Economy crash =/= stock market crash?

Notepad_Phil

beavere38 said:

... Take a look at the cost of your supermarket shopping. They are lying to us with the inflation figures. Real inflation is somewhere around 13 to 16%. 2 years ago I used to spend between £60 and £100 at Sainsburys now I spend £130 to £160. Sound familiar? They shrink the size of the item AND put the price up so 500gms becomes 420gms or 180ml becomes 160ml plus the price goes up. ...

You're talking of inflation of getting towards 100% in your costs at Sainsbury's over the last 2 years.

Are you sure the reason you're spending £130 to £160 instead of £60 to £100 isn't due to all the extras that you're now buying because you're home all day instead of being in the office, or nice meals/wine because you've not been going out, or treats that you're buying because covid is making life pretty miserable so we all need cheering up, etc, etc.

Our supermarket spending has risen a bit over the last two years but no where near the amount you're talking about

ps shrinkinflation is well known at the ONS e.g. https://www.ons.gov.uk/economy/inflationandpriceindices/articles/theimpactofshrinkflationoncpihuk/howmanyofourproductsaregettingsmaller and so that's not a way that inflation can be hidden, and no Boris/Rishi can't just get them to fudge the figures so that they can pretend that inflation is lower than it really is.

Linton

sevenhills said:

beavere38 said:

Lots of people taking the mickey out of what I have said on here over the past few weeks. I'm not bothered, I am just trying to alert people to the fact that the top of the market could be in and a crash could be around the corner.

The level of the FTSE is a very complex issue. The level of Sterling is 20% lower than 15 years ago, the level of Sterling is said to affect the FTSE.

So what effect is pumping all this QE having on the LSE? Does QE lower the value of the currency, I believe it does.

There was a warning from a committee of MPs this week about our overuse of QE.

https://www.bbc.co.uk/news/business-57865703

Yers, when sterling decreases in value the FTSE 100 is likely to go up since the largest companies are priced on a global market, effectively in $s.

tranquility1

My 2 cents:

Too many powerful people are invested in the stock market for it to be allowed to collapse entirely.  It may go down significantly, so that they can buy up at low prices.  But the stock market will survive.


The economy is more complicated.  Every few decades the economic system changes.  And we are due a change now.  Interest rates are zero and there is nothing our Central Bank can do except print money.  We are £2tn in debt, which we will never pay off.  My bet is a switch to a digital pound which will be devalued from what our current £ is worth and thus will whittle away at our debt.  This, coupled with high inflation to further eat away at debt.  

Thrugelmir

beavere38 said:

Go to your local pub or your favourite restaurant tomorrow (Saturday) night and see how busy it is compared to a typical Saturday night pre-covid.

Is the pandemic over? Far from it.  These aren't normal times by any stretch of the imagination. Many unsustainable businesses will fall by the wayside. Arguably not soon enough. As low interest rates have kept zombie ones alive for too long. Which has stifled the growth of new vibrant entrepreneurial ones. There's good reasons behind the saying "Out of adversity comes opportunity".  

Hexane

barnstar2077 said:

beavere38 said:

Lots of people taking the mickey out of what I have said on here over the past few weeks. I'm not bothered, I am just trying to alert people to the fact that the top of the market could be in and a crash could be around the corner.

Look back through this thread, on 23 June at 10:48pm I said this:

"I am trying to alert you to what I can see and it doesn't look good for the bulls. I posted my warning that the market may have topped 2 days after the all time high on the FTSE and Dax. We have not had new highs since so I am not wrong yet. If we get new highs then I was wrong and fair enough you can laugh at me."

I've just gone back through my charts (which might differ slightly from yours), the FTSE futures made an all time high on 16th June at 7,218. We're now at 6,984 on the futures, price has struggled for a month to go higher. The Dax futures made an all time high at 15,805 on 14 June and it squeezed slightly higher to 15,816 on 13th July. It is now at 15,492. The Dow - same story - high of 35,092 on 10th May and has been struggling to get higher for 2 full months, we are now at 34,650.

