Credit deflation and the reflation cycle to come (part 9)

[wherebee]

1 hour ago, tank said:

His views won't go down well with many on here or the other site but he's been bang on in his assessment of asset prices in recent years.

My general view is similar to his in the sense that I believe asset prices will keep increasing as money is devalued by systemic inflation.

Yes, I thought there might be a general crash in aussie property, but I now think that we'll just see devaluation of fiat to the point where houses have crashed badly in gold but remain flat or up in aussie dollars.

i had a drink yesterday with a 40 something mate who was raging about feeling poorer and poorer despite promotions, due to inflation, and he hates boomers he works with who have no mortgage, massive pensions ready, and in his words 'think the sun shines out of their arses'.

there's a lot of anger building, I think.  when wages are at 50k for an entry level job, but a shitty flat is 2 million, and rent 4000 a month, you'll be laying the basis for revolution, surely.

[JoeDavola]

3 hours ago, wherebee said:

hates boomers he works with who have no mortgage, massive pensions ready, and in his words 'think the sun shines out of their arses'

Yes there is a major wealth divide between folk in the same big companies 15 years apart sometime because of:

1. Getting a house before they exploded in price.

2. Getting a higher ranking/paing job before they downgraded the jobs and got cheaper staff in house to do the same job or offshored the jobs due to c-suite continunally wanting the work done cheaper and cheaper in real terms.

3. Better pension conditions for older staff vs new staff.

 

[jamtomorrow]

20 hours ago, Axeman123 said:

What is money? Money is a useful fiction that only works as long as people beleive a complex web of contradictory things about it - and in that way it is like the nation state. When both maintain confidence they can motivate millions to cooperative efforts and raise living standards to an incredible degree, and yet both always fall when the elite they create get greedy.

This is the closest to a direct hit on the true nature of today's money, in my view. It's only worth something to you or me because everyone we might want to transact with already agrees.

The properties of whatever is chosen as money will certainly help or hinder with creating and maintaining such a consensus, as can legitimacy by authority or historical precedent.

But as to what money really *is*: it's just game theory, network effects and standardisation. All else is secondary.

[DurhamBorn]

5 hours ago, tank said:

His views won't go down well with many on here or the other site but he's been bang on in his assessment of asset prices in recent years.

My general view is similar to his in the sense that I believe asset prices will keep increasing as money is devalued by systemic inflation.

They might,though less than inflation.I think the most likely outcome,almost certain looking at the macro is much more sharing off assets.Houses of course will see more and more sharing.Cars will be going that way.You might even see the likes of  companies sharing assets where they can.Resources are going to be more costly,so first wasting them will need to go,and it will.No prompting from me,but my brother is scrapping off his car as soon as he gets a repair bill or failed MOT and sharing my dads for instance.

We are desperate in the regions for better public transport,but without it,more sharing is certain.

[M S E Refugee]

20 minutes ago, DurhamBorn said:

They might,though less than inflation.I think the most likely outcome,almost certain looking at the macro is much more sharing off assets.Houses of course will see more and more sharing.Cars will be going that way.You might even see the likes of  companies sharing assets where they can.Resources are going to be more costly,so first wasting them will need to go,and it will.No prompting from me,but my brother is scrapping off his car as soon as he gets a repair bill or failed MOT and sharing my dads for instance.

We are desperate in the regions for better public transport,but without it,more sharing is certain.

Rather than wasting all that money on HS2 they could have reopened loads of defunct Railway lines in the North of England.

It would have kept our Steel making industry going a bit longer producing hundreds of miles of railway tracks.

The most obvious one near me would be Penrith to Keswick, Keswick has horrendous parking problems during the tourist season.

 

Edited May 6 by M S E Refugee

[JoeDavola]

For those who don't like the Gary's economics videos, please tell me:

1. Who else has a decent platform who is talking about things like falling real wages in such open and quite simple terms i.e. talks about it in a better way than he does.

2. Why the dislike of him in general? I havent watched all his videos so I dont actually recall him providing a solution yet but what he says is mostly spot on regarding the incredible accumulation/transfer of wealth and the end game in this just being a drop into greater and greater poverty for most people in each subsequent generation.

