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


spunko

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Bobthebuilder
Just now, AWW said:

Exactly - so where is the incentive to work?

Sorry AWW, my response was a bit crap.

I had presumed if they roll-out a UBI those who are working get the UBI on top of their wages

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I understood, Bob. I just think human nature will be that, if UBI is enough to provide for a reasonable standard of living - which it has to, given its aim - nobody's going to want to work.

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Bobthebuilder

I am pretty sure it could work quite well. Most people I work with are self-employed, cannot see any of them slowing down. More people working part-time to spread the jobs about is part of its attraction I think. The thing I don't like about it, is its heading down the communism route, and they could never get rid of it once implemented.

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1 hour ago, Talking Monkey said:

We can't be more than a couple of years from relentless cuts coming in can we DB. What's your view on how a benefits lifestyle will be mid decade, will it be much closer to a fairly basic lifestyle instead of the relative comfort as compared to say the guy working in the warehouse

I think it gets interesting once the CBs withdraw from printing the welfare budget,probably within 24 months.Its very difficult to reform though and they missed a great chance when the Tories tried to.Its a disaster at the moment.Giving huge amounts for free until children are 18,then hardly anything is crazy.Pushing the pension age back means there is a 20 year gap between welfare ending for the kids and a pension.Its hugely difficult to reform while the BBC exists.If i wanted to reform welfare the first thing id do is get shot of the BBC.

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52 minutes ago, AWW said:

I understood, Bob. I just think human nature will be that, if UBI is enough to provide for a reasonable standard of living - which it has to, given its aim - nobody's going to want to work.

I know lots of people who would never retire on the income il stop work on in a few weeks.They cant live without exensive holidays and having expensive lease cars etc.UBI would only cover the basics,oiling the economy really.I think it would be superb for the economy and society if set at the right level.The key is setting it low enough so that its not a nice existence on that alone,but fantastic for building on top of for jobs,saving,self employed etc.

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I think the benefits issue is velocity.
Give those £500 bonus to people like us and we'd just buy gold or something. 
Give it to the can't think past next week and it gets spent and often on high tax items, such as cigs and booze.

The question will be, what happens when they don't want the velocity.  

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Yadda yadda yadda
14 minutes ago, DurhamBorn said:

I think it gets interesting once the CBs withdraw from printing the welfare budget,probably within 24 months.Its very difficult to reform though and they missed a great chance when the Tories tried to.Its a disaster at the moment.Giving huge amounts for free until children are 18,then hardly anything is crazy.Pushing the pension age back means there is a 20 year gap between welfare ending for the kids and a pension.Its hugely difficult to reform while the BBC exists.If i wanted to reform welfare the first thing id do is get shot of the BBC.

Once someone has a 20 year gap on their CV who will employ them? Do Tesco or B&Q take on people with such a long period of idleness? I know women could always go back to work after 5 or 10 years off. Is there likely to be a glut of people losing family benefits over a few years? Tax credits took off in value in the mid-2000s. If that was mostly amongst people with young kids at that time then we must be at the beginning of a lot of them losing those extra bennies.

 

11 minutes ago, DurhamBorn said:

I know lots of people who would never retire on the income il stop work on in a few weeks.They cant live without exensive holidays and having expensive lease cars etc.UBI would only cover the basics,oiling the economy really.I think it would be superb for the economy and society if set at the right level.The key is setting it low enough so that its not a nice existence on that alone,but fantastic for building on top of for jobs,saving,self employed etc.

If UBI only covers the basics, and I think inflation would guarantee that after a while, then people will work for the extras in life. A lot will do part time work.

They could try to set UBI at a survival level that reaches a current benefits level of existence, for a family, with a couple of 16 hour jobs attached. It would be tricky to achieve because there are so many moving parts (people) that are hard to predict.

Whatever happens with UBI a lot of people will really struggle if they have to work for a living.

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5 hours ago, DurhamBorn said:

Work for most people is crap,and it should be used to get to a position where you dont have to,or can go part time etc,because the system now is stacked against people who work in a massive way.

