Is Tether Coin Trustworthy?

 Exactly how Tether is backed, or if it’s truly backed at all, has always been a mystery. For years a persistent group of critics has argued that, despite the company’s assurances, Tether Holdings doesn’t have enough assets to maintain the 1-to-1 exchange rate, meaning its coin is essentially a fraud. But in the crypto world, where joke coins with pictures of dogs can be worth billions of dollars and scammers periodically make fortunes with preposterous-sounding schemes, Tether seemed like just another curiosity.

Then, this year, Tether Holdings started putting out a huge amount of digital coins. There are now 69 billion Tethers in circulation, 48 billion of them issued this year. That means the company supposedly holds a corresponding $69 billion in real money to back the coins—an amount that would make it one of the 50 largest banks in the U.S., if it were a U.S. bank and not an unregulated offshore company.

Bloomberg

The Pandemic Has Been the Best Thing That Ever Happened for Many Americans

 

Generation X, the oft-overlooked demographic group squeezed between the Baby Boomers and Millennials, has experienced a wealth boom in the U.S. since Covid-19 was declared a national emergency…..

As of June this year, Generation X held 28.6% of the nation’s wealth, up 3.9 percentage points from the first quarter of 2020, according to Fed data. In dollar value, that translates into a 50% gain in their aggregate net worth — the difference between a household’s assets and debts…. 

In five quarters, equity assets owned by Gen X households more than doubled to $10.5 trillion, according to the Fed data. That amount is now more than 10 times the stock holdings of Millennials — yet only about half Boomers’ equity holdings.

Bloomberg

Bitcoin and Nuclear Power

The Wall Street Journal reports that bitcoin miners are turning to nuclear power plants to make their huge energy use appear to be less damaging to the environment.  The article “Bitcoin Miners Eye Nuclear Power as Environmental Criticism Mounts,” says that bitcoin miners in the US are setting up mining facilities the size of several football fields near nuclear power plants to take advantage of the fact that nuclear power does not emit greenhouse gases. 

By design the number of Bitcoins is limited and it becomes more and more difficult, and more energy intensive, to mine additional Bitcoins.  Using so much energy has made Bitcoin environmentally unpopular. If Bitcoins had not become so valuable, it would probably be uneconomic to mine them using any kind of commercial energy.

The article details the growing problems with nuclear power. Nuclear power has become less competitive as fracking has made natural gas less and less expensive. Fear of nuclear power has meant that few new nuclear plants are being built in the US. Almost all nuclear plants are old and are on the verge of being retired.  According to Wikipedia, between 2000 and 2020, the amount of electric power produced by nuclear energy in the United States has remained almost constant at about 20%.  Meanwhile during the same period, the percentage produced by coal dropped from about 50% to 20%; the natural gas percentage rose from 16% to 40%, and the renewable percentage rose from 10% to 20%. For renewables, the biggest change was in wind energy production, which rose from almost nothing in 2000 to over 8% in 2020. The big drop in coal usage has largely been replaced by natural gas, with some contribution from wind energy.

Producing electricity with natural gas produces less greenhouse gas than with coal, but the result of burning gas is still carbon dioxide. If there were a real carbon tax, producing electricity with natural gas would become more expensive. Nuclear plants do not emit carbon dioxide, which is why Bitcoin miners are turning to it to improve their public image.

The Breeder Reactor Arugment

The Bulletin of the Atomic Scientists published a lengthy article about the problems of using plutonium in nuclear power reactors, essentially an argument against breeder reactors.  It is based on a book by Frank von Hippel, Plutonium: How Nuclear Power’s Dream Fuel Became a Nightmare. It is essentially an argument against TerraPower, a new type of reactor proposed by Bill Gates, Warren Buffett and others, including some funding from the US Department of Energy. 

The Bulletin article argues against any use of plutonium for power generation because of two downsides:

•     Potential use of plutonium in a nuclear weapon;  
•      The danger of serious nuclear accident;  
•      A related problem is the disposal of dangerous nuclear waste. 

India’s use of civilian-produced plutonium in its first test nuclear explosion in 1974 illustrated the weapon proliferation dangers.  The US government turned against the use of plutonium in power reactors, but Britain and France continued to pursue the technology.  Separating plutonium from spent nuclear fuel is called reprocessing, which is an essential process for creating plutonium for weapons.  The US agreed not to oppose reprocessing in certain countries, including the UK, France, Japan and Germany.  The Soviet Union of course had its own reprocessing plants for military or civilian plutonium.  The book then discusses how most of the countries that started reprocessing largely abandoned the technique, except for France, which relies on nuclear power for much of its electricity.  Beside France, reprocessing continues in India, Russia, Japan and China. 

