Credit deflation and the reflation cycle to come (part 4)

[Axeman123]

20 minutes ago, Yadda yadda yadda said:

Handouts based on BMI.

Means Mass tested benefits

[Barnsey]

1 hour ago, DurhamBorn said:

https://www.dailymail.co.uk/news/article-11148651/Ofgem-energy-price-cap-Britons-tell-struggle-amid-rising-cost-living.html

Look at the amount of bennies on there.Obvious the first lot are just scroungers,moaning at getting £2k a month free money.Scottish woman with disabled child obvious genuine,then more scroungers,fat bloke with huge PC claims bi polar the made up illness of choice.Then lots of un-viable self employed.They are all consuming without producing.All part of the problem.Incredible the policy errors.We really are on the edge of a death spiral.

At least the replies to that article speak sense like you do.

[Petatep]

17 minutes ago, M S E Refugee said:

I must admit I'm sensing a disturbance in the force.

People are going to lose their shit both figuratively and literally.

 

I not sure we're there yet (I know we should be). Most are just looking forward to the World Cup.

[belfastchild]

Next round of energy price hikes here in NI announced for 1st october. One supplier 35.4% rise in electric and 28.3% rise in gas.
Mine will do the same so about 40p a unit here in October for electric.

 

[Democorruptcy]

3 hours ago, PETR4 said:

Hi all, after lurking for years I think I finally have something of value to add to the “best thread on the internet”!

In answer to:

“@Starsend Posted yesterday at 12:31

I'd like to see somebody do some real analysis into what will happen to my BP shares in the event of hyper-inflation / a new currency. There must be plenty of examples in history but nobody ever talks about the things we all want to know.”

There is a very good answer to this in Brazil and Petrobras.

Since 1967 the Brazilian currency has changed 7 times, most recently to the Real in 1994 to end Brazil’s hyper inflation

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

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

Petrobras has been around since 1953 and is a major component of the IBOVESPA, Brazil’s stock market.

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

I couldn’t find any price data on the internet for Petrobras prior to 1994, however I did find this re-indexed IBOVESPA chart going back to 1963 which covers all the currency switch overs and the hyperinflation. The 35 times increase is the hyperinflation era.

https://media.moneytimes.com.br/uploads/2022/02/image5-5-1536x1083.png

It’s in this larger article (browser will translate) about investing in Brazil:

https://www.moneytimes.com.br/conteudo-de-marca/depois-do-resultado-de-petrobras-petr4-e-hora-de-comprar-analista-que-lucrou-600-com-a-queda-da-acao-muda-de-ideia-e-recomenda-compra-brdfa020/

Brazil and Petrobras have obviously had there losing and winning streaks over the years and that chart has some savage pull backs, but overtime and through adversity Petrobras has held its value against fiat currencies. I think political confiscation during a crisis would be the bigger risk. In Brazil they froze cash accounts and forced conversion onto a new currency in 1990. I don’t think they took people’s stock portfolios, and the extreme measures didn’t work in the long run anyhow!

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

https://www.chicagotribune.com/news/ct-xpm-1990-03-25-9001240707-story.html

As an aside, Brazil’s a fantastic country. I think most dosbods would love it!

Thanks all for such an amazing meeting of minds and talent.

Do you live in Brazil?

[M S E Refugee]

25 minutes ago, Petatep said:

I not sure we're there yet (I know we should be). Most are just looking forward to the World Cup.

I don't think we are too far away.

[feed]

5 minutes ago, M S E Refugee said:

I don't think we are too far away.

I have to go to dinner with some normies tomorrow. dreading it.  Partners relatives.  
Vaxxed up, something must be done about the latest thing NPC's.  

Will see if it's still the government can fix this by giving everyone free stuff as it was 3 months ago.

i suspect we've a way to go.  

 

[PETR4]

25 minutes ago, Democorruptcy said:

Do you live in Brazil?

I have done in the past. Sadly not at the moment. I've been a regular visitor since the late 90's.

