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There’s trouble across the pond and it’s only going to get worse as winter quickly approaches.

While it’s most fashionable to talk about the dire economic situation currently taking place in the US, the situation in Europe is so much worse.

There are talks of massive energy bill hikes and even the lights literally going out across Europe. This is the product of the toxic combination of a misguided sanctions war against Russia and Europe’s decision to transition towards inefficient green energy sources.

As a result, folks across the pond are going to be in for a rough winter.

If you’re an America, you should feel safe knowing that our situation could be much worse…at least for now.

Now for residents of the United Kingdom, that’s a different story.

The UK is now facing inflation levels that haven’t been seen in decades. On top of that, energy and food prices have been soaring lately.

Liz Truss, the UK’s new prime minister, is now tasked with trying to get the country’s economic house in order.

Truss is currently proposing a plan to cut taxes (good), while raising spending (bad). It’s basically a moderate form of Keynesianism, which does not resolve any of the UK’s structural economic problems.

Instead of cutting spending and red tape, while also getting the UK’s monetary house in order, Truss’s new economic proposal worsens the country’s fiscal situation and will only further ignite inflation.

What’s taking place in the UK is not unique to the island. Most economies in the West are over-taxed, over-regulated, and feature central banks who have no regard for monetary restraint.

It’s small wonder why these countries are in such dire straits.

Will the UK be one of the first high-profile victims of the economic doom spiral engulfing the West?

Check out George Gammon’s most recent video on why there’s nothing but bad things coming to the island nation.

P.S. – The West is experiencing an existential economic crisis.

Hyperinflation Hits Europe

October 3, 2022

Hyperinflation Hits Europe

Angry Customers Demand Explanation As German Energy Bills Soar

September 17, 2022

Angry Customers Demand Explanation As German Energy Bills Soar

Utilities in Germany have had to handle a surge in customer service calls in recent weeks from clients angry or desperate about their sky-rocketing energy bills, Reuters reports.

The biggest utility, E.ON, has ramped up its capacity to handle calls from consumers who are shocked to find just how much their energy bills have surged in recent months.

Gas prices in Europe are very high and power prices in many countries, including Germany, have hit record levels this summer after Russia choked pipeline gas supply to Europe and shut down indefinitely the key gas export pipeline to Germany, Nord Stream, at the beginning of this month.

“Some become aggressive out of frustration, others are in tears and need psychological support,” Ingbert Liebing, head of local utilities organization VKU, told Reuters, commenting on the spike in customer calls to utilities’ service centers.

Apart from already high energy bills, German customers will have a surcharge as of October, as part of a government plan to implement a so-called gas levy on consumers in order to help struggling energy firms.

Germany has recently announced it would impose a gas levy on consumers from October 1 through March 2024 as it aims to help energy providers and importers of natural gas, which are struggling with low Russian gas supply and very expensive alternatives to Russian gas. The new natural gas tax is set to cost German families, who will have to foot the bill for the tax, an extra $500 a year.

Meanwhile, the German government is in talks with the biggest German importer of natural gas, Uniper, to potentially lift its 30% stake in the company to majority participation or to nationalize the firm…

…click on the above link to read the rest of the article…

Europe Cannibalized

September 17, 2022

Europe Cannibalized

Abandoned industrial building. Image credit: Pixabay

Europe is in the process of losing its industry. It didn’t start this year, it was already going on for decades now. However, in 2022 the process has switched from a long slow grind to a considerably higher gear.

Energy is the economy. This is the key point in understanding not only economics, but geopolitics and history as well — especially the recent events in Europe and around the world. Too bad, that this rather self-explanatory observation has been completely left out of modern (i.e.: neoclassical) economics theory, where everything revolves around prices of goods and services, demand and supply, and ultimately: infinite growth on a finite planet.

