For those of you who don’t know, I’m German. About as German as I am English and Australian, anyway. And this means I dig through a lot of media each day. Especially if you add in the US and Japanese news I also trawl through.
Which might seem boring, but I do get completely different reports about the same stories that way. String together the bits that each nation’s media is avoiding to mention, but that do get highlighted by the media elsewhere, and you usually get quite a narrative!
For example, exactly the same shortages are blamed on Brexit in one country, Russia in another, weather in a third and Covid lockdown disruptions in the last…
Another example is the gas debacle. Australia is a major producer and exporter of gas, the UK is a major gas hub for Europe because of its seaborn infrastructure, and Germany and Japan are major gas importers.
You’d think they’re faring very differently during this gas crisis. And yet all of them are facing gas shortages. Including Australia…
The rental crisis is a further example. I have friends and family around the world who are struggling to get into a flat. And I mean the viewing, not the actual rental itself. So many people show up to viewings that it takes longer than a lunch break to see anything thanks to Covid restrictions.
The same similarities go for mortgage costs and house prices. House prices are falling because mortgage costs are rising. But everyone is blaming their local central bank as though it’s the only one raising rates.
Each place blames unique local factors, or people. And yet the problem is the same in so many locations.
You’ve probably seen the riots and protests breaking out around the world? They’re about car fuel, energy and food. The list of countries featuring such protests is growing very long. But what’s remarkable is how different those countries are.
Sri Lanka and the Netherlands don’t appear to have much in common apart from attempts by their governments to impose restrictions on how farming can and can’t be carried out. And the consequences aren’t pretty in either place.
If you look at a list of locations facing diesel shortages, you’ll notice just how long it is and how the countries couldn’t be more diverse.
The same goes for the airline chaos. It’s taking place globally, but each media blames the local CEO.
My point is that there’s something deeper going on here. So, what is it?
I don’t know for sure. But I have my suspicions…
During the pandemic, governments and central banks became very involved in our economies. They regulated every aspect of our day and night, including which isles of the grocery store we could buy from, which businesses could stay open and who could go where.
Now, if you believe that government intervention is a good idea, then you won’t see the problem inherent in this. But government intervention is not a good idea, and causes the surprising and unintended consequences we are seeing now. Shortages, surpluses, misallocation of capital, waste and nonsensical outcomes such as Australia’s gas shortage.
Usually this sort of mess only plays out in the sectors of the economy in which the government became most involved – banking and housing being prime examples.
Governments zone land, control building regulations, control banks and lending regulations, heavily tax property transactions and even buy mortgage debt. It’s no wonder we get housing bubbles, unaffordability, busts and banking crises.
The same goes for the exchange-rate mechanism crash, the length of the Great Depression in the United States and, of course, trade. That’s the big one right now. I’ll get back to that in a moment.
My point is that we got a dose of central planning – the sort of thing which communists and socialists advocate for – a government-controlled economy.
And the consequences were surprisingly similar to what you see in centrally planned economies. Not as bad, but we are talking about the same issues.
Let’s focus on trade, though, because that’s getting all the headlines.
I’ve always wondered why governments get a right to prevent international trade, but not local trade. If I live on the border, I’m allowed to buy and sell freely with one neighbour but not the other.
Just because some politician has drawn an imaginary line between us shouldn’t give them the right to interfere in our personal affairs, if you ask me. And yet, try moving chorizo from Spain to Australia or meat from Ireland to Northern Ireland. You’ll be in big trouble.
What we have today is a bizarre version of this issue. Governments in Europe made us reliant on Russian gas and then sanctioned Russian gas. I mean, how stupid can you be?
You can make us reliant on Russian gas, or you can sanction Russia, but you can’t do both. Not without causing chaos. And getting your fair share of the blame too, I might add.
And that blame is piling up. Especially in Germany of late. My latest perusal of the German news there turned up some extraordinary stories.
Bild, Germany’s top-selling tabloid, had as its top story this headline: “It was only this bad after the Second World War”. What’s the quoted man referring to? Rationed hot water and washing only at scheduled times.
Hamburg’s senator, who is responsible for “all sorts of important things other than the climate” according to his website, is also warning that hot water will be rationed in the city.
Which made me wonder “how?”
It’s not like in Australia, where water bans could be monitored by neighbours looking at the state of your garden. Those water restrictions were brought in because climate change would mean the dams would never fill again.
Since then, there’s been no end to the flooding caused by forced dam releases to prevent overflowing.
But my search for how the Germans planned to ration hot water only resulted in the discovery that maximum heating temperatures might also be imposed, and Hamburg’s paper manufacturers would be prioritised for energy supply.
Paper?
Bild also summed up Germany’s broader economic struggles with the headline “Germany is crashing”. “The trade balance is negative for the first time in 30 years” and “Experts warned for years – and were ignored by politicians”.
That’s not fair, though. Even Donald Trump saw this coming. He told the entire UN that “German will become totally dependent on Russian energy if it does not immediately change course.” The German delegation laughed at him in disbelief. While Trump was accused of being Putin’s stooge…
But at least they’re laying the blame on someone other than Trump or Brexit these days. Bild’s third headline is “Merkel’s cold inheritance”. And the brief article’s comments are really worth translating once you know that former German Chancellor Angela Merkel was a physicist trained in East-Germany:
She’s only doing “feel-good events” former Chancellor Angela Merkel told an audience under friendly applause at an event. How good the Germans will feel in the coming Winter is written in the red star of the Kremlin.
As the “physicist of power,” Merkel reacted to the nuclear power panic after Fukushima, even though the physicist knew better than anyone that leaving nuclear power and coal at the same time would endanger Germany’s energy supply. Massive criticism from Europe and the USA was thrown to the wind.
[…]
Also thanks to her politics, Germany is sliding into a crisis. In the first flats, hot water is being rationed.
The often praised “crisis Chancellor” is getting a whole new meaning…
From Germany’s chancellor to the UK’s to central bankers all over the world, many former policymakers are getting out just in time…
Nick Hubble
Editor, Fortune & Freedom
