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Confounded

Has Ben Won The Battle?

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I'll add the same ZH quote again. It's scary.

Up until now the one and only defense that those who anticipate continued asset price declines was that on a net basis, the monetary system was still contracting. That is now no longer the case. And now, ironically, all that remains is for a very much cornered Ben Bernanke to convince people that the economy is getting better, resulting in a surge in net borrowings, and a spike in monetary velocity, and... hello Weimar.

If Bernanke really has "pulled this off", then a) are the consequences for the dollar as cut and dried as ZH think, and b ) are there any real differences between Bernanke's policy and King's? Are we about to witness where the UK is heading? :ph34r:

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Its more Ben at the Fed and the political leaders in charge of the fiscal spending have been able to stop deflation from taking over. Last I checked US inflation was running at 0.9% yoy.

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Its more Ben at the Fed and the political leaders in charge of the fiscal spending have been able to stop deflation from taking over. Last I checked US inflation was running at 0.9% yoy.

And you believe official stats...

Apart from that the issue is more complicated, up to now the US has exported inflation as a consequence of QE, but they won't be able to keep exporting it forever, sooner or later it will all come back to hit the US.

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I'll add the same ZH quote again. It's scary.

If Bernanke really has "pulled this off", then a) are the consequences for the dollar as cut and dried as ZH think, and b ) are there any real differences between Bernanke's policy and King's? Are we about to witness where the UK is heading? :ph34r:

Credit is contracting, excluding government spending and student loans.

My link

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I'll add the same ZH quote again. It's scary.

If Bernanke really has "pulled this off", then a) are the consequences for the dollar as cut and dried as ZH think, and b ) are there any real differences between Bernanke's policy and King's? Are we about to witness where the UK is heading? :ph34r:

My initial thought is this could be very bad for the UK. Due to the US dollar being the reserve currency if it stops printing then it would be nearly impossible for the UK to print going forward. If the actions of the FED have been successful in halting the deflationary pressures then interest rates will start to rise very rapidly (this has already been observed in UST over the last few months). This will not be good for the UK, the debt that brought the crises remains and is only manageable at depression level interest rates.

I formed a personal view that the best way out of this crisis is managed deflation. It is the only way the indebtedness can be dealt with without extremes of deflation or inflation. Socially I do not believe the mass populous will stand for the richest 10% getting richer while the jobs market is deteriorating and their purchasing power is rapidly eroded by the inflation.

My view is we could have just reached an inflation expectation peak but this is a critical point...

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By the time ben has even the faintest clue what the cumulative effect of economic manipulation by him and previous fed gang members have done to the us economy it will be too late.

Edited by OnlyMe

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And you believe official stats...

The inflation stats seem fairly good in the US. Housing and mortgage financing costs way down, food steady, medicine up, electronics down, seems like it would be about 1% increase for your average family.

Apart from that the issue is more complicated, up to now the US has exported inflation as a consequence of QE, but they won't be able to keep exporting it forever, sooner or later it will all come back to hit the US.

I believe the developing world can import the inflation for a long, long time to come. China alone would rather suck in a few hundred billion USD a year than try a rapid adjustment.

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The inflation stats seem fairly good in the US. Housing and mortgage financing costs way down, food steady, medicine up, electronics down, seems like it would be about 1% increase for your average family.

Any measure of inflation that is linked to the cost of money and not the price of the underlying asset is moronic in the extreme.

Buying beans on tick is not a sign of strength, next I suppose the statisticians will be telling us that the US has access to cheaper commodities than ever because they can buy them with near zero percecnt loans. It is the height of bubble-headed thinking.

Edited by OnlyMe

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By the time ben has even the faintest clue what the cumulative effect of economic manipulation by him and previous fed gang members have done to the us economy it will be too late.

I think it's like having a drunk who's driving and still drinking. Maybe we get lucky and they don't crash but as time goes on that outcome seems more and more unlikely as the driver speeds up weaving all over the road.

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I formed a personal view that the best way out of this crisis is managed deflation. It is the only way the indebtedness can be dealt with without extremes of deflation or inflation. Socially I do not believe the mass populous will stand for the richest 10% getting richer while the jobs market is deteriorating and their purchasing power is rapidly eroded by the inflation.

They already have stood for it for a very long time, what makes you think this will change? Remember they have all the guns you protest too loudly you're dead. Injin was wrong on that respect with his theory that people will eventually rise up and start lynching the elites. The elites have guns lots of them. There are even mass produced autoguns like in Korea so they don't even run the risk of the soldiers doing an about turn thinking wait this is wrong!

