Streetwise Professor

March 3, 2018

Trump Cuts the Hair Suspending the Trade Sword of Damocles

Filed under: China,Economics,Energy,Politics,Regulation — The Professor @ 11:04 am

Overall, I have found the Trump administration’s economic policies to be favorable.  The tax bill was pretty good, even though it was worse than the administration’s original proposal.  The chipping away at the encrustation of regulation has been highly beneficial.

But there was always a sword of Damocles hanging by a thread over our heads: protectionism. Heretofore, that sword has remained dangling, but last week the hair broke (perhaps by Trump’s hair-trigger temper) when he announced plans to impose substantial tariffs on imported steel and aluminum.

This is egregiously bad policy, even on its own terms. Like all tariffs, these will impose far greater costs on consumers than they will generate benefits for producers.  Since steel and aluminum are intermediate goods, the first consumers are manufacturers that use the metals.  The cost will be borne in the form of lower output from these firms, lower employment and wages in the consuming industries, and higher prices for the final goods.

These tariffs are a failure on their own terms, and demonstrate Trump’s economic ignorance. Trump wants to bolster American manufacturing: these tariffs will harm US manufacturing overall, even though they benefit relatively small subsectors thereof.   This is because US manufacturing is a big consumer of these materials.  As an example, Trump touts the American energy revolution and promotes American energy exports.  Well, the energy business is a huge consumer of steel in particular, in everything from pipelines to rigs to drill pipe to storage tanks to oil refineries to LNG liquefaction plants.  By helping one shrunken sector of the US economy, Trump is imposing substantial harm on a growing one–and one that he touts, no less.

A common retort to criticisms like mine is that the trade playing field is unfair, and that countries like China in particular advantage domestic producers at the expense of foreigners.  Well, they do that in many sectors, but even though that is inefficient, it redounds to the benefit of other sectors in the US economy: for example, subsidizing aluminum benefits US auto manufacturers, who increasingly utilize aluminum (in part to achieve compliance with self-inflicted regulatory harms, namely CAFE standards).

What is little understood is that a tax on imports is a tax on trade: it reduces both imports and exports.  Similarly, subsidizing exports increases trade–including exports by the country importing the subsidized good.

This is true over the long run: in the short run capital flows adjust as well as trade flows.  For example, Chinese subsidies can lead to an increased US trade deficit (Chinese trade surplus), which means that the Chinese accumulate US dollar claims–pieces of paper (or, more accurately, electronic book entries).  Then one of two things happens.  Either the dollar claims prove worthless, or the Chinese spend the dollars on US goods.  So we either get goods in exchange for worthless pieces of paper (or electronic records), or we export goods later.

If retaliatory measures like Trump’s tariffs could result in some bargain or accommodation that levels the playing field, then perhaps the benefit would exceed the cost (although ironically much of the overall benefit will redound to those who tip the playing field, because they bear the brunt of the cost of doing so). The track record on this is hardly encouraging, however. I predict that the likelihood is that Trump’s actions will not materially reduce imbalances in the trade playing field, and that as a result they will be highly detrimental to the US economy–including the sectors which Trump claims to champion.

When Trump was a candidate, I was highly critical of his views on trade, e.g.:

Perhaps to give him more intellectual credit than he deserves, Trump is a died-in-the-wool mercantilist who believes trade is a zero sum game, and who favors protectionism and beggar-thy-neighbor currency policies. He talks like it is the late-80s, and Japan is still an economic juggernaut that will overwhelm the US, completely overlooking the fact that Japan’s crypto-mercantilist policies gifted it a 25 year long lost decade, and that neo-mercantilist China is on the brink of the same fate. If it is lucky.


What is bizarre is that the sin of “giving our industrial markets to the Japanese” was somewhat dated by 1999, but Trump pounds on that theme today, when it is well past its sell date. Decades past. Just yesterday, in  Greenville, SC, he said something to the effect that “the Japanese are up here [holding his hand over his head] and we are down here [holding his hand by his knee].” Fact: Japanese per capita GDP is $36K, and US per capital GDP is exactly 50 percent higher, at $54K. But facts don’t matter. The image of Japanese domination (now accompanied by the image of Chinese domination) resonates intensely among Jacksonians.

