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

[sancho panza]

26 minutes ago, Rave said:

 

Chris Snowdon has done an interesting twitter thread on this:

 

He's a noted opponent of the nanny state so I'm inclined to take him at face value, but obviously I wouldn't want to be seen to be doing an 'appeal to authority' so please everybody continue to DYOR .

My own personal stance is that once everybody has been offered a vaccine (whether they have accepted it or not) then lockdowns must end and everyone must decide for themselves whether to chance it.

And my own personal stance on the vaccine was that, as someone who is not eligible for any government support payments of any type, and given that the vaccine appears to be safe enough by my own standards, then it was in my interest to take it simply because I'm "self employed" and I stood to lose money if I had to stop working through illness. I will not use a vaccine passport in this country on principle (though I would get one if it enabled me to travel abroad, since it doesn't seem unreasonable to me for countries to try to stop foreigners potentially bringing the virus in).

you've also got the issue that as self employed,some people may not hire you.Sad but true.That was why my dentist got the jab,to protect his business

[Lightscribe]

1 hour ago, sancho panza said:

I read the article and the reason I found it informative was that it highlighted,albeit as you point out,in a non peer reviewed study,the possibility that people who've been vaccinated can catch still catch covid. @Lightscribedid misinterpret what was in it but you can link to peer reviewed studies and misinterpret what's in them.I'd assume that anyone who's read the article and marked the post informative has similarly read the article.

You've assumed that I marked Lightscribe's post informative without reading the article from what I can see.

In terms of taking the vaccine,I'd agree that everyone has to weigh their risk profile individually.

The whole issue of peer review is important,hence one might attach more significance to articles that are. However,much like official inflation figures,some anecdotal evidence can potentially give you an insight that's not currently available from offically compiled stats .In terms of peer review,I'm still waiting(as is the world of lockdown sceptics) for Prof Neil Ferguson to publish the computer model he used to create his original wildly inaccurate covid fatality predictions in 2020.

 

Completely agree, figures, models and stats have been wildly inaccurate throughout the whole pandemic, especially with the suspect initial figures from China.

In addition I would also like to have access to further studies on why the government acted so irresponsibly in the 50’s by not initiating lockdowns or reviews into why so many older lives were lost to excess winter deaths, despite having such a smaller population.

https://www.bbc.co.uk/news/uk-42324984

 

Surely the answer would be to vaccinate the vulnerable and let them isolate, then let the rest of the younger demographic who are least affected by rhinoviruses, coronaviruses, influenza viruses and their variants to get on with their lives building herd immunity and the economy?

[Harley]

On 12/04/2021 at 21:39, DurhamBorn said:

Your probably looking at holders of the ADRs ,Telefonica Spain own 70% of the equity i think.

Having humbled myself over this, I dare risk more humiliation or maybe redemption!  I looked at the financials for VIV and its parent(?) TEF (Madrid exchange).  Very different.  VIV looks in quite good shape but TEF is more of a basket case regarding debt, etc, or is at least not as good.  Unless TEF somehow impacts VIV (say inter-company loans and guarantees, etc)  VIV seems the lower risk/better value in that respect?

[sancho panza]

1 hour ago, DurhamBorn said:

Inflation will decide how long this goes on.Once its over 3% and remains there QE will slow down and then stop.Governments then will be facing a huge structural deficit.Then government will have to hold down spending so inflation can do its work.

 

DB,I'd be interested on your take on the following if you have one.Sorry for the long post but it's hard to cut down.Highlights are mine.

Shaun Richards asking whetehr we will rein in credit rather than lift IR's like the Chinese are doing.

https://notayesmanseconomics.wordpress.com/2021/04/12/china-moves-to-tighten-monetary-policy/

China moves to tighten monetary policy

This morning has brought something which raised a bit of a wry smile. It came from the People’s Bank of China and the emphasis is mine.

At the end of March, the balance of broad money (M2) was 227.65 trillion yuan, a year-on-year increase of 9.4%, and the growth rate was 0.7 percentage points lower than the end of the previous month and the same period last year; the balance of narrow money (M1) was 61.61 trillion yuan, a year-on-year increase of 7.1%. The growth rate was 0.3 percentage points lower than the end of the previous month and 2.1 percentage points higher than the same period last year;

It was the case for many years that China had faster money supply growth than the West. But as you can see it is a fair bit lower now as for example the latest broad money growth in the Euro area is shown below.

