US Dollar Approaching Critical Juncture

The US dollar is approaching a critical juncture. Bearish sentiment on the dollar is very strong, and many are already pronouncing the dollar's demise. The decline of the dollar has been in the news for several weeks.

Generally, when there is extreme bearishness or extreme bullishness in play, a major trend change is around the corner. In the last two low points, one in 2008 and another in late 2009, there was extreme bearishness on the dollar. In both cases, the dollar rallied. There is every reason to believe that the dollar is going to rally this time around as well.

Now for some charts on the US Dollar Index. Here is a chart of 2008 - 2011:

 

 

The low point in 2008 is off the chart. Since the low point, a quick rally lasting 8 months unfolded, followed by a flat that has taken 2 years to unfold so far. The 8 month advance is best characterized as a Primary degree advance when considered in the context of the larger picture. The large flat that is still unfolding can reasonably be characterized as a Primary degree correction.

1 -- The advance from March 2008 to Nov 2008 would be Primary wave [1]. 8 months is quite brief for a Primary degree advance within a bull market. A Primary degree bull market advance would generally last around 6 years (as a guideline). Within the larger picture, this labeling works best.

2 -- The large flat that has been unfolding would be Primary wave [2]. 2 years is a reasonable amount of time for a Primary degree correction. Within the flat, Intermediate wave (A) unfolded as an expanded flat, Intermediate wave (B) unfolded as a zigzag, and Intermediate wave (C) is unfolding as an ending diagonal.

Here's a chart showing Minor wave 5 of Intermediate wave (C) in detail.

First of all, the chart shows how close the US Dollar is to a critical juncture. Within Minor wave 5 down, three waves have already unfolded with Minute wave [iii] just now completed. The final low of Primary wave [2] is indicated by the target box on the chart, with a downside target of 72.0 to 72.75 sometime in May 2011.

It's more than a coincidence that the US Dollar is approaching a critical juncture at the same time that the stock market is. The commodity markets are also approaching a critical juncture next month as well. The common denominator of all the markets reaching a critical juncture at virtually the same time is "The Great Deflation" which will no doubt kick into high gear upon the next leg down in the markets. One of the consequences of "The Great Deflation" is a bull market in the US dollar.

Projecting the future wave path of the US Dollar Index is fairly straightforward. Since Primary wave [2] is a deep retrace of Primary wave [1], we should expect Primary wave [3] to be 2.618 times the length of Primary wave [1]. This puts the target at around 120. Continuing with the "all the same market" theme, Primary wave [3] up in the dollar will unfold at the same time that Primary wave [3] down is unfolding in the stock market. This helps build the case that Primary wave [3] down in the stock market will last 55 - 60 months with the low point around April 2016.

Primary wave [4] down in the US Dollar Index should last around a year and is very likely to unfold as a zigzag. Primary wave [5] would start in 2017 and continue through 2021, lasting 55 months. The upside target for the end of Cycle wave I is 180. 13 years is definitely a reasonable amount of time for a Cycle degree advance. This helps build the case for "The Great Deflation" ending in 2021.

Here's the chart showing the projected wave path of the US Dollar Index.

The projected wave path of the US Dollar Index paints a picture of "The Great Deflation" unfolding with increasing momentum over time.

From the 1700s, the dollar went into a downtrend that continued until 2008. This decline is best labeled as Millennium wave ((2)). The decline unfolded as a triple zigzag with an ending diagonal unfolding from 1976 to 2008. The projected wave path of Cycle wave I would accomplish another guideline, namely, the ending diagonal would ideally be retraced in 10 - 15 years.

There is every reason to be bullish on the US dollar.

Single Payer in 2022?

In the last few days, all eyes have been on the fallout in the town hall meetings as constituents express their anger over the GOP in the House voting to end Medicare for all practical purposes. Even as the Primary degree bear market rally continues in its final stages, the undercurrents of negative social mood are already coming to the surface. The town hall meetings have received a lot of news coverage. Some sources follow:

1 -- MSNBC - House Republicans Regroup amid Medicare Anger
2 -- Daily Kos -- Anger on Display at Republican town hall meetings over Medicare and taxes
3 -- Think Progress -- Bedlam erupts in town hall in Orlando

There is a political aspect to the development as well, and the Democratic Party has wasted no time going after the GOP for the anti-Medicare vote. As I indicated in an earlier post, no democrat voted for Rep. Paul Ryan's anti-Medicare bill. Now, the Democratic Party has already started putting out ads calling out the GOP in the House for the vote, as detailed here.

There is a larger term picture unfolding, which goes back to 2009 when the Obama Administration initiated the campaign for health care reform in the United States. There is more information about the health care reform process here. While the health insurance companies focused all of its efforts trying to defeat "Obamacare" through lobbying, the real nemesis -- deflation -- was lurking underneath the surface, poised to wreck havoc upon the resumption of the larger downtrend. It's a lot like the scene from the movie Pitch Black when Riddick says, "it isn't me you should be worried about" as darkness engulfed the landscape.

The true threat to health insurance companies isn't "Obamacare", its deflation. The last time we had a deflationary collapse, insurance companies imploded. When the worst part of "The Great Deflation" starts later this year with the commencement of Primary wave [3] down, wage deflation will create an insurance death spiral that will eventually cause the health insurance companies to collapse by 2017.

I am going to make a bold prediction here. We will get single payer implemented in the United States in 2022. After "The Great Deflation" ends, we will have a long reprieve period. The Democratic Party will have control over the United States government at that time, and with the health insurance companies out of the way, it will be very easy to get a single payer health care system passed. The trend has already started as the state of Vermont is actually working on such a system even now.

The Education Bubble

I was aware of higher education potentially taking on the characteristics of a bubble as long as a year ago -- tuition that is rising at double the rate of consumer price inflation, weakening job market fundamentals which act to make it progressively harder to pay back student loan debt, and now, rising unemployment.

The chain of events goes all the way back to 1972, when the United States government created Sallie Mae as a government sponsored enterprise (GSE) with the purpose of creating, collecting, and handling college student loans. This event corresponds to the late stage of Cycle wave IV, just before Cycle wave V started in 1974. Deregulation is generally characteristic of Cycle (and above) degree fifth waves in social mood, motivated by ebullience and extreme optimism. This is where the creation of the education bubble got started.

The privatization of Sallie Mae started in 1997 and was completed in 2004 as the deregulation trend continued to unfold in the United States. This event also helped to fuel the education bubble. The next important development occurred in 2005 when George W. Bush signed a decree that student loan debt could not be purged by bankruptcy.

