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

[janch]

The generational aspect of all this is crucial.  Going back to the 70s, the pensioners then were on the whole badly off and struggling.  Since then the state pension has been raised considerably in real terms and as @DurhamBorn says todays baby boomers coming up to pension age will have assets to sell whereas those of pension age in the 70s generally didn't.

 Also in the 70s even though there was price inflation with food etc there was also price inflation with housing so at the time people took out the biggest mortgage they could and even though as interest rates rose it became a struggle to keep up the payments (no fixed mortgages then) in the long run it paid off.

Those in their 30s, 40s, 50s now with families to raise and servicing large debts will really suffer in the years to come if this all pans out as predicted.  Not only will everyday spending be hit but they will be losing on housing too.  Some may be saved by an inheritance but many won't. 

Many of us on here are trying to preserve as much as possible for our children and to maybe introduce them to some of the themes of this blog although in my case much seems to be falling on deaf ears!

[janch]

I've just been digesting the article by Raoul Pal posted a few pages back.  He seems to think it'll be just like the Wall Street crash followed by the 30s depression.  So far so good but then he thinks the dollar will rise and rise together with gold and also bitcoin.  He says other countries will default and also devalue their currencies.  The US will have to devalue eventually and the dollar standard will be dead.  A digital basket of currencies will be used for world trade.

I think I prefer DBs thesis that there will be so much printing that the dollar will fall rather than rise or is Raoul Pal right in that everyone rushes to the dollar for safety?  I seem to remember the dollar target on @DurhamBorn's roadmap is around 88 (it is around 100 today).  Who to believe........I'm confused

[Chewing Grass]

21 minutes ago, janch said:

Who to believe........I'm confused

Don't believe anyone, try to risk above the smoke and noise and work it out yourself as best you can then there is no-one else to blame.

I don't think anyone on this planet can work out a perfect roadmap but you should be able to sketch something out to get you to roughly where you want to be.

[Talking Monkey]

1 hour ago, Loki said:

Is there a chance that by 2029 they just crash everything/let the system lockup and bring a new, possibly digital only, currency?  The big 5G push makes sense in a context of that and tracking everything/everyone.  Compared to "Watch movies on your phone"

It looks like even the good times in the mid '20s will just be a final hurrah in an un-salvageable system.  They'll keep it going just long enough to get the final pieces in place.

This is what I am coming round to, I am feeling more confident we will successfully navigate out of the upcoming credit deflation into one last hurrah, after which this system collapses and something new is brought in. Also exactly as you say during that last hurrah the last pieces will be put in place ready for the collapse and introduction of the new system. I expect physical cash will be sidelined further as each year passes to 2028/29.

[Talking Monkey]

3 hours ago, DurhamBorn said:

"So, how do these "cost of money" and "government spending on infrastructure" aspects fit into recent history? The 1970s were a time of rising inflation, and I think you are expecting the 2020s (after the debt-deflation) to be similar in this regard. My impression though, is that the 70's were not a time of heavy infrastructure build, which had already happened in the immediate post-war decades. The 1970s felt like a running-down of industry, but with some desperate government props put in place to try to shore up key industries, against a background of increasingly noncompetitive production, and rising union power. If so, then the 2020s will surely be more positive (albeit very austere for the consumer), with supply chains coming home, and capabilities being (re-)built in the West?"

They will be better for the consumer longer term,but remember there will be a lag.A generation lag mostly.Those young people with HTB mortgages wont enjoy the inflation or wage increases because rates going up will take it all and more.

£400 interest on mortgage at 3% rates doubles at 6% rates.The wage increases will lag way behind that.Of course if you get a 10 year fix now

This makes a lot of sense DB, although the next cycle will be brutal along with the epic dislocation of the collapse around 2029, after the dust settles say into the early/mid 2030s, life for the average Joe may be pretty decent. I see how a generation will miss out over the next 12- 15 years. In terms of optimism I think the case can be made for being optimistic whilst acknowledging a pretty rubbish near to mid term period.

