Credit deflation and the reflation cycle to come (part 5)

[marceau]

1 hour ago, Majorpain said:

Not really, Fed spoketh:  "let U.S Treasuries, agency debt and mortgage-backed securities, and other qualifying assets not be marked to Market, but at par value"   And the market bought those bonds because the Fed Bond Put now makes something worth (say) 80 cents now worth close to 100.

The key thing is how long can they keep doing this, raising interest rates to combat inflation depresses bond prices, so if Powell wants to keep hiking the problem is going to keep happening.  Those bonds will eventually have to sit losing value on someone's balance sheet.

In a nutshell they are printing money to buy bonds so they can raise rates to stop inflation.  Western financial systems make no sense and are rather fragile these days.

It's reasonable to avoid mark-to-market in the middle of a panic, or when you have speculators & crooks trying to game the system.

The bonds were issued and purchased with coupons and profiles both parties agreed on. When the 'big man' intervenes, that should be the natural assumed level. A modern variant of what Ceasar was doing thousands of years ago to reign in the excesses of people like Crassus (hat tip to Martin Armstrong). It's sensible stuff, unless the remedy itself gets gamed, which is what happened after 2008.

Edited March 14, 2023 by marceau

[marceau]

8 hours ago, DurhamBorn said:

My worry is are there other changes to pay for it.Pushing the pension age back of factory workers to pay for even bigger pensions for consultants in the NHS etc would be shocking.They might also do this,but add pensions to estates instead of being inheritance tax free,doesnt hit those Drs as they are final salary pensions but would smash anyone in money purchase to pay for them.

 

The wealth of Doctors seems to have been on the brain of our polos since the days of Blair. Basing tax policies around them is just as dumb as basing economic policy around housing, or offshoring. Of course nothing changes in the charade that is UK 'politics', so I guess that's what will happen. 

I don't really understand the govts endless grovelling in front of Drs at all. They're a coherent political group, but not a large one. They really just aren't that important. A more capable system would be using the favourable conditions that currently exist to break cartels like the BMA. Given their behaviour during covid, I doubt there would be many violins playing.

Edited March 14, 2023 by marceau

[Onsamui]

A lot of people have been asking where to go, what bank is safe, and what’s next? This is by no means over. The fiscal mismanagement is off the charts and we have a major clash with the Marxist views of the Democrats who always want to punish the rich and then ask them for funding. Only in the Democratic Party can you have a $ 10,000-a-plate fundraiser and preach how evil inequality is and that the rich must be held accountable.

Those who keep calling for a gold standard are clueless. To have a return to balanced budgets means that the Democrats will have to completely reform. They DO NOT know how to govern without class warfare. Politics has deeply divided the United States to the point that the only reasonable solution will be to separate between the blue v red. As Lincon said, a house divided cannot stand. That is becoming so obvious that there will come a day soon when that will be the case. There are over 30 civilizations that have come before us. Every single one has collapsed. We are merely waiting for our 15 minutes in the spotlight.

We must understand that things are far worse outside the United States geopolitically thanks to the Neocons who have done nothing by conniving endless wars. They are ruthless evil people who have no problem sacrificing your family for their political aspirations. Short term, as they create World War III, the dollar will be the strongest currency as capital always flees from a conflict. We really need to IMPEACH Biden, because he is a dangerous puppet who reads whatever the Neocons write on the cue cards. Then we really need to launch an investigation of these Neocons who have usurped US foreign policy for decades and are never held accountable. Now, many people have asked what is a small bank. They are typically local regional banks. The problem is if they just make decisions based on the talking heads on TV, then they will face tremendous problems ahead. To be diverse, for now into 2024, you may want to look at US T-bills 30-day to the 90-day max. Not every bank is in trouble. You should ask if they publish their portfolio. The big risk is that money was basically free, and they were investing that long-term. But as rates have risen, they have suffered losses. Martin Armstrong

 

[Onsamui]

The Chinese yuan has out-traded the US dollar by volume for one of the first times in recent Russian history. The dollar was king in 1991 when the Soviet Union collapsed, but that is no longer the case after Moscow branded the dollar a “toxic currency” along with the euro. Toxic currencies accounted for 87% of exports from Russia at the beginning of 2022, but this figure fell to 48% by the start of the new year. The Bank of Russia has reported that the proportion of USD/ruble pair in exchange fell to only 36% in February. The central bank is calling this a “broad structural transformation of the Russian economy.”