According to Wikipedia, TerraPower’s fuel cycle plan does not involve reprocessing nuclear fuel to produce plutonium.  The plutonium would remain in the reactor.  As the uranium fuel in the reactor center core is used up, the plutonium produced in outside layers around the core who take over as the fuel. All the waste would remain in the reactor until it was decommissioned.  Of course, this still leaves the problem of waste disposal in the future, although it reduced the proliferation problem. 

According to The Guardian, the first reactor of this type may be built in Wyoming. 

Rise of Muslims after 9/11

 

Watching the analysis of the 20^th anniversary of 9/11, I was stuck by how many of the talking heads were Muslims.  It looked like 9/11 and Osama bin Laden were the best things that ever happened to American Muslims.  Twenty years ago, you seldom saw women wearing head scarfs; now you see them everywhere. 

It was a rough few years for Muslims immediately after 9/11 as suspicious minds tended to believe that all Muslims were terrorists.  But then the reaction set in.  American media and academia defended and supported Muslims as good, ordinary people.  As a result Muslims and Islamic ideas have become much more important to American politics and thinking.  America has become more Islamic and less Christian. 

Islamists not only won the war in Afghanistan, they won the war for minds in America.  Osama bin Laden did not “win,” but he should be proud of what he accomplished in terms of promoting Islam. 

In 2001, there were no Muslims in the American Congress; today there are three.  More and more Muslims are running for office and assuming more important positions around the country.  The Los Angeles Times reports that Muslims are becoming more politically active, particularly in Michigan which has a large Muslim community.  The PBS NewsHour, under Muslim Amna Nawaz’s leadership, has been particularly active in lobbying for and promoting Muslims and Islam in the US.   

Before 9/11 the Democratic Party was unified in its support for Israel; today many Democrats sympathize with the Arabs who oppose Israel, rather than with Israel. Before 9/11 the Democratic Party was unified in its support for Israel; today many Democrats sympathize with the Arabs who oppose Israel, rather than with Israel. 

Nuclear Power

 In its effort to control global warming and the resulting climate change, the world should not ignore nuclear power.  Nuclear power produces no greenhouse gases.  Many environmentalists oppose nuclear power because they fear an accident.  They would rather freeze in the dark than build another nuclear power plant to keep the heat and lights on.  Dealing with climate change would be easier if the it did not require giving up creature comforts like heat, light, the internet, electric cars, and all the other things that run on electricity.  We can produce electricity without producing greenhouse gases.  We should not turn out backs to that option. 

With current technology, it appears unlikely that the US can replace all carbon-fueled electric generation plants with renewable sources of electricity.  Wind and solar can produce significant amounts of electricity, but neither can be depended on to produce the needed amount 24 hours a day, 365 days a year.  Hydroelectric power from dams has been a long-time important source of electricity, but a water shortage is seriously limiting power production in the western US.  Storage technologies like batteries and hydrogen can help fill gaps when solar or wind power are unavailable, but so far is incapable to supporting the entire US power grid, leaving the job of picking up the slack to carbon-fueled plants that emit greenhouse gases.  Nuclear could pick up the slack easily without emitting greenhouse gases. 

Accidents at nuclear plants are a hazard.  There have been serious nuclear accidents, such as Chernobyl and Fukushima, but others, such as Three Mile Island, caused little lasting harm.  Compared to the disasters that climate change may bring, even the serious accidents may be less harmful than climate change.  The affect many people, but are localized, while climate change affects the whole world, bringing drought, crop failures, starvation, mass migration, hurricanes, rising sea levels, flooding cities.  Climate change is more likely to destroy several major cities than nuclear power is. 

Evidence of the fact that nuclear power is relatively safe is the fact that the average age of the 94 nuclear reactors operating at the 56 nuclear power plants in the US is 39 years old, according to the US Energy Information Agency.  Twenty-three nuclear reactors are shut down and being decommissioned.  These reactors produce about 20 percent of the electric power in the US.  The Energy Information Agency projects that because nuclear plants are old and are not being replaced, nuclear power will have less generating capacity in 2050 than it had in 2020.  This will be bad for global warming. 

 

Intel's Opening

When Satya Nadella took over as boss of Microsoft in 2014 he started by opening Windows. Unlike his predecessors, who had kept the software giant’s crown jewel hermetically sealed from the outside world, he exposed the operating system (os) to the breeze of competition. The firm’s other programs, which used to run almost exclusively on Windows, could now operate on other oss, including Linux, an “open-source” rival which Microsoft had previously called a “cancer”. The manoeuvre both broadened the market for Microsoft’s software and improved Windows by forcing it to compete with rival oss on more equal terms. In the process, it shook up Microsoft’s culture, helped it shed its reputation as a nasty monopolist and paved the way for a stunning revival that saw its market value soar above $2trn.

