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

[JMD]

7 hours ago, ThoughtCriminal said:

I'm going to channel the spirit of David Hunter and be a contrarian. 

 

What if there is no great orgy of spending, whoring, drinking and holidaying etc after this "ends"? 

 

Anecdotally I've seen a lot of changes in people's behaviour: taking up long forgotten hobbies, losing weight and getting fit, unbridled joy at how much money they've saved not going to the pub. 

 

Everyone is baking in the fact that everything goes back to normal and we hit the roaring 20s.

 

Im not so sure that the propaganda and a year of a new routine won't have caused profound and permanent changes to how people live. 

 

I used to be a prison officer before I hid asbestos for a living and I know full well the power routine has to institutionalise people and entrench behaviours. 

 

The effect this would hadve economically can't be overstated. 

 

Just something worth considering. 

 

 

 

Precisely what I think. And i believe it would fit with the macro thesis here, ie its not about short term spending sprees, its more about long term change in behaviours.

[ThoughtCriminal]

3 hours ago, Yadda yadda yadda said:

Yes, all that is true. I've also seen people go back to smoking after just one cigarette. Some people will stop going to pubs or change their lifestyle permanently. Lots more won't and will be desperate to go out and spend. Whether that be in pubs and restaurants or on clothes and accessories. The people spending will more than make up for those that don't.

There could be substitutions. Friends round the house rather than go to the pub. Save on beer costs. It isn't the same experience though and you have to tidy up afterwards.

There have also been people who have taken less healthy life choices because of lockdown. I've seen it reported that smoking is up. Some people have become even more sedentary. Others are drinking more out of boredom.

The lockdown will affect behaviour, in at least a proportion of the population. There will be a spending boom as the money accumulating in bank accounts won't stay there. I expect holidays will be very expensive, although that might not really take effect until next year.

Lockdown led to demand and price surges in home exercise equipment. Dogs. A massive expansion of home food delivery. What will benefit from unlocking?

I think you're massively underestimating what this is. 

 

I see it as a paradigm shift. 'We're not going back to "normal". Pub takings were massively down before lockdown 2 started. 

 

Every poll sees around 75% of people asking to be fucked harder: more lockdown, wear three masks, no touching or hugging. 

 

We're not a nation of hedonists, we're a nation of masochists. 

 

Of course I could be wrong. 

 

In which case I'll gladly come on here and eat humble pie. 😆

[DurhamBorn]

3 hours ago, Cattle Prod said:

I don't think we've discussed interest rates not going up, and the financial repression needed to do that. Theres a 14 page transcript on the macrovoices website, let me me know what you think.

I think its maybe the slightly more likely outcome now and very interesting.They want an industrial recovery,and holding down bank credit would help with that in many ways if they also add fiscal liquidity ongoing,however i think that it wouldnt work to kill inflation because its going to be cost push inflation coming through.Could it be we get both?,rates increasing maybe to say 2.5% and credit kept down.My roadmap says they need to run inflation around 3% above rates to avoid collapse,maybe they know that themselves and are aiming for it?.The key point is they need liquidity moving from bonds to production.The financial repression is needed and certain.Its a distribution cycle ahead.If they do go for holding down credit i still think we get the same result,but maybe inflation tops out at 7+% instead of 12+% and reflation/de complex areas dont go parabolic,just a very good run higher over the cycle.

[DurhamBorn]

https://www.telegraph.co.uk/money/consumer-affairs/millions-households-hit-above-inflation-bill-hikes/

Moving nicely along now.Lovely.

[M S E Refugee]

16 minutes ago, ThoughtCriminal said:

I think you're massively underestimating what this is. 

 

I see it as a paradigm shift. 'We're not going back to "normal". Pub takings were massively down before lockdown 2 started. 

 

Every poll sees around 75% of people asking to be fucked harder: more lockdown, wear three masks, no touching or hugging. 

 

We're not a nation of hedonists, we're a nation of masochists. 

 

Of course I could be wrong. 

 

In which case I'll gladly come on here and eat humble pie. 😆

It depends if you believe the rigged polls from the pollsters.

I don't believe for one minute that the majority of the public are in favour of 10 year Prison sentences for not quarantining.

This Poll below must be made up.

https://yougov.co.uk/topics/health/survey-results/daily/2021/02/10/1ff44/1

[janch]

The above talk about command economy and financial repression is very interesting and possibly a lot more likely now we have governments who love controlling things and populations who lap it up.  Those in government who remember the 70s would probably say that the main takeaway from tehn is not to let inflation runaway and then let loose a wage-price spiral which was very hard to get out of.  So it would mean a more controlled approach to inflation control generally.

