Streetwise Professor

October 15, 2018

The Media on Trump on Lee: Don’t Trust, But Verify

Filed under: Civil War,History,Military,Politics — cpirrong @ 11:08 am

The latest media Trump freakout derives from his statement during a campaign rally in Ohio last week that Robert E. Lee was “a great general.”  Since every Confederate is beyond the pale 153 years after the end of the Civil War, any praise of any Confederate is deemed evidence of racism.

As we’ll see, that spare characterization of Trump’s remarks was grotesquely misleading.  But hit pause on that for a moment, and just consider the objective truth of the part of the statement that was reported.  (Does truth even matter any more?)  There is little doubt that Lee displayed excellent generalship and leadership at the operational level.  Some of his campaigns–Second Manassas and Chancellorsville in particular–are justifiably renowned as examples of a smaller force defeating a larger one through maneuver.  His defense during the Overland Campaign was also laudable. Other campaigns–notably Gettysburg–were less creditable: but no modern general (not even Napoleon pre-Waterloo) was uniformly successful in campaign or battle.  The main objections to his generalship were that his operational success was not achieved pursuant to a broader strategic vision, and relatedly, that his tactical methods produced casualties that the Confederacy could not afford.  (Indeed, the casualties at his greatest victory–Chancellorsville–cast some shade on the achievement.)

Further note that acknowledging that someone was a great general does not imply an endorsement of the cause for which he fought.  Were Manstein and Rommel great generals?  Yes–much to the world’s cost.  Similarly, Zhukov.  The greatest generals in world history–Alexander, Caesar, Genghis Khan, Tamerlane, Napoleon–drowned their worlds in blood in their pursuit of grandeur.  Alas, one of the tragedies of history is that generalship exhibits some correlation with the depravity of the cause in which it is employed.  (This raises interesting questions regarding causation.)

So even if Trump said only what was widely reported, the facts were on his side.  But what was reported was not all he said.  Here are his remarks in full:

But maybe someday he will. It also gave you a general, who was incredible. He drank a little bit too much. You know who I’m talking about, right? So Robert E. Lee was a great general. And Abraham Lincoln developed a phobia. He couldn’t beat Robert E. Lee. He was going crazy. I don’t know if you know this story. But Robert E. Lee was winning battle after battle after battle. And Abraham Lincoln came home, he said, “I can’t beat Robert E. Lee.”  And he had all of his generals, they looked great, they were the top of their class at West Point. They were the greatest people. There’s only one problem — they didn’t know how the hell to win. They didn’t know how to fight. They didn’t know how. And one day, it was looking really bad. And Lincoln just said, you — hardly knew his name — and they said, don’t take him. He’s got a drinking problem. And Lincoln said, I don’t care what problem he has, you guys aren’t winning. And his name was Grant. General Grant. And he went in and he knocked the hell out of everyone. And you know the story. They said to Lincoln, you can’t use him anymore. He’s an alcoholic. And Lincoln said, I don’t care if he’s an alcoholic. Frankly, give me six or seven more just like him. He started to win. Grant really did. He had a serious problem. Serious drinking problem. But, man, was he a good general. And he’s finally being recognized as a great general. But Lincoln had almost developed a phobia, because he was having a hard time with a true great fighter and a great general, Robert E. Lee. But Grant figured it out, and Grant is a great general, and Grant came from right here.

So in a campaign rally in Ohio, Trump was praising Ohioans–a staple of stump rhetoric.  One Ohioan he praised was Ulysses S. Grant.  In the process of praising Grant, he touted the generalship of Grant’s most famous foe–Robert E. Lee.  This wasn’t about Lee, except indirectly.

Trump employed a standard rhetorical technique: he enhanced the achievements of the person he was praising by emphasizing the personal obstacles he had overcome (in Grant’s case, alcohol) and the brilliance and strength of the enemies that he vanquished (here, Lee).  Would David have become a legendary figure had he felled Irving, the Philistine Dwarf, instead of Goliath, the Philistine Giant?  Er, obviously not.  Nor would Grant have been as famous if he had vanquished Benjamin Huger or Leonidas Polk or any of the many non-entities that achieved general rank in the Confederacy.  (Indeed, one reason to question Lee’s brilliance is that his victories were won against a parade of incompetents.)  But beating Lee is a true accomplishment.

But the media ignored this in its haste to find another charge to add to the Trump indictment, and to further the narrative that he makes racist appeals to the Confederacy.   Indeed, some media couldn’t satisfy its frenzy by stopping merely at ripping a sentence fragment out of context: NBC falsely enhanced the narrative by claiming that Trump had said that Lee was “incredible.”   Actually, that is a classic case of projection: It is NBC, and the rest of the media that ran with the “Lee is great” meme that lacks credibility.

Yet they whine when he blasts them for spreading “fake news.”  Here’s a thought: if you don’t want Trump to accuse you of spreading false news, don’t spread false news!

If there’s anything objectionable in Trump’s remark, it is the first part of that rhetorical technique: Trump arguably exaggerated seriously Grant’s alcohol problem, at least as of the time of the Civil War.  There is still much debate over whether and when and how much Grant consumed alcohol.  Many of the reports of his abuse of liquor were insinuations by nasty backbiters (e.g., Henry Hallack) that exploited the reputation Grant developed in the 1850s while marooned at Fort Humboldt in California.  There is no credible report that he was impaired at any time in the conduct of his duties 1861-1865.

