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

[Bobthebuilder]

8 minutes ago, We Live In A Society said:

I doubt that.  The c*nt is about 5 foot 4.  The chance of him smashing anybody in the face with anything more than a TV License letter threatening the Luton office is coming down, is the square root of fuck all.

Think of him as an ant.  It would be very easy to say, pick up a breeze block and say squash the worthless c*nt.

I know a lass, who almost went on the game during lockdown, because that cunt made getting SEISS so difficult to get.

You might be able to break his leg face to face, but he will not change.

"But no one ever changed the church by pulling down a steeple
And you'll never change the system by bombing number ten
Systems just aren't made of bricks they're mostly made of people
You may send them into hiding, but they'll be back again"

 

[M S E Refugee]

German security official warns about ‘enemies of the state’ https://www.rt.com/news/561055-germany-enemies-state-energy-crisis/

The German Politicians are shitting themselves, conspiracy theorists are enemies of the State.

[CannonFodder]

Loving the look of the new USA gold eagle - you can tell class.

[Plan-b]

7 minutes ago, CannonFodder said:

Loving the look of the new USA gold eagle - you can tell class.

Their really gonna make/have already made those?

[JMD]

5 hours ago, Democorruptcy said:

Read that and saw this link

Interest-free loans to be rolled out in UK to help with food bills

A zero-interest loans scheme aimed at helping thousands of people who are struggling to put food on the table is being rolled out across the UK.

Let them eat... ZIRP!

[sancho panza]

Just having a play with some historical precedents.Tech run up 2000 and crash thereafter.GDX/GDXJ don't go back that far but Barrick and Newmont do.Worth noting the monthly heiken ashi has S&P 500 peaking in Sept 2000,Barrick and Newmont bottoming Oct 2000 before starting bull runs.....

correlation causation etc but PM fascinate me at the mo anyway.

I'll psot up some other stuff I'm working on but need to get timelines sorted.Think it's possible we could be in lower high territory on S&P/NDX and tradaitonally that has been the high to short rather than the final higher high in the bull run which is more of alottery imho

The two arrows point to the OCt00 high and the oct 02 low on the S&P

It's worth noting that Newmont went up 60% while the S&P lsot 45%.

Even stranger is that Barrick is currently about where it was at the start of that Tech sell off..........

 

 

Decl:long PM miners

[M S E Refugee]

3 minutes ago, JMD said:

Let them eat... ZIRP!

Offering interest free loans during high inflation, what could possibly go wrong!

[sancho panza]

3 hours ago, Ash4781b said:

Head in hands. It’s looking like the BOE inflation forecast will be going in the bin.
 

Presumably with the energy rises the council tax bill will go up by what 5-10% with a matching rebate of the whole annual bill then pain in year 2 with a £2k bill?

Shaun Richards is on this today

Tends to be very apolitical.And yet this with this piece you can almost feel him seething as he writes.

Welcome to the club Shaun. @baffledbyzirp

https://notayesmanseconomics.wordpress.com/2022/08/17/how-much-more-wrong-could-the-bank-of-england-be-as-inflation-soars-again/

How much more wrong could the Bank of England be as inflation soars again?

Posted on August 17, 2022

 

There is something symbolic in the fact that on this measure we are now in double digits. Also that means that it is now more than five times the level that the Bank of England is supposedly targeting. There is an enormous gap between its response and the number above.

This month we have raised our interest rate to 1.75%.

In total, since December 2021, we have increased our interest rate from 0.1% to 1.75%.

So their interest-rate is some 8.35% below the present inflation rate.Plus their increase of 1.65% is a bit over a third of the rise in inflation (4.7%) since they started raising interest-rates. So on every number they have applied a peashooter and of course there is the issue of them starting too late as to have had any chance of at least reducing the present crisis they would have had to have started last summer.

In many jobs such failure would get you the sack but we know that accountability is only for those lower down the scale not for the elite.Here is Bank of England Governor Andrew Bailey from the 27th of September last year.

Our view is that the price pressures will be transient – demand will shift back from goods to services, global supply chains are likely to repair themselves, and many commodity prices have demonstrated mean reverting tendencies over time.

How much more wrong could he be? He kept ramming it home and the emphasis is mine.

For most members of the MPC, the outlook for the labour market – as I described earlier – is highly uncertain and to some degree likely to be resolved in fairly short order, and this justified a wait and see approach on policy in view of the continuing belief that higher inflation will be temporary

The issue is that this is literally his job. If he were a football manager with a similar performance level he would have been fired months ago. The excuse that it is all the Ukraine war whereas I pointed out when I analysed the speech above that money supply growth was still 8.2% and that as growth looking ahead might not be great inflation was on the menu. It was predictable contrary to the official denials.

 

What caused it this time?

