Long Wave Dynamics Letter

Tracking Market Cycles for Global Investors & Traders

A Publication of Long Wave Dynamics, LLC COPYRIGHT OCTOBER 2012

The International

Summary: Fantasy Land Between Inflation and Deflation Both the inflationist and deflationist thought the theoretical arguments would be settled with facts by now. There are few who fear deflation these days, but the most important deflationists are Chairman Bernanke and the ECBs Mario Draghi. They are clearly focused on the global deflationary forces in play. They are buying years of mistakes by the politicians and the bankers to stop global debt deflation. On the one hand Im appalled by their actions of covering for the politicians and the bankers. On the other, they have actually managed to stop the devastating forces of global long wave debt deflation, at least to date. The question was whether there was the political will to let them do it, but the politicians caved long ago. Even former free market capitalists are cheering on the central bankers and begging for more. There is a global effort underway to push the dying long wave mistakes into the coming long wave spring. The difference in $40, $400 or $4,000 billion a month to Chairman Bernanke is only decimals. He is clearly willing to do anything to defend his Ph.D. dissertation, even at the risk of torching the global economy with inflation in the coming long wave spring season.
Chart of the Month (see page 15) Honk Kongs Hang Seng on a Golden High Wire

Contents

Market data through October 4, 2012

The Long Wave View Long Wave Season Summary Kitchin Cycle Update Kitchin Third Evaluation Wall Cycle Analysis Quarter Wall Countdown Dynamic Web Price Targets Large Cap Value Investing Gold, DGC and Gold Shares Developed & Emerging Markets Bonds & Interest Rates Commodities Currencies Prices, Utilization & Baltic DI Global Trade Real Estate Technology & Invention World Systems Analysis Perspective

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Long Wave View: The 2013 Deleveraging Air Pocket Scenario U.S. Fed Chairman Bernanke will clearly do anything required to stop deflation, as long as he is Chairman. Market support operations are producing higher lows in the Wall and business cycles and expanding them in time. The $144,000 question is whether they can do the same thing to the long wave winter bottom, which would have occurred in 2009 without the trillions in central bank intervention. In short, there is no reason to think the central banks cannot buy a higher low in the long wave in global equity markets than would occur otherwise. They may in fact have done so in 2009. If they stop cooperating and politics get in the way of the stop deflation at all costs agenda, it could all go south in a hurry. This interview with Ray Dalio of Bridgewater at a recent CFR event is worth listening to, even if Maria Bs interviewing skills are remarkably deficient. Dalio manages to provide valuable insights from his depth of experience. The powers that be globally are attempting a balance between private sector deleveraging, pumping and austerity. In the U.S. the austerity comes in 2013. It could tip the apple cart. The key facts that need to be recognized are that the bad debts of certain parties that were coming due have and are being made whole. Mr. Market would have cleared these debts from the system with bankruptcy. Global asset prices would have been adjusted. The central banks are circumventing Mr. Market, making bad debts and bad investments whole, and pushing the debts out in time and onto the backs of the public. In another time it would have been characterized as a criminal operation, today it passes for accepted monetary and fiscal policy. I add fiscal policy, because the central banks have more than crossed the line and are doing the bidding of the politicians that grant them sanction. To make matters worse, former free market Deleveraging capitalists are begging for it. They Total Debt/GDP have sold their souls. There will be hell to pay in one form or another. The U.S. central bank has pumped or loaned in excess of $10 trillion into global markets over the past four years, and by some estimates over $16 trillion. The higher figure represents the U.S. GDP. There is clearly no reason to think they will not double or triple down if required. You can add U.S. fiscal deficits to these numbers. A long wave winter debt collapse was clearly postponed at minimum, but likely only mitigated. A large portion of the bill for this long wave bailout will be paid by reduced economic growth in the coming long wave spring and borne by those that did not make the mistakes. However, life is too short to spend it dwelling on the grand theft and larceny of crony state capitalism on steroids, where Uncle Ben takes care of the mistakes of fellow state capitalists. Its days are numbered. But how do investors and traders react? You simply have to factor this new but passing age of state capitalism into the equation. Investors should look for great deals on the price of future cash flows in global companies at cycle lows. Traders should factor the cycles into their trading strategies, even if the cycles are running shallow and expanding in time from central bank liquidity.

