Tony_Teacake Posted January 26 Share Posted January 26 (edited) Inflation implications of printing more money? If the Federal Reserves plan to lower interest rates what will happen should they decide quantitative easing to keep the economy moving forward? It doesn't matter really where we stand politically or geopolitically but I think that we can all agree as a nation that we have more financial debt right now than at any other time in history and I do believe that inflation is still a huge problem. Something big in the news and mainstream media now is trying to say that we've successfully landed the plane safely or they're alluding to that no recession kind of thing and considering pivoting dropping rates. Still, we know that inflation is really what is behind devaluing all our currencies and most analysts believe that the US is in this financial mess today due to removing gold as the backer of the dollar. So now that we're not dependent on this finite supply of gold limiting you know how much money we can print? The government can decide to print more dollars or pounds to just keep pumping liquidity into the economy and of course that's creating more debt and from history we've seen how this behaviour has caused market bubbles overvaluing like the stock market and what we are seeing in the housing market. When we went off the gold standard in the UK in 1931 USA in 1971 we basically handed all the world's governments especially the US but everybody else too unlimited credit cards in effect they could basically via a monetary printing press create as much new currency as they wanted to and use it for whatever they wanted so naturally the governments of the world got bigger and bigger and bigger because there was no restraint on their growth. Now we have insane amounts of debt pretty much everywhere in every sector of every major society which is the inevitable result of allowing governments to create as much new currency and encourage the creation of as much new debt as they want and so we are where you would expect us to be given what rational people know about human nature and it's a really bad place because we've been taking on so much new debt that basically what we found out in the last couple of years is that all the higher interest rates can go. After all, when you've got huge amounts of debt Rising interest rates increase your interest expense. If you look at a chart of government for example the US government's interest costs have totally spiked from $200 billion a year to over a trillion now, those are very serious numbers in other words you can't have your interest costs soaring like that without going broke and so I have figured out why the FED has stopped raising interest rates and it's going to start cutting them pretty soon how far nobody really knows but it is not because inflation is below their target rate but because higher interest rates are going to bankrupt everybody. I believe just at over 5% will cause a massive Financial Crisis and we are already starting to see this with businesses which are dropping like flies. All the major governments, businesses and individuals who have credit card debt or adjustable rate mortgages or cheap fixes that are ending or adjustable rate business loans anything like that their interest costs are soaring and this has become so expensive. So unless they get interest rates back down and this is a huge deal because it means we can never again raise interest rates and when the markets figure that out people are going to act accordingly and they're going to panic and buy anything that can't be inflated away. In the investment thesis you want to get ahead of that process so what about the debt when we're talking about inflation do we need the inflation to actually deal with the debt? When you look at this modern age with computers and automation the way that we can produce things now is much more efficient than before we had this technology take a look at the television for example what was £3,000 just five years ago or 10 years ago which is now £200. What is the point of creating all of this inflation is it because we need it in some way to deal with the debt and how is the decision made if we are devaluing the currency. Is increasing more of it and do we need more of it and do we need inflation to deal with the debt who decides when to print more money? Well the the central banks of the world whenever they feel like things aren't growing fast enough they create a lot of new currency and then hand it to the big banks then give that money to their preferred customers with which they then go out and buy property and stocks and bonds and make those things go up in value so the rich get even richer and the rest of us suffer with higher cost of living. There's this group of people called Keynesian economists who would tell you that this is right and natural and how it should be and that we should always have a background rate of inflation because that kind of greases the skids of the capitalist economy but they are clueless. They are fundamentally and totally wrong for a variety of reasons. The biggest reason is once you start a little bit of inflation it leads people to borrow more money because if you see your currency being devalued the logical thing to do is go borrow money and then pay that debt back in devalued currencies so a little inflation leads to a lot of new debt which leads to the