As “unfriendly countries” and their “toxic currencies” band together, those on the outskirts are winning. China has become the new go-to country for new trade partnerships as it bypasses Western-imposed sanctions. Toxic currencies represented 46% of imports in December 2022 but were at 65% in January 2022 before the war. In contrast, the yuan’s share rose from 4% to 23% during that time.

Those who were previously shunned from the big table are now pulling up a chair to discuss economic prospects with China. This will make it much easier to phase out toxic currencies because more people are willing to accept the yuan. The confidence in the yuan is growing. Everything occurring may seem odd, but it is precisely on target. As I mentioned in my report “China on the Rise,” China will dethrone the United States to become the world’s leading economic powerhouse by 2032. It’s just time. M Armstrong

[Cattle Prod]

8 hours ago, DurhamBorn said:

My worry is are there other changes to pay for it.Pushing the pension age back of factory workers to pay for even bigger pensions for consultants in the NHS etc would be shocking.They might also do this,but add pensions to estates instead of being inheritance tax free,doesnt hit those Drs as they are final salary pensions but would smash anyone in money purchase to pay for them.

Its ludicrous how often they are changing pensions rules.I dont think it will have any effect on people retiring though.Most are going because of the toxic woke bullshit and are sick of paying tax for scroungers.Im off out on the drink tomorrow for Cheltenham,but dont want to be too rough Weds as this budget could be interesting.

An increase in pension allowance is no use is the tax free allowance and the tax bands are frozen. You’ll just pay more tax on the way out. Govt allowing people to save more, so they can take more.

Simplistically, if you fill your pot and want to stay under 50270 20% threshold after taking a tax free lump sum, you can only withdraw 4.5% pa, down from 6.2% Of course that’s more than enough for us dosbodders, but I suspect govt is planning on people drawing more than that. To stay tax free under 12570, you’re down to 1.1% down from 1.7%. I doubt many will be that disciplined. Especially after inflation makes that a pitiful amount.

If that’s the only stealth tax associated with this, fine with me. I’m going to take my pension overseas anyway.

[HousePriceMania]

53 minutes ago, DurhamBorn said:

Yep looks like a double wave inflation more and more.I expect now inflation will fall,it might even get down close to 2%,then turn back up to around 5% and sit there.Rates ended up at 3.5% longer term.I think they need to inflate away at around 2% to cover deficits to stop collapse.So rates to average 2% to 3% less than inflation over the cycle.

How the **** do they get away with this !!!

[Majorpain]

8 minutes ago, DurhamBorn said:

Remember when i said they might have to reach the place where they printed and increased rates,i wasnt sure if or how that would happen,but here we are.Instead of mark to marker losses you now have inflation losses.They still lose against inflation.Those bonds paying 2% coupons against an equity paying 7% increasing at 6% a year etc,but the Fed is stopping those losses being front loaded.Of course it also means you can but now with yields higher with much less risk and a good punt that if inflation averages less than 5% your in clover,if it doesnt its inflation losses at worst.

You did indeed, seemed a bit implausible at the time yet here we are!

Going to be interesting to see how financial system copes with this one, things are definitely worse in most metrics than 2008 and its not too long before people start worrying about return of their money rather than return on.  Latest UK review specifically says that multipolar world is emerging faster than expected, would 2008 crisis have gone as smoothly if Russia/China and friends start trying to throw spanner in the works, because that's the global situation US has managed to create today.

[M S E Refugee]

17 hours ago, Libspero said:

Tech has been overheating for the past couple of years..   we’ve really only gone over the top of the rollercoaster since Christmas.

Feels a bit like the dotcom bust with all the most speculative stuff going to the wall and dragging everything else down with it..  impressive to see they’ve managed to take out a bank though.  Clearly lessons weren’t learned from the GFC.

