Abstract
A key question for businesses and investors is whether the low inflation and low long-term interest rates we are now experiencing are a business cycle or a longer-term phenomenon. This paper updates and expands my earlier study on long waves [Synnott 1995]. Using this analytical perspective, I conclude that it is likely that high-grade, long-term bond yields will remain low, especially in real terms, for several years. Low long-term real interest rates for an extended period give the United States a major opportunity for investment and growth, as in previous long-term cycles, provided that appropriate government policies and plans are in place.
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Notes
The purpose of that paper was to look beyond traditional business-cycle analysis—which couldn’t explain why the recovery from the 1990–91. Recession was so sluggish—to see whether the concept of a “long-wave” could be helpful in understanding our economic condition then.
Economists have long been familiar with inventory cycles of 3–4 years duration (Kitchin cycles), capital equipment spending cycles of 7–10 years (Juglar cycles) and a commercial construction and heavy equipment cycle of 10–15 years (Kuznets cycles). What these cycles have in common is a certain regularity, so that once a peak or trough occurs, it is possible to have a rough idea of how the process will develop.
More controversial is the concept of a long cycle of 50 or 60 years duration. As previously noted this cycle is popularly associated with Kondratieff but other scholars have observed it also. As Fischer [1996, pp. 417–418] puts it, “My own judgment is that a fifty-or sixty-year cycle does in fact appear in many social indicators and has been confirmed by various statistical methods including business cycle analysis.”…
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*Thomas W. Synnott, 3rd is an adjunct professor of industrial engineering at Cooper Union Engineering School. Previously, he was with the USAF Institute of Technology and the U.S. Trust Company, where he is chief economist emeritus. He has published articles in various journals and is a member of a number of scientific and professional societies. He received his B.A. from Williams College and his M.A. and Ph.D. from Yale University.
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Synnott, T. The Long Wave Revisited. Bus Econ 47, 119–125 (2012). https://doi.org/10.1057/be.2012.3
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DOI: https://doi.org/10.1057/be.2012.3