Shortages Are Relative

By John Mauldin 

In some simplistic economic theories, shortages never happen. 

Supply and demand for any particular good are always perfectly balanced in a given time and place. 

If you can’t get what you demand at that moment, you pay a higher price or you demand something else.

But that’s theory. 

The real world doesn’t respond instantly, so we have these frustrating periods when producers have more widgets than they can give away, or consumers can’t get the widgets they need at any price. 

And in an increasingly specialized world, substitution is no longer as easy as it once was. 

That car you want needs a specific microchip or it’s worthless. 

No other chip will work. 

Hence the present shortages, higher prices, and growing inflation.

Nevertheless, there’s no widget shortage if no one wants widgets. 

Shortages appear when demand for a good rises faster than suppliers are able and/or willing to produce it. 

They recede when demand falls faster than supply. 

Shortages exist only relative to demand.

This is important to understanding why inflation is up and ports are so clogged. 

Is it because we are demanding more, or because our trading partners are supplying less? 

Remember the relative change is what matters. 

Higher supply won’t stop prices from rising if supply still lags demand.

Obviously, this varies for different products. 

Generally, though, I think the data shows demand growth is the bigger factor. 

Today we’ll look at some recent analysis and try to see how all these moving parts fit together. 

It matters to the inflation outlook… which affects everything.

Demand Shock

Ray Dalio and his researchers at Bridgewater have spent the last couple of years talking about “MP3.” 

No, not the music file format, but the third-generation monetary policy that now prevails worldwide. 

MP3’s key feature is closely coordinated monetary and fiscal policy.

Lacy Hunt has long noted how rising debt makes conventional monetary policy tools less effective. 

That’s why central bankers resorted to quantitative easing after the Great Financial Crisis, and assorted other new strategies in the years since. 

None of it worked very well.

When COVID came along they made another giant leap. 

The Federal Reserve and others essentially financed or subsidized vastly expanded government stimulus programs—unemployment insurance, healthcare benefits, and other safety-net spending.

In a recent report, Bridgewater analysts adeptly connected MP3 with our supply chain crisis. 

They believe it isn’t a supply problem at all, but an MP3-driven upward demand shock. 

Quoting their report…

“The mechanics of combined monetary and fiscal stimulus are inherently inflationary: MP3 creates demand without creating any supply. 

The MP3 response we saw in response to the pandemic more than made up for the incomes lost to widespread shutdowns without making up for the supply that those incomes had been producing. 

This is very different than post-financial-crisis MP2, where QE, by and large, was not paired with significant fiscal stimulus but instead offset a credit contraction and, as a result, was not inflationary.

“We’re now seeing the inflationary mechanics of MP3 play out and observing just how potent a tool it is. 

And while the composition of the demand it fueled will evolve (e.g., shift from goods back toward services as COVID recedes), demand is likely to remain highly elevated. 

There are still large stockpiles of latent spending due to the transformative effects that MP3 has had on balance sheets and the ongoing incentive provided by extremely low real yields, and more fiscal stimulus is on the way. 

Choking off demand would require central banks globally to move toward restrictive policies quickly, which looks unlikely.”

That bold sentence is critical. 

I suggest you put it on your bathroom mirror or refrigerator or someplace you will see it every day. 

Here it is again:

“The MP3 response we saw in response to the pandemic more than made up for the incomes lost to widespread shutdowns without making up for the supply that those incomes had been producing.”

This is simple math. 

Under MP3, governments and central banks responded to COVID by sustaining incomes (and in some cases actually increasing them) without sustaining supply

The result was rising demand relative to supply, and here we are.

Now, this doesn’t mean they sustained every income. 

Some of our key suppliers were left out of these schemes because, thanks to globalization, they were in other countries whose governments were less able to help. 

So, we have seen actual supply contractions in some materials and products, even as production rose for others. 

Overall consumer goods production is well above the pre-COVID level. 

The problem is that demand exploded even higher.

Source: Bridgewater Associates

There is actually a reasonable explanation for this phenomenon. 

The federal government put $6 trillion directly in the hands of consumers, much of it regardless of need. 

State and local governments also restricted many retail and service businesses, like restaurants and hotels, theme parks, travel, and other “experience”-related industries. 

So consumers, unable to spend on services, demanded more goods—roughly 15% more than our logistical infrastructure had ever produced and delivered. 

Et voila, supply shortages. 

Throw in supply chain problems and you get inflation in goods.

Services demand, while not yet fully recovered, is headed that way. 

Workers are the key input for services and employers are facing sticker shock. 

The maid in my hotel last week in New York was making $30 an hour. 

My son Trey tells me Cheesecake Factory is offering $18 an hour for a prep cook position in Orlando.

Source: Bridgewater Associates

Given the combination of strong demand and spot shortages, Bridgewater predicts an ongoing game of whack-a-mole. 

