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

[Yadda yadda yadda]

32 minutes ago, Hancock said:

Stick rates up a few percent see house prices crash, then people will empty their accounts to buy somewhere to live and furnish it ... they might even borrow money in addition to spending their savings ... and as its a place to live the borrowings will be at a level they can pay back.

Be boom time all over again! 

Most of the so-called excess savings are in the hands of existing homeowners. That is what I reckon anyway. Who were the financial winners out of covid lockdowns and payments? Benefits cases, who will have mostly spent their money. Not least because they lose benefits if they save but also because they don't worry about their financial futures. That is somebody else's problem. Also business owners who got bounceback loans. Mostly homeowners. Other groups that saved money are some middle class work from home types who saved on commuting. Plus the people who go on multiple holidays a year but couldn't. Some furloughed workers may have saved some money or paid off debts (which probably counts as saving) but not a lot compared with others. Overall most of the saving will have been done by those who own homes as that group includes most people with a lot of disposable income. Especially people who bought 15+ years ago.

I think they will be forced to put up rates, just not quite yet. Velocity will rise again and rates will follow. Slowly at first and then all of a sudden.

 

[Yadda yadda yadda]

10 minutes ago, MrXxxx said:

That's not 'Catching a falling knife', that's catching the whole bloody cutlery set!

Awesome!

What happened? Looks like they just scrubbed some noughts from the unit of measurement. I was going to call it a currency but that didn't seem appropriate. The graph brings to mind a trader climbing to the top of his office building, taking a look at his desk, thinking "nah, not today" before jumping out of the window. The hearse to the morgue seems to be a flat route but on close inspection isn't.

[Hancock]

13 minutes ago, Yadda yadda yadda said:

Most of the so-called excess savings are in the hands of existing homeowners.

 

Mixed bag, but there are millions of under 50s with a shit load of savings waiting for a HPC.

Breaks my heart that i was one of the few honest people to only get 25% of previous years earnings for my BBL, could have got another 37k if i wasn't such an idiot!

[Hancock]

9 hours ago, sancho panza said:

Think your spot on there Harley>Johnson's really messed the UK up.There's only so long you can cover up the mess at Dover,the fiscal issues,the energy shortfall,inflation,housing market,bennies bill etc etc...

Cue Fraser Nelson -

Boris Johnson recently hosted a dinner in No 10 for Tory MPs past and present who, like him, entered Parliament in 2001. To his surprise, David Cameron accepted the invitation. As they all sat down for dinner, the ever-competitive Prime Minister thought he’d have a bit of fun at his predecessor’s expense. He was about to launch a window-sill insulation scheme, he said – and he thought he’d call it “Greensill.”

When Cameron’s turn to speak came, he said that he ran No 10 in the glory days when there was food on the shelves and Tories who actually cut taxes. A decent joke. But Boris’s was better.

No one forgets a lobbying scandal. Cameron won two elections, he transformed both welfare and secondary schooling. But he will spend the rest of his days tainted by his lobbying for the now-collapsed Greensill. Sir Malcolm Rifkind, Stephen Byers and Neil Hamilton all ended up with similar stains on their reputations. When Owen Paterson accepted £9,300 a month from corporates – far more than his MP’s salary – scandal was sure to follow. A scandal now magnified several times over by No 10’s ineptitude, with career-ending effect.

ADVERTISING

Like so many political misjudgments, this started with an attempt at decency. Johnson likes to stand by his friends and allies even (perhaps especially) when that means taking fire. When Priti Patel’s former civil servants were accusing her of bullying, he asked MPs to “form a square around the Prittster” to defend her.

He thinks Paterson was wrongly accused of breaking lobbying rules by a biased Westminster sleaze watchdog – one who was, once, out to get him. He felt a particular sympathy for Paterson whose wife had taken her own life as this investigation dragged on. His majority meant the Tories could change the rules, which would create a fuss. But then again: so what?

It is not clear how much thought was given to all of this. It seems to have followed the Richard Branson logic of “Screw it: let’s do it” – or, as Jacob Rees-Mogg later put it, “Let justice be done, though the heavens fall.” Various Tory MPs pleaded with the whips not to go through with this madness. Whatever the details of the case, they said, people would just see a Tory caught with his snout in the trough, then let off the hook by his fellow Conservatives. How could they vote for what would be seen, by the public, as a stitch-up?

