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

[DurhamBorn]

22 minutes ago, dnb24 said:

Is that approximately?????!!

Ha thats the number i see from liquidity flows,sentiment etc.I dont usually do sterling work,but decided to for interest.

[Loki]

6 minutes ago, DurhamBorn said:

Ha thats the number i see from liquidity flows,sentiment etc.I dont usually do sterling work,but decided to for interest.

Thanks for that mate

Imagine the result of dogecoin brute-forced through your models 

[M S E Refugee]

2 minutes ago, PrincessDrac said:

Which miners do you prefer may I ask?

I've been averaging into Fres and Hoc for my silver, and Poly and Cey for my gold allocation. The more they drop, I buy, then on the rise, sell out my highest tranches. Got pretty good averages now.

But I got reading about some political issues in Peru, some Lefty wants to nationalise the mines, I cannot see this happening, but I could see higher taxation coming. Hoc would suffer, as has the share price recently. I think it dropped to 1.82 on ex div day, which did concern me. Anyway, I completely sold out on Friday PM; took a little loss (£600). We'll see tomorrow if I made the right call, if it opens and goes over 2, I hold my hands up, I was wrong. If it plummets to the low 1.9's or lower, I made the right call. There was some heavy selling Friday afternoon/after hours as it climbed after the NonFarmPay numbers were released. Shame I have held and traded Hoc for the past few months. But local politics and overseas companies tend to make me nervous. It might be all hogwash, but I've sold out on rumour, I'll see what the Asian markets open up at Gold and Silver tonight, that will give me a good idea on direction of travel.

I have been buying Jaguar, Sylvania Platinum, Anglo Asian Mining, Polymetal International, Centamin, Central Asian Metals, Shanta Gold and PSLV.

I may buy some Oroco Resource next week.

[Chewing Grass]

Was idly curious about Historical Tax Thresholds as being worker scum the 40% Threshold of Percieved Wealthiness pisses me off when most of the labour is pent on somewhere to live and the means to get to and from work leaving 40% for bills, food and some very modest spends.

The threshold hasn't in reality budged since 2009.

Oh, and don't stick 1990's threshold of £20700 in the B of E Inflation Calculator either.

Doh...

https://www.gov.uk/government/statistics/rates-of-income-statistics

[AWW]

3 minutes ago, Chewing Grass said:

Was idly curious about Historical Tax Thresholds as being worker scum the 40% Threshold of Percieved Wealthiness pisses me off when most of the labour is pent on somewhere to live and the means to get to and from work leaving 40% for bills, food and some very modest spends.

It's a joke. IR35 reform has pushed me into the 45% "oligarchs" bracket, which in reality is somewhere close to 70% after paying both employers and employees NI as I have to. But in London, with a family to support and Mrs AWW looking after the kids rather than outsourcing it, I don't feel very rich.

[AWW]

The inflation figures are massaged, but not to that extent. Here's the real reason that fags are so expensive now:

https://www.gov.uk/government/statistics/tobacco-bulletin/tobacco-duty-rates

[Animal Spirits]

Reverse repo operations have increased in volume recently; lots of deposits.

T bills look like they would continue below zero without intervention. Data is set monthly, so smoothed average:

4 week bill went 0 on 21st April and was 0.01 7th May.

[Noallegiance]

This confused me. Is he disagreeing with the inflation thesis?

https://youtu.be/GcrD1cBlMVA

 

[Animal Spirits]

5 minutes ago, Noallegiance said:

This confused me. Is he disagreeing with the inflation thesis?

https://youtu.be/GcrD1cBlMVA

 

David Rosenberg is suggesting continued disinflation/deflation.

[23rdian]

2 minutes ago, Animal Spirits said:

David Rosenberg is suggesting continued disinflation/deflation.

Watched this yesterday.

 

[lid]

With regards playing the benefits game heard a couple of crackers before ..

Guy who gets the bus to the benefits office in his pyjamas and housecoat.

And another guy who pissed on his keks and put them in the airing cupboard. Then when dry pissed on them again and dried them out again 🤢 Then put them on and butttoned his shirt up wrong and ruffled his hair up like Ken Dodd to go to his appointment.

You can't write this shit

[Lightscribe]

51 minutes ago, lid said:

With regards playing the benefits game heard a couple of crackers before ..

Guy who gets the bus to the benefits office in his pyjamas and housecoat.

