Providing Alcohol to an Alcoholic

Symptoms of a High Functioning Alcoholic

OPEC backs biggest oil cut since 2008 crisis

OPEC agreed on Thursday to cut oil output by an extra 1.5 million barrels per day (bpd) in the second quarter of 2020 to support prices that have been hit by the coronavirus outbreak, but made its action conditional on Russia and others joining in.

Notice that this and pretty much every other news report you read never explains the thermodynamic implications of what they report, because they are ignorant of, and/or deny, the relationships between wealth creation, credit availability, and fossil energy consumption.

Oil producers today cut production by about 1.5%.

Why? Because demand for oil is falling and the world has limited storage capacity. Oil must be burned at about the same rate it is produced. If they don’t curtail production prices will fall below the cost of production and everyone will lose money, except of course shale oil producers who have always lost money.

Why is oil demand falling? Because the oil powered machines that produce and deliver almost all of the things we use and eat are slowing down, which means economic growth is slowing or possibly declining.

What happens if economic growth stops or declines? Our banking system becomes fragile because the design of our debt backed fractional reserve monetary system requires growth to function.

Put more simply, money and debt retain value, and credit remains plentiful, only in the presence of economic growth.

Why are credit and debt important? Because our standard of living depends on them. For example, today you can save 5% of the price of a house, get credit for 95% in the form of a mortgage, and immediately enjoy 100% of the house. Your mortgage, in turn, funds someone else’s retirement portfolio. Without plentiful credit, most people will not enjoy their own home, or car, or iPhone, and most people will not be able to retire.

I explained the importance of growth and why we can’t have it forever in more detail here.

How have our leaders responded? Canada announced an emergency interest rate cut yesterday in the hope of stimulating economic growth. Our prime minister is planning to spend more printed money to stimulate growth.

Will it work? Does providing alcohol to an alcoholic work? Yes, for a while, unless he’s already too drunk, but doing so makes his bottom more painful.

How do you know when an alcoholic is too drunk? You offer him free liquor and he does not drink.

How do you know when an alcoholic has not yet bottomed out? He kills his hangover the next day with a drink.

How do you know when it’s too late to save an alcoholic? He dies from an overdose.

How do you know when an alcoholic is clean? He decides to promote and vote for a birth lottery.

<Edit Mar 8>

I’m going to go out on a limb and say the correction has begun that those of us with defective denial genes have anticipated since the rocket scientists that lead us “fixed” the too much debt crisis in 2008 with more debt. They’ll try again this time but I suspect the alcoholic is too drunk to drink. I don’t know if the drunk will respond if they try extreme measures like intravenous white lightning. Assuming he doesn’t, my guess is 20-50% of paper wealth will vaporize in this step down. There are more steps to follow in coming years until the alcoholic bottoms out when his preferred drink, oil, is gone. There’d be much less pain for all if he’d sober up now.

138 thoughts on “Providing Alcohol to an Alcoholic”

  1. Gail Tverberg, a smart aware person who is a leading expert on the relationship between the economy and energy, takes a contrarian view and thinks we would be much better off to let the virus burn through the population rather than our current plan to contain it which will collapse the economy.


  2. LitCovid is a curated literature hub for tracking up-to-date scientific information about the 2019 novel Coronavirus. It is the most comprehensive resource on the subject, providing a central access to 1378 (and growing) relevant articles in PubMed. The articles are updated daily and are further categorized by different research topics and geographic locations for improved access.

    h/t Apneaman


  3. So EU has decided to print much more money and give a fistful of euros to Italy. But is there any difference to what the U.S.A is doing? If everyone does it, no country will go Weimar or Zimbabwe. Helicopter money will be the new manna from heaven. What could possibly go wrong? Cheers!


  4. Mac10 this morning says some important things for us to ponder. He thinks there is good evidence that stimulating the economy with printed money and lower interest rates is not effective any more. His views align with my hunch that the alcoholic is too drunk to drink more.

    Governments are unlikely to stop printing money so the question is how does this all play out?

    My guess is that credit becomes scarce and expensive causing supply lines to break down causing governments to nationalize and manage key components of the economy. Followed some months or years later by civil society destroying inflation.

    In Idiots We Trust

    On March 3rd, the Fed slashed rates .5% – the market rallied for fifteen minutes and then crashed. This past week on Sunday night, in a shock and awe move, the Fed slashed rates an entire percentage point to 0% AND re-started Quantitative easing. When the futures opened, they were limit down in :5 minutes. Monday was the worst day for markets since 1987. On Friday this past week, the Fed injected a record $1.1 trillion of combined stimulus into markets (repo + QE), the market ended the week down -17%.

    …this past week, despite the restarting of QE (Fed bond buying), we witnessed the largest Treasury bond selloff in years. How could that possibly happen with the largest bond buying program in years? Because bond markets were spooked by the Trump fiscal stimulus package making its way through Congress. As it was with Trump’s asinine tax cut, we have now reached the point at which fiscal “stimulus” is doing far more harm than good. It’s called “the crowding out effect” – meaning the government is crowding out other borrowers in a limited credit market. Add in a global dollar liquidity crisis, and Trump extracting another $2 trillion of liquidity out of bond markets isn’t going to help.

    Note that the magnitude of the stimulus package grew an astounding 100% since Wednesday despite the impact the smaller version had on the bond market:

    “Long-term U.S. debt yields leaped Wednesday as investors sold 10- and 30-year bonds amid discussion about a potential $1 trillion federal stimulus package to help goose the economy.”

    Traders sold long-term bonds in anticipation of a deluge of future debt supply and the government’s eventual need to auction even more Treasury’s. Any glut in debt supply could cause bond prices to fall and their yields to rise.”

