The theory of “long waves”, due to Russian economist Kondratieff, which appeared in the 1920s, is presented, and a search whether a similar pattern exists in shipping economy since 1741 is made. Kondratieff believed in the existence — inherent in capitalistic system—of at least 21/2 long cycles of a non-random duration of 54 years on average since 1780—with 27 years up and 27 years down. As we showed—using mainly a diagrammatic analysis—economic history verified—till end-2008—Kondratieff’s theories, though it rejected his claimed harmony in their duration. Given that history may be repeated, and only for this is useful, we tried a nonlinear dynamic forecasting model for dry cargo shipping market for 20 years ahead using “Rescaled Range Analysis” and “Kernel Density estimation method” and found that cycles are here to stay. Presented also is the merger-waves in capitalistic economies since 1893— a factor ignored by Joan Robinson in her macroeconomic analysis for the trade cycle in the 1960s. Further we confirm/reject previous analysts, including Schumpeter, who claimed: 1) that technology has created the long shipping cycles (since 1741); 2) that the impact of major wars since 1740 on freight markets was another cyclical cause; 3) that economies of scale play the significant role and 4) that the impact of risk emerged at a certain time though this outcome was too ignored by macroeconomists. The paper “discovered” the secular shipping cycles of a total duration of 139 years using the proper extra-long time data. This means that the discovery of unknown cycles is a matter of data’s longevity. We have also verified Kondratieff’s cycles—when data were divided in 3 separate technological periods: 1741-1871; 1872-1947 and 1947-today, but lasting longer i.e. 58 years on average. We saw that the great gift of capitalism, which is the “free will”, is to be accompanied by “rationality”, and by a deep knowledge of how capitalistic system functions—a warning placed by Kondratieff a century ago—so that to avoid crises like that at end-2008; also globalization has to be used for the benefit of all nations. This paper indicated new tools: the “Joseph effect”—for cycles and the “Hurst exponent” for long-term dependence; the “Noah effect”—for sudden catastrophes and the “alpha coefficient” for risk. We reckon that economists are there par excellence to protect people and business men from risks and cycles and from the “Noah effects”.
The Russian economist Kondratieff wrote a paper in 1926 about the long waves in economic life [
Kondratieff wrote about “long waves”, which are the longest so far discovered “cycles”, lasting 54 years on average, with 27 years up and 27 years down. Certain writers said that the “secular trend”―another―“improper” for us―title of a long wave―is not a wave, but a steady and continuous trend of economic activity towards a rise or a fall.
Kondratieff (1892-1) dealt with agricultural economics and economic planning in the former USSR. He discovered 2.5 long economic cycles2: 1) from end-1780s to 1851; 2) from 1851 to 1896 and 3) an upswing from 1896 to 1920. For Kondratieff, long waves “are very probable” phenomenon of capitalism3.
Schumpeter [
Science is aware about “waves”, and in particular about “long waves”. In economic literature (Pearce, [
Certain economists believe that: 1) “prices” and “interest rates” are only involved in long waves… 2) long waves are caused by wars related to high governmental expenditures on armaments during prosper times. Worth noting is that Kondratieff’s long waves are not “secular”, as they are shorter than 100 years… Interesting is that shipping cycles are!
This paper reviews the theory of “long waves” and examines its existence in shipping economy since 1741, (year we have data), and till today 2016. The indirect aim of this paper is to provide a medium term―20 years―forecast of shipping markets (freight rates), as this is the only way to test cycles―and to examine if risks exist in them and when.
The paper is organized as follows: next is a literature review. Then, Kondratieff’s theory is presented. Next, we deal with globalization (1900-2016), which is closely connected with the recent long wave. Then, we deal whether long waves are caused by wars. Next, we present the waves in companies’ mergers. Then, we search the existence of long waves in shipping economy since 1741, separating analysis in: 1) the Sail period, 1741-1871, 2) the Tramp period, 1872-1947, and 3) the Bulk era, 1947-2016+, to see technology’s impact. The next section analyzes the whole shipping picture covering almost 300 years or so. Then we connect past, present with future, trying to forecast dry bulk market for 20 years ahead. Next the important factor of risk in businesses is presented. Finally, the view of the famous macroeconomist Mrs. J Robinson is quoted. Then we conclude.
