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Buy the dip.

Danishfurniturelover said:
https://www.neweurope.eu/article/lurking-in-the-shadows-the-source-of-the-next-financial-crisis/

I have been reading more and more articles on shadow banking. Feels like the start of something.
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The issue is, regulators who are paid a lot less, are always 5 steps behind the clever sods who come up with new ways to chop up and sell financial products. One loophole/potential for failure is closed and 5 more replace it.

An interesting (separate) question is how world governments take back all the excess cash they printed without slowing the economy. And how they dabble with inflation to reduce the debt burden. Will they be playing with fire or will it be prudent economic management?
 
SpurMeUp said:
An interesting (separate) question is how world governments take back all the excess cash they printed without slowing the economy. And how they dabble with inflation to reduce the debt burden. Will they be playing with fire or will it be prudent economic management?
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They're not going to get much if it back anyway. A debt jubilee would be a sensible approach (not palatable for some) based on the hole being so effing massive now it's nigh on impossible to see daylight again.
Inflating it away (well and truly taking off as we speak) is an option but if we need to keep a lid on it with interest rate rises, that crushes a whole load as of other people and a life of misery. The proverbial rock and hard place.

Fwiw this inflationary period might be a shortish burst as pent up demand and stored up money from lockdown floods out.
 
ricky2tricky4city said:
They're not going to get much if it back anyway. A debt jubilee would be a sensible approach (not palatable for some) based on the hole being so effing massive now it's nigh on impossible to see daylight again.
Inflating it away (well and truly taking off as we speak) is an option but if we need to keep a lid on it with interest rate rises, that crushes a whole load as of other people and a life of misery. The proverbial rock and hard place.

Fwiw this inflationary period might be a shortish burst as pent up demand and stored up money from lockdown floods out.
Click to expand...
I hear a lot of people talk about various methods to just wipe out debt like this.

Unfortunately it's not the government's money to wipe out, it's that of investors. Much of what's been given out came from bonds held by individuals and pension funds. Probably not so bad for Greece or Belarus, but that would ruin the rating of any country doing so.
 
ricky2tricky4city said:
They're not going to get much if it back anyway. A debt jubilee would be a sensible approach (not palatable for some) based on the hole being so effing massive now it's nigh on impossible to see daylight again.
Inflating it away (well and truly taking off as we speak) is an option but if we need to keep a lid on it with interest rate rises, that crushes a whole load as of other people and a life of misery. The proverbial rock and hard place.

Fwiw this inflationary period might be a shortish burst as pent up demand and stored up money from lockdown floods out.
Click to expand...

Essentially, people with savings or cash, pay off the debt as all money becomes worth less? I think central banks are going to aim for slightly higher inflation. Governments may well leave some of the excess cash they printed sloshing about to encourage inflation? Isn't the UK inflation target about 2%. Can see the Bank of England upping this target over the next few years to 1. keep the economy stimulated aiding employment as layoffs occur and 2. help to reduce the debt and 3. reduce the cost of borrowing in bond markets - as they print cash to buy bonds. But is this sound? You only have to look at African nations to see that inflation and unemployment can co-exist if too much money is printed.

Why didn't Japan print money when it suffered stagflation? I need to sit an economics 101 course!
 
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scaramanga said:
I hear a lot of people talk about various methods to just wipe out debt like this.

Unfortunately it's not the government's money to wipe out, it's that of investors. Much of what's been given out came from bonds held by individuals and pension funds. Probably not so bad for Greece or Belarus, but that would ruin the rating of any country doing so.
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Here's an interesting thought, because of QE (printing money), which the government spent on bonds, certainly some of the debt is both issued to and owned by the government. If it wasn't the government but say companies circular lending, then you'd call it an accounting scam!
 
Danishfurniturelover said:
What investments are people making to protect themselves from inflation?
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Traditionally its infrastructure and food. Electricity, water etc. things that people can not do with out. But maybe wise to move away from stocks altogether next year and buy gold or property, as central banks unwind QE. QE has pushed up asset prices, they will correct at some point, and if the central banks start taking money out of the economy again, then it is logical that asset prices will go back down. Truth is no one knows right! Maybe there is a magic money tree :rolleyes:
 
Favour said:
Platinum.
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In what form though? Actually the commodity or stocks in it.

