Nuclear Power and the Environment

 

If environmentalists were serious, they would embrace nuclear energy.  It has downsides, but it does not contribute to global warming.  Environmentalists oppose nuclear energy on political grounds, not scientific ones.  Wind and solar energy are becoming more productive and reliable, but they still cannot supply the base load for electrical power.  They are too dependent on the vagaries of the weather. 

Nuclear power cannot be made 100% safe, no power system can, but it can probably be 99.9% safe, and if well designed the 0.1% failures can be managed without great loss of life, while global warming could destroy a substantial portion of the world’s population through rising sea levels, crop failures, fierce storms and so on. 

Part of the new infrastructure plan could finance more research on safer reactor designs, and construction of new reactors because new nuclear power stations are needed sooner, rather than later.  New nuclear power reactors will be expensive and take a long time to build, so we need to get started sooner, rather than later. 

Biden as President

My last few blog posts have been critical of Biden, but I am glad he won.  Trump was a terrible President, but his strong point was that he represented and stood up for the cultural ideas that are espoused by many ordinary, middle class people.  He is the ultimate illustration of the problem highlighted by the book “What’s the Matter with Kansas?”  Many people vote against their economic interests because they believe cultural interests are more important.  In Trump’s case it is even more surprising because he is a bad cultural icon.  He is course, crude, immoral, impolite, selfish, stupid, and the list goes on and on.  However, regular old white people see themselves under attack from all sides, and Trump is someone who is willing to take on the hatred from American intellectuals and minorities.  That one trait got him elected and it almost got him re-elected.  The Democrats were smart to change the voting laws right before the election to make it easier to vote.  Democrats could get apathetic, uninterested blacks to make the minimal effort to vote by mail for Biden, and it worked.  This Denver Post article illustrates the two approaches to voting requirements, although it clearly comes down on the side of making voting as easy as possible.   

Trump has incorrectly claimed that there was something illegal about the mail-in vote, but the states involved had made it legal.  It probably did cost him the election, but the state Democratic politicians and judges did it legally.  Easier voting favors Democrats.  The Republicans used the 2010 census to gerrymander their states to favor Republicans.  Each side is looking for advantages.  There are arguments on both sides.  When the US was founded, in most states only white adult male property owners could vote.  They wanted to restrict voting to responsible people who had a stake in their country.  Today, the Democrats have completely different priorities from the nation’s founders. 

Anyway, Biden is a much more normal President and good for the country.  He is being pushed by the progressive wing of his party to do a lot of questionable things, questionable because they have never been done before and they are very expensive.  But the Republicans are in a position to block most of them, or to tone them down.  Infrastructure repair is needed, but it needs to be limited, and paying for it right after huge payments for the covid pandemic if bad timing.  It’s good that interest rates are so low now, making it reasonable for the government to borrow money. 

Biden is a welcome change from Trump on foreign policy issues.  Trump tended to alienate our allies and pander to our enemies.  Trump messed up relations with Europe and North Korea, among others.  His China and Russia policies could have been more nuanced.  Biden is currently facing tough decisions on Afghanistan and Israel-Palestine, but he is approaching them rationally and intelligently. 

Biden’s reassuring, comforting tone is another welcome change from the Trump’s often strident, mocking, confrontational approach.  This offsets my concerns that Biden will take the country too far left.  That may be the trade-off for having a more traditional President.  Let’s give Biden a chance. 

Praying for a miracle: Argentina’s debts

From a newsletter from the Econmist magazine

Alberto Fernández, Argentina’s beleaguered president, kicks off his European tour this week. He will meet the leaders of France, Italy, Portugal and Spain to beg for more time to repay Argentina’s enormous debts. The country, led by an increasingly unpopular Mr Fernández, owes $2.4bn to the Paris Club, a group of government lenders, and a record $45bn to the International Monetary Fund. Mr Fernández argues that the debt is unpayable in current conditions—ie, the pandemic. To help his case he is seeking support from his country’s most hallowed son, Pope Francis. Argentina’s economy minister, Martín Guzmán, will also visit the Vatican, to lobby Kristalina Georgieva, the IMF’s chief, before they both attend a seminar with the pope. The politicians are nervous ahead of Argentina’s monthly inflation figure, released on Thursday, which is forecast to show inflation heading towards 50% this year. That’s almost double the government’s target, and another headache for Mr Fernández.

