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

[DurhamBorn]

2 hours ago, Jay said:

Excellent post…thanks for breakdown..I think average inflation from here on until will be more than 7% per year for the next say 4 years..next year imo is where there is the possibility of cuts happen..as for the initial high rates, imo there will be higher rates as stagflation kicks in.. as you say end of the cycle is a nightmare..

also just a hat tip..you said in the past that 1.70 cable is a possibility on your roadmap a while back…I dismissed it as news and events were negative sterling and cable was a lot lower..doesn’t seem so crazy now..your roadmap is better than tea leaves..

1.70 or 0.2,strengthening with a risk of collapse.The UK is very much now an EM country without the thin women.

[Loki]

2 minutes ago, DurhamBorn said:

The UK is very much now an EM country without the thin women.

And the women could also turn out to be a man 

 

Actually saying that...that's been a gamble in some EMs for decades 

Edited July 13, 2023 by Loki

[Heart's Ease]

16 minutes ago, DurhamBorn said:

The Brand new distribution cycle and the civil war to come

Catchy new thread title! 

Cheers everyone. I'm being a good dosbodder and decorating the mother in law's flat.  Home made scones next ❤️.

[JMD]

3 hours ago, Harley said:

Apparently 500k less did last year.  Presumably it'll be funded out of tax soon.  They should just be open and make it a govt dept with a minister in charge.

BBC funding is set to become even more controversial!  

They need to raise nearly £5billion to replace the current license fee funding model. However they know very few would willingly buy a digital subscription?

So here's some of their blue sky/panicked thinking...   I bet we'll end up getting a mashup of these abominations!!

https://www.theguardian.com/media/2022/jul/18/council-tax-levy-bbc-tv-licence-fee-future-funding-model

https://www.ispreview.co.uk/index.php/2022/01/end-of-bbc-tv-licence-fee-raises-prospect-of-broadband-tax-again.html

 

[Yadda yadda yadda]

8 minutes ago, DurhamBorn said:

1.70 or 0.2,strengthening with a risk of collapse.The UK is very much now an EM country without the thin women.

Perhaps our national economic decline will be counterbalanced by The Great Slimming of our womenfolk?

[Harley]

Well had folks visiting these last few days and I can safely say I can cook better for pennies compared to what we bought for pounds.  It's no longer just a price issue.  Many places are not only not open Mondays but now also Tuesdays.  And the quality and imagination is just not there.  People can't even cook chips these days!  Our best (by a mile) place is now just a shadow of it's former self with a very restricted and costly menu.  Recent posts about the benefits of less work and more time are so right I can't fully express how good it is both practically and for the soul.  Years on the wheel of getting caught up in the expensive work cycle versus the current walk back.  We're now getting to the point where we can't save/improve much more without others (e.g. to avoid kennel fees).  Time to build a community for stage two!  

Edited July 13, 2023 by Harley

[janch]

More on CBDCs.  He looks a bit scary but it's quite interesting especially at the end   approx 12 mins

[AWW]

1 hour ago, JoeDavola said:

Yes I'm assuming @AWW is still in some kind ot tech job so I'd be really interested to hear about the journey that took him from a public sector skive job to investment banking and the associated large salaries. Though I get why most people wouldn't want to give all their career secrets away!

Not much really, moved from a public sector skive job on alright money in the north to a multinational blue chip in London on not very much money at all, worked pretty hard during the first 5 years here and got a good reputation in my industry, then went contracting. It's a fairly well-trodden career path. Those who did it 10 years before I did are much, much better off than I will ever be.

 

1 hour ago, AlfredTheLittle said:

Full time: Salary £150k, £60k into pension, £30k tax, £60k takehome (plus £60k in your pension = £120k)

3 days a week: Salary £90k, nothing into pension, £30k tax, £60k takehome, so half the £120k. 

I agree though with @Yadda yadda yadda - I'm not sure that pension saving isn't just storing up issues down the line, it's probably worth it if you assume the rules won't change going forward.

 

Not a million miles away. I am 15 years away from accessing my SIPP so there is a not insignificant risk of the rules changing before then, but I just can't see them going explicitly for private pensions. They're going for housing wealth. Making houses cheaper isn't the vote loser that the mainstream seems to think it is.