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Long Wave Winter Season: The Deflation/Inflation Tightrope The central banks are trying to manage a long wave winter landing that requires extensive public and private deleveraging, between the forces of inflation from monetary and fiscal easy money and the deflationary forces of a long wave winter debt collapse and deleveraging. The inflationists are scratching their heads and trying to figure out how in the world all this pumping, intervention and fiscal deficit have not led to inflation. The only explanation is a long wave winter debt and overproduction deflation that is producing the drag in the other direction. They are walking a tightrope between inflation and deflation. One reason they have been successful to date, at least at stopping the deflation, is that unlike the late 1940s and early 1950s, when capitalism was losing markets to communism, capitalism is greatly expanding into the emerging markets. Without these new markets coming on line the debt deflation in the developed would be overwhelming the system already. The problem is that these positive forces at work with emerging and frontier markets driving the exports of global franchise businesses, could trigger massive inflation as the global economy turns into a long wave spring season. In many respects countries like India, Kazakhstan, Belarus and others have and are making the turn into a long wave spring. Profits in the developed world indicate the forces at work in the long wave spring from automation. The Internet is entering its next phase, being a key technology initially deployed in a long wave winter, but really accelerates change to industry in the long wave spring. Once the developed world makes the turn into spring, the liquidity in the system from central banks antideflationary efforts, will ignite inflation. Private deleveraging would have been much more profound without central bank intervention, and government debt would have been constrained. The single force holding the long wave in the long wave winter season of unmanageable debt, is that the central banks have stepped in to keep the markets from clearing debt and prices.

Without Central Banks This line would be Plunging

Rate of Change Looks more like Deleveraging

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Kitchin Business Cycle Update: The 2013 Ending? It is certainly reasonable to ponder whether the business cycle low in 2009 was the end of Kitchin cycle #16, and the inflation adjusted low in equity markets for the long wave. It would be much easier to make that case if not for the fact that this is the most government debt leveraged equity rally in human history. The private sector has been deleveraging during this business cycle. During the first business cycle of a long wave spring the private sector should be leveraging up and not down. Then there is the little problem with emerging markets needing to lead the charge into the long wave spring, when China, the biggest of the emerging markets, appears to be in trouble. The objective of the central banks is to make sure 2009 was the long wave low. They could succeed, but Mr. Market likely has other ideas for 2013.

Nice L2 Golden Turn?

Wall #7 Running out of Steam...

November 2012 23.6%

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Kitchin Third Evaluation: Third, Last, and Weakest Set of Three Wall Cycles Like every 3rd Wall cycle, the 3rd Kitchin Third typically contains air pockets that allow the herd instinct to break to the downside. Key equity markets in the developed world appear to have full confidence in the central banks to do anything necessary to keep the market running higher, but the last third of the business cycle is where things can go wrong fast. Sure, the central banks could announce they are buying equities in the interest or price stability, but at some point here, even the most jaded of investors will have trouble living with this leveraged rally. The assumption is that the computers are not subject to the herd instinct and the right algorithms with large enough dark pools can always catch the market. The problem is that the quants that program the machines are not above the herd. Beware...

August 2013 will mean smaller final Wall cycles than lately.

January 2013 61.8% Ext.

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Wall Cycle Analysis: Stretching from Liquidity but Fragile Like the Wall cycles of recent years, Wall #7 appears to be stretching from the liquidity that engenders confidence. The problem here is that the later you are in the business cycle the greater the air pocket that can develop under short squeezes and rallies produced by actual and anticipated QE operations. It appears as if Chairman Bernanke is growing more obsessed with equity markets as the key to his virtuous circle. Your editor is growing increasingly convinced that the only way to play this market globally is to buy clear Wall cycle lows in the developed world. If you are more risk averse you sell them early. If you are young and can take more risks, you ride them longer. This particular Wall #7 has had a nice long run since the early June lows. As the QE in the system increases it could certainly stretch longer. The expectation remains that Wall #7, Wall #8 and Wall #9 will hit serious down drafts into mid-2013. You may prefer the 8-week to the 55-day slow. The Wall cycle is the alpha producing cycle.

