Streetwise Professor

May 19, 2019

G’Day, Greenies: I Frolic In Your Salty Tears

Filed under: Climate Change,Commodities,Economics,Energy,Politics — cpirrong @ 2:18 pm

I promised I would write a post on the Australian power market when a suitable article came along, and that time has come.

Check out the logic. Australia closes its coal plants (highly efficient, reliable, and with a cheap source of fuel given Australia is a dominant coal producer), and replaces them with wind. Wind, being highly erratic, requires (given the closure of the coal plants) gas-fueled plants to offset the variability of wind output, and as a result gas is on the margin most hours in Australia. And Australian power prices are sky-high because . . . LNG exports reduce gas supplies in Australia, keeping the price of gas high.

Riiiggghhhttt.

You cannot make up this stuff.

No. It’s not the first two links in the process that are blamed–the ones that those who are whinging deliberately chose. Instead, it’s the last link, which was an inevitable result of the first two choices.

This is blame shifting on crack.

I should also note that those gas resources that supply exports would not have been developed absent the export market. They would not have been developed to supply the domestic market alone. So LNG exports are a scapegoat for a problem created by conscious decisions by the green left (i.e., the watermelons) to jam renewables down people’s throats.

It is particularly ironic that this article came out shortly before the Australian election, the results of which have caused a complete mental breakdown on the left. The Liberal Party (which is to the right, relatively speaking, Down Under) staged a surprising upset of the Labour Party, resulting in an unhinging comparable to that in the UK after Brexit or the US after Trump. I can’t tell you the number of tweets I read where people–adults, allegedly–confessed to crying uncontrollably.

I frolic in their salty tears.

The irony comes from the fact that the Labour Party is hard core in its support for yet more attempts to decarbonize Australia’s economy. Perhaps they should consider the possibility that a major reason for their rejection at the polls is the anger of many Australians at the consequences of previous climate-driven policies (including sky high electricity prices), and their wanting no more of such nonsense.

The shock on the left at the outcome shows that three years after Brexit and two-and-a-half years after Trump the leftist elites have learned nothing, and forgotten nothing. It is no doubt another example of their perpetual bullshit loop in action. Leftist-friendly views dominate the media. Anyone expressing contrary views is attacked, which leads to self-censorship and preference falsification. So leftist opinions and sentiment dominate public discourse, convincing leftists that everybody agrees with them, except for a lunatic fringe. But in the privacy of the polling booth, people can express their true views, and perhaps do so with a relish, as this is an opportunity to stick it to those who shout them down. The result is shock and dismay on the left.

But they are as ever incapable of learning, instead just writing off their conquerors as cranks and extremists. As annoying as they are, I hope they don’t change. Because as long as they don’t change, they will continue to lose.

Ironically, the left’s climate change obsession is one of the things that doomed them:

Australian conservative Prime Minister Scott Morrison’s surprise come-from-behind win in national elections was fueled by a campaign that focused on fears that economic and climate policies pledged by center-left opponents would end the world’s longest growth streak.

. . . .

Climate change re-emerged as an election issue following a summer of wildfires, drought, floods and extreme temperatures. Voter support for policies aimed at addressing climate change was at the highest level since 2007. But, as in the U.S., divisions grew more stark as the issue gathered steam.
Labor pledged to reduce emissions by 45% from 2005 levels by 2030, after Australia under the conservatives became the first developed nation to abolish a price on carbon in 2014. The party also promised a push on renewable energy and electric vehicles, offering detailed and transparent policies that opened its agenda to months of concerted attack from Mr. Morrison.

Given the track record (e.g., the high electricity prices that motivated this post), this was a target rich environment for Mr. Morrison and the Liberals. And it is evident that they put much steel on the target.

Also ironic is that the Labour Party was defeated in part by the impact of its climate policies on what was once upon a time the bedrock of labor movements and parties around the world: coal miners, and those dependent on coal production. This demonstrates yet again that left parties have basically abandoned their historical constituencies, and are now dominated by effete metropolitans who are not only completely unfamiliar with muscular labor, but actually despise the muscular laborer.

Excuse me while I engage in a little long distance schadenfreude, and scroll through Twitter to witness yet another meltdown by the Bourbon left.

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May 12, 2019

Forget the Project Winner: The Winners of Projection Are . . .

Filed under: Politics — cpirrong @ 9:08 pm

So every election night, all the broadcast and cable news networks project the winners. Most nights, it’s about a 50-50 split between Republicans and Democrats, give or take. But when it comes to the winners of projection, the Democrats have it in a landslide.

Here are examples, just from the last week.

