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


spunko

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27 minutes ago, DurhamBorn said:

I think lower paid will see a small cut in spending power.That bit in the middle £35k to £50k will see a big loss of spending power.Like you say its very fuzzy,but im seeing massive demand at the lower to £35k end around here in factories etc.The lower paid £10 an hour ones simple cant get workers.Even when they do,they dont turn in half the time,drop sick days ,dont turn in on friday night shift etc.Iv never had as many phone calls offering jobs,its nuts,almost every day and they always go through all the great reasons to take the job,and slip salary in late at the end.Iv taken to stopping them now and asking salary straight away.I give them the same answer usually.Thats more a uni leavers starting salary,not someone with lots of experience.They know as well,and you can tell they know things have changed.

One last week was a micro chip company and ARM are investors.They said they were getting people and losing them after a few weeks,or having to let go as useless.Then they stated salary i actually laughed on the phone.Wanting clean room trained skilled technicians for £27k a year.Why would someone want to be locked in a suit in a room for 8 hours etc for that sort of money unless it was a training/first job type of thing.I told them they could try £40k and they might get someone decent,but even then likely they would move on without share options etc.

There are zillions of easy jobs at say £23k a year so poor shifts,harder technical work etc need to be much much better paid to attract anyone.Employers are in for a massive shock i think as things open.People have tasted freedom,so to have their lives destroyed by work will demand much higher wages.

Crickey only 27k you say? I went for one of those clean room type jobs with a Japanese employer (can't recall which one) approx. 1990 (didn't get the job, which really stung at the time), but remember that they were offering around 17k back then for what was an entry training position.

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DurhamBorn
35 minutes ago, JMD said:

Crickey only 27k you say? I went for one of those clean room type jobs with a Japanese employer (can't recall which one) approx. 1990 (didn't get the job, which really stung at the time), but remember that they were offering around 17k back then for what was an entry training position.

Yep,nuts.The problem these companies have is youngsters hate any job they cant access their phone at least every hour so wont do them.Doing technical work in a suit isnt nice.I was getting £35k if you include perks doing it in 95.Pharma,but very similar skill set.

These wages are nowhere near enough when you consider you can get a job putting a few bolts in for £23k a year.There is going to be a huge skill shortage going forward,employers have had all the cards for 30 years,but not anymore.

 

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1 hour ago, DurhamBorn said:

I think lower paid will see a small cut in spending power.That bit in the middle £35k to £50k will see a big loss of spending power.Like you say its very fuzzy,but im seeing massive demand at the lower to £35k end around here in factories etc.The lower paid £10 an hour ones simple cant get workers.Even when they do,they dont turn in half the time,drop sick days ,dont turn in on friday night shift etc.Iv never had as many phone calls offering jobs,its nuts,almost every day and they always go through all the great reasons to take the job,and slip salary in late at the end.Iv taken to stopping them now and asking salary straight away.I give them the same answer usually.Thats more a uni leavers starting salary,not someone with lots of experience.They know as well,and you can tell they know things have changed.

One last week was a micro chip company and ARM are investors.They said they were getting people and losing them after a few weeks,or having to let go as useless.Then they stated salary i actually laughed on the phone.Wanting clean room trained skilled technicians for £27k a year.Why would someone want to be locked in a suit in a room for 8 hours etc for that sort of money unless it was a training/first job type of thing.I told them they could try £40k and they might get someone decent,but even then likely they would move on without share options etc.

There are zillions of easy jobs at say £23k a year so poor shifts,harder technical work etc need to be much much better paid to attract anyone.Employers are in for a massive shock i think as things open.People have tasted freedom,so to have their lives destroyed by work will demand much higher wages.

I can’t wait in the next few months for the usual wailing farmers “ we can’t find labourers “ to pick their vile polytunnel fruits. O woe.

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£27k is about £15 an hour, and you'll lose a third of it in tax.

A cash in hand cleaner takes more home.

No wonder they can't hire decent people.

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DurhamBorn
15 minutes ago, AWW said:

£27k is about £15 an hour, and you'll lose a third of it in tax.

A cash in hand cleaner takes more home.

No wonder they can't hire decent people.

Thats right,and remember a lot of more skilled people are maybe inheriting etc or want an easier life and a small wage with little stress at they get older.The government is banking on productivity to lead the recovery,but it wont be,it will just be inflation.

Of course this begs the question what will government do?.

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4 minutes ago, DurhamBorn said:

Thats right,and remember a lot of more skilled people are maybe inheriting etc or want an easier life and a small wage with little stress at they get older.The government is banking on productivity to lead the recovery,but it wont be,it will just be inflation.

Of course this begs the question what will government do?.

