Streetwise Professor

Russian OMON security forces cracked down violently on some pre-inauguration protests when demonstrators attempted to march on the Kremlin.  That’s bad, but what is more ominous to me is this completely unprovoked raid by OMON on a cafe (the Jean Jacques) that is a well-known opposition hangout:

This is clearly Putin sending a very blunt message. He is making it plain that he will use whatever means necessary to beat down the opposition.

This is repulsive, but it is an eminently sensible move for an authoritarian. As I’ve written before, the authoritarian has an advantage as long as any opposition remains fragmented, and people are unaware of how widespread opposition is. The authoritarian must prevent the opposition from building critical mass; if it does, the equilibrium tends to tip to mass protest and the fall of the authoritarian. Authoritarians fall when they are soft-Putin clearly believes that, and no doubt absorbed the lessons of 1991 very, very well.

By striking preemptively, Putin likely scares off enough people from showing public support for the opposition to preclude the formation of critical mass. If the threat succeeds, he never has to carry out a mass crackdown.

Put differently, a discriminating use of force today makes it unnecessary to use force indiscriminately tomorrow.

There is already an indication that it might work. Oppositionist Masha Gessen has said she will not participate in any more protests until Putin is gone. I’m sure VVP is happy to hear that.

Look for periodic renewals of the object lesson. For OMON to use just enough force to send the message, thereby scaring off enough people from the opposition to ensure that it cannot challenge Putin in any meaningful way.

Election-related news in Europe and Russia is dominating the headlines, and I’ll devote a post to each.

First, with respect to Europe, the Socialist Hollande won the presidency, and the ruling coalition in Greece did not win enough seats to continue the current arrangement.

There was much rejoicing in Paris.  That will not last long, when reality rears its ugly head.  The hangover from that celebration will be horrific indeed.

For Hollande faces a very ugly choice. If he governs as he campaigns with increases in taxes that Obama can only dream about and more generous benefits for civil servants, he will face a bond crisis before too long.   If he concedes to the fiscal realities facing his country, and Europe generally, he will face a political backlash for his betrayal.  France has a long tradition of politically disruptive civil unrest, mainly emanating from segments of the population that are the base of Hollande’s support.  If he crosses them by capitulating to “the markets” and “finance” and even (per NPR “Wall Street”-what, no financiers in Europe?), these erstwhile supporters will be in the streets.

Hollande and others in Europe talk about replacing austerity with growth, growth, growth.  How, exactly?  What is the magic growth formula?  If it is so obvious, why hasn’t anybody found it before? Has Hollande captured a unicorn whose horn will create a spurt of growth that will catapult France (and Europe) out of its current recession and fraught fiscal situation?  If debt and more government spending are the secrets to growth, why aren’t France and Europe booming already, given they’re neck deep in both?

“Growth” is a code word, a euphemism, a lie, for debt funded “stimulus”.  It describes a glittering goal in order to convince people to agree to dubious means.  But even if you believed that stimulus could produce growth, how is this at all possible if the markets are almost certain not to fund this additional spending?

Yes, everybody wants growth.  No disagreement there.  How to get it is the problem.

In countries like France, increasing growth has to come from the supply side-cutting onerous restrictions, particularly in the labor market, combined with a credible plan to ensure that future spending growth is fiscally feasible.  If these things can be done, it is possible-just-to get decent growth while avoiding short term austerity.  Germany implemented labor market reforms in the 2000s, and has reaped the benefits. This is what Italy is trying now, with uncertain prospects for success.

But these things are highly unlikely to happen in France, or in Europe more broadly.

Unions and even some corporate interests will defend the existing labor market institutions and other regulatory restrictions to the last ditch.  Indeed, Hollande’s base will not meekly accede to such changes. Maybe, just maybe, he could play Nixon in China, but that seems wildly implausible.

And credibility about future fiscal prudence is almost impossible to achieve.  The promises can be made today, but when time comes to deliver those in charge of implementation face acute risk of being thrown out of office.  Indeed, the Greek elections illustrate this dynamic graphically, and in record time.  The parties that agreed to the bailout terms suffered badly in the election, and now those already dubiously sufficient terms are at risk of being repudiated, mere weeks after they were agreed to.

