Streetwise Professor

December 30, 2011

They Sank It

Filed under: Military,Politics,Russia — The Professor @ 10:52 am

The Old Year is going out with a bang–several, actually–in the Russian military.  (And just think: they have an extra two weeks to add to the record.)

The biggest of the disasters was the fire aboard the Delta IV class SSN Yekaterinburg.*  This culminates a year of maritime catastrophes in Russia that eclipses even the country’s horrific toll of air disasters in 2011: recall the sinking of the Bulgaria, the fire on another cruise ship in Moscow, and the recent sinking of the oil rig.

The Yekaterinburg caught fire while in dry dock undergoing repairs.  Initial reports state that the fire started when sparks from a welding torch ignited some inflammable material left lying around, which then set alight wooden scaffolding on which men were working.

I say again: set alight wooden scaffolding.  Welding.  Wooden scaffolding.  Nope.  No fire danger there.

The submarine was partially sunk to extinguish the fire.  So Putin can do a reprise of his post-Kursk performance.

But don’t worry.  Medvedev has ordered new Deputy PM Rogozin to conduct a thorough investigation.  I’ve lost count of how many investigations Medvedev has ordered.  I’ve also lost count of how many reports resulting from these investigations have been released, but I think that’s because there haven’t been any to count.

]Speaking of Rogozin, check out his Twitter pic.  WTF is he wearing anyways?  Can anybody identify his costume? Buck Rogers meets Buck Owens?  Or is it Buck Rogers meets Roy Rogers?]

[And speaking of accountability in Russia for transport disasters: the captain of a vessel that steamed by the sinking Bulgaria, leaving passengers to drown, was fined $5000, but retains his captain’s license.]

Reuters has a summary of submarine accidents over the past decade plus.  The two incidents involving US boats were not due to maintenance or safety issues.  One was a navigational error.  The other was due to the crew’s failure to take notice of a Japanese fishing vessel while surfacing.  The Russian disasters involve fires and explosions and pretty gruesome death tolls.  All betray a shambolic submarine force.  Shambolic+submarine=don’t go near the water.

Accident #2: An Su-24 crashed while landing, with both crew members surviving.

Screwup #3 did not involve a bang. Quite the opposite.  A woman and five companions managed to waltz into a plant for manufacturing engines for strategic rockets, snapping pictures all the while.  Not once, mind you.  Five times.

Blogger Lana Sator said she and friends met not a soul, much less any security guards, as they roamed around state rocket-maker Energomash’s plant, snapping pictures, on five separate night-time excursions in recent months.

She posted almost 100 pictures of decrepit-looking hardware from inside a rusted engine-fuel testing tower, the plant’s control room and even its roof at

Russian media cited a senior space agency official, speaking anonymously, who described the breach as a shock of the same scale as German pilot Mathias Rust’s brazen Cessna flight under Soviet radar to land on Red Square in 1987.

“It showed a complete inability to protect anything whatsoever,” the official told Izvestia. Space agency Roskosmos declined comment on the incident when reached by Reuters.

But don’t worry! Rogozin has ordered an investigation! [And don’t even think about snapping a photograph in a government office or a polling place or any other random place–like a supermarket, in some cases–unless you want a confrontation and a potential interaction with law enforcement.  Priorities, don’t you know.]

Methinks that soon Dmitry will pine for the days when all he had to do was vent at NATO and the US, rather than actually, like, you know, do something.  Dmitry Gorenburg (at Russian Military Reform–an optimistic title, no?) thinks so too:

These two accidents may serve as an early test for Dmitry Rogozin, the newly appointed Deputy Premier in charge of the defense industry. If he wants to show from the start that he is serious about shaking things up, he may use them as an excuse to push through a major house-cleaning of the industry, parts of which are known to have lax quality control and safety standards. Or he may continue to make strong statements that receive a great deal of media attention with little to no follow through, as he did in his previous position as Russia’s ambassador to NATO.

Good luck with that.

2011 was littered with disasters in Russia.  The entire year: it’s not just for August any more.  In the air, with several horrific air crashes.  In space, with a handful of spectacular launch failures.  And, as noted above, on the waters.  The Russian disaster triad.

