The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 84

Predicting Communism's Demise

I believed in the power of the Kondratieff Wave in 1987, and I believe in it now. One change—the cycles are getting longer (and weirder) because people live longer and their memories extend longer.

The Kondratieff Wave is an inflation-deflation-infrastructure cycle. Inflation inflates prices in some area, then there's a crash and deflation wipes out whatever obsolete infrastructure the inflation supported. Each cycle is different because those who lived through the previous one are always fighting the last war. As the last cycle peaked around 1980, we couldn't have a 1929–1932-like stock market crash and Great Depression—too many people like my father lived through the last one and remembered. The Wave had to wipe out what no one was watching. This time it wiped out communism, pretty much completely.

After the 1929 Crash, the Soviets began investing in steel and commodity-based, heavy industry infrastructure. As they gobbled up the neighbors, they were forced to do the same. Think back to the communism of the 1950s—with its huge industrial plants. Because they were communists, they invested stupidly, but that didn't matter. The inflationary cycle propped up steel and commodity prices and their stupid economy for a long time.

In the 1950s, '60s and '70s, the Soviet Union was a superpower, not only militarily, but also a large, unstoppable economy—able to underwrite and subsidize lesser communist countries while infecting the world with filthy ...