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


spunko

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Yellow_Reduced_Sticker
2 hours ago, DurhamBorn said:

Like Sibanye.Cracking managers who knew their market.They took on debt and bought up most of the industry during the bear market,everyone thought they were nuts buying failing assets.Then boom.Palladium rockets and they control the swing supply and print money.I want my arse kicking for selling most of them because i had too much in South Africa.I had 5 figures in them as well.Or as my dad says when he keeps mentioning how high they are now,"what did you sell em for dickhead" xD

 
I fluked it on Sibanye and got in near the BOTTOM, though I only put in a grand it's UP 327% :o My Top performer in my portfolio, can someone message Mr Hunter and ask when his Crystal Ball thinks the TOP is for Sibanye?! :Beer:
 
Actually all joking aside, if my portfolio hits + 70% (its up 40% now) in the next few months of the MELT-UP...I'm flogging the lot ...other than the telcos!:ph34r:
 
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JimmyTheBruce
1 hour ago, Yellow_Reduced_Sticker said:
 
I fluked it on Sibanye and got in near the BOTTOM, though I only put in a grand it's UP 327% :o My Top performer in my portfolio, can someone message Mr Hunter and ask when his Crystal Ball thinks the TOP is for Sibanye?! :Beer:
 
Actually all joking aside, if my portfolio hits + 70% (its up 40% now) in the next few months of the MELT-UP...I'm flogging the lot ...other than the telcos!:ph34r:
 
image.jpeg.e39938fa9b4d2554e6ba8cbf581a7368.jpeg

Only 327%?  It's my best performer by a country mile at 384%!!!  And it's bunging chunky dividend payments my way too 😃

And I'd never even have heard of them if it wasn't for this thread.  Thanks DB!! Sorry for rubbing it in. 😉

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15 minutes ago, Castlevania said:

@nirvanais shorting it :)

not me mate, I'm a fan of the USD nowadays :P

@Lokiit's NFP......non-farm payrolls day

News moves markets, you need to keep up at the back :Old:

Screenshot_2021-05-07_15-14-51.png

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forexfactory where all the best lunatics hang out xD

if I can be serious for more than 1 minute, it has been mentioned before but the calendar there is really good......any large moves I'm straight on FF to check the news feeds.....

But yeah this is what has got the algos all excited

US Economy added just 266K jobs in April, unemployment rose to 6.1% even as states eased restrictions, vaccinations rose

edit: lovely rips in cable and fibre, that's where you hit em with big shorts :P

 
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feck Gold loves the news! And Silver too BUT they really sold that rip....

did I tell you how much I hate silver now???......bloody shite gets on my tits xD:PissedOff:

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I'm in for some potash cos it sounds like hash! xD fill or kill

edit: scrub that crap from youinvest, I bought some shares through HL instead

Up the potash massive! :Jumping:

 

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2 minutes ago, nirvana said:

I'm in for some potash cos it sounds like hash! xD fill or kill

I just bought some K+S AG which is a German chemicals/potash company (mentioned here some time ago) which I had before (but got fed up with and sold).  It's in euros so FX charges for buy/sell but it looks to be taking off............:D

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Lightscribe
1 hour ago, nirvana said:

feck Gold loves the news! And Silver too BUT they really sold that rip....

did I tell you how much I hate silver now???......bloody shite gets on my tits xD:PissedOff:

Lots of volatility going on. Fres has finally started to move upwards (delayed reaction from last week as silver started to go higher) but I think that signals that were on the up now.

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DurhamBorn
2 hours ago, JimmyTheBruce said:

Only 327%?  It's my best performer by a country mile at 384%!!!  And it's bunging chunky dividend payments my way too 😃

And I'd never even have heard of them if it wasn't for this thread.  Thanks DB!! Sorry for rubbing it in. 😉

Im over the moon people did so well out of them and others,this thread is for ordinary people to share ideas and hopefully come out in front.A few crap plays along the way,but some amazing calls.The might Panther is lagging a bit though at 20% up its a stinking pile,but cant bring myself to sell it xD

 

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3 minutes ago, Lightscribe said:

Lots of volatility going on. Fres has finally started to move upwards (delayed reaction from last week as silver started to go higher) but I think that signals that were on the up now.

spoos is off to the races.......weren't you the loony calling the top the other day? ;)

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Lightscribe
12 minutes ago, nirvana said:

spoos is off to the races.......weren't you the loony calling the top the other day? ;)

For the FANNGs, yes they seem toppy. Once they go it all goes. As I said, will be interesting to see how this all plays out.

