UK services sector activity slows as inflation bites - FT

[Mikhail Liebenstein]

4 hours ago, Si1 said:

So do you think the UK economy is going to see some pain in the near future then? Or rather the generalised markets...?

I think the UK will see a bit more pain than the US. The reason being that the moment we show signs of central bank policy weakness, i.e. not looking like we'll raise interest rates despite BoE utterances, then Sterling will drop again.

The US has a certain amount of hegemonic power still via the Dollar. It may end dome day, but it os literally the ultimate license to print money and not take the full consequences.

[Si1]

57 minutes ago, Mikhail Liebenstein said:

I think the UK will see a bit more pain than the US. The reason being that the moment we show signs of central bank policy weakness, i.e. not looking like we'll raise interest rates despite BoE utterances, then Sterling will drop again.

It feels very like the early to mid 2000s, pedal to the metal, hubristic chancellor

57 minutes ago, Mikhail Liebenstein said:

The US has a certain amount of hegemonic power still via the Dollar. It may end dome day, but it os literally the ultimate license to print money and not take the full consequences.

 

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

5 hours ago, dugsbody said:

Why do you get so angry with people who disagree with you?

I think inflation will be seen but will be temporary. How long is temporary? A year? Less? Two years? I don't know. But I do know that as humans we're never going to get less efficient at producing and distributing stuff.

"You always do" is disagreeing? I always maintain the same position on inflation? The economy? It's inaccurate and it's nonsense. Discuss the facts not the person, etc. Sadly, the same old story. 

It won't be temporary imo - we are going through a period of deglobalization - a major structural adjustment. It isn't simply an economic hiccup. 

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

2 hours ago, Mikhail Liebenstein said:

I think the UK will see a bit more pain than the US. The reason being that the moment we show signs of central bank policy weakness, i.e. not looking like we'll raise interest rates despite BoE utterances, then Sterling will drop again.

The US has a certain amount of hegemonic power still via the Dollar. It may end dome day, but it os literally the ultimate license to print money and not take the full consequences.

Very good analysis indeed. 

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

7 hours ago, GregBowman said:

Roaring twenties for about 2 years. Only yesterday GM and Honda made very positive announcements, after that who can tell ? There is a shortage of good people driving wages up all over the world. There is a lot of money being held by a lot of people looking for a opportunity to spend, holidays, cars, clothes, watches, motorbikes in fact just about anything.

I rarely see a shortage of good people... I see a shortage of good employers / HR, etc. - the "labour shortage" bleating is often little more than a neoliberal mantra... dig into the data and there's a void (there's been a labour shortage in digital/tech for decades apparently... I think what they often mean is there are a lack of people willing to work for low salaries). Meanwhile, inflation erodes the performance of the real economy... https://www.bloomberg.com/news/articles/2014-11-24/the-tech-worker-shortage-doesnt-really-exist

[Flat Bear]

6 hours ago, dugsbody said:

Why do you get so angry with people who disagree with you?

I think inflation will be seen but will be temporary. How long is temporary? A year? Less? Two years? I don't know. But I do know that as humans we're never going to get less efficient at producing and distributing stuff.

I would really like to know why you think we will have a short period of relitively low inflation and then possibly deflation? I honestly can not see anything but high inflation for at least the mid term 3 to 4 years.

I really would like to know your reasoning.

[Mikhail Liebenstein]

59 minutes ago, gruffydd said:

Very good analysis indeed. 

Apart from my short word typos!!!

[captainb]

4 hours ago, Mikhail Liebenstein said:

I think the UK will see a bit more pain than the US. The reason being that the moment we show signs of central bank policy weakness, i.e. not looking like we'll raise interest rates despite BoE utterances, then Sterling will drop again.

The US has a certain amount of hegemonic power still via the Dollar. It may end dome day, but it os literally the ultimate license to print money and not take the full consequences.

I remember when OPEC tried to push oil to be priced or at least partially priced in EUR. Those contracts had all the liquidity of a lump of iron.

Then whatever chatter the press has about pricing in Renminbi, not even their neighbours actually trust the Chinese Communist party so until that changes again no real interest.