I wonder what this does to property prices as maybe there will be control here too in that commercial banks won't be allowed to lend more than a ertain amount as the bulk of the money creation is being done centrally.  However the narrative is still that property prices go up and this is what everyone expects.  They've just extended the stamp duty holiday and help to buy too.  People are happy when they see their house rising in value but I do wonder about those who are priced out.

TPTB will have to be careful though as already we're seeing more of a two-tier split even amonsgt the poorest and also the middle class  (as well as between the higher echelons and the rest).  Many businesses allowed to fail and many people not being eligible for furlough when others are coining it in.

[Hancock]

2 minutes ago, M S E Refugee said:

It depends if you believe the rigged polls from the pollsters.

I don't believe for one minute that the majority of the public are in favour of 10 year Prison sentences for not quarantining.

This Poll below must be made up.

https://yougov.co.uk/topics/health/survey-results/daily/2021/02/10/1ff44/1

Yougov is the Tories in house polling company, and just like the Tories they're always wrong.

[janch]

8 hours ago, ThoughtCriminal said:

before I hid asbestos for a living

You've mentioned this a couple of times and I'm curious as to where one would hide it!   Maybe I shouldn't ask especially on learning what you previous occupation was.

[JMD]

7 hours ago, sancho panza said:

I think there's been a lot written about the UK falling below replacement birth rate of 2.1 babies per woman,particualrly by Paul Hodges.

ALso worth noting that the current trends to aging are reinforced by hosuing prices.People like some security of tenure before having kids if they can-me and Mrs P rent and are having another little one in March so not judging anyone jsut saying I know what goes through her head-which means that places like Londinium are depopulating anyway given you've got 40 year olds living in shared accomodation becuase flats are so expensive or people paying £500k for a two bed flat.

Anotehr unintended consequence of our immigration and scoial hosuing policies.

Genuinely interested in whetehr you think housing costs play a part or not in the demogrpahic changes

 

 

this is similar to that great quote from you a few moments back that 'if it wasn't BTC it would besomething else'.....

I agree,if we didn't have nuclear weapons on all sides,there'd have been a proxy war or two by now.interested in @AWW point on his friends saying this was manufactured...which would explain why our govts panicked so much if intelligenece agencies were warning them of that fact.

Interesting that I've seen your roaring 20's meme cropping up across the media spectrum of late.

ALos,Luke Gromen interview I posted about teh other day was very much in line with a lot of your predictions,particualrly with regard to inflation.He predicts higher inflation than your good self but not by a lot.Number of bright minds heading in the same direction normally means 1 thing...(and I've still yet to study Napier's most recent round of interviews.

Lipstick indicator?

SP, not having a go at you, but I think demographics is mostly a kinda displacement theory (sponsored by gov.?) which mostly just says the bleeding obvious (...but conveniently let's gov. off the hook!). After all the problems it seeks to illuminate, have developed over decades and those problems wouldn't be problems if politicians had enacted proper policies, or never made stupid promises in the first place (eg pensions). Perhaps I am just making a circular argument? Or just showing my despair at modern 'experts'?!? However, demographics just mostly states the bleeding obvious does it not? ...Worth little more than a chapter in a good economics book maybe.                                                                                                                                                              So with my rant over(!), back to your housing point if I may. Extra population demand produces a squeeze, but think most price increases come from easy lending (yes, I'm back to beating on the experts). Any asset that can be borrowed against goes up, and up. This happens anywhere and everywhere, just look to the derivatives and hedge funds. Debt has its place of course, but If I were religious (I'm not) I might even be tempted to say debt was immoral, I think there is a lot to unpack there but I know that discussion is not for this thread.                                                                                                                                                  You mention Napier. I do like him but I note that his recent podcasts have been more informative (for investment plebs like me). You say you haven't watched yet, be interested if you have similar thoughts after viewing. I don't think this is a coincidence as he is now touting his new retail investor subscription service. I say this not to criticise Napier but to show the value of information, andi bet his long running commercial subscription service has been of great benefit to his institutional investors for many years.

[Yadda yadda yadda]

39 minutes ago, ThoughtCriminal said:

I think you're massively underestimating what this is. 

 

I see it as a paradigm shift. 'We're not going back to "normal". Pub takings were massively down before lockdown 2 started. 

 

Every poll sees around 75% of people asking to be fucked harder: more lockdown, wear three masks, no touching or hugging. 

 

We're not a nation of hedonists, we're a nation of masochists. 

 

Of course I could be wrong. 

