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Streetwise Professor

November 21, 2014

Swatting the Gold Bugs

Filed under: Economics,Military,Politics,Russia — The Professor @ 8:41 pm

There are idiots. There are morons. Then there are gold bugs. It would be a full time job fighting their insanity, and doing so is like kicking a manure pile: it raises a stink and a cloud of flies. But sometimes it just has to be done.

Recently it was reported that Russia has been buying gold at a furious rate. Gold now represents almost 11 percent of the country’s reserves.

The gold bugs buzzed in glee. To them, it represented another nail in the coffin of the doomed dollar, and Putin was an economic genius making a decisive move in his war against the US. And of course, Zero Hedge peddled this line (by posting an article by a bug site):

Russia’s central bank Governor Elvira Nabiullina told the lower house of parliament about the significant Russian gold purchases. She is an economist, head of the Central Bank of Russia and was Vladimir Putin’s economic adviser between May 2012 to June 2013.

This announcement is unusual and to our knowledge has not happened before. The announcement by the Russian central bank governor was likely coordinated with Putin and the Kremlin and designed to signal how Russia views their gold reserves as a potential geopolitical and indeed financial and currency war weapon.

(The comments are priceless.)

Here’s another, from July:

Reserve Currencies In History – Dollar’s Demise Cometh

Central banks continue to be buyers of gold at these attractive price levels. As sanctions, economic war and currency wars intensify we expect Russian and Russian ally buying of gold reserves and selling of dollars to intensify. Aggressive buying of gold and particularly silver by Russia will likely lead to defaults on the COMEX gold and silver futures exchanges and potentially an international monetary crisis.

See important guide to Currency Wars here Currency Wars: Bye, Bye Petrodollar – Buy, Buy Gold

The truth, of course, is much different. This is actually another symptom of Russian economic desperation, rather than a diabolically brilliant blow against the dollar:

Russia’s central bank has been forced to step up its gold buying this year to absorb domestic production that Western sanctions are making it hard for miners to sell abroad, and to boost liquidity in its foreign reserves, sources said.

Most Russian gold mine production is sold to domestic commercial banks, such as Sberbank or VTB, which can then sell the metal on to either the central bank or to foreign banks.

This year, sources say, foreign banks are holding off buying Russian gold after Western powers implemented sanctions against the country over the Ukraine crisis.

The central bank has therefore had no choice but take domestic mine production that cannot be sold to foreign banks, two sources said, and has bought most of the metal that commercial banks had available.

. . . .

While the sanctions do not expressly prohibit them from buying gold, Western banks are cautious over any business done with their Russian counterparts, sources said.

What’s more, the Russian CB can pay for the domestically-produced gold with rubles. It’s the only way it can really bolster reserves without selling rubles for dollars or euros.

Thus, rather than a blow against sanctions, it is yet another action forced on the Russians by them.

It’s also interesting to note that gold hasn’t been a great investment for the Russians. Gold purchase data is available on a quarterly basis. Assuming that Russia purchased gold in a quarter at the average price during those three months, based on IMF data and the current spot price of gold, I estimate that Russia has lost well over $1 billion on the gold purchased since 2009.

Speaking of Russia’s reserves, this piece by Anders Aslund is well worth reading. When he breaks down the numbers, Russia’s vaunted reserves look much less impressive. In particular, Anders points out that the National Wealth Fund and the Reserve Fund are not under control of the Central Bank, and committed to supporting pensions and the federal budget. Moreover, sharks like Sechin are already laying claim to big pieces of it. Further, Russia’s large external corporate debt cannot be refinanced due to sanctions, and payment commitments over the near to medium term will rapidly draw down the remaining reserves, and the current account surplus will fall substantially due to lower oil prices.  

One last gold item. ISIS are gold bugs. They have announced the creation of a currency, based on circulating gold, silver, and copper coins. They really believe the gold bug stuff. They are aficionados of ZH and currency warrior James Rickards (whose mug pops up everywhere, including on mainstream media websites like WaPo, in advertisements for his buy gold, buy a bunker, for the end is nigh book).

I was particularly amused by this:

 The gold and silver purchases are strange enough, he said. “But what is striking is how elements of the organization have seized power transmission cables and other copper components,” Obeidi said. The fighters are burning the insulation off the cables and harvesting the copper [to fashion into coins], he said.

So they’ll have metallic coins but no electricity. Which may be OK with them, given how much they want to live a 7th century lifestyle.

