Streetwise Professor

November 16, 2013

Died of Complications

Filed under: Economics,Politics,Regulation — The Professor @ 3:38 pm

Obama gave one of his rare press conferences to announce his alleged “fix” of the insurance cancellation problem.  Short version: “It’s broken, and I’m going to break it some more, and crank up the chaos while I do it.”

It was quite the performance.  Arrogance and condescension and displays of bruised ego all intended to distract attention from rank incompetence and hubris. Reading the transcript is quite illuminating.  The incoherence (replete with gibberish, double negatives, etc.) is plainly evident in black-and-white.

The are too many highlights (by which I mean lowlights) to do them all justice.  I’ll just pick one: “What we’re also discovering is that insurance is complicated to buy.”

This, of course, from the president who didn’t want a chart depicting Obamacare to be created because, you know, political opponents would use it to claim that Obamacare is really complicated and stuff.

Obama and Obamacare are going to put scads of satirists out of work, because who can compete?  Obama wants to outlaw self-insurance (eventually): if he outlawed self-satire he’d be looking at 99 to life.

November 14, 2013

For His Next Ukase, Obama Orders All Toothpaste Back Into the Tube

Filed under: Economics,Politics,Regulation — The Professor @ 7:57 pm

Today Obama allegedly announced a “fix” to the insurance cancellation problem.  His alleged fix is that he will issue a ukase permitting insurance companies to violate the law that is commonly referred to by his name by restoring (or not canceling) policies that do not conform to the ACA requirements.

I guess since it’s “his” law, with his name on it and everything, he can change it at a whim or something.  Lesley Gore should come back and record “It’s my law that I’ll change if I want to, change if I want to.”

So much for the faithfully execute the laws thing: did Obama teach that when he lectured about Constitutional law at Chicago?  Or maybe there’s a secret annex to the Constitution that permits the president to suspend the law if it’s politically inconvenient, or he just feels like it.  Maybe they tell the president about it right before inauguration, when they tell him about the secret nuclear codes.  Funny that no other president seemed to be as familiar with this annex as Obama.

But even overlooking the illegality of the actions, what about the practicality? In fact, his ukase is obviously wholly impractical.  Insurance companies, state regulators (which just tells us that there are other Constitutional issues here, namely federalism), and individuals have all made changes and adjustments predicated on the assumption that the ACA would be implemented as written.  Silly insurance companies.  Silly regulators.  Silly individuals.  But having been silly, it is utterly impossible for them to restore the status quo ante.

In essence, Obama has ordered that toothpaste be put back into the tube.  It can’t happen and it won’t happen.

At which time Obama will turn on the insurance companies, and blame them.  You can see this coming a mile away.

Not that that will help one individual who has lost coverage and can’t get it back.  But Obama really doesn’t care about that.  He is all about limiting the political damage.

Perhaps some insurance companies will challenge this in court, but I doubt it.  They know that the administration can-and will-punish them if they have the temerity to fight back.

It is hard to have too much sympathy for the insurers.  They made their bed, and they can’t really complain about what’s being done to them in it.

Unfortunately, millions of Americans will pay for  the corrupt bargain between insurers and the administration (and Congress).  These are the wages of corporatism.

I wrote quite a while ago.  Obamacare delenda est. Now more than ever.  This is the only fix.

November 12, 2013

OMG! NSA Spied on OPEC! GOOD! I Will Sleep Better Tonight.

Filed under: Commodities,Economics,Energy,Politics,Russia — The Professor @ 8:33 pm

The latest earth-shattering Snowden revelation emanating from the Russian Front aka Der Spiegel is that NSA and GCHC have spied on OPEC.

A couple of responses.

1. Duh. Or in the words of a Navy chief who left an indelible impression on me during Youngster Cruise: “That’s a real no sh*tter, son.”

2. Good!

Please. OPEC is of major economic and geopolitical importance. Of course it is a prime target for intelligence collection-and a legitimate one.  It is also an organization representing governments, many of whom are hostile to the US (Venezuela, anyone? Iran?), or of quite doubtful friendliness.  Many of its members-and I could probably say, all of its members-are hopelessly corrupt, and/or connected with terrorist organizations.

What would be scandalous is not that we’re watching OPEC with every means at our disposal, but that we were turning a blind eye.  I will sleep better tonight knowing that the NSA has not been delinquent in its duty to collect information on an economically important cartel that is really a congeries of corrupt anti-American nations.

