About Bernard Munk

Dr. Bernard E. Munk has had a career spanning academia, public service as well as long involvement as an owner and operator of companies engaged in both trading and production. He has also been a financial advisor to private investors, family offices and hedge funds. Read more on his Economics and Politics blog ? ECOMENTARY.COM

Political Theater: In front and behind the curtain

The forthcoming Presidential election is troubling to all believers in America’s democratic traditions—although for widely different reasons. The principal agendas of various groups of Americans differ in substantial ways. In our view, it is the failing attention to both internal and external order by a long-run sequence of Presidents that is the ultimate danger. Forgetting the importance of both dimensions of order upsets an ancient requirement of any polity. Forgetting it as a leader of America is unforgivable…it is the very cornerstone of the American experiment.

Order at home and abroad are vigorously attested by the 85 Federalist Papers, but no less, by the so-called, but not frequently cited, essays of the Anti-Federalists who were deeply fearful of the signally strengthened Presidency of our new Constitution of 1787. The immediate passage of the first ten amendments (the Bill of Rights) attenuated some but not all such fears. More accurately, it was the bearing, diction and carefully staged military-like posture of our first President that buttressed the dignity and probity of the office. Washington was aware of the precedent-setting nature of those first terms. He actually became distressed over the rancor and apparent corruption that he encountered. It so angered him that he issued his famous “Farewell Address” and published it some two years before the end of his second term (also setting another precedent for future Presidents to follow with a “farewell address” upon their retirement).

The importance of dignity and probity in the highest office underscores its evident absence in the current Presidential campaign. The widely held suspicions of many voters descend from the speeches and remarks now made by both candidates and their multi-tongued supporters. Each has significantly demeaned the office of the presidency by the language they use in campaign appearances and the explicit indignities they heap on their opponent. It is likely that such verbal tactics do not improve either’s chances in attracting more than their existing bases, while they deeply demean the integrity of our election process.

It is not a mere issue of language use. The Presidency combines the office of the Head of State and the Chief Executive of the State as distinct from a Constitutional Monarchy where the offices are separate. In the latter, the Chief of State is the King or Queen, but the Government is headed by a President or a Prime Minister. The Royals rule by their majesty, not by officially designated power. It is symbolic and not by accident that they command devotion and respect. The long reign of Elizabeth II emphasizes that majesty and dignity gave her political power and influence. Those characteristics also produced reverence for her governance by her subjects and an appalling contrast to the current politics of America.

Candidate Trump denigrated his opponents both within his own party as well as his chief opponent who now sits in the White House. With an emerging age issue of his own, ridiculing the current 81 year-old Biden might enhance the ardor of the Trump base—which has nowhere else to go—but it continually causes irrationality among other potential supporters that Trump will need to win over to govern successfully. Trump is well-behind in funding his campaign as well as raising needed funds for the Congressional Republican campaign. Where are the resources to be found? They will not be found substantially among his déclassé base which shouts approval no matter how ugly his language gets. His current mode of address—focused on demeaning characterizations is a kind of ‘gutter-speak.’ It lacks the dignity, poise, and elevated sense of command that is needed for the epic decisions a President needs to make and for the public to follow!

Trump showed this technique early in the Republican Party debates of 2016. He belittled the physical characteristics of his competitors. He called them childlike names. Presumably, his victory as the nominee engraved that technique on his approach to communication, but it fails to reach out to the larger audience he needs to command in order to govern successfully. He countered it somewhat by his choice for Vice President, Mike Pence, who was his opposite in demeanor, courtesy and speech. That is now gone while Pence is reviled by the usual Trump mannerisms because Pence refused to go along with Trump’s effort to overturn the electoral vote. What the public largely credits Pence with is seemingly sober judgment on the institution of Presidential succession—the very decision that Trump chooses to slander by his verbal idiom.

If one were a Senior Advisor to Trump in this election, that advisor could possibly convince Trump to completely jettison his current mode of popular address; to take it out of the gutter; to use subtler humor and clever ripostes as a way of elevating his campaign for an enlarged audience. Those are the presentation characteristics displayed by very able large corporate leaders and historically important politicians. The country is aching deeply for such leadership at a time of extreme domestic and international disorder.

Could Trump make such a change? It seems highly unlikely. It is not even very likely that a Senior Advisor would attempt to make a strong pitch for such a change, given Trump’s record of discharging those with whom he disagrees. The singular mark of a ‘corporate’ approach to leadership is the ability to abide policy disagreement from well-established advisors with long histories of success. Governance today is far too complicated for the Chief to be expert in every area requiring his decision. Could Trump change course on his manner of presentation? Doubtful!

He misses many boats. He chooses the low road rather than a higher road of sober erudition. Whatever President Obama’s failures both domestically and internationally, he presented well—well enough that large portions of the commentariat avoided direct confrontation with his political decisions. It took evolving history to clearly reveal that real substance might be lacking. It is unlikely that Trump can absorb the self-criticism that a presentation change like this might require.

Given the somewhat shattered nature of the “Blue Alliance,” Trump can still possibly win—but he cannot govern successfully. The U.S. will again be bereft of both domestic and international allies necessary to implement thoughtful policies. It is sufficiently long that people forget how artful was Bush I’s presentation in the build-up of his successful coalition to remove Saddam Hussain’s army from Kuwait. Even the Russians contributed! Trump seemingly shoves away foreign and domestic alliance-building. He denigrates those who could be brought into a larger tent and often offends foreign leaders when keeping an alliance together is crucial to the policy agenda decided upon behind the curtain.

What history tells us about leadership—-particularly previously elected leaders who faced huge domestic and international crises—is that sober and sagacious words can count importantly. They can reflect meaningful purpose and the display of resolve. Politically “big” politicians win when they reflect those characteristics whether rhetorically or otherwise. “Little” politicians are seen as simple-minded or undignified. The “bigs” win by a combination of admiration, respect and a fear of being left out of a successful coalition, even when they practice skullduggery of purpose behind the curtain.

Politic begins as “Showtime.” We know this from FDR, from Reagan and from Washington and Lincoln. We don’t easily get behind the curtain to see the intricacies of geopolitical or domestic strategy or of the tradeoffs that tactics bring. What we see, however, is very important conditioning of our attitudes, and what other leaders often base their decisions upon. A good “Showtime” is the Overture and the First Movement. The FINALE is—behind the curtain—and involves the trades that get the potential allies on board to create the momentum for success.

Language gives flexibility to a superior politician. It mediates between his(her) own political interest and the encouragement of alliances which only may be knitted together for a moment. Good, attractive language resonates, and covers problems when they finally occur. Churchill was often better in defeat than in victory because he stitched the victims together who could otherwise be bent out of shape by a lack of sensed leadership. He survived Gallipoli and Narvik—bad political gambles—and survived long enough to win. His political defeat came when winning WWII was no longer in doubt and the electorate was very tired of the sacrifice he had motivated for so long. It echoes in his speeches such as June 4, 1940 after the disaster at Dunkirk.

Can we imagine a re-tooled Trump idiom like a Churchillian rouser? It should only happen!
It would catapult many dollars now held back by the suspicious and wealthy who have trouble digesting his lamentable language  that he has been using for so long, particularly as the aggrieved victim of a vast conspiracy against him. It is hard to get behind a perpetual victim. It would put resources into the Republican campaign and divert attention from the many legal contests scheduled to come to the current campaign.

