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

[Cosmic]

12 minutes ago, JoeDavola said:

My Dad mentioned reading about hidden hyperinflation to me today, which may be indicitive of the general population starting to wake up to what's happening.

Not so hidden in Energy. My fix is due to end next month and I'm looking at a 30% hike. Granted I fixed last April so its more pronounced.

Energy hikes will imho, along with Petrol be the first thing people spot as its not easy to downgrade/downsize the product to hide price hikes.

[JoeDavola]

6 minutes ago, Cosmic Apple said:

Not so hidden in Energy. My fix is due to end next month and I'm looking at a 30% hike. Granted I fixed last April so its more pronounced.

Energy hikes will imho, along with Petrol be the first thing people spot as its not easy to downgrade/downsize the product to hide price hikes.

And house prices continuing to rise.

The difference between this and the last bubble we had in NI back in 2008 is that so many of the houses that are coming on as well as being expensive are in terrible states of repair. They're looking top dollar for renovation projects where you'd need rewiring, re-platering, new kitchen bathroom and every room decorated. In a hyperinflating economy.

[M S E Refugee]

15 minutes ago, JoeDavola said:

My Dad mentioned reading about hidden hyperinflation to me today, which may be indicitive of the general population starting to wake up to what's happening.

The current situation is very odd in that Supermarkets have lots of empty spaces on their shelves yet nobody is panicking.

As soon as the media tells the Sheeple to panic it will be carnage.

We have been buying extra tinned goods just in case.

[JoeDavola]

2 minutes ago, M S E Refugee said:

The current situation is very odd in that Supermarkets have lots of empty spaces on their shelves yet nobody is panicking.

As soon as the media tells the Sheeple to panic it will be carnage.

We have been buying extra tinned goods just in case.

Yeah I'm stocking up at the moment just like I did in Feb 2020.

[M S E Refugee]

https://www.nasdaq.com/market-activity/commodities/kt:nmx

Coffee has been on a tear lately.

I nearly bought a Coffee ETF when Francis Hunt was very bullish on Coffee a few months ago.

[sancho panza]

4 hours ago, planit said:

Because of the volatility we have to build way extra supply than we need because half of it might be 'offline' at the same time. I notice the comment earlier in the thread about aluminium being more expensive, the industry was very good at making use of any available cheap energy and as that disappears it will push up the price (aluminium production is very energy intensive). In the medium term all this spare energy will be used to produce hydrogen, it will be big business but as hydrogen starts eating up any spare energy, it will put a floor under the price per kWh. If hydrogen starts taking off it will raise this floor, costs per kWh are going to be high.

 

Going back to the first sentence, when you put these high electricity prices into calculations for EV's (and no economy 7), it removes the financial case for moving to EV's, they might only be for rich people.

I know we have some educated leccy types on here.

I remember @Bobthebuilder making a point about electircal boilers sometime ago and the fact that -iirc-if we went all electric then they'd need new infrastructure or some such point(take home for the people at the back like me was ,it ain't gonna happen except a ta price the public won't pay)

Alos froma production side either Bob or @Transistor Man or anyone else,if we do go to EV's only for sale by 2030,is the UK in a positon to handle that in terms of leccy supply/infrastructure?

I hear politicians talking about it like it's flicking a switch on the grid,I'm not so sure.

[sancho panza]

10 hours ago, jamtomorrow said:

 

Cracking discussion SP.

One of the theses of this thread is that cost-push inflation will lead to chronic secular inflation all through the economy, as wages start to get bid up. As I understand it, the thinking is "that is what happened in previous inflations once they got going", and we've seen plenty of anecdotals about this or that labour shortage that seemingly confirm the thesis that wages might be starting to follow assets.

But what if there's a missing ingredient, and this time it *is* different? I'm not talking about transitory inflation - the inflation in financial assets alone is going to leak into the real world for years to come, whether we like it or not. I'm talking about a relentless grind up in the cost of living that wages don't keep up with, therefore accompanied by a relentless grind down in living standards.