    The rapid rise in yields also appeared to spook equity markets on Wednesday. Dow futures hit their “limit down” level in premarket trade Wednesday, then tumbled more than 4.5% in morning trading.”

    I have said all along that heli money is going to nuke the credit markets. This past week we already got a small taste of that scenario. This week, once again, we will find out who is right and who is wrong. I can assure you, those who are betting everything on free money bailouts can’t afford to be wrong.

    Nature has checks and balances on how far profligacy and abject irresponsibility can be taken at the expense of future generations before it all blows up in the faces of the generation attempting to plunder the future for now.

    I believe these obedient corporate gerbils have reached the end of the line and can no longer be bailed out by their trusted morons.


  5. Wolf Richter explains some of the new ways the Fed will print money.

    What Are All the Fed’s Corporate & Investor Bailout Programs and SPVs? Here’s the Whole Shitload of Them

    Indirectly via its Special Purpose Vehicles and its Primary Dealers, the Fed can buy even old bicycles, as long as taxpayers take the losses.

    With its announcement this morning, the Fed expanded its three fundamental mechanisms in which it is once again bailing out the biggest risk takers, over-leveraged companies, hedge funds, mortgage REITs, and PE firms; wiping out cash-flows for crash-averse savers and holders of Treasury securities; and creating special opportunities for well-connected individuals who have access to the Fed’s programs. And let’s get this straight: None of the programs are going to fix the economy.

    These bailout programs fall into three mechanisms:

    1. Fed buys assets directly. Until this morning, this was limited to Treasury securities, agency debt, and residential MBS backed by Ginnie Mae (US government agency) and the GSEs, Freddie Mac and Fannie Mae. This morning, the Fed added agency-backed commercial mortgage-backed securities (CMBS) to the list.

    2. Fed sets up special purpose vehicles (SPV) and lends to the SPVs which then buy assets or lend. These SPVs can buy assets the Fed is not allowed to buy and they can lend to entities and individuals to buy certain assets. Under the Federal Reserve Act, these SPVs require taxpayer backing from the Treasury Department to protect the Fed from losses.

    3. The Fed lends to its 24 Primary Dealers against collateral, and that collateral can be anything the Fed decides, including now stocks – and in the end finally old bicycles.

    The entire alphabet soup of new programs will take a while to get set up and get started. And since they won’t fix the economy and its underlying problems, they might not work as well in accomplishing their goals – making the wealthy wealthier – as they did during the Financial Crisis. So we’ll have to see how this works out.


  6. An unprecedented effort! We’re fighting the apocalyptic evil! Fed announces unlimited bond purchases in unprecedented move aimed at preventing an economic depression. Thanks to Fed, money will surely keep on flowing to companies, households and cities (not only in the USA; of course the rest of the world will do the same and then money just keeps on flowing from heaven.)


  7. Nate Hagens, one of my favorite thinkers, published a big picture essay yesterday on the implications of the virus and what we should do in response. It’s a must read.

    I agree with most of what Nate says although I worry that the implications a few years from now of printing many trillions of dollars to bailout everything will be worse than the cure. I’d prefer we triage today which companies need to survive and which should be left to die. Displaced people should be put to work by the government in critical functions like food production.

    I also wish Nate would discuss the need for rapid population reduction (the non-virus democratically supported type). Fewer people on this planet is the only path to a reasonable future that I can see.

    Neither of my wishes will of course happen because of our genetic tendency to deny reality, and our tendency to deny that we deny reality.

    An Overview of the Systemic Implications of the Coronavirus

    Society swims in finance like a fish swims in water. As an energy-blind/systems-blind culture, we have assumed that growth is a natural law—that ingenuity and technology will naturally result in more growth in the future. For the past 50 years – and especially the last twelve – our ability to afford goods and services has been massively subsidized by credit. This credit, instead of going to Main Street in 2008/09 largely went into financial assets and has blown the Biggest Asset Bubble in History. Globally we now have hundreds of trillions of dollars of financial claims on a real economy of around 80 trillion dollars, which is about to drop by 10-20%+.

    The Big Short story in 2008 was about residential mortgages. In 2020 it will (at least) be corporate credit, as we have just ended a ten year period of extraordinary leverage by corporations borrowing at 2%, using the proceeds to buy back their own stock. Now there is going to be a massive decline in corporate balance sheets and many (50%?) of companies could be rated junk, which would mean insurance companies and pensions can’t own them (unless rules are changed). The ‘exits’ would be way too small for all the liquidations that people would have to make as we move into a deflationary depression, and these liquidations would then have a reflexive impact on the real economy. The central banks would be the only buyers of last resort, because so many trillions of bonds will be unloaded that no hedge fund or wall street bank or insurance company would be able to absorb them.

    What does this all mean? Stocks could be down 40-70% and bonds (other than Treasuries) would also have negative returns. The FED (and ECB, and BOJ, and BOC, and BOE and…) will massively expand their already massively expanded balance sheets. Eventually they’ll get approval to buy corporate bonds, and even stocks. There will be limits. We can print money, but we can’t print energy, resources or productivity. We got a clue in markets last week as US treasury yields backed up by 60 basis points when they announced $1 trillion stimulus. In other words, the amount of funds available to bail out society is not unlimited before market participants call uncle on the funding of it. This is a massive liquidity crunch and, in same vein as the virus itself, there are only bad options. We must choose the ‘less bad’.


  8. Mac10 articulates what I have been quietly thinking to myself. There’s a pretty good chance that the infinite printed money stimulus we just unleashed may not work for long.

