Deflationary collapse and the Reflation Cycle to Come.

[Lavalas]

Many things to applaud there, Durham. Particularly stealing the councils leccy and calling your partners lunch bait. I'm a snap man myself!

When's a good time for M&S? Got a food hall just down the road.

[durhamborn]

9 minutes ago, Lavalas said:

Many things to applaud there, Durham. Particularly stealing the councils leccy and calling your partners lunch bait. I'm a snap man myself!

When's a good time for M&S? Got a food hall just down the road.

M and S usually reduce very late for the good bargains.If yours closes at 8pm id go in at 7.30pm.If there is nothing then the night after try 10 minutes before and work back until you hit the time.If you go in and they havent done the final reductions (a £2.50 sarnie would be down to 25p/35p) then wander around a bit.Sundays are the same,go in 35 minutes before closing.Odd nights they dont reduce down the final reductions if they are busy etc.So dont be put off if you miss a few times.On sunday i got a lot of stewed steak and potato meals reduced to 50p each from £4.50.Sometimes during the week they can reduce everything accept the sarnies earlier.If you go in at 7.30 and there is nothing and they dont reduce in the next 30 minutes,try the night after at 6.30,then 5.30 until you find the time in your local store.Once you get it youl be saving thousands a year.

 

[sideysid]

1 hour ago, durhamborn said:

Yes,healthy and very cheap.Tesco,get there at 7.30pm,they will reduce then or in the next 30 minutes.Usually lots of veg for a few pence.Last week i got 9 heads of broccoli for 5p a head.Blanched and frozen.The week before parsnips 10p a bag.Lovely soups.The only thing outside of government theft (mostly council tax) i pay much for now is energy.I need to sort out some form of wind power.I have a booster pack i charge laptops and phones off etc that i charge up from the councils plug socket for the xmas decorations.Its behind a wall in the churchyard hidden by a bush.If i ever get an electric car il often be parking there,

I admire your frugality DB, my family/friends think I'm Martin Lewis for saving money and deals, but you're on the next level.

Just one word of warning however, I wouldn't mention about the electricity thing on a public forum however. ?

[Errol]

15 minutes ago, sideysid said:

Just one word of warning however, I wouldn't mention about the electricity thing on a public forum however. ?

If the plug is easily accessible, unmarked and there is no signage, couldn't someone just say that they assumed it was for public use?

[durhamborn]

2 minutes ago, sideysid said:

I admire your frugality DB, my family/friends think I'm Martin Lewis for saving money and deals, but you're on the next level.

Just one word of warning however, I wouldn't mention about the electricity thing on a public forum however. ?

Bit worrying though when recession hits, it gets a lot harder.The electric thing is a joke of course,i have no idea if there are plugs they plug Christmas decs into around town squares 

Its incredible really what you can pick up second hand for really cheap prices.A friend of mine has just bought a lot of baby/toddler items from Gumtree at around 20% the retail price from Boomer grandparents who probably used the top of the range items twice.

Iv been a bit lazy though lately.I used to metal detect places after an outdoor concert/music event/fair/village show etc.Very regular you could find £50-£100 in a couple of hours or on a good day gold rings,chains etc.You could tell where the beer tent was and the food sellers (and where most the money on the floor was) by the grass being the most trodden.Its amazing how much money is dropped at events.

[Old Guy]

3 hours ago, TheCountOfNowhere said:

That is impressive.

Started making home made soup....Pot from Sains/Tesco £1.50->£2.00, Aldi 95p...home made...approx 20p

 

 

My wife does the same with our home grown veg. Tasty, cheap and convenient.

[TheCountOfNowhere]

58 minutes ago, durhamborn said:

Bit worrying though when recession hits, it gets a lot harder.The electric thing is a joke of course,i have no idea if there are plugs they plug Christmas decs into around town squares 

Its incredible really what you can pick up second hand for really cheap prices.A friend of mine has just bought a lot of baby/toddler items from Gumtree at around 20% the retail price from Boomer grandparents who probably used the top of the range items twice.

Iv been a bit lazy though lately.I used to metal detect places after an outdoor concert/music event/fair/village show etc.Very regular you could find £50-£100 in a couple of hours or on a good day gold rings,chains etc.You could tell where the beer tent was and the food sellers (and where most the money on the floor was) by the grass being the most trodden.Its amazing how much money is dropped at events.

Some friends of ours have been selling baby stuff, they said they can't give it away.

 

They asked us if we wanted it, we said no :lol: 

[Tom82]

18 minutes ago, TheCountOfNowhere said:

Some friends of ours have been selling baby stuff, they said they can't give it away.

