Streetwise Professor

Over Labor Day weekend I will be attending my Naval Academy class reunion (which one?–classified!). Although I punched out after my Youngster Year, having determined that I was better cut out to be a scholar than a boat driver/order giver/order taker (a wise judgment, in retrospect, especially for a 19 year old in the face of family pressure), I have kept an eye on the Navy. And its current situation brings a tear to that eye.

The Navy faces serious hardware and meatware issues.

The surface fleet is dwindling. The Ticonderoga class cruisers are reaching the end of their useful lives. The Arleigh Burkes have proved to be an excellent platform whose capabilities have been increased steadily, but they are being stretched to their limits, both operationally and in terms of the ability to expand their capabilities.

Two of the Navy’s recent surface ship programs–the Littoral Combat Ship and the Zumwalt class–have proven to be total disasters. With regards to LCS, Strategy Page tells the dismal tale. A snippet (and alas there’s much more):

The ensuing endless equipment and operational problems led the navy to cut LCS production from the 52 originally planned to no more than 35 ships. As of May 2021 only 23 LCS are in service and four are to be retired by late 2021, one of them after only seven years of service.

The LCS was intended to replace 30 larger Perry class frigates and 26 smaller mine warfare ships. That did not work out as planned because of delays in completing the task-specific mission modules that enabled an LCS to quickly install specialized equipment, which was accompanied by a team of specialists to operate it. This enabled an LCS to handle mine warfare, surface combat, air defense and so on. While the first LCS entered service in 2008, the first Mission Modules didn’t arrive until 2018 and none of these modules worked as originally planned. Not only were the modules all late, some were cancelled and all were way over budget because of a variety of problems navy planners did not anticipate, but could have if they had paid more attention to all the potential problems with developing these modules.

The Zumwalts (of which 32 were originally planned, but only 3 will see the sea) were designed to be stealthy ships specialized for shore bombardment. The shells designed for the 155mm (6″) guns turned out to be unreliable and expensive, so were scrapped. So much for shore bombardment. Further, the reemergence of peer competition (notably from China, and to a lesser degree Russia) reduces the priority of the shore bombardment mission and increases the priority of anti-ship, anti-aircraft, and anti-missile capability which Zumwalts are relatively unsuited for (unable to carry Aegis radar, for example). The Zumwalts are thus an orphan class, and a dead end.

So billions of dollars and more than a decade have basically been wasted on two classes of ships that are not fit for purpose, especially in confrontation against a peer competitor.

New carriers of the Ford class are coming online. Over budget, of course, and with some teething problems (especially related to elevators and the electric catapults), but at least those ships appear to offer considerable improvements over the stalwart Nimitz class.

New ships for the Gator Navy (amphibious ships) are superior to their predecessors, but numbers and cost are major issues.

Submarines are a relative bright spot. The Virginia class boats are highly capable, and are improving substantially with every new Block (Block V currently). But numbers are a serious concern, and as Stalin said, quantity has a quality all its own. The Navy talks big about the new Columbia class boomers (ballistic missile subs) but it remains to be seen whether the big talk about cost and deadlines will be realized in fact. History suggests otherwise. There is also the issue of whether the US has the capability to build enough Virginias and Columbias simultaneously, not even considering cost.

The Navy also faces serious constraints in shipyards. Ships need to be repaired, and such constraints are causing delays in repairs and increases in their costs.

With respect to aircraft, it all depends on the much maligned and much touted (depending on who you listen to) F-35. The program seems to have turned a corner but it remains to be seen whether the theory of stealth fighters winning battles from a distance will turn out this time–as it didn’t with the F-4 in Vietnam. Moreover, relatively short range makes aerial refueling imperative, which will be difficult in a contested environment until stealth drone refueling aircraft become a reality.

Meatware is also a serious concern. The Navy suffered several serious accidents attributable to poor training, poor leadership, and excessive demands on ships and crews necessitated by hull numbers not keeping pace with operational commitments. Knock-on-wood there haven’t been any major incidents lately, presumably because lessons have been learned and corrective measures taken, but some of the underlying issues remain.

Moreover, morale is low. In part this is due to the operational demands. But it runs deeper than that, and the problem starts at the top. The Navy is in woke step with the rest of the US military. This is demoralizing, and time and effort spent on woke activities is time and effort that can’t be devoted to mission critical activities:

“I guarantee you every unit in the Navy is up to speed on their diversity training,” said one recently retired senior enlisted leader. “I’m sorry that I can’t say the same of their ship-handling training.”