All of these realities will be impossible to ignore in very short order.  I do not see how Hollande, or the Greeks, or the Euros collectively, can navigate between the Scylla of the bond markets and the Charybdis of mass protest in the streets.  Indeed, by raising expectations that have induced near euphoria in some quarters in France, Hollande has made the already narrow space between these mortal hazards narrower still.

So where does it go from here? Back to the old standbys.  Importuning the European Central Bank to loosen, and begging, pestering, cajoling, and guilting Germany into putting its taxpayers to work for everyone else in Europe.

Neither alternative is at all palatable to Germany.  Merkel will be caught between her own government-wrecking monsters: the frantic demands of the rest of Europe and the steadfast refusal of Germans to sacrifice their own high incomes and generous benefits for ungrateful (and often hateful and slanderous) citizens of Euroland.

Meaning that it is difficult to see how the standbys will work either.  They depend on German surrender, and it is hard to see that happening either.

To me, it seems almost certain that the core of the European game is empty.  The demands of the various constituencies and nations in Europe cannot be satisfied given the political and economic constraints.

Wen cores are empty, things fall apart. And when something as big as the EU falls apart, the consequences are historic and devastating.

Very interesting of juxtaposition of stories involving Norway and Russia (h/t R).

Story one-Norway’s Statoil and Russia’s Rosneft agree to exploration joint ventures in the Russian Arctic:

Statoil (OSE:STL, NYSE:STO) and Rosneft today signed a cooperation agreement. The companies have agreed to jointly explore offshore frontier areas of Russia and Norway and to conduct joint technical studies on two onshore Russian assets.

The agreement also envisages Rosneft’s acquisition of participating interests in selected Statoil projects.

. . . .

Under the agreement, Statoil and Rosneft will set up joint ventures, with Statoil holding 33,33% in each. The partners will jointly explore the Perseevsky licence in in the Russian part of the Central Barents Sea and three licences – the Kashevarovsky, Lisyansky and Magadan-1 – north of Sakhalin island in the Sea of Okhotsk. The four offshore licences cover an area of more than 100,000 square kilometres, equalling approximately 200 blocks on the Norwegian continental shelf.

Are the Norwegians setting themselves up to be the next victims of expropriation? A couple of things to note.

First, this an exploration deal.  Although this involves irreversible investments, the real risk of expropriation spikes when production begins.  This is particularly true inasmuch as even if the exploration identifies commercially attractive opportunities.  Rosneft would be in no position to try to freeze out Statoil after it had paid to discover the prospects because the Russian company seriously lacks the expertise to develop these resources itself: this is why it is so assiduously pursuing agreements with all the major western majors.

Second, it appears that Statoil is following the hostage model pioneered by ExxonMobil:

The cooperation agreement also provides Rosneft with an opportunity to acquire interests in selected Statoil exploration licences and assets in the North Sea as well as in the Norwegian sector of the Barents Sea.

This article, and all the others I’ve tracked down about the deal, are maddeningly short of details on this crucial aspect of the transaction.  But it is evident that the deal is structured so that Rosneft has a valuable asset at risk if it (or the Russian government) tries its old tricks.

Note to reporters: please get a clue and get more detail on this aspect of the agreement.  This is the crucial term in the agreement.

The hostage mechanism is an oft-used way of enforcing good behavior in transactions involving long-lived investments in specific assets.  Williamson wrote about this mechanism in detail in The Economic Institutions of  Capitalism and elsewhere.

The devil is truly in the details, though.  XOM is apparently confident that it can provide incentives for good behavior from the Russians, and apparently Statoil has taken XOM’s confidence to heart.  But how it works in practice remains to be seen.  Don’t underestimate the ability of the Russians to behave opportunistically.

A particular risk is that the values of the investment opportunities in Russia and in Norway (or in the US Gulf, in the XOM deal) diverge.  Let’s say that the Russian resource turns out to be extremely valuable, but the Norwegian (or Gulf) resource comes a cropper.  Then the hostage has no value, and the risk of expropriation rises dramatically.