This is great news. If a shambolic Iraqi military can’t destroy the Islamic State, economic mismanagement based on wacko gold bug theories might achieve that result instead. I suggest that the CIA carry out a mission to translate Rickards’ Currency Wars into Arabic, and clandestinely distribute it in ISIS-controlled lands. A very cheap, but very effective, form of subversion.

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November 20, 2014

How Do You Know That Zero Hedge is a Russian Information Operation? Here’s How

Filed under: History,Military,Politics,Russia — The Professor @ 9:41 pm

I have frequently written that Zero Hedge has the MO of a Soviet agitprop operation, that it reliably peddles Russian propaganda: my first post on this, almost exactly three years ago, noted the parallels between Zero Hedge and Russia Today.

A few days ago ZH ran a post that illustrates perfectly how it spews Russian propaganda that slanders the United States and other enemies of Russia, such as Ukraine: “Ukraine Admits Its Gold Is Gone: “There Is Almost No Gold Left In The Central Bank Vault.”

The lurid post highlights a statement by the head of Ukraine’s Central Bank, to the effect that almost all the gold in Ukraine’s official reserve is gone. It states that this is news, a stunning revelation, which confirms a story that ZH reported a few weeks after the triumph of Maidan: that soon after Yanukovych fled, the gold had been spirited out of the country in the dead of night by airplane. It closes by stating the the disappearance of the gold occurred at the time that US State Department official Victoria Nuland was in Kiev. The implication is obvious. The US stole it:

In any event, now that the disappearance of Ukraine’s gold has been confirmed, perhaps it is time to refresh the “unconfirmed” story that a little after the current Ukraine regime took power the bulk of Ukraine’s gold was taken to the United States.

Wow. Quite a tale.

And one that overlooks crucial details. Most importantly, the Ukrainian CB’s “admission” of that the vaults are empty is not news. At all. A mere few days after Yanukovych fled, Ukrainian Prime Minister Yatsenuk disclosed that the country’s gold reserves had been looted:

Speaking in parliament, Yatsenyuk said that the former government had left the country with $75bn of debts. “Over $20bn of gold reserve were embezzled. They took $37bn of loans that disappeared,” Yatsenyuk said. “Around $70bn was moved to offshore accounts from Ukraine’s financial system in the last three years,” he claimed. [Emphasis added.]

The US dispatched  FBI and Treasury investigators to assist Ukraine in an investigation.

Funny how ZH left out that history, which appeared in virtually every mainstream publication at the time, and made it seem for all the world like the Ukrainian Central Bank’s revelation hit the world like a thunderbolt, nine months after Yanukovych’s flight. That distortion of history makes it plain that the ZH story is not information, but an information operation.

Shortly after Yatsenuk disclosed the theft of the gold, stories started appearing on the web, first on a Russian website, claiming that the gold had been spirited out the country: including on ZH, which quoted the Russian web story. This obviously serves a Russian purpose: it presents a counter-narrative that blames the theft of the gold not on Yanukovych, or the Russians, but on the new Ukrainian government and the United States.

This is the classic Soviet/Russian agitprop MO that I noted 3 years ago. A story appears in an obscure publication, typically outside the US or Europe, where it has been planted by Soviet/Russian intelligence. It is then picked up by another, more widely read publication, in Europe or the West. Maybe it works its way through several additional media sources. It then gets disseminated more widely in the west, sometimes making it to prestige publications like the NYT.

In the era of the web, the information weapon needn’t make it that far. Getting into a widely-read web publication like Zero Hedge which is then linked by numerous other sources and tweeted widely ensures that the lie goes viral.

ZH is an important transmission belt moving the story from Russian propagandists/information warriors to western news consumers. It happens a lot. This is a particularly egregious example, but the transmission belt runs almost daily. ZH is as much a part of Putin’s information warfare as RT. If you follow closely enough, it’s as plain as the nose on your face.

So why does anyone take Zero Hedge seriously? And believe me, many do. Many people who should know better.

And what is the US’s counterstrategy? Marie Harf’s Twitter account. I say again: we are so screwed.

 

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November 19, 2014

Vladimir Putin, Anti-Corruption Crusader?

Filed under: Economics,Energy,Politics — The Professor @ 7:30 pm

Bloomberg reports that Putin “stunned advisors” by backing an anti-corruption campaign:

Vladimir Putin sat motionless as the minister, seizing on the Russian leader’s first major meeting with his economic team in months, itemized the challenges.

