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


spunko

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On 19/01/2020 at 22:22, MrXxxx said:

Well they had better go back to producing them (Haynes) the way they did thirty years ago, as the last time I look at one they were just glorified owners manuals!

MrX, surely your just being unfair - Halfords are a long respected publisher of mechanical publications and have not over recent years resorted to cheaponing their brand or dumbed down at all. 

https://www.ijustloveit.co.uk/product/haynes-pensioner-manual/?fo_c=95&fo_k=0c9293a37fbd7773af57d124b58136d6&fo_s=gplauk&gclid=EAIaIQobChMIz-2e9PWU5wIVTLTtCh30VQZqEAQYAyABEgIeZ_D_BwE

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On 19/01/2020 at 18:27, DurhamBorn said:

US inflation yes. I think they will think its a blip and be way behind the curve until the end of the cycle. As ever though it will build slowly, i wouldnt expect the big jumps above say 8% until the last year or two, so out into 2026 area.

DB, I believe your roadmap predicts higher int. rates in the early 2020's, but do you think time lags like the above might give the US a 'time window' to mitigate against a housing crash? After all the US already has a highly manipulated housing industry - 30-year mortgage products and Freddy Mac et al - so nothing in principle to stop them. Also, do you perhaps see any of those types of policy (HTB already here i suppose) coming here to the UK?

But the main reason I ask is i'm not clear if - for the credit deflation/reflation cycle - a house price crash is a crucual effect which is 'required'/inevitable in order to fundamentally reset debt borrowings across the West, or whether governments may 'find a way' to kick the can on this.       

 

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On 19/01/2020 at 23:17, sancho panza said:

http://theeconomiccollapseblog.com/archives/12-signs-that-the-economy-is-seriously-slowing-down-as-2020-begins

The following are 12 signs that the economy is seriously slowing down as 2020 begins…

#1 The U.S. Manufacturing Purchasing Managers Index has been in contraction for 5 months in a row, and it is now at the lowest level we have seen since June 2009.

#2 Last month, manufacturing employment fell at the fastest pace we have seen since August 2009.

#3 Last month, new manufacturing orders fell at the fastest pace we have seen since April 2009.

#4 Chicago PMI has been contracting for 4 months in a row.

#5 European manufacturing PMI declined again in December.

#6 Borden Dairy, one of the largest dairy companies in the entire world, declared bankruptcy just a few days ago.

#7 Earlier this month, the Baltic Dry Index had its worst day in 6 years.

#8 Overall, the decline in the Baltic Dry Index this month is the largest that we have seen since 2008.

#9 The auto recession just continues to get even worse.  Thanks to the substantial slowdown we witnessed during the second half of 2019, the total number of cars and trucks sold in the United States during all of 2019 was actually below the level that we witnessed back in 2000 when our population was significantly smaller.

#10 Used heavy duty truck prices have fallen “as much as 50%“.

#11 Macy’s just announced that they will be closing 28 stores.

#12 To start the year, AT&T is laying off thousands of workers, and according to Robert Reich those being laid off “will have to train their foreign replacements“.

SP, and (lucky) number 13?

https://www.bbc.co.uk/news/business-51144892

 

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6 hours ago, DurhamBorn said:

I think the main villain is the welfare state,or means tested benefits.Whats the point of saving if it means no welfare,and also why save if you have kids?,the tax credit income is certain every month.Of course the banks printing has paid for it mostly.The government have spent the last 20+ years working out how to keep the people who work working to pay for the rich and the benefit claimsHTB is simply designed to trap young people into working to pay a mortgage forever.The no1 thing to keep someone working is so they "dont lose my home".Thats what the last election result was about.People are one notch from revolution over it.They are sick are seeing half the country live off their backs.

Yep, these 'mad' government policies go against all major theories concerning human nature and development, tragically for us it can only end in massive failure. I have always found evolutionary psychology fascinating and it is interesting how people like Jordan Peterson find themselves in the limelight.

(Coincidentally, Harley quoted in his recent post that "only the paranoic survive". Another deep truth I suspect, however most of our citizens have been raised with a warm fuzzy view of the world, where I suspect concepts such as 'critical thinking' would be viewed as hate crime.)

 

 

 

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6 hours ago, Harley said:

A villan for sure, and well articulated about the enslavement.  Fortunately, we don't have to pick just one, no room 101!  Just to say the intellectual arrogance (or maybe just support for troughers) shown by our "experts" is the same sort of thing that has cost millions of lives in the past.  Intellectual Canutism at best!

PS:  One recent economic conference I attended had a presentation by one of the key economists reviewing public finances.  Take out welfare costs, let alone the NHS, and not much left to play with.  The vast majority of public expenditure is predetermined, hence the gimmicks to make it sound like things are being done.  Gonna take a lot to change things, plus big balls, or the more common bankruptcy and asset stripping by the IMF, World Bank, etc and their clients.

