This essay will be a trip through time. It will be a grand economic sweep from ancient Jewish history to the present and on into the future of this century. The purpose of this bird’s eye view of history is to gain a better appreciation of world economic events from God’s perspective. We will begin with the ancient Hebrew economic system called the Jubilee. Then we will examine modern economic super-cycles, and then look at some similarities and contrasts to the Jubilee. Finally, we will peer into the future and try to predict where the next half-century will take us.
THE HEBREW JUBILEE
The Hebrew Jubilee was an economic system brought into existence by God as a means of achieving multiple ends. Its purposes were economic, political, social and spiritual in nature. The Old Testament record spends a lot of time on the subject of Sabbath years, the Jubilee, and Israel’s refusal to keep them both. The reason why the Israelites were dragged into slavery for exactly seventy years in Babylon is due to both the Jubilee and Sabbath year commands not being kept (Jeremiah 34:12-22, 2 Chronicles 36:20-21). The nation had made a covenant with God and failed to keep the agreement. The entire books of Isaiah, Jeremiah, Ezekiel and Daniel refer to events brought on by Israel’s refusal to keep this economic, social and religious agreement with God.
“Count off seven Sabbaths of years, seven times seven years, so that the seven Sabbaths of years amount to a period of forty nine years. Then have the trumpet sound everywhere on the tenth day of the seventh month. On the Day of Atonement sound the trumpet throughout your land. Consecrate the fiftieth year and proclaim liberty throughout the land to all its inhabitants. It shall be a Jubilee for you. Each one of you is to return to his family property and each to his own clan. The fiftieth year shall be a Jubilee for you. Do not sow and do not reap what grows of itself, or harvest the untended vines. For it shall be a Jubilee and is to be holy for you; eat only what is taken directly from the fields.
“In this year of jubilee, everyone is to return to his own property. If you sell land to one of your countrymen, or buy any from him, do not take advantage of each other. You are to buy from your countrymen on the basis of the number of years left for harvesting crops. When the years are many, you are to increase the price, and when the years are few, you are to decrease the price, because what he is really selling you is the number of crops. Do not take advantage of each other, but fear your God. I am the Lord your God.
“Follow my decrees and be careful to obey my laws, and you will live safely in the land. Then the land will yield its fruit, and you will eat your fill and live there in safety. You may ask, “What will we eat in the seventh year if we do not plant or harvest our crops?” I will send you such a blessing in the sixth year that the land will yield enough for three years. While you are planting during the eighth year, you will eat from the old crop and will continue to eat from it until the harvest of the ninth year comes in.
“The land must not be sold permanently, because the land is mine and you are but aliens and my tenants. Throughout the country that you hold as a possession, you must provide for the redemption of the land.”
“At the end of every seven years you must cancel debts…”
WHY STUDY THE JUBILEE?
In the very first pronouncement of His ministry, just after His 40 days of fasting, Jesus declares the spiritual fulfilment of the Jubilee to be the purpose of His mission. His statement in Luke 4:14-21, includes the term “The year of the Lords favour”. This term refers directly to the fiftieth year of the Hebrew Jubilee economic system when a great social levelling took place (Isaiah 61:1-2). Jesus was ushering in a spiritual Jubilee for the rest of history for anyone who would accept His offer of freedom from spiritual slavery. There would now be eternal rest for our spirit (Matthew 11:28), forgiveness of spiritual debts (Matthew 6:12), the return of our souls to their rightful owner (Revelation 5:9) and liberty from the slavery of sin (Romans 6:6). This new spiritual Jubilee corrected the greatest injustice in the universe and the souring of history from the time of Adam’s fall. Adam and Eve had sold humanity into spiritual slavery through their rebellion. Jesus’ mission was to restore our freedom to walk with God once again. Paul addresses this theme again in Hebrews 4:1. The ancient Jubilee is the prism through which we must view the sunlight of salvation in order to see its beautiful rainbow.
