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

[Virgil Caine]

1 hour ago, Harley said:

Funny, I once had the same conversation with a German who thought the UK salaries were attractive!  Plus the job was in Slough!

Presumably he had never visited Slough.

[Long time lurking]

 

[AWW]

On 07/08/2023 at 17:53, AWW said:

I move to a 3-day week next week. My take home will be almost exactly equal to our current outgoings, so there'll be nothing left to put into savings or additional pension contributions unless we cut back on spending somewhere.

I expected colleagues to say, "WTF?" but every single one I have told said they're going to ask for the same thing.

Well, that backfired. So many people have asked to do the same thing that they now say I have to stay on full-time hours.

[Castlevania]

1 hour ago, Stuey said:

I don't think it matters now that the government is fixing retail prices (based on a wholesale model). 

Octopus have a proper variable tariff (changes every day in line with wholesale prices).

13 minutes ago, AWW said:

Well, that backfired. So many people have asked to do the same thing that they now say I have to stay on full-time hours.

Should have kept your mouth shut

[AWW]

3 minutes ago, Castlevania said:

Should have kept your mouth shut

You reckon?

[leonardratso]

8 minutes ago, AWW said:

You reckon?

simply string it out, i havent done anything for months at home, ive just bullshitted them, getting harder ill admit, but its like im doing zero days a week, never mind 3.

[Libspero]

2 hours ago, Axeman123 said:

You're giving me @Libspero vibes man.

I didn't realise I held such fame..   I barely post on this thread.

Nice to see our BRLA are paying out and doing well 

[Plan-b]

2 minutes ago, Libspero said:

I didn't realise I held such fame..   I barely post on this thread.

Your always Welcome - how's your Polymetal and Gazprom shares doing?

[sancho panza]

28 minutes ago, Plan-b said:

Your always Welcome - how's your Polymetal and Gazprom shares doing?

 

Poly £3.56 using cable 1.27

Edited August 11, 2023 by sancho panza

[King Penda]

19 hours ago, leonardratso said:

sounds a bit gay to me

Indeed in stoke only gay men would reconise a decent aftershave the women around here think lynx is exotic 

[crashmonitor]

7 hours ago, MrXxxx said:

UK Economy stronger in June than expected:

https://www.theguardian.com/business/live/2023/aug/11/uk-gdp-economy-growth-stagnation-contraction-june-q2-business-live

...good news for the economy, bad news for homeowners [as it will 'allow' the BoE to justify further rate hikes]

There has been a cuntish hope from the VIs that the economy will fall to rescue them from mortgage hikes. The facts that restaurants and roads are rammed, and you can't get a trader for love nor money is strangely off these journos radars. I've no idea what situation Liam Halligan is in, but I'm sick to death of his campaign to stop the rises. No matter that we need about five years of deflation to make up for the 25% Covid hyperinflation ( to get back on the 2% target) and that real rates are still  at negative 2.65%.

 

But that is the rub they want free money forever and negative rates, always weighted in the debtors favour.

Well soz if you carry on like that you become Turkey or Argentina and everyone loses more thsn faith in fiat. You fear a complete Weimar collapse 

Edited August 11, 2023 by crashmonitor

[sancho panza]

cross psot from tut banking thread.Key thing here this is going to force a few issues out into the open.People paying down debt is inherently deflationary from a credit perpsective.Last few days we've analysed Barclays results and despite profits booming the shares are not getting bid at all.They';re on a PE of 4 and Dowd Buckner leverage ration of circa 66/1.This could well be the calm before the storm with stated equity something like 3x ++ the market cap.

@Castlevania often cautions Mr market could be wrong  but that's a big gap.

