Credit deflation and the reflation cycle to come (part 3)

[Harley]

4 hours ago, JMD said:

Harley, I agree, inflation ahead. The inflation/deflation debate has been an interesting one to follow. But do you think the Lacy Hunt deflationist argument is fairly summed up by George Gammon below (very short video), ie that the crucial thing to recognise is that direct government spending and control creates for us a new economic and inflationary paradigm, but that the deflationists themselves seem to think this new system will not happen?                                                        https://m.youtube.com/watch?v=kg_hZoFRQOw

There's a lot of BS spoken these days.  Those of us who've been through this before, even as kids, know better.  There was BS back then too.  I remember (later!) President Carter saying inflation was a mystery, etc. 

IMO the only deflationary fall would be in asset prices, but that's really just a normal stock market crash.  I don't know why we've started to call it something else.  Maybe anoraks splitting hairs on terminology.  Bottom line, IMO the cost of living will go up in fits and assets will lose value at some point via crash and/or through attrition. It happened many times before.  The good inflation (in assets), then the bad (in the cost of living), and then the really bad where asset (equity) prices fail to outrun inflation (Weimar, Venezuela, etc). 

KISS.  Macro to me, over the intermediate to long terms, except for true growth, is a simple zero sum game.  There's no alchemy, just snake oil.  But that's in the overall so, sure individuals can get burnt so others don't.

PS:  I like how he mentioned the 1940's, just like another goodun, Lyn Alden.

[feed]

9 minutes ago, Harley said:

PS:  I like how he mentioned the 1940's, just like another goodun, Lyn Alden.

Today.

[sancho panza]

9 hours ago, Majorpain said:

Whilst I am happy to be corrected, I'm fairly sure that the "dollars" in Eurodollar market are US origin.  It would be a strange system if "foreigners" could print your currency at will.  Even if im wrong it doesn't change anything with regards to the rest, the US share of world GDP is not big enough for the amount of currency needed to circulate, if anything it would make it worse as Dollars would be "printed" by every bank that could.

Total Dollars in worldwide circulation is about $40T, Turkey GDP (PPP) is 11th in world is currently about $720bn.  External USD denominated debt is about $453.2bn, so whilst it will put a dent in total assets its only a small fraction in reality.

The fear is it derivative chain reacts the banks, BBVA, Unicredit, BNP and ING are exposed, so all the EU favorites bar the Germans.  ECB will be in a position to bail them out if worst comes to worst i suspect.

I think one of the overiring issues is regulation.Yes ,they can't print the $1 but they can magive up a $99 loan on the back of it.

Someone already psoted the Jeff Snyder Macrovoices interview.I think it's the one where he talks about red dollars(outside the fed control) and green dollars(inside).The slide deck available with that podcast is a great precy of the issues.

It jsut anotehr issue that creates a huge potential instability in the market as a lot of these Euro dollars are parked up in small offshore places such as the Bahamas.

We've never seen real contagion risk in the eurodollar market but if we did,it'd be an amazing thing to see.Think China's shadow banks on speed.

8 hours ago, Mapper said:

They circulate as freely as dollars created by commercial banks in the US. They are spent, borrowed, used as collateral for more lending.

This is the essense of the current global monetary system. The federal reserve has no control over it.

Agreed.

4 hours ago, planit said:

So the hand has been played. 

The US is to 'release' '$50m' barrels of oil. The figure is in quotes because $18m barrels of it was already planned for release so they are double counting it and 'release' is in quotes because it is an exchange and needs to be returned later just like the previous ones in China etc

US to release 50m barrels of oil from reserves

 

Oil rose on the announcement since it all seems a bit desparate and is a pass to OPEC not to speed up their plans for increasing output (which they probably can't physically do anyway).

Looking to the inventory figures later and tomorrow to hopefully push oil back over $80, I loaded up even more on the dip so too much skin in the game at the moment.

 

US Inventory figures including SPR will probably go under the 1bn barrels for the first time since 2008 (they dipped quickly below 2011) soon.

 

 

 

and for the comedy moment

 

[sancho panza]

Interesting tweet here that suggests we have some way to go thE the oil top.

