Ivo P. Janecka, MD, MBA, PhD

What Will the U.S. Economy Look Like in 10 Years? Look to Greece

You time frame of '2022-2025' is close to the projections of the bottom of the Kondratieff’s Long Wave, 2026-2028. See Instablog for details. Is there a message in the 300+ year old chart? seekingalpha.com/user/...

The Intrinsic Value of Nothing, Part 1

Value is not intrinsic to anything or anyone. Value only arises in a system as its emergence, based on self-organizing relationships; it’s a transient state. To achieve value, self-organizing relationships (read: horizontal hierarchy) must be “free.” Although, free markets are the pre-requisites for true self-organization to take place, the market freedom is able to achieve value only within a system-optimizing vertical hierarchy which represents the needed legislative/political structure of the larger societal system. Both the horizontal and the vertical hierarchy, the people in the trenches and the government, have to be in an ongoing, and again, a system-optimizing relationship.
To further dissect value, system-optimizing efforts of both hierarchies have to offer the system efficiency, effectiveness, risk management, and proportionate cost; when measured in an aggregate, the quantified value then becomes comparable across differing systems and offers a yardstick to judge the impact of any contemplated “improvement” by any segment of the societal system.

Yet Another Finger of Instability

Congratulations on your 60th birthday, John! Just remember, you don't turn into a pumpkin just because you turn 60. In the entire Universe, only human beings can suffer from, self-inflicted, premature cognitive perception. Ivo

Real Estate Will Recover in ... 2030?

The projected end/bottom of the current Kondratieff Long Wave, calculated from 1700s, may not occur until 2028. For details, see link below:
seekingalpha.com/insta...

The Great Deleveraging, Part II

See Instablog for Kondratieff Long Wave estimation of major cycle bottom (2026-2028)
seekingalpha.com/insta...

Is there a message in the 300+ year old chart?

It seems that all cycles need adjustment in order to stay in sync with still larger cycles; even our calendar has a leap year.


On Jun 21 03:40 AM Donald Ingram wrote:

> The data is open to each persons interpretation of said data.
> Too bad Stalin murdered Kondratieff. What a waste of a brilliant
> mind.
> The wave frequency can not be altered to fit the data. The frequency
> is what it is. Nicolais would be rolling over in his grave!

Health Care Bill: Prescription for Disaster

When the financial meltdown was accelerating, there were public calls for a “look at the whole system.” That insight might have come from the clarity of vision gained through the realization that the “parachute” may not open and the “ground” was rapidly approaching. But, when the parachute did open, the clarity came out of focus; with that, the need for the larger system coherence vanished. In another word, “we have resuscitated the patient’s important organ/the financial system, but without doing any “major surgery” on the part that was seriously ill; resuscitation is only an emergency step, it’s not a corrective one. The consequence of that is that the “organ” is back to processing its toxic metabolites and heads to its eventual “disease” recurrence.
The issue with health care is much more complex because finances are only about numbers but health care is about people, human beings that actually create and maintain the economy through their productive/consumptive relationships. The whole economy is a large system as every individual is also a system in its own right fitting or not fitting into the larger societal system. Hence, the importance of really looking at health care from systems science perspective which offers guiding principle, based on biologic correlates, of function and structure.
I have looked at the issue of the U.S. health care and asked the question: Is the U.S. health care an appropriate system? (see reference below). In the described Dynamic Systems Model, the health care, as a system, was found to represent a failing system localized within the outer zone of chaos (see reference for details). According to the systems science principles, to restructure the health care in order to resemble a well-functioning complex adaptive system, the focus needs to be on re-establishing the whole system’s coherence through the return to organized complexity. And, that’s a tall order. Anything less than that will not prove to be a system-optimizing move. On the contrary, because the current system is already within the zone of chaos, where the principles of chaos theory operate, there is a heightened probability of a “butterfly effect,” or as it has been recently popularized as a “black swan” with severe destabilization of the legislatively further-altered system; and, the risk would accelerate not just for health care but for the economy and the society as a whole.

Janecka IP: Is the U.S. Health Care an Appropriate System? A strategic perspective from systems science. Health Research Policy and Systems 2009, 7:1 (Highly Accessed) www.health-policy-syst...

Winter's Coming for the Boomers: Part 2

Your long-term time frame is quite similar to one extrapolated from a 300+ year chart of commodity prices. The end of the next Kondratieff “Winter” will likely not be seen until the year 2028. Since late 1700s, the Kondratieff waves have been running in pairs of shorter and shorter duration with also narrowing differences among the pairs (initially +/- 3years, then +/- 2 years, and the last pair differed only by +/- 1 year). Extrapolating this pattern forward, the next major bottom does appear to be the year 2028. For specific dates, please see InstaBlog Seeking Alpha from 6-2-09 at seekingalpha.com/insta...

Global Economic Crisis: What's Next?

