Month: December 2022

Authored by Charles Hugh Smith via OfTwoMinds blog,

The question that should be on our minds is: how are my household’s buffers holding up?

Lists of predictions for the new year are reliably popular. Here’s 10 predictions, there’s 17 predictions, over here we have 23 and a half… let’s strip it all down to one prediction: everyone’s predictions will be wrong because 2023 isn’t going to follow anyone’s script.

There are several reasons for this. One is that the vast majority of predictions are based on historical comparisons to previous eras. If the current era is unique in its combination of dynamics and instability, previous pathways are not going to accurately predict what happens next.

Recency bias leads us astray. The past 50 years of relatively mild weather, the past 40 years of Bull Markets, the past 30 years of financialization and the supremacy of monetary policy–all of these offer a warm and fuzzy confidence that the future will be comfortingly similar to the recent past. This assumption works pretty well in stable eras but fails dismally in destabilizing, transitional eras.

Stability and instability are not evenly distributed, so every cherry-picked bias can be supported. You predict slow sales? Here’s an empty shopping mall. See, I’m right! You predict a return to the good old days? Here’s a crowded street fair. See, I’m right!

Those who happen to be living inside an island of coherence are inside a bubble that they mistakenly think encompasses the entire world. This is especially prevalent in the top 5% who shape the narratives that influence the rest of us. If real estate is sinking in their little corner of the world, they predict real estate will crash everywhere.

If everything’s rosy in their protected enclave, they predict a mild recession and steady growth, blah blah blah.

Those living in a place that has lost its coherence and stability see the world differently. Systems are breaking down and when they are restored, they’re not the same: they’re less reliable, more expensive and prone to decay / decoherence.

This tracks the core-periphery model I often reference. Those in the still-coherent core cherry-pick evidence that all is well in the decohering periphery while those in the periphery expect the rot to spread quickly to the core.

It depends on how much is left in the buffers protecting core systems. As the diagram below illustrates, a system’s ability to bounce back (restore stability and function) depends on the robustness of its buffers: how much labor, capital, expertise, spare parts, etc. can be rushed into service to repair damage and restore functionality.

The quality and quantity of these buffers are invisible to outsiders. When staffing has eroded and there’s no one available to call up, when spare parts have been depleted, when budget constraints, corruption and managerial incompetence have stripped the system of expertise and the willingness to sacrifice, the system breaks down and cannot be restored because the means to do so are no longer available.

Outsiders clinging to recency bias are thus shocked when systems they assumed were rock-solid no longer function reliably. Insiders are amazed the duct-tape has held this long while outsiders are stunned to learn that student nurses are being passed off as certified nurses and the maintenance of critical systems has completely collapsed.

As I explained in How Things Fall Apart, The Blowback from Stripmining Labor for 45 Years Is Just Beginning and The “Let It Rot” Death Spiral, the competent are leaving in droves, leaving the ambitiously incompetent at the wheel while those keeping the whole mess glued together are burning out and retiring, quitting or downsizing to gigs with less pressure and more control of their work.

Systems that are still competently managed with ample buffers will maintain their coherence. The systems that are incompetently managed, riddled with corruption and favoritism and coasting on buffers that have been worn down and are now wafer-thin will break down and lose coherence and functionality.

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This process is uneven and unpredictable. In some cases, the core will shield itself from the decay and breakdown in the periphery, in other cases the falling dominoes will destabilize the core that everyone in the bubble thought was permanently safe and secure.

The question that should be on our minds is: how are my household’s buffers holding up? What resources do we have in reserve when systems lose their reliability and predictability?

Counting on the demi-gods in central banks to save us is not a substitute for strengthening your own buffers. There’s no substitute for owning and controlling everything that counts in your life, and developing trusted personal networks of reliable, trustworthy, productive people. Those are the foundations of self-reliance.

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Most Americans find their cost of living is rising faster than the income they’re bringing home. In times of economic uncertainty, thrifty consumers find cheaper substitutes for expensive brands. That is now happening with alcohol this holiday season as sales of higher-priced liquor and wine are slowing. 

“Sales growth of costlier spirits and wine is slowing, and even reversing, as shoppers seek out more value,” WSJ reported. 

According to the latest findings of Nielsen data by the Bump Williams Consulting Co., a beverage-industry consulting firm, US retail store sales for top-shelf spirits, including whiskey priced at $24 to $39.99 for 750 milliliters, dropped 3.7% in the 48 weeks that ended on Dec. 3, after increasing 4% in 2021. Sales growth for top-shelf spirits, which include tequila priced above $50 and American whiskey at more than $40, slowed to 2% from 24% in 2021.