Nevertheless, if this financial chaos was happening in Russia like it was supposed to, you would be sporting a raging hard-on.

[belfastchild]

9 hours ago, DurhamBorn said:

Pushing the pension age back of factory workers to pay for even bigger pensions for consultants in the NHS etc would be shocking.

Its anecdotal but I see that as just being narrative. I know 2 consultants who went 4 days a week at the start of Jan and are going 3 days a week from the start of the new tax year. Both have told the NHS to accept it or they will go 0 days a week.
Theyve stopped doing private work as well as it used to be the cream on top.
When you hit 1 million quid in the pension pot at 53-55, have either no kids or kids that have flown the nest, have a house worth a million or two you could sell up and come back to NI and live in something bigger for half that or bugger off and sit in the sun 6 months of the year then why the hell would you.
Well you are a doctor and you like helping people but when covid means that anyone who is put on the waiting list to see you today will either be dead or you will have actually retired then whats the point?

There comes a point, where people will have sat out covid doing fuck all and re-assessed their lives, realise that how much money do you actually need and more importantly ask around and see what their real life expectancy is going to be.

That and they actually see people, the people who come through the doors. If you want a job where you get to see what life excesses your tax money is actually funding then get a job as a consultant in the NHS.

[marceau]

4 minutes ago, belfastchild said:

Its anecdotal but I see that as just being narrative. I know 2 consultants who went 4 days a week at the start of Jan and are going 3 days a week from the start of the new tax year. Both have told the NHS to accept it or they will go 0 days a week.
Theyve stopped doing private work as well as it used to be the cream on top.
When you hit 1 million quid in the pension pot at 53-55, have either no kids or kids that have flown the nest, have a house worth a million or two you could sell up and come back to NI and live in something bigger for half that or bugger off and sit in the sun 6 months of the year then why the hell would you.
Well you are a doctor and you like helping people but when covid means that anyone who is put on the waiting list to see you today will either be dead or you will have actually retired then whats the point?

There comes a point, where people will have sat out covid doing fuck all and re-assessed their lives, realise that how much money do you actually need and more importantly ask around and see what their real life expectancy is going to be.

That and they actually see people, the people who come through the doors. If you want a job where you get to see what life excesses your tax money is actually funding then get a job as a consultant in the NHS.

Doctors aren't unique in this regard at all though. Lots of professions, and many supposed 'non-professions', have to deal with the same shit. Those working lower down have it far worse.

Govt funneling more money to the upper end of the public sector is just going to add to the problems. It's no better than  Kwarteezy's higher-tax band shenanigans.

[DurhamBorn]

18 minutes ago, marceau said:

Doctors aren't unique in this regard at all though. Lots of professions, and many supposed 'non-professions', have to deal with the same shit. Those working lower down have it far worse.

Govt funneling more money to the upper end of the public sector is just going to add to the problems. It's no better than  Kwarteezy's higher-tax band shenanigans.

Yep,the same as a warehouse worker on 2-10 in summer going to work in boiling hot weather seeing the bennies all sat outside the pubs or in their gardens etc.Its not amounts that matter,its amounts for the effort.That warehouse worker likely works for £40 a week more than those bennies if they have a kid.We have the top saving like mad to get out,the bottom getting Sharon pregnant to get out and the ones in the middle getting smaller and more angry.

Its all due to being past the tipping point where those taking from the taxpayer are more than those paying.The corporation tax increase a big example,its to pay for public sector pensions and bennie increases,the productive hammered to inflation protect the none productive.The thinking is ludicrous,but they dont see this is a distribution/cost push cycle.

[marceau]

1 minute ago, DurhamBorn said:

Yep,the same as a warehouse worker on 2-10 in summer going to work in boiling hot weather seeing the bennies all sat outside the pubs or in their gardens etc.Its not amounts that matter,its amounts for the effort.That warehouse worker likely works for £40 a week more than those bennies if they have a kid.We have the top saving like mad to get out,the bottom getting Sharon pregnant to get out and the ones in the middle getting smaller and more angry.

Its all due to being past the tipping point where those taking from the taxpayer are more than those paying.The corporation tax increase a big example,its to pay for public sector pensions and bennie increases,the productive hammered to inflation protect the none productive.The thinking is ludicrous,but they dont see this is a distribution/cost push cycle.

