How high will inflation go ?
- Thread starter Justin Smith
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The Byre
The Fed and the BoE and the ECB have to get on top of inflation before it kills the Western economy and results in war and/or really severe social unrest.
If governments and central banks allow inflation to run away with them, they will be swept away and with them, our way of life.
Germany was possibly the most prosperous and civilised nation on Earth, until inflation struck the Weimar Republik. The central banks are very mindful of that precedent and the examples of Zimbabwe, Venezuela and elsewhere.
And then there is the debt tsunami - $300 trillion of it!
I did warn people now for the past few years - well, now it's gonna be a recession*, followed by depression* - and for a long time too!
*(A recession is when your neighbour gets his house repossessed. A depression is when you get your house repossessed!)
If governments and central banks allow inflation to run away with them, they will be swept away and with them, our way of life.
Germany was possibly the most prosperous and civilised nation on Earth, until inflation struck the Weimar Republik. The central banks are very mindful of that precedent and the examples of Zimbabwe, Venezuela and elsewhere.
And then there is the debt tsunami - $300 trillion of it!
I did warn people now for the past few years - well, now it's gonna be a recession*, followed by depression* - and for a long time too!
*(A recession is when your neighbour gets his house repossessed. A depression is when you get your house repossessed!)
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Only a guess from myself, but I can see inflation hitting 20% or more.
To add to the problems in the USA, Europe and the UK, China’s problems are going largely unreported in the general press, but they are also facing a huge property bubble, one which dwarfs everyone else. This is a worldwide problem.
No easy way to say it, people are going to really feel the pain this recession, plenty of businesses will go to the wall as well, many through no fault of their own.
To add to the problems in the USA, Europe and the UK, China’s problems are going largely unreported in the general press, but they are also facing a huge property bubble, one which dwarfs everyone else. This is a worldwide problem.
No easy way to say it, people are going to really feel the pain this recession, plenty of businesses will go to the wall as well, many through no fault of their own.
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T
The Byre
And that is using their bogus basket that keeps changing, conveniently forgetting that people no longer buy certain things because they are today far too expensive.
Try buying a juicy fresh kipper like the ones that used to be available in every MacFisheries on every High Street in the UK in the 60s and 70s. All you get is some anemic poor wee timorous beastie in plastic that was sprayed with so-called 'liquid smoke' and died of old age - and it smells like it too!
Houses, gardens and flats have all become smaller, roads are more crowded and potholes abound where there were none before. And your healthy breakfast kipper and a fresh pot of tea have been replaced by a bowl of teeth-rotting Jumbo Minty McSweety-Puffs and some powder in hot water.
Switzerland - inflation there shot up from 2% to 3.4% this year. Their secret? Easy - no QE! No lockdown and use your common sense.
Your wish has probably been granted already! As long as the likes of the ONS, the Bureau of Labor Statistics and Eurostat keep moving the goalposts, getting reliable hard figures becomes almost impossible. It is systematic lying to the public on a grand scale!
The Consumer Price Index was reconfigured in the early-1980s so as to understate inflation. The CPI no longer measures the cost of maintaining a constant standard of living.
Under the cover of false academic theory, politicians forced the underreporting of official inflation, so as to cut annual cost-of-living adjustments to social security, the cost of government bonds and other things like pensions. The use of a bogus CPI to adjust retirement benefits and private income or to set investment goals impairs the ability of retirees, income earners and investors to stay ahead of inflation.
Stated simply - economically, we no longer know where we are!
Understated bogus inflation figures are used in estimating inflation-adjusted growth and is used repeatedly to create the illusion of recovery in GDP.
Now they are even lying about what is a recession - the US government has changed from the universally accepted negative economic growth for two consecutive quarters, to the laughably vague "a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." (I hope you can make sense of that gobbledygook because I can't!)
You watch out! They do the same here soon!
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T
The Byre
Prediction - Pakistan will be the first major country to collapse*. Sri Lanka was the canary in the coal mine. The big one will be China but that will take a while. $300 trillion is a very large number, but that is the size of the debt tsunami heading across the ocean.
The real danger is not massive economic collapse - we could ride that one out. The real danger is that when governments run out of options, they first start falsifying the figures, but when that no longer works, they go to war.
*I could always be wrong! Other candidates like Turkey are also fairly 'shoogly'.
The real danger is not massive economic collapse - we could ride that one out. The real danger is that when governments run out of options, they first start falsifying the figures, but when that no longer works, they go to war.