In the real world, however, every single economic activity requires an irreversible expenditure of energy: from cutting a client’s hair, to melting or forging steel. Take energy away and all economic activity stops, starting with the ones using the highest amount of energy and continuing with the rest as the loss of one business leads to the loss of another.

List of the most energy intensive businesses. Source: US Energy Information Administration

There is a very important point to understand here though. Complex self-adapting systems, like the Economy, very rarely collapse completely. As the knock-on effects take their toll, the falling of dominoes usually stops at a certain point. It’s like an avalanche: it starts slowly beneath the surface. As the fundamentals deep inside the snow-pack slowly give way to gravity, a large piece breaks away: all of a sudden half of the mountain is on it’s way towards the valley! However, there are many natural stopgaps in the process, and the avalanche remains concentrated to a certain area. It destroys everything in its path, but it eventually stops.

…click on the above link to read the rest of the article…

IMF Chief: Harsh Winter May Spark Social Unrest In EU Amid Energy Crisis

September 16, 2022

IMF Chief: Harsh Winter May Spark Social Unrest In EU Amid Energy Crisis

A number of countries in Europe may experience social unrest if the upcoming winter is harsh amid an economic crisis, the head of the International Monetary Fund (IMF) warned on Wednesday.

“There is certainly fear of recession in some countries, or even if it is not recession, that it would feel like recession this winter,” said Kristalina Georgieva, managing director of the IMF.

“And if Mother Nature decides not to cooperate, and the winter is actually harsh, that could lead to some social unrest,” she added.

Attending the 2022 “Michel Camdessus Central Banking Lecture” held in Washington, D.C., Georgieva pointed out that Europe is directly affected by Russia’s attack on Ukraine, saying the war has led to “horrible” economic consequences and added fuel to fears of recession in some countries.

Georgieva said the current situation meant that the European Central Bank needed to be “mindful of the necessity to keep the economy going,” while also remaining persistent in fighting broad-based inflation.

“Inflation is stubborn, it is more broad-based than we thought it would be,” Georgieva said. “And what it means is … we need central bankers to be as stubborn in fighting it as inflation has demonstrably been.”

Second-Order Effects

Georgieva noted at the event that the global economy had two consecutive shocks, the COVID-19 pandemic and Russia’s attack on Ukraine, which contributed to surging prices and a cost-of-living crisis.

The disruptions in the flows of Russian gas to Europe remain the primary cause of Europe’s current energy crisis. The continent has relied upon cheap Russian energy for years to power factories, generate electricity, and heat homes.

…click on the above link to read the rest of the article…

‘Worst Yet to Come’ as Global Civil Unrest Index Hits All-Time High

September 5, 2022

An opposition activist shouts slogans holding up bread as he protests along with others against rising living costs, at the entrance of the president’s office in Colombo on March 15, 2022. (Photo: Ishara S. Kodikara/AFP via Getty Images)

‘Worst Yet to Come’ as Global Civil Unrest Index Hits All-Time High

“Over the coming months, governments across the world are about to get an answer to a burning question: Will protests sparked by socioeconomic pressure transform into broader and more disruptive anti-government action?”

The risk of civil unrest is rising in over 100 nations, with the “worst yet to come,” according to an analysis published Thursday by the U.K.-based consulting firm Verisk Maplecroft.

“With more than 80% of countries around the world seeing inflation above 6%, socioeconomic risks are reaching critical levels.”

Incorporating data going back to 2017, the latest update to the firm’s civil unrest index (CUI) shows that the last quarter of this year “saw more countries witness an increase in risks from civil unrest than at any time since the index was released,” the analysis states. “Out of 198 countries, 101 saw an increase in risk, compared with only 42 where the risk decreased.”

“In December 2020, we warned of a new era of civil unrest, projecting that 75 countries would see an increase in civil unrest risk by August 2022. The reality has been far worse, with 120 countries witnessing an increase in risk since then,” the firm pointed out.

