It was exactly seven meager years. From fall 2008 until summer 2015 fits okay with seven years. Does that mean we’re guaranteed seven good years or how does Pharaoh’s dream from the Old Testament hold up?
The claim that seven good years will follow after seven bad years is one of the myths I’ve met most throughout my professional career and even amongst friends. Let’s take a closer look at it focusing on Denmark.
The crisis in the 1930s lasted from around 1929 till around 1936. It already started improving a little by 1933-34, but the crisis wasn’t over till a few years before the outbreak of World War II.
The time during the war doesn’t really align with meager or fat years, but after the crisis are many fat years. From 1948 there’s a high growth in Denmark and all the way till 1973 there are only a few meager years in the 1950s and 1960s (1951, 1955, 1963). Here the seven meager and seven fat years don’t hold up at all. There are only a few disruptions in the growth rate, which is also sky-high compared to modern years.
From October 1973 till 1981 there were meager years in Denmark with a growth of only 1% per year. So about 8 years. So that almost fits with the seven meager years. Then followed by five fat years from 1982 till 1986. Then the state intervened and stopped the housing market with tax reforms while the prosperity continued abroad until 1989 – so a sort of self-induced shortening of the seven fat years.
In Denmark the crisis lasted seven years, from 1987 till 1993. The upturn didn’t seriously set in until 1994 and lasted until 2001. The IT-bubble actually already burst in March 2000, but it took a little while before it took hold in Denmark.
But the crisis was very short and already from 2003 the economy was in full swing again and the prosperity lasted right up until the financial crisis in fall 2008. If we add 2002 to the good years, that’s almost seven years.
But the decline in productivity actually already starts in 2007, so it doesn’t really fit with the seven years. Then there’s the crisis from 2007-8 till 2014. It might be a crisis, but both 2010 and 2014 are pretty good years when it comes to growth in society with GDP growth in their respective years of 1.6% and 1.3%.
If we look at the big economies like the USA, the UK and Germany the seven year periods are even less accurate and the conclusion should be pretty clear – Pharaoh may have had a dream, but it doesn’t describe today’s reality. The two times seven years is a mirage. But there is a tendency for serious financial crises to last up to 7 years. On the other hand, the upturns are hard to predict.
The new year won’t be a crisis year. We’re – for now – pretty sure of. But upturns DON’T last seven years. More like 3-4 years or maybe a long period with a few interruptions. The big crises come with large periods of time in between, so the next crisis won’t be a long and tough one like the one we just had.
With this in mind we wish everyone a happy New Year!
Published here 2017