need for even more inflation and so on until you spin out of control. This is true always and everywhere and that's where we are right now we're in the mid to late stage of that process so we don't need inflation in fact we need a healthy economy the thing I mentioned about TVs getting cheaper and computers getting cheaper that should be the dominant factor in the economy and we should have deflation in other words as we get better at making things and smarter at doing it more efficiently so the price of stuff should go down. I personally think a new gold standard is probably what we'll end up with because that's understandable. We are now in Uncharted Territory and I think it would be comforting to go back to something that worked in similar circumstances way back then. Going forward boom you know we're on a sustainable system although everybody who kept dollars and trusted the government they're all impoverished and you're going to have some serious civil unrest as that works itself out but something like that would be the least painful way of getting from here to there but the civil unrest violent revolution kind of thing which frequently happens during a Financial Crisis which we are now seeing in certain parts of the world. We can hope that at some point the people in charge just decide that the least bad option is a Currency Reset with a new sound commodity-backed currency going forward and hopefully that's what we get but there is you know there's no guarantee of anything once things start spinning out of control because we can't stop that we cannot do anything about the momentum that the World's Financial Systems have created as they head towards that cliff but we can manage our own lives in ways that increase the odds that we come through it in pretty good shape and I think that's the that's the intellectual challenge for most people you know once you figure out thats ok the world is going to hell what do I do and what you do is something you can control so that's a psychologically healthy way of approaching this. It is always best to be prepared for a downturn like we are now experiencing and unfortunately, it is going to get a lot worse before it actually gets any better. That's right we are in a serious mess and the ones who saw this coming through past experiences will be better positioned provided you are a sane person. Edited January 26 by Tony_Teacake Quote Link to comment Share on other sites More sharing options...
DarkHorseWaits-NoMore Posted January 26 Share Posted January 26 Agreed, the debt levels are insane... I don't believe there is anything you can peg a currency to that cannot be manipulated, just look at gold and silver. Once financial instruments are attached to any asset it's price becomes distorted (by humans), just ask the gold bugs. The idea that a finite amount of gold/silver/BTC whatever, means it is a stable reference for price discovery is an illusion. Coming to this conclusion then poses the question of how to solve the value measure problem? The implementation of proper transparent regulations and rules to prevent currency value distortions. Of course, this will never happen when the power to legislate is in the pocket of powerful VIs. Quote Link to comment Share on other sites More sharing options...
Social Justice League Posted January 26 Share Posted January 26 100% agree. Printing worthless fiat without restraint always ends this way, throughout history. We are at the end of this 50 year cycle and it shows. All western nations and just about everyone living in them are maxed out on funny money 'debt'. Times are changing in front of our eyes. Quote Link to comment Share on other sites More sharing options...
DownwardSlopingPlateau Posted January 26 Share Posted January 26 US millennials, Gen Z need parents' help to pay household bills https://www.bbc.co.uk/news/world-us-canada-68099450 Quote Link to comment Share on other sites More sharing options...
winkie Posted January 26 Share Posted January 26 Nothing is working no more. Quote Link to comment Share on other sites More sharing options...
Stewy Posted January 26 Share Posted January 26 1 hour ago, DownwardSlopingPlateau said: US millennials, Gen Z need parents' help to pay household bills https://www.bbc.co.uk/news/world-us-canada-68099450 They don't. They just claim to need help as they're spending too much on takeaways, tattoos and the rest of it. Quote Link to comment Share on other sites More sharing options...
dpg50000 Posted January 26 Share Posted January 26 (edited) 12 minutes ago, Stewy said: They don't. They just claim to need help as they're spending too much on takeaways, tattoos and the rest of it. Your usual wibble nonsense again, I see. Edited January 26 by dpg50000 Quote Link to comment Share on other sites More sharing options...
Stewy Posted January 26 Share Posted January 26 5 minutes ago, dpg50000 said: Your usual wibble nonsense again, I see. Well she doesn't look like she needs help with haircuts, weird clothes, or make up Quote Link to comment Share on other sites More sharing options...
dpg50000 Posted January 26 Share Posted January 26 7 minutes ago, Stewy said: Well she doesn't look like she needs help with haircuts, weird clothes, or make up You do realise that's a stock photo, hence why it says Getty Images in the corner on the webpage version. Clown. Quote Link to comment Share on other sites More sharing options...