MACD Sell

Panic when the L1 85.4% 1361.08 does not hold in coming Wall #7 decline!

The Primary Time Target

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Quarter Wall Countdown: Sentiment is the Key in QW Lows The central bank equity price support operations, aka QE, have been distorting the QW cycles for a long time. It is getting worse. Traders have to realize they are trading with or against the Fed, and add the clues provided by the QW cycles. Investors should focus on the Wall cycle and leave the Quarter Wall cycles to the sophisticated traders that understand the dark pools at the hedge funds, big banks and the Fed. Ive been bothered by the shallowness of the low June 25th, which ended a 38.2% short QW cycle. Notice that the only time the S&P 500 has dropped under 20 in the 8-day slow stochastic since June 25 was the subdued decline into September 26. That was a 161.8% extension of a QW from 6/25. Also notice that it contains what appear to be four smaller cycles. These are likely the liquidity distorted and lengthened 8.8 -day cycles. That makes this QW3, with its life dependent upon central bankers that do not respect markets and free actors as the legitimate price clearing mechanism.

Another Central Bank Mutated QW Cycle How about some environmental protection for markets?

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Time Cycle Forecasters: In the Age of Cycle Manipulation The manipulators view cycles as failures of human engineering, not a form of market natural selection of good ideas and operators. In the future manipulation will be viewed as the artifical picking of winners and losers and be abolished. Cycles will then run their natural lengths, like in the 1800s where the 42 month cycle was observed as a recurring natural phenomenon that shook the trees of business and knocked down the dead branches. This will not occur on Chairman Bernankes watch. He appears to have a phobia of cycles large and small. The day when nature is restored may be a long time coming. As long as the pumps are on full bore, look for the cycles to run long. Even so, that 9/14 top was close to that 9/11 61.8% target for a left translated Kitchin Third. It may top early and still run its ideal length into next summer, producing the sort of left translated cycle expected to end a business cycle.

Romney Cycle Obama Cycle

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Dynamic Web Analysis: Reflecting on the 1995 K Wave Forecast for a 2009 Ending The fact that McGraw-Hill published my book The K Wave in 1995, which stands as a record with numerous charts indicating a long wave ending in 2009, should probably give me more respect for the 2009 low in global markets. Maybe Im just not sentimental enough, but the fact that the debt that produced that crash was repackaged and pushed onto loaded onto those that had nothing to do with it still makes me suspect. However, no political will has materialized, except of course Ron Paul, to stop the central banks from destroying the basic function of markets and shifting the risks into the future, forces me to at least consider that Bernanke & Co. bought a higher low and a long wave ending in 2009. Of course the Fed did not come clean on their little multi-trillion dollar loan program until late 2010, when global markets had been feeding on the central bank liquidity for some two years. If the Fed had not stepped in, that 2009 low would have taken out 450 like a hot knife through butter. The system was in fact collapsing in a debt implosion. The expectation remains for a final crash to end this business cycle in 2013, but a few trillion or so a month could make it less painful. The 2009 low or 2013, we will all be paying for it for the next 30 years plus. Figuring out a way to proceed profitably is the goal. Buying the upcoming business cycle and the Wall cycle lows is the plan.

Frenzy Range 1982-2007 61.8-100%

The Fed will defend at all costs...

What would the 2009 Low have been without over $10 trillion in Central Bank Funding, TARP, and trillions more in deficit spending? Likely far below 450, in a final long wave plunge.

