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

[sleepwello'nights]

20 hours ago, Yadda yadda yadda said:

They're morons, no doubt about that. Say mortgage increases were going to take £200 per month from mortgagees on average. What they want to do is get banks to adjust that so that those that can't afford the £200 pay only an extra £100 but that means that rates go higher and everyone else ends up paying £250. As part of the disinflationary impact of rates is caused by repossessions this idea reduces their impact and forces rates even higher.

Removing pain from mortgagees also means focussing more of it on businesses.

 

Interest rates as a tool to reduce inflation cannot work by focussing only on mortgage payers. They only represent a small proportion of the population. 

As I understand it the way interest rates work is by reducing demand. Holders of capital look at the return their capital can generate and will calculate how to generate that return. Any investment project then has to provide a greater return than the "risk" free return from keeping capital held as cash balance in consequence employment should shrink as the demand for labour falls. 

Some economists I have read say that the major factor in inflation, this time round, is insufficient supply. So the current policies do nothing to reduce the imbalance and exacerbate inflation because supply is constrained further. In other words

@DurhamBorn's thesis is correct because government policies direct money to those creating the demand. 

As I ponder the way it might work I start to contradict myself and my brain starts to hurt.  

 

[montecristo]

8 minutes ago, JoeDavola said:

Yes the only upside of the ever increasing bullshitting in coporate life is that if you should find yourself eventually at a point where there's few people who can actually do the work left, and you're one of them, you should be able to command a very healthy daily rate if you're brave enough to quit the permie job.

Do you not know some permies that went contracting?  Maybe reach out to them?  For all you know they could recommend you and could get a contracting job in the morning.

[JoeDavola]

1 minute ago, montecristo said:

Do you not know some permies that went contracting?  Maybe reach out to them?  For all you know they could recommend you and could get a contracting job in the morning.

I've been messaged about a contracting job on LinkedIn two days ago - £500 a day - the problem is I'm in such a niche I doubt I'd get many months of contracting work a year.

All my old collegues are in permie jobs, which now pay so well for the right skillset contracting isn't as attractive as it was.

Edited June 15, 2023 by JoeDavola

[Sasquatch]

Interesting work related anecdote.

Was on a building site yesterday and talking to one of the builder's directors. He was bemoaning the fact that they were slipping behind the programme and that their roofer had left site at lunchtime. This was seriously affecting the critical path as they wanted to strike the scaffold to finish off the hard pavings. 

Straight forward roof coverings (pantiles) on a new building so relatively easy stuff.

I was told that the mindset of lots of subcontractors had changed since covid and they were struggling to find people prepared to put in a full days work. I'm not sure if this is a true reflection of the marketplace but it does dovetail into some of the thoughts on this thread.

[HousePriceMania]

24 minutes ago, sleepwello'nights said:

Interest rates as a tool to reduce inflation cannot work by focussing only on mortgage payers. They only represent a small proportion of the population. 

As I understand it the way interest rates work is by reducing demand. Holders of capital look at the return their capital can generate and will calculate how to generate that return. Any investment project then has to provide a greater return than the "risk" free return from keeping capital held as cash balance in consequence employment should shrink as the demand for labour falls. 

Some economists I have read say that the major factor in inflation, this time round, is insufficient supply. So the current policies do nothing to reduce the imbalance and exacerbate inflation because supply is constrained further. In other words

@DurhamBorn's thesis is correct because government policies direct money to those creating the demand. 

As I ponder the way it might work I start to contradict myself and my brain starts to hurt.  

 

I see your mistake. You think the government want to reduce inflation.

[Wight Flight]

27 minutes ago, sleepwello'nights said:

Interest rates as a tool to reduce inflation cannot work by focussing only on mortgage payers. They only represent a small proportion of the population. 

As I understand it the way interest rates work is by reducing demand. Holders of capital look at the return their capital can generate and will calculate how to generate that return. Any investment project then has to provide a greater return than the "risk" free return from keeping capital held as cash balance in consequence employment should shrink as the demand for labour falls. 

Some economists I have read say that the major factor in inflation, this time round, is insufficient supply. So the current policies do nothing to reduce the imbalance and exacerbate inflation because supply is constrained further. In other words

@DurhamBorn's thesis is correct because government policies direct money to those creating the demand. 

