durhamborn

Deflationary collapse and the Reflation Cycle to Come.

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9 hours ago, Sancho Panza said:

That's really good.

That's very very very good !!!

Everyone should take a bit of time out and read that.

The jist of it is that it sums up what most of us on here are complaining about every day and the most likely end game scenario, I find it hard to disagree with what it says.

It's quite frightening and I cannot believe for one minute the bankers/politicians haven't realized this, hence why we see the likes of William Hague warning people that the insanity of the loose monetary police and that low interest rates must end.

I was saying to someone just the other day it feels like money has become worthless, look at house prices, people think paying 10/20x their income for a 2 bed flat is normal and affordable.  Look at the  estates filled with £50K cars.  Look at the price of going on a sh*t holiday during the school holidays, £2-£10K. Look at the premier league football, it's lost touch with any sense of reality and makes a mockery of the day to day lives of the supporters, we have blokes on the radio telling us that £50Million for Georgio Osborno from Arseio is a bargain.  All of these worry me and point to any sense of value in our fiat currency is becoming non-existent.  

This should worry everyone.

Is the article right...I dont see how it can't be!!!

The bankers have bailed themselves out at our expense by thrashing the currency and inflating asset prices.  Will they stop before it's too late ?  Human nature being what it is, I very much doubt it.

Maybe the US stopping the QE/raising rates was to stop the $ collapsing, that in itself is quite scary.  Will the UK follow suit, I would hope so.  if we see a rate rise in the next 6 months (I had hoped before Christmas but no one seems to be putting enough pressure on them ) and an end to the Term funding scheme then we'll know that they know they've gone as far as they can.  It's a dangerous game though as the £ looks worthless already to some ( me ).

Will we get a deflationary asset price crash before a currency collapse, it depends on the acts of the BoE, but based on the previous 10 years I very much doubt it now, hence why I am off.

I suspect, sadly, we've already seen the deflationary part of the collapse and all we have now is QE till the collapse happens, who know how long that could be, look at Japan it has managed decades, but at least with cheaper housing.

At the end of the day, the bankers/rich/establishment wont loose out ( I said as much yesterday to someone ).  They have used this magic money to buy up pretty much everything of any value.  If/When the £ becomes worthless then they'll still hold anything of any value, they might loose 50% of their unearned equity but you and I my HPC friends will loose 99% of everything we've earned.

If/when the collapse comes, who will the British people blame...not the bankers, who were kind enough to lend them money, nor the propaganda pumping politicians....that probably leaves the immigrants, the worst case scenario does not bear thinking out.

This is one f**king living nightmare.

How best to survive with your wealth intact is the only question on the table right now ?

I hope some of the idiot trolls read that article and realise what a f**king mess we are in and why the HPCers are so against this madness.  Their magical paper gains will mean nothing when they become worthless.

If push comes to shove then worst case their children might endure a lifetime of poverty...best case their children could be sent out to die in a massive war in the name of king and country of course.

 

 

Edited by TheCountOfNowhere

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Locke   
3 hours ago, TheCountOfNowhere said:

How best to survive with your wealth intact is the only question on the table right now

Water; dry food; toilet paper; silver; gold; bitcoin; gold stocks. In that order.

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Errol   

Whenever the world has been in this situation before it has always ended in war. No exceptions.

We are headed towards that now.

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13 hours ago, Will! said:

 That was interesting.  I've been heading the same way myself.  To me, fiat currency is just a load of empty promises about to hit a demographic brick wall.

My gross income now gets allocated as:

~15% goes in taxes
~35% gets sacrificed to SIPP (mix of equities with overseas earnings, some pm's, rest is cash looking for opportunities)
~15% gets sacrificed for a nearly tax-free stock option plan
~10% in house repayments
~25% to live off (includes mortgage interest)

So I'm managing to effectively save ~60%. I've been trying to convert as much of my £ into assets with low counterparty risk.  I take the minimum income I need to pay the bills and have only enough £ savings for emergencies.

I'm not convinced the deflationary collapse described by the OP will ever happen, I just expect us to go straight to inflation.

 

 

 

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15 hours ago, Will! said:

Very interesting, but I think its sloppy saying that all money is going to be the problem.  There is not yet a good replacement for Fiat currency, blockchain needs another evolution to be able to cope with the volumes the world requires, and getting change for my Britannia silver coin at the supermarket may be problematic. 

Cold hard cash is where you want to be IMO and I have my money where my mouth is.  "Real" Fiat currency you can hold in your hand, not the borrowed type appearing in another companies financial accounts, is likely to become the valuable component.   If banks were forced to use real cash and hadn't been able to leverage up so many times then 2008 wouldn't have happened as an example. 

It will be a rejection of credit and an insistence on paying by cash, which has no counterparty risk just like gold, which will do a lot of damage from what I am seeing IMO.

