Archive for Março, 2019

Leyéndote se percibe cierta tendencia a la melancolía, pero siempre gana tu sentido del humor. ¿Son dos cosas que van juntas?

Esas cosas no las eliges tú. Son temperamentales, supongo. La ironía suele ser un drenaje por el que fluyen esos humores melancólicos. El mayor elogio que pueden hacernos, creo, es el de que alguien se ha reído de buena gana leyendo una página tuya. Ponerse triste es relativamente sencillo, no tiene uno más que levantar un poco la vista hacia el futuro y ver lo que nos espera a todos, y si eso no basta, volver la cabeza atrás. Ahora, si alguien puede meter la alegría en el pecho de la gente, es para estar contento. A mí la vanguardia histórica, viendo los cuadros y la literatura de esa época, me ha parecido en general decepcionante, algo de cortísimo recorrido, si se compara con el arte clásico. Que hayan llegado a ser igualmente museables la Victoria de Samotracia y el urinario de Duchamp supongo que será una broma a la que tarde o temprano alguien con mando en plaza dejará de verle la gracia, y mandará el urinario a la mierda. Solo es cuestión de tiempo. Si han salido de los museos la mayor parte los pelucones de Luis XIV, ¿por qué no los bigotes de la Monalisa? Pero a la vanguardia hemos de reconocerle precisamente eso, el humor, que se rieran de todo y de todos, aunque luego se viera que les hacía menos gracia que alguien se riera de ellos. La jovialidad de los vanguardistas está muy bien, es decir, que la vanguardia es muy importante como punto de partida. La lástima es que luego no encontraran ni tiempo ni talento para ponerse serios y hacer algo más que trabajos manuales. Solo en la tipografía sus logros me han parecido siempre rotundos y brillantísimos y divertidos, pero no creo que los vanguardistas se resignaran a pasar a la historia solo como artesanos.

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Where now for energy?


What happens when energy prices are at once too high for consumers to afford, but too low for suppliers to earn a return on capital?

That’s the situation now with petroleum, but it’s likely to apply across the gamut of energy supply as economic trends unfold. On the one hand, prosperity has turned down, undermining what consumers can afford to spend on energy. On the other, the real cost of energy – the trend energy cost of energy (ECoE) – continues to rise.

In any other industry, these conditions would point to contraction – the amount sold would fall. But the supply of energy isn’t ‘any other industry’, any more than it’s ‘just another input’. Energy is the basis of all economic activity – if the supply of energy ceases, economic activity grinds to a halt. (If you take a moment to think through what would happen if all energy supply to an economy were cut off, you’ll see why this is).

Without continuity of energy, literally everything stops. But that’s exactly what would happen if the energy industries were left to the mercies of rising supply costs and dwindling customer resources.

This leads us to a finding which is as stark as it is (at first sight) surprising – we’re going to have to subsidise the supply of energy.

Critical pre-conditions

Apart from the complete inability of the economy to function without energy, two other, critical considerations point emphatically in this direction.

The first is the vast leverage contained in the energy equation. The value of a unit of energy is hugely greater than the price which consumers pay (or ever could pay) to buy it. There is an overriding collective interest in continuing the supply of energy, even if this cannot be done at levels of purchaser prices which make commercial sense for suppliers.

The second is that we already live in an age of subsidy. Ever since we decided, in 2008, to save reckless borrowers and reckless lenders from the devastating consequences of their folly, we’ve turned subsidy from anomaly into normality.

The subsidy in question isn’t a hand-out from taxpayers. Rather, supplying money at negative real cost subsidizes borrowers, subsidizes lenders and supports asset prices at levels which bear no resemblance to what ‘reality’ would be under normal, cost-positive monetary conditions.

In the future, the authorities are going to have to do for energy suppliers what they already do for borrowers and lenders – use ‘cheap money’ to sustain an activity which is vital, but which market forces alone cannot support.

How they’ll do this is something considered later in this discussion.

If, by the way, you think that the concept of subsidizing energy supply threatens the viability of fiat currencies, you’re right. The only defence for the idea of providing monetary policy support for the supply of energy is that the alternative of not doing so is even worse.

Starting from basics  

To understand what follows, you need to know that the economy is an energy system (and not a financial one), with money acting simply as a claim on output made possible only by the availability of energy. This observation isn’t exactly rocket-science, because it is surely obvious that money has no intrinsic worth, but commands value only in terms of the things for which it can exchanged.

To be slightly more specific, all economic output (other than the supply of energy itself) is the product of surplus energy – whenever energy is accessed, some energy is always consumed in the access process, and surplus energy is what remains after the energy cost of energy (ECoE) has been deducted from the total (or ‘gross’) amount that is accessed.

From this perspective, the distinguishing feature of the world economy over the last two decades has been the relentless rise in ECoE. This process necessarily undermines prosperity, because it erodes the available quantity of surplus energy. We’re already seeing this happen – Western prosperity growth has gone into reverse, and growth in emerging market (EM) economies is petering out. Global average prosperity has already turned down.

From this simple insight, much else follows – for instance, our recent, current and impending financial problems are caused by a collision between (a) a financial system wholly predicated on perpetual growth in prosperity, and (b) an energy dynamic that has already started putting prosperity growth into reverse. Likewise, political changes are likely to result from the failure of incumbent governments to understand the worsening circumstances of the governed.

Essential premises – leverage and subsidy

Before we start, there are two additional things that you need to appreciate.

The first is that the energy-economics equation is hugely leveraged. This means that the value of energy to the economy is vastly greater than the prices paid (or even conceivably paid) for it by immediate consumers. Having (say) fuel to put in his or her car is a tiny fraction of the value that a person derives from energy – it supplies literally all economic goods and services that he or she uses.

The second is that, ever since the 2008 global financial crisis (GFC I) we have been living in a post-market economy.

In practice, this means that subsidies have become a permanent feature of the economic landscape.

These issues are of fundamental importance, so much so that a brief explanation is necessary.


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