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The economy is totally and utterly fucked


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8 hours ago, whitevanman said:

The US is destroying one million jobs for each day of lockdown. That's permanent job destruction, the working class are being eviscerated. It's just the poor and the very rich from here on out.

No, The way the US works means that is there is a demand for a job then they spring back quickly.

US lab our market has been very very tight. Thats part ofthe reason a lot of compnaies are furlouhing. Last time in 2008 when they laid off loads, they had real problems restarting compnaies as there were little to no availability.

 

 

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2 hours ago, Uptherebels said:

Why didn't all the money printing from 2008 onwards , cause us to have inflation? 

Errrrr.....have you not been following....

Stock prices and asset values.

For example the DOW has inflated from 6600 to 29,000 pts..... if that’s not inflation what is?

Thats where all the printy printy...money has gone

Edited by Vendetta
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4 minutes ago, Vendetta said:

Errrrr.....have you not been following....

Stock prices and asset values.

For example the DOW has inflated from 6600 to 29,000 pts..... if that’s not inflation what is?

Thats where all the printy printy...money has gone

Yep. Got that. But when people, generally, talk about inflation, they talk about prices in shops, pay increases etc. As in the 70s. 

Why did that not happen?

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7 hours ago, Poseidon said:

This is it. Unless they 'want' something else to happen.  But why do you think inflation at double digits in 2025. Whats going to cause that.? 

And what industrial stuff will they be doing. Unless the consumer is there to soak up all that industrial effort what industry will they do.  Build bridges to places.? In the west no point. Bring Africa into the present day? 

Production facility was exported to China and Asia.

The West printed money, which all CBs have to do to allow the economy to transact. But rather than go into productive,wealth creation use, the banks lent it all to real estate, where it sits locked up, in bricks.

CB write off printed debt/money as the loan is paid back. Economies that printed loads that went into housing are stuck - HPI prevents jobs being created/people moving. Just idiots sat around in too expensive housed wondering where the buyers are.

They now need to ensure that most money printing goes into productive capacity rather than real estate.

Surprisingly, the UK is well positioned, after Browns 'miracle', MMR/basel3 puts a hard, wage restricted limit on housing debt. This is a good thing. Theres some minor poltical fucks up round the edges - HTB and the likes of IO loans, which the BoE will get to sort out.

But, to be clear, the UK housing debt economy (1987->1990, 2000->2012ish) is dead. You only have to look (hard, as they  are not forthcomign with the data) on how few mortgages are being written to see this.

Bear in mind that 2020 will see mortgages written in 1995 finishing.

All that the mortgages banks/books will have left is the junk lending from 2000-2012ish, mainly IO and HPE,

 

 

 

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10 hours ago, Wight Flight said:

 

 People will have learned their lesson and will start saving at all costs. Discretionary spending will be close to zero.

 

 

Taken from another forum, in relation to the mortgage interest rate cuts...

 

I'll be £15/month better off.
Might put it towards a new iPhone 11 on Apples 0% plan

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1 minute ago, Uptherebels said:

Yep. Got that. But when people, generally, talk about inflation, they talk about prices in shops, pay increases etc. As in the 70s. 

Why did that not happen?

Inflation has been gamed to the assets that the banks put in inflation basket.

You need a sane, broad inflation basket inc. housing.

By not putting in housing 0becasue tis hard, apparently,- the inflation stats are junk.

If the areas I visit for work really had low inflation then there would be no problems with them recruiting skilled people.

However as housing has not put in the inflation basket, the wages offered by  these companes are so reduced by housing inflation then there is nothing happening, nobody interested. Classic outcome of high inflation - destruction of the real wealth creatign economy.

 

 

 

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I love a bit of wishful thinking but you are a bit delusional if you think people will easily give up their iPhone 11 and thrice weekly McDonald's habit and just start saving. The consumer society will just double down on advertising.

Not having any money doesn't mean anything. Everything will be on credit in the future I suspect, Klarna for everyone. Incidentally Klarna are owned by a bank, I fully expect all UK banks to start offering a similar service from their apps etc. We'll go from cash , to debit card,  to credit for everything.

Secondly I doubt the rich will get richer. I posted in the other thread that already luxury retailers are seeing huge sales drops. Most rich people are over leveraged and over exposed, many of them have a few BTL properties where rents have sunk. There is no 80% wages guarantee for them. Look up high end items on Google Trends...

