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

[Axeman123]

14 minutes ago, geordie_lurch said:

As a stagflationary storm looms over the UK economy, the Federation of Small Businesses (FSB) chairman warned of a tsunami of small business closings without new support packages from the government. 

Those businesses need to close, sadly. If BJ is serious about lowering taxes and conservative principles, refusing a bailout for these unfortunate businesses would be a good starting point.

[Pip321]

9 minutes ago, geordie_lurch said:

A good article on Zerohedge here specifically talking about "Ticking Timebomb": 500,000 UK Small Businesses Could Imminently Go Bust via a Radio 4 interview with the Federation of Small Businesses (FSB) chairman which I don't remember anyone else mentioning yet. Emphasis added by me...

----

As a stagflationary storm looms over the UK economy, the Federation of Small Businesses (FSB) chairman warned of a tsunami of small business closings without new support packages from the government. 

FSB chairman Martin McTague, recently told BBC Radio 4's Today, "there is still a massive problem with small businesses. They are facing something like twice the rate of inflation for their production prices, and it's a ticking timebomb. They have got literally weeks left before they run out of cash and that will mean hundreds of thousands of businesses, and lots of people losing their jobs."

McTague referred to the Office for National Statistics (ONS) data, showing that 2 million (or about 40%) of the UK's small businesses had less than three months of cash in reserves to support operations. He noted that 10% (or 200,000) were in grave danger, and 300,000 only had a few weeks of cash left. 

"It is a very real possibility because … they don't have the cash reserves. They don't have any way they can tackle this problem," McTague said. 

FSB chairman's warning comes as April UK inflation hit 9%, the highest level since 1982. Inflation has been widely sparked not just by loose monetary policy conditions during the virus pandemic but now soaring energy costs as Europe tries to ween itself off Russian fossil fuels and monetary tightening by the central bank. 

McTague gave one example of a hotel owner in Scarborough, a resort town on England's North Sea coast, which had profits wiped out because soaring power bills were five times higher than normal levels. 

"They weren't able to trade any longer without essentially trading at a loss and therefore damaging the future of their business and everybody that worked for them," he said. 

Soaring inflation and faltering growth is a perfect recipe for a stagflationary macro backdrop that is already crushing small businesses and households. ONS data showed the economy contracted by .1% in March, and the economy appears to be sliding into what could be the beginning of a recession. 

----

Interesting.

So just the following will ask for assistance as inflation hits:

Small business owners (above), Large business owners, working families, Pensioners, single mums, landlords, tenants, farmers, disabled, private sector, public sector, local councils, car manufacturers, food suppliers, clothes production companies, NHS, dentists, building trade, banks, non working singles, mental health consultants, chemical suppliers, medical suppliers, commodity producers, gyms, taxi firms, bus companies, holiday and flight companies, pubs, hotels……yadda, yadda, yadda.

Everyone ready with the begging bowls. Printy printy will save us all. 

It’s a longer queue than at the breast inspection job vacancy role advertised in a Mens Health magazine.😉

[DurhamBorn]

36 minutes ago, geordie_lurch said:

A good article on Zerohedge here specifically talking about "Ticking Timebomb": 500,000 UK Small Businesses Could Imminently Go Bust via a Radio 4 interview with the Federation of Small Businesses (FSB) chairman which I don't remember anyone else mentioning yet. Emphasis added by me...

----

As a stagflationary storm looms over the UK economy, the Federation of Small Businesses (FSB) chairman warned of a tsunami of small business closings without new support packages from the government. 

FSB chairman Martin McTague, recently told BBC Radio 4's Today, "there is still a massive problem with small businesses. They are facing something like twice the rate of inflation for their production prices, and it's a ticking timebomb. They have got literally weeks left before they run out of cash and that will mean hundreds of thousands of businesses, and lots of people losing their jobs."

McTague referred to the Office for National Statistics (ONS) data, showing that 2 million (or about 40%) of the UK's small businesses had less than three months of cash in reserves to support operations. He noted that 10% (or 200,000) were in grave danger, and 300,000 only had a few weeks of cash left. 