Harley, another sobering fact - I read today that the NHS now spends £4Bn/year (and rising) in legal costs and compensation claims. And it has a whopping £90Bn in potential outstanding claims against it - that is nearly the entire NHS budget!!!!!   

 

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4 hours ago, JMD said:

 

 

2 hours ago, Barnsey said:

Barnsey, 'asking' prices only perhaps, but why is confidence returning at all I wonder?

I asked DB earlier about his thoughts over potential for government  manipulation of our housing market (my fear is this already happens big time in US, but will more follow?) as im suspicious of this also happening here. 

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3 hours ago, reformed nice guy said:

Dixons Carphone has said that it expects this to be a "trough" year for the mobile phone business

Nice bit of honesty from them there!

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8 hours ago, DurhamBorn said:

I think the main villain is the welfare state,or means tested benefits.Whats the point of saving if it means no welfare,and also why save if you have kids?,the tax credit income is certain every month.Of course the banks printing has paid for it mostly.The government have spent the last 20+ years working out how to keep the people who work working to pay for the rich and the benefit claimsHTB is simply designed to trap young people into working to pay a mortgage forever.The no1 thing to keep someone working is so they "dont lose my home".Thats what the last election result was about.People are one notch from revolution over it.They are sick are seeing half the country live off their backs.

They're not though. In my circle people understand how the Government and banks are trying to enslave us all. They are a tiny minority. The 99% are either thick or just can't put the jigsaw together. Many know that things aren't right, that life is shit, that your salary buys nothing, but they don't understand why, how it's come about.

We are a long way from revolution. People will not revolt until their bellies are empty. It needs to get a lot worse yet and I hope it does. I'd personally love to see the country on fire as in my view it cannot be rebuilt until major destruction has taken place first.

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1 hour ago, JMD said:

DB, I believe your roadmap predicts higher int. rates in the early 2020's, but do you think time lags like the above might give the US a 'time window' to mitigate against a housing crash? After all the US already has a highly manipulated housing industry - 30-year mortgage products and Freddy Mac et al - so nothing in principle to stop them. Also, do you perhaps see any of those types of policy (HTB already here i suppose) coming here to the UK?

But the main reason I ask is i'm not clear if - for the credit deflation/reflation cycle - a house price crash is a crucual effect which is 'required'/inevitable in order to fundamentally reset debt borrowings across the West, or whether governments may 'find a way' to kick the can on this.       

 

Interest rates will likely go lower first,then stay flat for 18 months then slowly creep higher.We could see 3% by 2024 and 12% by 2026.Its late in the cycle rates will explode higher i expect.

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7 minutes ago, Starsend said:

They're not though. In my circle people understand how the Government and banks are trying to enslave us all. They are a tiny minority. The 99% are either thick or just can't put the jigsaw together. Many know that things aren't right, that life is shit, that your salary buys nothing, but they don't understand why, how it's come about.

We are a long way from revolution. People will not revolt until their bellies are empty. It needs to get a lot worse yet and I hope it does. I'd personally love to see the country on fire as in view it cannot be rebuilt until major destruction has taken place first.

Agreed most people dont understand,but they dont need to,they just need to be fed up.We are seeing a revolution in front of us.The Tories took Blyth Valley and Redcar.They took where i live for  first time ever by 8000 votes.

People are voting against the system.Politics is following the macro as it always does.Interesting years ago and ordinary people go to war with the left.

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1 minute ago, DurhamBorn said:

Agreed most people dont understand,but they dont need to,they just need to be fed up.We are seeing a revolution in front of us.The Tories took Blyth Valley and Redcar.They took where i live for  first time ever by 8000 votes.

People are voting against the system.Politics is following the macro as it always does.Interesting years ago and ordinary people go to war with the left.

The only problem with not understanding is you end up with unfocused anger that can be manipulated easily and effectively.  Look at how easily we could go to "It's white people's fault you're skint/starving" 

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23 minutes ago, DurhamBorn said:

Agreed most people dont understand,but they dont need to,they just need to be fed up.We are seeing a revolution in front of us.The Tories took Blyth Valley and Redcar.They took where i live for  first time ever by 8000 votes.

People are voting against the system.Politics is following the macro as it always does.Interesting years ago and ordinary people go to war with the left.

They're not voting against the system by voting for the Tories, the Tories are part of the system. They think they're voting for change but they're voting for more of the same.

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Bobthebuilder
1 hour ago, Starsend said:

They're not voting against the system by voting for the Tories, the Tories are part of the system. They think they're voting for change but they're voting for more of the same.

I do agree with you but,

For the tories to win so many traditional labour seats in the North was as close to a bloodless UK polictical revolution as you can get, only 1 bigger in my 50 years i think. Now if they do anything to help those ex labour areas remains to be seen but i do think a infrastructure revolution may come of all this.

