Streetwise Professor

A few years back I learned that three of my ancestors were passengers on the Mayflower.  Two of them–my 10th great-grandfather Edward Fuller and his wife, Ann–didn’t make it to the first Thanksgiving.  They died during the first winter (April 20, 1621 and January 11, 1621, respectively), along with about half of the original Separatists (not Puritans) who sailed to the New World.  The third, their son Samuel, did survive: he was raised by his uncle, Samuel Fuller, a physician.  And Samuel (and Jane Lothrop) begat Hannah, and Hannah (and Nicholas Bonham) begat Hezekiah and after a lot more begetting, along came SWP.

Among many other things, I’m thankful that Samuel survived so that I could be begot.  But mostly I’m thankful for my family, my friends, professional good fortune, and for being born in the United States.  Recollecting the tribulations of people like the Fullers, and the ability of their survivors to rejoice in their meager blessings, I would be churlish to do anything but be deeply appreciative for the bounty conferred on me and mine.

In that spirit, I wish all of you in the Streetwise Professor community a joyous Thanksgiving, and a joyous holiday season to come.

Vladimir Putin is throwing the full weight of the Russian state behind efforts to save diminishing tiger populations.  Among the measures are tougher punishments for those who kill the endangered animals, or traffic in their body parts.

Meanwhile, it remains open season on journalists and oppositionists.  Medvedev makes noises about addressing this problem, but the real authorities that matter don’t even go through the motions of going through the motions to capture, let alone punish, those who kill, batter, or intimidate those with the termerity to criticize the state, key politicians, or their pilot fish (e.g., Nashi).

Glad to see the priorities are all in order.

In the US too.  The Obama administration’s response to the litany of human rights abuses in Russia is, well, pretty much nothing.  Administration policy is “engagement uber alles”:

In his interview with The Times, Mr. Nemtsov said Mr. Obama is wrong to engage Mr. Surkov through the commission on civil society.

But the White House has said that it is important to engage someone close to Mr. Putin’s inner circle on democracy and civil rights issues.

“I think his criticisms are legitimate,” a senior White House official said. “There are other political people in Russia, who have said to us categorically, ‘Do not dissolve this. If you engage with this guy, it gives us a direct shot at the guy who matters.'”

This official said that “we think it’s better to engage than not to engage.”

We see daily the wonderful results of various US engagement initiatives, such as in Iran.  Or North Korea: Yeah, that’s paying dividends.  (Can you say: “Incoming!”?  I knew you could.)

I remember when progressives who are now Obama’s main constituency went ballistic at Reagan administration policy of engaging South Africa during the apartheid era.  I ask in all seriousness: why was engagement a monstrosity then, but the best–and in the eyes of this administration apparently, only–way to deal with governments and regimes with serious human rights problems?   Each state is different, of course, meaning that differences in policy may well be warranted.  But it would be nice to know what factors are critical in determining whether engagement is the best policy alternative so that the policies can be appraised.  Why is engagement good sometimes and an anathema others?  For it seems that at present, “engagement” is merely a monotonous mantra rooted in dreamy wishes of comity and fears of confrontation, rather than a sober evaluation of the pros and cons of the policy vis a vis alternatives.

And speaking of dreamy wishes, here’s your proof:

The Obama administration has sought to engage Mr. Medvedev while marginalizing the former president and current prime minister, Mr. Putin.

How’s that Putin marginalization thing working out?  Sheesh.  If this is the basis for our Russia policy, we are well and truly delusional.

Speaking of ballistic, part of the administration’s reason for treading lightly with Russia on human rights matters is strategic arms limitation.  Obama has invested heavily in the new START treaty, and is doubling down by demanding approval of the treaty during the lame duck session (another Obama political gamble that is likely to end disastrously).  There are many problems with this strategic weapons-centric approach.  One of particular note, and of particular irony, is that it is essentially an artifact of a Cold War mindset in which the superpower nuclear balance was all that really mattered.  That world is well and truly gone, as the emergence of China, and the development of nuclear threats in North Korea and Iran clearly demonstrate.  In this environment of tremendous strategic flux, locking the US into restrictions rooted in bipolar Cold War thinking is extremely unwise.  Obama asserts that the new START is a lynchpin in a broader anti-proliferation effort: that by leading by example, the US and Russia will encourage others to temper their strivings for nuclear weapons.

As if.  This is just another dreamy inversion of reality, from the experts on the subject.

Russia plans to impose extraterritorially its uniquely self-serving interpretation of WWII history (h/t R):

Dmitry Medvedev, the Russian president, created a commission of 28 legislators and senior intelligence officers which will identify foreign “revisionists” who “disparage the international prestige of the Russian Federation”.

The move, condemned as “Orwellian” by its critics, comes shortly before the Russian parliament is expected to pass controversial legislation outlawing the “rehabilitation of Nazism”.

The bill has attracted criticism because of its definition of Nazi rehabilitation, with those who “belittle” the Soviet Union’s role in the war or criticise it in any way being regarded as equally culpable as those who glorify Hitler.

