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

[Loki]

3 minutes ago, marceau said:

I don't care about globalist power as it relates to China, Russia or anywhere else. I'm English and I care about its power and impact HERE, where at present it is stronger than ever.

You are correct that we SHOULD be moving back to national interest as the policy foundation. We SHOULD in fact have done so back in 2009, following the financial crisis - the last remaining prop failure in the hostile national takeover known as the 'Blair' project.

By that point foreign policy had failed with Iraq & Afg; domestic policy had failed with 7/7 bombings, the oh-so mysterious rise of the BNP in places like Rotherham, and the astonishing fuck ups of Tax Credits and EE migration. PFI was recognised as a goat fuck, Brown was a deeply unpopular oaf, and the absolute economic failure of the financial crisis should have finished the whole rotten project off for good.

People may remember Cameron making a lot of noise about 'national interest' during the early phases of the coalition, I'm not sure if he meant it or not. In reality, what was occuring was a slow, stealthy doubling down of trans-national policy in pretty much every failed area. Totally inexcusable behaviour that made no sense for a British govt to engage in. Of course the secret was that the British govt wasn't the driver, the supranational cartels were. They had enough control (principally through Blair-gov implemented legal process) to guide everything back in their direction. Within 2 years we're fucking around in Libya, engaging in totally fake 'negotiations' on EU terms, bottling benefits reform, launching ridiculous corporate welfare schemes like help to buy and extending QE to the end of time. The global project marched on.

And here we are, back in a hole, with a govt that doesn't know who it's for, where it is going or what it is doing. No political opposition whatsoever and complete legal, social, information and moral control in the hands of people we can't reach. 'National' isn't coming back under those conditions, even though it's desperately needed. That's the power of politics unfortunately.

Agreed, 'we' didn't even tell the World Health Organisation to do one, pretty clear evidence this country is wholly-owned by someone

[Chewing Grass]

3 hours ago, HousePriceMania said:

I had a Mortgage in 1990 and the interest rate was knocking on 14% which is why you could by a decent semi on 3x an average wage.

That's £4200 per year on a £30K Mortgage interest only plus another £30 per month for the endowment to pay it off in 2015.

Strangely £4200 per year Interest Only would still get you one in the same condition mine was in back then now at 2.5%.

House Prices are almost entirely an inverse function of interest rates.

[HousePriceMania]

4 minutes ago, Loki said:

Agreed, 'we' didn't even tell the World Health Organisation to do one, pretty clear evidence this country is wholly-owned by someone

Someone, or something.

 

1 minute ago, Chewing Grass said:

I had a Mortgage in 1990 and the interest rate was knocking on 14% which is why you could by a decent semi on 3x an average wage.

That's £4200 per year on a £30K Mortgage interest only plus another £30 per month for the endowment to pay it off in 2015.

Strangely £4200 per year Interest Only would still get you one in the same condition mine was in back then now at 2.5%.

House Prices are almost entirely an inverse function of interest rates.

Interest rates are rising.....

[feed]

11 minutes ago, marceau said:

I don't care about globalist power as it relates to China, Russia or anywhere else. I'm English and I care about its power and impact HERE, where at present it is stronger than ever.

You are correct that we SHOULD be moving back to national interest as the policy foundation. We SHOULD in fact have done so back in 2009, following the financial crisis - the last remaining prop failure in the hostile national takeover known as the 'Blair' project.

By that point foreign policy had failed with Iraq & Afg; domestic policy had failed with 7/7 bombings, the oh-so mysterious rise of the BNP in places like Rotherham, and the astonishing fuck ups of Tax Credits and EE migration. PFI was recognised as a goat fuck, Brown was a deeply unpopular oaf, and the absolute economic failure of the financial crisis should have finished the whole rotten project off for good.