I was hoping that he would not act on these impulses, or that he would be constrained from doing so. No such luck. Impulsive ignorance has won out.

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March 1, 2018

Teetotaler Putin Channels the Bourbons–And I Don’t Mean Old Granddad or Maker’s Mark

Filed under: History,Military,Politics,Russia — The Professor @ 5:35 pm

Talleyrand famously said of the Bourbons: “They had learned nothing, and forgotten nothing.” That thought came to mind in reading more about Putin’s speech.  He has obviously not forgotten a single slight, perceived or real, from the west, ever.  But he obviously learned nothing from the demise of the USSR, which was economically ruined attempting to compete in military power with a far more economically vibrant and productive rival–the west generally, and the US in particular. If anything, the economic gap has widened since the Cold War.  Indeed, this is especially the case in most military production: the hollowing out of the Russian military-industrial complex is manifest, and the loss of skilled labor in particular has been severe.  The USSR was unable to compete in an arms race, and Russia is in an even worse position to do so.

Yet Putin is announcing a new arms race.

Perhaps this is why Putin’s speech focused on nuclear weapons.  It is the one area in which Russia is competitive, and may actually have some advantages.

But the enemy (and Putin definitely perceives the US to be an enemy) gets a vote too, and Putin cannot unilaterally limit the locus of competition to nuclear weapons.  The US is likely to respond to a more truculent Russia with some new nuclear weapons (e.g., air-launched cruise missiles), but also by expanding conventional forces, and by innovating in technologies that Russia cannot hope to compete in.

This is a sobering thought though–or if you look at it a little differently, one that might get you to hit the bourbon. If nukes are the only tool in Russia’s kit, the likelihood of use becomes higher.

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I’ve Been Talking About Igor For Years Now, Thank You

Filed under: Commodities,Energy,Russia — The Professor @ 10:20 am

The FT ran a long profile of Igor Sechin today.

Nothing in the piece should be news to those who have followed my coverage of his escapades over the years. (I still miss the mullet!)

There are some interesting numbers in the piece that do speak volumes.  Such as Rosneft’s market cap–$65 billion. (ExxonMobil–$324b. Shell–$266b.) The number of employees–almost 300,000. (ExxonMobil–73,500.  Shell–92,000.)  The fact that Rosneft paid $55b for TNK BP–and still has a market cap of only $65b.

Rosneft is a Frankenstein’s monster that has been stitched together over the years from stolen body parts.  Igor is therefore a fitting name for its CEO.

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Putin: Living Down to Caricature

Filed under: Economics,Politics,Russia — The Professor @ 10:11 am

The old caricature of the Soviet Union–which like most caricatures merely exaggerated a fundamental reality–was that it was “Upper Volta with missiles.”  In his State of the State address today, Vladimir Putin gave ample proof that the caricature applies to contemporary (I won’t say “modern”) Russia as well.

The most memorable part of Putin’s speech was a growling, defiant boast–complete with animation–that Russia had introduced new nuclear missiles that could not be defeated by missile defenses.  He also brandished new cruise missiles (which seem to breach the INF treaty, despite previous Russian claims to the contrary) and a submersible drone carrying a massive nuclear warhead.

The rest of his speech was boilerplate about promising to halve Russia’s impoverished population (an implicit acknowledgement that it had grown in his most recent term), and raising expenditures on infrastructure and health care (which has also suffered greatly in recent years).  Lost in the rhetoric was the Russia has stagnated economically under his rule.  The country is a caught in a double trap: the middle income trap and the resource economy trap.  Further, Putin has no real prospect of escaping either, let alone both.

The speech reveals, I think, that Putin understands all this.  Frankly, he realizes that the only reason Russia matters now is its nuclear arsenal, and the widespread belief that it is willing to use it.  He further realizes that this reality will only grow in the remainder of his political life, as Russia falls further and further behind economically.  So he brandishes his missiles, and mouths platitudes about economic development.  Upper Volta with missiles–and nuclear sub drones!–indeed.

As such, the speech gives a clear foreshadowing of what is in store for post-re-election. International pugnacity combined with domestic political and economic Potemkin villages. The Putin Hamster Wheel keeps spinning.