Crypto Coins as Assets

The trouble with cryptocurrency like bitcoin is that it is relatively easy to create new currencies.  The most obvious current example is the dogecoin that Elon Musk has been promoting.  Bitcoin is a potential store of value because there will be a limited number made, a total of 21 million.  However, it is possible using the blockchain security system and other algorithms to develop a new cyber currency with similar or different characteristics. 

Bitcoin was originally developed to serve as a currency to pay for commercial transactions.  The blockchain process makes it relatively easy to make payments.  It appeals to dishonest actors (like drug dealers and hackers who hold data for ransom) because it is hard to trace.  But I don’t see anything particularly unique about bitcoin compared to any other cyber currency, except that the transfer mechanisms are in place and have worked for several years.  Some other organization – a country, a bank, a credit card company – could develop a new cyber currency that might have more political or financial weight behind it, and thus might pass bitcoin as the preferred cyber currency. 

One problem for countries might be that a cyber currency would be harder to inflate.  The Federal Reserve can just print dollar bills (physically or virtually), but it might not be able to make new cyber coins, depending on how the coin algorithm is designed.  If a country mandated that everyone had to accept the new cyber coin, that would certainly make it displace bitcoin as a form of payment. 

As a result, I do not see that bitcoin is an asset that will retain its value indefinitely, like gold.  There are other precious metals like silver, platinum, maybe copper, but they are also physically limited, and their value is determined to some extent by how much physically exists, plus or minus whatever speculative fever surrounds them at any given time.  Bitcoin might be more like gold if it had some intrinsic value, for example, if it were a store of energy that could light a house for year.  But currently, as a store of value, it is not even being used as a means of exchange.  Its skyrocketing value actually makes it a source of currency deflation; no one will spend a bitcoin today if it will buy twice as much tomorrow.  People will not spend them; they will save them.  This tends to be a drain on economic activity, which weakens the economy.  

Old Pictures

 Here is a link to some old pictures from my days in the Foreign Service.  

More Foreign Service Science Officers Needed

 The Scientific American called for more scientists at the State Department. Nick Pyenson and Alex Dehgan wrote:

"Traditional diplomacy related to territory and place. It was organized by sovereign nation-states with borders and limits that were clearly defined. Those coming into the foreign service, especially in the U.S., came from fields like history, economics and political science, forming the bread and butter of the foreign policy schools. These backgrounds help with the standard set of diplomatic responsibilities for engaging with host country officials, but they are no longer sufficient—nor is it enough to just listen to scientists. Bringing scientists to the front lines of solving our most pressing, complex problems is a necessary step for diversifying and improving the composition of our foreign affairs and foreign assistance institutions."

I came to the Foreign Service with some of what they want. I had a bacherlor's degree in mathematics, not exactly a hard science, and I had a law degree, adding to my liberal arts credentials, rather than my scientific credentials. However, I was more interested in science issues than most of my Foreign Service colleagues. The article continues:

"Even with a richness of talent, we still need more opportunities for integrating scientists on the front lines of U.S. embassies and missions abroad. Programs such as the AAAS fellowships already place postdoctoral scientists throughout the State Department and USAID for pressing problems in diplomacy and development. Scaling up this type of program would have a real impact on global diplomacy and development. At USAID, the Partners for Enhanced Engagement for Research have built hundreds of collaborative research programs to date, in conjunction with American scientific agencies, aimed at building long-term engagements and connections across the global scientific community."

When I was the deputy director of the State Department office dealing with environmental conservation issues, we had two AAAS fellows working on biological issues. The director of the office spent about a year in Nairobi negotiating the Biodiversity Convention, which the US then refused to sign. The main opposition came from then Vice President Quayle's office, mainly his chief of staff William Kristol. President George H.W. Bush said he could not sign two environmental agreements, one on climate change and the other on biodiversity, because of pressure from the Repubilan Party. He felt it was more important to sign the framework climate agreement than the biodiversity convention. So, the work of our office was for naught.