 

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Lightscribe
17 minutes ago, DurhamBorn said:

Im over the moon people did so well out of them and others,this thread is for ordinary people to share ideas and hopefully come out in front.A few crap plays along the way,but some amazing calls.The might Panther is lagging a bit though at 20% up its a stinking pile,but cant bring myself to sell it xD

 

The Panther shall shine once more, so let it be written, so let it be done.

I have prepared myself for the coming by placing this statue in my living room.

 

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8 hours ago, Castlevania said:

Good fundamentals? Nah, it’s an over leveraged piece of crap. But, that’s what you want if the underlying commodity they produce is about to enter a bull market.

Castlevania, are you talking about Intrepid Potash being 'over leveraged' in terms of its balance sheet debt? Only I thought it now only owed $50M, after paying back $100M in recent years. Whilst K+S for example have doubled their debt to over 3Bn Euros over same period. I know Intrepid is a lot smaller, and perhaps other comparative financials might be relevant, but what am i missing here? 

...I realise that this is not a stock selectors site (decl: i already own both), but am rather more asking because both of these companies were discussed many times on the thread back in the day, and so just concerned i have misinterpreted something very obvious re. leverage/debt. Or perhaps maybe i have just completely misinterpreted your post?!  

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Castlevania
2 hours ago, JMD said:

Castlevania, are you talking about Intrepid Potash being 'over leveraged' in terms of its balance sheet debt? Only I thought it now only owed $50M, after paying back $100M in recent years. Whilst K+S for example have doubled their debt to over 3Bn Euros over same period. I know Intrepid is a lot smaller, and perhaps other comparative financials might be relevant, but what am i missing here? 

...I realise that this is not a stock selectors site (decl: i already own both), but am rather more asking because both of these companies were discussed many times on the thread back in the day, and so just concerned i have misinterpreted something very obvious re. leverage/debt. Or perhaps maybe i have just completely misinterpreted your post?!  

Balance sheet actually does look much better than I thought. 

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31 minutes ago, Castlevania said:

Balance sheet actually does look much better than I thought. 

that's what we like to hear......get buying MOAR partisans! MOAR and MOAR!!!!

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How Doombrose can write that first sentence, i do not know .. sure something else happened in the 1940s.
https://www.telegraph.co.uk/business/2021/05/07/us-inflation-fears-mount-fed-monetises-joe-bidens-deficits/

 

The US Federal Reserve and Treasury are repeating one of the most disturbing episodes of the 1940s and risk stoking a destructive inflationary boom, a leading monetary watchdog has warned.

The Centre for Financial Stability (CFS) in New York says US money supply data is flashing a red alert and that excess reserves in the banking sector threaten to set off an “explosion of lending” as the recovery accelerates. The Fed is riding a tiger by the tail and may have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits.

The CFS said its "divisia" measure of the broad M4 money supply rose 24pc in March from a year earlier, and narrow its M1 variant rose 36.9pc. “Those monetary growth rates are potentially alarming,” said Professor William Barnett, the institution’s director.

Barnett said de facto collusion between the Fed and the Treasury is much like the 1940s, when the Fed served as a fiscal agent for Democratic administrations and mopped up the vast bond issuance needed to pay for the Second World War and its aftermath. Inflation reached 17pc by mid-1947 and creditors were gradually expropriated in what amounted to a stealth default stretched over several years.

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The US output gap has already closed and President Biden’s $6 trillion fiscal plan is expected to push economic growth above its pre-pandemic trajectory by next year. Five-year "breakevens" measuring inflation expectations have jumped to 2.71pc, the highest since the pre-Lehman boom. Yet the Fed is continuing to buy $120bn of bonds each month.

The situation is fundamentally different from waves of QE after the global financial crisis. Stimulus at that stage was needed to offset a contraction of the money supply as banks slashed lending and sought to beef up their capital ratios to meet tougher Basel rules. Today’s QE is monetisation of fiscal deficits and is leading to a surge in bank reserves. This money will catch fire if monetary velocity returns to normal as the economy recovers. 

The Bank for International Settlements - the venerable club of global central bankers in Basel - also fired a shot across the bows on Thursday, warning that it would be a grave error for policymakers to let rip on monetary growth in the hope that social inequalities could be cured with inflationary stimulus. 

The poor tend to suffer most when the consumer prices suddenly start to rise. Agustin Carstens, the managing director of the BIS, said: “We should not forget the long-lasting scars of uncontrolled inflation on inequality. History abounds with episodes of high and runaway inflation that increased poverty and inequality via sharp reductions in real wages.