Annual growth rate of broad monetary aggregate M3 decreased to 12.3% in February 2021 from 12.5% in January.

There are various contexts here and the first is the 3% difference in broad money growth rate. This matters in terms of monetarist theory because it leads into growth in nominal economic output or GDP with a lag of 18-24 months. So either the Euro area is going to grow faster than China or we will see an inflationary push. These days the inflationary push tends to turn up in asset prices such as house prices rather than consumer inflation especially in the Euro area where its measure ignores owner-occupied housing.

 

Time to Tighten?

Firstly let me apologise to any Western central bankers reading this next bit as it must be discombobulating. Please make sure you are sitting comfortably as we join the China Economic Review..

China’s central bank has asked lenders to rein in credit supply, as the surge of lending that sustained the country’s debt-fueled coronavirus recovery renewed concerns about asset bubbles and financial stability, reported the Financial Times.

New loan growth hit 16% in the first two months of the year. The People’s Bank of China responded in February by instructing domestic and foreign lenders operating in the country to keep new loans in the first quarter of the year at roughly the same level as last year, if not lower, according to FT sources with knowledge of the situation.

The directive could translate into a considerable drop in bank lending, the largest source of financing for the world’s second-largest economy, said the FT.

The policy mechanism of using a quantity measure is one that also differentiates China from the West or at least it did. The reason here is that Western experience was that trying to control lending in one area led to two problems. Firstly that it is a blunt instrument that tends to impact on all lending including that to the real economy and thus affects economic growth. Next that lending for property is hidden via all sorts of machinations so that we get what is called disintermediation where the official measures do not count what the officials think they do.

Is Inflation on the rise?

Late last week brought news of changes as we look up the inflation chain. From the National Bureau of Statistics.

2021 March, the country’s industrial producer prices rose 4.4% , up 1.6% ; industrial producer prices rose 5.2% , up 1.8%

The area pushing this change is below.

Among them, the price of mining and quarrying industry increased by 12.3% , the price of raw material industry increased by 10.1% , and the price of processing industry increased by 3.4% .

This has led to a response this morning.

China will strengthen controls on the raw materials market to help limit costs for companies that have been pressured by a surge in commodity prices, China National Radio reported, citing Premier Li ( @FirstSquawk)

According to Bloomberg the crunch is already impacting students.

Last month authorities effectively shuttered student access to the once ubiquitous online loan industry, a sprawling collection of apps, fintechs and other unregulated lenders. Internet platforms were told to stop offering online loans to students and unwind existing credit. Banks will need to seek regulatory approval before promoting such loans on campus.

The loans look not a little usurious to me.

Historically there were next to no affordability checks on short-term loans to students, where annualized rates are typically between 15% and 24%.

What could go wrong?

 

[Bear Hug]

I am trying to think where I can park my work pension contributions during the BK. 

Not many options, so narrowed it down to cash, UK FI gilts fund or UK indexed gilts fund. 

Does anyone have any views whether cash or gilts are better in such scenario? Unfortunately USD is not an option.

Other thoughts are maybe to put some in emerging markets fund, but guess that could be hit as hard as the rest. 

[Harley]

12 minutes ago, sancho panza said:

you've also got the issue that as self employed,some people may not hire you.Sad but true.That was why my dentist got the jab,to protect his business

Will he be welcoming the unvaccinated?

[Harley]

1 hour ago, leonardratso said:

hey fatty, stop going to the fridge, or if you cant then move the fridge to the next town and away from the settee by at least a mile.

Oh I don't know.  He posted a pic of himself upstairs.  I would!

[Harley]

5 minutes ago, Cattle Prod said:

thanks, that's interesting.

There is a major flaw in his analysis. I don't disagree with him that vaccines are not necessarily correlated with overall death reduction numbers (cases are largely irrelevant and should be discarded). The fact is that we are vaccinating millions of people who don't need to be. Whose immune systems will kill the virus in hours, and never transmit it, or who have already have had it and are already immune. However he gives lockdown as the causative factor in numbers coming down, which is a total assumption. How do we know, if there is no control group? We have never done this before, and the coincidence of dates is just that, coincidence. I'm sure locking everyone away from each other had some minor effect, but personally, I've had a few sniffles and tickly throats this winter (which my healthy immune system promptly killed. How did these viruses get into my system when this seasons dominant virus is supposedly 'locked out'? Doesn't add up. I suspect could make Snowdon's argument replacing the word 'lockdown' with 'seasonality'.