Hillary Clinton said if it were anybody other than Trump, they would be in jail. This from the woman who if she was anybody other than Hillary Clinton would have been jailed in the 80s, the 90s, and the 10s. I guess she rested up in the noughties.

Next item: the latest ongoing freakout is about Giuliani talking about going to Kyiv to encourage the Ukrainians to investigate then-VP Joe Biden’s pressuring the government there to get rid of a prosecutor that was investigating, among other things, a business that his son Hunter was involved with. How dare he (and Trump) attempt to get a foreign government to dig dirt on a political opponent!

Er. . . the DNC/Clinton campaign actively worked with the Ukrainian government to dig dirt on Trump in 2016. Some woman whose name comes right off the Taco Bell menu–Andrea Chalupa–was the liaison between the DNC and the Ukrainians.

We are now learning that the enterprising Hunter profited from private equity deals in China (with no previous experience in either private equity or China, let alone in both) weeks after accompanying his father to the country aboard Air Force Two. I’m sure his success in markets as difficult for foreigners and as different as Ukraine and China are a testament to Hunter’s awesome business skillz, rather than any family connections, right?

Compare this with the hyperventilating over Trumps failed attempts to do business in Russia. Beyond putting on a Miss Universe pageant in Moscow, I mean. But those attempts supposed mean that Putin OWNS Trump. Owns him, I say! But there is no quid pro quo involved when Joe makes the rain for his boy, right?

The Mueller report has done little to stem the hysteria in the most feverish quarters of The Swamp about Trump’s alleged collusion with the Russians to, among other things, dig dirt on Hillary. For instance, the egregious James Comey (more about him a future post!), for example, said last week that he still believes that “it’s possible Russia has leverage over Trump.”

Er . . . WTF was the Steele dossier, but an American presidential campaign hiring a foreigner (through two cutouts, no less) who colluded with foreigners (Russians, no less) to spread dirt on Trump?

Then there’s this, from the appalling Susan Hennessey at Lawfare:

Does anyone really doubt that Trump would love to have the FBI investigating his opponent during the campaign? Does anyone doubt that he would abuse his office in attempting to initiate or direct such an investigation?

Uhm . . . this is EXACTLY what her heroes–she is basically a polyp in Comey’s colon–did in 2016.

I could go on. And on. And on. But the basic point is that I don’t have to project the winner of projection. The results are already in. You can pretty much bank on this: whatever the Democrats say about Trump is true about them. In spades.

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May 4, 2019

Germany and Sweden Want to Reduce CO2 Emissions in the Worst Way–and Are Succeeding!

Filed under: Climate Change,Economics,Energy,Politics,Regulation — cpirrong @ 5:46 pm

I’ve written often about the economic nightmare that are renewables, specifically wind and solar power. They are terribly inefficient because they are intermittent, and they are diffuse. The intermittency requires maintaining substantial backup capacity. Their diffuse nature means that they are incredibly land intensive. I should also add that renewable energy sources are not miraculously located where loads are. Indeed, they are often located far, far away from load, and therefore necessitate substantial investment in transmission.

How inefficient? This recent University of Chicago study documents that the difference in cost between renewable and conventional generation dwarfs any possible benefit from CO2 reduction. To reprise the old joke: governments that subsidize renewables want to reduce CO2 emissions in the worst way, and they have.

Heretofore the Germans have been the world’s leader in renewable idiocy, with their Energiewende debacle, which has raised power costs to among the world’s highest, and not led to decreases in CO2 emissions (due mainly to the intermittency problem mentioned above). Well played! So how are the Germans going to deal with this? Perhaps by making electricity MORE expensive, by adding a CO2 tax on top of the CO2 cap and trade scheme.

I would say that will be hard to top Germany’s leading position in the ranks of renewables retards, but the Swedes are giving it a gallant try. So get this. The Swedes are replacing cheap zero carbon power (from four nuclear plants) located near load centers like Stockholm with expensive zero carbon power produced my windmills in the frozen back of buggery in the far north of Sweden. One big problem, they are woefully short of transmission capacity from back of buggery to the places where Swedes actually live and work.

This will make power more expensive, and is already constraining economic activity in Sweden. Moreover, it is raising the risk of blackouts.

So the Swedes may be replacing reliable carbon free electricity with electricity free electricity. That will be fun in the winters, eh?

Realistic people who believe that it is necessary to reduce carbon emissions understand that nuclear power is the efficient way to do so, and will become even more efficient with the development of new reactor technologies. It would be far more economical to invest in improvements in nukes than vast wind and solar projects.

