Summary of SuperCycles

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  • Analytical
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In classic economic theory, market forces move the global economy toward a balance in the creation and consumption of products and services. In reality, markets rarely settle into a steady equilibrium that neatly matches supply and demand. Arun Motianey sets out a new paradigm to explain this mismatch – and much more. He says serial disequilibrium drives “SuperCycles,” decades-long sequences of economic expansions, recessions and recoveries marked by a common pattern of changes in the prices of inputs and outputs. The “Classical SuperCycle,” which ended with the Great Depression, lasted almost 60 years. The “Modern SuperCycle,” which began in 1979, may die younger, largely because increased borrowing and other “financialization” forces are accelerating its advance. Instead of letting this unfold, regulators should set policies that sustain the Modern SuperCycle. Motianey criticizes classical macroeconomics’ poor predictive power and proposes that the SuperCycle may provide a defined structure that could make it easier to foresee the economic future. getAbstract recommends this lucid, if sometimes contrarian, book to readers intrigued by fiscal history and by new ways to understand long-term economic trends.

About the Author

Arun Motianey was managing director and head of macro research and strategy at Citigroup Global Wealth Management until March 2009, capping his 20-year career with Citigroup.



An Overview of “SuperCycle” Theory

Classical macroeconomic theory lacks both scientific credibility and predictive power. Its practitioners have failed to forecast some of the biggest economic shocks in recent history, including the 1987 stock market crash, the 2000 collapse of the Internet investment frenzy and the 2008 worldwide financial panic. Consider the theoretical possibility that those economic shocks are part of a bigger unfolding trend, part of a single SuperCycle. The potential reward of this idea is better economic foresight because the current SuperCycle is following a pattern roughly parallel to the prior SuperCycle. This is why national policy makers and central bankers should consider the theory of SuperCycles as a practical alternative to modern macroeconomic theory.

Imagine the economy as a pipeline representing progressive steps in the market-based allocation of resources. Raw commodity suppliers are at the front end of the pipeline, manufacturers and service providers are in the middle, and consumers (households and businesses) are at the back. This conceptual view is helpful in seeing cycles of economic expansion and contraction as part of a bigger...

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