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

[Heart's Ease]

49 minutes ago, JMD said:

I don't think mentioning 'Another/FOA/FOFOA...' is going off-track. Thanks to Loki's original post, even i did further reading on those guys (and i admit to being pretty ignorant about these concepts).

However their Euro hypothesis did make me laugh - but then if they/he were writing today (are they/he still around?) i expect they would be embracing crypto as the new currency; and that they were vindicated about defining gold/'Freegold' as being the 'store of wealth', and not part of the new money/currency system.

btw, correct me if i am wrong on any of this, as i say i'm no expert, and tbh their posts were so voluminous/generic i sort of lost track now and again. 

https://fofoa.blogspot.com/2019/05/?m=1

In the link above is a few pages of the interview FOFOA did which was included in the "In Gold We Trust 2019" report.  Still holds to $55,000 valuation, still believes Euro will be the bridge. 

(Looks like I'm now back on the A/FOA/FOFOA trail. Now with added Q!).

The reason I have positive things to say about the euro is because, no matter how it’s being used today, it was conceived and constructed to bridge the end of the dollar reserve system to the next one. Its design, its architecture, will not only allow it to survive the transition, but also to flourish within the next system.

In his famous acceptance speech for the International Charlemagne Prize of Aachen for the euro in 2002, Wim Duisenberg said, “It is the first currency that has not only severed its link to gold, but also its link to the nation-state.” You see, the euro solved two problems. 1. It severed its link to the wealth reserve function of money. And 2. it severed its link to the Triffin Paradox of an international currency being managed by a single nation. These are the dollar’s two greatest problems, and the design of the euro resolved them.

Is it susceptible to politics and political influence? Of course it is. But it’s the currency of many very different countries, and that’s why its susceptibility to political influence is actually a strength, not a weakness. FOA wrote:

 

“The dollar is ruled by one country and one country only. This implies that only one Economy is taken into consideration when policy is discussed, the USA. The management of interest rates, inflation, dollar value and crisis intervention, are therefore politically motivated to benefit one world group, again, Americans. We have seen the news events of how this tramples upon the needs of other geopolitical groups (countries).

On the other hand, the Euro will utilize a totally different structure of consensus management. It will be governed by many nations of obvious conflicting needs. This very weakness, that is so well documented by analysts, is the “major” strength that will contribute to the popularity of the Euro. In time, it will be governed by many cultures, including an “open market” valuation of gold.”

 

[Craig]

10 minutes ago, Dogtania said:

Thanks for the info.  @leonardratso I've only ever bought small amounts a few times in coinbase and iirc the fees always seemed quite large but I guess that's the same everywhere.  Even though buying foreign currency I would expect a fee for some reason still hurt buying a couple hundred of BTC and losing a few pounds off the bat.

Regarding revoult @Craigit is not somewhere you own the coins so not great IMO.  I do have a cold storage wallet thing think it's trezor.  Main reason I initially got was for transferring the maidsafe tokens as all the exchanges they were listed on kept delisting.. And honestly I shouldn't really be keeping on an exchange anyway as I'm not trading.

Saw revoult had gold offered recently which was interesting, wonder if they will subsequently offer silver.  All the same I would argue a lot safer going for something like bullionvault.

I wouldn't have recommended Revolut until a couple of days ago, but just got an email saying you are now the owner of the coins, so presumably they'll be making them tradeable fairly soon.

[leonardratso]

aha;

Current Maker Fee0.50%

Current Taker Fee0.50%

[leonardratso]

BP's divi just landed in my account.

8.3p /share. this cut.

[sancho panza]

5 hours ago, Cattle Prod said:

Has something changed at the Fed? Is this behind the strength we are seeing in the dollar, as in liquidity being reduced? If so it feels a little like them giving themselves an excuse for the next significant injection. 

From Wolf Street:

 

Thanks for posting CP.Something's afoot.Whether they're jsut taking a foot of f the pedal while they can??