Dollar will be still be used in my lifetime for all commoditys at least. 

Edited August 5, 2021 by captainb

[msi]

4 hours ago, Mikhail Liebenstein said:

I think the UK will see a bit more pain than the US. The reason being that the moment we show signs of central bank policy weakness, i.e. not looking like we'll raise interest rates despite BoE utterances, then Sterling will drop again.

The US has a certain amount of hegemonic power still via the Dollar. It may end dome day, but it os literally the ultimate license to print money and not take the full consequences.

Agree.  The greatest wartime activity the US did was to transition the world from GBP to USD as the Global Reserve Currency.  If USD or even EUR rates hint upwards then expect a massive currency dump of GBP that even the BoE can't absorb with QE.

Where is Soros when you need him?

[Mikhail Liebenstein]

44 minutes ago, msi said:

Agree.  The greatest wartime activity the US did was to transition the world from GBP to USD as the Global Reserve Currency.  If USD or even EUR rates hint upwards then expect a massive currency dump of GBP that even the BoE can't absorb with QE.

Where is Soros when you need him?

Yes, indeed,  technically it would need to sterilise the incoming pounds to avoid high inflation  with more GBP being repatriated and falling Sterling. This would probably be via gilt sales, driving up interest rates. 

Of course, if gilts did as it says on the tin and were backed by actual gold then I'm sure it would be fine. Good job we didn't sell off all our gold at $200 an Oz.

[msi]

54 minutes ago, Mikhail Liebenstein said:

Yes, indeed,  technically it would need to sterilise the incoming pounds to avoid high inflation  with more GBP being repatriated and falling Sterling. This would probably be via gilt sales, driving up interest rates. 

Of course, if gilts did as it says on the tin and were backed by actual gold then I'm sure it would be fine. Good job we didn't sell off all our gold at $200 an Oz.

When were gilts last backed by shiny stuff?  Probably when the US was still a colony...

[Mikhail Liebenstein]

Just now, msi said:

When were gilts last backed by shiny stuff?  Probably when the US was still a colony...

🤣🤣🤣🤣🤣🤣🤣🥲🥲

🥇🥇🥇🥇🥇🥇🥇🥇🥇

[dugsbody]

17 hours ago, Flat Bear said:

I would really like to know why you think we will have a short period of relitively low inflation and then possibly deflation? I honestly can not see anything but high inflation for at least the mid term 3 to 4 years.

I really would like to know your reasoning.

It depends on how you measure inflation. I'm only talking about the standard measurement that is used, resulting in CPI or RPI. I don't believe those are correct (*), but they are what they are.

I consider 1-4 years short term.

Humans have become increasingly efficient at producing and distributing goods. Our technology advances rapidly as the market demands this to happen. Hence, over several decades, we see things like food prices and other goods take up an increasingly lower percentage of our incomes. This results in very low inflation.

I don't believe the world economy has had a permanent structural change. I don't believe we're going into "de-globalisation". I think we're only going to continue to become more efficient at this stuff.

There has been a resulting fallout from the world economy practically shutting down during the pandemic and this is ongoing to a degree. Hence this will definitely feed high inflation in the short term. There is also the inflation in the UK that will come about as a result of brexit devaluing GBP. You can't simply have your currency valued lower against international goods and not expect to pay more for them eventually. That has been trickling through. We also now have more friction in our trade because of brexit which will contribute a bit too.

But all of these things in my view will result in inflation for 1+ years (I thought maybe 1-2 years but could be a bit longer). I think the BoE may react a little but longer term we're still headed towards zero interest rate policy.

[Flat Bear]

4 hours ago, dugsbody said:

It depends on how you measure inflation. I'm only talking about the standard measurement that is used, resulting in CPI or RPI. I don't believe those are correct (*), but they are what they are.

I consider 1-4 years short term.

Humans have become increasingly efficient at producing and distributing goods. Our technology advances rapidly as the market demands this to happen. Hence, over several decades, we see things like food prices and other goods take up an increasingly lower percentage of our incomes. This results in very low inflation.

I don't believe the world economy has had a permanent structural change. I don't believe we're going into "de-globalisation". I think we're only going to continue to become more efficient at this stuff.

