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The developer of the wave theory named after him. The Kondratiev Cycle is a theory based on a study of nineteenth century price behaviour which included wages, interest rates, raw material prices, foreign trade, bank deposits, and other data. Kondratiev was convinced that his studies of economic, social, and cultural life proved that a long-term order of economic behaviour existed and could be used for the purpose of anticipating future economic developments. He observed certain characteristics about the growth and contractionary phase of the "long wave" which he defined as approximately 54 years. Among them, he detailed the number of years that the economy expanded and contracted during each part of the half-century long cycle, which industries suffer the most during the down-wave, and how technology plays a role in leading the way out of the contraction into the next up-wave. The fifty to fifty-four year cycle of catastrophe and renewal had been known and observed by the Mayans of Central America and independently by the ancient Israelites. Kondratiev's observations represent the modern expression of this cycle, which postulates that capitalist countries tend to follow the long rhythmic pattern of approximately half a century. In the idealized long wave model, the cycle begins with the "up-wave" during which prices start to rise slowly along with a new economic expansion. By the end of a 25-30 year up-wave period, inflation is running very high. Its peak sets the stage for a deep recession that jolts the economy. The recession, which begins about the time commodity prices break from their highs, is longer and deeper than any that took place during the up-wave. Eventually, though, prices stabilize, and the economy recovers, beginning a period of selective expansion that normally lasts nearly a decade. Referred to as the secondary plateau, the expansion persists, giving the impression that "things are like they used to be," but its anaemic nature eventually takes its toll as conditions within the economy never reach the dynamic state that occurred during the up-wave. The secondary plateau ends with a sudden shock (financial panic/stock market crash) and the economy rolls over into the next contractionary phase, which is characterised by deflation and the start of an economic depression. The current revolution of the Kondratiev Wave began after the global economy pulled out of a deflationary depression in the 1930s. Prices began to accelerate upward after World War II, and reached the commodity price blow-off stage in 1980. Since that time, and then after the recession of 1990 the global economy has been treading the secondary plateau. During this period, consumers and investors become aware that inflation is not accelerating the Kondratieff Wave upward, and deflation becomes the buzz word. Paper assets such as stocks and bonds do well since neither inflation nor deflation - both of which are damaging to share investment returns - hurts the marketplace. The Kondratieff cycle is roughly equivalent to a man's economically active life span - from his early twenties to his late seventies. After that age he has generally ceased to have much influence on the economy. The cycle is based on the fact that each generation appears to have to learn about credit extension anew. There are no people alive today who were adults during the great depression. There is no first-hand experience and so credit extension is spiralling upwards. This can be seen from the massive trade and budget deficits in America, not to mention the record levels of household and corporate debt. Kondratieff's point is that sooner or later the piper must be paid. The current cycle has been stretched out by a number of factors - the clever management of the American economy by Alan Greenspan and his successors, the extended longevity of the current generation and vast improvements in technology. However, some sort of reckoning seems inevitable sooner or later. You should bear in mind that Kondratieff made his predictions in the mid-1920's - well before the crash of 1929 which heralded the Great Depression. For more on the Kondratiev wave and where we are now in that great cycle, read <a href="/index.php/our-background-approach">Our background approach</a>.

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