Streetwise Professor

August 29, 2022

New European Energy Policy Follies: The Inevitable Consequence of Past European Policy Follies

European power prices are going hyperbolic, with day ahead prices in swathes of the continent varying between €660 and €750/MWh.

For those who want to play at home–spot the congestion!

Even more remarkably, Cal 2023 power prices are around €1000/MWh in German and France:

That’s for baseload, folks. 24/7/365. Peak Cal 2023 French power is currently at €1425. Ooh la la!

This has of course set of a flurry of policy proposals.

None of these proposals will mitigate the fundamental problem–energy supply is extremely scarce. Most of these proposals will actually exacerbate the underlying scarcity.

Instead, these proposals are all about how to distribute the cost of scarcity. They are fundamentally redistributive in nature.

The proposals include price controls (natch), windfall profits taxes, and nationalization.

Price controls always exacerbate the scarcity and create actual shortages by encouraging consumption and discouraging production. They will necessitate rationing schemes. In electricity, rationing often involves brownouts and blackouts. Planned blackouts, such as no power availability at all for some hours of the day.

WIndfall profits taxes attempt to capture the surplus of inframarginal (i.e., low cost) suppliers, and redistribute that surplus (somehow) to consumers. Redistributing through subsidized prices exacerbates scarcity because it increases demand.

Windfall profits taxes may otherwise have few distorting effects in the short run, given that supply from the inframarginal firms is likely to be highly inelastic (they basically operate at capacity). (Ironically, the scheme to hit Russia by capping the prices it receives on oil is predicated on a belief that supply is highly inelastic.). However, windfall profits taxes have very deleterious long run incentives. They deprive those who invest in production capacity of the value of those investments precisely when they are greatest (which really distorts investment incentives). Even the risk that windfall taxes will be imposed in the future depresses investment today. Meaning that although such taxes may not do too much damage in the present, they increase the likelihood of future scarcity.

The reach of windfall profits taxes is also limited. Many of the rents resulting from the current world energy situation accrue to input suppliers (e.g., owners of LNG liquefaction capacity, coal miners that export to Europe) who are beyond the reach of grasping European hands via windfall profits taxes. (And are the Norwegians going to transfer wealth to Europe by imposing windfall taxes on their gas production and writing a check to Brussels? As if: the Norwegians are already talking about limiting energy exports to Europe.)

Nationalization can be a crude form of windfall profits tax: nationalizing low cost producers basically seizes their surplus. Nationalization can also be a form of subsidization: seize unprofitable firms, or firms that can only survive by charging very high prices, and sell the output below cost. Losses from below cost sales are socialized via taxpayer support of loss-making nationalized enterprises (which creates deadweight costs through taxation present and future).

Nationalization of course generates future operational and investment inefficiencies due to low power incentives, corruption, etc. Moreover, to the extent that nationalized entities subsidize prices, they will encourage overconsumption, and thereby create true shortages and necessitate rationing.

All of these policies aim to mitigate the pain that power consumers incur by shifting the costs to others–and in the forms of subsidies funded by general taxation, the overlap between those who receive the subsidies and those who pay them is pretty large. But even this transforms a very visible cost into a much less visible one, and thus has its own political benefit.

The Germans–at least the Green Party ministers in the government–are advocating a fundamental change in the market mechanism, specifically, eliminating marginal cost pricing:

“The fact that the highest price is always setting the prices for all other energy forms could be changed,” Economy Minister Robert Habeck, who is also the vice chancellor in the ruling coalition in Berlin, said in an interview with Bloomberg.

“We are working hard to find a new market model,” he said, adding that the government must be mindful not to intervene too much. “We need functioning markets and, at the same time, we need to set the right rules so that positions in the market are not abused.”

Marginal cost pricing is a fundamental economic tenet: price equal to marginal cost gives the right incentives to produce and consume. Below marginal cost pricing (the cost of the most expensive resource sets the price) encourages overconsumption. Further, unless marginal units are compensated there will be underproduction. Both of these create inefficiencies, exacerbate scarcity, and can lead to actual shortages and the necessity of rationing.

On a whiteboard you could draw up a pricing mechanism that perfectly price discriminates by paying each resource its marginal cost. This effectively appropriates all of the producer surplus which can be redistributed to favored political constituencies. But this doesn’t cover fixed costs and a return on capital, which discourages future investment.

Further, classroom whiteboard exercises are usually impossible even to approximate in reality. Knowing what marginal cost is for each resource in a complicated system is a major problem, especially when you take transmission into consideration. The likely outcome would be some sort of kludge with roughly average cost pricing combined with some Rube Goldberg scheme to compensate producers. This whole system would involve massive redistribution and all of the politicking and corruption attendant to it.

The real problem the Europeans have is that they want to kill the market messenger. The market is signaling scarcity. The scarcity is real, and acute, but they no likey! And by the nature of energy production–capital intensive, with moderate to long lead times to enhance capacity–the scarcity will continue for some time, with little the Europeans can do about it.