Now the other half of the once almighty “Wintel” arrangement, whereby pcs would run on Windows software and chips made by Intel, wants to throw the windows open. The American semiconductor giant has long guarded its core chipmaking business as jealously as Microsoft did its os. After years of product delays, misplaced technology bets and changing management, it is ready for some fresh air. “Our processes, our manufacturing, our intellectual property through our foundry services [producing processors for other chipmakers]: all will now be available to the world,” professes Pat Gelsinger (pictured), Intel’s newish boss.

From the Economist

Colorado Dark

  It is called Colorado’s last boom town. Ten thousand people stampeded into Creede in the late 1800s in search of the silver hidden within the San Juan Mountains. The town was the epitome of the Wild West, a hangout for outlaws and conmen. But more than the shoot-outs and gamblers, it was the mines that made Creede. For nearly 100 years its prosperity was tied to the price of silver. The town’s last mine closed in 1985 and only about 300 people remain. Ghost towns and the creaky remnants of old mining camps litter the mountains. Now environmentalists and residents are looking to another sparkly resource to revive the economy: the stars.

Headwaters Alliance, a local non-profit organisation, wants to create a “dark-sky reserve” in aptly named Mineral County, which includes Creede. The campaign is not unique to southern Colorado. Dark-sky communities are cropping up around the American West. The International Dark-Sky Association (ida), based in Tucson, wants towns to curb their light pollution, which harms nocturnal wildlife and obscures the stars. The ida has certified more than 130 dark-sky places globally since 2001; 14 of them are in Colorado.

From the Economist

Quantitative Easing

Former Treasury Secretary Larry Summers’ August 26 op-ed in the Washington Post is an excellent commentary of the Federal Reserve’s policy of “quantitative easing.”  Under quantitative easing, the Fed buys bonds, which keeps down interest rates and adds more money to the economy, greasing the wheels of commerce.  Summers says that this was necessary during the financial crisis of 2008 and during the first shock of the Covid crisis in 2020, but not now.  Quantitative easing tends to benefit the wealthy, pushing the stock market and other asset prices, like homes, higher, but not doing much for regular people. 

Furthermore, because of the way Fed borrowing works, quantitative easing tends to shorten the term of the debt.  Summers says that with interest rates so low at present, the Fed and Treasury should be financing long term debt, locking in the current low interest rates.  Summers is not convinced that interest rates will stay low forever.  Inflation is a bigger threat than the Fed currently acknowledges. 

Summers warns that the Fed has followed the course of quantitative easing without examining where it is going.  He fears that following the easy path of the status quo will lead us into a financial quagmire similar to the way our continuation of unexamined policies led eventually to disasters in Vietnam and Afghanistan. 

I think that Summers is right on.  But Wall Street and most people love quantitative easing because it is good for almost everyone in the short term, just better for the rich.  However, the question is whether there is a problem in the longer term.  While inflation is the immediate concern, there might be other disruptions of the market, a stock market crash, or problems in the labor market, or failure of supply chains for food and other daily needs.  It’s also possible that nothing bad will happen.  We are in uncharted territory by letting quantitative easing and “easy money” run so long. 

China is tightening up its financial markets.  Most people think this is political, to reign in the power the Chinese billionaires vis-à-vis the government.  I think the Chinese may also be worried about dislocations in their economy.  They may think that tightening up now may prevent worse consequences in the future.  If so, I share their concerns.  I wish the Fed did, too.  I think Larry Summers does. 

 

Vietnamese and Afghan Refugees

I have had two brushes with Vietnam during my life: one was serving in the Army artillery in Vietnam during the war, the second was overseeing databases of Vietnamese who wanted to go to the United States after the war. 

When I was in Vietnam from 1969 to 1970, I had very little interaction with the Vietnamese. I was in a heavy artillery battery that supported American Army soldiers on the ground.  Most of the time we were stationed at firebases in the middle of nowhere, with no Vietnamese around.  A few times we had Vietnamese units on the same firebase, but we did not interact.  They supported Vietnamese units and we supported American units.  We were in northern South Vietnam, which the Army called I Corps.  Occasionally I would ride into town with supply trucks; so, I occasionally saw Hue and Quang Tri. At Firebase Barbara, on a lonely mountaintop not too far south of Khe Sanh on the Laotian border, all of our resupply was done by helicopter.  When Saigon fell, I had no personal connection to any South Vietnamese left behind. 

At the American Embassy in Bangkok, Thailand, from 1984 to 1986, I was in charge of the embassy’s computers.  I was primarily responsible for the computers in the embassy, which mainly handled administrative tasks like maintaining personnel and financial records.  However, as the senior computer person in the embassy, I had oversight responsibility for several other computer operations.  One of them handled data for the Orderly Departure Program for Vietnamese still in Vietnam who wanted to leave the country.  The Orderly Departure Program had been established to try to stop the dangerous exodus of Vietnamese “boat people.” Another handled data for Vietnamese refugees who had already escaped across Laos or Cambodia to Thai refugee camps and who wanted to go to the United States.  This was about ten years after the fall of Saigon, but I don’t know how many of these people had worked for the US during the war. 