THE JUBILEE AS AN ECONOMIC SYSTEM
The Jubilee system was brilliant economic theory, though there is no evidence that the Hebrews ever kept the Jubilee so it remains theory today. On the other hand, the economic and social principles contained in the Jubilee provide us with wisdom that can be applied to our own circumstances. It contained four main elements:
1. Rest for the soil, and rest from work every seven years and for two years every 50th year at the Jubilee (Leviticus 25:1-13).
2. Reversion of property to its original owners, who, through poverty may have had to sell it sometime during the fifty-year cycle (Leviticus 25:14-17).
3. The freeing from slavery of those citizens who, through poverty or otherwise, had to sell themselves into bondage to their fellow Hebrews (Leviticus 25:39-41).
4. The cancellation of all financial debts (Deuteronomy 15:1-11).
The whole idea of the Jubilee was to introduce a fair and equitable economic system that, at the same time, beautifully reflected the covenant relationship between God and Israel. In the Sabbath year which was year fifty of the cycle, the whole community forgave each other their debts. There is a part of the human heart that loves to control other humans, and debt is one of the prime mechanisms for this control (Matthew 18:23-35). The Jubilee returned all citizens to being in debt only to their creator. Similarly, if they fell into slavery, everyone had an inheritance waiting at the fiftieth year. This reflects the inheritance that awaits people loyal to God upon their death (1 Peter 1:3-4). The reversion of property ownership every fifty years tangibly reminded Israel that God is the ultimate owner of all things. The instruction to rest likewise prodded the Israelites to remember their escape from Egypt (Deuteronomy 5:12-15). God astutely used these economic events to describe spiritual reality. Everywhere the Israelites turned, they saw the hand and mercy of God.
The main aim of the Jubilee, therefore, was to promote the knowledge of God and true human history (Deuteronomy 14: 4). God redeemed Israel from the bondage of Egypt to be his peculiar people. He was not going to allow any one to take his title as Lord over those whom he owned. The Jubilee also conveyed, in economic form, the message of grace for a suffering humanity, bringing freedom to the captive and rest to the weary as well as to the earth. This made the year of Jubilee the ideal symbol of the Messianic year of grace (Isaiah 62:1). This theme of divine ownership, redemption and grace reflected in economics is also the very purpose of these essays!
The Jubilee year also beautifully conveyed the message of creation returning to its original condition. The Jubilee was a symbolic return to Eden, to the time before the creation was cursed (Genesis 3:19). The nation would so prosper through its outward obedience to God’s decree that every seven years they could return to the “garden” of rest for a whole year. The Jubilee also looks forward to a day when the whole creation, which groans and travails in pain together until now, shall be restored into the liberty of the sons of God (Romans 8:18-23). This last passage implies that one of the blessings of Christianity would be a reversal of the curse through the vehicle of sustainable economic growth. Once again, God uses the language of economic prosperity to demonstrate to the world the benefits that belong to those who obey His decrees today.
Consider the moral, economic and social advantages that would have accrued to the Hebrew economy from the observance of the Jubilee:
1. It would prevent the accumulation of land by ruling elites at the expense of the community at large.
2. It would render it impossible for any one to spend an entire lifetime in absolute poverty, since every one had hereditary land, which would be returned to them in the Jubilee year.
3. It would prevent the development of extreme wealth and poverty. These extremes allow power, instead of grace, to dominate society.
4. It would utterly do away with economic slavery on a periodic basis.
5. It would provide a fresh opportunity to secure financial freedom for those who had been reduced to poverty.
If a modern economic system could achieve just a fraction of these social and economic advantages, it would be a staggering achievement.
HOW CAN THE JUBILEE HELP US TODAY?
It is no accident that the current worldwide push for debt relief for the world’s poorest countries is called “The Jubilee Campaign”. It is named after the Hebrew Jubilee. One of the positive consequences of the seven-year limit on debt for the ancient Hebrews was the opportunity for poorer citizens to work their way free of financial obligations (Deuteronomy 15:1). Foolish or excessively greedy citizens were not the eternal victims of their own shortsighted thinking (Proverbs 22:7).
