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Credit deflation and the reflation cycle to come.


DurhamBorn

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7 hours ago, MrXxx said:

SP, I wasn't aware of banks using mortgages as part of fractional reserve lending.....so not only have our politicians gifted them low interest cash with FLS, but with HTB they have provided a double whammy I.e reduced their risk AND through bubble inflating increase the FR loan pot size...basically wealth transfer on a grand scale... why are people in the UK not demonstrating en mass  to their local MP (or even worse)?..with the recent spate of incidents at MPs surgeries involving mentally unstable individuals in the last 5 years, I wouldn't like to be an MP in the next 5~10 years!

75% of new money is secured on houses. Hence, our dodgy money system is inextricably tied to our dodgy land system. This is why our politicians are so afraid of a housing crash. The whole house of cards threatens to fall down if our precious houses lose 50% of their value.

If our politicians were not stooges for global banks they would reform both systems. Money would be created by the state and not by private organisations through debt. Houses and HPI would feature prominently in inflation and cost of living metrics and the policy would be to STABILISE prices rather than encouraging bubbles. I tend to think a great crash is the only thing that will bring meaningful money and land reform into focus. It's a terrible price to pay for good governance but what can the electorate do when they themselves are ignorant of the problem and 99% of their MPs are completely bent? It's the bent leading the blind.

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6 hours ago, stoobs said:

Excellent description.

Note this shows again that we do not have fractional reserve banking in this country. The concept is a fallacy.

No, UK had fractional reserve banking since moving off he gold standard.

What the UK hasnt had since ~1987ish (Big Bang, de-regulation) is a mean of regulating banks to prevent them blowing up/real estate   boom (1987-1991) or a real estate boom and the destruction of ~80% of the UK banking sector (2002-2007).

 

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5 hours ago, A_P said:

This was shared in the main forum. Almost half of adults don't have enough savings to cover an unexpected £300 bill. Just under half of adults have a numeracy attainment age of 11 or below.

When you speak to most individuals their times horizons are very small. Usually not looking much further than what's for dinner or when the next holiday is. Additionally I've been doing a lot of house viewings recently and I'm gobsmacked at the amount of gadgets and tech in I see in peoples homes. Spend spend spend.

infographic-shakespeare-martineau.jpg

Anyone in the mainstream want to highlight the irony of the FCA overseeing Debt-Pushers International at the same time as being aware that half of adults are financially illiterate due to sub age 11 maths capabilities?

Anyone?

No?

Thought not.

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18 minutes ago, billfunk said:

75% of new money is secured on houses. Hence, our dodgy money system is inextricably tied to our dodgy land system. This is why our politicians are so afraid of a housing crash. The whole house of cards threatens to fall down if our precious houses lose 50% of their value.

If our politicians were not stooges for global banks they would reform both systems. Money would be created by the state and not by private organisations through debt. Houses and HPI would feature prominently in inflation and cost of living metrics and the policy would be to STABILISE prices rather than encouraging bubbles. I tend to think a great crash is the only thing that will bring meaningful money and land reform into focus. It's a terrible price to pay for good governance but what can the electorate do when they themselves are ignorant of the problem and 99% of their MPs are completely bent? It's the bent leading the blind.

Thats the issue.

FRB is many to get money int othe economy, so people and company can trade, be economically active.

The skewed weightings and poor management has seen most of the BoE money being put into real estate.

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9 minutes ago, spygirl said:

Thats the issue.

FRB is many to get money int othe economy, so people and company can trade, be economically active.

The skewed weightings and poor management has seen most of the BoE money being put into real estate.

Indeed,but not in the next cycle,it will go direct through government into the veins of the economy and is already  starting to show up in velocity checkers in the US.The next cycle will see CBs tighten on commercial banks,but be very loose on governments.They have no choice,its that or communism.

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42 minutes ago, DurhamBorn said:

Indeed,but not in the next cycle,it will go direct through government into the veins of the economy and is already  starting to show up in velocity checkers in the US.The next cycle will see CBs tighten on commercial banks,but be very loose on governments.They have no choice,its that or communism.

Well ... its is different this time - at least i nthe UK.

Not down to 'lessons learnt' or better regulation.

Its the fact the banks have blown themselves up. And the UK does not seem able to create new, viable ones - look a tthe desperation in trying to get the challengers banks floated, only for them to fuck p on their lending - see metro Bank.

UK retail banking is very different from the US and Germany.

German retail banking is done on purely regional levels. It stops bans becoming too large but its inefficient and limited scale, which is one of the reasons why German property has  never over inflated - apart from now, but thats the ECB low rates.

Us banking is sort of regional but also sort of does not care. banks originate loans and, providing the loans are prime, get shoved in the US GOV mortgage pools. i.e. US retial banks are more about doign the checkign for USGOV mortgage pools. Does not matter if they blow up, they only hold he loan for a couple of years and dont get caital tied up for long in  a mortgage loan. US banks are volatile - they blow, but no longter damage done as they do not provide he cpapital.

