The Declining Rate of Profit

At this stage of the long-wave business cycle, there are conflicting analyses that drives short-wave volatility.

On the one hand, consolidation of failed businesses, assets and market share by firms big enough to survive--with an accumulation of power to command as too big to fail--gives them an accumulated value reflected in their earnings power.

Pricing power (the ability to deflate the economy) is considered a premium to be priced into equity shares which have also been accumulated by the deflationary trend.

The deflationary trend presents the other hand of the short wave. It is the classic "declining rate of profit" identified by all classical economists.

Neo-classical economists tend not to identify the declining rate of profit without it being safely embedded in describing the benefits of capitalism to consolidate markets into a networked efficiency of scale, or what is "too big to fail."

Classical theory also provides that the ontological consolidation of wealth and power will result in a "natural" switch to socialism, then communism (an ultra-macro distribution phase, or the ultimate gamma risk).

For capitalists, preventing the natural consolidation of markets and the accumulation of wealth and power is a moral hazard. For communists, preventing the natural consolidation of wealth and power is also considered a moral hazard. Both regard the accumulation of power to result in the best practice of distribution on command.

The declining rate of profit is a trend reversed by distribution. That keeps the cycle dynamic and unpredictable on command, and since the declining rate is caused by the accumulation (the source of the power to command), a distribution MUST occur, which suggests a "natural," ontological tendency.

Looking for that ontological tendency, the short-wave analyst is more likely to identify the secular bull indicator before anyone else. Big, consolidated entities know when the bull market is long on the ticker because they are commanding it. Everyone else has to predict when that will be, and probably will before it is in command.

When the gamma risk is so high that deconsolidation of the capital is considered to be a solution to the declining rate of profits (remember that the rate is declining because the ability to pay it has been consolidated), the probability of a long-term distribution is virtually 100 percent.