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

[BurntBread]

I am guessing the macro models describe how the different sectors respond to the price and quantity of money: when there is a big injection of new money, it flows first into certain sectors, and then, with a delay, into other sectors of the economy. Classical economics then says that production expands in those sectors that money flows to (again with a lag), and so the profitability is handed across to the next sectors in the chain.

I guess what we need to contemplate is what happens when one of the factors of production (in this case energy) turns out to be unexpectedly inelastic: that increased profits do not call forth new supply (or only with a very long lag, of a decade or more).

I am wondering if there is an analogy from the middle ages, when another basic factor of production, at the basis of the supply chain, was completely inelastic: namely land? In that case, land ended up completely owned by the oligarch/aristocrat class, and was the foundation for their power. Could we rapidly move toward a world where ownership of oil companies becomes the exclusive province of the elite?

That would explain why governments didn't simply tell us, "look, cheap oil is running out, and we're going to have to cope with the consequences"; but instead created a (partially true) narrative of climate change and environmental degradation. That let them make the case that oil and gas was actually doomed, and "stranded assets". If they had told us the truth, there would have been a rush from ordinary people to own the oil companies instead.

Is there a possibility that even the super-majors might be taken private? Remember there was a point in time when Exxon (if I remember correctly) was valued at less than Tesla.

[sleepwello'nights]

14 hours ago, Spiney Norman said:

The above is true.

Amongst my collegues there is a level of both ignorance and apathy that is truly shocking, and they are proffesional engineers. God only knows how bad the general public are.

It's also because the financial services industry obfuscates and perpetuates the myth of complexity. Pensions are made to seem very complicated. The very fact there are so many investment strategies is testament to that. Indeed much more publicity is given to the investment stars that fall, it serves to keep the fear factor alive.

Another factor is that the best time to start nvesting is when you are young. However when you are young the time when you need pension income is a loooong , looong way off and there are other more pressing needs on your income. 

 

[sleepwello'nights]

14 hours ago, Cattle Prod said:

I've often thought this, makes a lot of sense.

As someone with expert knowledge of the oil industry what is your opinion on snippets that I am reading more frequently that oil is a mineral resource that is continually being replenished naturally. 

Here's a link to one such opinion: https://rense.com/politics6/replent.htm

[DurhamBorn]

16 minutes ago, Yadda yadda yadda said:

Bennies have to go up at a lower rate than inflation or else employment collapses. The only people left working average wage jobs will be those with mortgages - how many of us are there? Most of the young rent whilst a lot of 50 and 60 somethings own outright. At some point inflation would go stratospheric as even less is produced. The pound would collapse or some other trigger would bring everything down.

I think its the key moment of the cycle here in the UK.If the government put bennies up with inflation from September then the roadmap moves to even higher inflation and much higher risk of systemic collapse.However i see nothing yet to think they wont,no pushback,not one mention of the fact high bennies are one of the main problems.The left own the narrative at the moment due to the media etc.Employment wont collapse,but the margins will move and continue in one direction.Since Blair they had mass migration and monetising debt to mask it,now they dont.It could be the government is demonizing the BOE so that printing isnt available.My friends daughter and her boyfriend have 6 kids between them,he has just got a 4 bed house,she a 3,between them they get £3900 a month in bennies.She sublets her house of course and lives with him.My friend hates what she is doing,but like he says Browns bennies have corrupted them all.Funny enough he has retired at 52 and gone on sickness bennies,sick of working to pay bennies,even though his daughter takes a massive amount.

[Shamone]

9 minutes ago, DurhamBorn said:

I think its the key moment of the cycle here in the UK.If the government put bennies up with inflation from September then the roadmap moves to even higher inflation and much higher risk of systemic collapse.However i see nothing yet to think they wont,no pushback,not one mention of the fact high bennies are one of the main problems.The left own the narrative at the moment due to the media etc.Employment wont collapse,but the margins will move and continue in one direction.Since Blair they had mass migration and monetising debt to mask it,now they dont.It could be the government is demonizing the BOE so that printing isnt available.My friends daughter and her boyfriend have 6 kids between them,he has just got a 4 bed house,she a 3,between them they get £3900 a month in bennies.She sublets her house of course and lives with him.My friend hates what she is doing,but like he says Browns bennies have corrupted them all.Funny enough he has retired at 52 and gone on sickness bennies,sick of working to pay bennies,even though his daughter takes a massive amount.