And as Lincoln said when those backbiters criticized Grant: “I wish some of you would tell me the brand of whiskey that Grant drinks. I would like to send a barrel of it to my other generals.”  For Grant carried out one, and arguably two, of the greatest campaigns of maneuver in the Civil War.  The Vicksburg campaign, in fact, is one of the most brilliant campaigns in modern military history anywhere.  The crossing of the James in June, 1864 was also operationally brilliant, though barren of results due to the blundering of the generals in charge of carrying the attacks at Petersburg home–and arguably due as well to the exhaustion and casualties and loss of aggressiveness brought on by the relentless grinding of the Overland Campaign of the prior 5 weeks.

Further, Grant excelled Lee in that his operational successes all advanced broader strategic goals.  By March, 1864 Grant had responsibility for Northern grand strategy, and seized the opportunity with a relish, whereas Lee invariably avoided this responsibility.  Although the frictions of war–notably the incompetence of Franz Sigel, Benjamin Butler, and Nathaniel Banks–prevented the immediate consummation of Grant’s strategic vision, its breadth and flexibility eventually led to its success.  (There is some similarity between the fate of Grant’s strategic plan and his grand tactical scheme at Chattanooga in November, 1863.  Neither scheme worked according to plan, but since neither was dependent on the success of any single element, the failure of one or two aspects of the plans did not preclude their ultimate success.)

This sorry episode illustrates yet again what should by now be obvious.  If the media reports anything about Trump, modify Reagan’s famous remark about the USSR: don’t trust, but verify.

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October 7, 2018

The Apotheosis of an American Army: The Meuse-Argonne, 100 Years Ago

Filed under: History,Military — cpirrong @ 4:38 pm

The next few days are the centennial of some of the bloodiest fighting in the history of the American army.  The Lost Battalion underwent its horrific ordeal 2-8 October, 1918.  On 8 October, one of the 82nd Division soldiers who attacked in the desperate effort to rescue Major Whittlesey and his men–Corporal Alvin York–killed an estimated 25 Germans and captured 132 more.  On 7 October, John Barkley clambered into an abandoned tank and used its machine gun to beat back several German counterattacks.  On 12 October, Samuel Woodfill took out several German machine gun nests with expert marksmanship, and out of ammunition, dispatched two Germans with a pickaxe.

All of these men (two from the Lost Battalion) won the Medal of Honor.  I could go on.  Forty-three American soldiers won the MoH in action in the first two weeks of October, 1918.

If you read the medal citations, you will find that most of them were for single-handed attacks on German machine gun positions.  Yes, machine guns were major killers on the Western Front, but the Meuse-Argonne was different than say, the Somme, or the Chemin de Dames, where Allied armies attacked established trench lines in fairly open terrain.  Instead of extensive linear trench lines, the German positions in the Argonne Forest and the more open terrain to the east consisted of a dense thicket of machine gun nests.  The terrain was appalling.  Much of it was heavily wooded, cut by dense ravines.   The Americans had to crawl their way through it, yard-by-yard, taking out nest after nest, all the while subject not just to the fire from chattering Maxim guns, but to horrific shelling of high explosive, shrapnel, and gas from German guns posted on the high ground to the north and east.

Most of the American units in the initial waves had not been blooded before.  For instance, the 77th Division (in which the Lost Battalion served) and the 82nd Division (York’s) were rookies.  They had to learn the hard way, through bitter experience against an experienced foe fighting from prepared positions.

The inexperience showed initial phases of the  American assault.  Although the pivot that the 1st Army made from its attack on the St. Mihiel salient to the east to the Meuse-Argonne sector to the north and west was truly marvelous–and under-appreciated–the attack itself was beset by all of the problems of World War I offensive action, compounded by American greenness and a stubborn refusal to learn from bitter British and French experience.  American artillery support was inadequate.  The logistics–admittedly made difficult enough to start with by the wretched state of the roads–were botched.  American tactics, inspired by General Pershing’s belief in “open warfare” and the primacy of the offensive (heedless of the horrific fate of the French operating on the same beliefs in 1915 and 1917) were suicidal.

Yet the Americans learned quickly–by necessity.  It was adapt, or die.  Adaptation, combined with an almost preternatural self-confidence and aggressive spirit, ultimately prevailed.

Even as early at the battles of late-May/early-July 1918 (Chateau Thierry, Belleau Wood, Soissons) the Germans were taken aback by the aggressiveness of the Americans in the offense and their stubbornness in the defense.  “The Americans kill everything” wrote a shocked German grenadier.  “They showed a bestial brutality.”

Yes, tens-of-thousands of Americans leaked to the rear during Meuse-Argonne, but hundreds of thousands stuck it out–often sticking their bayonets in German bellies, as if to confirm the grenadier’s assessment.

World War I was a ghastly combination of inept leadership (often overwhelmed by the mismatch between the defense and offense) and individual courage.  Though the US army came late to the war, its experience from 26 September-11 November 2018 re-enacted this same combination.   And in the end, the incredible bravery and tenacity of the American soldier–farm boys and cowboys and immigrant slum dwellers alike–prevailed, and dealt the Germans body blows from which they reeled, and in the end, from which they could not recover.

But today, the centennial is passing almost completely unnoticed.  Where else but here are you reading about it?

In the aftermath of the war, the federal government, and many state governments, erected large monuments commemorating American service in the war.  Although the remains of most of the tens-of-thousands slain in the Meuse-Argonne were brought home, many thousands more were interred in large cemeteries,  most notably the Aisne-Marne Cemetery to the west of Rheims, and the Romagne Cemetery to the east.  The monuments are truly epic in scale–the US erected nothing comparable in the aftermath of WWII.  The cemeteries are immense–Romagne is larger than the cemetery at Omaha Beach.

Yet these places are almost forgotten and unvisited today.*  Located in an isolated pocket of France, commemorating a war that is largely outside of the consciousness of modern Americans (for whom even WWII is a vague memory), few Americans see them, either on purpose or by accident.

