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

[Axeman123]

15 minutes ago, Majorpain said:

I don't think so, it appears they are trying to introduce regulation...

Just for context, from the same source/date:

https://12ft.io/proxy?ref=&q=https://www.telegraph.co.uk/business/2022/05/31/cryptos-alive-london-could-worlds-blockchain-mecca/

Edit to add:

So, it appears that as well as "nationalizing" oil (like venezuela) BJ wants to embrace crypto (like El Salvador!)

[feed]

I've not read her stuff, but Lyn Aldens opinion is that CBDC's in the west will be some from of central bank / stable coin hybrid.

[Stuey]

4 hours ago, geordie_lurch said:

 

From what I have seen personally, I think May's sales will be even worse than the -11% from a year ago - I'd say -30% for non-essential retail at least unless the figures are majorly fudged and with everything going on I think it's only going to get worse

 

By September I think people will be limiting their spend to food, energy, petrol for commuting, and the all-important booze. 

[Plan-b]

23 minutes ago, Axeman123 said:

Just for context, from the same source/date:

https://12ft.io/proxy?ref=&q=https://www.telegraph.co.uk/business/2022/05/31/cryptos-alive-london-could-worlds-blockchain-mecca/

Edit to add:

So, it appears that as well as "nationalizing" oil (like venezuela) BJ wants to embrace crypto (like El Salvador!)

Nope not for me, time to arrange my tax affairs from a more stable and sensible jurisdiction.

I'm not having my tax input being put to use so that it can continually be used to work against me.

[Don Coglione]

Just now, Plan-b said:

Nope not for me, time to arrange my tax affairs from a more stable and sensible jurisdiction.

I'm not having my tax input being put to use so that it can continually be used to work against me.

Got anywhere nice in mind?

[Plan-b]

2 minutes ago, Don Coglione said:

Got anywhere nice in mind?

I'd say a BRICS country but been to/worked in most of them so it's a nope on those.

Open to ideas, none apparent at the moment, unfortunately.

[Lightly Toasted]

1 hour ago, Majorpain said:

https://www.telegraph.co.uk/business/2022/05/31/bank-england-take-collapsed-cryptocurrencies/

This makes no sense, the price of a stablecoin is dictated by the market as its only worth is what people are willing to pay for it.  If that is 2p to £1 because the underlying asset is junk that is the price.

BOE is the clown spinning plates at a party, and in addition to House prices and real economy that are now wobbling, they are adding another one in cryptocurrency just to spice things up.

It just keeps getting worse. What is the upside of such a bailout for the UK?

If the failure of stablecoins really is a significant threat to the wider economy, then the financial regulators who allowed it to get to that point need to be taken out and shot.

[Lightly Toasted]

59 minutes ago, Plan-b said:

FFS - WTF this cuntry is fuct

https://bombthrower.com/no-one-is-coming-to-save-you-or-crypto/

 

From the article: In August last year, Senator Elizabeth Warren warned that a “run on Crypto” might need a Federal bailout citing a lack of basic consumer protections afforded to investors in the traditional asset space.

They've been mulling this over for a while, then.

I might start playing slot machines, they're bound to help me out if I lose, right?

[Lightscribe]

1 hour ago, sancho panza said:

Difficult to know which emoji to click for that post.....can't do them all or I would.

So true,so ironic.this country's really on the slope into shit creek

It’s a bog. 

[Plan-b]

3 minutes ago, Lightly Toasted said:

From the article: In August last year, Senator Elizabeth Warren warned that a “run on Crypto” might need a Federal bailout citing a lack of basic consumer protections afforded to investors in the traditional asset space.

They've been mulling this over for a while, then.

I might start playing slot machines, they're bound to help me out if I lose, right?

Why not, anything thats stupidly risky.

What about the energy expenditure of crypto, wheres the green in that? talk about mixed signals.

[Lightscribe]

Antidotal. My brothers business (agricultural equipment) has dried up to  ticking over levels. I initially flagged up the container shipping prices in 2020, and now he has 90% of his production in the UK. Business is very slow in a semi-inflation proof industry.

I am selling my complete rare Lego collection 

Lockdown was the ultimate market, I still have some high value retired sets at the cheapest prices on EBay. These would have been gone within a week in normal circumstances and now still there a month later.

Things have majorly changed. Most have no idea of the Tsunami that’s coming. 

[Axeman123]

50 minutes ago, Lightly Toasted said:

It just keeps getting worse. What is the upside of such a bailout for the UK?