A recession is imminent, inflation is getting out of hand and the ruble and oil are in freefall, Economy Minister Alexei Ulyukayev told Putin, according to people who attended the meeting at the presidential mansion near Moscow in mid-October. Clearly, Ulyukayev concluded, sanctions need to be lifted.

At that, Putin recoiled. Do you, Alexei Valentinovich, he asked, using a patronymic, know how to do that? No, Vladimir Vladimirovich, Ulyukayev was said to reply, we were hoping you did. Putin said he didn’t know either and demanded options for surviving a decade of even more onerous sanctions, leaving the group deflated, the people said.

Days later, they presented Putin with two variants. To their surprise, he chose an initiative dubbed “economic liberalization,” aimed at easing the financial burden of corruption on all enterprises in the country, the people said. It was something they had championed for several years without gaining traction.

The policy, which Putin plans to announce during his annual address to parliament next month, calls for a crackdown on inspections and other forms of bureaucratic bullying that cost businesses tens of billions of dollars a year in bribes and kickbacks, the people said. It entails an order from the president to end predatory behavior, with prosecution being the incentive for compliance, they said.

A few comments.

First, Putin’s resignation to the persistence of sanctions means that he has no intention of backing down in Ukraine or elsewhere. No surprise there.

Second, the motives behind the anti-corruption campaign are much more equivocal than the article suggests. Although the ostensible reason for it is to ease burdens on the Russian economy, there is obviously a political dimension too. Such campaigns can be a way of asserting power over the bureaucracy, maintaining political discipline, and strengthening the vertical of power. Putin is obviously paranoid about asserting control throughout Russian society, especially now, and especially in times of economic difficulty, and maintaining a tight rein on the bureaucracy can advance that objective. “Maintaining party discipline” through draconian measures has a long history in Russia and the USSR. Does the word “purge” come to mind? And Putin has a contemporary example as well: China’s Xi is using an anti-corruption campaign to achieve dominance over the Chinese political and economic elites.

Third, this will no doubt be popular, because it is directed at the kinds of corruption that plagues Russians in their everyday lives and business. This very fact could mean that Putin’s move betrays a certain uneasiness about the durability of his popularity, currently at stratospheric levels (if polls are to be believed). This is a way of shoring up his popular flank.

Fourth, these things said, the prospects for success are rather dim. Corrupt bureaucrats and police are like cockroaches. Yes, you can squash or poison quite a few, but the species will survive and even thrive. Indeed, these campaigns paradoxically create new corruption opportunities: the enforcers can extort from the targets in exchange for turning a blind eye. Thus, any initial burst of popular enthusiasm is likely to lapse into cynicism and resignation.

Fifth, even if retail corruption is targeted, I seriously doubt that wholesale corruption at the elite level will be touched, at all, except as a weapon to destroy political enemies, or those who Putin believes have ideas about grabbing for political power, or who hold assets that more favored individuals covet.

Sixth, Putin apparently rejected a “mega-projects” alternative advanced by Timchenko. This only shows that Putin is not completely delusional. For given that he realizes that as a result of sanctions and low oil prices the Russian economy is in a precarious state, he knows that mega-projects are unaffordable. As a great illustration of that, after canceling five previous auctions, today Russia tried to auction $100 million in government debt. It ended up selling $10 million.

In other Putin news, he whined about American attempts to subdue Russia. Yeah, as if Obama is obsessed with exerting American hegemony, and as if Obama gives a damn about Russia (being in this way, any was, at one with the vast majority of Americans). Putin (and Russians) are so convinced of their importance, that they imagine that others must be too. Putin also demanded that relations be based on “respect.” Mobsters and gangstas are obsessed with respect, so Putin is only acting according to type.

Lastly, Putin’s mouthpiece Peskov demanded that  Nato give Russia a “100 percent guarantee” that the organization would not admit Ukraine. Apparently Nato’s approach to the Russian border makes the poor dears “nervous,” notwithstanding that Nato’s capability to and interest in projecting force into Russia is zero. Truth be told, other than the US, Nato’s military capability is zilch: with the exception of the (shrinking) British army and parts of the French, European Nato troops couldn’t fight their way out of a “piss-soaked paper bag” (in Patton’s graphic but timeless phrase). And perhaps someone should remind Peskov and his boss that Ukrainians had shown zero interest in joining Nato until Russia invaded. Go figure.