And another guy who pissed on his keks and put them in the airing cupboard. Then when dry pissed on them again and dried them out again 🤢 Then put them on and butttoned his shirt up wrong and ruffled his hair up like Ken Dodd to go to his appointment.

You can't write this shit

I thought it sounded like it was going to be the start of an old school joke then. 

I’ll bust one out anyway... 

Three parrots in a pet shop for sale.

They were priced at £170, £150 and £10.

A woman asks the shopkeeper "Why is that parrot so cheap?"

The shopkeeper replies "Because it used to live in a brothel."

The woman finds this amusing so she buys the parrot. On returning home the parrot takes in its new surroundings and says "Fuck me, a new brothel!". The woman laughs.

A few hours later, her two daughters come home and the parrot pipes up once more "Fuck me, new girls!". The woman and her daughters both laugh.

Later that evening, the woman's husband comes in from work and once more the parrot squawks, this time saying "Fuck me Keith, long time no see!"

[JimmyTheBruce]

Sorry folks, I know its been mentioned recently but can't find it via search; did we establish whether it was still possible to get silver coins without VAT?  I used silver-to-go before, but that was a while ago, and their site now makes it clear that VAT is applicable.

[Loki]

Just now, JimmyTheBruce said:

Sorry folks, I know its been mentioned recently but can't find it via search; did we establish whether it was still possible to get silver coins without VAT?  I used silver-to-go before, but that was a while ago, and their site now makes it clear that VAT is applicable.

Loophole closed with Brexit

[Iamcynical]

59 minutes ago, Loki said:

Loophole closed with Brexit

Can one not travel to the roi from England and purchase the silver and forget to declare it on entry back into England? 

[Loki]

Just now, Iamcynical said:

Can one not travel to the roi from England and purchase the silver and forget to declare it on entry back into England? 

Hypothetically 

[Iamcynical]

Just now, Loki said:

Hypothetically 

I've discussed it with a mate recently.  My mate wonders what records are kept by the seller though. 

[Loki]

Just now, Iamcynical said:

I've discussed it with a mate recently.  My mate wonders what records are kept by the seller though. 

I think anything under £2000 isn't declared. They're businesses, they'll want your cash...have a phone around

[Animal Spirits]

4 hours ago, 23rdian said:

Watched this yesterday.

 

There have been very few quarters of outright deflation in the US post WW2:

This was released by Blackrock in 2019, full PDF available for download:

https://www.blackrock.com/corporate/insights/blackrock-investment-institute/publications/global-macro-outlook/august-2019

Fiscal policy on its own will struggle to provide major stimulus in a timely fashion given high debt levels and the typical lags with implementation. Without a clear framework in place, policymakers will inevitably find themselves blurring the boundaries between fiscal and monetary policies. This threatens the hard-won credibility of policy institutions and could open the door to uncontrolled fiscal spending. This paper outlines the contours of a framework to mitigate this risk so as to enable an unprecedented coordination through a monetary-financed fiscal facility. Activated, funded and closed by the central bank to achieve an explicit inflation objective, the facility would be deployed by the fiscal authority.

