Expect Another Waste of Money Coming
I think it’s important to remind people of something they may or may not have heard before; the broken window fallacy. Why? Because of the amazing levels of misallocation of capital that we see every single day in front of our eyes and we’re gaslit that we should be proud of supportive of such errors. In reality, like the example, everything is breaking around us with no interest investing in growth or any vision for the long term.
What is the broken window fallacy?
Introduced by French economist Frédéric Bastiat in his 1850 essay “That Which Is Seen, and That Which Is Not Seen” (“Ce qu’on voit et ce qu’on ne voit pas“). The parable seeks to show how opportunity costs, as well as the law of unintended consequences, affect economic activity in ways that are unseen or ignored. The belief that destruction is good for the economy is consequently known as the broken window fallacy. I believe that it’s so easy to forget or ignore (hence the reminder of this article) because we don’t see what fails to take place, we only see what has happened. We don’t see the shortage of hospital beds, we only see Trump’s new cryptocurrency grift.
From the parable: “…Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade – that it encourages that trade to the amount of six francs – I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen“.
For this to even work, we must admit that the destruction, or that is, any sort of intervention is in fact a good thing (I wrote an article below on what I feel about that…https://statespeculator.substack.com/p/doing-something-the-most-dangerous). Notwithstanding, in this example, it is not seen or fully realized that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.
The only who have benefited are those who have jumped on the bandwagon and jumped off before the dead end to the scam. In 2021, the destruction of locking down the economy and jabbing toxic genetic material into people’s arms has been destructive to an incalculable figure, but, billions, not millions, of dollars were made in this interim. A perfect example from recent years.
I guess they stopped telling this parable in schools.
Analogy
What is another analogy that we see now?
We could say that renewables such as windmills and solar panels are in fact the new window being purchased after a broken financial system and an irrational, unscientific populace has taken over in replacement by means of propaganda and moral destruction over a functioning energy sourcing.
The funds for these sustaining energy sources, coal and oil & gas, has been invested elsewhere. This underinvestment in such a capital intensive space has created a perfect storm of supply shortages (relative to demand) in energy for the mid-to-long term future ahead. Essentially, while jobs are created in both situations, windmills or oil fields, the former is a result of misallocation of wealth and destruction, just like bad behavior of breaking a window instead of using that would-be wealth, to something for growth.
Due to the shallow attempt of “going green”, renewable or some other excuse to “save the planet” (which I believe to be code for human extermination, but that’s for another article), we can see that the broken window fallacy applies.
Be careful of government numbers. Growth can be engineered but it may not mean anything
This (the opportunity) is what I tried to argue in the following article:
What Degree of Misallocation?
We’re looking at approximately 11T dollars of government misallocation specifically towards renewable energy sources. Following this enormous investment across the years, we have only reduced fossil fuel consumption from a grand total of 83% of global consumption down to 81%–a 2% delta for every 11T, give or take a few hundred billion, in “cleaning the planet”. As a result, this had nothing to do with being productive or leading to true organic growth.
Instead, it meant that a huge number of jobs, technologies, methods and actions were taken that didn’t generate much productive value (outside of lining a few thousands peoples pockets from the grift). By analogy, the windmill has only broken the window, where it could have been spent on heating the home, reinvesting in the corn fields, building a bridge or new medical research, etc.
To pick on the Germans, determined to fail, they’ve now spent 500B for “infrastructure and climate” policies (renewables) and what did they get? Now they produce 20% less energy and 3X the cost. Now Germans can’t even repair windows they break.
Why Write This?
We’re going to have an energy crisis soon. The structural shortages are in place, notwithstanding the underinvestment that adds up year after year nor the supply chain threats and political sanctions. Most of the few countries who even produce hydrocarbons do not have the means to refine it into a viable fuel source. A lack of investment in energy production is more damaging than breaking glass–yet all we hear about is the amazement of wind farms and solar panels that populate our former agriculture lands.
The other classic parallel I see is warfare…and right now the world is slowly but firmly preparing for global conflicts. I believe that there will be many broken window fallacies presented to us by talking monkey politicians soon. They will highlight the number of jobs at Raytheon and Lockheed Martin, the new jet fighters or drones ordered, the value of engineering jobs, the value of military port and air terminal space expansions, etc–again this will continue to touch the trillions of dollars–and yes, jobs will be created.
However people never stop to think that jobs could be created in a plethora of other industries that doesn’t require the destruction of political relationships, infrastructure and institutionalized murder abroad. Look at some military bases vs. some car factories in Detroit now. One was the window, one was left to struggle & die. It’s an illusion that politicians are keen to brag about because they assume people will not think outside of the box to realize that there has been a waste that is unseen. In fact, the USA in particular has specialized in waste and misallocation of capital:
Of course, numerous, hundreds, thousands… of companies have joined chasing with the future grift–from SPACs to NFTs & Yield Farming to Semiconductor stocks & S&P 7 to now AI-themed companies. Each round, they continue to market by hitting the tag words they think everybody likes to hear like a paid prostitute and at least for the last 5-6 years… it has worked! However, as per the parable, “worked” is a relative statement. It is the intervention of the state, whether it be through campaigns or actual spending, that precedes the misallocation of funds and this is the engine that creates the distortions in the economy that we experience.
Lots of this money has rushed into new hands who otherwise were not deserving of it. This distortion is fine enough, but when it implicates energy markets and the defense industry, their taxing sums of capital expenditure leads to massive distortions in the economy. We will be told that a number of economic decisions are productive and good in the years to come but people must try to spot the unseen losses in our economy.
