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

[Plan-b]

53 minutes ago, Herd said:

Buy a house , buy gold , buy silver. Anything  tangible is far better than digits floating around in the ether , that occasionally appear on our screens.

Short term gains are comforting but when the tide turns the messages about being in it for the long run turn to ashes.

Nearly yes, not the house though in the UK they are denominated in pounds, they're falling in value in 2 ways, by value and by currency and they cost in upkeep..

Pms are denominated in dollars, a really handy fact.

[Chewing Grass]

8 hours ago, Cattle Prod said:

To emphasise my point about the ‘practically free energy’ have a look at this. You can see why they figured they didn’t need Bretton Woods or gold any more after 1971. And it’s not a stretch to link it to the drop off in innovation (computers and chips and telephony kicked off before this you could argue) and productivity after this too.

Yeah it’s all been a bit of a laugh since then, don’t worry about banking crises or printing money, we can get free productivity and growth from fossil fuels! No need for a Concorde designer, encourage him to design financial derivatives instead.

Until that incremental 1m barrels a year stops.

Note how the graph has not been updated for 10 years.

This covers the gap, growth has plateaued.

[JMD]

5 hours ago, JMD said:

I think the theory is that all fiat denominated assets and liabilities in the old-fiat are debased...    I shall find and post part 2.

@Yadda yadda yadda I found part 2, he talks about mortgages from the 7minute mark...

I meant to answer your comment about Thompson's perceived blasé attitude. I think it's much more a cynical attitude being shown toward how the monetary system 'rules' can be changed at will. The examples Thompson gives of previous resets, in Brazil for example, are historically interesting because they show the outrageous manipulation of the currency by Brazil government, and also shows how  accepted these money experiments are by the financial system, IMF, etc.

 

 

Edited March 26, 2023 by JMD

[Lightscribe]

Things kicking off in Israel now. Well there’s never a dull moment.

It’s shaping up to look like being an interesting week.

 

[Yadda yadda yadda]

36 minutes ago, JMD said:

@Yadda yadda yadda I found part 2, he talks about mortgages from the 7minute mark...

I meant to answer your comment about Thompson's perceived blasé attitude. I think it's much more a cynical attitude being shown toward how the monetary system 'rules' can be changed at will. The examples Thompson gives of previous resets, in Brazil for example, are historically interesting because they show the outrageous manipulation of the currency by Brazil government, and also shows how  accepted these money experiments are by the financial system, IMF, etc.

 

 

Thanks, I'll take a look tomorrow.

[King Penda]

3 hours ago, Long time lurking said:

Yep that`s what would happen if the bread and circuses was stopped ,for the tens of millions and that is why the public sector is not a sacred cow ,the public sector will be cut before significant welfare cuts why because it`s less politically damaging 

it was you that went of on a tangent with mass rapes and elites 

That was my whole point and the miners were public sector workers which were thrown under the bus when push came to shove 

 

Todays winner that’s what’s going to happen means tested pensions can take many forms the government promised you 190 ish a week .that’s all they have to give you private pension of 100 we will give you 90 . We kept our promise of 190. The general public won’t give a flying fuck if these insane pensions are pruned of teachers police twats that are high up in the council . They realy won’t give a fuck benifits are a bit harder to deal with because that many are claiming them 

[JMD]

8 hours ago, Axeman123 said:

Did any of the previous ones happen without the wholesale collapse and reconstitution of a nation state, like with the various transitions to new German Marks? It seems to be like an animal chewing its own paw off to escape a trap. Do you know of any examples of a basically functioning economy doing a transition?

Brazil and W. Germany are examples, very different types of economies, but both were stronger within 20 years.

However I don't see currency reset as a solution, merely only as a policy government might try. I posted a few months back that my base case was Nappier's 'government bank credit guarantees' happening (which I think is the topic of your Kofinas post up thread?), but if that failed would be followed by a cbdc/monetary reset. I recently swopped those two policies around in terms of timeline risk because I now view US foreign policy as kinda suicidal with no way back, so I figure why shouldn't they go for a full reset and start afresh with an unencumbered currency? 

Edited March 26, 2023 by JMD

[King Penda]

27 minutes ago, JMD said:

Brazil and W. Germany are examples, very different types of economies, but both were stronger within 20 years.

However I don't see currency reset as a solution, merely only as a policy government might try. I posted a few months back that my base case was Nappier's 'government bank credit guarantees' happening (which I think is the topic of your Kofinas post up thread?), but if that failed would be followed by a cbdc/monetary reset. I recently swopped those two policies around in terms of timeline risk because I now view US foreign policy as kinda suicidal with no way back, so I figure why shouldn't they go for a full reset and start afresh with an unencumbered currency? 

Such hope then but all that’s changed is that Germany has unified and treats the rest of Europe like Russia treated east Germany.ps I had tears in my eyes when the Berlin Wall came down .

