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Streetwise Professor

January 31, 2012

A Man WIth A Hammer Who Sees Only Nails

Filed under: Economics,Politics,Russia — The Professor @ 8:14 pm

Vladimir Putin wrote a long piece (5K words) in Vedemosti outlining his plans for Russia’s economy. It is bizarre, in a way, because he lays out a variety of different programs and identifies some serious problems with the system, which raises the question: what has he been doing the last 12 years?

His vision for transforming Russia from a resource-extraction dominated economy to a modern, innovation-based one, such as it is, relies heavily on state involvement.  The reason?: “Private capital will not voluntarily enter new sectors as it does not want to bear elevated risks.”

Well, why not? This isn’t a problem in other economies.

Putin acknowledges that the problem is institutional.  Specifically, institutionalized corruption and the lack of a reliable legal system make private businesses unwilling to invest “private capital” that can be taken in a trice.:

“The main problem is insufficient transparency and accountability on the part of state officials,” Putin wrote. “To call it by name, we are talking about systemic corruption.”

“Clearing the way for business that is ready to win in fair competition is a fundamental, systemic task … We need to change the state itself – executive and judicial power.”

Putin said Russia, ranked 120th in a World Bank investment climate survey, should seek to catch up with neighboring Kazakhstan, which is in 47th spot.

He called for business cases to be moved from criminal to commercial courts to break a cycle of collusion between police, investigators and judges that all too often ends in convictions.

Wow.  Aiming to catch up with Kazakhstan.  That says it all.

The diagnosis is actually spot on.  But again: what has he been doing the last 12 years? It’s not like these problems are new, or haven’t been pointed out again and again.

And how credible is it to say that he will do anything different in the future?  The corruption and legal nihilism are essential parts of Putinism.  Moreover, how credible is it claim that the new state corporations in the technologically dynamic sectors (such as pharmaceuticals) will be any less plagued by inefficiency, rent seeking, and corruption than the existing ones?

In sum: an acknowledgement that the existing system is fundamentally flawed, with no credible way to transition to a less-flawed one.  As I’ve said before: the hamster wheel from hell. The fact that the only way Putin can see to change the Russian economy is to continue to rely on extensive state involvement reveals him to be completely out of ideas.  Or, put differently, that he has only one idea.  He has a hammer–state directed investment–and every problem is a nail.

Putin’s intellectual bankruptcy foretells of a future of stagnation, not stability.  It further reveals that he is not Oz, but just a little man behind the curtain.  Which is why other members of the elite are openly sounding out, in places like Davos, the need to change the system.  No doubt these are just surface ripples.  Like the wake of a submarine, detected with a synthetic aperture radar.   If there are such things on the surface, something much bigger is moving deep below.  Putin’s weakness, and the palpable staleness of his thinking, is sparking bargaining  among the elites.   He used 5000 words to tell them–and the world–that he is not the future.   The future is now up for negotiation.

January 30, 2012

The Orwellian SOTU Address

Filed under: Economics,Politics — The Professor @ 4:33 pm

Obama gave his State of the Union address almost a week ago, and there’s been time to identify the real lowlights.  It is tough to rank them, but these three stood out:

1. Obama almost completely ignored the most important threat to the state of the Union: its parlous fiscal situation.  He mentioned the issue almost in passing, and then primarily to flog his idiotic tax proposal (more on this below).  He completely ignored any discussion of entitlements, and entitlement reform.  This should be the overriding priority: addressing this issue, or not, will largely determine the future state of the Union.  It borders on the criminal for a president allegedly giving the country an honest appraisal of the state of the nation to give such short shrift to the most crucial political and economic issue of the day.  Alfred E. Newman couldn’t have done any worse.

2. He flogged his fairness and justice theme.  Get ready for a hugely divisive campaign based on these issues.  I was hoping there would have been a camera on Valerie Jarrett during these parts of the speech, just to see whether her lips moved when he gave it.

This was yet another paean to the European welfare state model, though of course he didn’t frame it that way.  But his was the “social model” rhetoric that is standard in Germany, for instance.

Which is truly staggering, given that the European model is on the brink of extinction.  They may stagger on for awhile, but that model cannot be sustained.

That’s too bad for the Europeans, but who can be so clueless, at this time, to act as if it isn’t happening?  Hell, Scrooge was smart enough to pay heed to the Ghost of Christmas Future.  Not our ‘Bam.

