Euro Energy Bailout

Here I am in silence
It's a game I have to play
You and I in silence
With nothing else to say
--Information Society

On the back of yesterday's post, headlines this morning find euro bureaucrats committing to massive bailouts of consumers and producers as they face virtual margin calls as energy prices spiral higher.

These bailouts are forms of stimulus--subsidies that work against efforts to reign in higher prices.

Still wrapping my head around how this spills over to the US. The obvious consequence is an even strong USD vs the euro.

Frozen Policy

Hear the Salvation Army band
Down by the riverside
Bound to be a better ride
Than what you've got planned
--The Bangles

Europe seems headed toward a self-imposed depression. Sanctions against Russia, combined with previous 'green' policies, have exploded in the face of euro bureaucrats, leaving the EU facing a winter with insufficient heat, electricity, and gasoline.

Some gas and electric bills are already printing 5-10x year ago levels.

Policymakers appear to be doubling down by developing plans for rationing, price capping, and money printing.

Absent a quick policy about-face, it is difficult to see how the EU survives the next few months.

Be Poor and Like It

"Tis too much proved, that with devotion's visage and pious action, we do sugar o'er the devil himself."
-V (quoting Shakespeare) (V for Vendetta)

Another version of the 'suck it up' message. Euro leaders tell their people that 'abundance' is a thing of the past. Be poorer and like it.

One has to wonder how long a people is willing to endure hardship in support of a bureaucratic ideology.

Blatant Lying

"Richard, it profits a man to give is soul for the whole world...but for Wales?"
--Sir Thomas More (A Man for All Seasons)

An administration bureaucrat looks straight into the camera and claims that it is "factually not true" that gasoline prices were rising prior to the Ukraine conflict.

These people will use any means when attempting to manage narratives. Blatant lying included.

Inflation Reduction Act

I bought a novel, some perfume
A fortune all for you
But it's not my conscience
That hates to be untrue
I asked of my reflection,
"Tell me what is there to do?"
--Squeeze

As we've discussed, leftists are rarely honest with their rhetoric. They label things largely contrary of their actual effects.

Cast in point: the proposed Inflation Reduction Act. 

As Ron Paul discusses, the bill does the opposite. It increases government spending by hundreds of billions of dollars. It takes resources out of the hands of private citizens and puts them into the hands of bureaucrats.

Not only does this increase the risk of capital misallocation, but it must be funded. To the extent that citizens are taxed, it reduces economic resources available to people during an era of high price inflation and slowing economic activity.

It is a universal truth that slow economic activity motivates easier central bank monetary policy (read: inflation).

To the extent that taxes won't cover the spending, then those funds must either be a) borrowed, which taxes future incomes, or b) printed (the reason why inflation is called the 'invisible tax').

There is little doubt that the Inflation Reduction Act will ultimately result in more inflation, not less.

Ceiling Prices

We run though the day
And stare at the night
Is your head full of noises?
For me, well, it's just like
The Fourth of July
--Roger Daltrey

Among the dumbest of economic policies pursued by politicians is the price ceiling. The thinking is typical authoritarian. Think prices are too high? Then simply declare them lower. Set a maximum price for transactions on the market. Punish those who engage in transactions at a higher-than-mandated price.

What happens when producers are forcibly restrained from selling output at higher prices? Supply leaves the market. Shortages develop. 

Not only does present supply leave the market, but future sources do as well. Entrepreneurs are less motivated to develop marginal or substitute sources of supply when the profit signal of higher prices is suppressed.

Over time, prices are likely to be much higher--particularly if it takes a long time to replace capacity once it is taken off the market by the caps.

Cogitate on that as G-7 bureaucrats mull price caps on Russian oil.