The factor in play is both especially grim for the worst affected as it is vital and more woe for central bankers who have long tried to dismiss it with their “non-core” theories and rhetoric.

Rising food prices made the largest upward contribution to the change in  the  CPI annual inflation rate between June and July 2022.

What does CPI miss?

It ignores owner-occupied housing costs. What are they doing?

UK average house prices increased by 7.8% over the year to June 2022, down from 12.8% in May 2022.

That is quite a change and is such a large one it may be unreliable but what we have had is twenty odd years of house prices soaring. The UK house price index since  the summer of 2003 is below.

was 67. 2 and is now 150.2

Whereas UK CPI

was 75.4 and is now 122.5

 

So the removal of house prices from the inflation numbers has reduced inflation which is a major reason why our previous main inflation measure has consistently given higher numbers.

The all items RPI annual rate is 12.3%, up from 11.8% last month.

It has been running at around 2% or more higher for much of this recent burst in inflation. Another reason is that it has represented the surge in domestic energy prices more realistically via giving them a higher weight.

But if we stick with owner-occupied housing costs there has more recently been an official effort to mislead on this front. After many years we got this.

Given that the owner occupiers’ housing costs (OOH) component accounts for around 17% of the CPIH, it is the main driver for differences between the CPIH and CPI inflation rates. ……. This makes CPIH our most comprehensive measure of inflation

Not quite because that 17% assumes that owners  pay rent. Imagine if as well as a purchase price paid by a combination of a lump sum and monthly mortgage payments you had to pay rent too! Who would do that? It is a convenient fantasy though because look what it allows them to do to inflation.

Private rental prices paid by tenants in the UK rose by 3.2% in the 12 months to July 2022, up from 3.0% in the 12 months to June 2022.

Yes some 17% of their “most comprehensive measure of inflation” is only rising at 3.2% thus nicely reducing the inflation rate to this.

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.8% in the 12 months to July 2022, up from 8.2% in June.

So 12.3% becomes 10.1% and the plan was for it to become 8.8%. I think you can spot the trend here! Reality is of course unchanged but perception may be altered. There is another kicker to this which HM Treasury will love which is that these numbers are part of the GDP calculations, so the switch to CPI has boosted it by up to 0.5% annually.

Comment

The cost of living crisis continues to build and is a result of considerable institutional failure. The Bank of England was given independence back in 1997 because politicians were unwilling to make unpopular decisions and thus we saw that increases in interest-rates ended up being larger because they acted too late. If we fast forwards to now we see that the Bank of England has made exactly the same mistake meaning that independence became a facade. One route to this lack of  independence is that every single Deputy Governor has come from HM Treasury. A form of reverse takeover.

[Bus Stop Boxer]

4 hours ago, A tremendous # on the lung said:

I ducking hate those 

"RELAX"

[sancho panza]

Not sure hownaccurate the German data is but not surprised

https://www.iamexpat.de/housing/real-estate-news/house-prices-fall-66-percent-major-german-cities

House prices fall in major German cities

Rising construction costs and the higher price tag on mortgages are beginning to have an effect on the housing market: demand for properties in Germany fell significantly in the second quarter of 2022, according to the online real estate portal Immoscout24. Overall, demand fell by 36 percent compared to last year, while the number of listings increased by 46 percent. Advertisements are also staying live for a lot longer than they did last year.

The dip in the number of people looking to buy a house meant that property prices fell in some of the biggest German cities. In major centres like Cologne, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart, asking prices fell by as much as 6,6 percent. 

Outside these major cities, the price rises have continued, but the rate - which averaged 2 percent in the second quarter of 2022 - is nowhere near as high as what has been seen in recent months and years.

Rental market in Germany remains competitive

This change in the mortgage market has had a knock-on effect on the rental market, with Immoscout24 reporting a 48-percent increase in demand for rental apartments, which in turn has pushed up prices.

Data from the rental platform shows that listed apartments were on average 2,7 percent more expensive in the second quarter of 2022 compared to the first. New-build apartments were 3,6 percent more expensive, on average.

 

[wherebee]

1 hour ago, CannonFodder said:

Loving the look of the new USA gold eagle - you can tell class.

 picked this up along with a dozen more in 2017 in the US on a trip in a small country fair.  Not gold, fake, cheap as chips, but boy is it funny to give to people

[CannonFodder]

8 hours ago, Plan-b said:

Their really gonna make/have already made those?

Yup - you can buy   few different versions

 

[Barnsey]

Are you writing for the Telegraph now @DurhamBorn?

https://www.telegraph.co.uk/news/2022/08/17/entitlement-britain-becoming-poor-country-many-people-dont-care/

Britain has turned into a three-speed society, with some people, including blue-collar workers in warehouses, in factories, in delivery vans, as well as plenty of white-collar professionals, working flat out, much harder than they ever did before, their output closely monitored and controlled by technology, but with their pay held back by productivity constraints.