The article points out the advantages of scientific cooperation, expecially since many foreign scinetists have studied in the US. One of my biggest disappointments was whe the US ceased to fund scientific cooperation with Poland shortly after the fall of the Berlin wall, and as Poland was tansitioning from a Communist government. The US had promised several million dollars a year for science cooperation with Poland for five years. I was sent to oversee that cooperation, but the Gingrich Republican revolution occurred about a year after I arrived, and the Gingrich Republicans refused to fund the remaining years of the agreement. One would have thought that the Republicans would have wanted to encourage Polish scientists and welcome them into a free world with a free economy with a little help, but apparently Republicans didn't care about Communism anymore and had moved on the domestic political issues. Meanwhile the State Department had a little money of its own to supplement the cancelled Congressional appropriation, and it decided that China needed the money more than Poland; so, State gave its remaining science cooperation cash to China. At least we know the Chinese put it to good use, outpacing US scientific activity.

Failure of Primaries

One thing the last elections have shown us is the failure of political parties.  In retrospect the old smoke-filled room method of selecting candidates by party insiders worked better than the new open primary system.  Primaries have pushed both the left and the right to choose more extreme candidates.  Since only one-party votes in primaries, the extremists choose candidates that do not appeal to moderates, but when the election comes, you have two extreme candidates, one on the left and one on the right, with no moderate for independent centrists to vote for.  The biggest threat that any politician can make against another of the same party is “We’re going to primary you.”

This split occurs in almost every election from county commissioner to President.  The country is certainly divided between almost irreconcilable Republican and Democratic electorates, but when each party send Congressmen or Senators from its extreme wings to Congress, the split in Washington becomes even worse. 

The biggest failure was in the 2016 presidential primaries.  Hillary Clinton and Donald Trump were two terrible candidates.  Hillary had deep contempt for ordinary Americans.  Her Democratic party believe that ordinary Americans were too stupid, lazy, and uneducated to help themselves, and the Democratic Party had to take care of them.  Her contempt for ordinary Americans was evident in everything she said and did.  Trump on the other hand appealed to ordinary Americans because they were stupid, lazy, and uneducated.  They loved him because he didn’t talk down to them or disrespect them like Hillary did. 

The primary in 2020 made Biden in effect the second black President.  He is not as elitist as Hillary, but more important the black community united to support him over Trump.  Trump did not lose the election because of fraud, but because the black community in the US voted as a block from Biden.  Biden was doing poorly in the primaries until Jim Clyburn helped him win South Carolina, by whipping up the black vote in the South Carolina primary behind Biden.  It’s another example of how small, extremist primaries decide huge national elections.  Sometimes, Iowa or New Hampshire primaries decide elections; in 2020 South Carolina did. 

Trump complained that he was defeated by fraud in the elections, but in fact by legal standards there was not enough fraud to justify reopening the elections.  The problem was that blacks voted as a block, with 90% or more voting for Biden.  I think the mail-in ballots issue did work against Trump.  Blacks who might not have voted ordinarily voted by mail because it was easy.  If there were no mail-in ballots, Trump might have won, but the mail-in ballots were legal. 

If the US is to calm down the extremist rhetoric around politics, an important step is to reform the political parties and the primary system.  I think we might be better going back to the old, smoke-filled room method of having party leaders choose candidates, if only because it looks like nothing could be worse than the current system.  But this would only work if the party leaders were decent men who would choose candidates who they thought would be good for the country. 

Of course, another big problem is money in elections, no matter who gets nominated.  The Citizens United case allowing unlimited spending by corporations in campaigns.  This has made money the be all and the end all of campaigning.  The nominees may be awful, but everybody wants to be on record as financially supporting whoever wins in order to get favorable treatment for their pet issues. 

 

Returning from Vietnam

The media focus on current and former military members’ involvement in the January 6 assault on the Capitol makes me wonder how much longer Americans will honor those who serve in the military.  The press reported that the FBI was investigating the backgrounds of the thousands of National Guardsmen who were called to protect the Capitol during Biden’s inauguration, and that several were told to leave because of detrimental information found about them.  