“With more than 80% of countries around the world seeing inflation above 6%, socioeconomic risks are reaching critical levels,” the analysis explains. “Almost half of all the countries on the CUI are now categorized as high- or extreme-risk, and a large number of states are expected to experience a further deterioration over the next six months.”

In a separate index, measuring government stability within countries, the firm found that 42 nations saw an increased risk of having their governments challenged or toppled compared with 27 countries where it dropped…

…click on the above link to read the rest of the article…

Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government

September 1, 2022

Fed Paper Admits the Central Bank Can’t Control Inflation; Finger-Points at Federal Government

It appears somebody at the Federal Reserve has figured out that the central bank can’t tame inflation, so it’s setting up a scapegoat – Uncle Sam.

A paper co-authored by Leonardo Melosi of the Federal Reserve Bank of Chicago and John Hopkins University economist Francesco Bianchi and published by the Kansas City Federal Reserve argues that central bank monetary policy alone can’t control inflation.

The paper’s abstract asserts, “This increase in inflation could not have been averted by simply tightening monetary policy.”

In a nutshell, Melosi and Bianchi argue that the Fed can’t control inflation alone. US government fiscal policy contributes to inflationary pressure and makes it impossible for the Fed to do its job.

Trend inflation is fully controlled by the monetary authority only when public debt can be successfully stabilized by credible future fiscal plans. When the fiscal authority is not perceived as fully responsible for covering the existing fiscal imbalances, the private sector expects that inflation will rise to ensure sustainability of national debt. As a result, a large fiscal imbalance combined with a weakening fiscal credibility may lead trend inflation to drift away from the long-run target chosen by the monetary authority.”

There are a couple of startling admissions in this single paragraph.

First, the authors acknowledge that the federal government uses inflation as a tool to handle its debt. In other words, it acknowledges that we’re all paying an inflation tax.

Peter Schiff talked about this inflation tax in an interview on Rob Schmitt Tonight.

Inflation is a tax. It’s the way government finances deficit spending. Government spends money. It doesn’t collect enough taxes, so it has to run deficits. The Federal Reserve monetizes those deficits – prints money. They call it quantitative easing, but that’s inflation…

…click on the above link to read the rest of the article…

“How In The Name Of God”: Shocked Europeans Post Astronomical Energy Bills As ‘Terrifying Winter’ Approaches

August 31, 2022

“How In The Name Of God”: Shocked Europeans Post Astronomical Energy Bills As ‘Terrifying Winter’ Approaches

Over the past week, shocked Europeans – mostly in the UK and Ireland – have been posting viral photos of shockingly high energy bills amid the ongoing (and worsening) energy crisis.

Several of the posts were from small business owners who getting absolutely crushed right now, and won’t be able to remain operational much longer.

One such owner is Geraldine Dolan, who owns the Poppyfields cafe in Athlone, Ireland – and was charged nearly €10,000 (US$10,021) for just over two months of energy usage.

Geraldine Dolan, of Poppy Fields Cafe, Athlone, with an electricity bill for just under ten thousand euro for two months. Photograph: Dara Mac Dónaill / The Irish Times Photograph: Dara Mac Donaill / The Irish Times

As the Irish Times reports, “The cost of electricity to the Poppyfields cafe for 73 days from early June until the end of August came in at €9,024.70 an increase of 250 per cent in just 12 months. There doesn’t include the €812.22 in VAT, which brought her total bill to €9,836.92.”

“How in the name of God is this possible,” tweeted Dolan.

I got this electricity bill today, how in the name of God is this possible, we’re a small coffee shop in westmeath pic.twitter.com/uz5J8BePhB

— poppyfields cafe.🇺🇦 (@DolanGeraldine) August 29, 2022

UK pensioners are also facing a “terrifying” winter, as elderly Britons are about to get hit with an 80% rise in energy bills in October.

Elderly Britons are set to welcome a boost of around £1,000 to their state pension payments next year thanks to the return of the triple lock, however the cost of living crisis will still leave them significantly poorer.