The picture is different in office-based sectors where the working-from-home and HR cultures have spiralled out of control, and there has been a proliferation of non-jobs across the corporate world. Office workers spend too much time communicating with each other, which is easy, rather than creating value, which is hard. Poor, lazy, tick-box management is rife, some of it caused by regulatory idiocies. Many corporate types are resting on their laurels, insulated by cheap credit, lulled by rocketing house prices into thinking they have made it in life and can relax.

Last but not least, parts of the economy are suffering from the continued dysfunctionality of the welfare state: despite Universal Credit, there are insufficient incentives for some groups to increase their working hours. This is an important reason why so many vacancies for lower-paid jobs remain unfilled, and, combined with our poor education and skills, for our extreme reliance on immigrant labour.

All three challenges need to be addressed differently. We need to be honest about the new British disease: our staggering lack of competitiveness, poor levels of investment, the low quality of so many of our schools, the weakness of our skills, the disaster that is our infrastructure, our sky-high taxes, our deadly bureaucracy, and that fixing all of this will be painful. Incentives to work and invest need to be turbocharged: far too many people pay far too high marginal tax rates, and many youngsters are discouraged by our broken housing market.

Firms will need to be encouraged into investing a lot more. The economy requires more competition. The public sector needs radical reform and contraction. Crucially, higher interest rates would lead to a more rational allocation of capital, and the demise of wasteful low-return jobs and practices. One of the biggest barriers to change is the prevalence of middle-class Nimbyism, or at least the idea that things are good enough as they are, and that all new development – of homes, airports, power plants or water reservoirs – must be stopped.

Capitalism itself cannot survive another decade of zero growth in real incomes. The public only tolerates the profit motive and freeish markets if people feel that a rising tide is lifting all boats; but as incomes stagnate, they become ever more sceptical. But Britain is suffering from zombified social-democracy, over-regulation and monetary socialism, not from genuine capitalism. We wouldn’t be stagnating if a few million acres had been handed over to housing, or if monetary policy wasn’t obsessed with a proto-Keynesian desire to bail out the over-indebted, or if a flat tax had been introduced in 2010, or if the Oxford-Cambridge-London triangle had been turned into a giant high-productivity science enterprise zone.

Boris Johnson was meant to understand all of this but sadly didn’t, and three years have now been wasted. Liz Truss, a principled libertarian, does get it, and, crucially, isn’t scared of being blunt. The Tories can’t afford to mess this up again: it’s Truss’s way, hard graft and all, or a Labour landslide in 2024.

[M S E Refugee]

UK awaits shipment of Australian LNG – media https://www.rt.com/business/561007-uk-australia-lng-supplies/

 

[wherebee]

10 minutes ago, M S E Refugee said:

UK awaits shipment of Australian LNG – media https://www.rt.com/business/561007-uk-australia-lng-supplies/

 

yeah, good luck with that as a medium term solution.  The papers are already pointing out to people that we sell gas cheaper overseas than we charge our own people here, due to contracts entered into a while ago plus bans on new field development in many states.

The pressure to put Australia first is rising... and interestingly, the new Labour PM seems to get it.  He's already said no move to renewables without coal and gas doing the heavy lifting for a good while.

[M S E Refugee]

https://www.dividendmax.com/united-states/nyse/shipping/zim-integrated-shipping-services-ltd/dividends

https://www.dividendmax.com/united-states/nasdaq/shipping/star-bulk-carriers-corp/dividends

https://www.dividendmax.com/south-africa/johannesburg-stock-exchange/energy/thungela-resources-limited/dividends

I have been buying these inflation busting dividend payers in my Freetrade ISA.

I've also bought back into Thungela.

[Formerly]

58 minutes ago, Barnsey said:

there has been a proliferation of non-jobs across the corporate world. Office workers spend too much time communicating with each other, which is easy, rather than creating value, which is hard. Poor, lazy, tick-box management is rife, some of it caused by regulatory idiocies.

Nailed it!

[M S E Refugee]

More Russian oil headed for Asia – Bloomberg https://www.rt.com/business/561017-russian-oil-headed-asia/

[geordie_lurch]

.

[Stuey]

23 minutes ago, M S E Refugee said:

More Russian oil headed for Asia – Bloomberg https://www.rt.com/business/561017-russian-oil-headed-asia/

Once they stop selling it to the west it's not like they can just turn off the taps. 

