Ass Clowns of Austerity …



From the ‘Be careful of what you wish for, you might get it’ department:

Disappointed with the failure of ‘free- money’ to revive the Waste- based economy’, the Establishment now turns its hopes toward a well- tempered austerity to save it.

Well- tempered indeed: the world- political/economic system floats on an ocean of bribery and corruption; cruelty and narcissism. Faux belt- tightening dares not interrupt the flow of special favors and ‘self- expression’. Austerity is directed instead around corners and toward the shadows. Kicking children, elderly and the unemployed in the balls/into the gutter highlights the telegenic ruthlessness of the elites and their canned outrage over self- created bureaucratic waste.

Establishment lackeys fall over themselves proclaiming how diabolical they are. This is a cultural phenomenon: politicians pretending to be nazis gives them the ‘street cred’ of gun- toting, SUV- driving, crack smoking gangster rappers! Ol’ Dirty Bastard for President!

Never-mind the real waste, let slip the ass clowns of austerity!

 

 

This is the Brent crude front- month contract from TFC Charts. Nothing like some refreshing reality: the barrel price remained within a trading range from before the summer of 2009 until last fall. Since that time, the price has been within the ‘danger zone’. + $100 oil constrains business output and final demand. No wonder the economy is having the bends.

Here is the Estimable Gas Buddy gasoline price heat map of US counties (click on for bigger pic):

 

 

OUCH! Here’s austerity, serious as a heart attack: unless you live in South Carolina, you are going broke just driving around, doing nothing!

Brent prices have reacted to tumult within OPEC and the failure of that organization to raise non- existent production quotas. This suggests Middle East bigs are at some sort of fuel output limit. Peeps are also worried about the stability of Saudi Arabia, being as it is surrounded by disintegrating regimes and scary al Qaeda militants. Geo-strategic uncertainty drives prices along with the ongoing exhaustion of cheap, easy to access oil fields.

This is what the Peak Oilers have been yammering about for years: diminished flow rates leading to bidding wars over available supplies. At some point: chaos.

The current high price leaves infrastructure built to profit from $25 crude underwater. Oops, that infrastructure is America: too damned bad! This is why free money fails, at the end of the day what is subsidized is consumption. Making use of the subsidy leaves leaves consumers broke, which is where they started!

Meanwhile, the money winds up in the hands of banks and big business, better to give them the free money directly and leave out the middlemen! The effect of free money on establishment becomes indistinguishable from austerity. This is why proto- fascist Larry Summers demands more stimulus.  Heads or tails you lose, the banks and monopolists win.

Let slip the dogs of easy money!

The Dynamic of the Now is simple: as the so-called economy improves, accompanying demand pushes fuel prices higher. The world’s economy strangles on its ‘guzzling efficiency’. Cars appear faster than oil wells meaning something has to give.

Declining net energy shifts the paradigm from ‘growth’ toward ‘shrinkth’. Nobody has to wander dark alleys looking for austerity, it’s baked into the energy cake. The real challenge is to bypass the free- money/faux austerity food- fight and insert some common sense and humanity into the process. We need to prepare for hard times, in other words.

We don’t know how to deal with shrinkth. We don’t even know what it is. By the time we figure it out it’s too late. Shrinkth is a hyper- wicked problem: this is a problem that reveals itself as a set of solution-annihilating consequences that appear long after a solution can be applied. This is not to be confused with a mere wicked problem, which emerges out of the form of an equally problematic solution. With wicked you know you get that one solid chance: with hyper you discover the problem after it has killed you. Like the ‘coffin corner’ or face of Jesus in a slice of pizza, solutions to hyper- wickeds only appear in the wreckage of all possible solutions.

The much- ballyhooed ‘singularity’ emerges as a murderer’s row of machine- problems whose controls are set on ‘snuff’: population, nuclear power, climate change, energy shortages. Japan’s meltdowns rendered the country’s nuclear enterprise insolvent at the same instant it revealed nuclear surplus costs that require solvency to safely manage.

Like all-out thermonuclear war, hyper- wicked problems are to be avoided at all costs. This is serious, I’m not making a ‘joke’.