As with the National Insurance tax rise, the Conservatives were given no time to think – or rebel. They were given their orders and obeyed, knowing it would be another Charge of the Light Brigade. It was bound to fail. And even the attempt would cause permanent damage, making it easier to cast Tories as cheats and liars: dodging sleaze rules, reneging on manifesto pledges. They were doing it because a Westminster victory was guaranteed: they are up against a Labour Party so inept as to be a danger only to itself. Sir Keir Starmer actually had the votes to defeat the Government over the Paterson affair, but failed to organise his own troops on time. Only public outcry forced No 10 to change its mind.

Power corrupts, absolute power corrupts absolutely – and a majority of 80 gives the Prime Minister the kind of power that turns a brain fart into law within 24 hours. There is pitifully little scrutiny or questioning. No one to point out that this demented plan would fail because all parties needed to agree any changes to a parliamentary watchdog. No one to point out that, like the expenses scandal, this isn’t about the technicalities but a wider principle. About trust in politics.

Most of the expenses transgressions were within the rules. The helipad maintenance, the moat-dredging and even the sleazy video – all were approved by the relevant authorities, bought at the taxpayers’ expense. Perfectly legal, but still outrageous. The distinction between the two was lost on politicians so settled in the Westminster bubble that they could not see how all of this looked to people outside it. Back then, Johnson – as Mayor of London – was one of those who grasped this at once. He still teases Michael Gove about the “financial origins” of his £331 Chinon chair.

I am among Paterson’s admirers: he is a man of energy and tenacity. But on this issue, his judgment failed him. The rules might have permitted him to double his salary by shilling for corporates, but should he have done so? To accept £100,000 a year for advising any corporation was always going to raise questions about where his loyalty lay. The Prime Minister ought to have known this. As he wrote in these pages at the time, the expenses scandal showed that “the public is utterly fed up with politicians who seem to be actuated by their financial circumstances”. True then, and true now.

Much of this is classic overcorrection in No 10. This time last year, what the Prime Minister thought was seen as an almost peripheral issue in a machine run by Dominic Cummings. Now, what he says is enacted at once – even if it’s sure to end in disaster. Mark Spencer, the Chief Whip, assured Downing Street that the mission to save Paterson would be fine. Even the Tory party machine was not consulted.

So within the space of a few weeks, the Prime Minister went from needling Cameron about lobbying scandals to plunging the Tories into a scandal of his own. Had he sought advice, he would have told Paterson to take his punishment quietly and be back by Christmas. The watchdog could have been reformed a few months later, in consultation with Labour, at a time when neither party would have anyone under investigation. The Johnsonian impulse, this time, ended up crushing the man he intended to help.

Thoughtlessness, arrogance, complacency, being tone deaf to public opinion – in the past few days, the Tories have exhibited the traits of an exhausted government in its dying days. And that’s before the inflation that the Bank of England now expects to eat away any rise in wages for the next two years (if it doesn’t tip the economy into another crash). The difference from the 1990s is that there is no Tony Blair to capitalise on these errors. But now, as then, it’s becoming easier to see how a Tory government ends.    

 

 

[Yadda yadda yadda]

3 minutes ago, Hancock said:

Mixed bag, but there are millions of under 50s with a shit load of savings waiting for a HPC.

Breaks my heart that i was one of the few honest people to only get 25% of previous years earnings for my BBL, could have got another 37k if i wasn't such an idiot!

Those are the pre-covid 'normal' savings that are expected to be there. There are now billions of extra savings. If people think those savings are earning good interest they will keep the savings. If they think they're losing value to inflation they will spend them. These are windfall savings without a purpose. So keeping rates low will encourage spending whilst increasing rates will encourage saving. This is the point that I think was being made.

I think we can go further and say that people looking for a house price crash to spend savings - rather than borrow 90% - will wait for further rates rises once they start going up. They will want a proper crash.

I also think that if rates stay low and inflation rises that will cause velocity to increase as those with spare savings buy that holiday or car or extension or whatever else. Therefore increasing inflation is now baked in. Rate rises will follow and houses will crash in the bubblier areas. Unless there is a mechanism for inflation to disappear prior to a recession and I can't see that.

Holding rates down today has lowered the pound and will therefore push up imported inflation. Can't have that too many times. They're running out of options. DB is convincing when he says they want to capture inflation in the tax take before it appears in the Government interest bill. Rates will lag but it is a balancing act.

[Axeman123]

15 minutes ago, Hancock said:

Thoughtlessness, arrogance, complacency, being tone deaf to public opinion – in the past few days, the Tories have exhibited the traits of an exhausted government in its dying days. And that’s before the inflation that the Bank of England now expects to eat away any rise in wages for the next two years (if it doesn’t tip the economy into another crash)...But now, as then, it’s becoming easier to see how a Tory government ends.