One missing ingredient is the energy surplus that was available during previous inflations and allowed the economy to return to prosperity. That's gone now, and all the marginal options we have are high energy-cost energy sources (whether that be tight oil, wind whatever). Yeah, "the SEEDs thesis".

Increased automation is another factor, tending to replace labour with capital and keeping inflation locked into financial assets.

This is why I"m watching velocity prints like a hawk, and right now they're still flatlining. A few quarters in a row with strong velocity increases away from the current historic lows would be confirmation of "something happening" in my book.

I think Blain made trhe point that @DurhamBorn has is that there comes a point when ordianry joe's jsut see no point saving for a hosue,would rather be on furlough or enjoying life with less stress,which sends hosue prices down,which sends the banks down which sends unemployment up which sends hosue prices down etc etc.

and that's before new tech kills jobs.

Is the BK kciked off by a deflationary feedback loop from ordinary joe's jsut dropping off the debt treadmill?

Fisher wrote about this phenomenon in teh early 1930's.....

 

and I think you make an excellent point about the energy surplus not being there this time.If @Cattle Prod is right and exploration has been drawn right back,then where are the new fields in 4 years going to come from?

Much as Im a deflaionista credit wise,I think we have to accpet that this could well be the start of a secular era of price inflation.

[JoeDavola]

15 minutes ago, sancho panza said:

there comes a point when ordianry joe's jsut see no point saving for a hosue,would rather be on furlough or enjoying life with less stress,which sends hosue prices down,which sends the banks down which sends unemployment up which sends hosue prices down etc etc.

The example I used today was that the last few people I knew that got 'on' the housing ladder, had to seek out promotions to the point where they were earning almost double the average wage in order to be able to afford a decent first house.

The houses in question were new build with no work needing done. Not tiny but not huge either - bog standard 3 bed semi sized.

That was about 5-7 years ago. There has been virtually no wage growth and big inflation in costs since then. However the house they would get now for that money would be a smaller old house that needs completely renovated - basically a wreck at that price point. They couldn't afford to live where they're living now.

Which just begs the question who the fuck will buy these crumbling houses. Someone earning double the average salary in a job with responsibilities and they get to take on 30 years of debt to have the chance to spend 5 figures to renovate a knackered small 2.5 bed semi (in an environment where the renovation costs are inflating too)?

[Yadda yadda yadda]

13 minutes ago, sancho panza said:

I think Blain made trhe point that @DurhamBorn has is that there comes a point when ordianry joe's jsut see no point saving for a hosue,would rather be on furlough or enjoying life with less stress,which sends hosue prices down,which sends the banks down which sends unemployment up which sends hosue prices down etc etc.

We were discussing a bloke who was let go from my place around a year at work today. Got a job for a little while but doesn't see the point in working at the wages he has been offered. He can get the same on benefits with two kids. Probably worked non-stop for 15 years until now.

10 minutes ago, JoeDavola said:

Which just begs the question who the fuck will buy these crumbling houses.

Slumlords. Their tenants will get what they're offered as they won't be paying.

[planit]

11 minutes ago, sancho panza said:

I know we have some educated leccy types on here.

I remember @Bobthebuilder making a point about electircal boilers sometime ago and the fact that -iirc-if we went all electric then they'd need new infrastructure or some such point(take home for the people at the back like me was ,it ain't gonna happen except a ta price the public won't pay)

Alos froma production side either Bob or @Transistor Man or anyone else,if we do go to EV's only for sale by 2030,is the UK in a positon to handle that in terms of leccy supply/infrastructure?

I hear politicians talking about it like it's flicking a switch on the grid,I'm not so sure.

Exactly, the calc I posted on here a few days ago showed we needed 2.5 times the current electricity supply to do the vehicles. Would be over 3.5 to replace gas heating with electric (even if we all had heat pumps, 'convenience' heating using conventional heat would add a lot).

