Category: Daily Escape

Monday Wake Up Call – March 7, 2022

The Daily Escape:

Watson Lake, near Prescott, AZ –  February 2022 photo by Steve Matten

Last week, the Labor Department released its monthly Nonfarm payroll report. It showed strong hiring, and a substantial decrease in unemployment. Employment rose by 678,000 in February, the unemployment rate fell to 3.8%, wages rose by just 1 cent to $31.58 per hour, although wages have risen 5.1% over the past 12 months.

We still have 2.1 million fewer jobs (1.4%) than we had in February 2020 just before the start of the pandemic. At the average rate of jobs growth for the past 6 months, it’s about 4 more months before we get back to where we were. From Krugman:

“…what people are actually experiencing in their daily lives is a very strong job market. For example, according to the latest survey from the Conference Board, 53.8% of consumers said that jobs were “plentiful,” a near-record, while only 11.8% said that jobs were hard to get.”

More from Krugman:

“Yet the public doesn’t believe it. According to a new survey by Navigator Research, only 19% of Americans believe that the US economy is experiencing more job growth than usual, while 35% say that it is experiencing more job losses than usual.”

Pandemic unemployment peaked in April 2020 at 14.7%. Back then, Congress was afraid of the country entering another depression, or at best a recession similar to 2008. Congress decided to prop up the economy through a fiscal stimulus called the first CARES Act. Many politicians have talked about how the CARES Act was the financial jolt that has caused inflation to spike.

You probably didn’t realize just how large that unemployment aid was. When unemployment benefits were at their peak in June 2020, the government pushed $1.395 trillion dollars out to the unemployed. Here’s a chart from the St. Louis Fed that shows how fast and how high that cash injection into the economy moved:

Today, these unemployment payments have shrunk by 98% to $26.7 billion. So where in our economy did that $1.4 trillion go? It went primarily to goods purchased locally at Mom & Pop stores and supermarkets. It also went to the big box stores like Walmart, Costco, and Target. It went to Amazon and hundreds of online retailers. At the Mansion of Wrong, it also went to Peloton.  And it went to online services, like Netflix and online education.

Americans spent less than usual on services, so we saw huge job losses in the services sector. Statista reports that we are still short 3.75 million jobs in the services sector and less than .5 million in manufacturing. Leisure and hospitality account for 1.38 million of the total, while losses in education, health services and government also remain high.

Much of today’s inflation is the result of this trillion-dollar unemployment stimulus. Barry Ritholtz interviewed Rebecca Patterson, Director of Investment Research at Bridgewater Associates. She described how the one-two punch of monetary and fiscal stimulus led to a “Demand Shock” where demand for durable goods overwhelmed what manufacturers could supply. She says that while global manufacturers ramped up production by 5% above pre-pandemic levels, demand for those same goods rose by 20%. This is a large part of the inflation spike we’re experiencing, and why the Fed has called it a “transitory” problem.

America’s response to the pandemic reminds us that the way our government responds to crises brings different impacts to different parts of our society.

The Federal Reserve’s expansionary monetary stimulus since 2008 has primarily benefited corporations and the well-off who could buy ever more expensive assets with very cheap money. Fiscal stimulus like the CARES Act and like the new infrastructure bill mostly benefit the bottom 50% of the country: low-wage labor, the unemployed, and the middle class.

So the economy is doing just fine for the top 10% and the upper middle class. But people who make minimum wage aren’t flying to Barcelona this year. They’re not eating at high-end restaurants. When they shop, it isn’t at boutiques. They continue to split financial hairs trying to figure out how to feed their kids and keep a roof over their heads, because rents are rising everywhere in the US and the price of food is going out of sight.

Add to this the interest rate hikes we know are coming, and things aren’t getting better for the lower middle class or people in poverty.

The discussion of the impact that fiscal stimulus had on our labor market isn’t finished. No one really knows why so many people haven’t returned to work, despite the roaring economy.

Time to wake up America! Some Americans are going through hard times. Clearly, people in Ukraine are facing terror that is much worse than here at home. Maybe this cover of Neil Young’s “Harvest Moon” by The Brothers Comatose with AJ Lee can bring a momentary comfort in this age of discomfort:

Watch it, you won’t be disappointed.

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Saturday Soother – March 5, 2022

The Daily Escape:

Herring Cove, Provincetown MA – February 2022 photo by Karen Riddett

Wrongo and Ms. Right went to the big box store yesterday. Most of the things on our list were out of stock. We also needed to fill the car’s gas tank. Local prices ranged from $3.65 to $3.92/gal. We filled up at the place with the lower number.

This is before any effects of Putin’s War on prices here at home. One product that will be impacted is wheat. Russia is the largest exporter of wheat in the world, and Ukraine is #2. Reuters says that the two countries account for about 29% of global wheat exports. They also say that US wheat futures rose to a 14-year high earlier this week.

The reason is that major wheat exporters aren’t holding as much wheat in storage as they do usually. Wheat stocks are set to fall to a nine-year low of 57 million tons by the end of the 2021/22 season. The news gets worse: If Russia and Ukraine are excluded from those holdings, other major global wheat exporters account for just 16% of the global stock.

That’s enough wheat to feed the world for less than three weeks.

The majority of wheat stock that isn’t in the hands of major exporters is held by China. China’s expected to account for 47% of global inventories at the end of the year. And last Thursday, China started approving imports of Russian wheat that had been blocked for years over Beijing’s concerns about fungus and other contaminants. The countries had announced that China would begin importing Russian wheat and barley shortly after Putin visited China ahead of the Beijing Olympics.

