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


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Iv been taking myself away from it all a bit and doing jobs that need doing and just enjoying seeing my family etc.Im very worried about where we are heading for my families future.Mostly what is happ

Great interview by David Hunter, posted earlier in the week by @The Idiocrat. Lots of information, including timings and targets. I have posted below my summary table, and I'll add a rough transcript

Just wanted to wish everyone a happy xmas and for all adding their thoughts and knowledge to the thread this year.I think we can safely say without any doubt the thread has proved itself and a lot of

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Optimistic

BREAKING NEWS: 🚨

 

THE U.S. NONPROFIT DIGITAL DOLLAR PROJECT WILL LAUNCH FIVE PILOT PROGRAMS OVER THE NEXT 12 MONTHS TO TEST THE POTENTIAL USES OF A U.S. CENTRAL BANK DIGITAL CURRENCY, THE FIRST EFFORT OF ITS KIND IN THE UNITED STATES.

 

Just saw this on Gold Telegraph!

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Noallegiance
33 minutes ago, DurhamBorn said:

.The article and almost everyone seems to think governments have a cycle to print without worry,but the CBs will stop a few months after inflation holds above 3%.Government wont even be able to fund day to day spending then never mind investment.

 

Are you saying that the time of the magic money tree disappearing is imminent?

I thought CB balance sheets were to go stratospheric in response to the bust?

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BurntBread
23 minutes ago, Noallegiance said:

Are you saying that the time of the magic money tree disappearing is imminent?

I thought CB balance sheets were to go stratospheric in response to the bust?

David Hunter's interview from up-thread was expecting an inflation scare this Summer, and a mis-step from the FED (too much tightening) then pitching the economy fairly quickly into outright deflation. However, he is expecting inflation to re-surface as a persistent and growing problem from 2024.

I'm guessing DB has a similar time-frame (?), but I would be interested to know if DB thinks the taps will be turned off this Summer, or mid-cycle (2024). I'm guessing that DH's view would be governments have one last chance to print for infrastructure during the economic bust, next year.

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DurhamBorn
2 hours ago, Noallegiance said:

Are you saying that the time of the magic money tree disappearing is imminent?

I thought CB balance sheets were to go stratospheric in response to the bust?

They will,but until the bust arrives they will taper once inflation goes over 3%.Government has about 6 months to get its structural deficit under control i expect.Most companies etc go bust in the recovery,not the downturn.It will be very interesting to see the government once the BOE stop buying gilts.Of course the FED needs to stop first.

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DurhamBorn
1 hour ago, BurntBread said:

David Hunter's interview from up-thread was expecting an inflation scare this Summer, and a mis-step from the FED (too much tightening) then pitching the economy fairly quickly into outright deflation. However, he is expecting inflation to re-surface as a persistent and growing problem from 2024.

I'm guessing DB has a similar time-frame (?), but I would be interested to know if DB thinks the taps will be turned off this Summer, or mid-cycle (2024). I'm guessing that DH's view would be governments have one last chance to print for infrastructure during the economic bust, next year.

I think they will cut down on QE ,but they might use rate increase as cover to keep some printing going to fund government a while longer.So an interest rate increase yet still some printing and that would really blindside the market.They have printed over half what i expected now.

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3 hours ago, Optimistic said:

BREAKING NEWS: 🚨

 

THE U.S. NONPROFIT DIGITAL DOLLAR PROJECT WILL LAUNCH FIVE PILOT PROGRAMS OVER THE NEXT 12 MONTHS TO TEST THE POTENTIAL USES OF A U.S. CENTRAL BANK DIGITAL CURRENCY, THE FIRST EFFORT OF ITS KIND IN THE UNITED STATES.

 

Just saw this on Gold Telegraph!

https://www.reuters.com/article/us-cenbanks-digital-usa-idUSKBN2CK0S6
 

I think a lot will be surprised on how quickly digital currency rolls out. With cash carrying viruses, it’s the perfect springboard...

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sancho panza
Posted (edited)
On 30/04/2021 at 21:21, Cattle Prod said:

Super interview here folks from Michael Kao on RealVision. It's subscription only but you can do a trial for $1. Ok, he's got a bull thesis and it may be my selection bias, but it's the best analysis I've seen in a while, Art Berman seems to have lost the plot since Covid stuck. Lots of nuggets in there. US shale, long cycle production starved of capital, OPEC, backwardation, problems producers have hedging, I've said a lot of it here but if you want to hear a professional managing money saying it rather than a randomer off the internet, check it out:

https://www.realvision.com/shows/the-expert-view/videos/is-crude-oil-the-best-inflation-hedge-and-other-oil-questions

FWIW he mentions the contango to backwardation flip @sancho panza, and studied it back 30 years. Significantly higher prices a year later in all but 4 cases (for specfic reasons). I cant remember if I shared it here, but my base road map is off backwardation flips, which happened on 23rd November.

Teaser (though the editor didn't actually catch the best bits):

image.thumb.png.df8de88663a137b273e785154bfeef65.png

Finally had the time to listen to that.Well worth the dollar.

Some key take homes

1) improtance of opex commodities in pushing inflation-particualrly in light of US stimulus being run through lower ocio economci deciles.

2) backwardation plays a key role in causing capital constraints on US shale as banks/producers are unable to hedge beyond the spot sprice almsot guranteeing capital starvation.

3) OPEC would be mad to let oil run too high to say $150 as it would hasten adoption of EV's.

4) if demand normalises as predicted then spare capacity gone by 2024

5) long cycle projects not been funded since 2016 and given they can take 4-7 years to come online means further supply restrictions.

