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


spunko

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25 minutes ago, Don Coglione said:

Fuck 'em, let them burn.

Ultimatelty it is for the best.

For true fuckwittery you need to see Football Index (check Twitter). Another ponzi yet the losers there are trying to claim they were being sold it as an investment cos of a comment the CEO said, thus they should qualify for some kind of FCA compensation.

https://twitter.com/search?q=footballindex&src=typed_query&f=live

Some of these bitches will be whinging to their MPs every day until they die. Also the classic 'mental health problems' 'lost all my life savings' excuses in here as well.

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30 minutes ago, Boon said:

Someone starting 10 years ago might have been affected by Mt Gox going down; that would be the equivalent of Coinbase and Binance blowing up on the same day...doesn't seem likely to me that any experienced investor would continue to hold 100% of their funds on a second or third-tier site in the aftermath of that.

No-one knowingly keeps fiat or crypto on a second or third-tier platform. This DeFi stuff was considered blue-chip and copper-bottomed by many, right up until the wheels came off. People were genuinely talking about all capital/pensions innevitably ending up with Celsius etc, and that the yields weren't a red flag but proof of how corrupt and inneficient legacy finance was not matching them.

I don't dispute that these stories could be faked, and for many different reasons.

As for what would someone with a million in BTC at the ATHs be doing staking it on Celsius, imagine thinking you could get 0.2 million a year in passive income on top. Some idiots were thinking they could wait for super-wealth when BTC hits a million per coin, and live off staking income in the mean time. A lot of the "crypto nomad" stuff (moving to low or no tax places) presumably was based on this pipe dream.

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Latest Palisades interview. First half fits a lot of the thread thesis and then solid commodities discussion in the second half. Would recommend.

He might even have been reading the thread... Bob?

Also watched 10 minutes of a Palisades interview with Charles Nenner and it was all a tad bizarre. He came across as a complete grifter; managing to say lots whilst at the same time saying nothing in the manner of Simon Parkes. Would not recommend.

 

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Noallegiance
11 minutes ago, Xtal said:

 

Also watched 10 minutes of a Palisades interview with Charles Nenner and it was all a tad bizarre. He came across as a complete grifter; managing to say lots whilst at the same time saying nothing in the manner of Simon Parkes. Would not recommend.

 

Turned off the Nenner one part way through.

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sancho panza

Was uanaware of thsi story.Shows the growing risks of instability.

This is the stuff of Big Kahunas if it gets traction

https://www.asiamarkets.com/chinese-banks-run/

There’s a run on Chinese banks and it’s being ignored by the world

In Asia, bank runs have also been rare. A run on Japanese banks in 1927 led to the collapse of dozens of institutions across the country. There was a banking crisis in Myanmar in 2003 which the country has never really fully recovered from.

But perhaps since the Great Depression, none has been as significant compared to what is seemingly unfolding in China right now.

The Chinese bank run of 2022

In recent years it has become clear the Chinese people are losing faith in their financial institutions. There’s been anger over harsh COVID lockdowns in Shanghai recently, while the collapse of China Evergrande saw rare public demonstrations as residents faced the prospect of losing their life savings used as deposits for housing.

The song book is eerily similar at bank branches in a number of China’s rural provinces right now.

Multiple sources contacted by Asia Markets, have confirmed deposits at the following six banks have been frozen since mid-April.

  • Yuzhou Xinminsheng Village Bank (located in Xuchang City, Henan Province)
  • Zhecheng Huanghuai Bank (City of Shangqui, Henan Province)
  • Shangcai Huimin Rural Bank (Zhumadian City, Henan Province)
  • New Oriental Village Bank (City of Kaifeng, Henan Province)
  • Huaihe River Village Bank (Bengbu City, Anhui Province)
  • Yixian County Village Bank (Huangshan City, Anhui Province)

It’s understood the banks with branches across the Henan and Anhui Provinces successively issued announcements in April, stating they would suspend online banking and mobile banking services due to a system upgrade.

At the same time, clients reported their electronic deposits in online accounts, mobile apps and third-party platforms could not be withdrawn.

This led to depositors rushing to local bank branches, only to be told they were unable to withdraw funds.

By late May, images emerged on Chinese social media of demonstrations at the front of numerous bank branches. Asia Markets has verified these images with local contacts.