In other words, they can’t fix their real problem (scarcity), which is the harvest of their previous policy follies. So they are left to find redistributive schemes to allocate the costs in a politically satisfactory way. These redistributive schemes–price ceilings, windfall profits taxes, nationalization, fundamental restructuring of the market mechanism–all tend to exacerbate scarcity in both the short and longer runs.

The fact is, when you’re screwed, you’re screwed. And Europe is well and truly screwed. What is going on in policy circles in Europe right now is figuring out who is going to get screwed hardest, and who is going to get screwed not so much. And there will be substantial costs, both in the short but especially the longer term, as whatever Frankenstein “market” emerges from these frantic policy stopgaps will wreak havoc in the future, and will be very hard to put down.

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August 21, 2022

No, Dugin Is Not Putin’s Brain: They Are Products of a Shared History

Filed under: History,Politics,Russia — cpirrong @ 12:40 pm

Yesterday Daria Dugin, the daughter of Russian philosopher and ideologist Alexander Dugin, was killed on a Moscow highway by the detonation of a car bomb. The bomb was apparently intended for her father, who decided at the last minute not to ride with her from an event.

The murder triggered an avalanche of ghoulish, creepy, and frankly disgusting celebration. The only regret that many expressed was that Dugin père was not vaporized. Better luck next time!

The commentary was littered with descriptions of Dugin including “Putin’s brain,” or “Putin’s Rasputin,” and “fascist.” The implication being that Dugin is and has long been Putin’s Svengali, and that Putin has been in Dugin’s thrall. Putin wouldn’t have considered seizing Crimea without Dugin’s suggesting it, dontcha know.

This is illogical, idiocy, and entirely at odds with actual historical facts.

In terms of logic, D saying X and P doing X does not imply that D’s words caused P’s actions.

More generally, to the extent that there are parallels between Dugin’s writings and public statements and Putin’s words and actions, this does not mean that Putin was an acolyte sitting at the master’s feet, an Alexander to Dugin’s Aristotle.

Instead, there is a common root. Dugin’s emphasis on Russian exceptionalism–especially Russians’ supposedly transcendental spiritual mission in existential opposition to a degraded materialist West–and Putin’s expression of similar ideas draws from a very common theme in Russian thought. Think Dostoevsky, for example, or Solzhenitsyn, or the veneration of the supposed “Russian soul.” The examples could be multiplied.

Putin has long sought ideological and philosophical justifications for his politics. Once upon a time–in the mid-2000s, basically–Dugin was the flavor of the month. He was just a fashion that Putin donned for a bit, before moving on. Dugin didn’t shape Putin’s thinking. Instead, Dugin’s thinking was useful to Putin at one time. But the dynamic of Putin’s actions and the logic underlying them are largely independent of Dugin’s writing, and to the extent that they are correlated, it is because they draw inspiration from a common historical source, or from geopolitical forces that Dugin wrote about but did not create. If anything, Putin used Dugin for a while, but Dugin has never used Putin.

Much of Dugin’s writing is rooted in the geopolitical, geographical theories of Mackinder, combined with a distinctly Russian, anti-Western, anti-Enlightenment civilizational perspective. One can explain a lot of what Putin has done, and does, as an expression of the geopolitical and civilizational forces that Dugin wrote about, that doesn’t mean that Putin wouldn’t have done the same thing if Dugin had never existed. In fact, it means the opposite.

In other words, both Dugin’s words and Putin’s actions are the products of common forces and a common history, not the creators thereof.

As for fascism, yes there are points of contact, regarding culture, idealism v. materialism, Romanticism, etc., but the very Russianness of Dugin’s thought makes comparisons to Mussolini let alone Hitler superficial at best, and highly misleading at worst. The historical palette of most American and European commentators is highly limited.

I think of Dugin as the Russian avatar of Huntington’s Clash of Civilizations–and Dugin would probably consider that flattering. The hatred directed at him, and his returning that with interest, reflects that clash.

In other words, like most intellectuals, Dugin isn’t all that important except as an expression and illustration of what produced him. If he had chosen to ride with his daughter yesterday, the future would not have differed a whit, just as he reflected but did not create the past.

If he doesn’t matter, why was he targeted? Well, I am arguing that he shouldn’t matter. That’s different from saying that some people think that he does. The ghoulish gloating and “Putin’s brain” idiocy demonstrates that many do.

Some have weirdly suggested that Putin wants him gone. Er, why? And Putin has found that he can silence opponents by jailing them or tormenting them with judicial processes. No need to create a martyr.

The most likely culprits are Ukrainian. Not necessarily (or even likely) the government. More likely Azov types.

Killing Dugin would perhaps be emotionally satisfying to Ukrainian nationalists, but it would not advance Ukrainian interests in the slightest. Indeed, it would quite likely have the opposite effect, because it would only make the conflict even more existential from the Russian perspective.

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August 14, 2022

Thank You Kamala!

Filed under: Economics,Politics — cpirrong @ 6:50 pm

Kamala Harris is an idiot. This statement needs no elucidation. It verges on self-evident truth.