The country wants a winner—a show of triumph by a leader, not a steady stream of invective. Pity is not the weapon of the hero. The country needs to believe that politics can be helpful. A pitch like this  awakens the many and would unnerve our foreign enemies. It would give Trump “Command Presence” where now his snide gutter-talk turns off potential supporters.

Surely, it is time that this White House and its prosecutorial allies in the Blue States and Cities have made a ‘life in court’ dominate the ‘behind the curtain’ deep think on policies for a winning Trump campaign. If Trump wants the glow of achievement and legacy, he can only get it with an appeal to grandeur, not by assaulting his competitors with verbal degradation.

This USA—now badly divided and disoriented—craves the gracious phraseology and inspiring word-smithing of a truly regal leadership. It hasn’t had that combination since the failed Obama two-term combination of soaring oratory but failed foreign and domestic policy.

Behind the curtain there must be thoughtful geopolitics and clever tactics to make the “other guy” die for his country! Behind the curtain there must be the willingness to listen to advice that the President may not wish to hear and to which he instinctively disagrees. He needs to deliberate more behind the curtain and needs to avoid the oft-fatal negative response because the advice is “not invented here.” Conflicting advice from partisan advisors is the threshing that leads to fewer mistakes later regretted.

Trump should hear the obiter dictum passed on Lincoln: ‘It was a cabinet of lawyers and Lincoln out-lawyered them all.’ And, if Trump’s willingness to change would lure a speech writer as capable as Lincoln, he might achieve the praise that Edward Everett gave Lincoln: “I should be glad if I could flatter myself that I came as near to the central idea of the occasion, in two hours, as you did in two minutes.” Lincoln mulled his words carefully as he trained to Gettysburg that very sorrowful day, but it was part of the binding that would heal a nation someday.

The renewal of internal and external order fatefully depends on Leadership. In turn, leadership has roles to play in front of the curtain and behind it. Gaining an enlarged audience requires skillful and attractive presentation. After building an enlarged audience comes the threshing that achieves better policies. Good policy depends upon thoughtful strategy and well-executed tactics. It begins with “Showtime” but it ends with victory. That is the one-two punch that Trump needs to develop and the nation needs to hear and see!

“Major Strausser Has Been Shot. Round up the Usual Suspects”

—Claude Rains in Casablanca

“Casablanca”1 may have had a script fashioned on the fly, but some of its lines were epic. Unfortunately, rounding up the usual suspects has just been applied to the colossal failure of two banks, supported by their auditors very recently under current regulatory practices with a clean bill of health. How refreshing, to learn this after their prior equity holders were wiped out due to disastrous portfolio by their senior bank managers.

The continuing failure to write and administer proper financial regulation

The two usual “suspects” are the FED and the regulatory structure constructed after the disasters of 2001 and its recurrence of 2007-2009. Let’s get to the basics. Long ago, Milton Friedman told the JEC that his recommendations of a continual percentage increase in the money supply was not “theory.” It was practical advice to the FED not to behave as a counter-cyclical Central Bank. He argued for a stable monetary anchor. Instead, he told the Congress that the proper role of a Central Bank was to constantly focus on inflation and not to try to predict cyclical shifts in macro-economic behavior.

This FED, however, repeatedly shows itself to be politically astute at the expense of being a reliable monetary institution. It dramatically lowered interest rates to provide stimulus to an economy deeply troubled by Covid. Now, with the hindsight that the passage of time provides, many FED WATCHERS have told the FED that it was much too late in changing its zero-rate interest policy and got badly behind the curve in suppressing inflation. A poignant example of what Professor Friedman always warned us about once again. In theory, of course it would be a wonderful exercise if the FED could predict cyclical turning points and the appropriate lags in monetary policy so that the macroeconomy could avoid the ups and downs of the business cycle or the advent of a One-Off material shock like a pandemic. The evidence of that ability has yet to appear.

One might have supposed that the lessons of sending Bear Stearns into the arms of J P Morgan or subsidizing AIG’s failed portfolio management in 2008 might have changed the behavior of our Central Bankers—or that the monumental failure to bail out Lehman Brothers after the painful examples above—might have taught the FED and the Treasury about being late to the party. Sadly, regulatory “cures” such as Sarbanes-Oxley or Dodd-Frank were not good mentors to our regulators either.2 Those disasters were swept under the rug in the zeal of the Congress to fine-tune financial regulations that led to such poor results by external supervisors to monitor the financial sector of the economy. But again, we see that external monitoring is not timely and that auditing can be a paid-for service of “blessing” a client. KMPG was the auditor of both SVB and Signature Bank who gave these failed banks their approval. No doubt it was well paid for those efforts. Shades of 2008, once again depending on the auditing profession to miss the forest for the trees and get well paid while doing it.

Cardinal Talleyrand: Déjà vu

After Casablanca, my favorite reference is Talleyrand’ 1830’s summation of the French Bourbon rule leading up to the French Revolution. The witty Cardinal remarked, “They learned nothing and forgot nothing.”

We now hear the same nonsense from the Administration as it bails out unsecured demand depositors by creating a special provision to accept at face value the collateral of mid-term Treasury Bonds and Agency Debt taken on by the portfolio manager wizards. Those well paid managers thought they were maximizing shareholder value buying longer term debt with all the ‘fast money’ their depositor clients were taking in from Venture Capital. Monetary floods caused by FED-promoted zero interest rates seem wonderful until we see the damage caused at a later date. ‘Bourbonitis’ is a political virus for which our clever pharmaceutical manufacturers have not yet discovered a preventive vaccination. By the way, the disease is bi-partisan.

Bank Runs, Nash Equilibrium and Monetary Policy

The learning deficit in political economy is as long standing as the mordant humor of “Round up the Usual suspects.” Tax payers and voters should truly ask whether their governors in Congress and the Regulation Derby are doing the right job. And, it wouldn’t hurt for voters to be cynical over their answers or about the cost of bailouts.3

The monitoring process takes time and a random event intervenes to find the patient already suffering a fatal attack well before the monitoring process discovers and prevents the fatality. One wonders if the blame game will triumph over learning to be alert to the consequences of timing interest rate changes to perceived changes in macro-economic conditions. Some evidence of sales of equity stock awards by the managers at SVB prior to the huge bank runs that triggered their collapse will no doubt stimulate political accusations. Attempts to avoid such situations in the future would be more welcomed than current comments of our politicians. That is a minor lesson. The bigger lesson that surely will be too soon forgotten is how monetary policy can underwrite imprudent portfolio management.

 

  1. “Casablanca,” Warner Brothers, [1942] []
  2. As covered in my book, “Disorganized Crimes,” [2013]. []
  3. Diamond DW, Dybvig PH [1983]. “Bank runs, deposit insurance, and liquidity”. Journal of Political Economy91 {3}: 401–419. It is not to denigrate their contribution but to morn that our Congress and our bank regulators don’t seem to grasp the real lesson. The FED generally is late to the cyclical ups and downs of the economy, but so are the regulators. The Nobel citation is also humorous. “Their discoveries improved how society deals with financial crises”. Really? []

A Lawyer turned Politician: It sure would help if POTUS had taken some economics courses

When one listens to the President in a pre-arranged and canned News Conference, one is overwhelmed by political campaigning.   Equally, one is underwhelmed by Biden’s lack of knowledge of fundamental economics—both Micro and Macro.

Such was his distorted and Three Pinocchio press conference yesterday.   He gets the Three Pinocchio’s for his neglect of basic Macro and Micro.   It is possible he took economics while in college and just doesn’t remember any of it.  More likely, he is campaigning and uninterested in fundamental economics.