People may remember Cameron making a lot of noise about 'national interest' during the early phases of the coalition, I'm not sure if he meant it or not. In reality, what was occuring was a slow, stealthy doubling down of trans-national policy in pretty much every failed area. Totally inexcusable behaviour that made no sense for a British govt to engage in. Of course the secret was that the British govt wasn't the driver, the supranational cartels were. They had enough control (principally through Blair-gov implemented legal process) to guide everything back in their direction. Within 2 years we're fucking around in Libya, engaging in totally fake 'negotiations' on EU terms, bottling benefits reform, launching ridiculous corporate welfare schemes like help to buy and extending QE to the end of time. The global project marched on.

And here we are, back in a hole, with a govt that doesn't know who it's for, where it is going or what it is doing. No political opposition whatsoever and complete legal, social, information and moral control in the hands of people we can't reach. 'National' isn't coming back under those conditions, even though it's desperately needed. That's the power of politics unfortunately.

Don't disagree with that.  But, dare I say it, it's different this time. The end of the dis-inflationary cycle (and the fear of deflation) that's lead fiscal policy for the last 20 years and well, War. 

The West is at war with the rest of world. Call it an economic/currency/resource war, but globalism under the current circumstances is done.  And i don't think there is anyway back. Because, after everything the West has said about globalism, sanctioning Russian reserves demonstrated to the rest of the world that the US will still go to war simply to protect it's political class.

For the UK perhaps it's protectionism more than nationalism, but the rest of the world isn't going to accept globalism on our terms ever again.  
 

[JMD]

4 hours ago, DurhamBorn said:

I think that might be what changes things,the 10% bennie and retired government workers uplifts.It comes alongside allowance freezes in tax and will be paid for with more inflation on the workers paying for it.

Funny enough,some of the worst hit will be government and council workers still working.They will see retired getting 10% while they get 4%ish.The line between work and not is already in the wrong place.If i was public sector within a few years of retiring id go now because youl get the much bigger increase in pension than wages.Its economics of the madhouse.If someone aged 12 was learning macro and came up with it they would get a slap from their mentor.

Those 10% increases come directly from people not getting 10%.Dishi has already undone all the decent work the Cameron government did on welfare.Not enough,but they made some progress.This government seem unable to argue any case at all and simply live in fear of the left wing press etc.

Luckily the BOE is out of the picture for printing.Their models have been a disaster.The government is fighting the economy trying to fix itself.Its telling them those 50% consuming and not producing need to consume much less and then produce much more.Government is trying to let them consume even more of what someone else produces and for even more to hang up their boots.It really is macro suicide.

DB, when you mention 'macro suicide', are you describing that IF government continues to support the unproductive economy (bennies, more immigration, expanding fuel/food support payments) - that the subsequent risk would be hyperinflation?                                                                                                                                    I realise that hyperinflation is an extreme (as opposed to 'just' very high inflation) and i believe your model doesn't yet predict hyperinflation happening and you put a low, less than 20% chance, of it occuring? Plus I'm assuming that hyperinflation would also bring forward - at least the potential occurrence of - systemic/monetary collapse, from happening say 2030, to maybe as near as mid-decade 2025?        ...Anyway I'm just trying to get a perspective on all this, as I 'feel' (unscientific I know!) that the recent 'political events' of COVID/Ukraine plus then any resultant global fuel/food crunch, has massively changed the economic playing field?

[marceau]

2 minutes ago, feed said:

Don't disagree with that.  But, dare I say it, it's different this time. The end of the dis-inflationary cycle (and the fear of deflation) that's lead fiscal policy for the last 20 years and well, War. 

The West is at war with the rest of world. Call it an economic/currency/resource war, but globalism under the current circumstances is done.  And i don't think there is anyway back. Because, after everything the West has said about globalism, sanctioning Russian reserves demonstrated to the rest of the world that the US will still go to war simply to protect it's political class.

For the UK perhaps it's protectionism more than nationalism, but the rest of the world isn't going to accept globalism on our terms ever again.  
 

Correct, but the UK's fortunes are deeply embedded in this system. Possibly even deeper than the US.

