Denial is everywhere, we refuse to go to rehab and kick the waste habit:
Life imitates art: we attempt to live up to candy-colored assumptions about ourselves, even as these are only images projected onto screens.
The Amy Winehouse wannabes insist we have managerial control over our problems. We do but we first have to go to rehab:
the bonddad blog
People Are Finally Figuring Out: Austerity is Stupid
“We can only win back confidence if we bring down excessive deficits and boost competitiveness,” he said. “In a such a situation, consolidation might inspire confidence and actually help the economy to grow.”
The above statement shows why austerity is simply one of the dumbest policies on the planet. First, The EU region was already growing at a slow rate when people started to talk about austerity.
Go to rehab, Bonddad! We have zero choice about austerity which is driven by energy constraints and high fuel costs and a hyper-competitive credit environment. More demand pushes fuel prices higher, past what we can afford to pay even with borrowing. What is taking place in the world economy is the ‘pricing out’ of non-remunerative (frivolous) goods and services. This pricing dynamic takes no prisoners: there is no ‘plan’ that will return Greece to the community of wasteful consumers. If Greece is lucky and bold it will not turn into Somalia.
What the Greeks — and the Somalis — don’t realize is they are competing against China and the US for exportable fuel demand. The Europeans lack the fiscal-federal structure needed to compete with the demand kingpins who bring guns to a knife fight. The lower bound for energy demand in ‘wasted’ EU countries and the EU itself is effectively zero. Simply declaring an end to austerity policies is an empty gesture because any policy that doesn’t actively suppress demand allows events to violently smash it.
Go to rehab Michael Hudson! The argument is that policy has been reduced to monochromatic bailing out of finance creditors by their customers regardless of the consequences (or absence of logic). The counter-argument is that any strategy that does not include conservation is irrelevant. Behind all the doors is austerity whether the policy makers choose to open them or not.
More denial from estimable Steve Randy Waldman:
Depression is a choice
We are in a depression, but not because we don’t know how to remedy the problem. We are in a depression because it is our revealed preference, as a polity, not to remedy the problem. We are choosing continued depression because we prefer it to the alternatives.
He’s right of course! We reflexively choose our cars over everything else … including solvency. We’ve created a universal set of fake ‘problems’ that can only be solved by first jumping into cars. The cars presume to ‘solve’ the self-created problems which in turn justify the cars in a reinforcing, self-bankrupting cycle.
Usually, economists are admirably catholic about the preferences of the objects they study. They infer desire by observing behavior, listening to what people do more than to what they say. But with respect to national polities, macroeconomists presume the existence of an overwhelming preference for GDP growth and full employment that simply does not exist. They act as though any other set of preferences would be unreasonable, unthinkable.
But the preferences of developed, aging polities — first Japan, now the United States and Europe — are obvious to a dispassionate observer. Their overwhelming priority is to protect the purchasing power of incumbent creditors. That’s it. That’s everything. All other considerations are secondary. These preferences are reflected in what the polities do, how they behave. They swoop in with incredible speed and force to bail out the financial sectors in which creditors are invested, trampling over prior norms and laws as necessary. The same preferences are reflected in what the polities omit to do. They do not pursue monetary policy with sufficient force to ensure expenditure growth even at risk of inflation.
On the way to rehab Steve Waldman discovers end-game political economics is a Darwinian struggle with no winners only those who are prepared to lose less than others.
Steve Waldman assumes that Americans and others can simply choose to live beyond their means as we have for decades.
Steve Waldman insists managers’ “overwhelming priority is to protect the purchasing power of incumbent creditors. That’s it.” The intention is to defend sunk capital ‘investments’ that are stranded by higher fuel and credit costs. The finance demand for repayment is never satisfied because investments fail to provide a return. These returns simply do not exist: we have simply decided that consumption/waste is production because somewhere, somebody gains by it.
The same thing can be said about armed robbery.
Here is why the incumbent creditors are protected and not just their purchasing power. (Mark Grant/Out of the Box newsletter/Zero Hedge):
Michel Barnier, the head of Europe Financial Services, announced this morning that he will soon be offering new rules for the debt holders of the European banks. Under the plans, senior debt-holders would face losses after shareholders and holders of subordinated debt had their investments wiped out.
Michel Barnier acknowledges without saying so directly that most of the assets at ‘banks in crisis’ are worthless: this is another large reason why bank restructuring has been avoided at all costs. Restructuring will wipe out all liabilities including depositors.
Write downs may also be applied to bank’s derivatives counterparties, it has been learned, which could be a disaster for other European banks as well as American banks. Counterparty risk will have to be evaluated again after his announcement. Barnier is considering forcing lenders to issue at least 10 percent of their debt in securities that would be eligible for bail-ins and he is also prepared to set out alternative scenarios for debt that could be eligible for write downs. The proposals will also include requirements for national governments to set up so-called “resolution funds,” financed by the banks, to cover costs from failing lenders apparently which will add to the liabilities of the European banks. Now one does not consider these types of measures in a vacuum so one would suppose that there are reasons for the implementation of these proposals and that they will go from academic to realization in short order. One more reason to avoid European financial institutions.
