What this covers
On today's episode of "On the Margin", Doomberg, everyones favorite green chicken, joins the the show for an update on the European energy crisis.
After making bold claims throughout 2021 on the global energy situation, and particularly in Europe, Doomberg provides an update on the state of the European energy crisis. How severe will the impact of high energy prices be for Europe ahead of winter, particularly global manufacturing hubs such as Germany? Finally, Doomberg discusses the effect of energy on currencies around the world, but to hear that, you'll have to tune in! -- Follow Doomberg: https://twitter.com/DoombergT Follow Mike: https://twitter.com/MikeIppolito_ Follow On The Margin: https://twitter.com/OnTheMarginPod Follow Blockworks: https://twitter.com/blockworks_
Get top market insights and the latest in crypto news. Subscribe to Blockworks Daily Newsletter: https://blockworks.co/newsletter/ -- Circle’s USDC is one of the most trusted and widely used stablecoins in the digital asset industry. Check out their Transparency Hub at circle.com/transparency that outlines everything from links to USDC weekly reserve reports, monthly attestations, and blog posts written by their executive team highlighting how and why USDC was built the way it is. -- Timestamps: 00:00 Introduction 00:57 Doomberg's Core Energy Thesis 07:01 The Energy Situation In Europe 10:15 The Law of Antilogic 13:55 Energy Price Controls 17:18 How Energy Is Effecting Currencies 19:41 The Dollar Wrecking Ball 22:52 Circle Ad 24:13 Powell Will Hike Until Something Breaks 27:52 The BoJ Will Not Be Bullied 30:44 What Is Happening In China? 35:58 Entering A Period of Stagflation -- Disclaimer: Nothing discussed on On The Margin should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.
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Global energy shortage driven by underinvestment in fossil fuels will force geopolitical realignment, currency crises, and economic contraction unless energy production increases; current policy responses will worsen rather than solve the crisis.
- The world has transitioned from energy abundance to shortage due to ESG pressures, shale bankruptcies, and production underinvestment
- Price controls and stimulus cannot create energy supply and will cause inefficient rationing, currency weakness, and second-order economic collapse
- Energy-dependent regions (Europe, Japan) face currency crises and de-industrialization; energy-independent regions (US with shale) will benefit relatively
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Primary energy production puts a ceiling on the level of GDP an economy can experience; if primary energy production is shrinking, it follows that GDP will shrink and economic recession or depression will follow.
“quite literally the amount of primary energy we produce puts a ceiling on the level of GDP we can experience and if primary energy production is shrinking it follows that um that GDP will shrink and uh economic recession slash depressions will follow”
Price controls historically fail because they do not increase supply; any proposed solution to a crisis of supply that does not lead to an increase of supply is doomed to fail.
“because Europe can print molecules and so um any proposed solution to a crisis of Supply that does not lead to an increase of Supply is doomed to fail it's just that simple”
The world has transitioned from a period of relative energy abundance (lasting 15 years due to US shale revolution) to a period of energy shortage marked by convergence of three factors: lack of investment in fossil fuel maintenance and growth due to ESG pressures, recognition that shale producers were unsustainable and burning cash, and COVID-19 lockdowns driving many shale producers into bankruptcy.
“for the better part of the last 15 years the world has been in a period of relative energy abundance thanks in no small part to the technological revolution in the U.S Shale patch um all that came to a close uh with the lockdowns of kova 19 where a convergence of three parameters laid bare the fact that we have transitioned from abundance to shortage and those were um the lack of investment in maintenance and new growth in traditional fossil fuels driven largely by ESG pressures and The defund Campaign which has been very effective the recognition that many Shale producers were burning cash and were funding production with unsustainable debt and then the lockdowns associated with kova 19 drove many of those producers over a cliff they filed for bankruptcy”
If Europe is entering winter with fewer molecules than it needs (which is irreversible), the most efficient rationing would allow market forces to allocate those molecules to the most important uses; instead, politicians will impose price caps and stimulus, which will impede supply development and cause inefficient rationing.
