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Chinese Dog Year Outlook Part 1

by Michael Nystrom
February 1, 2006
Cambridge, MA

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Last Year's 2005 Rooster Year Outlook

1. The Chinese Calendar System

The Chinese calendar system is the oldest continuous timekeeping system in existence. It is a combined solar/lunar calendar, meaning that days are measured by the sun, but months are measured by the moon. The approximately 29.5 days between new moons constitutes one Chinese calendar month. Since the lunar cycle does not correspond neatly with the earth's annual cycle around the sun, the beginning of the Chinese New Year can fall anywhere between late January and the middle of February on the Gregorian calendar. This year, the new moon on January 29, 2006 marked the first day of the 4703rd Chinese year. Under the Chinese system, each year is designated by one of twelve animals -- Rat, Ox, Tiger, Rabbit, Dragon, Snake, Horse, Sheep, Monkey, Rooster, Dog, and Boar. The upcoming year will be the year of the Dog. A complete cycle of 12 calendar years constitutes a Great Year. Five great years, (60 calendar years) represents one Cycle, and 60 Cycles (3,600 years) makes an Epoch.

Everything in nature, from the revolution of the earth around the sun, to the beat of the heart of every living creature follows a cycle - a rise and fall, an ebb and flow. It is therefore reasonable to believe that the affairs of men also follow certain cycles, ebbing and flowing with the tides of time. Specific places, names and faces may change, but the underlying stories of the social cycles remain.

The idea of such a rhythm is captured graphically by the Chinese yin-yang, which illustrates both the interdependence of, and struggle between opposites. It is not true that they are always perfectly balanced - the yin-yang is a snapshot that captures the balance at a given moment in time. However, at other times darkness can be so pervasive as to nearly blind the light. Likewise, at times the light can be so pervasive as to overwhelm darkness. At the root of this dynamic balance is the idea that the seed of the opposite - be it light or dark - is always present, awaiting its chance to grow. Once an extreme is met, the tide turns once again.

I am not an expert in Chinese Astrology, but like with Chinese medicine, acupuncture and meditation, I am certain of the truth and wisdom contained in this ancient body of knowledge. As China and the West move closer though economic ties, cultural understanding will also increase, which should most certainly be beneficial to both societies. Rather than try to characterize what a dog year "should" be like, I would like to take a look back at past Dog years to see what kinds of common themes, if any, may emerge. You might also think of it as a search for a twelve-year cycle. Beginning in the depths of the Great Depression, with 1934, subsequent Dog years include 1946, 1958, 1970, 1982, 1994 and of course this year, 2006.

The Chinese have traditionally considered anyone who lived 60 years to be very wise, since they have lived through and seen one complete Cycle. But since the cycle of human events is determined by human actions, and since human life spans have elongated drastically in the last century, it is plausible that traditional long-wave cycle lengths may also be increasing. Because the Great Depression was one of the most fascinating periods of the last century, and because current times bear a certain resemblance to that era, I will begin 72 years ago with the Dog year of 1934.

2. Past Dog Years

1934 - From Depression to War; An Environmental Disaster

While the bottom of the Great Depression had passed, 1934 was no economic or social picnic. The previous year, 1933, had seen the worst of the banking panics, the stock market bottom, and the confiscation of gold from private US citizens - since the yellow metal served as viable completion to the US dollar - by FDR. It was hard times in the US, and around the world. Germany, under Hitler, continued on its steady march toward totalitarianism, consolidated corporate power and war. China was on the brink of civil war, and the Communists began their Long March, covering 8,000 km (4,960 miles) in 370 days to escape the pursuit of the Kuomintang. The Communists would ultimately prove victorious, exiling the Kuomintang to the tiny nearby island of Taiwan.

Instead of hurricanes or global warming, drought was America's environmental disaster of the early 1930's. For much of the 1930's the US struggled as the Great Plains turned to desert. Once fertile topsoil turned to powder, that blew across the country, producing a filth and grime that was difficult to wash out of fabric and clean out of buildings. It was a miserable time to be a farmer. Once the topsoil was gone, the underlying layer of clay was unsuitable for crops, leading to a wave of farm failures and mortgage foreclosures. This only contributed to the malaise of the Depression. You could say it was just the weather, but in reality it was a man made disaster caused by overfarming and poor stewardship of the land. May 1934 saw one of the worst dust storms of the era. The displaced "Okies" and "Arkies" moved west, looking for a better life in the West. John Steinbeck dramatized the plight of the displaced in the popular novels The Grapes of Wrath and Of Mice and Men.