[DoINeedOne]

So a honest question what are people views of what will happen over winter and next year with these high gas and electric prices

 

Im sitting here wondering about certain companies that own or require properties think offices, pubs or large retail stores, just how will they survive going forward, we're starting to see companies struggling or posting images of huge bills whilst i can't predict what will happen im just wondering what peoples views are

[DurhamBorn]

1 hour ago, Barnsey said:

Are you writing for the Telegraph now @DurhamBorn?

https://www.telegraph.co.uk/news/2022/08/17/entitlement-britain-becoming-poor-country-many-people-dont-care/

Britain has turned into a three-speed society, with some people, including blue-collar workers in warehouses, in factories, in delivery vans, as well as plenty of white-collar professionals, working flat out, much harder than they ever did before, their output closely monitored and controlled by technology, but with their pay held back by productivity constraints.

The picture is different in office-based sectors where the working-from-home and HR cultures have spiralled out of control, and there has been a proliferation of non-jobs across the corporate world. Office workers spend too much time communicating with each other, which is easy, rather than creating value, which is hard. Poor, lazy, tick-box management is rife, some of it caused by regulatory idiocies. Many corporate types are resting on their laurels, insulated by cheap credit, lulled by rocketing house prices into thinking they have made it in life and can relax.

Last but not least, parts of the economy are suffering from the continued dysfunctionality of the welfare state: despite Universal Credit, there are insufficient incentives for some groups to increase their working hours. This is an important reason why so many vacancies for lower-paid jobs remain unfilled, and, combined with our poor education and skills, for our extreme reliance on immigrant labour.

All three challenges need to be addressed differently. We need to be honest about the new British disease: our staggering lack of competitiveness, poor levels of investment, the low quality of so many of our schools, the weakness of our skills, the disaster that is our infrastructure, our sky-high taxes, our deadly bureaucracy, and that fixing all of this will be painful. Incentives to work and invest need to be turbocharged: far too many people pay far too high marginal tax rates, and many youngsters are discouraged by our broken housing market.

Firms will need to be encouraged into investing a lot more. The economy requires more competition. The public sector needs radical reform and contraction. Crucially, higher interest rates would lead to a more rational allocation of capital, and the demise of wasteful low-return jobs and practices. One of the biggest barriers to change is the prevalence of middle-class Nimbyism, or at least the idea that things are good enough as they are, and that all new development – of homes, airports, power plants or water reservoirs – must be stopped.

Capitalism itself cannot survive another decade of zero growth in real incomes. The public only tolerates the profit motive and freeish markets if people feel that a rising tide is lifting all boats; but as incomes stagnate, they become ever more sceptical. But Britain is suffering from zombified social-democracy, over-regulation and monetary socialism, not from genuine capitalism. We wouldn’t be stagnating if a few million acres had been handed over to housing, or if monetary policy wasn’t obsessed with a proto-Keynesian desire to bail out the over-indebted, or if a flat tax had been introduced in 2010, or if the Oxford-Cambridge-London triangle had been turned into a giant high-productivity science enterprise zone.

Boris Johnson was meant to understand all of this but sadly didn’t, and three years have now been wasted. Liz Truss, a principled libertarian, does get it, and, crucially, isn’t scared of being blunt. The Tories can’t afford to mess this up again: it’s Truss’s way, hard graft and all, or a Labour landslide in 2024.

They get lots of their ideas from this thread and out work,then flesh it out into articles.They never credit us though.To be fair though at least they are getting it out there.They need to really push the bennies and public sector unfunded pensions consuming so much while producing nothing as the main problem.I was talking to an old squeeze yesterday,she is an estate agent/letting agent in my home town.She said they had let 65 houses this year,only 4 paid their own rent,61 bennies.She said she saw working kids looking in the windows,but pushed out by bennies.

[DurhamBorn]

2 minutes ago, DoINeedOne said:

So a honest question what are people views of what will happen over winter and next year with these high gas and electric prices

 

Im sitting here wondering about certain companies that own or require properties think offices, pubs or large retail stores, just how will they survive going forward, we're starting to see companies struggling or posting images of huge bills whilst i can't predict what will happen im just wondering what peoples views are

I think we will get a cap of some sort this winter from government.There is no political way a government can survive £5k utility bills while only bunging to bennies.Business is being strangled in this country,a lot will go under this winter.

[Stuey]

5 minutes ago, DoINeedOne said:

An honest question what are people views of what will happen over winter and next year with these high gas and electric prices

 

Im sitting here wondering about certain companies that own or require properties think offices, pubs or large retail stores, just how will they survive going forward, we're starting to see companies struggling or posting images of huge bills whilst i can't predict what will happen im just wondering what peoples views are

Very limited hours, and heated to 16C bare minimum for employee purposes rather than the ubiquitous roasting that some places are.

I amended the start of your post. 

[Stuey]

2 minutes ago, DurhamBorn said:

I think we will get a cap of some sort this winter from government.There is no political way a government can survive £5k utility bills while only bunging to bennies.Business is being strangled in this country,a lot will go under this winter.

They have not mentioned anything about business AFAIK, except one or two Energy Intensive Industries that already receive support.