We can address particular problems but there is no quick or easy overall solution.

Policies have both put cash in people’s pockets (government stimulus spending) and raised asset values (through QE which raises asset prices). 

Low interest rates (negative in real terms) have reduced debt service costs, freeing up more cash that adds to the demand growth. 

This means continuing price inflation unless either

  • Productivity gains let supply catch up with demand, or
  • Fiscal and monetary policy tighten enough to reduce demand.

Neither of those appears likely in the near future, which means inflation will continue and maybe intensify, at least over the short to mid-term.

Low Teens Inflation?

My friends at Denmark’s Nordea Bank keep a sharper eye on US inflation than some Americans do. 

Their latest outlook is more than a little concerning, in part because it shows inflation moving higher even if the Fed accelerates the taper schedule and hikes rates three times in 2022.

Under some pretty reasonable assumptions, their model shows core CPI at 5% before year end. 

It’s been 4% or higher since June and was 4.6% in October. 

Note this is core inflation, excluding food and energy. 

For it to reach 5% in the next three months indicates inflation is seeping deeper into the economy.

Source: Nordea

In Nordea’s view, it starts with wages. 

Higher labor costs push inflation higher, but not immediately. 

There’s usually a 6–9 month time lag. 

If so, we should start seeing that effect soon.

But on the other hand, are wages up that much? 

In some industries, absolutely so, but not across the board. 

Average hourly earnings are actually running a bit behind CPI inflation. 

That would mean wages are headed higher still, unless inflation has already peaked.

Source: Nordea

Used cars have been a key inflation driver—a bit deceptively since car purchases are infrequent for most people. 

But it can still hit you if, for instance, the contractor you need to fix your driveway just had to pay a hefty price for their work truck.

Source: Nordea

But the real threat is housing prices. 

Shelter inflation has looked subdued in this cycle because of CPI’s bizarre methodology. 

My good friend Doug Kass went on a little rant about it this week.

“Shelter is 30% of the CPI. 

Owner's Equivalent Rent (OER) makes up about 75% of the shelter calculation or ~23% of the total CPI.

“We moved from using the actual cost of owning a home, to rental equivalence in 1983:  

"On October 27, 1981, Commissioner Janet Norwood announced that BLS would convert the CPI for All Urban Consumers (CPI-U) to a rental equivalence measure for homeowner costs, effective with data for January 1983." 

(This method was revised again in 1983, 1987, and 1998 as well further pushing the reported numbers down.)

“Now home prices are up 20% year over year but OER was reported to be up 3%. 

With mortgage rates unchanged, the cost of financing a house has not materially changed over the last 12 months, and insurance and utilities and taxes have all gone up - increased appraisals. 

The difference between 20% and 3% is 17%. 

23% (weight in the CPI) of 17% is 3.9%. 

Again, there may be a good argument against calculating shelter cost this way, but this is basically how we did it in the 1970s.

“Add the 3.9% to the 6.3% reported, we are up to 10.2%. 

There is your 1970's inflation. 

It is not too hard to find another 2%–3% on top of that for the average person, either. 

The composition of the basket itself, hedonics, substitution, other methods of massage and statistical torture, there you go.  

“Low teens inflation! 

“Maybe the guys that calculate inflation today using the 1970s methodology that results in 15% are not too far off from what today's inflation would be if measured the way it was then.”  

To be fair, the economy has changed in other important ways since the 1970s. 

That era’s methodology might be less meaningful now. 

But today’s methodology is certainly not ideal, either.

Sidebar: Unrealistic housing price assumptions gave Alan Greenspan, Janet Yellen, and now Jerome Powell room to keep rates low. 

As I said last week, OER is broken. 

Properly accounted for, shelter costs would have inflation at 10% in a very public manner no one could dismiss as “transitory.” 

The Fed would be forced to lean in farther than the bare minimum they are doing today. 

How you compile your statistics—or maybe I should say how you manipulate them—makes a difference.

But reality breaks through eventually. 

Nordea’s model predicts 6% growth in the OER model over the next two quarters, which would mean 1.7 percentage points added to the year’s core CPI. 

Then there’s the separate “rent of shelter” component, where they foresee a similar rise. 

That would mean 30% of headline CPI jumping 6%, not counting any consumer goods, energy, or food inflation—all of which should be significant.

This is going to create some interesting CPI anomalies. 

The 12-month comparison for January and February 2022 could very well hit 7% or even 8% because inflation was quite low early this year. 

It began picking up in March and into the summer.

Source: Nordea

My friends at The Daily Feather sent this chart Friday. 

Note that the price of food coming from the commodity sector is up almost 50% over the last two years. 

Bacon has almost doubled to $10. (It’s $12 at Costco in Puerto Rico.)

Source: Quill Intelligence

And here’s a closer look at food prices.

