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2023: Expect a financial crash followed by major energy-related changes

2023: Expect a financial crash followed by major energy-related changes

Why is the economy headed for a financial crash? It appears to me that the world economy hit Limits to Growth about 2018 because of a combination of diminishing returns in resource extraction together with rising population. The Covid-19 pandemic and the accompanying financial manipulations hid these problems for a few years, but now, as the world economy tries to reopen, the problems are back with a vengeance.

Figure 1. World primary energy consumption per capita based on BP’s 2022 Statistical Review of World Energy. Same chart shown in post, Today’s Energy Crisis Is Very Different from the Energy Crisis of 2005.

In the period between 1981 and 2022, the economy was lubricated by a combination of ever-rising debt, falling interest rates, and the growing use of Quantitative Easing. These financial manipulations helped to hide the rising cost of fossil fuel extraction after 1970. Even more money supply was added in 2020. Now central bankers are trying to squeeze the excesses out of the system using a combination of higher interest rates and Quantitative Tightening.

After central bankers brought about recessions in the past, the world economy was able to recover by adding more energy supply. However, this time we are dealing with a situation of true depletion; there is no good way to recover by adding more energy supplies to the system. Instead, the only way the world economy can recover, at least partially, is by squeezing some non-essential energy uses out of the system. Hopefully, this can be done in such a way that a substantial part of the world economy can continue to operate in a manner close to that in the past.

One approach to making the economy more efficient in its energy use is by greater regionalization. If countries can start trading almost entirely with nearby neighbors, this will reduce the world’s energy consumption…

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A tale of two civilisations

A tale of two civilisations

In recent years, America’s unsuccessful attempts at containing China as a rival hegemon has only served to promote Chinese antipathy against American capitalism. China is now retreating into the comfort of her long-established moral values, best described as a mixture of Confucianism and Marxism, while despising American individualism, its careless regard for family values, and encouragement of get-rich-quick financial speculation.

After America’s defeat in Afghanistan, the geopolitical issue is now Taiwan, where things are hotting up in the wake of the AUKUS agreement. Taiwan is important because it produces two-thirds of the world’s computer chips. Meanwhile, the large US banks are complacent concerning Taiwan, preferring to salivate at the money-making prospects of China’s $45 trillion financial services market.

The outcome of the Taiwan issue is likely to be decided by the evolution of economic factors. China is protecting herself against a global credit crisis by restraining its creation, while America is going full MMT. The outcome is likely to be a combined financial market and dollar crisis for America, taking down its Western epigones as well. China has protected herself by cornering the market for physical gold and secretly accumulating as much as 20,000-30,000 tonnes in national reserves.

If the dollar fails, which without a radical change in monetary policy it is set to do, with its gold-backing China expects to not only survive but be able to consolidate Taiwan into its territory with little or no opposition.

Introduction

On the one hand we have America and on the other we have China. As civilisations, America is discarding its moral values and social structures while China is determined to stick with its Confucian and Marxist roots. America is inclined to recognise no other civilisations as being civilised, while China’s leadership has seen America’s version and is rejecting it…
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Is the U.S. Fracking Boom Based on Fraud?

Is the U.S. Fracking Boom Based on Fraud?

typewriter reading 'fraud'

In a 2016 interview with Fraud Magazine, former Enron CFO Andrew Fastow explained what he thought made him so successful while at the former energy corporation that’s now infamous for financial scandal.

“I think my ability to do structured financing, to finance things off-balance sheet and to find ways to manipulate financial statements — there’s no nice way to say it. Like I said at the conference, I was good at finding loopholes.”

As Fastow explained, in finance, the difference between a loophole and fraud isn’t always easy to identify. And that may be something the U.S. fracking industry is working to its advantage.

Fastow, the convicted fraudster, does admit that what they did at Enron misled investors. “We created something that was monstrously misleading, but any one of those deals alone wasn’t necessarily considered fraudulent,” he said.

Fast-forward to today and a different part of the energy industry: The U.S. shale oil and gas industry has lost more than a quarter trillion dollars since 2007, while being sold to investors as an economic boom, even at oil prices much lower than those of recent years. Does that financial mismatch seem misleading? Or perhaps, familiar?

In an unexpected twist, Fastow now gives talks to the energy industry on ethical leadership.

Sounding the Alarm

Bethany McLean was the first reporter to question whether Enron was a financially sound company in a 2001 article for Fortune magazine. McLean went on to co-author the book The Smartest Guys in the Room, which documented the fall of Enron due to its fraudulent practices, including the ones Fastow engineered.

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Zero Hedge–A Maturing Fight Club Community or Just An Excuse to be Rude and Abusive

Zero Hedge–A Maturing Fight Club Community or Just An Excuse to be Rude and Abusive

The title of this essay asks a fair question. For quite a few who comment here on Zero Hedge the ‘Fight Club’ theme appears to be a convenient excuse to verbally bash heads and insult people, in essence to act like the school yard bullies some wanted to be and perhaps might even have been. For others, well………where else can you throw a temper tantrum in public and not be forced to deal with the embarrassing social consequences directly to your face? We’ve all had our moments and I’ve certainly had mine.

Deep down inside all of us is a petulant little boy and girl trying to get out, only for some he or she is more difficult to hide than others. It seems quite a few people who comment here find Zero Hedge the perfect place to let it all hang out and not be forced to clean up their mess afterwards. I suspect the wide open nature of Zero Hedge, meaning no rules and definitely no adult supervision, is the perfect breeding ground for egomania and naval gazing narcissism to run wild and uninhibited. And maybe that’s all we can ever really expect from a virtual Internet mosh pit. 

From my point of view Zero Hedge (ZH) is singularly unique in the blogosphere (or anywhere else for that matter) and I’ve often wondered if the readers who visit or comment on The Hedge have ever attempted to look beyond the oftentimes stark brutality on display here and discern what’s really going on in the background. On the surface there appears to be three virtual worlds within Zero Hedge, first and foremost the avatar world of Tyler Durden and Fight Club (FC) that super secret place from which Zero Hedge’s creator posts a steady stream of articles exposing financial and political manipulation, corruption and other assorted skullduggery.

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