Emptywheel reports that Russia imports a significant portion of the wheat seed it needs for each growing season:

“…where will Russia buy the wheat seed needed? (Depending on source, there’s a disparity in what percentage of wheat seed Russia imports, but it’s between 18-40% depending on spring, hard wheat, or other type.)”

Will Russia purchase seed from China and India? Will those two countries accept rubles? Or will they look to barter for something else in trade, like natural gas?

Ukraine is in an even worse position. Reuters says that Ukraine has confirmed stoppage of its grain exports until the end of the Russian invasion. There is a chance that supplies for the next season from both Ukraine and Russia could also be in jeopardy, pending the duration and outcome of the war.

They also report that Ukraine accounts for 16% of world corn exports. Ukraine and the US are the only world corn exporters until Argentina and Brazil gear up to export their crops. Apparently, Ukraine still has a good deal of its 2021 corn crop to ship, but given Russia’s closing of Ukraine’s access to the sea, that may be problematic.

As the Northern Hemisphere enters spring, grain planting is right around the corner for both Russia and Ukraine.  Corn is going in for Ukraine and spring wheat for Russia. It’s highly uncertain how Putin’s War will impact crop production this spring. Russia has yet to plant 30% of its 2022 wheat crop.

Brazil imports wheat because it can’t grow enough for its own consumption. After Trump closed soybean exports to China, Brazil moved land into soybean production for the Chinese market. Brazil could try to increase acreage dedicated to wheat, but new Brazilian acreage comes at the expense of further destroying their forests, a terrible tradeoff.

We are looking at the emergence of a global economic war of attrition brought about by the sanctions regime. The target is Russia, but economic costs will spill over to the rest of the world.

On that note, it’s time to unplug from the terrible news that for the moment, is mostly caused by a terrible country.

It’s time for our Saturday Soother. We can’t escape the cold blustery weather in Connecticut, so it’s another indoors weekend here at the Mansion of Wrong. Let’s start by brewing up a mug of Monarch Estate Gesha ($42/4oz.) from Honolulu’s own Monarch Coffee. The roaster says it has subtle, sweet flavors of berries, mango, honeydew, apple, and pear. Note the price. Coffee prices have spiked along with many other items.

Now grab a seat by a big window and listen to Hauser performing the cello solo in “Adagio” by Albinoni, accompanied by the Zagreb Philharmonic Orchestra in Zagreb, Croatia in 2017. This weekend, given the tragedy in Ukraine, it’s nice to listen to music that transports us to a place where there’s peace:

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Judge Says Jan. 6 Was a “Seditious Conspiracy”

The Daily Escape:

Sandhill Cranes, Monte Vista National Wildlife Refuge, CO – February 2022 photo by Rick Dunnahoo

Most of us had few expectations that the organizers of the Jan. 6 insurrection would face any legal consequences. Indeed, we’ve had almost zero confidence that the truth about what led up to that day would ever be known.

That just changed. Politico reported that:

“Joshua James, one of the 11 Oath Keepers militia affiliates indicted earlier this year on a charge of seditious conspiracy alongside the group’s founder, Stewart Rhodes, on Wednesday became the first person to plead guilty to the sedition-related charge in connection with the storming of the Capitol on Jan. 6, 2021.”

James admitted that he tried to disrupt the peaceful transfer of presidential power and that Oath Keepers leader Stewart Rhodes had a “plan” for accomplishing that disruption. The plea deal statement describes planning that occurred in November 2020 in the DC area and VA:

“On November 14 and 15, 2020, James met with Rhodes and others in the Washington, D.C., metropolitan area and at Caldwell’s Virginia farmhouse and learned about the start of their plans to oppose by force the lawful transfer of presidential power.”

The November planning meetings are important, because they suggest broader coordination with “others” at the Jan. 6 March. Perhaps the most interesting detail of the statement describes a plan to report to White House grounds and secure the perimeter:

“In the weeks leading up to January 6, 2021, Rhodes instructed James and other co-conspirators to be prepared, if called upon, to report to the White House grounds to secure the perimeter and use lethal force if necessary against anyone who tried to remove President Trump from the White House, including the National Guard or other government actors who might be sent to remove President Trump as a result of the Presidential Election.”

This begs the question of who is suicidal enough to plan to meet as an armed group at the White House grounds, unless they believed they were invited there and cleared for entry by Trump. Absent that, they should have expected to be arrested or shot on sight.

We’re looking at a plea of seditious conspiracy. From the WaPo:

“Federal law defines seditious conspiracy as two or more people who “conspire to overthrow, put down, or to destroy by force the Government of the United States,” or act “by force to prevent, hinder, or delay the execution of any law of the United States.”

This means we can now legally describe Jan. 6 as a conspiracy to commit sedition. For those among us who were wondering what Merrick Garland’s DOJ has been doing for the last year, it’s this: January 6 was officially a sedition, at least for Joshua James.

That says things are getting very interesting, particularly when we add to it this from the WaPo:

“The House committee investigating the Jan. 6 attack on the Capitol said on Wednesday that there was enough evidence to conclude that former President Donald J. Trump and some of his allies might have conspired to commit fraud and obstruction by misleading Americans about the outcome of the 2020 election and attempting to overturn the result.”

In a court filing in a civil case in California, the Committee’s lawyers said they had accumulated evidence demonstrating that Trump, the conservative lawyer John Eastman, and others could potentially be charged with criminal violations including obstructing an official proceeding of Congress and conspiracy to defraud the American people by illegally obstructing the counting of Electoral College ballots.

