Streetwise Professor

May 23, 2018

Ayatollah Khamenei Performs at Open Mike Night

Filed under: Politics — The Professor @ 7:59 pm

Some comic relief from an unexpected quarter today. Namely, Ayatollah Khamenei–such a card! He accused Germany, France, and the UK of “disloyalty” for not confronting the US for walking on the non-treaty, and spelled out an ultimatum which, if the Europeans do not comply, will trigger a resumption of Iran’s nuclear activities:

He further blasted the Europeans for keeping mum about the US frequent violations of the 2015 nuclear deal in the last two years, and said “the EU is required to make up for this silence”.

Ayatollah Khamenei reminded that the US has violated UN Security Council Resolution 2231 that accompanies the nuclear deal, and said hence “Europe should issue a resolution against the US violation” of the agreement.

He said “the EU should also undertake to avoid a discussion of Iran’s missile and regional power”.

The Iranian Leader reminded that the nuclear talks were aimed at the removal of the sanctions, “many of which were not lifted, while they have been recently threatening to revive the sanctions desipte the emphasis of the UN Security Council resolution” to the otherwise.

The Leader further underlined that the EU should also pledge “to take action against any kind of sanction against the Islamic Republic and stand against the US sanctions on the basis of a clear-cut position”.

“Europe is also needed to ensure Iran’s full crude sales,” he said, and explained, “In case the Americans manage to strike a blow at our oil sales, (we) should be able to sell whatever volume of oil that we want. The Europeans should compensate (for the loss in crude sales) in a guaranteed manner and buy Iran’s crude.”

Ayatollah Khamenei also underscored that the EU banks should also ensure trade with Iran, and said, “We don’t want a fight with these three countries, but (we) don’t trust them either because of their past record.”

I have it on good authority, from sources who cannot be identified, that in a secret protocol Khamenei demanded that the Europeans supply him with daily shipments of M&Ms, with all of the brown ones removed.

The Leader (what a giveaway that is) also seems somewhat hazy on what JCPOA is: The Islamic Republic cannot deal with a government that easily violates an international treaty, withdraws its signature and in a theatrical show brags about its withdrawal on television.” Um, not a treaty! Obama denied it was a treaty.  He refused to submit it to the Senate for ratification as a treaty, as the Constitution requires.  Hence, whatever Khamenei says or thinks, it is not a treaty that legally binds the US, and hence, it was a simple matter for Trump to walk away, leaving the Ayatollah and the Europutians sputtering in rage.  A perfect illustration of “hoist on his own petard,” as it were (both Khamenei and Obama).

European companies have already made clear that they are not going to get crosswise with the United States.  The Iranian threat to resume processing of nuclear fuel is utterly abstract, and irrelevant to them: the threat of multi-billion dollar fines and the potentially devastating effects of secondary sanctions (cf. Oleg Derispaska) are very concrete and real.  The Germans, French, and British may wish that Iran won’t spin up its centrifuges again, but it would be absurd to impose penalties on their own companies for deferring to the US, especially since it would be trivially easy for the US to beat any penalty that the Europeans impose, and whereas Europe would be harming its own companies by imposing penalties (and incurring greater penalties from the US), it would cost the US nothing to impose them. Solving for the equilibrium in this game is pretty easy–maybe someone should explain it to Khamenei.

And just what “actions” and “stands” can the Europeans take?  Angela can stomp her feet and hold her breath until she’s blue in the face in anger at Trump, and it won’t matter a damn.  When it comes down to actual action, the Europeans are so impotent that all the Viagra in the world wouldn’t help.  It is clear who has escalation dominance here, and all Khamenei’s demands will not change that.

So Khamenei can demand and threaten, and at the end of the day it will avail him nothing, except maybe the Europeans will send  him those M&Ms.  As for the substance of his demands, he’s just pissing in the wind.

 

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May 21, 2018

DOJ “Independence” Is Not a Thing: It Is an Extra-Constitutional Arrogation of Power

Filed under: Politics — The Professor @ 6:45 pm

On Sunday Trump announced (via Twitter, naturally) that he intended to order the Justice Department to investigate allegations of spying on his campaign: today, he followed through, and the DOJ has complied.

Immediately after Trump’s tweet, craniums began to explode all over DC and the media.  So many that it may be necessary to change the lyrics of the National Anthem to “heads bursting in air.”

Most of the exploding pates belonged to ex-DOJ officials and functionaries, many of whom do not come to this issue with clean hands (to understate things).  For example, ex-Assistant Attorney General Sally Yates shrieked (but I repeat myself):

“I think what we’re seeing here is the president has taken his all-out assault of the rule of law to a new level and this time he is ordering up an investigation of the investigators who are examining his own campaign. You know, that’s really shocking,” Yates said on MSNBC’s “Morning Joe.”