 

[Harley]

A "lovely" read of why we are where we are, 'em out there and us in 'ere.  A snippet:

'In the current ‘left hemisphere dominated’ environment, we feel obligated to seek protection from concentrated political hubris in the form of inflation – an insidious force that, in the timeless words of economist Jacques Rueff, “consists of subsidising expenditures that give no returns with money that does not exist”'.

https://www.pricevaluepartners.com/the-bug-in-our-thinking/

Edited May 6 by Harley

[M S E Refugee]

2 minutes ago, JoeDavola said:

For those who don't like the Gary's economics videos, please tell me:

1. Who else has a decent platform who is talking about things like falling real wages in such open and quite simple terms i.e. talks about it in a better way than he does.

2. Why the dislike of him in general? I havent watched all his videos so I dont actually recall him providing a solution yet but what he says is mostly spot on regarding the incredible accumulation/transfer of wealth and the end game in this just being a drop into greater and greater poverty for most people in each subsequent generation.

 

I think his job is to reinforce the mindset that Capitalism is the reason that the Pleb's living standards are falling.

He is also very pally with those Luxury Communists at Novara Media and the Guardian.

Maybe his intentions are earnest, but the way he has been propelled into the limelight makes me wary.

[Pip321]

36 minutes ago, Harley said:

A "lovely" read of why we are where we are, 'em out there and us in 'ere.  A snippet:

'In the current ‘left hemisphere dominated’ environment, we feel obligated to seek protection from concentrated political hubris in the form of inflation – an insidious force that, in the timeless words of economist Jacques Rueff, “consists of subsidising expenditures that give no returns with money that does not exist”'.

https://www.pricevaluepartners.com/the-bug-in-our-thinking/

That was a really good read. They do a free review. Have you tried it, and if so any feedback?

I use an IFA for my pension access but that temporary….i have been saying that a few years, but it is temporary. So every 6 months or so also get a free review from another firm….very bland never been great.

But might try these…..see what they say. 

[Harley]

8 hours ago, tank said:

His views won't go down well with many on here or the other site but he's been bang on in his assessment of asset prices in recent years.

My general view is similar to his in the sense that I believe asset prices will keep increasing as money is devalued by systemic inflation.

Yes, that's what happened in Weimar etc.  And for a fair amount of time.  And is happening now.  That is until other forces became, and will once again become, greater.  We have now passed the "good inflation" phase coined by Jens O'Parssons.  So true until......?  Maybe, atm, less Weimar and more a step function of ratching inflation with no defation in-between to take us back.  Regardless, as the boiling frogs we are, it will happen in earnest while we are on our back feet.

PS:  Jens was a nom de plume needed at the time, the real author Jim Paplava managed to interview in his retirement: 

https://static.financialsense.com/audio/2023-08/financial-sense-20230803-dying-money-parsson-1384a.mp3

Edited May 6 by Harley

[Harley]

1 hour ago, DurhamBorn said:

They might,though less than inflation.I think the most likely outcome,almost certain looking at the macro is much more sharing off assets.Houses of course will see more and more sharing.Cars will be going that way.You might even see the likes of  companies sharing assets where they can.Resources are going to be more costly,so first wasting them will need to go,and it will.No prompting from me,but my brother is scrapping off his car as soon as he gets a repair bill or failed MOT and sharing my dads for instance.

We are desperate in the regions for better public transport,but without it,more sharing is certain.

I was on a historic town tour at the weekend and thought of you when the bloke was saying how people used to use their houses any way they could to generate income - lodgers, small shops, micro pubs, workshops, etc.

[baffledbyzirp]

1 hour ago, JoeDavola said:

Yes there is a major wealth divide between folk in the same big companies 15 years apart sometime because of:

1. Getting a house before they exploded in price.

2. Getting a higher ranking/paing job before they downgraded the jobs and got cheaper staff in house to do the same job or offshored the jobs due to c-suite continunally wanting the work done cheaper and cheaper in real terms.

3. Better pension conditions for older staff vs new staff.

 

I had a conversation with my friend who is a lawyer for a FTSE 100 company specialising in digital contracts.

My friend is in his mid 50s and has worked in the industry for 30 years including at firms in London, Manchester and Leeds at partner level.

On a superficial basis he is well rewarded; his salary is approx £120,000 and he gets an annual bonus of around £15,000 and share options but he complains that he can't draw his bonus because the tax hit is huge so he puts it into his pension. He bought a house last year and is finding the costs of decorating, changing windows, replacing the tiles in the kitchen etc. crippling. Last week he had to replace some fence panels in his back garden which cost £2300 representing 4% of his notional disposable income. He goes on holiday twice a year with his girlfriend and pays for her and her kids. He is considering working 4 days a week because the added value of the 5th day is negligible.

