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The Daily Missive

The Economic Confidence Model

By December 14, 2022February 8th, 2023No Comments

“The best time to get involved with cyclicals is when the economy is at its weakest, earnings are at their lowest, and public sentiment is at its bleakest.”

– Peter Lynch

The Economic Confidence Model (ECM), sometimes referred to as the Pi Cycle, is the base model for comprehending the global economy. Focusing on global capital concentration, the ECM provides a timeframe for shifts in confidence that lead to major economic events.

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There is simply no possible way to prevent the collapse of our Republican forms of government. But since the media always promotes one-sided leftist fake news, they will be leading us down the path of authoritarianism for the cancel culture is all about silencing any opposition.

As Sagan points out, without skepticism we are doomed. What we must start planning for is the reconstruction of a new form of government post-2032 when this one collapses like Communism from its own corruption and weight.

No revolution will be even needed.

During my studies, I came across a list of financial panics between 1683 and 1907 that occurred in various economies throughout the world. By chance, I divided the timeframe between 1683 and 1907 (224 years) by the number of panics (26), and noticed that, on average, a financial panic had occurred every 8.6 years. In an attempt to quantify my findings, I noted that each 8.6-year wave consisted of roughly 3,141 days, which is equivalent to pi multiplied by 1000 (3.141 *1000).

Curious whether this was a coincidence or correlation, I came across the work of Nikolai Kondratieff who theorized that periods of economic growth and decline occurred on a cyclical basis in phases or waves that built in intensity and led to a major economic event every 50–60 years. I noted that my list of financial panics from 1683–1907 displayed a similar pattern where major events occurred every 51.6 years after six 8.6-year waves.

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To test my theory, I amassed the largest historical monetary database and correlated my findings with major economic events measured by changes in international capital flows. My research revealed a cyclical pattern to the global economy that has existed since the beginning of known currency. Every sixth wave (51.6 years), capital moves back and forth from government to the private sector based on the confidence that people have in each sector. When the majority feels confident and invests in one sector or nation, it leads to overvaluation and an overconcentration of capital that causes financial panics.

Unlike Kondratieff, the ECM acknowledges that not all long waves of economic activity are the same. We have found that in one 51.6-year period, the underlying confidence of the community may reside heavily within the public sector (i.e. government) or be wary of it and turn to the private sector. In either case, the next long wave of 51.6 years will move in the opposite direction. The excess of each sector causes the alternating confidence of the people.

Confidence can be determined by monitoring capital movements. During public waves, capital is comfortable residing in government bonds, whereas during private waves, capital begins to diversify into stocks, commodities, business, and real estate.

For example, during the 19th century, people became skeptical about government and did not trust its currency. This gave birth to the term “greenback” in the United States and referred to the only backing being the green ink on the reverse side of the note. To inspire the acceptance of unbacked paper currency, there used to be a schedule of interest payments on the reverse. Currency had become merely a strange form of circulating bonds. The long wave that resulted in the Great Depression was a wave of private confidence where people believed more in the virtues of the private sector. This high concentration of private confidence resulted in strong stock markets and expansion in business. When the economy reaches its point of maximum entropy or excess, the correction begins.


Martin A. Armstrong
Special to the Wiggin Sessions

Addison Wiggin

Addison Wiggin Addison Wiggin is an American writer, publisher, and filmmaker. He was the founder of Agora Financial and publisher for 18 years. An acclaimed New York Times best-selling author, his books include: Financial Reckoning DayEmpire of DebtThe Demise of the Dollar, and The Little Book of the Shrinking Dollar. Addison is also the writer and executive producer of the documentary I.O.U.S.A., an exposé on the national debt, shortlisted for an Academy Award in 2008. He lives in Baltimore, Maryland with his family. Addison started his latest project, The Wiggin Sessions, powered by The Essential Investor, in March 2020. He films from a homegrown studio in his basement.