Credit deflation and the reflation cycle to come (part 2)

[sancho panza]

7 hours ago, JMD said:

Thanks HeartsEase, It is curious that the blog author still clings to the Euro being a 'bridge to a world currency'. I think the article reads a bit cultish (like much of the original blog postings tbh; would you agree/disagree?), and perhaps written by someone (author is anonymous I think) unaware that the Euro's future role (if it does survive) is to lock european nations into a super-state, with common tax and spend policies for starters. For example, the 'susceptibility to political influence is a strengh' line sounds weak/disingenuous to me - surely it is obvious that the Euro experiment has shown that a world currency cannot be introduced regionally, particularly if one country such as Germany in the case of the Euro, is allowed to dominate a currency's function, eg exchange rate, and to the detriment of the other member countries.                                                                                                                                                                                   But perhaps the whole idea of having a world currency without a central authority to run it is a chimera. Surely Bitcoin has been shown to be to volatile to work as a currency? Perhaps a compromise is needed where maybe each country has its own crypto, with the underlying block-chain (very disruptive/exciting technology) defining the limit of government and also the responsibilities of its citizens. Actualy I think these types of ideas/technologies become even more important to implement as future governments will probably come to own larger and larger slices of the economy. For example the 'block-chain contract' could hopefully then allow a more libertarian/free society to emerge in future years, say sometime after the predicted monetary collapse - but the main point being that there be no need for nasty violent revolutionary resets to happen. Wishful thinking? - Maybe, but an important discussion I think, however it is noticeably absent from all political party agendas, media discussions, etc. 

There's already a world currency and it's called gold.been a functioing world currency at border psots for 2000 years.

 

you've nailed it in bold,they want a world currency they can print ad infintum.Hence whilst there is a world currency,it's not to their tastes.

[sancho panza]

2 minutes ago, Cattle Prod said:

Not really, in oil it really just reflects the storage situation. The likes of Vitol and Trafugura make good money storing oil in Contango situations. When futures move to backwardation, the incentive to store it is gone. Sign of stocks are about to be drawn down, and market is in deficit.

that makes sense,effectively guaranteeing a price spike at some point in the not too distant...

32 minutes ago, MrXxxx said:

Financial/economics newbie like me?...feel like DB el al appear to be speaking a different language?...take a look at this, one of the best articles I have read in a long time; she has a great way of explaining the complicated basics

https://www.lynalden.com/quantitative-easing-mmt-inflation/

I now understand what you guys are talking about....and it has also made me realize that QE is stealing from those who have been financially responsible to those (both companies and plebs) that haven't...

...oh, and how truly worthless FIAT is about to become!...a real `light bulb` moment.

does it make you want to buy euros as a brige to a new world currency?

[BearyBear]

I'm honestly thinking all these things that are currently happening can't be real...! What if someone from BoE reads this?

https://www.abc.net.au/news/2020-06-18/reserve-bank-considered-asking-for-real-estate-transaction-pause/12363222

Key points:

• RBA documents obtained under FOI warn of a sharp fall in housing prices
• In April, an RBA economist wrote to colleagues, calling for a housing market halt as happens in stock market trading during emergencies
• The RBA's reports on the deteriorating situation in construction may have influenced the announcement of the Government's HomeBuilder program

[MrXxxx]

13 hours ago, BearyBear said:

I'm honestly thinking all these things that are currently happening can't be real...! What if someone from BoE reads this?

https://www.abc.net.au/news/2020-06-18/reserve-bank-considered-asking-for-real-estate-transaction-pause/12363222

Key points:

• RBA documents obtained under FOI warn of a sharp fall in housing prices
• In April, an RBA economist wrote to colleagues, calling for a housing market halt as happens in stock market trading during emergencies
• The RBA's reports on the deteriorating situation in construction may have influenced the announcement of the Government's HomeBuilder program

So the government can dictate when you can sell your possessions...where's the free-market economics in this then?...this happens then there is no doubt that the whole system is `fixed`/a ponzi!

[Majorpain]

15 hours ago, BearyBear said:

I'm honestly thinking all these things that are currently happening can't be real...! What if someone from BoE reads this?

https://www.abc.net.au/news/2020-06-18/reserve-bank-considered-asking-for-real-estate-transaction-pause/12363222

Key points:

• RBA documents obtained under FOI warn of a sharp fall in housing prices
• In April, an RBA economist wrote to colleagues, calling for a housing market halt as happens in stock market trading during emergencies
• The RBA's reports on the deteriorating situation in construction may have influenced the announcement of the Government's HomeBuilder program

Australia's last recession was around 30 years ago, thanks to China's resource demand they skipped 2008, the problem with that is malinvestment doesn't get purged and builds up in the system until it risks collapsing the entire thing.  They have taken "you can't lose on bricks and mortar" to a whole new level and make the UK look like amateurs on the subject.

[Sugarlips]

1 hour ago, Majorpain said:

Australia's last recession was around 30 years ago, thanks to China's resource demand they skipped 2008, the problem with that is malinvestment doesn't get purged and builds up in the system until it risks collapsing the entire thing.  They have taken "you can't lose on bricks and mortar" to a whole new level and make the UK look like amateurs on the subject.

