What’s the biggest sign that economic trouble is on the way? That’s easy – the disappearance of low-cost energy. In part I (public) we cover the German experience with their self-inflicted wounds of depriving themselves of reliable, low-cost energy.
It’s predictably bad.
Well, predictably for those who have a good pair of energy goggles firmly installed on their face. Sadly, politicians and central bankers and related Ivy League strap-hangers-on seem to have zero clue about the most important variable of them all: energy.
So we make the connection for you.
This then feeds into my analysis in Part II (for members) where I make the call – by October reality sets in good and hard. Stock markets are operating on fumes here (be sure to see the Paul Kiker OTC-style Daily Take that was released today – it’s a great conversation about the state of the consumer and the stock market).
As always, be sure to comment early and often – we need everyone’s inputs (especially anecdotes from your area) to feel our way through this mess.
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We’ve just had an offer refused on a rural property. On the market for 4 months with 1 offer (us). A tidal wave of price reductions in the local property market and it is feeling like we the buyer are in a position of power.
Intangibly the world feels like it’s at a tipping point, not just economically but on so many other fronts: Political, energy, awareness, food security…
Meanwhile people continue to book holidays and buy new cars like there’s no tomorrow, for every person I see waking up, there are 1000 more tucking themselves tighter under the bed sheets.
I do business with an energy intensive polyethylene film supplier. I ask frequently about their energy input costs. They lament often about the prices but also comment that the German government subsidizes the energy costs. So the high costs are not always super correlated with German business viability or impending bankruptcies.
I usually watch Part 1s on YouTube to add my small bit to the views and likes. However, once I got here today…too hot, too lazy, etc. I’ll probably go to YT later just for that purpose.
We re-up our electric provider every couple of years when our ‘contract’ runs out. Our cost is nearly double for the next two years. Just sayin’. But the price will be stable for at least two years. I know there will be many who will go for a lower price at variable rates–I don’t have enough faith in the future to chance that.
I see this issue as being a resource scarcity problem. Human history can give us context. Feudalism was a social-economic model that was used for many years. The peasants got the scraps left over from the elite’s lavish life style.
I think we are heading here soon without a major course correction.
We live in an Ohio rural lake community. Lake properties have dramatically escalated in price from young buyers having fistfuls of either cash or high tolerance of debt. The large toy shopping begins within 3 months of buying an existing lakefront home or building on a lake lot. First stop is for a boat being either a nice water ski boat or a pontoon boat with 100HP plus motor. Then it is off to an off road vehicle store to purchase a new 4X4 side by side preferably a 4 seater for the family. Ditto for a new golf cart to take advantage of the community golf course or just tooling the family around the neighborhood. The toy shopping list is never completed until there is a new 4x4 Jeep in the driveway, preferably one of those 4 door models tricked out with a bumper winch and a Led light bar on the roof. No one has a garden and I wonder what type of a SHTF event could cause complete havoc. My guess is a gasoline shortage that sidelines all the toys.
This place is surrounded with 300 acre plus farms held through generations of family. Farms are dotted with oil n gas pumping units. Instead of welcoming Johnny Appleseed throwing seeds all over, we instead welcomed Chesapeake Oil and others issuing royalty contracts for the rights to tap the very deep shale oil and gas deposits. Farmers became instant millionaires. Livestock have now learned how to duck under the pipelines to get to the lush green promised land just beyond. Lol. Surprisingly, there are no wind generators on any farms nor any townsfolk protesting Big Oil. Lucrative priorities matter!
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Over this past week i heard two different comments that indicate tougher times are here.
1st was at a cycle shop - the bike technician mentioned that people were fixing their bikes (from $20 to $20000 bikes) rather than upgrading their bike. This is normally the quiet time for maintenance, but he is very busy. Bike sales are dead.
2nd was a motorbike shop where they have way too many motorbikes on the shop floor and are no longer taking trade ins.
The NZ reserve bank did not increase rates last week, as they say that inflation is decreasing. But for anyone buying food inflation is still running high. Food inflation is up 12.5% from April 22 to April 23. Mortgage rates are anywhere from 6.9% (5 year fixed) to 8.1% (floating).
It was Bastille Day in France yesterday. I noticed a bigger than usual turnout for the festivities. Probably a reaction to having been ‘confined’ during the plandemic. Life is returning to a new normal, with most activities which were suspended during covid back to operating as usual.
Masks are nowhere to be seen except, strangely, on journalists and competitors being interviewed at the Tour de France.
The big story is the price of energy. Gasoline is 1.7 euros per litre which translates to $7.70/US gallon. At the fuel pump at a marina in Belgium I saw diesel at 2.20 euros/litre ($9.96/US gallon). I exchanged a 13 kg propane tank last week. In 2019 that cost 18 euros. Now 40 euros.