    It might be a good time to convert any surplus cash you have into things you will need to survive in a simpler world, for two reasons. First, because supply lines from far away factories that make all of our stuff may stop functioning meaning what you need may not be available. Second, because in the not too distant future money will buy much less, meaning you may not be able to afford what you need.


  9. Reports reveal what officials are being told about COVID-19 … and it’s not what they are telling us

    “Supply chain and transportation impacts due to ongoing COVID-19 outbreak will likely result in significant shortages for government, private sector, and individual U.S. consumers.”

    Read that again. The Department of Health and Human Services is predicting significant shortages across our economy. Over a period of 18 months. And that’s probably the biggest reason this report is stamped “Not for public distribution or release.”


  10. Here’s a very intelligent articulate person, with a shitload of facts and references, making a very persuasive case that the virus is man-made and much worse than most expect.

    Where are the journalists asking intelligent questions? In denial as usual.

    Nothing about COVID-19’S clinical presentation is typical, including the fact that in many patients the first signs of infection seems to be losing your senses of smell and taste without any other symptoms, something no other virus on earth is known to do to otherwise asymptomatic patients. Additionally, an unnaturally juiced-up ability to use ADE would also explain what our front-line medical workers are observing in their patients: “I’m seeing people who look relatively healthy with a minimal health history, and they are completely wiped out, like they’ve been hit by a truck. This is knocking out what should be perfectly fit, healthy people. Patients will be on minimal support, on a little bit of oxygen, and then all of a sudden, they go into complete respiratory arrest, shut down and can’t breathe at all… That seems to be what happens to a lot of these patients: They suddenly become unresponsive or go into respiratory failure.” This sort of sudden precipitous decline is exactly what would be expected if COVID-19’s ability to use ADE had been accentuated in the lab, and would also explain the clinical observations that “this severity of [acute respiratory distress] is usually more typical of someone who has a near drowning experience — they have a bunch of dirty water in their lungs — or people who inhale caustic gas. Especially for it to have such an acute onset like that. I’ve never seen a microorganism or an infectious process cause such acute damage to the lungs so rapidly. That was what really shocked me.”

    And also the following horrific account: “Holy shit, this is not the flu. Watching this relatively young guy, gasping for air, pink frothy secretions coming out of his tube and out of his mouth. The ventilator should have been doing the work of breathing but he was still gasping for air, moving his mouth, moving his body, struggling. We had to restrain him. With all the coronavirus patients, we’ve had to restrain them. They really hyperventilate, really struggle to breathe. When you’re in that mindstate of struggling to breathe and delirious with fever, you don’t know when someone is trying to help you, so you’ll try to rip the breathing tube out because you feel it is choking you, but you are drowning.”


      1. I don’t know. Chris Martenson talked about the 20,000 number yesterday. Several countries are using the same number which is suspicious. He thinks it’s been plucked from thin air by people wanting to believe it’s true rather than analyzing real data.


        1. Yep-I don’t know either. There are some big time academic reputations on the line here. Time, as always, will tell – if we’re still here when the telling is told.


  11. I think one of the biggest mistakes in modern history made by our leaders was not prosecuting any of the rampant fraud of 2008.

    I must imagine that one vignette will feature a mob of inflamed formerly middle-class Long Islanders swarming into the Hamptons with blood in their eyes for the hedge funders cringing in their majestic show-places, who will discover with maximum chagrin that privet hedge is no hedge at all against the wrath of the plebes. There has never been a bigger swindle in history than the aggregate shenanigans on Wall Street lo these years of the new millennium, and we all know it, even if it’s hard to explain just how they did it. The money boyz should be taking a haircut-and-a-half now instead of wailing for bail-outs, but such is the perversity of human greed that they made one last desperate attempt to nail down their fortunes when everybody else was losing…everything.

    You understand that banking and finance was headed firmly south long before corona virus stole onto the scene. The tremors started back in September with the Fed jamming untold trillions into the black hole that had opened in overnight lending between banks. That was an infection, too, and boy did it spread — as fast as corona virus! This is indeed a most unfortunate convergence of events, but it should tell you that the banking and finance system, and the global economic arrangements that evolved with it, had already passed their event horizon. History had punched our ticket and was embarking us on a journey whether we were ready or not.


  12. More evidence from JC that we are not being told the truth.

    My guess is that scientists with good intentions, and a desire for fame and fortune, by being the first to find a cure for common human viral sicknesses, made a mistake and released a deadly virus, and they are now trying to cover their tracks and mislead us, to protect their reputations and research grants.

    If true, it’s a pretty big mistake to be responsible for killing millions and sending the global economy into a depression.

    They’re gonna need an extra big dose of reality denial to continue functioning as normal humans, but I’m sure their genes are up to the task.


  13. Canada today has the highest growth rate of infections of any country in the world, probably because a million of our citizens left the country for spring break in March.

    That’s about 2 months after anyone with a functioning brain should have voluntarily stopped travelling.


  14. It’s a rare treat to see Ajit Varki’s MORT theory mentioned in broadly read media…


    By Roy Jurgens @ LA Weekly

    In 2013, UC San Diego professor/scientist Ajit Varki and University of Arizona geneticist Danny Bower wrote a book, Denial: Self Deception, False Beliefs and the Origins of the Human Mind. Within it they presented an interesting theory about human evolution. Their argument wasn’t so much biological as it was psychological. Somewhere in our past, we got beyond the idea of our own mortality and chose to live in denial of it. It was that naked optimism that allowed us to separate mentally from other species, who continued to operate in “lizard brain” mode, fearing death at every juncture. It was within this denial of reality that we became human. It was because of this denial that we became creative and communicative.

