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

[Don Coglione]

5 minutes ago, DurhamBorn said:

Exactly,and that is starting to reverse.They are making TVs again 1 mile from my house,washing machines 3 miles.Inflation adds in at each point,so long supply chains get smashed.The lorry from the Chinese factory,the ship,everything.Thats why Nissan are building everything around their factory including the battery plant.

You havent posted a fit woman for ages by the way 

 

Guess what the below is,its a miracle of a type 

 

 

I know what that is, but I dare not speak it aloud!

I only wish mine was that colour...

[nirvana]

15 minutes ago, DurhamBorn said:

Guess what the below is,its a miracle of a type 

 

 

dunno, current cuntrica price? lol

[DurhamBorn]

8 minutes ago, Don Coglione said:

I know what that is, but I dare not speak it aloud!

I only wish mine was that colour...

ha correct,however thats just my SIPP,my ISA holding is a horrid red.

[No One]

Can some one give me an overview of the Centrica meme? I've been here for a while but back then I didn't have an investment account, fortunately it seems.

 

Did centrica stock go to shit?

[leonardratso]

yes

check it out, its awesome....

[No One]

Jesus christ, how did they manage to do that?

[leonardratso]

Just now, No One said:

Jesus christ, how did they manage to do that?

kept getting sacked down disproportionately by tariff caps, seemed to happen every time the govt announced a new one, i suspect it was more than that though, BG went thru a period of being the worst supplier - they seemed to be following the M&S or Boots model of retailing, being the most expensive for exactly the same product as the rest and trying to cater to a higher class of customer, either thst or they were just behind the times and werent into the cut throat squeezed margin game.

[Chewing Grass]

27 minutes ago, DurhamBorn said:

Exactly,and that is starting to reverse.They are making TVs again 1 mile from my house,washing machines 3 miles.Inflation adds in at each point,so long supply chains get smashed.The lorry from the Chinese factory,the ship,everything.Thats why Nissan are building everything around their factory including the battery plant.

Where my lad works they would rather buy a machine than get somebody else to machine or treat a component, everything as far as possible is done in-house to protect their manufacturing I.P. from the Chinese.

Their last purchase was a 5-axis laser machining centre.

[MrXxxx]

1 hour ago, ThoughtCriminal said:

More in one year than the previous 20 combined. 

 

I can't escape the feeling that things are about to go tits up in a spectacular way. 

But surely to be meaningful those values need to be standardized for the amount of money within the economy as a whole? i.e. if there is now twice as much money than 20 years ago the apparent $ value would be much less, and by extension portray a far less dramatic scenario.

[leonardratso]

26 minutes ago, Chewing Grass said:

Where my lad works they would rather buy a machine than get somebody else to machine or treat a component, everything as far as possible is done in-house to protect their manufacturing I.P. from the Chinese.

Their last purchase was a 5-axis laser machining centre.

do they do requests?

 

[planit]

2 hours ago, DurhamBorn said:

Dis-inflation is slowing of inflation,not deflation and since 82 thats what we have had.Without the printing prices would of fallen hard,so yes printing caused prices to be far higher than they would of been,but price increases still slowed and slowed over the cycle.Like you said the printing ended up in land and property like it nearly always does in the end.

In the UK the printing is pretty much the working age welfare budget over the decade.There is nothing wrong with expanding the money supply at 1%/1.5% a year,the problem is that they are printing to fund structural deficits.Thats the point where the gainers are mostly people getting from the government,the losers most of those who arent.

I expect in the UK we are very close to the end of QE,maybe some more smaller tranches then nothing.Government then has a £100billion+ structural deficit and a distribution cycle on its hands.

Of course one answer is to tax hard the 1% and the companies fleecing tax.Will they?.

 

In the last 20 years they have already found 3 new rule books to tear up so I am not convinced they won't find another one.

Luckily the only one I can think of will not be here in time - CB digital currency where they can create and destroy wealth at will in whichever sector they wish.

