Posted Sunday, 21 August 2011 Source: GoldSeek.com
By David Knox Barker
Life without appreciation for irony in global financial, economic and political affairs would be challenging. God undoubtedly enjoys the irony at work in human action. Politicians promising government sponsored heaven on earth for decades have delivered the world into a global financial meltdown nightmare, and the cusp of another depression. All around the world, the politicians are scrambling for their political lives, and many their political souls, as the global system enters a long wave extinction event.
The final plunge of this long wave winter season is now underway. The international political economy, which has lost its moorings in individual accountability, responsibility and purpose, is breaking up. Socialism in all its forms, including the global banking system that is dependent on the government dole, is collapsing from the weight of its internal contradictions. Socialism is going through an extinction event in the final years of this long wave, receiving its just reward from the crushing long wave forces that it has magnified around the globe.
It occurred to me that many readers may not appreciate the irony in the title of the latest version of my book on global long wave cycles of prosperity and depression; Jubilee on Wall Street; An Optimistic Look at the Global Financial Crash. Clarification is required. The optimism is based on the forecast that the final crisis years in the latest global long wave depression will usher in radical global change, for the better. What the world is now entering is an event several times larger in scale than the 2008-2009 global financial disaster that was maybe an 8.0 on the cycle scale. The financial quake of 2012-2013 will be closer to a 13.0 event in comparison.
The good news is that the long wave extinction event now unfolding around the globe, which will clean the slate of failed socialist ideas, is setting the stage for a new global economy. The days of socialism are numbered. In Jubilee on Wall Street, the name given to this new system that will emerge from the chaos created by the politicians and their crony capitalist conspirators is The Great Republic. A brave new world is coming. It will be a new form of international free market capitalism. It will produce the greatest global boom in human history. Adam Smith coined the term of the Great Mercantile Republic in his still relevant 1789 book, The Wealth of Nations. He used the term to explain the international gold based monetary system. Gold was the accepted international currency of Smith’s Great Republic, and it is making a stunning comeback as the global economy, which compromised with socialism, descends into chaos.
In the event you have not noticed, digital gold currency (DGC) is rising fast as the solution to the tomfoolery of politicians that cannot manage a simple budget, and didn’t think the world would notice. Bad politics has forced central banks to attempt to cover the political folly by liquefying the doomed system built on political bribery and favors.
Sovereign and private DGC is now on the fast track. The Gold Swiss Franc (GSF) legislation recently introduced in Switzerland is the first proposed sovereign dual monetary system. This is the monetary system of the coming Great Republic. The Swiss are following in the footsteps of James Turk’s GoldMoney.com, a private DGC bank where Lloyd’s of London insures your DGC on deposit in London, Zurich or Hong Kong. Others will follow the Swiss lead, first in a trickle, and then in a global DGC driven monetary revolution.
Don’t get me wrong. The fiat currencies of governments are here to stay, but DGC will keep the politicians and therefore the fiat money in check after this long wave extinction event that will serve to terminate failed ideas and remove their funding by taxpayers. DGC will force politicians to do their job and manage limited government efficiently. DGC will provide investors and businesses a way of escape from the politicians that seek to destroy the money world with their thirst for collective power over individual productive purpose. The relentless demand from the politicians for more sacrifice and more revenues through taxes, fees, bribery and grand theft will be exchanged for a new global economy of empowered human purpose in action. In the words of Ayn Rand, “It only stands to reason that where there’s sacrifice, there’s someone collecting the sacrificial offerings. Where there’s service, there is someone being served. The man who speaks to you of sacrifice is speaking of slaves and masters, and intends to be the master.”
Regarding gold, Rand said, “Gold requires no government sanction.” Out of this long wave extinction event, DGC will be fundamental to the recreation of international free market capitalism. Politicians that can balance a checkbook and provide limited government that allows the unleashing of the potential of their citizen’s individual purpose will find their fiat currencies rewarded with inflows from DGC. When government fails to empower individual purpose and manage its budget, their fiat currency will be punished, with outflows into DGC. Politicians that do not get out of the way and let the private sector solve the world’s problems will be shown the door. The politicians and their crony capitalist comrades that do not understand limited government and productive human purpose are fast approaching the long wave extinction event. They should go peacefully.
The primary interest a market analyst has in studying the ebb and flow of political folly is the impact it has on financial market cycles. Forget the damage our political leaders have managed to inflict on us for a moment, and consider what the cycles are telling us about the future. The current business cycle is the final business cycle of this long wave. Based on recent economic data, this final business cycle of the long wave is rolling over into the double-dip recession that was fully expected.
The late great WD Gann and PQ Wall are renowned for their market cycle research and discoveries. The number 144 was central for both these market masters, but they used it in different ways. Few realize that PQ Wall made one of the greatest discoveries in the history of market cycle research. Using his cycle analysis methods, which involved dividing cycles by four and three, PQ Wall discovered that the 20-week trader’s cycle is effectively a long wave divided by 144, and is a miniature long wave.
WD Gann recognized the importance of the 3.5-year cycle more so that PQ, and applied it to much of his cycle research. When the 3.5-year “ideal” business cycle is combined with PQ Wall’s cycle division method, the result is powerful analytical cycle tools. If you divide the business cycle by nine, which is what PQ suggested you should do, but not recognizing the ideal length, you arrive at an approximate 20-week cycle. Using the “ideal” 3.5-year cycle you will find that the 20-week cycle is actually an “ideal” 141.9-days. In my 1995 book, The K Wave, the 20-week cycle was rechristened the Wall cycle, in honor of PQ Wall.
