By Alan Hall | Excerpted from the November and December 2007 Global Market Perspective
Originally published under the title “Sizing Up a Superpower: A Socionomic Study of Russia”
[Ed: It’s no secret that in the past several years, Russia has become increasingly belligerent in its interactions with other nations. Take the contemporary conflict with Crimea, for example, or the Georgia crisis of 2008. Yet just prior to 2008, Russia was in the throes of a powerful bull market, Moscow burned with real estate fever, and Vladimir Putin was making partnerships with European space agencies. What prompted the change?
[In November 2007, socionomist Alan Hall spotted signs of an impending shift in Russia’s social mood. In that two-part report, Hall examined the relationship between Russia’s turbulent history and social mood as expressed by U.S. stock prices and the Russian Trading System Index, and explains how social signs in 2007 indicated the ensuing social mood shift and political / social danger.
[Here’s an excerpt of the report].
The Season of the Bull Is Ending
This study proceeds in two parts. First, we examine Russia by assessing historic social events in a global context via an Elliott wave labeled chart of the inflation-adjusted U.S. stock market index from 1859 to 1999. Second, we do the same via the Russian Trading System Index from its origin in 1995. Elliott wave analysis shows the RTSI near a bullish zenith. Socionomic analysis of Russian social mood corroborates this conclusion and suggests important implications for the future.
Looking Back: Russian History through a Socionomic Lens
1859-1892: Cycle Waves I, II and III
The bear market of the 1850s produced the Crimean War (1853-1856), which devastated Russia. With 256,000 dead, Grand Duke Konstantin Nikolayevich said “… we are both weaker and poorer not only in material but also in mental resources, especially in matters of administration.”
Positive events began in 1861 as wave I unfolded. Tsar Alexander II emancipated the serfs in an attempt to relieve revolutionary pressures and move Russia out of its feudal economy. Living conditions for the peasants remained unfavorable, however.
The wave II bear market produced several uprisings and a capitulation. In 1864, Alexander declared the end of the long Caucasian War (1817-1864).
The positive social mood that drove wave III from 1865 to 1892 generated no major conflicts and only one war, the brief Russo-Turkish War, from 1877 to 1878. (Note the pullback in the middle of wave III.) This period of relative peace is what we expect from third waves.
1892-1920: Cycle Wave IV
The wave IV bear market caused increasingly negative social expressions in Russia. The years 1901 through 1903 saw a steady increase in peasant revolts, in which mobs burned manor houses and mutilated animals. The Russo/Japan war was initially popular in 1904 but ended in crushing defeat. The Russian Revolution of 1905 brought nominal reforms by the Tsar, followed by a crackdown in 1906. The Tsar declared absolute executive power, then disrupted revolutionary groups and imprisoned or exiled the groups’ leaders.
By 1913, deep into wave IV, the average Russian was earning 27 percent of an average Englishman’s wages and paid 50% more in taxes. The Cycle-degree global bear market and the decaying czarist autocracy exacted terrible social costs. Russia had the highest mortality rate in Europe and a lower literacy rate than England 163 years earlier in 1750.
The effects of negative social mood worldwide led to World War I in 1914. By its end, 3.3 million Russians had died, by far the largest death toll of any combatant nation. The massive social and political chaos at the end of wave IV decimated manufacturing, foreign trade, agricultural production and Russia’s already pitiful per capita income, which fell over 70 percent.
… Elliott Wave Forecast
Figure 4 below is a chart of the Russian Trading System Index from its inception. Our Elliott wave count in the RTSI shows that a clear five-wave advance beginning in 1999 is near completion. During this time, the RTSI increased by sixty-fold. This index should soon begin its biggest bear market since the five-wave pattern began. The minimum probable drop—a move into the area of the fourth wave of 2004—would more than halve the value of the index.
Such a decline should produce financial and social events of a character comparable to those seen during comparable declines in the past. Viewed in the context of Russian history, this outlook has serious geostrategic implications.
Recent events do seem to foreshadow the expected social character of the ensuing contraction. They suggest that the onset of a bear market in Russia should be taken very seriously.
Bullish social mood produced the powerful ideas of glasnost and perestroika and moved Russia toward democracy and capitalism, but socialism and autocracy are deep in Russia’s bones. Reverence for Stalin is resurging, along with his penchant for rewriting history. Stalin watched Lenin inspire a cult of personality, and he encouraged it and attached himself to it. Stalin eventually accepted titles from fawning devotees, such as “Father of Nations,” “Brilliant Genius of Humanity,” “Great Architect of Communism” and, ironically, “Gardener of Human Happiness.”
Recently, President Putin endorsed a new guide for history teachers, “A Modern History of Russia: 1945-2006.” The book favorably compares Stalin to Otto von Bismarck and Peter the Great, and seeks to qualify and justify his crimes. It describes him as “one of the most successful leaders of the U.S.S.R.,” who created “the best educational system in the world.” Despite the devastation of the purges, one passage translates like this:
The result of Stalin’s purges was a new class of managers capable of solving the task of modernization in conditions of shortages of resources, loyal to the supreme power and immaculate from the point of view of executive discipline. (International Herald Tribune)
In the remainder of this two-part, twenty-page report (one of the lengthiest we’ve published), Alan Hall presents several other social signs of Russia’s major shift in social mood, such as Nazi parallels; the development of new offensive missiles, air defense systems, and naval activity; alleged assassinations of Putin critics; and a retreat from democracy.
Continue reading to learn what Russia’s bear market mood will mean for its relationships with other countries, including the United States, and how you can prepare for Russia’s rise to power.
This report alone is easily worth the price of an annual subscription.
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