Japan managed a long-running energy deficit by arbitrage: re-packaging and exporting its energy consumption overseas in the form of ‘economy’ cars. Japan’s consumption costs were purposely under-priced, hidden behind nuclear double- speak and net energy book- cooking. The Japanese establishment recognized the energy problems but chose to bury heads in sand. Anti- nuclear activists were marginalized: managed suspension of disbelief allowed the nuclear costs to multiply. The reactor enterprise as a whole became ‘Too Big to Fail’.

This ‘extend and pretend’ energy strategy allowed Japan to apply its own (fake) price on energy consumption costs: it could push these onto its export products and have gluttonous ‘buy anything’ Americans pick up the tab. March 11 ended the fantasy in an instant.

Japan is now stuck feet first in an atomic meat grinder: It cannot shift its nuclear liabilities to anyone, but must pay them out of its own vanishing energy returns. With obvious desperation Japan seeks to put off having to pay costs as long as possible in the hopes they go away or some ‘growth’ arrives. Unfortunately, the longer Japan waits the more the costs expand. Welcome to the singularity, Japan!

If the country cannot pay its nuclear costs or chooses to pretend, Japan fails as an industrial state. The rest of its reactors will melt down.. Hyper- wicked tends to the existential: Japan must be an ongoing business enterprise in order to service operating reactors. This means Japan’s existence depends entirely upon the economic activities — and success thereof — of its trading partners, all of which must also be ongoing business enterprises.

Our energy singularity does not manifest itself as ‘double- nickel’ speed limits or gas station lines as it did in the past or now in places like Pakistan. Fuel is allocated by price, determined by the availability of credit to energy bidders. Price distortions migrate up- and down the credit food chain toward the weakest links. Credit becomes the cost- shifting mechanism. The weak links are entities that cannot service their debts with output but rely on the forbearance of their creditors, that is: the willingness of creditors to continually roll over increasing amounts of debt without calling the loans.

During the real estate bubble, high fuel prices undermined real estate speculators and the (shadow) lenders that supported/enabled them. Insolvency at the street level was kicked upstairs to originators and CDOs. When mortgage lending croaked the bag- holders became governments along with the banks, hedge funds and wealthy individuals that ‘invested’ in mortgage lending derivatives. One looking at real estate would not come to any conclusions about energy constraints, but would rather notice credit fraud and solvency.

Real estate developers in ‘bubble’ states collapsed, the lenders to the developers failed then governments that guaranteed the lenders’ loans failed in turn. Default is austerity in action: it has no respect for ‘niceties’: corrupt Greece saddled with massive debts trembles at the edge of the abyss alongside corrupt German banks that own that debt.

American states and localities are weak links. Japan is the weak link. Meanwhile, America’s wannabe Mussolinis argue about the ‘sin’ of homosexuality. Good grief!

Buying fuel with credit requires fuel-driven output to service then retire the debts. Nothing else will do! Non- fuel output is too slender of means to have any effect on indebtedness. This is Japan’s ‘productivity trap’ and ours as well. The world desperately needs less destructive production methods, and we humans know what these are. Non- destructive production cannot return the surpluses necessary to retire the debts incurred to bring the destructive methods into use in the first place.

Because the economic argument does not include energy in any calculation the European establishment writhes in agony attempting to escape the productivity trap: (Economist)

Trichet’s long game

DESPITE being almost alone in its hard-line opposition to any form of Greek debt restructuring, the European Central Bank looks set to win the current round of Greek bail-out negotiations. As my colleagues have noted, an informal and voluntary debt rollover won’t deal with Greece’s underlying insolvency, and may make a future restructuring more complicated. This can-kicking exercise will end in tears.

Delay does, however, affect the likely political consequences of a debt restructuring. Research from JPMorgan, highlighted by FT Alphaville over the weekend, shows how euro-zone states are increasingly responsible for Greek debt (directly or indirectly through the ECB) as private creditors’ bonds mature and the bail-out tab rises. Future debt restructuring will be more costly for European states and fiscal integration more attractive.

This amounts to the advance of European integration by the back door, a time-honoured EU tradition. Judging by his provocative remarks at the Charlemagne prize ceremony—an award previously given to the euro itself—that may well be Jean-Claude Trichet’s goal in seeking to defer a debt restructuring. And the ECB, like any human institution, responds to the political perspective and personal ambitions of its leadership.