Macro:  POTUS claimed he was reducing the deficit.  Hardly.  This is simple:  Calculate G-T.  The latest data shows this is negative…ergo the deficit is growing, not shrinking.   But, maybe he meant the change in G-T?    This is the old “second derivative” problem that politicians confuse all the time…or maybe it isn’t an unforced error?  Perhaps, he has little regard for the intelligence of the average voter. Perhaps, he thinks they might rbuy his faulty economic reasoning?  The GDP data are essentially correct (plus-or-minus the revisions that will start next quarter and continue for quite some time).   If we have a deficit in the current period, however, then our total deficit is growing in the period in question, not shrinking. Sorry, POTUS, you fail Econ 1.

Of course, the POTUS may yet be able to claim that G-T over the entire calendar year will be positive, or that the deficit (G-T)<0  is still not as large as last year or that the QI2022 deficit is smaller than Q12021, but the relevance of the comparison is another Pinocchio, at least 1, maybe more!

Unfortunately, the economic malapropisms continued while the POTUS exuded a whitewash of Federal Reserve behavior.   ‘They were doing their job’ and the President alleges Inflation is a Supply Side Problem:  The POTUS  answer: first Covid then the Putin attack on the Ukraine.   These claims are easy to dismiss.  Inflation was heavily stimulated by excess monetary ease, despite the early allegations of a poorly reasoned commentary in 2021 by Jay Powell that observed inflation increases were transitory (Jay Powell was also trained as a Lawyer: please, JAY, never use the word “transitory” again!).  Inflation was rising well before the Russian attack on the Ukraine.  The President also claimed most economists agreed about the “transitory” nature of inflation.  Total Hogwash!  Many economists spoke out against the Monetary expansion that accompanied the fiscal blow-out.

Perhaps Lawyer Biden never heard of Milton Friedman’s obiter dictum, “Inflation is always and everywhere a monetary phenomenon…  But, any good Econ1 course would have noted that quote or at least a reasonable summary of the monetary causes of inflation.   One suspects that Law School didn’t do much for the  economic education of the POTUS.

What about the other economic faux pas yesterday?  Beware.  Biden throws sinkers!

The Oil Price Rise:  Cause?  the gouging of Oil Monopolists.   He doesn’t get a formal Pinocchio, even though his timing of the GROWTH of oil monopolies would be questioned by most oil economists.  Secondly, the cutback in crude oil shipments from the OPEC members never gets mentioned or rising world oil demand as Covid lessened. Too complex for a campaigner?  Believe voters are stupid?

A few other politically correct but economically incorrect assertions include the 9000 Federal Leases that are not being drilled during the huge increase in Crude Oil prices?  Why not?  NIMBY? Not enough pipelines from the well sites to major pipeline interchanges? No new pipeline approvals and the unlikely granting of new pipelines going forward?  The whimsical nature of the current Administration posturing on the Climate Crisis that makes building new production capability an exercise in what oil producers think the next turn of the screw from DC might be?  The 9000 un-drilled Federal Leases that his Press Secretary has been instructed to ridicule at her Press Conferences that are not being drilled by the gouging Oil Industry?  Another dog that won’t hunt.  One has to wonder whether the Press Secretary understands the propaganda her coaches wish her to pitch. If the lease was so good that a leaseholder would drill it given $100/barrel prices, they would drill it.  Listeners should ask, what barriers are there are that the Leaseholder must overcome?   We suspect mostly Government restrictions. The whimsical nature of current posturing on the Climate Crisis also makes building new production capability an exercise in what oil producers think the next turn of the screw from D.C. might be?  It is unlikely to be support.  At best less attacks, but POTUS teed off pretty strongly over alleged gouging.

Of course, the fascination with warding off Global Warming ignores the misguided love affair certain politicians have with electricity. As if it is a ‘free good.’  They ignore that new base load power has to be generated either by that hated word—COAL— or use higher price petroleum products (Fuel Oil, Diesel, Natural Gas) …or perish the thought that the even more hated source (Nuclear Power) is advocated.   Here, the POTUS might have looked at the turn-around of of GREEN NONSENSE in Germany or why the French don’t complain as much because significant quantities of their base load power is generated by rather safe NUKES!

We will ignore the caveat uttered by the POTUS that “Americans are working 18 hours a day just to keep food on the table.”   Shucks, if you can’t tell a first derivative from a second derivative, maybe 8 hours and 18 hours are about the same!

Then, there are the ingenuous attacks on tax policy by  Right Wing Republicans…”they wish to raise your taxes, but my tax policy of raising Corporate Taxes and making the Rich pay Their Fair Share will lower your taxes!’  Of course, the POTUS ignores the generally acceptable Public Finance finding that raising taxes on capital LOWERS the return to LABOR!

When he finally allowed a few questions, he stumbled when he came to “lowering tariffs.”  They are just “under consideration.” Finally, what about some of the more obvious political solicitations that might help to lower gasoline prices by depleting our corn supplies (15% ethanol)?  Are there some real alternatives to this posturing?  At least a few that could work.

Here’s my list of easy ‘do’s.”

Suspend the Jones Act and allow cheaper transportation of crude and products around the US including Alaska by other than expensive U.S. flagged carriers.

Let the KEYSTONE XL Pipeline be finished so we don’t create more CO2 by rail and truck shipping while we expand crude output.

Permit quicker approval to new pipelines that will increase the flow of both natural gas and crude oil from the oil fields to the refinery or processing plants.

The above list will not be a ‘do’ in this Administration nor will meat prices go back to their pre-Covid levels unless grain prices fall or this Administration teaches cattle and pigs to hold onto to their own methane!

One other important comment comes from the Graph below, available from the vast quantity of St. Louis Federal Reserve data.  The key point is to show that expectations by the public of rising prices are not very well anchored anymore and haven’t been since 2021. That means the Fed has a much bigger job to do than it has been admitting.

Did today’s collapse in the Stock Market reflect investors suspicions that the Fed is much further behind than it has been admitting?  It is a plausible hypothesis, even if not easily proved.  The graph triggered some commentary from the nominally Democratic supporters at the New York Times.    If in fact expectations of rising prices are indeed growing, then it will take a lot more action by the Fed to choke off economic demand…and getting to a soft landing might be far more difficult.

The graph suggests a little relief at the end of the current time period, but we should expect that the little relief we got yesterday in the monthly change of prices may not continue against still rising food and gasoline prices.

Tough markets reflect poor policy choices in the past and the conflicts they pose for the present and the future.

 

WHO PAYS FOR THE DAMAGES: more on Putin’s War on Ukraine

A BACKGROUNDER

Historians of World War II have provided many lessons about the brutality of both aggressors and defenders. Americans tend to think that wartime brutality was a characteristic only of our opponents.  Sadly, notions of a “just war” to defend a country have turned into ugly sprees of killing even by our own troops.  War is a tragedy for both sides.

Our commanders of land and naval artillery forces as well as bombing missions that targeted large cities had to face the ugliness that their efforts created.  Not infrequently, many commanders resigned or had to be hospitalized because they were overcome with the destruction to lives and property of the “innocents.”  Their mental states often collapsed as a result.  It is not a relief for those on such missions to be told that we are not a particularly cruel people, but because war ultimately becomes a confrontation of“them” or “us”.