 

[ThoughtCriminal]

This is the US energy Secretary.

 

She doesn't know how many barrels of oil a day the US uses. 🤣

 

Elon musk's right, this has to be a simulation because there's no fucking way it can be real life.

[Phil]

5 minutes ago, sancho panza said:

Interesting tweet here that suggests we have some way to go thE the oil top.

 

Checked RT news today . Post was 4 mins old when I spotted it, straight to the H&L account and topped up. I think Harley posted some info about how cheap energy is/has been, and how producers have been funding the decedent west’s lifestyle for decades. Really interesting and appreciated. Not a massive sum I got but it will be a hold. 

[Phil]

Just now, Phil said:

Checked RT news today . Post was 4 mins old when I spotted it, straight to the H&L account and topped up. I think Harley posted some info about how cheap energy is/has been, and how producers have been funding the decedent west’s lifestyle for decades. Really interesting and appreciated. Not a massive sum I got but it will be a hold. 

Forgot to mention that Harley said he could smell the fear. I think I could smell it as well.

[wherebee]

21 minutes ago, ThoughtCriminal said:

This is the US energy Secretary.

 

She doesn't know how many barrels of oil a day the US uses. 🤣

 

Elon musk's right, this has to be a simulation because there's no fucking way it can be real life.

To be fair, journalists love this 'gotcha' approach where they have a specific number and throw it at someone.  Unless they know hundreds of numbers in their head, you get to say 'actually, it is X' and make them look a fool.

However, she SHOULD have said 'the release of reserves is, whilst only a few days of use, will release pressure and enable normal market forces to re establish themselves'

she's a classic over promoted leftie.  great at  virtue points, shit at reality.

[Harley]

16 minutes ago, wherebee said:

To be fair, journalists love this 'gotcha' approach where they have a specific number and throw it at someone.  Unless they know hundreds of numbers in their head, you get to say 'actually, it is X' and make them look a fool.

However, she SHOULD have said 'the release of reserves is, whilst only a few days of use, will release pressure and enable normal market forces to re establish themselves'

she's a classic over promoted leftie.  great at  virtue points, shit at reality.

Really not expected at that level.  A very simple read.  I've been in high level meetings where folk have been skewered and gone within the month for less. 

[Harley]

26 minutes ago, Phil said:

Forgot to mention that Harley said he could smell the fear. I think I could smell it as well.

Alas, I have never said anything so sensible or prescient and don't intend starting so now! 

[Castlevania]

1 hour ago, sancho panza said:

What TIT?

Yeah Telecom Italia. I’d like a higher bid. An offer at €0.60 and I’d be happy.

[ThoughtCriminal]

9 minutes ago, wherebee said:

To be fair, journalists love this 'gotcha' approach where they have a specific number and throw it at someone.  Unless they know hundreds of numbers in their head, you get to say 'actually, it is X' and make them look a fool.

However, she SHOULD have said 'the release of reserves is, whilst only a few days of use, will release pressure and enable normal market forces to re establish themselves'

she's a classic over promoted leftie.  great at  virtue points, shit at reality.

I know but this was absolute basics.

 

Even I knew the answer and I'm an ex screw from a council estate in Middlesbrough.

 

 

[DurhamBorn]

7 minutes ago, wherebee said:

To be fair, journalists love this 'gotcha' approach where they have a specific number and throw it at someone.  Unless they know hundreds of numbers in their head, you get to say 'actually, it is X' and make them look a fool.

However, she SHOULD have said 'the release of reserves is, whilst only a few days of use, will release pressure and enable normal market forces to re establish themselves'

she's a classic over promoted leftie.  great at  virtue points, shit at reality.

Thing is,as energy sec the first number i want every day is how much energy we consume.Its the very basic number.It just shows how right across the UK and US the left woke filled blob has managed to get their people into power.Great for us though because one of the things iv found in life is that almost everything left wing turns to utter shit so we invest the opposite way.Doesnt really matter though,oil is going to $200 minimum,likely $300 and a blow off top of $450 not out of the question.Nothing they can do.The lead and lag looked superb on it when reflation looked likely,now we are in big inflation and extra green noise the risk is nearly all on the overshoot.