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February 27, 2018

Well Played Igor, Well Played–But Not Well Paid, Collateral Notwithstanding

Filed under: Economics,Energy,Politics,Russia — The Profesor 2 @ 7:33 pm

I recall being quite amused at those who panicked over Rosneft investing large amounts of money in Venezuela’s cratering national oil company PDVSA, thinking that it gave the Russians a vital foothold in America’s back yard. They’ve outsmarted us again! said this lot.

My thought was the exact opposite: they were utter fools for plunging billions into a country and a company run by socialist lunatics (excuse me, “Bolivarian” lunatics), and figured that it would not go well:

Rosneft lent large money to a deadbeat. It’s not going to get paid back so it is seizing assets, and will end up losing money. Playing repo man is hardly the road to riches. It just mitigates the losses from making a bad loan, and it is the bad loan that is the real story here.

But it gets better!  Repo Man Igor outsmarted himself by getting Rosneft’s collateral in the US in the form of a lien on Citgo’s US refineries.  But given sanctions, the probability that he will be able to repossess them can be rounded up to zero.

Now oil trading firm Mercuria senses weakness, and is involved in an effort to take the collateral off Igors hands:

Commodity trader Mercuria has asked the US Treasury for permission to buy out a $1.5bn loan between Russia’s Rosneft and Venezuela’s state oil company, which had raised the prospect of Moscow taking control of refineries on US soil.

. . . .

“Rosneft would have faced an uphill struggle to get approval to exercise a stake in Citgo so this avoids a potential diplomatic strain between the US and Russia if this deal goes ahead,” said Mr Mallinson.

“If this signals that Russia is looking to reduce its loans to Venezuela rather than offering more support that leaves Caracas with nowhere obvious to turn.”

Rosneft has said it is unwilling to extend further loans to PDVSA, many of which have been secured against crude supplies, as the country’s economic crisis starts to hit oil output from the country. The Russian company is seen as keen to reduce its exposure to Venezuela as oil output falls, with the country seen as precariously close to defaulting on its debts.

Well played, Igor. Bravo! The move was so brilliant, that now he’s desperate–sorry, “keen” doesn’t quite cover it–to get out.

Rosneft’s bargaining leverage is pretty much nonexistent.  PDVSA is circling the drain, with a collapse in oil output and revenues.  It can’t pay back the Russians. The collateral is off limits to them.  So Rosneft faces a choice between a big fat zero, and whatever Mercuria et al deign offer it. Perhaps Rosneft can scare up other bidders, but the company holds a very weak hand, and will be lucky to walk away with kopecs on the ruble.

Keep this in mind whenever anyone tries to convince you of Putin’s or Sechin’s strategic brilliance. In this case, they have brilliantly succeeded in flushing several billion into the Venezuelan cesspool, with no real recourse or exit strategy.

They can take some comfort, though, having lent Venezuela a mere $5 billion. The even more brilliant Chinese lent 11 times as much. So there’s that, Igor!

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February 24, 2018

Why Should We Give More Power to Those Who Presume to Rule But Can’t Even Govern?

Filed under: Guns,Politics — The Profesor 2 @ 11:13 pm

The left has reached new heights in its paroxysms of rage in the aftermath of the Parkland mass school shooting.  But anger and over-the-top virtue signaling fail both on substance and rhetoric.

In terms of substantive policy, the recommendations range from the utterly ineffectual (another symbolic ban on “assault weapons”) to the wildly overinclusive and utterly impractical (“ban all guns” or “ban all semiautomatic weapons”).  Overinclusive (if practical) because they would penalize the vast majority of gun owners who are not mass murderers–or murderers at all.  Impractical because (a) seizing tens of millions of firearms from tens of millions of Americans is an obvious impossibility, and (b) a country that cannot stop the mass importation of opiates, cocaine, and marijuana would never be able to stop gun running either.  The end result would be disarmament of the law abiding, and the empowerment of the criminals.

It is also rather amazing to see people demanding more laws in the face of the clear and systematic failure of every level of law enforcement in the Nikolas Cruz case.  I noted this failure in the hours after the shooting, and the subsequent days have seen an avalanche of new evidence of this systematic failure.

