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

[feed]

Drive people to part time, to stay under the thresholds.  I can see a 4 day working week becoming much more standard.  

It’s interesting, in a world where meaningful work becomes rare, punitive taxes for those engaging in more than their "fair share" of it.  
 

[DurhamBorn]

1 minute ago, Cattle Prod said:

I burst out laughing. He basically said, "I'm being honest here. It's not going to keep up with inflation, and it's going to hurt".

He didn't say how high inflation is likely to be. For my inflation worked examples above, your tax allowance will now be inflated away in the same way. And if wages go up with inflation, huge numbers will be thrown into the 40% tax bracket.

The govt has effectively put on an inflation hedge to 2026, the cheeky bastards.

Exactly,they have a massive incentive to create inflation just as we always said on here.Freezing the lower allowance is disgusting.Hitting mostly the lowest paid who dont have children.I think they will suffer hugely from this.

[Barnsey]

2 minutes ago, Cattle Prod said:

I burst out laughing. He basically said, "I'm being honest here. It's not going to keep up with inflation, and it's going to hurt".

He didn't say how high inflation is likely to be. For my inflation worked examples above, your tax allowance will now be inflated away in the same way. And if wages go up with inflation, huge numbers will be thrown into the 40% tax bracket.

The govt has effectively put on an inflation hedge to 2026, the cheeky bastards.

If I thought we were going to face a repeat of post GFC low inflation I wouldn't be as concerned, but if we're right, imagine where rates could be in 2026!

I guess I'll be syphoning more into my salary sacrific AVCs then 

[DurhamBorn]

2 minutes ago, feed said:

Drive people to part time, to stay under the thresholds.  I can see a 4 day working week becoming much more standard.  

It’s interesting, in a world where meaningful work becomes rare, punitive taxes for those engaging in more than their "fair share" of it.  
 

My partner is now going to put everything down to tax allowance into her Sipp.Im considering helping my kids to do the same.

[DurhamBorn]

"since the 1970s"

Glad he is catching up

[Hancock]

49 minutes ago, DurhamBorn said:

Well i might go back into employment,macro strategist for the treasury in Darlo ,can someone forward Dishi the thread.

Unfortunately you can add up and have worked in the private sector, so there is no fucken chance you'll get the job.

[DurhamBorn]

This thread said the North would be the winner in this cycle.People thought that mad,but its locked in.Industrial reflation certain now i think.

[The Idiocrat]

52 minutes ago, DurhamBorn said:

Well i might go back into employment,macro strategist for the treasury in Darlo ,can someone forward Dishi the thread.

You might just want to rent them your crystal ball DB! All that focus on Teeside too as you predicted. Well played sir!

[feed]

10 minutes ago, DurhamBorn said:

My partner is now going to put everything down to tax allowance into her Sipp.Im considering helping my kids to do the same.

Short term it will hurt people and of course anyone that can will bury income in pensions to get below the thresholds will do. But in keeping with the macro, I wonder what the longer term impact is.   

3 years from now how many people will understand it’s utterly pointless them working that 5th day and what does that do to recruitment in an era where the state fears unemployment more than inflation.  
 

[DurhamBorn]

Big hike in what companies can claim for capex is a huge giveaway,will spike demand for equipment and buildings etc.Every policy looks like to create inflation while making sure it flows in tax while freezing allowances.

 

[Agent ZigZag]

Looks like I will have to get married now to maximise my tax allowance. Got 4 years to plan the wedding though

[DurhamBorn]

2 minutes ago, The Idiocrat said:

You might just want to rent them your crystal ball DB! All that focus on Teeside too as you predicted. Well played sir!

Yep,its amazing how the macro has forced their hands.We knew all this before anyone even considered it.Our forecasts would be laughed at.Better though, the roadmap is fully in play now,we need to focus and outflank this inflation and come out in front.

 

[DurhamBorn]

4 minutes ago, Cattle Prod said:

How does that further 400bn fiscal tally with your liquidity calculations needed to reflate?

Inflate certain now,i think they need another QE round though.I always thought they needed 3% inflation above rates,and i think that is now certain as well,with allowances the battleground.

[Agent ZigZag]

The following freeports

East Midlands Airport, Liverpool, Felixstowe, Humber, Plymouth, Thames, Teesside, and Solent. Freeports announced. 

Nice trade corridor between the Humber, Teeside and the Mersey

[Hancock]

5 minutes ago, Agent ZigZag said:

Looks like I will have to get married now to maximise my tax allowance. Got 4 years to plan the wedding though

Quite a few single blokes on here, doubt they're fussy.

[geordie_lurch]

It seems like the Corporation tax increases won't start until 2023 and then they will be tiered...

 

[AWW]

9 minutes ago, Agent ZigZag said:

Looks like I will have to get married now to maximise my tax allowance. Got 4 years to plan the wedding though

...or make your other half an employee of your ltd co.

[moneyscam]

So CGT, IHT and personal tax allowances frozen until 2026. Coupled with a short term SD extension and 5% deposit mortgages I can see quite a few people going over IHT limits on house price rises by 2026.

If I was greedy I would renege on the full asking price offer I received on my house and hold out for another year of capital growth gains .