Fraud scheme blamed

Following the public protests and the PBOC statement, the China Banking and Insurance Regulatory Commission revealed it is investigating fraudulent activity carried about by the Henan New Fortune Group – the largest shareholder of the four banks listed above in the Henan Province. It’s understood the commission is working with police to investigate allegations that the Group colluded with bank insiders to misappropriate bank funds.

Bank run contagion to “sweep across China”

Regardless of the cause, the developments raise serious questions about the health of China’s and its regulatory oversight. The more immediate concern, however, is the prospect of contagion, which could see the (so-far) rural-only bank run spread to bigger cities.

There’s evidence this is already happening.

In one of the only mainstream international media articles to report on the unfolding situation, local residents highlighted the seriousness of the situation and the likelihood of contagion.

From the Financial Times on June 9:

Some depositors such as Xu have already lost trust in the system. The 39-year-old said he had withdrawn all of his deposits from 10 other small banks that had promised him an annualised yield of more than 4 per cent.

“Another depositor, a 30-year-old father, said he had placed more than Rmb900,000 in his village’s banks since 2020 at a return of 4.1 per cent. “I felt like being slaughtered,” he said, declining to give his name. He drove overnight to negotiate with the banking regulator in Zhengzhou, capital of Henan, in mid-May. “This is the money my wife and I have saved together since we got married. I had to lie to her that I was away for work
.”

On Twitter, a video of a large line at an ICBC Bank in China (one of China’s largest state-owned banks) posted on Tuesday, June 9, suggest contagion is in progress.

Translated to English, the tweet reads “The bank card system is locked, and these people are here to unlock it. Massive runs are coming.”

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38 minutes ago, Axeman123 said:

No-one knowingly keeps fiat or crypto on a second or third-tier platform. This DeFi stuff was considered blue-chip and copper-bottomed by many, right up until the wheels came off. People were genuinely talking about all capital/pensions innevitably ending up with Celsius etc, and that the yields weren't a red flag but proof of how corrupt and inneficient legacy finance was not matching them.

I don't dispute that these stories could be faked, and for many different reasons.

As for what would someone with a million in BTC at the ATHs be doing staking it on Celsius, imagine thinking you could get 0.2 million a year in passive income on top. Some idiots were thinking they could wait for super-wealth when BTC hits a million per coin, and live off staking income in the mean time. A lot of the "crypto nomad" stuff (moving to low or no tax places) presumably was based on this pipe dream.

One of the things is, is that these sites often aren't telling the truth.

Here is actually what Celsius pays:

spacer.png

(first column is the rate in CEL tokens, second is the rate in BTC)

So if someone had $1m on there, you would be getting 1% on $960,000 of it. 

Other currencies are not capped like this but the rates are worse (ie Celsius pays 9% on Polkadot vs 12% on Binance). In some ways it isn't too different from a bookie site offering price boosts, you will only get a limited amount on that but they'd be happy to lay you anything on their crapper prices because they can always turn around and hedge out. 

The 20% refers to some of the crappy tokens but if you were just going to attempt to try and get the highest rates irrespective of token why limit yourself to Celsius? There are tokens on Binance such as Moonbeam or Axie Infinity that pay over 100% a year.

So this is why I think most claiming entire life savings on one site is bullshitting. The rates are crap as the headline rate only covers a small amount of cash. If going purely for the rates other sites are better for amount and choice of currencies. 

Maybe there will be one or two but they'd have to be inexperienced idiots. 

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2 hours ago, Boon said:

See I dunno if there is cognitive bias but I would guess one set of people badly want to believe that story.... personally it just sounds too far fetched to me.

Celsius I don't think started until 2018/2019 so how did a guy buying bitcoins for 10 years get all his money on there? Furthermore he would have learned some lessons in that period not to have all your eggs in one basket due to failures and theft.

It seems more exaggerated as those fat mums pretending they haven't got any food to eat and are feeding their kids and eating absolutely nothing themselves. The equivalent of a football player rolling around after being brushed trying to con the ref.

I think the bit about the wife downloading dating apps leans towards it being a tongue in cheek troll!