Some very good points there. I agree that work is pretty grim for most. It was the same with me until 2005 when I resigned from my job and went out alone. Worked very hard since and earned very good money but I couldn't keep this pace up much longer. In a way covid has forced us to slow down and we have now re-appraised the work/life balance. We will now have a longer route into retirement but try to work 2/3rds time. Like you I want to be able to help my children. They do not have the DIY savvy (do any youngsters these days?) so inevitably I'll be rolling up with my toolkit to help them repair/improve their houses (which they are yet to buy). 

My main worry on the work front, other than it getting more complex as inflation takes hold, is the likelihood that we could have a Labour government next time round and they may look to extract much higher taxes from small businesses*. If that happens, I'm out.

* I would accept some tax rises if the money was spent wisely, but it won't of course..

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2 hours ago, AWW said:

There's actually quite an interesting discussion to be had here, given the march of automation.

What do you do when you only need 5% of the population in work to keep the lights on? This discussion is always approached from the angle of "what do the 95% live on?", with UBI being the usual answer.

But there is another question that needs to be answered - how do you reward the 5% who are still working? I've never seen this discussed seriously.

Personally, I'm all for shortening the working week. We did it after the industrial revolution, but not after the computer revolution. Not formally, anyway, although it's pretty common for office bods to do 3 or 4 day week after taking into account idle web browsing.

There is another variable you can change - the idle population size (ie. the 95% in your example). Covid’s a good start :ph34r:

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Democorruptcy
5 hours ago, DurhamBorn said:

Take a girl i know and her husband,26.They dont work,they get £280 a week in cash,the rent and council tax paid on a brand new house on a new estate where other people next door have to pay £130k.They sit and hes getting fat playing his x box all day.All she does is goes shopping with her mother.He has had a few jobs but he has taken days off after a couple of weeks and then gets finished.There is zero incentive to work because they cant think past next week.They cant think if we get a full time and part time job we will be  £200 a week better off.We can then buy a house and pay it off over 20 years so at 45 we will be mortgage free with kids up.We can then work full time and save to retire at 60 and look after out grandkids.Nope,they simply think we will do nothing and let the person next door pay for us.

They are mortgage free now so why would they bother with that lot? Working full time - what for? They have a free shelter and cash to spend. Working full time to become mortgage free just means you are a slave to a bank then pay your own benefits. The way they intend to look after the grandkids is leave them the instructions.

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3 hours ago, feed said:

I think the benefits issue is velocity.
Give those £500 bonus to people like us and we'd just buy gold or something. 
Give it to the can't think past next week and it gets spent and often on high tax items, such as cigs and booze.

The question will be, what happens when they don't want the velocity.  

The proposal of £500 helicopter money for those on UC got me thinking. I remember when my employer in my first proper job, gave everyone a thousand pound bonus for surpassing a revenue target. At the time I was in my early 20’s and after paying bills didn’t have a huge amount of money left over, most of which I then spent on nights out. Anyhow as soon as I got that money, I went shopping and in an afternoon bought some fancy trainers, a PlayStation 3 along with some games and a new suit. I spent it all. Nowadays bonuses just get added to the savings pile.

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4 hours ago, Democorruptcy said:

They are mortgage free now so why would they bother with that lot? Working full time - what for? They have a free shelter and cash to spend. Working full time to become mortgage free just means you are a slave to a bank then pay your own benefits. The way they intend to look after the grandkids is leave them the instructions.

Exactly,and its the road to ruin.Insane that the state would actually encourage such behaviour,but i think that comes from most of parliament coming from upper middle class,or rich backgrounds.They think £30k a yea rin benefits is really poor.

In my whole life of study and learning into macro and political cycles,the one stand out is how bad Brown was.He did more damage to the UK than any entity,apart from maybe William the Conqueor.The Vikings did massive local damage,and even national,but no single person did more to destroy the very fabric of family life in the UK.If i could change anything in this country's long histroy,from Saxon invasion,Vikings,Germany etc etc it would be to stop the Blair/Brown government.For me they were as a pair,pure evil.

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Democorruptcy
3 minutes ago, DurhamBorn said:

Exactly,and its the road to ruin.Insane that the state would actually encourage such behaviour,but i think that comes from most of parliament coming from upper middle class,or rich backgrounds.They think £30k a yea rin benefits is really poor.

