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

[sancho panza]

https://www.icis.com/chemicals-and-the-economy/2022/05/us-housing-bubble-starts-to-deflate-as-prices-peak-and-mortgage-rates-rise/

 

 

The chart highlights the result, based on median new US home prices and household incomes:

• Home prices in 1967 were less than 1x incomes before the Boomers began their buying spree
• By the time they had finished in 2000, the ratio had more than doubled to 2.5x

• Then Alan Greenspan and Ben Bernanke began their subprime and stimulus bubbles
• By the time they had finished, the ratio had more than doubled again to reach 5.8x today

As the Financial Times notes, the issue is affordability:

“Suppose back in December you were going to buy a house for $425,000 with 20 per cent down. But you didn’t get a deal done for whatever reason. The change in rates means that the monthly mortgage payment on your dream home has now gone up about 30 per cent, from $1,442 to $1,877. That’s $5,220 in additional payments a year.

“More to the point, if your mortgage budget was fixed at about $1,442, you are now shopping for a $325,000 house. That is a really different house. And so, unsurprisingly, many buyers are saying the hell with it. Applications for purchase mortgages (that is, not refinancings) are down by a third from their coronavirus pandemic peak.”

But those, like us, who remember the pre-Greenspan era know that prices can – and do – go down. And as Redfin reported last week:

“Housing Market Update: Nearly 1 in 5 Sellers are Dropping Their Price”

Most homeowners suffer from loss-aversion. They see that prices are falling, but they refuse to follow the market lower. Instead, the selling is led by people who have to sell due to the “3 Ds”  – Debt, Divorce and Death.

[Red Debt Redemption]

7 hours ago, Mapper said:

Re entropy, I watched a low budget doc on YT titled something like, "What if all the people suddenly disappeared?"

I can't vouch for its accuracy, but something that struck me was a claim that after a relatively short time (a few thousand years I think), nothing would be left to show humans had ever existed. Even concrete would degrade back into nature.

Actually, there would be one place with evidence of humans...

Don't know if my spoiler text will work, so I pushed the answer below the fold (I hope).

 

 

  Hide contents

the Moon

 

Nope, the Borg destroy it in season 27.

[Axeman123]

47 minutes ago, Cattle Prod said:

I still think we get two more 50bps hike and a pause, fwiw.

I am with you on that. I think this narrative of Powell as a madman inflation-fighter is a set-up for the pivot, akin to "only Richard Nixon could have gone to China".

[Lightscribe]

17 minutes ago, sancho panza said:

Some Paul Hodges out takes all on a theme

https://www.icis.com/chemicals-and-the-economy/2022/05/us-stocks-set-for-long-term-decline-as-fed-pivots-to-focus-on-putinflation/

The good news is that central banks have pivoted to focus on inflation. As US Federal Reserve chair Jay Powell and Bundesbank President Joachim Nagel made clear this month, they are now set to “normalise” monetary policy:

• Some analysts want to refer to this as tightening, but this simply isn’t true
• As the chart shows, US inflation was last at today’s level of 8.3% in 1982
• At that time, 10-year interest rates were 14.6%  – but today they are just 2.8%

Anyone who remembers the 1970s would know that the risk of a stock market downturn is now very high. But younger people only know the world of Alan Greenspan and Ben Bernanke, who believed that:

“What is good for financial markets, is good for the wider economy”.

 

 

 

 

Paul Hodges is obviously not watching and learning.

[Lightscribe]

1 hour ago, DurhamBorn said:

If the west falls id blame the media more than anyone.They never look at the issues from an open mind.Take these 10% increases in bennies.I have no problem with them showing fat Sharon who doesnt work moaning shes skint.However they should then go something like this,

"Sharon worked for 4 months after leaving school,but then had her child to a man she isnt with now and hasnt worked since.Including Housing Benefit and free school meals she gets xxx amount without having to work.She claims she doesnt have childcare yet her mother lives over the road and doesnt work herself claiming for some disability,though she looks in decent health for her age.

