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A Cold Old World


Monday, September 19, 2022

Chris Keefer  0:00  

Welcome back to Decouple. Today, I'm joined by three time returning guests Doomberg, the little green chicken. I don't think Doomberg requires any introduction, because he's our most downloaded guest to date, although we do have some competitors working their way up the chart. So those of you who are longtime listeners, no doubt recognize this guest. Maybe there's a few stragglers just joining us recently, but Doomberg has really taken Twitter by storm has an absolutely incredible sub stack, which you should all drop everything and subscribe to. Last time we chatted with Doomberg. Those, those morsels that show up in your email box and spark delight, we're free gone behind the paywall since then, so I'm looking forward to catching up with you Doomberg about how all that has been going. But today, we're going to be chatting about mostly about the European energy crisis. So let's just let's just say hello, welcome. Great to have you back.

Doomberg  0:59  

Yeah, Chris. It's great to be back. And that's it's flattering that you would say that were the most downloaded because that was going to open by complimenting you on the truly outstanding series of podcasts that you've done with Mark Nelson recently, that you have the what do you what do you call them? The academies or the master classes? masterclass? That's right. Even better, yes, even better. And I really enjoyed the opening music. And it must be said that if anybody is listening to this, because of Doomberg, they should stop what they're doing and go back and listen to the Mark Nelson episodes because they're truly, they truly are a masterclass. And I enjoyed them thoroughly as I expressed to you via DM and posted on Twitter. And I'm really proud of your success. And it's been fun to watch the Decouple brand grow and to watch your and in our own way, try to support the advocacy work that you're doing in nuclear energy. So always happy to be back and looking forward to a robust discussion.

Chris Keefer  1:53  

For sure, I mean, that's a pat each other's backs too much. But I do have to say that, you know, something I really enjoy about your writing and your, your present your your, your way of being in the world, shall we say, is this kind of generosity in terms of cultivating this exciting ecosystem that just continues to grow, really seeing this not as a zero sum game, but as a as a place where, you know, crediting and praising one another just elevates the conversation and brings, you know, more and more people on board. You know, that's something that's, that's, I think I've held, but it's been strengthened by the example that that you share, you know, in your pieces, you're constantly bringing to attention and hyperlinking to, to other great content. So just felt that had to be said, listen, so I you know, I think another breakthrough, I do want to catch up on how the sub stack is doing. But I think a testament to, to have compelling of a source of information Doomberg has become is a recent Twitter spaces that you guys had, I was able to join live for about half an hour. And then I had to hop on Grant Williams podcast to listen to the rest of it. But tell me a little bit about that. It was it was pretty well attended. I've been sort of watching on the sidelines, some some Twitter spaces and wondering, you know, is it is it a is it a successful meeting? Tell me Tell me about your experience there.

Doomberg  3:20  

It's it's it was a remarkable event. So I should take a step back and perhaps give some context to how it came about. There is this argument is too strong of a word, but a relatively civilized debate on Twitter, as to whether the tarp might be in the European energy crisis and what that even means. And there's a camp that I reside in. And Luke Roman, another great content creator resides in that that believes that this is sort of analogous to the global financial crisis. And we're at that period, sort of in between Bear Stearns and Lehman where everybody thinks that subprime is contained. And that you can quantify the you can quantify the the nature of the crisis by measuring the direct costs of the energy challenge, and I believe and Luke Grohmann believes and others believe that the downstream impacts of what is already a crisis and a catastrophe are just beginning to be felt. But but with that background, um, there are many sort of geopolitical experts and European focus analysts who think that we, let's just put it out there are being alarmist and that the crisis is manageable, and that Putin is the one that is going to suffer the most in the long run and so on and so on. And so it was,

Chris Keefer  4:40  

it was it was fascinating because of that, you know, I mean, I think I have a tendency towards you gave me a clinical diagnosis on our first episode together, but I was referring it to as this kind of Eastern European tendency to sort of prepare for the worst and be pleasantly surprised sometimes when things don't turn out quite so badly. Did you remember what that diagnosis was brilliant,

Doomberg  5:02  

it defensive pessimism, which I am a charter member of the club.

Chris Keefer  5:08  

So, but I've tendency towards that. And so it was, I think, a really rich conversation because you had Marco papparich on there. And what we'll talk a bit about, you know, some some of his arguments and maybe, you know, summarize those before we get onto your other other material.

Doomberg  5:23  

So let's talk about that space. So Marco is a brilliant analyst, successful author of an outstanding book called geopolitical alpha. And even though he and I have a different set of opinions on this particular issue, one of the things that is too often missing from modern discourse is a willingness to sit down, and to politely exchange views, and to have a civilized debate, and Grant Williams, who is sort of the ultimate master of ceremonies, and, you know, everybody's friend, and a really brilliant content creator, in his own right, agreed to host this space that featured myself, Marco Popovich and Luke, Roman are the aforementioned brilliant Luke Roman, who does a lot of great work in this regard as well. And over a period of two hours, the four of us had a perfectly lucid, civilized, back and forth, where I think both sides made some good points. And we had a brief opportunity for people to, to ask questions of the group. Here's the amazing thing about it. As of today, just on Twitter, that space has has been listened to 250,000 times. And then a grant released it on a full podcast, and I think we're at like another 30, or 40,000, listens. You know, the power of Twitter, and that this medium of spaces where you have at its apex, I think we had over six or 7000 people listening live a total of 13,500, participated in the way that you did, you know, for some measurable period of time, but the replays have just been spectacular. And, and the podcast medium, I think, is here to stay. And it has its role, and it's an important role. But there's something vibrant about the Twitter spaces medium. And, you know, we had a rigorous debate, I felt like I held my own. But I'm obviously very biased in that regard. And I let the listeners judge for themselves. But it was a it was interesting debate, you know, and I think the real confusion, let's say, or the source of disagreement arises from people who who have not spent time in the energy sector, assuming they can treat energy as just another commodity that were as, you know, as you know, my background. In terms of energy, abundance, energy is just another commodity. But in times of energy shortages, energy is the only commodity that matters. And, and that's what we're seeing today, we believe. And so yeah, that's the foundation was a great spaces. And it was a pleasure to be part of it. And we were blown away by the response. And there's something there, like, this is the way media news like the the old legacy media is, is too slow, not sufficiently dynamic, can't compete with the sort of spontaneous get together of four experts with different backgrounds rigorously, but politely expressing deeply held and well researched reviews of views.

