The Anglo-American Hegemonic Cycle

Cycles of War and Prosperity

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* Idealised Cycle - Not to Scale
* Germany and Austria proposed and then renounced a customs union in 1931.
* The European Union passed through a customs union stage on the path to fuller economic integration.
* The term "war-inflation upwave", below, describes a period of expansion that peaks with war-induced, or influenced, price inflation.


1783 - End of American War of Independence

1787 - End of postwar recession - start of war-inflation upwave

1815 - End of Napoleonic Wars - end of war-inflation upwave

1819 - End of postwar recession - start of asset-bubble phase of upwave

1825 - Stockmarket crash - start of downwave

1833 - Start of last expansion of the downwave

1837 - End of last expansion of the downwave - stockmarket crash - start of last recession of downwave

1843 - End of downwave - start of war-inflation upwave

1865 - End of American Civil War - end of war-inflation upwave

1867 - End of postwar recession - start of asset-bubble phase of upwave

1873 - Stockmarket crash - start of downwave

1886 - Start of last expansion of the downwave

1893 - End of last expansion of the downwave - stockmarket crash - start of last recession of downwave

1897 - End of downwave - start of war-inflation upwave

1918 - End of First World War - end of war-inflation upwave

1921 - End of postwar recession - start of asset-bubble phase of upwave

1929 - Stockmarket crash - start of downwave

1932 - Start of the expansion of the great depression

1937 - End of the expansion of the great depression - stockmarket crash

1949 - End of downwave - start of [Cold] war-inflation upwave

1989 - End of Cold War - end of war-inflation upwave

1991 - End of postwar recession - start of asset-bubble phase of upwave

???? - Stockmarket crash/high - start of downwave?


(1) Dates in chart may vary according to the different measurement criteria of historians.

(2) The end of the war-inflation upwave, (e.g. 1897-1918), roughly coincides with the end of a war - actual date of end of the upwave may vary by a number of years from the end of the war; in this example it was in 1920.

(3) In the first two downwaves the 'expansion' phase preceded the last contraction and trough of the downwaves (the dates chosen need to be qualified); while in the third downwave the 'expansion' phase is the first of the expansion of the downwave.

(4) "Finance and growth go together. It was no accident that the acceleration in growth in the industrial revolution was associated with the development of modern banking and capital markets.

"By the same token, disruption to the financial sector is costly to the real economy, as is only too clear in history" (Glen Stevens, Finance and Economic Development,, December 12, 2006).

(5) The 'Anglo-American Hegemonic Cycle' takes as its starting-point the 'Kondratiev Wave': "In the early 1920s a Russian economist N. D. Kondratiev, later an early victim of Stalin, discerned a pattern of economic development since the late eighteenth century through a series of "long waves" of from fifty to sixty years, though neither he nor anyone else could give a satisfactory explanation of these movements, and indeed sceptical statisticians have even denied their existence. They have since been universally familiar in the specialist literature under his name. Kondratiev, by the way, concluded at the time that the long wave of the world economy was due for its downturn. He was right... That good predictions have proved possible on the basis of Kondratiev Long Waves - this is not very common in economics - has convinced many historian and even some economist that there is something in them, even if we don't know what" (Eric Hobsbawn, Age of Extremes, (London: Abacus, 1995), p.87).

While the K-wave is the starting point of the AMHC, it needs to be qualified because of its weaknesses and supplemented with other factors.

"The basis of Kondratieff's argument came from his empirical study of the economy's performance of the USA, England, France, and Germany between 1790 and 1920...

"Kondratieff suggested that changes in technology, wars and revolutions, and the emerging of new countries as well as the surges in the production of gold was the cause of this business cycle...

"The problem with his data was that it properly reflected the beginning of his study. But as the Industrial Revolution took place, agriculture, which was 70% of the economy in 1850, fell to 40% by 1900 and eventually to 3% by 1980. His model failed because there was a cycle to the economy as well which he did not take into account. We moved from a commodity based system, to industrial, and then to primarily service industry...

"So the K-Wave offers no reliable method to forecast the economy, yet it stands as a testament to the existence of a complex business cycle..." (Martin Armstrong, Understanding Time & the Kondratieff Wave,, July 17, 2017).

"China's integration into the global economy brought one-fifth of the world's population into the international economic system, increasing market potential and integration to an unprecedented level. The increased scale and depth of international specialisation propelled by enlarged global markets offered new opportunities to boost world production, trade and consumption, with the potential for increasing the welfare of all countries involved (Golley and Song 2011). It promised an era of unsurpassed global economic growth and prosperity - a 'golden age' of world economic growth" (Peter Drysdale and Samuel Hardwick, China's 40 Years of Reform and Development: 1978-2018,

It is suggested that technological advances in industry and financial enginnering, and an increase in countries participating in the global-trading system has extended the latest long cycle, but has not cancelled out the boom-bust cycle, it just takes longer to get to the tipping point.

Human nature doesn't change so societies  keep making the same mistakes over and over again - never learning the lessons of history.

The AMHC is not meant to be a method of forecasting the economy but is a general guide to what the future may hold based on recurring patterns in human history.

Global debt allocation based on World GDP of $80 trillion
USD Trillions
Relative to GDP
Government debt
Non-financial corporate debt
Financial sector debt
Consumer debt
Sources: World Bank, Bloomberg, Goldmoney
(Alasdair Macleod, The global debt problem,, April 8, 2021)

(6) The previous long cycles of the K-wave of 50-60 years correlated roughly with the biblical Jubilee cycle where long term debts and contracts were cancelled every fifthy years, so that a the new cycle could begin afresh without the burden of  distortions built up in the previous cycle - a fresh debt-free start to meet the challenges of the next cycle. The biblical system was an orderly system of debt management but the present system has no financial architecture to deal with proper debt management so that the resetting of society for the future wil be a turbulent experience involving severe financial, economic, political, social upheavals leading to war.

(7) The stockmarket is added to provide the peaks and troughs of the finance-business cycle, and as a leading indicator of pivotal life-changing events ahead in the political/social/economic spheres of life.

Stockmarket and the Future

"Simply put, the socionomic hypothesis is that social mood generates social events, not the other way around. This is why the stock market - the primary historical database of collective optimism and pessimism - turns before pivot points in the economy and cultural expression. This is why major wars follow major bear markets. Social events occasionally give a clue to the character of social mood that lies ahead" (Editorial Staff, How Can You Use the Tax Revolt Indicator? June 27, 2007).

Why the Dow Jones?

"... the Dow is among the most closely-watched benchmark indices tracking targeted stock market activity. Although [Charles] Dow compiled the index to gauge the performance of the industrial sector within the American economy, the index's performance continues to be influenced by not only corporate and economic reports, but also by domestic and foreign political events such as war and terrorism, as well as by natural disasters that could potentially lead to economic harm" (Dow Jones Industrial Average, Wikipedia).

"Out of the big three US stock indexes, only the Dow 30 has been around long enough to chart sequential valuation waves through history. While the Dow was born in 1896, the S&P 500 didn't arrive until 1957 and the NASDAQ Composite until 1971. So the Dow remains the king of ultra-long-term charts" (Adam Hamilton, Long Valuation Waves 3,, August 17, 2007).

The Dow high will precede a stockmarket crash leading to "ugly" deflation and depression.

Note on deflation: "Our survey of history suggests that deflations of the past fall into three broad categories: "the good, the bad and the ugly"..." (Michael Bordo & Andrew Filardo, Deflation in a historical perspective,, November 2005, p.1). See below for the "good' deflation of the roaring twenties - after the severe recession of 1920-21.

The peak in the Dow will 'rhyme' with 1825, 1873 and 1929.

The Anglo-American Hegemonic Cycle

"For nearly all of human history, economic advance has been so slow as to be imperceptible within a span of a lifetime...

"From about 1750, this iron law of history was broken. Growth began to be no longer invisibly slow nor confined, as it largely had been before, to farming..." (The Economist, How mankind got rich, Millennium Edition, December 31, 1999, p.10).

