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.

102 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.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s