And to the Berlin gang, I ask: do you seriously think that German intelligence isn’t vacuuming up every piece of information about OPEC that it can? (That question was purely rhetorical: I still haven’t caught a ride on the cabbage truck, let alone fallen off head first.)

Here’s an even better question: don’t you think that the Russians are aggressively spying on OPEC?  Hell, they are directing a major effort at the Finns-the Finns-for crying out loud.  Don’t you think that Russia, which lives and dies by the price of oil, has a major economic and geopolitical interest in OPEC decisions, and hence is straining every nerve to collect every piece of information it can about it?  If you answer “no”, then either (a) you are a pathological liar, (b) you are a Russian tool, or (c) not only did you fall off the cabbage truck head first, it backed over your melon several times.  (I’m placing heavy money on “b”.)

One of the “revelations” in the Der Spiegel story is that the NSA had collected information that confirmed that OPEC and Saudi Arabia had released misleading estimates of oil production.  Can you imagine the wailing and rending of garments at Der Spiegel had it uncovered accounting fraud at Siemens, let alone Exxon?

OPEC is a malign organization, and many of its members would have to undergo thorough reforms to graduate to becoming merely malign.  Not only should we be collecting all the information on it we can, we should be using that information to undermine it at every turn.

No doubt the Berlin gang and its echo chamber around the world will use this story to claim that the NSA is engaged in “commercial espionage.”  Um, engaging in espionage on commercial enterprises is different than engaging in commercial espionage.

Commercial espionage, properly understood, is the covert collection of information from foreign firms that is then utilized to benefit commercial entities in the country engaged in the spying.  The Chinese, Russians, and yes, the French, are notorious for this.  Their intelligence agencies steal intellectual property, business plans, etc., and provide it to domestic firms who use it to improve their products, win contracts, etc.

Nothing in the stories that Der Spiegel or Greenwald have produced based on Snowden leaks demonstrate that information collected from commercial or quasi commercial organizations (OPEC, Petrobras) has been provided to American companies, to advance their commercial interests.  Indeed, the absence of specific disclosures of this nature is revealing in its own way: you know that if Snowden had evidence that this occurred, Greenwald and Der Spiegel would be shouting it from the rooftops.

The whole Snowden narrative has gone well beyond stale and tiresome. The only people who are outraged are those who want to be outraged.  Those who are looking for a reason to be outraged. Those willing to suspend disbelief in order to feed their desire to play the outraged victim. Serious people who know the way the world works react with disdain.  Sadly, such people seem to be in short supply, while there is a surfeit of wannabe victims, especially in Germany.

Update: I was especially amused at the “revelation” that OPEC tried to pin the rise of oil prices on “speculators”.  I made a presentation on the impact of speculation on energy prices at a conference at Champouloc in January, 2008 (before the big runup in prices in the spring and summer) at which I quoted several statements by OPEC officials blaming speculators for high oil prices.  As I recall, I sang a chorus of of Chuck Berry’s “It Wasn’t Me!” to make the point.  You didn’t need the NSA to uncover this great insight.  You just needed to read the energy press.

November 11, 2013

The Weakest Horse

Filed under: History,Military,Politics,Uncategorized — The Professor @ 9:54 pm

It gets better and better. And by better and better I mean worse and worse. And by “it”, I mean the rubbing of the American nose in the manure pile in the Middle East. The Saudis flip out on us.  Then Bibi flips out on us.  (Quite an accomplishment to get the Saudis and Israelis on the same page.)

And now the Egyptians host a Russian naval vessel for the first time since 1992. Moreover, the Egyptians, who can’t even afford a pot to pee in (as my grandfather used to say), are looking to buy $4 billion in arms from Putin.  Obviously the Egyptians are sending a message to Obama.

Yeah.  That hurried Kerry visit to Cairo sure worked magic, eh?

The US has always been the object of hatred in the Middle East, but the president who orated in Cairo promising to enhance American prestige in the region has made our nation even more widely hated, not that I would have thought that possible.  In Egypt-the location of his allegedly transformational Cairo speech-Obama has turned the amazing trick of making the US hated by Islamists, secularists, and militarists.  It’s the only thing all Egyptians agree on.  That’s our Obama.  Bringing people together.