Rick Atkinson’s three volume recount of the U.S. effort in North Africa, Sicily, Italy and Western Europe, contains many vivid examples of how our troops were first sickened by the killing of innocents while they tried hard to maintain the dignity of life even for their opponents.  In fact, their own commanders often commented that their troops had to learn to “hate” in order to be successful soldiers against such a fierce opponent as the Nazi army.  War is not a parlor game.  The Bell tolls for thee!

Still, if modern historians are reasonably accurate, nothing the U.S. forces did in Europe compares with the ruthlessness of the Red Army as it advanced from the defeat of the last German offensive at Stalingrad.  There are many reports of Red Army savagery against the German citizens as the Russians crossed into Germany, and, in particular, during its last drive toward Berlin.  Of course, it can be argued that the German invasion of Poland and Russia was even more ruthless and cruel to the innocents of these countries.  The Nazi death camps were an unparalleled human travesty whose memory can never be erased.   Did that Nazi savagery justify the behavior of the Red Army?  It is impossible to answer such a question.

How then, are we to deal with the discovery in recent days of executed Ukrainians, apparently killed by their Russian military captors, sometimes with shots to the head while the victims were bound?  How should we deal with the looting of the homes of Ukrainians by retreating Russian soldiers? Who will punish the Russians for their current savagery or the Russian military for not disciplining their invading troops? Are such cruelties performed on orders from superior officers?  Were they in response to the Russian defeats suffered in engagements with active Ukrainian units trying to liberate areas first conquered by the invading army of Russia? Were the perpetrators young, untrained draftees who responded to the deaths of their own comrades by killing innocent civilians?

Drawing a line between cruel military tactics and a policy of trying to limit the casualties of an invading army—even when that army is an aggressor—is a permanent fault line for military strategists.   We have history to guide us.  There is a long line of historic cruelties that stretches back even to Fifth Century Greece.

Many college students read with horror Thucydides’ graphic account of the Athenian attack on Melos, a small island that seemed sympathetic to Sparta.  Athens’ conduct seems to be such a counterweight to the formidable, democratic ideals of Athens that are also carefully studied.   The Melian debate portrays the sad fate of a small nation attempting to stay “neutral,” in the Athenian war with Sparta.  Melos is sacrificed because the Athenians fear that the Melians could pose a threat if the island were recaptured by the Spartans!   Thucydides tells us that all the Melian men were executed and the women and children sold into slavery!  This was a tragedy of war with a moral dilemma that has been repeated many times since.

Now, we come to reports of Russian soldiers executing Ukrainian civilians and the glaring, visual evidence of Russian artillery and missiles used relentlessly against the villages, cities and people of Ukraine.  The destruction of private homes and public facilities means much rebuilding will remain even if the war ends the killing for now.  How should we react to such brutality?  Who should pay for this destruction and by what means should repayment be made?

A NECESSARY RESET IN AMERICAN FOREIGN POLICY

This is foreground for thinking through a necessary reset of American foreign policy toward Russia.  We cannot go back to our prior policy stance that was inconsistent and flawed.  Yes, Russia is a nuclear power and the possibility that a Thug like Putin emulates the Nazi Thug Hitler can never be totally dismissed.  Hitler died understanding that Germany was losing.  According to some historians, he expressed a wish that it be destroyed in a funeral pyre because the Germans had let him down!  Yet, realizing that Putin is a Thug and that Russian tactics are vicious in the extreme to innocents caught in their line of fire, should never be an excuse to admit Russian motives are justifiable.  We should not accept the Putinesque vision of a re-constitution of the old empire of the USSR.  We made that mistake in 2014 and Putin read our “book!”   We promised Ukraine that they would be protected if they gave up their nuclear weaponry.   We didn’t keep that promise in 2014 when the Russians annexed parts of Ukraine bordering on the Black Sea (Crimea) and which it still holds.  Had we acted then, it is likely we would not be seeing Ukrainians murdered and catastrophic property damage inflicted.  Being “soft,” or “accepting” of Russian phobic fears of NATO was the wrong answer then.  It is not the right answer now.

Thug regimes are much alike.  They rule by fear and specialized, directed violence against those who protest.  Russia only respects fearful outcomes as a State.  We should enact a foreign policy toward Russia that shows strength and continuity.  Russia must fear us in order to respect the peace.  A Russia without fear of U.S. actions is not a stable element of world order.

We should reflect carefully on how Russia treats its own dissidents—those brave Russians who protest their leaders’ violence and totalitarian governance.  The Putin government beats them, jails them, and sentences them in Kangaroo Courts to the Putin Gulag.  They resort to murdering  leaders of dissent in Russia, as well as Russians who flee to the West.   Russia, ruled as it is, can never be our ally in trying to bring calm to the Middle East.  We need to immediately cease that delusion as well in our negotiations with Iran.  Our efforts to restrain Iran are often based upon Russia as an interlocutor.  We fool ourselves with such policies.

One of the great ironies of the Russian invasion are the reported attempts by Finland and Sweden to consider joining NATO.  Finland had a tragic military experience with Russia in 1940.  The Finns at first successfully resisted the attack by the USSR, again over false claims that Finland would not be neutral toward Russia.  Then the Russians inflicted massive casualties to people and property and took over parts of Finland.  The similarity to the Ukrainian attack is telling.  And, for the Swedes to consider giving up their long-held neutrality bespeaks a real fear that their only credible defense against Russia is to join NATO and acquire strong allies.  Finally, the behavior of Germany, which has reversed nearly 20 years of Merkel’s toadying to Russian markets and Russian Oil and Gas, is striking.  A pleasant surprise  indeed.  It needs to be amplified.

The U.S. needs a complete Reset of its foreign policies toward Putin-controlled Russia.   We can and must counter their military buildup; their active military stance in Syria; and, we must try to reverse their conquest of former Ukrainian territory along the Black Sea.  Finally, we must not be misled by their threats of nuclear war.  We must be fully armed and fully ready and we should make the Russians highly aware of our capabilities.  The Cold War was won by consistent diligence, supported by both of our political parties.  Only Resolve will succeed against totalitarian Thugs.

Russian policies toward the West are now quite clear.   This Administration must do an immediate reset of its Foreign Policy.  There will be benefits to such a reset—particularly in Asia.  We should follow through with a meaningful reset toward China.  No longer, can it be “business as usual” in either Putin Russia or Ji Pin’s China.  Our policy has to be a deliberate, dedicated stance of supporting our allies, explicitly, and not kowtowing to a “one China policy” that merely placates a totalitarian regime.

A reset also requires the U.S. to formulate a permanent policy with regard to Russian exports to the West.  This should apply to all oil and gas imported by the West, but import restrictions to all Russian products must also be implemented.  Germany is in an awkward position as is Italy, but we are in a definitive Cold War II with Russia as it is now ruled.   We should levy heavy taxation on all Russian petroleum and gas imported into the West, and those tax receipts should be used to rebuild the terrifying damage in Ukraine, to people who have lost family and have lost their homes and businesses.  Such policies need not be restricted to Russian Oil and Gas.  Sadly, this means that part of the tax revenue so raised will come from Western pockets as it lowers returns from exports to Russia.

A government policy that is clear will motivate citizens to look to the origin of their energy supplies as well as to other Russian exports.  Restrictions should stop only when Russia moves away from its current policies. In the meanwhile, there will be meaningful  losses of revenue to the Oligarchs and to Putin from depressed prices of  oil and gas as well as other Russian exports.   We should never agree to pay for such imports in Russian rubles.  Forget that approach by the Russians.  Just say “No!”  If you don’t like payment in Euros or Dollars, find another market!

