Assumptions About the Next Kondratiev Growth Wave in 2015

Economic GrowthHaving looked at how Kondratiev cycles can be used to define the broad-trends that define economic growth as a function of the technologies that are leveraged into the markets, we can start to look at the expanding research that has described the next potential growth cycle in store for the global markets.

That being said, because of the way in which the wave cycle itself requires a full deleverage of the investment industry before it can re-engage a growth cycle, it is interesting to note how it is that the prevalence of monetary intervention in the markets could interfere with the market’s ability to engage another growth period, and therefore either delay, or artificially augment the next growth cycle in a way that reduces its ability to assert itself to its full potential.

As economists continue to study the Kondratiev cycle, a series of key conclusions have been made about that nature of growth and decline. Specifically, it has been noted how it is that each cycle has become accelerated as a result of scientific progress, meaning that booms and busts are becoming increasingly volatile. From there, recent waves have been demonstrating overlapping tendencies, and an almost codependency. For example, the petroleum boom unlocked the technology required to build the semi-conductors that would launch the following boom cycle in the information age.

However, these industries then both collapsed during similar periods (ie. the petroleum industry began declining as the information technology age began stagnating). From there, it has also been determined that the shortening of the Kondratiev cycle creates a greater dependence on demographic factors as an influence of spending habits, and therefore as a driver of demand of both the leveraging and purchasing habits of the underlying markets. This latter point becomes particularly interesting in the way in which it defines how it is that the next trend will potentially emerge, with a mathematical starting date of sometime in 2015 (don’t get excited, that’s just a quantitative extrapolation, not a forecast date for returns).

In general, economists are suggesting that the next coming Kondratiev cycle will revolve around growth in the healthcare industry (not green energy, despite what politicians might argue). In fact, it’s been suggested that this growth wave has already started as a result of the way in which the information technology cycle allowed companies to better handle the sequencing of genetic information, and create modified products to improve agricultural yields. While this trend is supported by the demographic trends suggesting that an aging population will demand a higher standard and volume of healthcare products, it also becomes raises a question about how it is that the economy will be able to build into this industry due to its intangible nature.

Remembering how it is that one of the requirements of the Kondratiev growth cycle is the presence of leverage, a boom in the healthcare industry becomes difficult to explain. Today, investors are flocking to real estate holdings trusts (REITs) that provide a high-yield return as a function of the healthcare industry. However, these companies do not directly relate to the healthcare industry itself, and instead offer exposure to the real estate implications of such growth. From there, companies that research pharmaceutical and health care products are generally restricted to the way in which they can leverage their products because of their intangible nature.

While a patent is arguably able to provide value, the reduced ability of those companies to protect their patents prevents us from being able to reasonably classify it as being a foundation for major economy leverage. From there, the end products created by the healthcare industry are not generally available for leverage because it is a service-based industry. Even when looking at genetic modification, there is no way to use debt to use commercial debts to finance gene-therapy treatments or modified grain strains. As such, the theory that the healthcare industry will provide the next big growth cycle will arguably remain unfulfilled until such a time that they can develop a kind of product-set that is conducive to leverage.

Speak Your Mind