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Archive for December, 2015

The Front Runner

 

Republican logoThe Front-Runner believes in his own “greatness,” but like any believer he’s plagued by self-doubt and insecurity. His belief in his own superiority borders on a delusion of omnipotence that he will happily display at any moment, for anyone. The reason for this is simple: the more he makes a show of his own greatness, the happier he feels because the display both reinforces his belief in his own more-than-mere-mortal powers and pushes his self-doubt into the background, even if only temporarily.

The Front-Runner is, in his own mind, infallible. This explains why he cannot bear even the slightest criticism or contradiction. To contradict him is to commit the heinous crime of lese majeste. To even voice a doubt about the truth or wisdom of anything he has ever said or done is a betrayal of the lowest sort. No further respect is due to any such doubter.

The Front-Runner will blurt out things that are not true or only half-true, distorted, or even completely invented. But admitting a flaw or mistake is inconceivable for the Front-Runner. For his followers and supporters, invented or distorted facts don’t matter at all. Facts are irrelevant. This is because the Front-Runner long ago learned and bent to his will a fundamental principle of his political party that no other candidate has either grasped or learned to use: in their party, all thought proceeds from an emotional basis first, and then works its way out to factual matters. Facts are selected based on whether or not they confirm the original emotion. Contrary facts are rejected or ignored. This, in its own small way, is a return the reasoning of the medieval scholastics, whose scientific principles were based not on observed phenomena, but rather on Holy Scripture, the sayings of the Church Fathers (e.g., St. Paul), and certain ancient philosophers (e.g., Aristotle) whose works could be interpreted as prefiguring the coming of the Christian Era.

Either you are with the Front-Runner or against him. There is no middle ground. Anyone against him is by definition an enemy, and there is not so much as one atom of anything good in an enemy’s entire being. He will attribute terrible, demeaning personal characteristics to an enemy, and try to publicly embarrass them. For example, with regard to women in particular, menstruation and bathroom breaks are favorite subjects of his ingrained misogyny. If possible, he will try to blame the enemy for everything that goes wrong (e.g., Obama).

When it comes to interviews, he must do all the talking because an interview risks putting him on the defensive. He must be “treated fairly,” and he alone shall be the judge of what is or is not fair. He cannot expose himself to any circumstance that would in even the slightest degree mar the image he has of himself. Therefore, the risk of being “bested” by some news media interviewer (think Palin) must be guarded against. And the best way to do that is to make sure that only he talks, and that no one else gets a word in edge-wise. If he thinks he has been “treated unfairly,” he will engage in ad hominem attacks on the questioner. An interviewer can ask him neither a follow-up question nor request a clarification. If such a question is asked, the Front-Runner will launch into a lengthy dissertation. If at the beginning of the interview the Front-Runner’s speech had any conversational qualities at all, rest assured that by the halfway point he will have abandoned those and assumed the role of a lecturer, with more know-it-all condescension than one might expect from a tenured university professor. When he’s done spouting, regardless of whether he addressed the question or not, the interview is over.

Though the Front-Runner continually burnishes his own reputation as a tough negotiator and an all-around tough guy, whether with the Chinese or other counterparties, in reality he is utterly incapable of facing any real opposition on any issue, small or large. He cannot risk appearing in an inferior light, or risk having another person “win,” or even dominate, any contest or debate.

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Republican commentator David Frum writes in the current issue of Atlantic magazine that the rise of Trump reflects a revolt within the Republican Party. He makes a good point, but the revolt is not limited to the GOP. The revolt among the Dems hasn’t received as much media attention though, chiefly because there’s no one like Trump on that side.

Revolt is an interesting topic these days. In response to a recent comment on regulatory capture, I wrote that capture itself is just an indicator of a larger problem that permeates our entire politics. A substantial portion of enforcement of the law falls into the laps of administrative agencies, whether state or federal.

But recent disasters with administrative agencies like the federal Mining and Mineral Service (BP Deepwater Horizon) merely reflect our corporatist state, in which regulatory agencies, and the legal regimes they represent, exist to serve and protect regulated entities. A facade of protecting the public interest must of course be carefully maintained, but this gets difficult when during economic hard times.