Yates, of course, is directly implicated in the anti-Trump campaign, notably for setting up Michael Flynn (and likely many other things as well, including unmasking of US citizens).

The highest ranking exploding head is ex-Attorney General Eric Holder, who tweeted:

Trump demand for DOJ investigation is dangerous/democracy threatening. DOJ response is disappointing.There is no basis/no predicate for an inquiry. It’s time to stand for time honored DOJ independence. That separation from White House is a critical part of our system.

Let us pause for amusement at the thought of a man who proudly proclaimed that his proud duty as AG was to serve as Obama’s “wingman” intoning about “separation from the White House.”  Let us guffaw at Holder’s claim of “no basis/no predicate” for an investigation, after recalling the findings of the House and Senate Intelligence Committees, not to mention numerous NYT and WaPo articles, many based on leaks clearly emanating from Justice.  Certainly there is much more “basis/predicate” here than hearsay from a partisan about the drunken ramblings of a peripheral campaign figure, or a completely unverified dossier that is risible on its face.

But now let us turn to the main issue: the assertion of “time honored DOJ independence.”

In fact, “DOJ independence” is not a thing.  Indeed, the assertion thereof is an extra-Constitutional arrogation of authority.  Trump’s actions in ordering an investigation are not a threat to the Constitutional order–instead, it is threatened by the actions of members of the executive branch who usurp power based on their inflated and utterly mistaken belief that somehow the DOJ is not subordinate to the President.

This is not that hard.  Trump’s unconditional authority to demand an investigation is explicit in black-and-white in Article II, Section 2 of the Constitution:

[the President] may require the Opinion, in writing, of the principal Officer in each of the executive Departments, upon any Subject relating to the Duties of their respective Offices. [Emphasis added.]

Require written reports on any subject relating to the duties of an executive department.  There is no dispute that DOJ is an “executive department.”  If Eric and Sally need any guidance on this score, please refer them to An Act to Establish the Department of Justice (passed on 22 June, 1870) which reads, in part, “That there shall be, and is hereby, established an executive department of the government of the United States to be called the Department of Justice, of which the Attorney General [a position that predated the establishment of the DOJ] shall be the head.”

Thus, DOJ is clearly subordinate to the Chief Executive, and said Chief Executive has the unconditional authority to order reports (which necessarily involve the performance of some sort of investigation) on any subject related to the DOJ’s “duties” (which include criminal and counterintelligence investigations).  There is no “except for investigations of his campaign” exception.  In fact, there is no exception at all.

Further, the DOJ is clearly subordinate to the President, whose primary duty is to “take care that the laws be faithfully executed.”

Against this no doubt the likes of Holder and Yates and the other lesser lights who have also weighed in (heavy on the outrage) will respond: but it is necessary to ensure that the President does not violate his duty to execute the laws by interfering in investigations, particularly those that threaten him or his personal or political interests.

Two remarks are apposite in reply.  First, yes, this is a danger, but the Constitution has a remedy.  Presidents are subject to impeachment by Congress if they engage in such conduct–which would violate their duty under the Take Care Clause. Impeachment is the check on executive conduct–not the judgment of the executive’s subordinates.  One co-equal branch checks another: it is incoherent for the subordinate parts of one branch to check the acts of the head of that branch.  It is an inherent part of the system for the head to check the acts of the subordinates.  Indeed, it is his duty.

Second, it is particularly outrageous to raise this argument in this context, because if a President’s motives are suspect in a case involving his own interests, the motives of DOJ (including FBI) employees present and past are deeply suspect in the cases of spying on the Trump campaign, and the Clinton email investigation.  Indeed, all of the stonewalling of requests by Congress, and the extensive redactions, usually based on claims of “national security”, have been exposed as efforts of the DOJ to conceal its misdeeds and to protect senior department officials past and present.  Any presumption of independence and clean hands is risible here.  DOJ personnel past and present are up to their necks in this, and it is imperative to hold them accountable.

Thus, the rantings of Yates about threats to the rule of law, and Holder’s assertion of DOJ independence, are inversions of the truth.  Trump is not threatening the Constitutional order: he is upholding it by demanding accountability by those delegated by him pursuant to his Constitutional power in order to perform his Constitutional duties.

The hysterical reaction to Trump’s action is quite revealing.  Some people are afraid.  Very afraid.

Good.  Damn good.

My main reservation is the approach that emerged from today’s meeting between Trump, Sessions, and Rosenstein: delegating to the DOJ Inspector General the responsibility of investigating and reporting on the campaign spying issue–in addition to all of the other investigations on his plate.  This means that we will learn something in oh, 2020 or so.

Not acceptable.  This is an urgent matter that must be resolved quickly.