    Unfortunately, this can be a double-edged sword, as lately many among us are pushing the envelope on this denial that makes us human. With COVID-19 infections rapidly popping up across the country, a significant percentage of the population is acting as if life is as placid as ever.

    It’s not.

    What is it about “shelter in place” and “social distancing” that you do not understand?

    Yes, I’m looking you — person who went to the Santa Monica Pier this weekend, jogger that hit Runyon Canyon, tourist that took a day trip to Joshua Tree, college spring breaker who went to Florida, parent that took your kids on a play date.

    Would you people be going out if you knew that there was an active shooter in your midst? No? Well pretend it’s so. Because there is, and he is really small. True, most of us will barely get grazed by a bullet, but there is a significant amount of the population, perhaps hundreds of thousands or a million souls who will pay the ultimate price. And if that projection isn’t sobering enough for you to change your behavior, you might just be a sociopath.


  15. Germany has been one of the few countries in the world trying to hold back the money printing tide, because they understand the implications of hyperinflation (Hitler). The Wuhan virus has made it impossible to buck the trend.

    The body of Thomas Schäfer – finance minister of the German state of Hesse, was found next to high-speed train tracks on Saturday morning in the town of Hochheim, located between Frankfurt and Mainz, according to DW, citing local police.

    The remains of Schäfer, 54, were initially unable to be identified due to the extent of the injuries after witnesses reported the body. His death has been ruled a suicide by police.

    On Thursday, “Schäfer, together with Economics Minister Tarek Al-Wazir (Greens), explained how the government wants to support the more than 200,000 small entrepreneurs and solo self-employed in the country who fear for their existence due to the corona pandemic,” according to WELT.

    A bailout of 8.5 billion euros is opened and the debt brake, which Schäfer had always defended, is relaxed. The Mittelhesse from Biedenkopf near Marburg was very worried, that was obvious. The country and the whole world were facing “unforeseen challenges,” he said, and that tackling this “task of the century” would take several generations.

    He leaves behind a wife, a nine-year-old son and a twelve-year-old daughter.


  16. A lot of people think that shutting down the economy will do more harm than the virus. Let’s assume they are right and we tell everyone to go back to their normal business. What then? It seems to me we’d have to close the hospitals to COVID-19 cases and tell everyone that gets sick to stay home where they will either recover or die with minimal health care. Is this their plan?

    How about instead telling everyone they must wear a mask when out of their homes, provide education on the proper way to wear them, and provide free masks to every household in the country? Then tell non-vulnerable people to go back to work, with their masks on.

    Instead we have the idiot Canadian health minister telling the public not to wear masks unless they are symptomatic. It’s March 30 and our minister still does not understand anything about the disease, or she’s lying. She’d make a excellent economist.


  17. The Alberta government just announced they will invest $1.5 billion in building the Keystone XL pipeline. In the good ol’ days energy made enough profit to fund itself and provide plentiful taxes to our governments. Today governments must print money to keep the energy industry alive. The thermodynamics of this predicament guarantees inflation, unless our house of debt collapses first. We are on a path to making do with less via less money or lots of worthless money.

    A pint of good beer up in Canada will probably cost you about $5 bucks. You can now get a barrel of oil for less than that.

    The price of Western Canada Select (WCS) is being quoted at $4.18 per barrel, making it cheaper than beer.


  18. Every idiot given enough time will eventually be forced to acknowledge the truth. Watch our leaders flip flop on masks over the next week, only about 3 months too late. Most of them will keep their jobs unlike the people they harmed.


  19. Alice Friedemann summarizes an exponential change soon to go in the opposite direction of the virus.

    If Michael Hook and other scientists are right that the rate of decline when all oil fields are past their peak will be 6% and exponentially increasing, so that in 5 years it’s 7%, after another 5 years it’s 8%, and so on, then within 16 years, we’d be down to 10% of what’s produced today. I can’t see how people and governments could cope that quickly, unless decades ahead of peak oil we had already begun redesigning supply chains, manufacturing, consuming a lot less, tax laws that discourage families from having more than one child, and so on to prepare for decline. That didn’t happen, so now we are deep into overshoot. So I expect radical change, a breaking point, especially given the distribution of wealth. It will only take a few years for those on the bottom to start suffering and wondering where their next meal is coming from, and then the unraveling of the social fabric begins.


  20. Nice summary of why this time is different.
    h/t Panopticon

    In response to a collapsing financial infrastructure, a massive bailout was introduced in 2008, supported by a huge expansion of The Federal Reserve’s balance sheet.

    The increase in the Federal Reserve balance sheet worried many people because historically such expansion tends to lead to inflation. Because most of the money never found its way into the real economy but rather served to prop up financial institutions and other industry sectors within the economy, the fiscal stimulus and the on-going monetary loosening served to stimulate an impressive stock market rally. In other words it translated into inflation of sorts, but it was mostly confined to financial asset values. Actual consumer inflation remained low, given a slow wage growth environment, despite robust gains in employment.

    The reason why this time around it could all be different is that the nature of the current stimulus bill which was passed is also much different. The money is not going to shoring up the balance sheets of financial institutions. If one looks at the details of the bill, it seems that most of the money is headed to the real economy. A big chunk of the bill will go directly to households, with most people eligible to receive up to $1,200 per adult and $500 per child, based on 2018 or 2019 tax data available to the IRS. $500 billion will go to v industry in the form of loans. Hospitals will get $100 billion in funds. Airlines will receive $58 billion in grants and loans. State & local governments will get $150 billion in funds. Unemployment checks will be topped up by $600 per week on top of regular benefits. The objective of the stimulus is to compensate entities for lost revenues and wages.