The real problem my friend faces is that he got divorced fifteen years ago. The family home was sold and he lost half of his savings and pension. Since then he has lived in rental accommodation for over a decade waiting for the market to collapse. Eventually he bit the bullet and bought a house in a location he would not have considered at the start of his search. If he has difficulty balancing his budget as a single man with a relatively small mortgage and good income, how the hell does a working family with two school age kids on the average wage survive?

Older people have a bunch of benefits relative to younger counterparts;

Free education, no student debt, compounding, the rise of the property and stock market, costs of childcare, spending habits, opportunities before digitisation and AI.

I am capital rich which generates an income (yes @Mandaloriandividends) and passive returns from rental property. I am a dosbodder and spend money carefully. I cringe when I see mothers buying a basket of shit at the Co-op for £50 with processed crap to pacify the demands of their noisy kids. I am repulsed by junior school children on smart phones. I despair when I read statistics about people using finance to acquire sofas, electronics and even family holidays. 

Capital is in direct conflict with active income. Ironically capital generates passive income with rates at a normal levels. Savings and investments pay a return. If individual amass capital as opposed to debt life is far less stressful. However, does the system provide opportunity to build wealth? I would say that on balance it is far more difficult today than it was at the end of the last century. Moreover, the prudent behaviours of previous generations have been replaced by the American desire for instant gratification, YOLO. It is a tough world for kids who have expectations fuelled by TikTok without access to the high paid jobs than enable escape due to the class system and social exclusion. At what point will the plebs take up pitch forks and rebuild the system from the bottom up?

BTW good debate about Bitcoin Vs Gold on Zerohedge with Schiff, Roubini, Scaramucci and Voorhees. Well worth a watch if you have an hour to waste.

[Harley]

6 hours ago, wherebee said:

there's a lot of misdirected anger building

Fify.  What people, here on Dosbods too, are heading towards is not fixing the root causes but "kicking off" and ending back at square one with nothing more than (hopefully just metaphorical) blood on their hands, and in a worse position to then fight the correct fight.  Deliberate or strings being pulled, it ultimately matters little.  But that is the way of things as the responses will bear witness....

PS:  We've recently witnessed continual epic wastes of public money all based on no more than fake narratives which have hooked most.  If there ever was a time to kick back.  But no, it's the fault of 'em over there.  Me personally, I haven't overtly pushed back but for that I blame no-one but myself.  But let's hear all the usual excuses and gymnastics why they really aren't excuses. 

Edited May 6 by Harley

[Harley]

1 hour ago, M S E Refugee said:

Rather than wasting all that money on HS2 they could have reopened loads of defunct Railway lines in the North of England.

It would have kept our Steel making industry going a bit longer producing hundreds of miles of railway tracks.

The most obvious one near me would be Penrith to Keswick, Keswick has horrendous parking problems during the tourist season.

 

HS2, Covid, proxy and direct wars (well not quite "wars" for the direct ones), public "administration",........

Edited May 6 by Harley

[Harley]

1 hour ago, Pip321 said:

That was a really good read. They do a free review. Have you tried it, and if so any feedback?

I use an IFA for my pension access but that temporary….i have been saying that a few years, but it is temporary. So every 6 months or so also get a free review from another firm….very bland never been great.

But might try these…..see what they say. 

We haven't tried them but have done some background research.  Our take away was that we were already closely aligned, although plenty of specific opportunities to improve such as using a CTA.  CTA sector performance had not been great but we have been expectant and heard today that the sector's performance was good in recent months (as have been our humble and constrained efforts).

PS:  Unfortunately CTA uses TA (looking at charts) so off limits to most here! 

Edited May 6 by Harley

[ONC]

2 hours ago, DurhamBorn said:

They might,though less than inflation.I think the most likely outcome,almost certain looking at the macro is much more sharing off assets.Houses of course will see more and more sharing.Cars will be going that way.You might even see the likes of  companies sharing assets where they can.Resources are going to be more costly,so first wasting them will need to go,and it will.No prompting from me,but my brother is scrapping off his car as soon as he gets a repair bill or failed MOT and sharing my dads for instance.

We are desperate in the regions for better public transport,but without it,more sharing is certain.

Yes, I can see more “sharing/renting” as inflation bites.

A lot of what people now buy, they only use infrequently/once, they only buy because they have the money and it is cheap (ie from China).  I remember my dad  renting power tools much more than people do now. 
 