Source: Tony Sagami

Nordea also points to a distressing feedback loop. 

Higher energy prices lead to higher fertilizer prices, since fertilizer manufacturing uses large amounts of natural gas. 

Either expensive fertilizer or lack of fertilizer will mean higher food prices.

Source: Nordea

Going back to Doug Kass:

“All I know is that a friend from Boston told me that a pastrami sandwich he ordered on Saturday was $23. 

He didn't even know the price and he ordered two. 

When the cashier swiped his credit card, and it indicated $46 (before tax) he asked my friend how much he wanted to tip. 

My friend then said "excuse me, there must be some mistake, I didn't order the prime ribeye?" 

The cashier told him that the price of pastrami doubled over the last few months. 

Double means up 100%.”  

My family in Dallas just bought the prime roast for Thanksgiving. 

Up 20% at Costco. 

Same for mushrooms and other ingredients. 

I am sure you are experiencing the same sticker shock.

Reading through these reports, I found myself looking for something, anything where inflation doesn’t look like a growing problem. 

It’s tough to find examples. 

We all want more and, thanks to MP3, most of us can afford more. 

Yes, a lot of it is debt-financed, which means we’re simply pulling future consumption forward in time. 

We will pay for it with lower consumption in the future. 

But that future is down the road. 

We’re going to party a while longer before the punchbowl runs dry.

But run dry, it will, for a reason no one can change.

Aging Society

Neil Howe is my guru for all things demographic because he excels at taking the long view. 

Population trends very slowly, but very surely. 

That long view lets Neil perceive patterns like the “Fourth Turning” which is unfolding right now.

But that’s another topic. 

Looking more immediately at the US situation, Neil says the overriding #1 issue is labor force participation, not unemployment. 

Millions have simply left the workforce in the COVID era, for reasons we don’t fully understand.

Source: Neil Howe

As a reminder, “participation” in the labor force means adults who either have a job or are looking for one. 

It excludes retirees, full-time students, etc. 

You can see in the chart that the number in that category dropped hard in early 2020, bounced a bit that summer and has gone stubbornly sideways ever since. 

Whatever drove people out of the workforce happened quickly and hasn’t changed.

But in the longer perspective, participation was already trending downward. It peaked about 20 years ago.

Source: Neil Howe

Here’s Neil’s analysis.

“In the 2020s, this falling trend will speed up, not slow down, due to one further driver: the aging of the large Boomer population after they move past age 65. 

Yes, Boomers are workaholics, but even they want a rest. 

Between age 65 and 74, the LFP rate is still around 30%. 

But at age 75+, it drops to 10%. 

This year, in 2021, the first large 1946-born cohort is hitting age 75. 

And from now on, every year will bring this large horde ever further from their time clocks and keyboards and ever closer to their lakeside cottages.

“In the current BLS projection of future LFP rates, which also points to an ongoing decline, BLS analysts make precisely this point—that aging itself will become a new driver pushing LFP lower.

“In 2030, the BLS projects the LFP rate at 60.4—down roughly 0.2 pp per year from its annual 2019 value (63.1). 

Measured in millions, the BLS projects the labor force at 169.6M in 2030. 

That's a CAGR from 2019 of only +0.33%. 

Which is half the historical growth rate from 2010 to 2019 (+0.67%). 

Which is itself half the historical growth rate from 1990 to 2000 (+1.25%). 

And yes—I just can't stop—even this is half of what it was from 1970 to 1980 (+2.60%).

“You just can't miss the second derivative here. 

It's negative, not positive. 

We're an aging society. 

And when you juxtapose today's immediate pandemic drivers with America's long-term demographic drivers, any window of full LFP recovery is likely to be very brief if it happens at all.”

This is troubling. 

We need energy, housing, and so on, but labor is an input to everythingThe Baby Boomer generation, simply by its presence, gave the US a giant economic boost. 

For decades employers could draw on a large available workforce. 

Those days were already winding down before COVID and it will mean a profoundly different economy in the future, unless we somehow find more workers.

More immigration might help—the legal kind with appropriate screening. 

Apply to our embassy for a visa. 

We should welcome peaceful, educated people who want to work and contribute. 

There are ways to do that without simply throwing open the borders.

But even that may be of limited help because many other countries have similar or even greater labor shortages. 

Potential immigrants have opportunities at home that make moving to the US less attractive. 

But however we attract labor, we must make up for the dwindling domestic supply.

About That Supply Chain

That last $1.9 trillion stimulus bill was simply an inflation bridge too far. 

Larry Summers and others, including me, warned about the potential problem. 

It is why Joe Manchin wants to hit the pause button before we spend more. 

The intentions were good, but there are unintended consequences as it was coupled with QE and zero interest rates.

But at some point, that stimulus is going to recede. 

Then we will be dealing with supply shock inflation. 

Our just-in-time inventory systems will change to “just-in-case” systems. 