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Science!©, KXL Edition

Filed under: Climate Change,Commodities,Economics,Energy,Politics — The Professor @ 4:04 pm

When he said that oil shipped from Canada to the Gulf Coast would be “sent everywhere”, Obama was regurgitating a mantra of the enviro left and mainstream media outlets (but I repeat myself). Remarkably, his own government disagrees.

The State Department’s very detailed analysis of KXL addressed this specific issue in the market analysis chapter of the Environment Impact Statement. The relevant section, on  page 1.4-140 specifically notes that it had received comments throughout the review process claiming that KXL-shipped oil would be exported, and that it felt obliged to respond to these claims. It did so, and delivered a smackdown:

However, such an option appears unlikely to be economically justified for any significant durable trade given transport costs and market conditions.

. . . .

In short, while it is possible that some cargos of heavy WSCB crude could be exported, it is unlikely for a range of economic factors that any such trade flows would be significant or durable in the long run

The supporting analysis basically repeats and supports the arguments I made in my Keystone posts. This analysis is based on an exhaustive review of available data and a firm grasp of refining and transportation economics. Unlike Obama’s, in other words. The analysis states that two alternative models, including one from the EIA (another part of the government) predict no appreciable exports of Canadian heavy crude piped to the US via Keystone, and that this conclusion is robust to various assumptions about available transportation options.

To summarize, President Science!© did not perform, or rely on, any systematic economic analysis when he delivered his verdict on the economics of KXL. He just parroted claims from NRDC, Earth First! and the like that had been thoroughly debunked by a careful analysis of US government economists.

Why does anyone pay the slightest attention to anything he says? He speaks authoritatively about things of which he knows nothing. He is not just ignorant, he is willfully ignorant. His own government did the work that definitely demonstrates the falsity of his arrogantly-delivered claims. Yet he and his acolytes presume to lecture the hoi polloi about Science!©

As an aside, a bill to authorize KXL went down in the Senate yesterday, delivering a likely final blow to the dead parrot candidacy of Louisiana’s Mary Landrieu. Her soon to be erstwhile colleagues preferred to kick her to the curb, rather than force Obama to veto KXL. Now, anyways, because the Republicans will almost surely pass the bill in January, after Mary has moved back to Louisiana, that is if she can bear to leave her DC mansion.

The best part of the day was that a group of Rosebud Sioux (you read about them here first!) interrupted the session with protest chants while Elizabeth Warren was presiding. Senator Warren was not amused. Perhaps if they’d chanted in Cherokee she would have been more sympathetic.

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November 17, 2014

Obama Draws Another Red Line–On Pluto

Filed under: History,Military,Politics — The Professor @ 10:12 pm

Obama has identified a condition under which he would commit ground troops to fight ISIS: if ISIS gets a nuke.

The headline on the YouTube video is misleading. Read literally, it means that Obama has identified an ISIS nuke as a necessary condition for a commitment of US ground troops. He has instead stated a sufficient condition. There may be other sufficient conditions. Perhaps he would commit ground pounders if ISIS were to ally with space aliens whose ship landed in the Syrian desert. Or maybe if ISIS creates a zombie army. So an ISIS nuke isn’t necessary, exactly.

But it’s clear that Obama is making it plain that he would only contemplate ground troops under the most extreme circumstances. He has drawn a red line, without using the term. And learning from his Assad-uses-chemical-weapons red line blunder, he has drawn this one so far, far away that the probability it will be overstepped is vanishingly small, certainly in the two years remaining to Obama’s presidency. This red line might as well be on Pluto. Which is exactly Obama’s intent.

A reasonable interpretation of Obama’s remarks is that even though nukes are beyond the pale, chemical and biological weapons are not.

Note that the ground operation that Obama envisions is a commando raid to secure the weapon, rather than a persistent troop presence.

Further note the supercilious tone with which he delivers his statement. As if it as a nearly unbearable impertinence for someone even to broach this question.

There is a continuum of ways in which ground troops can be deployed. Obama’s scenario is about at one endpoint of that continuum. Moving close to the other endpoint, no one has seriously raised the possibility of deploying a force even remotely resembling what was on the ground in Iraq from 2003-2011. The deployments that Dempsey and Odierno and others have mooted are not far from Obama’s proposal, but would facilitate the two main pillars of American strategy, such as it is: an air campaign and relying on local troops to roll back ISIS. Ground controllers and special forces are tremendous force multipliers in an air campaign, especially when intelligence is hard to come by and avoidance of civilian casualties is vital and the battlefield is very complex. Moreover, the effectiveness of Iraqi and Kurdish troops would be greatly increased if US advisors were present at the front, at the battalion level and below. Training them in bases at the rear and then having US advisors wave goodbye as they send them off to get their asses kicked, again, is an exercise in futility. Every Iraqi battalion needs American officers embedded, and special forces should deploy with Iraqi troops at the point of the spear. These Americans can provide tactical guidance, buck up wavering Iraqis, collect intelligence, and facilitate coordination between ground units and between ground units and coalition air forces.

