The Jubilee Connection

 

by Robert A. Dahlquist

 

The Great Depression of the 1930’s is one of the most documented economic stress periods in history. Countless economists and historians have written about the period yet few have ever been able to define the root cause of that disaster. The list of causes for the depression range from the stock market crash of 1929 to the decline in the money supply due to bank failures; however the root cause of the depression was the high national debt to GDP ratio prior to the event. The actions of the Federal Reserve prior to the 1929 disaster caused a massive increase in the money supply in the 20’s creating asset inflation. Fast forward to the present and we see history is repeating itself.

 

It is fascinating that an obscure Russian economist Nikolai Kondratieff discovered that industrialized countries experienced a long wave economic cycle of 50- to 70-year in duration. Since 1926, when he wrote his treatise, “The Long Waves of Economic Life,” people that study economic and investment cycles have reviewed his findings and have come to the conclusion that a Kondratieff cycle will culminate in a period of involuntary debt liquidation known as the Kondratieff winter. Further investigation has shown that in addition to the Great Depression, we also have had two Kondratieff cycles in the 19th Century. Because his scholarly work did not fit with the Soviet view of the decadence of western societies, Stalin in a fit of rage, had the KGB send Kondratieff to the Gulag in Siberia, never to be seen again.

 

The evidence of this liquidity cycle is well documented, but a mystery surrounded its origin until Bible research was conducted. In Leviticus 25:10-16, Moses wrote the law describing a 50-year economic cycle that is seven 7-year periods followed by the year of the Jubilee. Now God didn’t tell Moses that he, Moses could select such a year to occur after some number of years but rather God said that after 49 years there would be the fiftieth year and it shall be the year of Jubilee. The year of Jubilee was to be a year of celebration as a result of voluntary debt liquidation. Debt liquidation has been a happy event in the United States. When a home mortgage was paid off, a celebration is held highlighted with burning of the mortgage.

 

Leviticus states to prevent involuntary debt liquidation episodes, the term of any loan shall not extend into start of the next year of Jubilee. For example, if you buy a home, the duration of the mortgage must be less than the time to the next Jubilee. This also applies to government and commercial debt instruments such as bonds and notes and also leases. This prevents a buildup of debt causing the next crash. The year of Jubilee was mandated to be entered with all debts paid off. If debt exists on any asset, the asset reverts, back to the original owner as a foreclosure. There will be no carryover of debt into either Jubilee or the following 49-year period.

 

During the 90’s the increase in the money supply by the Federal Reserve to counteract events such as the Mexican peso crisis, Asian contagion, LTCM failure and Y2K fear went into the financial markets to create bubbles just as it did in the 20’s. While the economic elephants from the FED stampede around the country proclaiming the virtues of going deeply into debt to play the housing bubble game, all we have to do is study Leviticus to understand the best economic plan.     A mystery still surrounds Kondratieff himself. Could it be possible he also knew the Jubilee connection?