The Committee made the statement in a court filing to force Trump’s lawyer, John Eastman, to turn over documents to the Committee. Eastman is the attorney who advised Trump that Vice President Mike Pence could reject the electoral ballots.

The Committee also released an email written in the middle of the Jan. 6 assault on the Capitol, to Eastman from Greg Jacob, a Pence advisor:

When you read the email above, don’t gloss over this sentence: “I share your concerns about what the Democrats will do once in power.” That shows he is a hard-right partisan. But he closes with the big point:

“…thanks to your bullshit, we are now under siege”.

Short-term, despite the way the media is breathlessly talking about the Select Committee’s court filing, the Joshua James guilty plea is more interesting.

He connects the dots with the Oath Keepers’ leader, Stewart Rhodes. James was also in contact with Roger Stone, which begs the question of what Stone knew about their plans, or more troublingly, what Stone might have directed them to do.

Let’s not get too excited, but it seems that it’s now remotely possible that Trump, Roger Stone, and others will discover that in America, it’s true that no one is above the law.

Cook up some popcorn and watch the show.

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Biden’s Key Domestic Problems

The Daily Escape:

Aerial view of sunset at Cathedral Rock just after snowstorm, Sedona, AZ – February 2022 photo by mattymeis

Wrongo will leave it to others to deeply analyze Biden’s State of the Union speech. Biden clearly doesn’t have the oratory skills of Obama, or a Reagan. He’s more like Carter, or GHW Bush. He is, however, a better public speaker than Mitch McConnell.

Biden’s performance was pretty solid for a guy facing down fascism, both here at home as well as abroad. He didn’t attack his predecessor. He didn’t mention Jan. 6. That means he knows that what really matters isn’t shouting at his political adversaries, but talking over the heads of Congress to the nation.

But let’s take a prospective look at a few of the issues that may make or break Biden’s second year and likewise, cost the Democrats their majorities in both Houses of Congress in November. He’s facing one global crisis (the pandemic) that’s fading, and another (Russia’s invasion of Ukraine) that’s escalating.

In his first year, Biden presided over a robust economic recovery. It did create inflation, bringing higher prices for everything from housing and food to cars and gasoline. Here are a few of the challenges and opportunities for Biden in 2022:

Inflation. Biden adopted an aggressive, populist approach to beating inflation in his speech. In particular, saying that “Capitalism without competition is exploitation—and it drives up profits” was a great way to speak to the average American. The Fed’s interest rate hikes in 2022 will help.

Gas prices. The cost of fuel, electricity and power was 3.8% of average disposable income in January 2022. This is about where it was in late 2018, when Trump was president. Vehicle fuel efficiency means $3.50/gal. gasoline isn’t the scourge it once was. But, with the oil markets at above $100 a barrel because of Russia’s invasion of Ukraine, Biden may have a difficult time convincing voters they’re better off.

The supply chain. The shipping logjam is still with us. The Port of Los Angeles processed 7 million 20-foot equivalent shipping containers last year, surpassing the previous record set in 2018 by 13%. But that system isn’t built to handle the spike in demand caused by people buying more goods than services in 2021. Our supply chain is controlled by private companies including port operators, labor unions, the rail and trucking industries, and the large shippers that rely on their services. It’s unclear what Biden can do to reduce shipping costs.

Homicides. Americans are killing each other at rates not seen in decades. The sense that crime is out of control is and will continue to be a drag on Biden’s approval ratings, especially among Republicans and Hispanics. The current wave of killings began before Biden took office in 2021, and other measures of crime haven’t shown increases. There’s little Biden can do to turn this around.

Illegal border crossings. The 1.66 million migrants seeking to cross the US-Mexico border illegally in the 12 months through September, are the highest number since 2000. But Biden isn’t doing as bad a job as Republicans say. The Migration Policy Institute estimates that the actual number of successful unlawful entries in 2021 was less than one-fourth the total in 2000. Customs and Border Patrol has greatly reduced the number of migrants who manage to sneak in. Biden says he will address the multiple year backlog in asylum cases by hiring more immigration judges.

Tax refunds will be late this year. Americans hate doing their taxes but love getting refunds. A Bankrate survey found that 67% of those expecting a refund said it was important to their finances and planned to either save it, or use it to pay down debt or for daily expenses. The IRS says they’re overwhelmed following pandemic-related challenges, years of underfunding, and additional duties such as administering stimulus payments. The IRS has added a “surge team” to help whittle the big backlog and speed refunds. But if long delays materialize, voters will only remember they had to wait for too long to get their money back.

Biden’s approval rating. Pundits think that unless Biden’s approval rating improves into the high 40%s in the next few months, Democrats risk a 2010-style bloodbath in November. We won’t know for a few weeks if Biden received a bump in his approval ratings post-speech. CNN’s post-speech poll shows that 67% of those who watched the speech say that Biden’s policy proposals would move the country in the right direction, with 33% saying we would go in the wrong direction. That’s in contrast with a survey conducted before the speech with the same people. They were closer to evenly split (52% right direction, 48% wrong direction).

Many of the challenges confronting Biden are not fully in his control. In addition to what are enumerated above, Biden can get a boost based on his handling of Putin’s War and the sanctions regime. That may offset the negative image of our Afghanistan withdrawal.

There are just 8 months until the mid-terms. Biden needs to move fast.