Chris Keefer  8:31  

Absolutely. I think that's, that's what made it that's what made it so special in the context of hyperpolarization, to see that, that civil debate and, you know, again, I find myself engaging in sort of a cognitive forcing strategy, again, to deal with that defensive pessimism to really try and put myself in challenge that bias, and maybe things aren't as bad as they seem. And so it's very useful to get Marcos perspective. You know, I use this podcast a lot as a way to fill in my weaknesses and educate myself, you know, despite it being something that, you know, I offer out there for free, it is a selfish project, in terms of, you know, this, this this educational path, and, you know, I haven't engaged in, in the crypto stuff, I don't have a very good understanding of, you know, monetary theory at all. But I was interesting what you were saying there in terms of, you know, when there is an energy crunch, that's when things really matter. You're famously quoted as saying, you know, energy is life. But to a certain degree, I've heard many people argue that, you know, energy is money, energy is currency. And I'm interested in exploring that with you as we sort of dive into the EU energy crisis and and the responses and the, you know, the anti logic TM, which is another phrase you coined recently. But again, particularly when it comes to, you know, the price caps, the bailouts, impacts on inflation. I think that's sort of where I would like to sort of make the central theme of this interview. And again, I'm sure have, you know been reading all your pieces very closely and taking notes, I'm sure we'll sort of go off in some nice, some nice paths. But in terms of sort of giving the listeners a sense of, you know, what I hope to get into and what I hope to learn, I'm really excited to get into that. But maybe we can start off with maybe a summary of what you feel have been some of the key events to date. Obviously, we don't need to be comprehensive and go on for a long time here. But I just think it'd be useful. You know, for those who have not been paying as close attention, or for those who are curious as to what you see as as the most important events of the last few months in forming this crisis, so that we can look forward and try and anticipate where it's going.

Doomberg  10:39  

So there are sort of two major trends that that have converged into a crisis. And one which has been well documented by your friend, Mark Nelson, and many others, is that the the introduction of massive amounts of intermittent sources of power into the European Electricity Grid, has caused significant damage to that grid. But concurrent with that has been a reluctance to produce their own fossil fuels, and an over reliance on cheap, steady, readily available, pipelines source natural gas from Russia, and then third, the attack on nuclear power. So if you're going to introduce intermittency, while simultaneously attacking baseload, while simultaneously outsourcing the drilling and, and processing and production of your fossil fuels, you leave yourself extraordinarily vulnerable to evil geopolitical actors like Vladimir Putin. And so one of the things that we have that frustrated us with a discourse is, by pointing out the flaws in our logic, many just write us off as sort of pro Putin or anti West, which is, of course, the exact opposite is the truth. And one thing you'll notice, for example, we've never written about, nor have we ever tweeted about any military aspects of this conflict. Why is that we know nothing about it. So we have nothing to add, we have limited our contributions to the discourse in this regard to the areas where we know and feel like we have some unique expertise, and that we can participate in a value added way. And so we have focused all of our commentary on trying to point out why the energy aspect of the hybrid war that we're fighting with Putin was destined to be a disappointment. And suggesting from the very beginning, alternative ways that we might be able to improve the situation, both for the benefit of the citizenry of Western Europe, and also for reducing the leverage that we have so foolishly handed to Vladimir Putin. So it is in that context, that we now enter what we believe is and have been saying for months, the greatest geopolitical event to unfold is how Western Europe will confront the winter of 2020 to 2023, with what essentially amounts to a shortage of molecules. And so once you realize that you have a shortage of molecules, all of the responses to that shortage that don't involve making more molecules, ultimately, are going to fail. And we're seeing a lot more of that than we are of a state of desire to make or get more molecules.

Chris Keefer  13:28  

It's interesting, you know, when I think about the challenges of 2022, it's almost been a kind of dream wishlist of of the Green Movement, really kind of experiencing the great sort of Degrowth experiment of 2022 in Europe. You know, I've heard many environmental thinkers, hoping fervently that fossil fuels will become incredibly expensive, because that's going to mean people will use less energy and be into conservation. This idea of energy rationing is something that comes up a lot, you know, on the green left in particular, you know, in terms of a deindustrialization agenda of the Degrowth movement, you know, high energy costs are leading to that result. And I mean, and in the, you know, the logical conclusion of of a Degrowth argument, the more sort of dark Malthusian undertones, the potential for some degree of depopulation due to famine as a result of the fertilizer crisis. You know, the green movements even despite the incredible illogic of this, their fantasy of, of closing nuclear plants fulfilled, it's, it's been quite a year when you look at it, you know, through that very dark lens.

Doomberg  14:37  

So in the piece we put out last night, called green shoots of logic. We, we did you know, make sure to survey the world and see where even some of the sort of more radical leaning progressives in the western world are beginning to see the light in this regard and And we close the piece by saying, the one country that is still, you know, heading full throttle towards the heart wall of physics is Germany. And, you know, it's almost too far gone for Germany for this winter. And in the piece we quoted how annoyed their neighbors are at their insistence on closing the last three nuclear reactors. And Sweden in particular is talking about cutting off Germany from its precious ability to produce electricity. Because if you're going to be so foolish, we're not going to sacrifice our population, and you're sort of this is not a shared sacrifice. This is a you own the blunder, you own the consequences. I think the ideal not the ideal, the best remaining outcome is the rest of the West gets to observe what happens in Germany, and course corrects, I think Germany is too far gone. And I think they have done severe, and I mean, severe damage to their manufacturing base, which is just now beginning to be felt. And this is what makes Twitter sort of toxic and great. At the same time. We have lots of people sort of mocking us for saying Europe will survive the winter. And we put out a tweet last night that said, we're old enough to remember when quote, will survive the winter was a pretty low bar. The consequences of the energy blunders will take some time to manifest downstream, but you're already seeing it, the German chemical industry is going to get decimated. That German chemical industry is a fulcrum that holds up an enormous amount of downstream value. Add, you know, Zoltan had a great piece where he talked about how 20 billion of energy is, is foundational to 2 trillion of value at and it's 100 to one leverage and his sort of comparison to the Lehman moment that that we alluded to earlier. This is a real catastrophe that we are talking about, they will survive should tell you just how much the goalposts have moved. When we started the sanctions regime against Putin, the objective was to turn the ruble into rubble and to cause hyperinflation in Russia and, and we are seeing the rebound of those sanctions. And, you know, Goldman Sachs predicting that the UK would experience 22% inflation before it would abate like this, these are catastrophic numbers. Yeah, the crisis is here, the predicted crisis has arrived. The only challenge now is how do you minimize it and prepare for you know, the second, third and fourth order effects?

