The following is a special excerpt from Harry Dent's latest book, Demographic Cliff: How to Survive and Prosper During the Great Deflation of 2014-2019.
We experience major generational booms in innovation and spending about every forty years. In turn, we get a fall bubble boom every other generation, or every eighty years or so. When the bubble bursts, that leads into the winter deflationary season.
In studying the major bubbles of modern history (and earlier), I’ve identified 10 summary principles:
1. All growth and evolution is exponential, not linear.
2. All growth is cyclical, not incremental.
3. Bubbles always burst; there are no exceptions.
4. The greater the bubble, the greater the burst.
5. Bubbles tend to go back to where they started or a bit lower.
6. Financial bubbles tend to get more extreme over time as credit availability to fuel them expands as our incomes and wealth expand.
7. Bubbles become so attractive that they eventually suck in even the skeptics.
8. No one wants the “high” and easy gains to end, so we go into denial as the bubble evolves, especially in its latter stages.
9. Major bubbles occur only about once in a human lifetime, so it is easy to forget the lessons from the last one.
10. Bubbles may seem fruitless and destructive when they burst, but they actually serve a very essential function in the process of innovation and human progress
Major bubbles occur about once in a lifetime. However, as life expectancy has extended, so have economic cycles, so the old rule of fifty to sixty years between bubbles has lengthened to more like eighty years. But the bubble we’re in now is different from earlier ones in that demographic trends are causing it to cascade around the world.
Reprinted from The Demographic Cliffby Harry Dent with permission of Portfolio, a member of Penguin Group (USA) LLC, A Penguin Random House Company. Copyright (c) Harry Dent, 2014.