Good weekly from Nordea as always...

https://corporate.nordea.com/article/65931/fx-weekly-the-boomers-aint-coming-back

The signal is still firm from G-7 leaders. They want to keep spending as the inflationary risks are muted, while also the global minimum corporate tax agreement is another leftist turn of the economic consensus post Covid-19. No-one wants to repeat the post-GFC mistakes when interest rates were increased too swiftly (in Europe), while spending was slowed too early.

The issue is just that the economic response to a crisis is always calibrated on the back of the most recent economic crisis (recency bias), but two crises never look similar. The risk is now that we act on Covid-19 as if it is a demand-crisis, which it is obviously not. The potential endgame of massive public spending during a supply shock crisis is a so-called “bottleneck crisis”; maybe exactly what we are already in the midst of.

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Talking Monkey
2 hours ago, DurhamBorn said:

I think lower paid will see a small cut in spending power.That bit in the middle £35k to £50k will see a big loss of spending power.Like you say its very fuzzy,but im seeing massive demand at the lower to £35k end around here in factories etc.The lower paid £10 an hour ones simple cant get workers.Even when they do,they dont turn in half the time,drop sick days ,dont turn in on friday night shift etc.Iv never had as many phone calls offering jobs,its nuts,almost every day and they always go through all the great reasons to take the job,and slip salary in late at the end.Iv taken to stopping them now and asking salary straight away.I give them the same answer usually.Thats more a uni leavers starting salary,not someone with lots of experience.They know as well,and you can tell they know things have changed.

One last week was a micro chip company and ARM are investors.They said they were getting people and losing them after a few weeks,or having to let go as useless.Then they stated salary i actually laughed on the phone.Wanting clean room trained skilled technicians for £27k a year.Why would someone want to be locked in a suit in a room for 8 hours etc for that sort of money unless it was a training/first job type of thing.I told them they could try £40k and they might get someone decent,but even then likely they would move on without share options etc.

There are zillions of easy jobs at say £23k a year so poor shifts,harder technical work etc need to be much much better paid to attract anyone.Employers are in for a massive shock i think as things open.People have tasted freedom,so to have their lives destroyed by work will demand much higher wages.

What's your opinion DB on the impact to the layer below the big boys ie 50 to 150k. Intuitively I think they too will see a big decrease in spending power. My understanding is this layer spend up to their earnings with kids in private school, huge mortgage, fancy cars etc

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Chewing Grass
2 hours ago, JMD said:

Jamtorrow, I'm just trying to get an idea of how many of these mini nuclear container rigs would be deployed, for example, for us here in the UK. I guess it would mainly be a function of their power output, but also where they could be adequately/safely sited, and needed in terms of plugging (sorry!) a power gap. What I mean is are we talking hundreds, or maybe even in the low thousands(?) If say most towns required one or more, for the UK alone? Or will they all end up being sited on military bases (approx 110 in uk) because they would become terrorist targets?

Easy to work out where they will be sited, any former industrial site that used lots of power so is already gridded up.

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jamtomorrow
2 hours ago, DurhamBorn said:

I think lower paid will see a small cut in spending power.That bit in the middle £35k to £50k will see a big loss of spending power.Like you say its very fuzzy,but im seeing massive demand at the lower to £35k end around here in factories etc.The lower paid £10 an hour ones simple cant get workers.Even when they do,they dont turn in half the time,drop sick days ,dont turn in on friday night shift etc.Iv never had as many phone calls offering jobs,its nuts,almost every day and they always go through all the great reasons to take the job,and slip salary in late at the end.Iv taken to stopping them now and asking salary straight away.I give them the same answer usually.Thats more a uni leavers starting salary,not someone with lots of experience.They know as well,and you can tell they know things have changed.

One last week was a micro chip company and ARM are investors.They said they were getting people and losing them after a few weeks,or having to let go as useless.Then they stated salary i actually laughed on the phone.Wanting clean room trained skilled technicians for £27k a year.Why would someone want to be locked in a suit in a room for 8 hours etc for that sort of money unless it was a training/first job type of thing.I told them they could try £40k and they might get someone decent,but even then likely they would move on without share options etc.

There are zillions of easy jobs at say £23k a year so poor shifts,harder technical work etc need to be much much better paid to attract anyone.Employers are in for a massive shock i think as things open.People have tasted freedom,so to have their lives destroyed by work will demand much higher wages.

Yup, seeing much the same in my own sector (which has suffered skills shortages on and off for best part of 2 decades - latest circumstances are just tge cherry on top really).

The 2 questions that interest me are:

1/ are these tighter labour conditions a permanent consequence of the macro picture, or other transient factors? (like COVID and Brexit)

2/ does it matter in relation to our thesis?

My own answer to 1 would be: "mostly other factors"

And 2 would be: "hard to say" - on the one hand, even if the initial tightening in labour supply is temporary, maybe we only need a spark to ignite a spiral of wage inflation, assuming cost-push continues. On the other, if it is a transient, how does labour maintain the bargaining power needed to keep wages spiralling?