6) spare capacity as per predictions around 10.5 mn.it sounds like he's taking Saudi spare capacity at face value,which you've warned us against CP(but would appreciate your take whether I've read that right)

7) US foreign policy on Saudi gurantees a hard line from them.

 

Like I said,many thanks,what an enlighening interview and a reflective bull thesis

Edited by sancho panza
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sancho panza
3 hours ago, DurhamBorn said:

They will,but until the bust arrives they will taper once inflation goes over 3%.Government has about 6 months to get its structural deficit under control i expect.Most companies etc go bust in the recovery,not the downturn.It will be very interesting to see the government once the BOE stop buying gilts.Of course the FED needs to stop first.

iirc UK govt issued £280bn net this tax year,BoE printed circa £250bn ..................between a rock and hard place.How can they get that strututral deficit under control when  they've haven't done so for 25 years.

All the QE/zirp/MBS buying hasn't been inflationary in a world where China was exporting deflation,however,that's changing.That Michael kao interview @Cattle Prod tipped had a great section where he talked about how funding stimmy cheques into lower socio economic deciles was highly inflationary because they spend it on commodities.

Interesting times.

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Option5

I know it's the Daily Fail but the MSM are starting to predict doom and gloom.

ALEX BRUMMER: Boom will give way to bust https://www.thisismoney.co.uk/money/comment/article-9538279/ALEX-BRUMMER-Boom-way-bust.html?ito=native_share_article-masthead

The Institute for Fiscal Studies notes that in the UK the ratio of housing wealth to national output is higher than before Japan's crash in 1991 and the subsequent lost decades.

In the US, the Financial Industry Regulatory Authority reports that total margin debt (cash borrowed to buy shares) stood at $822billion in March 2021 up from $479billion a year ago and $400billion as the financial crisis kicked off.

If you are not scared enough yet there is bitcoin. At $54,000 in the last week of April, it is up 600 per cent on a year ago. We should also consider the collapses of the Archegos hedge fund and Greensill.

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jamtomorrow

Interesting ... is this because an influx of deposits means banks are flirting with being undercapitalized (measured against, say, Basel 3 requirements)?

Presumably a MMF shows up on the would-be depositor's balance sheet instead of the bank's, thus helping the bank's capital ratio?

 

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Animal Spirits
15 minutes ago, DurhamBorn said:

One of the first things the FED did last March was change the rules so banks could buy up money market funds.It was one of the first things they did to inject liquidity,mainly to cover the fact corporate entities were pulling down credit lines back onto their balance sheets in case they needed it.The FED lost a money market fund during 08 and knew they needed to keep them liquid.Its called the MMLF scheme.

If the banks are telling corporates to move that liquidity back into money market funds it would see M3 fall back heavily.This says to me the FED is pushing the banks to get some of this massive liquidity back into the short end of the curve to keep rates down.If the cash sits on deposit its one step from being very inflationary.This says to me again the FED smells big risk from inflation now,and is trying to stall it without removing government fiscal support.The short end being below inflation helps fund the government deficit.

This could get interesting if the loan/deposit ratio returns to pre Covid levels:

657847657_Loantodepositratio.thumb.png.a5f3f5f8de2ac750de832ccefa06a1dc.png

 

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geordie_lurch
Posted (edited)

Not seen this guy before but he sees $200 oil within 5 years for a lot of the reasons those who know the oil markets have said in this thread via this 13 min video

 

Edited by geordie_lurch
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DurhamBorn

Copper runs hot first because the swing demand is when China increases investment in its power network,thats where most of the copper demand increase goes,and that has a lag on other demand,mainly oil.Id expect oil to follow copper with a small lag.

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nirvana

YELLEN SAYS RATES MAY HAVE TO RISE TO STOP ECONOMY OVERHEATING

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geordie_lurch
Posted (edited)
10 minutes ago, nirvana said:

YELLEN SAYS RATES MAY HAVE TO RISE TO STOP ECONOMY OVERHEATING

Lol we shall see if they dare! I still remember her saying the following back in 2017: https://www.reuters.com/article/us-usa-fed-yellen/feds-yellen-expects-no-new-financial-crisis-in-our-lifetimes-idUSKBN19I2I5

"U.S. Federal Reserve Chair Janet Yellen said on Tuesday that she does not believe that there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash."

Edited by geordie_lurch
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nirvana

Silver crashed a dollar on that Yellen news!!! Just when the fooker was breaking over 27 bucks too...I'm sure these cnuts do it deliberately O.o

BUY USD now???xD

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Cattle Prod

'Why has the physical oil market been weak over the last month or two'?

image.thumb.png.a4ba10cdaed839052b0452c8eaaf4563.png

Because it had to absorb another 800 kbpd of Iranian oil in a weak season in a year where many countries are still locked down. It's almost done so now, at relatively flat prices after a bog standard 15% correction. This of course coincides with Joe Biden being elected, and them betting that they'd not enforce sactions. I think Iran has around 700 kpbd left to maximum export capacity. Iran is not going to be the headwind for oil prices the MSM is banging on about, it's already most of the way there.

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Cattle Prod
13 minutes ago, nirvana said:

Silver crashed a dollar on that Yellen news!!! Just when the fooker was breaking over 27 bucks too...I'm sure these cnuts do it deliberately O.o

BUY USD now???xD

They forgot to tell the algos Yellen isn't the Fed any more and can't do a thing about interest rates. She can talk about it all she wants.

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nirvana

DAVE SAYS the market is about to take off again.......

Now is he the messiah or is he just a very naughty boy? xD

 

EfP6CMDWAAAfCRM.jpg

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