Your point that “the underlying cause of the crisis is much simpler – the economic supersizing of finance in the United States and elsewhere” will likely withstand the test of time/history as it approximates the assessment gained through systems science.

One of the fundamental precepts of systems science is that a system, and our economy is one giant system, must be of a certain size otherwise it either implodes or explodes (as we have witnessed). The reason behind this principle, based on biologic approximates, is that a well functioning system needs to oscillate, fluctuate, based on its physiology, morphology and applicable cycles. If that concept is bypassed, e.g. through supersizing the finance sector, the system begins to malfunction and will eventually crash/adjust to a livable size.

Chart of the Day - Inflation Adjusted Dow

The estimated timeframe for the bottom of market valuation, 2027, mentioned in this article, is very similar to the year 2028 arrived at through calculating sequences of Kondratieff waves on a commodity prices chart starting in 1730.
Since late 1700s, the Kondratieff waves have been running in pairs of shorter and shorter duration with also narrowing differences among the pairs (initially +/- 3years, then +/- 2 years, and the last pair differed only by +/- 1 year). Extrapolating this pattern forward, the next major bottom does appear to be the year 2028. For specific dates, please see InstaBlog Seeking Alpha from 6-2-09 at seekingalpha.com/insta...

The original chart used for these calculations was James Flanagan’s (Gann Global Financial) “Commodities Prices since 1730” recently published on seekingalpha.com/artic...

The Coming Depression: See It Clearly Through Historical Eyes

If the dates are extracted from the chart and schematically put in relationships of Kondratieff’s Long Wave, interesting observations emerge (see tables via the link below). It appears that the cycles of each Wave since 1730 are shortening, including the +/- difference among cycle pairs. If this relationship pattern continues, the projected end of the current Long Wave may not occur until 2028.

seekingalpha.com/insta...

Understanding Risk

Malsow and Nobel: Couple of clarifications:
The quote that you ascribe to Charlie Munger, “a man with a hammer everything looks like nails” actually belongs to Abraham Maslow (1908-1970) which reads: “if the only tool you have is a hammer, you tend to see every problem as a nail.” www.quotationspage.com.../

The other clarification is regarding your the Nobel Prize in Economics comment: “Alfred Nobel envisioned a prestigious prize….” Below is a short explanatory note from Wikipedia: “The Nobel Prize in Economics[2] … is identified with the Nobel Prizes, although it is not one of the five Nobel Prizes (in Physics, Chemistry, Physiology or Medicine, Literature, and Peace) which were established by the will of Alfred Nobel in 1895.[1][3][4][5][6] The Prize in Economics, as it is frequently referred to by the Nobel Foundation, is a prize established and funded by the Bank of Sweden, in memory of Alfred Nobel.” en.wikipedia.org/wiki/...

Taleb's Necessary and Impossible Wish List

Nassim Taleb’s Ten Principles and Systems Science.
It is possible to read Nassim Taleb’s article (Ten principles for a Black Swan-proof world. Financial Times, April 7, 2009 www.ft.com/cms/s/0/5d5... ) and see it in a different light. Taleb’s thesis resonates quite well with Systems Science which offers a gestalt view on societal problems among others. His ten principles are quite illustrative:
“1. What is fragile should break early while it is still small. Nothing should ever become too big to fail.” This is an important systems science principle as a system must be of a certain size to allow for its natural functional oscillations/changes through adaptive cycles; otherwise it ends.
“2. No socialisation of losses and privatisation of gains… 3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. “9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement.” These three points are pertinent to the systems science notion of the need for a reciprocal relationship between vertical hierarchy/the authorities and the people in the trenches, the horizontal hierarchy. Without it, system becomes unstable and a crisis is in its future.
“4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. No incentives without disincentives.” In systems science, an uphill is always considered jointly with a downhill; rights must go together with responsibilities as they, in real life, are a part of the same coin.
“5. Counter-balance complexity with simplicity. Complexity from globalization…The complex economy is already a form of leverage: the leverage of efficiency.” Systems science emphasizes the broader need for searching for full value; efficiency is only one component of that (the others are effectiveness, risk management, and a proportionate cost).
“6. Do not give children sticks of dynamite, even if they come with a warning. Complex derivatives need to be banned because nobody understands them.” In systems science, this metaphor would be seen more of representing complicatedness or a disorganized complexity; an organized complexity reflects the functionality of an evolving system.
Taleb’s point about “Citizens must be protected from themselves,” resonates with what Jams Madison wrote in Federalist Papers: if only men were angels… referring to the need for some complementary form of government, e.g. vertical hierarchy in systems science.
“7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Confidence is related to the resiliency/robustness of an individual system (a human being) and the larger one (society); it would be the system-within-a-system paradigm in systems science.
“8. Do not give an addict more drugs if he has withdrawal pains.” It follows from systems science that if using the wrong operational paradigm got us into this problem, using the same one on steroids will not get us out.
“10. Make an omelette with the broken eggs… we will have to remake the system… before it does so itself…Let us move voluntarily into Capitalism 2.0 ...converting debt into equity, marginalising the economics and business school establishments… banning leveraged buyouts … and teaching people to navigate a world with fewer certainties.” Systems science-based education teaches how to differentiate risk from uncertainty, how to change disorganized complexity into an organized one; that intake/output need to be in balance in order to preserve the energy/info gradient and velocity flow through an open system; that credit = trust (could excessive credit create excessive trust? Does it exist? Or does it change trust/an acceptance of a degree of risk, into a foolish uncertainty?). Educational institutions (from business to medicine, law, etc.) need to teach systems science.
Further, Taleb states that “Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage.” Indeed, the biologic metaphor permeates systems science. For example, bacterial colonies do not foolhardily and in totality forge into new territories where uncertainty prevails. They select and sequester only a small colony segment to explore the unknown, ready for a sacrifice; the larger system, however, lives on as it has lived likely for millennia.

