Actor and director Bradley Cooper is the star of a short advertising film that will spearhead a new brand campaign for Mercedes-Benz featuring the all-new G 580 with EQ Technology (in other words, the G-Class EV). The Hollywood superstar - "a passionate G-Class driver for years" (according to Mercedes-Benz) - attended the world premier event in L.A. Watch the video here. Editor-in-Chief's Note: How much did Mercedes have to throw Cooper's way for this brand loving? We're guessing somewhere between $15 - $20 million. At least. -PMD

The all-new, fourth-generation Bentley Flying Spur has arrived, with Bentley PR minions calling it "the most powerful Bentley sedan ever." With its all-new 4.0-liter, Twin-Turbo Hybrid V8 delivering 782 PS and 1000 Nm of torque, it accelerates from 0-60 mph in 3.3 seconds and also offers 47 miles of electric range. Other stuff? A Performance Active Chassis, Bentley Dynamic Ride and All-Wheel Steering. The exterior refresh includes a new grille, bumper, diffuser, 22” wheel option and dark tint brightware. Interior updates include a new Precision Diamond quilt pattern on the seats, and Precision 3D diamond hide on the doors and B pillars. The V8-powered Flying Spur outperforms the previous W12 Speed on every metric: torque, power, acceleration and emissions, according to the manufacturer. It is handcrafted at Bentley’s Dream Factory in Crewe, in a virtually limitless number of possible configurations. No price info is available as of yet.

 

Editor-in-Chief's Note: Longtime readers of this publication are probably familiar with our Economics Correspondent - Tom Bartkiewicz. Tom's musings on all things financial occasionally appear on our site, and his latest treatise is a must read. I will caution you, however, this is not a 30-second Internet read. Rather, it is an immersive - and superb - thought piece that requires your undivided attention, but it is well worth it. -PMD

FROM A BOOMER TURNED DOOMER.

By Thomas Bartkiewicz

Baton Rouge. The following is an attempt to defend how I have come to harbor my dire opinions. I have some pieces of parchment that credential me as an economist; however, age and experience have convinced me that mainstream neoliberal orthodox economics is utter BS. I would now describe myself as a lapsed economist and professional cynic. The credentialing process was not a total loss because fortunately I was exposed to the teachings of a world-renowned environmental economist named Herman Daly. Professor Daly studied under Nicholas Georgescu-Roegen who combined entropy from the Laws of Thermodynamics with economics.  (I used this concept in an email to you many years ago titled From Cleopatra to Cantarell). Daly, believing that unlimited exponential growth on a finite planet is impossible, envisioned what he called the Steady State Economy. This resonated with me because what stuck in my mind with going to the moon was the picture looking back at our Earth, a beautiful blue/green jewel floating in space and thinking that’s all we have and we need to take good care of it.

This caused internal conflict in me because I enjoy much of what our capitalist economy produces, particularly cars, while at the same time recognizing from my studies the costs and externalities associated with it. Understanding that there is a dark side to technology and “the invention of the ship was also the invention of the shipwreck,” technology has created problems now expected to be solved with more technology without any shipwrecks.

Start with how we measure the health of what is called the economy. We sum the total of all goods and services produced with a unit of measure called money. A thing that is very abstract and highly misunderstood. How about the following for a description? Money is quantum. It is a universal equivalent rather than an object of exchange. It is a reduced symbolic medium, a semiotic instance representing value without having any of its own which only acquires value through circulation and exchange. Money has no intrinsic value. Churning through the economy, it is added up to give us a measure called Gross Domestic Product or GDP. Forget about money having been created to replace barter. Adam Smith conjured this up. Anthropologist David Graeber studied 5,000 years of human civilization and found no evidence to back up Smith’s explanation.

Another person whose ideas were introduced to me in Daly’s classes were those of John Ruskin and Kenneth Boulding. Ruskin used a word for the opposite of wealth called “illth,” production and activities that subtract from wealth. Boulding used the term bads for the opposite of goods. Producing a car creates a good. The harmful industrial waste created in making a good creates illth or a bad, which should be subtracted from instead of added to GDP as it is now. Cleaning up a hazardous waste site or reversing environmental damage done by some previous project is an addition to GDP. It’s all additive. So the price (note I use the term price and not cost) of carbon capture to reduce the amount of CO2 in the air is not subtracted from GDP but considered an addition to it. The ship and the shipwreck are both goods.

Then there is the financialization of the economy. Financialization can be defined as the long-run shift in the center of gravity of the capitalist economy from production to finance. This change has been reflected in every aspect of the economy, including: (1) increasing financial profits as a share of total profits; (2) rising debt relative to GDP; (3) the growth of FIRE (finance, insurance, and real estate) as a share of national income; (4) the proliferation of exotic and opaque financial instruments; and (5) the expanding role of financial bubbles. For the past 30 years the US has been deindustrializating, sending manufacturing to other countries, mainly China, with less environmental controls and cheaper labor. The so-called globalization of manufacturing's main goal was cost shifting.

