“Ireland is ours!” said Boris Johnson, as he announced that the UK was invading Ireland. “We have a common culture and a common language. We controlled Ireland for centuries. Anyway, we can’t let the EU have a bridgehead in an island that is so close to us. We have no choice but to engage in a special military venture!”
Think this sounds ridiculous? No more than Putin’s invasion of Ukraine.
Putin takes the position that Ukraine has no right to exist as a separate nation due to its ethnic and cultural ties to Russia. The vast majority of Ukrainians, of course, beg to differ.
As a result, the Russian military is being ordered to kill their relatives. It sounds a bit like a domestic dispute involving a guy who would rather kill his girlfriend than let anyone else have her. How inspiring a cause is that? Based on the state of affairs on the ground, not very.
NOTE TO MY READERS: I will be on vacation for the next week. Postings will be sporadic at best until 3/15.
There is every reason to believe that Vladimir Putin is in Ukraine to win it. The Ukrainians and their allies can force the Russians to pay a heavy price, but in the end, they cannot prevail in a purely military sense. That leaves the question–can anyone at home change Putin’s mind as to the costs and benefits of the invasion?
Here are the possibilities:
Realistically, there isn’t much hope here, unless Putin is less committed to the invasion than he appears to be at this time. The best chances are #2 and #3; the most realistic alternative is a grubby compromise that trades NATO and EU membership for sovereignty on other issues.
Kaiser Wilhelm II gave one to the Austro-Hungarian government in 1914; you know how that one turned out. Donald Trump gave one to MBS in Yemen; things didn’t go much better there. It is a really bad idea to give your unconditional support to an unreliable actor, because it turns you into a hostage of fortune.
That’s exactly what Xi has done with Putin in Ukraine. He’s going to be viewed as an accomplice to a crime in the countries that, in the long run, really matter to the Chinese. That’s the opposite of soft power.
Real estate prices are soaring; rent, predictably, has followed. It is becoming an increasingly large component of our current inflationary episode; it also creates serious social problems. Can the Fed do anything about it?
This one is complicated. On the supply side, the problems are the rising cost of materials, the lack of available labor, and density constraints imposed by local governments. The Fed can’t do anything about these issues; in fact, by making financing more difficult for multi-family projects, it might actually make things worse by raising rates. On the demand side, raising interest rates would increase the cost of buying a unit, and thus reduce sales and, ultimately, prices; on the other hand, prices have already gone up dramatically without crushing demand, due largely to demographics and the impacts of the pandemic, so who is to say that increasing the cost of financing would make much of a difference? In addition, a substantial number of sales in the recent past have been for cash. The Fed has no control over those.
On balance, the case for reducing rents by raising rates is unpersuasive.
Gas prices are already soaring, and are about to get worse, as a result of the invasion of Ukraine. This is a classic supply side shock that will inevitably filter through the entire economy in the form of higher prices. What should the Fed do?
The Fed can’t do anything to address supply problems created by geopolitical crises. Crushing demand won’t solve the problem. The American public will respond to higher gas prices by driving and buying less regardless of what the Fed does with interest rates. The best thing the Fed can do is . . . nothing.
The rule is that inflation results when demand overtakes supply. No one disputes that the current inflationary episode is following the rule–at least as to goods. The debate is whether demand in the aggregate (i.e., for both goods and services) is too high, and should be reduced by interest rate hikes, or whether demand for goods has been increased artificially by the pandemic at the expense of services, in which case interest rate hikes will do nothing but punish the markets. Paul Krugman appropriately calls adherents of the first opinion “Overheaters” and the second opinion “Skewers.” Who is correct here?
Based on GDP data and inflation rates in comparable countries, 5 percent of our 7 percent inflation rate is caused by “skewing,” and the remainder by “overheating.” This means only a small portion of the inflation rate can be addressed through interest rate increases. In addition, much of the heightened demand for goods is being financed by pandemic savings, not by borrowing; increasing interest rates won’t solve that problem, either.
The bottom line is that the Fed can do a lot of collateral damage to the economy by raising rates sharply, but it cannot address the root cause of most of the inflation–the pandemic. Increasing rates to their pre-pandemic level is appropriate, as the economy no longer needs extra fuel to burn, but it would be a mistake to do anything more than that.
Supporters of Ron DeSantis were waving “Make America Florida” signs and banners during the CPAC convention. What would that mean, in practice?
Well, over the last year or so, DeSantis and the Florida Legislature have done the following:
Those are just the ones that come to mind quickly. DeSantis and his followers refer to this as the “Freedom Agenda.” What they mean by that is freedom for reactionaries and the virus, and cudgels for everyone else.
When Richard II’s government (the king himself was a minor) implemented it, the result was the Peasants’ Revolt. When Margaret Thatcher pushed one through, it led to riots and serious divisions in her government. Yes, the poll tax has a history of being a political disaster. And yet, Rick Scott’s proposed GOP agenda includes one. What is he thinking?