[M S E Refugee]

24 minutes ago, feed said:

I have to go to dinner with some normies tomorrow. dreading it.  Partners relatives.  
Vaxxed up, something must be done about the latest thing NPC's.  

Will see if it's still the government can fix this by giving everyone free stuff as it was 3 months ago.

i suspect we've a way to go.  

 

Hopefully they don't complain about the dinghy divers because if they do, be sure to call them out as racists.

[sancho panza]

6 hours ago, DurhamBorn said:

I see it as a point in the history of a society when it is unable to continue in its present form

So systemic collapse is already underway.Nobody can get a dentist,thats a turn of the dial,the coppers in my street getting 13% pension increases while workers get 5%,a turn of the dial,bennie woman the same,turn the dial.Food and energy are flatlining or falling in production,but government is only protecting those on its tit,so directly pushing more and more down who produce.£6k energy bills are are huge marker on systemic collapse given around 30% of homes cant pay.

In simple terms systemic collapse is when economic forces destroy the currency and the productive economy.It starts on the edges and moves inwards to the core,the edges beg for help and at first they get it,but in the end the core tells them to look to their own defences because they are under siege themselves.The core imagine they can regain control of the edges once things settle,but they never do because more and more hits continue and the edges look to new leaders and systems.

In the UK its almost all self inflicted by the polos and elite.Its huge policy errors that got us here not acts of god.

I think that's a great definition of the cancer first up and then a pretty decent defintion of some of the symptoms of the disease.

Talked to my Mum today(she's like the CEO of our little family effort) and I found myself today reiterating what I said to you a while back.Start of the year,chance of a currency/systemic crisis was rated by me <1% 2022/23.Now it's 25%.(I define a systemic currency crisis as cable <1 as that'll mean all sorts of price distortions will be running and as an economy predicated on borrowing cheaply and buying Chinese tat,the UK will be f****d.

Go furtehr out past 23 and we're heading north of 50%.

Like cancer,the illness can be treated but first you need the person in charge to diagnose and watching the current crop of cluster f***wits fall into every ambush Putin/Xi set,I can't see that happening before it's too late.

I was also saying ,I used to worry about hosue price bubble blowing up and casuing a massive dislocation in the credit markets,but I think this situation is way more serious than that now.We're playing for the stability of our society not jsut the fiancial system

If you're flapping about hosue prices,youre missing the elephant in the room imho.You can't eat a hosue.

[Plan-b]

1 hour ago, M S E Refugee said:

I must admit I'm sensing a disturbance in the force.

People are going to lose their shit both figuratively and literally.

 

Where has the youth rebellion gone?

So disappointed in them today we where real nuisances in our time.  

You can probably imagine what effect this had -- we loved it ..  

https://www.youtube.com/watch?v=IvG3is7Bm1w

 

[reformed nice guy]

2 hours ago, Van Lady said:

 

Thoth, Harpenden , United Kingdom, 2 hours ago

So they get 24,000 a year for doing nothing. That's why the rest of us taxpayers can't afford the government giving away yet more of our money.

 

 

To earn £24,000 a year you would need a salary of £30,000 which is more than the UK average

 

[M S E Refugee]

13 minutes ago, Plan-b said:

Where has the youth rebellion gone?

So disappointed in them today we where real nuisances in our time.  

You can probably imagine what effect this had -- we loved it ..  

https://www.youtube.com/watch?v=IvG3is7Bm1w

 

Pacified through social media and gaming, the Government better keep the power on to keep them sedated.

I also blame the Parents and Grandparents for having no backbone or fight in them, if more people were like the Forum members on here the Government wouldn't have got away with all of their shite.

[sancho panza]

6 hours ago, Cattle Prod said:

It's an odd one - food is the one element that polos should fear most, as it's the one that gets them strung up on lamposts if they mess it up. And yet, they are wilfully messing it up. Taking over good farmland for solar, mandating fertliser is cut back, eating meat is bad etc. I don't get it.