I am hearing that copper is going to be important over the next few years. Just not sure how to invest in it.

The guys over on the freetrade forum are pretty good. I am still in 2 minds about it all.
 
SpurMeUp said:
Essentially, people with savings or cash, pay off the debt as all money becomes worth less? I think central banks are going to aim for slightly higher inflation. Governments may well leave some of the excess cash they printed sloshing about to encourage inflation? Isn't the UK inflation target about 2%. Can see the Bank of England upping this target over the next few years to 1. keep the economy stimulated aiding employment as layoffs occur and 2. help to reduce the debt and 3. reduce the cost of borrowing in bond markets - as they print cash to buy bonds. But is this sound? You only have to look at African nations to see that inflation and unemployment can co-exist if too much money is printed.

Why didn't Japan print money when it suffered stagflation? I need to sit an economics 101 course!
Click to expand...
They won't need to encourage it, logic would dictate its here or on its way (although I have predicted it various times over the years, with no luck:D). Massive sums of that money (QE) has been dished out, the difference this time is it's gone directly into pockets of businesses, self employed, employees etc NOT placed with institutions to sit on or inflate asset bubbles with.

The other side of the coin is interest rates. So much of the government and private borrowing is possible (feasible) due to the rock bottom interest rates. Thing is, they have to stay that way or a whole load of debt goes underwater.
 
scaramanga said:
I hear a lot of people talk about various methods to just wipe out debt like this.

Unfortunately it's not the government's money to wipe out, it's that of investors. Much of what's been given out came from bonds held by individuals and pension funds. Probably not so bad for Greece or Belarus, but that would ruin the rating of any country doing so.
Click to expand...

It is these days.
Much much larger percentages of QE from 2008-9 and the Covid borrowing has simply been bought by the BofE, (gov gilts and bonds)its a never ending policy. They are even following in the footsteps of the Fed and spending billions on corporate bonds :rolleyes:

And don't be surprised if much larger economies, beyond fringe basket case economies that you quote, are staring down the barrel in the next 10years. That's why drastic collective action/ideas might be necessary.
 
ricky2tricky4city said:
They won't need to encourage it, logic would dictate its here or on its way (although I have predicted it various times over the years, with no luck:D). Massive sums of that money (QE) has been dished out, the difference this time is it's gone directly into pockets of businesses, self employed, employees etc NOT placed with institutions to sit on or inflate asset bubbles with.

The other side of the coin is interest rates. So much of the government and private borrowing is possible (feasible) due to the rock bottom interest rates. Thing is, they have to stay that way or a whole load of debt goes underwater.
Click to expand...

I think the BoE also bought something like £800B of bonds in 2020, not with real money, but by typing in a digital number and magicking money out of thin air. This was used to buy up bonds to reduce yields/interest rates, keeping borrowing cheap.

We’re not alone. All nations with strong currencies have done similar things. Japans central bank own 47% appx of government debt, the Dutch and the UK are 2nd and 3rd with around 35%.

In theory the BoE is separate from government. Yet no one really believes this. They should be working with government especially now. So you have a situation where we are buying up our own debt. This has been going on for a decade or more since the financial crisis, tho I think 2020 might have been the most QE yet? How it plays out is anyone’s guess. Probably only strong inflation will cause developed nations central banks to unwind their positions. None want to go first as it will cause their currency to fall short term - at the moment. I guess we’ll wait to see what the end of furlough does to employment before changing anything.


Sitting on my porcelain throne using glory-glory.co.uk mobile app
 
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SpurMeUp said:
I think the BoE also bought something like £800B of bonds in 2020, not with real money, but by typing in a digital number and magicking money out of thin air. This was used to buy up bonds to reduce yields/interest rates, keeping borrowing cheap.

We’re not alone. All nations with strong currencies have done similar things. Japans central bank own 47% appx of government debt, the Dutch and the UK are 2nd and 3rd with around 35%.