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Cycle Value Investing Review: Limited Value After the Wall Cycle Run There are different approaches and styles to successful investing and trading. You have to decide what your rules are and stick to them. If they dont work, set new rules, but if they work, be patient and consistent. The basic approach proposed by LWD/MCD is to combine the value investing of Benjamin Graham, with market cycle analysis. The objective is to buy large cap global franchise value and cash flows at cycle lows. You have two or three opportunities a year to buy value at Wall cycle lows. Selling after Wall cycle rallies is advised late in a business cycle, and especially in a long wave winter. However, starting next year, buying and holding will be advised for some companies, as the global economy begins to make a clear transition into a new long wave spring season. If you sell early you miss the remaining upside in a Wall cycle, but you also substantially reduce your risks. Of course making investment decisions is complicated when central banks are so active in providing liquidity and support activity to global markets. Their goal is to stamp on the cycles, but this is a passing period and markets will return to more normal cyclical behavior in the future. Be patient for Wall cycle lows.

Pulled Intraday 10-04-12

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Individual Stock: Siemens Wall #7 Run Sitting on L2G Support Historically the 20-week cycle, which I rechristened the Wall cycle in my 1995 book The K Wave, has often referred to as the traders cycle. The chart of German giant Siemens illustrates that the Wall cycle is just as much an investors cycle as a traders cycle. In June, just a few days past the golden ratio target of a Wall cycle low, Siemens was hammering the Level 1 38.2% grid, it was oversold on the 55-Daily or 8-Weekly slow stochastic, and sentiment was in the basement, well under 20. Price, time and sentient were signaling a Wall cycle low. Siemens has enjoyed a 15% plus rally into August and almost a 30% rally into September from the June lows. At the June lows Siemens was a global franchise large cap sporting a solid dividend in an oversold Wall cycle low. The strategy I am proposing to investors is to use Wall cycle lows to buy in order to manage a diversified portfolio of 8-12 global franchise large caps. This works regardless of your long wave views, even if you dont nail the exact Wall cycle lows and highs.

Siemens Market Sheet Music

June Wall low below the early October low

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Gold: Gann 3X1 Resistance Gold is running into resistance at the Gann 3X1 and the L2 90.9% target. This price level also shut down the rally in early 2012. If gold stalls here, and the rally looks tired, the key support below here has to be the L2 golden at 1701 and the Gann 2X1. Cleary the downtrend since the top in 2011 was broken with the breakout above the Gann 1X1 in late summer. Gold is the money, but it is also a commodity. If commodities do not buy into the central bank plan for stopping deflation, and keep their QE3 rally going, gold will continue to exhibit its bipolar behavior between its role as a commodity and currency. Gold will play an increasing role as currency in the long wave spring season. First of all there is inflation in a long wave spring, a lot of it at the rate central banks are printing, and international capitalism is getting tired of managing around the currency wars being fought with fiat currencies. Digital gold currency makes more sense every day as the politicians and the central bankers they sanction destroy the money world.

MACD Sell

Watch the L2G and the Gann 2X1 for Support

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Global Gold Shares: The 519 Resistance in Price, Time and Sentiment Clearly a few gold stock traders are tracking the HUI grids, and recognize that golden ratios always deserve respect. Gold shares will eventually make it over the 519 resistance, the question is when. In price, time and sentiment the rally up to 519 is due for a break. The clear resistance that is evident at this level means that once it manages to clear 519, then the next leg up will be underway. A retest of the L2 golden back down at 449.01 may be in the cards, that coincides with a risk off move in global assets. October is the month of famous risk off moves in global markets. Recognize that using price, time and sentiment for entry and exits only works if you are counterintuitive and invest or trade counter to the crowd. The crowd was in when the HUI tagged 519, and now they are questioning their timing, and maybe even their sentiments.

A price, time and sentiment turn?

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Developed Markets: Hiding in the DAX If you are not sure about the safety of the banking system, you own gold, our currencys future is in question, real estate is not an attractive asset class, and the central banks appear to be dead set on triggering global inflation, where do you hide? One place is clearly in large cap equities with global franchises that can maneuver production and core operations away from the grasps for more even more taxes from national governments and in fading and failed era of state capitalism. We are in a window where international capitalism is escaping the multi-decade bondage of state capitalism. The too-big-to-fail banks living off the largess of the state do not represent international capitalism. They are in their final years. The producers are going to win this world systems battle for survival, not the banks and politicians. Certainly there are risk in the equities of producers, but the alternatives have even more risks. It will soon be time to aggressively buy the cycle lows, when you can buy large cap value and future cash flows that are slowly but surely escaping the clutches of governments that overreached and must fail.