*I could always be wrong! Other candidates like Turkey are also fairly 'shoogly'.
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Michael Bury mentioned a few days ago that he thought there was a lot of silliness in the markets
Gov's, banks and traders all seemingly ignoring the elephants in the room
I saw yesterday U.S gov was trying to say inflation had dropped 0.02% based on their manipulated cpi data
Of course the market reacted by screaming " lets go" with pictures of rockets taking off and moons
Suspect this is what Bury is referring too
Gov's, banks and traders all seemingly ignoring the elephants in the room
I saw yesterday U.S gov was trying to say inflation had dropped 0.02% based on their manipulated cpi data
Of course the market reacted by screaming " lets go" with pictures of rockets taking off and moons
Suspect this is what Bury is referring too
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T
The Byre
That was the month-on-month figure (which seems very suspect to me!) and Biden made a big deal out of it.
The stock market prices are driven by emotions. It is a number placed upon assets that reflect where punters think asset prices will be in the near future. Those numbers are driven by retail punters loaded with stimmy cheques and loans against their over-valued houses and furlough payments. Institutional investors like BlackRock, Berkshire Hatheway and Vanguard do not pile in and out of a company from one day to the next.
Inflation and stock prices move in fits and starts. One supermarket or outlet puts up some prices and the others follow. One solitary month in Summer when prices usually are extremely steady or even falling is hardly a reason to celebrate!
And then there are the US and UK employment figures and they definitely are doctored. In the US, the BLS does it by surveying employers and they ask how many staff they have. They do not ask about levels of pay or whether full- or part-time. According to the BLS, 1.6m jobs were added to the market.
Parallel surveys of households have shown that the jobs market has not increased at all, but has decreased slightly, despite an increase in the population - so an increase in unemployment since March of this year. I have yet to look at the ONS figures.
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- Original Poster
- #252
An article in The Times was reporting that employers are starting to cut back on recruitment. It is probable, almost certain I would say, that unemployment will start to rise within months. One has to remember we are in an artificial situation here where the Billions pumped into the economy during the pandemic is working its way through (hence high inflation), but when that has dissipated that's when unemployment will be on the rise. The fact is people are becoming more and more careful spending their dosh now because they are fearful - esp with interest rates rising significantly - so that will be the start of it.
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Unfortunately I think your correct 20% plus by next year any reported figures we see are generally out of date. And again unfortunately our government in particular are just fiddling away on the side lines.
Big problems across Asia are impacting the markets and I fear worse to come. There has been intense amounts of selling over the past three sessions in the markets with indices failing at trendlines or their 200-day moving average, not a good sign it seems like the next leg lower in the 2022 bear market has begun @The Byre predictions are coming to the fore
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And I predicted a few days/weeks ago that education and care would be the next sectors hit by rising costs but fixed incomes and now I see schools are talking about 4 (or even 3) day weeks come winter to save the energy bills (how much would a 4 day week even save, 5% ?)
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I think the most worrying thing for the UK, is many are sleep walking into this recession and high inflation period, most Brits I know are still spending as if everything was normal.
My youngest daughters boyfriend, saving up for a house deposit, has a vow three year old car on lease, has just signed up for another new car lease at £270 per month, he drives an average of 20 miles per day maximum.
I would never tell anyone what to do with their money, as a teacher he feels job security and income is totally safe, but even so. We have a generation of youngsters who have no experience of high inflation, mass job losses or repossessions.
My youngest daughters boyfriend, saving up for a house deposit, has a vow three year old car on lease, has just signed up for another new car lease at £270 per month, he drives an average of 20 miles per day maximum.
I would never tell anyone what to do with their money, as a teacher he feels job security and income is totally safe, but even so. We have a generation of youngsters who have no experience of high inflation, mass job losses or repossessions.
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T
The Byre
The bear market began in 2006 with the first signs of over-priced houses in the UK and the US leading to market hysteria. 2007 saw the first MBS and CDO packages start to fail to find enough buyers to cover them and by the end of 2007 various investment bankers had to learn what a synthetic CDO squared was and why their banks had billions tied up in these dodgy things. "What the F has been going on in the trading rooms and why weren't we informed?"
The Flash Harry trading boys were earning many times more than the CEOs of the banks. They were more powerful and could order the risk officers out of the trading rooms and get them fired for interfering.