“The households at the lowest end of the income spectrum are the least able to hedge against it: their income is usually fixed in nominal terms and their savings held in cash or bank accounts. The best contribution monetary policy can make to an equitable society is to try to keep the economy on an even keel by fulfilling its mandates of stable prices and sustainable economic activity."

While Mr Carstens was careful not to name anybody, the words were clearly directed at the Fed and other central banks that have pushed their balance sheets to unprecedented levels and are continuing to buy bonds even as economies re-open. He raised the spectre of a Latin American denouement, speaking with personal experience as an economist who grew up in Mexico.

The story of US financial repression in the 1940s ought to be a warning for bondholders. The Fed under Marriner Eccles capped yields to stabilise the financial markets while the Roosevelt administration was running eye-watering budget deficits. It was justified at first as a patriotic necessity in the fight against Fascism but proved hard to stop, continuing into the late 1940s when the rationale was no longer clear.

“After the war ended in 1945, most policymakers were concerned with preventing another Great Depression. But inflation proved to be a much greater concern,” said the Fed’s own potted history.  The central bank - a creature of habit - was slow to realise that the long secular cycle had turned from deflation to reflation. The echoes today are striking.

This experiment with fiscal dominance led to a bitter dispute between the Fed and the Truman administration, ultimately leading to the Treasury-Fed Accord of 1951. This deal restored the operational independence of the central bank. But by then the compound effects of double-digit inflation had fleeced long-term debt holders.

This bond restructuring by stealth was highly successful in one sense: the US federal debt ratio fell from a peak of 120pc of GDP in 1945 to about 70pc a decade later, and yet further with the Great Inflation of the Johnson-Nixon years.

Barnett of the Centre for Financial Stability said there are grounds to suspect the Fed is surreptitiously playing the same trick today: converting what is supposed to be a temporary injection of liquidity into permanent monetisation, while pretending that inflation is a remote concern.

Yet in doing so the Fed has fallen into a trap of its own making since it pays interest on excess reserves to commercial banks as a side-effect of modern QE. This means it will have to pay them more as rates rise, at which point the institution might require recapitalisation by the Treasury to avoid sinking below water. This would precipitate a political storm in Congress. 

It creates a strong temptation for the Fed either to delay raising rates or to stop paying the full amount to banks if it does. But such a course would set off a credit bubble and inflation spiral as bloated bank reserves come out of the deep freeze and are hurled into the real economy. 

Barnett said the Fed is flying blind because it has stopped tracking key indicators of the money supply. The risk of a policy misjudgment is growing as the Fed tries to muddle through without a coherent or credible monetary framework.

A chorus of Fed officials has been playing down the inflation threat over recent days, uniting in a damage-control exercise after markets took fright at an off-the-cuff warning on the risks of “overheating” by Treasury Secretary Janet Yellen. 

Officials insist that any price spike over coming months - possibly well over 4pc - will be a temporary distortion caused by the pandemic and that headline inflation rates will subside in 2022. Vice-chairman Richard Clarida said it was too early to start thinking about bond tapering, let alone monetary tightening: “We’re certainly not there yet.”  

However, commodities are telling another story as copper blows through $10,000 a tonne and hits an all-time high. Lumber prices have risen 280pc in a year, adding $24,000 to the average cost of a new home in the US.

Property prices are rising faster than they did at the peak of the subprime bubble in 2006. The Fed’s own Beige Book is picking up ever louder complaints of bottlenecks and supply crunches across swaths of industry.

Households are sitting on $2.3 trillion of excess savings (15pc of GDP) accumulated during the pandemic and they are likely to unleash some of this on services as life returns to normal. The picture is a far cry from the long dragging conditions of semi-slump after the Lehman crisis, when it took over three years for families to rebuild their balance sheets.  

The Fed has a superb staff and may be vindicated in the end, perhaps after an initial inflation scare that rattles the markets before subsiding. The economy created just 266,000 jobs in April, far short of the 1m blockbuster expected by investors.

Bank lending in the US has fallen by $450bn over the last year as firms pay down debt. The unknown question is whether animal spirits will revive over the coming months and trigger fresh borrowing. “If the banks start lending again there is going to be real trouble. Rates may have to go to 3pc, 4pc, or 5pc, and that changes all the assumptions about fiscal sustainability,” said Tim Congdon from the Institute of International Monetary Research.