Those found to contravene the new law, which Russia insists is little different from Germany’s Holocaust-denial legislation, face up to five years in prison.

Foreign countries whose officials who the commission rules to be guilty of the new crimes will face sanction as well. The bill gives Russia the authority to expel ambassadors or sever diplomatic relations with offending nations and to impose full transport and communications blockades on them.

. . . .

A Russian MP yesterday said that the Baltic states deserved “to suffer punishment” for holding such views.

The new law could also be used to bar Western historians who accuse the Red Army of carrying out atrocities during its advance on Berlin or point out that Nazi Germany and the Soviet Union were once allies under the Molotov-Ribbentrop pact.

It is particularly disgusting that Russia asserts that this legislation is equivalent to German Holocaust denial laws.  Indeed, this is an inversion of those laws, because it makes denial of historical facts and suppression of historical debate official state policy.   Moreover, it is bad enough that a country adopts an official historical viewpoint, and enforces it with coercive means. It is beyond the pale to force other sovereign nations to adopt the same official viewpoint.  Can you say imperialism?  I knew you could.

Distortion of the Stalinist past, or amnesia about it, is not limited to WWII:

Our data verify that Russians have limited knowledge about the Stalin-era repressions. Only 28 percent correctly indicated that “millions or tens of millions” suffered, 31 percent cited lower figures, 24 percent simply did not know, and 17 percent had never even heard about them. This manifestation of “absent memory” is especially pronounced among 20-year-olds: 35 percent of them have not heard of the repressions.

It is peculiar that Russia, which after 1991 could have foresworn any responsibility for USSR and its gruesomely bloody history, has instead embraced an airbrushed, distorted vision of it.  It would not have taken much mental agility to separate, for instance, the bravery of Soviet soldiers and their essential role in defeating Hitler from the crimes of the mendacious leaders and the Party committed before, during, and after the War.  Such a separation would have built up some good will and trust.  But rather than attempting to separate Russia from the USSR, Russia conflates the two: historical revisionism about the actions of the USSR is deemed to “disparage the international prestige of the Russian Federation.”

RF=USSR.  USSR=RF.  I didn’t say it.  They did.

But I guess “peculiar” is not the right word.  “Revealing” is, and what this all reveals about the Russian ruling elite is quite disturbing.  And yet they continue to express surprise and anger at the fear, mistrust, and loathing that Russia inspires among its neighbors.  I mean, really: get a clue.

But the whitewashing of the past, and the angry and at times violent reaction to those who object to this whitewashing suggests that cluelessness is not really the problem.  Rather, these are symptoms of a malignant narcissism that impedes natural development and healthy relationships with other nations and peoples.  That is something that one cannot reset, and even the attempt creates the grave risk of being exploited by the narcissist.  So though it’s all to easy to dismiss this as a tempest in a historical teapot, that would be unwise.  This battle over the past is all about the present, and those in the US and Europe and elsewhere should pay heed to what this says about Russia and those who rule it.

In my talks over the last couple of years about national energy strategies that I’ve given to State Department and other US foreign policy folks, I’ve compared China to Wilhemine Germany.  Rising powers with a major chip on their shoulders.  Each believing that theirs is a superior culture that has been held down by inferior ones.  Inferior cultures that are now in terminal decline and who should make way for the ascendence of the rising ones, but were not doing so voluntarily–and so who would have to be pushed aside if necessary.  And nations intoxicated with the writings of an American naval officer who was a contemporary of Wilhelm II, one Alfred Thayer Mahan.

One of the deans of American foreign policy intellectuals, Walter Russell Mead, has recently made the same comparison:

As China’s economy grows and its military develops new capacities, it is looking for ways to turn that potential power into actual power over events.  In the past, China has tried to attract its neighbors into its orbit with sweeteners like trade deals and aid.

But these measures apparently strike a new generation of Chinese policy makers as unsatisfactory.  China is too great a power to play nice, they think.  So they assert their territorial claims more and more boldly, and blow up disputes with Japan out of all proportion.

Wilhelm I had put his empire together (defeating Napoleon III in the Franco-Prussian War), he and his brilliant chancellor Otto von Bismarck realized that Germany’s greatest danger was to unite the surrounding powers against it.  It was time for sweet talk and flowers, or as the last generation of policymakers in Beijing used to put it, “peaceful rise”.  Wilhelm and Bismarck were nice to everyone who might join a coalition against them: Russia, England, Austria, Italy, the Ottoman Empire, America — and even France.  This was an exhausting policy and German foreign policy sometimes looked like a French bedroom farce as Bismarck hid Austria in the closet when Russia stormed into the bedroom.  Nevertheless, it worked.  Germany rose peacefully after 1871; it overtook Britain in manufacturing and its exports filled the world.  German financial firms developed a world reach and Germany even built up a colonial empire with dependencies in Africa and the Pacific.