But no. Obama’s mulish insistence on no ground troops absent nukes/aliens/zombies substantially hampers the effectiveness of the limited resources he has grudgingly committed to the battle. He has imposed irrational limits on an already limited strategy and operational concept.

It would be reasonable to conclude that he wants to fail, because the constraints he has imposed make failure highly likely.

 

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November 15, 2014

Perhaps Fittingly, a Post on the Land of the Looney Brings Out the Lunatics

Filed under: Climate Change,Commodities,Economics,Energy,Politics — The Professor @ 7:59 pm

Tweeting my post about Obama’s Keystone mendacity unleashed a vortex of leftist idiocy that was stunning even by Twitter standards. Between a visceral and unthinking hatred of Keystone, and the need to rally to the defense of their cult leader (who also has a visceral and unthinking hatred of Keystone), the lunatics felt compelled to swarm from the hive.

One idée fixe was that Obama was right, and the oil is just going to travel down Keystone (spilling huge quantities all the way!), be put on tankers, and sail on its merry way to furriners abroad, especially the Chinese. The fact that the terminus to KXL is located at the heart of the largest concentration of refineries in the US, and refineries tailored to refine heavy crude to boot, could not shake them from their conviction. Apparently refiners in Texas are just going to stand by the Houston Ship Channel and wave as tanker after tanker of oil that they could be refining passes them by on its way to distant markets with much less efficient refineries. It’s rather amusing that some people believe (I won’t say think) that 830kbd is somehow supposed to sneak past the world’s largest concentration of sophisticated refineries tailor-made to process it, and end up in China.

Nor could they be budged by the fact that large quantities of Canadian crude, including oil sands, are already being shipped (via rail, barge, and rail then pipeline) to PADD 3 refineries and refined here. (Canadian oil sands already represent the largest single source of crude imported to, and refined in, the US.) Nor could geography sway them: if you want to ship oil from northwestern Canada to China, going via the Gulf would be a pretty stupid way to do it. Far better to pipe it to Canada’s Pacific coast: indeed, Canada has suggested that’s what it will do if KXL is blocked, which indicates that even that is the 2d best alternative, the best being to refine it in the US. If heavy oil is to go to China, it’s cheaper to substitute Canadian oil for Venezuelan, and have the Bolivarians ship it to the Maoists. (One Einstein said that the expansion of the Panama Canal proves that the oil is destined for China. Er, no. Even after expansion, the Canal can handle only  ships with about 1/2 to 1/3 of the capacity of a VLCC that is the most efficient way to ship crude long distances.)

A few grudgingly conceded that it would be refined in the US, but that wouldn’t benefit Americans, because then the refined products would be snapped up by the voracious Chinese. That there is EIA data showing that 80 percent of US refinery output is consumed domestically, and that less than 4 percent of US refinery exports (and hence less than 1 percent of refinery output) goes to China (and most of that from PADD 5 on the West Coast) made not a dent. And irony is apparently lost on some people: Canada is the 2d largest importer of US refined products. Meaning that a gallon of Keystone crude is far more likely to wind up in a Canuck gas tank than a Chinese one.

One genius Tweeted a Guardian article saying that most of Keystone oil would be exported. Obama is right! QED! Except that the article clearly meant that it would be exported from Canada. Or would that be Cana-duh?

Nor did the fact that transport of oil by rail  is much more dangerous, and poses far greater environmental hazards have the slightest impact on those who are allegedly so sensitive to the fraught state of the planet.

Then it got really nuts. It became all about the Indians. Apparently the ogichidaag* of the Rosebud Lakota Sioux tribe have stated that the House’s approval of Keystone was an act of war:

“The House has now signed our death warrants and the death warrants of our children and grandchildren. The Rosebud Sioux Tribe will not allow this pipeline through our lands,” said President Scott of the Rosebud Sioux Tribe. “We are outraged at the lack of intergovernmental cooperation. We are a sovereign nation and we are not being treated as such. We will close our reservation borders to Keystone XL. Authorizing Keystone XL is an act of war against our people.”

