The 40-Year Cycle has had diverse impacts on our nation and our economy. One of these impacts has to do with recurring economic ‘panics’ & ‘crashes’… another of which is expected to take hold by/in 2016/2017. A precursor to this would unfold if the stock market follows a combination of cycles & indicators that project an initial decline in late-April–late-Sept./early-Oct. 2015.
So, how consistent is this 40-Year Cycle of Panics/Crashes?
In 1773–1776, commerce went crashing into the Boston Harbor and the established economy of that day was thrown into upheaval (just ask theBank of England). Shortly after, the U.S. currency of the day – theContinental – suffered a similar fate… crashing from 1776 into 1781 and losing over 97% of its value in that 5-year period.
Up until 1775, Spanish silver dollars – ‘pieces of eight’ – backed the paper currency of the colonies and of the Continental Congress. In 1776, along with the Declaration of Independence from British rule, the Continental Congress also made a de-facto ‘declaration of independence’ from the sound backing of currency, opting instead for a fiat currency. The economic/currency results were disastrous…
In an intriguing parallel – 240 years later – Dollar cycles AND stock market cycles are projecting similar struggles for the second half of the2010’s… extending into 2021! If that does occur, it would mimic (resemblebut not replicate) what has transpired EVERY 40 years, since the 1770’s.
In order to better understand this analysis AND understand why it should be taken seriously, it is crucial to view ALL of the intervening, 40-Year Cycles…
In 1813–1816, the seeds were planted for all the future crashes as control of the currency was at stake. Thomas Jefferson – while engaged in an intense battle against the re-chartering of the Bank of the U.S. – famously warned: “A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army.”
Jefferson lost that battle, the 2nd Bank of the U.S. was chartered (in 1816) and the Panic of 1819 followed… another market crash! It reverberated into 1821.
1816–1821 possessed many intriguing parallels to 1776–1781, 40 years earlier!
The bubble-and-crash potential – of this economic & currency control (controlled by the fickle whims of man rather than founded on something solid) – was realized 40 years later… and every 40 years since…
In 1853, the government began manipulating the currency, reducing the weight of Silver in coins – a clever but catastrophic attempt at control. It was actually the culmination of a waging, economic battle that reached an impasse a few years later. The result – in 1857 – was the suspension of Silver payment and the Panic of 1857 – a financial and economic crash(surprise, surprise). The ramifications extended into 1861, when payment in Gold was also suspended… and when inflation came roaring back.
Here again, 1857–1861 timed the most devastating results of this debacle – similar to 1775–1781 & 1816–1821.
In 1893, déjà vu!
Government manipulation caused a boom-and-bust cycle when support for Silver was abruptly withdrawn in 1893 (following the Sherman Silver Purchase Act of 1890… a government stimulus plan not that dissimilar from similar ‘stimulus’ spending plans triggered 120 years later). Like 1853, it was a dramatic shift of the Gold/Silver/Dollar relationship – a pattern repeated throughout America’s history… every 40 years.
The Panic of 1893 triggered a run on Gold and ushered in the worst depression in America’s history… up to that point. Another CRASH! Sound eerily familiar – to 40 years earlier… and 40 years before that? Get used to it…the 40-Year Cycle is force to be reckoned with!
The Panic of 1893 led to escalating unemployment with the rate entering double digits (10+%) in 1893/1894 and remaining above 10% through 1898. At the peak, unemployment in New York hit 35% and in Michigan, 43%. The Panic of 1893 also triggered bank runs – and the closure of over 500 banks – as well as the failure of 15,000+ businesses.
In 1896 – similar to 1816 – another banking/economic battle was waged with the election battle between the pro-gold standard candidate (McKinley) and the pro-silver standard candidate (William Jennings Bryan). McKinley won.
In 1933, in precise lockstep with this 40-Year Cycle, another fatal blow struck the U.S. currency – with a crash before and a crash after. The Dollar was no longer backed by Gold, Gold coinage went out of production, & U.S. citizens were banned from holding Gold. (Emergency Banking Act &Executive Order 6102 in 1933 & Gold Reserve Act of 1934).
Shortly after, Executive Order 6814 – or Silver Purchase Act – was issued in 1934.
On a precise, 40-Year Cycle basis, America went from revolting against currency control in the 1770’s, to acquiescing to some control in the 1810’s, to reaping the consequences of government manipulation of the currency in the 1850’s, to a repeat performance in the 1890’s to government banning the holding of real currency (the ultimate control of the currency) in the 1930’s. Hmmmm.
American citizens were forced to turn in their Gold – priced at $20.67/oz. Then, the Treasury raised the Gold price (for int’l transactions) to $35.00/oz – creating a windfall profit for the government – paid for by citizens who saw their ‘currency’ crash 40% in value, overnight.
The Crash of 1929 preceded this event and the crash of 1937 followed it.
And, 40 years later…
1973 saw the collapse of Bretton Woods – the attempt at a global monetary order.
This occurred shortly after Nixon slammed shut the Gold Window in 1971 and it coincided with the stock market crash of 1973–1974 (50% drop in less than two years).
Since the Dollar no longer had any foundation left – other than debt and oil – it too crashed as inflation took hold like never before. (Gold, priced in Dollars, skyrocketed more than 20-fold, in less than a decade. The inverse means the Dollar crashed by a similar proportion vs. Gold.)
However, the most significant date of this phase – of the ubiquitous40-Year Cycle – was 1976! That is when the Jamaica Accord was signed – the official, international certificate of divorce between fiat currency and gold. From that point forward, global currencies lost any remaining link to Gold. And, with that divorce, those currencies also lost any remaining accountability!
The events of 1973–1976 began an unprecedented collapse in the Dollar versus Gold (and, conversely, an unprecedented run-up in the Dollar-based price of Gold) that really accelerated from 1976 into 1980. The ramifications of this inflationary Dollar collapse lingered into 1981 – as the Fed Funds rate topped at 20% in Jan. & May 1981.
Once again, the currency battle unfolded, led to two crashes (one in Stock Indices and the second in the Dollar) in the middle part of the decade, and violent reverberations extended into the ‘1’ year of the ensuing decade (1781, 1821, 1861, 1901, 1941 & 1981).
The cyclic evidence does not bode well for 2015/2016 into 2021.
Similar to 1853 & 1893, 2013 saw a crash in Silver (and a steep drop in Gold) – a result of central bank meddling, leading into (and out of) 2011.
Will 2016–2021 resemble 1776–1781, 1816–1821, 1856–1861, 1896–1901, 1936–1941 & 1976–1981?
And, will a plethora of “Crash Cycles” – focused on 2015–2017 – come to fruition?
This VERY brief cycle analysis is only one aspect of the dramatic shift that is expected – and is already being validated – between 2013–2021. The important factor has to do with the unique opportunities setting up for2015–2017… for which investors can now be preparing. However, as in most investing, TIMING IS EVERYTHING!