That risk seems to be particularly acute in this context, given the extreme uncertainty about the commercial value of the different projects.  Much information will be developed over time about the value of the various resources.  Moreover, technologies will change, affecting the commercial prospects of each.  There is an appreciable risk of a divergence in hostage values.  Given the asymmetric risk of opportunism, that divergence is particularly hazardous for Statoil and Exxon.

This probably explains why all of the deals involve bundles of several exploration prospects.  This diversification reduces the risk of the loss of hostage value.  Only if all of the Norwegian prospects turn out badly do the hostages die, leaving Rosneft free to screw the Norwegians out of any attractive opportunities in Russia.  Note in this regard that the Norwegian prospects are in two different regions-the North Sea and the Barents Sea.  This increases the diversification.

Clever.  I hope it works out for them.

Hey, Tim Newman-your insights would be greatly appreciated.

To emphasize why such measures are particularly important in dealing with Russia, consider the second story, about Russia banning Norwegian salmon imports:

Russia temporarily halted chilled salmon imports from 13 Norwegian firms, the animal and plant health watchdog in Moscow said.

The ban followed repeated instances of microbe pollution, a spokesman for the regulator said on Saturday.

Norway’s food Safety Authority said on April 30 it had received advance notice of the ban, which does not include frozen salmon, and was working with the firms to resolve the “very serious” issue.

Russia is Norway’s biggest salmon market.

Shares in fish and seafood products company Russian Sea . rose 7 percent in Moscow on Saturday.

. . . .

The global salmon market is experiencing a glut, and many firms are struggling to shift their stocks.

There are no “microbes” in salmon caught in Russian nets?  Sure there aren’t.

No.  The last two sentences tell the real story.  A supply glut is weighing on prices, hurting Russian fishers.  So the Russians gin up (or would that be vodka up?) the “health and safety” issue to justify an import ban.  Lo and behold, Russian fishing companies (or at least one, anyways, but there is no reason to believe it is exceptional) realize a windfall.

I’ve written in the past about how Russia routinely manipulates health and safety concerns as a protectionist instrument. (Search the site for “swine flu” and a couple of posts will come up.) (And yes, I recognize and condemn the fact that Russia is not the only sinner in this regard.  The US also engages in various forms of legerdemain to protect US firms.)  That this continues even as Russia joins the WTO indicates that it is still not too keen on rules and agreements that constrain its ability to take from foreigners to benefit domestic interests.

So, this fish story should focus Norwegian minds on the risks that they assume when trawling for other riches in cold waters.  Maybe the hostages will keep the Russians in line.  But the point is that you need hostages in dealing with them, for reputation and contracts alone aren’t enough.  You just need to hope that your hostages don’t die before you need them.

On the anniversary of the passage of Frankendodd, I named the swaps execution facility mandate as the Worst of Frankendodd.  There was intense competition for the honor, to be sure, but I stand by that conclusion.

Gary Gensler sortied into enemy territory at the ISDA AGM in Chicago to do his best to defend the worst.  My verdict (based on press coverage): #Fail.

Interestingly, although Gensler used to focus (wrongheadedly) on the supposed competitive benefits of a SEF mandate, in Chicago he tried to portray it as a bulwark against systemic risk:

“Transparency to the public lowers the risk [for] clearinghouses,” he told the conference.

“Clearinghouses can only survive if they have reliable pricing feeds on a daily basis to mark to market their positions, and also have reliable, liquid markets in default scenarios,” Gensler said.

“There is far less risk in a clearinghouse if you have both pre-trade transparency and post-trade transparency.”

Dealers have criticised the move to electronic execution of OTC derivatives, complaining the large size and small volume of trades means such rules are inappropriate for the market.

This is clearly-no pun intended-incorrect, particularly when viewed in the context of Gensler’s desire for extensive pre-trade transparency and near real time reporting of trades.

CCPs will obtain the prices of deals cleared through them, that they can use to determine marks on a periodic basis.  Moreover, they have access to information from member firms that will permit marking deals to market.

