Yesterday, the G7 leaders met to discuss an oil buyers’ cartel to drive down the price of oil. I commented “The details are still being worked out. Whatever they are, they won’t work.”
Today, we have the laughable details.
Politico reports G7 Agrees to Find Ways to Impose Price Cap on Russian Oil.
Leaders of the G7 advanced economies on Tuesday reached a broad agreement to seek ways to impose a price cap on Russian oil, overcoming interventions from France that had sought a worldwide scheme, two officials told POLITICO.
The agreement, reached in the early hours of the third day of the G7 summit at Schloss Elmau in the Bavarian Alps, follows growing frustration among Western countries that their embargoes on Russian oil have had the counterproductive effect of driving up the global crude price. This has led to a situation where Moscow ends up earning more money for its war chest and where oil market reactions help drive runaway inflation.
The U.S. had pushed to tackle the problem via a price cap, which could be enforced by lifting sanctions on insurance for the cargo ships that transport Russian oil in return for a price deal. Under the U.S. plan discussed over the previous days, those sanctions would be lifted for countries that agreed only to buy Russian oil at a settled maximum price, creating an incentive to enforce the price cap.
The statement from the leaders ultimately identified this specifically as a preferred choice. “We will consider a range of approaches, including options for a possible comprehensive prohibition of all services, which enable transportation of Russian seaborne crude oil and petroleum products globally, unless the oil is purchased at or below a price to be agreed in consultations with international partners,” the statement said.
The Escalating Stupidity of it All
- The US and EU imposed sanctions on Russian oil and proposed to not buy any.
- With supply reduced and supply chains disrupted, the price of oil rose.
- The US and EU added further sanctions including sanctions on any countries or companies that offered insurance on Russian oil tankers.
- With no insurance, supply reduced further, and prices rose again.
- Sanctions also blocked Biden’s ability to get parts, again with the same impact, higher prices.
- But sanctions did not stop the flow of oil or natural gas completely.
- One result is that Russia made as more money on natural gas selling less of it at higher prices than it did before the sanctions.
- Russia avoided the oil sanctions by using small tankers, without insurance, to unload oil in the middle of the night to large Chinese oil tankers. So the oil is getting through, but at more expense, and on longer routes, again driving up the price.
Stop right there because that is where we were right before the G7 laughable solution to the mess.
The collective genius of the G7 concocted a scheme that would allow Russian tankers to get insurance.
Then after Russian tankers get insurance, countries allegedly will refuse to buy the oil above a certain price.
What a Freaking Hoot!
- What is going to force Russia to get insurance on its tankers?
- Even if Russia bought insurance what is going to force China and India to comply?
Regarding point number two, cheating would be massive.
And if you thought it could not possibly get any stupider, well you were wrong.
French President Emmanuel Macron actually proposed the same set of rules for all of OPEC!
Politico reported “Macron upended the discussions on Monday by calling for a worldwide price cap on oil prices instead of only targeting Russian oil sales.“
After France backed down, the G7 agreed on the above buyer’s cartel deal.
Root of the Stupidity
The G7 does not want Russia to sell any oil but if they succeeded, the price has to rise unless production picks up elsewhere or demand drops.
Rather than admit economic fundamentals, G7 leaders, especially Biden and Macron keep doubling down on dumber and dumber ideas.
This latest proposal is so obviously stupid, I nearly fell out of my chair laughing.
Occam’s Razor
I am a big fan of Occam’s Razor. The idea is best described as the simpler the explanation, the more likely it is to be correct.
My corollary is “If stupidity is a possible explanation for anything, that’s likely the reason.” I use that idea to discard most conspiracy theories.
And as you look at the above proposal, you may be asking “Can these leaders really be that stupid?”, the unfortunate answer is “Yes!”.
Central Bank Buy-Ins
Treasury Secretary and former Fed Chair Janet Yellen signed off on this cartel idea.
And if you thought current Italian Prime Minister and former ECB chief Mario Draghi has anything on the ball, please think again.