[Loki]

57 minutes ago, Talking Monkey said:

This is what I am coming round to, I am feeling more confident we will successfully navigate out of the upcoming credit deflation into one last hurrah, after which this system collapses and something new is brought in. Also exactly as you say during that last hurrah the last pieces will be put in place ready for the collapse and introduction of the new system. I expect physical cash will be sidelined further as each year passes to 2028/29.

Thanks, good to know I'm not alone in thinking this way. 

[Calcutta]

4 hours ago, DurhamBorn said:

@BurntBread

"The reason I keep harping on about the 1970s, is that I am worried about what you hint concerning the end of the 2020s. It sounds like we will face the possibility of currency collapse, which I think we did (to some extent) at the end of the 70's - and which is always a danger at the end of an inflation. In the early 80's, we had Paul Volker reining in the inflation, and I think we had what could be called a "stabilisation crisis" here in the UK, as money became tighter through Thatcherite monetarist policies, giving a severe recession. If that is so, then why are you expecting the end of the 2020's to be so much worse? Is it because the scale of the money-printing, and therefore the dislocation caused by its being reined in, is so much more disruptive? It seems to me that we should be better set up, industrially, than the end of the 70's. Being very speculative (and I don't think you have mentioned this) are you suggesting that we will have inadvertently gone through a 1930's, German-style re-industrialisation (together with constant, real, austerity for the workers), and then when export markets collapse, and the government cannot print for welfare, we "end up with a tooled-up manufacturing sector with nothing to produce, and a discontented population? The only political option in that scenario might be war."

 

My friend says he hopes he is dead before the next cycle ends.Its exactly because of what you say.We will have a much better economy in industrial areas,and yes similar to Germany pre WW2 in output but not scale.However government spending  is and will be at eye water levels for welfare.The CBs wont be able to print at the end of the cycle.Inflation could be 20%+.Once they cant print governments cant pay the bills,benefits stop.This is where we will be in 2029.Likely the greatest financial dislocation and wealth destruction in all of history.Of course lots can change between now and then.If this thread is going,then the next several years will be about trying to work out if there are any areas to protect wealth.Where we are now and the next 12 months dislocation is nothing to the next one.

Started reading this thread in 2017, maybe even 16....imagine if it's still going in in '29.

There's got to be a way to protect ourselves when it does all kick off. My pension will be worth protecting by then. Don't suppose I can use a pension to buy a farm and a load of guns. Bank shares? 

[Agent ZigZag]

It’s all about less government or more. I’m would watching recourses allocated to police to protect a system for the benefit of the elite. Have you seen on tv armed response units they are like a paramilitary army. Or strong men come forward to create a better system for all, but like all systems and sysmic changes opposing views are taken that lead to the tree of liberty having to be bled. That’s were I consider we are going. For me the future can take care of itself for now and we should all enjoy the moment and day

[DurhamBorn]

 

 

2 hours ago, Loki said:

Is there a chance that by 2029 they just crash everything/let the system lockup and bring a new, possibly digital only, currency?  The big 5G push makes sense in a context of that and tracking everything/everyone.  Compared to "Watch movies on your phone"

It looks like even the good times in the mid '20s will just be a final hurrah in an un-salvageable system.  They'll keep it going just long enough to get the final pieces in place.

Could be Loki and its something we need to look at as the cycle develops.We should be able to start to see a few things by 2025 and have a few years to try to work out a roadmap.There is also a long way to go.If the cycle develops a bit less inflationary then we might get a less severe outcome.Currencies are toast at the end of the cycle that is certain.

[MrXxxx]

5 hours ago, DurhamBorn said:

£400 interest on mortgage at 3% rates doubles at 6% rates.The wage increases will lag way behind that.Of course if you get a 10 year fix now

I assume that this would also be the case where someone was unwaged but had the cash to buy outright?...hoping that if the cash was invested in something I.e. bonds, stocks that gave a better return over the 10yr time period than the fix then they would be `quids in`.

This sain how likely are BS to do this, as in essence they are `gifting` you a very low interest rate loan to `play` in the stock market casino?