According to Wikipedia, from 1980 to 1997, 623,509 Vietnamese were resettled abroad under the Orderly Departure Program, of whom 458,367 went to the United States.  As I recall, a friend at the embassy in Bangkok who worked in the Orderly Departure Program went to Vietnam about once a week to process a planeload of Vietnamese going to the US.  Outside of the Orderly Departure Program, the number of “boat people” leaving Vietnam and arriving safely in another country totaled almost 800,000 between 1975 and 1995.  The UN High Commissioner for Refugees estimated that between 200,000 and 400,000 boat people died at sea without reaching their destination.  About 40,000 Vietnamese refugees were held in Thai border refugee camps until they could be resettled. 

If Vietnam is an example, there will continue to be many refugees fleeing Afghanistan for years to come. 

 

Covid and the Stock Market

Mohamed El-Erian’s opinion piece on Bloomberg says it will take a huge shock to deter risk-taking investors.  He cites five mantras that stock traders have followed over the years:

·       Never fight the Fed.

·       The trend is your friend.

·       There is no alternative.

·       Fear of missing out.

·       Buy the dip.

For me, the first one is the most significant, “Never fight the Fed.” The Fed has become more and more important over the years. When inflation, which had started under Nixon, took off under Jimmy Carter, Fed Chair Paul Volker inflicted painfully high interest rates that got it under control.  Previously at Treasury, Volker had been instrumental in making Nixon’s decision take the US off of the gold standard work without destroying the US or the world economy. 

Fed Chair Greenspan was famous for holding up the stock market with the “Greenspan put,” named for a market option trade that enables an investor to avoid losses on a stock that goes down.  He was tested by the 1987 stock market crash just a few months after he was nominated to succeed Paul Volker.  He presided over a second crash, the dot.com bubble of 2000, and he was Fed Chair during the 9/11/2001 World Trade Center attack, which was a huge blow to Wall Street. 

Ben Bernanke was Fed Chair when the housing crisis hit in 2008, which threatened to bring down many of Wall Street’s most famous banks.  In the end, thanks to Bernanke, Treasury Secretary Paulson, and others at the Fed and Treasury, only one major bank failed, Lehman Brothers. 

When the Covid-19 lockdown crisis hit, Fed Chair Powell reacted even more strongly than Bernanke had.  Although many of the Fed measures to fight the 2008 crisis were still in place, Powell opened the flood gates of liquidity even wider, flooding the financial world with cash. 

The Fed “put” still exists and is more powerful today than it was in Greenspan’s day, justifying the maxim, “Never fight the Fed.”   The “put” has a double sided effect of keeping the US out of recession, but also magnifying inequality by enriching stock market investors.  This is a larger group that it was in previous generations, but still by no means includes everyone, and does not benefit investors equally.  It clearly favors the richest investors.  It subsidizes the rich to prevent the economy from collapsing for everyone. 

El-Erian mentions a phenomenon that has existed mainly since the the 2008 housing crash: low interest rates and bond yields.  People are buying stocks because bonds are such a bad deal.  Bond prices go down when interest rates go up.  There is no way for interest rates to go but up from here, and that means there is nowhere for bond prices to go but down. 

Interest rates are low for several reasons, but the main one is that the Fed buys them all as soon as they are issued by the Treasury.  If there is  no demand for bonds the interest rate goes up.  The Feds “quantitative easing” policy of buying bonds like crazy means that there is no reason for rates to go up because the Fed buys so many bonds quickly, no matter what the interest rate is, thus preventing the normal bond market from operating for normal investors. This is a global phenomenon because almost all central banks, particularly in Europe, have programs similar to the Fed’s “quantitative easing” resulting in negative interest rates in some countries, where banks charge you for holding your money instead of paying you interest. 

The loss of the bond market as an alternative to the stock market has meant that the stock market has risen even faster than in the past because of another of El-Erian’s maxims:  “There is no alternative.”  This is illustrated by the fact that the market has risen so much even as the Covid pandemic has played havoc with the economy.  Most recently the US suffered one if its most embarrassing defeats in Afghanistan in the last few days, but the defeat has almost no effect on market optimism.  The world may see the US as incompetent, weak and vulnerable, but investors see it as strong and vibrant. 

