Host of the Everything Financial Radio Show discusses two important topics.
Grand Rapids, MI -- (SBWIRE) -- 02/27/2013 -- When financial advisor Dennis Tubbergen isn't busy helping his own clients, you can find him writing his Moving Markets newsletter or interviewing a guest expert for his weekly radio show. Tubbergen spent a few days recently on his blog explaining inflation and deflation and how they relate to today's economy.
Tubbergen, who is an author, radio show host, and CEO of PLP Advisors, LLC, spends a lot of time giving his opinions on the economy in his weekly newsletter at
http://moving-markets.com and in his online financial blog. On February 20, 2013 his blog was titled Inflation - Deflation and History, Part One.
"We'll begin by discussing an economic theory that we believe is important to understanding where we are today economically," began Tubbergen. "We refer to the theory as the Economic Seasons Theory; however, it is more formally known as the Kondratieff Wave Theory. The theory is based on the belief that human nature is predictable."
According to Tubbergen, the decade was the 1920s. A Russian economist by the name of Nikolai Kondratieff was appointed by Russian ruler Joseph Stalin to study capitalism. As an opponent of capitalism, Stalin wanted Kondratieff to conclude that capitalism was simply a misguided experiment that could not succeed long term. Unfortunately for Kondratieff, he did not come to this conclusion. Instead, in his landmark work published in 1925 titled, The Major Economic Cycles, Kondratieff concluded that capitalist economies move in boom and bust cycles which are predictable.
"Stalin didn't like the results of Kondratieff's work, so Kondratieff was relegated to an existence in prison before facing a firing squad in 1938," explained Tubbergen. "Many of today's economists who have studied the work of Kondratieff have concluded, as Kondratieff did, that capitalist economies move in boom and bust cycles and that each of these predictable economic cycles can be broken down into four sub-cycles."
For the purposes of discussion, Tubbergen notes these cycles can be labeled as Spring, Summer, Autumn and Winter. Kondratieff and many modern-day economists have tracked these economic seasons, or sub-cycles, that have their roots in predictable human behavior all the way back to the beginning of the Industrial Revolution in the mid- to late-1700s.
Here are brief descriptions of each season and the characteristics of each one.
The Spring Cycle
During spring, an economy experiences a gradual increase in business and employment. Consumer confidence gradually increases. Consumer prices begin a gradual increase compared to levels seen during the previous cycle (the winter cycle). Stock prices rise and reach a peak at the end of the spring cycle. Interest rates begin to rise from historically low levels and credit gradually expands. At the beginning of the spring cycle, overall debt levels are low.
The Summer Cycle
During summer, an economy sees an increase in the money supply, which leads to inflation. Gold prices reach a significant peak at the end of the summer period. Interest rates rise rapidly and peak at the end of the summer season. Stocks are under pressure and decline through the period reaching a low at the end of the summer cycle.
The Autumn Cycle
During autumn, money is plentiful and gold prices fall, reaching a gold bear market low by the end of the autumn season. During autumn there is a massive stock bull market and much speculation. Financial fraud is prevalent and real estate prices rise significantly due to speculation. Debt levels are astronomical. Consumer confidence is at an all-time high due to high stock prices, high real estate prices and plentiful jobs.
The Winter Cycle
During winter, an economy experiences a crippling credit crisis and money becomes scarce. Financial institutions are in trouble. There are unprecedented bankruptcies at the personal, corporate and government levels. There is a credit crunch and interest rates rise. There is an international monetary crisis. There are pension funding problems and the price of gold and gold-related equities rise.
"Based on these descriptions, in which season would you say we currently find ourselves?" asked Tubbergen.
Tubbergen explains his view in this way:
- The most recent Spring Cycle occurred from 1949 to 1966.
- The most recent Summer Cycle occurred from 1967 to 1982.
- The most recent Autumn Cycle occurred from 1983 to 2000.
- The most recent Winter Cycle (in which we currently find ourselves) began in 2001.
"During an economic autumn season, debt accumulates until the system reaches its capacity for debt," concludes Tubbergen. "Then, once no more debt can be added to the system, the economic season changes from autumn to winter. During the economic winter season, debt must be purged from the system, which is a painful process as we'll soon see."
To read the blog in its entirety go to http://www.dennistubbergen.com and select his February 20, 2013 entry.
Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM. To hear his shows as a recorded podcast go to http://everythingfinancialradio.com.
About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at http://dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to www.moving-markets.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.