Month: June 2021

Authored by Egon von Greyerz via GoldSwitzerland.com,

As technological developments and markets go parabolic, we observe many market “experts”, even intelligent ones, forecasting that we are now in an exponential economic era. Thus many believe that this will go on forever. This is the typical attitude at market and economic tops and guarantees that THIS WILL NOT END WELL!

It is clearly absolute nonsense to believe that exponential expansion based on deficits, debts and fake money is the beginning of a new era. Anyone studying the economy and history of markets knows that exponential moves indicate the end of an era and not the beginning. As I have repeatedly said, history is our best teacher and it both rhymes and repeats itself. And history now gives us dire warnings.

ARE WE IN A PARADIGM SHIFT?

But for some reason, human beings always extrapolate current trends whether it is population growth or stock market rallies. We know from statements at historical tops like 1929, 1987 or 2000 that anyone, from politicians to investors at the time, believe that the trend will go on for ever and that the world has made a paradigm shift.

Many markets and investments are now going up exponentially and very few forecast an end to this euphoric state.

GLOBAL POPULATION TO HALVE?

Let’s start with global population. For thousands of years we saw a very slow and steady growth as the graph below shows. In the mid 1850s world population reached 1 billion.

Since the mid 1800s, we have seen exponential growth in population and we are now almost 8 billion people on earth.

Energy and oil in particular plays a major role in this growth, leading to increases in food production, industrialisation, better health care for people etc.

THE EXPONENTIAL LAW OF COMPOUNDING

Moore’s law, first linked to transistors, is a projection of historical trends. The fallacy with these projections is that they assume the same trend will go on for ever whether it relates to population or stock markets.

The old fable of the inventor of the chess board tells us how little understood exponential moves are. The king promised the inventor a reward for inventing the game of chess. The inventor asked for one single grain of rice on the first square of the chessboard, two on the second, four on the third and so on. The king thought that this request was easy and inexpensive to fulfil. Little did the king understand the exponential law of compounding. Because once the 64th square was reached, 18 quintillion grains were needed. This amount exceeded the total production of the kingdom. So instead of getting his reward the inventor was killed for fooling his king.

The longer a trend has gone on for, the more permanent it seems to be. The explosion of population growth does not seem reversible. But the Black Death period in the mid 1300s showed us how population can quickly halve. This was the case in Europe and probably also in the rest of the world.

So exponential moves always end and so will this one. The reasons for the coming “correction” are likely to be a combination of the causes in the graph above.

EXPONENTIAL MOVES WORK IN REVERSE

Just as exponential moves up are spectacular, so are the reversals. And although few people understand it, exponential moves always reverse, at least temporarily. The problem is that the reversal is always faster, more violent and more hair raising than the advance.

A correction of global population from 8 to 4 billion would be totally natural from a statistical point of view. It would obviously be devastating for the world. But if the advance from 1 billion population took 170 years, the “correction” might take at least half of that, say 85 years. Only future historians will tell the world what actually happened.

As the chart below indicates, economic growth is totally linked to the availability of oil.
The chart shows that World GDP per capita (from 1968) grows in line with consumption and therefore also to the availability of oil. As oil production is likely to decrease over the long term so will economic growth. This is totally in line with the view I have expressed in many articles and interviews, namely that we are at the end of a major economic cycle of at least 300 years and maybe longer.

Renewable energy is unlikely to replace fossil fuels for a very, very long time even if this is a politically uncomfortable view for the climate control activists. What very few realise is that most renewable energy sources are very costly and also all dependent on fossil fuels whether it is electric cars, wind turbines or solar panels.

EXPONENTIAL STOCK MARKET MOVES

If we look at some more recent exponential moves in the stock market, they have been spectacular.

EXPONENTIAL MOVES THAT WON’T END WELL

The above moves have grossly exaggerated the effect of new technologies. Once a new invention has been digested, it grows in line with the market as a whole. Take the wheel which was revolutionary at the time. It was invented. Still, today it certainly is not valued at a premium. So the value of new technologies only outperforms the market for a limited period and the above moves will see major corrections of much more than 50%.

BITCOIN – COULD ANYTHING BE MORE EXPONENTIAL

If you invested $1,000 in Bitcoin at $0.08 in 2010, you would have had $800 million at the $65,000 peak in April. Today it would be $400 million at $32,500 so easy come and quickly gone.

A commodity with such volatility can obviously never replace money. And nor would central banks permit it. Speculative frenzies can go on for longer than anyone expects.
So Bitcoin could go to $1 million or it could go to ZERO. Not the best of odds. And certainly Bitcoin has nothing to do with wealth preservation.