What’s worse, he’s made the US an object of ridicule and derision.

Machiavelli famously asked whether it was better for a prince to be loved than feared.  He concluded that it would be best to be both, but that since that was unlikely, it was better to be feared than loved.

The Middle East is as Machiavellian a place as exists today.  Obama’s Quixotic foreign policy-faithfully represented by his Sancho Panza, aka John Kerry-has resulted in the worst of all outcomes in such a place: to be hated and not just not feared, but to be actually ridiculed and despised as an unreliable ally and craven and cowardly enemy.

Obama reveled in killing Osama.  But he has given life to one of Osama’s most notable observations: “When people see a strong horse and a weak horse, by nature they will like the strong horse.”

Everybody in the Middle East-and the Russians too-see the US as a weak horse.  Hell, not even a horse. A donkey-or an ass-is more like it.

This cannot end well.

American Foreign Policy: Biggest Joke in the World, and Maybe the Funniest (to Russians, anyways)

Filed under: History,Military,Politics,Russia — The Professor @ 11:19 am

The Washington Post’s (yes-the WaPo’s) Jackson Diehl does a brutal, brutal takedown of John Kerry’s serial delusions about America’s Middle East policy (if it possible to use that word to describe such a farrago of idiocy).  My only disagreement with the article is that Diehl lays the entire responsibility for the debacles in Egypt, Syria, Israel/Palestine, Iran, etc. at Kerry’s big feet.  Kerry is merely the (very long) public face of this policy.  The true author resides at 1600 Pennsylvania Avenue.

I usually operate under the maxim that one should never attribute to malice which can be explained by incompetence (or stupidity), but the administration’s foreign policy, especially in the Middle East, is putting my trust in that credo to the test.

It’s a quick (though depressing) read, so do take the time to read the whole thing.  I will just call out one, truly staggering paragraph:

On Tuesday, Kerry offered the following explanation of why the Syrian peace conference he’s pushing will succeed: “The Assad regime knows full well that the purpose of” the conference is “the installation of a provisional government.” And “the Syrian government has accepted to come to Geneva.” It apparently follows that Assad will show up and placidly agree to hand over power. If not, Kerry ventured, “the Russians and the Iranians . . . will make certain that the Syrian regime will live up to its obligation.”

The only possible flattering interpretation of that quote is that Obama and Kerry are trying to incapacitate the Russians and Iranians in convulsions of uncontrollable laughing. Sort of like the old Monty Python Funniest Joke in the World bit:

November 10, 2013

Assume the Position

Filed under: Commodities,Derivatives,Economics,Energy,Exchanges,Politics,Regulation — The Professor @ 8:30 pm

The CFTC has released its new position limits proposed rule.  It is an improvement on the earlier version, but still lacks a serious logical and empirical basis, try as the agency might to muster up a justification.

It is an improvement primarily for two reasons.  First, it has more sensible aggregation standards.  Whereas in the 2011 proposed rule, an entity would have to aggregate positions in every entity of which it had a 10 percent or greater stake in order to determine its overall position for the purpose of determining compliance with the limit, now that threshold has been increased to a more reasonable 50 percent.

Second, the new proposal does not include “class limits”.  Under the 2011 rule, swaps and futures were treated as different classes, and long positions in one class were not offset against economically equivalent short positions in the other.  Thus, a firm could have a zero economic exposure because a swap position was offset by an equivalent futures position, but it could be in violation of the position limit.  This made no economic sense, and was likely a surreptitious way of hamstringing swap dealers’ ability to enter into transactions with the massive passives who bother Chilton (and Gensler) so much.  Along with many others, I submitted comments criticizing this approach, and lo and behold, it has disappeared.  Now position limits are based on net exposures, meaning that a swap dealer can hedge a swap entered into with a customer using futures, in any quantity, without falling afoul of the position limit rule.

Unfortunately, not all nonsensical features of the 2011 proposal have vanished along with the class limits.  Most notably, the 2013 proposal not only includes, but extends the scope of, the “conditional limit” on positions held during the last 5 days of the a contract month.  Under this provision, the limit on delivery-settled contracts during the last 5 days is 25 percent of the deliverable supply, but the limit on otherwise identical cash-settled contracts is 5 times larger (i.e., 125 percent of deliverable supply).