Politico reported “Italian Prime Minister Mario Draghi on Monday also pushed the G7 to eventually expand the price cap to Russian pipeline gas.“
That should tell you how we got to the economic crisis we are in.
How Stupidity Happens
Biden Forces Russia to Default, the Repercussions May be Serious
In case you missed it, please see Biden Forces Russia to Default, the Repercussions May be Serious
I discussed the previous Tweet in the above link.
If you think forcing Russia to default was a good idea, you need to think again.
This post originated at MishTalk.Com.
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2. When caught doing something that does not work, politicians would rather double down than admit a mistake
Wizard = William McKinley, chosen by the robber barons, elected president in 1896, daft Republican figurehead
Cowardly Lion = William Jennings Bryan, blustering fool, losing Democratic presidential candidate of 1896 who declared, “We shall not be crucified on a cross of gold.”
Yellow Brick Road = Gold standard. Slavishly obeyed, no one asks why
Oz = Ounce
Emerald City = New York
Munchkins = Ordinary powerless people
Dorothy = Innocent observer
Scarecrow = Stupid American farmer
Tin Man = Heartless American industrial worker
Wicked Witch of the West = Railroad barons
Flying monkeys = Indians
Tornado = The deeply divided politics of the 1890s, possibly the Panic of 1893
—–
The movie was a remake of a hit Broadway musical, 1902. The musical was adapted by L. Frank Baum, author of The Wonderful Wizard of Oz, 1900. Couched as a children’s story. Baum denied it was a political allegory; he had to eat, and it was his wisest course at the time. But the musical was changed during its run and political references were clear at the time. In the book Dorothy wore silver slippers, symbolizing the epic battle between by “free silver” movement against the gold standard. This was a huge political issue during the Gilded Age. Warner Brothers changed the slippers to ruby for the hit 1939 movie, not for political reasons but because they helped show off Technicolor.
By the way, prior to 1894, neither party dominated American politics. Then came the end of the railroad boom, hastened by John D. Rockfeller’s building of pipelines rather than pay exorbitant shipping rates to Vanderbilt and (I think) Scott of the Penn Central, but I might be wrong on the latter. RRs were very overbuilt, and the crash turned into the Panic of 1893, the severe and forgotten precursor to the Great Depression.
The president was Grover Cleveland, a Democrat. The midterms of 1894 produced the greatest landslide in American history. One-third of Congress was ousted, almost entirely by Republicans beating Democrats. Ordinary people danced in the streets. Really. J.P. Morgan, Rockfeller, and a few other titans literally chose the 1896 Republican nominee, and Rockfeller personally edited William McKinley’s convention speech. The resulting landslide for McKinley was followed by 38 years of Republican rule in the federal government, interrupted only by Woodrow Wilson.
McKinley was assassinated in Milwaukee six months into his second term, and Teddy Roosevelt took over and was elected president in 1904. He declined to run in ’08 and the barons who hated Teddy lined up behind Taft and won, but his rollbacks of Progressive reforms caused a reaction that got Wilson elected in ’12, partly because Teddy returned from one of his African safaris, mondo angry, and ran on an independent “Bull Moose Party” ticket, splitting the Repubs. (You see, Ross Perot had a political ancestor.)
The lefty commenters here shouldn’t confuse Teddy’s Progressives with themselves and their craziness. Today’s “progressives” are nothing like Teddy’s.
https://www.whatfinger.com/
http://wattsupwiththat.com/
Lol! “No one denies this”!
You must be joking.
The Germans invented the askimark, with plans to exchange it for South American food, with the askimarks redeemable for German manufactured goods. The South Americans were receptive, because the U.S. was awash in agricultural surpluses and wasn’t importing much of anything from southern countries outside of bananas, coffee, and sugar.
It didn’t work for Germany because the war destroyed their industrial base, but nevertheless it was seen as a stark threat. In that quarter-sphere world, the other three spheres would be command economies with slave labor. The U.S. and Britain knew it would destroy them. I view WW2 as a classic trade war right out of antiquity, except that the post-war Bretton Woods system plus the U.S. Navy was established to facilitate trade among all comers — a fundamental departure from prior patterns.