The centerpiece of the class warfare rhetoric was the Buffett Plan, as misguided a policy as could possibly be imagined. This plan would effectively raise, and raise substantially, taxes on capital.  This is a horrible idea, because capital taxation is a bad idea.  It is a bad idea not because it hurts plutocratic capitalists, but because it hurts the hoi polloi by reducing investment, thereby reducing productivity–and thus reducing wages.  Capital taxation in the US is already too high.  It is also dishonest beyond belief for Obama to suggest that this will make the slightest dent in the debt or deficit.

3. In a chilling ending, Mr. Anti-War appealed to martial virtues, and touted the military as a model for civil society to emulate.  He praised the unity and teamwork of the military, the virtue of working together to a common goal.

Many commentators (e.g., Jonah Goldberg and George Will) jumped on this quickly as fundamentally creepy and un-American.  Their takes are correct.  They were particularly correct to point out that this is a standard progressive theme.

What hasn’t been pointed out is how the class warfare and military-as-a-model-for-civil-society themes are going to work together–as they almost certainly will as a part of the Obama strategy.  The class warfare theme is inherently divisive, and will result in heated rhetoric during the campaign.  Mr. Uniter will decry this rhetoric, and wrap himself in the military, claiming that opposition is contrary to the military ideal of obedience, loyalty, and followership that we should all strive to emulate.  I expect Obama to use the military as a prop during his campaign (though not at official campaign events), continuing to sing its praises as a model for civil society, thereby insinuating that political criticism disrespects the military.  It would be utterly Orwellian, but mark my words.

Unintended, But Predictable–And In Fact Predicted

I’m sure you’ve noticed that I haven’t written much about clearing lately. (And yes, I can hear the Hallelujah Chorus.)  Simple reason, really.  Most of the clearing related news warrants schadenfreud, and an “I told you so” response.  I enjoy a good Lulz as much as the next guy, but I know it gets old.

But this article hits on so many things at once I have to impose on you all.  It basically gives the lie to all the justifications for the clearing mandates in Frankendodd.

1. The advocates of mandates, notably GiGi and Timmy! asserted repeatedly that clearing would reduce the connectedness of the financial system, and in particular, would reduce the importance of big banks in those connections.  I argued in response that clearing mandates would just change the topology of the network; that it would remain densely connected; big banks would still be tightly connected; and that the new topology was not obviously less systemically risky than the old one.

From the article:

Where do you find the spare $2 trillion needed as collateral for cleared swap trades?

With new regulation in the US and Europe set to move the bulk of the over-the-counter derivatives market towards central clearing from next year, swap buyers and dealers will soon be faced with that very question. Many custody banks believe they could provide the answer.

Already heavily involved in the plumbing of the clearing market, custodians act for almost every major financial services firm without a custody arm – including most dealers and every clearing house.

Most also offer collateral management services, including securities lending and collateral improvement – the process of turning less-liquid securities into eligible collateral to post as surety in transactions.

This experience could prove invaluable with the advent of new swap clearing rules, which come in with the expected implementation of the Dodd-Frank Act in the US from early next year, increasing the demand for collateral transformation services.

David Field, managing director with banking consultancy Rule Financial, said: “The buyside simply doesn’t have enough quality collateral available to lodge for clearing.

Executing brokers are expecting to generate strong post-trade revenues from collateral transformation – but the custody banks are the ones holding the collateral.

This is a huge opportunity for custodians, and several are already investing anywhere between $50m and $100m to position themselves.”

In other words, big custodial banks will be even more tightly connected with all major participants in the derivatives trade because of their comparative advantage in providing collateral transformation, and the strong economies of scope between providing this service and providing other custodial services.

2. The advocates of mandates argued that it would reduce leverage in the system.  I responded repeatedly that this was not at all obvious, and that the most likely effect would be to transform the nature of leverage.  The big move to collateral transformation makes it abundantly clear that this is in fact happening.  I go into this in much more detail in my forthcoming Journal of Applied Corporate Finance article titled “Clearing and Collateral Mandates: The New Liquidity Trap?”