 

Screenshot_20200413-090745_Samsung Internet.jpg

Edited by spunko
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Imho, if the virus *did* kill a lot of people it could save the economy. If you had a couple of hundred thousand dead it would mean a lot of people get an early inheritance. That money would obviously get spent or invested. 

You also have companies like BT with massive pension deficits. If a lot of pensioners died BT could reduce pension contributions and give money to shareholders instead.

People are also going to spend money like there is no tomorrow. We could all be dead next year and people's consumption will reflect that. There must be a hell of a lot of pent up demand building up. If someone is stuck at home on 80% pay they'll be saving a fortune due to not spending. As soon as lockdown finishes they'll go berserk spending money.

I'd also hope there is a "Buy British" campaign. I watched a news programme about the NHS not having enough scrubs (gowns). British manufacturers have stepped in to make them. I'd like to think the NHS and other public bodies will now buy British. The NHS must buy millions of bits of uniform a year. That would have to mean a factory of a couple of hundred is kept busy.

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37 minutes ago, Uptherebels said:

Yep. Got that. But when people, generally, talk about inflation, they talk about prices in shops, pay increases etc. As in the 70s. 

Why did that not happen?

Design and government economic policy. 

Money flows like water - it follows the path of least resistance. 

Money may eventually be pushed into other asset classes and areas such as oil, agricultural land prices and labour. Then you would get food price inflation - and as a result - wage increases - depending on the ‘right’ conditions. 
 

 

 

Edited by Vendetta
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1 hour ago, Libspero said:

I think the problem is the banks have been told they can borrow lots of money from the government..  but is it actually underwritten against defaulters?

If not,  then nobody is going to lend where you suspect you might not get paid back.   I suspect this is the problem..  especially when potentially looking down the barrel of the next big down turn.     If the government want to literally give out money they could just have their own treasury website where you apply for a grant and the treasury print it there and then.  Not really any different to QE anyway.

Anecdotal from a business banker acquaintance - admittedly this was 2 weeks ago, which given the speed things are moving at might mean it's already completely out of date.

Anyway, he told me then that the banks were still on the hook for 20% and that "only" 80% was underwritten by the tax payer. He also told me they'd seen a huge increase in applications from businesses that they never would have lent to before, and aren't going to lend to now either. So perhaps this will end up being a case of pushing on a string, but I can also see the government deciding that this looks bad on them, so changing the scheme so that the schmuck tax payer is on the hook for all 100%, and banker's bonuses become directly related to the amount they lend.

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37 minutes ago, Wight Flight said:

Report out that 20% of dentists might go bust. (Yes, I know, might)

You would have thought that a dental practice would be an a grade bank loan candidate, but apparently not.

 

Used to go every 6 months

Not been to the dentist for 6 years.

Not since an EU import fekked up a tooth, another EU import fekked up the remedial, and then i round a good old UK dentist to repair it all - he then retired.

Visitor numbers might have dropped off a cliff if other people found the same.

Might not be such a money tree now

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Just now, Frank Hovis said:

Obviously we all have different views of what represents "the economy".

If someone letting out several holiday cottages for their income goes bust then they can go and get a job in the care industry, for example, and their cottages sold to locals as actual homes.

Jobs lost: four hours of minimum wage cleaning.

Those affected: the holiday cottage letter who was contributing sod all to the local economy and holidaying abroad.

 

If this is what is meant by micro businesses then I hope they all crash and burn and the effect upon the wider economy will be zip.

But there is more to small business than rapacious Airbnb hosts, dodgy Turkish barbers and mummy dog walking tax credit services. Despite what most dosbodders think. 

I blame the government for encouraging the idea that a part time dog walker is to be held in the same light as the manufacturer on the industrial estate making medical pet supplies. 

3 minutes ago, Hopeful said:

Used to go every 6 months

Not been to the dentist for 6 years.

Not since an EU import fekked up a tooth, another EU import fekked up the remedial, and then i round a good old UK dentist to repair it all - he then retired.

Visitor numbers might have dropped off a cliff if other people found the same.

Might not be such a money tree now

I've only been to a dentist once since turning 18. I'm not paying twice for something... my taxes are supposed to cover it. 

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4 minutes ago, Frank Hovis said:

Obviously we all have different views of what represents "the economy".