Maybe more of this,  new cool name “library of things”

https://www.theguardian.com/money/article/2024/may/06/how-rental-libraries-of-things-have-become-the-new-way-to-save-money

 

 

[Errol]

 

[Axeman123]

1 hour ago, Harley said:

What people, here on Dosbods too, are heading towards is not fixing the root causes

Thats the thing IMO we should all be wary of. The widespread public anger about how fucked things are will be redirected by those that have caused this mess to benefit themselves, and ironically to prop up continuing all the actions that have fucked things up.

Savings, pensions, ordinary people wishing to end tax residency here or invest overseas are all in the firing line. We have already seen ominous phrases uttered by TPTB, one that absolutely chilled my blood not that long ago was IIRC a UK minister saying something about people thinking of their country "like a gym membership" and expecting to be able to "just leave and stop paying". That represents a fairly big assault on foundational assumptions about the relationship between private property and the state.

[SpectrumFX]

28 minutes ago, Axeman123 said:

Thats the thing IMO we should all be wary of. The widespread public anger about how fucked things are will be redirected by those that have caused this mess to benefit themselves, and ironically to prop up continuing all the actions that have fucked things up.

Savings, pensions, ordinary people wishing to end tax residency here or invest overseas are all in the firing line. We have already seen ominous phrases uttered by TPTB, one that absolutely chilled my blood not that long ago was IIRC a UK minister saying something about people thinking of their country "like a gym membership" and expecting to be able to "just leave and stop paying". That represents a fairly big assault on foundational assumptions about the relationship between private property and the state.

Arguably reversion to the mean. With the serfs as assets to be exploited, unable to leave the manor without the lord's permission.

[Castlevania]

3 hours ago, JoeDavola said:

For those who don't like the Gary's economics videos, please tell me:

1. Who else has a decent platform who is talking about things like falling real wages in such open and quite simple terms i.e. talks about it in a better way than he does.

2. Why the dislike of him in general? I havent watched all his videos so I dont actually recall him providing a solution yet but what he says is mostly spot on regarding the incredible accumulation/transfer of wealth and the end game in this just being a drop into greater and greater poverty for most people in each subsequent generation.

 

I don’t really understand the hate either. However, whilst I agree with a lot of what he says, his solutions are all wrong. He wants higher taxes and a bigger state whilst ignoring that a lot of the issues of wealth inequality are due to the state being too big and that government spending on non productive stuff almost always flows upwards thus making things worse.

With regards to the last point (to highlight what I mean by unproductive government spending almost always flowing upwards) quite a few US junk food manufacturers (Mondelez for one) have cited a cut to food stamps as being a driving force in poorer results of late. 

[Castlevania]

3 hours ago, M S E Refugee said:

I think his job is to reinforce the mindset that Capitalism is the reason that the Pleb's living standards are falling.

He is also very pally with those Luxury Communists at Novara Media and the Guardian.

Maybe his intentions are earnest, but the way he has been propelled into the limelight makes me wary.

Government being too big and a lack of actual capitalism is the issue.

[Axeman123]

20 minutes ago, SpectrumFX said:

Arguably reversion to the mean. With the serfs as assets to be exploited, unable to leave the manor without the lord's permission.

Indeed, lots of very old and discredited or unfashoinable ideas getting a wash and brush up. It reminds me of the elite reaction to the Brexit vote in a way, when many well off people started talking about things like voting should be restricted to graduates etc. In both cases a class are working through the bargaining stage of grief, and trying to imagine a solution to keep things the way they were in spite of the world moving on and making that ludicrous. The unreality of the needed fixes shows how ridiculous the goal is IMO.

The problem they will find if they try is that they will want to have their cake and eat it, and people will see straight through it. We have had years of being told Abdul straight off a dinghy is as English as any one of us, Ramadan Lights on the hign street and Sharia courts are consistent with (or even the best of) English values etc, and talk of mass conscription to fight Russia was rapidly dropped when it was thus laughed at by most of the intended victims. You can't have blood and soil nationalism in conjunction with pourous economic zones. It also seems ridiculous to expect to imprison private capital while letting labour flood in to crush wages.

For all the coercion of the fuedal system, there was also a great deal of obligation on the Lords etc or at least the widespread beleif in that among the peasants etc. It was also a system that rested on the total absence of change. It will never be possible to recreate that in the modern world while retaining the influx of Abduls and selling off our assets etc.

