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

[Bricormortis]

40 minutes ago, Knickerless Turgid said:

This is the reason I am convinced that governments have allowed the Bitcoin (and wider crypto) bubble to continue to run - they need the concept of cryptocurrencies to reach mainstream acceptance, before themselves introducing an alternative monetary system, based on what will by then have become more familiar technology.

Warnings about the risks of "investing" in cryptocurrencies have recently been released by governments and central banks, so they are already some way down the road. Next step will be to ban all shitcoins, "for you own protection", leading to their obsolescense - but, never fear, your friendly government has come up with an alternative, for the good of us all. Hell, the geeks might even embrace it!

For the record, I hate hill-walking these days.

I think they will leave no alternative to digital fiat whatsoever, if they can.

[dnb24]

46 minutes ago, Lightscribe said:

How about taking it further? Individually weighted currency.

Bob smokes 40 fags a day, so for the sake of Bob’s ‘health’, his second packet of fags costs him double. 

Bob can’t pay for a cheeky 200 box of counterfeited/imported either, as cash doesn’t exist. All digital person to person transfers tracked and accounted for on the government blockchain, naughty Bob, he gets fined and his cigarettes purchases suspended.

No dodging the tax man, no underhanded cash in hand payments, the upside to the government is endless.

Bob instead trades 200 fags for a couple of chickens and a 4 pack of home brewed beer- human necessity, ingenuity and corner cutting always out manoeuvres top down government 

[Cosmic]

1 minute ago, dnb24 said:

Bob instead trades 200 fags for a couple of chickens and a 4 pack of home brewed beer- human ingenuity and corner cutting always out manoeuvres top down government 

Unless buying fags lowers your government health score and impacts your access to healthcare down the line. You may be just buying them to barter but if it negatively impacts your healthcare this activity can be discouraged.

[Lightscribe]

1 minute ago, Bobthebuilder said:

Oi.

Want your boiler fixed? Pay me in tobacco if you want a good price.

The power of AI. Tracking, Facial ID, any job carrying out registered and logged to be signed off. Not the agreed rate, time spent etc? Flagged up. 

 

[Bobthebuilder]

3 minutes ago, Lightscribe said:

The power of AI. Tracking, Facial ID, any job carrying out registered and logged to be signed off. Not the agreed rate, time spent etc? Flagged up. 

 

In terms of the government chasing up registered trades for signing off notifiable works, they have not bothered anytime before now, how would they change that? 50% of so called licenced gas and electrical work is done by rubbish unlicensed twats already.

So many rules but no one to police them.

[Barnsey]

9 minutes ago, Lightscribe said:

The power of AI. Tracking, Facial ID, any job carrying out registered and logged to be signed off. Not the agreed rate, time spent etc? Flagged up. 

 

Watched Minority Report at the weekend, 19 years old now but fascinating and somewhat relevant, especially the iris tracking stuff (story even older of course)

[Noallegiance]

10 minutes ago, Barnsey said:

Minority Report

They should rename news bulletins to this.

[Lightscribe]

This scenario could be based on this where you own nothing theoretically.

https://www.weforum.org/agenda/2016/11/how-life-could-change-2030/

Smoking licences? NZ has brought a ban in from anyone smoking born after 2004. Designated smoking areas only? Cant smoke indoors as you don’t own it through debt forgiveness / asset forfeiture etc. 

The key aspect to take away here is its been proven the last year or so that people will openly favour restrictions placed on themselves given the right narrative. 

Changes that people may have thought impossible two years ago are in place today. What will the next few years bring?

What are the limits that people will adhere to avoid restrictions that could effect themselves or their family? We may find out.

 

[Barnsey]

7 minutes ago, Lightscribe said:

This scenario could be based on this where you own nothing theoretically.

https://www.weforum.org/agenda/2016/11/how-life-could-change-2030/

Smoking licences? NZ has brought a ban in from anyone smoking born after 2004. Designated smoking areas only? Cant smoke indoors as you don’t own it through debt forgiveness / asset forfeiture etc. 

The key aspect to take away here is its been proven the last year or so that people will openly favour restrictions placed on themselves given the right narrative. 

Changes that people may have thought impossible two years ago are in place today. What will the next few years bring?

What are the limits that people will adhere to avoid restrictions that could effect themselves or their family? We may find out.

 

Suppress human behaviour/needs in one way, and it always finds another, possibly worse behaviour.

[dnb24]

8 minutes ago, Barnsey said:

possibly worse behaviour

Usually worse behaviour! And worse being subjective- being a gangster during prohibition looked fun!

