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Archive for June, 2016

 

Erdogan

Recep Tayyip Erdogan, President of Turkey

A few months ago The Sparkspread wrote about Erdogan’s double game, that is, using ISIS as proxy fighters against the Kurds whose PKK organization inside Turkey is virtually at war with the regime.

The Syrian civil war has been a no-win situation for Turkey since it first broke out in 2011. Turkish Syrian policy has been more or less aligned with the U.S. insofar as Erdogan wants to get rid of Bashar al-Assad. But Erdogan and Obama both failed to reckon with how strongly Iran and Russia would backstop Assad. For the Russians, Syria and Assad are essential: without the Russian naval base in Tartus, on the Syrian coast, Russia cannot make a legitimate claim of being an Atlantic power. For Iran, Syria is the other end of the Shia Crescent from Tehran to the Mediterranean.

Assad plays the same game. Since the start of the civil war, Assad has allowed Syrian Kurds to control the Rojava, a territory in Syria that stretches east and west along the border with Turkey.

Take that, Erdogan.

The Syrian Kurds have been fighting ISIS with some degree of success. In the fall of 2014 they fought off an ISIS attempt to take over the Rojava town of Kobani. Kurds in Turkey wanted to join in the fight against ISIS, but Erdogan initially wouldn’t let them go and fight. Erdogan undoubtedly saw his advantage in letting ISIS win in Kobani and maybe roll up the other Kurdish-controlled towns in Rojava. Of course, Erdogan had to play his hand carefully because too much pro-ISIS/anti-Kurdish sentiment would cause friction with the Obama Administration.

For Obama, the Syrian Kurds were fighting the ISIS jihadis, so that was good. After a few months, complete with Kurdish riots in Turkey and pressure from Obama, Erdogan finally allowed the Turkish Kurds to join the Syrian Kurds in their fight against ISIS. That, plus American arms, plus American air strikes against ISIS positions finally kicked ISIS completely out of Kobani.

Even for Assad, he needs to fight ISIS, but not so hard that he wins and then finds that the U.S. and Turkey don’t really need him any more. He has to portray himself as part of a solution to a problem (ISIS), but he has to keep that problem going.

Though the U.S. knows that Erdogan’s attitude to ISIS is one of appeasement, Obama can’t play his hand too hard either. Remember those air strikes on the ISIS Kobani positions? The American fighters took off from Incirlik air base in Turkey.

This is one complicated chessboard.

The attack on Ataturk Airport shows the danger of any kind of appeasement of ISIS. Erdogan and his regime, though putatively Islamist, isn’t half as religious as it needs to be in order to meet the so-called Caliphate’s 7th Century standards of piety. In their view, Turkey isn’t part of the House of Islam. Is ISIS going to fight directly with Turkey? How many ISIS “sleeper” cells are there in Turkey, given the porosity of its borders with those parts of Syria and Iraq that comprise the so-called Islamic State? The Ataturk Airport bombing may well be just the beginning of a wave of ISIS-terrorist actions aimed at destabilizing Erdogan.

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Richard II, King of England

Richard II, King of England

Ah yes, back to those elites. They cannot stop calling the Brexit vote stupid. The contempt of the elites, both U.S. and English, for the voters of England knows no bounds. Like Andrew Sullivan on this side of The Pond, they think that England, like America with Trump, is suffering from too much democracy. Sullivan, and those of the punditocracy who condemn the Brexit vote and the Rise of the Trump Reich (as bad as that is) have it exactly backwards. Brexit and Trump are similar not because they reflect too much democracy, but because they reflect too little democracy.

In the EU, and at its center in Brussels, the heart of the issue is that there is a complete lack of democratic control. Edicts flow from a faceless, nameless bureaucracy in Brussels, and regardless of how well-intentioned any of its officials may be the fact remains that the ordinary people of England no longer have any voice in controlling their own lives. Here in America, we know the feeling when we have to press 1 for English, 2 for Spanish, 3 if we’d like to pay our bill, and so on. There’s never an option for the problem you’re calling about.