Corporatism is sometimes tough to discern because “hard” corruption —  giving an Abscam-like payoff in exchange for some official act or vote thrown to the payor, is unlawful. But regulatory capture is a feature of the “soft” corruption of American government at the state and local level. In the soft variety, individual regulators are beholden to the politicians who appointed them to the job (and the nice salary that comes with that job, plus reasonable hours and maybe even some perks). Their careers after their term at the administrative agency is up depend on the good will of their own patrons, the politicians, and their records in deciding cases in favor of the utility. One need only look at how many regulators ascend to jobs with the utilities they used to regulate. The politicians, in turn, are beholden to the wealthy individuals and large corporations who spend as much money as they can attempting to influence the policy choices made by the regulator, the legislature, or both.

The returns on this investment (i.e., campaign contributions) are beyond the wildest dreams of any business school professor. For example, banks and credit card companies spent more than $40 million lobbying for the Bankruptcy Abuse Prevention and Consumer Protection Act, which made it harder for Americans to discharge their debts. Meanwhile, capital gains taxes are as low as they’ve been since the Great Depression. A 2009 study showed that for every dollar a company spent lobbying for targeted tax benefits, the expected return was between $6 and $20.

In his Atlantic article on the current Republican revolt, Frum says:

A majority of Republicans worry that corporations and the wealthy exert too much power. Their party leaders work to ensure that these same groups can exert even more. Mainstream Republicans were quite at ease with tax increases on households earning more than $250,000 in the aftermath of the Great Recession and the subsequent stimulus. Their congressional representatives had the opposite priorities. In 2008, many Republican primary voters had agreed with former Arkansas Governor Mike Huckabee, who wanted “their next president to remind them of the guy they work with, not the guy who laid them off.” But those Republicans did not count for much once the primaries ended, and normal politics resumed between the multicultural Democrats and a plutocratic GOP.

The Great Recession ended in the summer of 2009. Since then, the U.S. economy has been growing, but most incomes have not grown comparably. In 2014, real median household income remained almost $4,000 below the pre-recession level, and well below the level in 1999. The country has recovered from the worst economic disaster since the Great Depression. Most of its people have not. Many Republicans haven’t shared in the recovery and continued upward flight of their more affluent fellow partisans.

A few things to note here. First, Frum’s assurance (along with that of the Federal Reserve and any number of economists) that the Great Recession ended in 2009 indicates the gulf which separates him from ordinary Americans. As far as they’re concerned, the Great Recession is still in full swing. If a person has a job, his or her primary concern is to hold on to it. Thoughts of moving to something better, common in the 80’s or the 2000’s up to ’07, are no longer at the forefront.

In certain ways the dislocation that the middle class (however one might define them) has been experiencing since the Great Recession is very much like the dislocation following the end of the Great War, another cataclysm that demonstrated the abject failures of the world’s so-called elites. Wall Street’s big banks led the U.S. economy, and indeed the world’s economy, off the cliff, and government regulators were either asleep or, like Alan Greenspan, cheering them on as  heralds of the Great Moderation. Not only did none of them accept any responsibility for these events, they were rewarded. Goldman Sachs, short on cash, calls up alumnus Hank Paulson at Treasury on Friday evening and by Sunday morning they’re a bank holding company with access to the Federal Reserve cash window.  The executives at run-amok insurance giant AIG, which issued untold billions in credit default swaps that propped up Wall Street’s securities with bogus AAA ratings (from equally incompetent executives at S&P’s and Moody’s) didn’t get fired; they got bonuses. Bank of America misrepresented the huge and growing losses of Merrill Lynch to its shareholders so that it could close on its $50 Billion purchase of the latter. Did anyone go to jail?

No, except for Bernie Madoff, whose record-setting Ponzi scheme collapsed along with the economy. Bernie was bad, but he helped Wall Street by serving as a scapegoat.

The run-up to the 2008 economic collapse bears a remarkable resemblance to the worldwide and unprecedented economic expansion in the roughly 40 years between the end of the Franco-Prussian War and the assassination Archduke Franz Ferdinand in Sarajevo in 1914. The contemporaries of this Great Age of Imperialism conceived of it in much the same way as Greenspan conceived of his Great Moderation: an almost universal belief, not only in the U.S. but in Europe and Asia as well, that the world had entered into an unprecedented era of indefinite peace and prosperity. History was over, according to Fukuyama.

In the 1918 collapse of Europe, armies of each side fought bravely and, sometimes, atrociously, against each other.