However, the price cap for energy bills will rise by 80 per cent to £3,549 in October, and it is predicted to rise over £6,600 next year according to Cornwall Insight.

…click on the above link to read the rest of the article…

Greyerz – The US Economy Is Crashing But The Global Collapse Will Be Even More Terrifying

August 31, 2022

Greyerz – The US Economy Is Crashing But The Global Collapse Will Be Even More Terrifying

Today the man who has become legendary for his predictions on QE and historic moves in currencies and metals warned King World News that the US economy is crashing but the global collapse will be even more terrifying.

_____

“Everyone wants to live
at the expense of the
state. They forget
that the state wants
to live at the expense
of everyone.”
Frederic Bastiat

August 28 (King World News) – Egon von Greyerz, Founder of Matterhorn Asset Management (based in Switzerland): Contrary to what the wisest men and women in the land have told us, the world has been hit by the most vicious bout of inflation.

The “transitory” heads of the Fed and ECB clearly couldn’t recognise inflation until there was a scapegoat like Putin to blame it all on.

The fact that Powell, Lagarde and their predecessors had laid the perfect foundation not just for a small spell of price increases but for an unstoppable avalanche of global inflation, they were totally oblivious of.

NEITHER COVID NOR PUTIN IS THE CAUSE OF INFLATION
Let’s be very clear.

Covid didn’t create inflation.

Putin didn’t create inflation.

No, inflation is the result of governments’ and central banks’ irresponsible and totally irrational policy of believing that prosperity can be created out of thin air.

They don’t understand or at least choose not to understand that reckless creation of fake money that has zero value CREATES ZERO WEALTH.

Money in itself has ZERO value. Money is just a derivative that derives its value as a medium of exchange through the production of goods and services.

In simple terms, money that has derived value from anything but goods and services has ZERO value.

…click on the above link to read the rest of the article…

“This Is Beyond Imagination”: Polish Homeowners Line Up For Days To Buy Coal Ahead Of Winter

August 28, 2022

“This Is Beyond Imagination”: Polish Homeowners Line Up For Days To Buy Coal Ahead Of Winter

Several weeks ago we reported that amid Europe’s mindblowing gas and electricity prices, Deutsche Bank predicted that a growing number of German households will be using firewood for heating, a forecast which appears to have become self-fulfilling as German google searches for firewood (“brennholz”) had since exploded off the charts:

But while Germans are still “searching” merely in the virtual realm, for countless Poles the search is all too real.

According to Reuters, with Poland still basking in the late summer heat, hundreds of cars and trucks have already lined up at the Lubelski Wegiel Bogdanka coal mine, as householders fearful of winter shortages wait for days and nights to stock up on heating fuel ahead of the coming cold winter in queues reminiscent of communist times.

Artur, 57, a pensioner, drove up from Swidnik, some 30 km (18 miles) from the mine in eastern Poland on Tuesday, hoping to buy several tonnes of coal for himself and his family.

“Toilets were put up today, but there’s no running water,” he said, after three nights of sleeping in his small red hatchback in a crawling queue of trucks, tractors towing trailers and private cars. “This is beyond imagination, people are sleeping in their cars. I remember the communist times but it didn’t cross my mind that we could return to something even worse.”

In Poland, where coal is king, dozens are lining up at the Lubelski Wegiel Bogdanka coal mine, waiting for days and nights to stock up on heating fuel. Read more: https://t.co/jVGwSEfLam pic.twitter.com/zZV3vtzEQk

— Reuters Business (@ReutersBiz) August 27, 2022

…click on the above link to read the rest of the article…

European Natural Gas Prices Are 6 Times Higher Than Last Year, And This Is Sparking Widespread Civil Unrest All Over Europe

August 26, 2022

European Natural Gas Prices Are 6 Times Higher Than Last Year, And This Is Sparking Widespread Civil Unrest All Over Europe

This is going to be a bitterly cold winter for a whole lot of people. In particular, things are likely to get really uncomfortable in Europe. Soaring energy prices and concern about potential shortages are causing anxiety all over the continent, and widespread protests have already started to take place. The cost of living has become extremely painful for those on the bottom of the economic food chain, and people want their governments to do something. Of course this is what always happens when nations embrace socialism. There is an expectation that those in charge will solve any and every problem, but this time around the limitations of the socialists running Europe will become very clear.