Should this principle be a recommendation to individual believers in a modern economy? Should Christian leaders teach such a debt limit in their churches? Could such a debt limit be possible in today’s global marketplace? Would God bless those who chose to go down this road? Each Christian leader must consider these awkward questions carefully.
Control of Monopolies
The Jubilee economy controlled the drift toward monopolistic ownership of the means of production which was land. A successful citizen was free to express their wealth only through their private home (Leviticus 25:29). Because of the neglect of the Jubilee, large estates did later develop in Israel during the reign of Hezekiah (Isaiah 5:8, Micah 2:2). The creation of these types of large estates was a key reason for the size of the slave trade of the Roman Empire, the Caribbean and the American South. This unique Hebrew economic system resulted in a relatively classless society with no permanent slaves.
One of the first goals of Biblical economics should be a society where every citizen feels they have the ability to prosper if they work hard for themselves and their family is free from oppression by monopolies. An irony of history is the love of monopoly power within the church itself. This can be seen in the rise of medieval church power structures, controlling access to the bible during the Middle Ages through reading it in latin, the limited access to the pulpit in the modern church and the structure of professional priests and pastors. The very institution that is meant to stand on the side of the oppressed and speak out on their behalf against the abuse of power so often abuses power itself (Proverbs 22:16, Zechariah 7:9-10). When the church gets its own house in order it will again become a prophetic voice to the economic institutions of the nation.
Protection of Liberties
Spiritual freedom is the foundation of all other freedoms. The Protestant Reformation is testimony to this truth. Social, political, economic and scientific progress developed rapidly after the Wesleyan revivals turned a backslidden England into a model of Godliness. Economic freedom and progress is therefore a long-term product of spiritual freedom (Exodus 23:25, Malachi 3:10, Matthew 6:33). Likewise, Ethical and economic rebellion follows spiritual rebellion and creates the conditions for long-term economic decline (Deuteronomy 28:1-68). Debt takes away freedom. Poverty takes away freedom. Welfare dependency takes away freedom and creates a slave mentality. Excessive taxation takes away freedom. Corruption takes away freedom. Currency manipulation takes away freedom. On the other hand, access to education creates freedom. Aversion to debt creates freedom on both a personal and national scale (Deuteronomy 28:12). Increased saving creates freedom. Private ownership of productive resources creates freedom. The Jubilee system wonderfully connected economics and freedom.
It is no accident that the USA used the weapon of debt to entrap and subdue Third World governments during the 1970’s and 1980’s. Debt is a powerful weapon of personal and international control. A Biblical economic system will make personal and national debt limitation one of its top priorities.
Control of Inflation
Inflation is an increase in prices caused by either a shortage in supply of goods or manipulation of the currency. In ancient Israel, the supply and price of land was determined by the number of crops remaining before the Jubilee began. Thus, the chief means of price speculation was limited. The currency of the day was either gold or silver and the use of these precious metals helped control currency manipulation.
Nevertheless, currency inflators still operated through false weights and measures (Deuteronomy 25:15), by mixing base metals (dross) with gold and silver (Isaiah 1:22-23), and through the ancient art of coin clipping. However, at least gold and silver were naturally scarce and attempts to debase the currency were limited. The modern practice of creating money from nothing by the government-sanctioned fractional reserve banking system could never have existed in the wildest imagination of any ancient thief. Consider the words of the most famous economist of the Twentieth Century, John Maynard Keyenes:
“By a process of inflation governments can confiscate, secretly and unobserved, an important part of the wealth of their people. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some…The process engages all of the hidden forces of economic law on the side of destruction and does it in a manner which not one in a million is able to diagnose.”
What was once the province of back yard thieves playing with a single gold or silver coin is now the pleasure of governments who play with the value of every dollar in circulation.
THE KONDRATIEFF LONG WAVE
Humans live by the cycles of life. We all travel through a daily cycle, a weekly cycle, a lunar cycle, a seasonal cycle and a yearly solar cycle. Economists regularly discuss the eight to eleven year economic cycle. Politicians discuss the election cycle. The ancient Hebrew economic cycle lasted exactly fifty years. Is there any echo of this fifty-year cycle still in existence today? If the answer is yes, then it is a powerful indication of the divine origin of the wisdom embedded in Leviticus and the need to look seriously at that wisdom.