“if if Europe is entering the winter with less molecules than it needs which we believe is true and irreversible at this point the next question becomes um what is the most efficient rationing of those molecules um and we predict that that will not be allowed to happen and so um we are seeing um an attempt at capping price uh which of course impedes uh the development of new Supply and more importantly we're seeing um massive stimulus being handed out just in the UK this morning which is causing the British pound to crash and their government debt to spike in yield um by by like the understandable desire to Shield small business and and residential consumers from the impacts of this energy crisis they are going to create a situation in which the rationing is not efficient in other words the most important um uses for that those limited molecules are best discovered through Market forces but Market forces are brutal and the median voter is is the voter that you know politicians are listening to and they will be I'm desperate to be seen as having done something and so the things they will do will be the wrong things that you should be doing and the consequences will be a bad situation will be made worse”
Japan cannot settle energy in Japanese yen, which is the primary issue with yen weakness; as the yen weakens, Japan becomes unable to pay for essential energy imports.
“the primary issue with the Japanese yen is they cannot um settle energy in Japanese yeah and so um and the way this sort of rebounds back into the United States of course is Japan was until recently a major buyer of U.S treasuries and so you know as you're seeing the Japanese Yen weaken you're also seeing the U.S yields skyrocketing right”
Approximately 87% of global energy comes from fossil fuels (oil, natural gas, and coal); attacking the supply of these three critical elements without ready solutions to replace them creates challenges.
“when you look at the energy sector as a whole something like 87 of our energy comes from fossil fuels and the three most important fossil fuels um are obviously oil natural gas and coal um when you attack the supply of those three critical elements without a ready solution to replace them um that's where challenges begin”
Japan has massive debt-to-GDP levels, terrible demographics with a shrinking population, and essentially has no bond market anymore—the government buys and monetizes all the debt, which historically always leads to hyperinflation (though it has not yet in Japan).
“they have a whole series of problems that have been um you know widely understood and people assumed would lead to the crisis that we might be seeing unfolding today for a very long time they include massive debt levels the debt to GDP in Japan um is enormous and terrible demographics um you know and so they have a shrinking population um and and you know um the the basically there is no bond market in Japan anymore the the government buys and monetizes all the debt well you know historically that always leads to hyperinflation it hasn't yet in Japan although it's beginning to um with the currency weakening”
Electricity represents only approximately 20% of energy use in the Western world; the remaining 80% is used for heating, production, manufacturing, transportation, and HVAC systems.
“there's an important distinction to be made between electricity and energy and people get those things confused electricity is of course an important subset of our energy use but it is actually a minor one so if you are to sort of account for all of the energy that the globe uses roughly in the Western World at least 20 percent of our energy goes towards the production of electricity and the balance of it 80 of it is used for heating and for production and Manufacturing and transportation and all these you know HVAC and all these critically important sectors”
Coal-to-oil energy-content pricing inversion suggests the world is entering a period of stagflation (simultaneous economic contraction and inflation).
“which to us says we're probably entering a period of stagflation so in times of energy shortages it's absolutely critical to get energy right we are at a time of energy shortage”
Japan was until recently a major buyer of US Treasuries; as the Yen weakens, this Treasury-buying support declines, and US Treasury yields are skyrocketing, drawing liquidity away from Japan and other asset classes.
“Japan was until recently a major buyer of U.S treasuries and so you know as you're seeing the Japanese Yen weaken you're also seeing the U.S yields skyrocketing right and so I'm just trying to pull up the two-year as we talk which is uh my good friend Tony Greer calls the bat signal if you look at just look at a a five-year chart of the of the of the U.S two-year yield it's remarkable what has transpired you know it was basically at zero for the post-covet era until late 2021 and now it's just that as we're talking this morning uh going vertical at 4.19”
Price controls have a 100% history of failing throughout history (grain in ancient Egypt, wine in ancient Rome, etc.); they are intuitive and easy to understand as a political decision but also perfectly wrong.
“there's a perfect 100 history of them failing right especially when it comes to something like price controls whether that's grain in ancient Egypt or you know the price of wine in Ancient Rome or whatever it is it's like numerous times throughout history right price controls have been implemented because it's so intuitive I think it's so easy to understand it's a political decision but it's also so perfectly wrong at the same time”
Fed tightening will trigger a currency crisis in energy-importing regions; the Fed's inflation-fighting agenda will act as a 'dollar wrecking ball' that damages glass (currencies) on the way down.