Pre-trade transparency is particularly irrelevant in this context.

And Gensler is positively delusional if he thinks that the pre- and post-trade transparency is going to ensure “reliable and liquid markets” in default scenarios-especially if those scenarios involve the default of a systemically important clearing member.   Note that even for normally listed, exchange traded products CME used an auction procedure, rather than normal trading protocols, to handle the Lehman default.  Also note that LCH was able to handle the Lehman IRS portfolio default in a pretty effective and orderly way even without mandated centralized trading.

Gensler appears to believe that OTC derivatives markets, even for cleared products, will be like exchange trade futures.  Hardly.  One size does not fit all.  The nature of the transactions, the transactors, and the products is very different.  That’s why there are different markets and different market structures: the different structures are discriminating ways of accommodating the diversity of trades and traders. Market structures are endogenous, and reflect the characteristics of trades and traders, a point that is lost on Gensler and all too many others.

Indeed, the biggest problem that CCPs will not be obtaining price information on fairly active products, even if those products trade without pre-trade or post-trade transparency: even without SEFs, it will be relatively easy to mark 10 year USD IRS or active credit indices to market.  The problem will be obtaining information on the value of the products that don’t trade.  Gensler apparently believes in the Field of Dreams Theory: if you build a SEF, the trades-and bids and offers-will come, for everything.

No, actually.  Many products traded OTC do not trade frequently.  That’s a major reason why a dealer market structure rather than a centralized auction market structure, predominates there.  Moreover, the life cycle of trading activity in OTC and listed products is quite different.  Exchange traded products start out illiquid, and if they become liquid at all, become progressively more liquid as their maturity/time to expiry declines.  With OTC products, the cycle is the reverse.  Five year and 10 year swaps are quite active and liquid, and a lot of deals are done.  Those deals live on, and the 10 year swap becomes a 9 year swap and then an 8 year swap, and so on, and these products are far less liquid than the benchmark maturities.  You can have all the SEFs in the world, and 3.35 year swaps ain’t going to be trading, and won’t even be bid or offered.  Meaning that it SEFs will matter exactly bupkus for such products.

What’s more, mandated pre- and post-trade disclosure has costs  (mainly in the form of lower liquidity as disclosure of trades and price information raises risks to liquidity suppliers, inducing them to supply less), and these costs will vary by product.  Again, one-size-fits-all is misguided in the extreme.  Gensler dismisses these costs, and pays even less attention to the heterogeneity of products and transactions.

ISDA has pretty much acquiesced to most of the clearing-related rules, but is still fighting hard against the SEF mandate:

A theme of the ISDA conference, which includes large dealers as well as users of derivatives, is that while central clearing reduces systemic risk, regulators should not impose new rules on how derivatives trade, because it could disrupt those established markets and reduce trading volumes.

“Listed and over-the-counter markets are completely different, and it’s important that lawmakers and regulators keep this in mind,” said [ISDA Chairman and Morgan Stanley’s head of Global OTC Clearing Stephen] O’Connor,

He added that the industry was open to more public reporting, but with restrictions such as not revealing the size of very large trades or delaying trade reporting. “We’re not anti-public reporting,” he said.

I agree with O’Connor, but you might say “but he’s biased and protecting the dealers’ gravy train.”  Fine.  But interestingly, a supposed beneficiary of what Gensler wants so badly, isn’t sold on the idea:

Michael Davie, head of LCH.Clearnet’s SwapClear platform, agreed that regulators, clearers and market participants must know what is going on, but public reporting isn’t essential.

As I’ve argued ad nauseum, regulators will know what is going (in terms of positions and trades) due to swap data repositories.  As Davie says, public trade reporting-particularly in near real time-isn’t important for CCPs to do what they need to do.  And as I state above, public reporting of trades won’t help CCPs at all if there are no trades.

No, Gary.  SEF mandates are still the Worst of Dodd-Frank.  And slathering on the systemic risk lipstick won’t make that pig any more attractive.