L1 85.4% is the Wall #7 Breakdown Line

Where would it be without the LTRO and Unlimited QE?

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Developed Markets Continued: Hong Kong on a Golden High Wire A review of Hong Kong is overdue. Hong Kong is a developed market, and is the gateway to emerging Asia. Consider the capital that was laid on the line to get the Hang Seng to gap up around 400 points in a remarkable leap over the L1 golden back on September 14. It appears that someone with very deep pockets wanted to make sure the gateway to Asia stayed in the Frenzy range of the Level 1 Fibonacci grid. My own view is that it took far more than private capital to make that leap, all in an attempt to stop financial asset deflation. Yes, Fibonacci is a natural force at work in markets. They are the fingerprints of the invisible hand at work in the global economy, but someone is trying to do the work of God.

A Remarkable Gap up to the L1Golden

Support produces longer cycles...

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Emerging Markets: Road Signs in India Either liquidity provided by the central banks in the developed world are finding their way into Indias equity market, or a Kondratieff long wave spring is underway in this emerging market. Most likely it is a bit of both, but the liquidity has the edge. The central banks are intentionally and very specifically trying to force investors out of the safety of short-term deposits with negative yields and into riskier investments. Investment strategists managing large funds around the world are throwing in the towel and moving into riskier assets. Of course the risks is that this just produces another round of bubbles that must burst for the global economy to rebalance. Indian stocks vs. euro deposits in a Spanish bank may be the right decision, but there will be some serious pain before this investment engineering is over.

Never Ignore a Golden Ratio

Late in the Wall Cycle Run!

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Emerging Markets (continued): Brazil Ahead of the Pack on the Downside It appears as if investors in the key emerging market of Brazil are more nervous about this Wall cycle rally than those in the developed world. Maybe they know something the rest of the world has not picked up on just yet, like demand from China is collapsing in the final swan dive into 2013. The story from Reuters points to weak Chinese and European demand weighing on Brazilian and Mexican markets. The BOVESPA is closing in on the L1 76.4% target, which will determine whether this Wall cycle is toast, or if central bank liquidity in the developed world can trickle down to South America and keep the Wall cycle rally alive. A bounce is likely, but watch to see if it can clear the L2 23.6% at 59026 and the bounce.

The Upcoming Test of Wall #7 Support

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Bonds and Interest Rates: What is the Long Bond Telling Us? It would be much easier to buy into the story lines that say the central banks have managed to stop the global deflation and inflate the global system, putting a bid under equity prices, if bond prices were falling harder. Yes, they have sold off from the summer highs, but they are far from crashing. The last few weeks have seen a rally. This Fibonacci projection grid continues to indicate that long term U.S. government bonds still has the potential to go to new highs. The first clue that the long wave winter and threat of deflation remains alive and well is that long-term bond prices cannot mange a real selloff, and continue to rally into the face of the rising inflationary expectations of unlimited QE3. A rally to new highs in long-term U.S., German and Swiss bonds will mean the central banks are losing control of the fight against deflation, and the rally in equities is highly suspect.

The Projection Grid to 164 is Still Exerting its Magic

An Important Reversal?

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Commodities: Buy the Rumor and Sell the News The spike higher in commodities from the summer lows was largely driven by the conviction that the central banks will do anything and everything necessary to put a bid under various asset classes, including commodities. Investors and hedge funds piled in, especially after the double bounce off the L2 38.2% inverse golden ratio at 267.08. The next L2 38.2% target at 319.76 has reversed the trend. The market has rallied back up to the 309 target, which will determine the short-term trend. The sharp reversal from the 319 target should force the inflationist to ponder the argument that QE is guaranteed to produce deflation. It is not. Mr. Market knows that someone always has to pay the bill for government funded boondoggles and the central bank policies sanctioned by government. Watch the CRB, it signals risk on and risk off ahead of equities. Below 293, deflation and the risk off trades are back on in a big way.