The thing that blew my mind was last night Owen Patterson announced he would do the same again, and called for the resignation of the Commissioner! That was the really tone deaf and politically incompetent part, no-one told him to keep his head down after the vote!

[Hancock]

4 minutes ago, Axeman123 said:

The thing that blew my mind was last night Owen Patterson announced he would do the same again, and called for the resignation of the Commissioner! That was the really tone deaf and politically incompetent part, no-one told him to keep his head down after the vote!

This comment from that article sums up politics over the last few decades.

[MrXxxx]

2 hours ago, Animal Spirits said:

That would seem likely. I'd suggest it was about prestige and then Covid came along...

Doesn't come across with conviction but he's only had Sir Kneel as competition and I suppose he hasn't shown himself to embrace wokeism directly. David Cameron more or less labelled him an opportunist, they obviously know each other well:

They look like a reject bunch of 1980's New Romantics!

[reformed nice guy]

13 minutes ago, Yadda yadda yadda said:

Those are the pre-covid 'normal' savings that are expected to be there. There are now billions of extra savings. If people think those savings are earning good interest they will keep the savings. If they think they're losing value to inflation they will spend them. These are windfall savings without a purpose. So keeping rates low will encourage spending whilst increasing rates will encourage saving. This is the point that I think was being made.

I think we can go further and say that people looking for a house price crash to spend savings - rather than borrow 90% - will wait for further rates rises once they start going up. They will want a proper crash.

I also think that if rates stay low and inflation rises that will cause velocity to increase as those with spare savings buy that holiday or car or extension or whatever else. Therefore increasing inflation is now baked in. Rate rises will follow and houses will crash in the bubblier areas. Unless there is a mechanism for inflation to disappear prior to a recession and I can't see that.

Holding rates down today has lowered the pound and will therefore push up imported inflation. Can't have that too many times. They're running out of options. DB is convincing when he says they want to capture inflation in the tax take before it appears in the Government interest bill. Rates will lag but it is a balancing act.

I think a part of the high savings will be oldies in the 80+ range that have very good pensions and not enough to spend that money on.

[Axeman123]

6 minutes ago, Hancock said:

This comment from that article sums up politics over the last few decades.

Here is a quote from the DM on the matter:

"he made three approaches to the Food Standards Agency relating to Randox and testing for antibiotics in milk in November 2016 and November 2017.

Emails to the FSA apparently read like marketing pitched on behalf of the firm, mentioning 'Randox's superior technology' in helping identify problems. 

He went on to suggest that 'once established the application of the technology could be discussed not just within the FSA but across the whole dairy industry,' something from which the company stood to make large sums of money."

Blatantly attempting regulatory capture. He didn't give a damn about milk safety, just his donor's p&l.

https://www.dailymail.co.uk/news/article-10165101/What-happens-Boris-Johnsons-U-turn-standards-shake-up.html

[Loki]

3 minutes ago, Axeman123 said:

He didn't give a damn about...safety, just his donor's p&l.

I'm seeing a theme here

[Mapper]

2 hours ago, Animal Spirits said:

That would seem likely. I'd suggest it was about prestige and then Covid came along...

Doesn't come across with conviction but he's only had Sir Kneel as competition and I suppose he hasn't shown himself to embrace wokeism directly. David Cameron more or less labelled him an opportunist, they obviously know each other well:

Doesn't that picture make you want to stamp on all of their bollocks?

[JMD]

2 hours ago, Animal Spirits said:

Doesn't come across with conviction but he's only had Sir Kneel as competition and I suppose he hasn't shown himself to embrace wokeism directly. David Cameron more or less labelled him an opportunist, they obviously know each other well:

Ah, is that the Bullingdon branch of the Covid club?! (NB the 2nd from the right has never been identified, am not joking!)

[Sugarlips]

 

[wherebee]

27 minutes ago, Cattle Prod said:

And so they should. Walked past Parliament sq this morning at 9 on the way to work. Insulate Britain had the place gridlocked in three directions, holding up thousands of people trying to make a living. Here's the thing: each row of wastreis sitting on the tarmac had a row of coppers standing in front of them.

So I went up to the nearest two and said "Why are you guarding them? Why don't you remove them from the road?". "Well sir unfortunately there is a process involved...and we stutter ...can't just do that...as much as we'd like to...pause ...I know that sounds crazy but it's the way it is". I wished them luck. I like coppers. But no one else questioned them. It's a only a small ...nudge...but they all add up and we need them going back to their superiors saying "people are getting pissed off about this". We need to be our own nudge unit! And its the clowns in Westminster behind their newly constructed steel barriers via that useless patsy Cressida Dick who are telling them to do this. If they're not careful, they'll lose the coppers too. That'd be fun to watch.