A meltdown is a meltdown is a meltdown: energy- driven austerity elbows monetary policy out of the way. Central bankers cannot not effect energy outcomes except by constricting money supplies and effecting energy conservation by ‘other means’.

Heaven forbid there would be an honest discussion about energy and how it relates to an economy that has outlived its usefulness. Meanwhile, the establishment greases up the ass clowns of austerity and — like the Japanese nuclear teams — hopes for the best..

23 thoughts on “Ass Clowns of Austerity …

  1. Jb

    “If the country cannot pay its nuclear costs or chooses to pretend, Japan fails as an industrial state.”

    Terrific post, Steve. It seems pretty clear now that the politicians, bankers, and the ‘Buy-n-Larges’ of the world will do everything they can to steer this ‘Axiom’ away from the hyper events …. until they can’t. The ugly truth of the waste based economy will be more than most have been conditioned to bear.

  2. Loveandlight

    Help me out, here. So will all of Japan’s reactors melt down because they will no longer be able to do all the stuff that needs to be done to maintain them properly? (Don’t know much about nuke-power, but I had a bad feeling that would turn out to be the case). If so, then *all* the reactors in the world will melt down at some point as industrialism and its economic model crumble, won’t they? And all their spent fuel-rods will explode like massive dirty-bombs when they can no longer be kept cool in massive pools of moving water. How utterly, unimaginably horrible.

    1. ben

      it would appear so. hyper-wicked.

      a month before ODB died he said the gov’t was coming for him like it did tupac and biggie smalls. just sayin’ – steve’s the one who brought it up, in his brilliant post.

    2. Rob

      I’m an engineer and have studied peak oil and climate change for several years. I was until recently a strong supporter of nuclear because I saw it to be the only scalable energy that might de-carbon our economy and keep the lights on.

      I’ve changed my mind. Most risks with nuclear can be managed to an acceptable level with good engineering and policies. Except one: having no money to maintain it. We are guaranteed to be broke in the future. Therefore nuclear is a bad idea.

      1. Loveandlight

        What soured me on nuclear is the fact that *all* the spent fuel-rods in *every* nuclear reactor that ever operated remain too highly radioactive to remove for off-site storage anywhere and have to be kept cool in massive pools of moving water, which means reliable electrical power to move the water. What does de-industrialization mean if not no more reliable baseload electrical power whether anyone likes it or not???

        To Steve’s components of the evil Singularity, I would add the fact that we’ve freaking *killed* the oceans. I can’t even wrap my mind around just how much destructive activity and malfeasant consciousness it takes to *kill* *the* *oceans*!

        I went through a neoprimitivist phase a few years ago but pretty much outgrew it because 1) It was a form of “True Believerism” more than anything else (True Believers, including foaming-at-the-mouth Dawkins-fanboi atheist-skeptics, *always* cherry-pick their facts) and 2) Way too many self-identified neo-primitivists are socially maladjusted idiot-losers who *DO* *NOT* have so much as a fraction of what it would take to survive as a hunter-gatherer and form a cohesive tribe. Having been an idiot-loser college-campus radical-leftist back in the day, that was a major “been-there-done-that”. But recently I have found myself wondering if it really is as stark a choice for humanity as either extinction or returning to pre-agricultural tribal life. (Yes, this would mean existing on the planet in drastically reduced numbers.)

    3. steve from virginia Post author

      I wondered what would happen when reactors became ‘unprofitable’? Would people just board them up with plywood and walk away?

      Rob sez it: “Having no money” is the fatal risk.

      I suspect the cost benefit analysis propels Germany, Switzerland and Italy to reject nuclear power.

      Japan could have gone w/ the geothermal: that ‘road not taken’. There would be less gross power but the economics would be more favorable.

  3. Josh

    Steve, I would suggest that Brent crude topped in early April in the high $120’s and that the recent run-up from $105 to $120 is nothing more than a gap-filling, corrective bounce. The trend is down now.

    This fossil fuel is heading back to $70 a barrel – that’s where it has support.