• There is not enough monetary policy space to deal with the next downturn: The current policy space for global central banks is limited and will not be enough to respond to a significant, let alone a dramatic, downturn. Conventional and unconventional monetary policy works primarily through the stimulative impact of lower short-term and long-term interest rates. This channel is almost tapped out: One-third of the developed market government bond and investment grade universe now has negative yields, and global bond yields are closing in on their potential floor. Further support cannot rely on interest rates falling.
• Fiscal policy should play a greater role but is unlikely to be effective on its own: Fiscal policy can stimulate activity without relying on interest rates going lower – and globally there is a strong case for spending on infrastructure, education and renewable energy with the objective of elevating potential growth. The current low-rate environment also creates greater fiscal space. But fiscal policy is typically not nimble enough, and there are limits to what it can achieve on its own. With global debt at record levels, major fiscal stimulus could raise interest rates or stoke expectations of future fiscal consolidation, undercutting and perhaps even eliminating its stimulative boost .
• A soft form of coordination would help ensure that monetary and fiscal policy are both providing stimulus rather than working in opposite directions as has often been the case in the post-crisis period. This experience suggests that there is room for a better policy – and yet simply hoping for such an outcome will probably not be enough.
• An unprecedented response is needed when monetary policy is exhausted and fiscal space is limited.  That response will likely involve “going direct”: Going direct means the central bank finding ways to get central bank money directly in the hands of public and private sector spenders. Going direct, which can be organised in a variety of different ways, works by: 1) bypassing the interest rate channel when this traditional central bank toolkit is exhausted, and; 2) enforcing policy coordination so that the fiscal expansion does not lead to an offsetting increase in interest rates.
• An extreme form of “going direct” would be an explicit and permanent monetary financing of a fiscal expansion, or so-called helicopter money. Explicit monetary financing in sufficient size will push up inflation. Without explicit boundaries, however, it would undermine institutional credibility and could lead to uncontrolled fiscal spending.
• A practical way of “going direct” would need to deliver the following. This could deliver the following: 1) defining the unusual circumstances that would call for such unusual coordination; 2) in those circumstances, an explicit inflation objective that fiscal and monetary authorities are jointly held accountable for achieving; 3) a mechanism that enables nimble deployment of productive fiscal policy, and; 4) a clear exit strategy. Such a mechanism could take the form of a standing emergency fiscal facility. It would be a permanent set-up but would be only activated when monetary policy is tapped out and inflation is expected to systematically undershoot its target over the policy horizon.
• The size of this facility would be determined by the central bank and calibrated to achieve the inflation objective, which would include making up for past inflation misses. Once medium-term trend inflation is back at target and monetary policy space is regained, the facility would be closed. Importantly, such a set-up helps preserve central bank independence and credibility.

Its almost as if they had the policies ready to use...

Some are calling for a Japan like zombiefication and DH is calling for both a deflationary bust and inflationary recovery over a specific time horizon. Lots of moving parts, DB's mentioned leads/lags and that recent interview posted with Russell Napier where Russell mentioned (again) the lines between CB's and Government blurring/government backed loans etc.

Low interests rates destroy bank profitibility and they actually signify monetary tightness. It makes more sense when you think of the quantity of money and not just the price of money.

Milton Friedman, The Role of Monetary Policy, The American Economic Review 1968:

As an empirical matter, low interest rates are a sign that monetary policy has been tight-in the sense that the quantity of money has grown slowly; high interest rates are a sign that monetary policy has been easy-in the sense that the quantity of money has grown rapidly. The broadest facts of experience run in precisely the opposite direction from that which the financial community and academic economists have all gener- ally taken for granted.

Rx for Japan: Back to the Future by Milton Friedman, Wall Street Journal 1997:

After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.

[Animal Spirits]

A while back someone posted a link to the excellent documentary adaptation of The Prize by Daniel Yergin. I don't think it has been mentioned but it's worth watching his series called Commanding Heights, a bit old school now but still a good watch for economic history. I did not know Keynes and Hayek went to Cambridge together until after watching this.

 

[sancho panza]

11 hours ago, PrincessDrac said:

Which miners do you prefer may I ask?

I've been averaging into Fres and Hoc for my silver, and Poly and Cey for my gold allocation. The more they drop, I buy, then on the rise, sell out my highest tranches. Got pretty good averages now.

But I got reading about some political issues in Peru, some Lefty wants to nationalise the mines, I cannot see this happening, but I could see higher taxation coming. Hoc would suffer, as has the share price recently. I think it dropped to 1.82 on ex div day, which did concern me. Anyway, I completely sold out on Friday PM; took a little loss (£600). We'll see tomorrow if I made the right call, if it opens and goes over 2, I hold my hands up, I was wrong. If it plummets to the low 1.9's or lower, I made the right call. There was some heavy selling Friday afternoon/after hours as it climbed after the NonFarmPay numbers were released. Shame I have held and traded Hoc for the past few months. But local politics and overseas companies tend to make me nervous. It might be all hogwash, but I've sold out on rumour, I'll see what the Asian markets open up at Gold and Silver tonight, that will give me a good idea on direction of travel.

IKN wrote a great piece on selling Peru.

Basically,a hard elft Marxist will win the coming residential run off.spelling doom for the mining industry in Peru.His advice was to sell Peru,quickly.

I have.BVN,Tinka,and Regulus gone.Tiny loss overall but I'll sit back and watch the car crash without being involved.