Before the 2008 collapse, the apparent abundance caused by rapid expansion of credit led the mass of workers to believe that they were the underlying cause of prosperity.

In 1918, it dawned on the players that the the massive flow of blood during the war had ruined and beggared Germany, and, to a somewhat lesser extent, England and France.

In 2008, it dawned on U.S. and European elites that the massive flow of cheap and almost limitless credit had ruined and bankrupted whole classes of their own people, and even whole countries (Greece, Spain, Ireland, Iceland, and so on).

In 1918, the calamity of the war was directly caused by the political leaders of the countries, or, if you were on the right in Germany’s Freikorps or other proto-Nazi ) factions, it was the work of the “enemy within,” the Dolchstoss, the “stab in the back.”

And now, in 2015, we have Donald Trump with his new Dolchstoss:

We have losers. We have losers. We have people that don’t have it. We have people that are morally corrupt. We have people that are selling this country down the drain.

The Republicans shouldn’t be surprised that they’ve become the 21st Century’s answer to the Freikorps.

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Oil at $34.54

Nymex Crude Futures 12/21/2015 about 12:30 pm

Nymex Crude Futures 12/21/2015 about 12:30 pm

The chart says it all, but NYMEX WTI Crude hit $34.54 around noon today.

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Emmanuel, Rahm

When a dashcam of po-lice brutality
Displayed clear CPD typicality
The cops said, with aplomb,
And with backup from Rahm,
The cop acted with pro-portionality

Rahm said “Bad, but not institutional.”
Yet his “Sorry!” was circumlocutional:
“It is quite a pity,
“But don’t blame the City;
“Sixteen shots are quite constitutional.”

But the dashcam proved too big a bombshell.
And the masses thronged Casa Emanu-el,
Shouting “Rahm, read our lip!
Ist kaput* Mayorship!”
“So pack up and leave office pellmell!”

But Rahm had another design,
For blame to fast reassign.
“If you crawl back in your beds,
“I’ll call in the Feds,
“But don’t pressure me to resign!”

[Kaput, Ger. for utterly finished, destroyed.]

If you care to add a stanza, please feel free to comment.

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CPD Violence

Chicago Police demonstrating standard procedure for requesting citizens to return home.

As police brutality scandals continue to roil Rahm’s administration, and as the Justice Department steps in, a modest proposal for a solution comes to mind.

As matters now stand, all of the incentives undermine the rule of law and the administration of justice.

Here’s one way that we might realign incentives. When police are determined by a court to have violated a citizen’s civil rights and the City of Chicago must respond in damages, those damages should be paid with moneys withdrawn from the police pension fund. This would  very likely encourage the vast majority of officers who act within the law to rid the CPD of those officers who break it.

After all, the underlying problem with the CPD is that they have absolutely no skin in this game. When they break the law, Chicago taxpayers foot the bill, and the Rahmulans spare no effort to cover it up.

 

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Former Massey Energy Co. CEO Don Blankenship

Former Massey Energy Co. CEO Don Blankenship

Huffington Post has a blog entry on Massey Coal that’s worth reading:

Justice — of sorts — was finally delivered as Donald Blankenship, the former Chairman and CEO of Massey Energy, was convicted (with a maximum fine of $250,000 and up to one year in prison) of conspiring to willfully violate mine safety standards at the Upper Branch Mine in West Virginia, where 29 workers died in April 2010. Here’s a blog I wrote about it a few months after the disaster.

Huffington makes the point that the Upper Big Branch mine explosion is much like the 2008 financial crisis because they both have the same root cause: elected officials who should have been creating a regulatory system that protects workers (or investors, or the public) instead created a system whose first priority is to protect the corporations it was meant to watch over.

Read the full Huff Post entry here.

It’s also the same as the BP Deepwater Horizon, whose regulator was the Minerals Management System, or MMS. The MMS was a bureau within the U.S. Department of the Interior (DOI):

MMS’s biggest problem was agency capture. In 2008, MMS was caught in a scandal in which the Department of Interior’s inspector general found that regulators had “inappropriate relationships with industry that could compromise their objectivity.” Those inappropriate relationships allegedly included sharing alcohol at industry functions, using drugs, and sexual relationships between regulators and industry professionals. [17] The inspector general also characterized MMS as dependent on industry’s greater expertise with the technology of deepwater and ultra-deepwater drilling, and thus reliant on industry’s judgment of appropriate safeguards to incorporate in regulations.[18] Essentially, the oil industry’s deep pockets gave it strong leverage over MMS decisions.

