Evidence of a Late Start to Summer

Paris is experiencing unusually hot weather for the time of year. A similar situation was reported in Spain a few days ago, and we had an unusually hot day here in Portugal a few weeks back as well.

These hot days are referred to as heat waves by the press, even though they don't last more than a day or two. They're proof of global warming, they claim. However, there's no proof whatsoever that what we're seeing has anything to do with a warmer climate. At least not in Portugal.

If the climate was getting warmer, we would see flowers bursting earlier than usual in spring. However, the very opposite has been the case this year.

I took this picture of my bougainvillea on April 30 last year.

Bougainvillea April 30, 2021

And I took this picture of my wax plant on June 20 2021, exactly one year ago:

Wax plant June 20, 2021

Both pictures display flowers that were about a week ahead in development compared to this year. The few hot days we've had this spring didn't make up for the many cool days. The hot days are therefore evidence of instability, rather than warmer climate.

This picture was taken on June 26 2020, indicating that 2020 had almost as late a start to summer as this year:

Wax plant June 26, 2020

This is something anyone can check for themselves. Find pictures of flowers with associated dates, and compare them to the progress made by the same plants in the current year. If the pictures show more progress than the current year, we have a late spring. If the opposite is the case, we're having an early spring.

This was how people talked about the weather when I was a kid. No-one made a big deal out of it. They would remark on the differences between one year and the other as a curiosity. Everybody knew that spring comes sometimes early and other times late.

Further evidence that nothing alarming is happening can be found by checking a web-camera in a climate sensitive area. This one at Dyranut in Norway is situated at a place that sometimes sees snow in the middle of summer. The snow normally melts away completely by July, only to return in late September.

If the climate is getting warmer, snow at Dyranut should disappear earlier and come back later, but this isn't happening. If anything, this year's summer looks a few days late, just like here in Porto.

Hardangerjøkulen glacier

By Berland - Own work, CC BY 2.5, Link

Never Before in Bitcoin History

I've predicted the imminent demise of Bitcoin ever since 2017, so I should be careful making any more predictions about its near term prospects. However, there's a few things worth noting about the latest drawdown in its price, which is now lower than its peak of almost $20,000 back in late 2017.

• In its 12-year trading history, Bitcoin has never before dropped below previous cycle peaks.
• The nearest support band below $20,000 is around $10,000.
• There is no such thing as oversold when it comes to things that no-one needs.

If Bitcoin fails to break above $20,000 in the short term, we're likely heading for $10,000, which will set up a new pattern in the Bitcoin chart; namely a left shoulder and a head, with a neck-line at $10,000.

This pattern will take five years to develop to its conclusion, and has a good chance of ending in a further drop. That's five lost years of potential gains elsewhere. It's also five years of changes in technology, which will make Bitcoin even more outdated than it is today.

Brass token currently priced at about $19,500

By Steve Jurvetson - https://secure.flickr.com/photos/jurvetson/8410385932/in/photostream/, CC BY 2.0, Link

Romanticizing Off Grid Living

My wife forwarded this video to me the other day. It's about a young couple living off grid in Portugal.

The impression given is that of simple living in harmony with nature. But it's also clear that these people are not living off the land. Their garden, however impressive, is not a major factor in their household. Their lifestyle is a cute hobby that they're likely to tire of relatively soon.

Their tiny house is not a place to raise a family, and it's clear from the clothes that the protagonist wears that she's used to better comforts than what her camping lifestyle affords her.

Life in the country can be deadly boring, and is not something people normally choose for themselves unless there's something to compensate for the monotony. The nearby village needs to be lively enough for some entertainment. Their house needs to be large and comfortable.

For this, they need to make money on the side, and from the look of it, that's how the couple have arranged things for themselves. They work remotely, while camping out in their mini-home.

Having watched the video, I told my wife what I thought of it, and she agrees. We're not going to try anything like this. We may one day buy a small place with a garden. But that will be somewhere relatively close to Porto. It will be a proper house, close to a supermarket, a village center and a beach.

Matosinhos beach

Another Relatively Wet and Cool Spring in Portugal

The drought we had in Portugal during the winter months is now definitely a thing of the past. We've had a relatively cool and wet spring, and June has been no exception. The weather has been unusually grey, and the forecast is for this to continue for a while still.

However, this is the third or fourth year in a row with this pattern, so it's starting to become more of a norm than an exception. I had no trouble predicting this weather back in January and March.

It increasingly looks like we're getting the weather patterns associated with more northerly regions, which is fine with me. I prefer winters to be dry and sunny over wet and miserable, and I don't mind trading this benefit with cooler and wetter weather during spring and summer.

Greta Thunberg

Eco-anxiety - By Anders Hellberg - Own work, CC BY-SA 4.0, Link

Shortages of Print Paper

There's a shortage of print paper in Portugal at the moment. I picked up this fact from a friend of my wife in the advertisement and publishing business.

The shortage is due to disruptions to the supply of wood pulp from Russia.

The paper industry has been in decline for decades, and only the cheapest suppliers of pulp are still in business. Pulp producers everywhere else have shut down their activities. Forestry in many countries have also been impacted.

This means that only Russia is still in the pulp production business. When sanctions against Russia hit, the supply of this vital raw material stopped.