In similar fashion, the West should provide no insurance to Western firms that wish to invest in Russia.   Firms doing that should receive no protection from Western, tax payer supported governments.  If shareholders don’t punish an American entity for such risk-taking, that is the business of that entity, but the West should offer no Government sponsored protection from the Russian authorities or their thug mob of Oligarchs.  A similar ban on Russian investment in the U.S. should be considered.    Why encourage asset diversification that benefits Oligarchs that support Putin?  We need to make tough sanctions and then keep them indefinitely until Russia truly changes.   The need for a total Reset is now!

The entire West, and particularly the United States, has to realize that Putin’s Russia is a serious enemy.   It is an armed nuclear state that claims it is willing to launch aggression against its neighbors on highly profaned grounds.  We cannot do better unless we take their threats seriously and respond in kind, now and until Russia throws out its own Thugs.

Russia is likely to experience a revolt only when a dedicated minority realize the pain that Putin causes.  That means that the principal beneficiaries of Putin Thuggery have to experience severe pain by losing export markets and being refused status in the West.   We should gear that reset in policy to run as long as Russia remains a totalitarian state.   It may take several generations, but it is the right policy for now and the foreseeable future.

WHO PAYS FOR THE DAMAGES: Putin’s War on the Ukraine?

It’s not too early to think about the end game in Putin’s murderous war on the Ukraine.  There are, of course, two possibilities:

Russian Success and a continuing Russian war of aggression

Suppose the Ukraine falls and a Putin supported Government is installed.  Possibly, common sense will occur in the Kremlin and at least some of the physical damage is repaired so that a functioning Ukraine can emerge from the damages inflicted. Undoubtedly it will minimal.   It is highly likely that Putin will limit his expense in cleaning up the mess his attack has caused.  Clearly, there will be no Russian compensation offered to the human casualties.  The Ukraine will become a totalitarian state “loyal” to Russian aims.  It will be hostile to the West and a threat to NATO members.  It will entail a permanent state of cold war with Russian military assets being deployed both to suppress the Ukraine’s population while posing as a tangible threat to other ex-Soviet states that border either Russia proper or occupied areas also conquered by Putin’s prior attacks. We should expect it will be Cold War II, extended in any case and hopefully not leading to a hot version

Russian failure but withdrawal

Suppose the Russians recognize they have failed and withdraw their army and the Ukraine retains its present government?  There will remain mammoth damages to be repaired to the physical structures and perhaps some State compensation for the tragic deaths of innocent Ukrainians who lost their lives as a result of the Russian aggression.   Who will pay for the this?  Which State pays?

It is impossible to believe that Putin’s Russia will foot the bill, no matter what the West together with the Ukraine will claim.  Yet, the West is not without resources for extracting financial resources from Putin Russia and his Co-Thug’s using the resources he and they control.  Russian commodities will try to regain lost export markets or enlarge the markets to which they can still export.  To the extent that these products enter the commerce of the West, they should be taxed!   Unfortunately, the incidence of such taxes falls on both the suppliers (Russian resource owners) and the users who continue to buy these resources.  The key to making Russia and Russian Thugs pay is the design of the West’s tax system.

Unfortunately, until former Russian users of gas and oil, wheat, metals, etc., switch their source of supply away from Russian-origin goods, any taxes levied will raise their cost of acquiring such resources.  To the extent that these goods are controlled by the Oligarch’s that support Putin, they will in turn realize less from their sales in the West—and perhaps that is a fitting and just allocation.    These Oligarch’s are the minions of Putin.  Previously, they gained lavish rewards, and many continue to support Putin.   The damages to their ostensible income from exporting these resources—in whichever form they are now exported—should become a perpetual drain to such Oligarch’s.  Maybe, they will realize that by supporting the Chief Thug, they will continue to pay a price and look for another political answer?   In the meantime, the West can collect revenues largely paid by the suppliers and contribute those tax revenues to the rebuilding of the Ukraine.

Reparations déjà vu

This becomes is a modern version of reparations.  The trick is to make the tax “bearable,” but distinctly painful to resource owners in Russia, as a continuing reminder that doing business with a Thug who has an Army to use on the innocents, has a distinct cost to the operators of such enterprises.

Wood the West resort to this tactic?  Surely, free-trade advocates will raise objections that will be that combining conditions of Trade and International Politics is a bad mixture, and that what is really needed is a reformation of property rights in Russia.  As far as it goes, the argument is correct.   Some will say that to offer tacit forgiveness by not restricting Russian trade opportunities as punishment for the heinous damages that the Thugs have essentially financed, is equivalent to allowing Putin and his supportive Oligarchs to escape from their adventure far too lightly.

That has to change and at least the Co-Thugs will now have an incentive to drop their support of Putin. The trick will be to construct import restrictions through licensing in some form for all products from Russia, however they are described in bills of lading or certificates of origin and to tax them heavily wherever they arrive.  It will take international cooperation from the West to construct such a regime.  Sadly, we will create another bureaucracy to levy, collect and disburse the proceeds.  And, at the end of the day, who knows where this kind of punishment will lead?

Perhaps it will lead to much less international trade, which is an affliction to traditional importers in the West?  Yet, it will force down the prices received by Russia and its collection of war-supporting exporters.  It will make for some suffering of those in Russia who are engaged in the chain of production and export.  They too have a stake in throwing Putin out as a leader of Russia.  Whatever revenues are collected should be donated to relief from the destruction Russia has caused.  It is not much given the scope of the Russian inflicted damages to property and people, but it is a step the West needs to take.

In the last few days, we have seen films of Hitler-type rallies organized by Putin in which he raises the absurd claims of de-nazifying the Ukraine.   He does so by the same techniques utilized by Hitler in the 1930’s as he motivated the hate and anger of Germans in support of his ultimate war aims.   No doubt, in this digital age, some of that nonsense will be recorded and filtered into the digital world of Russia, however internet communication is restricted by Putin.  Will it arouse the mass of Russians to revolt?

We don’t know; nor can anyone be relied upon to predict how the Russian Masses will behave.  Will they support Putin’s failed logic, or begin to develop sufficient resources to force Putin to retreat or resign?   200,000 cheering partisans gives the impression that his war on Ukraine has broad support.  We doubt that, but have no counter evidence.

We also doubt that a revolt in Russia is possible in the near future—and we must always remember that a revolt against a failed government requires a mobilized elite to organize the discontent.  We don’t know if such an elite will or can arise in Russia policed as it is by state and military police.

Thus, it is in the now-organized West, that a response is needed.   The West must stiffen its spine and penalize Russia for its behavior; for the deaths it has caused and the emigration that it has inspired.  The West must raise cash for a fund that can be used by the Ukraine when it has finally defeated this orgy of destruction led by Putin’s malevolence and Hitlerite ravings.

 

 

Cold War II has begun: when is the U.S. going to recognize that?

Marx once said that history repeats, the first time as tragedy and the second time as farce.   Marx may have had it backwards.  The second Cold War has begun and it is clearly not a farce.   Ukraine is a tragedy of growing proportions and the U.S. is failing to recognize  a key aspect of revolutions: they are made by elites not by the masses.

Lenin knew that which is why after reading Marx’s treatment of the Paris Commune’s failure in 1871, Lenin took as his cardinal principal that a revolution must have a violent armed guard!  Ultimately, Lenin’s view led to the success of the Russian revolution.   America can learn that lesson too, but it must give up on current fantasies that limit its response to Russian aggression in the Ukraine.