When you analyse all the major seismic political revolutions of hsitory,many were based on hunger/worsening living standards French Rev,Arab Spring,Russian Rev,Rise of Hitler.....

I sound like a broken record,but I think this is going to be the Westminster elites 'let them eat cake' moment over the next few years but this is the first winter we've had since rationing where people might end up going hungry.

and this process has been going on for a a decade or two and by that I mean the mismeasurement of inflation.The elite point to the headline figure and we get pay rises around that,no matter how far away it may be from the price inflation people face at the shops.It was offset for a time by rising hosue prices but as less and less under 40's have bought houses that's meant that all the asset wealth that has come from it has been concentrated in a demographically narrowing band of soceity predominantly retirees.

I did a psot the otehr night shwoing how a bloke with a wife and two kids on £50k p.a. and with a 70% LTV £250k mortgage went from reasonably off one year with £1000 pcm disposable income to £500pcm within a year with a 2% pay rise and 10% inflation.After that second year that bloke won't be voting for mainstream parties

Unfortunately,the engine of growth is the younger cohort and therein lies the political problem that DB often talks about ie how to shift that wealth to where it's needed to avert systemic political risk.

 

T

[Joncrete Cungle]

9 minutes ago, reformed nice guy said:

To earn £24,000 a year you would need a salary of £30,000 which is more than the UK average

 

No commuting costs for the bennies brigade either, guaranteed index linked 'pay rise' every year. Free eye tests, dentist trips, prescriptions etc......

I am paying £1286:50 out of my taxed income for my level 2 electrical installation night school, bennies brigade get it for free....

[Yadda yadda yadda]

3 minutes ago, sancho panza said:

When you analyse all the major seismic political revolutions of hsitory,many were based on hunger/worsening living standards French Rev,Arab Spring,Russian Rev,Rise of Hitler.....

I sound like a broken record,but I think this is going to be the Westminster elites 'let them eat cake' moment over the next few years but this is the first winter we've had since rationing where people might end up going hungry.

and this process has been going on for a a decade or two and by that I mean the mismeasurement of inflation.The elite point to the headline figure and we get pay rises around that,no matter how far away it may be from the price inflation people face at the shops.It was offset for a time by rising hosue prices but as less and less under 40's have bought houses that's meant that all the asset wealth that has come from it has been concentrated in a demographically narrowing band of soceity predominantly retirees.

Unfortunately,the engine of growth is the younger cohort and therein lies the political problem that DB often talks about ie how to shift that wealth to where it's needed to avert systemic political risk.

 

T

Lots of people have not had pay rises at the official inflation rates. Often nowhere near. The standard of living for the average person has been declining throughout my 20 year working life. Not just income from failing to match rigged inflation. A large  increase in the population without a corresponding increase in infrastructure or amenities. Vastly more expensive housing, especially when measured as a percentage of total lifetime earnings. More and more taxes. Now the cunt in chief prefers to visit Ukraine and lecture us that we will have to make do with less because of an unnecessary war that we don't want. Russia isn't 1938 Germany so fuck off with your wannabe Churchill shit Boris.

I sometimes can't help myself swearing when getting onto the subject of our politicians. It appears necessary.

[Axeman123]

Neatly encapsulating the dilema:

[Sidd]

What I still cant understand is with all the shit happening and coming, why Gold and Silver are moving in reverse..? Is it literally just pegged to the dollar and not impacted by anything else and does this also coincide with historical trends?

[sancho panza]

@moneyscam Thanks very much for psoting this with the edit done for us all.Just psoting the link doesn't do analysis of this quality jsutice imho and it's great that it's preserved here for psoterity.

 

 

Really is mind blowing stuff and it ties in with this Micahel kao twitter thread that @Cattle Prod psoted the other day that also deeply affected my reflections on where we are.

and between teh two of them,I think I've realsied I've been looking in the wrong place for the BK.I jsut assumed that the spark that will ignite it will be a dislcoation in debt marekts that's going to cause the a deflationary wave to breakdown credit markets.

