Steve Bull's Blog, page 218
June 16, 2022
Life in a Heroic Society
…where the hero’s journey might soon come to an unexpected end
Image credit: Mehdi MeSSrro via UnsplashWe live in a heroic society. Marvel heroes and heroines rule the small and not so small glowing screens, political and war heroes shape our societies future. Or at least, that’s what they think they do.
Inmy earlier posts, written on the subject of the catastrophic Failure of Imagination (Part 1 and Part 2) I have addressed some of the psychological and mythological factors behind the fall of our modern high-tech / high energy civilization. But, as they say: every story and narrative — no matter how false it is — needs a hero or heroine. I originally wanted to include this aspect in my previous article, but the subject proved to be such a rich target, that I decided it deserves a dedicated post. So, here we go!
A modern religion
First, let’s recap the story. In Part 2 I’ve talked about a new belief system — one that has incrementally replaced older religions and gods, and provided the same benefits by easing the believers’ fear of uncertainty and loss.
It did so via the myth of progress — an otherwise false narrative about human history — which states that everything both in social and in technological terms gets better over time, and will continue to get better in the future. According to it, despite various setbacks (wars, crises, fall of empires) the only way to go is up and up.
In contrast, it talks about earlier times as if it were all about being dirty, foul smelling, brutish and ruthless. The story uses the same narrative terms to scare people from misbehaving. It does so by presenting them an unwanted future (aka a dystopia), where dirty and foul smelling people commit brutish and ruthless acts…
…click on the above link to read the rest of the article…
The Fed Is Winging It: A 75 Basis-Point Hike “Seemed Like the Right Thing”
The Federal Reserve’s Federal Open Market Committee (FOMC) today announced an increase of 75 basis points to the target federal funds rate, raising the rate to 1.75% from 1%. June’s meeting today was the third meeting this year at which the FOMC has raised rates. Coming into the March meeting this year, however, the FOMC had not raised the target rate since March of 2020, even though price inflation began to accelerate during the second half of 2021.
Today’s 75-basis-point increase is the largest increase since late 1994 when the FOMC raised the target rate from 4.75% to 5.5%.
Notably, however, this increase comes mere weeks after the Fed Chair Powell slapped down the idea of a 75-basis point increase in June. As reported by Reuters on May 4, Powell had insisted “A 75 basis point increase is not something that the committee is actively considering.”
That didn’t last long.
The fact that the Fed was forced to hike the target rate by higher than it had suggested was even possible earlier in the year is a reminder that the Fed and its economists are simply in a reactionary mode when it comes to the US economy’s problem with mounting price inflation.
As even Powell admitted during today’s press conference, the Fed was surprised by how high price inflation has grown. The Fed then had to pivot in order to answer calls that the central bank “do something” about price inflation.
But when it comes to the Fed’s decisions about setting target rates, it is I increasingly obvious there is no model. The “plan,” to the extent one exists at all, amounts to “let’s see how bad inflation is, and then we’ll pick a target rate and hope that solves the problem.”
…click on the above link to read the rest of the article…
‘The economy is going to collapse,’ says Wall Street veteran Novogratz. ‘We are going to go into a really fast recession.’
Veteran investor and bitcoin bull Michael Novogratz’s economic outlook is not rosy
Michael Novogratz, founder and chief executive officer of Galaxy Digital Capital Management LP, spoke with MarketWatch on Wednesday ahead of a historically aggressive Fed rate hike.Veteran investor and bitcoin bull Michael Novogratz doesn’t have a rosy outlook on the economy, which he described as headed for a substantial downturn, with the likelihood of a “fast recession” on the horizon.
“The economy is going to collapse,” Novogratz told MarketWatch. “We are going to go into a really fast recession, and you can see that in lots of ways,” he said, in a Wednesday interview before the Federal Reserve decided to undertake its biggest interest-rate hike in nearly three decades.
“Housing is starting to roll over,” he said. “Inventories have exploded.”
“There are layoffs in multiple industries, and the Fed is stuck,” he said, with a position of having to “hike [interest rates] until inflation rolls over.”
Central-bank policy makers agreed to deliver an unusual 0.75-percentage-point rate increase, concluding a closely watched two-day policy meeting with a move that would push the Fed’s benchmark federal-funds rate rising to a range between 1.5% and 1.75% as it steps up the effort to quell an inflation rate that is hovering around a 40-year high.
It was the largest increase in the central bank’s policy rate since November 1994.
Before the Fed announced its decision, Novogratz speculated — accurately, it turned out — that the central bank would lift interest rates by 75 basis points and that the market would rally on that news. He also predicted that stocks will sell off in the coming days.
…click on the above link to read the rest of the article…
“We Are Teetering On The Edge”: Food Shortage Worries Mount As PA Farms “Crushed” By Record Diesel Prices
There’s nothing like the sweet smell of Building Back Better…
Pennsylvania farmers are being “crushed” by the record cost of diesel – so much so, that questions about a food crisis are starting to loom, the Morning Call reported.
One farmer in Lehigh County is quoted as saying: “I’ve got a tractor hooked up to my corn planter out here, no diesel fuel, and I can’t afford to get any.”