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Biden’s State of the Union Speech

The Daily Escape:

Garden of the Gods Park, Colorado Springs, CO – February 2022 photo by Daniel Forster

Biden will give his first State of the Union (SOTU) address to the nation tonight. If you read Wrongo’s column yesterday, it’s no surprise that he will address a country that remains sharply polarized about America’s priorities:

“According to a Pew Research Center survey, 71% of US adults rated strengthening the economy as a top policy priority, followed by reducing health care costs (61%), addressing the coronavirus (60%), improving education (58%) and securing Social Security (57%).”

Americans are concerned about the state of the economy (71%), with 82% of Republicans and 63% of Democrats agreeing it is a top political priority.

Anyone outside of the Right-wing bubble knows that Biden is already committed to tackling inflation, but Americans remain anxious about the economy, despite record job growth in 2021 and solid wage gains.

So Biden is vulnerable on inflation, particularly since Republicans will stress high gas prices. They will also make the point that excessive spending on Covid relief added to inflation while increasing the budget deficit. In the Pew study, 63% of Republicans said that the budget deficit should also be a top priority.

Biden’s administration hasn’t touted its successes very well. The NYT’s Jamelle Bouie said that Democrats did little to publicize their few successes:

“…rather than go on the offensive, infrastructure spending in hand, they sat quiet. There would be no publicity blitz, no attempt to capture the nation’s attention with a campaign to sell the accomplishments…no attempt to elevate members who might shine in the spotlight and certainly no serious attempt to push back on the right-wing cultural politics that helped Republicans notch a win in Virginia.”

This is an opportunity for Biden to recount his accomplishments. The pandemic is (again) trending in the right direction; the economy is roaring (even though inflation must be addressed); respect of our foreign partners continues to be restored around the world (just when US leadership was urgently needed).

He’s probably had to rewrite the speech a few times since Putin invaded Ukraine, so it’s anybody’s guess what will be emphasized about that.

Biden faces strong political opposition from Republicans, who will fault him for a chaotic withdrawal from Afghanistan, and the surge in migrants at the US-Mexico border. Some Republicans see Biden’s nomination of Ketanji Brown Jackson to the Supreme Court, as a wedge issue to keep Whites from voting for Democrats in November.

But as John Harris says at Politico, Democrats shouldn’t beat themselves up. They should remember:

“…that the modern presidency offers its occupants nearly inexhaustible capacity for political revival. While Biden faces a growing roster of doubts and doubters — including within his own party — his two immediate Democratic predecessors offer vivid examples showing that the tools for him to reverse perceptions and regain control of his presidency are within his grasp.”

Harris says that the Biden administration has failed to tell a compelling story to Americans:

“By outward evidence, Biden and his aides have either not settled on a narrative or have not effectively promoted it. It is on this score that the Obama and Clinton examples are especially notable. Since both Obama and Clinton recovered from midterm blowouts for Democrats to win second terms, why can’t Biden employ their strategies for recasting their presidencies before being blown out?”

The goal of the SOTU should be to give those voters who have open minds a chance to see Biden in new light. We’re always interested in success stories that show the main character growing from start to finish, discovering new ideas and new energy while amplifying his/her original values.

Biden ran and won on “Build Back Better”. It was a practical approach for dealing with the pandemic and the economic catastrophe that came with it. It encompassed straightforward solutions, many of which have been enacted into law.

He ought to use the SOTU as the start of the 2022 mid-term campaign. He’s not an agile politician like Obama, Clinton, or Trump. But he is easily their equal and possibly their superior in terms of understanding the day-to-day practical burdens and aspirations of the voters he needs to sell on staying with Democrats in 2022.

He needs to show America that he’s managing an office with unmatched power in a successful manner. He should work every day to tell the story about who he is and what he’s trying to achieve for the country.

Tonight, we’ll see in what direction he’s taking both the country and the Democratic Party.

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Monday Wake Up Call – February 28, 2022

The Daily Escape:

Wiggly Bridge, York, ME – February 2022 photo by Eric Storm Photo

Wrongo intended to write about domestic issues today. One domestic issue is how Republicans and the Right-wing media pivoted over the weekend from being pro-Putin and his War, to now saying Russia was wrong to invade Ukraine. Is that proof that the sanctions are working?

It’s hard to turn away today from Ukraine news, despite knowing that Biden’s State of the Union (SOTU) speech is tomorrow night. The Republican reply will be given by Iowa’s Governor Kim Reynolds. This happens at a time when there are big differences of opinion about the most important issues facing the nation by Democrats and Republicans.

According to a Pew Research Center survey, 71% of US adults rated strengthening the economy as a top policy priority, followed by reducing health care costs (61%), addressing the coronavirus (60%), improving education (58%) and securing Social Security (57%). The survey was conducted between Jan. 10-17, 2022 among 5,128 adults.

But as expected, the top issues were very different for those who identified as a Republican or as a Democrat. When asked which issues “should be a top priority for the president and Congress to address this year,” the top five regarded as most important by Democrats were:

Top 5 priorities, according to Democrats (percent saying issue should be a top priority)

  1. Dealing with the coronavirus outbreak (80%)
  2. Reducing health care costs (69%)
  3. Improving the educational system (66%)
  4. Dealing with global climate change (65%)
  5. Strengthening the nation’s economy (63%)

Here’s the Republicans’ top-five list:

Top 5 priorities, according to Republicans (percent saying issue should be a top priority)

  1. Strengthening the nation’s economy (82%)
  2. Dealing with the issue of immigration (67%)
  3. Defending the country from future terrorist attacks (65%)
  4. Reducing the budget deficit (63%)
  5. Reducing crime (60%)

Strengthening the nation’s economy is the only priority that both Democrats and Republicans rank among the most important. Two of the Democrats’ top priorities are among the five lowest-priority issues for Republicans. Only 11% of Republicans think global climate change should be a priority (vs. 65% of Democrats). Just 35% of Republicans think dealing with the coronavirus outbreak should be a priority (vs. 80% of Democrats).