Lots of arguments now in the media to "regulate" bitcoin & co more, but I think it's just human nature for many to gamble for the chance of a big payout. Just the mentions of Football Index and NFT (shitty digital ape drawings) on this page show that when loose money is showered around, any assets can be used to pump up. And when it goes wrong the formerly smug losers will kick up a fuss and say they were lied to and stolen from, demanding compensation. Whereas if it had come off, they would be flaunting their winnings and justifying it as deserved because of their intelligence and bravery 

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3 hours ago, Axeman123 said:

r/Buttcoin - Victim of Celsius... Oof

Joined a dating site eh,

"yeah he put all our money into crypto.So what is potash,sounds interesting?,and Durham looks lovely ,so yes id love to visit"............

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Eventually Right
12 minutes ago, DurhamBorn said:

Joined a dating site eh,

"yeah he put all our money into crypto.So what is potash,sounds interesting?,and Durham looks lovely ,so yes id love to visit"............

“Yes I’d love to check out your collection of silver coins, you keep it in the bedroom you say…?”

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The Grey Man
9 minutes ago, Eventually Right said:

“Yes I’d love to check out your collection of silver coins, you keep it in the bedroom you say…?”

I do to.

A few issues before that though.

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Bricormortis
2 hours ago, Lightscribe said:

https://www.extremetech.com/extreme/337086-japan-successfully-produces-electricity-with-kairyu-deep-sea-turbine
 

Interesting concept by the Japanese in regards to deep sea turbines.

00D4387B-ED2E-4462-9B85-AD6F66B580F5.thumb.png.8260ec6bd377356ac11272d83930bd23.png

Can generate nearly same as a coal fired power station. The problem with sea born renewables is they break. This one works with ocean current not waves so that could be a game changer.

We could have had the Severn Barrage doing 10 % of the nations electricity.  But environmentalists said no. They put the mentalist in environmentalist with that. Thanks guys. We can all be really pleased about  saving the newt colonies when we freeze.

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Lyn's latest monthly newsletter is (rightly) full of joy again.

https://www.lynalden.com/june-2022-newsletter/

She makes the important case, again ,that the current situation is more 1940's than 1970's.

"Unlike the 1970s, however, there is currently massive debt-to-GDP in the system, both in the private sector and at the federal level. , raising interest rates above the official inflation rate (e.g. over 9%) would result in widespread insolvency, unlike the 1970s. Therefore, faced with inflation, central banks including the US Federal Reserve have been rather slow to tighten monetary policy.

Back in the 1940s, when federal debt went to over 100% and inflation was running hot, the US Federal Reserve ended up doing yield curve control. They held short-term rates at 0.375%, and capped long-term Treasuries at 2.5%, despite the fact that official inflation averaged about 6% for the decade, and peaked as high as 19% year-over-year at one point. As a result, people holding cash and government bonds lost 30-40% in terms of purchasing power compounded throughout this decade. People holding cash and government bonds in most other countries lost even more."

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Democorruptcy
2 hours ago, Lightscribe said:

https://www.extremetech.com/extreme/337086-japan-successfully-produces-electricity-with-kairyu-deep-sea-turbine
 

Interesting concept by the Japanese in regards to deep sea turbines.

00D4387B-ED2E-4462-9B85-AD6F66B580F5.thumb.png.8260ec6bd377356ac11272d83930bd23.png

The Morlais project on Anglesey is using underwater turbines

Quote
  • Morlais will provide the infrastructure for developers of tidal energy converters to deploy their tidal devices on a commercial scale.
  • There will be a very controlled phased deployment, with the first turbines being carefully and extensively monitored – only when it is confirmed that there are no negative impacts will further devices be installed.
  • Morlais has the potential to generate up to 240 MW of electricity.
  • The electricity will be transmitted from the Morlais site to the National Grid.
  • Depending on the types of tidal devices used, some may be visible above the sea surface and others will be fully submerged and hidden from view.
  • Any moving turbine parts or rotors will be below the sea surface.
  • For safety purposes there will be some navigation markers showing the location of the devices.
  • Any devices on the surface will have lights similar to the navigation lights on small boats.
  • Electricity will be brought to a substation on shore via a maximum of 9 sub-sea cables.
  • Electricity will be exported from this landfall substation to the existing electricity network via buried cables to grid substation.

https://www.morlaisenergy.com/

 

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Noallegiance
13 minutes ago, CVG said:

Back in the 1940s, when federal debt went to over 100% and inflation was running hot, the US Federal Reserve ended up doing yield curve control. They held short-term rates at 0.375%, and capped long-term Treasuries at 2.5%, despite the fact that official inflation averaged about 6% for the decade, and peaked as high as 19% year-over-year at one point. As a result, people holding cash and government bonds lost 30-40% in terms of purchasing power compounded throughout this decade. People holding cash and government bonds in most other countries lost even more."