There has been a resulting fallout from the world economy practically shutting down during the pandemic and this is ongoing to a degree. Hence this will definitely feed high inflation in the short term. There is also the inflation in the UK that will come about as a result of brexit devaluing GBP. You can't simply have your currency valued lower against international goods and not expect to pay more for them eventually. That has been trickling through. We also now have more friction in our trade because of brexit which will contribute a bit too.

But all of these things in my view will result in inflation for 1+ years (I thought maybe 1-2 years but could be a bit longer). I think the BoE may react a little but longer term we're still headed towards zero interest rate policy.

I disagree with everything you say apart from the fact Brexit (leaving the EU) was the best thing this country has done in my lifetime. We still have not got a proper seperation which is causing major problems. Imagine what it would have been like if we had not left at all😵.............. Best not to think about it as it could give us both nightmares for weeks.

I suppose a million years is just a very temporary period in context of the Universe.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

6 hours ago, dugsbody said:

It depends on how you measure inflation. I'm only talking about the standard measurement that is used, resulting in CPI or RPI. I don't believe those are correct (*), but they are what they are.

I consider 1-4 years short term.

Humans have become increasingly efficient at producing and distributing goods. Our technology advances rapidly as the market demands this to happen. Hence, over several decades, we see things like food prices and other goods take up an increasingly lower percentage of our incomes. This results in very low inflation.

I don't believe the world economy has had a permanent structural change. I don't believe we're going into "de-globalisation". I think we're only going to continue to become more efficient at this stuff.

There has been a resulting fallout from the world economy practically shutting down during the pandemic and this is ongoing to a degree. Hence this will definitely feed high inflation in the short term. There is also the inflation in the UK that will come about as a result of brexit devaluing GBP. You can't simply have your currency valued lower against international goods and not expect to pay more for them eventually. That has been trickling through. We also now have more friction in our trade because of brexit which will contribute a bit too.

But all of these things in my view will result in inflation for 1+ years (I thought maybe 1-2 years but could be a bit longer). I think the BoE may react a little but longer term we're still headed towards zero interest rate policy.

A good amount of the deglobalization is political above anything else... China versus the West, and Covid has worsened relations yet further https://www.cirsd.org/en/horizons/horizons-winter-2020-issue-no-15/the-specter-of-deglobalization-and-the-thucydides-trap
 

[dugsbody]

13 hours ago, Flat Bear said:

I disagree with everything you say apart from the fact Brexit (leaving the EU) was the best thing this country has done in my lifetime. We still have not got a proper seperation which is causing major problems. Imagine what it would have been like if we had not left at all😵.............. Best not to think about it as it could give us both nightmares for weeks.

I suppose a million years is just a very temporary period in context of the Universe.

It's ok to disagree. The good news is we can observe who turns out to be correct.

Check back in a couple of years.

[Flat Bear]

5 hours ago, dugsbody said:

It's ok to disagree. The good news is we can observe who turns out to be correct.

Check back in a couple of years.

But 2 years is so short term?

But all of these things in my view will result in inflation for 1+ years (I thought maybe 1-2 years but could be a bit longer).

We both agree we will have high inflation over the next 1-2 years maybe a bit longer.

Maybe in the medium term say 10 years to 20 years? And again for the long term say 50 years to 100 years? Maybe a little longer? We will have to pass it down the generations to discuss who was right/wrong etc. It is possible they may not be interested!!

Did you hear about the hyper-inflation in the Weimer republic in Germany? It started to kick off in 1921 but luckily it was very temporary and the German government could see through it and realized it was only transient. They decided to QE which seemed to solve the problem as it got quite bad by 1923 and some of the more political types tried to make an issue of it. But within just over a decade after that everything was hunky dory and Germany was ready to take on the world.