If you’re an Englishman (or -woman) trading equities or bonds in the City of London and making GBP750,000 gross per year, you may find many features of the EU annoying, but all-in-all it’s manageable and you’re making a good living, so your take is to keep calm and carry on.

But if you’re running a bed-and-breakfast in the Cotswolds and have to make sure that your guests’ sheets have a certain number of threads per square inch, well, your perspective is likely to be rather different.

The liberals and the Left in the U.S. (of which I consider myself a member) and Europe do themselves no favors by trying to characterize the Brexit and the Rise of the Trump Reich as some sort of contemporary Peasant Revolt. The more they do this, the more they fail to acknowledge the very legitimate concerns of the people over their disempowerment, and the more they encourage the very type of populism they profess to condemn. By persisting in this fundamental disrespect of the people and their votes, the elites confirm not only that they live in a bubble, but that that bubble is impenetrable.

Take the headline from today’s Huff Post: “Hate Crimes Skyrocket in UK”, posted above above a picture of some graffiti to the effect of “F#@k off Polish Scum.” Sorry Arianna, you’re way off the mark on this. Are there those among the Brexit voters who are xenophobic and racist, or worse? Sure. Likewise, there are some number of Trump supporters who would readily identify with these types. But does that mean that all of them are racist, or that the popular vote in favor of leaving the EU is some sort of collective racist or xenophobic act? Not at all. Arianna has committed the same sin for which she (and many others on the Left) correctly condemn Trump and others on the Right: she has characterized an entire group (Brexit “Leave” voters) as racists based on the graffiti painted on some wall by one or more of them. Yes, the graffiti is awful. But conceptually Huffington’s reaction to it is identical to Trump’s alleging that all Muslims know about terror plots of their co-religionists simply because they are co-religionists. Whether coming from Trump or Huffington, this type of idiocy rightfully deserves our rejection.

Peasant Revolt? Not really, but there are, nonetheless, a few parallels with 1381 worth noting.

Just as the U.S. (and to a lesser extent Britain) have waged a decade-plus long war in Iraq and Afghanistan at a cost of thousands of U.S. and British lives (not to mention the locals) and trillions of dollars flushed into the latrine, Richard II through his uncle, John of Gaunt, led an equally catastrophic and prodigiously wasteful campaign in France to reassert Plantagenet control over Bordeaux and the Aquitaine. The peasants, naturally, had to pay for that disaster, just as we modern taxpayers have had to pay for our elites’ fiascos in Iraq and Afghanistan and the bailout of the banksters and their equally catastrophic gambling debts (a/k/a collateralized debt obligations, etc.).

Among other things, the peasants back in 1381 were very unhappy with villeinage, their status as serfs tied to the land and owned (that’s right, owned) by their landlords. Here in the modern U.S. (and likely in Britain, as well), our answer to villeinage is the mountain of debt, whether mortgage, educational, credit card, medical or other, that enables us peasants to fulfill our roles in the modern consumer economy. Feudalism 2.0.

Like the noblemen who accompanied Richard II to Mile End and Smithfield, our modern elites now stand aghast at the brazen insolence of the peasants, voting against what they’ve been told is in their best interest. Back in 1381, Wat Tyler, one of the leaders of the Peasant Revolt, raised the tensions quite a bit when he and his rebels met with Richard II.

Like some medieval Rodney Dangerfield, Richard II did not get any respect.

When he came face to face with the King, Wat Tyler did not take off his hat. Then, instead of waiting for the King to extend a hand to him first, Wat took the King’s hand and shook it roughly, just as one peasant farmer might greet another. Then Wat upped the ante. The King demanded that Tyler dismiss his men. Tyler not only refused, but said he’d be back to London in two weeks with forty thousand more men. Then he took a swig of ale (from a flagon with a dragon, not the chalice from the palace or the vessel with the pestle) and started tossing his dagger from hand to hand in front of Richard.