[sancho panza]

On 01/03/2021 at 14:29, Cattle Prod said:

Interesting @Barnsey I've heard a few things signalling weak physical crude buying in Asia lately. I can't decide if it's because the current prices have put them off, given they filled their boots at much cheaper prices last year, or if current prices are hurting their economics. OPEC will have the best data on physical buying, and how they react this week will be very telling.

Separately, I listened to a good short podcast with Jeff Currie of Golman Sachs. I know GS talks their book and is a bit of a joke contrarian indicator in the online investing world, but I like the sound of him. He is defintiely a long cycle, macro guy, he's not too interested in what happens next. He also said 'I don't know' a few times, which made me sit up. The very smartest guys say are confident enough to say 'I don't know' when they don't, bulshitters will always fill the air with nonsense. Anyway, a number of things he said resonates with this thread. Long term oil prices for one, and for me he is bang on about supply problems outside core OPEC, he even listed some of the same countries I have like Mexico and Nigeria. Also clear commentrary on the problems in investing in US shale now.

There is a key line it I'm trying to understand better, and I'd welcome comments on it. It is I think a crucial observation: 15.00 on:

Teaser:

"When the dollar-commodity link breaks down, it's when you break the global liquidity link... ... Why did it pick up and get really strong in March and April? Because places like Saudi and Russia had a draw on their reserves so they went from being providers of global liquidty to users of global liquidity which led to a sharp appreciation in the dollar." Thoughts, especially @DurhamBorn who understands dollar liquidity probably better than Jeff Currie ? Is he worth his salt?

https://www.spglobal.com/platts/en/market-insights/podcasts/focus/022221-commodity-supercycle-oil-energy-transition-jeff-currie-goldman-sachs

 

Fascianting podcast.

Interesting that at the end he was saying the upside in oil could be treble figures.

I'll have to relisten when I have time.the guy clearly has a lot of time in the market and is seeing the copper squeeze coming.My read is that teh copper squeeze and commodity squeeze will take us into the BK.

I also found the comments on liquidity interesting and perhaps pertain to why the correlation between oil and liles needs reseetiing every 5-10 years when assessing correlation.All it tkaes is one decent size change in liquidty and it throws off a good correlation before pikcing it back up down the line.

On 01/03/2021 at 14:55, DurhamBorn said:

By users of global liquidity he means spending US dollars of course.In normal times they suck in printed dollars for oil and buy other goods or invest them.Its the way global growth works.Fed is the start of the chain,energy is next.Fed prints,it goes to energy producers,they spend,liquidity increases.When Fed prints but oil price is down hard they have to sell assets to buy goods.So they do use global liquidity then to consume without providing the counter asset ie oil.Liquidity is actually up a lot,but its sat in M1 so there is a draw in dollars in the system outside of M1 and yet to move into M3.Once it moves to M3 as it will,maybe not all as some excess savings are kept it will flow to the Saudis etc and they will then be spending those $s in the world economy.Consumers with M1 dont drive inflation,its what energy producers do with the $ when it moves to M3.M3 increasing is the increase on energy use.

Amongst many exceelent explanations on the thread,this is one of the best.

7 hours ago, ThoughtCriminal said:

So theyre extending furlough until at least september. 

 

I can see big problems ahead when people have to return to full time work after 18 months of being paid to do fuck all. 

 

Lots of sullen people who've had their eyes opened to the fact there's more to life than work. I anticipate our already dog shit productivity levels are going to plummet. 

I dread to think twhere this will end.Jordan Peterson said something to the effect of marxist countires had poor productivity because in the end very few people did all the work.

I'm beginnign to see a lot of middle class people I know turning to Lockdown sceptics.They know this no longer makes much sense.The govt can't hide the all cause mortality figures from the UK/Sweden/Florida/Italy/California/New York.

[AWW]

2 minutes ago, moneyscam said:

5% deposit mortgages

These aren't going to have as big an impact as people seem to think. You still need to earn price/4.5 to get a mortgage in most cases.

[Noallegiance]

41 minutes ago, DurhamBorn said:

Hitting low paid workers hard.Crazy.Most dont understand it though so are lambs to the slaughter.5 years freeze does huge damage.

OK I'll say it. I don't get it.

[Hancock]

2 minutes ago, AWW said:

These aren't going to have as big an impact as people seem to think. You still need to earn price/4.5 to get a mortgage in most cases.

Bu last time it did, whilst numbers werent huge this is because it was running alongside HTB1.

[Hancock]

Runs only for 20 months

[Hancock]

Or until 2026 for freeport areas

[moneyscam]

2 minutes ago, Hancock said:

Bu last time it did, whilst numbers werent huge this is because it was running alongside HTB1.

The current HTB2 of 5% deposit + 20% gov equity loan ends end of this March for non first time buyers. What Sunak just announced effectively extends this to all buyers again without the 20% equity loan part.

I haven't seen any detail yet of the new scheme i.e how much are they guaranteeing? the full 95%, 50% 20%?

The actual level of guarantee will make a difference to how many of these mortgages banks will be willing to supply. At least with HTB2 it was easily understood that the purchaser was on the hook for the first 25% of loss.