It would be preferable for Trump to exercise another of his unconditional powers–the power to declassify.  At the very least, he should order all relevant documents be made available to Congress, unredacted, and should order all DOJ personnel to make themselves for Congressional questioning.  I would consider going further: declassifying and releasing unredacted to the public the relevant documents, to let us decide.

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May 19, 2018

Step Right Up! See the Amazing Anti-Trump Contortionists Defy the Laws of Anatomy and Reason!

Filed under: Politics,Russia — The Professor @ 4:46 pm

If you’ve been asking yourself where all the carnival barkers and side-show contortionists have gone, wonder no longer! They have joined the elite media and vast swathes of the US bureaucracy, especially intelligence and federal law enforcement.

The examples are uncountable, but two are of particular moment today.  The first relates to Operation Telling the Truth Slowly (Very Slowly), which relates to a counterintelligence operation mounted against the Trump campaign.  You’ll remember that the original response, 14 months ago, to Trump’s allegation that he had been “wiretapped” was outraged denial.  Said denials no longer being plausible have required massive contortions to create a new narrative.  The barkers at the NYT are promoting the show, based on leaks from US law enforcement and intelligence.   Well, yes, a US intelligence asset located in Britain was sent out to contact Carter Page and George Papadopolous, because of their suspect Russian ties.  Michael Flynn was also targeted because despite his vitriolic anti-Russia rhetoric in a book, he shared a table with Putin once at an RT function.

But this wasn’t a campaign directed at the Trump campaign! Oh–quite to the contrary! According to the whatever-is-worse-than-execrable-and-then-whatever-is-worse-than-that James Clapper, with the WaPo serving as chief barker now, this was intended to PROTECT Trump from insidious Russian influences.  Which of course had to be accomplished by never telling him that his hangers on were being investigated.

There is widespread speculation about who the individual pointed at Page and Papadopolous was.  The Republicans in Congress are demanding to know the name, which has sent the deep staters and their barkers (e.g., Ben Witless, I mean Wittes) into paroxysms of rage.  Krugman went so far as to assert that demanding the revelation of this name is treason.

Um, the NYT article has released leaked information about just about everything about the guy but his shoe size.  (That’s probably tomorrow’s exclusive.) . Certainly every intelligence agency in the world from whom we would want to protect his identity already knows who he is–and did so probably even before the leaks.  So it is beyond superfluous to conceal his identity–except to buy the FBI and CIA and others some time and perhaps the chance to cover their sorry asses.

I actually take comfort in their rage.  It means they are very, very afraid.

What is interesting is Carter Page’s silence.  All he has to say is: “I met the following people”–and let the frenzy begin!  He wouldn’t be disclosing any intelligence, because he would not represent, nor would he know, who was a US source.  That he remains silent suggests he is scared.

Or of course some intrepid journalist could ask him (perhaps dropping a name like, I dunno, Stefan Halper)!

I know.  I’m so droll.

One last thing on this.  The conventional reporting, especially on the pro-Trump side, is that there was a spy in the campaign.  This is misleading (based on what we know) and they should stop saying so NOW to avoid providing a convenient straw man for the anti-Trumpers to knock down.

I think what happened is more analogous to The Sting, or another classic con.  Someone was sent to set up a mark.  In this case, the marks were Page and Papadopolous,  After they were set up, they could serve as a pretext to mount a counterintelligence operation that wormed into the Trump campaign via their communications, and the communications of everyone they communicated with.

The second contortion act, involves yesterday’s meeting between Merkel and Putin.  Now,  non-contortionists with a modicum of sense of shame and intellectual consistency would blast her for meeting with their alleged arch enemy, whom they claim happens to be the root of all evil in the world.  But, what is clear is that despite all of their ravings about Putin as part of their jeremiads against Trump, that in their minds Trump is the arch enemy and the root of all evil in the world.   Putin is just a convenient stick to beat him with, and when that stick doesn’t work, they will pick up another.

But instead she is being lionized, and being credited for reasonably working with Putin to oppose Trump’s anti-Putin measures (such as threatening to block Nord Stream) and Trump’s move on the Iran deal.  FFS, if Trump had met with Putin the anti-Trump lot would be barking that  it is because he was selling out the West, and that he is the equivalent of the South Seas Cannibal.  Merkel is making cooing noises at Russia and Putin–primarily out of her narcissistic pique at Trump–and saying how important it is for Germany to have a good relationship with Russia.

Merkel says to applause that good relations with Russia are important to Germany.  Which is exactly what Trump has said about Russia and the US–only to have this thrown back in his face as evidence of his being Putin’s pawn.

If Trump said or did any of these things the barkers would be screaming. SELLOUT.  TRAITOR. COLLUSION. IMPEACH HIM–THEN BURN HIM AT THE STAKE!

