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

[wherebee]

10 minutes ago, Hancock said:

Maybe if we get actual deflation people will spend their savings.

Why would you spend in delfation?  Your savings buy more every month.

We have brought forward purchases as we believe that prices are rising fast (and we were right - picked up a woodburner on sale for almost half what they are 9 months later).

[Hancock]

20 minutes ago, wherebee said:

Why would you spend in delfation?  Your savings buy more every month.

We have brought forward purchases as we believe that prices are rising fast (and we were right - picked up a woodburner on sale for almost half what they are 9 months later).

Yes, ive not been buying a house due to inflation.

Phones, computers, TV's, sofas, household appliances have all been deflating in price for years now and people buy them like no tomorrow.

When they inflate thats when people buy less.

[wherebee]

2 hours ago, Hancock said:

Yes, ive not been buying a house due to inflation.

Phones, computers, TV's, sofas, household appliances have all been deflating in price for years now and people buy them like no tomorrow.

When they inflate thats when people buy less.

hmm.  I see what you mean.

maybe I am odd then.  I only buy shit when it wears out, because I know that by then I'll be getting a better product for less cost in an inflationary world.

Now that has reversed (I think), I am buying stuff before it needs replacing in case I can't afford the price hikes?

[BurntBread]

6 hours ago, Hancock said:

Yes, ive not been buying a house due to inflation.

Phones, computers, TV's, sofas, household appliances have all been deflating in price for years now and people buy them like no tomorrow.

When they inflate thats when people buy less.

My guess is that the transition (still to come) is from "not thinking about the future" to "having to think about the future".

During a disinflation, people have (borrowed) money in their pockets; they look at "stuff", and they buy it because it's affordable. As the disinflation continues (and as technology improves so there is real deflation in electronic goods), those things get more and more true, but still nobody is thinking about the future, just what they can buy now, and the fact it looks really cheap.

When the trend reverses, and inflation starts to pick up, people still have the "live for today" mentality, but find they can no longer afford things so easily. If there is any planning, it's along the lines of "things will get back to normal soon, so we'll hold off for a while on the big purchases."

The real change of sentiment is when people figure out it's not going back to normal, and they start to think about what they will be able to afford in a year's time, and compare it to what they can (just about) afford now. When they realise the cash in their pockets is on fire, that's when the purchases get brought forward.

I suppose a "leads and lags" thing, as DB keeps telling us.

[Noallegiance]

9 hours ago, Barnsey said:

Pretty sure this is exactly what Sunak is focused on...

 

Excess savings. Because you shouldn't have a bank balance, plebs.

[MrXxxx]

10 hours ago, reformed nice guy said:

Was reading an article on diesel shortages in China.

The country imports >70% of its oil.

Price at the pumps is an all time high of 7.22 yuan, which is 82p per litre

Lucky bastards!

Unlike the UK thought you would be living in a state where they suppress your civil liberties...oh, wait a moment?!

[jamtomorrow]

2 hours ago, BurntBread said:

During a disinflation, people have (borrowed) money in their pockets; they look at "stuff", and they buy it because it's affordable. As the disinflation continues (and as technology improves so there is real deflation in electronic goods), those things get more and more true, but still nobody is thinking about the future, just what they can buy now, and the fact it looks really cheap.

When the trend reverses, and inflation starts to pick up, people still have the "live for today" mentality, but find they can no longer afford things so easily. If there is any planning, it's along the lines of "things will get back to normal soon, so we'll hold off for a while on the big purchases."

Cracking summary, really chimes with where I think we are. The disinflation has, unfortunately, infantilised the majority of the population because the time value of money all but disappeared.

The sense of entitlement to all sorts of things, like owning a motor vehicle, is just one facet of that infantilisation. Living in ignorance or even denial about the future is another facet.

I don't see "bringing purchases forward" happening on any kind of scale until the infantile bubble has popped and we properly get into an inflationary grind where everyone has to learn to play a few moves ahead with their finances.

[Majorpain]

10 hours ago, wherebee said:

great wording, classic in fact.  Even I have felt the pull of the FAAANGS every now and then as people crow about their paper profits.

I'll sit here with my oilies and miners, and the scottish share of course (400 quid up now, woooo), and my licklt pile of cash to buy the BK.