"It is a very real possibility because … they don't have the cash reserves. They don't have any way they can tackle this problem," McTague said. 

FSB chairman's warning comes as April UK inflation hit 9%, the highest level since 1982. Inflation has been widely sparked not just by loose monetary policy conditions during the virus pandemic but now soaring energy costs as Europe tries to ween itself off Russian fossil fuels and monetary tightening by the central bank. 

McTague gave one example of a hotel owner in Scarborough, a resort town on England's North Sea coast, which had profits wiped out because soaring power bills were five times higher than normal levels. 

"They weren't able to trade any longer without essentially trading at a loss and therefore damaging the future of their business and everybody that worked for them," he said. 

Soaring inflation and faltering growth is a perfect recipe for a stagflationary macro backdrop that is already crushing small businesses and households. ONS data showed the economy contracted by .1% in March, and the economy appears to be sliding into what could be the beginning of a recession. 

----

Bennies again as well.Every cafe etc over there on the coast has job adverts in the windows and all the shops.However they simply cant compete with the bennies.Cafes cant pay £500 a week for staff.The polos think high bennies keeps demand up,and to be fair they are right,but we are well past the point where they become very destructive.Who is going to buy all the probates in Scabby? .Wonder if that bonkers Cat Cafe is still going.

[DurhamBorn]

34 minutes ago, Bricormortis said:

Could someone recap for me on what was being said about the amount of economically inactive / benefits claimants up thread please ?

Was it 20% of the working age population is not working...or 20% of the population of working age is in reciept of a benefit. ?

I think 87% of my home town rely on bennies and government wages.Its over 50% on a benefit in this county.20% of working age arent working,but in many areas its 50%+,a few will be wives/husbands,but its mostly bennie claims.

[Yadda yadda yadda]

1 hour ago, snaga said:

because Germany needs a weak Euro else their exports collapse? just speculation.

EU policy always seems to lag a year or so behind the US, whether it's QE stimulus or rate changes.

Rock and a hard place. Increase interest rates and the Italian budget deficit spirals. Leave as is and inflation takes off like a meme stock. Eventually they either have transfer payments from Germany to Italy and others or Germany leaves the Euro. They probably do a bit of the former before opting for the latter.

For now they will try to fudge. By delaying interest rate rises and then proceeding slowly they can capture some more of the inflation for tax receipts. Means inflation gets worse than it would have been.

To me it looks like there is no way out. The imbalances are too great and have been ignored. Italy will devalue it's currency eventually. France might try and go along with Germany and Benelux in a new North Euro forgetting that half of their country and most of its spirit is southern European.

[Democorruptcy]

10 hours ago, working woman said:

We will know a journalist has been reading this entertaining thread  if we see a best selling book in the style of a steamy Jilly Cooper novel, with a title along the lines of  "Stockmarkets and  Tumbles" or "Macros and Massages". 

Come on journalist, fess up, you are only here for the hilarious tales of romantic adventures............

The journalists and other lurkers are here for info about where to get the latest yellow reduced sticker items. Everybody is trying to reduce their personal inflation these days.

[Virgil Caine]

1 hour ago, Bricormortis said:

Could someone recap for me on what was being said about the amount of economically inactive / benefits claimants up thread please ?

Was it 20% of the working age population is not working...or 20% of the population of working age is in reciept of a benefit. ?

According to that notorious adherent to hardline Austrian economics the BBC about 21% of the working age population whether in and out of work are in receipt of benefits or tax credits of some kind. Sadly I am not one of them.

About 10% of the U.K. population are in receipt of some kind of out of work benefit (the figure is much higher in some localities)

The top working age benefits are

a) Tax credits

b) Housing Benefit

c) Sickness and disability benefits.

Hardly anything gets paid out in Contributory JSA.

My guess is that the cost of working age benefits were actually a much bigger amount than the cost of  old age pensions during the pandemic though I have yet to see a breakdown of the figures.
 

