It’s Lucky Phil!

Place your bets.

In the wake of the Bank Of England’s antics, Credit Suisse going Bear Sterns, Nord Stream and everything else, what does Lucky Phil do on Tuesday at the RBA?

I’m calling .75 raise. Looking more likely that QE infinity will return to save the property market, given that Annastacia Palaszczuk backed down from taxing investment properties last week.

Convinced now that the game plan is to blow up currencies world wide and usher in the CBDC’s, so they can also print unlimited amounts of those online and start again. Looking forward to the explanation on running an entirely digital system on solar and wind but whatever.

At least one bank bail-in before the end of the year is also now my call, likely Westpac.

Fire away.

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Gruppenführer Mark

Fiddy!

What do I win?

The90kwbeast

Another 1.8% decline in house prices for you!

Gruppenführer Mark

This is WA, baby! All we have to do is lock down the borders once again, and half of East Coast (and probably 75% of Victorians) will be creaming their panties trying to get into the last tyranny in Australia! House prices to the moon!

The90kwbeast

0.5%

The AUD is sitting on a precipice, any less than that and we’d be at AUD $0.60 by Friday.

0.75% would be embarrassing. Rates are already going up too quickly as it is from his no lift to 2024 promise.

Can someone start a mass mortgage market nationalisation countdown clock?

Coming

I reckon 0.75 but who knows phil will probably shit his pants last minute

The bigger question is when does QE/TFF re-start

I reckon that will have to be very soon

First round of TFF reaches maturity September 2023 (final round reaches maturity June 2024)
So that would be the very latest date imo

but seems like it might even have to be sooner than that as there are already problems

https://www.afr.com/companies/financial-services/uk-investors-dump-aussie-mortgage-bonds-in-cash-scramble-20221001-p5bmgr

Effectively the RBA will be increasing its liabilities from both ends
-QE/TFF
-increasing interest on reserves

of course none of this is disinflationary (including rate rises), and I don’t get why nobody talks about that

Ramjet

Lucky Phil will do 50bps. Anything else will spook the punters.

The UK looks to beat us from going from a developed nation to a developing nation.

A fly in your ointment

takes balls the size of USSR to do more than 0.5% and he’s been irreversebly emasculated long ago.
and even if he does more than half a percent, it will be symbolic. 0.75% was due last session at least, if not earlier.

Peachy

takes balls the size of USSR to do more than 0.5% and he’s been irreversebly emasculated long ago

have a little faith! 😉

Gruppenführer Mark

O sage one of the RBA board, what is it that you know but are not telling us?

Not the one to normally fan the conspiracy theory flames, but!

Peachy didn’t make a prediction this time. Peachy did predict in the past, and was right every time, which got people to wonder whether Peachy is indeed an insider.

By not predicting this time, when everyone expected at least .50% hike, Peachy has secured plausible deniability in this matter.

Hang on, I’m all out of tinfoil. I shall return.

Stewie

Import the 3rd world, become the 3rd world.

Peachy

The consumers are still spending harrrrd, so will need to yank the chain again.

got to exercise some finesse in doing it though, obviously, but at the end of the day if it’s not hurting, it’s not working.

Funnily enough, we finally have what we wanted for such a long time in EZFKA – “inflation” of a kind that spurs spending, because value of money is going down and you have to spend it quickly, before it devalues. long regarded as bit of a holy grail (just as Leudo and Davo).…unfortunately, what dey forgot was that that kind of spending spurs inflation. Which spurs spending. Which spurs inflation.

anyway, youse all should’ve listened to me when I told you that inflation is the freaking devil and deflation is mana from heaven, in comparison.

Last edited 2 months ago by Peachy
The90kwbeast

My outstanding question is how does the debt ever get deflated away if interest rates are never allowed to stay put to enable inflation to be anything more than a flash in the pan?

Debt deflation was a key premise/reason behind the “we need inflation” argument.

Last edited 2 months ago by The90kwbeast
Peachy

My outstanding question is how does the debt ever get deflated away if interest rates are never allowed to stay put, which was a key premise/reason behind the “we need inflation” argument?

“we need inflation” was always stupid, ….which is why I say that it’s the devil.

debt can basically be inflated away if interest rates are not allowed to rise enough to reflect currency devaluation. This means banks eat the loss over time. This worked back in the Stone Age, but wouldn’t be paler able now.

as to deflating debt away… I’m not exactly sure how that would work. I mean, to an extent you can sock it to households while you do that…. But only up to a point. After that point, the households break and then the banks blow up too.

Gruppenführer Mark

Inflation, eh?