There is already awareness of the bubble. Peter Thiel wrote an article on the education bubble, which can be accessed here. Socionomics Institute has also written articles on the subject as well over the last month.

For-profit colleges, such as University of Phoenix, are at the heart of the education bubble. These schools are funded by taxpayer dollars. Also at the heart of the education bubble are the prestigious schools such as Harvard, Princeton, Yale, and a few others of the same class -- they charge much higher tuition for the same type of education as "lower-tier" colleges and universities do, and yet, there exists the sentiment that going to an elite school means exceptional payoffs in the future in spite of the massive load of student loan debt that gets incurred.

There are already signs that the education bubble is about to burst. The end game is already being played out on various fronts, which will work together to cause the bubble to burst.

1 -- The California budget crisis is the first part of the end game. With tax revenues drying up, the state government cut funding for all of the colleges and universities in the state. Colleges and universities responded to the cuts by hiking tuition by 32% a year to make up for the shortfall -- which was followed by protests by students. With tax revenue drying up, states are implementing austerity measures to balance their budgets. One of the consequences of austerity measures is funding cuts for higher education -- which is then followed by colleges and universities implementing massive tuition hikes to make up for lost funding. Expect this trend to accelerate in the coming months and years. This will cause student loan debt to go parabolic.

2 -- The coming collapse of the job market -- As Primary wave [3] down unfolds in the stock market, and consequently in the economy and job market as well, there will be a massive wave of layoffs. The loss of 8.4 million jobs that took place during the so-called "Great Recession" (which would be identified as Primary wave [1] down in the job market) is just a teaser-trailer preview of what is yet to come. The job market follows the same wave path as the stock market. With Primary wave [3] down unfolding in the job market, corporations and businesses will implode in a massive cascade of debt defaults, which will result in the net loss of 36 million jobs over 5 years (more on that later). The result will be a massive cascade of student loan defaults.

3 -- Rising doubts about the value of a college education -- There are already signs of exhaustion starting to unfold, such as declining applications for law schools. Exhaustion signs are indicative of a bubble in its late stages. Expect to see signs of exhaustion in colleges and universities as tuition continues to rise and with a resumption of layoffs.

Expect the education bubble to implode within the next several years (if not within the next several months), with dramatic consequences for elite schools and for-profit colleges as the most immediate aftermath of the event.

Black Gold Mania

With a massive barrage of developments in the crude oil market taking place in the last few days, the analysis of the US Dollar Index will be deferred to a future post. Crude oil has been in the news for over a month, indicating that a blow-off top is in progress.

Looking at the larger picture, crude oil is in the midst of a Primary degree bear market rally. Here's the chart of crude oil from 2008 - 2011:

What we are seeing now is a repeat of 2008 when crude hit a high of $147 a barrel. As crude oil approached the final stages of a Grand Supercycle degree peak, the fear of "Peak Oil" was pervasive in media and politics and there were calls in Congress (particularly Nancy Pelosi, who was Speaker of the House at that time) for investigation into excessive speculation and fraud.

We are seeing it unfold again, just like 2008. Yesterday, President Obama placed the blame for rising oil and gas prices on speculators and called for an investigation headed by the Justice Department to look for fraud and manipulation. There is more information about the development here and here.

The calls for government intervention in rising oil and gas prices is not just happening at the federal level. Just today, Sen. Maria Cantwell and Sen. Patty Murray also called for increased regulation on oil speculation. There is more information about the development here.

Why would the Obama Administration call for government intervention on oil speculation now? The clue is the nature of blow-off tops in commodities. While blow-off tops in the stock market are fueled by hope, blow-off tops in commodity markets are fueled by fear. Fear is a stronger emotion than hope, which is the reason why we see parabolic tops in commodities but not in stocks. There is definitely a lot of fear in the air with economists and market analysts talking about the effect of social unrest in the Middle East on oil futures, and some contemplating what would happen if Saudi Arabia were to be affected by the same type of social unrest that has taken place in Tunisia, Egypt, Bahrain, Yemen, and Libya.

Here is the 6 month chart of crude oil:

As the chart indicates, a blow-off top is in progress. Crude oil is clearly tracing out an ending diagonal, which started with a massive thrust from a Minor degree triangle in late February. The initial thrust propelled crude oil past the 61.8% fibonacci retrace benchmark ($104 a barrel). The upside target for the ending diagonal is indicated by the blue box on the chart, which is $115 to $122 a barrel sometime in May 2011.

Crude oil is approaching a Primary degree peak, and the peak should be followed by a resumption of the larger downtrend. It's more than a coincidence that crude oil is approaching a critical juncture at the same time that the stock market is. Gas prices at the pump should keep rising into June 2011, retesting the 2008 high and hitting $4 a gallon in many areas of the United States.

Blow-off Top Update

This is an update to the earlier post concerning the blow-off top that is in progress in the bear market rally. As indicated before, we are in the final stages of a Primary degree bear market rally that has been unfolding for the past 2 years.

Enough of Minor wave 5 has unfolded that an attempt can now be made to estimate the target for the peak of the bear market rally and when the peak could occur. Yesterday, markets went up in a massive breakaway gap up. This is significant since breakaway gaps are associated with the center of third waves. In addition, Minute wave [i] of Minor wave 5 appears to be an extended first wave as the 1-2's are closely grouped near the start of the minute degree advance, and the 3-4's are closely grouped near the end of the minute degree advance. This is significant because there is a tendency for waves 2 - 5 to have a net length of 0.618 times the length of wave 1 when wave 1 is extended.

Within Minor wave 5:

1 - Minute wave [i] has a length of 895 points, taking the DJIA from 11555 to 12450.
2 - With waves 2 - 5 having 0.618 times the length of wave 1, we expect a net length of 553 points, which gives a target of around 13005 for the peak of Minor wave 5.
3 - The size of the breakaway gap up that occurred yesterday indicates that Minute wave [iii] is in progress, and that the center of Minor wave 5 has already occurred.
4 - The peak of Minute wave [iii] should be reached around April 25, 2011 with a target of around 12800. This allows the trend channels associated with Minor wave 5 to be deduced, which gives an estimate for the peak of Minor wave 5, and therefore Primary wave [2].

Here's the chart of the DJIA, which shows the projected wave path for the rest of Minor wave 5:

Notice that Minor wave 5 stays entirely within the trend channels associated with Intermediate wave (C). We are looking at May 2011 as when the bear market rally peaks and when Primary wave [3] down starts. The larger picture is still the same, with Supercycle wave (a) (and "The Great Deflation") expected to continue until 2021. There isn't much time left before the next leg down starts. Minor wave 1 of Intermediate wave (1) of Primary wave [3] is expected to last 3 months and take the DJIA down to around 9500.