All this was just a tad over the top for Richard II’s knights, one of whom galloped at Wat and ran him through with a sword. End of Wat.

In response, the yeomen that Tyler had brought with him nocked their arrows and drew their bows. Richard II and his knights saw that they were about to become a human version of swiss cheese courtesy of the English longbow. But like most of his Plantagenet forbears, Richard was nothing if not a quick thinker. He defused the situation by saying that he would lead the peasants and abolish villeinage. Hmmmm. (He went back on his word a few months later.)

Maybe the contemporary peasants are in revolt. One thing’s for sure, our present-day elites find them revolting.

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Elizabeth II

The Real QE2

By a margin of around 2 million votes the people of Britain gave a giant collective middle finger to the so-called elites of both their island and the EU. Recall that those elites have been warning for months that there would be a skyfall (and not the James Bond movie type) if Leave won and Remain lost.

The clueless American commentariat have trotted out their usual question when anything supposedly bad happens overseas: could it happen HERE? Since we’re not members of the EU, the media portray the Trump phenomenon as a yardstick to measure whether the popular will in England reflects the same type of popular will in the U.S.

The basic parallel between the Brexit vote and the Trump phenomenon is a rejection of the elitist, or corporatist, form of government that has been in effect in the United States as well as in Europe for more than a generation now.

The NRA is a perfect example of our corporatist form of government. The NRA funnels boatloads of money to U.S. senators and representatives, who then do the NRA’s bidding to ensure that people on the no-fly list can still buy assault rifles. Only in the past few days, with a sit-in by Democrats on the floor of the House, have the timbers of the gun lobby begun to shake a little bit.

While the NRA draws more press, Goldman Sachs is far more important. Goldman is not simply an example of the Wall Street-Washington Axis of elites, it is the Motherlode of corporatism/elitism. It’s the most important primary dealer in U.S. Treasury securities (i.e., buying direct from the government and then reselling). With alumni like Hank Paulson serving as Treasury Secretary and many others in prominent and important offices in the financial and regulatory side of the Washington, Goldman Sachs doesn’t just influence the U.S. Government’s financial policies; it is embedded in them. They flow from Goldman, whose word is swallowed whole by Treasury apparatchiks like Tim Geithner. In times of crisis, like the Great Financial Meltdown and Recession of 2008-09, a small group of Goldman executives, alums and acolytes exerted a decisive influence in deciding what steps the United States Government should, and would take in response to the financial crisis. No one dared dissent from the self-interested Goldman Sachs directives, and one way or another Goldman made a lot of money out of the crisis.

Elizabeth II

The Real QE2

Funny how that works. In Britain, they’ve said “enough.” And here?

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Oscar "Blade Runner" Pistorius

Oscar “Blade Runner” Pistorius

A South African court is about to hear testimony from the last witness in the sentencing phase of the murder trial of “Blade Runner” Oscar Pistorius, the athlete who has used leg prostheses in order to compete as a runner. He was convicted about two years ago for one category of homicide, but the trial verdict was overruled and he was found guilty of murder. His sentencing on this more serious charge is pending.

The case has been an international sensation not only because of Pistorius unique position in the athletic world, but also because the victim, his girlfriend, Reeva Steenkamp, was a beautiful and celebrated fashion model. The case could have been tailor-made for the tabloids and will undoubtedly give rise to a few docu-dramas in the near-term. From a legal perspective the case presents a number of interesting issues completely apart from any criminal laws and evidentiary rules specific to South Africa.

Briefly, Pistorius claims that he believed his apartment had been broken into by an intruder who, he allegedly believed, was hiding in the bathroom. Sleeping with a gun under your pillow is apparently commonplace in South Africa, but put that to one side. He claims that he went down the hall from his bedroom, and before he fired through the door at the as-yet-unseen intruder, he yelled out, allegedly at the top of his voice, to Reeva Steenkamp to get out and to call the police. Then Pistorius fired four shots from his 9 mm handgun through the door.

