Providing Alcohol to an Alcoholic

The EU was created with strong budget rules to prevent a repeat of the Weimar hyperinflation that caused the election of Hitler.

They just revoked the rules.

https://www.reuters.com/article/us-health-coronavirus-eu-fiscal/eu-executive-moves-to-formalize-suspension-of-eu-budget-rules-idUSKBN2180DR

The European Union executive moved to formalize a deal reached by EU finance ministers on March 5 to suspend EU budget rules that limit borrowing, giving hardest-hit Italy and other governments a free hand to fight the coronavirus.

https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic

After we’ve developed herd immunity and/or a vaccine (best case 12-24 months from now), and if the economy attempts to resume operating at a level similar to that a month ago, we are likely to experience energy shortages, which means we will probably never fully bounce back. Hope for the best but plan for a much leaner world in the future.

Here’s a nice explanation of why we should expect 12-24 months of disruption to the economy.
https://www.bbc.com/news/health-51963486

There are essentially three ways out of this mess.
– vaccination
– enough people develop immunity through infection
– or permanently change our behaviour/society

Chris Martenson in his YouTube video today explained that we need 75-80% of the population to have been infected to achieve herd immunity. Italy, the worst suffering country in the world, has only 0.8% of it’s population infected so far which means it has 1000 times as far to go to achieve herd immunity.

Steve St. Angelo here explains that the coming contraction of US oil production will be swift.
https://srsroccoreport.com/u-s-oil-price-collapse-u-s-economic-collapse/

U.S. shale oil production at the end of 2018, not including 2019’s production, fell from 7.3 mbd to 3.9 mbd in just ELEVEN MONTHS!! LOL. That is the natural decline rate of U.S. shale oil. Thus, if the industry added NO NEW WELLS in 2019, the shale oil industry would have lost 3.4 mbd.

Tim Watkins elaborates further in an essay today…
https://consciousnessofsheep.co.uk/2020/03/20/the-post-viral-economy/

The reason we have a “pandemic crisis” has less to do with the emergence of a novel coronavirus that with the fragility of the complex interconnected global economy that we have built in an attempt to counteract the impact of the remorselessly growing energy cost of energy. Fragility – for example, in the form of dangerously exposed just-in-time supply chains – is the inevitable cost of complexity. In the absence of an abundant energy-dense alternative to our now depleting reserves of fossil fuels in general and oil (which fuels 90% of global transport) in particular, future resilience can only be bought at the cost of simplification and localisation.

This sounds technical, but it has ramifications for all of us now that our governments and central banks have decided to harvest all of the fruits of the magic money tree in one last ditch attempt to keep the system going. The point of interaction between the financial economy and the real economy is the interest that is charged on the new currency which is borrowed into existence. Currency itself is merely a social convention which allows us the illusion of carrying wealth forward into the future; it has no intrinsic value. A worker provides labour and services to an employer in exchange for currency that is assumed to be of equivalent value. At some time in the future the worker will attempt to use that currency to purchase goods and services of equivalent value to the work provided to the employer. New currency must ultimately generate new value (in the form of energy-dependent goods and services) in order to maintain its nominal value and to repay the interest on the debt. If, however, new goods and services are not – or more importantly cannot – be created, the result is widespread debt defaults and/or inflation.

The financial response to the pandemic assumes that the post-virus economy can grow at rates not seen since the early 1960s. But there is no real world energy source that would allow us to grow at even a fraction of that rate. As Tim Morgan explains:

“[L]ess-than-expected access to oil would have some very specific consequences. With population numbers still growing, we’ll need to keep on increasing the supply of petroleum products to essential activities, such as the production, processing and distribution of food. You’ll know that my expectations for ‘de-growth’ anticipate a lot of simplification and ‘de-layering’ of industrial processes, and there’s no reason why this shouldn’t apply to food supply. But it remains hard to see how we can supply more food from less oil.

“In short, there are reasons to suppose that oil supply constraint is going to have a disproportionate and leveraged impact on the discretionary (non-essential) applications in which petroleum is used. At the same time, faltering energy supply – and a worsening trend in surplus energy, reflecting the rise in ECoEs – is likely to leave us a lot less prosperous than conventional, ‘economics is money’ projections seem to assume.”

One conclusion we might draw from this is that as we are obliged to direct an increasing amount of energy both at replacing energy supplies and maintaining our critical infrastructure, then a large part of what we were doing before the pandemic struck is going to be impossible in the years afterward. Ironically, the process of self-isolation – whether voluntary or imposed by law – allows us to differentiate between those things – utilities, food supplies, telecommunications, healthcare, etc. – that we must maintain for as long as possible and luxuries like commercial air travel that turn out to be anything but essential in an age of teleconferencing. The political consensus which is emerging against the bailout of airlines (the political right because of the widespread engagement in stock buy-backs; the left because of desire to impose conditions; greens because of the impact on the climate; and libertarians because of free market purity) may well begin to extend to whole sectors of the global economy as we are increasingly obliged to simplify to a far less material post-viral economy.

When the tide goes out, we get to see who’s naked.

Profits from having more revenue than expenses will once again matter.

Good riddance Tesla and all the other companies that never had to return a profit since the idiots in charge dropped the cost of money to zero.

Nice big picture essay today by Paul Arbair.

https://wordpress.com/read/blogs/102935372/posts/1582

…it looks like we might finally being caught up by what we have been trying to ignore and dismiss for decades: the limits to economic growth that some system scientists have been warning us about for several decades. We have managed to push back these limits for a while through debt-fueled financialization, globalization, liberalization and ‘technologization’, and also in the last decade through monetary adventurism. All we have managed to do in the end is to convert the world economy into a ‘bubble machine’, in which GDP grows essentially as a result of debt-fueled asset bubbles being blown, and periodically goes up in smoke when those bubbles burst. These tricks have however largely played out, and they have stocked up problems that are now overwhelming our capacity to address them. The ‘Limits to Growth‘, in fact, have finally arrived. They don’t look exactly as expected, and they happen to be wearing a face mask, but they have arrived.