    The money is going into the real economy, meaning that people, enterprises and local governments will be spending money they did not earn. At the same time, the value of goods and services being produced will be greatly reduced. It remains to be seen by exactly how much. Some estimates such as the one recently released by Goldman Sachs suggest that there could be a contraction of as much as 24% in the second quarter of this year. A strong rebound in economic output is also expected in the second half of the year, but this is not guaranteed, especially if the virus will not be fully contained, but rather it will continue circulating and pick up the pace of its spread as we start relaxing containment measures. If the virus will continue to linger, it will continue to disrupt economic activities until we will finally have a vaccine that will eradicate it. Some people optimistically hope that it might just disappear on its own. If it does not, we will be faced with the grim choice of extending economically unsustainable measures meant to slow down the spread of the virus or give up on containment and let the virus take its toll.

    Either way, the economic consequences will require further fiscal and monetary measures to avoid social breakdown. This in turn will lead to a massive imbalance in terms of goods and services produced on one hand and money available for spending in the real economy on the other. It is the classic hyperinflation scenario where more and more money will be chasing dwindling goods and services.


  21. Nice essay today by Raúl Ilargi Meijer on the sorry state of world leadership.

    We don’t have brave intelligent leaders. We don’t have intelligent leaders. We don’t even have leaders.

    We have reactive ass covering managers, at best.

    Ilargi calls them little managers. I call them idiots in denial.

    In actual reality, on January 1, the day after China told the WHO there was a problem in Wuhan, all the little managers should have been checking, with all the even littler managers working for them in the Disaster and/or Medical fields, whether all of the prevention apparatus in their countries was up to snuff, the protocols, the staff, the hospitals that might be needed, the production facilities, it’s a long list. Instead they all chose to ignore the WHO warning, and preoccupied themselves with their economies instead.

    Just the fact that they waited for the WHO to say something says enough: it’s the perfect organization for all their excuses: hey, they didn’t warn us soon enough! And the little managers would be partly right: the WHO functions no more or better than they themselves do. Not when it comes to Prevention.

    Still, at the $58 million or so we pay them a year, the WHO has no business waiting for a country that harbors an epidemic, to tell them it does. Because 99 out of 100 times, such a country will first try to hide the epidemic. Its leaders, too, are little managers who focus on their economies. The WHO’s job is to be there before it happens. And so you’re right, they fail exactly where the little political managers also fail: Prevention. There’s no doubt that there are brilliant people working there, but they’re all still managed by little managers.


  22. One number that does not lie is oil consumption because oil drives almost all wealth creation.

    Oil consumption has dropped from 100 million barrels per day in 2019 to 65 million barrels today due to the Wuhan virus shutdown.

    There has never been so large and so fast a decrease in the creation of wealth we need to pay the interest on the debt that has enabled us to deny that we hit limits to growth years ago.

    Buckle up. Something’s going to break.


  23. Useful and inexpensive items like specialty batteries are still shipping from China via AliExpress. I expect this flow may soon stop, or the prices may soon rise, so best to stock up now.

    Doug Nolan explains how the Wuhan virus crisis will likely transform into a financial crisis, starting in the periphery and moving towards the core.

    That China appeared to gain the upper hand on the virus has provided hope. Beijing’s aggressive efforts both to bolster its markets and restart its economy support the constructive view of China pulling EM economies and markets back from the brink. But with pandemic conditions rapidly deteriorating around the world, it may prove more a case of EM pushing a wavering China toward the precipice.

    Over this incredible boom cycle, China became banker to the world. As financier to “frontier” economies, the Chinese banking system evolved into the King of Sovereign Subprime. Funding “belt and road” and other initiatives, China formulated a massive “captive finance” operation for nations previously starved of finance and investment. It now faces the prospect of a dramatic drop in capital goods export orders and thousands of customers lacking wherewithal to pay their bills.

    As an analogy, automobile manufactures repeatedly succumb to the urge to “go subprime.” Lending to buyers previously unable to obtain financing is a sure way of boosting revenues. And so long as the general economy holds up, manufactures report booming profits both on auto sales and from “captive finance” businesses lending at above-market rates.

    Unfortunately, things invariably turn really sour when the bust arrives. Not only do auto sales tank and used car prices sink (vast buildup in used-car inventories). The finance business turns into an unmitigated disaster. The perils of subprime surface as soon as growth slows. Before long, massive losses wipe out all previously reported “profits,” as bad loan charge-offs and servicing costs spiral.

    China’s economy is today acutely vulnerable to collapsing demand, both domestically and internationally. Its $40 TN plus banking system goliath (add “shadow” lending) is a spectacular accident in the making. In the past, I’ve made the point that China’s huge international reserve position appears relatively less impressive with each passing year (of booming Credit and financial system expansion). With China’s reserves at $4.0 TN and Total Banking System Assets at $26.9 TN, reserves were about 15% of bank assets in mid-2014. Today, with reserves down to $3.1 TN and Bank Assets up to $41.7 TN, this ratio has been cut in half to 7.4%. There is also the issue of the liquidity, availability and transparency of these reserve holdings.

    It’s a different world now. The chasm that developed between inflated expectations and deflating economic prospects gapped wider than ever. Prospects for a ravaging EM meltdown keep me awake at night. The existing financial structure, dominated by unsound debt, leveraged speculation, derivatives and free-flowing finance – I don’t see how it works going forward.

    When EM citizens come to appreciate their boom experience has left them with unmanageable debt loads – and see their nation’s reserve holdings depleted in fruitless currency support operations – there’s going to be hell to pay. The house of cards is being exposed – and a crisis of confidence is at this point unavoidable. A domino collapse of currencies, Credit and banking systems, and economies has become a frighteningly high probability outcome.