Conversely, two of the Republicans’ top priorities are among the five lowest-priority issues for Democrats. Only 35% of Democrats think immigration should be a priority (vs. 67% of Republicans). Just 31% of Democrats say the budget deficit should be a priority (vs. 63% of Republicans).

All of this may be on display at the SOTU and the Republican reply on Tuesday.

Returning to Ukraine, it’s reported that Ukraine and Russia have agreed to have low-level delegations meet, hosted by Belarus, to discuss ending the war. It’s unclear what exactly might be achieved from these negotiations, given that Putin’s War appears to be aimed largely at removing Zelensky from power.

Finally, assuming that Russia wins either on the battlefield or at the negotiating table, that will almost certainly be followed by a Ukrainian insurgency supported by NATO. The US military knows a lot about how many troops it takes to hold ground when most of the locals want you dead.

Many military studies say that the number needed is 10 troops to one insurgent. From The Dupuy Institute (TDI): (Brackets by Wrongo)

“…TDI amassed data on 109 post-World War II insurgencies, interventions, and peacekeeping operations between 2004 and 2009. [TDI]…found that….While overwhelming numbers were not required to defeat an insurgency, force ratios above 10-to-1 nearly always produced a counterinsurgent victory. Conversely, lower force ratios did not preclude success, but conflicts with two or fewer counterinsurgents per insurgent greatly favored an insurgent victory.”

Remember in this case the insurgents would be Ukrainians, and counterinsurgents the Russians. More from TDI:

“When force ratios were assessed together with the nature of the motivation for the insurgency, TDI found that….when facing broadly popular insurgencies, counterinsurgents lost every time they possessed a force ratio advantage of 5-1 or less, failed half the time with odds between 6-1 and 10-1, but succeeded three-quarters of the time when outnumbering the insurgents by 10-1 or more.”

Ukraine’s pre-war population was 44 million. Let’s assume that 20% would support an insurgency, and that 2% would participate in an insurgency. That would be 176k Ukrainian insurgents. Following the 10-1 ratio would mean Russia would need to keep 1.76 million troops on the ground to win, an unsupportable number. Cutting the number of insurgents in half would mean Russia would need 880k troops to occupy Ukraine, still an unsupportable number.

This could mean that an insurgency in Ukraine could succeed as easily as it did in Afghanistan.

Time to wake up Putin! You might win before you lose in Ukraine. To help you wake up, watch the Saturday Night Live open, where the Ukrainian Chorus Dumka of New York performed “Prayer for Ukraine”:

Kinda makes you tear up.

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Saturday Soother – February 26, 2022

The Daily Escape:

Sedona, AZ dusted in snow- February 2022 photo by Valentina Tree

Late on Friday, the US, Britain and EU said they will sanction Russian President Vladimir Putin and Foreign Minister Sergey Lavrov. This is the third round of Biden’s sanctions, and blocks the Russian president from any economic activity within the American financial system. White House press secretary Jen Psaki indicated the US would also implement a travel ban for Putin.

These sanctions effectively place Putin in the same category as North Korea’s Kim Jong Un.

As with other Russian sanctions, it isn’t clear how effective the Putin asset freeze will be. According to the Pandora Papers investigation, Putin appears to control assets in Europe, but the amounts are trivial compared to estimates of his wealth. The travel ban is significant. It says that the West considers Putin to be an international pariah. Earlier, Biden also announced a second round of sanctions against Russia.

The challenge facing Biden is how to avoid either starting or losing, a World War. He’s done a decent job rallying other nations towards a common viewpoint about Putin’s War. Putin believed he could at least neutralize certain allies within both NATO and Europe, along with some politicians and the public in a few EU countries.

But thus far, Biden’s had success at undercutting Russia’s efforts. He has been able to achieve broad unity by making it clear that Russia is an unprovoked aggressor. Yet Kyiv may soon fall to the Russian invaders. Addressing his nation, Ukraine President Volodymyr Zelensky said the Russians are coming after him specifically:

“The enemy has marked me as enemy number one.”

He told EU leaders on a Thursday night zoom call that “this might be the last time you see me alive“.

We can’t ignore what’s happening, but the US won’t risk all-out war over Russia’s invasion of Ukraine. We hope to avoid these choices by imposing sanctions that might turn the Russian people against Putin, by depriving Russia of cash and other resources. The sanctions are impressively multilateral.

However, the new sanctions have some loopholes. Adam Tooze reports that the sanctions specifically exclude energy: (emphasis by Wrongo)

“Energy is the really critical issue in the sanctions saga for both sides. It is what will hurt Russia most. It is also what is most critical for Europe. And, on energy… Biden…made this aside:

‘You know, in our sanctions package, we specifically designed to allow energy payments to continue.’”

Really Joe? The sanctions say that as long as your energy-related transactions are channeled through non-sanctioned, non-US financial institutions, for instance a European bank, buying gas from Russia is peachy. So, all of the payments for Russian gas will be paid free of problems for as long as sanctions are in place.