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The article has merit and i definitely think it is right in its thrust that people are losing faith in fiat currency. 

The question is whether that trust will collapse in this cycle and I don't think that is likely, assuming that the crunch occurs in the next year or so. 

Currently, as mentioned above, there simply is no reasonable and practical alternative to using cash and the concerns on this website are not widespread in the populace because they simply aren't educated about money and how it works. 

Memories of 2007 are already distant in most people's minds - most were insulated to some extent from the GFC although they have been slowly bled dry since then. For that reason I think faith in central banks will remain and is more likely to collapse in the next cycle when they screw up the response to the present circumstances.

Nobody yet knows whether this is going to be a deflationary or inflationary crunch. 

My bet is on deflation since the Tories have spent years promoting austerity and criticising New Labour's "reckless" monetary policy. They are also worried about unaffordable housing wrecking their election chances so it's unlikely they are going to pull the trigger on QE and raising rates until it is too late. They believe in the Phiilips curve so we may see a hike of 0.25% or something but, as previously pointed out, either way they are screwed.

To some extent it's irrelevant anyway - the real action will come from the US where Janet Yelland has tightened into a recession. Given that she does not think there will be another financial crash in our lifetime I would estimate that she is likely to be pretty clueless about how to steer the ship.

Whether there is an inflationary or deflationary crunch there will be time to adjust your portfolio either way. 

 

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doahh   
20 hours ago, Will! said:

Agreed that this is a good article that takes us back to the real root of the problem, that our currency is being so far devalued that it could eventually become worthless. From the article:

Quote

it is tempting to think that the dollar might be the next currency at risk. There are, pretty obviously, significant weaknesses in the American economy. But the dollar enjoys one crucial advantage over sterling, and that is the “petro-prop”. Because oil (and other commodities) are priced in dollars, anyone wanting to purchase them has to buy dollars first. This provides support for the dollar, despite America’s economic weaknesses (which include cheap money, and a failure to break up market-dominating players across a series of important sectors).

I found this interesting and I guess it ties in with DurhamBorns theories about the future. However, I have read a few articles over the last couple of years about the Chinese linking the Yuan directly to gold so that it is possible to sell a security for Yuan and have it immediately convert into gold. I believe that both Russia and the Saudis have signed agreements that some of their oil sales to China will go through this mechanism and therefore convert oil directly into gold, thereby bypassing the dollar. Depending when the crisis hits and how well that direct convertibility is accepted by other countries (Iran etc), the dollar peg is also approaching its end. This system will also allow by-passing of US sanctions on oil imports of countries such as North Korea if the Chinese vote against sanctions in United Nations.

China Moves on New World Order: Will Buy Oil With Gold-Backed Currency—Bypassing US Petrodollar.

Edited by doahh

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Errol   

Yes China and Russia are moving quickly to sever the dollar to any connection with oil. Russia already sells gas/oil to China for Ruble/Yuan via existing pipelines. 

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Option5   
5 minutes ago, Errol said:

Yes China and Russia are moving quickly to sever the dollar to any connection with oil. Russia already sells gas/oil to China for Ruble/Yuan via existing pipelines. 

And gas to Europe in Euros.

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NuBrit   
On 9/10/2017 at 6:15 PM, nothernsoul said:

The problem with the cinema is the same as with premier league football. What was once a cheap, weekly form of entertainment for everyman has become too expensive. People no longer just decide to " go to the pictures" then look up whats on, they need to be enticed out by an event. In recent years this has been a churn of blockbuster superhero movies. Even this has started to wear thin. Ive noticed similar things in the rest of the economy; regular pub going, eating out etc has been replaced by occasional more expensive events. Unfortunately most of the service economy cant survive on this.

The problem with cinema is that it's sh1te. Remakes and derivative comic book rubbish. Anyone going to see the third remakeof a spiderman remake would want their head checking.

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A lack of faith in paper/plastic money is a given now imo.

The bit's of paper and plastic are worthless as they are back by nothing at all.

 

I promise to pay the bearer on demand.................what exactly??

 

Empty ginger bottles?

Packets of Pickled Onion Monster Munch?

 

The whole financial system is an utter joke ran by halfwits.  It will fail and by the look of it, quite soon.

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doahh   
15 minutes ago, Gigantic Purple Slug said:

If it's the same country that holds the gold that issues the currency then the backing is essentially worthless.

Can you explain the reasoning behind that please? You seem to be saying that every gold backed currency throughout history is worthless. I assume that trading oil for gold means that the gold can be repatriated back to the oil supplier when they want. You only need to trust that the country will do the physical transfer, and if they don't then they be left without oil in the future.

Edited by doahh

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Errol   

It's a Yuan oil contract convertible into gold. The idea is that you generally just stick with Yuan but the option for gold convertability is always there if required.