That means higher costs, but in the meantime is also means less supply which means higher prices. 

Eventually we get back to disinflation.

Low GDP growth + high prices is different than the 1970s stagflation, which was high inflation and unemployment, but is stagflation nonetheless. 

A common theme I heard in my New York meetings last week was how this will affect the 2022 midterm elections. 

“It’s the economy, stupid!”

Dallas, Lake Granbury, and New York

Monday Shane and I fly to Dallas. 

Tuesday I have a few meetings and a segment for Economic War Room with my good friend Kevin Freeman. 

Then that night dinner with some friends I have missed. 

Wednesday we move to Lake Granbury for Thanksgiving with the family. 

My niece Jennifer and my daughter Tiffani live next to each other on the lake. 

I will cook my usual prime roast and mushrooms and a few other things. 

Lots of kids and grandkids and right now the weather looks good. 

Then I am toying with a trip back to New York. 

I know I will need to be in Florida the first part of next year.

You have a great week and I hope you get to spend Thanksgiving with family and friends. 

The rest of the world doesn’t celebrate Thanksgiving like we do in the US, but it is my favorite holiday. 

I think I read somewhere that calories don’t count on Thanksgiving. 

I’m sure that was based on solid scientific evidence… 

And you should follow me on Twitter, where we have a lot of fun and I’m a little bit edgier.

Your facing sticker shock at the grocery store analyst,

John Mauldin
Co-Founder, Mauldin Economics


No one loves Joe Biden

Americans elected the president to get rid of his predecessor. They’re not sure what else he can do

Arlington, home of Robert E. Lee and a cemetery dug vengefully on his front lawn, is barely in Virginia these days. 

The city’s tony apartments and it firms have long made it feel like an extension of Washington. 

That, in turn, made it relatively safe for Joe Biden, one cold and blowy evening this week, to flit across the Potomac and dip his toes into Virginia’s gubernatorial race.

It would have been awkward had he not, given how many Democratic big-hitters have flooded the state as the contest between Terry McAuliffe and Glenn Youngkin has tightened. 

But no one expected the increasingly troubled president to move many votes. 

Even the irrepressible Mr McAuliffe, a force field of positivity and Mr Biden’s friend for 40 years, admits that he is unpopular in the commonwealth. 

This was implicit in the arrangements made for the presidential visit. 

Only a tiny corner of a large Arlington park had been fenced off and floodlit for it—to create the safest possible space in the most reliably Democratic city of a state that Mr Biden won last year by ten points.

Only a modest Democratic crowd duly showed up. 

And its members seemed ambivalent about the president. 

Asked for their opinion of him, some said they were “indifferent”, others claimed to have “no view”. 

Several of those quizzed by Lexington said they knew nobody who was enthusiastic about him. 

“That’s not really what he’s about,” said one woman, jiggling a “Terry for Virginia” sign. 

Just one person, an India-born woman huddled in the gloom, richly praised the administration. 

She worked for a hospital lobby and loved its increased health-care spending.

As Mr Biden’s approval ratings have dived in recent months, solid arguments have been offered in his defence. 

Most presidents lose support in their first year, as the thermostatic nature of public opinion asserts itself. 

And indeed his descent from 56% approval after his inauguration to the low 40s today is similar to the slides Barack Obama and Donald Trump suffered. 

Mr Biden has also faced daunting headwinds, in the resurgence of covid-19, the economic havoc it has wreaked and the fact that half of Americans have not heard a good word said about him, so polarised have the media become. 

History is against him in Virginia, too. As one of the first states to vote after a general election, it often bloodies the nose of whichever party occupies the White House. 

Yet such rationalisations cannot lessen the gravity of his predicament.

Mr Obama fell from such a high level after his first election that he remained in positive territory. 

Mr Trump was never popular outside his base—yet the more unpopular he got, the more its members loved him. Taking the fight to the liberal mainstream was his shtick. 

Neither ameliorating factor applies to Mr Biden. 

He won by a much narrower margin than Mr Obama’s, which in itself called the Biden shtick (his promise to unite the country against Trumpism) into question. 

And that tension has increased as his numbers have worsened.

In Arlington Mr Biden again focused, in his shouty way, on his predecessor. 

“Remember this: I ran against Donald Trump and Terry is running against an acolyte of Donald Trump!” 

The limits of that message were exposed in the general election, not only by Mr Trump’s robust losing performance, but also by how little damage other Republican candidates suffered by association. 

And the former president is even less of a bogie today. 

Most voters—especially independents, among whom Mr Biden’s slide has been steepest—appear to have put him from their minds. 

Moreover, it becomes increasingly hard to present yourself as a uniter, not a divider, when more than half the country thinks you’re doing badly.

If Mr Biden cannot reverse that impression, the outcome for his party will be grim. Mid-terms are a referendum on the president, not his predecessor. 