Deep Church

Desolate loving in your eyes
You used to make my life so sweet
Step out like a God-found child
I saw your eyes across the street
--Culture Club

Interesting interview with an Italian Catholic archbishop concerning the state of the world and of the church. He suggests that events of the last couple of years have been perpetrated by proponents of the Great Reset. Moreover, he argues that officials of the Catholic Church have done little to stop these people and that some are likely complicit.

He draws parallels to what is happening inside the church to the secular political world. Just as we have a deep state, we also have a deep church, with officials sympathetic to un-Godly principles reaching the highest levels of the church hierarchy.

Ultimately, he believes, the Great Reset is destined for failure because "it is inspired by inhuman and diabolical principles." However, its end may take time, depending both on human capacity to oppose it and on God's plans for Divine Providence.

His views will certainly not win him a ton of friends inside the deep church contingent. But his forthright challenge of status quo corruption instills confidence that God is indeed positioning for victory.

Commitment to Stupidity

"He chose...poorly."
--Grail Knight (Indiana Jones and the Last Crusade)

The larger question for big government types is this: Have not the past couple of years demonstrated the sheer ineptitude of central planning?

Public health. War and sanctions. Economic and monetary policy. Et al.

Hayek called it the fatal conceit--the belief that bureaucrats in a room can choose better than billions of individuals.

Ongoing belief in central planning constitutes a genuine commitment to stupidity.

Administrative Overhead

Brantley Foster: What's this department? What do they do here?
Fred Melrose: Who knows? This place is a zoo. Nobody knows what anybody else is doing.
--The Secret of My Success

Administrative staffing (a.k.a. 'overhead') generally increases with organizational size. Small organizations are characterized by decision-makers who wear 'many hats.' A manager might make a production decision one minute, then an HR or accounting decision in the next.

As organizations grow, it usually makes sense to divide up decisions among specialists. Specialists focus on a narrow functional domain, such as R&D or marketing, which increases their decision-making productivity as they benefit from learning effects and lower switching costs. 

Moreover, sheer size and complexity makes large organizations difficult for any one person to understand. The number of decisions that must be made on a daily basis could number in the tens of thousands and easily exceed any single decision maker's capacity for rendering them. 

There are technical reasons, then, why we should expect more staff and administrative overhead as organizations get larger. More staff can improve productivity.

However, staff could also grow for social reasons. Because they seek to maintain or improve legitimacy in their institutional environments, organizations seek to score points with external social entities. Stated differently, organizations might add staff to 'look good' rather than to 'do better.' 

Coercive social pressures might drive organizations to hire regulatory or compliance personnel. Think environmental, safety, and legal departments. 

Social pressures might also be normative in nature, motivating organizations to staff in manners that signal awareness and caring about particular social issues and causes. For instance, many organizations have recently staffed departments of diversity and sustainability in response to those popular movements.

Meyer and Rowan (1977) seminally observed that administrative additions of this type may not be accretive to the organization's technical core at all. Adoption of staff for legitimacy reasons is instead largely ceremonial in nature. It is meant to satisfy the social needs of outsiders rather than the economic needs of buyers.

This is the price to be paid for increased social standing. More resources that could be invested toward productive ends, such as process and product development, are allocated bureaucratically for the sake of appearance. 

Some have argued that organizations must strengthen their legitimacy in the eyes of others in order to acquire the resources necessary to achieve greater economic performance. However, it is straightforward to theorize that excessive attention paid to looking good robs resources from the technical core, thus decreasing the likelihood that socially conscious organizations will do better and survive over time.

Perhaps this pathology increases with the strength of the institutional environment.

Reference

Meyer, J.W. & Roward, B. (1977). Institutional organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83: 340-363.

Boosters Shot?

Hardy Jenns: Look, I'm perfectly willing to forget this. Okay? I see no reason in carrying this on any longer. It was a joke. It's gone too far. It's over. Okay?

Keith Nelson: You want the truth? You want the plain truth? You're over."
--Some Kind of Wonderful

Alex Berenson shares emerging data points suggesting that enthusiasm for CV19 vaccines and associated boosters is quickly waning. Pfizer's (PFE) CEO appears to be walking back his push for boosters. 