Another indication of "The Great Deflation" unfolding with increasing momentum over time is in the U.S. Dollar Index, which will be examined in the next post. It is more than a coincidence that the U.S. Dollar Index is at a critical juncture at the same time that the stock market is. There is reason to be bullish on the dollar.

Authoritarianism in Michigan

In the last couple of months, in the midst of protests in Wisconsin, we have been witnessing a rapid increase of authoritarianism in Michigan. This is yet another indication of a massive bear market unfolding. Authoritarianism is associated with bear markets of at least Cycle degree.

A short time back, Gov. Rick Snyder signed a bill into law that does the following:

1 -- Strip union rights and ends all forms of collective bargaining rights.
2 -- Imposes tax increases on the poor and middle class, while granting tax cuts for the rich.
3 -- Gives the state government the power to declare a city to be in a financial emergency, in which the governor has the power to appoint an EFP (Emergency Financial Person), who would effectively have power over the elected officials in the city, and for that matter, power over all the operations in the city.
4 -- Gives the state the power to dissolve any city it wishes.

Even as I write this, Benton Harbor became the first city to be affected by the new law as the newly appointed EFP effectively dissolved the city government and restricted the powers of the city mayor.

We are witnessing increasing authoritarianism in the United States, mostly at the state level. Already, there are a number of state governments in red states (states that are dominantly Republican) that are working on bills that are aimed at restricting abortion, voting rights, and collective bargaining rights. So far, we haven't seen any increase in authoritarianism in states whose governments are currently controlled by the Democratic Party.

In the months and years ahead, as Primary wave [3] down unfolds, expect the trend of increasing authoritarianism to accelerate in all the red states as social mood goes south and tax revenue rapidly dries up from rising unemployment. I do not see increasing authoritarianism in the United States unfolding at the federal level during "The Great Deflation", even during the Palin Administration Period. The purple states each could go either way, depending on which party manages to gain control over the state government.

Drama in Wisconsin

There continues to be a lot of drama in Wisconsin, with enough signatures secured to recall four of the eight Republican state senators that voted for Gov. Scott Walker's anti-union legislation. The updated information is here.

Earlier, there were massive protests in the state in response to the anti-union legislation. Detailed information about the Wisconsin protests can be found here.

Protests are characteristic of bear markets of at least Cycle degree. Even though a Primary degree bear market rally had been unfolding for the last 2 years, protests still erupted in Wisconsin in response to the anti-union legislation as people fight for their livelihoods. As the days and weeks went by, protests increased in magnitude in Wisconsin and spread to Indiana, Ohio, Florida, Michigan, and even Idaho.

Then there is the issue of political polarization as well. Gov. Scott Walker stubbornly refused to negotiate even as Democratic state senators valiantly attempted to keep collective bargaining rights intact. When negotiation efforts failed, all 14 of the state Democrats fled to Illinois to stop the anti-union bill by denying a quorum. This speaks of increased polarization not just at the federal level, but at the state level as well, as the GOP accelerates farther to the right.

There is a lot of anger in Wisconsin, and it's going to be expressed somewhere. Expect the Republican state senators that are targeted for recall to get thrown out of office by voters. Expect Gov. Scott Walker to get thrown out of office in a recall election next year. There is something to be said about a mass recall that is unfolding, which has never happened in the entire history of the United States. By the time the actual recall elections in Wisconsin take place later this year, Primary wave [3] down will be underway, meaning that there will be a rapid increase of voter anger and an increased willingness to express that anger as social mood goes south.

In terms of the larger picture, we are seeing austerity measures being implemented at the state level in Wisconsin, Michigan, Indiana, Ohio, and Florida. When austerity measures were implemented in Greece and Ireland in May 2010, mass protests and demonstrations followed as people fought for their livelihoods. We have seen a repeat of that scenario in the United States at the state level in the last couple of months.

Considering that we are still in the early stages of a Grand Supercycle degree bear market, the drama in Wisconsin and elsewhere is likely just a teaser-trailer preview of what is yet to come as "The Great Deflation" continues to unfold in earnest. Expect the same type of austerity measures to be implemented at the federal level in 2017, which will be followed by social unrest, protests, demonstrations and labor strikes of unprecedented magnitude.

Economic Corrective Periods

While we wait for Primary wave [3] down to start, we'll look at the different types of economic corrective periods that take place over the course of human civilization. There are generally only two terms that are used in economic circles: "recession" and "depression", although the terms "major recession" and "major depression" are used from time to time. There is a third term that should be used -- "dark age", which is reserved for economic corrective periods that are clearly too big to call a depression.

It's best to classify economic corrective periods in terms of the Elliott Wave Principle. After all, the economy follows the stock market and thus traces out the same wave path as the stock market does (in terms of real money). It's cleaner that way. There is already a basis for this type of classification, as depressions have already been linked to Supercycle degree bear markets.

In general:

Primary degree bear markets result in recessions
Cycle degree bear markets result in major recessions
Supercycle degree bear markets result in depressions
Grand Supercycle degree bear markets result in major depressions
Millennium (and larger) degree bear markets result in a dark age

Now for the descriptions in detail:

Recession

A recession is a relatively small economic corrective period that generally lasts about 1 year. Recessions result from Primary degree bear markets. The unemployment rate (U6) generally reaches a high of 6% to 9% at the end of the period. Recessions occur every 7 years on average. Recessions never result in deflation. Almost all losses in the job market in a recession are from service and retail jobs as lower demand temporarily results in layoffs. Banks and government are generally unaffected by recessions. Recessions can be identified as far back as the early 1800s.

Here's a list of all the recessions that occurred since 1932:

Primary wave [2]     1946 - 1948          Recession

Primary wave [4]     1960 - 1962          Recession

Primary wave [2]     1977 - 1980          Recession

Primary wave [4]     1986 - 1987          Panic (Recession in 1990 - 1991)

Major Recession

A major recession is a moderate sized economic corrective period that generally lasts 4 years. Major recessions result from Cycle degree bear markets. The unemployment rate (U6) generally reaches a high of 12% to 15% at the end of the period. Major recessions occur every 25 years on average. Major recessions result in more protracted job layoffs over a longer period of time, and declining professions suffer substantial losses. Around half of major recessions result in deflation, as was the case for the major recession of 1918 - 1921 and the major recession of 1937 - 1941. Corporate earnings generally take a substantial hit during major recessions. Periodic bank failures generally occur during major recessions, although the strongest banks are still unaffected. Governments take a moderate hit on their tax revenue, but are generally able to adapt without much trouble. Major recessions can be identified as far back as the Renaissance.