Chris Keefer  17:31  

You know, speaking of Germany, a listener sent me a great image. I may be getting this wrong. I think it was the HMS Savannah. And I think, you know, the nuke bros out there aware of the US ship the savannah was one of the first or maybe the only nuclear powered cargo ship but I think was the HMS Savannah was one of the first steam ships to cross the Atlantic it was steam but it was also rigged with sales. And I retweeted this recently a picture of that boat, you know, too, too tall mass with kind of insufficient sales really on them. And then a great big smokestack, presumably for a coal fired propulsion system. And that really is I think, a great symbol of the German electricity grid, that fossil fuel inputs that can actually get that boat across the Atlantic. The fuel for that has been incredibly constrained by by the Russian sanctions and now we're heading into winter into the so called I love this word that dunkel flout A, the Germans actually have a word for this period of, you know, weeks to months in which this the doldrums of winter there's no wind, there's no sun. And you know, they're leaning on this energy system, which is dependent on the two of those things. It really is pretty mind boggling.

Doomberg  18:44  

Be it'd be happy to know that we actually use that word and Doomberg Pease, the Dunker flower, it's one of it's one of the best German words, I'd say it's solidly in the top 10 of German words on that saying something

Chris Keefer  18:55  

100% And so topical right now, so topical right now. So, you know, there was a tweet, I really want to credit folks, as you've taught me to do here, and I did write down some notes here, might have to take a second to find it. But there was a great tweet, again, looking at at the implications of this energy crisis on German society. And it was talking about how, you know, Germany has this place with free tuition with generous support for the arts. You know, it's a, it's a vibrant social democracy, a very generous welfare state. And, you know, almost as a result of that, very few people have an appreciation for the productive forces within that society that generate the wealth that that enables that kind of prosperity. You know, it's it's a kind of classic story, I guess, of almost like a kind of post material environment where people forget about, again, those productive forces. And, you know, he was he was forecasting that those days, maybe over that the Germany could be headed towards what he was comparing to sort of the failing states of places, you know, in the I guess The middle income areas Egypt etc, which has to expend a huge amount of its budget every year subsidizing food and fuel just these kind of bare necessities. You know, I think I believe it was Marco, again, was was arguing that this, this is likely to be a short term event that Europe can recover that, you know, gas storage is full that, you know, LNG has supplanted Russian imports, the US only down about 5% in terms of their their total gas imports. You know, I did find some of that to be to be compelling. And again, I try and really entertain those arguments as a as a way to challenge my defensive pessimism as you've labeled it. Where are you at with that? I mean, how, how bad do you think things are going to be clearly you think it's going to be a tough winter? But in terms of this blow to the productive forces of German society to German heavy industry, chemical industry? Do you feel like this is recoverable? What are your What are your?

Doomberg  21:01  

I mean, we recovered from World War Two, the complete destruction of these countries. So of course, it's recoverable. The question at issue is what is the path function and what is the pain that needs to be felt integrated across the next 12 to 18 months, for it to happen. And I will say in in the piece, you know, green shoots of logic The UK has already pivoted, and we give this trustful credit for not all of her policies are what we would do. But on the supply side, she's the first of the sort of broader European leaders to recognize reality, and to say, this is a supply crisis. And we and the words that she used, which were very encouraging, were, we shall never let the UK find itself in this position again. And so a big push for nuclear a big push for natural gas, bridging as much coal as they need, unfortunately. But we have not yet seen what we would call intellectual capitulation out of the Germans. And in fact, we've seen the opposite, which is a doubling and tripling down of anti logic. Even in Sweden, as we're talking votes are still being counted. But it looks like there's a rightward tilt in the in the Swedish parliamentary election, that happened over the weekend here. This is something we've predicted as well, and what we fear in Germany like and what we fear in Italy, and sort of, like there, if you deny physics long enough to pop, you know, the population will revolt. And, and so the, the insistence that that so for example, that back to the storage thing, and Mark was point and one that I felt I made pretty clearly on the spaces. And I'll summarize here very briefly, storage is never meant to be a primary source of natural gas, it was always an only meant to be a supplement to pre existing flows. And there are significant constraints to accessing the total natural gas stored on the days where you need it the most, which is you can only pump so much out at a certain rate. And the rate at which you can pump natural gas out of storage decreases as a function of the amount of material that you have in storage. And this is, of course, heterogeneously is a heterogeneous characteristic of each of the individual storage units. But broadly speaking, as a general rule, if, for example, Germany had to rely on just storage or storage for most of its daily use on any particular day, it wouldn't work. And the fact that Russia has completely cut off Nord Stream one, and could still cut off the remaining gas coming in via Ukraine, especially if military advances by Ukraine continued to proceed with some positivity. It could be that Germany finds itself in a situation where it will not have enough natural gas to both maintain the heating of its residences, and keep its industry working. And the German economic Minister habeck who's just by all I mean, let's, let's speak bluntly, a clown said casually, on national television in Germany, that it's okay, the small businesses can just stop operating for a few months. And it's no big deal as though they don't have, you know, debt to repay or wages to pay, or that they might just decide to close their business deal. This is again a person who has never spent a day in business and has no idea how to run a p&l and is the the most powerful economic leader in Germany, which is the most powerful country in Europe. And, you know, as we said, on Twitter, when you're led by clowns, you should expect a circus. I mean,