The zero fault tolerance mindset that prevails today also saps initiative, induces extreme risk aversion, and is conducive to Bligh-like vertical chop discipline all down the line, which creates a “the lashings will continue until morale improves” mindset. Many years back I wrote about how US Navy icons such as Nimitz and Halsey experienced serious mishaps as junior officers, with Nimitz’s career surviving a ship grounding for example. That would never happen today.

These are all extremely deep problems with no easy fixes. In theory, the ship numbers can be fixed with money. But this administration is loath to spend that money. Moreover, the Navy’s wretched procurement record means that even though money is necessary to fix the problem, it may not be sufficient: as the LCS and Zumwalt experiences prove, the Navy can blow a lot of money–a lot of money–and get very little operational capability in return.

The institutional and cultural issues will be much harder to fix. Institutional cultures take longer to turn around than an aircraft carrier with disabled steering gear. Senior officers who rise in a particular culture are the ones who have to change it, but the very fact that they were selected in that culture means that they are often the least capable of doing so. They are the problem, or products of the problem, and are hence ill-disposed or ill-equipped to fix the problem. Political pressures to focus on mission-irrelevant or mission-inimical issues, such as diversity and phantom extremism, are potentially insuperable barriers to necessary change.

The Navy has faced budgetary, cultural, political, doctrinal, and institutional tempests before. If you read about the Navy’s performance early in WWII, especially in the Guadalcanal Campaign, and you’ll learn that arguably the only reasons it overcame, or even survived, its leadership, cultural, and doctrinal challenges in 1941-1942 were the presence of a couple of exceptional admirals (King and Nimitz), and the fact that the Japanese had even more crippling leadership, doctrinal, and cultural handicaps. That, and the fact that American industrial capacity to rebuild its fleet and expand it far outstripped that of its foe–something that is almost certainly not the case today.

We can’t count on being so lucky again.

Former Treasury Secretary Timothy Geithner–better known as Timmy! to loooooongtime readers of this blog–is back, this time as Chair of the Group of 30 Working Group on Treasury Market Liquidity. The Working Group was tasked with addressing periodic seizures in the Treasury securities market, most notoriously during the onset of the Covid crisis in March 2020–something I wrote about here.

This is a tale of two reports: the diagnosis is spot on, the prescription pathetic.

The report recognizes that

the root cause of the increasing frequency of episodes of Treasury market dysfunction under stress is that the
aggregate amount of capital allocated to market-making by bank-affiliated dealers has not kept pace with the very rapid growth of marketable Treasury debt outstanding

In other words, supply of bank market making services has declined, and demand for market making services has gone up. What could go wrong, right?

Moreover, the report recognizes the supply side root cause of the root cause: post-Financial Crisis regulations, and in particular the Supplemental Leverage Ratio, or SLR:

Post-global financial crisis reforms have ensured that banks have adequate capital, even under stress, but certain provisions may be discouraging market-making in U.S. Treasury securities and Treasury repos, both in normal times and especially under stress. The most significant of those provisions is the Basel III leverage ratio, which in theUnited States is called the Supplementary Leverage Ratio (SLR) because all banks in the United States (not just internationally active banks) are subject to an additional “Tier 1”leverage ratio.

Obviously fiscal diarrhea has caused a flood of Treasury issuance that from time to time clogs the Treasury market plumbing, but that’s not something the plumber can fix. The plumber can put in bigger pipes, so of course the report recommends wholesale changes in the constraints on market making, the SLR in particular, right? Right?

Not really. Recommendation 6–SIX, mind you–is “think about doing something about SLR sometime”:

Banking regulators should review how market intermediation is treated in existing regulation, with a view to identifying provisions that could be modified to avoid disincentivizing market intermediation, without weakening overall resilience of the banking system. In particular, U.S. banking regulators should take steps to ensure that risk-insensitive leverage ratios function as backstops to risk-based capital requirements rather than constraints that bind frequently.

Wow. That’s sure a stirring call to action! Review with a view to. Like Scarlett O’Hara.

Rather than addressing either of what itself acknowledges are the two primary problems, the report recommends . . . wait for it . . . more central clearing of the Treasury market. Timothy Geithner, man with a hammer, looking for nails.