The good ole USA have provided us with a proper experiment with many control groups. There is no statistical difference between lockdown or non lockdown states (or any in between). Lockdown is just bollocks. Viruses are really, really tiny and can't be stopped going about their business.

At the risk of turning this into a pure covid thread, I thought the numbers were coming down even before the last lockdown.  This whole "whateverdemic" has been a lovely lesson in the use and misuse of statistics and the sanctity of pure honest data and a rational mind.  We should be miles better to profit from the markets now, if we're still going to be allowed to!

[sancho panza]

11 minutes ago, Harley said:

Will he be welcoming the unvaccinated?

Absolutely,he's very well connected in the medical community and informed me that a fair few of his contacts in different fields thought the whole lockdown was 'bollocks'.His words not mine.

[nirvana]

53 minutes ago, Rave said:

though I would get one if it enabled me to travel abroad, since it doesn't seem unreasonable to me for countries to try to stop foreigners potentially bringing the virus in).

you can't discriminate against anyone who hasn't been 'drugged up'...... EU resolution 2361 section 7.3.2

But yeah I do acknowledge that the EU is trying to implement 'Digital Green Certificates'

If I was closer to the border I'd have a go at cycling over and see what the cunts have to say about it 

[JMD]

2 hours ago, BurntBread said:

There is something funny about digital currency with a time-limit, which makes me think it's slightly less likely.

Governments love inflation, because it's a tax which working people don't know how to avoid, and typically don't realise it is a tax at all. Once you inflate the money supply, and when things have come back to some kind of equilibrium, then I think the overall result has been to confiscate wealth from two types of people: cash savers and bondholders (for example pensioners). As DB says, this is confiscation of saved labour. Those people who want to avoid the tax can do so by getting out of cash and bonds and into real things (including part-ownership of companies).

By introducing a digital currency with a time-limit, the government would be forcing cash into being just a medium of exchange, rather than a store of value as well. That will actually reduce the pool of people they can steal from through inflation, which is why I'm starting to doubt whether they really want to do this. Admittedly, the theft from bond-holders is much greater than that from cash-savers (not many people have large cash savings, and the leverage from debt is bigger), but it's still removing a part of the benefit (to the government) of inflation, as a tool to farm the population.

Am I making a reasonable point here, or is it just wishful thinking?

I thought the main 'policy reasoning' by governments in regards forcing inflation up, was in order to engineer a soft default on debt? Controlling how/when money is spent - by implementing a digital currency - will make doing this much easier.

Plus, in the event of the above inflation policies not working - and instead we get a total world monetary collapse near the end of the decade - such CBDC's will really come into their own, because they also contain nice long-term features (not bugs), such as real-time monitoring/control facilities... so roll out the CBDC's say over next couple years, allow couple more years to work out how to use them properly 'on/against?' the public', and this brings us to approx. 2028, coincidence or conspiracy, you decide!?!

[JMD]

2 hours ago, Cattle Prod said:

6 months, I think

And the Covid emergency legislation also has a sunset clause. Though i do fear we are in this for the 'long haul' (ie i believe that that in Northern Ireland the IRA-terrorism threat security laws and powers were routinely re-enacted for over two decades. 

The below article seems to be a balanced summary of pros/cons. 

COVID-19, emergency legislation and sunset clauses, by Sean Molloy – COVID-19 Perspectives (ed.ac.uk)

 

[Noallegiance]

1 hour ago, planit said:

Funniest article so far today, I wonder what happens when people start flying

 

Plane industry's fucked

[Harley]

So I went back to work after visiting here and listened to the following.  On topic.  Gets better as it goes, if you can keep up!  What I like is this guy is from Latin America (Chile).  Always worth listening to such people when possible as they've been where we may be going.  It's a much as the way he thinks (through "upbringing") as what he says.

 

 

[DurhamBorn]

@sancho panza i think they will use both.We might see some QE still and a rate increase.The thing to remember here is the CBs havent really monetised government debt,they have monetised private debt by the government handing the printed money to the public and companies.So yes in pure simple terms the CBs monetised government debt,but the real affect was monetising private debt.

Why do that?,well because they want the private sector to take over the recovery from government once its in flow so governments structural deficits can be eliminated.Fed will be wanting to keep the long end from going up anymore i expect and the way to do that is to raise the short end to look like your taking inflation serious,but not letting the curve invert.