Credit means credit risk.  So the clearing mandate has not eliminated credit risk from the derivatives market, or even reduced it sharply.  It has just transformed it, relocated it.  And it has definitely not eliminated derivatives-related credit risk from big banks.   Indeed, it is moving more risk to some big banks.  BNY-Mellon and JP Morgan are also the most important settlement banks, and play a vital role in the repo market.  This is already a source of systemic risk.  These banks are arguably the most important pieces of the financial infrastructure, and these developments will make them even more important, and also concentrate more risks from disparate markets (e.g., repo and derivatives) in them.

3. The advocates of mandates asserted that it would make the derivatives market less concentrated and more competitive (although nb these are NOT equivalent).  From the article:

Tech-heavy effort

Among the most ambitious to gain business in the swaps market is BNY Mellon, the world’s largest custodian with $25.8 trillion of assets under custody. The bank sees its existing footprint as a springboard towards dominance in the collateral services market for OTC derivatives.

[A director] for collateral management and clearing at BNY Mellon in London, believes it will be a tech-heavy effort. He said: “According to recent Isda Margin Survey figures, roughly 80% of collateral used in the OTC swaps market is cash, with about 15%-20% being fixed-income securities.

If even 20% of the estimated extra $2 trillion of collateral required to clear OTC swaps via central counterparties is in the form of securities, that puts a big onus on the collateral managers to offer smart, quick systems capable of handling huge draws on client collateral daily.”

Rival US custodian State Street has also been boosting its presence in the cleared derivatives markets, launching a swaps clearing operation in September. In a signal of intent, the bank has quietly begun hiring senior futures brokers from established rivals.

Charley Cooper, senior managing director at State Street Global Markets, said: “State Street’s unconflicted approach combined with the operational efficiencies gained from clearing with a custodian, gives us a significant edge in the emerging clearing marketplace.”

A senior derivatives banker said that clients are already looking at custodians as a viable counterparty.
He said: “In the past six months, we’ve seen growing migrations to the custodial clearing business.

Some have a better credit rating than almost every investment bank, and it’s unlikely they will be subject to capital ring-fencing regulations.”

He said that if a major custodian is able to convert even half of its existing custody clients into clearing clients, it could be looking at a share of anywhere between 10% and 20% of the OTC clearing market.”

The incumbents

But existing derivatives flow dealers – especially ones with large custody and treasury businesses – are unlikely to shy away from a revenue-generating opportunity.

Citibank, in particular, is hoping to combine a swaps clearing operation with its custody and treasury services in the US.

Jerome Kemp, global head of exchange-traded derivatives and OTC clearing at Citi, is in no doubt which direction the market is heading.

He said: “We’re looking at a re-dealing of the cards in the derivatives clearing space. Post-Dodd-Frank implementation, clearing will be led by the larger, well-capitalised banks.”

Citi hired aggressively to expand its futures commission merchant business last year, including the hire of Kemp, previously co-head of listed derivatives and clearing at JP Morgan, who arrived with a raft of colleagues.

Kemp thinks the next battleground for the bigger futures commission merchants, which will act as clearers for many firms on the buyside, could hinge on the bundling of services across clearing and asset servicing.

JP Morgan, meanwhile, is also looking to leverage its existing prime services footprint for its hedge fund clients for whom swaps clearing will be a new experience.

The bank has merged its listed and OTC clearing teams, and invested heavily in client roadshows and clearing masterclasses since the Dodd-Frank Act was passed in 2010.

Dale Braithwait, a member of JP Morgan’s OTC clearing team, said: “It’s to our advantage that we’re a big collateral manager too.

For a lot of asset managers, who do not feel they are able to use prime brokerage services, it’s a big benefit to have someone who can act as a custodian and a clearer.”

So there is a big fixed cost to play in this game.  The resulting scale economies tend to increase concentration.  Moreover, there is a strong scope economy across collateral management and transformation services, and other custodial services.  Meaning that the big custodian banks have a strong competitive advantage in providing the new collateral management and transformation services that will become a crucial component of the OTC derivatives markets.

It is particularly ironic that BNY-Mellon will be a major beneficiary of this.  You might recall the execrable NYT piece (written by Louise Story) about the evil derivatives dealer cabal.  One of the most memorable parts of the article was BNY’s whinging about its inability to break into the dealer space.  Read this new piece and you can just imagine BNY execs rubbing their hands together in glee, throwing their heads back, and laughing an evil laugh.  All your cabal belong to us.

