Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Author: Ian Welsh Page 113 of 437

Solutions: Cash, The Unbanked, and Cashless Stores

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On September 13, 2022

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Recently I saw the observation that you can track gentrification by the spread of shops that won’t take cash.

This is a problem because a lot of people don’t have credit or debit cards, even still. It’s easy to wind up “unbanked”. It’s also the case that cashless societies have walked a fair way down the authoritarian path.

The solution is simple enough:

  1. make it illegal for retail stores to refuse cash.
  2. Create a national “cash card”, similar to gift cards, and mandate that it must be accepted by any retailer, offline or online. The cards can be unregistered, in which case they act much like cash in that if you lose it or it’s stolen, there’s little protection, but you have at least a bit of anonymity, or they can registered. If a registered card is given to everyone when they file taxes, and any refunds are put on it, use will spread like wildfire.
  3. In every post office and various other locations allow people to buy these cash cards for, well, cash.

This will make anti-money-laundering a bit harder, but we managed back when everything was true cash, and there are more important things.

You could even have registered cards receive interest payments if you wanted. Say prime minus 1/2 a point, and that would have lots of good knock-on effects, forcing banks to actually start paying reasonable interest on accounts again.

(In Canada, if you have unclaimed money with the tax service, you get a pretty decent interest rate based on prime, and with recent increases in prime, for a lot of people, it’s the best interest rate reasonably available. Pre-pay those taxes if you can!)

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China “To Those Who Have Everything”

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On September 12, 2022

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This is why you don’t give away your manufacturing base. China is “gaining market share in both low and hi-tech sectors.”  It is “now a more important international supplier than Germany, the U.S. and Japan combined.” China’s share of manufacturing exports grew from 17% in the 2017 to 21% in 2021.

The US recently put a ban on sending advanced AI chips to China, and the CHIPS act forbids any company which takes money from setting up new fabs in China, but it isn’t going to matter. Just as China jumped two chip generations (from 11 to 7nm) far faster than any western expert I know of thought they could, they will catch up in AI chips.

Then they will surpass.

As people at least as far back as Adam Smith pointed out, scale matters for efficiency in a lot of industrial processes. China has it. Once the US did, and before that England. Where the manufacturing floor is matters as well, it leads to faster iteration and more understanding of what works and doesn’t: “to those who have everything, more is given.”

America efforts to stem the rise of China aren’t working. The current anti-Russia sanctions are hurting Germany in particular. The entire “globalization” nonsense was a huge mistake for the West, and it will lead to a civilizational transfer of the locus of power from Europe/America to China/Asia unless climate change interferes (which it might.)

But the key thing to understand is that this is accelerating, not slowing down. In the 19th century, Britain deliberately helped America industrialize so its rich could make more money, without looking at the fact that it was a continental power with a larger population. In the late 20th and early 21st century, America did the same with China.

Helping Japan and Korea and Taiwan industrialize or reindustrialize didn’t matter that much: at the end, they are population constrained.

China isn’t. And for a few coins the West’s elites gave another civilization the opportunity to surpass it in perhaps the most important source of power in the post-industrial revolution world.

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Putin’s Personal Interests and the Interests of Russia Have Diverged & The Divergence Is Running The Ukraine War

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On September 11, 2022

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So, Ukraine has had its second significant success in the war, launching a successful counter-offensive which took the important logistical center Izyum. The counter-offensive worked because the Russians didn’t have enough troops defending AND didn’t have reserves for a counter-attack (which could have turned the Ukrainian attack into a fiasco.) The Ukrainian attack was well-telegraphed in advance, and there are very consistent reports of there being a LOT of foreign fighters. The actual area taken is less than the size of Rhode Island, it doesn’t have to be a war-determining catastrophe, but it shouldn’t have happened.

There are two military issues here for the Russians. The first is that the command doesn’t seem to have anticipated this, despite it being known in advance. Certain Generals need to be relieved.

But the second is one which has been known for a long time and which has exercised Russian observers: Russia attacked at 1:3 local odds and for the entire “operation” has been fighting with less troops than the Ukrainian side. Without “mass” they have had to engage in slow attrition warfare, without breakthroughs or significant envelopements.