The political pressure for an energy carve-out comes from Germany. Bloomberg reported earlier:

“The German government has pushed for an exemption for the energy sector if there is a move to block Russian banks from clearing US dollar transactions….other major western European nations hold similar views.”

It gets worse. The carve-out isn’t limited to energy, it also applies to Russia’s agricultural commodity exports. So long as those transactions run through non-US, non-sanctioned banks, the US sanctions will not apply.

This shows how dependent our European partners are on Russia for gas and agriculture. It also shows how hollow the sanctions are, and how they will not be the “punishing” sanctions Biden promised.

It’s useful to remember that Germany’s use of Russian gas has been a completely tenable and a mutually beneficial relationship for 40+ years.

Finally, Biden didn’t announce excluding Russia from the SWIFT global financial payments system because Italy, Germany, and Cyprus weren’t willing to do it. Part of this has to do with buying Russian gas. It also has to do with how dependent their economies are on exports to Russia. Although, as Biden noted, full blocking of Russian financial institutions should achieve the same, or even greater, effect as a SWIFT ban.

Except for that gas and agriculture thingy, so not the same at all.

The question is whether the EU and NATO are truly willing to bear the costs of inflicting pain on Russia in order to end the Russian invasion of Ukraine. As of today, it seems that they are not.

Time to take a break from geopolitics and whether Lindsay Graham will support Biden’s new Supreme Court nominee, Judge Ketanji Brown Jackson. It’s time for our Saturday Soother, where we turn away from the news and focus on trying to calm the f down.

Today is a typical winter day in Connecticut. It’s chilly and there’s snow on the ground, but far less than predicted.

Since Putin is acting like the Honey Badger, let’s start by upping your honey badger game by brewing a mug of Honey Badger Espresso from Intelligentsia Coffee. They’re a Chicago-based chain with locations in Chicago, Los Angeles, Austin, Boston, and NYC. Leave the intelligentsia and take the honey badger.

Now grab a seat by a window and listen to Handel’s “Ombra mai fu”, known as Handel’s Largo of Love, it’s the opening aria in the 1738 opera Xerxes. Here it is performed in 2017 by  Czechoslovakia’s Janacek Chamber Orchestra with soloist soprano Patricia Janečková:

Beautiful voice!

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Putin’s War

The Daily Escape:

Rio Grande, near Taos, NM – February 2022 photo by Augustine Morgan

“God created war so that Americans would learn geography” ― Mark Twain

Yesterday we woke up to a new world order created by Russia’s invasion of Ukraine. Details are still sketchy, but it seems that Russia attacked from the north, east and south. Cruise missiles hit targets even in western Ukraine. The NYT provided this early map of reported Russian attacks:

The shaded areas on the right are Donetsk and Luhansk, the Ukrainian provinces that Russia recognized a few days ago as independent republics. The smaller area inside is the area currently controlled by the Russian separatists.

This news and Putin’s kabuki play leading up to the invasion obscures the fact that we’re now seeing the revival of war as an instrument of statecraft. History shows that wars of conquest used to be common. In the 19th century, that’s what strong states did to their weak neighbors. Since the mid-20th century, wars of conquest are the exception not the rule. Russia has now brought wars of conquest back on the geopolitical stage.

Putin’s attack has the goal of regime change, plus the annexation of the breakaway provinces. While NATO and the US seem to have no real countermeasures, other than sanctions. That demonstrates another of Russia’s goals: exposing NATO’s impotence.

NATO’s late-stage impotence has many causes.

The collective defense provisions of Article 5 of the NATO Charter has held the alliance together. It provides that if a NATO ally is attacked, all members of the Alliance will consider it an armed attack against them and take action to assist the attacked ally.

For much of the Cold War, (including when Wrongo served in Europe) NATO had a standing army prepared to deter an attack by the Soviets and/or its Warsaw Pact allies. NATO also maintained significant air and naval forces to confront Soviet aggression. NATO’s forces were anchored by a massive US military presence in Europe, including hundreds of thousands of troops, tens of thousands of armored vehicles, thousands of combat aircraft, and hundreds of naval vessels.

All of this gave Article 5 teeth.

When the Cold War ended in 1990-91, this combat-ready military force was gradually dismantled. Now, if there were to be a conventional fight in Europe, the Russian military is much stronger. It would defeat any force NATO could assemble.

Today the ability to deter a potential adversary from considering military action against a NATO member is no longer a certainty. That means the notion of NATO providing European collective self-defense is questionable.

In the past, NATO planned on countering the Soviet Union’s weapons and manpower superiority with tactical nuclear weapons. But The Heritage Foundation says that we can’t do that because there’s an imbalance in our nuclear arsenals:

“While the US and Russia have a similar number of deployed strategic (i.e., high-yield) nuclear weapons as limited under New START, Russia has a 10:1 advantage over us in nonstrategic (i.e., low-yield) nuclear weapons—aka tactical or battlefield nukes.”

They report that Russia has about 2,000 nonstrategic nuclear weapons, while the US has about 200. Half of them are in the US and half are with NATO, so we have about 100 tactical nukes on the ground in Europe. You might say no one is ever going to use nukes in Europe, but on Wednesday Putin warned: (emphasis by Wrongo)

“Anyone who tries to interfere with us, or even more so, to create threats for our country and our people, must know that Russia’s response will be immediate and will lead you to such consequences as you have never before experienced in your history.”