I think their aim is something akin to a flat S&P come November and their job is done.Printing now is needless and carries no net benefit if S&P is sub 2500 come Novemeber.

Fed always tries to be politcally neutral.With everything going on,they have to be careful.

 

5 hours ago, Bricks & Mortar said:

Having a hard time with the 'conspiracy' angle.
First day of the thread, DB told us it would go down like this.  It's the same in every developed economy.  The timing comes from the economic collapse caused by 'Cervesa Sickness'.   It's just Trump's luck if it coincides with an election in his country.  (if, indeed he does manage to spend the money in such a way as to juice the economy all the way up to the election, and as long as our tinfoil hat isn't so big we think Trump released the virus to cause the collapse to make the Fed print so they'd get the warchest.)

I do agree the game for Trump is to use the warchest to get to the election with the S&P as high as possible, but think thats in synch with the desired V-shape recovery.   Can he get the $ flowing fast enough?  Will Congress agree to everything?  Will the second crash come if there's a delay with either of these?

AS I said above,he'll be happy with neutral by Nov.Or even slightly down.So that jsut him vs Joe rather him vs Joe+ a tanking economy.

Decl:I am a bit of a political gambler 

[feed]

The $600/week unemployment benefit (from Cares Act) expires end of July.  Somewhere between 40% to 60% of unemployed collecting benefits are making more than if they were working.  The headlines are coming that will show what most employers are experiencing...can't compete w/ free cash and "safety of staying home"... 

Election is in 137 days.  Bets on cares act getting extended. 

[sancho panza]

3 hours ago, Loki said:

I'm not looking for conspiracies I'm looking for confirmation of the reflation...hence the $1.6t followed by seeing Trump's twitterstorm jumped out at me.  My understanding is that the final can kick isn't a given, just that if it isn't, we will go Mad Max now rather than in 2030.

Also ECB pumping like mad.....E1.6tn lent out at neg rates.accroding to holger

2 hours ago, JMD said:

SP, re your question about the new Hertz investors, that's a great question. If we only knew the answer we could all adjust our investing strategies and become next cycle millionairs, hell probably billionairs! Seriously though, is there a way of discovering it (like who is buying/selling shares) or is it all a 'closed-book'?   

The ones worht knowing about may well be using the 3rd party subsids.Share registers aren't open as far as I know.

3 hours ago, DurhamBorn said:

Yep,no conspiracy at all,thats not how CBs work.People mistake their job and aims.Their main job is to try to ensure our way of life continues and that our economies can grow over time with a slowly increasing liquidity.Goverments are elected to choose to guide where.Where macro comes in is understanding the leads and lags.We arent better than them,its just we hopefully see what they have to react to.The reflation part comes from the political cycleas much as the macro.Both collide once or twice a lifetime.

ANd when they collide it gets really interesting.

 

Have you seen WTI at $40 today,yellow stuff $1745.....thesis holding nicewly.

@Cattle Prod any  claer idea yet how much shale production got shut down for good in the end?

 

[The Idiocrat]

I’m putting this here just to show the madness that is still going on in the credit/debt industry. I’m watching the football on a dodgy internet connection on NBC Sports in the States, and this ad is being run every commercial break. Quite extraordinary IMO:

 

[Option5]

4 minutes ago, The Idiocrat said:

I’m putting this here just to show the madness that is still going on in the credit/debt industry. I’m watching the football on a dodgy internet connection on CNBC in the States, and this ad is being run every commercial break. Quite extraordinary IMO:

 

Has to be a spoof, please say it is......

[The Idiocrat]

13 minutes ago, Option5 said:

Has to be a spoof, please say it is......

Yanks don’t do irony so it’s real I’m afraid. I did think it was a pisstake when I first saw it, but it’s come on several times during the coverage. I suppose it’s targeting dim/naive/greedy/desperate people and so is pitched accordingly.