So let’s summarize, shall we? Clearing mandates (and requirements to collateralize uncleared swaps) will result in the formation of new links between buyers and sellers of swaps (including dealer banks who do not offer custodial services) and a handful of major custodian banks.  These links will involve the extension of credit, and hence the existence of derivatives-related counterparty risk in which big banks still have substantial exposure.  If anything, the mandates will increase concentration in an important part of the derivatives market.  Moreover, it will arguably increase the concentration of credit risk exposure in a handful of systemically important banks.

Well played!  The actual results of Frankendodd will be the exact opposite of what was claimed by its tireless advocates (And yeah, I’m looking at you, Timmy! and GiGi.  I’m trying not to look at Barney, but that’s a whole other story.)

Unintended consequences, indeed.  Unintended, but predictable–and predicted.

January 29, 2012

An Unholy Alliance

Filed under: Military,Politics,Russia — The Professor @ 10:26 am

Vladimir Putin is playing to form in his presidential run, throwing out anti-US red meat right and left:

He told students in Siberia on Wednesday that the United States “wants to control everything” and seeks to make other countries its “vassals,” not allies.

This evokes a subject I hope to return to in more detail.  Specifically, his remark has clearly Eurasianist (or Neo-Eurasianist) tones.  One metaphor commonly used in Eurasianism (new and old–I won’t try to distinguish that much between them) is that of the US as Athens (or Carthage) and Russia as Sparta (or Rome): a commercial, maritime empire dominating a collection of vassal tribute states arrayed against a traditional, continental society.

Putin’s evocations of this theme tend to coincide with crises in which Russian political stability is in jeopardy.  He made similar remarks after Beslan, for instance.  Today, there are two crises that feed Putin’s anxiety.  The first, of course, is the domestic political situation in Russia.  The second is the ongoing civil war in Syria.

Syria is a nation that Russia, and the USSR before it, has invested in heavily.  It is Russia’s last remaining ally in the Middle East.  It is the home of Russia’s only overseas base, Tartus, where the shambolic flotilla visited earlier this month.

Longtime ally Assad is under siege. Russia’s other longtime ally in the region, Khadaffy, is dead. Putin sees this all this as part of an Athenian-American plot to extend its dominance.  He sees the protests in Moscow as another manifestation of this relentless campaign.

As a result, Russia is going all in to protect Assad, despite the latter’s incredible brutality in fighting against the uprising:

Moscow has been busy drawing “red lines” as it comes under pressure to stop shielding its old ally Assad and to use its power as a veto-wielding U.N. Security Council member to push Damascus into ending the crackdown which has killed thousands of civilians.

Russia has erected a wall of noise, emphasizing it opposes sanctions against Syria – a major customer for its arms – and making clear it will block any attempt for the Council to endorse military intervention.

The latest test of Russia’s resolve, a new draft resolution backed by Western and Arab powers led by Saudi Arabia and Qatar, does not call for new sanctions or threaten military action – but it does call for Assad to cede power.

The draft says the Council supports an Arab League plan “to facilitate a political transition leading to a democratic, plural political system … including through the transfer of power from the President and transparent and fair elections.”

Moscow could potentially be appeased if the draft’s supporters remove the specific reference to the transfer of power by Assad or add a clause ruling out military intervention.

However, it may also demand a clear statement that Assad’s more violent opponents share blame for the bloodshed. Russia would also be pleased by the removal of a clause calling for “further measures” if Syria does not comply swiftly, wording that to Moscow smacks of sanctions.

Gennady Gatilov, a deputy foreign minister, said on Friday that Russia would not support a demand for Assad’s resignation and warned that a rushed vote would be doomed to failure, indicating Moscow could veto the draft in its current form.

Putin gives the US far too much credit for Machiavellian machinations.  American policy in the Middle East has been confused and uncertain.  It is pushed and pulled by conflicting considerations, realpolitik wrestling with humanitarian concerns, though of course from a Putinist perspective desires for democracy and freedom are merely an element of American realpolitik–hence the Russian intransigence on Syria.

What has transpired in the last 12 months in the Middle East is not evidently in American interest, viewed from a purely realist perspective.  A nation interested in vassalage would have supported Mubarek: that’s what Athens would have done.  The current situation in Egypt is hardly encouraging, either from a geopolitical or humanitarian/democratic perspective.  If anything, the situation in Libya is even worse.