The first modern economist to discover the existence of long-wave cycles in international economics was Nikoli Dmitrievich Kondratieff. Kondratieff was a Russian economist, famous for drafting Russia’s first five-year plan under Communism. Kondratieff is far more famous now for the discovery of regular half-century long economic waves in European economic history. These days his discovery is called the “Kondratieff Wave”.
What Kondratieff discovered was the existence of a 45-60 year cycle of boom and bust in the capitalist countries of England, the United States, France and Germany. It went back as far as he could find figures and covered a broad range of economic indicators such as commodities, wages, foreign trade and interest rates. He found that these cycles occurred simultaneously in all four countries. Kondratieff also found that capitalist countries inevitably bounced back from the depths of each long wave. Kondratieff died young and never personally received any credit for his startling discovery. For his opposition to Stalin’s approach to collective agriculture, Kondratieff spent his last days in a gulag and died in 1938.
Many others have researched the Kondratieff wave since it was discovered. Lord Beveridge studied continental wheat prices from 1500AD and found a cycle that averaged 54 years. Edward Dewey studied English wheat prices from 1260AD and found the cycle averaged 54 years right back to that point. Many European intellectuals have looked at the Kondratieff wave in the last part of the Twentieth Century. They include J. Goldstein, P. Jourdon and G Modelski. In the United States, the Kondratieff wave is most intimately associated with the work of Professor J Forrester from the Massachusetts Institute of Technology. Typically, perhaps, the Europeans have studied the Kondratieff wave in terms of its cycles of war. Forrester, the American, has found the cycles to be about over-investment in capital spending followed by under investment in capital spending. They are both major aspects of the long wave cycle.
The Kondratieff long wave economic cycle has been found to have four distinct phases. The inflationary phase launches the cycle. Prices rise with the optimistic expansion of the economy in the decades following a depression. The summer phase sees the emergence of stagflation (an inflationary era without a corresponding increase in demand and employment) as the limits of expansion are reached. Deflation emerges in the Kondratieff autumn as the consequences of debt build-up begin to be unwound. Depression characterises the Kondratieff winter, where all weak debt is mercilessly wiped out and the economy is cleansed from the economic excesses of the previous 50-60 years.
The Cycle Since the Late 1700’s
The rise of the first modern international Kondratieff cycle coincides with the rise of the industrial revolution from 1780 and rises until about 1816. With the onset of the Napoleonic wars, trade levelled, demand dropped and the long wave peaked. The period from 1820 through to the end of the first wave was almost war free in Europe. Commodity inflation characterised the long wave upswing, while commodity deflation characterised the downswing. This is typical of all long waves.
The second long wave began around the 1850’s with the discovery of gold on several continents. Gold was still seen as money back in those days, and with more gold, economic activity started to take off again. Investment and speculation increased both in Europe and in many colonial outposts. During this time developments in telecommunications, railways and shipping began the process of stitching the world together into a single economy. Technical innovation and European demand for raw materials turned the upswing of the second cycle into the now famous “Victorian era”. It was described as “The Long Boom” in colonial Australia. Wholesale prices peaked in the late 1870’s and bottomed sharply in the 1890’s with a quite vicious depression.
The world struggled out of that depression in the first decade of the new century. World economic production accelerated into the First World War. For the first time in history, a truly global market had emerged so economic and political linkages and conflicts became global in scale. The outbreak of war in 1914 fed this global industrial machine unlike any other war in history. For the first time the supply of arms outstripped the supply of men. Tens of millions died. The USA, insulated from most of the economic effects of the war, emerged as the world’s chief creditor and producer. This was the beginning of a shift in global economic power from Europe to America. After the war, the newly created United States Federal Reserve (Fed) used its credit creation powers to push the USA into an artificial boom that lasted until the end of the 1920’s. When the Fed abandoned its easy money policy in early 1929, it was only a matter of time before an economic bust set in. The Great Depression of the 1930’s was an artificially severe Kondratieff winter. Stiff American tariff protection and international retaliation, government confiscation of gold and massive income tax increases all led to a halving of world trade. The unwinding of the Kondratieff wave once again deflated prices for most products and commodities during the 1930’s. The social unrest of this era led many countries, such as Germany and Spain, into political dictatorships. Germany’s dictator, Hitler, plunged Europe into war again in the 1940’s.