They say a picture is worth a thousand words, so how about two pictures. The S&P 500 and the German DAX charts are presented below. The new Market Cycle Dynamics (MCD) software, now available to the public, was the tool used to create these charts. The software is a quant busting security analysis tool, uncovering the important market turns generated by the computer programs run by the big banks, hedge funds and high frequency traders.
The Level 1 lows and highs are the most important long-term highs and lows identified in an index or security. They are the starting point for quant programming. Coming out of that March 16, 2011 low, the target bottom for a Wall cycle expected to run 141.9-days was August 4, 2011. The scale of the decline into the first week of August triggered overshoot, a term used by WD Gann, as key Fibonacci support targets were taken out. Specifically, the Level 1 76.4% target caved. These targets provide entry, exit and stop loss targets for investors and traders. The market then collapsed to lower support levels.
The decline in the German DAX into early August is particularly interesting and important. After falling through the 76.4% target, the DAX collapsed directly to the Level 1 golden ratio of 61.8% at 5542. After bouncing, that target is being tested again. This critical target needs to hold. The DAX closed just below this target on 8/19. It needs to get back above it next week. We all know Europe is in trouble, but they are due for a bounce. A further drop below this Level 1 golden ratio target signals the final leg of the global long wave field collapse is accelerating.
That June low in sentiment briefly obscured cycle analysis and remains troubling. Now we have a situation where the ideal target from the June low and the golden ratio of a Wall cycle from the August 9 low in the S&P 500 points to November 4, 2011. Put that target date on your calendar. It may be an important date in the current Wall cycle collapse, or some other cluster target in the natural laws that govern fields of human action. That date is a time window in human action that warrants watching. Play it safe.
It is important that investors and traders recognize that the above charts demonstrate human action field collapse in a relatively small Wall cycle. A long wave event is a much larger scale cycle than the Wall cycle. A long wave scales 144 times larger than a Wall cycle. Global markets are now entering Wall #6 of the final business cycle of the long wave. PQ Wall had a market cycle rule called third, last and weakest. What he proposed is that Wall #3, #6 and #9 are the weakest cycles. They will decline the hardest and the furthest. The decline into early August was the end of Wall #5. The current Wall #6 may well produce the greatest global market crash of this long wave cycle.
In short, Wall cycle #6 will usher in the final phase of this long wave collapse. Massive long wave change is coming to the global economy and financial markets. The old political and financial order is crumbling. The Great Republic will dawn as a new long wave spring season begins on the other side of this long wave disaster and extinction event of the failed ideas of socialism.
Speaking of market cycle forecasting, is it just me, or does anyone else find Chairman Bernanke’s forecast of zero rates into mid-2013 more than a little interesting? No Fed Chairman has ever made such a delayed forecast, with such profound global implications. The new Market Cycle Dynamics (MCD) software searches for market target clusters in the future that may be key market turning points.
Cycle projections by MCD are based on Fibonacci degrees of freedom in ideal cycles that are natural fields of human action. MCD is natural law for cycles. The next target in the long wave degrees of freedom radar is 7/28/2013, projected from the 1949 long wave start date. The long wave is the largest arc flying in from stage left. Maybe a market cycle analyst at the Fed downloaded a trial version of the Market Cycle Dynamics (MCD) software and gave it a spin. The chart below presents the mid-2013 cycle target cluster in time.
The final phase of the global long wave collapse will radically change the global financial and political system forever. It will be change for the better. The worst years of this long wave winter season, which lie directly ahead, will provide the impetus and opportunity for global change on a scale heretofore unimagined.
The global Jubilee long wave debt collapse has arrived. The international financial system is going to be purged of bad debts, overproduction, bad ideas and bad political apples in this long wave extinction event. Bid adieu to socialism.
The crisis the world is sailing into will trigger a new golden age and the next global long wave boom out of the coming long wave bottom. This is an ironic twist of events that few see coming. If the current crop of world leaders does not get government out of the way of the coming real and genuine international free market capitalism, the next ones will. It is not your typical post apocalyptic storyline, but out of this long wave extinction event for socialism, The Great Republic will dawn. You have a front row seat.
About David Knox Barker—Barker is the founder of LongWaveDynamics.com, and the publisher of The Long Wave Dynamics Letter. Barker is one of the world’s foremost experts on the economic long wave and stock market cycles. He is the author of Jubilee on Wall Street (2009), published earlier as The K Wave (1995) by McGraw-Hill. The last edition sold out as readers found Barkers predictions were spot on. He is a writer, inventor, technical market analyst and world-systems analyst. He has researched stock market cycles and written on the impact of the long wave on international financial markets and the international political economy for over twenty-five years. Barker expanded the original research of the legendary market analyst PQ Wall and discovered the Theory 144 method of technical analysis. Barker founded and served as CEO for a successful life sciences research and marketing services company, serving a majority of the top 20 global life science companies. He has a bachelor’s degree in finance from Appalachian State University and a master’s degree in political science from University of Central Florida where his thesis research explored the international political economy from the long wave perspective.