Europe is in a tight spot. It put itself there.
It shut down its economy in the COVID panic. It kept its interest rates way too low for way too long. It aims to rid itself of fossil fuel, upon which its economy and living standards depend. And now, in its misbegotten proxy war with Russia, it faces General Winter — Russia’s traditional ally.
We are here in Paris…enjoying a short holiday…and just finishing a US$110 breakfast.
Consumer prices are almost all, to some measure, dependent on energy. And Europe’s most important source of energy is Russia. Now that the Russians have cut off, indefinitely, gas coming from the Nord Stream 1 pipeline, prices are on the rise. Consumer prices in England, for example, are expected to rise more than 20%. Here’s Bloomberg:
‘Soaring energy bills are threatening to put six in 10 British manufacturers out of business, according to a survey that lays bare the extent of the crisis facing the next prime minister.
‘“The current crisis is leaving businesses facing a stark choice,” the report said. “Cut production or shut up shop altogether if help does not come soon.”’
And this from The Sun: ‘SEVEN in ten pubs could shut for good this winter because of rising energy costs, a survey reveals’:
‘Thousands of landlords already rocked by repeated lockdowns are teetering on the brink following a doubling in gas and electricity prices.’
Another curve to ‘flatten’
Germany is shutting down its factories too. Its citizens are urged to turn off the lights, turn down the thermostat, and bathe in cold water. Meanwhile, the French are planning to ration electricity…but are also applauding this opportunity to shift to ‘green energy’, as if it were possible to quickly replace Russian gas with windmills and solar panels.
Even level-headed Sweden, which resisted much of the COVID madness, has succumbed to anti-Russian propaganda. From Aljazeera:
‘Prime Minister Magdalena Andersson warned that Sweden was facing the prospect of a “war winter” because of Europe’s energy crunch…
‘Speaking to reporters on Saturday, Andersson said [financial] guarantees were aimed at giving energy groups “the breathing room that is needed”.’
And now, from the COVID Panic Playbook, Ursula von der Leyen, President of the European Commission, says the EU will propose a ‘mandatory target for reducing electricity use at peak hours’ in order to ‘flatten the curve’.
We’ve enjoyed using power, on-demand when we wanted it, all our lives. Forcing us to stop is like downsizing packages or printing money — another subtle form of impoverishment.
But it’s for a good cause, right? The feds say that lower output of carbon dioxide will mean lower surface temperatures on Planet Earth; ‘it will be worth it’, they say. But we don’t yet know what the price will be (wearing sweaters in the winter…or 100 million dead?).
Goldman Sachs put out a report this week, guessing about what cutting off Russian gas will do to Europe’s consumers:
‘In our view, the market continues to underestimate the depth, the breadth and the structural repercussions of the crisis — we believe these will be even deeper than the 1970s oil crisis. At current forward prices, we estimate that energy bills will peak early next year at c.€500/month for a typical European family, implying a c.200% increase vs. 2021. For Europe as a whole, this implies a c.€2 [trillion] surge in bills, or c.15% of GDP.’
Earnest planet savers
While cutting off fossil fuel supplies to Europe will purge some carbon dioxide from the air, we don’t know if any particular act of perjury will make any difference at all. If we trade in our old F-150 Ford truck for an electric model, will it reduce the heat of a Maryland summer by 1/100th of a degree? Or not at all? Or will we just sit in a long line waiting for a charge…like the Poles now sleeping in their cars at coal mines waiting for a sack of the dirty, old-fashioned fuel? And will our power plants end up running on coal, too, because the windmills can’t keep up?
Nor do we know what will happen if all goes ‘according to plan’? Let’s say we all go along with Janet Yellen and rid the world of dependence on fossil fuel. And let’s say we pay the price — whatever it is…perhaps doubling the real price of food and energy…perhaps 100 million early deaths from cold or malnutrition (in areas of the world where people are already living on the edge)…
….and then, what a shame it would be if arriving at the water’s edge…like the thousands of innocents in the ‘Children’s Crusade’ in 1212…the seas fail to part! What a shame if…despite all our sacrifices and suffering…the climate keeps changing anyway. What a pity if planet Earth doesn’t really care what we think or what we do.
But the ‘we’ and the ‘our’ hide a great many distinctions and flimflam. Like so many Great Campaigns in history, the costs are likely to fall primarily on the poor, the weak, and the children. The price of energy could double; but the ‘deciders’ won’t have to explain to their children why they can’t afford heat. Janet Yellen…Ursula von der Leyen…Hillary Clinton — how many of the earnest Planet Savers will be forced to choose between feeding children or paying rent? Will any of them wait in long lines to recharge their electric cars…or buy a gallon of gasoline? Will their private jets be grounded? Will their café lattes become unaffordable?
And then…when the campaign to alter the world’s temperatures fails…will they own up? Will they gush tears, like Robert McNamara, finally admitting that ‘we’ had killed a million people in Vietnam for nothing?
Will they admit that they didn’t know what the hell they were doing?
For The Daily Reckoning Australia