His dire ratings are therefore setting Democrats up for a hiding. 

History suggests they are consistent with their losing control of both chambers. 

It also shows how hard it will be for Mr Biden to claw his way back.

Among his recent predecessors, only Bill Clinton has staged a major public-opinion comeback in peacetime, and he had the advantages of an excellent economy and quicksilver political skills. 

Mr Biden has neither. 

He is above all tied to covid-19, the sort of fundamental that is far more determinative of political success or failure than most coverage suggests. 

Political performance tends to be less of a factor; but there too Mr Biden is in trouble.

By recent standards, his administration has performed creditably. 

It is led by serious people, unlike its predecessor. 

And he appears on track, despite Democrats’ slim congressional majority, to sign more major legislation in his first year than Mr Obama. 

The debacle in Afghanistan, which hit Mr Biden’s ratings hard, was a blot, yet one that received blanket coverage in part because of how uncharacteristic of the administration it was. 

Such incompetence, which was expected of the Trump administration, is atypical of Mr Biden’s—save in one respect, its ability to sell its aims and accomplishments, at which he and his party are abject.

Hardly any non-lobbyist in the Arlington crowd could name a significant thing the administration had done. 

Most knew congressional Democrats were haggling over the cost of a spending package, but struggled to recall almost any of the climate and social policies it contained. 

And this was in arguably the most educated, switched-on, centre-left place in the country. 

The chances of independent voters in Milwaukee or El Paso having half a clue as to what Mr Biden is attempting would appear to be close to zero.

In his labyrinth

Mr Trump was always selling his record, even when it didn’t exist. 

By contrast Mr Biden and his party are not making a case for what they are actually doing. 

Mr Clinton’s guru, James Carville, suggests they dislike salesmanship. 

Or perhaps Mr Biden is no good at it. 

Either way, he is falling short. 

If elections are about the future, as Mr Clinton liked to say, they cannot only be about Mr Trump. 

The GreenMageddon... Part 3

by David Stockman


Editor’s Note: Right now, the global elite and world leaders are coming together at the UN Climate Change conference in Glasgow to address the "problem" of climate change.

Over the next couple of days, Washington DC insider David Stockman will debunk the narrative and offer a comprehensive look at the climate change agenda, including what it means for you. 

Below is part three of David’s article series.


The geological and paleontological evidence overwhelmingly says that today’s average global temperature of about 15 degrees C and CO2 concentrations of 420 ppm are nothing to fret about. 

Even if they rise to about 17–18 degrees C and 500–600 ppm by the end of the century, it may well balance or improve the lot of mankind.

After all, bursts of civilization during the last 10,000 years uniformly occurred during the red portion of the graph below. 

The aforementioned river civilizations—the Minoan, the Greco-Roman era, the Medieval flowering, and the industrial and technological revolutions of the present era. 

At the same time, the several lapses into the dark ages happened when the climate turned colder (blue).

And that’s only logical. 

When it's warmer and wetter, growing seasons are longer, and crop yields are better—regardless of the agricultural technology and practices of the moment. 

And it’s better for human and community health, too—most of the deadly plagues of history have occurred in colder climates, such as the Black Death of 1344–1350.

Image 1.gif


Yet, the Climate Crisis Narrative shitcans this massive body of "the science" by means of two deceptive devices that invalidate the entire Anthropogenic Global Warming (AGW) story.

First, it ignores the entirety of the planet’s pre-Holocene (last 10,000 years) history, even though the science shows that more than 50% of the time in the last 600 million years, global temperatures were in the range of 25 degrees C or 67% higher than current levels and far beyond anything projected by the most unhinged climate models today. 

But, crucially, the planetary climate systems did not go into a doomsday loop of scorching meltdown—warming was always checked and reversed by powerful countervailing forces.

Even the history the alarmists do acknowledge has been grotesquely falsified. 

As we showed in Part 2, the so-called hockey stick of the past 1000 years in which temperatures were flat until 1850 and are now rising to allegedly dangerous levels is a complete crock. 

It was fraudulently manufactured by the IPCC (International Panel on Climate Change) to cancel the fact that temperatures in the pre-industrial world of the Medieval Warm Period (AD 1000–1200) were actually higher than at present.

Secondly, it is falsely claimed that global warming is a one-way street in which rising concentrations of greenhouse gases (GHGs) and especially CO2 are causing the Earth’s heat balance to continuously increase. 

The truth, however, is that higher CO2 concentrations are a consequence and by-product, not a driver and cause, of the current naturally rising temperatures.

Again, the now "canceled" history of the planet knocks the CO2-driver proposition into a cocked hat. 

During the Cretaceous Period between 145 and 66 million years ago, a natural experiment provided complete absolution for the vilified CO2 molecule. 