Putin can win in the Ukraine, only if the U.S. continues to operate on the fantasy that strength is a weakness because it might lead to unwinable wars, or worse, to nuclear war.  Why is this wrong?  Because elites make and win revolutions, not the masses.   The latter only enter the game after the elites have defined the rules.   The Russian masses, as their German predecessors were in WWII, have been cowed by the power of the Russian Thug State and its Oligarch allies.  Yes, there are protestors, but the strength of the Russian police state is such that the current masses are largely quieted by economic incentives along with brutal force and threats.  They cannot be our allies in putting Putin in his place. Waiting for a revolt of the masses in Russia against Putin is a fool’s task.  This is not a waiting game.  Aggression never is.

That said, Putin does have vulnerabilities. His inept attack on the Ukraine reveals that the Russian military conscripts are like all conscripts:  they have incentive and motivation issues.  It also appears they are not well-trained in the art and logistics of “combined arms.”  The invasion force is not up to the task Putin gave them.

Where else are Putin’s potential weaknesses?  Very simply, with his co-opted thugs, the Oligarchs he has made wealthy with the resources of the Russian state.  The Oligarchs run  oil, energy,  banking, mining, shipping, pipelines, etc.  These Oligarchs have made vast fortunes.  They have massive yachts, planes, multiple estates outside of Russia and bank accounts all across the globe, particularly in more hospitable climes!   They have benefited hugely from their support of Putin. They will continue to be his henchmen in aggression until such time as their assets around the world are taken away from them, or the enlarged prospects of a nuclear war threaten both their lives and their property.    They play a role similar to the Russian military who revolted against Khrushchev when that “madman” threatened the U.S. with the Russian Navy sailing to Cuba with nuclear-tipped missiles aboard on the way to Cuba in 1962.  When the U.S. finally applies really tough measures on those Oligarchs, we may begin to see some moderation begin in the Russia’s aggression.  Surely, Putin will hear about their confiscated assets.  The Oligarchs want they and their families to enjoy their Putin generated wealth.

The Thug-Oligarchs are corrupted by the rewards of Putin’s total control of the forces of discipline within Russia.   Corruption is legion in Russia.  It affects the Police, the Army and the Scientists who tool Russian military expenditures with new ideas and techniques.  That’s where U.S. pressure could be effective.  It is essential if the US is to fight COLD WAR II.  Nuclear destruction is two sided.  One side can’t rule the roost.

By the way, it is not different in China.  Corruption has a role there too. Remember Deng Hsiao Peng’s reply to the Peoples’ Army after they lost their attack on North Viet Nam in 1979.  North Viet Nam kicked the Chinese Army in the groin.  China lost more men in six weeks than the U.S. did in 10 years!   As the new leader in China, Deng told his military, ‘go into business and I will get you modern weapons for a modern army!’   The Chinese Army did exactly that and Deng kept his word as well.  So, their Generals are also part of the corruption-laden regime.

Corruption is like a pandemic.  It doesn’t stop with a certain group—it invades the entire country.  Chinese beneficiaries know that and that is why Ji Pin has been punishing some select beneficiaries.   He can’t afford to have his own Oligarchs revolt.  Consequently, selective punishment is meted out and that cows the rest of the corruption tribe.  He may indeed lessen his present support of Putin because he can read the tea leaves of a toughened American response.

The U.S. has a problem in the application of this “Punish the Thugs” strategy.  It involves a lot of very powerful people and their companies in the U.S.  Take Apple for example, or the mainstay financial houses of Wall Street.  They are beneficiaries of the global transfer of technology and capital to China (despite the hickeys now being taken in the Chinese Real Estate sector).  Globalization cuts many different ways.  Yes, it makes the supply chain more efficient.   By that token, however,  it creates industrial and commercial hostages who don’t want to lose their advantage, both from a corporate standpoint and from the personal rewards it brings to its major executives.  We have just sketched another problem in American diplomacy:  our own corruption with the Chinese experience.  In our view, it silences much of Washington and New York  intelligence that should know better!

The U.S. possesses a peculiar kind of Capitalism.  Nominally, we worship the efficiencies Capitalism brings to capital and labor markets by inducing innovation stimulated by the prospect of profits.   But, in dealing with a non-democratic state, all too often, American capitalists recruit the local, corrupt foreign politicians, generals, and advisors to the main foreign political heavyweights, in order to gain entry and advantage in the foreign country.  Deals get done by who you know rather than what you know.  Exports of our industries that can serve a market of a billion and a half people are important. Who gets there first with whatever special advantages the Chinese partners can bring, is often the most important aspect to a deal.

In such corrupted-market environments, real economic risk is also limited by who you know, not by what you know.  Concessionary capitalism is often the way of the world in the global market.  Breaking the backs of the already corrupted Chinese will be far more difficult than in Russia.  There are more than a few.  China is a much bigger economy and its tentacles into American industry and finance are far more intricate and run deeper.  Russia is a small boy with a big nuclear punch, but its economics are definitely small scale.   It is largely a raw materials producer with competitors.  Americans buy few if any final products from Russia and produce very little in Russia for export back to the U.S.  China is a different animal all together.

For this reason, the implications of Russian aggression into the Ukraine are highly important to understand when it comes to a possible Chinese takeover of Taiwan by military means.  The U.S. doesn’t have a lot of time to prevent that eventuality.  It most re-arm Taiwan to the teeth and make perfectly clear to the Chinese that Taiwan will be defended even if it takes American direct intervention.   Being coy with a Thug is not a good policy.  Be direct and clear, Washington!  Sanctions don’t prevent aggression.  Certainly, that follows from the Russian experience.

The U.S. may be getting negative feedback from its most important strategic partner in NATO:  Germany.  The Germans want to limit their response and ours too.  The Germans are already hostage to Russian corruption.  Half of their petroleum-based energy is Russian in origin and Germany has achieved (or should we say re-achieved) a huge presence in the current Russian economy.   The German counterpart companies will not easily disengage in their Russian adventures.  In fact, despite their sympathy with the suffering Ukrainians, they probably have to be pushed to disengage.

Germany’s Russian adventure is a century old.   It started in the early 1920’s when Germany was facing the draconian Reparations of the Versailles Peace Treaty.   And, it started up again after the fall of the Berlin Wall in 1989.  German business has strong connections and strong profit positions coming from its Russian agenda.   The Germans have in fact been stronger in their resistance to Russian aggression than many here in the US expected.  That is a pleasant surprise, but we should be warned, however, that such financial interests are powerful incentives to avoid a further Russian confrontation.

Perhaps more surprising is the extent of German cooperation with the U.S. in trying to tame Putin.  But, don’t bet on a long game in that arena from Germany.  It is now a major hostage of Russian energy resources as well as a continuing supplier of industrial materials to Russia.  The German nuclear power industry has largely been shut down.  Petroleum based energy counts more in Germany than in the U.S.  That mistake cannot be addressed in Germany for many years.

There are reports from Vienna showing a possibility of a new Iranian-nuclear control agreement and the release of sizable amounts of Iranian crude oil.  It might be a winner politically for the Biden Administration (in its efforts to slow inflation), but it works adversely in Cold War II. The Iranians have repeatedly shown that any such agreement offers them cover for refining more nuclear material and perfecting suitable delivery missiles.  Iranian ambitions in the Middle East have not changed, but the temporary allure of more crude oil and possible a lower price at the American gas station is alluring to some American politicians who will shortly have to face their voters.  Signing an agreement with the Iranians can make the U.S. a hostage to the Iranian Mullahs bent on mischief of their own making.

