Hyperinflation And Hpc Still On Their Way

[pjw]

Tullet Prebon has made waves with its reports, which show just how troubled the UK economy is. The latest is http://www.tullettprebon.com/announcements/strategyinsights/notes/2010/SIN20130510.pdf - they argue QE will lead to inflation - as QE can't be successfully reversed, and as soon as the velocity of money is increased, it will produce inflation - and a sharp rise in interest rates and all the rest of it.

This is the only report I've read that tries to map out what is actually going to happen.

[interestrateripoff]

To be honest it only touches the tip of the iceberg. There are potential huge shocks to the global economy just waiting to happen. Reading 1493 it would appear that most of the worlds rubber supply from Asia is at risk of leaf blight that currently is in the Amazon basin. If that ever gets transferred to Asia it will probably wipe out most of the worlds rubber supply for at least a decade, a shock that if it occurs now the global economy can't deal with.

The real danger to all of those printing money is when someone breaks rank, accepts reality crashes and recovers. Whilst they are all printing and you have the surplus nations parking the cash velocity isn't going to appear. China probably now has too many dollar reserves to spend if it trys it will unleash global inflation which will damage it's own economy.

Everyone is caught between a rock and a hard place, when will trigger the systemic collapse is anyone's guess.

Edited June 28, 2013 by interestrateripoff

[winkie]

http://www.youtube.com/watch?v=8XZWgHNcUeA

[R K]

Tullet Prebon

'Nuff said.

[billybong]

The bombs of economic collapse have not, after all, rained down on the developed economies, the Maginot Line of government support for the banks has not suffered a fatal breach, sovereign and corporate casualties have been few in number, and it seems, to many, that the world has escaped what looked very like the onset of economic disaster. After all, bond and equity markets are booming, property prices appear to have stabilised, and the price of gold – that famed barometer of fear – has staged a sharp retreat.

Only yesterday Lord Heseltine spoke of seeing green shoots - so the worst must certainly be over.

Edited June 28, 2013 by billybong

[XswampyX]

Only yesterday Lord Heseltine spoke of seeing green shoots - so the worst must certainly be over.

To be fair he didn't say that he had seen them, he said that someone else had!

[billybong]

To be fair he didn't say that he had seen them, he said that someone else had!

Indeed.

For a specific reference and the Rt. Hon. Lord having seen them himself

http://

www.bbc.co.uk/programmes/b02yzlwt

BBC Radio 5 Live.

A green shoots snippet at about 45 seconds in then an interview from 10 minutes 15 seconds on with a specific reference to him seeing green shoots in the context of the interview starting from 11 minutes 17 seconds. The interview was the usual stuff glossing over any problems.

The link also includes yesterday's Question Time - for those who might still be interested in it.

Edited June 28, 2013 by billybong

[Bloo Loo]

Green shoots are clearly visible...youd see lots of entreprenuers taking small units, advertising the speciality stuff, enter and meet a keen enthusiasm for your custom

nah...I dont see any green shoots.

[winkie]

Green shoots are clearly visible...youd see lots of entreprenuers taking small units, advertising the speciality stuff, enter and meet a keen enthusiasm for your custom

nah...I dont see any green shoots.

.....small seedlings, that have a potential to grow if not taxed with weed killer and trampled with bureaucracy.

Not the sort of green shoot with deep roots calibre the lenders now require to take on a commitment with the job security and stability like a long-term secured debt.

[Madmaximum]

Green shoots of Japanese knotweed perhaps.

[wonderpup]

Fundamentally, the problem is that the monetary economy has grown far beyond a scale sustainable

by the underlying ‘real’ economy of energy and broader resources.

This is the first time I have seen this idea presented so clearly outside of the tin foil hat blogosphere- normally the fiction is maintained that the monetary economy is simply a transparent 'wrapper' over the real economy that exists merely to facilitate trade- this being the conventional economic view.

One thing that always puzzles me is this idea that price inflation can be seen as a solution to private indebtedness- surely such inflation will just exacerbate the indebtedness of a population who must divert income away from debt servicing toward the purchase of increasingly expensive food and energy ect?

Is it that those who moot this idea simply assume that price inflation will automatically produce wage inflation to match, as if the two were some kind of binary pair that cannot exist in isolation?

Don't they get the point that Globalisation was in part designed to eliminate the ability of labour to demand wage rises based on inflation?

