24 April  06

Saturation Macroeconomics and the Wilshire Inverted Maximal Growth Fractals

The saturation asymptote of the composite equity index curiously has
the same quantum properties as do growth fractals - only in reciprocal
form.  Valuations bump up against an upper saturation slope line that
defines the boundaries of available money for investment. As inflation
of commodities, servicing of prior debt, and constraints caused by
both limitations of growth in wages and consumer saturation restrict
new money creation via additional debt obligation, the upper equity
valuation saturation slope line is bumped into repetitively, before a
terminal point.

At that terminal point, that final point, an unraveling occurs where
money creation falters and the ever more slowly moving bicycle comes
to a complete standstill and with no forward momentum, falls to the
left or right. Asset prices then begin their inevitable devolution.
The Fed, in reality, cannot effectively create money;  only borrowers
producing a service, a useful item, or an entitlement can create money
through the promise of future repayment through present and future
labors or taxes on those labors. What the Fed can do, besides
temporarily buying their own bond issues, is print zero interest money
in the form of currency to redeem bonds and debt instruments which are
a form of interest paying US currency equivalents. The problem with
this type of money creation is that there is no net gain of money
equivalents  within the system to prop up asset valuations. On the
contrary, there is a net loss of equivalents as the US debt load
remains the same and remaining bond holders demand higher interest

Since 11 January 2006 the Wilshire has bumped into the upper
saturation asymptote in the following daily pattern:

13/33/26 .... x/2.5x/2x....

This quantum inverted maximum growth fractal pattern bumping along the
top slope is the reciprocal mirror of the growth pattern as defined by
an underlying bottom slope for the Wilshire starting in October 2005:

24/60/48-49  x/2.5x/2x

where last Thursday and Friday's trading days appear currently to
represent a double day top to 7 April 2006, which had the very curious
third fractal 1.618 phi relationship
to the arithmetical base of the integrated first two fractals which
began on 12 March 2003.
Did the bicycle completely stop moving last Friday or will there be a
x/2.5x/2.5x extension for either or both of the defining upper and
lower slopes?

Gary Lammert