Inflation

[divs4ever]

I won't claim to be an expert on this but I'm not convinced. At least not yet.....

Now I'm not a central banker but let's suppose I am. I'm the CB and you owe the money.

To be clear, the task is to repay the debt in full. That means you can't take out a new debt in order to repay the existing one. You need to hand me the $105 and clear the debt completely. That's the task - to actually repay all the debt.

I can follow where you get the $100 from. I as the central banker created it. Assuming you haven't lost or set fire to it, it must be around somewhere.

Where does the $5 come from? I haven't created this and I don't allow anyone else to print money.

What am I missing here?

the simple answer is you create some more but sign a separate deal to lend it out ( to say the greengrocer , and he employs the original borrower so he/she can earn the extra dollars )

now where your question gets complicated is not everybody uses every dollar to repay the debts owed to you FIRST , some use the dollars to invest ( or lend to someone else ) that will give them more than the interest owed to the CB , or buy some food ( so take longer to repay )

or instead of getting money back you seize ( via the courts ) cars , property , etc etc .. you know tangible , useful stuff

 

[frugal.rock]

Billionaire investor Barry Sternlicht says Jerome Powell and ‘his merry band of lunatics’ are destroying faith in capitalism and leading us toward 'social unrest'

“The poor guy who's working in an hourly job that loses that job, he's going to say: ‘Capitalism is broken, it didn't work for me. I lost my job. And this whole system has to go out the door,’” Sternlicht told Fortune.

fortune.com

 

[Value Collector]

I won't claim to be an expert on this but I'm not convinced. At least not yet.....

Now I'm not a central banker but let's suppose I am. I'm the CB and you owe the money.

To be clear, the task is to repay the debt in full. That means you can't take out a new debt in order to repay the existing one. You need to hand me the $105 and clear the debt completely. That's the task - to actually repay all the debt.

I can follow where you get the $100 from. I as the central banker created it. Assuming you haven't lost or set fire to it, it must be around somewhere.

Where does the $5 come from? I haven't created this and I don't allow anyone else to print money.

What am I missing here?

Let’s say that $100 you created is made up of 20 x $5 notes, Now my goal is to hand over 21 x $5 notes to you which equals the $105 I owe you.

You seem to think it’s impossible to hand over 21 x $5 notes because you only created 20.

But here is the catch, say I spent the $100 on a lawn mower. Now the lawn mower sales man has the $100, But I Then Mow his lawn and he pays me $5. I then take that $5 an pay you/banker, you take the $5 and pay your security guard, I mow the security guards lawn for $5 then pay you the $5, you pay that five dollars as a dividend to the government, and they pay the PM’s wage of $5, I go mow the PM’s lawn and earn $5 then pay you etc etc etc.

Those same 20 $5 notes can keep circulating and each time I earn one I can clear some of my debt.

The principle amount of the loan is cleared and the interest amount can also be cleared as the central bank or government spends that interest and allows me to earn it and make a payment.

————————

Central banks don’t just stock pile all their interest they earn, it’s either spent back into the economy via their running costs, or paid to the government as a dividend and they spend it.

Provided any interest on the loans is spent back into the economy so that it can be earned by the borrowers there will never be a shortage of money to repay both principle and interest.

 

[mullokintyre]

One of the often forgotten aspects of "slowdowns", is that it is very rarely across the board.
Even in the "Recent Pandemic" (TM), almost everyone was affected, but some far more than others.
The well heeled would have had no problem working from home, despite the inconvenience of having to cook ones own meals more frequently. The folks working in transport, retail salespersons, the hospitality staff, cleaners , and event wokers would have had difficulty working from home, even assuming they had the space to set up an "office".
And of course, in EVERY instance, it is those at the bottom who feel it first.
Already under the pump as they juggle paying rent versus food versus energy bills versus health expenses, even small changes in the cost of living have a profound effect on their day to day choice.
The area that @JohnDe highlighted is I would suspect looking at the photographs, very much an upmarket area that the riff raff would be easily kept out by the higher prices.
However, if you went to some working class areas , spoke to the shopkeepers, the publican and the bloke who runs Maccas (won't find too many proper restaurants in those areas), you may find a very different story.
They will all be feeling a slowdown as their customers have inflationary pressures well above their meagre wages increases.
Lifes tough at the top.
But is complete crap at the bottom.
Mick

 

[JohnDe]

...The area that @JohnDe highlighted is I would suspect looking at the photographs, very much an upmarket area that the riff raff would be easily kept out by the higher prices.
However, if you went to some working class areas , spoke to the shopkeepers, the publican and the bloke who runs Maccas (won't find too many proper restaurants in those areas), you may find a very different story....
But is complete crap at the bottom.
Mick

Sorry to implode your theory, however, the area that I showed is not an 'upmarket area'. It is in fact a very working-class area, a major grain distribution port.