But the old Wilhelm died and a new Wilhelm (Wilhelm II) brought a new generation of Germans into power.  Firing the elderly and crotchety Bismarck, Wilhelm read Admiral Mahan’s Importance of Sea Power in History and dreamed of the blue water navy that would turn Germany into a true Weltmacht, world power.  Moreover, ‘Willi’ was sick and tired of deferring to all the neighbors.  Enough of this insipid “Dreikaiserbund“, the complicated three-way alliance between Russia, Germany and Austria!  And enough of this being nice to France.  The French were losers, has-beens.  It was time they were made to feel it.  Germany was the greatest power in Europe and it was high time people accepted this fact.

In true Mahanian fashion, China is attempting to amass rapidly a blue water navy and air and missile forces that can deny the US Navy access to vast expanses of the oceans bordering China.  It is stridently asserting expansive territorial claims with no basis in international law.  It is actively bullying neighbor states, and shrilly telling the US to butt out of these disputes.

One doesn’t need to be as hysterical and alarmist as Mark Helprin to recognize that this is a potentially dangerous emerging threat to American interests that requires (a) long term strategic planning, (b) alliance building, and (c) the maintenance of robust US naval forces that are capable of operating at will in the South China Sea and the Yellow Sea.

The US Navy’s hull count is down dramatically, to under 300 ships, and new building programs like the DD-1000/DD(X) are languishing (at best).  The current SecDef is not a big navy fan who could benefit by reading a little Mahan himself, and who has made noises about cutting back on the number of US carrier groups.  All meaning that (c) isn’t looking too good right now.

A Wilhelmine-esque China and a drifting, distracted, and enervating US is a bad combination.  As Mead points out, China’s obstreperousness is engendering a reaction that the US can use to bolster a containment-oriented strategy.  Whether we have the will to do so, or are willing to commit the resources necessary to implement it, is another issue altogether.

Although I found the initial leaks of parts of the Woodward book on Obama and Afghanistan intriguing, I held off saying anything until the installments actually ran.  Today the first one is available, so here it goes.

The theme of the first installment, accurately conveyed by the headline, is that the military thwarted Obama by refusing to provide options other than those (or that) it considered militarily prudent.

This is a crock.

It would be more accurate to say: the military refused to provide Obama with the option he preferred–and which the military knew he preferred.  That option being, of course, a plan for a rapid withdrawal from Afghanistan.  Rapid withdrawal being something between an immediate cut and run leaving behind a token force of trainers, and an only slightly lighter version of the plan currently in force.

This refusal frustrated Obama no end, because the military’s obstinacy deprived him of the political cover he desired.  The Pentagon and the uniformed military weren’t about to recommend something they did not believe in.  They said, in effect: if you want to gut the mission in Afghanistan, you take the responsibility, and don’t hide behind us.

The most important figure in this was SecDef Gates, who Obama feared would resign if he chose the trainers-only option.  Obama could not stand such a high profile defection.  It would give the lie to all of his high sounding campaign rhetoric about Afghanistan being a war of necessity.

So Obama chose a course that was as close to his (and Rahm Emmanuel’s and Joe Biden’s) preference for effective abandonment of the Afghan campaign but which was still politically viable.

This demonstrates that the whole idea that Obama was at a loss to craft a policy without recommendations from the Pentagon is in fact a crock.  The article makes it clear that faced with the military’s opposition, Obama dictated his own plan.  Which is his right, as Commander-in-Chief.  But spare me the crocodile tears about the military leaving Obama adrift without strategic advice.  They gave it.  He didn’t like it.  He chose his own option all by his lonesome, thank you very much.  He was capable of doing so all along.

This is all pretty transparent, so one wonders why Gates went along even with the plan Obama eventually dictated, despite its transparently fatal defects.  The only thing that comes to mind is that Gates thought that by keeping the door open, and getting a commitment for more troops albeit with a limited timeline, there was a chance that it Obama would have to renege on his commitment to begin withdrawals almost as soon as the deployment would be completed.

This is a false hope, for it is clear that Obama is viscerally opposed to a continued commitment to Afghanistan.  In this he is one with his political base, and he has no intention of crossing them on this.  Indeed, as Obama’s political fortunes slip, he is even less able to anger those few allies he has left.

Although the military is portrayed as the heavy in this, I would take the opposite view.  They presented what they believe to be their best advice.  That’s their job.  It’s Obama’s to accept it, or not.

It should be noted, moreover, that the current brass is not a bunch of Jack D. Ripper-esque warmongers.  For the most part, they are deeply concerned about the stress on the Army and Marines in particular, and would be anxious to reduce commitments to the extent they believe prudent.  They also realize that Afghanistan is a logistical nightmare.  The fact that they were  pretty unified on the approach needed in Afghanistan despite their concerns over the stresses an increased commitment would impose on the force speaks volumes.

The Woodward piece talks about the specter of Viet Nam hanging over the deliberations.  Here’s a Viet Nam analogy that escapes Woodward’s mention–and the attention of most (and arguably all) who have raised this analogy.   Colonel H. R. McMaster’s book on the Joint Chiefs during Viet Nam shows powerfully that (a) the Joint Chiefs disagreed vehemently with McNamara’s and Johnson’s approach to the war in 1964, (b) McNamara basically isolated them, and (c) the Joint Chiefs acquiesced in this despite their deep misgivings.  McMaster believes that in acquiescing so, the Chiefs were derelict in their duty.  He believes that they should have resigned rather than give their tacit consent to a policy that they did not approve.