BITCOIN vs GOLD

Bitcoin has been a spectacular speculative investment and early investors have made massive fortunes. Like all exponential manias it is likely to end in tears. But for the savvy investors who have now diversified into physical gold and some silver, they have managed to get the best of both worlds.

I doubt Bitcoin will continue to outperform gold. But even if it does, this is a binary investment that theoretically could go to $1 million in a continued speculative mania or it could go to zero, which is more likely in my view.

EXPONENTIALITY LEADS TO FINALITY

As shown above, global population together with many markets and financial instruments are now moving exponentially. Exponential moves up almost without exception finish with a move down of the same magnitude. So this will end badly.

With debts and deficits now going exponential, gold will continue to reflect the destruction of fiat money just as it has for several millennia.

More importantly, gold is the best form of wealth preservation par excellence as history teaches us.

Step aside NFTs: there is an even more ridiculous objet d’art on the shopping block – nothing.

Italian artist Salvatore Garau has auctioned off an “invisible” sculpture for 15,000 euros ($18,300). According to as.com, the sculpture’s initial price was set between 6,000 and 9,000 euros; however, the price was raised after several bids were placed. The kicker: titled ‘Io Sono’ (Italian for “I am”), the 67-year-old artist’s sculpture is “immaterial,” meaning that the sculpture does not actually exist.

Yes, someone paid over $18,000 for… nothing. And yes, there is so much liquidity out there, someone actually bought this, literally.

Though he’s received much critique for the sale, Garau argues that his work of art isn’t “nothing,” but is instead a “vacuum.”

“The vacuum is nothing more than a space full of energy, and even if we empty it and there is nothing left, according to the Heisenberg uncertainty principle, that ‘nothing’ has a weight,” Garau said of the statue according to as.com. “Therefore, it has energy that is condensed and transformed into particles, that is, into us.”

It gets better: according to Italy 24 News, per Garau’s instructions, the sculpture must be displayed in a private home free from any obstruction, in an area that is about 5 ft. long by 5 ft. wide. Because the piece does not exist, there are no special lighting or climate requirements.

Multiple outlets report that the only tangible item the buyer will receive is a certificate of authentication that is both signed and stamped by Garau.

Though this is the first immaterial sculpture Garau has sold, it is not the first of its kind he has “created.” Last month, Garau displayed another immaterial sculpture titled, “Buddha in Contemplation,” in the Piazza della Scala in Milan, near the entrance to the Gallerie d’Italia. Garau posted a video of the “statue” to his Instagram page.

The video shows the taped-off area where the invisible “work” is located.

 

 

 

 

View this post on Instagram

 

 

 

 

 

 

 

 

 

 

 

A post shared by Salvatore Garau (@salvatore_garau)

“Now it exists and will remain in this space forever,” says the video, apparently addressing millions of sophisticatedidiots. “You do not see it but it exists. It is made of air and spirit.”

The sculpture is meant to “activate” the viewer’s imagination, a power that, the artist says in the video, exists within everyone.

“When I decide to ‘exhibit’ an immaterial sculpture in a given space, that space will concentrate a certain amount and density of thoughts at a precise point, creating a sculpture that, from my title, will only take the most varied forms,” Garau said of his sculptures, according to as.com. “After all, don’t we shape a God we’ve never seen?”

Needless to say, this is absolute lunacy and yet this is the kind of world we now live in thanks to so much money sloshing around, banks can’t find any use for it and have parked half a trillion at the Fed where it is earning exactly nothing.

Providing a fitting conclusion to this story, Rabobank’s Michael Every writes that considering that in 2019, banana(s) taped to a wall sold for $120,000 (one was eaten: the others rotted, as bananas do.) “does something non-existent selling for $18,000 vs. something of minimal value selling for $120,000 represent inflation or deflation?”

Authored by Irina Slav via OilPrice.com,

If there is one thing everyone knows about the tiny northern nation of Iceland, it is that it has plentiful geothermal resources. Europe’s northernmost independent state satisfies a solid portion of its energy needs with local renewable geothermal power. And these resources could now help Iceland become the world’s first fully green hydrogen economy. Geothermal, according to Iceland’s National Energy Authority, accounts for a quarter of the country’s power generation and as much as 66 percent of Iceland’s total primary energy use. Geothermal is also used to heat 90 percent of Icelandic households. And it is renewable.

Iceland is also ahead of other countries in utilizing hydrogen. With early plans to become oil- and gas-free by 2050, the country started using hydrogen buses in Reykjavik back in the early 2000s. Yet buses could be only the start of what could become the world’s first hydrogen economy.