All administrative proposals to date are inadequate because they do not address the central ‘value’ issue: national ‘bail-in’ funds are meaningless conjectures as there are no funds to deploy, they have been ‘wasted’ or are flying out of the banks’ doors. Deposit flight puts more bank assets at risk in yet another vicious circle. The normal operation of the economy uses value — capital — as fuel, the process replaces the value(s) with debt. After centuries of burning value little of it remains, only massive accumulated obligations that can never be satisfied.
Here is an Peter ‘I Don’t Wanna Go To Rehab’ Huber in 2006: According to Huber, we have ‘huge, enormous, colossal, stupendous’ fuel resources. Do we or don’t we … and does it matter? Huber makes an economic argument that the spread between high-order energy sources and the lower-order variety will overcome EROI. His argument fails the test of time: the resources he claims don’t arrive on the market fast enough to avoid contests over them. Nations are outbid for fuel and fall destitute or they bankrupt themselves competing for fuel with borrowed funds.
Go to Rehab Godfrey Bloom! Anyone who claims central banks are “printing money” and causing inflation is a peak oil denier. Here is a more studied approach to denial:
Rethinking peak oil
Lin Shi and Yuhan Zhang (Climate Spectator)
In recent years, Chinese scholars have been embracing ‘peak oil’ theory in increasing numbers. The idea – first put forward by American geophysicist MK Hubbert in 1949 – is that individual oil fields, oil-producing regions and world oil production will display a ‘bell curve’: a steep rise in available supplies, narrow peak and subsequent rapid fall.
Peak oil theory holds a static view of the world, and its models ignore price effects: lots of oil discoveries and high production mean that prices and profits wane, and incentives for further exploration decline. But ensuing oil shortages then restore these incentives. When incentives exist, the industry will continue to produce and is likely to produce even more.
Get thee to rehab Lin Shi and Yuhan Zhang: the dynamic this duo fails to observe is that while a shortage provides incentives to drill, the effect of the higher price is to annihilate demand … of entire countries! Countries need cheap oil, their infrastructure is built assuming it. Without the cheap stuff the infrastructure is underwater: the debts taken on to install it cannot be serviced.
At least these analysts acknowledge the primacy of price in the oil equation. Both high and low prices provide incentives: low prices to waste more, high prices to extract more. However, the high-price incentive does little to moderate waste: it’s inelastic. Instead, high prices stretch fuel dependent enterprises until something breaks. At the same time the high prices increase the demand for credit. Because the fuel use is simply waste there is insufficient return to service or retire debt. This in turn requires ongoing debt monetization. What isn’t smashed by high fuel costs is clobbered with ruinous debt costs … or both.
The primacy of price in the oil equation: In dollar terms peak oil took place in 1998. The dynamic of high costs and a ‘waste gap’ that must be filled with unaffordable debt is ongoing: while analysts look out another ten or twenty years the effects they look for started to be felt in 2004.
Other analysts focus on phantoms such as the increase in total liquids and other forms of non-oil oil. Phantom-focus is simply another form of denial.
Here’s denial from climate science! (Skeptical Science) Who would have guessed?
On his way to rehab, Professor Alley supposes that renewable energy generators can replace conventional, fossil fuel versions at a negligible cost. Happy days are here again! Nobody has to die!
Either renewables replace fossil fuel waste or they don’t.
– If they don’t there is no point to renewables as the fuel waste enterprises will carry on as before, wasting fuel and loading carbon into the atmosphere. Fossil fuel waste will take place alongside the renewables (and their own embedded fossil fuel waste). The demand for more energy to waste is insatiable.
– If renewables DO replace fossil fuel waste the losses to the wasting enterprises will far exceed the cost of the renewables themselves. The auto industry and its dependencies represent 60% + of GDP. As has been seen over the past five years, reducing funds to- or cutting one dependency has effects that ripple across the entire economy: the bloated SUV is worthless without fuel as is suburbia.
– Meanwhile, the current level of ‘cash flow’ (which is what GDP represents) is what both enables and services the economy’s debts. Renewables therefor cannot replace fossil fuel waste, instead they are another fuel waste dependency (by way of debt). This is the same way sales of electric- and hybrid cars is internally subsidized within the auto industry by the sales of SUVs and giant pickup trucks. No truck sales means no electric cars b/c they are otherwise too expensive.
Speak of: the only pollution solutions must include getting rid of the cars, all of them along with car-related dependencies. The market is already solving the ‘car problem’. Europe is right now in the process of becoming car-free … the hard way.
The GDP cost is Massive. Cutthroat fuel competition using credit as a weapon is happening now under everyone’s noses and few are paying attention.
What economists and others don’t wish to discuss is when nations fail due to fuel shortage there is no chance of recovery. The reason is because no other nation will voluntarily surrender petroleum so that another can waste it driving aimlessly in circles. Should France fall it will likewise never recover or become a ‘growth’ economy as other countries will have to export their own petroleum demand to France.
Past time to kick the bad habits and go to rehab.