In my whole life of study and learning into macro and political cycles,the one stand out is how bad Brown was.He did more damage to the UK than any entity,apart from maybe William the Conqueor.The Vikings did massive local damage,and even national,but no single person did more to destroy the very fabric of family life in the UK.If i could change anything in this country's long histroy,from Saxon invasion,Vikings,Germany etc etc it would be to stop the Blair/Brown government.For me they were as a pair,pure evil.

There was a video from the 1960's that @crashmonitorposted the other day and bennies were paying more than work even then.

 

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9 hours ago, AWW said:

There's actually quite an interesting discussion to be had here, given the march of automation.

What do you do when you only need 5% of the population in work to keep the lights on? This discussion is always approached from the angle of "what do the 95% live on?", with UBI being the usual answer.

But there is another question that needs to be answered - how do you reward the 5% who are still working? I've never seen this discussed seriously.

Personally, I'm all for shortening the working week. We did it after the industrial revolution, but not after the computer revolution. Not formally, anyway, although it's pretty common for office bods to do 3 or 4 day week after taking into account idle web browsing.

I agree it is an interesting discussion because it informs I think the future shape of society, and what can be afforded, etc. Keynes and others in the 40's foresaw automation bringing us a shorter working week. It was obvious, to many but not all that by the 70's, capitalism, banking, etc, needed fundamental reform but instead debt fuelled consumerism and market financialisation was rabidly embraced. I don't however condemn the politicians of the time as the Russian Bear back then had very sharp teeth and claws. But since then the can has merely been kicked down the road, with the political class today alarmingly promoting policies that imo are socially harmful, never mind economically destructive.                                                                                      However going forward I'm not all doom and gloom, my base case is that in 25 years time all available work will be 'equitably shared' (yep by big government) by creating say 2/3 day a week jobs, with a UBI top-up. Most people will be ok with this, with the more ambitious independent types doing the professions or taking self employed roles. But the difficult bit I think will be the 'fair/sustainable' taxation of company profits and capital gains to pay for these changes. Though I suspect a more authoritarian government, capitol controls/crypto currency, etc, adopted by all Western countries will 'help secure' tax receipts. The work shy underclass that DurhamBorn speaks about will remain a problem, but I suspect even with the type of strong government i envisage happening, they will probably just be made to do 'tick box' street cleaning jobs.                                                                                                                                                                After deliberation, including much wisdom from this thread, i have (belatedly must admit) come to realise that the nature of 'work' and what constitutes a 'job' changes over time (history proves this) and is really mostly to do with social values/ambitions, technology/energy constraints. Sounds namby-pamby perhaps, but don't mean it to sound like that. Still think very hard economic choices next cycle will be made. And to navigate a path through, we will have strong government, which the younger generations seem very comfortable with having, but which concerns me immensely given our current crop of political pygmies - however even so, in order to keep people on side future governments will still need to navigate a middle path acceptable to the majority.

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8 hours ago, DurhamBorn said:

I think it gets interesting once the CBs withdraw from printing the welfare budget,probably within 24 months.Its very difficult to reform though and they missed a great chance when the Tories tried to.Its a disaster at the moment.Giving huge amounts for free until children are 18,then hardly anything is crazy.Pushing the pension age back means there is a 20 year gap between welfare ending for the kids and a pension.Its hugely difficult to reform while the BBC exists.If i wanted to reform welfare the first thing id do is get shot of the BBC.

Yes very astute comment there regarding the poisonous 'so called' BBC - 'defund the BBC!!'

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1 hour ago, Democorruptcy said:

There was a video from the 1960's that @crashmonitorposted the other day and bennies were paying more than work even then.

 

A very sobering watch. I expect very few were on 'national assistance' back then. Whereas today I expect it is something like 33% if include all the working tax credits? Must say the bit about how they allocated school meals sounded a bit harsh, maybe someone should send this video to Marcus Rashford!

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The western political system will never allows a hard rollback of benefits without an external party to blame.  Otherwise the opposition just offers less cuts, and get voted in.

That external opposition can be the IMF (boo!  they are making us do this!), or another country (boo!  the Eu says we can't do this!), or a hostile enemy (boo!  The Chinese developed COVID and so we are at war and so you can't have an XBOX5.  Go and kill chinese people to express your anger!)

 

I think TPTB want 1, but might get 3.

