Credit deflation and the reflation cycle to come (part 6)

[mcdongle]

16 hours ago, Yadda yadda yadda said:

Shame there is nothing there on the outstanding balance or how much if anything has been paid off the principal. Is the accrued interest one month's interest? If so the loan is around 794,000 Canadian dollars. That can't be right as the debt would be cleared much more quickly at that monthly repayment net of that interest, if also monthly. The accrued interest must either be for less than one month or based on a previous lower interest rate.

There must be the tiniest amount getting paid off for the term to be that long. Another rate rise and they will probably have to put in an horizontal 8 for time remaining to indicate infinity.

I agree about the outstanding balance, But the blog was about the extending of the term of the loans to stop a housing crash. Here is a link if you are interested in reading it.

https://www.greaterfool.ca/2023/04/page/9/

[Bien Pensant]

6 hours ago, ashestoashes said:

their staff seem to have downed tools

"In 2021 to 2022, ongoing challenges with recruitment and retention, as well as dealing with the additional correspondence demands and the level of stocks that built up as a consequence, meant HMRC’s [percentage of callers ultimately getting through] across all phone lines was 77.3%."

"In 2021 to 2022, ongoing challenges with recruitment and retention, as well as a significant increase in our correspondence workload, meant stocks of correspondence accumulated while we prioritised work to stabilise telephone performance, alongside our work on the COVID-19 support schemes and the UK’s transition from the EU."

HMRC Annual Report and Accounts 2021 to 2022

 

That was last year, God only knows what it's like now.

The other problem they'll be having is that, whether it should be or not, tax is fucking taxing. Whatever you think of civil servants, you can't just hoick a doley out of the queue and set them to clearing the backlog. For what they're paying you'll need to train them from the ground up, it'll take anywhere from 1 to 5 years, assuming you can recruit them in the first place and they don't just walk as soon as they can, and they probably don't have the old-hands about to do that any more.

Edited June 25, 2023 by Bien Pensant

[Stuey]

7 hours ago, DurhamBorn said:

VAT does capture inflation,but the problem is lots of the inflation is in zero or low VAT areas,food and energy.I have been working on some new data sets where im trying to work out what level wage increases are needed to cover bennie and pension increases.For instance £2k bennie increase for a single mother,needs a £7k pay increase on a worker.If a £33k worker gets 6% its only a £650 increase in tax so for each bennie claim you need 3 workers to fund the increase (thats just bennies).Iv got quite a lot of data now so i should be able to get close to what the average wage increase needs to be across all workers just to fund bennie increases.

Of you decided when the crash is? 

Jan 24?

[DurhamBorn]

1 hour ago, Stuey said:

Of you decided when the crash is? 

Jan 24?

You mean "Have you" seeing as your the grammar police.Im not really sure why go on threads just to try to belittle posters?.It really is not a good look.I share my work,you can take it or leave it,some on here are very very glad of it and have made a lot of money,others have saved themselves a lot of money getting long term fixes etc.Its far from a science or perfect,but id put it up against anyone else's over the last 5 years.If you think the thread worthless maybe you could just keep off it?

[DurhamBorn]

5 hours ago, Bien Pensant said:

"In 2021 to 2022, ongoing challenges with recruitment and retention, as well as dealing with the additional correspondence demands and the level of stocks that built up as a consequence, meant HMRC’s [percentage of callers ultimately getting through] across all phone lines was 77.3%."

"In 2021 to 2022, ongoing challenges with recruitment and retention, as well as a significant increase in our correspondence workload, meant stocks of correspondence accumulated while we prioritised work to stabilise telephone performance, alongside our work on the COVID-19 support schemes and the UK’s transition from the EU."

HMRC Annual Report and Accounts 2021 to 2022

 

That was last year, God only knows what it's like now.

The other problem they'll be having is that, whether it should be or not, tax is fucking taxing. Whatever you think of civil servants, you can't just hoick a doley out of the queue and set them to clearing the backlog. For what they're paying you'll need to train them from the ground up, it'll take anywhere from 1 to 5 years, assuming you can recruit them in the first place and they don't just walk as soon as they can, and they probably don't have the old-hands about to do that any more.