The most recent illustration:

Note Kamala’s characteristic redundancy and circularity.

But I have to extend my deepest thanks to Kamala. Before reading that, I didn’t know that my failed NBA dreams were the result of hidden structures of oppression. For if we all have the same capacity, I have the same capacity as, say, Michael Jordan. Meaning that systemic oppression has to be–has to be!–the only reason I am not the GOAT.

My only question no is: whom do I sue?

Sarcasm aside, I am genuinely grateful to Kamala because she said the quiet part out loud, and revealed the premise underlying the entire equity agenda. Namely, that “everyone has the same capacity.”

This is a self-evident untruth. Thus, the equity agenda is built on a lie, and all its assertions and conclusions are therefore false. Kamala has generously put the laser designator on the target that we need to destroy in order to eliminate this pernicious doctrine.

Most philosophies and social theories are built on beliefs about human nature. Arguments over Locke and Hobbes, for example, depend crucially on their contrasting assumptions about human nature. You may disagree with the human nature foundations of this philosophy or theory or that, but usually there is at least a kernel of truth and insight in those that have achieved wide acceptance and which have endured.

But that’s not the case with equity, as revealed by Kamala Harris. It is built on an obviously false model of humanity.

Most clever leftists who advocate the equity agenda obfuscate and obscure the underlying assumption. Kamala is a leftist, but a dim one, so she let the cat out of the bag. And for that we can all extend our hearty thanks.

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August 11, 2022

“Inflation Reduction Act”? More Like The Resource Curse on Meth Act.

Filed under: China,Climate Change,Commodities,Economics,Politics — cpirrong @ 11:35 am

The “Inflation Reduction Act” became Joe Biden’s climate and health care bill.

The narrative pivots are truly amazing to watch.

The deeper you dig into the details, the worse it looks. The supersizing of the IRS is one example. And if you believe that the massive expansion in “enforcement” (representing fully half of the $87 billion in increased expenditure) won’t be directed at schlubs like you, well, you’re a schlub and a sucker. The IRS, like federal law enforcement generally, goes after the easy targets. The people without the resources to defend themselves. And given the rampant politicization of all federal bureaucracies with any enforcement powers, if you are an easy and leveraged target. Get some money, damage the deplorables.

As to the climate aspect, it is a massive boondoggle of subsidies of inefficient technologies. We are constantly told (just read Bloomberg, if you can stomach it) that renewables are becoming so so so efficient. OK. Then why do they need massive subsidies to displace putatively inefficient fossil fuels?

And is there any evidence that our Solons have contemplated the systemic impacts of their intervention? In particular, how encouraging electrification generally, and the supply of electricity with renewables, will affect the reliability and indeed the stability of the grid? Of energy supply generally?

Or as another example, have they thought a nanosecond about the environmental and geopolitical consequences of this intervention into the extremely complex energy supply system? I’ve gone on at length before about the environmentally destructive effects of allegedly “green” policies. In a nutshell: mining ain’t green.

I’ve also discussed the geopolitical aspects, specifically the inevitable conflict over mineral resources vital for batteries and electrification generally. This conflict will be with China in particular, and will occur primarily in Africa and South America.

When I originally raised this issue, I received a lot of pushback. Whatever. Just watch. The Scramble for Africa Part Deux is already underway (with Russia as well as China contending with the US).

This benign summary of US policy towards Sub-Saharan Africa conceals more than it reveals. It acknowledges that Africa has 30 percent of the “critical minerals that power our modern world.” It says “[t]he United States will assist African countries to more transparently [sic] leverage their natural resources, including energy resources and critical minerals, for sustainable development while helping to strengthen supply chains that are diverse, open, and predictable.”

Just how is that supposed to work, exactly, in competition with the Chinese (and Russians) who are all about “assisting” rather non-transparently (through bribery and force) African nations exploit their natural resources in ways that are anything but “sustainable,” “diverse,” or “open”? (They are altogether predictable though.)

The logic is inexorable. Western nations hell-bent on the “energy transition” will increase dramatically the demand for resources in poorly governed or ungoverned regions of the world. Given that property rights in these regions are weak (and often non-existent) the competition will not be mediated through markets, but through force and fraud.

Meaning that the unintended–but inevitable–consequence of the compelled transformation of energy supply will be conflict in wretchedly poor areas that will make 19th century British and French struggles in Africa look like child’s play.

Put differently, virtue signaling policies in the West will create massive rents in countries with weak institutions that are especially prone to the most vicious forms of rent seeking. That will work out swell!

Case in point: the looming battle in the Lithium Triangle:

Similar setbacks are occurring around the so-called Lithium Triangle, which overlaps parts of Chile, Bolivia and Argentina. Production has suffered at the hands of leftist governments angling for greater control over the mineral and a bigger share of profits, as well as from environmental concerns and greater activism by local Andean communities who fear being left out while outsiders get rich.

And it’s not just lithium. It’s copper too. And rare earths, and nickel, and on and on.

