Scary Times

October 28, 2022

I love the fall!  Cool mornings, warm and sunny in the afternoon, later sunrises making it easier to sleep in, and the air is crisp and full life.  We’re heading into the Halloween season, and then things get scarier from there.  Freezing temperatures, still shorter days, icy roads and snowstorms!  We don’t suffer too much from these things in our modern age (or in our mild climate) - what with our natural gas furnaces, automatic snow days at school and our heated seats - but one can understand how the timing of this holiday developed when you reflect back to the times of our forefathers.  They were going into the lean times - relying on preserved meats, canned vegetables, and constantly chopping and burning wood to stay warm.  In many regions people mostly ate what they grew that summer - so if they had a poor crop year the winter ahead would be longer and hungrier than usual.  

But they didn’t worry about Russia using tactical nukes and setting off an armageddon, or running out of gas to heat homes and power plants, or runaway inflation, or climate change melting our poles and flooding our largest cities, or about an impending New World Order and a future of getting our protein from a tube and our children from a lab!  

Wow - that went off the rails fast - huh!?  

Au Contraire mon frère - we’re right where I want us to be, reflecting on the scary times we live in, and the perhaps scarier times ahead.  The truth is - it is human nature to fear for the future - in fact it may be one of our most defining attributes.  If not for this fear, we would not sacrifice, nor would we plan - we would live for the moment - and would have long since become extinct!  

In this month’s blog, I’ll be taking a broad-scope view of the scary times we’re in - and sharing reflections and examples of why we should fear not - but plan and work hard instead.

This winter is likely to feel longer and to be hungrier than any in recent memory - energy inflation is adding hundreds of Euros a month to the average household expenditure in Europe, a three-fold increase from 2021 - which will have citizens pinching pennies at the grocery store, and going out less often to restaurants, which will leave restaurant staff with shorter hours and pinching their pennies and going out to the pub less often and buying fewer cute new outfits, which will leave the pub workers and retail store owners pinching pennies and…you’re getting where I’m going with all this, right?  

Economies are funny, all interconnected and reliant on so many moving parts and markets - and they don’t like to shrink!  Especially in our modern fiat money system, the economy works best when it’s growing - at a nice modest pace - with low inflation - and even small slowdowns and shrinkages can set a spiral in motion that soon leaves everybody poorer and all the prices higher!  That’s why the western nations printed so much money during the covid pandemic, to keep from going into a recessive tailspin.  Basically, we shut down a bunch of productivity and killed a bunch of jobs and businesses - some permanently - and rather than the economy suffering the consequences immediately - we put it on credit.  A butt-load of credit! - between $6 and $7 Trillion of new US debt has been added to the balance sheet since March 1 of 2020, and across the world everyone did the same - almost $20 Trillion in debt has been added to government balance sheets - and most were already too leveraged.  

And then - inflation.  Our inflation rate in the US has been 8 - 9% most of the past year, and here in Colorado we’re top of the nation - at 15%!  Nailing it Guv’na!  To my mild surprise, the Federal Reserve has taken this seriously, and has raised interest rates numerous times and promised to keep going until the inflation monster is back in the cage.  The challenge is - interest rates on 5-year Treasuries are now over 4%, up from < 1% for most of the last few years, and < 2.% for more than a decade! - that higher interest spend has a real effect on the budget.  

The interest on our $30 Trillion National Debt at 4% in simple math is…a buttload!  I know it’s not simple - but it is real - and we as a society need to understand how dangerously leveraged our government - and governments around the world have become.  Our societies are not too big to fail, they are too leveraged to succeed!  

Here’s an encouraging snippet from this recent article from the Peter G. Peterson Foundation.   

“The growth in interest costs presents a significant challenge in the long-term as well. According to CBO’s projections, interest payments would total around $66 trillion over the next 30 years and would take up nearly 40 percent of all federal revenues by 2052. Interest costs would also become the largest “program” over the next few decades — surpassing defense spending in 2029, Medicare in 2046, and Social Security in 2049.”