The isolation and loneliness makes them truly haunting places.  I visited the Argonne battlefields with my dad in June, 2010.  We were alone everywhere.  We seldom saw even a car on the road as we wound our way across the Argonne, from the ravine to where the Lost Battalion bled to Chatel-Chéhéry where Alvin York started his advance to Montfaucon and Romagne where the Americans clawed for yards day after day, to the Heights of the Meuse from where German guns ruthlessly pounded the Americans.  The monuments and cemeteries were inhabited only by the ghosts.

In many ways, America came of age in the Meuse-Argonne, but today those who fought in that epic battle are not just forgotten–they have never even been known by most Americans.  So please, take a moment in these October days to remember, and pay tribute to, men who do not deserve the oblivion to which an easily distracted nation has consigned them.

*But fortunately, not abandoned.  The American Battle Monuments Commission has done a marvelous job  of maintaining and preserving these testaments to the bravery of American soldiers.

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August 28, 2018

Shed a Tear for Central Bankers Facing Obsolescence? Uhm, No. Jump for Joy.

Filed under: Economics,Financial crisis,History,Regulation — cpirrong @ 7:00 pm

Scott Sumner rightly skewers this central bankers’/macroeconomists’ angst:

That’s according to a paper presented Saturday by Harvard Business School economist Alberto Cavallo at the Federal Reserve Bank of Kansas City’s annual symposium in Jackson Hole, Wyoming.

Cavallo’s main finding was that competition from Amazon has led to a greater frequency of price changes at more traditional retailers like Walmart Inc., and also to more uniformity in pricing of the same items across different locations. He found that the shift has led to a greater influence of movements in the U.S. dollar exchange rate and gas prices on retail prices.

. . . .

The Cavallo study also showed that from 2008 to 2017, as online purchases accounted for an ever-growing share of total retail sales, the average duration of prices of goods sold at large U.S. retailers like Walmart fell from about 6.5 months to about 3.7 months.

The implications have subtle significance for monetary policy because so-called “sticky prices” — the notion that sellers aren’t able to change prices right away in response to changes in supply and demand — is precisely what gives interest rates power in mainstream models to have any effect on the economy at all. In those models, if prices adjust instantaneously in response to shocks, then there is no role for central bankers to guide supply and demand back into equilibrium.

“For monetary models and empirical work, my results suggest that the focus needs to move beyond traditional nominal rigidities,” Cavallo wrote. “Labor costs, limited information, and even ’decision costs’ (related to inattention and the limited capacity to process data) will tend to disappear as more retailers use algorithms to make pricing decisions.”

Come on.  The right response to Cavallo’s finding is NOT: “OH NOES! Monetary policy will be less effective when prices aren’t as sticky!”  The right response is: “Thank God we won’t need to rely on monetary policy–which can go horribly wrong because central bankers are humans operating with limited information and flawed theoretical understanding–to counteract shocks!”

Sticky prices create a potentially–and I emphasize potentially–beneficial role for monetary policy.  When prices are sticky, monetary shocks–including shocks to the demand for money–can have real effects.  Monetary authorities can in theory–and again I emphasize in theory–counteract these shocks and keep output closer to the optimum level.

However, the actual results often fall far short of the theoretical potential, because (as Sumner argues happened in 2007-2008, and Friedman and Schwartz argued happened regularly in US monetary history from 1867-1960) monetary authorities may misdiagnose economic conditions, and adopt a suboptimal policy, especially when they operate based on flawed heuristics, such as using the level of interest rates as a measure of whether monetary policy is tight or loose.

Thus, having more flexible pricing that allows nominal prices to adjust to shocks to the demand and supply of money makes us less reliant on central banking wizards–a very good thing, when they are often quite like the Wizard of Oz.

As Scott notes, more flexible/less-sticky prices do not eliminate the impact of monetary policy altogether, though for the most part that role should be less interventionist and more rule-based.

One nominal rigidity that more flexible goods prices won’t eliminate is that most debt will be denominated in nominal terms, and thus its real value will change with the prices of goods and services.  More flexible good prices may actually exacerbate the economic impact of nominal debt on real activity.  Although it is possible to imagine financial innovations that lead to more effective indexing or debt, whether the innovation is adopted widely remains to be seen, and there is room for doubt given the coordination issues involved.  Moreover.  there will still be a stock of existing nominal debt to work off even if new debt is indexed in more clever ways.

But even if nominal rigidities disappear, monetary shocks can still cause real fluctuations.  Remember that the Lucasian Rational Expectations models and their successors do not include rigid prices, yet they exhibit real responses to nominal shocks.  Indeed, that was the entire reason why Lucas and his contemporaries devised these models in the first place, as a way of resolving the Friedman conundrum: “money is a veil, but when the veil flutters, the economy stutters.”

In such a world, however, the role of central banks is much more limited.  In such a world, rule-based, rather than discretionary, policies that reduce the frequency and intensity of nominal shocks, are warranted.  That doesn’t leave much for central bankers to do.  They can’t be masters of the universe!

Central bankers no doubt look with dread on such a world.  That dread is implicit in the fretting over more flexible pricing reducing and perhaps eliminating the role of activist central bankers.  But their dread should be our joy.

 

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July 19, 2018

Freakouts Cause Flashbacks–to Montenegro, of All Places

Filed under: History,Military,Politics — cpirrong @ 6:55 pm

The freakout du jour–Trump’s questioning whether it made any sense to have Montenegro in Nato–triggered a flashback (from inauguration day, in fact):

Another example of dysfunction is Montenegro’s impending bid to join Nato. Just what is the rationale for this? There is none: Montenegro brings no military capability, but just adds an additional obligation.