It reminds me of the horrible way that Vietnam veterans were treated by their fellow Americans when they returned from Vietnam.  I was not actually spit on, and I don’t know anybody who was, but there was a lot of contempt for veterans, even to the point of calling them baby-killing war criminals.  On one hand it is good that there is a Vietnam memorial to remember those killed in Vietnam; on the other, the memorial is anything but heroic.  It could be interpreted as a dark slash in the ground, a stark recognition of those who tragically wasted their lives by dying in Vietnam.   

It is interesting that the Vietnam memorial was built before the World War II memorial.  World War II veterans were widely respected for their service, although the movie “The Best Years of Our Lives” shows that many WW II veterans faced the same kinds of problems that Vietnam veterans faced.  Nevertheless, no one felt when they returned that they needed a memorial.  Their service was memorial enough. 

The World War II memorial and the various Confederate memorials that are being torn down followed similar paths.  Neither set of veterans felt that they needed a memorial, but as they began to die off in greater and greater numbers, the people left behind, often wives and daughters, worked to build them memorials to preserve their memory. 

I fear that after a generation of honoring veterans, mainly starting after the 9/11 attack on the World Trade Center, we are moving back to suspicion of veterans.  Now, instead of being war criminals returning from Vietnam, they are pictured as traitors, insurrectionists, white supremacists who are dangers to the nation.  Now the proportion of the populations serving in the military is even smaller than it was during Vietnam, meaning that less and less of the population has any personal understanding of what military service is like.  No recent President has served in the military, and few senior political or other public officials have.  How many of the “talking heads” pontificating about American politics on TV have served?  Not many.  There is a group of veterans in the Congress, mostly because of 9/11, but it will probably shrink as time goes on. 

I worry that people will more and more view the military as something subversive, a hotbed of Nazi sympathizers and white supremacists, and thus military service will become less and less respected and more and more suspected. 

Ancient Rome and the US

 I have been reading some history of Rome to see if it had any lessons for today.  In the description of Rome around 133 BC, I found Mary Beard’s description apposite.  She writes: 

Looking back over the period, Roman historians regretted the gradual destruction of peaceful politics. Violence was increasingly taken for granted as a political tool. Traditional restraints and conventions broke down, one by one, until swords, clubs and rioting more or less replaced the ballot box. At the same time, to follow Sallust, a very few individuals of enormous power, wealth and military backing came to dominate the state – until Julius Caesar was officially made ‘dictator for life’ and then within weeks was assassinated in the name of liberty. When the story is stripped down to its barest and brutal essentials, it consists of a series of key moments and conflicts that led to the dissolution of the free state, a sequence of tipping points that marked the stages in the progressive degeneration of the political process, and a succession of atrocities that lingered in the Roman imagination for centuries. 

Beard, Mary. SPQR: A History of Ancient Rome (p. 216). Liveright. Kindle Edition.

 Her subsequent, more detailed, discussions brought out more similarities, the growth of parties divided by bitter animosities and points of view, increasing disparities between the wealthy and poor.  Violence and murder was much more common in ancient Rome than in the US today.  But it does make one wonder about where the US is heading, for if history does not repeat itself, it often rhymes.  

High School Social Media and Free Speech

I thought these two New York Times articles were about the same incident. They are similar but not identical.  The first one, “A Racial Slur, a Viral Video, and a Reckoning,” was about a high school cheerleader who used the N-word on social media referring to a classmate when she was 15.  The second story, “A Cheerleader’s Vulgar Message Prompts a First Amendment Showdown,” was about a ninth grade girl who failed to make the cheerleading squad and expressed her dissatisfaction with the school in four letter words on Snapchat. 

Since both of these stories seem to involve pretty cheerleaders, they might the basis for an episode of “Mean Girls.”  Both illustrate the increasing coarseness of conversation on social media, and often in person, in the United States.  But beyond the question of what is polite and decent is the question of what is legal?  The N-word has been part of the English language for hundreds of years, as have four-letter words.  Whatever happened to the old adage that “Sticks and stones may break my bones, but words will never hurt me.”  Before social media, these words and actions would have evaporated into thin air.  Today they are preserved forever. 

Does the fact that are not preserved in black and white mean that they are legally different from the same sentiments expressed verbally?  If Facebook has liability protection under section 230, why don’t these cheerleaders? 