Here's a list of major recessions from as far back as the 1500s:

Renaissance (4 of 6 major recessions identified)

Cycle wave II       1514 - 1520      Major Recession

Cycle wave IV     1587 - 1600      Major Recession

Cycle wave II       1660 - 1667      Major Recession

Cycle wave IV      1676 - 1695     Major Recession

Industrial and Technological Revolutions

Cycle wave II        1800 - 1810     Major Recession

Cycle wave IV       1826 - 1830    Major Recession

Cycle wave II        1875 - 1881     Major Recession

Cycle wave IV       1918 - 1921     Major Recession

Cycle wave II        1937 - 1941     Major Recession

Cycle wave IV       1966 - 1974    Major Recession

Depression
  
A depression is a large economic corrective period that generally lasts 8 to 15 years. Depressions result from Supercycle degree bear markets. The unemployment rate (U6) reaches a high of 20% to 30% at the end of the period. Depressions result in a moderate deflationary collapse and a substantial destruction of wealth. Layoffs are even more protracted as deflation results in a cascade of defaults in both the private and public sectors. Bank failures and bankruptcies are generally widespread with only the strongest banks and corporations surviving through the period in one piece. Depressions usually result in trade wars, currency wars, and austerity measures as tax revenue substantially dries up from rising unemployment. Depressions occur every 75 years on average, and can be identified as far back as the Roman Period. The two most recent depressions are well characterized.

A list of depressions follows:

Roman Period

Supercycle wave (II)     600 BC - 580 BC    Depression

Supercycle wave (IV)   509 BC - 493 BC    Depression

Supercycle wave (II)     343 BC - 338 BC    Depression (Uprising of Latium allies in 

                                                             Latin war)

Supercycle wave (IV)   265 BC - 242 BC    Depression (First Punic War)

Supercycle wave (II)     54 - 68                   Depression (Year of the four emperors, 

                                                             plus Nero)

Supercycle wave (IV)    162 - 177              Depression

Modern Civilization  (4 of 6 have unfolded, the last 2 are in the future)

Supercycle wave (II)     1470 - 1484            Depression

Supercycle wave (IV)    1637 - 1648           Depression

Supercycle wave (II)      1835 - 1859          The Long Depression

Supercycle wave (IV)    1929 - 1932           The Great Depression

Major Depression

Major depressions are massive in duration and severity, generally lasting 40 - 80 years. Major depressions result from Grand Supercycle degree bear markets. The unemployment rate (U6) generally goes as high as 50% to 70% at the end of the period. Major depressions result in a severe deflationary collapse that is accompanied by rapid destruction of wealth. The high unemployment is due to a massive cascade of debt defaults that causes virtually all corporations, banks, and businesses to implode. Trade wars, currency wars, and austerity measures are severe in magnitude as tax revenue rapidly dries up. Major depressions generally occur every 300 years and can be identified as far back as the Late Bronze Age.

Late Bronze Age (1 of 2 identified)

Grand Supercycle wave [IV]     1200 BC - 1053 BC   Major Depression

Roman Period

Grand Supercycle wave [II]       407 BC - 390 BC    Major Depression

Grand Supercycle wave [IV]     135 BC - 30 BC      Major Depression (Crisis of the 

                                                                       Roman Republic)

Modern Civilization

Grand Supercycle wave [II]      1720 - 1784         Major Depression

Grand Supercycle wave [IV]     2000 - 2055        Major Depression

Dark Age

A dark age is an extremely massive corrective period in the economy and job market. A dark age results from a bear market of Millennium or larger degree and generally last 150 years or more. The unemployment rate (U6) reaches 95% - 99% at the end of the period. A dark age results in a deflationary collapse of extreme magnitude in which virtually all wealth is destroyed. In a dark age, there is a total collapse of infrastructure and even the largest and most resilient of corporations, banks, and businesses implode, as well as a breakdown of government at all levels. A dark age generally occurs every 1000 years and can be identified as far back as the Neolithic Revolution period.

A list of dark ages from 10000 BC follows (not all are identified)

Super Millennium wave ([2])   c7000 BC - c6800 BC    Dark Age

Super Millennium wave ([4])   c3500 BC - c3200 BC    Dark Age

Millennium wave ((4))               933 BC - 700 BC         Dark Age

Ultra Millennium wave ((II))      337 - 1400                   Dark Ages

As indicated before, there is a major depression in progress. So far, the major depression has unfolded in the form of the economy collapsing in terms of real money (GDP in terms of gold) since it started in 2000. The reason why the nominal and real GDP continues to rise is that the dollar has been devalued as a result of government, banks, corporations, businesses and even individuals getting leveraged to the hilt with credit and debt. When Primary wave [3] down starts, the economy will start collapsing in nominal terms as well. More on that later.

Bear Market Politics

The events that have been unfolding in the political arena in the last several days are indicative of a bear market, not a bull market. It is quite obvious that there is a lot of polarization in the politics, and that polarization has been increasing at a steady clip over just the last 11 years.

Not too long ago, we were facing the prospect of a government shutdown. I previously addressed the topic in an earlier post, which can be accessed here: (Shutdown narrowly averted)

Today, Rep. Paul Ryan's budget plan, which would have ended Medicare for all practical purposes, went for a vote in the House. All Democrats voted "no" on the measure. All but 4 Republicans voted "yes" on the measure. This development speaks volumes about the polarization in the political arena. The GOP has been steadily moving farther to the right as the bear market unfolded. The development is discussed in the news such as MSNBC and Daily Kos.

The socionomic implications of this development are enormous. We are still in the early phase of a Grand Supercycle degree bear market. Bear markets result in polarized and radical politics with an "us vs them" mentality. We are already seeing it take place on the GOP side of the equation.

We are in the last part of a Primary degree bear market rally. When the next leg down (Primary wave [3]) starts, expect the political arena to be even more polarized than it is now as social mood rapidly heads south. Expect the GOP to accelerate even farther to the right during that time.

The real concern, however, is the type of politics that will unfold during Primary wave [5] down, which would be the Palin Administration Period (2017 - 2021). I expect that Medicare and Social Security will get repealed during that time under the pretense of balancing the federal budget. Even now, 65% of Tea Party constituents support Paul Ryan's budget proposal, which foreshadows the hard times to come in the last part of "The Great Deflation".