There is too little in what has appeared in Woodward’s piece and elsewhere to judge whether the uniformed military and SecDef Gates have been similarly derelict in their duty.  But their consistent opposition to presenting Obama with the option he craved but which revolted them suggests that they were more stalwart than their 1964-65 predecessors were.

I have said before that I am ambivalent about whether it is better to go large or go home in Afghanistan.  I am not ambivalent about the cold-blooded political course Obama has chosen.  His course has no chance of achieving anything there: the hard deadline is arguably the worst of all worlds.  It condemns many Americans–and allies, and Afghans–to death, without any prospect of achieving anything remotely resembling a military victory, even of the most limited variety.  I would much prefer that Obama do what he really wants to do, rather than follow a course that will have all of the same downsides, but which will get more people killed.

One last thing.  It is clear from reading Woodward’s first installment that Obama and Petraeus were bitter antagonists during these debates, and that Patraeus was particularly adamant in his opposition to Obama’s preferred course.  This makes sense, given their previous interactions, which no doubt left bad blood.  (And Patraeus would have every reason to hold a grudge against Obama and those pushing for the cut-and-run option, given the way they had slandered him during the Surge.)

This makes all the more remarkable Obama’s selection of Patraeus to take command in Afghanistan–and Patraeus’s decision to accept it.  The calculations, on both sides, regarding the offer and the acceptance cannot be even partly understood based on what is in the public record.  But it is evident that there is deep tension and suspicion in this relationship, and it is highly likely that there was a heavy dose of cynical gamesmanship by both.  That is the history I would really like to learn.  I wonder if and when we will.

I spoke about Frank-n-Dodd today at the 9th Annual Oil & Gas Institute here in Houston.  Prior to my talk, Larry Nettles of Vinson & Elkins gave a crisply delivered and amazingly informative talk about shale gas and fracking.

Mr. Nettles remarked on how there hasn’t been much drilling in the Northeast in the last 100 years, but that is changing with the Marcellus Shale.  His comment brought to mind some family history.

My grandfather’s stepfather, Bill Wilcox, “shot” oil wells in West Virginia and Southeastern Ohio from the 1890s to the 1920s.  Back in the day, fracking meant drilling a hole, filling a coffee can with nitroglycerine, lowering it very carefully down the hole, and then detonating it (hence the term “shooting” the well).  We have family pictures of the process, including an honest-to-God gusher that Wilcox blew.

Obviously, this was a very, very hazardous occupation.  My grandfather said that Wilcox told him that for 16 Februaries in a row, at least one of his fellow shooters was blown up.  The rapid fluctuations in temperatures typical for that time of year made the nitro unstable, and put that together with icy and rutted mountain roads in West Virginia, or the hills of Ohio, and well, use your imagination.  As a result, Wilcox eventually spent every February dead drunk, or so my grandfather said.  It must of worked, as he survived into a ripe old age (although his liver was probably twice as old as that).

But there were compensations, apparently.  Wilcox used to drive a “shooting wagon” (again, we have some photos) that everybody around knew was used to carry nitro.  As a result, everybody, and I mean everybody, steered clear of it.  Including law enforcement.  So Wilcox figured out that the shooting wagon was a great way to run moonshine, which he did.  According to my grandfather, the local brand was known as New Straitsville Special, after a small coal town called New Straitsville.  The stuff was distilled there in old mines that had been abandoned, because many of the mines had been set on fire during a labor dispute in the 1880s.

Think they’re running any moonshine in the water trucks used in that new fangled fracking?

A genealogist swears she can trace my mother’s family back to the Plantagenets.  My grandfather, and several others, have independently traced this line of the family back into the late-16th century.  There are several problematic links between that established line and the Plantagenets, but this woman claims she has done it.

Not that such a link, if it exists, is anything to brag about.  The Plantagenets, up and down the line, from Henry I to Richard III, were complete and utter bastards.  The connection, such as it is, would run through John (Jean Sansterre/John Lackland/John I), the baddie in the Robin Hood stories.  And bad he was.  But the supposed good guy, Richard I, the Lionheart, was also a mercenary, murderous SOB.  And their dear old dad, Henry II, was a real piece of work; Mom (Eleanor of Aquitaine) was what you would call very high maintenance.  (See the Lion in Winter for a dramatization of this dysfunctional family.)

Well today I made a pilgrimage, of sorts, to the old family stomping grounds (again, if the genealogist is to be believed).  I first visited the Abbey at Fontevraud.  Here Henry II, Eleanor, Richard I, and John’s wife Isabella lie beneath famous recumbent statues, still covered with traces of the original paint.  This is where Eleanor spent her last days.

I then went to Chinon, the seat of the Plantagenet lands in France.  (They were the Ducs d’Anjou as well as Kings of England.)  The Fortresse in Chinon is where the drama in the Lion of Winter played out.  It is where Eleanor and her sons plotted against Henry.