As I commented in 2011-based on a paper I published in the Journal of Business in 2000-this makes no economic sense.  A trader that is long a delivery settled contract can manipulate by standing on excessive deliveries, thereby effectively buying up too much of the deliverable supply.  But a trader that is long a cash-settled contract can have the same price impact by buying the same quantity in the cash market.  Under the conditional limit rule, the holder of the cash-settled contract can get 5 times the benefit from this price impact as the holder of a delivery-settled one. The logic of the 25 percent of deliverable supply limit implies that the CFTC believes that taking delivery of something less than 25 percent of deliverable supply permits the long with a futures position of 25 percent of deliverable supply to manipulate profitably.  This means that the holder of a cash-settled position equal to 125 percent of deliverable supply can manipulate far more profitably.

This rule is passing strange especially considering that the CFTC has filed a manipulation claim against a trading firm-Parnon-that allegedly used cash market purchases to distort futures prices.  The strategy that the CFTC finds illegal in Parnon would benefit both cash-settled or delivery-settled contracts.  Under the conditional limit rule, the agency provides an incentive for the holders of cash-settled contracts to engage in such strategies.

What’s more, whereas the 2011 rule would have potentially constrained such strategies by limiting ownership of physical supplies by the holder of a cash-settled derivatives position to 25 percent of deliverable stocks, the new rule imposes no such constraint.  Instead, it imposes a requirement to report cash market holdings, and hopes that market oversight officials at exchanges will intervene if it looks like a manipulation is in progress.

None of this makes economic sense, and is in fact logically contradictory.  What makes it worse is that whereas in the 2011 proposal the conditional limit applied only to natural gas futures, it now applies to all contracts subject to position limits.

A big chunk of the proposal is a long-winded justification of the rule, in an effort to overcome the legal challenges that saw a federal court reject the 2011 proposal.  It seems to me that the commission is merely restating the arguments that failed in court, so I don’t really see how this helps.

A couple of things struck me as quite interesting.  In both the 2011 and 2013 proposals, the CFTC utilized the Hunt silver case and the Amaranth case as examples of the kind of destabilizing conduct that the rule would prevent. But whereas the 2011 rule argued that large leveraged positions (like those held by the Hunts) posed a threat to market stability, the word “levered” does not appear in the 2013 proposal’s discussion of the kinds of positions that are particularly worrisome.

This is interesting to me, in part, because my criticism of the 2011 rule as over-inclusive focused on the leverage issue.  If leverage is the problem, I argued, why impose the rule on unlevered positions, like those held by ETFs (which are fully collateralized) or real money investors? If leveraged positions were the real problem, the rule was over inclusive because it would apply to unlevered positions too.  Arguably, this argument had some impact, as all reference to the unique dangers posed by leveraged positions disappeared between 2011 and 2013.

But dropping the argument doesn’t eliminate the problem.  The CFTC has not shown how large, unlevered positions with trading decisions made by many individuals (as is the case with ETFs like USO or USNG) pose a threat to market stability in the way the Hunts did, or can cause unwarranted fluctuations in commodity prices.

Relatedly, the 2011 rule argued that position limits would reduce systemic risk.  I commented that it is wildly implausible that even a disorderly liquidation of a large position in a small market could destabilize the financial system.  Would a disorderly liquidation in the milk futures market really pose a threat to world financial stability?  Seriously?

And wouldn’t you know, the 2013 justification does not mention systemic risk.

More generally, the two-two, mind you-cases that the CFTC puts forth to justify its imposition of limits is highly unpersuasive.  I regularly use the Hunt case as an example of how speculation can distort prices.  Or, should I say, the example.  It is pretty much the exception that proves the rule. It occurred over 33 years ago.

Talk about ancient history.  When do we get to the part about the Trojan War?

The commission’s analysis, such as it is, of the Amaranth episode relies heavily on a report from the Senate Subcommittee on Investigations.  This report in no way demonstrates that Amaranth distorted prices, or that the liquidation of its position when it ran into financial trouble caused unwarranted price fluctuations.

A more plausible story is that Amaranth took a huge bet on natural gas spreads based in large part on a view that 2006 would be another big hurricane season.  When September came with no hurricanes, and none in prospect, spreads collapsed and Amaranth lost a lot of money.  The loss does not demonstrate that Amaranth distorted spreads, just that it took a big bet on these spreads, and bet wrong.