And tell me: how is Making America Great Again anti-western?   If anything, it is a muscular assertion of Western primacy by a Gulliver who is unwilling to be tied down by Europutians.  I would argue that in fact, Germany is far less part of the West than the US, and has been since before Arminius slaughtered three Roman legions in the Teuteborg Forest.  (I may well write a post on this.  Suffice it to say that German thought has always been decidedly opposed to Anglo-Saxon, French, and Italian thought, and two world wars show exactly how and why.) Meaning that making America great again is far more pro-Western than Making the EU Great ever will be, given that it is a crypto-socialist Trojan Horse for German ambitions.

I also note that Merkel is–get this–reaching out to Xi as an ally on free trade.

No, really.

This is such utter bullshit that even my 800 SAT score scatalogical vocabulary is utterly inadequate to do it justice.  Yet all of the carnival barkers not only eat it up, they regurgitate it.  (This also happened in spades at Davos.)

So we see why all the contortions are necessary.  Every argument must be bent and twisted and contorted in order to support the anti-Trump crusade, even though doing so violates the rules of logic, the rules of evidence, and basic human decency.

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May 17, 2018

Today’s Adventures in Trumpland

Filed under: Economics,Energy,Politics,Russia — The Professor @ 6:38 pm

The WSJ reports that the Trump administration has told Germany that the US would restart talks on a trade deal with Europe if Germany pulls the plug on support for the Gazprom-led Nord Stream project.  I find the linkage rather odd, but we’re talking the Trump administration here, and moreover, it may well be a brushback pitch after all of the German-led Eurowhining about the US: “Think it’s bad now? Let’s see what it’s like when I put my mind to it.”

One EU official responded as follows:

“Trump’s strategy seems to be to force us to buy their more expensive gas, but as long as LNG is not competitive, Europe will not agree to some sort of racket and pay extortionate prices,” an EU official said.

I could perhaps take this seriously, were it not for the fact that Germany forces its own citizens to pay “extortionate prices” for power produced by outrageously uncompetitive means as a result of its idiotic energiewende policy.

How extortionate? How uncompetitive? The article claims that US LNG would cost about 20 percent more than Russian gas.  Well, Germans pay approximately 50 percent more for power than the average across the EU, and EU-wide average prices are about double the US average.

In other words, Europe has its own energy extortion racket in place, and doesn’t want to let in any Americans.

The other interesting aspect to this story is that it is yet another example (I’ve lost count of the number) of the alleged Putin pawn Trump taking a major shot at the Russians.  The Russians are not pleased:

The Kremlin shot back immediately as spokesman Dmitry Peskov called the U.S. efforts “a crude effort to hinder an international energy project that has an important role in energy security.”

“The Americans are simply trying crudely to promote their own gas producers,” he said.

All I can say is that if Trump was bought, he sure as hell didn’t stay bought.  Not that any of those who have invested their entire being in the Trump-Russia collusion narrative will bother to notice.

Speaking of the obsessed and delusional, yesterday represented an all time low in the dishonesty of the inveterate Trump haters.  In a meeting with law enforcement officers, Trump called members of the brutal Salvadoran gang MS-13 “animals,” but the media and many politicians widely asserted that he was referring to immigrants as a whole.  If you read the transcript, it is clear that only someone who is deeply and deliberately dishonest could make such an assertion.

The fallback position of these reprobates is that well, MS-13 members are people too, so it is wrong to call them animals.

All right, if that’s what you think–prove it.  Invite a few to move in with you, and you can discuss the nuances of “kill, rape, and control” (“mata, viola, controla“) which just so happens to be the MS-13 motto. (Some say that “rob” is part of the motto too.)  If you’re real nice, they just might honor your request not to bring those icky guns into your house, and will just bring their machetes instead.  After a few verses of Kumbaya, I’m sure that your common humanity will shine through, along with some light illuminating the hole in your neck where your head used to be.

Of course, that will never happen.  Those who are preening and posing would never dare even enter the neighborhoods where MS-13 and similar gangs operate, let alone invite them into their houses.

Further: by defending these beasts, our better thans are condemning decent and innocent people whom they claim to care about to their depredations.

This is the worst kind of moral posing by the worst kind of poseurs.  These are twisted partisan hacks pretending to be moral titans. To let their rank partisanship utterly blind them to the reality of evil, and to ignore those who will have to suffer from that evil, is appalling beyond words.

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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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May 5, 2018

Coup by Pretext

Filed under: Politics — The Professor @ 6:04 pm

The Fourth Branch of Government (the professional bureaucracy, especially its law enforcement and intelligence branches) seems incapable of doing anything in a forthright manner, acting instead like a cast of sidling crabs.  This perhaps reflects the fact that it has arrogated to itself this status, it being found nowhere in the Constitution, thus making it necessary to act by indirection.