Over these two articles and lsitening to Gromen's thesis as well, I'm beginning to sense that it will be a forex event and the deflationary credit wave will be a side hussle.I feel all of asudden like I've not been seeing the wodd for the trees as this Ukraine debacle has unfolded.

Bopth pozsar and Gromen have tlak convincingly about the USA effectively exporting dollars and treasuries and then sending the military to secure the supply line.As Poszar says,at best the US military is spending ponzi units(they need to sell treasuries to spedn).Groemn took a slightly diffent view the other night staing why would US kids go out and bleed for the US in taiwan to defend an economic system that's not in their family's interests back home.

Both routes lead to the same detination.A US suffering a weakened military that can';t enforce the petrodollar hegemnoy.

It's funny ,we had a thread on here 1000's of pages ago wehn Jerome Powell got put in place and the hive midn came to the conclusion that the USD had one more crisis in it.Thats looking like an exceptional call froma few years back.

I think the Minsky moment Zoltan alludes to is the BK and its' intersting how he twists the relaatively previous narrow definiton of Minsky within a finacnial context to tlak about Minsky and leverage from the prespective of global supply chains

It's great the way he lays out the logic for the TRICKs to stop funding of 'G7 debt claims' as it's no longer in their interest.It's imepccably argued.

We're still long this market-oilies,goldies,baccy,comms but I made the decison last week to take us out of all UK centric stocks .Reading this confirms that's the right decsion for us.(Not that there's much left admittedly)-scottish play,BT.

Think it's time to keep a super sletuh eye on cable.

 

from previuosu cahpter post by @moneyscam

'As I've posted before on this thread, I'm a big fan of Zoltan Pozsar and his missives. Yesterday he released his latest one and as ever is worth the read. Underlined emphasis is mine. @sancho panzafor the Minsky references

https://plus2.credit-suisse.com/shorturlpdf.html?v=5amR-YP34-V&t=-1e4y7st99l5d0a0be21hgr5ht

Some highlights :

…and that’s why forecast s of a rapid deceleration of inflation are naively optimistic: if Pax Americana enabled globalization and globalization underwrote lowflation, the TRICKs trying to poke holes in the Pax means that inflation is a big risk. To understand the path of inflation from here, we will have to read more history and think about trust, trade, and Dale Copeland’s theory of trade expectations: if trust drove globalization, and globalization drove “The Great Moderation”, distrust will drive de -globalization, and de -globalization “The Great Reflation ” …

And:

More broadly, the three “moments” of reckoning we discussed above mean that global supply chains, whether they produce military or civilian goods, are facing a Minsky Moment – a Real Minsky Moment. Paul McCulley’s term referred to the implosion of the long -intermediation chains of the shadow banking system that marked the onset of the Great Financial Crisis. Today, we are witnessing the implosion of the long -intermediation chains of the globalized world order: masks, baby formula, chips, missiles, and artillery shells, for now. The triggers aren’t a lack of liquidity and capital in the banking and shadow banking systems, but a lack of inventory and protection in the globalized production system, in which we design at home and manage from home, but source, produce, and ship everything from abroad, where commodities, factories, and fleets of ships are dominated by states – Russia and China – that are in conflict with the West. Inventory for supply chains is what liquidity is for banks. In 2007 -08, big banks ran on “just -in -time” liquidity: the dominant form of liquidity was market liquidity, for which you could always sell assets into a deep market without moving prices, so you did not have to have liquidity reserves at the central bank. Similarly, big corporations today run “just -in -time” supply chains for which they assume that they can always source what they need without moving the price. But not really: the U.S. military has to wait a little bit as Raytheon “will take a little while”; Taiwan and Saudi Arabia have to wait as well until the conflict in Ukraine is over; and if your washing machine broke recently, you’ll have to wait a bit too until defense contractors are done buying them up to rip chips out to make missiles. We’re borrowing from “here” to make things “there”. Do you remember the three units of Minsky? Hedge units can cover their payments from their incomes. Speculative units have to borrow to be able to make payments. And Ponzi units can make their payments only if they sell some of their assets and are thus the most exposed to rising interest rates. As our chip examples demonstrate, Minsky would classify our military supply chain s as “speculative” units at best, which are exposed to a further escalation of geopolitical tensions that could easily turn them into Ponzi supply chains. We can also apply Minsky’s framework in Europe, where German y can’t cover its payments without Russian gas and the government is asking citizens to conserve energy to leave more fo r industry. Minsky moments are triggered by excessive financial leverage, and in the context of supply chains, leverage means excessive operating leverage: in Germany, $2 trillion of value added depends on $20 billion of gas from Russia …that’s 100 -times leverage (see the last chart here ) – more than Lehman’s.

