Guest post by Karl Denninger from his blog on Market-Ticker.org:
It’s pretty basic, as I noted in Leverage about 10 years ago: Behind every unit of GDP is a unit of energy.
Period.
I’ve been doing a fair bit of traveling this summer and fall, and in fact am having some fun right now, as I did last weekend. There is a constant — the spread between diesel and regular gasoline has held right around $2.
I’ve never seen this before.
It portends very bad things.
You see, diesel isn’t just what you think of, although that’s bad enough. That is, big trucks without which you get….. nothing. Basically every item you buy from any place, anywhere, makes at least the last mile of that journey by truck. Most of it makes a very large percentage of its journey by either truck or train — both of which run primarily on diesel fuel.
That includes the gasoline you buy at the corner station.
So who thinks inflation pressure is going to come down? How about the people who still use heating oil this winter? Oh, that’s diesel incidentally. Same fuel. Exactly the same fuel — just no road tax, and dyed red so if you try to cheat and put it in a truck you can be caught.
“Well those fools should have converted by now!” you might say. Really? Have you looked at the price of natural gas lately? Propane?
Well just burn wood! If you live where you can. And then…… wait, isn’t this about “saving the planet”? I thought wood was… dirty?
Here’s reality, like it or not.
That huge spread exists because the government — and not just ours — has declared war on the very reason we have had a rational cost of living for the last one hundred years. It has driven basically all of our advancement in that regard. It is responsible for all of the plastic things you have (look around you), all of the synthetic fibers (your couch, your bed, etc.) your shoes, your computer(s), your cellphones, the Internet and even the shingles on your house without which it rains inside as well as out.
Bernie Sanders thinks it’s “wrong” that this spread in prices exists.
Well, let me tell you a little story.
Back in the late 1990s I engaged Investment Bankers to decide what to do with MCSNet as the firm’s CEO. I had laid before me three basic options:
1. Attempt to take the company public, lever it up and expand it to the best of my ability at the most-rapid pace I could get away with, endeavoring to execute an IPO. This of course had great risk (if you try and fail the leverage will probably kill you) but also great potential reward (a billion was certainly possible, a hundred million easy.)
2. Sell it to whoever we could market it to in its current (very healthy) financial condition, unlevered.
3. Run it to deliberate destruction, extracting as much as possible but investing nothing.
I decided to execute on #2.
Read #3 however many times you need to until it sinks on for one simple reason: If the government had ever told me it was going to deliberately destroy my industry or even just my firm that is the only sane choice I could have made. #1 would be fraud under those conditions for which I’d go to prison and #2 would fail. Therefore #3 it would be.
Every single fossil fuel firm in America has been told this, and thus until and unless the government that did this is forced to both retract it and never be able to do it again #3 is what they are and will all do.
No other choice makes any sense at all.
You and I are directly responsible for this because many of you have directly demanded exactly this via your green energy fantasies and the rest of us have tolerated both those fantasies and the people promoting them.
This is the truth whether you like it or not, and the economic circumstances will continue to deteriorate until and unless it is stopped.
Period.
Guest post by Karl Denninger from his blog on Market-Ticker.org.
Market Wizard who made $95 million for his clients in 2008
And predicted the 2022 collapse back in January – reveals his strategy:
The One Ticker Retirement Plan
How to make all the money you need – in any market – using a single stock.
One thought on "Karl Denninger: It Is ALL, At This Point, ENERGY"
I’ll have to read this several times to understand it. I’ve read Lyn Larouche on the topic of energy flux density which is the intensity of the energy per square inch and per unit of time that goes through a cable. He’s got a really good explanation of why green can’t work for modern civ. I’ll be back on this soon.