    In such a scenario, how would a crisis of confidence in Chinese finance be held at bay? Will Beijing turn more insular as it confronts calamitous domestic issues? Or would a more aggressive global stance be considered advantageous in the face of mounting domestic insecurity and dissent? The upside of Bubbles, buoyed by an optimistic view of an expanding “pie,” is conducive to cooperation, assimilation and integration. The downside unleashes a demoralizing slide into antipathy, disintegration and confrontation.


  24. Some quotes and links of late, many from Panopticon’s Climate and Economy blog:
    “Otherwise we run the risk of complete economic chaos as supplies shrink and shortages emerge, with widespread unemployment and poverty, with associated social and political unrest.” (
    And Timothy Lenton: The coronavirus pandemic has reshaped the way we live, work, and interact in a matter of weeks. It has also shown that governments are able—and in many cases are expected—to take swift, significant action on crises. “Under these extraordinary circumstances, there can be quite decisive action from governance and policy that changes the way we’re all living day to day,” Lenton said. “It is possible to change large-scale patterns of human behavior, pretty quickly.”
    the climate crisis cannot be solved incrementally, Lenton said, because it’s
    taken too long to spur action: Many warming-related changes are already
    underway. Global greenhouse gas emissions must be dramatically reduced and
    eventually eliminated. “If we’re going to avoid the worst of bad climate
    tipping points, then we’re going to need to find some positive tipping points
    in society and ourselves to transform the way we live—in a generation”
    Reported in


    1. Thanks. The Wuhan virus illuminates how the human brain works. To save a few million people from COVID-19 we instantly shut down many high carbon emitting activities in most countries. To save most of our 8 billion from climate change we’ve done nothing for 30 years in any country. The only difference is that in one case death is a few weeks away, and in the other case death is a few decades away.


  25. Just finished reading “Deadliest Enemy: Our War Against Killer Germs” by by Michael T. Osterholm and Mark Olshaker. It’s excellent and highly recommended. When you hear our idiot leaders saying about the Wuhan virus that “no one could see this coming”, tell them to read this book. The predictions it makes about what we currently experiencing are remarkably accurate.

    It remains a mystery why Osterholm deliberately misled us a couple weeks ago on the Joe Rogan show.


  26. Who knew? A common first step in vaccine production is to grow viruses in live chicken eggs. How will vegans react when vaccinations are mandatory and they learn that chicken babies were murdered to keep us healthy? We’re gonna need military personnel to hold people down for their shots.


  27. Ventured out for groceries for the first time in 4 weeks today. I wore a mask and gloves and felt pretty safe due to good social distancing behavior in the stores. The shelves were well stocked but I have a hunch we are in the lull before the storm.

    The organic farm I work at has planted potatoes for the first time this year in part due to my doomish encouragement. Fresh veg is good for health but calories are also important for survival.

    Sales at the farmer’s market are way down. I spent the last week building a farm stand on wheels for self serve sales near the highway. Will be interesting to see if people are honest in times of need.


  28. Intravenous white lightning it is. Will the drunk respond? Maybe, maybe not. Regardless, central banks are trapped now and cannot stop until the drunk is dead, which guarantees a much worse outcome than the pain of a hangover and living within our means.

    Federal Reserve Assets surpassed $6.0 TN for the first time, having inflated another $272 billion for the week (to $6.083 TN). Fed Assets inflated an astonishing $1.925 TN, or 46%, in only six weeks. Bank of American analysts this week suggested the Fed’s balance sheet could reach $9.0 TN by the end of the year.


    1. We will miss him. Our old friend Moral Hazard, who had been on life support since 2008, finally gave up the ghost in April 2020. Having lived a long and useful life he was finally taken from us by Covid19 and the comorbidities of the accumulated financial shenanigans of the last few decades.
      Let her rip you bankers, traders, hedgies – anything goes from here on in as long as it’s big enough. Don’t worry though Moral Hazards little brother, Moral Hazard for the not so rich and downright poor, is still in robust health and promises he will be with us until the very end.

      Liked by 1 person

  29. New documentary: Tracking Down the Origin of the Wuhan Coronavirus

    Much compelling evidence here that the virus is man made. Must watch with a filter to ignore the capitalism good, communism bad, patriotic bullshit.


  30. Mac10 on the fireworks display scheduled for next year…

    The Coronavirus Is Lehman Times 10

    …the economy itself will remain in an EXTREME deflationary state UNTIL all of the various restrictions are lifted. Which will take months if not the rest of this year. In the meantime, the Fed and Treasury will be engaged in joint development of their MMT weapon of mass destruction. At the point at which the economy is finally fully unleashed, gamblers will experience the long awaited v-shaped explosion in reflation expectations which will explode the bond market.

    Also in the meantime, while the bond market is still pricing in extreme deflation -giving the Fed temporary ability to monetize Trump’s exploding deficit – default risk is growing by the day. Which means that credit quality is deteriorating across sovereign debt, municipal bonds, mortgages, and corporate bonds. The entire bond market will be re-rated lower over the coming weeks. Which means that bond portfolios will soon experience immediate loss in value upon each downgrade. No trades necessary.

    The Fed has fooled markets by stepping into these various bond markets, using liquidity to disguise insolvency and more importantly driving short covering. However, they are not going to take over the entire junk yard, they are going to limit themselves to a corner of the junk yard. The entire bond market is the new subprime, only 10x larger.


  31. One of my heroes, Dennis Meadows, with a new short essay.

    Limits to Growth and the COVID-19 Epidemic

    There are two main causative links.