When he opened the door, Reeva’s bullet-torn body was on the floor of the bathroom.

Pistorius’ story of what happened that night does not make sense. First, Pistorius could only have suspected that the alleged intruder was in the bathroom, and he claims he believed that Reeva was still in bed. But he also claims that he was yelling at the top of his voice. He’s a very good runner, so he must have a rather strong set of lungs, and if someone like that tries to shout I’m sure he can do it rather loudly. He says Reeva never responded. Why not? When someone yells at the top of his voice for you, “What?” or “I’m in here,” or something of that sort is a typical response. When he pulled his gun out from beneath his pillow, why didn’t he notice that Reeva was not on the other side of the bed? Even in the dark (or relative dark), that’s not that hard. And if his adrenaline was going strong at the thought of an intruder, wouldn’t he at least check to make sure she was safe, or at least make sure where she was?

Why didn’t he even shout out “Who’s in there?” since he hadn’t actually seen the intruder before he started shooting? Why did he fire four shots, instead of one?

Then things get even weirder. Four witnesses at the trial, neighbors of Pistorius in the apartment building, all testified that they distinctly heard a woman’s voice, and each of them testified not only that this woman’s voice was “screaming hysterically,” but also that it preceded the firing of the gunshots. A key to Pistorius’ defense is that the screams were his after he realized what he’d done.

Not credible. To defend himself, Pistorius had to claim that when he’s stressed, his voice goes from that of the manly man he is most of the time, to that of a woman.

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Exelon CEO Chris Crane

Exelon CEO Chris Crane

A week or so ago, the Illinois General Assembly failed to pass Senate Bill 1585, the Exelon Bailout Bill. The bill failed despite a series of full-page newspaper ads and a robocall campaign touting how great the Exelon bailout would be for consumers. Exelon CEO Chris Crane even went so far as to set a deadline for the Illinois Legislature: Unless you pass the bailout bill by May 31, we’ll close two nuclear generating stations (Clinton and  Quad Cities).

Mr. Crane apparently remains unaware how much his threat to kill off two of his own nuclear plants resembles the threat made by Cleavon Little, playing the unforgettable role of new Sheriff Bart in Mel Brooks’s Blazing Saddles (1974).  Just after new Sheriff Bart arrives, the townspeople (nearly all of whom are surnamed Johnson) threaten to shoot him because he’s not quite who they expected. Bart then draws his pistol, holds the muzzle to his own head and threatens to shoot the sheriff (i.e., himself) if the townspeople don’t back off:

Sheriff Bart (as gunman): Hold it! The next man makes a move, the #$%^& gets it!

Olson Johnson: Hold it, men. He’s not bluffing.

Howard Johnson: Listen to him, men. He’s just crazy enough to do it.

Sheriff Bart (as gunman): Drop it! Or I swear I’ll blow this #$%^&’s head all over this town!

Sheriff Bart (as hostage): Oh, Lordy, Lord, he’s desperate! Do what he say! Do what he say!

[SHERIFF BART, STILL HOLDING THE GUN TO HIS OWN HEAD, DESCENDS FROM THE PLATFORM AND MOVES TOWARD THE SHERIFF’S OFFICE]

Harriet Johnson: Isn’t anybody going to help that poor man?

Howard Johnson: Hush, Harriet. That’s a sure way to get him killed.

Sheriff Bart (as hostage): Help me, help me……somebody help me!

Sheriff Bart (as gunman): Shut up!

Just as Sheriff Bart managed to escape unscathed, so we learned the next day that Exelon and the legislature are working on a “new compromise” that would prop up Exelon’s two troubled nuclear plants. Expect to see Mr. Crane reprise his role as Sheriff Bart, with a renewed threat to euthanize the Clinton and Quad Cities stations, in the weeks leading up to the next legislative session.