If the failure of stablecoins really is a significant threat to the wider economy, then the financial regulators who allowed it to get to that point need to be taken out and shot.

100% on the second part.

There is nothing in the article about a bailout however. I read it as wanting statutory powers to impose administration of wobbly stable coins, which is probably needed.

Tether for one needs a proper audit, with all recievables called in and a % buyback value for privately-held coins circulating subject to reserves.

[Barnsey]

3 hours ago, Nomad said:

Where I live (south coast) I would say house prices have gone up around 30% in the last two years, so if there is only going to be a 10% decrease over the next 2 years it will be a blip and have no significant impact on affordability, especially if interest rates are rising.

 

When DB says 10%, most "normal" areas of the UK probably fall into that average, but holiday home hotspots will no doubt be affected more, especially if his pension erosion predictions are right, along with looming council tax increases etc for 2nd home owners.

We'll most certainly see props come out though, can't encourage many to buy then let them suffer with too much negative equity, especially when they are "doing the right thing" compared to the leeching benny brigade who are being saved right now whilst penalising the home owning middle class. No props, no conservatives.

[Pip321]

2 hours ago, Nomad said:

using the BoE inflation calculator (CPI), the 102k is the equivalent of just shy of 160k in 2021, just shows how distorted house prices are in some parts of the uk,

I love that you use CPI calculator to see what £102k means in average real terms. So sensible, helpful and relatively accurate. 

Mentioned it before but when my son bought last year (against my wishes but with my help).  I used the very same CPI methodology to help me come to terms to with prices because although we wanted a relative bargain I knew it would still be a ‘retail price’ and not what I was used to. 

He bought well in the end but it really helped me using CPI on old comparables because in 2020/21 the world went mad and I was trying to remove that madness from what we were using for comparables.

I guess we could apply that CPI methodology more accurately whenever we buy anything including gold and some investments.

Stocks are slightly different because is the underlying growth of the business v share price but I imagine P/E and yields kind of do that for us.

[sancho panza]

2 hours ago, Option5 said:

Margins for big builders are normally circa 30%.

If house prices fall, their margins fall, and, more importantly, in the long term the value of their land banks fall.

As they put up their assets as collateral for their loans any fall in land bank values is a bigger problem.

One is a cash flow issue, the other is a solvency issue.

Interesting piece from Savills in 2015 but I know a new build developer(2-4 per annum) who works similar to you and Savills.

https://www.savills.co.uk/research_articles/229130/188996-0

We can demonstrate the link between house prices and land values using a simple model. It uses Nationwide new build house prices as a proxy for GDV and the only input. It is based on an old land buyer’s rule of thumb: land is 1/3rd of GDV. Therefore the modelled land value is 1/3rd of the house price. The volatility in land prices is accounted for by assuming that the remaining 2/3rds (effectively costs and profit) are sticky and do not fall. Therefore land values absorb the full impact of any falls in house price and the full benefit from any rises while house prices are below their previous peak.

[snaga]

57 minutes ago, Axeman123 said:

100% on the second part.

There is nothing in the article about a bailout however. I read it as wanting statutory powers to impose administration of wobbly stable coins, which is probably needed.

Tether for one needs a proper audit, with all recievables called in and a % buyback value for privately-held coins circulating subject to reserves.

all very well, but does the UK have jurisdiction on these coins? where are the offices to audit?

perhaps this is just a pre-emptive move to keep cryptocurrencies out of UK jurisdiction?

[King Penda]

2 hours ago, Stuey said:

By September I think people will be limiting their spend to food, energy, petrol for commuting, and the all-important booze. 

When people get that 650 they will spend like sailors on shore leave then moan I can’t pay my gas bill

[Plan-b]

2 hours ago, Plan-b said:

I'd say a BRICS country but been to/worked in most of them so it's a nope on those.

Open to ideas, none apparent at the moment, unfortunately.

Official delegates from wealthy developed nations like Australia, the UK, and the US spoke in strong support of the amendments and urged other states to join them in signing away their countries’ sovereignty.

Multiple other countries also said they had reservations over the changes and would not be supporting them either.

These included Brazil, Russia, India, China, South Africa, Iran and Malaysia. Brazil in particular said it would exit WHO altogether, rather than allow its population to be made subject to the new amendments

 

[Lightly Toasted]

1 hour ago, Axeman123 said:

There is nothing in the article about a bailout however. I read it as wanting statutory powers to impose administration of wobbly stable coins, which is probably needed.

