4 October 2005
1932-2006 - The Second 74 Year SubCycle of the US
Second Grand Fractal? A Replay of 1858-1932?
As the United States enters the possible turbulent time frame
of its second major decay fractal since 1858, its government,
corporations, and people are not in good fiscal shape. The first major
decay cycle ended in 1932 for a total of 74 years. By recent fractal
analysis the second cycle may likewise end in an additional 74 years
or in 2006. A nearly unimaginable asset and economic deflationary
collapse is possible.
The imbalances in the world's leading GDP economy are profound. Since
1982 America's GDP has been stimulated by a general trend of falling
long term interest rates -set at the high bar by Mr. Volcker. Before
1982, the US GDP was stimulated by post World War II European
rebuilding, real smoke stack and factory mass production, interstate
highway building, social spending, Vietnam war spending, and cold war
military spending. In the last few years massive tax rebates and ultra
low interest rates combined with imprudent and unregulated lending
practices have created historical personal debenture spending
resulting in housing overvaluation and secondary debt accumulation
from second mortgages. Unlike the 150 years prior to 1948 where nearly
half the years were contracting GDP's, the post 1947-48 years have had
all positive GDP growth - a historical anomaly. The breaking branch
today is so much higher than the one perched on in 1929.
The severity of America's occult economic illness may be judged by the
trends in total federal revenues since 1966. Total tax revenues have
historically doubled every 7-10 years. From the CBO's historical
tables, there was doubling in revenues in the following years from
1966: 1974,1980,1990, and 2000. Since 2000, total revenues have
actually decreased with a loss of several trillion dollars of
traditional revenue growth.
Without the borrowed social security funds from the empty 'lock box',
governmental borrowing would tax even the abilities of the 'world glut
of foreign dollar saving recipients.' Social security tax revenue
nearly matches personal income tax revenue and has come to represent
merely an additional tax that offsets the summation of all federal
expenses. There is no money in the social security trust fund;
interest earned in the trust fund is an accounting mirage; and the
fallacy of depicting future solvency based on assets and interest
earned in that trust fund is likewise, purely an illusion. Solvency
and future payments to a growing number of retirees will be based on a
dwindling ratio of predominately US service-type workers with their
lower wages and increased personal income taxes to maintain needed
discretionary spending. For linear thinkers a look at the US CBO
report for the out years is instructive. Where is the projected growth
in GDP coming from? The maximum economic stimulation has been spent.
Likewise a look at the past CBO report from 2000 with its forward
projection of budgetary surpluses in 2001-2010 is instructive on the
effects that an equity collapse has on projected surpluses.
The macroeconomy is efficient. Asset deflation does occur and occurs
in discrete fractal patterns. It is not chaotic. A look at the DJIA
from 1929 to 1932 is instructive.
The last major monthly growth fractal pattern for US equities started
in late 1994. The monthly pattern was:
14/32-34/28; a low occurred 1.5x later at month 21 for nearly a
perfect x/2-2.5x/2x/1.5x pattern.
The 28 months at the top which incorporates the March 2000 peak
becomes the base for the
major decay fractal with an expected end at 2.5x or 70 months. The
equities are currently in their 60th month of this 70 month evolution.
Since October 1998, this month and week completes a maximal 15/37/37
monthly fractal growth cycle and a maximal 59/157/157 weekly fractal
The timing for the end of the 70 month devolution matches the end of
an ideal 1.5x weekly decay fractal for the completed 30/75/60 week
growth cycle. 1.5x of the 30 month base would be 45 weeks. The
Wilshire is currently in week 2 of this potential 45 week decay