But the Swedes appear to still be in the thrall of post-Three Mile Island hysteria (note that the decision to close the plants was made in 1980, a year after TMI) just as the Germans responded to post-Fukushima hysteria by deciding to close all their nukes.

That is, the energy policies of supposedly sophisticated societies are being driven by bugbears and bogeymen–a morbid obsession with CO2, and a view of nuclear power shaped by a nearly 40 year old Jane Fonda movie. This is leading them to force people to rely energy sources that are monstrously inefficient, making said people poorer. (Not to mention that a monomaniacal focus on CO2 leads them to overlook the total environmental impact of wind and solar, which is not a pretty picture.)

The Swedes are also leaders in a modern-day Children’s Crusade (that worked out great the first time, right?) to impose their climate bogeymen on the rest of the world. A rather unfortunate Swedish teenager is going around lecturing the world on the need for drastic action on CO2 now. This is an emotionally manipulative use of children as a substitute for actual argument and analysis and facts. Cynically, it exploits the reluctance of people to criticize children (even though they know nothing, or next to it), especially ones (in the words of the immortal Hank Hill) that ain’t right.

And behold what policies the Swedes want to visit on the rest of us. What they do in Sweden is their business, but they should keep their noses out of everyone else’s.

Makes me more glad than ever that my ancestors bugged out for Minnesota 140 odd years ago. But recent research suggests that they are to blame for Sweden’s current idiocies! I’ve long hypothesized that more independent souls are far more likely to emigrate, leaving the conformists behind. And recent research focusing on Scandinavia provides support for this hypothesis:

The researchers suggest the migration flows, which were small relative to the native population of America but equivalent to about 25 per cent of the total population of Scandinavia, changed the character of Norwegian and Swedish society by removing the most ambitious and independently-minded people.

So Scandinavia’s loss was America’s gain. And if their energy policies are any indication, they are still paying the price today.

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April 28, 2019

Erdogan: Cruisin’ For a Bruisin’

Filed under: Economics,Politics,Turkey — cpirrong @ 7:18 pm

I don’t believe it is an exaggeration to say that Turkey is ruled by a lunatic–Recep Tayyip Erdogan. His increasingly autocratic rule is putting Turkey at serious risk of an economic and geopolitical crisis.

Erdogan dreams of Turkey becoming the dominant power in the Middle East, a modern day version of the Ottoman Empire, including an explicit Islamic orientation–a decisive break with the founder of the Turkish Republic, Mustafa Kemal Ataturk, who eschewed imperial ambitions, and who was avowedly secularist, and indeed, harshly anti-Islam. (Which is one reason Erdogan despises him.)

These ambitions have led Erdogan into some foreign policy disasters, most notably in Syria. At the outset of the Syrian civil war, Erdogan was supporting the rebels and foursquare behind attempts to overthrow Assad. In this he failed utterly. But in the attempt, he (through his intelligence services) provided support to the most radical Islamist elements in Syria–including ISIS.

The Syrian debacle contributed to a serious breach with Europe which has all but eliminated the prospects for Turkish accession to the EU. In particular, his cynical unleashing of waves of Syrian refugees into Europe, and his threats of sending even more, thereby blackmailing the EU into providing Turkey financial aid, have left Turkey friendless in Europe.

Even worse, from a geopolitical perspective, has been his picking fight after fight with the US. The list is long. The extended standoff over an American minister he had imprisoned. His rapprochement with Iran in Syria (which in effect was a concession of his failure to achieve his objectives there), and generally cooperative relationships with Iran, including most notably helping the Islamic Republic circumvent US sanctions by exchanging Turkish gold for Iranian gas. His strident opposition to Israel. His cooperation with another American pariah–Venezuela–which Turkey is helping evade sanctions by agreeing to refine Venezuelan gold. His burning desire to destroy America’s Kurdish allies who have been the only effective local force in the battles against ISIS, said desire driven by Erdogan’s burning hatred of the Kurds in Turkey. This desire to attack Kurds in Syria has led to standoffs (with the serious risk of escalation) with US troops working with them. And last, but by no means least, an agreement to purchase S-400 surface-to-air missile systems from Russia despite the information this could provide the Russians about US F-35 aircraft–which Turkey wants to purchase.

Some of these things–canoodling with Iran, opposing Israel–were not a problem with the Obama administration. They are a big deal with Trump.