It would also destroy the foundations beneath the edifice of exalted asset prices. Current equity multiples are a function of near-zero funding costs. As soon as rates rise in earnest - or even threaten to do so - Wall Street will look forbiddingly overvalued.

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Castlevania
1 hour ago, nirvana said:

that's what we like to hear......get buying MOAR partisans! MOAR and MOAR!!!!

Where were you last October?

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Job numbers today.

The market didn't seem to know how to react to the US jobs report but it was spooked as the figures were "unexpected". 

Gold rose as the dollar fell even though bond prices rose (yields down) and Tech stocks rose as they decided inflation was not coming.

Bond prices recovered after this and real rates ended up. 

Gold didn't lose most of it's step up.

It reminded me of a load of pigeons flying off in directions that seemed best to each pigeon.

 

But my initial reaction was meh, and this has not changed 8 hours later. I don't believe you can draw any conclusions from the figures since people are being paid more to stay at home than work. There is probably a war going on with salaries where employers don't want to pay the amount employees are demanding. We could end up in a months time with another shock where figures show salaries rising more than expected. This will be taken as evidence of inflation but in reality it will be another response to the crazy stay at home not working package.

 

The above will again trigger reactions in the markets so we are in for a choppy time. I just don't believe the reopening of the US has suddenly been halted in it's tracks.

Gold has hit the top of it's down-trend channel on the weekly and monthly chart. The current up channel on the daily seems really strong so we are at a crunch point now. I suppose it depends on what the US inflation news says on the 12th.  

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38 minutes ago, Castlevania said:

Where were you last October?

dunno I've slept a few times since then, why?.......been good all week so getting off my tits tomorrow :Jumping:

 

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@planitinteresting summary, you should do a youtube channel xD

do you scalp or daytrade? news like today is for scalpers methinks.....the gurus here think macro but then idiots like me come along and create somewhat 'micro noise' BUT it's a good thread so I keep coming back

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sancho panza
On 04/05/2021 at 16:48, DurhamBorn said:

The fact is they are thinking about it though.They need to keep fiscal pumping going while at the same time trying to hold inflation in the 3% zone,this is about real rates ,i think they are aiming for 2% negative.Huge risk for the Fed now,if that liquidity enters the economy at once big inflation.

It's sort of surreal ,given the CB's stated mandate is monetary stability,that they've gone from targetting 2% inflation to 2% negative inflation....

Always worth remembering the 2% inflation target was decided upon because the Kiwi Banks board of governors wanted to get home for Christmas.30 year slater,look at the mess.

On 04/05/2021 at 20:43, Majorpain said:

I'm interested to see if they can actually do anything to control it, a lot of the inflation is cost push off the commodity prices, not just demand pull consumer side.  If you couple that with the unprecedented scenario of the past year, high household savings and lockdown there is no guarantee that the average person is not going to spending a lot of time and money enjoying life to the full over the summer.

I've been speaking to a lot of people I know and all are saying the exact same thing about the costs of commodities from copper to wood to steel......loads of stories .

I think we're in for a real run up here.

On 04/05/2021 at 21:19, Cattle Prod said:

Just catching up. Yes, Kao is taking spare capacity at face value. In fairness, finance people have to, as they have no way to qualify it. Some banks hire ex oil industry geos to help with this, but they are second or third rate and we run rings around them if we want to. Without sounding biased, the only people you'll find suggesting this are active industry operator subsurface professionals. I still can't believe no one has noticed that Saudi is cycling production, or that Mexico is in steep structural decline (see whats happened since I said that a year ago) etc. It's subtle stuff. I pinged him on Twitter about it, he was interested and is probably looking into with his team. He's absolutely right about 5), I've said exactly that here. But a littke bullish. I could name you a bunch of projects that took 10 years. But he understands the lag and inelasticity of conventional production. $200 oil won't get those projects on line faster. But thats ok, because we have fast and nimble shale production. Right? Right...? Until it doesn't respond.

This won't all happen at once in 2021. But this structural shift is 100% guaranteed. As he pointed out, we are six years into capital starvation. We have maybe one year left of projects sanctioned 7 years ago when oil was over $100.

One of the last, Guyana, the biggest find, 9bn barrels and counting, in decades, was a very high risk exploration well sanctioned in 2014. Many, many companies passed over it as too risky, after years of $100 oil economics to screen it on. Exxon had the balls and muscle to drill it into the 2015 crash, thats the last one. They turned it around fast, but development has some problems, maybe rushed.

Not a chance it would pass now at $60 price deck. And wouldn't pump first oil till the end of the cycle.