“in order to crush inflation in the United States we believe and obviously others who have written eloquently on the topic like Lou groman um and Brent Johnson um believe that by in so doing um he will trigger a currency crisis in the regions that we're talking about today”
If the BOJ loses control of the currency, this will uncork very interesting and serious consequences that might cause the Fed to pivot faster than Powell would prefer.
“if they can hold the line at 145 then this will just be another episode in which investors bearish on Japan get steamrolled by the government once again that the trade has a nickname it's called the Widowmaker trade um but at the same time we now have a chart to watch and a number to look for for a direct measure of the severity of the economic crisis because I do think um if if the boj gets steamrolled um that that's going to uh uncork a whole very very interesting set of of consequences that we think might um might cause the FED to Pivot faster than drone Powell might like to”
When you squeeze a balloon, the air just moves—Japan's attempt to control currency while also managing yields has created a bulge (yen weakness) that must be addressed, but there is no solution if Powell insists on breaking inflation.
“now this week they're trying to sort of you know when you squeeze a balloon um the amount of air and it just moves and so um you know they're just now they're gonna have to deal with the Bulge of a weakening currency and I don't know what the solution is especially if Jerome Powell is is insisting upon breaking the back of unique inflation in the United States”
The economy is a chaotic system sensitively dependent on initial conditions; a small butterfly—like Japan losing control of its currency—can trigger cascading second and third-order effects throughout the US and global economy.
“since the economy is a chaotic system and sensitively dependent on initial conditions maybe you know a butterfly that flaps its wings is um the Japanese lose control of the currency and that causes second and third order effects in the U.S and we see you know economic destruction here um and Jerome Powell can claim that he beat back the Beast of inflation um hard to imagine that you know the combination of either significant inflation and or an economic depression doesn't cover most of the most of the potential outcomes here”
The DXY (US Dollar Index) is not a true measure of dollar strength but rather a measure of dollar strength against three predominantly weak currencies: the euro, Japanese yen, and British pound, which make up 83% of the index; all three regions are deeply short energy.
“the dxy which you mentioned which everyone thinks is a quote measure of dollar strength um it's actually a measure of dollar strength against predominantly three currencies it's a measure against the Euro the Japanese Yen and the British pound um and that makes up 83 percent of that index and all three of those regions are deeply short energy”
Europe has stopped local fossil fuel production, banned fracking, attacked nuclear power, and built its entire manufacturing industry around cheap natural gas from Russia, making it completely at the mercy of Vladimir Putin.
“for a combination of reasons they have decided to stop local production of fossil fuels they have at the farm on wind turbines and solar power which come with you know their their own sort of host of challenges which are totally knowable but often ignored as people are sort of trying to create this world filled with happy unicorns and and pristine environments and then built an entire manufacturing industry especially in Germany around the prospect of cheap natural gas flowing from Russia to Germany and so the entire German business model is predicated on being able to add value to cheap reliable natural gas and for decades that has worked well but in so doing in in Banning fracking for example in Germany um and attacking its own supply of nuclear power and refusing to develop their own resources uh the the Germans and Western Europeans in general have made themselves totally completely um at the mercy of Vladimir Putin”
Maslow's hierarchy of needs places food, shelter, and basic physical security at the top; when these are threatened, all other ideals become secondary.
“I like I kind of tend to trace everything back to Maslow's hierarchy of needs right at the very top you have food and shelter and all of these other basically every other ideal short of that is is certainly secondary right so when so when you start to see the those those needs at the top of the pyramids threatened kind of everything else is on the table”
The British pound is crashing and UK government debt yields are spiking due to the government handing out massive stimulus to shield consumers from energy crisis impacts, creating a situation where the attempted solution (stimulus) is destroying currency and credit quality.
“we are seeing um massive stimulus being handed out just in the UK this morning which is causing the British pound to crash and their government debt to spike in yield um by by like the understandable desire to Shield small business and and residential consumers from the impacts of this energy crisis they are going to create a situation in which the rationing is not efficient”
German producer price index readings are on the cusp of hyperinflation; this will lead to significant de-industrialization of what was one of the most prolific and value-added economies in the world, with serious second and third order impacts downstream.