That farmer was airing his gripes to Kyle Kotzmoyer, a legislative affairs specialist for the Pennsylvania Farm Bureau. Kotzmoyer then turned around and testified to state lawmakers: “We have reached that point to where it is very close to being a sinking ship. We are teetering on the edge right now.”
The situation looks as though it will continue to push food prices higher, after the government reported that food prices in May were 10.1% higher than last year.
Kotzmoyer lamented the possibility of a food shortage: “One, if they can’t afford to put it in the ground. Or, two, if they can’t afford to take it out.”
The PA average for diesel is now $6.19 per gallon, up about 75% from a year ago, the report notes. It is a “huge, huge expense” for farmers, Kotzmoyer told state legislators.
One farmer who works on about 3,500 acres burns through about 2,000 gallons of diesel per month, he said. “If the farmers cannot get crops out of the ground, then there is not food on the shelves.”
Not Enough Renewables: Minister Blames Australian Electricity Shortage on Lack of Green Energy
Chris Bowen, Labor Party’s minister for energy and climate change, speaks to media during a press conference at Parliament House in Canberra, Australia, on June 16, 2022. (AAP Image/Lukas Coch)AUSTRALIANot Enough Renewables: Minister Blames Australian Electricity Shortage on Lack of Green EnergyEnergy Minister Chris Bowen has blamed Australia’s current electricity shortage on a supposed lack of investment in renewable energy and storage facilities from the previous government.
The Labor minister was responding to questions on whether Australia should simply increase—or repair—coal-fired energy generators that already provide around 64.67 percent of the country’s total electricity, as of December 2021.
“The problem is there hasn’t been enough investment in renewable energy,” Bowen told reporters on June 16. “There hasn’t been enough investment in storage.”
“Yes, you can say the wind doesn’t always blow, and the sun doesn’t always shine. Well, the rain doesn’t always fall out there, but we managed to store the water,” he said.
“We can store the renewable energy if we have the investment, and that investment has been lacking for the last decade. That’s the problem.”
Outside of coal, the National Electricity Market is supported (pdf) by wind power (10.45 percent of total generation), hydro (7.21 percent), individual solar systems (7.09 percent), gas (6.57 percent), and grid-scale solar (3.85 percent) among others.
Incidentally, Australia has been one of the fastest nations to adopt rooftop solar technology installing over 380,000 systems in 2021, with the Clean Energy Regulator saying the combined amount of electricity generated was 3,200 megawatts.
Further, experts have noted that simply building more batteries to increase storage capacity was unfeasible. One of the world’s largest battery storage systems is FPL Manatee Energy Storage Center in Florida, which can power approximately 329,000 homes but for only a two hour period.
Another problem with increasing battery production would be an increased reliance on Chinese supply chains, which would be risky considering the willingness of the Chinese Communist Party to leverage trade relationships in geopolitical disputes.
…click on the above link to read the rest of the article…
Running on Empty, Part IV
How the War between Russia and Ukraine is Destroying the Petrodollar System
Welcome to Part IV of Running on Empty, my four-part analysis of the Petrodollar system.
Part I of this series explained that the US dollar is the world’s first reserve currency that is not backed by precious metals. Instead it is backed by other people’s oil. Because of a secret treaty between the US and Saudi Arabia, petroleum can only be purchased with dollars. Every country needs oil, so everyone country needs dollars and sells imports to the US to get them. Demand for dollars has made the USD the primary American export, allowing the US to deindustrialize and financialize its economy.
Part II explained how the petrodollar has grossly enriched American asset holders (stocks, bonds, and real estate) and painfully impoverished American wage earners. Under the petrodollar system, dollars are created by private banks for profit. These dollars are recycled into the economy by OPEC nations, causing stocks, bonds, and real estate to rise. This profitable exchange is enforced by American military might, which punishes any country that seeks to exit the petrodollar system.
Part III explained that for the petrodollar system to function, America needs to be able to project power worldwide to secure international trade and enforce the system. America secures global commerce and projects military power by commanding the World Ocean, by which 90% of all goods are trafficked. To overcome America’s naval supremacy, both Russia and China have sought to establish control of the World Island, the Eurasian supercontinent that houses most of the world’s population and resources. The Russo-Ukraine War is a proxy war between the uncontested master of the World Ocean (America) and the would-be masters of the World Island (China and Russa).
…click on the above link to read the rest of the article…
June 15, 2022
ECB Holds Emergency Meeting To Discuss Market Turmoil
Last week, shortly after the ECB’s latest meeting disappointed markets and concluded without a discussion of Europe’s growing bond market fragmentation (which is to be expected since QE – the glue that held the Euro area’s bond market together – is ending) and which has since sent Italian bond yields soaring above 4%, we joked that “at this rate the ECB would make an emergency rate cut” just hours after announcing an end to QT and guiding to a July rate hike.
Once again, our “joke” was spot on because on Wednesday morning, just hours before the Fed’s first 75bps rate hike sine 1994, and with Italian bonds in freefall, European Central Bank “unexpectedly” announced it would hold an emergency, ad hoc meeting of its rate-setters starting 11am CET in which it would “discuss current market conditions.” It wasn’t immediately clear if a statement would be published after the confab.