The real lunacy is that Erdogan is risking a confrontation with the US at a time when his economy is teetering–in large part due to his mismanagement. The lira dropped significantly last summer, and although it has recovered (a) it is still substantially below the level of 2017, (b) has been dropping steadily since topping out in December, and (c) is poised for another drop due to Erdogan’s inveterate hostility to higher interest rates–well, to interest rates period, which he calls “the mother and father of all evil.” The Turkish Central Bank has been playing games to conceal how weak its reserve position is. These include borrowing dollars from Turkish banks via swaps, putting the dollars as on-balance sheet assets, but treating the swaps as off-balance sheet.

The Turkish economy is in recession, has heavy external indebtedness (which makes its low reserve position all the more dangerous), and has an economic management team that is universally considered to be greatly out of its depth. Erdogan did not help matters when he declared:

The main issue is interest rates. As interest rates are brought down, inflation will fall. The real problem is interest rates. I’m also an economist.

Not only is he not an economist (as his getting the Fisher effect exactly backwards shows), I don’t even think he’s ever even stayed at a Holiday Inn Express. Combining his economic stupidity with his autocratic behavior is a recipe for disaster.

Given this fraught economic situation, Erdogan courts disaster by continuing to pull Uncle Sam’s beard. He is very likely to need the US’s help to stave off economic crisis, and on the flip side, if sufficiently provoked the US could smash the Turkish economy with a mere flick of its fingers.

Erdogan also has domestic political problems. After prevailing in a surprise national election last summer that cemented his changes to the constitution creating a presidential system, his AKP party suffered some stunning losses in local elections last month, most notably a (narrow) loss in Istanbul. Erdogan is attempting to get a do over in the Istanbul election, claiming systemic voting abuses–in a city his party controlled at the time of the election. It is something akin to the Chicago Democratic machine blaming a loss on nefarious Republican voter fraud.

There are many reasons for Erdogan’s near panic over Istanbul. It will give his CHP opponents a highly visible platform and power base, in a city that is widely viewed as the launching pad for Turkish national leaders. (Erdogan was mayor there before becoming prime minister, then president.) Perhaps even more importantly to Erdogan, CHP control of Istanbul threatens to undermine his vast patronage system there (which will undercut his power), and also threatens to expose equally vast corruption (of which Erdogan has already been very credibly accused in the past).

Erdogan is not the type of man who will trim his sails in the face of such fierce headwinds. He will more likely redouble his confrontational efforts, both internationally and domestically, despite his extremely weak economic situation. This is not wise, and will not end well. A bad end to Erdogan is hardly something that should be rued, but his bad end will also mean serious and extended misery for the Turkish people, and a serious potential for even more instability in the Middle East.

This last prospect may be the only thing that saves Erdogan. The potential for turmoil may be the only reason why the Trump administration does not give Erdogan the brusin’ he has been cruisin’ for, not just recently, but since 2003.

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April 20, 2019

Evidence of Absence Is Incompatible With Obstruction

Filed under: Politics,Russia — cpirrong @ 10:56 pm

The Mueller Report was released (with redactions) on Thursday. Although the “collusion” portion of the report is framed, as is the case with most decisions not to prosecute, in terms of absence of evidence to meet a burden of proof, the thoroughness of the investigation and the findings come as close to providing evidence of absence as one is ever likely to find. Most telling was the conclusion that although the Russians made numerous attempts at gaining access to Trump and Trump personnel, these attempts were uniformly rebuffed.

Yet like the dog returning to its vomit–again and again and again–the media cannot resist parts of the Mueller report that keep the collusion dream alive. Like this piece in Bloomberg (which has been particularly insane in its post-Mueller coverage). They fail to realize that this story (and others like it) completely demolishes the entire idea of pre-election collusion. If Putin was in cahoots with Trump or his minions before 8 November, he would have had no need to use oligarchs–or anybody else–to try to establish connections with Trump’s people after 8 November. Yet people who were (are!) willing to believe baroque and convoluted theories like the one in which Trump was communicating with the Russians via an Alfa Bank server (to name just one) don’t see how ludicrous these theories are in light of Putin’s obviously desperate attempts to make contact after Trump’s surprising election. So surprising that Putin was clearly caught off-guard and unprepared and completely without connections with the incoming administration.

It is particularly delicious that the Russian billionaire featured prominently in the report (and the Bloomberg article)–Petr Aven–controlled Alfa Bank. So Alfa Bank was supposedly the portal between Putin and Trump which they used to coordinate their dastardly deeds but months later Putin sent the man in charge of Alfa Bank to open communications with Trump–and he fails!

Yeah. Makes total sense!

One wonders when Mueller realized that there was no there there. None whatsoever. I suspect he realized it very early on, but was loath to admit it. If this is so, his extension of the investigation to this late date–and well past the midterm elections–inflicted grave injury on the country, and makes Mueller a figure of infamy deserving severe obloquy.