    1. steve from virginia Post author

      $70 Brent would mean Bernanke spent $600 billion to buy a recession driven by a fuel price spike.

      The ‘Bernanke Bulge’. Even though he didn’t cause it, he encouraged it by cheerleading and with zero percent interest rate policy and a dollar carry trade.

      $600 billion purchased a Greek default and a bunch of bank failures that will cost another $ trillion or so. It never ends, unless Greece blows up (literally) Ireland and Portugal will also default … Spain? Italy?

      Cheap gas and the US can ride out this one. I’m looking @ gold, which might be the ‘new 2008 oil’. It might spike to $3000 (then collapse).

      1. Josh

        The precious metals train left the station a long time ago, and is now at its destination. This is not the time to be getting long gold, especially with a bearish Hanging Man candle staring us in the face on the monthly chart.

      2. Loveandlight

        I have no talent for reading such charts, but even I have noticed that Aurum’s momentum appears to have stalled out a bit.

      3. Josh

        The only reason gold has been in a bull market for the past decade is because since 9/11 the US Dollar has been losing value relative to the Euro and other currencies. It’s not due to women all over the planet increasing their demands for more and more jewelry. It’s currency related.

        Now that the Eurozone is falling apart, the buck is starting to catch a bid. Its status as a safe haven store of value is slowly being restored. As a result peeps feel less of a need to load up on American Eagles.

  4. Ric

    Re: Steve’s mentioning of ‘unprofitable’ and L&L’s point that all spent fuel is in pools for every reactor that has ever operated:

    There is a decommissioned reactor that used to be run by PG&E at Humboldt Bay in NorCal, an active seismic zone. In 1983, PG&E shut down the plant for annual refueling and to make modifications based on updated seismic data. Before restarting, PG&E peformed an “economic analysis” and determined that restart would not be cost-effective. According to the NRC all spent fuel has been transferred from the pool to dry cask storage.

    It would seem that dry cask storage is safer than fuel in pools, but I wonder by how much. If dry casks suffer severe structural damage, does the exposed fuel present a risk to the local environment via decay heat, chance of recriticality, etc.?

    Should communities near nuclear power plants be pushing for their shutdown and the eventual movement of spent fuel to 100% dry cask storage? (I realize that fuel recently removed from the core needs to spend a few years in a pool before it is cool enough for dry cask storage.)

    Or is this really a hyper-wicked problem in that there is not enough time to cool fuel in pools and then move to dry cask storage and the entities in charge of nuclear power plants do not or will not have the ability to do so?

    1. Loveandlight

      That situation is likely different because the plant in question was shut down entirely. But it does show that spent fuel-rods technically can be moved off-site to dry-cask storage (though perhaps only after a long time in terms of a human lifetime). And the questions you ask are excellent questions indeed.

    2. steve from virginia Post author

      I think there is momentum for a shutdown if not then a moratorium. ‘Beater’ reactors have been getting rubber- stamp NRC license extensions. A few parts are replaced but 40 year old stainless pressure vessels/pumps/heat exchangers/piping are brittle, corroded, cracked, fatigued, etc. Extension = playing with fire. Letting reactors die when licenses expire is something that needs to be done.

      There is no escape for the pools until 10 years pass then the fuel can be casked or turned into glass. These casks were intended for transport not long term storage. I’ve seen photos of them stuck in rows in parking lots, rusting away. The Yucca Mountain long- term high level waste facility is DOA by NIMBY. Dumb idea anyway w/ groundwater probs. Spent fuel pools ‘R’ cheap expedient. Closed tanks are a danger: fuel in suspension can go ‘critical’ and a tank can blow up. ‘Hot’ reprocessing cannot be done w/ current facilities (but this can be done in theoretical MSR designs.) We are all stuck with the pools.

      After 9/11 there was a frenzy to harden the pools w/ reinforced roofs over the pools that would withstand an airplane strike but that was deemed too expensive. Most have primitive cooling dependent on grid power. The answer is both: we are running out of time and we lack the will to make decisions.

      1. Jb

        It will take a major nuclear accident here in the US to motivate a large enough percentage of the population to get off their asses and demand powering down of nuclear plants. Until then, Fukushima will be ‘somebody else’s problem.’ What happens when the Japanese figure out that not only is their country irradiated, but powering down means dying of cancer in the dark?