The effect of this particular sanction was pretty much immediate. Once paper stocks in warehouses was sold out, deliveries stopped.

This illustrates the damage made to businesses by the sanctions. It also highlights the fragility of a global economy dependent on single suppliers. Myopic focus on cost cutting has left an entire industry exposed to shocks of this kind.

What we're also seeing is the likely medium term impact of sanctions against Russia. With paper, the impact came almost over night. However, sanctions against Russian fertilizers will not work its way through the supply chain before this fall. There's a six months delay between fertilizer shortages, and food shortages.

We're currently living in the interim before food shortages kick in.

Gleaners

By Bundesarchiv, B 145 Bild-F004601-0004 / Enzen / CC-BY-SA 3.0, CC BY-SA 3.0 de, Link

Putin on TV

My wife and I were surprised to see direct coverage on TV of Putin's latest speech. Why would a Portuguese national broadcaster do such a thing?

This comes on top of the Portuguese prime minister being opposed to the inclusion of Ukraine in the EU, and the Pope refusing to call Putin a heartless crook for invading Ukraine.

The fierce anti-Putin sentiment that prevails in the US and the West at large is not equally strong in the South. The Latin world is drifting away from its protestant neighbors to the north and west.

Brazil, which is to Portugal what the US is to the UK, is a BRIC country, so its not a complete surprise to see Portuguese sentiments drift towards a more neutral stance when it comes to Russia. It's also becoming increasingly clear that the West has lost its mind. Much of what Putin said on TV resonates heavily with sentiments in Portugal.

There appears to be a shift, and a fragmentation towards a multi polar world order. Former colonial powers and empires will re-establish links that have been severed over the last century. The new arrangements will be based on mutual benefits in trade. Culture will be an important determining factor in how things pan out.

Portugal will hook up with Brazil, Angola, Mozambique and East Timor, and a host of other countries. Spain will re-establish ties with Mexico and other former colonies. The Italians will revive the silk route together with Turks, Persians, Russians, Indians and the Chinese. Historically successful configurations will re-emerge.

Vladimir Putin

By Kremlin.ru, CC BY 4.0, Link

The Effect of Interest Rates on Prices

The Fed hiked interest rates in the US by 0.75% yesterday. The stated aim of this is to reduce the rate at which prices for everyday consumer goods are going up. But will this work as intended?

Interest rates have been going down ever since 1981, and consumer prices haven't gone up by more than about 2% annually until recently, so there doesn't seem to be a direct link between price increases in stores and interest rates set by the Fed. There's no historic evidence to suggest that the price of consumer goods will go down if interest rates go up. However, logic tells us that the opposite may happen.

Producers of basic commodities use credit to run their operations. Farmers borrow money to pay for seeds and animal feed, so an increase in interest rates is an increase in cost of production. Their response will be to either cut back on production or increase their asking price. Either way, prices can be expected to go up as a consequence of higher interest rates.

If the people at the Fed believe that higher interest rates are necessary in order to curb consumer prices, they will continue to hike interest rates in response to higher prices on everyday consumer goods. We get a vicious cycle that continues until something breaks.

The Fed derives its power over people from the fact that just about everyone is in debt. They can increase or reduce the cost of this debt at will, from a centralized position. However, the effect is not equal for everyone, nor is it equal for every aspect of the economy.

The online entertainment business did well during our state imposed vacation. Everyone was at home, watching streamed videos. The cost of this was covered by state subsidies. Now that the subsidies have dried up and the cost of credit has gone up, this type of entertainment will be cut from people's budgets. Given the choice between food and entertainment, food comes out as the obvious winner.

The result of this is that the price of online entertainment will go down. Such businesses must cut costs and fire people. Share prices of such companies will go down. When looking at this segment of the economy, the response to higher interest rates is lower prices. However, this does little to reduce prices for essentials, because online entertainment isn't a big cost factor for the average farmer.

Higher interest rates forces everybody to cut down on costs. Consumers will delay purchases and cut discretionary spending. Any business dependent on this type of consumption will find it hard to find customers. They will fire people and cut costs. Things like houses and cars, which are typically bought with credit, will see a drop in demand.

With interest rates going up, it becomes less desirable to buy financial assets with credit. The financial sector will see deleveraging. People will sell assets to cover debt. All financial assets will be impacted by this, but industries dependent on discretionary spending and credit will be the hardest hit.

The effect of higher interest rates will hit unevenly, with consumer prices continuing up, and just about everything else crashing. People will see the value of their homes and financial assets drop relative to their cost of living. Many will find themselves unemployed, with little to no savings to cushion the blow.

The only bright spot in this is a stronger dollar, making imports less expensive than they would otherwise be. However, with inflation still higher than interest rates, the demand for dollar denominated assets will be muted. Why hold bonds with negative real yields when there's an alternative?

The US has abused its monopoly position as issuer of the world's reserve currency. Foreign states and large corporations know that US assets may be confiscated or frozen. Physical gold seems like a safe alternative.

Smaller actors will also pick up on this fact. Why hold speculative assets that may go to zero when there's gold for which there will always be demand? Nobody needs Bitcoin to get married. But without a gold ring, marriage is difficult, if not impossible.

The bottom line is that an increase in interest rates sends prices down for just about everything except essentials and gold. Commodities, energy, food and gold will continue up, and there's very little the Fed can do about it.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link