 

 

Edited March 27, 2023 by King Penda

[Axeman123]

23 minutes ago, JMD said:

I posted a few months back that my base case was Nappier's 'government bank credit guarantees' happening (which I think is the topic of your Kofinas post up thread?)

In practice there would likely be multiple ways for the government to direct/ration credit, and a patchwork of carrots and sticks might be employed to that end.

So for example credit gaurantees would eliminate or reduce default risk associated with lending to priority areas of the economy, whereas conditional CB funding would reduce or eliminate the associated cost of funding for lending to those areas. On the other hand regulation could force a minimum percentage of lending to be for those priority areas, and perhaps impose punitive cost of borrowing from the CB for excess leding to low priority areas of the economy (eg consumption/trampolines etc).

32 minutes ago, JMD said:

so I figure why shouldn't they go for a full reset and start afresh with an unencumbered currency? 

I don't see a new currency getting the same perks as the USD, so it would be a net loss. There is no need to formally default on a currency when you could just devalue it to nothing with inflation and printing first.

All the historical currency resets that I am aware of happened because no-one would accept the old currency because it was at the end of that road already.

 

[JMD]

8 hours ago, Long time lurking said:

What is a currency reset ? there is no definition just speculation of what it actually is 

You could argue the EU have had a currency reset since the euro came to fruition 

The problem the west has is debt and going forward it`s being able to sell that debt ,the game of central banks lending money to it`s retail sector at 0% to buy the central banks bonds that no one are willing to buy are over ,why do you think Japan has been selling UST`s and buying their own bonds with the money raised 

 

It's a managed monetary collapse involving debt default. As you suggest there are no good options left once a country becomes insolvent and can't offload it's debt burden by selling to others. Not saying it's imminent but risk is increasing with the suicidally  crazed US foreign policy during previous year.

Edited March 27, 2023 by JMD

[JMD]

8 hours ago, DurhamBorn said:

I dont even think the problem is debt,the CBs own so much of that,the problem is deficits,because the state is so huge now,so many bennie and state worker pension promises even is good times they cant cover spending.The bomb under western economies,the UK a front runner is inflation linking the incomes of those who dont produce.It means those calling the shots,including all state workers have no loss from inflation.Look at the BOE,beyond useless,yet RPI pensions,they gain the worse it gets.We are at the stage where a lifetimes savings can be worthless after 3 to 6 years if they are in assets that fall or flatline in value with inflation running hard.Hardly anyone seems to understand that they have taken about a third of the wealth so far to pass to the none productive in a few years.How do you stop them taking everything when its over 50% taking ?.

The UK is in serious trouble.If i roadmap from here you get collapse if they dont change,collapse if they do.The only hope is a decade long plan to cut government spending while they increase primary manufacture,mining,energy,food etc jobs,they dont even understand that,there is zero happening on it.

I've gotten very pessimistic about our politicians. Always was but now am totally off the chart. I think they've given up, worse still their energy and Ukraine antics look totally self destructive. Plus surely our deficits (and debt burden) can only increase from here especially with inflation and higher cost of debt? Tbh the only thing that might possibly change my mind is if Trump were to win next US election and then magically form a detent with Russia (oh and the return of my gazprom shares!!). 

[WICAO]

10 hours ago, DurhamBorn said:

I dont even think the problem is debt,the CBs own so much of that,the problem is deficits,because the state is so huge now,so many bennie and state worker pension promises even is good times they cant cover spending.The bomb under western economies,the UK a front runner is inflation linking the incomes of those who dont produce.It means those calling the shots,including all state workers have no loss from inflation.Look at the BOE,beyond useless,yet RPI pensions,they gain the worse it gets.We are at the stage where a lifetimes savings can be worthless after 3 to 6 years if they are in assets that fall or flatline in value with inflation running hard.Hardly anyone seems to understand that they have taken about a third of the wealth so far to pass to the none productive in a few years.How do you stop them taking everything when its over 50% taking ?.

The UK is in serious trouble.If i roadmap from here you get collapse if they dont change,collapse if they do.The only hope is a decade long plan to cut government spending while they increase primary manufacture,mining,energy,food etc jobs,they dont even understand that,there is zero happening on it.

Sequence of returns risk is the big one for anyone trying to live off wealth.  Therefore, to try and at least have a feel for what was going on personally, so I could adapt as required, when I first FIRE'd I set up a little forward looking spreadsheet to try and monitor it for my life using history as the reference to compare with.

As they were readily available I used US datasets and the filters were 65% Equities : 5% Gold : 25% Bonds : 5% Cash, no portfolio rebalancing, no cash growth, 0.25% expenses and a 2.5% withdrawal rate.  After 30 years there were 5 sequences where ending wealth in real terms was less than starting wealth.