[King Penda]

1 hour ago, The Idiocrat said:

I’m putting this here just to show the madness that is still going on in the credit/debt industry. I’m watching the football on a dodgy internet connection on NBC Sports in the States, and this ad is being run every commercial break. Quite extraordinary IMO:

 

They can’t help me get my pension early I’ve just rang them fucking cunts

[JMD]

11 hours ago, Heart's Ease said:

https://fofoa.blogspot.com/2019/05/?m=1

In the link above is a few pages of the interview FOFOA did which was included in the "In Gold We Trust 2019" report.  Still holds to $55,000 valuation, still believes Euro will be the bridge. 

(Looks like I'm now back on the A/FOA/FOFOA trail. Now with added Q!).

The reason I have positive things to say about the euro is because, no matter how it’s being used today, it was conceived and constructed to bridge the end of the dollar reserve system to the next one. Its design, its architecture, will not only allow it to survive the transition, but also to flourish within the next system.

In his famous acceptance speech for the International Charlemagne Prize of Aachen for the euro in 2002, Wim Duisenberg said, “It is the first currency that has not only severed its link to gold, but also its link to the nation-state.” You see, the euro solved two problems. 1. It severed its link to the wealth reserve function of money. And 2. it severed its link to the Triffin Paradox of an international currency being managed by a single nation. These are the dollar’s two greatest problems, and the design of the euro resolved them.

Is it susceptible to politics and political influence? Of course it is. But it’s the currency of many very different countries, and that’s why its susceptibility to political influence is actually a strength, not a weakness. FOA wrote:

 

“The dollar is ruled by one country and one country only. This implies that only one Economy is taken into consideration when policy is discussed, the USA. The management of interest rates, inflation, dollar value and crisis intervention, are therefore politically motivated to benefit one world group, again, Americans. We have seen the news events of how this tramples upon the needs of other geopolitical groups (countries).

On the other hand, the Euro will utilize a totally different structure of consensus management. It will be governed by many nations of obvious conflicting needs. This very weakness, that is so well documented by analysts, is the “major” strength that will contribute to the popularity of the Euro. In time, it will be governed by many cultures, including an “open market” valuation of gold.”

 

Thanks HeartsEase, It is curious that the blog author still clings to the Euro being a 'bridge to a world currency'. I think the article reads a bit cultish (like much of the original blog postings tbh; would you agree/disagree?), and perhaps written by someone (author is anonymous I think) unaware that the Euro's future role (if it does survive) is to lock european nations into a super-state, with common tax and spend policies for starters. For example, the 'susceptibility to political influence is a strengh' line sounds weak/disingenuous to me - surely it is obvious that the Euro experiment has shown that a world currency cannot be introduced regionally, particularly if one country such as Germany in the case of the Euro, is allowed to dominate a currency's function, eg exchange rate, and to the detriment of the other member countries.                                                                                                                                                                                   But perhaps the whole idea of having a world currency without a central authority to run it is a chimera. Surely Bitcoin has been shown to be to volatile to work as a currency? Perhaps a compromise is needed where maybe each country has its own crypto, with the underlying block-chain (very disruptive/exciting technology) defining the limit of government and also the responsibilities of its citizens. Actualy I think these types of ideas/technologies become even more important to implement as future governments will probably come to own larger and larger slices of the economy. For example the 'block-chain contract' could hopefully then allow a more libertarian/free society to emerge in future years, say sometime after the predicted monetary collapse - but the main point being that there be no need for nasty violent revolutionary resets to happen. Wishful thinking? - Maybe, but an important discussion I think, however it is noticeably absent from all political party agendas, media discussions, etc. 

[MrXxxx]

Financial/economics newbie like me?...feel like DB el al appear to be speaking a different language?...take a look at this, one of the best articles I have read in a long time; she has a great way of explaining the complicated basics

https://www.lynalden.com/quantitative-easing-mmt-inflation/

I now understand what you guys are talking about....and it has also made me realize that QE is stealing from those who have been financially responsible to those (both companies and plebs) that haven't...

...oh, and how truly worthless FIAT is about to become!...a real `light bulb` moment.

