Europeans printing their way to happiness

“As Crises Mount, Europe Turns Once Again to Big Spending” (NYT, today):

Nationalizations. Subsidies. Cash handouts. Price caps. Profit taxes. It’s back to 20th-century economics in Europe.

Governments are resorting to old-school solutions, long dismissed as bad policy, throwing vast amounts of money at the energy crisis engulfing the region, in a bid to avert a political, social and economic meltdown.

In response [to rising energy prices], E.U. governments have already earmarked more than $350 billion to subsidize consumers, industry and utility companies; ministers are to meet on Friday to finalize the bloc’s direct intervention in markets to grab excess profits, cap electricity prices and subsidize utilities companies.

The huge public spending is in addition to a nearly trillion-dollar stimulus package adopted over the past year to deal with the economic fallout from the pandemic, mostly through borrowing. The ballooning debt load would have normally caused an uproar in the bloc, where fiscal conservatism has dominated policy and politics for years.

“This is clearly an exceptional and one-off situation,” said Daniel Gros, a German economist and director of the Centre for European Policy Studies, a Brussels-based think tank, who normally takes fiscally conservative positions. “It’s different from increasing unemployment or social benefits structurally forever, and it’s a special situation that won’t last forever.”

The last paragraph is my favorite. Coronapanic was exceptional, so borrowing/printing and spending $1 trillion (amateurs! the U.S. spent $10 trillion) in 2020/2021 was okay. The rise in energy prices is 2022’s exceptional event, so borrowing/printing and spending another $1 trillion will also be okay. The end of the paragraph is also interesting. The U.S. actually did make “structurally forever” changes to the American welfare state, already the world’s 2nd largest (percent of GDP), the free-forever broadband benefit for those who choose not to work and King Biden’s forgiveness of student loans previously owed to the Crown. According to the Germans, therefore, we are headed for disaster.

Eurocrats seem to think that voters won’t notice the subtle inflation tax caused by these programs and/or future standard tax increases. They’re paying subjects with their own money:

The Belgian government has handed out $100 to every household irrespective of income.

This is a fascinating example of human psychology. Europeans will eventually have to pay for all of the energy that they’re consuming in 2022 and they’ll have to pay the 2022 price. But they’re going to be happier paying starting in 2023 if the government gives them a Three-card Monte game to watch in 2022. And they’ll be happier getting a pay cut via inflation than getting a pay cut in nominal euros.

What’s non-EU-member Norway doing, other than getting insanely rich from the war in Ukraine? The nation’s hydroelectric power is being sold at record prices to the rest of Europe. The oil and gas wells are producing unprecedented gushers of money. Consumers have to pay higher prices for natural gas, but the government steps in and pays, using the record revenues coming in for oil and gas, 90 percent of the amount over a set price. Cruise ships that formerly stopped in St. Petersburg now come to Oslo for two days per sailing, paying enormous port fees and buoying the local tour operators.

“The problem with socialism is that you eventually run out of other people’s money,” said Margaret Thatcher. Norway has amended this to “The beauty of socialism is that you never run out of the dinosaurs’ money”.

Here are some of Oslo’s gleaming new waterfront neighborhoods next to the gleaming new Munch Museum:

22 thoughts on “Europeans printing their way to happiness

  1. It’s just like US’s rhetoric since quantitative easing began. It was a one time situation in 2008, again in 2019, again in 2020. No-one buying Powell’s bullshit about cutting inflation.

  2. in addition to borrowing/printing and spending there is also potential in lifestyle modifications. For example, the Europeans can trade in their fancy German cars for this nice French car, which is both energy efficient and easy to park.

    “The Renault Twizy is a two-seat electric microcar designed and marketed by Renault. It is classified in Europe as either a light or heavy quadricycle depending on the output power, which is either 4 kW (5.4 hp) for the 45 model or 13 kW (17 hp) for the 80 model, both names reflecting its top speed in km/h.

  3. I’m disgusted that the United States didn’t decide – prior to the entire situation in Ukraine coming to a head – that we would respond by helping Europe with any kind of effort needed to buffer their energy supply. None of this was a surprise, and we knew what the likely consequences were. I was sitting in a parking lot on my way to a doctor’s appointment the day Russia invaded and for months prior it was highly probable (despite Biden’s early denials that Russia would invade – which he DID deny) that Europe would find itself in this situation.