I wonder if there's any evidence from the time of politicians blaming the war for the inflation that started before the war.

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27 minutes ago, CVG said:

Lyn's latest monthly newsletter is (rightly) full of joy again.

https://www.lynalden.com/june-2022-newsletter/

She makes the important case, again ,that the current situation is more 1940's than 1970's.

"Unlike the 1970s, however, there is currently massive debt-to-GDP in the system, both in the private sector and at the federal level. , raising interest rates above the official inflation rate (e.g. over 9%) would result in widespread insolvency, unlike the 1970s. Therefore, faced with inflation, central banks including the US Federal Reserve have been rather slow to tighten monetary policy.

Back in the 1940s, when federal debt went to over 100% and inflation was running hot, the US Federal Reserve ended up doing yield curve control. They held short-term rates at 0.375%, and capped long-term Treasuries at 2.5%, despite the fact that official inflation averaged about 6% for the decade, and peaked as high as 19% year-over-year at one point. As a result, people holding cash and government bonds lost 30-40% in terms of purchasing power compounded throughout this decade. People holding cash and government bonds in most other countries lost even more."

I think Lyn might be right.My interest rate target is showing 3.25% in the UK due to structural issues.The fact that ties in to the 40s is very interesting and i really like it when people who's work i respect get similar results from angles i didnt consider.Id go so far as to say we are right,or will be close.My work is still showing roughly 66% compounded inflation for the cycle,hardly any change from when i started the reflation roadmap.So if we are looking at an average rate of say 2.5% over the cycle about 23% compounded so a rough 43% loss of purchasing power bang on what Lyn shows happened in the 40s.

However ,could it be we get a 40s style monetary policy,but a 70s style fiscal/society environment?.I think maybe yes.

If we roadmap this scenario its pretty obvious value type companies with pricing power and big debts depreciating should do very well indeed.The areas we own.

Growth/bubble areas wont see rates as high so that removes one thing smashing them down,but its still bleak,and bonds could simply give up that 40% purchasing power.

My initial roadmap showed rates could go into double figures,but that ignores the politics of the situation.It is more likely my cycle inflation target needs boosting to around 77% instead.

Could we see the initial falls we are now like in the Vanguard 60/40,but then returns of around 2% after costs?.Housing similar? 

 

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Interesting today how DS Smith is able to pass on all inflation to its customers (and likely a bit more on top).Amazon will be paying up and has no choice.The huge companies with mass input costs they just have to suck up ;)

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Bricks & Mortar
34 minutes ago, Democorruptcy said:

The Morlais project on Anglesey is using underwater turbines

 

I see the Morlais puff piece says 'has the potential to generate 240MW.   Japanese one, "the current could provide 200GW.

Neither of these is describing the power of the device you see in the picture.  They're talking about the total power in the tidal stream.  That Japanese lump, 20m long, with twin 11m diameter turbines, can produce 100kW, and has been since 2017.  It's an early entrant to the tech.

In Morlais, they plan to try a couple of different 1mW designs.

And up in Orkney, they have a 2mW monster.

The Orkney piece tells us 2mW is enough for 2000 homes.  I think that's 1kW per home.  Seems light to me, only 1 bar of a fire per home.  I guess, maybe averaged over summer winter, and overnight.  But that's now, before they convince everyone to give up gas boilers and put a Tesla in the garage.

I guess this is a long way from being economic, and they'll have to force electricity prices up a lot more before it gets there.

https://newatlas.com/energy/ihi-nedo-kairyu-ocean-current-turbine

https://www.morlaisenergy.com/international-tidal-technology-developers-sign-agreement-with-morlais-project/

https://www.cnbc.com/2021/07/28/worlds-most-powerful-tidal-turbine-starts-to-export-power-to-grid-.html

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Democorruptcy
1 hour ago, CVG said:

Lyn's latest monthly newsletter is (rightly) full of joy again.

https://www.lynalden.com/june-2022-newsletter/

She makes the important case, again ,that the current situation is more 1940's than 1970's.