It is against background that one must evaluate the second portion of Mueller’s report, relating to obstruction. Put aside the Constitutional issues raised by the fact that several of the theories of obstruction involve Trump’s exercise of his presidential powers (firing Comey, requesting that Sessions unrecuse himself, discussing using the pardon power), and others involve the ability of the president to fire an inferior official (which just points out the Constitutional anomalies of special counsels): firing Mueller would have been a blunder, rather than a crime, and Trump was indeed fortunate that he was talked out of it.

No, think of how you would have reacted if you had been subjected to a Kafkaesque investigation into something that you knew was complete and utter bullshit–and bullshit that had been concocted by your political enemies who were dead set on rationalizing–and avenging–their loss to you. I think you would be outraged, and feel completely justified in fighting back by whatever means necessary. I think any normal person would be. And heaven knows, Donald Trump is not normal. If he were, he wouldn’t be president. So of course he said intemperate things and contemplated intemperate actions and no doubt felt perfectly justified in his intemperateness–yet in the end did not take these actions.

Anybody who harrumphs at this–and yeah, I’m looking at you, Mitt–is irredeemably partisan, or not a serious person, or is completely incapable of realistically appraising how he or she would react if in another’s shoes. There are those who attempt to obstruct investigations because they know they are guilty, and there are those who fight investigations that they believe to be unjust. Mueller strained every nerve, tried out every possible legal theory, and left no stone unturned in his attempt to demonstrate illicit dealings, and admitted abject failure. This failure validates Trumps belief that the investigation was a travesty that never should have taken place, and puts his reaction in the second category rather than the first. The excesses are typically Trumpian ones.

That is, the evidence of absence of collusion completely undermines assertions of obstruction, given that obstruction requires mens rea. F. Scott Fitzgerald wrote “The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.” Finding Trump innocent (not just not guilty, but innocent) of collusion or conspiracy yet believing that he might have obstructed justice makes Mueller a genius, by the Fitzgerald standard. These are utterly opposed ideas.

Such geniuses the Republic can live without.

I would like to say that Mueller did Trump–and the country–a favor by proving him innocent of illicit dealings with Russia far more convincingly than Trump ever could have himself. To be found not culpable by people who are almost certainly your enemies and who desperately want to hang something on you is as close to vindication as you can get.

But facts don’t matter. Russia was just a pretext, a dog to tree Trump with. If that dog won’t hunt, his enemies will find another. And another. And another.

This is a power struggle, pure and simple. Meaning that Trump has to take that fight to his enemies. And the best way to do that is to attack legally the apparatchiks–the Brennans and Comeys and Clappers and those still in the bureaucracy–who unleashed the Russia collusion hound. And after that, to go after their political masters.

This is war to the knife. Trump has warded off the attacks so far, and almost miraculously survived. He can’t count on such luck continuing, especially since defeat will only spur his enemies to greater efforts. He has to be the attacker now.

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April 13, 2019

The Russians Aren’t There to Spread Disorder; They are There to Maintain Disorder

Filed under: China,Commodities,Economics,Energy,Politics,Russia — cpirrong @ 4:41 pm

This headline in Bloomberg made me chuckle and think of a famous malapropism from Mayor Daley I: “The policeman isn’t there to create disorder; the policeman is there to preserve disorder.”

The Russians (and the Chinese) are not in Venezuela to create (or spread) disorder, the Russians are in Venezuela to preserve disorder. Quite literally. Because they are there to preserve Maduro, and Maduro has created such chaos and misery that “disorder” seems far too mild a word to describe it. So adapting Mayor Daley’s words to the Russians in Venezuela, it wouldn’t be a malapropism–it would be descriptively accurate. An understatement, even.

Yes, I understand that permitting foreign interference in the Western Hemisphere violates just short of 200 years of American policy, and this is not a precedent we want to set. But in comparison to say the French in Mexico in the 1860s, this is truly small beer.

And consider the fate of Maximillian et al. Not a precedent that the Russians or Chinese should want to emulate.

Venezuela is a disaster–the world’s largest tar baby (literally, in some respects, given the physical characteristics of Venezuelan crude oil). The Russians and Chinese are actually fools if they think that propping up this disastrous regime–which is on the verge of overseeing a record setting decline in economic output–will increase their odds of getting paid back the billions they lent. Every day that Maduro continues in power, and the catastrophe metastasizes, makes the prospects of recovering even a few kopecs all the more remote.

