The Finance Thread

[SillyBilly]

Can I just say I check this thread daily and never understand any of it? But I'm just waiting for someone who knows what they're talking about to finally just go "yep, board up your windows and wait it out, this is the end of days".

I mean, on a scale of 1-100, how ****** are we? Make it dead easy for me, just whack a number on it. 1 being "hunky dory" and 100 being "All is lost".

Impossible to give a credible timing that isn't a blind guess, basically asking when will people lose confidence in the ability of the central banks to hold this thing together? The whole "market" is a punt on that question. They technically have "infinite money" to keep the charade going as they can print it at will. The only thing Japan has proved that is once you start on the road to printing money and cutting interest rates there is no going back, its a prop you can can't remove without crashing the economy. If you want a number, I personally would say we're at 80+. We won't be waiting any longer than 2017 to find out anyway.

I think conditions were actually less severe in the 20's than they are today (!) and we know what happened there:

1924

The stock market begins its big rise. Bears little relation to the rest of the economy.

1925

The top tax rate is lowered to 25 percent, wealth increasingly concentrating to the 1% as opposed to rest of society. Sound familiar?

1928

From May 1928 - September 1929, prices of stocks rise 40 percent. The boom is completely artificial.

1929

Mayhem, out of the blue.

We're in the late 20's IMO.

[SillyBilly]

Indeed people seem to have forgotten the number of times over the last couple of years that he has set up a rate increase only to knock it back. The one that sticks in the mind is the 7% employment figure. 

 

 

Yep, the Fed has done the same, until they deliberately took away numbers from their "forward guidance" and put loosely fitting criteria on which they could weasel out of as it suited. It is obviously critical that that they convince the markets they intend to raise and will eventually raise (...at some point). They can't let that impression drop, it will send a message that the system is broke. Whether they do or not is immaterial so long as more time can be bought. Quite for what, I don't know. Delay the inevitable? Its all a non-debate really when you consider we're talking about rate rises from 0.25% (U.S) and 0.5% (GB) and 0.05% (EU). The actual conditions in the economy and global outlook actually lend themselves to a rate cut if anything, like China and New Zealand have just done and Oz before them.

[Tombo]

Impossible to give a credible timing that isn't a blind guess, basically asking when will people lose confidence in the ability of the central banks to hold this thing together? The whole "market" is a punt on that question. They technically have "infinite money" to keep the charade going as they can print it at will. The only thing Japan has proved that is once you start on the road to printing money and cutting interest rates there is no going back, its a prop you can can't remove without crashing the economy. If you want a number, I personally would say we're at 80+. We won't be waiting any longer than 2017 to find out anyway.

I think conditions were actually less severe in the 20's than they are today (!) and we know what happened there:

1924

The stock market begins its big rise. Bears little relation to the rest of the economy.

1925

The top tax rate is lowered to 25 percent, wealth increasingly concentrating to the 1% as opposed to rest of society. Sound familiar?

1928

From May 1928 - September 1929, prices of stocks rise 40 percent. The boom is completely artificial.

1929

Mayhem, out of the blue.

We're in the late 20's IMO.

Much much easier to digest. I should probably endeavour to understand economics a bit better, it would probably help me in my history degree to understand that sort of thing. Cheers.

[Brammie Steve]

Impossible to give a credible timing that isn't a blind guess, basically asking when will people lose confidence in the ability of the central banks to hold this thing together? The whole "market" is a punt on that question. They technically have "infinite money" to keep the charade going as they can print it at will. The only thing Japan has proved that is once you start on the road to printing money and cutting interest rates there is no going back, its a prop you can can't remove without crashing the economy. If you want a number, I personally would say we're at 80+. We won't be waiting any longer than 2017 to find out anyway.

I think conditions were actually less severe in the 20's than they are today (!) and we know what happened there:

1924

The stock market begins its big rise. Bears little relation to the rest of the economy.

1925

The top tax rate is lowered to 25 percent, wealth increasingly concentrating to the 1% as opposed to rest of society. Sound familiar?

1928

From May 1928 - September 1929, prices of stocks rise 40 percent. The boom is completely artificial.

1929

Mayhem, out of the blue.

We're in the late 20's IMO.

you're anything but silly Billy!

[Ramarena]

Yep, the Fed has done the same, until they deliberately took away numbers from their "forward guidance" and put loosely fitting criteria on which they could weasel out of as it suited. It is obviously critical that that they convince the markets they intend to raise and will eventually raise (...at some point). They can't let that impression drop, it will send a message that the system is broke. Whether they do or not is immaterial so long as more time can be bought. Quite for what, I don't know. Delay the inevitable? Its all a non-debate really when you consider we're talking about rate rises from 0.25% (U.S) and 0.5% (GB) and 0.05% (EU). The actual conditions in the economy and global outlook actually lend themselves to a rate cut if anything, like China and New Zealand have just done and Oz before them.