“there's a lot of sort of um accusations of alarmism or that you know Europe will be just fine for the winter and and we would say that the crisis is already here um 45 producer price index readings in Germany are on the cusp of sort of hyperinflation this is going to lead to significant de-industrialization de-industrialization of what was one of the most um you know uh prolific uh and value-added economies in the world it's hard to imagine how this doesn't cause serious second and third order impacts Downstream”
Jerome Powell has staked his entire reputation on combating inflation in the United States; to walk that back soon seems probable, but the political path to get there is unclear.
“you have a situation now where the chair of the U.S federal reserve has staked his entire reputation and much of the reputation of the institution that he leads on combating inflation in the United States right um for him to walk that back so soon we think is probably inevitable but I don't know what the path function is politically to get there”
Belgium has shut down a large, perfectly fine, and perfectly operable nuclear power plant, exemplifying what Doomberg characterizes as a 'self-impelled suicide cult' at the policy level.
“the Germans having shut down or continuing to insist that they will shut down the remaining nuclear power plants just like the belgians have done today they shut down a a large nuclear got a power plant when it's perfectly fine and perfectly operable and it's just sort of this self-impelled suicide cult at this point”
Estonian prime minister warns Russia could be preparing to disconnect the Baltic countries from its electricity grid, leading to potential blackouts.
“just as we're talking you know Estonian prime minister of Wars Russia could be preparing to disconnect the true Baltic countries from its electricity grid uh leading to potential blackouts”
Four major unknowables about China should be monitored: (1) when will zero-COVID policies end, (2) Xi's gambit at the 20th National Congress regarding his consolidation of power, (3) the property and drought crises and their effects on energy demand and supply, and (4) China's intent and timing regarding Taiwan.
“I'm happy to speculate but yeah I will instead of sort of speculating I'll at least outline what we think are four major unknowables um that uh we should be on the lookout for and that um at least when you can identify what shifts you need to see uh in order to understand what the next move is going to be then then at least you know what to look for so the first major unknowable is when will Zero coveted policies end uh and they eventually have to um I we we find there are zero covered policies to be literally insane there must be a reason that they're doing this um we don't know what that reason is but by inducing um lockdowns in massive um at massive scale they are certainly toggling back significant demand for energy and oil in particular”
Europe's situation is analogous to an emerging market experiencing an exogenous shock: they have local-currency-denominated debt they cannot repay, they print local currency, they cannot print dollars to settle energy imports, and they experience hyperinflation as a result.
“a great colleague or you know a fellow content creator um Alfonso over at macro alph has a really great analogy which is uh what's going on in Europe today as analogous to an exogenic shock that an Emerging Market might might experience say they have U.S dollar denominated debt that they can't pay back and um they're printing local currency um and um they really can't since they can't print US dollars they can't you know settle that debt and their economy goes through a period of hyperinflation um he's he he correctly analogizes that to the confrontation facing um Europe today in the sense that um they can't print energy”
Europe is already experiencing recession/macro turndown; the US less so because of advantages from shale energy and proximity to affordable energy relative to Europe.
“I'd say Europe certainly is um the US less so because of the advantages that we articulated earlier”
There are no solutions only trade-offs when attempting to optimize an economy around CO2 emissions reduction while maintaining current living standards.
“if we have decided that we want to optimize our economy around uh CO2 emissions um there's a there's sort of another parameter we have to consider which is sort of the standard of living that we're going to create for the populations and ultimately as an opening quote for one of our pieces that we used recently something to the effect of there are no Solutions only trade-offs”
The Japanese yen broke through a critical barrier at 145 yen/dollar (higher = weaker); this level is psychologically important because the yen has historically traded between 110-120 for decades.
“on Thursday of this week the Japanese Yen um has which has been weakening substantially all year the Japanese Yen punched through um sort of a a critical number of 145 and um you know the higher that number is the weaker the end so just to Benchmark you know for seem like forever for decades the Yen traded between 110 and 120 let's say and starting in March of this year it just it's been on this incredible rant from uh you know start of the year at 110 and it was a set busted through that psychologically important barrier of 145.”
Mike Bloomberg recently announced a major charitable donation to stop development of more than 100 petrochemical plants in the U.S., which will contribute to an energy crisis.