Absolute state of this cuntry. 

[RJT1979]

14 hours ago, Castlevania said:

This is my view. I have no idea whether increased levels of carbon dioxide in the atmosphere is a bad thing (I’d expect plants to thrive from higher levels) but we realistically do need to reduce the use of oil and gas simply because it’s not finite.

It is finite. Not infinite 

[Axeman123]

27 minutes ago, BurntBread said:

Is there a possibility that even the super-majors might be taken private?

That is a real big picture question. I don't think they would ever go de jure private, but instead become de facto uninvestable for the ordinary joe. Heavy buybacks to reduce the number of publicly traded shares would be the first step.

My thought would be that it would be akin to Berkshire Hathaway A shares, where the lack of stock-splits combined with rocketing value has resulted in a six figure price. That would keep the oiks from getting access, except through index or 60/40 type funds which would presumably be heavily diluted with ESG and green-bond rubbish.

[Boon]

https://www.bbc.co.uk/news/business-61523624

UBI incoming? Once started it'll be impossible to take away.

[Virgil Caine]

25 minutes ago, DurhamBorn said:

I think its the key moment of the cycle here in the UK.If the government put bennies up with inflation from September then the roadmap moves to even higher inflation and much higher risk of systemic collapse.However i see nothing yet to think they wont,no pushback,not one mention of the fact high bennies are one of the main problems.The left own the narrative at the moment due to the media etc.Employment wont collapse,but the margins will move and continue in one direction.Since Blair they had mass migration and monetising debt to mask it,now they dont.It could be the government is demonizing the BOE so that printing isnt available.My friends daughter and her boyfriend have 6 kids between them,he has just got a 4 bed house,she a 3,between them they get £3900 a month in bennies.She sublets her house of course and lives with him.My friend hates what she is doing,but like he says Browns bennies have corrupted them all.Funny enough he has retired at 52 and gone on sickness bennies,sick of working to pay bennies,even though his daughter takes a massive amount.

My guess is that one way or another they will gear it so inflation is used to chase working age people back into employment. One area that has not been touched so far is the education system but my guess is a higher education set up that excludes about 2 million plus  people from the labour force until the age of 21 or more is not going to be sustainable. Moving people as well as money from unproductive to productive activities is key to any redistribution cycle.

[Axeman123]

Warehouse space could be about to become very over supplied! Will any be converted to residential I wonder?

A real sign of the times.

[feed]

I think you give the global elite (I've always hated that term as it lends some credibility to what is largely just inherited wealth) too much credit.  

The last 40 years they've got almost everything wrong.  From the fall of the Soviet Union, to the dot come boom and bust, the GFC, this and countless others.  The only consistent action i can see is against the fear of real deflation.

The Eugenicists, Malthusians, old EU money craving the good old days of feudalism, the techno fetishists and their AI singularity, all exist, but there is no coherent plan.  They lurch from crisis to crisis, using each as an opportunity to increase their power and influence.  To increase authoritarianism and control, but kicking the problems down the road. 

6 months ago we were on the verge of a global government, forced injections and digital id and social credits.  And now they're back to laundering money through an old fashioned kinetic conflict.  One that might see the end of the US hegemony and a return to a bi (multi) polar state.  Sanctions on Russia reserves killed any chance of a global CBDC. But they just can't help themselves. 

Climate change as a tool to beat up the plebs, sure.  But it's doesn't mean they don't believe it themselves..  They're mostly exceptionalists, they believe their own bullshit, by virtue if they have said it, it must be true or it must be possble. 

And as for knowing fossil fuels are done.  The Biden administration is jetting around the world, cajoling and begging the marginal producers to increase supply.  Even the likes of David Hunter still thinks, print and it (energy) will come.

 

 

 

[Axeman123]

Another anecdotal about the fall of Amazon:

In the past falling retail sales or high-street footfall could always be hand-waved as being signs of the switch to online shopping. If Amazon is struggling it looks like a real hard rain will fall soon...