Because the United States now accounts for 23% of global economic activity, the unfolding of these latest two Kondratieff waves is being considerably influenced by the economic leadership and failures of this one country. With the outbreak of the Second World War, credit expansion once again took off as governments debt-financed their war efforts. In the post war era, industrial production and world trade soared into the 1970’s. Inflation peaked around 1980 after every nation abandoned the gold standard in 1971. Gold lept from US$35 an ounce to US$850 an ounce in that one decade. From 1969 until 1982 stock markets were sick, stagflation set in, oil shocks rocked advanced economies and most citizens in wealthy countries saw their purchasing power fall. The rise of this latest Kondratieff wave also saw continual battles around the world between capitalist America and the forces of Communism. The decline of the Kondratieff wave that should have taken place has been delayed by several decades due to the unrelenting ability of the fiat monetary system to expand the normal debt cycle into a debt super-cycle monster that now threatens to bring down the entire western economic system. Never before has the entire global financial system faced a Kondratieff winter having developed a pathological addiction to fiat debt.
The Kondratieff wave has several points of interest to us as Christian thinkers:
1. Firstly, it exists! This leaves us with tremendous respect for the original Jubilee cycle and its deliberate policy of debt reduction with time. Most commentators place the current cycle at around 54 years, with possibilities for extension due to loose modern monetary policies. Therefore, we are still remarkably close to the original 50-year cycle.
2. It confirms our suspicions that debt accumulation is a prime problem in the modern long-wave economic cycle. The present system creates mountainous debt levels as the cycle unfolds. These enormous debts are swept away in a severe depression at the end of the cycle. Because of the now integrated nature of the global economy the next depression will bring untold misery upon the people of the entire world.
3. War and aggression seem to take place in the Kondratieff spring, when rich, overconfident countries like to flex their political muscle. Conflict eases during the Kondratieff autumn and winter.
4. World political hegemony and the Kondratieff wave are closely linked. Every few Kondratieff waves the dominant world power suffers an economic and political tsunami, and gives way to the next world super power in a cycle of around 100 years.
WHERE ARE WE NOW?
As always, large scale events are much easier to identify in the past then in the present. At present it seems increasingly likely that we are in a death spiral down through the Kondratieff autumn and will enter the Kondratieff winter sometime this decade. The prime purpose of the Kondratieff winter is to eliminate the excess debt that has been accumulated toward the end of the economic super-cycle. Consider the following:
1. The conversion of the world’s currencies form being gold backed to freely floating fiat currencies in the early 1970’s has allowed this present Kondratieff cycle to be extended by several decades through the astronomical build up of debt and its artificial stimulation of economies. This situation is unprecedented.
3. The entry of China as the factory of the world has changed the economic pecking order and kept consumer prices lower than otherwise would be the case, allowing consumers around the world one last debt-laden splurge before the inevitable economic winter sets in.
2. However, the huge debt levels of many western individuals, corporate, municipalities and governments have now snowballed to the point where extra debt no longer stimulates economic demand.
4. Consumer debt troubles from the last four decades morphed into the corporate debt problems of the global financial crisis (GFC) from 2000 to 2010. The corporate debt spiral of the GFC has now morphed into a sovereign debt time-bomb slowly engulfing Europe and the United States, which represent roughly 45% of the global economy.
6. If current trends continue, by 2015 the USA government will be paying 20% of all tax receipts just in interest on its debt. They are now taking on new debt just to pay the interest. Their deficit for 2009 alone was equal to one third of all the gold ever mined in the history of the planet. This trend is unsustainable and will lead to the world’s greatest default ever. This will spell the end for the US$ as the world’s reserve currency and the end of the American empire.