[DurhamBorn]

2 minutes ago, ThoughtCriminal said:

I know but this was absolute basics.

 

Even I knew the answer and I'm an ex screw from a council estate in Middlesbrough.

 

 

Who likely owns more oil shares than the US energy sec  

[reformed nice guy]

Doesnt the release of these strategic reserves mainly help the huge, energy hungry country that doesnt have enough of its own reserves to power its large manufacturing base... China?

If it worked (which it wont obviously) wouldnt a lower price of oil help China more than America?

[JMD]

3 hours ago, Harley said:

There's a lot of BS spoken these days.  Those of us who've been through this before, even as kids, know better.  There was BS back then too.  I remember (later!) President Carter saying inflation was a mystery, etc. 

IMO the only deflationary fall would be in asset prices, but that's really just a normal stock market crash.  I don't know why we've started to call it something else.  Maybe anoraks splitting hairs on terminology.  Bottom line, IMO the cost of living will go up in fits and assets will lose value at some point via crash and/or through attrition. It happened many times before.  The good inflation (in assets), then the bad (in the cost of living), and then the really bad where asset (equity) prices fail to outrun inflation (Weimar, Venezuela, etc). 

KISS.  Macro to me, over the intermediate to long terms, except for true growth, is a simple zero sum game.  There's no alchemy, just snake oil.  But that's in the overall so, sure individuals can get burnt so others don't.

PS:  I like how he mentioned the 1940's, just like another goodun, Lyn Alden.

Yes definitions and time frames are important and Lacey Hunt was talking long term not just a market correction... But I suppose it's just me, as I hadn't appreciated that Hunt and many other deflationists think the current monetary system status quo will continue and so consider ratios like the money-multiplier important in highlighting the inexhaurable grinding down of productive capital. Whearas instead the future 'reset' will circumvent commercial bank money creation, and we will get a (utopian?!) command economy utilising MMT, cbdc's and other tricks to provide the required velocity of money uptick and the inflation boost in spades.

[JMD]

4 hours ago, sancho panza said:

Not sure it's small fry to a lot of Spainish banks who are exposed there.Typically,banking crises start at the margins.

Aug 15 2020

https://wolfstreet.com/2020/08/15/as-turkeys-2nd-financial-currency-crisis-in-2-years-blossoms-heavily-invested-european-banks-look-for-exit-but-not-the-most-exposed-bank/

By Nick Corbishley, for WOLF STREET:

As the Turkish lira logged fresh record lows against both the dollar and the euro on Friday, and is now down 19% this year against the dollar, attention is turning once again to the potential risks facing lenders. They include a handful of very big Eurozone banks that are heavily exposed to Turkey’s economy via large amounts in loans — much of it in euros — through banks they acquired in Turkey. And the strains are beginning to replay those of the last currency/financial crisis in 2018.

Three weeks ago, when the lira was trading within a tight band against the dollar — the result of the Central Bank of the Republic of Turkey (CBRT) pegging the lira to the dollar by burning through billions of dollars of already depleted foreign-exchange reserves and dollars borrowed from Turkish banks — no corporate bonds in Turkey were trading at these levels. Now that the CBRT has stopped propping up the lira, which has since fallen 7% against the dollar, the average risk premium demanded by investors to hold dollar-denominated notes of Turkish businesses has soared.

European Banks’ Exposure

Of all non-Turkish lenders Spanish and French banks continue to have the most loans outstanding to Turkey, according to the Bank for International Settlements. Banks in Spain, France, Italy and the UK have an estimated combined exposure of around €118 billion. Spanish lenders (read: BBVA) account for just over half of that (€61 billion) while French (read: BNP Paribas), Italian (read: Unicredit) and British (read: HSBC) banks are respectively due €24 billion, €21 billion and €11 billion.

A Big Gamble that went well for years has gone sour.

These lenders were drawn to Turkey by the country’s record of high-octane, debt-fueled economic growth and its much more favorable demographics than the ageing populations of Western Europe. For a fair while, the bet paid off. Erdogan’s economic miracle, fueled largely by a huge foreign-currency-denominated debt bubble, provided over a decade of juicy lending opportunities and bumper profits for the banks. Then, when the miracle faltered, the bubble went pop, and things went to heck.