It is worth noting that Iceland is unique, and if it succeeds with its net-zero plans with hydrogen, it will hardly be possible to replicate it anywhere else. For one thing, it has unlimited geothermal resources and also abundant hydropower resources. For another, it is a tiny nation of fewer than 300,000 people. This means a lot lower energy demand than other countries. So, a technology as expensive as green hydrogen production has a better chance of being commercially viable in Iceland than virtually anywhere else.

“People say Iceland is a very small country and can’t be copied. But it’s a real society, with infrastructure similar to big societies,” chemistry professor Bragi Arnason from the University of Iceland said back in 2005.

“We can start in Iceland on a small scale,” he added.

Arnason has been called Professor Hydrogen for his work in the field. According to Arnason, when it comes to transport in particular, engine efficiency could offset the energy losses during the process of producing green hydrogen, thus offsetting part of the costs.

Theoretically, all this sounds very promising. In truth, the first attempt of Iceland to introduce hydrogen buses was scrapped shortly after its start because the technology had yet to be developed enough to make hydrogen buses viable. It did develop eventually, and in 2018, the EU provided funds for Iceland to purchase a number of hydrogen buses for its public transport system.

But hydrogen buses are only the start. In a 2009 paper for the International Association for Energy Economics, oil economist and consultant Mamdouh Salameh noted Professor Arnason’s plan to make all vehicles and vessels in Iceland run on hydrogen, which can be produced locally at a cost considerably lower than in most other developed countries. He also noted a few challenges for the hydrogenization of the Icelandic economy—and any other economy, for that matter—chief among them which was cost.

Since 2009, the costs of producing most forms of renewable energy have fallen considerably, making them a lot more viable alternatives to fossil fuels than before. With hydrogen, however, things have moved more slowly because green hydrogen production is a picky technology that needs an optimal location for an electrolyzer near a water source and with good wind or solar energy generation potential.

With Iceland, this would be easier than in most other countries, thanks to its geothermal and hydropower resources and its small population. But the country has bigger plans than just domestic supply. Last year, Icelandic media reported the national power utility, Landsvirkjun, and the port authorities of Rotterdam had inked a deal for cooperation on hydrogen-related matters to find ways to make exports of green hydrogen from Iceland to Europe a reality.

While the agreement is quite general, it may be the latest indication that hydrogen, and especially green hydrogen, is moving nearer to becoming economical enough to produce on a large enough scale to export it.

Back in December, SocGen’s resident market skeptic Albert Edwards shared with the world why he is starting to panic about soaring food prices. And since that was before food prices really took amid broken supply chains, trillions in fiscal stimulus and exploding commodity costs, off we can only imagine the sheer terror he must feel today.

A United Nations index of world food costs climbed for a 12th straight month in May, its longest stretch in a decade, rising to the highest in almost a decade, heightening concerns over bulging grocery bills.

All five components of the index rose during the month, with the advance led by pricier vegetable oils, grain and sugar.

Month after month, the UN’s Food and Agriculture Organization’s food price index continues to soar to levels not seen in a decade. Soaring food prices have tremendous implications on societal trends and may result in unrest in emerging market countries if trends persist. 

For May, the FAO Food Price Index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat, and sugar, surged to an average of 127.1 points in May, 4.8% higher than in April and 39.7% higher than in May 2020.

The Rome-based FAO data said prices of vegetable oils, sugar, and cereals drove the increase in the overall index to the highest level not seen since September 2011 and only 7.6% below its all-time high in nominal terms. 

FAO’s cereal price index rose 6.0% in May over last month and 36.6% year-on-year. Maize, also known as corn, is a cereal grain that led the surge and is up 89% over the previous year’s value. Wheat prices also saw a jump, up 6.8% in May over the prior month, while rice prices were flat. 

The FAO Vegetable Oil Price Index rose 7.8% in May over the prior month, mainly reflecting rising palm, soy, and rapeseed oil prices. Palm oil prices were supported by sluggish production growth in southeast Asia, while prospects of strong global demand. Soyoil prices increased due mainly to the rising demand for biodiesel. 

The FAO Sugar Price Index posted a 6.8% month-on-month gain due to harvest concerns and a decline in crop yields in Brazil.

The FAO Meat Price Index inched higher for the month, up 2.2% versus April prices, due mainly to increased import purchases by China. 

The FAO Dairy Price Index rose by 1.8% on the month, up 28% from the same period last year. 

Soaring international food prices began on the onset of the virus pandemic in early 2020. 

This is a massive problem since food is a significant component of CPI baskets in Asia, and this inflationary impulse will strain households in these emerging markets. 

The continued advance risks accelerating broader inflation, complicating central banks efforts to provide more stimulus. It also risks giving Albert Edwards terrifying nightmares.