The battle between the bureaucracy and the president, ostensibly over the “Russia investigation” is an ongoing (and going and going and going) illustration of this phenomenon.  Virtually every action undertaken by various bureaucrats that has advanced the investigation has been justified by a pretext that has nothing whatsoever to do with the real motives:

  • A supposed violation of the hoary–and never enforced–Logan Act was a pretext for Sally Yates to order the unmasking of  Michael Flynn. (Hey Sally–no doubt if you were still in office you’d be siccing the dogs on John Kerry, right? Right?)
  • The same supposed violation was a pretext for Yates to order the FBI to conduct an ambush interview of Flynn.
  • The inconsistency between Flynn’s statement to the FBI and the NSA intercept of his conversation with the Russian ambassador was a pretext to prosecute him, in the hope of getting him to roll on Trump, and at the very least, give Mueller a scalp to justify his investigation.
  • The dossier, with its farcical claim that Igor Sechin had offered Trump via Carter Page either (a) a 20 percent stake in Rosneft, or (b) a brokerage fee on the 20 percent stake (which is hard to say, given the idiotic wording of the dossier) was used as a pretext to get a FISA warrant on Page. (By the way, as @soncharm points out to me on Twitter, how could Qatar buy a stake in Rosneft if it had been promised to Carter Page? Great question! :-P)
  • The FISA warrant on Page was a pretext to conduct surveillance on the Trump campaign.
  • The Comey briefing of Trump on the dossier was a pretext to leak it to the media.
  • Comey’s memos to himself, and the leak thereof, were a pretext intended to lead to the appointment of a special counsel.
  • As US District Court Judge T.S. Ellis scathingly noted in a hearing yesterday, Mueller’s prosecution of Paul Manafort for crimes bearing absolutely zero connection with the ostensible purpose of the Mueller inquiry is a pretext to pressure him into rolling on Trump.
  • Mueller’s apparently focus on obstruction of justice is a pretext to continue an inquiry that has apparently failed to find any evidence of the turpitude he was charged to investigate.
  • Stormy Daniels was used as a pretext to conduct a raid on Trump’s lawyer.
  • Rob Rosenstein’s and the FBI’s repeated claims of national security to justify refusal to produce documents or the heavy-handed redaction of the documents that they grudgingly do produce are merely pretexts to cover up their dubious behavior. (By the way, I am more convinced by the day that Rosenstein is the Iago in this entire affair.  On Thursday, I asked how given his involvement in many aspects of case–such as his involvement in the Page warrant–Rosenstein did not recuse himself.  Judge Ellis asked the same thing on Friday.  The guy is conflicted out the wazoo.  Recusal is required at a bear minimum.)

Indeed, the entire Russia collusion investigation is merely a pretext for the Fourth Branch’s rebellion against the elected president.

The repeated reliance on subterfuge and pretext is prima facie evidence of dishonorable motives and conduct by public “servants” who believe themselves to be rightfully masters, accountable to no one.  The pervasiveness of this conduct demonstrates that the importance of this issue transcends Trump.  It calls into question whether the federal government is in fact accountable, and subject to Constitutional checks and balances.  Indeed, it is worse than that: it largely answers that question, and the answer is disturbing indeed.

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May 2, 2018

When You Play With Fire, Eventually You Get Burned–Even if You are Glencore

Filed under: Commodities,Economics,Politics,Regulation,Russia — The Professor @ 6:10 pm

Even by the standards of the commodity business (and the commodity trading business in particular) Glencore is known for its appetite for political and legal risk, and its willingness to deal with sketchy counterparties.  It does so because by taking on these risks, it gets deals at good prices.  But the bigger the appetite, the greater the indigestion when things go wrong.

In the past several weeks, Glencore has hit the going wrong trifecta.

It has a longstanding relationship–including marketing deals and equity investment–with Rusal, entered when the Russian company’s reputation was particularly dubious in the aftermath of the aluminum wars, and its owners were involved serial litigation.

We know what happened to Rusal–it is in dire straits because of US sanctions.  Yes, the Treasury has indicated that it will take Rusal’s case on appeal, but there is no guarantee that it will grant a stay of execution when the appeal process is completed.

Glencore also partnered with very dubious Israeli businessman Daniel Gertler in the Democratic Republic of the Congo (DRC).  Gertler was sanctioned by the US government in December for a history of corrupt dealings in that country.  Glencore bought out Gertler in 2017.  After the sanctions were imposed, Glencore stopped paying Gertler royalties, but now Gertler is suing for $3 billion in royalties that he claims Glencore owes him.