The other side of this is Paul here.Paul works in the local warehouse.He too is struggling,even though hes is working 48 hours a week.His rent is very high due to people like Sharon who gets theirs paid forcing up rents,ironic as its out of his tax.If Sharon is to get more for doing nothing,Paul must lose more by paying more tax.In affect Sharon is consuming Pauls work.

Then there is Sue.Sue worked for 40 years in the local factory.She saved for her retirement.She is struggling.The inflation partly caused by Sharon consuming,but never producing means her lifetimes savings are being inflated away.

The cry is for more free money for Sharon,but its not free.To give Sharon more Paul and Sue need to lose more than they already do.For all three to improve their incomes the best solution would be for Sharon to get into a job and off benefits,lifting her up,and then stopping Paul and Sue working harder or becoming poorer because their hard work is being split with those who cant,or simply wont work.Government seems all about  Sharon,but perhaps the real victims are the ones you never hear about paying for it."

This is Durhamborn reporting for the BBC

I remember in the 80’s, the words ‘on the  dole’ was mentioned by newspapers in articles describing people as much as the Daily Mail mentions how much their house price was worth.

It had a negative connotation. ‘Scroungers’, ‘YTS’, ‘council’ like words gave a ‘looked down’ upon meaning that no one wanted to be associated with.

Most media outlets now are all of the same ‘Associated Press’, ‘Rockefeller Foundation’ etc. The narrative wouldn’t dare to go down the same route with such terms nowadays.

Its no longer frowned upon as the majority of the country get benefits. You go on to mumsnet and they constantly incorrectly assume that the whole country is on tax credits in some form or another. You can’t blame them as it is indeed the case in some areas.

Theres no way out of the hole that’s been dug. They will see the last tax payer go bust before benefits are ever reformed.

[Plan-b]

2 hours ago, Cattle Prod said:

That grasping hag Pelosi, in the last few weeks, spent over a million dollars on Apple and Microsoft calls expiring March-June to next year.

Make of that what you will, but I read that as the Democrats have either worked out how to get a stimulus through before the mid term elections, or that they've agreed a pause with Powell (they met a few weeks ago). I still think we get two more 50bps hike and a pause, fwiw.

If it plays out this way then rather than direct action against inflation using interest rates the Fed decides to temper inflation through demand destruction. But they'd still have interest rate rises later on if it doesn't work out.

 

[HousePriceMania]

2 hours ago, Cattle Prod said:

That grasping hag Pelosi, in the last few weeks, spent over a million dollars on Apple and Microsoft calls expiring March-June to next year.

Make of that what you will, but I read that as the Democrats have either worked out how to get a stimulus through before the mid term elections, or that they've agreed a pause with Powell (they met a few weeks ago). I still think we get two more 50bps hike and a pause, fwiw.

I'll close my short.

Just now, Plan-b said:

If it plays out this way then rather than direct action against inflation using interest rates the Fed decides to temper inflation through demand destruction. But they'd still have interest rate rises later on if it doesn't work out.

 

That's exactly what the tories are up to IMHO

[Starsend]

10 hours ago, Juniper said:

I read this piece on hyperinflation at the weekend 

https://rudy.substack.com/p/a-very-ordinary-life?s=r&utm_campaign=post&utm_medium=web&utm_source=direct

It’s not inconceivable that the Davos crowd aspire to this:

“Finally, there was a revaluation and each person could turn in so much of the previous money, if they hadn’t spent it for nothing already, and get a small amount of new currency. It was very little, 200 marks or so. And the rest was all lost. I’m not sure how they did manage to stabilize the currency, but once the government decided to take action they did it.

Of course all the little people who had small savings were wiped out. But the big factories and banking houses and multi-millionaires didn’t seem to be affected at all. They went right on piling up their millions. Those big holdings were protected somehow from loss. But the mass of the people were completely broke.”

I still think and hope we’re not headed for hyperinflation but each time we do payouts, such as the current bungs for the ‘cost of living crisis’, the more I fear we won’t be far off. 

No great mystery as to why the big boys didn't get wiped out; they owned real stuff, factories, farms, real estate, gold... and probably had lots of debt to buy that stuff that got wiped out.

[marceau]

12 minutes ago, Starsend said:

No great mystery as to why the big boys didn't get wiped out; they owned real stuff, factories, farms, real estate, gold... and probably had lots of debt to buy that stuff that got wiped out.