A Blow-off Top

There is a strong reason to believe that we are in the midst of a blow-off top, the final stage of a Primary degree bear market rally that has been unfolding for the last 2 years. It's not just the wave path of the stock market that indicates that a blow-off top is in progress. There are also socionomic indicators that point to a blow-off top as well.

Looking at the larger picture, here is a look at the 1999 - 2000 period, the final stage of a Grand Supercycle degree advance unfolding since 1784.

There is a reason for marking the events on the chart. Grand Supercycle degree bull markets always end in a speculative blow-off top. One of the characteristics of a blow-off top is extreme optimism. The extreme optimism unfolds in many ways such as the stock market getting regular news coverage, people getting extremely bullish on the stock market, and yes, people writing books on why the stock market will keep rising into the stratosphere forever.

Here is a case in point for the expression of extreme optimism:

Dow 100,000: Fact or Fiction by Charles Kadlec, came out in bookstores in late 1999.

Dow 40000 by David Elias, came out in late 1999. The author believed that the DJIA would hit 40,000 by 2016.


Dow 36000 : The new strategy for profiting from the coming rise in the stock market by James Glassman and Kevin Hassett. The title came out in bookstores in early 2000.

Notice that shortly after the titles came out, the stock market peaked and a Grand Supercycle degree bear market got underway.

In spite of the bear market unfolding over the last 11 years, there is still a high level of optimism. As we get to the final stages of the bear market rally, optimism is again reaching stratospheric extremes. When the stock market pulled back from the highs of late Feb 2011, there were a number of bearish people claiming that a top in the bear market rally is in. When the pullback was only a few days old, I predicted that we would get one more new high in the bear market rally. The reason for the prediction has to do with the socionomic part of the equation.

Second waves are seen as a continuation of the previous trend. In a bull market, bearish sentiment builds as the second wave unfolds, and by the time the bottom is in, bearish sentiment is even more extreme than it was at the start of the bull market. We are in a bear market, so we invert the expectations. Second waves in a bear market would be seen as a continuation of the bull market, and by the peak, optimism would be even more extreme than it was at the peak of the bull market.

The "blow-off" aspect of the bear market rally were not yet present in Feb 2011. Since the stock market peaks in 2000 and 2007 were characterized by blow-off tops, there is every reason that the bear market rally would end in a blow-off top as well. The market would make a final push for the peak of the bear market rally in a "blow-off" fashion. During that time, the stock market and the economy would get into the news and the last of the bears would throw in the towel in capitulation mode. Ultimately, Minor wave 5 would be a cunning bull trap. Once the bear market rally peaks, the next leg down, Primary wave [3], would get under way and the stock market, the job market, and the economy would plumb greater depths than before.

Here's a chart of the DJIA in 2010-2011

Minor wave 5, which started to unfold in late March 2011, has indeed turned out to be a blow-off top in every sense of the word. Here is what has unfolded since the start of the final thrust:

1 -- Virtually all the economists and analysts have concluded that the worst is over in the economy, and that hiring will accelerate in the job market.
2 -- People have become even more bullish on stocks than they were in 2000 and 2007.
3 -- On April 1, 2011, after the release of the jobs report, Obama declared that the U.S. economy is "back on the road to utopia".
4 -- On April 4, 2011, there was a report on CNBC that a third of the bears threw in the towel in less than a week. This is indicative of a capitulation peak in progress.
5 -- A title, Super Boom Why the Dow will hit 38820 and how you can profit from it by Jeffrey A. Hirsch, is now out in bookstores nationwide. The title is selling like crazy. People are again believing that the stock market will rise into the stratosphere forever.

This is just like 2000 and 2007. From a socionomic perspective, the market is peaking and the next leg down is just around the corner. The worst part of "The Great Deflation" is ahead of us.

Shutdown Narrowly Averted

With 90 minutes left on the clock, the Obama Administration was finally able to reach an agreement on a budget plan for 2011. This was after two stopgap measures were implemented to buy time. The specter of a government shutdown was looming large with the media talking about the possible implications of a shutdown.

The way I saw it in the days leading to the decisive moment was that a government shutdown would either be narrowly averted or if a shutdown did occur, that it would be short lived. First, it was about the size of the budget cuts, as the GOP wanted larget cuts than the Democrats. When we got to the final days and hours leading to the decisive moment, it was about Planned Parenthood and the EPA, which the GOP wanted to defund both, but the Democrats fought valiantly to defend both.

From a socionomic perspective, this was predictable. Consider that in bear markets, politics gets more polarized with an "us" vs "them" mentality, but in bull markets, politics moves towards the center and there is cooperation and the willingness to compromise. Consider that from 1942 - 1966, which is identified as Cycle wave III, both Democrats and Republicans were helping out in paying off the national debt and consensus was frequent. In contrast, politics has been much more polarized with the GOP going to the extreme right as the bear market continues its course.

We have been in a Primary degree bear market rally for the last 2 years. In politics, this has been reflected by a reluctant willingness to compromise, especially on the Democrat end of the equation. This was why that any government shutdown that happens would have been a short-lived one.

Here's the chart of the DJIA for the last 12 months. I have marked the spot where the shutdown was narrowly averted.

Social mood plays a strong role in politics. One would expect that in a large degree bear market rally, that the willingness to compromise and move to the center to get things done would start to take place by the late stages of the rally.

The bear market rally, Primary wave [2], is very close to completion. Even now, Minor wave 5 is in progress, suggesting that the peak is very close at hand. If social mood plays a strong role in politics, then what happens when Primary wave [3] gets under way?

Around February 2012, the Obama Administration will again have to put together a fiscal budget.

Here's the chart of the DJIA with the time marked for when the federal government would work on the budget for FY 2012 - 2013.

When it comes time for the Obama Administration to put together an annual fiscal budget for FY 2012 - 2013, Primary wave [3] will already be under way. The GOP will still have control over the House. The implication here is that politics will be even more polarized in 2012 than it is now with the resumption of the larger bear market trend in force. I predict a government shutdown next year, lasting several months, with broad implications for the economy.

Modern Civilization Period

We are now in the position to flesh out the rest of Grand Supercycle wave [IV], and for that matter, the rest of Millennium wave ((1)).  The "Great Deflation" is associated with Supercycle wave (a). We know that Grand Supercycle wave [IV] will trace out a flat, triangle, or a double-three to satisfy the guideline of alternation since Grand Supercycle wave [II] is a zigzag. Given that Grand Supercycle wave [IV] must remain within the parallel trend channels associated with Millennium wave ((1)) with perhaps an under-throw at the end of the correction, I lean heavily towards a flat.