[Lightscribe]

25 minutes ago, Barnsey said:

Suppress human behaviour/needs in one way, and it always finds another, possibly worse behaviour.

What if human behaviour could be ‘edited’? I’m playing Devil’s advocate here but it’s all in the realms of possibility.

https://www.gov.uk/government/publications/regulation-for-the-fourth-industrial-revolution/regulation-for-the-fourth-industrial-revolution

[Barnsey]

 

[planit]

@Cattle Prod

 

Regarding the Saudi Inventory drawdown, I thought I would try to be a bit useful to find some more information.

 

This article from Sep 2016 (when the level was 281m barrels) says this (which is probably the authors guess):

Quote

Saudi Arabia's oil inventories peaked last October at a record high 329.430 million barrels but have declined since as the country has drawn down its stockpile to meet domestic demand without impacting its exports

At that time Saudi was exporting 7.6mbpd and producing 10.7mbpd so this implies

internal usage + exports > 10.7mbpd. 

They reduced 50m barrels roughly in 270 days so that is 0.2mbpd they were drawing down.

Their max consistent production has never gone higher than that as you have previously said.

If one instigates a price war (as there was against shale) it would be best for the 'war' to be as short as possible and the best way to do that would be to flood the market with as much extra oil as you can (to prove your might and get the 'enemy' to capitulate ASAP). The draw down of inventory and consistent level of production is consistent with this thesis.

Saudi did manage this in early 2020 when they seemed to be proving to Russia that they had spare capacity (sounds like Russia called their bluff). Whether they could keep these levels up is another matter, they could have drawn down inventories and hidden the draw,  their wells  might be able to produce at those levels for short periods (as @Cattle Prod has said) or perhaps they really do have the spare capacity.

 

The consistent draw down over 4 years is very odd, even when they reduced exports these inventories didn't rise. Perhaps they don't want the storage any more.

Bloomberg Sep 2018 said that Saudi was needing to ramp up production to make up the shortfall with Iranian sanctions. At the time the article says Saudi production was 10.6mbpd and Saudi did manage a single month at over 11mbpd before it dropped all the way to 9.8mbpd (so who increased production to cover this and the Iranian sanctions if not US). Going back to the Oxford report  you can see that it dropped below the 'target' for over a year. The graph does look like they suffered from over production on the wells. The inventory draw on CP post shows its steepest fall at this point.

 

The Bloomberg article also mentions this, not sure if this has been resolved but could be an extra or subtraction of 0.5mbpd:

Quote

There’s one more complication: of the 12.5 million barrels a day, only 12 million is controlled directly by state-owned company Saudi Arabian Oil Co., or Aramco. The other 500,000 barrels a day lies in the so-called Neutral Zone shared with Kuwait. But the region hasn’t produced a single barrel for nearly two years due to a dispute between Kuwait and Riyadh.

The Bloomberg article also questions the Crude storage figures (unfortunately the English is not good so I am not sure what they mean apart from it might be lower than the 229m they officially quote)

Quote

"From the sky, we see 70 million barrels in storage," he said, out of the 125 million barrels that the kingdom can store in 231 tanks spread across with terminals and refineries. "We don’t see anything extraordinary either in Saudi overseas tanks."

 

This Article says Saudi were aiming for 12.3mbpd in April 2020 but the chart above says they managed 11.9mbpd.

 

Conclusion

I couldn't find any recent articles discussing why the inventories were still declining and are now the lowest for 20 years. The best explanation is that there is no spare production  but we need to be very careful as commentators have been wrong questioning Saudi figures for a very long time (since 70s at least).

There is nothing to suggest that they can produce more than 11mbpd even when they were trying and the current situation is likely the same as everywhere else with no incentive to keep drilling when demand was so low. The Saudis can drill and raise production quicker than elsewhere, the article mentions 3 months. Even with this there is the chance that 9.7mbpd (from 2019-2020) is their limit, the Russians probably thought so.

I don't like to gamble on unknowns but hitting the 101.5mbpd needed at the end of next year does rely on all the countries being at the top of their game to make up for the US shortfall and this is against a couple of years where there was very low demand due to Covid.

The way I am looking at this is OPEC don't want prices lower than $60 per barrel so this limits the downside (barring any more Covid or similar disasters) and the upside is a world economic boom with all the money printing, infrastructure spending, excess consumer  savings, renewable and EV investment banging into a lack of spare capacity causing a price spike.