It is also where Joan of Arc recognized Charles VII, Dauphin of France–or was recognized by him, depending on the version of the story.  She received his promise to fight for the kingship of France, and his permission to lead an attack on Orleans.  The rest is history and legend, inextricably mixed.

So much history in a small space.  I have been to many historical sites in my life, but the royal house at Fortresse Chinon affected me in ways that most sites do not.  Perhaps it was the emotional intensity of the Angevin melodrama, or the inexplicable mysteries of Joan, but the place left its mark on me in ways that few historical sites have.  (Perhaps this was encouraged by the interesting and evocative film dramatizations of Fulk, Duc d’Anjou; Henry II and his sons; and Joan that played in rooms of the house.)

There is other family history in Chinon that is beyond dispute.  My dad was stationed there during his days as a draftee in the Army in 1955.  His unit was a communications outfit, and their equipment was stored in caves in the banks of La Vienne river.  I drove by some caves visible on the hillside today–perhaps the same ones.  These were what the Polish vets I mentioned yesterday guarded.

Today Chinon is pretty much a tourist town, touting the Fortresse and the medieval city at its base as its main attractions.  My dad’s memories are hardly so romantic.  He mainly recalls killing with fire pokers the rats that infested their tarpaper barracks; the GIs would turn out the lights, and when they heard the rats scurrying about they would blind them with flashlights and then bash them with the pokers.  But that was the France of the mid-1950s, recovering from the devastation of WWII, much poorer than today.  The France of the pissoirs.  And I’m sure when my dad was there, they didn’t have Le Tennessee Tex Mex restaurant, complete with a bright yellow promotional “Le Tenessee Tex Mex” car parked in front.  They have one today!–incongruously in the center of the medieval town.  (BTW, Jack Daniels might have a good copyright infringement suit against this place.  Just sayin’.)

But no GIs.  They are long gone.  That’s probably mutually agreeable.

And Chinon is the place that would have wrecked my life, had I been born a girl.  My dad met a woman there whose name was Pierrette.  Now, for some reason, that name struck my dad’s fancy.  He was going to name his first daughter Pierrette.

Pirette Pirrong.  Oh. My. God.  There but for a Y-chromosome go I.

He suggested that name for my girls.  Needless to say that silence was the only reply.

Now Pierrette Plantagenet–there’s a name for you!

Demonstrating that his stalwart position on the need to defer to the legal and Constitutional rights of the builders of the Ground Zero Mosque was a matter of deep principle, Obama came out in support of Rev. Terry Jones’s exercising his right to free expression by burning the Koran.  He said this was a purely local matter, the subject of Gainesville, Florida fire ordinances.  He didn’t want to express any opinion on the wisdom of Rev. Jones’s actions.

Just kidding.  Obama actually said:

“If he’s listening, I just hope he understands that what he’s proposing to do is completely contrary to our values … this country has been built on the notions of religious freedom and religious tolerance,” Obama said. “As a very practical matter, as commander (in) chief of the armed forces of the United States, I just want him to understand that this stunt that he is pulling could greatly endanger our young men and women in uniform who are in Iraq, who are in Afghanistan.”

So, here he lectures on “our” values and tolerance, excoriates the wisdom and prudence of Jones’s (since dropped) plans, and avoids any discussion whatsoever of the legality of the act, or Jones’s right to do it.  With the GZ mosque, however, he emphasized the legalisms, and explicitly eschewed any comment on the wisdom of the matter.

In contrast to Obama, Bloomberg was consistent: he focused on the legal and constitutional issues in both cases.  From the other end of the political spectrum, Palin was also consistent: she focused on the wisdom and sensitivity  in each.

When on closely related issues a politician uses flatly inconsistent arguments to justify his/her decisions, it is usually because he or she does not want to acknowledge publicly the real rationale, which is often very consistent across the cases.   What could that rationale be in these matters?  I do not know for certain, of course.  It is immediately obvious, however, that in each case Obama clearly sided with Muslim sensitivities.

The whole Jones thing is farcical.  Look, there are over 300 million people in the US.  In a population of 300 million, there will be a fair number of attention seeking pinheads.  Jones is an attention seeking pinhead.   Such people are best ignored.  The attention lavished on Jones is counterproductive.  It will encourage other pinheads.  It gives a distorted impression of the relevance and representativeness of pinheads.  It especially gives an extremely distorted perception of what the vast majority of Americans think.  It plays to foreign bigotry and prejudices–notably Muslim bigotry and prejudices.

Jones’s foil in this farce, Feisel Rauf, is also a pinhead.  This was on display in an interview on CNN on Wednesday:

I meant it, the danger from the radicals in the Muslim world to our national security, to the national security of our troops. I have a niece who works in the Army and served in Iraq. The concern for American citizens who live and work and travel overseas will increasingly be compromised if the radicals are strengthened. And if we do move, it will strengthen the argument of the radicals to recruit, their ability to recruit, and their increasing aggression and violence against our country.