In other words, we are about to witness the “resource curse” on meth. Massive rent seeking struggles in weak polities, all due to the whims of western elites in the thrall of a theory–and divorced from reality.

And for what? Even if the theory is correct, the impact of things like the “Inflation Reduction Act” on global climate will be virtually immeasurable, in the 100ths of a degree F at most, and perhaps in the 10000s of a degree.

In other words, the intended consequences of this act, and others like it, will be virtually nonexistent, while the unintended consequences will be dire. “Died of a theory” will be literally true–especially for those unfortunate enough to be living atop the resources the demand for which will be stimulated greatly by western elites mesmerized by that theory.

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August 7, 2022

Reversal of Polarity: Not Protecting Rednecks From Hate, But Protecting Modern Day Reds From Competition

Filed under: Economics,Politics,Regulation — cpirrong @ 5:33 pm

Missed me on Twitter? Well, probably not, but if so, there’s an explanation. The thumbsuckers on Twitter locked me out for a week for this innocuous (IMO) tweet:

(NB: “Thumb” is a euphemism. Know what I mean? Nudge Nudge. Say no more.)

The beatdown notice came literally within seconds of posting, meaning that the tweet offended Twitter’s algorithms. Who knew they were so solicitous of rednecks’ feelings?

Lesson learned: next time I’ll say “peckerwoods” instead.

I guess Randy Newman must be banned for life, like James Lindsay (with trannies claiming credit for the censorship):

Twitter’s algo also apparently has some logical issues. The phrase “redneck racists” does not imply that all rednecks are racists. Just that there are racists who are rednecks. Does anyone deny this? Actually, does anyone at Twitter deny this? Indeed, I think it is more likely that the average pierced tattooed fascist at Twitter is highly likely to believe that all rednecks are racists. And they think all people like me are rednecks.

Or maybe Twitter is hypersensitive about accusations that leftists can be racists. They probably should be, because as my tweet suggests, leftist racism is pervasive and far more insidious than the traditional peckerwood variety. Insidious because of its fundamental dishonesty. Its condescension. Its manipulative use of blacks in particular to advance its anti-freedom, anti-American agenda. And the fact that leftists hold far more power in 21st century society than some Klansman wannabe.

Case in point: the leftist effort to rename monkeypox, because the name allegedly stigmatizes black people. Well, if your first association with the word “monkey” is black people, who is the racist, exactly?

Ironically, my time in the penalty box coincided with my reading of a Coase essay “The Market for Goods and the Market for Ideas,” and my watching of a documentary on Monty Python. They both demonstrate how much the left has changed from they heyday of American liberalism to today.

Back in the day, the liberals–the 1960s establishment left (not the New Left)–were the defenders of free speech, not its sworn enemies, as the left is today. The ACLU was all about free speech then: it is all about suppressing it now.

The Python documentary covered the controversy over The Life of Brian, which, among other things, resulted in its censorship in South Carolina at the behest of Strom Thurmond. The documentary showed earnest young liberals protesting the censorship, and defending free speech.

You know that their modern day successors hate free speech, and are the prime supporters of censorship on campus and throughout society generally.

The Coase essay is of particular interest, because he was trying to explain why the left of his day were anti-economic freedom (“market for goods”), but near absolutists on freedom of speech (“market for ideas”). His explanation was that liberals had a vested interest in freedom of speech since they were disproportionately represented in media and academia.

Well, they are even more dominant in the commanding heights of speech today than they were in 1974, when Coase wrote. (In the American Economic Review, I might add. The thought of anything similar appearing in the AER today would be ludicrous. In fact, the thought of anybody like Coase being a leading light in economics today is ludicrous).

So what explains the undeniable shift in attitude from pro-free speech to ardently anti-free speech in the space of 50 years, in the face of the strengthening of the force that Coase identified as the driver of pro-free speech attitudes?

Well, I hypothesize that it is exactly the overwhelming dominance that exists in traditional fora today, combined with the emergence of non-traditional outlets in the internet age. Although liberals held the upper hand in the 1960s, they did not have a monopoly over traditional media or academia then. The environment was more competitive, and liberals thought that they could prevail in that competition and feared they would be squelched to prevent them from prevailing. So they supported free speech because they thought that it worked to their competitive strength.

Now, however, they have a virtual monopoly over print media, television, and academia. They dominate social media, but they face more competition there. So their economic, social, and political interests have flipped: they benefit from suppressing competition, rather than encouraging it.

And as is the case with the regulation of the “market for goods,” vested interests in the “market for ideas” conspire with government in order to advance those interests. The unseemly–and almost certainly unconstitutional–collaboration between the United States government in particular and social media companies is not at all different from the collusion between industry and government to suppress entry and competition that is at the root of Stigler’s now 51 year old article on the economics of regulation.

In a nutshell, the Old Left was in favor of free speech because they believed it worked to their competitive advantage. The New Left hates free speech because they believe it works to their competitive detriment.

This reversal of polarity has nothing to do with principle. It is about power, pure and simple. The “principles” are purely instrumental, and intended to advance the political and social interests of a particular class. The censorship of some peripheral figure over a mild comment indicates how dominant that class is, and how sensitive it is to the maintenance of its dominance. Not a sparrow falls, as it were.