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DurhamBorn
15 minutes ago, Talking Monkey said:

What's your opinion DB on the impact to the layer below the big boys ie 50 to 150k. Intuitively I think they too will see a big decrease in spending power. My understanding is this layer spend up to their earnings with kids in private school, huge mortgage, fancy cars etc

They will likely be hurt more than anyone from where they are now i suspect.They have very expensive lives just trying to look the part and of course leveraged highly.Government will see that band as prime tax givers as well.Best thing to do in that band is fill the SIPP as quick as you can.

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DurhamBorn
3 minutes ago, Harley said:

What will the government do? :)

Trap people in mortgages,force out pension age,try to stop wealth being passed down etc i suspect.Indirect tax and inflation the weapons of choice as well.The parasites calls on the host just grow and grow and once QE stops and the structural deficit shows itself,ouch.

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Transistor Man
3 hours ago, JMD said:

Jamtorrow, I'm just trying to get an idea of how many of these mini nuclear container rigs would be deployed, for example, for us here in the UK. I guess it would mainly be a function of their power output, but also where they could be adequately/safely sited, and needed in terms of plugging (sorry!) a power gap. What I mean is are we talking hundreds, or maybe even in the low thousands(?) If say most towns required one or more, for the UK alone? Or will they all end up being sited on military bases (approx 110 in uk) because they would become terrorist targets?

I’m a little sceptical on aspects of the SMR concept.

The RR proposal isn’t that small at all, it’s 470 MWe. 

It isn’t a submarine reactor in a shipping container, or anything close.

Siting a nuclear power plant at a non-nuclear site in the UK will be very difficult.

we Aren’t talking hundreds of these, in my view. 

Instead of 2* 1600 MWe at Sizewell C, 

you’d build 6 of these. 

There might be advantages in terms of manufacturability.

but thermal efficiency will be a little lower. 

And you’d need 6 steam turbines etc.

And they’re still going to need to be next to the sea. Trawsfynydd is a proposed development site, but I’d be surprised if we end up using lakes or rivers for cooling water. 

This might all be great, but it’s quite different from original SMR design concept, like the pebble-bed modular reactor. 

 

 

 

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2 hours ago, Transistor Man said:

I’m a little sceptical on aspects of the SMR concept.

The RR proposal isn’t that small at all, it’s 470 MWe. 

It isn’t a submarine reactor in a shipping container, or anything close.

Siting a nuclear power plant at a non-nuclear site in the UK will be very difficult.

we Aren’t talking hundreds of these, in my view. 

Instead of 2* 1600 MWe at Sizewell C, 

you’d build 6 of these. 

There might be advantages in terms of manufacturability.

but thermal efficiency will be a little lower. 

And you’d need 6 steam turbines etc.

And they’re still going to need to be next to the sea. Trawsfynydd is a proposed development site, but I’d be surprised if we end up using lakes or rivers for cooling water. 

This might all be great, but it’s quite different from original SMR design concept, like the pebble-bed modular reactor. 

An SMR solves a few of the bigger problems with nuclear (raising the money for one), although the waste aspect is still a sore spot UK wise. On the timescale they are looking at it also ties in fairly well with Oil going vertical in the late 2020's, although it could do with being in the 2028ish frame.

It also provides a reasonable platform that if they ever get fusion or another next gen power source sorted, then the UK has a reactor building concept ready to be tweaked as needed.

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Transistor Man
15 minutes ago, Majorpain said:

An SMR solves a few of the bigger problems with nuclear (raising the money for one), although the waste aspect is still a sore spot UK wise. On the timescale they are looking at it also ties in fairly well with Oil going vertical in the late 2020's, although it could do with being in the 2028ish frame.

It also provides a reasonable platform that if they ever get fusion or another next gen power source sorted, then the UK has a reactor building concept ready to be tweaked as needed.

It’s not obvious to me where any cost savings come from.

Smaller pressure vessel, easier forgings.... maybe.

But Westinghouse had a 600MWe design, and had to up-scale to 1000 MWe to get better economies-of-scale. 

Its a conventional PWR design, it will be more expensive than larger PWRs per MW.

Waste? No problem whatsoever, in my view. 

A UK-platform for now and the future? I agree, that’s the main, and best reason.

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5 minutes ago, Transistor Man said:

It’s not obvious to me where any cost savings come from.

Smaller pressure vessel, easier forgings.... maybe.

But Westinghouse had a 600MWe design, and had to up-scale to 1000 MWe to get better economies-of-scale. 

Its a conventional PWR design, it will be more expensive than larger PWRs per MW.

Waste? No problem whatsoever, in my view. 

A UK-platform for now and the future? I agree, that’s the main, and best reason.

