Energy and Inflation
“But when thou doest alms, let not thy left hand know what thy right hand doeth.” Mathew 6:3
In regards to scripture's counsel and inflation, today’s corporate media is full of stories of the left hand not knowing what the right hand doeth. The biggest, call it dialectic to warm the hearts of the perpetually confused, is between the central banks, particularly the ECB and the Federal Reserve, and the elected “representatives” of their various governments.
Central banks have one way to deal with inflation – tighten the money supply. Tightening the money supply slows the economy and lowers markets, making most elected officials nervous – a slowing economy and markets going down not a great election platform. So, as central banks tighten, elected representatives are handing out greater and greater bucket loads of cash.
The FT reports, “EU governments have already allocated €280bn between September 2021 and July this year to protect consumers from skyrocketing energy prices.” In addition, just in the last few days, Bloomberg reports the Brits new PM wants to spend 130 billion pounds to “Freeze UK Energy Bills,” Germany €65 billion, and Sweden and Norway €23 billion. Of course not to be out done is the US Congress’ $400 billion, ironically named “Inflation Reduction Act.”
No one should consider this conflicted thinking and acting as anything new. An excellent, too little understood fact, the FT writes in “A Deglobalizing World will be an Inflationary One,"
“Polluting the planet to produce and transport low-margin goods around the world doesn’t make as much sense when you tally in the true cost of labour and energy, not to mention changing geopolitics. More than three decades of falling real interest rates have resulted in unproductive and dangerous asset bubbles; we desperately need some price discovery in markets.”
Volumes could be written on this alone, starting with there's no price discovery in today's central bank inflated markets. One might say price discovery is the last thing anyone wants. Certainly for the last four decades, you would never find a word in the financial press or out of the mouths of most American and European elected officials about the essential role cheap and plentiful fossil fuels played fueling corporate globalization, its pollution, and its “true costs.”
Remember Al Gore, sort of a first time tragedy, second time farce, John the Baptist of Climate, beheaded not by Herod, but the US Supreme Court? As Mr. Bill's Vice-President, Al was a strong advocate for NAFTA. Remember how Al shined in that NAFTA debate with the little upstart Texan, Ross Perot? His performance was praised by the corporate media and Al was championed as the future by every global conglomerate. But then the one time Senator from Tennessee was always a very average Southern Democrat, Military Industrial Complex elected official. If you think the South's only problem was segregation, well.... Al also actively supported the Clintons’ further deindustrialization of America and moving manufacturing to China. Al got caught capitalizing on this China policy for 1996 Democratic election fundraising.
The farce was in 2000, first with the Supreme Court wielded axe depriving Al of the top office. Then unlike the gospels' evangelist, the electorally decapitated Gore became more vocal about Climate. However, he inconveniently avoided the truth that getting rid of fossil fuels meant changing how we live from the bottom-up or the top-down depending on your political aesthetics. The world, especially Europe and the US, will not simply unplug from fossil fuels and plug-into renewables. An economy built atop cheap and plentiful fossil fuels needs to be restructured around new fuel sources.
Concluding with, not the cause of our energy woes, but certainly its most recent catalyst, the stupidly criminal, bloody, and obscenely wasteful war in Ukraine, the FT writes a propaganda piece, Europe’s new dirty energy: the ‘unavoidable evil’ of wartime fossil fuels. Make no mistake, this war has caused an enormous backsliding, on a hill we're already at the bottom of, on everything environmental, social, and governance, that's ESG for you finance types. Anyone who claims to care about Climate, the very top of the to-do list is end this war with full knowledge of what both the left and right hands doeth.