 

'Fishers paradox  asserts that teh more people pay down debt the more they will be unable to pay down debt as the economy will shrink

from the results weve seen in the last few days net interest margins have been strong and profits too for the big boys.Also possibly indicative of smaller palyers struggling in wholesale markets

Obviously it wasnt going to last.

fascinating to see consumer behaviour here forcing bigger banks into whoelsale markets

Let's refresh Fisher

Fisher's formulation (1933)

In Fisher's formulation of debt deflation, when the debt bubble bursts the following sequence of events occurs:

Assuming, accordingly, that, at some point in time, a state of over-indebtedness exists, this will tend to lead to liquidation, through the alarm either of debtors or creditors or both. Then we may deduce the following chain of consequences in nine links:

1. Debt liquidation leads to distress selling and to
2. Contraction of the money supply, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of the money supply and its velocity, precipitated by distress selling, causes
3. A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be
4. A still greater fall in the net worths of business, precipitating bankruptcies and
5. A like fall in profits, which in a "capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make
6. A reduction in output, in trade and in employment of labor. These losses, bankruptcies and unemployment, lead to
7. pessimism and loss of confidence, which in turn lead to
8. Hoarding and slowing down still more the velocity of circulation.

   The above eight changes cause

9. Complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest.

— (Fisher 1933)

https://12ft.io/proxy?q=https%3A%2F%2Fwww.telegraph.co.uk%2Fpersonal-banking%2Fsavings%2Fsavers-pull-out-80bn-britains-biggest-banks-interest-rates%2F

Savers pull £80bn out of Britain’s four biggest banks in protest of dismal rates

Savers are either switching to rival savings providers or paying off rising mortgage bills

By Tom Haynes 11 August 2023 • 11:03am

Savers have pulled £80bn out of Britain’s biggest four banks in search of better rates and to pay down mortgages. 

NatWest, Lloyds, HSBC and Barclays saw outflows of roughly £78bn in the 12 months to June 2023 – the biggest annual drop since 2018, according to analysis of company reports by the Financial Times. 

Experts suggest frustrated savers were voting with their feet and moving to rival savings providers paying higher rates, or were using cash to help cover rising mortgage bills. 

It has been almost two months since the Chancellor ordered high-street banks to pass on higher rates to savers. Britain’s biggest banks had been quick to increase costs for mortgage borrowers, but far more hesitant to lift “easy-access” savings rates.

In July the House of Commons Treasury Committee accused the big four of “blatant profiteering” and “squeezing higher profits from their loyal savings customers”. Just last week the city watchdog set a deadline for banks to justify low savings rates or face a penalty.  

Yet since the Bank of England first began raising the Bank Rate in December 2021, the average rate on an easy-access savings account has risen by a mere 2.68 percentage points, from 0.2pc to just 2.88pc, despite far larger increases in central rates. 

The average two-year fixed mortgage rate has shot up from 2.34pc to 6.8pc according to the financial data provider Moneyfacts.

Out of the top five easy-access deals, none are offered by the large high-street banks. 

The best savings deals are typically offered by smaller “challenger banks”, who have been much faster to respond to the changing interest rate environment, offering rates of more than 6pc in some cases.

Anna Bowes, of analyst Savings Champion, said the figures suggested some savers “have finally realised how much interest they are missing out on by remaining loyal to their high-street provider, or by leaving their cash to languish because it’s convenient”. 

She said a leading account, such as the app-only Tandem Instant Access Saver, paying 5pc, could earn £1,250 more in interest than the top-paying high-street bank account, which pays 2.5pc.

Ms Bowes added: “By not shopping around you could be missing out on hundreds if not thousands of pounds in interest.”

High-street banks have defended their rates, insisting they offer value for money and pointing to fixed-rate deals as opposed to their easy-access accounts, with the former typically paying more.

[Libspero]

2 minutes ago, Plan-b said:

Your always Welcome - how's your Polymetal and Gazprom shares doing?

I don't like to laugh at others misfortune,   but after a lot of promotion here I imagine quite a few got caught out by that.

I was toying with Poly for a while but ended up going for Fres. TFFT 

Mining shares I usually go for the investment trusts..   BRWM,  BRLA etc  they've done ok.

[sancho panza]

more navel gazing from the MSM and the Wall St paper traders.