A few others like Sea Lion on the shelf (since 2012) but aren't big enough to affect world supply.

 A few interesting points.I msut say,it was very much a condensed version of the discussion you've led here ovver the last couple of years.There was nothing massively new in it but rather it was a solid condensed version.I think what I found of interest was Kao's place in the world and that he was having the conversation he was.It's telling that a number of respected names are beginning to see the problems coming.Interesting to see him confirm energy's status as the 'go to' for inflationary times.

One point of note that interested me was the role he explained backwardation played in capital starvation.

I had a felling he was using face value figures for spare capacity so it's nice to see you confirm that.

Given the last few days price action,looks like we're on track.I've been reogansing our options exposure selling BP and moving it into RDSB which I think is the value trade short term.XOM is moving nicely.

Personally,my near term target for XOM is $66,and I think we kight well see that in the next few weeks.Time will tell.

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7 hours ago, Hancock said:

How Doombrose can write that first sentence, i do not know .. sure something else happened in the 1940s.
https://www.telegraph.co.uk/business/2021/05/07/us-inflation-fears-mount-fed-monetises-joe-bidens-deficits/

 

The US Federal Reserve and Treasury are repeating one of the most disturbing episodes of the 1940s and risk stoking a destructive inflationary boom, a leading monetary watchdog has warned.

The Centre for Financial Stability (CFS) in New York says US money supply data is flashing a red alert and that excess reserves in the banking sector threaten to set off an “explosion of lending” as the recovery accelerates. The Fed is riding a tiger by the tail and may have great difficulty extricating itself from a torrid monetary experiment that is reaching its limits.

The CFS said its "divisia" measure of the broad M4 money supply rose 24pc in March from a year earlier, and narrow its M1 variant rose 36.9pc. “Those monetary growth rates are potentially alarming,” said Professor William Barnett, the institution’s director.

Barnett said de facto collusion between the Fed and the Treasury is much like the 1940s, when the Fed served as a fiscal agent for Democratic administrations and mopped up the vast bond issuance needed to pay for the Second World War and its aftermath. Inflation reached 17pc by mid-1947 and creditors were gradually expropriated in what amounted to a stealth default stretched over several years.

Advertisement

The US output gap has already closed and President Biden’s $6 trillion fiscal plan is expected to push economic growth above its pre-pandemic trajectory by next year. Five-year "breakevens" measuring inflation expectations have jumped to 2.71pc, the highest since the pre-Lehman boom. Yet the Fed is continuing to buy $120bn of bonds each month.

The situation is fundamentally different from waves of QE after the global financial crisis. Stimulus at that stage was needed to offset a contraction of the money supply as banks slashed lending and sought to beef up their capital ratios to meet tougher Basel rules. Today’s QE is monetisation of fiscal deficits and is leading to a surge in bank reserves. This money will catch fire if monetary velocity returns to normal as the economy recovers. 

The Bank for International Settlements - the venerable club of global central bankers in Basel - also fired a shot across the bows on Thursday, warning that it would be a grave error for policymakers to let rip on monetary growth in the hope that social inequalities could be cured with inflationary stimulus. 

The poor tend to suffer most when the consumer prices suddenly start to rise. Agustin Carstens, the managing director of the BIS, said: “We should not forget the long-lasting scars of uncontrolled inflation on inequality. History abounds with episodes of high and runaway inflation that increased poverty and inequality via sharp reductions in real wages.

“The households at the lowest end of the income spectrum are the least able to hedge against it: their income is usually fixed in nominal terms and their savings held in cash or bank accounts. The best contribution monetary policy can make to an equitable society is to try to keep the economy on an even keel by fulfilling its mandates of stable prices and sustainable economic activity."

While Mr Carstens was careful not to name anybody, the words were clearly directed at the Fed and other central banks that have pushed their balance sheets to unprecedented levels and are continuing to buy bonds even as economies re-open. He raised the spectre of a Latin American denouement, speaking with personal experience as an economist who grew up in Mexico.

The story of US financial repression in the 1940s ought to be a warning for bondholders. The Fed under Marriner Eccles capped yields to stabilise the financial markets while the Roosevelt administration was running eye-watering budget deficits. It was justified at first as a patriotic necessity in the fight against Fascism but proved hard to stop, continuing into the late 1940s when the rationale was no longer clear.

“After the war ended in 1945, most policymakers were concerned with preventing another Great Depression. But inflation proved to be a much greater concern,” said the Fed’s own potted history.  The central bank - a creature of habit - was slow to realise that the long secular cycle had turned from deflation to reflation. The echoes today are striking.