"...some time in the 1780s, and for the first time in human history, the shackles were taken off the productive power of human societies, which henceforth became capable of the constant, rapid and up to the present limitless multiplication of men, goods and services. This is now technically known to the economists as the 'take-off into self-sustained growth'. No previous society had been able to break through the ceiling which a pre-industrial social structure, defective science and technology, and consequently periodic breakdown, famine and death, imposed on production..." (E. J. Hobsbawn, The Age of Revolution 1789-1848, (London: Weidenfeld & Nicolson, 1962), p.28).

"By the 1780s, the English had acquired, through the accident of geography and the merit of their own efforts, a unique conjunction of advantages: a free, though oligarchic, political constitution, and all the elements of an economic revolution... no State, except England, had the physical means to produce an unaided and self-sustaining acceleration of economic growth. England was the one dynamic element in a static universe" (Paul Johnson, The Offshore Islanders, p.240).

Coinciding with this explosion of growth was the separation of the American colonies from Britain:

September 3, 1783 "Definitive Treaty of Peace between Great Britain and United States, signed at Paris. It recognized the independence of the United States" (An Encyclopaedia of World History, Compiled and Edited by William Langer, p.562).

From the 1780s first Britain then America rose to world hegemony - Pax Britannica and Pax Americana.

To be world hegemon an industrial power has to fulfil two requirements: (1) it is the superdominant world economy; and (2) it provides the diplomatic leadership of the Western world.

"When one nation enjoys cheap military predominance, along with disproportionate shares of manufacturing output and financial power, the world tends to enjoy free trade and monetary stability, and thus prosperity. When the predominate power fades, borders and barriers proliferate, access to markets is curtailed, and debts are repudiated. Often, major wars begin at a time when the predominant power has weakened, but when several nations are wealthy enough to fight" (James Dale Davidson & William Rees-Mogg, The Great Reckoning, p.265).

In looking at the rise and fall of Britain and the rise and the soon coming fall of America the "Anglo-American Hegemonic Cycle" is employed. This cycle began just after the big-bang of the Industrial Revolution in 1785. The end of the America War of Independence (1775-1783) resulted in a post-war recession (1784-86). The recovery in 1787 from the postwar economic crisis was the immediate ascent of the Anglo-Saxon peoples to world hegemony.

The Anglo-American Hegemonic Cycle (AAHC)

The Future Watch AAHC is an idealised cycle based on the patterns of history. The AAHC is a template to view the future direction of world events.

Some critical points on the WIPDHC may not be technically correct. Why? History does not repeat exactly but there are some general trends which are common to each cycle but vary according to the different factors of each historical period, especially the stage of industrial development a country is at - whether it is a young and growing or a mature and declining nation. To establish a pattern the cycle is modified to take in account the differences in the repeating trends. The variations are still compatible with the historical pattern.

While looking at the economic-war history of both nations, prior to and including their respective industrial revolutions, the British account concludes basically with the First World War. Britain grew and matured industrially, and therefore acceded to world hegemony before America, so that Britain provides the historical  template to view the decline of America and its march to a catastrophic war, seeing that there are many parallels between British and American ascent to and experience as world hegemon.

"Industrialized economies were already dominated by the business cycle, at least from the end of the Napoleonic Wars, but this affected, in practice, only Britain, perhaps Belgium and the small sectors of other economies geared to the international system. Crises not linked with simultaneous agrarian disturbances, e.g. that of 1826, 1837 or 1839-42, shook England and the business circles of the eastern America seaboard or Hamburg, but left most of even Europe reasonably untroubled" (Eric Hobsbawn, The Age of Capital 1848-1875, (London: Cardinal, 1988), p.85).

The events of the AAHC of Britain and America roughly coincide, following a similar pattern especially because of the economic interactions of these 'brother' nations. A good example of this is that the upturn in the British economy from 1832 to 1836 which had its parallel in America from 1833 to 1837.

While Britain, the frontrunner of the Industrial Revolution, sets the pattern for future longwave cycles, it is America, with its propensity for excess, combined with the reality that the economic and political fortunes of the Anglo-Saxon-Celtic world revolve around her, the dates chosen for the longwave cycle chart gives British dates for the first upwave, but beginning with 1833-1837 they are American ones.

With the spread of industrialization after 1848, the critical points of the cycle basically impacts the integrating global economy  - varying in degree in relationship to a nation's developmental stage and its economic position as, or relative to, the world hegemon.

The Cycles

"Any systematic explanation of the inflation cycle must include some account of the role of war. Inflation is the monetary footprint of war" (James Dale Davidson and William Rees-Mogg, The Great Reckoning, p.358).

The Anglo-American Hegemonic Cycle comprise two general components: the 'upwave' and 'downwave'. The upwave of a cycle is a period characterised by 'war-peaking-price' inflation followed by a period of 'asset-price' inflation while the downwave is a period characterised by severe deflation and depression. The upwave and downwave of a cycle is referred to as a longwave.

As a generalization: the upwave is a period characterized by expansion - contraction - expansion in an inflationary environment, while the downwave is characterised by contraction - expansion - contraction in a depressionary background.

(The Great Depression has been defined as the years 1929 to 1939. During those years "ugly" deflation, year on year (December) occurred in 1930 (6.4%), 1931 (9.3%), 1932 (10.3%) coinciding with the contraction of 1929-33; and  "bad" deflation occurred in 1938 (2.8%), coinciding with the contraction of 1937-38).

In the AAHC the upwave comprises an upward leg of expansion, then a downward leg of contraction, followed by an upward leg of expansion.

The first leg of the upwave is a period of expansion that ends with a peak in war-induced, or influenced, consumer price-inflation - war causes goods-price inflation to peak - (as opposed to the second leg which is a period of expansion that ends with a peak in debt-induced, or influenced asset-price inflation).

The period of expansion with 'war-peaking-price' inflation, is depicted as a straight line but it should be a series of expansion-contractions, ending with an expansion, the number depending on the wealth of the world economy as it interacts with the war cycle along with the concentration and cooperation of industrial nations, to sustain a long period of growth. The contractions of these cycles are normal recessions from which the economy quickly recovers and the expansion continues - life goes on as normal.

War-Peaking-Consumer Price Inflation in Upwaves

"Not until a series of major advances opened new eras of investment around the turn of the [twentieth] century was the deceleration reversed". [The end of the downwave - the end of the Great Depression of the Nineteenth Century]. "These years saw the lusty childhood, if not the birth, of electrical power and motors; organic chemistry and synthetics; the internal combustion engine and automotive devices; precision manufacturing and assembly-line production - a cluster of innovations that have earned the name of the Second Industrial Revolution... this cluster of innovation marked the start of a new upswing, a second cycle of industrial growth..." (David Landes, "Technological Change and Development in Western Europe, 1750-1914", The Cambridge Economic History of Europe, (Cambridge, Cambridge University Press, 1965), Vol.6, Pt.1, pp, 462-63).

British dominance was driven by the First Industrial Revolution with American dominance by the Second - as reflecting in the two halves of the AAHC.

"On one point, however - the periodization of the long trends - all [the exponents] agree. Beginning with the late eighteenth century, they would punctuate the economic history of the industrial era roughly as follows: 1790-1817, inflation; 1817-50, deflation; 1850-73, inflation; 1873-96 deflation; 1894-1914, inflation. (The exact dates will vary from one analysis to another, but the schema and the approximate points of demarcation remain the same.) Moreover, most would agree on the cyclical character of these fluctuations... The main source of difficulty is the optical illusion produced by the contrast between the boom of the 1850's and the depression of the 1870's: each stands out and seems to usher in a new era, marking off a period of inflationary upswing from 1850 to 1873. In fact, the price series show no such long trend. The long deflation that begins after the Napoleonic wars is momentarily reversed by the influx of bullion and the credit boom of the 1850s. But the inflation last no longer than the upturn of the short cycle. Prices break in 1857, and while they have their ups and downs over the next decade and a half, the trend is slightly falling (at most, level in some cases), with a sharp decline setting in from 1873...

"The path of prices varied somewhat from one country to another, for each felt the impact of boom and bust differently according to political as well as economic circumstances. For all major economies of western Europe, however - Great Britain, Germany, France, Belgium - the trough of 1873-96 is an extension of the path traced in 1820-50.