Everything in the public sector is failing,and will get worse.Lots causing it.The big one is people dont want to work now because of bennies,not just those getting them,but those who go out to work in a morning and see them not having to.It has destroyed morale and the work ethic in this country.Mass immigration has also put massive pressure on things.My daughter is a Mental Health Nurse and their service is collapsing,almost all their new "clients" are immigrants,from ones who they know will end up stabbing someone,to Romanias who beat their wives up.Lots of middle eastern ones with a taste for school children as well.The costs of immigration are incredible in the negative.

This inflation is being caused by lack of production,yet all policy so far has been on rates and nothing to get down government spending on consumption.I feel for anyone dealing with HMRC or any government department,the laws still fine you,but the service is not there to sort anything.

Edited June 25, 2023 by DurhamBorn

[Stuey]

10 minutes ago, DurhamBorn said:

You mean "Have you" seeing as your the grammar police.Im not really sure why go on threads just to try to belittle posters?.It really is not a good look.I share my work,you can take it or leave it,some on here are very very glad of it and have made a lot of money,others have saved themselves a lot of money getting long term fixes etc.Its far from a science or perfect,but id put it up against anyone else's over the last 5 years.If you think the thread worthless maybe you could just keep off it?

My prediction is that rates will peak then totally tumble starting probably November or December time. 

It will be cost-push, meaning that deflation through from energy will feed through and feedstock.

It is a pretty simple roadmap and no need to get angry about it unless you have VI.

[Stuey]

19 minutes ago, DurhamBorn said:

.If you think the thread worthless maybe you could just keep off it?

Just maybe you could learn from others too. 

Rather than asking for them to be banned. 

[DurhamBorn]

1 minute ago, Stuey said:

Just maybe you could learn from others too. 

Rather than asking for them to be banned. 

Im not asking anyone to be banned.Most of what i know i learned from others.You have now said where you see things going and why,thats much better.There is a very good chance rates do fall,and there is also a chance we get a whipsaw into a short deflation.This next part of the cycle is very very difficult to call in the UK.The problem we have is the government locked in higher inflation by massive bennies and pension increases,so even as energy prices fall workers are (rightly) pushing for much higher wages.There is a big risk inflation stays higher,not due to energy etc,but due to the lag of wages.Lots depends on how much more damage is done to production before we see inflation back below 3%.I see lots of structural issues feeding things in the UK,so although inflation should fall going forward,maybe 5.3% late autumn it is likely to run the cycle at 3% higher than lots of other economies,so i prefer EMs for capital.If i was buying a house,i suspect 12 to 18 months might be a decent pitch.

[Stuey]

3 minutes ago, DurhamBorn said:

Im not asking anyone to be banned.Most of what i know i learned from others.You have now said where you see things going and why,thats much better.There is a very good chance rates do fall,and there is also a chance we get a whipsaw into a short deflation.This next part of the cycle is very very difficult to call in the UK.The problem we have is the government locked in higher inflation by massive bennies and pension increases,so even as energy prices fall workers are (rightly) pushing for much higher wages.There is a big risk inflation stays higher,not due to energy etc,but due to the lag of wages.Lots depends on how much more damage is done to production before we see inflation back below 3%.I see lots of structural issues feeding things in the UK,so although inflation should fall going forward,maybe 5.3% late autumn it is likely to run the cycle at 3% higher than lots of other economies,so i prefer EMs for capital.If i was buying a house,i suspect 12 to 18 months might be a decent pitch.

I agree there is a risk that inflation could stay high, mainly because of boomers and inflation-linked benefits. 

However mortgaged DEANO will be suffering badly.

Eventually tumbling energy prices will feed throughout the economy. 

[DurhamBorn]

14 minutes ago, Stuey said:

I agree there is a risk that inflation could stay high, mainly because of boomers and inflation-linked benefits. 

However mortgaged DEANO will be suffering badly.

Eventually tumbling energy prices will feed throughout the economy. 

That is the massive tug of war going on in the economy.IF the government had dealt with the structural issues of bennies and pensions the economy would be starting to heal now.Its my focus at the moment in my work because im trying to get the numbers together on exactly how much spending is tax payer funded and inflation linked.Its funny  because in many ways its very simple and the economy has simply sent out price signals,and over time the invisible hand should respond with production.However we have far too large a percentage of the population who dont need to adjust to price signals.

Due to such poor leadership since Blair got in,almost all the pain is now going to be pointed at the small part of the population who do the work,and have the least assets.

