Tuesday, April 10, 2012
Kondratieff was a Soviet economist who discovered the existence of long term, historical price ondulations. For me, cycles confirm Marxist dialectics but the Stalinists judged it subversive and he was condemned to death. Those were the times...!
Anyway, the world 2012 is going through a large increase of government generated credit with low or negative interest rate (Marc Faber says -5%). At the same time, governments are imposing evermore impossible regulations on every industry. The latest is in the water and food industry, one of the safest industries of all, with deaths per year that can be counted in a hand. This is happening not only in America but the European Union and Israel too. Here, it is becoming very difficult to receive a "food-producer" permit, and the minimum time to get it is a year. The economic cost is enormous and the benefit nil.
Now, what happens in an economy with easy and cheap credit and high regulatory costs and barriers? I think it kills small and mid enterprises, and investment tends to flow into large companies. The trend is to oligopolies and higher prices - inflation. Operative conclusion: Courageously assume loans and invest in large established corporations.