It's not going to be easy to get through to the other side.

[Axeman123]

2 hours ago, Cosmic said:

Yet we are still finding evidence of stone age humans which would far predate their 'few thousand years', and fossils etc much much older? Sounds like BS

Most big cities are riddled from below with tunnels that depend on electricity for pumped drainage, without that most really big buildings would fall over. Most smaller modern structures also wouldn't last long without heating and cleared gutters etc. Archeological evidence would certainly survive, but it would all be under forests or flooded within a hundred years or something IMO. Big tree roots would break up most foundations after a few centuries.

[Bricormortis]

https://www.theguardian.com/business/2022/jun/06/london-metal-exchange-sued-cancelled-trades-elliott-management

London Metal Exchange being sued for $456 million re Nickel shenanigans. Ouch. 

[belfastchild]

44 minutes ago, Chewing Grass said:

I had a Mortgage in 1990 and the interest rate was knocking on 14% which is why you could by a decent semi on 3x an average wage.

 

Just checked and I had a cracking 2 year introductory fixed rate in 1995 of 5.7%. After that went on variable rate of 6.75% until 2001.

[Noallegiance]

[Starsend]

2 hours ago, Yellow_Reduced_Sticker said:

Nah...it's cos of uncle Dave's prediction, WATCH and LEARN!

 

P.S - I've still only been 95% well - however I think I've turned a corner with some SECRET info that most doctors are NOT even aware of, (it's NOT taught in medical school cos there is NO money/patent in this) I kid you not, anyways will be posting this info in the relative forum section soon...

 

I've gotta get 100% well, as i'm the organiser (self appointed ) of the "Durham-meetup/pissUP" along with my sidekick @MrXxxx

 

Spill the beans man, love these old medical secrets, big believer there's a lot of old knowledge out there that really does work.

[DurhamBorn]

1 hour ago, JMD said:

DB, when you mention 'macro suicide', are you describing that IF government continues to support the unproductive economy (bennies, more immigration, expanding fuel/food support payments) - that the subsequent risk would be hyperinflation?                                                                                                                                    I realise that hyperinflation is an extreme (as opposed to 'just' very high inflation) and i believe your model doesn't yet predict hyperinflation happening and you put a low, less than 20% chance, of it occuring? Plus I'm assuming that hyperinflation would also bring forward - at least the potential occurrence of - systemic/monetary collapse, from happening say 2030, to maybe as near as mid-decade 2025?        ...Anyway I'm just trying to get a perspective on all this, as I 'feel' (unscientific I know!) that the recent 'political events' of COVID/Ukraine plus then any resultant global fuel/food crunch, has massively changed the economic playing field?

If the government continues trying to fight what the economy is telling it then yes hyper-inflation is certain IF the BOE monetises the debt.However i dont think they will,or can.So im mapping now that that doesnt happen.I expect instead shortages ,strikes,unrest,high inflation and more theft of wealth.Their models are based on truths that dont work in this type of cycle.For instance,they think that if you bring in 100k immigrants,GDP,growth etc goes up as they consume.However when the cycle is all about lack of production and lack of inputs then those 100k immigrants simple share in consuming a smaller and smaller pie.

The government is a disaster and they have undone the hard work Osborne did.I know not perfect,but he made some good moves.

Ask a five year old what happens if you give the 4 families in the street not working,on bennies and state/council/police pensions 10% and the workers 4%.

[Pip321]

12 minutes ago, DurhamBorn said:

If the government continues trying to fight what the economy is telling it then yes hyper-inflation is certain IF the BOE monetises the debt.However i dont think they will,or can.So im mapping now that that doesnt happen.I expect instead shortages ,strikes,unrest,high inflation and more theft of wealth.Their models are based on truths that dont work in this type of cycle.For instance,they think that if you bring in 100k immigrants,GDP,growth etc goes up as they consume.However when the cycle is all about lack of production and lack of inputs then those 100k immigrants simple share in consuming a smaller and smaller pie.