It's all hypothetical for me as I think UK gov is well past the point of no return, but it still suprises me that they aren't capable of considering the whole system when making these sorts of decisions. The plans are always so narrowly focused, with second order effects not even considered.

They don't need to be machiavellian geniuses to stop doing obviously stupid things. The problem is that the system works on policy and all of the policy for decades has been slanted one way. The Conservatives should have been creating alternate policy foundations, but were too lazy/dishonest/stupid to do it.

I think UK gov is more fucked than even most on here would believe.

[DurhamBorn]

2 minutes ago, marceau said:

It's all hypothetical for me as I think UK gov is well past the point of no return, but it still suprises me that they aren't capable of considering the whole system when making these sorts of decisions. The plans are always so narrowly focused, with second order effects not even considered.

They don't need to be machiavellian geniuses to stop doing obviously stupid things. The problem is that the system works on policy and all of the policy for decades has been slanted one way. The Conservatives should have been creating alternate policy foundations, but were too lazy/dishonest/stupid to do it.

I think UK gov is more fucked than even most on here would believe.

Well they are so bad each policy they make sends my roadmap into 99% probability areas and not in a good direction.Some is technical,but lots of the worst affects take about ten minutes cross market work.I think the main problem is they are all inflation protected as well,so they simply dont care,but the problem with that is that it ends in complete collapse.All main parties in the UK are enemies of ordinary people,but the scale if off the charts.

[afly]

6 minutes ago, DurhamBorn said:

Well they are so bad each policy they make sends my roadmap into 99% probability areas and not in a good direction.Some is technical,but lots of the worst affects take about ten minutes cross market work.I think the main problem is they are all inflation protected as well,so they simply dont care,but the problem with that is that it ends in complete collapse.All main parties in the UK are enemies of ordinary people,but the scale if off the charts.

There would be hope if this was the flailing end of a Labour leadership about to get hammered in an election next year.

What the fuck are we in for!?

[marceau]

8 minutes ago, DurhamBorn said:

Well they are so bad each policy they make sends my roadmap into 99% probability areas and not in a good direction.Some is technical,but lots of the worst affects take about ten minutes cross market work.I think the main problem is they are all inflation protected as well,so they simply dont care,but the problem with that is that it ends in complete collapse.All main parties in the UK are enemies of ordinary people,but the scale if off the charts.

They're fixated on the the most visible things, most likely due to lobbying but it's impossible to be sure.

Obviously will have to wait for tomorrow for the details, but this LTA boost (if it's not part of a bigger package) is like trying to fix a failing haulage firm by working on the boss's Merc and forgetting about the trucks. I mean - it's all vehicles, right? Most expensive one must be the most important......

Edited March 14, 2023 by marceau

[marceau]

1 minute ago, afly said:

There would be hope if this was the flailing end of a Labour leadership about to get hammered in an election next year.

What the fuck are we in for!?

The worst thing of all - more of the same.

[Cattle Prod]

3 minutes ago, marceau said:

They're fixated on the the most visible things, most likely due to lobbying but it's impossible to be sure.

Obviously will have to wait for tomorrow for the details, but this LTA boost (if it's not part of a bigger package) is like trying to fix a failing haulage firm by working on the bosses' Merc and forgetting about the trucks. I mean - it's all vehicles, right? Most expensive one must be the most important.

That analogy only works if the bosses Merc pays more in road tax than all the trucks put together. Someone has noticed where the majority of income tax was coming from, and that the take must be falling rapidly in that bracket,

This is all about income tax, not pensions.

[JMD]

12 hours ago, HousePriceMania said:

Powell's revealed how he'll cover $7 trillion of deposits

Even the paper money note itself (see picture) - is clearly depicting to those who want to see - that 100 trillion Zim dollars = 3 large sh*ts behind a bush!!!

Edited March 14, 2023 by JMD

[marceau]

8 minutes ago, Cattle Prod said:

That analogy only works if the bosses Merc pays more in road tax than all the trucks put together. Someone has noticed where the majority of income tax was coming from, and that the take must be falling rapidly in that bracket,

This is all about income tax, not pensions.