But it’s worse than than. Nato’s biggest weakness is its governance structure, which requires unanimity and consensus in major decisions. This is flagrantly at odds with one of the principles of war–unity of command–and makes Nato decision making cumbersome and driven by the least common denominator. Nato’s governance, in other words, makes it all too easy for an adversary to get inside its decision loop.

Coalitions are always militarily problematic: Napoleon allegedly rejoiced at the news that another nation had joined one of the coalitions against him. Nato’s everybody gets a vote and a trophy philosophy aggravates the inherent problems in military coalitions.

Put differently, decision making power in Nato bears no relationship to contribution and capability. This is a recipe for dysfunction.

So what is the point of adding yet another non-contributor (population 620K!) whose consent is required to undertake anything of importance? This is madness.

It is especially insane when one considers that Montenegro is a Slavic country with longstanding ties to Russia, and in which Russia has a paternalistic interest. Parliamentary elections last year were extremely contentious, with the pro-western incumbents barely hanging on. Post-election, there were allegations of an attempted coup engineered by the Russians. The country is extraordinarily corrupt. All of which means that if you are concerned about Russia undermining Nato, Montenegro is the last country you would want to admit. It is vulnerable to being suborned by Russia. Outside of Nato-who cares what Russia does there? Inside of Nato-that is a serious concern, especially given the nature of Nato governance.

But apparently current Nato members believe that it would be really cool to collect the entire set of European countries: frankly, I can think of no other justification. There is no better illustration of how Nato has lost its way, its strategic purpose, and its ability to think critically.

Now Trump’s particular objection (that Montenegrins are excitable types who might trigger WWIII) was typically Trumpian, in that it was a rather bizarre thought process/formulation that ultimately led to the right conclusion: it makes no sense to include Montenegro in Nato, and doing so can only cause trouble.  Arriving at the correct conclusion based on fractured reasoning–or a fractured articulation of the reasoning–usually occurs only by accident, but it happens enough with Trump that it is unlikely to be totally accidental.  But given that the establishment places undue emphasis on articulateness and verbal polish, the convoluted explanation completely prevents people from taking the conclusion seriously–in part because they are too busy freaking out.

Something that I pointed out in my post goes double–or triple–today.  Simultaneously freaking out about the existential threat posed by Russia and the outrage of objecting to including Montenegro in Nato is utterly illogical to the point of idiocy, and no amount of verbal acuity is going to change that fundamental fact.  That circle cannot be squared.

So here’s what we have on offer: articulate and invariably wildly wrong, or wildly inarticulate and sometimes right, especially on big issues.

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June 6, 2018

Putting Germany First

Filed under: History,Politics,Russia — The Professor @ 1:24 pm

Angela Merkel is set to challenge Donald Trump’s America First agenda at the G-7, presumably to the strains of Deutschland über alles.

This is just another illustration of Germany’s utter lack of self-awareness, because criticizing America First is rather jarring coming from Merkel and her country’s political elite, which espouses Germany First in all but the slogan.  But actions speak louder than words.

Consider the record of the last few weeks.  The German elite threw an absolute tantrum at the prospect of an anti-EU government in Italy, and strongly backed the Italian president when he rejected such a government.  The German budget minister, Guenther Oettinger said “The markets will teach the Italians to vote for the right thing.”

This was yet further evidence of German tone-deafness, because the backlash against his remark, and the real possibility that the Italian reaction would be to have another vote that would strengthen the populists even more, unleashed another market meltdown. This forced the EU, led by Jean-Claude Juncker, to go into damage control mode and force Oettinger to apologize and to get German politicians to put a cork in it generally, lest they do even more damage.

Oettinger, in other words, had committed a gaffe.  That is, he said exactly what he really believed–and you know that the German establishment believes exactly the same.

Another case in point.  Completely oblivious to the optics of Germany and Russia cooperating to benefit at the expense of the Poles (e.g., the three partitions, Molotov-Ribbentrop), Merkel and Germany are unwilling to give the time of day to the Poles’ objections to the Nord Stream II pipeline. Germany has also been extremely critical of Poland’s democratically elected government, and is leading the charge in the EU to cut aid to Poland (and Hungary) for “violating the rule of law.” Like the Italians, the Poles apparently just got it wrong when they voted and are in need to Teutonic guidance.

Altogether now: “Deutschland, Deutschland über alles, Über alles in der Welt . . . ”

I’ve already mentioned in a previous post the obliviousness of Germany’s anger at Trump for interfering with its ability to do business with a state that has vowed-repeatedly-to exterminate Israel.  Yes, Angela did criticize Khamenei’s characterization of Israel as a “cancerous tumor” that Iran would eliminate, but again, actions speak louder than words.  Germany’s preferred policy–a continuation of the JCPOA, with a bonanza of European (and especially German) investment in and trade with Iran-would do far more to assist Iran in realizing its objective than Merkel’s words will impede it.

Merkel is apparently of the belief that she’s not advancing German interests.  Oh, no! She’s the defender of the “liberal international order”:

Chancellor Angela Merkel of Germany told Mr. Obama that she felt more obliged to run for another term because of Mr. Trump’s election to defend the liberal international order. When they parted for the final time, Ms. Merkel had a single tear in her eye. “She’s all alone,” Mr. Obama noted.

What self-sacrifice!

Tell me: just exactly where does Iran fit into the “liberal international order”? Russia? China? All of these are avowedly opposed to that order, and say so at every opportunity.  All are clearly revisionist powers. But in her hatred for Trump (and likely for the US generally), Merkel is more than willing to reach out to them.  Subjectively, Angela is all about the “liberal international order.” Objectively, quite the opposite.

