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Deflationary collapse and the Reflation Cycle to Come.


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HOLA441
52 minutes ago, Barnsey said:

All very interesting but let's steer the ship back to discussing matters regarding a deflationary crash as per title.

http://247wallst.com/economy/2017/08/10/ppi-report-resurfaces-with-hints-of-deflation-again/

All in all, this was the worst wholesale inflation number in 11 months. It’s one thing to be talking about prices not rising enough for the Fed target, but it’s entirely different to be having the deflationary bias again.

 

 

The Fed has reduced the monetary base for over two years since QE3.Thats never happened before according to my charts outside of causing a recession and where the economy and inflation was running red hot.Reducing the monetary base with the amount of leverage out there is crazy.I think they risked it to try to stop asset prices going into bubble territory but instead they have created deflation that will kick off massive wealth destruction.People are going to be shocked at whats coming and the savings ratio says they are facing the first deflationary crash since the war with the lowest level of savings.Each generation gets the education so that they remember to vote for sound money and avoid too much debt out of fear.The lesson is about to begin.

GDX is outperforming Amazon by 12% this week ;)

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HOLA442
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HOLA443
9 minutes ago, durhamborn said:

The Fed has reduced the monetary base for over two years since QE3.Thats never happened before according to my charts outside of causing a recession and where the economy and inflation was running red hot.Reducing the monetary base with the amount of leverage out there is crazy.I think they risked it to try to stop asset prices going into bubble territory but instead they have created deflation that will kick off massive wealth destruction.People are going to be shocked at whats coming and the savings ratio says they are facing the first deflationary crash since the war with the lowest level of savings.Each generation gets the education so that they remember to vote for sound money and avoid too much debt out of fear.The lesson is about to begin.

GDX is outperforming Amazon by 12% this week ;)

Deflation would seem to affect CB more than joe bloggs, they create the currency at almost no cost so it seems once they find something to hook you on their credit lines they surely don't want to give it up.  I guess it takes a few generations of credit is evil before people start accepting it again?

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HOLA444
4 minutes ago, Habitationi Bulla said:

So DH when do you see it kicking off so to speak?

Well not sure really,i just know the seeds are already sown and probably cant be stopped now.Timing isnt possible at cycle ends.It has probably already started,but there will be times and bits of data that look like everything is fine.My charts tell me gold to $1450+,GDX to $38,dollar index down from 102 to 88.Equities down 15% in the first wave down.Iv liquidated most of my equities that i bought as far back as the early 90s apart from a few small buys and some gold miners and will build a portfolio for the next cycle if this thing hits.If not and the markets carry on up i can accept that.If people dont agree i fully understand,but even at best i think people need to be very careful this next 12 months.

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HOLA445
Just now, giggler000 said:

Deflation would seem to affect CB more than joe bloggs, they create the currency at almost no cost so it seems once they find something to hook you on their credit lines they surely don't want to give it up.  I guess it takes a few generations of credit is evil before people start accepting it again?

Yes i think that would be right.The parents telling the children etc.People tend to remember pain very well.I actually think people today are the least prepared for a cycle turn than any that went before.The CBs will stop complete collapse and turn the ship after a delay,but the question is how much wealth destruction before that happens?.Here in the UK it will be interesting to see if they try to prop house prices up,or instead deal with the affects.

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HOLA446
12 minutes ago, durhamborn said:

Yes i think that would be right.The parents telling the children etc.People tend to remember pain very well.I actually think people today are the least prepared for a cycle turn than any that went before.The CBs will stop complete collapse and turn the ship after a delay,but the question is how much wealth destruction before that happens?.Here in the UK it will be interesting to see if they try to prop house prices up,or instead deal with the affects.

How will this impact developing nations DB, can their central banks print huge amounts too and direct it to infrastructure, or will a lot of the developed world get a huge contraction in GDP

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HOLA448
Just now, Talking Monkey said:

How will this impact developing nations DB, can their central banks print huge amounts too and direct it to infrastructure, or will a lot of the developed world get a huge contraction in GDP

Hard to tell is the simple answer.The ones that produce a lot of commodities will probably do well,but the risk is social problems that swamp governments.The main points are the world will end up awash with dollars.We will have to see how hard hit they are in the crunch,but there will be no need to rush into EM assets.

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HOLA4410
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HOLA4411
14 hours ago, Princekie said:

I could show you more in the pretty Yorkshire Dales villages just over the border. We've not had a full on crash yet, but prices are either stagnating or going down.

Interesting one here in the link. It was originally bought as a holiday cottage for a couple setting up in business. Bought for close to £200000, the business didn't do well and it became a bank repo. It is located in a beautiful little hamlet, with views all round in every direction. I went to see it in February with my friend. It needed minimal work.