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Just about what that form could take. Basically it is the rich who have taken out the huge bets that involve the creation of assets and liabilities. It is the rich who are able to leverage up and then profit from either asset price rises or default - whichever suits the market at that time.

Whilst the poor are indebted and pledge their wages, it is actually the rich who borrow the most. So what form would that managed deflation take?

Wouldn't a managed deflation result in some of the rich being wiped out? The clever rich will have moved to preserve purchasing power rather than nominal value.

At least with deflation you have a bottom, with inflation there is no limit to the ridiculousness of what we can reach. Electronic money can be created and used faster than paper money.

Although to be honest I don't think there is a managed way out of this mess.

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Anyone who thinks Bernanke has any control over what is going on is crazy. He lost control a long time ago. The gold price is evidence of this - and will continue to show the systemic breakdowns as it continues on to $1650, $2000, $5000 etc.

Edited by Errol

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I'll add the same ZH quote again. It's scary.

If Bernanke really has "pulled this off", then a) are the consequences for the dollar as cut and dried as ZH think, and b ) are there any real differences between Bernanke's policy and King's? Are we about to witness where the UK is heading? :ph34r:

Why is anyone surprised? It's pretty obvious that when you can and will create any amount of fiat currency required and hand it over to the banking system to 'make good' their losses, there can only be inflation in the med-long term. Hold on to your hats.

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Any measure of inflation that is linked to the cost of money and not the price of the underlying asset is moronic in the extreme.

Buying beans on tick is not a sign of strength, next I suppose the statisticians will be telling us that the US has access to cheaper commodities than ever because they can buy them with near zero percecnt loans. It is the height of bubble-headed thinking.

As insane as the monetary system is.. the cost of money does matter for your average citizen. If the monthly mortgage payments falls from 1500$ a month to 1200$ a month, it takes a very large increase in prices elsewhere to merely close that 300$ decline.

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My initial thought is this could be very bad for the UK. Due to the US dollar being the reserve currency if it stops printing then it would be nearly impossible for the UK to print going forward. If the actions of the FED have been successful in halting the deflationary pressures then interest rates will start to rise very rapidly (this has already been observed in UST over the last few months). This will not be good for the UK, the debt that brought the crises remains and is only manageable at depression level interest rates.

My view is we could have just reached an inflation expectation peak but this is a critical point...

Except yields are still way below where they were for most of 2009. Rising yields is a sign of a recovering economy. They fall during the slump/recession, they rise during expansionary growth (normal inflationary period).

As for 'Hello Weimar' - Errrr.............based on that little green arrow on ZH's chart indicating something just went positive? :blink: So how come we didn't have 'Weimar' during the last 30 years when it was consistently positive? Instead we had falling rates and a gold slump for 20 years.

ZH (like Putin's RT) are a hard money site - everything points to Weimar and their gold stash in their heads.

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One month does not make a trend, and we don't really know what Ben's targets are. It's all speculation at this moment.

Head in Sand.

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Except yields are still way below where they were for most of 2009. Rising yields is a sign of a recovering economy. They fall during the slump/recession, they rise during expansionary growth (normal inflationary period).

As for 'Hello Weimar' - Errrr.............based on that little green arrow on ZH's chart indicating something just went positive? :blink: So how come we didn't have 'Weimar' during the last 30 years when it was consistently positive? Instead we had falling rates and a gold slump for 20 years.

ZH (like Putin's RT) are a hard money site - everything points to Weimar and their gold stash in their heads.

Rising yields are a sign of recovery indeed. Take Ireland for example, the yields on their bonds rose recently and as a result they got loads of lovely money from the EU. If that's not a recovery I don't know what is. Looks like lucky Portugal, Spain and Italy will get some lovely recovery money too if their bond yields keep rising too.

Bottom line is we need easy money to keep the ball rolling. Rising bond yields are bad news, hence ZIRP and QE. Without cheap debt the interest payable for individuals, companies and governments is going to rocket. Remember, 0.5% rates increasing to 5% ( low by historic standards) is a TEN-FOLD increase in interest. That's a bit of a stretch if you're on an interest only tracker mortgage. Such a move in rates, which despite the machinations of governments, the bond market can implement at any moment it wishes, would be devastating for the western economies. Faced with such a scenario the government would have to decide between a deflationary depression (accompanied by drastic cuts in services to enable them to service the debt - if it's still possible) or go for an inflationary depression, by printing their way out of trouble (more popular with voters).