The only real notable success to counter this litany of catastrophes is the Bulava missile, which experienced three successful test launches in the last several months of the year, and is on the verge of being operational. This success, when contrasted with the other disasters, only cements Russia’s reputation as Upper Volta with missiles.

*My mistake, in haste: The Yekaterinburg is an SSBN in US Navy nomenclature (B=ballistic for ballistic missile sub).  Interesting that Citizen M had a post on the Robert Amsterdam blog a couple of hours after mine that (a) used the exact phrase “Delta IV class SSN Yekaterinburg”, (b) is titled “Submarine Fire Caps Year of Disasters”–the theme of my post, but (c) doesn’t acknowledge or link to this post.  Google “Delta IV class SSN Yekaterinburg” (in quotes) and you get two hits–my post and the RA post.  I wonder if Citizen M knows a Delta IV from a Delta faucet: if s/he did, s/he might have corrected my SSN vs. SSBN error.

I appreciate people reading and quoting material from the blog, but links and acknowledgement are the blog-socially correct courtesies.  This happens with some frequency (and is not limited to blogs–I’ve had international publications lift material without attribution) and it is just annoying.

Update: Citizen M updated the RA post to include a link and a kind word to SWP.  Thanks.

December 29, 2011

What Side Are You On?

Filed under: Economics,Financial crisis,Financial Crisis II,History,Politics,Regulation — The Professor @ 5:04 pm

The President of the KC Fed, Thomas Hoenig has joined a rather loud chorus clamoring for “Glass Steagall-type” measures to prevent another financial crisis (h/t R). (It should give Mr. Hoenig some pause that LaRouchies are very outspoken advocates of Glass-Steagall, btw.)

I find this nostalgia for Glass-Steagall to be bizarre and disconnected from the realities of Financial Crises I and II. The theory behind Glass-Steagall (and GS-lite measures like the Volcker Rule and the swaps pushout provision of Dodd-Frank) is that banks with insured deposits are subject to moral hazard, and will take on too much risk.  This problem can be reduced by restricting the activities in which banks with insured deposits can undertake.  That is, the problem is deemed to be giving banks too much discretion on the asset side of the balance sheet, when the liability side is insured.

But this bears no relationship to what happened in the 2008 crisis, or the one currently going on.

For starters, most of the major institutions that cratered in 2008 were not universal banks that funded capital market activities (such as underwriting) with insured deposits.  Indeed, the opposite was true.  They were investment banks/broker dealers (Bear, Lehman, Merrill); GSEs (Fannie, Freddie); insurance companies (AIG); commercial or universal banks heavily dependent on wholesale funding; and SIVs (many of which did have connections to commercial banks, admittedly).

Indeed, one could make the case that those who prescribe Son of Glass-Steagall to cure our financial ilss have the diagnosis exactly backwards.  Many of the institutions that cratered–notably the IBs and SIVs–did so precisely because they did not have sticky funding (like insured retail deposits): they relied on short-term, uninsured funding like repo and commercial paper.   Others, like RBS, had some retail deposits, but notably were very dependent on wholesale (uninsured) funding, and that dependence had grown over time.  All of these institutions suffered classic runs.

In this interpretation, it is the concentration of risk in institutions that do not fund primarily through insured deposits that is the problem.  David Murphy has a new paper that looks at Lehman and RBS, and arrives at a similar conclusion.  This would imply that Glass-Steagall is utterly off-point.

The history of banking in the US supports this view as well.  Banking panics occurred throughout the 19th and first-third of the 20th centuries due to funding fragility.  These panics destroyed banks that engaged in traditional banking activities like commercial and real estate lending.  Yes, there were runs on investment houses too (Jay Cooke & Co., Barings) but the point is that it’s the liability side of the balance sheet that matters more than the asset side.  There was tremendous diversity in the asset side of the balance sheets of firms that suffered runs prior to deposit insurance: there was very little diversity on the liability side.  All were funded with short term liabilities that could run at the drop of a hat.