During that period, global temperatures rose dramatically from 17 degrees C to 25 degrees C—a level far above anything today’s Climate Howlers have ever projected.

Alas, CO2 wasn’t the culprit. 

According to science, ambient CO2 concentrations actually tumbled during that 80-million-year expanse, dropping from 2,000 ppm to 900 ppm on the eve of the Extinction Event 66 million years ago.

You would think that this powerful countervailing fact would give the CO2 witch-hunters pause, but that would be to ignore what the whole climate change brouhaha is actually about. 

That is, it’s not about science, human health and well-being or the survival of planet Earth; it’s about politics and the ceaseless search of the political class and the apparatchiks and racketeers who inhabit the beltway for still another excuse to aggrandize state power.

Indeed, the climate change narrative is the kind of ritualized policy mantra that is concocted over and over again by the political class and the permanent nomenklatura of the modern state—professors, think-tankers, lobbyists, career apparatchiks, officialdom—in order to gather and exercise state power.

To paraphrase the great Randolph Bourne, inventing purported failings of capitalism—such as a propensity to burn too much hydrocarbon—is the health of the state.

Indeed, fabrication of false problems and threats that purportedly can only be solved by heavy-handed state intervention has become the modus operandi of a political class that has usurped near-complete control of modern democracy.

In doing so, however, the ruling elites have gotten so used to such unimpeded success that they have become sloppy, superficial, careless and dishonest. 

For instance, the minute we get a summer heatwave, these natural weather events are jammed into the global warming mantra with nary a second thought by the lip-syncing journalists of the MSM.

Yet there is absolutely no scientific basis for all this tom-tom beating. 

In fact, NOAA publishes a heatwave index based on extended temperature spikes, which last more than 4 days and which would be expected to occur once every 10 years based on the historical data.

As is evident from the chart below, the only true heatwave spikes we have had in the last 125 years were during the dust bowl heat waves of the 1930s. 

The frequency of mini-heatwave spikes since 1960 is actually no greater than it was from 1895 to 1935.

Image 2.png


Likewise, all it takes is a good Cat 2 hurricane and they are off to the races, gumming loudly about AGW. 

Of course, this ignores entirely NOAA’s own data as summarized in what is known as the ACE (accumulated cyclone energy) index.

This index was first developed by renowned hurricane expert and Colorado State University professor William Gray. 

It uses a calculation of a tropical cyclone’s maximum sustained winds every six hours. 

The latter is then multiplied by itself to get the index value and accumulated for all storms for all regions to get an index value for the year as shown below for the past 170 years (the blue line is the seven-year rolling average).

Your editor has a special regard for the expertise of William Gray. 

Back in our private equity days, we invested in a Property-Cat company, which was in the super-hazardous business of insuring against the extreme layers of damage caused by very bad hurricanes and earthquakes. 

Correctly setting the premiums was no trifling business, and it was the analytics, long-term databases, and current-year forecasts of Professor Gray upon which our underwriters crucially depended.

That is to say, hundreds of billions of dollars of insurance coverage were then and still is being written with ACE as a crucial input. 

Yet, if you examine the 7-year rolling average (blue line) in the chart, it is evident that ACE was as high or higher in the 1950s and 1960s as it is today and that the same was true of the late 1930s and the 1880–1900 periods.


Image 3.png

The above is an aggregate index of all storms and is therefore as comprehensive a measure as exists. 

But for want of doubt, the next three panels look at hurricane data at the individual storm count level. 

The pink portion of the bars represents the number of big Cat 3–5 storms, while the red portion reflects the number of Cat 1–2 storms and the blue the number of tropical storms that did not reach Cat 1 intensity.

The bars accumulate the number of storms in 5-year intervals and reflect recorded activity back to 1851. 

The reason we present three panels—for the Eastern Caribbean, Western Caribbean, and Bahamas/Turks & Caicos, respectively—is that the trends in these three sub-regions clearly diverge. And that’s the smoking gun.

If global warming were generating more hurricanes as the MSM constantly maintains, the increase would be uniform across all of these subregions, but it’s clearly not. 

Since the year 2000, for example,

the Eastern Caribbean has had a modest increase in both tropical storms and higher-rated Cats relative to most of the past 170 years;

the Western Caribbean has not been unusual at all, and, in fact, has been well below the counts during the 1880–1920 period; and

the Bahamas/Turks & Caicos region, since 2000, has actually been well weaker than during 1930–1960 and 1880–1900.

The actual truth of the matter is that Atlantic hurricane activity is generated by atmospheric and ocean temperature conditions in the eastern Atlantic and North Africa. 

Those forces, in turn, are heavily influenced by the presence of an El Niño or La Niña in the Pacific Ocean. 

El Niño events increase the wind shear over the Atlantic, producing a less-favorable environment for hurricane formation and decreasing tropical storm activity in the Atlantic basin. 