 

[MrXxxx]

1 hour ago, DurhamBorn said:

You havent posted a fit woman for ages by the way 

:-))))...don't encourage him otherwise he will only get 'told off' again! :-)))

[planit]

This is a good short interview which confirms some of the thoughts discussed here. It's nice to get some figures on the current situation.

Goldman’s Jeff Currie on expectations for the July OPEC+ meeting

 

Summary

Current oil demand - 97.5mbpd which is up from 95mbpd a few weeks ago from fast demand growth

Pre-covid was 100mbpd 

He sees $80 average oil price in Q3 with upside shock risk.

 

Current deficit is $2.2mbpd, shale will give a maximum of $300kbpd by end year

Demand could also surge by $2.2mbpd more by end of year so planned increases are not enough to cover this and the current deficit.

There is more on the lack of investment leading to supply being difficult to ramp up much more from other countries and Saudi getting to $9.5mbpd by early next year. 

 

 

 

[sancho panza]

2 hours ago, DurhamBorn said:

Not in goods it hasnt.Thats how they have managed to disguise it until now.The middle class are the victims yes,or more actually the children of the middle class.However the real victims are the working working class.Those who actually go to work and dont have parents with capital or state final salary pensions etc.Its them who have had the lower rung houses removed from them,pensions,wages increasing with RPI+ etc.

The public keep voting for change, but are ignored.Lets see what happens over the next few years as CBs have no choice but to pull back.

Funnily enough,saw my big sister yesterday.She's a very successful in her clincial field-Fellow of the Royal College etc-and for the first time,she started telling me how she felt sorry for her kids generation-student loans,hosue prices,DC pensions,poor job prospects etc..........couldn't get my breath as she's never really mentioned it before.

More and more people are starting to understand and it's dawning on them,how are younger people have been utterly shafted.

I've said before,I think a political revolution is imminent in the UK.FPTP hides all manner of structural weaknesses in the two main parties.At the moment I can't see that threat in England but look at Scotland,I remember when people laughed at the SNP....................

Our political classes are asleep in so many wasy

1 hour ago, No One said:

Can some one give me an overview of the Centrica meme? I've been here for a while but back then I didn't have an investment account, fortunately it seems.

 

Did centrica it's called it the' Scottish play' round here for a variety of reasons,the mere mention of the name can bring allergic rashes to some long term posters incl myself-stock go to shit?

 

1 hour ago, leonardratso said:

kept getting sacked down disproportionately by tariff caps, seemed to happen every time the govt announced a new one, i suspect it was more than that though, BG went thru a period of being the worst supplier - they seemed to be following the M&S or Boots model of retailing, being the most expensive for exactly the same product as the rest and trying to cater to a higher class of customer, either thst or they were just behind the times and werent into the cut throat squeezed margin game.

they were also up against a lot of small suppliers who were losing moeny yoy..........a lot of whom have now gone bust.

Also, @DurhamBorn said sometime back,once the govt get scared that the framework will collapse,then all manner of price hikes will get shoved through.Look at telecoms.A year ago BT was looking doomed,then the political class wanted Broadband/5G etc and all of a suddent theyve double.d

Decl:I will likely never make a proift on the scottish play,but it did give birth to the Coma Scores,which have served me well.

[sancho panza]

not sure if we've had this

https://www.shell.com/media/news-and-media-releases/2021/shell-starts-up-europes-largest-pem-green-hydrogen-electrolyser.html

Shell starts up Europe’s largest PEM green hydrogen electrolyser

Europe’s largest PEM hydrogen electrolyser^*, today began operations at Shell’s Energy and Chemicals Park Rheinland, producing green hydrogen.

As part of the Refhyne European consortium and with European Commission funding through the Fuel Cells and Hydrogen Joint Undertaking (FCH JU), the fully operational plant is the first to use this technology at such a large scale in a refinery.