The government is a disaster and they have undone the hard work Osborne did.I know not perfect,but he made some good moves.

Ask a five year old what happens if you give the 4 families in the street not working,on bennies and state/council/police pensions 10% and the workers 4%.

Kicking the can I know but another way to keep workers happy is to give them truly flexible working. This can only apply to the soft jobs but non the less…..some will be on a nice little package and relatively ‘easy’ employment.

Once this starts then I imagine real workers (skilled or unskilled) will command and demand real pay….

[belfastchild]

15 hours ago, lid said:

 If I were you fellas I'd be looking on liquidating at least a small proportion of my life's work into something worthwhile..kruggerands, rolexes etc. There's no way I would be expecting things to just carry on as normal. Don't wanna be a shoeshine boy/canary in the coalmine type but I think it needs mulling at least.

Luckily for me i've only got £14.79 in the bank but the point stands

Reading the 'when money dies' was a wakeup call for me in this department. People swapping grand pianos for bags of spuds.
Middle classes getting hit first and not being able to recover (private doctors, dentists, accountants etc, nobody needs them)
People holding shares, companies still contain that 'value' but after hyperinflation no use. Set your dividend and by the end of the week its not worth collecting.

Ordering a coffee at one price, paying for it at a higher price.

Foreigners coming in and taking _all_ your assets and then you go out and spend the money as quickly as possible.

Guy going into a shop and buying all the baby clothes as they were the only thing left and he had to spend his pay that day or it would be worthless the next, whereas the baby clothes wouldnt be.

Certainly a lot of it is beginning to rhyme...

[Lightly Toasted]

6 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. 

That's a question that we might eventually need to answer in the UK, so it's worth exploring the German answer.

The most important thing they did was to stop printing, which was done by introducing a new currency (the short-lived Rentenmark) that could not be printed willy-nilly. The mechanism for this was to back the Rentenmark with something of perceived value (land/property).

Another ingredient was that the population had had enough and were willing to give the new currency a go -- they'd probably have embraced cowrie shells, if informed that they could not be printed by the government 

 

https://en.wikipedia.org/wiki/Rentenmark

The newly created Rentenmark replaced the old Papiermark. Because of the economic crisis in Germany after the First World War, there was no gold available to back the currency. Luther thus used Helfferich's idea of a currency backed by real goods. The new currency was backed by the land used for agriculture and business. This was mortgaged (Rente is a technical term for mortgage in German) to the tune of 3.2 billion Goldmarks, based on the 1913 wealth charge called Wehrbeitrag which had helped fund the German war effort from 1914–1918. Notes worth RM 3.2 billion were issued. The Rentenmark was introduced at a rate of one Rentenmark to equal one trillion (10¹²) old marks, with an exchange rate of one United States dollar to equal 4.2 Rentenmarks.^[3]

The Act creating the Rentenmark backed the currency by means of twice yearly payments on property, due in April and October, payable for five years. Although the Rentenmark was not initially legal tender, it was accepted by the population and its value was relatively stable. The Act prohibited the recently privatised Reichsbank from continuing to discount bills and the inflation of the Papiermark immediately stopped. The monetary policy spearheaded by Schacht at the Reichsbank and the fiscal policy of Finance Minister Hans Luther brought the period of hyperinflation in Germany to an end. The Reichsmark became the new legal tender on 30 August 1924, equal in value to the Rentenmark. This marked a return to a gold-backed currency in connection with the implementation of the Dawes Plan.^[3] The Rentenbank continued to exist after 1924 and the notes and coins continued to circulate. The last Rentenmark notes were valid until 1948.

[marceau]

7 minutes ago, belfastchild said:

Reading the 'when money dies' was a wakeup call for me in this department. People swapping grand pianos for bags of spuds.
Middle classes getting hit first and not being able to recover (private doctors, dentists, accountants etc, nobody needs them)
People holding shares, companies still contain that 'value' but after hyperinflation no use. Set your dividend and by the end of the week its not worth collecting.