The meeting, which comes less than a week after the rate-setting governing council’s last vote, raised investor expectations that the central bank is preparing to announce a policy instrument to stave-off another debt crisis in the region, which can only come in the form of more QE… which is ironic at a time when the ECB just announced it was phasing out all QE!
Italian government bonds rallied in price following news of the planned meeting, reversing some of the recent sell-off that analysts said brought the country’s borrowing costs towards the “danger zone”. Gilles Moec, chief economist at Axa, an insurer, said the “stakes are high” for the ECB “now that everyone is dusting off their debt sustainability spreadsheets for Italy, they probably need to go up an extra notch”.
…click on the above link to read the rest of the article…
The Harsh Reality of Energy TINA Strikes the US and Europe
Natural gas chart courtesy of Trading Economics, annotations by Mish.
Some European Factories, Long Dependent on Cheap Russian Energy, Are Shutting Down
The Wall Street Journal reports Some European Factories, Long Dependent on Cheap Russian Energy, Are Shutting Down
For decades, European industry relied on Russia to supply low-cost oil and natural gas that kept the continent’s factories humming.
Now Europe’s industrial energy costs are soaring in the wake of Russia’s war on Ukraine, hobbling manufacturers’ ability to compete in the global marketplace. Factories are scrambling to find alternatives to Russian energy under threat that Moscow could abruptly turn off the gas spigot, bringing production to a halt.
Europe’s producers of chemicals, fertilizer, steel and other energy-intensive goods have come under pressure over the last eight months as tensions with Russia climbed ahead of the February invasion. Some producers are shutting down in the face of competition from factories in the U.S., the Middle East and other regions where energy costs are much lower than in Europe. Natural-gas prices are now nearly three times higher in Europe than in the U.S.
The Sanction Impact
Global map from Nations Online Project, annotations by Mish
De-Globalization: New Supply Chains Are Inefficient and Will Drive Up Inflation
On April 4, I wrote De-Globalization: New Supply Chains Are Inefficient and Will Drive Up Inflation
What I called “proposed” then is happening now.
The EU does not want to use Russian oil or natural gas.
So instead, the EU gets oil from Saudi Arabia and has turned to the US for liquid natural gas (LNG).
This economic madness is driving up the price of natural gas in the US as well.
…click on the above link to read the rest of the article…
U.S. Midwest may have summer power shortages for years
June 10 (Reuters) – The power grid operator in the Central United States warned on Friday that problems it may experience keeping the lights on this summer could also occur during the summers of 2023, 2024 and beyond.
The region’s grid operator, Midcontinent Independent System Operator (MISO), has already warned of potential capacity shortfalls and other reliability concerns in parts of its territory this summer.
The northern and central regions are at “increased risk of temporary, controlled outages to preserve the integrity of the bulk electric system,” MISO has said.
MISO operates the grid for some 42 million people in 15 U.S. central states from Minnesota to Louisiana and the Canadian province of Manitoba.
On Friday, MISO released a survey showing it could have a potential capacity deficit of 2.6 gigawatts (GW) during the summer of 2023 depending on market responses over the next year.
One gigawatt can power about a million U.S. homes on average, but as little as 200,000 on a hot summer day.
MISO’s biggest problem is that demand was rising at the same time generation resources have declined due mostly to the retirement of coal and nuclear plants for economic or environmental reasons.
MISO said it may only have 119 GW of power resources available this summer to meet a projected peak demand of 124 GW.
For 2024 and beyond, MISO said “the capacity deficits are projected to widen … due to declining committed capacity and modestly growing demand.”
MISO officials were not immediately available to say what the grid would do to fix this problem.
Sarah Freeman, president of the Organization of MISO States and commissioner with the Indiana Utility Regulatory Commission, said in a statement: “States stand ready to work with MISO … to maintain reliability and resilience throughout this significant resource transformation.”
Science Snippets: Peak Oil Has NOT Gone Away
The video embedded below is scheduled to Premiere on YouTube at noon Eastern time on 13 June 2022. An online conversation will ensue shortly before, during, and slightly after the video is shown.
Professor Guy McPherson’s AVID Audio Course Described and Available HereThe Washington Post, 7 June 2022: World Bank warns global economy may suffer 1970s-style stagflation
Business Insider, 31 May 2022: IEA chief warns of summer fuel shortages and a triple energy crisis that will outstrip the oil shocks of the 1970s
CNN Business, 3 June 2022: 3 reasons high oil prices are here to stay
McPherson, Guy R. and Jake F. Weltzin. 2008. Implications of peak oil for industrialized societies. Bulletin of Science, Technology, & Society 28:187-191.
United States Department of Energy, February 2005: Peaking of World Oil Production: Impacts, Mitigation, and Risk Management
Latest Peer-Reviewed Journal Article:
McPherson, Guy R., Beril Sirmack, and Ricardo Vinuesa. March 2022. Environmental thresholds for mass-extinction events. Results in Engineering (2022), doi: https://doi.org/10.1016/j.rineng.2022....