Stewy Posted January 26 Share Posted January 26 It does support the Bank of Boomer idea though. Quote Link to comment Share on other sites More sharing options...
Tony_Teacake Posted January 26 Author Share Posted January 26 (edited) 2 hours ago, Social Justice League said: 100% agree. Printing worthless fiat without restraint always ends this way, throughout history. We are at the end of this 50 year cycle and it shows. All western nations and just about everyone living in them are maxed out on funny money 'debt'. Times are changing in front of our eyes. The alternative to government borrowing is? Just print more money and still have no economic growth. Inflation, loss of confidence in the currency, and misallocation of resources are just some of these negative effects of excessive money printing. Edited January 26 by Tony_Teacake Quote Link to comment Share on other sites More sharing options...
Tony_Teacake Posted January 26 Author Share Posted January 26 51 minutes ago, Stewy said: It does support the Bank of Boomer idea though. Maybe in some cases but in many cases the bank of boomer will probably be more worried about paying for there stay when they go into a care home. Quote Link to comment Share on other sites More sharing options...
Frankie Teardrop Posted January 26 Share Posted January 26 There will be more councils clawing back money that pensioners gifted to relatives before they went into care too. I believe they can go back 7 years. Quote Link to comment Share on other sites More sharing options...
Orb Posted January 26 Share Posted January 26 4 minutes ago, Frankie Teardrop said: There will be more councils clawing back money that pensioners gifted to relatives before they went into care too. I believe they can go back 7 years. How on earth can they enforce that? Let's say an elderly woman arranges with her son that she'll gift him £20k, but that's to help him financially while he takes time off work, or goes part time to look after her? Or an elderly man gifts his daughter £20k which she uses towards home improvements? Quote Link to comment Share on other sites More sharing options...
Chunketh Posted January 26 Share Posted January 26 3 hours ago, Orb said: How on earth can they enforce that? Let's say an elderly woman arranges with her son that she'll gift him £20k, but that's to help him financially while he takes time off work, or goes part time to look after her? Or an elderly man gifts his daughter £20k which she uses towards home improvements? All of it tax evasion . why the ****** should I pay for their care when they had the ability to cover it themselves but chose to give it to their kids. its the very definition of tax evasion Quote Link to comment Share on other sites More sharing options...
Stewy Posted January 26 Share Posted January 26 9 minutes ago, Chunketh said: All of it tax evasion . why the ****** should I pay for their care when they had the ability to cover it themselves but chose to give it to their kids. its the very definition of tax evasion It's the very definition of the tax system creating distorting effects. Quote Link to comment Share on other sites More sharing options...
nero120 Posted January 27 Share Posted January 27 7 hours ago, DarkHorseWaits-NoMore said: Agreed, the debt levels are insane... I don't believe there is anything you can peg a currency to that cannot be manipulated, just look at gold and silver. Once financial instruments are attached to any asset it's price becomes distorted (by humans), just ask the gold bugs. The idea that a finite amount of gold/silver/BTC whatever, means it is a stable reference for price discovery is an illusion. Coming to this conclusion then poses the question of how to solve the value measure problem? The implementation of proper transparent regulations and rules to prevent currency value distortions. Of course, this will never happen when the power to legislate is in the pocket of powerful VIs. Regardless, gold still remains an effective store of wealth after thousands of years of governments trying their best to prevent that. Sounds to me like the answer is right in front of you... Quote Link to comment Share on other sites More sharing options...
Orb Posted January 27 Share Posted January 27 1 hour ago, Chunketh said: All of it tax evasion . why the ****** should I pay for their care when they had the ability to cover it themselves but chose to give it to their kids. its the very definition of tax evasion As far as I know, Charles didn't pay any inheritance tax when his mother died. This should be the greater outrage. Quote Link to comment Share on other sites More sharing options...