Wake me up when physcial demand is below 98mbpd at $70.Supply might get below 100mbpd but that's a very different issue from a price perspective.

do they get paid to produce this bilge? What are the french going to pwoer their leccy cars with? uranium from Niger?

https://www.telegraph.co.uk/business/2023/08/11/oil-demand-slow-2024-electric-car-market-grows/

Oil demand set to slow in 2024 as electric car market grows

Growth will more than halve next year as green energy policies cap demand

Growth forecasts for global oil demand next year have been downgraded as the post-pandemic recovery stalls just as electric vehicle (EV) use surges.

The International Energy Agency (IEA) said on Friday that demand will rise by only one million barrels per day (bpd) in 2024, which is 150,000 bpd less than previously forecast.

This will be a blow to both Russian President Vladimir Putin, who is using oil and gas revenues to fund his war in Ukraine, and Saudi Arabia’s Crown Prince Mohammed bin Salman, whose oil profits are driving the country’s economic diversification.

The IEA said: “With the post-pandemic rebound running out of steam, and as lacklustre economic conditions, tighter efficiency standards, and new electric vehicles weigh on use, growth is forecast to slow to 1m bpd in 2024.”

The Paris-based energy watchdog has forecast that 14 million electric vehicles will be sold by the end of 2023, a 35pc surge compared to 2022.

By 2030, it expects EV use will be displacing five million barrels of oil per day.

But for now, world oil demand is still hitting record highs following China’s post-pandemic reopening and a rebound in global air travel.

In June, demand hit an all-time peak of 103m bpd. The IEA said August demand could surpass this level.

The IEA said global oil demand will jump by 2.2m bpd to hit 102.2m bpd in 2022(2023 sic), with China driving more than 70pc of this growth.

At the same time, a succession of production cuts led by Saudi Arabia has driven a rally in prices, as Brent crude surpassed $88 per barrel on Thursday – its highest level since January.

Global oil supply fell by nearly a million bpd to 100.9m bpd in July, following sharp cuts in production from Saudi Arabia and its allies.

However, the IEA analysis found that Putin and the Saudi Crown Prince may not be able to rely on this boom long-term.

It said growth in demand will more than halve next year, as high interest rates dent economic growth across the West and green energy policies cap demand.

The IEA added: “The global economic outlook remains challenging in the face of soaring interest rates and tighter bank credit, squeezing businesses that are already having to cope with sluggish manufacturing and trade.”

 

https://www.iea.org/reports/oil-market-report-july-2023

Global oil demand is projected to climb by 2.2 mb/d in 2023 to reach 102.1 mb/d, a new record. However, persistent macroeconomic headwinds, apparent in a deepening manufacturing slump, have led us to revise our 2023 growth estimate lower for the first time this year, by 220 kb/d. Buoyed by surging petrochemical use, China will account for 70% of global gains, while OECD consumption remains anaemic. Growth will slow to 1.1 mb/d in 2024.

[King Penda]

9 minutes ago, crashmonitor said:

There has been a cuntish hope from the VIs that the economy will fall to rescue them from mortgage hikes. The facts that restaurants and roads are rammed, and you can't get a trader for love nor money is strangely off these journos radars. I've no idea what situation Liam Halligan is in, but I'm sick to death of his campaign to stop the rises. No matter that we need about five years of deflation to make up for the 25% Covid hyperinflation ( to get back on the 2% target) and that real rates are still  at negative 2.65%.

 

But that is the rub they want free money forever and negative rates, always weighted in the debtors favour.

Well soz if you carry on like that you become Turkey or Argentina and everyone loses more thsn faith in fiat. You fear a complete Weimar collapse 

Indeed 

[King Penda]

11 minutes ago, Libspero said:

I don't like to laugh at others misfortune,   but after a lot of promotion here I imagine quite a few got caught out by that.

I was toying with Poly for a while but ended up going for Fres. TFFT 

Mining shares I usually go for the investment trusts..   BRWM,  BRLA etc  they've done ok.