[DurhamBorn]

1 hour ago, Talking Monkey said:

This is what I am coming round to, I am feeling more confident we will successfully navigate out of the upcoming credit deflation into one last hurrah, after which this system collapses and something new is brought in. Also exactly as you say during that last hurrah the last pieces will be put in place ready for the collapse and introduction of the new system. I expect physical cash will be sidelined further as each year passes to 2028/29.

Its an interesting point you make on cash and Loki mentioning 5G.Perhaps as the cycle develops we need to keep a close eye on cash (or more the lack of it) as if it gets down to a very small amount of transactions it would be easy to switch to a new currency.The problem is every debt is someone else's asset.

The funny thing is i was talking to a younger guy about this who said it will be fine they will just colonise the Moon and Mars and the massive growth will deal with it.Could the end of of this massive long term cycle simply be showing Earth isnt big enough and its time for Space?.

 

 

[MrXxxx]

5 hours ago, DurhamBorn said:

@BurntBread

"The reason I keep harping on about the 1970s, is that I am worried about what you hint concerning the end of the 2020s. It sounds like we will face the possibility of currency collapse, which I think we did (to some extent) at the end of the 70's - and which is always a danger at the end of an inflation. In the early 80's, we had Paul Volker reining in the inflation, and I think we had what could be called a "stabilisation crisis" here in the UK, as money became tighter through Thatcherite monetarist policies, giving a severe recession. If that is so, then why are you expecting the end of the 2020's to be so much worse? Is it because the scale of the money-printing, and therefore the dislocation caused by its being reined in, is so much more disruptive? It seems to me that we should be better set up, industrially, than the end of the 70's. Being very speculative (and I don't think you have mentioned this) are you suggesting that we will have inadvertently gone through a 1930's, German-style re-industrialisation (together with constant, real, austerity for the workers), and then when export markets collapse, and the government cannot print for welfare, we "end up with a tooled-up manufacturing sector with nothing to produce, and a discontented population? The only political option in that scenario might be war."

 

My friend says he hopes he is dead before the next cycle ends.Its exactly because of what you say.We will have a much better economy in industrial areas,and yes similar to Germany pre WW2 in output but not scale.However government spending  is and will be at eye water levels for welfare.The CBs wont be able to print at the end of the cycle.Inflation could be 20%+.Once they cant print governments cant pay the bills,benefits stop.This is where we will be in 2029.Likely the greatest financial dislocation and wealth destruction in all of history.Of course lots can change between now and then.If this thread is going,then the next several years will be about trying to work out if there are any areas to protect wealth.Where we are now and the next 12 months dislocation is nothing to the next one.

So the answer is wealth protection via a range (both sector and global location) of highly liquid/mobile investments, and then to leave/relocate from the UK (or the weakened country you reside in) to a more financially healthy/stable country just before the SHTF?

[Loki]

 

8 minutes ago, DurhamBorn said:

 

The funny thing is i was talking to a younger guy about this who said it will be fine they will just colonise the Moon and Mars and the massive growth will deal with it.Could the end of of this massive long term cycle simply be showing Earth isnt big enough and its time for Space?.

 

 

Never was a fan of Star Trek...too soul less and 'One world order' for me.  Even Wikipedia calls it the 'space-borne humanitarian and peacekeeping armada of the United Federation of Planets'.  Peacekeeping...maybe it means something different in Klingon 

And I'm a fan of blue skies and green grass. Call me old fashioned.  I'd probably go with the whisky and a Smith and Wesson investment plan if it came to that, frankly. 

[Loki]

22 minutes ago, DurhamBorn said:

 

 

Could be Loki and its something we need to look at as the cycle develops.We should be able to start to see a few things by 2025 and have a few years to try to work out a roadmap.There is also a long way to go.If the cycle develops a bit less inflationary then we might get a less severe outcome.Currencies are toast at the end of the cycle that is certain.