It’s not the job of the regulators to prevent market participants from losing big, if those big bets do not distort prices, either when they are initiated, or when they are liquidated.  (In the event, Amaranth’s positions were assumed-quite profitably-by JP Morgan and Citadel, with no notable dislocation in market prices.)

Moreover, even taking the commission’s view, the two episodes do not support the level of limits it proposes to impose.  The 2013 limits (like those proposed in 2013) would limit an individual firm to between 2.5 percent and 10 percent of open interest: the bigger the contract, the smaller the limit as a fraction of open interest.

But the Hunts and Amaranth had around 40-50 percent of the open interest in big contracts-at least 4 times, and arguably close to 20 times the limits the commission has proposed.  So even if you could argue that a 40 percent position could distort prices, or result in unwarranted price fluctuations when the position is liquidated, that doesn’t imply that a 10 percent or 5 percent or 2.5 percent of open interest position would.  There is thus a huge gap between the sizes of the positions that the CFTC claims, based on historical experience, distort markets, and the sizes of the limits it is proposing.

This is related, in a way, to cost-benefit analysis.  The agency is required to compare the costs and benefits of the regulation, but its analysis is perfunctory, at best. In particular, it does not provide a persuasive cost-benefit analysis of any major attribute of the rule, most notably of the size of the limits.  It basically adopts a precautionary principle approach: big positions could cause big problems, so they should be constrained as a precaution.  It asserts-but does not show-that liquidity will not be unduly restricted as a result.  This is insufficient.

Chilton-who has announced his departure-has claimed that the new proposal is immune to legal challenge.  I wouldn’t be so sure.  Even if the court accepts the verbose arguments relating to the commission’s obligation-or not-to make a finding that the limits are necessary, the agency is still vulnerable on the adequacy of its cost-benefit analysis.  Judge Wilkins never ruled on this issue in his 2012 decision, and in my opinion the CFTC is still vulnerable here.

It is not just the cost-benefit trade-off of the rule overall, but the specific choices made.  Most notably, the size of the limits needs to be justified better on a cost-benefit basis.  Similarly, the conditional limit needs to be so justified: and I’ll say that it is impossible-impossible-to do so, if one is constrained to using, you know, rigorous economics.

The rule is unbelievably long.  Five-hundred thirty three double spaced pages.  533.  (395 pages excluding appendices and attachments.) I have read most of it, but have to spend more time digesting the bona fide hedging portion of the rule.  More on that later.

Oh.  There are 846 footnotes: this is where the land mines lurk.  And there was much rejoicing.  By the lawyers, anyways.

November 9, 2013

Beware Presidents in Search of a Legacy

Filed under: Economics,Energy,History,Military,Politics,Russia — The Professor @ 8:40 pm

There are few things more dangerous than a president in search of a legacy.  Especially those who are in political straits.

A besieged Obama is in search of a legacy in foreign policy by achieving a rapprochement with Iran.  No doubt he is being egged on in this by his Rasputin, Valerie Jarrett, who, you know, is an expert about Iran because she lived there until she was four.

Never mind that even the French think this is insane.  (This being the second time in the past 3 months that the French have made Obama look like the surrender monkey.  Quite an accomplishment.)

Never mind that this is disconcerting-no, infuriating-every traditional American ally in the Middle East, notably Israel and Saudi Arabia.  Quite an accomplishment to get those two singing from they same, um, hymnal.

Never mind that this could actually provoke the increased nuclearization of the Gulf, with the Saudis ordering nukes Prêt-à-Porter from Pakistan.

Never mind that the Iranians have taken president after president to the cleaners.  (And lest you think I am being partisan, the president who was dry cleaned most thoroughly was Reagan.  In attempting to bargain with the Iranians for the release of hostages, Reagan gave the Iranians incentives to take even more hostages, which they did.)

I just read the memoir of former CIA operative Bob Baer (“See No Evil.”)  Baer compellingly ties Iran to numerous major terror operations launched against the US for the last 30 years, including the bombing of the US embassy in Lebanon, the bombing of the Marine barracks in that city, and the Khobar Towers bombing in Saudi Arabia. He also plausibly argues that Osama and the Iranians worked together.

Note: the same people-notably the mullahs (especially Khamenei) and the pesdaren (i.e., the Revolutionary Guards)-who approved and/or carried out all of these operations are still the true powers in Iran today.  (Anyone gulled by the new, and supposedly moderate, Iranian president are truly fools.)

