WE just marked another Lunar New Year. It is easy to calculate what the animal symbol will be in the year 2120 or back in 1920. That is because the moon’s movement around the Earth is a cycle.
Stonehenge, a prehistoric monument in England, was built—by best estimate—sometime between 5,000 and 4,000 years ago. It is a fact that the encompassing horseshoe arrangement of the five central trilithons, the heel stone, and the embanked avenue, are aligned to the sunset of the winter solstice and the opposing sunrise of the summer solstice.
That culture figured out the cycle of the sun and marked it with this edifice.
The Mandelbrot set puts a mathematical formula to fractals that show the geometric pattern of a grain of sand, which is identical to that of a mountain range. The spiral pattern of a typhoon is the same as the spiral pattern of a galaxy. These patterns in turn also reflect cycles. The Earth travels around the universe and reaches the same spot once every 250 million years. The precession of the Earth is one cycle of 25,800 years.
While we live within countless natural cycles every moment of our lives, we refuse to believe that cycles are also part of our human condition.
Prior to the 19th century, economists debunked the idea of a business cycle believing the idea of economic equilibrium in which economic forces such as supply and demand are balanced in the absence of external influences like war or famine. Then political economist Jean Charles Léonard de Sismondi discovered economic cycles when there was both boom and bust without the traditional external factors that classical economists always blamed.
Then John Maynard Keynes and like-minded economists believed that the business cycle was a myth that, at the least, could be controlled by government policy. Then in 1978 Paul Volcker wrote a book, titled The Rediscovery of the Business Cycle.
The economic cycles apply to other aspects such as politics. On October 1, 2015, the political cycle turned and it turned against the politics of the previous decades. There are many examples, but this is best illustrated in three political events that “could never happen” according the political powers. These were Duterte in May 2016 followed by Brexit in June, and finally Trump in November.
As I said before, the next one to turn would be the economic cycle, and that happened on January 20, 2020. The phase will continue until 2024. It will be a firm transition to the private sector from the public sector, as the political winds changed direction from—for want of better terms—elite to populist.
I will speak more about this as developments unfold. However, let’s drop to the bottom line. Global economic growth is flat and China just took an economic headshot with the 2019-nCoV outbreak. China’s economic problems are now intensified and will have ripple effects around the planet.
In the months to come there will be a move to a safe haven, which at this time is the United States. For example, on an annual basis, US consumer confidence is at the highest since before the 9/11 attack. To track capital moves to a safe haven —whether the US or not—you only need to look at the currency exchange rate.
However, if the US dollar appreciates too much, the economic house of cards will fall. Many countries have way too much debt denominated in dollars that they will not be able to service.