As the Tunisian dictator Zine el Abidine Ben Ali discovered in January, there is no surer route to political oblivion than to deny people access to affordable food. On Dec. 17, after Tunisian police assaulted a street vendor named Mohamed Bouazizi and seized his produce cart because, according to his family, he couldn't afford to pay bribes, the 26-year-old Bouazizi doused himself with accelerant and lit a match. He died two weeks later. The riots that ensued—propelled in part by anger over high food prices—drove Ben Ali from power and spread to Egypt, Jordan, Yemen, and Algeria.
The hunger that has roiled the Middle East was not caused by the whims of autocrats and cops. It began last year with crippling drought in Russia and later Argentina, and torrential rains in Australia and Canada. Weather cycles, economic (including stock market) cycles, political cycles and warfare cycles have and will continue to be the basis for worldwide change.
The global agriculture crisis's supply and demand imbalance has caused commodities to spike and food to become less affordable. Hungary people riot because of lack of food and jobs which results in a political imbalance that changes governmental power centers. Unstable governmental balance, in regions of the world, lead to warfare by the perceived stronger states over their weaker neighbors.
World War I (called at the time the Great War) was a major war centered on Europe that began in the summer of 1914. The assassination on 28 June 1914 of Archduke Franz Ferdinand of Austria, the heir to the throne of Austria-Hungary, was the proximate trigger of the war. Within weeks the major powers were at war; via their colonies, the conflict soon spread around the world. More than 9 million combatants were killed. The European nationalism spawned by the war, the breakup of empires, and the repercussions of Germany's defeat (including Hitler's rise to power that lifted Germany out of its economic depression) led to the beginning of World War II twenty years later in 1939. World War II also led the United States out of its Great Depression; the innovation and industrialization required to win the war later was applied to products to satisfy a great consumer demand over the next fifty years.
The longest social cycle has been approximately 50 years (the length of an adult's productive life). The last long-term social cycle ended at the turn of the century kicking off a long-term bear market cycle that we are experiencing today. It should be noted that governments can temporarily affect the severity of downward cycles through stimulus spending that cushions the recessionary cycle for awhile before people recognize they are deep into a great depression.
The stock market still moves in cycles, large and small, market forecaster Robert Prechter says, based mainly on "social mood," which, in turn, influences the economy. The current cycle will lead the unwary to ruin, Prechter says, “We are in a long-term bear market that started in 2000.” He says the rally that has been so enjoyable for stock investors is just a mini-cycle in that longer swoon.
“I think the bear market will end when most debtors default and the media change from calling it a great recession that’s over to calling it a great depression that isn’t,” he says.
Part of his argument will be familiar to anyone who follows the financial news. We are living “in a world saturated with debt,” he says. “Newly conservative regulatory policies have been clamping down on bank credit,” he adds. “State and local governments will soon cut spending and borrowing, and when the federal government finally cuts spending and borrowing and the Fed — either from within or without — is forced to stop” its quantitative easing program, the game will be up.
Danger is lurking, he warns, and not just in stocks, but also in bonds and commodities and other asset classes. “I have no interest in investing in any traditional financial market,” he says. “They are all dangerously over-owned, overpriced and overleveraged.”
If you do hold stocks, this isn’t the time to just sit back and watch your account balances rise, he says. “I believe deeply that opting for maximum safety is the right thing to do,” he says. “I think bulls are about to lead people over a cliff.”
Sources: Bloomberg BusinessWeek, February 21, 2011 and The New York Times, February 20, 2011
Robert R. Prechter Jr.: Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression