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

[sancho panza]

56 minutes ago, Castlevania said:

Worldpay. It was ignored as part of RBS. Sold off on the cheap to private equity who actually invested a load of money before they relisted it. The last time I checked (and admittedly after a couple mergers) Worldpay had a bigger market cap than RBS.

There's always one.....undermines my point with a fact.

ok have you got two success stories....???

 

you're sucha smart arse CV

 

[sancho panza]

22 minutes ago, DurhamBorn said:

https://www.dailymail.co.uk/money/markets/article-9752431/Bosses-say-Britains-entitled-young-wont-mop-floors.html

Why work?

They import millions,then they pay those millions tax credits.Then they pay the council workers etc with their BTL housing benefits for those millions.Young decent Brits trying to get on,work,buy a home fucked over.Now the cycle changes.Tell them to fuck off,im not working for that,whats the point.

There is zero difference in the UK earning £400 a week or nothing because they reward scroungers at every point so now they can reap that.Welcome to the reflation.

Just wait until the BOE is forced to stop QE,i think round October,then the big structural deficits emerge and they cant finance them.

My Mum was jsut banging on about how many people the Daily Mail reckon are actually living in the UK,above and beyond the govt figures(70mn??).She was asking how can that be the case and we're still short of lorry drivers/skilled workers .

Your average basement dweller knows the truth in as you say,the claimant count count has risen,little else.

This country has been destroyed by the political class in London

[sancho panza]

I ahvent posted this in the sceptics thread because it's not really relevant to the discussion,but when you see kids doubling dwon on debt to then not get a job,you have to concede that we might be looking at  deflationary vortex

It never ceases to amaze me that getting an even bigger debt for a qualification that pigeon holes you even more than the first degree which couldn't get you a job,makes sense for some people.

https://lockdownsceptics.org/2021/07/03/cancelled-placements-push-recent-university-graduates-to-study-panic-masters/

With many work placements and internships cancelled last year due to lockdown, and a good deal of employers not bothering to get back to failed applicants, thousands of recent university graduates have rushed to study “panic masters” courses. The Observer has the story.

Universities including UCL, Cambridge and Edinburgh, told the Observer they were seeing substantial increases, ranging between 10 and 20%, in the number of U.K. students applying to study for postgraduate degrees in the autumn.

Mary Curnock Cook, an admissions expert who is chairing an independent commission on students, said the rise is due to “a collapse in confidence in the graduate employment market”. There is a backlog of applications from graduates who struggled to secure roles last year or whose placements were cancelled, she said.

“That’s what’s causing this idea of the panic master’s,” she said. “A lot of what I’m hearing is people getting stressed about making tons of applications and not even getting acknowledgement. It’s a stain on employers that they’re not treating their applicants with common courtesy.”

Dan Barcroft, Head of Admissions at Sheffield University, said postgrad study has been especially popular among undergraduates planning to remain at the university, with application numbers rising by 35%. “People are choosing to stay in education at a time of economic turbulence,” he said. …

Last year top graduate employers cut vacancies by nearly a half, although some jobs have been reinstated this year. There are particular shortages of entry-level roles in the industries that have been worst affected by the pandemic, including travel, hospitality and retail.

A recent survey of more than 2,000 students by advice service Prospects showed that over a third of university finalists are changing their career plans due to the pandemic, while two-thirds who are planning postgraduate study are choosing to do so to switch career path.

Nearly half of university students said they felt unprepared for the job market, citing a lack of experience, vacancies and their skills as the main barriers. 

Worth reading in full.'

 

as for that last bit,Im 50 and stil feel unprepared for the job market.

[Hancock]

4 hours ago, sancho panza said:

as for that last bit,Im 50 and stil feel unprepared for the job market.

Must be tempting to do something easier and less stressful when reaching 50!

 

4 hours ago, DurhamBorn said:

https://www.dailymail.co.uk/money/markets/article-9752431/Bosses-say-Britains-entitled-young-wont-mop-floors.html

Why work?

They import millions,then they pay those millions tax credits.Then they pay the council workers etc with their BTL housing benefits for those millions.Young decent Brits trying to get on,work,buy a home fucked over.Now the cycle changes.Tell them to fuck off,im not working for that,whats the point.

There is zero difference in the UK earning £400 a week or nothing because they reward scroungers at every point so now they can reap that.Welcome to the reflation.

Just wait until the BOE is forced to stop QE,i think round October,then the big structural deficits emerge and they cant finance them.

So with all that immigration of hard workers into London over the last 3 decades, that drove the "lazy" indigenous workers to move out, he can't find anyone to mop up his floors! 

David Moore, owner of the Michelin-starred Pied a Terre restaurant in Fitzrovia, Central London, said Britain still had an 'upstairs, downstairs' mentality that did not see hospitality as a fulfilling career. 

He blamed the British education system for pushing school-leavers to go to university, producing 'entitled' young people not prepared to work their way up in hospitality. By contrast, he said young people who came over from Europe were 'self-motivated and bright' and keen to learn skills they could use to build a career in their home country. 

Moore, 56, said of the UK: 'I think young people leave education and have a sense of entitlement to a job as a supervisor. I see very few young people coming through the door willing to roll their sleeves up and do the basic jobs. 

'The basic places to start when you've got no knowledge of somewhere is the cleaning, the sweeping, the mopping, the carrying, the bin-emptying – that sort of stuff.' 

[jamtomorrow]

1 hour ago, Hancock said:

Must be tempting to do something easier and less stressful when reaching 50!

 

So with all that immigration of hard workers into London over the last 3 decades, that drove the "lazy" indigenous workers to move out, he can't find anyone to mop up his floors! 

David Moore, owner of the Michelin-starred Pied a Terre restaurant in Fitzrovia, Central London, said Britain still had an 'upstairs, downstairs' mentality that did not see hospitality as a fulfilling career. 

He blamed the British education system for pushing school-leavers to go to university, producing 'entitled' young people not prepared to work their way up in hospitality. By contrast, he said young people who came over from Europe were 'self-motivated and bright' and keen to learn skills they could use to build a career in their home country. 

Moore, 56, said of the UK: 'I think young people leave education and have a sense of entitlement to a job as a supervisor. I see very few young people coming through the door willing to roll their sleeves up and do the basic jobs. 

'The basic places to start when you've got no knowledge of somewhere is the cleaning, the sweeping, the mopping, the carrying, the bin-emptying – that sort of stuff.' 

Wonder what will happen to all these bubble era businesses that relied on cheap imported/subsidised labour.

I shan't be shedding a tear if the bling-life-for-all culture does get taken down a notch or two, it'll be fascinating to see how people try to find meaning in their lives once the hedonism is dialled back.

There's a new SEED up on the closely-related topic of the coming squeeze on hedonic/discretionary consumption: https://surplusenergyeconomics.wordpress.com/2021/07/02/204-how-it-happens/

Makes me wonder if these supply-side labour shortage problems are in some sense the other side of the coin to the coming demand-side contraction in hedonism.

[JimmyTheBruce]

As if my work pension offering wasn't bad enough already:

https://esgclarity.com/latest-launches/

Got a letter from them this week saying the available Blackrock funds would now all have an ESG screener applied.  No non-ESG options will remain.  I genuinely didn't think the offering could get any worse.  Silly me....

[invalid]

8 hours ago, sancho panza said:

 

I saw this earlier.Inflation starting to look a little more entrenched than 'transitory'.

 

Private equity is one of the financial caners of our time.From what I can see,they borrow to buy,sell and lease back the real assets,have a few round of bonuses before it goes bump.Except for th the first ones in,noone does well.not least the taxppayer who generally picks up the pieces in terms of bank loans being market to market and people getting laid off.

 

 

I can't see the inflation as being 'transitory' either. Unless you count decades as being transient. The increases we are seeing now are in the basics and the building blocks. Energy, fuel, materials, feedstock - all used to make things, move things or provide services, all will be impacted further down the line.

I can however, see it over shooting and then settling back down a bit, just not back to previous levels.

 

Not quite on the subject of private equity, but closely related is that I've seen a lot of businesses in recent years get completely hooked on cheap finance. I've seen the forecasts and projections on which the borrowing is based for a couple and they really are pushing it to the limit, no wriggle room at all.

One company saw an increase in profits and went back to the bank after a years worth of accounts to borrow more based on the increased earnings.

The thing is, the borrowed money was not used to invest in the business, it was used to buy assets in the form of residential property.

[BurntBread]

2 hours ago, jamtomorrow said:

There's a new SEED up on the closely-related topic of the coming squeeze on hedonic/discretionary consumption: https://surplusenergyeconomics.wordpress.com/2021/07/02/204-how-it-happens/

The surplus energy articles are nice, although always just a minor variation on things they have said already.

I do wonder though whether they are being a bit blinkered in their own way? For example, even in their own terms, we don't really inhabit an "energy economy", but an "energy-and-technology" economy, and technological advances can let us exploit surplus energy more efficiently (as a trivial example, think of LED bulbs replacing incandescent; although [Jevons' paradox] we tend to use these advances to use more energy than before; but in extremis we could imagine reducing our energy usage while keeping up our standard of living).

I also don't remember a detailed discussion on nuclear energy, which has a pretty high EROEI.

Overall, I'm guessing we might avoid their dire prediction of discretionary income falling to zero in the mid 2030's ... but I can certainly recognise the broad thesis of average prosperity falling from now on.

[Boon]

The game is up if they described inflation as anything but transitory. Because what would that mean? The measures to deal with it would be unpalatable, and even if they didn't take them, the market forces would be self-reinforcing.

What would happen to the velocity of money if Joe Public wakes up and realises that not only is the inflation statistic a gamed figure and his dollars are worth 10% less every year? Over a relatively short period like a few years a decline in purchasing power would put some people in some strife, which politically could only be solved by more money printing. The MMT tool of taxation strikes me as the difference between theory and real life; the way life is means a big increase in tax means being voted out at the next election.

So, it wouldn't surprise me to see the CPI gamed to produce friendly figures. The huge weight given to the imputed rents in the CPI means that suppressing or declining rents greatly cancel out massive rises elsewhere. Would not surprise me if BTR continues to boom, but at some stage all these blocks will be competing with each other, and eventually puts pressure on the private sector. 

For instance, a corporate landlord has some fairly good upsides - everything is going to be outsourced, the big blocks probably have their own in-house repair teams and your tenure is guaranteed as long as you want. That is the opposite to a private landlord - ie if a boiler breaks you're at his whim to get it repaired, and also you could be given notice at any time. So if the BTR apartments set the average rent, the privately owned stuff should be at a discount. Lower rents is good for CPI.

 

[jamtomorrow]

14 minutes ago, BurntBread said:

I do wonder though whether they are being a bit blinkered in their own way? For example, even in their own terms, we don't really inhabit an "energy economy", but an "energy-and-technology" economy, and technological advances can let us exploit surplus energy more efficiently (as a trivial example, think of LED bulbs replacing incandescent; although [Jevons' paradox] we tend to use these advances to use more energy than before; but in extremis we could imagine reducing our energy usage while keeping up our standard of living).

I have the same reservations, somewhat - the reality is we live in an energy-information economy (and maybe that's just an entropy economy?). Still, must have been a big undertaking developing and refining the SEEDs model, can't imagine how much harder it would be to reformulate it in terms of entropy.

[Noallegiance]

10 hours ago, DurhamBorn said:

https://www.dailymail.co.uk/money/markets/article-9752431/Bosses-say-Britains-entitled-young-wont-mop-floors.html

Why work?

They import millions,then they pay those millions tax credits.Then they pay the council workers etc with their BTL housing benefits for those millions.Young decent Brits trying to get on,work,buy a home fucked over.Now the cycle changes.Tell them to fuck off,im not working for that,whats the point.

There is zero difference in the UK earning £400 a week or nothing because they reward scroungers at every point so now they can reap that.Welcome to the reflation.

Just wait until the BOE is forced to stop QE,i think round October,then the big structural deficits emerge and they cant finance them.

What will that start to look like for the average muggle on the 6 o'clock news?

[Noallegiance]

11 hours ago, JMD said:

Haulage sector is saying UK is short 60,000 hgv drivers. They say 15,000 EU drivers went home last year (because Covid) but won't return because can earn more in Europe. The other shortfall is partly historic and partly due to a backlog of hgv testing because of lockdown (again because Covid). They had a haulage owner saying he had recently increased wages by 25%.                                                                                                         Very inflationary of course. But the other thing is that the building industry has been talking of even bigger numbers in terms of required numbers of trained people their own sector needs. And this is before the anticipated next cycle national infrastructure big build has even gotten underway.                                                               I find these developments very striking. So might this mean that unemployment will not be a policy concern for government over say the next 5/8 years? (After then all bets are off if we get monetary collapse!!) I ask because last year out of work actors/cabin crew were forced to take up new careers as electricians/nurses - btw, those were actual examples I remember seeing reported. Good for them I say, but my point is if they can change careers - so drastically - then surely most other unemployed can also do similar?.... I'm thinking the challenge will be around the government effectively managing people into the right jobs, plus as @DurhamBornfrequently comments, coming down very hard on the work-shy/benefit claimer culture.

I used to class 2 lorry drive. Still have the licence but don't do it. The risk, responsibility and hours for £11-£14 per hour is nowhere near worth it.

[Harley]

Never thought of this until I heard it yesterday - Western energy consumption figures skewed by outsourcing to the East.  And what happens if that changes?

[DurhamBorn]

16 minutes ago, Harley said:

Never thought of this until I heard it yesterday - Western energy consumption figures skewed by outsourcing to the East.  And what happens if that changes?

The Scottish share makes us rich? .My work experience when 14 at school was a local factory that made fake fur coats,the best thing about it was the women kept grabbing between your legs "see if your ready for plucking",,but the next best bit was working with the boiler man.Shoveling coal into the boilers for a bit then going around opening all the valves etc.The energy produced from coal was amazing in that stand alone system.I guess until gas most energy consumption in the UK was off grid with coal.

[Castlevania]

50 minutes ago, Harley said:

Never thought of this until I heard it yesterday - Western energy consumption figures skewed by outsourcing to the East.  And what happens if that changes?

Yeah. The net zero targets don’t include the energy used in shipping stuff have way across the globe.

[Transistor Man]

3 hours ago, jamtomorrow said:

I have the same reservations, somewhat - the reality is we live in an energy-information economy (and maybe that's just an entropy economy?). Still, must have been a big undertaking developing and refining the SEEDs model, can't imagine how much harder it would be to reformulate it in terms of entropy.

Have you looked at Exergy Economics?

From what I remember, Your thinking seems along the lines of what this attempts to deal with. 

The grade or quality of energy is accounted for, during conversion processes, via second law of thermodynamics, and information theory - I guess.

I looked into it a little when working on cogeneration. I can’t remember too much, but it looked interesting. Also, we discuss something similar in electronics .... via Landauer principle. 

https://www.researchgate.net/profile/Steve-Sorrell/publication/329787826_Exergy_economics_New_insights_into_energy_consumption_and_economic_growth/links/5c1aba83458515a4c7eb05c0/Exergy-economics-New-insights-into-energy-consumption-and-economic-growth.pdf?origin=publication_detail

 

 

https://www.nasa.gov/sites/default/files/atoms/files/40_gilbert_uses_of_exergy_in_systems_engineering.pdf

 

[Harley]

1 hour ago, Castlevania said:

Yeah. The net zero targets don’t include the energy used in shipping stuff have way across the globe.

I was thinking of the actual making of stuff, but defo it's transportation too.  More of the big con.  Like getting kids to slave away extracting lithium and then dealing with all the waste on the return of stuff while the western virtue signalers virtue signal.

[Boon]

https://www.bbc.co.uk/news/business-57712618

Right on cue. I wonder if they'll price match?

Could be that others would follow; if it is simply a means to earn yield on cash this is surely quite an easy way to go about it. Why bother selling products and all the hassle that entails to return a tiny percentage? Car dealerships spring to mind, they have a net margin of 1% yet own lots of land, supermarkets as well -the Morrisons deal I think reflects lots of unlocked potential in terms of land.

Big companies already own their land, in some cases it might be as simple as converting a disused premises into loads of flats.

Kind of also reflects the 'you'll own nothing, and you'll be happy' prediction. If BTR went into oversupply and rents for these apartments cratered, it could very well be that the young people don't own them, and they'll be happy about it.

[Castlevania]

14 minutes ago, Boon said:

https://www.bbc.co.uk/news/business-57712618

Right on cue. I wonder if they'll price match?

Could be that others would follow; if it is simply a means to earn yield on cash this is surely quite an easy way to go about it. Why bother selling products and all the hassle that entails to return a tiny percentage? Car dealerships spring to mind, they have a net margin of 1% yet own lots of land, supermarkets as well -the Morrisons deal I think reflects lots of unlocked potential in terms of land.

Big companies already own their land, in some cases it might be as simple as converting a disused premises into loads of flats.

Kind of also reflects the 'you'll own nothing, and you'll be happy' prediction. If BTR went into oversupply and rents for these apartments cratered, it could very well be that the young people don't own them, and they'll be happy about it.

Tesco already has a house building arm.

[Option5]

2 minutes ago, Castlevania said:

Tesco already has a house building arm.

So do IKEA.

[Hardhat]

In a way I think corporate landlords would be a good thing and certainly better than private.

But my issue in general is the turn towards the middle and working class of this country becoming tenant classes.

With the asset ownership of the two above classes overwhelmingly in property, it wouldn't be hard for a coalition of corporate landlords to squeeze those classes increasingly out of ownership and into permanent rental.

[JMD]

14 hours ago, sancho panza said:

I ahvent posted this in the sceptics thread because it's not really relevant to the discussion,but when you see kids doubling dwon on debt to then not get a job,you have to concede that we might be looking at  deflationary vortex

It never ceases to amaze me that getting an even bigger debt for a qualification that pigeon holes you even more than the first degree which couldn't get you a job,makes sense for some people.

https://lockdownsceptics.org/2021/07/03/cancelled-placements-push-recent-university-graduates-to-study-panic-masters/

With many work placements and internships cancelled last year due to lockdown, and a good deal of employers not bothering to get back to failed applicants, thousands of recent university graduates have rushed to study “panic masters” courses. The Observer has the story.

Universities including UCL, Cambridge and Edinburgh, told the Observer they were seeing substantial increases, ranging between 10 and 20%, in the number of U.K. students applying to study for postgraduate degrees in the autumn.

Mary Curnock Cook, an admissions expert who is chairing an independent commission on students, said the rise is due to “a collapse in confidence in the graduate employment market”. There is a backlog of applications from graduates who struggled to secure roles last year or whose placements were cancelled, she said.

“That’s what’s causing this idea of the panic master’s,” she said. “A lot of what I’m hearing is people getting stressed about making tons of applications and not even getting acknowledgement. It’s a stain on employers that they’re not treating their applicants with common courtesy.”

Dan Barcroft, Head of Admissions at Sheffield University, said postgrad study has been especially popular among undergraduates planning to remain at the university, with application numbers rising by 35%. “People are choosing to stay in education at a time of economic turbulence,” he said. …

Last year top graduate employers cut vacancies by nearly a half, although some jobs have been reinstated this year. There are particular shortages of entry-level roles in the industries that have been worst affected by the pandemic, including travel, hospitality and retail.

A recent survey of more than 2,000 students by advice service Prospects showed that over a third of university finalists are changing their career plans due to the pandemic, while two-thirds who are planning postgraduate study are choosing to do so to switch career path.

Nearly half of university students said they felt unprepared for the job market, citing a lack of experience, vacancies and their skills as the main barriers. 

Worth reading in full.'

 

as for that last bit,Im 50 and stil feel unprepared for the job market.

I had always suspected that 'education, education, education' might be code for Degree, Hons Degree, Masters...!!!                                                                                                                                                                            As an aside I think that the state education system (weapons of mass instruction/Gatto) will continue to be shunned by an increasing minority in the next cycle, and especially so when online degrees become a reality. 

[JMD]

6 hours ago, jamtomorrow said:

I have the same reservations, somewhat - the reality is we live in an energy-information economy (and maybe that's just an entropy economy?). Still, must have been a big undertaking developing and refining the SEEDs model, can't imagine how much harder it would be to reformulate it in terms of entropy.

Yes, energy-information economy sounds far more descriptive. It is also very useful term because it helps highlight the fact that we don't own our own data. That is to say that many huge online companies survive - and gain more and more power - by using our data to sell products and 'influence' us,  yet we don't have any say or understanding of what's happening. We have become online serfs - anyone not appreciating this is seriously in denial. (Ie even ex-presidents can be silenced)                                                                                                                         Jamtorrow please could you elaborate more on what you mean by 'entropy economy'? I kinda understand that extracting fossil fuels increases entropy. But for the information/digital economy my - very basic understanding - is that If say a company move online... profits usually increase/marginal costs decrease so I assume that overall company utility has increased, therefore a more 'effective' company means that entropy has decreased?                                                                                                                                                                          I guess I'm using loose terminology above, however I note that many commentators in the crypto space have begun talking about entropy and tbh it turns me off a bit because the topic sounds pretentious, but perhaps maybe that's just my bad because I don't understand it?

[JMD]

6 hours ago, Noallegiance said:

I used to class 2 lorry drive. Still have the licence but don't do it. The risk, responsibility and hours for £11-£14 per hour is nowhere near worth it.

Hi Noallegiance, I knew there were some hgv license holders on here!                                                                               I didn't mention before, but the hgv shortage is also leading to all kinds of dislocatons. Some councils don't have the hgv drivers to operate their full refuse recycling services, so have told residents to take their rubbish to local tips if they want it recycled, else the advise is to just put their plastics, etc in with their general waste for normal bin man collection. (Don't tell Greta, Oh the humanity of it!!)

[JMD]

6 hours ago, Harley said:

Never thought of this until I heard it yesterday - Western energy consumption figures skewed by outsourcing to the East.  And what happens if that changes?

Yes, this is what the environmentalists have been arguing and stamping their feet about for long while - that the carbon reductions made so far have been the low hanging fruit, and that in any case much western production (and therfore emmisions) happens abroad and is never measured in the first place. This is why I think the 2050 targets are unachievable. However those same climate reports also do realise this, because they contain a second target date of 2100 which is curiously never mentioned. Funny that!!                                                                                                         Plus the other aspect not normally mentioned is that getting the world to net zero is not sufficient, because the carbon itself hangs around in the atmosphere for hundreds of years. So sequestration tech will also be needed to remove that carbon else it will continue to warm the planet (according to the theory). My thoughts on this is that sequestration tech is the real answer to the whole problem, and that all the other manipulative government policies look suspiciously/obviously like a mere power grab.