In the first case, the thought-police who run the University of Tennessee thought it was more important to recruit black athletes than white cheerleaders, and thus denied admission to the cheerleader in the first story in order to help them recruit black football and basketball players. 

The family in the first case involving the University of Tennessee probably doesn’t have the millions of dollars necessary to pursue a case to the Supreme Court, or maybe they would just like to go about their lives without fighting the though-police at every turn.  They may not want to repay their accuser, Jimmy Gilligan, with the unbelievable hatred and vindictiveness he displayed in getting the girl refused admission to the University of Tennessee. 

To me, these are not hard cases for the Supreme Court, I think they should come down on the side of free speech except in the oft-cited example of crying “Fire!” in a crowded theater.  Actions that may follow disliked words are another matter, but the words should be protected. 

Fox News reported on the story in an article entitled, “New York Times accused of 'glorifying' cancel culture, 'celebrating teenage revenge narratives.' “The subtitle said, “’The tone of the NYT piece wasn't skeptical or unnerved; it was nearly celebratory,' one critic noted.” The Fox News piece concluded:

The framing of the story was ridiculed on social media as readers felt the Times was glorifying cancel culture. 

"It's interesting that the NY Times uses the word *reckoning* in their story on the revocation of a college admission, three years after the teenage girl used a racial slur in a video. *Reckoning* implies that the cancelation was deserved, rather than an outrageous overreaction," one critic observed.

 

"The tone of the NYT piece wasn't skeptical or unnerved; it was nearly celebratory. It was also filled with scattered accusations of racism to make the behavior of the student who sat on it and released it *three years later* seem more reasonable," another reader added.

 

 

Russian Hacking

The media is overly excited about the Russian hacking using the SolarWinds update process. 

First, was it Russia?  It seems likely that it was Russia, but not certain.  Anyone who is good enough to develop the SolarWinds hack would be smart enough to cover his tracks.  He may not have covered them perfectly, and we may be able to track down the hacker, but he may also have successfully covered his tracks.  He could be a Chinese hacker who copied the trademark signatures of the Russian hackers and who routed his hacks through Russian servers or websites.  It could be a hacker anywhere who did the same thing.  It requires computer expertise, but there are a lot of computer geniuses out there, including in the Middle East and Latin America.  I am surprised that no one has mentioned Edward Snowden in connection with the hacking.  He is a computer genius living in Russia who knows American computer security extremely well.  Is it possible that the Russians have gotten some help from him? 

Second, I think that whatever this was, it was not an attack or the start of a war.  It looks more like intelligence gathering and testing of hacking techniques.  The test worked pretty well, since it went undetected for six months, but of course there may be other hacks out there that have been even more successful and have still not been detected.  In any case, nothing major has been damaged.  They have not even emulated the ransomware hackers, who have captured and held important data from hospitals and government offices for ransom.  They have not shut down the electric grid or turned off the water or sewage treatment in any cities. 

I doubt that the hackers knew exactly what organizations they were going to be hacking into.  They knew that SolarWinds had lots of important clients, but they probably weren’t sure exactly which ones they would end up getting access to.  They may have succeeded far beyond their expectations, or it might have gone exactly as planned.  We don’t know.  Were their main targets government agencies, or private companies?  We don’t know.  The fact that the hackers did not steal money indicates to me that they were probably government-backed, and not private citizens hacking for fun and profit. 

Sen. Mitt Romney compared the hack to the US invasion of Iraq, when we took out many of Iraq’s communications hubs with our missiles.  I do not think this is an appropriate comparison.  The hackers did not use their weapons, if indeed they have weapons that could bring down facilities in the US.  It was like developing and demonstrating new missiles, putting the enemy on notice that you have these capabilities and can use them if you choose to.  But they (whoever they are) have not chosen to.  But just as Saddam should have been wary of provoking the US, we should beware of provoking these hackers. 

As nations develop new weapons they often turn to arms control to prevent the new weapons from leading to war.  We don’t have much experience with arms control type agreements for computer hacking, but some of the same principles apply, like Reagan’s maxim, “Trust buy verify.”  I am not sure how you verify an agreement to control hacking.  Bombs and missiles usually need to be tested in the open, where detection by satellites or other means is often possible.  Hackers can experiment on their own internal networks, which may be difficult or impossible for outsiders to monitor.  Of course the best test would be to see if you can penetrate the actual defenses of the country or business you might want to attack in the future. 