EU regulators are now warning of potential immune system problems that could arise from ongoing boosters.

In a statement about CV19 vaccines yesterday, the WHO warned that "a vaccination strategy based on repeated booster doses of the original vaccine is unlikely to be appropriate or sustainable.

After what has transpired over the past two years, it is hard to believe that policymakers and vax makers are suddenly waving the white flag of defeat. On the other hand, the evidence continues to pour in on a) the ineffectiveness of the vaccine, particularly in booster form, to prevent CV19 infection, and b) side effects.

Prepare, therefore, for a concerted program of denial to spring forth from vax enthusiasts of all stripes.

no position

Chinese Eyes

"I can feel it."
--Jack Goddell (The China Syndrome)

As headlines like this continue to surface, it is difficult not to construe that a primary objective of CV19 policy is to intentionally weaken US military capacity. Otherwise, it simply makes no sense to force vaccines on a demographic that is exposed to far greater risk in the line of duty than to the virus.

Reinforces notion that it would be wise to keep eyes on China.

Compulsory Failure

In violent times
You shouldn't have to sell your soul
In black and white
They really, really ought to know
--Tears for Fears

Nice collection of studies showing the ineffectiveness of various CV19 interventions. Various forms of lockdowns, closures, stay at home, and masking policies are considered.

Not only have they been found to be ineffective, results suggest that, as these pages discussed early on, these policies cause great harm to society, particularly to the poor and other vulnerable groups.

Would think that an addendum for vaccines is in the works.

Science of Conceit

All my tubes and wires
And careful notes
And antiquated notions
But, it's poetry in motion
--Thomas Dolby

The hubris of this guy is consistent with what Hayek termed the 'fatal conceit' of central planners. Because bureaucrats generally believe that they know better than the masses weighing options and acting in ways best suited for their individual situations, they are destined to make poor decisions that lead to their downfall. 

Fauci says that he represents science. What he means is that what is says and does shouldn't be questioned.

His conceit has quite literally proven fatal to many already. The question is when will it take Fauci down as well.

Bureaucratic Incompetence

Oil, that is
Black gold
Texas tea
--Flatt and Scruggs

In the midst of skyrocketing gasoline prices and the administration's release of oil from the Strategic Petroleum Reserve, the Secretary of Energy is unable to answer what should be simple question for a person in her position: How many barrels of crude does the US consume daily?

Representative example of the bureaucratic incompetence engulfing this administration. 

btw, a useful repository of energy supply/demand info can be found in BP's annual Statistical Review of World Energy. Turn to p.23 of the 2021 edition to view US daily oil consumption for the past 10 yrs.

Shrugging Atlas

The whole world is out there
Just trying to score
I've seen enough
Don't want to see anymore
--Bruce Springsteen

In an upcoming book, Stanford professor and former White House advisor Scott Atlas recounts the dismissal of scientific evidence by CDC officials during his tenure. For example, Atlas presented data indicating the inadvisability of closing schools and that children are not significant spreaders of CV19.

After the presentation, there was silence. No one citing work with contrary results. No discussion of the serious harms likely to result from school closures.

According to Atlas, Dr Deborah Birx instead told him that his opinion was 'out of the mainstream' and that he was part of a 'fringe' group wanting to re-open schools. She insisted that all experts agreed with her, despite the reality that many well known epidemiologists vehemently disagreed with the position of CDC officials.

Birx subsequently testified before Congress that Trump-appointed advisors such as Atlas did not take mitigation steps such as mask wearing that could have prevented CV19-related deaths. Of course, many of those mitigation steps still lack conclusive scientific support.

Atlas' book will serve to document and confirm what public health officials predictably do in the face of a pandemic.