[wherebee]

8 minutes ago, Axeman123 said:

Warehouse space could be about to become very over supplied! Will any be converted to residential I wonder?

 

Excellent news for the prepping DOSBODDER.  3 acres of beans and rice.

[feed]

1 hour ago, sleepwello'nights said:

It's also because the financial services industry obfuscates and perpetuates the myth of complexity.

They don't need too.  Numeracy in the UK is pitiful 

[Bricormortis]

i recieve a small pension relating to my employment in Royal Mail from 1980 to 1988. To the best of my knoweledge this was increased by inflation each year. 

I am looking at the increase for this year coming whereby they have sent very minimal information but mentioned that  (around 70 % of ) my pension is subject to Guaranteed Minimum Pension rules and will therefor NOT be inflation linked and get zero uplift. The rest of my pension gets 3.1 % uplift. Which is worth 38 pence a week extra. Hmmph.

It was never a massive amount as we never earned much in the 80's, but for a lot of older posties retired and counting on their pension being adjusted, well a chunk of it is going to wither on the vine, . It never mentioned that in the glossy pension booklet they gave out when we joined. In fact im surprised its that easy to take pensions off people like that. Would have thought there would be some legal challenge.

Is this the future for the PS pension liabilities ?

[Bricormortis]

1 hour ago, Boon said:

https://www.bbc.co.uk/news/business-61523624

UBI incoming? Once started it'll be impossible to take away.

" For the poorest members of society " thats the bit that gets my goat. Make everybody else pay the bill.

[Barnsey]

57 minutes ago, Axeman123 said:

Another anecdotal about the fall of Amazon:

In the past falling retail sales or high-street footfall could always be hand-waved as being signs of the switch to online shopping. If Amazon is struggling it looks like a real hard rain will fall soon...

Same for the deliveroo/uber eats crowd too, other half tends to cave in and order something from one of them once a week as works from home, deliveries arriving so much faster than a couple months ago. So we're seeing the collapse of discretionary spend, does that alone get our unemployment rate back up to the 5% range without having to significantly raise rates?

[Errol]

1 hour ago, Boon said:

https://www.bbc.co.uk/news/business-61523624

UBI incoming? Once started it'll be impossible to take away.

It will have to be for everyone. No means testing  - so universal.

[M S E Refugee]

1 hour ago, Boon said:

https://www.bbc.co.uk/news/business-61523624

UBI incoming? Once started it'll be impossible to take away.

I can't see how UBI can work if the currency becomes worthless.

I'm no financial expert but I just can't see how it can work. 

[feed]

1 hour ago, Boon said:

https://www.bbc.co.uk/news/business-61523624

UBI incoming? Once started it'll be impossible to take away.

When the only tool you have is a printer. 

[wherebee]

4 minutes ago, M S E Refugee said:

I can't see how UBI can work if the currency becomes worthless.

I'm no financial expert but I just can't see how it can work. 

company stores.  or, in this case, state backed stores, like in the USSR.  Everyone will have the right to a loaf of bread every day, and UBI credits for that loaf.

Only problem is, as the USSR found out.... people don't make the bread fast enough or good enough if there is no profit.

[M S E Refugee]

1 minute ago, wherebee said:

company stores.  or, in this case, state backed stores, like in the USSR.  Everyone will have the right to a loaf of bread every day, and UBI credits for that loaf.

Only problem is, as the USSR found out.... people don't make the bread fast enough or good enough if there is no profit.

It is sad that despite it's 100% failure rate people still believe Communism is a viable system.

[Bricormortis]

If you work in a low wage job not paying much tax, and plenty do, proposed tax cuts will do nothing for you, and you  will earn too much to get the bennie uplifts. No one gives a crap about low wage earners though.

[Option5]

6 minutes ago, wherebee said:

company stores

You're Tennessee Ernie Ford and I claim my £5.

[Option5]

4 minutes ago, M S E Refugee said:

It is sad that despite it's 100% failure rate people still believe Communism is a viable system.

Because they know they can do it better.

Because they know they're smarter and better than anyone else.