[sancho panza]

17 hours ago, Cattle Prod said:

Yep, oil prices are surprising all and sundry, except us. Brent curve has just moved into backwardation, Trafigura and Vitol have just started talking their (long) book, and Total has just bought up most of the floating caroges in the North Sea. All points to physical tightness. At the bottom, with single digit oil, all the meadia scraming about tank tops and overflowing oil, I said this was likely to happen. People must have thought I was nuts, but here we are. The industry responded and supply is way down, probably below demand. Lovely to see a market work like it should.

Production in the US went to about 9.5, from about 13.5. I thought it might lose 4.5mbpd, I'd say it got to 4. About 2 million was from shale wells shutting in. Some of those are coming back on now, and that's fine. (I don;t know how many will stay off, to answer your question). But I'm ok with that,  I want them producing and depleting at these prices, with no new drilling coming in behind them. So US production is rising modestly, and probably will for a few months yet. The real fun will start toward the end of the year, when production declines really kick in with no new wells to offset. I was concerned that we needed a few months more of low prices to ensure shale stays quiet, but Art Berman is persuading me that it's baked in already. He knows a lot more than me about land rig contracting, drilling and completing, and reckons a long term decline is now unavoidable due to the lead time needed to get the rig fleet up and running again. It's all about natural decline of shale oil. Please note that the 27% Permian decline he cites is for the basin, not new wells. New wells are much higher, probably 70%+ in the Permian. You can see that in the steepness of the blue segment on the graph, he doesn't make this clear. The 27% is an average of these new wells, and the tens of thousands of old wells plugging on at 10-50 bbl a day. It is an incredibly high decline number for a basin, and is useful to indicate how many rigs you need drilling to offset that number (500-600 rigs for all shale plays, currently 165).

He reckons the US will decline to 8m bbl/d by mid 2021. That's (a non shut in or easily replaceable) loss of 4-5mbpd. That's half a Saudi Arabia. That will be the largest and fastest natural loss of production in the history of the oil industry, by far. As he points out, that may be appropriate to a new demand level, but if demand catches back up...yikes.

He has a new piece out yesterday, funnily enough, and is on macrovoices about this yesterday, which I haven't heard yet:

https://www.artberman.com/2020/06/18/u-s-energy-dominance-is-over/

This could have been written by @DurhamBorn himself:

He also notes what I had been saying before Covid 19 on here, it was happening anyway, and the virus has massively accelerated it;

Full text:

 

Thanks for posting and doing the highlights.You're insights always pick up the subtle nuances that the layman reader like myself wouldn't get,some of which can play a crucial role in the leads and lags.

I presume Backwardation is unusual with non perishable commodities?Does a move into bacwardation mean that the market expects a hgiher oil price in the future or is it more a factor of supply/demand.How unusual is it?

Also,presuming that these rigs are constantly being sighted in new places means a relatively transient workforce that can be hard to reassemble once they've all headed home.?same with the drilling kit?I presume once they;ve stopped drilling,the kit heads back to the owner and they store it.How logn would it take to get back to 500 rigs logistically once you're down at 165? Difficult question I realsie you may not know the answer to it.

One interesting fact I learned off a friend who drives for the CO op is that engines,once theyve been stood,have all sorts of problems when they start being used again with bits breaking and faults galoe.Is that the same with drilling rigs? ie if one has been stood around for a year,then it's going to take time and maintenance to get it running regularly.

Given we're down from 100mn bpd in 2019,EIA is projecting 97mn for 2021......That probably doesn't include the loss of shale.