The town had an important smelter built in the 1850's and closed in the 1930's, leaving large sections of prime land contaminated and strewn with debris. With the smelter and mining closed the town's population shrank by 70%, with the only source of income being grain storage and distribution. Local government could not afford to clean and clear contaminated land, there was no recourse to claim compensation from the long-gone smelter owners. Over the past decades there has been several attempts to entice businesses and conglomerates to create wealth and fund clean ups. A few started but nothing serious came from it, until about 20 years ago. A multi-national company came with some big ideas which included multistage developments, got approval and reclaimed part of the land and started building. Stage 1 completed in about 2009, and then hard times hit. A few attempts to restart, some convoluted building, and finally a new bigger company got on board with new improved plans, working with local government everything was going forward nicely but then another setback - Covid lockdowns, everything stopped.

During the past few months building projects have come back online, For Sale signs have turned to Sold, holidays have shown large increases in visitors, the developer has re-committed to the development plans.

Sometimes things don't appear to be what they are, that is why in my post that you mention I said: The thing with trying to assess the economy at street level, is that each street is different, like every suburb, city and town. It is worth taking the time to look further than our own little bubble.

 

[divs4ever]

Sorry to implode your theory, however, the area that I showed is not an 'upmarket area'. It is in fact a very working-class area, a major grain distribution port.

The town had an important smelter built in the 1850's and closed in the 1930's, leaving large sections of prime land contaminated and strewn with debris. With the smelter and mining closed the town's population shrank by 70%, with the only source of income being grain storage and distribution. Local government could not afford to clean and clear contaminated land, there was no recourse to claim compensation from the long-gone smelter owners. Over the past decades there has been several attempts to entice businesses and conglomerates to create wealth and fund clean ups. A few started but nothing serious came from it, until about 20 years ago. A multi-national company came with some big ideas which included multistage developments, got approval and reclaimed part of the land and started building. Stage 1 completed in about 2009, and then hard times hit. A few attempts to restart, some convoluted building, and finally a new bigger company got on board with new improved plans, working with local government everything was going forward nicely but then another setback - Covid lockdowns, everything stopped.

During the past few months building projects have come back online, For Sale signs have turned to Sold, holidays have shown large increases in visitors, the developer has re-committed to the development plans.

Sometimes things don't appear to be what they are, that is why in my post that you mention I said: The thing with trying to assess the economy at street level, is that each street is different, like every suburb, city and town. It is worth taking the time to look further than our own little bubble.

increases over WHAT ?? ( Xmas 2020 perhaps , try Xmas 2018 or 2019 )

i sold a property in November 2021 , slightly over asking price but before the property could even be listed for auction , sure it was a 'fixer-upper ' but the buyer bought the neighbor's as well ( 2 weeks later ) and shot in the paperwork for a 'residential enclave ' ( i assuming adjoining blocks of units ) ( the neighbour didn't even approach the RE agent .. the buyer did the legwork as soon as the ink on my property was drying )

that was two sales and no signs needed .. how many more ( this area is suburban fringe but gentrifying over the last decade )

i speak to the greengrocer , the pharmacist ( the news agent sold , the replacing tobacconist went kaput ) and at least 10 percent of the two 'strip malls ' are vacant AND the malls now have 3 bottle shops between them ( used to be one in the whole suburb )

if that is a K-shaped recovery , i can guess which leg we are travelling on

now sure as a life-long bargain hunter that is not tragic news .. for me , but what about others ( like my current small business owner neighbours )

 

[Value Collector]

One of the often forgotten aspects of "slowdowns", is that it is very rarely across the board.
Even in the "Recent Pandemic" (TM), almost everyone was affected, but some far more than others.
The well heeled would have had no problem working from home, despite the inconvenience of having to cook ones own meals more frequently. The folks working in transport, retail salespersons, the hospitality staff, cleaners , and event wokers would have had difficulty working from home, even assuming they had the space to set up an "office".
And of course, in EVERY instance, it is those at the bottom who feel it first.
Already under the pump as they juggle paying rent versus food versus energy bills versus health expenses, even small changes in the cost of living have a profound effect on their day to day choice.
The area that @JohnDe highlighted is I would suspect looking at the photographs, very much an upmarket area that the riff raff would be easily kept out by the higher prices.
However, if you went to some working class areas , spoke to the shopkeepers, the publican and the bloke who runs Maccas (won't find too many proper restaurants in those areas), you may find a very different story.
They will all be feeling a slowdown as their customers have inflationary pressures well above their meagre wages increases.
Lifes tough at the top.
But is complete crap at the bottom.
Mick

It’s not just people at the bottom that feel it though, it’s anyone associated with the industries that get hit.