In February of this year, the Rosebud Sioux Tribe and other members of the Great Sioux Nation adopted Tribal resolutions opposing the Keystone XL project.

“The Lakota people have always been stewards of this land,” added President Scott. “We feel it is imperative that we provide safe and responsible alternative energy resources not only to Tribal members but to non-Tribal members as well. We need to stop focusing and investing in risky fossil fuel projects like TransCanada’s Keystone XL pipeline. We need to start remembering that the earth is our mother and stop polluting her and start taking steps to preserve the land, water, and our grandchildren’s future.”

Yes. The Indians hate oil as a despoiler of land. They are all about sustainability and alternative energy. They would never have anything to do with the stuff. Never mind the 30mm bbl of oil produced on reservations, an amount that has spiked up in recent years, primarily because of the fact that the Three Affiliated Tribes on the Fort Berthold Reservation have been major beneficiaries of the Bakken boom.

Keystone’s alleged oppression of Indians brought forth a torrent of race-based idiocy, culminating in this gem.

And I thought Custer died for my sins.

It is also bizarre that Keystone turns prog Citizens of the World into ranting America Firster nationalists. Keystone just helps the Canadians! The Chinese! Apparently, the Chinese get the oil, the Canadians get the money, and ‘Mericans get the pollution. When @libertylynx pointed out that some good ol’ made in the USA Bakken oil would be shipped on Keystone (a true fact, as there will be a Bakken MarketLink on-ramp that will pump US oil into KXL), someone responded, YOU LIE!!! (yes, complete with caps and exclamation marks). Some people just can’t handle the truth.

And yes, of course I was accused of being a Fox News watching (not), Tea Party (not), Koch Brothers shill (not). And a racist by implication.

I was almost tempted to see if I could make things truly nuts by figuring out some way to bring gold bugs into the conversation. I decided against it, figuring that it would risk creating a singularity of stupidity that could destroy the universe. (I will tempt fate, probably tomorrow, by writing a post on recent Russian gold purchases, which will  bring out the gold bugs and the Russian trolls.)

I have very low expectations on the level of debate on Twitter. Subterranean expectations, in fact. But even given that, I was stunned at the level of insanity, stupidity, ignorance, and venom that the topic of Keystone unleashed. I guess it represents a convergence of prog bugbears (oil, capitalism, “climate change”, criticism of Obama), compounded by the trauma of a rout at the polls.

This may seem like a small thing, but I regretfully conclude that it is a harbinger of something bigger. Obama will spend the next two years dog whistling and throwing red meat to his rabid progressive pack as a part of his post-election, lame duck (or would that be lame loon?) guerrilla campaign. Since he can no longer play Moses, he will become Sampson. Keystone is just one of the columns that he will use to pull down the temple around our ears.

It is going to be ugly, ugly, ugly. And Elizabeth Warren is waiting in the wings.

*This is weird, since this is apparently an Ojibwe (Chippewa for you old timers) word for warrior, and not a Lakota word. The Ojibwe are/were a helluva long way from the Great Plains generally, and Nebraska or the Dakotas specifically. Indeed, it gets better! The Ojibwe and the Lakotas were inveterate enemies. (I am always amused at the romanticization of Indians by prog peaceniks: just who the hell were those warriors and braves fighting before the arrival of Europeans? Other tribes, of course.) The Ojibwe got firearms before the Lakota, and drove the Sioux into the Dakotas.

 

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November 14, 2014

Lies, Damn Lies, and Obamaisms

Filed under: Climate Change,Commodities,Economics,Energy,Politics — The Professor @ 6:44 pm

The Gruber Gone Wild video collection (with a release a day!) demonstrates graphically that Obamacare is a 900+ ply tissue of lies. And Obama himself was the lead retailer of those lies.

Today gives another example of Obama’s mendacity. He came out against Keystone, again, but this time on the grounds that it just helps Canada, and doesn’t benefit the US one whit:

“Understand what this project is: It is providing the ability of Canada to pump their oil, send it through our land, down to the Gulf, where it will be sold everywhere else. It doesn’t have an impact on U.S. gas prices,” Mr. Obama said, evidently frustrated with questions about the Canadian-backed project while he was standing alongside Myanmarese opposition leader Aung San Suu Kyi.

(Using a human rights champion-whom he is going to toss aside-as a prop is a great touch.)

Like a good leftist, Obama apparently aspires to become Lillian Hellman, for every word in that statement is a lie, including “and” and “the”.