If recouping some of their debt is an objective, the Russians and Chinese would actually be far better off killing Maduro, overthrowing his thugs, and making a deal with the opposition. But Putin and Xi are doubling down on a regime that makes the phrase “failed state” seem like a compliment.

Putin also views an outpost in Venezuela as a military provocation to the US. Whatever. At over 5400 miles from Russia (and over 9000 miles from Shanghai), that outpost would be utterly unsustainable if push came to shove with the US. Russia has no ability to sustain it logistically over that distance–nor does China, really, even though its navy and sealift are not as decrepit as Russia’s.

Fools put bases in places they can’t support. Complete fools put bases in places that they can’t support AND which are located in places that are descending into a state that the creators of Mad Max would have found fantastical.

So let Putin add Venezuela to his collection of failed state allies. It will be an ulcer, not an asset.

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April 11, 2019

Who Watches the Watchmen? William Barr, Evidently

Filed under: Politics — cpirrong @ 9:45 am

Attorney General William Barr triggered the greatest mass loosening of bowels in Washington, DC since the cholera outbreak of 1866 when he matter of factly stated that the government had indeed spied on the Trump campaign. According to Barr, the only unresolved issue is the propriety of the predicate for the spying. These comments caused the Democrats and the media to lose their ends-with-it, and the howls of pain are still being heard.

Barr only stated the obvious, and it is clearly welcome news that he plans to investigate, with the clear implication of holding the guilty accountable, not just to mete out their just punishment, but pour encourager les autres. The main difference is that the poor Admiral Byrd Byng who occasioned Voltaire’s quip did not deserve his grim fate, but Brennan, Clapper, Comey, McCabe, and most likely Lynch, Yates, Rice and perhaps others are justly deserving of a legal reckoning, on the merits and for the example. Alas, none will be dropping a handkerchief to signal his or her readiness to the firing squad, but hopefully they will be punished to the maximum extent allowable under the law.

Almost two millennia ago Juvenal posed the question: Quis custodiet ipsos custodes? “Who watches the watchmen?” The CIA, FBI, and the Justice Department are all supposedly our watchmen, protecting us from the depredations of those foreign and domestic who mean us ill. But for decades it has been evident that these watchmen can succumb to the temptations of power. There is a colorable case, based just on the information available to the public, that this official misconduct reached an acme with the 2016 election, and the subsequent inauguration of Trump. These watchmen must be watched, and more than just watched: they must be punished severely when they overstep their bounds.

To the extreme discomfort (gastrointestinal and otherwise) of the denizens of the Beltway, Bill Barr has signaled that he is about to do just that. I sincerely hope that he has the intestinal fortitude to carry it through.

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April 10, 2019

Trump’s Energy Infrastructure Executive Order: A Constructive Use of Federal Power, Consonant With the Purpose of the Constitution

Filed under: Climate Change,Economics,Energy,Politics,Regulation — cpirrong @ 7:31 pm

Trump just departed from Ellington Joint Reserve Base here in Houston, ending a quick trip to Texas which included a rally in Houston. The focus of Trump’s visit was the US energy sector (In Texas? Go figure!). As part of that, he announced and signed an executive order limiting the power of states to block or obstruct the construction of interstate oil and gas pipelines.

Overall, I’m not a fan of executive orders, as they tend to be used to override or circumvent normal Constitutional procedures and purposes. There is a strong argument, however, that this order is an exception.

The very genesis of the Constitution traces to commercial disputes between states under the Articles of Confederation. Contention between Virginia and Maryland over navigation of the Potomac and the Chesapeake resulted in the calling of the Annapolis Convention (formally The Meeting of Commissioners to Remedy Defects of the Federal Government) in 1786. Although the Convention itself was something of a damp squid, it did result in the calling of the Philadelphia Convention of 1787, which wrote the Constitution that continues to be the law of the land to this day, 232 years later.

Of course, one part of that document is the Commerce Clause (Article I, Section 8, Clause 3) which grants to the Federal government the power to regulate commerce between the states. This was not an accident, comrades. Preventing protectionism by the states against each other was one of the main reasons for creating a more powerful central government.

State governments always have the temptation and incentive to favor their own constituents at the expense of people in other states. Letting that impulse operate freely would result in a Balkanized country with myriad wasteful restrictions, taxes, tolls, and regulations that would sap wealth. (Consider pre-Revolutionary France, with its oppressive system of local tolls on the movement of goods.) Anticipating that, the Founders expressly sought to limit the protectionist powers of states.

In Gibbons v. Ogden (1824) the Marshall court forcefully exerted the Commerce Clause. Things have likely gone too far since: for example, the Commerce Clause’s delegation of authority over navigable waters to the US government has been pushed to the extreme by using it to impose Federal environmental regulation on an intermittent wet spot on your back 40.