Clearing cash Treasuries will almost certainly have a trivial effect on market making capacity. The settlement cycle in Treasuries is already one day–something that is aspirational (don’t ask me why) in the stock market. That already limits significantly the counterparty credit risk in the market (and it’s not clear that counterparty credit risk is a serious impediment on market making, especially since it existed before the recent dislocations in the Treasury market, and therefore is unlikely to have been a major contributor to them).

The report recognizes this: “Counterparty credit risks on trades in U.S. Treasury securities are not as large as those in other U.S. financial markets, because the contractual settlement cycle for U.S. Treasury securities is shorter (usually one day) and Treasury security prices generally are less volatile than other securities prices.” Geithner (and most of the rest of the policymaking establishment) were wrong about clearing being a panacea in the swap markets: it’s far less likely to make a material difference in the market for cash Treasuries.

The failure to learn over the past decade plus is clear (no pun intended!) from the report’s list of supposed benefits of clearing, which include

reduction of counterparty credit and liquidity risks through netting of counterparty exposures and application of margin requirements and other risk mitigants, the creation of additional market-making capacity at all dealers as a result of recognition of the reduction of exposures achieved though multilateral netting

As I wrote extensively in 2008 and the years following, netting does not reduce counterparty credit risk or exposures: it reallocates them. Moreover, as I’ve also been on about for more than a fifth of my adult life (and I’m not young!), “margin requirements” create their own problems. In particular, as the report notes, as is the case in most crises the March 2020 Treasury crisis sparked a liquidity crisis–liquidity not in terms of the depth of Treasury markets (though that was an issue) but liquidity in terms of a large increase in the demand for cash. Margin requirements would likely exacerbate that, although the incremental effect is hard to determine given that existing bilateral exposures may be margined (something the report does not discuss). As seen in the GameStop fiasco, a big increase in margins in part driven by the central counterparty (ironically the DTCC, the parent of the FICC which the report wants to be the clearinghouse for its expanded clearing of Treasuries) was a major cause of disruptions. For the report to ignore altogether this issue is inexcusable.

Relatedly, the report touches only briefly on the role of basis trades in the events of March 2020. As I showed in the article linked above, these were a major contributor to the dislocations. And why? Precisely because of margin calls on futures.

Thus, the report fails to analyze completely its main recommendation, and in fact its recommendation is based on not just an incomplete but a faulty understanding of the implications of clearing (notably its mistaken beliefs about the benefits of netting). That is, just like in the aftermath of 2008, supposed solutions to systemic risk are based on decidedly non-systemic analyses.

Instead, shrinking from the core issue, the report focuses on a peripheral issue, and does not analyze that properly. Clearing! Yeah, that’s the ticket! Good for whatever ails ya!

In sum, meet the new Timmy! Same as the old Timmy!

Post-911, the idea of the “Anglosphere” gained some traction. The English speaking nations, the UK, US, Australia, Canada, and New Zealand, were held out as the last bulwarks of liberty in the world.

This idea has not aged well. In the Age of Covid, the Anglosphere is now the cutting edge of repression and fascism and active hostility to the ideals of individual freedom that were allegedly its hallmark.

Look at them.

Australia: entire states are locked down–hard–in response to single digit “case” numbers. People who protest are set upon by truncheon and club wielding police.

Canada: adopting a panoply of highly restrictive policies and restrictions on free speech.

New Zealand: locked down hard for months. And recently, the Skeletor-resembling PM instructed the proles that the government was the “sole source of truth.” Oh thank you so much Big Sister! Governments have been so so so omniscient in the past 20 months!

UK. Locked down until just recently. The “Freedom Day” (19 July) is a simulacrum of real freedom because numerous restrictions remain, and even that has freaked out the establishment, including most notably the Orwellian-named “SAGE.” Even though case numbers have declined since the lockdown was eased, SAGE is issuing dire warnings. No doubt because they have been wrong so often that they need to cover their sorry asses by keeping up the scare.

US. There are some bright spots, including Florida and Texas, but the “elite” is panting to reimpose mask mandates (to make us pant) and forced vaccination and lockdowns because Delta variant. Or something.

I’m not anti-vax. I’m vaccinated. But the externality argument is so abused. The costs and benefits of vaccination are almost completely internalized.

(Although ironically I bet dimes to donuts that Jim Carey and Jeff Daniels (a neighbor for several years) would love to mandate vaccines.)

Australia is particularly sad, and almost inexplicable to me. It used to be a bad ass, fuck-it-all kind of place. A similar ethos to Texas. But not now. Incredibly authoritarian, with a largely craven and submissive populace. Crocodile Dundee? Watching that is like Charlton Heston finding an almost completely buried Statue of Liberty. A relic of a dead era.