But the foreign bank that has taken the biggest loss on its investment in Turkey so far…

One foreign bank that remains optimistic, at least outwardly, about its exposure to Turkey’s economy is the most exposed of all: Spain’s BBVA, which owns half of Turkiye Garanti Bankasi. BBVA has already written off over 75% of its investment in Garanti since buying its first chunk of the lender in 2011, under the combined influence of Garanti’s plummeting shares and Turkey’s plunging currency.

Thanks in large part to this, as well as the expansion of lending and the relatively strong performance of the lira in May and June, Garanti earned €189 million in the second quarter of 2020 — despite the loan growth, this was down from €218 million in the second quarter of 2019. And this as as of the end of June.

Is Spain's BBVA a future 'RBS waiting to happen'? Bad management, devil may care upstart, though their USP seems to be tech focus... Can't make out whether they are public or private?

[macca]

2 hours ago, DurhamBorn said:

Thing is,as energy sec the first number i want every day is how much energy we consume.Its the very basic number.It just shows how right across the UK and US the left woke filled blob has managed to get their people into power.Great for us though because one of the things iv found in life is that almost everything left wing turns to utter shit so we invest the opposite way.Doesnt really matter though,oil is going to $200 minimum,likely $300 and a blow off top of $450 not out of the question.Nothing they can do.The lead and lag looked superb on it when reflation looked likely,now we are in big inflation and extra green noise the risk is nearly all on the overshoot.

Problem is affording the shares.. they are not exactly cheap to buy,, iv'e looked before but i would only be able to buy a few..

[Phil]

8 hours ago, Harley said:

Alas, I have never said anything so sensible or prescient and don't intend starting so now! 

Apology. 

[jamtomorrow]

Interesting to see Javier diverge from one of the tenets of this thread (that only Big Oil has the Big Bollox to drive the energy transition). Albeit in a nuanced way, the thread he links is still saying O&G should be allowed to focus on O&G -

 

[ThoughtCriminal]

9 hours ago, DurhamBorn said:

Thing is,as energy sec the first number i want every day is how much energy we consume.Its the very basic number.It just shows how right across the UK and US the left woke filled blob has managed to get their people into power.Great for us though because one of the things iv found in life is that almost everything left wing turns to utter shit so we invest the opposite way.Doesnt really matter though,oil is going to $200 minimum,likely $300 and a blow off top of $450 not out of the question.Nothing they can do.The lead and lag looked superb on it when reflation looked likely,now we are in big inflation and extra green noise the risk is nearly all on the overshoot.

To the options boys on here, DB just gave me an idea.

 

If oil is going to 200ish or maybe even 3-400, doesn't that represent huge upside bet with low downside even if it doesn't come off?

 

Can't be many people out there putting 300-400 oil in their numbers.

 

Or am I talking shite??

 

@MvR

 

 

 

 

 

 

 

 

 

[ThoughtCriminal]

And it's not even cold yet.

 

It's like watching an exciting film where you know someone bursts in the room and blows your head off at the end.

[Noallegiance]

1 minute ago, ThoughtCriminal said:

And it's not even cold yet.

 

It's like watching an exciting film where you know someone bursts in the room and blows your head off at the end.

I'm thinking Titanic, but this real life movie makes that look short.

[afly]

7 minutes ago, ThoughtCriminal said:

To the options boys on here, DB just gave me an idea.

 

If oil is going to 200ish or maybe even 3-400, doesn't that represent huge upside bet with low downside even if it doesn't come off?

 

Can't be many people out there putting 300-400 oil in their numbers.

 

Or am I talking shite??

 

Trying to tag man versus recession but not coming up. Anyone know his handle on here?

 

 

 

 

 

 

 

 

 

@MvR

[ThoughtCriminal]

4 minutes ago, afly said:

@MvR

You're a gentleman! It's like putting up the bat signal, MvR we have an options emergency, another clown with a cunning plan to run past you 😂