It's impossible to sell. Everyone wants new, we are giving ours away.

1 hour ago, durhamborn said:

 

Durhamborn - are you generally happy with where we are at today, I know you expected gold to be higher.  

[durhamborn]

2 minutes ago, Tom82 said:

It's impossible to sell. Everyone wants new, we are giving ours away.

Durhamborn - are you generally happy with where we are at today, I know you expected gold to be higher.  

Yes pretty much.Dollar isnt far off my target now,very pleased with that call.Id of expected gold to be higher,but it did put on $150 in a short time so the direction was bang on,but i would of expected around $1380 now on its way to $1450 target.Time will tell if it makes it or not and its best to ignore the short term tape most of the time.The deflation stocks i sold are mostly down between 15% and 20% from their highs,and gold stocks up around 15% from their buy points.The reflation stocks iv started to very slowly buy are down on average 2%.I expect to average into those over the next 12 months,unless we do see very large falls where i would be buying in two chunks.Again i would of expected GDX to be around 30/31 by late October,so its lagging.Right direction and decent profits from 21 but not as far along as i would of expected given where the dollar is.These things can come together quickly though.Stops are in place,all at profitable levels on my remaining gold stocks.I sold Sibanye at a 30% profit,turned out very good timing as its given up 20% since.I wont be adding back in any.Once they are sold im in cash or treasuries.Only debate im having with myself is if to hold onto some gold miners or not.

 

[Tom82]

15 minutes ago, durhamborn said:

Once they are sold i'm in cash or treasuries. Only debate im having with myself is if to hold onto some gold miners or not.

 

Thank you , So the plan is to hold say 80% cash/bond (TLT)  though the deflation and then your buying gold and reflationary blue chips when the printing starts? 

Forgive my ignorance but why bonds? Is that a very short term move just for the deflation period?  

 

[durhamborn]

7 minutes ago, Tom82 said:

Thank you , So the plan is to hold say 80% cash/bond (TLT)  though the deflation and then your buying gold and reflationary blue chips when the printing starts? 

Forgive my ignorance but why bonds? Is that a very short term move just for the deflation period?  

 

Yes Tom its a very short term position the bonds.I expect a very severe bear market in bonds the next cycle,but if we do get a deflation they might/should have one last jump up in their 35 year bull market.

Il likely be around 70% cash/treasuries.Iv started buying small amounts into reflation stocks i think might be already cheap/within 25% of their bottoms.Mostly UK industrial/utility stocks.If im right they will go down more,but i will average in over perhaps a year,unless the big falls do hit and id buy in a couple of goes.

I like to have a balanced,income producing  blue chip portfolio.All im really doing is swapping out deflation stocks i bought over the last 25 years for huge profits and buying reflation blue chips instead at what i think are very cheap levels (and will probably get cheaper).However i will also have a decent sized position in commod producers and physical metals as well.A lot depends on if we do see some big falls and a deflation.There are many on this thread who think we go straight to inflation without a deflation event.I dont agree,but i do respect that view as being very possible.I think the key might be if the US goes into recession or not.I do think a portfolio pointed more to reflation/inflation will serve people well going forward,but i do think we have a cliff edge to get through first.Caution,and very tricky times.

[ThePrufeshanul]

Finally got round to watching and summarising those Steve Keen videos. 

The upshot is:

1) He expects a deflationary Crunch to be coming; tightening central banks, unfolding China crash are adding up to a perfect storm

2) A number of countries are particularly exposed, in order: China, Australia, Sweden, Hong Kong, Korea, Canada, and Norway, partly due to their high level of personal debt and partly because they rolled over the crisis in 2008.

3) The global slowdown in China's credit is going to affect housing bubbles in Vancouver, Sydney and good old Landahn Tahn.

4) Depending on the timing and whether or not Trump can get his budget through he anticipates a stock boom in America - possibly even a debt default (obviously affecting treasury bonds) depending on the level of craziness that Trump can get through Congress. If this happens gold will obviously go through the roof.

5) He thinks there is a good chance of a euro crisis with further bailouts triggering another country leaving the EU in 2018/9

After reading around on the topic he is definitely the economist who has been right on the money as far as i'm concerned. 

With that in mind i'm going to hedge treasuries with Gold.

[Tom82]

52 minutes ago, durhamborn said:

Yes Tom its a very short term position the bonds.I expect a very severe bear market in bonds the next cycle,but if we do get a deflation they might/should have one last jump up in their 35 year bull market.