Plans are under way to expand capacity of the electrolyser from 10 megawatts to 100 megawatts at the Rheinland site, near Cologne, where Shell also intends to produce sustainable aviation fuel (SAF) using renewable power and biomass in the future. A plant for liquefied renewable natural gas (bio-LNG) is also in development.

 “This project demonstrates a new kind of energy future and a model of lower-carbon energy production that can be replicated worldwide,” Shell’s Downstream Director, Huibert Vigeveno, said at today’s official opening ceremony.

“Shell wants to become a leading supplier of green hydrogen for industrial and transport customers in Germany,” he added. “We will be involved in the whole process — from power generation, using offshore wind, to hydrogen production and distribution across sectors. We want to be the partner of choice for our customers as we help them decarbonise.”

Shell has a target to become a net-zero-emissions energy business by 2050, in step with society. As part of its Powering Progress strategy, Shell plans to transform its refinery footprint to five core energy and chemicals parks. This means Shell will reduce the production of traditional fuels by 55% by 2030.

The Rheinland electrolyser will use renewable electricity to produce up to 1,300 tonnes of green hydrogen a year. This will initially be used to produce fuels with lower carbon intensity. The green hydrogen will also be used to help decarbonise other industries.

The European consortium backing the project consists of Shell, ITM Power, research organisation SINTEF, consultants Sphera and Element Energy. The electrolyser was manufactured by ITM power in Sheffield, UK, and includes parts made in Italy, Sweden, Spain and Germany.

[Noallegiance]

 

[Barnsey]

Julien chiming in on China, don't think the ROW will be able to offset so I'll be continuing to average in through this next year or so.

 

[Harley]

3 hours ago, ThoughtCriminal said:

I can't escape the feeling that things are about to go tits up in a spectacular way. 

I don't know about that by nuffing much from my (admittedly conservative) weekly review of the monthlies.  Frustrating having cash on the side getting burnt but I've got no time to trade.  Across all my asset classes.

On stocks, I liked one Finnish, one Italian, one Russian, four Hong Kong and two Japanese.  But I might already own several so more a question if I want to add which is unlikely.

Some stocks on my screen are either in downtrends or wobbling at overbought levels so may have some more (crazy) upside.   Some good yields on offer but the stocks look overbought. 

Bonds might be strengthening for a buy signal but the one than has gone looks like a fake one so I'm expecting a reversal.  Gold is strengthening but the technicals are messy so it could muck around a bit more.  Commodities continue to run but are overbought.  Interestingly agriculture signaled a pullback but that then reversed. 

Just my observations on what I look at.  DYOR.

[sancho panza]

Just looking at the last proper BK ie credit deflation.Some of the oilies price action is interesting.

RDSB started the June peak at £20, in Oct 08 got as low as £12.20,but never had a monthly close below £14.44.So roughly peak to trough of 30%.

I'm reappraising my intention to sell the oilies ahead of a BK if I can identify the wave(that's a big IF).They appear to have some defensive qualities.

BP similar story,drop from £6 to £4.40 using monthlies ie 26.6% June to Mar 09

Worth noting as well that you could have picked up BP at £5.10 in  March 08.

 

 

[sancho panza]

On 04/07/2021 at 10:08, BurntBread said:

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.

One thing that's lacking in a lot of analysis is breaking down these headline figures by income decile.It's the same sort of critiscism I'd lever at inflation figures ie for people who don't buy cars,their inclusion in the inflation data is rather meaningless.

I think for bottom income deciles I would say Dr Tim is possibly being optimistic.This is the sort of ground that saw the far right rise in Germany in the 1930's,the Arab Spring back in 2011,French revolution etc etc.

For a society to remain stable,it's continued stability has to be in the interests of a majority of it's members.When you dispossess a portion of the middle class either via cost inflation and/or declining real wages
,you have to stand by.It doesn't takemore than a couple of years of food/fuel price rises at 20% with no wage increases before the bottom two income deciles are out of spare capacity to absorb any more losses.

More and more people are questioning why they should work when the rewards for doing so are declining sharply.