Similarly, S&Ls raped and pillaged deposit insurance even though they were very “narrow banking” institutions with significant restrictions on the asset side of the balance sheet (though those restrictions were eased by Garn-St. Germain in 1984).

As a last point, Financial Crisis II is concentrated in European banks heavily dependent on wholesale funding, and the underlying source of the problem is assets that regulators deemed to be utterly safe for commercial banks–highly rated sovereign debt.  Relatedly, many of the assets that caused commercial and universal banks in the US problems in 2008 were again deemed by regulators to be super-safe, carrying very low (and in some cases zero) capital charges. The assets that are raising/raised questions about the solvency of financial institutions would have been perfectly copacetic even in a Glass-Steagall world.

Which all suggests that the Glass-Steagall focus on the asset side of the balance sheet is completely misguided.  The fragility in the financial system comes from the liability side, and regulators and legislators are terrible at identifying the assets that are “safe” for insured institutions to hold.  Given this, measures to stabilize funding–like deposit insurance, or the existence of a lender of last resort–are key to establishing stability.

Of course this raises moral hazard concerns, but the Friedman-Kraus analysis in Engineering the Financial Crisis convinces me that this was not an important part of Financial Crisis I.  Gorton also argues that the moral hazard effects of deposit insurance have been overstated.  The S&L Crisis was a large part a moral hazard problem, but it occurred in large part because of grossly negligent regulators who (under pressure from Congress) let insolvent thrifts continue to operate rather than shutting them down when their financial condition weakened in the late-70s and early-80s: regulators (and Congress) let readily containable moral hazard flourish.  That crisis also shows that banks have plenty of room to engage in morally hazardous behavior even when they are very narrow institutions with extensive restrictions on the asset side.

Identifying the fragility of liabilities as the true vulnerability of the system of course raises important questions: why do financial institutions routinely rely on run-prone funding, as they have done for centuries? Diamond-Rajan argue that fragile funding plays an important disciplinary role: the threat of a run limits the ability of banks to act opportunistically and expropriate those who lend to them.  This implies that trying to reduce reliability on fragile funding will have a cost: There will be more opportunism.  The hard thing is to design regulations that balance between micro incentives (to control opportunism) and macrostability (arising from the fact that the fragile funding that controls opportunism is vulnerable to jumps to bad coordination game equilibria).

But though I don’t have an answer to what the right balance is, I am pretty confident that it is appropriate to focus more on the liability-side issues as opposed to the asset-side issues.  Which further implies that pining for a return of Glass-Steagall is misguided, and positively dangerous, because it distracts attention from the real problems.

We Are So Inside His Head

Filed under: Politics,Russia — The Professor @ 10:54 am

Putin is utterly Pavlovian about the United States.  He nurses intense bitterness about the outcome of the Cold War, and the collapse of his beloved USSR.  As a loyal KGB man, he internalized anti-Americanism.

Which is why Hillary Clinton’s criticism of the Duma elections rankled Putin so much.  Enraged him, actually.  It triggered his Pavlovian reactions, because of the source (the US) and his paranoia about a US-directed and funded color revolution.

It is against that background that one should interpret the Russian government’s rather amusing foray into the human rights forum.  The government released a report similar to the US State Department’s annual review of human rights around the world.  It is a 99.99 percent pure sample of whataboutism:

The 90-page Russian report slams EU nations, Canada and Georgia, but reserves its longest section of 20 pages for what it says are violations by the United States. The report does not cover Asia, Africa or the Middle East, other than a five-page section criticizing the NATO operation in Libya.

Moscow laments the ongoing operation of the “notorious” prison in Guantanamo Bay, where terrorism suspects have been held since the Sept. 11, 2001 attacks, and criticizes President Barack Obama for “legalizing indefinite and extrajudicial custody and the return of court martials [sic: it’s courts martial].”

The report accuses the U.S. of prying into citizens’ personal lives and violating the rights of Muslim Americans in the fight against terrorism. It also points to errors made by American courts.

“Judicial errors are the Achilles heel of American justice as concerns capital punishment,” the report argues. It notes the roughly 130 people sentenced to death in the past 30 years who were later cleared of the charges, some after they were executed.