A quick comment about the ISDA AGM.  A perusal of the press coverage is fascinating.  Virtually every issue-every damn one-that is the subject of intense debate at the AGM was raised here on SWP, or in my academic writing years ago.  Going back to 2008-2009, and sometimes to the late-90s (obviously pre-SWP, but not pre-Pirrong clearing research).  That old Cassandra feeling is particularly powerful right now.  I was invited to participate in the meetings, but had to decline due to another commitment, which alas did not materialize due to the vagaries of court scheduling.  (No! I am not on trial!  Sorry to disappoint some of you.) It would have been a fascinating experience.

Chinese dissident Chen Guangcheng is now pleading for asylum in the United States, literally hours after he left the US embassy in Beijing, under the terms of a stitched together deal which supposedly guaranteed his safety and the safety of his family.  His presence in the embassy was a huge embarrassment, especially in view of the impending visit of Hillary Clinton and Timmy! for talks with the Chinese leadership.  Reports strongly suggest that the US pressured Chen to leave, and at the very least, did nothing to push back on Chinese threats (delivered to Chen) to beat his wife to death.

So the United States government did something exactly analogous to turning over a fugitive slave, to avoid a conflict with the slaveowner, or in response to the slaveowner’s threat to whip the slave’s wife to death.

This is disgraceful, craven, and cowardly

Obama claims that human rights are raised at every meeting with the Chinese.  I can imagine the conversation now: Obama: “You need to respect human rights.” Chinese official: “Mind your own business.” Obama: “Now we have that out of the way . . . ”

Deeds speak far louder than words.  The immediate and panicked capitulation shows clearly that Obama has no real interest in human rights, and is unwilling to risk the slightest displeasure from the Chinese.  Not that he has succeeded in the latter: the Chinese are shrilly demanding an apology for us letting Chen step onto embassy grounds.

This is all a piece with Obama’s overall policy.  He is fighting the Magnitsky Act tooth and nail.  Doesn’t want to upset the Reset, dontcha know.  He has thrown human rights under the bus everywhere, from China to Russia to Iran to the Middle East, and has exactly nothing to show for it in return.

With respect to Chen in particular, what did the US gain for its unseemly capitulation?  What is to be gained from such a craven abandonment of principle? What great achievements were expected from Hillary’s visit to China?  What important agreements were being negotiated? Will China agree to do anything regarding North Korea, or South Sudan, or Syria, or Iran?

Yeah, right.

Even if deals were on the table, the Chinese behavior tells you what deals with them are worth.  Within hours-hours-of the Chinese assurances that he would be treated well, Chen was obviously in fear for his life, and the lives of his family and friends. A deal is a deal until it is not convenient for them.  Then it is as if it never happened.

One more thing.  When dealing with brutal authoritarian regimes, caving only invites future tests.  Expect a confrontation of some sort soon, perhaps in the South China Sea.

The United States government-and this administration in particular-abandoned a brave man and his family to the decidedly not tender mercies of a police state, and for nothing.  It revealed itself to be unprincipled, weak and panicky. And for this it-we-will reap what it has sown.

Shameful.

Update: This CNN interview with Chen is a must read:

Q: U.S. officials said you looked optimistic when you walked out of the embassy, what happened?

A: At the time I didn’t have a lot of information. I wasn’t allowed to call my friends from inside the embassy. I couldn’t keep up with news so I didn’t know a lot of things that were happening.

Q: What prompted your change of heart?

A: The embassy kept lobbying me to leave and promised to have people stay with me in the hospital. But this afternoon as soon as I checked into the hospital room, I noticed they were all gone.

Q: Has the U.S. disappointed you?

A: I’m very disappointed at the U.S. government.

Q: Why?

A: I don’t think (U.S. officials) protected human rights in this case.

Q: What would you say to U.S. President Obama?

A: I would like to say to (President Obama): Please do everything you can to get our whole family out.

The administration contests this characterization.  Who are you going to believe?  Since Chen would never have left unless he was highly confident that his security, and that of his wife, would be protected, his story seems much more plausible.  In which case, the government’s behavior is even worse than the title indicates, because it is compounding its original sin by covering its own rear by calling the man it betrayed a liar.