We are therefore undoubtedly in the autumn of the Kondratieff cycle and peering into the abyss. In contrast to the Hebrew Jubilee, with debt reducing as they moved closer to the end of their economic super-cycle, our Kondratieff system, combined with universal fiat currencies, has seen the biggest build-up of debt in the history of the planet.
Professor J Forrester’s extensive computer modelling at MIT, which he has labelled “System Dynamics”, has led him to the conclusion that an aggressively liberal monetary policy can extend the Kondratieff wave for up to twenty years. He believes that this is what has happened from 1990 to 2010. He suggests the global economy is at the same point that Japan was in 1990 when excessive credit creation led to extremes in real estate and stock valuations, followed by at least two decades of economic stagnation.
So, it looks like we are about to receive at least a decade of financial medicine for the excesses of the last Kondratieff wave. How does the Kondratieff winter eliminate the debt bubble? The answer comes in a single word: bankruptcy. We are still to experience a very necessary and ugly global depression.
PEERING INTO THE GLOBAL FUTURE
The political and economic events of the last ten years are radically different from those of the previous two decades. Anyone who keeps an eye on international events knows something big is unfolding globally. The now five year long global financial crisis is beginning to shed some light on where the world might be heading in the next two decades. The following is a list of the issues the world will face in the next generation.
The Debt Time Bomb
As just mentioned, debt levels are dangerously high and climbing fast. Global debt is growing by over US$6 trillion annually and has now reached $200 trillion. The American Federal Government deficit and the American trade deficit alone, consumes $2 trillion of that total. Under the fiat monetary system debt has to double every 15 years or so or the whole system will collapse due to the siphoning of money from the system with the repaying of existing debt and interest paid on that debt. Where will the next $200 trillion of debt come from? European household debt levels are at 80-150% of income. In Japan, the figure is 110% of household income, while the figure for the USA is 100%. The USA owes a total of approximately US$60 trillion from both the public and private sectors in existing debt and unfunded future liabilities. Both the USA and Australia now spend 6% more than they produce annually. Derivative obligations (futures contracts) now exceed US$600 trillion globally. American retirement pension obligations now total some US$30 trillion and are totally unfunded.
These figures are alarming and point very clearly to the wisdom of the Jubilee system of debt restrictions. There are two ways to pay back this current mountain of debt. A flood of inflated currency could be used to pay it. Alternatively, the debt could be wiped out through bankruptcy in a global depression. History tells us we are likely to see both, and in that order. During a recession or depression, more money leaves the global economy than enters it. If you were a politician would you opt for inflating the currency or initiating a global depression? The inflation option wins every time! Armed with the global reserve currency, debt levels of US$60 trillion, and social security obligations of US$30 trillion, it is absolutely certain that America will try to inflate away its obligations and responsibilities. This explains why the American money growth rate, as measured by their M3 publications, has been growing at over 10% a year since 2000 and spiked upward dramatically during 2007-9.
The derivatives time bomb alone has brought disaster. The global economy came very close to a meltdown in 2008 when Lehman Brothers, a derivatives trader, collapsed in the USA. An extreme level of money injection by the Federal Reserve was the only factor between that event and a domino effect sweeping the global economy that year.
There are all sorts of dangerous debt imbalances hanging over the global economy at present. Their abrupt resolution in a Kondratieff winter depression will have profound effects on all the people of the globe. For the first time in history the entire planet is connected to the monetary economic system.
The Rise of China
As mentioned, every two or three Kondratieff waves there seems to be a changing of the superpower pecking-order. Are we in the early stages of the next shift? China is repeating the economic development miracle that Japan produced from 1950 to 1990. This means China has at least twenty years of robust growth ahead of it, regardless of booms and busts in other parts of the world. This growth has already put a bomb under commodity prices. China is now the world’s largest consumer of copper, tin, nickel, rubber, wool and coal. In nearly every other commodity, it is a top five consumer. At one stage Shanghai alone was constructing the equivalent of all the high rise buildings in New York every two years!