Main thing to watch is inflation.I dont think they will do anything before 3%,and then if they tighten too quickly,BK.

[Harley]

45 minutes ago, JMD said:

And the Covid emergency legislation also has a sunset clause. Though i do fear we are in this for the 'long haul' (ie i believe that that in Northern Ireland the IRA-terrorism threat security laws and powers were routinely re-enacted for over two decades. 

The below article seems to be a balanced summary of pros/cons. 

COVID-19, emergency legislation and sunset clauses, by Sean Molloy – COVID-19 Perspectives (ed.ac.uk)

 

FYI.  The sunset clause is misleading.  Sunset for some relatively minor things, but at the minister's discretion for the remainder.  As usual, devil's in the written detail the MSM don't touch.

[sancho panza]

2 hours ago, planit said:

With a vaccine you are less likely to catch Covid AND less likely to pass it on. This has been confirmed by studies in Israel etc.

Vaccinated people less likely to transmit coronavirus

I haven't checked these figures but hopefully it demonstrates the point.

If there is an 80% efficacy for the virus then there is only 20% chance of catching it.

On top of that if there is a 50% less chance of passing it on if you do catch it then the propagation of the virus falls by 90% due to the virus (0.2 x 0.5). This is a huge drop and more than enough for herd immunity solely from the vaccine (ignoring the 30% of the population that have already had the virus and the 25%[guess] who are naturally immune).

 

This is the sort of thing @Rave is referring to.What this article says is that in people over 60(most of whom have been vaccinated),viral loads were lower.Not surprising.The article does point out that the study was unsure whether the samples were from people who'd been vaccinated .

 

'The results are only based on partial data, because MyHeritage did not know if individual samples came from patients who had been vaccinated or not. But overall, the results appear to show that once someone is vaccinated, even if they have the virus in their system, they are less likely to pass it on because they have fewer infectious SARS-CoV-2 droplets hanging around their noses and throats. '

From my limited understanding,lower viral load means a reduction in the severity of symptoms,all other things being equal.Exactly as it should with a vaccine.

There's an assumption underpinning the article and it's one that's still being debated by scientists and Doctors and that's with regard to asymptomatic infection.If you're not symptomatic ie not coughing/sneezing etc,then you're less likely to pass the disease on than someone who is.Viral load isn't the only determinant of how symptomatic you become as far as I'm aware.Younger people,tend to be more asymptomatic

Furthermore if asymptomatic infection does exist,the article states clearly

'clinical trials didn’t produce robust results on whether those who are vaccinated will still spread the virus. '

 

 

[sancho panza]

1 hour ago, Lightscribe said:

Completely agree, figures, models and stats have been wildly inaccurate throughout the whole pandemic, especially with the suspect initial figures from China.

In addition I would also like to have access to further studies on why the government acted so irresponsibly in the 50’s by not initiating lockdowns or reviews into why so many older lives were lost to excess winter deaths, despite having such a smaller population.

https://www.bbc.co.uk/news/uk-42324984

 

Surely the answer would be to vaccinate the vulnerable and let them isolate, then let the rest of the younger demographic who are least affected by rhinoviruses, coronaviruses, influenza viruses and their variants to get on with their lives building herd immunity and the economy?

You need to be very careful with any data relating to 'excess deaths' as definition is everything and a lot of people on both sides of the debate have played loosely with them.

All cause mortality per capita is the sensible metric for context historically in terms of death rates.It cuts out debates over whether people died of covid or MI's or strokes.

I suspect the difference between the UK and NZ is more demographic than anything else.And we'll likely see a rise in both as missed cancer diagnoses etc etc come through hereafter.

UK highest death rate since 2007

https://www.macrotrends.net/countries/GBR/united-kingdom/death-rate

New Zealand has it's highest death rate since 2003

[JMD]

2 hours ago, Harley said:

To me, the odd furlough extension to September immediately made me think of a project go-live being delayed.  Maybe they are not ready yet to pull the switch to whatever they have in store for us financially.  Systems not ready, data not ready, users haven't been fully "trained", change managers saying user acceptance not quite there yet, technical issues, testing not going well etc, etc?

Harley, yes I.T. departments have always insisted that missed deadlines, budget over-runs, etc, are because they are tasked with inventing/introducing something new, so problems and unforeseen delays are to be expected. However, after 30 years of hearing this 'excuse', it is beginning to wear a bit thin.