You can often tell more about someone by the way that he or she responds to an embarrassing revelation, than from the revelation itself.  That is definitely the case with Elizabeth Warren,  and her response to disclosures that she claimed Native American heritage during her climb up the legal academic ladder.  A claim based on “family lore.”

Warren’s explanation?  It was kinda like online dating, except before the internet became big:

Democratic Senate candidate Elizabeth Warren, fending off questions about whether she used her Native American heritage to advance her career, said today she enrolled herself as a minority in law school directories for nearly a decade because she hoped to meet other people with tribal roots.

“I listed myself in the directory in the hopes that it might mean that I would be invited to a luncheon, a group something that might happen with people who are like I am. Nothing like that ever happened, that was clearly not the use for it and so I stopped checking it off,” said Warren.

And what kind of people are like her? Melanin challenged strivers? And really, is putting a listing in a directory the best way to snag luncheon invites? Do organizations of  “people with tribal roots” go trawling through professional directories, looking for people who checked the “Native American” box? If Warren really grew up immersed in tales of tribes, isn’t it pretty likely she have already known other “people like her”, whole groups of them in fact?  She did grow up in Oklahoma, for crissakes.  And uhm, wouldn’t it have been easier for Warren to have, you know, done some research-she is a scholar, after all-identified such a group, and joined it, rather than doing something that had about as much of a chance as being noticed by the Jay Silverheels Society as a message in a bottle?

But, aside from the “tribal roots” part, there is some truth to her remarks: she definitely used the Native American claim to try to ingratiate herself with people like her.  Or more accurately, people like she wanted to be: tenured faculty at prestige law schools.

She achieved her aim.  And lo and behold, once that happened, the references to her alleged Amerind heritage disappeared from view.  She had achieved what she wanted, and connecting with those of common ancestry had nothing to do with it: she had connected with the people she really wanted to be like.  Indeed, once she had gone to Harvard, the old claims became something of an embarrassment, raising the possibility that she was an affirmative action hire-a suspicion fed by Harvard’s touting her as an example of its commitment to diversity.  So the family lore was airbrushed out of her biography like the image of a disgraced party member in a Soviet encyclopedia.*

I would actually have more respect for Warren had she said: “Yeah.  I gamed the system.  There is a huge element of arbitrariness and luck in academic career advancement.  It’s dog eat dog.  You have to use any means to advance.  I did.  I got what I wanted.”

No, that would not be respectable, really, but it would at least have the virtue of refreshing honesty.  Instead, she compounds her past manipulativeness and deceit with a wildly implausible lie.  When you get caught, Elizabeth, own up to it.  Bullshitting just compounds the offense.

*Warren is now desperately trying to photoshop it back in, with a genealogist claiming, based on an electronic transcription that her GGG grandmother listed Indian on her marriage application.  Except that the original does not exist, and her marriage license does not list her as Indian.

If you haven’t noticed by now that Obama is a narcissistic preener, you haven’t been paying attention, or you are an enabler.  But if you read the excerpts from some of Obama’s college letters to his girlfriend, you cannot avoid coming to that conclusion-or you are so far into the tank that you are beyond saving.

A few excerpts to follow.  Airsickness bags recommended.  Don’t say I didn’t warn you.  Read this, and you can almost hear the fingers snapping:

I haven’t read “The Waste Land” for a year, and I never did bother to check all the footnotes. But I will hazard these statements—Eliot contains the same ecstatic vision which runs from Münzer to Yeats. However, he retains a grounding in the social reality/order of his time. Facing what he perceives as a choice between ecstatic chaos and lifeless mechanistic order, he accedes to maintaining a separation of asexual purity and brutal sexual reality. And he wears a stoical face before this. Read his essay on Tradition and the Individual Talent, as well as Four Quartets, when he’s less concerned with depicting moribund Europe, to catch a sense of what I speak. Remember how I said there’s a certain kind of conservatism which I respect more than bourgeois liberalism—Eliot is of this type. Of course, the dichotomy he maintains is reactionary, but it’s due to a deep fatalism, not ignorance. (Counter him with Yeats or Pound, who, arising from the same milieu, opted to support Hitler and Mussolini.) And this fatalism is born out of the relation between fertility and death, which I touched on in my last letter—life feeds on itself. A fatalism I share with the western tradition at times. You seem surprised at Eliot’s irreconcilable ambivalence; don’t you share this ambivalence yourself, Alex?