As I ponder the way it might work I start to contradict myself and my brain starts to hurt.  

 

Is that true?

Remember there are more people with savings than mortgages.

If you have inflation at 10%, and interest at 1%, anyone with an ounce of sense will bring forward purchases, as they will be more expensive in real terms next year.

That will stoke demand led inflation.

[HousePriceMania]

7 minutes ago, Wight Flight said:

Is that true?

Remember there are more people with savings than mortgages.

If you have inflation at 10%, and interest at 1%, anyone with an ounce of sense will bring forward purchases, as they will be more expensive in real terms next year.

That will stoke demand led inflation.

Sunak, during covid, actually said that he didn't want people "hoarding wealth", i.e. having savings ( while his family hoard billions)

he's clearly a wef globalist plant.

Edited June 15, 2023 by HousePriceMania

[belfastchild]

24 minutes ago, JoeDavola said:

I've been messaged about a contracting job on LinkedIn two days ago - £500 a day - the problem is I'm in such a niche I doubt I'd get many months of contracting work a year.

How many days at 500 a day do you _need_ to work? How many days at 500 a day do you _want_ to work?

Work the winter, take the summer off. Get a decent accountant and earn 12.5k a year, bung shitloads into a sipp, write off a lot of your expenses. Get another self employed job tuning guitars for which you need a lot of them as base reference (no pun intended)

[Democorruptcy]

31 minutes ago, sleepwello'nights said:

Interest rates as a tool to reduce inflation cannot work by focussing only on mortgage payers. They only represent a small proportion of the population. 

As I understand it the way interest rates work is by reducing demand. Holders of capital look at the return their capital can generate and will calculate how to generate that return. Any investment project then has to provide a greater return than the "risk" free return from keeping capital held as cash balance in consequence employment should shrink as the demand for labour falls. 

Some economists I have read say that the major factor in inflation, this time round, is insufficient supply. So the current policies do nothing to reduce the imbalance and exacerbate inflation because supply is constrained further. In other words

@DurhamBorn's thesis is correct because government policies direct money to those creating the demand. 

As I ponder the way it might work I start to contradict myself and my brain starts to hurt.  

 

Banks get the base rate on their overnight deposits at the BoE. Each 1% rise is another £9bn that taxpayers have to pay bankers. It's costing us £40bn a year at 4.5%

[HousePriceMania]

10 minutes ago, Wight Flight said:

Is that true?

Remember there are more people with savings than mortgages.

If you have inflation at 10%, and interest at 1%, anyone with an ounce of sense will bring forward purchases, as they will be more expensive in real terms next year.

That will stoke demand led inflation.

Had a thought.

If people's house price collapses and they feel poor, will they spend ?

This is the opposite of what the BoE was doing by pumping house prices, p[eople feel rich so they spank all their money on shite.

 

[HousePriceMania]

1 minute ago, Democorruptcy said:

Banks get the base rate on their overnight deposits at the BoE. Each 1% rise is another £9bn that taxpayers have to pay bankers. It's costing us £40bn a year at 4.5%

It's purely coincidental that bankers shoe horned an ex-GS banker into power.

 

[Wight Flight]

11 minutes ago, HousePriceMania said:

Had a thought.

If people's house price collapses and they feel poor, will they spend ?

This is the opposite of what the BoE was doing by pumping house prices, p[eople feel rich so they spank all their money on shite.

 

I think the general political consensus is that no, they won't.

Odd things, people.

[A tremendous # on the lung]

42 minutes ago, JoeDavola said:

I've been messaged about a contracting job on LinkedIn two days ago - £500 a day - the problem is I'm in such a niche I doubt I'd get many months of contracting work a year.

All my old collegues are in permie jobs, which now pay so well for the right skillset contracting isn't as attractive as it was.

What was the equivalent rate 15 - 20 years ago? I bet it was similar?

[JoeDavola]

Just now, A tremendous # on the lung said:

What was the equivalent rate 15 - 20 years ago? I bet it was similar?

Yep. There are folks here who were getting that in the 90's.