1946 - The Relief of War's End

Nothing happens in a vacuum. From the eye of history, all events are the reaction or response to what has come before. 1946 marked the official end to hostilities in World War II (Truman signed the documents ending WWII in '46). The bloody battle of war was something that no one was interested in repeating, and as a result, the United Nations held its first meeting, and the same year the United Nation's Children's Fund (UNICEF) was founded to give long-term humanitarian and developmental assistance to children and mothers in developing countries. 1946 was a year of optimism that war was over, and that by working together, we could prevent the horrors from ever revisiting humanity again. But unfortunately, it was not to be.

The seeds of war were being planted in SE Asia, as Ho Chi Minh was elected President of North Vietnam. US testing of nuclear weapons continued. The first underwater test of the atomic bomb was undertaken at Bikini Atoll in the Pacific Ocean. Every year since has seen some kind of war, somewhere on the planet. But good times had begun for the average American a long domestic peace and prosperity ensued. The Flamingo Hotel opened in Las Vegas.

1958 - Nuclear Posturing during the Cold War, Stars are Born, and a Recession

The good economic times for the US continued to roll on, in spite of a recession in '58. Public opposition continued to build towards nuclear weapons. Bertrand Russell launched the Campaign for Nuclear Disarmament, and 9235 scientists publish a plea to stop nuclear bomb tests. It is rarely that the people of a nation - any nation - want war. But it is also rare for governments to listen to the please, regardless of how democratic (or undemocratic) they claim to be. The Cold War was in full swing, and the USSR continued with its nuclear testing. In March, A US B-47 bomber accidentally dropped an A-bomb in Mars Bluff, South Carolina. Luckily, it didn't go off!

Prince, Madonna and Michael Jackson - the Big Three of 1980's pop music - were all born in 1958. Today Madonna has a best selling album at the top of the charts, having nimbly managed to keep up with the changing times. Prince has stayed true to his personal artistic ideals, even changing his name to an unpronounceable symbol for a time in order to make a moral and artistic statement. Few people got it, and he alienated many because of it. But he remained true to himself. And poor Michael Jackson. He's been to the top, was the King of Pop, only to become a true American tragedy. The moral of the story: People and things morph and change in unpredictable ways. And while you can get to the top, once there you may discover that there are more important things in life.

In spite of the good times, the big news of 1958 was the recession. An article from the times stated:

THE SPOKESMEN for US capitalism call it a "recession" or "deflation," a "rolling adjustment," a "shakeout" or a "levelling off." President Eisenhower soothingly describes it as "a breather." But all such comforting appellations cannot lend brighter tints to the bleak picture or conjure away the facts. The downward movement is operating with increasing force and the elements of serious crisis are gathering within the weakened national economy. …By the end of 1957 it was widely conceded that the business slowdown was swifter, sharper and cutting deeper than had been anticipated. The production index fell to 136 from its peak of 147 in December 1956. Stock-market prices came tumbling down, recording the biggest decline since 1931. The number of unemployed climbed steeply upward…

No matter the year, recessions are always the same in at least one regard: People don't like them.

1970 - The Musical Lights dim; Wars and Rumors of Wars; Turmoil and Recession

The first year of the 70's was a year of turmoil. It was the year the music of the 60's died: The Beatles gave official word that they had disbanded. Janis Joplin and Jimi Hendrix went and started "that club" of young, lost musicians to die at the age of 27 from drug overdoses. Jim Morrison of the Doors would join them in '71, and Kurt Cobain 24 years later in the dog year of '94.

In April, the U.S. expanded the unpopular war in Vietnam and invaded neighboring Cambodia. Massive antiwar protests continued in the U.S., and in Ohio, four students were shot and killed at Kent State University, and nine others wounded at an anti-war demonstration. Congress gave Nixon the authority to sell arms to Israel, planting more seeds of resentment in the Middle East.

Salvador Allende, a Marxist, won the democratic election for president of Chile, in spite of massive CIA efforts to defeat him. Nixon feared Chile might become "another Cuba", and initiated plans to work with insurgent elements within Chile to overthrow Allende in a coup. The US would go on to impose economic sanctions against Chile, and ultimately aid in the ouster of the democratically elected Allende by dictator Augusto Pinochet in 1973. Another seed in the current South American blowback had been planted. In Japan, world famous author Yukio Mishima attempted a bizarre coup in Japan, and committed ritual suicide with a samurai sword after his attempt failed. Shock and disbelief were the watchwords of the day.

