The rapid economic collapse that Britain is facing is simply an accelerated version of what the whole of Europe is about to go through; unsustainable borrowing to fund the gap between high energy prices and what households can actually afford. With the sabotage of the Nord Stream pipeline, there is now no feasible way back. Europe can no longer physically import Russian gas – prices will remain high until Europe builds more energy capacity, which could take years.
What is likely to come of this? High energy prices will render European manufacturing uncompetitive. European manufacturers will be forced to pass through the higher energy costs in the form of higher prices and consumers will find it cheaper to buy products from countries with normal energy prices. The only logical European response to the threat of widespread deindustrialisation is to raise tariffs. This is the only way to equalise prices between more expensive European goods and cheaper foreign goods, therefore artificially supporting European manufacturing. This strategy will lower living standards, depriving Europeans of cheaper goods, but it will at least preserve some manufacturing jobs.
This process looks remarkably like the start of the Great Depression. In the 1920s, due to lopsided financial arrangements initiated in the Treaty of Versailles, western economies accumulated enormous amounts of debt. In 1929, the collapse of the American stock market removed one of the key remaining props and the western economies collapsed. Europe went first and, as trade dried up, America followed it down the hole.
Modern western economies have been accumulating debt for decades. But since the lockdowns in early 2020, this debt accumulation has gone into overdrive. In 2019, Eurozone government debt-to-GDP was 83.8 per cent. In 2020, after the lockdown bailouts were unveiled it shot up to 97.2 per cent. In the same period, Britain’s debt-to-GDP ratio went from 83.8 per cent to 93.9 per cent. These are the largest single increases in history. The run-up in debt during the lockdown was probably unavoidable. But it certainly triggered the beginning of the inflationary pressures we now see everywhere, especially because the lockdowns themselves completely demolished supply chains. So, more money chasing fewer goods. But what has happened since the start of this year is something else entirely.
The Russian invasion of Ukraine has triggered an energy price war in Europe that is forcing even higher levels of government borrowing to cover energy costs. Unlike the lockdowns, these energy price increases are putting direct pressure on both prices and the trade balance between countries. Higher energy prices mean that Europe must send more euros and pounds abroad to get energy and so the value of imports rises and these higher import costs are fed through to consumers as businesses try to offset rising energy costs by raising prices. The situation is no longer remotely sustainable. This is almost certainly our 1929 moment.
And here we go! Shocked by gas bills, thrifty Dutch stockpile coal, wood for winter.
The budget-conscious Dutch, who enjoyed abundant cheap gas for half a century to heat their homes, are turning to more traditional heating methods as cold weather reaches the Netherlands.
Sales of coal, wood and pellets for heating stoves have jumped as consumers seek cheaper energy alternatives to counter sky-rocketing gas bills in the wake of the war in Ukraine.
Customers visiting the warehouse of coal merchant Wim van Beek in the central Dutch town of Veenendaal this week were primarily looking to trim spending on heating, the merchant told Reuters.
They were also worried about the security of commercial energy supplies amid the escalating confrontation between the West and Russian President Vladimir Putin, he said, adding that sales volumes were as high as in the 1980s.
Customers were driven by the belief that “if I have coal in my shed I will be warm this winter. Then if Putin goes nuts or three more gas pipelines get sabotaged, I have my heating sorted”, Van Beek said.
Coming to America? The Coming Green Electricity Nightmare.
Senator Joe Manchin (D-WV) wanted regulatory reform, in part to reverse some of the Biden Administration’s reversals of Trump-era reforms intended to expedite permits for fossil fuel projects.
Majority Leader Chuck Schumer (D-NY) needed Manchin’s vote in the 50-50 Senate to enact his latest spending extravaganza, the Inflation Reduction Act, which was primarily a massive climate and “green” energy subsidy arrangement. It gives Schumer allies some $370 billion in wind, solar, battery, and other funding, tax credits, and subsidies. In exchange, Schumer would offer a path for Manchin’s reform bill.
Manchin voted YEA and promptly got bushwhacked. Once he’d helped enact the IRA, he had zero leverage. Schumer, he discovered, had promised an opportunity, maybe a vote, but not actual support. House and Senate members told him, we weren’t part of your secret negotiations with Schumer; we didn’t shake hands on any deal; we don’t want easier permitting for drilling, pipelines, and LNG terminals that could help send US natural gas to Britain and Europe.
by Ed Driscoll
- The tables are turning: Twitter is cleaning the house… Banning dangerous Leftists
- BIDEN MEDIA IS LYING TO YOU – No one is spending a dime, inflation at all time high, China dumping dollar, black Friday bust!
- The Dollar is Dying in Ways Most People Don’t Understand and I’ll Explain Why
- Why is Klaus Schwab Sucking up to China?
- China may have ‘passed the point of no return’ as Covid infections soar. Government has changed all protestors Covid QR codes to RED. Effectively locking them down.
- Why Are Large Groups Of Animals, Insects And Birds Suddenly Walking In Circles All Over The Globe?
- Supreme Court Case to Remove Biden On Docket. Finally Justice? Or is America Dead?
- The theme of 2023 will be deflation, as frugality is already coming back into style with a vengeance for the middle class. Meanwhile, investor FOMO is about to explode with extreme dislocation
- Americans Don’t Want to Join the Military Anymore
- New Visa Card Features Personal Carbon Emissions Tracker, M.O.B. Begins