The Foreign Ministry also struck back at international criticism of Russia’s recent parliamentary election, which independent observers said involved widespread fraud. Outrage over the vote set off a spate of protests led by citizens unhappy with Vladimir Putin’s rule.

The report accuses the U.S. of blocking independent candidates from elections and criticizes the practice of allowing governors to nominate senators when a Senate seat is vacated, as when Obama became president. It refers to the conviction this year of former Illinois Gov. Rod Blagojevich, who was accused of trying to auction off Obama’s Senate seat.

I find the Blago reference incredibly amusing.  Blago would fit in perfectly in Russia.  In so many ways.  (Even the “vich” ending of his name fits.  Yes, he’s of Serbian extraction, but Russians paternalistically think of Serbs as kindred souls for whom they once waged a disastrous war and for whom they continue to risk confrontation.)

Another interesting tidbit in the report: Russia criticizes growing xenophobia in the EU.  More distilled whataboutism coming from as it does from an extremely xenophobic nation and government.

Insofar as the specifics are concerned, the compilers of the report could do all of their research just by reading myriad open sources from newspapers to blogs.  And I’m sure they did.  So it’s not telling us–or the world–anything we didn’t know, or which we don’t discuss, debate and at times agonize over on a nearly continuous basis.

No, this report says far more about Putin’s Russia than it does about the US, or the EU, or any of the other countries studied in the report (notably Russian betes noir Georgia and the Baltic states).  It betrays obsession.  It reveals defensiveness.  It makes plain the continued reliance of the Russian government on Soviet tropes.

In brief, it is like an advertisement for coming attractions from Putin II.

It will be also very revealing to see who in the US echoes what’s in the report.

One last Russia note.  There’s a lot of discussion of the meaning of Surkov’s apparent demotion.  To me the main meaning is that this matter has sparked so much discussion.  Just as the human rights report is redolent of Soviet era “but in the US they lynch negroes” whataboutism, the scrutiny of the meaning of Surkov is a harbinger of the return of Kremlinology.  All illustrating yet again that you can take the boy out of the USSR (kicking and screaming, in Putin’s case) but you can’t take the USSR out of the boy.

December 27, 2011

What’s My Name Again?

Filed under: Politics — The Professor @ 9:41 pm

In 1960 Hayek wrote an essay titled “Why I Am Not a Conservative.”  In it, Hayek pondered the conundrum that many Americans like me have struggled with since: What should we call ourselves?  This is not a problem in Europe: I would be a liberal.  Adam Smith is the quintessential liberal, in the European sense.  But as Schumpeter noted, in the US, those who supported big government and wanted to limit and control the free market started calling themselves liberal:  “[a]s a supreme, if unintended, compliment, the enemies of private enterprise have thought it wise to appropriate its label.”  So unhyphenated liberal means “progressive” or the like in the US, and that is definitely not an accurate label for a believer in a minimal state.  Say “classical liberal” in the US and people just hear “liberal” and think “progressive”: confusion still reigns.  “Conservatives” in the European sense, as Hayek argued, are primarily traditionalists, and hostile to many economic, personal, and civil liberties.

So what is the alternative?  By default, “libertarian”–a word that Hayek said “[f]or my taste . . . carries too much the flavor of a manufactured term and of a substitute”–is pretty much all that is left.  Again quoting Hayek: “But I have racked my brain unsuccessfully to find a descriptive term which commends itself.”  So libertarian has pretty much become the default term to describe someone in the US who is not a liberal/progressive, traditional conservative, socialist, communist, or what have you.

But the “libertarian” label has been claimed by myriad people whom Hayek, and Friedman, and Richard Epstein–and Adam Smith–would find repulsive and decidedly unliberal, in the classical sense.  The most prominent of these today is presidential candidate Ron Paul.  Another is Paul’s former chief of staff Lew Rockwell.  Yet another is radio ranter Alex Jones.  (Sort of working my way down the food chain here.)

As Paul has made a serious challenge in Iowa, he and these others, and his supporters, have attracted much more scrutiny.  And what is revealed is not pretty.  Actually, ugly would be the proper word.

