Although the long-term economic trend is contracting, we’re currently passing through a small window within the yearly Kress cycles which began at the end of 2008 when the 6-year cycle bottomed. The bottom of this important cycle lifted a sufficient amount of downward pressure from the financial market to allow for a temporary reprieve in the de-leveraging process which began in 2007 with the credit crisis. The nominal force behind the credit crisis was the metastasis of toxic debt but the impetus behind it was the long-term yearly cycles which compose the Grand Super Cycle of 120 years and is scheduled to bottom in late 2014. The final “hard down” phase of the 60-year component cycle, for instance, began in 2007-08.
With the bottom of the 6-year cycle in late 2008 and the corresponding “good years” of 2009-2011, individuals and institutions have had an excellent opportunity to get their balance sheets in order and expunge debt from their lives as much as possible. The 6-year cycle is scheduled to peak in October this year but as Mr. Kress has emphasized, it’s a possibility that the weight of the long-term 30-year, 40-year and 60-year cycles could end up foreshortening the peaking process before October. It’s important therefore to be prepared for the eventual end of the Fed’s loose money policy and the closing of the 6-year cycle window, the effects of which should be felt within a few months.