"In sum, the nineteenth century was marked by protracted and sharp deflation, stretching from 1817 to 1896 with only one short interruption of some six or seven years. In the long history of money and prices from the Middle Ages to the present, there is nothing like it... Moreover, unlike these earlier periods, when falling prices were linked to catastrophe, depopulation, and widespread depression, the nineteenth century was a period of peace..." (David Landes, "Technological Change and Development in Western Europe, 1750-1914", pp.460-61).

The AAHC correlates roughly with the Western European inflations of 1790-1817 and 1894-1914; and the deflations of 1817-50 and 1873-96. Instead of the Western Europe experience of 1850-73 the American  experience of 1843-1864 is employed as it fits best with the parameters of the AAHC. That is, a period of expansion, ending with war-peaking inflation, followed by a post war boom that sets the stage for the downwave.

The first-leg upwaves of the second and third cycles follows the graph "of American business activity from January 1, 1790, until the end of 1951 ... compiled from various data by the late General Leonard P. Ayres and the Cleveland Trust Company" (Harold Underwood Faulkner, American Economic History, 8th edition, (New York: Harper & Brothers, 1960), p.639).

The graph above pictures the period of expansion - 1843-1864 - as defined by wholesale prices, that peaks with war-induced, or influenced, inflation.

The first-leg of the second upwave of the AAHC, that ends with 'war-peaking-price' inflation, is defined as the period from 1843 to 1865; 1865 being the end of the American Civil War. American wholesale price peak, according to Ayres, is in 1864.

The post-war boom 1867-73, the second leg of the second upwave, was a period of asset-price expansion ending in a financial crisis that only a very few saw coming.

Debt-peaking Asset-Price Inflation in Upwaves

"Widespread use of fiat money continued into the Reconstruction Era [1865-77], fueling the rapid expansion of railroads and wild speculation.

"In September 1873 the post-Civil War railroad boom in the United States climaxed with a financial crisis in financial markets...

"Banks, especially Jay Cooke and Co., raised millions of dollars through selling bonds to finance construction. Speculators 'bet' on the railroad, gambling on the fact that settlement and opportunities to make money would follow behind the completed railway. However, construction expenses ballooned and outpaced financing. Efforts to raise more funding failed. When they could no longer pay the bills, Jay Cooke and Co. and other banking houses folded. The collapse of the railway financiers sparked high bank withdrawals, the failure of brokerage firms, and railway construction halted.

"The stockmarket sank 25 per cent in a week.

"By [Saturday] September 20th, the New York Stock Exchange suspended trading for the first time, for an unspecified period not to open until ten days later.

"The Panic of 1873 triggered the first 'Great Depression' in the United States and abroad. Lasting from September 1873 until 1878/9, the economic downturn then became known as the Long Depression after the stock market crash of 1929" (Nancy Lovas, the panic of 1873,, August 27, 2017 and Scott Mixon, The Crisis of 1873: Perspectives for Multiple Asset Classes, The Journal of Economic History, Vol.8, No.3,, September 2008, p.722).

"... in early 1873, very few in the US had any inkling of a crisis. The country's government believed that the US had put the Civil War of the 1860s behind. Railroad construction and real estate were booming. Credit was easy, and there were a host of new financial instruments including railroad bonds. According to [the American historian] Reylonds Nelson, in the early 1870s, every gentleman who wore a diamond pin or employed a governess knew he could rely on three things: the Pennsylvania Railroad, Girard's Bank and the Bible. But by September 1873, Pennsylvania Railroad's stocks had plummeted by 20 per cent, Girard's was in the doldrums and the Bible offered cold comfort" (Kaushik Das Gupta, A great panic,, December 31, 2008).

The downwave

"1873-96: a good deflation that turned somewhat bad

"Although secular deflation was accompanied by positive growth, it was controversial because of its distributional consequences. Groups whose real incomes fell, such as debtors and farmers, or those whose real incomes were perceived to have fallen in an age before price indices, complained bitterly and engaged in often disruptive social and political agitation...

"Although real output grew on average in the deflation episode of 1873-96 in most countries, growth was punctuated by several recessions (1873-75, 1884-85, 1890-96), the worst of which was the last -which may even possibly be characterised as bad" (Michael Bordo & Andrew Filardo, Deflation in a historical perspective,, November 2005  pp.9-10)

The peak to trough in wholesale prices ran from 1864 to 1897 - a downwave in wholesale prices. But the AAHC does not begin until the America stockmarket peak in 1873, but the AAHC downwave ends in 1897. The American economy went into recession in October 1873. The last recession of the downwave ended in June 1897.

The third upwave

The peak in inflation due to the American civil war corresponds to the peak in inflation due to WW1:

"From 1896 to 1914, prices continued their slow, steady rise. [Prices rose by 40 to 50 percent in America]. Then suddenly a new trend appeared. The outbreak of war in 1914 shattered not only the peace of Europe but also its economic stability. A symptom and cause of that disruption was a massive surge of inflation in every western nation. From 1914 to 1919, wholesale prices doubled in the United States, trebled in Britain, quadrupled in Germany , and sextupled in Italy... In 1920, these trend lines broke. A severe economic depression occurred throughout the world..." (David Hackett Fischer, The Great Wave, (New York: Oxford University Press, 1996), pp.190-191).

The first-leg of the third upwave, that ends with 'war-peaking-price' inflation, is defined as the period from 1897 to 1918; 1918 being the end of WW1. American wholesale prices peak, according to Ayres, is in 1920.

The peak to trough, that followed, ran from 1920 to 1932 - a downwave in wholesale prices. But the AAHC downwave does not begin until the America stockmarket peak in 1929, but the AAHC downwave ends, not in 1932, but in 1949. The American economy went into recession in August 1929. The last recession of the downwave ended in October 1949. (See below for explanation).

This pattern of inflation peaking around the end of a war occurs in the other upwave periods.

A Non-linear World

"Most of the time, most people expect current conditions to continue for the immediate future... Wherever prosperity exist, it is natural for people to expect prosperity to continue" (James Dale Davidson and William Rees-Mogg, The Great Reckoning, p.254).

Or conversely,

'Whenever depression exists, it is natural for people to expect depression to continue.'

"The years from 1873 to 1896 seemed to many contemporaries a startling departure from historical experience. Prices fell unevenly, sporadically, but inexorably through crises and boom - an average of one-third on all commodities. It was the most drastic deflation in the memory of man. The rate of interest fell too... And profits shrank, while what was now recognized as periodic depressions seemed to drag on interminably. The economic system appeared to be running down. Then the wheel turned. In the last years of the century, prices began to rise and profits with them. As business improved, confidence returned - not the spotty, evanescent confidence of the brief booms that had punctuated the gloom of the preceding decades, but a general euphoria such had not prevailed since the Grunderjahre of the early 1870's. Everything seemed right again... In all of western Europe, these years live on in memory as the good old days - the Edwardian era, la belle epoque" (David Landes, "Technological Change and Development in Western Europe, 1750-1914", pp.458-59).

The AAHC looks for the turning points of the cycle which are the signals that the "conventional" expectations for the future are soon to be turned upside down. This is why, in the upwave, there is a straight line for the period of 'war-peaking-price' inflation. This emphasis is on the beginning and ending of the upwave.

The war-inflation phase, that is a period characterised by 'war-peaking-price' inflation, peaks at the end of the first leg while the asset-bubble phase, that is a period characterised by 'asset-price' inflation, peaks at the end of the second leg, which is the end of the upwave.

The end of the period of 'war-peaking-price' inflation to the end of the asset-inflation phase maybe considered a transition stage to a period characterized by deflation and depressionary conditions, when the inflationary excess are purged. It is characterised by mild inflation, relative to the preceding period, i.e. disinflation ("the process of reducing the rate of inflation") as in the 1990s or mild deflations as in the 1920s:

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(Bill Gross, How We Learned to Stop Worrying (so much) and Love "Da Bomb",, May/June 2007).