They don't seem to understand that Globalisation is a deflation machine that operates not only on the prices of manufactured goods and services but also- by definition- on the wages of those who make and provide them- even in China factories are now being shut down in response to wage pressures and moved to India- so good luck with wage inflation in the west if even the Chinese workers cannot raise their wages without their jobs being outsourced.

And without a wage spiral can we ever have hyperinflation?- or would the collapsing debt edifice get us long before any wage/price spiral kicked in?

[Billy soy]

This is the first time I have seen this idea presented so clearly outside of the tin foil hat blogosphere- normally the fiction is maintained that the monetary economy is simply a transparent 'wrapper' over the real economy that exists merely to facilitate trade- this being the conventional economic view.

One thing that always puzzles me is this idea that price inflation can be seen as a solution to private indebtedness- surely such inflation will just exacerbate the indebtedness of a population who must divert income away from debt servicing toward the purchase of increasingly expensive food and energy ect?

Is it that those who moot this idea simply assume that price inflation will automatically produce wage inflation to match, as if the two were some kind of binary pair that cannot exist in isolation?

Don't they get the point that Globalisation was in part designed to eliminate the ability of labour to demand wage rises based on inflation?

They don't seem to understand that Globalisation is a deflation machine that operates not only on the prices of manufactured goods and services but also- by definition- on the wages of those who make and provide them- even in China factories are now being shut down in response to wage pressures and moved to India- so good luck with wage inflation in the west if even the Chinese workers cannot raise their wages without their jobs being outsourced.

And without a wage spiral can we ever have hyperinflation?- or would the collapsing debt edifice get us long before any wage/price spiral kicked in?

so stagflation then. how long can that last though, surely there must be a breaking point.

[InlikeFlynn]

I'm not sure all the data are correct. This statement stuck out

"Amongst domestic mortgages, an estimated 12% are already in forbearance, and available statistics suggest that a 200bps rise in interest rates could lift the proportion of troubled mortgages to more than 50%."

I just don't think a 2% rise in interest rate would push half of all mortgages into arrears.

Having said that I agree with much of the author's analysis of the motives for QE and the impossibility of it ever being unwound.

[TrevorS]

Dr Doom always cheers me up.

[goldbug9999]

While I agree with his analysis of the current situation, I don't see where this massive velocity-inducing spending spree is going to come from.

[winkie]

While I agree with his analysis of the current situation, I don't see where this massive velocity-inducing spending spree is going to come from.

From the credit card.

[Tired of Waiting]

While I agree with his analysis of the current situation, I don't see where this massive velocity-inducing spending spree is going to come from.

+1

Me too, I agree with his general analysis, but he didn't explain at all how or why V would increase, much less how or why V would increase suddenly: "This inflation-limiting factor is likely to end very abruptly."

[VeryMeanReversion]

Very good. Nice to see demographics, energy and the economy linked up. Pity it's only fact and reasoned argument. Most people seem to never learn anything that way.

My plan in progress :

Demographics - Adding/converting outbuildings for elderly relatives and/or the kids to move into later. Permitted development rights bypass planning permission and there are various council tax exemptions.

Energy - Buying insulation by the truckload. Rapid return on investment, let alone future energy cost increases.

Economy - Converting my £ into building materials then clear the base-rate tracker mortgage.

[zugzwang]

While I agree with his analysis of the current situation, I don't see where this massive velocity-inducing spending spree is going to come from.

Where it always comes from, the central bank! Carney and Osborne could choose to whack up public sector pay if they so choose, all paid for with QE. How about an inflation-busting rise in social security benefits? More capital spending? Whoops, there go the gilts. And a run on sterling too. Hey presto: hyperinflation.

[winkie]

Where it always comes from, the central bank! Carney and Osborne could choose to whack up public sector pay if they so choose, all paid for with QE. How about an inflation-busting rise in social security benefits? More capital spending? Whoops, there go the gilts. And a run on sterling too. Hey presto: hyperinflation.

That is a bit one sided....no not so much increasing the pay just yet, inflation is low so they say, but employing everyone who wants one a relatively stable and secure job with good benefits......all should be offered the opportunity to work in the public sector, there must be some kind of work that everyone could do....higher employment levels with better pay meaning far more people with qe money in their pockets to spend.....the tax take should also improve so should gdp, when inflation starts getting out of control just give everyone a pay rise to compensate......what could go wrong?