Il likely be around 70% cash/treasuries.Iv started buying small amounts into reflation stocks i think might be already cheap/within 25% of their bottoms.Mostly UK industrial/utility stocks.If im right they will go down more,but i will average in over perhaps a year,unless the big falls do hit and id buy in a couple of goes.

I like to have a balanced,income producing  blue chip portfolio.All im really doing is swapping out deflation stocks i bought over the last 25 years for huge profits and buying reflation blue chips instead at what i think are very cheap levels (and will probably get cheaper).However i will also have a decent sized position in commod producers and physical metals as well.A lot depends on if we do see some big falls and a deflation.There are many on this thread who think we go straight to inflation without a deflation event.I dont agree,but i do respect that view as being very possible.I think the key might be if the US goes into recession or not.I do think a portfolio pointed more to reflation/inflation will serve people well going forward,but i do think we have a cliff edge to get through first.Caution,and very tricky times.

Thank you again

[duckwomanloulou]

Interesting chart from Real Vision Weekly Hack newsletter:

https://www.realvision.com/landing/weekly-hack/

[Barnsey]

All eyes on the Fed tomorrow to announce their commencement of QT (tightening), and then the 19th National Congress of the PRC on 18th October. These, at the moment, seem to be the two biggest global triggers to get things underway, removing the stimulus for zombie companies that has prevaled for so long. Exactly what Durhamborn has been explaining throughout this topic.

What could be rather alarming is the sheer violence of the algo's once things turn, reacting far more quickly to even the slightest falls in order to preserve profit. The CB's will be caught out by this rapid escalation of sell-offs, and equally very reluctant to buy EVERYTHING to save the day, which again as Durhamborn rightly points out could cause a severe deflationary shock when it does hit. Increasing popularity of ETFs will only exacerbate the falls.

Edited September 19, 2017 by Barnsey

[MrXxx]

Was going to sell all my miners, tlt and ftse100 trackers and invest it all in M & S shares but I can now see where all my dividends would go!...DB is there no end to your talents?...Warren Buffett one minute, Martha Stewart the next!

So nice to be amongst kindred spirits who view frugality as a badge of honour rather than akin to having an STD :-) :-) :-)

[leonardratso]

well if youve got the time and drive to make it cheap then why not, im not so good at it but i havent really got the time.

I have to admit i spent a lot of time and had some luck switching around the gas and electricity to make it cheaper and it worked quite well, i keep a rolling spreadsheet of gas+leccy and compare year for year what im spending, we havent changed habits really so we use as much as ever and it goes up in winter, but 2013-14 £1200 total for year, 14-15 £1074 for year, 15-16 £850 for year, 16-17 £690 for year, and now 17-18 im accumulating those may-->may. And this is with prices actually rising and stuff like boiler getting older and less efficient. I suspect ill see diminishing returns and it will start to rise again but it was and still is worth the effort.

[Sancho Panza]

10 hours ago, durhamborn said:

M and S usually reduce very late for the good bargains.If yours closes at 8pm id go in at 7.30pm.If there is nothing then the night after try 10 minutes before and work back until you hit the time.If you go in and they havent done the final reductions (a £2.50 sarnie would be down to 25p/35p) then wander around a bit.Sundays are the same,go in 35 minutes before closing.Odd nights they dont reduce down the final reductions if they are busy etc.So dont be put off if you miss a few times.On sunday i got a lot of stewed steak and potato meals reduced to 50p each from £4.50.Sometimes during the week they can reduce everything accept the sarnies earlier.If you go in at 7.30 and there is nothing and they dont reduce in the next 30 minutes,try the night after at 6.30,then 5.30 until you find the time in your local store.Once you get it youl be saving thousands a year.

 

As part of eldest Panza Junior's education, I take him to Leicester Market,he thinks he's buying fruit,but actually I'm trying to get him to weigh value, price and oppurtunity cost against each other.I just worry the kids today aren't getting taught any useful life skills besides traipsing to the supermarket.

On a more practical level,the fruit is significantly cheaper thna Aldi (which trounces most supermarkets) but the quality can be variable.

6 hours ago, ThePrufeshanul said:

Finally got round to watching and summarising those Steve Keen videos. 

The upshot is:

1) He expects a deflationary Crunch to be coming; tightening central banks, unfolding China crash are adding up to a perfect storm

2) A number of countries are particularly exposed, in order: China, Australia, Sweden, Hong Kong, Korea, Canada, and Norway, partly due to their high level of personal debt and partly because they rolled over the crisis in 2008.