Don’t you share it too, dear reader?  Who knew that the Western tradition was “deeply  fatalistic”?  And this: “Remember how I said there’s a certain kind of conservatism which I respect more than bourgeois liberalism.”  Any use of “bourgeois liberal” is a sure tell of a prog poser.

As for the rest: urp.

Even the decidedly sympathetic biographer, David Maraniss, cannot ignore the intense self-absorption:“Obama was the central character in his letters, in a self-conscious way, with variations on the theme of his search for purpose and self-identity.”  But he couldn’t decide on just which identity to choose, so he selected “all of the above”: “The only way to assuage my feelings of isolation are to absorb all the traditions [and] classes; make them mine, me theirs.”  As Mariness says “The different path he saw for himself was to rise above the divisions of culture and society, politics and economics, and embrace something larger – embrace it all.”

But hey.  We all say and do things when we’re that age that we find embarrassing, and grow out of.  Most of us do, anyways.  But with Obama, it is still about him, all the time.  Case in point: the beyond unseemly preening about, and politicizing of, the decision to approve the raid that resulted in Osama’s death.  Look, any president would have made this decision, if for no other reason than that the decision to pass up on such an opportunity would have inevitably have been leaked, much to the political detriment of any president who did so.  But mainly because anyone would have considered it a duty.  A responsibility to all of those who who had died as a result of Osama’s war on the US.  Part of the job.

The SEALs who actually carried out the mission are called-and call themselves-“the Quiet Professionals.” A lesson to be learned from that, and an example to be followed.  Professionals do their job.  They don’t expect lavish praise for doing it.  Braggarts and boasters who expect adulation for doing their jobs don’t deserve praise, quite the reverse-and especially when they hog the credit for the courage and consummate skill of those who actually take the risks and accomplish things you or I-or Obama-could never do.  I can only imagine the intense loathing that Obama’s victory lap-which ran to Afghanistan and back-has engendered not just among the SEALs, but virtually everyone in the military.  (Not to mention that the victory lap included an obsequious reference to Karzai as “my friend”-when everyone paying the slightest attention knows he is anything but, and with friends like him we don’t need enemies.  And further not to mention the excuse the the trip just had to be made so that an agreement could be signed before Karzai traveled to Chicago for the NATO summit-which begins on 20 May, meaning that making the trip precisely on the anniversary of the Osama raid was not necessary to meet the alleged deadline.)

And it is also clear that Obama has not grown out of the juvenile beret-and-Galoises leftism that oozes from passages that Mariness quotes.  Only now he calls those he used to refer to as bourgeois as “bitter clingers” and “social Darwinists.”

All politicians are narcissists, to some degree, but Obama is off the charts.  A friend who knows tells me there is no cure for narcissism.  None.   Obama certainly provides living proof of that dreary assessment.

The hallmark of the natural/patrimonial/extractive state is the complementarity between property and political power.  Property is allocated through political means, giving an incentive to achieve political power; moreover, access to property  permits the purchase of political fealty through the distribution of the rents the property generates.

The renewal of my interest in Russia can be traced precisely to my interest in it as a classic example of this institutional economics insight.  And events surrounding Putin’s resumption of the presidency provide an excellent example of this phenomenon in action:

A struggle for position and power in Vladimir Putin’s new government has been intensifying as liberals vie with conservatives, insiders say, ahead of the planned unveiling of the new cabinet next week.

At stake is how, and how fast, tens of billions of dollars in state assets are sold under ambitious privatisation plans being eyed by foreign and Russian investors – plans drawn up by Dmitry Medvedev, the Russian president, who is due to swap places with his mentor Vladimir Putin to become prime minister.

The primary implication of the article is that Medvedev and the other “liberals” (civilikis would probably be more accurate) have pursued, and are pursuing privatization not out of some belief that this will help make the Russian economy more efficient, or to meet fiscal needs, but because it strikes at the heart of the power of their deadly rivals, the silovikis in general, and Igor Sechin in particular.