In theory the BoE is separate from government. Yet no one really believes this. They should be working with government especially now. So you have a situation where we are buying up our own debt. This has been going on for a decade or more since the financial crisis, tho I think 2020 might have been the most QE yet? How it plays out is anyone’s guess. Probably only strong inflation will cause developed nations central banks to unwind their positions. None want to go first as it will cause their currency to fall short term - at the moment. I guess we’ll wait to see what the end of furlough does to employment before changing anything.


Sitting on my porcelain throne using glory-glory.co.uk mobile app
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It's all MMT...which is handily the modern theory of basically living beyond your means and not worrying about it as we can just create money out of thin air and keep piling up the debt.

Ironically we need it, as we are past the point of any traditional rebalancing. Infinite loop.

State banks and governments are closer than ever, and of course, they have the perfect excuse to be, with a pandemic and all.

Inflation is a worry as only raising interest rates can keep a lid on it, and much of the world is leveraged to f.ck.
 
ricky2tricky4city said:
It's all MMT...which is handily the modern theory of basically living beyond your means and not worrying about it as we can just create money out of thin air and keep piling up the debt.

Ironically we need it, as we are past the point of any traditional rebalancing. Infinite loop.

State banks and governments are closer than ever, and of course, they have the perfect excuse to be, with a pandemic and all.

Inflation is a worry as only raising interest rates can keep a lid on it, and much of the world is leveraged to f.ck.
Click to expand...

Maybe taking out money from the economy - quantitative repayment as it were - can also reduce inflation. It is all pretty new. Ultimately, it is peoples labour and hard work that keeps the economy going. Printing money and other interventions just help to keep confidence and liquidity. But how far central banks can push it is quite interesting. We know what happens to less strong currencies when they print money. There are limits.
 
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What happens to the power of some currencies when digital ones come along? I mean at the moment the US can monitor the SWIFT payments system and apply dollar sanctions. If China just create their own currency and use their influence to get adoption then their sanctions won't do much and they won't be able to see the money trail either. The dollar could slowly erode, with the amount they print if other countries drop it or oil starts to get priced in another currency it could be in real trouble.
 
P.D. said:
What happens to the power of some currencies when digital ones come along? I mean at the moment the US can monitor the SWIFT payments system and apply dollar sanctions. If China just create their own currency and use their influence to get adoption then their sanctions won't do much and they won't be able to see the money trail either. The dollar could slowly erode, with the amount they print if other countries drop it or oil starts to get priced in another currency it could be in real trouble.
Click to expand...

I imagine some South American countries would happily drop the dollar. If the Chinese drop a road and belt thing in it will be even more a cert.
 
SpurMeUp said:
Maybe taking out money from the economy - quantitative repayment as it were - can also reduce inflation. It is all pretty new. Ultimately, it is peoples labour and hard work that keeps the economy going. Printing money and other interventions just help to keep confidence and liquidity. But how far central banks can push it is quite interesting. We know what happens to less strong currencies when they print money. There are limits.
Click to expand...
The problem is (this time round) the money has been spent or being spent. You are effectively borrowing money from the future to pay for today. That's why people float the idea of debt jubilees or rounds of debt forgiveness as we are in a never ending cycle and how do we break it?. (beyond reenaming it and pretend it the new norm and modern way:rolleyes:).

Labour and hard work is the economy and that should be what creates value and increases wealth. Just as manufacturing takes the lower cost raw material adds process and skill and sells it for a higher price. So many modern areas of the economy don't do that, it's money out of thin air practice, and much of that has lead to capitalism at it worst. It's made a whole lot of the rich richer and greed and manipulation has got us in some very big holes.

Printing money just helps the whole thing from caving in. There's no value there it just paper (in fact it's devaluing) This is at full reach now, from the man in the street, to zombie businesses to governments. The truth is no-one wants to take any pain, we are way past the point where it would have been palatable, and from a political point of view, if the man on the street thinks he's working hard (even if he's indebted), don't take his home, his job etc he will focus his blame and rage on you (obviously it's just as likely to be his own fault:D), so you do what you can (ie the same old tool) to keep things turning.
 
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