Tilting at Windmills

Tilting at Windmills

You cannot step into the same river twice, for other waters are continually flowing on.

Heraclitus

Herewith…a rumination on why the economy cannot recover from the damage inflicted since 2008.

We drove back up to Paris on Saturday…almost immediately; our rental car began scolding us about our speed, crossing the white line, following too close, etc. This electronic back seat driving is completely unnecessary. That’s what we have wives for.

Then, stopping at a roadside restaurant for breakfast, we were disappointed to find it had no orange juice on the menu.

We haven’t gotten a delivery of oranges in weeks’, the young woman explained.

What…they grow oranges in Ukraine, too?

The girl laughed. But we all know that Ukraine is the new COVID — it explains everything.

All-time gas high

Maybe US gasoline comes from Ukraine too. CBS News Los Angeles reports:

Gas prices in Los Angeles have yet again reached an all-time high, just as 3.1 million Southern Californians were expected to hit the roads and skies over the extended Memorial Day Weekend. 

As the number of travelers rose, so did gas prices and cost of travel, as Los Angeles experienced it’s fifth-consecutive day of increasing gas prices, reaching a record $6.16 per gallon up nearly two dollars from the previous Memorial Day record of $4.29 in 2012. 

One gas station in Beverly Grove displayed an astounding $7.49 per gallon of regular unleaded gas.

In the past, we looked forward to a drive-in France. The countryside is beautiful…punctuated by fascinating castles and picturesque towns. But today, the view is effaced by monsters — huge ‘eoliennes’ — hundreds of wind turbines. You look over a charmingly bucolic scene…and there they are…menacing…like an army of giant robot warriors from outer space, with their deadly blades slicing the air, ready to battle with all things human.

The turbines are supposed to generate electricity. But many of them were idle. Do they do more harm than good? Do they make the planet worse, not better, by ruining the sweet landscapes that have charmed artists and tourists for generations? Are they like face masks…a sign of mindless obedience, destroying the beauty of France in order to appease the Green Gods?

Once in Paris, we returned the car to Hertz and then went for lunch at ‘Le Train Bleu’, an iconic restaurant in the Gare de Lyon. The décor is rich and voluptuous…with ornate, gilded mouldings and bare-breasted women sculpted on the walls. It was built for the Paris Exposition of 1900 and takes its name from the famous ‘Blue Train’ that took travellers from the chilly English Channel all the way to the Mediterranean. Large paintings still recall the cities served by the train and the warm glory of the South of France in the 19th century.


Fat Tail Investment Research

Source: Getty Images. Le Train Bleu in Gare de Lyon.

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Today, the Gare de Lyon serves Provence, and carries passengers to Lyon, Marseilles, Grenoble, Cannes…and of course Geneva. And the restaurant, in the train station itself, celebrates not only the technological progress of the Third Republique…but the sumptuous ebullience of the Belle Epoque, too.

Crazier and crazier

Our son, Henry, lives in Paris; he joined us for lunch and brought us up to date on France’s situation.

Crazier and crazier’; he gave us his conclusion first.

Speaking of France’s ruling class:

They’re not quite as obsessed by things like race and gender. But when it comes to the Green Agenda, the door falls off the hinges.

That’s why you see those wind turbines all over the country. The goal is to keep the planet from heating up. Are they effective? I don’t know. But temperature is not the only thing that matters. France used to be beautiful. Now, practically everywhere you look you see those ugly windmills.  

Since the power they generate is not really commercially viable, they’re subsidized…which takes capital away from other investments. And since the wind is unreliable, you still need traditional back-up power sources. So when you figure it all out…and add in all the fossil fuel required to make the steel and the concrete, and the environmental damage of having to look at those things, it is not at all certain that you’re ahead of the game.  

But that’s just a part of the Green Agenda. Now they’ve got a new law that makes it illegal to throw anything away. It’s part of what they call a “circular economy.” Everything is supposed to be recycled. So, businesses can’t write off unsold inventory, for example. And supermarkets aren’t allowed to throw away food.

France’s leaders, probably more than those in the US, are technocrats. They do not represent ‘the people’ nor do their bidding. Instead, they believe they are like Moses, leading ‘the people’ to a better world.

Henry studied physics in college; he continued:

The idea of the circular economy probably comes from a mistaken reading of the first law of thermodynamics the conservation of energy. It tells us that the sum of energy in a closed system is constant. It takes energy to make something. So they think you can get the energy back by un-making it. Or save the energy by not making it. But that’s not the way it works.

There are a lot of things that go only one way. You can wreck a car. But you can’t un-wreck it. There’s no circularity to it. It’s the end of the line. All you can do is to salvage a few pieces.

The ultimate one-way road

The same is true for a human life, we thought to ourselves. It only goes one way. And when it comes to the end, you might be able to recycle a few organs, but once the spark of life is gone, you can’t bring the corpse back to life by reassembling the body parts.

Time, too, is the ultimate one-way road. You can’t save it. And there’s no backing up. No pausing. No recovering the past. You step into the river only once.

You use a lot of resources, time, and energy to build a windmill. Of course, you can take it apart. You can break up the concrete foundation, for example. But you can’t just add water and make a new one. Concrete is a one-way phenomenon.  

As for the rest of it, you’ll just get a lot of scrap steel, plastic, and copper. They can be recycled, but it will cost more in energy and CO2 emissions than starting from scratch.  

Same is true for an economy. You can slow it down. You can distort it. You can take it apart. But then, you can’t put the parts back together the way they were.  Companies go out of business. Skills are lost. Workers retire…or don’t want to come back to the office. Time can’t be recovered. And capital does not reappear after you wasted it. It’s gone forever. 

And who wants to build a new factory if they have to worry that it will be shut down by a new virus? Who wants to buy a bond yielding 3% when the dollar is losing 8% per year? Who’s going to plant more corn when he can’t get parts for his tractor?

An economy takes all the “knowns” into account including the damage that you caused.

It’s a new river, in other words. Like a husband and wife, after one has been caught cheating, the marriage can go forward…but it can never go back to what it was.

Regards,

Dan Denning Signature

Bill Bonner,
For The Daily Reckoning Australia