And:

Today, the assumption among investors is that globalization is Too Big to Fail… …but globalization is not a bank in need of a bailout. It’s in need of a hegemon to maintain order. The systemic event is someone challenging the hegemon, and today, Russia and China are challenging the U.S. hegemon. For the current world order and its trade arrangements and network of global supply chains to survive the challenge, the challenge must be squashed quickly and decisively, in the spirit of the Powell Doctrine. But Ukraine and Taiwan aren’t Kuwait, Russia and China aren’t Iraq, and Top Gun 2 isn’t the same movie as Top Gun …

And:

These are the scary times when the “euthanasia of the rentier” is a risk. To ensure that the West wins the economic war – to overcome the risks posed by “ our commodities, your problem”; “chips from our backyard, your problem”; and “our straits, your problem” – the West will have to pour trillions into four types of projects starting “yesterday ”: (1) re -arm (to defend the world order) (2) re -shore (to get around blockades) (3) re -stock and invest (commodities) (4) re -wire the grid (energy transition) Similar to how Basel III was the “tab ” associated with the Great Financial Crisis, the above list is the tab for the currently unfolding “Great Crisis of Globalization”. The four items on the list are self -explanatory. We read about them every day:

And:

Commodity intensity means that inflation will be a nagging problem as the West executes on the above list. Re -arming, re -shoring, re -stocking, and re -wiring need a lot of commodities – it’s a demand shock. It’s a demand shock in a macro environment in which the commodities sector is woefully underinvested – a legacy of a decade of ESG policies. Underinvestment means supply constraints, and geopolitics means even more supply constraints: resource nationalism – see Russia’s stance or Mexico’s recent decision to nationalize lithium mines – means that the supply you think is there to meet the surge in demand isn’t there: prices can thus surge. Executing on the to -do -list can easily drive another commodity super cycle, like the one we had after China joined the WTO in 2000. But that super cycle happened in the context of a peaceful, unipolar world order in which great powers had positive expectations of the future trade environment (see the “theory of trade expectations” above). But that’s not the case anymore. Capital intensity means that governments and also the private sector will have to borrow long - term to execute the to -do s. Re -arming and re -stocking are the domains of the government, and re -shoring and re -wiring the grid will involve public -private partnership s. Private firms will have to issue debt and raise equity to build things: ships, F -35s, factories, commoditywarehouses, andwind turbines. Insensitivity to interest rates means that the to -do -list will have to be executed regardless of whether the Fed hikes rates to 3.5% or 7%. Hell or high water, executing on the to -do -list is imperative. Industrial sovereignty depends on it.

And in conclusion:

Finally, uninvestability means that for certain large countries in the global East, it makes absolutely and categorically no logical sense to roll their investments in G7 debt claims. Not just because of what happened to Russia’s FX reserves, but also because rolling a $1 trillion portfolio of U.S. Treasury securities means that you will fund the West’s effort to re-arm, re-shore, re-stock, and re-wire… …against the East. And we are back to where we started on the cover page: Dale Copeland’s theory of trade expectations is the right frame to think about world from here, and sadly things make no sense to continue like they used to, be either from a real (trade/production) perspective or a financial (FX reserves) perspective… …which is why Bretton Woods III is destined to happen. It’s already happening, and we will explore the Bretton Woods III topic in detail in our upcoming dispatch: War and Currency Statecraft.