Cournot A A [
Schumpeter J A [
Hampton [
It is very interesting that economists have very early realized the existence of long waves and moreover Schumpeter [
Kondratieff [
As shown, the “UK wholesale price index” fell in 1788, 1842, 1896, 1950 (and 2004), and a further fall is expected in 2058―following a boom lasting till 2031. The process is as follows: interest rates fall; people disinvest from land and natural resources and invest in financial assets. Cash goes into bonds, and then into equities. Profits are made much easier from trading shares, and this attracts many people. This is what happened in 1999 in Greece. As this is a “bubble”, is destined to burst [
Kondratieff’s theory is believed remained under-utilized and under-appre- ciated inside economics profession (Hampton [
Kondratieff [
As shown, the price level exhibits long waves. The up phase lasted 25 years (from 1790 to 181511); the down lasted 30 years (1815 to 1845) (a total of 55 years). The 2nd long wave12 lasted 25 years (1845-1870). The down phase lasted 25 years (1870-1895) (a total of 50 years). The 3rd wave lasted 23 years (1895- 1918); the next decline lasted 21 years (1918-1939) (due to 2nd World War) and thus the 3rd wave lasted 44 years.
Kondratieff [
The causes identified for the existence of long waves are the: 1) population rise, 2) improved living standards, 3) technological progress, 4) major wars, 5) increase in agricultural production and 6) new lands brought-into the productive process at Kondratieff’s time. This list, however, could be improved if “globalization” (1990s) and “law of the sea” (1980s) are also examined. We turn now to globalization, which is now under doubt by USA’s new Presidency in 2017.
Globalization increased the worldwide integration of economic systems; it is a process, where the whole world is becoming one market. It is a par excellence phenomenon of the 1980s/1990s. It caused-no doubt-the acceleration of global technological change. Now, countries like USA, France, UK, S Arabia, Australia, Norway, Finland, Germany, Sweden and Hong Kong―by majority―and increasingly, doubt the good face of globalization13.
Goods and services, capital and labor are traded on a global basis; information and the results of research flow readily between countries. A fast worldwide transportation system (containerization; just in time; door-to-door) has been required. A major policy in one large economy may carry along with it the rest of national economies… One may imagine “securitization”14…
If the world is becoming one village, then villagers should be close neighbors and discuss their economic policies for the implications they may have one on to the other… The need for the various G5, G10 and G20 etc. has been arisen.
Globalization pursues the reduction of existing international trade regulations, and taxes, and other impediments to global trade. The economic globalization of production, markets, competition, technology, corporations and industries, is taking place. Current globalization trends can be largely accounted for by developed economies, which have been integrated with less developed economies through foreign direct investments, as well as other economic reforms, and, in many cases by immigration. Immigration today due to wars is surely destabilizing of economic development except for the countries that need labor.
History of globalization goes back to 1944, when 44 nations attended the “Bretton Woods Conference”, which established many of the organizations essentials towards a closer global economy and a globalized financial system with such institutions of: “World Bank”―WB, “International Monetary Fund”―IMF, and “International Trade Organization”―ITO.
Chinese economic reforms began to open China to globalization in the 1980s and it attained a degree of openness unprecedented among such large and populous nations, with competition from foreign goods in almost every sector of the Chinese economy. Foreign investment helped China to increase product quality and knowledge, and standards, especially in the heavy industries. China’s experience supports the assertion that globalization increased wealth. During 2005-2007, and again from 2010 to 2013, the “Port of Shanghai” was among world’s busiest ones.
In India, the “business process” outsourcing’ is the “primary engine of country’s development, contributing broadly to growth of country’s GDP, employment growth, and poverty alleviation”. Economic activities expanded across national boundaries by globalization, but also there is a transnational fragmentation. The production of goods is becoming increasingly global.