 

In which case I'll gladly come on here and eat humble pie. 😆

Time will tell and I could well be wrong. There will be changes, that is inevitable. In your prison scenario you saw people who were still in prison and not after they were released. Although I expect a lot returned because they resumed their old behaviour patterns at some point after release. The whole country will be metaphorically released from prison. Although it seems like we will be going into open prison of varying harshness for an unquantified period first.

When pubs are open people will want to go even if they intend to only go once for 'old times sake'.

It may be some time before it all really kicks off as the old especially will be wary for a long while. Pubs might have to cater more for younger people again. Eventually older people will think they're missing out on what life they have left.

If people can predict which areas do well on reopening they could make a lot of money. More even than purely following the advice of this thread. Unfortunately I can't think what will do best and certainly not when.

[Yadda yadda yadda]

11 minutes ago, Cattle Prod said:

Thanks, I need to have a good think about how this works. I mean we've all heard our parents banging on about double digit interest rates (usually not mentioning the high inflation that went with that). But in my case anyway, there were no credit cards or bank loans, no cars on finance and mortgages were very hard to get, cap in hand to the bank manager stuff. I don't know if bank credit was restricted then, or just wasn't available, but you had all three things in the late 70s early eighties: no bank credit, high interest rates and high inflation.

Pretty sure our TV was rented into the late 80s. Of course these days a lot of people rent their phones.

[JMD]

6 hours ago, Cattle Prod said:

I have to relisten to his recent one on macrovoices. He had an alternative outcome to rising interest rates to cintrol inflation, by controlling bank credit growth  Keen to hear what you @DurhamBorn and the thread thought of it:

Would have considerable implications for the macro thesis discussed here

@MvR

Yes, that is a good point to raise. I heard other economic commentators say similar last year (Marisa Katusa?) re credit controls and for example favoured lending for the green sector. So our ollies sector suffers because hated by government. I asked DB about it and if I recall correctly he didn't think it presented big risk or concern.

[Don Coglione]

I wonder how many green wokies have turned off their fossil fuel-fired heating this week...

[feed]

Just now, Knickerless Turgid said:

I wonder how many green wokies have turned off their fossil fuel-fired heating this week...

Their heating was power by renewals, it was your heating that was fossil fuel powered, you terrible person. 

But seriously, "oilies" will just rebrand as energy companies.  It's clearly what shell have started to do with their recent press release and purchases.  

[JMD]

4 hours ago, Hancock said:

Once the shops, pubs and restaurants open, the only thing that will stop Brits spending is job losses or a tightening of credit.

This is a nation who on a Saturday night watches a dancing sausage to guess who is inside.

Isn't that program called Primed Minister's Questions?   (It's on Wednesday afternoons btw!!)

[Don Coglione]

5 minutes ago, feed said:

Their heating was power by renewals, it was your heating that was fossil fuel powered, you terrible person. 

But seriously, "oilies" will just rebrand as energy companies.  It's clearly what shell have started to do with their recent press release and purchases.  

Oh yes, that renewable gas that comes through the pipes - magic.

There is no way that human nature will allow the bounty that is low-cost fossil fuel energy to be squandered. Once the green wokies start to feel cold and are unable to heat up their vegan burgers and chai lattes, the hypocrisy will be revealed.

[JMD]

4 hours ago, feed said:

Risk taking.

Nothing quite like locking down an entire generation of youth for a year for a virus that has almost no averse effect on them to stimulate risk taking once let out again.  I imagine the roads will be carnage for a while.  

Roads will be carnage you say?  ...don't forget the new sport of London 'street knife crime', coming to an area near you soon!                                                                                                                                                             (NB i don't say this lightly, I am sick of the institutional failings - and leadership failures - that have led up to this)

[feed]

4 minutes ago, JMD said:

Roads will be carnage you say?  ...don't forget the new sport of London 'street knife crime', coming to an area near you soon!                                                                                                                                                             (NB i don't say this lightly, I am sick of the institutional failings - and leadership failures - that have led up to this)

That's not really new, or driven by the lockdown.  
I'm thinking more, risky drug taking, drinking, sex, driving, just generally stupid behavior from a generation that have had no outlet for a year.  From a group that have been told something that almost no risk to them was deadly.  

Due to government interference it's almost impossible to price financial risk.  And now it could be almost impossible to assess real health risks.  

[JMD]

5 hours ago, Harley said:

Another relevant historical insight - the Empire used to send it's troublesome youth off to fight in foreign lands and thereby maintain stability at home.  What's the new escape valve?  Eastern Germany missed that one did they not?

I am 'intrigued' by your oblique reference to East Germany ....Ok, I'm not too proud to ask - I don' un'staan' yer, what do yer mean fella?!? 