"Remember inflation, the beast that ravaged pay, pensions and savings in the 1970s and 1980s?...  inflation [in the 1990s] has indeed been lower than most people expected" (The Economist, Survey: The World Economy, September 28, 1996, p.39)

"... most of the net rise in prices that has occurred in human history took place between the late 1940s and about 1990 [during the Cold War]... In Australia's case,... By the second half of the 1960s, it was clearer that the price level had acquired a persistent upward trend... [I]nflation reached nearly 20 per cent during the mid 1970s [coinciding with the end of the Vietnam war 1975]... Thereafter [during the so-called "Second Cold War"] policies aimed at reducing it, with mixed success at first, but more lasting success in the aftermath of the early-1990s downturn [the 'primary' post-Cold war recession]. A number of other countries had more clearly broken the back of serious inflation in the early 1980s; we [in Australia] took a little longer. But in general it could be said that the period of really serious inflation in the western world lasted from the late 1960s until the early 1990s [the end of the Cold War]" (Glen Stevens, Inflation, Deflation and All That,, December 4, 2002).

"Three decades of disinflation... why [did] it even happen...[?]. Some have offered automation as an explanation; others, ageing. I have argued for many years that China joining the global economy is the main reason. That unleashed hundreds of millions of workers into the global labour market. There was around a 20-fold difference between Western and Chinese wages at the beginning. That wouldn't have mattered if there was a similar difference in productivity...

"China's entry into the global economy took away the pricing power of labour everywhere else. That was the key driver of the disinflationary trend..." (Andy Xie, Inflation is coming, and the world economy's fate depends on the Fed,, May 19, 2021).

"...Far from being an inflationary decade, the [nineteen] twenties were the reverse... the 1920's were, if anything, a time of relative deflation: from 1923 to 1929 - to compare peak years of the business cycle ... wholesale prices fell at the rate of 1 per cent per year..." (Milton Friedman and Anna Jacobson Schwartz, A Monetary History of the United States, 1867-1960, (Princeton: Princeton University Press, 1963), pp.298, 699).

"Good" deflation occured (year over year) in 1922 (0.59%), 1927 (1.14%), and 1928 (1.16%). No inflation/deflation in 1924 and 1929.

Peace and Manias

Before looking at the parameters employed in the downwave of the AAHC, an overview of the boom of the 1990s is presented. The end of the Cold War signalled the end of the period of 'war-peaking-price' inflation, which also a signal for a post-war boom. The events that occur in this period are the catalyst for a period of 'asset-price' inflation.

"War causes inflation. Inflation causes economic decline or even bankruptcy that necessitates peace. Peace frees resources for productive use. More production raises output and lowers prices" (James Dale Davidson and William Rees-Mogg, The Great Reckoning, p.362).

The end of a period of 'war-peaking-price' inflation coincides with the end of or soon after the end of a war and is 'signalled' by a post-war recession.  The end of the "Cold War," symbolised by the fall of the Berlin Wall on November 9, 1989, came when the Soviet Union could no longer afford to "wage" it. The postwar recession in the Western world occurred in 1990-91.

"In economic terms, the period since 1940 has been equivalent to fifty years of war. It was a half-century of unprecedented military outlays for weapons of unprecedented destructive might... The release of real resources...from military employment will set the stage for a long-delayed drop in the price level, not just in the United States, but around the world... As military spending is cut in real as well as relative terms, U.S. industrial competitiveness will increase, and so will output. The sudden dampening of conflict and trends to lower military spending are deflationary..." (James Dale Davidson and William Rees-Mogg, The Great Reckoning, p.365).

After the postwar recession there is a period of prosperity. This period, as mentioned, is characterised by disinflation or mild deflation.

"A large part of the explanation of the recovery in America's competitiveness lies with the trillions of dollars that American taxpayers have spent on military and space research over the past 50 years, and the more recent run-down in defence spending, [that is, after the Cold War], which has transferred massive, leading-edge knowledge-based skills to industry" (Peter Brain, Beyond Meltdown, p.229).

The pattern from history is that war, especially turning point wars, promotes the development of new inventions and new industries (e.g., computers and the nuclear industry in WW2), or in some cases, suspends the development of a nascent industry (e.g. commercial-television in America in WW2). The potential of 'war-baby' inventions and growing pre-war inventions can then be fully exploited in peace-time when a number of factors come together to create a virtuous circle. The Internet was a product of the Cold War which became commercially viable in the popular market in the postwar boom:

"The Internet had its origin in U.S. Department of Defence program called ARPANET (Advanced Research Projects Agency Network), established in 1969 to provide a secure and survivable communications network for organizations engaged in defense-related research" (Internet, Encyclopaedia Britannica).

"The Internet got going properly only with the invention of the World Wide Web in 1990 and the browser in 1993" (The Economist, Survey: The new economy, September 23, 2000, p.1).

"Investment, especially in information technology, (IT), has been the driving force of America's expansion. Business investment has almost doubled its share of GDP over the past decade... As a result, the American economy has enjoyed a splendidly virtuous cycle: strong investment has lifted productivity growth and helped to hold down inflation; this has boosted profits and share prices. That, in turn, reduces the cost of capital and so encourages further investment and productivity gains. Meanwhile, faster growth in America has resulted in a stronger dollar, which also helped to hold down inflation and interest rates and so supported growth" (The Economist, Special: America's economy, December 9, 2000, p.86).

The 1990s, after the Cold War, followed the pattern of the 1920s, after the First World War:

"The [first world] war, moreover, had prompted endless new inventions, some of which were not merely destructive but could afterwards be applied to peaceful service. So a war gave a great new impulse to the spirit of invention. In America, invention became almost a trade, and something like mass production was brought to bear upon it. Captains of industry who had held the academic life in low esteem began to install laboratories...and hired university professors to run these laboratories... Accordingly, in the decade 1920-1929 more patents were granted in America than in its entire first century - the peak years being 1926 and 1929... There were also innumerable technological improvements not recorded in the patent office. Great strides were taken by the electrical, chemical and transportation industries. Road building became active. Scientific management struck a new tempo. Efficiency engineers came into their own. People began to talk of a new Era" (Irving Fisher, Booms and Depressions, (London: George Allen and Unwin), pp.71-72).

The pattern then is that the end of a turning point war signals or marks the end of the period of 'war-peaking-price' inflation. The end of the first leg of the AAHC upwave has been reached. A post-war recession then follows. The 'war-peaking-price' inflation is over but the 'asset-price' inflation phase of the AAHC takes over. The peak of the asset-bubble phase is reached at the end of the postwar boom.

In the postwar boom some favourable economic factors come together to create a virtuous cycle. It is considered a new era where growth can be sustained indefinitely by the blossoming of new inventions and industries that were created in the preceding war, and the coming of age of 'evolving' prewar technologies. There are often time lags between the invention of a new 'disruptive' technology and the reaping of the benefits by business and the consumer, especially in a post-war environment:

"The first industrial revolution, triggered by James Watt's improved steam engine in the mid-1770s, immediately had an enormous impact on the West's imagination, but it did not produce many social and economic changes until the invention of the railroad in 1829, and of pre-paid postal service and of the telegraph in the decade thereafter. Similarly, the invention of the computer in the mid-1940s, the information revolution's equivalent of the steam engine, stimulated people's imagination, but it was not until 40 years later, with the spread of the Internet in the 1990s, that the information revolution began to bring about big economic and social changes" (Peter Drucker, A survey of the new future, The Economist, November 3, 2001, p.20).

The optimism generated by the recovery leads to a boom which results in a bust ending the upwave of the cycle:

"Some crises occur immediately at the beginning or end of a war, or soon enough after the end to permit a few expectations to be falsified... At the end [of a war] there are the crisis of... [and] 1920. Moreover, seven to ten years after a war, long enough for expectations formed at the end of the original crisis to be falsified, comes an impressive series of crises... and of course 1929" (Charles Kindleberger, Manias, Panics, and Crashes, (New York: Basic Books, 1989), p.46).

The immediate post-war recession, that coincides with the end of the span of 'war-peaking-price' inflation, such as 1920-21 and 1990-91, maybe referred to as the primary postwar recession while the recession after the end of the 'asset-price' inflation phase maybe referred to as the secondary postwar recession. The primary postwar recession is mild in comparison to the secondary recession. Because of the 'extended' pattern in the latest upwave, the recessions of 2001 and 2007-09 are a prelude to the real secondary recession yet to begin. In the 1920s there were two recession, 1923-24 and 1926-27, between the primary and secondary recessions.

The Extended Upwave of 1949-???

War-Peaking-Price Inflation Years
Asset-Price Inflation Years
1787 - 1815
28 years
1819 - 1825
6 years
1843 - 1865
22 years
1867 - 1873
6 years
1897 - 1918
21 years
1921 - 1929
8 years
1949 - 1989
40 years
1991 - 2021*
30 years

* The latest year so far.