Quick Maths:

Lets say 30 Gw target generation (will be less online at any one time)

That's 64 reactors at 470mw each

64 x £2bn is £128bn construction costs

30 year lifespan amortises at £4.2bn a year, peanuts for UK economy.

 

Hinkley point C for comparison is 10 reactors at about £22bn each for £220bn, so around double the price all in.

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Transistor Man
1 minute ago, Majorpain said:

Quick Maths:

Lets say 30 Gw target generation (will be less online at any one time)

That's 64 reactors at 470mw each

64 x £2bn is £128bn construction costs

30 year lifespan amortises at £4.2bn a year, peanuts for UK economy.

 

Hinkley point C for comparison is 10 reactors at about £22bn each for £220bn, so around double the price all in.

Are you just taking the cost RR say they will be? They haven’t built one yet. 

You have a good point. 

France got very good at building reactors, building at scale:

50 built in 15 years or so.

If you really go for it, the price will tumble. 

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7 hours ago, JMD said:

Jamtorrow, I'm just trying to get an idea of how many of these mini nuclear container rigs would be deployed, for example, for us here in the UK. I guess it would mainly be a function of their power output, but also where they could be adequately/safely sited, and needed in terms of plugging (sorry!) a power gap. What I mean is are we talking hundreds, or maybe even in the low thousands(?) If say most towns required one or more, for the UK alone? Or will they all end up being sited on military bases (approx 110 in uk) because they would become terrorist targets?

You can't have small nuclear rigs in a multi-cultural society.  end of.  You probably couldn't even have them in japan due to the doomsday cults.  Maybe iceland?

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6 hours ago, DurhamBorn said:

These wages are nowhere near enough when you consider you can get a job putting a few bolts in for £23k a year.There is going to be a huge skill shortage going forward,employers have had all the cards for 30 years,but not anymore.

 

Place im working at the moment hires workers via an agency and gifts them £9 and a few pennies per hour.

I'd imagine the agency are getting a similar amount, so the money is there to pay the worker if he/she could grab all that money .... but the govt would have to take the boot off the self employed and change employment laws so it'd be easier to lay people off, but then pay them that extra that the agency are grabbing.

..... sadly the Labour party (and Tory crony capitalists) wouldn't like that scenario.

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12 hours ago, Transistor Man said:

I’m a little sceptical on aspects of the SMR concept.

The RR proposal isn’t that small at all, it’s 470 MWe. 

It isn’t a submarine reactor in a shipping container, or anything close.

Siting a nuclear power plant at a non-nuclear site in the UK will be very difficult.

we Aren’t talking hundreds of these, in my view. 

Instead of 2* 1600 MWe at Sizewell C, 

you’d build 6 of these. 

There might be advantages in terms of manufacturability.

but thermal efficiency will be a little lower. 

And you’d need 6 steam turbines etc.

And they’re still going to need to be next to the sea. Trawsfynydd is a proposed development site, but I’d be surprised if we end up using lakes or rivers for cooling water. 

This might all be great, but it’s quite different from original SMR design concept, like the pebble-bed modular reactor. 

 

 

 

Not my area so this thought path may be daft, but could they not be combined with hydro schemes?...the idea being that you can use the nuclear power generated to pump the water to the top reservoir when demand is low, and then use both nuclear and hydro when its high.

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8 hours ago, Hancock said:

Place im working at the moment hires workers via an agency and gifts them £9 and a few pennies per hour.

I'd imagine the agency are getting a similar amount, so the money is there to pay the worker if he/she could grab all that money .... but the govt would have to take the boot off the self employed and change employment laws so it'd be easier to lay people off, but then pay them that extra that the agency are grabbing.

..... sadly the Labour party (and Tory crony capitalists) wouldn't like that scenario.

But having exited Europe it makes it far easier to change employment law.

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jamtomorrow

New SEEDs up. Good read as ever, although with much repitition of points already covered so I won't paste much, just this choice quote:

"... we can infer that discretionary consumption will fall sharply, as soon as the credit-based, growth-predicated financial system falls apart. This is going to be extremely unpopular, and can be expected to shift the basis of political debate towards economic issues and away from all non-economic topics of debate"

To me, this quote echoes something @DurhamBorn has said all along, which is that the politics follows the macro, not the other way round.

Looked at that way, today's woke menace culture war bollox makes sense: it's the political equivalent of credit-funded over-consumption, pointless rampant discretionary politics for the fag end of the discretionary age.

They say you should be careful what you wish for, but is it possible some real economic problems might do us some good?

https://surplusenergyeconomics.wordpress.com/

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Transistor Man
43 minutes ago, MrXxxx said:

Not my area so this thought path may be daft, but could they not be combined with hydro schemes?...the idea being that you can use the nuclear power generated to pump the water to the top reservoir when demand is low, and then use both nuclear and hydro when its high.

Yes, you can do that. Wylfa and Dinorwig, worked like that for decades. 

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