Defending Shortages

Arthur Castus: What is his punishment for? Answer me!
Ganis: He defied our master, Marius. Most of the food we grow is sent out by sea to be sold. He asked that we keep a little more for ourselves, that's all. My ass has been snappin' at the grass, I'm so hungry!
--King Arthur

Transportation secretary defends widespread shortages, claiming that they are a product of a strong economy. Textbook central planner rationalization. 

The truth is that prolonged shortages occur only when markets are not permitted to freely function. In unhampered markets, increased demand motivates producers to increase prices. Higher prices signal opportunity to producers, who subsequently increase production rates and, in some cases, add capacity so that higher demand is met with more supply. 

Shortages persist if this process is impaired. If prices are not permitted to rise, or if producers are restrained from increasing supply (through, for example, regulations that slow supply chain activities), then demand continues to outstrip supply and shelves go bare. 

Those who defend shortages are typically the people who create them.

Idiocracy

Somebody once told me the world is gonna roll me
I ain't the sharpest tool in the shed
She was looking kind of dumb with her finger and her thumb
In the shape of an 'L' on her forehead
--Smash Mouth

Hard not to find a kernel of truth in this observation.

Reasoning minds across the globe have been bothered by what has transpired over the past 18-20 months. Conclusions drawn by policymakers and their lackeys defy logic as well as empirical evidence.

The obvious question: Can these people really be this stupid?

Afghan Unwind

There's a room where the light won't find you
Holding hands while the wall come tumbling down
When they do, I'll be right behind you
--Tears for Fears

The chaos that has erupted in Afghanistan following the abrupt removal of remaining American forces by Joe Biden has fostered no shortage of finger pointing. Republicans, especially, smell political blood in the water. Their howls range from "America has been completely embarrassed" to "Biden should resign."

These rants may be justified on some levels, particularly in light of what has transpired over the past year and a half. But, as Ron Paul notes in a more or less "I told you so" rant of his own, many of these same politicians created the Afghan mess to start with.

Meanwhile, most Democrats are predictably circling the wagons around Biden. He did the right thing, Dems claim, by taking us out of an unpopular war. And, indeed, prior to the chaos polls had suggested that nearly 70% of American opposed US presence in Afghanistan and wanted us out. 

As a matter of fact, I was one of them.

At the end of the day, I suspect the problem that most Americans, and perhaps many across the globe, have with what is going on is not the intent but the execution. As Ron Paul observes, the 20 year campaign of terrorist fighting and nation-building in Afghanistan had been counterproductive for years. Most people saw the writing on the wall.

The Trump administration seemed to understand this. Trump had begun the process of unwinding in-country military commitments but stopped short of complete withdrawal based on advice that it wasn't quite time to do so yet. 

Reports are circulating that the Biden Administration ignored similar advice. Rather than continuing a measured withdrawal, Biden decided to pull out cold turkey. Unfortunately, the political vacuum created by his hasty action has cost many lives, with more surely to come. It has also cost Biden a pile of political capital.

Which brings me to my main point. There was a time where I might have done things like Biden did here. I used to think that if I were in charge, then I would end every government-sponsored program--immediately. 

But now I know better.

When government intervenes anywhere--overseas in military ops such as Afghanistan, or in domestic affairs such as welfare and healthcare redistribution, it distorts human behavior and interaction. These distortions create dependencies and other commitments that cannot quickly be reversed should those interventionary policies no longer garner political support.

As Biden's actions have demonstrated, trying to reverse these dependencies quickly is likely to create considerable pain. Retrospectively, a more measured phase out may have been more sensible--and more humane. 

Biden might have told his administration, the media, and people in the US and Afghanistan, that the US would be out of Afghanistan in, say, two years. He could have demanded phased withdrawal plans from the military and other advisors in the early days of his administration, and then shared the plans with all stakeholders. Those plans could have included key dates, goals, measures of progress along the way.

And to be fair, Trump could have done the same thing.

