Dear Fred,
I am writing in response to your question, “Should I buy a bigger house now so that my adult children will have a
place to stay when they come home to visit because interest rates are so attractive?”
As you well know there has always been trouble in the world. I have studied cycles in history and as they state in the book, “The Fourth Turning” history is not linear but more like a vertically extended slinky. While history advances, it does so in cycles that run approximately 80 to 100 years per cycle (4 generations). The Russian economist Kondratiev in the 1920’s came up with the K wave cycle of 50 or so years. Stalin didn’t approve of his work since it did not predict the end of capitalism and had him killed by firing squad in 1938 but that is another topic. Then there are cycles within cycles such as Martin Armstrong’s work exemplifies based on a multiple of pi. The Old Testament also talks about 7 year cycles and the 7 times 7 year cycle that results in the 50 year jubilee. The debt forgiveness during the jubilee is necessary to wash out the excess debt buildup in the system. (If you have ever played a very long game of monopoly the banker ALWAYS wins in the end—never forget this when trying to outsmart the bank.)
I feel that we are currently entering into a long term economic winter (20-25 years in duration) as a result of the build up in debt that is currently overwhelming the system. We have tried everything to put it off including changing the bankruptcy laws that make it harder to enter into bankruptcy. We have lowered interest rates in order to allow us to take on and service even more debt. The world’s central banks are entering into “negative interest rates” in order to encourage consumer spending and discourage savings. Competitive currency devaluations also tend to discourage savings and encourage spending. People tend to forget that Capitalism at its very heart is about accumulating capital through savings to purchase the economic tools (backhoes vs shovels; factories vs garage industries; trucks vs draft wagons) that allow the overall standard of living to increase for all of society. When Capital is destroyed, squandered on silly public works programs (bridges to nowhere) or misspent on consumer items then there is less to invest in the very powerful capital intensive tools that allow us all to live better through an increased standard of living for all.
Bill Bonner writes that (continue reading)