3) The global slowdown in China's credit is going to affect housing bubbles in Vancouver, Sydney and good old Landahn Tahn.

4) Depending on the timing and whether or not Trump can get his budget through he anticipates a stock boom in America - possibly even a debt default (obviously affecting treasury bonds) depending on the level of craziness that Trump can get through Congress. If this happens gold will obviously go through the roof.

5) He thinks there is a good chance of a euro crisis with further bailouts triggering another country leaving the EU in 2018/9

After reading around on the topic he is definitely the economist who has been right on the money as far as i'm concerned. 

With that in mind i'm going to hedge treasuries with Gold.

Post them why don't you?

I love Steve Keen.Earlier on in the thread,I posted his superb Roving Cavaliers of Credit article.

However, if you'd followed his line in investing,you'd have lost a lot,particualrly versus Australian property .Hurts to say it.

 

Edited September 19, 2017 by Sancho Panza

[Sancho Panza]

On a different tangent here's a great article from the NYT from 2014.

It explains how various central banks arived at the 2% inflation target.Remember,this is the level of inflation that according illustrious economists like G Brown and G Osbourne,will deliver the optimum stability.

Much as we focus on declining real disposable income,we sometimes forget about the nefarious ways that Govts have played around with the deflator.

https://www.nytimes.com/2014/12/21/upshot/of-kiwis-and-currencies-how-a-2-inflation-target-became-global-economic-gospel.html

'Of Kiwis and Currencies: How a 2% Inflation Target Became Global Economic Gospel

Sometimes, decisions that shape the world’s economic future are made with great pomp and gain widespread attention. Other times, they are made through a quick, unanimous vote by members of the New Zealand Parliament who were eager to get home for Christmas.

That is what happened 25 years ago this Sunday, when New Zealand became the first country to set a formal target for how much prices should rise each year — zero to 2 percent in its initial action. The practice was so successful in making the high inflation of the 1970s and ’80s a thing of the past that all of the world’s most advanced nations have emulated it in one form or another. A 2 percent inflation target is now the norm across much of the world, having become virtually an economic religion.

A core piece of the Japanese government’s strategy to jolt its economy to life is to do “whatever it takes” to get to that magical 2 percent inflation level. In the United States, the same rationale has driven the Federal Reserve to keep interest rates near zero for six years and to pump nearly $4 trillion into the economy by buying bonds. The European Central Bank appears on the verge of its own huge effort to bring inflation closer to 2 percent.

Yet even as the idea of a 2 percent target has become the orthodoxy, a worrying possibility is becoming clear: What if it’s wrong? What if it is one of the reasons that the global economy has been locked in five years of slow growth?

That’s what the Reserve Bank Act of 1989 was supposed to do. It directed the finance minister and the head of the central bank to arrive at a formal target for how high inflation should be, and granted the central bank political independence to guide interest rates to achieve that inflation level. The head of the central bank could be dismissed for failure to reach the inflation goal.

Ultimately, however, the leaders of the majority party in Parliament decided to brush off the concerns. It helped the cause that one of the bill’s strongest opponents was laid up in the hospital. And Christmas was around the corner.

Once the law was enacted, though, there was the difficult question of what the inflation target should be. Zero percent? Two percent? Five percent?

Mr. Brash and Mr. Caygill got a head start on an answer from an offhand comment made during a television interview in 1988. Roger Douglas, Mr. Caygill’s predecessor as finance minister, had been seeking to dissuade New Zealanders from thinking that the central bank would be content with high inflation, and so he said in an interview that he was aiming for inflation of around zero to 1 percent.

“It was almost a chance remark,” Mr. Brash said in a recent interview. “The figure was plucked out of the air to influence the public’s expectations.”

With Mr. Douglas’s figures as a starting point, Mr. Brash and Mr. Caygill agreed that it would be best to expand the range to give them more room to maneuver, but only a bit. New Zealand would aim for inflation between zero and 2 percent.

Not surprisingly, the passage of a law to reform the central bank governance of an archipelago of 3.4 million people received no coverage in the major American papers. But across the close-knit world of global central bankers, people started to notice the Kiwis’ monetary policy experiment.

 

 

Britain takes its 2 percent target seriously enough that the governor of the Bank of England has to write a letter to the chancellor of the Exchequer, explaining whenever inflation misses by more than a percentage point in either direction — the economic policy equivalent of a naughty student writing an apology on the blackboard.

But there was an alternate view — that keeping inflation that low might be dangerous. And the person mounting that argument most forcefully within the Federal Reserve in the 1990s was a Fed governor named Janet L. Yellen.