For example a “well heeled” person that earns $300K a year in event management prior to the pandemic, would have felt it and might not have qualified for government assistance.

But yes you are correct, the pain of slow downs is definitely not evenly spread, certain industries won’t feel a thing while others will be very hard hit.

 

[JohnDe]

increases over WHAT ?? ( Xmas 2020 perhaps , try Xmas 2018 or 2019 ).........

Since the Covid restrictions have reduced and removed.

Tourism from surrounding towns and the city has started to return to pre-covid numbers, though still not at its peak. A marina was the first stage, which brought in a lot of interest from people living and working in surrounding land locked towns. With the reclamation of contaminated land in several stages, the building of homes and apartments has been increasing as prime locations disappear. A snowball effect is now occurring. As the development grows the town has taken on a new feel, the once run-down streets have been sharpened up with the increased revenue that local government is getting from new rate payers. Word is getting around, more people visiting for day trips or staying for days, people buying and building holiday homes to rent to visitors, workers deciding to move to the town, and so on.

The 'increase' is continuing.

 

[divs4ever]

Since the Covid restrictions have reduced and removed.

Tourism from surrounding towns and the city has started to return to pre-covid numbers, though still not at its peak. A marina was the first stage, which brought in a lot of interest from people living and working in surrounding land locked towns. With the reclamation of contaminated land in several stages, the building of homes and apartments has been increasing as prime locations disappear. A snowball effect is now occurring. As the development grows the town has taken on a new feel, the once run-down streets have been sharpened up with the increased revenue that local government is getting from new rate payers. Word is getting around, more people visiting for day trips or staying for days, people buying and building holiday homes to rent to visitors, workers deciding to move to the town, and so on.

The 'increase' is continuing.

am waiting for the 'fiscal fallout ' they can't keep stimulating forever without consequences ( just like a cash splash won't fix the lock-down pandemic )

i suppose the trader types would call it a bear market rally ( of the economy )

 

[JohnDe]

am waiting for the 'fiscal fallout ' they can't keep stimulating forever without consequences ( just like a cash splash won't fix the lock-down pandemic )

i suppose the trader types would call it a bear market rally ( of the economy )

Watch out for pockets that go against the grain.

So how big is the national debt?​

At the end of June, the total size of Australia's national debt was $895 billion.​

​

That's about $100 billion short a trillion dollars.​

​

But many economists argue the total, or gross debt figure is not the best debt figure to look at.​

​

They point to the net debt figure, which takes the total debt then subtracts many of the government's financial assets — like cash it holds, deposits and loans it is owed.​

​

That figure is substantially lower, at $515 billion, or just over half a trillion dollars.​

​

Which is still a huge amount of money. But economists also look to another key indicator.​

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They compare the size of the debt, to the size of Australia's economy.​

​

Net debt is currently at 22.5 per cent of GDP, or just over a fifth of Australia's total national income.​

​

Gross debt is obviously higher, at closer to 40 per cent.​

​

It's a big debt, but it's not the biggest​

​

Comparing debt to GDP allows Australia's debt to be put in a global context, too.​

​

And the comparisons are actually pretty good.​

​

Australia's gross debt-to-GDP is below average in the OECD, which is basically a collection of wealthy countries.​

​

Countries like the UK and US are carrying debts larger than their economy.​

​

​

Economist Sarah Hunter from KPMG said the numbers reflect pretty favourably on Australia.​

​

"We're still at relatively low levels [of debt]," she said...........​

 

[divs4ever]

Comparing debt to GDP allows Australia's debt to be put in a global context, too.And the comparisons are actually pretty good.

yep i agree there , good for ( relative ) 'safe-havens , a little bit ordinary for growth potential ( i need some of both , but they don't have to be in the same place )

Watch out for pockets that go against the grain.

i am one of those pockets , just not a particularly deep one ( being a minnow contrarian has it's own opportunities )

i notice Indonesia is on par with Australia ( in the debt to GDP race ) sadly getting solid exposure to Indonesia ( as stand-alone investments is normally difficult )

interesting times , indeed

 

[Value Collector]

yep i agree there , good for ( relative ) 'safe-havens , a little bit ordinary for growth potential ( i need some of both , but they don't have to be in the same place )


i am one of those pockets , just not a particularly deep one ( being a minnow contrarian has it's own opportunities )

i notice Indonesia is on par with Australia ( in the debt to GDP race ) sadly getting solid exposure to Indonesia ( as stand-alone investments is normally difficult )

interesting times , indeed

Australia also has a solid position when it comes to the balance of trade too.