[sancho panza]

BoE tapers follwoing BoC

Says soemthing that the BoE currently owns £875bn of assets(mainly UK govt debt)........if that isn't a wtf moment I don't know what is

https://wolfstreet.com/2021/05/06/bank-of-england-now-2nd-central-bank-to-taper-after-canada-but-denies-tapering-is-tapering-also-following-canada/

The BoE announced that the blistering pace of its asset purchases would be “slowed somewhat”  – tapering the bond purchases from £4.4 billion a week to £3.4 billion a week – but that this tapering was an “operational decision” that “should not be interpreted as a change in the stance of monetary policy.”

Obviously, denying that tapering is tapering was designed to mollify the markets with a welcome dose of delusion, and it worked: the UK’s stock index FTSE 100 rose 0.5% for the day.

However, when the members voted on maintaining the target of £895 billion, it wasn’t unanimous, with eight members voting for maintaining it, and one member, outgoing chief economist Andy Haldane, voting to lower it by £50 billion, to £845 billion.

The Bank of England has other assets on its balance sheet, in addition to the QE-related government bonds and corporate bonds.

Following the Brexit vote in 2016, the BoE’s total sterling-denominated assets surged as it was using QE to pump up asset prices. This ended in 2018. But then the Pandemic hit, and the BoE’s assets skyrocketed:

The Bank of Canada also denied initially it was “tapering.”

The Bank of Canada, which now has a super-mega housing bubble on its hands, blazed the trail last October when it announced that it would taper its purchases of Government of Canada bonds from C$5 billion a week to C$4 billion a week, and that it would stop buying MBS altogether. This wasn’t tapering, it said; it was just “recalibrating the QE program to shift purchases towards longer-term bonds…” and yada-yada-yada.

Then in April, it announced that it was in fact tapering, and that it would further taper its government bond purchases from C$4 billion a week to C$3 billion a week.

This came after it had announced in March, citing “moral hazard” as reason, that it would unwind its crisis liquidity facilities, and that this would reduce its total assets by about 17%, from C$575 billion at the time, to C$475 billion by the end of April. And this has now transpired on its balance sheet as of the week ended April 28:

Other central banks too...

The central bank of Norway, Norges Bank – which never got into QE in the first place, and therefore cannot taper – confirmed today that it would raise interest rates in the second half of 2021.

Sweden’s central bank, the Riksbank, announced in late April that it is following through on its plan and completely end its QE program later in 2021.

The central banks of Brazil, Turkey, and Russia, whose economies are grappling with surging inflation, already announced shock-and-awe rate hikes.

Now lagging behind are the biggies, the Fed, the ECB, and the Bank of Japan. And taper talk is all over the place.

In the US, a veritable cacophony of tapering talk has erupted in public with multiple daily speeches by Fed governors, spearheaded by Dallas Fed President Robert Kaplan, who today said he wants the Fed to start talking about tapering “sooner rather than later''

[JMD]

19 hours ago, Mapper said:

Did the Chinese government watch Black Mirror and get their ideas, or was it the other way around?

Hmmm, Black Mirror/or rather 'Tales of the Very Expected'? Ok I admit I'm not a fan, but thing is there really is nothing new under the sun...     For example, China has always indulged in all kinds of control freakery. Back in the day it was burying alive whole families deemed enemies of the state, today there are many rumours that it harvests organs from prisoners/political enemies. Nah, that Charlie Brooker chap has nothing on the 'Black Heart' of the CCP. (schizophrenic statism at its purest)

[jamtomorrow]

https://www.reuters.com/technology/colonial-pipeline-halts-all-pipeline-operations-after-cybersecurity-attack-2021-05-08/

Top U.S. fuel pipeline operator Colonial Pipeline shut its entire network, the source of nearly half of the U.S. East Coast’s fuel supply, after a cyber attack on Friday that involved ransomware.

The incident is one of the most disruptive digital ransom operations ever reported and has drawn attention to how vulnerable U.S. energy infrastructure is to hackers. A prolonged shutdown of the line would cause prices to spike at gasoline pumps ahead of peak summer driving season, a potential blow to U.S. consumers and the economy.

"This is as close as you can get to the jugular of infrastructure in the United States," said Amy Myers Jaffe, research professor and managing director of the Climate Policy Lab. "It's not a major pipeline. It's the pipeline."

Colonial transports 2.5 million barrels per day of gasoline, and other fuels through 5,500 miles (8,850 km) of pipelines linking refiners on the Gulf Coast to the eastern and southern United States. It also serves some of the country's largest airports, including Atlanta's Hartsfield Jackson Airport, the world's busiest by passenger traffic.