Most people don’t realise it but the actual number of new state pension claims has been declining recently due to a number of reasons (birth rates in the 1950s, the rise in the pension age, COVID etc) so that there were actually 200,000 fewer new state pensioners in 2020 than in 2019.

https://www.gov.uk/government/statistics/dwp-benefits-statistics-february-2021/dwp-benefits-statistics-february-2021#pensions

 

[Pip321]

4 hours ago, WICAO said:

The Reserve Bank of Australia have just raised interest rates 0.5% to 0.85% while staring at official inflation figures of 5.1% and expecting that to go higher.  Behind the curve anyone...

I'm doing my best, as always, to reducing my personal inflation to deflation levels.  Year to date my personal inflation is at -2.9% so doing ok so far.  Food is the big one for me though at +20.4% so plenty of work to address that coming up.

Reducing personal inflation…..love it. 

Following my £100 to £265 increase in energy we are cutting lazy spending. 

Last Tuesday we went to watch Top Gun, in the afternoon so almost empty. However went to the Odeon because with Meerkat it’s 2 for 1. Ie £12 for both of us plus we took our own popcorn £2.

A few weeks ago it would have been the Everyman at £24 plus Hot Dog and Sweet Potato Fries £11.

So £14 down from £35, but seats not nearly as good. So some real hardship up here for me in Yorkshire….I might ask for some sort of government grant to ensure I can get comfier seats and protect my mental health or summit.

[Virgil Caine]

56 minutes ago, DurhamBorn said:

Bennies again as well.Every cafe etc over there on the coast has job adverts in the windows and all the shops.However they simply cant compete with the bennies.Cafes cant pay £500 a week for staff.The polos think high bennies keeps demand up,and to be fair they are right,but we are well past the point where they become very destructive.Who is going to buy all the probates in Scabby? .Wonder if that bonkers Cat Cafe is still going.

It is sort of symbiotic situation. There are lots of businesses created during the period of low interest rates, plentiful benefits and cheap imports that have been set up to soak up all that extra cash in the economy.  It has created a lot of malinvestment in enterprises that are not viable under more normal economic cycles. The truth is most of these businesses should simply go bust. If you see a shopping street dominated by just one or two types of outlets be it cafes, takeaways, nail bars or charity shops you know that something is seriously fucked. One could have said the same about the large numbers banking an other financial outlets in the late 1990s. To be honest if the government wants to prop up local retail it would be better if they subsidised a butchers, bakers, greengrocers and hardware store on every high street.

[DurhamBorn]

51 minutes ago, Virgil Caine said:

According to that notorious adherent to hardline Austrian economics the BBC about 21% of the working age population whether in and out of work are in receipt of benefits or tax credits of some kind. Sadly I am not one of them.

About 10% of the U.K. population are in receipt of some kind of out of work benefit (the figure is much higher in some localities)

The top working age benefits are

a) Tax credits

b) Housing Benefit

c) Sickness and disability benefits.

Hardly anything gets paid out in Contributory JSA.

My guess is that the cost of working age benefits were actually a much bigger amount than the cost of  old age pensions during the pandemic though I have yet to see a breakdown of the figures.
 

Most people don’t realise it but the actual number of new state pension claims has been declining recently due to a number of reasons (birth rates in the 1950s, the rise in the pension age, COVID etc) so that there were actually 200,000 fewer new state pensioners in 2020 than in 2019.

https://www.gov.uk/government/statistics/dwp-benefits-statistics-february-2021/dwp-benefits-statistics-february-2021#pensions

 

Yes,but that 21% doesnt include partners on the claim,children,etc etc,so its much higher.

[Transistor Man]

2 hours ago, DurhamBorn said:

Another private equity bid this time for Biffa. @Harley predicted years ago on here that "they" would take all cash producing assets private so the little man would be left with nothing to invest in,but government bonds and hopeless themes.