Continental Europe–the supposed antithesis of the Anglosphere–has actually demonstrated more of the spirit of liberty than any English-speaking country. Check out today’s protests in Paris.

Large crowd in Paris against the
*#HEALTHPASS*#PassSanitaire. #NoAuPassSanitaire pic.twitter.com/VnmVkX3Fa0

— Ignorance, the root and stem of all evil (@ivan_8848) July 24, 2021

A la Bastille! (And note that in Louis XVI fashion, Macron is doubling down. I hope the past is prophecy.)

No. The vaunted Anglosphere has proved to be ruled by authoritarians and populated by submissive and insanely risk averse cattle. It would be wrong to say that the ideal of freedom is dead. It is more accurate to say that the ideal of freedom is reviled, at least by the elites–and far too many of the non-elite have proved to be ovine in their submissiveness to their soi disant (but not really) betters.

Speaking of things that did not age well. This from a decade ago is a (sick) laugh:

I do not mean that English speakers act any less extravagantly than speakers of other tongues, but rather that English generally acts to tether thought to the empirical world. This is something Bishop Thomas Sprat dilated on in his History of the Royal Society (1667): “The general constitution of the minds of the English,” he wrote, embraces frankness and simplicity of diction, “the middle qualities, between the reserv’d subtle southern, and the rough unhewn Northern people.”

English, Bishop Sprat thought, is conspicuously the friend of empirical truth. It is also conspicuously the friend of liberty. 

If there is one thing that is conspicuous about the events of the past 19 months it is that for all of the strident commands to “follow the science!” public policy has been completely untethered from “the empirical world.” Instead, an arrogant priesthood has imposed a cultish, unscientific, evidence-free orthodoxy and branded as heresy any skepticism–even after the skeptics have been proved right time and again. Empirical reality is not just ignored–it is anathematized.

Perhaps you can explain the collapse of the Anglosphere to its infection by Continental ideas (Derrida, Foucault, etc.). But that is merely by way of a post mortem. The fact is that practically speaking, the Anglosphere is as dead as Hector. Perhaps “palimpsests of freedom” (to use Paul Johnson’s chapter title from Modern Times) still exist in the English speaking world, but they are under siege and definitely not in command. Enemies of freedom–the antitheses of traditional “English liberties”–are in the saddle and wielding the whip.

The Babylon Bee, as usual, nails the idiocy and absurdity of the FBI:

Based On LEGO Evidence, FBI Believes Capitol Rioter Was Also Planning Attack On Hogwarts Castle https://t.co/J4hhl9EN1d

— The Babylon Bee (@TheBabylonBee) July 7, 2021

This refers, of course, to the FBI’s and DOJ’s weighty pronouncement that one of the 1/6 arrestees was in possession of–wait for it!–an assembled Lego model of the Capitol. Except it wasn’t actually assembled. It was still in the box. But still! Obviously he was planning dastardly deeds with Legos! It’s amazing the Republic survived. Thank God the FBI is there to protect us!

The FBI has of course been going all out to apprehend the trespassers, gapers, gawkers, and other assorted invaders of the Capitol. They announced with pride some weeks back that they had made 535 arrests. (Gee. Why that number?) (And none for sedition. Why is that, if this was a greater threat to “our democracy”–which it ain’t–than the Army of Northern Virginia?)

But of course the FBI had advanced warning. So why didn’t they stop it?

Why do I say that they had advanced warning? Because I guarantee that every remotely open access organization or ad hoc grouping is penetrated by the FBI. FFS, the FBI has surveilled the “Concerned Women of America,” as if it’s the ISIS Women’s Auxiliary. What next? Red state sewing circles?

A necessary–but not sufficient–condition to prevent being infiltrated by the FBI is a classic cell structure. But take-all-comers groups like Proud Boys or Oath Keepers or Concerned Women of America or a bunch of idiots bragging on Twitter will attract FBI agents and/or assets like a dog attracts fleas.

Oh. And not joining any organization won’t help. The FBI is also deeply concerned about “lone wolf” white extremists. Damned if you do, damned if you don’t. (I’m sure I’m already damned, so this post won’t make any difference.)

So was the FB I complicit in 1/6, or just incompetent in not stopping it?