Ps. I do think they were voting for something else as well but i will leave that for another thread.

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sleepwello'nights
4 hours ago, JMD said:

MrX, surely your just being unfair - Halfords are a long respected publisher of mechanical publications and have not over recent years resorted to cheaponing their brand or dumbed down at all. 

https://www.ijustloveit.co.uk/product/haynes-pensioner-manual/?fo_c=95&fo_k=0c9293a37fbd7773af57d124b58136d6&fo_s=gplauk&gclid=EAIaIQobChMIz-2e9PWU5wIVTLTtCh30VQZqEAQYAyABEgIeZ_D_BwE

I prefer the Ladybird series. They haven't got as far as the pensioner yet.

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sleepwello'nights
7 hours ago, JMD said:

DB, am I right in thinking (simple question, but still learning here) if past government's didn't take the easy - tax and spend - (bribery) policy option - for example in the form of spending on farm subsidies in the case of our broccoli farmer - then that farmer could have set 'real' prices and contributed positively to the 'real' economy? Instead mallinvestment and other inefficiencies build, eventually leading to macro deflation/reflations, with mini boom/bust business cycles happening along the way.    

That's exactly the hypothesis put forward by Peter Schiff. An alternative view is put forward by Harry Dent who reckons its down to demographics.

They have diametrically opposing views on the price of Gold. Both agree that government interference exacerbate  problems with economic cycles.

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TheCountOfNowhere
30 minutes ago, Lavalas said:

Personally I’m totally down with party policy’s being for another thread, although it doesn’t really matter what I think.

I'll vote for that. 

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Democorruptcy
7 hours ago, Barnsey said:

The party of Help to Buy in for at least another 5 years with a massive majority? I was expecting a Boris Bounce and all the properties I was watching have gone SSTC since the election. 

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6 hours ago, JMD said:

MrX, surely your just being unfair - Halfords are a long respected publisher of mechanical publications and have not over recent years resorted to cheaponing their brand or dumbed down at all. 

https://www.ijustloveit.co.uk/product/haynes-pensioner-manual/?fo_c=95&fo_k=0c9293a37fbd7773af57d124b58136d6&fo_s=gplauk&gclid=EAIaIQobChMIz-2e9PWU5wIVTLTtCh30VQZqEAQYAyABEgIeZ_D_BwE

And to cite the decline of another classic, has anyone seen what Lonely Planet guides are like since they were taken over by BBC publishing?...well at least the So-Called BBC are consistent, as their programmes are shite nowadays as well!

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4 hours ago, Lavalas said:

Personally I’m totally down with party policy’s being for another thread, although it doesn’t really matter what I think.

Can't argue with that. This is an important thread and we shouldn't let it get derailed.

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10 hours ago, Democorruptcy said:

The party of Help to Buy in for at least another 5 years with a massive majority? I was expecting a Boris Bounce and all the properties I was watching have gone SSTC since the election. 

Absolutely the ‘Boris Bounce’ was always going to happen. We’ve had non stop spin from the media on why the housing market has been stagnant the last year or so (decreasing in London) citing the reason as ‘Brexit uncertainty’. That ‘uncertainty’ now been unanimously confirmed, so those sitting on the fence have jumped in.

The real reason for the stagnation (that we all here are well aware of) is that house prices have risen way beyond the income threshold to the maximum of what banks will lend and that BTL is becoming less of a cash cow it once was. Those certainty’s won’t change in the foreseeable, so that ‘Boris Bounce’ will involve a dead cat.

If DB is correct on interest rates dropping and holding for 18 months we can expect more of the same. Stagnation. One thing that will change however is sentiment. Yes they’ll always be blame Brexit on ‘why I can’t get 3/4 mill for my 3 bed terrace’, but the annual hpi % results will speak from themselves. These are manipulated of course (was it Halifax that changed to 6% increase one month last year?) but it will become increasingly more difficult to fudge the numbers.

Once it becomes apparent (to even the most deluded) that annual hpi is turning negative, it will time in nicely with DB’s prediction on rising interest rates, then a rolling stone gathers no moss as the thickest BTL landlords finally understand the game is up and race for the exits.

 

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Don't know if I have got this completely wrong, but the Government embark on a massive spending/development plan (or propose to) and so the interest rate drops just in time to fix their borrowing at a low rate...then twelve months time and forward when the projects start wages/inflation/interest rates will start to rise...could you not pick a worst time to buy a property, as a best a 2-3yr fix will end at just the wrong time?!

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Transistor Man
10 hours ago, MrXxxx said:

And to cite the decline of another classic, has anyone seen what Lonely Planet guides are like since they were taken over by BBC publishing?...well at least the So-Called BBC are consistent, as their programmes are shite nowadays as well!

They’ve sold them, haven’t they? At a big loss. Should never have been allowed.

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