I will continue to look for early signs to play this before anyone else realises, in the meantime I still think BP is undervalued.

Thanks to everyone on this thread for all their input.

 

ps I haven't read through this post so I am sorry if there are mistakes

[23rdian]

7 hours ago, DurhamBorn said:

Retail investors are being squeezed and its always been so.There will always be things to invest in though because a retail investor can be quicker than almost anyone else.

Take BT

This thread highlighted the cycle was turning in its favour, @sancho panza even had it as the best value telco in his coma scores,we moved and i went in hard on that one,very hard,many at 95p.60% up and now the big banks who were saying sell then now start to see what we saw back then.Now i see what they see now.I agree with them.The point is though we understand the leads and lags on these macro road maps and thats the critical thing.

https://www.sharecast.com/news/broker-recommendations/bt-in-line-for-major-rerating-jp-morgan-says--7872894.html

As for the oilies,its sentiment still as the narrative is oil is dead,even Wood Mackenzie is saying $30 a barrel and falling by 2030 and $10 by 2050.

I think they are wrong.I think oil use will be just a little less than now by 2050 and inbetween i think the big oilies will cash flow in 5x their market caps and maybe a lot more.I HOPE Bp etc can stay down for as long as possible,i want them buying back shares at £3,not £4,£5 etc and i hope when they said at least 60% of cash flow after the div on buybacks they also use the other 40% as well until there is at least a £4 at the front of the share price.

As for the goldies ,im not a chartist and usually use ladders and not advice etc,but iv being buying Yamana Gold.

I'm not sure about BT, I quite fancy buying some but surely 5G and beyond will kill landlines however speedy in the long run? 

I mean, at least in the retail market, perhaps not for business?

[DurhamBorn]

@Barnsey on the jobs front its happening here as well.Almost every manufacturing company is taking on here,or trying to.GSK,3M and Cummins,iv worked at them all,and very hard to get in ,all wanting people now,unheard of them all to be hiring at once.The lower tier employers cant fill the positions.Im seeing adverts staying up forever,they simply cant fill the jobs at £10 an hour,and when they do the people dont care,go sick,dont turn in,leave etc.Im seeing nearly all adverts adding on,must be ok to work shifts for good,must ensure they have good attendance,cant change shifts etc etc,obvious people are tossing it off.I expect lack of new Eastern Europeans is biting now.

It was only a matter of time.Tax credits and public sector wages have priced out the lower end private sector.Im getting job offers daily,sometimes more than one and you can hear the desperation in their voices.They give the talk about wonderful prospects etc knowing the wages dont cut it.They go silent when you tell them the wage is way under,but i hope you find someone suitable willing to accept that 

[DurhamBorn]

8 minutes ago, 23rdian said:

I'm not sure about BT, I quite fancy buying some but surely 5G and beyond will kill landlines however speedy in the long run? 

I mean, at least in the retail market, perhaps not for business?

BT own EE and all the backhaul lines.For every account lost for a landline they will add five 5G accounts for IOT.The key to the industry is prices going up while depreciation falls,and thats where we are now in the cycle and then free cash increases fast.Regulators backing off and allowing inflation increases is key.Its always best in my opinion not to overthink things.A lot of the easy gains are already in though,but the sector should still outperform inflation from here easily.

[Phil]

Hi all, DurhamBorn. First timer on this thread and long time lurker for my sins, and they do go back to 2007 approx ( from the other site).  I’d like to thank everyone for their input into my layman understanding of the bullshit that has unfortunately always surrounded me. Just wanted to say thank you.

[JMD]

5 hours ago, Lightscribe said:

How about taking it further? Individually weighted currency.

Bob smokes 40 fags a day, so for the sake of Bob’s ‘health’, his second packet of fags costs him double. 

Bob can’t pay for a cheeky 200 box of counterfeited/imported either, as cash doesn’t exist. All digital person to person transfers tracked and accounted for on the government blockchain, naughty Bob, he gets fined and his cigarettes purchases suspended.

No dodging the tax man, no underhanded cash in hand payments, the upside to the government is endless.

Regarding future tax revenue oversight and controls, perhaps it's not all bad news. I mean with AI and Blockchain couldn't all corporate accounts be made equally as transparent to the government tax inspectors? And along with capitol controls placed on all tax havens I'm thinking a lot more tax globally would be raised by government. 

[JMD]

5 hours ago, Bobthebuilder said:

Oi.

Want your boiler fixed? Pay me in tobacco if you want a good price.