Where would Canadian heavy crude pumped through Keystone go? The US Gulf.

Now think hard, people. What is located on the Gulf Coast? Think, think, think.

Got it yet? Of course you do: Refineries! You know, those things that turn crude gunk into stuff we can actually use. I know that even idiot leftists know that there are refineries in Texas, because each of the 4 times a Bush ran for president, they told us ad nauseum about the pollution in Houston/Texas from the eeeeeevvvvillll refineries.

US refineries are optimized to handle heavy crude like that produced from oil sands in Canada. At present, we get most of that from Venezuela and Mexico. Canadian crude would displace most, and perhaps all, of that. (Maybe that’s what frosts Obama: boring, pasty white, Anglo Saxon Canadians benefit, and Bolivarians/Chavistas lose out!) Meaning that US refineries would benefit from cheaper crude which would, inevitably, reduce gasoline prices in the US. (It will also alleviate some of the excess supply of condensate and  light crudes produced in the US-particularly the Bakken-as these can be used as diluents. And I know Obama has totally mastered all of the intricacies of pipeline transportation.)

Indeed, Gulf refineries are already processing Canadian heavy crude. More than 100kbd is reaching the Gulf, via rail or barge, and via rail to Cushing and then pipeline to the Gulf. Keystone would just make those flows cheaper-and safer.

So the “it goes everywhere else” line is a total crock. It comes here, is refined, and fuels our cars, and airliners and homes, and is sold overseas so that we can buy other things foreigners produce that we like to consume.

The only question is: What is worse? That Obama actually believes this crock, or he doesn’t but is willing to say anything to defend an indefensible position?

Obama poses as a great environmentalist. Pray tell, how does relying on riskier forms of transport (tankers from Venezuela and Mexico, barges down the US inland waterways, and rail) rather than pipelines help the environment?

And I am sure it is a total coincidence that Obama booster Warren Buffett, he of the BNSF and Union Tank Car Company, is  a major beneficiary of the  stonewalling of Keystone.

The mendacity is not all that’s appalling about this statement. One of Obama’s worst habits has been giving allies the back of his hand, while he sucks up to sworn enemies. Canada is a close ally, and has been for decades. Indeed, even now Canada is actually contributing military force to Obama’s otherwise farcical anti-ISIS coalition.

Fat lot of good that it does them. Who needs friends like Canada when you have Iran? Can Canada help Obama build a legacy? No! So what good are they? (Please ignore the fact that the legacy will really be a nuclear arms race in the other Gulf: the Arab/Persian one.)

The sad thing is that we are in for two years of this mendacity. It will be all Alinsky, all the time. Non-stop demagoguery in the service of progressive causes. He lost, but we’ll pay.

So we will have to update Twain. No longer should you say “lies, damn lies, and statistics.” The version that will describe the next two years is: “lies, damn lies, and Obamaisms.”

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Russians May Want to Consider Starting to Panic

Filed under: Commodities,Economics,Politics,Russia — The Professor @ 1:00 pm

At the outset of the Financial Crisis in September, 2008, Putin touted that Russia would be an “island of stability.” We know how that worked out. Russia experienced the most severe decline of any G-20 economy in large part due to a steep fall in the price of oil.

Today Putin said that Russia was preparing for a “catastrophic” fall in the oil price, but no worries!, everything is under control:

President Vladimir Putin said Russia’s economy, battered by sanctions and a collapsing currency, faces a potential “catastrophic” slump in oil prices.

Such a scenario is “entirely possible, and we admit it,” Putin told the state-run Tass news service before attending this weekend’s Group of 20 summit in Brisbane, Australia, according to a transcript e-mailed by the Kremlin today. Russia’s reserves, at more than $400 billion, would allow the country to weather such a turn of events, he said.

. . . .

With $421 billion in international reserves, Russia has a “big enough” buffer to meet all social commitments and maintain budgetary and economy stability, Putin said. The value of the stockpile last week extended its slide to the longest since 2008 as the monetary authority attempted to smooth the ruble’s decline.

“A country like ours finds the situation easier to cope with,” Putin said. “Why? Because we are producers of oil and gas and we handle our gold and currency reserves and government reserves sparingly.”

Read that again: ”A country like ours finds the situation easier to cope with. Why? Because we are producers of oil and gas.” The prices of which are highly sensitive to global economic conditions. And how does being a producer of oil and gas make a catastrophic decline in the price of oil “easier to cope with”? Really. I’d like to know.