Thanks mate, didn't want to sound too pessimistic but I follow other non-financial subjects and different factors are going to converge around 2030.  Let's hope this site continues long into the future

[MrXxxx]

5 hours ago, DurhamBorn said:

@BurntBread

"I note that your models have many other aspects too, such as psychology, and the insight that the market hurts the most people, and also a lot of detail about which sectors have knock-on effects (with delays) for other sectors. For that reason, I can see that there may be many differences between different distribution cycles throughout history. Nevertheless, it would be fascinating if you could say what you think will be notable about the end of the 2020s that will make it so perilous?"

The removal of the ability to print from CBs due to being on the edge of hyper inflation (20%+)

Imagine March 12th for two weeks with the Fed and CBs printing nothing.Injecting nothing.

Imagine that same scenario with treble the debts on government balance sheets.

Imagine the UK government now being unable to borrow anything and nobody to monetize.Imagine that now.All pensions and welfare payments stop last week.

When the government becomes  the main driver of the economy,but cant borrow.Worldwide.

 

But this is based on the assumption that every country goes `down the pan` at the same rate at the same time doesn't it?...its usual that when someone is a loser someone benefits from this to become a winner...possibly SAm or African countries receiving an economic `helping hand` via debt forgiveness and/or infrastructure development (via China) before the Developed world financially crashes?

[MrXxxx]

5 hours ago, DurhamBorn said:

friend thinks one way out might be a war between India and China stoked by the west.He said watch Japan invest heavily into India during this cycle especially in industry to tool them for war.Just a thought for now.

In a similar way that the US did in WWII with Britain?....and would Japan get drawn in to it in the same way?

[Noallegiance]

21 minutes ago, DurhamBorn said:

Its an interesting point you make on cash and Loki mentioning 5G.Perhaps as the cycle develops we need to keep a close eye on cash (or more the lack of it) as if it gets down to a very small amount of transactions it would be easy to switch to a new currency.The problem is every debt is someone else's asset.

The funny thing is i was talking to a younger guy about this who said it will be fine they will just colonise the Moon and Mars and the massive growth will deal with it.Could the end of of this massive long term cycle simply be showing Earth isnt big enough and its time for Space?.

 

 

Hopefully space is so big that we're naturally constrained to fucking up just the one solar system.

[M S E Refugee]

31 minutes ago, Noallegiance said:

Hopefully space is so big that we're naturally constrained to fucking up just the one solar system.

Space is still not big enough to stop these lot from finding you and fucking up your new planet with their sponging and mad religion.

[Loki]

5 minutes ago, M S E Refugee said:

finding you and fucking up your new planet with their sponging and mad religion.

With a little help from their friends...

[leonardratso]

we will still need fruit pickers and moon buggy washers in space.

hopefully richard branson will fuck off out there first and take musk with him.

[Bobthebuilder]

3 hours ago, DurhamBorn said:

Earth isnt big enough

Its Saturday night allow me a tune.

 

[Loki]

Quote

There are too many of us them 

fixed 

[Loki]

Just reading some of that Raoul's latest tweets and I am struggling to understand this one

 

https://twitter.com/RaoulGMI/status/1254111689374666754

 

In the preceding tweets he seems to spell out why a strong dollar is a problem, then seems to imply a weaker dollar/lower DXY is bad.

 

I cannot understand this in the context of this thread - what am I missing? (Keep it civil yeah?) 

 

Edit: Has he just missed the 'government infrastructure spending' possiblility?
 

https://twitter.com/RaoulGMI/status/1254112583260528644/photo/1

[Errol]

No, he is saying that the break of the downward sloping wedge will accelerate - i.e. upwards - leading to a massively 'stronger' dollar.

'Stronger', because in reality it will be the best of the toilet paper.

Gold will be what you actually want.

[Loki]

18 minutes ago, Errol said:

No, he is saying that the break of the downward sloping wedge will accelerate - i.e. upwards - leading to a massively 'stronger' dollar.

'Stronger', because in reality it will be the best of the toilet paper.

Gold will be what you actually want.

Thanks Errol - I had to look it up to understand fully, this is a good link for anyone else who wasn't sure 
https://school.stockcharts.com/doku.php?id=chart_analysis:chart_patterns:falling_wedge_reversal

 

Are you still buying physical? What's the availability like? (My most recent silver order is delayed)