Chris Keefer  24:27  

the quality of leadership in the West, broadly speaking is astounding, the kind of gerontocracy that we see in the US. I won't comment too much on on my prime minister here habeck PhD in literature, I think best known for writing children's books, as you said, probably the most powerful man in Europe at this point in terms of economic policy. I guess in terms of you know, the recoverability clearly with the right policies in place and you know, with the US able to bankroll the Marshall Plan, the you know, Europe was able to rebuild itself from from World War Two, I was reading a very interesting Twitter thread. I think I tagged you in it. It's gentleman, I'm not getting his name wrong, Alexander Starr Hill, he's a investor in Switzerland, amazing guy. You know, but he was really talking about how differently Europe is positioned, particularly when it comes to its electricity production, you know, facing the 73 and 79. Energy shocks versus versus today's, you know, and in 79, I mean, Europe was rapidly building out a nuclear fleet, you know, putting 200 gigawatts of nuclear plants online, building, you know, reliable electricity, obviously, they had a lot of loyal fire generation, which took a big hit. But it was, it was kind of a different trajectory. And I thought style did an amazing job of of pointing out the absolute precarity of this, you know, what Robert Bryce, you know, is referring to, as you know, the network of all networks. You know, I call it the civilizational life support structure. I mean, there's going to need to be some massive policy change arounds. And you mentioned that with, with Liz, trust in the UK, I'm really struck by the kind of I mean, I shouldn't be but the kind of nimbyism that we see. I mean,

it's, it's fine to be importing Russian gas. That's not been a huge problem for Europe. It's kind of an out of sight, out of mind thing, you know, offshoring emissions from manufacturing to China, for instance. And, you know, I think there may be some shock to seeing, you know, fracking rigs in the in the beautiful UK countryside, but it is just it is just interesting that that degree of of kind of make believe in nimbyism in Europe, where I think, you know, they feel like they're making huge leaps forward on climate, but really just offshoring a lot of resource extraction and manufacturing.

Doomberg  26:47  

It can't be avoided. Let me start that over. It, it can't be avoided it. It is stunning to see yet in real time. And, you know, little Twitter exchange last night like NAFTA, US Canada and Mexico have enormous potential. Compared to Europe, because we have we are largely already energy and commodity independent, we have CANDU suite of nuclear power, which could be spread across the region, we have ample farmland, we have ample fertilizer production, we have ample natural gas production, you know, Canadian natural gas is trading for what $5 per million, BTUs $4 per million BTUs, it's trapped, they're landlocked in Canada, we have the potential here to be energy superpower, none of that exists in Europe. So yes, there will be a recovery in Europe in the long term. But there's the opportunity cost of loss loss potential. That is real. And as you're seeing these remarkable and sad stories, sadly, predictable stories, too, I might add of small business owners taking to Twitter to complain about 506 100% increases in their electricity bills, which they simply can't handle, which is forcing the governments of Germany and the UK to print Fiat to support these people, which is only got you can't print molecules. And so it's only going to make the incremental cost of a molecule all that much higher for two reasons. There's more Fiat floating around and you're breaking the market mechanism to try and figure out what the most efficient use of your limited molecules should be. And so that they're taking the anti logical approach, as we put in a piece two or three pieces ago. The they will be can be counted upon to take the worst decision at every opportunity now, because we're in crisis mode. And none of the leaders before this dress seem to have any sort of logical connection to reality that you and I might have. I haven't been citizens in the real world and not sort of, you know, the, the, the noble elite of European decadence.

Chris Keefer  28:46  

Well, let's talk a little bit about that. That kind of monetary policy response. You've you've profiled a few of these, both the don't pay UK action. You know, we've we've, you've also highlighted, I think this was Liz Trump's plan for an energy bailout, totaling $170 billion, there was a great tweet, I think, from having a blast talking about, you know, you think Hinkley Point is expensive. I think it's clocking in around 20 billion it'll produce. I'm not sure if it's 10 or 13% of the UK electricity, but you can just do the math on that if you spent 100 70 billion on nuclear. Even assuming that cost didn't come down from cereal production, you'd be you know, something like 73% of electricity coming from nuclear instead that's that's going to a bailout. You know, and you were mentioning this, this chance of hyperinflation and Goldman Sachs predicting a 22% inflation rate in the UK.

You know, let's talk a little bit about that. Again, I'm on shaky ground here. I do not have a strong background in this area at all. But again, I was referencing that that concept of yours energy is life and this idea as well that energy is fundamental. It really underpins currency. I'm interested in your in your thoughts.

Doomberg  29:57  

Well, unless and until then, This is a point that Luke Grohmann makes quite persuasively in his paywalls materials that we happily subscribe to, unless and until the UK and the EU can procure energy in their own currency, then they're just printing Fiat and they're, they're just, they're not going to get the molecules. And so most energy is is settled in US dollars. And Russia is looking to settle, you know, with friendly countries in local currency. So if you can settle your energy needs in local currency, that means you can print your energy needs. And the UK and the EU cannot do that today. And so it's actually 170 billion British pounds, dollars, which is multiplied by 1.15, although that might not be the case for much longer as this continues. So if again, by printing Fiat, that you cannot directly use to acquire your energy needs, you are simultaneously increasing the price in local nominal Fiat, of that same molecule, and destroying the normal market forces that would otherwise be able to dictate to you the most efficient places within your economy for your limited molecules to go. And so it's a losing strategy on both fronts, now look at the US can print dollars, and people accept dollars for energy, so the US can print energy. And the US is also relatively energy, independent in the sense that already we produce more than we need. And we trade, you know, to match what we need, you know, the particularities of of industry. But we also have readily accessible reserves, that we could tap with the right political will and financial support, such that we can satisfy everything that we almost everything that we need internally, the UK and the EU, are both sitting in currencies that aren't used to settle energy and therefore must acquire US dollars for example, to buy the energy they need, and they don't produce enough. And they don't have the political will internally yet, like crispy this Liz trust, this speech was controversial in the UK. How dare you talk about fracking in the UK? Or you still have people gluing themselves to you know, the Speaker of Parliament's chair in London, you have these fringe extremist groups, drilling holes in all of the tires of milk delivery trucks, for some some perverted reason, yeah, they took out 50 of them in one night, and were bragging about it on Twitter. So we have a lot lot more pain for these people to suffer before the political capitulation that is necessary for a sane path forward and recovery presents itself.