Try holding a sit down outside Parliament to protest the mass rape of children by immigrants.  See how long you sit there.

[Loki]

17 minutes ago, Sugarlips said:

 

Me gusta

[Harley]

5 hours ago, wherebee said:

Try holding a sit down outside Parliament to protest the mass rape of children by immigrants.  See how long you sit there.

Now that's an idea.  Join their demo, protesting about something else and see what happens.

[jamtomorrow]

10 hours ago, Barnsey said:

Stroppy teens all over the city, hilarious 

 

 

[sancho panza]

6 hours ago, Cattle Prod said:

Fully agree, but I'm hoping the coppers are waking the f up. Of course there are less squaddies and more social science degrees in there these days, so let's see.

Yeah,this is an issue,being a copper now involves doing a two/three year degree,I think it's safe to say they're not targetting people leaving the military anymore.

As I've said,there's some jobs I've been on where we've been backed up by two models in police uniform.Nice people no doubt but they'd need back up to restrain a mildly aggressive person.

 

6 hours ago, Cattle Prod said:

My, my. How quickly the worm has turned for Larry... evil and duplicitous. It's almost like elites are starting to panic about starving and/or freezing masses. 

 

I find it amazing when I speak to a lot of Remoaner types who fail to appreciate the role declining disposable incomes played in Brexit and Trump.

This chart trend is still running and anyone who thinks this won't end in a large social dislocation where the bottom 50% have nothing to lose hasn't studied history-as per previous discussions @JMD. The set up here is similar to Russian revolution/rise of Hitler.

David Hunter has said he hopes he's dead before this cycle comes to an end and I can see why.I look at COP26 and it's clear our political elite have forgotten the lessons of history

This is a chart I've stumbled across but we've had similar before iirc.

https://jessescrossroadscafe.blogspot.com/2021/11/stocks-and-precious-metals-charts_4.html

[sancho panza]

While the data appears to be not clear,the outtake seems pertinent.

Interesting to see they're syaing income inequality wasn't exceptional but the Tsarist regime was oppressive,had unequal land ownership and that it's tax regime was regressive.

We are ticking boxes here with the way our elite is going.Key thing from this paper is that the income inequlaity in Tsarist Russia wasn't that bad but clearly their elite failed to read the future whereas Japan/UK etc broadened suffrage out across society.1918 was universal suffrage in the UK iirc.

https://www.cambridge.org/core/journals/journal-of-economic-history/article/russian-inequality-on-the-eve-of-revolution/A5CED37A899914A15F9CFB1777A441DF

Our findings—which we subject to a variety of robustness exercises—suggest that just prior to the revolutions of the early twentieth century, Russia's income inequality was not exceptional, either in comparison to contemporary societies or when stacked up against estimates for the post-Soviet period. This was despite the extreme suppression of political rights, the inequality of landownership, and the clear regressivity of the imperial fiscal system. We suggest that this “moderate” income inequality was a net result of the tension between Russia's labor scarcity, or land abundance, and its regressive and repressive institutions. At the same time, inequality was higher in the capital city provinces, the Baltics, and the Black Sea region— i.e., some of the more dynamic and urban parts of the empire. As the revolutions of 1905 and 1917 were urban in origin, the geography of Russian inequality would suggest some support for distributional factors as underlying causes.

CONCLUSION

Russia's distribution of incomes thus contrasted sharply with the distribution of political voice on the eve of the 1905 Revolution. Russia's inequality of political voice was extreme: Of the 53 sovereign states in 1904, Russia was one of the bottom four having a Polity rating of zero democracy and complete autocracy.Footnote ⁴⁵

Yet in terms of income inequality, Russia seems to have been relatively egalitarian among data-supplying countries. This income result might be viewed as the net result of two fundamental influences on Russian economic fortunes prior to the Revolutions. The fundamental egalitarian force was geographic: Russia has always stood out as abundant in productive land and staple grains. The land/labor logic that other scholars have used to link the Black Death to the freedom and wellbeing of the English yeoman should theoretically have compressed the income structure—and likely continued to do so, other things equal, even on the eve of Revolution. Contemporary accounts of land “scarcity” were not reflected in the statistical evidence and were almost entirely limited to a declining region to the south of Moscow, where agriculture was simply not as productive as the southern and Ukrainian provinces (Wheatcroft Reference Wheatcroft, Kingston-Mann and Mixter1991). Although the peasantry was not the homogenous group that is often assumed, the predominance of communal property among such a large part of the population likely held down inequality (even if only by providing a security net with which peasants could pursue nonagricultural pursuits).Footnote ⁴⁶