Episodes like Parkland are not due to guns per se, but to the intersection of guns and clearly disturbed individuals like Cruz, who seems to be a classic psychopath who was pegged as a potential school shooter by many who came into contact with him.  The school, social services, local law enforcement, and federal law enforcement observed his aberrant behavior, or were warned of the risk he posed, multiple times, yet did nothing. Repeatedly.

If the “authorities” can’t intervene to stop Nikolas Cruz, who raised more red flags than a Soviet May Day parade, who can they stop? The question answers itself.

Further: why should we expect more from, or grant more power to, the same people and institutions that proved feckless and incompetent in dealing with Cruz (and many other mass shooters before him)? Talk about a triumph of faith over bitter experience.

Yet further: in the face of this evidence of the inability of authorities to protect the citizenry, few things incite more leftist rage than someone who protests against being deprived of the means of self-defense. The more the institutions fail us, the more we are supposed to surrender to them.

Which brings me to the rhetoric. The left does not even attempt to persuade or understand those who hold different views on guns. For all their bleating about The Other, leftists are the passed masters at treating those who have the temerity to disagree with them as an unspeakable Other that is completely beyond the pale. If you object to their demands that you disarm, if you assert your right to self-defense, they label you a Nazi, a child killer.

This may be emotionally satisfying, and a way of bonding with those of like mind, but it is utterly self-defeating as a matter of practical politics.  Have they learned nothing in the two years? Do they really think that reprising memes about “deplorables” and “bitter clingers” is going to advance their political agenda by cowing people into acquiescence and silence? Shouldn’t they have figured out by now that shrieking invectives only galvanizes the opposition, especially given that much of that opposition consists of prickly Jacksonians?

We are constantly told about the need for “conversation” and “dialog”, but what we actually get are lectures and shout-downs.  The natural responses are to tune out or shout back, and to view every gun control proposal as merely a first step towards ultimate confiscation (because that is the only policy that is consistent with the maximalist rhetoric about the evils of guns–and those who own them). The result is that the left fails politically, because it is not a majority that can impose its rule in a democracy, which only stokes its rage to greater heights.

What’s that about doing the same thing over and over and expecting different results? And these are the Smart People? After all, they constantly tell us so.

Maybe they are smart–but just insane.

The fundamental problem is that a would-be ruling class can’t even govern. This failure is widely understood, which means that demands for more power will produce resistance, rather than submission. This is especially true when the demands are made against the background of as grotesque a failure as could be imagined, as in the tragic case of Nikolas Cruz and the seventeen people he murdered, where “serve and protect” proved to be a sick joke.

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Are Trustless Transactions a Good Thing? I Don’t Know Until You Tell Me How Much They Cost

Filed under: Commodities,Cryptocurrency,Economics — The Profesor 2 @ 11:04 am

One of the most annoying crypto-tropes is the unconditional statement that Bitcoin and its competitors are great because they eliminate the need for trust in transactions. It is annoying because it is repeated ad nauseum despite the fact that it is seriously analytically incomplete. There is no free lunch: the banishment of trust comes at a cost, and a proper comparative analysis of cryptocurrency vis a vis alternatives (e.g., traditional bank-based payment mechanisms, fiat currency) requires a comparison of the costs of each. Which mechanism performs particular types of transactions more efficiently? Which mechanism performs particular economic functions more cheaply?

In Bitcoin, the economic function performed is the elimination of fraud (e.g., double spending, spending what you don’t have) in an anonymous setting. This is achieved via proof of work, which involves the use of real resources–notably, large quantities of electricity and computing power. That is, trustlessness comes at a cost.

The relevant question is whether this cost is higher or lower than the cost of performing the same economic functions (elimination of double spending, spending what you don’t have) using alternative mechanisms, such as traditional bank payment systems that rely on trust.

Trust is not free either. In essence, economic actors can be incentivized to act in a trustworthy way if they earn a stream of rents that would be lost if they betray trust.  But creating a stream of rents requires an increase in the price of an output and a reduction in the prices of the inputs of the trusted entity.  These price adjustments reduce output below the level that would be attained if transactions could be executed costlessly. (Proof-of-stake mechanisms use a variant of this to address double spend problems.)