The inflation that we’re suffering from is a direct consequence of two main things - supply disruptions (mostly still a hangover of Covid lockdowns and mandates) making availability of goods and shipping a greater challenge, and the global money-printing making all the existing monetary units a little bit smaller by comparison.  The biggest disruption of course has been to the energy supply - Putin cut off the gas from Europe as a consequence of their support of Ukraine, and the EU has been scrambling to refill their storage and generate power through any and all means during recent months.  They’ve especially been purchasing LNG intended for Asia and the Middle East, driving prices and availability to levels that have sparked protests in Pakistan and Sri Lanka and other places - it’s all connected!  

They’ve even been restarting coal power plants across Europe, finding it a superior decision to kick the can down the road on climate change than to have their citizens freezing to death or marching in the streets - better to keep that kind of stuff in the poorer countries.  But the authorities in the EU have bound themselves fairly strictly to their climate goals - which is noble I suppose - but rather ineffective on a global scale if the Chinese and the Indians and the Brazilians and the Iranians and many others pay it no mind. Meanwhile America makes progress by converting to natural gas power (made available by the evil fracking technology) - and by outsourcing our manufacturing to the poor places.  

We’re not going to “fix climate change” in this short blog, and probably not in my lifetime, we’ve got 8 billion people in the world, give or take, and about 7.5 billion of them don’t care about using less carbon - they want more of it - and easier and more dependable and affordable!  They want stable electrical power, pumped water for their homes and villages, cars and scooters instead of walking…and to cook with something other than wood or animal dung.  

You know what would reduce the carbon footprint of our world?:  Armageddon!  I find this old cartoon from 1982 both humorous and terrifying:

To me - that’s the scariest prospect in our current season - nuclear war!  Between the US and Russia, we’ve got over 10,000 nuclear warheads in inventory, and across the world, something over 13,000.  You’ve heard it said that there are enough nuclear weapons to basically end the world - but there’s a bit of catastrophizing in that statement.  Millions and millions would die immediately, especially if large cities are bombed, but the major impacts will play out over the months and years ahead. Ash clouds would cause rapid and significant cooling, hampering crop yields for years to come and causing widespread famine, and of course there would be radiation poisoning and increases in cancers (and probably war over the remaining productive lands) - likely a significant decline in the population - for a time. The economic disruption would be devastating, and methinks most all insurance companies would fail…and much else!

But then - life would go on.  

One would hope that there are enough distributed resources to put human knowledge and understanding back together again, even if the lights go out for a time. And in the end, we humans don’t require much - give us food and shelter and relationships, and challenging things to do - and we’re pretty happy. There’s an old expression that some things are fun when you were going through it, and you barely remember it later, but the real fun times are when you struggle through a challenge with friends or family, and those are the times that you look back upon fondly as fun.  

I’d suggest that we are at our happiest when we struggle through challenging times - at least if it is toward a meaningful outcome - and some of the reason that times are so scary today is that they’re too easy!  

“Hard times create strong men, strong men create good times, good times create weak men, and weak men create hard times.”  

Post-apocalyptic Author G. Michael Hopf

There will be hard times ahead - there always are.  The stage for a broad recession is set, and the governments of the world are too leveraged to kick the beat up can down the road any farther.  

And…there’s nothing you can do about it.  

And…there’s a lot you can do about it!  You can get your financial house in order, add new skills, work harder than your coworkers, get more education, start your own business, raise a garden, find a more affordable place to live, meditate, start a side hustle, get some chickens, start going to church again, focus on your health, build your network, read 12 Rules for Life from Jordan Petersen and try to do most of them…there is so much you can do!  

And if you do these things with others, the impacts are even greater, and before you know it - we’re back in the good times!  

Stay safe out there, be creative, build new skills and relationships and if you want your government to do things for society in the future instead of just paying interest on the luxuries of the past - vote for small government!  And fear not - the scary times often look like the fun times in the lens of the rearview mirror.  

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