As for being a producer of oil and gas, this is true. And that’s the problem: Russia is not a producer of much else. A nicely illustrative factoid: Apple’s market cap exceeds that of the entire Russian stock market (which is dominated by natural resource firms, of course).

Putin mentions meeting social commitments. What about military spending? What about the cost of foreign adventures? Which do you think is going to get whacked first if oil prices decline further, or even stay at current levels?

Given Putin’s track record as a prognosticator of economic crisis, and Russia’s economic resilience, and his interesting theoretical perspectives, his calming words should make Russians think about panicking. Like now.

 

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November 12, 2014

Is the Next Invasion Coming in Ukraine? It Looks That Way

Filed under: Military,Politics,Russia — The Professor @ 2:54 pm

It is clear that things are heating up in Ukraine. Nato commander Breedlove stated that Russian troops and armor have moved into the Donbas. Even the blind OSCE has noticed their presence. There are nine battalion combat groups on the border. The intensity of combat between “rebels” and the Ukrainians is increasing. Ukraine has put its troops on alert, telling them to expect an assault.

I have predicted that the conscription cycle and the need to open a land route to Crimea would lead Putin to launch an attack soon. When the ground is reliably frozen, but before winter fully sets in, would be the optimal time. That would be very soon.

I think an attack is likely, especially since the west (Obama, Merkel, etc.) continue to avert their eyes and pretend like nothing is going on. “Leaders” who will not utter the word “invasion” even though that is clearly what has transpired obviously have no stomach for confrontation, and Putin is betting on that continuing.

I think it will proceed as follows. The “rebels” will be committed to attacks throughout Donbas to fix and attrit the Ukrainian forces. They will be cannon fodder. Once the Ukrainians are fixed in place, and their units become combat ineffective due to losses, or at least lose significant numbers of personnel and equipment, the Russian regulars will slice in to deliver the coup de grâce.

Then the castrati in western capitals will express concern, and have meetings, and end up doing nothing.

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Gruber Gone Wild!, or, Gruber Pyle, PhD

Filed under: Economics,Politics — The Professor @ 2:34 pm

For someone who has, at times, shot off his mouth (“you don’t say!” I can hear you saying), I am agape in amazement at MIT’s Jonathan Gruber’s lack of a filter between his brain and his trap. But this is a good thing, for we learn a lot when he unburdens himself.

He first came to the attention of most of us when he was caught on video saying that Obamacare had been deliberately written to limit subsidies to those buying insurance through a state-run exchange. This became an issue because few states set up exchanges, and people have been receiving subsidies through Federal exchanges. This is the reason for a legal challenge to Obamacare that has reached the Supreme Court.

The legal embarrassment this caused led Gruber to claim, subsequently, that the letter of the law regarding state exchanges was a typo, and that his statement had been a “speak-o.”

The latest episode in the Gruber Gone Wild video collection is his performance at a conference at U Penn, where he said that key elements of the ACA had been written in a misleading way to conceal deliberately their true intent and effect. Gruber said that the law was written in a “tortured” way to ensure that CBO would not score it as taxes, and to hide the fact that the healthy would be subsidizing the sick. If these things had been transparent, the bill never would have passed. But fortunately, sayeth Gruber, American voters are too stupid to see through this.

How Leninist of him. The ends justify the means. Who-whom (the Smart People giving it to the Great Unwashed, but only for their own good).

Gruber again sends his regrets for his incautious language. No apology needed. His ex post honesty is welcome, if his (and the drafters’) contemporaneous dishonesty is not.

And there’s apparently a third video, in which Gruber again insults American voters.

Quite the franchise he’s got here.

Gruber’s revelations makes it clear that Obamacare was a fraud, passed (by the thinnest of margins) using utterly dishonest means.

Hopefully, SCOTUS is paying attention and will consign the whole thing to the ash heap of history.

But of course the New York Times fawned over Gruber for his role in driving forward Obamacare. Another revealing thing, that. The NYT uses unethical and shoddy journalistic practices to heap outrageous slurs on academics who dare take positions that contravene its agenda, but gives journalistic tongue baths (I cleaned that way up-way up) to those who say anything-anything-that advances the progressive cause.

Update. The videos are from the collection of one Rich Weinstein, an investment advisor infuriated at paying higher premiums under Obamacare, who decided to investigate what happened. The good Mr. Weinstein says that there are many more videos in his collection. Great! Drip. Drip. Drip.

 

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