Endgame

Interest Rate Response

I don’t read ZeroHedge much anymore because they don’t understand and/or deny the relationships between energy, overshoot, and the economy.

Today the US Fed lowered the interest rate so I had a peak at ZeroHedge to see what the knuckleheads were saying. It seems we’re approaching a Minsky Moment.

https://www.zerohedge.com/news/2019-07-31/endgame-starting-2024-all-us-debt-issuance-will-be-used-pay-only-interest-debt

Endgame: Starting In 2024, All US Debt Issuance Will Be Used To Pay Only For Interest On Debt

As we first pointed out back in March, when looking at the US ‘income statement’, most concerning by far is that for the first four months of fiscal year 2019, interest payments on the U.S. national debt hit $221 billion, 9% more than in the same five-month period last year, with the rate of increase breathtaking (see chart below). As a reminder, according to the Treasury’s conservative budget estimates, interest on the U.S. public debt is on track to reach a record $591 billion this fiscal year, more than the entire budget deficit in FY 2014 ($483 BN) or FY 2015 ($439 BN), and equates to almost 3% of estimated GDP, the highest percentage since 2011. In fact, as of June 30, US interest had already surpassed $600 billion.

In short: in the stylized cycle of the US “Minsky Moment”, the US will enter the penultimate, Ponzi Finance,phase – the one in which all the new debt issuance is used to fund only interest on the debt – some time around in 2024.

From that point on, every incremental increase in interest rates, which will eventually happen simply due to rising inflation expectations, will merely accelerate the ponzi process, whereby even more debt is sold just to fund the rising interest on the debt, requiring even more debt issuance, and so on, until finally the “Minsky Moment” arrives.

At that point, while we don’t know yet what the next reserve currency – either fiat, hard or digital – after the US dollar will be, we urge readers to own a whole lot of it.

In case you don’t understand any of this, let me simplify:

We are using more debt to fix too much debt, and not one of our leaders understands that fossil energy depletion is why we have to borrow $3 $4 of debt to generate $1 of growth, nor that doing so is a really bad idea.

14 thoughts on “Endgame”

  1. I wonder if “they” understand more about oil depletion and its link to the western currencies than they let on. Certainly the armed services have issued public portions of planning documents highlighting fossil fuel depletion as a future challenge for operations. And those issues have been openly discussed in U.S. congressional hearings.

    Recent (and past) geopolitical machinations hint at oil being a prime mover of those actions, rather than the publicly stated reasons. Michael Klare recently wrote an article that begins (paraphrasing from memory) “it’s all about oil”. He did not however make the link between oil and western fiat currencies.

    I think “they” have no choice but to “print” money at this point, and try to maintain the current geopolitical and financial system for as long as possible. Trump’s instincts on this might be right if framed from this narrow perspective. Borrow from the world as long as possible, keep interests as low as possible, and boost corporations profits by lowering taxes and deregulating. Climate and environment be damned. This current system is going to break at some point anyway, and they know it. But maybe the U.S. will be the last man standing, as some have suggested.

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    1. You might be right but I think it more likely that our leaders do not understand what is going on and are simply behaving according to the Maximum Power Principle encoded by their genes.

      What is the advantage of being the last man standing in a globalized world where almost everything we need to maintain our lifestyles comes from other countries, and when the dust settles there’s insufficient oil to go and take what you need from other failed states?

      If your objective is wrong then achieving the objective will not be a success.

      I think the correct objective is to minimize total suffering as our economy contracts. This objective would completely change our current priorities. Unfortunately it would require a majority to break through their genetic tendency to deny unpleasant realities and that’s not going to happen because denial evolved to ensure we don’t use our intelligence to override the Maximum Power Principle which governs all life.

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  2. Any leader, brilliant or otherwise, who starts seriously talking about declining net energy, peak oil & it’s implications – last call…ever – will not keep their job as leader very long & it would be an even worse career move if they claimed we needed to scale back to preserve energy. Just ask Jimmy Carter.