Also in the DRC, Glencore is in a dispute with the government’s mining company, which claims that a Glencore subsidiary operating in the country is undercapitalized.  This is really a battle over rents: in essence, the government claims that foreign miners (including Glencore) overburden operating subsidiaries with debt in order to reduce dividend payments to the government (which is part owner).  The government has moved to dissolve the Glencore subsidiary.

I don’t know enough to comment on the substance of the various legal disputes in Africa.  But I can say that the risks of such disputes are material, and that they can be very costly.

In some respects, the Glencore political/legal risk strategy is like a short vol trade.  It can be a money printing machine when things go well, but when it goes bad, it goes really bad.

In a way Glencore is lucky.  It can withstand these hits now, having clawed its way back from its near death experience in the fall of 2015.  If these hits had occurred back then, well . . .

In sum, when you play with fire, eventually you are going to get burned.  Even if you are Glencore.

PS. The tumult in the Congo could disrupt cobalt supplies.  This would put pressure on one of my fave targets–Tesla–which is already in a parlous state.  Elon gave a crazed performance at today’s Tesla earnings call.  To me it came off as the meltdown of a narcissist who is facing failure and cannot handle being questioned.

I’ve been biding my time on some additional Tesla posts.  The time may be near!

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May 1, 2018

Rusal: Premature Celebration

Filed under: Commodities,Derivatives,Economics,Politics,Regulation,Russia — The Professor @ 9:31 am

Rusal shares rose sharply and aluminum prices fell sharply on the news that the US Treasury had eased sanctions on the company.  The concrete change was an extension in the time granted for those dealing with Deripaska-linked entities to wind down those dealings.  But the market was more encouraged by the Treasury’s statement that the extension was being granted in order to permit it to evaluate Rusal’s petition to be removed from the SDN list.  It is inclusion on that list that sent the company into a downward spiral.

Methinks that the celebration is premature.  Treasury made clear that a stay of execution for Rusal was contingent upon it cutting ties with Deripaska.  Well, just how is that supposed to happen? This is especially the case if any transaction that removes Deripaska from the company not benefit him financially.  Well, then why would he sell?  He would have no incentive to make certain something–the total loss of his investment in Rusal–that is only a possibility now.

Of course, Putin has ways of making this happen, the most pleasant of which would be nationalization without compensation to Deripaska, perhaps followed by a sale to … somebody (more on this below). (Less pleasant ways would involve, say, Chita, or a fall from a great height.)

But if the US were to say that this was sufficient to bring Rusal in from the cold, the entire sanctions regime would be exposed as an incoherent farce.  For the ultimate target of the sanctions is not Deripaska per se, but the government of Russia, for an explicit foreign policy purpose–a “response to the actions and polices of the Government of the Russian Federation, including the purported annexation of the Crimea region of Ukraine.”

Deripaska didn’t personally annex Crimea or support insurrection in the Donbas.  The Russian government did.  The idea behind sanctions was to put pressure on those the Russian government (allegedly) cares about in order to change Putin’s policies.  They are an indirect assault on Putin/the Russian government, but an assault on them nonetheless.

So removing Rusal from the SDN list because it had been seized by the Russian government would make no sense based on the purported purpose of the sanctions.  Indeed, under the logic of the sanctions, the current discomfiture of the Russian government, facing as it does the potential unemployment of tens of thousands of workers, should be a feature not a bug. The sanctions were levied under an act whose title refers to “America’s adversaries,” which would be the Russian state, and were intended to punish said adversaries.

Mission accomplished!  Which is precisely why the Russian government is completely rational to view the Treasury announcement “cautiously,” and to view the US signals as “contradictory.”  The Russians would be fools to believe that nationalization and kicking Deripaska to the curb would free Rusal from the mortal threat that sanctions pose.

Perhaps Treasury has viewed the market carnage, and is trying to find a face-saving way out.  But it cannot do so without losing all credibility, and appearing rash, and quite frankly stupid, for failing to understand the ramifications of imposing SDN on Deripaska.  Also, doing so would feed the political fire that Trump is soft on Russia.

Further, who would be willing to take the risk buying Rusal from Deripaska either directly, or indirectly after nationalization?  They would only do so if they had iron clad guarantees from the US government that no further sanctions would be forthcoming.  But the US government is unlikely to give such guarantees, and I doubt that they would be all that reliable in any event.  Analogous to sovereign debt, just what could anyone do if the US were to say: “Sorry.  We changed our mind.”?

Indeed, the Treasury’s signaling of a change of heart indicates just how capricious it can be.  Any potential buyer would only buy at a substantial discount, given this massive uncertainty.  A discount so big that Deripaska or the Russian government would be unlikely to accept.

And who would the buyers be anyways?  Glencore already has a stake in Rusal, and a long history of dealings.  But it is probably particularly reluctant to get crosswise with the US, especially given its vulnerabilities arising from, say, its various African dealings.