“just this week Mike Bloomberg is out with a big charitable donation to try to stop the development of more than 100 petrochemical plants in the U.S um there's going to be an energy crisis as a fall as a consequence of this”
Europeans are critically unaware of what's coming and unprepared because they view themselves as the pinnacle of enlightenment and civilization, whereas Argentinians, familiar with currency crises, have developed Argentinian mindsets to prepare for similar crises.
“Europe is less prepared to deal with such a crisis because they still view themselves as the sort of um The Pinnacle of Enlightenment and the Civilized World whereas you know argentinians are pretty familiar with currency crises they've had to go through them what a dozen times right um Europeans are um I think um critically unaware of what's coming because it's just not even possible within their worldview that they should have sort of an Argentinian mindset to prepare with what's for what's coming”
Xi Jinping is angling to become essentially a point dictator for life at the upcoming 20th National Congress of the Chinese Communist Party and looks likely to achieve this; if zero-COVID policies end after Xi consolidates power, the propaganda machine could reorient to celebrate a 'great COVID victory' and ignore new cases.
“the second major unknowable is that she's Gambit at the upcoming 20th National Congress of the Chinese Communist party and his is angling to be essentially what we call a point of dictator for life and that looks like he's going to to achieve that and maybe those two are related that once he you know um cements his position on the throne the propaganda machine will be reoriented around celebrating a great covet Victory and ignoring any cases that come up or calling them the flu or pick your favorite you know pick your favorite propaganda tool because they could totally do that I mean like they they make massive uh disasters just disappear from the news um that's no big deal”
Zero COVID policies appear to be politically motivated rather than epidemiologically necessary; the CCP has hung its domestic political hat on handling COVID better than the West, making the policies important to Xi's political legitimacy regardless of medical rationale.
“it it's basically a campaign promise right the CCP right has the the dubious responsibility right of there's no peaceful transition of power right when they make campaign pain promises they're always trying to think about like how can I deliver more how can I make these kind of costs and ongoing campaign promises and that they kind of hung their hat from what I understand domestically on China handling the covet situation better than the West”
Russia's ruble is strengthening because Russia has excess energy; the Canadian dollar and Australian dollar are outperforming the euro because they have excess commodities; Mexico's peso is outperforming expectations for the same reason—energy abundance correlates with currency strength.
“you're seeing obviously the Russian Ruble strengthen and that's a very controversial thing to point out but it's very clear that Russia has an excess of energy and its currency is doing just fine um the Canadian dollar and the Australian dollar are doing better than the Euro on a sort of relative um measure because they have obviously excess Commodities even if not all of them can find their way to the international markets um and so yeah uh even Mexico the peso is uh is outperforming um versus expectations and so yeah I do think that um when energy short um and you can't print you know you can't settle energy in a currency you can print um I think it explains a fair bit of the variance”
The energy crisis will cause a wave of energy-intense producers closing down, which will ripple to second-order effects of producers supplying goods and services to those industries, creating a whip effect through supply chains where the tip smashes the garage floor remains unknown.
“the energy crisis will um that wave will go down to the second level effect of energy intense producers closing down which then will go to the third wave of people that supply and need the materials you know they Supply goods and services to those Industries and or um require their services and their products to run their business you're just going to see this sort of this snapping of a whip through the supply chains and where the tip of that whip smashes the garage floor remains to be seen um but it is not a healthy Outlook”
Even if Europe successfully develops infrastructure to import enough LNG to wean itself off Putin, it is only developing a new energy dependency on the US/LNG suppliers, not solving the fundamental problem of self-sufficiency; future geopolitical relationships with the US may change.
“even if they successfully develop the infrastructure to import enough LNG to wean themselves off of Putin they're just developing new dependencies and while the US and the you know uh EU might have great relationships today that doesn't mean that it'll always be that way you know um and and in fact um we might be be seeing a right word tilt uh in European politics that we've been warning about”
The strongest argument for why the crisis might not be as bad as Doomberg predicts is that peace breaks out in Europe; historically, peace was considered a left-leaning position, but today hoping for peace in Europe is characterized as pro-Putin or right-wing, an ideological inversion.