Old money did well, but the speculators who configured for inflation all got wiped out by the deflation that followed the rentenmark. No liquidity and crippling interest rates made vertical integration a huge liability.

Real estate performed terribly & landlords were obliterated because rents were capped right at the start.

[Plan-b]

19 minutes ago, Starsend said:

No great mystery as to why the big boys didn't get wiped out; they owned real stuff, factories, farms, real estate, gold... and probably had lots of debt to buy that stuff that got wiped out.

The house always wins, I'm hoping for a few scraps off their table

[M S E Refugee]

Biden declares US energy emergency https://www.rt.com/news/556722-biden-declares-energy-emergency/

[DurhamBorn]

38 minutes ago, M S E Refugee said:

Biden declares US energy emergency https://www.rt.com/news/556722-biden-declares-energy-emergency/

“Multiple factors are threatening the ability of the United States to provide sufficient electricity generation to serve expected customer demand,” Biden said in his emergency declaration. “These factors include disruptions of energy markets caused by Russia’s invasion of Ukraine and extreme weather events exacerbated by climate change.”

[Pip321]

3 hours ago, DurhamBorn said:

If the west falls id blame the media more than anyone.They never look at the issues from an open mind.Take these 10% increases in bennies.I have no problem with them showing fat Sharon who doesnt work moaning shes skint.However they should then go something like this,

"Sharon worked for 4 months after leaving school,but then had her child to a man she isnt with now and hasnt worked since.Including Housing Benefit and free school meals she gets xxx amount without having to work.She claims she doesnt have childcare yet her mother lives over the road and doesnt work herself claiming for some disability,though she looks in decent health for her age.

The other side of this is Paul here.Paul works in the local warehouse.He too is struggling,even though hes is working 48 hours a week.His rent is very high due to people like Sharon who gets theirs paid forcing up rents,ironic as its out of his tax.If Sharon is to get more for doing nothing,Paul must lose more by paying more tax.In affect Sharon is consuming Pauls work.

Then there is Sue.Sue worked for 40 years in the local factory.She saved for her retirement.She is struggling.The inflation partly caused by Sharon consuming,but never producing means her lifetimes savings are being inflated away.

The cry is for more free money for Sharon,but its not free.To give Sharon more Paul and Sue need to lose more than they already do.For all three to improve their incomes the best solution would be for Sharon to get into a job and off benefits,lifting her up,and then stopping Paul and Sue working harder or becoming poorer because their hard work is being split with those who cant,or simply wont work.Government seems all about  Sharon,but perhaps the real victims are the ones you never hear about paying for it."

This is Durhamborn reporting for the BBC

Sorry DB you couldn't pass for any western journalist.

No mention of body positivity, cancel culture, gender binary issues, internalised misogyny, toxic masculinity , environmental issues nor the fact its all Putin's fault.  .

Also too much actual detail....headline only in western media followed by repeating the surface level headline again and again eg old couple lose home to horrible equity release firm (but omit to mention the couple have spent the last 15 years on a yacht drinking champagne etc) 

[Nomad]

3 hours ago, DurhamBorn said:

If the west falls id blame the media more than anyone.They never look at the issues from an open mind.Take these 10% increases in bennies.I have no problem with them showing fat Sharon who doesnt work moaning shes skint.However they should then go something like this,

"Sharon worked for 4 months after leaving school,but then had her child to a man she isnt with now and hasnt worked since.Including Housing Benefit and free school meals she gets xxx amount without having to work.She claims she doesnt have childcare yet her mother lives over the road and doesnt work herself claiming for some disability,though she looks in decent health for her age.

The other side of this is Paul here.Paul works in the local warehouse.He too is struggling,even though hes is working 48 hours a week.His rent is very high due to people like Sharon who gets theirs paid forcing up rents,ironic as its out of his tax.If Sharon is to get more for doing nothing,Paul must lose more by paying more tax.In affect Sharon is consuming Pauls work.

Then there is Sue.Sue worked for 40 years in the local factory.She saved for her retirement.She is struggling.The inflation partly caused by Sharon consuming,but never producing means her lifetimes savings are being inflated away.

