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


spunko

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2 hours ago, Vendetta said:

I think massive deflation first. 

Demand has - and will continue to collapse.

Lots of businesses will fail and default on debts.

Very little lending by banks. 

Lack of confidence causing a ‘domino and contagion effect’ that will spread and spiral downwards. 
 

Massive monetisation and fiscal policy to attempt to reverse this deflationary event will be needed first before we have the start of the full inflationary effect.

This echoes my sentiments....

Are you in the bear or bull camp regarding stocks???

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2 hours ago, NogintheNog said:

Last month was one of the best in terms of rallies on markets.....???

stocks rocketed last month after the FED said it would provide 'unlimited liquidity/support' to the markets....

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DurhamBorn
1 minute ago, 5min OCD speculator said:

stocks rocketed last month after the FED said it would provide 'unlimited liquidity/support' to the markets....

Thats their job,they printed close to $3 trillion,BOE has done around £200billion.It goes into the plumbing.They used most to buy US treasuries on the open market and cover the short end in the repo market.The US treasury was  issuing new debt at the same time so they could pay food stamps etc.We live in a Fiat money debt system.The Fed and CBs are doing their jobs.If they didnt act as the nut jobs on some blogs would push for then the resulting economy would see millions starve and be horrific.

The CBs will always do unlimited liquidity during deflation.They are only limited by the end of the next cycle when they have free falling markets but high inflation.Most of the problems in the economy are due to governments,not CBs.The state machine spends too much on welfare.Blaming the CBs is like blaming the fire brigade for ruining your carpets with water when they turned up to put a massive fire out.

 

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Jesus Wept
14 minutes ago, 5min OCD speculator said:

This echoes my sentiments....

Are you in the bear or bull camp regarding stocks???

Both - ‘Hedging my bets’.

If I knew with certainty what was coming I would be a billionaire. 

Diversity...... balance...... timing..... research ...... common sense .....and a little bit of luck is what one needs. 

Don’t bet the house on either.... There will probably be a third outcome we haven’t even considered....   

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42 minutes ago, 5min OCD speculator said:

Ok I listened to the macrovoices podcast with Dr Lacy Hunt, I didn't finish it cos I was falling asleep..... not his fault I actually found it quite interesting!

Some points he made:

-the velocity of money will continue to fall* ushering in weaker growth and economic activity
-the Feds kind of lending will not generates an income stream to repay interest and principle therefore the inflation rate will go into negative territory
-Hyperinflation is only going to happen if the Federal Reserve Law gets changed so that the Fed can 'spend directly' and this will make 99% of us terribly miserable; sadly politics is looking towards changing the law.....

His most entertaining comment:

the BOE is crossing the rubicon by directly giving the uk government half a billion quid and is in danger of turning the UK into a banana republic!! xD

@JMD I take on board what you're saying....

how much money has been printed in April and where has it gone? Nobody on here can answer that simple question....
(I'm not even bothered about an exact figure, the nearest billion will do) ;)
Why? Cos the banks are not transparent about what they do for starters!
Do you believe in usury? One of the popes certainly didn't, he banned it for a while! Maybe he saw through the bankers too??

And seeing as it's Sunday and we should all have a laugh on a Sunday

* there's a measurement for velocity of money somewhere.....it's very important cos the CBs can print as much as they want but if it's not going anywhere it's not much use!

 

 

 

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Do I 'believe' in usury? I suppose the monetary system can operate without debt and without interest. Perhaps the next one will, I know there are many theorists out there who propose such a system.  Has anyone here a favoured system to replace our current one? Would be interested to hear.                                                                                                          Btw iit wasn't just one pope that banned usury, usury was effectively banned by the Christan church from ithe earliest times (ie. Jesus and the money lenders in the temple). I believe that's why Newton didn't accept the position of governor of Bank of England because he was so devout. This is the reason btw, why Jews came to dominate finance as it was one of the few progressions left open to them. So an own goal by 'our side' if you will, and not a conspiracy.

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9 minutes ago, DurhamBorn said:

Thats their job

No it's not!!

Their mandate: since 1977, the Federal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates"

All they're doing by giving the smack heads on Wall Street even more smack is creating an even bigger problem! Even you recognise it's going to end spectacularly badly!!!

They should have gone 'cold turkey' in 2008 ;)

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16 minutes ago, DurhamBorn said:

The state machine spends too much on welfare

yes i totally agree with this......

Another side effect of the 2008 bailouts was to create 'zombie banks' even a 'zombie economy' is you believe some 'nutters' ;)

And if you don't let bad businesses fail you get a bloody mess.......and if you don't prosecute finance chiefs for blatantly lying they'll just continue to behave badly....