Price, cost and value are terms used interchangeably but to economists have distinct meanings. Price expressed in money terms is a signal and a very noisy one. Cost is often expressed in money terms but has importance that often cannot be expressed in money terms. Price does not represent cost if there are externalities and cost shifting involved. Shifting costs increase profits and some have gone so far as to estimate that if all costs were priced into production that no profit has been made during the history of industrialization. These unpriced costs have been dumped mainly on the environment. Value is extremely abstract and very personal. Value and the realization of value take place in different spheres.  Value is created in the workspace and realized in the market with exploitation taking place in that rupture. The belief that money, which has no value, can be a store of value is absurd. Money withheld from current consumption, i.e. saving or hoarding, represents future demand and there is nothing to guarantee that one’s savings will equal or exceed the current value, i.e. inflation. That’s why we call money currency because you need to spend it right away.

Living in a world of lies, damned lies and statistics, it is difficult if not impossible to separate the signals from the noise and the noise is becoming deafening. Have no fear, cryptocurrencies and artificial Intelligence will give us clear signals and store the value created by our work then all will be right with the world. I see a newer and bigger ship resulting in a bigger wreck.

When economics comes up in discussions I asses the knowledge expressed or lack of with what I call my four thats: (1) That was then, this is now, (2) that which you own owns you, (3) that which is seen and that which is unseen (may be this one makes it five) and (4) that which cannot go on forever will end. Each one is important to the study of economics and all of them are intertwined.

As to the problem facing the automakers two and three warrant further explanation. No.2, that which you own owns you, is about the sunk costs and opportunity costs associated with choices. With sunk costs, every major investment leads to further investment to protect the value of past investment, expanding the system, requiring more energy and eventually overwhelming the ability to create surpluses necessary to maintain the investment. Sunk costs increase opportunity costs. The huge investment in the current system and the need to maintain it makes alternatives more expensive, i.e. opportunities are lost. Ford and GM are surviving on profits from large gas and diesel powered trucks and SUVs. Current BEV technology does not work well with vehicles this size as evidenced by their excessive weight, lengthy charging times and short range.  Smaller and lighter cars have been virtually abandoned due to their low profitability and these are the type of vehicles that should be electrified and used in cities. This is quite a conundrum for GM and Ford.

No.3, that which is seen and that which is unseen, deals with entrainment. Entrainment is technically defined as the second order interaction of the energy of the components creating a system. We are born into a system that entrains us. You do what the system requires or you perish. Economics acts as a coordinating device creating a framework that is forced by a minority onto a majority. Economic coordination devices are what is important. They create social conventions and the expectations we act on and don’t see them acting on us. Underneath this entrainment is a system of stupid and moronic economic ideas: Keynesianism, monetarism, the Great Moderation, QE, etc. This has brought us to the point where the intensity required for survival is exhausting. Precarious economic security fosters passivity while undermining democracy. This is by design.

VW’s predicament is different than what Detroit is facing and has been caused by the conflict between Ukraine and Russia. Green energy production may sound well and good but German industry was very dependent on cheap natural gas from Russia to maintain its competitiveness.  Sanctioning Russian natural gas and replacing it with US liquefied natural gas at 4 times the cost has made the German car and chemical industries uncompetitive. Germans are restive and want out of the sanctions and cheap Russian gas back but the ruling class is not hearing any of it. I hear much talk from the ruling class about saving democracy. Must be some other kind, because to me democracy usually means pursuit of policies in favor of the wishes of the electorate not the ruling class pursuing policies opposed by the electorate.

Then there is the manufacturing Germany is noted for, the Mittelstand. They are considered the heart of German industry. They are small to medium size firms with revenues less than 50 million euros, usually family owned and based in smaller cities with a talent for export and a command of their markets that belie their small size and low profile. They make up a large percentage of German manufacturing. 

Energy is the linchpin for Germany’s Mittelstand. Long-term contracts with Russia to provide gas at prices significantly below market prices were a necessity to maintain competitiveness. Now that gas is going to China, which also has the industrial base and workforce to provide what Germany needs. In the US the Mittelstand would be set upon by private equity, looted and liquidated.

In closing I could posit solutions but it would be futile and a waste of time. Our socio-economic systems are FUBAR. Stupidity reigns and in the words of Charles Darwin: “Ignorance more often begins confidence than does knowledge,” and where knowledge is concerned it ain’t the things you don’t know that hurt, it’s the things you know that ain’t so.

From a Boomer turned Doomer, Peter, keep ranting and giving us the high-octane unvarnished truth.