Fibonacci convergence patterns are again helpful in looking for significant events. After 2021, the next two years of significance are 2042 and 2055.

2042 -- is 21 years after the proposed low point of the "Great Deflation" in 2021
            is 34 years after the top of Cycle wave b of Supercycle wave (a)
            (off by 3 months)
            is 55 years after the Black Monday crash of 1987
            is 89 years after an Intermediate degree low point in 1953

2055 -- is 34 years after the proposed low point of the "Great Deflation" in 2021
            is 55 years after the peak of Grand Supercycle wave [III] in 2000
            is 89 years after the peak of Cycle wave III in 1966

The year 2055 is also special because it is a low point in the Kondratiev cycle, which is primarily a cycle involving liquidity, which is reflected in the rate of change in prices. The average duration is 54 years, but it can vary from one cycle to the next. The last low points occurred in 1830, 1890, 1949, and 2003. The next low point should therefore occur in 2055. This strengthens the case for a flat in Grand Supercycle wave [IV] with the bear market ending in 2055.

Here's the chart showing the predicted wave path for Grand Supercycle wave [IV].

DJIA, 1995 - 2055

We will get a strong bounce following the end of the "Great Deflation". The bounce should be strong enough to take the US economy to new highs in terms of nominal GDP (although not in terms of real money). Supercycle wave (b) represents a long reprieve period within the larger bear market.

Just as fifth waves have weaker fundamentals than third waves, B waves have weaker fundamentals than fifth waves. This case will be no different. Economic fundamentals for Supercycle wave (b) are expected to be on par with Cycle wave b (of Supercycle wave (a)). In other words, 2021 - 2042 will be a lot like 2003 - 2007. Economic fundamentals will be strong enough to support emerging industries, which in this case, an industry built on green technology (i.e. solar, wind, geothermal, carbon capture technology). Supercycle wave (b) would therefore be identified as the "Green Technology Age".

A second decline, Supercycle wave (c), will follow. In many ways, the period 2042 - 2055 will be akin to 1770 - 1784. We all remember what happened during 1770 - 1784. War, uprisings, large scale religious persecution, authoritarianism, and revolutions took place, engulfing the entire planet. The American and French Revolutions are the best known parts of the period, but the entire planet was affected. 1770 - 1784 was a period of tribulation in human civilization, which is identified as Supercycle wave (c) of Grand Supercycle wave [II].

There is reason to believe that 2042 - 2055 will be worse than 1770 - 1784. There are two things that human civilization will have to contend with in 2042 - 2055 that were not an issue in the 1700's: Global warming and the fear of an asteroid impact. Global warming will cause a lot of havoc on its own. An asteroid, named 2007 VK 184, found in the Catalina Sky Survey, has a 0.04% chance of hitting Earth in 2048, which happens to be the center of Supercycle wave (c). There is no need for an actual impact to occur. Just the fear of an impact would be enough to cause mass panic. It is for that reason that Supercycle wave (c) would be identified as "The Great Tribulation". As we get to the end of the period, the fear of a dark age will become pervasive in media and politics.

After Grand Supercycle wave [IV] is completed, we can look forward to a new bull market, Grand Supercycle wave [V], with new achievements, new industries emerging, and a period of renewed growth for human civilization. There is already work underway in biotechnology and nanotechnology which will help propel human civilization to new heights in the next bull market.

Here's the chart for the Modern Civilization period. The wave path of the stock market prior to 1695 is reconstructed based on economic and socionomic data, and the wave path of the stock market in the future is projected.

DJIA-Equivalent, 1400 - 2233

Here's the full picture of the Modern Civilization period:

Ultra Millennium wave ((III))     1400 - 11000+,        Modern and Future Civilization

Super Millennium wave ([1])     1400 - 4400+,          Modern and Future Civilization

Millennium wave ((1))               1400 - 2233,           Modern Civilization

Grand Supercycle wave [I]        1400 - 1720,          Renaissance

Supercycle wave (I)                  1400 - 1470,          Commercial Revolution

Supercycle wave (II)                 1470 - 1484,          Depression

Supercycle wave (III)                1484 - 1637,          Enlightenment Age

Supercycle wave (IV)                1637 - 1648,         Depression

Supercycle wave (V)                 1648 - 1720,         Scientific Revolution

Grand Supercycle wave [II]       1720 - 1784,         Major Depression

Supercycle wave (a)                   1720 - 1722,       South Sea and Mississippi

                                                                            bubbles burst

Supercycle wave (b)                  1722 - 1770,       Temporary reprieve period

Supercycle wave (c)                  1770 - 1784,       "The Tribulation" (American and

                                                                       French Revolutions occurred

                                                                       during this period)

Grand Supercycle wave [III]      1784 - 2000,      Industrial and Technological

                                                                       Revolutions

Supercycle wave (I)                   1784 - 1835,      Early Industrial Revolution

Supercycle wave (II)                  1835 - 1859,      The Long Depression

Supercycle wave (III)                 1859 - 1929,      Late Industrial Revolution

Supercycle wave (IV)                 1929 - 1932,      The Great Depression

Supercycle wave (V)                  1932 - 2000,       Technological Revolution

Grand Supercycle wave [IV]      2000 - 2055,        Major Depression

Supercycle wave (a)                   2000 - 2021,        "The Great Deflation"

Supercycle wave (b)                   2021 - 2042,        Green Technology Age

Supercycle wave (c)                   2042 - 2055,        "The Great Tribulation"

Grand Supercycle wave [V]       2055 - 2233,         Biotech and Nanotech

                                                                         Revolutions

Supercycle wave (I)                   2055 - 2084,         Biotech Revolution

Supercycle wave (II)                  2084 - 2092,         Depression

Supercycle wave (III)                 2092 - 2144,         Nanotech Revolution

Supercycle wave (IV)                 2144 - 2152,         Depression

Supercycle wave (V)                  2152 - 2233,        Space Colonization Age 

The Great Deflation

The objective here is to flesh out the rest of Supercycle wave (a), the period that is known as the "Great Deflation".

Primary wave [4] will follow Primary wave [3]. Since Primary wave [2] is a zigzag, then Primary wave [4] would be a flat, a triangle, or a double-three to satisfy the guideline of alternation. Looking at the larger picture, a flat is a virtual certainty since a triangle or a double-three would take too long of time. Primary wave [4] would perhaps serve as a reprieve period from the deflationary crash that had been taking place for 5 years while Primary wave [3] was in force. There would still be a lot of social unrest. We would be past the point of recognition at that point, so pessimism would be the dominant social mood in play. There would be recognition by economists and analysts that a major depression is in force in the economy and job market.