I agree, but they aren't growing revenues above inflation without fixing the structure. Blood out of a stone otherwise.

The analogy is that they're missing the purpose and focusing on status and symbols. Cargo-cultism in action.

Edited March 14, 2023 by marceau

[JMD]

10 hours ago, DurhamBorn said:

My worry is are there other changes to pay for it.Pushing the pension age back of factory workers to pay for even bigger pensions for consultants in the NHS etc would be shocking.They might also do this,but add pensions to estates instead of being inheritance tax free,doesnt hit those Drs as they are final salary pensions but would smash anyone in money purchase to pay for them.

Its ludicrous how often they are changing pensions rules.I dont think it will have any effect on people retiring though.Most are going because of the toxic woke bullshit and are sick of paying tax for scroungers.Im off out on the drink tomorrow for Cheltenham,but dont want to be too rough Weds as this budget could be interesting.

Yes I fear the pension changes might involve 'robbing Pete to pay Portia'...  It's the play book of all Banana Republics - favour the elite professions (doctors, etc) at the detriment of the working classes.

Edited March 14, 2023 by JMD

[geordie_lurch]

Lyn's latest newsletter is out and is another great piece of work. This time they take "A Look at Bank Solvency" : https://www.lynalden.com/march-2023-newsletter/

Some snippets

....

Here in 2023, small banks are already back down to cash levels they had at the time of the 2019 repo spike, while large banks aren’t yet. This draining of liquidity has sucked cash out of smaller banks at a faster rate than large banks, which didn’t really happen during the 2018-2019 period of quantitative tightening

...

If the Federal Reserve does continue to push forward by raising interest rates and performing quantitative tightening, the long tail of small and medium-sized banks are at risk of ongoing liquidity drains, starting with the most vulnerable and moving up from there. If the small banks sharply raise interest rates to keep deposits, then they risk getting into solvency problems. The beneficiaries of this flight to safety would most likely be several of the the largest banks and money market funds.

...

If the Federal Reserve is unable to keep up the combination of interest rate increases and quantitative tightening for much longer due to hurting small banks too much, despite price inflation still being above-target, then a basket of anti-dollar positions such as gold, oil, commodities, emerging markets, and bitcoin would likely benefit.

 

 

Edited March 14, 2023 by geordie_lurch

[Yadda yadda yadda]

1 hour ago, DurhamBorn said:

Well they are so bad each policy they make sends my roadmap into 99% probability areas and not in a good direction.Some is technical,but lots of the worst affects take about ten minutes cross market work.I think the main problem is they are all inflation protected as well,so they simply dont care,but the problem with that is that it ends in complete collapse.All main parties in the UK are enemies of ordinary people,but the scale if off the charts.

They're fucking cowards. If you gave them a plan of reform that they agreed with they still wouldn't implement it. Too difficult.

Edited March 14, 2023 by Yadda yadda yadda

[HousePriceMania]

1 hour ago, DurhamBorn said:

Well they are so bad each policy they make sends my roadmap into 99% probability areas and not in a good direction.Some is technical,but lots of the worst affects take about ten minutes cross market work.I think the main problem is they are all inflation protected as well,so they simply dont care,but the problem with that is that it ends in complete collapse.All main parties in the UK are enemies of ordinary people,but the scale if off the charts.

https://www.tickcounter.com/countdown/3628901/uk-economic-collapse

[Bilbo]

12 hours ago, No One said:

t212, aj and bell, so on... theres much to choose from

Sorry to be a pain but nobody has recommended HL. I thought most of you used them? 

I was going to open an account today for wife and another for me. I noticed that they did cash ISA as well because wife won't do anything else.

 

[afly]

2 minutes ago, Bilbo said:

Sorry to be a pain but nobody has recommended HL. I thought most of you used them? 

I was going to open an account today for wife and another for me. I noticed that they did cash ISA as well because wife won't do anything else.

 

HL is expensive for non-frequent traders when buying and selling, cheap to free for holding though. 

They are a bit lacking for many international stocks and data. Customer service is very good