Ordering a coffee at one price, paying for it at a higher price.

Foreigners coming in and taking _all_ your assets and then you go out and spend the money as quickly as possible.

Guy going into a shop and buying all the baby clothes as they were the only thing left and he had to spend his pay that day or it would be worthless the next, whereas the baby clothes wouldnt be.

Certainly a lot of it is beginning to rhyme...

The hidden lesson of that era is that while those at the bottom-to-middle got screwed financially from the start, by the end all the profiteers wound up in exile, in prison or, more commonly, in the ground. 

[Loki]

1 minute ago, marceau said:

The hidden lesson of that era is that while those at the bottom-to-middle got screwed financially from the start, by the end all the profiteers wound up in exile, in prison or, more commonly, in the ground. 

Do you have any more on this?

[janch]

The financial press over the weekend (OK Mail on Sunday) but other things I've read elsewhere too are all about losing money in the favourite funds etc eg Fundsmith and Scottish Mortgage etc and other funds/ITs not being worth the fees for fund managers ie tales of woe and also the number of investors in HL and other platforms going down but to hang on for markets to recover.  (But my  thought is they probably won't as they have a lot of Amazon/FB etc)

Meanwhile my reflation shares are doing quite nicely and although haven't done anything spectacular recently I certainly haven't lost and they're up overall.  So a massive thanks to @DurhamBorn for pointing me in the right direction.  Every so often I take out some profit and mostly buy a new share or sometimes add to something which looks to be taking off.  Of course I also have some duffers eg a few PM miners.  Will they ever do anything? (Sigh)

I'm wondering about India now as I read somewhere its economy is growing fast and of course its now able to buy cheap Russian oil.  Does anyone have any thoughts on JPMorgan Indian Investment Trust (JII) or Templeton Emerging Markets Inv Trust (TEM)?

[Axeman123]

6 minutes ago, Lightly Toasted said:

...The most important thing they did was to stop printing...

On a related note, I remember hearing about a heavily inflated African currency where the intorduction of a new currency caused the old defunct one to appreciate (as there would no longer be further printing!)

[HousePriceMania]

1 minute ago, janch said:

The financial press over the weekend (OK Mail on Sunday)

[marceau]

Just now, Loki said:

Do you have any more on this?

http://thirdparadigm.org/doc/45060880-When-Money-Dies.pdf

It's all in there. Then the various paramilitaries come along to finish the job. They REALLY finish the job.

[JMD]

49 minutes ago, Pip321 said:

Kicking the can I know but another way to keep workers happy is to give them truly flexible working. This can only apply to the soft jobs but non the less…..some will be on a nice little package and relatively ‘easy’ employment.

Once this starts then I imagine real workers (skilled or unskilled) will command and demand real pay….

I predict a big rollout (after the suspiciously short 6 month trial!?) of 4-day office jobs, and 3-day factory/12 hour shift jobs across all sectors. Employers will love the idea because they can then suppress wage increases for next couple of years.  But also other related positives for workers as will enable them to organise their personal home lives better, less child care expenses , etc.                       ...However, changes would damage NHS as it's already overwhelmed, so government will either need to setup massive training programs OR it will create long term contracts with private health providers - I predict a little bit of the former and large lashings of the latter!!                                                                                                                                        (Before last election Corbyn saw these changes coming, however he couldn't get it included into the labour manifesto - but how on earth I wonder could he possibly have foreseen this?!)

[Axeman123]

11 minutes ago, marceau said:

...by the end all the profiteers wound up in exile, in prison or, more commonly, in the ground. 

Exile doesn't sound too bad when you look at those alternatives!

[Chewing Grass]

Remember the 1930s dustbowl in the US, this could be the 2030 one.

 

[Loki]

3 minutes ago, Chewing Grass said:

Remember the 1930s dustbowl in the US, this could be the 2030 one.

 

I read that there were some dams that were deliberately just being released straight out to sea.  California I think