China/Russia Alliance Evolving. What Does This Mean for 2019 – 2021?
China/Russia Alliance Evolving. What Does This Mean for 2019 – 2021?
02/27/19 INSIIDE Track – The ~11-Year Cycle:
“Cause and Effect
Perhaps the best-known solar cycle is the one that governs the ebb and flow of sunspots or solar storms. It is an ~11-Year Cycle (averages out to 11.2 years) that has an uncanny knack for also linking monetary and military events of cause and effect. Perhaps a better way of describing that would be the Cycle of Unintended Consequence.
Events during one phase of this cycle often have a distinct and irrefutable link to events during the next phase. In many cases, those phases also link similar players or similar events. (I have often documented an overlapping 11- Year Cycle that impacts Middle East conflict and recurs in 2021/2022.)
Most recently, the last two phases began with the events of 1997 – 1998 (11 years after the stock market crash of 1987) when the economic world was rocked by a pair of crises – the Asian Financial Crisis and the Russian Ruble Crisis – in 1997 & 1998.
US & Western stock markets were able to mount a final surge before a worldwide stock malaise took hold in 2000 – 2002. However, it was 11 years after the events of 1997 – 1998, in 2008 – 2009, when a larger global collapse ensued.
As time has unfolded, it has become clear that the Western financial and economic collapse of 2008/ 2009 drove countries like China & Russia into closer cooperation with one another, as an alternative to the US & Europe (see previous discussions on multiple unions spearheaded by China & Russia). This cycle comes back into play in 2019 – 2020 and is likely to perpetuate/foster that alignment.
However, the intriguing part to me continues to be the coinciding recurrence of unrelated – but potentially related – cycles in Saudi Arabia (see page 3) and even in Turkey. Not surprisingly, the two most predominant cycles in those discussions are the 40-Year Cycle and an ~11-Year Cycle.
East vs West
One of the reasons for addressing these synergistic cycles is to highlight the recent phases and how they have timed this dramatic evolution of powerful (antagonistic) competitors to US/Europe.
First, there was WWII in which the US & USSR fought against Germany and Japan (who had invaded China, loosely aligning China & USSR).
11 years later, it was the Korean Conflict coming on the heels of the Chinese Civil War. The US/UN were ultimately pitted against the Soviets and Chinese – a division that is back in vogue now (even as North Korea is in the headlines 66 years after the 1953 ‘end’ to that war).
In the early-1960’s (see 1963 – 1964 phase), the US was pushed to the brink of war with the USSR over the Cuban Missile Crisis (late-’62) a little before the Gulf of Tonkin incident – the escalator of US involvement in Viet Nam. Ultimately, it was China & the USSR on the side of N. Viet Nam.
The next two phases saw similar events (including those related to Nixon and to the rise of major economic reforms in China) but it wasn’t until the 1997 – 1998 & 2008 – 2009 phases – of this particular ~11-Year Cycle – that economic events pushed both nations to the edge of a financial abyss… and led to the developments in recent years. So, what could 2019 – 2020 have in store? Stay tuned.
Reaction begets action begets reaction…
2019 – 2020 ????? China economy decline lead to conflict? S China Sea. Russia/China alliance.
2008 – 2009 – Financial and real estate meltdown (triggers shift in global faith in US and West; China and Russia initiate multiple financial, economic and military alliances to compete with the West); Formalization of BRIC(later BRICS) exemplifies these alliances.
1997 – 1998 – Asian and then Ruble Crisis; final parabolic rise in stocks and then crash leads to unending interest rate declines… leads to real estate bubble.
1986 – 1987 – 18 month interest rate rise… leads to stock market crash
1974 – 1975 – Watergate, Nixon, stock crash, end of Viet Nam war (1976 = death of Mao, ushers in economic reforms in China – triggering a 40-Year Cycle that is now reaching fruition.)
1963 – 1964 – Aftermath of Cuban Missile Crisis, Kruschev’s demise; assassination of JFK; Gulf of Tonkin incident, and resulting Resolution, leading to massive buildup of US troops in Viet Nam by LBJ (…and that led to China & Russia re-establishing relations after a decade-long split – a recurring pattern in this cycle).
1952 – 1953 – Culmination of Korean War; Soviet assistance to Chinese on side of N. Korea.
1941 – 1942 – Entry into WWII; Culmination of Great Depression; End of second multi-year stock decline (1942).
1929 – 1930 – Stock Crash and Great Depression.
1917 – 1918 – WWI, Bolshevik Revolution
1906 – 1907 – Panic of 1907 – also rescued by J.P. Morgan (see below); led to forming of Federal Reserve;
1895 – 1896 – Gold reserve of US Treasury saved with 65 million loan from JP Morgan and Rothschilds; Gold Rush (Yukon); Election of 1896; Cross of Gold; Gold v Silver standard. (End of First Sino-Japanese War, with Korea changing hands.)
1884 – 1885 – Depression of 1882 – 1885; third longest recession in past 160 years. Panic of 1884 – lasting from July 1884 – July 1885 was culmination of that recession/depression.
1873 – 1874 – Panic of 1873 (known as Great Depression until 1930’s; see 1862 – 1863 for triggering events); Coinage Act of 1873 (demonetizing Silver);
1862 – 1863 – Civil War, Lincoln, (End of Civil War led to boom in railroad construction… that led to over-expansion – similar to the housing crisis of the mid-2000’s… that led to the collapse of Jay Cooke & Co., when they were unable to market millions in Northern Pacific Railway bonds in Sept. 1873… Panic of 1873). IT
The preceding list is just the tip of the iceberg, with respect to how this cycle has evolved throughout US and world history… and how events triggered in one phase often reach fruition in the next and then shift events moving forward.
For example, in 1862 – 1863 – the Civil War and its after-effects led to a boom in railroad construction. As the pendulum swung way too far in the early-1870’s (much like the housing bubble & the beginning of its bursting in 2008 – 2009), the Sept. 1873 collapse of Jay Cooke & Co. – which previously planned on constructing a second cross-country railroad (the Northern Pacific Railway) – ushered in the Panic of 1873, depression of 1873 – 1879 and an even longer depression in parts of Europe… that lasted ~two decades.
A few phases later, the stock market peak and reversal lower – in 1929 – 1930 – led to a decade of social struggles and the rise of Hitler and others. During the ensuing phase, in 1940 – 1941 (11 years later), the US found itself entering WWII – a decision that soon broke the stock market out of its doldrums. There is much more…”
Late-2018 ushered in a pivotal time for Chinese equities, the Chinese currency (Yuan) and China/US relations, when decisive shifts were anticipated. The Yuan & Shanghai Composite bottomed, entering an upswing that could last into April/May ‘19. On a broader scale, China cycles continue to focus on a larger-magnitude paradigm shift projected to take hold in 2018 – 2021 – including intensifying economic and trade battles as this cycle plays out. Military battles are also an increasing possibility as the world nears 2021. Watch mid-2019 – mid-2020!
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.