The CRB Hit the L2 38.2% Wall

Notice the Switch to 55-daily Slow Stochastic

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Currencies: US Dollar Index and Inflation vs. Deflation The deflationary scenario falls apart without a rallying U.S. dollar. Debt deflation requires an unbalanced repayment of debt in dollars. If the dollar is falling then commodities can keep rallying, preventing deflation in the costs of goods and services. The late September test of the Level 1 Fib grid of 79.18 seriously tested the dollar deflation argument. This current final leg of the long wave decline should see a rallying if not soaring U.S. dollar. Granted the trillions in central bank pumping should send shutters up the spine of any deflationist, but the fact is that all the pumping has only produced stagflation. Only the long wave debt deflation undertow explains it. In short, if the dollar does not rally soon, odds rise that this is a long wave spring season, weighed down by debt. This may be deflations last stand.

Deflations Last Stand?

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Currencies Continued: EURUSD Failure at the L1 Golden The brief spike over the L1 Golden in the EURUSD was unsustainable. It is now on the way back down, likely to test the L2 golden at 1.2351 before years end, and then the L2 inverse golden at 1.1915. The rally back up to the Level 1 golden was a surprise, in light of the weakening economy in Europe and the promise for unlimited QE as required from Draghi. The EURUSD clearly rallied in light of the counter to Draghi of QE3 for as long was required announcement from Chairman Bermanke. Make no mistake about it, there is a currency war going on in place of a trade war during this long wave winter season. Europes economic recovery will require a much lower euro to drive exports. The latest rumors are that Germany will leave the euro before Greece. If so, the EURUSD will hit parity sooner rather than later. It is more likely that Germany stays in, but if not, a strong deutschmark would allow German corporations and investors an opportunity to expand globally and acquire additional global production capacity. They could expand their global franchises with foreign investment on the back of a strong deutschmark, while the rest of Europe gets their act together.

The rally attempt over the L1G. Expect failure.

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Prices, Capacity Utilization and The Baltic Dry Index It would be nice to go all in with the optimist and believe that I actually predicted the long wave low of 2009 in many of the charts in my 1995 book. If it wasnt for all the debt I could almost buy it, but other key items just dont point to a new long wave spring. Capacity utilization appears to have hit a wall, and the Baltic Dry Index is testing the 2009 lows. Trillions in pumping and easy money and no meaningful inflation. Conclusion, its not over.

Testing 2009 Low

No K-Wave Spring! Yet.

Chairman Bernanke is trying to guarantee that the plunge into 2009 was it, but a 2013 air pocket could produce the real low.