This is something I haven’t understood, because Putin’s political calculus about the war is fairly simple, as I’ve said before. His actual opposition is to his right, and if he loses the war, he will almost certainly lose power. If he loses power, he’ll probably wind up dead, and so will his family. He can’t afford to lose this war.

Russia, even without full mobilization, has a much larger military than Ukraine, and no, it isn’t all crap. (Besides, as Stalin observed “quantity has a quality of its own.” Even third echelon units, in sufficient numbers, would have been sufficient to stop this counter-attack.)

So, what I’ve said since the beginning is “Putin has to win this war or he will probably wind up dead, and he has the resources to do so, so he will win the war.” This logic is good and I still think it’s accurate, but it has been contradicted by the fact that Putin wasn’t using the resources. One reason might be that the Russian military beyond this 200K force is so bad and under-equipped it’s essentially paper only, but I’ve never found that convincing.

What appears to be the case, on further investigation, is that domestic political considerations are the problem. Again, Putin’s opposition is his right. There is no liberal or left wing opposition of significance. The people who will replace Putin are the ones who have been saying that Putin should use much more of the military and “take off the gloves.” Understand that power and water is still on in Ukraine, and Russia could “bomb it off” tomorrow if it wanted to, along with taking out most of the core rail and road infrastructure.

If Putin uses more troops, he essentially gives weapons to his opposition. Even without general mobilization, when those troops go to war, the careful control over who has what weapons at all times goes away. Weapons will wind up in the hands of the right wing opposition, and will stay there after the war, and that appears to be what concerns Putin.

This is the strongman’s dance, and indicates more weakness in Putin’s position than I had realized was the case. Putin, in the Russian context is a moderate (not a liberal, which is what that would mean in the West, but a moderate). He played a cautious game thru his entire tenure as leader, trying to avoid a final rift with the West.

But the time of the moderate is done in Russia. The liberals have fled to the West or been completely dis-empowered by this war. Russia is now firmly anti-West, games can be played with sanctions, but even after the war, unless Russia loses in a way that allows the West to put its own government(s) in charge, there will be no long-term resumption of trade, but a titration off. China and the 2nd and 3rd world (BRICS, Africa, etc…) are Russia’s future, and Russia is at best a locked-in Junior Ally to China and arguably a powerful satrapy.

Russia has chosen or been forced to choose its side in the upcoming cold war and struggle for world supremacy: it’s on China’s side.

This means that the day of the moderate is all but over. There’s no need or reason to play moderate games with the West and try and balance the West vs. China any more. It’s cold war (and almost hot) and the people who recognize that are likely to take power after Putin. Putin appears unwilling to take on the right wing mantle

The question for Putin is if he can take on the mantle, or how the transition occurs: does he or at least his family get out alive, with their assets intact, or do they wind up dead and/or lose their wealth? Putin, even though he politically disagreed with Yeltsin, made sure that Yeltsin’s family was kept safe, but if Putin can’t be sure that his successor will do that for him.

A good bell-weather here is Dimitry Medvedev, the man who Putin chose as President when he had to step aside for one term. Medvedev has gone full right wing, one of the most rabid warmongers in Russian politics, but he was considered a moderate and near-liberal before. He sees where the future is, and knows whose support he needs.

So Putin has a problem: if he loses the war in Russian perception he loses power and probably his life. A stab-in-the-back narrative (not, actually, unjustified, in this case) will be used by his domestic opposition to take him out. He had hoped to win the war using the minimum number of troops possible in order to not empower his internal opposition and give their followers weapons, but it may be that’s not possible.

If he wants to stick to the current force structure of only about 200K men, I’d guess he has about 2 months to show that this counter-offensive didn’t matter: it was just one of those things that happens. If by then Russia isn’t clearly back on its front foot, I’d say he’s at genuine risk, because he’s losing the army’s political support and it’s not clear the secret police will back him because winning this war is genuinely in Russia’s interest: if it loses or is seen to lose the hit to its prestige and perceived power will be massive and its position with China will definitely be “satrapy” not “junior ally.”