2008 saw the banking crash and the BoE, the ECB and the Fed all stopped the dominos from falling with QE. But QE = inflation. You might say QE is inflation - the inflation of the money supply. But all that QE went into banking reserves and that freed up the banks to lend money for assets such as houses, bonds, shares - and by 2010 we were off to the races again! Yeeha!
But then a little change began to make itself felt - velocity, the speed with which money circulated, was falling. In 1997 it was two. By 2010 it was just 1.5. All that extra money was not going into the economy, but getting parked up in the form of houses and other assets. By 2020 it was down to one. With falling productivity, there was nothing to buy so the extra money went into assets.
Central banks everywhere did an extremely stupid thing (again!) Instead of seeing falling velocity as a symptom of a failing economy, they thought that it was the disease - we need more inflation! 2% was no longer a ceiling, it became a target! They stoked the fires of inflation and reduced interest rates to zero and in the Eurozone to BELOW zero!
2019 and 2008 happened all over again! Almost the same stupidity struck - but this time it affected the inter-bank lending markets - repos and reverse repos. The Fed printed a few trillion and everybody calmed down and the whole thing was hushed up and forgotten.
2020 and C19 struck. Governments everywhere were helpless and useless. They blundered about, issuing edicts that often countermanded orders given earlier. Nearly every government did the most dangerous and stupid thing they could have done. "Everybody has to stay at home and not go to work and we shall give you free money!"
Whoopee! Helicopter money! BBLs, stimmy cheques, furlough payments for staying in bed, huge grants for doing nothing - now that's what I call music! And we all caught the C19 bug anyway! The endless lockdowns were futile and pointless.
At the height of all that madness, two-thirds of the economy was government spending financed with QE and government borrowing. The standard joke was to ask why governments bother to raise taxes - just print the bloody money!
Western economies were extremely vulnerable and Putin saw his opportunity. One quick and painless push into Ukraine and we can take it back. "We have a huge and very well-financed military with some of the most modern weapons available!" he thought. Except he didn't - corruption had drained the military of funds for just about everything, even fuel and maintenance.
He also didn't expect the West to pour billions into reequipping the Ukrainian military with truly modern weapons his soldiers could only dream about. Six months into this pointless conflict and the Russian government is embroiled in a war that it cannot win and cannot afford to lose.
So it has been one 'Black Swan Event' after another, each created and compounded by government stupidity, combined and abetted by banking corruption and greed.
For the rest of this story, I suggest reading the book 'When Money Dies' by Adam Furguson.
It closes with the words -
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Hmmm assuming he is probably on somewhere between 25 and 30K a year ( at very best)
15-20 years ago these salaries were fairly respectable today they are barely scraping very average incomes
Yet a vast majority of people like to believe they are financially secure on 30k a year and can afford to indulge in as many unnecessary consumer purchases as they can get their hands on. So that they are able to convince friends family and neighbours they are doing well
If you go to any suburbia in England or Wales you will find nearly every car on the drive will be a 20 something plate on a juicy £3-400 pcm
pcp or lease deal
"After all we couldn't possibly have a 10 year old car on the drive what on earth would the neighbours think"
The British middle class is very concerned with what others think of them and as a result have absolutely no issue with going into tens of thousands of debt to ensure they look the part
None of them understand compounding interest or even APR's so they just look at the baseline monthly repayment hum and harr for an hour over a nice cup of coffee and then decide they work hard enough so why not treat themselves ......
Very worrying times indeed.
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I never understood this at all. I've friends up to their eyeballs paying for a car they hardly drive that isn't even that fancy. Another friend has currently landed a 100k salary job (from 70k at his previous place) and he's decided to 'treat' himself by getting a new car on HP at £400 a month. I can't fathom how that is a treat.
The youngest car I ever had was 9 years old. A set of refurbished alloys, quick polish, cheap £250 private plate and everyone always thinks I've got a lovely young expensive car. Little do they know it's also got 120k on the clock which reduced the price I paid further.
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All my neighbours think my 11 year old paid off V8 AMG Mercedes is a brilliant car to have. Just saying. The only one that's not impressed is the guy with a Tesla but hey it is what it is.
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well at least your mate is actually earning a triple figure salary he can afford to piss money away
Most people i know on PCP deals will be earning something between 20 & 30K
about 6 years ago I knew a girl working in BT on the phones earning 23K a year with a 30 grand Audi parked outside with all the bells and whistles
Another old mate of mine works on the bins..... has a 10 grand BMW parked outside his parents house ....where he still lives at 32 years of age
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T
The Byre
That brings me to a few very important points that need to be said and understood. Those people paying a series of monthly payments for this, that and the other are living at the bottom of the tree. They THINK of themselves as being halfway up the tree, but they are not. They are right down at the bottom because they run the highest risks and own almost nothing. The house belongs to the bank, the car belongs to the leasing company, the furniture belongs to . . . Well, you get the idea!