US investors have turned against China in recent days because it has cracked down and restricted many of its most famous high-tech companies.  They see this as a Chinese turn away from innovation toward more repressive government control.  There is an element of this, but I think China may be reacting to what it sees as excesses in the world financial markets, and is trying to limit this excess in China.  If this is the case, then I think it is good thing.  I worry that the excessive optimism in the US markets may be leading to a fall at some point, but I thought we would have seen something crack long before now. 

Finally, I think the US needs to repair its infrastructure, but I am not sure that now is the best time to do it.  We have spent like drunken sailors since the Covid crisis, running up the most debt since World War II.  I think this may be an overreaction.  Covid has killed many, but mainly it has killed older people, while war mostly kills people in their 20s, some of their most productive years; so, there is less of an effect on the economy.  Despite the fact that the damage to the economy was not as great as a war, the US government borrowed as if it were.  The borrowing was encouraged by the new, trendy idea that deficits don’t matter.  For some reason the economists have decided that governments never have to pay off their debts and so it doesn’t matter how much debt they have.  I don’t believe this idea.  I think someday interest rates will go up and it will become very expensive to pay off a gigantic federal debt.  Therefore, I don’t think this is the best time to start a very expensive infrastructure project.  It is as if you had just gotten out of the hospital with big medical bills and when you got home said, “Now is the time to build that new swimming pool we’ve been talking about for years.”  You should spend on big projects when you don’t have extra bills, like we have for the Covid stimulus.  We should get our house in order first.  We can always spend on essentials, like repairing bridges before they fall down, but we shouldn’t take on big, new projects now.  

Yellow Rain

This article from ADST reminds me of a trip I made to Udorn, Thailand, while serving at the embassy in Bangkok.  Udorn had been a huge Air Force base during the Vietnam War, but when I was in Thailand in the 1980s there was very little left there, except an American Consulate with very few employees. As the embassy computer systems manager, I went up to Udorn to help them with their computers. An embassy secretary (administrative assistant) with a lot of time on her hands used her new PC to inventory everything in the consulate, down to the number of pencils. I was happy to help her do something constructive.

On my way home to Bangkok one of the officers at the consulate asked me if I would take something back for the embassy. He gave me a picnic cooler with biohazard labels on the side. This was about the time when the dispute about “yellow rain” was at its peak. Was it bee pollen or a deadly biochemical weapon? I was inclined toward the bee pollen viewpoint, so I wasn’t too worried, but I wondered what Thai Airlines would say about putting a biohazard in the overhead luggage rack. They didn’t say anything. We all arrived safely, and I took the picnic cooler into the embassy. I never knew what happened to it.

 

Bitcoin

 Cybercurrencies are here to stay.  Maybe Bitcoin is too, but not at the levels it currently holds.  Tulips are still here, but the tulip mania of the 1630s has passed.  Bitcoin was originally intended to be a medium of exchange that would be insulated from almost all external control.  This anonymity made it an excellent means of exchange for illegal activities, most recently illustrated by the fact that most of the ransomware attacks on private data have demanded payment in Bitcoin. 

Bitcoin transactions are recorded by blockchain, which is like an old accounting ledger.  It contains every Bitcoin transaction, although looking at blockchain from the outside, you can tell that a transaction is verified, but you cannot tell who the parties were or how much Bitcoin was involved.  As one of the parties to the transaction, however, you can pull out the specific information.  So, if Elon Musk for example says you never paid him for your Tesla, you can prove that you did using blockchain. 

The Economist magazine recently explored what would happen to the financial markets if Bitcoin went to zero.  It illustrates how far Bitcoin has come from mainly being a payment mechanism for drug dealers and other criminals to store of value rivaling gold bullion.  Many old school financial institutions -- banks, hedge funds, and payment systems like PayPal -- have begun to invest in and accept Bitcoin.  The Economist speculates that a Bitcoin crash would also crash the broader financial markets, and the more widely accepted Bitcoin becomes, the bigger the crash would be.  Because there is so much speculation today in Bitcoin, much of the investment is leveraged, likely leading to margin calls and liquidations in the event of a Bitcoin crash. 

The Economist says that “because changing dollars for bitcoin is slow and costly, traders wanting to realize gains and reinvest proceeds often transact in stablecoins” pegged to the dollar, like Tether.  The fact that traders think Bitcoin transactions are slow and costly is ironic, since Bitcoin was conceived as a payment mechanism.  But the reliance on Tether and other stablecoins creates problems for these currencies, which are somewhat like money market funds that are vulnerable if they are insufficiently backed, which many regulators believe they are. 

It is ironic that as Bitcoin has become seen as a store of value, it has become less used as a transaction mechanism, which was its original purpose.  But many Bitcoin proponents tout Bitcoin as a way for the poor, unbanked people around the world to participate in the financial system with their wealthier cohorts. 