First of all, it proves that he is ignorant of history–not that we should be surprised. Second, he thinks we’re living in 2010, and the Tea Party is all the rage on the right, which it isn’t. Finally, and most importantly, in addition to passionately hating government at all levels, Scott is completely committed to the makers/takers distinction that Mitt Romney made famous in 2012. Scott believes that businessmen create all the wealth in this country, and that those of us who no longer work for a living (or work for entities which don’t make a profit) should just die and stop mooching off the economically productive people. That’s the key to his political identity.
Two points are relevant here. First of all, Donald Trump wouldn’t be eligible to vote under the Scott proposal, as he typically does not pay income taxes–he thinks that’s for losers. Second, there is no corresponding proposal for a minimum tax on large corporations. It would seem that businesses don’t need any “skin in the game” to be major political players in the Scott universe.
After Putin is finished blowing up a large portion of Ukraine and impoverishing its remaining residents, can you guess who’s going to be asked to pay to put the pieces back together? You! He will weaponize our humanitarian instincts against us. It’s going to happen.
Herbert Hoover fed millions of starving Russian peasants after the Russian Civil War, thereby subsidizing the Bolshevik regime. Assad tried it in Syria. The Taliban are putting on a full court press for American aid today. Get ready for it in Ukraine.
Assume the following conditions exist 30 days from now:
Who won? Not the Ukrainians, for obvious reasons. Not Russia, whose military has seriously underperformed and is now tied up in Ukraine, whose economy has collapsed, which faces a united and angry NATO, and which no longer even pretends to be a democratic state. Not Biden, even though he handled the crisis masterfully; the GOP is denouncing him as the man who lost Ukraine. Not China, which has been deterred from attacking Taiwan. Not the “New Right,” which has been discredited by its admiration for Putin.
It’s hard to find a winner here, but the best answer is . . . American hawks, who thought their chance to fight the USSR had evaporated when it collapsed. They’re back, baby! The defense budget is about to soar! Let the good times roll!
So now Putin invaded Ukraine.
Some people aren’t sure that he’s sane.
I hope that we’ll see
That Ukraine will stay free
And the Russians will lose more than gain.
George W. Bush famously promised us a humble foreign policy in his Inaugural Address. What we actually got, after 9/11, was a foreign policy based on the premise that liberal democracies could not exist safely until autocracy had been eliminated everywhere. We know how that turned out.
The Bolsheviks similarly believed, in the early days of their revolution, that they could not survive capitalist hostility without revolutions elsewhere in Europe. While the Communist regime ultimately imploded, the system did not fail simply because capitalism thrived in Europe and the United States. On that point, Stalin was more correct than his Old Bolshevik opponents.
Putin, by contrast, appears to think that his illiberal kleptocracy cannot survive on its own, and that authoritarian regimes in countries close to Russia must be created or propped up, regardless of the cost or the ineptitude of their leaders. This is Bush/Bolshevik thought applied to reactionary–not liberal or revolutionary–ideology. Russia can’t afford it, any more than we could afford Bush.
It’s time to check in with some of our favorite New Right luminaries! Given that they have openly admired Putin for his anti-gay posture (whether the cuddly ex-KGB agent takes his bigotry seriously or not is another question), the Ukraine invasion has been a bit of an embarrassment. How are they handling it?
The consensus seems to be to convince us that they are foreign policy realists, not pro-Putin bootlickers. They don’t support the invasion, but they fear the consequences of doing much about it. Furthermore, they are extremely concerned that they will be treated as traitors and pariahs if they don’t rock along with the wave of popular sentiment against the Russians. As they see it, the left is always out to shut them up; the invasion will just give them a plausible excuse.
The second point, as usual, is pure projection; like Trump, the New Right is always ready to falsely accuse the left of the kind of censorship that it openly longs to impose on those who don’t support what they would call traditional religious values. On the first point, I don’t buy it; most of these people supported the Iraq War at the time (some say they have repented of it). They aren’t pacifists or realists; they just want to fight their battles against liberals and gays at home and Muslims and the Chinese in the rest of the world, not against someone they see as a fellow traveler.
Germany has decided to suck it up and increase its defense budget dramatically, both now and in the future. In light of the, shall we say, difficult history involving Russia and Germany, a well-armed and hostile German state is the worst possible scenario for Putin short of nuclear war or a coup at home. It means he will be the loser even if he gets everything he wants in Ukraine.
Ukraine has recruited an international volunteer IT army to fight Russian disinformation. Have the Chinese noticed? If they decide to attack Taiwan, it isn’t just the Taiwanese and the Americans with whom they will have to contend. This is a completely new phenomenon, and it shifts the balance of power against illiberal military aggressors.
India, Saudi Arabia, and the UAE declined to openly condemn the invasion. The latter two are sending the message to us that they demand unconditional support for their military adventures, and that keeping the price of oil sky-high is more important than American friendship. The first is telling us that it still values its historic relationship with the Russians. Whether that translates into neutrality in a dispute with China remains to be seen.