The fundamental problem is that trying to chart a transition from repressive systems to freer ones in the Middle East is devilish hard.  The more repressive the system–with Libya and Syria being at the extreme repressive end of the scale–the more difficult the transition.  As both Iraq and Libya demonstrate, these are fundamentally broken societies, with cultures with no tradition of either personal liberty or political democracy.  There is no easy way from there to somewhere better: there’s not even reason to believe that there is any agreement between people in those societies and most in the West as to what would constitute better.

The West generally, and the US specifically, are at least trying to navigate a transition to something better. Russia has no desire to do anything of the kind. To Russia, it is all about stability, the body count be damned.  Indeed, Russia is quite willing to help Assad add to the body count, as indicated by a recent shipment of small arms ammunition from Russia to Syria and the agreement to sell Yak-130 aircraft to the Syrian regime.

In so doing, Russia is doubling down, earning itself the enmity of many ordinary Syrians in the bargain. If Assad survives, Russia will have a beachhead–a very shaky one–in the Mediterranean, and the US will be dealt a setback. If he loses, all that is gone, and from Putin’s perspective, the loss is a leveraged one because it will resonate in Russia, emboldening the opposition by showing that authoritarians can be overthrown.

But Putin perceives no choice.  Especially from his zero sum perspective, anything but Assad’s survival is a defeat.

So Russia is joining with China in a new sort of Holy Alliance, attempting frantically to protect authoritarian regimes (and worse) abroad in order to protect their own authoritarian systems.

This is understandable.  This is what authoritarians do–from Sparta to the Holy Alliance.  What is more troubling is that these views are echoed in the West, and in the US, especially the the (convergent) progressive and Paulbot fringes, both of whom rail against the loss of liberty in the US and the US’s “imperialism”, all the while defending Putin, the quintessential anti-libertarian and anti-progressive.  This is not explicable on the basis of a consistent defense of liberty, one that acknowledges the difficult choices in politics and diplomacy. As with Assange, it seems most explicable on the principle of the enemy of my enemy is my friend.

And that is a very unholy alliance indeed.

January 28, 2012

Russophobes Attack RT and Assange

Filed under: Politics,Russia — The Professor @ 11:42 am

Russia Profile–a Ria Novosti operation–has a pretty brutal takedown of the RT-Assange menage:

On second thought, however, the selection may be fitting, given the longstanding allegations of RT’s anti-American bent, matched with Assange’s own apparent skepticism of Western politics. What’s more, the shadowy Assange in many ways fits the typical RT bill, as critics say the network has a track record of reporting on a variety of peculiar stories, from conspiracy theories to downright oddball dispatches from Russia and throughout the world.

In a telling sign of the announcement’s impact on the international media scene, many have taken to the Web to either ridicule or voice their concerns over Assange’s new project, which critics deem questionable and believe further fuels RT’s reputation as a disreputable news source. “Shame on you, Mr. Assange! Hard to imagine [a] more miserable final[e] for ‘world order challenger’ than [as an] employee of state-controlled ‘Russia Today,’” tweeted UK-based Russian oligarch and publishing mogul Alexander Lebedev shortly after the news broke.

. . . .

Observers said that Assange’s famously dodgy character would fit right in with a channel long criticized for reporting on a number of dubious themes – and above all, for consistently attacking the United States and its various policies at home and abroad. According to Internet entrepreneur, journalist and media critic Anton Nossik, the channel’s perceived dearth of credibility coincides with Assange’s own questionable integrity, exemplified by his putting scores of lives at risk through publishing sensitive documents.

“No normal actor in the international media, or politics, or public life would associate themselves with Assange after what we have seen and heard about his record,” Nossik said. But, he added, “[RT] is our biggest conspiracy theorist, and it is actually the only government body that openly says the Americans blew themselves up on 9/11, and this is very much what Assange would like to prove – that the United States is behind every crime in the world since Jesus Christ’s crucifixion, including 9/11.”

Exactly as I said in my post: this is just a collaboration between two parties with a common agenda: hatred of the US.