Putin’s threat could mean anything from cyber-attacks to nuclear war. But Global Security Review reports that the current edition of Russian military doctrine says that Russia:

“…reserves the right to use nuclear weapons to respond to all weapons of mass destruction attacks…on Russia and its allies.”

That significantly lowers the threshold for the use of nuclear weapons. The idea is Russia might employ tactical nuclear weapons during a conventional conflict with NATO forces to prevent a defeat, to consolidate gains, or to freeze a conflict in place without further fighting. The last two could happen in Ukraine.

Given that the disparity between Russian and European tactical nuclear weapons is so large, Moscow probably thinks any potential NATO nuclear response to their threat of using nukes isn’t credible.

This means NATO today can no longer stave off a Russian threat in Europe without using strategic nuclear weapons, a major escalation. That would be a very unlikely scenario if Russia is taking small bites of Western territory, as in Ukraine:

(hat tip, Monty B.)

Since World War II, the US has reserved the right to the “first use” of nuclear weapons should the need arise. But in January, several Democrats urged Biden to promulgate a “no-first-use” policy for US nuclear weapons. Eleven Senators and 44 House members signed a letter urging Biden to accept the policy. Imagine the consequences if a policy of no-first-use was in place, given what’s happening in Ukraine. Or what might happen if the fight was with a NATO member.

We’re now in a place where the West either accepts Russia’s new European order, or we gear up to make them recalculate Putin’s strategy.

If we choose to oppose the new Russian order, the US and Europe will incur costs. It will hurt our economies, since while sanctions will hurt the Russians, we’re hoping they will not hurt us as much, or more. Russian cyber-attacks may seriously hurt our infrastructure. The West will be forced to provide large levels of military and humanitarian support to a damaged and smaller Ukraine, possibly for years.

We will see increased defense spending. Our military will once again be deployed to Europe where they will serve as a tripwire against Russian aggression like they did in the Cold War.

This will require a unified NATO to work together for many years. Is that a realistic plan, given that different US presidents, like Trump, may not support the goals of this new NATO?

We’re in a different world now. This war will almost certainly be transformative for Europe and the world. The full effects of Russia’s attack on Ukraine will play out not just for years, but for decades.

Let’s close with the Beatles “Back in the USSR”:

Lyrics:

Well the Ukraine girls really knock me out,
They leave the West behind
And Moscow girls make me sing and shout
That Georgia’s always on my mind

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Biden Must Take the Gloves Off

The Daily Escape:

Delicate Arch, Arches NP – 2022 photo by Nannette White

(The hosting service for the Wrongologist continues to have intermittent problems with the RSS feed that sends subscribers an email version of the column in the morning. Please go to the website to see earlier columns.)

The tense standoff between Ukraine and Russia took an ominous turn towards war when, as Wrongo forecasted on Feb 14, Putin recognized the independence of the two breakaway eastern Ukraine provinces:

“Wrongo has no crystal ball but thinks that Russia will formally recognize Ukraine’s disputed Eastern provinces of Donetsk and Luhansk as independent states….But Ukraine doesn’t recognize these provinces as independent….Ukraine could be lured into trying to regain control of both provinces. At that point Russia would help defend them against Ukraine, most likely assuring that they would remain independent, although still technically part of Ukraine.”

Putin also said that he was ordering “peace-keepers” into both provinces. That effectively blunts most military responses that Ukraine might attempt.

One way to look at the situation is that Putin didn’t “invade” Ukraine. Instead, using this pretext, Russia is prepared to fight on behalf of two independent Republics who asked for Putin’s help. By recognizing Donetsk and Luhansk, Putin is following the model of how Western nations handled the 1990s breakup of Yugoslavia into three separate republics, ending communist rule in the nation.

This is a watershed moment for European security. Russia has dared Ukraine and the West to attack the breakaway provinces in the face of Russia defending them. The absolutely central question is: What aid and comfort are NATO and the US going to give Ukraine?

Biden has announced what he called the “first tranche” of sanctions on Russia, targeting two Russian banks, VEB and Russia’s military bank, along with the country’s sovereign debt. That means Russia can no longer raise money from the West and will not be able to trade its debt in US or European markets.

Biden also said sanctions on Russian elites and their families members would be rolled out starting tomorrow.

Wrongo doubts that Russia will move significant numbers of its forces into the two “independent” regions unless Ukraine attempts to re-occupy them. If Ukraine does that, it’s likely that a general war between Ukraine and Russia will begin.

Americans (specifically Republican chicken hawks) should remember that eastern Ukraine is very remote in logistical terms. Even if the US wanted to help defend Ukraine’s east, the logistics of movement and supply would be absurdly difficult.

We should immediately implement our strongest sanctions. Biden shouldn’t meet with Putin, although Blinken and Lavrov should meet. Diplomacy should determine if recognition of Donetsk and Luhansk is what Putin will settle for. If so, the task is to see if Ukraine would be fine with that. If both agree, so should the West and the US.

One thing NATO could do is close the Bosphorus, the narrow straits between the Black Sea and the Mediterranean Sea. NATO member Turkey controls access to the Bosphorus under a 1936 treaty called the Montreux Convention. In wartime, Turkey is authorized to close the straits to all foreign warships. It can also refuse transit for merchant ships from countries at war.

Turkish President Recep Tayyip Erdogan recently has emphasized his support for Ukraine. Erdogan has said Turkey will do what is necessary as a NATO ally if Russia invades, without elaborating. But Turkey is also reliant on Russia for energy and tourism. It has forged close cooperation with Moscow on energy and defense, even deploying Russia’s S-400 missile air defense system.