Many have documented the ugliness–most notably the racism that pervades Ron Paul’s newsletters from the 90s.  A good compendium can be found at Ace of Spades.   Given all that’s out there, I’ll let you find it for yourself.  Just be prepared for what you find.  Don’t say you weren’t warned.

I just want to make a few points.

First, much of the most trenchant criticism of Paul and his cultish followers (more on them later) comes from people who are sympathetic with many of the position he takes.  These critics think that government is far too large, and that our liberties have been progressively (pun intended) eroded.  And I agree.

But the dislike of Paul and the Paulians for the government has curdled into a hatred of America.  There is no ugly anti-American conspiracy theory that they do not embrace.  9-11 Trutherism, for instance.  They routinely recycle theories first floated by the KGB.  No wonder RT loves Paul and gives Rockwell plenty of air time.   And it is this profound anti-Americanism that repels people like me, and other Paul critics–people who believe that America is flawed but the last, best hope of mankind that has on balance been a profound force for good at home and in the world at large.

Second, Paul and the Paulians are utterly unrealistic in their prescriptions.  Politics is the art of the possible, but Paul advances impossible plans built on fantastical foundations.  Maybe a dictator could implement them.  Maybe.  But even ignoring the irony of dictatorial libertarianism, these grandiose plans are fundamentally at odds with Hayek’s warnings about the pretense of knowledge: the unintended consequences of libertarian social engineering would likely be as traumatic, at least in the short run, as socialist social engineering.  The world is not an Etch-a-Sketch that you can shake clear and start all over again.  But Paul evidently thinks so and prescribes root-and-branch transformations of every aspect of government policy from money to the military.

And the shrieking vituperation that Paulians direct at those who point out these realities makes plain that if, heaven forfend, they did take power they would be as extreme and uncompromising as any True Believing Bolshevik or Khmer Rouge.  Disagree with any of their extremely unrealistic prescriptions–abolish the Fed, adopt the gold standard, eliminate every American overseas military facility–and you will be immediately bombarded with the Paulian insult trilogy: “neocon, statist, warmonger.”  Yeah, that’s the way to win friends and influence people.

Paul’s historical disquisitions present a revealing perspective on his belief in his unique ability to find magical solutions to immense problems in the face of political obstacles that stymied generations of able statesmen in the past.  The Civil War is an excellent example.  He has called Lincoln a warmonger, and claims that the Civil War could have been avoided at lower cost by buying slaves.

Yeah.  Nobody thought of that.  Gee, I wonder what the problems would have been?  Like: who would pay?  Would the South have agreed to a paid emancipation plan given that the primary source of government revenue was tariffs that were paid largely out of Southern agricultural exports, notably cotton (an import tax is equivalent to an export tax)? Would Northerners, who were not, truth be told, abolitionists, been willing to pay taxes to compensate rich Southerners to free blacks whom most Northerners didn’t care a whit about?  And another issue: as Reconstruction demonstrated, the issue of slavery was more complicated than dollars and cents.  It involved the entire social structure of the South.  One could go on.

Lincoln was in fact sympathetic to the idea of paid emancipation: he advanced the futile plan of buying slaves and relocating them to Africa.  It was a political and practical folly.

But pay no mind to these practical realities.  Ron Paul would have solved the political problem that bedeviled America from its founding.  It is an American tragedy that Ron Paul was not around at the beginning of the 19th century.  (Well, maybe he was. He is pretty old.)

Paul’s and the Paulian’s treatment of political issues past and present reveals them to be political gnostics of the radical dualist stripe.  They believe they have special esoteric knowledge that gives them the ability to devise schemes of social salvation.  They believe that the political world is divided between powers of darkness and powers of light.

These positions are utterly fantastical and have no hope of prevailing.  Moreover, the stridency, weirdness and frequent ugliness of the advocates of these positions actually undermine the prospects for progress towards a smaller, Smithian state that focuses on protecting people against force and fraud.  In 2012, Paul empowers Obama.  Paul has no chance of winning, but he can so damage the already tenuous Republican presidential prospects that Obama could coast to victory despite fundamentals that would doom him to a landslide loss in most years.