We kept hearing about our booming economy earlier in the year, yet no rate rise. If a booming economy can't take a 0.25% rate rise then it's certainly not booming, far from it. I've had very serious concern's about the "recovery". It's so unbalanced and it looks like my concerns are were right, as things look to be heading south now. People are blaming China, but we have done nothing to address the causes of 2008, it's actually been business as usual, with little organic growth in the economy, any growth has been driven by consumer debt a housing bubble and immigration.

From here on in I can only see a rate cut for the U.K as you mention, the outlook does not look good, there just isn't the demand in the economy. The talk of a rate rise is just a tactic to try and boost confidence to try and wring out a tiny percentage of a percentage rise in GDP to look good. 

The time for an interest rate rise was IMO early/mid 2014 but that was not politically viable as it would have been detrimental to the Conservatives electoral hopes. Now we are addicted to cheap money that is actually damaging the economy and we can't kick the habit.

[Wolfie]

Indeed people seem to have forgotten the number of times over the last couple of years that he has set up a rate increase only to knock it back. The one that sticks in the mind is the 7% employment figure. 

I think it's wrong to criticise the BoE for not sticking to forecasts for increasing the interest rate. The 7% unemployment target was fine at the time but the rate rises have been put off because of the huge fall in the oil price, sending us and many others pretty much into deflation. The BoE has an inflation target of 2%, so they can hardly increase rates when the inflation rate is bobbing around 0.1% can they?. Of course if the Fed does so, we will pretty much have to follow suit regardless of our own situatiion - and of course the "imminent" rate rise has been factored in to most markets' expectations for a while anyway.

I'd be surprised if we didn't see a small rate rise by January.

[Ramarena]

I think it's wrong to criticise the BoE for not sticking to forecasts for increasing the interest rate. The 7% unemployment target was fine at the time but the rate rises have been put off because of the huge fall in the oil price, sending us and many others pretty much into deflation. The BoE has an inflation target of 2%, so they can hardly increase rates when the inflation rate is bobbing around 0.1% can they?. Of course if the Fed does so, we will pretty much have to follow suit regardless of our own situatiion - and of course the "imminent" rate rise has been factored in to most markets' expectations for a while anyway.

I'd be surprised if we didn't see a small rate rise by January.

The 7% target was hit in Jan 2014, Oil didn't start slipping till Aug 2014. As I mentioned in an earlier post this is the period it should have happened in. However politics will have played a big role. 

[Wolfie]

The 7% target was hit in Jan 2014, Oil didn't start slipping till Aug 2014. As I mentioned in an earlier post this is the period it should have happened in. However politics will have played a big role. 

I agree that politics played a role but inflation was already on a downward trend (and moving away from the 2% target), so it would have been hard to justify a rate increase.

[LesterRam]

Real level of unemployment almost 3.5million - new report

Business
Welfare reform and labour markets

The real level of unemployment across Britain is nearly 3.5 million – almost a million more than the highest official estimate and two million more than the number claiming Jobseeker’s Allowance.

The new report published today by Sheffield Hallam University.documents the scale of ‘hidden unemployment’ among men and women who fail to qualify for Jobseeker’s Allowance or are diverted on to other benefits.

The report presents an alternative set of unemployment figures for April this year for every local authority in Britain, exposing the extent to which hidden unemployment is concentrated in the weakest local economies.

The differences in unemployment between the best and worst parts of the country are far bigger than official figures have led us to believe, the report finds.

In Knowsley in Merseyside, for example, the real rate of unemployment is estimated to be nearly 17 per cent, compared to just over three per cent in Stratford on Avon.

The older industrial areas of the Midlands, the North of England, Scotland and Wales are particularly badly affected.

The figures do however show that despite the recession, unemployment in much of southern England outside London remains modest.

The new report from the Centre for Regional Economic and Social Research (CRESR), is the fourth in a series dating back to 1997. Earlier reports provided the first systematic evidence on the scale hidden unemployment across Britain and challenged government complacency about falling numbers on Jobseeker’s Allowance.

Comparisons with the data for earlier years shows that Britain was still a long way off full employment before the 2008 financial crisis, but that full employment is now further away and the real rate of unemployment is higher than at any time since 1997.

Professor Steve Fothergill, who led the research, said: “For more than 20 years successive governments have hidden the true scale of unemployment, especially by parking vast numbers on incapacity benefits.”