The company said it shut down its operations after learning of a cyberattack on Friday using ransomware.

"Colonial Pipeline is taking steps to understand and resolve this issue. At this time, our primary focus is the safe and efficient restoration of our service and our efforts to return to normal operation," it said.

While the U.S. government investigation is in early stages, one former official and two industry sources said the hackers are likely a professional cybercriminal group.

The former official said investigators are looking at a group dubbed "DarkSide," known for deploying ransomware and extorting victims while avoiding targets in post-Soviet states. Ransomware is a type of malware designed to lock down systems by encrypting data and demanding payment to regain access.

Colonial said it had engaged a cybersecurity firm to help the investigation and contacted law enforcement and federal agencies.

The cybersecurity industry sources said cybersecurity firm FireEye (FEYE.O) was brought in to respond to the attack. FireEye declined to comment.

U.S. government bodies, including the FBI, said they were aware of the situation but did not yet have details of who was behind the attack.

President Joe Biden was briefed on the incident on Saturday morning, a White House spokesperson said, adding that the government is working to try to help the company restore operations and prevent supply disruptions.

 

The Department of Energy said it was monitoring potential impacts to the nation's energy supply, while both the U.S. Cybersecurity and Infrastructure Security Agency and the Transportation Security Administration told Reuters they were working on the situation.

"We are engaged with the company and our interagency partners regarding the situation. This underscores the threat that ransomware poses to organizations regardless of size or sector," said Eric Goldstein, executive assistant director of the cybersecurity division at CISA.

Colonial did not give further details or say how long its pipelines would be shut.

The privately held, Georgia-based company is owned by CDPQ Colonial Partners L.P., IFM (US) Colonial Pipeline 2 LLC, KKR-Keats Pipeline Investors L.P., Koch Capital Investments Company LLC and Shell Midstream Operating LLC.

"Cybersecurity vulnerabilities have become a systemic issue," said Algirde Pipikaite, cyber strategy lead at the World Economic Forum's Centre for Cybersecurity.

"Unless cybersecurity measures are embedded in a technology's development phase, we are likely to see more frequent attacks on industrial systems like oil and gas pipelines or water treatment plants," Pipikaite added.

PUMP PRICE WORRIES

The American Automobile Association said a prolonged outage of the line could trigger increases in gas prices at the pumps, a worry for consumers ahead of summer driving season.

 

A shutdown lasting four or five days, for example, could lead to sporadic outages at fuel terminals along the U.S. East Coast that depend on the pipeline for deliveries, said Andrew Lipow, president of consultancy Lipow Oil Associates.

After the shutdown was first reported on Friday, gasoline futures on the New York Mercantile Exchange gained 0.6% while diesel futures rose 1.1%, both outpacing gains in crude oil. Gulf Coast cash prices for gasoline and diesel edged lower on prospects that supplies could accumulate in the region.

"As every day goes by, it becomes a greater and greater impact on Gulf Coast oil refining," said Lipow. "Refiners would have to react by reducing crude processing because they've lost part of the distribution system."

Oil refining companies contacted by Reuters on Saturday said their operations had not yet been impacted.

Kinder Morgan Inc (KMI.N), meanwhile, said its Products (SE) Pipe Line Corporation (PPL) serving many of the same regions remains in full service.

PPL is currently working with customers to accommodate additional barrels during Colonial's downtime, it said. PPL can deliver about 720,000 bpd of fuel through its pipeline network from Louisiana to the Washington, D.C., area.

The American Petroleum Institute, a top oil industry trade group, said it was monitoring the situation.

Ben Sasse, a Republican senator from Nebraska and a member of the Senate Select Committee on Intelligence, said the cyberattack was a wakeup call for U.S. lawmakers.

"This is a play that will be run again, and we're not adequately prepared," he said, adding Congress should pass an infrastructure plan that hardens sectors against these attacks.

Colonial previously shut down its gasoline and distillate lines during Hurricane Harvey, which hit the Gulf Coast in 2017. That contributed to tight supplies and gasoline price rises in the United States after the hurricane forced many Gulf refineries to shut down.

[jamtomorrow]

Aaaahhhh:

"... may not be able to invoice customers ..."

I wouldn't want to bet against the entire f***er ending up nationalised before the week is out, if this is true. How's *that* for infrastructure spending?!