Inflation

[divs4ever]

I am not an economist so can't answer that, it would more likely increase productivity I would guess.

As far as consumption goes I wouldn't know the answer in the long term at least, do you have some modelling to show consumption would decrease??

As far as bureaucrats losing jobs isn't that one of the key argument for a UBI, Nothing to evaluate every fortnight so no need for massive bureaucracies to evaluate. EVERYONE just gets the UBI regardless.

but until Australia ramps up manufacturing REAL productivity can't increase ( turn raw materials into products that are consumed or sold )

you tell me about these the generation welfare recipients , but have you stayed with them for some time , ( without being shocked into blindness ) , they are educational in their own way and give you a great insight into current governments and the public service

not being an economist is probably to your advantage ( and considering most mainstream economic predictions your guess is just as likely to be correct .. the difference is you didn't need to study an extra 6 plus years to formulate that opinion

modeling ?? if you have no money in your pocket .. how much can you buy ( currently up to your credit limit )

now IF there is a credit crisis ( which arguably happened in September 2019 ) and still no cash in the pocket ??

this isn't rocket science , the compounding factor is built in obsolescent in many products ( some products self-destruct after say 3 or 5 years ) so the risk is some products will fail ( even sitting on the shelf ) and there is some chance some people will not be able to replace them ( without resorting to theft )

yep UBI sounds like the solution UNTIL government realizes it has relaxed it's grip on control ( bring in Central Bank digital currency so the government gets both hands on control , now you can even de-bank folks at whim , and have the old Soviet ' non-person' sledge-hammer to wield

AND GUESS WHAT , real productivity ( outside of criminal activity ) will slide and slide , no incentive to work hard to get a safety buffer , the laziest bastard gets the same as you ( or even promoted i have seen that as well )

it's a harsh world out there outside the ivory towers

 

[3 hound]

but until Australia ramps up manufacturing REAL productivity can't increase ( turn raw materials into products that are consumed or sold )

you tell me about these the generation welfare recipients , but have you stayed with them for some time , ( without being shocked into blindness ) , they are educational in their own way and give you a great insight into current governments and the public service

not being an economist is probably to your advantage ( and considering most mainstream economic predictions your guess is just as likely to be correct .. the difference is you didn't need to study an extra 6 plus years to formulate that opinion

modeling ?? if you have no money in your pocket .. how much can you buy ( currently up to your credit limit )

now IF there is a credit crisis ( which arguably happened in September 2019 ) and still no cash in the pocket ??

this isn't rocket science , the compounding factor is built in obsolescent in many products ( some products self-destruct after say 3 or 5 years ) so the risk is some products will fail ( even sitting on the shelf ) and there is some chance some people will not be able to replace them ( without resorting to theft )

yep UBI sounds like the solution UNTIL government realizes it has relaxed it's grip on control ( bring in Central Bank digital currency so the government gets both hands on control , now you can even de-bank folks at whim , and have the old Soviet ' non-person' sledge-hammer to wield

AND GUESS WHAT , real productivity ( outside of criminal activity ) will slide and slide , no incentive to work hard to get a safety buffer , the laziest bastard gets the same as you ( or even promoted i have seen that as well )

it's a harsh world out there outside the ivory towers

I think productivity would increase because more people will stop being dependent and go participate in the workforce at varying levels of contribution. If it's just easier not to work and still get your needs met then why work??

 

[divs4ever]

There has been a run of men getting killed on the job sites recently, I do not know the details of every accident but it pushes me in favour that correct supervision and processes should be mandatory and industry should not be allowed to skimp on safety to increase profits.

No man or woman (they are almost exclusively men tho) should have to die in the workplace for just doing their job.

there is ALWAYS risk doing your job , blood clots and heart attacks for the office worker , the obvious ones for the blue-collar folk

one trend i noticed ( while i was still working ) was all these safety lectures tend lull the worker into a false sense of security

sometimes the BEST safety is worker self-awareness ( on what COULD happen on that site )

for instance in computer server rooms , the first thing i do is check the fire suppression units , if they are de-activated ( because most kill more than just fires ) and IF the system fails ( while folk are in there ) what chance of saving one or more co-workers ( the answer is USUALLY zero but have been delighted to find a couple of potential escape opportunities ) the NEXT thing to watch for is damage to the power cabling , 4000v DC has it's own dangers , 'cos those bloody rats can be found anywhere .

and NO the site induction is more worried about security and you being trapped in a cool environment for hours , causing some embarrassing paperwork

and distressingly safety measures get diluted all the time ( often the funding is eroded by pointless safety lectures and site inductions )

so you get six-monthly lectures but a first-aid kit that isn't worth the walk to get it

 

[sptrawler]

If it's just easier not to work and still get your needs met then why work??

