The Asset-Debt Macroeconomic system is deterministic and Its valuation growth and decay cycles are self-assembled in the most efficient manner and in highly ordered time-based fractal patterns.
The asset debt macroeconomic system’s two time based fractal patterns are a 3 phase cycle: x/2-2.5x/1.5-2.5x and a 4 phase cycle: x/2-2.5x/2-2.5/1.4-1.6x.
Cycle lengths are determined by absolute or average valuation nadirs for a given time unit. The exception is the third subcycle (fractal) of the 4 phase cycle where the peak or lower high valuation determines the third sub-cycle’s 2-2.5x time length. Longer term cycles of asset valuation growth and decay (yearly, quarterly, monthly) are created by credit and debt expansion followed by asset valuation decay via credit tightening and/or by bad debt liquidation/restructuring. Shorter time-based cycles (monthly, weekly, daily, hourly, minutely) self-assemble by saturation peak buying followed by saturation selling. The hallmark of long term second fractals (second sub-cycles) of 4 phase cycles is nonlinear devaluation and gapped lower low valuations. Shorter cycles are components of the longer cycles, and a 3 or 4 phase daily or weekly cycle may be at or near the the end of a longer (yearly) cycle with nonlinearity at the end of the 3rd or 4th sub cycles of the shorter 3 and 4 phase cycles, respectively.
The US Hegemony’s Great 4 Phase 1807 36/90/90/54 year :: x/2.5x/2.5x/1.5x Asset/Debt Macroeconomic Fractal Series
The US hegemony is undergoing a self assembly 4 phase 1807 36/90/90/54 year :: x/2.5x/2.5x/1.5x Asset Debt Macroeconomic Great Fractal Series ending in 2074 with nadir valuation lows in 1842/43, 1932, and 2074 and a 90 year third fractal high in November 2021. 1932 represented the end of the second subcycle of this 267 year 4 phase Great Fractal series with a 90% 1929 peak to nadir devaluation. The second fractal valuation nonlinearity decline was profound.
The 1982 Interpolated 13/31-33/31-33/18-20 year Fractal Series
From 1932 a three phase 10-11/21/21 year :: x/2x/2x series brought the asset-debt system to 1982.
In 1981 and 1982 interest rates were raised to 18-21% to control consumer based inflation. This resulted in significant business contraction with unemployment at 10 percent near the end of 1982. As interest rates dropped from their 1980-81 peaks, gains from previously held bonds entering equities offset any marked correction in equity valuations.
The 1982 first 13 year fractal spanned from 1982 to 1994 and was composed of a 3/7/5 year :: x/2-2.5x/1.6x 3 phase fractal series.
The 31-33 year second fractal contains two subseries. The first subseries was a 3/8/7 year fractal ending in 2009 containing credit expansions and collapses of the 2000 internet bubble and the 2007-8 housing bubble. The second series is more complicated with long periods of credit expansion and near zero interests and other QE programs punctuated with QT in 2018 and 2019. This was terminated with a Covid related unemployment spike to 13-14 %, which was offset by the greatest QE and money expansion program in history with free payments from the government that often exceeded working salaries. This excess money with supply disruptions caused consumer inflation.
From the nadir in 2009, the monthly fractal patterns for equities have been 5/13/10/7; 3/8/6; 8/17/17; 10/26/16; and 8/18/13 of ?13 all following the 4 phase and 3 phase fractal patterns.
6 May 2010 showed single day second fractal nonlinearity with the crash devaluation occurring during month 11 between month 10 and 13: 2x and 2.5x of the 13 month second fractal with a March 2009 base first fractal of 5 months. This daily second fractal crash was similar to the 19 October 1987 crash occurring at month 26 with a base fractal of 11 months. This one crashes can be seen on daily charts covering 40 years.
The March 2020 monthly fractal series has been under an umbrella of both extraordinary credit expansion by the central bank resulting in double digit monthly consumer inflation followed by an extraordinary acceleration in Fed Funds rate increases. The latter decreased the paper value of US debt instruments held by banks by 600 billion dollars and likely by several hundred billion of held corporate bonds and have precipitated a banking crises.
What are the similarities between the inflationary situation in 1980-82 and the end 2021-23?
In the ten to fifteen years following 1980 1500 commercial and savings banks and 1200 savings and loans failed, representing about 30% of all institutions. Bad real estate loans on overvalued property were the principal cause. . The total US debt to GDP in 1980 was about 180% whereas today it is about 360% with federal debt having grown from 30 to 120% GDP. Because of the increase federal debt to GDP ratio, bank holdings of US debt (and insolvent corporate bonds) is a significantly greater problem than 1980. Zombie corporations unable to pay the interest on their outstanding debt have assumed a position similar to the 1980’s savings and loans holdings of overvalued real estate,
Banking failures which were part of the post 1980 asset debt macroeconomic scenario with interest rate hikes affecting loans on overvalued real estate have started in an explosive fashion in 2023 affecting ‘overvalued’ bonds and other overvalued asset classes. Valuations have been dependent upon easy credit and excessively low interest rates that have encouraged speculation and discouraged savings.
The fractal anatomy of the Wilshire’s self assembly from its 12 October 2022 average valuation low to a 29 March 2023 nonlinear final low (or major low)
A potential x/2-2.5x/1.6x :: March 2020 8/18/13 of 13 month fractal series would be a proportional replica of the preceding 10/26/16 month 3 phase fractal series. The final 13 month (third fractal) is composed of a 3/6/6 month 3 phase fractal series correlating to a 10/23/23 of 24 week fractal series. The final 24 weekly series starts with the low in October 2022 and is composed of 4/9/9/5 of 6 week 4 phase x/2-2.5x/2-2.5x/1.5x series.
From the Wilshire’s average daily low valuation on 12 October 2022, the 4/9/9/6 weeks series corresponds to a 17/38/40/25 day series with day 38 of the second fractal representing the average low valuation on 28 December 2022. The 40 day third fractal lower high valuation occurred on 24 February 23 rest in the mid portion of lower high peaks on 15 Feb and 6 March. The 25 day fourth fractal is composed of a 5/10/12 day decay fractal series ending on 30 March,
Will a nonlinear devaluation occur near the end of this 17/38/40/25 day fractal series which is contained within the 1994’s 31-33 year second fractal terminal 2x-2.5x window of 26- 33 years of the 13 year x 1982 first fractal base?
Time will tell.
24 March 2023 0114 EST addendum: Thoughts on 29 March 2023 as a final low:
The highest ever global asset valuations of 2021 and 2022 were based on the highest ever global total debt to GDP ratios and the lower interest rates ever. Confidence in banks have been decimated by liquidity problems secondary to real and paper losses in bank-held bond valuations caused by central banks’ QE/QT policy shifts to combat inflation. These factors are the direct cause of the coming nonlinear valuation collapse in world equities, commodities, crypto’s, and gold.
The Bank of Shanghai is undergoing a deteriorating fractal pattern of 9/23/23/13 months; of which the terminal 13 months is composed a declining pattern of 10/22/20 of 21- weeks of which the terminal 21 weeks consists of a final pattern of 16/38/30/22 days. This interpolated decay pattern suggests a final low on Thursday 30 March 2023.
For the Wilshire, a final Wednesday 30 March low valuation completes a 17/38/40/25 day pattern from the 12 October 2022 average low.
For US Ten Year Notes, March 31 will complete a 2 February US ten year treasuries pattern of 8/20/13 days with US ten year treasuries at less than 2.5%.
For bitcoin represented by Coinbase or GBTC, March 31 would complete an intermediate first and second fractal pattern of 42/89 days.