Liz Paquette, head of insights for online alcohol retailer Drizly, found belt-tightening consumers are more inclined to choose prosecco over French Champagne this holiday season. She said prosecco sales are booming, and on Drizly’s website, the average bottle sells for around $16 versus the average bottle of Champagne for $57. 

An analysis by WineDirect and Enolytics, which provide winemakers with e-commerce platform solutions, noted a similar trend of high-end wine sales plateauing in 2022 while cheaper wines are more in demand.

Bump Williams Consulting said wine priced between $50 to $99.99 per bottle saw retail store sales increase by more than 18% in 2021. Now those sales are down 4.5%, and bottles priced between $25 to $50 also see less demand. But bottles priced under $20 are booming.

The shift is another sign consumers, especially the bottom 90% of Americans, are in financial trouble after 19 months of consecutive negative real wage growth. 

Meanwhile, consumers max out their credit cards while the personal savings rate plunges to a 17-year low. This is a toxic combination. 

And in November, overall retail sales plunged the most in 11 months. Price-sensitive shoppers are gravitating to more affordable goods as the Federal Reserve is hellbent on tightening financial conditions into a downturn — a policy error that could spark even more turmoil. 

Authored by Paul Joseph Watson via Summit News,

The Austrian defense minister has warned that Europeans could face blackouts that go on for days, leaving one–third of citizens unable to “supply themselves.”

Klaudia Tanner made the comments during an interview with German news outlet Die Welt.

“The question is not whether it (the blackout) will come, but when it will come,” said Tanner, blaming the war in Ukraine.

“For Putin, hacking attacks on Western power supplies are a tool of hybrid warfare. We must not pretend that this is just a theory. We must be prepared for blackouts in Austria and Europe,” she added.

Austrian armed forces are set to establish 100 self-sufficient barracks by 2025 that are capable of sustaining themselves for a minimum of two weeks if energy supplies are seriously disrupted.

Tanner spoke to how unprepared Europeans were for crippling elongated blackouts by warning, “one-third of citizens would not be able to supply themselves on the fourth day of a blackout at the latest.”

While Vladimir Putin remains the convenient scapegoat, others have pointed to Europe’s overdependence on ‘green energy’ and its shutting down of traditional coal-fired and nuclear plants as one of the primary reasons for increasing the risk of blackouts.

In Germany for example, the country only has three remaining operational nuclear power plants, with MPs even having to vote to extend their life span into 2023 after previous plans to shut them down.

As we previously highlighted, Germans buying up electric heaters in anticipation of the gas supply being cut off is threatening to cause huge spikes in demand that could lead to widespread blackouts.

“If everyone switched on a fan heater at home, it would mean that we would have to almost double the existing network structure on every street,” said Peter Lautz, the boss of the Stadtwerke Wiesbaden Netz utility company.

Before winter began, cities across Germany announced they were planning to use sports arenas and exhibition halls as ‘warm up spaces’ to help freezing citizens who are unable to afford skyrocketing energy costs.

Top Green Party official Winfried Kretschmann caused controversy earlier this year by suggesting Germans use washcloths instead of taking showers, as well as buying expensive eco-heating systems that are unaffordable for the average person.

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The new general secretary of the Trades Union Congress (TUC) has accused Prime Minister Rishi Sunak’s government of refusing to listen or negotiate about pay demands which have led to strikes on Britain’s railways and in the National Health Service.

Train services over Christmas were badly hit by strikes and Network Rail warned this week that “industrial action means rail travel will be significantly disrupted throughout December and January.”

The NHS has seen unprecedented strikes by nurses and ambulance workers this month and there have also been pay disputes with postal workers, civil servants, and university staff which have led to industrial action.

Ambulances parked during a strike outside Waterloo ambulance station, London, on Dec. 21, 2022. (Kirsty O’Connor/PA Media)

As Chris Summers report at The Epoch Times, Paul Nowak, who will take over as TUC general secretary next week, accused the government of refusing to negotiate over NHS pay claims.

He said in an interview with PA:

“We want to see public services where workers are properly rewarded and respected. There is overwhelming support for NHS workers, so it is not good enough for government ministers to continue to put their fingers in their ears.”

In an interview with the BBC’s Today programme, Nowak also doubted whether pay review bodies were “genuinely independent” and said they found their “hands tied” by the government.

The new General Secretary of the Trades Union Congress, Paul Nowak, pictured outside the TUC’s office in London, England, on Dec. 21, 2022. (PA)

Nowak said:

“Our unions are looking very seriously at the pay review bodies and looking particularly at the way the Government has used them effectively as a human shield in this discussion about public sector pay.”