All those 'possessions' are in reality just liabilities and every liability is someone else's asset - i.e. not theirs!
There are four types of people in the workforce and the much-loved security that the middle classes strive for is lowest for the wage/salary earner. Yes, I know that conventional wisdom places the salary earner as having the greatest security - but them days is over!
If you are a wage or salary earner, you have almost no security - and I am including government employees in that group. Companies fail, governments fall, people get chucked out, bad things happen. If an employee loses their job, they have lost all their income.
Next comes the self-employed. These people have far greater security than those who are employed because they have many employers. A car repair shop will have a few hundred, an accountant may have the same, a building contractor jumps from employer to employer - only they all call them clients.
So who's next? Ah yes, the business person. These are the people who create a system, a structure that provides others with employment who then earn money for the business person. That can range from the local plumber and his crew, all the way to the owner/manager of a large company. Once the company has gained size, market share and momentum, the manager/owner is far more secure than the self-employed.
Right at the top is the investor. This person is very secure if they are genuine investors. I don't mean someone playing the stock market - that's just a gambler. It is gambling because, unless it is a new company selling newly issued stocks, there is a counterparty - if the stock goes up after the gambler has bought it, the person who sold that stock has lost that increase in value. The gambler is betting against others just like in a poker game.
A real investor places assets in the hands of others and seeks to earn a reward in exchange.
So there we have the structure of the workforce. Inflation and all those lockdowns (that are still going on in China) are breaking that and other structures. We rely on currencies to allow exchanges of value in the same way that blood allows exchanges of oxygen and other vital things to flow through the body. Disturbances in that flow are deadly!
The employed rely on the value of money remaining constant. When the money supply is increased, that acts as an additional tax on those whose only asset is that monthly pay cheque. The government has created the funds to meet its obligations, those relying on an income find that that income buys them less as a result.
BTW - here's an alarming factoid for everyone to think about -
About 99 years ago, a nice house on the outskirts of Berlin that today would cost about €2m (or over 1,000oz of gold) back then cost just $100 which at the time represented just 5oz of gold. That is how desperate people had become in Germany in 1923.
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T
The Byre
But it cannot accumulate all by itself - it must be invested in something. Property that is not rented out or otherwise is productive is just another liability and an asset for those that maintain, heat, repair, etc. that property in exchange for currency.
But wealth is never currency. Currency must be set to work to become wealth. Land that produces crops is wealth. Assets are those things that produce more assets.
As things stand at the moment, currency is just another liability because it loses value over time due to inflation. In times of deflation, it could be regarded as an asset as it increases in value - but those times are extremely rare and always short-lived!
The only currency I can think of that seems to more or less hold its value is gold. But gold is just another unit of exchange that can be turned into assets.
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T
The Byre
Where we are today is beginning to look alarmingly like where Germany was exactly 100 years ago - in 1975, Adam Furguson wrote (about the year 1922) -
"It was natural that a people in the grip of raging inflation should look about for someone to blame. They picked upon other classes, other races, other political parties, other nations. In blaming the greed of tourists, or the peasants, or the wage demands of labour, or the selfishness of the industrialists and profiteers, or the sharpness of the Jews, or the speculators making fortunes in the money markets, they were in large measure still blaming not the disease but the symptoms.
"It was significant enough that union demands were still for higher wages to meet rising prices rather than, before all else, stable prices and a stable currency. A few of the financially sophisticated could be heard blaming the government, and the Finance Minister in particular, but a typical view was that prices went up because the foreign exchange went up, that the exchange rate went up because of speculation on the Stock Exchange, and that this was obviously the fault of the Jews. Although the price of the dollar was a matter for almost universal discussion, it still appeared to most Germans that the dollar was going up, not that the mark was falling; that the price of food and clothing was being forcibly increased daily, not that the value of money was permanently sinking as the flood of paper marks diluted the purchasing power of the number already in circulation."
Then, as now, it all began so slowly, 10%, then 20%, then 50% and then by the end of the year, it was 50% every month. And in the EU, the US and in the UK we have governments claiming that they can introduce new measures that rely on more borrow-and-spend policies - here in particular and the proposed measures that both of the infantile candidates for PM espouse.