Globalization of any form did not help, however, either the global growth or trade15, the last 116 years (1900-2016) (
As shown, the 1929-1930 depression caused the “global GDP real growth” to fall from ~4% in 1900 to 1% in 1930. Next, it rose from 1% to ~5.8% (1930- 1945). After 1945, a continuous fall from 5.8% to 1.9% took place till end-2008; worth noting is that 2010 showed a turning point up; then a 2.2% rate up to 2014 occurred. The above picture suggests that capitalism helped growth by… creating the two World Wars… The real GDP grew in 1900 and stopped by 1930; its growth re-started in 1930 and ended in 1945. Moreover, the real GDP growth rate on average fell from 1934 to 2010: 6.7%: 1934-1938; 3.7%: 1976-1980; except, 4.6% for 1983-1987; and 2.2%: for 2010-2014.
The end-2008 crash: In end Sept. 2008, an unexpected worldwide market crash occurred. Analysts (Mandelbrot & Hudson, (preface) [
evolve”? The market fell in Sept. 29, 2008 by 7% and in few hours more than $1.6 trillion from USA industry and $5 trillion globally, wiped out… This paper has the ambition to help Academia to find its way to get nearer to reality.
The “subprime mortgages” surely undermined the largest banks in USA, as they were written on the wrong assumption that what happened in the past, will persist into the future. Housing prices were expected to be rising, default cases to be forecastable and the hedging strategies to work.
Moreover, in 2006, a Dutch bank invented the so called “constant proportion debt obligations” and sold it to investors as a safe way to make money out of the booming market of corporate debts. Investors were promised to receive returns 2% over the standard, international, bank lending rate. In the case of losing money, bankers raised the bet to recover-but this had as a result to chase losses…
Trade between 1995 (2nd quarter) and 2007 (4th quarter) grew by 2.2%, and between 2011 (3rd quarter) and 2014 (3rd quarter) by only 1.1%. The post-1945 fall (
This is so as we believe that the major wars coincided with long waves have cut-off whatever secular trend pre-maturely… Does this post-2nd World War long wave of 63 years or so (1945-2008) indicate a Kondratieff cycle? After 1930 Kondratieff stopped to write; according to his theory, the 3rd wave had to finish in 1939, at the outbreak of the 2nd World War (1918-1939 = 21 years), and then to be extended to 2004 (or really rather to end-2008, 61 years; 1947-2008).
The World Wars, which occurred, firstly in 1918 and secondly in 1939, we believe made long waves shorter than otherwise. For this conclusion we took as a prototype range the first long wave, which lasted 56 years. Surely, the end-2008 depression was not caused by any world war, but by the causes we mentioned.
Modern writers―following Kondratieff―argued that the 3rd long wave cycle had to end in 2004 on average (Hampton, [
The first boom from 1790 to 1815 terminated by the Napoleonic wars; the next depression terminated in 1845. The 2nd wave boom started in 1870, with 3 wars: the Crimean, the American Civil and the French-German (1870). These started in 1871 and ended in 1895. From 1896 to 1918 is the boom connected with the 3rd wave, where 5 wars took place: 1) among Spain and America, 2) the Transvaal (in S Africa; for the Gold mines), 3) among Russia and Japan, 4) among Balkan nations, and 5) the major war of the 1st World War in 1918. The relevant recession lasted 20 years, between 1919 and 1939-when the 2nd World War took place. After the 2nd World War, a new cycle started in 1945, lasting till end-2008 (63 years).
Are long waves the characteristic of capitalist economies, as Kondratieff argued, or are also of capitalistic industries?
The 1st “merger-wave” in USA was mainly horizontal, and achieved the integration of industries (Martin, [
The 2nd “merger-wave” started in ~1919/1921 ending during the 1929 stock market crash. The main industries this period were the: food, primary metals, petroleum refining, chemicals and the manufacturers of transportation equipment. It preceded by the technological change of the motor-car and the commercial radio19.