Chris Keefer  32:44  

I mean, and the timelines again, I think I'm referring probably to a Robert Bryce podcast with the head of Mercator, you know, just, you know, if the rigs were there, if the workforce is there, how long would it take to get gas flowing out of out of this, you know, fracked wells in the UK, and they were saying, you know, at least two years, at least two years, and then with nuclear, you know, the best time to build nuclear was 20 years ago, 10 years ago, second best time is today, these things are gonna take time, and it's also occurring in an environment, you know, a de industrialized Europe where there's been, you know, such a loss of the human capital required to, to build, you know, to build a productive economy to build energy infrastructure, it is it is daunting, and this is where my defensive pessimism is maybe taking over a little bit.

Doomberg  33:32  

We had a friend, Alfonso from macro compass. We were on a spaces together different spaces, the one we talked about earlier. And he made a great analogy, which is the European Union today can be thought of as a sort of emerging market economy, on the cusp of hyperinflation, because it is experiencing sort of exogenic shock, for which it cannot print the solution. So if you're, if you're Argentina, and you owe billions of dollars of US dollar denominated debt, there's no amount of of your local currency that you can print to make good on that debt. And because Europe does not produce its own energy, and the energy it needs is not settled in its local currency. This this shock is totally analogous to what happens in developing economies, except it's transpiring in the developed world. And we would argue, not really freaked out. The population of Europe and Germany are far less prepared to weather such storms than the population of Argentina who's who's had to do it a dozen times in the past 50 years. This is going to be the the dislocation between the perceived range of potential outcomes amongst the average German citizen. And what seems on offer right now is profound. And it's not clear to us that the integrity of the institutions within a country like Germany are prepared to weather that storm Now, look, it's Doom Bergen. And as we said, 100 times, we would love nothing more than to come back here in one year. And for you to label us as having been alarmist, that'd be great. We would proudly wear the alarmist badge. If it meant that the people of Europe did better than we fear. We'd make that trade today all day long.

Chris Keefer  35:20  

Yeah. Yeah. Yeah. I mean, we've been, you know, a credit to Mark Nelson here. We've been forecasting Big Trouble in Europe for about probably 16 months now on Decouple. And I take no satisfaction in, you know, our content being somewhat prophetic in terms of what's what's happening here. I guess, you know, I'm wondering in terms of Europe's future, you know, the, for instance, German industry, energy prices before, before this crisis were probably double that of, of the US, they made up for that, because of incredible efficiency, having a highly educated workforce, really quality products, all of that basis for, you know, the things with which your Europe still produces value are being undermined by this. And you know, if energy is twice as expensive, you can survive that with with some of the qualities I mentioned before, but if it's if it's 10 times as expensive, we're in a real world of pain.

Doomberg  36:18  

But you're making us you're making a slight mistake, which we highlighted on the spaces, which I'd like to articulate here was electricity prices were double Yes, energy prices were cheap. And electricity is 20% of the energy bill. Okay, and so electricity prices being double. But the energy being cheap because of this dependence on Russia and natural gas means that energy prices going up 10x is a way bigger deal than electricity prices, doubling because of the intermittency that was introduced to the grid. And if so, like, if your electricity prices double, that means your energy bill has gone up by 10%. But your energy bill now is up by multiple fold, which is a catastrophic situation and far more difficult, for a value add economy like Germany to just pass on to the consumer. So again, this is one of the things that sort of people, even you with all of your experience and all the shows that you've recorded, the profoundness of this catastrophe is because it has the cancer has spread from electricity to energy. Energy is heating homes, that it is producing chemicals that is producing fertilizer, it is all of the rest of the economy that occurs off the grid. And we're talking about the whole enchilada doubling, tripling quadrupling 5x in price, as opposed to a doubling of electricity prices, which can be reasonably contained and passed on. If you have enough productivity improvements, and all of the other attributes you just described.

Chris Keefer  37:46  

You know, I had that written in my notes, actually that distinction. But you know, it takes a while I think to get it through this, this thick skull of mine, but thank you for pointing that out. You mentioned the the Swedish elections and the kind of course correction that may be required. And it may be, you know, politically ugly, in terms of some of the forces that may come to bear I was I was talking with a great friend of the podcast, Noah Rettberg.

We had that episode, Germany, the canary in the coal mine, that's also done very, very well, in terms of our downloads. But you know, he was talking about how, you know, unlike in France, where Marine LePen comes very close to winning the presidency, on their on their presidential election cycles, the German fire rate, you know, there's a real, understandable reason why the establishment is does everything they can to really marginalize them.

But that's, you know, their voices, they won't necessarily be elected, but the policies they put forward in order for the mainstream to sort of take their potential electoral success away, those ideas might start to infiltrate into into the political middle. I'm not I'm not sure at you know, in terms of your kind of political commentary here, but I'm just wondering what you think, you know, beyond the energy and economic impacts what what the sort of political course correction may look like, if you're paying attention to that?

