The word on every European citizen’s lips is austerity. It represents the wave of the future, the giving up of the idea of the good life acquired without effort. A benefit of being alive in the right place at the right time.
I almost feel sorry for them. Austerity is a frightening concept, along with the dawning realization there is no easy or even sure way to escape it. The world is at a turning. The crisis is being unmasked not as one of liquidity or even solvency but productivity and fundamental values.
What is money worth? What is a house or a ‘lifestyle’ worth? The unintended consequences are multiplying fast. Where is the value? The Greek rioters illuminate the future; no good German wants to vacation in a war zone. Vacations are what Greece sells. The remains of Greek – and Italian, Spanish, Portuguese and even littoral French – tourist economies are flying out the window, taking with them any notion of digging out of the avalanche of increasing claims.
The reason for the austerity is the inability of (waste) production to lift all boats in the rising tide, that tide being debt. The world witnesses the end of the efficacy of credit, which along with cheap oil has propelled a billion and more to the lifestyle that would cause a renaissance archduke to blanch with envy.
What is happening isn’t surrealism, it’s Dada.
It’s painful to watch the Eurozone attempt to bail itself out by simply declaring the bailout to be so. What is terrifying is that after three years of accumulating hazards, ‘Bailout 4.0 (or whatever it is now) too late and too little is the best that the Euro- establishment can come up with. How can anyone who can count or use a calendar take Monetary Union seriously? All the public misery and terror produces a cheesy perpetual motion machine. Nobody dares to ask where the new money – the value – is going to come from? It cannot come from trade; Europe is slowly and painfully awakening to the reality that modern, industrial commerce has finally priced itself out of business leaving the residue of speculation to take its place.
The Key- Man/Domino strategy intended to keep economic depression at bay is failing. There are too many key men breaking down, too many dominoes falling. It was not a very good strategy to begin with. In the long run we are all dead; how long did the establishment believe it could keep its collections of mortified remains animated – or in suspended animation? Realization takes time – to parse through the background noise of self- serving promotions – that the post modern world is not nearly as creative in the important matters as the pre– modern world is proven to have been!
Our forefathers are our betters in almost all things except for the ability to waste and get paid for it. Now the logical conclusion of the waste process is morphed into the wasting process. Analogous to Wendell Berry’s eating of the seed corn, destroying for a small profit the very capital that the process of destruction absolutely depends upon.
Conservation cannot be mentioned in polite company or in the high houses of the establishment so it operates in the dark. There are now monsters behind every door, there is no way out of the hallway we have cleverly created and have now confined ourselves to.
The greatest and most subtle and terrible of all stands the hardening dollar, forcing choices and valuations that the Establishment has hoped to avoid – ‘kicking the can down the road’ which, like ‘austerity’ is at the point of overuse. The dollar is hard; exchangeable on demand for crude oil, the stuff of life for industrial society, all of it. When the dollar is hoarded the outcome is the hoarding of oil as well as nothing else will be traded for it. One will only be reluctantly be traded for the other.
China has been living off its arbitraging labor/energy productivity against that of the US and the rest of the world. What is happening is the consequence of zero productivity left to those who are supposed to buy China’s products.
The fantasy of the West is that it can lift itself by its bootstraps. It’s the upper bound; where the narrative of the promise of endless material progress comes hard against reality.
The hope now is for an invasion of bankers from Mars.The economy isn’t really growing at all. The rise in nominal oil prices distributed throughout the oil platform since the economic peak in 1998 has been rationalized by the establishment as growth, even as the faster real rise in fuel costs has allocated capital away from increased extraction … even if the resources to extract could be found. Investments that could provide a real return are left out in the cold. The ‘price phenomenon’ has killed what it would in the past support. High input costs have ended output. Commerce is unprofitable, only buying and selling money can be counted as growth.
What ZeroHedge has humorously suggested as an ever- tightening currency compounding cycle is taking place in real time in the real economy because of the rising real cost of its vital component!
… Europe agrees to bail your bonus out, by flushing $1 trillion under the pretext the money will be used to stabilize the periphery and the euro. Immediately the stock of CMC, and thus the value of your accrued bonus (several million worth), surges by a record 20% in one day. So you think: “How can I get an even greater bonus appreciation? Why – I will short the euro again. At this point I know that between myself and the other FX desks at all the other French and German banks we can easily take the euro down to 1.20 if not much lower.
After all we are only trading against the very central banks that are keeping us alive. And when that happens Europe will have to print another trillion, then ten trillion, then one hundred trillion, all the while the stock portion of my accrued bonus surges. Brilliant.” Brilliant indeed – Zero Hedge has received confirmation that several of the largest French banks are now actively shorting the euro to take advantage of globalized moral hazard, which with every ensuing bailout does nothing but make the bonuses of French FX traders surge.
The allocation process with energy is identical to what is described here! The increasing share of productivity must be allocated to oil stifles demand for it … leaving little for citizens to occupy themselves other than shorting the euro or watching TV.
Too bad there is nothing on …