[arrow]

1 hour ago, DurhamBorn said:

I think its maybe the slightly more likely outcome now and very interesting.They want an industrial recovery,and holding down bank credit would help with that in many ways if they also add fiscal liquidity ongoing,however i think that it wouldnt work to kill inflation because its going to be cost push inflation coming through.Could it be we get both?,rates increasing maybe to say 2.5% and credit kept down.My roadmap says they need to run inflation around 3% above rates to avoid collapse,maybe they know that themselves and are aiming for it?.The key point is they need liquidity moving from bonds to production.The financial repression is needed and certain.Its a distribution cycle ahead.If they do go for holding down credit i still think we get the same result,but maybe inflation tops out at 7+% instead of 12+% and reflation/de complex areas dont go parabolic,just a very good run higher over the cycle.

If they keep interest rates down, I think Napier said about 4% or under, while controlling inflation and the economy through credit control, they can create their command economy while inflating away debt. Which industries, companies they choose in this economy will be interesting

[JMD]

3 hours ago, SpectrumFX said:

It wasn't the norm, but didn't used to be out of the ordinary in the public sector. When I started work in the civil service late 90's it was a standard part of any redundancy exercise to top up pensions for people (those who were either very well liked, or utterly hated by management) so that they paid out immediately and in full at 50 or thereabouts.

I understand that it was also standard practice back in the days of big local government pension surpluses to give a load of people early retirement in order to shift the cost of the restructuring onto the pension funds. In fact local government pensions still have rules that force the employer to pay out the pension if they make somebody redundant within some arbitrary timescale before pension age.

And In the private sector, it was also allowed to use pension 'surpluses' for redundancy program expenses/early payoffs, etc. Still is I think. Obviously the trustees thought that such 'surpluses' would always exist, it never entered their expert/entrused heads that one day deficits may happen!! And yet no one spoke out, tens of thousands of trustees, of many pension schemes, and over many decades all bought into this malfeasance!!! 

[JMD]

2 hours ago, janch said:

The above talk about command economy and financial repression is very interesting and possibly a lot more likely now we have governments who love controlling things and populations who lap it up.  Those in government who remember the 70s would probably say that the main takeaway from tehn is not to let inflation runaway and then let loose a wage-price spiral which was very hard to get out of.  So it would mean a more controlled approach to inflation control generally.

I wonder what this does to property prices as maybe there will be control here too in that commercial banks won't be allowed to lend more than a ertain amount as the bulk of the money creation is being done centrally.  However the narrative is still that property prices go up and this is what everyone expects.  They've just extended the stamp duty holiday and help to buy too.  People are happy when they see their house rising in value but I do wonder about those who are priced out.

TPTB will have to be careful though as already we're seeing more of a two-tier split even amonsgt the poorest and also the middle class  (as well as between the higher echelons and the rest).  Many businesses allowed to fail and many people not being eligible for furlough when others are coining it in.

I've been thinking more about which lessons government might want to learn (be capable of learning!) from the 70's, I think one obvious thing is that they will want to avoid union power increasing. Union memberships are I think at all time lows. I'm sure government are secretly polling the Tory red wall to discover what they want to see happen. Anyone here know what the red-wallers really-really want? Secure, skilled jobs are pretty obvious, but what else (economically speaking)?

[arrow]

2 hours ago, Cattle Prod said:

Thanks, I need to have a good think about how this works. I mean we've all heard our parents banging on about double digit interest rates (usually not mentioning the high inflation that went with that). But in my case anyway, there were no credit cards or bank loans, no cars on finance and mortgages were very hard to get, cap in hand to the bank manager stuff. I don't know if bank credit was restricted then, or just wasn't available, but you had all three things in the late 70s early eighties: no bank credit, high interest rates and high inflation.

Which is why I think that if this is implemented, there will be huge damage to the finance sector. The sector appears to exist on the creation of credit and its interest charges. Government controlled credit would allow a portion to flow to this sector, but not nearly enough to support its current existence

[MrXxxx]

22 hours ago, Harley said:

For example, war bonds anyone?  Er, actually no choice, there's a war on dontyaknow! 

....a we have our very own 21st Century Churchill...let's just hope this war doesn't last 6 years!

[JMD]

24 minutes ago, arrow said:

Which is why I think that if this is implemented, there will be huge damage to the finance sector. The sector appears to exist on the creation of credit and its interest charges. Government controlled credit would allow a portion to flow to this sector, but not nearly enough to support its current existence

Yes, I'd be interested to know what the insider ownership is now of banking stocks. Got to be at an all time low I would guess. For me the Insurance sector (though not the life/pension part) still worth a punt if get say a BK.