Thanks to the war in Ukraine and a number of other factors, the price of natural gas in Europe is now approximately six times higher than it was last year…

European natural gas prices are taking a breather amid further signs that soaring energy costs are crippling economic output, heaping pressure on politicians to resolve the crisis with winter just a few months away.

Benchmark futures retreated after settling at a record high on Monday. Prices are still about six times higher than they were at this time last year, with the panic spreading across nations ahead of peak winter demand.

Needless to say, many in Europe are being completely stunned by the size of their energy bills, and a massive backlash has been brewing.

In fact, we are already starting to see very large protests in a number of different countries…

…click on the above link to read the rest of the article…

The Fed Can’t Stop Supply-Side Inflation

August 24, 2022

The Fed Can’t Stop Supply-Side Inflation

The Fed and other central banks have zero control of supply-driven inflation, period.

America’s financial punditry is bewitched by four fatal fantasies:

1. Inflation is demand-driven. If the Federal Reserve (or other central banks) reduce demand with monetary tools like raising interest rates, inflation will cool.

2. Substitution of high-cost goods with lower-cost goods reduces inflation, and substitution is infinite: there’s always cheaper chicken if beef gets too pricey.

3. Higher prices will lead suppliers to increase production, which will increase supply and reduce prices.

4. The Federal Reserve has control of all these inflation-reducing dynamics via interest rates and its balance sheet (buying or selling various durations of Treasury bonds).

All of these are fantasies, fantasies that are fatal because they’re flat-out false. The Fed has no control over supply-driven inflation, which is what we have now. Consider eggs. The price has skyrocketed not because consumers suddenly ramped up demand that is now outstripping supply, but because essential inputs to supply such as feed and energy have soared in price and constraints that have nothing to do with interest rates such as the spread of bird viruses.

These essential inputs are going up in cost due to factors completely unrelated to interest rates or monetary policy. Drought and weather extremes are constraining the supply of animal feed stocks, and energy prices are being driven by geopolitical forces completely outside central bank control.

Infinite substitution is also false. What’s the substitute for eggs? Silkworm goo squeezed into plastic eggs? Well, not yet… there are no substitutes for eggs. And with the soaring input costs of producing chickens, chicken is no longer that cheap.

…click on the above link to read the rest of the article…

Belgian PM Warns “Next 5-10 Winters Will Be Difficult” As Energy Crisis Worsens

August 24, 2022

Belgian PM Warns “Next 5-10 Winters Will Be Difficult” As Energy Crisis Worsens

Belgian Prime Minister Alexander De Croo might have spilled the beans about the duration of Europe’s energy crisis. He told reporters Monday, “the next 5 to 10 winters will be difficult.”

“The development of the situation is very difficult throughout Europe,” De Croo told Belgium broadcaster VRT.

“In a number of sectors, it is really difficult to deal with those high energy prices. We are monitoring this closely, but we must be transparent: the coming months will be difficult, the coming winters will be difficult,” he said.

The prime minister’s comments suggest replacing Russian natural gas imports could take years, exerting further economic doom on the region’s economy in the form of energy hyperinflation.

Europe faces a historic energy crisis exacerbated by Russia’s war in Ukraine (and Western sanctions that have backfired). The continent heavily relies on Russia for its energy needs, importing about 40% of NatGas. At just 20% capacity with risks of going to zero next month, Russian supplies via Gazprom’s Nord Stream 1 have sent NatGas and power prices to record highs this week.