You may dislike Trump’s America First/MAGA agenda and rhetoric.  But it does have one thing all over Merkel’s: honesty.

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May 24, 2018

Gazprom and Its Connected Contractors: The Credit Mobilier Scheme, With Russian Variations

Filed under: Commodities,Economics,Energy,History,Russia — The Professor @ 6:05 pm

A couple of SWP friends were kind enough to send me a copy of the swan song of one Alex Fak, an erstwhile senior analyst at Sberbank.  Alex lost his job because he committed a mortal sin: telling the truth, in this instance about the monstrosity that I have savaged for years–Gazprom.

Alex said that the oft-heard question “why does Gazprom do such stupid things?” is off base because it presumes that the company is run in the interest of shareholders: if it were, its unmatched record of value destruction would indeed be stupid.  However, Mr. Fax opined that the company’s actions over the decades are definitely not stupid if you evaluate them from the perspective of its contractors, who make massive amounts of money building obscenely negative NPV projects.

Why does this persist, in the Putin era, which allegedly cracked down on oligarchic thievery? Well, one reason is that the biggest contractors happen to be owned by–wait for it–the two biggest friends of Vova: Gennady Timchenko (a hockey buddy) and Arkady Rotenberg (a judo buddy).*  Putin did not eliminate oligarchs, so much as replace them with his cronies.  Calling out such connected men by name is no doubt why Mr. Fax is an ex-Sberbank analyst.  And saying this kind of thing puts him at risk of being an ex-person.

The Gazprom MO described by Mr. Fak  represents a continuation of, and a mega-sizing of, the bizness model of the 1990s, when the “red directors” of state-owned firms tunneled out huge amounts of funds by having their firms buy supplies and services at seriously inflated prices from firms owned by their relatives.

Indeed, in the pre-Cambrian days of this blog–2006(!)–I hypothesized that Gazprom and its contractors were in effect a Russian version of Credit Mobilier, the construction firm that the Union Pacific hired to build the railroad.

The WaPo article also mentions that Gazprom’s pipeline construction costs are two to three times industry norms. To me this suggests a Credit Mobilier-Union Pacific type situation, where inflated prices for materials and equipment flow into the pockets of companies owned by Gazprom managers. Just thinkin’.

Thomas C. Durant was the president of the Union Pacific–and the major shareholder in Credit Mobilier.  The UP paid Credit Mobilier around $94 million, and Credit Mobilier incurred only about $50 million in costs to build the UP.   The Gazprom arrangement is somewhat different given that neither Timchenko nor Rotenberg are executives at the Russian gas giant, but the basic idea is very similar. (I also noted early on that Transneft, the oil pipeline monopoly, operates on the same model.)  Gazprom and its contractors operate on the Credit Mobilier model, with Russian variations.

Once upon a time Gazprom CEO Alexei Miller boasted that he would make Gazprom the world’s first trillion dollar company.  Today it’s market cap is south of $55 billion.  Hey! anybody can be off by two orders of magnitude, right?

This is not surprising, because maximizing value to shareholders is not, nor has it ever been, the objective of Gazprom.  The objective is, and always has been, to divert resources to the politically connected via wasteful capital expenditures (that happen to be the revenues of the likes of Timchenko and Rotenberg).  Alex Fak understood this, and paid the price for shouting that the emperor had no clothes.

Both Gazprom and Rosneft are world leaders in destroying value, rather than creating it.  But this is a feature, not a bug, given the natural state political economy of Russia, which prioritizes rent creation and redistribution to the elite. And this is precisely why Russia’s pretensions to great power status rest on economic quicksand.  That should be blindingly obvious, and I am sure that Putin understands this at some level.  But revealed preference suggests that he values enriching his friends more than implementing the economic changes that would make his nation economically and militarily competitive.

*The sums tunneled from Gazprom to Timchenko make me laugh when I think about the oft-repeated allegation that oil trader Gunvor (half-owned by Timchenko) was a source of massive personal wealth for Putin (via Timchenko).  There was much more money to be made much closer to home, and completely outside the scrutiny of bankers and regulators.

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May 15, 2018

Merkel Seems Intent on Proving Churchill (“Germany Is Either At Your Feet or At Your Throat”) Right

Filed under: History,Military,Politics — The Professor @ 6:25 pm

The political and commercial elite in Germany generally, and Angela Merkel in particular, are having quite the meltdown of late.  Angela angrily said that Germany would no longer hold back its anger against the United States. And a mere few days after lamenting that Europe could no longer depend on the US to defend it, Merkel huffily said Germany would not comply with Trump’s “demand” that it increase its defense spending.

The proximate cause of Merkel’s rage was Trump’s decision to withdraw from the Iran “deal”–a secretly negotiated, and largely undisclosed, transaction negotiated between Obama and the mullahs, never submitted for ratification, and which therefore is a legal nullity insofar as the US is concerned.  Obama refused to formalize it because he knew such an attempt would fail, but figured that it would live on because Hillary would succeed him.  Ah, Barack, the best laid plans, eh? Your personal agreement as president could be undone by your successor, and with the same effort that was exerted to give it the force of law: that being none whatsoever.

Germany is particularly distressed at the prospect of losing investment in and trading with Iran.  Even if Europe does not reimpose sanctions, it knows that is irrelevant because the secondary US sanctions of the kind that cost BNP Paribas a cool $9 billion, and risk destroying Rusal, make it suicidal for any European company to deal with any Iranian entity the US sanctions.

