The more energy we have access to, the more we feel the urge to burn. And we produce children to help us do it, and raise them accordingly. There seems to be a pattern here. We make sure every next generation is even more dependent on burning even more energy, and less capable of doing without. Not because we don’t understand this can only end in tears and blood and piles of corpses; we do. All the evidence says we simply can’t help ourselves.
Perception for now remains that Draghi will do whatever it takes – re: buy buy buy – to rescue anyone and everyone. But that perception rests on the idea that he can, in the first place. Jeremy Warner puts his finger on a sore spot that doesn’t get nearly enough attention anymore:“… in the end, no amount of liquidity can cover up for an underlying problem with solvency”.
The illusion of central bank omnipotence, be it in setting interest rates or in buying up any and all kinds of paper, will continue until it doesn’t; we have our media, our politicians and our own gullibility and wishful thinking to thank for that. In the meantime, though, hardly any of the problems in Europe are truly being solved. Moreover, those that are even attempted will increasingly involve bail-ins as a way of funding bail-outs.
It’s just a matter of time until the walls come down, and of course it’s ironic that the longer reality can be kept hidden underneath the carpet, the less real it seems. But that’s simply a predictable consequence of having short attention spans. And we should be able to look beyond that.
The “Lord Stern report” focuses on the carbon bubble caused by the discrepancy between climate targets and the exploitation of carbon resources. But there’s another potential bubble in carbon that the report does not address: a large part of the resources will simply never become economically viable.
Even before you run into climate related limits, a lot of carbon will prove unburnable not primarily because of climate change legislation, but because of either one of two issues: 1) physics meets monetary limits, i.e. developing the asset makes no sense economically, or 2) physics meets physics, i.e. developing the asset makes no sense in energy terms because it costs more energy than it delivers.
Far more money is spent on the promise of oil and gas plays than on the actual product. The result is a carbon related land (rights) bubble, and a typical case of something that looks good, until it doesn’t.
The point to take away from all this is that a storm cloud of uncertainties is taking shape above the carbon industry. And that alone will be enough to leave a lot of carbon unburnable. Which may not be such a bad thing.
It’s a very simple discussion. You can start it today with Krugman or one of his alleged adversaries: Why do you advocate economic growth? Why do you see a period of non-growth or shrinkage as a necessary evil that needs to be brought down to its knees at – quite literally – all cost?
And what is it you want to grow into? Can you explain that? I’ve never seen that properly defined. Isn’t it perhaps true that if you don’t know the answer to that question, you are by definition blindly chasing a mirage?
I don’t think you can reform [the finance system] – I think it’s beyond anybody’s control and history teaches that we have these large structures that rise and fall all the time. This is just our form of empire – our form of economic imperialism, and we’re going to see that collapse and then we will do something different.
So it is “how do we reboot the operating system?” – there’s no point trying to build a better dinosaur, let’s be mammals. The dinosaurs are going extinct anyway, no matter what anybody does. So let’s concentrate on building new systems of government from the bottom up – new systems for money, new operating systems.
It’s a very simple story really: this is a widespread tale of “western societies transforming themselves into pyramid schemes”; or perhaps we should say one big global Ponzi scheme. And these Ponzi things collapse, and there’s nothing anyone can do to “fix” that: the poisoned chalice must and will be emptied to the last drop.
The main problem seems to be that the entire westworld economic system is based on belief alone. The Netherlands has become a society built entirely on delusion, and it’s by no means the only one.
Oliver Stone’s 1987 film Wall Street was as much an answer to as a parody of a mind change that had pervaded the world since Ronald Reagan and Margaret Thatcher came to power in their respective nations.
But in the upper echelons Gordon Gekko’s “Greed is Good” was never truly seen as a parody, just as the message of the film was completely lost on the people it was about. And still is. It’s too convenient when justifying your behavior to yourself and others, like Ayn Rand is again today. The world is full of people who still today will sing the praises of the Iron Lady and The Great Communicator, of the Falklands and Grenada.
Reagan and Thatcher made it acceptable, nay, hip, to borrow one’s way (back) to wealth, or the illusion thereof, and a little cheating and lying was sort of alright on your way to the top provided you lied and cheated while you were already a mover and a shaker. That mindset has never left us anymore.
The EU as a governing body has started to react as your own body would do if for instance you were exposed to extreme cold for a prolonged period of time (hypothermia). That is, in order to save the core, blood flow to the extremities (in the EU case, the peripheral countries) would be cut off, eventually resulting in the amputation of toes and fingers.
The Roman empire didn’t fall because of just one cause, but this hypothermia-like dynamic certainly played a big role. The more Rome resorted to squeezing the peripheral regions to maintain its own wealth, the more resistance it encountered. Until the periphery sacked the entire empire.
Yeah, some things in life are inevitable. That’s why it was no surprise, though still endlessly amusing, to find that while depositors of Laiki Bank (aka Cyprus Popular Bank) on the island itself have been unable to get to their money for 10 days now, Laiki’s 4 branches in the UK have all that time simply remained open for business.
It seems to escape everbody, but that doesn’t make it any less true: people from Portugal to Spain to Italy to Greece to Cyprus and Ireland are worse off today than they were when they first adopted the euro. Moreover, their economies are all getting worse as we speak and projected to plunge further. The once highly touted blessings of the common currency are by now lost on most of southern Europe; for them, the euro has been a shortcut to disaster.
The EU’s financial scorched earth strategies have left its Mediterranean members with highly elevated unemployment rates, fast rising taxation levels, huge cuts to pensions, benefits and services and above all insanely high debt levels, personal, corporate and sovereign. And now, as ironic as it is cynical, their savings. The only thing that keeps the nations from going bankrupt is more debt, largely in the form of ECB loans.
Staying in the union has nothing positive to offer anyone anymore, except for those presently in power in Brussels and in the capitals of the rich core nations. The dissolution of the union is inevitable. Unfortunately, given the hubris in the core, so is the bloodshed that will pave the way there.