In other words, we are supposed to appease Muslim radicals.  You know, those people who are unappeasable.  The same people who will view the GZ mosque as a monument to a Muslim triumph, an attack on the American kafirs.  The same people who were killing Americans long before the mosque was ever mooted, and who will continue to try to kill Americans long after the issue is resolved one way or another.

The foregoing quote from the interview has received most of the attention; some interpret as a threat, and that interpretation is not unreasonable.  But that’s not the comment that I found most outrageous. This is:

I am extremely concerned about sensitivity. But I also have a responsibility. If we move from that location, the story will be that the radicals have taken over the discourse. The headlines in the Muslim world will be that Islam is under attack. And I’m less concerned about the radicals in America than I’m concerned about the radicals in the Muslim world.

. . . .

As I mentioned, because if we move, that means the radicals have shaped the discourse. The radicals will shape the discourse on both sides. And those of us who are moderates on both sides — you see Soledad, the battle front is not between Muslims and non-Muslims. The real battle front is between moderates on all sides of all the faith traditions and the radicals on all sides. The radicals actually feed off each other. And in some kind of existential way, need each other. And the more that the radicals are able to control the discourse on one side, it strengthens the radicals on the other side and vice versa. We have to turn this around.

So, to Rauf, the debate over the mosque is between the radicals in the Muslim world on the one hand–and the radicals in the United States on the other.  I guess it’s nice of him to acknowledge that the radicals in the US are less of a threat (though that acknowledgement is decidedly missing from the second quote) but the clear meaning of his remark is that deferring to the overwhelming sentiment of Americans would be making a concession to radicals; that is, Americans who oppose the mosque are radicals.

Sorry, Rauf, but American opposition to the GZM is anything but the obsession of radicals.  It is broad and deep, cutting across virtually all segments of the American public.  With a few notable exceptions, of course, one of whom, unfortunately, occupies the Oval Office.

This slur on the opponents of the mosque is factually wrong and deeply offensive.  It deserves far more attention than it has received.

Rauf is not just offensive, he’s self-admittedly clueless:

O’BRIEN: Right, but given what you know now, would you have said, listen, let’s not do it there? Because it sounds like you’re saying in retrospect you wouldn’t have done it.
RAUF: Well, yes.
O’BRIEN: You would not have done it?
RAUF: If I knew this would happen, this would cause this kind of pain, I wouldn’t have done it.

So here we have someone, who by his own admission, didn’t have the slightest clue about the sensitivities surrounding 9-11.  Who believes that opposition to his initiative is solely the province of “radicals” in the US.

Let’s say the mosque gets built, and Rauf leads it.  Uhm, you think that there’s any doubt that given his self-admitted incomprehension of American views about 9-11, that the mosque and his mouth would become  never ending sources of injuries and insults to deeply held American beliefs and sensibilities?

And let’s further consider the fact that Rauf repeatedly–repeatedly–justifies his actions as necessarily deferential to Muslim radicals, lest they go on a violent rampage.  (How would you know?)  If he truly believes this, every decision he makes about the mosque, and its operation, will be made with an eye–no, two eyes and two ears–on those same radicals.  Even giving him every benefit of the doubt about his sincerity in building bridges, his cravenness towards Muslim radicals, his evident belief that it is imperative to appease them, makes it highly likely that he will be forever susceptible to radical pressure.  And he has announced that to them, in no uncertain terms.  Knowing that, they will threaten him every time he does anything that offends them.  He will bend to their will.  He admits as much.

And if you do doubt his sincerity, well, you know that he can always hide behind the threat of radical violence to justify further sacrileges to the memory of 9-11.

A man who has no understanding of America and Americans whatsoever, and who obsessively appeases Muslim radicals.  Just the man to head a mosque on a site that is sacred to most Americans, no?

Yes, Terry Jones is a pinhead.  But Feisel Rauf is a pinhead too.  And a far more important and dangerous one to boot.

In a speech Tuesday, SEC Chairwoman Mary Schapiro suggested imposing affirmative obligations on high frequency traders:

The SEC should consider whether traders with the “best access” to markets should be obligated to buy and sell stocks to preserve liquidity, Schapiro said today in a speech at the Economic Club of New York. The agency is also examining whether stock quotations should have to stand for a minimum amount of time. Such a change would stop high-frequency traders from repeatedly placing and canceling orders in milliseconds.

“Some could argue that May 6 was an aberration — another perfect storm — and now that it has passed markets have naturally adapted leaving no need for a comprehensive review of our market structure,” Schapiro said. “I disagree.”

Schapiro hearkened back to an earlier era, when some (and I emphasize some) market makers had affirmative obligations:

“In the old manual market structure, the market participants with the best access to the markets — the specialists and the dominant exchanges — were subject to significant trading obligations,” Schapiro said. “These traditional obligations have fallen by the wayside.”

First, a little history.  The affirmative obligation to make markets–to “lean against the wind”–was not universal.  Yes, NYSE specialists had such an obligation.  But NASDAQ market makers did not.  Nor did futures or options market makers.  Moreover, it should be noted that in exchange for their affirmative obligation, specialists were the beneficiaries of many privileges; I’ll return to this point below.