One cannot rule out the latter. After all, the FBI had advanced warnings about the Pulse nightclub shooter, the Parkland HS shooter, the Fort Hood shooter, and the San Bernardino shooters. Yet they all blazed away unmolested by our vigilant Federal dicks. (I also wonder about the Las Vegas shooter, whom the FBI cannot even figure out ex post. Or supposedly can’t. Maybe their ex post befuddlement is an attempt to conceal ex ante knowledge.)

Although I do not rule out incompetence, I lean towards complicity. Why? This sick-making statement by the current FBI Douchenozzle*, Christopher Wray:

FBI Dir. Wray: ‘Any time there’s an attack, our standard at the FBI is we aim to bat 1.000 … you can be darn tootin’ that we are focused very, very hard on how can we get better sources, better information, better analysis’ pic.twitter.com/2TaVd1oflN

— NowThis (@nowthisnews) March 2, 2021

“Darn tootin'”? Are you effing kidding me? “Golly gee willikers Mr. G-man! I’m sure glad we have you to protect us!” “Aw shucks, Jimmy. Just doin’ my job.”

That performance was so transparently phony that Wray would have earned an F in any community college acting class. But our “elite” eats it up.

And that’s the point, exactly. The FBI operates as the elite’s political police. Not the president’s–as demonstrated by its concerted campaign to get Trump. The elite’s/oligarchy’s/ruling class’/administrative state’s political police.

(The FBI also shanked Nixon, BTW. Cf. Mark Felt.)

What is the FBI good at? Setting up mouth breathers to commit crimes, whom it can then arrest and then claim with great fanfare to have protected us from. If you look at most of the high profile terrorism cases the FBI prosecuted post-911, they were low-IQ losers cajoled by FBI informants (operating, of course, at the direction or at least strong suggestion of FBI agents) into committing crimes.

Most recently, the hair-on-fire claims about the allegedly dastardly plot to assassinate Wretched Gretchen Whitmer, governor of Michigan, appear to be less than a real threat than another prêt-à-porter FBI setup, with 12–12!–FBI informants/provocateurs outnumbering the actual dim bulb alleged conspirators.

But this is just one part of the bill of particulars against the FBI. It has also proved shockingly inept (to give it the benefit of the doubt) or complicit in some horrible crimes.

For example, in addition to the terrorism fails mentioned above, it let serial sex offender Larry Nasser operate with impunity for years. Its response to the revelations by the DOJ IG? Not even a “whoops, my bad.” It had copious information on Jeffrey Epstein whom it also allowed to continue his romps for years. (Given Bill Clinton’s and others’ involvement with Epstein, this may have been part of its political police function.) And just recently, FBI agent David Harris was arrested by Louisiana authorities–n.b. state authorities, not the FBI itself–for a sickening trail of child sexual abuse.

Again, in each case: incompetent, or complicit?

In the Nasser case (and others) an FBI agent lied when being questioned. If you or I lie when the FBI questions us–hard Federal time. They lie? No biggie!

Some on the right have called for the “reform” of the FBI. Spare me your naivete. The FBI is unreformable because of its deep internal rot, and the fact that anyone who would be in a position to “reform” it no doubt quakes in terror at the prospect of FBI blackmail or slanderous leaks. (Cf. MLK.)

No. The only peace we could obtain from the FBI is a Carthaginian one. But there’s no Cato or Scipio in sight.

*Four years ago I referred to James Comey as a douchenozzle, for which I apologized profusely, for having insulted douchenozzles. But “Douchenozzle” is clearly a much more descriptive title than “Director.”

Vladimir Putin penned–or at least posted–a long disquisition about how Russia and Ukraine really, really, really belong together. They are meant for each other. They are one soul ripped apart in a great historical injustice.

The most charitable way I could characterize it is that it reminds me of Pepe LePew (Putin LePew?) trying to sweet talk a reluctant female feline into falling for his historical charms. But that would trivialize what is really a weird and creepy and threatening missive. More Travis Bickle than Pepe LePew.

Putin portrays Russia and Ukraine as being spiritually connected and wrongly separated by malign Western actors (the Lithuanians, Poles, and Austrians at one time, the EU and US today), and misguided Bolsheviks who dismembered Holy Russia. Thus, they belong together. They need to be together. They are a single soul separated by cruel fate, who need to be reunited. And Putin is just the man for the mission.

But this begs the question: why don’t Ukrainians feel the same way? If the historical and spiritual ties are so deep, so mystical, why aren’t most Ukrainians equally desperate to be reunited with their Russian soulmate?