But what Trump is ordering is clearly within the four corners of the Clause as originally conceived. Oil and gas are produced in some states, and consumed in others. Interstate movement is necessary to connect producers and consumers. Further, for myriad motives many states have attempted to obstruct that movement. That is not, and has not been since the formation of the Republic, their prerogative.

The case can be made that the Commerce Clause has proved a Trojan Horse that has facilitated an expansion of Federal power beyond that what the Founders envisioned. But what Trump is ordering is squarely within the intent of the Clause, as drafted and intended.

The dramatic growth in US energy production is being hampered by infrastructure constraints. For many, that is a feature, not a bug: the hostility towards fossil fuel energy in particular by many in the US, especially on the left, makes such infrastructure a schwerpunkt for environmentalists. Knock out the transit links between producers and consumers, and energy will be neither produced nor consumed. They often find it easier to focus their efforts on state and local governments because (a) they are often more biddable, and (b) since you only need to prevail in one or two to delay or derail altogether a pipeline moving across many, the odds of success are higher. (If there are N jurisdictions crossed by a pipeline, and the probability of getting a jurisdiction to block it is P, the probability that it will go through is (1-P)^N, which decreases with N.)

Yes, local communities do have concerns. The question is what is the appropriate remedy for them. A properly applied Takings Clause (with payment of true value for taken property) is one: it prevents subsidization through expropriation. Insofar as environmental issues are concerned, the question is whether ex ante restrictions (i.e., imposing high standards to permit construction) are better than ex post penalties for damage imposed (which provide an incentive for infrastructure operators to take precautions against damage).

Since infrastructure operators are well-capitalized, and unlikely to be judgment proof, and since there are armies of class action attorneys waiting in the wings salivating at the opportunity to sue for damages, ex post penalties are likely to be more efficient than ex ante restrictions, especially ex ante restrictions imposed by state and local governments who internalize the benefits they obtain for their constituents, but who do not internalize the costs that they impose on producers upstream or consumers downstream.

And this is not to say that the Federal government is inevitably predisposed to efficient outcomes. Look no further than the previous administration, which largely embraced the environmentalist hostility to domestic energy development, and which as a consequence used its powers to thwart some important infrastructure developments (e.g., Keystone, which would have proven especially valuable in light of the loss of heavy crude production in Venezuela and to a lesser degree Mexico). So Federal power can be exercised for good or ill when it comes to energy infrastructure. Trump’s order is an example of it being exercised for the good of energy consumers and producers.

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March 26, 2019

The Strategic Genius Putin Reinforces Failure (and a Failed State) in Venezuela

Filed under: History,Politics — cpirrong @ 6:57 pm

As something of a coda to the previous post, it’s worth commenting on Sunday’s story that Russia dispatched 100 troops to Venezuela. Within hours of their arrival, the power went out, and the country was plunged into darkness yet again.

This is how deep Russia must dig to find allies, all in a pathetic effort to tweak its bête noire, the US. Yet this is the colossus that has preoccupied the fevered minds of the American governing class since 8 November, 2016.

It is also a rather scathing commentary on Putin’s alleged strategic genius. There’s an old adage: never reinforce failure. Venezuela is a failure–and a failed state–on a grand scale. Yet perhaps thinking of his previous “investments” in the country, Putin reinforces this failure.

Succumbing to the sunk cost fallacy is hardly a sign of strategic genius.

Further, if Trump is in Putin’s thrall, why has Trump ramped up the pressure on the Maduro regime? Maybe Max Boot or Bill Kristol can enlighten us.

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The NYT Figures Out That Putin Is Not An Omnipotent Dr. Evil. Well, I Guess 12 Years Late Is Better Than Never.

Filed under: Economics,History,Politics,Russia — cpirrong @ 6:35 pm

The image of Vladimir Putin as an all-powerful mastermind was central to the Russia Collusion Hoax. In this telling, the omnipotent and omnipresent Vova, secure in his lair in Moscow, could manipulate at will the electoral process in the most powerful country in history. His power, devious intelligence, and malign purpose made it especially reprehensible and dangerous for Trump to collude with him, and the image of the Putin evil mastermind made collusion with him a grave threat to the republic, in a way totally different from, say, assorted Chinese boodlers boosting Bill Clinton.