    I would estimate that over 95% of the supposedly educated humans who are convinced climate change needs to ‘be addressed’ by governments are still under the delusion that it can be done with only little, to at most, a modest sacrifice in their standard of living. Tell them it’s a minimum 80% and they won’t believe it & boo you off the stage. What Carter proposed was a sliver of a fraction of that. Most of the climate change believers are not up to speed on the mass extinction/biological annihilation, which could only be addressed by quickly reducing the majority of the humans. It’s as big of a threat as climate change.

    There are no solutions for humans. Humans would need to speciate into true sapient beings before they would voluntarily give up the goodies no matter how bad the consequences get. Given my understanding of this thermodynamic universe, a true sapient species is likely impossible.

    If the humans survive their own behaviour, it will be because of luck & not from any moves on their part.

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    1. Yes. It’s nevertheless remarkable that there aren’t even a few leadership candidates or prominent scientists/environmentalists that speak publicly about what we should do. You would expect that a few sapients would speak up, there would be some debate, and then the majority would vote for business as usual. Rather there is total silence on the issue. For me this reinforces how powerful the human tendency to deny unpleasant realities is.

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      1. I’m still trying to find both the e-book & audio book of:

        “Into the Cool: Energy Flow, Thermodynamics, and Life”
        by Dorion Sagan and Eric D. Schneider

        I just found that site yesterday. Other than that, I use audiobookbay, torrentz2.eu & borrow physical books from the library, which don’t have everything.

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        1. I don’t believe Into the Cool was ever released as an e-book or audiobook. I own a paperback which you are welcome to borrow if ever in the Comox area.

          I’ll send you an email with info on the best site for ebooks and audiobooks.

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          1. Thanks, Rob. Definitely interested. audiobookbay has become polluted by the MAGA crowd the last few years.

            Years ago, before Varki, I read a few books by evolutionary biologist and sociobiologist Robert Trivers. He’s done a lot of work on deception & self deception. Good stuff. He’s not as well known as he should be because he don’t sugar coat anything & thus pisses off the true believers classes – religious, progressives, conservatives, econ 101 disciples, toxic feminists, transgender, etc – you know, most of the ones who are pro science until scientific findings contradict one or more of their ideological beliefs. He’s great;) Kinda a giant in his field. I see they have most of his books on that e-book site & my library had a few.

            A talk by Trivers

            The Folly of Fools: The Logic of Deceit and Self-Deception in Human Life

            “Although our senses have evolved to give us a detailed perception of the outside world, as soon as that information hits our brain it becomes biased and distorted, usually without conscious effort. Whether it’s a romantic relationship or the planning of an offensive war, there are many opportunities to lie and self-deceive—but deceit and self-deception alienate us from reality and can lead to disaster. Why does deception play such a prominent role in our everyday existence?”

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              1. Lol. A Canadian boy. Very clever. Has done his homework.

                Baba reminds me of my hip hop nephews, except their raps are not so big on sexual selection & mating strategies.

                My oldest hip hop nephew does plenty of philosophizing & social critiques in his songs, but he did make this one video that can sort of be categorized as science themed – Ornithology.

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  3. Tick, tick, tick…..

    Bailout #3: Chinese Bank With $200 Billion In Assets Is Nationalized
    https://www.zerohedge.com/news/2019-08-09/bailout-3-chinese-bank-200-billion-assets-nationalized

    China can’t cut rates and ease to boost negative PPI as food prices are exploding

    China can’t halt soaring pork prices as half of its pigs are dead or slaughtered

    China can’t raise the yuan to ease the highest CPI in 16 months as it currently devaluing in retaliation to Trump

    The bottom line: Trump now appears to be winning the trade war with China, whose economic contraction is accelerating and between slowing trade, sliding corporate profits (PPI), rising inflation (CPI), a devaluing Yuan, a record debt load, and now a sudden crisis in its banking sector, Beijing has found itself paralyzed and with zero credibly options how to kickstart the economy.

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