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

[spygirl]

1 hour ago, DurhamBorn said:

Just roll the interest rate graph back to 1982.We are in a massive deflation so they have no choice but to print,and they arent scared of inflation as that isnt the problem right now.The big problems come at the end of the inflation cycle when things collapse.They cant print then when inflation is 12%+ and will be in a corner.

Fed is nowhere near  where it needs to be though on printing.If they dont all increase quickly then we are on the edge of a systemic collapse.Im talking every single large bank etc rolling over.

Until the $ starts to fall hard then we are going to collapse.Hopefully the lawyer Powell wakes up quickly to the risk.

How does $ fall?

Euro is fucked. Yuan is fucked.

And that's it. Theres no upn coming currency block. Back in 80s the DM n Yen looked like a contender.

Fed can put dollars into economy, to tie stuff over. 

Only way would be a synthetic currency.

[sleepwello'nights]

19 minutes ago, Bricks & Mortar said:

EDIT TO ADD  The whole thread has been about the coming deflationary collapse.  When it comes, I think you want to have liquidated your investments at the high price, and sit in cash, or USD cash, or US treasury bonds, waiting for the bottom, to reinvest and make $$$. 

 

But cash is going to be devalued as well, so why liquidate into cash?

[TheCountOfNowhere]

Id still hold off piling in....

 

https://edition.cnn.com/world/live-news/coronavirus-outbreak-03-21-20-intl-hnk/h_3a2b6cfe6072f78ac20e9e2909e206f2

[DurhamBorn]

36 minutes ago, Noallegiance said:

.... Which looks like what to the man on the street?

Its a popular narrative to think it only hurts the "elite",but if it happened it would be the worst thing you could imagine for the middle class and working class.There are huge arguments to be had about the economy going forward,and im sure the next cycle will see lots of things change,but to get more for workers etc you need to keep the system alive,then get more of the pie.

[Bricks & Mortar]

Just now, sleepwello'nights said:

But cash is going to be devalued as well, so why liquidate into cash?

I think, (and no idea why you'd pay attention to what I think), that in deflation, assets are devalued in real cash terms.

Cash starts to be devalued at the end of the deflation, when governments print it into infinity. 

So, I think, liquidate to cash when you percieve it starts, then buy assets at cheaper prices before the central banks shoot their final bullets

But in real life, the picture is not clear.  The fed prints a little as soon as a deflationary crisis hits.  It watches.  It might print some more.  And some more.  it'll do whatever it takes, but doesn't want to risk hyperinflation.

Personally, I hope not to be playing.  I've removed 75% of my wealth from the market right now.  If I think its going back up, I'll get back in having missed the lows.

 

[DurhamBorn]

20 minutes ago, spygirl said:

How does $ fall?

Euro is fucked. Yuan is fucked.

And that's it. Theres no upn coming currency block. Back in 80s the DM n Yen looked like a contender.

Fed can put dollars into economy, to tie stuff over. 

Only way would be a synthetic currency.

Easy,the Fed prints more than the others.Longer term it will go up again,but they need to take the pressure off the system.I would think index back down to 96 would signal we have backed off from systemic collapse.It doesnt help the US to see its allies crash and burn.They need them for the next cycle when they turn full attention on China.The longer the dollar stays where it is (or higher) then the biggest crash in history could arrive.

They might get away with $3 trillion QE if they move very quickly.

Inflation is coming,only question is if its 15% by 2028 or 200%.If they wait too long its the later.

[Loki]

4 minutes ago, DurhamBorn said:

I would think index back down to 96 would signal we have backed off from systemic collapse

Thanks mate

[DurhamBorn]

Interesting reading.Im treading it like it will kill everyone in my home life to protect my family,but interesting read with lots of data.

https://medium.com/six-four-six-nine/evidence-over-hysteria-covid-19-1b767def5894

[Talking Monkey]

2 hours ago, DurhamBorn said:

Just roll the interest rate graph back to 1982.We are in a massive deflation so they have no choice but to print,and they arent scared of inflation as that isnt the problem right now.The big problems come at the end of the inflation cycle when things collapse.They cant print then when inflation is 12%+ and will be in a corner.

Fed is nowhere near  where it needs to be though on printing.If they dont all increase quickly then we are on the edge of a systemic collapse.Im talking every single large bank etc rolling over.

Until the $ starts to fall hard then we are going to collapse.Hopefully the lawyer Powell wakes up quickly to the risk.

DB the collapse at the end of the inflation cycle is its nature different to the potential collapse we could see now if Powell doesn't print big

[DurhamBorn]

14 minutes ago, Talking Monkey said:

DB the collapse at the end of the inflation cycle is its nature different to the potential collapse we could see now if Powell doesn't print big

Yes,it will involve collapse of all fiat currency.If they dont print currency will increase against assets at the moment.This collapse feels very nasty,but it can be turned with printing.The next one will be due to inflation,and so printing will be off the table.