This also rings true:

Other analysts noted that RT has long since cut back on its own efforts to cast itself as an unbiased news source. According to Kommersant FM commentator Konstantin von Eggert, the network has instead shifted its focus toward openly purveying state propaganda that hardly conforms to journalistic standards. And for this reason, he said, Assange will make a perfect addition to the team. “What he does is not journalism at all – you can’t compare it to the Pentagon Papers or to Watergate,” he said. “I’m not at all surprised that he teamed up with Russia Today, and I think no matter how much RT pays him, it’s not a marriage of convenience, it’s one made in heaven – or probably in hell.”

But I guess Russia Profile is just another American, Russophobic conspiracy.

The Company They Keep

Filed under: Military,Politics,Russia — The Professor @ 11:34 am

To get an idea of just how bizarre are Russian claims that the American HAARP system, it’s worthwhile to check out the kinds of conspiracy theories, and conspiracy theorists, that surround this program.  Here are a couple of useful summaries.  Ain’t no tinfoil hat thick enough . . .

This is the scientific equivalent of the Protocols of the Elders of Zion.  So no wonder it resonates in Russia.  And no wonder that RT was at the front of the pack in flogging this theory. It is of note that a Google search of “phobos-grunt haarp” generates 986,000 hits.

For a non-insane dissection of this theory, see this Scientific American piece.

January 27, 2012

The fault, dear Vladimir, is not in the stars, But in yourselves

Filed under: Politics,Russia — The Professor @ 7:26 pm

I have heard that experts in Europe have concluded that the colossal failure of the Phobos-Grunt had nothing to do with extraterrestrial plasma waves exploding from the sun, or nefarious American radars, but something far more down to earth:  specifically, the craft was powered by faulty fuel.  Given how risible the alternative theories are, this one has the ring of truth, especially given the utterly shambolic nature of the Russian space program.

But of course admitting such a thing is unacceptable for Russian officialdom.  Hence the search for non-Russian scapegoats, no matter how ludicrous the story.

I wonder if they fool themselves.  They certainly aren’t fooling anybody else, and make themselves look fools in the bargain.

Obama’s Economic Incoherence Goes to College

Filed under: Economics,Politics — The Professor @ 7:19 pm

Obama gave a speech on higher education at my erstwhile employer, the University of Michigan.  It is noteworthy for two reasons.

First, it gives further proof, as if further proof were needed, of his economic incoherence.  The Smartest Man in the World is as thick as a sequoia stump when it comes to economics:

Appearing before a raucous student crowd in Michigan — a potentially critical swing state this year — Obama outlined plans to boost total federal spending on Perkins loans from $1 billion to $8 billion. He also announced plans to push for the creation of a $1 billion competition encouraging states to contain public tuition rates, among other things.

. . . .

Noting that student loan debt now exceeds credit card debt, the president said Washington is “putting colleges on notice. You can’t assume you’ll just jack up tuition every year.”

“We should push colleges to do better,” he said. “We should hold them accountable if they don’t.”

. . .

Obama warned Friday that rising tuition costs are now threatening to surpass the ability of government to help pay for them. Between 1999 and 2010, inflation adjusted prices for undergraduate tuition, room and board rose 37% at public schools and 25% at private colleges, according to the National Center for Education Statistics, part of the Education Department.

We can’t keep subsidizing (skyrocketing) tuition,” he said. “Sooner or later we’re going to run out of money.”

Uhm, think that tuition might be skyrocketing in large part because college attendance is so heavily supported by government funds?  Is it really a surprise that prices for a good go up when demand for it is stimulated by targeted federal largesse?   If you are, I have a large sum of money I would be willing to share with you: all you need to do to collect is share your banking details.

And note also the all too typical dialectic.  Stimulating demand leads to higher prices, which are politically unpopular.  But rather than ending the demand stimulus, the progressive mind thinks it far better to prevent the price rises.  Here it starts, as it usually does, with the progressive leader jawboning, threatening, and cajoling those who have the temerity to raise prices in response to demand subsidies to abstain from doing so.

If that works, the result is predictable.  There will be shortages, more crowded classes, and a decline in quality on all dimensions.

If it doesn’t work, the progressive will conclude that threats are insufficient, so government coercion must be employed to prevent the adverse, though entirely predictable, effect of the initial policy.  There will be price controls or some other constraint on universities’ ability to charge market clearing prices.  At which time the shortages, crowded classes, and decline in quality will occur.