Putin’s answer, such as it is, is that malign forces–again Western–are conspiring to keep them apart. They have bewitched Ukrainians, or somehow fascistically intimidated them (which seems like a clear case of projection). Moreover, the underlying Western purpose of separating Ukraine from its spiritual kin is to attack Russia itself. And thus, Russia is justified in using force to unite Ukraine and Russia–it is an act of self-defense!

Yes, Putin and Travis Bickle have a lot in common. The paranoia and obsessions and delusions in particular. Except Travis only had Smith & Wessons and Walthers, not tanks, Buks, and nukes.

Putin goes on and on about how history, over a thousand years of it, means that Ukraine and Russia are destined to be as one. This argument is apparently quite persuasive to him, but not to most Ukrainians. Nor is anyone else in the world likely to be persuaded. Such historical arguments–especially ones stretching back to well before the First Millennium–are almost never persuasive or even plausible to those not steeped in that history. What seems self-evident to Putin seems bizarre to anyone who does not already believe in the Third Rome view of history. And especially so to anyone who views Russia as a historically predatory, imperial power.

Which would include Poland. Yes, Poland attempted to exploit Russian (Muscovite, actually) weakness during the Time of Troubles, but examining the sweep of history one must conclude that Poland has been far more the victim of Russia than the victimizer thereof.

Poland comes in for much criticism from Putin, but look at the benign way that he characterizes Russian connivance at the dismemberment of Poland:

After the partitions of the Polish-Lithuanian Commonwealth, the Russian Empire regained the western Old Russian lands, with the exception of Galicia and Transcarpathia, which became part of the Austrian – and later Austro-Hungarian – Empire.

The partitions just happened, I guess. And for someone who emphasizes the importance of language and religion, it is striking how Putin somehow happens to overlook that the partitions brought in Polish-speaking Catholics into the Russian Empire when it “regained the western Old Russian lands.” I would love to hear historian Putin’s explanation of say the January 1863 insurrection in the Polish parts of “Old Russian lands.” Somehow he left that out. Huh.

Indeed, reading this, I would say that not only Ukrainians should be put on notice as to Putin’s ill intent: Poles should be as well.

Another example of Putin’s selective history:

I would like to dwell on the destiny of Carpathian Ruthenia, which became part of Czechoslovakia following the breakup of Austria-Hungary. Rusins made up a considerable share of local population. While this is hardly mentioned any longer, after the liberation of Transcarpathia by Soviet troops the congress of the Orthodox population of the region voted for the inclusion of Carpathian Ruthenia in the RSFSR or, as a separate Carpathian republic, in the USSR proper. Yet the choice of people was ignored. In summer 1945, the historical act of the reunification of Carpathian Ukraine ”with its ancient motherland, Ukraine“ – as The Pravda newspaper put it – was announced.

Yes, elections held in the presence of Soviet tanks and bayonets and NKVD executioners are clearly an expression of the will of the people.

And if we want to go all historical, it is also sickly amusing that Putin’s tract was published 550 years to the month after Muscovy won a decisive victory that culminated it its subjugation of Novgorod the Great, which sort of harshes the entire image of the deep fraternal, linguistic, historical, and spiritual bonds between Russian peoples.

The question is whether Putin intends to reprise Ivan III, this time in Ukraine. The threatening tone surely suggests this. He gives the impression of trying to persuade Ukraine to embrace Russia willingly. But he is abundantly clear that should his advance be rejected, it is due to the fact that the country is ruled by local stooges of malign Western powers who threaten Russia, hence reunification may only be accomplished by force, which is (according to him) fully justified and which he is willing to use.

Empty threat or real? It would be unwise to discount it. Operationally and logistically, it would be difficult, and would likely result in a stalemate and vicious guerrilla warfare (as occurred in the aftermath of World War I during the Russian Civil War, and in the aftermath of WWII) that could well stop any Russian drive well before it reached Kiev/Kyiv. It would sharply increase tensions between Russia and the West, far more than the Crimean anschluss did. Poland and the Baltics–Nato members–would clearly consider such an invasion a mortal threat. This sharply raises the odds of a Russia-Nato confrontation.

But despite these obstacles and risks, Putin is clearly obsessed with Ukraine. He has been throughout his presidency. He clearly views the 2004-2005 Orange Revolution and the 2014 Maidan as devastating personal defeats. Megalomania and the knowledge that he is aging and thus doesn’t have long to achieve what he believes to be a historical mission may push him to act, sooner rather than later.

