Menu
Sister Sites

  • What if soaring rates don't kill inflation? Central banks may be about to blow up the economy

    From abc.net.au

    They are the pivotal moments, the personal turning points that changed most of our lives. The adventure that could have been, the job that was turned down or the chance encounter with someone from the other side of the planet that took you down a completely unexpected path. Sometimes the choices are compulsive and immediate. Other times they're based upon long and difficult decisions. And occasionally, we make mistakes. They're often the "what if?" moments. But what if those "what if?" moments affect entire nations? What if the decisions those in control are making are based upon a mistake or a misinterpretation? ... (full story)

Well it kinda caused inflation by making things expensive.
Trading is gambling. So gamble responsibly.
What if we shoot your ass in the sky and it will never return on Earth ?
What if gravity won't respond ?
...you ABC dumb financial illiterates look bored, huh!
Member
Quoting TudorIoan
What if we shoot your ass in the sky and it will never return on Earth ? What if gravity won't respond ? ...you ABC dumb financial illiterates look bored, huh!
Haters gonna hate.

Stop. Seek help
Trading is gambling. So gamble responsibly.
Quoting Sovy
{quote} Haters gonna hate. Stop. Seek help
...and stups are gonna stup around!
I wasn't addressing to you, Momo! It's ABC.net.au there. But thanks for your attention!
Stop. Stop being a megalomaniac! It's not all about you!
Seek... just get a fkn life!
Member
At last some candid thinking from a Central Banker
Quote
US Federal Reserve chief Jerome Powell summed it up succinctly a few weeks back with this pithy quote.
"I think we now understand better how little we understand about inflation," he said in a rare moment of clarity.
What a guy!

A while back some economist wrote that "inflation is when there is too much money chasing too few goods" .. or something like that, a reflection upon the effects of opulence. This has resulted in Central Banks attempting to control inflation by messing with the supply of money. However nobody seems to have questioned whether that expression of inflation was a truth or merely an aberration of the method of observation.

Now we have inflation (in the UK at least) caused by too few goods which are needed by all members of the population. Market forces of supply and demand have therefore pushed pricing with a great energy. The pain begins ... and the Central Banks are there to make sure almost everybody experiences their share.

So what about this NAIRU farce?
Quote
It was adopted globally and central banks still adhere to that idea, that we need to have a pool of unemployed to keep consumer prices in check. So they're not castigated for being heartless bureaucrats, they gave it an unassuming title.
It's called the Non-Accelerating Inflation Rate of Unemployment (the NAIRU) although, in true form, no-one can definitively pinpoint the required unemployment rate.
Did anybody look at Japan? For many years the Japanese unemployment rate has been enviably low, and their inflation rate has been ... negative! (IIRC), or very close to that.