“We have very little room for any production shock. We have very little room for any unexpected surge in demand in any country,” Abdolreza Abbassian, senior economist at the UN’s Food and Agriculture Organization, said by phone.

“Any of those things could push prices up further than they are now, and then we could start getting worried.”

Besides the usual factors listed above, food prices have also surged as a result of drought in key Brazilian growing regions which has crippled crops from corn to coffee, and vegetable oil production growth has slowed in Southeast Asia. That’s boosting costs for livestock producers and risks further straining global grain stockpiles that have been depleted by soaring Chinese demand. The explosive move has stirred memories of 2008 and 2011, when price spikes led to food riots in more than 30 nations and lead to a wave of violent revolutions across Northern Africa and the Middle East.

Meanwhile, as central bankers across the globe vow higher prices are “transitory”, the prolonged gains across the staple commodities have trickled through to store shelves, with countries from Kenya to Mexico reporting sharply higher food costs. The pain will be particularly pronounced in some of the poorest import-dependent nations, which have limited purchasing power and social safety nets as they grapple with the pandemic.

As Bloomberg adds, the world’s hunger problem “has already reached its worst in years as the pandemic exacerbates food inequalities, compounding extreme weather and political conflicts.”

Should violence break out as starving people take to the streets, they can thank not only the Fed but also China, as food price gains in the past year have been fueled by China’s “unpredictably huge” purchases of foreign grain, and world reserves could hold relatively flat in the coming season, Abbassian said. Summer weather across the Northern Hemisphere will be crucial to determine if U.S. and European harvests can make up for crop shortfalls elsewhere.

“We have very little room for any production shock. We have very little room for any unexpected surge in demand in any country,” Abbassian said by phone.

“Any of those things could push prices up further than they are now, and then we could start getting worried.”

Indeed, “getting worried” is the right approach since, as you’ll notice from the chart below, the last big surge from the middle of 2010 to early 2011 coincided with the start of the Arab Spring, for which food inflation is regarded as a contributing factor.

DB’s Jim Reid reminds us that emerging markets are more vulnerable to this trend since their consumers spend a far greater share of their income on food than those in the developed world.

… and soaring food prices isn’t just an emerging market story. It’s also one for developed countries, such as the US. With millions still on pandemic unemployment insurance and the labor market in tatters, disposable personal incomes on food will have to be adjusted higher – straining the ability for people to service bills as they need to eat.

The UN’s Abbassian offered some silver lining amid the fear, saying that “we are not in the situation we were back in 2008-10 when inventories were really low and a lot of things were going on… However, we are in sort of a borderline. It’s a borderline that needs to be monitored very closely over the next few weeks, because weather is either going to really make it or create really big problems.”

We’ll see if it is “just the weather” and it’s “just transitory”…

Authored by Paul Joseph Watson via Summit News,

Authorities in Denmark have shut down much of the country’s access to video platform Bitchute in the name of preventing the spread of “dangerous information” about COVID.

Denmark’s National Police Cyber Crime Center (NC3) petitioned for a court order to block the site and ISPs followed suit by blocking access to users.

“The National Police Cyber Crime Center (NC3) has blocked the homepage that your browser has tried to access contact as there is reason to assume that from the website commits a violation of criminal law, which has a background in or connection with the covid-19 epidemic in Denmark,” states a message users see when trying to access Bitchute.

It then advises the owner of the website that they will have to contact the authorities in order to try to get the website back online.

“The block appears to be site-wide meaning that Danish citizens aren’t just being prevented from viewing alleged COVID-19 misinformation on BitChute – they’re being blocked from viewing any BitChute videos, regardless of the topic,” writes Tom Parker.

Bitchute is routinely targeted by governments because it provides a platform for controversial content that isn’t permitted on YouTube.

Some ISPs in Australia previously tried to block the site, while Twitter blocked people from posting Bitchute links on its platform last year.

Authorities in the UK and the EU are also trying to get the site shut down, claiming it engages in “incitement to hatred.”

Advocates of social media censorship routinely claim that free speech isn’t under assault because people can simply ‘build their own platforms’.

Yet when an entity like Bitchute does just that, they are targeted for elimination by the state.

This is straight up Communist Chinese-style totalitarianism, but what makes it worse is its timing.

As we’ve learned in recent weeks, by censoring “misinformation” about the Wuhan lab leak theory which could turn out to have been true all along, social media networks may have been complicit in facilitating one of the biggest cover-ups in modern history.

So for Danish authorities to target Bitchute for the exact same reason is yet another chilling example of the danger of allowing corporate and government entities to define the boundaries of acceptable speech and literally dictate reality.

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