When Governments Do Truly STUPID Things….

by Karl Denninger, Market Ticker:

They tend to collapse spectacularly and the “powers that be” almost-never survive politically — and frequently physically.

Sri Lanka is the latest example; they are literally bankrupt, having bought into the “green” thing and then… oops.  The root causes were many, but chief among them were overspending and a commitment to “green” farming practices, which decimated crop yields, spiked prices and then of course here comes higher oil costs.  The combination proved fatal to the economy.

“The rich” are being literally chased down and slaughtered, with “rich” being defined as “has something, when we have nothing.”  The President fled the nation and, at least report, the Presidential home has been stormed by protestors.

TRUTH LIVES on at https://sgtreport.tv/

As they say…. oops.

Germany is facing an existential crisis of its own making as well.  Deciding to go “green/woke” for energy they foolishly shut down both coal and nuclear generation, relying on Russian gas for that which they couldn’t manage to produce reliably from renewable sources.  Renewable sources such as wind and solar are not reliable and never will be; the only means to prevent shortages is to either back them up with fossil plants (which means you pay twice since the capacity has to be available when the sun and wind don’t show up in sufficient quantity) or wildly overbuild against expected capacity requirements which is prohibitive for cost reasons, never mind that both solar and wind are entirely dependent on fossil fuels for the materials, mining and production.  Then Germany bought into the war in Ukraine and sanctions, along with the rest of the EU despite the utter insanity of being dependent on Russian gas, one of the warring nations, flowing through the other nation that is at war!  Backing someone who is at war with your now-primary energy supply because you shut down all your own stuff isn’t very smart.  Electrical costs have skyrocketed and this winter brings the possibility of literally freezing to death.


The UK is in serious trouble as well.  Energy bills this winter are threatening to more than double.  What’s worse is that supply may not meet demand at all, which means outages, including of natural gas.  How’s that “green” thing looking about now, may I ask?  Are you still happy with your “commitment” to this newfound religion as you both starve (you do realize the goods have to get there and that requires petroleum, right?) and freeze this winter?


The Dutch decided to try to effectively expropriate their farmer’s land by, for “green/woke” reasons once again, mandating the non-use of nitrogen fertilizers among other steps.  Some allege the true purpose is to effectively destroy the industry and seize the land, but the underlying reality of that does not matter.  The Dutch are one of the largest food exporters in Europe and, obviously, trashing that will not only screw the Dutch but threatens famine on a regional or even world-wide basis as ruining the production capacity of what people need to eat isn’t very smart.  The farmers are fighting back and, by some accounts, the nation may be rather close to insurrection or even civil war.  We’ll see.

The Ukraine/Russia dust-up also ruined another serious exporter of food, Ukraine to be specific.  The land there is well-suited to agriculture and thus they’ve been one of the largest exporters of same.  Not anymore; a nation at war on their own soil has problems, obviously, with managing to produce and export anything.  This risks famine in multiple parts of the world, such as Africa for instance.

Once again…. oops.

We, in the US, thought it would be wise to not only play in the Russia/Ukraine sandbox but worse, try to mitigate the impact on oil and gas prices here using the SPR after we also decided to try to backstop European oil and gas supplies.  That was stupid all the way around and the people responsible should be asset-stripped to their underwear and thrown in prison — the SPR exists for the possibility of an external cut-off of oil supplies, such as was threatened and partially done during the Arab Oil Embargo.  Biden not only abused that for our voluntary involvement in Ukraine his energy department let some of it go not to US motorists and industry but rather be exported to China.  Maybe someone can explain to this blogger and the rest of the United States how exporting oil from our strategic reserves can or does benefit the extreme inflation in fuel costs right here at home, never mind that the SPR will be basically depleted and will have less than a half-million barrels remaining in it out of an authorized 714 million.  Incidentally the US consumes about 20 million barrels of oil a day to keep our economy functioning, so the current stockpile is good for about…. a half-hour.  The SPR was only about a third full when Biden took office and he has basically blown all of what remained for no net benefit to the United States.  If we do have an event occur, whether natural (e.g. a hurricane — you know, those spinny things that show up from time to time during this particular time of year?) or man-made (war, economic or otherwise) where we need it we don’t have it.  It’s gone.  At the same time the Biden Administration has shut down capacity build in all respects (Keystone, leases and more) and by taking those actions ruined people’s investments while bribing them to convert to things like “biofuel” production.  Now we’re short and there’s no reason for anyone to invest in fossil fuel production and transport because this and any future administration can screw them one again with nothing more than a pen and a phone, not even bothering to go through Congress.  This is not fixable in a few weeks or months folks, and I remind you that without diesel you literally have nothing in the store because you must have it for the truck to get to said store.

Congress, for its part, still thinks spending money it does not have is a good idea.  In fact its not only a good idea its a grand idea, despite the fact that all the inflation sequestration that we’ve enjoyed for the last 30+ years has been permanently cut off by the Russia/Ukraine conflict.  Why?  Because nobody in their right mind, having now seen the mass-seizure of assets and funds denominated in dollars, euros and similar is going to allow that risk to happen to them down the road.  This in turn means that said sequestration of “printed credit” in dollars (never mind Euros) via import trade imbalance is over and when you run deficits they will and do immediately reflect back into prices, exactly as Milton Friedman observed.  That is, inflation is always and everywhere a monetary phenomena.  Further, until and unless the cost to borrow is positive in real terms, and no, it isn’t today for either the government or well-connected businesses despite the so-called “rate hikes” said credit emission continues whether officially or otherwise and thus so does the inflation.  The Fed would have to put roughly seven percent on rates at the next meeting to restore a positive cost of borrowing!  The longer they wait to restore said positive cost and the longer Congress goes without cutting off the deficit spending the worst the inflation and recession will be and the longer it will last.

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