Conversely, La Niña causes an increase in hurricane activity due to a decrease in wind shear.

These Pacific Ocean events, of course, have never been correlated with the low level of natural global warming now underway.

The number and strength of Atlantic hurricanes may also undergo a 50- to 70-year cycle known as the Atlantic multidecadal oscillation. 

Again, these cycles are unrelated to global warming trends since 1850.

Still, scientists have reconstructed Atlantic major hurricane activity back to the early eighteenth century (the 1700s) and found five periods averaging 3–5 major hurricanes per year and lasting 40–60 years each and six other periods averaging 1.5–2.5 major hurricanes per year and lasting 10–20 years each. 

These periods are associated with a decadal oscillation related to solar irradiance, which is responsible for enhancing/dampening the number of major hurricanes by 1–2 per year and is clearly not a product of AGW.

Moreover, like in all else, the long-term records of storm activity also rule out AGW because there was none for most of the time during the last 3,000 years, for instance. 

Yet, according to a proxy record for that period from a coastal lake in Cape Cod, hurricane activity has increased significantly during the last 500–1,000 years compared to earlier periods.

In short, there is no reason to believe that these well-understood precursor conditions and longer-term trends have been impacted by the modest increase in average global temperatures since the Little Ice Age (LIA) ended in 1850. 

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As it happens, the same story is true with respect to wildfires—the third category of natural disasters that the Climate Howlers have glommed onto. 

But in this case, it’s bad forestry management, not man-made global warming, which has turned much of California into a dry wood fuel dump.

But don’t take our word for it. 

This comes from the George Soros-funded Pro Publica, which is not exactly a right-wing tin foil hat outfit. 

It points out that environmentalists had shackled federal and state forest management agencies so much so that today’s tiny "controlled burns" are but an infinitesimal fraction of what Mother Nature herself accomplished before the helping hand of today’s purportedly enlightened political authorities arrived on the scene.

"Academics believe that between 4.4 million and 11.8 million acres burned each year in prehistoric California. 

Between 1982 and 1998, California’s agency land managers burned, on average, about 30,000 acres a year. 

Between 1999 and 2017, that number dropped to an annual 13,000 acres. 

The state passed a few new laws in 2018 designed to facilitate more intentional burning. 

But few are optimistic this, alone, will lead to significant change.

We live with a deathly backlog. 

In February 2020, Nature Sustainability published this terrifying conclusion: California would need to burn 20 million acres—an area about the size of Maine—to restabilize in terms of fire."

In short, if you don’t clear and burn out the deadwood, you build up nature-defying tinderboxes that then require only a lightning strike, a spark from an unrepaired power line, or human carelessness to ignite into a raging inferno. 

As one 40-year conservationist and expert summarized,

"…There’s only one solution, the one we know yet still avoid. We need to get good fire on the ground and whittle down some of that fuel load."

In fact, a dramatically larger human footprint in the fire-prone shrublands and chaparral (dwarf trees) areas along the coasts increases the risk residents will start fires. 

California’s population nearly doubled from 1970 to 2020, from about 20 million people to 39.5 million people, and nearly all of the gain was in the coastal areas.

Under those conditions, California’s strong, naturally-occurring winds, which crest periodically, are the main culprit that fuels and spreads the human-set blazes in the shrublands. 

The Diablo winds in the north and Santa Ana winds in the south can actually reach hurricane force. 

As wind moves west over California mountains and down toward the coast, it compresses, warms and intensifies. 

The winds blow flames and carry embers, spreading the fires quickly before they can be contained.

Among other proofs that industrialization and fossil fuels aren’t the culprit is the fact that researchers had shown that when California was occupied by indigenous communities, wildfires would burn up some 4.5 million acres a year. 

That’s nearly six times the 2010–2019 period, when wildfires burned an average of just 775,000 acres annually in California.

Beyond the untoward clash of all of these natural forces of climate and ecology with misguided government forest and shrubland husbandry policies, there is actually an even more dispositive smoking gun, as it were.

To wit, the Climate Howlers have not yet embraced the apparent absurdity that the planet’s purportedly rising temperatures have targeted the Blue State of California for special punishment. 

Yet when we look at the year-to-date data for forest fires, we find that unlike California and Oregon, the US as a whole is now experiencing the weakest fire years since 2010.

That’s right. 

As of August 24 each year, the 10-year average burn has been 5.114 million acres across the US, but in 2020, it was 28% lower, at 3.714 million acres.

National fire data year to date:

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Indeed, what the above chart shows is that on a national basis, there has been no worsening trend at all during the last decade—just huge oscillations year to year, driven not by some grand planetary heat vector but by changing local weather and ecological conditions.

You just can’t go from 2.7 million burned acres in 2010 to 7.2 million acres in 2012, then back to 2.7 million acres in 2014, then to 6.7 million acres in 2017, followed by just 3.7 million acres in 2020—and still argue along with the Climate Howlers that the planet is angry.