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5 hours ago, wherebee said:

The western political system will never allows a hard rollback of benefits without an external party to blame.  Otherwise the opposition just offers less cuts, and get voted in.

That external opposition can be the IMF (boo!  they are making us do this!), or another country (boo!  the Eu says we can't do this!), or a hostile enemy (boo!  The Chinese developed COVID and so we are at war and so you can't have an XBOX5.  Go and kill chinese people to express your anger!)

 

I think TPTB want 1, but might get 3.

Know who the enemy is....and it's not always the one that they tell you!

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On 14/01/2021 at 21:12, Vendetta said:

My brother asked me if I could see a stockmarket crash coming soon.....

Here is my reply .... (the rantings of a madman possibly as I haven’t eaten in 14 days.... they do say one can see more clearly on a fast). (Source  material from @DurhamBorn2020-21).
 

What I now see this year in terms of Stockmarket performance is a little pull back  (10-15%) from where we are now (6800) maybe to 6000pts. Maybe 5800.

There is trillions and trillions of dollars in liquidity pushing through the pipes and more to come.

Government are (rightly) borrowing hugely at the lowest long term IR’s ever over really long time frame (50years) and will be investing massively in infrastructure (in ‘deprived areas’ like the NE).

All this money printing, borrowing of money and ‘malinvestment’  and the end of covid, may result in a wall of money becoming a surge in inflation throughout the 2020’s. Not just in U.K. but US etc.

Exacerbated by China no longer exporting deflation. Inflation, starting late 21 or 22 - hitting double figures by 2025-27.

Inflation is notoriously bad for most stocks. I’ll be protecting myself  from inflation with companies at the base of the supply chain. Big oils, potash, telecoms and miners plus commodities and commodity tracker. Gold and Silver will surge.

Governments will have to tighten IRs - they will have no choice -  and this will eventually result in stagflation, and possibly a massive monetary collapse and potential collapse of the financial system.

Physical gold and silver (and housing assets) might offer the only protection.  I also see an oil supply squeeze early on this decade, late 2021 or early 2022 which will also kickstart inflation. 
 

However alternatively I can easily see the NASDAQ collapse 30-50% or more within 6 months or earlier of today’s date. Tesla will be the ‘pin’. Ftse could as a result hit 5500 in the fallout, but it will be a short lived fall. It will benefit certain non service, and non-tech stocks long term.
 

This Nasdaq fall will just result in more and more fed stimulus $Trillions and $Trillions. Other major governments will be doing the same. This liquidity will get into the pipes and just keep pushing up assset prices and destroy the currency. They will have no choice but to just keep printing.


Bottom line is I am not too bothered by short term (12 months) ‘mini crashes’, ultimately my theory is that we are well on the way to having a ‘crack up boom’. Oil will be over $100 per barrel within 18 months possibly earlier. Well into the decade Silver could hit $150/oz (and Gold $7000/oz).


Most of this has been absorbed from reading this thread too much.....

Discuss ? 

I know it is bad form to quite oneself. However I think my post above from a few days ago found it hard to compete with a picture of a loaf of sourdough I posted (thankfully it was not a pizza).
 

Anyway I’ve got some graphs to back up my prediction.

Basically I can see at most 2 more months of rising stock markets - maybe another 5-10% from where we are now and then a 20-30% correction. 
 

Reversion to the mean:

8EB4A5E3-42FB-4CC6-A4D6-A6AE70538E6A.thumb.jpeg.e9e9fd115273ab10494b42d6f38ac68f.jpeg
 

 

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2BE33D7A-F081-40F6-91AE-41DDCD0A5234.thumb.jpeg.e0590fb47b8405aa8b373ddd0d0c514f.jpeg
 

The timing might be superb if it comes late March and early April..... in terms of tax planning. 
 

The eternal question is “Should ‘one’ sell their holdings?

For me it’s a “No” - as I reckon I’ve picked up nearly all of them at their cyclical lows and they may be insulated from the major fallout

Also I’ve gone for large cap dividend paying  long term stocks in the OPTIMiSM sectors and shielded them in ISA’s so I don’t want to lose the tax break in 10-15 years time. However will the tax break be greater than the potential ‘loss’ in a coming crash? 
 