The figures for 1949-2021 could be used to discredit the argument of the AAHC.

"In real terms - that is, after adjusting for inflation - the average American worker today earns roughly nine times as much as his 1840 counterpart. That's because today's worker is roughly nine times as productive... Today's workers are more productive because they're working with better equipment - computerized looms instead of handlooms, for example" (Steven E. Landsburg, Why the Stimulus Shouldn't Stimulate You,, January 2008).

It is suggested that a more integrated, productive and wealthier world economy has extended the latest upwave, but not extinguished the boom-bust cycle.

Five major factors - many new peoples  particpating in the global economy, with expanded roles of consumers, governments, central bankers, and financial sectors - have contributed to an extended upwave:

"A brilliantly inventive generation has harnessed computing power and financial theory to transform the world of finance. Trillion-dollar global markets have sprung up on the back of techniques for converting loans, interest payments, default risk and who knows what else into new securities that could be chopped up and repackaged in mind-boggling combinations, sold and resold. Much good has come of that - and not only fat bonuses on Wall Street and in the City. The most valuable result of the new finance is that more people and businesses have gained access to credit on better terms" (The Economist, Only human,, October 18, 2007).

"By now, "activist" central banking doctrine - with pegged rates, aggressive market intervention/manipulation and blatant monetization - should already have been discredited. Instead, policy mistakes lead to only bigger policy mistakes, just as was anticipated generations ago in the central banking "Rules vs. Discretion" debate. Today, a small group of global central bank chiefs can meet in private and wield unprecedented power over global markets, economies and wealth distribution more generally. They are said to somehow be held accountable by politicians that have proven even less respectful of sound money and Credit. In the U.S., Europe, the UK, Japan and elsewhere, central bankers have become intricately linked to fiscal management. As such, disciplined and independent central banking, a cornerstone to any hope for sound money and Credit, has been relegated to the dustbin of history" (Doug Noland, Hotel California,, December 14, 2012).

US government spending in 1929, according to, was 11.7% of GDP while in 2007 it was 35.09%.

"... the sobering reality that for many Americans the Great Depression brought times only a little harder than usual... what historian James Patterson has called the "old poverty" that was endemic in America well before the Depression hit. By his estimate even in the midst of the storied prosperity of the 1920s some forty million Americans [out of a population of around 120 million], including virtually all nonwhites, most of the elderly, and much of the rural population, were eking out unrelievedly precarious lives that were scarcely visible and practically unimaginable to their more financial secure countrymen... They were the "one-third of a nation" that Franklin Roosevelt would describe in 1937 as chronically "ill-housed, ill-clad, ill-nourished" " (David M. Kennedy, Freedom From Fear: The American People in Depression and War 1929-145), (New York, Oxford University Press), 2001, pp.16, 168).

"... and while there might be a car in the driveway there was often no bathtub in the house" (Harold Evans, The American Century, p.183).

"It was painfully clear that the health of the nation depended on installment buying... A banker estimated that 95 percent of the nation's business was done on credit. "Do away with installment buying suddenly," declared the Wall Street Journal [on February 19, 1930], "and the country might face a real industrial depression" (Maury Klein, Rainbow's End: The Crash of 1929, (Oxford, OUP, 2001), p.259).

"Stephen Roach, chairman of Morgan Stanley Asia ... said US consumption reached 72pc of GDP in 2007. "No country in the history of the world has ever consumed that much of its GDP" (Ambrose Evans-Pritchard, Europe and Asia face hard landings as bubbles burst,, January 24, 2008).

" "While the credit boom in the 1920s was largely specific to the US, the boom during 2004-2007 was global, with increased leverage and risk-taking in advanced economies and many emerging economies. Levels of integration are now much higher than during the inter-war period, so US financial shocks have a larger impact," it [the IMF] said" (Ambrose Evans-Pritchard, IMF warns over parallels to Great Depression,, April 17, 2009).

Post WW1 Boom As Type for Post Cold War Boom

"The current U.S. and global current backdrop is regrettably more late-1920's than 1930's" (Doug Noland, How Crazy?, January 18, 2013).

The primary post-war recessions were 1920-21 and 1990-91.

The post WW1 boom ran from 1921 to 1929 - the economy began its decline one month before the stockmarket. Between 1921 and 1929 there were two mild recessions (1923-24 and 1926-27). This then provides the types for the post Cold War boom. There was mild recession in 2001; a severe recession in 2007-09; and a severe dowturn/recession in 2020. Central bank intervention in 1927 and 2020 contributed to the 'melt-up' stage of the sharemarket boom. The types are presented below.

"There was a vigorous cyclical recovery after the trough in mid-1924, accompanied by a real estate boom that leveled off in 1926 and the beginning of a stockmarket boom. Towards the end of 1926, moderate restraining measures were taken before the cyclical peak which occurred in October 1926. The subsequent contraction was mild. Not long before the cyclical trough in November 1927, easing measures were taken. The buying rate on banker's acceptances was reduced ¼ of 1 percentage point from July to August 1927, and the System's bill holdings rose by $200 million; the discount rate was reduced by all Banks from 4 to 3½ between July and September 1927; and open market purchases of government securities totaling $340 million were made between late June and the middle of November 1927..." (Milton Friedman and Anna Jacobson Schwartz, A Monetary History of the United States, 1867-1960, p.288).

1927: "Had the situation continued, most European nations would have had to leave the gold standard. Given the complexities of the reparations situation, the United States would be dragged down with them in a major financial crisis. Accordingly, Secretary of the Treasury Andrew Mellon and Benjamin Strong eagerly accepted initiations from European central bankers to a conference on the question. In 1927 Montague Norman of the Bank of England, Hjalmar Schacht of the Reichsbank, and Charles Rist of the Bank of France met with their American counterparts. The situation might well be saved, the argued, if the Federal Reserve cut its discount rate. Such an action would lower American interest rates in relation to those in Europe, and therefore attract funds to European banks. At the same time, low rates would encourage borrowing in America and stoke the speculative furnaces. Strong [President of the New York Federal Bank] was unhappy about the latter probability, but in the end proved willing to further stimulate an already active American economy in order to save international liquidity. In 1927, the Federal Reserve lowered its discount rate from 4 to 3½ percent.

"Wall Street greeted the lowered rate... Thus, the international situation was resolved in such a way as to encourage speculation on Wall Street" (Robert Sobel, Panic on Wall Street, (New York: Macmillian, 1968), pp.360-61).

2020: "The world had never faced a downturn of this speed, scale or severity...

"It was unprecedented in the history of central banking: intervention without limits. The pledges this spring by the U.S. Federal Reserve, the European Central Bank and some of their counterparts to make a seemingly infinite ocean of money available to fight the disruption caused by the coronavirus marked a dramatic expansion of their traditional role. Central banks became backstops to entire economies...

"The traditional tool of central banking is its control over interest rates. The Fed's first response to the crisis was to bring its main interest rate back to near zero in March; the European Central Bank and Bank of Japan were already below zero" (David Goodman and Jill Ward, How Vast Covid Response Remade Central Bank Toolkits, Bloomberg, September 3, 2020).

"Between March and April 2020 ... The Federal Reserve [-1.5%], the Bank of Canada [-1.5%] and the Bank of England [-0.65%] ... cut interest rates" (Paolo Cavallino and Fiorella De Fiore,  Central banks' response to Covid-19 in advanced economies,, June 5, 2020 pp.1-2).

"Central banks also ramped up bond-buying programs, known as quantitative easing, to pull down long-term rates. But it wasn't enough...

"To keep the flow of credit from freezing up, central banks offered themselves as massive short-term lenders, willing buyers of good (and not-so-good) assets and suppliers of their currencies for other central banks. They also massively expanded the speed and scope of their bond buying, adding a combined $2.7 trillion to their balance sheets in three months. Proclamations from policy makers including phrases such as "no limits" and "as much as necessary" not only calmed markets but made it easier for governments to launch expansive, deficit-funded relief programs by cutting their borrowing costs....