Doomberg  39:07  

Well, I mean, again, take your home country and the recent ascension of what the CBC is desperately trying to label as an unelectable populace to the Conservative Party leadership in a sort of surprisingly easy defeat of the establishment candidate, John Srei. We're going to see that play out in many countries to the extent that these elections are sort of open and fair. But the the bubble in which the leaders who got us here reside in is pretty remarkable and there'll be the last to know exactly so I actually don't believe in the sort of wild not wild but the becoming evermore reasonable conspiracy theories that this is somehow all on purpose. We're still in the incompetence camp. The incompetence camp is informed by our direct experience at the high levels of corporate America where board members and C suite executives not only literally had no clue what's going on to three, four levels below them, but believe what they're saying, like they, they say it enough times that they actually believe it. Like, I actually think that Havik believes that nuclear is part of the problem and not the solution. Because he says it so often that I think he believes it. And also, I think he thinks that businesses can shut down for two months or three months and be just fine. And not worry about it, because he has no clue how business works. And so the if you're that confident in your ignorance, how confident are you in your permanence? And so they will be the last to see it. And, you know, as we've said many times on the path from abundance to starvation is riot. And there's a very short path from empty, empty grocery stores to the guillotine. And when we say that, it's only half, you know, jokingly, these people have no clue they'll be the last to know who started the piece with the with Romania, the collapse of the Romanian dictatorship, I think it was meant to be a really great piece, you know, like, she's Jessica was the last to know he was, he was baffled by why the crowd was angry with him as he was telling them to stop storming his his headquarters, you know, that this is exactly like there's no difference in this scenario. And so I think the people that live in bubbles are the last to know that there's a giant needle coming.

Chris Keefer  41:26  

anti establishment politicians are I mean, the surprise in the Hillary campaign, Trump's sweeping of the rust belt, I think is probably instructive of some of where

Doomberg  41:38  

we live in the Rust Belt. And I can assure you, it was no surprise to us. Yeah, yeah,

Chris Keefer  41:42  

absolutely. No, I mean, you call it this as well, I think I think I tweeted it similarly, but I'm forgetting the exact article that comes out of but the quote is, in reference to Habakkuk, and the greens, what they're doing with their nuclear plants, in regards to this ridiculous plan of, you know, sacrificing one on the altar and keeping two in reserve, which is a very strange way to operate nuclear, particularly on a massive grid. I know, that was another real learning point from Alexander Stiles tweet thread was, you know, there's European grid, it connects something like 42 countries, 520 million consumers, you know, a lot of the the rationale that has been put forward by the Germans as well, you know, we're facing a gas shortage, not really an electricity shortage. And we mean, you know, nuclear will not offset that much gas use, you know, forgetting that they're part of a grid. But all that to as an aside, the the quote was, you know, for the greens, it was a win to show their party base that they were standing up for their core beliefs, despite reactivating coal power plants, and super fast tracking fossil fuel import infrastructure. I mean, this is really the party of nihilism, God is dead, but the devil still exists. And it seems like their only core belief nowadays is that, you know, nuclear is the ultimate source of evil, and they're willing to sacrifice any environmental commitment on that altar. It's truly astounding.

Doomberg  43:03  

It is the most robust demonstration of an intellectually bankrupt position that I have ever had the unfortunate experience of reading. If we're being totally honest, like, they claim to care about carbon emissions primarily. And yet, they're willing to sacrifice the cleanest form of energy production, with the least amount of carbon emissions in exchange for the dirtiest form, with the most. If you couldn't, like if we had written this as a script for Hollywood, they would reject it as foolish. Like, there's no way that could transpire. But it just shows you the cult aspect of all of this, that this has become a religion, and that the purity of your beliefs is far more important than the logical underpinnings of those same beliefs. This is a an acid test for acceptance into a perverse cult. With all of the pressures that come with it, you know, like, like, people who are victims of cults don't realize it in the moment they honest that that's the whole that's the whole scam. Is is this sort of social pressure to demonstrate purity, and that's what's going on here. There's just no other way to describe it.

Chris Keefer  44:22  

It is bizarre, because, you know, there's obviously a big environmental backlash against Liz trusts ending of the fracking ban. The German greens are reigniting their lignite sector. I mean, there's some parallels here in terms of a kind of pro fossil fuels agenda. By you know, both Liz truss and bizarrely the the greens I mean, there's some attempts here from the supply side to to increase supply of fossil fuels and it's coming from some very unlikely champions in the in the German Green Party.

Doomberg  44:53  

So it this is an example of what we talked about in our latest piece, which is I think the best case scenario now is is the rest of them. Well begins to come to its senses. And if Germany is hell bent on, you know, national suicide, then the sort of next best alternative for the rest of the world was to observe that and make sure it doesn't get replicated anywhere else. There's not much we can do for Germany now, like they have tossed the die. And it's come up Snake Eyes, and they've decided to hold hands and stay in the barrel and go over Niagara Falls, that's, that's a tragedy. There's only so much for warning you can give people ultimately, you know, they're a free country, and they can do and govern themselves as the police, it's going to be tragic. We have many German friends, we have many German friends who disagree with the course of the country. But it is what it is, like tragedies happen, the sort of fallback position, the regroup position for the rest of the world, is observe what happens when we are stupid enough to run this experiment, and then make sure we have the political will to avoid a replication of that experiment anywhere else in the world.

Chris Keefer  46:02  

More broadly, in terms of the responses of Canada, the US, you know, we had Chancellor, all of all of Scholtz, coming to Canada, basically begging us for, you know, LNG export capacity to and to increase. You know, you've talked about, you know, the path to defeat Putin being very different from from what is on offer, in terms of, particularly the North American response, outline that a little bit for us.

Doomberg  46:30  

Yeah, you know, Canada is kind of this weird. But not to get too political. We've written some pretty tough pieces on your current prime minister, and we think he's a particularly dangerous character, but that's probably too polarizing for your audience. Canada has a ton of stranded natural gas that could help the world decarbonize actually, because that natural gas could be used as a bridging source of fossil fuels to displace coal, while we implement smart policies around nuclear. But the Canada's is sort of this weird outlier in the sense that it at the same time that that's occurring, Trudeau is invoking treaty rights to try to get line five. And the closure of line five is critical pipeline from Alberta reversed the scheduled closure of it or the attempted closure of it. And so like on that particular issue, which we both written about and threaded about on Twitter, Trudeau is on the same side as the fossil fuel industry, which is a bit peculiar. Canada, the US and Mexico, which is something we've been saying from the beginning, NAFTA, you just draw a circle around North America. It's a spectacularly blessed area, with all the resources needed to not only support abundance for our population, but to project geopolitical power by exporting that abundance to friendly allies. And every day that we do not sort of get together and collectively take advantage of that, that abundance. There's a reason why all of the European powers try to settle North America. Right? I mean, it is literally an endless source of everything the world needs for abundance. Every day that we don't take full advantage of that the opportunity cost is higher for the countries that could be benefiting from it, but it's also real here and Canada, you know, with its nuclear heritage, and with its abundance of fossil fuels, and its abundance of great farmland, and its abundance of natural resources and mining, and it literally has everything, it has a very small population. And we've pushed back on some sort of Canada bears on Twitter spaces, which have since been lost to the internet. But, you know, on a per capita basis, Canadians are among the wealthiest in the planet, probably second only to Australia, if you just look at sort of resource blessing divided by population. Great, great institutions, great education. Great, you know, controversially, but but but very good public health. And then there's just this mountain of resources. All it takes is the political will to exploit it.

