Does anyone else think we have entered spring in the Kondratieff cycle?
1 Like
A friend suggested an theoryâŠ
Currently central banks hold a lot of the treasuries of their governments. So a lot of debt is basically on the active and passive side of the countries balance sheet.
Now, if you were to simply net both, the debt goes down without any real harm to any real world investor.
Would this drive inflation? Probably not.
Would this reduce trust in the currency? Maybe a bit, but for USD and EUR probably no alternatives.
What do you think, is this the way out for a reset of the debt without a major craah?
For the US, that would apparently be 5 Trillions out of 35. I donât think it makes a significant dent if nothing in the fiscal policy is changed.
Federal debt held by federal banks:
Source: Federal Debt Held by Federal Reserve Banks (FDHBFRBN) | FRED | St. Louis Fed
Total public US debt (higher curve, currently around 35T) and debt held by the public (lower curve, currently around 28T):
Source: Debt to the Penny | U.S. Treasury Fiscal Data
Sounds convoluted to me and I really donât see the cycles in this graph. Can you educate me further on what makes each season of the Kondratieff wave and what would make the current times a spring of such wave?
Edit: I should be more precise: I donât see cyclical patterns on the graph (the 1845-1896 seems particularly odd to me) and would fail to extend it; which leads me to assume that Kondratieff waves are not pure market events, in which case, knowing the underlying would be useful. I may be wrong but if itâs purely market driven, then I fail to see the cycles.
get a mortgage
Yes, I think a long term low interest fix will be a winner.
Do you think inflation in dollars will jump over to inflation in CHF? Or more likely that the dollar will lose more value compared to CHF? Probably a combination of bothâŠ
Well the long term trend has been for USD to decline vs CHF.
Though I wonder with China economy in trouble whether we actually get deflation exported to us over the next years.
As of 2023, approximately 40% of the revenue for S&P 500 companies is generated from outside the United States.
But also, companies are assets. When theyâre denominated in USD, the assets are still worth the same as when theyâre denominated in some other currency.
If the USD currency continues to devalue against other currencies like the CHF, then the price of these assets (in USD) will go up the same.*
* Probably more, as e.g. S&P 500 companies have been growing earnings with a close to 10% CAGR. Sure, thatâs nominally and before inflation, but Iâm pretty sure if you look at it measured in CHF, you still arrive at impressive numbers.
1 Like
If they stay the same asset, they do, but if their earnings prospects vs other investable assets diminishes as a result of the USD loosing value, then their intrinsic value diminishes too. Thatâs why the currencies in which the earnings are made and the liabilities are held would matter to someone trying to sort through companies to hedge against a potential crash of the USD. Itâs quite a bit of work and has to be performed regularly so Iâm not sure Iâd go through it.
1 Like
I see your point.
I still wouldnât bet against America (insert Warren Buffet quote here 
).
2 Likes