 

I hope you're right, this is the bit that looks like a bailout (along the lines of bank deposit insurance but without the industry funding) to me:

Stablecoin issuers would be placed into special administration by the Bank to protect consumers if they fail, a Government consultation said on Tuesday.

The proposals would mean companies offering stablecoins, cryptocurrencies designed to hold their value, would fall under similar rules as banks and other systemic institutions.

 

Presumably they mean (in future) to take insurance levies from crypto companies but since assets are collapsing right now, it's hard to see how consumers could be protected without the taxpayer coughing up.

[snaga]

clown world confirmed, SNP now more Tory than the Conservatives.

Kate Forbes says Scotland must 'reset' public services - BBC News

[Axeman123]

3 minutes ago, Lightly Toasted said:

I hope you're right, this is the bit that looks like a bailout (along the lines of bank deposit insurance but without the industry funding) to me:

Stablecoin issuers would be placed into special administration by the Bank to protect consumers if they fail, a Government consultation said on Tuesday.

The proposals would mean companies offering stablecoins, cryptocurrencies designed to hold their value, would fall under similar rules as banks and other systemic institutions.

 

Presumably they mean (in future) to take insurance levies from crypto companies but since assets are collapsing right now, it's hard to see how consumers could be protected without the taxpayer coughing up.

I have been following the Terra/Luna debacle, and one of the allegations is that the entire reserves were used to bail-out "whales" at face value under cover of "defending the peg". I do see your point about reading what you quoted as bail-outs, but equally that could be read as freezing reserves to distribute equitably.

Ultimately though, why would anyone base a stablecoin here when El Salvadore etc are just as available and barely regulated? The only situation I can think of is a public/private partnership, ie CBDC in all but name. KYC/AML would be the death of any kind of real crypto-currency or self-custody. People would expect to be able to do chargebacks or get lost private keys reset!

[Lightly Toasted]

1 minute ago, snaga said:

clown world confirmed, SNP now more Tory than the Conservatives.

Kate Forbes says Scotland must 'reset' public services - BBC News

They have the advantage of not having their own magic money tree

Comparable to countries seeking to self-impose fiscal discipline by using currency substitution, though less extreme because Scotland is a semi-detached part of the UK rather than being an independent state.

 

[DurhamBorn]

36 minutes ago, Lightly Toasted said:

They have the advantage of not having their own magic money tree

Comparable to countries seeking to self-impose fiscal discipline by using currency substitution, though less extreme because Scotland is a semi-detached part of the UK rather than being an independent state.

 

Less services,but much higher bennies,over a 50% increase,nuts,

 funding for social security benefits will increase from £3.9bn to £6.3bn in cash terms.

[snaga]

12 minutes ago, DurhamBorn said:

Less services,but much higher bennies,over a 50% increase,nuts,

 funding for social security benefits will increase from £3.9bn to £6.3bn in cash terms.

Which is a large chunk of their increase in budget over the next 5 years, way below inflation 

The overall budget for the Scottish government is due to increase from £41.8bn to £47.5bn

[tank]

5 hours ago, Lightscribe said:

I think any house price correlation has to be taken with a pinch of salt. Monetary stimulus and central banks is one thing, but anything in regards to humans and emotion is another.

Remember that house prices and ‘bricks and mortar’ attitude has been well entwined into the British economic psyche for decades.

Previous cycles were long forgotten by those just staying put for years, the only ones burnt were the unlucky ones who’s hand was forced (three D’s and buying at the top of the cycle). Then the last decade went way off kilter with stratospheric deviation to wage/price ratio, gentrification and sentiment to match.

The moment of realisation that trees don’t grow to reach the sky, inflation is here to stay and BTL is a loss making investment will be devastating. The supply/demand narrative will be turned on its head with those cashing in their chips trying to catch the top of the cycle. That coupled with a very small number who can actually buy, with free cash funds (once everything is selling off) and banks willing to lend.

This will vary massively on area, and the south will be decimated. I can easily envisage 50% nominal falls (far less than that up north). 

Properties like this in Tooting (used to be a shithole) below were £200k 20 years ago and £300k 10 years ago. It’s not difficult to imagine that decade of cheap credit could reverse astronomically to 2012 prices.

They're going to issue another 3-4 million third world visas between now and the GE in 2024.

That will prop up BTL and more.

Any fall in property prices will be a small blip before 'normal service' resumes. That 2 bed Victorian terrace in South London will be worth ~£1 million by 2030.