I'm still not wrong. The Indices are all struggling to go higher. Mock me if you like but do some common sense research, take a look at your local area - for example take a trip to your local shopping centre and count the empty units - you know, the ones where they put pictures of a shop interior in the window so it doesn't look like it is empty. Lots of these smaller shops have gone bust.

Go to your local pub or your favourite restaurant tomorrow (Saturday) night and see how busy it is compared to a typical Saturday night pre-covid.

Try booking a summer holiday abroad. I'm sure I don't have to explain the problems connected to travelling and paying for tests / taking time off to isolate etc etc. My friend had to isolate for longer than the 7 days length of his holiday when he got home.

Do you have track and trace? If you get "Pinged" you are supposed to drop everything and self isolate for several days. How can a business function with staff taking time off like that? Do some staff make it up so they can stay home and get paid for months on end?

Take a look at the cost of your supermarket shopping. They are lying to us with the inflation figures. Real inflation is somewhere around 13 to 16%. 2 years ago I used to spend between £60 and £100 at Sainsburys now I spend £130 to £160. Sound familiar? They shrink the size of the item AND put the price up so 500gms becomes 420gms or 180ml becomes 160ml plus the price goes up.

Everything is broken right now and yet the stock market has been making all time new new highs (until just recently when it has stalled)

I stand by what I said a month ago. I believe the top is already in and a crash is coming. 

I think you knew when you started throwing in stuff about the Mayan calendar etc that people would struggle to take you seriously.

Please don't stop taking her seriously!

https://forums.moneysavingexpert.com/discussion/6275320/economy-crash-stock-market-crash/p13

Here she was quite sure about it, just read that over again!

It's about URANUS transiting the sign of Gemini, see?

This is what she said back then: "All these separate cycles are pointing towards great unrest and change around 2025/2026. There is a possibility of some kind of international conflict, an internal conflict similar to a civil war, a change to the reserve currency and general financial chaos." https://forums.moneysavingexpert.com/discussion/6275320/economy-crash-stock-market-crash/p13

Eco_Miser

tranquility1 said:

The economy is more complicated.  Every few decades the economic system changes.  And we are due a change now.  Interest rates are zero and there is nothing our Central Bank can do except print money.  We are £2tn in debt, which we will never pay off.  My bet is a switch to a digital pound which will be devalued from what our current £ is worth and thus will whittle away at our debt.  This, coupled with high inflation to further eat away at debt.  

The £2tn debt will be  paid off eventually (when the pound has devalued enough), but so long as we can keep paying the interest, it doesn't really matter.

There's no need to switch to a digital pound to devalue the currency, the devaluation happens automatically and incrementally, as long as we let the exchange rates float.

tranquility1

Eco_Miser said:

tranquility1 said:

The economy is more complicated.  Every few decades the economic system changes.  And we are due a change now.  Interest rates are zero and there is nothing our Central Bank can do except print money.  We are £2tn in debt, which we will never pay off.  My bet is a switch to a digital pound which will be devalued from what our current £ is worth and thus will whittle away at our debt.  This, coupled with high inflation to further eat away at debt.  

The £2tn debt will be  paid off eventually (when the pound has devalued enough), but so long as we can keep paying the interest, it doesn't really matter.

There's no need to switch to a digital pound to devalue the currency, the devaluation happens automatically and incrementally, as long as we let the exchange rates float.

I'm not particularly knowledgeable on economics, just so you know!

But my understanding is that the UK can intentionally devalue the pound anytime it wants.  It doesn't have to be a natural, organic process. 

We have debts of £2tn, and that number will keep rising.  It won't stop there and then start paying it off.  It will keep growing.

Sure, we can service that debt at the moment.  But that can change.


I'm also aware that the switch to digital £ is a separate issue, but I think the devaluation and the switch may take place in the same time frame (ie, soon enough).

Our financial system has surely reached the end of the road.  



My questions would be: 

What happens to the stock market?   

What happens to people's savings?

