Econ Depression Watch: Belgian PM (and WEF Young Leader) De Croo warns of '5-10 years of hard times'

'Price Stability' and 'Central Bank Independence' confirmed to be a myth--it's time to take back control over cash and energy production (distribution)

As per the Epoch Times (European ed.), first published on 25 Aug. 2022, we are told (my emphases):

‘The next five to ten winters will be difficult’, De Croo told a press conference in Zeebrugge. ‘We are watching this very closely, but we have to be clear about this: The coming months will be difficult, the coming winters will be difficult’, De Croo said.

And that looks like the case across Europe, he continued. ‘Some sectors are having serious difficulties with high energy prices.’

The cost of natural gas products has soared in the EU this year, and heating oil prices are expected to hit an all-time high this week. Yet there are no immediate signs of a slowdown, according to data released by Belgium's Federal Public Service.

Weakening economies in Germany and France put further pressure on EU markets on Tuesday, as decades of high inflation and rising gas prices drag the continent towards recession. In addition, the euro was pushed to a 20-year low against the US dollar.

Now, that’s quite something, eh?

Also, if you’re not afraid enough already, here’s an op-ed by Javier Blas, which appeared on Bloomberg (Europe Ed.) on 26 Aug. 2022 (my emphases):

Every week, the people who trade electricity in the UK get to quiz the managers of the national grid for an hour. The conference call, which anyone can monitor, offers an insight into what the men and women on the front line of the power market are worried about. Listening to them is getting scarier by the week—and suggests keeping the lights on this winter will be a lot more challenging than European governments are admitting…

British households were told on Friday that their power and gas bills will increase from Oct. 1 by 80%…

But the industry’s teleconference suggests the problem is broader than just rising costs. Increasingly, the words ‘emergency’ and ‘shortages’ are being used, with participants focusing on when, rather than if, a crisis will hit…

In the forward market, UK power for December 2022 is fast approaching £1,000 per megawatt hour, up 50% from current prices. The implication? Power shortages.

EUropean Solidarity? Be Afraid, Be Very Afraid…

A key concern is what happens if European countries introduce beggar-thy-neighbor policies by shutting down cross-border electricity flows, as Norway has already said it’s considering.

Oh my, while Bloomberg doesn’t know or care too much about non-English-speaking parts of Europe, we do find something else here:

Another topic is how much consumption might drop if households and businesses can’t afford elevated electricity and gas prices. ‘What level of demand reduction, demand destruction, are you forecasting for the winter ahead from commercial industrial consumers as a price response?’, was one recent example. Another repeated the request: ‘What demand destruction, if any, is included in your demand forecast for this winter for residential and industry?’ The grid managers were unable to supply any numbers to the callers…

The manager of the Finnish grid, in a rare example of the kind of transparency that’s badly needed, told citizens earlier this week to prepare for shortages this winter. European governments have a duty to come clean with their voters about the magnitude of the coming crisis. Minimizing the scale of the problem or, worse, pretending there’s not an issue, won’t keep the power running this winter.

On that latter point, well, the Norwegian gov’t has been pretty open about the possible problems, as a treasure trove of pieces (e.g., here, here, here, and here) from the past couple of weeks shows, with some news outlets ‘even’ replacing the notorious ‘Covid Trackers’ on their front pages with ‘Utility Price Tickers’, as the below example shows, as well as new dedicated websites.

Note that there’s a ‘click here for more information’ button, and if you do, you’ll see this:

There’s but one thing to note: the light green line indicates the average price 2016-20, i.e., ‘before Covid’ (B.C.). Just look at this and ponder, together with me, as to what has changed since 2016-20, which includes:

The outbreak of the open conflict in Ukraine, which is what the Energy Providers are telling you everywhere is causing these sky-high utility prices (it’s not true).

Look at that: we do have ‘so much higher’ utility prices ‘from autumn 2021’ onwards, which is ‘explained’ (ahem) by pointing to ‘Russia’s invasion of Ukraine and reduced gas supply’.

Now, here’s where my ‘historical expertise’ (ahem) comes in handy: as far as I understand how time ‘works’, 2021 was, in fact, before 2022.

That means you don’t get to ‘explain’ things that (allegedly) happened ‘from autumn 2021’ onwards by pointing to events and developments from, specifically, 24 Feb. 2022 onwards. That’s simply not a logical argument; in fact, these ‘arguments’ cannot logically co-exist.