Also in a historical vein, (a) affirmative obligations are not a panacea, (b) market makers frequently attempt to avoid their obligations in times of stress, and (c) evaporating liquidity in times of stress is driven by fundamental economics, not technology, meaning that HFT-oriented markets are not uniquely vulnerable to this problem: there is, in brief, no Golden Age to which we can return through the waving of the regulatory wand.

These points are best illustrated by the events of the 1987 Crash.  The Brady Report documents that specialists were not uniformly acting as price stabilizers.  On the 19th, 26 percent of specialists were trading in a way that exacerbated price trends; on the 20th, as many specialists were trading in this way as were leaning against the wind.  The Report concluded that the behavior on the 20th reflected the fact that many specialists exhausted their capital on the 19th, which limited their ability to supply liquidity on the 20th:

The limited nature of some specialists’ contributions to price stability may be have been due to the exhaustion of their purchasing power following attempts to stabilize the markets at the open on October 19.

Moreover, even though HFT was not even a gleam in the eyes of its creators in 1987, liquidity suppliers in other markets responded to the intense uncertainty by drastically reducing the amount of liquidity they supplied.  Of NASDAQ, the Brady Report said:

During the week of October 19, some market makers formally withdrew from making markets.  In addition, some market makers ceased performing their function, merely by not answering their telephones during this period.  .  .  .  There were also widespread reports that many market makers, who normally stand ready to buy and sell hundreds and sometimes thousands of shares at their quoted prices, were only willing to fulfill their minimum obligation by buying and selling 100 shares at the quoted price.  Another indication of deterioration in market making performance is the withdrawal by some market makers from the SOES [Small Order Execution System] system, thus reducing from 1,000 to 100 the number of shares they were obligated to buy or sell.

In addition, bid-offer spreads also widened during the period.

Interestingly, the Brady report noted that although futures locals had no obligation to supply liquidity, they were “as a group somewhat more aggressive than normal in taking net positions on October 19.”  But, this herculean effort also exhausted their capital, and limited their ability to make markets late in the 19th and on the 20th.  I can attest, from personal observation, that by the afternoon of the 19th, most locals were out of the pits: they had been yanked out by their clearing firms.  Many of the remaining locals were standing with their arms crossed over their badges, to reduce the possibility that somebody would write down their ID on a trade ticket, hoping to win the outtrade lottery.

So: Don’t blame the loss of liquidity during periods of stress on technological innovation.  It happened in the horse and buggy days too.  Also: don’t expect that affirmative obligations are sufficient to ensure that markets are immune to crashes.

As I wrote in the immediate aftermath of the Flash Crash in May, the no free lunch principle works here.  The imposition of affirmative obligations to supply liquidity when it is unprofitable to do so will reduce the return on market makers’ capital.  Absent some other compensation, this will lead to the exit of market making capital.   As a result of this exit, investors will pay the cost of the affirmative obligation in the form of higher spreads/greater price impact during times when the affirmative obligation constraint is not binding.  Moreover, the exit of market making capital will offset to some degree the effects of the obligation: when the constraint binds, market makers will be risking a greater fraction of their capital to make markets during stressed times than they would in the absence of the constraint, but this greater fraction will be applied to a smaller pool of capital.  It should also be noted that one of the costs of fulfilling the obligation is that market making capital will be depleted during times of stress, thereby reducing liquidity subsequently (until new capital can flow into liquidity supply).

The previous paragraph contains the phrase “absent some other compensation.”  In the old days of the specialist system, specialists had various privileges that allowed them to trade profitably–at the expense of their customers.   These privileges were rationalized, in part, as a means of compensating specialists for their affirmative obligations.  Again: no free lunch.  Investors end up paying for the obligation.

The primary effect of affirmative obligations is to change the pattern of liquidity supply over time.  Less liquidity supply in “normal” times (due to the exit of market making capital, or profits that market makers earn from privileges extended to compensate for the costs of the obligations), less liquidity in post-stress periods, and perhaps more liquidity supply in stressed times.

It is possible that this altered pattern of liquidity supply is welfare enhancing.  But Schapiro’s remarks, and much of the post-Flash Crash commentary, does not acknowledge the costs of imposing affirmative obligations.  Thus, the proper cost-benefit trade-off question has not even been posed, let alone answered.

The old Greenwald-Stein paper written in the aftermath of the ’87 Crash theorizes that there are market failures during times of market stress, and that there is insufficient liquidity supplied during these periods.  But it is not clear that affirmative obligations are the most efficient way to address that problem.  Perhaps some other strategy, such as shifting from continuous to call trading during such periods, would be more efficient, especially inasmuch as this does not distort liquidity supply in “normal” times, as the affirmative obligation would.

It must also be recognized that defining and enforcing an affirmative obligation in the current market is much more difficult than was in the case with the NYSE under the specialist system.  The “right” obligation is by no means obvious.  HFT firms will design their systems to mitigate, not to say evade, the obligation arising under any set of criteria.  The details here will be very important, and very difficult to get right.