Understand that winter is actually the best time to advance in Ukraine, for both sides: the ground is solid, the rivers may well be frozen.

We’ll see in the next few days what Putin decides to do: try and finesse it out with the current force structure, or send in more troops and resources. But this is, for him, a genuine problem and shows that his personal interests have now diverged from those of Russia itself. That’s not a good position for him to be in and I suspect the best path forward for him might be to let loose the military, win the war, and negotiate a safe retirement with his domestic opposition, since it’s better for them if he goes peaceful into that good political night.

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Open Thread

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On September 10, 2022

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Use to discuss topics unrelated to recent posts.

The Life & Death Of Queen Elizabeth II

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On September 9, 2022

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Queen Elizabeth II in 1959

I was born in 68, and I remember the middle-aged Elizabeth and the era before the Commonwealth became meaningless. There was a post-war world where people traveled freely & often between the ex-Empire nations, and where economic ties between those nations and Britain were still primary. It came to an end when Britain went into a financial crisis so serious it required IMF intervention and then joined the EU to get a real bailout. Once Britain was in the EU, its focus became European, not ex-Imperial.

It was, in a way, a betrayal of the ex-colonies, but Britain didn’t have much choice. I’ve always found it ironic that British elites are such loyal dogs for the Americans, because the US did everything it could to hasten the fall of the Empire and then to put the boots to Britain. The US understood it was taking over the old Empire in a new form (less direct killing, but the boot was still there), and wanted to make sure Britain not only didn’t get back on its feet, but went from on its knees to on its belly.

It succeeded in this. Leading Brits in the late 40s and 50s knew this was what was happening, but could see no way out, given how relatively powerful the US was (and how Europe and Britain were garrisoned by US troops).

I can’t, offhand, think of a “good” Empire; they’re always bad, though in some places, some relative good can be done. (Hong Kong started out with a population under 1,000, and Chinese fled there. Though the Brits were bastards, they were better than the late Manchu, however.)

From Ireland to India and most parts in between, the British Empire did plenty of evil, as one would expect from the largest Empire to ever exist. (The Mongols come in second, though they had the largest land empire. The US? It’s a bit hard to count. Might be that post-USSR collapse they could be seen as eclipsing the UK.)

Elizabeth ceremonially presided over the dismantling of the British Empire. She worked hard to try and keep the Commonwealth together, but post-70s, even that disintegrated step by step. She died, I would say, mercifully, before the United Kingdom itself (the union of England and Scotland) broke up, and before Northern Ireland was lost. For a person in her position, she seems to have done less harm than one would expect.

The sun set on the British Empire decades ago. Soon, it will set on the UK. Europe is no longer the center of the world, but a collection of satrapies conquered by its old colony, the US.

In the normal order of things, the next Empire would rise in China — but we no longer exist in the “normal order,” but rather the end of a climate which has existed for thousands of years.

Elizabeth is lucky to miss the end of that order as well.

Note: Yesterday’s article was incorrect. A month after publication, the scientists clarified that the Antarctic sea-shelf collapse would not raise the sea level quickly, and that sea level rise (from this collapse) could take a century. I apologize for the error, and thank commenter David for catching it. The article is still up, with the error noted, but will be deleted after a bit. This note will stay.

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When Is the Next Oil Driven Inflation Spike In the US? December to March.

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On September 7, 2022

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Recently read a smart lad who noted a few simple things:

  1. Biden’s been releasing oil from the Strategic Petroleum Reserve (SPR).
  2. The SPR has basically two types of oil: sour and sweet.
  3. Biden has been releasing almost all sour since that’s what most US refineries need.
  4. At the current rate of release, the SPR runs out of sour crude to release around March.

A Bloomberg article from June noted the same issue (just prior to Joe’s begging visit to Saudi Arabia.)