Tobacco would become a currency itself in that scenario. Why bother with money? cut out the middle man, go straight to the product/services. Rubbish fiat.

Would you accept Junk US silver? (...Just asking for a friend!!). With a silver price hike even those small denominated coins will become valuable. Really wish I'd bought a couple of 5kg bags back when they were cheap.

[Mapper]

Re CBDCs and governments tracking more things with AI, blockchain etc. we should all be very concerned about it. They are real threats and they are coming.

But, I am now thinking more as others have said above, that people will reject them. In ways we don't actually know about yet.

Think about how much benefit fraud goes on now. It boggles my mind the ingenuity of some of the scams people come up with.

Do you think more AI etc, will stop benefit fraud? I don't, I think people will just go about it in different ways.

And by forcing a [time limited / purchase type restricted...] currency on us, we will adapt. They will force more people into illegal activity, but if everyone is at it, who cares?

And let's not forget, some coppers like to drink, some politicians like to smoke.

I hope so anyway, I really do.

If there is hope it lies in the proles.

[Lightscribe]

5 hours ago, JMD said:

Regarding future tax revenue oversight and controls, perhaps it's not all bad news. I mean with AI and Blockchain couldn't all corporate accounts be made equally as transparent to the government tax inspectors? And along with capitol controls placed on all tax havens I'm thinking a lot more tax globally would be raised by government. 

In theory yes. But there lies the point, will it *actually* be completely transparent or will they use a separate blockchain? 

Marketed as socialism but in reality would it really just be Neo-feudalism. History of human nature has proven that there has always been one set of rules for those at the top and another for the masses.

As others have said on here, would all this bring about a barter economy? Maybe, unless people wouldn’t want to risk stepping outside of the lines. China could be the template as they already control nearly 20% of the world’s population.

The question remains however, could the westernised world transition to a similar format and live under similar government control? There would have to be major shift in westernised behaviour and people would have to be reliant on government for everything, UBI, feed family etc. What could cause that? Hard times, global depression, war, food shortages etc.

Maybe that’s what’s already been gradually happening over the years. How many grew their own food and made everything from scratch 70 years ago until now. Self sufficiency becoming less and less as time goes on.

[Siggy]

I've been following this thread for a while now,  alas without being able to contribute much,  and really appreciate the analysis and perspectives provided by the regular contributors. 

A while back, someone mentioned about VAT free silver from Germany (coininvest/silvertogo). I can sadly confirm that they are not letting it slip through anymore.  I scrupulously ordered less than 1k, so that there would be no customs declaration,  yet UPS sent a link for the VAT to be paid before releasing parcel for delivery. 

Also Petrofac shares seem to be on a bit of tear, hat tip to whoever mentioned them last month.  As a result I opened a small position and it's 30% up on paper. 

[Mr X]

11 hours ago, Bobthebuilder said:

Oi.

Want your boiler fixed? Pay me in tobacco if you want a good price.

Tobacco would become a currency itself in that scenario. Why bother with money? cut out the middle man, go straight to the product/services. Rubbish fiat.

People would also bin their dumbphones, because they would quickly realise that their main function is to provide the state with all the information that they need about your private life in order to control you inside a fascist, totalitarian, state

[JimmyTheBruce]

2 hours ago, Mapper said:

Re CBDCs and governments tracking more things with AI, blockchain etc. we should all be very concerned about it. They are real threats and they are coming.

But, I am now thinking more as others have said above, that people will reject them. In ways we don't actually know about yet.

Think about how much benefit fraud goes on now. It boggles my mind the ingenuity of some of the scams people come up with.

Do you think more AI etc, will stop benefit fraud? I don't, I think people will just go about it in different ways.

And by forcing a [time limited / purchase type restricted...] currency on us, we will adapt. They will force more people into illegal activity, but if everyone is at it, who cares?

And let's not forget, some coppers like to drink, some politicians like to smoke.

I hope so anyway, I really do.

If there is hope it lies in the proles.

According to the lead story on the BBC this morning, the proles are busy making banners about some fellas kicking a ball about.  Seems the PM and parliament also have it high on their agenda.  Why do I feel like my attention is intentionally being diverted from something that is actually important 🤔

I'll keep watching, I'm sure the piece on inflation, CBDCs, creeping socialism, and the impending implosion of the economy will be on next.......

[desertorchid]

Average Earnings Report UK- 4.4%

How the hell has average earnings risen in the last year by 4.4% unless this is purely inflationary? There cannot been any increase in productivity or growth in the real economy to otherwise explain this. Flies in the face of all known economic theory if not.