One reason that Merkel, and other Europeans, are beside themselves is that their utter impotence is exposed.  They pretend as if they are an independent geopolitical force, but can act only at the sufferance of the US.   Being exposed as powerless and subordinate does breed rage, no?

The evidence of this is all around, both in Trump’s punitive actions (the sanctions on Rusal or ZTE, for instance), and in his proffers of mercy (again to Rusal or ZTE).  Mercy is the prerogative of the powerful: masters can extend mercy, and doing so is the most powerful demonstration thereof.

This whole episode also demonstrates the irrelevance of the Europeans to the process from its beginning.  What is happening now demonstrates that German, French, and British participation was utterly irrelevant to imposing economic hardship on the mullahs.  The US could have–as it is doing now–unilaterally deterred the Europeans from offering Iran aid and comfort.  Including them only led to a more Iran-friendly deal.  (Actually, it just basically cheer-led for Obama’s Iran friendly deal, because he was about as friendly as could be imagined to the mullahs.)

It must also be noted that the German posture towards Iran is beyond unseemly, given Germany’s history.  The moral obtuseness of Germany, of all nations, panting after the business of a nation that has vowed to destroy Israel is mind boggling.

It is especially mind boggling given the German predilection for moral preening, and their tendency to lecture all about their moral superiority.

If you think this is too harsh, consider the fact that Germany’s Incitement to Hatred law (i.e., its Holocaust Denial law) makes it a felony punishable by five years imprisonment for those who:

  1. incites hatred against a national, racial, religious group or a group defined by their ethnic origins, against segments of the population or individuals because of their belonging to one of the aforementioned groups or segments of the population or calls for violent or arbitrary measures against them; or
  2. assaults the human dignity of others by insulting, maliciously maligning an aforementioned group, segments of the population or individuals because of their belonging to one of the aforementioned groups or segments of the population, or defaming segments of the population,

So, if the mullahs did in Germany what they do in Iran on a daily basis, they’d be in the slammer for a nickel.  But they’re OK to do business with, even though they have far more power to act on their threats than some skinhead in Leipzig. AfD is beyond the pale, but the mullahs–now there’s somebody to do business with!

Got it.

As for Merkel’s threats to show her displeasure–who’s stopping you? Go ahead.  Act like any respectable Resistance member. Stomp your feet.  Roll around on the floor screaming.  Hold your breath until your face turns blue.

I won’t say that it won’t have any effect on me–because I’ll genuinely enjoy the spectacle, primarily because it just makes all the more clear your impotence.

As Putin is fond of saying: the dog barks, but the caravan moves on.

As for Trump’s “demand” regarding defense spending.  Um, this was a commitment that Germany voluntarily made to Nato, on more than one occasion long before Trump came to office.  So I guess it’s utterly outrageous for the US to walk away from a deal with the mullahs that did not involve the imprimatur of America’s designated representative body (the Senate), but it’s totally OK for Germany to stiff the US and other Nato allies–all European, mind you–because they are just too fucking cheap (despite having the healthiest fiscal condition of any large nation).  (I further note that Germany is more than happy to “stitch up” (Tim Newman’s phrase) its European confreres when there’s money to be made, kumbaya rhetoric notwithstanding.)

Churchill came close to the truth when he said that the Germans were either at your feet or at your throat.  They certainly go for the throat of the weaker members of the EU, and now at the UK for having the audacity to leave. These days, however, they don’t have the might to tear at the US’s throat, their presumptions notwithstanding.  So while they practice proskynesis at Persian feet, the best they can muster is to nip at Donald Trump’s ankles.

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March 17, 2018

Fighting Joe Hooker

Filed under: Civil War,History,Politics — The Professor @ 11:14 am

Or the Joe Hooker entrance to the Massachusetts State House, anyways.  In a further illustration of the descent of the US into PC madness, MA State Rep. Michelle DuBois (D-Plymouth)  is calling for the removal of a sign designating one entrance of the State House as the General Hooker Entrance because it is an “affront ‘to women’s dignity.'”

Oh please. Fightin’ Joe’s last name has been a source of much tittering over the years.  (Tittering–can I say that? Or will that trigger Mizz DuBois too?) Some have claimed that his name inspired the slang for “prostitute” but that has long been disproven.  Yes, Joe’s moral character was rather dubious, but hardly that bad.

Why did Massachusetts honor Hooker with a statue, and emblazon the entrance to the State House facing said statue with his name?  Well, Hooker’s Civil War record was largely creditable, with a few exceptions.  He was a very solid division and corps commander, both in the Army of the Potomac and the Army of the Cumberland.  His rejuvenation, reorganization, and reform of the Army of the Potomac after the disaster and deep demoralization of the Burnside era was truly remarkable, and laid the foundation for the Army’s eventual triumph.

Hooker’s initial moves in the Chancellorsville Campaign were excellent, and seriously wrong-footed Lee.  Then, as Hooker himself said, Joe Hooker “lost confidence in Joe Hooker.”  Rather than pushing out of The Wilderness, he stopped his advance and left the initiative to Lee.  Lee launched Jackson against Hooker’s right flank, which Oliver Otis “Uh-oh” Howard failed to post properly.  Even after Jackson’s stunning flank attack, Hooker could have prevailed, but he made some fatal errors (notably ordering Sickles to withdraw from Hazel Grove, thereby gifting the Confederates with an artillery position that dominated the Union lines, and then withdrawing from an extremely strong position that Lee could not have possibly driven him from) and eventually slunk away from the battlefield.

Ironically, given the location of his statue, Hooker’s biggest flaw was politics.  He was an inveterate schemer who attempted to advance himself by pulling down his superiors, in part by saying nasty things about them to politicians.