The characteristics of Cold War II should determine American Strategy.  The first characteristic is Time!  The war in the Ukraine will not be over quickly.  Russia is not going to just quit tomorrow and stop with its debilitated attempt to take over the Ukraine.  There are other Russian targets as well in their geopolitical gunsights.  All of the areas that used to be constituent parts of the old Soviet Union are up for grabs, now or in the near future.  The U.S. has to plan for a long war,  and it must start by arming its allies thoroughly with whatever they need to defeat a Putin attack.  The difficulties the Biden Administration has today are nothing they could face in the future, if American unwillingness to confront Russia now continues during this recent aggression.

Our national interest is for a complete stop of the Russian invasion as quickly as possible with the Ukraine being returned to its former free nation status.  Without forceful and immediate aid from the U.S., that is an impossibility.   This Administration cannot afford to lose this opening battle of Cold War II.

 

Learning from History: has the US failed again?

The World is witnessing a three-fold tragedy.  First, as we now appear to be just coming out of the Omicron variant, we are witnessing a terrible, inhumane, aggression against a sovereign nation by a Russian Thug.  Second,  rather than properly responding to the American security guarantees  given to an independent Ukraine by the Obama Administration in 2014 in exchange for giving up their nuclear weapons, the USA has basically said the Russian aggression is “0ff-Limits” to active American military forces.  Notwithstanding some help with armaments delivered now and over the course of 2021 and before and limited supplies of defensive weaponry since the Russian attack, the people of an independent and democratic state are being violently slaughtered and forced to run for their lives from Russian aggression.   Third, the Biden Administration, having botched the departure from Afghanistan, is sufficiently frightened of Putin’s threats that it has basically forgotten our history with the Russians.  Time to Remember Mr. President!

Relevant History

The history of dealing with aggression in Europe begins in the 19th century with the German attack on France, and  continues in 1914.  But, what is truly relevant is the September, 1938, Chamberlain concession to the Hitler regime. A misguided British Prime Minister allowed the Nazi’s to take over the Sudetenland, a largely German-speaking segment of the post WWI Czechoslovakian Republic.  Ironically, Chamberlain actually frustrated Hitler because, as we now know, Hitler actually wanted to march the Wehrmacht into Czechoslovakia thinking the British were too supine to resist.  Hitler was correct in his assessment of Chamberlain!   Chamberlain, of course, claimed he was preventing a war.  He did not succeed.  Rather,  he whetted tHitler’s appetite by allowing the take-over. (See Golo Mann’s brilliant history, “Germany since 1789.”

Britain and France might have been far better off to face the Nazi’s in 1938 rather than waiting until the tragedy of 1940 that gave the Nazi’s even more time to prepare their onslaught of Belgium and France accompanied by the Allies difficulty in sending supplies to Poland, next on the aggressor’s list of conquest.  In the meantime, Hitler got a respite from Communist Russia with the Hitler-Stalin pact and was able to carve up Poland (along with the Russians from the East, with the terrible consequences for the murder of so many people.  We need to remind ourselves what can happen when you stimulate the appetite of an aggressor!

Our relevant history, however,  is October, 1962, long before President Biden became a significant politician.  He was less than 20 years old when the Kennedy Administration had to face down the Russian Navy steaming toward Cuba with nuclear tipped missiles.   There was the risk of nuclear war then too, but the Kennedy ExCom Group stood its ground and the Russian military revolted against Khrushchev.  After the confrontation, we learned that the Russian military leaders were not willing to see whatever progress the Soviet Union had made since its second Revolution and its immense victory over Nazi Germany go up in a Nuclear Holocaust.  They essentially backed Khrushchev down and the Russian Navy turned back with its vicious cargo.  Of course, no one then (or now) can be sure what the Russians will do if confronted today, but certainly we have some intelligence to guide this Administration?  There is a precedent here, however much we have violated our Red Line in the Sand since 2014!

We may be witnessing the real decline of American power and prestige in our forlorn resistance to Vladimir Putin.  We are not willing to provide a No Fly Zone because combat between American-piloted aircraft against Russian invaders to Ukraine could be a pretext for Putin to ignite a Nuclear War.  One can’t blame this Administration for being cautious, but post-Afghanistan, we look weak, disordered and unwilling to exert the power that we have.   Will it whet the Aggressor’s appetite?  History speaks on this issue, in a very troubling manner.

Democratic countries worry about the next election, but our forbears,  just four years out of war with their former Ruler,  highlighted the two major tasks of our Republic in 1787.   Those two primary tasks were internal peace and quiet and external security.   We are now failing at both, lost in the Woke aspirations of saving Humanity from a climate future that is more scientific conjecture than reliable and tested climate theory. (Try running the climate models backward and see if you can predict current results!)

It is also true that there is considerable cant coming from Congressional electees who wish to suspend the sales of Russian crude oil around the world, to penalize Putin for his catastrophic adventure.   Based on the news clips, there is apparent misunderstanding, (perhaps deliberately?) over Congressional views on the nature of the global oil market.   Taking Russian’s approximately 10 mmbbls/day off the market would definitely tighten the current world supply of crude oil.  The mere threat has escalated crude oil to $130 bbl, and collapsed the Equity Market.  Such a policy will definitely impact inflation here and abroad, lowering real incomes.  But that vulnerability is also part of the Wokism that inhabits this Administration.

The U.S. has a lot of not yet developed crude oil supplies that will only begin gradually to come into the market if crude oil trades above $100/bbl as it now does.  It will take time to address the current price path of finished petroleum products.  Sadly,voters in many Blue States have elected politicians who parade Climate Worries and ignore national security.  In addition, countries like Germany, which discarded most of their nuclear generating capacity have made themselves unambiguous hostages to Russian oil and gas. Their financing and  build-out of NordStream 2 to make themselves integrated with a threatening supplier was the triumph of politicians wishing election and a denial of history.  Maybe the delay in certification of NordStream 2 will be longer than next year…but one never knows.  German politicians are also addicted to re-election and they have long believed that investment in Russia and exports to Russia were vital to their prosperity.  They are vigorous advocates of an Iranian deal, despite considerable evidence that this will not stop a nuclearization of Iran nor Iranian attempts to implement their own geopolitical aims in the Mid-East.

Maybe the Germans will learn what they once knew prior to 1989 when the Berlin Wall came down and the former Communist East Germany was successfully integrated into the West.  Thoughtful Geopoliticians in the US and Germany might understand, but German politicians ignore history as well to our collective discomfort.

So, Folks, as the President likes to say, there we are.  Stuck in a huge dilemma: whether to come to the aid of a vital, democratic country, resisting Thugs from the East who threaten the rest of us with a Nuclear War, or draw a line that we mean to enforce?

The Chinese “alliance,” with Russia is an additional geopolitical dilemma, worse so,  because so many American firms having been profitably “selling the rope by which we will hang them” (to use Lenin’s more than appropriate quip) dealing with China, despite their own inhumane behavior.  Are we tempting them to finally follow Putin’s path and invade Taiwan?   Rome burned while Nero fiddled, but the clock is running fast now for the U.S. and its democratic allies are fiddling while the Ukraine is burning.