Love Gold.jpg
stagmal

i dont know why anyone thinks inflation is a good thing. why would anyone celebrate stuff getting more expensive, but it seems to be a very common view amongst the economic expert crowd

central banks should have a deflation target not the other way around

Last edited 2 months ago by stagmal
Peachy

i dont know why anyone thinks inflation is a good thing. why would anyone celebrate stuff getting more expensive, but it seems to be a very common view amongst the economic expert crowd

people are idiots

The90kwbeast

The theory again is that deflation would mean demand could significantly decline i.e. If you knew something was going to be cheaper tomorrow, why bother buying the thing today?the suggestion is it would create recessions.

Conversely 2% as a target is a subtle nudge to ensure there is always some baseline demand level for things.

Maybe 0% should be the new 2%.

stagmal

maybe people buying less shit wouldnt be so bad. nobody is going to stop buying fuel food essentials and crap

all a recession is is gdp going backwards that doesn’t actually translate into a real quality of life decline

Last edited 2 months ago by stagmal
bjw678

I take it you’ve never lived through a recession.
Quality of life is essentially consumption/gdp so a recession means some people at least are taking a QOL decline.

A fly in your ointment

up to a point inflation causes people to spend wisely. Anything more makes the life a nightmare and less makes a reckless spending.

some inflation is counterweight to silly endebtment

The90kwbeast

I have a theory running that some of the hospitality inflation we are seeing is bullshit and is in fact a revenue grab by businesses post covid shutdowns etc with inflation simply being a catch all smokescreen excuse.

Case in point, Sydney rock oysters still $4 each from my two local fish mongers same as last year.

Used to be $5-5.50 in 2021 in a restaurant now it’s $6.50.

Schnitzels are now $28-30 used to be $23-26 but chicken hasn’t moved much.

Beer up 15%

Food and drink is up 15%+ this year

Even Macca’s jacked up prices 20% on a heap of items.

Peachy

Case in point, Sydney rock oysters still $4 each from my two local fish mongers same as last year.

Used to be $5-5.50 in 2021 in a restaurant now it’s $6.50.

Schnitzels are now $28-30 used to be $23-26 but chicken hasn’t moved much.

im sure it’s all gone to padding out salaries 😂

A fly in your ointment

agreed, a lot of prices are ratcheted because they can.
A feature of capitalism though

Coming

the problem is the people continuing to spend, not the capitalists putting up prices

still I haven’t noticed any reduction in consumer spending around me

Every pub and restaurant is packed to the gills
Every hotel is full

Went out to a very fancy place for dinner
Oysters $7.5 and $298 steak on the menu

Service was dogshit

Place was completely full. All pretty ordinary looking people. Young people, one guy in trackpants, ethnics, the full gamut

I don’t understand where the money comes from

The90kwbeast

$7.50 new record! Hubert is $6.50 which I thought was enough.

Obviously businesses will price to a level they think they can get away with to maximise revenue. The current price inflation can only be explained by post lockdown FOMO/YOLO splurging otherwise we would have seen these prices in late 2019. This pricing is only possible if people keep paying those prices to your point.

Demand destruction at this point looks to be assured now via the RBA rate hikes and recession by extension.

Coming

again I need someone to explain to me why interest rate rises should necessarily be deflationary or recessionary

every loan creates a deposit

for ever person with a $2 million mortgage there’s another person with a $2 million deposit

only 35% of the population has a mortgage . Quite a few must be fully or nearly offset , or very small balances

interest rates going up means the other 65% has more money coming in, not less

also interest rate rises discourage new businesses from forming (cost of capital )

means less competition and less overall production

maybe that’s why I saw a lot of young people at that restaurant – they’re mortgage free

increasing interest rates is only going to create demand destruction by insolvency and defaults – that will be all at once rather than gradual

The90kwbeast

Well re: recession isn’t it because consumer spending is like 55% of GDP?

If you increase interest rates less discretionary funding available for the masses and therefore less demand, as mortgage payments and credit servicing becomes more expensive.

Cbf looking up the % of the adult population with a mortgage if it’s 35% that sounds about right. Then you have renters who get smashed immediately as we are seeing with rent increases from investors covering their increased loan repayments.

Yes also that it impacts business from forming capital and all that.

Literally the only people who benefit from rising interest rates are pensioners and retired millionaires who would mostly not be big spenders anyway.

So again deflationary.

And the banks own the assets or loans created obviously but they only get a margin from whatever the spread is in aggregate irrespective of the rates.