But all in all, Hooker’s accomplishments were not undeserving of memorialization by his native state. Who else would Massachusetts so honor? Its other sons who reached army command–Ben Butler and Nathaniel P. Banks–were serial disasters as commanders, and only reached and retained their elevated positions because they were prominent Massachusetts politicians. For all his flaws, Hooker far outshone them.  (The other Civil War general to have a statue on the State House grounds, Charles Devens, was a rather undistinguished division commander–including ironically in Howard’s XI Corps at Chancellorsville–whose post-war career that culminated in his service as Attorney General in the Hayes administration was actually much more impressive than his war service.)

But service and achievement in America’s greatest historical episode is irrelevant to twits (that’s with an “i”, people) like Rep. DuBois. Their sensitive feelings must come first, history be damned.

This is yet another example of iconoclasm as an assertion of power by those with an agenda.  Hooker fought against slavery, and was indeed closely aligned with the Radical Republicans.  Perhaps that was merely political opportunism on Hooker’s part, but it definitely went against the grain in the high command of the Army of the Potomac, which was adamantly opposed to waging war on slavery.  You’d think that would win Joe some plaudits from Mizz DuBois–but no! His name is an affront to her dignity, and what’s more important than that?

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March 10, 2018

The FT Recycles a 19th Century Stereotyping Image to Convey the Same Stereotype in the 21st

Filed under: Guns,History,Politics — The Professor @ 6:32 pm

It is very telling that the FT chose an iconic photograph of the Hatfields to illustrate its latest act of cultural condescension.  In doing so, it is repeating a stereotyping meme for the exact reason that the meme developed in the late-19th century.

The Hatfield-McCoy feud achieved national prominence, and became the archetypal mountain feud of the 19th century.  The story resonates to this day: in 2012 Kevin Costner starred in a History Channel miniseries on the feud, and there are well over 100 books about the feud on Amazon.

Why did this episode in the West Virginia-Kentucky backwoods attract such attention? The intense coverage was largely a product of the growing urbanization of America, and the conscious and unconscious desire to distance a modernizing country from its rugged pioneer past. East Coast newspapers covered the feud for years, and portrayed the protagonists as backwards reprobates. The Hatfields and McCoys were foils for an urbanizing nation: see how different we are from those hillbillies!

This is why there are so many photographs of the Hatfields in particular, and why they were posed with guns–this is the image that coastal elite wanted to see, and how they wanted to portray the kind of people whom had once been viewed as ideal Americans–think Daniel Boone and Davy Crockett, who were viewed and portrayed as rugged pioneering mountain men blazing new frontiers for freedom. But in the late-19th century press they were transformed into ominous, dangerous throwbacks.

Which is exactly the message conveyed in the FT oped, and which is exactly why that image was chosen.  So the FT doesn’t even score points for originality. They are just recycling a century-plus old slur, to serve a similar purpose.

Lost in the lurid coverage was the fact that a driving force behind the conflict–and in particular its persistence–was a battle for control over timber rights in West Virginia. The Hatfields in particular were trying to resist the inroads of large timber and coal companies, and the McCoys were to a large extent their somewhat witting, somewhat unwitting accomplices.

Another meme that resonated around the same time was the battle between moonshiners and “revenuers,” which also received considerable media attention. The message was pretty much the same: backwards backwoodsmen resisting order and progress. Untamed anarchy vs. social control exercised by progressive forces embodied in government. (This was a meme in the Whiskey Rebellion too.)  Wild borderers vs. civilization.

Again, there is little new under the sun. Political battles and the tactics employed therein may appear to be different, but they are often merely echoes or mutations of conflicts that have been raging for centuries. The FT’s use of a long-ago image that gained prominence because it conveyed a political and sociological message to frame a story about a modern political controversy intended to convey a very similar political and sociological message demonstrates that perfectly.

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The FT Takes Aim at My Gun Toting Ancestors, and Misses!

Filed under: Guns,History,Politics — The Professor @ 2:48 pm

I seldom read the FT anymore–with a few exceptions, it is unreadable. I never read the FT opinion pieces any more–they are unreadable, without exception.  But the photo on this FT tweet brought me up short, and compelled me to click through to the article: my relatives! Really: my mother’s grandmother’s family were Hatfields, and cousins of the famous/notorious West Virginia feud family in the picture.

The article is an attempt–kind of–to explain to superior Brits those “barking mad” Americans and their “distinctly American attitudes towards guns and family.”  Note the sneering title: America has a gun “fixation.”

The article (by the FT’s chief editorial writer, Robert Armstrong) is largely correct in its history: American attitudes towards guns are deeply rooted in history.  Irritatingly, Armstrong’s attitude is condescending and dismissive: he clearly considers this to be a barbarous atavism.

Armstrong’s take is also quite superficial, and misses something that I have pointed out in a previous post: namely, that among many Americans, the right to bear arms is the most tangible badge of individual liberty and autonomy.  Slaves are disarmed: free men answerable only to God can arm themselves. For those who value individual freedom above all, guns have an importance that post-modern people like Armstrong who do not value personal liberty so highly, and whose values are more collectivist, not only cannot really grasp, but recoil from in horror.

A couple of remarks.  The first is that while Armstrong bewails “America’s destructive gun culture,” which he claims causes the “grisly status quo,” he utterly fails to acknowledge that the toll of gun violence today is actually quite low in the precincts where “gun culture” is most deeply rooted. Indeed, the vast bulk of gun deaths in the US occurs miles away–geographically and culturally–from the hollers of the Tug River Valley where Devil Anse once roamed, and other locales where “gun culture” is the norm. This objective fact poses insuperable logical obstacles for Armstrong and his lot, because it flies in the face of his assertion that there is a link between the gun culture in Jacksonian America and the “grisly” toll of gun deaths in the US: Mingo County ain’t Fuller Park or Englewood.  If it’s a culture issue, it’s thug culture, not gun culture.