Not sure what you mean?!

Phone number prices for utter shite

https://www.domain.com.au/news/decrepit-darlinghurst-terracce-sells-for-4621000-more-than-half-a-million-dollars-above-reserve-963831/

[Loki]

I can't help but wonder if we're not going to get a reflation if these COVID shutdowns carry on.  It just won't be possible to get the economy moving again if the real world is in 'safe mode'.

Edit: Tell me why that's stupid and I'm stupid, me and my ISA welcome these thoughts. 

[Loki]

3 minutes ago, Cattle Prod said:

To me its a question of liquidity. What does it matter if the economy is in safe mode, say down 10%  GDP a year, if the central bank is spraying a multiple of that around? About 25% so far in the UK? And unlike 2008, we can see it. All the folks on furlough, cheap business loans.

But is that an infrastructure reflation? That's just 2008 again isn't it?

What are they going to buy at the moment? What are they going to buy when existing stock is used up?

[ThoughtCriminal]

10 hours ago, Sugarlips said:

Not sure what you mean?!

Phone number prices for utter shite

https://www.domain.com.au/news/decrepit-darlinghurst-terracce-sells-for-4621000-more-than-half-a-million-dollars-above-reserve-963831/

That is astonishing. By any standards.

[Viceroy]

In light of 'The Great Reset' as they call it, my other half who works in insurance risk sent me this article today - ; 

 

https://www.brinknews.com/not-all-oil-is-equal-which-types-should-oil-companies-turn-back-on-as-the-economy-recovers-paris-agreement-climate-change-post-covid/?utm_source=BRINK+Subscribers&utm_campaign=78fdf564e7-EMAIL_CAMPAIGN_2020_06_18_09_07&utm_medium=email&utm_term=0_c3639d7c98-78fdf564e7-109766913

 

'In recent months, numerous European oil majors have tightened their commitments to zero-GHG emissions. Eni is creating a new internal division, a Transition Company, to attract a different set of investors. Over the past decade, transition energy ventures have had higher and less volatile shareholder returns than oil companies. Equinor is planning to convert natural gas to hydrogen with carbon capture. BP plans to erase over 400 million metric ton of GHGs annually by investing in renewables and reducing methane emitted from its equipment. Shell is banking on a new power business and natural sinks like reforestation and carbon capture. Repsol plans to integrate renewables into its refining operations through the production of green hydrogen and the use of zero-carbon electricity. '

[MrXxxx]

On 20/06/2020 at 09:26, sancho panza said:

There's already a world currency and it's called gold.been a functioing world currency at border psots for 2000 years.

 

you've nailed it in bold,they want a world currency they can print ad infintum.Hence whilst there is a world currency,it's not to their tastes.

And wrapped up in this is the move to a cashless society where you can `manage` (read devalue) a  currency at the `flick of a switch`...try doing that with an oz of gold.....its also interesting how the supermarkets are trying to `encourage` the use of cashless payments during the Coronavirus scenario under the guise of hygiene yet others could pass on the pathogen by handling their stock, just one of the many Covid19 contradictions! 

[MrXxxx]

20 hours ago, Majorpain said:

Australia's last recession was around 30 years ago, thanks to China's resource demand they skipped 2008, the problem with that is malinvestment doesn't get purged and builds up in the system until it risks collapsing the entire thing.  They have taken "you can't lose on bricks and mortar" to a whole new level and make the UK look like amateurs on the subject.

But the system doesn't run like that now anyway, malinvestment continues and when it is too `big to fail` the government bails it out, whether its the finance or housebuilding industry.

[Bricks & Mortar]

9 hours ago, Loki said:

I can't help but wonder if we're not going to get a reflation if these COVID shutdowns carry on.  It just won't be possible to get the economy moving again if the real world is in 'safe mode'.

Edit: Tell me why that's stupid and I'm stupid, me and my ISA welcome these thoughts. 

I think you're right.  No reflation until the economy opens.  The printing and spending right now isn't even treading water.   Furlough money replaces only 80% of the wages.   Loans to business aren't being invested, just covering shutdown costs.

[sancho panza]

10 hours ago, Loki said:

But is that an infrastructure reflation? That's just 2008 again isn't it?

What are they going to buy at the moment? What are they going to buy when existing stock is used up?

I think they've seen with the spike in credit card repayments during April/May that in the UK at least,consumers have shown an unnerving desire to pay down debt.That makes it likely that stimulus will be channeled into more productive areas of the economy.

They're still pushing on a string though but that's what govts do.Insert Forrest Gump quote.

[sancho panza]

44 minutes ago, Bricks & Mortar said:

I think you're right.  No reflation until the economy opens.  The printing and spending right now isn't even treading water.   Furlough money replaces only 80% of the wages.   Loans to business aren't being invested, just covering shutdown costs.

Political class are beginning to realsie the damage that the covid response has done.All around the world,lot of right of centre govts declining to even contemplate second shut down.