The 3rd “merger-wave” took-off in 1965, peaked in 1968, and fell back in 1972. This led companies towards conglomeration to face the risks involved. The bigger is the size of a company, the bigger is its risk, we believe. The 4th “merger- wave” emerged in late 1970s till 1980s and it cancelled the previous conglomeration trend. The 5th “merger-wave” started in 1990s and evolved till 2001 (11/09); ended in end-2008, perhaps being the longer.
Joan Robinson [
Shipping underwent 3 major technological innovations: 1) the Wind-Sails, 1741- 1871, lasting 130 years (
As shown (
The wars were: 1) for the Austrian succession, 1740-1748; 2) the American War for independence, 1775-1783; 3) the Napoleonic Wars, 1792-1813 and 4) the American civil war, 1861-1865.
As it is shown, since 1741, the 1st maritime long wave lasted 74 years; “deducting” the 21 years of the Napoleonic Wars (1792-1813), its peaceful period was ~53 years22. This is very close to Kondratieff’s long wave of 54 years on average! The 2nd “shipping long wave” started in 1815 and ended in 1870, lasting 55 years23. Worth noting is that the “shorter cycles’ range” fell over time and the booms were shorter than depressions24… Can this be attributed to the elasticity of demand and supply of ship space vis-à-vis the prevailing freight rate? If e.g. demand rises and supply cannot respond―due to inelastic shipbuilding25 supply or lack of finance or unclear foresight―or due to zero tonnage in lay-up, then a “boom” will be prolonged than otherwise (like in 1754; 1821; 1853; 1889; and 1918-26).
During the above 2 long periods, lasting together ~130 years, dominated by sails, 4 wars are marked on
and lasted 23 years (from 52nd year to 75th). The last war made Greek shipowners really rich26―certain of which were coming from Aegean Islands. The 4th war lasted only 4 years (121st year to 125th).
What happened during the Steam era: 1873-1946? (
As shown, the third shipping long wave lasted 73 years; this is the period of the “tramp ships27” (1872-1947). We may “subtract” the years of the 2 World Wars, 9 years, and thus the 3rd shipping long wave lasted28 finally 64 peaceful years (73th - 79th). The freight rate market was depressed29 from 1875 to 188730. The 1918 peak-all periods high―was due to the massive destruction of ships caused by the Great War.
As argued by Stopford [
The post-2nd World War shipping long wave started in 1947 and ended at end-2008 (61 years31). This period is the “bulk era” (1947-2016+). The ultimate crisis is lasting 7 years, from 2009 to 2016+ (
From 1945 to 1995 mechanization of the “bulk fleet’’ (Stopford, [
waters till the 1980s, being 6 times larger-, today32 reached the 400,000 dwt (~7 times larger) called “Valemax” (
The last era (1947+) may be better called the “era of economies of scale”, we reckon. Capitalists thus increase their profits―and their power of monopoly33― if they increase the difference between price and marginal cost, and one way of doing this is by either increasing freight rate34 or reducing cost or both. If we stop economies of scale, then you made capitalists almost totally inactive, we believe... Economies of scale are a two-edged sword however―it needs adequate demand. So, demand is the king in shipping economy and in capitalism.
However, the picture we presented by slicing the long period of 275 years or so in 3 technological distinct periods to assess the impact of technology on long waves is indeed misleading in our effort to find out “shipping secular waves”… We rectify this next.
As shown (
The “new” 1st full shipping wave shows an upward trend between 11th year (1752-1780; 28 years; 1781-1813; 32 years) and 71rd year, i.e. till “Napoleonic
Wars” (=60 years); one may subtract the 21 years of the Napoleonic Wars (so the up phase lasted 39 peaceful years). The down phase started in 1814 (72nd year) till 170th year (1911), lasting 97 years. The secular new shipping wave thus lasted 136 years (39 + 97)! The “new” 2nd shipping secular wave up started in 170th year (~1912) till end-2008 (259th) meaning ~89 years, and subtracting the 10 years of the two World Wars (=~79 years). The next down phase follows from end-2008 onwards. Till when?
Let us see what forecasting science can tell us…on this question.