[Starsend]

12 hours ago, leonardratso said:

But i suppose he did steal tens of thousands of pounds of kit from work over the years, so it wasnt all bad, wonder what happened to it all, i can remember him having really high grade professional tools of all varieties but none of it was ever delivered or bought.

Lol, reminds me of my old man. He got caught topping his own car up with diesel from the on-site tanks (for trucks) by his boss. His boss asked him how long he'd been doing it. First time I've ever done it says my Dad with a hopeful expression  on his face - my arse, he'd worked there 40 years. Thinking back, I can't ever recall him filling up in a petrol station, even as a child.

They didn't always treat their employees that great so hard to feel any sympathy for them.

[Starsend]

1 hour ago, JoeDavola said:

Yes the only upside of the ever increasing bullshitting in coporate life is that if you should find yourself eventually at a point where there's few people who can actually do the work left, and you're one of them, you should be able to command a very healthy daily rate if you're brave enough to quit the permie job.

You'll need a bloody healthy day rate to put up with the ten clueless women managing you.

[stoobs]

1 minute ago, Starsend said:

Lol, reminds me of my old man. He got caught topping his own car up with diesel from the on-site tanks (for trucks) by his boss. His boss asked him how long he'd been doing it. First time I've ever done it says my Dad with a hopeful expression  on his face - my arse, he'd worked there 40 years. Thinking back, I can't ever recall him filling up in a petrol station, even as a child.

They didn't always treat their employees that great so hard to feel any sympathy for them.

My Dad built an entire camping trailer using materials that found their way home from the explosives factory he built and maintained for 40 years.

It was probably the most highly-specced camping trailer ever made. All stainless steel chassis with industrial bogeys and wheels meant for fabricating the hand-pulled trucks used to move nitroglycerin cartridges from the production silos.

There was a regular stream of stuff that used to turn up in our garage. As a youngster I remember in the summer sliding down a steep grass slope out in the farm fields, on a heavy gauge polythene sack marked with toxic chemical symbols, stark bollock naked.

[Plan-b]

6 minutes ago, stoobs said:

My Dad built an entire camping trailer using materials that found their way home from the explosives factory

Hmmmm explosive camping trailer you say.....

[SpectrumFX]

2 hours ago, JoeDavola said:

Yes the only upside of the ever increasing bullshitting in coporate life is that if you should find yourself eventually at a point where there's few people who can actually do the work left, and you're one of them, you should be able to command a very healthy daily rate if you're brave enough to quit the permie job.

These boys have managed to get it set up so that all of the government contractor jobs need to go through them.

https://www.publicsectorresourcing.co.uk/jobsearch

Across government they're dying on their arse due to a lack of people who can do IT. They've put IT allowances on top of their standard pay scales, but they're still offering well under market rate, which means that they can't recruit. As a consequence hefty contracting rates are available if you're offering the right skillset at the right time.

For a lot of contracts they'll offer remote working, or hybrid working where you're supposed to drop into a local government building a couple of days a week. How much they actually care about that will vary from department to department, and manager to manager.

I'm finance rather than IT, so the rates I would get aren't quite as attractive but once I've got my mortgage covered and can take more risk, then spending my last few years in work contracting at stupid rates with a few big gaps between contracts sounds ideal.

Edited June 15, 2023 by SpectrumFX
put my reading glasses on

[PETR4]

1 hour ago, Democorruptcy said:

Banks get the base rate on their overnight deposits at the BoE. Each 1% rise is another £9bn that taxpayers have to pay bankers. It's costing us £40bn a year at 4.5%

Those bank deposits belong to people, companies, and other governments so it's not the wealth transfer you think it is. The circulation of money is something people often forget and it's the reason you rarely see out and out collapse because there is always a winning side to each transaction.

[stoobs]

8 minutes ago, Plan-b said:

Hmmmm explosive camping trailer you say.....

There was a terrorist angle, but obviously Irish Republican back then.

At some point, I'm guessing late 70s/early 80s he was away a lot as he had to travel around the country fitting heavier and higher security doors to the magazines used for temporary storage of explosives before they were delivered to quarries and mines. The IRA had started using them as handy local collection points.

[King Penda]

12 hours ago, JoeDavola said:

Well this is the problem once the amount of a certain kind of wimmin in management hits an inflection point - you end up with actual sexism, targeted at men. There's a reason I called it a 'caste' system a few posts ago, thats what its starting to feel like.