[Harley]

2 hours ago, Castlevania said:

What do you mean by capital control issues? 

There is/was a process for getting funds from the central bank. 

[sancho panza]

2 hours ago, Cattle Prod said:

 I think the dollar is helping, so is COT positioning, but yeah the physical market has just digested the biggest SPR drawdown in history as well as the US deciding to ignore Iran sanctions and allowing them sell al their stored oil too. It was a significant addition to world supplies. But was a one off card to play, and monumentally stupid. The downside risk is a banking crisis/BK/crash as ever as the paper market will dump, but otherwise yes I see it going higher. You'll notice as well though the oil price itself corrected around 50%, good quality equiites like BP and XOM didn't. More like 20%. Good refining margins, and the fact they still make cash above ~$40 a barrel.

I wouldn't worry about the UK licencing rounds, it's noise really. UK production is in steep terminal decline, and that's just the nature of the beast, it always follows a gaussian distribution in the end. But briefly: they're not auctions like in the US, you bid a work programme ('studies' or 'well commitments'. Not at set dates, but around every 18 mths. Different areas each time, the UK govt agencies do their own work in trying to promote the areas and do a pretty good job in fairness. Bid size these days is trending down but I was just trying to point out that 100 licences out of 900 offered is not much. Offering that many is somewhat unusual, they are usually more focussed. Smacks of desperation, I guess because new licences were going to be banned not so long ago, and probably will be by Labour. As I said I haven't seen the results yet, but I'd be surprised if there were many firm wells. Or maybe the opposite, there will be a lot of firm wells as people will now drill all the speculative junk they've been fantasising about because they will get the money they waste back from the taxpayer via the EPL (windfall tax). Either way, noise. The government doesn't make any money on licencing rounds here. They get it at the other end by taxing production. That's the number to watch, they've aleady massively undershot their projected EPL gains, well, because windfall taxes don't work.

 

Thanks for the explanation CP.There's so much nuance in these issues,you need specialist knowledge to know what matters.

At the moment,I've jsut started wathcing the dollar closely again.Something gnawing at me.I've said previously that the BK will be rpeceded by a weak dollar phase  and the turn of that will signal the looming roll over.

Lot of things feeding into that besides weaker dollar,eg banking weakness and the state of many UK/US banks in terms of capital.

Oil in itself in these inflationary times plays an even bigger role than 08 especially given what you said in reply to alden ref there isn't the fields to delvier oil in a year no matter the capital thrwon at it.

9 hours ago, WICAO said:

Life really is very good.  Deciding to pursue FIRE in 2007 (which was Plan B at the time) rather than buying an over priced UK house (which was Plan A) really was a defining moment in our lives.

Fascinating that your life's path was influenced by not wanting to play financial russian roulette with a generational ponzi scheme. @AWW was commenting on the property thread about youngish couples with kids buying semi's in London for £1mn++

In many ways,I think I've followed a simialr path but jsut without your clarity of purpose and vision.I jsut sort of fell into it.It's fantastic what you've achieved in terms of ahppiness and even if you only helped one person that's a fantastic thing to do but I think you've helped many more than that Wicao.

Edited July 13, 2023 by sancho panza

[AWW]

53 minutes ago, DurhamBorn said:

The Brand new distribution cycle and the civil war to come

The civil war started in 1997, it's just that one side is only just realising it.

[AWW]

(or 1973, depending on who you think the enemy is)

[stockton]

1 hour ago, JoeDavola said:

I'd also be interested in thoughts about the UK gov cancelling a bunch of IT contracts.

So much of the IT industry over the last 15+ years here has been either consultancies ripping off the public sector (which were always seen to have bottomless wallets), and subsidized American companies setting up offices here.

If you remove public money from the UK IT industry alltogether I think it would collapse much of the 'private' industry which is really just public sector one level removed.

Thoughts?

Reading this and understanding how public sector management work, my first thought is they are looking to chatGPT et all to do most of the work.

They don't understand it but will be seeing the "cost savings" and nothing else will matter to them.