[Ellandback]

Just wanted to thanks for recent posts fellas, thought provoking stuff. I'm currently 50% stocks (heavily weighted toward PMs & Oilies) the rest in cash plotting my next move , it's been a wild few weeks - fascinating times!

[TNS]

1 hour ago, DurhamBorn said:

Interesting reading.Im treading it like it will kill everyone in my home life to protect my family,but interesting read with lots of data.

https://medium.com/six-four-six-nine/evidence-over-hysteria-covid-19-1b767def5894

Fantastic piece imo and one that most should read.

[M S E Refugee]

6 hours ago, sam1994 said:

I want to have it in my possession.

Silver is VAT free from the EU until we leave.

I was looking at picking up 500ozs of silver. Sounds like a lot but it isn't. The ratio of silver:gold is now so large I cannot ignore it further.

 

What's CHF doing? Are they devaluing like crazy as well?

Carney mentioned that we should get rid of the US as a reserve currency only recently and pointed at a synthetic currency as a solution.

I can understand that you want to have in your possession but how do you propose to sell it when the ratio drops?

[BadAlchemy]

6 hours ago, DurhamBorn said:

Interesting reading.Im treading it like it will kill everyone in my home life to protect my family,but interesting read with lots of data.

https://medium.com/six-four-six-nine/evidence-over-hysteria-covid-19-1b767def5894

That link comes back with "article under investigation" (which makes me even more interested to read it!)

Here is a link to a cached version on Wayback Machine....

https://web.archive.org/web/20200321164503/https://medium.com/six-four-six-nine/evidence-over-hysteria-covid-19-1b767def5894

[MrXxxx]

9 hours ago, sancho panza said:

There's been some highly unusual trade patterns in the PM mining sector.Chart effectively shwoing that for a brief moment a week or so back you could buy the GDXJ ETF at a 20% discount to it's net asset value at that moment.I providied the 5 year chart for context.I think that was hte day Kinross yoyoed 40% on the day bottom to top.

Anywhere nice CV?

Thanks, and what do you think was the reason for this?...bad news and a sudden sentiment in the market or something more devious?

[MrXxxx]

9 hours ago, DurhamBorn said:

Just roll the interest rate graph back to 1982.We are in a massive deflation so they have no choice but to print,and they arent scared of inflation as that isnt the problem right now.The big problems come at the end of the inflation cycle when things collapse.They cant print then when inflation is 12%+ and will be in a corner.

Fed is nowhere near  where it needs to be though on printing.If they dont all increase quickly then we are on the edge of a systemic collapse.Im talking every single large bank etc rolling over.

Until the $ starts to fall hard then we are going to collapse.Hopefully the lawyer Powell wakes up quickly to the risk.

As we have seen this pattern time and time again with our current economic system, I can help but think there must be a better way to transact...I believe it was Einstein who stated "The definition of stupidity is doing the same thing again and again and expecting a different result"

[MrXxxx]

8 hours ago, Bricks & Mortar said:

the coming deflationary collapse.  When it comes, I think you want to have liquidated your investments at the high price, and sit in cash, or USD cash, or US treasury bonds, waiting for the bottom, to reinvest and make $$$. 

You see this is what I don't understand, as I would think with massive QE cash would be the last thing you would want to be in due to inflation eroding its value?!...to me the best would be PM, followed by gilts/high grade bonds, followed by high grade stocks...can someone explain what I am missing.

[Don Coglione]

11 hours ago, Bricks & Mortar said:

I bought some Signature Silver at Royal Mint today.   It's like a slice of a bar they hold for you.
A long time ago, the thread had a discussion about different ways to own silver, and some thought there were better ways, some preferring physical, ETF's,  Bullionvault,  yada yada.
If you're new around here, one of the best uses of an enforced stay at home, would be go back to the start, on the other site if you can, (or just to the part 1 thread on this site if not), and read the entire thing.

Anyway - you can still get it.  Price earlier today was £11.64 / oz to buy.  £10.25/oz to sell.

VAT implications?

[Castlevania]

14 minutes ago, MrXxxx said:

Thanks, and what do you think was the reason for this?...bad news and a sudden sentiment in the market or something more devious?

The market was incredibly volatile .Everything was getting dumped. Added to this there was a big liquidation of the 3 times leveraged version of the GDXJ. I just don’t think the ETF issuer had the time to rebalance to match the outflows. 

[MrXxxx]

8 hours ago, sancho panza said:

I think this is entirely possible.It wouldn't take much good news on the virus to reverse the latest drop given it's been one of the shrapest ever.