Of course that had nothing to do with a thriving Japanese economy, national budget surplus and a persistently appreciating value of the ¥en.
Carbon-Dioxide: the gas of life!
Quoting Exodus
At last some candid thinking from a Central Banker {quote} What a guy! A while back some economist wrote that "inflation is when there is too much money chasing too few goods" .. or something like that, a reflection upon the effects of opulence. This has resulted in Central Banks attempting to control inflation by messing with the supply of money. However nobody seems to have questioned whether that expression of inflation was a truth or merely an aberration of the method of observation. Now we have inflation (in the UK at least)...
I wonder if this is so because the japanese love anime and manga.
Trading is gambling. So gamble responsibly.
Quoting Sovy
{quote} I wonder if this is so because the japanese love anime and manga.
No... it is because they had a massive stock market and asset-value crash in the 90s ... rather like the one we all had in 2008, but theirs was worse.
Carbon-Dioxide: the gas of life!
Quoting Exodus
At last some candid thinking from a Central Banker {quote} What a guy! A while back some economist wrote that "inflation is when there is too much money chasing too few goods" .. or something like that, a reflection upon the effects of opulence. This has resulted in Central Banks attempting to control inflation by messing with the supply of money. However nobody seems to have questioned whether that expression of inflation was a truth or merely an aberration of the method of observation. Now we have inflation (in the UK at least)...
You don't think the Uk housing market is over-inflated & over-leveraged
due to printing money and forcing rates down, then?
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot 2023-07-11 at 14.43.43.png Size: 28 KB
#doyourownanalysisordietryin
Quoting Bones
{quote} You don't think the Uk housing market is over-inflated & over-leveraged due to printing money and forcing rates down, then? {image}
Yes, the UK housing market is expensive. However the owner-occupier ratio is back to where it was pre-Thatcher, I read that recently but can't remember where. The high price of housing is due to the general shortage of housing, but that has little to do with the current inflation episode which is driven by huge increases in the price of energy.
Carbon-Dioxide: the gas of life!
Quoting Exodus
{quote} Yes, the UK housing market is expensive. However the owner-occupier ratio is back to where it was pre-Thatcher, I read that recently but can't remember where. The high price of housing is due to the general shortage of housing, but that has little to do with the current inflation episode which is driven by huge increases in the price of energy.
I'm surprised you are using that metric to describe a healthy market; no idea if its right.
What high house prices don't drive the cost of living inflation?
The UK housing market (and rent) is about to tank from over 9/12xwage. Homes went to that leverage because of all the liquidity in search of a safe bet.
Energy, then food, then wages, you can keep chasing the reason. How about too much money? Chasing too few goods. (homes). If they let it, inflation will stop showing up when there's a balance.
Attached Image(s) (click to enlarge)
Click to Enlarge Name: Screenshot 2023-07-12 at 07.41.18.png Size: 359 KB
Click to Enlarge Name: Screenshot 2023-07-12 at 08.10.08.png Size: 100 KB
#doyourownanalysisordietryin
The free market doesn't care who caused the inflation.
If inflation ran at over 8%, longer rates WOULD go above that level with or without the BoE.
The only way to stop it is to print more money.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot 2023-07-12 at 08.20.41.png Size: 36 KB
#doyourownanalysisordietryin
Well....
Quoting Bones
{quote}I'm surprised you are using that metric to describe a healthy market; no idea if its right. What high house prices don't drive the cost of living inflation?
Achieved house prices are only just starting to fall, prior to now there has been a reduction in sales volumes. So I guess we shall see in the near future.

Quote
The UK housing market (and rent) is about to tank from over 9/12xwage. Homes went to that leverage because of all the liquidity in search of a safe bet.
I believe that is an aberration from the support provided after the 2008 financial disaster. I never saw a list, nor even a categorisation, of zombie companies but that is exactly what Marc Carney was propping up and it has continued under Andrew Bailey. Now that the MPC has shifted its attention we shall see how many companies were in that list. Thames Water perhaps..? This morning I heard a business analysts say that the overall result is good for business because the collapse creates opportunities for well managed businesses and also frees some labour.

Quote
Energy, then food, then wages, you can keep chasing the reason. How about too much money? Chasing too few goods. (homes). If they let it, inflation will stop showing up when there's a balance. {image} {image}
The public are no longer chasing homes in the way they used to, although they may still have aspirations in that vein. Renters are stuck in a situation where it is impossible to escape renting and move to home purchase. A part of that situation is the British 'system' but that has now been enhanced by the fact that people need more money to live than they are earning. The number of people using credit cards to make ends meet covering subsistence costs is worrying.

That is an interesting statistic revealing that the over-50s own 78% of private housing.
Carbon-Dioxide: the gas of life!
Quoting Bones
The free market doesn't care who caused the inflation. If inflation ran at over 8%, longer rates WOULD go above that level with or without the BoE. The only way to stop it is to print more money. {image}
You can't have it both ways. Either printing money (2009 - 2021) caused this inflation or it will be the solution to inflation. Somehow I don't believe that printing money right now is the answer unless one considers inflation to be a 'seasonal' artefact and could therefore be ignored. History suggests that printing more money right now would be disastrous.