My friend offered £124,000 which the estate agent laughed at. "It'll sell quickly". My friend replied that was his full and final offer. The house sat on the market until recently when the bank took an offer off a local chap of £110,000. Who says that the your money is always safe in the bank?

 

http://www.rightmove.co.uk/property-for-sale/property-64994942.html

 

Sop these homes are essentially selling for less than it costs to build them?

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HOLA4412

US inflation numbers today CPI it will be interesting to see if inflation has softened compared to expectations.The markets look very wobbly now.Any sign inflation is getting weaker should see the dollar head lower and gold head higher.If inflation shows its creeping up the dollar might get a bid for a day or two.

Over here the market looks like its starting the process of pricing in a recession.Utility and defensive steady or up,cyclical down.Its the scale i think that will shock everyone and perhaps the speed when it hits.

 

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HOLA4413

Look, people are reading too far into this. The central banks are controlling and manipulating everything. Everything peaked and became a bubble several years ago, now it's just a case of keeping everything within a range. Some weeks it goes down, the next it goes up, all within a tolerance of around 10%.

Mr Brown quite correctly stated no return to boom and bust. That was said for a reason - i.e. he knew that the system was fixed and that the CBs can manipulate anything to anywhere. Of course, his statement was only true when applied to the elite, as for everyone else, it's all bust.

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HOLA4415
21 minutes ago, Dreamcasting said:

Look, people are reading too far into this. The central banks are controlling and manipulating everything. Everything peaked and became a bubble several years ago, now it's just a case of keeping everything within a range. Some weeks it goes down, the next it goes up, all within a tolerance of around 10%.

Mr Brown quite correctly stated no return to boom and bust. That was said for a reason - i.e. he knew that the system was fixed and that the CBs can manipulate anything to anywhere. Of course, his statement was only true when applied to the elite, as for everyone else, it's all bust.

No they are not.The central banks react to things.There is far too much belief out there that CBs can control the economy in a small range long term.They cant.They also make policy mistakes.This thread is about the fact the Fed has made the biggest one since 1937 by tightening into a slowing economy with huge leverage and very low inflation.Thats my opinion based on charts i have 100% faith in.

10%?.This bear will see some assets down 70% i think and will be the biggest since the 2nd world war.

US CPI misses forcast "unexpected" ;)

https://www.bloomberg.com/news/articles/2017-08-11/u-s-inflation-remains-subdued-as-core-index-misses-forecasts

"St. Louis Fed President James Bullard said Wednesday that Fed officials have been surprised by the low inflation readings this year."

 

 

Edited by durhamborn
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HOLA4416
11 minutes ago, durhamborn said:

No they are not.The central banks react to things.There is far too much belief out there that CBs can control the economy in a small range long term.They cant.They also make policy mistakes.This thread is about the fact the Fed has made the biggest one since 1937 by tightening into a slowing economy with huge leverage and very low inflation.Thats my opinion based on charts i have 100% faith in.

10%?.This bear will see some assets down 70% i think and will be the biggest since the 2nd world war.

US CPI misses forcast "unexpected" ;)

https://www.bloomberg.com/news/articles/2017-08-11/u-s-inflation-remains-subdued-as-core-index-misses-forecasts

"St. Louis Fed President James Bullard said Wednesday that Fed officials have been surprised by the low inflation readings this year."

 

 

US Inflation should "in theory" be skyrocketing by now, so we're seemingly at turning point.

China making it clear they're in bed with Pyongyang is just fuel to the fire for Trump to press the button, not only removing an unstable nuclear state but quite possibly being the pin for China's bubble, a bubble which has robbed much of the USA. His approval ratings are also climbing during this current tension, never mind the beneficial distraction from the Russia investigations. Russia's Lavrov saying he doesn't accept a nuclear-armed NK.

I know you tend to avoid politics DB but this could be quite the accelerant for the inevitable.

Edited by Barnsey
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HOLA4417
Just now, Barnsey said:

US Inflation should "in theory" be skyrocketing by now, so we're seemingly at turning point.

China making it clear they're in bed with Pyongyang is just fuel to the fire for Trump to press the button, not only removing an unstable nuclear state but quite possibly being the pin for China's bubble, a bubble which has robbed much of the USA. His approval ratings are also climing during this current tension, never mind the beneficial distraction from the Russia investigations. Russia's Lavrov saying he doesn't accept a nuclear-armed NK.

I know you tend to avoid politics DB but this could be quite the accelerant for the inevitable.

Could be yes.I dont look at triggers because i cant know them.I just look at where we are in the cycle and how much debt/growth inflation etc there is compared to the flows of money in the monetary base.I do love the fact the media and most of the press say gold is up because of Korea and lots of other things when the markets were going where they are anyway.There is a very good chance people will buy the falls in the equity markets because they will think the Fed might stop tightening now and maybe even print.However they are missing the point that it doesnt matter.The damage is already done.36 months of a flat or falling monetary base with the largest leverage in history is starting to show through.Tightening into falling inflation close to zero has never ever been done before.The nearest was in 37 when the Fed tightened too early.This is a repeat.