[Loki]

31 minutes ago, Cattle Prod said:

However, I still don't understand why Feb liquidity is currently dropping. Narrative is saying 'the Fed is focussing now on saving the real economy rather than inflating asset prices', but that doesn't make sense. Both because the real economy is not spending, is hoarding and paying down debt, and because the Fed/US govenrment consider the stock market to be the real economy!

Exactly, they just don't seem at all committed enough if you look at the state of the DXY and the media still being allowed to create fear hyping COVID wave 2. I try and take a big picture view of things and i can't see how current society would create a reflation even if liquidity was moving - which it won't in the current society!

People like me are exhausted from feeling like they're in a personal showing of a mash-up of Groundhog Day and They Live, and people who a frightened of the virus are exhausted from being on high alert for months.  How can you base a meaningful recovery on that?  (The 'foundations' on which it will be built)

 

[UnconventionalWisdom]

2 hours ago, MrXxxx said:

But the system doesn't run like that now anyway, malinvestment continues and when it is too `big to fail` the government bails it out, whether its the finance or housebuilding industry.

Or a conpany that builds planes which fall out of the sky.

[TheCountOfNowhere]

Just has my working from home electricity bill in....MASSIVELY up.  

Think on.

[Loki]

31 minutes ago, TheCountOfNowhere said:

Just has my working from home electricity bill in....MASSIVELY up.  

Think on.

Carbon neutral vegan free range electricity will be too cheap to meter

It's all good count

[MrXxxx]

4 hours ago, sancho panza said:

Political class are beginning to realsie the damage that the covid response has done.All around the world,lot of right of centre govts declining to even contemplate second shut down.

Well if they show such lack of awareness in their actions to appreciate such a scenario was likely, then they have no right to be in a position to govern...that said, I suppose that's what happens when you have career politicians rather than those with real world experience!

[Talking Monkey]

4 hours ago, sancho panza said:

Political class are beginning to realsie the damage that the covid response has done.All around the world,lot of right of centre govts declining to even contemplate second shut down.

We haven't fully reopened from the first shutdowna and its late June, say a second wave starts in late November then a second shut down would be over 6 months long at least. No economy would come back from that, and social breakdown would be guaranteed

[DurhamBorn]

3 hours ago, Loki said:

Exactly, they just don't seem at all committed enough if you look at the state of the DXY and the media still being allowed to create fear hyping COVID wave 2. I try and take a big picture view of things and i can't see how current society would create a reflation even if liquidity was moving - which it won't in the current society!

People like me are exhausted from feeling like they're in a personal showing of a mash-up of Groundhog Day and They Live, and people who a frightened of the virus are exhausted from being on high alert for months.  How can you base a meaningful recovery on that?  (The 'foundations' on which it will be built)

 

Patience.Most people think that Loki because they are macro tourists.They look at whats in front of them and project it forward at key inflection points.The reflation is nearly locked in now.Lots more dislocation to come first though.As companies go down,debt gets wiped,jobs go etc the CBs will keep the pipes full of liquidity.Its not a straight line though,markets are never linear.The greatest macro skill iv learned is to let the cycle play out.The reason most investors lose over the longer term is being whipsawed by the markets over the short term.

If you have a hungry tiger coming at you and you have an endless supply of meat in a bottomless bag you dont stop throwing the meat to it until its full and goes to sleep.Just because you have already given it a lot you dont stop,if you stop it will still kill you.The Fed know this.They are still engaged,and will be for a long time yet.There will be lots of talk of tax increases etc to "pay down the debt",and some follow through,but its liquidity full steam ahead for government,and the CBs will monetize most of it.

[sancho panza]

On 21/06/2020 at 11:12, Majorpain said:

Australia's last recession was around 30 years ago, thanks to China's resource demand they skipped 2008, the problem with that is malinvestment doesn't get purged and builds up in the system until it risks collapsing the entire thing.  They have taken "you can't lose on bricks and mortar" to a whole new level and make the UK look like amateurs on the subject.

Just heard an aussie relative has lost her job.Will likely be one of many in Oz in the not too distant.One of the problems of never having recessions is that people forget to prepare for them.

[sancho panza]

19 minutes ago, Talking Monkey said:

We haven't fully reopened from the first shutdowna and its late June, say a second wave starts in late November then a second shut down would be over 6 months long at least. No economy would come back from that, and social breakdown would be guaranteed

They're also looking at Sweden and realising the Marxists at Imperial have had them over.Imperial still havent released the code they used to predict 500,000 deaths in the UK if our govt didn't lock down. as far as Im aware.

I'll need to get in touch with our resident hospital informant and find out what the current thinking is,but I think a lot of Drs are beginning to question the govts method and hence we're getting the debate over 2m rule.Lock down opponents such as Swdeish Public Helath officals said some time back that getting out of a lock down was a lot easier than going into it.

I was chatting to and A&E consutlant and his GPwife at the park yesterday as our kids played together on the swings (well whats left of the play equipment) and he didn't seem too fussed.

[Loki]

Thanks @DurhamBorn i wasn't doubting your work, i was doubting the whole system and wondering if it really was different this time from what has gone before (and not in a good way)

@sancho panza the last few pages of the massive pandemic thread is interesting. Still plenty happy with the End of Days narrative being pushed.