One thing seems clear now: The U.S. sponsored “rules-based order” has been crumbling. Japan, South Korea, and the BRICs already see it. It won’t be bifurcation, but it’s rapidly becoming multi-polar. This sanctions regime has really accelerated it, and if the G-7 backs it up with American naval power, it will spell the final demise of the post-WW2 system. For now, the EU doesn’t want to face the military realities, and China is hooked on the American consumer market.
Replacing this will likely take time, but that doesn’t mean it’ll be smooth.
All these “OPINION” testimony will change in 2023, when they are called back to testify!!!
wheel from the secret service to steer himself back to lead the
insurrection riot at the capitol building left me in convulsions! But
the implications are far less humorous.”
All they really have to do is take a look at recent Russian history, i.e. 1942-1945. These fat, comfortable, spoiled G-7 “leaders” somehow have convinced themselves that a Russian nation that lost 26 million people in WW2 are going to capitulate? If I could have been in that room, my question would’ve been simple: Where do you get your mushrooms, because I want to see in colors too.
Putin is a despot, but by Russian standards he’s Ghandi compared to Stalin. Putting on my true cynic’s hat, I wonder if someone(s) are actually trying to boost his popularity at home. Watch me be wrong, but they have paved the way for Putin to dig deep into the Russian cultural DNA and rally that population behind him.
It goes into a bucket that I’d call the idiocy of national leadership. It’s behind most of the wars of the last 200 years. It doesn’t take any kind of genius to see it. The arrogance and stupidity of the G-7 “leadership” is as blatant as anything I’ve seen in my lifetime, at least out of the industrialized nations. I can only hope that, by tacitly blessing the Russian oil and gas trade, this is “Western” capitulation “hidden” behind a laughably transparent and unworkable buyer’s cartel fig leaf that they know is a joke. I actually hope so, because the alternative really could lead to WW3.
All of the industrialized countries are okay (at least for the last 60 or so years) with U.S. suzerainty over the oceans. It saves them big money, plus until this year the U.S. has been a neutral party, seizing ships only in tightly defined circumstances apart from ordinary commerce. At present, it’s in no one’s interest to challenge that. Everyone has benefitted from that part of the arrangement, laregly because the U.S. has not followed the age-old naval pattern of favoring its own transport.
There has been no need for it, plus U.S. history is one of neutrality on the high seas. Prior to WW1, the Germans sank a U.S. merchant ship in 1915, causing a major problem. Germany apologized but kept doing it, and the sinkings were the stated cause for entry into that war. Germany and Japan attacked some U.S. merchant ships prior to the declarations of war in December 1941, but mostly U.S. ships were stopped for a while and then released. Starting in January 1942, the U-boats were sinking American merchant ships in sight of the East Coast.
Thus, it’s not a “bright line,” but quite close. If the U.S. Navy begins seizing Russian cargoes on the high seas, it will constitute a major escalation. It will expand the current “cool war” outside of Ukraine, and be quite appropriately seen by the Russians as the beginning of direct warfare. In that contest, I’d much rather be the U.S. than Russia, especially given that Russia doesn’t have much of a navy to put it mildly. But they do have subs and Exocets.
I see no good reason for the U.S. to go to war with Russia over Ukraine, period.
Russia is a basket case. But so is Ukraine, and far smaller with far fewer resources. The Russians are being their usual selves: brutal, incompetent, and relentless. Anyone who thinks that Russia ain’t quite able to buy the armaments they can’t make themselves should be locked in a rubber room somewhere. If this didn’t seem to be heading toward a U.S.-Russian war (for what?!), I’d be laughing.
My maternal grandparents were refugees from the Great German Inflation of 1923. He was paid twice a day, and would run out at lunch with the other workers to buy food before the prices went up by dinnertime. He used to call Hitler “stupid,” and as a youngster I thought it was a disguised justification. As I aged, I changed my mind. People can be wrong and I won’t like it. But stupid is probably the worst insult I can throw, and has been that way for a couple or three decades.
This situation is stupid, stupid, stupid, stupid, stupid!