He added:

“The pay review body process itself is in danger of being brought into disrepute because the government is hiding behind the pay review bodies, refusing to negotiate on pay and refusing to reach a reasonable settlement with our public sector unions.”

The government, which is battling inflation and trying to keep down the national deficit, has tried to restrict pay rises.

But Nowak said: “Starting off the conversation about NHS pay by saying ‘We’ve got this limited amount of money, that’s all there is, it doesn’t matter what evidence the unions bring to the table, it doesn’t matter what the pressures are on the workforce’ I don’t think is a reasonable starting point for a reasonable conversation about public sector pay.”

Nowak’s Predecessor Has Become Labour Peer

Nowak, who replaces Frances O’Grady—who was given a peerage in October and became a Labour peer, Dame O’Grady of Upper Holloway—accused the government of “sabotaging” attempts to resolve the wave of strikes which have spread across the country since the summer.

He added: “Today I am issuing a challenge to government and employers. Work with unions to end Britain’s living standards nightmare. UK workers are on course for two decades of lost pay. This is the longest squeeze on earnings in modern history. We can’t go on like this.”

Nowak said: “We can’t be a country where nurses are having to use food banks, while City bankers get unlimited bonuses. Unless we get wages rising across the economy, families will just keep lurching from crisis to crisis.”

“Unions stand ready to work with good employers to drive up growth, living standards, and productivity,” he added.

Passengers wait at the barriers at King’s Cross station following a strike by members of the Rail, Maritime, and Transport union (RMT), in a long-running dispute over jobs and pensions, in London, on Dec. 27, 2022. (James Manning/PA Media)

The TUC—an umbrella group which speaks up for the whole trade union movement in Britain—has traditionally been allied to the Labour Party and, with a general election looming in the next two years, Nowak made a party political point when he said: “For too long we have been trapped in a vicious Conservative cycle of stagnant growth, stagnant investment, and stagnant wages. It’s time for a proper long-term economic plan that rewards work not wealth.”

‘Dangerous Trap’

Earlier this month Health Secretary Steve Barclay accused the Unite, Unison, and GMB unions, which have been coordinating the ambulance strike, of refusing to work with the government at the national level to set out plans for dealing with medical emergencies during the strike.

In an article in The Telegraph on Dec. 20, Barclay said: “The British people would not forgive if politicians like me spent every single winter frozen in negotiations with trade unions, rather than getting on and solving the very real challenges we face as a country. It is a dangerous trap we have been determined to avoid.”

Barclay said the government had accepted the advice of the independent NHS pay review body and he added: “Most ambulance staff received a rise of at least four per cent this year, following the body’s recommendation. On average, ambulance staff have additional earnings worth around 37 per cent of basic pay, covering unsocial hours, geographical supplements and overtime. This takes total earnings to around £47,000 per person.”

But Nowak said workers were facing two decades of “lost pay” and he accused the government of being “blind” to the staffing crisis in the NHS, which he said was largely the fault of low pay.

A government spokeswoman told The Epoch Times, in an email: “The unions have chosen to strike over Christmas to cause maximum disruption. We are doing all we can to mitigate the impact, but the union bosses should be reasonable, stay around the negotiating table and call off these damaging strikes.”

She added: “Pay must be affordable and fair, which is why we accepted the recommendations from the independent pay review bodies to pay our valued public servants more. Inflation-matching pay increases for all public sector workers would cost everyone more long-term—worsening debt, fuelling inflation, and costing every household an extra £1,000.”

Authored by Katabella Roberts via The Epoch Times,

ExxonMobil has filed a lawsuit against the European Union (EU) over a windfall tax on energy companies announced in September, arguing that the move is “counterproductive” and will “undermine investor confidence.”

The Texas-headquartered oil and gas company announced the legal challenge against the bloc, which will be decided on by the European General Court, in a statement to media outlets on Dec. 28.

“Our challenge is targeted only at the counter-productive windfall profits tax, and not any other elements of the package to reduce energy prices,” a company spokesperson said.

“This tax will undermine investor confidence, discourage investment, and increase reliance on imported energy and fuel products. European industries already face a very real competitiveness crisis and governments should be supporting the production of reliable and affordable energy,” the statement added.

In a separate statement to multiple media outlets, the company added that whether or not it invests in Europe will “primarily depend on how attractive and globally competitive Europe will be.”

EU Announces Windfall Tax

European Commission chief Ursula von der Leyen announced in September emergency measures that would charge energy companies who make record profits in 2022.