The Benefits of This Recession

Your introduction of cancer analogy to the current economic crisis debate is quite appropriate as there are many similarities between cancer and economic bubbles. Both processes can be modeled (see reference below) to be affecting systems that are functioning way outside of their normal range in what is labeled the outer edge of chaos. Here, such systems exhibit many characteristics including disorganized complexity, loss of value creation (as a consequence of some components of the system maximizing only their benefit, e.g. cancer/a financial sector without regard to the entire system-the human body or the society); this behavior causes system instability and heightened susceptibility to the butterfly effect/a Nassim Taleb’s black swan, which is a key characteristic of chaos theory. As with the exponential growth of cancer cells, which drain all energy reserves from the entire body, this process has been mirrored by the massive expansion of the financial debt instruments that have already drained most of societal resources.
The modeled path to the re-establishment of healthy biologic functional and structural oscillations of human body affected by cancer, is similar to the journey back to “physiologic” societal business cycles, and requires the return to system’s organized complexity. For the undifferentiated cancer stem cells, that means imposing differentiation to revert them to a specific function that contributes to the entire system’s value creation, epitomized by the evolutionary progression, not destruction, of the human body. A financial equivalent of this biologic process would require re-differentiation of the financial sector, from maximizing self, to optimizing the larger societal system.
Reference
Janecka IP: Cancer control through principles of systems science, complexity, and chaos theory: A model. Int J Med Sci 2007; 4:164-173. www.medsci.org/v04p016...

The Structural Crisis That Nobody Talks About

The Structural Crisis posting highlights two important aspects of a failing societal framework during major downturns (two historic ones and the current one). They are: structure/industries and finance. When it comes to identifying fundamental societal/economic deficiencies, systems science offers a unique perspective, a common denominator, that allow for a unified comparison across societal cycles.
A system is an amalgamation of numerous and variable components, engaged in ongoing multi-directional relationships under the influence of horizontal and vertical hierarchies, attempting to create system’s emergence, its value.
The structure/industries, referred to in the posting, represent system components. They need to be numerous and variable in order to assure system’s evolution. The shrinkage of industries/structural components weakens the system and diminishes its robustness.
The combined effect of structural and financial deficiencies, during the mentioned long and great depressions and the current turmoil, shows the devastating impact of such a combination. The financial sphere represents a key form of system relationships with money being the medium of exchange.
The mentioned past structural crisis instigators, from horse to automobile, etc., is a reflection of the appearance of new system attractors leading to the creation of new system components/industries. The current changes, Internet and globalization, reflect the new sophistication of system communication as well as the expansion of the entire system via globalization. What is also pertinent, but not mentioned in the posting, is the importance of system’s boundaries which, according to systems science, should not be too open or too closed; they need to be, expressed in a biological term, semipermeable, reflecting selective cross-flow. Otherwise, the entire system, e.g. the global economy and its smaller sub-systems such as various national economies, is quite vulnerable to Nassim Taleb’s black swan.
The posing correctly singles out the key role of political decisions in containment or expansion of system-wide societal crisis. Political decisions are a reflection of the influence of system’s vertical hierarchy which must be in a reciprocal relationship with a horizontal hierarchy understood as system’s capacity for self-organization.
One of the subsequent comments to the posting (Sentinel) brings out the contributing influence of cheep energy and debt. A system is alive due to a gradient of energy and information which must be at a “need+” level in order for the system to prosper, meaning that energy/information must be at a favorable cost/availability for it to “flow” through an open system; otherwise, the system will be approaching entropy, an increasing non-functionality within the system. Also mentioned is the bright side of a major cycle downturn which is the increase of innovation; that is a reflection of system’s ongoing creation of emergence/value.
Systems science can clarify societal/economic history, current status, and the needed direction for tomorrow. Re-balancing society along systems science principles has high probability for system’s ongoing evolution especially during “hard-to-understand societal crisis.”