 

Politicians annoy me. I did some research to confirm my feelings [and assumptions] on biomass over the weekend after getting a question from a chemistry teacher. It was worse than I thought. The paper decided it took between 50 and 120 years for the extra CO2 to be absorbed resulting in extra global warming during the entire period.

The main argument for biomass seems to be that CO2 which was fixed 200 million years ago is different than CO2 fixed 50 years ago.

[JoeDavola]

Relevant video:

 

[Harley]

1 hour ago, JoeDavola said:

Yeah I'm stocking up at the moment just like I did in Feb 2020.

We've still got most of the stuff.  We'd better spend the weekend stocktaking.  Maybe implement a stock control system.

[Harley]

47 minutes ago, sancho panza said:

11 hours ago, jamtomorrow said:

 

I think Blain made trhe point that @DurhamBorn has is that there comes a point when ordianry joe's jsut see no point saving for a hosue,would rather be on furlough or enjoying life with less stress,which sends hosue prices down,which sends the banks down which sends unemployment up which sends hosue prices down etc etc.

Reminds me of the Japan everything bubble which caused some odd things given people were priced out of the "normal" stuff like houses.  They would have fads like sprinkling gold dust on their food.  Interesting lesson in how a debt bubble could unwind (Iceland on a larger scale). 

[King Penda]

2 hours ago, JoeDavola said:

My Dad mentioned reading about hidden hyperinflation to me today, which may be indicitive of the general population starting to wake up to what's happening.

Yes petrol is up to 130 here it was just over a shiney pound

[King Penda]

54 minutes ago, Harley said:

We've still got most of the stuff.  We'd better spend the weekend stocktaking.  Maybe implement a stock control system.

Wish I could go panic buying 

[DurhamBorn]

1 hour ago, Yadda yadda yadda said:

We were discussing a bloke who was let go from my place around a year at work today. Got a job for a little while but doesn't see the point in working at the wages he has been offered. He can get the same on benefits with two kids. Probably worked non-stop for 15 years until now.

Slumlords. Their tenants will get what they're offered as they won't be paying.

Its a bit different for me because im sort of retired at 49,but iv turned down dozens of jobs since Feb and some with blue chip employers.You can hear them on the phone that they are struggling to get decent people.I always tell them the same thing,its not enough money,or usually i tell them its nowhere near enough,or if its good money i tell them im not working weekends or nights etc.Last few places  iv noticed most of the younger workers didnt give a toss.

Welfare has destroyed the need to work for about 50% of people with children.The government needs the others to work 30 years none stop to buy a slave box.

 

[Yadda yadda yadda]

5 minutes ago, DurhamBorn said:

Its a bit different for me because im sort of retired at 49,but iv turned down dozens of jobs since Feb and some with blue chip employers.You can hear them on the phone that they are struggling to get decent people.I always tell them the same thing,its not enough money,or usually i tell them its nowhere near enough,or if its good money i tell them im not working weekends or nights etc.Last few places  iv noticed most of the younger workers didnt give a toss.

Welfare has destroyed the need to work for about 50% of people with children.The government needs the others to work 30 years none stop to buy a slave box.

 

A friend of mine is about your age. Took redundancy from a well paid but stressful job around five years ago. Hasn't worked since apart from a small amount of online selling. Now he has sold up down here and is moving his family to the small northern town he grew up in. No intention to ever work again.

[JoeDavola]

14 minutes ago, DurhamBorn said:

Welfare has destroyed the need to work for about 50% of people with children.The government needs the others to work 30 years none stop to buy a slave box.

Yeah I can't help but think of the eternally inflating housing costs relative to wages for the ever-shrinking pool of people who need to work to pay for their shelter is seen as a necessity by the state to ensure that they need to work and pay tax until they die basically.

I think ideally they want the answer to "how much is it to own/maintain house" to basically be "all your spare money every month until you die". In parts of the UK it appears to be at that level.