I track lots of different areas,and i have never seen all of them flashing red like they are now.From a policy point its where do you start?.For me,massive bennies reform and massive social house building for sale and rent would be a good start,along with zero net immigration.Without those three things it will just get worse.

Edited June 25, 2023 by DurhamBorn

[Kendo]

Tug of war is a good way of putting it. Perversely, I’ve seen some tweets/comments suggesting the rise in interest rates themselves are inflationary. Maybe just VIs calling for the BoE to stop but I was wondering if, because businesses and people have so much debt, if the rising interest costs would encourage price rises and higher wage calls to compensate. I don’t agree on the whole but perhaps in some cases that’s happened. 
 

I’ve noticed more people talking about the bluntness of interest rate rises in cooling demand, particularly given how many people are on fixed mortgages and because it’s solely cost-push inflation (in their view I mean). But when every other central bank is increasing rates and we import so many basics, it would have been suicidal for sterling surely if interest rates had not risen.

[Axeman123]

13 minutes ago, Kendo said:

Perversely, I’ve seen some tweets/comments suggesting the rise in interest rates themselves are inflationary.

L Alden is in that camp, and asserts that since the massive debts of governments mean that the interest on it will have to be printed that will act as QE. Businesses and individuals OTOH won't necessarily be able to pass on interest costs etc, and damn sure won't be able to print, so will likely just go bust instead.

14 minutes ago, Kendo said:

Maybe just VIs calling for the BoE to stop

Exactly, good arguements can be made but mostly people will just be talking their book. Some may have latched on to credible stuff they found online, perhaps like Alden, others will just be confabulating whatever they need to justify their own agenda and by luck have aligned partially with something that makes sense. Those same people would have been chuckling at Erdogan in Turkey making those same arguements a few years back from a position of comfort.

21 minutes ago, Kendo said:

I’ve noticed more people talking about the bluntness of interest rate rises in cooling demand, particularly given how many people are on fixed mortgages and because it’s solely cost-push inflation (in their view I mean).

None of those people would have felt the need to comment on the bluntness of pumping their house prices to the moon as a tool! They are right, to a degree, in that in the UK it is govt spending that needs to be cut and is driving inflation. I don't expect repeater stations to take up that narrative though...

[Wight Flight]

The government spends 50% of my money yet tell me that i need to cut back on spending the 10% of my income that is discretionary to solve the inflation problem.

I haven't heard a single one of them suggest cutting back the 30% odd of government spend which is non essential. Perhaps that would do more to reduce inflation?

[Axeman123]

2 minutes ago, Wight Flight said:

The government spends 50% of my money yet tell me that i need to cut back on spending the 10% of my income that is discretionary to solve the inflation problem.

I haven't heard a single one of them suggest cutting back the 30% odd of government spend which is non essential. Perhaps that would do more to reduce inflation?

Exactly, however the only tool CBs have is interest rates and it only works on your discretionary spending etc. Governments are sovereign, and can even print the interest on their debts. Only systemic collapse, or the looming spectre of it, can rein govt spending in. The lack of a mortgage bailout so far means we may have reached that point.

[Yadda yadda yadda]

I wish there was a debate about what a successful economy is. For me it is one where wages are growing more than inflation.  You can make the argument for GDP per capita instead. As a worker I prefer a measure that takes my reward into account.

Clearly policy since at least 2008 has failed me and the majority of the population. As far as I can see this isn't even discussed. No-one in politics appears to realise just how bad things have been for Joe Public.

Is it any wonder workers are demotivated when they are told they must receive less money each year? That is where the real anger comes from, nevermind benefits.

Edited June 25, 2023 by Yadda yadda yadda

[Sugarlips]

1 hour ago, DurhamBorn said:

You mean "Have you" seeing as your the grammar police.Im not really sure why go on threads just to try to belittle posters?.It really is not a good look.I share my work,you can take it or leave it,some on here are very very glad of it and have made a lot of money,others have saved themselves a lot of money getting long term fixes etc.Its far from a science or perfect,but id put it up against anyone else's over the last 5 years.If you think the thread worthless maybe you could just keep off it?

Indeed much appreciation here, sometimes it’s when you don’t do something that you benefit the most. I’m very grateful to have stopped chasing and just be completely debt free at this point - if in doubt don’t do owt..