The Chinese?  Well, since China is already on the verge of a trade war in the US, and a trade war involving aluminum in particular, they would have to be especially chary about buying out Deripaska.  Such a deal would present the US with a twofer–an ability to shaft both Russia and China.  And perhaps a three-fer: providing support to the US aluminum industry in the bargain (although of course harming aluminum consuming industries, but that hasn’t deterred Trump so far.)

So short of the US going full Emily Litella (and thus demolishing its credibility), it’s hard to see a viable path to freeing Rusal from SDN sanctions.  Meaning: Put away the party hats.  The celebration is premature.

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April 17, 2018

Where’s Hercules When You Need Him? McCabe’s “Defender” Unwittingly Reveals How DC Puts the Augean Stables in the Shade

Filed under: Politics — The Professor @ 6:37 pm

Writing on the relentlessly anti-Trump, pro-swamp Lawfare site, Steptoe & Johnson attorney (and made swamp thang) Stewart Baker attempts to explain and rationalize Andrew McCabe and the “lack of candor” (swamp-speak for “lying”) that resulted in his termination.  What he really accomplishes, however, is to demonstrate just how depraved DC is.

Baker’s essay is a target-rich environment, but I will focus on just a couple of things.

There’s this gem:

But the Trump administration’s ferocious response to leaks, including FBI leaks, led to an internal investigation.

That is, Andy would have gotten away with leaking if it hadn’t been for that blasted Trump! It’s Trump’s fault! He doesn’t understand the rules!

Apparently, leaking is droite du bureaucrate, and the upstart Trump was violating privileges and immunities of longstanding by attacking this conduct.

But the best (or worst, depending on how you look at it) is this:

So, what should we think of Andrew McCabe? He’s certainly no hero. But he’s no sacrificial goat, either. Assuming he did what the IG says he did, the recommendation that he be fired is completely understandable. Still, the things McCabe did are not uncommon in government, even—perhaps especially—among talented and effective officials. His bad luck, and his failing, is that the issue kept coming back month after month, and his efforts to give misleading but not quite false answers grew ever more strained. It’s hard not to feel some sympathy. If the times had been different, he might have ended his service as a respected bureaucrat like many others—with a reputation for being talented and a bit slippery.

“Everybody does it!” is the best that Baker can muster in McCabe’s defense.  It is probably true that everybody does it.  But what the DC denizen cannot see is that is precisely the problem.  It may indeed be the case that McCabe is something of a Sad Sack who behaved completely in accordance with the rules of the DC game, but fell afoul of developments that he could never have imagined.  But for that interloper the leaky liar would have retired with honor, and after additional years of leaking and lying and railroading political enemies and doing God knows what else.  Bad luck!

I’d call it karma.  Too bad it’s limited to him, so far.

But the fact that McCabe’s behavior was “normal” is (a) exactly why US politics–and the administrative state–is a sewer, and (b) why Trump was elected in a fit of Jacksonian revulsion at corruption.

Baker is right: if Andy McCabe is fired, everyone in DC deserves to be fired. If we could only be so lucky.

Baker’s piece also lays out the chronology and background of McCabe’s agonies, which further demonstrates how perverse the Potomac Swamp is.

Baker relates that McCabe was leaking as part of a bureaucratic war against Sally Yates at DOJ, and one of McCabe’s lackeys (the now notorious Lisa Page) exulted at throwing one of Yates’ lackeys under the bus.  Now remember that Yates has rushed to McCabe’s defense.  Further, McCabe leaks undercut Comey, and he lied to Comey’s face.  Yet Comey has also leapt to McCabe’s defense and savaged Trump’s firing of him.  Another defender of both Comey and McCabe is the execrable (there has to be a better epithet–execrable seems so tame!) John Brennan.  Yet if Lee Smith’s reporting is to be credited, Brennan basically strong-armed Comey into launching the counterintelligence operation against Trump.

In other words, when in power, and behind the scenes, these paragons of public virtue waged vicious bureaucratic battles against one another.  But they deliver slobbering encomiums to one another and their virtue when it advances their war against a common enemy: Trump.

So thank you, Stewart Baker, for inadvertently laying bare precisely why DC makes the Augean Stables pale in comparison, and why it needs to be cleansed, post haste.  Unfortunately, Trump is probably not quite the Hercules we need.  And alas, DC is so overflowing in filth that even Hercules hisself would be hard pressed to perform that labor.

 

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April 10, 2018

What SDN Hath Wrought: How Trump Rocked Not Just Rusal, But Most of Russia

Filed under: Commodities,Economics,Politics,Russia — The Professor @ 8:42 pm

I clearly underestimated the impact that the sanctions imposed on Deripaska, Rusal, and others would have.  The initial reaction Monday by many was to puke everything Russian.  Everything.  The ruble. The overall Russian stock market.  Russian debt.  Every major Russian company.  They all crashed. The carnage was widespread and indiscriminate and extended far beyond those directly targeted.