Under the new measures, a 33 percent tax on this year’s oil, gas, and coal profits will be rolled out if they are 20 percent or more above average profits between 2018 and 2021. The measure will be effective as of Dec. 31.

ExxonMobil’s lawsuit was filed on Dec. 28 by its German and Dutch subsidiaries at the European General Court in Luxembourg City, The Financial Times reports.

Specifically, it challenges whether the EU has the legal authority to impose the new tax and its use of emergency powers in getting member states to approve the measure, according to the publication.

European Commission spokesperson Arianna Podesta said in a statement to The Hill that the commission “maintains that the measures in question are fully compliant with EU law.”

Additionally, the tax measure will “ensure that the whole energy sector pays its fair share in these difficult times,” the spokesperson said.

ExxonMobil reported a quarterly profit of almost $20 billion in October.

At the time, Darren Woods, chairman and chief executive officer, said the results “reflect the hard work of our people to invest in and build businesses critical to meeting the demand we see today.”

“We all understand how important our role is in producing the energy and products the world needs, and third-quarter results reflect our commitment to that objective,” Woods added.

ExxonMobil Chairman and CEO Darren Woods speaks during a press conference in Doha, on June 21, 2022. (Karim Jaafar/AFP via Getty Images)

Tax Could Cost ExxonMobil $2 billion

Chief Financial Officer Kathryn Mikells told analysts on a call on Dec. 8. that the windfall tax profits imposed by the EU could cost the company at least $2 billion through the end of 2023. The company said it had invested $3 billion in the past decade in refinery projects in Europe, helping the country to get more energy while reducing its reliance on imports from Russia.

The EU previously had a long-running relationship with Russia when it came to natural gas imports, but that relationship turned sour this year following the Kremlin’s invasion of Ukraine, with Europe vowing to end dependence on Russian gas by 2030. This has left the 27-member bloc scrambling to find alternative sources.

EU ministers estimate that they can raise €140bn ($148 billion) by imposing the windfall tax on emergency companies raking in larger-than-usual profits.

Biden Threatens Similar Tax

In the U.S., President Joe Biden also threatened a similar tax on oil company profits if they don’t boost production.

In November, Biden accused oil companies of profiting from the war in Ukraine, saying that the profits are “not because they’re doing something new or innovative” but instead are “a windfall of war—the windfall from the brutal conflict that’s ravaging Ukraine and hurting tens of millions of people around the globe.”

“Any company receiving historic windfall profits like this has a responsibility to act beyond their narrow self-interest of its executives and shareholders,” he said.

Biden has repeatedly blamed increased oil prices on Russian President Vladimir Putin, or what he calls “Putin’s price hike.” Some Republican lawmakers have taken aim at the President and a number of his energy policies, including his decision to suspend construction of the Keystone XL pipeline, which would have brought oil from Canada to the United States.

The Epoch Times has contacted ExxonMobil for comment.

Hungarian Prime Minister Viktor Orbán has been harshly criticized by the Ukrainian Foreign Ministry, according to remarks published on the ministry’s website on Tuesday, Dec. 27, German news agency dpa reports.

Ukraine’s Foreign Minister Dmytro Kuleba talks during an interview with The Associated Press in Kyiv, Ukraine, Monday, Dec. 26, 2022. (AP Photo/Efrem Lukatsky)

Orbán’s statements “demonstrate a pathological disregard for Ukraine and the Ukrainian people who are fighting against Russian aggression,” the Ukrainian ministry said, accusing the Hungarian leader of “political short-sightedness.”

As Denis Albert reports at Remix News, the comments came in response to a statement by Orbán that the war could end if the United States stopped supplying arms to Ukraine. Orbán was working in this way towards Ukraine’s defeat, even if it would increase the danger of Russian aggression directed at Hungary, the Ukrainian ministry said.

“The Hungarian leader should ask himself if he wants peace,” the ministry said in a statement.

In an earlier interview Orbán said, “Ukraine can continue fighting only as long as the United States supports them with money and weapons. If the Americans want peace, then there will be peace.”

As Remix News reported, in a recent interview Orbán said that while it is important for his government that Russia poses no security threat, continued economic relations is essential for not only Hungary, but also for the entire European economy.

“The answer to the question of whether we are on the right or wrong side of history is that we are on the Hungarian side of history. We support and help Ukraine, it is in our interest to preserve a sovereign Ukraine, and it is in our interest that Russia does not pose a security threat to Europe, but it is not in our interest to give up all economic relations with Russia. We are looking at these issues through Hungarian glasses, not through anyone else’s,” Orbán said.