  5. Ellen Anderson

    Great to see serious discussion of the specific steps that need to be taken to deal with the spent fuel rods. Has Arnie Gunderson made any specific recommendations for Vermont Yankee that anyone knows of?

  6. steve from virginia Post author

    Spent fuel rods = no permanent solution.

    – no repository for high level waste anywhere.

    – uncertain reprocessing incl MSR types.

    – conventional reprocessing hostage to weapons developers.

    – reactor industry completely compromises regulators.

    Gunderson doesn’t directly address spent fuel b/c he has nowhere to go with it. Right now the urge is to get fuel out of lagoons and into dry cask storage. There is vitrification plant in some sort of ‘stage’ but no one is certain vitrification can maintain integrity over the multi- millenia time frames that are indicated.

    Economic context is unknown, including tipping points where industry cannot self- maintain: the reticence of industry/governments suggest tipping points may have been passed but who really knows?

    I do know Gunderson is/has been on the side of angels here and he has a lot of credibility. Maybe the citizenry can build some buzz for a reactor moratorium which would be a good start.

  7. Josh

    Here’s an interesting chart comparison. The Blackberry maker that keeps us all connected is getting slaughtered in the stock market, while the Blu-Ray manufacturer that keeps us all mesmerized is also in a downtrend but well above support. What’s up with that? I guess keeping us mesmerized is more important than keeping us connected.

  8. Ellen Anderson

    “Spent fuel rods = no permanent solution.”
    Unbelievable!
    The momentum for a moratorium will have to be organized and built at the local level around each reactor. Then a coalition would have to emerge that would be able to influence the decision makers at the federal level.

    1. steve from virginia Post author

      The outcome of Fukushima is to strip the ‘gloss’ from ‘New Nuclear’. It’s the old, paranoid ‘Atomic Energy Commission’ nuclear in drag. Radiation does not respect political plot-lines, it’s an ‘equal opportunity’ poisoner.

      The economy will have its way with reactors — both promise and curse. Long depressions would be the end of the industry but might also be the end of us if the ‘left- over’ reactors cannot be tended effectively or there is a nuclear war.

      The Achilles heel of the nuclear power industry is it is customer- dependent. It’s bomb- making rationale vanished with Gorbachev and strategic arms reduction. The reactors become unprofitable if the customers are clear that they won’t buy the power.

  9. Jb

    “The Achilles heel of the nuclear power industry is it is customer- dependent…The reactors become unprofitable if the customers are clear that they won’t buy the power.”

    You’re not serious, are you? Drought in France: yes. Lack of cash: certainly. Lack of customers for cheap electricity in the WBE?! I don’t think so.

    1. steve from virginia Post author

      Jb, In general, you are right, in particular — in the US — the ratepayers have enormous clout. The generators cannot force people to buy electricity.

      A reason why dozens of plants were canceled in the 1970s and 80s was because the utilities’ baseload demand projections did not reflect reality: they had too much baseload and not enough peak. The utilities were adjusting projections to gain Atomic Energy Commission- derived subsidies.

      Peak was addressed with smaller, cheaper natgas turbines. Satisfying peak demand was far more profitable as pricing schedules reflected ‘market clearing price’ for the marginal megawatt. Pathetic baseload could be ‘bought’ with conservation — an advertising campaign — and changes in retail metering. The cost was a fraction of the capex of a new plant, even a conventional, coal- fired version.

      Now the trend is to phase out the coal baseload and use natgas, instead, to cut greenhouse emissions.

      The only thing to keep nukes alive is subsidies which are a hard sell w/o the weapons imperative. Nobody is going to spend $10 billion to generate baseload @ 3cents/kwhr unless ‘Santa Claus’ pays them to do so. The customers refuse to buy it, that’s why no US nukes for 30+ years.

      This is a different equation in China where life is cheap, growth ‘numbers’ matter and there is no Mandarin word for ‘Environment’.

      In ‘Baseload America’ the customers rule; go to some public meetings w/ utilities and watch. I believe this is a big reason why utilities sold off their generating capacity; too much of a hassle for too little gain.

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