Grand Super Cycle National Bankruptcies

Part I

Introduction

Joseph M. Miller

Daan Joubert

daanj@kingsley.co.za

Marion Butler

Grand Super Cycles, in Elliott Wave terminology, are long economic advances lasting approximately 300 years. Three such advances in succession, combined with two intermediate declines, constitute a higher order wave lasting roughly 1000 years that we call an X Wave. In subdividing an X Wave into its component Grand Super Cycle (GSC) Waves, we label the three 3-century advances as GSC1 (the first 300-year advance of the sequence), GSC3 (the second such advance), and GSC5 (the third and final advance), with the intermediate declines (lasting roughly half a century each) labeled GSC2 and GSC4. Grand Super Cycles are similarly composed of smaller advancing waves called Super Cycles, each lasting about 70 years.

In our previous Elliott Wave articles (An Elliott Wave Perspective available at www.freebuck.com/articles/elliott/) we identified ten X Waves from the beginning of the Neolithic to 2000 AD, but we are only able to dissect the most recent two X Waves into component Grand Super Cycles. These two X Waves are the Roman period from roughly 750BC to 337 AD, and the Modern X Wave from 1000 to 2000 AD. The GSC components of these waves are as follows:

Roman X Wave

GSC1: 750 BC-432 BC Classical Greece

GSC2: 431 BC-390 BC Fall of the Athenian Empire

GSC3: 390 BC-91 BC Roman Republic

GSC4: 91 BC-31 BC Fall of the Roman Republic

GSC5: 30 BC-337 AD Roman Empire

Modern X Wave

GSC1: 1000-1337 The Late Middle Ages

GSC2: 1337-1400 The Hundred Years War and the Black Death

GSC3: 1400-1720 The Renaissance

GSC4: 1720-1781 South Sea and Mississippi Bubbles Burst

GSC5: 1782-2000 The Industrial & Atomic Revolutions

In one of our articles, The Rise and Fall of Civilizations Part I, we said that systemic risk increases at the end of successively higher wave orders. At Super Cycle peaks the risks are: collapse of excessive (personal) debt, increased (personal) bankruptcies, major stock market decline, reduced economic activity, and increased unemployment. At Grand Super Cycle peaks, the risk level rises to include national debt default, collapse of fiat money systems (including precursor systems), and radically changed forms of government. At X Wave peaks, the risk level increases to include extinction of major nations, collapse of international trade, disappearance of luxury goods, and decline of architecture (mainly reflected in reduced monumentality of buildings).

We stated that these risks represented the typical, but not inevitable, developments associated with declining periods subsequent to the peaks of the three wave orders described. For example, if you read our Foundations of Western Civilization and Rise and Fall of Civilizations Part II, which describe the ten historical X Waves, you will see that major nations at the end of an X Wave have a roughly 50-50 chance of surviving the subsequent decline. National extinction is serious risk, but not inevitable.

Regarding systemic risk at the end of Grand Super Cycles, the collapse of fiat money systems and its precursors was described in Elliott Waves and Monetary History, while examples of radical government reorganization were provided in Rise and Fall of Civilizations Part I. Unfortunately, however, we never provided examples of national bankruptcy except for glimpses here and there in our various articles. This deficiency is being addressed in Grand Super Cycle National Bankruptcies here.

In addition to this introduction, the series will consist of six articles on financial conditions at the end of the six GSCs listed above. Their titles are:

Fall of the Athenian Empire
Fall of the Roman Republic
Fall of the Roman Empire
The Hundred Years War and the Black Death
Fall of the French Monarchy, and
The Great Credit Bubble

The series will conclude with a brief wrap-up summary, making eight articles in all, which will be published over the next few months.

Based on the above six GSC examples, it appears to be a universal rule that the nation (or nations) representing the economic center of gravity of Western Civilization experiences extreme fiscal and monetary stress at the end of a Grand Super Cycle (GSC1, GSC3, or GSC5). In most cases this stress is followed by monetary collapse, financial ruin of the state, and collapse of the government; but these are typical rather than inevitable developments.

Each case is different, yet they have remarkable similarities. In the Fall of the French Monarchy, state financial insolvency was a direct and immediate cause of the fall of government, which occurred simultaneously with complete fiscal and monetary collapse. In the Fall of the Roman Empire, state financial insolvency was a direct, but not immediate, cause of government collapse. (Barbarian invasion was the immediate cause.) Nevertheless, like the French Monarchy, the Fall of the Roman Empire was still accompanied by fiscal and monetary collapse. In the Fall of the Athenian Empire, financial problems were merely an indirect cause of the government’s fall. Nevertheless, the government did fall, and its fall was concurrent with monetary collapse and financial ruin of the state. In the Fall of the Roman Republic, financial difficulties do not appear to have caused the fall of the government, directly or otherwise. Nevertheless, the government did fall in the midst of grave monetary and financial difficulties. In the case of the Hundred Years War/Black Death, there were severe economic, financial, and monetary problems in Europe, including bankruptcies of England and France, English debt default and concurrent Italian banking crisis, and monetary debasement in England and France. Revolts in England and France did not topple those monarchies, but Italian states did experience severe political upheaval (eg. a police state in Venice, popular overthrow of Genoa’s elite, and a tyranny in Florence), and there was the Great Schism in the Catholic Church.

