EIR LEAD EDITORIAL FOR TUESDAY, OCTOBER 5, 2021
Rising Energy Prices: It Is Hyperinflation, Stupid!
Oct. 4, 2021 (EIRNS)—(The following was published in EIR European Strategic Alert.) The 15-30% price increases for gas and electricity which have started to hit households in Europe are only a fraction of the dramatic price increase of gas on the spot market, which has risen by 280% this year. This is close to the technical definition of hyperinflation, which is defined as a steady increase by 50% monthly.
Whereas the immediate causes for the energy price explosion are Green Deal policies, which have caused producers to shift from coal to gas, the hyperinflationary dynamic was long underway and needed only an opportunity to run rampant. Indeed, commodity prices had exploded one year ago already, hitting copper, lumber, wheat, etc. Like today, establishment figures had explained such a price explosion with a “lone assassin” theory, namely the increased demand coming from the Chinese recovery.
Today, the “lone assassin” theory tells us that energy prices have increased because Zeus blew less wind in the North Sea and the increase in the CO2 price made coal too expensive. On top of this, bad guy Vladimir Putin is having fun in turning off gas supplies to Europe.
The failure of renewable energies, especially in wind energy-dependent Great Britain and Germany, is a true factor, as it is the wicked decision to double the CO2 price in order to promote “climate transition.” However, these are just opportunities that have been offered to the financial markets to unleash a speculative assault. In fact, were it for the simple market mechanism of demand/offer, prices would not increase in a hyperinflationary way; they are doing so because all commodity prices—including CO2, which is traded as a commodity—are determined by financial bets on the future market. In other words, the demand for a commodity is multiplied by speculators, who create an artificial scarcity and astronomical prices.
What is going on is the final act of the crisis of the global financial system which, as Lyndon LaRouche had often insisted, was hopelessly bankrupt already decades ago. There are only two alternatives: Either the system disintegrates through a chain-reaction of financial bankruptcies or through a hyperinflationary blowout if central banks insist on continuing bailout policies. The Green Deal, or climate transition, is an attempt to continue bailout policies under the pretext of climate transition.
In a Sept. 21 webinar on “Economy and Finance of Climate Ideology,” Italian economist Prof. Mario Giaccio recounted that a highly placed UN source told him that “the global economic system is obsolete; it is not possible to ‘extract’ more value and therefore it must be changed.” What is emerging is “the effort of financially reorganizing the world economy using climate as a pretext.”
This candid confession proves that the central banks’ narrative that inflation is “transitory,” is a lie and that consumer price increases are planned, in order to “extract” value from the physical economy, in a final act of cannibalization. Indeed, expansionary monetary policy has come to a dead end, with negative rates all over financial markets and less and less opportunities for the bubble to expand further. Since central banks are buying all sorts of assets, even yields on junk bonds have collapsed; the financial system must have a huge volume of additional loot taken from consumers, businesses, and taxpayers, in one way or another, in order for the system to survive. The alternative would be a bankruptcy reorganization of the system, which the current elite is deadly opposed to.
(In this context, the approach taken by Chinese authorities to the insolvency of real estate giant China Evergrande is exemplary. If Evergrande were a Western company, it would fall under the category of “too big to fail” and obtain a government bailout. Taxpayer money would go into the pockets of speculators who have bought bonds at 14% return. Instead, the Chinese government is letting those creditors fail, shutting down the speculative part and bailing out only retail customers who paid for houses and will either get their house or their money back.)
Consumer price inflation is not accidental: It has been chosen by central banks in order to keep the system alive—on one side, by extracting more value from the physical economy; on the other side, by forcing a reduction of the global debt through inflation. However, the high increase of energy costs is already hitting production activities and threatening a collapse of the physical economy.
We are still in time to prevent Hell from breaking loose, by reorganizing global finances according to the Glass-Steagall standard, shutting down financial speculation, regulating global commodity markets and launching a recovery program such as the one proposed by The LaRouche Organization in its latest report, “The Coming U.S. Economic Miracle on the New Silk Road.”