What are others on here doing? I sold up a good 60% of my portfolio in early October thinking the “TESLA/NASDAQ” bubble was going to ‘pop’ - and bring it all crashing down.
Worked out well as I reallocated more in BP/SHELL and a bitcoin miner. However the stocks I sold have still gone on to do 20-50% more.

As someone said in here a few posts ago:

”all the technical analysis is just ‘noise’...... “ 

And words to the effect of....

He said “my dads SIPP has gone from £600k to £1,600,000k in 10 months..... there’s a crash coming.”

I reckon he is right....

 

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18 minutes ago, Vendetta said:

What are others on here doing?

Still got half my equity allocation sat in cash, ready to go if/when the BK occurs. Most of all, I'd like some potash. Missed out in the March 2020 dip because I didn't have my sh*t together, fortunately the oilies carried on grinding down and saved me from a 100% miss.

Would also like to top up a few industrials like Siemens, BASF, LyondellBasell, also fancy a bit of forestry with the likes of Weyerhaeuser. All depends on how good the "value" looks if/when SHTF.

Anything left in the cash pot I'll likely reallocate and buy a bit of land locally. With sporting rights.

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8 hours ago, JMD said:

After deliberation, including much wisdom from this thread, i have (belatedly must admit) come to realise that the nature of 'work' and what constitutes a 'job' changes over time (history proves this) and is really mostly to do with social values/ambitions, technology/energy constraints. Sounds namby-pamby perhaps, but don't mean it to sound like that.

Not namby-pamby at all. People overlook the fact that in the grand sweep of human history, concepts like "work" and "work ethic" are something of a fad.

Sure, they've been around for 10,000 years or so and are therefore deeply ingrained in human culture over hundreds of generations. But that doesn't change the essential fact that work is a temporary socio-economic and technological construct.

The adjustment to a predominantly automated world is going to occur *very* quickly relative to that 10,000 year legacy, and will f*** with many heads and many articles of faith in human affairs.

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A heavily reduced cross psot from the sceptics thread(don't wish to offend the long post police).Some data hot fo the press from 15 Jan regarding ICU admissions.Hattip @dnb24

Key points are exploding themyth that there's a lot more younger people going into ICU currently.Also reaffriming that being overweight remains a critical indicator for ICU admission.

Also showing that the increase in numbers going to ICU isn't that high,it's jsut that despite having 10 months to prepare,the NHS hasn't been able to cope with a 10-20% rise in demand.

https://www.icnarc.org/DataServices/Attachments/Download/4cd9c693-6657-eb11-912d-00505601089b

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Democorruptcy
9 hours ago, JMD said:

A very sobering watch. I expect very few were on 'national assistance' back then. Whereas today I expect it is something like 33% if include all the working tax credits? Must say the bit about how they allocated school meals sounded a bit harsh, maybe someone should send this video to Marcus Rashford!

The equivalent mother now wouldn't have to spend hours working at home for peanuts and would have a flat screen TV, Sky, mobile etc. This is because the central bankers are such goodies and created a lot of money for the governbankment to spend. DB suggests they do their good work so people like her have a better life now?

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Chewing Grass
18 minutes ago, sancho panza said:

A heavily reduced cross psot from the sceptics thread(don't wish to offend the long post police).Some data hot fo the press from 15 Jan regarding ICU admissions.Hattip

This was the interesting one for me and probably more significant with age.

25 - 30 is blatantly overweight

>30 is obese

So that is 79.3% are overweight and 47.5% are obese land whales

There you have it in a nutshell, sedentary lifestyles and poor cardio-vascular fitness.

1436910828_Screenshotfrom2021-01-1710-08-25.png.bac7468ffb037cdf12ff73cdb1b71219.png

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10 hours ago, Democorruptcy said:

There was a video from the 1960's that @crashmonitorposted the other day and bennies were paying more than work even then.

 

Interesting...'Poor but proud'...you could see this in the ladys reaction, she (and here husband) could never have gone on the assistance for the shame in the neighbourhood, so her husband went to work and earnt less. A society that still had respect for the system as a means of supporting the sick, elderly and disabled...we may have developed further as a society but there are things that we have regressed in.

Bought back memories as well, I can remember my Mother doing piece/homework for 'pin' money, and as children helping her with this; the non-essential tasks....as we got older she even 'subbed out' some of the tasks to us, always paying less than what she was getting :-)))

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