That is the principal my youngest son works on.

 

[divs4ever]

I think productivity would increase because more people will stop being dependent and go participate in the workforce at varying levels of contribution. If it's just easier not to work and still get your needs met then why work??

there still needs to be something PRODUCTIVE for them to do ,

go back and study Aboriginal Culture , one expert calculated that the Aboriginal only needed six hours of effort a day , to survive/thrive

now sure i like some of the modern benefits , BUT the Aboriginal lifestyle had it's own integrated wisdom ,only harvest so much food and move on ( and come back in a few years as one example ) ( let the land recover naturally ) keep the population low and remove food pressure , as another

goodness knows what other lessons could have been learned before we destroyed their culture

 

[divs4ever]

That is the principal my youngest son works on.

it could be worse .. he could be addicted to academia ( and cost the taxpayers many times that much )

 

[sptrawler]

there still needs to be something PRODUCTIVE for them to do ,

go back and study Aboriginal Culture , one expert calculated that the Aboriginal only needed six hours of effort a day , to survive/thrive

now sure i like some of the modern benefits , BUT the Aboriginal lifestyle had it's own integrated wisdom ,only harvest so much food and move on ( and come back in a few years as one example ) ( let the land recover naturally ) keep the population low and remove food pressure , as another

goodness knows what other lessons could have been learned before we destroyed their culture

It certainly was a clash of cultures, from different ends of the spectrum, hunter gatherers as opposed to settlers both require the same land for different purposes.

 

[Smurf1976]

I have two websites I have been watching for the past couple of years that track which fuels are being used for electricity production, and I have noticed since the Liddell coal plant began its shutdown a month or so ago the use of gas has stepped up quite a bit.

Do you think that this plant closure is causing the the higher usage/prices?

Short answer is the whole energy industry has seen an extended period of underinvestment and that's global not simply local.

In more detail what's basically happened, in sequence is:

International LNG price soared. Note this happened prior to the Russia - Ukraine war and comes down to insufficient supply globally although obviously the war's adding to it.

That opened up a large discrepancy between Australian domestic market gas prices and the export value of LNG, thus leading to the Qld LNG plants running flat out and buying gas on the market in order to run LNG production at maximum. For reference, the ACCC's latest estimate of the value of exported gas is $38.09 per GJ whereas at the start of this calendar year, domestic market prices were circa $10. So a huge incentive to export even if that requires buying gas on the Australian spot market in order to do so.

International thermal coal price soared and is presently at about $19 per GJ equivalent. That's the price for exportable black coal, noting that some Australian power stations are heavily exposed to that, since they're using coal that's physically able to be loaded onto a ship as an alternative market, whilst are either using off-spec low grade coal of no real value or they have a "captive" supplier - there's no rail line that would enable export from the mine. It varies but for those that are exposed, well even if they've got a pile of coal sitting there they'll value that based on replacement cost in terms of operating decisions.

Coal at $19 per GJ whereas until recently Australian domestic market gas was cheaper. That has driven a partial switch from coal to gas for power generation, noting the complexity that doing so often involves a different company doing it (since not all owners of coal-fired generation also own gas-fired generation and vice versa).

Meanwhile we have declining gas production capacity, that is maximum flow rate in layman's terms, in both Victoria and SA.

Meanwhile the diesel price has shot up due to international factors. Not of immediate direct relevance to the Australian domestic situation but it does raise the maximum that someone would pay for gas. That is, if you've got the option to switch the plant to burn diesel well then the diesel price going up raises the price point at which that switching makes sense, thus raising the price you'd be willing to pay for gas.

All of that basically created a situation just waiting for something to set it off. Just needed physical consumption of gas in the Australian domestic market + maximum exports to exceed available supply and all of a sudden price would be sharply increased.

That trigger, of course, is simply the weather. Victoria has a large population in Australian terms and the majority of buildings, both residential and commercial, are heated with gas. Once the weather cooled, up went the price on the spot market.

From a financial perspective it all comes back to the overall tightness of supply for all forms of energy.

If coal wasn't so scarce and crazily priced then there'd be more enthusiasm to burn it. It certainly can't replace all gas use but a bit more could be used yes.

If oil and thus diesel wasn't so expensive then to some extent that could be used as a substitute by industry and power generation.