[Transistor Man]

2 hours ago, planit said:

Exactly, the calc I posted on here a few days ago showed we needed 2.5 times the current electricity supply to do the vehicles. Would be over 3.5 to replace gas heating with electric (even if we all had heat pumps, 'convenience' heating using conventional heat would add a lot).

 

Politicians annoy me. I did some research to confirm my feelings [and assumptions] on biomass over the weekend after getting a question from a chemistry teacher. It was worse than I thought. The paper decided it took between 50 and 120 years for the extra CO2 to be absorbed resulting in extra global warming during the entire period.

The main argument for biomass seems to be that CO2 which was fixed 200 million years ago is different than CO2 fixed 50 years ago.

@sancho panza I would have guessed going all EV would have added a very considerable demand. But McKinsey and National Grid say otherwise. 

I was at my parents house last week, I will ask my Dad next time, as he worked in electricity distribution for 40 years.

 Talking of biomass, my Dad’s hobby is running the house’s radiators and hot water, via a back boiler, by burning collected wood - mostly pallets. 

They don’t hold back: big house, big hot water tank. Over the winter, he burns 24 kg of wood an evening! And has 5 tonnes collected by October. 

(They do burn some coal, but not much)

[MrXxxx]

4 hours ago, JoeDavola said:

Yeah I'm stocking up at the moment just like I did in Feb 2020.

Forget panic buying like you did in Feb2020, I want another opportunity to panic buy like I did in Mar2020, as being new to investing then I didn't appreciate what a golden opportunity it was! :-)

[Harley]

2 minutes ago, MrXxxx said:

Forget panic buying like you did in Feb2020, I want another opportunity to panic buy like I did in Mar2020, as being new to investing then I didn't appreciate what a golden opportunity it was! :-)

Yep, I was too burnt out by then buying me crates of UHT so missed it.  Gotta pace meself next time.

PS: Just had our BBD Dec20 prunes in a home made brownie and they tasted fine.

[DurhamBorn]

On welfare it needs to be remembered though that massive welfare spending and the printing to go with it is a disaster for single unemployed.£74.70 a week £117.40 for a couple.The massive amounts for children and made up disability is where the money is.Most of the single mothers raking the money in get a huge shock once the child bennies stop.

Inflation is rampant in the basics and will be a disaster for those on those rates above.The woman over the road from me getting £500 a week + selling balloons on the side,+ two of the childrens dads there regular handing over money is laughing and forcing other welfare claims into massive poverty.

The left are squealing for the £20 covid uplift to be kept,but so far Sunak looks to be saying no,time will tell.

 

[wherebee]

6 hours ago, JoeDavola said:

Yeah I can't help but think of the eternally inflating housing costs relative to wages for the ever-shrinking pool of people who need to work to pay for their shelter is seen as a necessity by the state to ensure that they need to work and pay tax until they die basically.

I think ideally they want the answer to "how much is it to own/maintain house" to basically be "all your spare money every month until you die". In parts of the UK it appears to be at that level.

I've said to my kids that our house is big enough for them to live in long term.  The future (assuming no end of world vaxx holocaust) is one of back to the 20's and 30's - the vast majority will rent, middle class will erode, and home ownership will be dependent on generational wealth, not work.

Yay for globalisation.

[MrXxxx]

6 hours ago, DurhamBorn said:

Inflation is rampant in the basics and will be a disaster for those on those rates above.The woman over the road from me getting £500 a week + selling balloons on the side,+ two of the childrens dads there regular handing over money is laughing and forcing other welfare claims into massive poverty.

This goes to show how society has changed, and why the benefits system is due a overhaul. I n my Grandparents time people would have felt shame everyone knowing this, but now it appears a `Badge of honour`....the result?...something that was a good thing for the working class has now become a bad thing (except for the shameless few).

[Boon]

I know nothing about the benefits system.... but googling it Child Benefit is £21.15 a week - is that correct? 

It seems to have gone up pretty crappily over the years.... ie in 1995 a lone parent would have gotten £16.70.

In real terms (not the official inflation figures) I'm guessing it should be over double that to have the same purchasing power.