After Primary wave [4] is completed, Primary wave [5] would start. Here's a model used to predict Primary wave [5].

DJIA, 1929 - 1932

There are a number of things to observe from the chart.

1 -- Notice the semi-parabolic shape of the decline following the peak of the bear market rally. This tells of deflation unfolding with increasing momentum over time.
2 -- The model suggests that Primary wave [5] will have a duration of 55 months
3 -- The model suggests that Primary wave [5] will be a stronger downward impulse than Primary wave [3]. The most likely ratio is 1.618.
4 -- The model suggests that all three of the intermediate degree impulses that compose Primary wave [5] will have equal duration, that is, 13 months.
5 -- The model suggests that the intermediate degree corrective waves that are part of Primary wave [5] will each last 8 months.

The model predicts an upside price target of 4633 in the DJIA and 485 for the S&P 500 at the peak of Primary wave [4]. The model predicts that Primary wave [5] will have 1.618 times the downward impulse strength of Primary wave [3].

The DJIA therefore falls by a factor of (1.618 * 5.748) = 9.3007

This gives us a target of 498 in the DJIA at the end of Primary wave [5], which would also end Cycle wave c and Supercycle wave (a). Using the same technique, we get a target of 48 for the S&P 500 at the end of Supercycle wave (a).

There would actually be a fibonacci relationship between Cycle wave a and Cycle wave c in terms of downward impulse strength. Cycle wave a dropped the DJIA by a factor of 1.611. Cycle wave c would drop the DJIA by a factor of 28.441. This gives a ratio of 17.653, which is very close to 2.618 cubed (17.943, which would put the target for Cycle wave c at 491).

Fibonacci convergence patterns are also important and help point out potentially significant events in the future. Here's a chart showing the convergence pattern centered on the year 1987.

We all remember the infamous Black Monday crash that happened when the DJIA fell 508 points in one day.
The next significant Fibonacci convergence pattern is centered on the year 2021. Here's the chart for that pattern.

What's significant about the year 2021? Very likely, it's when Supercycle wave (a) is completed. It would indeed be a significant event.

Here it is. The predicted wave path for Supercycle wave (a).

DJIA, 1995 - 2021

Primary wave [5] will be a period of chaos and social unrest. We have already seen a preview of the hard times that we will face during that time with all the drama taking place in Wisconsin, Michigan, Ohio, Florida, and Indiana with anti-union legislation in progress by the state governments there and the massive protests that followed as people fight for their livelihoods. In 2017, when Primary wave [5] starts, all this will play out full force at the federal level as the Palin Administration imposes austerity measures to balance the federal budget. The chaos, social unrest, protests, and labor strikes that will result will be enormous in magnitude.

Here's the picture so far:

Supercycle wave (a)          2000 - 2021,           "The Great Deflation"

Cycle wave a            Jan 2000 - Oct 2002     Dot-com bubble bursts

Cycle wave b            Oct 2002 - Oct 2007    Stock market and housing bubbles

                                                              (Housing bubble bursts in 2005)

Cycle wave c            Oct 2007 - Nov 2021   Stock market, credit, junk bond,

                                                               commodity, and student loan 

                                                               bubbles burst

Primary wave [1]         Oct 2007 - Mar 2009   Stock market and oil bubbles burst

Primary wave [2]         Mar 2009 - Apr 2011  Early Obama Administration Period

Primary wave [3]         Apr 2011 - Apr 2016  Late Obama Administration Period.

                                                                Credit, gold, silver, junk bond, and

                                                                student loan bubbles burst

Primary wave [4]         Apr 2016 - May 2017  Consolidation period with social

                                                                unrest and chaos

Primary wave [5]         May 2017 - Nov 2021  Palin Administration Period

In the next post, the rest of Grand Supercycle wave [IV] will be projected.

The 45th President

One of the correlations that was uncovered early on when socionomics was in its infancy is the correlation between the stock market and presidential election results. The stock market, in many ways, measures social mood fluctuations in real time, with bull markets resulting in an increasing positive social mood, and bear markets resulting in an increasing negative social mood.

Here's a chart of the DJIA from 1930 - 2011 with the election results added onto the chart.

There are a lot of observations that we make from the chart.

1 - At the lows of Supercycle wave (IV), Hoover was ousted in a landslide in 1932.
2 - Near the high of Cycle wave I (after four years of bull market), F. Roosevelt won a second term in a landslide in 1936.
3 - With Cycle wave III playing out, and the point of recognition reached in 1954, Eisenhower won a second term in a landslide in 1956.
4 - With Cycle wave III still playing out, Johnson wins a second term in a landslide in 1964.
5 - Nixon wins a second term in spite of a Cycle degree bear market in force. Nixon was fortunate that a positive social mood returned at the peak of Primary wave [D] when the election took place in 1972.
6 - Just two years later in 1974, at the low of Cycle wave IV and the fear of a depression pervasive in media and politics, Nixon resigned due to political pressure.
7 - In 1980, with a Primary degree bear market in force (Primary wave [2] of Cycle wave V) and a long recession, Carter was ousted in a landslide.
8 - With the return of a bull market, Cycle wave V of Supercycle wave (V), Reagan wins a second term in a landslide in 1984.
9 - Bush 41 is ousted in a landslide in spite of a bull market in the nominal DJIA in force in 1992. We were still in a Primary degree bear market in terms of the Value Line Index at the time.
10 - With the bull market still in force, Clinton wins a second term in a landslide in 1996.
11 - In 2004, Bush 43 wins a second term by a narrow margin. The stock market took a large dive in Cycle wave a from 2000 - 2002, and recovered much of the lost ground by the time voting took place in 2004.
12 - John McCain was defeated in a landslide in Nov 2008 as we were approaching the low of Primary wave [1] of Cycle wave c of Supercycle wave (a). Obama was elected by a large margin.

With this information on hand, we can deduce that bull markets result in landslide retentions and bear markets result in landslide oustings. This correlation stands the test of scrutiny when we look all the way back to the birth of the United States, and the correlation also holds in other nations as well. Social mood is a big part of the equation. In bull markets, voters want to "stay the course" as the leadership gets credit for continued progress and prosperity. In bear markets, voters blame the party and leaders in power for the hard times that are playing out as a result of the bear market, and thus adopt the mantra "throw the rascals out".

For example, in the 2008 presidential election, Bush 43 and the Republicans got the blame for the "Great Recession" and many Republicans were voted out of office. The result was Obama winning the presidency by a large margin and the Democrats getting a filibuster proof majority in the Senate and a large majority in the House.