If LNG wasn't so expensive on international markets then there wouldn't be the incentive to run exports flat out.

But when they're all in short supply globally, when they're all expensive, well it's a bit of a tail chasing game really.

Same's underway in the US now too. Latest gas price there is $7.98 whereas same time last year it was just under $3. Noting different units of measurement and different currency, that $7.98 is equivalent to $10.65 per GJ in AUD. So gas in the US is still cheap but the same basic pattern is unfolding, the cheapness of US gas relative to coal is prompting an aggressive switch to gas for power generation, industry etc and the cheapness of US gas relative to international is prompting export facilities to run flat out. Same basic pattern there.

As for Liddell, well it has contributed in a minor way, closure of a quarter of the plant has lowered the maximum ability to use coal, but really it's only one of the many factors and not the major one. It's not zero but it's not the main cause.

I've intentionally avoided any mention of politics and have stuck to economics but what I will note there is that energy has been an extremely contentious subject in Australian politics for more than a decade now and I suspect this price shock will change that debate to some extent. There's quite a few in very high places who seemingly weren't expecting this....

 

[3 hound]

That is the principal my youngest son works on.

Well you can't fault his logic.

 

[3 hound]

there still needs to be something PRODUCTIVE for them to do ,

go back and study Aboriginal Culture , one expert calculated that the Aboriginal only needed six hours of effort a day , to survive/thrive

now sure i like some of the modern benefits , BUT the Aboriginal lifestyle had it's own integrated wisdom ,only harvest so much food and move on ( and come back in a few years as one example ) ( let the land recover naturally ) keep the population low and remove food pressure , as another

goodness knows what other lessons could have been learned before we destroyed their culture

Stupidest thing I ever heard of you are proposing a hunter gather lifestyle is going to be a solution for modern populations.

Sounds like weed talk.

 

[divs4ever]

It certainly was a clash of cultures, from different ends of the spectrum, hunter gatherers as opposed to settlers both require the same land for different purposes.

we MIGHT have to have some of the population go back to a hunter-gather lifestyle ( shame a lot of that local knowledge was lost )

 

[Smurf1976]

There has been a run of men getting killed on the job sites recently, I do not know the details of every accident but it pushes me in favour that correct supervision and processes should be mandatory and industry should not be allowed to skimp on safety to increase profits.

That's not the kind of supervision I'm referring to.....

If it was about safety then I'd be all for it.

 

[divs4ever]

Stupidest thing I ever heard of you are proposing a hunter gather lifestyle is going to be a solution for modern populations.

Sounds like weed talk.

well the US call them preppers and survivalists , and they are starting to trend

option B. would be to have those malcontents still circulating in your society ( helping the disharmony )

this thread has wandered onto the subject of non-contributing members in the community

BTW i have prescribed medications that you probably should not drive with ( even a mobility scooter )

i think the weed gets too much credit for non-conventional thinking

 

[divs4ever]

That's not the kind of supervision I'm referring to.....

If it was about safety then I'd be all for it.

sadly , there seems to be a new way ( every day ) for a worker to get killed or maimed at work

however SOME accidents could have been prevented , and we should strive to avoid those accidents in the future

i would LOVE to see the statistics on workers injured going to or from work , before and during the 'work from home era '

and maybe the home-injuries during working hours v. office injuries as well

( maybe insurance premium adjustments need to be made )

 

[over9k]

 

[over9k]

No idea how much this has to do with the futures looking like this but I suspect it's quite a bit:




Hence this:



But it's only hungary that's skewering (All EU members have veto power) the sanctions and apparently there's some pretty big stuff in the works reference getting ukraine's power grid connected to the EU's and so obviously eastern europe is a stepping stone to that happening.

So long story short, it's not a "no" to the rest of the sanctions, it's a "not yet". Should therefore be another buy opportunity tonight.

These sanctions being stalled obviously puts a pretty serious damper on energy (and therefore everything else) inflation which is probably why we now see the NDX futures running the hardest.


Remember that sanctions = energy inflation = everything else inflation.

 

[waterbottle]

View attachment 141446

No idea how much this has to do with the futures looking like this but I suspect it's quite a bit:

View attachment 141447
View attachment 141449

Hence this:

View attachment 141448

But it's only hungary that's skewering (All EU members have veto power) the sanctions and apparently there's some pretty big stuff in the works reference getting ukraine's power grid connected to the EU's and so obviously eastern europe is a stepping stone to that happening.