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Global Trade: Election Posturing or Trade Wars Brewing You have to ignore much of the trade war saber rattling that occurs in a U.S. election year, but suddenly the talk of trade wars is picking up steam. The Obama Administration is starting a tomato fight with Mexico, who accuses the Obama Administration of pandering to Florida farmers in an important swing state. The New York Times considers the brewing trade conflict between the U.S. and Mexico stemming from low cost tomato imports from Mexico. The Detroit Business News is reporting that Obama wants to avoid an all-out-trade-war with China, leaving open the option of an almost all out trade war. Romney has promised to name China as a currency manipulator. The last time China loosened the trading range the Chinese Renminbi fell against the dollar, so Im not sure the manipulation argument will fly, but it must be expected to help win votes. Sky News reports that the tit-for-tat between the U.S. and China is escalating. The most disturbing news on the trade front is that the China-Japan island dispute is turning into a trade war that could have global implications and pull in the U.S. and others, as reported by the Atlantic Wire. Real Estate: $40 Billion a Month Will Help The U.S. central bank QE3 program, which is spending $40 billion a month, as long as it needs to, has multiple objectives. The first is to take bad mortgages off the books of the big banks and transfer them to the U.S. Fed. QE3 is close to one TARP a year until further notice. Another reason is to try and put a floor under U.S. real estate prices, when in fact it will only prolong the real estate depression. The idea that QE3 will create jobs is suspect. Maybe a few more bankers will keep their jobs and some folks at Fannie and Freddie, but not real job impact. Any jobs in construction sooner will mean less jobs later. Housing prices and sales in the U.S. have shown some firmness recently, but the housing depression is not over. QE3 will prevent the market from clearing and delay the real recovery, even if it appears it is helping. Technology and Innovation: Jamming Speech and Element 113 Of course free speech is an important component of any free society, but inventors in Japan have come up with a device that jams speech by delaying the sound of a speakers voice, causing them to pause. On a more serious note in the area of innovation in Japan, New Scientists reports that it looks like the Japanese may earn the right to name element 113. Until this only U.S., Russian and German labs have discovered and earned the right to name elements. World Systems Analysis: The Struggle Continues The current long wave winter crisis is providing front row seats in the struggle for the world system that will dominate the future. There is some basis for the view that socialism is gaining the upper hand, such as the 75% tax rate in France. But the French producers are already leaving, moving to where they are appreciated. Many view this as a conflict between capitalism and socialism, when in socialism has no chance and state-capitalism is failing miserably. The outcome of the current global crisis will be the clear failure of both socialism and state-capitalism. International capitalism is morphing rapidly and winning. Capital is freer than ever to flow to where it is appreciated globally. A global corporate tax cut war is brewing.

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Page 24 Perspective: The Coming Caesarist K-Wave In the Caesarist K-Wave coming up when the runaway deflation of the coming 15 years runs out, the middle class will begin trading all power to the executive so that legislative and judicial functions become mere rubber stamps. A retired major general has straightened out the education system in Seattle. Juliani has straightened out New York City. These are protoCaesarist straws in the wind and you see them everywhere now. The masses demand Caesars because of; a) the breakdown of law and order in the overpopulated cities, b) the tendency of politics to steadily destroy the money world, i.e., to confiscate especially urban property. ...we have stated for years that you can read the biographies of the next twelve Presidents in advance in Lives of the Caesars by the ancient historian Suetonius. Stick around for Nero, Caligula, Heligabalus. The gossip columnists little dream what awaits them. Civilization in excess brings always increasing addictiveness. As the I Ching, the Chinese Book of Changes said as early as 2,000 B.C. Success breeds failure. Failure breeds success. But this turn of the Spenglerian November into December coming up in a few years is an even more major watershed because it is the turn of the whole Spenglerian Season of Autumn into Winter for our whole Western culture. Autumn (1500 A.D. to 2000 A.D.) is the Season of the workaholic ant building up the great cities in anticipation of the coming Winter. P.Q. Wall, Destiny is Real, page 193 P.Q. Wall penned the above in Destiny is Real in 1999. The deflationary winter has been challenged by the electronic printing presses and bubble economics. Recall that your editor is far more optimistic than P.Q. Wall on the prospects for civilization coming out of this long wave winter. Im a realist, not a fatalist. The rise of Western Civilization, verses civilizations of the past, is rooted in moral law and order that may outlast the fall or transformation of Western civilization into a new golden age. Still, pondering P.Q.s thinking during the U.S. election season is worthwhile. There are certainly signs that the legislative and judicial functions are becoming mere rubber stamps of growing executive power. The U.S. has operated without a budget for years now while executive power is rubber stamped and goes unchecked. With Bernankes mortgage bond buying spree the central bank will own over 30% of all U.S. mortgages before 2015, and they will not hesitate to own far more if required to stop the deflation. The $2.8 trillion on the U.S. Feds balance sheet includes urban commercial property as well. So in addition to government confiscation of property the government sanctioned central banks are buying it. Id like to dismiss P.Q.s pessimism for our political prospects, but his accurate forecasting to date does not allow that option. The world needs game changing events over the next year, or P.Q. may prove correct, with the Caesarist K-Wave upon us.
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