[NogintheNog]

1 hour ago, Stuey said:

Rather than asking for them to be banned. 

I have to say that's pretty disrespectful Stuey. What made you think DB was asking for you to be banned?

I don't think you have done yourself any favours there

[StrugglingMillennial]

1 hour ago, Stuey said:

I agree there is a risk that inflation could stay high, mainly because of boomers and inflation-linked benefits. 

However mortgaged DEANO will be suffering badly.

Eventually tumbling energy prices will feed throughout the economy. 

Why do you think energy prices will fall?

As far as I see OPEC has been reducing production and US shale can't replace the loss.

Yes a recession will reduce consumption but global oil consumption is still very high and is projected in the short term at least to go even higher.

[DurhamBorn]

54 minutes ago, Kendo said:

Tug of war is a good way of putting it. Perversely, I’ve seen some tweets/comments suggesting the rise in interest rates themselves are inflationary. Maybe just VIs calling for the BoE to stop but I was wondering if, because businesses and people have so much debt, if the rising interest costs would encourage price rises and higher wage calls to compensate. I don’t agree on the whole but perhaps in some cases that’s happened. 
 

I’ve noticed more people talking about the bluntness of interest rate rises in cooling demand, particularly given how many people are on fixed mortgages and because it’s solely cost-push inflation (in their view I mean). But when every other central bank is increasing rates and we import so many basics, it would have been suicidal for sterling surely if interest rates had not risen.

Yes it is inflationary for the reason you say,until things collapse in a fire sale.I think it is all they have to stop a sterling collapse,and needed to get close to gilts anyway to try to slow them down as well.

[Butthead]

19 minutes ago, Axeman123 said:

L Alden is in that camp, and asserts that since the massive debts of governments mean that the interest on it will have to be printed that will act as QE...

For me this is the most interesting aspect of our situation that is yet to come. In the UK, debt to GDP is roughly double what it was in the '70s (Chart link), and government spending on debt is increasing at an alarming rate (OBR Link). Governments printing to pay debt and/or rates coming down because they have to lower their own debt burden cost both lead to a Sterling crisis as far as I can see, from which there is no obvious escape.

It's not just the UK though. In the US, lots of debt is held overseas. You can imagine a US politician standing up in the next couple of years and making the point that "China is our biggest enemy but each month we pay them $x Bn in debt interest" and making a spurious case for selective default. Then presumably you get a dollar crisis, and/or war...

 

[NogintheNog]

1 hour ago, Stuey said:

I agree there is a risk that inflation could stay high, mainly because of boomers and inflation-linked benefits. 

However mortgaged DEANO will be suffering badly.

Eventually tumbling energy prices will feed throughout the economy. 

15 years of NIRP and QE has really distorted the financial system, and the market is trying desperately to find the equilibrium swing to rebalance which may well need to be a recession, which is being openly talked about now by Hunt & Bailey. I have no doubts in their ability to achieve that!

1 hour ago, Stuey said:

My prediction is that rates will peak then totally tumble starting probably November or December time. 

It will be cost-push, meaning that deflation through from energy will feed through and feedstock.

It is a pretty simple roadmap and no need to get angry about it unless you have VI.

Sure, falling energy will be felt further down the line.

But so will inflation linked increases for a big chunk of the population, demand for energy/food for illegals, and labour cost increases for employers. None of those things will be reduced in line with any energy cost deflation.

Still at least you have given us a timeline to watch, and we'll know by the end of the year if your thesis is correct.

[Stuey]

29 minutes ago, StrugglingMillennial said:

Why do you think energy prices will fall?

As far as I see OPEC has been reducing production and US shale can't replace the loss.

Yes a recession will reduce consumption but global oil consumption is still very high and is projected in the short term at least to go even higher.

It's not that I think they will. It is that it has already happened. 

Just a few months and it will feed into bills.

Sorry for the axis

 

[Errol]

8 minutes ago, Stuey said:

It's not that I think they will. It is that it has already happened. 

Just a few months and it will feed into bills.

Sorry for the axis

 

Green tariffs starting from July on all bills. Extra £170 a year.

[montecristo]

 

[Underwhelmed]

how do i get tax relief on my SIPP contribution for the higher rate bracket, I don't do a tax return so do I just write to them? ta