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Bursting of bubbles: Faith-Trust-Credit-Risk-Uncertainty

The sequential bursting of our economic bubbles (tech, housing) is being linked to loss of faith: “when this bubble bursts … investors will have lost faith….” (Graham Summers, Jan 15, 2010

It seem, however, that such a loss is a process and not an event (yes, there is an ending to the process). Faith is an expression of trust and trust may be referred to as credit (from Latin credo=believe). The following schematic chart of Kondratieff cycle expresses expansion/contraction of commodity prices. Simple overlay of word substitution (credit=money=trust) provides an intriguing picture of expansion and contraction of societal not only credit but also simultaneously trust.  The approaching ending of the Autumn phase (secondary plateau) of Kondratieff’s Long Wave may be heralded by ”… investor sentiment [being] back to [peak] 2007 levels despite the worst Financial Crisis in 80+ years….”

The accompanying chart portrays the Long Wave as simply a journey from risk-based trust to uncertainty-based credit; from: trust but verify to don’t worry be happy. It is useful to differentiate quantifiable risk (by relevant sensory experience) to uncertainty that is unquantifiable. The credit contraction has already started; the return of trust and quantifiable risk, however, still has a way to go.

Kondratieff Long Wave

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