JC’s back and asks how come the news media can spend 10 minutes explaining why we should vote for Joe instead of Bernie, but can’t spend 2 minutes to explain the implications of printing $1,500,000,000,000 to prop up the stock market?

Is it stupidity or denial? I suspect both.

Comedy cutting through the denial…

h/t Apneaman

Forget toilet paper, it’s time to panic buy stocks because there’s no need for a functioning economy for stocks to go up, just plentiful denial and some money printing, maybe. 🙁

Datagasm demonstrates that a picture is worth many words.

Joe Rogan’s interview today with Michael Osterholmis, an expert in infectious disease epidemiology, will wake a lot of people up that have been snoozing or denying. I’m glad I’ve finished preparing. Expect a run on food soon.

Big takeaway points for me:
1) May be as bad as the 1918 Spanish flu.
2) Very hard to prevent transmission (washing hands not good enough, must stop breathing the same air as other people)
3) Infected people spread the virus for several days before showing or feeling any signs of sickness.
4) US is totally unprepared with no plans and a limited stockpile of supplies and drugs that are mostly made in China. (I don’t know about Canada’s readiness but I’m betting it’s not much better.)
5) Expect it to be worse in North America than China because obesity worsens the outcome and 50% of people here are obese.
6) Not a short term problem, expect many months of troubles.
7) Lots of false or misleading information is circulating.

Dr. Liz Specht, a chemical and biomolecular engineer, calculates that hospital beds in the US will be full by about May 8 and the US government’s stockpile of masks will be gone in about 2 days when all healthcare workers start wearing them. I can’t imagine Canada’s numbers will be much better.

https://threadreaderapp.com/thread/1236095180459003909.html

h/t Chris Martenson

Notice, as usual, the news media that informs us never contemplates physical limits to growth. It seems “why?” is not in their vocabulary.

https://apnews.com/b273d554d3656420507d61d5536020c6

Interest rates on a range of U.S. government bonds have plunged to all-time lows as investors seeking relative safety from stocks have furiously snapped them up . (As the price of a bond goes up, its interest rate, or yield, declines.)

The yield on the 10-year Treasury — a benchmark for mortgages and other consumer debt — was 1.9% as recently as Dec. 24. On Friday, it dipped below 0.7 percent before finishing the day at 0.79%.

“The bond market is already pricing in a worst-case scenario — a U.S. and global recession,” said Scott Anderson, chief economist at Bank of the West.

The plunging yields across bond markets could hamstring the Federal Reserve’s ability to respond to a future recession. During previous economic slumps, the Fed has sought to drive down longer-term rates to try to stimulate borrowing and spending. But with those rates already nearly as low as they can go, the Fed now has less firepower at its disposal.

The shrunken bond yields will also make it harder for those who invest in them to earn much income: The return on the benchmark 10-year Treasury note is now less than half the inflation rate. After adjusting for inflation, an investor who buys a Treasury will effectively lose money over the course of the loan.

Doug Nolan, my favorite debt analyst, on the bubble.

http://creditbubblebulletin.blogspot.com/2020/03/market-commentary-modern-day-bank-run.html

More than a decade ago, I began warning of the risks of an inflating “global government finance Bubble”. Policy makers had resorted to an unprecedented expansion of central bank Credit and sovereign debt to reflate global finance (and economies). And for years policymakers have administered near zero rates and egregious “money printing” operations to sustain history’s greatest Bubble, in the process extending a dangerous cycle. The unprecedented inflation of government finance has been alarming enough. Yet I worry most about this “infinite multiplier effect” and how leveraged speculation infiltrated all nooks and crannies – as well as the very foundation – of global finance.

As I have stated repeatedly over the years, contemporary finance appears miraculous so long as it is expanding/flourishing – so long as new “money”/liquidity is created through the process of financing additional speculative holdings of financial assets. The new securities-related Credit fuels asset inflation, self-reinforcing speculation and more powerful Bubbles. Importantly, credit growth associated with global securities and derivatives speculation expanded to the point of becoming the marginal source of liquidity throughout international financial markets. After first ignoring it ascending role, central banks moved to accommodate, nurture and, finally, to assertively promote financial speculation. The risk today is that this unwieldy Bubble inflated beyond the capacity of central bank control.

Bubbles and resulting manias take on lives of their own. They cannot, however, escape harsh realities: Fragilities only build up over time, and Bubbles don’t work in reverse. Collapse becomes unavoidable, with any serious de-risking/deleveraging dynamic leading to a contraction of marketplace liquidity, a spike in risk premiums, illiquidity, panic and dislocation. It’s the modern form of the old-fashioned bank run. That’s where we are today.

As far as I’m concerned, the evidence is indisputable: We have been witnesses to history’s greatest – and most precarious – globalized Bubble. If traders want to play for “oversold” bounces and the inevitability of more QE, it’s their money. But Bubbles invariably burst – and there is now a clear and present catalyst. The world is at the cusp of momentous change. Everyone has tried to remain convinced that risk can be ignored, with central bankers having everything under control. Yet the scope of global financial excess, myriad imbalances and structural impairment now dwarfs the capacity of central bankers to sustain market confidence, speculative excess and economic growth.

https://consciousnessofsheep.co.uk/2020/03/05/because-the-economy-stupid/