It is instructive to note that Christianity in America is in decline but on the rise in China. This was also the case when England gave the superpower batten to America one hundred years ago. It was also the case when Europe gave the batten to England a century before that. China now has the world’s largest community of Christians and their spiritual strength and determination is legendary. They will have a profound effect on both global economics and church development for the rest of this century. Sometime in the future the Twenty First Century will probably be called “The Chinese Century”. Remember, spiritual freedom is the foundation of all other freedoms. India is following in the shadow of China, with high levels of economic growth and an abundance of English speaking smart young educated people who can work for low wages. These two countries will be the superpowers of this century and both are experiencing significant growth in Christianity.
Western Population Collapse
Sixty countries around the world no longer reproduce their own populations. The main cause of this is abortion. In Australia for example, 40% of all pregnancies in are terminated. The decline is predominately Western countries, with the inclusion of Russia, Japan and China. Western countries continue to grow only because they steal skilled workers from developing countries. Many of these sixty countries face the outright collapse of their population in the next fifty years if present projections are accurate. A turning away from Christianity last century led to sky rocketing divorce rates. The next generation then turned its back on marriage and family, choosing a more selfish lifestyle. This development is now coming home to bite. European governments attempted to solve their population time bomb by importing Muslim workers from Africa and the Middle East. The results have been less than positive and they now have a bomb of a different sort to worry about!
The long-term consequences of this trend will be the decline of Western civilization, values, institutions and power. The days of the world being ruled by aging white men of European decent in positions of global corporate and political supremacy are numbered. Their proportion of the world’s population could decline to around 12% by the end of this century.
Commodity Inflation, Asset Deflation
The last twenty-five years have seen a steady increase in the value of paper assets on a massive scale. Bonds, stocks, insurance policies, derivatives, mutual funds, superannuation accounts and other financial instruments have steadily grown in value as inflation moderated from 1980 to 2006, providing greater returns and increasing asset values. With the turning of the corner into an era of inflation this decade, financial assets are beginning to stagnate and deflate in value. In an era of inflation, hard assets are king. That is why gold prices have risen dramatically since 2000. Gold is the world’s best barometer of inflation expectations. Most mineral commodities have also experienced a quantum leap in value in the last ten years, at least in American dollars. These prices are here to stay and will work their way through the economic “food chain” into increased consumer prices in coming years.
There have been five great commodity booms over the last 200 years with the last running from 1963 to 1980. It was also the shortest boom, at seventeen years. The sixth began in 2000.
There are several points that come out of this discussion that need to be repeated because of their utmost importance.
Firstly, debt is a scourge to a person and a nation. It is a temptation of the human heart to spend what you does not own, thereby mortgaging the future of your family and nation. Borrowed money is unearned money. There is a different emotional impact when spending earned money and unearned money, regardless of whether you are a household or a government. Debt is economic slavery. Wherever possible, we must avoid debt. The Jubilee economic system spells this principle out, loud and clear. We are fools not to heed its warning. The near term future will bear this out. This is why the Bible speaks negatively about debt around 73 times. Debt is one of the most powerful representations of the spiritual condition humanity is in.
Second, social and political freedoms are both closely connected to economic freedom. The Jubilee protected social freedoms through economic policy. There was a decentralising of power on a periodic basis. Centralisation of economic power leads to a loss of freedom over time. Because of the human will to personal power, all leaders suffer the constant temptation to use others to feather their own economic nest. Perhaps the event of an economic superpower being toppled every century or so is poetic justice. Their national lust for wealth and power sow the very seeds of their downfall. God is not mocked. Whether a government or individual, pride comes before a fall.
The Kondratieff wave is an inverted Jubilee economic super-cycle. Its repetition is testimony to the accuracy of the Bible and the wisdom of God. The future will see all the same mistakes of the past. History has a habit of repeating itself, simply because there are new actors on the stage with the same sinful heart condition. If we follow God’s wisdom, we will prosper through future Kondratieff long waves. If a people ignore that wisdom, they will suffer.
If you have not already done so, take the time now to read the seminars under the “Financial Freedom” and “Financial Market” tabs so that you can learn how to set yourself apart from the debt crowd and prepare for the difficult times ahead.