Chris Keefer  49:01  

Yeah, I mean, it is interesting. You know, I guess, coming from my, my political and environmental background, you know, I think initially in this journey, you know, the plan was just let's, let's get a global Mesmer plan going in May 1000. Nuclear reactors bloom as a way to sort of leapfrog over fossil fuels and avoid those nuanced and difficult discussions about okay, well, what what do we develop from a fossil fuel perspective, you know, you know, from a climate Hawk background,

but it is interesting, you know, as, as I've delved into this more, you know, and as as a humanist understanding, the real proximate dangers of energy crisis, and again, I hope that we had you on in April of this year to talk about your your peace, the perfect storm that was facing global agriculture. Again, I hope that was alarmist and fear mongering in the end, but

you know, we're going to see, the Decouple team is going to the climate conference. is in what I'm calling the Versailles climate conference. This is in Sharm el Sheikh. In Egypt. I've been there before this insane resort town. I'm really worried about there being hunger on the streets of Cairo. And, you know, in any case, I guess I'm just trying to say that it's been an interesting Personal Development Development for me, and I'm still I'm still wrestling with it. You know, the, the need to, you know, certainly use fossil fuels as a as a bridge towards getting toward a nuclear future to both to both tackle climate change, but not not really, you know, tank humanity in the in the pursuit of it. You know, this energy crisis? I think we'll see it's, it's still blooming, in terms of the the food impacts, how long do you think that's going to take? You know, you wrote that that piece? On the on the potential for the very real potential for famine back in April? How is that panning out? And what are the kind of timelines in terms of when nitrogen for instance, nitrogen shortages, will will affect crop yields?

Doomberg  51:04  

You know, we're seeing it play out now in Europe as the complete devastation of its ammonia production capabilities will eventually lead to a shortage of fertilizer, which has to impact yields. You know, the perverse irony of all of this, of course, is that the world could, as it exists, they could easily feed every human on the planet with the resources that we have with the resources that we waste. But it has played out in in the emerging economies, and food inflation is real in the Western world. And, you know, emergency room doctors or successful newsletter writers might find it as a relative annoyance that we have to pay 30 40% More than we were last years, but from any family, that many families in our own societies, that means tough choices between you know, where they're going to get their protein, and the quality of the foods that they're able to buy. And, and it's going to have health impacts. And, you know, it's it's a shame because it, it doesn't need to happen, you know, if you just did sort of a high level macro measurement, you'd say, you know, if an alien came down and measured the sort of global human condition against Maslow's hierarchy of needs, the the disparity between how the top one to 3%, which we would both agree that we are blessed enough to fall in, the disparity between the top one to 3%, and the bottom 80% is staggering and unethical and inhuman. And so this is just sort of dastardly icing on a terrible cake. I guess the we've made a terrible situation worse, we've exacerbated those inequalities. And so too many in the world that the things we've written in April have already come true. They just don't make the headlines because it's not in Western Europe yet. And it's not, you know, it's not encroaching on North America. But South America, Southeast Asia, we are seeing the beginnings of a food riots. Sri Lanka's complete collapse collapse, which you have documented thoroughly here is derived as a direct consequence of such policymaking decisions. And I think, again, one of the challenges with us is we're early. And then when the when stuff doesn't quite play out at the speed with which the modern sort of dopamine induced news cycle compressed news cycle demands. It's easy to say that oh, you know, you guys, were just being alarmist, I'd say let's give it three to four more months with with radically reduced ammonia production. In Europe, just as we head into the spring planting season, before we realize the we can measure the full integrated impact of the primary energy crisis. This is like the snapping of a whip. And energy is at the very front end of the supply chains and where the tip of the whip smacks the floor. And when it does, it's less interesting to us than the fact that it must inevitably.

Chris Keefer  53:57  

So we have a few more minutes here. On the topic of, you know, the energy required to make the ammonia you know, we are in a global fossil fuel shortage. Again, from that, that tweet thread, a really outstanding tweet thread from Alexander starhill. He was it was just talking about where the investment cycle is at that, basically, to, to finance the global fossil fuel industry, for just, you know, a stable baseline amount of production. He was estimating it's about $300 billion of investment required every year. And we're down to about half of that, you know, in the short term, to avoid famine, starvation, to lower energy prices to disempower Putin, there's going to need to be investment in order to to a increase the supply of energy. You know, one of the responses and one of the ways that has been talked about to fund some of the energy bailouts is windfall tax on on fossil fuel producers. Can you talk us through a little bit about the logic or anti logic of that position?