With the cliques that form it does feel like the social dynamics of high school have returned - but then again did they ever really go away.

They are micromanaged insanely they are all on a wattsapp group and even at 2am I’ve seen my supervisor messaged . They must have a hobby of watching the cameras at home (I’m not kidding)

[sancho panza]

21 hours ago, MrXxxx said:

So referencing one of my previous post about a Bank/BS crash Top Ten it looks as though NW will get No1 spot?

I think Nationwide is potentially the mother ship of the banking crisis that might loom in the not so far off distance.

By that I mean,it's the first systemic bank that is likely to need state support.Jsut for the fact that it has 91% of it's BTL portfolio IO means it's massively exposed to interest rate risk( and that's before you get to the rest of it's laond book).It may be hedged(most likely) in respect of it's money supply but a lot of those hedges will roll off and the NW will be left with loans it may struggle to fund in wholesale markets.All banks/BS's have liabilities skewed much shroter than assets, ie they borrow for 0-3 years(mainly shorter end in terms of depositis) and lend fixed for 5 and then variable thereafter.

Having said that NW is the first systemic bank that appears at risk,that's not to say there isn't a raft of smaller BS's with similar amounts of elverage to BTL/IO/FTBers/High LTV loans.The smaller £2bn ones don't release that much data in theri annuals,so we've got little idea of their exposure.

However,I do know of one or two that have been involved in ledning to what might politley be termed 'off balance sheet vehicles' where when you look at the board of the BS and then look at the Baord of the off balance sheet vehicle ,they're pretty much the exact same people.

I think you need some context to the list

Edited June 15, 2023 by sancho panza

[Plan-b]

20 minutes ago, sancho panza said:

I think Nationwide is potentially the mother ship of the banking crisis that might loom in the not so far off distance.

By that I mean,it's the first systemic bank that is likely to need state support.Jsut for the fact that it has 91% of it's BTL portfolio IO means it's massively exposed to interest rate risk.It may be hedged(most likely) in respect of it's money supply but a lot of those hedges will roll off and the NW will be left with loans it may struggle to fund in wholesale markets.All banks/BS's have liabilities skewed much shroter than assets, ie they borrow for 0-3 years(mainly shorter end in terms of depositis) and lend fixed for 5 and then variable thereafter.

Having said that NW is the first systemic bank that appears at risk,that's not to say there isn't a raft of smaller BS's with similar amounts of elverage to BTL/IO/FTBers/High LTV loans.The smaller £2bn ones don't release that much data in theri annuals,so we've got little idea of their exposure.

However,I do know of one or two that have been involved in ledning to what might politley be termed 'off balance sheet vehicles' where when you look at the board of the BS and then look at the Baord of the off balance sheet vehicle ,they're pretty much the exact same people.

I think you need some context to the list

Yes I noticed the Nationwide were heavily exposed to BTL, I did have accounts with them so several years ago I decided that it was time to get the funds out and leave a quid in them just to be annoying.

[MMax]

44 minutes ago, sancho panza said:

I think Nationwide is potentially the mother ship of the banking crisis that might loom in the not so far off distance.

By that I mean,it's the first systemic bank that is likely to need state support.Jsut for the fact that it has 91% of it's BTL portfolio IO means it's massively exposed to interest rate risk.It may be hedged(most likely) in respect of it's money supply but a lot of those hedges will roll off and the NW will be left with loans it may struggle to fund in wholesale markets.All banks/BS's have liabilities skewed much shroter than assets, ie they borrow for 0-3 years(mainly shorter end in terms of depositis) and lend fixed for 5 and then variable thereafter.

Having said that NW is the first systemic bank that appears at risk,that's not to say there isn't a raft of smaller BS's with similar amounts of elverage to BTL/IO/FTBers/High LTV loans.The smaller £2bn ones don't release that much data in theri annuals,so we've got little idea of their exposure.

However,I do know of one or two that have been involved in ledning to what might politley be termed 'off balance sheet vehicles' where when you look at the board of the BS and then look at the Baord of the off balance sheet vehicle ,they're pretty much the exact same people.

I think you need some context to the list

Any advice on which banks or building societies are most/more resilient?