In earlier posts, The Sparkspread explained how, more than a decade ago, the top management of Exelon embarked on a grand plan: strip the generating assets (i.e., nukes) out of the stodgy, old, regulated utility and transfer them to a shiny, new generation subsidiary called Exelon Generation. After all, it wasn’t as if the regulated utility was going to open up new markets. Its service territory was fixed. It was much better to have the generation assets in an entity that wasn’t regulated, that could make profits in a competitive wholesale market, and keep those profits without a regulatory say-so.

Once Exelon had the nukes in a separate subsidiary, it stood to earn some hefty profits because its generation costs were very stable. Sure, it had to refuel periodically, and operations and maintenance are not cheap, but on a relative basis the cost of nuclear generation was very low relative to natural gas-fired generation, and the latter sets the electricity price at the margin in this market. All of this was planned before the advent of fracking, when the price projections for natural gas all looked like hockey sticks. Well-informed market players feared that the U.S. wouldn’t have enough natural gas, and they predicted that we’d have to import it. So Exelon placed its bets. One could almost see Adam Smith smiling down from above. What could go wrong?

A couple of things, it turns out. First, the fracking revolution in natural gas turned lots of assumptions about the U.S. energy picture upside down. The U.S. with a natural gas shortage? Not now. We’ve got more than a century’s worth of supply at current consumption rates, enough to export it with the right facilities and markets. Between 2005 and 2012, natural gas production increased almost 30%, a rate of increase that triggers comparisons with the Golden Age of American Industrialization between the end of the Civil War and the turn of the 20th century. Heady stuff, but the cloud in this silver lining is that decreasing natural gas prices translate to decreasing wholesale electricity market prices.

Then the Great Recession Double Whammy hit, and the economy tanked. Production, and therefore energy demand, went down. Nowadays the Federal Reserve issues its monthly Panglossian pronouncements that the recession is over, unemployment is down, and everything is fine. The 2016 presidential primary season showed that neither the Fed nor anyone else in D.C. has a clue about anything outside the Beltway. The American voter has seen enough bogus economic data swallowed without question and regurgitated by bogus financial news media. The continuation of low market electricity prices says it all.

Make no mistake, Exelon’s fighting a war on two fronts: low energy market prices in the east and sluggish economic recovery in the west. But Exelon, its management, and its shareholders assumed that risk. They wanted to be entrepreneurs, and the Illinois General Assembly granted their wish with the necessary amendments to the Illinois Public Utilities Act.

Exelon played the market, and it lost. In Donald-Trumpese, Exelon is a “LOOZER,” just like all those poor slobs who keep demanding an increase in the minimum wage. (The nerve!!!)

When the energy market was high and Exelon Generation was making money, Crane was pleased to talk about the glories of the free market, private enterprise, shareholder value and the privatization of profits. But now that the market has turned against Crane all that shareholder value malarkey has to be swept under the rug like something unmentionable that you don’t want your dinner guests to see.

To everything there’s a season, and the time for privatizing profits is over. Now is the time for socializing losses. Crane has to talk about how “the market is flawed,” how the Exelon Generation nuclear fleet is imbued with a vast public interest, and how the citizens of Illinois are no longer just chumbolones (to borrow a John Kass-ism). Now, they’ve been elevated to the rank of “stakeholders.” Funny how that works. Crane’s worshipful attitude towards ratepayers increases in direct proportion to the magnitude of the public subsidy he’s looking for. To bail out Exelon, the Illinois General Assembly needs to hit ratepayers with a new charge called a zero emission credit. He didn’t get it this time around.

The Exelon Bailout Bill perfectly exemplifies the type of crony capitalism (or, more appropriately, Craney Capitalism) in which Exelon’s sycophants in the General Assembly are only too happy to use the state’s power to subsidize Exelon and protect its privatized profit model from the perils of a free market whose virtues it extolled when the market was high.

No wonder Trump’s popular.

 

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