The bottom line of many analysts is that our immense discontinuity in Presidential elections, our withdrawal from Afghanistan and our indecisiveness over what measures we will utilize to help the Ukrainians maintain their freedom is being seen by our Thuggish opponents as weakness.  They seem to think  we will not resist which makes their threats so real!  Its time to make the Thugs do a re-think on their own.

No one wants to see our young men and women perish again in a “foreign” war…but is it really a “foreign war, or is it a precursor to our own external security worsening even more?

 

Defending Freedom is Good Governance

Freedom-lovers all around the world are hoping that tonight President Biden will reverse his previous floundering efforts in foreign policy and announce a substantial support package for the brave Ukrainians. Ukrainians, like their forbears in Hungary, Czechoslovakia, Poland and Romania before them, have revolted against Russian totalitarianism. Our President has the opportunity to show he is a President of whom freedom-loving Americans can be proud. He needs to stand up tall and place the full panoply of American capabilities at the disposal of those who are sacrificing their lives and fortunes by defending their country against Russian expansionism through military force. Moreover, he needs to do it tonight at the traditional State of the Union speech to both Houses of Congress.

His recent behavior doesn’t suggest that he will do that. But that is what he needs to do at a time when it counts! A strong statement backed up with immediate and substantial movement of military supplies and civilian goods to feed, clothe and heal the wounded is called for. The already-invaded economy of the Ukraine needs help now, not the promise of sanctions that may help, if at all, only after their emergency has passed.

American foreign policy, particularly regarding the twin threats from China and Russia, has looked weak and flailing. Under this President, real deterrence has not been in play. Deterrence begins with positive displays of meaningful action which our enemies need to worry about. This is not a time to cater to the prevalent view of “no more foreign wars.” The Ukrainians have demonstrated that they are willing to fight and die for their country. We must immediately supply them for their struggle. This illegal attempt to take over a free country by military force is exactly what we must resist with substantive actions. The Free World cannot afford any further delay by America in meaningful support for the Ukraine.

Totalitarian countries watch what we do, not what we say. They formulate their own strategies by estimating how we will respond. A flaccid response by the USA is an open invitation by Putin and Ji pin to-implement their own aggressive policies with military means now and in the future.

This is nothing new. Have we learned nothing from the history leading up to WWII? Have we no guidance from our struggles during the Cold War? Didn’t the confrontation with the Khrushchev-led Soviet Union with Missiles in Cuba in 1962 teach us anything? A Putin-led Russia wishes to similarly assert its world presence by demonstrated military power coupled with a nuclear threat precisely because our leadership has been a blither of words lacking forceful actions. This is the time, Mr. President, to “walk the walk.” Americans of all political persuasions know this. Your prestige hangs on your actions, not your speech, and so does the prestige of our country. As Benjamin Franklin once said at that critical moment of the signing of our Declaration of Independence, “We must all hang together, or, most assuredly, we shall all hang separately.”

Mr. President: Don’t denigrate our traditions of defending freedom by talking brave but doing little. Now is not the time for the “summer soldier and the sunshine patriot.” Now is the time to be the Leader of free peoples everywhere and of those who yearn still to be Free.

The Whole World is Watching!

This article originally appeared on Ecomentary.com

FRAUDULENT DISBURSEMENT OF PUBLIC FUNDS

FOLLOW THE MONEY

An enduring truth of economics is that by and large, people consider their own financial fortunes more seriously than they do when they are caring for other people’s money, Sadly, that is also true of our political governors. They systematically are patently stupid when handing out government funds, particularly when the appropriation is based on a claimed national emergency.

In a rush to show that Government is the source of the peoples’s welfare, not only are legislated appropriations accompanied by imprudent controls against fraudulent disbursement, but this pattern persists over time through many Administrations. Markets do a far better job of punishing inadequate controls on fraud by punishing corporate executives once the fraud becomes a public matter. CEO’s and CFO’s are regularly fired and entire Boards can be replaced if the scandal is big enough. What about Government? Hardly ever!

Even when a Government is attacked by its own watchdogs, little is done to the failed Administrators who allowed or worse participated in the fraud. We should expect such exposés when the massive appropriations stimulated by Covid come to be matters of future election campaigns. Watch for them. They are the next attraction in Political Theater in your local election district.

The problem with ex post revelation and punishment is that the next national emergency will feature a similar lack of financial prudence regarding “other peoples’ money.” Legislators applaud themselves for simply passing emergency funding and clearly not for prudential financial watchman-ship, They leave that to the administrative bureaucracy which suffers “agency” issues like all other delegated activities in Government,

Primarily, when disbursing funding to the public suffering from an involuntary emergency, the main criteria for legislation succor are size, timeliness and the description of beneficiaries. If Government functionaries regarded the protection of tax revenues, (the People’s Money), one might expect more care of such resources. That some unqualified individuals or fictitious firms are able to obtain these funds is a sign of woeful neglect and awful political governance. It is a major failing of US political governance over the vast resources generated by taxation.

When news stories such as this referenced story in THE WASHINGTON POST appear, one has to wonder about the activities of the senior Senator from Massachusetts? She is constantly trying to introduce regulations to protect citizens from the alleged rapaciousness of private financial companies? Where is this Senator on the issue of protecting the resources of the public weal?

We know the answer, It is not a meaningful inducement to her political campaign. As an aside: Senator Warren widely announced on television that she wouldn’t vote for the renomination of the current Chairman of the Federal Reserve because of his alleged neglect of the poor and needy! It will be interesting if she reverts to the political consensus among Senate Democrats when Powell’s reconfirmation is voted on again. My skepticism is unbounded.

A TIME FOR SENATE GOVERNANCE: the Powell Re-nomination

Not by whim or chance did our Founding Founders create a tripartite division of governance even though they gave significant power to the Presidency. It is time for our senior legislative body to step up to that responsibility and reject the confirmation of the Chairman of the Federal Reserve to another 4-year term.  Why?  Because he and his Board of Governors of the Federal Reserve have failed to carry out their dual mandate.

Any thoughtful observation of the recent inflation data shows that inflation is neither transitory—as the current Chairman has previously asserted it would be over the  past year—nor is it anywhere close to the self-proclaimed 2% boundary that the Fed had so often stipulated for inflation governance in the past. It is well past the time that the Senate carried out its mandated  (Constitutional) task of “advise and consent.”

Failure to reject a Powell second term would be a feckless concession to Executive power and another long step down the path of faulted political governance. Sadly, but likely, we should anticipate another failure by this present Senate.

The only reason that key Senators in the confirmation process could possibly evoke is that a failure to confirm Powell now might produce an even less qualified and “woke” nominee!  The evidence of that likelihood are this President’s other nominees’ to other important financial positions. Specifically, Ms. Raskin’s pending nomination and strong doubts concerning the orientation of Ms. Lisa Cook’s nomination to the Fed’s Board of Governors.1

If the Senate confirms the Powell reappointment it will have failed to assert the responsibility given it by our Constitution. If it denies the reappointment, it will have to face the likelihood of a rudderless Board of Governors at least until the November elections when its voice can be important in telling this President that he must act prudently in finding a more adequate leader of the Fed. A rejection now could accelerate a more reasonable appointment process to begin earlier!

This article originally appeared on Ecomentary.com

  1. Professor Harald Uhlig has recently posted a strong letter on that nomination in a recent Wall Street Journal opinion column. “The Fed doesn’t need a Censor,”
    The Wall Street Journal 2/13/2022. []