So long story short, it's not a "no" to the rest of the sanctions, it's a "not yet". Should therefore be another buy opportunity tonight.

These sanctions being stalled obviously puts a pretty serious damper on energy (and therefore everything else) inflation which is probably why we now see the NDX futures running the hardest.


Remember that sanctions = energy inflation = everything else inflation.

Agreed.
This has been my thesis since the start of the Russo - Ukraine war, and it's what the Fed see as one of the drivers of inflation at present - the other two being rolling China lockdowns and supply disruptions.

There is a political burden that EU countries will have to carry should they ban Russian oil - that is, their economies will crumble (see UK inflation rate predicted at 10% with energy inflation accounting for 40%). Furthermore, it makes no sense from a security standpoint to further ostracise Russia, forcing it to also crumble and lash out - this starts to read like the pretext for Japan's oil embargo in the pacific and all that entailed thereafter. I would hope that EU politicians are wise enough to appreciate that and put the issue of an oil ban to rest.
In addition, the US is seeking alternative oil suppliers. When, whom, and how is yet to be detailed.
Finally, the Russo-Ukraine conflict will end at some point, either with Ukraine ceding (likely) or the war being extended due to other parties becoming involved (unlikely, although 2 out of 2 world wars have been initiated courtesy of Europe).

The China lockdown should have a predictable outcome. All lockdown end eventually, as we've seen over the past 2 years, either due to political fatigue or due to the illness running its natural course. Taking the Australian experience (where lo kdowns weren't anywhere near as harsh), then a 2-6 month lockdown could be expected. This would coincide nicely with Xi's attempts at "re-election" for another 5 year term in October 2022 the CCP's 20th National Congress.
If he doesn't get re elected, then expect a whole bunch of volatility as we recalculate East-West relations.

And finally, supply chain issues. I'm not too familiar with what the actual driver is - it seems to be ambiguous and no one seems to pinpoint what the actual problem is. Regardless, one would expect an improvement as demand gets smacked down with rising interest rates.

I think the the fundamentals behind this thesis are still valid and it's why I believe we will see inflation fall once oil prices are stabilised, China is out of lockdown and supply issues are resolved. Neither issue seems like a permanent, fundamental shift to the economy, so the talk regarding hyperinflation and economic armageddon does not make any sense to me.

What I didn't expect was the volatility that drove through my portfolio over the past 2 weeks. The NASDAQ has had three almost 5% down days which is insane - the last time I saw something like that was in 2008 when the entire financial system was staring down the barrel of complete collapse. That isn't the case this time around. One could argue that we had that moment in 2020 when economies were literally shut down overnight.

Any thoughts? Are glasses too rose-tinted?

 

[over9k]

Are you aware of this:

https://www.wsj.com/articles/house-to-vote-on-nearly-40-billion-ukraine-aid-package-11652124769

"House Speaker Nancy Pelosi said U.S. lawmakers are aware of the urgency of approving a proposed $33 billion aid package for Ukraine, though she stopped short of predicting when Congress might pass it.

“I think we will be able to do it as quickly as possible,” Pelosi said on CBS’s “Face the Nation” on Sunday. “We are very current on the needs and the urgency and, again, we will have bipartisanship as we go forward with it.”

Asked if Congress would pass the package this month, she said, “I think we have to.”


Apparently the ukrainians are actually in with a very very good shot of stopping the russians - the russians have underperformed massively and the ukrainians have overperformed massively and the javelins that they did have have been an absolute godsend.

With a metric boatload of arms now essentially already on their way and another $33 billion worth soon to be approved (already en route, just not approved for final step of delivery) including literally thousands of javelins, the ruski's are in quite the jam.

If they can get the EU's power connected to ukraine that'll knock out another strategic option the russians had there too.

Apparently the final piece of the puzzle is that there's just one bridge from the crimea over to mainland ukraine that the russians are using so if the ukrainians can knock that out they'll stop their southern invasion almost cold.

Have a listen to this from the 31.30 to the 40.30 point:

 

[waterbottle]

Yep, it's a proxy war. Might turn out to be similar to Israel v. Arabs (where cash + technology overwhelms poor strategy + numbers).
Not sure if that'd be a good outcome for anyone...

 

[waterbottle]

10 year bond down 4%, now below 3... GDPNow figures from US Atlanta Fed estimate 2nd Qtr GDP at 1.8% (compared to -1.4% prior) which is a farcry from the inflationary 4+% GDP we were getting in 2021. WTF is going on. All eyes on inflation numbers tomorrow!