 

[Axeman123]

New Javier Blas article on Bloomberg, Headline:

Listening to European Electricity Traders Is Very, Very Scary

"Every week, the people who trade electricity in the UK get to quiz the managers of the national grid for an hour. The conference call, which anyone can monitor, offers an insight into what the men and women on the front line of the power market are worried about. Listening to them is getting scarier by the week — and suggests keeping the lights on this winter will be a lot more challenging than European governments are admitting...But the industry’s teleconference suggests the problem is broader than just rising costs. Increasingly, the words “emergency” and “shortages” are being used, with participants focusing on when, rather than if, a crisis will hit...Here’s a question from last week’s session: “Are you war-gaming possible options for if/when cross-border trading collapses under security of supply pressures this winter?” And another: “Can we have a session where we talk through the emergency arrangements?” Another participant said that the forecast for demand-and-supply electricity balance showed “how bad the winter could be for anyone who can do the maths.” The same caller was blunt about the grid’s own predictions: “I don't think you believe what you've written, and nobody else does.”. One intervention was particularly revealing. “Based on where winter ‘22 products are trading, where does this position yourself with respect to securing power over the winter?” asked one participant. The background? In the forward market, UK power for December 2022 is fast approaching £1,000 per megawatt hour, up 50% from current prices. The implication? Power shortages"

https://archive.ph/jyljT#selection-3525.0-3943.28

Nothing we haven't discussed before on here, but expect this in the Daily Mail within the week IMO.

[Axeman123]

Just finished reading the latest Zoltan Poszar piece.

Damn good.

[Lightscribe]

1 hour ago, Sidd said:

What I still cant understand is with all the shit happening and coming, why Gold and Silver are moving in reverse..? Is it literally just pegged to the dollar and not impacted by anything else and does this also coincide with historical trends?

My theory there, is that Gold can’t be allowed to run. I could never understand why speculative crypto was allowed to remain unregulated for so long. That’s done it’s job however by sucking up the excess helicopter money that may of alternately run into PMs.

Yes crypto technologies will definitely be going hand in hand with CBDCs, but a few neck beard early XRP adopter whales won’t be allowed to be the next Rothschilds, it will be the technology itself  that will be used. 

The paper wealth can be further destroyed, just like meme stocks and stock spilt FAANGs. Physical gold couldn’t. That’s why I’ve got quite a bit of physical (in Minecraft) for a SHTF scenario.

It should be well north of $2.5k by now and silver at $50. I hold a large proportion of PM miners in the event that paper implodes with the likes of the BRICs going their own way.  The test will be at the end of the year into early 2023. 

 

 

[Noallegiance]

Ignore the person. Listen to the words. 

 

[Bus Stop Boxer]

19 minutes ago, Lightscribe said:

My theory there, is that Gold can’t be allowed to run. I could never understand why speculative crypto was allowed to remain unregulated for so long. That’s done it’s job however by sucking up the excess helicopter money that may of alternately run into PMs.

Yes crypto technologies will definitely be going hand in hand with CBDCs, but a few neck beard early XRP adopter whales won’t be allowed to be the next Rothschilds, it will be the technology itself  that will be used. 

The paper wealth can be further destroyed, just like meme stocks and stock spilt FAANGs. Physical gold couldn’t. That’s why I’ve got quite a bit of physical (in Minecraft) for a SHTF scenario.

It should be well north of $2.5k by now and silver at $50. I hold a large proportion of PM miners in the event that paper implodes with the likes of the BRICs going their own way.  The test will be at the end of the year into early 2023. 

 

 

If BRICS punch a hole in the dorrar then its off to the races surely?

[Lightscribe]

27 minutes ago, Bus Stop Boxer said:

If BRICS punch a hole in the dorrar then its off to the races surely?

Well… we’ll finally get to see if that much really is in Fort Knox.