Reason I say this is that I've read that a 5% drop in supply can lead to a 20% rise in price if demand is constant.How accurate do you think that ratio is?

https://www.eia.gov/outlooks/steo/report/global_oil.php

 

also worth ntoing when you see the OPEC proportion of world  production,you realise that in poker terms theyre trying to bluff the big stack

[sancho panza]

7 hours ago, JMD said:

Thanks HeartsEase, It is curious that the blog author still clings to the Euro being a 'bridge to a world currency'. I think the article reads a bit cultish (like much of the original blog postings tbh; would you agree/disagree?), and perhaps written by someone (author is anonymous I think) unaware that the Euro's future role (if it does survive) is to lock european nations into a super-state, with common tax and spend policies for starters. For example, the 'susceptibility to political influence is a strengh' line sounds weak/disingenuous to me - surely it is obvious that the Euro experiment has shown that a world currency cannot be introduced regionally, particularly if one country such as Germany in the case of the Euro, is allowed to dominate a currency's function, eg exchange rate, and to the detriment of the other member countries.                                                                                                                                                                                   But perhaps the whole idea of having a world currency without a central authority to run it is a chimera. Surely Bitcoin has been shown to be to volatile to work as a currency? Perhaps a compromise is needed where maybe each country has its own crypto, with the underlying block-chain (very disruptive/exciting technology) defining the limit of government and also the responsibilities of its citizens. Actualy I think these types of ideas/technologies become even more important to implement as future governments will probably come to own larger and larger slices of the economy. For example the 'block-chain contract' could hopefully then allow a more libertarian/free society to emerge in future years, say sometime after the predicted monetary collapse - but the main point being that there be no need for nasty violent revolutionary resets to happen. Wishful thinking? - Maybe, but an important discussion I think, however it is noticeably absent from all political party agendas, media discussions, etc. 

There's already a world currency and it's called gold.been a functioing world currency at border psots for 2000 years.

 

you've nailed it in bold,they want a world currency they can print ad infintum.Hence whilst there is a world currency,it's not to their tastes.

[sancho panza]

2 minutes ago, Cattle Prod said:

Not really, in oil it really just reflects the storage situation. The likes of Vitol and Trafugura make good money storing oil in Contango situations. When futures move to backwardation, the incentive to store it is gone. Sign of stocks are about to be drawn down, and market is in deficit.

that makes sense,effectively guaranteeing a price spike at some point in the not too distant...

32 minutes ago, MrXxxx said:

Financial/economics newbie like me?...feel like DB el al appear to be speaking a different language?...take a look at this, one of the best articles I have read in a long time; she has a great way of explaining the complicated basics

https://www.lynalden.com/quantitative-easing-mmt-inflation/

I now understand what you guys are talking about....and it has also made me realize that QE is stealing from those who have been financially responsible to those (both companies and plebs) that haven't...

...oh, and how truly worthless FIAT is about to become!...a real `light bulb` moment.

does it make you want to buy euros as a brige to a new world currency?

[BearyBear]

I'm honestly thinking all these things that are currently happening can't be real...! What if someone from BoE reads this?

https://www.abc.net.au/news/2020-06-18/reserve-bank-considered-asking-for-real-estate-transaction-pause/12363222

Key points:

• RBA documents obtained under FOI warn of a sharp fall in housing prices
• In April, an RBA economist wrote to colleagues, calling for a housing market halt as happens in stock market trading during emergencies
• The RBA's reports on the deteriorating situation in construction may have influenced the announcement of the Government's HomeBuilder program

[MrXxxx]

13 hours ago, BearyBear said:

I'm honestly thinking all these things that are currently happening can't be real...! What if someone from BoE reads this?

https://www.abc.net.au/news/2020-06-18/reserve-bank-considered-asking-for-real-estate-transaction-pause/12363222

Key points:

• RBA documents obtained under FOI warn of a sharp fall in housing prices
• In April, an RBA economist wrote to colleagues, calling for a housing market halt as happens in stock market trading during emergencies
• The RBA's reports on the deteriorating situation in construction may have influenced the announcement of the Government's HomeBuilder program

So the government can dictate when you can sell your possessions...where's the free-market economics in this then?...this happens then there is no doubt that the whole system is `fixed`/a ponzi!