On a brighter note, humans began to realize the importance of our environment. The first Earth Day was celebrated in 1970, and the US Environmental Protection Agency was created. Once again, the big economic news was recession, which began in the 4th Quarter of 1969 and lasted to the 4th Quarter of 1970:

There was a sharp tightening of fiscal and monetary policies across the OECD in 1968 and 1969, leading to a mild recession between 1969 and 1971. This recession was rather more marked in the USA and Japan than in Europe. It did little to suppress inflation, being followed quickly by a 'mini-boom' in 1972-3. This synchronized upswing was largely due to the large increase in international liquidity that followed the weakness of the dollar and the Smithsonian Agreement in December 1971, and the fact that an unusually large number of elections were scheduled in 1972-3.
1982 - Severe Recession - Out with the Old, in with the New

In fact, the "mild" recession of 1970 was a precursor to a decade of inflation, stagnation, recession and malaise. 1982 was also a year of severe recession for the US:

When, in August 1981, Reagan signed his Recovery Act into law at Rancho del Cielo, his Santa Barbara ranch, he promised to find additional cuts to balance the budget, which had a projected deficit of $80 billion -- the largest, to that date, in U.S. history. That fall, the economy took a turn for the worse. To fight inflation, running at a rate of 14 percent per year, the Federal Reserve Board had increased interest rates. Recession was the inevitable result. Blue-collar workers who had largely supported Reagan were hard hit, as many lost their jobs.

The United States was experiencing its worst recession since the Great Depression, with conditions frighteningly reminiscent of those 50 years earlier. By November 1982, unemployment reached nine million, the highest rate since the Depression; 17,000 businesses failed, the second highest number since 1933; farmers lost their land; and many sick, elderly, and poor became homeless.

The country lived through the recession for a full year before Reagan finally admitted publicly that the economy was in trouble. His budget cuts, which hurt the poor, and his tax cuts, which favored the rich, combined with the hardships of a recession, spawned the belief that Reagan was insensitive to his people's needs. (Although it was a 25% across-the-board tax cut, those people in the higher income brackets benefited the most.)

As economic hardship hit American homes, Reagan's approval rating hit rock bottom. In January 1983, it was estimated at a dismal 35 percent. Having failed in his promise to deliver economic prosperity, Reagan's reelection in 1984 seemed unlikely.

With a failing economy, hopes for a balanced budget vanished. Even David Stockman, Reagan's Budget Director and an advocate of supply side economics, fearing future deficits "as high as $200 billion," urged the president to cut taxes.

While Reagan finally agreed to a moderate tax increase on businesses, he steadfastly refused to raise income taxes or cut defense spending, despite a growing negative sentiment toward the buildup. In January 1983, with his approval rating at an all-time low, the economy slowly began to right itself. Unemployment, as high as ten percent in 1982, had improved enough by 1984 for his popularity to be restored, and by the November presidential election, it was hard to believe that a second term was ever in doubt.

[source here]

Some other notable events of '82: The commercial breakup of AT&T. The US embargo of Libyan oil imports for Libya's support of terrorist organizations (imagine the luxury of having the option to use the oil weapon, rather than fear it being used against us) An event that characterized the new social malaise of America, the Tylenol scare panicked the nation as seven people died after ingesting Tylenol capsules laced with potassium cyanide. The event lead to the tamper-proof packaging we have on all products today.

The computer era was officially upon us, as Time Magazine named "The Computer" its man of the year. And lest we forget, 1982 was the year that started the longest bull market in American history, leading to an 11x increase in the Dow Jones Industrial Average, from under 1,000 to over 11,000.

1994 - The Great Bond Massacre

The North American Free Trade Agreement was signed, and thus began the "giant sucking sound" of jobs rushing out of the US that Ross Perot warned of during his failed presidential bid in 1992. In a tiny victory for the anti nuclear weapons crowd, the US and Russia agreed to stop the pre-programmed pointing of nuclear weapons at one another by signing the Kremlin Accords. Kurt Cobain, lead singer of the Seattle group Nirvana went and "joined that club" that Hendrix & Joplin started in the dog year of 1970. Progress marches on: Nelson Mandela was inaugurated as South Africa's first black president.

Television reaches new all time lows with the live broadcast of OJ Simpson's "White Bronco" chase, and the complete domination of the news by the OJ Simpson murder trial. Ken Star's Whitewater investigation begins, which will ultimately lead to the impeachment of the President.

Unlike the Dog years of 1934, 1958, 1970 and 1982, the year 1994 saw no economic recession. However, it was the year of "The Great Bond Massacre:"

In January 1994, the 34th month of economic expansion, bond yields were historically low and inflation seemed negligible: Wages were going nowhere, and companies dared not raise prices. But within seven short months of that promising start, something fairly unusual happened: 1994 became the year of the worst bond market loss in history. As the Federal Reserve began nudging short-term interest rates higher in early February, the bond market inflicted heavy damage on financial companies, hedge funds, and bond mutual funds. In a year of low inflation, bondholders suffered more than $1 trillion in losses.

2006 - Parallels to Previous Dog Years

Which brings us to today. This is where I turn it over to you, dear readers. What did you notice? What did I miss? What kind of significant events will mark the year 2006? Which year will 2006 be most similar to, or different from? Post your comments here.

I'll be working on my own version of the parallels I see this week. If you'd like to be notified as soon as it is up on the website, sign up here.

Last Year's 2005 Rooster Year Outlook

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Turn off the TV and think!

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