The answer to this question is likely to differ, depending on the type of transaction at issue. For example, Bitcoin et al are likely to be cheaper for transactions for which anonymity or concealment of the identities of the parties from third parties  is highly desired by one or both of the transactors (which is a condition that may characterize many illicit transactions).*

It has yet to be shown, and there is room for serious doubt, that cryptocurrencies scale as efficiently as traditional trusted payment systems. Unless it scales, crypto will not be a viable replacement for large scale transactions, especially commercial transactions which represent the vast bulk of payments.

Another potential difference in cost involves security.  It is costly for trusted institutions to prevent theft and loss, but as has been seen of late, theft and loss are serious issues for crypto too. It is not clear which  mechanism mitigates theft and loss most cheaply.

Economics is all about the analysis of the costs and benefits of alternative means of achieving particular objectives. An analysis that hypes a feature of one such alternative (no trust required!) without comparing its costs with that for other ways of achieving the same objective (fraud-free transactions) is fundamentally flawed. Yet that is the default mode of discourse in cryptocurrency.

*The use of cryptocurrency in illicit transactions is close to the top of many elite/official criticisms of cryptocurrency–as it is in elite/official criticisms of fiat currency (“the war on cash”). I am at best ambivalent about this critique because the government decides what is illicit, and tends to overcriminalize transactions between consenting adults, and to overtax. As a Swiss friend told me when we were discussing the war on cash: “I would fight any attempt to eliminate cash. Cash is freedom!”

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February 22, 2018

VIX VapoRubOut

Filed under: Commodities,Derivatives,Economics,Exchanges — The Profesor 2 @ 12:28 pm

Bloomberg’s Odd Lots podcast from a few days ago discusses “How one of the Most Profitable Trades of the Last Few Years Blew Up in a Single Day.” Specifically, how did short volatility trades perform so well for so long, and then unravel so dramatically in a short period of time?

In fact, these two things are directly related. This trade performed well for a long time precisely because it was effectively selling insurance against an infrequent, severe event–in this case, a volatility spike. In essence, those who shorted volatility (primarily by selling VIX futures either directly or indirectly through exchange traded products like the XIV note) were providing insurance against a volatility spike, collected premiums for a long time, and then ended up paying out large amounts when a spike actually occurred. It is analogous to a company insuring against earthquakes: it’s rolling in the dough collecting premiums until a big earthquake actually happens, at which time the company has to pay out big time.

If you look at a graph of the VIX, you’ll see that the VIX can be well-described as a mean reverting process (i.e., it doesn’t behave like a random walk or a geometric random walk, but tends to return to a base level after it diverges from that level) subject to large upward shocks.  After the spikes, mean reversion kicks in, and the index returns roughly to its previous level.



So if you are short the VIX, you pay out during those spikes.

And that’s not all.  The VIX is strongly negatively correlated with the overall market.  That is, VIX tends to increase when the market goes down:


This means that providing insurance against volatility spikes is costly: the volatility short seller commits to making payouts in bad states of the world.  Thus, risk averse suppliers of volatility insurance will demand a premium to bear the risk inherent in that position.  Put crudely, a short VIX position has a large positive beta, meaning that the expected return (risk premium) on this position will be positive, and large.

The flip side of this is that those with a natural short volatility exposure incur a large cost to bear this risk, and might be willing to hedge (insure) against it.  Indeed, given the fact that such natural short exposures incur losses in bad states of the world, those facing them are willing to pay a premium to hedge them.

In equilibrium, this means that short volatility positions will earn a risk premium.  Since short sellers of volatility futures will have to earn a return to compensate them for the associated risks,  the VIX futures price will exceed the expected future value of VIX at futures expiration.  Thus, VIX futures will be in a Keynesian contango (with the futures above the expected future spot).  Given that VIX itself is a non-traded risk (one cannot buy or sell the actual VIX in the same way one can buy or sell a stock index), this means that the forward curve will also be in contango.*  Further, one would expect that long VIX futures positions lose money on average, and given the spikiness of realized VIX, lose money most of the time with the gains occurring infrequently and being relatively large when they do occur.

And of course, short positions have the exact opposite performance.  Shorts sell VIX futures at a premium over the price at which they expect to cover, and hence make money on average.  Furthermore, losses tend to be relatively infrequent, but when they occur they tend to be large.

And that’s exactly what happened in the period leading up to February 5.  During most of that period, VIX shorts were making money.  When the spike occurred on 2/5/18, however, they were hammered.

