You have all heard about Ludwig von Mises by now.

You may have heard of F. A. Hayek. He was awarded a Nobel Prize in Economics. He was a member of the "Austrian" School of Economics

"In 1939, Joseph Schumpeter, the Austrian-born economist who moved to America, published a two-volume work, "Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process." In it he argued that long waves stemmed from innovation. A modern example could be "Just in Time" that appears to have first been used in the car industry before spreading throughout manufacturing. The work also incorporated Kondratieff's findings and helped publicise them. "

Notice that Joseph Alois Schumpeter’s work was heavily dependent upon Kondratieff's findings! And Schumpeter was not alone in his discoveries.

A 50- to 60-year economic cycle was observed by a Dutchman, Van Gelderen in 1913 although there is no evidence of a connection with Kondratieff. W.H.Beveridge (1879-1963), later Lord Beveridge, studied wheat prices back to the 1500's and is reputed to have deduced them back to 1260. He discovered many cycles, publishing his findings in 1921 and 1923 (three years earlier than Kondratieff). One of these cycles occurred every 50 to 60 years, with an average periodicity of 54 years.

The long wave rhythm, which varies from 45 to 60 years, has attained its periodicity from averaging a wide distribution. It is widely known as the "Kondratieff wave" or, less elegantly the "K-wave."

Of course, you have rarely heard of these works, because they suggest that all government attempts to control are doomed to failure. Actually, Schumpeter’s work questions the value of government other than in its most minimal condition.

We must realize that the "bureaucrat "training schools will always find a reason why we need to pay for more government. This is particularly true of the faculties at "state universities". Their very existence depends on a never-ending stream of money "coerced" from the taxpayers. The "state universities" have the additional advantage of the elementary and secondary public school systems, which begin preaching collectivism commencing with preschool. The state system will never "willingly" refer to Schumpeterian economics.

Private universities are tad more honest, but there are all those government grants and research contracts to consider. Who would dare endanger the revenue from the student loan program? "When you take the man’s money, you dance the man’s dance" is a never failing rule.

THE IMPLICATIONS OF CYCLES

Since the onset of the 20^th century, students of the world economy have been drawing attention to certain long-term regularities in the behavior of the leading economies. The first to make this argument in a sustained manner was Nikolai Kondratieff , a Russian economist writing in the 1920s. Statistical work on the behavior of prices, and some output series, for the United States and Britain since the 1790s, led him to conclude that the existence of long waves as very probable, and his dating scheme is shown in Table 1. He saw the capitalist world economy as evolving and self-correcting and, by implication, he denied the notion of an approaching collapse of capitalism then current among Marxist economists.

"What was dangerously unacceptable to his Communist masters was the idea that there was an inherent self-correcting mechanism perpetuating capitalism. He was banished to the Gulag where he was quickly condemned to solitary confinement. He became mentally ill and died. "

In the 1930s, Joseph Schumpeter endorsed this concept, and named the pattern the Kondratieff, a name that has since been attached to this phenomenon, even as its existence remained in contention in the years after 1945. Neo-classical economists have remained wary of it, and it is only in the 1970s, as the post-World War II expansion slowed down once again that attention was drawn to it, and new research especially on innovation moved the subject forward in an important manner.

Although excelling as a teacher above everything, Joseph Schumpeter nonetheless completed three more books while at Harvard: his didactic Business Cycles (1939), his popular Capitalism, Socialism and Democracy(1942) -- in which he famously predicted the downfall of capitalism in the hands of intellectuals -- and his encyclopedic, History of Economic Analysis (1954). In the first two, he expanded upon his theory of entrepreneurship and theory of growth into a wider theory of the development of capitalism, integrating it into a business cycle theory and a theory socio-economic evolution.

It is interesting to note that Joseph Schumpeter was the Austrian economist that was developing a methodology to predict booms and busts in the major economies of the world. He was threatening to both the economic historians and the economists. Economic historians constitute the bulk of the economics profession today. The business schools are in a similar postion.

Paul Tudor Jones is one of the "great commodities traders". He was blunt about business school in one of his interviews.

Paul Tudor Jones: "In 1976 I started working on the floor as a clerk and then I became a broker for E.F. Hutton. In 1980 I went strictly on my own as what they called a local and did that for about two and a half years and had two and a half wonderfully profitable years, but I really got bored. I applied to Harvard Business School, got accepted and was about to go. I literally was packed up to go and then I thought, ‘this is crazy’, because for what I’m doing here, they’re not going to teach me anything. This skill set is not something that they teach in business school. So I didn’t go, I stayed, but I was really bored because there wasn’t the personal interaction that was something that I craved and having colleagues and being in a clean atmosphere and that was when I started my fund."

We need to recognize that most economists and business school professors equate the word cycles with washing machines. Not a surprising observation when we realize that collectivism’s primary objective is to achieve a "command economy"! The simple recognition of the existence of cycles is a refutation of "central planning"! How can there be anything "more powerful" than a bureaucrat (Commissar)? This is sheer heresy to a potential planner/czar/dictator.

"If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid." John Maynard Keynes. Keynes knew what economists are!

Joseph Schumpeter was also the economist who warned about the universities "hatred" of freedom and free markets! Somehow, this economist was written out of the script! I’m shocked! They would have sent him off to die in a Soviet "gulag" along with Kondratieff if they could have gotten away with it.

We must remember that Socialism, and all other variants of Collectivism, exist by promising the citizen protection from the business cycle. The promise to suspend the law of "cause and effect" has always been a big vote getter! No wonder that Joseph Alois Schumpeter was dropped for J. M. Keynes, the "Big Government Providing A Free Lunch for All" economist.

Capitalism is a self correcting mechanism, requiring no intervention or planning by the government. Normal people automatically make the proper decisions "over time" to bring the system back into "balance". Observing commodity markets will show the "invisible hand" mechanism at work.

Supply and demand are always reconciling themselves into balance through the means of "price discovery".

Markets always go to extremes, and always rebalance themselves. No government supervision is required. The surest way to prevent markets from rebalancing themselves is to introduce governmental controls.

Intellectuals know nothing about the voluntary relationships of a free market. Consequently, the market's ability to make correct decisions over time without the guidance of government frightens them. Their classic argument is "This is too important to be left to the Free Market"

The reason that intellectuals are frightened by the free market is simply because the main employer of intellectuals is the government! Should society ever realize that governments are the cause of economic problems, employment prospects would be nil for these intellectuals. Self interest being the primary rule in all human behavior, the intellectuals will always promote the argument that we are doomed without government guidance and control.

It is time to take back your financial future from these economists/economic historians, and begin to learn how the economy really works. There is no better way to understand how economics works than to observe the commodities markets. Study the past, and you will see how markets continually move from bottom to top, and back to bottoms, as supply and demand work out their eternal rhythms.

Cycles vitually guarantee that many opportunities will come your way. It is your responsibility to be ready to recognize and capitalize on the gifts from Nature. Of course, you can just wait for the state to plan your life, and nuture you in golden years. However, there are now many proven reasons to doubt the state's intentions, or abilities, to provide for you now, or in the future!

Opportunities from the free market, or entitlements from the government! It’s your choice!

Wayne N. Krautkramer onlypill@cox.net https://onlypill.tripod.com/toolsofthetrade/