“The health problems and disabilities of these men and women are real, but we estimate that as many as 900,000 of the 2.5m on incapacity benefits would have been in work in a genuinely fully-employed economy.”

“Our figures on the real level of unemployment cast serious doubt on the likely impact of government reforms such as the Work Programme and Universal Credit, which are founded on the assumption that unemployment can be brought down simply by encouraging the unemployed to look for work.”

“The evidence points to large and continuing shortfalls in job opportunities away from the most prosperous parts of southern England.”

[Stive Pesley]

once you start on the road to printing money and cutting interest rates there is no going back, its a prop you can can't remove without crashing the economy.

Feels a bit like that has happened with super low interest rates too. Difficult to see a way out for us.

 They’ve been low for so long, which seems like it was primarliy done  to keep the housing market moving. Now we have millions of people with stretched mortgages who will be screwed if rates start to go up again. Once the banks start repossessing houses and we have millions made homeless or thust into poverty then the whole thing will start to unravel.

 People’s salaries won't go up to reflect interest rate rises – that’s the problem. Because the businss world is entrenched in the capitalist dogma of extracting every last penny of profit.

 So QE in its current form – up interest rates and put the money supply directly into people’s pockets so that they can afford their mortgages! (I know you can’t do that but still you get the point)

[eddie]

Can I just say I check this thread daily and never understand any of it? But I'm just waiting for someone who knows what they're talking about to finally just go "yep, board up your windows and wait it out, this is the end of days".

I mean, on a scale of 1-100, how ****** are we? Make it dead easy for me, just whack a number on it. 1 being "hunky dory" and 100 being "All is lost".

Me neither - and I used to work at the London Stock Exchange.

Mind you, that was in the days before dematerialisation and T+3 rolling electronic settlement, when there was a distinction between jobbers and brokers. You could argue that all of today's volatility and the recent financial crises (and certainly the 'rogue traders' who keep popping up, losing institutions billions) are a legacy of that agreement between the Thatcher government and the London Stock Exchange (aka 'The Big Bang') - especially when you throw in banking deregulation which followed a decade later.

 

[Ramarena]

Real level of unemployment almost 3.5million - new report

Business
Welfare reform and labour markets

The real level of unemployment across Britain is nearly 3.5 million – almost a million more than the highest official estimate and two million more than the number claiming Jobseeker’s Allowance.

The new report published today by Sheffield Hallam University.documents the scale of ‘hidden unemployment’ among men and women who fail to qualify for Jobseeker’s Allowance or are diverted on to other benefits.

The report presents an alternative set of unemployment figures for April this year for every local authority in Britain, exposing the extent to which hidden unemployment is concentrated in the weakest local economies.

The differences in unemployment between the best and worst parts of the country are far bigger than official figures have led us to believe, the report finds.

In Knowsley in Merseyside, for example, the real rate of unemployment is estimated to be nearly 17 per cent, compared to just over three per cent in Stratford on Avon.

The older industrial areas of the Midlands, the North of England, Scotland and Wales are particularly badly affected.

The figures do however show that despite the recession, unemployment in much of southern England outside London remains modest.

The new report from the Centre for Regional Economic and Social Research (CRESR), is the fourth in a series dating back to 1997. Earlier reports provided the first systematic evidence on the scale hidden unemployment across Britain and challenged government complacency about falling numbers on Jobseeker’s Allowance.

Comparisons with the data for earlier years shows that Britain was still a long way off full employment before the 2008 financial crisis, but that full employment is now further away and the real rate of unemployment is higher than at any time since 1997.

Professor Steve Fothergill, who led the research, said: “For more than 20 years successive governments have hidden the true scale of unemployment, especially by parking vast numbers on incapacity benefits.”

“The health problems and disabilities of these men and women are real, but we estimate that as many as 900,000 of the 2.5m on incapacity benefits would have been in work in a genuinely fully-employed economy.”

“Our figures on the real level of unemployment cast serious doubt on the likely impact of government reforms such as the Work Programme and Universal Credit, which are founded on the assumption that unemployment can be brought down simply by encouraging the unemployed to look for work.”

“The evidence points to large and continuing shortfalls in job opportunities away from the most prosperous parts of southern England.”

I'm shocked that this could be the case…..shocked!!!!!!

Nah it's no surprise at all. I imagine 3.5 million is a conservative estimate too. 

[SillyBilly]

I agree that politics played a role but inflation was already on a downward trend (and moving away from the 2% target), so it would have been hard to justify a rate increase.