Jon Corzine springs to mind.......I was looking for an amusing gif when he was being questioned by congress about where the money had gone......of course he had no idea :wanker:

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DurhamBorn
14 minutes ago, 5min OCD speculator said:

No it's not!!

Their mandate: since 1977, the Federal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates"

All they're doing by giving the smack heads on Wall Street even more smack is creating an even bigger problem! Even you recognise it's going to end spectacularly badly!!!

They should have gone 'cold turkey' in 2008 ;)

Exactly,so they are doing their job.If they didnt act there would be 100% unemployment in our system and a huge deflation (they job is to stop that).It is going to end badly,but its not the CBs fault,its governments for replacing capitalism with welfare and allowing massive wealth gaps to grow.The CBs are responding to whats in front of them.There are massive questions around how moral it is,and if the system should be changed,but those wont protect my families wealth at the moment.Thats all im interested in.Powell got off to a bad start as he tightened far too early,but he has started to right size (for now) and the markets stopped falling because by right sizing he cut down the systemic risk.Markets price risk.The question is,he cant see the size of the debt deflation and demand destruction ahead,so its likely the wont inject enough liquidity and we get another big leg down before he does right size (and go beyond).

 

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DurhamBorn
12 minutes ago, 5min OCD speculator said:

yes i totally agree with this......

Another side effect of the 2008 bailouts was to create 'zombie banks' even a 'zombie economy' is you believe some 'nutters' ;)

And if you don't let bad businesses fail you get a bloody mess.......and if you don't prosecute finance chiefs for blatantly lying they'll just continue to behave badly....

Jon Corzine springs to mind.......I was looking for an amusing gif when he was being questioned by congress about where the money had gone......of course he had no idea :wanker:

Agreed,they made mistakes,governments though should of used the tax system etc to balance things and they havent.Its governments,not the CBs that have caused the disaster.Mainly as the media,university,civil service etc have all been taken over by lefties.Remember it was Brown who pushed the banks to lend lend lend because he wanted the tax for welfare spending.

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7 minutes ago, DurhamBorn said:

Remember it was Brown who pushed the banks to lend lend lend because he wanted the tax for welfare spending

Sure but it was Thatcherism that 'deregulated' the banks....... this and the abolition of Glass-Steagall caused the money men to start behaving badly....

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12 minutes ago, DurhamBorn said:

Powell got off to a bad start as he tightened far too early

I disagreee with this too! The US economy was running well, even talk of it running 'hot', he was following the Feds mandate, he only did a u-turn when Wall Street threw a tantrum before xmas; it lost 9% in December 2018

Do you see a pattern here???

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16 minutes ago, DurhamBorn said:

university,civil service etc have all been taken over by lefties

That isn't true either!! They've been taken over by 'free market capitalists' who think it's ok to pay themselves upwards of half a million £ a year AND get a massive pension to boot!

Yet another example of take all the rewards with absolutely no risk whatsoever!!! :wanker:

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DurhamBorn
8 minutes ago, 5min OCD speculator said:

That isn't true either!! They've been taken over by 'free market capitalists' who think it's ok to pay themselves upwards of half a million £ a year AND get a massive pension to boot!

Yet another example of take all the rewards with absolutely no risk whatsoever!!! :wanker:

So you have worked all your life,own a house,have £400k mixed between ISAs,a SIPP and some cash and are 50.Where do you invest it?

This thread is about the macro picture and the way CBs and governments will likely respond to that and then the likely results.Its so ordinary people can try to find a route through the cycle and protect their wealth and protect their families.For myself,im not interested in the morals,and couldnt care less about bankers apart from how they will respond to the macro picture.The system is what it is.We cant wish it away.

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14 minutes ago, DurhamBorn said:

The system is what it is.We cant wish it away.

Sure......if there was no inflation we wouldn't need to 'invest'.....there wasn't really any for 1000s of years until about 100 years ago when the bankers really got going! xD

Anyway I'll try and STFU now

I bid you good luck and good health sir!

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SillyBilly
2 hours ago, DurhamBorn said:

Thats their job,they printed close to $3 trillion,BOE has done around £200billion.It goes into the plumbing.They used most to buy US treasuries on the open market and cover the short end in the repo market.The US treasury was  issuing new debt at the same time so they could pay food stamps etc.We live in a Fiat money debt system.The Fed and CBs are doing their jobs.If they didnt act as the nut jobs on some blogs would push for then the resulting economy would see millions starve and be horrific.

The CBs will always do unlimited liquidity during deflation.They are only limited by the end of the next cycle when they have free falling markets but high inflation.Most of the problems in the economy are due to governments,not CBs.The state machine spends too much on welfare.Blaming the CBs is like blaming the fire brigade for ruining your carpets with water when they turned up to put a massive fire out.