But this was not an indication of a badly performing market, or irrational trading.  Given the behavior of volatility and the existence of individuals and firms with a natural short volatility position that some wanted to hedge, this is exactly what you’d expect.  Participants (mainly institutional investors, including university endowments) were willing to take the opposite side of those hedges and receive a risk premium in return. Those short positions would earn positive returns most of the time, but when the returns go negative, they tend to do so in a big way. Again, just like earthquake insurance.

One of the inventors of VIX claims that he doesn’t understand why products such as VIX futures or ETPs that have long or short volatility exposures exist. Really? They exist because they facilitate the transfer of risk from those who bear it at a higher cost to those who bear it at a lower cost.  Absent these markets, the short volatility exposures wouldn’t go away: those with such natural exposures would continue to bear it, and would periodically incur large losses.  Those losses would not be as obvious as when volatility products are traded, but they would actually be more costly.  The pain that volatility short sellers incurred earlier this month might be bad, but it was less than the pain that would have existed if they weren’t there to absorb that risk.

One interesting question is whether technical factors actually exacerbated the size of the volatility spike.  Some sellers of volatility short ETPs (like the XIV exchange traded note that is basically a short position on the front two month VIX futures) hedge that exposure by going short VIX futures.  To the extent that the delta of the ETPs remains constant (i.e., the sensitivity of the value of the product to changes in forward volatility remains constant) that’s not an issue: the hedge positions are static.  However, the XIV in particular had a knock-out feature: payment of the note is accelerated when the value of the position falls to 20 percent of face amount.  The XIV experienced such an acceleration event on the 5th, and to the extent the issuer (UBS) had hedged its volatility exposure this could have caused it to buy a large number of futures, because as soon as the note was paid off, the short VIX position was unnecessary as a hedge, and UBS would have bought futures to close that hedge.  This would have been a discontinuous move in its position, moreover: oh, the joys of hedging barrier options (which is essentially what the acceleration feature created). This buying into a spike could have exacerbated the spike.  Whether UBS actually did this, or whether liquidating its hedge position was big enough to have an appreciable knock-on effect on prices is not known.  But it could have made the volatility event more severe than it would have been otherwise.

Bottom line. These markets exist for a reason–to transfer risk.  Moreover, they behaved exactly as expected, and those who participated got–and paid–in the expected way.  Insurance sellers (those short volatility futures) collected premiums to compensate for the risk incurred.  Most of the time the risk was not realized, because of its “spikey” nature, and those sellers realized positive returns.  When the spike happened, they paid out.  There is never a free lunch.  Yes, the insurance sellers dined out on somebody else most of the time, but when they had to pick up the tab, it was a big one.

*Keynes caused untold confusion by using “normal backwardation” to describe a situation where the futures price is below the expected spot price. In market parlance, backwardation occurs when the futures price is below the actual spot price.  Keynesian backwardation and contango refer to a risk premium, which is not directly observable in the market, whereas actual contango and backwardation are.  It is possible for a market to be in contango, but in a Keynesian backwardation.  Similarly, it is possible for a market to be in backwardation, but a Keynesian contango.  If interest rates exceed dividend yields, stock index futures are an example of the former situation.   No arbitrage forces the market into a contango, but long positions earn a risk premium (a normal backwardation).

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February 16, 2018

Now That He’s Tackled the ORGANIZATION, When Will Mueller Indict Grandfather Frost?

Filed under: Politics,Russia — The Profesor 2 @ 10:19 pm

Today Mueller indicted 13 Russians for “interfering” in the US election.  The indictment would be hilarious, if it weren’t so tragic: for nigh on a year the country has been transfixed and the government convulsed by an investigation that is descending into farce.

So this is the best that a “dream team” (nightmare would be more like it, given the presence of people like Andrew Weissman) of prosecutors can come up with:

August 18, 2016, Defendants and their co-conspirators sent money via interstate wire to another real U.S. person recruited by the ORGANIZATION, using one of their false U.S. personas, to build a cage large enough to hold an actress depicting Clinton in a prison uniform.

No, really.

The ORGANIZATION. Yeah. Just like the cosa nostra or the Cali Cartel or something. You cannot make up this stuff.