[Majorpain]

15 hours ago, BearyBear said:

I'm honestly thinking all these things that are currently happening can't be real...! What if someone from BoE reads this?

https://www.abc.net.au/news/2020-06-18/reserve-bank-considered-asking-for-real-estate-transaction-pause/12363222

Key points:

• RBA documents obtained under FOI warn of a sharp fall in housing prices
• In April, an RBA economist wrote to colleagues, calling for a housing market halt as happens in stock market trading during emergencies
• The RBA's reports on the deteriorating situation in construction may have influenced the announcement of the Government's HomeBuilder program

Australia's last recession was around 30 years ago, thanks to China's resource demand they skipped 2008, the problem with that is malinvestment doesn't get purged and builds up in the system until it risks collapsing the entire thing.  They have taken "you can't lose on bricks and mortar" to a whole new level and make the UK look like amateurs on the subject.

[Sugarlips]

1 hour ago, Majorpain said:

Australia's last recession was around 30 years ago, thanks to China's resource demand they skipped 2008, the problem with that is malinvestment doesn't get purged and builds up in the system until it risks collapsing the entire thing.  They have taken "you can't lose on bricks and mortar" to a whole new level and make the UK look like amateurs on the subject.

Not sure what you mean?!

Phone number prices for utter shite

https://www.domain.com.au/news/decrepit-darlinghurst-terracce-sells-for-4621000-more-than-half-a-million-dollars-above-reserve-963831/

[Loki]

I can't help but wonder if we're not going to get a reflation if these COVID shutdowns carry on.  It just won't be possible to get the economy moving again if the real world is in 'safe mode'.

Edit: Tell me why that's stupid and I'm stupid, me and my ISA welcome these thoughts. 

[Loki]

3 minutes ago, Cattle Prod said:

To me its a question of liquidity. What does it matter if the economy is in safe mode, say down 10%  GDP a year, if the central bank is spraying a multiple of that around? About 25% so far in the UK? And unlike 2008, we can see it. All the folks on furlough, cheap business loans.

But is that an infrastructure reflation? That's just 2008 again isn't it?

What are they going to buy at the moment? What are they going to buy when existing stock is used up?

[ThoughtCriminal]

10 hours ago, Sugarlips said:

Not sure what you mean?!

Phone number prices for utter shite

https://www.domain.com.au/news/decrepit-darlinghurst-terracce-sells-for-4621000-more-than-half-a-million-dollars-above-reserve-963831/

That is astonishing. By any standards.

[Viceroy]

In light of 'The Great Reset' as they call it, my other half who works in insurance risk sent me this article today - ; 

 

https://www.brinknews.com/not-all-oil-is-equal-which-types-should-oil-companies-turn-back-on-as-the-economy-recovers-paris-agreement-climate-change-post-covid/?utm_source=BRINK+Subscribers&utm_campaign=78fdf564e7-EMAIL_CAMPAIGN_2020_06_18_09_07&utm_medium=email&utm_term=0_c3639d7c98-78fdf564e7-109766913

 

'In recent months, numerous European oil majors have tightened their commitments to zero-GHG emissions. Eni is creating a new internal division, a Transition Company, to attract a different set of investors. Over the past decade, transition energy ventures have had higher and less volatile shareholder returns than oil companies. Equinor is planning to convert natural gas to hydrogen with carbon capture. BP plans to erase over 400 million metric ton of GHGs annually by investing in renewables and reducing methane emitted from its equipment. Shell is banking on a new power business and natural sinks like reforestation and carbon capture. Repsol plans to integrate renewables into its refining operations through the production of green hydrogen and the use of zero-carbon electricity. '

[MrXxxx]

On 20/06/2020 at 09:26, sancho panza said:

There's already a world currency and it's called gold.been a functioing world currency at border psots for 2000 years.

 

you've nailed it in bold,they want a world currency they can print ad infintum.Hence whilst there is a world currency,it's not to their tastes.

And wrapped up in this is the move to a cashless society where you can `manage` (read devalue) a  currency at the `flick of a switch`...try doing that with an oz of gold.....its also interesting how the supermarkets are trying to `encourage` the use of cashless payments during the Coronavirus scenario under the guise of hygiene yet others could pass on the pathogen by handling their stock, just one of the many Covid19 contradictions!