Are Cycles About to Make our Lives "Interesting"?

You are receiving this post/email because you are a subscriber to Of Two Minds / Charles Hugh Smith. This is Musings Report 2023-49.

Longtime readers know I have written about cycles from the start of the blog 18 years ago. 

Many commentators dismiss financial cycles as cherry-picked illusions. Natural cycles such as sunspot activity are based on observations and are verifiable facts.

The effects such cycles have on our world are not as predictable as the cycles themselves, as Nature is a self-organizing system of feedback loops that interact, strengthen or weaken other dynamics. Society and the economy are also self-organizing systems, which means that they have the potential to veer from predictable linear trends to unpredictable nonlinear dynamics. 

This is often described as "small events can trigger large consequences," with the butterfly's wings precipitating a hurricane. Another way of understanding this potential to consider the difference between linear 3+3+3=9 and geometric 3X3X3=27.

I've often described the role of buffers in absorbing crises / rapid changes in systems, and the hidden fragility of systems in which buffers have been thinned by repeated stress, poor maintenance, incompetence, etc. On the surface, the system looks robust but beneath the surface it's one shock wave from collapse.

We can think of cycles as waves of varying intensity and consequence.  Waves have different dynamics, a point elucidated by historian David Hackett Fischer in his book The Great Wave: Price Revolutions and the Rhythm of History, which was gifted to me 15 years ago by longtime correspondent Cheryl A., a work that profoundly influenced my thinking and that I have often recommended to readers.

Recently, longtime correspondent Stuart L. shared some of his takeaways from the book, starting with the difference between cycles and waves. Stuart begins by quoting Fischer: 

"Cyclical rhythms are fixed and regular. Their periods are highly predictable. Great waves are more variable and less predictable. They differ in duration, magnitude, velocity, and momentum. One great price wave lasted less than ninety years; another continued more than 180 years. The irregularities in individual price movements make them no more (or less) predictable than individual waves in the sea.

Even so, all great waves had important qualities in common. They all shared the same wave-structure. They tended to have the same sequence of development, the same pattern of price relatives, similar movements of wages, rent, interest rates; and the same dangerous volatility in later stages. All major price revolutions in modern history began in periods of prosperity. Each ended in shattering world crises and was followed by periods of recovery and comparative equilibrium."

Stuart then added his own comments:
"The author then goes on to talk about how cycles often have to be 'teased' out of the data by statistical inference. For the waves, however, he says they emerge entirely based on empirical data, with no preconceived theory to arrange the facts. And he has an interesting explanation of how American academic thought since the 40s has maintained that without a theory nothing can exist or be studied, whereas in French thought no theory is necessary. Thus, it is difficult for American academics to allow the facts to emerge empirically and speak for themselves."

I replied that this reminded me of Musings 41,  What Are Islands of Coherence?, which explored the system dynamics presented by Nobel Prize winner Ilya Prigogine: small fluctuations are amplified into structure-breaking waves.  In my view, this aligns with Fischer's "Great Wave" of price and resource scarcities, which amplify social discord / destabilization.

In Prigogine's words, "Nature is change, the continual elaboration of the new, a totality being created in an essentially open process of development without any pre-established model." In other words, Nature isn't teleological, steering toward a set goal. Put another way, Progress (however we define it) is not guaranteed. 

Prigogine also described the dynamic nature of equilibrium, and what happens when systems veer far from equilibrium: they tend to destabilize / decohere, i.e. collapse into some other state of relative equilibrium.