Because of that prospect of some kind of cybercoin becoming a worldwide medium of exchange, central banks around the world, like the US Federal Reserve, are looking a creating cybercurrencies that would not have some of the negative aspects of Bitcoin.  If cybercurrencies become widespread, will that take some of the luster off of Bitcoin. 

Bitcoins will always represent the massive amounts of energy that were required to produce them.  This unenvironmental aspect of Bitcoin is supposedly what make Elon Musk change his mind and refuse to accept Bitcoins for Teslas.  If Bitcoin were to go to zero, that would be an awful lot of wasted energy and greenhouse gases. 

Bitcoin will have to find its long-term value.  When it was first being mined, it was worth a few thousand dollars.  I would guess that in the long term, it will return to something like that, less than $10,000 per Bitcoin.  It will retain some value as a medium of exchange for criminals, since national cybercurrencies will be more traceable.  Also, national central banks will probably be able to print their new cybercurrencies like the Fed now prints paper dollars, making the new currencies less valuable as a hedge against inflation. 

Anne Applebaum on Mike Lindell

I was disappointed by this Atlantic Magazine article by Anne Applebaum about Mike Lindell, the “My Pillow” guy.  The title says, “The MyPillow Guy Really Could Destroy Democracy,” and the subtitle says, “In the time I spent with Mike Lindell, I came to learn that he is affable, devout, philanthropic – and a clear threat to the nation.” 

After reading the article, I failed to see the threat he presents. Presumably, this is the threat that Democrats see everywhere: Trump’s attempt to undo the last election and reinstate himself as President. I don’t see this a likely to happen and I am thus not alarmed by it.

Apparently, Lindell has something called “packet captures,” which are some kind of computer data proving that the Chinese stole the last election from Trump. But her article never makes clear what these packet captures are, or how the Chinese altered electoral results. I do not believe that there is anything to this. Perhaps, if you thought it would prove that Trump won the election, then it would throw the country into turmoil, but it would not be a threat to democracy. It would mean that Biden’s fake election was a threat to democracy, and that Trump was honestly re-elected and thus democracy would require that he be reinstated.

I do think Trump personally is a threat to democracy. The icing on the cake was the January 6 invasion of the Capitol, but in general Trump was a terrible President who surrounded himself with third-rate people, unable to carry out business of government. I don’t think Lindell is going to reinstate Trump.

The rest of Applebaum’s article supports her characterization of Lindell as a basically nice guy who is wacky on some subjects. I do not think her examples of other wacky businessmen who supported questionable causes are comparable to Lindell. I don’t really know anything about Aschberg, but I doubt that he was responsible for the success of Lenin’s Russian revolution. And Henry Ford is not single-handedly responsible for anti-Semitism, which is probably thousands of years old. Mike Lindell may stir up the waters a little, but he is not going to bring about a sea change in politics.

World Heritage Convention

This Economist article on World Heritage sites in Africa misses a distinction between the US and the European approach to the World Heritage Convention.  When I was on the US delegation to the World Heritage Convention annual committee meeting many years ago, I learned that over the years, the US has favored designating natural sites as additions to the World Heritage List, while the Europeans have favored adding manmade cultural and historical sites to the List. 

This preference for natural sites may date back to the US accession to the World Heritage Convention in 1973, when Richard Nixon was President.  I don’t think of Nixon as an environmental President, but he created the Environmental Protection Agency as well as joining the World Heritage Convention.  His supporters included many rich businessmen, whose environmental interests generally run toward preserving nature as it is.  I think of the Nature Conservancy as the kind of environmental organization rich people would support, as opposed to Greenpeace, for example.  Both of these organizations are genuinely interested in preserving the environment, but they go about it in different ways.  A Congressional Research Service report on the Convention was prepared in 2011, giving a lot of background on the US participation. 

There is an additional reason for the lack of African World Heritage sites described in the Economist article.  The Convention requires that countries where sites are located must take care of them.  Many African countries with wonderful natural sites do not have the resources to preserve them.  We are all familiar with the damage done by elephant poaching over the years, for example, even though elephant habitat is in some of the more advanced African countries.  On the protection issue there is a division between the overseers.  I come down on the side of those who support naming a worthwhile site even if there is some doubt about whether the host country can care for it properly.  Others will only support a new site if they are confident the country can care for it.  I think designating a site at least gives the Convention the ability to pressure and cajole the host country to preserve the site.  Otherwise, development or poaching is almost sure to lead to its destruction. 

Infrastructure

A major problem with the infrastructure bill, aside from its cost, is its lack of focus.  The Democrats have tried to include everything but the kitchen sink. The Republicans have tried to exclude non-traditional items from infrastructure bill, such as childcare. Nevertheless, the bill contains a hodge-podge of projects from roads and bridges to broadband internet connection.  The main goal seems to be pushing a lot of money out the door, rather than funding specific projects.  This will lead to a lot of waste, fraud, and mismanagement.  Since there are no priorities, politicians will fund pet projects and projects pushed by favored constituents, rather than projects that are most needed to keep America running. 