I had a funny conversation last night with a guy moaning about how much his morgage had gone up I’d guess about aged 40.I’m like my normal thoughtful self and said suck it up buttercup. He is why don’t you care about morgage holders I’m like do you care about my mum. She is a saver and has way over 100k in cash she gets /got fuck all interest on.I’m like do you have any clue how much 100k 10 years ago would be at 5% . He said 105k . I’m like think simple it’s 150k without compounding the interest.he actually asked what compound intetest was I’m like look at your student loan has a good example

[King Penda]

24 minutes ago, sancho panza said:

cross psot from tut banking thread.Key thing here this is going to force a few issues out into the open.People paying down debt is inherently deflationary from a credit perpsective.Last few days we've analysed Barclays results and despite profits booming the shares are not getting bid at all.They';re on a PE of 4 and Dowd Buckner leverage ration of circa 66/1.This could well be the calm before the storm with stated equity something like 3x ++ the market cap.

@Castlevania often cautions Mr market could be wrong  but that's a big gap.

 

'Fishers paradox  asserts that teh more people pay down debt the more they will be unable to pay down debt as the economy will shrink

from the results weve seen in the last few days net interest margins have been strong and profits too for the big boys.Also possibly indicative of smaller palyers struggling in wholesale markets

Obviously it wasnt going to last.

fascinating to see consumer behaviour here forcing bigger banks into whoelsale markets

Let's refresh Fisher

Fisher's formulation (1933)

In Fisher's formulation of debt deflation, when the debt bubble bursts the following sequence of events occurs:

Assuming, accordingly, that, at some point in time, a state of over-indebtedness exists, this will tend to lead to liquidation, through the alarm either of debtors or creditors or both. Then we may deduce the following chain of consequences in nine links:

1. Debt liquidation leads to distress selling and to
2. Contraction of the money supply, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of the money supply and its velocity, precipitated by distress selling, causes
3. A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be
4. A still greater fall in the net worths of business, precipitating bankruptcies and
5. A like fall in profits, which in a "capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make
6. A reduction in output, in trade and in employment of labor. These losses, bankruptcies and unemployment, lead to
7. pessimism and loss of confidence, which in turn lead to
8. Hoarding and slowing down still more the velocity of circulation.

   The above eight changes cause

9. Complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest.

— (Fisher 1933)

https://12ft.io/proxy?q=https%3A%2F%2Fwww.telegraph.co.uk%2Fpersonal-banking%2Fsavings%2Fsavers-pull-out-80bn-britains-biggest-banks-interest-rates%2F

Savers pull £80bn out of Britain’s four biggest banks in protest of dismal rates

Savers are either switching to rival savings providers or paying off rising mortgage bills

By Tom Haynes 11 August 2023 • 11:03am

Savers have pulled £80bn out of Britain’s biggest four banks in search of better rates and to pay down mortgages. 

NatWest, Lloyds, HSBC and Barclays saw outflows of roughly £78bn in the 12 months to June 2023 – the biggest annual drop since 2018, according to analysis of company reports by the Financial Times. 

Experts suggest frustrated savers were voting with their feet and moving to rival savings providers paying higher rates, or were using cash to help cover rising mortgage bills. 

It has been almost two months since the Chancellor ordered high-street banks to pass on higher rates to savers. Britain’s biggest banks had been quick to increase costs for mortgage borrowers, but far more hesitant to lift “easy-access” savings rates.

In July the House of Commons Treasury Committee accused the big four of “blatant profiteering” and “squeezing higher profits from their loyal savings customers”. Just last week the city watchdog set a deadline for banks to justify low savings rates or face a penalty.  

Yet since the Bank of England first began raising the Bank Rate in December 2021, the average rate on an easy-access savings account has risen by a mere 2.68 percentage points, from 0.2pc to just 2.88pc, despite far larger increases in central rates. 

The average two-year fixed mortgage rate has shot up from 2.34pc to 6.8pc according to the financial data provider Moneyfacts.

Out of the top five easy-access deals, none are offered by the large high-street banks. 

The best savings deals are typically offered by smaller “challenger banks”, who have been much faster to respond to the changing interest rate environment, offering rates of more than 6pc in some cases.

Anna Bowes, of analyst Savings Champion, said the figures suggested some savers “have finally realised how much interest they are missing out on by remaining loyal to their high-street provider, or by leaving their cash to languish because it’s convenient”. 

She said a leading account, such as the app-only Tandem Instant Access Saver, paying 5pc, could earn £1,250 more in interest than the top-paying high-street bank account, which pays 2.5pc.