 

De-Dollarization Accelerates: China Readies Yuan-Priced Crude Oil Benchmark Backed By Gold

http://www.zerohedge.com/news/2017-09-02/de-dollarization-accelerates-china-readies-yuan-priced-crude-oil-benchmark-backed-go

Edited by Errol

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20 minutes ago, doahh said:

Can you explain the reasoning behind that please? You seem to be saying that every gold backed currency throughout history is worthless. I assume that trading oil for gold means that the gold can be repatriated back to the oil supplier when they want. You only need to trust that the country will do the physical transfer, and if they don't then they be left without oil in the future.

Yes. The country that provides the currency with the gold backing can withdraw the gold backing at any time. So you amass a large amount of currency X, believing that it has value because it is gold backed, only to find that the backing is only a promise to make good and nothing that can be enforced (in other words exactly the same as non gold backed).

If you don't amass a large amount of the currency, you don't need the backing in the first place.

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Been following this thread since its inception and I would now be interested in opening and account and putting some cash in TLTs . Dont know much about this, so, questions for those that do know, firstly are TLT etfs  compatible with an ISA ? Secondly which Fund would you recommend ?, precise name of fund please. Many thanks.

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5 hours ago, Errol said:

Whenever the world has been in this situation before it has always ended in war. No exceptions.

We are headed towards that now.

I thought this 5 years ago now.

Buying a house in the UK is a mugs game now, need to be able to secret yourself away somewhere to see out the war growing spuds and drinking red wine.

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36 minutes ago, Social Justice League said:

The whole financial system is an utter joke ran by halfwits very clever 1000 year old famillies.  It will fail and by the look of it, quite soon.

The rest of us are the half wits for going along with it.

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8 minutes ago, bricor mortis said:

Been following this thread since its inception and I would now be interested in opening and account and putting some cash in TLTs . Dont know much about this, so, questions for those that do know, firstly are TLT etfs  compatible with an ISA ? Secondly which Fund would you recommend ?, precise name of fund please. Many thanks.

TLT is not ISA compatible,but can go in a SIPP or fund and share account.

https://www.ishares.com/uk/individual/en/products/272124/ishares-usd-treasury-bond-20-yr-ucits-etf

The above is ISA compatible.

Both funds are pretty much the same.

The only thing to say about buying dollar bond funds is that you are buying them because you think there will be a crash/big slowdown/sterling tops out soon and goes back down.The bond bull is 36+ years old.I think it has one last big uptick before it then starts a big bear market.If thats wrong and we get inflation before a deflation it would be a bad call.Holding them at this stage is a hedge (myself im about 18% in them),not an all in situation.Everyone needs to decide on the make up of their portfolio.Its a very difficult time to get it right.Half right will do me the way things are.

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doahh   
1 hour ago, Gigantic Purple Slug said:

Yes. The country that provides the currency with the gold backing can withdraw the gold backing at any time. So you amass a large amount of currency X, believing that it has value because it is gold backed, only to find that the backing is only a promise to make good and nothing that can be enforced (in other words exactly the same as non gold backed).

Yes, that is true. However, I think the important point is that assets are beginning to be convertible into gold without passing through the dollar. How many of the oil suppliers will be happy to hold Yuan? Given they want away from the dollar, what is the incentive to move to a different fiat? I guess it could simply be that they want to stop the American's spreading their tentacles around the world, but I would have thought the real attraction is the direct convertibility to gold.

Edited by doahh

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2 hours ago, durhamborn said:

TLT is not ISA compatible,but can go in a SIPP or fund and share account.

https://www.ishares.com/uk/individual/en/products/272124/ishares-usd-treasury-bond-20-yr-ucits-etf

The above is ISA compatible.

Both funds are pretty much the same.

The only thing to say about buying dollar bond funds is that you are buying them because you think there will be a crash/big slowdown/sterling tops out soon and goes back down.The bond bull is 36+ years old.I think it has one last big uptick before it then starts a big bear market.If thats wrong and we get inflation before a deflation it would be a bad call.Holding them at this stage is a hedge (myself im about 18% in them),not an all in situation.Everyone needs to decide on the make up of their portfolio.Its a very difficult time to get it right.Half right will do me the way things are.

Thanks DB.

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2 hours ago, durhamborn said:

TLT is not ISA compatible,but can go in a SIPP or fund and share account.

https://www.ishares.com/uk/individual/en/products/272124/ishares-usd-treasury-bond-20-yr-ucits-etf

The above is ISA compatible.

Hi DB. Someone else mentioned the "IBTL" ETF upthread and I put a little of that into a H&L stocks and shares ISA recently. The one you've linked there seems to be called "IDTL" and seems to be a USD version of "IBTL" ( which is in GBP ). Can't seem to find "IDTL" on the H&L website. Hmmm....

I have no idea what I am doing really :lol: so that's why I'm only putting  a little bit in and learning as I go along... hopefully !

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