We took the data used for the construction of
The distance travelled by a random time series is proportional to a power of the relevant time elapsed. Einstein [
If H > 1/2, freight rates will roam far with persistent motion and with an eventual reverse. Increments of freight rates may cluster together. If H < 0.5 = 1/2, the price will roam less. Each move will tend to be followed by another reversing direction; the action is furious, but constrained. The dry cargo freight rate market has H = 0.69―as mentioned―meaning it tended to move up and down in long persistent trends… and it did so over 265 or so years.
As a filter―for stationarity―we have used the first logarithmic differences39. The method used is the “Rescaled Range Analysis”-R/S and in particular the “Hurst-Mandelbrot” variation. The H40 exponent is estimated by regression, and we ignore the first 9 observations as suggested by Peters [
As shown, the red line indicates random walk (“Einstein’s line”). Starting at
N = 10 or log 1, the blue line of the index of dry cargoes since 1750 and till 2015 runs at a slower speed―after N = 18 years (log 1.25) and occasionally near there, and at log 2.25 (178 years)―than random. The blue line stays below random walk most of the years.
The maximum value of H is found at N = 10 and this indicates that there are strong short run dependencies41, which obstruct us to find out a longer term memory beyond 10 years; this phenomenon has been met also in financial time series quite frequently. To eliminate the bias due to small samples, we followed the variation of Hauser [
Why do we insist on long term memory of time series? For if it exists―in the freight rates―then the efficient market hypothesis-EMH (in its weak form) fails; moreover, the stochastic procedures used for pricing maritime derivatives are incompatible and finally the return distribution from shipping businesses is not normal (Gaussian). So, this is a very important diagnostic test. The picture is not clear, however, as the time series have a long period (1741-1981 = 240 years) of random behavior and a shorter period of increased risk (1982-2016 =34 years) and with a nonrandom behavior. As shown in appendix 4, 20 values of the distribution were outliers and its shape was not normal.
There are available 5 forecasting nonlinear methods; we have chosen―after making the required tests―the most successful―nearer to reality―method: the “Kernel density estimation”―described in appendix 3. The method requires the embedding dimension―which after a test determined at number 9―the time delay at 1 (standard), and the number of near neighbors at number 10. Forecasting has been done for the next 20 years (
As shown, the freight market index for dry cargo vessels is falling from 216 units in 2015 to 114 in 2036.This is in line with the secular shipping cycle theory advanced above.
We examined the existence of risk in shipping business. For this we used coefficient alpha43 (=α). The measurements of risk are done by 2 only―most common ―tools: alpha = volatility and β = beta = the degree to which freight rate changes correlate to those of the market overall44 (Mandelbrot & Hudson, [
As shown in
2017: 198 | 2022: 146 | 2027: 140 | 2032: 113 |
---|---|---|---|
2018: 192 | 2023: 151 | 2028: 135 | 2033: 120 |
2019: 170 | 2024: 148 | 2029: 128 | 2034: 124 |
2020: 150 | 2025: 139 | 2030: 123 | 2035: 123 |
2021: 148 | 2026: 137 | 2031: 118 | 2036: 114 |
Source: Data as in
Alpha = 2 in shipping time series indicates a fair risk and holds for most of the above period (1741-1982); it varied from 1.91 to 1.95 (48th year - 155th year; 1806-1913) and from 2.11 (180th year; 1938) to 2 (223rd year; 1981). Exceptional is the 1981-1987 depression and the period after it, including the 2008-2015 crisis. This matter is discussed further in appendix 4. Risk, as mentioned, was ignored by macroeconomists; as shown by the analysis was not always present in shipping economy and emerged in a tragic way in 1982 and thereafter. We may say that economies of scale created risk and the probability of a depression introduced it into ship-owners’ hearts…
Robinson (1903-1983) [
Once investment begins to decline, ―and the multiplier works undesirably-, consumption falls off, unemployment increases and activity and profits decline. The depletion of the stock of capital is the mechanism for a turning point up (via obsolescence, wear and tear). For Joan Robinson the rhythm of investment is the main force governing a cycle.
