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Politics : Formerly About Applied Materials
AMAT 267.16-0.4%3:59 PM EST
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To: zonder who wrote (69913)4/23/2003 11:02:59 AM
From: Sun Tzu  Read Replies (1) of 70976
 
The short answer is that there are 3 major economic cycles based on chunky effect and market psychology. I am going to give you the simplified explanations": the short business cycle which is 3-5 years is due to inventory cycle (over build up of inventory causes recession). The medium cycle (10-12 years) is based on factory (and production means) over investment. And the long cycle, or K-Wave, is based on infrastructure over investment. This means that roughly once every 60 years or so there is a new technology that fundamentally changes the fabric of industry. Internet was such technology. The new technology draws too much over investment and leads to market bubbles. Because it takes much longer to get rid of infrastructure than to inventory, the fall out will also be so much worse and deflationary in nature.

There has been plenty of research on this since its discovery early in the century. I also read a paper (MIT?) on this which said the real cycle is two K-Waves long when one is concerned with technology and the other with management techniques.

During the last bubble the K-Wave was off by about 8 years, but the general picture it painted was very accurate.

You can read more about it here gold-eagle.com and here csf.colorado.edu but there are perhaps better sites.

ST
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