Our object, therefore, in writing this series, is to describe the fiscal and monetary stress at the end of each GSC wave, and the extent of financial collapse during each subsequent decline. We use the term “bankruptcy” here in the broader sense of financial ruin, rather the narrow sense of the inability to pay one’s creditors. Public debt is a phenomenon that began in earnest during the Middle Ages, starting in the 1200s AD. Ancient states did not utilize public debt except on rare occasions, so public debt is not a major feature in the financial ruin of either Greece or Rome.

Method of Footnoting

Each of the articles will have a high number of footnotes from a relatively small list of sources. Sources will therefore be listed and numbered at the bottom of each article. Footnotes in the body of the text will refer to the number of the source in the list, last name of author for clarification, and page number of the source. It is hoped that this will reduce the page count of each article substantially, while avoiding undue confusion for the reader.

Note on Wave Counts

Readers of previous articles of ours may notice that some of our wave counts have been modified slightly since the publishing of 12,000 Years of Elliott Waves three years ago. The following comments are meant to clarify these changes for anyone concerned with such detail.

The beginning of the Roman X Wave, shown here as 750 BC, was stated as 700 BC in 12,000 Years of Elliott Waves. We know that Western Civilization emerged from a long dark age in the latter half of the 8^th century BC. That puts the beginning of GSC1 somewhere between 750 and 700 BC. 750 BC is used here because that is roughly the traditional date of the founding of Rome most people are familiar with.

The height of Classical Greece corresponds with the Age of Pericles in the middle of the 5th century BC. Athens was at the peak of her power in the 440’s and 430’s. Upon closer examination of financial aspects of the Peloponnesian War since writing 12,000 Years of Elliott Waves, we think it best to label the start of the declining period GSC2 as the start of the war in 431 BC. This is slightly earlier than the date used in 12,000 Years of Elliott Waves.

The Fall of the Roman Republic also presents difficulties in labeling wave counts because the Republic was experiencing internal stresses at the same time that it was achieving final dominion over the Mediterranean world. The Fall of the Republic can be viewed as a period of increased civil strife including assassination of key political figures, conspiracies to overthrow the constitution, Servile Wars (slave revolts), revolts of allies, and civil wars fought between republicans and democrats. Therefore, in 12,000 Years of Elliott Waves, we dated the start of GSC4 (Fall of the Republic) at 135 BC, the year when the first of these events, the First Servile War, took place. This wave count was always problematic, because it created a GSC decline that was way too long. The change here, to 91 BC, was done upon closer examination of financial conditions in Rome, which were not under extreme stress until the Social War starting in 91 BC.

In 12,000 Years of Elliott Waves we dated the declining wave between the Late Middle Ages (GSC1 of the modern X Wave) and Renaissance (GSC3) as 1350 to 1400. This wave count for GSC2 corresponded with the immediate effects the Black Death that reached Europe in the late 1340’s, with outbreaks continuing though 1400. A closer examination of economic and financial history shows that the declining period should be shifted back and expanded somewhat, but we are presented with a dilemma in determining an exact wave count.

Economic conditions were at their peak in Europe immediately after 1300, but there were numerous economic, financial, and monetary problems evident well before the onslaught of the Black Death. The English aristocracy was at the height of their wealth in the decades preceding the start of the Hundred Years War in 1337; yet there was severe, widespread European famine in 1315, and an agricultural depression in the 1320s. French insolvency in the first decade of the 14^th century led to severe measures including suppression of the Templars in 1307 and confiscation of their vast wealth; and the nadir for French royal revenue was in 1336, just before the war. One source dates the Venetian economic decline as 1320 to 1380, while another source dates the beginning of decline in Venice to the establishment of a police state in 1325.

This conflicting data makes it difficult to decide on the best starting date of the European decline, and we have taken the expedient of using the start of the Hundred Years War in 1337, which was a watershed event - particularly from the standpoint of national financial distress. The reader should understand, however, that the actual start of economic decline was a decade or two earlier. Our ending date for GSC2 in 1400 was chosen simply for convenience. General economic conditions began to improve somewhat in the final years of the 14^th century, an example being Florence where conditions improved after 1378.

Regarding the Renaissance (GSC3) and its aftermath (GSC4), in 12,000 Years of Elliott Waves we labeled the end of the declining wave (GSC4) as 1780 for England and America, and noted that we consider the start of the French Revolution to be the start of GSC5 in France. Again, in examining fiscal matters more closely, we feel it more appropriate to end the French decline with the final fiscal and monetary collapse, which occurred in 1796. The period of Dutch economic decline corresponds closely to the decline in France, while the exact starting date for GSC5 in America and England is 1782. (The siege of Yorktown was in 1781, and England sued for peace after the fall of Lord North’s ministry in March 1782.)

It is probably worth mentioning, as a final note, that in the French example there were opportunities, and efforts taken, to restore financial stability in the 1770’s. These efforts failed, and the decline of France was exacerbated and extended beyond the normal duration of a GSC decline. Part V of this series, Fall of the French Monarchy, deals almost entirely with France because we have discussed the English South Sea Bubble elsewhere, and the French decline was the most severe example of financial collapse in GSC4.

Feel free to write the authors with comments and questions at the emails addresses listed at the beginning of the article.