In other words, this isn’t about protecting rednecks from hateful comments: it’s about protecting the social dominance of today’s reds.

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July 29, 2022

This Is Not Your Father’s Recession: This Is Your Economy on Puberty Blockers

Filed under: Climate Change,Economics,Politics — cpirrong @ 5:51 pm

The latest hysteria in DC and the media revolves on whether the United States is currently in a recession, given that real GDP has contracted in consecutive quarters. That has always been the good-enough-for-government-work definition of a recession, but the administration and its media mina birds are saying “ackshually that’s NOT the technical definition of a recession NBER blah blah blah low unemployment blah blah blah.”

So what is it? Well, the dimwitted press secretary and the only slightly more witted head of the National Economic Council, the appalling apparatchik Brian Deese, inform us that the economy is “in transition.” From what to what, they don’t say. Just . . . in transition. So I guess the economy is on puberty blockers or something. Because you know those are a thing now.

This obsessing over terminology brings to mind Jimmy Carter’s Chairman of the Council of Economic Advisors, Alfred E. Kahn. In 1980 Kahn made the mistake of referring to the economy being in depression or recession and he was promptly taken to the woodshed by the political types in the White House. Koch then announced he was foregoing use of those words, and would instead say that the economy was in a banana. After Chiquita (if memory serves) complained, he changed “banana” to “kumquat.”

Kahn was a real economist with a real sense of humor. In other words, totally different that the current crowd of humorless lilliputians.

The parallel with Carter demonstrates one thing though: when an administration freaks out about terminology, it means that they are frantic and desperate and have no substantive case to make. But calling a turd ice cream doesn’t improve the taste.

In fact, the economy’s performance is actually worse than the GDP figures alone would suggest. Instead of underperforming for two quarters, the economy has actually underperformed for three quarters. That’s illustrated in this chart of the shortfall of GDP from potential (as measured by the Fed):

Note that prior to the fourth quarter of 2021, the economy was rebounding sharply from the COVID policy-created collapse. (Not the COVID-created collapse: the COVID policy-created collapse.). The rate of convergence of GDP to potential slowed in the quarter Biden took office, then speeded up for a quarter. By 3Q21, the gap had narrowed to $108 billion, and actual GDP was 99.5 percent of potential. But in the fourth quarter, the gap widened by $169 billion. It widened again by $144 billion in 1Q22, and a further $155 billion in 2Q22.

Based on the trend prior to the fourth quarter of last year, it would have been reasonable to expect that the gap would have been closed by the end of 2021. That would have meant about $108 billion in convergence in the fourth quarter. Adding that $108 billion “shoulda” convergence to the actual divergence of $467 billion gets you to $575 billion in underperformance in the last three quarters.

You can say that this isn’t akshually evidence of a recession, and I really don’t care if you do (because it makes you look like an idiot). You CAN’T say that this doesn’t mean the economy has sucked for 9 months. Nine. Not six.

Oh, and of course, inflation has been raging over that period of time.

How’s that Phillips Curve working out guys? Can you say “stagflation”? Well, you probably won’t say that either, but it’s accurate.

And what is our wonderful government doing in these stagflationary times? Well, experiencing another bout of fiscal diarrhea that resembles a colitis sufferer binging on ExLax.

For starters there is the $52 billion CHIPS act, which is a subsidy boodoggle. There is no economic case whatsoever for it. If computer chips are scarce and prices are high, that provides the right incentive to invest. But the chip industry realizes that Uncle Sucker will crank up the printing machine if they whine loud enough. So they whine “supply chain yadda yadda”, and Uncle Sucker turns the crank.

On deck is the odds-on-favorite for most Orwellian named thing of 2022: “The Inflation Reduction Act of 2022.” More government spending (almost $1 trillion) allegedly paid for with higher taxes (which we know never materialize). Since fiscal excess is the main driver of the recent inflation, this Inflation Reduction Act will increase inflation.

It actually might be better if the government dropped the trillion from helicopters and let us decide where to spend it–then we’d just have the inflationary consequences.

But nooooo. The bill ladles out billions in subsidies for “renewable energy” boondoggles which will raise the true cost of energy because “renewables” are notoriously inefficient. (I put “renewables” in quotes because copper, lithium, cobalt, etc., are not renewable.) And it imposes new levies on efficient fossil fuels like natural gas and coal. Which will raise the cost of energy further.

So deciding where to spend what it shouldn’t be spending at all will harm the economy further.

There’s also some health care fuckery included but I can only take so much so you’re on your own to learn about that.

And of course many Retardicans in Congress, especially in the Senate, are totally on board.

Meaning that Congress and the administration are hell bent on fueling stagflation and making energy more expensive and less efficicient, while arguing over the esoteric meaning of a word pretty much everybody understood just fine before, oh, Monday.

Fiddling while the dollar burns. And you’re the one who will get burned the worst.

