David Hackett Fischer

To most, the appearance and severity of the current crisis is unexpected. To Professor David Hackett Fischer, author of The Great Wave, Price Revolutions and the Rhythm of History (Oxford University Press 1996) the crisis and its severity was both expected and understood.

According to Professor Fischer, waves of rising prices have interrupted long periods of stability throughout history. These great waves are often accompanied by unexpected disasters, extreme social upheaval and always end in economic collapse.

Such great waves last from 80 to 120 years and their appearance spells the end of epochs and eras. Great waves marked the end of the feudal era, as it did the end of the renaissance and the enlightenment; and soon, the current great wave that began in 1896 will end the era of “Victorian equilibrium”, an era that began with the reign of England's Queen Victoria.

The End of an Era: the Great Wave crashes
This era, however, could be called “the era of debt-based paper money and credit” for debt-based paper money and credit was the foundation of Queen Victoria 's British Empire, an empire now in its final stages of dissolution and collapse.

The current great wave of rising prices began in 1896. Lasting from 80 to 120 years and always culminating in economic collapse, this great wave will collapse between now and 2016. But, according to Fischer, this great wave differs from preceding waves.

..the great inflation of the twentieth century differed from every price-revolution that had preceded it. Its velocity, mass, and momentum were greater than those that came before.

When will the Great Wave come?
Just as the magnitude of this great wave is unprecedented, so, too, will be the severity of its collapse; and, although such changes happen with varying regularity, this time, we—all of us now here—will witness and experience this event together.

Professor Fischer writes in the preface to his book:

…Every period of the past has been a time of change. The world is always changing—but not always in the same way. We shall find empirical evidence of distinct “change-regimes” in the past that were often highly dynamic, but stable in their dynamism. Sooner or later, even the strongest of these change-regimes broke down in moments of what might be called “deep change”. When it did so, one system of change yielded to another. Deep change may be understood as a change in the structure of change itself. In the language of mathematics, deep change is the second derivative. It may be calculated as a rate of change in rates of change.

We have been living through a period of “deep change,” when one “change regime” yields to another...In periods of deep change, understanding lags behind the movement of events…In the United States problems of economic understanding have been compounded by the effects of economic prosperity…The Greeks called it hubris, and thought that it always ended in the intervention of the goddess Nemesis. That lady makes her appearance when wave-riders begin to believe that they are wave-makers, at the moment when the great wave breaks and begins to gather its energy again.

Past knowledge is no defence
Economic misunderstandings exacerbated by recent economic prosperity have left those in the US, Asia and Europe particularly ill-equipped to deal with what is now about to occur. Nonetheless, the past is proof that misunderstandings are no defence against future occurrence, no matter how many are ignorant of its coming.

While the whiff of hubris is still evident in the optimistic outlook of economic hucksters and those who job it is to keep us ignorant and complacent, it is clear that the goddess Nemesis is now about to take center stage. The great wave has broken.

The Collapse of Paper Money
The great stock market bubble of the 1920s was caused by the sudden influx of leveraged credit from the introduction of debt-based money by the Federal Reserve in 1913. Just 16 years after its introduction, the explosive growth of credit in the hands of speculators led to the collapse of the US stock market in 1929 and was to bring the world economy to a virtual standstill by 1933.

Debt is caused by fiat currency
We are about to see a variation of that disaster, except this time it will be worse because this time sovereign monetary defaults will accompany the defaulting of debt and the contracting of credit. This time money itself will be a victim. Fiat paper money systems have always ended in failure. This time is no exception.

Massive debt failures will happen and credit will become increasingly scarce. Indeed, both are occurring already. But what will happen this time that did not happen before is that this time the US dollar will increasingly lose value as will all debt-based paper currencies issued by central banks.

Blame the Fed
This time, the debt-based paper money of the Federal Reserve will not only be responsible for a deflationary collapse as it was in the 1930s, its continued excessive printing will be responsible for the hyperinflation that will succeed the present inflation now in motion around the world.

Ben Bernanke will be the usher than when the era of fiat money, the foundation of the era of Victorian equilibrium, comes to an end sometime in the next eight years when Professor Fischer's Great Wave finishes its work.