But even beyond 2012, Paul and Paulians have so tarnished the libertarian label, that many like me are revisiting Hayek’s question: what’s my name again?  And further: what is the practical political program that will lead to a smaller, less intrusive, less controlling, less destructive state?  That is what Hayek pondered.  That is what Friedman wrote about.  That is what serious Smithian liberals think about today.  That is not what Ron Paul and the Paulians do.  And what they do gives libertarianism a bad name.

Whither Kudrin? Roadkill, probably

Filed under: Economics,Politics,Russia — The Professor @ 1:23 pm

The most intriguing aspect of the current wary circling dance between protesters and the government in Russia is the role of Alexei Kudrin, former Minister of Finance, and the man widely credited as being the architect of the sane and constructive parts of Russian economic policy in the Putin years.  A man who has worked with Putin since the St. Petersburg days.  Reputed to be the only government official permitted to address Putin with the familiar ты.

Kudrin was unceremoniously dumped by Medvedev in the fall, for his outspoken criticism of the administrations defense spending plans.  Although Kudrin called out Medvedev, given that (a) Medvedev is a cipher and a lame duck, and (b) Putin has been quite voluble in his support for dramatic increases in military spending, Putin was the actual target of Kudrin’s blast.  And Medvedev would never have relieved longtime Putin associate Kudrin without Putin’s agreement.

Kudrin has moved even further from the regime.  He has called for cleaning up Russian politics, the need for new Duma elections, and the necessity of a credible liberal political party.  And on Saturday, he went so far as to speak at the opposition rally in Moscow.

He did so–according to his own account–after speaking with Putin (h/t R).  He is holding himself out as a mediator between civil society and the government.  He is calling for peaceful change to the system, predicated on normalizing politics and honest elections.

His efforts are almost certainly doomed to futility.  To begin with, anyone who tries to come between parties to any domestic dispute is at high risk of being set on by both parties.   What’s more, Russia is already a low trust society (pace Tim Newman), where motives are always viewed with deep suspicion.  But most importantly, the only thing that makes Kudrin a credible interlocutor with Putin–his longstanding personal relationship–simultaneously makes him totally suspect in the eyes of the opposition.  And if Kudrin does something to build cred with the opposition, he will make himself suspect in the eyes of the regime–and make himself vulnerable to kompromat and worse.

Which all means that if Kudrin tries to maintain his middle-of-the-road course, he will end up like most things that walk the center line: roadkill.

But this means that a negotiated, transactional resolution to the standoff is virtually impossible, because there is likely no one who has credibility with both the regime and the opposition.  Indeed, the opposition itself is so splintered that there is likely no one even in its ranks that can unite it, let alone simultaneously transact with Putin.

Which means that Putin’s political purgatory is likely to last for some time.  He and his regime have sharply diminished respect and prestige, and the pretense of near universal popularity has been exploded.  But there is (in part by design) no credible alternative, nor anyone to bridge the divide.

The upshot of this is that this standoff is likely to continue.  Putin will no doubt just try to hold on, hoping that the energy of the opposition will dissipate and the country will lapse into its usual atomized apathy.

He is likely to succeed in this, but this does not mean that the protests and the existence of the opposition are irrelevant.  It is not likely–and it never was–that Putin would be removed by a popular movement surging on the streets.  But the revelation that large swathes of the population are already suffering from Putin fatigue even before the official restoration begins will have its effect.  The problem for observers is that its effect will be on the proverbial dog fights underneath the carpet.  That is, it will change the dynamic of the intra-regime infighting, the course of the battle between the clans.  The puncturing of the Putin hagiography will affect the palace intrigues, and those palace intrigues can have a dramatic effect on the way the country is governed–or not.

But as a man now outside of the palace, Kudrin’s ability to influence those intrigues is limited.  He is fatally compromised as an interlocutor between the insiders and the outsiders.  At most, his role is symptomatic of Russia’s current circumstances.  As a serious person who was seriously invested in the status quo, his opposition is a strong signal that the current system has reached a dead end.  But he will have virtually no impact on how that system evolves–or whether it is replaced by something else.