European NatGas prices soared to a record high of 277 euros per megawatt-hour on Monday, about 15 times the average summertime price. Leon Izbicki, a commodity analyst at Energy Aspects Ltd., told Bloomberg if NS1 flows come to a halt in September, prices could rise to 400 euros per megawatt-hour.

Bloomberg’s commodities reporter Javier Blas tweeted a map of day-ahead electricity prices across Europe. He called the prices “eye-watering, with lots of countries setting record highs for today.”

The shift from Russian NatGas supplies has backfired for the 19-nation eurozone. Germany, Europe’s largest economy, could be headed for a recession that will bring down the rest of the continent.

De Croo said Belgium and the eurozone must “support each other in these difficult times.”

…click on the above link to read the rest of the article…

The Pause…

August 22, 2022

The Pause…

I have frequently described “Project Zimbabwe” as a highly inflationary cycle where both fiscal and monetary stimulus go into insanity mode. While I sincerely hope we don’t go hyperinflationary like Zimbabwe, I certainly think we see an elongated period of substantial and debilitating inflation. When this cycle finally ends, society and our financial system will have been irreparably changed. For those who are aware of where we’re heading, this is going to be the golden age of inflection and Event-Driven investing. For everyone else, it will be absolutely miserable.

One point that I made last year, was that “Project Zimbabwe” will be a process. It will not be linear. Look back at old charts of Weimar Germany, they all look like parabolas, however that is quite deceptive—there was actually a whole lot of volatility. There were multiple deep pullbacks that bankrupted speculators who knew what was coming on the inflationary side but got over-levered or overstayed their welcome in the various rolling bubbles of the period. Looking into the weeds and ignoring the parabolas; there were frequent sector rotations, speculative bubbles that crested and collapsed, and multiple 50% or greater pullbacks. As I have said many times, the trick to managing “Project Zimbabwe” is to be as long as possible, without getting taken out during one of these pullbacks—especially as the increased level of stimulus warps the market’s ability to price securities, leading to violent and often arbitrary movements.

Let’s go back a century to Weimar. Most speculators knew that the government had lost control and that the only path forward was to print money. However, occasionally the politicians would try and arrest the inflation—as inflation crushes voters. Sometimes, it was an offhand quote from a government official, sometimes it was concrete action…

…click on the above link to read the rest of the article…

Winter is Coming for the UK

August 20, 2022

Winter is Coming for the UK

The outlook for the UK looks increasingly grim. There are few reasons to hope a new government can reverse the mounting consumer fears, stagflation and the growing sense of decline.

“Tell them the North remembers. Tell them Winter is Coming.”

This morning. The outlook for the UK looks increasingly grim. There are few reasons to hope a new government can reverse the mounting consumer fears, stagflation and the growing sense of decline.

Yesterday was cold, wet and grey. The sudden end of the glorious summer highlights how dark and bleak the mood in the UK has become. UK Consumer confidence has collapsed to levels not seen since the 1970s. London has ground to a halt with tube and rail strikes. Its not just the cost of living crisis – which, to be blunt, has only just begun and will get much, much worse as winter deepens– but folk are losing confidence in the broken mechanics of the economy, the absence of leadership and a growing sense things won’t get any better.

The country feels like its sinking into a treacle of energy-sucking, suffocating despond. Everything in Britain feels broken: the NHS is too crowded to treat patients, excess death rates show untreated cancers, heart-disease and stokes from lockdown now far outnumber Covid deaths, the police are so overloaded they have stopped even bothering to investigate crime, while airports are blocked, trains don’t work, and it really doesn’t matter because you can’t get a passport or driving licence renewed. As the rains come down, we’re under threat of dire authoritarian punishment if we dare use a garden hose – although to be fair, who is going to arrest you?

Thank heaven we’re about to get a new prime minister – SARCASM ALERT.

…click on the above link to read the rest of the article…

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