Are we heading into deleveraging?

Discussion in 'Markets & Economies' started by willrocks, May 16, 2020.

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Are we heading into deleveraging?

  1. Yes, there will be deleveraging and deflation

    16 vote(s)
    76.2%
  2. No, there won't be deleveraging

    5 vote(s)
    23.8%
  1. willrocks

    willrocks Well-Known Member Silver Stacker

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    So you're saying those numbers won't drop over the next 24 months?
     
  2. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Are you saying those prices are the peak over the next 24 months?
     
  3. willrocks

    willrocks Well-Known Member Silver Stacker

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    Are you answering my question with a question?
     
  4. President Trump

    President Trump Active Member Silver Stacker

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    The answer is we will get both. While the printing presses work to make people and companies feel better off you can't get deflation. There are 2 feel good stages to this money printing fairlytail, first the CBs lend into the banking system. This feels good, who doesn't like cheap loans. But even with lax lending standards, eventually banks wont lend these funds on because companies will have too much existing debt to borrow even more. They become an insolvency risk. In the second stage the CBs buy government debt and the government just gives this money away. What could be nicer that this, and it's a process that recapitalise companies and individuals, so the banks can lend even more to them. This is all inflationary, but how long can this process go on?
    The fly in the ointment is confidence.
    While people and companies feel financially sound, printing keeps the ponzi scheme running, but with each headline about unemployment, debt levels, extraordinary measure by CBs and governments etc confidence is effected. When companies and people feel financially threatened they will hoard cash. The loans and the giveaways will not stimulate the economy any longer. On a relative basis, companies will not invest and people will not spend. This is deflationary. It will hit the stock market as the reduced earning power of many companies in this economy is realised and finally the true value of companies will be reflected in share prices. Gold and silver may also fall because of liquidation (for margin calls), but not for long because cash, at least for the smart, will not be the place to store proceeds. As this is happening the only trick the gov and CBs have is to ramp up the money printing . This inflates the typical bubbles (after their initial purging) but as hoarded money looking for a home meets newly printed money it may also cause hyperinflation. Hyperinflation is just everyone realising that everyone has money.
    Finally if the government see the potential for hyperinflation and decides to take the pain now to stop it... the printing stops, interest rates go up, asset values fall and we get liquidations and deflation of everything. Rising interest rates at this point cause a government debt crisis. There is no good outcome no matter how I look at this mess.
     
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  5. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    I know how you like to set traps. ;)

    Let's say that those prices are a guide, I shouldn't expect much on the downside. The general trend over the next two years will be asset inflation.
     
  6. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    This is 100% my view also. There is historical precedent for a deflation to hyperinflation transition.

     
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  7. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Historical precedents are no longer applicable.
     
  8. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    Of course.

    Because this time is different :)
     
  9. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    That’s the same thing the property bears were sarcastically saying after the GFC.

    This is like 2009 only bigger.
     
  10. BuggedOut

    BuggedOut Well-Known Member Silver Stacker

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    ...and we've been fighting off deflation for over a decade and only just managing to do it despite all the QE, asset buying, low/zero/negative interest rates and stimulus programs.

    Yes. This is a bit like 2009.....but it's bigger.
     
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  11. willrocks

    willrocks Well-Known Member Silver Stacker

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    And yet real estate bulls always point to historical precedent to support their price predictions. Even in these times.

    People do generally cut back spending in uncertain times. In today's economy that may take the form of the inability to take on additional debt. Their old car can get by for a few more years, upgrading their laptop, phone, tablet ... etc can wait a year or two ... the renovation might be put on the back-burner. Forget about eating out or taking holidays.
     
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  12. sgbuyer

    sgbuyer Well-Known Member Silver Stacker

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    Do you mean to say "calling it BS"? Harry Dent is as anti-gold as CJ is anti-silver.
     
  13. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    They do. Let's just say if we were looking for some insight into what's happening and how best to maximise our own opportunity then we probably should go to the source that knows best.

    I've made the mistake in the past to listen to Austrians when it comes to what is happening in the world. They know what should happen but they're not real good at explaining what is happening and the why. Simply because it both offends them (and me) and they don't understand nor agree with what is happening. Neither does Mike Baloney understand what is going on. So we can shelve his historical precedents next to those of the Austrians.

    Classic balance sheet recession. And the MMTers have a solution for that.
     
    Last edited: May 17, 2020
  14. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Fiscal policy stimulus has been generally absent over the past decade. This is why I believe that it's going to be different this time.
     
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  15. leo25

    leo25 Well-Known Member Silver Stacker

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    I guess central banks and governments just decide it’s time to start squeezing the system in order to more easily implement the new rules. Atm it seems credit is draining faster then It is being replaced and it all looks very planned.

    but as soon as the new rules are in then the taps normally open up again.
     
  16. leo25

    leo25 Well-Known Member Silver Stacker

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    I don’t think that’s true, I think they only wanted to make it seem like they are fighting off deflation. They went to a lot of effort to make sure inflation didn’t enter the general economy. (I’m talking about western countries)
     
  17. Eureka Moments

    Eureka Moments Well-Known Member Silver Stacker

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    No he's questioning your question with another question.:cool:
     
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  18. SilverDJ

    SilverDJ Well-Known Member

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    Oops, I left out the word NOT, as in "will NOT be spared".
     
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  19. willrocks

    willrocks Well-Known Member Silver Stacker

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    No technical solution will solve a problem that is based on human nature.

    It's already apparent that most people will either pay bills, pay debt or save. Only 12% said they would spend their next tax return on non-essential items.

    https://www.news.com.au/finance/mon...r/news-story/05c2f54b949b6626d7aeacf5c0a2928c

    tax-refund.png
     
  20. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    The "technical" solution doesn't require the consumer to spend their cash on what you refer to as "non-essential" items. In fact, the consumer's role in the "technical" solution is minor. :)
     

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