"Broader lending programs were meant to carry companies and individuals over the economic abyss created by pandemic lockdowns. By May, when more than 20 million Americans had filed for unemployment benefits, the Fed had supplied $2.3 trillion in credit. Its programs supported big companies through the corporate bond market and small- and medium-size businesses by buying bank loans; both approaches gave it far greater involvement in the fate of individual firms than it had had in decades. The ECB's lending programs offered up to 3 trillion euros ($3.4 trillion)" (David Goodman and Jill Ward, How Vast Covid Response Remade Central Bank Toolkits, Bloomberg, September 3, 2020).

The Central Bankers conference and response to crisis in 1927 is the type for the Central Bankers response to the Covid-19 crisis of 2020.

"Adolph C. Millar, a dissenting member of the Federal Reserve Board, subsequently described this as 'the greatest and boldest operation ever undertaken by the Federal Reserve System, and...[it] resulted in one of the most costly errors committed by it or any other banking system in the last 75 years'. The funds that the Federal Reserve made available were either invested in common stocks or (and more important) they came available to help finance the purchase of common stocks by others. So provided with funds, people rushed into the market. Perhaps the most widely read of all the interpretations of the period, that of Professor Lionel Robbins of the London School of Economics, concludes: 'From that date, according to all the evidence, the situation got completely out of control' " (John Kenneth Galbraith, The Great Crash 1929, (Ringwood: Penguin Group, 1992), pp.38-39).

"The major stock market boom on Wall Street coincided with a virtual suspension of new international lending and a retreat of capital. New money from America stopped going to Germany, Latin America, or Central Europe in June 1928. All the hot money went to Wall Street instead. And much more foreign money, especially English money, was also attracted by high returns as compared to bleak prospects elsewhere" (James Dale Davidson & William Rees-Mogg, Blood in the Streets, p.207).

"Not all countries implode at the same time. It is a series of dominoes. Europe and Japan must tip over forcing capital to concentrate in the United States" (Martin Armstrong, Unemployment the lowest since 2008,, May 10, 2013).

"This one is a Sovereign Debt Crisis and as that happens, it will drive the dollar higher and create massive losses around the globe... So you have to go up before you crash and burn as was the case in 1931" (Martin Armstrong, Dollar - Trade - Reserves,, May 8, 2013).

It has taken a Technology Bubble, a Housing bubble and Government and Central Bank Bailout Bubble to get the world economy to the brink of the next Great Depression. The bursting of the third bubble, still ongoing despite the interruption of the short and severe recession of 2020, whenever that occurs, begins the dowwave.

The Downwave

"The crash [of the bubble] is then followed by a wind-down period, interrupted by numerous suckers' rallies, which absorb cash from optimists expecting an early recovery. Ultimately, assets are deflated by about 90 percent" (James Dale Davidson and William Rees-Mogg, The Great Reckoning, p.146).

The crash of the stockmarket signals the end of the 'asset-price' inflation leg of the upwave. The ready availability of credit, or the expansion of credit, is the hallmark of the asset-price-bubble phase of the AAHC. Severe credit contraction is then the hallmark of the first leg of the deflationary downwave. The 'virtuous' cycle then becomes a 'vicious' cycle.

"Much of banking history consists of one speculative bubble after another... Each tends to be fuelled by an explosion of credit, a wave of unwarranted optimism and a subsequent mispricing of risk" (The Economist, Handle with care, October 3, 1998, p.15).

" "The 1920s was the first time in which a real mass production economy requiring mass consumption arose, and that's where the rub comes in," said Professor Robert McElvaine who is a leading expert on the Great Depression.

"The masses of people certainly didn't have enough share of the income to be buying all the goods and services that were out there.

"The basic way in which that was kept going for a number of years was by letting people buy things they didn't have the money for, extending them credit, very similar, again, to what's been going on here.

"So you had a bubble increasing and you finally reach the point before the stock market crash in 1929 where goods and services were not being sold at the level that was needed to keep the economy going.

"Credit had pretty much been exhausted and that starts a downward spiral," said Professor McElvaine" (Adrian Brown, What is deflation,, December 1, 2008).

"[A] decline in general economic prospects makes it difficult for some borrowers to pay, creating losses to banks in the form of both lost income and bad debts... If the initial bank losses are on a large scale to severely damage the equity base of the banking system, or to threaten the minimum requirements of the regulatory authority ... the banks have no option but to curtail or cease new lending. In extreme liquidity crises, banks stop rolling-over existing loans or even start calling-in loans before their maturity date, if the lending contract allows them to do so. This imposes a credit crunch on the economy, which forces the non-finance sector to curtail activity. This will, of course, impose further loses on the banking system, leading to an intensification of recessionary tendencies... If there is no effective lender of last resort facility, and banks start failing, a financial meltdown will occur. As soon as customers lose confidence in the banks, and demand their deposits back in cash, bank failures multiply, which further intensifies the credit-crunch cycle.

"This is what happened between 1929 and 1933 in the United States. In 1929, there were 28,000 banks in the United States. By 1933, the vicious cycle of bank closures mutually reinforcing the declining economy conditions had led to half the banks failing. This rate of banking failure in effect confiscated assets from the household and corporate sectors. Between 1929 and 1933, depositors in the United States' banking sector had one-in-ten chances of losing their funds" (Peter Brain, Beyond Meltdown, pp.139-40).

As a general rule the downwave begins and ends with a contraction - a contraction is also known as a recession.

In between the bookend contractions are alternating periods of expansion and contraction.

In the downwave of 1873-1897, there were six contractions and five expansions, as defined by the NBER. Therefore the downwave is not a linear experience.

The AAHC places emphasis on the turning points of the cycle. So that, as a general rule, the down-legs of the downwave are the beginning and ending contractions.

The AAHC, as mentioned before, has as its starting point the Kondratiev wave (K -Wave). The K-wave was originally defined by the upwave and downwaves of the wholesale prices index.

The average length of the two downwaves, as defined by the AAHC, that ended in 1843 and 1897 respectively, was 21 years.

The end of deflation, in these episodes, coincided with the end of depressionary conditions.

But the downwave, beginning in 1929, departed somewhat from the script, as did the following upwave, so modifications, based on the patterns of the previous downwaves, are made.

Looking at the 1930s:

"The Great Depression of the 1930s was a conjunction of many cycles such as technology where the invention of the combustion engine reduced the need for workers in agriculture. Like the internet is replacing local book and camera stores, tractors reduced the agricultural workforce from 40% to 3% causing unemployment to rise. Add to that the Dust Bowl, the Sovereign Debt Crisis in 1931, and the excess capital inflows fleeing Europe, what you ended up with was a bubble economy like Japan into 1989, and then the dramatic decline" (Martin Armstrong, Seeing Cycles Everywhere Around Us,, January 27, 2020).

"The depression of the 1930s was the most severe in American history, in terms of unemployment and the fall of output. Popular culture credits the New Deal with rescuing the economy from collapse. This is wrong. The National Bureau of Economic Research dates the recovery to March 1933. The stockmarket market rebounded from the nadir of depression in July 1932. The recovery after the New Deal was instituted from 1933 forward was actually less robust than the recoveries from previous depressions" (James Dale Davidson & William Rees-Mogg, The Great Reckoning, p.347).

"...while certain other major powers steadily recovered output by the middle to late 1930s, the United States suffered a further economic convulsion in 1937 which lost much of the ground gained over the preceding five years... the overall consequence was that in the year of the Munich crisis, the US share of world manufacturing output was lower than at any time since around 1910" (Paul Kennedy, The Rise and Fall of the Great Powers, p.426).

"I want to suggest in this study that the difficulty experienced by the American economy in the 1930s was an outgrowth of secular trends in development. By the 1920s, the economy had entered an era characterized by the emergence of dramatically new demand patterns and investment opportunities foreshadowed and indeed encouraged a shift in the composition of national output. But such a qualitative transformation created impediments to the recovery process in the thirties. These impediments derived from the difficulty of altering technology and labour skills to meet demands for new investment and consumer goods at a time of severe financial instability. In this sense, long-term growth mechanisms played a major role in the cyclical problems of the interwar period" (Michael A. Bernstein, The Great Depression, Delayed Recovery and Economic Change 1929-1939, (Cambridge: Cambridge University Press, 1987), p.20).

