On 5 Nov 2021 The US Composite Wilshire peaked at 48809.39 trillion dollars. This was the 90th year of a US Great 90 year Third Fractal starting in 1932 and completing a 1807 maximum 36/90/90 year :: x/2.5x/2.5x self-assembly asset-debt macroeconomic fractal growth series. Since 1982 higher high equities valuations have been propelled by cascading lower interest rates and since 2008, by near zero prime rates and outright central bank money creation to monetize the 2005-2008 toxic-asset-debt bubble and to later monetize the 15-20 % unemployment rate created by the pandemic.
Global central banks’ policies have averted a 1930’s type of depression. Since 2020 too low of interest rates associated with mortgage backed securities for too long of time have created Western property and equity super bubbles with 30-40% housing appreciation over two year’s time, transient dr/dt record growth of equity valuations, and ongoing continuing higher and higher commodity inflation with a 60 percent relative divergence of lower equity prices and higher commodity prices since the November 2021 Wilshire high. The higher commodity prices are impactful and have left the majority of consumers on the thinest of viabilty edges. And in principally consumer-based economies, this inflation is resticting purchases and resulting in lower company profit margins and relatively high inventories – the opposite of what is expected in a supply-line limited system. In response to the historical increases in consumer inflation central banks have allowed market-based increases in interest rates of sovereign debt instruments which have far outpaced the central bank prime rate increases. The former rate increases have resulted in 30 year mortgages rates above peak rates for the last 12 years. These rates have reduced the population capable of buying an availble over-priced house to a historically small proportion.
Western countries are faced with the dual prospects of increasing commodity inflation and 15-20 trillion losses in equities. Increasing energy cost and grain shortages secondary to Russia’s illegal action will continue global inflationary pressures.
China, the world’s new manufacturing Hegemony, has unstable and mighty fraility in its 1989-equivalent Japan-like property supper bubble with a 40 times asset valuation to annual income ratio.
Evergrande’s valuation collapse and the Bank of Shanghai valuation collapse are congruent. Expect a transient nonlinear decline for a global equities and commodities at the x/2.5x :: March 2020 33/83 week first and second fractal time units.
Next: Ark Restaurant: A microcosm of America’s service- sector- dependent Asset-Debt Macroeconomic Asset-Debt System
2 thoughts on “The Global Asset-Debt Macroeconomic System: The US Hegemonic 1807 36/90/90/54 year :: x/2.5x/2.5x/1.5y Fractal Series …”
The End of May 2022 83rd week Second Fractal crash:
From the March 2020 lows with a 33 week base (x), the maximum 83 week (2.5x) second fractal length will transpire this week with expected transitional nonlinear decreases in equities, crypto’s, the CRB, and treasuries (transient lower interest rates).
This correlates with expected devaluation lows in Evergrande, the Bank of Shanghai, the Shanghai Composite, the Shanghai Property Index, and the Hangseng Index.
For the French CAC representive of EuroZone equities Friday 27 May 2022 represents the 25th third fractal day of a 3/7/2022 10/25/25 day :: y/2.5y/2.5y decay fractal series.
Zillow, Evergrande, the Shanghai property index, and ARK R
Is the Shanghai property index: a 1929 daily fractal decay series replay?
The global asset-debt macroeconomy’s superbubble is its residential property valuations: prices are at ten times average annual earnings in the US and 40 times annual earnings in China. The CCP was responsible for the property bubble in China to create spectacular annual GDP increases and the Fed in the US to keep the macroeconomic system afloat with such high and increasing debt to GDP ratios. Both the CCP and the Fed waited too long. The CCP has reversed its policy through its 2021 restrictions on debt creation by Chinese building corporations and the Fed by its 2022 Ten Year Note freer market policy and hence, the derivative 30 year mortgage interest rates rising above 5%, evaporating the pool of potential US home buyers. Add inflation of consumer necessities and the buyer pool is further bubbled away – now with increased credit card borrowing for recent buyers to make ends meet. Zillow, representative of the Fed policy, is near its March 2020 low. The soon to be experienced nonlinear effect on the working people base of the macroeconomic system is like an incoming hurricane, or more analogously, a sizable incoming and impacting asteroid.
The Shanghai property index has a 1929 daily decay fractal series of 11/28/16 of 27-28 days and a 15/30 of 32 weeks first and second fractal series. Earlier today, Fitch lowered its ratings on Evergrande foreign bonds to basically a default status. The 33/83 weeks maximal March 2020 low first and second fractal series has been extended a few weeks as rising/persistent inflation and rising/persistent 30 year mortgage rates dislodge equity owners in a second fractal nonlinear ending.