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July 23, 2022

Black Jack: A Coda

Filed under: Civil War,History,Military,Politics — cpirrong @ 6:04 pm

To round out the picture of Logan’s antagonism to service academies, it is worth noting that although he was a pre-War Democrat from a part of Illinois (“Little Egypt,” in the far south of the state) that was widely deemed to be sympathetic to the South, post-War Logan was an ardent pro-Reconstruction Republican and one of the most widely renowned practitioners of “bloody shirt” politics. He hated the South with a passion, and this also contributed to his West Point/Annapolis animus.

Logan’s book The Volunteer Soldier in America has a very strong populist, republican (small “r”) tone. Many of his arguments against the academies echo those of Jeffersonians and Jacksonians before him, perhaps not surprisingly given Logan’s upbringing in a staunch Jacksonian area of the country. Logan believed the academies to be anti-republican, aristocratic, and oligarchic in nature, and believed their graduates to be anti-republican and aristocratic in turn. Thus, they were a threat to self-government, whereas a military firmly rooted in the people, through a militia system, would not be.

Logan linked this aristocratic predilection to the South, which he viewed as being aristocratic and anti-republican due to slavery. He believed slavery was incompatible with popular rule, and inevitably led to the dominance of an aristocratic class. He argued that if secession had succeeded, the South would have become a monarchy, not a republic.

This was in turn linked to his view of the pernicious effects of the political nature of academy appointments: anti-republican elements in the country (especially in the South) corrupted the academies, and hence the military, with their appointment of like minded cadets and midshipmen.

Logan also expressed what could be called an early version of capture theory. He argued that the military establishment had captured the government, and as a result was able to extract lavish benefits from it. No doubt this astounded those serving in the 1870s-1880s military, who commonly complained of low pay, glacial promotion, and inadequate numbers.

So I think it’s fair to say that Logan’s anti-academy, anti-professional military views were a combination of bitter personal experience and political populism. In many ways, he was a 19th century expositor of a debate that had raged in the United States since before the founding: did the US need a professional military?; was a professional military a threat to self-government?

Bloody shirt politics became less and less popular after the Hayes-Tilden election, and the end of Reconstruction in 1877. Within a decade Logan was increasingly unpopular, as this print from 1885 shows:

That’s Logan getting booed off the stage. Note the blood-stained shirt hanging on his back.

As an aside, when skimming through Logan’s book I was reminded of the works of a contemporary, and another Civil War veteran, Theodore Ayrault Dodge. Dodge wrote many books on military history, including biographies of Gustavus Adolphus, Hannibal, Alexander, Napoleon, Frederick, and Caesar. In his book on Caesar, he repeatedly lauded the citizen-based Roman armies of the Republic, and compared Caesar’s professional army to them in very unfavorable terms.

Dodge was also a volunteer soldier, losing a leg at Gettysburg–ironically while in O. O. Howards XI Corps. He obviously shared Logan’s beliefs regarding the correct military for a republic, and the superiority of a popular, volunteer army over a professional one.

You can see echoes of these views in modern American politics, especially in this age of resurgent populism–and the reaction against it.

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Putin’s Hamster Wheel Spins Bloodily On

Filed under: Commodities,Energy,Military,Politics,Russia — cpirrong @ 1:46 pm

The war in Ukraine grinds on, and recent developments–non-developments really–mean that it will grind on for a long time to come. Specifically, Russian Foreign Minister stated that Russian territorial goals were not limited to the Donbas but included (at least) the Kharkiv and Zaporizhzhia regions. For his part, Ukrainian president Zelensky declared that Ukraine would attempt to negotiate a cease fire only after his country had recaptured all of the areas previously seized by the Russians (presumably including Crimea as well). I say “non-developments” because they represent mere restatements of previous positions.

These stated goals are clearly irreconcilable. Therefore, the beat will go on. And on. And on.

Russia continues to grind, but at an even slower pace than in May and June–and that pace was glacial. Ukraine is making some gains around Kherson, and is intimating that it will mount an offensive there. Even if successful, that will put the attempting-to-take-a-city-shoe–with all the attendant casualties–on the other foot. And even if successful, it will not be decisive, especially given Putin’s obvious bloody mindedness. Zelensky’s ambition of decisive victory is delusional.

Even the one glimmer of hope in the situation shone weakly for only a few hours. The day after a deal brokered by Turkey was reached between Russia and Ukraine to resume grain shipments from Ukraine, the Russians launched a small salvo of Kaliber cruise missiles at the port of Odesa/Odessa. As this video shows, firing Kalibers in ones and twos at a port poses relatively little threat to port infrastructure:

But they don’t have to in order to make the agreement a meaningless scrap of paper. Cruise missiles, even in penny packets, would pose a threat to ships loading at the port. The brazenness of the Russian action before the ink was dry on the grain export deal makes it plain that calling in Odesa/Odessa is nothing but a game of Russian roulette–literally. Few if any carriers (or their insurers) will be game to play, especially given the other dangers (e.g., mines).