If someone letting out several holiday cottages for their income goes bust then they can go and get a job in the care industry, for example, and their cottages sold to locals as actual homes.

Jobs lost: four hours of minimum wage cleaning.

Those affected: the holiday cottage letter who was contributing sod all to the local economy and holidaying abroad.

 

If this is what is meant by micro businesses then I hope they all crash and burn and the effect upon the wider economy will be zip.

I am in particular referring to secondary industry. Primary will be ok, but if secondary industry takes a massive hit, tertiary businesses will be toast, as will the fourth sector.

We could end up with just farming and the state as the only viable employers.

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1 hour ago, Libspero said:

I think the problem is the banks have been told they can borrow lots of money from the government..  but is it actually underwritten against defaulters?

If not,  then nobody is going to lend where you suspect you might not get paid back.   I suspect this is the problem..  especially when potentially looking down the barrel of the next big down turn.     If the government want to literally give out money they could just have their own treasury website where you apply for a grant and the treasury print it there and then.  Not really any different to QE anyway.

 

10+ years of stress-testing and again we are going to be outside the most pessimistic part of the fan chart. 

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53 minutes ago, Wight Flight said:

Report out that 20% of dentists might go bust. (Yes, I know, might)

You would have thought that a dental practice would be an a grade bank loan candidate, but apparently not.

 

Worth qualifying that as 'dental practices'.

Same number of teeth, same number of dentists -- they'll probably be okay. 

The ones that'll suffer are the banks that lent money for dental practices to open.

[As far as I can tell most dental clinics aren't owned by the dentists that work in them -- they're owned by a single older dentist that pops in occasionally and the other dentists there will be employees.]

9 minutes ago, Fully Detached said:

I would think a lot of it would be used to pay off debt before people go on a spendathon.

Are you new to this planet?

[To add, that most 'inheritance' is housing wealth, and we're in a weird position where inherited houses will sell slowly because people won't be so willing to buy, and also where inherited wealth will (still) be used to BTL (that'll take years of slow but persistent declines to get out of the system)]

Edited by dgul
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9 minutes ago, Fully Detached said:

Anecdotal from a business banker acquaintance - admittedly this was 2 weeks ago, which given the speed things are moving at might mean it's already completely out of date.

Anyway, he told me then that the banks were still on the hook for 20% and that "only" 80% was underwritten by the tax payer. He also told me they'd seen a huge increase in applications from businesses that they never would have lent to before, and aren't going to lend to now either. So perhaps this will end up being a case of pushing on a string, but I can also see the government deciding that this looks bad on them, so changing the scheme so that the schmuck tax payer is on the hook for all 100%, and banker's bonuses become directly related to the amount they lend.

This is the stupidity of our system as compared to Germany's, who managed to process 130k applications in four days.

By leaving this 20% liability with the banks they have ensured the banks will want to do a full risk analysis on every loan, which has slowed the whole thing down to a crawl.

At the end of the day the borrower is liable for 100% of the loan.

If the government guaranteed 100% of the loan, but insisted on a personal guarantee, directors of solid businesses would take the risk and cash would flow.

Directors of unviable businesses would probably throw in the towel.

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26 minutes ago, Great Guy said:

Imho, if the virus *did* kill a lot of people it could save the economy. If you had a couple of hundred thousand dead it would mean a lot of people get an early inheritance. That money would obviously get spent or invested. 

You also have companies like BT with massive pension deficits. If a lot of pensioners died BT could reduce pension contributions and give money to shareholders instead.

People are also going to spend money like there is no tomorrow. We could all be dead next year and people's consumption will reflect that. There must be a hell of a lot of pent up demand building up. If someone is stuck at home on 80% pay they'll be saving a fortune due to not spending. As soon as lockdown finishes they'll go berserk spending money.

I'd also hope there is a "Buy British" campaign. I watched a news programme about the NHS not having enough scrubs (gowns). British manufacturers have stepped in to make them. I'd like to think the NHS and other public bodies will now buy British. The NHS must buy millions of bits of uniform a year. That would have to mean a factory of a couple of hundred is kept busy.

Indeed a lot of death could be positive. Inheritance property and extra money into economy. Some care homes.might not like it, however I see that as a huge positive. 

I was actually impressed by the staff who've moved into a care home to ensure inmates are safe. They did look like they'd eaten the residents though.

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