Ms Bowes added: “By not shopping around you could be missing out on hundreds if not thousands of pounds in interest.”

High-street banks have defended their rates, insisting they offer value for money and pointing to fixed-rate deals as opposed to their easy-access accounts, with the former typically paying more.

I get a splendid errection when I see the population be prudent cut back wasteful spending and downplay debt and it fucks the economy and exchequer up 

[ashestoashes]

vod one of the smallest fallers today, knew it was a good idea to stay with them

[leonardratso]

6 minutes ago, King Penda said:

I had a funny conversation last night with a guy moaning about how much his morgage had gone up I’d guess about aged 40.I’m like my normal thoughtful self and said suck it up buttercup. He is why don’t you care about morgage holders I’m like do you care about my mum. She is a saver and has way over 100k in cash she gets /got fuck all interest on.I’m like do you have any clue how much 100k 10 years ago would be at 5% . He said 105k . I’m like think simple it’s 150k without compounding the interest.he actually asked what compound intetest was I’m like look at your student loan has a good example

fuck me, what an arse.

[King Penda]

1 minute ago, leonardratso said:

fuck me, what an arse.

I realy doubt he is on his own he is like why would you enjoy the chaos and actually buy a house now if they are going down . I’m like it’s sort of irrelevant to me if my house drops in value the next one I buy does .he was baffled then he said but your next morgage will cost you a lot more . I’m like there won’t be a morgage I’ve got around 58k and my hovel .then I’m like and 50k of it’s at 5% that’s over 200 a month in intetest .he is fuck but what’s your plan then you don’t even have a proper job I’m like I don’t want a real job to much commitment .anyway I’m like I’m going back on benifits and retiring he was like wtf he was like when I’m like that’s the only thing I don’t no yet when 

[belfastchild]

22 minutes ago, sancho panza said:

By 2030, it expects EV use will be displacing five million barrels of oil per day.

With what exactly?

It takes more oil to make them than conventional cars so unless theres a reduction in the number of cars sold overall, demand will go up. Electricity cant make electric cars.

Then theres what you fuel them with. It takes a lot of electricity to replace five million barrels of oil per day. Over 8 terrawatt hours. Thats more than all the nuclear currently or all the wind currently or 3/4 of all the hydro currently, or double the solar currently and we are using all of those.

[Loki]

Just now, belfastchild said:

With what exactly?

It takes more oil to make them than conventional cars so unless theres a reduction in the number of cars sold overall, demand will go up. Electricity cant make electric cars.

Then theres what you fuel them with. It takes a lot of electricity to replace five million barrels of oil per day. Over 8 terrawatt hours. Thats more than all the nuclear currently or all the wind currently or 3/4 of all the hydro currently, or double the solar currently and we are using all of those.

Why bother trying to ratify their bullshit? They have an infinite supply of it. Another load will arrive shortly i imagine

[leonardratso]

1 minute ago, belfastchild said:

With what exactly?

It takes more oil to make them than conventional cars so unless theres a reduction in the number of cars sold overall, demand will go up. Electricity cant make electric cars.

Then theres what you fuel them with. It takes a lot of electricity to replace five million barrels of oil per day. Over 8 terrawatt hours. Thats more than all the nuclear currently or all the wind currently or 3/4 of all the hydro currently, or double the solar currently and we are using all of those.

answering your own questions there. You cant get fuel, you wont buy the machine that needs the fuel.

[Wight Flight]

3 minutes ago, belfastchild said:

so unless theres a reduction in the number of cars sold overall

Bingo!

[feed]

https://www.mylondon.news/news/transport/sadiq-khan-backs-electric-car-27485121

Sadiq Khan backs electric car rental scheme that will make them cheaper to run than paying ULEZ

As part of a “game-changing” leasing scheme, the Times reports, fully electric cars will be available to lease for than £300 per month. This included all running costs, and would altogether be cheaper than a month paying the ULEZ charge - £375 for 30 days.

ICE will be taxed off the roads and you'll rent a EV.  Feels like i've been saying this for about a decade now.