Nevertheless, arms control agreements are like speed limits.  Not everyone obeys them, but they set standards of behavior and provide a basis for at least discussing violations, if not definitively proving and punishing them. 

Another complication is non-state actors who hack for their own personal purposes.  It is a lot easier for an individual or small group to hack into a network than it would be for them to develop a bomb or missile.  Governments have developed systems for dealing with violent terrorists that are different from those for dealing with other governments.  We already have criminal penalties for individual hackers although they may be hard to apply to hackers operating from foreign countries. 

I think it is worthwhile to begin discussions of some kind of arms control agreement covering hacking to get some idea of what’s possible and what’s not.  In an ideal world leading tech countries would work together to control individual bad actors and well as to monitor each other’s conduct. 

Asset Inflation

The Fed has decided that creating asset inflation is the best response to the pandemic.  Thus, if you owned a $1 million house before the pandemic, you now probably own a $1.5 million house.  But if you don’t own a house, you will probably never be able to own a house.  If you had a $1 million stock portfolio before the pandemic, you probably now have a $1.5 million portfolio, but if you didn’t own lots of stock before the pandemic, you will probably never be able to own any. 

The Fed has decided the only way to save the US economy is to make the rich richer and starve the poor. 

Healthcare Crisis

The US healthcare system is set up to make money, not to take care of people.  That is one reason why hospitals are having so much trouble dealing with the COVID-19 pandemic. 

To start with, the US limits the number of doctors it trains to keep their salaries high.  It brings in foreign trained, foreign doctors to do the dirty work in emergency rooms and family clinics, so that American doctors can do the highly paid specialist work.  If American medical schools trained more doctors, Americans would have better healthcare.  The focus of doctors on money is illustrated by how many have been implicated in the use – illegal and legal – of painkillers like Oxycontin, how many doctors accept gifts or paid speaking (vacation) opportunities if they prescribe a certain, expensive drug.    

Secondly, American hospitals are set up to maximize profits, not to improve the healthcare they provide.  The buildings, staffing, administration are all organized for profit, not for care.  Just in time inventories and small staffs do not work well for epidemics. 

The health insurance industry adds further distortion to the healthcare business.  It means that consumers don’t care about the cost because insurance pays most of the costs.  All the negotiations are between the insurers and the providers, without any consumer input. 

This business model has left the healthcare industry unprepared for a pandemic where the treatment is not cost effective, i.e., lots of expensive treatment for poor people.  But if the poor people are not treated, they will spread the infection to everybody else.  Most of the patients are old and sick, requiring extensive care, while the virus hardly affects young, healthy people. 

The clearest indication that the American healthcare system is in a mess is the fact that it is one of the main campaign issues in every election.  Obamacare would not be such an issue if the overall healthcare system were not so messed up.  Americans are afraid to criticize their doctors because they fear that if they do, their doctors will let them die screaming in pain.  However, they do criticize the general healthcare system of which the doctors they fear are a critical part.  Healthcare is always the number one issue in elections because people think it is bad. 

Those highly paid, American trained specialists are good at treating the illnesses in which they specialize, orthopedics, cardiology, cancer, etc., but they are less good at keeping their patients heathy, because there’s no money in healthy patients who don’t visit the doctor.  The American healthcare system maximizes treatment, not health.  Healthy patients are bad for doctors’ bank accounts. 

Individual doctors should be aware that they are part of a corrupt system that s not taking care of the American people.  They may be rich financially, but they are ethically poor. 

The Fed and the Bond Market

I worry that the Fed has permanently damaged the bond market.  The bond market has been a relatively stable institution for hundreds of years.  The idea was that people with money would loan it to other, usually poorer people, for things like starting businesses.  In return they would get enough interest to make the risk of the loan worthwhile. If wealthy people did not like the risk outlook, they would demand higher interest, which meant that fewer and fewer borrowers would be willing or able to borrow at the higher rate. 