Another thing that Schapiro mentioned in her speech was the high rate of order cancellations, which she suggested indicate that much HFT liquidity supply is chimerical.  To address these, she mooted the idea of a minimum time for which orders must be in force.

Oi.

Limit orders are  short options.  Options are costly.  Mandating a minimum time quotes must be maintained increases the cost of those options.  Market makers will respond accordingly, by increasing spreads and reducing depth.  Again, investors will pay.  No free lunch, again.

Moreover, this recommendation cuts against the concern that liquidity dries up in stressed times.  The option inherent in a quote is more costly when markets are volatile: that’s exactly why market makers reduce their commitments during volatile times.  A minimum quote time will make market makers even more reluctant to supply quotes in volatile/stressed times.  So this measure, by itself, could make liquidity strikes more likely, not less.  To offset this, by imposing affirmative obligations, would result in higher liquidity costs in normal times: the no free lunch principle, yet again. (It would also make enforcement more difficult and costly, as market makers would have a greater incentive to evade the obligations.)

Bottom line: there is no quick fix to the evaporation of liquidity during stressed times.  Evaporation is driven by fundamental economic considerations: it is more costly to make markets during volatile periods.  Rule changes will not alter that fundamental fact.  That fundamental fact holds across trading technologies.

The costs of rules intended to increase liquidity supply in volatile times will be paid for.  Period.  The only question is when and how.  A reasoned policy debate would focus on identifying and quantifying the relevant trade-offs.  And it is my obligation to affirm that hasn’t happened yet.

Obviously an adherent of the view that the best defense is a good offense, Vladimir Putin responded to a question from a British reporter (Richard Beeston) about the continued presence of Lenin’s corpose in Red Square by bringing up–Oliver Cromwell. Huh?

All was well until I asked him about Vladimir Lenin, whose body still lies in state in Red Square, Moscow. Was it not time to bury him?

The Russian leader’s piercing blue eyes narrowed and he lost his composure: “What about Cromwell, was he any better than Lenin? There are memorials to Cromwell all over Britain. The Russian people will in time decide what happens to Lenin.”

Here’s a more complete account:

Richard Beeston: Thank you Prime Minister. Richard Beeston, The Times, London. Last week we talked about the past, about Russian history and especially about the turbulent 20th century which was fatal for many Russians. I am amazed that with seven years to the centenary of the Bolshevik Revolution, Vladimir Lenin is still lying on display in the Mausoleum in Red Square, with guards standing around him. Don’t you think its a good idea to finally bury him before this event, to help Russia turn a new page? Thank you.

Vladimir Putin: Are you from Great Britain?

Richard Beeston: Yes.

Vladimir Putin: Then I have a question for you. Was Cromwell better or worse than Stalin?

Richard Beeston: Probably just as bad. But he is not displayed on Trafalgar Square, but somewhere in Westminster, at the back.

Vladimir Putin: But there are monuments to him all over Britain, everything in its season. When time comes, the Russian people will decide what to do. History is something that avoids hassle. Next question please.”

Although the Irish might disagree, Beeston was wrong to equate Cromwell with Stalin: the latter’s crimes dwarf the former’s.

More to the point, Putin completely ignores the actual question–the continued presence of Lenin on Red Square.  That’s a different thing altogether than the statues of Cromwell scattered across Britain.

Indeed, the historical comparison is quite illuminating.  After the Restoration of Charles II (whose father Cromwell had beheaded), Cromwell’s corpse was dug up from Westminster, hanged, drawn, and quartered; the punishment meted out to traitors.  His head was displayed on a pike for decades afterwards, and then was sold from hand to hand, and displayed as a curiosity for centuries thereafter.

Continued display in a referential way in the capital vs. symbolic repudiation, desecration, and ridicule.  See the difference?  I knew you could.

And let’s say, counterfactually, that the UK continued to let Cromwell rest in an honored place.  Would that be appropriate?  Would this justify the continued honoring of another mass murderer (who also put Cromwell to shame, BTW)?

By going on the offensive (in multiple meanings of the word), Putin avoids answering, in an honest way, the justification for honoring Lenin long after the USSR fell.  As for the “Russian people will decide”: As if.  When have the Russian people been allowed to decide anything?

Seldom does one see such 190 proof, distilled essence of whataboutism.  (Well, sometimes in the comments at SWP.)  It is a low rhetorical dodge intended to allow the whatabouter to escape confronting the issue head on.  It would be better if Putin gave a full-throated defense of Lenin, or of the propriety of keeping his embalmed corpse on display.  You might disagree with his reasoning, but at least if he answered so he would be respecting the question and the questioner, and acknowledging the weightiness of the issue.

But perhaps the whataboutism is telling: perhaps it betrays that even Putin knows that he cannot make a reasoned and reasonable defense, so he feels compelled to stoop to such discreditable rhetorical dodges.

More substantively, reporting from Putin’s Valdai performance almost universally agrees that it indicates he is planning to resume the presidency.

What, this is news?