[wherebee]

12 minutes ago, Castlevania said:

I don’t really understand the hate either. However, whilst I agree with a lot of what he says, his solutions are all wrong. He wants higher taxes and a bigger state whilst ignoring that a lot of the issues of wealth inequality are due to the state being too big and that government spending on non productive stuff almost always flows upwards thus making things worse.

With regards to the last point (to highlight what I mean by unproductive government spending almost always flowing upwards) quite a few US junk food manufacturers (Mondelez for one) have cited a cut to food stamps as being a driving force in poorer results of late. 

Not only that, the US government food pyramid has been utterly corrupted so, for example, sugary cereals are rated better than cheese and butter.  So public services providing food have to buy shite to comply with official guidelines.

[DurhamBorn]

2 hours ago, baffledbyzirp said:

I had a conversation with my friend who is a lawyer for a FTSE 100 company specialising in digital contracts.

My friend is in his mid 50s and has worked in the industry for 30 years including at firms in London, Manchester and Leeds at partner level.

On a superficial basis he is well rewarded; his salary is approx £120,000 and he gets an annual bonus of around £15,000 and share options but he complains that he can't draw his bonus because the tax hit is huge so he puts it into his pension. He bought a house last year and is finding the costs of decorating, changing windows, replacing the tiles in the kitchen etc. crippling. Last week he had to replace some fence panels in his back garden which cost £2300 representing 4% of his notional disposable income. He goes on holiday twice a year with his girlfriend and pays for her and her kids. He is considering working 4 days a week because the added value of the 5th day is negligible.

The real problem my friend faces is that he got divorced fifteen years ago. The family home was sold and he lost half of his savings and pension. Since then he has lived in rental accommodation for over a decade waiting for the market to collapse. Eventually he bit the bullet and bought a house in a location he would not have considered at the start of his search. If he has difficulty balancing his budget as a single man with a relatively small mortgage and good income, how the hell does a working family with two school age kids on the average wage survive?

Older people have a bunch of benefits relative to younger counterparts;

Free education, no student debt, compounding, the rise of the property and stock market, costs of childcare, spending habits, opportunities before digitisation and AI.

I am capital rich which generates an income (yes @Mandaloriandividends) and passive returns from rental property. I am a dosbodder and spend money carefully. I cringe when I see mothers buying a basket of shit at the Co-op for £50 with processed crap to pacify the demands of their noisy kids. I am repulsed by junior school children on smart phones. I despair when I read statistics about people using finance to acquire sofas, electronics and even family holidays. 

Capital is in direct conflict with active income. Ironically capital generates passive income with rates at a normal levels. Savings and investments pay a return. If individual amass capital as opposed to debt life is far less stressful. However, does the system provide opportunity to build wealth? I would say that on balance it is far more difficult today than it was at the end of the last century. Moreover, the prudent behaviours of previous generations have been replaced by the American desire for instant gratification, YOLO. It is a tough world for kids who have expectations fuelled by TikTok without access to the high paid jobs than enable escape due to the class system and social exclusion. At what point will the plebs take up pitch forks and rebuild the system from the bottom up?

BTW good debate about Bitcoin Vs Gold on Zerohedge with Schiff, Roubini, Scaramucci and Voorhees. Well worth a watch if you have an hour to waste.

I find it incredible how much people pay for simple jobs.My uncle used to tell me,buy the tools and do the job,then you have the tools forever.He was right.I bought an expensice set of big ladders for instance to repair the edging on my gable end.Ladders were the cost of the job of someone doing it.Iv used them for 5 other jobs since including my sons guttering strapped onto my Pug Estate.Fencing is another.I bought big hammers,crow bars,mortar chisels etc and enjoy digging the posty holes smashing through old concrete ,rocks etc.Post cement makes putting the posts in easy,and good quality portable drill for screws makes the lats easy.

My windows were the same,cash off the bloke at the window factory,my mate a window fitter and his mate,no scaffold,we just lifted them up on his and my big ladders,Upstairs cost me £1800 all in,whole house including french windows,doors etc £4300.

The cost of repairs for most who are not on a DB pension etc though is another reason welfare is exploding,because on bennies you dont have to pay for repairs on a council or rented house.

[leonardratso]

french windows, lah de dah.

People getting ideas above their stations must be crushed without hesitation.

(signed R.Sunak and Keir Starmer - Lying billionaires ltd.)