Was just having a conversation with someone who recommended Tesla back in 2018, i said it wasn't for me and its gone up 10x since which he has been winding me up about!  

However, by owning a chunk of oil/miners myself i know that it doesn't matter who the biggest car manufacturer in the world is, they will be using some of my fuel to power it and my minerals to build it.  It can't be too far off the time when financial reality reimposes itself and quaint things like "supply and demand" and "resource depletion" take precedence over "speculative hype", "FOMO" and "futures manipulation".

[Errol]

1 hour ago, Noallegiance said:

Excess savings. Because you shouldn't have a bank balance, plebs.

Yes. Wtf are 'excess savings'? Who determines how much is enough?

And even if you did have 'excess', why would you want to spend it on tat?

[Talking Monkey]

18 hours ago, Axeman123 said:

100%.

I am roughly 50:50 Cash : GJGB (ie GDXJ in sterling on the LSE). Like I said these are trying times, and I have my eye on the door.

That's ballsy positioning 

[Errol]

10 hours ago, Hancock said:

Phones, computers, TV's, sofas, household appliances have all been deflating in price for years now and people buy them like no tomorrow.

This really isn't true - or at least, it's only true if you buy rubbish equipment.

A top, very top of the line custom built gaming PC was about £2500 10 years ago. Now if you go to buy a similar top of the line custom built machine it is £3500. Gaming monitors are the same - what cost £300 ten years ago might cost £500-600 now.

I'm sure there are other examples - like televisions. The absolute top of the line TV from 10 years ago has an equivalent that often costs more today.

The deflation only applies to tat and cheap nonsense.

[DurhamBorn]

8 hours ago, wherebee said:

hmm.  I see what you mean.

maybe I am odd then.  I only buy shit when it wears out, because I know that by then I'll be getting a better product for less cost in an inflationary world.

Now that has reversed (I think), I am buying stuff before it needs replacing in case I can't afford the price hikes?

Iv been stocking up on some nice clothes 2nd hand.One seller on ebay sold a load of Boss/Reiss etc for tenners,by photos of hand it was a woman,so husband naffed off or died,or some reason.Got £3ks worth new for £180 .

Asda corned beef is still £1.45  iv got 4 years pie making supply.

It sounds silly,but getting in front of this distribution cycle will be crucial.Its not just investments,but keeping ahead of the government thieves and as much of the inflation.

It was just number seeing it on the roadmap as where we were heading,but the way the government is handling it so far is very worrying.They are trying to stop the pain for working bennies and public sector by doubling the pain on the hardworking middle.

I think the savings glut is people trying to bring forward retirement.

[stoobs]

9 minutes ago, Errol said:

This really isn't true - or at least, it's only true if you buy rubbish equipment.

A top, very top of the line custom built gaming PC was about £2500 10 years ago. Now if you go to buy a similar top of the line custom built machine it is £3500. Gaming monitors are the same - what cost £300 ten years ago might cost £500-600 now.

I'm sure there are other examples - like televisions. The absolute top of the line TV from 10 years ago has an equivalent that often costs more today.

The deflation only applies to tat and cheap nonsense.

Although both the PC and television will be significantly more powerful than their predecessors, so in terms of £ per transistor they are much cheaper.

[Errol]

4 minutes ago, stoobs said:

Although both the PC and television will be significantly more powerful than their predecessors, so in terms of £ per transistor they are much cheaper.

I'm just talking about an exact equivalent 10 years later. Just something to play the latest stuff at maximum. Interesting that it just keeps on getting more and more expensive - it's because on things like the motherboard they can't skimp on the rare metals and expensive capacitors etc.

[SpectrumFX]

25 minutes ago, Errol said:

This really isn't true - or at least, it's only true if you buy rubbish equipment.

A top, very top of the line custom built gaming PC was about £2500 10 years ago. Now if you go to buy a similar top of the line custom built machine it is £3500. Gaming monitors are the same - what cost £300 ten years ago might cost £500-600 now.

I'm sure there are other examples - like televisions. The absolute top of the line TV from 10 years ago has an equivalent that often costs more today.

The deflation only applies to tat and cheap nonsense.

It's not the quite the same thing though is it.

With computers if you wait a bit you'll get the same spec cheaper, and a machine spec'd as per a top of the range gaming machine from 10 years ago is now cheap as chips.