The Big Kahuna occurs for me when the debt deflation begins.As you outline B&M ,there's a chance they could turn this around but it has irrevocably set of the chain of actions needed to set the deflation in motion.There's variables eg if people take the moeny they save on going out to pubs/restaurants etc and spend it elsewhere or if they take savings and pay off debt then we're game on.There's a lot of CRE laon booksthat are currently looking unsellable,same with a lot of residentail loan books

Hence I'm fence sitting on the BK

So in essence, the whole virus thing has allowed them to `kick the can down the road` for a little bit longer?...now the logical amongst us would say lets have it sooner rather than later, but if you are a politician incumbent and have an election coming up you want the former!

[MrXxxx]

8 hours ago, spygirl said:

How does $ fall?

Euro is fucked. Yuan is fucked.

And that's it. Theres no upn coming currency block. Back in 80s the DM n Yen looked like a contender.

Fed can put dollars into economy, to tie stuff over. 

Only way would be a synthetic currency.

Hence the importance of a gold standard to act as an unbiased FIAT reference/datum?

[Calcutta]

Japanese friend of mine thinks all of this is designed so that the US can print trillions and make the government debt China holds worthless, and he's hoping they put sanctions on the Communists. 'shit chin reds' as he calls them.

[spygirl]

36 minutes ago, MrXxxx said:

Hence the importance of a gold standard to act as an unbiased FIAT reference/datum?

What if an asteroid made of gold crashes into Earth?

No, I dont thnk having a gold currency is wholey essential or useful. Theres just not enough. And would require a totally honest holding facility to vouch for the units of currency.

The oly way a gold currency would work would be if people paid for stuff gold - and thats not going to happen.

Whatever replaces the dollar is probably going to be synthetic.

Having a world trading currency/seigniorage is something noone understands or can create.

You need a country thats big enough to create a large float of currency, willing to run large deficits to support global trade and be trusted a a unit of value/exchange.

Back to inflation.

The fall out of 2008, where the central banks had to basically bail out the banks did not create much inflation. Or rather, they didnt create inflation which he inflation stats mesaure i.e. asstes, amely housing.

Howeer, having high housing cost in lreation to wages has created loads of distortions, none of which the GO or BoE were willing to take on, at least not urgently.

IO BTL should have hammered down to nothing. Hard debt levels to had been applied to individuals - i.e. same as MMR - max of 4x household income.

As they didnt, youve had the UK economy basically freeze with limtied to no people moving to jobs, so productivity has gone absolutely nowhere.

This effect will become worse will be felt in some areas as bascially the old, property owning population die off,leaving a massive 40 year gap where theres no buyers.

Ive said earlier, the fallout for IO BTL slumlords scamming the under 40s, so they can skim a few 100 a year, paying the rest to the banks, is going to have a huge fucking effect on the price of housing. Theres no equity to use to buy boomers housing.

Moronic EAs felt it first, as the boom of IO BTL purchasers faded to nothing and new sales fell to ~20-30% of what youd expect.

House sellers will feel it now esp if the virus death rate cranks up probates.

Now Govs are going to print, and put that money into the economy. They are going  to get it wrong and have to crank up IR to get it back.

 

So, the question i s- will your income.wages adjust with inflation?

It depends.

I can see massive problems for all the people scamming it on in work benefits, where they are just going to drag the increases to inflate Browns benefits away.

I dont see all the horde of self employed dog walkers lasting.

And I think people carrying high levels of debt - think more than 3x income getting wiped out.

Get your debt down to under 2x household income. Or hedge with a fixed rate mortgage/other assets,

And I think the millions of non nationals , sucking benefits are going to get kicked out. Or rather have all bennies stopped and be billed for public services such as schooling and health.

 

 

 

 

 

 

8 minutes ago, Calcutta said:

Japanese friend of mine thinks all of this is designed so that the US can print trillions and make the government debt China holds worthless, and he's hoping they put sanctions on the Communists. 'shit chin reds' as he calls them.

Too tinfoiled hatted.

Ive had the BIL going i - its al lthe illuminant, making everyone work for a large company.

None of this is planned.

[Loki]

10 hours ago, DurhamBorn said:

Interesting reading.Im treading it like it will kill everyone in my home life to protect my family,but interesting read with lots of data.

https://medium.com/six-four-six-nine/evidence-over-hysteria-covid-19-1b767def5894

410

This post is under investigation or was found in violation of the Medium Rules.

Looks like it's been memory-holed for true bad-speak

[Bricks & Mortar]

1 hour ago, Ponty Mython said:

VAT implications?

Yes, there was VAT.  And I don't expect to see that 20% again.  I believe I'd have got the signature gold VAT-free.  But with the gold/silver ratio at 120ish, I still went for silver.

Not for everyone, i suppose.  I think the particular circumstances of the present 'quarantine' influenced me.