The Angry Capitalist Posted January 27 Share Posted January 27 7 hours ago, DarkHorseWaits-NoMore said: Agreed, the debt levels are insane... I don't believe there is anything you can peg a currency to that cannot be manipulated, just look at gold and silver. Once financial instruments are attached to any asset it's price becomes distorted (by humans), just ask the gold bugs. The idea that a finite amount of gold/silver/BTC whatever, means it is a stable reference for price discovery is an illusion. Coming to this conclusion then poses the question of how to solve the value measure problem? The implementation of proper transparent regulations and rules to prevent currency value distortions. Of course, this will never happen when the power to legislate is in the pocket of powerful VIs. A gold standard prevents governments from printing money (currency). Prices will generally be stable. There will be exceptions. For example, a sudden flood of gold into an economy will cause inflation. However, it is highly unlikely that would occur. If a country on a gold standard is rich in gold mines it is a possibility or if they export to a nation abundant in gold and silver. The government could also just devalue the currency against gold and print money on a gold standard (via the devaluation process) which is what happened to the USA during the great depression under Roosevelt. But it is difficult for governments to abandon the gold standard once in place. Laws are in place and it becomes political suicide. They can't run continuous deficits like they have since going off the gold standard. They can't start wars either. Abandonment of the gold standard is essential for governments to start wars. Just look at USA since Nixon took them off. National debt has skyrocketed and purchasing power of the currency has lost something like 98% since then. Now they are close to the point where tax receipts are only just covering the interest payments on the debt. We are very near the stage where either they print money to cap interest rates from going any higher or deflation and thus defaults and bankruptcies. The former puts on the path to Argentina or Turkey (and no possibility of ever choosing the latter option again) and the latter crashes the markets and high unemployment with asset price declines across the board. A gold standard may have to be necessary to bring back confidence into the economies and markets. If the debts continue to rise then the market is going to demand very high interest rates. This will be chaotic. All hell could break loose in the markets at any time now. For now the market thinks the economies are fine and rates will come down. A "soft landing". This is pure fantasy but money printing causes these miscalculations of the real economy. If the markets lose confidence in central banks and governments all bets are off. Then it's game over. The only solution to that potential scenario in my opinion is a gold standard. But let's wait and see. Quote Link to comment Share on other sites More sharing options...
Tony_Teacake Posted January 27 Author Share Posted January 27 (edited) 21 hours ago, The Angry Capitalist said: All hell could break loose in the markets at any time now. If the markets lose confidence in central banks and governments all bets are off. Then it's game over. In the US you've got 10-12 trillion dollars worth of treasuries that mature in 2024 that have to be rolled over at 500 basis points whatever the rates are meanwhile the Federal Reserve is selling treasuries. They used to be a big buyer of the so-called Social Security trust funds they're selling treasuries too because the government doesn't collect enough in payroll taxes to cover the cost of Social Security and that deficit gets wider every week as more people drop out of the labour force and more people retire. The trust funds are selling treasuries and the other big buyers like the Japanese, Chinese, Saudis and Russians they're not buying any more in fact they're selling and I think they have a lot more treasuries to sell so I think the US is very close to a sovereign debt crisis which will precipitate a US dollar crisis. The signs are already there that a crisis is coming I mean trying to pinpoint the exact date is impossible but I believe we are really close. In the US banks are in much worse shape because it's not the defaulting mortgages that are the problem it's all the mortgages because it's not houses that went down in value it's the mortgages that went down in value. The banks own them and the FED owns them on its balance sheet all these mortgage-backed securities so the banks have lost a fortune on these loans that is why so many of these banks can't pay their depositors any interest because they're losing money and the depositors want their money back so they can lend it to the government by buying a money market and getting 5%. So we have a a much bigger financial problem now than we had in 2008 plus it's not just residential it's commercial real estate that is a disaster. In 2008 there was no problem with commercial real estate in fact commercial real estate went up because when the FED cut rates to zero that was a big boom for commercial real estate prices went up like bond prices because those rental incomes were a lot more valuable with lower rates but what's happening now is commercial real estate prices have collapsed. They've collapsed for a couple of reasons one you know people are working from home so a lot of these office buildings are empty and people are shopping from home because they're online and so a lot of shopping centres and malls are half empty. Commercial real estate prices are down 30-40-50-60% and in some of these buildings you know crime has gone way up and that's another big problem people don't even want to go to work and the employers don't want their employees coming to work and a