I then started comparing from end of 2018 meaning I'm a bit over 4 and a bit years into the experiment.  To date I have lost, in real terms, 8.8% of my wealth and I consider my financial savviness a little above the average punter.  Of my 5 sequences I'm comparing against there is only one sequence which is performing worse by this point.  It started at the end of 1965.  It's early days but if the thesis of this thread plays out this little experiment might prove invaluable for spending management.

[Democorruptcy]

 

[belfastchild]

I didnt realise there was another round of cost of living payments going out.
https://www.bbc.co.uk/news/business-65066972

Up to 900 quid spread over spring, autumn and spring 2024. 300 quid extra for pensioners in the winter and 150 quid extra for disabled in the summer.

Im trying to think of something smart arsed or witty to say about that, or make some crack about loading up the fb marketplace and gumtree posts to try and recoup some of that but think I'll just finish my coffee and work out how to spend another 200 quid on the business to take me down to the tax threshold before the end of the financial year.

[Onsamui]

16 minutes ago, belfastchild said:

I didnt realise there was another round of cost of living payments going out.
https://www.bbc.co.uk/news/business-65066972

Up to 900 quid spread over spring, autumn and spring 2024. 300 quid extra for pensioners in the winter and 150 quid extra for disabled in the summer.

Im trying to think of something smart arsed or witty to say about that, or make some crack about loading up the fb marketplace and gumtree posts to try and recoup some of that but think I'll just finish my coffee and work out how to spend another 200 quid on the business to take me down to the tax threshold before the end of the financial year.

I did not think it was all pensioners only those on some kind of credit.  I have had the topped up winter fuel one.

[Errol]

8 minutes ago, Onsamui said:

I did not think it was all pensioners only those on some kind of credit.  I have had the topped up winter fuel one.

All pensioners get the £300 extra heating allowance payment. No means testing.

[Onsamui]

25 minutes ago, Errol said:

All pensioners get the £300 extra heating allowance payment. No means testing.

Great!  Thanx.

[M S E Refugee]

Thungela to pay £1.42 per share dividend after South African withholding tax.

[ThoughtCriminal]

I'm sure it's nothing...........

[Long time lurking]

 

[desertorchid]

5 minutes ago, Long time lurking said:

 

7 years ago?

[dev.null]

OWCH!

https://www.marketwatch.com/story/scotgold-resources-shares-fall-on-going-concern-uncertainty-7f403968

Edited March 27, 2023 by dev.null

[Plan-b]

3 minutes ago, dev.null said:

OWCH!

They're likely to be in trouble.. 

 https://www.marketwatch.com/story/scotgold-resources-shares-fall-on-going-concern-uncertainty-7f403968

[Long time lurking]

11 minutes ago, desertorchid said:

7 years ago?

I just noticed that why that popped up in my feed I have not got a clue even so it goes to show how long this game has been at play 

[DurhamBorn]

5 hours ago, WICAO said:

Sequence of returns risk is the big one for anyone trying to live off wealth.  Therefore, to try and at least have a feel for what was going on personally, so I could adapt as required, when I first FIRE'd I set up a little forward looking spreadsheet to try and monitor it for my life using history as the reference to compare with.

As they were readily available I used US datasets and the filters were 65% Equities : 5% Gold : 25% Bonds : 5% Cash, no portfolio rebalancing, no cash growth, 0.25% expenses and a 2.5% withdrawal rate.  After 30 years there were 5 sequences where ending wealth in real terms was less than starting wealth.

I then started comparing from end of 2018 meaning I'm a bit over 4 and a bit years into the experiment.  To date I have lost, in real terms, 8.8% of my wealth and I consider my financial savviness a little above the average punter.  Of my 5 sequences I'm comparing against there is only one sequence which is performing worse by this point.  It started at the end of 1965.  It's early days but if the thesis of this thread plays out this little experiment might prove invaluable for spending management.

Yes,and your not really retired in the way 99.9% of people do it,they stop earning and then start taking 4% drawdowns mostly with IFA fees on top.Just this year they would of needed over 15% returns when instead they likely got -10%+ ones.Of course over most periods you then get a run of years where they make 8% and withdraw 4% plus fees,but a few years at the start with inflation adjusted 15% down pa the retirement and pension is destroyed over 3 years with no way back.There is a very real risk,most pensions that went into drawdown from just before Covid onwards will run out of money in under a decade.

The point is the average pension holder is having their lifetimes savings stolen,and at a very fast pace.This isnt 1% a year.The only thing that really saved my familys wealth was getting the cycle turn right,that has proved critical,so really simply getting out of the way,then getting way out in front.I see things now as trying to grow with inflation at worst because outperforming in the middle of the cycle wont be easy.We should manage it,but its far from a given.Like you say spending management will likely be critical for those in drawdown etc.