    In other words, we had a long time to think about this and apparently did nothing substantive to prepare. That infuriates me.

    I suppose there are some loyal readers here who violently disagree with my opinion.

    • Addendum: Sorry, I didn’t finish my thought: while I was sitting in that parking lot listening to NPR, the first thought that crossed my mind was: “Europe is going to have its gas cut off. Putin is also going to hit the power plants in Ukraine. I hope we have a plan for that!”

      Looks like everything is going according to “plan.”

    • At least you guys CAN help Europe and are ramping up sending gas to them. In Canada we may have the third largest energy reserves in the world, but it is landlocked. The Environmental/Indian Industrial Complex won’t let us build any pipelines or LNG terminals.

    • randall g: I always wonder if that is just the official excuse. The real plan might be that Canada will be one of the last remaining countries on earth with fossil fuel reserves. Which makes perfect sense.

      Only, in that case we should prioritize depleting Russia of fossil fuels, drop the sanctions and run both Nord Stream pipelines at 100% instead of importing Russian LNG via China and then ship it to Europe via the most polluting method (doesn’t everyone complain about cruise ships?).

      So perhaps politicians do not think that far.

    • @Anonymous: Policymakers are supposed to think that far in advance (or at least seek advice and dissent from those who do so for a living.) That is why think tanks like RAND and the Hudson Institute exist. I remember reading mainstream news reports that Merkle was being advised that the next 10-20 years had a high proabability of being a more chaotic and disorderly world back when the British voted for Brexit.

      We have to assume that many of them do. One of the landmark examples in the genre was written by Herman Kahn and Anthony J. Weiner, published in 1967 – 33 years before the millenium. My father has an orignial copy that he read as an undergraduate at a pretty good school, and I still have it on my bookshelf.

      Some of the scenarios they consider are FAR OUT!

      Of course, not all high-level politicians are created equal and some are suffering from various degrees of mental illness and/or neurological impairment, and thus cannot grasp the concept of advance planning and scenario wrangling, so it’s something of a crapshoot. However, Angela Merkel is a pretty smart woman who appeared to be in command of her faculties and also held a doctorate in quantum chemistry. I’m pretty sure that she asked some of the Really Big Brains in Germany and Elsewhere for advice and “frameworks for speculation” on the future, and those conversations were reflected in contemporaneous media reports.

      By the way, that book was parodied by Conan O’Brien on his eponymous Late Night show via his hilarious “In the Year 2000” skits. O’Brien attended Harvard, so I guess he skimmed it and got someone to help him with the exam so he could later appear as a Commencement speaker. But he’s not a serious academic – he’s a comedian!

    • Sorry, I misspelled “Merkel” in the first paragraph. I keep getting confused by “Markle” who definitely doesn’t have a doctorate in quantum chemistry – she is an actress. However she does possess a Coat of Arms. My apologies, and my reply in no way implies endorsement of either of them, it’s just to illustrate my point.

      “Members of the British royal family are politically neutral by convention.[86] However, Markle was politically vocal before marrying Prince Harry. At age 10, she and her friends reportedly campaigned against the Gulf War.[19] Decades later, she backed Hillary Clinton during the 2016 United States presidential election and publicly denounced the opponent and eventual winner, Donald Trump. In the same year, when the referendum on the United Kingdom’s membership of the European Union resulted in favor of Brexit, Markle expressed her disappointment on Instagram.[87] In 2017, Markle recommended the book Who Rules the World? by left-wing intellectual Noam Chomsky on her Instagram account.[88]”

  4. Great analysis of European shenanigans. I never thought I’d say this, but now I’m nostalgic about the Merkel era. It is wise to remember that a bad political situation can always get worse.

  5. Here in Germany I’ve got enough heating oil stored to get through 3 winters in my townhouse. The heater is pretty efficient. I use 13312 kWh annually in total for heating and hot water (9112 kWh heating + 4200 kWh electricity per year). So for 113 m2 of living space (that’s excluding stairwells and basement) my house gets a 13312/113 = 117 rating on my house efficiency.
    Oddly enough the previous energy expert rated it at 250 (far worse) but they are in the business of convincing you to spend more money on insulation.
    I have insulated the roof very well and will soon look into insulating the basement ceiling to make the ground floor a little more comfortable in winter. Hopefully I can stop there and not bother with expensive exterior wall insulation. Germany’s Aldi’s and Lidl have been able to slow down food inflation compared to Publix in Florida, eg. 1.5 liter orange juice in USA 4.50 dollars, same thing in Germany 1.89 euros. Prices in the USA are insane. And tips – they want tips everywhere.. handing me food for pick at the counter and they want 20%! what nonsense.