    First, the explosive growth of humanity’s population and economy has stressed natural ecosystems, lowering their capacity to self-regulate, and making breakdowns such as epidemics more likely. In the recent past global society has been confronted with MERS, Ebola, Zika, SARS, and H1N1 plus major outbreaks of measles and cholera. And now we have COVID-19.

    Second, growth in consumption has forced us to use resources more efficiently. Efficiency is the ratio between the output we want and the inputs required to produce it. Common measures of efficiency are, for example, miles per gallon, years of expected lifespan per dollar of health care, or bushels of wheat per gallon of water. Raising the efficiency of a system permits one to use fewer inputs per unit of output. In itself, higher efficiency is typically good. However, raising efficiency inescapably lowers resilience.

    Slowing growth in population and in consumption of materials and energy will not eliminate the problem. But it would reduce the pressure to increase efficiency and leave more possibility for increasing resilience.


  32. Oil consumption has fallen by 33% over the last 3 weeks in the US and could fall another 10+% over the next 3 weeks. That suggests to me the federal reserve will need to print about $1 trillion per month for every month of the lock down to avoid crashing the monetary system because our idiot leaders allowed debt levels to get too high in the “good times”.

    I doubt the per capita ratios are much different in Canada.

    This cannot end well, even if they find a vaccine, which is not a sure thing.


  33. My friend Panopticon is still providing daily proof that climate change remains a bigger threat than the Wuhan virus despite the news media focusing 100% on the latter. The Wuhan virus will probably kill millions over the next few months, and climate change will probably kill billions over the next few decades.

    Over the weekend, the island nation of Cuba set its hottest all-time temperature on record, according to the nation’s official meteorological agency.

    Amid the COVID-19 outbreak, Mexico is yet confronted with another crisis: severe drought brought by climate change.

    Miami’s low temperature on Monday was 80 degrees. This was an all-time record-warm low for the month of April.

    There were more than 60 reports of tornadoes that ripped across Texas, Arkansas, Louisiana, Mississippi, Alabama, Tennessee and Georgia…

    There has been an extraordinary about-turn this spring as the [UK] weather flipped from floods to drought.

    The epicentere of Iran’s coronavirus crisis is now besieged by floods, with many vehicles swept away and many factories and stores filled with muddy water.

    [Thailand’s] Office of the National Water Resources says up to 6,255 villages in 24 provinces have already been declared as drought-affected areas, while national dams and reservoirs are only at an average of 49% capacity (only 26% of that water is usable.)


  34. Today’s excellent essay by Tim Watkins discusses many important aspects of sustainability that we deny.

    I personally remain confident that only voluntary rapid population reduction can improve the outcome of our predicament. And this won’t happen because genetic reality denial prevents our uniquely powerful intelligence from overriding our genes’ desire to execute the Maximum Power Principle. Which means we should configure our lives to expect the worse.

    Firstly, with the exception of the end of the Second World War – the first human conflict to be fuelled and won with petroleum – the only times that we have ever halted the growth in greenhouse gas emissions have involved system-wrecking economic crises. More importantly, the last dip – the recession that followed the 2008 financial crash – accounted for more carbon dioxide reduction than all of the non-renewable renewable energy-harvesting technologies deployed around the planet thus far. “Non-renewable” because they cannot be manufactured or even maintained without the fossil fuels – coal, gas and oil – which still provide 86 percent (assuming we can take Chinese government statistics at face value) of the world’s energy. The cement and steel in the concrete bases of wind turbines depends upon coal. The glass used in solar panels depends upon gas. Let’s not overlook what rare metals production looks like. And, of course, to transfer the manufactured solar panels and wind turbines from the Chinese factories to the European and American “farms” where they will be deployed depends upon a global transport system, at least 90 percent of which runs on petroleum.

    The assumption that the pandemic crisis is teaching us how we might change the way our economy operates is fanciful at best. Mostly it is rooted in the entirely wrong belief that it is possible to do away with all of the supposedly non-essential and frivolous consumption that we engage in while keeping the essential components. But that is not how it works. The reason, for example, that you can access scientific papers about the current pandemic on the internet is because billions of other people are uploading pictures of cats. Take away the cats and the advertising revenue crashes. Take away the advertising and social media cannot function. Take away social media and what remains of the internet would be little different to the internet of the mid-1980s (when few outside academia and the military even knew it existed).

    Even the oil industry itself operates only because of technically frivolous consumption. Diesel fuel is the lifeblood of the economy. But diesel is only a small fraction of what is refined from a barrel of oil. A waste product – petrol/gasoline – is by far the largest fuel to be produced. In a sense – as the response to the pandemic is demonstrating – most of us could dramatically cut back on our petrol consumption because most of our journeys – including the daily commute – have been shown to be non-essential. The problem is that our collective petrol consumption effectively subsidises the cost of diesel. So if we stopped using it, the oil industry would have the double whammy of having to increase the price of diesel (which the economy would likely be unable to afford) and to find something else to do with all that petrol (which will also likely come at a high cost).

    Less obviously, the energy that we depend upon to do anything is itself increasingly constrained as most of the large oil fields around the planet pass peak production. It is not that there isn’t plenty of oil – or, indeed, fossil fuels in general – under the ground. Nor that enhanced recovery techniques, deep water drilling, hydraulic fracturing and strip-mining bitumen sands cannot continue to deliver vast quantities. Rather, the problem is that each additional barrel of oil from this point on is taking more energy to produce, so that the net energy available to the wider economy is shrinking.