Last edited 2 months ago by The90kwbeast
Coming

Yeah I don’t know about all that

apparently the evidence is not that strong – increasing interest rates doesn’t seem historically to reduce inflation or there isn’t a tight relationship

in fact there’s a heterodox theory that suggests that increasing interest rates increases inflation for the very reason/phenomenon you have just described in the rental market : a higher return on capital is demanded so prices have to rise , and investment in new production is described

I wanted to write an article on here about it , but don’t have time

The90kwbeast

The rental example I used I agree you have a one off increase in inflation but then demand all else being equal gets crushed every other quarter afterwards leading to either less inflation/deflation.

Basically interest rates rising leads to aggregate demand destruction to normalise prices, in Australia where we don’t really produce much.

Coming

“demand all else being equal gets crushed”

Why?

Only 35% have substantive debts
The rest have deposits

Increased interest rates increases money supply

Prices chase yields
Investment in new capacity is diminished

The relationship you are postulating which is widely accepted has never been proved

Also question has to be asked is why hasn’t inflation already rolled over given the fastest pace of interest rate rises in history
Both the numbers and the eye test (expensive restaurants packed out) tells me it isn’t working

Last edited 2 months ago by Coming
Peachy

Only 35% have substantive debts

The rest have deposits

Increased interest rates increases money supply

What’s the relevance of the 35%? Is that basically your model – because debtors are <50%, higher interest rates negative affect the minority and positively affect the majority?

Coming

Yes, rising interest rates only have significant direct effects on a third of the population

The rest of the population is at worst unaffected or minimally impaired, and many will be positively affected

The point I’m making is that every debt is somebody else’s deposit (by definition)

There are second order effects of course on the economy from possible reduction in new loan creation, but as I’ve said that in itself can have inflationary rather than deflationary effects (if new businesses and productivity are discouraged from being formed by high rates)

Results in an inflationary spiral, rather than the intended disinflationary effect

The90kwbeast

Huh?

Renters get smashed with rent increases which explains the other third which just leaves the remaining third which own outright and are generally either asset rich cashflow poor pensioners or wealthy retirees who both again tend not to spend huge sums of money at that life stage anyway on consumables, which are again 55% of GDP.

Basically 2/3rds of the adult population are adversely impacted by rising interest rates, reducing discretionary spending.

At least in Australias case.

Coming

Huh?

if rents go up it counters out interest rate rises for land lords
you can’t have it both ways

The point is that velocity increases, money supply increases , productive capacity decreases

its inflationary

The90kwbeast

Inflation is by definition excess money chasing too few goods/services. The scenario described above for both renters and owners, is one where there is demonstrably less money in each of their pockets all else being equal.

Therefore it’s reduces some of the ‘excess’, money available to spend on things (55% of GDP), therefore reducing inflation.

The rate of interest being the price of money and the velocity of money generated M2 are also two different things right

Coming

Inflation is by definition increase in the money supply resulting in increased prices

too few goods is a supply shock

what we have by increasing interest rates is an increase in the money supply

Last edited 1 month ago by Coming
bjw678

what we have by increasing interest rates is an increase in the money supply

No you don’t.
You have a reduction in new money creation as new loans in both individual value and volume.
And virtually all the inflation of the money supply for decades has been loans…

What really matters is the rate of change, not the rate itself.

Coming

https://seekingalpha.com/article/2918386-do-low-interest-rates-actually-cause-deflation

https://www.weforum.org/agenda/2015/07/are-low-interest-rates-deflationary/

Quite persuasive

I think it needs to be very seriously considered, as the fastest interest rate rises in history appear to have had no impact on inflation in fact it seems to be getting worse
Why?

it wouldn’t be the first time that central bankers had no idea what they were doing

Coming

Here is stanley Fisher’s original paper

https://www.nber.org/system/files/working_papers/w2473/w2473.pdf

But I think also critical is that this time is different from when Fisher was writing – the fed is lifting rates by raising IOR, not by draining reserves/OMO

https://www.themoneyillusion.com/why-are-higher-interest-rates-inflationary-3b/

Hard to wrap one’s head around

In the short run, a Fed decision to raise rates is indeed often contractionary. But that’s because they typically raise rates by cutting the money supply, which is more contractionary than the higher interest rates are expansionary.

My claim was that a rise in market interest rates is expansionary, as this makes it more costly to hold base money (in an opportunity cost sense.) As the demand for base money falls, the price level and NGDP rise. But a rise in IOR is very different, it increases the demand for base money, which is contractionary.

Let me repeat, higher interest rates are inflationary. They increase velocity. If you don’t believe me, check out interest rates and velocity during any extremely high inflation episode. When rates rise, inflation usually rises. Higher interest rates are inflationary. Repeat 100 times. But the thing the Fed uses to generate higher short term interest rates—a reduction in the money growth rate—is deflationary. To reduce inflation you must reduce money growth. Interest rate targeting (or exchange rate targeting) is simply a tool. It is changes in the money growth rate that actually drive macro nominal aggregates up and down.