Behind the oversize doors of the Federal Reserve’s boardroom on Constitution Avenue in Washington, the fight over whether the world’s largest economy should emulate the likes of Canada and New Zealand took place in 1995 and 1996.

 

All of this has quite a few smart economists wondering whether the central bankers got the target number wrong. If they had set it a bit higher, perhaps at 3 or 4 percent, they might have been better able to combat the Great Recession because they could cut inflation-adjusted interest rates by more.

Mr. Blanchard offered no definitive answer, but others are more confident that 2 percent inflation has proved misguided.

“It’s kind of a historical accident that we have a 2 percent target to begin with,” said Laurence Ball, an economist at Johns Hopkins University who advocates raising the target to 4 percent. “Any adverse effects on the economy of having 4 percent rather than 2 percent inflation are trivial compared to the effects of having a horrible recession like we’ve been experiencing.”

Such a shift would come at a cost. At 2 percent inflation, it is easy to enter into many financial transactions without really having to adjust for inflation. At 2 percent inflation, the value of a dollar falls by half over 35 years, whereas at 4 percent it falls in half every 18 years. On the other hand, inflation also hovered in the range of 3 to 4 percent through the mid-1980s, hardly remembered as an economic nightmare.'

Edited September 19, 2017 by Sancho Panza

[Sawitcoming]

Interesting to see how they arrived at this. I am not surprised by this story.

Have we really had 2% inflation?  It appears to me that the baskets are so fudged, that they bear no relation to reality.

[pmgdawau]

inflation is theft, target should be zero, but then the theory is the consumer would have no incentive to spend money as it's too easy to slip into deflation and the consumer will wait for cheaper prices which then stalls the economy.

[Will!]

5 hours ago, pmgdawau said:

it's too easy to slip into deflation and the consumer will wait for cheaper prices which then stalls the economy.

It's often repeated, but it still isn't true.  All technology products are subject to deflation and yet the market for them doesn't collapse.

[durhamborn]

12 hours ago, MrXxx said:

Was going to sell all my miners, tlt and ftse100 trackers and invest it all in M & S shares but I can now see where all my dividends would go!...DB is there no end to your talents?...Warren Buffett one minute, Martha Stewart the next!

So nice to be amongst kindred spirits who view frugality as a badge of honour rather than akin to having an STD :-) :-) :-)

I view frugality as freedom MrXxx.However i fully understand it depends on how you are wired up.The thing i hate more than anything is control.Having a boss and a clock card for work and having to be somewhere for a certain length of my life.I decided long ago,whatever the cost in material goods i couldnt stand my life being like that.The ironic thing is though i dont go without anything.I have a car and a van.However they cost me next to nothing £15 a week diesel,tax £300 insurance,£300 a year MOT repairs.£30 a week all in for two vehicles.

Food?.I eat very high quality food with almost every meal cooked fresh,with lots of vegetables,salad,etc.If my weekly bill hits £20 iv bought more than i need that week.

The only real thing we dont have are holidays (but then a holiday from what?).For me thats a good thing though as i see working nightshifts all year to lie on a Benidorm beach for two weeks as insane.However other/most people view consuming as much as your credit will allow as the route to a happy life.Each to their own.As long as we stop having to bail them out with so much currency debasement thats fine.

[Sancho Panza]

17 hours ago, Sawitcoming said:

Interesting to see how they arrived at this. I am not surprised by this story.

Have we really had 2% inflation?  It appears to me that the baskets are so fudged, that they bear no relation to reality.

That's the Shaun Richards line.

There are vast differences between CPI, CPIH and RPI (There are also other measures).

Inflation measures like these are crude at best as they are unable to differentiate between the different deciles in terms of earnings ie food/fuel are a mch bigger part of expenditure for lowest income groups than highest.They all get treated the same.

The major omission of the last 30 years has obviously been house prices...............

The thing I take most from this article is that it's an illusion that these people have any real idea what they're messing with. 30 years of inflation mismanagement has created income inequality,social and political tensions that will burst alongside possibly the greatest deflation we've witnessed in 80 years.

Edited September 20, 2017 by Sancho Panza

[Sancho Panza]

14 hours ago, pmgdawau said:

inflation is theft, target should be zero, but then the theory is the consumer would have no incentive to spend money as it's too easy to slip into deflation and the consumer will wait for cheaper prices which then stalls the economy.

Absolutely.If they want stability,then 0 makes logical sense.

All 2% inflation targeting has done is shift an even bigger crisis 30 years to the right of the timescale.

Edited September 20, 2017 by Sancho Panza