First Snowfall of Kondratieff Winter
Friday, February 1, 2008
A Kondratieff Winter is the correction of a credit expansion. During a credit expansion capital moves up the pyramid. During the credit contraction, or Kondratieff Winter, capital burrows down the pyramid to safety. This is why stock markets have been crashing as investors flee into T-Bills. Ultimately, investors ensconce themselves within a deflationary but
invincible and immoveable golden force field.
Alan Greenspan understands the risk a Kondratieff Winter poses to central bankers as they are impotent against stopping it. On Nov 6, 2003 he said, “Indeed, the Federal Open Market Committee has judged that the probability, though minor, of an unwelcome fall in inflation exceeds that of a rise in inflation from its already low level.”
Legendary investor George Soros recently said in Davos, Switzerland,
"The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency. Now the rest of the world is increasingly unwilling to accumulate dollars."
Soros said, “I think we do have to rescue markets, otherwise we would go into a depression like we did in the 1930s."
Of course, such intervention is what has gotten the world into this mess to begin with. If the United States followed the free-market money of the Constitution instead of establishing the Federal Reserve that manipulates the supply and price of money, always inefficiently compared to the market, then this financial train wreck would never have happened. More government intervention and regulation will have the same effect as in the 1930s; more capital will retreat to gold in a deflationary spiral.
As the charts below show investors are buying T-Bills no matter what the cost and accepting negative real returns. The negative real return marks the first snowfall of the Kondratieff winter. The next level down is either physical fiat currency or bullion. Unlike physical fiat currency the bullion has no counter-party risk.
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As the charts below show investors are buying T-Bills no matter what the cost and accepting negative real returns. The negative real return marks the first snowfall of the Kondratieff winter. The next level down is either physical fiat currency or bullion. Unlike physical fiat currency the bullion has no counter-party risk.
Perhaps one meaning of the joke is that the earth (US$) revolves around the sun (gold). When Dr. Paul says the US is broke he isn’t referring to the $10T debt but instead Fort Knox being empty of gold because it has been sold to keep the US$ strong. This is the ‘strong dollar policy.’.