In 2010, voters started to blame the Democrats for the "Great Recession". One would think that voters would remember how bad it was to have the GOP in charge in 2000 - 2008 and choose to keep the Democrats in power. Instead, many democrats were voted out of office and the GOP regained control of the House. Social mood was the reason for the outcome in the 2010 elections. All of this happened in spite of a Primary degree bear market rally still playing out.

If the voting patterns show one thing, it's the fact that people generally follow the herd when it comes to voting. People generally vote with their limbic systems (the part of the brain that induces herding) rather than their neocortex (the part of the brain that enables people to handle critical thinking).

With all of this in mind, it is possible to forecast future election outcomes through socionomics. Here is the forecast for future presidential elections:

In the 2012 election, Obama will win a second term by a narrow margin. The GOP will retake the Senate and increase their majority in the House. At that time, Intermediate wave (2) of Primary wave [3] of Cycle wave c will be playing out. Optimism should still be evident, but not at the levels achieved at the top of Primary wave [2].

In the 2016 election, voters will blame the Obama Administration and the Democratic Party for the "Great Deflation". At that point, Primary wave [3] will have fully played out, dropping the DJIA to 2185 and the S&P 500 to 218. Voters will be itching to vote the Democrats out of office as fast as they can at that time. All bets are off when we have 41% unemployment (U6) in the United States. We will be past the point of recognition and people will have realized that a major depression is in force.

This is how Sarah Palin gets elected as the 45th President of the United States. It won't happen because of the quality of her platform. Voters won't care if her platform is the right one or the wrong one for the country. Voters will elect her as an act of repudiation against the Obama Administration for having to suffer from the "Great Deflation". Sarah Palin will be the next President of the United States.

The Palin Administration Period would logically be associated with Primary wave [5] of Cycle wave c and it will start in 2017. In the next post, we'll examine that period in detail.

Predicting Primary wave [3], part 3

In the last post, we established that Primary wave [3] of Cycle wave c of Supercycle wave (a) will last 5 years and bring the DJIA down to 2185 and the S&P 500 down to 218. Furthermore, we also established that Intermediate wave (1) of Primary wave [3] will have a duration of 13 months.

Now we turn our attention to Intermediate wave (2). Here's the chart that is used to predict Intermediate wave (2).

DJIA, 1930

There are a number of observations about the pattern.

1 -- The pattern is a zigzag.
2 -- The model suggests a fibonacci relationship between Minor wave 2 (of Intermediate wave (1)) and Intermediate wave (2) in terms of duration. The large zigzag pattern lasted 2.7 months (3 time units) and the smaller zigzag pattern lasted 0.9 months (1 time unit). The model predicts that Intermediate wave (2) will have a duration of 8 months.
3 -- The model suggests a relationship of equality between Minor wave A and Minor wave C in terms of amplitude and duration.
4 -- The model suggests that Minor wave A of Intermediate wave (2) will have 78.6% of the length of Intermediate wave (2).
5 -- The model suggests that Minute wave [i] of Minor wave A of Intermediate wave (2) will have 38.2% of the length of Intermediate wave (2).
6 -- The model suggests that within Intermediate wave (2), Minor wave A will last 3 months, Minor wave B will last 2 months and unfold as a flat, and Minor wave C will last 3 months.

Within Intermediate wave (2), we have a price target of Dow 10215 for Minor wave A, Dow 8600 for Minor wave B, and Dow 10820 for Minor wave C. Intermediate wave (2) is expected to retrace 61.8% of Intermediate wave (1). The price target for the S&P 500 at the end of Intermediate wave (2) is 1130.

Here is the chart showing the projected wave path of Intermediate waves (1) and (2):

DJIA, 2009 - 2013

Intermediate wave (2) represents the last stand of the bulls. Optimism is expected to grow over time during this period, although it won't reach the lofty levels achieved at the peak of Primary wave [2]. From a socionomic perspective, Obama will win a second term because the stock market (and therefore, positive social mood) will be rising when voting takes place in Nov 2012.

The rest of Primary wave [3] is projected in the same fashion, although I won't go into detail at this point.

Here's another chart showing the model used to predict the rest of Primary wave [3].

DJIA, 1930 - 1931

The model suggests that Intermediate wave (4) will have a relationship of equality with Intermediate wave (2) in terms of duration. The model also suggests that Intermediate wave (1) is the smallest of the three impulse waves that compose Primary wave [3]. From the model, the price targets and durations follow.

Intermediate wave (3) will last 15 months and take the DJIA down to 4300.
Intermediate wave (4) will last 8 months, form a flat, and take the DJIA up to 5600.
Intermediate wave (5) will last 16 months and take the DJIA down to 2185 and the S&P 500 down to 218.

Here's our updated picture for the "Great Deflation" period:

Supercycle wave (a)      2000 - ???,                    "The Great Deflation"

Cycle wave a              Jan 2000 - Oct 2002,    Dot-com bubble bursts

Cycle wave b              Oct 2002 - Oct 2007,   Stock market and housing bubbles

                                                                      (Housing bubble bursts in 2005)

Cycle wave c              Oct 2007 - ???,             Stock market, credit, commodity,

                                                                      junk bond, and student loan

                                                                      bubbles burst

Primary wave [1]       Oct 2007 - Mar 2009,    Stock market and oil bubbles burst

Primary wave [2]       Mar 2009 - Apr 2011,    Early Obama Administration Period

Primary wave [3]       Apr 2011 - Apr 2016,    Late Obama Administration Period.

                                                                 Credit, junk bond, gold, silver, and

                                                                 student loan bubbles burst

Intermediate wave (1)    Apr 2011 - May 2012,   Resumption of deflation

Intermediate wave (2)    May 2012 - Jan 2013,    Last stand of the bulls

Intermediate wave (3)    Jan 2013 - Apr 2014,    United States defaults on its debt. 

                                                                     Deflation accelerates.

Intermediate wave (4)    Apr 2014 - Dec 2014,   Dead cat bounce with increased
                                                                     social unrest

Intermediate wave (5)    Dec 2014 - Apr 2016,   Major banks collapse, causing
                                                                     large scale bank runs

Primary wave [4]           Apr 2016 - ???,        Consolidation period with unrest

                                                                  and chaos

Primary wave [5]           ??? - ???                 Palin Administration Period

In the next post, we'll look into the 45th administration period. I am going to make a bold prediction here -- Sarah Palin will be the next president of the United States. The socionomic model actually supports this scenario.