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To: AllansAlias who wrote (98475)	4/28/2001 5:43:21 PM
From: Box-By-The-Riviera™	Respond to of 436258

k wave bull... it's a nightmare out there! from longwaves: Hugh: Thanks for the reference to the World Bank presentation on the international capital flow cycle and its crises. Slide 17, which I have copied and uploaded, tells the whole story from the LW perspective: ispeculator.iprism.com World Bank's commentary on this slide is as follows: "All four episodes were accompanied by solid growth in world trade and investment, were punctuated by currency and financial instability in the capital receiving countries, and eventually ended in global political or economic crisis. [The first wave of British capital to Latin America to finance infrastructure and mining ended with the crisis of 1825. The second wave ended with the 1873 financial crisis in Europe. The inflow of foreign capital to the United States in the 1820s and 1830s ended with the depression of 1837-43.] "This figure shows that debt defaults were widespread during the late 19th century and jumped sharply following the 1920s and 1970s booms in capital flows." [end of quote] In each case (~1835, 1873, 1933, 1982) the international capital flow crisis began quite rapidly with the developed countries' "crash from plateau" of the LW top formation, which I have previously discussed in detail here and elsewhere. This will not be a surprise to those who understand the dynamics behind the Long Wave of Kondratieff. The slide also demonstrates the fact, which I have also discussed many times, that the current capital cycle from 1982 has resulted in large scale restructurings rather than primarily outright and total debt repudiation as in earlier cycles. As those familiar with the history of this cycle will remember, it was "Mexico I" in 1982 which set the policy format which remains in place. There are several benefits which accrue to this policy. One is that restructuring allows for earlier resumption of positive capital flows than would be the case with total repudiation. This is the same benefit we find under prevailing US corporate bankruptcy laws, which allow for resumption of short term credits and purchasing power while the previous debt is worked out by the court. Nor is restructuring as deflationary as repudiation since all the debt is not lost and the borrower and the economic benefit flowing from him is not totally destroyed. It is this policy shift, and other re-flationary long term political changes, which has led so many to miss the very fact that a "crash from plateau" and Kondratieff down wave was occurring at all. But for countries needing the capital flows, who are often also heavily tilted toward commodity production, this has been a devastating down wave. Even for Japan this has been an extremely harsh down wave. Another interesting feature of the capital flow cycle shown on the slide is that the percent of debt repudiation or restructuring is highest right at the "crash from plateau" bottom, so that even though the down wave of Kondratieff has 15-20 years to run, the crisis is already ebbing. And as the upturn in the next up wave of Kondratieff begins, the percent default rate ratchets downward gradually in the inflationary growth phase. I continue to believe that we are in the transition from the last down wave to the new upwave. One shouldn't read too much into any one week's or month's data with a 50-60 year cycle, but evidence of wage gains, worker demands, and the fact that consumers will have more to spend are telling. Initial first quarter US GDP shows that the consumer is supporting the economy as corporations retrench a bit. The usual response from the deflationists is that that consumers are using credit cards or home equity loans, but evidence from previous cycles shows that labor wage gains are what drives the up cycle of the Long Wave. As inflationary growth picks up so do international capital flows. Regards, Tom PS: I also noted in the World Bank presentation the very prominent role that Denmark plays as the nation with the highest percent of GDP devoted to international aid. Hopefully the US will do better in the future. TD@TenorioResearch.itgo.com tenorioresearch.itgo.com -------------------------------------------------------------------------------- The following section of this message contains a file attachment prepared for transmission using the Internet MIME message format. If you are using Pegasus Mail, or any another MIME-compliant system, you should be able to save it or view it from within your mailer. If you cannot, please ask your system administrator for assistance. ---- File information ----------- File: capital-flow-cycle.gif Date: 28 Apr 2001, 12:58 Size: 17276 bytes. Type: GIF-image --------------------------------------------------------------------------------