So what Putin giveth with one hand to great fanfare he taketh away with little more than a shrug. A typically cynical play.

The biggest losers from all this (other than the combatants themselves, of course) are the Europeans. They are looking at a cold, dark winter. And they are looking at serious economic damage for as long as this lasts. German industry (chemicals especially) will suffer greatly from protracted high energy prices, natural gas in particular.

German resolve, such as it was, is already cracking. It is fading its promises to provide weapons to Ukraine, and its foreign minister said the quiet part out loud: “If we don’t get the gas turbine, then we won’t get any more gas, and then we won’t be able to provide any support for Ukraine at all, because then we’ll be busy with popular uprisings.” Translation: Ukraine, we don’t have your backs–but we might stab you there! (“At your feet or at your throat” also comes to mind.)

She backtracked, but her words are a vivid example of Michael Kinsley’s definition of a gaffe: “A gaffe is when a politician tells the truth – some obvious truth he isn’t supposed to say.” Or in this instance, “she.”

Putin is executing a major psyop, varying the volumes of gas shipped to Europe. “Nice little energy-dependent economy you got here. Shame if anything happened to it.”

The likely outcome is that the western Europeans will temporize. They won’t back off on sanctions altogether, but their support for Ukraine and their opposition to Russia will be hedged and tepid at best. They will choose the muddle course, because they don’t have the guts either to confront Putin or to capitulate to him. This will also help extend the stalemate.

Years ago I used to refer to “Putin’s hamster wheel.” The fiasco in Ukraine is just a particularly bloody version of that. And betting on form, it will continue to spin for the indefinite future.

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July 18, 2022

The Imperative of an American Lustration

Filed under: CoronaCrisis,Military,Politics — cpirrong @ 5:56 pm

In the aftermath of the downfall of the Soviet empire, many of its former captive nations (like the Baltics, Poland, and the Czech Republic) implemented a policy of “lustration,” a process of identifying, exposing, and removing officials who were complicit in the oppressions and crimes of the Communist governments that they served. Reading the reviews of Deborah Birx’s book by Michael Senger and Jeffrey Tucker of the Brownstone Institute makes it clear that the post-Communist example is worthy of imitation in post-COVID (speaking optimistically) world.

In her appalling book, this appalling woman chronicles her myriad appalling deeds. In a nutshell, she lied and manipulated and manipulated and lied in order to impose her desired COVID strategy–severe lockdown, of indefinite duration. Moreover, her book makes clear that her beliefs and desires were not grounded in science or fact or a sober appraisal of trade-offs (something that did not enter her “thinking” in the least), but were instead purely the product of her monomania, righteous ignorance, and not a little CCP-philia.

And because largely of this, and her, 330 million Americans had their lives and livelihoods turned upside down.

Of course as egregious as she was, Birx did not work alone. Some of her co-conspirators (and yes, that is the right word) are known: Anthony Fauci, Francis Collins, Robert Redfield, Matthew Pottinger. But there were necessarily many other accessories with much lower public profiles, or indeed no public profilecs at all.

Given the massive harm inflicted on the country, and the lives and liberties of its citizens, the actors and their acts must be known. And not merely through the self-interested memoirs of confessed (indeed boastful) liars. This is necessary not just to punish the guilty (though any punishment will not come anywhere near the harm), but to shed a light on how government “works” in the hope it may not “work” this way in the future.

That’s the purpose of lustration.

The public health establishment should of course be a focus of this effort, to investigate its role in shaping the response to COVID and also its potential role in causing it. But not the only one. The actions of the FDA in approving vaccines and responding (or not, more accurately) to widespread reports of adverse side effects also demand examination. (Look at how the FDA responded to a report about contamination at the Abbot baby formula factory, and compare to how it is responding–or not–to report after report regarding “vaccine” side-effects.)

The military as well. Who is responsible for the vaccine mandates that have devastated morale, led to the separation, resignation, or failure to re-enlist of thousands of dedicated soldiers, sailors, airmen, and Marines, and which are a major cause in the military’s current shocking recruiting shortfalls? Why did they make this decision? Why are they sticking to it so mulishly despite the obvious consequences?

And the need for cleansing extends beyond COVID. For example, did the execrable General Mark Milley usurp the Constitutional powers of the commander and chief?

I could go on.

You will note that my (very incomplete) list of potential subjects is limited to soi disant “civil servants,” i.e., bureaucrats, and is devoid of politicians. That is no accident. The most shocking fact about COVID policy is that it was almost entirely the creation of an American nomenklatura, with the supposed agents of self-government (including Donald Trump) playing at best a tertiary and certainly cowardly part.

Look at Birx. She arrogated to herself the powers to make momentous decisions, because. Because why? Well, because she could and no Constitutionally sanctioned individual stopped her. Indeed, they enabled her.

Restoration of true self-government requires Americans to know what a sham self-government has become.

If you think that lustration is unprecedented, well that’s not true. We have an example before our very eyes–the January Sixth Committee. Its purpose is clearly the lustration of Trump and Trump officials who allegedly attempted to undermine “our democracy.” So if the left shrieks in horror at the thought of Deborah Birx and Tony Fauci et al in the dock, well, sauce for the goose . . .