So regardless of whether Door #1 or Door #2 opens, quality declines.  Yeah.  That will create loads of human capital that will contribute to growth and higher incomes.  (Not to mention that all too much of the money in these progras is completely wasted in subsidizing useless degrees, thereby creating a new wave of recruits for Zuccotti Park.)

We have seen the same dynamic before, in health care.  And we ain’t seen nothing yet.  Just wait until Obamacare kicks in.

No, when geniuses like Obama conclude, after flooring the accelerator, that the car is going too fast, they do not ease up on the gas.  No, no, no.  That would be to admit a mistake of pushing it too hard in the first place.  Rather, they keep the gas pedal floored–and then jam on the brakes.  Like I say.  Pure Genius.

The other noteworthy aspect of this speech is that Obama apparently decided that it was impossible to pander to two of his constituencies: those employed in higher education (a heavily Democratic group), and 18-22 year olds in college or with ambitions to go.  He is opting to pander to the latter, which is quite interesting.

Back in ’08, Obama merely had to mouth soaring pieties about hope and change yadda yadda and the college-age crowd swooned.  They were energized, at virtually no cost.

Evidently Obama doesn’t think that the old magic is sufficient to catalyze the intense support from this demographic.  He has to promise goodies.  Billions in goodies.

Potentially very revealing.

January 26, 2012

So How Long Until Rogozin Claims That the US Has a Supersecret Project to Control the Sun?

Filed under: Politics,Russia — The Professor @ 9:46 am

From the Moscow Times:

A powerful solar flare may have been the cause of an error in the Fobos-Grunt space probe that fell to Earth earlier this month, an unnamed source in the space industry told Interfax on Thursday.The device may have ended up in a cloud of plasma that was released during the solar event, the source said. That is the main version being considered by the commission investigating the reasons for the probe’s technical failure, the source said.

January 25, 2012

Birds of a Feather

Filed under: Politics,Russia — The Professor @ 5:21 pm

To the utter jubilation of one long time commenter, Wikileaks’s Julian Assange has been hired to host an interview program on The Propaganda Network Formerly Known as Russia Today.  Said commenter and I have polar opposite views on this, but this announcement validates my response to one of his comments last night:

And many authoritarians support Wikileaks, precisely for the reason that Wikileaks exists: it is at root a fundamentally anti-American project, and that’s quite attractive to many authoritarians.

And, as I have noted repeatedly in the past, thereby inciting paroxysms of rage by another frequent commenter, RT is first and foremost an anti-US project.  That is its primary purpose.  It is an important piece of Putin’s information operations directed at the west generally, and the US in particular.

Assange is also virulently anti-American.  Among the most virulent, in fact.

So this pairing is perfectly understandable, and I came quite close to predicting it.  I certainly pointed out the logic of the marriage in that comment.

This whole relationship gives the lie to Assange’s pious claims that he is about openness and transparency and freedom everywhere.  If he were, he would not be pimping (or is it whoring?) for an authoritarian government that is notoriously secretive, and which routinely engages in widespread surveillance of anybody and everybody.

Assange might have a little more credibility if he were an equal opportunity leaker.  But no chance of that.  Especially now.  Now that he is a kept man.

Yup.  Just another anti-American poser wrapping himself in pieties.

And Assange cares too much about his health to do to the Russian Foreign Ministry what he did to the State Department. This brings to mind what Orwell wrote about Gandhi:

It is difficult to see how Gandhi’s methods could be applied in a country where opponents of the régime disappear in the middle of the night and are never heard of again. Without a free press and the right of assembly, it is impossible not merely to appeal to outside opinion, but to bring a mass movement into being, or even to make your intentions known to your adversary. Is there a Gandhi in Russia at this moment? And if there is, what is he accomplishing? The Russian masses could only practise civil disobedience if the same idea happened to occur to all of them simultaneously, and even then, to judge by the history of the Ukraine famine, it would make no difference.

Now Putin’s Russia is far softer than Stalin’s USSR of which Orwell wrote. But to say that Assange would be in far greater peril were he to do against Russia than what he did against the US goes without saying.

But that’s really rather idle conjecture, because the basic fact is that Assange has no interest in doing so. The enemy of his enemy is his friend. And now his employer.

And for more on RT, check out this report from Al Jazeera(!):

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