lot of stores can't even afford to stay in business because everybody keeps stealing their merchandise so their insurance rates have gone up. Commercial real estate prices are way down the banks are going to lose a fortune on these foreclosure defaults because just like homeowners mailed in the Keys in 2008-2009 because they didn't want to make payments on a $400,000 mortgage when they lived in a $250,000 house didn't make any sense to throw away that money. The commercial owners are going to do the same thing you know why refinance their loan you borrow $200 million to buy a building and now you have to refinance the loan but the building is only worth $150 million. Just walk away that saves you $50 million you know $150 million property and a $200 million mortgage especially when the rates are going up so the banks are stuck and they're going to lose a ton of money on defaulted commercial real estate and they're going to lose a ton of money on all of their residential mortgages that don't default. The banks would be better off today if you default because then they could sell the property and tear up the mortgage which they don't want because the mortgage is a liability because it's a loser they're collecting 3% and their cost of funds is 5%. The health of the banks back in 2023 we saw the failures of the second third and fourth largest bank failures in the history of the United States. They would have had a worse financial crisis than 2008 had the FED not come to the rescue of those banks but that does not mean that they've fixed the problem they haven't they have just bought some time while the problem got worse but the banking sector again is much sicker than it was in 2008 when we bailed them all out and all the banks that were too big to fail in 2008 are much bigger now and so when they fail this time it's going to be even worse. Edited January 27 by Tony_Teacake Quote Link to comment Share on other sites More sharing options...
The Angry Capitalist Posted January 27 Share Posted January 27 (edited) 1 hour ago, Tony_Teacake said: The signs are already there that a crisis is coming I mean trying to pinpoint the exact date is impossible but I believe we are really close. In the US banks are in much worse shape because it's not the defaulting mortgages that are the problem it's all the mortgages because it's not houses that went down in value it's the mortgages that went down in value. The banks own them and the FED owns them on its balance sheet all these mortgage-backed securities so the banks have lost a fortune on these loans that is why so many of these banks can't pay their depositors any interest because they're losing money and the depositors want their money back so they can lend it to the government by buying a money market and getting 5%. So we have a a much bigger financial problem now than we had in 2008 plus it's not just residential it's commercial real estate that is a disaster. Commercial real estate prices are way down the banks are going to lose a fortune on these foreclosure defaults because just like homeowners mailed in the Keys in 2008-2009 because they didn't want to make payments on a $400,000 mortgage when they lived in a $250,000 house didn't make any sense to throw away that money. The health of the banks back in 2023 we saw the failures of the second third and fourth largest bank failures in the history of the United States. They would have had a worse financial crisis than 2008 had the FED not come to the rescue of those banks but that does not mean that they've fixed the problem they haven't they have just bought some time while the problem got worse but the banking sector again is much sicker than it was in 2008 when we bailed them all out and all the banks that were too big to fail in 2008 are much bigger now and so when they fail this time it's going to be even worse. We are close, I think. However, you can never underestimate governments and the tricks they use because I am amazed it's lasted this long as have many others. The consensus with the smart guys in the room has been it should have all collapsed by now. It hasn't and still keeps chugging along. But there are many leaks emerging on the titanic. Inflation, wars in different parts of the world, an agitated populace, low birth rate, massive debt burden, immigration out of control, housing shortages and just around the corner massive drop in discretionary spending as a consequence of the money printing. Everything everywhere. All at once. I will be surprised if something major does not break the markets in 2024. The black swan could appear from anywhere. Might even pop up in China and then all the dominoes start to fall. Commercial real estate is a disaster in the making. When the recession comes that will get even worse. But like all the under performing mortgages who owns them? The commercial banks have probably sold most of them on to pension funds & hedge funds etc. But as you point out the banks are not paying market rates of interest to depositors so something is not functioning properly in bank land. The bodies will appear to the surface eventually. We will know when share prices of the banks/companies who own them start tanking. The Fed should be okay because they will just hold their bad under performing assets to maturity. Don't pay attention to their balance sheet because it does not tell the real story. They print money from nothing so it's meaningless apart from if they buy any more because that will increase the currency supply and therefore result in price rises. If you had your own printing press and used that to buy mortgages and they all went down 50% in price what does it matter? Didn't cost you anything. You just printed the money to buy them so any income from them is profit. Edited January 27 by The Angry Capitalist Quote Link to comment Share on other sites More sharing options...