The cry is for more free money for Sharon,but its not free.To give Sharon more Paul and Sue need to lose more than they already do.For all three to improve their incomes the best solution would be for Sharon to get into a job and off benefits,lifting her up,and then stopping Paul and Sue working harder or becoming poorer because their hard work is being split with those who cant,or simply wont work.Government seems all about  Sharon,but perhaps the real victims are the ones you never hear about paying for it."

This is Durhamborn reporting for the BBC

Great post, I think some of the problems with msm is they don't understand basic economics, if that is the case they would be ignorant of the real issue and what is causing this inflation, politicians appear to suffer from the same problem.

[BadAlchemy]

20 minutes ago, DurhamBorn said:

“Multiple factors are threatening the ability of the United States to provide sufficient electricity generation to serve expected customer demand,” Biden said in his emergency declaration. “These factors include disruptions of energy markets caused by Russia’s invasion of Ukraine and extreme weather events exacerbated by climate change.”

Have you printed too much fiat currency?

Did you outsource all your industrial base to China?

Is your dollar hegemony losing its shine?

Out of your depth? Fucked up geopolitically? Getting your arse handed to you on a plate?

No worries. All new, extra strength 'Russia Did It' spray is here. Feckless western leaders have trusted it for generations. And now you can rely on our best formula yet.

Remember...

Our household name.... Clears your name... Every game!

[nirvana]

21 hours ago, leonardratso said:

@nirvana

 

[Plan-b]

7 minutes ago, BadAlchemy said:

Have you printed too much fiat currency?

Did you outsource all your industrial base to China?

Is your dollar hegemony losing its shine?

Out of your depth? Fucked up geopolitically? Getting your arse handed to you on a plate?

No worries. All new, extra strength 'Russia Did It' spray is here. Feckless western leaders have trusted it for generations. And now you can rely on our best formula yet.

Remember...

Our household name.... Clears your name... Every game!

Lets not forget the Biden administration cancelled the Keystone Pipeline and the Alaska Oil and Gas leases 

[Joncrete Cungle]

14 minutes ago, Plan-b said:

Lets not forget the Biden administration cancelled the Keystone Pipeline and the Alaska Oil and Gas leases 

Our own morons initially rejected the Shell Jackdaw gas field development only last year. It has been given the green light today, wasting 6 months....

https://www.offshore-mag.com/regional-reports/north-sea-europe/article/14277701/north-sea-jackdaw-project-goes-ahead-following-shell-revisions

[Plan-b]

Just now, Joncrete Cungle said:

Our own morons initially rejected the Shell Jackdaw gas field development only last year. It has been given the green light today, wasting 6 months....

Plenty of Morons to go around! I like the "Green" light reference , Very good 

[Harley]

4 hours ago, DurhamBorn said:

If the west falls id blame the media more than anyone.They never look at the issues from an open mind.Take these 10% increases in bennies.I have no problem with them showing fat Sharon who doesnt work moaning shes skint.However they should then go something like this,

"Sharon worked for 4 months after leaving school,but then had her child to a man she isnt with now and hasnt worked since.Including Housing Benefit and free school meals she gets xxx amount without having to work.She claims she doesnt have childcare yet her mother lives over the road and doesnt work herself claiming for some disability,though she looks in decent health for her age.

The other side of this is Paul here.Paul works in the local warehouse.He too is struggling,even though hes is working 48 hours a week.His rent is very high due to people like Sharon who gets theirs paid forcing up rents,ironic as its out of his tax.If Sharon is to get more for doing nothing,Paul must lose more by paying more tax.In affect Sharon is consuming Pauls work.

Then there is Sue.Sue worked for 40 years in the local factory.She saved for her retirement.She is struggling.The inflation partly caused by Sharon consuming,but never producing means her lifetimes savings are being inflated away.

The cry is for more free money for Sharon,but its not free.To give Sharon more Paul and Sue need to lose more than they already do.For all three to improve their incomes the best solution would be for Sharon to get into a job and off benefits,lifting her up,and then stopping Paul and Sue working harder or becoming poorer because their hard work is being split with those who cant,or simply wont work.Government seems all about  Sharon,but perhaps the real victims are the ones you never hear about paying for it."