Yet political inequality also dominated the country's pre-Revolutionary history. The demise of serfdom did not necessarily end restrictions on peasant labor mobility, nor did it eliminate the economic and political power of the landed elite in the countryside. The imperial autocracy's dependency on elites for its power continued to be reflected in the property, income, and political inequality among estates and classes. Even if extraordinary political inequality did not manage to create extraordinary income inequality by global standards, it did leave those signs of limited, or even regressive, redistribution we have already noted. Furthermore, income inequality in contemporary Russia likely matches or exceeds the pre-Revolutionary level, and the fiscal structure is perhaps equally skewed towards politically connected elite at the expense of those lower on the income distribution (Gelbach 2008).

 

 

[JimmyTheBruce]

16 hours ago, JMD said:

Well yes I'd agree with that, but I thought i'd said as much in my post? Anyway just to demonstrate how fatuous I think the culture wars are...   Take the current Yorkshire cricket racism claim furere - the MSM laps it up, yet no one is really the wiser as to what actually happened. One part of the story released so far, is that the claimant Rafiq is suffering something like PTSD (well that's my take!!) because he is now triggered by remembering shared conversations he regularly enjoyed having with a close fellow player at the club, however the language and terms both he and that other player regularly enjoyed using, he now finds offensive!!... And of course so called institutional racism has also been claimed - but what's the betting the details there will need someone with twin PhD's in parapsychology and comparative wokism to properly comprehend!

Completely off-topic, but can't help myself.....

Rafiq joined Yorkshire in 2008 and left in 2014.  He was subjected to such abuse during that period that he.... returned to play for Yorkshire in 2016. 

[MrXxxx]

7 hours ago, Cattle Prod said:

The thing is, he doesn't want to be PM.  He's flat broke, with an avaricious wife and God knows how many children. He looks at Blair, richer than Croesus, and says "I'll have some of that". He's mostly working on after dinner speech material atm

The thing is after fuc£ing everyone/everything up he will be so toxic no one will want to listen to him, or seen to be....he will be like the man at Speakers Corner on his soap box without the crowd, this accolade usually reserved for  one shouting about God and original sin.

[sleepwello'nights]

2 hours ago, Harley said:

Now that's an idea.  Join their demo, protesting about something else and see what happens.

And the police will say they haven't got a clue what they're protesting about. 

[MrXxxx]

https://www.msn.com/en-gb/money/other/market-report-purplebricks-crumbles-as-it-runs-out-of-houses-to-sell/ar-AAQkK9w?ocid=mailsignout&li=BBoPWjQ

 

Same scenario coming to an estate agent near you....they are going to have a shock after years of sitting back thinking they were 'doing their customers a favour' by showing them a property or considering their 10% above asking price as inadequate!

[Yadda yadda yadda]

7 hours ago, Cattle Prod said:

Fully agree, but I'm hoping the coppers are waking the f up. Of course there are less squaddies and more social science degrees in there these days, so let's see.

The police know that these protestors are unpopular. They know that they're told to police other demonstrations differently. Sit in the road for another cause and they go in. Good idea to talk to them politely to remind them of that fact.

2 hours ago, Harley said:

Now that's an idea.  Join their demo, protesting about something else and see what happens.

This has occurred to anti-lockdown circles. The biggest difficulty is getting people to a random location at short notice on a working day. I also think that some of the locations are problematic. They don't want to inconvenience drivers, they want support from them. Parliament Square is fair game though.

There is also an assumption that all the extinction rebellion protests have political support and that one of the aims is to bring in further laws curtailing protest by others.

The only mitigation for the police is that the insulation protestors are few in number and not a physical threat to anybody other than themselves.

Remember, remember the fifth of November. Tonight is the million mask march. Sounds like it will be a chaotic affair in central London. Various meeting points at various times. Anonymous masks. Fireworks. Guy Fawkes was originally the anti-hero of bonfire night. Now he is the hero. What was once a pro-monarchy and historically very anti-catholic event is now firmly anti-establishment. At least for a growing number. The message for many is that blowing up Parliament would be a good thing. It is why they're trying to relegate it behind Halloween - a festival of greed and plastic consumerism. The police will be on war footing tonight.