Yep. MMS was literally in bed with the company it was supposed to regulate. And as they said on the bridge of the Titanic, that’s just the tip of the iceberg.

From: Changing Direction: How Regulatory Agencies Have Responded to the Deepwater Horizon Oil Spill (Part I of II)

 

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BP Deepwater Horizon, 2010

BP Deepwater Horizon, 2010

AP reports that federal prosecutors have dropped manslaughter charges arising from the 2010 Gulf of Mexico rig explosion that killed 11 workers and unleashed the nation’s worst offshore oil spill. The federal government also pressed criminal charges against four BP employees.

The Justice Department’s decision to drop manslaughter charges against two BP rig supervisors makes it increasingly likely that nobody will spend a day behind bars for any crime associated with the deadly disaster.

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Mine Explosion-Trial

Former Massey Energy CEO Don Blankenship departs the Robert C. Byrd United States Courthouse following the second day of jury deliberation in Charleston, W.Va., Wednesday, Nov. 18, 2015. Blankenship is charged with conspiring to break safety laws at the mine and defraud mine regulators, and with lying to financial regulators and investors about company safety in the years before an explosion killed 29 men at the Upper Big Branch mine in southern West Virginia in 2010. (AP Photo/Walter Scriptunas II)

Earlier this morning a federal court jury in West Virginia convicted Don Blankenship, the former CEO of Massey Coal, of conspiracy in connection with an April 2010 coal mine explosion that killed 29 coal miners more than a thousand feet underground. The explosion in Massey’s Upper Big Branch Mine was the worst mine explosion in the U.S. since 1970, when 38 miners were killed in an explosion in a coal mine in Kentucky.

Months after the explosion,  Blankenship stated to the media that

What we’re trying to do is actually avoid the focus on culpability and figure out what happened…. The focus ought to be on the physics, the chemistry, the math, the science … and figure out what we could do to prevent it from happening again, rather than try and point fingers.

(Massey CEO: Explosion probe needs to be completed, Associated Press State & Local Wire, November 20, 2010.)

Blankenship took the position that changes in the mine’s ventilation plan ordered by the federal Mine Health and Safety Administration contributed to the blast, and said a sudden release of natural gas flooded the mine and sparked the explosion. (Id.)

In other words, according to Blankenship, one principle that we must exclude at the outset is that of accountability.

The 2006 Mine Improvement and New Emergency Response Act boosted the number of mine inspectors, enhanced fines and imposed stricter safety regulations for the nation’s coal mines. However, the mining companies adopted a strategy of contesting every citation issued by the inspectors, and Massey Coal was the leader in clogging the Federal Mine Safety and Health Review Commission docket. In April 2010, the FMSHRC had 46,822 contested violation proceedings on its docket. Of that number, Massey was the leading challenger of citations, contesting 3,741 violation citations, which accounted for more than 11% of the dollar value of fines involved. Contests brought by Massey and other coal companies caused a backlog of cases that overloaded the FMSHRC.

An independent investigation completed in 2011 stated:

The story of Upper Big Branch is a cautionary tale of hubris. A company that was a towering presence in the Appalachian coalfields operated its mines in a profoundly reckless manner, and 29 coal miners paid with their lives for the corporate risk-taking. The April 5, 2010, explosion was not something that happened out of the blue, an event that could not have been anticipated or prevented. It was, to the contrary, a completely predictable result for a company that ignored basic safety standards and put too much faith in its own mythology.

Upper Big Branch, Report to the Governor, May 2011, pg. 108 

Perhaps instead of litigating every citation, Massey should have paid more attention to “the physics, the chemistry, the math, the science … [to] figure out what [Massey] could do to prevent [explosions] from happening….” The Wall Street Journal will no doubt seek to portray Blankenship as an object of pity, a martyr for the cause of fighting over-regulation. They might even insist that he not be crucified on a Cross of Carbon.

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"Hey, c'mon, 13 months is no time at all in Chicago government!"

“Hey, c’mon, 13 months is no time at all in Chicago government!”

You can read all the particulars of the Laquan McDonald shooting on other sites, and see the video as well, so I won’t cover all the issues here. I will only predict that the Rahm Administration does not survive this incident.  The rot runs too deep.