Incidentally are you 'Bones' on TradingView ?
Carbon-Dioxide: the gas of life!
Shelter is a basic need. Seems like families need to home or rent pooling now
Trading is gambling. So gamble responsibly.
Quoting Exodus
{quote} You can't have it both ways. Either printing money (2009 - 2021) caused this inflation or it will be the solution to inflation. Somehow I don't believe that printing money right now is the answer unless one considers inflation to be a 'seasonal' artefact and could therefore be ignored. History suggests that printing more money right now would be disastrous. Incidentally are you 'Bones' on TradingView ?
I can have it both ways when they print the money they buy up all the debt, right up to making it worth 0%.
Then the Bond market isn't a free market at all.
Not all QE is equal; it depends on what they do with money.
From 2009-2020 most of the money/liquidity was trapped in the financial economy.
In 2020 the money was dropped directly into the real economy.
No Im not on trading view, but I use it some charts.
#doyourownanalysisordietryin
Quoting Exodus
Well.... {quote} Achieved house prices are only just starting to fall, prior to now there has been a reduction in sales volumes. So I guess we shall see in the near future. {quote} I believe that is an aberration from the support provided after the 2008 financial disaster. I never saw a list, nor even a categorisation, of zombie companies but that is exactly what Marc Carney was propping up and it has continued under Andrew Bailey. Now that the MPC has shifted its attention we shall see how many companies were in that list. Thames Water perhaps..?...
UK house sold price data has at least a 6/7-month lag, ONS sold data has a huge backlog, and Rightmove twist the data reporting asking prices of newly listed. All the reports are a fraction of the market and require close inspection of what they are.
Mortgage cost just went up from <2%->6%. That's a 60%+ increase for a large majority rolling off a fix this year by normalising rates to the long-term average.
#doyourownanalysisordietryin
Quoting Bones
{quote} UK house sold price data has at least a 6/7-month lag, ONS sold data has a huge backlog, and Rightmove twist the data reporting asking prices of newly listed. All the reports are a fraction of the market and require close inspection of what they are. Mortgage cost just went up from <2%->6%. That's a 60%+ increase for a large majority rolling off a fix this year by normalising rates to the long-term average.
Agreed
Rightmove numbers are wishful thinking, although the website reveals an increasing number of unsold properties whose asking price has been reduced.
Today's RICS data is more revealing.

Something like 75% of UK mortgages are on a fixed rate so BoE rate movements do not immediately affect them. However the 'fixed period' is either 2 or 5 years, and those whose 2 year fix is expiring are going to see around a 40% increase in mortgage costs, more if your earlier rate was below 2.5%. The pain has just started.
Carbon-Dioxide: the gas of life!
Quoting Exodus
{quote} Agreed Rightmove numbers are wishful thinking, although the website reveals an increasing number of unsold properties whose asking price has been reduced. Today's RICS data is more revealing. Something like 75% of UK mortgages are on a fixed rate so BoE rate movements do not immediately affect them. However the 'fixed period' is either 2 or 5 years, and those whose 2 year fix is expiring are going to see around a 40% increase in mortgage costs, more if your earlier rate was below 2.5%. The pain has just started.
From Sept onwards, were be comparing from the peak rather than a lower number on the headline. I'm expecting it to speed up then.
The headlines will get bigger.
House prices are set on the margins; all you need is some forced sellers rocking up to tank it.
or non-existent first-time buyers
Attached Image(s) (click to enlarge)
Click to Enlarge Name: Screenshot 2023-07-06 at 12.11.23.png Size: 37 KB
Click to Enlarge Name: Screenshot 2023-07-13 at 17.49.04.png Size: 22 KB
#doyourownanalysisordietryin
  • New Comment
  •  Guest
  • | IP X.XX.4.147
Join FF
  • Story Stats
  • Posted: Jul 11, 2023 2:10am
  • Submitted by:
     Newsstand
    Category: Fundamental Analysis
    Comments: 18  /  Views: 5,672
  • Linked event:

  • Related Stories