Much of Biden’s and the Democrats’ agenda seems to be giving blacks reparations payments without calling them that.  The previous stimulus bills and the proposed infrastructure bill will undertake a massive transfer of assets from white people to black and brown people, both in terms of jobs that will employ mainly black and brown people and in terms of the beneficiaries of the projects, e.g., the main beneficiaries of improved broadband internet will be poorer black and brown people.  Better internet is a priority, but we should recognize that there is a second agenda here.  Similarly, the Democrats will try to get more roads and bridges built in poorer parts of town.  That’s not bad, but it may not be what America needs to best improve its transportation system.  Of course, the non-traditional infrastructure proposals err even more in the direction of wasted money.  There will be some short-term benefit to spending money on warm and fuzzy things like childcare, but it will not provide the same benefit to the nation as repairing roads and bridges. 

I would prefer to see narrowly focused bills, e.g., a bill to replace bridges that have fallen into a certain state of disrepair that makes this dangerous to use.  A bill to repair airports that have become unsafe.  A bill specifically targeting broadband internet.  These bills could provide specific benchmarks to decide whether the programs were succeeding or not.  Otherwise, there will be lots of handwaving and celebrating all the money that got spent without evaluating whether we got our money’s worth. 

Finally, I am not sure that this is the time to do infrastructure for infrastructure’s sake, even if it is well planned.  We have just spent trillions on the previous stimulus bills, and we will continue to spend trillions on the theory that debt and deficits no longer matter.  It’s possible that there has been some change in the world financial situation that makes the national debt meaningless.  But it’s also possible that this is a temporary situation and someday interest rates may go back up and future generations will be faced with insurmountable debt, with will limit their future and leave them cursing this “me” generation that spent all its money on itself.

In the last few days, it looks like China has begun to take a more conservative approach to its financial wellbeing, limiting financial IPOs and huge expansions of businesses.  This may be political, protecting the power of the Chinese central government, but it could also be financially based, to make sure that the economy does not spin out of control.  Meanwhile, the US seems totally unconcerned about the red-hot financial situation as it pumps tons of money out the door and looks the other way as more and more “unicorns” go public, fed by trillions of investors’ dollars.  Maybe there is no tomorrow, but what if it rains tomorrow?  Will China be in better shape to deal with the rain?  I am afraid it might be.  There seems to be a consensus that there are not storm clouds on the horizon, but what if we are not looking closely enough.  Maybe those few clouds are not as harmless as they look.     

Human Rights

 

After Trump’s presidency there is a lot of talk about whether the United States remains a beacon light for democracy, human rights and the moral standing that Americans rejoiced in for so long.  In fact, the idea of the US being a “city on a hill” is a relatively recent concept.  The US Constitution, which is widely criticized today, was always seen as enlightened, but America’s practices were not frequently highly praised.  What people now look back on as the good old days of democracy were days when segregation still existed, and a much higher percentage of the population lived in what we now call poverty and wealth inequality. 

The State Department did not have a human rights bureau until the Carter administration created one.  I had to write the first draft of the first human rights report on Brazil while I was working on the Brazil desk.  Brazil still had a military government and had many black marks in its human rights record.  I remember trying to make the report as positive as possible for Brazil, but always made more negative by the human rights bureau.  I remember Mark Schneider and Michelle Bova particularly wanted the report to be more critical of Brazil.  I suppose I had a case of “clientitis,” from having served in Brazil before working on the Brazil desk. 

In any case, I don’t think “human rights” were nearly as important an issue earlier as they were in the Carter administration.  There were the Nuremberg war crimes trials, but the Holocaust did not become a widely publicized event on everyone’s lips until years after World War II.  It was a horrible thing, but there was no Holocaust Museum until 1993, 

It is only in the last fifty or so years that the US has begun to proclaim its moral superiority to the world and demand other countries to equal our level of human rights protection.  We should not be surprised if we and the rest of the world begin to look at our standing with a more jaundiced eye. 

July 4, 1976

On July 4, 1976, I was working in the Current Intelligence Office of the State Department Operations Center. It was the 200th anniversary of US independence. The glitterati were having a big party in the eighth-floor diplomatic reception rooms of the State Department. My shift happened to be in the evening while the fireworks on the mall were going off. The powers that be invited all the officers working in the Operations Center to come up for a few minutes and watch the fireworks from the eighth-floor balcony overlooking the mall. I went, and although I could only stay a few minutes, it was memorable. A few years later while I was working on the Brazil desk, President Jimmy Carter held a dinner for all the Latin American ambassadors in Washington. I had to meet the Brazilian Ambassador and escort him up to the dinner, they wait and escort him out of the building after dinner, along with the desk officers for the other Latin American countries. While we were waiting, Rosalynn Carter came down to thank us all for helping out with the dinner. She demonstrated the Carters’ concern for the little guys, and I appreciated it.