UK is wierd. Brown allowed them to grow way too big - end of the day in 2007 most banking was via what was RBS or what was BOS, strnage that 2 scotttish banks ..

 

UK banks *dont* have a UKGOV mortage poo lt offload debt to. They have to hold the loan til competeion. If they fuck up their capital disappears rapidly. And each bad loan affects a future loan.

The amount of capital and capcity that is leaving the UK banking sector is huge at the mo. AS it stand, banks have a large number of mortgages from the mid 90s reaching maturity.  In 10 years time, itll be people who took mortgages out in the mid 00s. Theres just not enough  solvent borrower able to meet MMR requirements a the moment - the size of UK banks has to shrink even  more.

Which sounsd bad.

Its even worse when you consider the low home ownership in the under 40s and the extreme level of real estate exposure in the over 55s - own house, holiday cottage, a few BTL. And even worse when you consider a lot of that over 55 real estate exposure is grossly mispriced and IO based. and they have much more limited pension income to service it all when employment ends.

 

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Great new article from Steve Kaplan,

https://seekingalpha.com/article/4238301-powerless-powells-jerome-jeremiad

Some great quotes from him in the comments,

"Probably the main reason investors aren't worried about inflation is that it has been almost three decades since we had serious inflationary behavior. It is like concluding in early November that since many months have passed without cold temperatures, we have nothing to fear from winter."

" Investors tend to think something won't happen if it hasn't occurred in a long time, but often that it when it is most likely to occur."

 

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20 minutes ago, DurhamBorn said:

Great new article from Steve Kaplan,

https://seekingalpha.com/article/4238301-powerless-powells-jerome-jeremiad

Some great quotes from him in the comments,

"Probably the main reason investors aren't worried about inflation is that it has been almost three decades since we had serious inflationary behavior. It is like concluding in early November that since many months have passed without cold temperatures, we have nothing to fear from winter."

" Investors tend to think something won't happen if it hasn't occurred in a long time, but often that it when it is most likely to occur."

 

Well,,, its almost 30 years since China stared trading with the world, vastly depressing good prices.

I mean its not to discuss UK now and 30 years ago without mentioning that China, with a population of ~1bln, entering starting to trade.

Central banks and economists piss around, detailign the little changes - productivty, age distribution, real intetrst rates etc etc. But when a a whole herd of mental Elephants enter room .. not a peep.

We (US + UK + EU) have *had* inflation, mainly assets and real estate. Its been masked by static/falling wages, all down to China.

Central banks are forever fighting the last war.

Chinese labour is getting re=priced. Thats huge.

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Just now, spygirl said:

Well,,, its almost 30 years since China stared trading with the world, vastly depressing good prices.

I mean its not to discuss UK now and 30 years ago without mentioning that China, with a population of ~1bln, entering starting to trade.

Central banks and economists piss around, detailign the little changes - productivty, age distribution, real intetrst rates etc etc. But when a a whole herd of mental Elephants enter room .. not a peep.

We (US + UK + EU) have *had* inflation, mainly assets and real estate. Its been masked by static/falling wages, all down to China.

Central banks are forever fighting the last war.

Chinese labour is getting re=priced. Thats huge.

Yep huge,as is the fact they have 65 million unsold apartments.Their credit bubble is insane.

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7 hours ago, DurhamBorn said:

Yep huge,as is the fact they have 65 million unsold apartments.Their credit bubble is insane.

I predict executions on the streets of China within 25 years.  Whether it will be the current rulers executing rebels, or rebels executing current leaders, is hard to say.

But there are going to be a LOT of very very angry chinese folk

https://blogs.wsj.com/chinarealtime/2011/10/25/shanghai-homeowners-smash-showroom-in-protest-over-falling-prices/ 

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5 hours ago, wherebee said:

I predict executions on the streets of China within 25 years.  Whether it will be the current rulers executing rebels, or rebels executing current leaders, is hard to say.

But there are going to be a LOT of very very angry chinese folk

https://blogs.wsj.com/chinarealtime/2011/10/25/shanghai-homeowners-smash-showroom-in-protest-over-falling-prices/ 

Mmm, it's interesting to see how some nations like the Chinese are obedient and the eventually explode, some like the French explode and then eventually conform, and then we have the British who just conform and are obedient!

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45 minutes ago, MrXxx said:

Mmm, it's interesting to see how some nations like the Chinese are obedient and the eventually explode, some like the French explode and then eventually conform, and then we have the British who just conform and are obedient!

before poll tax rioting after a century under the kosh

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China to me just seems an odd place, always liked ADV's youtube channel about China https://www.youtube.com/channel/UCwNPa8fSXzzAZuT9859GVhg

But also saw this article yesterday which made me laugh because some Chinese bike sharing companies are pulling out of some UK cities due to the amount of stolen, missing or damaged bikes but then in China, you have this https://www.theatlantic.com/photo/2018/03/bike-share-oversupply-in-china-huge-piles-of-abandoned-and-broken-bicycles/556268/

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http://www.constructionenquirer.com/2019/02/07/demolition-firm-coleman-suffers-second-loss-in-56-years/

Quote

In 56 years of trading, it is only the second time the specialist has fallen into the red – the other time was as a result of the 2008/9 financial crisis.

