The Hoyt/Harrison Economic Cycle

Bryan Kavanagh

[Reprinted from a Land-Theory online discussion, May 1999]

The 18 year cycle is based upon the Homer Hoyt/Fred Harrison model - and it is an excellent one. However, rather than producing this as catechism, we need to continue the research. For example, my analysis of *the whole of the Australian property market* since 1972 (see attachment) which removes the effects of local and regional phenomena, and which permits analysis against national GDP figures, shows that the 18 year cycle may be as few as *16* years, and that there is indeed an intermediate lesser cycle of 8 to 9 years duration. The 16/18 year cycle is certainly the big one, being inclusive of booms in residential, commercial, industrial and rural markets. The intermediate cycle is preponderantly a residential one - which is not to belittle it excessively, because 75% of all land values are residential in Australia, the other 25% being rural/industrial/commercial. I was happy in the recent World Bank forum to find these alternating cycles, 8/9 yr & 16 yrs, confirmed by an English researcher whose thesis was that commercial office and industrial palyed a lesser part in the 8/9 year cycle because there generally remained an 'overhang' of these categories of property from the preceding 16/18 year cycle.

<The position that I hold, which I think is entirely Geoist, is that we entered the early stages of wordwide economic depression in 1990, following the collapse of the '80s property bubble. In this regard, I am not unhappy to find myself completely onside with Ravi Batra - albeit other economists have claimed him to be 'obviously' wrong. I do not believe this to be obvious at all, and that superior analyses show something *is* desperately wrong with *all* economies at the moment. I am afraid I haven't the ability to ignore these patently obvious facts, as does much of the US media. It becomes difficult for citizens of the US to appreciate their true situation, and they *are* terribly insular on this matter, because massive capital inflows from nations perceiving the US dollar to be the last bastion have tended to mask their position and to endow the American economy with a greatly exaggerated appearance of strength. Meanwhile, a lot of slash and burn has taken place, and part-time employment, and the need for the holding of more than one job, is commonplace. Also, a major transmogrification has taken place within this longwave cycle: the US nation has become the greatest debtor nation, whereas in 1929 it was the greatest creditor. Much of what is now happening in the economy is super-excessively speculative; yet we are reliably informed by the media that this is a strong economy!

Western residential property values (in the intermediate cycle) are in their ninth year, and due for a correction. The DJIA, which some people apparently believe is proceeding, uninterrupted, to the 30,000 level, is also overdue for a correction - and we also happen to be in the end stage of a 54-year Kondratieff long wave whose period is defined by economic depression (1788, 1844, 1899, 1949). Most practitioners on the Longwaves List believe that the current cycle commenced in 1949. I believe that Henry George offers the explanation not only for the longwave cycle, but also for the 8/9 year & 16/18 recessionary periods which follow land booms. But we do need to look at what is happening all around us to be able to interpret where we are in the economic cycle correctly. Simply parroting the '18 year' model without other reference points is hopelessly inadequate, even from professors of economics.