Either way, the currency will be toast and hard money will win. Just a matter of a little more time. TICK, TOCK, TICK, TOCK... We will have our day and as a result of our prudence will be vilified by the powers that be far more than any BTLers have ever been vilified by HPCers.

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Head in Sand.

We have no idea what is BB's plan, if any.

Reading ZH, as I do, including comments, about 40% is speculation as to what BB is trying to do, and another 40% is ramping PM's.

The other 20% is the part that I find useful and interesting.

Edited by Toto deVeer

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There are three broad components to interest rates. You are talking about the default component. RK is referring to the compensation for expected inflation component. (The last component is the 'pure' rate).

EDIT: Just to add - RK is rightly pointing out that the Telegraph is probably mistaking which component is causing the overall rise in yields.

Regardless of the rate RK is talking about, the default component is rising for the EU, US and UK. This is portends trouble, big trouble.

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There are three broad components to interest rates. You are talking about the default component. RK is referring to the compensation for expected inflation component. (The last component is the 'pure' rate).

EDIT: Just to add - RK is rightly pointing out that the Telegraph is probably mistaking which component is causing the overall rise in yields.

Interestingly the last two weeks' rise in yields is not due to a rise in inflation expectations as indicated by TIPS (they fell as much as the rest). It looks more like a worry about the quantity of government bonds due to hit the market, in the face of a less probable QE3. Not good if it continues.

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As for 'Hello Weimar' - Errrr.............based on that little green arrow on ZH's chart indicating something just went positive? :blink: So how come we didn't have 'Weimar' during the last 30 years when it was consistently positive? Instead we had falling rates and a gold slump for 20 years.

ZH (like Putin's RT) are a hard money site - everything points to Weimar and their gold stash in their heads.

Perhaps for 30 years their was belief in productive capacity of the economy which allowed the printing of money? Now that productive belief is coming to an end as it appears the Ben Bernanke is simply printing money for the sake of it?

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Just about what that form could take. Basically it is the rich who have taken out the huge bets that involve the creation of assets and liabilities. It is the rich who are able to leverage up and then profit from either asset price rises or default - whichever suits the market at that time.

Whilst the poor are indebted and pledge their wages, it is actually the rich who borrow the most. So what form would that managed deflation take?

Like we have seen so far. We could go back to 2000 but the intervention became a lot more apparent going into this crisis. The run up of the stock market from late 06 (despite the US housing bubble already popping by that stage) to the DOW high of October 2007 bought ground that could be lost when the crisis hit. The intervention in the early stages of the crisis drove up natural inflation expectation pushing up interest rates commodities and oil, this was followed by a collapse of inflation expectations with a plunging stock market and commodities in 08

In order to fight deflation left in the wake of 08/09 the global governments (with the help of the newly bailed out banks) coordinated a global reflation to counteract the pushing string phenomenon experienced in a normal deflationary depression, they intervened in every financial market. We are now at the cusp of them reigniting natural animal spirits in the markets and we could be on the verge of a repeat of 07/08 if they let things get to far. My view would be that the central banks could at this point allow another period of deflation to crush commodity prices and let some air out of the 09/10 bubble they have blown. As I have said many times this is the crunch point for my theory and they may well push on on into a highly inflationary environment to kill deflation for good....

I believe my managed deflation, similar to Japan is a better outcome than hyperinflation or hyperdeflation, but as with anyone if I knew what the FED is planning I would be a lot richer than I am.

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There are three broad components to interest rates. You are talking about the default component. RK is referring to the compensation for expected inflation component. (The last component is the 'pure' rate).

EDIT: Just to add - RK is rightly pointing out that the Telegraph is probably mistaking which component is causing the overall rise in yields.

These components are never really clear cut anyway in non euro case (or even in euros case) - So, UK Gilts at 3% - is that 3% for inflationary (money printing) default or is it

3% to compensate for outright default? Or is it 1.5% each ? Is inflationary default default ?

If these pension managers (the larger buyers of the fixed income securities) are so clever in calculating these %es 10 years out, they would have retired and rich.

An investor has to decide if 3% is worthwhile and if there is much better return elsewhere. Trying to split the yield into various components is just purely a academic exercise.

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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