"It was not until the actual outbreak of World War II in Europe, a decade after the depression began, that U.S. industrial output exceeded its 1929 highs. From 1929 to 1939, adult unemployment averaged 18 percent" (James Dale Davidson & William Rees-Mogg, The Great Reckoning, p.347).

Industrial output surpassed the 1929 high in the expansion that began in June 1938.

If the downwave is defined by the information above the starting contraction is from 1929 to 1933, followed by the expansion of 1933 to 1937, with the ending contraction from 1937-38.

This downwave would be only nine years long, less than half as long as its predecessors.

But if P/E ratio longwaves are employed the end of the downwave would be 1942 (ten year earnings) or 1949 (one year earnings).

The following observations lend weight to defining the later ending point of the downwave in 1949, which would bring it length into line with its predecessors.

"The year 1949 was chosen as the beginning year in the study, since prior to 1949, excluding the eight year period 1941 through 1948, inflation was basically non-existent in the United States on a continuing basis, and typically occurred only during war-time periods. The eight year period from 1941 through 1948 was excluded, since it contains the five year period 1941 through 1945, representing the years of World War II - an inflationary period - and the three year period following World War II, 1946 through 1948. The three years from 1946 through 1948 can be characterized as a period when pent-up demand, which accumulated during the war years, was unleashed in the form of increased consumer spending - which generated inflation. Thus the eight year period from 1941 through 1948 was atypical regarding the rates of inflation that have been experienced in the United States. As a result, 1949 will be the beginning year for measuring increases in the price level...

"It must be mentioned that during the 46 year period 1949 through 1994 there were only 2 deflationary years - 1949 [-2.1] and 1954 [-0.7]. Beginning with 1913 and going forward through 1994, deflationary years occurred during 1921, 1922, 1926 through 1928, 1930 through 1932, 1938, 1949 and 1954" (Christopher T. Manos, System, method and program product for managing and controlling the disposition of financial resources,, Patent issued March 16, 1999).

If the downwave, following the pattern of the wholesale price index peaking at the end of a war and then running to the trough of the cycle, was defined by the period encompassing periods of deflation after WW1 it would run from 1921-1954, a period of 33 years. This would parallel the wholesale price index peak to trough that ran from 1864 to 1897, also 33 years.

"By "modern economic growth" [Ben] Bernanke refers to the healthy growth rates of what economists call the "Golden Age", the period from 1949 to 1973. This was the longest period of sustained economic expansion in American history: the economy grew at an average annual rate of 4.3 ... and private-sector jobs increased at a rate of 3.5 percent a year. And in 1973 the real median wage was the highest it's ever been" (Alan Nasser, Mass Unemployment and the Current Economic Crisis,, March 19, 2010).

The AAHC employs 1949 as the starting year of the first-leg of the upwave period characterized by 'war-peaking-price' inflation. The post-war recession also ended in 1949. So 1949 is the year chosen that 'best' fits the pattern of the first-legs of the upwave.  


"Before World War II, it was common to refer to any business cycle downturn as a "depression." This confused the short-term cycles ... what we now call "recessions" ... with the long-term cycles what we now call "depressions" (James Dale Davidson & William Rees-Mogg, The Great Reckoning, p.371). The longer-term depression may be referred to as a "great" depression to distinguish it from a short-term depression or recession of the upwaves.

In the AAHC there are two major upwaves for Britain to reach its pinnacle before decline: 1787 to 1825 and 1843 to 1873 - technically the British upwave was from 1848 to 1873; and two for America to reach its pinnacle before decline: 1897 to 1929 and 1949 to ????.

In the first major British upwave, Britain, by the end of the Napoleonic Wars in 1815 was world hegemon in the economic and diplomatic spheres. In the first American upwave, after the First World War America met, arguably, only one of the two requirements for world hegemon:

"The war had quickly catapulted the Americans close to the position of world economic leadership that the British had taken nearly a century to reach. Perhaps the very speed of that advanced helped to frustrate its final success, as did the markedly different structure of the American economy compared to the British, and of the postwar global system compared to that before 1914. Despite the vastly increased role that America was now called upon to play in the international economic order, she had neither the skills, nor the wisdom, nor the compulsion of interest, to play the role as productively as Great Britain had played her part in the nineteenth century. And despite the dreams of some men at the time, and the claims of some historians later, the United States was not in 1919, nor even in 1929, yet heir to the mantle of "empire" that history was stripping from the backs of the British. America was still a pretender to the title. Her time was yet to come, in another war, a generation later" (David M. Kennedy, Over Here - The First World War and American Society, (New York: Oxford University Press, 1982), pp.346-347).

"...the United States ... clearly the most powerful nation in the world by 1919 ... preferred to retreat from the centre of the diplomatic stage. In consequence, international affairs during the 1920s and beyond still seemed to focus either upon the actions of France and Britain, even though both countries had been badly hurt by the First World War, or upon the deliberation of the League [of Nations], in which French and British statesmen were pre-eminent" (Paul Kennedy, the Rise and Fall of Great Powers, p.357).

It took the Great Depression and the Second World War for America to assumed the diplomatic leadership of the West to complement its economic might.

In looking, therefore, at the parallels, between the rise of Britain and America the dates of 1815 and 1918 are critical as well as 1815 and 1945.

The end of the Civil War in the British empire in 1783, coinciding with the big-bang of Britain's Industrial Revolution, up to the end of the Napoleonic wars in 1815 is 'rhymed' with the end of the American Civil War in 1865, coinciding with the take-off of America's Industrial Revolution, up to the end of the Second World War in 1945.  Britain and America became world hegemon in 1815 and 1945 respectfully.

"Simply because much of the rest of the world was either exhausted by war or still in a stage of colonial 'underdevelopment', American power in 1945 was, for want of another term, artificially high, like say, Britain in 1815. Nonetheless, the actual dimensions of its might were unprecedented in absolute terms...

"... the expansion of American economic influence was going hand in hand with the erection of an array of military-base and security treaties across the globe... Here, too, there are many parallels with the expansion of British bases and treaty relationships after 1815; but the most obvious difference was that Britain, on the whole, was able to avoid the plethora of fixed and entangling alliances with other sovereign countries which the United States was now assuming...

"Little of this seems to have worried the decision makers of 1945... 'American experience', exulted Henry Luce of Life magazine, 'is the key to the future ... America must be the elder brother of nations in the brotherhood of man'...

Ex 4:22b This is what the LORD says: Israel is my firstborn son (NIV).
"... Israel was not only a son, but the "first-born son" of Jehovah. In this title the calling of the heathen [i.e., the Gentiles] is implied. Israel was not to be Jehovah's only son, but simply the first-born, who was peculiarly dear to his Father, and had certain privileges above the rest. Jehovah was about to exalt Israel above all the nations of the earth (Deu 28:1)" (C. F. Keil, The Pentateuch, KD, Vol.1, p.298).

"Like the British after 1815, the Americans in their turn found the informal influence in various lands hardening into something more formal - and more entangling; like the British, too, they found 'new frontiers of insecurity' whenever they wanted to draw the line. The 'Pax Americana' had come of age" (Paul Kennedy, The Rise and Fall of Great Powers, pp.460, 464, 461-62).

The hegemonic eras of both Britain and America enjoyed two periods of prosperity in their hegemonic upwaves as defined by the AAHC. For Britain it was one 'asset-price' inflation upwave [1819-1825] and a 'war-peaking-price' inflation upwave [1842-1873] which included an 'asset-price' inflation upwave [1869-1873]; and for America it was one 'war-peaking-price' inflation upwave [1949-1990] followed by an 'asset-price' inflation upwave [1991-????].

"From 1950 to 1973, the developed economies enjoyed their fastest sustained period of economic growth of the whole century, with the fastest sustained rise in productivity and in incomes, and with low male unemployment" (The Economist, Survey: 20th Century, September 11, p.15).

"For most of the postwar era, Western Europe and Japan slowly gained ground on the U.S. by adopting U.S. technology and adding their own innovations. In 1970, the U.S. per capita income was 31% higher than that of other major industrialized countries. By 1991, the difference had narrowed to only 10%. But with the dawn of the Internet Age, the gap has started to widen again, to more than 22% this year [1999]" (Michael J. Mandel & Irene M.Kunii, The Internet Economy: The World's Next Growth Engine,, October 4, 1999).