[ThoughtCriminal]

4 hours ago, MrXxxx said:

But surely to be meaningful those values need to be standardized for the amount of money within the economy as a whole? i.e. if there is now twice as much money than 20 years ago the apparent $ value would be much less, and by extension portray a far less dramatic scenario.

When 1 year has 50% more than the previous 20 years combined then i dont see any context in which that isn't dramatic. 

 

Then theres 21 compared to every single other year. There's no nuance there, its a sledgehammer. 

[ThoughtCriminal]

I think Michael Burry summarises it best. 

[BurntBread]

6 hours ago, MrXxxx said:

All caused by moving away from the gold standard.

I'm reading Quigley's "Tragedy and hope" (getting on for a third of the way through - I'm a slow reader), and one of many things he has opened my eyes to is the nature of the gold standard. It was subtle, oddly fragile, and not really as I had imagined it.

First, to state the obvious, it was not an alternative to fractional reserve banking: it operated completely in tandem with FRB, but served the two functions of providing a limit to credit expansion, and also keeping foreign exchange rates steady. It did the latter because if they got out of sync beyond the "gold points" (distance away from par sufficient to pay for transporting gold), then gold would flow from one country to another, causing a deflation in one (leveraged up by the FRB), and allowing price inflation in the other. A kind of leveraged negative-feedback.

The fragility came from the fact that it required a lot of political things to be in place across many countries, including zero-cost conversion of notes to gold, free trade, and no extra controls on foreign exchange. As soon as countries needed to run large deficits, or wanted to play games with the gold flows as a diplomatic weapon, then it was bound to cause political strife and ultimately fail.

What really screwed it over was the first world war, which led to all the major powers leaving the gold standard, and inflating, or incurring enormous debts. When they tried to get back on it after 1918, the amounts of gold in different countries were way out of whack compared to the money supply, and all kinds of other obligations had been incurred. There was simply no way back, and the problems in the system manifested themselves in myriad different ways (prices, exchange rates, export/import imbalances, unemployment, too much war-related industries, pensions, debts, reparations, unprofitability of farming etc.), that different players had no idea which to tackle first, nor how. Quigley paints the inter-war years (and probably everything since) as being in the shadow of the gold standard, and attempts to come to terms with it no longer being possible.

As an aside, WWI was the war which broke the trust of the people in the government, because it was the first time in modern history that mass propaganda had been used by governments on their own people, and this caused a lot of anger when some of it was revealed afterwards. It's probably a period that bears reflection on for the present day.

Anyway, what I found most interesting was that the main people driving to get back on the gold standard were the bankers, and for a very sensible reason. They have the license to print money out of thin air, provided they lend it out at interest ... but they want the money that gets paid back to be of full value. As creditors, they would suffer from inflation. Of course, their actions, through FRB were inflationary (compared to the base money supply), but they always used to have a deflationary preference. I'm interested to learn now why, how and when the transition was made to an inflationary preference by central banks. I am guessing it's all tied up with the doomed struggles to right the ship of international finance after 1913. 

[DurhamBorn]

CBs became agents of inflation when the governments introduced welfare states mostly.

[spygirl]

7 hours ago, nirvana said:

ONLY cos the CORPORATE NEOLIBERAL CUNTS outsourced all their jobs to wee chinaman!!

And who helped em? those BANKER CUNTS AGAIN! 

Not really.

The CCP helped the, waving nocost labour and free land.

All they had to do was take a minority stake in a CCP joint venture and share their IP ... think of the cost savings..... oh course, the joint venture will honour the IP.

Few years later, an entirely different CCP is making something using the same IP.

Theres a bloke near me who designed s plastic gadget, supplied to an obsessive bloke activity.

Hes made millions from it. Production is done locally and stuff shipped from a large garden shed.

I'm sure that some MBA would have told him to move production Chinkland in late 90s- think of labour cost savings...

If he had, hed have been out of business in 5 years.

Germans n Italians are finding this.