The Federal Reserve has eliminated the risk in the bond market and thus reduced the interest rate to about zero.  By buying up a substantial part of the entire bond market, it has reduced the risk associated with bonds is almost zero, because the Fed will buy almost anything.  The lenders may not be happy with the interest rate, but they like the security of no risk.  The borrowers like what is essentially free money.  This looks like an ideal situation, but it works only because the US government finances at least part of it.  In essence the Fed pays the risk premium, eventually causing the national debt to skyrocket.  The Fed can also print paper money. At some point printing money should be inflationary.  It may be that currently it is creating asset inflation, driving up the stock market and house prices, while not yet driving up consumer prices.  It may be that consumer inflation is kept down because so many of our consumer products come from China and other Asian countries.  If inflation takes off in Asia, we may quickly feel it here. 

One thing that helps the US is that most international trade is done in dollars.  As long as the dollar is the world’s reserve currency, we are less affected by economic conditions in other countries.  If the US continues to be a spendthrift, running continual huge budget deficits, and printing huge amounts of dollars, then the dollar’s status as the world’s reserve currency may be threatened.  If so, then we become less insulated from vagaries of the world financial markets. 

Basically, interest rates have been zero since the 2008 great recession.  This was when “quantitative easing,” bond buying by the Fed, started, which drove down interest by reducing bond risk.  So far, it seems to be working, but it’s not clear what it means for the long term. 

There may be a price to pay in the future.  Asset inflation of stocks and real estate may worsen income inequality, which is already a problem.  It will solidify and worsen class differences and/or create social unrest.  It might undermine the value of the dollar, which would be good for exporters, but bad for every other sector of the economy, particularly consumers.  Prices of clothes, TVs, computers, etc. will skyrocket. 

So far, though, the Fed’s machinations seem to be working. 

In Friday’s New York Times, Paul Krugman wrote a whole column about the national debt and the future of interest rates without mentioning the Federal Reserve.  His explanation for why interest rates are so low is:

That’s a longish story, probably mainly involving demography and technology. Basically, the private sector doesn’t seem to see many opportunities for productive investment, and savers who have no place else to go are willing to buy government debt even though it doesn’t pay much interest. The important point for current discussion is that government borrowing costs are now very low and likely to stay low for a long time.

So Krugman says interest rates are low because there is nothing worth investing in in the US; so, rich people just buy low-interest bonds.  He doesn’t mention that the Fed is buying bonds like there is no tomorrow.  Then he also says the US government should not be afraid to spend money to deal with the pandemic.  Isn’t that investing, isn’t that the very thing he said was not worth doing because there is nothing to invest in?  His is an unpersuasive argument for doubling the national debt.  

Saturday’s Barron’s “Up & Down Wall Street” column blames the Fed for zero interest rates.  It quotes Mark Grand of B. Riley as saying, “I assert … that you are not getting paid for credit risk….”  Barron’s adds, “This bond-market veteran put the blame on the Fed and other central banks for creating a ‘borrower’s paradise’ and a ‘fixed-income investor’s hell’ by holding interest rates down, in part to help finance the massive fiscal deficits.”

I think Barron’s has a better understanding of the situation than Paul Krugman.  

Strategic Arms Control in a Trilateral World

The website warontherocks.com looks at how the US might use strategic arms control negotiations, such as the new Start treaty wth Russia, to affect the overall relationship between the US, Russia and China.  It thinks the negotiations with Russia might tend to weaken Russia-China ties and give the US more leverage with both of the other parties.  It says:

The United States and the Soviet Union both used arms control to, among other objectives, drive a wedge in adversarial coalitions. The Limited Test Ban Treaty exploited Sino-Soviet differences in terms of the nuclear balance, and SALT I emphasized different Chinese and American policies toward the Soviet Union. In both cases, the wedge drivers achieved some limited success. Washington aggravated the Sino-Soviet split beyond repair. Moscow delayed and dampened encirclement by the United States and China for six years, from Nixon’s visit to China in 1972 to the normalization of Sino-American relations in 1978. The success of these wedge strategies turned upon different strategic circumstances. The test ban treaty capitalized on an already disintegrating alliance, while SALT I countervailed anti-Soviet convergence by conciliating the United States on key issues.