Doomberg  55:10  

Well, look, let's let's take a step back. If you're short molecules, the very best way to allocate the molecules across more demand than you can supplies through market forces. And so for example, one of those market forces might dictate that fertilizer producers should be at the front of the line, given the criticality of their product to food. By handing out stimulus in Fiat, and absorbing the blow, we are creating artificially, at least temporarily, more demand in less efficient uses of that energy than otherwise would be. This gets back to the point I made earlier about an inability to print energy means you can only print Fiat and when you print Fiat for political purposes, which is totally understandable, totally predictable. And I think regimes in such situations are batting 1000, for making this exact same mistake every time. It's not like the history books are clear as to what's coming next. But one real example is by handing out 170 billion pounds of stimulus, you are masking the market forces that would otherwise tell you that your local ammonia producers should get the first crack at the limited molecules you have left. And so when they don't, they shut down. And when they shut down, farmers can't afford to plant and when farmers can't afford to plant there was a story today from Financial Times that we tweeted out without comment that bases. Salad growers are going out of business because the energy to keep their greenhouses warm and these relatively northern climates is is is inaccessible relative to the price they could charge for their product. So these are all sort of standard theories of economics where price caps don't work. They lead to supply shortages. obfuscating market signals leads to suboptimal allocation of shortages. This is one of the points we made in one of our very first pieces, which we're ashamed to read now, because the quality is so much better today is that, you know, the classic example A hurricane is coming into the Gulf Coast, and people are trying to get out and hurricane comes in the powers down. And the price of generators skyrocket from $400 to $2,500. For a portable generator, the government would call it gouging. And so retailers don't do it. And so the signal to the rest of the country that could easily ship their generators in that cost 400. And they could capture that spread is not sent. And the the aftermath is is tougher than it needed to be and goes on for longer than it should have. That's a real example of the political grandstanding around quote unquote, price gouging is nothing more than the UPS suffocation of real market signals that would bring in needed supply. The clearing price of $2,500 for a generator would trigger all manner of people in their pickup trucks bringing lightly used generators down to the region to try and sell them, which is the exact supply response you want in an emergency. That's not going to happen today in the UK, or in Germany, or in Western Europe, as the politicians are spinning too many plates. So the political plate is we must shield our voters from the impact of this cost, which is laudable and understandable and dead rock, which means your ammonia producers aren't going to get their molecules, which means your chemical producers aren't going to get their molecules, which means in some instances, your electricity producers aren't going to get their molecules. It's perverse. It's understandable, but it's also very destructive. And unfortunately, history is filled with just this exact behavior and what inevitably must follow.

Chris Keefer  58:50  

And then on the on the topic of the other side of things, in terms of taxing the kind of windfall profits. Yeah,

Doomberg  58:56  

well, I mean, that's just again, political populism. And yeah, I mean, nothing triggers a robust desire to invest in a critically needed resources in the government taking away all of your profits. It is too tempting, and and too irresistible for the politicians, it's a flaw in our democratic system, if we're being totally honest. It is also an affront to contract law. And contract law is, is probably the strongest foundation for, you know, robust institutions that lead to successful societies and rewriting a effective rewriting of contract law to say, this right tail gain that you were not hoping for, but but possibly incorporating into your analysis when you decided to invest in the resource development. We're going to take that away from you now. Well, what does that tell the next round of investors I will never have that right tail possibility which means I will move my money somewhere else and I will invest it somewhere else, which is why we have half of the amount of maintenance capital even going into the fossil fuel industry then Would it be needed just to maintain what we do today, let alone growth capital for the development of future resources?

Chris Keefer  1:00:05  

Is there any role for and again, this is not an area I'm super familiar with. But would there be any role for the government mandating that those profits are spent in terms of reinvestment rather than paying out dividends to shareholders, for instance, I'm just trying to

Doomberg  1:00:19  

any government interference is going to be perished for incremental future investments? whose property is it? whose property is it? It's

Chris Keefer  1:00:28  

I'm thinking of wartime rationing. And some of the measures taken, say, in World War Two for the British Isles to resist, you know, fascist takeover? I mean, would you argue that it's purely the market that should steward those scarce dollars

Doomberg  1:00:45  

to do or you can't do wartime rationing without wartime sacrifice and by, by, by by, by issuing these giant stimulus packages, they are trying to have their cake and eat it too, which is there shall be no sacrifice. But we will impose central planning rationing upon otherwise capitalistic, productive industries. We all know how that goes like that. History is undefeated in this regard. And so it is the worst again, the anti logic, your Western, the current slate of Western leaders, with the possible exclusion of the newest of them, this trust, can be counted upon to make the worst possible decision at every opportunity until a sufficient amount of pain is inflicted upon their society, that regime change, hopefully, peacefully, but, you know, perhaps not so peacefully occurs. And we're beginning to see the signs of a rightward tilt, which we've been warning about which European, the European elite ought to fear in Sweden with the recent election with less trust is confrontation with reality and, and with Italy, as well keep a close eye on Italy, you know, the far right, quote unquote, far right parties seem poised to make massive gains, we'll see what happens and if and when Trudeau ever has the courage to call an election in Canada. The times are changing.

Chris Keefer  1:02:00  

Yeah, I mean, I'm definitely been forecasting that the unintended consequences of a kind of Degrowth agenda. And again, if this is kind of, maybe I'm wrong to label it this way, but sort of the the great Degrowth experiment of 2022, that it's going to have these unintended consequences. And, you know, we're gonna probably see a big return to populism and right wing populism and some of the potential xenophobia and other issues that can come along with that. Do me I think we're gonna have to cut it off there. Great having you back, it's been too long. I'm going to try and set an intention to have you on a little more frequently than this. But thank you again. And for folks looking to subscribe, do want to just name the address that they go to for on substack?

Doomberg  1:02:42  

Share? Before I do that, I reiterate my gratefulness for having the invitation extended and I always enjoy talking to you and big admirer of your work and your team's work both here and and in your nonprofit activities as well. Yeah, interested listeners can go to We are a 100% subscriber supported newsletter. We do not take ads. And we do not take sponsorships which believe we believe allows us to be as editorially free and as biting in our commentary, as we like to be. And, and that's the model that we have designed from the beginning and intend to stick with. And it's been great. We have been shocked and humbled by the outpouring of support by our subscribers and the level of success that we have been able to achieve. We are truly doing the work we were meant to do. And for that we are we feel extraordinarily blessed. And we are forever grateful to all of our precious subscribers who are putting their hard earned money to support our efforts and so truly, life changing for us and the work of my life for sure and always a pleasure to talk to you Chris and humbled to be included on a podcast that has so many great and brilliant guests.

Chris Keefer  1:04:06  

Alright, thanks again. Look forward to speaking to you soon. Thanks

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