The entire Russian Collusion Hoax was farcical to me from the beginning, and this grotesque exaggeration of Putin’s power and influence was the most farcical part of the charade. It was particularly annoying to hear about it from idiots who hadn’t paid the slightest bit of attention to Russia since, well, ever, and who when they did weigh in on Russia it was to slam Mitt Romney for calling it a threat, and to chortle at Obama’s snarky response to Romney’s alarums.

Put simply, most of these people who have been running around with their hair on fire about Russia since, come to think of it, the minute that Hillary conceded defeat and needed an excuse, couldn’t find the place on a map, despite the fact it is the biggest country on earth. But all of a sudden they were experts on all things Putin and all things Russia.

Perhaps in a signal to the hysterics that they should back off, the NYT ran an oped titled “How Powerful is Putin Really?” The answer: pretty much the same one I gave 12 plus years ago, and repeatedly–not very. Because Russia is not that powerful, and because Putin’s main role is to be an intermediary in wars between completing clans in the security forces and business, rather than to be a grandmaster moving inanimate chess pieces around the board.

This is comic gold:

The gulf between what Mr. Putin says and what happens in Russia raises a fundamental question about the nature of his rule after more than 18 years at the pinnacle of an authoritarian system: Is Mr. Putin really the omnipotent leader whom his critics attack and his own propagandists promote? Or does he sit atop a state that is, in fact, shockingly ramshackle, a system driven more by the capricious and often venal calculations of competing bureaucracies and interest groups than by Kremlin diktats?

I won’t keep you in suspense as to the answer. Hell, if you have been reading here anytime since around 2007, you know the answer. But then again, if you read me you probably haven’t been drinking the NYT Kool-aid, and won’t need them to tell you the answer 12 years too late.

If you read the rest of the article, you will see a description that echoes exactly the one I first applied to Russia in April, 2007: “a natural state.” As I quoted North, Weingast, and Wallis:

natural state is a specific way of structuring political and economic systems so that the economic rents created by limited entry are available to secure credible commitments among politically powerful groups. Potential rivals in a natural state stop fighting (or fight less when the economic rents they enjoy depend on continued existence of the sate and of social order. Natural states limit economic entry to create rents and then use those rents to credibly commit powerful groups to support the state. In other words, natural states use the economic system as a tool to solidify the stability of the ruling coalition.

I also quoted Celeste Wallander:

Patrimonial authoritarianism is a political system based on holding power in order to create, access, and distribute rents. It is well known that Russia is deeply corrupt, but corruption in the Russian system of patrimonial authoritarianism is not merely a feature of the system; it is essential to the very functioning of political power. The political system is based on the political control of economic resources in order to enrich those within patron-client clans. The patron remains in power by rewarding clients, and the clients are rewarded by supporting their patron. The patron requires support from his clients, and he must access and distribute rents for that support. Without the creation and control of rents, political power disappears. At the top of the political system, Putin manages relations among competing patron-client clans headed by top government and business figures, such as Development and Trade Minister German Gref, Deputy Prime Minister and Gazprom chairman Dmitry Medvedev, Gazprom president Alexei Miller, and Igor Sechin, deputy head of the presidential administration and chairman of Rosneft. Each of these individuals in turn has his own set of clients, who are in turn patrons of their own clans, and so on, creating a complex web of relationships that sustain political power and distribute patronage rents.

The basic point of the analysis was that of course someone like Putin is powerful within such a system, but he is not all powerful. Further, his power derives from his ability to intermediate between independent sources of power within Russia. The main purpose of the state in Russia is to organize theft, and divide the spoils. The main purpose of Putin is to keep that process from devolving into violent chaos.

Put differently, I’ve often emphasized the deinstitutionalized, highly personalized nature of the Russian state. The personalism is a bug, not a feature, and inherently limits the power of the person at the top. It is a great mistake to confuse the prominence of the public face of a shambolic state with actual power. Institutions are necessary to generate national power, either domestically or abroad. The power of deinstitutionalized state is inherently constrained.

But especially post-8 November, 2016, the left and the media and Hillary needed a figure to personify evil, and to tie him to Trump, so the reality of Russia and Putin and Putinism–which is pretty plain to see if you actually look–was deliberately ignored, and in its place our “elite” became fixated on a cartoonish Dr. Evil figure in a way that would make the most crazed 1950s Bircher blush.

These are people who fell for the scary wizard and his pyrotechnics, and paid no attention to the little man behind the curtain. Some because they were fools. Some–the worst of them, and the most powerful–because it advanced their political agenda.

So I say to the NYT: Bravo! Better 12 years late then never! But this should be a lesson: don’t pay the slightest bit of attention to those Bozos, because their news and editorial “judgments” are driven by a political and ideological bias that is impervious to readily observable realities.

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