Last edited 2 months ago by Coming
bjw678

Do you have any concept of cause and effect and dealing with more than one potential variable at a time?

When rates rise, inflation usually rises. 

What do they use to decide what the rates are?
Or to put it in really simple terms what comes first?
Did we have rate rises or inflation first?
Does the future rate rise cause the inflation that has already happened in the past?

stagmal

lmao $298 steak what was it made out of gold

who buys stuff like tht and why

Coming

yeah it blows my mind

It was absolutely fucking incredible though.
Shit was melting inside, crispy outside
Don’t think I’ve ever had anything that good before

But in order for me to have paid for it myself, I reckon I would need to be making at least $5million a year – $100k/wk 50k after tax 298 wouldn’t really make a dent

But these were young people like in their twenties
How much could they be earning if they work? $50/hr?
NFI what is going on

how much is a good steak in a regular middle-Australia pub nowadays?
$30?

I grew up lower middle class, and have a scarcity mindset though
So I just fucking cringe when people buy expensive things
I sit there and calculate how many hours I have to work to pay for something

Last edited 2 months ago by Coming
stagmal

was it a dry aged steak thats the only explanation

the process involved in making something like that probably necessitates the price tag given the inventory/energy cost and labor

Coming

dont know mate but i cant cook steak like that at home even if i buy the most expensive rib eye from the butcher

Gouda

It’s not like people are eating $298 steaks every day though. Even for someone on $50/hour, it’s only a days worth of work. Not cheap, but also not going to break the bank.

And if I’m clearing $5m, I’d pay for a private chef instead.

Aussie Soy Boy

They’re living their best life lol

lswchp

I don’t but I’d like to, just to see if it’s any different to normal steak. Wagyu and Shiraz, you know!

bjw678

who buys stuff like tht and why

clearly coming, to prove he’s better than the rest of us lol

DictatorDavid

I know for a fact that this is the case. I know of several (friends) small businesses that have jacked their prices up around 40% to claw back the two years of no business at all.

stagmal

whats the difference between someone jacking up their price and inflation, arent they identical

Gruppenführer Mark

Inflation is when the cost of inputs goes up and the business either absorbs the rise from its profit, or passes the rise on to the customer.

Jacking the price up is finding that delicate balance between supply and demand on the Econ 101 graph, where a business charges whatever they want for the product, irrespective of input costs, because the consumer will pay.

bjw678

yes they are identical. It depends on how the economist wants to portray the event…

Science my arse.

Peachy

I know for a fact that this is the case. I know of several (friends) small businesses that have jacked their prices up around 40% to claw back the two years of no business at all.

it’s the commercial rents price-soak… takes a while to build but then has very significant inertia…

Gouda

There’s also a bunch of hospo businesses that have gone under, so whoever survives can also raise their prices without too much fear. One of our local coffee joints is charging $7, but there’s at least 3-4 in the area that died during Covid.

Most of the groceries I see at colesworth has gone up 15-20%. It’s more noticeable at the cheaper end where an extra 50c or dollar gets tacked on. Fast food is an interesting one. Have seen some cheap deals on various apps, yet there are also some KFC meals that have gone up 40% which seems a bit much even accounting for increased fuel costs.

Hoody

7-11 $1 coffee goes up to $2 tomorrow.

Phil does 0.75%

The90kwbeast

Sacrilege a 100% increase

Could be front page News.com stuff haha

The90kwbeast

It’ll be back surely as an inflation example for the masses

Otherwise Phil is gonna get ripped this week by the media can’t wait

Freddy

0.5%. Last month RBA suggested rate rises will soon slow down so I doubt they will contradict that statement by going even harder than 0.5%.

Coming

Good point

but they are constantly contradicting themselves , they also said no rises until 2024

the problem the RBA is that they have two meetings before the next fed (October 3 and November 2)
also things seem like they are about to implode in the UK and CS

they are going to be absolutely lost

will look absurd if they hike in the immediate vicinity of GFC 2.0
Phil must be sweating hard

Freddy

Phil nearing the end of his current term and would already know his fate. I doubt he would be sweating too much with his $300k+ pension for life.

DictatorDavid

I’m with whatever Peach “predicts”. They have insider information 😉

A fly in your ointment

who else (they) is there besides Peach is an insider?

20220927_164049.jpg
DictatorDavid

lolwut?