OilX, a consultant, estimates that by the end of October, the SPR will hold only 179 million barrels of medium-sour crude. To put that into perspective, during the period June 2021 to October 2022, the US is likely to sell about 180-190 million barrels of medium-sour crude from the reserve. Clearly, Washington is running out of firepower to repeat that exercise.

Of course, when Biden stops releasing oil, either because he’s out or because he chooses to stop after the election or the holidays are over, then prices are going to spike if sanctions are still in place against Russia and/or Russia is unwilling to sell to the West. As a bonus, the government will need to buy oil itself to stock the reserve back up.

This means you have to ask yourself whether or not the Ukraine war will still be going on thru the winter. It’s hard to say, but unless the US tells the Ukrainians to give Russia enough of what it wants to get peace, the answer appears to be yes, especially as winter is the best time to wage war in Ukraine, as it is when the ground is most solid and many rivers are likely to iced over. Putin needs a decisive, obvious win and if he can’t get it diplomatically, he has to get it on the ground.

Putin’s happy with slowly grinding forward militarily in part because he’s also aware of what sanctions are doing to the West. The most rabid anti-Russia country outside of Eastern Europe has been Britain, and energy price increases which are often 500% or more are taking Britain apart. More of this later, and I want to see what new PM Truss’s plan is, but if Britain doesn’t get its act together soon, this could be the year its descent into 2nd world status becomes unstoppable.

Russia can get most of what it needs from sources other than Western nations, but energy and inflation issues are kneecapping much of the West. Why not drag things out and see how much damage is done?

Remember that the entire previous post-war order was essentially destroyed by stagflation caused by oil price shocks back in the 70s (that gave us neoliberalism.) This order can be destroyed the same way.

What this means for Americans is that there’s a very good chance of a big inflation spike after the election. It might hold off for as long as spring, it might start a few weeks after the election. It won’t just hit gas prices, oil is important for much more than driving cars, so it’ll rip thru the entire economy. Stock up on what you need before the election if you can.

And let this be a lesson that GDP means very little when the chips are down. Who cares if you have Hollywood and lots of fast food stores and Google and FaceBook? What matters is what you grow, dig up, refine and make.

Russia has enough energy and food and can buy the manufactured goods it needs from India and China.

The West, with a few exceptions, does not have enough energy and the primary manufacturing power is China. In certain ways we’re in a weaker position than we were during the last oil shocks.

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The Egalitarian Rift Which Doomed The New Chilean Constitution

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On September 6, 2022

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So, Chile wound up rejecting a new left wing constitution, and by a significant margin: about 2:1. This is interesting, because Chileans also wanted the old constitution replaced at about the same ratio.

Apparently a big issue was that indigenous people were given rights and status and that struck many as wrong.

It’s easy to see this as simple racism and colonialism, and no doubt that motivated many, but there’s something important here that should be teased apart because it’s important far beyond Chile.

Egalitarianism is defined by Oxford as:

relating to or believing in the principle that all people are equal and deserve equal rights and opportunities.

This leads to the first principle of egalitarianism:

No one should be treated differently in ways that matter based on who their parents are.

Notice that I’ve changed this around a bit. Slavery, while not always based on birth, is a violation of egalitarianism in essentially the same way that aristocracy is: someone being treated differently in an important way based on something they had no control over: who their parents are.

This leads to the second principle of egalitarianism:

No one should be treated better or worse than anyone else unless they’ve earned that treatment in a legitimate fashion.

So, the ideal is that no one should lose rights unless they’ve committed a crime. No one should be treated better unless they’ve earned that better treatment.

In democracy, you earn power by being chosen by your fellows for it. In capitalism you earn power and thus better treatment by having money, since it’s assumed that if you have money you or someone else did something people were willing to pay for, and if they were willing to pay it provided them utility. Utility is assumed to identical to “good”, so you’ve done lots of good and deserve better treatment. (This is obvious bullshit, but it’s how the system is justified.)

Let’s bring this back to Chile: indigenous people’s have been badly treated and deserve restitution, but to give them permanent rights that others in Chile don’t have based on their ancestry means that some people have rights that they didn’t earn legitimately from an egalitarian point of view.