For his part, Sechin is waging an aggressive fight to delay privatization-and through delay, to kill it-and Medvedev and his cohort along with it:

As the jockeying has intensified, Mr Sechin embarked on a lobbying campaign to delay some privatisations. In a letter to Mr Putin leaked this year and seen by the Financial Times, Mr Sechin argued strongly for a delay to many of the sales due to “volatile” conditions on world markets that could see some of Russia’s biggest assets sold at prices far below their peaks.

The most outlandish arguments that Sechin raises relates to the notoriously corrupt state oil pipeline company, Transneft, which Sechin says cannot be privatized “until the company had completed a programme to consolidate its accounting under international standards.”  Yeah.  Whether that happens depends on who controls the company-and if the current lot do, that means right after OJ finds the real killers.

Putin, of course, is the ultimate arbiter here, hence Sechin’s appeals to him.  He will use his ability to allocate property and control over it to secure support, and to maintain a balance among the competing factions.  Sechin and the other elements associated with the security services pose the greatest threat to him, so it is likely that they will prevail in most of the disputes.  But Putin cannot afford to let them become too strong either, so he needs the civilikis as a check on their power.  He will therefore make some concessions to them, and refuse to grant all of Sechin’s wish list.

This is the order of things in the natural state.  “Privatization”, or the lack thereof, is not primarily an economic policy: it is an instrument of political policy used to allocate wealth and power among competing factions.

To the extent that privatization does go forward, and these struggles become more than a spectator sport for westerners, one thing should be kept in mind.  If things are privatized for pressing political reasons, they can be unprivatized for equally pressing political reasons.  There is no ideological commitment to privatization, or any real legal or constitutional checks on future reversals.  If you invest in privatized companies, you are basically taking a position on future political developments.   Given the fragility of political equilibria in natural states, and the utter opacity of the process to outsiders, this is a risky position indeed.  Which is a major reason why Russian companies sell at such discounts, which in turn provides the strongest argument of Sechin and his ilk not to privatize in the first place, and which “justifies” future unprivatizations to undo the unjust theft of the state’s patrimony by those who paid low prices for shares in privatized companies.  This is a very bad equilibrium, but one that is difficult indeed to escape from.

Hence: Putin’s purgatory, and the hamster wheel from hell.

Another explosion at an ammunition depot in Russia:

The explosion was the result of a safety breach which occurred during ammunition stacking in a small town of Mulino, an Army source reported.

A safety breach?  And the first clue was?

I’ve often written that the Russian military has a huge software problem: these repeated ammunition handling disasters are a particularly graphic example of that.  Untrained, unmotivated conscripts supervised-or not-by unmotivated and unprofessional officers are accidents waiting to happen.  And the wait isn’t long.  Yet Putin wants to spend huge sums on hardware.  The mind boggles.

Nearly a century after the event, the Armenian genocide is the subject of intense controversy.  Like in Faulkner’s South, in the Caucasus “the past is never dead. It’s not even past.”

The latest example of this comes from The Republic of Georgia, where a near brawl broke out in parliament after an opposition lawmaker brought up the issue.  Last year the parliament recognized the Circassian expulsion in the late-19th century, and Armenians in Georgia are asking for similar recognition.  It is not clear from the RFE/RL piece whether the opposition deputy favors this; it appears that he is using it to tweak Saakashvili, who supported the Circassian recognition over the deputy’s objection.

Regardless, the mere raising of the issue inflamed another deputy, a man of Azeri descent:

Baghaturia’s comments drew the ire of fellow deputy Azer Suleimanov. His family’s country of origin, Azerbaijan, is a staunch ally of Turkey, which rejects the term “genocide” for the Armenian mass killings.

When Baghaturia dismissed his objections with a wave of his hand, Suleimanov angrily reached into his pocket, drew out a tube of Vaseline and flung it at Baghaturia.

What I want to know is: What is a parliamentarian doing with with a tube of Vaseline in his pocket?