That said, the greatest service that the January Sixth Committee is performing is to show how NOT to proceed. It is transparently partisan. Worse, it lacks the procedural safeguards–specifically the ability to present evidence and witnesses, and cross-examine–that are necessary to ferret out the truth, uncover the lies, and protect the accused.

But we cannot allow those responsible for inflicting so much harm to escape unexamined and unscathed. If they are as righteous as they claim, they will emerge not merely unbowed, but elevated. If they are not, they deserve public obloquy. Or worse.

But it’s about more than exposing the culpable. It’s about showing how the system operates. How the unelected and unaccountable wield powers–awesome powers–not granted by the Constitution or laws. Until we know how the system operates, we cannot know what needs to be changed.

Bureaucratic usurpation is a fact of American life. COVID policy represents what is hopefully an extreme example of such usurpations, and hence can provide insights to the system that people will care about, and pay attention to. So it is not for the past–because sunk costs are sunk–but for the future the American people need to know what happened, who did it, and why.

So lustration. Sooner rather than later.

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July 13, 2022

Hey, Janet, Here’s a Deal! Buy a Russian Toaster for $5 Mil, and Igor Will Throw in 100K Barrels of Oil for an Additional $5 Mil

Filed under: Commodities,Economics,Energy,Politics,Russia — cpirrong @ 6:06 pm

The Biden Better Than Yous’ most recent brain flash is to impose a price cap on Russian oil. We’re told (by an anonymous senior Treasury official–maybe the ex-economist Janet Yellen herself?) that if we don’t the price of oil could reach $140/bbl.

Oh thank you for thinking of how to save us!!!

Not so fast. That is based on a particular counterfactual: namely, a complete cutoff of Russian oil exports. That counterfactual is totally unrealistic.

Let’s compare to a more realistic alternative–current reality. Russia currently has to sell its barrels at a discount. But even the discounted price is well above the price cap being bruited about. So, if the plan works–which it won’t, for reasons I’ll get into momentarily–Russia would receive a lower price for its oil. Russia’s supply curve slopes up. Yes, it’s pretty steep, but it will export less if the proposed price cap were indeed binding. And if it exports less, world prices will rise. And since the demand curve is pretty steep too, the price rise will be appreciable.

In other words, compared to the current situation, this plan will raise prices if it works.

This is not complicated.

One could rationalize this as a way of reducing Russian oil revenues while having a relatively modest impact on prices. If Russian output was completely price inelastic, the cap would not reduce its output, and world prices would not rise, but Russia would receive less money to blow up Ukraine with.


Again . . . if the plan works.

This rosy scenario would mean that the plan is oil price neutral. But it would create a huge windfall for any entity that secures barrels at the capped price. That “windfall” is an economic rent, and there will be massive rent seeking to attempt to secure it. And rent seeking will undermine the operation of the plan.

It’s not as if this is a theoretical possibility. Remember why Marc Rich fled the US? Well, one reason was that he sought rents created by Jimmy Carter’s idiotic oil pricing scheme which created different categories of oil with different price caps. “Old” oil was subject to a price cap. “New” oil wasn’t. So enterprising rent seekers like M. Rich found ways to buy old oil and magically transform it into new oil, thereby making bank.

Substitute “Russian” for “Old” and you have Janet Yellen’s current plan. It creates tremendous incentives to evade, and will require tremendous resources to enforce. Uncle Sam no likey, and indicted Rich. But remember Marc died a free man in Switzerland.

Moreover, there are myriad ways to circumvent price controls.

If you are old enough, you’ll remember banks giving away toasters and other small appliances to depositors. Why? Because interest rates on deposits were capped at below market levels. But there was no rule against giving away toasters! So, in essence, interest was paid in toasters.

Think of the possibilities now! Buy a limited edition autographed portrait of Igor Sechin (the old Igor, with a mullet) for $5 million, and Rosneft will throw in 100,000 bbl of oil for $5 million more–a 50 percent discount off the current price, and compliant with the cap! It’s a bargain!

Or maybe buy a Russian toaster for $5 million, and get the 100kbbl for another $5 mil.

Warning: Do NOT accept sausages from Igor.

The bundling possibilities are endless. Side deals run through a labyrinth of shell companies are another way around this.

And don’t forget, one of the main ways that Russian oligarchs got rich in the 1990s was buying commodities at official Russian prices (well below world prices), illegally exporting them and selling at world prices, and then stashing the money overseas.

Meaning that they just have to dust off their old playbooks–they are pros at this. Only this time they will be circumventing foreign price caps instead of domestic ones. And they will have numerous eager accomplices in China, India, South America, and Africa.

And the Russians aren’t the only pros. Do you have any idea about all the invoicing scams in China to circumvent capital controls?

What’s the US going to do in response? Sanction everybody?

In sum, this is a plan that looks great on a whiteboard in economics class, but will not survive contact with the enemy. The enemy being reality.

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