Now, egalitarianism isn’t the only value, and more societies post-agriculture (and possible pre-agriculture) have been based on in-egalitarianism than on egalitarianism. Some of them have run relatively well. But there’s no question that creating status-anything based on birth is not egalitarian.

For this to work it would have to be a legitimate way for people without the ancestry to gain the status, and a legitimate way for people wit the status to lose it.

If it was based on ancestry combined with “you’ve been treated badly”, then the harm would have to be quantified, and the status lost when the harm has been rectified. “The harm has been made substantially whole.” People could join the status by proving similar harm had been done to their ancestors and/or them and was still effecting them.

If, on the other hand, the status is justified by “indigenous people are better stewards of the land” then a duty would have to be set up to take better care of the land, and those who did not do so would lose the status, while those who are willing to do so (and to learn indigenous methods) would be allowed to gain the status.

There are more rules to egalitarianism than the two mentioned, but these two, though not one person in a million could state them clearly, are, I suspect at the heart of some legitimate opposition to “rights” for various groups. They are also why the rich always like to claim they earned their money legitimately and why the 2008 bailouts damaged capitalist legitimacy so badly (because going bankrupt is how the rich are supposed to lose their special treatment in capitalism.)

Most of history has been about different status groups, with different legal rights, whether those rights were positive (nobles, charter city townsmen) or negative (serfs and slaves, women in many places and times.) The revolution against older forms was about getting rid of explicit status groups, and there is often resistance to creating new ones.

But ultimately it’s about legitimacy, and legitimacy of status rests on “you got it thru approved means and there are ways for you to lose it.”

Deal with those two issues in a way which seems fair and opposition to indigenous status is likely to diminish significantly. Base it on ancestry, and not current and future behavior or welfare, and many will object.

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The Delusional Dishonesty of the G7 Russian Oil Price Cap

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On September 5, 2022

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So…

Members of the G7 have agreed to impose a price cap on Russian oil in a bid to hit Moscow’s ability to finance the war in Ukraine.

Finance ministers said the cap on crude oil and petroleum products would also help reduce global energy prices. The cap will be set at a level based on a range of technical inputs.

“We will continue to stand with Ukraine for as long as it takes,” the G7 said.

Russia said it would stop selling oil to countries that imposed price caps.

Well, so the price cap is effectively a “we won’t buy it because you won’t sell it” policy.

There’s long been a delusion that commodities like oil are global. They operated almost as if they were for a while, but oil is produces in certain places, refined in certain places and shipped in specific pipelines, ships, trucks and trains. It has different qualities and not all refineries can handle all types of crude.

To the extent, however, that oil or natural gas or coal or whatever is subject to boycotts, it becomes less of a global market and that won’t generally decrease prices, rather the reverse, at least in the early phases of a breakdown of a global market. (In the late phase prices will diverge significantly in different countries, with extensive measures or realities in place to prevent arbitrage.)

So (2)…

UK Chancellor Nadhim Zahawi said the G7 were “united against this barbaric aggression”, adding the price cap would “curtail Putin’s capacity to fund his war”.

US Treasury Secretary Janet Yellen said a cap would also help fight inflation, which is on the rise in many of the world’s economies.

The price cap helps achieve “our dual goals of putting downward pressure on global energy prices while denying Putin revenue to fund his brutal war in Ukraine”, she said.

Sanctions have not reduced Russia’s income, they have increased it. This won’t be an exception because most of the world isn’t onside with sanctions, including India, China, virtually all of Africa and most of South America, but by fragmenting the market it will increase prices, especially in specific areas like Europe which need to get their hydrocarbons (remember, this is not a virtual good, it has to be extracted, refined and shipped), through specific infrastructure links.

The “price cap” is thus largely a symbolic measure, which will if anything increase prices somewhat. That’s not to say it’s useless, if the plan is a new long Cold War with Russia (and almost certainly China), getting off supplies from those two countries needs to be done and done in stages.

But it sure isn’t going to decrease prices or empty Putin’s treasury. In fact, in the short to middle term it’s likely to hurt Europe, again, far more than Russia.

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