It does work, though, if one admits that the conflict in (Eastern) Ukraine began, in fact, before 24 Feb. 2022. That would ‘work’, argumentatively speaking, but only to certain degrees, eh?

As a hilariously stupid aside, here’s a very well-aged ‘argument’ from Fagpressenytt, dated 16 March 2022, which held that ‘experts intimate that expensive electricity in Norway is good for Ukraine’.

Most Inane Comments: A Tie Made in Hell

Yet, the price for the most idiotic comments, in my opinion, is currently in a hot tie.

On the one hand, that Epoch Times piece quoted above held that we’re now reaping the consequences of ‘decades of high inflation’.

As the Central Banks of the ‘advanced economies’ are pondering interest rate hikes, let me ask you and them: isn’t the job of an ‘independent central bank’ to ‘maintain price stability’?

This is why we’ve been told for decades (which I’m also old enough to remember) that Central Banks must be ‘independent’ of government interference. Once upon a time, this was considered one of, if not the, core tenets of macroeconomic doctrine.

Yet, this isn’t even a very outrageous statement (that, incidentally, that journalist didn’t understand, it would appear), but it’s an admission that Central Bank independence is, well, nothing more than propaganda. Or, in other words: a big, fat, stinkin’ LIE.

The other case would be a statement by Norwegian Water Resources and Energy Directorate (NVE), which peddled the below BS, masquerading as ‘expert assessment’ (faglige vurderinger) a week ago, as reported by state broadcaster NRK (emphasis in the original):

In our view, secure energy supply is a relevant consideration, while protection against high prices is not, says NVE director Kjetil Lund in a press release.

Keep in mind that Mr. Lund (Kjetil, for Northererns) is in charge of a state-run Directorate subordinate to the Energy and Petroleum Ministry, i.e., the national government.

In other words, he’s a state servant, and if there’s ever been a question about the necessity, on part of the citizenry, to clearly differentiate between ‘the public’ and ‘the state’, there you go.

That said, here’s why I deem this such an outrageous statement: Mr. Lund’s salary is paid for by taxpayer money, and he’s telling—yelling, really—that the public can go f*** themselves.

A bit further below in that NRK piece, we also read the following (my emphases):

While we understand the need to ensure security of supply, we are also deeply concerned that the proposed capacity reduction [that is, reduction of energy exports] ignores the benefits of keeping borders open. They do not seem to recognise that it is through a well-functioning market that security of supply is ensured most effectively, write the system operators in Sweden, Denmark and Finland.

So, while some people may claim that Finland is ‘open’ and ‘transparent’ about this or that issue, it’s a gigantic media-hyped pile of horse manure. And it’s both fresh and steaming in the crisp autumn morning mist. (apologies to horses)

Bottom Lines

And here’s why: on the one hand, independent central banks—which, in EUrope don’t have a twin mandate (‘price stability’ and ‘full employment’) like in the U.S., but ‘just’ the ‘price stability’—have, by all accounts and measures, failed.

And now the Norwegian public utility directorate is telling the public that they are more concerned with ‘keeping borders open’ and ‘a well-functioning market’.

These two things cannot logically coexist in reality, hence something will have to give.

Please, dear readers, get ready for the shock of your lifetime.

By the end of this year, as NRK also reported (in one of the above-linked pieces), new plans must be in place to allow the government to ‘safely’ implement rotating blackouts and brownouts. In other words: the government is currently mulling to deny energy to certain areas for about 8 hours per day.

The government has said it’s a last-resort notion that nevertheless has a 20% chance of implementation.

Keep in mind that no electricity also means no heating and colling (fridges and freezers), heating, internet connection, or payment processing.

Please, dear readers, let me share with you what I’m doing:

• Have cash on hand.

• Keep your car’s gas tank filled and, if possible, a jerry can, too.

• Have enough firewood to keep you and your loved ones as warm as possible during winter.

• Stock up on key medication and durable food items, in particular if you care for kids or elder relatives.

• Have ‘analogue’ ways and means at-hand to keep your brain active (e.g., real books, boardgames, etc.)

• If you have pets and animals, make sure to have an adequate supply of food for them, too.

• And: no-one is an island—talk to you neighbours, for they are likely the only ones you could possibly turn to in an hour of need.

Apart from all of the above (and then some), please let me know what you think in the comments below.

Join me tomorrow as we’ll discuss the impending economic storm: the most likely outcome of the above is—a depression, pretty much like the one in the 1930s.