Imagine the pressure on Putin if Russia couldn’t send warships or merchant ships through the Bosphorus so long as the Ukraine crisis is hot.

In effect, Ukraine lost its Eastern territories along with Crimea, eight years ago. If Russian forces now start patrolling the line of contact with the new “Republics”, that will probably end the shooting. People on both sides of the border could then get back to a more normal life.

It would still leave an unstable Eastern Front for NATO and an unstable Western Front for Russia. That is something diplomacy could work on solving. Russia would have to deal with a Western-facing Ukraine integrating even more deeply into the EU. NATO would remain in Eastern Europe from the Baltics to the Balkans. NATO would then have a true mission, rather than floundering around without purpose.

Putin won’t be totally happy with this. But right now, he isn’t getting his demands met, even though he has more than half of his army on the Ukrainian border.

Let’s close with a tune. Here’s 1974’s “You Ain’t Seen Nothing Yet” from Bachman Turner Overdrive, because in Ukraine, you ain’t seen nothing yet:

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Boeing Documentary Shows Corporate Malfeasance

The Daily Escape:

Mount Liberty, White Mountains, NH – February 2022 photo by AG Evans Photography

Over the weekend, Wrongo and Ms. Right watched the Netflix Boeing documentary: “Downfall: The Case Against Boeing”. You can watch the trailer here. It exposes how Boeing’s management, Wall Street’s influence and the cratering of Boeing’s culture of quality control, resulted in two plane crashes of the 737 MAX, just months after being placed in service.

That two new planes would go down within five months of each other was beyond a chance event in 21st Century airplane manufacturing. Boeing initially blamed the pilots based in Indonesia and Ethiopia for being poorly trained. But it turns out that Boeing knew all along that the 737 MAX had a critical software problem that caused the plane to go into an irreversible nosedive.

The film makes it clear that pilots had just 10 seconds to reverse those faulty software commands before it was too late. It shows that Boeing told the FAA and the airlines that purchased the MAX that no new pilot training was required to fly the new plane, even though pilots knew nothing about the software or the glitch.

Boeing was lying about training to keep the costs of the new aircraft competitive with Airbus. It was a lie that Boeing took months to correct. It also took months for Boeing to admit that they were flying an unsafe plane.

Why did this (and even worse things) occur while Boeing was attempting to bamboozle the Feds, the airlines, crash victims and their families? Money. The film features Michael Stumo, father of Ethiopian Airlines crash victim 24-year-old Samya Stumo. While not mentioned in the film, Ralph Nader is Samya’s uncle. At the time, he published an open letter to Dennis A. Muilenburg, then-CEO of Boeing. Here’s a part of his letter: (brackets by Wrongo)

“Your narrow-body passenger aircraft – namely, the long series of 737’s that began in the nineteen sixties was past its prime. How long could Boeing avoid making the investment needed to produce a “clean-sheet” [new design] aircraft and, instead, in the words of Bloomberg Businessweek “push an aging design beyond its limits?” Answer: As long as Boeing could get away with it and keep necessary pilot training and other costs low…as a sales incentive.”

Nader draws a connection between Boeing’s decision to “push an aging design” and their financial engineering:

“Did you use the $30 billion surplus from 2009 to 2017 to reinvest in R&D, in new narrow-body passenger aircraft? Or did you, instead, essentially burn this surplus with self-serving stock buybacks of $30 billion in that period?”

Nader notes that Boeing was one of the companies that MarketWatch labelled as “Five companies that spent lavishly on stock buybacks while pension funding lagged.” More:

“Incredibly, your buybacks of $9.24 billion in 2017 comprised 109% of annual earnings….in 2018, buybacks of $9 billion constituted 86% of annual earnings….in December 2018, you arranged for your rubberstamp Board of Directors to approve $20 billion more in buybacks.”

Nader shows that Boeing had the capital to invest in developing a new plane. They also had problems with the launch of the 787:

“In the summer of 2011, the 787 Dreamliner wasn’t yet done after billions invested and years of delays. More than 800 airplanes later…each 787 costs less to build than sell, but it’s still running a $23 billion production cost deficit.

The 737 MAX was the answer to Boeing’s prayer. It allowed them to continue their share buybacks while paying for the 787 cost overruns. Abandoning the 737 for a completely new plane would’ve meant walking away from a financial golden goose.

Rep. Peter DeFazio (D-OR) who chaired the House Committee on transportation and infrastructure that investigated Boeing, said:

“My committee’s investigation revealed numerous opportunities for Boeing to correct course during the development of the 737 Max but each time the company failed to do so, instead choosing to take a gamble with the safety of the flying public in hopes it wouldn’t catch up with them in the end…”

Wrongo remains baffled by how Boeing management was given a pass after this gross negligence. They paid the US government $2.5 billion to settle criminal charges that the company defrauded the FAA when it first won approval for the 737 MAX. The deal deferred any criminal charges by the DOJ to January 2024 and will dismiss the case then if there are no more misdeeds by the company.

Perhaps this is another example of a corporate mistake that’s simply too big to be punishable in the US. That means US corporations and their CEOs are immune to accountability. This should have put people into prison, but the CEO got off, and ultimately got a $62.2 million severance for his misdeeds, despite a lot of people dying on his watch.

To curry favor on Wall Street, Boeing reduced salaries. They cut costs deeply in quality assurance and safety programs to give the shareholders more money.

See the movie. Be outraged. Elect more people like Peter DeFazio.

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