Risk of India-China Nuclear War

The Carnegie Endowment for International Peace has published an article, “After the Border Clash, Will China-India Competition Go Nuclear?” evaluating the possibility of nuclear war between India and China.  It concludes there is low probability of the conflict turning nuclear. 

China’s nuclear capabilities are far in advance of India’s.  The conflict in the mountainous region of their border does not lend itself to nuclear warfare.  Neither country sees the other’s nuclear capabilities as a significant factor in the current faceoff. 

China perceives the likelihood of an India-Pakistan nuclear conflict as more likely, and as something that could draw in China on Pakistan’s side.  Even that possibility, however, seems remote. 

So, the Carnegie Endowment’s conclusion as to whether the conflict might go nuclear seems to be no. 

Outer Space Arms Control

The Hill newspaper published an article on “How to avoid a space arms race” by several authors, including Bill Courtney, with whom I used to work at the State Department. 

The article reports that Putin has proposed an agreement to prohibit the stationing of weapons in space and the threat or use of force against space objects, but that there is nothing new in Putin’s proposal  Despite the Outer Space Treaty, which bans stationing weapons of mass destruction in orbit, Russia, China, and the US are all concerned about the possibility of warfare in space.  They all use space assets for gathering intelligence, for communications, for GPS location services, for monitoring weather, land use, etc.  These assets are potentially threatened by activities that are on their face peaceful, such as servicing old satellites.  If you can maneuver close to a satellite, you can probably destroy it.

A new space arms control agreement will be difficult, but the increasing importance of space for commercial and military purposes makes it more desirable as time goes on. 

Gates on Foreign Policy

In an article in Foreign Affairs, former Defense Secretary Robert Gates calls for less emphasis on military power in America’s foreign policy. 

Regarding the use of military power, Gates criticizes the failure to define clear goals for US military involvement and to let mission creep change the goals after military intervention starts.  There are many examples of this in the Iraq and Afghanistan wars, but also in the US intervention in Libya, which changed from humanitarian assistance to regime change. A new national security threat, cyber warfare, needs more attention

While he was Secretary of Defense, Gates often called for a bigger role for the State Department in Iraq.  He often pointed out that there were more members of military bands than Foreign Service officers.  Trump’s gutting of the State Department has made this situation even worse.  Gates calls for strengthening State and making it less bureaucratic, saying that the National Security Council cannot perform all the functions of the State Department, and he calls for re-establishing the roles of the related agencies, the US Agency for International Development, and the old US Information Agency.  USAID has withered while Chinese assistance to developing countries has expanded dramatically un the Belt and Road Initiative.  USIA has been rolled into the main State Department and has basically ceased to exist while the battle for world public opinion continues. 

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China Policy

Foreign Affairs has published a dialogue on US policy toward China between Princeton Professor Aaron Friedberg and a number of China hands, including Stapleton Roy, with whom I served in Bangkok, before he was Ambassador to China. 

The group responding to Professor Friedberg’s article basically argues for treating China more or less like any other important country, trying to work with it, not singling it out a threat to the US which requires special economic and security policies to rein it in.  They argue:

U.S. policymakers must adopt a more careful and considered approach. The United States must coordinate with allies and partners not only to deter and compete with China when needed but also to incentivize Beijing to cooperate in addressing shared concerns such as global warming and current and future pandemics. Washington should aim to diminish the likelihood of nuclear war, the proliferation of weapons of mass destruction and missiles, a costly arms race, and the spread of terrorism. It should seek a stable power balance in the Asia-Pacific region that respects the interests of all countries—including those of China. And it should revise and expand multilateral trade and investment agreements and foster international efforts to better address natural disasters and human rights abuses in all countries.

 

New North Koran Missile

 

The Bulletin of the Atomic Scientists has commented on two unknowns about the new, large North Korean ICBM. 

One question is how mobile the new missile will be.  It is liquid fueled and huge, which means it will be hard to move, although it was displayed on a mobile vehicle.  Since it is liquid fueled, it  most likely would have to be moved to a fixed launch site and then fueled, allowing some advance notice that it is about to be launched. 

The other question is how many warheads it will carry.  After weighing the pros and cons of a multiple, MIRVed payload versus a single large warhead, the Bulletin seems to come down on the side of a single warhead as more likely to be within the technical prowess of the North Koreans.