This is Durhamborn reporting for the BBC

Waiting for the useful idiots to get fecked after Paul....

[Loki]

4 hours ago, DurhamBorn said:

If the west falls id blame the media more than anyone.They never look at the issues from an open mind.Take these 10% increases in bennies.I have no problem with them showing fat Sharon who doesnt work moaning shes skint.However they should then go something like this,

"Sharon worked for 4 months after leaving school,but then had her child to a man she isnt with now and hasnt worked since.Including Housing Benefit and free school meals she gets xxx amount without having to work.She claims she doesnt have childcare yet her mother lives over the road and doesnt work herself claiming for some disability,though she looks in decent health for her age.

The other side of this is Paul here.Paul works in the local warehouse.He too is struggling,even though hes is working 48 hours a week.His rent is very high due to people like Sharon who gets theirs paid forcing up rents,ironic as its out of his tax.If Sharon is to get more for doing nothing,Paul must lose more by paying more tax.In affect Sharon is consuming Pauls work.

Then there is Sue.Sue worked for 40 years in the local factory.She saved for her retirement.She is struggling.The inflation partly caused by Sharon consuming,but never producing means her lifetimes savings are being inflated away.

The cry is for more free money for Sharon,but its not free.To give Sharon more Paul and Sue need to lose more than they already do.For all three to improve their incomes the best solution would be for Sharon to get into a job and off benefits,lifting her up,and then stopping Paul and Sue working harder or becoming poorer because their hard work is being split with those who cant,or simply wont work.Government seems all about  Sharon,but perhaps the real victims are the ones you never hear about paying for it."

This is Durhamborn reporting for the BBC

Print that, Telegraph wankers

[Joncrete Cungle]

3 minutes ago, Loki said:

Print that, Telegraph wankers

They should work out and publish how much some of these whinging bennie whales have been given tax and work free over the past 10, 15 or 20 years. Some of the figures will be mind blowing!

[Chewing Grass]

1 hour ago, M S E Refugee said:

Biden declares US energy emergency https://www.rt.com/news/556722-biden-declares-energy-emergency/

I always thought the US had more energy than it knew what to do with.

Bunch of wankers.

However, our wankers are no better.

The writing was on the cards in the UK as soon as they got rid of the CEGB (and hence any energy policy), flogged the generating units off and expected private investment to flood in whilst simultaneously throwing green legislation at everything.

Cunts, all of them.

p.s. I work in the energy industry and wouldn't spit on it anymore.

[BadAlchemy]

3 minutes ago, Loki said:

Print that, Telegraph wankers

I was going to ask them more politely... appeal to their professionalism etc. But yeah, whatever... come on all you so called journalists reading this site... for once cover the FULL story (as summarized above) will ya! Dont just follow the narrative you are given. You might even have the power to prevent us all ( yourselves included) getting sucked down the financial plug hole here. You just need to find your backbones and your balls. Do you think you can you do that?

[Yellow_Reduced_Sticker]

3 hours ago, Cattle Prod said:

You know I'd almost forgotten that. I remember that men (it was all men round me) were ashamed to be seen in the dole queue, they'd look down or hide their faces with their newspaper if us children were passing in case they were your mate's Da. Especially as they had the poor buggers in the papers or the news every day. I don't remember them being slagged off or taunted though, it was their own shame, they wanted to work. Very different now. I suppose the state saw that and thought "let's make them dependent on us so that they want this. That'll justify the gravy train for ever more".

 

YEP...Bang on!

 

I was doing my engineering apprenticeship at this time, during the day-release at college, someone every other week was getting made redundant, BUT there was NO talk of dole, it was get on ya bike and get knocking on companies doors or going into another trade.

 

TV Highlight of the week was: Boys From The Black Stuff with Yozzer Hughes "Gis a job, I can do that!"

 

The pathetic BBC should repeat this drama series, but what a hope as it may upset barrel-necks Sharon & Tim, who ffs will need special trauma bennies because of watching it!

 

P.S - BRING back Thatcher, she'd sort this country out!