say,
Jupiter is in a waxing formation with Saturn. When Jupiter moves towards Saturn, from behind, we say, Jupiter is in a waning formation to Saturn.
Now 1971 war was a war of economic considerations.
Why so? According to Wikipedia,
“Approximately 10 million people fled East Pakistan and took
refuge in the neighbouring Indian states. The East Pakistan-India border was
opened to allow refugees safe shelter in India. The governments of West Bengal,
Bihar, Assam, Meghalaya and Tripura established refugee camps along the border.
The resulting flood of impoverished East Pakistani refugees placed an
intolerable strain on India's already overburdened economy.” The war was a
successful bid by India to stem the flow of refugees and prevent economic
bleeding.
This brings us back to the topic under discussion-so 1971 to
1981 represents the last years of contraction of a previous Kondratieff cycle
which had its origins sometime in the 1920s. Maybe in sync with the Great
Depression years in the US. Who knows? We have precious little records from
those times.
1971 to 1980 represented slow growth under the burden of a flourishing license raj and it was the external environment changes and India`s response to them, which might have brought about the closure of the contraction phase of the previous Kondratieff cycle.
The external environment changed dramatically in the course of 1979 with the second oil price shock, the full impact of which was evident in 1980-1981, the current account went into deficit and net foreign capital inflows increased to 1.7 per cent of GDP.
If we assume the Economic cycle bottomed out in the later half of 1980, then this ties up with the Bombay Sensex touching its all time low in December 1979.
Jupiter was conjunct Saturn on January 01, 1981 in Libra.One cycle of Jupiter and Saturn, from conjunction to conjunction is 19.85 years and it takes approximately 59.55 years for Jupiter and Saturn to come back into conjunction in the same sign. This seems to tie up with the length of the Kondratieff cycle- varying between 45-63 years.So the next Jupiter -Saturn conjunction, in the same sign, of Libra, after January 01, 1981,is on 31 October, 2040.
Waning trine in 2014, may be a big top , followed by a side ways market in 2015 and then an explosive upmove close to 2016.
Here is the weekly chart:
Conjunctions of Jupiter and Saturn are called as Royal Conjunctions.For several centuries now, people have been interpreting them to know the prevailing economic cycles of various kinds.
Of course the Economy is subject to various other cycles, some of them very long term.What is amazing is that periodically these cycles seem to come together in times of great import.The trick of course is to decipher them clearly.
Iam not anticipating any particular price targets here. That is best done with application of Elliott wave Principles closer to the events.
These are postulations. I request visitors to this blog to please value add with your comments. Let me be corrected wherever Iam wrong in my assumptions or projections.
Of course, these topics are for academic interest. Please use such information for trading or investing only after you consult your Financial Advisors.