Maghull Mike Posted January 28 Share Posted January 28 10 hours ago, The Angry Capitalist said: We are close, I think. However, you can never underestimate governments and the tricks they use because I am amazed it's lasted this long as have many others. The consensus with the smart guys in the room has been it should have all collapsed by now. It hasn't and still keeps chugging along. But there are many leaks emerging on the titanic. Inflation, wars in different parts of the world, an agitated populace, low birth rate, massive debt burden, immigration out of control, housing shortages and just around the corner massive drop in discretionary spending as a consequence of the money printing. Everything everywhere. All at once. I will be surprised if something major does not break the markets in 2024. The black swan could appear from anywhere. Might even pop up in China and then all the dominoes start to fall. Commercial real estate is a disaster in the making. When the recession comes that will get even worse. But like all the under performing mortgages who owns them? The commercial banks have probably sold most of them on to pension funds & hedge funds etc. But as you point out the banks are not paying market rates of interest to depositors so something is not functioning properly in bank land. The bodies will appear to the surface eventually. We will know when share prices of the banks/companies who own them start tanking. The Fed should be okay because they will just hold their bad under performing assets to maturity. Don't pay attention to their balance sheet because it does not tell the real story. They print money from nothing so it's meaningless apart from if they buy any more because that will increase the currency supply and therefore result in price rises. If you had your own printing press and used that to buy mortgages and they all went down 50% in price what does it matter? Didn't cost you anything. You just printed the money to buy them so any income from them is profit. I no idea if these figs are right, but Bloody Hell! https://nitter.uni-sonia.com/KobeissiLetter/status/1751316139756466554#m Quote Link to comment Share on other sites More sharing options...
regprentice Posted January 28 Share Posted January 28 On 26/01/2024 at 19:33, Orb said: How on earth can they enforce that? Let's say an elderly woman arranges with her son that she'll gift him £20k, but that's to help him financially while he takes time off work, or goes part time to look after her? Or an elderly man gifts his daughter £20k which she uses towards home improvements? The council has teams of people (revenues teams) who do a financial analysis of your assets before your council start paying for your care. They look specifically for "deprivation of capital". a £20k transfer out of the elderly personals bank account is likely to fall into this category. The reason doesnt matter. The council doesnt care who the elderly person gave the £20k to. its the elderly person who owes them the money. If the elderly person owns their own home theyll place a second charge on the home - the £20k debt to the council will come from the home sale whenever that happens. This can cause animosity in the family if theres less than £20k left each for any other kids when the will is sorted. If they've cash (over £23k iirc) theyll ask them to repay it then go to court if they refuse. If they've no cash it'll go against any benefits they receive as a debt and theyll be sanctioned until theyve repaid the £20k. Quote Link to comment Share on other sites More sharing options...
The Angry Capitalist Posted January 28 Share Posted January 28 6 hours ago, Maghull Mike said: I no idea if these figs are right, but Bloody Hell! https://nitter.uni-sonia.com/KobeissiLetter/status/1751316139756466554#m They look about right. Interest rates will go up as the treasuries come onto the market. It will be the free market in bonds demanding high rates that will stop congress from completely destroying the US dollar. Quote Link to comment Share on other sites More sharing options...
Tony_Teacake Posted January 28 Author Share Posted January 28 4 hours ago, The Angry Capitalist said: They look about right. Interest rates will go up as the treasuries come onto the market. It will be the free market in bonds demanding high rates that will stop congress from completely destroying the US dollar. You are correct on this one. I am glad someone else on here gets this. Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.