That is the crux of this thread, there likely won't be any inflation (apart from in the property/stock market). There will be either deflation (Japan) or in an extreme case hyperinflation (driven by a loss of confidence in a currency, perhaps as a result of QE infinity). 2-3% inflation seems a fantasy.

The economy is drowned in cheap debt, when commodity prices decrease because the demand isn't there (as we service debt) then naturally prices of consumer goods will fall. And when deflation hits, its almost self-reinforcing as purchases are withheld (again reference Japan).

And exactly like LesterRam's employment post, the actual inflation figure is so manipulated anyway its really not worth paying too much attention to. They take out and put into the basket what they like depending on what figure they want.

 

[SillyBilly]

http://www.bloomberg.com/news/articles/2015-09-11/-20-oil-possible-for-goldman-as-forecasts-cut-on-growing-glut

Goldman on $20 oil price.

[Ramarena]

http://www.bloomberg.com/news/articles/2015-09-11/-20-oil-possible-for-goldman-as-forecasts-cut-on-growing-glut

Goldman on $20 oil price.

Goldman are as dodgy as the proverbial. They must have ulterior motive. 

However, today threw up another random story. Kristin Forbes thinks were are going to need to increase rates very soon to stave off inflation. 

http://www.thisismoney.co.uk/money/markets/article-3230647/Expectations-UK-rate-hike-highest-level-four-years.html

[SillyBilly]

Goldman are as dodgy as the proverbial. They must have ulterior motive. 

However, today threw up another random story. Kristin Forbes thinks were are going to need to increase rates very soon to stave off inflation. 

http://www.thisismoney.co.uk/money/markets/article-3230647/Expectations-UK-rate-hike-highest-level-four-years.html

Of course they have, though I do like seeing what the manipulators are saying as at least you know which way they're betting. While we're on the subject, up until recently never bothered with PM's but recently I've upped their % in my portfolio as a hedge, I have really got into watching the big boys rig that market. The other commodities will be the exact same I am sure. We have just hit a record of precious metal paper claims standing at a record 228 ounce against each physical ounce in the COMEX vaults. So they're buying and selling contracts in a paper market and in doing so rigging the actual market. Try buying physical gold from a dealer at spot price, I've seen people posting transactions at a 20% premium in the last few weeks. Just shows the actual market is completely detached from the banks manipulated market. JPM from my little understanding basically set the silver price for the world to buy and sell at.

http://www.zerohedge.com/news/2015-09-09/something-just-snapped-comex?page=5

Can't say I buy into Forbes's inflationary forecast. Comments strike me as insightful as Ben Bernanke's comments on the housing market immediately before the world caved in. Time will tell. These idiots want us to believe they know what they are doing.

[SillyBilly]

http://www.independent.co.uk/news/business/news/uk-inflation-drops-back-to-zero-in-august-narrowly-avoiding-deflation-territory-10501426.html

So, deflationary pressures still persist, in July we were 20 times off the BoE's inflation target (0.1% to 2% respectively). August is another step down. Oil to push it negative next month?

Not up-to-date with things this week but the Fed's decision is on Thursday to stick or twist. I might even put my money back in the market for a quick chase of a few % if they stick and there is no immediate adverse reaction. It will just be another admission they are prepared to blow the bubble bigger. Hoping they raise whatever the market outcome.

[Boycie]

I concur.

[sage]

http://www.independent.co.uk/news/business/news/uk-inflation-drops-back-to-zero-in-august-narrowly-avoiding-deflation-territory-10501426.html

So, deflationary pressures still persist, in July we were 20 times off the BoE's inflation target (0.1% to 2% respectively). August is another step down. Oil to push it negative next month?

Not up-to-date with things this week but the Fed's decision is on Thursday to stick or twist. I might even put my money back in the market for a quick chase of a few % if they stick and there is no immediate adverse reaction. It will just be another admission they are prepared to blow the bubble bigger. Hoping they raise whatever the market outcome.

Good time for peoples quantative easing, little inflationary threat

[SillyBilly]

Good time for peoples quantative easing, little inflationary threat

Personally think it wouldn't solve anything but widen the difference between the asset/debt owners and the asset less/unleveraged. Exactly what you shouldn't be doing. Give people £5k each and (as per Steve Keen's model) on the proviso where they have debt they must pay it off first then all that does is benefit the leveraged and speculators disproportionately. As their asset prices which they're paying down/off will have gone up in value due to the "new" money coming to the market pushing the prices of said assets up. So, they basically benefit twice (free money and a higher asset price) than the person who is unleveraged or without assets. I think its a nice idea on paper but in reality would be a disaster.