 

[divs4ever]

Australia also has a solid position when it comes to the balance of trade too.

that could change given we have a Leftist party that irritates China , without embracing India ( or at least Vietnam )

a Federal Budget soon , i guess we will get more clues soon

 

[mullokintyre]

On a local related subject, i have been told on the grapevine that containers price in Australia are heading down steeply ahead , due to a flood of containers ..aka reduced commerce?
This could put an end to some supply issues based inflation .

From the WSJ

The backup of container ships off Southern California’s coast that was at the heart of U.S. supply chain congestion during the Covid-19 pandemic has effectively disappeared.

The queue of ships waiting to unload at the ports of Los Angeles and Long Beach fell from a peak of 109 ships in January to four vessels this week, according to the Marine Exchange of Southern California. Shipping specialists say fewer ships than normal are heading to the main U.S. gateway complex for imports from Asia in coming days and that cargo volumes that had long swamped the ports now are receding.

Bottlenecks continue to delay cargo at other major U.S. seaports and at inland freight hubs, but the end of the backup at the big ports in California signals broader supply-chain tangles that have been troubling retailers and manufacturers are unwinding.

---

Port and Biden administration officials point to a range of factors that have helped ease congestion, including a tighter queuing system that had ships lining up further out in the Pacific, new container yards that freed up space on docks, and government initiatives that fostered better collaboration between retailers, ports, railroads and truckers.
But the biggest gain likely has come from fewer boxes reaching the busiest U.S. seaport complex for container imports. U.S. import volumes are declining, according to trade data analysts, and a growing share of the shipments are heading to ports on the East and Gulf coasts as importers ship away from the Southern California backup.

Key Stats​

• The queue of ships waiting to unload at the ports of Los Angeles and Long Beach fell from a peak of 109 ships in January to four vessels this week.
• Descartes Datamyne, a data analysis group owned by supply-chain software company Descartes Systems Group Inc., says container imports to the U.S. in September declined by 11% from a year earlier and by 12.4% from August.
• Shipping lines have canceled between 26% to 31% of their sailings across the Pacific over the coming weeks, according to Sea-Intelligence
• In September of 2021 the average cost for shipping a container from Asia to the U.S. West Coast exceeded $20,000. Last week, the average cost to ship a container from Asia to the U.S. West Coast had declined 84% from a year earlier to $2,720.

it looks suspiciously like a collapse in Imports.
Imports are one of the first casualties of a Recession.
How long before the R word starts to enter the financiers conversations.
Mick

 

[divs4ever]

How long before the R word starts to enter the cinancuers conversations.

it will happen on the 12th of never , even if it means creating a new definition to describe the same condition

wait for the R word to be banned on Google searches and labeled disinformation

the precedent has already been set elsewhere

 

[waterbottle]

From the WSJ


it looks suspiciously like a collapse in Imports.
Imports are one of the first casualties of a Recession.
How long before the R word starts to enter the financiers conversations.
Mick

It already has, many are predicting a recession in 2023. Might coincide with final leg down?

 

[over9k]

Alright so treasuries are all surging, growth plays are on the move, big tech reports this week, and china basically all but confirmed it intends on torpedoing itself, so growth is back on the menu for at least today.

Obviously markets are expecting some pretty good news from the earnings that drop this week so a degen growth play last week has, for now, been a winner.

 

[Smurf1976]

It already has, many are predicting a recession in 2023. Might coincide with final leg down?

Agree - whilst I've posted on another thread that I've been buying shares lately I see that as a short term trading opportunity.

I don't think we've seen the bottom yet, just a temporary one.

 

[waterbottle]

Earnings haven't been all that bad in the US.
WSJ confirming 75bps as next Fed hike, possible slow down in hikes thereafter.
Bonds retreating.
ETH and BTC rising too.

Looks like a bear market rally to me. Will have to see if earnings sustain it.

 

[Dona Ferentes]

From around the traps:

....
Am trying to figure out the implications, because the movements are dramatic, to say the least.