Now let me get this straight. The City of Chicago agrees to a $5,000,000 settlement with McDonald’s family, and Rahm never watched the video? This is not a slip-and-fall outside City Hall. The only politician who’s that incurious is George W. Bush.

Rahm explaining why he didn’t watch it could appear on the next episode of “That’s Incredible!”, which airs right after the Trump Unreality Show.

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Putin - exasperated

Yes Vlad, oil prices are all the way down there.

About this time last year, the Sparkspread pointed out that Vladimir Putin had overlooked Energy Rule Numero Uno when he re-annexed Crimea to Russia sixty years after Khruschev gave it back to Ukraine. That rule is that energy is all about infrastructure. So, before you invade a country with the ultimate goal of ruling it (and therefore, of necessity, administering it in one fashion or another), you should make sure you understand the target territory’s energy infrastructure.

This is something Putin notably forgot to do. Crimea has four power plants that aggregate to a rather puny 327MW in nameplate capacity, but demand in Crimea ranges from 850MW to 1250MW in winter, depending on the severity of the season.

The math is easy. More than 80% of Crimea’s commodity electricity supply is under the control of Kiev, and Kiev, being the capital of Ukraine, takes a rather dim view of Volodya’s revanchism.

The maps are pretty easy too. The little Isthmus of Perekop, which connects Crimea to Ukraine, is a chokepoint with two main transmission lines that supply the Crimean peninsula.

Crimea-electricity--638x539

Electric transmission lines into Crimea

Wait… Did we say that Kiev controls the electricity supply? Not so fast. Over the past week or so, saboteurs have blown up power lines in southern Ukraine, which have plunged Russian-annexed Crimea into an energy crisis. About 2 million Crimeans are now relying on emergency generators. This proves the point the Sparkspread made last November: Crimea depends almost entirely on Ukraine for energy.

And that’s not Putin’s only headache. Under Russian law, using drafted Russian soldiers outside the borders of Russia requires the soldiers’ consent. (Of course, “Russian law,” along with “moderate rebel” and “limited nuclear war,” enters the language as one of the 21st Century’s new oxymorons.) The fighting in Ukraine produced about 2000 dead and 3200 wounded Russian soldiers. Hmmm… How to explain that? Injured in training? That’s a tough sell. That many dead and disabled soldiers in a war of choice presents a fundamental question of political sustainability of the conflict at home, even if home is a totalitarian state. Vlad might give a call to Dubbaya if he has any doubts.

Oil prices stayed low. U.S. and European sanctions started to affect the Russian economy. Just as von Schrotter described Prussia as an army with a country, Russia can be imagined as an army with oil fields and natural gas reserves. But under sanctions, drilling for new reserves and maintaining the production equipment on existing fields became far more difficult. Putin’s oil oligarchs and their apparatchiks have had their hands full trying to maintain Russian oil production in both quantity and quality.

Vladimir had to weigh the costs and benefits of his Crimean campaign. Better to cut his losses on Crimea, leaving matters to the resident separatists, and focus on a new adventure.

Like Syria, maybe.

This past February, Putin and Peroshenko, Ukraine’s president, inked the Minsk II accord, which at least implemented a cease-fire, more or less. Peroshenko had to recognize his country’s loss of certain territory in Ukraine to pro-Russian separatists, and the deal allowed Putin to pull the Russian army out without too much loss of face. Putin’s proxy war through Russian-leaning separatists continued in full swing, of course, but since the Russian pull-out the separatists’ battles have not yielded any significant territorial gains beyond what was already obtained through Minsk II.

Kiev is not in control of rebuilding the transmission lines in Ukraine. Ethnic Tatars, whose parents and grandparents were forcibly deported by Stalin at the end of WWII, and Ukrainian nationalists have blocked repair teams. So far, authorities in Kiev have not tried to force the issue.

Putin is now accusing Ukraine of “torturing” Crimeans with the power cuts. Russia has responded by cutting coal deliveries to Ukraine. Coal sales are one thing, but he hasn’t shut off natural gas yet. Russia needs the natural gas revenues as much as it ever did, but escalation is always possible. But if Putin presses too hard on Ukraine, he’ll just unite Ukrainians against him politically.

As the winter sets in, this should provide some great political theater.

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