On the contrary, the only real trend evident is that on a decadal basis during recent times, average forest fire acreage in California has been slowly rising, owing to the above-described dismal failure of government forest management policies. 

But even the mildly rising average fire acreage trend since 1950 is a rounding error compared to the annual averages from prehistoric times, which were nearly 6 times greater than during the most recent decade.

Furthermore, the gently rising trend since 1950, as shown below, should not be confused with the Climate Howlers’ bogus claim that California’s fires have "grown more apocalyptic every year," as The New York Times reported.

In fact, they are comparing 2020’s above-average burn to 2019, which saw an unusually small amount of acreage burned—just 280,000 acres compared to 1.3 million and 1.6 million in 2017 and 2018, respectively, and 775,000 on average over the last decade.


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Nor is this lack of correlation with global warming just a California and US phenomenon. 

As shown in the chart below, the global extent of drought, measured by five levels of severity, with brown being the most extreme, has shown no worsening trend at all during the past 40 years.

Global Extent of Five Levels Of Drought, 1982–2012

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This brings us to the gravamen of the case. 

To wit, there is no climate crisis whatsoever, but the AGW hoax has so thoroughly contaminated the mainstream narrative and the policy apparatus in Washington and capitals all around the world that contemporary society is fixing to commit economic hari-kari.

That’s because, in contradistinction to the phony case that the rise of fossil fuel use after 1850 has caused the planetary climate system to become unglued, there has been a massive acceleration of global economic growth and human well-being. 

One essential element behind that salutary development has been the massive increase in the use of cheap fossil fuels to power economic life.

The chart below could not be more dispositive. 

During the pre-industrial era between 1500 and 1870, real global GDP crawled along at just 0.41% per annum. 

By contrast, during the past 150 years of the fossil fuel age, global GDP growth accelerated to 2.82% per annum–or nearly 7 times faster.

This higher growth, of course, in part resulted from a larger and far healthier global population made possible by rising living standards. 

Yet, it wasn’t human muscle alone that caused the GDP level to go parabolic, as per the chart below.

It was also due to the fantastic mobilization of intellectual capital and technology. 

One of the most important vectors of the latter was the ingenuity of the fossil fuel industry in unlocking the massive trove of stored work that Mother Nature extracted, condensed, and salted away from the incoming solar energy over the long warmer and wetter eons of the past 600 million years.


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Needless to say, the curve of world energy consumption tightly matches the rise of global GDP shown above. 

Thus, in 1860, global energy consumption amounted to 30 exajoules per year and virtually 100% of that was represented by the blue layer, labeled "biofuels," which is just a polite name for wood and the decimation of the forests which it entailed.

Since then, annual energy consumption has increased 18-fold to 550 exajoules (at 100 billion barrels of oil equivalent), but 90% of that gain was due to natural gas, coal, and petroleum. 

The modern world and today’s prosperous global economy would simply not exist absent of the massive increase in the use of these efficient fuels, meaning that per-capita income and living standards would otherwise be only a small fraction of current levels.

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Yes, that dramatic rise in prosperity in generating fossil fuel consumption has given rise to a commensurate increase in CO2 emissions. 

But contrary to the Climate Change Narrative, CO2 is not a pollutant!

As we have seen, the correlated increase in CO2 concentrations—from about 290 ppm to 415 ppm since 1850—amounts to a rounding error in both the long-trend of history and in terms of atmospheric loadings from natural sources.

As to the former, concentrations of less than 500 ppm are only recent developments of the last ice age, while during prior geologic ages concentrations reached as high as 2400 ppm.

Likewise, the oceans contain an estimated 37,400 billion tons of suspended carbon, land biomass has 2,000-3,000 billion tons and the atmosphere contains 720 billion tons of CO2. 

The latter alone is more than 20X current fossil emissions (35 billion tons) shown below.

Of course, the opposite side of the equation is that oceans, land and atmosphere absorb CO2 continuously so the incremental loadings from human sources is very small. 

That also means that even a small shift in the balance between oceans and air would cause a much more severe rise/fall in CO2 concentrations than anything attributable to human activity.

But since the Climate Howlers falsely imply that the "pre-industrial" level of 290 parts per million was extant since, well, the Big Bang and that the modest rise since 1850 is a one-way ticket to boiling the planet alive, they obsess over the "sources versus sinks" balance in the carbon cycle for no valid reason whatsoever.

Actually, the continuously shifting carbon balance of the planet over any reasonable period of time is a big, so what!

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Editor’s Note: Western countries are leading the charge in restructuring their economies around the issue of climate change. They’re committed to a comprehensive agenda to "decarbonize" their economies by 2050.

That means these governments will wage a new war on carbon emissions.

And it’s just getting started...

What comes next, is more government intervention and likely a carbon tax.