But just to flesh-out further the technical analysis (or was it paralysis?) you kindly provide us above, i would like to add that our own Track-and-Trace system is to be overhauled. (the improbably named/or is it aptly named?, i can never quiet decide!) 'Dido Harding' has apparently come up with a novel new idea involving Lobster Pots(!!)... anyhow Dido assures us the concept is mostly about the marketing, so do please be assured that no cruel or unusual methods are planned.  

 

[Lightscribe]

1 hour ago, Noallegiance said:

Plane industry's fucked

That was my next topic subject backing away from virus talk proving controversial  (I’ll add that to the list with crypto )

https://www.ft.com/content/b8766e60-1a20-41ee-871d-6b97dbee71e8

Virgin will be buggered. I exchanged all my points for my Dads birthday for flying lesson package for me and him at RAF Duxford last year.

My ex used to work up the chain in BA management so I know BA will also be in major trouble. Business’s travel pays for the flights to operate basically and one look at the FT article comments above and those on sites like Headforpoints, will show that is in danger of never coming back. They also sometimes work to 10-20% no show in overselling which makes up the profits which may also be a factor.

I myself used to be an avid airmile and credit card point collector and flew a bit through work. I’ve always enjoyed sitting in the comfort of a lounge, out of the hussle and bustle of the airport as well as getting a comfortable seat with an upgrade. The soulless look however in the travellers eyes that spend half their life in the air was never for me. 

After 9/11 the airline credit cards threw out massive bonuses to get people back on the aircraft and into the system. I can’t see them doing that now with reduced transaction card fees etc.

Most now have finally realised that waiting in airport security queues and the jet lag wasn’t ever really worth the jolly, and companies are cutting back realising their savings now the remote working infrastructure is all in place.

Domestic companies may have the upper hand here, as face to face securing deals becomes more of a rarity combined with inflationary environment.

I did buy some IAG and have taken profits and sold. I’ve mentioned my allocation in Rolls Royce that has been a stella buy for me but I’ve also now sold that too.

[nirvana]

in other news, cryptos to the moon (again) 

 

[Lightscribe]

40 minutes ago, sancho panza said:

You need to be very careful with any data relating to 'excess deaths' as definition is everything and a lot of people on both sides of the debate have played loosely with them.

All cause mortality per capita is the sensible metric for context historically in terms of death rates.It cuts out debates over whether people died of covid or MI's or strokes.

I suspect the difference between the UK and NZ is more demographic than anything else.And we'll likely see a rise in both as missed cancer diagnoses etc etc come through hereafter.

UK highest death rate since 2007

https://www.macrotrends.net/countries/GBR/united-kingdom/death-rate

New Zealand has it's highest death rate since 2003

I’ll edit this as I was being facetious

here’s the official CDC influenza map and reasoning 

 

https://www.who.int/influenza/surveillance_monitoring/updates/latest_update_GIP_surveillance/en/

[nirvana]

2 minutes ago, Lightscribe said:

Well at least influenza has disappeared which must of helped reduce the statistics 

here's a statistic for you.....which highlights why it's all shite to me....I'll be off to talk to my plants again 

Figures show that 36 people on average died each day from coronavirus over the past week, down from a peak seven-day average of 1,280 in mid-January. 

By comparison, cancer is claiming 450 lives every day, or about 166,000 annually

[Harley]

27 minutes ago, JMD said:

Harley, yes I.T. departments have always insisted that missed deadlines, budget over-runs, etc, are because they are tasked with inventing/introducing something new, so problems and unforeseen delays are to be expected. However, after 30 years of hearing this 'excuse', it is beginning to wear a bit thin.

But just to flesh-out further the technical analysis (or was it paralysis?) you kindly provide us above, i would like to add that our own Track-and-Trace system is to be overhauled. (the improbably named/or is it aptly named?, i can never quiet decide!) 'Dido Harding' has apparently come up with a novel new idea involving Lobster Pots(!!)... anyhow Dido assures us the concept is mostly about the marketing, so do please be assured that no cruel or unusual methods are planned.  

 

So we agree they have a project.  That it is not going well is to be expected, indeed further proof they have a project(!).  Oi, Dido, stand away from Dr Patterson!

[Bricormortis]

Re above               link to Telegraph, remember to press refresh then escape, to dodge the pay wall.

Oxford university calculates that the number of people in hospital with a current covid infection is likely to be around half the official number.

Figures from the ONS show a quarter of all people recorded as died with covid died from other causes in UK.