The amount of construction companies reporting trouble is quite worrying, if the UK can continue to grow GDP Y/Y I will be seriously impressed.  Since its debt fuelled consumer spending that's the main driver at the minute that is still a possibility and im not going to try to predict when that's going to stop!

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38 minutes ago, DoINeedOne said:

China to me just seems an odd place, always liked ADV's youtube channel about China https://www.youtube.com/channel/UCwNPa8fSXzzAZuT9859GVhg

But also saw this article yesterday which made me laugh because some Chinese bike sharing companies are pulling out of some UK cities due to the amount of stolen, missing or damaged bikes but then in China, you have this https://www.theatlantic.com/photo/2018/03/bike-share-oversupply-in-china-huge-piles-of-abandoned-and-broken-bicycles/556268/

That is plain crazy...what a waste of resources. Unbelievable...

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19 hours ago, DurhamBorn said:

Great new article from Steve Kaplan,

https://seekingalpha.com/article/4238301-powerless-powells-jerome-jeremiad

Some great quotes from him in the comments,

"Probably the main reason investors aren't worried about inflation is that it has been almost three decades since we had serious inflationary behavior. It is like concluding in early November that since many months have passed without cold temperatures, we have nothing to fear from winter."

" Investors tend to think something won't happen if it hasn't occurred in a long time, but often that it when it is most likely to occur."

 

Kaplan is superb.

At the end of the day,they've printed a lot of money over the last decade and have been saved from inflation by velocity declining.If for eany reason it picks up then all hell could break loose in terms of CPI/RPI(but obviously not core CPI as it excludes food and fuel because...welll.....it's so core....)

19 hours ago, spygirl said:

 

We (US + UK + EU) have *had* inflation, mainly assets and real estate. Its been masked by static/falling wages, all down to China.

Central banks are forever fighting the last war.

Chinese labour is getting re=priced. Thats huge.

Going into Shaun Richards mode...

 

also masked by the fact that CPI/CPIH/RPI effectively exclude the items that have inflated.

4 hours ago, Majorpain said:

http://www.constructionenquirer.com/2019/02/07/demolition-firm-coleman-suffers-second-loss-in-56-years/

The amount of construction companies reporting trouble is quite worrying, if the UK can continue to grow GDP Y/Y I will be seriously impressed.  Since its debt fuelled consumer spending that's the main driver at the minute that is still a possibility and im not going to try to predict when that's going to stop!

I worte in the HPI thread that a friend in constructionw as telling me how quiet his firm has gone in terms of deliveries of goods.Coudl be Brexit but i suspect the housing market is going down the pan.

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On 06/02/2019 at 08:41, Democorruptcy said:

I was thinking how Fed policy might favour large firms and enable them to have the cash to buy up more small firms and also stifle small firms starting up. They can price them out with economies of scale. Ultimately it leads to power in the hands of a few and lots of people on basic income handouts. However they talk about more employment and firms starting up, so just checked some US figures. A lot of it is people who cannot afford to live, doing bits on the side
 

I suppose in the UK we have 16 hour nail shops and tax credits.

 

 

I'm sure its the same in the UK. They make out we have loads of 'entrepreneurs' but it's basically a rise in self employed uber drivers and nail artists etc. No problem with that and people working for themselves (other than the tax credits issue) but what we really need is people in proper full time employment and real entrepreneurs to create that full time employment.

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9 hours ago, MrXxx said:

Mmm, it's interesting to see how some nations like the Chinese are obedient and the eventually explode, some like the French explode and then eventually conform, and then we have the British who just conform and are obedient!

there are many ways to get your revenge on the system,the best are ones that cost it money.its also a bit safer than throwing bricks at plod.

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Hochschild up 20% in my daughters ISA so far, definitely feel it’s up from here for the initial run until the pull back.

Cruise ship boomer critic group program on ITV at the moment defines the essence of excess mass consumption to me. I’m sure our future descendents will marvel on the excesses available to the post war generation.

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I dont tend to focus on the route of my roadmap but thought id share the exact numbers on it just in case it carries on as its showing and so people arent shaken out.

Its showing as gold topping between $1315 and $1350,then dropping to the $1240/1260 region into May,then starting to trend much higher into the end of the year ($1570).

GDX on the roadmap goes $23 down to $19.50 area then up to $34 by year end.

I always focus on where we are going,not the bumps and turns,but just wanted to put it out there.If gold did fall into May then i think it will provide the last buying chance before it trends.Those are just what might be the route,not what will be of course.If we fall $19.50/$20.00 is the area in the GDX to be buying more miners or average any already owned.

We could already be trending of course towards the $1500+ mark.

The roadmaps are showing clear that gold compared to houses and gold compared to the S+P speeds up going forward and doesnt stop doing so until around 2027.The inflation cycle is nearly upon us.

 

 

 

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