    • Agree with Aldi slowing food price rise. Prices grew there but not as much.
      In US, Aldi and Trader Joe’s slow down food prices.

    • ALDI in Delaware perhaps has raised prices a bit less than some other food retailers, but the inexorable rise in costs, including transportation costs, takes its toll. So my particular ALDI had its grand opening Nov 11, 2021. 3 lb bag onions from Texas (mostly) was $1.89 until March or perhaps April. Over the summer, same onions went to $2.69 and more recently to $3.19. That’s up 69% in less than a year! It may reflect that onions are bulky/heavy so transportation costs are a significant part of their delivery cost? But organic 1/2 gallon milk began at under $3 in November; now it’s $3.65. Having said that, some things have remained steady, e.g., Hass avocados from Mexico have hovered between 89 cents and $1.15 each since November, with exception that they are no longer featured as a 7 day sale item for 69 or 79 cents are they were regularly, about 1/4 of the time, from November until February, perhaps even a few months after February (big Super Bowl loss leader item). Trader Joe’s has only one store in Delaware, so I don’t know whether they’ve raised prices more or less than conventional supermarkets in Delaware (Weis Markets, Acme, Giant Food, among others). But from what I’m hearing on Facebook from those who shop at Trader Joe’s in the suburbs or in urban areas like Manhattan, the cost increases are significant week over week. Two Buck Chuck can’t possibly be a thing anymore? (and in the DC area where I previously lived, it was Three Buck Chuck 2010-2015 — I think the West Coast, due to lower transportation costs of California generic TJ’s wines, got the two buck 750 ml vin de table)

    • @Susan Goode, ALDI and Trader Joe’s belong to the same parent entity and it splits them geographically in their native Germany and apparently in the USA. I visit them during my travels. I have never been a customer of 2 buck chuck but premium kosher meat there risen less and costs less and of good quality. Same goes for fancy food items and wines, they costed less then non-fancy items of same category in other supermarkets. Maybe it was due to lower demand in economically not hyper area it was located on, not sure,

  6. btw my 4 week vacation trip to florida had various bad luck incidents a long the way. Two week before trip my wife and I get covid. Recover and arrive – to find out the cat got gravely ill while in pet hotel during our first week – a 2200 euro operation later and the cat was back to normal – turned out it ate some silicon toy parts and blocked his stomach (one of my son’s toys). Remind me to buy pet insurance! Then in one of our beach excursion I locked myself and my family members out of the car my parents lent me while at the beach (dongle got exposed to some salt water! couldnt deactivate security without it), My dad had to come with the backup dongle from an hour away! Then two weeks into our airbnb, lighting stuck and started a fire in the attac- we had to leave while the firefighters blasted the roof off with water and drenched three floors under. Some of our stuff got wet (company iphone died after water exposure) but at least they moved us into another airbnb. Playing in the pool volleyball with my daughter she clocks me hard in the eye by mistake with her finger… vitreous hemorage – getting better but will go to the doc to get it checked out. Came back to Germany to find somebody stole my garbage pail. Other than that it was a lot of fun!! 🙂 Went to some fantastic beaches, took the kids to zoos, aquariums and theme rides, and chuck e cheese, camping with my dad’s fancy RV, ate a lot of food (korean grill, cuban food, argentine grill, fancy tampa-native american fusion, ), Also hung out with some crypto bros working for Coinbase. Kids preferred to stay at grandparent’s with 80 inch TV, my brothers collection of PC/Xbox/Switch etc, and 24 h pool access and no to mention grandparent spoiling. So parents could retreat to airbnb for breaks from the kids. Flying between the best USA airport (tampa) and best european airport (Zurich) was also great.. no walking for miles to get to terminals.. everything efficient, and zurich has direct train running out of the airport in the underground floors. Edelweis Air served ice cream on board too..

