KW Spring Overview
The brief description of the spring cycle phase of the Kondratieff Wave below is an excerpt from the first article in the Kondratieff Wave section on this site. It is important for us to become more acquainted with the features of this cycle phase now so that we can recognize for ourselves when conditions indicate that a sustainable transformation has begun. Since this cycle phase is more noted for its moderation, especially in its early stages, we will be seeking evidence of these subtle features that will mark the transformation.
We would expect these and other changes to accompany the shift:
A deceleration in the chaotic upheaval of winter’s wrath reflected in stabilization of stock prices, debt levels and bankruptcies.
More rational and sanguine behavior by market participants that now demand more transparency, are more risk-adverse, and work to more creative ends than before.
A gradual increase in business activity and employment that leads to increased consumer confidence shortly thereafter.
Moderate increases in asset and consumer prices that spur additional marginal cap ex spending by corporations that sense a more favorable environment for profits.
Increased cap ex investment yields the fruits of productivity gains through increased innovation and efficiency.
A gradual increase in credit expansion for consumers and businesses by banks and private capital.
Moderate stock price appreciation that reflects the forward-looking expectation of increased profits.
Wages and prices rise to create a new cycle of wealth prosperity.
You will notice that there are no dramatic events that will make your head spin, just steady and moderate progress in many areas. This cycle sets the foundation for more significant evolution later in the spring cycle as these changes are integrated into the new economy. Many poorly performing sectors and companies, large and small, are thoroughly overhauled or eliminated altogether. The energy, automotive, and banking industries are sure to endure their share of this brutal but necessary repatriation. We can look forward to the day when the excesses of these sectors are a thing of the past.
SPRING – Inflationary Growth Phase
A common premise among business cycle economists supposes inflation as an inevitable part of growth. Government becomes a passive participant in the inflation cycle. Growth begins from a depressed economic base and expands in an ever-increasing spiral. The interaction of the participants within the economy causes wealth, as represented by savings, and the production of capital equipment to be accumulated for the future. The expansion of production and affluence causes prices to rise, and the increased volume of goods requires a higher velocity of money, thus creating a higher price structure.
Historically, the growth phase requires 25 years to complete. During this time, unemployment falls, wages and productivity rise and prices remain relatively stable. The mood of the growth phase is one of accumulation and the desire for new product manufacture.
Accompanying growth is a shift in social demands. As wealth is accumulated and new innovation introduced great upheavals and displacements take place. The process of social unrest builds with growth culminating in massive shifts in the way work is defined and the role of the participants in society.