A fly in your ointment

typo, should’ve said

who else (they) is there besides Peach as an insider?

you were not a using PC pronouns when you a
said “they”, were you?

Aussie Soy Boy

0.5% is basically keeping it on hold and the mums and dads investors out there are conditioned to it at this point.

Coming

I see the UK has just back flipped on it’s tax cuts

kind of odd as it seems they had got away with it after boe intervened

I wonder if ALP will backflip on the stage 3 tax cuts here now too
maybe it’s already been discussed with the RBA

as a second thought – maybe 0.65% would be a nice one for the RBA to finish on

confident and forthright without being too aggressive

and would bring us to a nice even 3.0% for what might be the last raise they get to make

Freddy

Stage 3 tax cuts are July 2024. It really depends what the inflation rate is at that time.

You know my thoughts on a 0.25%-rounded rate making RBA lose credibility.

Ramjet

The UK is on the fast road to developing nation status. The tax cuts will just ensure that happens with the next few years rather than by the end of the decade. The UK has decreased the importance of its manufacturing base and decided to become a laundry.

Australia’s fate will be similar if it wasn’t for our mineral wealth,

A fly in your ointment

OT, brought to you by a grifter that barks (or not the “it’s the roit thing to do moite!“)

https://zeeemedia.com/interview/zerotime-new-aussie-legislation-to-force-quarantine-vaccinations-optus-cyber-attack-wwiii/

apparently as per new law, as of soon, when the next strain of the novi-cough comes we all get to be lined up and take a shower the Auschwitz style is what the Zeee says in the first part of the vid.

LostSocialist

It will be 0.5 simply because the RBA is too stupid to do anything else.

Peachy

will be 0.5 simply because the RBA is too stupid to do anything else.

😔

Gouda

That was my reasoning too! Can’t see them doing anything else.

Freddy

0.25%. I knew they would try to save face on their “slowing down rate rises” comments but wow.

Coming

and AUD barely moved !

Freddy

That is the curious thing. Do they know RBA will eventually raise rates to support the AUD?

Coming

AUD up 1.6%

bond yields falling all along the curve

see my posts above to peachy and 90kw

lifting interest rates is inflationary

Aussie Soy Boy

What do you think happens to the AUD if rates are held at 0.1%? And what’s the impact on prices of goods in Australia?

Coming

many factors will be relevant

But why did the AUD shoot up when the RBA surprised to the downside?

Last edited 1 month ago by Coming
Aussie Soy Boy

We’d be importing a lot of inflation through a very weak AUD.

The90kwbeast

Does the AUD ever do things that make sense?

Reus's Large MEMBER

LOL, house price falls must be more than they are letting on then

T

25!

No1

Savvy Aussies were right, the RBA will always save them in the end

Jam

Yep. $298 slabs of dead cow all round.

stagmal

https://www.macrobusiness.com.au/2022/10/rba-returns-to-reality-with-0-25-rate-hike/#comments

macro being all in on rate cuts is like your favourite indie rock and selling out to a big name label and mainstreaming their act

Coming

MB has nothing but hope to save their nucleus fund returns

They have been absolutely slaughtered on bonds

Scroll down to Myne’s comment here
https://www.macrobusiness.com.au/2022/10/bond-market-more-psycho-than-psychic-on-interest-rates/

stagmal

i’ve been murdered in absolutely everything this year except oil, at least bonds you get the money back regardless of market value at maturity

Jam

Lolz. So true. I went to comment on a Mathias comment saying it’s sad but not as sad as that place had become.

No1

Need sum analysis on the possibility that Aus is the equivalent of Japan but for household debt. Our public policy only works now with low rates so the RBA is doomed to lag the ROW. And like the Yen the AUD will be eroded faster than other fiat shitcoins.

A fly in your ointment

they ended up chickenshit… 25 pts is fuq all, like a fart in the hurricane

Still an increase. Since June, my variable (small) portion of the mortgage went up 26%. Will be up another 5% next time around, so almost a third up in 6 months. Killing them softly.

lswchp

Phil stopped sucking banker cock for a few second to listen to the sage advice of LSWCHP, who are now referring to themselves in the plural third person, just to confuse everybody.

Peachy

Phil stopped sucking banker cock for a few second to listen to the sage advice of LSWCHP

It was really hard to pry him off! …Magdeburg eat your heart out.

https://en.m.wikipedia.org/wiki/Magdeburg_hemispheres

lswchp

Thanks for the pointer! That’s some suction, right there! 😊

Coming

and now the AUD is soaring

Up 1.6% for the day

I am telling you that interest rate rises (particularly IOR) don’t mean what you think they do

they are inflationary