What happens to people's debts (mortgages etc)?

Linton

Perhaps you would be less worried about the debts if you knew to whom the debts are owed:

Mostly the debts are owed to us in the form of our pension and insurance companies and our BoE who together buy the majority of issued gilts and us as investors in gilt funds or directly held gilts. Other than gilts a significant amount of debt is represented by money deposited by us in Premium Bonds and NS&I accounts.

I believe debts owed to foreigners are roughly covered by debts foreigners owe the UK though I cannot find full data.  For example at the year end 2020 UK debt was £1877Bn. 28% =£52bB of UK debt is owned abroad.  UK holdings of US debt alone were $368Bn=£266 Bn.

tranquility1

Linton said:

Perhaps you would be less worried about the debts if you knew to whom the debts are owed:

Mostly the debts are owed to us in the form of our pension and insurance companies and our BoE who together buy the majority of issued gilts and us as investors in gilt funds or directly held gilts. Other than gilts a significant amount of debt is represented by money deposited by us in Premium Bonds and NS&I accounts.

I believe debts owed to foreigners are roughly covered by debts foreigners owe the UK though I cannot find full data.  For example at the year end 2020 UK debt was £1877Bn. 28% =£52bB of UK debt is owned abroad.  UK holdings of US debt alone were $368Bn=£266 Bn.

The UK's £2.2tn debt, albeit to itself, still needs to be serviced. 

I can't fund the current annual service figure.

But in 2018, when we were £1.78tn in debt, we were paying £48bn per year to service it.


That figure keeps going up with the debt. 


And I am also assuming that higher rates in the future will also increase the cost (someone will be along to correct me on that if it's not the case).

Linton

tranquility1 said:

Linton said:

Perhaps you would be less worried about the debts if you knew to whom the debts are owed:

Mostly the debts are owed to us in the form of our pension and insurance companies and our BoE who together buy the majority of issued gilts and us as investors in gilt funds or directly held gilts. Other than gilts a significant amount of debt is represented by money deposited by us in Premium Bonds and NS&I accounts.

I believe debts owed to foreigners are roughly covered by debts foreigners owe the UK though I cannot find full data.  For example at the year end 2020 UK debt was £1877Bn. 28% =£52bB of UK debt is owned abroad.  UK holdings of US debt alone were $368Bn=£266 Bn.

The UK's £2.2tn debt, albeit to itself, still needs to be serviced. 

I can't fund the current annual service figure.

But in 2018, when we were £1.78tn in debt, we were paying £48bn per year to service it.


That figure keeps going up with the debt. 


And I am also assuming that higher rates in the future will also increase the cost (someone will be along to correct me on that if it's not the case).

The interest bill on government debt amounts to about £24Bn/year. according to https://www.thisismoney.co.uk/money/article-9326947/Government-paying-2bn-month-service-ballooning-national-debt.html.  Assuming the number is right I guess this is lower than in 2018 because the government has been refinancng its debts as interest rates are much lower.

Total government tax take is about £820Bn.  So not a great worry.  Interest rates on government debt will only go up when there is a shortage of people wanting to lend the government money.  Clearly not a problem at the moment with institutions queueing up to lend money at negative real interest rates.  Many of the buyers of gilts have no other choice with what to do with their money - they need the 100% guarantee. 

Also the money may simply recirculate.  For example you get a £50K lump sum from your DB pension.  This could be financed by the government paying off £50K of the debt it owes the pension provider.  What do you do with the money?  Perhaps you put it into PBs where it becomes part of the government debt again.

If interest rates rise existing bonds dont get the higher annual interest.  What happens is that only the new money the government has to borrow pays the higher interest.  The old gilts paying low interest of course drop in value on the markets, but that's not a problem for the government.  So at the moment with interest rates very close to zero in £ terms, negative in real terms, it makes sense for the government to issue as many very long term bonds as it can.  Particularly as most government income is automatically inflation-linked - there is no need to engineer massive inflation.  Time will do the same job with much less hassle.