I seem to be going through a very sarcastic phase at the moment, sorry😬

[GregBowman]

On 05/08/2021 at 19:41, gruffydd said:

I rarely see a shortage of good people... I see a shortage of good employers / HR, etc. - the "labour shortage" bleating is often little more than a neoliberal mantra... dig into the data and there's a void (there's been a labour shortage in digital/tech for decades apparently... I think what they often mean is there are a lack of people willing to work for low salaries). Meanwhile, inflation erodes the performance of the real economy... https://www.bloomberg.com/news/articles/2014-11-24/the-tech-worker-shortage-doesnt-really-exist

My two 'worlds' are IT and Creative media definite shortage of good people in IT particularly and salaries very good. Spent all Thursday in a creative media company discussing exit interview feedback as production managers and producers are increasingly tempted by free lance work and they have excellent HR policies and pay well. Interviewing in Qatar at the moment in creative media and packages are astronomical out there - candidates have been very poor 

[shlomo]

39 minutes ago, GregBowman said:

 Interviewing in Qatar at the moment in creative media and packages are astronomical out there - candidates have been very poor 

Are the companies hiring western or other 

[phantominvestor]

1 hour ago, GregBowman said:

My two 'worlds' are IT and Creative media definite shortage of good people in IT particularly and salaries very good. Spent all Thursday in a creative media company discussing exit interview feedback as production managers and producers are increasingly tempted by free lance work and they have excellent HR policies and pay well. Interviewing in Qatar at the moment in creative media and packages are astronomical out there - candidates have been very poor 

Salaries are not good. You have to be paid 65k to be equivalent to 45k in 2008. Inflation has been that bad.

 

[Money Frugality]

On 05/08/2021 at 11:58, GregBowman said:

Roaring twenties for about 2 years. Only yesterday GM and Honda made very positive announcements, after that who can tell ? There is a shortage of good people driving wages up all over the world. There is a lot of money being held by a lot of people looking for a opportunity to spend, holidays, cars, clothes, watches, motorbikes in fact just about anything.

 

On 05/08/2021 at 12:03, 2buyornot2buy said:

Have to agree. Bought a new car and two expensive holidays in the next 6 months. My corporate accounts have never looked healthier even with the massive raw material inflation I'm seeing. 

Agreed as well.. Bought a Rolex, Range Rover and currently paint and tiling the house.. F***, I thought I was always against the tide..! Still investing and saving each month though so what the heck.. I’m like the only 27 year old who doesn’t go out drinking every weekend. My weekends are either painting, doing something productive or err making use of my dining table. Gym 5 days a week but smoke like a chimney though.. All in moderation 😂

Edited August 7, 2021 by Money Frugality

[GregBowman]

22 minutes ago, phantominvestor said:

Salaries are not good. You have to be paid 65k to be equivalent to 45k in 2008. Inflation has been that bad.

 

? paying about that  good 2nd line not even 3rd line. This is supplier side not client.

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

5 hours ago, GregBowman said:

My two 'worlds' are IT and Creative media definite shortage of good people in IT particularly and salaries very good. Spent all Thursday in a creative media company discussing exit interview feedback as production managers and producers are increasingly tempted by free lance work and they have excellent HR policies and pay well. Interviewing in Qatar at the moment in creative media and packages are astronomical out there - candidates have been very poor 

I suppose my knowledge would lie mainly in IT/data/tech and my main gripe is the recruiters - they often fail to engage with the detail when writing job specs or hiring -  I question whether they know who they are recruiting much of the time. Then there's the issue of endless interviews. I know several people who are highly skilled at what they do (10+ years experience) but gave up on interview processes due to switches in the location of jobs mid process... the number of interview stages and length of process, etc. - something's gone very wrong with the hiring process in some sectors....  

[Zzzzzzzzzzzzzzzzzzzzzzzzzz]

4 hours ago, phantominvestor said:

Salaries are not good. You have to be paid 65k to be equivalent to 45k in 2008. Inflation has been that bad.

 

I am eternally shocked by the salary levels in the UK in IT... so many positions seem to be stuck below 50,000... 

[hurlerontheditch]

1 hour ago, gruffydd said:

I am eternally shocked by the salary levels in the UK in IT... so many positions seem to be stuck below 50,000... 

cheap imported labour, non EU, 

 

same is happening in engineering, 20 years ago a process engineer with a chemical engineering degree was well paid, but these days the hourly rate is half due to imported Indian engineers