[sancho panza]

Doom porn running on a loop.covid gone

now it's fiancail armageddon...stay in your house.

https://12ft.io/proxy?q=https%3A%2F%2Fwww.telegraph.co.uk%2Fpersonal-banking%2Fmortgages%2Fhouseholds-20000-salary-cuts-rising-mortgage-bill-property%2F

Households face effective £20,000 pay cuts as mortgage bills rise

One million homeowners facing a £500 a month mortgage shock, according to Bank of England

Homeowners bracing for “disastrous” increases to their monthly mortgage bills face the equivalent of a £20,000 pay cut.

Borrowers paying the highest rate of tax face the equivalent of a £22,642 cut in gross pay if monthly mortgage bills rise by £1,000. 

Higher-rate payers face an effective cut of £20,690, while basic-rate payers would be hit with a £17,647 effective wage cut. 

Increases in monthly mortgage payments of £500 could be equivalent to a pay cut of £11,321 for additional rate payers, £10,345 for higher-rate payers and £8,824 for basic-rate payers, according to analysis from wealth managers Quilter.

The monthly mortgage bills of around 250,000 people will rise by as much as £1,000 under the same time frame, the bank said. 

More than 3.5m will see increases of between £1 and £199 in the same time period, figures published on Wednesday showed.

Karen Noye, of Quilter, said: “As a result of mortgage rates skyrocketing people are going to have significantly less cash in their pocket each month. However, when viewed through the lens of a pay cut the true damage of higher interest rates is really worrying.

“If you are a higher-rate taxpayer who is sadly seeing their monthly payments go up by £700 per month you are essentially having to find an additional £8,400 a year just to service your mortgage.

[Harley]

2 hours ago, AlfredTheLittle said:

Full time: Salary £150k, £60k into pension, £30k tax, £60k takehome (plus £60k in your pension = £120k)

3 days a week: Salary £90k, nothing into pension, £30k tax, £60k takehome, so half the £120k. 

I agree though with @Yadda yadda yadda - I'm not sure that pension saving isn't just storing up issues down the line, it's probably worth it if you assume the rules won't change going forward.

 

I don't follow, no £60K into the pension when on £90K?  To compare like for like, you need to include the tax saving so not a valid comparison.  Is it because more than £30K is needed to live on but if so that's different.  Clearly you'll get less if you earn less but that's not the point.  It's about the margin - marginal tax versus marginal value (e.g. one hour paid at the margin v one extra free hour at the margin).  And that margin judgement varies as you get older, more financially independent, etc.   I've banged on about value enough!

PS: Then you've got child benefits and the rest for some.  And that £30K tax includes the loss (taper) of allowances, etc?  And NI? 

Edited July 13, 2023 by Harley

[JoeDavola]

4 minutes ago, stockton said:

Reading this and understanding how public sector management work, my first thought is they are looking to chatGPT et all to do most of the work.

They don't understand it but will be seeing the "cost savings" and nothing else will matter to them.

Yeah I know for a fact that the big boss in my place who is very pro-automation is going to be implenting Microsoft's private enterprise ChatGPT across the business anywhere he can - I don't know the details of how it works but it allows you to use ChatGPT without risking private company data.

How useful it is remains to be seen, but I'd be lying if I said I wasn't interested in playing with it myself.

[Loki]

27 minutes ago, JoeDavola said:

implenting Microsoft... without risking private company data.

lmao

[nirvana]

[Stuey]

1 minute ago, Loki said:

lmao

It really needed a honkler punching his nose that one. 

[JoeDavola]

2 minutes ago, Loki said:

lmao

Yep I was hoping someone would pick up on that

[JMD]

1 hour ago, Loki said:

 

 

(Tribute to @marceau wherever he's got to)

Is that Labour's shadow chancellor Rachel Reeves in the background, training up her prospective BoE governor?  ...'Good boy, roll over, now f'ing play dead until 2028 !?!'

Edited July 13, 2023 by JMD

[JMD]

1 hour ago, DurhamBorn said:

The Brand new distribution cycle and the civil war to come

Darn it, no let up....   Creative - economic and social - Destruction all the way down then?