Grandiose, Narcissistic, Nihilistic, and Twisted

Filed under: Politics — The Professor @ 7:45 am

Hackers claiming to be from Anonymous (a claim disputed by others claiming to speak for Anonymous) have hacked Stratfor, releasing client lists and private information (including credit card information and passwords) from subscribers.  They also defaced the Stratfor site, which as of now is still unavailable.

This is vandalism, pure and simple, however the perpetrators try to dress it up as some moral campaign and a blow for freedom.  How, exactly, does it advance freedom to disclose the names and personal information of thousands of individuals who freely contracted with Stratfor, exchanging their money for Stratfor content?  Individuals who do nothing but read what Stratfor publishes?  How does exposing innocent individuals–private individuals–to substantial financial loss serve any constructive cause?  Just because corporations and government agencies happen to be among the subscribers?  Just how does that matter?  Only to a warped mind which believes corporations and governments as inherently evil.  But even putting aside that warped view, what about the collateral damage to individuals?  Indeed, individuals, rather than the ostensible targets, are probably most vulnerable to damage from these disclosures.

And the hypocrisy of these particular vandals is breathtaking.  They revel in their anonymity–they take the word for their movement’s/organization’s name after all–but cavalierly and callously take it upon themselves to deny others their anonymity and privacy.  They presume to determine who has, and who does not have, the ability to maintain a zone of privacy, the ability to determine whom to reveal themselves to, or not.

There are certainly always reasons to be leery of government secrecy, and to challenge its necessity or appropriateness in particular instances.  But the fact that secrecy is misused by governments at time does not logically imply the opposite–that it is never necessary, and that it should be compromised at every opportunity.  That appears to be the twisted logic of the Anonymous set, and the entire constellation of conspiratorial wackos left and right.  But that view is no more defensible than the presumption that the state’s right to secrecy is absolute and unchallengeable.  What adults try to do is to figure out the proper balance, and to structure institutions and to inculcate values to maintain that balance.

The problem with government secrecy is that it can compromise accountability, thereby permitting those operating under its cloud to engage in criminal and unethical conduct, without fear of penalty.

And therein lay the irony: who holds the Anonymous types accountable?  They take it on themselves to determine who and what is deserving of privacy, and who and what is not, but are answerable to no one.

These people portray themselves to be moral paragons, crusading for justice and holding those in government accountable.  But those with accounts at Stratfor hardly fit that characterization.  And moreover, if power wielded without accountability is inherently wrong, how is Anonymous anything but inherently wrong?  To whom do they answer?

No, the simple fact is that these people are nihilistic narcissists.  In their grandiosity, they presume to stand in judgment of others, and to be above judgment themselves.  Anonymous, Bradley Manning, Julian Assange.  All of a piece.  Grandiose, narcissistic, nihilistic and twisted. Acting in the belief that they are somehow superior.  Moral and intellectual avatars fit to hold others to account, but beyond being held to account themselves.  True believers in the Stalinist creed that to make omelets you need to break eggs.

Then there is the question of why Stratfor?  Perhaps this was just opportunistic: that real targets were too difficult to crack but these narcissists needed to feed their egos with some big splash.  Perhaps there was something more deliberate about the choice.  A friend and I have been puzzling over this for the last couple of days.  Hopefully more on that later.

December 25, 2011

Merry Christmas From SWP

Filed under: Uncategorized — The Professor @ 5:27 pm

Merry Christmas to all SWP readers. May you and yours have a wonderful day and enjoy the season in its true spirit. Your participation here is a very generous gift. Many thanks.

December 21, 2011

This Would Explain a Lot

Filed under: Economics,Energy,Politics,Russia — The Professor @ 2:58 pm

From #1 SWP daughter: Young Vladimir Putin Looks Totally Like Tom Riddle (a/k/a Voldemort):

Speaking of Putin.  He is reaching new levels of chutzpah in his campaign.

A couple of examples.  First, Russia to Be a Top Country for Business in 10 Years:

“We need to outline a quite clear goal – to become one of the world’s leading countries with the best conditions for entrepreneurial activity within ten years,” Putin said at a congress of Business Russia, a national association of businesses.