For America, the catching up periods of the 'challengers' are defined as 1949-90 and 1990-to the present; and for Britain 1819-42 and 1848-1873:

"By Spring 1821, the ... [Bank of England's] ... agents had been able to buy enough gold to risk sovereign backing of its paper, and an act of Parliament was promptly passed enabling it to return to the gold currency standard on 1 May. The effect of this move was to increase immensely worldwide confidence in the British economy and the expansion of international trade. It intensified a manufacturing and commercial boom which had begun in the second half of 1819 and was now well under way...

"The rapid expansion of the world economy in the early 1820s marked the upswing of the first modern trade cycle..." (Paul Johnson, The Birth of the Modern - World Society 1815-1830, (London: Orion Books Limited, 1992), p.862).

"The economic boom, felt everywhere but most intensively in Britain, sent government revenues soaring, and in the years 1823-25, the new Chancellor of the Exchequer earned himself the name "Prosperity" Robinson by across the-board reductions in taxes and duties...

"By February 1825 Robinson was boasting that the current prosperity has "nothing hollow in its foundation, artificial in its superstructure, or flimsy in its good results... and when we reflect upon ... the recent discoveries of modern science, and by the magical energies of the steam engine, who can doubt that its expansion is progressive, and its effects permanent?" Robinson had stumbled on the important truth: modern science and industry could turn the luxuries of one generation into the necessities of the next. His notion of a universal, steadily increasing prosperity, powered by technology and free trade, was a heady one" (Paul Johnson, The Birth of the Modern, pp.878-79).

"That was the difficulty about prosperity: It was fragile and, as economists had not yet learned, there was no chance that the rapid expansion of the years 1819-25 would be maintained at the same rate...." (Paul Johnson, The Birth of the Modern, p.883)

"The Bank of England tightened credit still further, and other London banks began to call in bills, chiefly from the country, to strengthen their reserves. The calling in of country bills hit the country banks and at the end of November the leading Bank in Plymouth ran out of cash and shut its doors. That introduced the black month of December 1825, the beginning of the first world financial crisis..." (Paul Johnson, The Birth of the Modern, pp.889).

"The 1840s remained ... a decade of crisis, even in terms of classical economics. British industry was still dominated by textiles, and the market for them was both finite and subject to increasing competition from American and Europe" (The Oxford History of Britain, Edited by Kenneth O. Morgan Editor, p.505).

"Britain saved herself, and so the world, by expanding out of crisis through the explosion of railway technology, by creating, and then exporting, the matrix of heavy industry based on coal and steel. The United States and Germany became great industrial powers. Other countries - France, Belgium, Austria, even Russia and Japan - began to follow. The modern economy took shape in the middle decades of the century, and for a time it seemed possible that his shape would be essentially English, with London as the financial pivot, and unrestricted free trade, by treaty or unilateral action, as the dynamic of unlimited self-sustaining growth. The world was going England's way: hence the almost crazy optimism of the 1850s and 1860s" (Paul Johnson, The Offshore Islanders, p.327).

The fortunes of Britain, after the 1873 stockmarket crash, after the heady days of the beginnings of the Industrial Age, will rhyme with the fortunes of America, after a future stockmarket crash, after the heady days of the beginnings of the Information Age.

Hegemonic decline - Britain a 'type' for the future

"Mid-Victorian prosperity had reached its peak in a boom that collapsed in 1873. Thereafter, although national income continued to increase (nearly four times at constant prices between 1851 and 1911), there was a persistent pressure on profit margins, with a price fall that lasted until the mid-1890s. Contemporaries talked misleadingly of a "great depression," but however misleading the phrase was as a description of the movement of economic indexes, the period as a whole was one of doubt and tension..." (Great Britain: Edwardian & Pre-War Britain, Encyclopaedia Britannica).

"Indeed, though our period subsides into the troubled time of the 'Great Depression', it would be misleading to paint too highly coloured a picture of it. Unlike the slump of the 1930s, the economic difficulties themselves were so complex and qualified that historians have even doubted whether the term 'depression' is justifiable as a description of the twenty years after this volume ends - [1875-1895]. They are wrong, but their doubts are enough to warn us against excessively dramatic treatment. Neither economically nor politically did the structure of the mid-nineteenth-century capitalist world collapse... for a generation or two after 1875 the world of triumphant bourgeoisie appeared to remain firm enough. Perhaps it was a little less self-confident than before, and its assertions of self-confidence therefore a little shriller, perhaps a little worried about its future..." (Eric Hobsbawn, The Age of Capital 1848-1875, p.359).

"Britain's relative lack of skills and knowledge (who could have imagined this eventuality in the first half of the nineteenth century?)" (David Landes, "Technological Change and Development in Western Europe, 1750-1914", p.575).

"Britain was never as strong or as innovatory in the age of steel as in the earlier age of iron - by 1896 British steel output was less than that of either the United States or Germany... There were many explanations of what was happening - some concerned education; others were psychological as well as economic - but none of them was encouraging" (Great Britain: Edwardian & Pre-War Britain, Encyclopaedia Britannica).

"What was different now was that the relative power of the various challenger states was much greater, while the threats seemed to be developing almost simultaneously... so British statesmen had to engage in a diplomatic and strategical juggling act that was literally worldwide in its dimensions" (Paul Kennedy, The Rise and Fall of the Great Powers, p.292).

"The second, interacting weakness was less immediate and dramatic, but perhaps even more serious. It was the erosion of Britain's industrial and commercial pre-eminence, upon which, in the last resort, its naval, military, and imperial strength rested... In terms of industrial muscle, both the United States and Imperial Germany had moved ahead. The 'workshop of the world' was now in third place, not because it wasn't growing, but because others were growing faster" (Paul Kennedy, The Rise and Fall of the Great Powers, p.294).

"That Britain ... possessed economic [and military] strengths in this period ought to be a warning, therefore, against too gloomy and sweeping a portrayal of the country's problems. In retrospect one can assert, 'From 1870 to 1970 the history of Britain was one of steady and almost unbroken decline, economically, militarily and politically, relative to other nations, from the peak of prosperity and power which her industrial revolution had achieved for her in the middle of the nineteenth century';  but there is also a danger of exaggerating and anticipating the pace of that decline and ignoring the country's very considerable assets, even in the nonindustrial sphere..." (Paul Kennedy, The Rise and Fall of the Great Powers, pp.295-297).

Post 1929 - a type for the future

While Britain provides a type after the stockmarket crash of 1873, America also provides a type after the stockmarket crash of 1929, with the qualification that both types are 'inferior' to the coming antitype:

"Roosevelt himself stood before the world in 1938 as a badly weakened leader, unable to summon the imagination or to secure the political strength to cure his own country's apparently endless economic crisis. In the ninth year of the Great Depression and the sixth year of Roosevelt's New Deal, with more than ten million workers [19 percent of the workforce] still unemployed, America had still not found a formula for economic recovery. From such a leader, what could the democracies hope? From such a troubled nation, what did the dictators have to fear" (David M. Kennedy, Freedom From Fear: The American People in Depression and War 1929-1945, pp.362 & 350).

The coming great depression - with its economic/financial/political and social convulsions, aggravated by natural disasters - will so trouble America that the coming 'dictators' will also have nothing to fear; especially if the United States of America breaks apart making it an easier target for conquest from a German-led European superpower and her allies, just as the divided Kingdoms of Israel and Judah, without God's protection, were an easier target for the Assyrian superpower and her allies in the former days.

Israel's Next Cycle of War and Prosperity

In the AAHC there is the theme of prosperity following turning-point wars.

The end of WW2 and the prosperity that started in America and spread to the rest of the  'western world' is the 'type' for the end of WW3 and the prosperity starting in Israel - a United Kingdom of all the Tribes of Israel - and spreading to the rest of the world.

Modifying Harold Evans summation of the prosperity of America in the 1950s, qualifying "the world" to the post Garden of Eden age, and applying it after, not some 23 years (1950-1973), but after 1000 year of prosperity, it may be said:

"There had been nothing like it before in the history of the world".

As would be expected of this time:

"Heaven and earth will then put on their sabbath dress; for it will be the Sabbath of the world's history, the seventh day in the world's week" (F. Delitzsch, Isaiah, KD, Vol.7,p.325).

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