The only hope is that the true realists-like the French! (yes-SWP just wrote that)-will derail this insane train before it gets to the station.

And maybe the Russians will derail it (yes-SWP just wrote that too!)  The Russians are utterly cynical, and utterly self-interested. The Russian economic situation-by the admission of the Economics Ministry and the Russian Central Bank, not to mention the IMF and World Bank-is increasingly fraught.  A substantial decline in oil prices would put substantial stress on the Russian economy, the Russian budget-and the lifestyle of the rent seekers that rule the country.  A deal with Iran that relaxed sanctions would add approximately 1mm bbl of oil to world markets-around 1.1 percent of world liquids output.  Using a short run elasticity of 10, that translates into an 11 percent decline in world prices.  That would put Brent in the mid-90s. Russia needs a Brent price of approximately $117/bbl to balance its budget.  It is already on the edge with a current price of $105: $95 would be a major problem.  Major problem.

The Russians, in other words, want turmoil in the Middle East.  An American rapprochement with Iran that would reduce tensions in the Gulf-at least in the short run-and bring Iranian oil back onto market is the last thing that Russia needs right now.  Which could well lead the Russians to throw a spanner in any deal.

So this is what we’ve been reduced to.  To relying on French realism and stalwartness and Russian cynicism and cupidity to prevent Obama from making a blunder of historical proportions in his narcissistic search for a legacy.

If it works out this way I will never doubt Bismarck again.

Obamacare Has Met the Enemy, and It is Reality

Filed under: Economics,Politics,Regulation — The Professor @ 8:00 pm

There’s an old military adage: no plan survives first contact with the enemy.*  Obamacare has met its enemy, and that enemy is reality.

The reality that the government is horrid at IT.  (Amazingly, Obama blamed government red tape-namely, contracting requirements-for the failure of his red tape machine to work.  Seriously.  I could not make up that sh*t.)  The reality that the need to stock the insurance pool with healthy individuals who would be charged prices well above cost would lead to the cancellation of the private policies that many healthy individuals have (despite an Obama promise that if you like your plan you can keep it).  The reality that any scheme built on cross-subsidies is inherently coercive.  The reality that any system that imposes what are effectively price controls on suppliers will result in reductions in quality (i.e., increasingly limited choices of physician, despite an Obama promise that if you like your doctor you can keep him/her.)

And more brutal counteroffensives from reality are to come. There are reports that the administration will attempt to mitigate the sticker shock that many are experiencing (or will inevitably experience) on the exchanges by increasing eligibility for subsidies.  This means that the reality will be that Obamacare will inflate the deficit (despite an Obama promise, duly endorsed by the CBO-arguably under a combination of duress and deceit-that ACA would reduce the deficit.)  And then there will be the reality that Obamacare will not reduce health care costs: how can a plan that extends coverage (both in terms of the comprehensiveness of the policies and the number of people covered) reduce costs?  More reality will bite later.  For instance, the effects on labor supply, due to the effect of Obamacare on effective marginal tax rates. Or effects on the structure of employment, as some companies substitute to part time employment for full time in order to avoid employer mandates.

All of this was predictable.  All of it.  And ironically, those who predicted it are being demonized as wreckers and saboteurs.  If only.  Wrecking this nightmare would prevent the wreckage of a substantial chunk of the US economy-and millions of lives.

* In the US this expression is often attributed to Eisenhower, but it probably traces its origin to a remark by von Moltke the Elder.

November 7, 2013

If You Didn’t Get That Wikileaks Was Russia’s Handmaiden Before, You Should Now

Filed under: History,Military,Politics,Russia — The Professor @ 1:57 pm

Sarah Harrison has left Snowden’s side in Russia, and joined the Berlin cabal (Poitras, Appelbaum, Holger Stark, et al.)  I won’t bore you with her tedious announcement: Google it in case you need a sick laugh.

The fact that she stayed so long in defiance of typical Russian visa regulations already suggested that she was essentially acting as an agent of the Russians all along, shepherding Snowden from Hong Kong to Moscow.   The Russians bent and broke the rules to permit her to stay.  Presumably because she was working with them, or for them.  This would be consistent with Assange’s pro-Russian tilt.