 

Hasn't welfare been a QE-of-sorts for poor people (who consume with every penny given)? Not advocating it but in a consumption based economy there is the danger of all the capital concentrating with the capitalists toward the end of the cycle and that killing the goose that lays their golden eggs...

I don't see benevolence in the central banks either, if an analogy is the current COVID-19 response, then they can garner all the plaudits each crisis by doing the "thing" that immediately and conveniently resolves their most acute problem. Irrespective of what other chronic problems and larger devastation they've guaranteed by doing so. I don't think we should be applauding them for building bigger and bigger problems by kicking cans. I like your work and the road map and agree with it fully but this a lamentable situation, aided and abetted by government and central banks. If a central bank was truly independent and had some foresight perhaps they'd have pulled the plug on propping up unsustainable government behaviour like a parent giving tough love to a toddler. 

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SillyBilly
5 hours ago, AlfredTheLittle said:

 

We do think that over the next few years the reflation stocks will do well, so could be worth picking up at or around current prices, which are a lot lower than they were a couple of months back.

The best outcome is wealth preservation here if this thread comes to pass IMO. 300 dollar oil and 10,000 dollar gold may sound exciting and give a nice £ balance if holding shares and selling back into currency but that sort of world in the speculated time-frame won't be a nice one to live in and not sure how many out-and-out winners will emerge. If your "profit" gives you back enough devalued currency to give you back what you already had then you may have done alright... My outlook here is to use the knowledge gained to maintain a decent purchasing power, actually "making" money in this backdrop will be a challenge. 

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2 hours ago, Vendetta said:

Both - ‘Hedging my bets’.

what's your 'hedging' strategy?

 

15 minutes ago, SillyBilly said:

Hasn't welfare been a QE-of-sorts for poor people

Yes agree! Good post! Both extremes, ie the rich and the poor are getting handouts from the Government and the CBs; the middle classes are getting fucked with taxes and they're too dumbed down/frightened/fat to do anything about it :P

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DurhamBorn
48 minutes ago, 5min OCD speculator said:

what's your 'hedging' strategy?

 

Yes agree! Good post! Both extremes, ie the rich and the poor are getting handouts from the Government and the CBs; the middle classes are getting fucked with taxes and they're too dumbed down/frightened/fat to do anything about it :P

Yep,thats exactly whats happened.Scroungers at the top and the bottom.I dont single out the "elite",high paid none job council workers do more damage to working people.My council tax is £140 a month.Its insane amounts.People just put up with it though.You cant even vote out the councillors because over half dont pay the council tax and dont care.The government will try to get money the same way.I expect they will try to raid pensions,merge NI and tax so pensioners pay it etc.At some point they will have to deal with welfare and state worker pensions,but it might be after the next cycle.

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SillyBilly

Councils need to play this crisis carefully. Bleating for more money when the tax base is in quicksand isn't going to down well. Particularly as people are waking up to the fact about a third of their council tax bill is payment of their salaries and pensions. If the private sector is making deep cuts the councils will be expected to follow suit. 

Unfortunately there are some dimwits, most of them occupying my Facebook feed, that still believe that councils are immune to belt tightening in a depressionary world. Massively increasing taxes on surviving businesses and the diminished workforce isn't going to shelter them.

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Bobthebuilder
53 minutes ago, DurhamBorn said:

.My council tax is £140 a month

Thats shocking, i pay £110 a month on a house in London.

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SillyBilly
13 minutes ago, Bobthebuilder said:

Thats shocking, i pay £110 a month on a house in London.

£146.37 for a 1 bed flat, Reading Borough council. Pay them £36k in business rates too. Not my favourite people.

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Bobthebuilder
12 minutes ago, TheCountOfNowhere said:

Big down, the buffet bear is here. Cash is king 

Bollocks.

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Agent ZigZag

Council tax is out of hand with the poorest paying the most.that is a tax after take home pay. Here are a few examples of how extreme they are. Chelsea £3 million flat £1800pa. london flat zone 3 £450,000, £1400pa,. Shepherd Bush house £850,000 £900pa, friends house North West of England’s £650,000 £2,800pa, Richmond house £800,000, £2800pa. It’s the tax I fear the most.

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M S E Refugee
11 minutes ago, TheCountOfNowhere said:

Big down, the buffet bear is here. Cash is king 

Talking of Buffett,he is having a stinker at the moment.

Lost a ton of cash in airline's and lent money to Occidental to help buy Anadarko.

I wouldn't be surprised if he fancies a few Centrica shares.

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