As yet there is no evidence of collusion (which is not a crime, actually), let alone a conspiracy, between anyone in the Trump campaign or administration and any Russian individual or organization. Indeed, the fact that Mueller apparently feels that he can waste his time on such trivialities suggests strongly that there is no evidence of anything untoward, let alone criminal.

Amidst all the harrumphing, all I can say is that if the republic can’t survive such Mickey Mouse efforts as described in the Mueller indictment, it doesn’t deserve to survive.

Deep thinkers like Ben Sasse say that Putin is attempting to raise doubts about American institutions.  That is unnecessary: the institutions are doing a bang up job at that without any foreign assistance.

Further, as I noted in a talk on the forthcoming Russian election at Rice University last week, there is nothing new here. Nothing. The Russians have been doing this (and far worse) continuously since, oh, around November 8, 1917.  They almost certainly did it 99 years later out of habit, rather than conviction, or a sincere belief that it would have any effect.

But it has had an effect, because by obsessing about it the American political class is actually ensuring that Putin and his creatures are succeeding beyond their wildest dreams.  This obsession, moreover, is not driven by the real threat posed by the Russian effort, but by the need of the political losers to excuse their failure, and to destroy the usurper who deprived them of what should have been theirs by divine right.

The indictment is all for show, because the Russians are in, well, Russia, and hence out of reach of US law enforcement. Mueller might as well have indicted Putin–or Grandfather Frost, for that matter–for all the real effect it will have.

But Mueller desperately needs to show that he is actually doing something.  In this he has succeeded. He has shown that he is chasing phantoms, and wreaking havoc in the process.  But since he is accountable to no one, and politically sacrosanct, he will go on and on, to serve the political class and to justify his existence. A perfect illustration of the a-constitutional monstrosity that is a special counsel.

Shut. It. Down.

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The Answer to Systematic Law Enforcement Failure is Not More Laws

Filed under: Guns,Politics — The Profesor 2 @ 4:16 pm

The horrific school shooting in Florida has elicited the same responses from the same people.  Truth be told, there are no easy answers. Or even hard answers.

What adds to the horror is the realization that it was eminently preventable, and should have been prevented. Not by different laws, or more laws, but by merely minimally competent exercise of existing law enforcement authority.  The hours since the shooting have revealed systematic government failures at every level. The school administration, yes, but especially local law enforcement and especially especially the FBI.

The local police responded to 39–yes, 39–separate calls about shooter Nikolas Cruz, yet he was free to buy guns and to kill indiscriminately. Cruz was a textbook case of a dangerous threat who scared the bejezus out of everyone who came in contact with him. But he skated time after time after time.

Even more shockingly, the FBI had at least two separate warnings about Cruz. Very specific warnings.

One warning pointed them to a YouTube video on which Cruz had made threatening and disturbing comments and identified himself. But the FBI claims it couldn’t find him.

The response to the second warning suggests they didn’t try very hard.  This one came more than a month ago from someone “close to” Cruz and specifically stated that he intended to shoot up a school.  If they knew someone close to him, they should have had no problem finding him, right?

Well, that would require that they tried. And today FBI director Wray admitted that the agency had not lifted a finger in response to this very specific threat.  Not. A. Finger.

After all, the FBI obviously had more important things to do. Like fight furiously to protect disclosure of its actions before, during, and after the issuance of the FISA warrant against Carter Page.  Priorities, dontcha know.

I am literally nauseated–yes, literally–at the juxtaposition between the FBI’s appalling inaction in Florida and its frenzied actions in DC.

And this is not the first time someone that someone on the FBI’s radar has committed mass murder–Orlando, San Bernardino, NY bike path, the Tsarnaevs. And why is Stephen Paddock a mystery to them to this day? Perhaps they have derailed many more plots, but this litany of false negatives is beyond disturbing.

What’s the point of passing new laws when those who would be responsible for enforcing them and the existing laws are capable of such systematic failures of omission and commission?

That is not a rhetorical question. The institutional decay in the United States is beyond obvious. Yet the institutions fight tooth and nail to avoid accountability. Before entrusting these institutions with any more power, it would be far better to fix them–which may require a root-and-branch restructuring–so that we can be confident that they can responsibly exercise the vast powers they already wield.  To say that no such confidence is warranted today is beyond cavil.

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