Nixon and the Gold Standard

David Westin’s “Balance of Power” show on Bloomberg is often insightful. Today I learned of Jeffrey Garten’s new book Three Days at Camp David: How a Secret Meeting in 1971 Transformed the Global Economy. It is a bout President Nixon’s decision to take the US off the gold standard, under which gold had been pegged at $35 per ounce. It was a momentous decision by Nixon, but one that has received less attention than other momentous Nixon decisions: the opening to China, pursuit of the Vietnam War, creation of the Environmental Protection Agency, and of course Watergate. I haven’t read the book, but I should because it’s time someone recognized how important that 1971 decision was. It changed the way the world economy worked. It opened up the global financial system but also made it more unstable. Jimmy Carter got a lot of grief for the high inflation that took place during his administration. I think at least part of it was due to Richard Nixon taking the US off the gold standard, making it much easier for inflation to take place. Markets were adapting to the new reality of depending on the Federal Reserve, rather than the gold in Fort Knox to control the value of the dollar. Central banks around the world became more important. Despite being on the gold standard, Nixon was faced with inflation of over 5%, as well as high unemployment. He was under pressure to devalue the dollar’s price against gold. Wikipedia says that Nixon conferred with recently appointed Treasury Secretary Connelly, Fed chair Arthur Burns, Treasury Under Secretary Paul Volker (later to be Fed chair under Jimmy Carter), and others, probably including OMB chair George Shultz (later to be Secretary of State under Reagan). A Wall Street Journal article said that Fed chair Arthur Burns played only a minor role there and that Henry Kissinger, who may have been preoccupied with China, was not there. Garten says Nixon’s decision showed that the US could no longer support the world economy alone. To Nixon’s credit, he took the initiative, rather than waiting for a crisis when the world came calling all at once to collect gold for dollars and there was not enough gold to pay everybody. Taking preemptive action was the right decision, even if it left Jimmy Carter holding the bag a few years later. Whether it was exactly the right action is debatable, but the United States and the world have prospered in the fifty years since then. In his interview on Bloomberg, Garten mentioned that there are some similarities between 1971 and today. Financial conditions are unsettled today and there is a potential big change in the offing, in the form of cybercurrencies. I don’t think that Bitcoin is necessarily the future of cybercurrencies, but I think some new form of it may be, probably a currency connected in some way to a central national bank, or maybe several central banks. It may use blockchain, or some new improvement for authenticating transactions that uses less energy. Will Bitcoin be to the new cybercurrency what gold is to the dollar? I doubt it, but it could be. Many people are betting that it will be. Will a new international conference set up a new system, as Bretton Woods did after World War II? Or will individual nations set up their own mechanisms as Nixon did in 1971?

Stop Idolizing George Floyd

It is sad that Black Lives Matter has made such a point of honoring George Floyd.  He is a human being and should not have been killed by the police.  However, he was a convicted felon for a violent crime, in addition of being a drug user, a poor father, and generally a failure in life.  He was being arrested for committing a crime while being high on drugs.  He was a drag on the US economy and a bad example of the human race. 

The fact that he is being held up to such esteem by the black race indicates what a terrible state the black race is in.  There are many wonderful black individuals, but the black race looks pretty awful.  Africa is a failed continent, populated by the black race.  Why haven’t blacks made something of Africa.  Latin America is dark or brown because of the black intermarriage, and it too is a failed continent compared to the Northern Hemisphere.  Is the Southern Hemisphere failing because if is Southern, or because it is mainly populated by black and brown people? 

Black and brown people need good models for their race like Colin Powell, not failed criminals like George Floyd.  The fact that they honor George Floyd shows how violent, how uncivilized, how uneducated their race is.  They blame it on white oppression, but slavery ended 150 years ago.  Many blacks left the segregated South, but still failed to succeed in the northern US, turning cities like Detroit into spreading slums.  I would like to see an example of a failing city with a majority white population that improved itself as black people moved in and made it a better city.  I would like to see one; most examples are the opposite – nice cities that ran down as more black people moved in. 

When I was at the American Embassy in Warsaw, Poland, I went down to Silesia to survey the coal mines there and to see what their environmental impact was.  The Pole who was escorting me made a point of taking me to an apartment house lived in by coal miners. He wanted me to see how neat and clean they were at home, despite their dirty occupation.  This is the kind of example the blacks need. I’m sure such an example exists, but I don’t know of it.  Blacks should publicize it, instead of praising a criminal like George Floyd.