“I think um peace breaking out in Europe would solve a lot of these problems and I'm old enough to remember when um hoping that peace would break out was sort of a left left-leaning opinion as opposed to today you know um this sort of assumption that if you would like peace in Europe that somehow you're pro-putin or right wing and so on um so peace either breaking out through a durable negotiated settlement or um less likely and more risky um you know a total Victory on the part of the ukrainians and Putin gets toppled and Lord knows what happens after that event horizon um but you know adorable peace breaking out um in Europe would be a game changer and would cause most of our assumptions about what to expect in the coming months to be Revisited”
Norway produces major electricity via hydroelectric power; a European drought has resulted in low water levels in Norway; if Norwegians face choice between rolling blackouts at home vs exporting less electricity to neighbors, they will choose to prioritize their own people.
“you know Norway is a major producer of electricity using hydro there's a drought in Europe um they're entering the winter with very low water levels there are major export of electricity if the Norwegians are forced to choose between rolling blackouts in their country or exporting less to their neighbors you can guess what they're going to choose”
The price of oil in the global financial crisis followed a similar trajectory to current oil prices: both spiked massively months before crisis events, then crashed as demand destruction overwhelmed supply shortages, creating a boomerang effect.
“once posted a chart that compared the price of oil um during the financial crisis and the NASDAQ and Javier blast was a great energy columnist and Bloomberg is out just as we're talking a tweet went through my screen um basically comparing the price of oil today to the price of oil back then um when um you know the the price spikes in energy which peaked you know just months before the global financial crisis in what we would call an interesting coincidence at least um you know there's the the boomerang effect of crushing demand and since energy is so you know inelastic as you mentioned earlier um the drop in demand overwhelms the sort of supply shortages and suddenly you are now in a situation where you have access relative to the demand”
Doomberg's Law of Anti-Logic states that the current slate of Western leaders can be counted upon to make the worst possible decision at every opportunity.
“the law of anti-logic states that the current slate of Western leaders can be counted upon to make the worst possible decision at every opportunity”
China's property crisis and drought crisis create conflicting effects on energy: property contraction reduces demand for copper, cement, and other energy-intensive materials; but drought limits hydroelectric production and creates logistics challenges for coal transport, constraining energy supply.
“the property crisis radically reduce demand for copper and other you know cement and and other sort of um primary uh energy intense materials um and then the drought of course limits their ability to produce energy so that's a flow in a different direction um you know Hydro is is significantly impacted and the ability to get coal around the country can be a challenge if they don't have enough Rail and so on”
Companies that are backward-integrated to the US energy complex and can price their products globally will print cash for the next several years until Europe gets serious about producing its own energy.
“at a minimum you know the as we've long said the companies that are back integrated to the U.S energy complex but can price their product uh globally are going to be printing cash for the next several years until this until Europe gets serious about producing its own energy”
The euro is trading at 97 to the dollar; asking whether Europe is in a crisis is answered by observing that the crisis is already here.
“the euro is trading at um 97 flat to the dollar you know like well let's define what a crisis is you know um I think it's here like as I said”
The US 2-year yield (which Tony Greer calls 'the bat signal') went from near-zero for the post-COVID era until late 2021 to 4.19% as of this recording, a remarkable vertical move that signals financial stress.
“the two-year as we talk which is uh my good friend Tony Greer calls the bat signal if you look at just look at a a five-year chart of the of the of the U.S two-year yield it's remarkable what has transpired you know it was basically at zero for the post-covet era until late 2021 and now it's just that as we're talking this morning uh going vertical at 4.19”
The US could benefit from European de-industrialization through wave of chemical producer investment on the Gulf Coast taking advantage of massive natural gas spreads, assuming regulatory sanity allows it.
“the us could also benefit again mapping these flows the us could benefit from the de-industrialization of of Europe as say chemical producers on the Gulf Coast take advantage of the massive spread in natural gas and we see a wave of investment here assuming that we can have some sanity uh in the regulatory framework needed to take advantage of those spreads”
Zero-COVID policies reduce demand for energy and oil by inducing lockdowns at massive scale, which suppresses the oil market; some of the weakness in oil prices can be attributed to China's Zero-COVID policy.