My phone that I bought on eBay for £90 has better specs than my first computer that cost me two months take home pay.

[ThoughtCriminal]

 

Another day another vertical line. 

 

Fertilizer shortage this time. 

[Axeman123]

20 minutes ago, Errol said:

I'm just talking about an exact equivalent 10 years later. Just something to play the latest stuff at maximum. Interesting that it just keeps on getting more and more expensive - it's because on things like the motherboard they can't skimp on the rare metals and expensive capacitors etc.

I thought the big expense was GPU's, which have been inflated by crypto mining which is itself arguably a symptom of easy money.

[working woman]

Re Rewilding. The only people I see making real money initially will be those selling the land to the Rewilding "business". It is a great idea, but I would view any money put into it as a charitable donation, as I doubt there would be any financial return for a long time.

It could be turned into a money spinner though, such as selling membership and access like the National Trust, charging for wild camping or building small scale "green" holiday complexes. Or buying up land by motorways for green service stations, selling decent food, with lovely views over a nature area, a couple of which already exist in Cumbria and Gloucestershire. 

The wider community would benefit financially, such as local homes increasing in value as it becomes a more desirable place to live and local small businesses catering to nature loving tourists.

I was in Sainsbury's the other day with my husband and passed their large stand of Xmas cards. He  noted that every single Xmas card featured serene natural scenes and animals, such as snowy landscapes , robins, deer, christmas trees, kids making snow men, cosy homes with log fires and pets curled up in front. He said there you go, that is what people want, nature. There is not one single card showing a flashy car wrapped up with a big bow, or bling jewellry or designer brand clothes, or fattening Xmas food and drink.  Interestlingly there were not a single religious cards either, nor any with scantily clad young women in santa themed outfits, which his beady eye would definately have spotted

[Axeman123]

33 minutes ago, ThoughtCriminal said:

Another day another vertical line. 

Gold next hopefully...

[Hancock]

1 hour ago, Errol said:

This really isn't true - or at least, it's only true if you buy rubbish equipment.

A top, very top of the line custom built gaming PC was about £2500 10 years ago. Now if you go to buy a similar top of the line custom built machine it is £3500. Gaming monitors are the same - what cost £300 ten years ago might cost £500-600 now.

I'm sure there are other examples - like televisions. The absolute top of the line TV from 10 years ago has an equivalent that often costs more today.

The deflation only applies to tat and cheap nonsense.

In 1983ish i remember my dad buying a flat screen TV which were all the rage at the time for £500, this must have been close to a months take home pay.

Almost 40 years later I can go out and buy a SMART TV for £500, that does pretty much everything the top of the range ones do, and is most certainly not "rubbish equipment or tat and cheap nonsense".

[Noallegiance]

22 minutes ago, Axeman123 said:

Gold next hopefully...

I'd rather it was last.

[Boon]

Same in mobile phones, although you could argue for consistency sake the very best Apple phone on the market has gone up in price, maybe by double. But maybe that is good marketing, they have enough suckers so that they know even if they increase the price it'll still sell.

The difference is the levels below the top. For a while there were only a few companies getting at the premium end , Apple, Samsung, HTC. The chinese stuff was limited to knock-offs which looked good but actually were not.

However today the stuff with Xiaomi/Huawei is pretty good, the bang for the buck certainly wasn't as good 10 years ago. 

 

 

[Axeman123]

9 minutes ago, Noallegiance said:

I'd rather it was last.

I'd assumed pretty much every comodity had already run, except PMs. I expected gold to be the last to go, and figured we were due for launch. What are you hoping will run first?

[King Penda]

On 23/10/2021 at 22:16, AWW said:

That's effectively why benefits are paid at the level where the workshy can have Sky, a TV with its own gravitational field, forty fags a day and as many cans of Stella as they can drink. It's protection money.

Forty fags is pushing it mind you unless they go a Kurdish mini mart

[King Penda]

44 minutes ago, Hancock said:

In 1983ish i remember my dad buying a flat screen TV which were all the rage at the time for £500, this must have been close to a months take home pay.

Almost 40 years later I can go out and buy a SMART TV for £500, that does pretty much everything the top of the range ones do, and is most certainly not "rubbish equipment or tat and cheap nonsense".

True certain things have plummeted in price