“This is a very difficult task, because it is rather hard to eradicate and wipe out corruption, which, unfortunately, is part of the culture, or its absence,” the premier said.

Vladimir Putin, anti-corruption campaigner.  Mind boggling.

Second, another related piece: “Business must return from off-shore ‘shadows‘”.  This story included this bit:

“There should be absolute clarity concerning the structure of ownership, with real shareholders and beneficiaries,” said Putin.

“This is a key indicator of how civilised the business climate is, the maturity of the economy and the level of responsibility of the business community,” he added, saying his comments did not only refer to the energy sector.

Hey.  Speaking of the energy sector and clarity regarding “real shareholders and beneficiaries”, how about shining some light on Gunvor!  I’m sure that would be quite interesting.

And for an extended treatment as to why Putin lecturing about corruption as anything but a practitioner, see the new Milov, Nemtsov, Ryzhkov, and Shorina paper.  (Five, four, three . . . )

December 20, 2011

I Think I’ve Found the Money

Filed under: Commodities,Derivatives,Financial Crisis II,Politics — The Professor @ 1:36 pm

Reports suggest that some of the MF Global customer funds may have made their way to MF’s UK subsidiary.  In which case, I found it, and right around the block no less!

Kudrin Speaks

Filed under: Economics,Financial Crisis II,Politics,Russia — The Professor @ 10:07 am

Alexei Kudrin is maintaining a relatively high profile of late.  His name has been mentioned as a potential leader of a liberal party in Russia.  Perhaps most interestingly, Putin has dropped hints that Kudrin, who was unceremoniously dumped by Medvedev when he spoke out against profligate government spending, could have a high level post in a Putin presidency.  I interpret this as Putin’s attempt to discredit Kudrin in the eyes of those opposed to Putin.  In the murky world of Russian politics, who knows?  But Putin made these remarks after Kudrin offered some outspoken comments on the Russian political system, so the possibilities are (a) Kudrin is really independent, and Putin is trying to undercut him by raising doubts about that independence, and (b) Kudrin is really just playing a role as a faux oppositionist crafted for him by Putin’s political technologists in order to divide and channel the opposition.  But if it were (b), why would Putin insinuate that Kudrin was still inside the Putin tent?  So I’m going with (a).

Kudrin’s criticism of government policy is not limited to politics.  It also focuses on economic policy.  He gave an interview for RiaNovosti which is quite interesting.  The most interesting bit:

You said in a recent interview that the second wave of the crisis is already here. What will Russia be like once it’s over?– Russia is entering this crisis in a more weakened state. Though more experienced in dealing with crises, Russia’s international reserves have shrunk since last time, while its dependence on oil exports has grown. This could make things more difficult for Russia when the downturn unfolds. But I hope that the plunge will not be as deep this time. I am certain that Russian will be able to address most of the problems successfully. I would only suggest a proactive effort to reduce our oil dependency, although this will require a revision of defense spending along with some other decisions, such as raising the retirement age. This will give Russia more confidence in the face of an uncertain future. All countries are doing this now and Russia is no exception. The high oil prices and the small reserves, which can only last us a year maybe, are a thin cushion for a slump like the one in 2008. We also need to think about the future, the post-crisis years. It isn’t good to cut costs during a downturn because this always makes the decline steeper. If Russia becomes better prepared, cost cutting will not be necessary, which will certainly benefit the general business situation. The government should never cut costs in times of crisis because this policy aggravates problems and makes them snowball. The government increased spending during the last crisis. At the moment, it appears that we have increased spending in the lead up to a new crisis, and we will probably be unable to keep them at the same level during a new crisis. This is where the problem is rooted. If we do not take proactive measures, Russia will be hit harder and will emerge from the new crisis weaker than last time.

Sounds about right to me.  But note that it also goes directly counter to Putin’s populist election campaign.  It will be fascinating to keep an eye on Kudrin, and the Putin-Kudrin dynamic over the next 3 months leading up to the presidential vote, and the months after that.

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