The fact that they let her go only reinforces that conclusion.  She knows a great deal.  About where Snowden is.  About his experiences in Russia.  And most notably, about the relationship between Snowden and the security services.

If the Russians, and notably FSB/GRU/SVR, believed that she was at all unreliable, they would not have let her go and risk having this information come out.  The fact that they did let her leave makes it beyond plain that she is a reliable tool of the Russian security services, and that by extension Assange and Wikileaks are too.

Her current location also strongly suggests that the rest of the Berlin cabal is also considered highly reliable by the Russians.  And why wouldn’t they?  The entire agenda, the entire body of “reporting” is damaging to the US and highly beneficial to the Russians and Putin.

Not that those who pass for journalists in the US and Europe will connect these huge dots.

The Russian Economic Ministry Channels SWP

Filed under: Commodities,Economics,Energy,History,Politics,Russia — The Professor @ 1:34 pm

For years-probably going on 7-I have argued that Russia was in for a long period of economic stagnation.  I referred to Putin’s Hamster Wheel From Hell, on which Russia would just continue spinning.

This prediction was based on my belief that Russia’s “natural state” politico-economic system was inimical to sustained growth.  Yes, the country could experience Cocaine Blues spurts of growth (“took another shot of cocaine and away I run”)-with the Russian economic cocaine being black and gooey instead of white and powdery-but the fundamental institutional deficits would continue to hold it back.  Indeed, the rent seeking and redistributionist policies that resource wealth sustain were-and are-a detriment to the country’s long term prospects.

I stopped writing about Russian stagnation so much, well, because I didn’t want the blog to stagnate along with them 😉  What new was there to say?

Today the Russian Economics Ministry released a forecast that echoes what I’ve been on about all these years:

Russia acknowledged for the first time on Thursday that its economy would lag global growth over the next two decades, setting the stage for an era of stagnation that could threaten President Vladimir Putin’s grip on power.

Economy Minister Alexei Ulyukayev forecast that Russia’s economy would grow at an average rate of 2.5 percent during that period – down from an earlier 4 percent and half the rate Putin targeted before his return to the Kremlin last year.

The downward revision casts Russia as the poor relation in the BRICS group of large emerging markets that includes Brazil, China, India and South Africa. The ministry expects the BRICS to grow at a 5.2 percent clip during that time.

With the ministry expecting global economic growth to average 3.4-3.5 percent, the outlook threatens to make a mockery of Putin’s oft-repeated pledge to lift Russia into the world’s top-five economies by the end of this decade.

And it is still based on an oil price forecast many analysts view as over-optimistic, showing just how much Putin’s Russia, the world’s largest oil producer, relies on not only high, but rising, oil prices to prosper.

Over-optimistic.  Too funny.

Note this isn’t a forecast about a year to two.  This is a forecast that extends to beyond Putin’s departure (likely, anyways, but not absolutely certain-which is symptomatic of the problems).  It is a damning verdict on Russia’s fundamental structural and institutional flaws.  From their own mouths.

One bank analyst sarcastically remarks: “Stagnation is starting to look like a policy goal in Russia.”  Actually, there is much truth in this remark, as I also noted in my writing on this subject going back to ’06-’07.  Autocratic systems like Russia’s that exist to redistribute rents in order to maintain political control and stability hate economic dynamism.  It creates new sources of wealth that can be used to challenge existing power structures.  It creates new groups of individuals, of middling means, who aspire for greater liberties and a political voice.

Meaning that given the choice between stagnation and control on the one hand, and dynamism and a lack of control on the other, Putin and the siloviki will choose stagnation in a heart beat.  Stagnation is a policy goal.  Stagnation means that those are on top stay on top, profiting wildly from their parasitism.  And that, ultimately, is the point.

Until it all falls apart.  Which it will.   The system is strong, in its way (note the utter demoralization of the opposition), but it is brittle.  Dynamic societies can adapt to big shocks.  Stagnant ones not so much.  They tend to shatter into little pieces instead of bending and adapting in response to big shocks.

I’ll sit here patiently waiting for all those soi-disant “Russophiles” who criticized, and at times ridiculed, my earlier prognostications as the product of a Russophobe mind to explain to me how the Economic Minister is similarly Russophobic.  Because he’s just saying what I’ve said for years. Some people are slow learners.  And some are no learners.  Which means I’ll probably be waiting a long time.

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