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..