“by inducing um lockdowns in massive um at massive scale they are certainly toggling back significant demand for energy and oil in particular and so um some of the weakness that we're seeing in the oil Market can be attributed to this crazy zero covet policy that she has been implementing”
Europe's head of EU leadership was out saying 'we have tools if the election in Italy goes the wrong way', essentially pre-nullifying a democratic election; this unelected bureaucrat's statement is unlikely to go over well in Italy and will feed the populism and rightward political tilt Doomberg has warned about.
“the head of the EU was out today saying quote we have tools if the election in Italy goes quote the wrong way um you know this unelected bureaucrat basically um pre-nullifying a democratic election in Italy is is unlikely to go over well in Italy um and so that only feeds the sort of populism that we see growing um across Europe”
China's intent and timing regarding Taiwan is the 'mother of all black swans'—it is unknowable because we incorrectly assumed Putin would not invade Ukraine, so we should not assume Xi will not move on Taiwan; dictators receiving only positive feedback and little critical information are unpredictable.
“what is their intent and timing over Taiwan right um and how much is Bluster and what what threats are real um that this is again we incorrectly assume that Putin wouldn't be so foolish to move into Ukraine um we were wrong and uh he did and so I I we hesitate to make any predictions about what the minds of uh people who are basically dictators um how they think about the world and who feeds them information and how much critical feedback are they getting we suspect precious little so who knows what G is telling himself about the military capabilities of China and the need to move on Taiwan”
China is a black hole for most Western analysts and very difficult for Western analysts to understand; Doomberg acknowledges it is difficult for them to analyze China with confidence.
“before I dive into that I just want to make very clear that we believe that China is is really a black hole for most western analysts and um and we would be among those that um find it difficult to understand what's going on in China”
Periods of economic stress create a conductive medium for the spread of ideas and tend to make people more willing to unify around common threats.
“these periods of stress certainly make it easier you know the me a more conductive medium for the spread of ideas right uh in in a weird way stress does tend to unify unify people”
An uncontrolled experiment is running with parameters of possible outcomes that are not well understood; much pain is still ahead.
“we are running an uncontrolled experiment and the parameters of possible outcomes um are not well understood yet uh and and and like we say it's called doomberg and we don't want to be you know we'd overly do me and as we've said uh in every form um possible we would love nothing more than the comeback on your show in one year and apologize for having been alarmist um because that would mean that the worst of potential outcomes um were uh were abated”
Doomberg is 100% subscriber-supported, takes no ads, accepts no sponsorships, prides itself on 100% editorial freedom, and publishes 6-8 times per month.
“we are 100 subscriber supported we take no ads and uh accept no sponsorships nothing wrong with those business models but we we pride ourselves on having 100 editorial Freedom um we write at doomberg.substack.com um we have a really amazing set of subscribers and um and we write six to eight times per month um we're very comfortable with that Cadence”
Doomberg has thousands of subscribers across Europe and personal ties to the region through repeated travel; they would prefer nothing more than to be proven alarmist because that would mean the worst outcomes were averted.
“because we have hundreds probably more than a thousand subscribers from Europe and um we have many uh fans that we interact with and people that we respect in the country and that as much as I traveled to China I personally traveled to Europe even more and I probably count 20 um uh stamps on my passport for trips I've made to Germany um it's a beautiful country I have many German friends we would love nothing more than for the things we have been warning about to have uh have been proven uh uh alarmist”
Doomberg's predictions on energy have been vindicated more often than not over the past 18 months; the speaker credits a relatively high success rate to consistently analyzing energy shortage as the dominant macro framework.
“as it pertains to our warnings on energy that we have been writing about for since the beginning of doomberg 18 months ago um we feel like we have gotten more more right than wrong”
The host requested that Doomberg present the strongest bullish argument for why the situation might not be as bad as predicted, to avoid excessive bearishness like was experienced in March 2020, when many predictions proved directionally incorrect over subsequent years.
“I won't if I could impede on your time sure if you had to steal me on the argument for why it might not be as Doom and Gloom as it seems and to give you context here I because I've started to really feel myself ingesting a lot of uh kind of kind of doomy content um and I was looking for I want to go the last time I remember feeling like this was March of 2020 and I went back and I listened to a bunch of the material that I was consuming around that period of time”