 

 

Reuters: Repsol in Talks to Sell 25% of Oil and Gas Unit to EIG

 

 

[HousePriceMania]

42 minutes ago, Virgil Caine said:

It is sort of symbiotic situation. There are lots of businesses created during the period of low interest rates, plentiful benefits and cheap imports that have been set up to soak up all that extra cash in the economy.  It has created a lot of malinvestment in enterprises that are not viable under more normal economic cycles. The truth is most of these businesses should simply go bust. If you see a shopping street dominated by just one or two types of outlets be it cafes, takeaways, nail bars or charity shops you know that something is seriously fucked. One could have said the same about the large numbers banking an other financial outlets in the late 1990s. To be honest if the government wants to prop up local retail it would be better if they subsidised a butchers, bakers, greengrocers and hardware store on every high street.

If I were being cynical then I'd say the UK economy is basically non-existent.  There is no wealth generation it's all people working for worthless bits of paper which benefit the people at the top.

There is a word for this....SLAVERY

1 hour ago, Pip321 said:

Reducing personal inflation…..love it. 

Following my £100 to £265 increase in energy we are cutting lazy spending. 

Last Tuesday we went to watch Top Gun, in the afternoon so almost empty. However went to the Odeon because with Meerkat it’s 2 for 1. Ie £12 for both of us plus we took our own popcorn £2.

A few weeks ago it would have been the Everyman at £24 plus Hot Dog and Sweet Potato Fries £11.

So £14 down from £35, but seats not nearly as good. So some real hardship up here for me in Yorkshire….I might ask for some sort of government grant to ensure I can get comfier seats and protect my mental health or summit.

The number of well dressed people in their Mercedes 4x4 shopping at Lidl is pretty noticeable now.

 

[JMD]

10 hours ago, DurhamBorn said:

Leads,Lags,Slags and Fags.

 

Hmm, i have an early on-thread recollection of (rubbish-tip porno) MAGS!!! ...plus it fits with the Jilly Cooper theme, or am I now just lowering the tone?!

[Chewing Grass]

Just been on Mr Bank Statement and it was like being machine-gunned with accumulated transactions from the BH weekend, some people are going to be very unwittingly skint this week.

[Virgil Caine]

22 minutes ago, DurhamBorn said:

Yes,but that 21% doesnt include partners on the claim,children,etc etc,so its much higher.

Yes it is just the original claimant count not the underlying number of dependents.

[Lightly Toasted]

2 hours ago, geordie_lurch said:

A good article on Zerohedge here specifically talking about "Ticking Timebomb": 500,000 UK Small Businesses Could Imminently Go Bust via a Radio 4 interview with the Federation of Small Businesses (FSB) chairman which I don't remember anyone else mentioning yet. Emphasis added by me...

----

As a stagflationary storm looms over the UK economy, the Federation of Small Businesses (FSB) chairman warned of a tsunami of small business closings without new support packages from the government. 

FSB chairman Martin McTague, recently told BBC Radio 4's Today, "there is still a massive problem with small businesses. They are facing something like twice the rate of inflation for their production prices, and it's a ticking timebomb. They have got literally weeks left before they run out of cash and that will mean hundreds of thousands of businesses, and lots of people losing their jobs."

McTague referred to the Office for National Statistics (ONS) data, showing that 2 million (or about 40%) of the UK's small businesses had less than three months of cash in reserves to support operations. He noted that 10% (or 200,000) were in grave danger, and 300,000 only had a few weeks of cash left. 

"It is a very real possibility because … they don't have the cash reserves. They don't have any way they can tackle this problem," McTague said. 

FSB chairman's warning comes as April UK inflation hit 9%, the highest level since 1982. Inflation has been widely sparked not just by loose monetary policy conditions during the virus pandemic but now soaring energy costs as Europe tries to ween itself off Russian fossil fuels and monetary tightening by the central bank. 

McTague gave one example of a hotel owner in Scarborough, a resort town on England's North Sea coast, which had profits wiped out because soaring power bills were five times higher than normal levels. 

"They weren't able to trade any longer without essentially trading at a loss and therefore damaging the future of their business and everybody that worked for them," he said. 