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HOLA4418
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HOLA4419
8 minutes ago, Habitationi Bulla said:

You say they're tightening too early, but if they didnt tighten and let the debt bubble grow things would be even worse in a few years time when forced to tighten.

Quite simply isnt it just a case of no matter what they do they're fkd, with the current tools they have to use.

 

Yes very true,they should of tightened in 11 or 12,they are tightening to stop bubbles forming (in their eyes) and they wanted to send a message  normal was coming back.From a purely selfish view though i dont care about what they do,i just want to know as best i can how it affects asset prices so i can profit.Ordinary investors are always the victims in these events and thats wrong,but its how it always is.Look at everyone jumping on BTL by releasing equity from their main home the last few years.People pulling cash savings out because of rates and putting it into equity trackers or income funds at the worst point in the cycle.

Most people on this site know very well the disaster bailing out the last business cycle has created.They know it by the insane house prices,the wages that increase less than inflation,the falling productivity,£25k cars in Aldi car park driven by someone on a temporary contract at £8 an hour.I hope this thread can help point to where we go now.How past events and macro policy has worked out in the past at these cycle turns.

So far everything is where i would expect it to be apart from id expect gold a little higher by now.The markets will always try to get people to look the wrong way.Lets see how things develop going into autumn and winter.

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HOLA4420
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HOLA4421
Just now, Habitationi Bulla said:

Corrected for you!

Well yes,but that is a tale back in history now.All simply parts of the disinflation cycle that started in 1982.Almost everyone from CBs to consumer think thats the norm.The reflation cycle ahead will give them a much needed education.Just a huge deflationary sell off to get through first before that can begin.For a lot of us it might be the last time we see a cycle turn like this,so we better make the most of it.

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HOLA4422
7 minutes ago, durhamborn said:

Well yes,but that is a tale back in history now.All simply parts of the disinflation cycle that started in 1982.Almost everyone from CBs to consumer think thats the norm.The reflation cycle ahead will give them a much needed education.Just a huge deflationary sell off to get through first before that can begin.For a lot of us it might be the last time we see a cycle turn like this,so we better make the most of it.

If one can service a large loan, would now not be the time to fill ones boots,if as you predict helicopter money is on its way in the coming years.

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HOLA4423
20 minutes ago, Habitationi Bulla said:

If one can service a large loan, would now not be the time to fill ones boots,if as you predict helicopter money is on its way in the coming years.

No i dont think so far too much risk.The inflation will be industrial and might not feed through to the consumer for a long time.There is also a very high chance asset prices go up slower than the inflation.Its leverage that will take down a lot of people and companies.In inflation cycles yields tend to rise and PE ratios contract because of rising rates.You could argue leverage invested in the right sectors will prove a very good bet,but for ordinary investors leverage will catch you in the end and is best avoided.History is full of bankrupt companies and consumers who could service a big loan,until they couldnt.

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HOLA4424
48 minutes ago, durhamborn said:

No i dont think so far too much risk.The inflation will be industrial and might not feed through to the consumer for a long time.There is also a very high chance asset prices go up slower than the inflation.Its leverage that will take down a lot of people and companies.In inflation cycles yields tend to rise and PE ratios contract because of rising rates.You could argue leverage invested in the right sectors will prove a very good bet,but for ordinary investors leverage will catch you in the end and is best avoided.History is full of bankrupt companies and consumers who could service a big loan,until they couldnt.

Must admit I don't see how all your freshly printed money is only going to go towards industrial inflation but at the same time house prices are toast. If our governbankment is given lots of spending money, why won't it finish up in assets, via wage inflation? Or do you think it will but just after a delay? For one thing 17% of the workforce is public sector so presumably they will be OK, when the governbankment is stuffed with cash? Printing means the public sector don't have nominal pay cuts like in Greece. If there is more infrastructure spending that even more jobs and wage inflation. Looking at your last reflation period, at the start of the 1970's the average house was £5k by the end of the 1970's it was £20k up 300%.

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HOLA4425
1 hour ago, durhamborn said:

No i dont think so far too much risk.The inflation will be industrial and might not feed through to the consumer for a long time.There is also a very high chance asset prices go up slower than the inflation.Its leverage that will take down a lot of people and companies.In inflation cycles yields tend to rise and PE ratios contract because of rising rates.You could argue leverage invested in the right sectors will prove a very good bet,but for ordinary investors leverage will catch you in the end and is best avoided.History is full of bankrupt companies and consumers who could service a big loan,until they couldnt.

Im talking about a person who could quite easily service say a 200K loan. As inflation is the name of the game surely it stand to reason that having debt that will be wiped out by inflation is the way to go.

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