[spygirl]

On 10/07/2023 at 20:09, DurhamBorn said:

https://www.bbc.co.uk/news/business-66152690

The retired coppers in my close got £3500 increase in their pensions in one year and it will compound.The best Hunt can come up with for "the average earner" ie the private sector in a £1000 boost assuming these pie in the sky "growth" investments work out.The real story of course is every 60/40 pension scheme and even worse lifestyle ones within 5 years of retirement have lost around 33% of their value to fund those above coppers pensions,bennies,and every other retired public "servant" including Hunt himself.Look at the 2nd statement as well.Struggling the most means bennies,even though they are not struggling the most,lower waged workers are.Just more bullshit while ignoring the real systemic problems.

"He will take to the stage to unveil plans for pension fund reform aimed at boosting economic growth, promising a £1,000-a-year pensions boost to the average earner.

He will also promise the government will continue to honour its "responsibilities to those struggling the most" in the face of inflation."

 

Chart shows it - 

UK government debt to reach 310% of GDP by 2070s, fiscal watchdog warns

Public finances in ‘very risky’ position, says Office for Budget Responsibility

 

https://www.ft.com/content/a8329a62-271b-495a-a751-545e6a89787e

Comment states why -

(Edited) That £23bn in State Pension excess payments due to the triple lock is basically crowding out investment into childcare, education, and capital infrastructure. Until the UK comes to its senses and stops enabling the pensioner demographic, the whole country will simply continue on its path of managed decline.

 

(Edited) reply   In reply to The_Thinking_Goblin It is worse as public sector pensions are also linked to CPI. , even higher payments. Turning into a pension fund with an economy attached and that thing about Also "Leaving the country a better place than how one found it".

Avg earning 7.6% Triple lock - 10.1%

Civil Service - 4.5%. Civil service pensioners = 10.1%

Teachers got offered 5/6%. Teacher's Pension members got CPI, +10.1%

NHS also got 5% (plus one off £1400). NHS pension members got CPI, 10.1%

Local government - avg 6% LGPS members got CPI 10.1%

 

I don’t know about other schemes, but the NHS pension scheme is not funded by the government but by current contributors. Most years it actually turns a surplus and lends that back to HMG at highly favourable rates.

Moron.

 

All the contributions go to the Treasury. Treasury then pays out. It is nominally funded and there is no pot of money out there.

While you are correct that it had positive cashflow to the tune of around £4bn as of 2022 (that was before the 10.1% rise), it has a total liability (it is called Tax payers' equity, funnily) of around £869bn (868,972,671,000 according to the report) as of 31 March 2022.

Liability will have become smaller with higher IR and the cash flow will also smaller (probably still a small positive) when this year report is produced. S

houldn't take much to turn that into a large -ve cash flow with inflation & aging as CPI adjustments are uncapped.

https://www.nhsbsa.nhs.uk/nhs-pension-scheme-accounts-and-valuation-reports

 

Rachel Reeves - 

Rachel Reeves MP, Labour’s shadow chancellor, said: “This report just shows how far we are falling behind our peers, how exposed our economy is and again highlights that the government is failing to take action in areas like energy security to help get bills down.”

 

UKGOV need to start hackign away at publci sector pension liabilities.

Gidiot did a lot of heavy lifting accerlating woman pension from 60 -> 67.

However as it stand publuic sector wimmin accur a pension of of 50%+  of salary for each years worked. Only ~20% os funded.

UK public needs gutting.

Or at least a vast reduction i nthe nubmer of wimmin employed.

In work beenfits need removing.

Pension credit needs scrapping.

Housign benefiot need fixing to 400/m

 

 

 

 

[spygirl]

The y need to improve the means of detminign whether as task is cheaper done in public sector or not.

That wood require putting in 30 days sick (public) versus 5 (private)

And thakign into account the actual pension liability.

Poof! 80% of publci sector jobs gone.

 

[Harley]

2 hours ago, JoeDavola said:

For reasons that I don't want to go into here, I may end up with several grands worth of physical gold as a handy way to get part of my net worth out of sterling.

Nice to hear you've taken up scuba diving.  It's a great hobby!