Watching Ray Dalio’s How The Economic Machine Works it’s clear that cycles are created by human nature, or at least by the taking on of debt.
Dalio mentions productivity increases being linear, and then small short-term debt cycles, and long-term debt super cycles. The long-term cycles are 80-100 years in length, so roughly a lifetime. That means, it won’t feel like a cycle, or be noticeable as one. The smaller ones, that happen 5-10 years apart, will be noticeable as cycles because a person sees 10 in their lifetime.
We’re at a period in history where it feels as if the superrich class and politicians are hurting everyone. Taking as much as they can from the working class. The question is, “Is this just part of the super cycle?”
If we use a sin curve to represent the long-term super cycle and Ray’s 80-100 year estimate on it, that means if we start at the productivity line, where wealth equals productivity, in 20-25 years wealth will have surpassed productivity fairly significantly, but that can’t be, so there is a pull back for the next 40-50 years. The first 20-25 years of that is getting back to the productivity line, the next 20-25 years is dipping below it. Finally, we end with another 20-25 years of getting back to the productivity line and starting all over.
If we assume the Great Depression as being the bottom of the last cycle, we can calculate some periods in time where society was at during this period.
Great Depression Started in 1929, we’ll use that as the bottom of the last cycle. Between the fact that there is a decade of wiggle room in there since the depression lasted all the way through the 30’s and the fact that a cycle can be influenced by a number of factors, they generally last 80-100 years. There is a possible 30 year debate that is happening.
Let’s assume 80 years as the cycle length because that more closely resembles most people’s lifetime.
That means in the cycle, the Great Depression of 1929 is when wealth became lower than productivity. People were poorer than they should be. A 1/4 cycle later, 1949, wealth had risen or should have been close to productivity levels. From there, it increases until 1969, when wealth had surpassed productivity levels to the maximum. It would have started to decline until around 1989 when wealth got back to productivity levels. And finally, bottomed out again in 2009 when wealth became below productivity levels once more.
These numbers seem to align pretty well. In 1949, after the war, the average American was doing well, and also true in 1969. In 1987, in the coming down part of the cycle, there was a major stock market crash. In 2009 at the bottom of the cycle, we were in the Great Recession.
We are currently in the bottom part of this super cycle, and with the decade of wiggle room, and the 2 decades of uncertainty of length, it may be as far as late 2020s until we start to see things on the upswing of the big cycle again. For me, that’s a relief. That means things will be peaking around retirement time, which is preferable to crashing at that time.