Rusal was the biggest loser, and extended its losses today.  Overall, its stock price is down almost 55 percent.  Ivan Glasenberg resigned from the board, and just now two Russian non-executive directors also resigned.  The company is clearly toxic/radioactive.  I don’t see it surviving without massive state support, and perhaps nationalization.   But even then . . . who outside of Russia and China will buy its aluminum?  (Note China is already suffering an overcapacity problem in the metal, which US trade restrictions would only make worse.)

I thought I might have misjudged seriously that Potanin would gain at Deripaska’s expense: on Monday Norilsk Nickel was down almost 20 percent, and Potanin was the biggest absolute loser.  Norilsk has since bounced back, and recovered much of its loss: it is now down about 7.5 percent from Friday.  But the “shootout” auction will still be between two gunmen who have been grievously wounded by fire from an unexpected direction.

Many other Russian companies that were pounded yesterday have also bounced back.  Severstal is actually trading above the pre-sanctions-news price.  Rosneft and Novatek have also recovered most of their losses.

Sberbank remains down–down more than 16 percent.  The bank disingenuously stated that the selloff was overdone because its exposure to sanctioned companies represented only 2.5 percent of its assets.  Well, since it is leveraged about 12-to-1, that represents 30 percent of its shareholder equity, which would justify a pretty big selloff.

The ruble remains down.  Indeed, it extended its loss today, and actually experienced a greater percentage decline today (almost 5 percent) than it did Monday (around 3 percent).  Perhaps this reflects the central bank’s statement that it would not intervene in support.  But it does indicate that this is perceived as a Russia-wide shock, and not one limited to a few billionaires and their companies.

The broader selloff, somewhat overdone as it was (as reflected by today’s recovery in many names) suggests a widespread estimation that other shoes will drop, and that billionaires that escaped the first round are still at risk for the Oleg treatment.

This raises the question of how the targets were chosen. Leonid Bershidsky argues that Deripaska and Rusal were targeted because taking Rusal’s aluminum off the market (as is happening, with the LME saying it will not warrant Rusal metal not already in warehouses) would be a much more effective way of supporting the US aluminum industry than selective tariffs.  This does have a certain logic, but if that is the logic, it would speak very poorly of the the US government, for it would imply the masking of a protectionist measure behind an allegedly principled reaction to Russian turpitude. It also doesn’t explain the other targets.

Nor does it explain the non-targets.  Novatek and Timchenko are much more tightly connected to Putin than Deripaska and Rusal. And Novatek LNG competes with US LNG, so there would be a protectionist rationale for hitting it.  Yet Novatek was not subject to SDN treatment, and as noted earlier its stock price has largely rebounded.  Perhaps a journalist friend in Moscow is right that Total’s big investment in it and its Yamal project has given it some immunity.

Similarly, Rosneft and Sechin are much more in the inner sanctum than Deripaska/Rusal.  Yet it too has escaped SDN.  Perhaps the risk of creating an oil shock is too great.

The “perhapses” indicate, however, that the rhyme and reason of the administration’s actions is not obvious.  And perhaps (there’s that word again) that’s what really has the market–and many rich Russians–spooked.  Given the capriciousness of the list, everyone is at risk.

Russia’s official reaction was of course negative, but one voice has been missing: Putin’s.  It’s not quite akin to Stalin, 22 June-3 July, 1941 (when he remained out of sight after the shock of Barbarossa), but it does suggest uncertainty as to how to respond.  Not a B’rer Rabbit reaction, at least not yet.

This uncertainty is no doubt fed by the realization of the vulnerability of the Russian economy to US policy.  I’ve written before that the US could crush Russia like an overripe grape by, for instance, cutting it off from SWIFT or the dollar system altogether.  This shows that it can wreak havoc with far more limited measures.

It’s also interesting that Xi made rather conciliatory remarks yesterday.  A coincidence? Perhaps (again). But Friday’s sanction action shows that Trump can act unpredictably and punishingly.  That likely concentrates minds in Beijing as well as in Moscow.

Whatever the logic of Friday’s thunderbolt, it should put paid to the Trump-is-Putin’s-pawn and Putin-has-something-on-Trump theories.  Indeed, a desire to terminate with prejudice those narratives is as good an explanation for the administration’s action as anything.  Not that reality will interfere with the conspiratorial ravings of those in the Democratic Party and the media and the neocon NeverTrumpers.  They are just too invested and obsessed, and nothing short of a preemptive nuclear strike on Moscow is likely to change that–and even then . . . . And with Trump threatening to attack Syria despite Russian warnings against it, maybe we’ll soon put that theory to the test as well.

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