Similar measured exits could be designed for every bloated government-sponsored program on the books. Social Security, Medicare, welfare, etc. For example, Social Security payments might be phased out over the course of four, eight, or ten years.

Do measured withdrawals from government programs cost more? Perhaps, but perhaps not given the potential cost associated with chaotic withdrawal. Is it possible that a measured withdrawal never happens--given the proclivity of institutionalized bureaucracies to stifle change? For sure. Will they be politically unpopular with large voting blocs that benefit from the largesse? Without question.

However, I can't help but think that the transparency of a well communicated gradual exit strategy executed by determined leadership would be an effective, and fair, way to back out of trillion$ in government largesse.

Let's also note this. If we don't proactively back out of commitments, particularly those with massively upside down economics, then market forces will do it for us at some point. And when they act, market forces are likely to do so quickly. 

Biden's handling of the Afghan situation therefore serves as a harbinger of the chaos likely to ensue in other domains if we do not learn from mistakes made here and initiate programs of measured reversal.

In God We Trust

Put not your trust in princes, nor in a son of man, in whom there is no help.
--Psalm 146:3

In the early 1900s President Theodore Roosevelt thought it was time to take US coinage into the 2oth century. For effect, Teddy first targeted the two highest denomination coins--the $10 (a.k.a. 'eagle') and $20 gold ('double eagle') pieces--for redesign. Renowned sculptor Augustus Saint-Gaudens won the commission, and his designs were unveiled with much acclaim in 1907.

1908 $20 PCGS MS66+ No Motto CAC

Although the art deco-inspired coins were fresh, optimistic, and inspirational, there was public outcry over the omission of the 'In God We Trust' motto that had, by law, appeared on all new issues since 1864. However, an oversight in the Coinage Act of 1892 amended the law so that the motto was no longer required. The Saint-Gaudens coins happened to be the first new issues under the amended law.

1908-D $20 PCGS MS65+ Motto CAC

It took the federal government bureaucracy more than a year to pass the necessary legislation that reinstated the motto requirement. About halfway thru 1908 production, the mints retooled their dies to include In God We Trust on gold eagle and double eagle coins.

All was right with the world again.

This author argues that recent developments demonstrate that many Americans no longer put their faith in God. He may be right.

Which bids the question, would today's Americans raise a ruckus over the omission of In God We Trust on coinage as their ancestors did more than 100 years ago?

Or might they insist on a new motto: In Government We Trust?

Dot Plots

Sam Gerard: Cosmo, this guy's dirty.
Cosmo Renfro: Yeah he is, Sam.
--The Fugitive

If you're connecting dots to picture what has truly gone on over the past year and a half, then it seems likely that an image of Dr Anthony Fauci will appear in the middle of it. A public health sector bureaucrat for more than 50 yrs, Fauci is the director of the National Institute of Allergy and Infectious Diseases (NIAID). He has been the chief mouthpiece of CV19 public health measures since the pandemic began.

It did not take long for Fauci to blow his credibility with anyone with reasoning capacity. His stance on several matters (e.g., travel policy, masking) flip flopped. He promoted policies grounded in dogma rather than in science. He failed to advocate for projects to obtain better understanding of the situation (e.g., seroprevalence studies, randomized trials evaluating effectiveness of various PPE). He ignored data that contradicted his viewpoints.  

Because Fauci has been an active member of the Democratic Party who strongly supported Hillary Clinton in 2016, it is easy to construe his actions as politically motivated. Indeed, failing to remove Fauci from his position of influence may have been Donald Trump's most glaring error.

Evidence is emerging that Fauci received information about the potential origin of the virus in a Wuhan lab. He also knew that the research was funded in part by US tax dollars. In both cases his subsequent actions suggest coverups. Yesterday he failed to appear before a House panel hearing to answer questions about these matters.

Undoubtedly, Fauci is seeking political cover while it is still available for him. But it will be hard to hide from what the dots plot.