This is a major reason–arguably the primary reason–why the gun debate in the US is so intractable: “I’m not the one shooting anybody. Why should I give up my guns because of someone else’s criminality or insanity?” And this is at root a deeply philosophical divide that pits people like Armstrong against those he believes to be atavists.  It is a divide between a belief in individual responsibility and accountability vs. a collectivist mindset.

This relates to the second point. I find it deeply ironic that post-Trump the Armstrongs of the world have warned of the impending descent of authoritarianism on America all the while decrying the resurgence of the benighted Jacksonians that still inhabit the less refined corners of America–whom they also largely blame for Trump’s victory. Well, hate to break it to you, Bob, but these people are the most ardent anti-authoritarians in the US. This anti-authoritarianism goes hand-in-hand with the emphasis on the primacy of personal liberty which drives the “gun culture.”

This goes back a long way in history. My branch of the Hatfields were Whiskey Rebels in Washington County, PA, and decamped from there for points west after the U.S. Army crushed the rebellion in 1791. The Whiskey Rebellion was an archetypal battle between the anti-authoritarian and elite elements in American society that echoes in today’s struggle over guns.

What animates the resistance (and yes, this is a real resistance, not the faux virtue signalling Hillary Meets Hollywood “Resistance”) that rallies around the gun issue is an instinctive anti-authoritarianism.  It is a resistance to the the “soft despotism” that de Toqueville presciently perceived at the height of the Jacksonian Era:

Thus, After having thus successively taken each member of the community in its powerful grasp and fashioned him at will, the supreme power then extends its arm over the whole community. It covers the surface of society with a network of small complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate, to rise above the crowd. The will of man is not shattered, but softened, bent, and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals, of which the government is the shepherd.

I have always thought that servitude of the regular, quiet, and gentle kind which I have just described might be combined more easily than is commonly believed with some of the outward forms of freedom, and that it might even establish itself under the wing of the sovereignty of the people.

Our contemporaries are constantly excited by two conflicting passions: they want to be led, and they wish to remain free. As they cannot destroy either the one or the other of these contrary propensities, they strive to satisfy them both at once. They devise a sole, tutelary, and all-powerful form of government, but elected by the people. They combine the principle of centralization and that of popular sovereignty; this gives them a respite: they console themselves for being in tutelage by the reflection that they have chosen their own guardians. Every man allows himself to be put in leading-strings, because he sees that it is not a person or a class of persons, but the people at large who hold the end of his chain.

By this system the people shake off their state of dependence just long enough to select their master and then relapse into it again. A great many persons at the present day are quite contented with this sort of compromise between administrative despotism and the sovereignty of the people; and they think they have done enough for the protection of individual freedom when they have surrendered it to the power of the nation at large. This does not satisfy me: the nature of him I am to obey signifies less to me than the fact of extorted obedience. I do not deny, however, that a constitution of this kind appears to me to be infinitely preferable to one which, after having concentrated all the powers of government, should vest them in the hands of an irresponsible person or body of persons. Of all the forms that democratic despotism could assume, the latter would assuredly be the worst.

When the sovereign is elective, or narrowly watched by a legislature which is really elective and independent, the oppression that he exercises over individuals is sometimes greater, but it is always less degrading; because every man, when he is oppressed and disarmed, may still imagine that, while he yields obedience, it is to himself he yields it, and that it is to one of his own inclinations that all the rest give way. In like manner, I can understand that when the sovereign represents the nation and is dependent upon the people, the rights and the power of which every citizen is deprived serve not only the head of the state, but the state itself; and that private persons derive some return from the sacrifice of their independence which they have made to the public.

It’s the better thans who presume that the country will be a better place if they lead and the great unwashed defer to their superior wisdom and virtue vs. those who don’t want to be led by anybody and who think that the presumed leaders are self-impressed asses, and often malign ones at that.

This is why Parkland has been even more polarizing than other mass shootings in the US–it is a stark example of elite failure at every level.  Armstrong notes this at the outset of his piece:

“None of the events in Parkland have taught me to trust others to protect my family. And certainly none of the events in Parkland have built my trust in government.” That is David French, of the National Review, who is in my view the smartest of the American gun rights advocates. French sees America’s last mass shooting — in Parkland, Florida — as born of incompetence and cowardice. The FBI was tipped off and did nothing. Local law enforcement knew the shooter was dangerous and did nothing. The armed officer at the school waited outside, listening to gunshots, as the rampage went on.

So for French, the massacre shows why gun rights are important, not why they should be curtailed. The government cannot be counted on to protect your family. It is up to you.

Armstrong fails utterly to confront the fact of “incompetence and cowardice.” It is undeniable that it occurred. The question is: was it was a fluke or systemic? That matters–but rather than meeting this crucial issue head on, he merely dismisses it in a conclusory fashion by saying he “rejects French’s view.” A rejection based on neither argument nor evidence, and therefore worth nothing.

What it comes down to is that the gun issue is only the most highly charged manifestation of the deeper conflict that de Toqueville identified the year before the Alamo between the supporters of soft despotism (which is often not that soft) and those who “wish to remain free.”  So yes, this is a conflict with deep historical roots.  But that does not mean that the conflict is anything like Armstrong describes it, between primitive atavists and enlightened moderns. Unless, however, you believe that individual liberty is an atavism unfit for modern times.

And if you are one of those people, you should realize–though you probably don’t–that it is precisely that attitude which galvanizes the intense opposition against you on guns.

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