Ukraine is hard to love. It is the most Sovok of the Soviet successor states–a painful illustration of how decades of Soviet oppression wreaked havoc on psyches and institutions. Some of Putin’s criticisms of it have more than a grain of truth. But that does not mean that it should be consigned to Putin’s tender mercies. Especially since there is no guarantee that Putin’s pining for Russian lands will stop in Ukraine.

The situation is fraught. A man obsessed with a messianic mission, be he Travis Bickle or Vladimir Putin, is not easily deterred.

No. Wait. That was a Tesla in Taiwan City.

But Elon did ignite some (metaphorical) pyrotechnics in a Delaware Chancery courtroom with his fiery defense of the Solar City deal of 2016. My criticism of the deal at the time–which inspired some of my better lines, IMO–is the gravamen of the shareholder lawsuit against Musk. Namely, that the Tesla purchase of Solar City was a bailout of a sinking Solar City, mainly driven by Elon’s desperation to avoid a blow to his reputation as a visionary genius.

Nothing in what I’ve read about Elon’s testimony changes my mind. Ya sure the Tesla board was totes independent of him. Ya sure he did not dominate the board. Ya sure the deal made sense on the merits. Whatever, dude.

All that said, I surmise that the plaintiffs have a difficult hill to climb. Proving, legally, in court, what we all know to be true is sometimes a very difficult thing. That’s probably a good thing, but that’s a statement about the average–not any particular case.

That said, since the Solar City deal Tesla’s stock price, unlike Elon, has gone to Mars. It’s about 20 percent off its all time high in January, but still about 15 times above its June, 2015 price, which I thought was inflated then. So what do I know?

The most logical explanation to me is that $TSLA is not so much a bet on Tesla qua Tesla, or Musk qua Musk, but on government policies around the world that seem hell bent on forcing us all to drive electric cars, never mind fire risks (and Taiwan City is not a freak event), or the environmental costs of mining, or the insanity of renewables, or the increasing inability of electrical grids to handle existing demands let alone massive new ones such as that arising from electric autos, or on and on and on and on. Tesla is a first mover in electric vehicles, governments are compelling the shift to electric vehicles regardless of all the myriad problems, so Tesla stock booms. It’s not an efficiency story or an innovation story. It’s a wealth creation (for Tesla shareholders) by wealth destruction (the rest of us) story.

A couple of other Tesla/Musk-related comments that have struck me recently but not sufficiently to catalyze a post.

Tesla is having problems in China. Musk assiduously courts China. Musk makes huge sunk investments in China. China shtups Musk.

This storyline alone is sufficient to make you question Musk’s acumen. Did he really think that China would not act opportunistically? FFS. Opportunism ‘R Us is the CCP motto. Look at how the CCP is shtupping domestic tech companies (and those foolish enough to invest in tech company IPOs). If that’s what they do to “their” companies, what can foreign devils expect? Foreign devil Elon apparently thought he was special. He ain’t.

Crypto. Elon’s pronouncements can cause massive movements in cryptocurrency prices. This alone is enough to demonstrate the utter arbitrariness of crypto. Why should the value of anything depend on the musings of a mercurial and megalomaniacal individual other than the things that individual can control? Especially when said mercurial and megalomaniacal individual no doubt derives immense glee from watching people jump to his tune? That incentivizes him to say ever more outlandish things. Which the KoolAid drinkers respond to, which just incentivizes him more.

Why do his musings matter? Because people believe they matter.

In coordination games sunspot equilibria exist. In sunspot equilibria, values/prices change in response to a variable that people think matters, even though it is totally unrelated to fundamentals. Currencies–including cryptocurrencies–have a coordination game aspect where expectations matter. The value of currency (or a cryptocurrency) depends on what people think its value is, or what they expect it to be. If people believe that variable X–e.g., what Elon Musk tweets–matters, then X will matter.

That is apparently the case with crypto: whatever Elon says, cryptos do, at least to a considerable degree. What is more bizarre is that whereas “sunspots” are exogenous, Elon’s pronouncements are endogenous–he says what he says almost surely based on the fact that he knows that what he says will move prices. Yeah, that’s exactly the kind of power you want to give a megalomaniac.

Exogenous/extrinsic uncertainty can lead to excessive volatility. Crypto suggests that endogenous uncertainty a la Musk creates massive excess volatility.