In the case of the capitalistic system―in our opinion―it seems to be crucial47 that people save their income, and that capitalists only invest, as there may be a discrepancy between the two. Underinvestment is thus one cause of a depression, but this leads also to under-consumption, and the two may act together in a spiral. So there is a tragedy of the capitalistic system to have a propensity to save by all those who earn income (including governments; governmental companies; savings made by companies in the form of depreciation and of undistributed profits etc.) and not to spend all income to buy goods and services produced during the current year.
Moreover, the banking system―including Stock exchanges―may fail to attract all savings into deposits, or shares, destined to finance new investments― perhaps due to low rates of interest, low dividends, risk of a haircut―and for the reason that some savings are kept at home (= hoarding). All income out of the production of current GDP―with the exception of that consumed―should pass over to entrepreneurs, and to others, who are willing to spend them even over current consumption (e.g. in the form of consumers’ loans) through the banking system and stock exchange.
Capitalistic system is in need of spending, as GDP = Consumption + Investment − Imports + Exports. As shown imports reduce national GDP and this connects the international economies with globalization. Space programs, research spending and wars, plus state investments, are ways of creating the “proper” spending for an improved GDP, where savings set free appropriate resources as a strong psychological propensity of the human element governed by the insecurity of future. Unfortunately, inflation will punish those who spend above of what is available at low current prices.
Despite what Stopford argued about technology in shipping economy as creating the long Kondratieff waves―influenced by the opinion of Schumpeter―we have indicated that technology just lowered the level of the freight rates, but it did not create the long waves.
Moreover, with the argument that major wars have created long waves, we know that the 2nd World War boosted incomes of people working in the war-industry in USA. So, after the end of a major war, economies had to increase spending greatly and thus a boom was triggered. This is a manifestation of the role of “effective demand” in capitalism48.
The traditional theory in an attempt to explain long waves failed to estimate the impact of two-three other major factors, which appeared in between: “globalization”; the “law of the sea49” and the increasing “risk” in businesses due to economies of scale.
The pursuit of capitalistic companies since 1893 was to increase their size by merging with other companies, and at the same time eliminating competitors― killing two birds with one stone. This was over sighted by Joan Robinson. In business world, 5 merger waves have been recorded in the USA and elsewhere since 1893 of 10 years duration on average, except the last one (1990s-end 2008), characterized by strong economies of scale.
Economies of scale50 no doubt increase profits and monopoly power. But economies of scale in shipping, and in general, depend on the level of particular demand to fill out a large vessel… Half the number of Capes (~200,000 dwt) will be soon redundant in the appearance of the “Valemax” of 400,000 dwt as mentioned.
Capitalism is not a system of a civilized club of gentlemen as Robinson thought where capitalists share their fixed profits among all, and thus profit is falling for everybody… as more and more take part into the same businesses.
Kondratieff’s theory, as shown, influenced Hampton who used it to argue that a shipping and world crisis had to be expected by 2004. The great surprise is that the global depression in fact took place in end-2008… This strange coincidence is the second in a row―as the 1929 depression was also predicted by Kondratieff… Forecasting of the dry cargo freight rate market using Chaos theory, however, denied this, because falling freight rates will prevail from 2016 to 2036…
Combining the theory of Joan Robinson with that of Kondratieff, a depression is caused by the decline in profits, and in investment, due to many competitors; this should supposedly take place some 27 years ahead on average, including the evolution of obsolescence, wear and tear.
Marx, Keynes and Kondratieff, as well as others, recognized certain defects of the capitalistic system; for us, the main defects are based on “man’s free will with no rationality”. It is also the obligation of Governments to create the suitable “level of confidence”―as mentioned by Keynes in 1936―and to undertake public works, when business-men refuse to invest. Reducing demand for consumer’s goods and services inactivates the scope of investors and profits.
To investigate the impact of technology on long waves we had first sliced the period since 1741 into 3 technologically distinct sub-periods: sail, 1741-1871; steam, 1872-1947 and oil, 1947-2016+. These periods were characterized by technological advances and economies of scale. The analysis showed 4 Kondratieff shipping long waves… of 58 years on average, i.e. 4 years longer!