    The current lockdown measures are only “sustainable” for as long as national currencies maintain their value. National currencies, in turn, are only sustainable for as long as the myth of a bigger and wealthier future can be sustained. That myth depends upon growth in the net energy available to the economy that ceased sometime around 2005. There is already a growing list of things that we used to be able to do that – for net energy reasons – are no longer possible; from the collapse of commercial supersonic flight at one end to the growth of such things as bicycle delivery services and hand car washes at the other. In the aftermath of the pandemic, we will likely say goodbye to many more things that we used to take for granted until such time as investors notice and either markets and asset prices collapse for good or stagflation arrives to remove the paper wealth that western economies currently run on.


  35. Our news media was 3 months late on the virus story. I’m betting they’ll be even later on the implications of the money printing story. It takes a 2 by 4 across the head for these morons to acknowledge reality.

    For The First Time Ever, The Fed Will Monetize Double The Total Treasury Issuance

    While daytraders look transfixed at a stock market which continues to surge higher even as the US has lost around 22 million jobs in the past month alone, something far more nefarious is taking place behind the scenes: the Fed is nationalizing (or privatizing, depending on whether one views the Fed as a public, or a private – which it actually is – entity) the entire capital market at a pace unseen before in history.

    Liked by 1 person

  36. Nobel prize winning discoverer of the HIV virus says Wuhan virus is man made.

    “With my colleague, bio-mathematician Jean-Claude Perez, we carefully analyzed the description of the genome of this RNA virus,” explains Luc Montagnier, interviewed by Dr Jean-François Lemoine for the daily podcast at Pourquoi Docteur, adding that others have already explored this avenue: Indian researchers have already tried to publish the results of the analyses that showed that this coronavirus genome contained sequences of another virus, … the HIV virus (AIDS virus), but they were forced to withdraw their findings as the pressure from the mainstream was too great.


  37. Kunstler can turn a phrase.

    Money is not an economy. Money is a medium of exchange within an economy where people grow things, make things, move things, and serve each other in countless ways. We’re not going to replace all those growings, makings, movings, and services by just giving people money. Money may produce more money by the magic of compound interest, but money is not necessarily wealth, it just represents our ideas about wealth, and interest stops compounding anyway when the trend is clearly for reduced growings, makings, movings, and servicings. That’s exactly how and why capital vanishes. The hocus-pocus of Modern Monetary Theory can only pretend to work around that reality.


  38. “The massive slump on the stock markets and the flight to safe investments is a reaction to these shocks, but may trigger further shocks and intensify the downward dynamic in the real economy. The extent of these shocks depends heavily on expectations and thus on psychological factors. Economic policy measures must be tailored and targeted to these specificities. The timing and communication of the measures are crucial. The most important goal is to secure the public’s trust so that the health crisis does not turn into a systemic economic crisis that affects the labor market, banks, and financial markets, thus further weakening domestic demand.”


    1. I think they’re missing a key point. We have hit limits to growth and therefore total wealth must and will decline soon. We are social monkeys that compete for status. If all the monkeys become poorer together we’ll be ok. If, on the other hand, the rich monkeys get bailed out and the poor monkeys lose everything we’ll have pitchforks in the streets, despots, and war. We need wise aware monkey leaders to ensure we all become poorer together. Instead we have moron monkeys that deny reality leading us.


  39. The Fatal Road to +4°Celsius
    Extreme GHG and T°C rise rates exceed climate tipping thresholds
    Andrew Glikson

    Summary and Conclusions

    1. Late 20th century to early 21asrt century global greenhouse gas levels and regional warming rates have reached a high factor to an order of magnitude faster than those of past geological and mass extinction events, with major implications for the nature and speed of extreme weather events.

    2. The Anthropocene CO₂ rise and warming rates exceed that of the Last Glacial Termination (LGT) (21–8kyr), the Paleocene-Eocene hyperthermal event (PETM) (55.9 Ma) and the post-impact Cretaceous-Tertiary boundary (K-T) (64.98 Ma).

    3. Further to NASA’s reported mean land-ocean temperature rise of +1.18°C in March 2020, relative to the 1951-1980 baseline, large parts of the continents, including central Asia, west Africa eastern South America and Australia are warming toward mean temperatures of +2°C and higher.

    4. Major consequences of the current shift in state of the climate system pertain to the weakening of the polar boundaries and the migration of climate zones toward the poles. Transient cooling pauses are projected as a result of the flow of cold ice melt water from Greenland and Antarctica into the oceans, leading to stadial cooling intervals.

    5. Given the abrupt shift in state of the atmosphere-ocean-cryosphere-land system, the current trend signifies an abrupt shift in state of the atmosphere, accelerating since the mid-20th century. Terms such as climate change and global warming no longer reflect the extreme nature of the climate events consequent on this shift, amounting to a climate catastrophe on a geological scale.


  40. Monkeys think highly of themselves and like to assume an intelligent strategy behind things they see other monkeys doing. I look for simpler explanations because most monkeys deny reality and are not very bright or strategic. My guess is that the Saudi’s are broke and are desperate for cash so they’re selling their oil at whatever price the market will pay.

    West Texas Intermediate (WTI) futures collapsed 45% today from the already collapsed price, to $10 a barrel, lowest since 1999.

    In a strategic move to maximize pain for the US shale oil drillers, and wipe out as many as it can, Saudi Arabia has sent a flotilla of 20 tankers carrying a combined 40 million barrels of Saudi crude oil to the US Gulf Coast to flood the US market that is already flooded with oil. The tankers are carrying about seven times as much crude as the Gulf Coast took from Saudi Aribia per month in 2019, when there was still strong demand for crude oil in the US.


    1. Excellent point! We humans are meaning-making-machines. We love to make up a story so we can feel secure because we “understand”. Whether or not the story is actually true does not seem to matter to most of us.


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