"It was natural that a people in the grip of raging inflation should look about for someone to blame. They picked upon other classes, other races, other political parties, other nations. In blaming the greed of tourists, or the peasants, or the wage demands of labour, or the selfishness of the industrialists and profiteers, or the sharpness of the Jews, or the speculators making fortunes in the money markets, they were in large measure still blaming not the disease but the symptoms.
"It was significant enough that union demands were still for higher wages to meet rising prices rather than, before all else, stable prices and a stable currency. A few of the financially sophisticated could be heard blaming the government, and the Finance Minister in particular, but a typical view was that prices went up because the foreign exchange went up, that the exchange rate went up because of speculation on the Stock Exchange, and that this was obviously the fault of the Jews. Although the price of the dollar was a matter for almost universal discussion, it still appeared to most Germans that the dollar was going up, not that the mark was falling; that the price of food and clothing was being forcibly increased daily, not that the value of money was permanently sinking as the flood of paper marks diluted the purchasing power of the number already in circulation."
Then, as now, it all began so slowly, 10%, then 20%, then 50% and then by the end of the year, it was 50% every month. And in the EU, the US and in the UK we have governments claiming that they can introduce new measures that rely on more borrow-and-spend policies - here in particular and the proposed measures that both of the infantile candidates for PM espouse.
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A first edition of John Law's Proposal for Supplying the Nation with Money recently sold for £22k, which is fair enough.
The article on Antiques Trade Gazette includes the following quote.
www.antiquestradegazette.com
"Adam Smith presented the Mississippi ‘Bubble’ as a lesson in the perils inherent in Law’s advocacy of the unlimited expansion of paper money, but some modern authorities have taken a different view and, said the saleroom in a lengthy and detailed catalogue entry, nowadays see Law as an exceptional monetary theorist."
John Law created the Mississippi Bubble, which led to the complete collapse of the French economy and directly to the French Revolution.
He's now an exceptional monetary theorist.
The article on Antiques Trade Gazette includes the following quote.
BOOKS AND WORKS ON PAPER: Rare appearance of financial work by author who ended up dying in poverty | Antiques Trade Gazette
It is close on 50 years since a 1705 first of John Law’s 'Money and Trade Considered…' was seen at auction, said Lyon & Turnbull (20% buyer’s premium) of the copy in re-backed contemporary calf that it sold for £22,000 in a summer sale held in Edi...
www.antiquestradegazette.com
"Adam Smith presented the Mississippi ‘Bubble’ as a lesson in the perils inherent in Law’s advocacy of the unlimited expansion of paper money, but some modern authorities have taken a different view and, said the saleroom in a lengthy and detailed catalogue entry, nowadays see Law as an exceptional monetary theorist."
John Law created the Mississippi Bubble, which led to the complete collapse of the French economy and directly to the French Revolution.
He's now an exceptional monetary theorist.
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The only that we are missing at the moment is a 'Celebrity Politician' - But, I dare say one will be along soon
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No, nor do many around here. There are a fair few newish JLR cars as we are commuting distance to Gaydon, but those are mostly employee perks on special deals. The remainder? The usual mostly mix, very, very far from "nearly every...".
You must live in a very affluent and extraordinary area. Lucky you hahaha
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my street - 2 doors down the daughter is doing a degree apprenticeship for Thames Water - she has an Audi A3 that is brand new - I am assuming that is on finance as she is living at home and has nowt better to do with her £ ?
otherwise other than a company car opposite and a guy who buys tarts up and sells high end motors as a sideline all the cars are over 5yrs
BUT last time I went to Marple (Stockport) it was wall to wall newish SUV's and BMW's
otherwise other than a company car opposite and a guy who buys tarts up and sells high end motors as a sideline all the cars are over 5yrs
BUT last time I went to Marple (Stockport) it was wall to wall newish SUV's and BMW's
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Trading anecdotes doesn't defeat facts I'm afraid. That's the material point.Indeed. It's hard to prove a theory. It's very easy to debunk the original assertion. All you need is one counter example. Two have now been given, so it's doubly debunked
Private car financing is a (frankly) huge business. It's virtually the default method for modern car purchasing in the UK.
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See above.
New cars are typically bought on finance. It is also far more common to see new cars being driven nowadays by people on more modest incomes than in previous eras. Anyone disputing that reality is basically wasting everyone's time. Doesn't matter what the evidence of their street says. The original remark merely set the scene and was a shorthand to describe that reality.
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