  7. @susanne, thanks for the interesting link! initially I had some extra floaters and some reddish tint for a few days, but my vision was otherwise fine (no focus issues or peripheral loss or “curtains”). I contemplated going to a Florida doc, but seem to have recovered well. Perhaps it would have been smarter to go to an American doc, but as my vision was generally OK and my fear of the American health care system made me hesitate (even though I have travel medical insurance), I decided instead to schedule for a checkup in Germany when I returned. Usually in my small town the doctors are not overbooked and easy to see on short notice.

    @philg, thanks! that scene is hilarious! I totally forgot about that movie! I *seem* to be fully recovered now after 1 week, but I just want a doc to assess it – having severe myopia (-8 diopters) puts me in the more “danger zone” for retinal detachment. Regarding the Flamingo, it was quite nice to see in person – more of a surprise for me as I didn’t hear about it beforehand, but I wouldn’t go to Tampa Airport just for that. Funny side note- I attempted to take some photos of the Flamingo with the kids but I am a bumbling idiot when it comes to smartphones. I just realized when I got back that my “photo shot” ended up being a blurry 6 second video clip that got automatically uploaded to youtube short (!) with the title “flamingooo Tampa Airport” and I’m now getting comment notifications of “wtf?” and “cringe”. I have no clue how I did that…. Trust me, I’m very good with desktop/laptop computers, but smartphones are my weakness!

  8. sorry to hear that you’re afraid of the American health care system since you had purchased travel medical insurance. The prodigious cost is normally the scary aspect, whereas the quality of the care is considered world-class. Meantime, when price isn’t a factor, Sir Mick Jagger and many others have their surgeries in the US. In the case of Jagger, he should be fully eligible for the NHS in Great Britian, but underwent a cardio-thoracic procedure at NY Presbyterian in Manhattan a few years ago. Or maybe the UK revoked his NHS privileges since he is a tax exile in the Netherlands & beyond???? But mostly glad to hear that you recovered well, as your daughter would have carried quite a burden (whereas in the case of Savannah Guthrie’s injury, a two-year-old wouldn’t face the same emotions, I don’t think)

    • @SG: From my perspective, the most important changes I’d like to see in the U.S. Healthcare system are:

      1) True interoperability and data sharing between different providers so you don’t have to spend two or three hours on the phone to have things faxed or sent back and forth while talking with people who have almost no idea of what they’re doing. Everyone should have *all* of their medical records provided to them on a completely cross-platform thumb drive or other whimwham that they can then authorize providers to access, or not. @philg once imagined something similar to this but it apparently went nowhere. I wish it hadn’t.

      2) The complete and total end of COVID-induced (or other “pandemic”) care delays. There should *never* be facility shutdowns for people with serious diseases because a receptionist came down with COVID and resulted in a total facility shutdown for two weeks – TWICE. I am about 70% sure that delays in my early treatment has cost me two of my internal organs and a great deal more money.

      3) Much more aggressive and forceful “weeding out” of incompetent practitioners who get old, sit back in their office chairs and wait to retire while not doing anything substantive to treat their patients.

      I have now been deeply involved with our healthcare system for more than two years and there are a lot of heros and a lot of zeros, the complaints above are not even a thumbnail sketch of what I’ve witnessed personally. I’ve met some nurses who were so competent I thought they were Florence Nightingale and others who should have been working for Idi Amin.

      My overall impression is that we are no longer encouraging the best and brightest people to become doctors and nurses, NPs, etc. We’re attracting a lot of “Billing Practitioners” who order tests upon tests upon tests to cover their legal arses. The surgeon who operated on me is one of the best in the country and I asked him recently (because I heard a rumor) that he was going to retire before my treatment ended. He said candidly: “No, but I wish I could.”

      I said: “I guess that’s a relief! Glad to be here with you!” Hahahahah.

      That’s AWFUL. This guy took me apart and put me back together successfully and saved my life. He’s still a great surgeon but he told me point blank that he wishes he could retire early. I guess he’s seen enough and that’s a real shame.

    • @SG, @Deutschman: Also, the quality of care that you receive in the US healthcare system – in my experience – depends to a large extent on *where you are accessing it.* It’s a very Elitist system, to the point of real, chilling absurdity. All the metro areas have great facilities but you have to choose them carefully. 70 miles away, you might as well put the tourniquet on and do the surgery yourself, and I’m not exaggerating by much. The care follows the money.

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