Everything in the physical universe exists in the form of waves. Light and other forms of energy are in the form of electro-magnetic-waves. Matter, at the quantum level is also in the form of waves. Human behavior, when looked at over long periods of time can be seen as wave activity.
We are all made of atoms and molecules which are further sub-divided into electrons and sub-atomic particles. Therefore, we must obey the same laws as those that control these particle. As a consequence, although we have the illusion of “Free Choice” we are just as determined to follow the laws that control the behavior of stones or rain drops.
Many economists have recognized this fact and have noted that economic events can be seen as falling into a wave pattern.
THE BUSINESS CYCLE
We have all heard of the “Business Cycle.” It is a fundamental premise in courses of business and accounting. The “Business Cycle” is simply a small wave of economic activity.
As any student of accounting will tell you, the Business Cycle consists of an “Up Wave”, where prosperity reigns, and a “Down Wave” where recession reigns. In the “Up Wave” society is happy as profits are earned and in the “Down Wave” society is unhappy as businesses fail and unemployment supervenes.
The simple wave occurs every few decades and people accept the up and down periods as an inevitable part of life. However, many economists have seen and proven that the business Cycle is simply one wave superimposed on larger waves.
We have all heard of Elliott Wave Theory which correctly predicted the Great Depression.
And, some economists are convinced that the Russian economist Kondratiev has correctly discovered a much larger series of waves that has predicted all the major depressions and boom periods of all recent economic history.
WHAT ARE WAVES
Since we all will agree that waves are everywhere, we really should what they are and how they are formed. This task is not daunting. We must simply follow the effects of energy on millions of particles or people.
The easiest way to understand waves is to understand how water waves are formed.
Water, as we know, is a molecule of two atoms of hydrogen and one atom of oxygen. Depending on the amount of energy contained in the water molecule, it can exist in three different phases: a gas phase known as water vapor; a liquid phase, known as water and a solid crystalline phase known as ice or snow.
These three phases are simply manifestations of movement. Fast moving water molecules are gas, slower moving are liquid and almost immobile molecules are ice.
People behave in almost the same way.
When water is in the liquid phase each molecule moves in an erratic pattern, but always within the confines of a radius that does not vary to any great degree.
And, of course, humans do the same thing.
The radius of the water molecules, that is, the area in which they move is controlled by gravity pulling them down and their temperature which gives them the kinetic energy of moving.
If we add a third source of energy, wind, we can then create a wave. The air molecules push the water molecules and some go higher than normal. But, gravity pulls them down.
This rise and fall of molecules gives the human observer the impression that something new exists. The shape of the rising and falling molecules appears to be a new entity, a wave. The cause of this new entity is the larger lateral movement of the molecules caused by the energy of the air molecules.
Because the new radius of movement is larger, water molecules go higher and also more laterally. Gravity, however, always pulls them down. If the force of the air molecules is greater, the upward and lateral movements are also greater.
Amongst people, if you give them money, they behave in the same way. Money is a form of energy. More money received produces more purchases and even different types of purchases. As people receive energy in the form of money they start buying goods and services they would never consider when money was scarce.
We can see the strong correlation between wind energy and money energy.
In water, the movement upwards, downwards and laterally is interpreted as waves.
In people, the same sort of movement is interpreted as Economic Waves.
Waves in water or in people are the summation of millions of molecules or people. When energy is added in the form of wind or money the behavior of the individuals change.
Here is a graph of the Kondratiev wave:
You can see we have another twenty years to go before the wave starts going up.