This experiment with fiscal dominance led to a bitter dispute between the Fed and the Truman administration, ultimately leading to the Treasury-Fed Accord of 1951. This deal restored the operational independence of the central bank. But by then the compound effects of double-digit inflation had fleeced long-term debt holders.

This bond restructuring by stealth was highly successful in one sense: the US federal debt ratio fell from a peak of 120pc of GDP in 1945 to about 70pc a decade later, and yet further with the Great Inflation of the Johnson-Nixon years.

Barnett of the Centre for Financial Stability said there are grounds to suspect the Fed is surreptitiously playing the same trick today: converting what is supposed to be a temporary injection of liquidity into permanent monetisation, while pretending that inflation is a remote concern.

Yet in doing so the Fed has fallen into a trap of its own making since it pays interest on excess reserves to commercial banks as a side-effect of modern QE. This means it will have to pay them more as rates rise, at which point the institution might require recapitalisation by the Treasury to avoid sinking below water. This would precipitate a political storm in Congress. 

It creates a strong temptation for the Fed either to delay raising rates or to stop paying the full amount to banks if it does. But such a course would set off a credit bubble and inflation spiral as bloated bank reserves come out of the deep freeze and are hurled into the real economy. 

Barnett said the Fed is flying blind because it has stopped tracking key indicators of the money supply. The risk of a policy misjudgment is growing as the Fed tries to muddle through without a coherent or credible monetary framework.

A chorus of Fed officials has been playing down the inflation threat over recent days, uniting in a damage-control exercise after markets took fright at an off-the-cuff warning on the risks of “overheating” by Treasury Secretary Janet Yellen. 

Officials insist that any price spike over coming months - possibly well over 4pc - will be a temporary distortion caused by the pandemic and that headline inflation rates will subside in 2022. Vice-chairman Richard Clarida said it was too early to start thinking about bond tapering, let alone monetary tightening: “We’re certainly not there yet.”  

However, commodities are telling another story as copper blows through $10,000 a tonne and hits an all-time high. Lumber prices have risen 280pc in a year, adding $24,000 to the average cost of a new home in the US.

Property prices are rising faster than they did at the peak of the subprime bubble in 2006. The Fed’s own Beige Book is picking up ever louder complaints of bottlenecks and supply crunches across swaths of industry.

Households are sitting on $2.3 trillion of excess savings (15pc of GDP) accumulated during the pandemic and they are likely to unleash some of this on services as life returns to normal. The picture is a far cry from the long dragging conditions of semi-slump after the Lehman crisis, when it took over three years for families to rebuild their balance sheets.  

The Fed has a superb staff and may be vindicated in the end, perhaps after an initial inflation scare that rattles the markets before subsiding. The economy created just 266,000 jobs in April, far short of the 1m blockbuster expected by investors.

Bank lending in the US has fallen by $450bn over the last year as firms pay down debt. The unknown question is whether animal spirits will revive over the coming months and trigger fresh borrowing. “If the banks start lending again there is going to be real trouble. Rates may have to go to 3pc, 4pc, or 5pc, and that changes all the assumptions about fiscal sustainability,” said Tim Congdon from the Institute of International Monetary Research.

It would also destroy the foundations beneath the edifice of exalted asset prices. Current equity multiples are a function of near-zero funding costs. As soon as rates rise in earnest - or even threaten to do so - Wall Street will look forbiddingly overvalued.

You have to remember most economists and all the media experts were (and still are) all looking the wrong way. An inflationary financial  environment was last seen since before most of these journalists were born, very few have prepared. The inflationary signals have blind sided them and they are worried which will become increasingly obvious in their journalism.

Large swathes will be up to their neck in generic passive fund ISAs/pensions and over leveraged BTL. What’s coming will render their economics degree at university seem pointless. The saltiness of the articles will transition to one of panic. 

Obviously it comes as no surprise to this thread, as we’ve known what was coming for years and knew what had to happen at the end of this cycle. Our only unknown factor which is what lengths the government will go to sanction/seize/impose to save the masses.

”This experiment with fiscal dominance led to a bitter dispute between the Fed and the Truman administration, ultimately leading to the Treasury-Fed Accord of 1951. This deal restored the operational independence of the central bank. But by then the compound effects of double-digit inflation had fleeced long-term debt holders.”

I only wish Carney was around for this bit. He knew exactly how far he could push it before it was time to get out of dodge.

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