Soaring inflation and faltering growth is a perfect recipe for a stagflationary macro backdrop that is already crushing small businesses and households. ONS data showed the economy contracted by .1% in March, and the economy appears to be sliding into what could be the beginning of a recession. 

----

"new support from the government" 

[Virgil Caine]

4 hours ago, JohnnyB said:

Any thoughts as to why the EU still holding out with no IR increases whilst the Anglosphere seems to be panicking somewhat?

Bond market blowout and currency crisis with the Euro area were highlighted as places where the system was likely to give according to this quite long but interesting video posted  on Mish Shedlock’s site which covers quite a lot of what is has been discussed here

https://mishtalk.com/economics/end-of-the-40-year-bull-in-debt-and-a-global-depression-threat

 

[Conniption]

New follow on Gab: so many great stories from this bloke. This one reminded me of hard times coming our way.

When I was living in Prague in the 1990s, I met an American who lived and studied in Moscow. He recounted a story of coming across an older Muscovite who, in his little kiosk, was selling dead light bulbs. Mystified, he asked, "Why would anyone buy a dead light bulb?" The man gave him the look of someone who is speaking to a complete moron and contemptuously replied, "You buy the light bulb, take it to the office, replace a working light bulb with a dead one. Now you have a working light bulb."

In communist Czechoslovakia there was a saying "Those who don't steal from the state, steal from their families."

Read more:

https://gab.com/ShemNehm/posts/105680245258604071

[Lightly Toasted]

2 hours ago, Bricormortis said:

Could someone recap for me on what was being said about the amount of economically inactive / benefits claimants up thread please ?

Was it 20% of the working age population is not working...or 20% of the population of working age is in reciept of a benefit. ?

Approx 20% are disabled (similar level both for working age and overall, which is telling), maybe that was what you have in mind?

This is over a year old now but still presumably not far off:

https://www.gov.uk/government/statistics/dwp-benefits-statistics-february-2021/dwp-benefits-statistics-february-2021

... People can claim more than one DWP benefit at a time. Experimental benefit combination statistics show:

• the total number of people claiming DWP benefits was 22.8 million in the year to August 2020
• 12.5 million were Pension Age, 9.5 million were Working Age, and the remainder children claiming Disability Living Allowance
• 30% of State Pension Age claimants and 32% of Working Age claimants were claiming more than one benefit

 

OECD says 63.5% of the population is working age.

https://data.oecd.org/pop/working-age-population.htm

edit: and bear in mind that tax credits are not a DWP benefit, the figures are going to be much higher than suggested above -- and also much harder to disentangle than would be the case if benefits were all under one ministerial roof.

[DurhamBorn]

40 minutes ago, Transistor Man said:

 

Reuters: Repsol in Talks to Sell 25% of Oil and Gas Unit to EIG

 

 

Il be selling the rest of mine very soon.Been a fantastic call,hit the bottom on them and had a very big holding,but i want those profits in divis not windmills etc and its time to move on from them.Shares are still cheap in the context of the cycle,but it looks like the gains are on capital more than divis.I can understand their logic though,but im off with my loot.

[JMD]

1 hour ago, Transistor Man said:

 

Reuters: Repsol in Talks to Sell 25% of Oil and Gas Unit to EIG

 

 

That's looks to be a big departure for EIG. EIG currently has 25bn dollars under management, and quick look shows them to be invested only in the smaller energy companies, ie not the large integrated oillies.                                                                                                              Really hope EIG are 'only' investing in Repsol, and that Repsol are not actually transferring those assets to EIG? Although 'sell' does imply a transfer...   Why would Repsol do that (to me and this thread!)???         ...Declaration: EIG have already robbed me this year of my Gaslog (LNG shipping company) shares!!

[Axeman123]

23 minutes ago, Lightly Toasted said:

"new support from the government"

On that subject:

We have 6 1/2 weeks of parliamentary time before summer recess, and then another 3 weeks before conference. 9 1/2 weeks total between now and mid October, and I could imagine very little legislation actually passing in that time.