"Unlike the 1970s, however, there is currently massive debt-to-GDP in the system, both in the private sector and at the federal level. , raising interest rates above the official inflation rate (e.g. over 9%) would result in widespread insolvency, unlike the 1970s. Therefore, faced with inflation, central banks including the US Federal Reserve have been rather slow to tighten monetary policy.

Back in the 1940s, when federal debt went to over 100% and inflation was running hot, the US Federal Reserve ended up doing yield curve control. They held short-term rates at 0.375%, and capped long-term Treasuries at 2.5%, despite the fact that official inflation averaged about 6% for the decade, and peaked as high as 19% year-over-year at one point. As a result, people holding cash and government bonds lost 30-40% in terms of purchasing power compounded throughout this decade. People holding cash and government bonds in most other countries lost even more."

Little Lynn had some good stuff in that one. These were my top 3 favourite bits:

Quote

 

The housing market has slammed shut. A year ago, mortgage rates were 3%. The monthly cost of a 30-year $300k mortgage at a 3% interest rate is $1,265. The monthly cost of the same mortgage now at 6% is $1,799, which is 39% higher. When you add that the median house is up in price by 16% over the past year, the monthly cost of paying for a mortgage on the same house as it did a year ago is $2,086 or around 65% higher.

When Paul Volcker famously raised rates to 19% in 1980 to slow down money supply growth, total debt (public and private combined) was 160% of US GDP. Today, total debt is 370% of GDP. , a much lower interest rate would cause widespread insolvencies and economic contraction.

Oil got up to $120+/barrel in this cycle. I can imagine a scenario where we push it down to $70 in a recession, then stimulate our way out of the recession and oil goes to $150. So then we try to rein it in again and get it down to $90, and then simulate again and send it to $180. Those are just hypothetical numbers, but the point is, I would expect some sort of zig-zag grind higher during this decade during rounds of tightening, debasement, tightening again, and debasement again.

 

 

 

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From RT.com

EU must not ‘backslide’ to coal-burning – EU Commission

Ursula von der Leyen warned against returning to the use of dirty fossil fuels amid tensions with Russia

The EU must not revert to using coal and neglect its climate change goals in order to replace Russian gas, European Commission President Ursula von der Leyen has said.

“We have to make sure that we use this crisis to move forward and not to have a backsliding on the dirty fossil fuels,” von der Leyen told the Financial Times on Monday.

“It’s a fine line and it’s not determined whether we are going to take the right turn.”

Von der Leyen said EU nations need to continue “massive investment in renewables.” 

She added that Brussels has “emergency steps in place” to respond to the threat of decreasing supplies from Russia, such as energy conservation and prioritizing which industries receive gas.

 

EU members such as Germany, however, have repeatedly warned that an immediate ban on Russian energy will badly hurt their economies.

German Economy Minister Robert Habeck said on Sunday that coal-fired power plants have to be used instead of gas to generate electricity, and more gas must be pumped into storage facilities. “Otherwise, it will be really tight in winter,” he said. “That’s bitter, but it’s simply necessary in this situation to lower gas usage.”

Habeck’s comments appear to be a stark departure from the climate change plan unveiled by the government in January, in which Germany’s share of renewable energy is to increase to 80% by 2030.

His statement came after Russian gas company Gazprom announced last week that it was reducing the flow through the Nord Stream 1 pipeline for technical reasons. The Netherlands said on Monday that it would also lift restrictions on coal-burning. A similar plan was rolled out by Austria.

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belfastchild
9 hours ago, DurhamBorn said:

Joined a dating site eh,

"yeah he put all our money into crypto.So what is potash,sounds interesting?,and Durham looks lovely ,so yes id love to visit"............

I havent logged in to pof for over a year.
Have had 4 emails since Saturday from women on there. All around my own age.
Curiosity got the better of me as I thought the usual fare but no, apart from one, all late 40s early 50s, milfy, fit, public sector types. All divorced, kids grown up.

Against my better judgement Ive arranged to meet 2 of them later in the week!

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