So you want to “invest” in crypto why, exactly? To speculate on Elon’s mood swings and narcissism? To speculate on how other speculators speculate on Elon’s mood swings and narcissism? To speculate on how other speculators speculate on how speculators speculate on Elon’s mood swings and narcissism. (To complete this post, continue ad infinitum.)

A few posts back I said that the America Founding is a political Rorschach test. Yesterday–4 July 2021–proved that beyond cavil: the haters were out in force. The NYT claimed that flying the American flag is divisive–reading between the lines, what they meant was only knuckle dragging right wingers do it. NPR–your tax dollars at woke!–makes the banal point that people were not equal under the law–some were indeed enslaved–at the time that Jefferson penned “all men are created equal.” It adds that the Declaration includes a racist slur–“Indian Savages.” (I guess I will have to take a sledgehammer to may GGGGGF’s tombstone, which reads: “Here Lies the Body of ABEL SHERMAN Who Fell By The Hand of the Savage,” said Abel being ambushed and scalped by Silverheels on 15 August, 1794.)

The likes of NPR were joined by some of our illustrious solons, including Rep. Cori Bush:

When they say that the 4th of July is about American freedom, remember this: the freedom they’re referring to is for white people.

This land is stolen land and Black people still aren’t free.

— Cori Bush (@CoriBush) July 4, 2021

(Pssst. Cori. You’re living on stolen land! Please move!)

And Maxine Waters:

July 4th… & so, the Declaration of Independence says all men are created equal. Equal to what? What men? Only white men? Isn't it something that they wrote this in 1776 when African Americans were enslaved? They weren't thinking about us then, but we're thinking about us now!

— Maxine Waters (@RepMaxineWaters) July 4, 2021

As I said before, this point is so banal. FFS, people (including especially the British) were pointing this out about, oh I dunno, 5 July, 1776.

But it completely misses the truly subversive effect of the Declaration. Accepting it as a statement of founding principle made the reality of slavery untenable. These things could not coexist. The logical tension was too great–one would have to give way. In the end, slavery did. Not easily, but it did.

This was a point Lincoln pounded on in speech after speech, starting from the Lyceum address in 1838, and especially in his debates with Douglas in 1858. If you believe in the Declaration, you must believe slavery is wrong. You cannot have both. Pick one.

That is, the Declaration started two revolutions, one immediate, against the British, and one that took generations to ripen, culminating in the Civil War four score and five years after the first. The very contradiction between ideal and reality that so exercises midwits (feeling generous today) like Bush and Waters and NPR sparked a dialectic that culminated in emancipation. (Leaving, of course, other contradictions, meaning that the dialectic continues to operate.)

The language of the Declaration–“that they are endowed by their Creator with certain unalienable Rights”–reveals plainly its natural rights roots. And this is another thing that drives leftists mad–although they are more circumspect in criticizing this aspect of it. The modern left in particular finds natural rights an anathema. (Not all conservatives embrace natural rights, but the modern left loathes the idea.)

Those of you who are old enough might remember Joe Biden’s weird questioning of Clarence Thomas about natural rights at the latter’s confirmation hearing, back when Joe was a compos mentis Senator idiot rather than a non compos mentis President idiot (not feeling that generous). To Biden and his ilk, the idea that rights exist independently of the government is dangerous crazy talk.

Relatedly, the Declaration is subversive because it asserts that the people have the right to revolt against a government that deprives them of their natural rights. It’s that subversive thinking that leads Joe to threaten nuking anyone who dares act upon it.

Lincoln’s treatment of the Declaration–which he venerated, over the Constitution, in fact–represents a far more sophisticated and lucid approach than the simplistic screeds of the NPRs, the Cori Bushes, and the Maxine Waters of the world. (I could expand that list greatly.) Lincoln venerated the principles the Declaration espoused, and dedicated his life to making those principles reality–and eventually gave his life in the attempt. The haters can’t get past the fact that the principles weren’t the reality instantaneously. And many of the haters don’t actually venerate the real principles–the natural rights principles–of the Declaration. In fact, they loathe them.

And that’s the nub of the real division in America today. The Declaration, though a statement of universal principles, is not universally embraced. Not just because the principles were not reality in 1776. But because some venerate the Declaration’s principles of liberty and natural rights–including the right to resist a tyrannical government–and some don’t. What’s happened progressively over the years (pun not intended) is that the ranks of the don’ts have swelled, and the ranks of the dos have thinned. The Fourth of July has therefore become a national Rorschach test that reveals the shift in that balance.