I am not even sure the windfall tax etc will actually happen, let alone any mad-cap new wheezes.

[DoINeedOne]

 

seems same lady was in the Telegraph too

Last orders for Britain's pubs as energy crisis strikes

Miranda Richardson, landlady of the Live and Let Live, has been told the £1,400 she pays each month for gas and electricity will rise by 50pc thanks to the escalating energy crisis.

 

“Just to open the doors each week it costs £2,700 and that doesn’t include food and drink,” she said. “That’s just the lease, staff wages and energy bills, which are huge outgoings.

 

“I can’t make cutbacks like I can at home. You can’t tell customers to put on an extra jumper or turn lights off. The cellar equipment needs to be powered 24/7 to keep the beer cool and stock frozen, they can’t just be turned off.”

https://archive.ph/TR808

I said a few weeks back about someone i know who runs a pub told there son they don't know if they will still be in the pub next year

 

So more pubs and restaurants will go under less nice places to go

 

Was chatting with my partner about the younger ones in our family and how they don't even go out drinking when i was there age i was out Thursday, Friday, Saturday and Sunday if i could handle it but there was so many pubs to go too, but now...

[Lightscribe]

2 hours ago, Virgil Caine said:

According to that notorious adherent to hardline Austrian economics the BBC about 21% of the working age population whether in and out of work are in receipt of benefits or tax credits of some kind. Sadly I am not one of them.

About 10% of the U.K. population are in receipt of some kind of out of work benefit (the figure is much higher in some localities)

The top working age benefits are

a) Tax credits

b) Housing Benefit

c) Sickness and disability benefits.

Hardly anything gets paid out in Contributory JSA.

My guess is that the cost of working age benefits were actually a much bigger amount than the cost of  old age pensions during the pandemic though I have yet to see a breakdown of the figures.
 

Most people don’t realise it but the actual number of new state pension claims has been declining recently due to a number of reasons (birth rates in the 1950s, the rise in the pension age, COVID etc) so that there were actually 200,000 fewer new state pensioners in 2020 than in 2019.

https://www.gov.uk/government/statistics/dwp-benefits-statistics-february-2021/dwp-benefits-statistics-february-2021#pensions

 

https://www.gov.uk/government/statistics/income-tax-liabilities-statistics-tax-year-2018-to-2019-to-tax-year-2021-to-2022/summary-statistics#income-tax-payer-numbers-by-type

It’s better to look at the net drain on the UK as a whole than rely on BBC statistics.

We have a 67 million population (obviously much more than that, the census results will be interesting this year) which includes 11.7 million children. 

There is a ‘projected’ 27 million basic tax payers in the UK with 4.13 million higher tax payers and 440k additional rate.

That means roughly 24.3 million of adults (over 44%) of the population pay no income tax at all.

It was thought to be 43% in 2014/15 

https://www.thesun.co.uk/money/9667319/half-adults-dont-pay-income-tax/amp/

https://www.dailymail.co.uk/news/article-7326881/amp/How-nearly-HALF-British-adults-pay-NO-income-tax-data-reveals-23-million-adults-exempt-PAYE.html

 

 

 

[Barnsey]

In a similar vain to what I mentioned about B&M, but on a much bigger scale...

https://www.cnbc.com/2022/06/07/target-markdowns-plan-to-cut-inventory.html

“We thought it was prudent for us to be decisive, act quickly, get out in front of this, address and optimize our inventory in the second quarter — take those actions necessary to remove the excess inventory and set ourselves up to continue to be guest relevant with our assortment,” CEO Brian Cornell said in an interview with CNBC.

By taking swift action, Cornell said Target can fend off further pain and make room for merchandise that customers do want, such as groceries, beauty items, household essentials and seasonal categories like back-to-school supplies. He said the company’s stores and website are seeing strong traffic and “a very resilient customer,” but one who no longer shops popular Covid pandemic categories.

“We want to make sure that we continue to lean into those categories that are relevant today,” he said.

End of an era for cheap Chinese tat.