The surprise, however, came when the whole shipping period has been analyzed―some 275 years. There, 1 and a half secular wave discovered of 136 years and 79 years… These waves we have recognized as true “secular” ones… This means that if the last very long wave started in 1919 and ended in end-2008, i.e. 89 years (less 7 years of the 2nd World War = 82 years) and this is 1/2 of a very long maritime wave, then the other half downwards will be between 2009 and 209151… i.e. 82 years.
Technology in the form of economies of scale influenced the level of risk in shipping business, but latest depression (1981-1987) increased risk greatly. Risk has been identified by the coefficient alpha in this paper―though Joan Robinson ignored this factor too. Modern capitalism is thus affected by risk, and many methods have been invented to protect capitalism from risk, one of which―as shown―was merging.
The tragedy, however, of capitalism is the permanent misunderstanding of economic reality by ignoring two essential characteristics of the capitalistic system: trends and cycles (the “Joseph effects”) and abrupt rises or falls (the “Noah effects”) and the use of wrong analytical tools like “normal distribution” together with standard deviation (=risk) as the safe guidelines. So, capitalism is a system that moves in cycles towards up and towards down. This in nonlinear terminology is called an economy full of “Joseph effects”. Worth noting is that our century created a serious depression due to the sub-prime house loans in USA in 2007 and in 2008 indicating lack of rationality. In this last case we cannot blame capitalism, but capitalists… and especially the capitalistic institution of bankers.
We thank an anonymous experienced referee for his/her valuable suggestions for a better manuscript.
We have discovered “secular waves” in “dry cargo shipping economy” since 1741 of 136 years on average with 68 years up and 68 years down. This opens to research the discovery of cycles of various durations―beyond the ones established by the so far research, including those of Kondratieff―provided the proper time series are available. A similar contribution is the discovery that risk varies over various parts of one and the same time series. An indirect main contribution was―based on the last great capitalistic crisis at end 2008―the use of Chaotic, dynamic, and nonlinear tools including nonlinear forecasting, as a way to combat cycles; cycles that have flood capitalistic economies from today to tomorrow and in near and distant future…
Paper would be more proud if it could provide a full and convincing shipping secular waves theory, something, however, that even Kondratieff did not provide. Paper’s responsibility should be how to avoid cycles of whatever duration… Surely, a strong weapon against cycles is forecasting and forecasting in this paper was possible only for 20 years…
Goulielmos, A.M. (2017) The “Kondratieff Cycles” in Shipping Economy since 1741 and till 2016. Modern Economy, 8, 308-332. https://doi.org/10.4236/me.2017.82022
Hurst [
Define the sum Rn as that of a stable variable in a particular interval n and let R1 be the initial value, and then: Rn = R1*n1/α [
(*) determines the magnitude of the probabilities overall; (**) if β = 0, we have a symmetrical curve; if α = 2 (and β = 0) the equation describes normal distribution; when α = 1 and β = 0, we have the Cauchy distribution with much fat in its tails. In our analysis above we found α to vary from ~2 to 1.46 since 1981 to 2015. As alpha as mentioned describes volatility, it is true that after the 1981-1987 depression in dry cargo sector and the end-2008 banking crisis, as well as the 2016 crisis in dry cargoes too, the industry became more volatile and more risky than used to be before 1982 and since 1741.
This method (bolds stand for vectors) in fact is a weighted average. For the last observation xT (which is defined by
The freight rate index 1741-2015, has a mean of 143.47 units and a standard deviation 102.31, median 115; also 25 outliers (right graph); 42 units is the minimum value and 795 units is the maximum value. The histogram of the index is shown below, where a right fat tail is shown. The width of the bins determined at 50 years. The spike is in 51 - 100 units with 38% of all observations, but not at 143.5 units (=mean) as it should. The curve is not symmetrical with a positive skew. The Pearson coefficient of skewness is found at 0.83 > 0. The mode is 58 units. The situation is as follows:
The values of the index extend to 7σ with 2.6% values there, away from 3σ.
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